HomeMy WebLinkAboutPublic Financing Authority Resolution No. 25 Authorizing the Tom--
-4PP-4Q6 1> -7--0
_ City of Huntington Beach p;-7h A1jeo 0
ti �-7�oAl
File #: 20-1764 MEETING DATE: 7/20/2020
REQUEST FOR PUBLIC FINANCING AUTHORITY ACTION
SUBMITTED TO: Honorable Chair and Board Members
SUBMITTED BY: Oliver Chi, Executive Director
PREPARED BY: Dahle Bulosan, Chief Financial Officer
Subject:
Adopt Public Financing Authority Resolution No. 25 authorizing the execution and delivery by
the Authority of a Master Site Lease, a Master Lease Agreement, a Master Indenture, a Bond
Purchase Agreement, a Second Amendment to Site Lease and a Second Amendment to Lease
Agreement in connection with the issuance of Huntington Beach Public Financing Authority
Lease Revenue Refunding Bonds, in one or more series, approving the issuance of such
bonds in an aggregate principal amount of not to exceed $21,000,000, authorizing the
distribution of an official statement and authorizing the execution of necessary documents
and certificates and related actions in connection therewith
Statement of Issue:
Authorization is requested from the Public Financing Authority to approve the refunding of the
Huntington Beach Public Financing Authority's outstanding 2010 Lease Revenue Refunding Bonds,
Series A ($7,410,000) and 2011 Lease Revenue Refunding Bonds, Series A ($15,725,000) in an
amount not to exceed $21,000,000.
Financial Impact:
General Fund debt service expenditures will be reduced by over $900,000 in the first two years of
refunding, followed by an average annual savings of $390,000 thereafter through 2032. All costs of
the bond refunding will be paid from bond proceeds. The maturity dates of the new bonds coincide
on a fiscal year basis with the maturity dates of the bonds that are being refunded.
Public Financing Authority Recommended Action:
A) Adopt Resolution No. 25, "A Resolution of the Board of Directors of the Huntington Beach Public
Financing Authority Authorizing the Execution and Delivery by the Authority of a Master Site Lease, A
Master Lease Agreement, A Master Indenture, A Bond Purchase Agreement, A Second Amendment
to Site Lease and a Second Amendment to Lease Agreement in Connection with the Issuance of
Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, in One or More
Series, Approving the Issuance of Such Bonds in an Aggregate Principal Amount of not to Exceed
$21,000,000, Authorizing the Distribution of an Official Statement and Authorizing the Execution of
Necessary Documents and Certificates and Related Actions in Connection Therewith;" and,
City of Huntington Beach Page 1 of 4 Printed on 7/17/2020
power. LegistarTM
File #: 20-1764 MEETING DATE: 7/20/2020
B) Authorize the Executive Director and Authority Secretary to take all administrative and budgetary
actions necessary to perform the bond refunding.
Alternative Action(s):
Do not approve the recommended actions and the refinancing of the bonds, and direct staff
accordingly.
Analysis:
The Huntington Beach Public Financing Authority (PFA) was formed in 1988 to issue debt to finance public
improvements and other capital projects for the City of Huntington Beach and the Redevelopment Agency of
the City of Huntington Beach. The PFA's governing body is the City Council, which also adopts the PFA annual
budget. The PFA is financially dependent on the City for all its operations. Currently, the PFA has three separate
debt issues outstanding (2010 Series A, 2011 Series A, and 2014 Series A) totaling $35,665,000.
Staff regularly monitors the market for municipal securities. Recently, the municipal bond market has improved
to the point where refunding the bonds will be economically beneficial. The 2010 Series A Bonds are callable
on September 1, 2020 and can be refunded on a tax-exempt basis. The 2011 Series A Bonds are callable on
September 1, 2021 and will be advance refunded on a taxable basis. The Tax Cuts and Jobs Act of 2017, which
went into effect on January 1, 2018,prohibits the use of tax-exempt bonds for advance refundings.
Below is a summary of the proposed transaction:
Bond Issue Original Amount Economic urrent Refunding
Issuance Currently 3enefit of verage -oupon
Amount Outstanding Refinancing 3oupon Rate Rate
2010 Lease Revenue 14,745,000 7,410,000 2,085,300 5.0% .0%
Bonds, Series A
2011 Lease Revenue 36,275,000 15,725,000 3,637,700 4.1% 2.4%
Bonds, Series A
Total $ 51,020,000 $ 23,135,000 $ 5,723,000
The City's economic benefit is the difference between the cash flows for the new debt compared to the old debt,
or $5,723,000, which takes into account all of the expenditures of the new debt. The proposed refunding will
be structured to provide over $900,000 in annual savings for the first two years of the refunding, and an average
of$390,000 in annual debt service savings through 2032. The maturity dates of the new bonds coincide on a
fiscal year basis with the maturity dates of the bonds that are being refunded.
Staff is recommending that the existing debt be refunded by the issuance of new debt, not to exceed
$21,000,000. The recommended "not to exceed" amount is determined by the City's financial advisors, and is a
conservative estimate based on issuing bonds at par, without the additional proceeds generated from bond
"premium." Upon issuance of the new debt, the City will have no further obligation to fund debt service on the
original debt.
Staff is recommending that the bonds be sold through its selected underwriter, Stifel, through a negotiated sale.
Stifel was selected through a competitive Request for Proposals process where seven different firms submitted
proposals. Stifel provided the most competitive qualified proposal and will market the bonds to investors.
City of Huntington Beach Page 2 of 4 Printed on 7/17/2020
powered LegistarT1
City Council/ ACTION AGENDA July 20, 2020
Public Financing Authority
Documents and Certificates and Related Actions in Connection Therewith;" and,
B) Authorize the City Manager and City Clerk to take all administrative and budgetary
actions necessary to perform the bond refunding.
Approved 7-0 as amended by Supplemental Communication- inclusion of Preliminary
Official Statement, Huntington Beach Lease Revenue Refunding Bonds
19. 20 1764 Adopted Public Financing Authority Resolution No. 25 authorizing
execution and delivery by the Authority of a Master Site Lease, a
Master Lease Agreement, a Master Indenture, a Bond Purchase
Agreement, a Second Amendment to Site Lease and a Second
Amendment to Lease Agreement in connection with the issuance of
Huntington Beach Public Financing Authority Lease Revenue
Refunding Bonds, in one or more series, approving the issuance of
such bonds in an aggregate principal amount of not to exceed
$21,000,000, authorizing the distribution of an official statement and
authorizing the execution of necessary documents and certificates
and related actions in connection therewith
Recommended Action:
A) Adopt Resolution No. 25, "A Resolution of the Board of Directors of the Huntington Beach
Public Financing Authority Authorizing the Execution and Delivery by the Authority of a
Master Site Lease, A Master Lease Agreement, A Master Indenture, A Bond Purchase
Agreement, A Second Amendment to Site Lease and a Second Amendment to Lease
Agreement in Connection with the Issuance of Huntington Beach Public Financing Authority
Lease Revenue Refunding Bonds, in One or More Series, Approving the Issuance of Such
Bonds in an Aggregate Principal Amount of not to Exceed $21,000,000, Authorizing the
Distribution of an Official Statement and Authorizing the Execution of Necessary Documents
and Certificates and Related Actions in Connection Therewith;" and,
B) Authorize the Executive Director and Authority Secretary to take all administrative
and budgetary actions necessary to perform the bond refunding.
Approved 7-0 as amended by Supplemental Communication-inclusion of Preliminary
Official Statement, Huntington Beach Lease Revenue Refunding Bonds
20. 20 1777 ITEM WITHDRAWN- A„thOFize and direGt the City Manager to exeGute
Ground Lease Agreement, pp y rn in a form aroved b the Gity Attoey, to
e
lease real property located of 17642 Beach Blvd by and between the City
of Huntington -Rea..h and Shige Yamada, T-Fustee of the Shigerw
V al Living Trust, and Mitsuru Yarnad ae Trustee of MitSUFU
Ya Fnada Living Trust•e Approve allocation of fURdS neressaF to lease the
r
funds-nersess
ATTAC H M E N T # 1
File #: 20-1764 MEETING DATE: 7/20/2020
The bonds are payable from rental payments received by the Huntington Beach Public Financing Authority
from General Fund lease payments made on City-owned properties. The 2010 Series A and 2011 Series B
bonds have been payable from General Fund lease payments made on the following properties:
• Donald W. Kiser Corporate Yard
• Civic Center
Given current valuations, the City will only use the Donald W. Kiser Corporate Yard as a leased
property for the new debt and will release the Civic Center from the remaining lease obligation of the 2014
bonds. The leased asset securing the 2014 bonds will now be the Central Library.
Consistent with financial industry standards, in order for staff to proceed with the transaction, the net present
value savings to the City must be at least 3% of the refunded principal amount. The minimum savings amount
is calculated as follows:
Principal Amount of Debt to be Redeemed $ 23,135,000
Multiplied by 3%
Minimum Necessary Present Value Savings $ 694,050
If the savings is less than $694,050, then the transaction will not be completed. Currently, the City is
anticipating Net Present Value Savings of —8.4%. Staff will continue to monitor interest rate trends to
determine when and if additional debt refunding or defeasances will create a financial benefit. If such a
situation occurs, staff will present the proposal to the Authority for approval.
Environmental Status:
Not applicable.
Strategic Plan Goal:
Strengthen long-term financial and economic sustainability
Attachment(s):
1. Resolution No. 25, "A Resolution of the Board of Directors of the Huntington Beach Public
Financing Authority Authorizing the Execution and Delivery by the Authority of a Master Site
Lease, A Master Lease Agreement, A Master Indenture, A Bond Purchase Agreement, A
Second Amendment to Site Lease and a Second Amendment to Lease Agreement in
Connection with the Issuance of Huntington Beach Public Financing Authority Lease Revenue
Refunding Bonds, in One or More Series, Approving the Issuance of Such Bonds in an
Aggregate Principal Amount of not to Exceed $21,000,000, Authorizing the Distribution of an
Official Statement and Authorizing the Execution of Necessary. Documents and Certificates
and Related Actions in Connection Therewith."
2. Master Site Lease
3. Master Lease Agreement
4. Master Indenture
City of Huntington Beach Page 3 of 4 Printed on 7/17/2020
power&?A LegistarT"
File #: 20-1764 MEETING DATE: 7/20/2020
5. Bond Purchase Agreement
6. 2010A Escrow Agreement
7. 2011A Escrow Agreement
8. Second Amendment to Site Lease
9. Second Amendment to Lease Agreement
10. Preliminary Official Statement
City of Huntington Beach Page 4 of 4 Printed on 7/17/2020
powered LegistarTM
RESOLUTION NO. 25
RESOLUTION OF THE BOARD OF DIRECTORS OF THE HUNTINGTON
BEACH PUBLIC FINANCING AUTHORITY AUTHORIZING THE
EXECUTION AND DELIVERY BY THE AUTHORITY OF A MASTER SITE
LEASE, A MASTER LEASE AGREEMENT, A MASTER INDENTURE, A
BOND PURCHASE AGREEMENT, AN ESCROW AGREEMENTS, A
SECOND AMENDMENT TO SITE LEASE AND A SECOND AMENDMENT
TO LEASE AGREEMENT IN CONNECTION WITH THE ISSUANCE OF
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY LEASE
REVENUE REFUNDING BONDS, IN ONE OR MORE SERIES, APPROVING
THE ISSUANCE OF SUCH BONDS IN AN AGGREGATE PRINCIPAL
AMOUNT OF NOT TO EXCEED $21,000,000, AUTHORIZING THE
DISTRIBUTION OF AN OFFICIAL STATEMENT AND AUTHORIZING THE
EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND
RELATED ACTIONS IN CONNECTION THEREWITH
WHEREAS, in order to refinance certain capital improvements, including certain
improvements to public facilities to be installed as a part of the City's Pier Plaza project and a
portion of the City's share of the costs of a countywide 800 MHz coordinated communications
system (the "1997 Project") and other capital projects, including South Beach Phase I and 11
Improvements, a Beach Maintenance Facility, energy retrofitting of various facilities, design costs
of the City's Sports Complex, water system improvements and the City's Emerald Cove Senior
Housing project (the "2000 Project"), the Huntington Beach Public Financing Authority (the
"Authority") issued its Huntington Beach Public Financing.Authority Lease Revenue Refunding
Bonds, 2010 Series A(the"Prior 2010A Bonds"),payable from certain lease payments to be made
by the City of Huntington Beach (the "City"); and
In order to refinance certain capital improvements, including certain improvements to the
Civic Center, including the Police Administration Building (the "1993 Project") and 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" and together with the Prior 1993 Project, the 1997 Project and the
2000 Project, the "Projects"), the City leased certain real property owned by the City, including
the improvements thereto, known as the Civic Center (collectively, the "2011 Property"), to the
Authority pursuant to a Site Lease, dated as of September 1, 2011, as heretofore amended and
supplemented (the "2011 Site Lease"), and subleased the 2011 Property back from the Authority
pursuant to a Lease Agreement, dated as of September 1, 2011, as heretofore amended and
supplemented (the "2011 Lease Agreement"); and
The City and the Authority determined that it would be in the best interests of the City and
the Authority to provide the funds necessary to refinance the 1993 Project and the 2001 Project
through the issuance by the Authority of Huntington Beach Public Financing Authority (Orange
County, California) Lease Revenue Refunding Bonds, 2011 Series A (Capital Improvement
Refinancing Project) (the "Prior 2011A Bonds" and, together with the Prior 2010A Bonds, the
"Prior Bonds"), pursuant to an Indenture, dated as of September 1, 21011, as heretofore amended
and supplemented (the "2011 Indenture"), by and among the Authority, the City and U.S. Bank
4154-3159-1460.4
RESOLUTION NO. 25
National Association, as successor trustee (the "2011 Trustee"), payable from certain lease
payments to be made by the City under the 2011 Lease Agreement and the other assets pledged
therefor under the 2011 Indenture; and
In order to achieve certain savings, the City and the Authority desire to refund all or a
portion of the Prior Bonds and, therefore, refinance all or a portion of the Projects; and
In order to refund the Prior Bonds and, therefore, refinance all or a portion of the Projects,
the City is leasing certain real property, and the improvements thereto, consisting of Donald W.
Kiser Corporation Yard (the "Property"), to the Authority pursuant to a Master Site Lease (the
"Site Lease"), and sublease the Property back from the Authority pursuant to a Master Lease
Agreement (the "Lease Agreement"); and
In order to provide the funds necessary to refund all or a portion of the Prior Bonds and,
therefore,refinance all or a portion of the Projects,the Authority and the City desire to provide for
the issuance of Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds,
(collectively, the "Series 2020 Bonds"), to be issued in one or more series, on a tax-exempt or
taxable basis, with such series designations as authorized hereby in an aggregate principal amount
of not to exceed $21,000,000,pursuant to a Master Indenture (the"Indenture"),by and among the
Authority, the City and U.S. Bank National Association, 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
All rights to receive such base rental payments will be assigned without recourse by the
Authority to the Trustee pursuant to the Indenture; and
The Series 2020 Bonds will be issued pursuant to the Marks-Roos Local Bond Pooling Act
of 1985, constituting Section 6584 et seq. of the California Government Code (the "Act"); and
Stifel, Nicolaus & Company, Incorporated (the "Underwriter") has submitted to the
Authority and the City a proposal to purchase the Series 2020 Bonds in the form of a Bond
Purchase Agreement(the "Bond Purchase Agreement"); and
The moneys to pay and redeem the Prior 2010A Bonds will be applied to such purpose
pursuant to an Escrow Agreement by and between the City and the trustee for the Prior 2010A
Bonds to be refunded, as trustee and as escrow bank(the"2010A Escrow Agreement"); and
The moneys to pay and redeem the Prior 2011A Bonds will be applied to such purpose,
pursuant to an Escrow Agreement by and between the City and the trustee for the Prior 2011A
Bonds to be refunded, as trustee and as escrow bank (the "2011 A Escrow Agreement"); and
A form of the Preliminary Official Statement (the "Preliminary Official Statement")to be
distributed in connection with the public offering of the Series 2020 Bonds has been prepared; and
The City is a member of the Authority and each of the Projects is to be located within the
boundaries of the City; and
2
4154-3159-1460.4
RESOLUTION NO. 25
Section 7.02 of the 2011 Lease Agreement provides that the City has the right to substitute
alternate real property for any portion of the 2011 Property or to release a portion of the 2011
Property from the 2011 Lease Agreement if certain conditions specified therein are satisfied; and
Section 9.01(b) provides that the 2011 Lease Agreement and the 2011 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,
without the written consents of any owners of the bonds issued under the 2011 Indenture, to
provide for the substitution or release of any portion of the Property in accordance with the
provisions of Section 7.02 of the 2011 Lease Agreement; and
In connection with the refunding of all or a portion of the Prior 2011 A Bonds and,therefore,
the refinancing of all or a portion of the Prior 1993 Project and the Prior 2001 Project,the City and
the Authority desire to substitute certain real property, and the improvements thereto, consisting
of Central Library (the "Library"), for the 2011 Property currently subject to the 2011 Lease
Agreement; and
In connection therewith, the City and the Authority find it desirable to modify the 2011
Site Lease and the 2011 Lease Agreement pursuant to the Second Amendment to Site Lease, by
and between the City and the Authority (the "Second Amendment to Site Lease") and the Second
Amendment to Lease Agreement, by and between the City and the Authority (the "Second
Amendment to Lease Agreement"); and
Section 5852.1 of the California Government Code requires that the Board of Directors of
the Authority (the "Board of Directors") obtain from an underwriter, financial advisor or private
lender and disclose, in a meeting open to the public, prior to authorization of the issuance of the
Series 2020 Bonds, good faith estimates of (a) the true interest cost of the Series 2020 Bonds,
(b)the sum of all fees and charges paid to third parties with respect to the Series 2020 Bonds,
(c)the amount of proceeds of the Series 2020 Bonds expected to be received net of the fees and
charges paid to third parties and any reserves or capitalized interest paid or funded with proceeds
of the Series 2020 Bonds, and (d) the sum total of all debt service payments on the Series 2020
Bonds calculated to the final maturity of the Series 2020 Bonds, plus the fees and charges paid to
third parties not paid with the proceeds of the Series 2020 Bonds; and
In compliance with Section 5852.1 of the California Government Code, the Board has
obtained from KNN Public Finance,the City's municipal advisor,the required good faith estimates
and such estimates are disclosed and set forth in Exhibit A attached hereto; and
The Authority has previously adopted a local debt policy(the "Debt Management Policy")
that complies with California Government Code Section 8855(i), and the sale and issuance of the
Series 2020 Bonds as contemplated by this,Resolution is in compliance with the Debt Management
Policy; and
The Board of Directors has been presented with the form of each document referred to
herein relating to the actions contemplated hereby, and the Board of Directors has examined and
approved each document and desires to authorize and direct the execution of such documents and
the consummation of such actions; and
3
4154-3159-1460.4
RESOLUTION NO. 25
All acts, conditions and things required by the Constitution and laws of the State of
California to exist, to have happened and to have been performed precedent to and in connection
with the consummation of the actions authorized hereby do exist, have happened and have been
performed in regular and due time, form and manner as required by law, and the Authority is now
duly authorized and empowered, pursuant to each and every requirement of law, to consummate
such actions for the purpose, in the manner and upon the terms herein provided;
NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Huntington
Beach Public Financing Authority, as follows:
Section 1. All of the recitals herein contained are true and correct and the Board of
Directors so finds.
Section 2. The form of the Site Lease, submitted to and on file with the Secretary of
the Authority, is hereby approved, and the Chair of the Board of Directors of the Authority, and
such other member of the Board of Directors as the Chair may designate, the Executive Director
of the Authority and the Treasurer of the Authority, and such other officers of the Authority as the
Executive Director of the Authority may designate (collectively, the "Authorized Officers"), are
each hereby authorized and directed, for and in the name and on behalf of the Authority,to execute
and deliver the Site Lease in substantially said form, with such changes therein as the Authorized
Officer executing the same may require or approve, such approval to be conclusively evidenced
by the execution and delivery thereof.
Section 3. The form of the Lease Agreement, submitted to and on file with the
Secretary of the Authority, is hereby approved, and the Authorized Officers are each hereby
authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver
the Lease Agreement in substantially said form, with such changes therein as the Authorized
Officer executing the same may require or approve, such approval to be conclusively evidenced
by the execution and delivery thereof; provided, however, that the aggregate amount of the
principal portions of the base rental payments payable under the Lease Agreement shall not exceed
$21,000,000, the term of the Lease Agreement shall not exceed 12 years (provided that such term
may be extended as provided therein) and the true interest cost applicable to the interest portions
of the base rental payments shall not exceed 3.00%per annum.
Section 4. Subject to the provisions of Section 5 hereof,the issuance of the Series 2020
Bonds, in one or more series, with such series designations, in an aggregate principal amount of
not to exceed $21,000,000, on the terms and conditions set forth in, and subject to the limitations
specified in, the Indenture, is hereby authorized and approved. The Series 2020 Bonds shall be
dated, shall bear interest at the rates, shall mature on the date or dates, shall be subject to call and
redemption or be non-callable, shall be issued in the form and shall be as otherwise provided in
the Indenture, as the same shall be completed as provided in this Resolution. Each series of Series
2020 Bonds or portion thereof may be issued such that the interest on such series of Series 2020
Bonds is Tax-Exempt or such that the interest on such series of Series 2020 Bonds is not Tax-
Exempt. The Board of Directors hereby finds and determines that,pursuant to Section 5903 of the
California Government Code, the interest payable on each series of Series 2020 Bonds or portion
thereof issued as Taxable Bonds will be subject to federal income taxation under the Internal
Revenue Code of 1986 in existence on the date of issuance of such series of Series 2020 Bonds.
4
4154-3159-1460.4
RESOLUTION NO. 25
The term "Tax-Exempt" means, with respect to interest on any obligations of a state or local
government,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. The term "Taxable Bonds"
means those Series 2020 Bonds the interest on which is not Tax-Exempt.
Section 5. The form of the Indenture, submitted to and on file with the Secretary of the
Authority, is hereby approved, and the Authorized Officers are each hereby authorized and .
directed, for and in the name and on behalf of the Authority, to execute and deliver the Indenture
in substantially said form, with such changes therein as the Authorized Officer executing the same
may require or approve, such approval to be conclusively evidenced by the execution and delivery
thereof; provided, however,that(a)the aggregate principal amount of the Series 2020 Bonds shall
not exceed $21,000,000, (b)the final maturity date of the Series 2020 Bonds shall be no later than
the date which is 12 years from the date of the Series 2020 Bonds, and(c)the present value of debt
service savings shall not be less than 3.00% of the aggregate principal amount of the Prior Bonds
to be refunded.
Section 6. The form of the Bond Purchase Agreement, submitted to and on file with
the Secretary of the Board of Directors, is hereby approved, and the Authorized Officers are each
hereby authorized and directed, for and in the name and on behalf of the Authority,to execute and
deliver the Bond Purchase Agreement in substantially said form, with such changes therein as the
Authorized Officer executing the same may require or approve, such approval to be conclusively
evidenced by the execution and delivery thereof, provided, however, that the underwriters'
discount for the sale of the Series 2020 Bonds shall not exceed 0.40% of the aggregate principal
amount of the Series 2020 Bonds.
Section 7. The form of the 2010A Escrow Agreement, submitted to and on file with
the Secretary of the Board of Directors, is hereby approved, and the Authorized Officers are each
hereby authorized and directed, for and in the name and on behalf of the Authority,to execute and
deliver the 2010A Escrow Agreement in substantially said form, with such changes therein as the
Authorized Officer executing the same may require or approve, such approval to be conclusively
evidenced by the execution and delivery thereof.
Section 8. The form of the 2011A Escrow Agreement, submitted to and on file with
the Secretary of the Board of Directors, is hereby approved, and the Authorized Officers are each
hereby authorized and directed, for and in the name and on behalf of the Authority,to execute and
deliver the 2011A Escrow Agreement in substantially said form,with such changes therein as the
Authorized Officer executing the same may require or approve, such approval to be conclusively
evidenced by the execution and delivery thereof.
Section 9. The form of Preliminary Official Statement, submitted to and on file with
the Secretary of the Board of Directors, with such changes therein as may be approved by an
Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in
connection with the offering and sale of the Series 2020 Bonds is hereby authorized and approved.
The Authorized Officers are each hereby authorized to certify on behalf of the Authority that the
Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12
5
4154-3159-1460.4
RESOLUTION NO. 25
(except for the omission of certain final pricing, rating and related information as permitted by
Rule 15c2-12). If and to the extent it is necessary to make substantial changes to the Preliminary
Official Statement prior to the offering and sale of the Series 2020 Bonds, the use of the
Preliminary Official Statement in connection with the offering and sale of the Series 2020 Bonds,
and the certification of its finality within the meaning of Rule 15c2-12 by an Authorized Officer,
shall follow the distribution to the Board of Directors of a revised draft of the Preliminary Official
Statement with accompanying directions and instructions to members of the Board of Directors to
review such revised Preliminary Official Statement and provide comments to such Authorized
Officer.
Section 10. The preparation and delivery of an Official Statement, and its use by the
Underwriters in connection with the offering and sale of the Series 2020 Bonds, is hereby
authorized and approved. The Official Statement shall be in substantially the form of the
Preliminary Official Statement with such changes, insertions and omissions as may be approved
by an Authorized Officer. The Authorized Officers are each hereby authorized and directed, for
and in the name of and on behalf of the Authority, to execute the final Official Statementt and any
amendment or supplement thereto and thereupon to cause the final Official Statement and any such
amendment or supplement to be delivered to the Underwriters.
Section 11. The Board of Directors hereby authorizes the substitution of the Library for
the 2011 Property currently subject to the 2011 Lease Agreement pursuant to Section 7.02 of the
2011 Lease Agreement.
Section 12. The form of the Second Amendment to Site Lease, submitted to and on file
with the Secretary of the Board of Directors, is hereby approved, and the Authorized Officers are
each hereby authorized and directed,for and in the name and on behalf of the Authority,to execute
and deliver the Second Amendment'to Site Lease in substantially said form, with such changes
therein as the Authorized Officer executing the same may require or approve, such approval to be
conclusively evidenced by the execution and delivery thereof.
Section 13. The form of the Second Amendment to Lease Agreement, submitted to and
on file with the Secretary of the Board of Directors, is hereby approved, and the Authorized
Officers are each hereby authorized and directed, for and in the name and on behalf of the
Authority,to execute and deliver the Second Amendment to Lease Agreement in substantially said
form, with such changes therein as the Authorized Officer executing the same may require or
approve, such approval to be conclusively evidenced by the execution and delivery thereof.
Section 14. The Authorized Officers are hereby authorized and directed, jointly and
severally, to do any and all things which they may deem necessary or advisable in order to
consummate the transactions herein authorized and otherwise to carry out, give effect to and
comply with the terms and intent of this Resolution, including, without limitation, entering into
necessary lease termination agreements with respect to the defeasance of the Prior Bonds,
obtaining title insurance with respect to the Property and entering into an agreement to indemnify
and hold the insurance company providing the same harmless with respect to encumbrances
recorded against the Property between the last title continuation as set forth in such agreement and
the recording of the documents (or notice thereof) herein approved.
6
4154-3159-1460.4
RESOLUTION NO. 25
Section 15. With the passage of this Resolution, the Board of Directors hereby certifies
that the Debt Management Policy complies with California Government Code Section 8855(i),
and that the Series 2020 Bonds authorized to be issued pursuant to this Resolution are consistent
with such policy, and instructs Orrick, Herrington& Sutcliffe LLP, as Bond Counsel, on behalf of
the Authority,with respect to the Series 2020 Bonds issued pursuant to this Resolution,(a)to cause
notices of the proposed sale and final sale of the Series 2020 Bonds to be filed in a timely manner
with the California Debt and Investment Advisory Commission pursuant to Government Code
Section 8855, and (b) to check, on behalf of the Authority, the "Yes" box relating to such
certifications in the notice of proposed sale filed pursuant to Government Code Section 8855.
Section 16. All actions heretofore taken by the officers and agents of the Authority with
respect to the transactions set forth above are hereby approved, confirmed and ratified.
Section 17. This Resolution shall take effect from and after its date of adoption.
PASSED AND ADOPTED by the Board of Directors of the Huntington Beach Public
Financing Authority at a regular meeting thereof held on the 20th day of July , 2020.
Chair
REVIEWED AND APPROVED: INITIATED AND APPROVED:
Executive Director Deputy Exec tive Director
APPROVED AS TO FORM:
Authority Attorney
7
4154-3159-1460.4
Resolution No. 25
EXHIBIT A
GOOD FAITH ESTIMATES
The good faith estimates set forth herein are provided with respect to the Series 2020 Bonds
in compliance with Section 5852.1 of the California Government Code. Such good faith estimates
have been provided to the City and the Authority by KNN Public Finance, the City's municipal
advisor under Section 15B of the Securities Exchange Act of 1934 (the "Municipal Advisor").
Principal Amount. The Municipal Advisor has informed the City and the Authority that,
based on the City's and the Authority's financing plan and based on market conditions prevailing
at the time of preparation of such estimate,its good faith estimate of the aggregate principal amount
of the Series 2020 Bonds to be sold in a public offering is$19,695,000.00(the"Estimated Principal
Amount").
True Interest Cost of the Series 2020 Bonds. The Municipal Advisor has informed the
City and the Authority that, assuming that the Estimated Principal Amount of the Series 2020
Bonds is sold, and based on market conditions prevailing at the time of preparation of such
estimate, its good faith estimate of the true interest cost of the Series 2020 Bonds, which means
the rate necessary to discount the amounts payable on the respective principal and interest payment
dates to the purchase price received for the Series 2020 Bonds, is 2.02%.
Finance Charge of the Series 2020 Bonds. The Municipal Advisor has informed the City
and the Authority that, assuming that the Estimated Principal Amount of the Series 2020 Bonds is
sold, and based on market conditions prevailing at the time of preparation of such estimate, its
good faith estimate of the finance charge for the Series 2020 Bonds, which means the sum of all
fees and charges paid to third parties (or costs associated with the Series 2020 Bonds), is
$362,323.11.
Amount of Proceeds to be Received. The Municipal Advisor has informed the City and
the Authority that, assuming that the Estimated Principal Amount of the Series 2020 Bonds is sold,
and based on market conditions prevailing at the time of preparation of such estimate, its good
faith estimate of the amount of proceeds expected to be received by the City and the Authority for
sale of the Series 2020 Bonds, less the finance charge of the Series 2020 Bonds, as estimated
above, and any reserves or capitalized interest paid or funded with proceeds of the Series 2020
Bonds, is $20,537,644.54.
Total Payment Amount. The Municipal Advisor has informed the City and the Authority
that, assuming that the Estimated Principal Amount of the Series 2020 Bonds is sold, and based
on market conditions prevailing at the time of preparation of such estimate, its good faith estimate
of the total payment amount, which means the sum total of all payments the Authority will make
to pay debt service on the Series 2020 Bonds,plus the estimated finance charge for the Series 2020
Bonds, as described above, not paid with the proceeds of the Series 2020 Bonds, calculated to the
final maturity of the Series 2020 Bonds, is $23,534,285.82.
The foregoing estimates constitute good faith estimates only and are based on market
conditions prevailing at the time of preparation of such estimates. The actual principal amount of
the Series 2020 Bonds issued and sold, the true interest cost thereof, the finance charges thereof,
A-1
4154-3159-1460.4
RESOLUTION NO. 25
the amount of proceeds received therefrom and total payment amount with respect thereto may
differ from such good faith estimates for a variety of reasons, including, without limitation, due to
(a) the market conditions prevailing on the actual date of the sale of the Series 2020 Bonds being
different than the market conditions prevailing at the time of preparation of the estimates contained
herein, (b) the actual principal amount of Series 2020 Bonds sold being different from the
Estimated Principal Amount, (c) the actual amortization of the Series 2020 Bonds being different
than the amortization assumed for purposes of preparing the estimates contained herein, (d) the
actual interest rates at which the Series 2020 Bonds are sold being different than those estimated
for purposes of preparing the estimates contained herein, (e) other market conditions, or (f)
alterations in the City's and the Authority's financing plan, or a combination of such factors. The
actual date of sale of the Series 2020 Bonds and the actual principal amount of Series 2020 Bonds
sold will be determined by the City and the Authority based on various factors. The actual interest
rates borne by the Series 2020 Bonds will depend on market conditions at the time of sale thereof.
The actual amortization of the Series 2020 Bonds will also depend, in part, on market conditions
at the time of sale thereof. Market conditions, including, without limitation, interest rates are
affected by economic and other factors beyond the control of the City, the Authority and the
Municipal Advisor.
A-2
4154-3159-1460.4
Res. No. 25
STATE OF CALIFORNIA )
COUNTY OF ORANGE )
CITY OF HUNTINGTON BEACH )
I, ROBIN ESTANISLAU, the duly appointed, qualified Secretary
of the Huntington Beach Public Financing Authority, do hereby certify that the
whole number of members of the Board of Directors of the Huntington Beach
Public Financing Authority. is seven; that the foregoing resolution was passed and
adopted by the affirmative vote of at least a majority of all the members of said
Board at a Regular meeting thereof held on July 20, 2020 and that it was so
adopted by the following vote:
AYES: Directors: Posey, Delgleize, Hardy, Semeta, Peterson, Can, Brenden
NOES: Directors: None
ABSENT: Directors: None
ABSTAIN: Directors: None
Secretary of the Board of Directors
of the Huntington Beach Public
Financing Authority
ATTACHMENT #2
TO BE RECORDED AND WHEN RECORDED
RETURN TO:
Orrick,Herrington&Sutcliffe LLP
2050 Main Street,Suite 1100
Irvine,California 92614-8255
Attention: Donald S.Field,Esq.
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.
MASTER SITE LEASE
by and between
CITY OF HUNTINGTON BEACH
and
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
Dated as of ] 192020
4162-0786-5380.3
605
MASTER SITE LEASE
THIS MASTER SITE LEASE (this "Site Lease"), executed and entered into as of
[ ] 1, 2020, is by and between the CITY OF HUNTINGTON BEACH (the "City"), a
municipal corporation and chartered city organized and existing under the laws of the State of
California, as lessor, and the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY(the
"Authority"), a joint powers authority organized and existing under the laws of the State of
California, as lessee.
RECITALS
WHEREAS, in order to refinance certain capital improvements, including certain
improvements to public facilities to be installed as a part of the City's Pier Plaza project and a
portion of the City's share of the costs of a countywide 800 MHz coordinated communications
system (the "1997 Project") and other capital projects, including South Beach Phase I and II
Improvements, a Beach Maintenance Facility, energy retrofitting of various facilities, design costs
of the City's Sports Complex, water system improvements and the City's Emerald Cove Senior
Housing project(the "2000 Project"),the Authority issued its Huntington Beach Public Financing
Authority Lease Revenue Refunding Bonds, 2010 Series A (the "Prior 2010A 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 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" and together with the Prior 1993 Project, the 1997
Project and the 2000 Project, the "Projects"), the Authority issued its Huntington Beach Public
Financing Authority (Orange County, California) Lease Revenue Refunding Bonds, 2011 Series
A (Capital Improvement Refinancing Project) (the "Prior 2011A Bonds" and, together with the
Prior 2010A 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 refund
the Prior Bonds and, therefore, refinance the Projects; and
WHEREAS, in order to refund the Prior Bonds and, therefore, refinance the Projects, the
City will lease certain real property, and the improvements thereto, consisting of the Donald W.
Kiser Corporation Yard(the "Property"),to the Authority pursuant to this Site Lease, and the City
will sublease the Property back from the Authority pursuant to a Master Lease Agreement, dated
the date hereof(the "Lease Agreement"); and
WHEREAS,the Property is more particularly described in Exhibit A hereto; and
WHEREAS, in order to provide the funds necessary to refund the Prior Bonds and,
therefore, refinance the Projects, the Authority and the City desire to provide for the issuance of
Huntington Beach Public Financing Authority (Orange County, California) Lease Revenue.
Refunding Bonds, 2020 Series A (Tax-Exempt) (the "Series 2020A Bonds"), and Huntington
Beach Public Financing Authority(Orange County, California) Lease Revenue Refunding Bonds,
2020 Series B (Federally Taxable)(the"Series 2020B Bonds"and,together with the Series 2020A
4162-0786-5380.3
606
Bonds,the"Series 2020 Bonds"), in the respective aggregate principal amounts of$[ ]
and$[ ],pursuant to a Master Indenture(the"Indenture"),by and among the Authority,
the City and U.S. Bank National Association, 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
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, 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 $[ ] (the "Site Lease Payment"). The Site Lease
Payment shall be paid from the proceeds of the Series 2020 Bonds; provided, however, that in the
event the available proceeds of the Series 2020 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 refinancing the Projects. 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
2
4162-0786-5380.3
607
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 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.
3
4162-0786-5380.3
608
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;
(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
4
4162-0786-5380.3
609
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 [May 1, 20 ], unless such term is extended or sooner terminated as
hereinafter provided.
Section 7.02 Extension; Early Termination. If, on [May 1, 20 ], 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 [May 1, 20 ], 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.
5
4162-0786-5380.3
610
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.
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:
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By:
Attest:
Robin Estanislau,
Secretary
6
4162-0786-5380.3
611
EXHIBIT A
DESCRIPTION OF THE PROPERTY
All that certain real property situated in the County of Orange, State of California, and any
improvements thereto, described as follows:
A-1
612
A notary public or other officer completing
this certificate verifies only the identity of
the individual who signed the document to
which this certificate is attached, and not
the truthfulness, accuracy, or validity of
that document.
STATE OF CALIFORNIA )
ss
COUNTY OF ORANGE )
On before me, Notary Public,
personally appeared who proved to me on the basis of satisfactory
evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature [SEAL]
4162-0786-5380.3
613
A notary public or other officer completing
this certificate verifies only the identity of
the individual who signed the document to
which this certificate is attached, and not
the truthfulness, accuracy, or validity of
that document.
STATE OF CALIFORNIA )
ss
COUNTY OF ORANGE )
On before me, Notary Public,
personally appeared who proved to me on the basis of satisfactory
evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature [SEAL]
4162-0786-5380.3
614
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 Master Site Lease, dated as of[ ] 1,
2020, by and between the City of Huntington Beach, a municipal corporation and chartered city
organized and existing under 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 [ ], 2020, and the Authority consents to
recordation thereof by its duly authorized officer.
Dated: [ ], 2020
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By:
4162-0786-5380.3
615
ATTACHMENT #3
MASTER LEASE AGREEMENT
by and between
CITY OF HUNTINGTON BEACH
and
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
Dated as of j 1, 2020
4149-0022-5572.4
616
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 4.0.2. Power and Authority of the Authority.................................................9
Section 4.03. Net-Net-Net Lease...............................................................................9
Section 4.04. Disclaimer of Warranties.....................................................................9
Section 4.05. Quiet Enjoyment..................................................................................9
Section4.06. 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.............................. 12
Section 5.02. Additional Insurance Provision; Form of Policies............................. 12
i
4149-0022-5572.4
617
TABLE OF CONTENTS
(continued)
Page
Section 5.03. 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 ......................................................................................22
Section 10.01. Authority Not Liable..........................................................................22
Section 10.02. Assignment to Trustee; Effect ...........................................................22
Section 10.03. Gender and References; Article and Section Headings.....................22
Section 10.04. Validity and Severability...................................................................22
Section 10.05. California Law...................................................................................23
Section10.06. Notices ...............................................................................................23
Section 10.07. Execution in Counterparts..................................................................23
ii
4149-0022-5572.4
618
LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT (this "Lease Agreement"), dated as of
[ 1, 2020, is by and between the CITY OF HUNTINGTON BEACH, a municipal
corporation and chartered city organized and existing under 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 refinance certain capital improvements, including certain
improvements to public facilities to be installed as a part of the City's Pier Plaza project and a
portion of the City's share of the costs of a countywide 800 MHz coordinated communications
system (the "1997 Project") and other capital projects, including South Beach Phase I and 11
Improvements, a Beach Maintenance Facility, energy retrofitting of various facilities, design costs
of the City's Sports Complex, water system improvements and the City's Emerald Cove Senior
Housing project(the "2000 Project"), the Authority issued its Huntington Beach Public Financing
Authority Lease Revenue Refunding Bonds, 2010 Series A (the "Prior 2010A 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 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" and together with the Prior 1993 Project, the 1997
Project and the 2000 Project, the "Projects"), the Authority issued its Huntington Beach Public
Financing Authority (Orange County, California) Lease Revenue Refunding Bonds, 2011 Series
A (Capital Improvement Refinancing Project) (the "Prior 2011A Bonds" and, together with the
Prior 2010A 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 refund
the Prior Bonds and, therefore, refinance the Projects; and
WHEREAS, in order to refund the Prior Bonds and, therefore, refinance the Projects, the
City is leasing certain real property, and the improvements thereto, consisting of Donald W. Kiser
Corporation Yard (the "Property"), to the Authority pursuant to a Master 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, the Property is more particularly described in Exhibit A hereto; and
WHEREAS, in order to provide the funds necessary to refund the Prior Bonds and,
therefore, refinance the Projects, the Authority and the City desire to provide for the issuance of
Huntington Beach Public Financing Authority (Orange County, California) Lease Revenue
Refunding Bonds, 2020 Series A (Tax-Exempt) (the "Series 2020A Bonds"), and Huntington
Beach Public Financing Authority (Orange County, California) Lease Revenue Refunding Bonds,
4149-0022-5572.4
619
2020 Series B (Federally Taxable)(the"Series 2020B Bonds"and,together with the Series 2020A
Bonds,the"Series 2020 Bonds"), in the respective aggregate principal amounts of$[ ]
and$[ ],pursuant to the Master Indenture,dated as of the date hereof(the"Indenture"),
by and among the Authority, the City and U.S. Bank National Association, 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 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:
2
4149-0022-5572.4
620
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 the laws of the State of California.
"Closing Date" means [ ], 2020.
"Event of Default" means an event described as such in Section 8.01.
"Indenture" means the Master 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 Master Lease Agreement, as originally executed and as it
may from time to time be amended in accordance with the provisions hereof.
3
4149-0022-5572.4
621
"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 [June 30, 20_] and,
thereafter, the twelve-month period commencing on July 1 of each year during the term of this
Lease Agreement.
"Scheduled Termination Date" means [May 1, 20_].
"Site Lease"means the Master 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 U.S. Bank National Association, 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.
4
4149-0022-5572.4
622
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.
5
4149-0022-5572.4
623
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 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;
6
4149-0022-5572.4
624
(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. In making such
determination of fair rental value, consideration has been given to the uses and purposes which
may be served by the Property and the benefits therefrom which will accrue to the City and the
general public. Payments of the Rental Payments for the Property during each Rental Period shall
constitute the total rental for said Rental Period.
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 abatement and the basis
therefor. Such abatement shall continue for the period commencing with the date of interference
7
4149-0022-5572.4
625
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.
8
4149-0022-5572.4
626
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 Enjoyment. 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. 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 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 the Property; provided,
however, that the City may contest in good faith the validity or application of any such law or rule
9
4149-0022-5572.4
627
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.
10
4149-0022-5572.4
628
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.
11
4149-0022-5572.4
629
ARTICLE V
INSURANCE
Section 5.01. Public Liability and Property Damage Insurance. (a) The City shall
maintain reasonable and customary liability insurance. 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.
(b) The City shall maintain or cause to be maintained insurance insuring the Property
against fire, lightning and all other risks covered by an extended coverage endorsement (all risk
basis excluding earthquake)to be written at full replacement cost of the Property structures, subject
to a minimum $25,000 loss deductible provision. Full replacement cost 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, following receipt of a written request of the Trustee, cause to be delivered
to the Trustee on or before August 15 of each year, commencing [August 15, 20 ], 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 be approved in writing by an Independent Insurance Consultant or
the City's Risk Manager.
12
4149-0022-5572.4
630
Section 5.04. Title Insurance. The City shall provide, at its own expense, one or more
CLTA 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.
13
4149-0022-5572.4
631
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
5.01 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. 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, 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 35 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.
14
4149-0022-5572.4
632
ARTICLE VII
ASSIGNMENT AND SUBLETTING; SUBSTITUTION OR RELEASE; TITLE .
Section 7.01. Assignment and Subleasin1j. 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) a qualified employee of the City or 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);
(b) the City shall have obtained or caused to be obtained an CLTA title insurance policy
or policies with respect to any substituted property in the amount of the fair market value of such
15
4149-0022-5572.4
633
substituted property(which fair market value shall have been determined by a qualified employee
of the City or 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
[U of subsection U 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.
16
4149-0022-5572.4
634
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,
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
17
4149-0022-5572.4
635
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 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
18
4149-0022-5572.4
636
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 "re-
letting" as used in this Section shall include, but not be limited to, re-letting by means of the
operation by the Authority of the Property.
(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 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
19
4149-0022-5572.4
637
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.
20
4149-0022-5572.4
638
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
(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.
21
4149-0022-5572.4
639
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, occupy and
22
4149-0022-5572.4
640
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: Chief Financial Officer
If to the Authority: Huntington Beach Public Financing Authority
c/o City of Huntington Beach
2000 Main Street
Huntington Beach, California 92648
Attention: Chief Financial Officer
If to the Trustee: U.S. Bank National Association
633 West Fifth Street, 241h Floor
Los Angeles, California 90071
Attention: Global Corporate Trust
Each such notice, statement, demand, consent, approval, authorization, offer, designation,
request or other communication hereunder shall be deemed delivered to the parry 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.
23
4149-0022-5572.4
641
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:
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By:
ATTEST:
Robin Estanislau,
Secretary
24
4149-0022-5572.4
642
A notary public or other officer completing
this certificate verifies only the identity of
the individual who signed the document to
which this certificate is attached, and not
the truthfulness, accuracy, or validity of
that document.
STATE OF CALIFORNIA )
ss
COUNTY OF ORANGE )
On , 2020, before me, Notary Public,
personally appeared , proved to me on the basis of satisfactory evidence to
be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to
me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature [SEAL]
4149-0022-5572.4
643
A notary public or other officer completing
this certificate verifies only the identity of
the individual who signed the document to
which this certificate is attached, and not
the truthfulness, accuracy, or validity of
that document.
STATE OF CALIFORNIA )
ss
COUNTY OF ORANGE )
On , 2020, before me, Notary Public,
personally appeared , proved to me on the basis of satisfactory evidence to
be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to
me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature [SEAL]
4149-0022-5572.4
644
EXHIBIT A
DESCRIPTION OF THE PROPERTY
All that certain real property situated in the County of Orange, State of California, and any
improvements thereto, described as follows:
A-1
4149-0022-5572.4
645
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 Master Lease Agreement, dated as of[
1, 2020,by and between the City of Huntington Beach, a municipal corporation and chartered city
organized and existing under 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 [ �, 2020, and the City consents to recordation thereof
by its duly authorized officer.
Dated: , 2020
CITY OF HUNTINGTON BEACH
By:
4149-0022-5572.4
646
ATTACHMENT #4
MASTER INDENTURE
by and among
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
and
CITY OF HUNTINGTON BEACH
and
U.S. BANK NATIONAL ASSOCIATION,
AS TRUSTEE
Dated as of [ ] 1, 2020
Relating to
Huntington Beach Public Financing Authority
(Orange County, California)
Lease Revenue Refunding Bonds
4127-3236-0228.4
647
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS; EQUAL SECURITY ............................................................3
Section 1.01. Definitions............................................................................................3
Section 1.02. Equal Security.................................................................................... 10
ARTICLEII THE BONDS ................................................................................................. 11
Section 2.01. Authorization of Bonds...................................................................... 11
Section 2.02. Terms of Series 2020 Bonds.............................................................. 11
Section 2.03. Issuance of Series 2020 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 ............................... 15
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...............................................................................20
ARTICLE III REDEMPTION OF BONDS.........................................................................21
Section 3.01. Extraordinary Redemption.................................................................21
Section 3.02. Optional Redemption.........................................................................21
Section 3.03. Mandatory Sinking Fund Redemption...............................................21
Section 3.04. Selection of Bonds for Redemption...................................................22
Section 3.05. Notice of Redemption........................................................................23
Section 3.06. Partial Redemption of Bonds.............................................................23
Section 3.07. Effect of Notice of Redemption.........................................................23
ARTICLE IV PLEDGE AND ASSIGNMENT; FUNDS AND ACCOUNTS ....................25
Section 4.01. Pledge and Assignment......................................................................25
Section 4.02. Costs of Issuance Fund......................................................................25
Section 4.03. Payment Fund....................................................................................26
Section 4.04. Redemption Fund...............................................................................26
Section 4.05. Reserve Fund .....................................................................................26
Section4.06. Rebate Fund.......................................................................................28
Section 4.07. Investments........................................................................................29
i
4127-3236-0228.4
648
TABLE OF CONTENTS
(continued)
Page
ARTICLE V NET PROCEEDS AND TITLE INSURANCE; COVENANTS ..................31
Section 5.01. Application of Net Proceeds..............................................................31
Section 5.02. Title Insurance ...................................................................................32
Section 5.03. Punctual Payment...............................................................................32
Section 5.04. Compliance with Indenture................................................................32
Section 5.05. Compliance with Site Lease and Lease Agreement...........................33
Section 5.06. Observance of Laws and Regulations................................................33
Section5.07. Other Liens.........................................................................................33
Section 5.08. Prosecution and Defense of Suits ......................................................33
Section 5.09. Accounting Records and Statements .................................................33
Section5.10. Recordation........................................................................................34
Section 5.11. Tax Covenants ...................................................................................34
Section 5.12. Continuing Disclosure .......................................................................34
Section 5.13. Notifications Required by the Act.....................................................34
Section 5.14. Further Assurances.............................................................................35
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES ................................................36
Section 6.01. Events of Default...............................................................................36
Section 6.02. Action on Default...............................................................................36
Section 6.03. Other Remedies of the Trustee ..........................................................37
Section 6.04. Remedies Not Exclusive....................................................................37
Section 6.05. Application of Amounts After Default..............................................37
Section 6.06. Power of Trustee to Enforce..............................................................38
Section 6.07. Bond Owners Direction of Proceedings ............................................38
Section 6.08. Limitation on Bond Owners' Right to Sue........................................38
Section 6.09. Termination of Proceedings...............................................................38
Section 6.10. No Waiver of Default.........................................................................39
ARTICLE VII THE TRUSTEE.............................................................................................40
Section 7.01. Duties and Liabilities of Trustee........................................................40
Section 7.02. Removal and Resignation of the Trustee...........................................40
Section 7.03. Compensation and Indemnification of the Trustee............................41
Section 7.04. Protection of the Trustee....................................................................41
ii
4127-3236-0228.4
649
TABLE OF CONTENTS
(continued)
Page
Section 7.05. Appointment of Co-Trustee...............................................................43
ARTICLE VIII SUPPLEMENTAL INDENTURES ..............................................................45
Section 8.01. Supplemental Indentures....................................................................45
Section 8.02. Effect of Supplemental Indenture......................................................46
Section 8.03. Endorsement of Bonds; Preparation of New Bonds..........................46
Section 8.04. Amendment of Particular Bonds........................................................46
ARTICLE IX DEFEASANCE..............................................................................................47
Section 9.01. Discharge of Indenture.......................................................................47
Section 9.02. Bonds Deemed To Have Been Paid...................................................47
Section 9.03. Unclaimed Moneys............................................................................48
ARTICLE X MISCELLANEOUS ...................................................................................... 50
Section 10.01. Benefits of Indenture Limited to Parties............................................ 50
Section 10.02. Successor Deemed Included in all References to Predecessor.......... 50
Section 10.03. Execution of Documents by Owners .................................................50
Section 10.04. Waiver of Personal Liability..............................................................50
Section 10.05. Acquisition of Bonds by Authority or City........................................50
Section 10.06. Disqualified Bonds.............................................................................51
Section 10.07. Money Held for Particular Bonds......................................................51
Section 10.08. Funds and Accounts...........................................................................51
Section 10.09. Gender and References; Article and Section Headings.....................51
Section 10.10. Partial Invalidity................................................................................. 52
Section 10.11. California Law................................................................................... 52
Section10.12. Notices ...............................................................................................52
Section 10.13. Business Days....................................................................................53
Section 10.14. Execution in Counterparts..................................................................53
EXHIBIT A FORM OF SERIES 2020 BOND ................................................................A-1
EXHIBIT B PERMITTED INVESTMENTS ..................................................................B-1
EXHIBIT C FORM OF COSTS OF ISSUANCE FUND REQUISITION......................C-1
4127-3236-0228.4
650
MASTER INDENTURE
THIS MASTER INDENTURE (this "Indenture"), dated as of[ 1, 2020, 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 the laws of the State of California (the "City"), and. U.S. BANK NATIONAL
ASSOCIATION, 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 refinance certain capital improvements, including certain
improvements to public facilities to be installed as a part of the City's Pier Plaza project and a
portion of the City's share of the costs of a countywide 800 MHz coordinated communications
system (the "1997 Project") and other capital projects, including South Beach Phase I and 11
Improvements, a Beach Maintenance Facility, energy retrofitting of various facilities, design costs
of the City's Sports Complex, water system improvements and the City's Emerald Cove Senior
Housing project(the "2000 Project"),the Authority issued its Huntington Beach Public Financing
Authority Lease Revenue Refunding Bonds, 2010 Series A (the "Prior 2010A 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 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" and together with the Prior 1993 Project, the 1997
Project and the 2000 Project, the "Projects"), the Authority issued its Huntington Beach Public
Financing Authority (Orange County, California) Lease Revenue Refunding Bonds, 2011 Series
A (Capital Improvement Refinancing Project) (the "Prior 2011A Bonds" and, together with the
Prior 2010A 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 refund
the Prior Bonds and, therefore,refinance the Projects; and
WHEREAS, in order to refund the Prior Bonds and, therefore, refinance the Projects, the
City is leasing certain real property, and the improvements thereto, consisting of Donald W. Kiser
Corporation Yard (the "Property"), to the Authority pursuant to a Master 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 Master 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 and,
therefore, refinance the Projects, the Authority and the City desire to provide for the issuance of
Huntington Beach Public Financing Authority (Orange County, California) Lease Revenue
Refunding Bonds, 2020 Series A (Tax-Exempt) (the "Series 2020A Bonds"), and Huntington
Beach Public Financing Authority(Orange County, California) Lease Revenue Refunding Bonds,
1
4127-3236-0228.4
651
2020 Series B (Federally Taxable) (the"Series 2020B Bonds"and,together with the Series 2020A
Bonds,the"Series 2020 Bonds"), in the respective aggregate principal amounts of$[ ]
and $[ ], 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
2020 Bonds (the Series 2020 Bonds and any such Additional Bonds being collectively referred to
as the "Bonds"); and
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:
2
4127-3236-0228.4
652
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 2020 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,the Assistant City
Manager of the City or the Chief Financial Officer 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.
"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.
3
4127-3236-0228.4
653
"Bond Year" means each twelve-month period beginning on May 2 in each year and
extending to the next succeeding May 1,both dates inclusive, except that the first Bond Year shall
begin on the Closing Date and end on May 1, 2021.
"Bonds" means the Huntington Beach Public Financing Authority (Orange County,
California) Lease Revenue Bonds issued hereunder, and includes the Series 2020 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 2020 Bonds are delivered to the
Original Purchaser, being [ , 2020].
"Code" means the Internal Revenue Code of 1986.
"Common Reserve Account" means the account of that name established in the Reserve
Fund pursuant to a Supplemental Indenture to secure the Common Reserve Bonds.
"Common Reserve Bonds" means each Series of Additional Bonds secured by the
Common Reserve Account as provided in the Supplemental Indenture providing for the issuance
of such Series of Additional Bonds.
"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 or any Reserve Facility, 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.
4
4127-3236-0228.4
654
"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
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 2010A Escrow Agreement and the 2011A Escrow
Agreement.
"Escrow Bank"means U.S. Bank National Association, 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 Master 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 Series 2020 Interest Account and each additional account
established for the payment of interest of a Series of Additional Bonds within the Payment Fund
pursuant to Section 4.03 hereof.
"Interest Payment Date" means each May I and November 1, commencing
[November 1, 2020], so long as any Bonds remain Outstanding.
"Lease Agreement" means the Master 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.
5
4127-3236-0228.4
655
"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.
"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 Stifel, Nicolaus & Company, Incorporated, the original
purchaser of the Series 2020 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.
6
4127-3236-0228.4
656
"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 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 Series 2020 Principal Account and each additional
account established for the payment of principal of a Series of Additional Bonds within the
Payment Fund 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.
"Prior 2010A Bonds"means the prior bonds of the Authority as defined in recital clauses
hereto.
"Prior 2011A Bonds"means the prior bonds of the Authority as defined in recital clauses
hereto.
"Projects"means the capital improvement projects described in recital clauses hereto.
"Rebate Fund"means the fund by that name established pursuant to Section 4.05 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 June 30, 20[—] and,
thereafter, the twelve-month period commencing on July 1 of each year during the term of the
Lease Agreement.
"Reserve Account" means either the Common Reserve Account or any other reserve
account established pursuant to Section 4.05 hereof,which account may secure one or more Series
7
4127-3236-0228.4
657
of Additional Bonds as provided in the Supplemental Indenture providing for the establishment
thereof.
"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 secured by such Reserve Facility 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 applicable Reserve
Account, rated in one of the two highest rating categories (without regard to any modifier) by any
one rating agency then rating the Bonds secured by such Reserve Facility, and(e) is deposited with
the Trustee pursuant to Section 4.05 hereof
"Reserve Fund"means the fund by that name established in accordance with Section 4.05
hereof pursuant to a Supplemental Indenture.
"Reserve Requirement" means, (a) with respect to any Series of Additional Bonds that
are Common Reserve Bonds, such amount, as shall be specified in the Supplemental Indenture
authorizing the issuance of the first Series of Common Reserve Bonds, and (b) with respect to any
Series of Additional Bonds that are not Common Reserve Bonds, such amount, if any, as shall be
specified in the Supplemental Indenture authorizing the issuance of such Series of Additional
Bonds; provided, however, that in no event shall any Reserve Requirement exceed an amount
permitted by the Code.
"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 2020A
Bonds and the Series 2020B Bonds, and any Additional Bonds issued pursuant to a Supplemental
Indenture and identified as a separate Series of Bonds.
"Series 2020 Bonds" means, collectively, the Series 2020A Bonds and the Series 2020B
Bonds, issued hereunder.
"Series 2020 Interest Account" means the Interest Account by that name within the
Payment Fund established pursuant to Section 4.03 hereof.
"Series 2020 Principal Account" means the Principal Account by that name within the
Payment Fund established pursuant to Section 4.03 hereof.
"Series 2020A Bonds" means the Huntington Beach Public Financing Authority (Orange
County, California) Lease Revenue Refunding Bonds, 2020 Series A (Tax-Exempt), issued
hereunder.
8
4127-3236-0228.4
658
"Series 2020B Bonds" means the Huntington Beach Public Financing Authority (Orange
County, California) Lease Revenue Refunding Bonds, 2020 Series B (Federally Taxable), issued
hereunder.
"Site Lease" means the Master 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 2020A 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 2020 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 U.S. Bank National Association, 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.
"2010A Escrow Agreement" means the Escrow Agreement, dated as of the date hereof,
by and between the Authority and the Escrow Bank, relating to the Prior 2010A Bonds, as
originally executed and as it may be amended from time to time in accordance with the terms
thereof.
"2011A Escrow Agreement" means the Escrow Agreement, dated as of the date hereof,
by and between the Authority and the Escrow Bank, relating to the Prior 2011A 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.
9
4127-3236-0228.4
659
"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 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.
10
4127-3236-0228.4
660
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 2020 Bonds. (a) The Series 2020A Bonds shall be
designated "Huntington Beach Public Financing Authority (Orange County, California) Lease
Revenue Refunding Bonds, 2020 Series A (Tax-Exempt)." The aggregate principal amount of
Series 2020A Bonds that may be issued and Outstanding under this Indenture shall not exceed
$[ ], except as may be otherwise provided in Section 2.11 hereof.
(b) The Series 2020A Bonds shall be issued in fully registered form without coupons
in Authorized Denominations. The Series 2020A Bonds shall be dated as of the Closing Date,
shall be in the aggregate principal amount of$[ ], shall mature on May 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:
11
4127-3236-0228.4
661
Maturity Date Principal Interest
Ma 1 Amount Rate
$
(a) The Series 2020B Bonds shall be designated "Huntington Beach Public Financing
Authority(Orange County,California)Lease Revenue Refunding Bonds,2020 Series B (Federally
Taxable)." The aggregate principal amount of Series 2020B Bonds that may be issued and
Outstanding under this Indenture shall not exceed $[ �, except as may be otherwise
provided in Section 2.11 hereof.
(b) The Series 2020B Bonds shall be issued in fully registered form without coupons
in Authorized Denominations. The Series 2020B Bonds shall be dated as of the Closing Date,
shall be in the aggregate principal amount of$[ 1, shall mature on May I 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:
Maturity Date Principal Interest
Ma 1 Amount Rate
$
(c) Interest on the Series 2020 Bonds shall be payable from the Interest Payment Date
next preceding the date of authentication thereof unless (i) a Series 2020 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 2020 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 2020 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 2020 Bonds at their respective
addresses shown on the Registration Books as of the close of business on the preceding Record
12
4127-3236-0228.4
662
Date; provided, however, that, in the case of an Owner of $1,000,000 or more in aggregate
principal amount of Series 2020 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 2020 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 2020 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 2020 Bonds; Application of Proceeds. (a) The
Authority may, at any time, execute the Series 2020 Bonds and deliver the same to the Trustee.
The Trustee shall authenticate the Series 2020 Bonds and deliver the Series 2020 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 2020A Bonds received
by the Trustee, $[ ], shall be deposited by the Trustee as follows:
(i) the Trustee shall deposit the amount of $[ ] in the Costs of
Issuance Fund; and
(ii) the Trustee shall transfer the amount of$[ ] to the Escrow Bank,
to be applied to the payment and redemption of the Prior 2010A Bonds in accordance with
the 2010A Escrow Agreement.
(c) On the Closing Date, the proceeds of the sale of the Series 2020B Bonds received
by the Trustee, $[ ], shall be deposited by the Trustee as follows:
(i) the Trustee shall deposit the amount of $[ ] in the Costs of
Issuance Fund; and
(ii) the Trustee shall transfer the amount of$[ ] to the Escrow Bank,
to be applied to the payment and redemption of the Prior 201 IA Bonds in accordance with
the 2011A 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 2020 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:
13
4127-3236-0228.4
663
(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 Bonds, and (D)providing funds to make any deposit
to any Reserve Account 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 May
1 or November 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 May 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
May 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;
(vii) the designation as to whether such Additional Bonds shall (A) constitute
Common Reserve Bonds secured by the Common Reserve Account, (B) be secured by any
other Reserve Account, or(C) not be secured by any Reserve Account; and
(viii) 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
Account applicable to such Additional Bonds, if any, shall be at least equal to the applicable
Reserve Requirement for such Additional Bonds; and
14
4127-3236-0228.4
664
(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:
(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
15
4127-3236-0228.4
665
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 CLTA 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
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 2020 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
16
4127-3236-0228.4
666
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.
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 2020A Bonds and the Series 2020B 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
17
4127-3236-0228.4
667
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.
(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
18
4127-3236-0228.4
668
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
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.
19
4127-3236-0228.4
669
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 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.
20
4127-3236-0228.4
670
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. (a) [The Series 2020A Bonds maturing on or before
May 1, 20_, are not subject to optional redemption prior to their respective stated maturity dates.
The Series 2020A Bonds maturing on or after May 1, 20 , are subject to optional redemption
prior to their respective stated maturity dates, on any date on or after May 1, 20_, in whole or in
part, in Authorized Denominations, from (i)prepaid Base Rental Payments paid pursuant to
subsection (a) of Section 6.02 of the Lease Agreement, 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.]]
(b) [The Series 2020B Bonds maturing on or before May 1, 20_, are not subject to
optional redemption prior to their respective stated maturity dates. The Series 2020B Bonds
maturing on or after May 1,20 , are subject to optional redemption prior to their respective stated
maturity dates, on any date on or after May 1, 20 , in whole or in part, in Authorized
Denominations, from (i)prepaid Base Rental Payments paid pursuant to subsection (a) of Section
6.02 of the Lease Agreement, 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. Mandatory Sinking Fund Redemption. The Series 2020A Bonds
maturing May 1, 20 shall be subject to mandatory sinking fund redemption, in part, on May 1
in each year, commencing May 1, 20 , at a redemption price equal to the principal amount
thereof, plus accrued interest thereon to the date fixed for redemption, without premium, in the
aggregate respective principal amounts in the respective years as follows:
Sinking Fund Principal Amount
Redemption Date to be
Ma 1 Redeemed
(Maturity)
If some but not all of the Series 2020A Bonds maturing on May 1, 20 are redeemed
pursuant to Section 3.01 hereof,the principal amount of Series 2020A Bonds maturing on May 1,
20_to be redeemed pursuant to this Section shall be reduced by the aggregate principal amount
21
4127-3236-0228.4
671
of the Series 2020A Bonds maturing on May 1,20 so redeemed pursuant to Section 3.01 hereof,
such reduction to be allocated among redemption dates as nearly as practicable on a pro rata basis,
in amounts equal to Authorized Denominations, as determined by the Trustee, notice of which
determination shall be given by the Trustee to the Authority and the City. If some but not all of the
Series 2020A Bonds maturing on May 1, 20 are redeemed pursuant to Section 3.02 hereof, the
principal amount of Series 2020A Bonds maturing on May 1,20 to be redeemed pursuant to this
Section shall be reduced by the aggregate principal amount of the Series 2020A Bonds maturing
on May 1,20_so redeemed pursuant to Section 3.02 hereof, such reduction to be allocated among
redemption dates in Authorized Denominations, as designated by the City in a Written Certificate
of the City.
The Series 2020B Bonds maturing May 1, 20_shall be subject to mandatory sinking fund
redemption, in part, on May 1 in each year,commencing May 1,20 , at a redemption price equal
to the principal amount thereof, plus accrued interest thereon to the date fixed for redemption,
without premium, in the aggregate respective principal amounts in the respective years as follows:
Sinking Fund Principal Amount
Redemption Date to be
Ma 1 Redeemed
(Maturity)
If some but not all of the Series 2020B Bonds maturing on May 1, 20 are redeemed
pursuant to Section 3.01 hereof, the principal amount of Series 2020B Bonds maturing on May 1,
20 to be redeemed pursuant to this Section shall be reduced by the aggregate principal amount
of the Series 2020B Bonds maturing on May 1,20 so redeemed pursuant to Section 3.01 hereof,
such reduction to be allocated among redemption dates as nearly as practicable on a pro rata basis,
in amounts equal to Authorized Denominations, as determined by the Trustee, notice of which
determination shall be given by the Trustee to the Authority and the City. If some but not all of the
Series 2020B Bonds maturing on May 1, 20 are redeemed pursuant to Section 3.02 hereof, the
principal amount of Series 2020B Bonds maturing on May 1,20 to be redeemed pursuant to this
Section shall be reduced by the aggregate principal amount of the Series 2020B Bonds maturing
on May 1,20_so redeemed pursuant to Section 3.02 hereof, such reduction to be allocated among
redemption dates in Authorized Denominations, as designated by the City in a Written Certificate
of the City.
Section 3.04. 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 2020 Bonds,as directed
in a Written Certificate of the City, and (c) with respect to any other redemption of Additional
Bonds, among maturities as provided in the Supplemental Indenture pursuant to which such
Additional Bonds are issued, and by lot among Bonds of the same Series with the same maturity
22
4127-3236-0228.4
672
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 3.05. 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 20 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, 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 3.06. 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 3.07. 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
23
4127-3236-0228.4
673
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.
24
4]27-3236-0228.4
674
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 D. 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 one or more accounts or subaccounts
within the Payment Fund as directed in a Written Request of the City, 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
25
4127-3236-0228.4
675
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.
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 "Series 2020 Interest Account" and a separate account
designated the "Series 2020 Principal Account." Upon the issuance of Additional Bonds, the
Trustee shall also establish and maintain, within the Payment Fund, a separate Interest Account
and a separate Principal Account for each Series of Additional Bonds.
(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 applicable Interest Account and Principal
Account of the Payment Fund amounts transferred from the related Reserve Account pursuant to
subsection (c) of Section 4.05 hereof.
(c) The Trustee, on each Interest Payment Date, shall transfer from the Payment Fund
to each Interest Account an amount equal to the interest on the related Series of Bonds coming due
on such Interest Payment Date; provided, however, that if and to the extent that such amount is
available for such Series of Bonds in any capitalized interest subaccount established pursuant to a
Supplemental Indenture on such Interest Payment Date, the Trustee shall, instead, transfer such
amount from such capitalized interest subaccount to the related Interest Account on such Interest
Payment Date. Moneys in each Interest Account shall be withdrawn and used by the Trustee for
the purpose of paying interest on the related Series of Bonds as and when due and payable.
(d) The Trustee,on each Principal Payment Date, shall transfer from the Payment Fund
to each Principal Account an amount equal to the principal of the related Series of Bonds, including
principal due and payable by reason of mandatory sinking fund redemption, coming due on such
date.Moneys in each Principal Account shall be withdrawn and used by the Trustee for the purpose
of paying principal of the related Series of 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 Series 2020 Bonds shall not be secured by any
Reserve Account.] When provided for in a Supplemental Indenture,the Trustee shall establish and
26
4127-3236-0228.4
676
maintain a special fund designated the "Reserve Fund." Within the Reserve Fund, the Trustee,
when provided for in a Supplemental Indenture, shall establish and maintain a separate account
designated the "Common Reserve Account" and one or more additional Reserve Accounts, each
of which may secure one or more Series of Bonds pursuant hereto and pursuant to the
Supplemental Indenture authorizing the issuance thereof. In connection with the issuance of
Additional Bonds,there shall be deposited in the Common Reserve Account or any other Reserve
Account established and/or maintained for such Additional Bonds, as applicable, 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 any Reserve Account by depositing such Reserve Facility with the Trustee,provided that, at the
time of such substitution, the amount on deposit in such Reserve Account, together with the
amount available under all Reserve Facilities on deposit in such Reserve Account, shall be at least
equal to the Reserve Requirement for such Reserve Account. 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 for the purpose of redeeming the related Series of Bonds 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 to be applied to the payment of capital costs of the City. Amounts on deposit in any
Reserve Account which were not derived from payments under any Reserve Facility credited to
such Reserve Account to satisfy a portion of the Reserve Requirement for such Reserve Account
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 Accounts pursuant to subsection (c) of
Section 4.03 hereof or to the Principal Accounts pursuant to subsection (e) of Section 4.03 hereof,
amounts in the Payment Fund are insufficient for such purpose, the Trustee shall withdraw from
each Reserve Account, to the extent of any funds therein, the amount of the insufficiency of the
related Series of Bonds, and shall transfer any amounts so withdrawn first to the related Interest
Account and then to the related Principal Account. If the amount on deposit in any Reserve
Account 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 a Reserve Account 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 any Reserve Account, plus the amount
available under all available Reserve Facilities held for such Reserve Account, is less than the
Reserve Fund Requirement for such Reserve Account,the first of Base Rental Payments thereafter
27
4127-3236-0228.4
677
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 Accounts, 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 for each Reserve Account;provided,however,
that such Base Rental Payments shall be allocated among all Reserve Accounts ratably without
preference or priority of any kind, according to each Reserve Account's percentage share of the
total deficiencies in all Reserve Accounts.
(f) If, as a result of the payment of principal of or interest on any Series of Bonds, the
Reserve Requirement applicable to such Series of Bonds is reduced, amounts on deposit in the
applicable Reserve Account in excess of such reduced Reserve Requirement shall be transferred
to the related Interest Account(s) and Principal Account(s) of the Payment Fund as directed in a
Written Request of the City.
(g) On any date on which Bonds of a Series 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 related Reserve Account in excess of the applicable 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 a Reserve Account shall be withdrawn and applied
by the Trustee for the final payments of principal of and interest on the Bonds secured by such
Reserve Account.
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.
28
4127-3236-0228.4
678
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 ([_]) 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 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 any Reserve Account of 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 such Reserve Account 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 any Reserve Account. 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 any Reserve Account) shall be retained
therein. Any interest or profits received with respect to investments held in a Reserve Account
shall be transferred to the related Interest Account. Notwithstanding the foregoing, any such
transfer or disbursement shall be made from a Reserve Account only if and to the extent that, after
such transfer, the amount on deposit in such Reserve Account, together with amounts available to
be drawn on all Reserve Facilities held for such Reserve Account, if any, is at least equal to the
Reserve Requirement for such Reserve Account.
29
4127-3236-0228.4
679
(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.
30
4127-3236-0228.4
680
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 such effect, shall be deposited in the Reserve
31
4127-3236-0228.4
681
Accounts, ratably without preference or priority of any kind according to each Reserve Account's
percentage share of the total deficiencies in all Reserve Accounts, to the extent that the amounts
therein are less than the applicable 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 Accounts, ratably without preference or priority of any kind according to each
Reserve Account's percentage share of the total deficiencies in all Reserve Accounts,to the extent
that the amounts therein are less than the applicable Reserve Requirement. Any amounts not
required to be so deposited into the Reserve Accounts 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.
32
4127-3236-0228.4
682
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 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
33
4127-3236-0228.4
683
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.
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 2020A 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 2020A 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 2020A 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 2020 Bonds, shall, upon receipt of indemnification reasonably
satisfactory to the Trustee, or any holder or Beneficial Owner of the Series 2020 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 a
Reserve Account to pay principal and interest on any Series of 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
34
4127-3236-0228.4
684
Advisory 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.
35
4127-3236-0228.4
685
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
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
36
4]27-3236-0228.4
686
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 Bonds due and
payable, with interest on the overdue principal at the rate borne by the respective Bonds.
Notwithstanding anything herein to the contrary, any amounts held in a Reserve Account
shall be applied by the Trustee only after the application of all Lease Revenues and other funds
pursuant to subsections (a), (b) and(c) above and shall only be applied as provided by subsections
37
4127-3236-0228.4
687
(a), (b) and (c) above toward payments related to the Series of Bonds secured by such Reserve
Account.
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
any one or more Owners on account of any Event of Default shall have been discontinued or
38
4127-3236-0228.4
688
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.
39
4127-3236-0228.4
689
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 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 bank or trust company publishes a report of condition at least annually,pursuant to law or
to the requirements of any supervising or examining authority above referred to, then for the
purposes of this Section the combined capital and surplus of such bank or trust company shall be
deemed to be its combined capital and surplus as set forth in its most recent report of condition so
published.
The Trustee may at any time resign by giving written notice of such resignation to the
Authority and the City and by giving notice,by first class mail,postage prepaid,of such resignation
to the Owners at their addresses appearing on the Registration Books. Upon receiving such notice
of resignation, the Authority 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 may reasonably be required for more
fully and certainly vesting in and confirming to such successor Trustee all the right, title and
40
4127-3236-0228.4
690
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 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
41
4127-3236-0228.4
691
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 or for statements made in the preliminary or final official statement relating to the
Bonds, or of the title to the Property.
Except as otherwise expressly provided herein,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.
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 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.
42
4127-3236-0228.4
692
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.
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
43
4127-3236-0228.4
693
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.
44
4127-3236-0228.4
694
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
45
4127-3236-0228.4
695
(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) 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.
46
4127-3236-0228.4
696
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
47
4127-3236-0228.4
697
have given to the Trustee in form satisfactory to it irrevocable instructions to mail, on a date in
accordance with the provisions of Section 3.05 hereof, notice of redemption of such Bond on said
redemption date, said notice to be given in accordance with Section 3.05 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
or interest become payable, shall, at the Written Request of the Authority,be repaid by the Trustee
48
4127-3236-0228.4
698
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.
49
4127-3236-0228.4
699
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 fo 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.
50
4127-3236-0228.4
700
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 similar import
refer to this Indenture as a whole and not to any particular Article, Section, subsection or clause
hereof.
51
4127-3236-0228.4
701
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
200 Main Street
Huntington Beach, California 92648
Attention: Chief Financial Officer
If to the Authority: Huntington Beach Public Financing Authority
c/o City of Huntington Beach
200 Main Street
Huntington Beach, California 92648
Attention: Chief Financial Officer
If to the Trustee: U.S. Bank National Association
633 West Fifth Street, 24th Floor
Los Angeles, California 90071
Attention: Global Corporate Trust
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.
52
4127-3236-0228.4
702
Section 10.13. 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 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.
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:
ATTEST:
Robin Estanislau,
Secretary
CITY OF HUNTINGTON BEACH
By:
U.S. BANK NATIONAL ASSOCIATION
By:
Authorized Officer
53
4127-3236-0228.4
703
EXHIBIT A
FORM OF SERIES 2020 BOND
No. R- ***$***
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(ORANGE COUNTY, CALIFORNIA)
LEASE REVENUE REFUNDING BOND, SERIES 2020[A][B]
[(TAX-EXEMPT)][(FEDERALLY TAXABLE)]
MATURITY DATE INTEREST RATE DATED DATE CUSIP NO.
May 1, 20 % , 20
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 May 1
and November I in each year, commencing ,20 (the"Interest Payment Dates"),until
payment of such Principal Amount in full. This Bond is issued pursuant to the Master Indenture,
dated as of [ ] 1, 2020 (the "Indenture"), by and among the Authority, the City of
Huntington Beach (the "City") and U.S. Bank National Association, 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 15, 20_, 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 U.S. Bank National Association, 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 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.
A-]
4127-3236-0228.4
704
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,
2020 Series [A][B] [(Tax-Exempt)][(Federally Taxable)]" (the"Series 2020[A][B] Bonds") in the
aggregate principal amount of$[ ]. The Series 2020[A][B] Bonds are issued pursuant
to the Indenture, and this reference incorporates the Indenture herein. An additional series of
bonds, the Huntington Beach Public Financing Authority (Orange County, California) Lease
Revenue Refunding Bonds, 2020 Series [A][B] [(Tax-Exempt)][(Federally Taxable)] (the "Series
2020[A][B] Bonds"), in the aggregate principal amount of$[ ], have also been issued
pursuant to the terms of the Indenture. The Series 2020A Bonds and the Series 2020B Bonds are
collectively referred to at the "Series 2020 Bonds."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 2020 Bonds. The Series 2020 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 Master Lease Agreement, dated as of
[ ] 1, 2020,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.
A-2
4127-3236-0228.4
705
The Bonds are issuable as fully registered Bonds without coupons in Authorized
Denominations ($5,000 or any integral multiple thereof).
[The Series 2020 Bonds are subject to extraordinary, optional and mandatory 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.
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
A-3
4127-3236-0228.4
706
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
A-4
4127-3236-0228.4
707
CERTIFICATE OF AUTHENTICATION
This is one of the Series 2020 Bonds described in the within-mentioned Indenture and
registered on the Registration Books.
Dated:
U.S. BANK NATIONAL
ASSOCIATION, AS TRUSTEE
By:
Authorized Signatory
A-5
4127-3236-0228.4
708
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.
A-6
4127-3236-0228.4
709
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 better rating for the
B-1
4127-3236-0228.4
710
issuer's long-term debt as provided by Moody's, S&P, or Fitch and "P-1", "A-1", "F1" 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 "F I" 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;
B-2
4127-3236-0228.4
711
(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.
B-3
4127-3236-0228.4
712
EXHIBIT C
FORM OF COSTS OF ISSUANCE FUND REQUISITION
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(ORANGE COUNTY, CALIFORNIA)
LEASE REVENUE REFUNDING BONDS, SERIES 2020A
(TAX-EXEMPT)
AND
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(ORANGE COUNTY, CALIFORNIA)
LEASE REVENUE REFUNDING BONDS, SERIES 2020B
(FEDERALLY TAXABLE)
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;
(b) that U.S. Bank National Association, as trustee (the "Trustee"),is hereby requested
to disburse from the Costs of Issuance Fund, established pursuant to the Master Indenture, dated
as of [ ] 1, 2020 (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
C-1
4127-3236-0228.4
713
(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:
C-2
4127-3236-0228.4
714
ATTACHMENT
COST OF ISSUANCE FUND DISBURSEMENTS
Payee Name and Address Purpose of Obligation Amount
C-3
4127-3236-0228.4
715
ATTAC H M E N T #5
$
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(ORANGE COUNTY,CALIFORNIA)
LEASE REVENUE REFUNDING BONDS
2020 Series A (Tax-Exempt) 2020 Series B
(Federally Taxable)
BOND PURCHASE AGREEMENT
2020
Huntington Beach Public Financing Authority
c/o City of Huntington Beach Department of Finance
2000 Main Street
Huntington Beach, California 92648
Attention: Executive Director
City of Huntington Beach
c/o City of Huntington Beach Department of Finance
2000 Main Street
Huntington Beach, California 92648
Ladies and Gentlemen:
The undersigned, Stifel Nicolaus & Co. Incorporated (the "Underwriter"), acting not as a
fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement
(which, together with Exhibit A, is referred to as the "Purchase Agreement") with the Huntington
Beach Public Financing Authority (the "Authority") and the City of Huntington Beach, California
(the "City"), which, upon the acceptance of the Authority and the City, will be binding upon the
Authority, the City and the Underwriter. This offer is made subject to acceptance by the Authority
and by the City by the execution of this Purchase Agreement and delivery of the same to the
Underwriter prior to 6:00 P.M., Pacific Standard Time, on the date hereof, and, if not so accepted,
will be subject to withdrawal by the Underwriter upon notice delivered to the Authority and the City
at any time prior to the acceptance hereof by the Authority and the City. Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the Master Indenture, dated as
of July 1, 2020 (the "Indenture"), by and among the City, the Authority and U.S. Bank National
Association, as trustee (the "Trustee") substantially in the form previously submitted to the
Underwriter with only such changes therein as shall be mutually agreed upon by the Authority, the
City and the Underwriter.
Section 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the
representations, warranties and agreements herein set forth, the Underwriter hereby agrees to
purchase from the Authority and the City, and the Authority and the City hereby agree to issue, sell
and deliver to the Underwriter all (but not less than all) of the Huntington Beach Public Financing
Authority (Orange County, California) Lease Revenue Refunding Bonds, 2020 Series A (Tax-
1
716
Exempt) in the aggregate principal amount of $ (the "Series 2020A Bonds") and
Huntington Beach Public Financing Authority (Orange County, California) Lease Revenue
Refunding Bonds, 2020 Series B (Federally Taxable) in the aggregate principal amount of
$ (the "Series 2020B Bonds" and, together with the Series 2020A Bonds, the "Bonds").
The Bonds will be dated as of their date of delivery. Interest on the Bonds shall be payable
semiannually on May 1 and November 1 in each year, commencing 1, 20 and will bear
interest at the rates and mature in the principal amounts and on the dates as set forth in Exhibit A
hereto. The purchase price for the Series 2020A Bonds shall be equal to $ (being the
aggregate principal amount thereof plus net original issue premium of $ and less an
underwriter's discount with respect to the Series 2020A Bonds of$ ) and the purchase price
for the Series 2020B Bonds shall be equal to $ (being the aggregate principal amount
thereof less an underwriter's discount with respect to the Series 2020B Bonds of$ ).
The City and Authority acknowledge and agree that: (i) the purchase and sale of the Bonds
pursuant to this Purchase Agreement is an arm's-length commercial transaction among the City, the
Authority and the Underwriter; (ii) in connection therewith and with the discussions, undertakings
and procedures leading up to the consummation of such transaction, the Underwriter is and has been
acting solely as a principal and is not acting as a Municipal Advisor (as defined in Section 15B of
The Securities Exchange Act of 1934, as amended), financial advisor or fiduciary; (iii) the
Underwriter has not assumed an advisory or fiduciary responsibility in favor of the City or the
Authority with respect to the offering contemplated hereby or the discussions, undertakings and
procedures leading thereto (irrespective of whether the Underwriter has provided other services or
are currently providing other services to the City or the Authority on other matters); (iv) the only
obligations the Underwriter has to the City and the Authority with respect to the transaction
contemplated hereby expressly are set forth in this Purchase Agreement; and (v) the City and the
Authority have consulted their own legal, accounting, tax, financial and other advisors to the extent
they have deemed appropriate.
Section 2. The Bonds. The Bonds shall be secured by revenues consisting primarily of
base rental payments ("Base Rental Payments") to be paid by the City pursuant to the Master Lease
Agreement between the City and the Authority, dated as of July 1, 2020 (the "Lease Agreement").
The Authority's right to receive the Base Rental Payments due under the Lease Agreement and to
exercise remedies upon default under such Lease Agreement shall be assigned to the Trustee for the
benefit of the owners of the Bonds pursuant to the Indenture.
The Bonds shall be as described in, and shall be secured under and pursuant to the Indenture.
The Series 2020A Bonds are being issued to (i) refund the outstanding Huntington Beach
Public Financing Authority Lease Revenue Refunding Bonds, 2010 Series A (the "Refunded 2010
Bonds"), and (ii) pay costs of issuance of the Series 2020A Bonds. The Series 2020B Bonds are
being issued to (i) advance refund the outstanding Huntington Beach Public Financing Authority
Lease Revenue Refunding Bonds, 2011 Series A (Capital Improvement Refinancing Project)(the
"Refunded 2011 Bonds" and, together with the Refunded 2010 Bonds, the "Refunded Bonds").
The Bonds, this Purchase Agreement, the Indenture, the Lease Agreement, the Master Site
Lease dated as of July 1, 2020 (the "Site Lease")by and between the City and the Authority, and the
resolution of the Authority authorizing the issuance of the Bonds and the execution and delivery of
the Authority Documents (hereinafter defined) are collectively referred to herein as the "Authority
Documents."
2
717
This Purchase Agreement, the Continuing Disclosure Certificate, dated as of the Closing
Date (as hereinafter defined) and entered into by the City (the "Continuing Disclosure Certificate"),
the Indenture, the Lease Agreement, the Site Lease and the resolution of the City authorizing the
execution and delivery of the City Documents (hereinafter defined) are collectively referred to herein
as the "City Documents."
Section 3. Public Offering.
(a) The Underwriter agrees to make an initial public offering of all of the Bonds
at the public offering prices (or yields) set forth on Exhibit A attached hereto and incorporated herein
by reference. Subsequent to the initial public offering, the Underwriter reserves the right to change
the public offering prices (or yields) as the Underwriter deems necessary in connection with the
marketing of the Bonds, provided that the Underwriter shall not change the interest rates set forth on
Exhibit A. The Bonds may be offered and sold to certain dealers (including dealers depositing the
Bonds into investment trusts) at prices lower than such initial public offering prices.
(b) The Underwriter agrees to assist the City in establishing the issue price of the
Bonds and shall execute and deliver to the City at Closing an "issue price" or similar certificate,
together with the supporting pricing wires or equivalent communications, substantially in the form
attached hereto as Exhibit B, with such modifications as may be appropriate or necessary, in the
reasonable judgment of the Underwriter, the City and Bond Counsel, to accurately reflect, as
applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds.
All actions to be taken by the City under this section to establish the issue price of the Bonds may be
taken on behalf of the City by the Municipal Advisor, identified herein and any notice or report to be
provided to the City may be provided to the Municipal Advisor.
(c) Except as otherwise set forth in Exhibit A. the City will treat the first price at
which 10% of each maturity of the [Series 2020A Bonds] (the "10% test") is sold to the public as the
issue price of that maturity (if different interest rates apply within a maturity, each separate CUSIP
number within that maturity will be subject to the 10% test). At or promptly after the execution of
this Purchase Agreement, the Underwriter shall report to the City the price or prices at which it has
sold to the public each maturity of[Series 2020A Bonds]. If at that time the 10% test has not been
satisfied as to any maturity of the [Series 2020A Bonds], the Underwriter agrees to promptly report
to the City the prices at which it sells the unsold [Series 2020A Bonds] of that maturity to the public.
That reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10%
test has been satisfied as to the [Series 2020A Bonds] of that maturity or until all [Series 2020A
Bonds] of that maturity have been sold to the public.
(d) The Underwriter confirms that it has offered the Bonds to the public on or
before the date of this Purchase Agreement at the offering price or prices (the "initial offering
price"), or at the corresponding yield or yields, set forth in Exhibit A, except as otherwise set forth
therein. Exhibit A also sets forth, identified under the column "Hold the Offering Price Rule Used,"
as of the date of this Purchase Agreement, the maturities, if any, of the [Series 2020A Bonds] for
which the 10% test has not been satisfied and for which the City and the Underwriter agree that the
restrictions set forth in the next sentence shall apply, which will allow the City to treat the initial
offering price to the public of each such maturity as of the sale date as the issue price of that maturity
(the "hold-the-offering-price rule"). So long as the hold-the-offering-price rule remains applicable to
any maturity of the [Series 2020A Bonds], the Underwriter will neither offer nor sell unsold [Series
3
718
2020A Bonds] of that maturity to any person at a price that is higher than the initial offering price to
the public during the period starting on the sale date and ending on the earlier of the following:
1. the close of the fifth (5th)business day after the sale date; or
2. the date on which the Underwriter has sold at least 10% of that maturity of
the [Series 2020A Bonds] to the public at a price that is no higher than the initial offering price to the
public.
The Underwriter shall promptly advise the City when it has sold 10% of that maturity of the
[Series 2020A Bonds] to the public at a price that is no higher than the initial offering price to the
public, if that occurs prior to the close of the fifth (5th)business day after the sale date.
(e) The Underwriter confirms that any selling group agreement and any retail
distribution agreement relating to the initial sale of the Bonds to the public, together with the related
pricing wires, contains or will contain language obligating each dealer who is a member of the selling
group and each broker-dealer that is a party to such retail distribution agreement, as applicable, to:
(1) report the prices at which it sells to the public the unsold Bonds of each maturity allotted to it
until it is notified by the Underwriter that either the 10% test has been satisfied as to the [Series
2020A Bonds] of that maturity or all [Series 2020A Bonds] of that maturity have been sold to the
public; and (2) comply with the hold-the-offering-price rule, if applicable, in each case if and for so
long as directed by the Underwriter. The City acknowledges that, in making the representation set
forth in this subsection, the Underwriter will rely on: (A) in the event that a selling group has been
created in connection with the initial sale of the [Series 2020A Bonds] to the public, the agreement of
each dealer who is a member of the selling group to comply with the hold-the-offering-price rule, if
applicable, as set forth in a selling group agreement and the related pricing wires; and (B) in the
event that a retail distribution agreement was employed in connection with the initial sale of the
Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply
with the hold-the-offering-price rule, if applicable, as set forth in the retail distribution agreement and
the related pricing wires. The City further acknowledges that the Underwriter shall not be liable for
the failure of any dealer who is a member of a selling group, or of any broker-dealer that is a parry to
a retail distribution agreement, to comply with its corresponding agreement regarding the hold-the-
offering-price rule as applicable to the [Series 2020A Bonds].
(f) The Underwriter acknowledges that sales of any Bonds to any person that is a
related party to the Underwriter shall not constitute sales to the public for purposes of this section.
Further, for purposes of this section:
1. "public"means any person other than an underwriter or a related party;
2. "underwriter" means: (A) any person that agrees pursuant to a written
contract with the City (or with the lead underwriter to form an underwriting syndicate) to participate
in the initial sale of the Bonds to the public; and (B) any person that agrees pursuant to a written
contract directly or indirectly with a person described in clause (A) to participate in the initial sale of
the Bonds to the public (including a member of a selling group or a party to a retail distribution
agreement participating in the initial sale of the Bonds to the public);
3. a purchaser of any of the Bonds is a "related party" to an underwriter if the
underwriter and the purchaser are subject, directly or indirectly, to: (A) at least 50% common
4
719
ownership of the voting power or the total value of their stock, if both entities are corporations
(including direct ownership by one corporation of another); (ii) more than 50% common ownership
of their capital interests or profits interests, if both entities are partnerships (including direct
ownership by one partnership of another); or (iii) more than 50% common ownership of the value of
the outstanding stock of the corporation or the capital interests or profit interests of the partnership,
as applicable, if one entity is a corporation and the other entity is a partnership (including direct
ownership of the applicable stock or interests by one entity of the other); and
4. "sale date" means the date of execution of this Purchase Agreement by all
parties.
Section 4. The Official Statement. By its acceptance of this proposal, the Authority
and the City ratify, confirm and approve of the use and distribution by the Underwriter prior to the
date hereof of the preliminary official statement relating to the Bonds dated _, 2020
(including the cover page, all appendices and all information incorporated therein and any
supplements or amendments thereto and as disseminated in its printed physical form or in electronic
form in all respects materially consistent with such physical form, the "Preliminary Official
Statement") that authorized officers of the Authority and the City deemed "final" as of its date, for
purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 ("Rule 15c2-12"),
except for certain information permitted to be omitted therefrom by Rule 15c2-12. The Authority
and the City hereby agree to deliver or cause to be delivered to the Underwriter, within seven
business days of the date hereof, copies of the final official statement, dated the date hereof, relating
to the Bonds (including all information previously permitted to have been omitted by Rule 15c2-12)
(including the cover page, all appendices, all information incorporated therein and any amendments
or supplements as have been approved by the Authority, the City and the Underwriter, the "Official
Statement"), in such quantity and format as the Underwriter shall reasonably request to comply with
Section (b)(4) of Rule 15c2-12 and the rules of the Municipal Securities Rulemaking Board (the
The Underwriter hereby agrees that it will not request that payment be made by any
purchaser of the Bonds prior to delivery by the Underwriter to the purchaser of a copy of the Official
Statement. The Underwriter agrees: (i)to provide the Authority and the City upon request with final
pricing information on the Bonds on a timely basis; and (ii)to promptly file a copy of the Official
Statement, including any supplements prepared by the Authority or the City with the MSRB at
http://emma.msrb.org. The Authority and the City hereby approve of the use and distribution by the
Underwriter of the Official Statement in connection with the offer and sale of the Bonds. The
Authority and the City will cooperate with the Underwriter in the filing by the Underwriter of the
Official Statement with the MSRB.
Section 5. Closing. At 8:00 a.m., Pacific Standard Time, on _, 2020 (the
"Closing Date"), or at such other time or date as the Authority and the Underwriter agree upon, the
Authority shall deliver or cause to be delivered to the Trustee, and the Trustee shall deliver or cause
to be delivered to The Depository Trust Company, New York New York ("DTC"), the Bonds in
definitive form, duly executed and authenticated. Concurrently with the delivery of the Bonds, the
Authority and the City will deliver the documents hereinafter mentioned at the offices of Orrick,
Herrington & Sutcliffe LLP, Los Angeles, California ("Bond Counsel"), or another place to be
mutually agreed upon by the Authority, the City and the Underwriter. The Underwriter will accept
such delivery and pay the purchase price of the Bonds as set forth in Section 1 hereof by wire transfer
5
720
in immediately available funds. This payment for and delivery of the Bonds, together with the
delivery of the aforementioned documents, is herein called the"Closing."
The Bonds shall be registered in the name of Cede& Co., as nominee of DTC in
denominations of five thousand dollars ($5,000) or any integral multiple thereof and shall be made
available to the Underwriter at least one (1)business day before the Closing for purposes of
inspection and packaging. The Authority and the City acknowledge that the services of DTC will be
used initially by the Underwriter in order to permit the issuance of the Bonds in book-entry form, and
agree to cooperate fully with the Underwriter in employing such services.
Section 6. Representations, Warranties and Covenants of the Authority. The
Authority represents, warrants and covenants to the Underwriter and the City that:
(a) The Authority is a public body, duly organized and existing under the
Constitution and laws of the State of California(the "State"), including the Authority's Joint Exercise
of Powers Agreement (the "JPA Agreement") and the Joint Exercise of Powers Act (Government
Code Division 7, Chapter 5, Section 6500 et seq.) (the"JPA Act").
(b) The Authority has full legal right, power and authority to adopt or enter into,
as the case may be, and to carry out and consummate the transactions on its part contemplated by the
Authority Documents.
(c) By all necessary official action, the Authority has duly adopted, authorized
and approved the Authority Documents, has duly authorized and approved the Preliminary Official
Statement, will, by execution thereof, duly authorize and approve the Official Statement, and has
duly adopted or authorized and approved the execution and delivery of, and the performance by the
Authority of the obligations on its part contained in, the Authority Documents and the consummation
by it of all other transactions contemplated by the Authority Documents in connection with the
issuance of the Bonds. As of the date hereof, such authorizations and approvals are in full force and
effect and have not been amended, modified or rescinded. When executed and delivered, and
assuming due execution and delivery by the other parties thereto, if applicable, the Authority
Documents will constitute the legally valid and binding obligations of the Authority enforceable in
accordance with their respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting
creditors' rights generally, or by the exercise of judicial discretion and the limitations on legal
remedies against joint powers authorities in the State. The Authority will at the Closing be in
compliance in all respects, with the terms of the Authority Documents.
(d) To the best of its knowledge, the Authority is not in any material respect in
breach of or default under any applicable constitutional provision, law or administrative regulation of
any state or of the United States, or any agency or instrumentality of either, or any applicable
judgment or decree, or any loan agreement, indenture, bond, note, resolution, agreement or other
instrument to which the Authority is a party which breach or default has or may have an adverse
effect on the ability of the Authority to perform its obligations under the Authority Documents, and
no event has occurred and is continuing which with the passage of time or the giving of notice, or
both, would constitute such a default or event of default under any such instrument; and the adoption,
execution and delivery of the Authority Documents, if applicable, and compliance with the
provisions on the Authority's part contained therein, will not conflict in any material way with or
constitute a material breach of or a material default under any constitutional provision, law,
6
721
administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution,
agreement or other instrument to which the Authority is a party, nor will any such execution,
delivery, adoption or compliance result in the creation or imposition of any lien, charge or other
security interest or encumbrance of any nature whatsoever upon any of the property or assets of the
Authority or under the terms of any such law, regulation or instrument, except as may be provided by
the Authority Documents.
(e) To the best of its knowledge, all material authorizations, approvals, licenses,
permits, consents and orders of any governmental authority, legislative body, board, agency or
commission having jurisdiction of the matter which are required for the due authorization by, or
which would constitute a condition precedent to or the absence of which would materially adversely
affect the due performance by the Authority of its obligations in connection with the Authority
Documents have been duly obtained or, when required for future performance, are expected to be
obtained, other than such approvals, consents and orders as may be required under the Blue Sky or
securities laws of any state in connection with the offering and sale of the Bonds; except as described
in or contemplated by the Preliminary Official Statement and the Official Statement, all
authorizations, approvals, licenses, permits, consents and orders of any governmental authority,
board, agency or commission having jurisdiction of the matter which are required for the due
authorization by, or which would constitute a condition precedent to or the absence of which would
materially adversely affect the due performance by, the Authority of its obligations under the
Authority Documents have been duly obtained.
(f) The Authority hereby agrees that it will notify the other parties hereto if,
within the period from the date of this Purchase Agreement to and including the date twenty-five (25)
days following the end of the underwriting period (as defined herein), the Authority discovers any
pre-existing or subsequent fact or becomes aware of the occurrence of any event, in any such case,
which might cause the Official Statement (as the same may have then been supplemented or
amended) to contain any untrue statement of a material fact or to omit to state a material fact
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading.
(g) As of the time of acceptance hereof and the Closing, except as disclosed in
the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, governmental authority, public board or body, pending, with service
of process having been accomplished, or threatened in writing and delivered to the Authority: (i) in
any way questioning the corporate existence of the Authority or the titles of the officers of the
Authority to their respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin
the issuance or delivery of any of the Bonds, or the payment or collection of Base Rental Payments
with respect to the Lease Agreement or any amounts pledged or to be pledged to pay the principal of
and interest on the Bonds, or in any way contesting or affecting the validity of the Bonds or the other
Authority Documents or the consummation of the transactions contemplated thereby or hereby, or
contesting the exclusion of the interest on the Bonds from taxation or contesting the powers of the
Authority or its authority to issue the Bonds; (iii)which would be likely to result in any material
adverse change relating to the business, operations or financial condition of the Authority; or
(iv) contesting the completeness or accuracy of the Preliminary Official Statement or the Official
Statement or any supplement or amendment thereto or asserting that the Preliminary Official
Statement or the Official Statement contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
7
722
(h) To the best of the Authority's knowledge, there is no basis for any action,
suit, proceeding, inquiry or investigation of the nature described in clauses (i) through (iv) of
paragraph 6(g).
(i) The information in the Official Statement set forth under the captions
"INTRODUCTION—The Authority" and "THE AUTHORITY" does not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they were made, not
misleading.
0) Any certificate signed by any officer of the Authority authorized to execute
such certificate in connection with the execution, sale and delivery of the Bonds and delivered to the
Underwriter shall be deemed a representation of the Authority to the Underwriter and the City as to
the statements made therein but not of the person signing such certificate.
Section 7. Representations, Warranties and Covenants of the City. The City
represents, warrants and covenants to the Underwriter and the Authority that:
(a) The City is a chartered city and municipal corporation duly organized and
existing under and by virtue of the laws of the State.
(b) The City has full legal right, power and authority to adopt or enter into, as the
case may be, and to carry out and consummate the transactions on its part contemplated by the City
Documents.
(c) By all necessary official action, the City has duly adopted, authorized and
approved the City Documents, has duly authorized and approved the Preliminary Official Statement
and the Official Statement, and has duly adopted or authorized and approved the execution and
delivery of, and the performance by the City of the obligations on its part contained in, the City
Documents and the consummation by it of all other transactions contemplated by the City
Documents in connection with the issuance of the Bonds. As of the date hereof, such authorizations
and approvals are in full force and effect and have not been amended, modified or rescinded. When
executed and delivered, and assuming due execution and delivery by the other parties thereto, if
applicable, the City Documents will constitute the legally valid and binding obligations of the City
enforceable in accordance with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to
or affecting creditors' rights generally, or by the exercise of judicial discretion and the limitations on
legal remedies against municipal corporations in the State. The City will at the Closing be in
compliance in all respects, with the terms of the City Documents.
(d) To the best of its knowledge, the City is not in any material respect in breach
of or default under any applicable constitutional provision, law or administrative regulation of any
state or of the United States, or any agency or instrumentality of either, or any applicable judgment or
decree, or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to
which the City is a party which breach or default has or may have an adverse effect on the ability of
the City to perform its obligations under the City Documents, and no event has occurred and is
continuing which with the passage of time or the giving of notice, or both, would constitute such a
default or event of default under any such instrument; and the adoption, execution and delivery of the
City Documents, if applicable, and compliance with the provisions on the City's part contained
8
723
therein, will not conflict in any material way with or constitute a material breach of or a material
default under any constitutional provision, law, administrative regulation, judgment, decree, loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a
party nor will any such execution, delivery, adoption or compliance result in the creation or
imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever
upon any of the property or assets of the City or under the terms of any such law, regulation or
instrument, except as may be provided by the City Documents.
(e) To the best of its knowledge, all material authorizations, approvals, licenses,
permits, consents and orders of any governmental authority, legislative body, board, agency or
commission having jurisdiction of the matter which are required for the due authorization by, or
which would constitute a condition precedent to or the absence of which would materially adversely
affect the due performance by the City of its obligations in connection with the City Documents have
been duly obtained or, when required for future performance, are expected to be obtained, other than
such approvals, consents and orders as may be required under the Blue Sky or securities laws of any
state in connection with the offering and sale of the Bonds; except as described in or contemplated by
the Preliminary Official Statement, all authorizations, approvals, licenses, pennits, consents and
orders of any governmental authority, board, agency or commission having jurisdiction of the matter
which are required for the due authorization by, or which would constitute a condition precedent to
or the absence of which would materially adversely affect the due performance by, the City of its
obligations under the City Documents have been duly obtained.
(f) The Preliminary Official Statement was as of its date, and the Official
Statement is, and at all times subsequent to the date of the Official Statement up to and including the
Closing will be, true and correct in all material respects, and the Preliminary Official Statement and
the Official Statement do not and will not contain and up to and including the Closing will not
contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements contained therein, in the light of the circumstances under which they were made, not
misleading (except that this representation does not include information regarding DTC and its
book-entry only system, information under the caption"UNDERWRITING," CUSIP numbers,prices
and yields for the Bonds and any other information provided by the Underwriter, as to which no view
is expressed).
(g) The City will advise the Underwriter promptly of any proposal to amend or
supplement the Official Statement and will not effect or consent to any such amendment or
supplement without the consent of the Underwriter, which consent will not be unreasonably
withheld. The City will advise the Underwriter promptly of the institution of any proceedings known
to it by any governmental authority prohibiting or otherwise affecting the use of the Official
Statement in connection with the offering, sale or distribution of the Bonds.
(h) As of the time of acceptance hereof and the Closing, except as disclosed in
the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, governmental authority, public board or body, pending, with service
of process having been accomplished, or threatened in writing and delivered to the City: (i) in any
way questioning the corporate existence of the City or the titles of the officers of the City to their
respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin the issuance or
delivery of any of the Bonds, or the payment or collection of Base Rental Payments with respect to
the Lease Agreement or of any amounts pledged or to be pledged to pay the principal of and interest
on the Bonds, or in any way contesting or affecting the validity of the Bonds, or the City Documents
9
724
or the consummation of the transactions contemplated thereby or hereby, or contesting the exclusion
of the interest on the Series 2020A Bonds from taxation, or contesting the powers of the Authority to
issue the Bonds; (iii)which would be likely to result in any material adverse change relating to the
business, operations or financial condition of the City; and (iv) contesting the completeness or
accuracy of the Preliminary Official Statement or the Official Statement or any supplement or
amendment thereto or asserting that the Preliminary Official Statement or the Official Statement
contained any untrue statement of a material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(i) To the best of the City's knowledge, there is no basis for any action, suit,
proceeding, inquiry or investigation of the nature described in paragraph 7(h).
0) Until the date which is twenty-five (25) days after the "end of the
underwriting period" (as hereinafter defined), if any event shall occur of which the City is aware that
would cause the Official Statement to contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements in the Official Statement, in light of the
circumstances under which they were made, not misleading, the City shall forthwith notify the
Underwriter of any such event of which it has knowledge and shall cooperate fully in furnishing any
information available to it for any supplement to the Official Statement necessary, in the
Underwriter's reasonable opinion, so that the statements therein as so supplemented will not be
misleading in light of the circumstances existing at such time and the City shall promptly furnish to
the Underwriter a reasonable number of copies of such supplement. As used herein, the term "end of
the underwriting period" means the later of such time as: (i)the Authority delivers the Bonds to the
Underwriter; or (ii)the Underwriter does not retain, directly or as a member of an underwriting
syndicate, an unsold balance of the Bonds for sale to the public. Unless the Underwriter gives
written notice to the contrary, the"end of the underwriting period" shall be deemed to be the Closing
Date. Any notice delivered pursuant to this provision shall be written notice delivered to the
Authority and the City at or prior to the Closing Date of the Bonds and shall specify a date (other
than the Closing Date) to be deemed the "end of the underwriting period." The City agrees to
cooperate with the Underwriter in the filing by the Underwriter of such supplement or amendment to
the Official Statement with the MSRB.
(k) Except as disclosed in the Preliminary Official Statement and the Official
Statement, the City has not within the last five years failed to comply in any material respect with
any continuing disclosure undertakings with regard to Rule 15e2-12, to provide annual reports or
notices of material events specified in such rule.
(1) The financial statements relating to the receipts, expenditures and cash
balances of the City as of June 30, 2019 attached as Appendix B to the Official Statement fairly
represent the receipts, expenditures and cash balances of the City. Except as disclosed in the Official
Statement or otherwise disclosed in writing to the Underwriter, there has not been any materially
adverse change in the financial condition of the City or in its operations since June 30, 2019 and
there has been no occurrence, circumstance or combination thereof which is reasonably expected to
result in any such materially adverse change.
(m) To the extent required by law, the City will undertake, pursuant to the
Continuing Disclosure Certificate, to provide annual reports and notices of certain enumerated
10
725
events. A description of this undertaking is set forth in Appendix F to the Preliminary Official
Statement and will also be set forth in the Official Statement.
(n) Any certificate signed by any officer of the City authorized to execute such
certificate in connection with the execution, sale and delivery of the Bonds and delivered to the
Underwriter shall be deemed a representation of the City to the Underwriter and the Authority as to
the statements made therein but not of the person signing such certificate.
Section 8. Conditions to the Obligations of the Underwriter. The Underwriter has
entered into this Purchase Agreement in reliance upon the representations and warranties of the
Authority and the City contained herein. The obligations of the Underwriter to accept delivery of
and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the
accuracy in all material respects of the statements of the officers and other officials of the Authority
and of the City, as well as authorized representatives of the Trustee made in any certificates or other
documents furnished pursuant to the provisions hereof, to the performance by the Authority and the
City of their obligations to be performed hereunder at or prior to the Closing Date; and to the
following additional conditions:
(a) The representations, warranties and covenants of the City and the Authority
contained herein shall be true, complete and correct at the date hereof and at the time of the Closing,
as if made on the Closing Date.
(b) At the time of Closing, the City Documents and the Authority Documents
shall be in full force and effect as valid and binding agreements between or among the various parties
thereto, and the City Documents, the Authority Documents and the Official Statement shall not have
been amended, modified or supplemented except as may have been agreed to in writing by the
Underwriter.
(c) At the time of the Closing, no default shall have occurred or be existing under
the City Documents or the Authority Documents, and the City shall not be in default in the payment
of principal or interest with respect to any of its financial obligations, which default would adversely
impact the ability of the City to pay the Base Rental Payments.
(d) In recognition of the desire of the Authority, the City and the Underwriter to
effect a successful public offering of the Bonds, and in view of the potential adverse impact of any of
the following events on such a public offering, this Purchase Agreement shall be subject to
termination in the absolute discretion of the Underwriter by notification, in writing, to the Authority
and the City prior to delivery of and payment for the Bonds, if at any time prior to such time:
(i) there shall have occurred any outbreak or escalation of hostilities,
declaration by the United States of America of a national emergency or war or other calamity
or crisis (or the escalation of such calamity or crisis) the effect of which on financial markets
is materially adverse such as to make it, in the sole judgment of the Underwriter, impractical
to proceed with the purchase or delivery of the Bonds as contemplated by the Official
Statement(exclusive of any amendment or supplement thereto); or
(ii) a general banking moratorium shall have been declared by federal,
State or New York authorities, or the general suspension of trading on any national securities
exchange; or
11
726
(iii) any event shall occur which makes untrue any statement or results in
an omission to state a material fact necessary to make the statements in the Preliminary
Official Statement or the Official Statement, in the light of the circumstances under which
they were made, not misleading, which event, in the reasonable opinion of the Underwriter
would materially or adversely affect the ability of the Underwriter to market the Bonds; or
(iv) any legislation, ordinance, rule or regulation shall be introduced in, or
be enacted by any govermnental body, department or agency of the State, or a decision by
any court of competent jurisdiction within the State shall be rendered which materially
adversely affects the market price of the Bonds; or
(v) the marketability of the Bonds or the market price thereof, in the
reasonable opinion of the Underwriter, has been materially adversely affected by an
amendment to the Constitution of the United States of America or by any legislation in or by
the Congress of the United States of America or by the State, or the amendment of legislation
pending as of the date of this Purchase Agreement in the Congress of the United States of
America, or the recommendation to Congress or endorsement for passage (by press release,
other form of notice or otherwise) of legislation by the President of the United States of
America, the Treasury Department of the United States of America, the Internal Revenue
Service or the Chairman or ranking minority member of the Committee on Finance of the
United States Senate or the Committee on Ways and Means of the United States House of
Representatives, or the proposal for consideration of legislation by either such Committee or
by any member thereof, or the presentment of legislation for consideration as an option by
either such Committee, or by the staff of the Joint Committee on Taxation of the Congress of
the United States of America, or the favorable reporting for passage of legislation to either
House of the Congress of the United States of America by a Committee of such House to
which such legislation has been referred for consideration; or
(vi) an order, decree or injunction shall have been issued by any court of
competent jurisdiction, or order, ruling, regulation (final, temporary or proposed), official
statement or other form of notice or communication issued or made by or on behalf of the
Securities and Exchange Commission, or any other governmental agency having jurisdiction
of the subject matter, to the effect that: (i) obligations of the general character of the Bonds,
or the Bonds, including any or all underlying arrangements, are not exempt from registration
under the Securities Act of 1933, as amended, or that the Trust Agreement is not exempt
from qualification under the Trust Indenture Act of 1939; or (ii)the issuance, offering or sale
of obligations of the general character of the Bonds, or the issuance, offering or sale of the
Bonds, including any or all underlying obligations, as contemplated hereby or by the
Preliminary Official Statement and the Official Statement, is or would be in violation of the
federal securities laws as amended and then in effect; or
(vii) legislation shall be introduced, by amendment or otherwise, or be
enacted by the House of Representatives or the Senate of the Congress of the United States of
America, or a decision by a court of the United States of America shall be rendered, or a stop
order, ruling, regulation or official statement by or on behalf of the Securities and Exchange
Commission or other governmental agency having jurisdiction of the subject matter shall be
made or proposed, to the effect that the issuance, offering or sale of obligations of the general
character of the Bonds, as contemplated hereby or by the Preliminary Official Statement and
the Official Statement, is or would be in violation of any provision of the Securities Act of
12
727
1933, as amended and as then in effect, or the Securities Exchange Act of 1934, as amended
and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect, or
with the purpose or effect of otherwise prohibiting the issuance, offering or sale of the Bonds
or obligations of the general character of the Bonds, as contemplated hereby or by the
Preliminary Official Statement and the Official Statement; or
(viii) additional material restrictions not in force as of the date hereof shall
have been imposed upon trading in securities generally by any governmental authority or by
any national securities exchange, which, in the Underwriter's reasonable opinion, materially
adversely affects the marketability or market price of the Bonds; or
(ix) the New York Stock Exchange, or other national securities exchange
or association or any governmental authority, shall impose as to the Bonds, or obligations of
the general character of the Bonds, any material restrictions not now in force, or increase
materially those now in force, with respect to the extension of credit by or the charge to the
net capital requirements of broker dealers; or
(x) trading in securities on the New York Stock Exchange or the
American Stock Exchange shall have been suspended or limited or minimum prices have
been established on either such exchange which, in the Underwriter's reasonable opinion,
materially adversely affects the marketability or market price of the Bonds; or
(xi) any rating of the Bonds or the rating of any general fund obligations
of the City shall have been downgraded or withdrawn by a national rating service, which, in
the reasonable opinion of the Underwriter, materially adversely affects the market price of the
Bonds; or
(xii) any action shall have been taken by any govermnent in respect of its
monetary affairs which, in the reasonable opinion of the Underwriter, has a material adverse
effect on the United States securities market, rendering the marketing and sale of the Bonds,
or enforcement of sale contracts with respect thereto impracticable; or
(i) the commencement of any action, suit or proceeding
described in Section 6(g) or Section 7(h).
(e) at or prior to the Closing, the Underwriter shall receive the following
documents, in each case to the reasonable satisfaction in form and substance of the Underwriter:
(i) All resolutions relating to the Bonds adopted by the Authority and
certified by an authorized official of the Authority authorizing the issuance of the Bonds and the
execution and delivery of the Authority Documents;
(ii) All resolutions relating to the Bonds adopted by the City and certified
by an authorized official of the City authorizing the execution and delivery of the City Documents
and the delivery of the Bonds and the Official Statement;
(iii) The City Documents and the Authority Documents duly executed and
delivered by the respective parties thereto, with only such amendments, modifications or
supplements as may have been agreed to in writing by the Underwriter;
13
728
(iv) The approving opinion of Bond Counsel dated the Closing Date and
addressed to the Authority and the City, in substantially the form attached as Appendix E to the
Official Statement, and a reliance letter thereon addressed to the Underwriter;
(v) A supplemental opinion of Bond Counsel dated the Closing Date and
addressed to the Underwriter, to the effect that:
(A) the statements in the Official Statement under the captions
"INTRODUCTION," "THE BONDS," "SECURITY FOR THE BONDS" and "TAX MATTERS,"
and in Appendix D—"SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL
DOCUMENTS," excluding any material that may be treated as included under such captions and
appendices by any cross-reference, insofar as such statements expressly summarize provisions of the
Indenture, Lease Agreement, Site Lease and set out the form and content of Bond Counsel's final
opinion concerning certain federal tax matters relating to the Bonds, are accurate in all material
respects as of the Closing Date;
(B) The Purchase Agreement has been duly authorized, executed
and delivered by the City and the Authority and is the valid, legal and binding agreement of the City
and the Authority, enforceable in accordance with its terms, except that the rights and obligations
under the Purchase Agreement are subject to bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws affecting creditors' rights, to the application of
equitable principles if equitable remedies are sought, to the exercise of judicial discretion in
appropriate cases and to limitations on legal remedies against public agencies in the State, and
provided that no opinion is expressed with respect to any indemnification or contribution provisions
contained therein; and
(C) The Bonds are not subject to the registration requirements of
the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the
Trust Indenture Act of 1939, as amended;
(vi) The Official Statement, executed on behalf of the Authority and City,
and the Preliminary Official Statement;
(vii) Evidence that the ratings on the Bonds are as described in the Official
Statement;
(viii) A certificate, dated the Closing Date, signed by a duly authorized
officer of the Authority satisfactory in form and substance to the Underwriter to the effect that:
(i)the representations, warranties and covenants of the Authority contained in this Purchase
Agreement are true and correct in all material respects on and as of the Closing Date with the same
effect as if made on the Closing Date by the Authority, and the Authority has complied with all of the
terms and conditions of this Purchase Agreement required to be complied with by the Authority at or
prior to the Closing Date; (ii)to the best of such officer's knowledge, no event affecting the
Authority has occurred since the date of the Official Statement which should be disclosed in the
Official Statement for the purposes for which it is to be used or which is necessary to disclose therein
in order to make the statements and information therein not misleading in any material respect;
(iii)the information and statements contained in the Official Statement under the captions
"INTRODUCTION—The Authority" and "THE AUTHORITY" did not as of its date and do not as
of the Closing contain an untrue statement of a material fact or omit to state any material fact
14
729
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading in any material respect; and (iv)to the best of its knowledge after reasonable
investigation, the Authority is not in breach of or default under any applicable law or administrative
regulation of the State or the United States or any applicable judgment or decree or any loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which the Authority is
a party or is otherwise subject,which would have a material adverse impact on the Authority's ability
to perform its obligations under the Authority Documents, and no event has occurred and is
continuing which, with the passage of time or the giving of notice, or both, would constitute a default
or an event of default under any such instrument;
(ix) A certificate, dated the Closing Date, signed by a duly authorized
officer of the City satisfactory in form and substance to the Underwriter to the effect that: (i)the
representations, warranties and covenants of the City contained in this Purchase Agreement are true
and correct in all material respects on and as of the Closing Date with the same effect as if made on
the Closing Date by the City, and the City has complied with all of the terms and conditions of the
Purchase Agreement required to be complied with by the City at or prior to the Closing Date; (ii) to
the best of such officer's knowledge, no event affecting the City has occurred since the date of the
Official Statement which should be disclosed in the Official Statement for the purposes for which it
is to be used or which is necessary to disclose therein in order to make the statements and
information therein not misleading in any material respect; (iii) the information and statements
contained in the Official Statement (except that this representation does not include information
regarding DTC and its book entry only system, information under the caption "UNDER)MTING,"
CUSIP numbers, prices and yields for the Bonds and any other infonnation provided by the
Underwriter, as to which no view is expressed) did not as of its date and do not as of the Closing
contain an untrue statement of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading in
any material respect; and (iv)to the best of its knowledge after reasonable investigation, the City is
not in breach of or default under any applicable law or administrative regulation of the State or the
United States or any applicable judgment or decree or any loan agreement, indenture, bond, note,
resolution, agreement (including but not limited to the Lease Agreement) or other instrument to
which the City is a parry or is otherwise subject, which would have a material adverse impact on the
City's ability to perform its obligations under the City Documents, and no event has occurred and is
continuing which, with the passage of time or the giving of notice, or both,would constitute a default
or an event of default under any such instrument;
(x) An opinion dated the Closing Date and addressed to the Underwriter,
the Authority, the City and Bond Counsel, of the City Attorney of the City of Huntington Beach, as
counsel to the Authority,to the effect that:
(A) The Authority is a public body, organized and existing under
the Constitution and laws of the State, including the JPA Act and the JPA Agreement;
(B) The resolution relating to the Bonds adopted by the Authority
and certified by an authorized official of the Authority authorizing the issuance and sale of the Bonds
and the execution and delivery of the Authority Documents and the Official Statement has been duly
adopted at a regular meeting of the Authority, and is in full force and effect and has not been
modified, amended, rescinded or repealed since the date of its adoption;
15
730
(C) The Authority Documents have been duly authorized,
executed and delivered by the Authority and constitute valid, legal and binding agreements of the
Authority enforceable in accordance with their respective terms;
(D) Except as otherwise disclosed in the Official Statement and to
the best knowledge of such counsel after due inquiry, there is no litigation, proceeding, action, suit,
or investigation at law or in equity before or by any court, governmental authority or body, pending,
with service of process having been accomplished, or threatened in writing against the Authority,
challenging the creation, organization or existence of the Authority, or the validity of the Authority
Documents or seeking to restrain or enjoin thy,collection of Base Rental Payments with respect to the
Lease Agreement or the repayment of the Bonds or in any way contesting or affecting the validity of
the Authority Documents or contesting the authority of the Authority to enter into or perform its
obligations under any of the Authority Documents;
(E) the execution and delivery of the Authority Documents and
the issuance of the Bonds and compliance with the provisions thereof, do not and will not in any
material respect conflict with or constitute on the part of the Authority a breach of or default under
any agreement or other instrument to which the Authority is a party or by which it is bound or any
existing law, regulation, court order or consent decree to which the Authority is subject, which
breach or default has or may have a material adverse effect on the ability of the Authority to perform
its obligations under the Authority Documents;
(F) no authorization, approval, consent, or other order of the State
or any other governmental body within the State is required for the valid authorization, execution and
delivery of the Authority Documents or the Official Statement by the Authority or the consummation
by the Authority of the transactions on its part contemplated therein, except such as have been
obtained and except such as may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Bonds by the Underwriter; and
(G) based on the information made available to such counsel in its
role as counsel to the Authority, and without having undertaken to determine independently or
assume any responsibility for the accuracy, completeness or fairness of the statements contained in
the Official Statement under the caption entitled "THE AUTHORITY," nothing has come to its
attention which would lead it to believe that the statements contained in the above-referenced caption
as of the date of the Official Statement and as of the Closing Date (excluding therefrom the financial
and statistical data and forecasts included therein, as to which no opinion is expressed) contained or
contains any untrue statement of a material fact or omitted or omits to state a material fact necessary
to make the statements therein, in the light of the circumstances under which they were made, not
misleading;
(xi) an opinion dated the Closing Date and addressed to the Underwriter
and Bond Counsel, of the City Attorney of the City of Huntington Beach, to the effect that:
(A) The City is a chartered city and municipal corporation, duly
organized and existing under and by virtue of the laws of the State;
(B) The resolution relating to the Bonds adopted by the City and
certified by an authorized official of the City authorizing the execution and delivery of the City
16
731
Documents and the Official Statement has been duly adopted and is in full force and effect and has
not been modified, amended, rescinded or repealed since the its date of adoption;
(C) The City Documents have been duly authorized, executed and
delivered by the City and, assuming due authorization, execution and delivery by the other parties
thereto, if applicable, constitute the valid, legal and binding agreements of the City enforceable in
accordance with their respective terms;
(D) Except as otherwise disclosed in the Official Statement and to
the best knowledge of such counsel after due inquiry, there is no litigation, proceeding, action, suit,
or investigation at law or in equity before or by any court, governmental authority or body, pending,
with service of process having been accomplished, or threatened in writing against the City,
challenging the creation, organization or existence of the City, or the validity of the City Documents
or seeking to restrain or enjoin the payment of the Base Rental Payments or the repayment of the
Bonds or in any way contesting or affecting the validity of the City Documents or contesting the
authority of the City to enter into or perform its obligations under any of the City Documents, or
which, in any manner, questions the right of the City to pay the Base Rental Payments under the
Lease Agreement;
(E) The execution and delivery of the City Documents and
compliance with the provisions thereof, do not and will not in any material respect conflict with or
constitute on the part of the City a.breach of or default under any agreement or other instrument to
which the City is a party or by which it is bound or any existing law, regulation, court order or
consent decree to which the City is subject, which breach or default has or may have a material
adverse effect on the ability of the City to perform its obligations under the City Documents;
(F) No authorization, approval, consent, or other order of the
State or any other governmental body within the State is required for the valid authorization,
execution and delivery of the City Documents or the consummation by the City of the transactions on
its part contemplated therein, except such as have been obtained and except such as may be required
under state securities or Blue Sky laws in connection with the purchase and distribution of the Bonds
by the Underwriter; and
(G) Based on the information made available to City Attorney,
and without having undertaken to determine independently or assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the Official Statement, nothing has
come to its attention which would lead it to believe that the Official Statement as of its date and as of
the Closing Date (excluding therefrom financial statements and other statistical data, information
regarding DTC and its book entry only system, information under the caption "UNDERWRITING,"
CUSIP numbers, prices and yields for the Bonds and any other information provided by the
Underwriter, as to which no view need be expressed) contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
(xii) An opinion of Orrick, Herrington& Sutcliffe LLP as Disclosure
Counsel to the Authority and the City, dated the Closing Date and addressed to City, Authority and
the Underwriter, to the effect that, based on the information made available to it in its role as
Disclosure Counsel, without having undertaken to determine independently the accuracy,
completeness or fairness of the statements contained in the Official Statement, but on the basis of
17
732
their participation in the above-mentioned conferences (which did not extend beyond the date of the
Official Statement), and in reliance thereon and on the records, documents, certificates and matters
mentioned above, such counsel advises the Underwriter as a matter of fact and not opinion that,
during the course of such counsel's role as disclosure counsel with respect to the Bonds, no facts
came to the attention of the attorneys in such firm rendering legal services in connection with such
role which caused them to believe that the Official Statement as of its date (except for any CUSIP
numbers, financial, accounting, statistical, economic or demographic data or forecasts, numbers,
charts, tables, graphs, estimates, projections, assumptions or expressions of opinion, any information
about The Depository Trust Company or its book-entry system, litigation, ratings, rating agencies or
underwriting, and Appendices A, B, C, G, H and I included or referred to therein, which such counsel
shall expressly exclude from the scope of this paragraph and as to which such counsel shall express
no opinion or view) contained any untrue statement of a material fact or omitted to state any material
fact necessary to make the statements therein, in the light of the circumstances under which they
were made, not misleading;
(xiii) An opinion of Stradling Yocca Carlson & Rauth, a Professional
Corporation, dated the Closing Date, addressed to the Underwriter to the effect that, although such
attorneys have not undertaken to check the accuracy, completeness or fairness of, or verified the
information contained in, the Official Statement, and are therefore unable to make any representation
in that regard, such attorneys have participated in conferences prior to the date of the Official
Statement with representatives of the City, the Authority, the Underwriter and others, during which
conferences the contents of the Official Statement and related matters were discussed. Based upon
the information made available to such attorneys in the course of their participation in such
conferences, their review of the documents referred to above, their reliance on the certificates and the
opinions of counsel described above and their understanding of applicable law, such attorneys do not
believe that the Official Statement (any CUSIP numbers, financial, accounting, statistical, economic
or demographic data or forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions
or expressions of opinion, any information about The Depository Trust Company or its book-entry
system, litigation, ratings, rating agencies or underwriting, and the Appendices to the Official
Statement, as to which no view need be expressed) as of its date contained, or as of the date of such
opinion, contains, any untrue statement or a material fact, or as of its date omitted, or as of the date of
such opinion omits, to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading;
(xiv) An opinion of counsel to the Trustee, addressed to the Underwriter
and dated the Closing Date, in form and substance satisfactory to the Underwriter and to Bond
Counsel;
(xv) A certificate, dated the Closing Date, signed by a duly authorized
official of the Trustee in form and substance satisfactory to the Underwriter;
(xvi) The preliminary and final Notice of Sale required to be delivered to
the California Debt and Investment Advisory Commission pursuant to Section 53583 of the
Government Code and Section 8855(g) of the Government Code;
(xvii) A copy of the executed Blanket Issuer Letter of Representations by
and between the Authority and DTC relating to the book-entry system;
18
733
(xviii) The tax and nonarbitrage certificate of the City and the Authority in
form and substance to the reasonable satisfaction of Bond Counsel and the
Underwriter;
(xix) A certificate, dated the date of the Preliminary Official Statement, of
the City, as required under Rule 15c2-12;
(xx) A certificate, dated the date of the Preliminary Official Statement, of
the Authority, as required under Rule 15c2-12;
(xxi) Certified copies of the JPA Agreement and all amendments thereto
and related certificates issued by the Secretary of State of the State;
(xxii) A certified copy of the general resolution of the Trustee authorizing
the execution and delivery of certain documents by certain officers of the Trustee, which resolution
authorizes the execution and delivery of the Indenture and the authentication and delivery of the
Bonds by the Trustee;
(xxiii) Evidence of insurance as required by the Lease Agreement;
(xxiv) Evidence that the Bonds have been assigned the ratings of" " and
respectively, by Standard and Poor's Ratings Service and Fitch Ratings, Inc.; and
(xxv) Such additional legal opinions, certificates, proceedings, instruments
or other documents as Bond Counsel or the Underwriter may reasonably request.
Section 9. Expenses. Whether or not the transactions contemplated by this Purchase
Agreement are consummated, the Underwriter shall be under no obligation to pay, and the Authority
shall pay only from the proceeds of the Bonds, or cause the City to pay out of the proceeds of the
Bonds or any other legally available funds of the City or the Authority, but only as the Authority and
such other party providing such services may agree, all expenses and costs of the Authority and the
City incident to the performance of their obligations in connection with the authorization, execution,
sale and delivery of the Bonds to the Underwriter, including, without limitation, printing costs, rating
agency fees and charges, initial fees of the Trustee, including fees and disbursements of their
counsel, if any, fees and disbursements of Bond Counsel and Disclosure Counsel and other
professional advisors employed by the Authority or the City, costs of preparation, printing, signing,
transportation, delivery and safekeeping of the Bonds and for expenses (included in the expense
component of the spread) incurred by the Underwriter on behalf of the City's employees which are
incidental to implementing this Purchase Agreement, including, but not limited to, meals,
transportation, lodging, and entertainment of those employees. The Underwriter shall pay all out-of-
pocket expenses of the Underwriter, including, without limitation, the fees and expenses of its
counsel, advertising expenses, the California Debt and Investment Advisory Commission fee, CUSIP
Services Bureau charges, regulatory fees imposed on new securities issuers and any and all other
expenses incurred by the Underwriter in connection with the public offering and distribution of the
Bonds. Certain payments may be in the form of inclusion of such expenses in the expense
component of the Underwriter's discount.
Section 10. Notices. Any notice or other communication to be given to the Underwriter
under this Purchase Agreement may be given by delivering the same in writing to Stifel, Nicolaus &
19
734
Company, Incorporated 515 S. Figueroa Street, Suite 1800 Los Angeles, CA 90071, Attention: John
Kim. All notices or communications hereunder by any party shall be given and served upon each
other party. Any notice or communication to be given the Authority under this Purchase Agreement
may be given by delivering the same in writing to the Huntington Beach Public Financing Authority,
c/o City of Huntington Beach Department of Finance, 2000 Main Street, Huntington Beach,
California 92648, Attention: Executive Director. Any notice or communication to be given the City
under this Purchase Agreement may be given by delivering the same in writing to the City of
Huntington Beach c/o City of Huntington Beach Department of Finance, 2000 Main Street,
Huntington Beach, California 92648. Attention: Chief Financial Oficer.
Section 11. Parties in Interest. This Purchase Agreement is made solely for the benefit
of the Authority, the City and the Underwriter (including the successors or assigns thereof) and no
other person shall acquire or have any right hereunder or by virtue hereof. All representations,
warranties and agreements of the Authority and the City in this Purchase Agreement shall remain
operative and in full force and effect regardless of any investigation made by or on behalf of the
Underwriter and shall survive the delivery of and payment for the Bonds.
Section 12. Severability. In case any one or more of the provisions contained herein
shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision hereof.
Section 13. Counterparts. This Purchase Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
20
735
Section 14. Governing Law. This Purchase Agreement shall be governed by the laws of
the State.
STIFEL NICOLAUS & CO. INCORPORATED
By:
Title: Authorized Officer
Accepted as of the date first stated above:
CITY OF HUNTINGTON BEACH
By:
Its: City Manager
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
By:
Its: Chair
21
736
EXHIBIT A
Huntington Beach Public Financing Authority
Lease Revenue Refunding Bonds
2020 Series A (Tax-Exempt)
$ Serial Bonds
Hold-The-
Maturity Offering-
(May 1) Principal Interest 10% Test Price Rule
Amount Rate Yield Price Used Used
C Priced to par call on 2020
Huntington Beach Public Financing Authority
Lease Revenue Refunding Bonds
2020 Series B (Federally Taxable)
$ Serial Bonds
Maturity Principal Interest
(May 1) Amount Rate Yield
A-1
737
REDEMPTION PROVISIONS
Optional Redemption. The Series 2020A Bonds maturing on or after May 1, 20_, are subject to
optional redemption prior to their respective stated maturities, on any date on or after May 1, 20, 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 the Lease Agreement to cause Series 2020A 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.
The Series 2020B Bonds maturing on or after May 1, 20_, are subject to optional redemption
prior to their respective stated maturities, on any date on or after May 1, 20, 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 the Lease Agreement to cause Series 2020B 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 2020 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.
738
EXHIBIT B
FORM OF ISSUE PRICE CERTIFICATE
Huntington Beach Public Financing Authority
Lease Revenue Refunding Bonds
2020 Series A (Tax-Exempt)
$ Serial Bonds
The undersigned, on behalf of Stifel, Nicolaus & Company, Incorporated ("Stifel") hereby
certifies as set forth below with respect to the sale and issuance of the above-captioned bonds (the
"Bonds").
1. Sale of the General Rule Maturities. As of the date of this certificate, for each
Maturity of the General Rule Maturities, the first price at which at least 10% of such Maturity was
sold to the Public is the respective price listed in Schedule A.
2. [Initial Offering Price of the Hold-the-Offering-Price Maturities.
(a) Stifel offered the Hold-the-Offering-Price Maturities to the Public for
purchase at the respective initial offering prices listed in Schedule A (the "Initial Offering Prices") on
or before the Sale Date. A copy of the pricing wire or equivalent communication for the Bonds is
attached to this certificate as Schedule B.
(b) As set forth in the Bond Purchase Agreement, dated , 2020, by
and between Stifel and the Issuer, Stifel has agreed in writing that, (i)for each Maturity of the Hold-
the-Offering-Price Maturities, it would neither offer nor sell any of the Bonds of such Maturity to any
person at a price that is higher than the Initial Offering Price for such Maturity during the Holding
Period for such Maturity (the "hold-the-offering-price rule"), and (ii) any selling group agreement
shall contain the agreement of each dealer who is a member of the selling group, and any retail
distribution agreement shall contain the agreement of each broker-dealer who is a party to the retail
distribution agreement, to comply with the hold-the-offering-price rule. Pursuant to such agreement,
no Underwriter (as defined below) has offered or sold any Maturity of the Hold-the-Offering-Price
Maturities at a price that is higher than the respective Initial Offering Price for that Maturity of the
Bonds during the Holding Period.]
3. Defined Terms.
(a) General Rule Maturities means those Maturities of the Bonds listed in
Schedule A hereto as the "General Rule Maturities."
(b) [Hold-the-Offering-Price Maturities means those Maturities of the Bonds
listed in Schedule A hereto as the"Hold-the-Offering-Price Maturities."
(c) Holding Period means, with respect to a Hold-the-Offering-Price Maturity,
the period starting on the Sale Date and ending on the earlier of(i)the close of the fifth business day
after the Sale Date, or (ii)the date on which Stifel has sold at least 10% of such Hold-the-Offering-
Price Maturity to the Public at prices that are no higher than the Initial Offering Price for such Hold-
the-Offering-Price Maturity.]
B-1
739
(d) Issuer means the City of Huntington Beach, California.
(e) Maturity means Bonds with the same credit and payment terms. Bonds with
different maturity dates, or Bonds with the same maturity date but different stated interest rates, are
treated as separate maturities.
(f) Public means any person (including an individual, trust, estate, partnership,
association, company, or corporation) other than an Underwriter or a related parry to an Underwriter.
The term "related party" for purposes of this certificate generally means any two or more persons
who have greater than 50 percent common ownership, directly or indirectly.
(g) Sale Date means the first day on which there is a binding contract in writing
for the sale of a Maturity of the Bonds. The Sale Date of the Bonds is 52020.
(h) Underwriter means (1) any person that agrees pursuant to a written contract
with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the
initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract
directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial
sale of the Bonds to the Public (including a member of a selling group or a party to a retail
distribution agreement participating in the initial sale of the Bonds to the Public).]
The representations set forth in this certificate are limited to factual matters only. Nothing in
this certificate represents Stifel's interpretation of any laws, including specifically Sections 103 and
148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder.
The undersigned understands that the foregoing information will be relied upon by the Issuer with
respect to certain of the representations set forth in the Tax Certificate and with respect to
compliance with the federal income tax rules affecting the Bonds, and by Orrick Herrington &
Sutcliffe LLP in connection with rendering its opinion that the interest on the Bonds is excluded from
gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form
8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating
to the Bonds.
STIFEL,NICOLAUS & COMPANY,
INCORPORATED
By:
Name:
Dated: 52020
740
SCHEDULE A
SALE PRICES OF THE GENERAL RULE MATURITIES [AND INITIAL OFFERING
PRICES OF THE HOLD-THE-OFFERING-PRICE MATURITIES]
(Attached)
741
[SCHEDULE B
PRICING WIRE OR EQUIVALENT COMMUNICATION
(Attached)]
742
ATTAC H M E N T #6
ESCROW AGREEMENT
by and between the
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
and
U.S. BANK NATIONAL ASSOCIATION
Dated as of August 1, 2020
Huntington Beach Public Financing Authority
Lease Revenue Refunding Bonds, 2010 Series A
4151-8642-2820.4
743
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement"), executed and entered into
and dated as of August 1, 2020, is by and between the HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY, a joint powers authority organized and existing under the laws of
the State of California (the "Authority"), and U.S. BANK NATIONAL ASSOCIATION, as
escrow bank(the "Escrow Bank") and as Prior Trustee (as defined herein).
RECITALS
WHEREAS, there are currently outstanding Huntington Beach Public Financing
Authority Lease Revenue Refunding Bonds, 2010 Series A (the "Prior Bonds"), in the aggregate
principal amount of$7,410,000; and
WHEREAS, the Prior Bonds were issued pursuant to the Indenture, dated as of June 1,
2010 (the "Prior Indenture"), by and between the Authority and U.S. Bank National Association,
as trustee (the "Prior Trustee"); and
WHEREAS, the Prior Bonds are payable from certain lease payments to be made by the
City of Huntington Beach (the "City") under the Lease Agreement, dated as of June 1, 2010, by
and between the City and the Authority(the"Lease Agreement"),pursuant to which the Authority
leased certain real property and the improvements thereto to the City; and
WHEREAS,the Escrow Bank is the trustee under the Prior Indenture; and
WHEREAS, the Authority and the City have determined that savings will be realized by
providing the funds necessary to pay, when due, the principal of and interest on the Prior Bonds to
September 1, 2020 (the "Redemption Date") and to redeem the callable Prior Bonds on the
Redemption Date at a redemption price(the"Redemption Price")equal to the principal of the Prior
Bonds plus the accrued but unpaid interest on the Prior Bonds to the Redemption Date, without
premium; and
WHEREAS, in order to provide the funds necessary to redeem the Prior Bonds, the
Authority has issued $[ ] aggregate principal amount of Huntington Beach Public
Financing Authority (Orange County, California) Lease Revenue Refunding Bonds, 2020 Series
A(Tax-Exempt)(the"Series 2020A Bonds")pursuant to the Indenture,dated as of August 1,2020
(the "Indenture"), by and among the Authority, the City and U.S. Bank National Association, as
trustee (the "Trustee"); and
WHEREAS, the Prior Bonds are subject to redemption on the Redemption Date and the
City has determined to provide for the call for redemption on the Redemption Date of the Prior
Bonds outstanding on the Redemption Date;
NOW THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the Authority and the Escrow Bank agree as follows:
Section 1. Definitions. Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to such terms in the Prior Indenture.
4151-8642-2820.4
744
Section 2. The Escrow Fund. (a) There is hereby established a fund (the "Escrow
Fund") to be held as an irrevocably pledged escrow by the Escrow Bank, which the Escrow Bank
shall keep separate and apart from all other funds of the Authority and the Escrow Bank and to be
applied solely as provided in this Escrow Agreement.
Pending application as provided in this Escrow Agreement, amounts on deposit in the
Escrow Fund are hereby pledged and assigned solely to the payment of(i)the principal and interest
evidenced by the Prior Bonds coming due on and prior to the Redemption Date, and (ii) the
Redemption Price on the Redemption Date, which amounts shall be held in trust by the Escrow
Bank for the Owners of the Prior Bonds.
(b) Upon the execution and delivery of the Series 2020A Bonds, there shall be
deposited in the Escrow Fund $[ ] received from the proceeds of the sale of the Series
2020A Bonds as provided in Section 2.03 of the Indenture. [The Escrow Bank, as Prior Trustee,
has informed the City that, as of the date hereof, there is no less than $[ ] on deposit in
the Reserve Fund established under the Prior Indenture. The Authority has determined that
$[ ] may be released as a result of the refunding of the Refunded Bonds. On the date
hereof, the Prior Trustee is directed by the Authority to transfer such moneys to the Escrow Bank
and the Escrow Bank shall deposit such moneys in the Escrow Fund.]
(c) Upon the deposit of moneys pursuant to Section 2(b), the Authority has determined
or caused to be determined that the moneys on deposit in the Escrow Fund will be at least equal to
an amount sufficient to make the payments required by Section 4 hereof.
Section 3. Use and Investment of Moneys. (a) The Escrow Bank hereby acknowledges
deposit of the moneys described in Section 2(b) and is directed by the Authority, and agrees to
invest $[ ] of such moneys in the Exhibit A Securities upon receipt of certification by
a nationally recognized firm of independent certified public accountants that the Exhibit A
Securities will mature in such principal amounts and earn interest in such amounts and, in each
case, at such times, so that sufficient moneys will be available from maturing principal and interest
on the Exhibit A Securities, together with any uninvested moneys then held by the Escrow Bank
in the Escrow Fund, to make all payments required by Section 4 hereof. Except as provided in
Section 3(b) or Section 3(c), the balance of the moneys described in Section 2 shall be held
uninvested in the Escrow Fund.
(b) Upon the written request of an Authorized Representative of the Authority, but
subject to the conditions and limitations herein set forth,the Escrow Bank shall purchase substitute
Defeasance Obligations for the Defeasance Obligations then held in an Escrow Fund with the
proceeds derived from the sale, transfer, redemption or other disposition of Defeasance
Obligations then on deposit in such Escrow Fund and any uninvested money then held by the
Escrow Bank hereunder in accordance with the provisions of this Section. Such sale, transfer,
redemption or other disposition of Defeasance Obligations then on deposit in such Escrow Fund
and substitution of other Defeasance Obligations shall be effected by the Escrow Bank upon the
written request of an Authorized Representative of the Authority but only by a simultaneous
transaction and only upon receipt of(i)certification by a nationally recognized firm of independent
certified public accountants that the Defeasance Obligations to be substituted, together with the
Defeasance Obligations which will continue to be held in such Escrow Fund, will mature in such
2
4151-8642-2820.4
745
principal amounts and earn interest in such amounts and, in each case, at such times so that
sufficient moneys will be available from maturing principal and interest on such Defeasance
Obligations held in such Escrow Fund,together with any uninvested moneys,to make all payments
required by Section 4 hereof,which have not previously been made, and(ii)receipt by the Escrow
Bank of an opinion of counsel of recognized standing in the field of law relating to municipal
bonds to the effect that the sale, transfer, redemption or other disposition and substitution of
Defeasance Obligations will not adversely affect the exclusion of interest evidenced by any Prior
Bonds or by any Prior Bonds from gross income for purposes of federal income taxation.
(c) Upon the written request of an Authorized Representative of the Authority, but
subject to the conditions and limitations herein set forth, the Escrow Bank will apply any moneys
received from the maturing principal of or interest or other investment income on any Defeasance
Obligations held in an Escrow Fund, or the proceeds from any sale, transfer, redemption or other
disposition of Defeasance Obligations pursuant to Section 3(b) not required for the purposes of
said Section (i) to the extent such moneys will not be required at any time for the purpose of
making a payment required by Section 4 hereof, as certified by a nationally recognized firm of
independent certified public accountants delivered to the Escrow Bank, such moneys shall be
transferred to the Trustee for deposit in the Interest Account of the Payment Fund established under
the Indenture upon the written request of an Authorized Representative of the Authority as received
by the Escrow Bank, free and clear of any trust, lien, pledge or assignment securing the Prior
Bonds or otherwise existing hereunder, and(ii)to the extent such moneys will be required for such
purpose at a later date, shall, to the extent practicable, be invested or reinvested in Defeasance
Obligations maturing at times and in amounts sufficient, as certified by a nationally recognized
firm of independent certified public accountants delivered to the Escrow Bank, to make such
payment required by Section 4 hereof
(d) All Defeasance Obligations purchased pursuant to this Escrow Agreement shall be
deposited in and held for the credit of the Escrow Fund. Except as provided in this Section 3, no
moneys or Defeasance Obligations deposited with the Escrow Bank pursuant to this Escrow
Agreement nor principal of, or interest payments or other investment income on, any such
Defeasance Obligations shall be withdrawn or used for any purpose other than, and shall be held
in trust for, the payment of the Prior Bonds as provided by Section 4 hereof.
(e) The Owners of the Prior Bonds shall have a first and exclusive lien on the moneys
and Defeasance Obligations in the Escrow Fund until such moneys and Defeasance Obligations
are used and applied as provided in this Escrow Agreement.
(f) The Escrow Bank shall not be held liable for investment losses resulting from
compliance with the provisions of this Escrow Agreement
Section 4. Payment of Prior Bonds. From the maturing principal of the Defeasance
Obligations held in the Escrow Fund and the investment income and other earnings thereon and
any uninvested money then held in the Escrow Fund, the Escrow Bank shall, on the Redemption
Date, pay the Redemption Price in accordance with the terms of the Prior Indenture.
To the extent that the amount on deposit in the Escrow Fund on the Redemption Date is in
excess of the amount necessary to make the required payments with respect to the Prior Bonds, as
3
4151-8642-2820.4
746
shown in the then applicable escrow verification of the nationally recognized firm of independent
certified public accountants, such excess shall be transferred to the Trustee for deposit in the
Interest Account of the Payment Fund established under the Indenture.
Section 5. Irrevocable Designation of Redemption and Instructions to Mail Notices.
The Authority hereby irrevocably designates the Prior Bonds for prior redemption on the
Redemption Date as indicated in Section 4 hereof. The Authority has instructed the Prior Trustee
to provide conditional notice of optional redemption of the Prior Bonds in accordance with Section
4.03 of the Prior Indenture. The Authority hereby waives the right to rescind such notice and
deems such notice irrevocable.
Section 6. Performance of Duties. The Escrow Bank agrees to perform the duties set
forth herein and agrees that the irrevocable instructions to the Escrow Bank herein provided are in
a form satisfactory to it.
Section 7. Escrow Bank's Authority to Make Investments. The Escrow Bank shall
have no power or duty to invest any funds held under this Escrow Agreement except as provided
in Section 3 hereof. The Escrow Bank shall have no power or duty to transfer or otherwise dispose
of the moneys held hereunder except as provided in this Escrow Agreement.
Section 8. Indemnity. To the extent permitted by law, the Authority hereby assumes
liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are
consummated) to indemnify, protect, save and keep harmless the Escrow Bank and its respective
successors, assigns, agents, officers, directors, employees and servants, from and against any and
all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and
disbursements (including reasonable legal fees, expenses and disbursements) of whatsoever kind
and nature which may be imposed on, incurred by, or asserted against, the Escrow Bank at any
time (whether or not also indemnified against the same by the Authority or any other person under
any other agreement or instrument, but without double indemnity) in any way relating to or arising
out of the execution, delivery and performance of this Escrow Agreement, the establishment
hereunder of the Escrow Fund, the acceptance of the funds and securities deposited therein, the
purchase of any securities to be purchased thereto, the retention of such securities or the proceeds
thereof and any payment,transfer or other application of moneys or securities by the Escrow Bank
in accordance with the provisions of this Escrow Agreement;provided,however,that the Authority
shall not be required to indemnify the Escrow Bank against the Escrow Bank's own negligence or
willful misconduct or the negligence or willful misconduct of the Escrow Bank's respective
successors, assigns, agents and employees or the material breach by the Escrow Bank of the terms
of this Escrow Agreement. In no event shall the Authority or the Escrow Bank be liable to any
person by reason of the transactions contemplated hereby other than to each other as set forth in
this Section. The indemnities contained in this Section shall survive the termination of this Escrow
Agreement.
Section 9. Responsibilities of Escrow Bank. The Escrow Bank and its respective
successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in
tort, contract, or otherwise, in connection with the execution and delivery of this Escrow
Agreement,the establishment of the Escrow Funds,the acceptance of the moneys or any securities
deposited therein, the purchase of the securities to be purchased pursuant hereto, the retention of
4
4151-8642-2820.4
747
such securities or the proceeds thereof,the sufficiency of the securities or any uninvested moneys
held hereunder to accomplish the redemption of the Prior Bonds, or any payment,transfer or other
application of moneys or securities by the Escrow Bank in accordance with the provisions of this
Escrow Agreement or by reason of any non-negligent act,non-negligent omission or non-negligent
error of the Escrow Bank made in good faith in the conduct of its duties. The recitals of fact
contained in the "Whereas" clauses herein shall be taken as the statements of the Authority, and
the Escrow Bank assumes no responsibility for the correctness thereof. The Escrow Bank makes
no representation as to the sufficiency of the securities to be purchased pursuant hereto and to any
uninvested moneys to accomplish the redemption of the Prior Bonds pursuant to the Prior
Indenture or to the validity of this Escrow Agreement as to the Authority and, except as otherwise
provided herein, the Escrow Bank shall incur no liability in respect thereof. The Escrow Bank
shall not be liable in connection with the performance of its duties under this Escrow Agreement
except for its own negligence, willful misconduct or default, and the duties and obligations of the
Escrow Bank shall be determined by the express provisions of this Escrow Agreement. .The
Escrow Bank may consult with counsel, who may or may not be counsel to the Authority, and in
reliance upon the written opinion of such counsel shall have full and complete authorization and
protection in respect of any action taken, suffered or omitted by it in good faith in accordance
therewith. Whenever the Escrow Bank shall deem it necessary or desirable that a matter be proved
or established prior to taking, suffering, or omitting any action under this Escrow Agreement, such
matter (except the matters set forth herein as specifically requiring a certificate of a nationally
recognized firm of independent certified public accountants or an opinion of counsel of recognized
standing in the field of law relating to municipal bonds) may be deemed to be conclusively
established by a written certification of the Authority. Whenever the Escrow Bank shall deem it
necessary or desirable that a matter specifically requiring a certificate of a nationally recognized
form of independent certified public accountants or an opinion of counsel of recognized standing
in the field of law relating to municipal bonds be proved or established prior to taking, suffering,
or omitting any such action, such matter may be established only a certificate signed by a nationally
recognized firm of certified public accountants or such opinion of counsel of recognized standing
in the field of law relating to municipal bonds.
No provision of this Escrow Agreement shall require the Escrow Bank to risk or advance
its own funds. The Escrow Bank shall be protected in acting upon any notice, resolution,request,
consent, order, certificate, report, opinion, bonds or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties. The Escrow Bank
may execute any of its powers or duties hereunder through attorneys, agents or receivers and shall
not be answerable for the actions of such attorneys, agents or receivers if selected by it with
reasonable care.
The Escrow Bank agrees to accept and act upon instructions or directions pursuant to this
Escrow Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured
electronic methods,provided, however,that, the Escrow Bank 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 Escrow Bank e-mail or facsimile instructions (or instructions by a similar
electronic method) and the Escrow Bank in its discretion elects to act upon such instructions, the
Escrow Bank's understanding of such instructions shall be deemed controlling. The Escrow Bank.
5
4151-8642-2820.4
748
shall not be liable for any losses, costs or expenses arising directly or indirectly from the Escrow
Bank'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 Escrow Bank, including without limitation the risk of the Escrow Bank acting on unauthorized
instructions, and the risk of interception and misuse by third parties.
Section 10. Amendments. The Authority and the Escrow Bank may (but only with the
consent of the Owners of all of the Prior Bonds and the Insurer) amend this Escrow Agreement or
enter into agreements supplemental to this Escrow Agreement.
Section 11. Term. This Escrow Agreement shall commence upon its execution and
delivery and shall terminate on the date upon which the Prior Bonds have been paid in accordance
with this Escrow Agreement.
Section 12. Compensation. The Authority shall from time to time pay or cause to be paid
to the Escrow Bank the agreed upon compensation for its services to be rendered hereunder, and
reimburse the Escrow Bank for all of its reasonable advances in the exercise and performance of
its duties hereunder; provided, however, that under no circumstances shall the Escrow Bank be
entitled to any lien whatsoever on any moneys or obligations in the Escrow Fund for the payment
of fees and expenses for services rendered or expenses incurred by the Escrow Bank under this
Escrow Agreement or otherwise.
Section 13. Severability. If any one or more of the covenants or agreements provided in
this Escrow Agreement on the part of the Authority or the Escrow Bank to be performed should
be determined by a court of competent jurisdiction to be contrary to law, such covenants or
agreements shall be null and void and shall be deemed separate from the remaining covenants and
agreements herein contained and shall in no way affect the validity of the remaining provisions of
this Escrow Agreement.
Section 14. Counterparts. This Escrow Agreement may be executed in several
counterparts, all or any of which shall be regarded for all purposes as an original but all of which
shall constitute and be but one and the same instrument.
6
4151-8642-2820.4
749
Section 15. Governing Law. This Escrow Agreement shall be construed under the laws
of the State of California.
U.S. BANK NATIONAL
ASSOCIATION, as Escrow Bank and
Prior Trustee
By:
Authorized Officer
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By:
ATTEST:
Robin Estanislau,
Secretary
7
4151-8642-2820.4
750
EXHIBIT A
DEFEASANCE OBLIGATIONS
Type Maturity Par Amount Interest Rate Price Cost
A-1
4151-8642-2820.4
751
ATTACHMENT #7
ESCROW AGREEMENT
by and between the
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
and
U.S. BANK NATIONAL ASSOCIATION
Dated as of August 1, 2020
Huntington Beach Public Financing Authority
(Orange County, California)
Lease Revenue Refunding Bonds, 2011 Series A
(Capital Improvement Refinancing Project)
4165-9649-5396.4
752
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement"), executed and entered into
and dated as of August 1, 2020, is by and between the HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY, a joint powers authority organized and existing under the laws of
the State of California (the "Authority"), and U.S. BANK NATIONAL ASSOCIATION, as
escrow bank (the "Escrow Bank") and as Prior Trustee (as defined herein).
RECITALS
WHEREAS, there are currently outstanding Huntington Beach Public Financing
Authority (Orange County, California) Lease Revenue Refunding Bonds, 2011 Series A (Capital
Improvement Refinancing Project) (the "Prior Bonds"), in the aggregate principal amount of
$15,725,000; and
WHEREAS,the Prior Bonds were issued pursuant to the Indenture, dated as of September
1,2011 (the"Prior Indenture"),by and between the Authority and U.S.Bank National Association,
as successor trustee (the "Prior Trustee"); and
WHEREAS, the Prior Bonds are payable from certain lease payments to be made by the
City of Huntington Beach (the"City")under the Lease Agreement, dated as of September 1,2011,
by and between the City and the Authority (the "Lease Agreement"), pursuant to which the
Authority leased certain real property and the improvements thereto to the City; and
WHEREAS, the City has determined that debt service savings can be achieved by
refunding the Prior Bonds maturing on September 1 of each of the years [2020 through 2031],
inclusive (the "Refunded Bonds"); and
WHEREAS, the Escrow Bank is the trustee under the Prior Indenture; and
WHEREAS, the Authority and the City have determined that savings will be realized by
providing the funds necessary to pay, when due, the principal of and interest on the Refunded
Bonds to September 1, 2021 (the"Redemption Date") and to redeem the callable Refunded Bonds
on the Redemption Date at a redemption price (the "Redemption Price") equal to the principal
amount thereof, plus unpaid accrued interest thereon to the Redemption Date, without premium;
and
WHEREAS, in order to provide the funds necessary to redeem the Refunded Bonds, the
Authority has issued $[ ] aggregate principal amount of Huntington Beach Public
Financing Authority (Orange County, California) Lease Revenue Refunding Bonds, 2020 Series
B (Federally Taxable) (the "Series 2020B Bonds") pursuant to the Indenture, dated as of August
1, 2020 (the "Indenture"), by and among the Authority, the City and U.S. Bank National
Association, as trustee(the "Trustee"); and
WHEREAS,the Refunded Bonds are subject to redemption on the Redemption Date and
the City has determined to provide for the call for redemption on the Redemption Date of the
Refunded Bonds outstanding on the Redemption Date;
4165-9649-5396.4
753
NOW THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the Authority and the Escrow Bank agree as follows:
Section 1. Definitions. Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to such terms in the Prior Indenture.
Section 2. The Escrow Fund. (a) There is hereby established a fund (the "Escrow
Fund")to be held as an irrevocably pledged escrow by the Escrow Bank, which the Escrow Bank
shall keep separate and apart from all other funds of the Authority and the Escrow Bank and to be
applied solely as provided in this Escrow Agreement.
Pending application as provided in this Escrow Agreement, amounts on deposit in the
Escrow Fund are hereby pledged and assigned solely to the payment of(i)the principal and interest
evidenced by the Refunded Bonds coming due on and prior to the Redemption Date, and (ii) the
Redemption Price on the Redemption Date, which amounts shall be held in trust by the Escrow
Bank for the Owners of the Refunded Bonds.
(b) Upon the execution and delivery of the Series 2020B Bonds, there shall be
deposited in the Escrow Fund $[ ] received from the proceeds of the sale of the Series
2020B Bonds as provided in Section 2.03 of the Indenture. [The Escrow Bank, as Prior Trustee,
has informed the City that, as of the date hereof,there is no less than $[ ] on deposit in
the Reserve Fund established under the Prior Indenture. The Authority has determined that
$[ ] may be released as a result of the refunding of the Refunded Bonds. On the date
hereof, the Prior Trustee is directed by the Authority to transfer such moneys to the Escrow Bank
and the Escrow Bank shall deposit such moneys in the Escrow Fund.]
(c) Upon the deposit of moneys pursuant to Section 2(b),the Authority has determined
or caused to be determined that the moneys on deposit in the Escrow Fund will be at least equal to
an amount sufficient to make the payments required by Section 4 hereof.
Section 3. Use and Investment of Moneys. (a) The Escrow Bank hereby acknowledges
deposit of the moneys described in Section 2(b) and is directed by the Authority, and agrees to
invest $[ ] of such moneys in the Exhibit A Securities upon receipt of certification by
a nationally recognized firm of independent certified public accountants that the Exhibit A
Securities will mature in such principal amounts and earn interest in such amounts and, in each
case, at such times, so that sufficient moneys will be available from maturing principal and interest
on the Exhibit A Securities, together with any uninvested moneys then held by the Escrow Bank
in the Escrow Fund, to make all payments required by Section 4 hereof. Except as provided in
Section 3(b) or Section 3(c), the balance of the moneys described in Section 2 shall be held
uninvested in the Escrow Fund.
(b) Upon the written request of an Authorized Representative of the Authority, but
subject to the conditions and limitations herein set forth,the Escrow Bank shall purchase substitute
Defeasance Securities for the Defeasance Securities then held in an Escrow Fund with the proceeds
derived from the sale, transfer, redemption or other disposition of Defeasance Securities then on
deposit in such Escrow Fund and any uninvested money then held by the Escrow Bank hereunder
in accordance with the provisions of this Section. Such sale, transfer, redemption or other
2
4165-9649-5396.4
754
disposition of Defeasance Securities then on deposit in such Escrow Fund and substitution of other
Defeasance Securities shall be effected by the Escrow Bank upon the written request of an
Authorized Representative of the Authority but only by a simultaneous transaction and only upon
receipt of (i) certification by a nationally recognized firm of independent certified public
accountants that the Defeasance Securities to be substituted, together with the Defeasance
Securities which will continue to be held in such Escrow Fund, will mature in such principal
amounts and earn interest in such amounts and,in each case,at such times so that sufficient moneys
will be available from maturing principal and interest on such Defeasance Securities held in such
Escrow Fund, together with any uninvested moneys, to make all payments required by Section 4
hereof, which have not previously been made, and (ii) receipt by the Escrow Bank of an opinion
of counsel of recognized standing in the field of law relating to municipal bonds to the effect that
the sale, transfer, redemption or other disposition and substitution of Defeasance Securities will
not adversely affect the exclusion of interest evidenced by any Prior Bonds or by any Prior Bonds
from gross income for purposes of federal income taxation.
(c) Upon the written request of an Authorized Representative of the Authority, but
subject to the conditions and limitations herein set forth, the Escrow Bank will apply any moneys
received from the maturing principal of or interest or other investment income on any Defeasance
Securities held in an Escrow Fund, or the proceeds from any sale, transfer, redemption or other
disposition of Defeasance Securities pursuant to Section 3(b) not required for the purposes of said
Section (1) to the extent such moneys will not be required at any time for the purpose of making a
payment required by Section 4 hereof, as certified by a nationally recognized firm of independent
certified public accountants delivered to the Escrow Bank, such moneys shall be transferred to the
Trustee for deposit in the Interest Account of the Payment Fund established under the Indenture
upon the written request of an Authorized Representative of the Authority as received by the
Escrow Bank, free and clear of any trust, lien,pledge or assignment securing the Refunded Bonds
or otherwise existing hereunder, and (ii) to the extent such moneys will be required for such
purpose at a later date, shall, to the extent practicable, be invested or reinvested in Defeasance
Securities maturing at times and in amounts sufficient, as certified by a nationally recognized firm
of independent certified public accountants delivered to the Escrow Bank, to make such payment
required by Section 4 hereof.
(d) All Defeasance Securities purchased pursuant to this Escrow Agreement shall be
deposited in and held for the credit of the Escrow Fund. Except as provided in this Section 3, no
moneys or Defeasance Securities deposited with the Escrow Bank pursuant to this Escrow
Agreement nor principal of, or interest payments or other investment income on, any such
Defeasance Securities shall be withdrawn or used for any purpose other than, and shall be held in
trust for, the payment of the Refunded Bonds as provided by Section 4 hereof.
(e) The Owners of the Refunded Bonds shall have a first and exclusive lien on the
moneys and Defeasance Securities in the Escrow.Fund until such moneys and Defeasance
Securities are used and applied as provided in this Escrow Agreement.
(f) The Escrow Bank shall not be held liable for investment losses resulting from
compliance with the provisions of this Escrow Agreement
3
4165-9649-5396.4
755
Section 4. Payment of Refunded Bonds. From the maturing principal of the Defeasance
Securities held in the Escrow Fund and the investment income and other earnings thereon and any
uninvested money then held in the Escrow Fund, the Escrow Bank shall pay, when due, the
principal of and interest on the Refunded Bonds to the Redemption Date and, on the Redemption
Date,pay the Redemption Price in accordance with the terms of the Prior Indenture.
To the extent that the amount on deposit in the Escrow Fund on the Redemption Date is in
excess of the amount necessary to make the required payments with respect to the Refunded Bonds,
as shown in the then applicable escrow verification of the nationally recognized firm of
independent certified public accountants, such excess shall be transferred to the Trustee for deposit
in the Interest Account of the Payment Fund established under the Indenture.
Section 5. Irrevocable Instructions to Mail Notices. The Authority hereby irrevocably
designates the Refunded Bonds for prior redemption on the Redemption Date as indicated in
Section 4 hereof and hereby irrevocably instructs the Escrow Bank to give, in accordance with
Section 3.04 of the Prior Indenture, notice of redemption of the Refunded Bonds.
Section 6. Performance of Duties. The Escrow Bank agrees to perform the duties set
forth herein and agrees that the irrevocable instructions to the Escrow Bank herein provided are in
a form satisfactory to it.
Section 7. Escrow Bank's Authority to Make Investments. The Escrow Bank shall
have no power or duty to invest any funds held under this Escrow Agreement except as provided
in Section 3 hereof. The Escrow Bank shall have no power or duty to transfer or otherwise dispose
of the honeys held hereunder except as provided in this Escrow Agreement.
Section 8. Indemnity. To the extent permitted by law, the Authority hereby assumes
liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are
consummated) to indemnify, protect, save and keep harmless the Escrow Bank and its respective
successors, assigns, agents, officers, directors, employees and servants, from and against any and
all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and
disbursements (including reasonable legal fees, expenses and disbursements) of whatsoever kind
and nature which may be imposed on, incurred by, or asserted against, the Escrow Bank at any
time (whether or not also indemnified against the same by the Authority or any other person under
any other agreement or instrument,but without double indemnity)in any way relating to or arising
out of the execution, delivery and performance of this Escrow Agreement, the establishment
hereunder of the Escrow Fund, the acceptance of the funds and securities deposited therein, the
purchase of any securities to be purchased thereto, the retention of such securities or the proceeds
thereof and any payment,transfer or other application of moneys or securities by the Escrow Bank
in accordance with the provisions of this Escrow Agreement;provided,however,that the Authority
shall not be required to indemnify the Escrow Bank against the Escrow Bank's own negligence or
willful misconduct or the negligence or willful misconduct of the Escrow Bank's respective
successors, assigns, agents and employees or the material breach by the Escrow Bank of the terms
of this Escrow Agreement. In no event shall the Authority or the Escrow Bank be liable to any
person by reason of the transactions contemplated hereby other than to each other as set forth in
this Section. The indemnities contained in this Section shall survive the termination of this Escrow
Agreement.
4
4165-9649-5396.4
756
Section 9. Responsibilities of Escrow Bank. The Escrow Bank and its respective
successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in
tort, contract, or otherwise, in connection with the execution and delivery of this Escrow
Agreement,the establishment of the Escrow Funds,the acceptance of the moneys or any securities
deposited therein, the purchase of the securities to be purchased pursuant hereto, the retention of
such securities or the proceeds thereof, the sufficiency of the securities or any uninvested moneys
held hereunder to accomplish the redemption of the Refunded Bonds, or any payment, transfer or
other application of moneys or securities by the Escrow Bank in accordance with the provisions
of this Escrow Agreement or by reason of any non-negligent act, non-negligent omission or non-
negligent error of the Escrow Bank made in good faith in the conduct of its duties. The recitals of
fact contained in the "Whereas" clauses herein shall be taken as the statements of the Authority,
and the Escrow Bank assumes no responsibility for the correctness thereof. The Escrow Bank
makes no representation as to the sufficiency of the securities to be purchased pursuant hereto and
to any uninvested moneys to accomplish the redemption of the Refunded Bonds pursuant to the
Prior Indenture or to the validity of this Escrow Agreement as to the Authority and, except as
otherwise provided herein,the Escrow Bank shall incur no liability in respect thereof. The Escrow
Bank shall not be liable in connection with the performance of its duties under this Escrow
Agreement except for its own negligence, willful misconduct or default, and the duties and
obligations of the Escrow Bank shall be determined by the express provisions of this Escrow
Agreement. The Escrow Bank may consult with counsel, who may or may not be counsel to the
Authority, and in reliance upon the written opinion of such counsel shall have full and complete
authorization and protection in respect of any action taken, suffered or omitted by it in good faith
in accordance therewith. Whenever the Escrow Bank shall deem it necessary or desirable that a
matter be proved or established prior to taking, suffering, or omitting any action under this Escrow
Agreement, such matter (except the matters set forth herein as specifically requiring a certificate
of a nationally recognized firm of independent certified public accountants or an opinion of counsel
of recognized standing in the field of law relating to municipal bonds) may be deemed to be
conclusively established by a written certification of the Authority. Whenever the Escrow Bank
shall deem it necessary or desirable that a matter specifically requiring a certificate of a nationally
recognized form of independent certified public accountants or an opinion of counsel of recognized
standing in the field of law relating to municipal bonds be proved or established prior to taking,
suffering, or omitting any such action, such matter may be established only a certificate signed by
a nationally recognized firm of certified public accountants or such opinion of counsel of
recognized standing in the field of law relating to municipal bonds.
No provision of this Escrow Agreement shall require the Escrow Bank to risk or advance
its own funds. The Escrow Bank shall be protected in acting upon any notice, resolution, request,
consent, order, certificate, report, opinion, bonds or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties. The Escrow Bank
may execute any of its powers or duties hereunder through attorneys, agents or receivers and shall
not be answerable for the actions of such attorneys, agents or receivers if selected by it with
reasonable care.
The Escrow Bank agrees to accept and act upon instructions or directions pursuant to this
Escrow Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured
electronic methods,provided, however, that,the Escrow Bank shall have received an incumbency
certificate listing persons designated to give such instructions or directions and containing
5
4165-9649-5396.4
757
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 Escrow Bank e-mail or facsimile instructions (or instructions by a similar
electronic method) and the Escrow Bank in its discretion elects to act upon such instructions, the
Escrow Bank's understanding of such instructions shall be deemed controlling. The Escrow Bank
shall not be liable for any losses, costs or expenses arising directly or indirectly from the Escrow
Bank'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 Escrow Bank,including without limitation the risk of the Escrow Bank acting on unauthorized
instructions, and the risk of interception and misuse by third parties.
Section 10. Amendments. The Authority and the Escrow Bank may (but only with the
consent of the Owners of all of the Refunded Bonds and the Insurer)amend this Escrow Agreement
or enter into agreements supplemental to this Escrow Agreement.
Section 11. Term. This Escrow Agreement shall commence upon its execution and
delivery and shall terminate on the date upon which the Refunded Bonds have been paid in
accordance with this Escrow Agreement.
Section 12. Compensation. The Authority shall from time to time pay or cause to be paid
to the Escrow Bank the agreed upon compensation for its services to be rendered hereunder, and
reimburse the Escrow Bank for all of its reasonable advances in the exercise and performance of
its duties hereunder; provided, however, that under no circumstances shall the Escrow Bank be
entitled to any lien whatsoever on any moneys or obligations in the Escrow Fund for the payment
of fees and expenses for services rendered or expenses incurred by the Escrow Bank under this
Escrow Agreement or otherwise.
Section 13. Severability. If any one or more of the covenants or agreements provided in
this Escrow Agreement on the part of the Authority or the Escrow Bank to be performed should
be determined by a court of competent jurisdiction to be contrary to law, such covenants or
agreements shall be null and void and shall be deemed separate from the remaining covenants and
agreements herein contained and shall in no way affect the validity of the remaining provisions of
this Escrow Agreement.
Section 14. Counterparts. This Escrow Agreement may be executed in several
counterparts, all or any of which shall be regarded for all purposes as an original but all of which
shall constitute and be but one and the same instrument.
6
4165-9649-5396.4
758
Section 15. Governing Law. This Escrow Agreement shall be construed under the laws
of the State of California.
U.S. BANK NATIONAL
ASSOCIATION, as Escrow Bank and
Prior Trustee
By:
Authorized Officer
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By:
ATTEST:
Robin Estanislau,
Secretary
7
4165-9649-5396.4
759
EXHIBIT A
DEFEASANCE SECURITIES
Type Maturity Par Amount Interest Rate Price Cost
A-1
4165-9649-5396.4
760
EXHIBIT B
NOTICE OF REDEMPTION
Huntington Beach Public Financing Authority
(Orange County, California)
Lease Revenue Refunding Bonds, 2011 Series A
(Capital Improvement Refinancing Project)
Each maturity of the Refunded Bonds relating to this notice(as defined below)is identified
by the corresponding CUSIP number set forth below:
Maturity
Date Principal Interest Redemption
Bond Number (September 1) Amount Rate Price CUSIP
R-11 2022 $1,150,000.00 3.000% 100.00% 446216 FVO
R-12 2023 1,185,000.00 3.375 100.00 446216 FW8
R-13 2024 1,225,000.00 3.625 100.00 446216 FX6
R-14 2025 1,265,000.00 4.000 100.00 446216 FY4
R-15 2026 1,315,000.00 4.000 100.00 446216 FZ1
R-16 2027 1,370,000.00 4.000 100.00 446216 GA5
R-17 2028 1,425,000.00 4.125 100.00 446216 G133
R-18 2029 1,480,000.00 4.250 100.00 446216 GC
R-19 2030 1,545,000.00 4.250 100.00 446216 GD9
R-20 2031 1,610,000.00 4.500 100.00 446216 GE7
NOTICE IS HEREBY GIVEN that the Huntington Beach Public Financing Authority
(the "Authority"), has caused to be deposited a portion of the proceeds of its Huntington Beach
Public Financing Authority (Orange County, California) Lease Revenue Refunding Bonds, 2020
Series B (Federally Taxable), with U.S. Bank National Association, as escrow bank(the "Escrow
Bank")pursuant to the Escrow Agreement, dated as of August 1,2020 (the "Escrow Agreement"),
by and between the Authority and the Escrow Bank, to redeem the Huntington Beach Public
Financing Authority (Orange County, California) Lease Revenue Refunding Bonds, 2011 Series
A(Capital Improvement Refinancing Project),maturing on September 1 in the years 2022 through
2031, inclusive, as further described in the table above (the "Refunded Bonds") on September 1,
2021 (the "Redemption Date") at a redemption price (the "Redemption Price") equal to the
principal amount thereof,plus accrued interest thereon to the Redemption Date,without premium.
The Refunded Bonds were issued pursuant to the Indenture, dated as of September 1, 2011,by and
between the Authority and U.S. Bank National Association, as successor trustee (the "Trustee").
On the Redemption Date, there shall become due and payable upon the Refunded Bonds the
Redemption Price and interest on the Refunded Bonds will not accrue from and after the
Redemption Date.
The Refunded Bonds must be surrendered by the owners at the corporate trust office of the
Trustee (or at such other place or places designated by the Trustee):
U.S. Bank National Association
Global Corporate Trust
B-1
4165-9649-5396.4
761
111 Fillmore Avenue E
St. Paul, Minnesota 55107
In compliance with federal law, the Trustee is required to withhold at the current rate of
withholding from payments of principal to individuals who fail to furnish valid Taxpayer
Identification Numbers. A completed form W-9 should be presented with your Refunded Bonds.
The CUSIP numbers have been assigned to this issue are included solely for the
convenience of the holders. Neither the Authority nor the Trustee nor the Escrow Bank shall be
responsible for the selection or use of the CUSIP numbers, nor is any representation made as to
their correctness on the Refunded Bonds or as indicated in any notice of redemption.
Dated: , 2021.
U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE
B-2
4165-9649-5396.4
762
ATTACHMENT #8
TO BE RECORDED AND WHEN RECORDED
RETURN TO:
Orrick,Herrington & Sutcliffe LLP
2050 Main Street, Suite 1100
Irvine, CA 92614-2558
Attention: Donald S. Field, Esq.
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.
SECOND AMENDMENT TO
SITE LEASE
by and between
CITY OF HUNTINGTON BEACH
and
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
Dated as of [ ] 192020
4158-7929-2708.2
763
SECOND AMENDMENT TO SITE LEASE
THIS SECOND AMENDMENT TO SITE LEASE (this "Second Amendment")
executed and entered into as of [ 1 1, 2020, is by and between the CITY OF
HUNTINGTON BEACH, a municipal corporation and charter city duly organized and existing
under and by virtue of the Constitution and laws of the State of California and its Charter (the
"City"), and the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, a joint exercise
of powers entity organized and existing under and by virtue of the laws of the State of California
(the "Authority"). Unless otherwise defined herein, capitalized terms used herein shall have the
meanings ascribed to such terms in the Lease Agreement(as defined below).
RECITALS
WHEREAS, the Authority and the City have entered into a Site Lease, dated as of
September 1, 2011 (the "Original Site Lease"), as Recorder Instrument No. 2011000479933 with
the Official Records, Orange County, on September 28, 2011; and
WHEREAS, the Authority and the City have entered into a First Amendment to Site
Lease, dated as of November 1, 2014 (the "First Amendment to Site Lease" and together with the
Original Site Lease, the "Site Lease"), as Recorder Instrument No. 2014000488049 with the
Official Records, Orange County, on November 13, 2014; and
WHEREAS, Section 8.03 of the Site Lease provides that the City has the right to substitute
alternate real property for the real property and improvements, constituting the Property (as
defined in the Site Lease) or to release portions of the Property in accordance with the Lease
Agreement, dated as of September 1, 2011, as heretofore amended and supplemented (the "Lease
Agreement"), by and between the Authority and the City; and
WHEREAS, Section 7.02 of the Lease Agreement provides that the City has the right to
substitute alternate real property for any portion of the Property or to release a portion of the
Property if certain conditions specified therein are satisfied; and
WHEREAS, Section 9.01(b) of the Lease Agreement provides that 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, without the written consents of any owners of the bonds issued under
the Indenture, dated as of September 1, 2011, as heretofore amended and supplemented, by and
among the Authority, the City and U.S. Bank National Association, as successor trustee (the
"Trustee"),to provide for the substitution or release of a portion of the Property in accordance with
the provisions of Section 7.02 of the Lease Agreement; and
WHEREAS, in connection with the refunding of all or a portion of the Huntington Beach
Public Financing Authority (Orange County, California) Lease Revenue Refunding Bonds, 2011
Series A (Capital Improvement Refinancing Project), the City and the Authority desire to
substitute certain real property, and the improvements thereto, consisting of Central Library as
described in Exhibit B hereto (the"Substituted Property"), for the Property currently subject to the
Lease Agreement described in Exhibit A hereto (the "Released Property"); and
4158-7929-2708.2
764
WHEREAS,in connection therewith,the City and the Authority find it desirable to modify
the Site Lease and the Lease Agreement pursuant this Second Amendment and the Second
Amendment to Lease Agreement, dated as of[ ] 1, 2020, by and between the City and the
Authority; and
WHEREAS, the conditions specified in Section 7.02 of the Lease Agreement to be
satisfied prior to such substitution have been so satisfied; and
WHEREAS,there exists a non-exclusive license agreement, dated September 3, 2019 (the
"One Fine Blend Agreement"), by and between the City and the Subhash and Sushila Patel,
individuals, doing business as One Fine Blend ("One Fine Blend"), relating to the Substituted
Property for the use of certain space and permission to sell coffee and various food and beverage
items; and
WHEREAS, the One Fine Blend Agreement has been subordinated to the Site Lease and
Lease Agreement pursuant to a Subordination Agreement, dated as of [ ], 2020, by and
between the City and One Fine Blend, which was recorded, as Recorder Instrument No.
[ ] with the Official Records, Orange County, on [ ], 2020; and
WHEREAS, there exists a non-exclusive license agreement, dated March 19, 2018 (the
"Genealogical Agreement"), by and between the City and the Orange County, California
Genealogical Society(the"Genealogical Society"),relating to the Substituted Property for the use
of certain space and library materials; and
WHEREAS, the Genealogical Agreement has been subordinated to the Site Lease and
Lease Agreement pursuant to a Subordination Agreement, dated as of [ ], 2020, by and
between the City and the Genealogical Society, which was recorded, as Recorder Instrument No.
[ ] with the Official Records, Orange County, on [ ], 2020; 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
Second Amendment 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 Second Amendment;
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION THE
RECEIPT AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, THE
PARTIES HERETO DO HEREBY AGREE AS FOLLOWS:
Section 1. Amendment. Exhibit A to the Site Lease is hereby amended to delete the
Released Property described in Exhibit A hereto. Exhibit A to the Site Lease is further amended
by substituting the Substituted Property described in Exhibit B hereto.
Section 2. Termination and Reversion. All provisions related to the Released
Property in the Site Lease are hereby terminated. All right, title and interest of the Authority and
the Trustee in the Released Property under the Site Lease shall hereupon revert to the City free and
clear of any interest of the Authority and the Trustee.
2
4158-7929-2708.2
765
Section 3. Binding Effect. This Second Amendment shall inure to the benefit of and
shall be binding upon the City and the Authority and their respective successors and assigns.
Section 4. Severability. In the event any provision of this Second Amendment 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 5. Applicable Law. This Second Amendment shall be governed by and
construed in accordance with the laws of the State of California.
Section 6. Execution in Counterparts. This Second Amendment may be executed in
several counterparts, each of which shall be deemed an original, and all of which shall constitute
but one and the same instrument.
3
4158-7929-2708.2
766
IN WITNESS WHEREOF, the City and the Authority have caused this Second
Amendment to be executed by their respective officers thereunto duly authorized, all as of the day
and year first above written.
CITY OF HUNTINGTON BEACH
By:
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By:
ATTEST:
Robin Estanislau,
Secretary
4
4158-7929-2708.2
767
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness, accuracy,
or validity of that document.
STATE OF CALIFORNIA )
) ss
COUNTY OF ORANGE )
On ,before me, ,Notary Public,
personally appeared ,who proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to
me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
[Seal]
768
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness, accuracy,
or validity of that document.
STATE OF CALIFORNIA )
) ss
COUNTY OF ORANGE )
On ,before me, ,Notary Public,
personally appeared , who proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s)is/are subscribed to the within instrument and acknowledged to
me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
[Seal]
769
EXHIBIT A
DESCRIPTION OF THE RELEASED 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
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 06, 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 001 19' 06" EAST 358.00
FEET ALONG SAID PARALLEL LINE; THENCE NORTH 451 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 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 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 48121' 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 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 001 19' 06" EAST 358.00
FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45' 19' 06" EAST 24.04 FEET; THENCE SOUTH 891
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 000 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 891 39' 33" EAST 200.89 FEET ALONG SAID CENTERLINE TO THE POINT OF
BEGINNING.
A-1
4158-7929-2708.2
770
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 05, 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 06, 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 001 19' 06" EAST 358.00
FEET ALONG SAID PARALLEL LINE; THENCE NORTH 451 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
MAP OF TRACT NO. 12; THENCE NORTH 891 40' 01" WEST 245.00 FEET ALONG SAID LAST MENTIONED
PARALLEL LINE TO SAID EASTERLY RIGHT OF WAY LINE OF MAIN STREET; THENCE SOUTH 001 20' 13"
WEST 1058.12 FEET ALONG SAID EASTERLY LINE OF MAIN STREET TO THE CENTERLINE OF SAID UTICA
STREET; THENCE SOUTH 891 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)
A-2
4158-7929-2708.2
771
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 05, 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 891 40' 54" WEST 237.70 FEET ALONG SAID CENTERLINE OF PARK STREET;
THENCE NORTH 000 19' 06" EAST 155.89 FEET TO THE CENTERLINE OF SAID SEVENTEENTH STREET;
THENCE NORTH 410 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 05, 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
A-3
4158-7929-2708.2
772
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. 89-137620 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 410 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 270 11' 59" WEST;
THENCE SOUTHEASTERLY 36.30 FEET,ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 20 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 240 45' 11"
WEST;
THENCE CONTINUING SOUTHEASTERLY 44.96 FEET, ALONG SAID CURVE, THROUGH A CENTRAL ANGLE
OF 30 01'51",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 680 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 000 00' 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 900 00' 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 410 19' 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 EXPLORATION,
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: 023-031-14 and 023-031-14
[END OF LEGAL DESCRIPTION]
A-4
4158-7929-2708.2
773
The above-described property is commonly referred to as the Civic Center located at 1900
Main Street, Huntington Beach, California.
A-2
4158-7929-2708.2
774
EXHIBIT B
DESCRIPTION OF THE SUBSTITUTED PROPERTY
All that real property situated in the County of Orange, State of California, described as
follows, and any improvements thereto:
THAT CERTAIN PARCEL OF LAND, BEING THAT PORTION OF THE RANCHO LAS
BOLSAS, SECTIONS 26 AND 35,TOWNSHIP 5 SOUTH,RANGE 11 WEST,AS SHOWN ON
MAP RECORDED IN BOOK 51, PAGE 13 OF MISCELLANEOUS MAPS, IN THE OFFICE
OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
COMMENCING AT THE CENTERLINE INTERSECTION OF GOLDEN WEST STREET
AND ELLIS AVENUE, SAID CENTERLINE INTERSECTION BEING DELINEATED AS
THE ORANGE COUNTY HORIZONTAL CONTROL STATION "GPS #5059" HAVING
A STATE PLANE COORDINATE VALUE OF NORTHING 2200569.821 FEET AND
EASTING 6027477.751 FEET; THENCE NORTH 0° 16' 33" EAST, 2641.81 FEET ALONG
THE CENTERLINE OF GOLDEN WEST STREET TO A POINT OF INTERSECTION
WITH THE CENTERLINE OF TALBERT AVENUE, SAID CENTERLINE
INTERSECTION BEING DELINEATED AS THE ORANGE COUNTY HORIZONTAL
CONTROL STATION "GPS #5073" HAVING A STATE PLANE COORDINATE VALUE
OF NORTHING 2203211.545 FEET AND EASTING 6027490.465 FEET AND SAID
POINT BEING THE SOUTHWESTERLY CORNER OF SAID SECTION 26;THENCE SOUTH
890 43' 27" EAST, 207.74 FEET TO THE TRUE POINT OF BEGINNING; THENCE
SOUTH 20 07' 44" WEST, 320.54 FEET; THENCE NORTH 87' 20' 19" EAST, 1122.81
FEET; THENCE NORTH 36' 13' 50" WEST, 535.78 FEET; THENCE NORTH 0° 12' 15"
EAST, 377.82 FEET; THENCE NORTH 83' 19' 27" WEST, 562.50 FEET; THENCE SOUTH
21° 08' 07" WEST, 261.18 FEET; THENCE SOUTH 14° 28' 10" EAST, 235.93 FEET; THENCE
SOUTH 770 48' 10" WEST, 201.57 FEET; THENCE SOUTH 2° 07' 44" WEST, 92.62 FEET TO
THE TRUE POINT OF BEGINNING.
Excluding the rights granted under the Master Communications Site Lease, dated April 18,
1996 (the "Communications Lease"), by and between the City and [T-Mobile, as successor
in interest to] Pacific Bell Mobile Services, relating to the installation of mobile/wireless
communications facilities on such property,while the Communications Lease is in effect for
the term thereof.
[END OF LEGAL DESCRIPTION]
The above-described property is commonly referred to as the Central Library located at
7111 Talbert Avenue, Huntington Beach, California.
B-1
4158-7929-2708.2
775
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"),as amended and supplemented by the First Amendment
to Site Lease, dated as of November 1, 2014, by and between the City and the Authority, as
amended by the Second Amendment to Site Lease, dated as of[ ] 1, 2020, 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
[ , 2020, and the Authority consents to recordation thereof by its duly authorized
officer.
Dated: [ ], 2020
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By:
4158-7929-2708.2
776
ATTACHMENT #9
TO BE RECORDED AND WHEN RECORDED
RETURN TO:
Orrick, Herrington & Sutcliffe LLP
2050 Main Street, Suite 1100
Irvine, CA 92614-2558
Attention: Donald S. Field, Esq.
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.
SECOND AMENDMENT TO
LEASE AGREEMENT
by and between
CITY OF HUNTINGTON BEACH
and
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
Dated as of [ ] 1, 2020
4156-5476-6116.2
777
SECOND AMENDMENT TO
LEASE AGREEMENT
THIS SECOND AMENDMENT TO LEASE AGREEMENT (this "Second
Amendment") executed and entered into as of[ ] 1, 2020, is by and between the CITY
OF HUNTINGTON BEACH, a municipal corporation and charter city duly organized and existing
under and by virtue of the Constitution and laws of the State of California and its Charter (the
"City"), and the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, a joint exercise
of powers entity organized and existing under and by virtue of the laws of the State of California
(the "Authority"). Unless otherwise defined herein, capitalized terms used herein shall have the
meanings ascribed to such terms in the Lease Agreement (as defined below).
RECITALS
WHEREAS,the Authority and the City have entered into a Lease Agreement, dated as of
September 1, 2011 (the "Original Lease Agreement"), with regard to which a Memorandum of
Lease Agreement and Assignment was recorded,as Recorder Instrument No.2011000479934 with
the Official Records, Orange County, on September 28, 2011;
WHEREAS, the Authority and the City have entered into a First Amendment to Lease
Agreement, dated as of November 1, 2014 (the "First Amendment to Lease Agreement" and
together with the Original Lease Agreement, the "Lease Agreement"), with regard to which a
Memorandum of Lease Agreement and Assignment was recorded, as Recorder Instrument No.
2014000488050 with the Official Records, Orange County, on November 13,2014;
WHEREAS, Section 7.02 of the Lease Agreement provides that the City has the right to
substitute alternate real property for any portion of the real property and improvements,
constituting the Property(as defined in the Lease Agreement)or to release a portion of the Property
if certain conditions specified therein are satisfied; and
WHEREAS, Section 9.01(b) of the Lease Agreement provides that the Lease Agreement
and the Site Lease, dated as of September 1, 2011, as heretofore amended and supplemented (the
"Site Lease"), by and between the City and Authority, 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,without the written consents of any
owners of the bonds issued under the Indenture, dated as of September 1, 2011, as heretofore
amended and supplemented, by and among the Authority, the City and U.S. Bank National
Association, as successor trustee (the "Trustee"), to provide for the substitution or release of a
portion of the Property in accordance with the provisions of Section 7.02 of the Lease Agreement;
and
WHEREAS, in connection with the refunding of all or a portion of the Huntington Beach
Public Financing Authority (Orange County, California) Lease Revenue Refunding Bonds, 2011
Series A (Capital Improvement Refinancing Project), the City and the Authority desire to
substitute certain real property, and the improvements thereto, consisting of Central Library as
described in Exhibit B hereto (the"Substituted Property"), for the Property currently subject to the
Lease Agreement described in Exhibit A hereto (the "Released Property"); and
1
4156-5476-6116.2
778
WHEREAS,in connection therewith,the City and the Authority find it desirable to modify
the Site Lease and the Lease Agreement pursuant the Second Amendment to Site Lease
Agreement, dated as of [ ] 1, 2020, by and between the City and the Authority and this
Second Amendment; and
WHEREAS, the conditions specified in Section 7.02 of the Lease Agreement to be
satisfied prior to such substitution have been so satisfied; and
WHEREAS,there exists a non-exclusive license agreement, dated September 3, 2019 (the
"One Fine Blend Agreement"), by and between the City and the Subhash and Sushila Patel,
individuals, doing business as One Fine Blend ("One Fine Blend"), relating to the Substituted
Property for the use of certain space and permission to sell coffee and various food and beverage
items; and
WHEREAS,the One Fine Blend Agreement has been subordinated to the Site Lease and
Lease Agreement pursuant to a Subordination Agreement, dated as of [ ], 2020, by and
between the City and One Fine Blend, which was recorded, as Recorder Instrument No.
[ ] with the Official Records, Orange County, on [ ], 2020; and
WHEREAS, there exists a non-exclusive license agreement, dated March 1.9, 2018 (the
"Genealogical Agreement"), by and between the City and the Orange County, California
Genealogical Society(the "Genealogical Society"),relating to the Substituted Property for the use
of certain space and library materials; and
WHEREAS, the Genealogical Agreement has been subordinated to the Site Lease and
Lease Agreement pursuant to a Subordination Agreement, dated as of [ ], 2020, by and
between the City and the Genealogical Society, which was recorded, as Recorder Instrument No.
[ ] with the Official Records, Orange County, on [ ], 2020; 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
Second Amendment 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 Second Amendment;
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION THE
RECEIPT AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, THE
PARTIES HERETO DO HEREBY AGREE AS FOLLOWS:
Section 1. Amendment. Exhibit A to the Lease Agreement is hereby amended to
delete the Released Property described in Exhibit A hereto. Exhibit A to the Lease Agreement is
further amended by substituting the Substituted Property described in Exhibit B hereto.
Section 2. Termination and Reversion. All provisions related to the Released
Property in the Lease Agreement are hereby terminated. All right,title and interest of the Authority
and the Trustee in the Released Property under the Lease Agreement shall hereupon revert to the
City free and clear of any interest of the Authority and the Trustee.
2
4156-5476-6116.2
779
Section 3. Binding Effect. This Second Amendment shall inure to the benefit of and
shall be binding upon the City and the Authority and their respective successors and assigns.
Section 4. Severability. In the event any provision of this Second Amendment 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 5. Applicable Law. This Second Amendment shall be governed by and
construed in accordance with the laws of the State of California.
Section 6. Execution in Counterparts. This Second Amendment may be executed in
several counterparts, each of which shall be deemed an original, and all of which shall constitute
but one and the same instrument.
3
4156-5476-6116.2
780
IN WITNESS WHEREOF, the Authority and the City have caused this Second
Amendment to be executed by their respective officers thereunto duly authorized, all as of the day
and year first above written.
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By:
ATTEST:
Robin Estanislau,
Secretary
CITY OF HUNTINGTON BEACH
By:
4
4156-5476-6116.2
781
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness, accuracy,
or validity of that document.
STATE OF CALIFORNIA )
) ss
COUNTY OF ORANGE )
On ,before me, ,Notary Public,
personally appeared , who proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to
me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
[Seal]
782
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness, accuracy,
or validity of that document.
STATE OF CALIFORNIA )
) ss
COUNTY OF ORANGE )
On ,before me, ,Notary Public,
personally appeared , who proved to me on the basis of satisfactory evidence
to be the person(s)whose name(s) is/are subscribed to the within instrument and acknowledged to
me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
[Seal]
r
783
EXHIBIT A
DESCRIPTION OF THE RELEASED 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
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 06,
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 00' 19' 06"
EAST 358.00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45' 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 41°38'23"EAST 427.42 FEET ALONG SAID
CENTERLINE OF SEVENTEENTH STREET; THENCE SOUTH 89' 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 4V 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
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 89' 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 00' 19' 06"
EAST 358.00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45' 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 00' 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 89' 40' 0 1" WEST 245.00
FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO SAID EASTERLY RIGHT OF WAY LINE OF
MAIN STREET;THENCE SOUTH 00'20' 13"WEST 1058.12 FEET ALONG SAID EASTERLY LINE OF MAIN
STREET TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 89' 39' 33"EAST 200.89 FEET
ALONG SAID CENTERLINE TO THE POINT OF BEGINNING.
A-1
4156-5476-6116.2
784
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 05, 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 06, 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' 19' 06"
EAST 358.00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45' 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 00°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 89'40' 0 1" WEST 245.00 FEET
ALONG SAID LAST MENTIONED PARALLEL LINE TO SAID EASTERLY RIGHT OF WAY LINE OF MAIN
STREET; THENCE SOUTH 00' 20' 13" WEST 1058.12 FEET ALONG SAID EASTERLY LINE OF MAIN
STREET TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 89° 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,
A-2
4156-5476-6116.2
785
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 05, 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 89'40' 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 05, 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
A-3
4156-5476-6116.2
786
RESOLUTION NO. 5989, ON JANUARY 17, 1989 RECORDED MARCH 16, 1989 AS INSTRUMENT NO. 89-
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 27' 11' 59"WEST;
THENCE SOUTHEASTERLY 36.30 FEET,ALONG SAID CURVE,THROUGH A CENTRAL ANGLE OF 2°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 240 45' 11"WEST;
THENCE CONTINUING SOUTHEASTERLY 44.96 FEET, ALONG SAID CURVE, THROUGH A CENTRAL
ANGLE OF 30 01' 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 68-16'
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 000 00' 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 90°00' 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 41°19'00"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 EXPLORATION, 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: 023-031-14 and 023-031-14
[END OF LEGAL DESCRIPTION]
The above-described property is commonly referred to as the Civic Center located at 1900
Main Street, Huntington Beach, California.
A-4
4156-5476-6116.2
787
EXHIBIT B
DESCRIPTION OF THE SUBSTITUTED PROPERTY
All that real property situated in the County of Orange, State of California, described as
follows, and any improvements thereto:
THAT CERTAIN PARCEL OF LAND, BEING THAT PORTION OF THE RANCHO LAS
BOLSAS, SECTIONS 26 AND 35,TOWNSHIP 5 SOUTH, RANGE 11 WEST,AS SHOWN ON
MAP RECORDED IN BOOK 51, PAGE 13 OF MISCELLANEOUS MAPS, IN THE OFFICE
OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
COMMENCING AT THE CENTERLINE INTERSECTION OF GOLDEN WEST STREET
AND ELLIS AVENUE, SAID CENTERLINE INTERSECTION BEING DELINEATED AS
THE ORANGE COUNTY HORIZONTAL CONTROL STATION "GPS #5059" HAVING
A STATE PLANE COORDINATE VALUE OF NORTHING 2200569.821 FEET AND
EASTING 6027477.751 FEET; THENCE NORTH 0° 16' 33" EAST, 2641.81 FEET ALONG
THE CENTERLINE OF GOLDEN WEST STREET TO A POINT OF INTERSECTION
WITH THE CENTERLINE OF TALBERT AVENUE, SAID CENTERLINE
INTERSECTION BEING DELINEATED AS THE ORANGE COUNTY HORIZONTAL
CONTROL STATION "GPS #5073" HAVING A STATE PLANE COORDINATE VALUE
OF NORTHING 2203211.545 FEET AND EASTING 6027490.465 FEET AND SAID
POINT BEING THE SOUTHWESTERLY CORNER OF SAID SECTION 26;THENCE SOUTH
89° 43' 27" EAST, 207.74 FEET TO THE TRUE POINT OF BEGINNING; THENCE
SOUTH 20 07' 44" WEST, 320.54 FEET; THENCE NORTH 87' 20' 19" EAST, 1122.81
FEET; THENCE NORTH 36' 13' 50" WEST, 535.78 FEET; THENCE NORTH 0° 12' 15"
EAST, 377.82 FEET; THENCE NORTH 83' 19' 27" WEST, 562.50 FEET; THENCE SOUTH
21° 08' 07" WEST, 261.18 FEET; THENCE SOUTH 14° 28' 10" EAST, 235.93 FEET; THENCE
SOUTH 770 48' 10" WEST, 201.57 FEET; THENCE SOUTH 2° 07' 44" WEST, 92.62 FEET TO
THE TRUE POINT OF BEGINNING.
Excluding the rights granted under the Master Communications Site Lease, dated April 18,
1996 (the "Communications Lease"), by and between the City and [T-Mobile, as successor in
interest to] Pacific Bell Mobile Services, relating to the installation of mobile/wireless
communications facilities on such property,while the Communications Lease is in effect for the
term thereof.
[END OF LEGAL DESCRIPTION]
The above-described property is commonly referred to as the Central Library located at
7111 Talbert Avenue,Huntington Beach, California.
B-1
4156-5476-6116.2
788
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"), as amended and supplemented by the
First Amendment to Lease Agreement, dated as of November 1, 2014, as amended by the Second
Amendment to Lease Agreement, dated as of[ ] 1, 2020, by and between the City and
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
[ ], 2020, and the City consents to recordation thereof by its duly authorized officer.
Dated: [ ], 2020
CITY OF HUNTINGTON BEACH
By:
4156-5476-6116.2
789
ATTACHMENT # 10
a
m
m
L
f
-
eri �
N -
N
gc E 3
b
a o u
C
o
u 3
a
d
o �
3 �
10 m E
L _
c
`o
L
3 v e
� m a
C _ -
r
a n o n d
L n
3 a a a a
a
0
m
00
c
=a
c
r �
u y
ea �
d
m d
C 3
O O
N
C N
'a+ �
C N p
3 f6 O
Q� N
O C a
N N
� { k ) § ) J , �
( t / �
) ! ) \ !
-
.
= k k ) \ k \
C
LL
\ (
k )
!#— ■ #§
tco
\ ■� (
+ i go \ \
@�n�
75
_ .
« — \ o k —
�
—
ƒ W.
f%.
N
O
r
N
a1
�7y
V
0
n
a
`o
`o
_ y
� E
a' °1
a
'o O
u
� � E3 0 _
� m m
� o
Vo 0 0
f0 o r
C 75
OH&S 7/9/20 Draft
PRELIMINARY OFFICIAL STATEMENT DATED JULY 2020
NEW ISSUE—BOOK-ENTRY ONLY RATINGS:
Fitch
S&P.
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 2020A Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of
1986 In the further opinion of Bond Counsel, interest on the Series 2020A Bonds is not a specific preference item for purposes of the federal
alternative minimum tax. Bond Counsel is also of the opinion that interest on the Series 2020 Bonds is exempt from State of California personal
income taxes. Bond Counsel further observes that interest on the Series 2020E Bonds is not excluded from gross income for federal income tax
purposes. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount,
accrual or receipt of interest on,the Series 2020 Bonds. See "TAX MATTERS"herein.
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(ORANGE COUNTY,CALIFORNIA)
LEASE REVENUE REFUNDING BONDS
consisting of
2020 Series A(Tax-Exempt) 2020 Series B(Federally Taxable)
Dated:Date of Delivery Due:May 1,as shown on inside cover
The $ ' aggregate principal amount of Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2020
Series A(Tax-Exempt)(the"Series 2020A Bonds")and$ 'aggregate principal amount of Huntington Beach Public Financing Authority
Lease Revenue Refunding Bonds, 2020 Series B (Federally Taxable)(the"Series 2020B Bonds"and, together with the Series 2020A Bonds,the
"Series 2020 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 2020 Bonds and a master indenture,dated as of
August 1,2020(the"Indenture"),by and among the City of Huntington Beach(the"City"),the Authority and U.S.Bank National Association,as
trustee(the"Trustee"). The Series 2020A Bonds are being issued to(i)refund the outstanding Huntington Beach Public Financing Authority Lease
Revenue Refunding Bonds,2010 Series A,and(ii)pay costs of issuance of the Series 2020A Bonds. The Series 2020B Bonds are being issued to(i)
advance refund the outstanding Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2011 Series A (Capital
Improvement Refinancing Project), and (ii)pay costs of issuance of the Series 2020B Bonds. See "REFUNDING PLAN" and "ESTIMATED
SOURCES AND USES OF FUNDS"herein. The Series 2020 Bonds and any additional bonds issued in accordance with the Indenture will be
secured by a pledge of and lien on the Lease Revenues(as defined herein). The Series 2020A Bonds and such additional bonds,if any,are referred
to herein as"Bonds."
The Series 2020 Bonds are issuable in denominations of$5,000 and any integral multiple thereof. Interest on the Series 2020 Bonds is
payable on May 1 and November I of each year,commencing November 1,2020. See"THE BONDS"herein.
The Series 2020 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 2020 Bonds.
Ownership interests in the Series 2020 Bonds may be purchased in book-entry form only. Principal of,premium,if any,and interest on the Series
2020 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 2020 Bonds. See"THE BONDS"herein and APPENDIX G—"BOOK-ENTRY ONLY SYSTEM."
The Series 2020 Bonds are subject to optional and extraordinary redemption as described herein. See "THE BONDS—Redemption"
herein.
The City is leasing and will lease certain real property and the improvements thereon from the Authority pursuant to a master lease
agreement,dated as of August 1,2020(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 2020 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 AND SOURCES OF PAYMENT FOR THE BONDS"herein.
SUPPLEMENTAL
Preliminary,subject to change. COMMUNICATION
4129-6022-6339.5 Ming Dom: Z�LD
Agenda item No.,, /�[ " /
OH&S 7/9/20 Draft
MATURITY SCHEDULES
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 2020 Bonds will be offered when,as and if issued,and received by the Underwriter,subject to the approval as to their validity
by Orrick, Herrington&Sutcliffe LLP, Bond Counsel to the Authority, and certain other conditions. KNN Public Finance is serving as municipal
advisor to the City in connection with the issuance of the Series 2020 Bonds. Certain legal matters will be passed upon for the City and the Authority
by Michael E.Gates,Esq.,City Attorney,and by Orrick,Herrington&Sutcliffe LLP,as Disclosure Counsel. Certain legal matters will be passed on
for the Underwriter by Stradling Yocca Carlson&Rauth,a Professional Corporation, Newport Beach, California. It is anticipated that the Series
2020 Bonds will be available for delivery through DTC on or about August ,2020.
Stifel
Dated:July ,2020
4129-6022-6339.5
MATURITY SCHEDULES'
Huntington Beach Public Financing Authority
Lease Revenue Refunding Bonds
2020 Series A(Tax-Exempt)
$ Serial Bonds
CUSIP Prefix: 446216,
Maturity Principal Interest CUSIP
(May 1) Amount Rate Yield Suffixt
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Huntington Beach Public Financing Authority
Lease Revenue Refunding Bonds
2020 Series B(Federally Taxable)
$ Serial Bonds
CUSIP Prefix: 4462161
Maturity Principal Interest CUSIP
(May 1) Amount Rate Yield Suffix,
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
' Preliminary,subject to change.
t Copyright 2020,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-
Hill Companies,Inc. None of the City,the Authority or the Underwriter shall be responsible for the selection or correctness
of the CUSIP numbers set forth herein.
4129-6022-6339.5
I
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.ci.huntington-beach.ca.us/
AUTHORITY BOARD OF DIRECTORS AND CITY COUNCIL
Lyn Semeta,Authority Chair/Mayor
Jill Hardy,Authority Vice Chair/Mayor Pro Tem
Patrick Brenden,Authority/City Council Member
Kim Carr,Authority/City Council Member
Barbara Delgleize,Authority/City Council Member
Erik Peterson,Authority/City Council Member
Mike Posey,Authority/City Council Member
AUTHORITY/CITY STAFF
Oliver Chi, City Manager
Travis Hopkins,Assistant City Manager
Robin Estanislau, City Clerk
Michael E. Gates, City Attorney
Alisa Backstrom, City Treasurer
Joyce Zacks,Deputy City Treasurer
Dahle Bulosan, Chief Financial Officer
Sunny Rief,Assistant Chief Financial Officer
SPECIAL SERVICES
Bond Counsel and Disclosure Counsel
Orrick, Herrington& Sutcliffe LLP
Los Angeles, California
Municipal Advisor
KNN Public Finance
Los Angeles,California
Trustee
U.S. Bank National Association
Los Angeles,California
Verification Agent
Causey Demgen&Moore P.C.
Denver, Colorado
4129-6022-6339.5
No dealer, broker, salesperson or other person has been authorized by the Authority, the City or the
Underwriter 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 Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of the Series 2020 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 2020 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 Underwriter. 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 2020 Bonds
referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. The Underwriter
has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the
information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the
federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not
guarantee the accuracy or completeness of such information.
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 AND SOURCES OF PAYMENT 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 UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2020 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
UNDERWRITER MAY OFFER AND SELL THE SERIES 2020 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 UNDERWRITER.
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 2020 Bonds. None of the Authority, the City or the Underwriter is responsible for the selection or uses of
these CUSIP numbers,and no representation is made as to their correctness on the Series 2020 Bonds or as included
herein. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Series 2020
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 2020 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 2020 Bonds.
4129-6022-6339.5
TABLE OF CONTENTS
Page
INTRODUCTION..........................................................................................................................................1
GeneralDescription..................................................................................................................................1
Termsof the Series 2020 Bonds...............................................................................................................1
Book-Entry Only......................................................................................................................................2
Security and Sources of Payment for the Series 2020 Bonds...................................................................2
NoReserve Fund......................................................................................................................................3
TheCity....................................................................................................................................................3
TheAuthority...........................................................................................................................................3
ContinuingDisclosure..............................................................................................................................3
CertainRisk Factors.................................................................................................................................4
Forward-Looking Statements...................................................................................................................4
OtherInformation.....................................................................................................................................4
ESTIMATED SOURCES AND USES OF FUNDS ......................................................................................5
THEPROPERTY...........................................................................................................................................5
REFUNDINGPLAN......................................................................................................................................6
THEBONDS..................................................................................................................................................7
General.....................................................................................................................................................7
OptionalRedemption...............................................................................................................................8
Extraordinary Redemption from Insurance or Condemnation Proceeds..................................................9
Noticeof Redemption..............................................................................................................................9
Selection of Bonds for Redemption.........................................................................................................9
PartialRedemption of Bonds..................................................................................................................10
Effectof Redemption.............................................................................................................................10
SECURITY AND SOURCES OF PAYMENT FOR THE BONDS............................................................10
General................................................................................................................................................... 10
Base Rental Payments and Additional Payments................................................................................... 11
Insurance and Condemnation Awards....................................................................................................12
NoReserve Fund.................................................................................................................................... 13
Abatement.............................................................................................................................................. 14
Insurance................................................................................................................................................ 14
DebtService Schedule............................................................................................................................ 15
AdditionalBonds....................................................................................................................................16
Substitution and Release of Property ..................................................................................................... 16
THEAUTHORITY......................................................................................................................................17
THECITY....................................................................................................................................................17
CITY FINANCIAL INFORMATION.......................................................................................................... 18
FinancialStatements............................................................................................................................... 18
BudgetaryProcess.................................................................................................................................. 19
City Financial Management Policies......................................................................................................23
CurrentInvestments ...............................................................................................................................23
Relianceon State Budget........................................................................................................................24
Principal Sources of General Fund Revenues........................................................................................24
i
4129-6022-6339.5
TABLE OF CONTENTS
(continued)
Page
PROPERTYTAXES....................................................................................................................................25
AdValorem Property Taxes...................................................................................................................25
MotorVehicle In-Lieu Tax....................................................................................................................30
SALESTAXES ............................................................................................................................................30
OTHERTAXES...........................................................................................................................................31
UtilityTaxes...........................................................................................................................................31
OtherTaxes............................................................................................................................................31
OTHERREVENUES ...................................................................................................................................32
OTHER FINANCIAL INFORMATION......................................................................................................36
LaborRelations......................................................................................................................................36
RiskManagement...................................................................................................................................36
Employee Retirement Plan—CalPERS..................................................................................................37
Retirement Plan—Supplemental............................................................................................................47
Other Post-Employment Benefits(OPEB).............................................................................................48
Short-Term Obligations..........................................................................................................................49
Long-Term Obligations..........................................................................................................................49
AdditionalObligations...........................................................................................................................51
OverlappingDebt...................................................................................................................................51
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND
APPROPRIATIONS........................................................................................................................54
Article XIIIA of the California Constitution..........................................................................................54
SplitRoll Initiative.................................................................................................................................55
Article XIIIB of the California Constitution..........................................................................................55
Proposition218.......................................................................................................................................56
Proposition1 A of 2004..........................................................................................................................58
Proposition22.........................................................................................................................................58
Proposition25.........................................................................................................................................59
Proposition26.........................................................................................................................................59
FutureInitiatives.....................................................................................................................................59
RISKFACTORS ..........................................................................................................................................59
LimitedObligation.................................................................................................................................60
Base Rental Payments Are Not Debt......................................................................................................60
Valid and Binding Covenant to Budget and Appropriate.......................................................................61
Abatement..............................................................................................................................................61
Riskof Uninsured Loss..........................................................................................................................61
EminentDomain.....................................................................................................................................62
HazardousSubstances............................................................................................................................62
NaturalDisasters....................................................................................................................................63
Droughtand Drought Response.............................................................................................................64
Climate Change and Sea Level Rise ......................................................................................................64
Cybersecurity..........................................................................................................................................65
Infectious Disease Outbreak—COVID-19.............................................................................................65
ii
4129-6022-6339.5
TABLE OF CONTENTS
(continued)
Page
Bankruptcy.............................................................................................................................................69
Limitationson Remedies........................................................................................................................70
No Liability of Authority to the Owners................................................................................................71
Riskof Tax Audit...................................................................................................................................71
StateBudget...........................................................................................................................................71
Lossof Tax Exemption..........................................................................................................................75
LimitedSecondary Market.....................................................................................................................75
Changesin Law......................................................................................................................................75
TAXMATTERS...........................................................................................................................................76
Series2020A Bonds...............................................................................................................................76
Series2020B Bonds...............................................................................................................................77
CERTAIN LEGAL MATTERS....................................................................................................................81
FINANCIAL STATEMENTS......................................................................................................................81
LITIGATION................................................................................................................................................81
VERIFICATION OF MATHEMATICAL ACCURACY............................................................................82
RATINGS.....................................................................................................................................................82
UNDERWRITING.......................................................................................................................................82
MUNICIPALADVISOR..............................................................................................................................83
CONTINUING DISCLOSURE....................................................................................................................8,
ADDITIONAL INFORMATION.................................................................................................................84
APPENDIX A GENERAL,ECONOMIC AND DEMOGRAPHIC INFORMATION
RELATING TO THE CITY.........................................................................................A-1
APPENDIX B COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR
THE FISCAL YEAR ENDED JUNE 30, 2019............................................................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
4129-6022-6339.5
OFFICIAL STATEMENT
Huntington Beach Public Financing Authority Huntington Beach Public Financing Authority
(Orange County,California) (Orange County,California)
Lease Revenue Refunding Bonds Lease Revenue Refunding Bonds
2020 Series A(Tax-Exempt) 2020 Series B(Federally Taxable)
INTRODUCTION
The following introduction presents a brief description of certain information in connection with
the Series 2020 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
DOCUMENTS—Definitions."
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
$ ' aggregate principal amount of Huntington Beach Public Financing Authority Lease
Revenue Refunding Bonds, 2020 Series A (Tax-Exempt) (the "Series 2020A Bonds") and $ `
aggregate principal amount of Huntington Beach Public Financing Authority Lease Revenue Refunding
Bonds, 2020 Series B (Federally Taxable) (the "Series 2020B Bonds" and, together with the Series
2020A Bonds, the "Series 2020 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 2020 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 2020
Bonds(the"Authority Resolution") and a master indenture, dated as of August 1, 2020(the "Indenture"),
each by and among the City of Huntington Beach (the "City"), the Authority and U.S. Bank National
Association, as trustee (the "Trustee"). The Series 2020A Bonds are being issued (i) refund the
outstanding Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2010 Series
A, and (ii) pay costs of issuance of the Series 2020A Bonds. The Series 2020B Bonds are being issued
(i) advance refund the outstanding Huntington Beach Public Financing Authority Lease Revenue
Refunding Bonds, 2011 Series A (Capital Improvement Refinancing Project), and (ii) pay costs of
issuance of the Series 2020B Bonds. See "REFUNDING PLAN" and "ESTIMATED SOURCES AND
USES OF FUNDS."
Terms of the Series 2020 Bonds
The Series 2020 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 2020 Bonds is payable semiannually
` Preliminary,subject to change.
1
4129-6022-6339.5
on each May 1 and November 1 (each, an "Interest Payment Date"), commencing November 1, 2020,
computed at the respective rates of interest set forth on the inside cover page of this Official Statement.
The Series 2020 Bonds will be issuable in denominations of$5,000 or any integral multiple thereof. The
Series 2020 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 2020 Bonds and all payments due on the Series 2020 Bonds will be made to DTC or its
nominee. Ownership interests in the Series 2020 Bonds may be purchased in book-entry form only. See
APPENDIX G—"BOOK-ENTRY ONLY SYSTEM."
Security and Sources of Payment for the Series 2020 Bonds
Pursuant to the master site lease, dated as of August 1, 2020 (the "Site Lease"), by and between
the City and the Authority; the City is leasing and 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 master
lease agreement, dated as of August 1, 2020 (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 2020
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 AND SOURCES OF PAYMENT FOR THE BONDS—Abatement." The
Series 2020 Bonds and any additional bonds issued in accordance with the Indenture will be secured by a
pledge of and lien on the Lease Revenues (as defined herein). The Series 2020A 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
2
4129-6022-6339.5
applied for such other purposes as are permitted under the Indenture. As defined in the Indenture, 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.
No Reserve Fund
No reserve fund will be established to support the payment of debt service on the Series 2020
Bonds. The Indenture provides for the establishment of a Reserve Fund and Reserve Accounts therein for
Additional Bonds issued under the Indenture to be funded in an amount equal to the Reserve Requirement
for such Bonds as set forth in the applicable Supplemental Indenture. Amounts held or to be held in the
Reserve Fund and Reserve Accounts therein established for any other Series of Bonds or any Reserve
Facility for any other Series of Bonds will not be available or drawn upon to pay principal of, redemption
premium, if any, or interest on the Series 2020 Bonds. See "SECURITY AND SOURCES OF
PAYMENT FOR THE BONDS —No 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, as amended
including by that Second Amendment to Joint Exercise of Powers Agreement, dated as of July 17, 2014,
by and among the City, the Successor Agency to the Redevelopment Agency of the City of Huntington
Beach (the "Agency") and the Huntington Beach Housing Authority, 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 and sources of payment for 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." See also APPENDIX F—"FORM
OF CONTINUING DISCLOSURE CERTIFICATE" for a description of the specific nature of the 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.
3
4129-6022-6339.5
i
Certain Risk Factors
Certain events could affect the ability of the City to make the Base Rental Payments when due.
See "RISK FACTORS" for a discussion of certain factors that should be considered, in addition to other
matters set forth herein, in evaluating an investment in the Series 2020 Bonds.
Forward-Looking Statements
Certain statements included or incorporated by reference in this Official Statement constitute
"forward-looking statements." Such statements are generally identifiable by the terminology used such as
"plan,""expect,""estimate,""budget"or other similar words. 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. Although such expectations reflected in such forward-looking
statements are reasonable, there can be no assurance that such expectations will prove to be correct.
Neither the Authority nor the City is obligated to issue any updates or revisions to the forward-looking
statements if, or when, its expectations, or events, conditions or circumstances on which such statements
are based change.
Other Information
The descriptions herein of the Indenture, the Lease Agreement and any other agreements relating
to the Series 2020 Bonds are qualified in their entirety by reference to such documents, and the
descriptions herein of the Series 2020 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 Chief Financial Officer, 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.
4
4129-6022-6339.5
ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds realized upon the sale of, or in connection with, the
Series 2020 Bonds are as follows:
Series 2020A Bonds Series 2020B Bonds Total
Estimated Sources:
Principal Amount
[Net]Original Issue Premium
Amounts Released by Refunding 0)
Total Sources
Estimated Uses:
Deposit to Escrow Fund(2)
Costs of Issuance(3�
Total Uses
(') Amounts on deposit under the 2010 Indenture and 2011 Indenture. See"REFUNDING PLAN."
(2) See"REFUNDING PLAN."
0) Includes,but is not limited to,the Underwriter's discount,the fees and expenses of Bond Counsel,Disclosure Counsel,
the Municipal Advisor,the Trustee,the Escrow Agent,the Verification Agent,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 2020 Bonds.
THE PROPERTY
The Property consists of the Donald W. Kiser Corporation Yard and the site thereof located at
17371 Gothard Street in the City. The Donald W. Kiser Corporation Yard consists of a main
administration building, four large warehouse type structures, equipment and materials storage, and office
space. The two-story 7,200 square foot administration building was constructed in 1972 and is used for
centralized customer service operations and office space. The City Yard buildings provide operations
bases for a variety of City maintenance services. Building B is approximately 26,000 square feet and was
also constructed in 1972. Building B houses the fleet maintenance facility that includes mechanics bays
and parts storage for servicing vehicles, large and small equipment, and fire engines. Building C,
constructed in 1973, is approximately 19,000 square feet. The building holds materials and equipment
used in traffic signal, signs, and marking maintenance. Building C also includes facility maintenance
small equipment such as carpentry, locksmith, plumbing, and electrical tools. Building D is
approximately 7,500 square feet and was built in 1983. It is used for mechanical services to police
vehicles, motorcycles, and radio equipment. This facility includes mechanics bays and parts storage.
Building E, approximately 14,600 square feet is a storage warehouse for parts, supplies, and equipment.
Building E was finished in 1988. The lot includes several small sheds as well as storage for sand, gravel,
and loose construction materials. A fuel island contains four gasoline, two diesel, and one propane pump
that service all city-owned vehicles and equipment.
The City has determined that the Rental Payments are not in excess of the fair rental value of the
Property. In making such determination of fair rental value, consideration has been given to the uses and
purposes which may be served by the Property and the benefits therefrom which will accrue to the City
and the general public.
5
4129-6022-6339.5
REFUNDING PLAN
Net proceeds of the Series 2020A Bonds,together with other available moneys, will be applied to
refund the outstanding Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds,
2010 Series A (the"Series 2010A Bonds") issued on June 2, 2010 pursuant to an indenture of trust, dated
as of June 1, 2010 (the "2010 Indenture"), by and between the Authority and U.S. Bank National
Association, as trustee (the "2010 Trustee") of which $7,405,000 aggregate principal amount is currently
outstanding. See "ESTIMATED SOURCES AND USES OF FUNDS" herein. The following table
details outstanding Series 2010A Bonds to be refunded.
Lease Revenue Refunding Bonds,2010 Series A
Maturity Principal Interest Redemption
(September 1) Amount Rate CUSIP No. Date
2020 $ 865,000 5.00% 446216 FE8 n.a.
2021 905,000 5.00 446216 FF5 9/1/2020
2022 550,000 5.00 446216 FG3 9/1/2020
2025 1,820,000 5.00 446216 FH1 9/1/2020
2030 3,270,000 5.00 446216 FJ7 9/l/2020
On the date of issuance of the Series 2020A Bonds, a portion of the proceeds thereof, together
with other available moneys, will be deposited in an escrow fund to be held in trust by U.S. Bank
National Association, as prior trustee, in accordance with an escrow agreement, dated as of August 1,
2020 (the "2010A Escrow Agreement"), by and between the Authority and U.S. Bank National
Association. The Authority expects to transfer remaining amounts, in the approximate amount of
$[1,097,614]", currently on deposit under the 2010 Indenture, to the escrow fund to be applied in
accordance with the 2010A Escrow Agreement. Such funds on hand and proceeds deposited into the
escrow fund will be invested in U.S. Treasury securities, with the remainder held uninvested, and applied
to pay the scheduled principal of and interest on the Series 2010A Bonds on September 1, 2020, and the
redemption price of all of the Series 2010A Bonds on September 1, 2020, at a redemption price equal to
100% of their principal amount as specified in the 2010A Escrow Agreement, plus accrued interest. See
"ESTIMATED SOURCES AND USES OF FUNDS." Upon deposit of such proceeds and other moneys
into the escrow fund,the Series 2010A Bonds will no longer be deemed outstanding.
Net proceeds of the Series 2020B Bonds,together with other available moneys, will be applied to
advance refund the outstanding Huntington Beach Public Financing Authority Lease Revenue Refunding
Bonds, 2011 Series A (Capital Improvement Refinancing Project) (the "Series 2011A Bonds" and,
together with the Series 2010A Bonds,the "Refunded Bonds") issued on September 28, 2011 pursuant to
an indenture, dated as of September 1, 2011 (the "2011 Indenture"), by and among the City,the Authority
and The Bank of New York Mellon Trust Company, N.A., as trustee (the "2011 Trustee") of which
$15,725,000.00 aggregate principal amount is currently outstanding. See "ESTIMATED SOURCES
AND USES OF FUNDS" herein. The following table details outstanding Series 2011A Bonds to be
refunded.
I
' Preliminary,subject to change.
I
6
4129-6022-6339.5
f
Lease Revenue Refunding Bonds,2011 Series A
Maturity Principal Interest Redemption
(September 1) Amount Rate CUSIP No. Date
2020 $ 1,060,000 3.000% 446216 FT5 n.a.
2021 1,095,000 5.000 446216 FU2 n.a.
2022 1,150,000 3.000 446216 FVO 9/1/2021
2023 1,185,000 3.375 446216FW8 9/1/2021
2024 1,225,000 3.625 446216 FX6 9/1/2021
2025 1,265,000 4.000 446216 FY4 9/1/2021
2026 1,315,000 4.000 446216 FZ1 9/1/2021
2027 1,370,000 4.000 446216 GA5 9/1/2021
2028 1,425,000 4.125 446216 G133 9/1/2021
2029 1,480,000 4.250 446216 GC 9/1/2021
2030 1,545,000 4.250 446216 GD9 9/1/2021
2031 1,610,000 4.500 446216 GE7 9/1/2021
On the date of issuance of the Series 2020B Bonds, a portion of the proceeds thereof, together
with other available moneys, will be deposited in an escrow fund to be held in trust by U.S. Bank
National Association, as successor to the prior trustee, in accordance with an escrow agreement, dated as
of August 1, 2020(the"2011A Escrow Agreement'and,together with the 2011A Escrow Agreement,the
Escrow Agreements"), by and between the Authority and U.S. Bank National Association. The City
expects to transfer remaining amounts, in the approximate amount of$[2,424,385]' currently on deposit
under the 2011 Indenture, to the escrow fund to be applied in accordance with the 2011A Escrow
Agreement. Such funds on hand and proceeds deposited into the escrow fund will be invested in U.S.
Treasury securities,with the remainder held uninvested,and applied to pay the scheduled principal of and
interest on the Series 2011A Bonds to September 1, 2021, and the redemption price of all of the Series
2011A Bonds on September 1, 2021, at a redemption price equal to 100% of their principal amount as
specified in the 2011A Escrow Agreement, plus accrued interest. See "ESTIMATED SOURCES AND
USES OF FUNDS." Upon deposit of such proceeds and other moneys into the escrow fund, the Series
201]A Bonds will no longer be deemed outstanding.
The moneys and securities held in accordance with the Escrow Agreements are pledged,
respectively, to the payment of the Refunded Bonds. Moneys deposited and in accordance with the
Escrow Agreements are not available to pay principal of or interest on the Series 2020 Bonds or other
outstanding bonds of the City.
See"ESTIMATED SOURCES AND USES OF FUNDS"below. See also "VERIFICATION OF
MATHEMATICAL ACCURACY"below.
THE BONDS
General
The Series 2020 Bonds will be issued in fully registered form without coupons in denominations
of$5,000 or any integral multiple thereof. The Series 2020 Bonds will mature on May 1 in each of the
Preliminary,subject to change.
7
4129-6022-6339.5
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 2020 Bonds will be payable semiannually on each May 1 and November 1,
commencing November 1,2020 (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 October 15, 2020, 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 2020 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 2020 Bonds. Individual purchases of the Series 2020 Bonds will be made in book-entry
form. Purchasers will not receive certificates representing their ownership interest in the Series 2020
Bonds. So long as Cede & Co. is the registered owner of the Series 2020 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 2020 Bonds. So long as Cede&Co. is the registered owner of the Series
2020 Bonds, principal of and interest on the Series 2020 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 2020A Bonds maturing on or after May 1, 20_, are subject to optional redemption
prior to their respective stated maturities, on any date on or after May 1, 20, 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 the Lease Agreement to cause Series 2020A 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.]
[The Series 2020B Bonds maturing on or after May 1, 20_, are subject to optional redemption
prior to their respective stated maturities, on any date on or after May 1, 20_, 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 the Lease Agreement to cause Series 2020B Bonds to be optionally
I
8
4129-6022-6339.5
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 2020 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.
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 20 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 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."
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
9
4129-6022-6339.5
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 Bonds, as directed in a Written Certificate of the City, and(c)with
respect to any other redemption of Additional Bonds, among maturities, as provided in the Supplemental
Indenture pursuant to which such Additional Bonds are issued, and by lot among Bonds of the same
Series with the same maturity in any manner which the Trustee in its sole discretion 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.
Partial Redemption of Bonds
Upon surrender of any Bonds redeemed in part only, the Authority will execute and the Trustee
will authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds
of the same Series in Authorized Denominations equal in aggregate principal amount representing the
unredeemed portion of the Bonds surrendered.
Effect of 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 AND SOURCES OF PAYMENT 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 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.
10
4129-6022-6339.5
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 Original Lease Agreement has required 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. 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 October 15, 2020 (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
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 Series 2020A
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.
11
4129-6022-6339.5
i
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.
I
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 AND SOURCES OF PAYMENT 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.
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
12 '
4129-6022-6339.5
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, shall be deposited in the
Reserve Accounts, ratably without preference or priority of any kind according to each Reserve
Account's percentage share of the total deficiencies in all Reserve Accounts, to the extent that the
amounts therein are less than the applicable 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
Accounts, ratably without preference or priority of any kind according to each Reserve Account's
percentage share of the total deficiencies in all Reserve Accounts, to the extent that the amounts therein
are less than the applicable Reserve Requirement. Any amounts not required to be so deposited into the
Reserve Accounts 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 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.
No Reserve Fund
No reserve fund will be established to support the payment of debt service on the Series 2020
Bonds. The Indenture provides for the establishment of a Reserve Fund and Reserve Accounts therein for
Additional Bonds issued under the Indenture to be funded in an amount equal to the Reserve Requirement
for such Bonds as set forth in the applicable Supplemental Indenture. Amounts held or to be held in the
Reserve Fund and Reserve Accounts therein established for any other Series of Bonds or any Reserve
Facility for any other Series of Bonds will not be available or drawn upon to pay principal of, redemption
premium, if any, or interest on the Series 2020 Bonds.
In connection with the issuance of Additional Bonds, the Authority shall establish in a
Supplemental Indenture the designation as to whether such Additional Bonds shall (A) constitute
Common Reserve Bonds secured by the Common Reserve Account, (B) be secured by any other Reserve
Account, or(C)not be secured by any Reserve Account,and upon the issuance of such Additional Bonds,
the amount on deposit in the Reserve Account applicable to such Additional Bonds, if any, shall be at
least equal to the applicable Reserve Requirement for such Additional Bonds.
0
4129-6022-6339.5
See APPENDIX D—"SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL
DOCUMENTS"for additional information on the Reserve Fund for Additional Bonds, if any.
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"below.
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 insurance insuring the Property
against fire, lightning and all other risks covered by an extended coverage endorsement (all risk basis
excluding earthquake) to be written at full replacement cost of the Property structures, subject to a
minimum $25,000 loss deductible provision; provided that full replacement cost shall 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.
The City currently maintains an insurance policy up to a $50 million limit for earthquake
coverage on City facilities. The current values of all City facilities is just under $550 million. The
program deductible is $100,000 per Occurrence except 5% of Total Insured Values at the time of loss at
each location involved in the loss or damage, subject to a minimum of $100,000 per Occurrence, as
respects locations in California. The City plans to continue to purchase earthquake insurance so long as
14
4129-6022-6339.5
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 "RISK
FACTORS—Abatement"above.
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 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.
Rental Interruption Insurance. The City is required under the Lease Agreement to maintain
rental interruption insurance to cover the Authority's loss, total or partial, of Base Rental Payments
resulting from the loss, total or partial, of the use of any part of the Property as a result of any of the
hazards required to be covered as described under "Fire and Extended Coverage Insurance" above, 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.
Title Insurance. 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 annual debt service schedule for the Series 2020 Bonds by
fiscal year(assuming no optional redemption prior to the scheduled maturity of the Series 2020 Bonds.
Debt Service Schedule
Year Series 2020A Bonds Series 2020B Bonds
Ending Annual
May 1 Principal Interest Total Principal Interest Total Total
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
15
4129-6022-6339.5
I
Source: Stifel,Nicolaus&Company,Incorporated.
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 2020 Bonds
when due. The City's Base Rental Payments are due on the fifth Business Day next preceding each
Interest Payment Date.
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 2020A 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 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 Bonds, and(D)providing funds to make any deposit to any Reserve Account
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 May 1 or November
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 May 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 May 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; (vi)the
designation as to whether such Additional Bonds shall (A)constitute Common Reserve Bonds secured by
the Common Reserve Account, (B) be secured by any other Reserve Account, or (C) not be secured by
any Reserve Account; (vii) upon the issuance of such Additional Bonds, the amount on deposit in the
Reserve Account applicable to such Additional Bonds, if any, shall be at least equal to the applicable
Reserve Requirement for such Additional Bonds; and (viii) 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). 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) a qualified
employee of the City or 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
16
4129-6022-6339.5
it
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
the Lease Agreement); (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 a qualified employee of the
City or 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; (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. See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL
LEGAL DOCUMENTS."
THE AUTHORITY
The Authority is a public agency duly organized and existing pursuant to a Joint Exercise of
Powers Agreement, dated as of March 8, 1988, as amended by the First Amendment to Joint Exercise of
Powers Agreement, dated as of May 16, 1988 (collectively, the "First Amended Joint Powers
Agreement"), each by and between the City and the Former RDA, as further amended by the Second
Amendment to Joint Exercise of Powers Agreement, dated as of July 17, 2014 (the "Second Amended
Joint Powers Agreement"and, collectively,the"JPA Agreement"), by and among the City,the Successor
Agency to the Redevelopment Agency of the City of Huntington Beach (the "Agency") and the
Huntington Beach Housing Authority (the "Housing Authority"). The First Amended Joint Powers
Agreement created and established the Authority for the purposes set forth in the First Amended Joint
Powers Agreement and to exercise the powers described in the First Amended Joint Powers Agreement.
The parties executed and delivered the Second Amended Joint Powers Agreement in order to substitute
the Housing Authority for the Agency as a member of the Authority and to make certain other
amendments to the First Amended Joint Powers Agreement.
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.
17
4129-6022-6339.5
i
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, 2020, the State of California Finance
Department estimated its population at 201,281.
On August 22, 2011, the City completed the process of annexation of the adjacent community of
Sunset Beach, a 134-acre, formerly unincorporated area of about 1,000 residents. The area was placed
under the City's sphere of influence 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. 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.
Change to June 30 Fiscal Year End. With the City Council's adoption of a new fiscal year end,
changing its fiscal year end from September 30 to June 30, effective for fiscal year 2017-18, the City's
financial period aligns with that of the State, the County, and with Ca1PERS. As a result, the summary
financial information for fiscal year 2017-18 presents nine months of activities only.
Audited Financial Statements. The City retained the firm of Davis Farr LLP, Certified Public
Accountants to examine the general purpose financial statements of the City as of and for the City's fiscal
year ended June 30, 2019. The City is the recipient of the Government Finance Officers Association
Certificate of Achievement for Excellence in Financial Reporting for the fiscal year ended June 30, 2018
and has been for 33 consecutive years. The audited financial statements for fiscal year ended June 30,
2019, are attached hereto as APPENDIX B — "COMPREHENSIVE ANNUAL FINANCIAL REPORT
OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30,2019." 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.
I
18
4129-6022-6339.5
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 July 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 Chief Financial Officer'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.
As discussed under the caption "RISK FACTORS—Infectious Disease Outbreak—COVID-19,"
the finances and operations of the City have been and will continue to be impacted by COVID-19. The
COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus,the duration and severity
of the outbreak, and the economic and other actions that may be taken by governmental authorities to
contain the outbreak or to address its impacts are uncertain. The spread of COVID-19 has altered the
behavior of businesses and people in a manner that has had a negative effect on global and local
economies. The activities that generate, in particular, sales and use taxes, property taxes, and transient
occupancy taxes, actually received by the City may be adversely affected by the spread of COVID-19.
There can be no guarantee that sales and use taxes,property taxes,and transient occupancy taxes resulting
from changes in consumer activity and to collected in the future will be consistent with historical
collection trends.
On June 3, 2019, the City adopted its fiscal year 2019-20 City Budget, which includes total
General Fund revenues forecasted at $230.8M, a 2.06% increase from the fiscal year 2018-19 adopted
budget. Budgeted General Fund expenditures total $231.6M,a 1.42%increase from the fiscal year 2018-
19 adopted budget. This amount includes a one-time use of reserves totaling $781,000 to fund a portion
of the City's $1 million contribution to its Section 115 Trust.
Currently,the City is anticipating General Fund revenues at$220AM at June 30, 2020, a$10AM
decrease from fiscal year 2018-19, largely due to declines in sales tax, transient occupancy tax (TOT),
and use of money and property as a result of the COVID-19 pandemic, for an overall 4.5% decrease from
the fiscal year 2019-20 Adopted Budget. On April 20, 2020, City staff identified $15.5M in General
Fund expenditure reductions to City Council to offset the decline in revenue from the pandemic,
including: $2.5M in operating cuts; $2M savings from a hiring freeze of all non-critical positions; and
reduction of various transfers totaling $1 1 M to the City's retirement savings accounts, equipment, and
infrastructure funds.
The City budget for fiscal year 2020-21 was introduced on June 1, 2020 and adopted on June 29,
2020. Of particular note, the General Fund is expected to be structurally balanced, with no reliance on
one-time revenues to balance the budget. The City's fiscal year 2020-21 budgeted General Fund revenues
remain conservative at $216.9M as the nation continues to experience the effects of the COVID-19
pandemic. Property tax receipts for fiscal year 2019-20 are largely unaffected by the pandemic, and
current economic indicators show that the financial growth of property tax will continue to increase at a
moderate pace in fiscal year 2020-21. The economic impacts of the COVID-19 pandemic to sales tax,
19
4129-6022-6339.5
i
transient occupancy tax, and use of money and property are expected to continue through fiscal year
2020-21 and are budgeted accordingly.
City staff have identified $21.OM in expenditure reductions to balance the General Fund budget,
including: operating budget reductions; continuation of the hiring freeze for all non-essential personnel; a
planned reduction in workforce of approximately 5% of total full-time positions within the City;
reductions in overtime and part-time personnel, and reduced transfers to General Liability, Infrastructure,
and Equipment Replacement funds. The planned reduction will be achieved through a voluntary early
separation program, which would provide estimated ongoing personnel savings of $6.2M annually
through reduced staffing levels.
The following tables show the City's budget and actual results for General Fund revenues and
expenditures for fiscal year 2016-17 through fiscal year 2018-19, adopted budget and estimated actuals
for fiscal year 2019-20,and the adopted budget for fiscal year 2020-21.
20
4129-6022-6339.5
I
City of Huntington Beach
General Fund Budget Summary
Fiscal Years 2016-17 through 2017-18
(in Thousands)
Fiscal Year Nine-Month
2016-17 Fiscal Year 2017-18 Nine-Month
Adopted 2016-17 Adopted 2017-18
Budget Actual Budget Actual
REVENUES
Property Taxes $ 80,120 $ 80,826 $ 79,058 $ 80,614
Sales Taxes 41,441 40,371 30,758 31,364
Utility Taxes 19,837 19,303 13,743 14,014
Other Taxes 17,844 17,991 14,599 14,883
License and Permits 8,336 8,736 6,128 6,247
Fines,Forfeitures and Penalties 5,090 3,995 2,989 3,048
Use of Money and Property 16,363 16,555 10,931 11,211
Intergovernmental 3,676 3,831 3,521 3,901
Charges for Current Services 26,132 24,800 18,401 18,132
Other 1,312 1,492 2,102 1,502
Total Revenues $220,151 $217,900 $182,230 $184,916
EXPENDITURES
Current:
City Council 364 333 301 279
City Manager 2,403 2,116 2,190 1,928
City Treasurer 209 201 178 134
City Attorney 2,667 3,052 2,097 2,037
City Clerk 971 830 647 602
Finance 5,884 5,763 5,009 4,376
Human Resources(2) 5,864 5,535 5,431 5,323
Community Development 7,313 6,770 5,940 5,428
Fire 45,710 46,746 36,976 36,304
Information Services 6,931 6,384 5,402 5,225
Police 74,144 73,543 57,520 57,218
Community Services 10,453 10,652 8,016 6,410
Library Services 4,270 4,246 3,807 3,283
Public Works 22,954 22,081 19,557 19,009
Non-Departmental(') 23,641 25,163 22,128 20,048
Debt Service:
Principal 1,414 981 524 311
Interest 32 186 87 87
Total Expenditures $215,224 $214,582 $175,810 $168,002
Excess of Revenues
Over Expenditures 4,927 3,318 6,420 16,914
OTHER FINANCING SOURCES(USES)
Transfers In 929 221 1,463 152
Transfers Out (5,836) (6,068) (13,400) (13,400)
Total Other Financing Sources(Uses) (4,907) (5,847) (11,937) (13,248)
Net Change in Fund Balances 20 (2,529) (5,517) 3,666
Fund Balance-Beginning of Year 62,847 62,847 61,180 61,180
Prior Period Adjustment 862 862 3,788 3,788
Fund Balance-Beginning Restated 63,709 63,709 64,968 64,968
Fund Balance-End of Year $ 63,729 $ 61,180 $ 59,451 $ 68,634
0) Beginning with the fiscal year ended June 30,2019,non-departmental expenditures are no longer presented separately but
are included as part of functional expenditures.
cz) Beginning with the fiscal year ended June 30,2020,Human Resources expenditures are no longer presented separately but
are included as part of the City Manager budget.
Source: City of Huntington Beach Finance Department.
21
4129-6022-6339.5
i
City of Huntington Beach
General Fund Budget Summary
Fiscal Years 2018-19 through 2020-21
(in Thousands)
Fiscal Year Fiscal Year Fiscal Year
2018-19 Fiscal Year 2019-20 Fiscal Year 2020-21
Adopted 2018-19 Adopted 2019-20 Adopted
Budget Actual Budget Est.Actual Budget
REVENUES
Property Taxes $ 85,909 $ 89,367 $ 89,732 $ 93,816 $ 94,350
Sales Taxes 42,993 43,942 41,203 36,592 39,227
Utility Taxes 18,360 18,788 17,906 17,380 16,605
Other Taxes 20,092 20,227 20,926 16,690 12,416
License and Permits 7,594 8,292 7,858 7,767 7,358
Fines,Forfeitures and Penalties 4,316 4,300 4,519 3,273 3,282
Use of Money and Property 17,236 19,859 17,272 14,128 14,500
Intergovernmental 2,903 4,974 3,067 3,240 3,130
Charges for Current Services 25,656 25,390 26,388 24,930 24,630
Other 1,378 1,492 1,957 2,589 1,396
Total Revenues $226,437 $236,631 $230,828 $220,405 $216,895
EXPENDITURES
Current!
City Council 428 369 466 421 396
City Manager 2,862 2,656 1,813 3,971 6,472
City Treasurer 264 248 266 245 284
City Attorney 2,877 2,874 2,874 2,765 3,034
City Clerk 1,053 981 947 894 1,005
Finance 6,559 6,467 6,626 6,423 6,164
Human Resourcest2l 7,455 6,362 7,024 -- --
Community Development 8,501 7,960 9,748 9,708 9,201
Fire 52,376 53,547 53,799 52,360 50,903
Information Services 7,790 7,938 7,939 7,731 7,475
Police 84,378 82,098 86,293 82,863 83,672
Community Services 10,122 9,414 9,393 8,714 8,924
Library Services 4,998 4,710 5,040 4,875 4,844
Public Works 28,162 28,289 28,460 27,335 26,844
Non-Departmental(') -- -- -- -- --
Debt Service!
Principal 1,321 1,379 1,078 1,806 2,075
Interest 203 177 195 271 194
Total Expenditures $219,349 $215,469 $221,961 $210,382 $211,487
Excess of Revenues
Over Expenditures 7,088 21,162 8,867 10,023 5,408
OTHER FINANCING SOURCES(USES)
Transfers In 499 13 13 13 13
Transfers Out (9,896) (10,796) (9,661) (7,489) (5,421)
Total Other Financing Sources(Uses) (9,397) (10,783) (9,648) (7,476) (5,408)
Net Change in Fund Balances (2,309) 10,379 (781) 2,547 --
Fund Balance-Beginning of Year 68,634 68,634 79,013 79,013 81,560
Prior Period Adjustment -- -- -- -- --
Fund Balance-Beginning Restated 68,634 68,634 79,013 79,013 81,560
Fund Balance-End of Year $ 68,325 $ 79,013 $ 78,232 $ 81,560 $ 81,560
Beginning with the fiscal year ended June 30, 2019, non-departmental expenditures are no longer presented separately but are
included as part of functional expenditures.
(2) Beginning with the fiscal year ended June 30, 2020, Human Resources expenditures are no longer presented separately but are
included as part of the City Manager budget.
Source: City of Huntington Beach Finance Department.
22
4129-6022-6339.5
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. The City's Economic Uncertainties Reserve Policy
states 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 June 30, 2019, the City had an
Economic Uncertainties Reserve balance of$25,011,000. Since this date, there have been no changes to
the reserve. The current goal for the reserve balance represents 11.6% of the fiscal year 2020-21 General
Fund adopted 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 in excess of$1 million 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 never 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 2020 Investment Policy, as approved on February 3, 2020 (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—Deposit and Investments of Money in Funds."
Current Investments
The assets of the City's investment portfolio, as of March 31, 2020, are shown in the following
table:
23
4129-6022-6339.5
Investment Portfolio of the City
As of March 31,2020
(in Thousands)
Market Book %of Days to
Type Par Value Value Value Portfolio Maturity
Federal Agency Issues—Coupon $ 82,000 $ 84,442 $ 82,237 35.33% 1,028
Local Agency Inv.Fund(LAIF) 56,933 56,933 56,933 24.46 1
Treasury Securities—Coupon 23,000 23,424 22,948 9.86 956
Medium Term Notes 21,000 21,670 21,180 9.10 1,327
Corporate Bonds 49,375 50,241 49,465 21.25 1,208
Total Investments $232,308 $236,710 $232,763 100.00% 1,016
Source: City of Huntington Beach
Reliance on State Budget
Approximately 56.8% (consisting of the sales tax, property tax and the motor vehicle license fee)
of the City's General Fund revenues included in the budget for fiscal year 2019-20 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 61.7% of the City's General Fund revenues included
in the budget for fiscal year 2020-21 are expected to come from such sources. There can be no assurance
that any future State budget difficulties will not adversely affect the City's revenues or its ability to pay
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 2020 Bonds. See
"CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND
APPROPRIATIONS—Proposition I of 2004"and"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 received or anticipated for fiscal years ending September 30, 2016 through June 30,
2020. The current spread of COVID-19 has altered the behavior of businesses and people in a manner
that has had significant negative effects on global and local economies, which initially are expected to
materially impact sales and use taxes, property taxes, and transient occupancy taxes resulting from
changes in consumer activity, reduced travel and related use of lodging facilities within the City. There
can be no assurances what long-term effect the current spread of COVID-19 will have on the levels
consumer and business activity in the City for a period of time. See "RISK FACTORS — Infectious
Disease Outbreak — COVID-19" and the detail in the sections below describing General Fund tax
revenues by source, sales taxes and other taxes.
i
i
24
4129-6022-6339.5
City of Huntington Beach
General Fund Tax Revenues by Source
(in Thousands)
Fiscal Year Nine-Month Fiscal Year Estimated Adopted
Actual Actual Actual Actual Budget
Source 2016-17 2017-18 2018-19 2019-20 2020-21
Property Taxes $ 75,035 $ 74,999 $ 82,992 $ 87,588 $ 87,966
Pension Tax(') 5,791 5,615 6,375 6,228 6,384
Property Tax Revenues 80,826 80,614 89,367 93,816 94,350
Sales and Use Taxes 40,371 31,364 43,942 36,592 39,227
Utility Taxes 19,303 14,014 18,788 17,380 16,605
Other Taxes(2) 17,991 14,883 20,227 16,690 12,416
Total Tax Revenues $158,491 $140,875 $172,324 $164,478 $162,598
Limited in application. Not available to make Base Rental Payments.
(2) Includes Transient Occupancy Taxes,Franchise Taxes and other taxes.
Source: City of Huntington Beach Finance Department
Property taxes were the single largest revenue source to the General Fund in fiscal year 2018-19,
representing approximately 37.8% of revenues, followed by sales taxes representing approximately
18.6%. These sources represented an aggregate of approximately 56.3% of the actual General Fund
revenues for fiscal year 2018-19 and represent an aggregate of approximately 59.2% and 61.6% of
General Fund revenues in the City's fiscal year 2019-20 estimated actuals and fiscal year 2020-21
adopted budget, respectively. For further discussion of the levy and collection of taxes, see
"CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS."
For a discussion of potential State Budget impacts on General Fund revenues, see "- State
Budgets." For a discussion of property tax revenues and sales taxes, see "PROPERTY TAXES" and
"SALES TAXES"below.
PROPERTY TAXES
Ad Valorem Property Taxes
General. The County levies a one percent property tax on behalf of all taxing agencies in the
County, including the City. The taxes collected are allocated on the basis of a formula established by
State law enacted in 1979. Under this formula,the County and all other taxing entities receive a base year
allocation plus an allocation on the basis of"situs"growth in assessed value(new construction,change of
ownership, inflation) prorated among the jurisdictions which serve the tax rate areas within which the
growth occurs. Tax rate areas are specifically defined geographic areas which were developed to permit
the levying of taxes for less than county-wide or less than city-wide special and school districts. In
addition, the County levies and collects additional approved property taxes and assessments on behalf of
any taxing agency within the County.
Taxes are levied for each fiscal year on taxable real and personal property which is situated in the
County as of the preceding January 1. However, upon a change in ownership of real property or
completion of new construction, State law permits an accelerated recognition and taxation of increases in
real property assessed valuation (known as a "floating lien date"). For assessment and collection
purposes, property is classified either as "secured" or "unsecured" and is listed accordingly on separate
25
4129-6022-6339.5
parts of the assessment roll. The "secured roll" is that part of the assessment roll containing State and
County assessed property secured by a lien which is sufficient, in the opinion of the assessor, to secure
payment of the taxes. Other property is assessed on the "unsecured roll." See "CONSTITUTIONAL
AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS"herein.
Retirement Tax. In accordance with the City Charter, the City imposes a retirement tax (the
"Pension Tax Override")to meet its obligations under its contract with the California Public Employees'
Retirement System (CaIPERS). The City has levied such tax since 1966. In fiscal year 1983-84, the
Pension Tax Override was set at a rate not to exceed $0.04930 cents per $100 of assessed valuation. In
August 2012, Chapter 3.07 of the Municipal Code capped the Pension Tax Override tax rate to the fiscal
year 2012-13 rate of$0.01500 per $100 of assessed value. This is the currently applied rate. Revenues
generated by the Pension Tax Override are applied to pay the costs of retirement benefits for public safety
employees, and are not available to make Base Rental Payments under the Lease Agreement or payments
of principal of and interest on the Series 2020 Bonds.
California courts have held that Proposition 13, discussed below under the heading
"CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS,"
permits additional property taxation to pay for pension plans with special tax authority approved by voters
prior to July 1, 1978; provided the imposition of such tax is limited to the funding of safety employee
retirement benefits at a level not in excess of the retirement benefits in existence prior to July 1, 1978(the
"Pre-Proposition 13 Pension Liability"). The City filed a complaint to commence a validation action and
on May 18, 2020 was awarded a judgement by the Superior Court of the State of California validating a
trust agreement and the issuance of its Pension Obligation Bonds, which may be issued in an aggregate
principal amount not to exceed the sum of the City's unfunded accrued actuarial liability under the City's
contract with CalPERS ($436.2M as of June 30, 2018 actuarial valuation report). In connection with the
issuance of its Pension Obligation Bonds,the City expects to covenant to deposit such revenues generated
by the Pension Tax Override in a Pension Tax Override Fund to be applied as provided in the trust
agreement to pay such Pre-Proposition 13 Pension Liability with respect to the Pension Obligation Bonds,
Series 2020.
The Pension Tax Override was the subject of a prior judgment of the Orange County Superior
Court. That judgment was subsequently upheld by the Appellate Court on appeal, in the case of Howard
Jarvis Taxpayers Assn. v. County of Orange, and Real Party in Interest, City of Huntington Beach,
Orange County Superior Court Case No. 818780, which invalidated certain property taxes collected by
the County of Orange on behalf of the City to the extent that such taxes exceeded the City's employer
contribution for retirement benefits that were in effect prior to July 1, 1978, or amendments thereto
mandated by the California Legislature. Following that decision, the City agreed to a tax rate not to
exceed$0.01500 per$100 of assessed value annually.
A challenge to the Pension Tax Override was narrowly defeated in 2012 with the failure to reach
the requisite 50% majority on a ballot question entitled, "A Huntington Beach Levy of Property Tax for
Municipal Purposes,Measure Z"which appeared on the November 6, 2012 ballot. If Measure Z had been
approved,the Pension Tax Override would have been repealed.
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.
26
4129-6022-6339.5
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. See "RISK FACTORS — Infectious Disease
Outbreak — COVID-19" for the potential of a grant of waivers on penalties, based on application and
approval, benefiting taxpayers that do not make timely payment of property taxes, due to the COVID-19
virus.
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 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
non-unitary 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 county-wide 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 non-unitary property.
27
4129-6022-6339.5
i
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.
In the most recent cycle of increased foreclosure activity 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 ten
most recent fiscal years and the current fiscal year.
Gross Assessed Value of All Taxable Property
(Dollars in Thousands)
Percent
Fiscal Year Secured Unsecured Total(') Increase
2009-10 $25,325,120 $1,086,770 $26,411,890 1.2%
2010-11 25,584,186 1,090,869 26,675,055 1.0
2011-12 25,553,372 1,170,004 26,723,376 0.2
2012-13 26,988,540 1,056,938 28,045,479 5.0
2013-14 28,059,691 1,106,038 29,165,729 4.0
2014-15 29,979,376 989,809 30,787,185 5.6
2015-16 31,260,013 1,132,728 32,392,741 5.2
2016-17 32,596,119 1,067,760 33,663,879 3.9
2017-18 34,240,137 1,100,077 35,340,214 5.0
2018-19 36,002,850 1,117,879 37,120,729 5.0
2019-20 37,741,614 1,145,838 38,887,452 4.8
<<> Excludes redevelopment project area incremental assessed valuation.
Source: City of Huntington Beach Finance Department;County of Orange Auditor Controller
28
4129-6022-6339.5
I
General Fund Property Tax Levies and Collections
Secured Taxes
(Dollars in Thousands)
Total Delinquency Delinquency
Fiscal Year Total Levy(')_ Collections(') Amountt3l Percent
2009-10 $43,892 $38,872 $1,038 2.4%
2010-11 44,014 43,572 746 1.7
2011-12 44,304 43,562 660 1.5
2012-13 47,162 46,577 565 1.2
2013-14 49,808 49,108 545 1.1
2014-15 52,188 51,335 519 1.0
2015-16 55,886 54,462 1,263 2.3
2016-17 58,258 57,006 1,253 2.2
2017-18 62,418 60,205 2,073 3.3
2018-19 63,934 62,844 920 1.4
Excludes refunds and collection charges.
(2) 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.
cs As of end of fiscal year.
Source: City of Huntington Beach Finance Department
According to a secured property tax collection report by the Orange County Treasurer-Tax
Collector, as of May 31, 2020, the County has collected 98.4% of the property tax bill amounts (both
installments), a 0.7% decrease from prior year. The County has reported to the City that, through
May 31, 2020, the County had received approximately 97.5% of the second installment of the property
tax levy. The County is continuing to receive a significant number of COVID-19 penalty cancellation
requests, and these payments are not reflected in the collection totals until they are processed. See"RISK
FACTORS—Infectious Disease Outbreak—COVID-19."
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 property taxpayers in the City
as of fiscal year 2019-20,the most current information available.
29
4129-6022-6339.5
Top Ten Property Taxpayers
Fiscal Year 2019-20
(Dollars in Thousands)
2019-20
Assessed % of
Property Owner Primary Land Use Valuation Total
1. AES HB Energy LLC Utility $ 420,264 0.99
2. Bella Terra Associates LLC* Commercial 381,693 0.90
3. SoCal Holding LLC* Possessory Interest 274,824 0.65
4. McDonnell Douglas Corporation* Commercial 221,121 0.52
5. PCH Beach Resort LLC Commercial 219,135 0.52
6. DCO Pacific City LLC Residential 217,022 0.51
7. Elan Multifamily LLC* Residential 136,292 0.32
8. Monogram Residential HB Proj. Residential 135,586 0.32
9. The Waterfront Hotel LLC Commercial 125,333 0.30
10. One Pacific Plaza Owner LLC Commercial 124,500 0.29
Total Top Ten $ 2,255,770 5.32
All other Properties 40,141,638 94.68
City Total $42,397,408 100.00
Source: Orange County Assessor
* Pending appeals on parcels as of April 2020.
Motor Vehicle In-Lieu Tax
Vehicle license fees("VLF")are assessed as a percentage of a vehicle's depreciated market value
for the privilege of operating a vehicle on California's public highways. The City receives a portion of
VLF collected Statewide. Several years ago, the Statewide VLF was reduced by approximately two-
thirds. However, the State continued to remit to cities and counties the same amount that those local
agencies would have received if the VLF had not been reduced, known as the "VLF backfill." The State
VLF backfill was phased out and as of fiscal year 2011-12 all of the VLF is now received through an in-
lieu payment from State property tax revenues. The backfill is funded from property tax revenue (i.e.,
property tax in lieu of VLF). The in lieu property tax is allocated to local governments based on growth
in assessed valuation.
There can be no assurance that the property tax revenues the City currently expects to receive will
not be reduced pursuant to State legislation enacted in the future. If the property tax formula is
permanently changed in the future it could have a material adverse effect on the receipt of property tax
revenue by the City. There can be no assurance that any future State budget difficulties will not adversely
affect the City's revenues or its ability to pay 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 2020 Bonds. See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES,
REVENUES AND APPROPRIATIONS — Proposition IA of 2004" and "RISK FACTORS — State
Budgets."
SALES TAXES
A sales tax is imposed on retail sales or consumption of personal property. Sales tax revenues
total $43.9M or 18.6% of the City's total General Fund revenues for fiscal year 2018-19. The current
30
4129-6022-6339.5
spread of COVID-19 has altered the behavior of businesses and people in a manner that has had
significant negative effects on global and local economies, including reducing travel and related use of
lodging facilities, and consumer spending. See "RISK FACTORS — Infectious Disease Outbreak —
COVID-19." As a result of the COVID-19 pandemic, national consumer spending dropped in the fourth
quarter of fiscal year 2019-20. Estimated actual General Fund revenues are $36.6M or 16.6% for fiscal
year 2019-20,and$39.2M or 18.1%of budgeted General Fund revenues for fiscal year 2020-21.
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.
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 1,2019
Jurisdiction Rate
State 6.00%
City portion of State 1.25
Orange County Transportation Authority 0.50
Total 7.75%
Source: State of California,Board of Equalization
On March 30, 2020, the Governor signed an Executive Order providing emergency relief for
businesses generating less than $1,000,000 in annual sales to delay filing for 30 days until July 31, 2020.
The impacts of this Order are unknown at this time.
OTHER TAXES
Utility Taxes
The City levies a 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 the
utility users tax represented approximately 7.9% of the City's total General Fund revenues for fiscal
year 2018-19 and estimated actual revenues for fiscal year 2019-20, and 7.7% of the projected General
Fund revenues for fiscal year 2020-21.
Other Taxes
In addition,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, and a 10%transient
31
4129-6022-6339.5
occupancy tax on hotel and motel bills. Revenues generated from franchise taxes represented
approximately $6.2M or 2.6% of the City's total General Fund revenues on the fiscal year 2018-19,
approximately$7.OM or 3.0%of the estimated actual General Fund revenues for fiscal year 2019-20, and
$5.5M or 2.3% of projected revenues for fiscal year 2020.21. Revenues generated from transient
occupancy taxes represented $14M or 5.9% of the City's total General Fund revenues on the fiscal year
2018-19, $9.7M or 4.1% of the estimated actual General Fund revenues for fiscal year 2019-20, and
approximately $6.9M or 2.9% of projected General Fund revenues for fiscal year 2020-21. Declines in
transient occupancy tax resulted from the shelter-in-place orders related to the COVID-19 pandemic
began in the fourth quarter of fiscal year 2019-20 and are projected to continue through fiscal year 2020-
21. The City's Utility Users Tax, Measure P was approved with 68.6% voting to approve the ballot
question on the November 2, 2010 ballot. Measure P was proposed to raise more revenue for the City by
expanding the type of services to which the City's existing utility tax would be applied. The tax, after
Measure P, was applied to telephone and video services regardless of the specific type of technology or
method of billing.At the same time,the tax rate was reduced from 5%to 4.9%.
OTHER REVENUES
The following table illustrates other General Fund revenue sources:
City of Huntington Beach
Other Revenue Sources
(in Thousands)
Fiscal
Fiscal Fiscal Nine- Fiscal Year
Year Year Month Year Adopted Est. Adopted
Actual Actual Actual Actual Budget Actual Budget
Source 2015-16 2016-17 2017-180) 2018-19 2019-20 2019-20 2020-21
Licenses and Permits $ 9,639 $ 8,736 $ 6,247 $ 8,292 $ 7,858 $ 7,767 $ 7,358
Fines and Forfeitures 5,144 3,995 3,048 4,300 4,519 3,273 3,282
Use of Money and Property 16,861 16,555 11,211 19,859 17,272 14,128 14,500
Intergovernmental 4,327 3,831 3,901 4,974 3,074 3,240 3,130
Charges for Current Services 25,813 24,800 18,132 25,390 27,132 24,930 24,630
Other Revenue 2,509 1,492 1,502 1,492 1,460 2.589 1,396
Total Other Revenues $64,293 $59,409 $44,041 $64,307 $61,315 $55,927 $54,296
Fiscal year 2017-18 financial information presents nine months of activities only as the fiscal year change from
September 30 to June 30 resulted in a reporting period from October 1, 2017 to June 30, 2018. Prior fiscal years ended
September 30.
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.
Intergovernmental. These revenues consist primarily of reimbursements from Federal, State, and
County sources.
32
4129-6022-6339.5
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.
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 2014-15
through 2018-19. As a result of City Council action taken December 18, 2017, the City's fiscal year
changed from a September 30 year-end to a June-3 0 year-end. As a result, the summary financial
information for fiscal year 2017-18 presents nine months of activities and the prior fiscal years included
therein ended September 30 and each represent 12 months of activities.
33
4129-6022-6339.5
City of Huntington Beach
General Fund Balance Sheet
Fiscal Years 2014-15 through 2018-19
(in Thousands)
Fiscal Year Ended,
2015 2016 2017 2018(5) 2019
ASSETS:
Cash and Investments $ 62,358 $56,700 $52,201 $64,405 $74,657
Cash and Investments with Fiscal Agent -- -- -- -- --
Taxes Receivable 32,241 29,623 31,301 10,405 10,607
Other Receivables,Net 6.348 6.610 7.115 8,181 7,783
Prepaids 4,479 -- -- 41 23
Total Assets $105,426 $92,933 $90,617 $83,032 $93,070
LIABILITIES,DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES:
Liabilities:
Accounts Payable $ 5,655 $ 4,999 $ 4,929 $ 4,096 $ 4,102
Accrued Payroll 7,639 4,360 2,871 4,365 4,286
Deposits Payable 1,449 1,691 1,349 1,924 2,070
Unearned Revenue -- -- -- 1,730 1,840
Claims Payable 2.694 -- -- -- --
Total Liabilities $ 17,437 $11,050 $ 9,149 $12,115 $12,298
Deferred Inflows of Resources:
Unavailable Revenue 23,197 1%036 20,288 2,283 1,759
Total Deferred Inflows of Resources 23,197 19,036 20,288 2,283 1,759
Fund Balances:
Nonspendable $ 4,479 -- -- $ 41 $ 23
Restricted«> 2,871 2,637 2,671 6,384 8,154
Committed 0) 25,011 25,011 25,011 25,011 25,011
Assigned(4) 32,431 35,199 33,498 34,464 45,825
Unassigned -- -- -- 2,734 --
Total Fund Balance $ 64,792 $62,847 $61,180 $68,634 $79,013
TOTAL LIABILITIES,DEFERRED
INFLOWS OF RESOURCES AND
FUND BALANCES $105,426 $92,933 $90,617 $83,032 $93,070
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.
2� Restricted includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource
providers,or through enabling legislation.
(3) Committed includes amounts that can be used only for the specific purposes detennined by a formal action of the City
Council. The City Council has authority to establish,modify,or rescind a fund balance commitment.
(4) 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.
(1) Fiscal year 2017-18 financial information presents nine months of activities only as the fiscal year change from
September 30 to June 30 resulted in a reporting period from October 1, 2017 to June 30, 2018. Prior fiscal years ended
September 30.
Source: City of Huntington Beach Comprehensive Annual Financial Report
34
4129-6022-6339.5
i
City of Huntington Beach
General Fund
Statement of Revenues,Expenditures and Changes in Fund Balance
Fiscal Years 2014-15 through 2018-19
(in Thousands)
Fiscal Year Ended,
2015 2016 2017 2018111 2019
REVENUES:
Property Taxes $ 82,472 $ 86,382 $ 80,826 $ 80,614 $ 89,367
Sales Taxes 29,460 36,097 40,371 31,364 43,942
Utility Taxes 20,229 19,482 19,303 14,014 18,788
Other Taxes 16,238 17,313 17,991 14,883 20,227
Licenses and Pen-nits 9,215 9,639 8,736 6,247 8,292
Fines and Forfeitures 4,746 5,144 3,995 3,048 4,300
From Use of Money and Property 16,528 16,861 16,555 11,211 19,859
Intergovernmental 5,582 4,327 3,831 3,901 4,974
Charges for Current Services 26,298 25,813 24,800 18,132 25,390
Other 2,401 2,509 1,492 1,502 1,492
Total Revenues $213,169 $223,567 $217,900 $184,916 $236,631
EXPENDITURES:
Current:
City Council 278 318 333 279 369
City Manager 2,065 2,169 2,116 1,928 2,656
City Treasurer 167 204 201 134 248
City Attorney 2,425 2,539 3,052 2,037 2,874
City Clerk 895 790 830 602 981
Finance 5,452 5,659 5,763 4,376 6,467
Human Resources 4,606 6,582 5,535 5,323 6,362
Planning&Building 6,954 7,062 -- -- --
Community Development -- -- 6,770 5,428 7,960
Fire 44,892 46,106 46,746 36,304 53,547
Information Services 6,846 6,742 6,384 5,225 7,938
Police 67,792 71,638 73,543 57,218 82,098
Community Services 9,323 9,903 10,652 6,410 9,414
Library Services 3,984 4,077 4,246 3,283 4,710
Public Works 21,768 21,411 22,081 19,009 28,289
Non-Departmental 19,758 24,460 25,163 20,048 -
Debt Service
Principal 29 163 981 311 1,379
Interest 18 41 186 87 177
Total Expenditures $197,252 $209,864 $214,582 $168,002 $21.5,469
Excess(Deficiency)of Revenues
Over(Under)Expenditures 15,917 13,703 3318 16,914 21,162
OTHER FINANCING SOURCES(USES):
Transfers In 913 13 221 152 13
Transfers Out (13,092) (15,661) (6,068) (13,400) (10,796)
Total Other Financing Sources(Uses) (12,179) (15,648) (5,847) (13,248) (10,783)
Net Change in Fund Balances 3,738 (1,945) (2,529) 3,666 10,379
Fund Balances-Beginning of Year 61,054 64,792 62,847 61,180 68,634
Prior Period Adjustments - -- 862 3,788 --
Fund Balance Beginning Restated 61,054 64,792 63,709 64,968 68,634
Fund Balances-End of Year $ 64,792 $ 62,847 $ 61,180 $ 68,634 $ 79,013
1 Fiscal year 2017-18 financial information presents nine months of activities only as the fiscal year change from
September 30 to June 30 resulted in a reporting period from October 1,2017 to June 30,2018. The prior fiscal years ended
September 30 and represent 12 months of activities.
Source: City of Huntington Beach Comprehensive Annual Financial Report
35
4129-6022-6339.5
OTHER FINANCIAL INFORMATION
Labor Relations
City employees are represented by eight labor union associations, the principal one being
Huntington Beach Municipal Teamsters which represents approximately 39.1% of all City employees.
Currently 94.3% of all permanent City employees are covered by negotiated agreements. Negotiated
agreements have the following expiration dates:
Negotiated Employee Agreements
Contract Expiration Number of
Bargaining Unit Date Employees
Huntington Beach Municipal Teamsters 9/30/2020 358
Management Employees' Organization 10/31/2020 98
Police Officers' Association 6/30/2023 240
Police Management Association Expired 6/30./2020 12
HB Firefighters' Association 6/30/2021 114
Fire Management Association Expired 9/30/2017 8
Marine Safety Officers' Association Expired 3/31/2018 12
Surf City Lifeguard Employees' Association Expired 6/30/2019 22
Source: City of Huntington Beach Finance Department
The expired contracts are currently under active negotiations. 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 the liability
claims as expenditures in the Self Insurance General Liability Internal Service Fund and the workers'
compensation claims in the Self Insurance Workers' Compensation Internal Service Fund. 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 up to $1,000,000 are paid from the City's Self Insurance General Liability
Internal Service Fund. The City currently purchases liability insurance in the open marketplace, which
provides insurance for claims costs exceeding the City's self-insured retention of $1,000,000. The
maximum coverage limit is $30,000,000, which is inclusive of the self-insured retention. Claims that
exceed the maximum limit of liability are covered by the City's Self-Insurance General Liability Internal
Service Fund. There were no liability claims in the last three years that exceeded the coverage limit.
Workers' compensation claims of up to $1,000,000 per claim are paid from the Self Insured
Workers' Compensation Internal Service Fund. Excess workers' compensation coverage is purchased
through the CSAC-Excess Insurance Authority. Payments for claims from $1,000,000 to statutory limits
are covered by CSAC-Excess Insurance Authority.
All funds of the City participate in the program and make payments to these funds based on
estimated cost information.
36
4129-6022-6339.5
I
The Self Insurance Workers' Compensation Internal Service Fund had a $12.2 million deficit as
of June 30, 2019. The City has established plans to help reduce the deficit in this fund. This will be
accomplished by additional transfers from the General Fund, proprietary funds, and other governmental
funds in which employees are charged over the next nine years.
See Note 9 in APPENDIX B — "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF
THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2019."
Employee Retirement Plan—CalPERS
General. 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. 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. See Note 7 in APPENDIX B — "COMPREHENSIVE ANNUAL FINANCIAL
REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2019."
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.
One of the most significant changes to the State and local financial landscape is the recently
enacted Public Employees' Pension Reform Act ("PEPRA") of 2013. While PEPRA will have no
immediate impact to current pension costs, the law will reduce pension costs of virtually all public
employers in the long term. New employees hired after December 31, 2012 will be enrolled in a plan
with substantially lower benefits. In addition, new employees will be required to pay at least 50% of the
pension costs. The City, as with virtually all public agencies in California, still has an underfunded
pension plan for existing employees. The new reform legislation will have no impact on this unfunded
liability. Pension contribution rates for existing employees are expected rise over the medium term. The
City will be working with labor groups to increase the amount paid by employees in order to mitigate
impacts upon the City's overall financial condition.
As a result of City Council action taken December 18,2017,the City's fiscal year changed from a
September 30 year-end to a June 30 year-end. The new June 30 fiscal year end aligns the City's financial
period with that of the State,the County, and with CalPERS.
Actuarial Methods and Assumptions. In each actuarial valuation,the CalPERS actuary estimates
the actuarial value of the assets (the "Actuarial Value")of the CalPERS Plans at the end of the fiscal year
(which assumes, among other things, that the rate of return during that fiscal year equaled the assumed
rate of return of 7.75%). The CalPERS actuary uses a smoothing technique to determine Actuarial Value
that is calculated based on certain policies. As described below, these policies changed significantly in
recent years.
On January 1, 2013, PEPRA took effect. On April 17, 2013, the CalPERS Board of
Administration approved a recommendation to change the CalPERS amortization and rate smoothing
policies. Beginning with the June 30, 2013 valuations that set the 2015-16 rates, CalPERS would no
37
4129-6022-6339.5
i
I
longer use an actuarial value of assets and will employ an amortization and smoothing policy that will pay
for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread
directly over a 5-year period.
At its April17, 2013, meeting, CalPERS' Board of Administration (the "Board of
Administration") approved a recommendation to change the CalPERS amortization and smoothing
policies. Prior to this change, CalPERS employed an amortization and smoothing policy that spread
i
investment returns over a 15-year period with experience gains and losses paid for over a rolling 30-year
period. After this policy change, CalPERS commenced an amortization and smoothing policy that pays
for all gains and losses amortized over a 20-year period with a five-year ramp-up and five-year ramp-
down period. The new amortization and smoothing policy was used for the first time in the June 30,2013
actuarial valuations in setting employer contribution rates for fiscal year 2015-16.
On February 18, 2014, the Board of Administration approved new demographic actuarial
assumptions based on a 2013 study of recent experience. The largest impact, applying to all benefit
groups, is a new 20-year mortality projection reflecting longer life expectancies and that longevity will
continue to increase. Because retirement benefits will be paid out for more years, the cost of those
benefits will increase as a result. The Board of Administration also assumed earlier retirements for Police
(3%at age 50), and Miscellaneous (2.7%at age 55 and 3%at age 60), which will increase costs for those
groups. As a result of these changes, rates began to increase beginning in fiscal year 2016-17 (based on
the June 30, 2014 valuation) and are expected to continue to increase with full impact in fiscal year 2020-
21.
Also in 2014, CalPERS completed a 2-year asset liability management study incorporating
actuarial assumptions and strategic asset allocation. On February 19, 2014, the CalPERS Board of
Administration adopted relatively modest changes to the current asset allocation that will reduce the
expected volatility of returns. The Board also approved several changes to the demographic assumptions
that more closely align with actual.experience. The most significant of these is mortality improvement to
acknowledge the greater life expectancies Ca1PERS reported seeing in its membership and expected
continued improvements. The new actuarial assumptions were first used in the June 30, 2014 valuation to
set the fiscal year 2016-17 contribution for public agency employers. The increase in liability due to new
actuarial assumptions is amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance
with Board policy. These new actuarial assumptions are set forth in this section.
On November 18, 2015, the Board of Administration adopted a funding risk mitigation policy
intended to incrementally lower its discount rate—its assumed rate of investment return—in years of good
investment returns, help pay down the pension f ind's unfunded liability, and provide greater
predictability and less volatility in contribution rates for employers. The policy establishes a mechanism
to reduce the discount rate by a minimum of 0.05 percentage points to a maximum of 0.25 percentage
points in years when investment returns outperform the then existing discount rate, currently 7.5%, by at
least four percentage points. CalPERS staff modeling anticipates the policy will result in a lowering of
the discount rate to 6.5% in about 21 years, improve funding levels gradually over time and cut risk in the
pension system by lowering the volatility of investment returns. More information about the funding risk
mitigation policy can be accessed through the CalPERS web site at the following website address:
https://www.calpers.ca.gov/page/newsroomicalpers-news/2015/adopts-funding-risk-mitigation-policy.
The reference to this website is provided for reference and convenience only. The information contained
within the website may not be current, has not been reviewed by the Authority or the City and is not
incorporated in this Official Statement by reference.
In December 2016, the Board of Administration voted to lower the CalPERS discount rate from
7.5%to 7.0% over the following three years, advising plan members that this incremental lowering of the
38
4129-6022-6339.5
I
discount rate will give employers more time to prepare for the changes in contribution costs. The
discount rate changes approved by the Board of Administration for the current and next two fiscal years
are as follows:
Fiscal Year 2018-19: 7.375%
Fiscal Year 2019-20: 7.250%
Fiscal Year 2020-21: 7.000%
In addition, the Board of Administration approved separate timelines for implementing the new
rate for state, school, and public agencies. The new discount rate for the State went into effect July 1,
2017. The discount rate decreases for the school districts and public agencies, including the City, took
effect July 1, 2018. The difference allows schools and public agencies additional time to plan for rate
increases.
For actuarial methods and assumptions, see Note 6 in APPENDIX B — "COMPREHENSIVE
ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2019."
See also the tabular information for the Retirement Plan,the CaIPERS City Safety Plan and the Ca1PERS
City Municipal Plan in the Required Supplementary Information therein.
Projected Rates. The tables below show the employer contribution rates and projected employer
contribution rates for the City's Miscellaneous Plan and Safety Plan for the seven years from fiscal year
2018-19 through fiscal year 2024-25. [The tables below show projected employer contribution rates
(before cost sharing)for the next five fiscal years, assuming Ca1PERS earns 7.375%for fiscal year 2018-
19, 7.250% for fiscal year 2019-20, and 7.00% the fiscal years thereafter, and assuming that all other
actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits,
or funding will occur between now and the beginning of the fiscal year 2021-22.] The projections assume
that all actuarial assumptions will be realized and that no further changes to assumptions, contributions,
benefits, or funding will occur during the projection period and that no further changes to assumptions,
contributions, benefits, or funding will occur during the projection period. Changes in the UAL due to
actuarial gains or losses as well as changes in actuarial assumptions or methods are amortized using a 5-
year ramp up, phasing in the impact of unanticipated changes in UAL over a 5-year period and attempting
to minimize employer cost volatility from year to year. Required contributions can change gradually and
significantly over the next five years. In years where there is a large increase in UAL the relatively small
amortization payments during the ramp up period could result in a funded ratio that is projected to
decrease initially while the contribution impact of the increase in the UAL is phased in. The projected
contribution rates do not reflect that the City's Miscellaneous Plan's normal cost will decline over time as
new employees are hired into PEPRA and other lower cost benefit tiers.
39
4129-6022-6339.5
City of Huntington Beach Miscellaneous Plan
Projected Future Pension Contribution Rates
Fiscal Years 2019 Through 2025
Fiscal Year Normal Cost Total as a
Ended Contribution UAL % of
(June 30) Rate Payment Payroll
2019 9.2% $11,042,676 32.2%
2020 10.0 12,765,260 35.9
2021 10.8 13,849,615 38.9
2022 10.8 15,252,808 40.9
2023 10.8 16,357,581 42.2
2024 10.8 17,005,852 42.6
2025 10.8 17,792,480 43.1
t CaIPERS projected.
* The City opted to use the no phase-in CaIPERS employer contribution rates.
Source: City of Huntington Beach Finance Department and 2019 CaIPERS Report.
City of Huntington Beach Safety Plan
Projected Future Pension Contribution Rates
Fiscal Years 2019 Through 2025
Fiscal Year Normal Cost Total as a
Ended Contribution UAL % of
(June 30) Rate Payment Payroll
2019 19.8% $14,791,298 51.0%
2020 20.9 17,127,399 5 7.3
2021 21.7 18,717,558 60.8
2022 21.7 20,620,396 63.6
2023 21.7 22,215,631 65.6
2024 21.7 23,241,539 66.4
2025 21.7 24,314,526 67.3
j CaIPERS projected.
* The City opted to use the no phase-in CaIPERS employer contribution rates.
Source: City of Huntington Beach Finance Department and 2019 CaIPERS
Report. Projected future employer contribution rates are shown based on
CaIPERS June 30 fiscal year end.
The member rates are as follows for fiscal years 2019-20 and 2020-21:
Miscellaneous-Classic 8.000%
Miscellaneous- PEPRA 6.250
Safety—Classic 9.000
Safety—PEPRA 11.750
The City's fiscal year 2018-19 annual employer contribution of$37,880,000 was equal to the
City's required and actual contributions and includes both the normal cost and UAL contribution. The
required contribution was determined as part of the June '0, 2018, actuarial valuations provided by
4129-6022-6339.5 40
I
i
CalPERS in October 2019 (the "2019 CalPERS Report"), using the entry age normal actuarial cost
method.
Public Employees' Pension Reform Act of 2013 (PEPRA). On January 1, 2013, the Public
Employees' Pension Reform Act of 2013 (PEPRA) took effect, requiring that a public employer's
contribution to a defined benefit plan, in combination with employee contributions to that defined benefit
plan, shall not be less than the normal cost rate. Since fiscal year 2013-14, the percentage of City full-
time employees (FTEs) enrolled in PEPRA has increased from 9.5% to 33.1%. The increase in the
number of PEPRA members over the last seven fiscal years is shown below:
Total %of
Fiscal PEPRA PEPRA Misc. Safety Total PEPRA PEPRA
Year Misc. Safety Classic Classic FTEs FTEs FTEs
2013-14 57 30 499 329 915 87 9.5%
2014-15 85 43 476 327 931 128 13.7
2015-16 116 55 452 308 931 171 18.4
2016-17 142 63 431 292 928 205 22.1
2017-18* 156 91 404 292 943 247 26.2
2018-19 174 103 363 269 909 277 30.5
2019-20** 208 112 343 253 916 320 34.9
* Effective fiscal year 2017-18,the City changed its fiscal year from September 30 to June 30.
** Fiscal year 2019-20 data is current as of June 2020.
Source: City of Huntington Beach Finance Department
The City has begun negotiating with all eight of its collective bargaining units for employer cost-
sharing retirement benefit concessions and have reached agreements with six:
The City and the Huntington Beach Firefighters' Association (HBFA) have agreed that HBFA
"Classic" members pay 3% of the employer-paid contribution to CalPERS, effective November 2018.
HBFA PEPRA members pay the difference between the required PEPRA employee contribution and
12%,which is currently 0.25% for the fiscal year 2019-20.
The City and the Fire Management Association(FMA)have agreed that FMA"Classic"members
pay 2%of the employer-paid contribution to CalPERS,effective October 2016.
The City and the Police Management Association (PMA) have agreed that PMA "Classic"
members pay 2%of the employer-paid contribution to CalPERS,effective January 2017.
The City and the Police Officers' Association (POA) have agreed that POA "Classic" sworn
members will pay 2% of the employer-paid contribution to CalPERS, effective January 2020, increasing
by an additional 1% per year through 2022, for a total cost share of 4%. POA "Classic" non-sworn
members will pay 1.25% of the employer-paid contribution to CalPERS, effective January 2020. POA
"PEPRA" sworn members will pay 1.25% of the employer-paid contribution to CalPERS, effective
January 2020, not to exceed a total of 13% of pensionable compensation. POA "PEPRA" non-sworn
members will pay 1.5%of the employer-paid contribution to CalPERS, effective January 2020, increasing
by 1.25%in January 2021 for a total employee contribution not to exceed 9%.
The City and the Huntington Beach Municipal Teamsters (HBMT) have agreed that HBMT
"Classic" and '`PEPRA" members will pay 1% of the employer-paid contribution to Ca1PERS, effective
October 1, 2019.
41
4129-6022-6339.5
The City and the Management Employees' Organization(MEO)have agreed that MEO"Classic"
and "PEPRA" members will pay 1% of the employer-paid contribution to Ca1PERS, effective November
1,2019.
All bargaining units pay 100% of the required employee contributions for Ca1PERS. "Classic"
members for Miscellaneous and Safety contribute 8% and 9%, respectively. PEPRA members for
Miscellaneous and Safety pay 6.25%and 11.75%, respectively.
Negotiations with the Fire Management Association, Marine Safety Officers' Association, and
Surf City Lifeguard Employee Association are ongoing.
Contributions. Section 20814(c) of the California Public Employee's Retirement Law requires that
the employer contribution rates for all public employers be determined on an annual basis by the CaIPERS
actuary and shall be effective on the July I following notice of a change in the rate. The actuarially determined
rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year,
with an additional amount to finance any unfunded accrued liability. The employer is required to contribute
the difference between the actuarially determined rate and the contribution rate of employees.
Beginning with fiscal year 2017-18 Ca1PERS began collecting employer contributions toward the
plan's unfunded liability as dollar amounts instead of the prior method of a contribution rate. According to
CalPERS, this change was to address potential funding issues that could arise from a declining payroll or
reduction in the number of active members in the plan. Funding the unfunded liability as a percentage of
payroll could lead to the underfunding of the plans. Due to stakeholder feedback regarding internal needs for
total contributions expressed as an estimated percentage of payroll,the Ca1PERS reports include such results in
the contribution projection set forth in the tables below. These results are provided for information purposes
only.Contributions toward the unfunded liability will continue to be collected as set dollar amounts.
The following tables set forth the City's required contributions for fiscal years 2014-15 through 2018-
19. The City funded the required employer contribution in such fiscal years.
I
42
4129-6022-6339.5
Miscellaneous Plan
Total Employer Required Required
Employer Normal Contribution Employee Employee
Fiscal Year Cost Rate (in thousands) Classic Rate PEPRA Rate
2014-15 24.843% $ 10,510 8.00% 6.25%
2015-16 26.483 11,238 8.00 6.25
2016-17 26.428 11,921 8.00 6.25
2017-180) 28.428 9,734 8.00 6.25
2018-19 32.1,79 14,819 8.00 6.25
Safety Plan
Total Employer Required Required
Employer Normal Contribution Employee Employee
Fiscal Year Cost Rate (in thousands) Classic Rate PEPRA Rate
2014-15 42.969% $19,125 9.00% 11.75%
2015-16 45.123 19,129 9.00 11.75
2016-17 45.701 19,468 9.00 11.00
2017-180) 45.701 15,223 9.00 11.00
2018-19 51.009 23,062 9.00 11.00
0) Effective fiscal year June 30, 2018,the City changed its fiscal year end from September 30 to June 30,resulting in a one-
time nine-month period for the October 1,2017-June 30,2018 period.
Source:Huntington Beach CAFR for the Fiscal Year Ended June 30,2019 and Ca1PERS actuarial reports for fiscal years.
Funding Status. The Ca1PERS Board of Administration has adopted a new amortization policy
effective with the June 30, 2019 actuarial valuation. The new policy shortens the period over which
actuarial gains and losses are amortized from 30 years to 20 years with the payments computed using a
level dollar amount. In addition, the new policy removes the 5-year ramp-up and ramp-down on UAL
bases attributable to assumption changes and non-investment gains/losses. The new policy removes the 5-
year ramp-down on investment gains/losses.These changes will apply only to new UAL bases established
on or after June 30, 2019.
In December 2016, the CAPERS Board of Administration voted to lower the discount rate from
7.5 percent to 7.0 percent over the subsequent three years. For public agencies including the City, the
discount rate changes approved by the Board for the three fiscal years ending June 30, 2019, 2020, and
2021 are 7.375%, 7.25%, and 7.00%, respectively. Effective October 1, 2017, the City changed its fiscal
year end from September 30 to June 30.
The City's net pension liability for each Plan is measured as the total pension liability, less the
pension plan's fiduciary net position. The net pension liability is measured as of each June 30, using the
annual actuarial valuation as of the prior June 30 rolled forward using standard update procedures. The
City's changes in net pension liability for each Plan for the last 5 years as reported by CaIPERS is shown
below.
43
4129-6022-6339.5
i
I
Schedule of Funding Progress
Retirement Plan-Normal
(Dollars in Thousands)
Local Miscellaneous Local Safety
Total Fiduciary Net Total Fiduciary Net
Measurement Pension Net Pension Pension Net Pension
Period Liability Position Liability % Liability Position Liability %
6/30/2014 $485,656 $373,141 $112,515 70.5 $624,982 $440,704 $184,728 76.8
6/30/2015 493,569 371,115 122,454 75.2 639,852 441,234 198,618 69.0
6/30/2016 514,955 363,147 151,808 70.5 670,963 433,724 237,239 64.6
6/30/2017 557,090 393,812 163,278 70.7 729,281 472,474 256,807 64.8
6/30/2018 571,812 415,455 156,357 72.7 755,812 497,767 258,045 65.9
Source:City of Huntington Beach CAFR as of June 30,2019.
The Total Pension Liability, Fiduciary Net Assets, and Net Pension Liability calculations and
sensitivity of the Net Pension Liability to Changes in the Discount Rate that follow are prepared using the
requirements in GASB Statement No. 68 - Accounting and Financial Reporting for Pensions - an
amendment of GASB Statement No. 27("GASB No. 68").The plan fiduciary net position pursuant to the
GASB No. 68 accounting valuation report may differ from the plan assets reported in the annual actuarial
valuation report due to several reasons. For example, for the accounting valuations, CaIPERS must keep
items such as deficiency reserves and fiduciary self-insurance included as assets. These amounts are
excluded for rate setting purposes in the actuarial valuation. The City has agreed in its Continuing
Disclosure Certificate to update this table as part of its Annual Report.
The following table illustrates net pension liabilities and funded ratios for the past five fiscal
years for each of the City's plans. The following table is an alternative presentation of the information set
forth above,and the City will not update this table as part of its Annual Report.
I
I
44
4129-6022-6339.5
I
I
Schedule of Funding Progress
Retirement Plan-Normal
(Dollars in Thousands)
Entry Age
Normal
Actuarial Funded
Actuarial Accrued Market Unfunded Ratio
Valuation Liability Value of Accrued (Market
Date/Plan (AAL) Assets Liability Value)
6/30/2014
Safety $ 624,162 $439,980 $184,182 70.5%
Miscellaneous 482,757 372,526 110,231 77.2
Total $1,106,919 $812,506 $294,413
6/30/2015
Safety $ 654,038 $440,552 $213,486 67.4%
Miscellaneous 503,489 370,535 132,954 73.6
Total $1,157,527 $811,087 $346,440
6/30/2016
Safety $ 681,856 $432,727 $249,129 63.5%
Miscellaneous 522,362 362,308 160,054 69.4
Total $1,204,218 $795,035 $409,183
6/30/2017
Safety $ 721,352 $471,442 $249,910 65.4%
Miscellaneous 546,431 392,946 153,485 71.9
Total $1,267,783 $864,388 $403,395
6/30/2018
Safety $ 768,274 $498,167 $270,107 64.8%
Miscellaneous 581,854 415,788 166,066 71.5
Total $1,350,128 $913,955 $436,173
Source:City of Huntington Beach Finance Department and 2019 Ca1PERS Report.
For funded status of the plans, see Note 6 in APPENDIX B - "COMPREHENSIVE ANNUAL
FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2019." See also
the tabular information for the Retirement Plan, the Ca1PERS City Safety Plan and the CalPERS City
Municipal Plan in the supplemental information therein.
As described herein, the City filed a complaint to commence a validation action and on May 18,
2020 was awarded a judgement validating a trust agreement and the issuance of its Pension Obligation
Bonds, which may be issued in an aggregate principal amount not to exceed the sum of the City's
unfunded accrued actuarial liability under the City's contract with Ca1PERS ($436.2M as of June 30,
2018 actuarial valuation report) to refund all or a portion of the City's current UAAL to Ca1PERS. See
"OTHER FINANCIAL INFORMATION-Additional Obligations."
Volatility Ratios. As noted in the 2019 Ca1PERS Report,the actuarial calculations are based on a
number of assumptions about very long-term demographic and economic behavior. Unless these
assumptions (terminations, deaths, disabilities, retirements, salary growth, and investment return) are
45
4129-6022-6339.5
i
exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences
between actual experience and the assumptions are called actuarial gains and losses and serve to lower or
raise the employer's rates from one year to the next. Therefore, the rates will inevitably fluctuate,
especially due to the ups and downs of investment returns.
Asset Volatility Ratio (AVR). Plans that have higher asset to payroll ratios produce more volatile
employer rates due to investment return. For example, a plan with an asset to payroll ratio of 8 may
experience twice the contribution volatility due to investment return volatility,than a plan with an asset to
payroll ratio of 4. As part of the 2019 CalPERS Report, Ca1PERS has provided the asset volatility ratio, a
measure of each plan's current rate volatility, as shown in the table below. It should be noted that this
ratio is a measure of the current situation. It Increases over time but generally tends to stabilize as the
plan matures.
Liability Volatility Ratio. Plans that have higher liability to payroll ratios produce more volatile
employer rates due to investment return and changes in liability. For example, a plan with a liability to
payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability to payroll
ratio of 4. The liability volatility ratio is also included in the table below. It should be noted that this
ratio indicates a longer-term potential for contribution volatility and the asset volatility ratio, described
above,will tend to move closer to this ratio as the plan matures.
The following table illustrates rate volatility as of June 30,2018.
Miscellaneous Plan Safety Plan
1. Market Value of Assets without Receivables $414,311,222 $497,810,217
2. Payroll 45,296,423 44,100,586
3. Asset Volatility Ratio(AVR= 1./2.) 8.6 11.3
4. Accrued Liability 546,430,784 768,274,245
5. Liability Volatility Ratio(4./2.) 12.1 17.14
Source: CaIPERS Actuarial Valuation Reports as of June 30,2018
Superfunded Status. Prior to enactment of the Public Employees' Pension Reform Act(PEPRA)
that became effective January 1, 2013, a plan in superfunded status (actuarial value of assets exceeding
present value of benefits) would normally pay a zero employer contribution rate while also being
permitted to use its superfunded assets to pay its employees' normal member contributions.
However, Section 7522.52(a) of PEPRA states, "In any fiscal year a public employer's
contribution to a defined benefit plan, in combination with employee contributions to that defined benefit
plan, shall not be less than the total normal cost rate..." This means that not only must employers pay
their employer normal cost regardless of plan surplus,but also, employers may no longer use superfunded
assets to pay employee normal member contributions.
Internal Revenue Code Section 415. The limitations on benefits imposed by Internal Revenue
Code Section 415 are taken into account in this valuation. Each year the impact of any changes in this
limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base.
This results in lower contributions for those employers contributing to the Replacement Benefit Fund and
protects Ca1PERS from prefunding expected benefits in excess of limits Imposed by federal tax law.
Internal Revenue Code Section 401(a)(17). The limitations on compensation imposed by Internal
Revenue Code Section 401(a)(17) are taken into account in this valuation. Each year, the impact of any
46
4129-6022-6339.5
i
changes in the compensation limitation since the prior valuation is included and amortized as part of the
actuarial gain or loss base.
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 Ca1PERS 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 892 eligible employees reported
on the September 30, 2017 valuation report (the most recent actuarial report), only 738 were receiving
plan benefits.
For the year ended June 30, 2019, the City recognized pension expense in the amount of
$1,219,000 for the Supplemental Plan. The Supplemental Plan's fiduciary net position as a percentage of
the total pension liability was 89.93%as of June 30,2019, for a net liability of$6,591,000.
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 at the June 30, 2019 measurement
date:
Retirees and beneficiaries receiving benefits 738
Active Plan Members 129
Total Plan Participants 867
Source: City of Huntington Beach Finance Department
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 2.7% of total payroll for all permanent employees for the year ended June 30, 2019.
Administrative costs of this plan are financed through investment earnings.
For actuarial methods and assumptions, see Note 7 in APPENDIX B — "COMPREHENSIVE
ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2019."
See also the tabular information for the Supplemental Retirement Plan in the Required Supplementary
Information therein.
Since the City is required to adopt GASB 68 for the supplemental pension plan, the difference
between the Total Pension Liability (TPL) and the Fiduciary Net Position (FNP) must be recorded as a
liability in the government-wide financial statements. As of June 30, 2019, the amount of this liability is
$6,591,000, and the plan was 89.93% funded. Benefits are recognized when due and payable under plan
provisions.
47
4129-6022-6339.5
i
Other Post-Employment Benefits(OPEB)
The City administers the two other post-employment benefit (OPEB) plans as described below.
As of June 30, 2018 measurement period, the plan was 80.23% funded. The Total OPEB Liability was
$33,434,000, the Plan Fiduciary Net Position was $26,825,000, resulting in a net OPEB liability of
$6,609,000, of which $5,906,000 is payable from Governmental Activities. The covered payroll (annual
payroll of active employees covered by the plan) was $81.2 million. See Note 8 in APPENDIX B —
"COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR
ENDED JUNE 30,2019."
Post-Employment Medical Insurance. The City agreed, via contract, with each employee
association to provide post-employment medical insurance to retirees. This OPEB is 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,Ca1PERS 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. Employees hired on or after October 1,2014 are not eligible for this benefit.
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.
PEMHCA. The City provides an agent multiple-employer defined benefit healthcare plan to
retirees through CAPERS under the California Public Employees Medical and Hospital Care Act
(PEMHCA), commonly referred to as Ca1PERS Health. PEMHCA provides health insurance through a
variety of Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) options.
The PEMHCA benefits are applied to all safety employee groups,based on retirement plan election.
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
$773,000 for year ended June 30, 2019. The assets of the CERBT are excluded from the financial
statements attached hereto as APPENDIX B since they are in an irrevocable trust administered by
Ca1PERS. The City's policy is to make 100%of each year's ARC, with an additional amount to prefund
benefits as determined annually by City Council in order to improve the funded status of the plan. See
48
4129-6022-6339.5
APPENDIX B — "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE
FISCAL YEAR ENDED JUNE 30,2019."
For PEMHCA, the City selected the "unequal" method for the contribution. Under this method,
the City offered a lesser contribution for retirees than for active employees. The City paid the PEMHCA
minimum for actives($128 in 2017, $133 in 2018, and$136 in 2019). Beginning in 2008, Assembly Bill
2544 changed the computation for annual increases to annuitant health care under the unequal method.
Under the new provisions, the City increases annuitant health care contributions equal to an amount not
less than five percent of the active employee contributions, multiplied by the number of years in
PEMHCA. The City's contribution for retirees is $54.40 per employee for the Huntington Beach
Firefighter's Association (HBFA) and $102 for all other Safety groups in 2019. The annual increase in
minimum PEMHCA contribution to Ca1PERS will continue until the time that the City contribution for
retirees equals the City contribution paid for active employees.
The City's actual contributions of$4,192,000 for fiscal year ending June 30, 2019, are greater
than the actuarially determined contribution of$2,022,000.
For actuarial methods and assumptions, see Note 8 in APPENDIX B — "COMPREHENSIVE
ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2019."
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.
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.
Short-Term Obligations
The City currently has no outstanding short-term obligations.
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 Authority to
finance capital projects through the issuance of certificates of participation and Lease revenue bonds.
49
4129-6022-6339.5
On June 2, 2010, the Authority issued the Series 2010A Bonds under an indenture, dated as of
June 1, 2010, by and between the Authority and U.S. Bank National Association, as trustee. The bonds
were issued to(a)refinance the costs of the acquisition, construction, installation and equipping of certain
public capital improvements, including the refunding of (i) the Huntington Beach Public Financing
Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project) and (ii) the Huntington Beach
Public Financing Authority Lease Revenue Bonds, 2000 Series A (Capital Improvement Financing
Project), (b)fund a reserve fund for the Series 2010A Bonds, and (c)pay costs of issuance of the Series
2010A Bonds. The Series 2010A Bonds will be refunded and defeased with net proceeds of the Series
2020A Bonds.
On September 28, 2011, the Authority issued the Series 2011A Bonds under an indenture, 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. The Series 201 IA Bonds were issued to (a)refinance the costs of the
acquisition, construction, installation and equipping of certain public capital improvements, including the
refunding of(i) the Huntington Beach Public Financing Authority Lease Revenue Bonds, 2001 Series A
(Capital Improvement Financing Project), and (ii) the 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. The Series 2011A
Bonds will be refunded and defeased with net proceeds of the Series 2020B Bonds.
On November 13, 2014, the Authority issued $15,295,000 aggregate principal amount of its
Huntington Beach Public Financing Authority Lease Revenue Bonds, 2014 Series A (Senior Center
Project) (the "Series 2014A Bonds") under an indenture, dated as of September 1, 2011, as amended and
supplemented by a first supplemental indenture, dated as of November 1, 2014, each by and among the
City, the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee. The Series
2014A Bonds were issued to (a) finance the costs of the acquisition, construction, installation and
equipping of certain public capital improvements, including the costs of construction of a senior center,
(b) fund a reserve fund for the Series 2011 A Bonds and the Series 2014A Bonds, and (c) pay costs of
issuance of the Series 2014A Bonds.
On October 1, 2014, the City entered into a lease-leaseback financing with Capital One Public
Funding, LLC to upgrade aged street, area and pole lighting from high-pressure sodium lamps to energy
efficient LED light sources,resulting in long-term energy cost savings to the City.
On May 1, 2016, the City entered into a $3 million CLEEN loan agreement with the California
Infrastructure and Economic Development Bank ("I-Bank") to purchase and retrofit approximately
11,000 streetlights from high-pressure sodium to LED, resulting in long-term energy cost savings to the
City. This loan was supplemented by an additional $3 million 1 percent interest loan from the California
Energy Commission executed May 27,2016.
The City entered into a Master Lease Agreement with JP Morgan Chase Bank,N.A. ("Chase")on
February 5, 2016. Since then,the City has entered into various lease-purchase agreements with Chase to
fund the City's portion of the Countywide 800 mHz Backbone (emergency telecommunication dispatch
and information)and radios,three fire engines, and two ambulances.
The following table is a summary of the City's long-term General Fund-secured obligations as of
June 30,2019. Each has an equal claim to General Fund revenues.
50
4129-6022-6339.5
Summary of Long-Term General Fund Obligations
Fiscal Year
Original Outstanding 2019-20
Issue Principal Payments(')
Series 2010A Bonds(2) $14,745,000 $ 8,235,000 $ 825,000
Series 2011A Bonds(3) 36,275,000 17,770,000 2,045,000
2014A Lease Revenue Bonds 15,295,000 13,145,000 615,000
LED Lighting Phase I 1,062,924 546,000 111,000
I-Bank CLEEN Loan 3,000,000 2,171,000 283,000
CEC Loan 3,000,000 2,717,000 230,000
Leases Payable 8,136,846 5,241,000 1,014,000
Total Long-Term Obligations $81,514,770 $49,825,000 $5,123,000
0) Amount due in fiscal year 2019-20 represents principal payments only.
(2) To be refunded and defeased with net proceeds of the Series 2020A Bonds.
0) To be refunded and defeased with net proceeds of the Series 2020B Bonds.
Source:City of Huntington Beach Finance Department
The City is not a party to any other material lease obligations or direct placement loans or
obligations.
See Note 11 in APPENDIX B — "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF
THE CITY FOR THE FISCAL YEAR ENDED JUNE 30,2019."
Additional Obligations
The City filed a complaint to commence a validation action and on May 18, 2020 was awarded a
judgement by the Superior Court of the State of California validating a trust agreement and the issuance
of its Pension Obligation Bonds, which may be issued in an aggregate principal amount not to exceed the
sum of the City's unfunded accrued actuarial liability under the City's contract with Ca1PERS ($436.2M
as of June 30, 2018 actuarial valuation report) to refund all or a portion of the City's unfunded accrued
actuarial liability and to pay the costs of issuance related to the bonds. Annual debt service payments are
projected to be approximately$[ through fiscal year 2043-44 and, if issued, will be payable, like
the City's obligations to Ca1PERS, from funds to be appropriated by the City pursuant to the Public
Employees' Retirement Law, commencing with Section 20000 of the California Government Code,
including,without limitation available General Fund revenues and the Pension Tax Override.
Overlapping Debt
Set forth below is a direct and overlapping debt report(the"Debt Report")prepared by California
Municipal Statistics, Inc. and effective June 30, 2020. 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.
51
4129-6022-6339.5
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.
i
52
4129-6022-6339.5
CITY OF HUNTINGTON BEACH
Statement of Direct and Overlapping Bonded Debt
as of June 30,2020
2019-20 Assessed Valuation: $42,462,946,112 City's Share
Total Debt Percent of
6/30/20 Applicable(')- Debt 6/30/20
OVERLAPPING TAX AND ASSESSMENT DEBT:
Metropolitan Water District of Southern California $ 37,300,000 1.371% $ 511,383
Coast Community College District 908,050,757 28.561 259,348.377
Huntington Beach Union High School District 172,819,998 73.021 126,194,891
Fountain Valley School District 52,460,000 26.739 14,027,279
Huntington Beach School District 88,868,962 99.947 88,821,861
Ocean View School District 38,855,000 93.503 36,330,591
Westminster School District 100,121,110 23.804 23,832,829
Los Alamitos Unified School District Facilities District No. 1 152,430,227 1.189 1,812,395
City of Huntington Beach Community Facilities District No. 1990-1 170,000 100.000 170,000
City of Huntington Beach Community Facilities District No.2000-1 9,675,000 100.000 9,675,000
City of Huntington Beach Community Facilities District No.2002-1 3,945,000 100.000 3,945,000
City of Huntington Beach Community Facilities District No.2003-1 16,415,000 100.000 16,415,000
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $581,084,606
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
Orange County General Fund Obligations $386,745,000 6.786% $ 26,244,516
Orange County Pension Obligations 466,863,754 6.786 31,681,374
Orange County Board of Education Certificates of Participation 12,930,000 6.786 877,430
North Orange County Regional Occupation Program Certificates of Participation 8,950,000 0.087 7,787
Coast Community College District General Fund Obligations 2,600,000 28.561 742,586
Huntington Beach Union High School District Certificates of Participation 62,581,090 73.021 45,697,338
Los Alamitos Unified School District Certificates of Participation 38,286,024 1.068 408,895
Huntington Beach School District Certificates of Participation 12,106,385 99.947 12,099,969
Ocean View School District Certificates of Participation 19,595,000 93.503 18,321,913
Westminster School District Certificates of Participation 35,707,297 23.804 8,499,765
City of Huntington Beach General Fund Obligations 45,038,000 100.000 45,038,000(2)
TOTAL DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT $189,619,573
OVERLAPPING TAX INCREMENT DEBT(Successor Agency): $ 6,150,000 100.000% $ 6,150,000
TOTAL DIRECT DEBT $ 45,038,000
TOTAL OVERLAPPING DEBT 731,816,179
COMBINED TOTAL DEBT $776,854,179
0) The percentage of overlapping debt applicable to the City is estimated using taxable assessed property value. Applicable percentages
were estimated by determining the portion of the overlapping taxing entity's assessed value that is within the boundaries of the City
divided by the taxing entity's total taxable assessed value.
(2) Excludes the Series 2020 Bonds,tax and revenue anticipation notes,enterprise revenue and mortgage revenue obligations.
Ratios to 2019-20 Assessed Valuations:
Total Overlapping Tax and Assessment Debt........................................................................1.37%
TotalDirect Debt ($45,038,000).........................................................................................0.11%
CombinedTotal Debt............................................................................................................1.83%
Ratios to Redevelopment Successor Aeencv Incremental Valuation( 3 323 791 483):
Total Overlapping Tax Increment Debt.................................................................................0.19%
Source: California Municipal Statistics and City of Huntington Beach Finance Department.
53
4129-6022-6339.5
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 XIIIA. 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 XIIIA. 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
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.
I
54
4129-6022-6339.5
I
I
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.
Split Roll Initiative
An initiative measure (the "Split Roll Initiative") to amend Article XIIIA has qualified for the
State's November 2020 ballot. If adopted, the Split Roll Initiative would base property taxes for
commercial and industrial properties on market values beginning in tax year 2020-21. Such market
values would be reassessed by the applicable county assessor's office at least once every three years. The
Split Roll Initiative includes exceptions for businesses with a total market value of less than $2 million
(adjusted for inflation),which would continue to be subject to property taxes based on purchase price, and
exempts from property tax assessments up to $500,000 of the value of personal property, or all personal
property for businesses with fewer than 50 employees. There can be no assurance that the Split Roll
Initiative will be adopted. Moreover, if the Split Roll Initiative is adopted, the City is unable to predict
how it would affect the relationship of the assessed value between land use types (i.e.,residential versus
commercial)in the City or what other impacts the Split Roll Initiative might have on the local economy or
the City's financial condition.
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
55
4129-6022-6339.5
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
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 $921,344,622 for fiscal year 2018-19 and is$964,662,284 for
fiscal year 2019-20 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
XIIIC and XIIID 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 XIIIC 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. The voter approval requirements of Article XIIIC reduce
the flexibility of the City to deal with fiscal problems by raising revenue through new, extended or
increased taxes. No assurance can be given that the City will be able to raise taxes in the future to meet
increased expenditure requirements.
Article XIIIC 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
I
56
4129-6022-6339.5
i
I
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 XIIIC 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 "charges" are not defined in Article XIIIC or SB 919, and it is unclear whether these terms are
intended to have the same meanings for purposes of Article XIIIC as they do in Article XIIID.
Accordingly, the scope of the initiative power under Article XIIIC 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 XIIIC 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.
A challenge to the Pension Tax Override was narrowly defeated in 2012 with the failure to reach
the requisite 50% majority on a ballot question entitled, "A Huntington Beach Levy of Property Tax for
Municipal Purposes, Measure Z"which appeared on the November 6,2012 ballot. If Measure Z had been
approved,the Pension Tax Override would have been repealed.
Article XIIID 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 2020 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 XIIID 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
57
4129-6022-6339.5
property related fees and charges under Article XIIID 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 2020 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.
i
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.
Proposition IA of 2004
On November3, 2004 the voters of the State approved Proposition 1A ("Proposition IA of
2004"). Proposition lA 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 IA 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 IA 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 IA 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 1 A 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 lA of 2004 do not apply
to schools or community colleges or to mandates relating to employee rights.
Proposition 22
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 22 supersedes certain provisions of Proposition IA of 2004. See "—Proposition IA
of 2004"above. In addition, Proposition 22 generally eliminates the State's authority to temporarily shift
property taxes from cities, counties, and special districts to schools, temporarily increase school and
community college district's share of property tax revenues, prohibits the State from borrowing or
redirecting redevelopment property tax revenues or requiring increased pass-through payments thereof,
and prohibits the State from reallocating vehicle license fee revenues to pay for State imposed mandates.
In addition, Proposition 22 requires a two-thirds vote of each house of the State Legislature and a public
58
4129-6022-6339.5
I
hearing process to be conducted in order to change the amount of fuel excise tax revenues shared with
cities and counties. The State's Legislative Analyst's Office (LAO) states that Proposition 22 will
prohibit the State from enacting new laws that require redevelopment agencies to shift funds to schools or
other agencies.
Proposition 22 prohibits the State from borrowing sales taxes or excise taxes on motor vehicle
fuels or changing the allocations of those taxes among local government except pursuant to specified
procedures involving public notices and hearings. In addition,Proposition 22 requires that the State apply
the formula setting forth the allocation of State fuel tax revenues to local agencies revert to the formula in
effect on June 30, 2009. The LAO anticipates that Proposition 22 will require the State to adopt
alternative actions to address its fiscal and policy objectives, particularly with respect to short-term cash
flow need.
Proposition 25
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
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.
Future Initiatives
Article XIIIA, Article XIIIB, Proposition 218 and Proposition I 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. City Measure Z which appeared on the November 6, 2012 ballot, but
was rejected by voters, is an example.
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
59
4129-6022-6339.5
2020 Bonds. This section is not meant to be a comprehensive or definitive discussion of the risks
associated with an investment in the Series 2020 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 2020 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 2020 Bonds. There can be no assurance that other risk
factors not discussed herein will not become material in the future.
Limited Obligation
The Series 2020 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 2020 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 2020 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 2020 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 2020 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.
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 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 2020 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 activities 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
60
4129-6022-6339.5
I
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 2020
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 2020
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 2020 Bonds. Abatement,
therefore, could have an uncertain and material adverse effect on the security for and payment of the
Series 2020 Bonds. Depending on its severity, an earthquake could result in abatement of Base Rental
Payments under the Lease Agreement. See"—Natural Disasters—Earthquakes."
Risk of Uninsured Loss
The City covenants under the Lease Agreement to maintain insurance on the Property. See
"SECURITY AND SOURCES OF PAYMENT 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
61
4129-6022-6339.5
i
amounts received as proceeds from insurance or from condemnation of the Property will be sufficient to
redeem the Series 2020 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, among other City properties, although the Lease Agreement does not require it
to do so. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Insurance." The City
plans to continue to purchase earthquake insurance 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"above.
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
Owners and lessees of real property, including the Property, may be required by state and federal
laws to remedy conditions relating to release or threatened releases of hazardous substances on such
property. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980,
sometimes referred to as "CERCLA" or the "Superfund Act," is the most well-known and widely
applicable of these laws, but California laws with regard to hazardous substances are also 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.
62
4129-6022-6339.5
I,
I
Natural Disasters
Earthquake. 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 expressly not obligated under the Lease Agreement to maintain, or cause to be
maintained, earthquake insurance on the Property. 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
revenues and expenditures. See"—Abatement"above.
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
susceptible to tsunami run up and seiche hazards.
Also, due to the high water table condition and subsoils of City, portions of the City can
experience substantial liquefaction in earthquakes, in which vibrations or groundwater pressure within a
mass of soil cause the soil particles to lose contact with one another and approach a slurry consistency.
The area of the City in which the Property is located is considered to be potentially susceptible to
liquefaction in the event of an earthquake. According to the City, the Property does not appear to be
located in an area that is 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 2020 Bonds.
Wildfire. The City is substantially developed as a highly urbanized coastal city. Like other areas
of Southern California, greenbelt areas in the City can season to become dry vegetation which may
combine with swift moving Santa Ana winds and result in fast moving fires. No part of the City is
located in a"Very High Fire Hazard Severity Zone" -Cal Fire's designation for places highly vulnerable
to devastating wildfires.
63
4129-6022-6339.5
Flood. Historical flooding of Huntington Beach dates back to 1825. The most recent flooding
was February 6 and 7, 1998, when a constant rainfall and heavy downpour caused street closures,
intersection flooding,and up to 2-3 feet deep flooding in a mobile home park.
Portions of the City are located in flood zones. The flood zone boundaries of Huntington
Harbour and Sunset Beach were revised in March 2019 and affected properties were placed into a Special
Flood Hazard Area(SFHA) and designated as "AE" or "VE" zones on the flood map. In June 2019, the
Federal Emergency Management Agency(FEMA) issued a Letter of Map Revision(LOMR)that changed
the flood designation of properties within the vicinity of the East Garden Grove Wintersburg Channel,
from the confluence of Bolsa Bay to the San Diego Freeway (Interstate 405). Properties that were
designated as flood zone A were revised to flood zone AE or X.
Although improvements to the Santa Ana River have reduced potential flood impacts, flooding in
the City may occur. It may be caused by the Santa Ana River, East Garden Grove Wintersburg Channel,
Talbert Channel, Huntington Beach Channel, or the Pacific Ocean. Most floods occur when the
floodwaters leave the river or channels; however, tsunamis from the ocean may create flooding near the
coastline.
Drought and Drought Response
California has recently experienced extended drought conditions, although rainfall in recent years
has somewhat abated the drought conditions throughout the State. Water service within the City is
provided by the City's Public Utilities Department through its regional water supply agencies(the Orange
County Water District and The Metropolitan Water District of Southern California, a regional supplier or
supplemental water). While these suppliers currently anticipate being able to supply water for existing
and new development within the City for the foreseeable future, there can be no assurance that any
renewal of drought conditions will not adversely affect their ability to do so. The City utilizes a broad
range of conservation methods, including: long-term water conservation programs and incentive
programs for efficient landscaping and irrigation management programs, park and recreation partnerships,
and public education and outreach.
Climate Change and Sea Level Rise
The direct risks posed by climate change currently include or are expected to include more
extreme heat events, rising sea levels, changes in precipitation levels, and more intense storms. In order
to address these risks, California law (the Global Warming Solutions Act) requires the State to
significantly reduce its emissions of greenhouse gases(GHGs),which contribute to climate change.
Sources of GHG emissions in the City include cars and trucks, electricity and natural gas use in
buildings, decomposition of solid waste, landscaping and construction equipment, oil drilling, and water
and wastewater distribution, treatment, and use. On-road vehicle use represents the largest source of
GHGs, followed by energy use in residential and nonresidential buildings. These three sources comprised
95 percent of Huntington Beach's GHG emissions in 2012. Going forward, Huntington Beach's GHG
emissions will continue to change due to new policies, technological improvements, and population
growth and new development.
Current science indicates that sea level rise is directly linked to climate change, and sea level is
expected to increase over time. The City has 9.5 miles of shoreline and other coastal and inland areas that
are threatened by sea level rise. The Huntington Beach community is vulnerable to coastal erosion of its
protective beaches and flooding from wave run-up(particularly from large waves associated with coastal
I
64
4129-6022-6339.5
I
storms). Sea level rise threatens the inland areas by exacerbating flooding from very high tides, and by
contributing to flooding from extreme rainfall events.
In 2017, the City adopted a Greenhouse Gas Reduction Program (GGRP), which quantified
baseline (2005), existing (2012), and projected (2040) GHG emissions and identified specific measures
and performance standards that would reduce GHG levels consistent with State reduction targets if
implemented. In addition, the City prepared a sea level rise vulnerability assessment estimating the
consequences, probability, and resulting risk from various sea level rise scenarios, including an inventory
of potentially affected assets and their estimated replacement value. Based on the vulnerability
assessment, the City prepared a Coastal Resiliency Program, which outlines strategies the City could
implement to minimize potential impacts from sea level rise. However, there is an inherent degree of
uncertainty in projecting future GHG emissions and sea level rise. As well, the City cannot provide
assurances that the adoption of future policies and implementation of measures to reduce GHG emissions
and sea level rise impacts will occur.
The City cannot predict the timing, extent, or severity of climate change, GHG emissions or sea
level rise; the extent to which protective measures would be implemented and effective; or whether such
changes or measures will have a material adverse effect on the City's operations and finances,or the State
and local economies.
Cybersecurity
The City relies heavily on computers and technology to conduct its daily operations. The City
and its departments face cyber threats from time to time, including but not limited to hacking, viruses,
malware,phishing,and other attacks on computers and other sensitive digital networks and systems.
In 2017, the City's Infonnation Services Department performed an in-house cybersecurity
assessment to evaluate all computing resources including networking infrastructure, operating system of
all computers, business applications and systems, and related components. The findings of this
assessment were used to drive the creation of a list of recommendations that was used to increase the
overall resiliency of the City's computing resources. The police department has a separate network with
physical separation and law enforcement compliance requirement.
Currently the City has a complex layered cyber security posture to protect the City's digital assets
and networks. The City also uses anti-phishing software and practices periodic security awareness
training for end-users. Additionally,the City has a Cyber insurance policy with maximum aggregate limit
of$10,000,000.
Although the City has a comprehensive layered security defense mechanism, no assurances can
be given that the City's security and operational control measures will guard 100% against all cyber
threats and attacks. The results of any attack on the City's computer and information-technology systems
could adversely affect the City's operations and damage its digital networks and systems, and potential
losses from such attacks, as well as the costs of defending against future attacks,could be substantial.
Infectious Disease Outbreak—COVID-19
The outbreak of coronavirus disease 2019 ("COVID-19"), a respiratory disease caused by a new
strain of coronavirus, has been characterized as a pandemic (the "Pandemic") by the World Health
Organization and is currently affecting many parts of the world, including the United States and
California. On January 31, 2020, the Secretary of the United States Health and Human Services
Department declared a public health emergency for the United States and on March 13, 2020, the
65
4129-6022-6339.5
President of the United States declared the outbreak of COVID-19 in the United States a national
emergency. Also on March 13,2020, California Governor Gavin Newsom issued Executive Order N-26-
20, proclaiming a State of Emergency to exist in California as a result of the threat of the COVID-19
virus. Subsequently, the President's Coronavirus Guidelines for America and the United States Centers
for Disease Control and Prevention called upon Americans to take actions to slow the spread of COVID-
19 in the United States.
On March 16, 2020,the Governor issued Executive Order N-28-20, lifting the State's preemption
of landlord/tenant law, authorizing local governments to halt evictions for renters and homeowners, slows
foreclosures, and protects against utility shutoffs for Californians affected by the COVID-19 virus, and
further providing that the order does not relieve a tenant from the obligation to pay rent, or restrict the
landlord's ability to recover rent that is due. The order expands a local government's authority to limit
residential or commercial evictions, but only as to nonpayment evictions caused by a documented loss of
income caused by the pandemic or the governmental responses. The protections are in effect through
May 31, 2020, unless extended. The order also requests banks and other financial institutions to halt
foreclosures and related evictions during this time period.
On March 19, 2020, the Governor issued Executive Order N-33-20, a State-wide stay at home
order to protect the health and well-being of all Californians and to establish consistency across the State
in order to slow the spread of the COVID-19 virus; such order to go into effect immediately and to stay in
effect until further notice. The order directs all individuals living in the State to stay home or at their
place of residence except as needed to maintain continuity of operations of the federal critical
infrastructure sectors as outlined at https://www.cisa.gov/identifying-critical-infrastructure-during-covid-
19. This includes 16 critical infrastructure sectors whose assets, systems, and networks, whether physical
or virtual, are considered so vital to the United States that their incapacitation or destruction would have a
debilitating effect on security, national economic security, national public health or safety, or any
combination thereof. Neither the Authority nor the City can take no responsibility for the continued
accuracy of this internet address or for the accuracy, completeness or timeliness of information posted
therein,and such information is not incorporated in this Official Statement by such reference.
Effective March 17, 2020, the City suspended all street sweeping enforcement within the City.
On June 10, 2020, the City announced that street sweeping and related parking control enforcement
would resume on June 22,2020 with a two-week written warning period.
On March 31, 2020, the City approved two forms of temporary financial relief, including rent
abatement to concessionaire tenants of City-owned facilities and a suspension on water shutoffs for
delinquent bills, each designed to mitigate some of the significant financial burdens of the Pandemic. On
July 6, 2020, the City approved the termination of the rent abatement program to concessionaire tenants
of City-own facilities,effective August 1, 2020.
Effective April 10, 2020 until further notice, the City closed all metered parking along both sides
of Pacific Coast Highway, in the interest of limiting beach visitations and promoting social distancing
during the Pandemic. By this order, previous closures of beachside metered parking between 6`1i Street
and Goldenwest Street were extended throughout Pacific Coast Highway within City boundaries. Also,
all beaches within Huntington Harbor were closed starting April 17 until further notice. Beginning
May 15, 2020, certain beach parking lots were reopened with 50% capacity, moving to 100% capacity
beginning May 28, 2020. With the warmer summer months approaching, residents and out-of-town
visitors have been visiting the beach with increased frequency, generating additional parking revenues for
the City.
66
4129-6022-6339.5
On April 20, 2020, the City approved payment deferral programs for Business License payment
renewals, Transient Occupancy Taxes, and Business Improvement District("BID")assessments collected
by the City to provide local businesses with temporary relief from the financial burdens of the Pandemic.
A similar payment deferral program for the Tourism Business Improvement District ("TBID")
assessments collected by the City was approved by City Council on May 4, 2020.
Effective May 1, 2020, the City closed all beaches, including the City's bike paths, parking lots,
and associated amenities. On May 5,2020,the beaches were reopened for active recreation use only after
extensive discussions with other local area cities and State representatives, including those at the
California Natural Resources Agency and the California Department of Parks and Recreation.
On May 23, 2020, the State authorized Orange County's plan to facilitate an accelerated
reopening of Stage 2 reopening. Business that fall under the category on the Stage 2 reopening include,
but are not limited to, dine-in restaurants, destination retail, shopping malls, and in-store retail, with
proper safety protocols in place.
On June 12, 2020, the City moved to Stage 3 of the reopening plan, which allows higher risk
environments with adaptions to open such as hair and nail salons, gyms, entertainment venues, and in-
person religious services.
Many of the federal, State and local actions and policies under the aforementioned disaster
declarations and shelter-in-place orders are focused on limiting instances where the public can congregate
or interact with each other, which affects the operation of businesses and directly impacts the economy.
These include, for example, imposing limitations on social gatherings and temporarily closing school
districts throughout the State. In addition to the actions by the State and federal officials, certain local
officials, including the County, have declared a local state of disaster and have issued "shelter-in-place"
orders.
The Pandemic has negatively affected travel, commerce, and financial markets globally, and is
widely expected to continue negatively affecting economic growth and financial markets worldwide.
These negative impacts may reduce or negatively affect property values and/or the collection of sales tax
revenues and ad valorem tax revenues within the City. A decline in property values may impact the
City's ability to pay Base Rental Payments under the Lease Agreement as and when due, and have further
impacts on the City's finances and operations. Additionally, the City collects a sales and use tax on all
taxable transactions within the City's boundaries as well as transient occupancy taxes. A reduction in the
collection of sales tax and transient occupancy tax revenues may negatively impact the City's operating
budget and overall financial condition.
On March 25, 2020, Orange County Treasurer Tax Collector Shari Freidenrich announced her
plan to grant waivers on penalties to taxpayers as allowed by existing law to assist them during these
challenging times, providing that for taxpayers that do not make payment of property taxes due to the
COVID-19 virus by April 10, such taxpayers would be expected to submit to the Treasurer a Penalty
Cancellation Request Form and documentation to support the cancellation of penalties as allowed in
limited circumstances under current State law, allowing for waiver of penalties, costs and other charges
when failure to make a timely payment is due to reasonable cause and circumstances beyond the
taxpayer's control, and occurred notwithstanding the exercise of ordinary care in the absence of willful
neglect.
On April 1, 2020, the Governor directed that all California schools remain closed to students
through the end of the current school year due to the COVID-19 virus.
67
4129-6022-6339.5
The current spread of COVID-19 is altering the behavior of businesses and people in a manner
that may have negative effects on global, national and local economies, and which has resulted in a
volatile stock market response. These events and other factors resulting from such an outbreak,
particularly if prolonged, could result in, or increase the likelihood of, the occurrence of certain of the
other potential adverse effects described in this Official Statement, including those relating to declines in
the value of property, and delays in (or insufficient funds received from) the collection of sales taxes,
transient occupancy taxes,and property taxes.
Information provided by County Health Officials is available at: http://www.ochealthinfo-com-
novel coronavirus. Neither the City nor the Authority can take responsibility for the continued accuracy
of this internet address or for the accuracy, completeness or timeliness of information posted therein, and
such information is not incorporated in this Official Statement by such reference. The City provides .
additional information on actions with respect to the COVID-19 virus at
https://www.surfcityusa.com/coronavirus-updates-in-huntington-beach/. The information on such
website is not incorporated herein by such reference or otherwise.
On March 27, 2020, the President signed H.R. 748, known as the Coronavirus Aid, Relief, and
Economic Security (CARES) Act or "Phase 3," a $2 trillion stimulus and supplemental spending plan to
address the effects of the COVID-19 virus, which includes more than $150 billion for the so-called
"Marshall Plan" for hospitals and health care infrastructure. Also included is $150 billion for state and
local governments. On April 24, 2020, the President signed H.R. 266, known as "Phase 3.5," titled the
Paycheck Protection Program and Heath Care Enhancement Act, which appropriates additional funds for
the Paycheck Protection Program (the "PPP") and for emergency Economic Injury Disaster Loan
("EIDL")grants; mandates a certain "set-aside" for qualifying small and midsize PPP lenders; and makes
other appropriations, including for a Department of Health and Human Services COVID-19-related
"emergency fund."The Act increases appropriations for PPP loans from the $349,000,000,000 originally
provided in the CARES Act to $670,335,000,000. It also increases appropriations for emergency EIDL
grants from the $10,000,000,000 originally provided in the CARES Act to $20,000,000,000. The Act
expands the types of entities eligible to receive emergency EIDL grants to include agricultural enterprises
with not more than 500 employees.
The City continues to monitor the spread of COVID-19 and is working with local, State, and
national agencies to address the potential impact of the Pandemic upon the City. The City projects that
two of three primary sources of operating revenue(sales and transient occupancy tax)will be dramatically
reduced and long term required expenditures significantly increased. While the potential impact of the
Pandemic on the City cannot be quantified at this time,the continued outbreak of COVID-19 could delay
and/or impair the collection of sales taxes, transient occupancy taxes, and property taxes and have an
adverse effect on the City's operations and financial condition and impair 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 2020 Bonds.
Projections included in this Official Statement represent City's forecast of future results as of the
date of hereof as well as estimates, trends and assumptions that are inherently subject to economic,
political, regulatory, competitive and other uncertainties, all of which are difficult to predict and many of
which will be beyond the control of the City. As a result, projected results may not be realized and actual
results could be significantly higher or lower than projected. The City is not obligated to update, or
otherwise revise, the financial projections or the specific portions presented to reflect circumstances
existing after the date when made or to reflect the occurrence of future events, even in the event that any
or all of the assumptions are shown to be in error.
68
4129-6022-6339.5
I
A continued spread of the COVID-19 virus, future outbreak of the COVID-19 virus or another
infectious disease, or the fear of any such outbreak, and measures taken to prevent or reduce it, could
adversely impact State, national and global economic activities and, accordingly, adversely impact the
financial condition and operations of the City, and the extent of impact could be material. The City
cannot predict the duration of COVID-19, the duration or expansion of travel restrictions and warnings,
whether additional countries or destinations will be added to the travel restrictions or warnings, and what
effect such travel restrictions and warnings may have on tourism-related revenues. Additionally, the City
cannot predict what impact COVID-19 may have on the City's general financial condition or operations,
or the assessed values of property within the City. The City is monitoring the impact of COVID-19 and
will incorporate it into the assumptions used in the fiscal year 2019-20 and 2020-21 budgets as necessary.
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
2020 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 2020 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 2020 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 2020 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 2020 Bonds; and(iv)the
69
4129-6022-6339.5
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 2020 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. 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 2020 Bonds could be required to litigate these issues in order to protect
their interests.]
[The City and the Authority may be able, without the consent and over the objection of the
Trustee or the Holders of the Bonds, to alter the priority, interest rate, payment terms, maturity dates,
payment sources, covenants, and other terms or provisions of the Indenture,the Lease Agreement and the
Bonds,as long as the bankruptcy court determines that the alterations are fair and equitable.
There may be delays in payments on the Bonds while the court considers any of these issues.
There may be other possible effects of a bankruptcy of the City or the Authority that could result in delays
or reductions in payments on the Bonds, or result in losses to the Holders of the Bonds. Regardless of any
specific adverse determinations in a City bankruptcy proceeding, the fact of a City or Authority
bankruptcy proceeding could have an adverse effect on the liquidity and value of the Bonds.]
The opinion to be delivered by Bond Counsel concurrently with the execution and delivery of the
Series 2020 Bonds will be subject to various limitations on remedies including those related to
bankruptcy and the various other legal opinions to be delivered concurrently with the issuance of the
Series 2020 Bonds will be similarly qualified. See Appendix E. In the event that the City fails to comply
with its covenants under the Indenture or fails to make Lease Payments as and when due in amounts
sufficient for the Authority to pay debt service payments on the Series 2020 Bonds, there can be no
assurance of the availability of remedies adequate to protect the interest of the Beneficial Owners of the
Series 2020 Bonds.]
Limitations on Remedies
The rights of the Owners of Series 2020 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 2020 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. See"Bankruptcy"above.
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.
70
4129-6022-6339.5
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 2020 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 Series 2020A Bonds) is expected to increase significantly under the new
TE/GE Division. There is no assurance that if an IRS examination of the Series 2020A Bonds was
undertaken that it would not adversely affect the market value of the Series 2020A Bonds. See "TAX
MATTERS." The City has not been contacted by the IRS regarding the examination of any of its bond
transactions.
State Budget
Approximately 56.3% (consisting of the sales tax, property tax and the motor vehicle license fee)
of the City's fiscal year 2018-19 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.
Approximately 56.7% of the City's projected General Fund revenues for fiscal year 2019-20 consist of
such payments collected by the State. 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, www.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 Underwriter,
and the none of the Authority, the City or the Underwriter 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.
71
4129-6022-6339.5
�I
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.
Proposed 2020-21 State Budget. The Governor released his proposed State budget for fiscal year
2020-21 (the "Proposed 2020-21 State Budget") on January 10, 2020. Since the Proposed 2020-21 State
Budget preceded the COVID-19 pandemic, it did not take into account the significant adverse impacts it
will have on the State's financial condition in fiscal year 2020-21. The complete Proposed 2020-21 State
Budget is available from the California Department of Finance website at www.dof.ca.gov. Neither the
Authority nor the City can take any responsibility for the continued accuracy of this internet address or
for the accuracy, completeness or timeliness of information posted therein, and such information is not
incorporated herein by such reference.
May Revision to the 2020-21 Proposed State Budget. The Governor released the May Revision to
the Proposed 2020-21 State Budget (the "2020-21 May Revision") on May 14, 2020, which reflects the
initial and profound effects of the COVID-19 pandemic on the State's economy. The 2020-21 May
Revision indicates that, although the State began 2020 with a solid fiscal foundation as reflected in the
Proposed 2020-21 State Budget,the COVID-19 pandemic and resulting recession have changed the fiscal
landscape dramatically. Job losses and business closures are sharply reducing State revenues. Compared
to the Proposed 2020-21 State Budget, the 2020-21 May Revision projects that State general fund
revenues will decline over $41 billion. Such a decrease in State general fund revenues, combined with
the increased costs in health and human services programs and the added costs to address COVID-19,
leads to a projected budget deficit of approximately $54 billion before the changes proposed in the 2020-
21 May Revision.
Consistent with the State's constitutional obligation to enact a balanced budget and the
prohibition against issuing long-term bonds to finance deficits, the 2020-21 May Revision proposes the
following actions to achieve a balanced budget for fiscal year 2020-21:
• Cancel $6.1 billion in program expansions and spending increases, including canceling or
reducing a number of one-time expenditures included in the 2019-20 State Budget. It also includes
redirecting$2.4 billion in extraordinary payments to CalPERS to temporarily offset the state's obligations
to Ca1PERS in fiscal years 2020-21 and 2021-22.
• Draw down $16.2 billion in the Rainy Day Fund over three years, and allocate the Safety
Net Reserve to offset increased costs in health and human services programs over the next two years. The
2020-21 May Revision reflects the withdrawal of$8.3 billion, including $7.8 billion from the Rainy Day
Fund and$450 million from the Safety Net Reserve in 2020-21.
• Borrow and transfer$4.1 billion from special funds.
72
4129-6022-6339.5
• Temporarily suspend net operating losses and temporarily limit to $5 million the amount
of credits a taxpayer can use in any given tax year. These short-term limitations will generate new
revenue of$4.4 billion in fiscal year 2020-21,$3.3 billion in fiscal year 2021-22, and$1.5 billion in fiscal
year 2022-23 to increase funding for schools and community colleges and maintain other core services.
• Reflect the nationwide request of$1 trillion in flexible federal funds to support all 50
states and local governments, and identifies reductions to base programs and employee compensation that
will be necessary if sufficient federal funding does not materialize.
Although the 2020-21 May Revision proposes a balanced budget for fiscal year 2020-21, a
significant out-year deficit would remain, increasing to over$16 billion by fiscal year 2023-24. However,
without the actions described above to achieve a balanced budget for fiscal year 2020-21, the out-year
structural deficit would be approximately$45 billion annually. The 2020-21 May Revision estimates that
total resources available in fiscal year 2019-20 will be approximately $148.1 billion (including revenues
and transfers of approximately $136.8 billion and a prior year balance of $11.3 billion) and total
expenditures in fiscal year 2019-20 will be approximately $146.5 billion. The 2020-21 May Revision
projects total resources available for fiscal year 2020-21 of approximately $139.0 billion, inclusive of
revenues and transfers of approximately $137.4 billion and a prior year balance of approximately $1.6
billion. The 2020-21 May Revision projects total expenditures of approximately $133.9 billion. The
2020-21 May Revision proposes to allocate approximately $3.2 billion of the State general fund's
projected fund balance to the State's reserve for liquidation of encumbrances and approximately $2.0
billion of such fund balance to the State's special fund for economic uncertainties. In addition,the 2020-
21 May Revision estimates that the Rainy Day Fund will have a fund balance of approximately $8.4
billion.
The complete 2020-21 May Revision is available from the California Department of Finance
website at www.dof.ca.gov. The LAO released its analyses of the proposals included in the 2020-21 May
Revision entitled, "Initial Comments on the Governor's May Revision" on May 19, 2020. The 2020-21
May Revision analysis is available on the LAO website at www.lao.ca.gov.
Neither the Authority nor the City can take any responsibility for the continued accuracy of these
internet addresses or for the accuracy, completeness or timeliness of information posted therein, and such
information is not incorporated herein by such references.
2020-21 State Budget. The Governor signed the fiscal year 2020-21 State budget (the "2020-21
State Budget") on June 29, 2020. According to the State, the economic impact of COVID-19 pandemic
has resulted in a $54.3 billion budget deficit, which the State is addressing through the following
measures:
• The 2020-21 State Budget draws down $8.8 billion in reserves, including $7.8 billion
from the Rainy Day Fund, $450 million from the Safety Net Reserve, and all of the funds in the Public
School System Stabilization Account.
• The 2020-21 State Budget includes $11.1 billion in reductions and deferrals that will be
restored if at least $14 billion in federal funds are received by October 15, 2020. If the State receives a
lesser amount between$2 billion and$14 billion,the reductions and deferrals will be partially restored.
• The 2020-21 State Budget relies on $10.1 billion in federal funds that provide general
fund relief, including $8.1 billion already received. This includes the enhanced Federal Medical
Assistance Percentage (FMAP), a portion of the State's Coronavirus Relief Fund allocation and funds
provided for childcare programs.
73
4129-6022-6339.5
i
• The 2020-21 State Budget temporarily suspends the use of net operating losses for
medium and large businesses and temporarily limits to$5 million the amount of business incentive credits
a taxpayer can use in any given tax year. These short-term limitations will generate $4.4 billion in new
revenues in fiscal year 2020-21.
• The 2020-21 State Budget relies on $9.3 billion in special fund borrowing and transfers.
(Approximately $900 million in additional special fund borrowing is associated with the reductions to
employee compensation and is contained in the trigger.)
• The 2020-21 State Budget includes $10.6 billion of other solutions for addressing the
budget deficit, such as cancelling multiple program expansions and anticipating increased government
efficiencies,higher ongoing revenues,and lower health and human services caseload costs that previously
estimated.
Because of such measures described above, the 2020-21 State Budget is a balanced budget for
fiscal year 2020-21 that projects approximately $137.7 billion in revenues. The 2020-21 State Budget sets
aside$2.6 billion in the Special Fund for Economic Uncertainties.
The complete 2020-21 State Budget is available from the California Department of Finance
website at www.dof.ca.gov. Neither the Authority nor the City can take responsibility for the continued
accuracy of this internet address or for the accuracy, completeness or timeliness of information posted
therein,and such information is not incorporated herein by such reference.
Changes in State Budget. The City cannot predict what future actions will be taken by the State
Legislature and the Governor to address changing State revenues and expenditures or the impact such
actions will have on State revenues available in the current or future years for education. As indicated
above, the 2020-21 May Revision and the 2020-21 State Budget differ dramatically from the Proposed
2020-21 State Budget due to the effects of the COVID-19 pandemic on the State. The 2020-21 State
Budget may be affected by national and State economic conditions and other factors which the Authority
or the City cannot predict, including the continued and evolving effects of the COVID-19 pandemic on
State revenues that may in turn impact the funding that the City receives from the State. See "RISK
FACTORS—Infectious Disease Outbreak—COVID-19."
In fact,the State Legislature and the Governor have widely differing proposals for the final fiscal
year 2020-21 State budget largely related to whether or not to assume the receipt of potential federal aid
in addressing the budget deficit. The 2020-21 May Revision put forward by the Governor reduces
programs and spending to address budget shortfalls, but indicates adjustments will be made if federal aid
becomes available. The State Legislature's fiscal year 2020-21 State budget assumes the receipt of
potential federal aid and rejects many of the reductions included in the 2020-21 May Revision. On June
15, 2020, the Constitutional deadline for the State Legislature to approve a fiscal year 2020-21 State
budget, the State Legislature passed four main bills containing the fiscal year 2020-21 State budget,
reportedly without reaching any prior agreement with the Governor on such bills. It is widely reported
that the State Legislature's fiscal year 2020-21 State budget is unlikely to become the final fiscal year
2020-21 State budget given its rejection of the reductions included the 2020-21 May Revision. Reports
indicate that negotiations between the State Legislature and the Governor are ongoing. Accordingly, the
Authority or the City cannot provide any assurances what the final fiscal year 2020-21 State budget will
include and whether it will be consistent with the 2020-21 May Revision or the State Legislature's fiscal
year 2020-21 State budget. The Authority or the City cannot predict the impact that the final fiscal year
2020-21 State budget, or subsequent budgets,will have on its finances and operations.
74
4129-6022-6339.5
I
Future State Budgets. Neither the Authority nor the City can 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 2020A 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 2020A Bonds under Section 103 of the Internal Revenue Code of 1986, as amended. Interest on
the Series 2020A Bonds could become includable in gross income for purposes of Federal income
taxation retroactive to the date the Series 2020A 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 2020A 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 2020A 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 2020A Bonds should consider such investment. There can
be no guarantee that there will be a secondary market for purchase or sale of the Series 2020A Bonds or,
if a secondary market exists,that the Series 2020A Bonds can or could be sold for any particular price.
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 2020 Bonds. See
"CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS."
75
4129-6022-6339.5
TAX MATTERS
Series 2020A Bonds
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 2020A 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
2020A Bonds is not a specific preference item for purposes of the federal alternative minimum tax. 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 2020A Bonds is less than the amount
to be paid at maturity of such Series 2020A Bonds(excluding amounts stated to be interest and payable at
least annually over the term of such Series 2020A 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 2020A 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 2020A Bonds is the first price at which a substantial amount of such maturity of the
Series 2020A 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 2020A Bonds accrues daily over the term to maturity
of such Series 2020A 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 2020A Bonds to determine taxable gain or loss upon disposition
(including sale, redemption, or payment on maturity) of such Series 2020A Bonds. Beneficial owners of
the Series 2020A Bonds should consult their own tax advisors with respect to the tax consequences of
ownership of Series 2020A Bonds with original issue discount, including the treatment of beneficial
owners who do not purchase such Series 2020A Bonds in the original offering to the public at the first
price at which a substantial amount of such Series 2020A Bonds is sold to the public.
Series 2020A 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.
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 2020A Bonds.
The Authority and the City have each made certain representations and covenanted to comply with certain
restrictions, conditions and requirements designed to ensure that interest on the Series 2020A 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 2020A Bonds being included in gross income for
federal income tax purposes, possibly from the date of original issuance of the Series 2020A 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
76
4129-6022-6339.5
i
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 2020A Bonds may adversely affect the value
of, or the tax status of interest on,the Series 2020A 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 2020A 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 amounts treated as interest on,
the Series 2020A 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.
Current and future legislative proposals, if enacted into law, clarification of the Code or court
decisions may cause interest on the Series 2020A Bonds to be subject, directly or indirectly, in whole or
in part, 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 legislative proposals or clarification of the Code or
court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Series
2020A Bonds. Prospective purchasers of the Series 2020A Bonds should consult their own tax advisors
regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or
litigation, as to which Bond Counsel is expected to express 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 2020A 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 each covenanted,however,to comply with the requirements of the Code.
Bond Counsel's engagement with respect to the Series 2020A Bonds ends with the issuance of
the Series 2020A 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 2020A 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 or the City legitimately disagrees, may not be practicable. Any
action of the IRS, including but not limited to selection of the Series 2020A 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 2020A Bonds, and may cause the Authority, the City or the beneficial
owners to incur significant expense.
Series 2020B Bonds
In the opinion of 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 2020B Bonds is exempt from State of California
personal income taxes. Bond Counsel observes that interest on the Series 2020B Bonds is not excluded
from gross income for federal income tax purposes under Section 103 of the Code. Bond Counsel
77
4129-6022-6339.5
expresses no opinion regarding any other tax consequences relating to the ownership or disposition of, or
the amount, accrual, or receipt of interest on, the Series 2020B Bonds. The proposed form of opinion of
Bond Counsel is contained in Appendix E hereto.
The following discussion summarizes certain U.S. federal tax considerations generally applicable
to holders of the Series 2020B Bonds that acquire their Series 2020B Bonds in the initial offering. The
discussion below is based upon laws,regulations, rulings, and decisions in effect and available on the date
hereof, all of which are subject to change, possibly with retroactive effect. Prospective investors should
note that no rulings have been or are expected to be sought from the IRS with respect to any of the U.S.
federal tax consequences discussed below, and no assurance can be given that the IRS will not take
contrary positions. Further,the following discussion does not deal with U.S.tax consequences applicable
to any given investor, nor does it address the U.S. tax considerations applicable to all categories of
investors, some of which may be subject to special taxing rules (regardless of whether or not such
investors constitute U.S. Holders), such as certain U.S. expatriates, banks, REM, RICs, insurance
companies, tax-exempt organizations, dealers or traders in securities or currencies, partnerships, S
corporations, estates and trusts, investors that hold their Series 2020B Bonds as part of a hedge, straddle
or an integrated or conversion transaction, or investors whose"functional currency" is not the U.S. dollar.
Furthermore, it does not address (i) alternative minimum tax consequences, (ii)the net investment income
tax imposed under Section 1411 of the Code, or (iii) the indirect effects on persons who hold equity
interests in a holder. This summary also does not consider the taxation of the Series 2020B Bonds under
state, local or non-U.S. tax laws. In addition,this summary generally is limited to U.S. tax considerations
applicable to investors that acquire their Series 2020B Bonds pursuant to this offering for the issue price
that is applicable to such Series 2020B Bonds (i.e., the price at which a substantial amount of the Series
2020B Bonds are sold to the public) and who will hold their Series 2020B Bonds as "capital assets"
within the meaning of Section 1221 of the Code.
As used herein, "U.S. Holder" means a beneficial owner of a Series 2020B Bond that for U.S.
federal income tax purposes is an individual citizen or resident of the United States,a corporation or other
entity taxable as a corporation created or organized in or under the laws of the United States or any state
thereof(including the District of Columbia), an estate the income of which is subject to U.S. federal
income taxation regardless of its source or a trust where a court within the United States is able to
exercise primary supervision over the administration of the trust and one or more United States persons
(as defined in the Code) have the authority to control all substantial decisions of the trust (or a trust that
has made a valid election under U.S. Treasury Regulations to be treated as a domestic trust). As used
herein, "Non-U.S. Holder" generally means a beneficial owner of a Series 2020B Bond (other than a
partnership) that is not a U.S. Holder. If a partnership holds Series 2020B Bonds, the tax treatment of
such partnership or a partner in such partnership generally will depend upon the status of the partner and
upon the activities of the partnership. Partnerships holding Series 2020B Bonds, and partners in such
partnerships,should consult their own tax advisors regarding the tax consequences of an investment in the
Series 2020B Bonds(including their status as U.S. Holders or Non-U.S. Holders).
Notwithstanding the rules described below, it should be noted that certain taxpayers that are
required to prepare certified financial statements or file financial statements with certain regulatory or
governmental agencies may be required to recognize income, gain and loss with respect to the Series
2020B Bonds at the time that such income,gain or loss is recognized on such financial statements instead
of under the rules described below (in the case of original issue discount, such requirements are only
effective for tax years beginning after December 31, 2018).
Prospective investors should consult their own tax advisors in determining the U.S. federal, state,
local or non-U.S. tax consequences to them from the purchase, ownership and disposition of the Series
2020B Bonds in light of their particular circumstances.
78
4129-6022-6339.5
U.S.Holders
Interest. Interest on the Series 2020B Bonds generally will be taxable to a U.S. Holder as
ordinary interest income at the time such amounts are accrued or received, in accordance with the U.S.
Holder's method of accounting for U.S. federal income tax purposes.
To the extent that the issue price of any maturity of the Series 2020B Bonds is less than the
amount to be paid at maturity of such Series 2020B Bonds (excluding amounts stated to be interest and
payable at least annually over the term of such Series 2020B Bonds) by more than a de minimis amount,
the difference may constitute original issue discount("OID"). U.S. Holders of Series 2020B Bonds will
be required to include OID in income for U.S. federal income tax purposes as it accrues, in accordance
with a constant yield method based on a compounding of interest (which may be before the receipt of
cash payments attributable to such income). Under this method, U.S. Holders generally will be required
to include in income increasingly greater amounts of OID in successive accrual periods.
Series 2020B Bonds purchased for an amount in excess of the principal amount payable at
maturity (or, in some cases, at their earlier call date) will be treated as issued at a premium. A U.S.
Holder of a Series 2020B Bond issued at a premium may make an election, applicable to all debt
securities purchased at a premium by such U.S. Holder,to amortize such premium, using a constant yield
method over the term of such Series 2020B Bond.
Sale or Other Taxable Disposition of the Series 2020B Bonds. Unless a nonrecognition provision
of the Code applies, the sale, exchange, redemption, retirement (including pursuant to an offer by the
Authority or the City)or other disposition of a Series 2020B Bond will be a taxable event for U.S. federal
income tax purposes. In such event, in general, a U.S. Holder of a Series 2020B Bond will recognize gain
or loss equal to the difference between (i) the amount of cash plus the fair market value of property
received(except to the extent attributable to accrued but unpaid interest on the Series 2020B Bond,which
will be taxed in the manner described above) and (ii)the U.S. Holder's adjusted U.S. federal income tax
basis in the Series 2020B Bond (generally, the purchase price paid by the U.S. Holder for the Series
2020B Bond, decreased by any amortized premium, and increased by the amount of any OID previously
included in income by such U.S. Holder with respect to such Series 2020B Bond). Any such gain or loss
generally will be capital gain or loss. In the case of a non-corporate U.S. Holder of the Series 2020B
Bonds,the maximum marginal U.S. federal income tax rate applicable to any such gain will be lower than
the maximum marginal U.S. federal income tax rate applicable to ordinary income if such U.S. holder's
holding period for the Series 2020B Bonds exceeds one year. The deductibility of capital losses is subject
to limitations.
Defeasance of the Series 2020B Bonds. If the Authority defeases any Series 2020B Bond, the
Series 2020B Bond may be deemed to be retired and"reissued" for U.S. federal income tax purposes as a
result of the defeasance. In that event, in general, a holder will recognize taxable gain or loss equal to the
difference between (i) the amount realized from the deemed sale, exchange or retirement (less any
accrued qualified stated interest which will be taxable as such) and (ii)the holder's adjusted tax basis in
the Series 2020B Bond.
Information Reporting and Backup Withholding. Payments on the Series 2020B Bonds generally
will be subject to U.S. information reporting and possibly to "backup withholding." Under Section 3406
of the Code and applicable U.S. Treasury Regulations issued thereunder, a non-corporate U.S. Holder of
the Series 2020B Bonds may be subject to backup withholding at the current rate of 24% with respect to
"reportable payments," which include interest paid on the Series 2020B Bonds and the gross proceeds of
a sale, exchange, redemption, retirement or other disposition of the Series 2020B Bonds. The payor will
be required to deduct and withhold the prescribed amounts if(i)the payee fails to furnish a U.S. taxpayer
79
4129-6022-6339.5
identification number("TIN")to the payor in the manner required, (ii)the IRS notifies the payor that the
TIN furnished by the payee is incorrect,(iii)there has been a"notified payee underreporting"described in
Section 3406(c)of the Code or(iv)the payee fails to certify under penalty of perjury that the payee is not
subject to withholding under Section 3406(a)(1)(C) of the Code. Amounts withheld under the backup
withholding rules may be refunded or credited against the U.S. Holder's federal income tax liability, if
any, provided that the required information is timely furnished to the IRS. Certain U.S. holders
(including among others, corporations and certain tax-exempt organizations) are not subject to backup
withholding. A holder's failure to comply with the backup withholding rules may result in the imposition
of penalties by the IRS.
Non-U.S. Holders
Interest. Subject to the discussions below under the headings"Information Reporting and Backup
Withholding"and"Foreign Account Tax Compliance Act,"payments of principal of,and interest on, any
Series 2020B Bond to a Non-U.S. Holder, other than (1) a controlled foreign corporation, a such term is
defined in the Code, which is related to the Authority or the City through stock ownership and (2) a bank
which acquires such Series 2020B Bond in consideration of an extension of credit made pursuant to a
loan agreement entered into in the ordinary course of business, will not be subject to any U.S. federal
withholding tax provided that the beneficial owner of the Series 2020B Bond provides a certification
completed in compliance with applicable statutory and regulatory requirements, which requirements are
discussed below under the heading"Information Reporting and Backup Withholding,"or an exemption is
otherwise established.
Disposition of the Series 2020B Bonds. Subject to the discussions below under the headings
"Information Reporting and Backup Withholding" and "FATCA," any gain realized by a Non-U.S.
Holder upon the sale, exchange, redemption, retirement (including pursuant to an offer by the Authority
or the City or a deemed retirement due to defeasance of the Series 2020B Bond) or other disposition of a
Series 2020B Bond generally will not be subject to U.S. federal income tax, unless (i) such gain is
effectively connected with the conduct by such Non-U.S. Holder of a trade or business within the United
States; or(ii) in the case of any gain realized by an individual Non-U.S. Holder, such holder is present in
the United States for 183 days or more in the taxable year of such sale, exchange, redemption, retirement
(including pursuant to an offer by the Authority or the City) or other disposition and certain .other
conditions are met.
U.S. Federal Estate Tax. A Series 2020B Bond that is held by an individual who at the time of
death is not a citizen or resident of the United States will not be subject to U.S. federal estate tax as a
result of such individual's death, provided that, at the time of such individual's death, payments of
interest with respect to such Series 2020B Bond would not have been effectively connected with the
conduct by such individual of a trade or business within the United States.
Information Reporting and Backup Withholding. Subject to the discussion below under the
heading "FATCA," under current U.S. Treasury Regulations, payments of principal and interest on any
Series 2020B Bonds to a holder that is not a United States person will not be subject to any backup
withholding tax requirements if the beneficial owner of the Series 2020B Bond or a financial institution
holding the Series 2020B Bond on behalf of the beneficial owner in the ordinary course of its.trade or
business provides an appropriate certification to the payor and the payor does not have actual knowledge
that the certification is false. If a beneficial owner provides the certification, the certification must give
the name and address of such owner, state that such owner is not a United States person, or, in the case of
an individual,that such owner is neither a citizen nor a resident of the United States, and the owner must
sign the certificate under penalties of perjury. The current backup withholding tax rate is 24%.
80
4129-6022-6339.5
I
Foreign Account Tax Compliance Act("FATCA")—U.S. Holders and Non-U.S. Holders
Sections 1471 through 1474 of the Code impose a 30% withholding tax on certain types of
payments made to foreign financial institutions, unless the foreign financial institution enters into an
agreement with the U.S. Treasury to, among other things, undertake to identify accounts held by certain
U.S. persons or U.S.-owned entities, annually report certain information about such accounts, and
withhold 30% on payments to account holders whose actions prevent it from complying with these and
other reporting requirements, or unless the foreign financial institution is otherwise exempt from those
requirements. In addition, FATCA imposes a 30% withholding tax on the same types of payments to a
non-financial foreign entity unless the entity certifies that it does not have any substantial U.S. owners or
the entity furnishes identifying information regarding each substantial U.S. owner. Under current
guidance, failure to comply with the additional certification, information reporting and other specified
requirements imposed under FATCA could result in the 30%withholding tax being imposed on payments
of interest on the Series 2020 Bonds. In general, withholding under FATCA currently applies to
payments of U.S. source interest (including OID) and, under current guidance, will apply to certain
"passthru" payments no earlier than the date that is two years after publication of final U.S. Treasury
Regulations defining the term "foreign passthru payments." Prospective investors should consult their
own tax advisors regarding FATCA and its effect on them.
The foregoing summary is included herein for general information only and does not discuss all
aspects of U.S. federal taxation that may be relevant to a particular holder of Series 2020B Bonds in light
of the holder's particular circumstances and income tax situation. Prospective investors are urged to
consult their own tax advisors as to any tax consequences to them from the purchase, ownership and
disposition of Series 2020B Bonds, including the application and effect of state, local, non-U.S.,and other
tax laws.
CERTAIN LEGAL MATTERS
Legal matters incident to the authorization, issuance, sale and delivery by the Authority of the
Series 2020A 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 Underwriter 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 2020A Bonds.
FINANCIAL STATEMENTS
The City's financial statements . for the fiscal year ended June 30, 2019, included in
APPENDIX B — "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE
FISCAL YEAR ENDED JUNE 30, 2019," have been audited by Davis Farr LLP, Certified Public
Accountants, Irvine, California, as stated in its report appearing in Appendix B. Davis Farr LLP has not
undertaken to update its report or to take any action intended or likely to elicit information concerning the
accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is
expressed by Davis Farr 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 action, suit, proceeding, inquiry or investigation pending, with service of
81
4129-6022-6339.5
process having been accomplished, or threatened in writing and delivered to the Authority or the City: (i)
in any way questioning the corporate existence of the Authority or the City or the titles of the officers of
the Authority or the City to their respective offices; (ii) affecting, contesting or seeking to prohibit,
restrain or enjoin the issuance or delivery of any of the Series 2020 Bonds,or the payment or collection of
Base Rental Payments under the Lease Agreement or of any amounts pledged or to be pledged to pay the
principal of and interest on the Series 2020 Bonds, or in any way contesting or affecting the validity of the
Lease Agreement, the Indenture or the Series 2020 Bonds, or the consummation of the transactions
contemplated thereby or hereby, or contesting the exclusion of the interest on the Series 2020 Bonds from
taxation, or contesting the powers of the Authority to issue the Series 2020 Bonds; (iii) which would be
likely to result in any material adverse change relating to the business, operations or financial condition of
the City.
VERIFICATION OF MATHEMATICAL ACCURACY
Causey Demgen & Moore P.C., certified public accountants, will verify, from the information
provided to them,the mathematical accuracy of the computations contained in schedules to determine that
the amounts to be held in the respective escrow fund pursuant to the Escrow Agreements will be
sufficient to pay principal, interest and redemption price due on the Refunded Bonds through and
including the redemption date. Causey Demgen & Moore P.C. will express no opinion on the
assumptions provided to them, nor as to the exemption from taxation of interest on the Series 2020A
Bonds.
RATINGS
Fitch Ratings, Inc. ("Fitch") and S&P Global Ratings, a Standard & Poor's Financial
Services LLC business ("S&P") have assigned their ratings of" " and " " respectively, to the
Series 2020 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: Fitch Ratings, Inc., 33 Whitehall 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 warrant. Any such downward revision or withdrawal
of such ratings may have an adverse effect on the market price of the Series 2020 Bonds.
UNDERWRITING
The Series 2020 Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the
"Underwriter"). The Underwriter has agreed to purchase the Series 2020A Bonds at a price of
$ which amount represents the principal amount of the Series 2020A Bonds of$ ,
less $ , representing the Underwriter's discount, plus $ , representing [net] original
issue premium. The Underwriter has agreed to purchase the Series 2020B Bonds at a price of
$ , which amount represents the principal amount of the Series 2020B Bonds of$ ,
less $ , representing the Underwriter's discount, plus $ , representing [net] original
issue premium. The contract of purchase pursuant to which the Series 2020 Bonds are being purchased
by the Underwriter provides that the Underwriter will purchase all of the Series 2020 Bonds if any are
purchased. The obligation of the Underwriter to make such purchase is subject to certain terms and
conditions set forth in such contract of purchase. The Underwriter may offer and sell the Series 2020
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 Underwriter.
82
4129-6022-6339.5
The Underwriter and its respective affiliates are full service financial institutions engaged in
various activities, which may include securities trading, commercial and investment banking, financial
advisory, investment management, principal investment, hedging, financing and brokerage services. The
Underwriter and its respective affiliates have, from time to time, performed, and may in the future
perform, various investment banking services for the City and/or the Authority, for which they received
or will receive customary fees and expenses.
In the ordinary course of their various business activities, the Underwriter and its respective
affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or
related derivative securities, which may include credit default swaps)and financial instruments (including
bank loans) for their own account and for the accounts of their customers and may at any time hold long
and short positions in such securities and instruments. Such investment and securities activities may
involve securities and instruments of the City and/or the Authority.
The Underwriter and its respective affiliates may also communicate independent investment
recommendations, market color or trading ideas and/or publish or express independent research views in
respect of such assets, securities or instruments and may at any time hold, or recommend to clients that
they should acquire, long and/or short positions in such assets, securities and instruments.
MUNICIPAL ADVISOR
KNN Public Finance, Los Angeles California(the "Municipal Advisor")has served as municipal
advisor to the City in connection with the issuance of the Series 2020 Bonds. The Municipal Advisor has
not independently verified any of the data contained in this Official Statement or conducted a detailed
investigation of the affairs of the City to determine the accuracy or completeness of this Official
Statement. The Municipal Advisor assumes no responsibility for the accuracy or completeness of any of
the information contained in this Official Statement. The fees of the Municipal Advisor are contingent
upon issuance of the Series 2020 Bonds.
CONTINUING DISCLOSURE
The ultimate security for the payments of principal and interest on the Series 2020 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 Underwriter 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 2020
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.
[Within the last five years,with respect to the Refunded Bonds,the City's annual report for the fiscal year
ending June 30, 2019 was not posted to properly reference certain CUSIP numbers and the filing of an
event notice of a rating upgrade in 2016 concerning the Refunded Bonds was not filed on a timely basis
by the City pursuant to the Rule, such filing being approximately 9 days late. The City has made the
necessary filings to address the deficiencies identified above. Currently, the City believes that it is in
material compliance with its continuing disclosure undertakings under the Rule for the last five years.]
83
4129-6022-6339.5
ADDITIONAL INFORMATION
Summaries and explanations of the Series 2020 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.
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By:
Chair of the Board of Directors
CITY OF HUNTINGTON BEACH
By:
Chief Financial Officer
i
84
4129-6022-6339.5
THIS PAGE INTENTIONALLY LEFT BLANK
85
4129-6022-6339.5
i
APPENDIX A
GENERAL,ECONOMIC AND DEMOGRAPHIC INFORMATION
RELATING TO THE CITY
The information herein is subject to change without notice, and neither delivery of this Official
Statement nor any sale thereafter of the Series 2020 Bonds shall under any circumstances imply that
there has not been any change in the affairs of the City or in any other information contained herein since
the date of the Official Statement. The Series 2020 Bonds are solely payable from and secured by the
Lease Revenues pledged under the Indenture, as and when paid by the City. See "SECURITY AND
SOURCES OF PAYMENT FOR THE BONDS." The taxing power of the City of Huntington Beach, the
County of Orange, the State of California or any political subdivision thereof is not pledged to the
payment of the Series 2020 Bonds.
General Information
Founded in the late 1880's, Huntington Beach(the"City") was incorporated as a general law 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, Califomia,(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 of January 1,
2020, the State of California Finance Department estimated its population at 201,281. 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,
Community Development, Library Services, Public Works, Community Services, Information Services,
and Police and Fire. The City has approximately 986 full-time employees and a total fiscal year 2019-20
budget of approximately$381,000,000.
Internationally known as Surf City,the City boasts 9.5 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 1 1 million visitors flock to the City each year. The City's parks and recreation features
its iconic 1,856 foot-long pier — one of the largest recreational piers in the world, public parks, riding
stables and equestrian trails, marina, 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 events as the U.S. Open
Championship of Surfing, AVP Pro Beach Volleyball and the Great Pacific Airshow — the only
beachfront air show on the West Coast.
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, frequently
receiving local, state, and federal awards and honors, including recognition as California Distinguished
Schools and National Blue Ribbon Schools.
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.
A-1
4129-6022-6339.5
The members of the City Council, the expiration dates of their terms and key administrative
personnel are set forth in the charts below.
CITY COUNCIL
Council Member Term Expires
Lyn Semeta,Mayor November 2020
Jill Hardy,Mayor Pro-Tem November 2020
Patrick Brenden,Member November 2020
Kim Carr,Member November 2022
Barbara Delgleize,Member November 2022
Erik Peterson,Member November 2022
Mike Posey,Member November 2022
KEY ADMINISTRATIVE PERSONNEL
Oliver Chi City Manager
Travis Hopkins Assistant City Manager
Marie Knight Director of Organizational Learning and Engagement
Robin Estanislau City Clerk
Michael E. Gates City Attorney
Alisa Backstrom City Treasurer
Joyce Zacks Deputy City Treasurer
Dahle Bulosan Chief Financial Officer
Sunny Rief Assistant Chief Financial Officer
Governmental Services
Public Safety and Welfare — Law enforcement, fire, and marine safety protection services are
provided by the City. The Huntington Beach Police Department currently employs 207 sworn officers.
The Huntington Beach Fire Department employs 127 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. The City's 12 Marine Safety officers, supported by part-time ocean lifeguards, provide year-end
lifeguard services on the City's beaches, including medical aid and code enforcement services.
Community Development— The department plans for the future growth and development of the
City and safeguards existing building stock. Services include planning, building, code enforcement,
permit and plan check services, and inspection services.
Public Works—The City's Public Works department is responsible for the planning, construction,
operation and maintenance of the City-owned infrastructure. The infrastructure includes buildings,
streets, parks, landscaping, flood control, beach facilities and utilities. Essential services such as water,
sewer,drainage,and traffic control systems are operated and maintained 24 hours a day.
Library and Community Services — The City's library services include 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, over 10 miles of beach, a public golf course, Equestrian
Center,and state-of-the-art Senior Centers.
A-2
4129-6022-6339.5
i
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
by 10 parochial and private schools. Area colleges and universities include Orange Coast College,
Golden West College, California State University - Long Beach, California State University - Fullerton
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, and the Aquarium of the Pacific.
Locally,the City's public beaches routinely serve as the site of the U.S. Open of Surfing and AVP Beach
Volleyball tour. The City is also the destination for the Great Pacific Airshow, attracting a crowd of over
1.2 million over the two-day event. Other attractions include the Bolsa Chica Ecological Reserve, a
restored wetlands area known for winter bird watching,International Surf Museum.
Transportation
The City is 12 miles from John Wayne/Orange County Airport(SNA), 18 miles from Long Beach
Airport (LGB), 38 miles from Los Angeles International (LAX) and 48 miles from 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 and
commuter rail serving the greater Los Angeles (Metropolitan Transportation 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 2010 and 2020.
A-3
4129-6022-6339.5
Populational
City of Huntington Beach and Orange County
2010-2020
City of Orange
Year Huntington Beach County
2010 190,136 3,008,855
2011 190,828 3,036,412
2012 193,588 3,072,381
2013 194,678 3,103,018
2014 196,131 3,122,962
2015 197,742 3,145,029
2016 199,796 3,162,789
2017 200,669 3,184,229
2018 200,211 3,192,092
2019 201,239 ),192,987
2020 201,281 3,194,332
1 The population estimates provided for 2010-2020 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
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
Per Capita Income
City of
Huntington Orange State of
Year Beach County California United States
2014 42,680 34,416 29,906 28,555
2015 43,016 34,817 30,318 28,930
2016 43,863 35,939 31,458 29,829
2017 45,597 37,603 33,128 31,177
2018 47,078 39,590 35,021 32,621
Source: U.S. Census Bureau,American Community Survey(5-Year Estimates).
A-4
4129-6022-6339.5
Employment and Industry
The following table sets forth labor force, employment and unemployment for the period from
2015 to 2019, in the City,the County,the State and the United States:
CITY OF HUNTINGTON BEACH LABOR MARKET
Labor Force, Employment and Unemployment
Annual Average(Dollars in Thousands)
Civilian Civilian Unemployment
Year and Area Labor Force Employment Unemployment Rate(%)
2015
City of Huntington Beach 108 103 5 4.3%
Orange County 1,586 1,515 71 4.5
California 18,851 17,682 1,169 6.2
United States 157,130 148,834 8,296 5.3
2016
City of Huntington Beach 108 104 4 4.0%
Orange County 1,599 1,534 65 4.0
California 19,045 18,003 1,042 5.5
United States 159,187 151,436 7,751 4.9
2017
City of Huntington Beach 109 105 4 3.5%
Orange County 1,610 1,553 56 3.5
California 19,205 18,286 920 4.8
United States 160,320 153,337 6,982 4.4
2018
City of Huntington Beach 110 107 3 2.9%
Orange County 1,625 1,578 48 2.9
California 19,398 18,583 815 4.2
United States 162,075 155,761 6,314 3.9
2019
City of Huntington Beach 109 106 3 2.8%
Orange County 1,623 1,578 45 2.8
California 19,412 18,627 784 4.0
United States 163,539 157,538 6,001 3.7
Source: California Employment Development Department; United States Department of Labor Bureau of Labor Statistics
A-5
4129-6022-6339.5
I
The principal private employers operating within the City and their respective number of
employees as of June 30, 2019, are as follows:
CITY OF HUNTINGTON BEACH
Principal Private Employers
Number of
Name of Employer Employees
The Boeing Company 3,827
No Ordinary Moments 740
Hyatt Regency Huntington Beach 641
Safran Cabin Galleys US Inc. 631
Waterfront Hilton Beach Resort 625
Safran Cabin Inc. 555
Cambro Manufacturing 550
Huntington Beach Hospital 527
Walmart 462
Huntington Valley Healthcare 381
Total of Top 10 8,939
All others 98,761
Total Employment(public and private) 107,700
Source: City of Huntington Beach
Commercial Activity
The following charts summarize the volume of retail sales and taxable transactions for the City
for 2015 through 2019.
CITY OF HUNTINGTON BEACH
Total Taxable Transactions
([in Thousands[)
2015-2019
Total Taxable Issued
Retail Sales Retail Sales Transactions Sales
Year ($000's) Permits ($000's) Permits
2015 2,502,440 5,769 3,207,380 8,725
2016 2,554,369 5,997 3,246,972 9,106
2017 2,642,949 6,095 3,489,560 9,295
2018 2,635,760 6,146 3,576,655 9,586
2019 2,651,311 6,237 3,465,555 9,977
Source: California Department of Tax and Fee Administration, "Taxable Sales in California"
A-6
4129-6022-6339.5
i
I
A seven-year history of taxable transactions by type of business for the City are shown in the
tables below.
CITY OF HUNTINGTON BEACH
Taxable Transactions by Type of Business
(in Thousands)
2013-2015
Retail and Food Services 2013 2014 2015
Clothing and Clothing Accessories Stores $ 132,820 $ 133,527 $ 137,002
General Merchandise Stores 300,820 303,646 307,010
Food&Beverage Stores 172,131 175,499 179,964
Food Services and Drinking Places 377,360 402,998 427,287
Home Furnishings and Appliance Stores 188,396 157,622 192,010
Bldg. Material&Garden Equip. & Supplies 147,573 153,404 158,232
Motor Vehicles and Parts Dealers 514,669 567,216 613,888
Gasoline Stations 245,807 242,706 209,073
Other Retail Group 262,886 272,133 277,975
Total Retail and Food Services $2,342,462 $2,408,750 $2,502,440
All Other Outlets 627,018 702,792 704,940
Total All Outlets $2,969,480 $3,111,543 $3,207,380
Source: California Department of Tax and Fee Administration, "Taxable Sales in California"
CITY OF HUNTINGTON BEACH
Taxable Transactions by Type of Business
(in Thousands)
2016-2019
Retail and Food Services 2016 2017 2018 2019
Motor Vehicles and Parts Dealers $ 630,858 $ 673,889 $ 648,412 $ 664,052
Home Furnishings and Appliance Stores 193,813 174,172 143,410 134,192
Bldg. Material&Garden Equip. & Supplies 164,331 165,303 166,074 168,243
Food&Beverage Stores 183,992 187,099 194,418 197,616
Gasoline Stations 182,175 199,801 221,463 223,313
Clothing and Clothing Accessories Stores 147,388 155,905 159,043 151,858
General Merchandise Stores 299,854 307,140 312,130 312,815
Food Services and Drinking Places 469,566 501,561 511,876 518,019
Other Retail Group 282,392 278,078 278,934 281,203
Total Retail and Food Services $2,554,369 $2,642,949 $2,635,760 2,651,311
All Other Outlets 692,603 846,610 940,895 814,244
Total All Outlets $3,246,972 $3,489,560 $3,576,655 3,465,555
Source: California Department of Tax and Fee Administration, "Taxable Sales in California"
A-7
4129-6022-6339.5
APPENDIX B
COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY
FOR THE FISCAL YEAR ENDED JUNE 30,2019
B-1
4129-6022-6339.5
i
APPENDIX C
CITY INVESTMENT POLICY
CITY OF HUNTINGTON BEACH
STATEMENT OF INVESTMENT POLICY
2020
TABLE OF CONTENTS
Section
1.0 Purpose......................................................................................................................................2
2.0 Policy.........................................................................................................................................2
3.0 Scope.........................................................................................................................................2
3.1 Funds.........................................................................................................................................2
4.0 Prudence....................................................................................................................................3
5.0 Objective...................................................................................................................................3
5.1 Safety.........................................................................................................................................3
5.2 Liquidity....................................................................................................................................3
5.3 Return on Investments...............................................................................................................3
6.0 Investment Advisory Board.......................................................................................................3
7.0 Delegation of Authority.............................................................................................................4
8.0 Ethics and Conflicts of Interest.................................................................................................4
9.0 Authorized Financial Dealers& Institutions.............................................................................4
10.0 Authorized& Suitable Investments...........................................................................................5
10.1 Investment Pools/Money Market Funds....................................................................................9
11.0 Portfolio Adjustments................................................................................................................9
12.0 Collateralization........................................................................................................................9
13.0 Safekeeping and Custody........................................................................................................ 10
14.0 Diversification......................................................................................................................... 10
15.0 Maximum Maturities............................................................................................................... 10
16.0 Internal Control....................................................................................................................... 11
17.0 Performance Standards............................................................................................................ 11
17.1 Market Yield(Benchmark) ..................................................................................................... 11
18.0 Reporting................................................................................................................................. 12
19.0 Investment Policy Adoption.................................................................................................... 13
Glossary...................................................................................................................................................... 14
C-1
4129-6022-6339.5
I
1.0 Purpose:
This policy is intended to provide guidelines for the prudent investment of the City's unexpended
cash balances, and to outline the policies to assist in 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 California
state law and prudent money management.
3.0 Scope:
This investment policy applies to all financial assets as indicated in Section 3.1 below of the City
of Huntington Beach. These funds are accounted for in the City's Comprehensive Annual
Financial Report.
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, the Post-Employment Section 115 Trust
and the Supplemental Pension Trust. The City Treasurer will strive to maintain the level of
investment of this cash(that is not to be utilized for operating cash flow in the next six months),
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
3.1.7 Infrastructure Funds
3.1.8 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.
C-2
4129-6022-6339.5
I
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 care—under 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. The City Treasurer and any
designee of the 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.
5.2 Liquidity:
The investment portfolio will remain sufficiently liquid to enable the City of Huntington Beach to
meet all reasonably anticipated operating requirements 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 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.
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 members may each appoint one Huntington Beach resident to serve on
an Investment Advisory Board for the purpose of advising the City Treasurer and the City
Council on the City's investment program. The Investment Advisory Board will review the
investment portfolio for compliance with the adopted investment policy on a quarterly basis and
will prepare an Annual Report.
C-3
4129-6022-6339.5
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 City funds will be the City
Treasurer and may be delegated to such deputy chosen by the City Treasurer in the absence of the
City Treasurer (as allowable per State of California Government Code § 41006). 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 such qualified providers. The City Treasurer will also require
annual audited financial statements to be on file for each company. 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 feasibly 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 national or state chartered banks, savings
associations, federal associations, credit unions, or federally insured industrial loan companies in
this state selected by the City Treasurer or other official having legal custody of the money; 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.
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 156-1 (Uniform Net Capital Rule).
The institution must have an office in California. The dealer must be experienced in institutional
and public fund trading practices and familiar with the California Government Code as related to
investments appropriate for the City; and, other criteria as may be 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
C-4
4129-6022-6339.5
i
broker, proof of state registration, proof of Financial Industry Regulatory Authority, Inc.
("FINRA") certification and a certification of having read and understood the City's investment
policy and agreeing.to comply with the policy. Capital requirements for registered government
securities brokers and dealers shall meet or exceed the requirements as set forth by the Securities
and Exchange Commission Rule 15c3-1 (Uniform Net Capital Rule). Such companies shall also
have a minimum of five years of operation.
10.0 Authorized and 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 are prohibited:
A. BANKERS ACCEPTANCES, maximum 25% of portfolio (up to 40% with City
Council approval). Maximum term of 180 days.
Banks must have a short term rating of at least Al/P1 and a long-term rating of"A" or
higher as provided by a nationally recognized statistical rating organization ("NRSRO").
No more than 10 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 of 3 years(up to 5 years with City Council approval).
May be issued by a nationally or state-chartered bank, a savings association or a federal
association (as defined by Section 5102 of the Financial Code), a state or federal credit
union, or by a federally-licensed or state-licensed branch of a foreign bank. Issuer must
have a short term rating of A 1/P 1 and a long term rating of"A"or higher as provided by
an NRSRO. No more than 10 percent of the agency's money may be invested in
negotiable certificates of deposit of any one issuer.
C. COMMERCIAL PAPER,maximum 25%of portfolio. Maximum term of 270 days.
Commercial paper must be of"prime" quality of the highest ranking or of the highest
letter and number rating as provided by an 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 an 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.
C-5
4129-6022-6339.5
(B) Has program-wide credit enhancements including, but not limited to,
overcollateralization, letters of credit,or surety bond.
(C) Has commercial paper that is rated"A-I"or higher, or the equivalent, by
an 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.
No more than 10 percent of the agency's money may be invested in Commercial Paper of
any one issuer.
D. BONDS ISSUED BY THE STATE OF CALIFORNIA OR ANY OF THE OTHER
49 UNITED STATES. Maximum term of 5 years.
Bonds must have an "A"rating or higher by an NRSRO. No more than 10 percent of the
agency's money may be invested in state bonds of any one issuer.
E. BONDS ISSUED BY THE CITY OR ANY LOCAL AGENCY WITHIN THE
STATE OF CALIFORNIA. Maximum term of 5 years.
Bonds must have an"A"rating or higher by an NRSRO. No more than 10 percent of the
agency's money may be invested in city or local agency bonds of any one issuer.
F. OBLIGATIONS OF THE UNITED STATES TREASURY. Maximum term of 5
years.
United States Treasury bills, bonds and notes or certificates of indebtedness, 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.
G. U.S. GOVERNMENT AGENCY SECURITIES (FEDERAL AGENCIES).
Maximum term of 5 years.
Obligations, participations or other instruments of or issued by a federal agency or a
United States government-sponsored enterprise. There is no limit on the percentage of
the portfolio that can be invested in this category.
H. REPURCHASE AGREEMENT. Maximum term of 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.
1. 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:
C-6
4129-6022-6339.5
(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.
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 be 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:
(i) 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.
J. MEDIUM-TERM CORPORATE NOTES, maximum 30% of portfolio with a
maximum remaining maturity of 5 years or less.
Notes eligible for investment must be rated "A" or higher by an NRSRO. No more than
10 percent of the agency's money may be invested in medium-term corporate notes of
any one issuer.
I
I
C-7
4129-6022-6339.5
K. TIME DEPOSITS-CERTIFICATES OF DEPOSIT (non-negotiable certificates of
deposit). Maximum term of 3 years.
Deposits must be made with banks or savings& loan that have a short term rating of
Al/PI or a long-term rating of at least an "A" rating or higher by an NRSRO. No more
than 10 percent of the agency's money may be invested in time-deposits of any one
issuer.
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 U.S. 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 at least two NRSROs, 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).
LAIF is a special fund of the California State Treasury through which any local
government may pool investments. The City may invest up to the maximum allowable
by the State Treasurer's Office (currently $75,000,000). Investments in LAIF are highly
liquid and may be converted to cash within 24 hours.
N. Shares of beneficial interest issued by a joint powers authority organized pursuant to
Section 6509.7 that invests in the securities and obligations authorized in subdivisions (a)
to (q), inclusive. Each share shall represent an equal proportional interest in the
underlying pool of securities owned by the joint powers authority. The City may invest
up to $20,000,000 per joint powers authority. To be eligible under this section, the joint
powers authority issuing the shares shall have retained an investment adviser that meets
all of the following criteria:
(1) The adviser is registered or exempt from registration with the Securities and
Exchange Commission.
(2) The adviser has not less than five years of experience investing in the securities
and obligations authorized in subdivisions(a)to(q), inclusive.
(3) The adviser has assets under management in excess of five hundred million
dollars($500,000,000).
O. United States dollar denominated senior unsecured unsubordinated obligations issued or
unconditionally guaranteed by the International Bank for Reconstruction and
Development (IBRD), International Finance Corporation (IFC), or Inter-American
Development Bank(IDB), with a maximum remaining maturity of five years or less, and
eligible for purchase and sale within the United States. Investments under this
subdivision shall be rated "AA" or better by an NRSRO and shall not exceed 10 percent
of the agency's moneys that may be invested pursuant to this section.
C-8
4129-6022-6339.5
Maximum Specified%of Minimum Quality
Investment Type Maximum Maturity Portfolio per Issuer Requirements
Bankers'Acceptances 180 days 25%(up to 40%with A1/P1,"A"Rating
Council approval)/10%
Negotiable Certificates of Deposit 3 years(up to 5 years 300/o/10% Al/P1,"A"Rating
with Council approval)
Commercial Paper 270 days 25%/10% AL"A"Rating
State Obligations—CA and Others 5 years None/10% "A"Rating
City/Local Agency of CA Obligations 5 years None/10% "A"Rating
U.S.Treasury Obligations 5 years None None
U.S.Government Agency Obligations 5 years None None
IBRD,IFC,IADB 5 years 10% "AA"Rating
Repurchase Agreements 3 Months None None
Reverse Repurchase Agreements 92 days 20%of the base value of the None
portfolio. Requires City
Council Approval
Medium-Tenn Corporate Notes 5 years 300/o/10% "A"Rating
Non-negotiable Certificates of Deposit 3 years None/ 10% A1/P1,"A"Rating
Money Market Mutual Funds 60 days 15%/10% "AAA"Rating
Local Agency Investment Fund(LAIF) N/A Up to$75,000,000 None
Joint Powers Authority N/A None/$20,000.000 See 10.0 N above
10.1 Investment Pools/Money Market Funds:
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:
California government code Section 53601 states that if a percentage limitation for a particular
category of investment is specified, then that percentage is applicable only at the date of
purchase. Should any investment listed in Section 10.0 exceed a percentage-of-portfolio
limitation or a percentage-by-issuer 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 may consider reconstructing the portfolio basing his/her decision on the expected
length of time the portfolio will be unbalanced. As well, the credit criteria listed herein refers to
the credit rating at the time the security is purchased. If a security held in the portfolio is
downgraded by an NRSRO to a level below the quality required by this investment policy, the
City Treasurer will review the credit and make a determination as to whether to sell or retain such
security. The City Treasurer will review the portfolio for such compliance no less than quarterly.
12.0 Collateralization:
Under provisions of the California Government Code, California banks, and other depository
institutions 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.
C-9
4129-6022-6339.5
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 mitigate incurring unreasonable and
avoidable risks associated with concentrating investments in specific security types, maturity
segment,or in individual financial institutions.
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 as much as possible in conjunction with major cash outflows, thus
minimizing 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
C-10
4129-6022-6339.5
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 50% of its investment portfolio to be invested in securities with
maturities over four years.
16.0 Internal Control:
The City Treasurer and the Finance Department 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. Treasury Manager
3. Chief Financial Officer
4. Accounting 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 objectives of preservation of principal,
liquidity, and return, and its relevance to current law and financial and economic trends.
The moneys entrusted to the City Treasurer will be primarily a passively managed portfolio.
However, the City Treasurer will make best efforts to observe, review, and react to changing
conditions that affect the portfolio.
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 primarily a `hold-to-maturity' premise, 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 12-month moving average of the interpolated 1.5-
Year Constant Maturity Treasury (CMT) rate. This interpolated rate shall be utilized in order to
best match the average duration of the portfolio. However, since return on investment is the least
C-11
4129-6022-6339.5
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. 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.
18.0 Reporting:
The City Treasurer shall submit a quarterly report to the City Council, City Manager, Chief
Financial Officer 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(GASB)#40:
18.1 Type of investment
18.2. Institution/Issuer
18.3 Purchase Date
18.4 Date of maturity
18.5 Amount of deposit or cost of the investment
18.6 Face value of the investment
18.7 Current market value of securities and source of valuation
18.8 Rate of interest
18.9 Interest earnings
18.10 Statement relating the report to its compliance with the Statement of Investment Policy or
the manner in which the portfolio is not in compliance
18.11 Statement on availability of funds to meet the next six month's obligations
18.12 Monthly and Year to date City Treasurer Budget Amounts for Interest Income
18.13 Percentage of Portfolio by Investment Type
18.14 Days to Maturity for all Investments
18.15 Comparative report on Monthly Investment Balances &Interest Yields
18.16 Monthly transactions
This 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
C-12
4129-6022-6339.5
i
I
report. The City Treasurer shall submit to the City Council, City Manager and Chief Financial
Officer a monthly report listing the above stated(18.1 — 18.16)financial transactions.
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
year.
C-13
4129-6022-6339.5
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. 0.0 1%)
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/she 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 Generally Accepted Accounting Principles. 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/her own account.
DEBENTURE: An unsecured bond backed 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
C-14
4129-6022-6339.5
i
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).
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 is considered to be at a
discount.
i
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 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
approximately 38 percent of the 8,039 commercial banks in the United States are members of the Federal
Reserve System. National banks must be members; state-chartered banks may join if they meet certain
requirements.
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 a reasonable size can be done at those quotes.
LOCAL GOVERNMENT INVESTMENT POOL (LGIP): 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 presumably be purchased or sold.
I
C-15
4129-6022-6339.5
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.
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION ("NRSRO"): Firms
that review and assess the creditworthiness of an obligor as an entity or with respect to specific securities
or money market instruments and express their opinion in the form of a letter rating. A credit rating
agency may apply to the SEC for registration as a nationally recognized statistical rating organization
("NRSRO"). The primary rating agencies are Standard& Poor's Corporation, Moody's Investor
Services, Inc. and Fitch,Inc.
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.
C-16
4129-6022-6339.5
I
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.
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.
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 156-1: 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.
SUPRANATIONAL SECURITIES: United States dollar denominated senior unsecured
unsubordinated obligations issued or unconditionally guaranteed by the International Bank for
Reconstruction and Development (IBRD), International Finance Corporation (IFC), or Inter-American
Development Bank (IDB), with a maximum remaining maturity of five years or less, and eligible for
purchase and sale within the United States. Investments under this subdivision shall be rated "AA" or
better by an NRSRO and shall not exceed 10 percent of the agency's moneys that may be invested
pursuant to this section.
TREASURY BILLS: A non-interest bearing discount security issued by the U.S.Treasury to finance the
national debt. Most bills are issued to mature in three months, six months, or one year.
TREASURY BOND: Long-term U.S. Treasury securities having initial maturities of more than 10
years.
TREASURY NOTES: Intermediate-term coupon bearing U.S.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
C-17
4129-6022-6339.5
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.
C-18
4129-6022-6339.5
i
APPENDIX D
SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS
I
D-1
4129-6022-6339.5
APPENDIX E
PROPOSED FORM OF BOND COUNSEL OPINION
Upon delivery of the Series 2020 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 2020 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,2020 Series A(Tax-Exempt)and
Lease Revenue Refunding Bonds.2020 Series B (Federally Taxable)
(Final Opinion)
Ladies and Gentlemen:
We have acted as bond counsel to the Huntington Beach Public Financing Authority (the
"Authority") in connection with issuance of $ aggregate principal amount of Huntington
Beach Public Financing Authority (Orange County, California) Lease Revenue Refunding Bonds, 2020
Series A (Tax-Exempt) (the "Series 2020A Bonds"), and $ aggregate principal amount of
Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2020 Series B
(Federally Taxable) (the "Series 2020B Bonds" and together with the Series 2020A Bonds, the "Series
2020 Bonds"), issued pursuant to the Master Indenture, dated as of August 1, 2020 (the "Indenture"), by
and among the Authority,the City of Huntington Beach(the"City")and U.S. Bank National Association,
as trustee (the "Trustee"). Capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Indenture.
In such connection, we have reviewed the Indenture,the Master Site Lease, dated as of August 1,
2020 (the "Site Lease"), by and between the City and the Authority, the Master Lease Agreement, dated
as of August 1, 2020 (the "Lease Agreement"), by and between the City and the Authority, the Tax
Certificate of the Authority, dated the date hereof(the "Tax Certificate"), relating to the Series 2020A
Bonds, 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 original delivery of the Series 2020 Bonds
on 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 original
delivery of the Series 2020 Bonds on the date hereof. Accordingly, this letter speaks only as of its date
and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions,
events or matters. Our engagement with respect to the Series 2020 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.
E-1
4129-6022-6339.5
I
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 Site Lease, the Lease Agreement, the Indenture and the Tax Certificate,
including (without limitation) covenants and agreements compliance with which is necessary to assure
that future actions, omissions or events will not cause interest on the Series 2020A 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 2020 Bonds, the Site
Lease,the Lease Agreement,the Indenture and the Tax Certificate and their enforceability may be subject
to bankruptcy, insolvency, receivership, 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 charter cities in the State of California. We express no opinion with respect to any
indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute or
having the effect of a penalty), right of set-off, arbitration, judicial reference, choice of law, choice of
forum, choice of venue, non-exclusivity of remedies, 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 as
subject to the lien of the Indenture or the accuracy or sufficiency of the description contained therein of,
or the remedies available to enforce liens on, any such property. Our services did not include financial or
other non-legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness
of the Official Statement or other offering material relating to the Series 2020 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 2020 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 Site Lease, the Lease Agreement and the Indenture have been duly executed and
delivered by,and constitute valid and binding obligations of,the Authority.
3. The Site Lease, the Lease Agreement and the Indenture have been duly executed and
delivered by,and constitute valid and binding obligations of,the City.
4. Interest on the Series 2020A Bonds is excluded from gross income for federal income tax
purposes under Section 103 of the Internal Revenue Code of 1986. Interest on the Series 2020A Bonds is
not a specific preference item for purposes of the federal alternative minimum tax. Interest on the Series
2020 Bonds is exempt from State of California personal income taxes. We express no opinion regarding
other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of
interest on,the Series 2020 Bonds.
Faithfully yours,
ORRICK, HERRINGTON & SUTCLIFFE LLP
per
E-2
4129-6022-6339.5
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,2020 Series A(Tax-Exempt)and
Lease Revenue Refunding Bonds,2020 Series B(Federally Taxable)
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, a master indenture, dated as of August 1, 2020 (the "Indenture"), by and
among the City of Huntington Beach (the "City"), the Authority and U.S. Bank National Association, as
trustee(the"Trustee"). 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 (Series 2020A Bonds) 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 U.S. Bank National Association, or any successor
Dissemination Agent designated in writing by the City and which has filed with the City a written
acceptance of such designation.
"Financial Obligation" shall mean, for the purposes of the Listed Events set out in
Section 5(a)(10) and 5(b)(8), a (i)debt obligation; (ii)derivative instrument entered into in connection
with, or pledged as security or a source of payment for, an existing or planned debt obligation; or
(iii)guarantee of(i) or (ii). The term "Financial Obligation' shall not include municipal securities (as
defined in the Securities Exchange Act of 1934, as amended) as to which a final official statement (as
defined in the Rule)has been provided to the MSRB consistent with the Rule.
"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.
F-1
4129-6022-6339.5
"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.
"Official Statement"shall mean the Official Statement, dated July_,2020 (including all exhibits
or appendices thereto),relating to the offer and sale of Bonds.
"Participating Underwriters (Series 2020 Bonds)" 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 April 1 of each year, so long as the City's fiscal year ends
on June 30), commencing with the report for the 2019-20 fiscal year(which is due not later than April 1,
2021), provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of
this Disclosure Certificate. The Annual Report must be submitted in electronic format, accompanied by
such identifying information as is prescribed by the MSRB, and 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 the date specified in subsection(a), 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 to the MSRB 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.
F-2
4129-6022-6339.5
I
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) General Fund 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
(ix) 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 Plan—
CalPERS" [(including the table entitled "Schedule of Funding Progress and including the Total Pension
Liability, Fiduciary Net Assets, and Net Pension Liability)], "—Retirement Plan—Supplemental," and "—
Other Post-Employment Benefits(OPEB)."
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. Adverse tax opinions or 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;
F-3
4129-6022-6339.5
7. Defeasances;
8. Rating changes;or
9. Bankruptcy, insolvency, receivership or similar event of the obligated person.
10. Default, event of acceleration, termination event, modification of terms, or other
similar events under the terms of a Financial Obligation of the City, any of which reflect financial
difficulties.
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 the City
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 City, 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 City.
(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), 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;
7. Appointment of a successor or additional trustee or the change of name of a
trustee; or
8. Incurrence of a Financial Obligation of the City, or agreement to covenants,
events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the
City,any of which affect Bond holders.
F-4
4129-6022-6339.5
(c) The City shall give, or cause to be given, in a timely manner, notice of a failure to
provide the annual financial information on or before the date specified in Section 3 hereof, as provided in
Section 3(b)hereof
(d) Upon the occurrence of a Listed Event described in Section 5(a), or upon the occurrence
of a Listed Event described in Section 5(b) which the City 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 subsection(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.
(e) The City intends to comply with the Listed Events described in subsection(a)(10) and
subsection(b)(8), and the definition of"Financial Obligation" in Section 2, with reference to the Rule,
any other applicable federal securities laws and the guidance provided by the Securities and Exchange
Commission in Release No. 34-83885, dated August 20, 2018 (the "2018 Release"), and any further
amendments or written guidance provided by the Securities and Exchange Commission or its staff with
respect to the amendments to the Rule effected by the 2018 Release.
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, and any information that the Dissemination
Agent may be instructed to file with the MSRB shall be prepared and provided to it by the City. The
initial Dissemination Agent shall be U.S. Bank National Association
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, 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
F-5
4129-6022-6339.5
I
(c) The proposed amendment or waiver either (i) is approved by the Holders in the same
manner as provided in the Indenture for amendments to the Indenture with the consent of Holders, or(ii)
does, 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 Infonnation. 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. A default under this
Disclosure Certificate shall not be deemed an event of default under the Indenture or under the Lease
Agreement,and 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.
SECTION 12. Duties, Immunities and Liabilities of Trustee and Dissemination Ayent.
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, cost,claim, suit,judgment, damages 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 and expenses) 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
F-6
4129-6022-6339.5
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 (Series 2020 Bonds) and Holders and
Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.
SECTION 14. Governing Law. This Disclosure Certificate shall be construed in accordance
with and governed by the laws of the State of California applicable to contracts made and performed in
the State of California.
Date:August_,2020
CITY OF HUNTINGTON BEACH
By:
Chief Financial Officer
AGREED AND ACKNOWLEDGED:
U.S. BANK NATIONAL ASSOCIATION, as
Dissemination Agent
By:
Authorized Officer
F-7
4129-6022-6339.5
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,2020 Series A(Tax-Exempt)and
Lease Revenue Refunding Bonds,2020 Series B (Federally Taxable)
Date of Issuance: August 12020
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:
F-8
4129-6022-6339.5
APPENDIX G
BOOK-ENTRY ONLY SYSTEM
The description that follows of the procedures and recordkeeping with respect to beneficial
ownership interests in the Series 2020 Bonds, payment of principal of and interest on the Series 2020
Bonds to Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests
in the Series 2020 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
Series 2020 Bonds (the "Securities"). The Securities 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 Securities, 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"). DTC has a Standard &
Poor's rating of AA+. 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. The information
on such website is not incorporated herein by such reference or otherwise.
Purchases of Securities under the DTC system must be made by or through Direct Participants,
which will receive a credit for the Securities on DTC's records. The ownership interest of each actual
purchaser of each Security ("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
Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Securities, except in the event that use of the book-entry system for the Securities is
discontinued.
G-1
4129-6022-6339.5
i
To facilitate subsequent transfers, all Securities 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 Securities 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 Securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts such Securities 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.
I
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 Securities may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the
Securities, such as redemptions, tenders, defaults, and proposed amendments to the Indenture and the
Lease Agreement. For example, Beneficial Owners of Securities may wish to ascertain that the nominee
holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In
the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and
request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are
being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
Securities 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 Securities are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Redemption proceeds, distributions, and dividend payments on the Securities 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,the Authority or the City, 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, the City 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 Securities at any
time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event
that a successor depository is not obtained, Security certificates 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, Security certificates will be printed and delivered to
DTC.
The City,the Authority and the Underwriter 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
G-2
4129-6022-6339.5
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 Underwriter 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.
G-3
4129-6022-6339.5