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Adopt Resolution No. 2020-52 Authorizing the Execution and D
City of Huntington Beach SUP/'LE�'IQu7�1, File #: 20-1763 MEETING DATE: 7/20/2020 REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Oliver Chi, City Manager PREPARED BY: Dahle Bulosan, Chief Financial Officer Subject: Adopt Resolution No. 2020-52 authorizing the execution and delivery by the City of a Master Site Lease, Master Lease Agreement, Master Indenture, Bond Purchase Agreement, Continuing Disclosure Certificate, 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: City Council authorization is requested 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. Recommended Action: A) Adopt Resolution No. 2020-52, "A Resolution of the City Council of the City of Huntington Beach Authorizing the Execution and Delivery by the City of a Master Site Lease, A Master Lease Agreement, A Master Indenture, A Bond Purchase Agreement, A Continuing Disclosure Certificate, 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;" City of Huntington Beach Page 1 of 4 Printed on 7/17/2020 -"Legistar— File #: 20-1763 MEETING DATE: 7/20/2020 and, B) Authorize the City Manager and City Clerk to take all administrative and budgetary actions necessary to perform the bond refunding. Alternative Action(s): Do not approve the recommended action 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 Driginal Amount Economic urrent Refunding ssuance Currently 3enefit of verage -oupon mount Outstanding Refinancing oupon Rate Rate 2010 Lease Revenue 14,745,000 7,410,000 2,085,300 .0% 1.0% 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. City of Huntington Beach Page 2 of 4 Printed on 7/17/2020 powereVA LegistarTP File #: 20-1763 MEETING DATE: 7/20/2020 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. 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 City Council for approval. Environmental Status: Not applicable. Strategic Plan Goal: Strengthen long-term financial and economic sustainability Attachment(s): 1. Resolution No. 2020-52 "A Resolution of the City Council of the City of Huntington Beach Authorizing the Execution and Delivery by the City of a Master Site Lease, A Master Lease Agreement, A Master Indenture, A Bond Purchase Agreement, A Continuing Disclosure Certificate, 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 City of Huntington Beach Page 3 of 4 Printed on 7/17/2020 powered LegistarW File #: 20-1763 MEETING DATE: 7/20/2020 4. Master Indenture 5. Bond Purchase Agreement 6. Continuing Disclosure Certificate 7. Second Amendment to Site Lease 8. Second Amendment to Lease Agreement 9. Preliminary Official Statement City of Huntington Beach Page 4 of 4 Printed on 7/17/2020 powerAO7y LegistarTM City Council/ ACTION AGENDA July 20, 2020 Public Financing Authority Ordinance No. 4216, "An Ordinance of the City Council of the City of Huntington Beach Amending Chapter 230 of the Huntington Beach Zoning and Subdivision Ordinance Titled Site Standards (Zoning Text Amendment No. 19-005);" and, Ordinance No. 4213, "An Ordinance of the City Council of the City of Huntington Beach Amending Title 5 of the Huntington Beach Municipal Code Titled Business Licenses and Regulations;" (Attachment Nos. 2 - 6). Approved 7-0 ADMINISTRATIVE ITEMS 17. 20-1746 Approved the Revised Master Plan for the Redevelopment of the Rodgers Seniors' Center Site and directed staff to complete the design process and issue a bid package for construction Recommended Action: Approve the revised Rodgers Seniors' Center Site Master Plan, as included in Attachment 3, and direct staff to complete the design process and issue a bid package for construction. Approved 7-0 18. 20-1763 Adopted Resolution No. 2020-52 authorizing the execution and by the City of a Master Site Lease, Master Lease Agreement, Master Indenture, Bond Purchase Agreement, Continuing Disclosure Certificate, 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. 2020-52, "A Resolution of the City Council of the City of Huntington Beach Authorizing the Execution and Delivery by the City of a Master Site Lease, A Master Lease Agreement, A Master Indenture, A Bond Purchase Agreement, A Continuing Disclosure Certificate, 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 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 i 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--thori_e and- rlirert the riff. Manan er to execute G FOUnd Lease Agreement, a fArm aroved b the City Attorney, to pp y y y� lease real Property lerated at 17647 Beenh Blvd by and between the City Yarna a Living jinn Trust and MitSUFU Yamada TFustee of the MitSUFU Yamada Living iing TFUst•f AppFeve allonation of funds necessary to lease the e ATTAC H M E N T # 1 RESOLUTION NO. 2020-52 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH AUTHORIZING THE EXECUTION AND DELIVERY BY THE CITY OF A MASTER SITE LEASE, A MASTER LEASE AGREEMENT, A MASTER INDENTURE, A BOND PURCHASE AGREEMENT, A CONTINUING DISCLOSURE CERTIFICATE, 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 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 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 2011 A Bonds" and, together with the Prior 2010A Bonds, the "Prior Bonds"), pursuant to an Indenture, dated as of September 1, 2011, as heretofore amended and supplemented (the "2011 Indenture"), by and among the Authority, the City and U.S. Bank 4142-2382-8516.4 RESOLUTION NO. 2020-52 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 Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 ("Rule 15c2-12") requires that,in order to be able to purchase or sell the Series 2020 Bonds,the underwriters thereof must have reasonably determined that the City has undertaken in a written agreement or contract for the benefit of the holders of the Series 2020 Bonds to provide disclosure of certain financial information and certain enumerated events on an ongoing basis; and In order to cause such requirement to be satisfied, the City desires to execute a Continuing Disclosure Certificate (the "Continuing Disclosure Certificate"); 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 the Projects are located within the boundaries of the City; and 2 4142-2382-8516.4 RESOLUTION NO. 2020-52 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 City Council of the City (the "City Council") 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 City Council 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 City 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 City Council has been presented with the form of each document referred to herein relating to the actions contemplated hereby,and the City Council 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 4142-2382-8516.4 RESOLUTION NO. 2020-52 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 City 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, the City Council of the City of Huntington Beach does hereby resolve, determine and order as follows: Section 1. All of the recitals herein contained are true and correct and the City Council so finds. Section 2. The City Council, on behalf of the City,hereby finds that the use of the Act to assist the City in refinancing the Projects will result in significant public benefits to the citizens of the City because it is expected that such use will provide demonstrable savings in effective interest rate costs. Section 3. The form of the Site Lease, submitted to and on file with the City Clerk of the City, is hereby approved,and the Mayor of the City,and such other member of the City Council as the Mayor may designate,the City Manager,the Assistant City Manager and the Chief Financial Officer of the City, and such other officers of the City as the City Manager may designate (collectively, the "Authorized Officers"), are each hereby authorized and directed, for and in the name and on behalf of the City, 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 4. The form of the Lease Agreement, submitted to and on file with the City Clerk of the City, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the City,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 5. The form of the Indenture, submitted to and on file with the City Clerk of the City, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the City,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 4 4142-2382-8516.4 RESOLUTION NO. 2020-52 service savings shall not be less than 3.00% of the aggregate principal amount of the Prior Bonds to be refunded. Section 6. The issuance of not to exceed $21,000,000 aggregate principal amount of Series 2020 Bonds, in one or more series and on a tax-exempt or taxable basis, with such series designations, in the principal amounts, bearing interest at the rates and maturing on the dates as specified in the Indenture as finally executed, is hereby approved. Section 7. The form of the Bond Purchase Agreement, submitted to and on file with the City Clerk of the City, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the City, 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 8. The form of Continuing Disclosure Certificate, submitted to and on file with the City Clerk of the City, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Continuing Disclosure Certificate 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 City Clerk of the City, 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 City that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 (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 City Council of a revised draft of the Preliminary Official Statement with accompanying directions and instructions to members of the City Council 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 City, to execute the final Official Statement 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. 5 4142-2382-8516.4 RESOLUTION NO. 2020-52 Section 11. The City Council hereby authorizes the substitution of the Library for the 2011 Property currently subj ect to the 2011 Lease Agreement pursuant to Section 7.02 of the 2011 Lease Agreement. Section 12. The form of Second Amendment to Site Lease, submitted to and on file with the City Clerk of the City, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the City, 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 Second Amendment to Lease Agreement, submitted to and on file with the City Clerk of the City, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the City, 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. Section 15. All actions heretofore taken by the officers, employees and agents of the City with respect to the transactions set forth above are hereby approved, confirmed and ratified. 6 4142-2382-8516.4 RESOLUTION NO. 2020-52 Section 16. This Resolution shall take effect from and after its date of adoption. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 20th day of Ju1L, 2020 ayor NIEWED AND PPROVED: INITIATED AND APPROVED: it ager Chief Financial Officer APPROVED AS TO FORM: ('c-� City A ,:f rney 7 4142-2382-8516.4 RESOLUTION NO. 2020-52 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 4142-2382-8516.4 RESOLUTION NO. 2020-52 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 4142-2382-8516.4 Res. No. 2020-52 STATE OF CALIFORNIA COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) I, ROBIN ESTANISLAU, the duly elected, qualified City Clerk of the City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach 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 City Council at a Regular meeting thereof held on July 20, 2020 by the following vote,: AYES: Posey, Delgleize, Hardy, Semeta, Peterson, Carr, Brenden NOES: None ABSENT: None RECUSE: None City Clerk and ex-officio Clerk of the City Council of the City of Huntington Beach, California ATTAC H M E N T #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 ] 1, 2020 4162-0786-5380.3 417 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 4]62-0786-5380.3 418 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 4162-0786-5380.3 419 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 4162-0786-5380.3 420 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 4162-0786-5380.3 421 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_1, 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 4162-0786-5380.3 422 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 4162-0786-5380.3 423 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-1 424 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] 4162-0786-5380.3 425 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] 4162-0786-5380.3 426 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: 4162-0786-5380.3 427 ATTACHMENT #3 MASTER LEASE AGREEMENT by and between CITY OF HUNTINGTON BEACH and HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY Dated as of ( ] 11 2020 4149-0022-5572.4 428 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS.................................................................................................3 Section 1.01. Definitions............................................................................................3 ARTICLE II LEASE OF PROPERTY; TERM....................................................................5 Section 2.01. Lease of Property................................................................................. 5 Section 2.02. Term; Occupancy................................................................................. 5 ARTICLE III RENTAL PAYMENTS ...................................................................................6 Section 3.01. Base Rental Payments..........................................................................6 Section 3.02. Additional Rental Payments ................................................................6 Section 3.03. Fair Rental Value................................................................................. 7 Section 3.04. Payment Provisions..............................................................................7 Section 3.05. Appropriations Covenant.....................................................................7 Section 3.06. Rental Abatement.................................................................................7 ARTICLE IV REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENTS...............................................................................................9 Section 4.01. Power and Authority of the City..........................................................9 Section 4.02. Power and Authority of the Authority.................................................9 Section 4.03. Net-Net-Net Lease...............................................................................9 Section 4.04. Disclaimer of Warranties.....................................................................9 Section 4.05. Quiet Enjoyment..................................................................................9 Section 4.06. Right of Entry......................................................................................9 Section 4.07. Use of the Property..............................................................................9 Section 4.08. Maintenance and Utilities.................................................................. 10 Section 4.09. Additions to Property......................................................................... 10 Section 4.10. Installation of City's Equipment........................................................ 10 Section4.11. Taxes.................................................................................................. 10 Section4.12. Liens................................................................................................... 11 Section 4.13. Compliance with Law, Regulations, Etc............................................ 11 Section 4.14. No Condemnation.............................................................................. 11 Section 4.15. Authority's Purpose........................................................................... 11 ARTICLEV INSURANCE................................................................................................. 12 Section 5.01. Public Liability and Property Damage Insurance.............................. 12 Section 5.02. Additional Insurance Provision; Form of Policies............................. 12 i 4149-0022-5572.4 429 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 4149-0022-5572.4 430 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 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 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, 4149-0022-5572.4 431 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$[ 1 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 4149-0022-5572.4 432 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 4149-0022-5572.4 433 "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. 4149-0022-5572.4 434 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 4149-0022-5572.4 435 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 4149-0022-5572.4 436 (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 4149-0022-5572.4 437 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 4149-0022-5572.4 438 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 4149-0022-5572.4 439 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 4149-0022-5572.4 440 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 4149-0022-5572.4 441 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 4149-0022-5572.4 442 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 4149-0022-5572.4 443 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 4149-0022-5572.4 444 ARTICLE VII ASSIGNMENT AND SUBLETTING; SUBSTITUTION OR RELEASE; TITLE Section 7.01. Assignment and Subleasing. Neither this Lease Agreement nor any interest of the City hereunder shall be sold, mortgaged, pledged, assigned, or transferred by the City by voluntary act or by operation of law or otherwise; provided, however, that the Property may be subleased in whole or in part by the City, but only subject to the following conditions, which are hereby made conditions precedent to any such sublease: (a) this Lease Agreement and the obligation of the City to make all Rental Payments hereunder shall remain the primary obligation of the City; (b) the City shall, within 30 days after the delivery thereof, furnish or cause to be furnished to the Authority and the Trustee a true and complete copy of such sublease; (c) no such sublease by the City shall cause the Property to be used for a purpose other than a governmental or proprietary function authorized under the provisions of the Constitution and laws of the State of California; (d) any sublease of the Property by the City shall explicitly provide that such sublease is subject to all rights of the Authority under this Lease Agreement, including,the right to re-enter and re-let the Property or terminate this Lease Agreement upon a default by the City; and (e) the City shall have filed or caused to be filed with the Authority and the Trustee an Opinion of Counsel to the effect that such sublease will not, in and of itself, cause the interest on Tax-Exempt Bonds to be included in gross income for federal income tax purposes. Section 7.02. Substitution or Release of the Property. Subject to the provisions of this Section, the City shall have the right to substitute alternate real property for any portion of the Property or to release a portion of the Property from this Lease Agreement. All costs and expenses incurred in connection with any such substitution or release shall be borne by the City. Notwithstanding any substitution or release pursuant to this Section,there shall be no reduction in or abatement of the Base Rental Payments due from the City hereunder as a result of such substitution or release. Any such substitution or release of any portion of the Property shall be subject to the following conditions, which are hereby made conditions precedent to such substitution or release: (a) 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 4149-0022-5572.4 445 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 (_) 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 4149-0022-5572.4 446 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 4149-0022-5572.4 447 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 4149-0022-5572.4 448 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 4149-0022-5572.4 449 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 4149-0022-5572.4 450 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 4149-0022-5572.4 451 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 4149-0022-5572.4 452 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 party to whom it is addressed (a) if given by courier or delivery service or if personally served or delivered, upon delivery, (b)if given by telecopier,upon the sender's receipt of an appropriate answerback or other written acknowledgment, (c) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, or (d) if given by any other means, upon delivery at the address specified in this Section. Section 10.07. Execution in Counterparts. This Lease Agreement may be simultaneously executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. 23 4149-0022-5572.4 453 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 4149-0022-5572.4 454 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] 4149-0022-5572.4 455 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] 4149-0022-5572.4 456 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 4149-0022-5572.4 457 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 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: 4149-0022-5572.4 458 ATTAC H M E N T #4---�j 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 4127-3236-0228.4 459 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; EQUAL SECURITY ............................................................3 Section1.01. Definitions............................................................................................3 Section 1.02. Equal Security.................................................................................... 10 ARTICLE II THE BONDS ................................................................................................. I I Section 2.01. Authorization of Bonds...................................................................... 1 I Section 2.02. Terms of Series 2020 Bonds.............................................................. I 1 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 Section4.05. Reserve Fund .....................................................................................26 Section 4.06. Rebate Fund.......................................................................................28 Section 4.07. Investments........................................................................................29 i 4127-3236-0228.4 460 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 Section 5.07. 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 4127-3236-0228.4 461 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 4127-3236-0228.4 462 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 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 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 4127-3236-0228.4 463 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 4127-3236-0228.4 464 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 4127-3236-0228.4 465 "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 41 27-3236-0228.4 466 "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 1 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 4127-3236-0228.4 467 "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 4127-3236-0228.4 468 "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 4127-3236-0228.4 469 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 4127-3236-0228.4 470 "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 4127-3236-0228.4 471 "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 4127-3236-0228.4 472 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 4127-3236-0228.4 473 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 $[ ], except as may be otherwise provided in Section 2.11 hereof. (b) The Series 2020B Bonds shall be issued in fully registered form without coupons in Authorized Denominations. The Series 2020B Bonds shall be dated as of the Closing Date, shall be in the aggregate principal amount of$[ ], 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: 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 4127-3236-0228.4 474 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 2011 A 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 4127-3236-0228.4 475 (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; (ill) 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 l; (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 4127-3236-0228.4 476 (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 4127-3236-0228.4 477 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 4127-3236-0228.4 478 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 4127-3236-0228.4 479 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 4127-3236-0228.4 480 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 4127-3236-0228.4 481 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 4127-3236-0228.4 482 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 4127-3236-0228.4 483 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 4127-3236-0228.4 484 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 4127-3236-0228.4 485 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 4127-3236-0228.4 486 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 4127-3236-0228.4 487 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 4127-3236-0228.4 488 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 4127-3236-0228.4 489 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 4127-3236-0228.4 490 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 4127-3236-0228.4 491 (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 4127-3236-0228.4 492 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 4127-3236-0228.4 493 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 4127-3236-0228.4 494 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 4127-3236-0228.4 495 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 4127-3236-0228.4 496 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 4127-3236-0228.4 497 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 4127-3236-0228.4 498 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 4127-3236-0228.4 499 (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 4127-3236-0228.4 500 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 4127-3236-0228.4 501 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 4127-3236-0228.4 502 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 4127-3236-0228.4 503 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 4127-3236-0228.4 504 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 4127-3236-0228.4 505 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 4127-3236-0228.4 506 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 4127-3236-0228.4 507 (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 4127-3236-0228.4 508 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 4127-3236-0228.4 509 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 4127-3236-0228.4 510 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 4127-3236-0228.4 511 ARTICLE X MISCELLANEOUS Section 10.01. Benefits of Indenture Limited to Parties. Nothing contained herein, expressed or implied, is intended to give to any Person other than the Authority, the City, the Trustee and the Owners any claim, remedy or right under or pursuant hereto, and any agreement, condition, covenant or term required herein to be observed or performed by or on behalf of the Authority or the City shall be for the sole and exclusive benefit of the Trustee and the Owners. Section 10.02. Successor Deemed Included in all References to Predecessor. Whenever the Authority, the City or the Trustee, or any officer thereof, is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the Authority, the City or the Trustee, or such officer, and all agreements, conditions, covenants and terms required hereby to be observed or performed by or on behalf of the Authority, the City or the Trustee, or any officer thereof, shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. Section 10.03. Execution of Documents by Owners. Any declaration, request or other instrument which is permitted or required herein to be executed by Owners may be in one or more instruments of similar tenor and may be executed by Owners in person or by their attorneys appointed in writing. The fact and date of the execution by any Owner or its attorney of any declaration, request or other instrument or of any writing appointing such attorney may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state or territory in which such notary public or other officer purports to act that the Person signing such declaration, request or other instrument or writing acknowledged to such notary public or other officer the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer, or by such other proof as the Trustee may accept which it may deem sufficient. The ownership of any Bond and the amount,payment date,number and date of owning the same may be proved by the Registration Books. Any declaration, request or other instrument in writing of the Owner of any Bond shall bind all future Owners of such Bond with respect to anything done or suffered to be done by the Authority, the City or the Trustee in good faith and in accordance therewith. Section 10.04. Waiver of Personal Liability. Notwithstanding anything contained herein to the contrary, no member, officer or employee of the Authority or the City shall be individually or personally liable for the payment of any moneys, including without limitation, the principal of or interest on the Bonds, but nothing contained herein shall relieve any member, officer or employee of the Authority or the City from the performance of any official duty provided by any applicable provisions of law, by the Lease Agreement or hereby. Section 10.05. Acquisition of Bonds by Authority or City. All Bonds acquired by the Authority or the City,whether by purchase or gift or otherwise, shall be surrendered to the Trustee for cancellation. 50 4127-3236-0228.4 512 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 4127-3236-0228.4 513 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 4127-3236-0228.4 514 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 4127-3236-0228.4 515 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 1 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-1 4127-3236-0228.4 516 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 4127-3236-0228.4 517 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 4127-3236-0228.4 518 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 4127-3236-0228.4 519 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 4127-3236-0228.4 520 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 4127-3236-0228.4 521 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 4127-3236-0228.4 522 issuer's long-term debt as provided by Moody's, S&P, or Fitch and "P-1", 44A-119, "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 "F1" 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 4127-3236-0228.4 523 (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 4]27-3236-0228.4 524 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 1; (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 4127-3236-0228.4 525 (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 4127-3236-0228.4 526 ATTACHMENT COST OF ISSUANCE FUND DISBURSEMENTS Payee Name and Address Purpose of Obligation Amount C-3 4127-3236-0228.4 527 ATTACHMENT #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- 1 528 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 I 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 (1) 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." 2 529 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 3 530 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 parry 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 party 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 parry 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 4 531 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 "MSRB"). 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 5 532 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, 6 533 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. 7 534 (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 8 535 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 parry 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, 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 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 9 536 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. G) 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). (j) 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 15c2-12, 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 10 537 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 11 538 (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 governmental 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 12 539 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 government 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; 13 540 (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 14 541 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 "UNDERWRITING," CUSIP numbers, prices and yields for the Bonds and any other information 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 party 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; 15 542 (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 the 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 16 543 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 17 544 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; 18 545 (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 & 19 546 Company, Incorporated 515 S. Figueroa Street, Suite 1800 Los Angeles, CA 90071, Attention: John Kim. All notices or communications hereunder by any parry 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] 20 547 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 21 548 EXHIBIT A Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds 2020 Series A (Tax-Exempt) $ Serial Bonds Hold-The- Maturity o Offering- (May 1) Principal Interest 10/o Test Price Rule Amount Rate Yield Price Used Used C Priced to par call on 12020 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-1 549 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. 550 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-1 551 (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 party 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 12020. (h) Underwriter means (i) 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: , 2020 552 SCHEDULE A SALE PRICES OF THE GENERAL RULE MATURITIES [AND INITIAL OFFERING PRICES OF THE HOLD-THE-OFFERING-PRICE MATURITIES] (Attaehec) 553 [SCHEDULE B PRICING WIRE OR EQUIVALENT COMMUNICATION (Attached)] 554 ATTACHMENT #6 CONTINUING DISCLOSURE CERTIFICATE City of Huntington Beach relating to Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, Series 2020 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, 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 2020 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. 4137-2745-9364.2 555 "Listed Events"shall mean any of the events listed in Section 5(a)or(b)of this Disclosure Certificate. "MSRB" shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org. "Official Statement"shall mean the Official Statement, dated 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: 2 4137-2745-9364.2 556 (a) Audited financial statements of the City for the preceding fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board (GASB) and the laws of the State of California and including all statements and information prescribed for inclusion therein by the Controller of the State of California. If the City's audited financial statements are not available by the time the Annual Report is required to be provided to the MSRB pursuant to Section 3(a),the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be provided to the MSRB in the same manner as the Annual Report when they become available. To the extent not included in the audited financial statement of the City,the Annual Report shall also include the following: (i) Summary of Long and Intermediate Term Obligations; (ii) 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 (viii) Investment Portfolio. An update of the financial and operating data contained in the Official Statement under the caption "CITY FINANCIAL INFORMATION—Current Investments." An update of the financial and operating data contained in the Official Statement under the captions "OTHER FINANCIAL INFORMATION—Risk Management," "— Employee Retirement Plan — Ca1PERS" (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. 3 4137-2745-9364.2 557 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; 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: 4 4137-2745-9364.2 558 I. 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. (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. 5 4137-2745-9364.2 559 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 (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. 6 4137-2745-9364.2 560 SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information,using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice required to be filed pursuant to this Disclosure Certificate, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice in addition to that which is specifically required by this Disclosure Certificate,the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event or any other event required to be reported. SECTION 11. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate;provided,that any such action may be instituted only in the Superior Court of the State of California in and for the County of Orange or in U.S. District Court for the Central District of California in or nearest to the County. 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 Agent. Article VII of the Indenture is hereby made applicable to this Disclosure Certificate as if this Disclosure Certificate were (solely for this purpose) contained in the Indenture. The Dissemination Agent shall be entitled to the protections and limitations from liability afforded to the Trustee thereunder. The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent, the Trustee, their officers, directors, employees and agents, harmless against any loss, expense, 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 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 7 4137-2745-9364.2 561 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. 8 4137-2745-9364.2 562 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: , 2020 CITY OF HUNTINGTON BEACH By: AGREED AND ACKNOWLEDGED: U.S. BANK NATIONAL ASSOCIATION, as Dissemination Agent By: Authorized Officer 4137-2745-9364.2 563 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: 92020 NOTICE IS HEREBY GIVEN that the City of Huntington Beach (the "City") has not provided an Annual Report with respect to the above-named Bonds as required by Section 4 of the City's Continuing Disclosure Certificate, dated the Date of Issuance. [The City anticipates that the Annual Report will be filed by ] Dated: CITY OF HUNTINGTON BEACH By: [to be signed only if filed] A-1 4137-2745-9364.2 564 ATTACHMENT #7 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 [ ] 19 2020 4158-7929-2708.2 565 SECOND AMENDMENT TO SITE LEASE THIS SECOND AMENDMENT TO SITE LEASE (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 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 4158-7929-2708.2 566 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 4158-7929-2708.2 567 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 4158-7929-2708.2 568 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 4158-7929-2708.2 569 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] 570 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] 571 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 1: THOSE PORTIONS OF BLOCKS 1901, 1903, 2001 AND 2002 OF TRACT NO. 12, IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP RECORDED IN BOOK 9, PAGE 13 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA, TOGETHER WITH PARK STREET, UNION AVENUE, AND THE ALLEYS IN SAID BLOCKS, AS SHOWN ON SAID MAP AND AS VACATED BY RESOLUTION NO. 3415 OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, A CERTIFIED COPY OF WHICH WAS RECORDED JANUARY 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 891 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 001 19' 06" EAST 155.89 FEET ALONG A LINE PARALLEL TO THE CENTERLINE OF SAID LAKE AVENUE, TO THE CENTERLINE OF SAID SEVENTEENTH STREET; THENCE NORTH 410 38' 23" EAST 134.38 FEET ALONG SAID CENTERLINE OF SAID SEVENTEENTH STREET AND ITS NORTHEASTERLY PROLONGATION TO A POINT ON THE NORTHERLY LINE OF SAID TRACT NO. 12; THENCE NORTH 481 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 001 20' 13" WEST 1266.12 FEET ALONG SAID EASTERLY LINE TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 890 39' 33" EAST 200.89 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING. EXCEPTING THEREFROM THAT PORTION DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET, 60.00 FEET IN WIDTH,AND A LINE PARALLEL WITH AND 840.00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE, 90.00 FEET IN WIDTH, BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 000 19' 06" EAST 358.00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 450 19' 06" EAST 24.04 FEET; THENCE SOUTH 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 001 20' 13" EAST 683.13 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO A LINE PARALLEL WITH AND 208.00 FEET SOUTHERLY OF THE NORTHERLY LINE OF BLOCK 2002 OF SAID TRACT NO. 12; THENCE NORTH 89140' 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. A-1 4158-7929-2708.2 572 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 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 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 890 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 4158-7929-2708.2 573 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 4158-7929-2708.2 574 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 4158-7929-2708.2 575 The above-described property is commonly referred to as the Civic Center located at 1900 Main Street, Huntington Beach, California. A-2 4158-7929-2708.2 576 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 360 13' 50" WEST, 535.78 FEET; THENCE NORTH 0° 12' 15" EAST, 377.82 FEET; THENCE NORTH 830 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 4158-7929-2708.2 577 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: 4158-7929-2708.2 578 ATTAC H ME N T #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 LEASE AGREEMENT by and between CITY OF HUNTINGTON BEACH and HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY Dated as of [ 1 1, 2020 4156-5476-6116.2 579 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 4156-5476-6116.2 580 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 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 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 4156-5476-6116.2 581 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 4156-5476-6116.2 582 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 4156-5476-6116.2 583 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] 584 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] 585 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,UN10N 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 41' 38' 23" EAST 134.38 FEET ALONG SAID CENTERLINE OF SAID SEVENTEENTH STREET AND ITS NORTHEASTERLY PROLONGATION TO A POINT ON THE NORTHERLY LINE OF SAID TRACT NO. 12;THENCE NORTH 48' 21' 17"WEST 474.37 FEET ALONG SAID NORTHERLY TRACT LINE OF TRACT NO. 12; THENCE NORTH 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 4156-5476-6116.2 586 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 4156-5476-6116.2 587 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 DULY 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 4156-5476-6116.2 588 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 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] The above-described property is commonly referred to as the Civic Center located at 1900 Main Street,Huntington Beach, California. A-4 4156-5476-6116.2 589 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 00 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 4156-5476-6116.2 590 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: 4156-5476-6116.2 591 ATTACHMENT #9 d .m d L NI N - V} — C O m C C aq+ O d Gl O 3 E L E E C v�i om L 3 m C 1L u o o c W I O = n n n n _j :) r ca,. � CL e LA 0 m _ tn L 3 U � R � C� GJ OJ C d C N O N _ O 14 0 � O (J N / \ ! Iz § ) ) 1 � \ ( / } \ ■ z ■ _ \ � / 7fLi E - ) f _ © - k ) k § \ k q . � . � . I k j !!c ! !# ) & } ]|) ! !\ 72 \ ƒ)k { )\ $ 75 - « - 2 - E cc m , n. C O 'a+ N N V 'o a n `o `o Q' m a E v v o O V cu E3 0 _ M m di ° d - t a a o V a u to o fD o 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 I (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 2020E 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 1 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. ' Preliminary,subject to change. SUPPLEMENTAL r,C)MM JNiCATION 4129-6022-6339.5 Z�/Lo Z20- OH&S 7/9/20 Draft MATURITY SCHEDULES See Inside Cover Page T14E 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 1 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 Suffix, 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 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 I 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 I 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 Selectionof 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...................................................................................I 1 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—Ca1PERS..................................................................................................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 CONTINUINGDISCLOSURE....................................................................................................................83 ADDITIONAL INFORMATION.................................................................................................................84 APPENDIX A GENERAL,ECONOMIC AND DEMOGRAPHIC INFORMATION RELATINGTO 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 j 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 I (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 I 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 i 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. 4129-6022-6339.5 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 i 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 0) Amounts on deposit under the 2010 Indenture and 2011 Indenture. See"REFUNDING PLAN." (2) See"REFUNDING PLAN." (3) 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/l/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 9/1/2020 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. Preliminary,subject to change. i i 6 4129-6022-6339.5 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 3375 446216 FW8 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 GB3 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 2011 A 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 2011A 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 8 4129-6022-6339.5 i 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. i 10 4129-6022-6339.5 I 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 Pursuant to the Lease Agreement, the City covenants to take such action as may be necessary to include all Rental Payments due under the Lease Agreement in its annual budgets and to make necessary annual appropriations for all such Rental Payments. As provided in the Lease Agreement, such covenants of the City thereunder are deemed to be and will be construed to be duties imposed by law and it will be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform such covenants. California law requires, and the Lease Agreement provides, that Base Rental Payments are required to be abated in whole or in part during any period in which there is substantial interference with the use and occupancy of the Property by the City due to damage, destruction or taking in eminent domain proceedings. Under these circumstances, failure to make any Base Rental Payment will not be an event of default under the Lease Agreement. See "SECURITY 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 I 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. 13 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 I 14 4129-6022-6339.5 I 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 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. I 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 I or November I; (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 I 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 I 16 4129-6022-6339.5 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 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 CalPERS. 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 I i 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 H 5 Trust. Currently, the City is anticipating General Fund revenues at$220.4M 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 $11 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 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 V LOM 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('-) 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-DepartmentalM 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 cu 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. 21 4129-6022-6339.5 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 Resources(�) 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-DepartmentalM -- -- -- -- -- 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 11> 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 24 4129-6022-6339.5 I 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(i) 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. (z� 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 (CalPERS). 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 Ca1PERS ($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 I 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 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 Totalltl 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 <<1 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(i) Collections(2) Amount(3) 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 (1) Excludes refunds and collection charges. ('-) 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. 0) 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 I 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 31282 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 47974 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 11460 2,589 1.396 Total Other Revenues $64,293 $59,409 $44,041 $64,307 $61,315 $55,927 $54,296 01 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 I 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 30 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. 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: i 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 $ 41999 $ 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 0) $ 4,479 -- -- $ 41 $ 23 Restricted«> 2,871 2,637 2,671 6,384 8,154 Committed(1) 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 S 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. 0) Committed includes amounts that can be used only for the specific purposes determined by a fonnal action of the City Council. The City Council has authority to establish,modify,or rescind a fund balance commitment. 141 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. (5) 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 i 34 4129-6022-6339.5 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 201801 2019 REVENUES: Property Taxes $ 82,472 $ 86,382 $ 80,826 $ 8014 $ 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 Permits 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 $215,469 Excess(Deficiency)of Revenues Over(Under)Expenditures 15,917 13,703 3,318 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 0) 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 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 (CalPERS), an agent, which is a multiple-employer public employee defined benefit pension plan. CaIPERS 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 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 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 CalPERS 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 fund'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-pol icy. 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 I 38 4129-6022-6339.5 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 CalPERS 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 Ca1PERS 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 17,127,399 573 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 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. Projected future employer contribution rates are shown based on CalPERS 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 30, 2018, actuarial valuations provided by 40 4129-6022-6339.5 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 CalPERS, 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 CAPERS, effective November 1, 2019. All bargaining units pay 100% of the required employee contributions for CalPERS. "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 CalPERS actuary and shall be effective on the July 1 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 CalPERS 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 CalPERS 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 32.179 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 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 CalPERS 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 ratnp-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 Ca1PERS 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 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, CalPERS 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. 44 4129-6022-6339.5 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 CaIPERS 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 CalPERS 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 CalPERS ($436.2M as of June-3 0, 2018 actuarial valuation report) to refund all or a portion of the City's current UAAL to CalPERS. See "OTHER FINANCIAL INFORMATION-Additional Obligations." Volatility Ratios. As noted in the 2019 CalPERS 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 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 Ca1PERS 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: CaIPERSActuarial Valuation Reports as of June 30,2018 I 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 nonnal 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 CalPERS 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 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 CalPERS 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 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 DUNE 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 Ca1PERS 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'0, 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 I I 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 CalPERS 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 CaIPERS' 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 2011A 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. I � 4129-6022-6339.5 50 I Summary of Long-Term General Fund Obligations Fiscal Year Original Outstanding 2019-20 Issue Principal Payments(l) Series 2010A Bonds(2) $14,745,000 $ 8,235,000 $ 825,000 Series 2011 A Bonds(') 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. `'-) To be refunded and defeased with net proceeds of the Series 2020A Bonds. ls> 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 1 1 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 CalPERS, 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 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% Total Direct Debt ($45,038,000).........................................................................................0.11% CombinedTotal Debt............................................................................................................1.83% Ratios to Redevelopment Successor Aaencv 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 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 56 4129-6022-6339.5 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. 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 1A of 2004 On November'), 2004 the voters of the State approved Proposition I ("Proposition I of 2004"). Proposition IA 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'), 2004. Pursuant to Proposition 1 A 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 pen-nits 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 IA of 2004 also expanded the definition of what constitutes a mandate to encompass State action that transfers to cities, counties, and special districts financial responsibility for a required program for which the State previously had partial or complete responsibility. The State mandate provisions of Proposition 1A of 2004 do not apply to schools or community colleges or to mandates relating to employee rights. 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 1 A of 2004. See "—Proposition 1 A 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 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 IA 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 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 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 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 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 Information 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—COV1D-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 4129-6022-63395 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`h 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 I 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 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 I 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 Ciry 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 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 CaIPERS 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 $1 1.3 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 • 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 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, REITs, 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 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 I I 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 84 4129-6022-6339.5 THIS PAGE INTENTIONALLY LEFT BLANK 85 4129-6022-6339.5 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, California(the "County"), adjacent to the Cities of Costa Mesa, Fountain Valley,Newport Beach, Seal Beach and Westminster. The City is approximately 40 miles southeast of Los Angeles and 90 miles northwest of San Diego. As 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 11 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 I I i 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 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. I A-3 4129-6022-6339.5 i Population(" City of Huntington Beach and Orange County 2010-2020 City of Orange Year Huntington Beach County 2010 190,136 ),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 3,192,987 2020 201,281 3,194,332 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 3 0,3 18 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 Qin 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 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 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 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 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 15c3-1 (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 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 Al/PI 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, overcoI lateral ization, 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/P1) 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. I. 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 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 AI/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% AI."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-Term 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 i 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. 1nstitution/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 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-U 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. 0.01%) BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio's investments. BID: The price offered by a buyer of securities. (When you are selling securities,you ask for a bid.) BROKER: A broker brings buyers and sellers together for a commission. He/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 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. 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. 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 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 APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS 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 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 I 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 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— Ca1PERS" [(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. Reportingof 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 (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 Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice required to be filed pursuant to this Disclosure Certificate, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event or any other event required to be reported. SECTION 11. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order,to cause the City to comply with its obligations under this Disclosure Certificate; provided, that any such action may be instituted only in the Superior Court of the State of California in and for the County of Orange or in U.S. District Court for the Central District of California in or nearest to the County. 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 Agent. Article VII of the Indenture is hereby made applicable to this Disclosure Certificate as if this Disclosure Certificate were (solely for this purpose) contained in the Indenture. The Dissemination Agent shall be entitled to the protections and limitations from liability afforded to the Trustee thereunder. The Dissemination Agent(if other than the Trustee or the Trustee in its capacity as Dissemination Agent)shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent,the Trustee, their officers, directors, employees and agents, harmless against any loss,expense, 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 I 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 ,2020 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. 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