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HomeMy WebLinkAbout2019/01/16 - Agenda PacketAMENDED AGENDA (Posted 1/15/19: Item J1) FIRE PROTECTION DISTRICT BOARD-HOUSING SUCCESSOR AGENCY - SUCCESSOR AGENCY - PUBLIC FINANCE AUTHORITY - CITY COUNCIL Wednesday, January 16, 2019 10500 Civic Center Drive Rancho Cucamonga, CA 91730 REGULAR MEETINGS: 1st and 3rd Wednesdays - 7:00 P.M. ORDER OF BUSINESS: CLOSED SESSION TAPIA CONFERENCE ROOM 5:00 P.M. REGULAR MEETINGS COUNCIL CHAMBERS 7:00 P.M. MEMBERS: MAYOR L. Dennis Michael CITY MANAGER John R. Gillison MAYOR PRO TEM Lynne B. Kennedy CITY ATTORNEY James L. Markman COUNCIL MEMBERS Ryan A. Hutchison Kristine D. Scott Sam Spagnolo CITY CLERK CITY TREASURER Janice C. Reynolds James C. Frost Rancho Cucamonga City Council Mission Statement Make decisions, and be perceived as making decisions, for the general welfare of the community. Always work to improve existing services and develop policies to meet the expected as well as anticipated needs of the community. Work together cooperatively to respect all persons and their ideas in order to develop and maintain the trust of the community. Reflect the community's desires and priorities by assuring that decisions accurately reflect the community's interests by fairly translating public feedback into public policy. Enhance the quality of life of all Rancho Cucamonga residents through the continued pursuit of excellence and commitment to the City's core values and goals. Set the vision for the community for the future. Have a professional, objective and respectful relationship with each other in order to more effectively address the challenges of the future. Page 1 TO ADDRESS THE FIRE BOARD, HOUSING SUCCESSOR AGENCY, SUCCESSOR AGENCY, PUBLIC FINANCE AUTHORITY AND CITY COUNCIL The Fire Board, Housing Successor Agency, Successor Agency, Public Finance Authority and City Council encourage free expression of all points of view. To allow all persons to speak, given the length of the Agenda, please keep your remarks brief. If others have already expressed your position, you may simply indicate that you agree with a previous speaker. If appropriate, a spokesperson may present the views of your entire group. To encourage all views and promote courtesy to others, the audience should refrain from clapping, booing or shouts of approval or disagreement from the audience. The public may address the Fire Board, Housing Successor Agency, Successor Agency, Public FinanceAuthority and City Council by filling out a speaker card and submitting it to the City Clerk. The speaker cards are located on the wall at the back of the Chambers, at the front desk behind the staff table and at the City Clerk's desk. Any handouts for the Fire Board, Successor Agency, Public Finance Authority or City Council should be given to the City Clerk for distribution. During "Public Communications," your name will be called to speak on any item listed or not listed on the agenda in the order in which it was received. The "Public Communications" period will not exceed one hour prior to the commencement of the business portion of the agenda. During this one hour period, all those who wish to speak on a topic contained in the business portion of the agenda will be given priority, and no further speaker cards for these business items (with the exception of public hearing items) will be accepted once the business portion of the agenda commences. Any other "Public Communications" which have not concluded during this one-hour period may resume after the regular business portion of the agenda has been completed. Comments are to be limited to five minutes per individual or less, as deemed necessary by the Chair, depending upon the number of individuals desiring to speak. If you are present to speak on an "Advertised Public Hearing" or on an "Administrative Hearing" Item(s), your name will be alled when that item is being discussed, in the order in which it was received. Comments are to be limited to five minutes per individual or less, as deemed necessary by the Chair, depending upon the number of individuals desiring to speak. AGENDA BACK-UP MATERIALS Staff reports and back-up materials for agenda items are available for review at the City Clerk's counter, the City's Public Libraries and on the City's website. A complete copy of the agenda is also available at the desk located behind the staff table during the Council meeting. LIVE BROADCAST Fire Board, Housing Successor Agency, Successor Agency, Public Finance Authority and City Council meetings are broadcast live on Channel 3 for those with cable television access. Meetings are rebroadcast on the second and fourth Wednesdays of each month at 7:00 p.m. Streaming Video on Demand is available on the City's website at www.cityofrc.us/cityhall/council/videos.asp. The Fire Board, Successor Agency, Public Finance Authority and City Council meet regularly on the first and third Wednesday of the month at 7:00 p.m. in the Council Chambers located at 10500 Civic Center Drive. Members of the City Council also sit as the Fire Board, Housing Successor Agency, Successor Agency, and Public Finance Authority. Copies of the agendas and minutes can be found @ www.cityofrc.us If you need special assistance or accommodations to participate in this meeting, please contact the City Clerk's office at (909) 477-2700. Notification of 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility. Listening devices are available for the hearing impaired. Page 2 Please silence all cell phones and devices while the meeting is in session. JANUARY 16, 2019 FIRE PROTECTION DISTRICT, SUCCESSOR AGENCY, HOUSING SUCCESSOR AGENCY, PUBLIC FINANCE AUTHORITY AND CITY COUNCIL AGENDA CLOSED SESSION - 5:00 P.M. Roll Call:Mayor Michael Mayor Pro Tem Kennedy Council Members Hutchison, Scott, Spagnolo A.ANNOUNCEMENT OF CLOSED SESSION ITEM(S) B.PUBLIC COMMUNICATIONS ON CLOSED SESSION ITEM(S) C.CITY MANAGER ANNOUNCEMENTS D.CONDUCT OF CLOSED SESSION - Tapia Conference Room D.1.CONFERENCE WITH REAL PROPERTY NEGOTIATORS PER GOVERNMENT CODE SECTION 54956.8 FOR PROPERTY GENERALLY LOCATED AT 7089 ETIWANDA AVENUE, RANCHO CUCAMONGA; NEGOTIATING PARTIES LORI SASSOON, DEPUTY CITY MANAGER REPRESENTING THE CITY OF RANCHO CUCAMONGA AND NATALIE AND DANNY NAVARRETTE; AND THE FRIENDS OF THE PACIFIC ELECTRIC TRAIL REGARDING INSTRUCTIONS FOR NEGOTIATING THE PRICE, TERMS OF PAYMENT, OR BOTH – CITY D.2.CONFERENCE WITH LABOR NEGOTIATOR ROBERT NEIUBER, HUMAN RESOURCES DIRECTOR PER GOVERNMENT CODE SECTION 54954.2 REGARDING LABOR NEGOTIATIONS WITH RANCHO CUCAMONGA FIREFIGHTERS LOCAL 2274, FIRE SUPPORT SERVICES ASSOCIATION AND FIRE MANAGEMENT EMPLOYEE GROUP. – DISTRICT D.3.CONFERENCE WITH LABOR NEGOTIATOR ROBERT NEIUBER, HUMAN RESOURCES DIRECTOR PER GOVERNMENT CODE SECTION 54954.2 REGARDING LABOR NEGOTIATIONS WITH TEAMSTERS LOCAL 1932 AND EXECUTIVE MANAGEMENT EMPLOYEE GROUP. – CITY D.4.CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION - INITIATION OF LITIGATION PURSUANT TO PARAGRAPH (4) OF SUBDIVISION (D) OF SECTION 54956.9: (ONE CASE) Page 3 D.5.CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION - INITIATION OF LITIGATION PURSUANT TO PARAGRAPH (4) OR SUBDIVISION (D) OF SECTION 54956.9: (ONE CASE) D.6.CONFERENCE WITH LEGAL COUNSEL – SIGNIFICANT EXPOSURE TO LITIGATION PURSUANT TO GOVERNMENT CODE SECTION 54956.9(D)(2): NUMBER OF CASES (1) – CITY D.7.CONFERENCE WITH REAL PROPERTY NEGOTIATORS PER GOVERNMENT CODE SECTION 54956.8 FOR PROPERTY GENERALLY LOCATED AT THE NORTHWEST CORNER OF HAVEN AVENUE AND JERSEY BOULEVARD IDENTIFIED AS PARCEL NUMBERS 0209-131-01; NEGOTIATING PARTIES JOHN GILLISON, CITY MANAGER, REPRESENTING THE CITY OF RANCHO CUCAMONGA, AND POWER MEDIC TECHNOLOGIES, INC., THE PROPERTY OWNER; REGARDING PRICE AND TERMS OF PAYMENT. – CITY D.8.CONFERENCE WITH REAL PROPERTY NEGOTIATORS PER GOVERNMENT CODE SECTION 54956.8 FOR PROPERTY GENERALLY LOCATED AT THE RANCHO CUCAMONGA METROLINK STATION IDENTIFIED AS PARCEL NUMBERS 0209-272-11, 0209-143-21, AND 0209-272-22; NEGOTIATING PARTIES CITY MANAGER JOHN GILLISON, CITY MANAGER, REPRESENTING THE CITY OF RANCHO CUCAMONGA, CARRIE SCHINDLER REPRESENTING SBCTA, AND MICHAEL DIEDEN REPRESENTING EMPIRE YARDS AT RANCHO, LLC; REGARDING PRICE AND TERMS. – CITY E.RECESS CLOSED SESSION TO RECESS TO THE REGULAR FIRE PROTECTION DISTRICT, HOUSING SUCCESSOR AGENCY, SUCCESSOR AGENCY, PUBLIC FINANCE AUTHORITY, AND CITY COUNCIL MEETINGS AT 7:00 P.M. IN THE COUNCIL CHAMBERS AT CITY HALL, LOCATED AT 10500 CIVIC CENTER DRIVE, RANCHO CUCAMONGA, CALIFORNIA. REGULAR MEETING - 7:00 P.M. COUNCIL CHAMBERS THE REGULAR MEETINGS OF THE FIRE PROTECTION DISTRICT, HOUSING SUCCESSOR AGENCY, SUCCESSOR AGENCY, PUBLIC FINANCE AUTHORITY, AND CITY COUNCIL WILL BE CALLED TO ORDER. IT IS THE INTENT TO CONCLUDE THE MEETINGS BY 10:00 P.M., UNLESS EXTENDED BY CONCURRENCE OF THE FIRE BOARD, AGENCIES, AUTHORITY BOARD AND COUNCIL. Pledge of Allegiance Roll Call:Mayor Michael Mayor Pro Tem Kennedy Council Members Hutchison, Scott and Spagnolo A.ANNOUNCEMENT / PRESENTATIONS A.1.Presentation of Proclamation to San Bernardino County Children’s Network Mentoring Task Force Declaring January 2019 as “National Mentoring Month”. B.PUBLIC COMMUNICATIONS This is the time and place for the general public to address the Fire Protection District, Housing Successor Agency, Successor Agency, Public Finance Authority Board, and City Council on any item listed or not listed on the agenda. State law prohibits the Fire Protection District, Housing Successor Agency, Successor Agency, Public Page 4 Finance Authority Board, and City Council from addressing any issue not previously included on the Agenda. The Fire Protection District, Housing Successor Agency, Successor Agency, Public Finance Authority Board, and City Council may receive testimony and set the matter for a subsequent meeting. Comments are to be limited to five minutes per individual or less, as deemed necessary by the Mayor, depending upon the number of individuals desiring to speak. All communications are to be addressed directly to the Fire Board, Agencies, Successor Agency, Authority Board, or City Council not to the members of the audience. This is a professional business meeting and courtesy and decorum are expected. Please refrain from any debate between audience and speaker, making loud noises, or engaging in any activity which might be disruptive to the decorum of the meeting. The public communications period will not exceed one hour prior to the commencement of the business portion of the agenda. During this one hour period, all those who wish to speak on a topic contained in the business portion of the agenda will be given priority, and no further speaker cards for these business items (with the exception of public hearing items) will be accepted once the business portion of the agenda commences. Any other public communications which have not concluded during this one hour period may resume after the regular business portion of the agenda has been completed. CONSENT CALENDARS: The following Consent Calendar items are expected to be routine and non-controversial. They will be acted upon by the Fire Board/Housing Successor Agency/Successor Agency/Authority Board/Council at one time without discussion. Any item may be removed by a Fire Board/Housing Successor Agency/Successor Agency/Authority Board/Council Member for discussion. C.CONSENT CALENDAR – FIRE PROTECTION DISTRICT C.1.Consideration to Approve Bi-Weekly Payroll in the Amount of $1,198,483.01 and Weekly Check Registers in the Amount of $144,845.45. Dated December 11, 2018 Through January 08, 2019. C.2.Consideration to Receive and File Current Investment Schedule as of December 31, 2018. D.CONSENT CALENDAR – HOUSING SUCCESSOR AGENCY E.CONSENT CALENDAR – SUCCESSOR AGENCY F.CONSENT CALENDAR – PUBLIC FINANCE AUTHORITY G.CONSENT CALENDAR – CITY COUNCIL G.1.Consideration to Approve Bi-Weekly Payroll in the Amount of $2,491,683.72 and Weekly Check Registers in the Amount of $4,025,634.60. Dated December 11, 2018 Through January 08, 2019. G.2.Consideration to Receive and File Current Investment Schedule as of December 31, 2018. G.3.Consideration to Accept as Complete, File the Notice of Completion, and Authorize Release of Retention and Bonds for the Fiscal Year 2016/17 Installation of Four (4) Traffic Signals at Various Locations Project. G.4.Consideration to Approve the Plans, Specifications, and Estimates (PS&E); Authorize to Bid; and Approval of an Appropriation in the Amount of $501,959 from the Community Development Block Grant Funds (Fund 204) for the Amethyst Avenue street Improvements Project. G.5.Consideration of Amendment No. 1 to the RCMU Fiber Licensing and Service Agreement with Inyo Networks, Inc. (CO18-022). G.6.Consideration to Accept as Complete, File the Notice of Completion and Authorize Release of Retention and Bonds for the McKinley Street Drainage Improvement Project. Page 5 G.7.Consideration of a Contract with FS Contractors, Inc., in the Amount of $43,412, Plus a 10% Contingency for the Fiscal Year 2018/19 Sidewalk Improvements for Bus Stops at 5 Locations Project. G.8.Consideration of a Purchase and Sale Agreement with Linda and Joseph Walker for the Acquisition of a Temporary Construction Easement, Located at 5917 Archibald Avenue, for the Archibald Avenue Widening North of Sunflower Street Project. G.9.Consideration to Accept the Victoria Windrows 2A & 2B Greenbelt Lighting Project as Complete, File the Notice of Completion, and Authorize Release of Retention and Bonds. H.CONSENT ORDINANCES The following Ordinances have been introduced for first reading. Second readings are expected to be routine and non-controversial. The City Council will act upon them at one time without discussion. The City Clerk will read the title. Any item can be removed for discussion by a Council Member. H.1.Conduct Second Reading and Approve Ordinance No. 943 Authorizing the Levy of a Special Tax Commencing in Fiscal Year 2019/20 and Each Ensuing Fiscal Year Solely Within and Relating to The Resort at Empire Lakes Community Facilities District No. 2018-01 of the City of Rancho Cucamonga. ORDINANCE NO. 943 ORDINANCE OF THE CITY COUNCIL OF THE CITY OF RANCHO CUCAMONGA ACTING IN ITS CAPACITY AS THE LEGISLATIVE BODY OF THE RESORT AT EMPIRE LAKES COMMUNITY FACILITIES DISTRICT NO. 2018-01 OF THE CITY OF RANCHO CUCAMONGA, AUTHORIZING THE LEVY OF A SPECIAL TAX IN SUCH COMMUNITY FACILITIES DISTRICT I.ADMINISTRATIVE HEARING ITEM J.ADVERTISED PUBLIC HEARINGS – CITY COUNCIL/FIRE PROTECTION DISTRICT The following items have been advertised and/or posted as public hearings as required by law. The Mayor will open the meeting to receive public testimony. J.1.Consideration of a Resolution of Necessity Declaring Certain City-Owned Real Property Interests, Previously Acquired as a Portion of San Bernardino County Assessor’s Parcel Number 0209-131-01, Necessary for Public Purposes in Connection with and to Allow for the Establishment and Maintenance of a Public Utility Facility Located on the Northwest Corner of Haven Avenue at Jersey Boulevard. RESOLUTION NO. 19-001 A RESOLUTION OF NECESSITY OF THE CITY OF RANCHO CUCAMONGA, CALIFORNIA, DECLARING CERTAIN CITY-OWNED REAL PROPERTY INTERESTS, PREVIOUSLY ACQUIRED AS A PORTION OF SAN BERNARDINO COUNTY ASSESSOR’S PARCEL NUMBER 0209-131-01, NECESSARY FOR PUBLIC PURPOSES IN CONNECTION WITH AND TO ALLOW FOR THE ESTABLISHMENT AND MAINTENANCE OF A PUBLIC UTILITY FACILITY STAFF IS RECOMMENDING THE CITY COUNCIL CONTINUE THE PUBLIC HEARING TO FEBRUARY 20, 2019 AT 7:00 PM IN COUNCIL CHAMBERS (REFER TO REVISED STAFF REPORT) J.2.Conduct First Reading and Introduction of Ordinance No. 944 - Municipal Code Amendment DRC2018-00956 – City of Rancho Cucamonga – A request to amend Title 17 (Development Code) of the Municipal Code to expand limits on animal keeping for educational uses in the Industrial Park (IP) Zone. This item is exempt from the requirements of the California Environmental Quality Act (CEQA) and the City’s CEQA guidelines under Page 6 CEQA section 15061(b)(3). ORDINANCE NO. 944 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF RANCHO CUCAMONGA, CALIFORNIA, TO CONDITIONALLY PERMIT CERTAIN ANIMAL KEEPING IN THE INDUSTRIAL PARK ZONE AND AMENDING SECTIONS 17.30.030 AND 17.88.020 OF THE MUNICIPAL CODE REGARDING THE SAME K.CITY MANAGER’S STAFF REPORTS The following items have no legal publication or posting requirements. K.1.Consideration to Approve Legal Documents Related to Financing of the Design, Construction and Acquisition of Improvements to the City's Existing Fiber Optic Network and Make Certain Determinations in Connection Therewith. RESOLUTION NO. 19-002 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO CUCAMONGA, CALIFORNIA, AUTHORIZING PROCEEDINGS AND AGREEMENTS RELATING TO THE FINANCING OF THE ACQUISITION, DESIGN, CONSTRUCTION AND EQUIPPING OF A FIBER OPTIC NETWORK WITHIN THE CITY, APPROVING ISSUANCE AND SALE OF BONDS BY THE RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY, APPROVING AN OFFICIAL STATEMENT, AND AUTHORIZING OFFICIAL ACTIONS RESOLUTION NO. 19-003 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO CUCAMONGA, CALIFORNIA, AUTHORIZING THE EXECUTION AND RECORDATION OF THAT CERTAIN RELEASE OF LIEN AND TERMINATION OF AGREEMENTS RELATED TO THE CENTRAL PARK PROPERTY K.2.Consideration to approve the Issuance of Bonds and Legal Documents Related to the Financing of the Design, Construction and Acquisition of Improvements to the City of Rancho Cucamonga's Existing Fiber Optic Network. RESOLUTION NO. PFA 2019-001 RESOLUTION OF THE BOARD OF DIRECTORS OF THE RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY AUTHORIZING THE ISSUANCE OF ITS LEASE REVENUE BONDS IN THE ORIGINAL PRINCIPAL AMOUNT OF NOT TO EXCEED $14,500,000 IN CONNECTION WITH THE FINANCING OF THE ACQUISITION, DESIGN, CONSTRUCTION AND EQUIPPING OF A FIBER OPTIC NETWORK, AUTHORIZING AND DIRECTING EXECUTION OF AN INDENTURE OF TRUST, A LEASE AGREEMENT, AN AGENCY AGREEMENT, A BOND PURCHASE AGREEMENT AND AUTHORIZING AN OFFICIAL STATEMENT AND OTHER OFFICIAL ACTIONS AND EXECUTION OF RELATED DOCUMENTS L.COUNCIL BUSINESS L.1.COUNCIL ANNOUCEMENTS (Comments to be limited to three minutes per Council Member.) L.2.INTER-AGENCY UPDATES (Update by the City Council to the community on the meetings that were attended.) M.IDENTIFICATION OF ITEMS FOR NEXT MEETING N.ADJOURNMENT CERTIFICATION Page 7 I, Linda A. Troyan, MMC, City Clerk Services Director of the City of Rancho Cucamonga, or my designee, hereby certify under penalty of perjury that a true, accurate copy of the foregoing agenda was posted on at least Seventy-Two (72) hours prior to the meeting per Government Code 54954.2 at 10500 Civic Center Drive, Rancho Cucamonga, California and on the City's website. Page 8 AGENDA FIRE PROTECTION DISTRICT BOARD-HOUSING SUCCESSOR AGENCY - SUCCESSOR AGENCY - PUBLIC FINANCE AUTHORITY - CITY COUNCIL Wednesday, January 16, 2019 10500 Civic Center Drive Rancho Cucamonga, CA 91730 REGULAR MEETINGS: 1st and 3rd Wednesdays - 7:00 P.M. ORDER OF BUSINESS: CLOSED SESSION TAPIA CONFERENCE ROOM 5:00 P.M. REGULAR MEETINGS COUNCIL CHAMBERS 7:00 P.M. MEMBERS: MAYOR L. Dennis Michael CITY MANAGER John R. Gillison MAYOR PRO TEM Lynne B. Kennedy CITY ATTORNEY James L. Markman COUNCIL MEMBERS Ryan A. Hutchison Kristine D. Scott Sam Spagnolo CITY CLERK CITY TREASURER Janice C. Reynolds James C. Frost Rancho Cucamonga City Council Mission Statement Make decisions, and be perceived as making decisions, for the general welfare of the community. Always work to improve existing services and develop policies to meet the expected as well as anticipated needs of the community. Work together cooperatively to respect all persons and their ideas in order to develop and maintain the trust of the community. Reflect the community's desires and priorities by assuring that decisions accurately reflect the community's interests by fairly translating public feedback into public policy. Enhance the quality of life of all Rancho Cucamonga residents through the continued pursuit of excellence and commitment to the City's core values and goals. Set the vision for the community for the future. Have a professional, objective and respectful relationship with each other in order to more effectively address the challenges of the future. Page 1 TO AD D R E S S T H E FIR E BOAR D, H OU S IN G S U C C E S S OR AGE N C Y, S UC C E S SOR AGEN C Y, P U BL IC F IN AN C E AU TH OR IT Y AN D C ITY C OU NCIL The F ire B oard, Housing S uccessor A gency, S uccessor A gency, P ublic F i nance A uthority and C ity C ouncil encourage free expression of all points of view. To allow all persons to speak, given the length of the A genda, please keep your remarks brief. If others have already expressed your position, you may simply i ndicate that you agree with a previous speaker. If appropri ate, a spokesperson may present the views of your entire group. To encourage all views and promote courtesy to others, the audience should refrai n from clapping, booing or shouts of approval or disagreement from the audience. The public may address the F ire B oard, Housing S uccessor A gency, S uccessor A gency, P ublic F inanceA uthority and C ity C ouncil by filling out a speaker card and submitting it to the C ity C lerk. The speaker cards are located on the wall at the back of the C hambers, at the front desk behind the staff table and at the C ity C lerk's desk. A ny handouts for the F ire B oard, S uccessor A gency, P ubli c F inance A uthority or C ity C ouncil should be given to the C ity C lerk for distribution. D uring "P ublic C ommunications," your name will be called to speak on any item listed or not listed on the agenda in the order in which it was received. The "P ublic C ommunications" period will not exceed one hour prior to the commencement of the business portion of the agenda. D uring this one hour peri od, all those who wish to speak on a topic contained in the business portion of the agenda will be given priority, and no further speaker cards for these business i tems (with the exception of public hearing items) will be accepted once the business portion of the agenda commences. A ny other "P ublic C ommunications" which have not concluded during this one-hour period may resume after the regular business portion of the agenda has been completed. C omments are to be limited to five minutes per individual or less, as deemed necessary by the C hair, depending upon the number of individuals desiring to speak. If you are present to speak on an "A dvertised P ublic Hearing" or on an "A dministrati ve Hearing" Item(s), your name will be alled when that item is being discussed, in the order i n which it was received. C omments are to be limi ted to five minutes per individual or less, as deemed necessary by the C hair, depending upon the number of individuals desiring to speak. AGE N D A B AC K-U P MATE R IALS S taff reports and back-up materials for agenda items are available for review at the C ity C lerk's counter, the C ity's P ublic Libraries and on the C ity's website. A complete copy of the agenda is also available at the desk located behind the staff table during the C ouncil meeting. L IV E B R OAD C AST F ire B oard, Housing S uccessor A gency, S uccessor A gency, P ublic F inance A uthority and C ity C ouncil meetings are broadcast live on C hannel 3 for those with cable television access. Meetings are rebroadcast on the second and fourth Wednesdays of each month at 7:00 p.m. S treaming Video on D emand is available on the C ity's website at www.cityofrc.us/cityhall/council/videos.asp. The Fire Board, Successor Agency, Public Finance Authority and City C ouncil meet regularly on the first and third Wednesday of the month at 7:00 p.m. in the Council Chambers located at 10500 Civic C enter Drive. Members of the City Council also sit as the Fire Board, Housing Successor Agency, Successor Agency, and Public Finance Authority. C opies of the agendas and minutes can be found @ www.cityofrc.us I f you need spec ial assistance or accommodations to partic ipate in this meeting, please contact the C ity Clerk's offic e at (909) 477-2700. Notification of 48 hours prior to the meeting will enable the C ity to make reasonable arrangements to ensure accessibility. Listening devic es are available for the hearing impaired. Page 2 Please silence all cell phones and devices while the meeting is in session. JANUARY 16, 2019 FIRE PROTECTION DISTRICT, SUCCESSOR AGENCY, HOUSING SUCCESSOR AGENCY, PUBLIC FINANCE AUTHORITY AND CITY COUNCIL AGENDA CLOSED SESSION - 5:00 P.M. Roll Call:Mayor Michael Mayor Pro Tem Kennedy Council Members Hutchison, Scott, Spagnolo A.ANNOUNCEMENT OF CLOSED SESSION ITEM(S) B.PUBLIC COMMUNICATIONS ON CLOSED SESSION ITEM(S) C.CITY MANAGER ANNOUNCEMENTS D.CONDUCT OF CLOSED SESSION - Tapia Conference Room D.1.CONFERENCE WITH REAL PROPERTY NEGOTIATORS PER GOVERNMENT CODE SECTION 54956.8 FOR PROPERTY GENERALLY LOCATED AT 7089 ETIWANDA AVENUE, RANCHO CUCAMONGA; NEGOTIATING PARTIES LORI SASSOON, DEPUTY CITY MANAGER REPRESENTING THE CITY OF RANCHO CUCAMONGA AND NATALIE AND DANNY NAVARRETTE; AND THE FRIENDS OF THE PACIFIC ELECTRIC TRAIL REGARDING INSTRUCTIONS FOR NEGOTIATING THE PRICE, TERMS OF PAYMENT, OR BOTH – CITY D.2.CONFERENCE WITH LABOR NEGOTIATOR ROBERT NEIUBER, HUMAN RESOURCES DIRECTOR PER GOVERNMENT CODE SECTION 54954.2 REGARDING LABOR NEGOTIATIONS WITH RANCHO CUCAMONGA FIREFIGHTERS LOCAL 2274, FIRE SUPPORT SERVICES ASSOCIATION AND FIRE MANAGEMENT EMPLOYEE GROUP. – DISTRICT D.3.CONFERENCE WITH LABOR NEGOTIATOR ROBERT NEIUBER, HUMAN RESOURCES DIRECTOR PER GOVERNMENT CODE SECTION 54954.2 REGARDING LABOR NEGOTIATIONS WITH TEAMSTERS LOCAL 1932 AND EXECUTIVE MANAGEMENT EMPLOYEE GROUP. – CITY D.4.CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION - INITIATION OF LITIGATION PURSUANT TO PARAGRAPH (4) OF SUBDIVISION (D) OF SECTION 54956.9: (ONE CASE) Page 3 D.5.CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION - INITIATION OF LITIGATION PURSUANT TO PARAGRAPH (4) OR SUBDIVISION (D) OF SECTION 54956.9: (ONE CASE) D.6.CONFERENCE WITH LEGAL COUNSEL – SIGNIFICANT EXPOSURE TO LITIGATION PURSUANT TO GOVERNMENT CODE SECTION 54956.9(D)(2): NUMBER OF CASES (1) – CITY D.7.CONFERENCE WITH REAL PROPERTY NEGOTIATORS PER GOVERNMENT CODE SECTION 54956.8 FOR PROPERTY GENERALLY LOCATED AT THE NORTHWEST CORNER OF HAVEN AVENUE AND JERSEY BOULEVARD IDENTIFIED AS PARCEL NUMBERS 0209-131-01; NEGOTIATING PARTIES JOHN GILLISON, CITY MANAGER, REPRESENTING THE CITY OF RANCHO CUCAMONGA, AND POWER MEDIC TECHNOLOGIES, INC., THE PROPERTY OWNER; REGARDING PRICE AND TERMS OF PAYMENT. – CITY D.8.CONFERENCE WITH REAL PROPERTY NEGOTIATORS PER GOVERNMENT CODE SECTION 54956.8 FOR PROPERTY GENERALLY LOCATED AT THE RANCHO CUCAMONGA METROLINK STATION IDENTIFIED AS PARCEL NUMBERS 0209-272-11, 0209-143-21, AND 0209-272-22; NEGOTIATING PARTIES CITY MANAGER JOHN GILLISON, CITY MANAGER, REPRESENTING THE CITY OF RANCHO CUCAMONGA, CARRIE SCHINDLER REPRESENTING SBCTA, AND MICHAEL DIEDEN REPRESENTING EMPIRE YARDS AT RANCHO, LLC; REGARDING PRICE AND TERMS. – CITY E.RECESS CLOSED SESSION TO RECESS TO THE REGULAR FIRE PROTECTION DISTRICT, HOUSING SUCCESSOR AGENCY, SUCCESSOR AGENCY, PUBLIC FINANCE AUTHORITY, AND CITY COUNCIL MEETINGS AT 7:00 P.M. IN THE COUNCIL CHAMBERS AT CITY HALL, LOCATED AT 10500 CIVIC CENTER DRIVE, RANCHO CUCAMONGA, CALIFORNIA. REGULAR MEETING - 7:00 P.M. COUNCIL CHAMBERS THE REGULAR MEETINGS OF THE FIRE PROTECTION DISTRICT, HOUSING SUCCESSOR AGENCY, SUCCESSOR AGENCY, PUBLIC FINANCE AUTHORITY, AND CITY COUNCIL WILL BE CALLED TO ORDER. IT IS THE INTENT TO CONCLUDE THE MEETINGS BY 10:00 P.M., UNLESS EXTENDED BY CONCURRENCE OF THE FIRE BOARD, AGENCIES, AUTHORITY BOARD AND COUNCIL. Pledge of Allegiance Roll Call:Mayor Michael Mayor Pro Tem Kennedy Council Members Hutchison, Scott and Spagnolo A.ANNOUNCEMENT / PRESENTATIONS A.1.Presentation of Proclamation to San Bernardino County Children’s Network Mentoring Task Force Declaring January 2019 as “National Mentoring Month”. B.PUBLIC COMMUNICATIONS This is the time and place for the general public to address the Fire Protection District, Housing Successor Agency, Successor Agency, Public Finance Authority Board, and City Council on any item listed or not listed on the agenda. State law prohibits the Fire Protection District, Housing Successor Agency, Successor Agency, Public Page 4 --- Finance Authority Board, and City Council from addressing any issue not previously included on the Agenda. The Fire Protection District, Housing Successor Agency, Successor Agency, Public Finance Authority Board, and City Council may receive testimony and set the matter for a subsequent meeting. Comments are to be limited to five minutes per individual or less, as deemed necessary by the Mayor, depending upon the number of individuals desiring to speak. All communications are to be addressed directly to the Fire Board, Agencies, Successor Agency, Authority Board, or City Council not to the members of the audience. This is a professional business meeting and courtesy and decorum are expected. Please refrain from any debate between audience and speaker, making loud noises, or engaging in any activity which might be disruptive to the decorum of the meeting. The public communications period will not exceed one hour prior to the commencement of the business portion of the agenda. During this one hour period, all those who wish to speak on a topic contained in the business portion of the agenda will be given priority, and no further speaker cards for these business items (with the exception of public hearing items) will be accepted once the business portion of the agenda commences. Any other public communications which have not concluded during this one hour period may resume after the regular business portion of the agenda has been completed. CONSENT CALENDARS: The following Consent Calendar items are expected to be routine and non-controversial. They will be acted upon by the Fire Board/Housing Successor Agency/Successor Agency/Authority Board/Council at one time without discussion. Any item may be removed by a Fire Board/Housing Successor Agency/Successor Agency/Authority Board/Council Member for discussion. C. CONSENT CALENDAR – FIRE PROTECTION DISTRICT C.1. Consideration to Approve Bi-Weekly Payroll in the Amount of $1,198,483.01 and Weekly Check Registers in the Amount of $144,845.45. Dated December 11, 2018 Through January 08, 2019. C.2. Consideration to Receive and File Current Investment Schedule as of December 31, 2018. D. CONSENT CALENDAR – HOUSING SUCCESSOR AGENCY E. CONSENT CALENDAR – SUCCESSOR AGENCY F. CONSENT CALENDAR – PUBLIC FINANCE AUTHORITY G. CONSENT CALENDAR – CITY COUNCIL G.1. Consideration to Approve Bi-Weekly Payroll in the Amount of $2,491,683.72 and Weekly Check Registers in the Amount of $4,025,634.60. Dated December 11, 2018 Through January 08, 2019. G.2. Consideration to Receive and File Current Investment Schedule as of December 31, 2018. G.3. Consideration to Accept as Complete, File the Notice of Completion, and Authorize Release of Retention and Bonds for the Fiscal Year 2016/17 Installation of Four (4) Traffic Signals at Various Locations Project. G.4. Consideration to Approve the Plans, Specifications, and Estimates (PS&E); Authorize to Bid; and Approval of an Appropriation in the Amount of $501,959 from the Community Development Block Grant Funds (Fund 204) for the Amethyst Avenue street Improvements Project. G.5. Consideration of Amendment No. 1 to the RCMU Fiber Licensing and Service Agreement with Inyo Networks, Inc. (CO18-022). G.6. Consideration to Accept as Complete, File the Notice of Completion and Authorize Release of Retention and Bonds for the McKinley Street Drainage Improvement Project. Page 5 9 23 30 44 55 58 62 66 G.7. Consideration of a Contract with FS Contractors, Inc., in the Amount of $43,412, Plus a 10% Contingency for the Fiscal Year 2018/19 Sidewalk Improvements for Bus Stops at 5 Locations Project. G.8. Consideration of a Purchase and Sale Agreement with Linda and Joseph Walker for the Acquisition of a Temporary Construction Easement, Located at 5917 Archibald Avenue, for the Archibald Avenue Widening North of Sunflower Street Project. G.9. Consideration to Accept the Victoria Windrows 2A & 2B Greenbelt Lighting Project as Complete, File the Notice of Completion, and Authorize Release of Retention and Bonds. H. CONSENT ORDINANCES The following Ordinances have been introduced for first reading. Second readings are expected to be routine and non-controversial. The City Council will act upon them at one time without discussion. The City Clerk will read the title. Any item can be removed for discussion by a Council Member. H.1.Conduct Second Reading and Approve Ordinance No. 943 Authorizing the Levy of a Special Tax Commencing in Fiscal Year 2019/20 and Each Ensuing Fiscal Year Solely Within and Relating to The Resort at Empire Lakes Community Facilities District No. 2018-01 of the City of Rancho Cucamonga. ORDINANCE NO. 943 ORDINANCE OF THE CITY COUNCIL OF THE CITY OF RANCHO CUCAMONGA ACTING IN ITS CAPACITY AS THE LEGISLATIVE BODY OF THE RESORT AT EMPIRE LAKES COMMUNITY FACILITIES DISTRICT NO. 2018-01 OF THE CITY OF RANCHO CUCAMONGA, AUTHORIZING THE LEVY OF A SPECIAL TAX IN SUCH COMMUNITY FACILITIES DISTRICT I. ADMINISTRATIVE HEARING ITEM J. ADVERTISED PUBLIC HEARINGS – CITY COUNCIL/FIRE PROTECTION DISTRICT The following items have been advertised and/or posted as public hearings as required by law. The Mayor will open the meeting to receive public testimony. J.1. Consideration of a Resolution of Necessity Declaring Certain City-Owned Real Property Interests, Previously Acquired as a Portion of San Bernardino County Assessor’s Parcel Number 0209-131-01, Necessary for Public Purposes in Connection with and to Allow for the Establishment and Maintenance of a Public Utility Facility Located on the Northwest Corner of Haven Avenue at Jersey Boulevard. RESOLUTION NO. 19-001 A RESOLUTION OF NECESSITY OF THE CITY OF RANCHO CUCAMONGA, CALIFORNIA, DECLARING CERTAIN CITY-OWNED REAL PROPERTY INTERESTS, PREVIOUSLY ACQUIRED AS A PORTION OF SAN BERNARDINO COUNTY ASSESSOR’S PARCEL NUMBER 0209-131-01, NECESSARY FOR PUBLIC PURPOSES IN CONNECTION WITH AND TO ALLOW FOR THE ESTABLISHMENT AND MAINTENANCE OF A PUBLIC UTILITY FACILITY J.2. Conduct First Reading and Introduction of Ordinance No. 944 - Municipal Code Amendment DRC2018-00956 – City of Rancho Cucamonga – A request to amend Title 17 (Development Code) of the Municipal Code to expand limits on animal keeping for educational uses in the Industrial Park (IP) Zone. This item is exempt from the requirements of the California Environmental Quality Act (CEQA) and the City’s CEQA guidelines under CEQA section 15061(b)(3). ORDINANCE NO. 944 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF RANCHO Page 6 68 73 75 78 81 90 94 100 109 CUCAMONGA, CALIFORNIA, TO CONDITIONALLY PERMIT CERTAIN ANIMAL KEEPING IN THE INDUSTRIAL PARK ZONE AND AMENDING SECTIONS 17.30.030 AND 17.88.020 OF THE MUNICIPAL CODE REGARDING THE SAME K.CITY MANAGER’S STAFF REPORTS The following items have no legal publication or posting requirements. K.1.Consideration to Approve Legal Documents Related to Financing of the Design, Construction and Acquisition of Improvements to the City's Existing Fiber Optic Network and Make Certain Determinations in Connection Therewith. RESOLUTION NO. 19-002 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO CUCAMONGA, CALIFORNIA, AUTHORIZING PROCEEDINGS AND AGREEMENTS RELATING TO THE FINANCING OF THE ACQUISITION, DESIGN, CONSTRUCTION AND EQUIPPING OF A FIBER OPTIC NETWORK WITHIN THE CITY, APPROVING ISSUANCE AND SALE OF BONDS BY THE RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY, APPROVING AN OFFICIAL STATEMENT, AND AUTHORIZING OFFICIAL ACTIONS RESOLUTION NO. 19-003 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO CUCAMONGA, CALIFORNIA, AUTHORIZING THE EXECUTION AND RECORDATION OF THAT CERTAIN RELEASE OF LIEN AND TERMINATION OF AGREEMENTS RELATED TO THE CENTRAL PARK PROPERTY K.2.Consideration to approve the Issuance of Bonds and Legal Documents Related to the Financing of the Design, Construction and Acquisition of Improvements to the City of Rancho Cucamonga's Existing Fiber Optic Network. RESOLUTION NO. PFA 2019-001 RESOLUTION OF THE BOARD OF DIRECTORS OF THE RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY AUTHORIZING THE ISSUANCE OF ITS LEASE REVENUE BONDS IN THE ORIGINAL PRINCIPAL AMOUNT OF NOT TO EXCEED $14,500,000 IN CONNECTION WITH THE FINANCING OF THE ACQUISITION, DESIGN, CONSTRUCTION AND EQUIPPING OF A FIBER OPTIC NETWORK, AUTHORIZING AND DIRECTING EXECUTION OF AN INDENTURE OF TRUST, A LEASE AGREEMENT, AN AGENCY AGREEMENT, A BOND PURCHASE AGREEMENT AND AUTHORIZING AN OFFICIAL STATEMENT AND OTHER OFFICIAL ACTIONS AND EXECUTION OF RELATED DOCUMENTS L.COUNCIL BUSINESS L.1.COUNCIL ANNOUCEMENTS (Comments to be limited to three minutes per Council Member.) L.2.INTER-AGENCY UPDATES (Update by the City Council to the community on the meetings that were attended.) M.IDENTIFICATION OF ITEMS FOR NEXT MEETING N.ADJOURNMENT CERTIFICATION I, Linda A. Troyan, MMC, City Clerk Services Director of the City of Rancho Cucamonga, or my designee, hereby certify under penalty of perjury that a true, accurate copy of the foregoing agenda was posted on at least Seventy-Two (72) hours prior to the meeting per Government Code 54954.2 at 10500 Civic Center Drive, Page 7 112 115 122 267 270 --- --- R ancho C ucamonga, California and on the City's website. Page 8 D AT E : J anuary 16, 2019 T O:P resident and Members of the B oard of D irectors F RO M :J ohn R . Gillison, C ity Manager INIT IAT E D B Y:Tamara L ayne, F inance D irector S UB J E C T:C O NS ID E RAT I O N T O AP P RO V E B I-WE E K LY PAY RO L L I N T HE AM O UNT O F $1,198,483.01 AND WE E K LY C HE C K RE G IS T E RS IN T HE AM O UNT O F $144,845.45. D AT E D D E C E M B E R 11, 2018 T HRO UG H J ANUARY 08, 2019. RE COMMENDAT ION: Staf f recommends F ire Board approve payment of demands as presented. BACKGROUND: N/A ANALY S IS: N/A FISCAL IMPACT: Adequate budgeted funds are available for the payment of demands per the attached listing. COUNCIL GOAL(S) ADDRE S S E D: N/A AT TAC HM E NT S : D escription Attachment 1 Check Register Page 9 AmountFireCityVendor NameCheck Date 12/11/2018 through 1/8/2019 Agenda Check Register RANCHO CUCAMONGA FIRE PROTECTION DISTRICT AND CITY OF RANCHO CUCAMONGA Check No. 39,395.960.0039,395.96ALL CITY MANAGEMENT SERVICES INC.12/12/201800008539AP 892.880.00892.88BUREAU OF RECLAMATION12/12/201800008540AP 13,800.000.0013,800.00EDF TRADING NORTH AMERICA LLC12/12/201800008541AP 10,966.080.0010,966.08NORMAN A TRAUB ASSOCIATES12/12/201800008542AP 6,909.000.006,909.00RIVERSIDE, CITY OF12/12/201800008543AP 149.000.00149.00SAN BERNARDINO COUNTY12/12/201800008544AP 196,437.500.00196,437.50SHELL ENERGY NORTH AMERICA12/12/201800008545AP 9,292.680.009,292.68US DEPARTMENT OF ENERGY12/12/201800008546AP 653.66653.660.00AHUMADA, ALEXANDER R12/19/201800008547AP 653.66653.660.00ALMAND, LLOYD12/19/201800008548AP 511.48511.480.00BANTAU, VICTORIA12/19/201800008549AP 677.47677.470.00BAZAL, SUSAN12/19/201800008550AP 1,551.561,551.560.00BELL, MICHAEL L.12/19/201800008551AP 1,101.281,101.280.00BERRY, DAVID12/19/201800008552AP 1,102.611,102.610.00BROCK, ROBIN12/19/201800008553AP 806.38806.380.00CAMPBELL, GERALD12/19/201800008554AP 1,608.881,608.880.00CAMPBELL, STEVEN12/19/201800008555AP 511.48511.480.00CARNES, KENNETH12/19/201800008556AP 1,101.281,101.280.00CLABBY, RICHARD12/19/201800008557AP 2,057.832,057.830.00CLOUGHESY, DONALD R12/19/201800008558AP 707.78707.780.00CORCORAN, ROBERT ANTHONY12/19/201800008559AP 2,057.832,057.830.00COSTELLO, DENNIS M12/19/201800008560AP 653.66653.660.00COX, KARL12/19/201800008561AP 1,072.301,072.300.00CRANE, RALPH12/19/201800008562AP 511.48511.480.00CROSSLAND, WILBUR12/19/201800008563AP 1,551.561,551.560.00DAGUE, JAMES12/19/201800008564AP 707.78707.780.00DE ANTONIO, SUSAN12/19/201800008565AP 677.47677.470.00DEANS, JACKIE12/19/201800008566AP 1,102.611,102.610.00DOMINICK, SAMUEL A.12/19/201800008567AP 1,551.561,551.560.00EAGLESON, MICHAEL12/19/201800008568AP 2,057.832,057.830.00EGGERS, BOB12/19/201800008569AP 511.48511.480.00FRITCHEY, JOHN D.12/19/201800008570AP 653.66653.660.00HEYDE, DONALD12/19/201800008571AP 258.83258.830.00INTERLICCHIA, ROSALYN12/19/201800008572AP 1,101.281,101.280.00KILMER, STEPHEN12/19/201800008573AP 1,472.461,472.460.00LARKIN, DAVID W12/19/201800008574AP 1,306.221,306.220.00LEE, ALLAN J.12/19/201800008575AP 1,203.501,203.500.00LENZE, PAUL E12/19/201800008576AP 1,101.281,101.280.00LONCAR, PHILIP12/19/201800008577AP 187.74187.740.00LONGO, JOE12/19/201800008578AP 511.48511.480.00LUTTRULL, DARRELL12/19/201800008579AP 482.64482.640.00MACKALL, BEVERLY12/19/201800008580AP 1,072.301,072.300.00MAYFIELD, RON12/19/201800008581AP 653.66653.660.00MCKEE, JOHN12/19/201800008582AP 653.66653.660.00MCNEIL, KENNETH12/19/201800008583AP 1,102.611,102.610.00MICHAEL, L. DENNIS12/19/201800008584AP 1,731.231,731.230.00MORGAN, BYRON12/19/201800008585AP 08:26:22 01/09/2019Current Date:VLOPEZ - VERONICA LOPEZ Page:1 Time:CK_AGENDA_REG_PORTRAIT_CONSOLIDATED - CK: Agenda Check Register Portrait Layout User: Report: Page 10 AmountFireCityVendor NameCheck Date 12/11/2018 through 1/8/2019 Agenda Check Register RANCHO CUCAMONGA FIRE PROTECTION DISTRICT AND CITY OF RANCHO CUCAMONGA Check No. 1,101.281,101.280.00MYSKOW, DENNIS12/19/201800008586AP 511.48511.480.00NAUMAN, MICHAEL12/19/201800008587AP 677.47677.470.00NEE, RON12/19/201800008588AP 187.74187.740.00NELSON, MARY JANE12/19/201800008589AP 1,551.561,551.560.00O'BRIEN, TOM12/19/201800008590AP 584.82584.820.00PLOUNG, MICHAEL J12/19/201800008591AP 1,503.071,503.070.00POST, MICHAEL R12/19/201800008592AP 2,057.832,057.830.00PROULX, PATRICK12/19/201800008593AP 1,551.561,551.560.00REDMOND, MIKE12/19/201800008594AP 1,551.561,551.560.00ROEDER, JEFF12/19/201800008595AP 653.66653.660.00SALISBURY, THOMAS12/19/201800008596AP 511.48511.480.00SMITH, RONALD12/19/201800008597AP 1,979.021,979.020.00SORENSEN, SCOTT D12/19/201800008598AP 511.48511.480.00SPAGNOLO, SAM12/19/201800008599AP 806.38806.380.00SPAIN, WILLIAM12/19/201800008600AP 511.48511.480.00SULLIVAN, JAMES12/19/201800008601AP 1,605.351,605.350.00TAYLOR, STEVE12/19/201800008602AP 1,551.561,551.560.00TULEY, TERRY12/19/201800008603AP 653.66653.660.00VANDERKALLEN, FRANCIS12/19/201800008604AP 1,102.611,102.610.00VARNEY, ANTHONY12/19/201800008605AP 1,472.461,472.460.00WALTON, KEVIN12/19/201800008606AP 1,490.941,490.940.00YOWELL, TIMOTHY A12/19/201800008607AP 28,589.100.0028,589.10CALIF GOVERNMENT VEBA/RANCHO CUCAMONGA12/19/201800008608AP 1,536.720.001,536.72CHAFFEY JOINT UNION HS DISTRICT12/19/201800008609AP 18,750.000.0018,750.00HD PRODUCTIONS INC12/19/201800008610AP 23,507.500.0023,507.50MICHAEL BAKER INTERNATIONAL INC12/19/201800008611AP 122.710.00122.71MICHAEL, L. DENNIS12/19/201800008612AP 1,819.000.001,819.00RCCEA12/19/201800008613AP 11,982.640.0011,982.64RCPFA12/19/201800008614AP 64,576.300.0064,576.30RE ASTORIA 2 LLC12/19/201800008615AP 24.000.0024.00SAN BERNARDINO COUNTY12/19/201800008616AP 13,140.000.0013,140.00CALIF GOVERNMENT VEBA/RANCHO CUCAMONGA01/02/201900008617AP 1,820.500.001,820.50RCCEA01/02/201900008618AP 11,979.180.0011,979.18RCPFA01/02/201900008619AP 89.430.0089.43A & A AUTOMOTIVE AND TIRE12/12/201800396289AP 2,723.200.002,723.20ABLE BUILDING MAINTENANCE12/12/201800396290AP 299.500.00299.50ABM BUSINESS MACHINES INC12/12/201800396291AP 16,426.510.0016,426.51ABSOLUTE SECURITY INTERNATIONAL INC12/12/201800396292AP 97.530.0097.53ACEY DECY EQUIPMENT INC.12/12/201800396293AP 70.000.0070.00ACOSTA, RAUL HOLGUIN12/12/201800396294AP 1,274.700.001,274.70ACTION CHEMICAL COMPANY12/12/201800396295AP 170.260.00170.26ALL PRO PLUMBING CORPORATION12/12/201800396296AP 400.000.00400.00ALTA VISTA MOBILE HOME PARK12/12/201800396297AP 1,250.000.001,250.00AQUABIO ENVIRONMENTAL TECHNOLOGIES INC.12/12/201800396298AP 85.000.0085.00ARROYO, CRISTEN LEIGH12/12/201800396299AP 88.000.0088.00AUTO AND RV SPECIALISTS INC.12/12/201800396300AP 133.160.00133.16BARNES AND NOBLE12/12/201800396301AP 08:26:22 01/09/2019Current Date:VLOPEZ - VERONICA LOPEZ Page:2 Time:CK_AGENDA_REG_PORTRAIT_CONSOLIDATED - CK: Agenda Check Register Portrait Layout User: Report: Page 11 AmountFireCityVendor NameCheck Date 12/11/2018 through 1/8/2019 Agenda Check Register RANCHO CUCAMONGA FIRE PROTECTION DISTRICT AND CITY OF RANCHO CUCAMONGA Check No. 377.900.00377.90BEAVERS, DAVID12/12/201800396302AP 20.750.0020.75BLACK, MARTHA12/12/201800396303AP 46,161.370.0046,161.37BRIGHTVIEW LANDSCAPE SERVICES INC.12/12/201800396304AP 10,049.110.0010,049.11BUREAU VERITAS NORTH AMERICA INC12/12/201800396305AP ***67,967.79907.3967,060.40C V W D12/12/201800396308AP 600.000.00600.00CA LLC - DBA ALTA LAGUNA MHP12/12/201800396309AP 800.000.00800.00CASA VOLANTE MOBILE HOME PARK12/12/201800396310AP 50.000.0050.00CCAC12/12/201800396311AP 253,820.490.00253,820.49CCI SYSTEMS INC12/12/201800396312AP 1,492.841,492.840.00CCS ORANGE COUNTY JANITORIAL INC.12/12/201800396313AP 525.940.00525.94CHAFFEY COLLEGE12/12/201800396314AP 193.950.00193.95CHAMPION AWARDS AND SPECIALTIES12/12/201800396315AP 500.000.00500.00CHAPARRAL HEIGHTS MOBILE HOME PARK12/12/201800396316AP 80,422.340.0080,422.34CHARTER COMMUNICATIONS12/12/201800396317AP 177.730.00177.73CHINO MOWER AND ENGINE SERVICE12/12/201800396318AP 4,412.020.004,412.02CINTAS CORPORATION #15012/12/201800396319AP 72.000.0072.00CORDERO, ADRIAN C.12/12/201800396320AP 145.000.00145.00CPRS12/12/201800396321AP 145.000.00145.00CPRS12/12/201800396322AP 145.000.00145.00CPRS12/12/201800396323AP 3,033.760.003,033.76D AND K CONCRETE COMPANY12/12/201800396324AP 1,472.360.001,472.36DAISY12/12/201800396325AP 114.000.00114.00DENDULK, BRADLEY GERARD12/12/201800396326AP 76.000.0076.00DEPARTMENT OF MOTOR VEHICLES12/12/201800396327AP 76.000.0076.00DEPARTMENT OF MOTOR VEHICLES12/12/201800396328AP 76.000.0076.00DEPARTMENT OF MOTOR VEHICLES12/12/201800396329AP 76.000.0076.00DEPARTMENT OF MOTOR VEHICLES12/12/201800396330AP 76.000.0076.00DEPARTMENT OF MOTOR VEHICLES12/12/201800396331AP 76.000.0076.00DEPARTMENT OF MOTOR VEHICLES12/12/201800396332AP 75.000.0075.00DEPARTMENT OF MOTOR VEHICLES12/12/201800396333AP 324.270.00324.27DIRECTV12/12/201800396334AP 52.200.0052.20DREAM2INSPIRE LLC12/12/201800396335AP 3,386.010.003,386.01E-Z-GO12/12/201800396336AP 22,060.290.0022,060.29ECS GLOBAL SOLUTIONS12/12/201800396337AP 23,403.170.0023,403.17ECS GLOBAL SOLUTIONS12/12/201800396338AP 97.000.0097.00EDWARDS, BARBARA12/12/201800396339AP 1,156.820.001,156.82ELITE CUSTOMS CONSTRUCTION12/12/201800396340AP 139.000.00139.00ESPINOZA, JAVIER12/12/201800396341AP 250.000.00250.00EUE, RONISHA12/12/201800396342AP 615.190.00615.19EXPRESS BRAKE SUPPLY12/12/201800396343AP 27.900.0027.90FEDERAL EXPRESS CORP12/12/201800396344AP 84.000.0084.00FIGUEROA, GRACIEZA12/12/201800396345AP 2,020.170.002,020.17FORD OF UPLAND INC12/12/201800396346AP 30,000.000.0030,000.00FOX FAMILY TRUST12/12/201800396347AP 1,740.000.001,740.00FRAZER CONSTRUCTION CO12/12/201800396348AP ***2,197.46367.691,829.77FRONTIER COMM12/12/201800396349AP 1,575.740.001,575.74FRONTIER COMM12/12/201800396350AP 08:26:22 01/09/2019Current Date:VLOPEZ - 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VERONICA LOPEZ Page:10 Time:CK_AGENDA_REG_PORTRAIT_CONSOLIDATED - CK: Agenda Check Register Portrait Layout User: Report: Page 19 AmountFireCityVendor NameCheck Date 12/11/2018 through 1/8/2019 Agenda Check Register RANCHO CUCAMONGA FIRE PROTECTION DISTRICT AND CITY OF RANCHO CUCAMONGA Check No. 432.000.00432.00TYUS, IDA12/19/201800396692AP 308.200.00308.20U S LEGAL SUPPORT INC12/19/201800396693AP 503.190.00503.19ULINE12/19/201800396694AP 93.000.0093.00UNITED WAY12/19/201800396695AP 472.500.00472.50UNIVERSAL MARTIAL ARTS CENTERS12/19/201800396696AP 108.000.00108.00UPS12/19/201800396697AP 5,000.000.005,000.00US POSTMASTER12/19/201800396698AP 4,800.000.004,800.00VANDERHAWK CONSULTING LLC12/19/201800396699AP 26.670.0026.67VERIZON12/19/201800396700AP 11.450.0011.45VERIZON WIRELESS - LA12/19/201800396701AP 101.730.00101.73VERIZON WIRELESS - LA12/19/201800396702AP 4,755.560.004,755.56VERIZON WIRELESS - LA12/19/201800396703AP 16,510.000.0016,510.00VICTOR MEDICAL COMPANY12/19/201800396704AP 50.000.0050.00VICTORIA ANIMAL HOSPITAL12/19/201800396705AP 106.260.00106.26VICTORINO, VALERIE12/19/201800396706AP 500.000.00500.00VIRTUAL PROJECT MANAGER INC12/19/201800396707AP 11,404.510.0011,404.51VISION SERVICE PLAN CA12/19/201800396708AP 125.000.00125.00VOHNE LICHE KENNELS INC12/19/201800396709AP 14,581.780.0014,581.78VULCAN MATERIALS COMPANY12/19/201800396710AP 7,784.830.007,784.83WAXIE SANITARY SUPPLY12/19/201800396711AP 1,605.000.001,605.00WESTERN UNIVERSITY OF HEALTH SCIENCE12/19/201800396712AP 8,338.500.008,338.50WESTLAND GROUP INC12/19/201800396713AP 355.580.00355.58WHITTIER FERTILIZER12/19/201800396714AP 306.13306.130.00WINZER CORPORATION12/19/201800396715AP 125,641.510.00125,641.51WONDRIES FLEET GROUP12/19/201800396716AP 3,229.270.003,229.27WORLD BOOK INC12/19/201800396717AP 2,709.960.002,709.96ZOETIS US LLC12/19/201800396718AP 288.270.00288.27ZONES CORPORATE SOLUTIONS12/19/201800396719AP 24.560.0024.56HUTCHISON, RYAN12/19/201800396720AP 26.920.0026.92ABC LOCKSMITHS12/20/201800396721AP ***586.81301.75285.06AIRGAS USA LLC12/20/201800396722AP 312.040.00312.04B AND K ELECTRIC WHOLESALE12/20/201800396723AP 211.180.00211.18DEMCO INC12/20/201800396724AP ***4,755.50600.004,155.50DUMBELL MAN FITNESS EQUIPMENT, THE12/20/201800396725AP 33,122.000.0033,122.00EMCOR SERVICE12/20/201800396726AP 2,072.480.002,072.48GRANICUS INC12/20/201800396727AP 299.110.00299.11HENRY SCHEIN ANIMAL HEALTH SUPPLY12/20/201800396728AP 208.110.00208.11HOSE MAN INC12/20/201800396729AP 1,944.600.001,944.60INLAND VALLEY DAILY BULLETIN12/20/201800396730AP 660.000.00660.00INLAND VALLEY DAILY BULLETIN12/20/201800396731AP 453.26453.260.00LN CURTIS AND SONS12/20/201800396732AP 819.910.00819.91OC TANNER RECOGNITION COMPANY12/20/201800396733AP ***557.82397.19160.63OFFICE DEPOT12/20/201800396734AP 38.790.0038.79PSA PRINT GROUP12/20/201800396735AP 1,002.100.001,002.10SITEONE LANDSCAPE SUPPLY LLC12/20/201800396736AP 835.070.00835.07STOVER SEED COMPANY12/20/201800396737AP 4,233.650.004,233.65A & M FIRST AID INC01/02/201900396738AP 08:26:22 01/09/2019Current Date:VLOPEZ - VERONICA LOPEZ Page:11 Time:CK_AGENDA_REG_PORTRAIT_CONSOLIDATED - CK: Agenda Check Register Portrait Layout User: Report: Page 20 AmountFireCityVendor NameCheck Date 12/11/2018 through 1/8/2019 Agenda Check Register RANCHO CUCAMONGA FIRE PROTECTION DISTRICT AND CITY OF RANCHO CUCAMONGA Check No. 186.280.00186.28ACEY DECY EQUIPMENT INC.01/02/201900396739AP 40.970.0040.97AFLAC GROUP INSURANCE01/02/201900396740AP 1,745.000.001,745.00AQUABIO ENVIRONMENTAL TECHNOLOGIES INC.01/02/201900396741AP 86.4686.460.00AT&T MOBILITY01/02/201900396742AP 2,460.000.002,460.00AUFBAU CORPORATION01/02/201900396743AP 2,463.580.002,463.58BC TRAFFIC SPECIALISTS01/02/201900396744AP 280.000.00280.00BOSTON COURT PERFORMING ARTS CENTER01/02/201900396745AP 5,799.950.005,799.95CALIFORNIA BANK & TRUST01/02/201900396746AP 317.650.00317.65CALIFORNIA, STATE OF01/02/201900396747AP 250.000.00250.00CALIFORNIA, STATE OF01/02/201900396748AP 314.110.00314.11CALIFORNIA, STATE OF01/02/201900396749AP 7.220.007.22CALIFORNIA, STATE OF01/02/201900396750AP 8.440.008.44CALIFORNIA, STATE OF01/02/201900396751AP 100.000.00100.00CALIFORNIA, STATE OF01/02/201900396752AP 89,029.600.0089,029.60CALIX INC.01/02/201900396753AP 76,975.540.0076,975.54CCI SYSTEMS INC01/02/201900396754AP 250.000.00250.00CHANOCUA, MARIA01/02/201900396755AP 6,221.500.006,221.50COMMERCIAL TRANSPORTATION SERVICES INC.01/02/201900396756AP 8,316.380.008,316.38CYBER SECURITY SOURCE01/02/201900396757AP 270.00270.000.00EDDY, MATTHEW W.01/02/201900396758AP 527.000.00527.00ENN GEE CORP.01/02/201900396759AP 13.940.0013.94FEDERAL EXPRESS CORP01/02/201900396760AP 502.250.00502.25FORD OF UPLAND INC01/02/201900396761AP 784.230.00784.23G AND M BUSINESS INTERIORS01/02/201900396762AP 821.700.00821.70GEORGE HILLS COMPANY01/02/201900396763AP 2,490.000.002,490.00GRIFFIN STRUCTURES INC01/02/201900396764AP 58.870.0058.87HOME DEPOT CREDIT SERVICES 64501/02/201900396765AP 1,164.320.001,164.32HONDA YAMAHA HUSQVARNA OF REDLANDS01/02/201900396766AP 6,486.910.006,486.91IDEXX DISTRIBUTION INC01/02/201900396767AP 743.480.00743.48INDUSTRIAL HARDWARE AND SERVICE CO01/02/201900396768AP 420.230.00420.23INDUSTRIAL SUPPLY CO INC01/02/201900396769AP 450.000.00450.00INLAND EMPIRE REGIONAL COMPOSTING AUTHORITY01/02/201900396770AP 276.500.00276.50INLAND VALLEY EMERGENCY PET CLINIC01/02/201900396771AP 3,474.460.003,474.46INLAND VALLEY RV SERVICE & SUPPLIES01/02/201900396772AP 2,835.980.002,835.98J J KELLER AND ASSOC INC01/02/201900396773AP 30.000.0030.00KWAPINSKI, SASHA01/02/201900396774AP 3,035.320.003,035.32LENOVO (UNITED STATES) INC.01/02/201900396775AP 35.000.0035.00LIEBERT CASSIDY WHITMORE01/02/201900396776AP ***25,321.911,998.3223,323.59MARIPOSA LANDSCAPES INC01/02/201900396777AP 50.000.0050.00MARY S ROBERTS SPAY/NEUTER CLINIC01/02/201900396778AP 1,007.150.001,007.15MC AVOY & MARKHAM01/02/201900396779AP 845.000.00845.00MEDIWASTE DISPOSAL01/02/201900396780AP 2,910.190.002,910.19MIDWEST TAPE01/02/201900396781AP ***54.0036.0018.00MIJAC ALARM COMPANY01/02/201900396782AP 30.000.0030.00MORRO, NICHOLE R01/02/201900396783AP 94.820.0094.82MOUNTAIN VIEW GLASS AND MIRROR INC01/02/201900396784AP 1,176.191,176.190.00NAPA AUTO PARTS01/02/201900396785AP 08:26:22 01/09/2019Current Date:VLOPEZ - VERONICA LOPEZ Page:12 Time:CK_AGENDA_REG_PORTRAIT_CONSOLIDATED - CK: Agenda Check Register Portrait Layout User: Report: Page 21 AmountFireCityVendor NameCheck Date 12/11/2018 through 1/8/2019 Agenda Check Register RANCHO CUCAMONGA FIRE PROTECTION DISTRICT AND CITY OF RANCHO CUCAMONGA Check No. 869.540.00869.54NEWCO DISTRIBUTORS INC01/02/201900396786AP 15,652.500.0015,652.50NINYO & MOORE01/02/201900396787AP 4,508.000.004,508.00NINYO & MOORE01/02/201900396788AP 13,962.000.0013,962.00NINYO & MOORE01/02/201900396789AP 250.000.00250.00ONTARIO SPAY AND NEUTER INC01/02/201900396790AP 44.970.0044.97ONTRAC01/02/201900396791AP 11,495.000.0011,495.00ONWARD ENGINEERING01/02/201900396792AP 396.000.00396.00OPARC01/02/201900396793AP 210.000.00210.00PORAC01/02/201900396794AP 229.500.00229.50PORAC LEGAL DEFENSE FUND01/02/201900396795AP 66.980.0066.98PRE-PAID LEGAL SERVICES INC01/02/201900396796AP 6,922.500.006,922.50PSOMAS01/02/201900396797AP 433.120.00433.12R AND R AUTOMOTIVE01/02/201900396798AP 466.450.00466.45RANCHO REGIONAL VETERINARY HOSPITAL INC01/02/201900396799AP 12.930.0012.93RBM LOCK AND KEY SERVICE01/02/201900396800AP 6,000.000.006,000.00RCPD RESERVE UNIT 13401/02/201900396801AP 730,259.290.00730,259.29RJ NOBLE COMPANY01/02/201900396802AP 1,050.000.001,050.00ROTO ROOTER01/02/201900396803AP 1,583.310.001,583.31SBPEA01/02/201900396804AP 100.000.00100.00SHERIFFS COURT SERVICES01/02/201900396805AP 251.570.00251.57SHOETERIA01/02/201900396806AP 184.08184.080.00SIGN SHOP, THE01/02/201900396807AP 5,453.340.005,453.34SILVER & WRIGHT LLP01/02/201900396808AP 153.96153.960.00SO CALIF GAS COMPANY01/02/201900396809AP 560.000.00560.00STOR'EM SELF STORAGE01/02/201900396810AP 715.410.00715.41STOTZ EQUIPMENT01/02/201900396811AP 860.920.00860.92THOMPSON BUILDING MATERIALS01/02/201900396812AP 110,199.280.00110,199.28TOVEY/SHULTZ CONSTRUCTION INC01/02/201900396813AP 1,304.870.001,304.87U.S. BANK PARS ACCT #674602250001/02/201900396814AP 16,758.120.0016,758.12U.S. BANK PARS ACCT #674602250001/02/201900396815AP 6,605.000.006,605.00U.S. BANK PARS ACCT #674503370001/02/201900396816AP 93.000.0093.00UNITED WAY01/02/201900396817AP 12,000.000.0012,000.00UPBEAT PARADE PRODUCTIONS01/02/201900396818AP 10,064.590.0010,064.59BRODART BOOKS01/03/201900396821AP 314.100.00314.10DIAMOND ENVIRONMENTAL SERVICES01/03/201900396822AP ***3,051.17160.702,890.47OFFICE DEPOT01/03/201900396824AP 59.950.0059.95SAFELITE FULFILLMENT INC01/03/201900396825AP $4,170,480.05 $144,845.45 Note: Grand Total: Total Fire: $4,025,634.60Total City: *** Check Number includes both City and Fire District expenditures 08:26:22 01/09/2019Current Date:VLOPEZ - VERONICA LOPEZ Page:13 Time:CK_AGENDA_REG_PORTRAIT_CONSOLIDATED - CK: Agenda Check Register Portrait Layout User: Report: Page 22 D AT E : J anuary 16, 2019 T O:P resident and Members of the B oard of D irectors F RO M :L ori E . S assoon, Deputy City Manager/Administrative Services INIT IAT E D B Y:Tamara L . L ayne, F inance D irector S andra G. Ramirez, Management Analyst I I I S UB J E C T:C O NS ID E RAT I O N T O RE C E IV E AND F IL E C URRE NT I NV E S T M E NT S C HE D UL E AS O F D E C E M B E R 31, 2018. RE COMMENDAT ION: Staf f recommends that the President and Members of the Board of D irectors receive and file the attached current investment schedule for the R ancho C ucamonga F ire P rotection District as of December 31, 2018. BACKGROUND: T he attached investment schedule as of December 31, 2018 reflects cash and investments managed by the F inance/Treasury Management Division and is in conf ormity with the requirements of California Government C ode S ection 53601 and the Rancho Cucamonga F ire P rotection District’s adopted I nvestment P olicy as approved by the P resident and Members of the B oard of D irectors on April 17, 2017. ANALY S IS: T he District’s Treasurer is required to submit a quarterly investment report to the P resident and Members of the B oard of D irectors in accordance with California Government C ode S ection 53646. T he quarterly investment report is required to be submitted within 30 days following the end of the quarter covered by the report. However, the D istrict Treasurer has elected to provide this report on a monthly basis. FISCAL IMPACT: None COUNCIL GOAL(S) ADDRE S S E D: N/A AT TAC HM E NT S : D escription Attachment 1 - Portfolio Management - P ortf olio Summary D ecember 31, 2018 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F RO M :J ohn R . Gillison, C ity Manager INIT IAT E D B Y:Tamara L ayne, F inance D irector S UB J E C T:C O NS ID E RAT I O N T O AP P RO V E B I-WE E K LY PAY RO L L I N T HE AM O UNT O F $2,491,683.72 AND WE E K LY C HE C K RE G IS T E RS IN T HE AM O UNT O F $4,025,634.60. D AT E D D E C E M B E R 11, 2018 T HRO UG H J ANUARY 08, 2019. RE COMMENDAT ION: Staf f recommends City Council approve payment of demands as presented. BACKGROUND: N/A ANALY S IS: N/A FISCAL IMPACT: Adequate budgeted funds are available for the payment of demands per the attached listing. COUNCIL GOAL(S) ADDRE S S E D: N/A AT TAC HM E NT S : D escription Attachment 1 Check Register Page 30 AmountFireCityVendor NameCheck Date 12/11/2018 through 1/8/2019 Agenda Check Register RANCHO CUCAMONGA FIRE PROTECTION DISTRICT AND CITY OF RANCHO CUCAMONGA Check No. 39,395.960.0039,395.96ALL CITY MANAGEMENT SERVICES INC.12/12/201800008539AP 892.880.00892.88BUREAU OF RECLAMATION12/12/201800008540AP 13,800.000.0013,800.00EDF TRADING NORTH AMERICA LLC12/12/201800008541AP 10,966.080.0010,966.08NORMAN A TRAUB ASSOCIATES12/12/201800008542AP 6,909.000.006,909.00RIVERSIDE, CITY OF12/12/201800008543AP 149.000.00149.00SAN BERNARDINO COUNTY12/12/201800008544AP 196,437.500.00196,437.50SHELL ENERGY NORTH AMERICA12/12/201800008545AP 9,292.680.009,292.68US DEPARTMENT OF ENERGY12/12/201800008546AP 653.66653.660.00AHUMADA, ALEXANDER R12/19/201800008547AP 653.66653.660.00ALMAND, LLOYD12/19/201800008548AP 511.48511.480.00BANTAU, VICTORIA12/19/201800008549AP 677.47677.470.00BAZAL, SUSAN12/19/201800008550AP 1,551.561,551.560.00BELL, MICHAEL L.12/19/201800008551AP 1,101.281,101.280.00BERRY, DAVID12/19/201800008552AP 1,102.611,102.610.00BROCK, ROBIN12/19/201800008553AP 806.38806.380.00CAMPBELL, GERALD12/19/201800008554AP 1,608.881,608.880.00CAMPBELL, STEVEN12/19/201800008555AP 511.48511.480.00CARNES, KENNETH12/19/201800008556AP 1,101.281,101.280.00CLABBY, RICHARD12/19/201800008557AP 2,057.832,057.830.00CLOUGHESY, DONALD R12/19/201800008558AP 707.78707.780.00CORCORAN, ROBERT ANTHONY12/19/201800008559AP 2,057.832,057.830.00COSTELLO, DENNIS M12/19/201800008560AP 653.66653.660.00COX, KARL12/19/201800008561AP 1,072.301,072.300.00CRANE, RALPH12/19/201800008562AP 511.48511.480.00CROSSLAND, WILBUR12/19/201800008563AP 1,551.561,551.560.00DAGUE, JAMES12/19/201800008564AP 707.78707.780.00DE ANTONIO, SUSAN12/19/201800008565AP 677.47677.470.00DEANS, JACKIE12/19/201800008566AP 1,102.611,102.610.00DOMINICK, SAMUEL A.12/19/201800008567AP 1,551.561,551.560.00EAGLESON, MICHAEL12/19/201800008568AP 2,057.832,057.830.00EGGERS, BOB12/19/201800008569AP 511.48511.480.00FRITCHEY, JOHN D.12/19/201800008570AP 653.66653.660.00HEYDE, DONALD12/19/201800008571AP 258.83258.830.00INTERLICCHIA, ROSALYN12/19/201800008572AP 1,101.281,101.280.00KILMER, STEPHEN12/19/201800008573AP 1,472.461,472.460.00LARKIN, DAVID W12/19/201800008574AP 1,306.221,306.220.00LEE, ALLAN J.12/19/201800008575AP 1,203.501,203.500.00LENZE, PAUL E12/19/201800008576AP 1,101.281,101.280.00LONCAR, PHILIP12/19/201800008577AP 187.74187.740.00LONGO, JOE12/19/201800008578AP 511.48511.480.00LUTTRULL, DARRELL12/19/201800008579AP 482.64482.640.00MACKALL, BEVERLY12/19/201800008580AP 1,072.301,072.300.00MAYFIELD, RON12/19/201800008581AP 653.66653.660.00MCKEE, JOHN12/19/201800008582AP 653.66653.660.00MCNEIL, KENNETH12/19/201800008583AP 1,102.611,102.610.00MICHAEL, L. 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VERONICA LOPEZ Page:10 Time:CK_AGENDA_REG_PORTRAIT_CONSOLIDATED - CK: Agenda Check Register Portrait Layout User: Report: Page 40 AmountFireCityVendor NameCheck Date 12/11/2018 through 1/8/2019 Agenda Check Register RANCHO CUCAMONGA FIRE PROTECTION DISTRICT AND CITY OF RANCHO CUCAMONGA Check No. 432.000.00432.00TYUS, IDA12/19/201800396692AP 308.200.00308.20U S LEGAL SUPPORT INC12/19/201800396693AP 503.190.00503.19ULINE12/19/201800396694AP 93.000.0093.00UNITED WAY12/19/201800396695AP 472.500.00472.50UNIVERSAL MARTIAL ARTS CENTERS12/19/201800396696AP 108.000.00108.00UPS12/19/201800396697AP 5,000.000.005,000.00US POSTMASTER12/19/201800396698AP 4,800.000.004,800.00VANDERHAWK CONSULTING LLC12/19/201800396699AP 26.670.0026.67VERIZON12/19/201800396700AP 11.450.0011.45VERIZON WIRELESS - LA12/19/201800396701AP 101.730.00101.73VERIZON WIRELESS - LA12/19/201800396702AP 4,755.560.004,755.56VERIZON WIRELESS - LA12/19/201800396703AP 16,510.000.0016,510.00VICTOR MEDICAL COMPANY12/19/201800396704AP 50.000.0050.00VICTORIA ANIMAL HOSPITAL12/19/201800396705AP 106.260.00106.26VICTORINO, VALERIE12/19/201800396706AP 500.000.00500.00VIRTUAL PROJECT MANAGER INC12/19/201800396707AP 11,404.510.0011,404.51VISION SERVICE PLAN CA12/19/201800396708AP 125.000.00125.00VOHNE LICHE KENNELS INC12/19/201800396709AP 14,581.780.0014,581.78VULCAN MATERIALS COMPANY12/19/201800396710AP 7,784.830.007,784.83WAXIE SANITARY SUPPLY12/19/201800396711AP 1,605.000.001,605.00WESTERN UNIVERSITY OF HEALTH SCIENCE12/19/201800396712AP 8,338.500.008,338.50WESTLAND GROUP INC12/19/201800396713AP 355.580.00355.58WHITTIER FERTILIZER12/19/201800396714AP 306.13306.130.00WINZER CORPORATION12/19/201800396715AP 125,641.510.00125,641.51WONDRIES FLEET GROUP12/19/201800396716AP 3,229.270.003,229.27WORLD BOOK INC12/19/201800396717AP 2,709.960.002,709.96ZOETIS US LLC12/19/201800396718AP 288.270.00288.27ZONES CORPORATE SOLUTIONS12/19/201800396719AP 24.560.0024.56HUTCHISON, RYAN12/19/201800396720AP 26.920.0026.92ABC LOCKSMITHS12/20/201800396721AP ***586.81301.75285.06AIRGAS USA LLC12/20/201800396722AP 312.040.00312.04B AND K ELECTRIC WHOLESALE12/20/201800396723AP 211.180.00211.18DEMCO INC12/20/201800396724AP ***4,755.50600.004,155.50DUMBELL MAN FITNESS EQUIPMENT, THE12/20/201800396725AP 33,122.000.0033,122.00EMCOR SERVICE12/20/201800396726AP 2,072.480.002,072.48GRANICUS INC12/20/201800396727AP 299.110.00299.11HENRY SCHEIN ANIMAL HEALTH SUPPLY12/20/201800396728AP 208.110.00208.11HOSE MAN INC12/20/201800396729AP 1,944.600.001,944.60INLAND VALLEY DAILY BULLETIN12/20/201800396730AP 660.000.00660.00INLAND VALLEY DAILY BULLETIN12/20/201800396731AP 453.26453.260.00LN CURTIS AND SONS12/20/201800396732AP 819.910.00819.91OC TANNER RECOGNITION COMPANY12/20/201800396733AP ***557.82397.19160.63OFFICE DEPOT12/20/201800396734AP 38.790.0038.79PSA PRINT GROUP12/20/201800396735AP 1,002.100.001,002.10SITEONE LANDSCAPE SUPPLY LLC12/20/201800396736AP 835.070.00835.07STOVER SEED COMPANY12/20/201800396737AP 4,233.650.004,233.65A & M FIRST AID INC01/02/201900396738AP 08:26:22 01/09/2019Current Date:VLOPEZ - VERONICA LOPEZ Page:11 Time:CK_AGENDA_REG_PORTRAIT_CONSOLIDATED - CK: Agenda Check Register Portrait Layout User: Report: Page 41 AmountFireCityVendor NameCheck Date 12/11/2018 through 1/8/2019 Agenda Check Register RANCHO CUCAMONGA FIRE PROTECTION DISTRICT AND CITY OF RANCHO CUCAMONGA Check No. 186.280.00186.28ACEY DECY EQUIPMENT INC.01/02/201900396739AP 40.970.0040.97AFLAC GROUP INSURANCE01/02/201900396740AP 1,745.000.001,745.00AQUABIO ENVIRONMENTAL TECHNOLOGIES INC.01/02/201900396741AP 86.4686.460.00AT&T MOBILITY01/02/201900396742AP 2,460.000.002,460.00AUFBAU CORPORATION01/02/201900396743AP 2,463.580.002,463.58BC TRAFFIC SPECIALISTS01/02/201900396744AP 280.000.00280.00BOSTON COURT PERFORMING ARTS CENTER01/02/201900396745AP 5,799.950.005,799.95CALIFORNIA BANK & TRUST01/02/201900396746AP 317.650.00317.65CALIFORNIA, STATE OF01/02/201900396747AP 250.000.00250.00CALIFORNIA, STATE OF01/02/201900396748AP 314.110.00314.11CALIFORNIA, STATE OF01/02/201900396749AP 7.220.007.22CALIFORNIA, STATE OF01/02/201900396750AP 8.440.008.44CALIFORNIA, STATE OF01/02/201900396751AP 100.000.00100.00CALIFORNIA, STATE OF01/02/201900396752AP 89,029.600.0089,029.60CALIX INC.01/02/201900396753AP 76,975.540.0076,975.54CCI SYSTEMS INC01/02/201900396754AP 250.000.00250.00CHANOCUA, MARIA01/02/201900396755AP 6,221.500.006,221.50COMMERCIAL TRANSPORTATION SERVICES INC.01/02/201900396756AP 8,316.380.008,316.38CYBER SECURITY SOURCE01/02/201900396757AP 270.00270.000.00EDDY, MATTHEW W.01/02/201900396758AP 527.000.00527.00ENN GEE CORP.01/02/201900396759AP 13.940.0013.94FEDERAL EXPRESS CORP01/02/201900396760AP 502.250.00502.25FORD OF UPLAND INC01/02/201900396761AP 784.230.00784.23G AND M BUSINESS INTERIORS01/02/201900396762AP 821.700.00821.70GEORGE HILLS COMPANY01/02/201900396763AP 2,490.000.002,490.00GRIFFIN STRUCTURES INC01/02/201900396764AP 58.870.0058.87HOME DEPOT CREDIT SERVICES 64501/02/201900396765AP 1,164.320.001,164.32HONDA YAMAHA HUSQVARNA OF REDLANDS01/02/201900396766AP 6,486.910.006,486.91IDEXX DISTRIBUTION INC01/02/201900396767AP 743.480.00743.48INDUSTRIAL HARDWARE AND SERVICE CO01/02/201900396768AP 420.230.00420.23INDUSTRIAL SUPPLY CO INC01/02/201900396769AP 450.000.00450.00INLAND EMPIRE REGIONAL COMPOSTING AUTHORITY01/02/201900396770AP 276.500.00276.50INLAND VALLEY EMERGENCY PET CLINIC01/02/201900396771AP 3,474.460.003,474.46INLAND VALLEY RV SERVICE & SUPPLIES01/02/201900396772AP 2,835.980.002,835.98J J KELLER AND ASSOC INC01/02/201900396773AP 30.000.0030.00KWAPINSKI, SASHA01/02/201900396774AP 3,035.320.003,035.32LENOVO (UNITED STATES) INC.01/02/201900396775AP 35.000.0035.00LIEBERT CASSIDY WHITMORE01/02/201900396776AP ***25,321.911,998.3223,323.59MARIPOSA LANDSCAPES INC01/02/201900396777AP 50.000.0050.00MARY S ROBERTS SPAY/NEUTER CLINIC01/02/201900396778AP 1,007.150.001,007.15MC AVOY & MARKHAM01/02/201900396779AP 845.000.00845.00MEDIWASTE DISPOSAL01/02/201900396780AP 2,910.190.002,910.19MIDWEST TAPE01/02/201900396781AP ***54.0036.0018.00MIJAC ALARM COMPANY01/02/201900396782AP 30.000.0030.00MORRO, NICHOLE R01/02/201900396783AP 94.820.0094.82MOUNTAIN VIEW GLASS AND MIRROR INC01/02/201900396784AP 1,176.191,176.190.00NAPA AUTO PARTS01/02/201900396785AP 08:26:22 01/09/2019Current Date:VLOPEZ - VERONICA LOPEZ Page:12 Time:CK_AGENDA_REG_PORTRAIT_CONSOLIDATED - CK: Agenda Check Register Portrait Layout User: Report: Page 42 AmountFireCityVendor NameCheck Date 12/11/2018 through 1/8/2019 Agenda Check Register RANCHO CUCAMONGA FIRE PROTECTION DISTRICT AND CITY OF RANCHO CUCAMONGA Check No. 869.540.00869.54NEWCO DISTRIBUTORS INC01/02/201900396786AP 15,652.500.0015,652.50NINYO & MOORE01/02/201900396787AP 4,508.000.004,508.00NINYO & MOORE01/02/201900396788AP 13,962.000.0013,962.00NINYO & MOORE01/02/201900396789AP 250.000.00250.00ONTARIO SPAY AND NEUTER INC01/02/201900396790AP 44.970.0044.97ONTRAC01/02/201900396791AP 11,495.000.0011,495.00ONWARD ENGINEERING01/02/201900396792AP 396.000.00396.00OPARC01/02/201900396793AP 210.000.00210.00PORAC01/02/201900396794AP 229.500.00229.50PORAC LEGAL DEFENSE FUND01/02/201900396795AP 66.980.0066.98PRE-PAID LEGAL SERVICES INC01/02/201900396796AP 6,922.500.006,922.50PSOMAS01/02/201900396797AP 433.120.00433.12R AND R AUTOMOTIVE01/02/201900396798AP 466.450.00466.45RANCHO REGIONAL VETERINARY HOSPITAL INC01/02/201900396799AP 12.930.0012.93RBM LOCK AND KEY SERVICE01/02/201900396800AP 6,000.000.006,000.00RCPD RESERVE UNIT 13401/02/201900396801AP 730,259.290.00730,259.29RJ NOBLE COMPANY01/02/201900396802AP 1,050.000.001,050.00ROTO ROOTER01/02/201900396803AP 1,583.310.001,583.31SBPEA01/02/201900396804AP 100.000.00100.00SHERIFFS COURT SERVICES01/02/201900396805AP 251.570.00251.57SHOETERIA01/02/201900396806AP 184.08184.080.00SIGN SHOP, THE01/02/201900396807AP 5,453.340.005,453.34SILVER & WRIGHT LLP01/02/201900396808AP 153.96153.960.00SO CALIF GAS COMPANY01/02/201900396809AP 560.000.00560.00STOR'EM SELF STORAGE01/02/201900396810AP 715.410.00715.41STOTZ EQUIPMENT01/02/201900396811AP 860.920.00860.92THOMPSON BUILDING MATERIALS01/02/201900396812AP 110,199.280.00110,199.28TOVEY/SHULTZ CONSTRUCTION INC01/02/201900396813AP 1,304.870.001,304.87U.S. BANK PARS ACCT #674602250001/02/201900396814AP 16,758.120.0016,758.12U.S. BANK PARS ACCT #674602250001/02/201900396815AP 6,605.000.006,605.00U.S. BANK PARS ACCT #674503370001/02/201900396816AP 93.000.0093.00UNITED WAY01/02/201900396817AP 12,000.000.0012,000.00UPBEAT PARADE PRODUCTIONS01/02/201900396818AP 10,064.590.0010,064.59BRODART BOOKS01/03/201900396821AP 314.100.00314.10DIAMOND ENVIRONMENTAL SERVICES01/03/201900396822AP ***3,051.17160.702,890.47OFFICE DEPOT01/03/201900396824AP 59.950.0059.95SAFELITE FULFILLMENT INC01/03/201900396825AP $4,170,480.05 $144,845.45 Note: Grand Total: Total Fire: $4,025,634.60Total City: *** Check Number includes both City and Fire District expenditures 08:26:22 01/09/2019Current Date:VLOPEZ - VERONICA LOPEZ Page:13 Time:CK_AGENDA_REG_PORTRAIT_CONSOLIDATED - CK: Agenda Check Register Portrait Layout User: Report: Page 43 D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F RO M :J ames C . F rost, C ity Treasurer INIT IAT E D B Y:L ori E . S assoon, Deputy City Manager/Administrative Services Tamara L . L ayne, F inance D irector S andra G. Ramirez, Management Analyst I I I S UB J E C T:C O NS ID E RAT I O N T O RE C E IV E AND F IL E C URRE NT I NV E S T M E NT S C HE D UL E AS O F D E C E M B E R 31, 2018. RE COMMENDAT ION: Staf f recommends that the City C ouncil receive and f ile the attached current investment schedule for the C ity of R ancho Cucamonga as of D ecember 31, 2018. BACKGROUND: T he attached investment schedule as of December 31, 2018 reflects cash and investments managed by the F inance/Treasury Management Division and is in conf ormity with the requirements of California Government Code S ection 53601 and the City of Rancho Cucamonga’s adopted I nvestment P olicy as approved by the City Council on A pril 17, 2017. ANALY S IS: T he City Treasurer is required to submit a quarterly investment report to the City Council in accordance with C alif ornia Government Code Section 53646. T he quarterly investment report is required to be submitted within 30 days f ollowing the end of the quarter covered by the report. However, the C ity Treasurer has elected to provide this report on a monthly basis. FISCAL IMPACT: None COUNCIL GOAL(S) ADDRE S S E D: N/A AT TAC HM E NT S : D escription Attachment 1 - Portfolio Management - P ortf olio Summary D ecember 31, 2018 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F RO M :J ohn R . Gillison, C ity Manager INIT IAT E D B Y:J ason C . Welday, D irector of E ngineering Services/C ity Engineer Gianf ranco L aurie, Senior Civil Engineer S UB J E C T:C O NS ID E RAT I O N T O AC C E P T AS C O M P L E T E , F IL E T HE NO T IC E O F C O M P L E T I O N, AND AUT HO RIZE RE L E AS E O F RE T E NT I O N AND B O ND S F O R T HE F IS C AL Y E AR 2016/17 I NS TAL L AT I O N O F F O UR (4) T RAF F IC S I G NAL S AT VARI O US L O C AT IO NS P RO J E C T. RE COMMENDAT ION: Staf f recommends that the City Council: 1. Accept the F iscal Year 2016/17 I nstallation of F our (4) Traf f ic S ignals at Various L ocations P roject, C ontract No. 17-190, as complete (Project); 2. Approve the f inal contract amount of $2,452,161; 3. Authorize the release of the F aithful Performance Bond 35 days af ter recordation of Notice of C ompletion and accept a Maintenance Guarantee Bond; 4. Authorize the release of the L abor and Materials B ond in the amount of $2,327,205, six months af ter the recordation of said notice if no claims have been received; 5. Authorize the City E ngineer to f ile a Notice of Completion and release of the project retention, 35 days af ter recordation of Notice of C ompletion; and 6. Authorize the City Engineer to approve the release of the Maintenance G uarantee Bond one year following the filing of the Notice of Completion if the improvements remain f ree from defects in material and workmanship. BACKGROUND: T he Project consists of constructing new traf f ic signals and saf ety lighting at four locations; 1) Miller Avenue and E ast Avenue, 2) Sixth S treet and Rochester Avenue, 3) Milliken Avenue and F ifth Street, and 4) R ochester Avenue and J ersey B oulevard. T he P roject scope of work includes the installation of traf f ic signal improvements including: video detection cameras, conduit, conductors, interconnect conduits with fiber cables, pull boxes, modifying existing medians, construction of curb ramps, and installation of signing and striping. Bids were received and opened on J une 13, 2017 and the P roject was subsequently awarded to Alfaro C ommunication Construction, I ncorporated (A C C I ) on J une 21, 2017 in the amount of $2,327,205. Page 55 ANALY S IS: C onstruction began September 2017 and continued through October 2018. During the course of the Project and following construction operations numerous change order requests were submitted by A C C I . A pproximately 32 individual change order requests totaling $298,796 (or 12.84% of the contract award) were submitted. S taff reviewed, concurred, and approved or partially approved 23 individual change orders requests that summed to a total of $124,956 (or 5.37% of the contract award). F ollowing a thorough evaluation, a total of $173,840 in change order requests have been denied by staf f . Approved change order requests primarily consisted of additional utility pothole locations, trenching and shoring, modif ying foundations, conduits, f iber optic cables, credit f or cabinet keys, and balancing final contract bid quantities. C opies of the approved change order requests are on f ile with the City E ngineer. W hile staff has attempted to resolve and reach a f ull and final settlement of the change order requests with the contractor, A C C I is in disagreement on several of the denied or partially approved requests. One in particular represents the largest of the change order requests. T his request is related to the number and cost for additional utility potholes (small excavations to identify and locate existing underground utilities). A C C I ’s change order request for this item included additional utility potholing at a stated cost of $196,200 (109 potholes at $1,800 each). S taff reviewed the change order and determined that only 28 utility potholes were eligible f or compensation at $1,300 each, totaling $36,400 for the request. Staf f ’s determination of the number and cost of additional utility potholes was based on a review of the of the contract, public contract code, and a thorough analysis of the labor, material, and equipment used to perform the extra work. I n attempting to resolve this matter, staf f presented the analysis to A C C I and met in person and by phone to discuss staf f ’s findings. Unf ortunately, the contractor did not agree with the analysis and af ter numerous attempts at resolution, staff issued a unilateral change order f or the amount determined to be due to the contractor. As provided in State law and the contract, A C C I may f ollow the claims process to file a claim for expenses incurred on the project they believe remain outstanding. At this time, the P roject has been completed in accordance with the approved plans and specif ications and to the satisf action of the C ity Engineer. A t the end of the one-year maintenance period, if the improvements remain f ree f rom defects in materials and workmanship, the C ity Clerk will authorize the release of the Maintenance Guarantee B ond upon approval of the City E ngineer. FISCAL IMPACT: Sufficient f unds have been budgeted from the Transportation F und (F und 124) for this project, all of which are identif ied under Capital I mprovement P roject Account No's and in the amounts listed below. Account No F unding Source D escription Amount 11243035650/1888124-0 Transportation F und (124)Miller@ E ast $638,944 11243035650/1939124-0 Transportation F und (124)6th @ Rochester $980,244 11243035650/1940124-0 Transportation F und (124)Milliken @ 5th $655,793 11243035650/1941124-0 Transportation F und (124)R ochester @ J ersey $507,479 Total P roject F unding:$2,782,460 T he f inal project cost is $2,567,395 as shown in the table below. E xpenditure C ategory Amount F inal Construction Contract $2,452,161 Construction I nspection $115,234 Total Project C ost:$2,567,395 Page 56 A total of $215,065 is remaining in the budget f or this project and will be returned to the Transportation F und (Fund 124) f und balance to be used for f uture capital improvement projects. Furthermore, the C ity entered into a reimbursement agreement with the City of F ontana f or 50% of the project costs for the traf f ic signal located at Miller Avenue and E ast Avenue. I t is recommended that this reimbursement also be returned to the Transportation F und (F und 124) f und balance upon receipt. COUNCIL GOAL(S) ADDRE S S E D: T his project addresses the C ity Council Goal of P ublic S af ety by enhancing equipment to signalize intersections f or locations that have experienced community growth as well as enhancing premier community status by increasing the active investment in improving traf f ic management operations throughout the City. Page 57 D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F RO M :J ohn Gillison, City Manager INIT IAT E D B Y:J ason C . Welday, D irector of E ngineering Services/C ity Engineer Romeo M. D avid, Associate Engineer S UB J E C T:C O NS ID E RAT I O N T O AP P RO V E T HE P L ANS, S P E C I F IC AT I O NS , AND E S T I M AT E S (P S &E ); AUT HO RIZE T O B I D; AND AP P RO VAL O F AN AP P RO P RI AT I O N IN T HE AM O UNT O F $501,959 F RO M T HE C O M M UNI T Y D E V E L O P M E NT B L O C K G RANT F UND S (F UND 204) F O R T HE AM E T HY S T AV E NUE S T RE E T I M P RO V E M E NT S P RO J E C T. RE COMMENDAT ION: Staf f recommends that the City Council: 1. Approve the plans, specifications, and estimate for the Amethyst Avenue Street I mprovements Project on file with the C ity Engineer; 2. Authorize staf f to advertise and solicit bids for the A methyst Avenue Street I mprovements P roject; and 3. Approve an appropriation of $501,959 from the C ommunity D evelopment Block Grant (C D B G) F und (F und 204) to Account No. 12043145650/1928204-0. BACKGROUND: T he City’s C apital I mprovement P rogram (C I P ) includes a project to design and ultimately construct Phase 3 of the Upper Cucamonga S torm D rain (Upper Cucamonga P roject). T his phase would construct storm drain improvements beginning on 19th S treet east of A methyst Avenue and connecting to the C ucamonga S torm Drain at Hellman Avenue and the P acific Electric Trail via Amethyst Avenue, R oberds Street, and B ase L ine Road. T his storm drain will capture storm water that currently surface f lows through the Chaparral Heights Mobile Home Park and a vacant lot on Archibald Avenue and Victoria S treet reducing the potential for flooding and bypassing the open channel portion of the C ucamonga S torm D rain between A rchibald Avenue and Hellman Avenue that is undersized and requires surf ace diversion of the storm water during a 100-year storm. The scope of the project also includes the construction of missing and damaged street improvements such as curb and gutter and sidewalk along Amethyst Avenue between 19th Street and B ase L ine Road. ANALY S IS: T he project’s design calls f or construction of storm drain mainline in various sizes along the project alignment, including mainline pipe as large as 90-inch in diameter. A preliminary estimate to construct the Page 58 storm drain mainline including all the planned street improvements is approximately $4 Million. Staf f has identif ied two potential alternative f unding sources f or the Upper C ucamonga P roject that may assist in reducing the City’s cost f or the project. F irst, this project may qualif y as a regional storm drain line and could be eligible for partial funding by the San B ernardino F lood Control D istrict (S B C F C D). W hile currently available S B C F C D funding has been allocated to other projects in the region, the C ity has received f unding from S B C F C D in the past and could submit this project for consideration as f uture funding becomes available. Given the size of this project and the City’s limited available funding for infrastructure improvements, staff believes it prudent to wait on construction of the storm drain improvements at this time to allow an opportunity to submit the project f or partial S B C F C D f unding should it become available in the near future. S econd, staf f determined that street improvements on the east side of A methyst Avenue between 19th Street and B ase L ine R oad are eligible for use of C D B G funds, and on J une 20, 2018, the C ity Council programmed and appropriated $501,959 of C D B G f unds in F iscal Year 2018/19 toward construction of these east side street improvements. W ith the project’s C D B G f unds programmed for F iscal Year 2018/19 and in order to assist with satisf ying C D B G Program f und draw down requirements, construction of the C D B G funded improvements will need to begin in March 2019. I n order to meet this timeline, staff has prepared plans and specifications f or a separate project, identified as the Amethyst Avenue Street I mprovements P roject, that will include construction of the eligible street improvements on the east side of A methyst Avenue f rom 19th Street to Base L ine Road. T he scope of this initial project will include construction of minor roadway widening, asphalt paving, concrete handicap access ramps, curb and gutter, sidewalk, driveway approaches, and driveway tie-ins. P lans and specif ications for the Amethyst Avenue S treet I mprovements Project are on file with the C ity Engineer. T he f ollowing tentative schedule has been identif ied for the bid process: Notice I nviting B ids to be P osted:J anuary 22, 2019 D eadline to Submit B ids:F ebruary 5, 2019 at 2:00 P M C onsideration of Contract Award by C ity C ouncil:F ebruary 20, 2019 Environmental: Staf f has determined that the Amethyst Avenue Street I mprovements Project is C ategorically Exempt per the C alif ornia E nvironmental Quality Act (C E Q A) Article 19 C ategorical E xemptions. I n Accordance with Section 15301 “Existing Facilities” subsection (c), C lass 1 projects consist of minor alteration of existing public f acilities, therefore, the scope of work is considered categorically exempt from C E Q A . FISCAL IMPACT: T he estimated construction cost f or the proposed Amethyst Avenue S treet I mprovements Project is $625,000 and categorized as follows: Estimated Construction Contract $500,000 C onstruction C ontract Contingency (10%)$50,000 Estimated I nspection/S oil Testing (15%)$75,000 Estimated Construction Costs $625,000 Sufficient f unds are available in the F iscal Year 2018/19 B udget from the Measure I (F und 176) and C D B G (F und 204) Funds to cover the anticipated project costs, all of which are identif ied under the C apital I mprovement A ccount No.’s and in the amounts listed below: Page 59 Account No.Funding Source Description Amount 11763035650/1928176- 0 Measure I F und C ucamonga S D $150,000 12043145650/1965204- 0* C D B G Fund Upper Cucamonga S D/Street $501,959 Total P roject F unding:$651,959 * A ccount number listed in the J une 20, 2018 staff report. I t should be noted that the J une 20, 2018 staf f report included an error in the account number f or these improvements and should have been listed as 12043145650/1928204-0. T heref ore, an appropriation has been included in staff’s recommendation to correct this error. COUNCIL GOAL(S) ADDRE S S E D: T he proposed A methyst Avenue Street I mprovement P roject will enhance the C ity position as the premier community in our region by constructing high quality street improvements. AT TAC HM E NT S : D escription Attachment 1 - Vicinity Map Page 60 66 US CALIFORNIA10 INTERSTATE C A L I FORNIA 210 CITY OF RANCHO CUCAMONGA Amethyst Avenue Street Improvements ATTACHMENT 1 Page 61 D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F RO M :J ohn R . Gillison, C ity Manager INIT IAT E D B Y:J ason C . Welday, D irector of E ngineering Services/C ity Engineer Trina Valdez, Management A nalyst I S UB J E C T:C O NS ID E RAT I O N O F AM E ND M E NT NO . 1 T O T HE RC M U F IB E R L IC E NS I NG AND S E RV I C E AG RE E M E NT WIT H I NY O NE T WO RK S , I NC. (C O18-022). RE COMMENDAT ION: Staf f recommends the C ity Council approve Amendment No. 1 to the R C MU F iber L icensing and Service Agreement (C O18-022) with I nyo Networks, I nc. BACKGROUND: On March 21, 2018, the C ity of Rancho C ucamonga and I nyo Networks, I nc. entered into a F iber Optic L icense and S ervice Agreement to provide retail gigabit broadband services to select residential and business customers located within the f iber master plan area in partnership with the City's broadband infrastructure. ANALY S IS: T he amendment to the existing license and service agreement with I nyo Networks, I nc. (I nyo) is required due to the City's anticipation of issuing bonds to finance a portion of the F iber Optic Master P lan in F ebruary 2019. B ecause some of the bonds issued will be "tax-exempt" and the interest excluded from gross income for federal tax purposes under the I nternal R evenue C ode of 1986, an amendment clarif ying I nyo's use of the City's F iber Optic Network is required. T his amendment enables the City to comply with the requirements of the F ederal Tax Code by clarif ying and restricting the private use of the City's network in order to protect the tax-f ree status of the bonds T his amendment amends a single paragraph of the existing agreement to specify that I nyo’s use of the C ity's f iber network infrastructure is capped at 1 fiber pathway and 50% of the fiber lines, but in no event will exceed 16.67% of the total network inf rastructure. Nothing else in the agreement has changed. T his amendment has been reviewed and concurred by the City Attorney's office, the City's Bond Counsel and I nyo's L egal Counsel. FISCAL IMPACT: T here is no direct f iscal impact as a result of this item. A pproval of the attached amendment will enable Page 62 the City to issue tax exempt bonds resulting in reduced costs to the C ity. COUNCIL GOAL(S) ADDRE S S E D: T he implementation of the F iber O ptic Master P lan will enhance the C ity’s position as the premier community in our region by expanding the availability of high speed broadband services to businesses and residents within the program’s service area. AT TAC HM E NT S : D escription Attachment 1 - A mendment 1 Page 63 AMENDMENT No. 1 to RCMU FIBER LICENSING AND SERVICE AGREEMENT This Amendment No. 1, dated December 11, 2018 (this "Amendment"), amends that certain RCMU Fiber Licensing and Service Agreement ("Agreement") dated March 21, 2018 between the City of Rancho Cucamonga, a California municipal corporation ("City") and Inyo Networks, Inc., a California Corporation ("Provider''). Capitalized use not otherwise defined herein have the meanings ascribed to them in the Agreement. RECITALS A.City and Provider are Parties to the Agreement, pursuant to which City licenses Provider the right to use the RCMU Network for the purpose of providing Retail Services subject to the terms and conditions of the Agreement. B.City anticipates issuing bonds ("Bonds") to finance a portion of the projects described in the Master Plan. C.All or some of the Bonds will be issued as "tax-exempt" bonds, the interest on which will be excludable from gross income for federal income tax purposes under the Internal Revenue Code of 1986, as amended ("Tax Code"). D.To enable the City to comply with the requirements of the Tax Code applicable to the Bonds, City and Provider wish to amend the Agreement to clarify that Provider's license and right to use the RCMU Network under the Agreement applies only to those portions of the RCMU Network as specified in this Amendment No. 1, and in no event shall apply to any portion of the RCMU Network intended or used for public use. AMENDMENT NOW, THEREFORE, in consideration of the mutual covenants and promises set forth herein, the Parties agree to amend the Agreement as follows: Section 1. Section 1, paragraph A. of the Agreement is hereby amended to read as follows: "A. City hereby grants Provider an exclusive license and indefeasible right of use ("IRU") to that certain portion of the RCMU Network as follows: no more than one fiber cable pathway, including but not limited to inner ducts, micro ducts or any ducts within an existing carrier conduit, and no more than fifty percent (50%) of the total physical fiber optic cable of the total RCMU Network, provided in no event shall such use exceed 16.67% of the total RCMU infrastructure. Provider may use such portion of the RCMU Network for the exclusive purpose of providing the Retail Services subject to 1 ATTACHMENT 1 Page 64 Page 65 D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F RO M :J ohn R . Gillison, C ity Manager INIT IAT E D B Y:J ason C . Welday, D irector of E ngineering Services/C ity Engineer Curt Billings, Associate Engineer S UB J E C T:C O NS ID E RAT I O N T O AC C E P T AS C O M P L E T E , F IL E T HE NO T IC E O F C O M P L E T I O N AND AUT HO RIZE RE L E AS E O F RE T E NT IO N AND B O ND S F O R T HE M C K INL E Y S T RE E T D RAI NAG E IM P RO V E M E NT P RO J E C T. RE COMMENDAT ION: Staf f recommends that the City Council: 1. Accept the McKinley S treet Drainage I mprovement Project, Contract No. 18-067, as complete (Project); 2. Approve the f inal contract amount of $43,670; 3. Authorize the release the F aithf ul P erformance B ond 35 days af ter recordation of Notice of C ompletion and accept a Maintenance Guarantee Bond; 4. Authorize the release of the L abor and Materials B ond in the amount of $44,170, six months after the recordation of said notice if no claims have been received; 5. Authorize the City E ngineer to f ile a Notice of Completion and release of the project retention, 35 days af ter recordation of Notice of C ompletion; and 6. Authorize the City Engineer to approve the release of the Maintenance B ond one year f ollowing the filing of the Notice of C ompletion if the improvements remain f ree f rom defects in material and workmanship. BACKGROUND: T he scope of work consisted of the removal of asphalt pavement, concrete, metal storm drain and gate, construction of asphalt paving, curb, gutter, sidewalk, storm drain bulkhead, crushed aggregate base, landscape rock, 50psi low density cellular concrete abandonment grout and install iron gate. Bids were received and opened on May 15, 2018, and the subject project was awarded to T S R C onstruction and I nspection on J une 6, 2018 in the amount of $44,170. ANALY S IS: T he P roject has been completed in accordance with the approved plans and specif ications and to the Page 66 satisf action of the City E ngineer. T he net decrease in the total cost of the construction contract is the result of minor decreases in the f inal project quantities which are accounted f or in the B alancing S tatement. At the end of the one-year maintenance period, if the improvements remain free f rom def ects in materials and workmanship, the City Clerk is authorized to release the Maintenance Bond upon approval by the C ity Engineer. FISCAL IMPACT: Adequate f unds were budgeted in F iscal Year 2017/18 from the Citywide I nf rastructure I mprovement F und (F und 198) for this project, all of which are identif ied under C apital I mprovement P roject A ccount No. and in the amount listed below. A ccount No.F unding Source Description A mount 11983035650/1954198-0 I nf rastructure F und (198)Mc K inley at R amona Repair $75,200 T he f inal project cost is $69,660 as shown in the table below. E xpenditure C ategory A mount F inal Construction Contract $43,670 P re-C onstruction and I nspection $25,990 Total P roject Cost $69,660 A total of $5,540 is remaining in the budget for this project and will be returned to the Citywide I nf rastructure I mprovement F und (F und 198) balance to be used f or f uture capital improvement projects. COUNCIL GOAL(S) ADDRE S S E D: T he project street drainage improvements will enhance the City position as the premier community in our region by ensuring that City's storm drain system is well maintained. Page 67 D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F RO M :J ohn R . Gillison, C ity Manager INIT IAT E D B Y:J ason C . Welday, D irector of E ngineering Services/C ity Engineer Curt Billings, Associate Engineer S UB J E C T:C O NS ID E RAT I O N O F A C O NT RAC T WIT H F S C O NT RAC T O RS , INC ., I N T HE AM O UNT O F $43,412, P L US A 10% C O NT ING E NC Y F O R T HE F I S C AL Y E AR 2018/19 S ID E WAL K IM P RO V E M E NT S F O R B US S T O P S AT 5 L O C AT I O NS P RO J E C T. RE COMMENDAT ION: Staf f recommends the C ity C ouncil: 1. Approve the plans and specifications f or the F iscal Year 2018/19 S idewalk I mprovement P roject for Bus S tops at 5 L ocations on f ile with the City E ngineer (P roject); 2. R eject the bids received from Hardy & Harper, I nc., Gentry General E ngineering, I nc., and Aramexx Group, I nc. as non-responsive; 3. Accept the remaining bids received f or the Project; 4. Award and authorize the execution of the contract in the amount of $43,412, to the lowest responsive bidder, F S Contractors, I nc.; 5. Authorize the expenditure of a 10% contingency in the amount of $4,341; and 6. Authorize a Purchase Order in the amount of $5,000 to Onward Engineering f or on-call construction inspection services. BACKGROUND: On October 16, 2017, the C ity was awarded a grant by the San Bernardino C ounty Transportation Authority (S B C TA) in the amount of $43,000 from Transportation D evelopment A ct, Article 3 program for the F iscal Year 2018/19 S idewalk I mprovements for Bus Stops at 5 L ocations P roject. T he project will provide accessibility improvements by connecting sidewalks to existing public transit stops. T he improvements are intended to increase ridership, resulting in less vehicle trips and reduced C O2 emissions. ANALY S IS: Bids were solicited, received and opened on November 13, 2018. Staf f reviewed all bids received and Page 68 found that three of the eight bids were non-responsive due to the bidders not properly executing their bidder agreements. W hile the bid documents indicate the requirements for a responsive bid, including signature requirements, staff will review the related language to determine if revisions could be made to help clarif y the requirements for future bids. T he lowest bid was received from F S C ontractors, I nc., in the amount of $43,412, and is a valid and fully executed bid. S taff has completed the required background investigation and finds the lowest responsive bidder, F S C ontractors, I nc., meets the requirements of the bid documents and is reasonably priced at approximately 3.6% above the engineers estimate. T he scope of work consists of the installation of asphalt concrete sidewalk, portland cement concrete sidewalks, retaining curbs, cobble stone, accessible ramps, truncated domes, pavement striping, and landscape and irrigation restoration, to provide accessible pedestrian pathway connections to and from existing bus stops. T he contract documents call f or f if teen (15) working days to complete the work. FISCAL IMPACT: Anticipated construction costs are estimated to be as f ollows: Bid A dvertisement $1,225 C onstruction C ontract $43,412 C onstruction C ontract Contingency (10%)$4,341 C onstruction I nspection $5,000 Estimated Construction Costs $53,978 As previously mentioned, the C ity was awarded a grant in the amount of $43,000 for this P roject. T he grant program requires that the City match the grant funds at a rate of 20%. Funds from the G as Tax R &T 7360 F und (F und 174) will be used to satisf y this match requirement. Adequate f unds from the Gas Tax R &T 7360 and P edestrian Grant, A rticle 3 grant have been budgeted in F iscal Year 2018/19 f or this project and no additional appropriation is required at this time. Account No.F unding S ource D escription Amount 11743035650/1823174-0 Gas Tax R &T 7360 Bus S top/Various L ocations $11,000 12143035650/1823214-0 Pedestrian Grant, A rticle 3 Bus S top/Various L ocations $43,000 $54,000 COUNCIL GOAL(S) ADDRE S S E D: T he proposed sidewalk improvements f or bus stops at five locations will enhance the City position as the premier community in our region. AT TAC HM E NT S : D escription Attachment 1 - Vicinity Map Attachment 2 - Bid Summary Page 69 FY 2018/2019 SIDEWALK IMPROVEMENTS FOR BUS STOPS AT 5 LOCATIONS 5 LOCATIONS ATTACHMENT 1 Page 70 UNIT UNIT BID BID NO QTY UNIT DESCRIPTION COST AMOUNT COST AMOUNT UNIT COST AMOUNT 1 370 SF Construct 3" AC pavement including removal of existing $10.00 3,700.00$ $10.00 $3,700.00 $8.00 $2,960.00 2 1146 SF Construct PCC sidewalk for bus pad per City Std. No. 103 including removal of existing $13.00 14,898.00$ $10.00 $11,460.00 $10.00 $11,460.00 3 235 SF Construct PCC access ramp per City Std. No. 102 including removal of existing $20.00 4,700.00$ $20.00 $4,700.00 $15.00 $3,525.00 4 18 SF Construct PCC spandrel per City Std. No. 106- A including removal of existing $40.00 720.00$ $30.00 $540.00 $50.00 $900.00 5 6LF Construct PCC mow curb per City Std. No. 534 including removal of existing $25.00 150.00$ $50.00 $300.00 $50.00 $300.00 6 47 LF Construct retaining curb (0" to 8"CF)$35.00 1,645.00$ $50.00 $2,350.00 $50.00 $2,350.00 7 31 SF Construct rockscape per City Std. No. 542, Case No. 1, including removal of existing $30.00 930.00$ $40.00 $1,240.00 $100.00 $3,100.00 8 12 SF Install truncated dome panel $50.00 600.00$ $42.00 $504.00 $50.00 $600.00 9 4EARelocate bus stop sign and post $250.00 1,000.00$ $250.00 $1,000.00 $500.00 $2,000.00 10 1LS Remove and restore landscaping & irrigation system including grading and installing sod to match existing $4,000.00 4,000.00$ $5,000.00 $5,000.00 $4,000.00 $4,000.00 11 75 LF Irrigation lateral lines PVC sleeve $25.00 1,875.00$ $20.00 $1,500.00 $28.00 $2,100.00 12 24 EA Remove/Relocate plant per City Std. 506 $20.00 480.00$ $25.00 $600.00 $100.00 $2,400.00 13 1LSInstall mulch to match existing $300.00 300.00$ $600.00 $600.00 $700.00 $700.00 14 1LSInstall 36" tall orange plastic safety fencing $300.00 300.00$ $1,500.00 $1,500.00 $700.00 $700.00 15 114 LF Install 2"x4" redwood header $14.00 1,596.00$ $12.00 $1,368.00 $20.00 $2,280.00 16 3EARelocate boulder per City Std. 542-A $200.00 600.00$ $250.00 $750.00 $300.00 $900.00 17 100 LF Paint 4" white solid stripe $4.00 400.00$ $13.00 $1,300.00 $10.00 $1,000.00 18 1 LS Traffic control $4,000.00 4,000.00$ $5,000.00 $5,000.00 $3,200.00 $3,200.00 TOTAL BASE BID $41,894.00 $43,412.00 $44,475.00 UNIT BID COORRECTED UNIT BID NO QTY UNIT DESCRIPTION COST AMOUNT AMOUNT COST AMOUNT UNIT COST AMOUNT 1 370 SF Construct 3" AC pavement including removal of existing $10.00 $3,700.00 $3,700.00 $14.00 5,180.00$ $19.00 $7,030.00 2 1146 SF Construct PCC sidewalk for bus pad per City Std. No. 103 including removal of existing $18.00 $20,628.00 $20,628.00 $15.00 17,190.00$ $13.00 $14,898.00 3 235 SF Construct PCC access ramp per City Std. No. 102 including removal of existing $30.00 $7,050.00 $7,050.00 $18.00 4,230.00$ $15.00 $3,525.00 4 18 SF Construct PCC spandrel per City Std. No. 106- A including removal of existing $12.00 $216.00 $216.00 $34.00 612.00$ $50.00 $900.00 5 6LF Construct PCC mow curb per City Std. No. 534 including removal of existing $10.00 $60.00 $60.00 $45.00 270.00$ $50.00 $300.00 6 47 LF Construct retaining curb (0" to 8"CF)$70.00 $3,290.00 $3,290.00 $90.00 4,230.00$ $35.00 $1,645.00 7 31 SF Construct rockscape per City Std. No. 542, Case No. 1, including removal of existing $30.00 $930.00 $930.00 $49.00 1,519.00$ $50.00 $1,550.00 8 12 SF Install truncated dome panel $20.00 $240.00 $240.00 $40.00 480.00$ $75.00 $900.00 9 4EARelocate bus stop sign and post $200.00 $800.00 $800.00 $400.00 1,600.00$ $200.00 $800.00 10 1LS Remove and restore landscaping & irrigation system including grading and installing sod to match existing $2,000.00 $2,000.00 $2,000.00 $6,000.00 6,000.00$ $5,000.00 $5,000.00 11 75 LF Irrigation lateral lines PVC sleeve $20.00 $1,500.00 $1,500.00 $32.00 2,400.00$ $10.00 $750.00 12 24 EA Remove/Relocate plant per City Std. 506 $20.00 $480.00 $480.00 $150.00 3,600.00$ $100.00 $2,400.00 13 1LSInstall mulch to match existing $500.00 $500.00 $500.00 $1,200.00 1,200.00$ $3,000.00 $3,000.00 14 1LSInstall 36" tall orange plastic safety fencing $1,000.00 $1,000.00 $1,000.00 $2,100.00 2,100.00$ $1,500.00 $1,500.00 15 114 LF Install 2"x4" redwood header $20.00 $2,280.00 $2,280.00 $8.00 912.00$ $16.00 $1,824.00 16 3EARelocate boulder per City Std. 542-A $300.00 $900.00 $900.00 $120.00 360.00$ $500.00 $1,500.00 17 100 LF Paint 4" white solid stripe $20.00 $2,000.00 $2,000.00 $11.00 1,100.00$ $5.00 $500.00 18 1 LS Traffic control $4,000.00 $4,000.00 $4,000.00 $1,400.00 1,400.00$ $15,000.00 $15,000.00 TOTAL BASE BID $55,834.00 $51,574.00 $54,383.00 $63,022.00 NOTE: * NON-RESPONSIVE BID AS A RESULT OF MISSING REQUIRED SIGNATURES ON THE BIDDER AGREEMENT FORM. FY 2018/2019 Sidewalk Improvements for Bus Stops at 5 Locations BID SUMMARY FOR BID OPENING NOVEMBER 13, 2018 TSR Construction and Inspection 2 FY 2018/2019 Sidewalk Improvements for Bus Stops at 5 Locations ENGINEER'S ESTIMATE FS Contractors, Inc. BID SUMMARY FOR BID OPENING NOVEMBER 13, 2018 APPARENT LOW BIDDER 3 Leonida Builders, Inc. 4* Hardy & Harper, inc. (NON-RESPONSIVE) 5 EBS General Engineering, Inc. ATTACHMENT 2 Page 71 UNIT UNIT BID BID NO QTY UNIT DESCRIPTION COST AMOUNT COST AMOUNT UNIT COST AMOUNT 1 370 SF Construct 3" AC pavement including removal of existing $21.50 7,955.00$ $20.00 $7,400.00 $20.00 $7,400.00 2 1146 SF Construct PCC sidewalk for bus pad per City Std. No. 103 including removal of existing $13.80 15,814.80$ $12.00 $13,752.00 $33.00 $37,818.00 3 235 SF Construct PCC access ramp per City Std. No. 102 including removal of existing $15.65 3,677.75$ $32.00 $7,520.00 $33.00 $7,755.00 4 18 SF Construct PCC spandrel per City Std. No. 106- A including removal of existing $27.50 495.00$ $55.00 $990.00 $160.00 $2,880.00 5 6LF Construct PCC mow curb per City Std. No. 534 including removal of existing $90.00 540.00$ $100.00 $600.00 $175.00 $1,050.00 6 47 LF Construct retaining curb (0" to 8"CF)$57.00 2,679.00$ $50.00 $2,350.00 $27.00 $1,269.00 7 31 SF Construct rockscape per City Std. No. 542, Case No. 1, including removal of existing $22.00 682.00$ $70.00 $2,170.00 $102.00 $3,162.00 8 12 SF Install truncated dome panel $114.17 1,370.04$ $65.00 $780.00 $129.00 $1,548.00 9 4EARelocate bus stop sign and post $525.00 2,100.00$ $300.00 $1,200.00 $488.00 $1,952.00 10 1LS Remove and restore landscaping & irrigation system including grading and installing sod to match existing $2,600.00 2,600.00$ $5,000.00 $5,000.00 $1,000.00 $1,000.00 11 75 LF Irrigation lateral lines PVC sleeve $19.50 1,462.50$ $60.00 $4,500.00 $46.00 $3,450.00 12 24 EA Remove/Relocate plant per City Std. 506 $130.00 3,120.00$ $100.00 $2,400.00 $106.00 $2,544.00 13 1LSInstall mulch to match existing $2,600.00 2,600.00$ $2,000.00 $2,000.00 $1,096.00 $1,096.00 14 1LSInstall 36" tall orange plastic safety fencing $2,500.95 2,500.95$ $2,000.00 $2,000.00 $500.00 $500.00 15 114 LF Install 2"x4" redwood header $26.00 2,964.00$ $19.00 $2,166.00 $22.00 $2,508.00 16 3EARelocate boulder per City Std. 542-A $650.00 1,950.00$ $500.00 $1,500.00 $200.00 $600.00 17 100 LF Paint 4" white solid stripe $19.50 1,950.00$ $30.00 $3,000.00 $10.00 $1,000.00 18 1 LS Traffic control $11,900.00 11,900.00$ $7,500.00 $7,500.00 $10,000.00 $10,000.00 TOTAL BASE BID $66,361.04 $66,828.00 $87,532.00 NOTE: * NON-RESPONSIVE BID AS A RESULT OF MISSING REQUIRED SIGNATURES ON THE BIDDER AGREEMENT FORM. BID SUMMARY FOR BID OPENING NOVEMBER 13, 2018 6* 7 8* FY 2018/2019 Sidewalk Improvements for Bus Stops at 5 Locations Gentry General Engineering, Inc. (NON-RESPONSIVE) IE General Engineering, Inc. Aramexx Group, Inc. (NON-RESPONSIVE) Page 72 D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F RO M :J ohn R . Gillison, C ity Manager INIT IAT E D B Y:J ason C . Welday, D irector of E ngineering Services/C ity Engineer Gianf ranco L aurie, Senior Civil Engineer S UB J E C T:C O NS ID E RAT I O N O F A P URC HAS E AND S AL E AG RE E M E NT WIT H L IND A AND J O S E P H WAL K E R F O R T HE AC Q UIS IT IO N O F A T E M P O RARY C O NS T RUC T I O N E AS E M E NT, L O C AT E D AT 5917 ARC HI B AL D AV E NUE, F O R T HE ARC HIB AL D AV E NUE WI D E NING NO RT H O F S UNF L O WE R S T RE E T P RO J E C T. RE COMMENDAT ION: I t is recommended that the C ity C ouncil authorize the C ity Manager to execute a Purchase and Sale Agreement for the acquisition of a temporary construction easement for the A rchibald Avenue W idening North of S unf lower S treet Project (Project). BACKGROUND: C onstruction of the proposed Project requires the acquisition of a 4,951 square foot temporary construction easement over a portion of real property located at 5917 A rchibald Avenue. T he C ity intends to construct and install various street improvements, including partial road widening, curb and gutter, community trail and f encing. The purpose of the P roject is to reduce traffic congestion, improve traf f ic safety and circulation in accordance with the C ity’s General and S pecif ic Plans. ANALY S IS: An appraisal taking into consideration the highest and best use of the subject property, the location, the condition and size of any improvements existing on the land was performed in April 2018. S ubsequently, an offer was presented to the property owners, L inda and J oseph Walker, to purchase a temporary construction easement for the amount of $5,700 with a term of one year over a portion of their property. F ollowing the offer, staf f met with Mr. and Mrs. Walker in person and by phone on a multiple occasions to discuss the proposed P roject and required temporary construction easement and to negotiate the terms of the agreement. I n addition to the f inancial compensation, the negotiated agreement includes terms related to site restoration, tree relocation and planting, and access requirements. T hese terms will be included in the f inal construction drawings as work to be performed during the construction phase of the project. On D ecember 5, 2018, the property owners delivered the signed P urchase and S ale Agreement to the C ity for consideration by the C ity C ouncil. On that basis, staff recommends that the City Council authorize the C ity Manager to execute the Purchase and S ale A greement and all associated documents relative to the acquisition of temporary construction easement for the P roject. Page 73 FISCAL IMPACT: A total of $187,000 has been budgeted in F iscal Year 2018/19 to construct the proposed improvements on A rchibald Avenue north of Sunflower Street. T heref ore, suf f icient funding exists to purchase a temporary construction easement f or a one year term to proceed with the construction. Funding is made available from the Beautification F und (F und 110) all of which is identif ied under C apital I mprovement Project A ccount No. and in the amount listed below. A ccount No.F unding S ource D escription Amount 1103035650/1945110 B eautif ication F und (110)A rchibald W iden N/O S unf lower $187,000 COUNCIL GOAL(S) ADDRE S S E D: T he proposed roadway widening and street improvements will enhance the City’s position as the premier community in our region by improving traffic saf ety and circulation on C ity streets. Page 74 D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F RO M :J ohn R . Gillison, C ity Manager INIT IAT E D B Y:W illiam W ittkopf , P ublic Works S ervices Director Dean R odia, P arks and L andscape S uperintendent K enneth F ung, Assistant E ngineer S UB J E C T:C O NS ID E RAT I O N T O AC C E P T T HE V IC T O RIA WIND RO WS 2A & 2B G RE E NB E LT L IG HT ING P RO J E C T AS C O M P L E T E , F I L E T HE NO T IC E O F C O M P L E T I O N, AND AUT HO RI ZE RE L E AS E O F RE T E NT IO N AND B O ND S. RE COMMENDAT ION: Staf f recommends the C ity C ouncil: 1. Accept the Victoria W indrows 2A & 2B Greenbelt L ighting P roject, C ontract No. 18-026, as complete. 2. Approve the f inal contract amount of $257,280.00. 3. Authorize the release of the F aithf ul Perf ormance Bond and accept a Maintenance Bond. 4. Authorize the release of the L abor and Materials B ond in the amount of $257,280.00, six months after the recordation of said notice if no claims have been received. 5. Authorize the P ublic Works S ervices Director to file a Notice of Completion and release of the retention in the amount of $12,864.00, 35 days af ter acceptance. Authorize the P ublic Works S ervices D irector to approve the release of the Maintenance B ond one year following the filing of the Notice of Completion if the improvements remain f ree from defects in material and workmanship. BACKGROUND: T he Victoria W indrows 2A & 2B Greenbelt L ighting P roject scope of work consisted of the removal of existing lighting (poles, f oundations, light fixtures, etc.) and their replacement with new L E D lighting. T he tops of the original lighting f oundations were flush with the ground which allowed water to sit over the foundations and rust the adjacent metal portions (steel reinforcement, poles, wiring) of the light poles. Over time, this damaged the light poles and their f oundations. As a result, the light poles, foundations, and wiring had to be replaced. T his project also included the replacement of existing light f ixtures with L E D f ixtures. The new L E D light fixtures use less electricity and have a longer service lif e than the original light fixtures. This reduces operational and maintenance costs to the L andscape Maintenance District. Page 75 Another cost saving measure was the reduction of the number of lighting controllers f rom four (4) of each to two (2) of each. T he original controllers had to be reprogrammed every f ew months to account for the changing seasons and the associated sunset and sunrise times. T he new controllers are astronomic controllers which automatically adjust when the greenbelt lights turn on and of f based on the controllers’ location on Earth. D ue to the reduction in the number of controllers from four (4) of each to two (2) of each, the number of electrical meters was also reduced by two (2). T his eliminated the annual fees that the L andscape Maintenance D istrict previously paid f or each of the two (2), now removed, electrical meters. Pertinent inf ormation of the project is as f ollows: B udgeted A mount:$290,000.00 P ublish Dates f or L ocal P aper:F ebruary 6, 2018 and F ebruary 13, 2018 B id Opening:March 13, 2018 Contract Award Date:April 4, 2018 L ow Bidder:Torga Electrical Contract A mount:$257,280.00 Contingency:$32,720.00 F inal Contract A mount:$257,280.00 Difference in Contract A mount:$0.00 (0%) ANALY S IS: T he project has been completed in accordance with the approved plans and specifications and to the satisf action of the Public Works Services D irector. A t the end of the one-year maintenance period, if the improvements remain free from defects in materials and workmanship, the C ity C lerk is authorized to release the Maintenance B ond upon approval by the Public Works Services D irector. FISCAL IMPACT: Adequate f unds were included in the F iscal Year 2017/18 adopted budget f or this project in account number 1131303-5650/1716131-0 (L MD 2). COUNCIL GOAL(S) ADDRE S S E D: T he replacement of newer lights and controllers supports the Council’s goal for public saf ety by improving illumination within the greenbelts area. AT TAC HM E NT S : D escription Attachment 1 - Notice of C ompletion Page 76 Page 77 D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F RO M :J ohn R . Gillison, C ity Manager INIT IAT E D B Y:L ori S assoon, Deputy City Manager/Administrative Services Tamara L . L ayne, F inance D irector Noah Daniels, F inance Manager S UB J E C T:C ONDUCT S ECON D RE A D I N G A N D A PP R OV E ORDI NANCE NO. 943 A U T H ORI ZI N G THE L EV Y O F A S PE C I A L TAX CO M M ENCI NG I N FI S C A L Y EAR 2019/20 A N D E A C H ENSUI NG F I SCAL Y E A R S OLE LY WI T H I N A N D R ELATI NG TO T H E RE SO R T AT E MPI RE L AKES COMMUNI TY FA C I L I T I ES D I STRI CT N O. 2018-01 OF T H E C I T Y OF R A N C H O C U C A M ONG A. RE COMMENDAT ION: I t is recommended that the C ity Council approve the second reading of Ordinance No. 943, which authorizes the levy of the special tax starting in F iscal Year 2019/20 for T he Resort at E mpire L akes C ommunity F acilities District No. 2018-01 of the C ity of R ancho Cucamonga (the “District). BACKGROUND: T he process to establish the District began on November 7, 2018, when the C ity C ouncil adopted a resolution approving the boundary map, a resolution of intention to establish the District, and a resolution ordering and directing the preparation of a report f or the District. Per the resolution of intention, a public hearing and election were set f or December 19, 2018. On November 20, 2018, the approved boundary map was recorded at the County of S an Bernardino’s Assessor-R ecorder’s office under the document number 2018-0434189. T he Public Hearing Notice was posted in the I nland Valley Daily B ulletin on December 4, 2018, and the notice was mailed to the property owners. T he Special Tax Report f or the D istrict has been f iled with the C ity Clerk in advance of the public hearing. On December 19, 2018, the City Council opened the public hearing on the formation of the D istrict, where any comments from the public were to be solicited and heard by the C ouncil. A fter inviting the public testimony, the hearing was closed and the City C ouncil approved R esolution No. 18-136 for the formation of the District. Next, an election of the qualified voters of the District was conducted and the City Council adopted R esolution No. 18-137 declaring the results of the election, which was a unanimous vote in f avor of the levy of special taxes. T he City Council then introduced and read O rdinance No. 943 authorizing the levy of a special tax commencing F iscal Year 2019/20 and each fiscal year thereaf ter. Page 78 T he District will finance certain types of services within the boundary of the District, including, but not limited to, street maintenance, public safety improvements, storm drains, traffic signals and public right-of - way maintenance, as well as the increased level of service and maintenance for public trails, landscaped areas, parkways, medians and parks, and recreation improvements outside of the area of the District as a result of the development. Establishing the D istrict ensures that the development will be self -suf f icient financially f or the maintenance and improvements specific to the development, but also does not create a fiscal burden or adversely impact existing services or taxpayers in other areas of the city. ANALY S IS: As required by the Mello-R oos A ct, the notice of special tax lien was recorded at the San B ernardino C ounty Recorder ’s of f ice on December 20, 2018, with a recorded document number of 2018-0469154. T he recording of the notice of special tax lien will put all interested parties, including title companies, lenders and future home purchasers, on notice that the property is located within T he Resort at Empire L akes Community F acilities D istrict No. 2018-01 of the City of Rancho C ucamonga and is subject to a special tax. Based on an estimate of costs to be incurred by the City of Rancho C ucamonga for providing the services for T he Resort at Empire L akes C ommunity F acilities District No. 2018-01 of the C ity of R ancho C ucamonga, the maximum annual special tax is $318.84 (in F iscal Year 2019/20 dollars) per unit. T he maximum special tax is limited to an increase of a minimum of two percent (2%) to a maximum of six percent (6%), determined on an annual basis as needed to satisf y the costs of providing the services. F inal adoption of Ordinance No. 943 is proposed to take place at the J anuary 16, 2019 City Council meeting. Should the C ity C ouncil adopt the ordinance, the City Clerk is required to publish the Ordinance No. 943 within 15 days after its passage in a newspaper of general circulation published and circulated in the area of the D istrict. P ublication will complete the process to authorize the levy of special taxes within the Resort at Empire L akes C ommunity F acilities District No. 2018-01 of the C ity of R ancho Cucamonga commencing in F iscal Year 2019/20. FISCAL IMPACT: T he District is being established to be financially self -suf f icient. T he special tax revenues will be levied annually on the homeowners and businesses within the boundary of the D istrict. T hese special tax revenues will offset the cost of providing services to the District, as well as the increased level of services and maintenance to existing public facilities and improvements due to the new development. T he additional f unding, estimated at full build-out, to be received by certain existing special districts annually to of f set the increased levels of services and maintenance because of the development is as f ollows: L andscape Maintenance D istrict No. 1 - $254,650 L andscape Maintenance D istrict No. 3B - $3,300 Park and R ecreation D istrict No. 85 - $161,992 Street L ighting Maintenance District No. 1 - $54,500 Street L ighting Maintenance District No. 2 - $139,120 Street L ighting Maintenance District No. 6 - $440 COUNCIL GOAL(S) ADDRE S S E D: T his item addresses the City Council's goal to undertake projects to enhance the C ity's position as the premiere community in our region. T his item also addresses the City Council’s goal to ensure the fiscally Page 79 sustainability of the C ity’s special districts. AT TAC HM E NT S : D escription Attachment 1 - Ordinance No. 943 Page 80 Ordinance No. 943 - Page 1 of 9 ATTACHMENT #01 ORDINANCE NO. 943 ORDINANCE OF THE CITY COUNCIL OF THE CITY OF RANCHO CUCAMONGA ACTING IN ITS CAPACITY AS THE LEGISLATIVE BODY OF THE RESORT AT EMPIRE LAKES COMMUNITY FACILITIES DISTRICT NO. 2018-01 OF THE CITY OF RANCHO CUCAMONGA, AUTHORIZING THE LEVY OF A SPECIAL TAX IN SUCH COMMUNITY FACILITIES DISTRICT A. Recital WHEREAS, the City Council of the City of Rancho Cucamonga, California (the “City Council”), has initiated proceedings, held a public hearing, conducted an election and received a favorable vote from the qualified electors authorizing the levy of special taxes in a community facilities district, all as authorized pursuant to the terms and provisions of the “Mello-Roos Community Facilities Act of 1982,” being Chapter 2.5, Part 1. Division 2, Title 5 of the Government Code of the State of California (the “Act”). This community facilities district shall hereinafter be referred to as The Resort at Empire Lakes Community Facilities District No. 2018-01 of the City of Rancho Cucamonga (the “District”). B. Ordinance NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RANCHO CUCAMONGA, CALIFORNIA, ACTING IN ITS CAPACITY AS THE LEGISLATIVE BODY OF THE RESORT AT EMPIRE LAKES COMMUNITY FACILITIES DISTRICT NO. 2018-01 OF THE CITY OF RANCHO CUCAMONGA, DOES HEREBY ORDAIN AS FOLLOWS: SECTION 1. This City Council does, by the passage of this ordinance, authorize the levy of special taxes on taxable properties located in the District pursuant to the Rate and Method of Apportionment as set forth in Exhibit “A” attached hereto and incorporated herein by this reference (the “Rate and Method”). SECTION 2. This City Council, acting in its capacity as the legislative body of the District, is hereby further authorized, by resolution, to annually determine the special tax to be levied within the District for the then current tax year or future tax years; provided, however, the special tax to be levied shall not exceed the maximum special tax authorized to be levied pursuant to the Rate and Method. SECTION 3. The special taxes herein authorized to be levied, to the extent possible, shall be collected in the same manner as ad valorem property taxes or in such other manner as this City Council shall determine, including without limitation, direct billing of the affected property owners, and shall be subject to the same penalties, procedure, sale and lien priority in any case of delinquency as applicable for ad valorem taxes. Any special taxes that may not be collected on the County tax roll shall be collected through a direct billing procedure by the Treasurer of the City of Rancho Cucamonga, acting for and on behalf of the District. SECTION 4. The special taxes authorized to be levied shall be secured by the lien imposed pursuant to Sections 3114.5 and 3115.5 of the Streets and Highways Code of the State of California, which lien shall be a continuing lien to secure each levy of the special tax, shall attach to all non-exempt real property in the District and shall continue in force and effect until the lien is canceled in accordance with law or until collection of the tax by the legislative body ceases. SECTION 5. This Ordinance shall be effective thirty (30) days after its adoption. Within fifteen (15) days after its adoption, the City Clerk shall cause this Ordinance to be published in a newspaper of general circulation in the City of Rancho Cucamonga. Page 81 Ordinance No. 943 - Page 2 of 9 ATTACHMENT #01 PASSED, APPROVED, and ADOPTED this 16th day of January, 2019. AYES: NOES: ABSENT: ABSTAINED: L. Dennis Michael, Mayor ATTEST: Janice C. Reynolds, City Clerk I, JANICE C. REYNOLDS, CITY CLERK of the City of Rancho Cucamonga, California, do hereby certify that the foregoing Ordinance was introduced at a Regular Meeting of the Council of the City of Rancho Cucamonga held on the 19th day of December, 2018, and was passed at a Regular Meeting of the City Council of the City of Rancho Cucamonga held on the 16th day of January, 2019. Executed this ____ day of ______________, 2019, at Rancho Cucamonga, California. Janice C. Reynolds, City Clerk Page 82 Ordinance No. 943 - Page 3 of 9 ATTACHMENT #01 EXHIBIT A RATE AND METHOD OF APPORTIONMENT FOR THE RESORT AT EMPIRE LAKES COMMUNITY FACILITIES DISTRICT NO. 2018-01 OF THE CITY OF RANCHO CUCAMONGA A Special Tax shall be levied and collected within The Resort at Empire Lakes Community Facilities District No. 2018-01 (“CFD 2018-01”) of the City of Rancho Cucamonga each Fiscal Year commencing with Fiscal Year 2019/20 in an amount determined by the application of the procedures described below. All of the real property (as defined below) in CFD 2018-01, unless exempted by law or by the provisions hereof, shall be taxed for the purposes of, to the extent, and in the manner herein provided. A. DEFINITIONS The terms hereinafter set forth have the following meaning: “Accessory Unit” means a secondary residential unit of limited size (e.g., granny cottage, second unit) that shares an Assessor’s Parcel with a Residential Dwelling Unit of Residential Property. “Acreage” or “Acre” means the land area of an Assessor’s Parcel as shown on an Assessor’s Parcel Map or in the Assessor’s Data for each Assessor’s Parcel. In the event the Assessor’s Parcel Map or Assessor’s Data shows no acreage, the Acreage for any Assessor’s parcel shall be determined by the CFD Administrator based upon the applicable final map, parcel map, condominium plan, or other recorded County parcel map or calculated using available spatial data and geographic information systems (GIS). The square footage of an Assessor’s Parcel is equal to the Acreage of such parcel multiplied by 43,560. “Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Division 2 of Title 5 of the Government Code of the State of California. “Administrative Expenses” means the actual or reasonably estimated costs directly related to the administration of CFD 2018-01 including, but not limited to, the following: the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City, the CFD Administrator, or both); the costs of collecting the Special Taxes (whether by the County, the City, or otherwise); the costs to the City, CFD 2018-01, or any designee thereof in complying with disclosure requirements; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; and the costs of the City, CFD 2018-01, or any designee thereof related to any appeal of the levy or application of the Special Tax. Administrative Expenses shall also include amounts estimated or advanced by the City or CFD 2018-01 for any other administrative purposes, including, but not limited to, attorney’s fees, proposed formation of CFD 2018-01, or any other expenses incidental to the provision of the Services. “Assessor’s Data” means Acreage or other Assessor’s Parcel information contained in the records of the Assessor of the County. “Assessor’s Parcel” means a lot or parcel shown on an Assessor’s Parcel Map with an assigned Assessor’s Parcel number. Page 83 Ordinance No. 943 - Page 4 of 9 ATTACHMENT #01 “Assessor’s Parcel Map” means an official map of the assessor of the County designating parcels by an Assessor’s Parcel number. “Authorized Services” means the public services authorized to be financed, in whole or in part, by CFD 2018-01 which are generally described as follows: (a) (i) the maintenance of streets, public trails and trailhead improvements, landscaped areas, parkways, medians, and parks and recreation improvements and public right-of-ways, including, but not limited to, street trees, fencing, irrigation systems, sidewalks, drainage systems, signs, monuments, graffiti removal, replacement, repair or rehabilitation of playground equipment, sports fields, parking lots, restrooms, sport field lighting, street lighting, traffic signals and appurtenant facilities and other improvements placed in parks, trails medians, landscaped areas, or public right- of-ways, furnishing of water, electric current or energy, gas, or other illuminating agent for the operation of any improvement within the City; (ii) the equipping, furnishing, and maintenance of public safety improvements; (iii) the furnishing of any service authorized under the Act, as may be amended from time to time; (iv) the furnishing of electric current, materials, contracted services, and the necessary maintenance, replacement, and repair required to keep such improvements in operational and satisfactory condition; and (v) the establishment of a reserve fund for the replacement of any such improvements; and (b) the incidental expenses which will be incurred, including but not limited to: (i) all costs associated with the formation of the proposed community facilities district, the determination of the amount of and collection of special taxes, the payment of special taxes, and costs otherwise incurred in order to carry out the authorized purposes of the community facilities district; and (ii) any other expenses incidental to the provision of the services. “CFD Administrator” means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement and providing for the levy and collection of the Special Taxes. “City” means the City of Rancho Cucamonga. “City Council” means the City Council of the City of Rancho Cucamonga, acting as the legislative body of CFD 2018-01. “County” means the County of San Bernardino. “Developed Property” means for each Fiscal Year, all Taxable Property, for which a building permit was issued prior to the March 1st preceding the Fiscal Year for which the Special Tax is being levied. “CFD 2018-01” means The Resort at Empire Lakes Community Facilities District No. 2018-01 of the City of Rancho Cucamonga. “Equivalent Benefit Unit” or “EBU” means the units assigned to all Assessor’s Parcels of Developed Property based on the classification for their parcel and Acreage pursuant to Section B of this Rate and Method of Apportionment. Page 84 Ordinance No. 943 - Page 5 of 9 ATTACHMENT #01 “Exempt Property” means all Assessor’s Parcels that are exempt from the Special Tax pursuant to Section E. “Fiscal Year” means the period starting July 1 and ending on the following June 30. “Homeowner Association Property” means any property within the boundaries of CFD 2018-01 which is owned by a homeowners’ or property owners’ association, including any master or sub- association as of January 1 of the prior Fiscal Year. “Maximum Annual Special Tax” means the maximum Special Tax, determined in accordance with the provisions of Section C below, which may be levied in any Fiscal Year on any Assessor’s Parcel of Taxable Property. “Mixed Use Property” means all Assessor’s Parcels that have been classified by the City to allow both Residential Property and Non-Residential Property uses on each such Assessor’s Parcel. For an Assessor’s Parcel of Mixed Use Property, each Land Use Class thereon is subject to taxation pursuant to the provisions of Sections B and C regardless of the geographic orientation of such Land Use Classes on such Assessor’s Parcel. “Non-Residential Property” means all Assessor’s Parcels of Developed Property within the boundaries of CFD 2018-01 for which a building permit(s) has been issued for a non-residential structure(s). “Proportionately” means for Taxable Property that the ratio of the Special Tax levy to the Maximum Annual Special Tax is equal for all Assessor’s Parcels within each classification (Residential Property, Non-Residential Property, and Undeveloped Property) within CFD 2018-01. “Public Property” means any property which (a) is owned by a public agency, (b) has been irrevocably offered for dedication to a public agency, or (c) is designated with specific boundaries and acreage on a final subdivision map as property which will be owned by a public agency. For purposes of this definition, a public agency includes the Federal government, the State of California, the County, the City, or any other public agency. “Residential Dwelling Unit” means any residential dwelling unit constructed or to be constructed for habitable living purposes located on an Assessor’s Parcel as indicated in the records of the County Assessor, or, if not indicated, as otherwise determined by the CFD Administrator based on available official information, including building permit(s) issued. An Accessory Unit that shares an Assessor’s Parcel with a Residential Dwelling Unit of Residential Property shall not be considered a separate Residential Dwelling Unit for purposes of calculating the Special Tax. “Residential Property” means all Assessor’s Parcels of Developed Property within the boundaries of CFD 2018-01 for which a building permit(s) has been issued for purposes of constructing one or more Residential Dwelling Units. “Special Tax” means the special tax to be levied in each Fiscal Year on each Assessor’s Parcel of Taxable Property to fund the Special Tax Requirement. Page 85 Ordinance No. 943 - Page 6 of 9 ATTACHMENT #01 “Special Tax Requirement” means that amount of Special Tax revenue required in any Fiscal Year for CFD 2018-01 to: (i) pay for the Authorized Services; (ii) pay Administrative Expenses; (iii) pay any amounts required to establish or replenish any repair and contingency funds, capital improvement funds, or reserve funds for CFD 2018-01; and (iv) pay for reasonably anticipated delinquent Special Taxes based on the delinquency rate for Special Taxes levied in the previous Fiscal Year; less (v) a credit for funds available to reduce the annual Special Tax levy, as determined by the CFD Administrator. “State” means the State of California. “Taxable Property” means all of the Assessor’s Parcels within the boundaries of CFD 2018-01 that are not exempt from the Special Tax pursuant to law or Section E below. “Undeveloped Property” means each Assessor’s Parcel of Taxable Property within the boundaries of CFD 2018-01 that is not classified as Developed Property. B. ASSIGNMENT TO LAND USE CATEGORIES AND EBUS On, or around, July 1 of each Fiscal Year, the CFD Administrator shall determine the valid Assessor’s Parcel numbers for the current Fiscal Year for all property within CFD 2018-01. Each Assessor’s Parcel of Taxable Property within CFD 2018-01 shall be classified as Residential Property, Non-Residential Property, Mixed Use Property, or Undeveloped Property, and shall be subject to the levy of annual Special Taxes determined pursuant to Section C below. For each Assessor’s Parcel of Developed Property EBUs shall be assigned according to the table below: Property Land Use Equivalent Benefit Unit Assignment Residential Property 1 EBU per Residential Dwelling Unit Non-Residential Property 1 Acre or less 2 EBUs per Parcel Non-Residential Property greater than 1 Acre 2 EBUs per Acre or portion thereof Mixed Use Property The EBU assignment for each Assessor’s Parcel of Mixed Use Property is equal the total of (i) the Assigned Special Tax that would be applicable to such Assessor’s Parcel if it was classified only as Residential Property and (ii) the Assigned Special Tax that would be applicable to such Assessor’s Parcel if it was classified as Non-Residential Property. Page 86 Ordinance No. 943 - Page 7 of 9 ATTACHMENT #01 C. MAXIMUM ANNUAL SPECIAL TAX The Maximum Annual Special Tax for each Assessor’s Parcel that may be levied in any Fiscal Year is shown below: Development Status 2019/20 Special Tax Developed Property $318.84 per EBU Undeveloped Property $5,234.20 per Acre On July 1 of each Fiscal Year, commencing on July 1, 2020, the dollar amount per EBU for Developed Property and the dollar amount per acre of Undeveloped Property shall be increased by a minimum of two percent (2%) to a maximum of six percent (6%), determined on an annual basis as needed to satisfy the Special Tax Requirement. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year 2019/20, and for each subsequent Fiscal Year, the CFD Administrator shall determine the Special Tax Requirement and shall levy the Special Tax on each Assessor’s Parcel of Taxable Property until the amount of Special Taxes equals the Special Tax Requirement. The Special Taxes shall be levied each Fiscal Year as follows: First: Determine the Special Tax Requirement. Second: The Special Tax shall be levied Proportionately on each Assessor's Parcel of Developed Property at a rate of up to 100% of the applicable Maximum Annual Special Tax as needed to satisfy the Special Tax Requirement. Third: If additional moneys are needed to satisfy the Special Tax Requirement after the second step has been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at a rate of up to 100% of the applicable Maximum Annual Special Tax to satisfy the Special Tax Requirement. E. EXEMPTIONS The CFD Administrator shall classify the following Assessor’s Parcels as Exempt Property: (i) Public Property, (ii) Homeowner Association Property, and (iii) and Assessor’s Parcels with public or utility easements making impractical their utilization for any use other than the purposes set forth in the easement. If the use of an Assessor's Parcel of Exempt Property changes so that such Assessor's Parcel is no longer classified as one of the uses set forth above that would make such Assessor's Parcel eligible to be classified as Exempt Property, such Assessor's Parcel shall cease to be classified as Exempt Property and shall be deemed to be Taxable Property. Notwithstanding any other provision of this Rate and Method of Apportionment of Special Tax, no Special Taxes shall be levied on Public Property, except as otherwise provided in Sections 53317.3 and 53317.5 of the Act. Page 87 Ordinance No. 943 - Page 8 of 9 ATTACHMENT #01 F. REVIEW/APPEAL Any property owner may file a written appeal of the Special Tax with the CFD Administrator claiming that the amount or application of the Special Tax is not correct. The appeal must be filed not later than three (3) calendar years after having paid the Special Taxes that are disputed, and the appellant must be current in all payments of Special Taxes. In addition, during the term of the appeal process, all Special Taxes levied must be paid on or before the payment date established when the levy was made. The appeal must specify the reasons why the appellant claims the Special Taxes are in error. The CFD Administrator shall review the appeal, meet with the appellant if the CFD Administrator deems necessary, and advise the appellant of its determination. If the property owner disagrees with the CFD Administrator’s decision relative to the appeal, the owner may then file a written appeal with the City Council whose subsequent decision shall be final and binding on all interested parties. If the decision of the CFD Administrator or subsequent decision by the City Council requires the Special Taxes to be modified or changed in favor of the property owner, the CFD Administrator shall take any of the following actions, in order of priority, in order to correct the error: (i) amend the levy of Special Taxes for the current fiscal year prior to the payment date; (ii) require CFD 2018-01 to reimburse the current property owner the amount of the overpayment to the extent of available funds of CFD 2018-01; or (iii) grant a credit against, eliminate or reduce the future Special Taxes levied on the property owner’s property within CFD 2018-01 in the amount of the overpayment. This procedure shall be exclusive and its exhaustion by any property owner shall be a condition precedent to filing any legal action by such owner. G. INTERPRETATION OF RATE AND METHOD OF APPORTIONMENT The City reserves the right to make minor administrative and technical changes to this document that do not materially affect the rate and method of apportioning the Special Tax. In addition, the interpretation and application of any section of this document shall be at the City’s discretion. Interpretations may be made by the City by ordinance or resolution for purposes of clarifying any vagueness or ambiguity in this Rate and Method of Apportionment of Special Tax. H. MANNER OF COLLECTION The annual Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that the City may directly bill the Special Tax and may collect Special Taxes at a different time or in a different manner as necessary to meet its financial obligations. I. PREPAYMENT OF SPECIAL TAX The Special Tax may not be prepaid. Page 88 Ordinance No. 943 - Page 9 of 9 ATTACHMENT #01 J. TERM OF SPECIAL TAX The Special Tax shall be levied, commencing in Fiscal Year 2019/20, as needed to fund the Special Tax Requirement, in perpetuity. Page 89 D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F RO M :J ohn R . Gillison, C ity Manager INIT IAT E D B Y:J ason C . Welday, D irector of E ngineering Services/C ity Engineer S UB J E C T:C O NS ID E RAT I O N O F A RE S O L UT IO N O F NE C E S S I T Y D E C L ARI NG C E RTAIN C IT Y-O WNE D RE AL P RO P E RT Y INT E RE S T S, P RE V IO US LY AC Q UIRE D AS A P O RT IO N O F S AN B E RNARD I NO C O UNT Y AS S E S S O R’S PARC E L NUM B E R 0209-131-01, NE C E S S ARY F O R P UB L IC P URP O S E S I N C O NNE C T I O N WIT H AND T O AL L O W F O R T HE E S TAB L IS HM E NT AND M AI NT E NANC E O F A P UB L IC UT I L IT Y FAC IL I T Y L O C AT E D O N T HE NO RT HWE S T C O RNE R O F HAV E N AV E NUE AT J E RS E Y B O UL E VARD. RE COMMENDAT ION: Staf f recommends that the City Council: 1. Hold a public hearing, in accord with Code of C ivil Procedure sections 1245.235, 1245.240, and 1245.245, to consider the public use f or real property interests, previously acquired as a portion of San B ernardino County A ssessor’s P arcel Number 0209-131-01, and 2. F ollowing the public hearing adopt the attached Resolution of Necessity declaring the public use necessary in connection with and to allow for the establishment and maintenance of a public utility facility located on the northwest corner of Haven Avenue and J ersey Boulevard. BACKGROUND: As part of the Haven G rade S eparation P roject, the C ity acquired real property rights f rom adjacent property owners to provide the right-of-way and temporary construction easements necessary to construct and maintain the project’s roadway improvements. A mong the real property rights acquired was a 20,719 square foot, more or less, area of land on the west side of Haven Avenue at the intersection with J ersey Boulevard acquired in 2007 f rom D.R. L andmark, I nc. by eminent domain and described in the F inal Order of Condemnation recorded on F ebruary 28, 2017 as I nstrument No. 2017-0090139, Official R ecords. T he original purpose f or acquiring this property in 2007 was to construct a public street access f rom Haven Avenue to the property to the south owned by Hofer P roperties, L L C (“Hof er Property”). After the acquisition of the P roperty, the C ity entered into a settlement agreement with Hofer Properties, L L C (“Hofer A greement”) in a separate eminent domain case related to the same project. As a result of the Hof er A greement, direct access (ingress to and egress from) f or the Hofer P roperty to the City’s general circulation of streets was provided along Haven Avenue south of J ersey B oulevard and the City was not required to construct a public street access via the intersection of Haven Avenue and J ersey Boulevard. I n 2007, the City’s municipal utility (R C MU) constructed its Phase 2 backbone line extension along Haven Page 90 Avenue from F oothill Boulevard to J ersey B oulevard. I t was later determined that a portion of this line extension f rom 26th S treet to J ersey B oulevard was constructed outside of the C ity’s right-of-way and within property owned by Power Medic Technologies, I nc. (successor in ownership to D .R . L andmark, I nc.). I n order to resolve this encroachment, the C ity seeks to acquire a public utility easement f rom Power Medic Technologies, I nc. ANALY S IS: T he attached Resolution of Necessity seeks to establish a dif f erent public use f or the f ollowing C ity- owned real property interest ("Property") in the City of Rancho C ucamonga: A 19,318 square foot area, more or less, being a portion of the property, previously condemned by the C ity for public street purposes and all uses necessary and convenient thereto for the Haven Grade Separation P roject and as described in the F inal Order of Condemnation recorded on February 28, 2017 as I nstrument No. 2017-0090139, Of f icial Records. T he legal description of the Property is attached as E xhibit "A" and is depicted on the diagram attached as E xhibit "B" to the R esolution of Necessity. T he P roperty is now sought to be used f or a different “public use”, namely to allow for the establishment and maintenance of a public utility facility on the northwest corner of Haven Avenue and J ersey B oulevard ("P roposed P roject”, the area described in Exhibit "C" and depicted in E xhibit "D" of the R esolution of Necessity), and all uses necessary and convenient thereto pursuant to the authority conferred upon the C ity of Rancho C ucamonga to acquire property by eminent domain by C alif ornia Constitution Article 1, Section 19, California G overnment Code sections 37350, 37350.5, 37351, 37353, 40401, and 40404 and C alif ornia C ode of Civil P rocedure section 1230.010, et seq., including, but not limited to sections 1240.010 through 1240.050, 1240.110, 1240.120, 1240.410, 1240.510, 1240.610, 1240.650, 1245.245, 1245.350 and other provisions of law. T he public use for the P roperty is required to carry out and ef f ectuate the principal purpose of the Proposed Project. F I ND I NG S: Prior to adoption of a Resolution of Necessity and change of public purpose for the P roperty, the C ity C ouncil must make the f ollowing findings: T he public interest and necessity require the establishment of a dif f erent public use, T he establishment of a different public use is planned and located in that manner that will be compatible with the greatest public good and least private injury, and T he P roperty described in the Resolution of Necessity is necessary f or the public use. D iscussion and analysis f or each required finding is provided below. T he Public I nterest A nd Necessity R equire T he Establishment of a D if f erent P ublic Use A s explained above, the C ity seeks to establish a dif f erent public use for the P roperty in connection with and to allow f or the establishment and maintenance of a public utility f acility on the northwest corner of Haven Avenue at J ersey B oulevard. No additional property rights would be necessary for the P roposed P roject if the proposed public use for the P roperty is adopted and thereafter used to assist the City in resolving a municipal utility line encroachment into the Power Medic Technologies, I nc. property. T he public interest and necessity require the proposed public use to better meet the City’s public utility needs. Page 91 T he Establishment of a D if f erent P ublic Use I s P lanned A nd L ocated I n T he Manner T hat W ill Be Compatible W ith T he Greatest Public Good A nd L east Private I njury T he attached Resolution of Necessity proposes to establish a different public use for the C ity- owned P roperty that was previously acquired f or the Haven Grade Separation P roject. The original purpose for acquiring the Property in 2007 was to construct a public street access f rom Haven Avenue to the Hof er P roperty. A f ter the acquisition of the P roperty, the City entered into the Hofer A greement. As a result of the Hof er A greement, direct access (ingress to and egress from) for the Hofer Property to the C ity’s general circulation of streets was provided along Haven Avenue south of J ersey B oulevard and the C ity was not required to construct a public street access via the intersection of Haven Avenue and J ersey Boulevard. S ignif icantly, no additional property rights would be necessary f or the Proposed P roject if the proposed public use f or the P roperty is adopted and thereafter used to assist the City in resolving a municipal utility line encroachment into the Power Medic Technologies, I nc. property. T he proposed public use will not unreasonably interf ere with or impair the continuance of any existing public or private use or as those uses may reasonably be expected to exist in the future as allowed pursuant to Code of Civil P rocedure S ection 1240.510. T he Property D escribed in the R esolution of Necessity I s Necessary F or T he P ublic Use T he original purpose for acquiring the Property in 2007 was to construct a public street access from Haven Avenue to the Hofer Property. S ubsequent to the acquisition of the P roperty, the C ity entered into the Hofer A greement. As a result of the Hofer Agreement, direct access (ingress to and egress from) f or the Hofer P roperty to the City’s general circulation of streets was provided along Haven Avenue south of J ersey B oulevard and the City was not required to construct a public street access via the intersection of Haven Avenue and J ersey Boulevard. Signif icantly, no additional property rights would be necessary for the P roposed P roject if the proposed public use f or the P roperty is adopted and thereafter utilized to assist the City in resolving a municipal utility line encroachment into the Power Medic Technologies, I nc. property. C A L I F O R NI A E NV I R O NME NTA L Q UA L I T Y A C T F I ND I NG S: T he E ngineering Services and P lanning Departments have determined that the Proposed Project and this R esolution are categorically exempt from the requirements of the California Environmental Quality Act (“C E Q A”) and the City’s C E Q A Guidelines. T he Proposed P roject qualif ies under the Class 1 exemption under S tate C E Q A Guidelines Section 15301 (“E xisting Facilities”) because the P roposed Project involves the operation of an existing f acility of a publicly-owned utility used to provide electric power, which has already been developed. I n addition, there is no substantial evidence that the project may have a signif icant effect on the environment. As an alternative to the categorical exemption discussed above, the potential environmental impacts of the Haven Grade S eparation Project (“Haven Project”) were studied and analyzed under C E Q A in connection with an I nitial S ite A ssessment ("I S A") and I nitial S tudy. T he public utility f acility was initially constructed in furtherance of the Haven Project. I n connection with its approval of the Haven P roject, the City Council, as the lead agency, found that with the implementation of mitigation measures all signif icant impacts identif ied in the I S A were mitigated, avoided, or reduced to an acceptable level. On September 8, 2004, the C ity conducted a public hearing and adopted a Mitigated Negative Declaration f or the Haven P roject. T he I S A together with its E xhibits, the Mitigated Negative D eclaration and the Notice of Determination are on f ile in the Of f ice of the C ity Clerk of the C ity of R ancho Cucamonga and are incorporated in this report by this ref erence. F urther, the Engineering S ervices and Planning Departments, in connection with this proposed R esolution Page 92 of Necessity, have reviewed all of the environmental documentation prepared on the Haven Project, and pursuant to the criteria of Section 15162 of the C alif ornia Environmental Quality A ct G uidelines and Section 21166 of the P ublic Resources Codes found that there have been no substantial changes in the Haven P roject or the circumstances surrounding the Haven Project, nor has the C ity obtained any new information of substantial importance that could have been known with reasonable diligence at the time that the negative declaration was adopted that would require further environmental review. T herefore; no f urther environmental documentation is necessary and there continues to be no substantial evidence that the public utility facility associated with the Haven P roject, as the proposed public use for the P roperty, will have any significant environmental impact and therefore no f urther environmental review is required. T he af orementioned environmental studies are incorporated herein by this ref erence. C O NC L US I O N: I f the City Council f inds, based upon the evidence contained in and referred to in this Report and the testimony and comments received at this hearing, that the evidence warrants the necessary findings with respect to the proposed R esolution of Necessity, then staf f recommends that the City C ouncil, in the exercise of its discretion, adopt the R esolution (which require a 4/5ths vote) declaring certain C ity-owned real property interests, previously acquired as a portion of S an B ernardino C ounty A ssessor’s Parcel Number 0209-131-01, necessary for public purposes in connection with and to allow f or the establishment and maintenance of a public utility facility: T he P roperty that is a 19,318 square f oot area, more or less, being a portion of the property, previously condemned by the City (condemnee D.R. L andmark, I nc., a California corporation) for public street purposes and all uses necessary and convenient thereto f or the Haven Grade S eparation P roject and as described in the F inal Order of C ondemnation recorded on F ebruary 28, 2017 as I nstrument No. 2017-0090139, Official Records. T he legal description of the P roperty is attached as E xhibit "A " and is depicted on the diagram attached as Exhibit "B " to the R esolution of Necessity. I f the R esolution of Necessity is approved, it shall authorize and direct the C ity A ttorney's of f ice and C ity staf f to take all steps necessary to commence any necessary actions and legal proceedings in a court of competent jurisdiction to effectuate the public use identified herein, and authorize the City Manager to execute all related necessary documents. FISCAL IMPACT: T here is no direct f iscal impact as a result of this item. I f the City C ouncil adopts the attached R esolution of Necessity, the Property may be used to assist in resolving the municipal utility line encroachment into the Power Medic Technologies, I nc. property, potentially reducing the C ity’s costs to acquire the required public utility f acility easement. COUNCIL GOAL(S) ADDRE S S E D: T his item addresses the C ity C ouncil’s goal of E nhancing P remier Community Status by providing the right-of -way necessary to continue the operation of R C MU’s backbone f acilities along Haven Avenue. AT TAC HM E NT S : D escription Attachment 1 - R esolution of Necessity Page 93 ATTACHMENT 1 Resolution No. 19-001 – Page 1 of 6 RESOLUTION NO. 19-001 A RESOLUTION OF NECESSITY OF THE CITY OF RANCHO CUCAMONGA DECLARING CERTAIN CITY-OWNED REAL PROPERTY INTERESTS, PREVIOUSLY ACQUIRED AS A PORTION OF SAN BERNARDINO COUNTY ASSESSOR’S PARCEL NUMBER 0209-131-01, NECESSARY FOR PUBLIC PURPOSES IN CONNECTION WITH AND TO ALLOW FOR THE ESTABLISHMENT AND MAINTENANCE OF A PUBLIC UTILITY FACILITY THE CITY OF RANCHO CUCAMONGA HEREBY RESOLVES AS FOLLOWS: SECTION 1. The City of Rancho Cucamonga is a municipal corporation in the County of San Bernardino, State of California. SECTION 2. The real property interests (“Property”) described in Section 3 of this Resolution are to be used for a “public use”, namely to allow for the establishment and maintenance of a public utility facility ("Proposed Project”, the area described in Exhibit "C" and depicted in Exhibit "D"), and all uses necessary and convenient thereto pursuant to the authority conferred upon the City of Rancho Cucamonga to acquire property by eminent domain by California Constitution Article 1, Section 19, California Government Code sections 37350, 37350.5, 37351, 37353, 40401, and 40404 and California Code of Civil Procedure section 1230.010, et seq., including, but not limited to sections 1240.010 through 1240.050, 1240.110, 1240.120, 1240.410, 1240.510, 1240.610, 1240.650, 1245.245, 1245.350 and other provisions of law. The public use for the Property is required to carry out and effectuate the principal purpose of the Proposed Project. SECTION 3. The Property necessary for the Proposed Project is a 19,318 square foot area, more or less, being a portion of the property, previously condemned by the City for public street purposes and all uses necessary and convenient thereto for the Haven Grade Separation Project and as described in the Final Order of Condemnation recorded on February 28, 2017 as Instrument No. 2017-0090139, Official Records. The legal description of the Property is attached as Exhibit "A" to this Resolution and is depicted on the diagram attached as Exhibit "B" to this Resolution. SECTION 4. The Engineering Services and Planning Departments have determined that the Proposed Project and this Resolution are categorically exempt from the requirements of the California Environmental Quality Act (CEQA) and the City’s CEQA Guidelines. The Proposed Project qualifies under the Class 1 exemption under State CEQA Guidelines Section 15301 (Existing Facilities) because the Proposed Project involves the operation of an existing facility of a publicly-owned utility used to provide electric power, which has already been developed. In addition, there is no substantial evidence that the project may have a significant effect on the environment. The City Council has reviewed the staff determination of exemption, and based on its own independent judgment, concurs in the staff’s determination of exemption. SECTION 5. As an alternative to the categorical exemption discussed in Section 4 of this Resolution, the potential environmental impacts of the Haven Grade Separation Project (“Haven Project”) were studied and analyzed under CEQA in connection with an Initial Site Assessment ("ISA") and Initial Study. The public utility facility was initially constructed in furtherance of the Haven Project. In connection with its approval of the Haven Project, the City Council, as the lead agency, found that with the mitigation measures and all significant impacts identified in the ISA were mitigated, avoided, or reduced to an acceptable level. On September 8, 2004, the City conducted a public hearing and adopted a Mitigated Negative Declaration for the Haven Project. The Engineering Services and Planning Departments, in connection with this proposed Resolution of Necessity, have reviewed all of the environmental documentation prepared on the Haven Project, and pursuant to the criteria of Section 15162 of the California Environmental Quality Act Guidelines and Section Page 94 Resolution No. 19-001 – Page 2 of 6 21166 of the Public Resources Codes found that there have been no substantial changes in the Haven Project or the circumstances surrounding the Haven Project, nor has the City obtained any new information of substantial importance that could have been known with reasonable diligence at the time that the negative declaration was adopted that would require further environmental review. Therefore; no further environmental documentation is necessary and there continues to be no substantial evidence that the public utility facility associated with the Haven Project, as the proposed public use for the Property, will have any significant environmental impact and therefore no further environmental review is required. The City Council has reviewed this staff determination, and based on its own independent judgment, concurs in the staff’s determination. SECTION 4. The City Council of the City of Rancho Cucamonga hereby finds and determines that: (A) The public interest and necessity require the establishment of a different public use for the Property. (B) The establishment of a different public use is planned and located in the manner that will be most compatible with the greatest public good and least private injury. (C) The Property described in this Resolution is necessary for the public use. SECTION 5. The findings and declarations contained in this Resolution are based on the record before the City Council on January 16, 2019 when it adopted this Resolution, including the Staff Report dated January 16, 2019, all documents referenced and incorporated in the Staff Report, the testimony at the hearing, and the records and documents prepared in connection with the Proposed Project, all of which are incorporated in this Resolution by this reference. SECTION 6. The City Council of the City of Rancho Cucamonga authorizes and directs the City Attorney's office and City staff to take all steps necessary to commence any necessary actions and legal proceedings in a court of competent jurisdiction to effectuate the public use identified herein. SECTION 7. This Resolution shall take effect upon adoption. SECTION 8. The City Clerk shall certify to the adoption of this Resolution and shall cause this Resolution and a certification to be entered in the Book of Resolutions of the City Council of this City. PASSED, APPROVED, AND ADOPTED by the City Council of the City of Rancho Cucamonga this 16th day of January 2019. ____________________________________ L. Dennis Michael, Mayor City of Rancho Cucamonga, California ATTEST: ___________________________(SEAL) Janice C. Reynolds City Clerk APPROVED AS TO FORM: ___________________________ __________________________ James L. Markman John R. Gillison City Attorney City Manager Page 95 Resolution No. 19-001 – Page 3 of 6 Resolution No. 19-001 – Page 3 of 6 Page 96 Resolution No. 19-001 – Page 4 of 6 Resolution No. 19-001 – Page 4 of 6 Page 97 Resolution No. 19-001 – Page 5 of 6 Resolution No. 19-001 – Page 5 of 6 Page 98 Resolution No. 19-001 – Page 6 of 6 Resolution No. 19-001 – Page 6 of 6 Page 99 D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F RO M :J ohn R . Gillison, C ity Manager INIT IAT E D B Y:J ason C . Welday, D irector of E ngineering Services/C ity Engineer S UB J E C T:C O NS ID E RAT I O N O F A RE S O L UT IO N O F NE C E S S I T Y D E C L ARI NG C E RTAIN C IT Y-O WNE D RE AL P RO P E RT Y INT E RE S T S, P RE V IO US LY AC Q UIRE D AS A P O RT IO N O F S AN B E RNARD I NO C O UNT Y AS S E S S O R’S PARC E L NUM B E R 0209-131-01, NE C E S S ARY F O R P UB L IC P URP O S E S I N C O NNE C T I O N WIT H AND T O AL L O W F O R T HE E S TAB L IS HM E NT AND M AI NT E NANC E O F A P UB L IC UT I L IT Y FAC IL I T Y L O C AT E D O N T HE NO RT HWE S T C O RNE R O F HAV E N AV E NUE AT J E RS E Y B O UL E VARD. RE COMMENDAT ION: Staf f recommends that the City Council continue the public hearing scheduled for this item on J anuary 16, 2019 be continued to the regularly scheduled C ity C ouncil meeting on F ebruary 20, 2019. BACKGROUND: R eference is made to the staff report prepared for the above-ref erenced item included in the agenda for the J anuary 16, 2019 City Council meeting. ANALY S IS: Staf f is recommending that this item be continued to the F ebruary 20, 2019 City Council meeting based on information received after the agenda for the J anuary 16, 2019 agenda was prepared. FISCAL IMPACT: R eference is made to the staff report prepared for the above-ref erenced item included in the agenda for the J anuary 16, 2019 City Council meeting. COUNCIL GOAL(S) ADDRE S S E D: R eference is made to the staff report prepared for the above-ref erenced item included in the agenda for the J anuary 16, 2019 City Council meeting. AT TAC HM E NT S : D escription Attachment 1 - D .R . L andmark, I nc. L etter dated D ecember 30, 2018 Page 90 Attachment 2 - Manatt L etter dated J anuary 14, 2019 (without ref erenced enclosures) Attachment 3 - C ity L etter dated J anuary 15, 2019 Attachment 4 - O R G J 1. Staf f R eport Page 91 Page 92 Page 93 Page 94 Page 95 Page 96 Page 97 Page 98 Page 99 Page 100 Page 101 Page 102 Page 103 Page 104 Page 105 Page 106 Page 107 Page 108 Page 109 Page 110 January 15, 2019 SUBJECT: STAFF RECOMMENDATION TO CONTINUE HEARING FROM JANUARY 16, 2019 TO FEBRUARY 20, 2019, TO CONSIDER THE ADOPTION OF A RESOLUTION OF NECESSITY AUTHORIZING A PUBLIC USE FOR PROPERTY PREVIOUSLY ACQUIRED BY THE CITY FOR PUBLIC USE, IDENTIFIED AS THOSE CERTAIN CITY-OWNED REAL PROPERTY INTERESTS, PREVIOUSLY ACQUIRED AS A PORTION OF SAN BERNARDINO COUNTY TAX ASSESSOR’S PARCEL NUMBER 0209-131-01, NECESSARY FOR PUBLIC PURPOSES IN CONNECTION WITH AND TO ALLOW FOR THE ESTABLISHMENT AND MAINTENANCE OF A PUBLIC UTILITY FACILITY To All Interested Parties: PLEASE TAKE NOTICE that staff has recommended that the City Council of the City of Rancho Cucamonga (“City”) continue the hearing, from January 16, 2019 to February 20, 2019, to consider the adoption of a Resolution of Necessity authorizing a public use for property previously acquired by the City for a public use. The real property is identified as those City-owned real property interests, previously acquired as a portion of San Bernardino County Tax Assessor’s Parcel Number 0209-131-01. If you have any questions regarding this matter, please contact Jason Welday, Director of Engineering Services/City Engineer at (909) 774-4011. Sincerely, ENGINEERING SERVICES DEPARTMENT Jason C. Welday, P.E., T.E. Director of Engineering Services/City Engineer Page 111 D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F ROM :J ohn R. Gillison, City Manager INI T IAT E D B Y:J ason C. Welday, Director of Engineering Services/C ity Engineer S UBJ E C T:C O NS ID E RAT IO N O F A RE S O L UT I ON O F NE C ES S IT Y D E C L ARING C E RTAIN CIT Y-O WNE D RE AL PROP E RT Y INT E RE S T S, P RE V IOUS LY AC Q UI RE D AS A P ORT IO N O F S AN B E RNARD INO C O UNT Y AS S E S S OR’S PARC E L NUM B ER 0209-131-01, NE C E S S ARY F O R P UB L IC P URP O S E S IN C ONNE C T IO N WIT H AND T O AL L O W F O R T HE E S TAB L IS HM E NT AND M AI NT E NANC E O F A P UBL IC UT IL IT Y FACIL IT Y L O C AT E D ON T HE NO RT HWE S T C O RNE R O F HAV E N AV E NUE AT J E RS E Y B OUL E VARD. RE COMMENDAT ION: Staff recommends that the City Council: 1. Hold a public hearing, in accord with Code of Civil Procedure sections 1245.235, 1245.240, and 1245.245, to consider the public use for real property interests, previously acquired as a portion of San Bernardino County Assessor’s Parcel Number 0209-131- 01, and 2. F ollowing the public hearing adopt the attached R esolution of Necessity declaring the public use necessary in connection with and to allow for the establishment and maintenance of a public utility facility located on the northwest corner of Haven Avenue and J ersey Boulevard. BACKGROUND: As part of the Haven Grade S eparation Project, the City acquired real property rights f rom adjacent property owners to provide the right- of-way and temporary construction easements necessary to construct and maintain the project’s roadway improvements. A mong the real property rights acquired was a 20,719 square foot, more or less, area of land on the west side of Haven Avenue at the intersection with J ersey B oulevard acquired in 2007 from D .R. Landmark, I nc. by eminent domain and described in the F inal Order of Condemnation recorded on F ebruary 28, 2017 as I nstrument No. 2017-0090139, Official R ecords. T he original purpose f or acquiring this property in 2007 was to construct a public street access from Haven Avenue to the property to the south owned by Hof er P roperties, L L C (“Hofer P roperty”). After the acquisition of the Property, the C ity entered into a settlement agreement with Hof er Properties, L L C (“Hofer Agreement”) in a separate eminent domain case related to the same project. A s a result of the Hofer Agreement, direct access (ingress to and egress from) for the Hof er P roperty to the City’s general circulation of streets was provided along Haven Avenue south of J ersey Boulevard and the City was not required to construct a public street access via the intersection of Haven Avenue and J ersey Boulevard. I n 2007, the City’s municipal utility (R C MU) constructed its P hase 2 backbone line extension along Haven Avenue from Foothill Boulevard to J ersey B oulevard. I t was later determined that a portion of this line extension from 26th Street to Jersey B oulevard was constructed outside of the City’s right-of-way and within property owned by Power Medic Technologies, I nc. (successor in ownership to D.R. L andmark, I nc.). I n order to resolve this encroachment, the City seeks to acquire a public utility easement from Power Medic Technologies, I nc. ANALYSIS: The attached R esolution of Necessity seeks to establish a dif ferent public use for the following City-owned real property interest ("Property") in the City of Rancho Cucamonga: A 19,318 square foot area, more or less, being a portion of the property, previously condemned by the City for public street purposes and all uses necessary and convenient thereto for the Haven Grade Separation P roject and as described in the Final Order of Condemnation recorded on February 28, 2017 as I nstrument No. 2017-0090139, Official Records. The legal description of the Property is attached as E xhibit "A" and is depicted on the diagram attached as Exhibit "B" to the Resolution of Necessity. The Property is now sought to be used for a different “public use”, namely to allow f or the establishment and maintenance of a public utility facility on the northwest corner of Haven Avenue and J ersey Boulevard ("Proposed Project”, the area described in Exhibit "C" andPage 112 utility facility on the northwest corner of Haven Avenue and J ersey Boulevard ("Proposed Project”, the area described in Exhibit "C" and depicted in Exhibit "D" of the Resolution of Necessity), and all uses necessary and convenient thereto pursuant to the authority conferred upon the C ity of Rancho C ucamonga to acquire property by eminent domain by California Constitution Article 1, Section 19, California Government Code sections 37350, 37350.5, 37351, 37353, 40401, and 40404 and California Code of C ivil Procedure section 1230.010, et seq., including, but not limited to sections 1240.010 through 1240.050, 1240.110, 1240.120, 1240.410, 1240.510, 1240.610, 1240.650, 1245.245, 1245.350 and other provisions of law. T he public use for the Property is required to carry out and effectuate the principal purpose of the Proposed P roject. F I NDI NG S: Prior to adoption of a Resolution of Necessity and change of public purpose for the Property, the City Council must make the following findings: T he public interest and necessity require the establishment of a different public use, T he establishment of a dif ferent public use is planned and located in that manner that will be compatible with the greatest public good and least private injury, and T he Property described in the R esolution of Necessity is necessary for the public use. Discussion and analysis for each required finding is provided below. T he Public I nterest And Necessity Require T he Establishment of a Different Public Use A s explained above, the C ity seeks to establish a different public use for the Property in connection with and to allow for the establishment and maintenance of a public utility facility on the northwest corner of Haven Avenue at J ersey Boulevard. No additional property rights would be necessary f or the P roposed Project if the proposed public use for the Property is adopted and thereafter used to assist the City in resolving a municipal utility line encroachment into the Power Medic Technologies, I nc. property. T he public interest and necessity require the proposed public use to better meet the City’s public utility needs. T he E stablishment of a Different Public Use I s P lanned And L ocated I n The Manner That W ill B e Compatible W ith The Greatest Public Good And L east Private I njury T he attached Resolution of Necessity proposes to establish a different public use for the City-owned Property that was previously acquired for the Haven Grade Separation Project. T he original purpose f or acquiring the P roperty in 2007 was to construct a public street access from Haven Avenue to the Hofer Property. A f ter the acquisition of the Property, the City entered into the Hofer A greement. As a result of the Hofer A greement, direct access (ingress to and egress from) for the Hofer Property to the City’s general circulation of streets was provided along Haven Avenue south of J ersey Boulevard and the City was not required to construct a public street access via the intersection of Haven Avenue and J ersey Boulevard. S ignificantly, no additional property rights would be necessary f or the P roposed Project if the proposed public use for the Property is adopted and thereafter used to assist the City in resolving a municipal utility line encroachment into the Power Medic Technologies, I nc. property. The proposed public use will not unreasonably interfere with or impair the continuance of any existing public or private use or as those uses may reasonably be expected to exist in the future as allowed pursuant to Code of Civil P rocedure Section 1240.510. T he Property D escribed in the Resolution of Necessity I s Necessary F or The Public Use T he original purpose for acquiring the Property in 2007 was to construct a public street access from Haven Avenue to the Hofer P roperty. Subsequent to the acquisition of the Property, the City entered into the Hofer Agreement. As a result of the Hofer A greement, direct access (ingress to and egress from) for the Hofer P roperty to the City’s general circulation of streets was provided along Haven Avenue south of J ersey B oulevard and the City was not required to construct a public street access via the intersection of Haven Avenue and J ersey Boulevard. Significantly, no additional property rights would be necessary f or the P roposed P roject if the proposed public use for the Property is adopted and thereafter utilized to assist the City in resolving a municipal utility line encroachment into the P ower Medic Technologies, I nc. property. C A L I F OR NI A E NV I R O NME NTA L QUA L I T Y A C T F I ND I NGS : The Engineering Services and Planning Departments have determined that the Proposed Project and this R esolution are categorically exempt from the requirements of the C alifornia Environmental Quality Act (“CE QA”) and the City’s C EQA Guidelines. The Proposed Project qualifies under the Class 1 exemption under State C E Q A Guidelines S ection 15301 (“E xisting Facilities”) because the Proposed Project involves the operation of an existing facility of a publicly-owned utility used to provide electric power, which has already been developed. I n addition, there is no substantial evidence that the project may have a significant ef f ect on the environment. As an alternative to the categorical exemption discussed above, the potential environmental impacts of the Haven Grade Separation Project (“Haven Project”) were studied and analyzed under CE QA in connection with an I nitial Site Assessment ("I S A ") and I nitial Study. The public utility facility was initially constructed in furtherance of the Haven Project. I n connection with its approval of the Haven Page 113 Study. The public utility facility was initially constructed in furtherance of the Haven Project. I n connection with its approval of the Haven Project, the City C ouncil, as the lead agency, found that with the implementation of mitigation measures all significant impacts identified in the I S A were mitigated, avoided, or reduced to an acceptable level. On September 8, 2004, the City conducted a public hearing and adopted a Mitigated Negative Declaration for the Haven Project. The I S A together with its E xhibits, the Mitigated Negative Declaration and the Notice of Determination are on file in the Office of the City Clerk of the City of Rancho Cucamonga and are incorporated in this report by this reference. Further, the E ngineering Services and P lanning Departments, in connection with this proposed Resolution of Necessity, have reviewed all of the environmental documentation prepared on the Haven Project, and pursuant to the criteria of Section 15162 of the California Environmental Quality Act Guidelines and S ection 21166 of the Public Resources Codes f ound that there have been no substantial changes in the Haven Project or the circumstances surrounding the Haven P roject, nor has the City obtained any new information of substantial importance that could have been known with reasonable diligence at the time that the negative declaration was adopted that would require further environmental review. Therefore; no further environmental documentation is necessary and there continues to be no substantial evidence that the public utility facility associated with the Haven Project, as the proposed public use for the Property, will have any significant environmental impact and theref ore no further environmental review is required. The aforementioned environmental studies are incorporated herein by this reference. C O NC L US I O N: I f the City Council finds, based upon the evidence contained in and ref erred to in this Report and the testimony and comments received at this hearing, that the evidence warrants the necessary findings with respect to the proposed Resolution of Necessity, then staff recommends that the City Council, in the exercise of its discretion, adopt the Resolution (which require a 4/5ths vote) declaring certain City-owned real property interests, previously acquired as a portion of San Bernardino County A ssessor’s P arcel Number 0209-131-01, necessary for public purposes in connection with and to allow for the establishment and maintenance of a public utility facility: T he Property that is a 19,318 square foot area, more or less, being a portion of the property, previously condemned by the City (condemnee D.R. Landmark, I nc., a California corporation) for public street purposes and all uses necessary and convenient thereto for the Haven Grade S eparation P roject and as described in the F inal Order of Condemnation recorded on F ebruary 28, 2017 as I nstrument No. 2017-0090139, Official Records. The legal description of the P roperty is attached as Exhibit "A " and is depicted on the diagram attached as Exhibit "B" to the Resolution of Necessity. I f the Resolution of Necessity is approved, it shall authorize and direct the C ity Attorney's office and City staff to take all steps necessary to commence any necessary actions and legal proceedings in a court of competent jurisdiction to effectuate the public use identified herein, and authorize the C ity Manager to execute all related necessary documents. FIS CAL IMPACT: There is no direct fiscal impact as a result of this item. I f the City C ouncil adopts the attached R esolution of Necessity, the P roperty may be used to assist in resolving the municipal utility line encroachment into the Power Medic Technologies, I nc. property, potentially reducing the City’s costs to acquire the required public utility facility easement. COUNCIL GOAL(S) ADDRESSED: This item addresses the City Council’s goal of Enhancing P remier Community S tatus by providing the right-of -way necessary to continue the operation of R C MU’s backbone facilities along Haven Avenue. AT TAC HM E NT S: Description Attachment 1 - Resolution of Necessity Page 114 ATTACHMENT 1 Resolution No. 19-001 – Page 1 of 6 RESOLUTION NO. 19-001 A RESOLUTION OF NECESSITY OF THE CITY OF RANCHO CUCAMONGA DECLARING CERTAIN CITY-OWNED REAL PROPERTY INTERESTS, PREVIOUSLY ACQUIRED AS A PORTION OF SAN BERNARDINO COUNTY ASSESSOR’S PARCEL NUMBER 0209-131-01, NECESSARY FOR PUBLIC PURPOSES IN CONNECTION WITH AND TO ALLOW FOR THE ESTABLISHMENT AND MAINTENANCE OF A PUBLIC UTILITY FACILITY THE CITY OF RANCHO CUCAMONGA HEREBY RESOLVES AS FOLLOWS: SECTION 1. The City of Rancho Cucamonga is a municipal corporation in the County of San Bernardino, State of California. SECTION 2. The real property interests (“Property”) described in Section 3 of this Resolution are to be used for a “public use”, namely to allow for the establishment and maintenance of a public utility facility ("Proposed Project”, the area described in Exhibit "C" and depicted in Exhibit "D"), and all uses necessary and convenient thereto pursuant to the authority conferred upon the City of Rancho Cucamonga to acquire property by eminent domain by California Constitution Article 1, Section 19, California Government Code sections 37350, 37350.5, 37351, 37353, 40401, and 40404 and California Code of Civil Procedure section 1230.010, et seq., including, but not limited to sections 1240.010 through 1240.050, 1240.110, 1240.120, 1240.410, 1240.510, 1240.610, 1240.650, 1245.245, 1245.350 and other provisions of law. The public use for the Property is required to carry out and effectuate the principal purpose of the Proposed Project. SECTION 3. The Property necessary for the Proposed Project is a 19,318 square foot area, more or less, being a portion of the property, previously condemned by the City for public street purposes and all uses necessary and convenient thereto for the Haven Grade Separation Project and as described in the Final Order of Condemnation recorded on February 28, 2017 as Instrument No. 2017-0090139, Official Records. The legal description of the Property is attached as Exhibit "A" to this Resolution and is depicted on the diagram attached as Exhibit "B" to this Resolution. SECTION 4. The Engineering Services and Planning Departments have determined that the Proposed Project and this Resolution are categorically exempt from the requirements of the California Environmental Quality Act (CEQA) and the City’s CEQA Guidelines. The Proposed Project qualifies under the Class 1 exemption under State CEQA Guidelines Section 15301 (Existing Facilities) because the Proposed Project involves the operation of an existing facility of a publicly-owned utility used to provide electric power, which has already been developed. In addition, there is no substantial evidence that the project may have a significant effect on the environment. The City Council has reviewed the staff determination of exemption, and based on its own independent judgment, concurs in the staff’s determination of exemption. SECTION 5. As an alternative to the categorical exemption discussed in Section 4 of this Resolution, the potential environmental impacts of the Haven Grade Separation Project (“Haven Project”) were studied and analyzed under CEQA in connection with an Initial Site Assessment ("ISA") and Initial Study. The public utility facility was initially constructed in furtherance of the Haven Project. In connection with its approval of the Haven Project, the City Council, as the lead agency, found that with the mitigation measures and all significant impacts identified in the ISA were mitigated, avoided, or reduced to an acceptable level. On September 8, 2004, the City conducted a public hearing and adopted a Mitigated Negative Declaration for the Haven Project. The Engineering Services and Planning Departments, in connection with this proposed Resolution of Necessity, have reviewed all of the environmental documentation prepared on the Haven Project, and pursuant to the criteria of Section 15162 of the California Environmental Quality Act Guidelines and Section Page 115 Resolution No. 19-001 – Page 2 of 6 21166 of the Public Resources Codes found that there have been no substantial changes in the Haven Project or the circumstances surrounding the Haven Project, nor has the City obtained any new information of substantial importance that could have been known with reasonable diligence at the time that the negative declaration was adopted that would require further environmental review. Therefore; no further environmental documentation is necessary and there continues to be no substantial evidence that the public utility facility associated with the Haven Project, as the proposed public use for the Property, will have any significant environmental impact and therefore no further environmental review is required. The City Council has reviewed this staff determination, and based on its own independent judgment, concurs in the staff’s determination. SECTION 4. The City Council of the City of Rancho Cucamonga hereby finds and determines that: (A) The public interest and necessity require the establishment of a different public use for the Property. (B) The establishment of a different public use is planned and located in the manner that will be most compatible with the greatest public good and least private injury. (C) The Property described in this Resolution is necessary for the public use. SECTION 5. The findings and declarations contained in this Resolution are based on the record before the City Council on January 16, 2019 when it adopted this Resolution, including the Staff Report dated January 16, 2019, all documents referenced and incorporated in the Staff Report, the testimony at the hearing, and the records and documents prepared in connection with the Proposed Project, all of which are incorporated in this Resolution by this reference. SECTION 6. The City Council of the City of Rancho Cucamonga authorizes and directs the City Attorney's office and City staff to take all steps necessary to commence any necessary actions and legal proceedings in a court of competent jurisdiction to effectuate the public use identified herein. SECTION 7. This Resolution shall take effect upon adoption. SECTION 8. The City Clerk shall certify to the adoption of this Resolution and shall cause this Resolution and a certification to be entered in the Book of Resolutions of the City Council of this City. PASSED, APPROVED, AND ADOPTED by the City Council of the City of Rancho Cucamonga this 16th day of January 2019. ____________________________________ L. Dennis Michael, Mayor City of Rancho Cucamonga, California ATTEST: ___________________________(SEAL) Janice C. Reynolds City Clerk APPROVED AS TO FORM: ___________________________ __________________________ James L. Markman John R. Gillison City Attorney City Manager Page 116 Resolution No. 19-001 – Page 3 of 6 Resolution No. 19-001 – Page 3 of 6 Page 117 Resolution No. 19-001 – Page 4 of 6 Resolution No. 19-001 – Page 4 of 6 Page 118 Resolution No. 19-001 – Page 5 of 6 Resolution No. 19-001 – Page 5 of 6 Page 119 Resolution No. 19-001 – Page 6 of 6 Resolution No. 19-001 – Page 6 of 6 Page 120 manatt Edward G. Burg Manatt, Phelps & Phillips, LLP Direct Dial: (310) 312-4189 E-mail: eburg@manatt.com manatt | phelps | phillips January 16, 2019 41649-060 BY EMAIL - Mayor L. Dennis Michael . Mayor Pro-Tem Lynne B. Kennedy Councilmember Ryan A. Hutchison Councilmember Kristine D. Scott Councilmember Sam Spagnolo Janice C. Reynolds, City Clerk City of Rancho Cucamonga 10500 Civic Center Drive Rancho Cucamonga, CA 91730 . Re: Notice of Intent to Adopt Resolution of Necessity for Public Purposes January 16,2019 City Council Meeting, 7:00 p.m. Amended Agenda Item J.l Dear Mayor Michael, Mayor Pro-Tem Kennedy, Councilmembers, and City Clerk: We represent Hofer Properties, LLC ("Hofer"). Late yesterday we received from the City's attorney, Regina N. Danner, a letter from Jason Welday dated January 15, 2019 and related materials indicating that staff is recommending that the matter referenced above be continued to February 20, 2019. Recognizing the importance of this matter and the amount of materials submitted by Hofer and others, we agree with staffs recommendation to continue the hearing. - Accordingly, and in reliance on Ms. Danner's advice that it is highly likely the matter will be continued as recommended, we do not intend to appear at tonight's hearing and will defer our appearance to February 20, 2019. Thank you. 11355 West Olympic Boulevard, Los Angeles, California 90064-1614 Telephone: 310.312.4000 Fax: 310.312.4224 Albany | Chicago | Los Angeles | New York | Orange County | Palo Alto | Sacramento | San Francisco | Washington, D.C. Very truly yours, Edward G. Burg ^ Manatt, Phelps & Phillips, LLP 1/16/2019 City Council Meeting: Item J1. - Additional Material manatt manatt | phelps | phillips Mayor Michael, Mayor Pro-Tem Kennedy, Coiincilmembers, and City Clerk January 16, 2019 Page 2 " cc: Paul B. Hofer (by email) Viral Mehta, Esq. (by email) Kevin F. Gillespie, Esq. (by email) Paul M. Shimoff, Esq. (by email) Jason Welday (by email) Michael F. Yoshiba, Esq. (by email) Regina N. Danner, Esq. (by email) 321594775.1 1/16/2019 City Council Meeting: Item J1. - Additional Material D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F RO M :J ohn R . Gillison, C ity Manager INIT IAT E D B Y:Matthew Burris, D eputy C ity Manager Candyce Burnett, City P lanner S UB J E C T:C O ND UC T F IRS T RE AD ING AND I NT RO D UC T I O N O F O RD INANC E NO. 944 - M UNIC IPAL C O D E AM E ND M E NT D RC2018-00956 – C I T Y O F RANC HO C UC AM O NG A – A RE Q UE S T T O AM E ND T I T L E 17 (D E V E L O P M E NT C O D E ) O F T HE M UNI C IPAL C O D E T O E X PAND L I M I T S O N ANIM AL K E E P ING F O R E D UC AT IO NAL US E S IN T HE I ND US T RIAL PARK (I P ) ZO NE. T HIS I T E M IS E X E M P T F RO M T HE RE Q UI RE M E NT S O F T HE C AL IF O RNI A E NV I RO NM E NTAL Q UAL IT Y AC T (C E Q A) AND T HE C IT Y’S C E Q A G UI D E L I NE S UND E R C E Q A S E C T IO N 15061(B )(3). RE COMMENDAT ION: Planning C ommission and S taff recommend the C ity C ouncil review and conduct the f irst reading of Ordinance No. 944, amending C hapters 17.30 and 17.88 of the Rancho C ucamonga Municipal C ode to permit certain animal keeping in conjunction with educational uses in the I ndustrial P ark Z oning District. BACKGROUND: R ancho Cucamonga has a long history of animal husbandry and the City has helped to foster this tradition in its large-lot residential areas through its zoning and General P lan policies. Over the past several years, the Planning Department has received inquiries about animal husbandry programs associated with educational uses f rom sources such as primary and secondary schools. I n a f ew cases, these schools have been in the I ndustrial Park zone, which does not allow animal keeping. Most recently, Abundant L iving F amily Church and United Christian Academy approached the City about incorporating animal husbandry into their curriculum. T he purpose of this amendment is to address this inequity so that educational uses based in I ndustrial P ark zones that wish to pursue animal husbandry-based educational programs, such as Abundant L iving F amily C hurch and United C hristian Academy, may have the option to do so. On D ecember 12, 2018 the proposed amendment was presented to the P lanning Commission for review and recommendation to the C ity Council. T he P lanning C ommission voted unanimously to recommend the amendment be forwarded to the C ity C ouncil f or f inal approval as presented by staf f . ANALY S IS: After studying the issue in depth, staf f is recommending that the C ity’s Development C ode be amended to allow limited animal keeping in I ndustrial P ark zones when associated with public or private school uses. Animal husbandry programs are acceptable and expected accessory uses of primary and secondary schools. Numerous high schools throughout the region have animal husbandry programs and the scale can Page 100 vary f rom a small f ootprint with a f ew small animals, to a large footprint with many animals and even includes greenhouses and barns. Animal husbandry and agricultural science programs can provide students with valuable exposure to science and serve as a launching point for science and technology- based career opportunities, such as biology, chemistry, veterinary medicine, anatomy, and biotechnology. However, if not properly managed, animal keeping activities can impact adjacent properties. Most typically, these impacts occur as noise, dust, and odor impacts. T hrough limits on the number and type of livestock as well as maintaining distances, impacts can be controlled. T he S ection 17.88.020.B of the Development C ode currently provides that: “All animals, excluding household pets, shall be kept a minimum distance of 70 feet from any adjacent primary dwelling, school, hospital or church located on any adjoining site. The location of corrals, fenced enclosures, barns, stables, or other enclosures used to confine horses shall conform to this requirement. This setback shall not apply from any adjacent guesthouse or second dwelling unit.” T his existing provision adequately addresses the need for maintaining distances between adjacent uses and buildings to minimize impacts and, as proposed, will also apply to schools in I ndustrial Park zones. T he proposed amendment would further help prevent impacts by limiting the size and number of livestock associated with educational uses in I ndustrial Park zones. O nly small livestock, such as sheep, goats, and chickens, would be allowed. Sheep and goats would be limited to 6 animals total and no more than 12 chickens would be permitted. F urthermore, this code amendment would restrict such activities to lots of 10 acres or more to further limit potential f or impacts to adjacent uses. Animal keeping associated with educational uses in the Industrial Park zone would be allowed only through a Conditional Use Permit (CUP). By requiring a Conditional Use Permit, the City retains the ability to address any unforeseen site constraints, design issues, or concerns. T his provides an additional layer of opportunity to ensure these small-scale animal keeping uses would not result in impacts to properties near educational uses in the Industrial Park zone. Section 17.88.030 contains specific C onditional Use Permit findings for animal keeping that must be met in order f or the Planning D irector to approve the Conditional Use P ermit. T hese are: “A. The keeping of the ani mal at the l ocati on specified in the application wil l not violate any federal, state, or local law. B. Odor, noi se, dust, and drainage from the keeping and maintenance of the animal will not contribute a nuisance or hazard to the public. C. The keeping and mai ntenance of the animal will not endanger the peace, health, or safety of persons in the immediate vicinity, or in the city as a whole.” I t is staff’s professional opinion that, with the requirements proposed under this Development Code Amendment, agriculture and animal keeping educational activities can be provided by schools in the I ndustrial Park zone without creating nuisance issues for adjacent properties or unduly af f ecting business activities in the I ndustrial P ark zone. T he P lanning D epartment staf f has determined that the project is exempt f rom the requirements of the C alif ornia Environmental Quality A ct (C E Q A ) and the City’s C E Q A Guidelines. T he project qualifies under the general rule that C E Q A applies only to projects, which have the potential for causing signif icant ef f ect on the environment. Pursuant to S tate C E Q A Guidelines Section 15061(B )(3), where it can be seen with certainty that there is no possibility that the activity in question may have significant effect on the environment, the activity is not subject to C E Q A. T he amendment conditionally permits the keeping of a limited number of livestock animals in a single land use zone and on parcels sufficient in size to avoid impacting neighboring uses. T he small number of animals is consistent with the existing limits in other zoning districts. F urther, the amendment requires discretionary review through the Conditional Use P ermit process prior to animal keeping on-site. A pplications subject to these provisions will be reviewed for C E Q A compliance during the C onditional Use Permit entitlement process at which time the applicant may be required to submit environmental studies that analyze potential impact(s), such as, air quality, biological Page 101 resources, cultural resources, noise levels, and transportation/traf f ic caused by the site-specific project. On a case-by-case review of each project, the appropriate environmental document will be prepared to address project-specif ic impacts. Therefore, the amendment will not have a significant impact on the environment. Per S ection 17.22.040 of the D evelopment C ode, amendments to the code may be approved only when the C ity Council f inds that the D evelopment C ode amendment is consistent with the General Plan goals, policies, and implementation programs. General Plan E conomic D evelopment P olicy E D -3.7, “S upport access to local and regional educational resources that provide educational opportunities to local residents and workers,” provides that the C ity should enhance ongoing educational opportunities f or local residents and workers to generate lasting economic benefits by preparing the local workforce for a wide range of employment opportunities. E nsuring that our educational uses can expand their curricula and educational of f erings without creating nuisances or impacts expands the educational opportunities for our residents. General P lan Economic Development Policy E D-4.1, “Encourage high-quality design f or inf ill development and continue to support new high-quality uses” is also applicable in guiding the consideration of this code amendment. T he standards proposed are designed to minimize impacts to surrounding uses while allowing existing schools in I ndustrial Park zones to diversify and expand their educational programs. FISCAL IMPACT: F uture applicants would be responsible f or paying permit and inspection fees f or any new applicable physical improvements. COUNCIL GOAL(S) ADDRE S S E D: T he proposed amendment does not specifically address a Council goal, however encouraging animal husbandry and agricultural science programs by permitting animal keeping in all schools within the C ity promotes our Premier Community Status within the region. AT TAC HM E NT S : D escription Attachment 1 - Planning C ommission R esolution Attachment 2 - Planning C ommission Minutes, D ecember 12, 2018 Attachment 3 - Ordinance Page 102 RESOLUTION NO.18-78 A RESOLUTION OF THE PLANNING COMMISSION OF THE CITY OF RANCHO CUCAMONGA, CALIFORNIA, RECOMMENDING APPROVAL OF MUNICIPAL CODE AMENDMENT DRC2018-00956, TO CONDITIONALLY PERMIT CERTAIN ANIMAL KEEPING WITHIN THE INDUSTRIAL PARK ZONE AND MAKING FINDINGS IN SUPPORT THEREOF A.Recitals. 1.The City of Rancho Cucamonga has prepared Municipal Code Amendment DRC2018- 00956, as described in the title of this Resolution. Hereinafter in this Resolution, the subject Municipal Code Amendment is referred to as "the application". 2.On December 12, 2018, the Planning Commission of the City of Rancho Cucamonga conducted a noticed public hearing on the application and concluded said hearing on that date. 3.All legal prerequisites prior to the adoption of this Resolution have occurred. B.Resolution. NOW, THEREFORE, it is hereby found, deter mined, and resolved by the Planning Commission of the City of Rancho Cucamonga as follows: 1.This Commission hereby specifically finds that all of the facts set forth in the Recitals, Part A, of this Resolution are true and correct. 2.Based upon the substantial evidence presented to the Planning Commission during the above-referenced public hearing on December 12, 2018, including written and oral staff reports, together with public testimony, this Commission hereby specifically finds as follows: a.General Plan Economic Development Policy ED-3.7, "Support access to localand regional educational resources that provide educational opportunities to local residents and workers," provides that the City should enhance ongoing educational opportunities for local residents and workers to generate lasting economic benefits by preparing the local workforce for a wide range of employment opportunities. Ensuring that our educational uses can expand their curricula and educational offerings without creating nuisances or impacts expands the educational opportunities for our residents; and b.General Plan Economic Development Policy ED-4.1, "Encourage high-quality design for infill development and continue to support new high-quality uses" is also applicable in guiding the consideration of this code amendment. The standards proposed are designed to minimize impacts to surrounding uses while allowing existing schools in Industrial Park zones to diversify and expand their educational programs. 3.The Planning Department Staff has determined that the project is exempt from the requirements of the California Environmental Quality Act (CEQA) and the City's CEQA Guidelines. The project qualifies under the general rule that CEQA applies only to projects, which have the potential for causing significant effect on the environment. Pursuant to State CEQA Attachment 1 Page 103 PLANNING COMMISSION RESOLUTION NO. 18-78 MUNICIPAL CODE AMENDMENT DRC2018-00956 - CITY OF RANCHO CUCAMONGA December 12, 2018 Page 2 Guidelines Section 15061(B)(3), where it can be seen with certainty that there is no possibility that the activity in question may have significant effect on the environment, the activity is not subject to CEQA. The amendment conditionally permits the keeping of a limited number of livestock animals in a single land use zone and on parcels sufficient in size to avoid impacting neighboring uses. The small number of animals is consistent with the existing limits in other zoning districts. Further, the amendment requires discretionary review through the Conditional Use Permit process prior to animal keeping on site. Applications subject to these provisions will be reviewed for CEQA compliance during the Conditional Use Permit entitlement process at which time the applicant may be required to submit environmental studies that analyze potential impact(s), such as, air quality, biological resources, cultural resources, noise levels, and transportation/traffic caused by the site-specific project. On a case-by-case review of each project, the appropriate environmental document will be prepared to address project -specific impacts. Therefore, the amendment will not have a significant effect on the environment. 4. Based upon the findings and conclusions set forth in paragraphs 1, 2, and 3 above, this Commission hereby recommends that the City Council approve Municipal Code Amendment DRC2018-00956 as indicated in Attachment A incorporated herein by this reference. 5. The Secretary to this Commission shall certify to the adoption of this Resolution. APPROVED AND ADOPTED THIS 12TH DAY OF DECEMBER 2018. PLANNING COMMISSION OF THE CITY OF RANCHO CUCAMONGA B: 21122 Tony buglielmo, Chairman ATTEST: Candyc Burnett, ecretary I, Candyce Burnett, Secretary of the Planning Commission for the City of Rancho Cucamonga, do hereby certify that the foregoing Resolution was duly and regularly introduced, passed, and adopted by the Planning Commission of the City of Rancho Cucamonga, at a regular meeting of the Planning Commission held on the 12th day of December 2018, by the following vote -to -wit: AYES: COMMISSIONERS: NOES: COMMISSIONERS: ABSENT: COMMISSIONERS: ABSTAIN: COMMISSIONERS: Page 104 DRAFT ORDINANCE NO. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF RANCHO CUCAMONGA TO CONDITIONALLY PERMIT CERTAIN ANIMAL KEEPING IN THE INDUSTRIAL PARK ZONE AND AMENDING SECTIONS 17.30.030 AND 17.88.020 OF THE MUNICIPAL CODE REGARDING THE SAME The City Council of the City of Rancho Cucamonga hereby ordains as follows: Section 1. The City Council hereby amends Table 17.88.020-1 of the Rancho Cucamonga Municipal Code to read as follows: TABLE 17.88.020-1 LIMITS ON ANIMALS Table Notes: 1) Refer to section 17.88.020(E) for additional allowances. 2) More than 5 birds or rodents per each 5,000 square feet of property area may be permitted subject to approval of a Conditional Use Permit. With a Conditional Use Permit as required by Table 17.30.030-1. Additional findings in section 17.88.020 shall be met. Draft Ordinance Page 1 of 3 Minimum Property Maximum Allowed Type of Animal Area (Square Feet per Number 11ai Districts Animal) Domestic Pets Cat(s) No Minimum Required 3(8) VL, L, LM, M, MH, H, MU, HR Dog(s) No Minimum Required 3(s) VL, L, LM, M, MH, H, MU, HR Rodents 12) and Small Birds 12j 5,000 SF (2) 25121 VL, L, LM, M, MH, H, MU, HR Other Domestic Pets No Minimum Required No Maximum VL, L, LM, M, MH, H, MU, HR Exotic Animals See Table Note #3 VL, L, LM, M, MH, H, MU, HR Insects See Table Note #3 VL only Livestock Animals Horse (4), Mule (°), Donkey (4), Pony (4,5) or Pot Bellied Pig 151 10,000 SF 6 VL and L Cattle, Swine, Llama, or similarly 20,000 SF 3 VL and L sized Livestock Animal Sheep and Goats or similarly sized 5,000 SF 6 VL and L 10 Acres 6 IP onlylivestockAnimal19) Poultryt9) 5,000 SF 6 VL only 10 Acres 12 IP only Table Notes: 1) Refer to section 17.88.020(E) for additional allowances. 2) More than 5 birds or rodents per each 5,000 square feet of property area may be permitted subject to approval of a Conditional Use Permit. With a Conditional Use Permit as required by Table 17.30.030-1. Additional findings in section 17.88.020 shall be met. Draft Ordinance Page 1 of 3 Page 105 4) A property must be a minimum of 20,000 square feet in area to maintain these animals. 5) A pony, which is defined as any horse measuring 14 hands and 2 inches or less in height at the withers, may be kept in addition to the keeping of two horses, or in lieu of two horses, three ponies may be kept on a 20,000 -square -foot lot. 8) Pot belly pigs are subject to the conditions/requirements described in section 17.88.020(F). 1) The overall maximum number of animals that can be kept on a property can be a combination of the permitted different animal types provided that: a. The property complies with the minimum lot size requirement for each individual type of animal; and b. The number of each individual type of animal does not exceed the maximum number of each individual type of animal permitted on the property. ga For lots with a minimum area of 10,000 square feet, one additional dog and/or cat may be allowed. 19) Such animals may be kept in the IP district on lots of ten acres or greater in size as an accesso use to a private or public school. Additional findings in Section 17.88.020 shall be met. Section 2. The City Council hereby amends the "Agricultural and Animal -Related Uses" provisions of Table 17.30.030-1 of the Rancho Cucamonga Municipal Code to read as follows: TABLE 17.30.030-1: ALLOWED LAND USES AND PERMIT REQUIREMENTS BY BASE ZONING DISTRICT Land Use/Zoning VL L LM M MH H MU OP NC GC CC SC RRC CO IP GI IWl/HI Hi OS HR FC UC District Agriculture and Animal - Related Uses Agricultural Uses N N N INININ N N N N NINI N N NINI N N P N P P Animal Keeping, P P P P P P P N N N N N N N N N N N N P N N Domestic Pets (4) Animal Keeping, C C C C C C C N N N N NJ N N N N N N N C N NExoticAnimals (4) Animal Keeping, P N N N N N N N N N N N N N N N N N N N N NInsects (4) Animal Keeping, Livestock P P N N N N N N N N N N N N C N N N N N N N Animals (4) Animal Keeping, P N N N N N N N N N N N N N C N N N N N N N Poultry (4) Equestrian Facility, C N N N N N N N N N N N N N N N N N C N C C Commercial Equestrian P N NNN N N N N N N N N N N N N N N N N N Facilit , Hobb Draft Ordinance Page 2 of 3 Page 106 Section 3. The City Council hereby finds that it can be seen with certainty that there is no possibility that the adoption of this Ordinance, and the zoning provisions established hereby, may have a significant effect on the environment, because the Ordinance involves the keeping of a limited number of livestock animals in a single land use zone and on parcels sufficient in size to avoid impacting neighboring uses. The small number of animals is consistent with the existing limits in other zoning districts. This Ordinance does not otherwise permit development within the City. It is therefore not subject to the California Environmental Quality Act review pursuant to Title 14, Chapter 3, Section 15061(b)(3) of the California Code of Regulations. Section 4. Severability. The City Council declares that, should any provision, section, paragraph, sentence, or word of this Ordinance be rendered or declared invalid by any final court action in a court of competent jurisdiction, or by reason of any preemptive legislation, the remaining provisions, sections, paragraphs, sentences and words of this Ordinance shall remain in full force and effect. Section 5. The City Clerk shall certify to the adoption of this Ordinance. BY: ATTEST: L. Dennis Michael, Mayor Janice C. Reynolds, City Clerk I, Janice C. Reynolds, City Clerk of the City of Rancho Cucamonga, do hereby certify that the foregoing Ordinance was introduced at a regular meeting of the City Council of the City of Rancho Cucamonga held on the , 2018, and was passed at a regular meeting of the City Council of the City of Rancho Cucamonga held on , 2018, by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS; ABSENT: COUNCILMEMBERS.- ABSTAINED: COUNCILMEMBERS: Draft Ordinance Page 3 of 3 Page 107 DECEMBER 12, 2018 HISTORIC PRESERVATION COMMISSION AND PLANNING COMMISSION MINUTES RANCHO CUCAMONGA CIVIC CENTER COUNCIL CHAMBERS 10500 CIVIC CENTER DRIVE RANCHO CUCAMONGA, CALIFORNIA Page 6 of 8 Commissioner Dopp noted the public comments will be part of the public record and encouraged the residents to keep talking to neighbors and officials. He requested more information on the following: the alternative for the residents if the annexation doesn’t take place, traffic patterns, impacts from commercial development, the impact of the Wilson extension, potential wildlife and wildfire issues, flooding concerns, issues with water resources (ground water reserves, water table replenishment, and water capture), and the impact of any potential development in the conservation area, specifically to the Etiwanda Preserve. Chairman Guglielmo requested more clarification on what the potential development would be if the annexation did not take place, if there is a feasible option to conserve all of the land, the potential effects of the project on traffic, public services, school impacts, and noise. E2. MUNICIPAL CODE AMENDMENT DRC2018-00956 – CITY OF RANCHO CUCAMONGA – A request to amend Title 17 (Development Code) of the Municipal Code to expand limits on animal keeping for educational uses in the Industrial Park (IP) Zone. This item is exempt from the requirements of the California Environmental Quality Act (CEQA) and the City’s CEQA guidelines under CEQA section 15061(b)(3). This item will be forwarded to City Council for final action. Mike Smith, Senior Planner, gave the staff report and PowerPoint presentation (copy on file). Commissioner Dopp asked if United Christian Academy would be required to apply for a Conditional Use Permit that would be heard by the Planning Commission. Mr. Smith replied that CUPs are handled administratively so it would not be a public hearing, but staff would evaluate the application, notice adjacent property owners accordingly, and apply any conditions of approval. Commissioner Oaxaca asked if there are any other current schools in the IP district that meet the 10 acre requirement for this Municipal Code Amendment other than Abundant Living Church and United Christian Academy. Mr. Smith replied that other schools were not surveyed, but there are a limited number of schools that are 10 acres or more. Chairman Guglielmo (after seeing and hearing no one), closed the public hearing. Commissioner Dopp spoke in favor of project-based education such as animal husbandry. Moved by Oaxaca, seconded by Dopp, carried 5-0 to adopt the Resolution recommending the item be forwarded to the City Council for final approval as presented by staff. Attachment 2 Page 108 Draft Ordinance Page 1 of 3 ORDINANCE NO. 944 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF RANCHO CUCAMONGA TO CONDITIONALLY PERMIT CERTAIN ANIMAL KEEPING IN THE INDUSTRIAL PARK ZONE AND AMENDING SECTIONS 17.30.030 AND 17.88.020 OF THE MUNICIPAL CODE REGARDING THE SAME The City Council of the City of Rancho Cucamonga hereby ordains as follows: Section 1. The City Council hereby amends Table 17.88.020-1 of the Rancho Cucamonga Municipal Code to read as follows: TABLE 17.88.020-1 LIMITS ON ANIMALS Type of Animal Minimum Property Area (Square Feet per Animal) Maximum Number (1,7) Allowed Districts Domestic Pets • Cat(s)No Minimum Required 3 (8) VL, L, LM, M, MH, H, MU, HR • Dog(s)No Minimum Required 3 (8) VL, L, LM, M, MH, H, MU, HR • Rodents (2) and Small Birds (2)5,000 SF (2) 25 (2) VL, L, LM, M, MH, H, MU, HR • Other Domestic Pets No Minimum Required No Maximum VL, L, LM, M, MH, H, MU, HR Exotic Animals (3) See Table Note #3 VL, L, LM, M, MH, H, MU, HR Insects (3) See Table Note #3 VL only Livestock Animals • Horse (4), Mule (4), Donkey (4), Pony (4,5) or Pot Bellied Pig (6)10,000 SF 6 VL and L • Cattle, Swine, Llama, or similarly sized Livestock Animal 20,000 SF 3 VL and L • Sheep and Goats or similarly sized livestock Animal (9) 5,000 SF 6 VL and L 10 Acres total 6 IP only Poultry (9) 5,000 SF 6 VL only 10 Acres total 12 IP only Table Notes: (1)Refer to section 17.88.020(E) for additional allowances. (2)More than 5 birds or rodents per each 5,000 square feet of property area may be permitted subject to approval of a Conditional Use Permit. (3)With a Conditional Use Permit as required by Table 17.30.030-1. Additional findings in section 17.88.020 shall be met. Attachment 3 Page 109 Draft Ordinance Page 2 of 3 (4) A property must be a minimum of 20,000 square feet in area to maintain these animals. (5) A pony, which is defined as any horse measuring 14 hands and 2 inches or less in height at the withers, may be kept in addition to the keeping of two horses, or in lieu of two horses, three ponies may be kept on a 20,000-square-foot lot. (6) Pot belly pigs are subject to the conditions/requirements described in section 17.88.020(F). (7) The overall maximum number of animals that can be kept on a property can be a combination of the permitted different animal types provided that: a. The property complies with the minimum lot size requirement for each individual type of animal; and b. The number of each individual type of animal does not exceed the maximum number of each individual type of animal permitted on the property. (8) For lots with a minimum area of 10,000 square feet, one additional dog and/or cat may be allowed. (9) Such animals may be kept in the IP district on lots of ten acres or greater in size as an accessory use to a private or public school. Additional findings in Section 17.88.020 shall be met. Section 2. The City Council hereby amends the “Agricultural and Animal-Related Uses” provisions of Table 17.30.030-1 of the Rancho Cucamonga Municipal Code to read as follows: TABLE 17.30.030-1: ALLOWED LAND USES AND PERMIT REQUIREMENTS BY BASE ZONING DISTRICT Land Use/Zoning District VL L LM M MH H MU OP NC GC CC SC RRC CO IP GI MI/HI HI OS HR FC UC Agriculture and Animal- Related Uses Agricultural Uses N N N N N N N N N N N N N N N N N N P N P P Animal Keeping, Domestic Pets (4) P P P P P P P N N N N N N N N N N N N P N N Animal Keeping, Exotic Animals (4) C C C C C C C N N N N N N N N N N N N C N N Animal Keeping, Insects (4) P N N N N N N N N N N N N N N N N N N N N N Animal Keeping, Livestock Animals (4) P P N N N N N N N N N N N N C N N N N N N N Animal Keeping, Poultry (4) P N N N N N N N N N N N N N C N N N N N N N Equestrian Facility, Commercial C N N N N N N N N N N N N N N N N N C N C C Equestrian Facility, Hobby P N N N N N N N N N N N N N N N N N N N N N Page 110 Draft Ordinance Page 3 of 3 Section 3. The City Council hereby finds that it can be seen with certainty that there is no possibility that the adoption of this Ordinance, and the zoning provisions established hereby, may have a significant effect on the environment, because the Ordinance involves the keeping of a limited number of livestock animals in a single land use zone and on parcels sufficient in size to avoid impacting neighboring uses. The small number of animals is consistent with the existing limits in other zoning districts. This Ordinance does not otherwise permit development within the City. It is therefore not subject to the California Environmental Quality Act review pursuant to Title 14, Chapter 3, Section 15061(b)(3) of the California Code of Regulations. Section 4. Severability. The City Council declares that, should any provision, section, paragraph, sentence, or word of this Ordinance be rendered or declared invalid by any final court action in a court of competent jurisdiction, or by reason of any preemptive legislation, the remaining provisions, sections, paragraphs, sentences and words of this Ordinance shall remain in full force and effect. Section 5. The City Clerk shall certify to the adoption of this Ordinance. BY: __________________________________ L. Dennis Michael, Mayor ATTEST: _______________________________ Janice C. Reynolds, City Clerk I, Janice C. Reynolds, City Clerk of the City of Rancho Cucamonga, do hereby certify that the foregoing Ordinance was introduced at a regular meeting of the City Council of the City of Rancho Cucamonga held on the ____________, 2018, and was passed at a regular meeting of the City Council of the City of Rancho Cucamonga held on ____________, 2018, by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAINED: COUNCILMEMBERS: Page 111 City Council January 19, 2019 MUNICIPAL CODE AMENDMENT DRC2018-00956 CITY OF RANCHO CUCAMONGA A request to amend Title 17 (Development Code)of the Municipal Code to expand limits on animal keeping for educational uses in the Industrial Park District. Background •The City has received inquiries about animal husbandry programs associated with educational uses (schools); •These schools have been in the Industrial Park Districts where animal keeping is not permitted; •Most recent inquiries were from Abundant Living Family Church and United Christian Academy to incorporate animal husbandry into their curriculum; Background •Animal husbandry and agricultural science programs provide students with exposure to science and science and technology-based career opportunities; •Limited opportunities in Industrial Districts; •The purpose of this amendment is to allow them to have the option of animal husbandry-based educational programs. Current Standards Type of Animal Minimum Property Area (Square Feet per Animal) Maximum Number (1,7) Allowable Residential District • Cat(s)No Minimum Required 3 (8)All • Dog(s)No Minimum Required 3 (8)All • Rodents (2) and Small Birds (2)5,000 SF (2)25 (2)All • Other Domestic Pets No Minimum Required No Maximum All Exotic Animals (3)All (3) Insects (3)VL only • Horse (4), Mule (4), Donkey (4), Pony (4,5) or Pot Bellied Pig (6)10,000 SF 6 VL and L • Cattle, Swine, Llama, or similarly sized Livestock Animal 20,000 SF 3 VL and L • Sheep and Goats or similarly sized livestock Animal 5,000 SF 6 VL and L Poultry 5,000 SF 6 VL only See Table Note #3 See Table Note #3 TABLE 17.88.020-1 LIMITS ON ANIMALS WITHIN RESIDENTIAL AREAS Domestic Pets Livestock Animals Revised Standards Type of Animal Minimum Property Area (Square Feet per Animal) Maximum Number (1,7) Allowable Residential District • Cat(s)No Minimum Required 3 (8)All • Dog(s)No Minimum Required 3 (8)All • Rodents (2) and Small Birds (2)5,000 SF (2)25 (2)All • Other Domestic Pets No Minimum Required No Maximum All Exotic Animals (3)All (3) Insects (3)VL only • Horse (4), Mule (4), Donkey (4), Pony (4,5) or Pot Bellied Pig (6)10,000 SF 6 VL and L • Cattle, Swine, Llama, or similarly sized Livestock Animal 20,000 SF 3 VL and L 5,000 SF 6 VL and L 10 Acres 6 IP only 5,000 SF 6 VL only 10 Acres 12 IP onlyPoultry (9) • Sheep and Goats or similarly sized livestock Animal (9) TABLE 17.88.020-1 LIMITS ON ANIMALS WITHIN RESIDENTIAL AREAS Domestic Pets See Table Note #3 See Table Note #3 Livestock Animals Conditional Use Permit Required •The amendment includes text specifying that the animals may be kept as an accessory use to a private or public school with a Conditional Use Permit. •The finding specific to this type of use would be that all animals shall be kept a minimum distance of 70 feet from any adjacent sensitive use; •Table 17.30.030-1 will be revised to show that animal- keeping of this type is allowed with a Conditional Use Permit. Planning Commission Review and Recommendation •The Planning Commission reviewed the proposed amendment on December 12,2018; •There were no comments from the public during this hearing; •The Planning Commission adopted Resolution No.18- 78 recommending approval of the proposed amendment. Environmental Assessment •Staff has determined that the project is exempt from the requirements of the California Environmental Quality Act (CEQA).The project qualifies under the general rule that CEQA applies only to projects,which have the potential for causing significant effect on the environment. •Pursuant to State CEQA Guidelines Section 15061(8)(3),where it can be seen that there is no possibility that the activity may have effect on the environment,the activity is not subject to CEQA. Conclusion The Planning Commission and Staff recommend the City Council review and conduct the first reading of Ordinance No.944 D AT E : J anuary 16, 2019 T O:Mayor and Members of the City Council F RO M :J ohn R . Gillison, C ity Manager INIT IAT E D B Y:Tamara L . L ayne, F inance D irector Noah Daniels, F inance Manager S UB J E C T:C O NS ID E RAT I O N T O AP P RO V E L E G AL D O C UM E NT S RE L AT E D T O F INANC I NG O F T HE D E S I G N, C O NS T RUC T I O N AND AC Q UI S I T I O N O F I M P RO V E M E NT S T O T HE C I T Y 'S E X IS T ING F I B E R O P T IC NE T WO RK AND M AK E C E RTAIN D E T E RM INAT IO NS I N C O NNE C T IO N T HE RE WI T H. RE COMMENDAT ION: I t is recommended that the City Council adopt the resolutions to approve certain legal documents and make certain determinations in connection with the issuance of the Rancho C ucamonga P ublic F inance Authority’s (the “Authority”) 2019 L ease Revenue B onds (F iber Optic P roject), Series A B onds (Tax- Exempt) and Series B B onds (Taxable) (collectively, the “B onds”) in an amount not to exceed $14,500,000 to finance improvements to the City’s existing f iber optic network (the “Project”) and approve all related legal documents, a preliminary of f icial statement, a bond purchase agreement, a continuing disclosure agreement and the release of a lien on certain property owned by the City. BACKGROUND: At its September 20, 2017 meeting, the C ity C ouncil adopted the City’s Fiber Optic Master P lan that was prepared by Magellan A dvisors. T he Master Plan showed that the opportunity to provide gigabit broadband service is important not only in positioning the City f or f uture economic development, but to attract businesses and commerce into the City. As noted in the staf f report, P hase 1 of the Master P lan incorporates several important objectives including: Establishing a formal memorandum of understanding with a private broadband provider to partner with the C ity in establishing and marketing the proposed broadband utility (approved by C ity Council at its March 21, 2018 meeting); Beginning the first phase of the network design in repurposing existing assets and filling in gaps in our network infrastructure (in process); and I mplementing a six-year capital investment plan in which the conduit gaps between the C ity and traf f ic conduits will be connected, interconnect to the C ity’s new data center and expand the conduit infrastructure to key strategic areas throughout the City (in process). I n furtherance of the F iber O ptic Master P lan, the City plans to f inance the acquisition, design, construction and equipping of the Project throughout the C ity. Pursuant to the laws of the S tate of C alif ornia, the C ity cannot directly issue bonds which are secured by payments f rom the C ity’s General F und for a period in Page 112 excess of one year. However, a joint powers authority created pursuant to J oint E xercise of Powers A ct, Government Code S ection 6500 et. seq. (the “A ct”) may issue bonds to finance capital improvements of its member agencies. As such, it is proposed that the Authority will issue the Bonds to finance approximately $13.5 million (representing Phase 1 of the P roject) of the estimated $21.6 million aggregate price to acquire, design, construct and equip the P roject. T he Bonds will be issued under the J oint Exercise of P owers A ct, Government C ode Section 6500 et. seq. (the “A ct”) and a portion of the B onds will be issued as tax-exempt obligations. T he Bonds will be repaid pursuant to the payments made by the C ity to the Authority pursuant to the L ease A greement described below. Under S tate law and certain court case decisions, the C ity is authorized to enter into a lease financing so long as such financing is subject to non-appropriation and/or abatement. T he L ease A greement is subject to non-appropriation and abatement. On D ecember 5, 2018, the City C ouncil set a public hearing regarding the f inancing of the design, construction and acquisition of a f iber optic network for December 19, 2018 as required by the Act. Sections 6586 and 6586.5 of the Act state that the City may participate in the financing with the A uthority so long as it (1) makes a determination that the financing will provide significant public benef its such as: (a) demonstrable savings in the effective interest rate, bond preparation, bond underwriting and/or bond issuance costs; or (b) more ef f icient delivery of local agency services to residential and commercial development; or (c) employment benefits from undertaking the Project in a timely fashion; or (d) more ef f icient delivery of local agency services to residential and commercial development; and (2) calls a public hearing. City staff believes that the P roject will allow for more ef f icient delivery of C ity services to residential and commercial development. On D ecember 19, 2018, the City Council conducted such public hearing. ANALY S IS: T he attached resolution contains a f inding that makes the determination that the Project will allow f or more ef f icient delivery of C ity services to residential and commercial development. Additionally, the attached resolution authorizes the City to enter into certain agreements and prepare and deliver certain other documents required to f inance the Project. L ease Agreement: T he L ease A greement provides the terms and conditions pursuant to which the City will lease to the Authority the Goldy S. L ewis Community C enter and the J ames L . B rulte Senior Center and accompanying parking lot (the “L eased Premises). I n consideration of such lease, the Authority will provide proceeds of the B onds to f inance the Project. T he Authority will then lease the L eased Premises to the C ity for its use for which the City will make certain payments to the A uthority which are subject to abatement and annual appropriation. Such payments serve as the source of repayment of the Bonds. C ontinuing Disclosure Agreement: T his A greement is included as an appendix to the Preliminary Of f icial Statement and outlines the inf ormation that the Authority and City will agree to provide, on an annual basis, to the municipal bond markets. D isclosure is required annually and on a timely basis f or enumerated material events. Official S tatement: T he Official S tatement describes the general terms of the B onds, security f or repayment and discloses potential risks to prospective investors including disclosure on the stipulated judgment. I t will describe, among other things, the C ity’s General F und revenues and expenditures, characteristics of the P roject and inherent known risk f actors associated with the B onds. T he P reliminary Official S tatement is distributed to prospective investors prior to the sale so that they can make inf ormed decisions on whether to purchase the Bonds. Bond P urchase Agreement: T he A uthority and C ity will enter into a Bond P urchase Agreement with S tifel, Nicolaus & C ompany, I ncorporated, as underwriter (the “Underwriter”), which sets forth the terms and conditions pursuant to which the Underwriter will purchase the Bonds f rom the A uthority. R elease of L ien and Termination A greement : T he City previously utilized the L eased P remises to secure lease payments required pursuant to a L ease Agreement dated October 1, 1988 (the “1988 L ease Agreement”) by and between the C ity and C alif ornia Cities F inancing C orporation (“C C F C”). Such lease Page 113 payments secured certain certificates of participation (the “1988 C O P S ”) issued by C C F C to refinance the acquisition of the L eased Premises. T he former Rancho C ucamonga R edevelopment Agency issued its tax allocation bonds in March 1990 which prepaid the 1988 C O P S. A t such time, the liens placed on the L eased P remises in connection with the 1988 C O P S should have technically been released but were not released. Since such time, C C F C has dissolved and the C ity will need to unilaterally execute the R elease of L ien and Termination in order to remove liens placed on the L eased Premises so that the L eased Premises may serve as security for the f iber optic financing. F ollowing approval of the resolutions, C ity staf f will authorize the sale of the B onds to the Underwriter, and it is anticipated that the B onds will be sold on or about F ebruary 14, 2019. No further action will be required by the City Council. FISCAL IMPACT: T his action will authorize staff to pursue issuance of lease revenue bonds in the original principal amount of not to exceed $14,500,000 to provide funding for P roject improvements. Annual debt service in the amount of approximately $1,000,000 may be paid f rom the City’s General F und Fiber Master P lan R eserve (currently has three years’ worth of debt service payments accumulated), excess revenues from the Project or any other source of f unds legally available to the C ity to make L ease Payments. Debt service payments are due in November (interest only) and May (principal and interest) of each fiscal year with the first payment being due on November 1, 2019 which will be included in the F Y 2019/20 B udget. COUNCIL GOAL(S) ADDRE S S E D: T he implementation and f inancing of the F iber Optic Master Plan will enhance the C ity’s position as the premier community in our region by expanding the availability of high speed broadband services to businesses within the program’s service area which will improve economic development. AT TAC HM E NT S : D escription Attachment 1 - R esolution A pproving the F inancing Attachment 2 - R esolution A uthorizing Execution and Recordation of R elease of L ien Attachment 3 - F orm of L ease A greement Attachment 4 - F orm of P reliminary Official S tatement (includes C ontinuing Disclosure Agreement) Attachment 5 - F orm of B ond Purchase A greement Attachment 6 - F orm of Release of L ien and Termination Page 114 Page 1 of 7 60285.00031\31484106.9 RESOLUTION NO. 19-002 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO CUCAMONGA, CALIFORNIA, AUTHORIZING PROCEEDINGS AND AGREEMENTS RELATING TO THE FINANCING OF THE ACQUISITION, DESIGN, CONSTRUCTION AND EQUIPPING OF A FIBER OPTIC NETWORK WITHIN THE CITY, APPROVING ISSUANCE AND SALE OF BONDS BY THE RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY, APPROVING AN OFFICIAL STATEMENT AND AUTHORIZING OFFICIAL ACTIONS WHEREAS, the Rancho Cucamonga Public Finance Authority (the “Authority”) is a joint exercise of powers authority formed pursuant to a Joint Exercise of Powers Agreement by and between the City of Rancho Cucamonga (the “City”), the Rancho Cucamonga Fire Protection District, and the Former Rancho Cucamonga Redevelopment Agency and is authorized under said Agreement and under the laws of the State of California to finance the acquisition and construction of public capital improvements for the City; and WHEREAS, the City has requested that the Authority issue its revenue bonds (the “Bonds”) for the purpose of providing funds to enable the City to finance certain improvements to the benefit of the City, specifically the costs of acquisition, design, construction and equipping of a fiber optic network located within the City (the “Project”), which the City believes will provide significant benefits to the City by allowing the City to provide services in a more efficient manner to residential and commercial development; and WHEREAS, Section 6586.5 of the California Government Code allows the City to participate in financings with the Authority to finance projects with significant benefits to the City; and WHEREAS, to provide such financing for the Project, the Authority proposes to issue its revenue bonds in an aggregate original principal amount of not to exceed $14,500,000 under the provisions of Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “Act”), such Bonds may be issued as one or more series of tax-exempt bonds and/or taxable bonds in such amounts as may be determined by the City as stated herein, and which are proposed to be payable from lease payments to be paid to the Authority by the City pursuant to a Lease Agreement (the “Lease Agreement”) as may be determined by the Authority; and WHEREAS, the City Council of the City has determined that the facility consisting of the Goldy S. Lewis Community Center and James L. Brulte Senior Center and accompanying parking lot should be the leased assets under the Lease Agreement (the “Leased Premises”); and Page 115 Page 2 of 7 60285.00031\31484106.9 WHEREAS, a portion of the proceeds of the Bonds will be deposited in the Acquisition and Construction Fund established pursuant to an Indenture of Trust, by and between the Authority and Wells Fargo Bank, N.A. (the “Indenture”), and will be applied by the Authority and the City for the acquisition, design, construction and installation of the Project pursuant to the Lease Agreement; and WHEREAS, Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) has proposed to purchase and underwrite the Bonds and has presented to the City a form of Bond Purchase Agreement for the Bonds, to be entered into among the Authority, the City and the Underwriter (the “Purchase Agreement”) and there is also presented to the City a proposed form of Official Statement describing the Bonds, to be used in connection with the marketing thereof by the Underwriter; and WHEREAS, the City Council has conducted a noticed public hearing held December 19, 2018 pursuant to Section 6586.5 of the California Government Code and published notice was given in accordance with the terms of the Government Code and Resolution No. 18-127 adopted on December 5, 2018; WHEREAS, Section 5852.1 of the Government Code of the State of California (“Section 5852.1”) provides that the City 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 Bonds, good faith estimates of: (a) the true interest cost of the Bonds, (b) the finance charge of the Bonds, meaning the sum of all fees and charges paid to third parties, (c) the amount of proceeds of the Bonds received less the finance charge described above and any reserves or capitalized interest paid or funded with proceeds of the Bonds and (d) the sum total of all debt service payments on the Bonds calculated to the final maturity of the Bonds plus the fees and charges paid to third parties not paid with the proceeds of the Bonds; and WHEREAS, in accordance with Section 5852.1, the City has obtained such good faith estimates from Fieldman, Rolapp & Associates, Inc., the City’s municipal advisor (the “Municipal Advisor”), and such estimates are disclosed in Exhibit A attached hereto; and WHEREAS, the City wishes at this time to authorize all proceedings relating to the issuance and sale of the Bonds and all other agreements and documents relating thereto. NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED by the City Council as follows: 1. Findings and Determinations. The City Council finds and determines that: (a) the above recitals are true and correct and it is in the prudent management of the fiscal affairs of the City that the proceeds to be deposited in the Acquisition and Construction Fund will be used for the acquisition, design, construction and equipping of the Project; Page 116 Page 3 of 7 60285.00031\31484106.9 (b) The fair rental value of the Leased Premises exceeds the net present value of Lease Payments to be made under the Lease Agreement; and (c) Pursuant to Section 6586.5 of the California Government Code, the City Council hereby approves the financing of the Project by the Authority and finds that such financing will result in significant public benefits to the City by allowing efficient delivery of City services to residential and commercial properties. 2. Approval of Bonds. The City Council hereby approves the issuance of the Bonds for the purpose of funding the Project by the Authority under and pursuant to the Act provided that the maximum aggregate principal amount of the Bonds shall not exceed $14,500,000. The Bonds will be issued as two series of Bonds, the “Tax-Exempt Series A Bonds” and the “Taxable Series B Bonds” provided that the provisions of Sections 2 and 4 of this Resolution shall have been met on the date of sale. 3. Approval of Financing Documents. The City Council hereby approves each of the following documents in substantially the respective forms on file with the City Clerk, together with such additions thereto and changes therein as the Bond Counsel shall deem necessary, desirable or appropriate, the execution of which by the Mayor, the Mayor Pro Tem, or the City Manager (the “Authorized Officers”) shall be conclusive evidence of the approval of any such additions and changes. (a) the Lease Agreement relating to the lease and sub-lease of the Leased Premises between the City and the Authority; (b) the Purchase Agreement, by and among the Authority, the City and the Underwriter; and (c) the Continuing Disclosure Agreement. The Authorized Officers are each hereby authorized and directed to execute, and the City Clerk is hereby authorized (to the extent required by such documents) to attest and affix the seal of the City to, the final forms of each of the above-mentioned documents for and in the name and on behalf of the City. 4. Sale of Bonds. The City Council hereby approves the sale of the Bonds by the Authority by negotiation with the Underwriter, pursuant to the Purchase Agreement in substantially the form on file with the City Clerk, together with such additions thereto and changes therein as Bond Counsel shall deem necessary, desirable or appropriate. (a) The amount of Underwriter’s discount for the Tax-Exempt Series A Bonds shall be not more than 0.65% of the aggregate principal amount thereof and the true interest cost to be represented by the Tax-Exempt Series A Bonds (taking into account any original issue discount or premium on the sale thereof) shall not exceed 4.50%; and (b) The amount of Underwriter’s discount for the Taxable Series B Bonds shall be not more than 0.65% of the aggregate principal amount thereof and Page 117 Page 4 of 7 60285.00031\31484106.9 the true interest cost to be represented by the Taxable Series B Bonds (taking into account any original issue discount or premium on the sale thereof) shall not exceed 4.50%. 5. Official Statement; Continuing Disclosure. The City Council approves the preparation of, and hereby authorizes the City Manager or the Finance Director to deem final within the meaning of Rule 15c2-12 of the Securities and Exchange Commission except for permitted omissions, a preliminary form of Official Statement describing the Bonds, the form of which is on file with the City Clerk together with such changes as may be approved by the officer executing the same. The Mayor, the City Manager or the Finance Director is hereby authorized to execute the final Official Statement in the name and on behalf of the City, including any modifications resulting from additions thereto and changes therein as the Disclosure Counsel shall deem necessary, desirable or appropriate, with the execution of the final Official Statement by the City Manager or the Finance Director to be conclusive evidence of the approval of any such additions and changes. The City Council has reviewed and approved the Continuing Disclosure Agreement, the form of which is on file with the City Clerk and the City Manager or the Finance Director is further authorized to sign the Continuing Disclosure Agreement on behalf of the City in such form as may be approved by the officer executing the same. 6. Appointment of Professionals. The following professionals are hereby approved to provide services in connection with the issuance of the Bonds: (a) Trustee. Wells Fargo Bank, N.A. is appointed as Trustee pursuant to the Indenture to take any and all action provided therein to be taken by the Trustee; (b) Municipal Advisor. Fieldman, Rolapp & Associates, Inc., is hereby appointed to provide municipal advisory services; and (c) Bond and Disclosure Counsel. Best Best & Krieger LLP is hereby appointed as bond and disclosure counsel in connection with the issuance of the Bonds. 7. Official Actions. The Authorized Officers and the City Clerk and any and all other officers of the City are hereby authorized and directed, for and in the name and on behalf of the City, to do any and all things and take any and all actions, including obtaining title insurance on the Leased Premises, obtaining a rating on the Bonds and/or a municipal bond insurance policy and a debt reserve fund surety bond, and including execution and delivery of any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they, or any of them, may deem necessary or advisable in order to consummate the transactions as described herein in connection with the issuance and sale of the Bonds. 8. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. Page 118 Page 5 of 7 60285.00031\31484106.9 PASSED, APPROVED, and ADOPTED this 16th day of January 2019. AYES: NOES: ABSENT: ABSTAINED: L. Dennis Michael, Mayor ATTEST: Janice C. Reynolds, City Clerk I, JANICE C. REYNOLDS, CITY CLERK of the City of Rancho Cucamonga, California, do hereby certify that the foregoing Resolution was duly passed, approved and adopted by the City Council of the City of Rancho Cucamonga, California, at a Regular Meeting of said City Council held on the 16th day of January 2019. Executed this ____ day of ______________, 2019, at Rancho Cucamonga, California. Janice C. Reynolds, City Clerk Page 119 Page 6 of 7 60285.00031\31484106.9 EXHIBIT A GOOD FAITH ESTIMATES The good faith estimates set forth herein are provided with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the City by the Municipal Advisor in consultation with the Underwriter. Principal Amount. The Municipal Advisor has informed the City that, based on the financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the Bonds to be sold is $12,160,000 (the “Estimated Principal Amount”), which excludes approximately $1,393,156.05 of net premium estimated to be generated based on current market conditions. Net premium is generated when, on a net aggregate basis for a single issuance of bonds, the price paid for such bonds is higher than the face value of the bonds. True Interest Cost of the Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the 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 Bonds, is 3.75%. Finance Charge of the Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $291,794. Amount of Proceeds to be Received. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the Authority, on behalf of the City, for the sale of the Bonds, less the finance charge of the Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the Bonds, is $13,261,362. Total Payment Amount. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates 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 Bonds, plus the finance charge for the Bonds, as described above, not paid with the proceeds of the Bonds, calculated to the final maturity of the Bonds, is $19,780,470 (excluding any offsets from reserves or capitalized interest). The foregoing estimates constitute good faith estimates only. The actual principal amount of the Bonds issued and sold, the true interest cost thereof, the finance charges Page 120 Page 7 of 7 60285.00031\31484106.9 thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being different from the Estimated Principal Amount, (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the financing plan or finance charges, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the Authority, on behalf of the City, based on the timing of the need for proceeds of the Bonds and other factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the City. Page 121 Page 1 of 3 60285.00031\31720305.1 RESOLUTION NO. 19-003 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO CUCAMONGA, CALIFORNIA, AUTHORIZING THE EXECUTION AND RECORDATION OF THAT CERTAIN RELEASE OF LIEN AND TERMINATION OF AGREEMENTS RELATED TO THE CENTRAL PARK PROPERTY WHEREAS, the Rancho Cucamonga Public Finance Authority (the “Authority”) is a joint exercise of powers authority formed pursuant to a Joint Exercise of Powers Agreement by and between the City of Rancho Cucamonga (the “City”), the Rancho Cucamonga Fire Protection District, and the Former Rancho Cucamonga Redevelopment Agency and is authorized under said Agreement and under the laws of the State of California to finance the acquisition and construction of public capital improvements for the City; and WHEREAS, the City has requested that the Authority issue revenue bonds (the “Bonds”) for the purpose of providing funds to enable the City to finance certain improvements to the benefit of the City, specifically the costs of acquisition, design, construction and equipping of a fiber optic network located within the City (the “Project”); and WHEREAS, to provide such financing for the Project, the Authority proposes to issue its bonds which are proposed to be payable from lease payments to be paid to the Authority by the City pursuant to a Lease Agreement (the “Lease Agreement”); and WHEREAS, the City Council of the City has determined that the facility consisting of the Goldy S. Lewis Community Center and James L. Brulte Senior Center and accompanying parking lot should be the leased assets under the Lease Agreement (the “Leased Premises”); and WHEREAS, the Leased Premises served as security for those certain Certificates of Participation issued by California Cities Financing Corporation (“CCFC”) dated October 4, 1988 (the “1988 COPS”) which were issued to refinance the acquisition of the Leased Premises and repaid from payments made by the City pursuant to a Lease Agreement dated October 1, 1988 (the “1988 Lease Agreement”) by and between the City and CCFC; and WHEREAS, the 1988 Lease Agreement, a Site Lease Agreement dated October 1, 1988 (the “1988 Site Lease”) by and between the City and CCFC and an Assignment Agreement dated October 1, 1988 (the “1988 Assignment Agreement”) by and between the City, CCFC and Bank of America National Trust & Savings Association, as prior trustee, were recorded against the Leased Premises as a lien securing the Lease Payments required by the Lease Agreement; and WHEREAS, on March 28, 1990, the former Rancho Cucamonga Redevelopment Agency issued certain tax allocation bonds (the “1990 TABS”), which among other things Page 122 Page 2 of 3 60285.00031\31720305.1 refinanced the City’s obligations under the 1988 Lease Agreement and caused the 1988 COPS to be prepaid; and WHEREAS, the liens placed on the Leased Premises, were not released at the time of such prepayment; and WHEREAS, the City now desires to release such liens by executing a Release of Lien and Termination of (the “Release of Lien”) in substantially similar form to that attached hereto and causing such Release of Lien to be recorded; and NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED by the City Council as follows: 1. Findings and Determinations. The City Council finds and determines that the above recitals are true and correct. 2. Approval of Release of Lien. The City Council hereby approves the Release of Lien in substantially the form on file with the City Clerk, together with such additions thereto and changes therein as the bond counsel shall deem necessary, desirable or appropriate, the execution of which by the Mayor, the Mayor Pro Tem, or the City Manager (the “Authorized Officers”) shall be conclusive evidence of the approval of any such additions and changes. The Authorized Officers are each hereby authorized and directed to execute, and the City Clerk is hereby authorized (to the extent required by such documents) to attest and affix the seal of the City to, the final forms of each of the above-mentioned documents for and in the name and on behalf of the City. 3. Official Actions. The Authorized Officers and the City Clerk and any and all other officers of the City are hereby authorized and directed, for and in the name and on behalf of the City, to do any and all things and take any and all actions, including to cause the removal of any liens and encumbrances on the Leased Premises related to the 1988 COPS. 4. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. Page 123 Page 3 of 3 60285.00031\31720305.1 PASSED, APPROVED, and ADOPTED this 16th day of January 2019. AYES: NOES: ABSENT: ABSTAINED: L. Dennis Michael, Mayor ATTEST: Janice C. Reynolds, City Clerk I, JANICE C. REYNOLDS, CITY CLERK of the City of Rancho Cucamonga, California, do hereby certify that the foregoing Resolution was duly passed, approved and adopted by the City Council of the City of Rancho Cucamonga, California, at a Regular Meeting of said City Council held on the 16th day of January 2019. Executed this ____ day of ______________, 2019, at Rancho Cucamonga, California. Janice C. Reynolds, City Clerk Page 124 60285.00031\31483807.7 ______________________________________________________________________________ ______________________________________________________________________________ LEASE AGREEMENT Dated as of ___________ 1, 2019 by and between the CITY OF RANCHO CUCAMONGA, as lessor and sub-lessee and the RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY, as lessee and sub-lessor Relating to Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project) ______________________________________________________________________________ ______________________________________________________________________________ Page 125 60285.00031\31483807.7 LEASE AGREEMENT THIS LEASE AGREEMENT (this “Lease Agreement”), dated as of ___________ 1, 2019, is by and between the CITY OF RANCHO CUCAMONGA, a municipal corporation organized and existing under the laws of the State of California, as lessor and sub-lessee (the “City”), and the RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY, a joint powers authority organized and existing under the laws of the State of California, as lessee and sub-lessor (the “Authority”); WI T N E S S E T H : WHEREAS, the Authority is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement by and between the City and the Rancho Cucamonga Fire Protection District; and WHEREAS, under Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Bond Law”) the Authority is authorized to borrow money for the purpose of financing the acquisition of bonds, notes and other obligations of, or for the purpose of making loans to, public entities including the City, and to provide financing for public capital improvements of public entities including the City and to lease and lease back such public capital improvements; and WHEREAS, the City intends to lease certain public improvements owned by the City (the “Leased Premises”) to the Authority and lease the Leased Premises back from the Authority; and WHEREAS, the Leased Premises constitute a public capital improvement, as that term is defined in the Bond Law; and WHEREAS, the Authority and the City propose to enter into this Lease Agreement for the purpose of providing amounts sufficient to pay the principal and interest on Bonds (defined herein), the proceeds of which will be used to pay for the acquisition, design, construction and equipping of a fiber optic network in the City (collectively, the “Project”); and WHEREAS, the Authority proposes to issue its 2019 Lease Revenue Bonds (Fiber Optic Project) issued as $__________ aggregate principal amount of Series A Bonds (Tax-Exempt) (the “Series A Bonds”) and as $__________ aggregate principal amount of Series B Bonds (Taxable) (the “Series B Bonds” and together with the Series A Bonds, the “Bonds”) under an Indenture of Trust dated as of ___________ 1, 2019 (the “Indenture”), by and between the Authority and the Trustee for the purpose of financing public capital improvements of the City; and WHEREAS, all conditions to the execution and delivery of this Lease Agreement have been satisfied and the Authority and the City are duly authorized to execute and deliver this Lease Agreement; NOW, THEREFORE, for and in consideration of the premises and the material covenants hereinafter contained, the parties hereto hereby formally covenant, agree and bind themselves as follows: Page 126 60285.00031\31483807.7 2 ARTICLE I DEFINITIONS AND EXHIBITS Section 1.1. Definitions. Unless the context clearly otherwise requires or unless otherwise defined herein, the capitalized terms in this Lease Agreement shall have the respective meanings specified in Section 1.01 of the Indenture. In addition, the following terms heretofore defined in this Lease Agreement and the following terms defined in this Section 1.1 shall, for all purposes of this Lease Agreement, have the respective meanings herein specified. “Event of Default” means any of the events of default defined as such in Section 9.1. “Facilities” means all of the buildings, improvements and facilities at any time situated on the Site and described in Exhibit A attached hereto and by this reference incorporated herein. “Fiscal Year” means the twelve-month period beginning on July 1 of any year and ending on June 30 of the next succeeding year, or any other twelve-month period established by the City as its fiscal year pursuant to written notice filed with the Authority and the Trustee. “Hazardous Substance” means any substance, pollutant or contamination included in such (or any similar) term under any federal, state or local statute, law, ordinance, code or regulation now in effect or hereafter enacted or amended. “Indenture” means the Indenture of Trust dated as of ___________ 1, 2019, by and between the Authority and the Trustee, together with any duly authorized and executed amendments thereto. “Lease Payment Date” means, with respect to any Interest Payment Date, the business day prior to such Interest Payment Date. “Lease Payments” means the amounts payable by the City pursuant to Section 4.3(a), including any prepayment thereof pursuant hereto and including any amounts payable upon a delinquency in the payment thereof. “Leased Premises” means, collectively, the Site and the Facilities, subject to the provisions of Section 4.9. “Miscellaneous Rent” means the amounts of additional rental which are payable by the City pursuant to Section 4.8. “Permitted Encumbrances” means, as of any time: (a) liens for general ad valorem taxes, special taxes and assessments, if any, not then delinquent, or which the City may permit to remain unpaid pursuant to Article V; (b) this Lease Agreement, the Indenture and any other agreement or other document contemplated hereunder to be recorded against the Leased Premises including any amendment to this Lease pursuant to Section 8.3(e) hereof; (c) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law; (d) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist pursuant to the policy of title insurance obtained Page 127 60285.00031\31483807.7 3 pursuant to Section 5.6, (e) such minor defects, irregularities, encumbrances and clouds on title as normally exist with respect to property similar in character to the Leased Premises and as do not materially impair the use intended to be made of property affected thereby; and (f) easements, right of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions, of which the City certifies in writing will not materially impair the use of the Leased Premises for their intended purposes. “Project” means the acquisition, design, construction and equipping of a fiber optic network. “Site” means all of the land described in Exhibit A attached hereto and by this reference incorporated herein. “Term” means the time during which this Lease Agreement is in effect, as provided in Section 4.2. “Trustee” means Wells Fargo Bank, N.A., or any successor thereto acting as Trustee pursuant to the Indenture. Section 1.2. Exhibits. The following exhibits are attached to, and by this reference made a part of, this Lease Agreement. Exhibit A: Description of the Leased Premises. Exhibit B: Schedule of Lease Payments. ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.1. Representations, Covenants and Warranties of the City. The City makes the following covenants, representations and warranties to the Authority as of the date of the execution and delivery of this Lease Agreement: (a) Due Organization and Existence. The City is a municipal corporation duly organized and validly existing under the laws of the State, has full legal right, power and authority under the laws of the State to enter into this Lease Agreement and to carry out and consummate all transactions contemplated hereby and thereby, and by proper action the City has duly authorized the execution and delivery of this Lease Agreement. (b) Due Execution. The representatives of the City executing this Lease Agreement have been fully authorized to execute the same pursuant to a resolution duly adopted by the City Council of the City. (c) Valid, Binding and Enforceable Obligations. This Lease Agreement has been duly authorized, executed and delivered by the City and constitutes the legal, valid and binding agreement of the City enforceable against the City in accordance with the terms hereof, except to the extent that such enforceability may be limited by any applicable Page 128 60285.00031\31483807.7 4 bankruptcy, insolvency, debt adjustment, receivership, fraudulent conveyance or transfer, moratorium, reorganization, arrangements or other laws 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 public entities in the State or other laws or equitable principles affecting the enforcement of creditors’ rights generally. (d) No Conflicts. The execution and delivery of this Lease Agreement, the consummation of the transactions herein contemplated and the fulfillment of or compliance with the terms and conditions hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the City is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the City, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease Agreement or the financial condition, assets, properties or operations of the City. (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the City or of the voters of the City, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Lease Agreement, or the consummation of any transaction herein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending and notice of which has been served upon and received by the City or, to the knowledge of the City after reasonable investigation, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Lease Agreement, or upon the financial condition, assets, properties or operations of the City, and the City is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease Agreement or the financial conditions, assets, properties or operations of the City. (g) Status of Leased Premises. The Lease Premises are fully functional, operational, and in sound condition, excepting only reasonable wear and tear. No event which constitutes, or which with the passage of time if not cured would constitute, an Event of Default has occurred and is continuing. Page 129 60285.00031\31483807.7 5 Section 2.2. Representations, Covenants and Warranties of Authority. The Authority makes the following covenants, representations and warranties to the City as of the date of the execution and delivery of this Lease Agreement: (a) Due Organization and Existence. The Authority is a joint powers authority duly organized and existing under and by virtue of the laws of the State; has power to enter into this Lease Agreement and the Indenture; is possessed of full power to lease and lease back the same; and has duly authorized the execution and delivery of each of the aforesaid agreements. (b) Valid, Binding and Enforceable Obligations. The Lease Agreement and Indenture constitute the legal, valid and binding agreements of the Authority, enforceable against the Authority in accordance with their respective terms, except to the extent that such enforceability may be limited by any applicable bankruptcy, insolvency, debt adjustment, receivership, fraudulent conveyance or transfer, moratorium, reorganization, arrangements or other laws 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 public entities in the State or other laws or equitable principles affecting the enforcement of creditors’ rights generally. (c) Due Execution. The representatives of the Authority executing this Lease Agreement and the Indenture are fully authorized to execute the same pursuant to official action taken by the governing body of the Authority. (d) No Conflicts. The execution and delivery of this Lease Agreement and the Indenture, the consummation of the transactions herein and therein contemplated and the fulfillment of or compliance with the terms and conditions hereof and thereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the Authority is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Authority, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease Agreement and the Indenture or the financial condition, assets, properties or operations of the Authority. (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the Authority, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Lease Agreement or the Indenture, or the consummation of any transaction herein or therein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending Page 130 60285.00031\31483807.7 6 and notice of which has been served upon and received by the Authority or, to the knowledge of the Authority after reasonable investigation, threatened against or affecting the Authority or the assets, properties or operations of the Authority which, if determined adversely to the Authority or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Lease Agreement or the Indenture, or upon the financial condition, assets, properties or operations of the Authority, and the Authority is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease Agreement or the Indenture or the financial conditions, assets, properties or operations of the Authority. ARTICLE III THE BONDS Section 3.1. The Bonds. The Authority has authorized the issuance of the Bonds pursuant to the Indenture in the aggregate principal amount of _________________________ Dollars ($__________). The Authority agrees that the proceeds of sale of the Bonds shall be paid to the Trustee on the Closing Date for deposit and application pursuant to the terms and conditions of the Indenture. The City hereby approves the Indenture, and the issuance of the Bonds by the Authority thereunder. Section 3.2. Financing of Project. In order to pay the Authority’s lease payment for the Leased Premises hereunder, on the Closing Date, the Authority shall cause a portion of the proceeds of the Bonds to be deposited in the Acquisition and Construction Fund for the financing of the Project pursuant to the Indenture. Section 3.3. Payment of Costs of Issuance. Payment of all Costs of Issuance shall be made from the moneys deposited with the Trustee in the Costs of Issuance Fund, which moneys shall be disbursed for such purpose in accordance with Section 3.03 of the Indenture. Any Costs of Issuance for the payment of which insufficient funds shall be available on deposit in the Costs of Issuance Fund, shall be paid by the City. ARTICLE IV LEASE; TERM OF THIS LEASE AGREEMENT; RENTAL PAYMENTS Section 4.1. Lease by Authority and Lease Back to City. (a) In consideration of the payment of a lease payment of $__________ by the Authority less the Original Purchaser’s discount, and in consideration of the execution of this Lease Agreement by the City, and other good and valuable consideration, the City hereby leases Page 131 60285.00031\31483807.7 7 to the Authority, and the Authority hereby leases from the City, the Leased Premises for the Term of this Lease Agreement, plus one week following the end of the Term of this Lease Agreement. (b) The Authority hereby leases the Leased Premises to the City, and the City hereby leases the Leased Premises from the Authority, upon the terms and conditions set forth in this Lease Agreement. (c) The City hereby takes possession of the Leased Premises on the Closing Date. Section 4.2. Term of Lease Agreement. The Term of this Lease Agreement shall commence on the Closing Date and shall end on [May 1], 20___, unless such term is extended as hereinafter provided or unless Lease Payments have been paid or prepaid in full or provision shall have been made for such payment pursuant to Section 4.3(f) hereof. If on [May 1], 20___, the Indenture shall not be discharged by its terms or if the Lease Payments payable hereunder shall have been abated at any time and for any reason, then the Term of this Lease Agreement shall be extended until the earlier of [May 1], 20___, or the date the Indenture shall be discharged by its terms. If prior to [May 1], 20___, the Indenture shall be discharged by its terms and any amounts then owed to the Trustee have been paid in full, the Term of this Lease Agreement shall thereupon end. Section 4.3. Lease Payments; Security Deposit. (a) Obligation to Pay. In consideration of the lease and lease back by the Authority of the Leased Premises and in consideration of the issuance of the Bonds by the Authority for the purpose of acquiring, designing, constructing and equipping the Project, and subject to the provisions of Section 6.1 and Section 6.2, the City agrees to pay to the Authority, its successors and assigns, as rental for the use and occupancy of the Leased Premises during each Fiscal Year, the Lease Payments (denominated into components of principal and interest) for the Leased Premises in the respective amounts specified in Exhibit B hereto, to be due and payable on the fifteenth day prior to each respective Lease Payment Date specified in Exhibit B hereto. Any amount held in the Bond Fund, the Interest Account, the Sinking Account or the Principal Account (other than amounts resulting from the prepayment of the Lease Payments in part but not in whole pursuant to Section 4.5) on any Lease Payment Date shall be credited towards the Lease Payment then due and payable. The Lease Payments coming due and payable in any Fiscal Year shall be for the use of the Leased Premises for such Fiscal Year. (b) Effect of Prepayment. In the event that the City prepays all Lease Payments in full pursuant to Section 4.5 or 6.01 (or the Bonds shall be redeemed in full from other sources of funds pursuant to Section 4.01 of the Indenture), the City’s obligations under this Lease Agreement shall thereupon cease and terminate, including but not limited to the City’s obligation to pay Lease Payments under this Section 4.3. In the event that the City prepays the Lease Payments in part but not in whole pursuant to Section 4.5 or 6.01 (or the Bonds shall be redeemed in part from other sources of funds pursuant to Section 4.01 of the Indenture), the Authority shall provide, or cause to be provided, to the Trustee and the City a revised schedule of Lease Payments due after such partial prepayment, which revised schedule of Lease Payments shall be sufficient to provide for the scheduled payment of remaining principal of and interest on the Bonds, and which schedule Page 132 60285.00031\31483807.7 8 shall represent an adjustment to the schedule of Lease Payments set forth in Exhibit B hereto after taking into account said partial prepayment. (c) Rate on Overdue Payments. In the event the City should fail to make any of the payments required in this Section 4.3, the payment in default shall continue as an obligation of the City until the amount in default shall have been fully paid, and the City agrees to pay the same with interest thereon, to the extent permitted by law, from the date of default to the date of payment at the rate per annum equal to the actual interest rate on the Bonds. (d) Fair Rental Value. The Lease Payments and Miscellaneous Rent (described in Section 4.8 below) coming due and payable hereunder in each Fiscal Year shall constitute the total rental for the Leased Premises for each Fiscal Year and shall be paid by the City in each Fiscal Year for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of, the Leased Premises during such Fiscal Year. The parties hereto have agreed and determined that the net present value of such Lease Payments and the annual payment of Miscellaneous Rent for the Leased Premises do not exceed the fair rental value of the Leased Premises. In making such determination, consideration has been given to the obligations of the parties under this Lease Agreement, the uses and purposes which may be served by the Leased Premises and the benefits therefrom which will accrue to the City and the general public. (e) Source of Payments; Budget and Appropriation. The Lease Payments shall be payable from any source of available funds of the City, subject to the provisions of Section 6.1 and Section 6.2. The City covenants to take such action as may be necessary to include all Lease Payments and Miscellaneous Rent due in a Fiscal Year hereunder in each of its budgets for such Fiscal Year during the Term of this Lease Agreement and to make the necessary annual appropriations for all such Lease Payments and Miscellaneous Rent. The covenants on the part of the City herein contained shall be deemed to be and shall be construed to be ministerial duties imposed by law and it shall be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in this Lease Agreement agreed to be carried out and performed by the City. The City and the Authority understand and intend that the obligation of the City to pay Lease Payments, Miscellaneous Rent, and other payments hereunder constitutes a current expense of the City and shall not in any way be construed to be a debt of the City in contravention of any applicable constitutional or statutory limitation or requirement concerning the creation of indebtedness by the City, nor shall anything contained herein constitute a pledge of the general tax revenues, funds or moneys of the City. Lease Payments and Miscellaneous Rent due hereunder shall be payable only from current funds which are budgeted and appropriated, or otherwise legally available, for the purpose of paying Lease Payments, Miscellaneous Rent, or other payments due hereunder as consideration for use of the Leased Premises during the Fiscal Year for which such funds were budgeted and appropriated or otherwise made legally available for such purpose. This Lease Agreement shall not create an immediate indebtedness for any aggregate payments which may become due hereunder. The City has not pledged the full faith and credit of the City, the State or any agency or department thereof to the payment of the Lease Payments or any other payments due hereunder, the Bonds or the interest thereon. Page 133 60285.00031\31483807.7 9 (f) Security Deposit. Notwithstanding any other provision of this Lease Agreement, the City may on any date secure the payment of the Lease Payments in whole or in part by depositing with the Trustee (or another fiduciary or escrow agent) an amount of cash which, together with other available amounts, is either (i) sufficient to pay such Lease Payments, including the principal and interest components thereof, in accordance with the related Lease Payment schedule set forth in Exhibit B, or (ii) invested in whole or in part in non-callable Federal Securities in such amount as will, in the opinion of an Independent Accountant, together with interest to accrue thereon and together with any cash which is so deposited, be fully sufficient to pay such Lease Payments when due hereunder or on any optional prepayment date pursuant to Section 4.5 and Section 10.01 of the Indenture, as the City shall instruct at the time of said deposit. Said security deposit shall be deemed to be and shall constitute a special fund for the payment of Lease Payments in accordance with the provisions of this Lease Agreement. In connection with the making of any such security deposit, the Authority shall take, and shall cause the Trustee to take, any actions necessary to remove such appropriate portions of the Leased Premises from the lien of this Lease Agreement. (g) Delinquent Lease Payments. Any delinquent Lease Payment shall be made to the Trustee for application as set forth in the Indenture. Section 4.4. [Intentionally Reserved]. Section 4.5. Optional Prepayment. The City shall have the option to prepay the principal components of the Lease Payments in whole, or in part in any integral multiple of $5,000, on any date on or after _______________, with respect to the Lease Payments, by paying a prepayment price equal to the aggregate principal components of the Lease Payments to be prepaid, together with a prepayment premium equal to the premium (if any) required to be paid on the corresponding redemption of the Bonds pursuant to Section 4.01(a) of the Indenture and together with accrued interest to the prepayment date. Such prepayment price (except the interest portion thereof, which shall be deposited into the Interest Account) shall be deposited by the Trustee in the Redemption Fund to be applied to the optional redemption of Bonds pursuant to Section 4.01(a) of the Indenture. The City shall give the Authority and the Trustee written notice of its intention to exercise its option not less than fifteen (15) days in advance of the date of exercise. Notwithstanding any such prepayment, as long as any Bonds remain Outstanding or any Miscellaneous Rent payments remain unpaid, the City shall not be relieved of its obligations hereunder as to such Bonds or such Miscellaneous Rent. Section 4.6. Quiet Enjoyment. During the Term of this Lease Agreement, the Authority shall provide the City with quiet use and enjoyment of the Leased Premises, and the City shall, during such Term, peaceably and quietly have and hold and enjoy the Leased Premises without suit, trouble or hindrance from the Authority, except as expressly set forth in this Lease Agreement. The Authority will, at the request of the City and at the City’s cost, join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Authority may lawfully do so. Notwithstanding the foregoing, the Authority shall have the right to inspect the Leased Premises as provided in Section 7.2. Section 4.7. Title. During the Term of this Lease Agreement, the Authority shall hold a leasehold in the Leased Premises, and in any and all additions which comprise fixtures, repairs, Page 134 60285.00031\31483807.7 10 replacements or modifications to the Leased Premises, except for those fixtures, repairs, replacements or modifications which are added to the Leased Premises by the City at its own expense and which may be removed without damaging the Leased Premises and except for any items added to the Leased Premises by the City pursuant to this Lease Agreement. All right, title and interest of the Authority in and to the Leased Premises shall be transferred to and vested in the City if (a) the City pays all of the Lease Payments and Miscellaneous Rent during the Term of this Lease Agreement as the same become due and payable, or if the City posts a security deposit for payment of the Lease Payments pursuant to Section 4.3(f) or prepays the Lease Payments pursuant to Section 4.5, and (b) if the City has paid in full all of the Miscellaneous Rent coming due and payable as of the date of such prepayment; provided, however, any such transfer shall not constitute a waiver of any Event of Default that shall have occurred and be continuing. The Authority agrees to take any and all steps and execute and record any and all documents reasonably required by the City to consummate any such transfer of title. Section 4.8. Miscellaneous Rent. In addition to the Lease Payments, the City shall pay when due the following items of Miscellaneous Rent: (a) all fees and expenses incurred by the Authority in connection with or by reason of its leasehold estate in the Leased Premises as and when the same become due and payable; (b) all reasonable compensation to the Trustee pursuant to Section 8.06 of the Indenture for all services rendered under the Indenture and for all reasonable expenses, charges, costs, liabilities, legal fees and other disbursements incurred in and about the performance of its powers and duties under the Indenture; (c) the reasonable fees and expenses of such accountants, consultants, attorneys and other experts as may be engaged by the Authority to prepare audits, financial statements, reports, opinions or provide such other services required under this Lease Agreement or the Indenture; and (d) the reasonable out-of-pocket expenses of the Authority in connection with the execution and delivery of this Lease Agreement or the Indenture, or in connection with the issuance of the Bonds, including, but not limited to, amounts payable pursuant to Section 5.11 and including but not limited to any and all expenses incurred in connection with the authorization, issuance, sale and delivery of the Bonds, or incurred by the Authority in connection with any litigation which may at any time be instituted involving this Lease Agreement, the Bonds, the Indenture or any of the other documents contemplated hereby or thereby, or otherwise incurred in connection with the administration of this Lease Agreement. Section 4.9. Substitution or Release of Leased Premises. The City shall have, and is hereby granted, the option at any time and from time to time during the Term of this Lease Agreement, to substitute other land, facilities or improvements (the “Substitute Leased Premises”) for the Leased Premises or any portion thereof (the “Released Premises”) from the lien of this Lease Agreement, provided that the City shall satisfy all of the following requirements which are hereby declared to be conditions precedent to such substitution or release: Page 135 60285.00031\31483807.7 11 (a) The City shall provide written notification of such substitution or release to the rating agencies, which notice shall contain the certification that all conditions set forth in this Section 4.9 are met with respect to such substitution or release. (b) The City shall take all actions and shall execute all documents required to subject the Substitute Leased Premises to the terms and provisions of this Lease Agreement, including the filing with the Authority and the Trustee an amended Exhibit A which adds thereto a description of the Substitute Leased Premises and deletes therefrom the description of the Released Premises, as applicable. (c) (i) In the case of a substitution, the City shall determine and certify in writing to the Authority and the Trustee that the fair rental value of the Substitute Leased Premises is at least equal to the net present value of remaining Lease Payments. (ii) In the case of a release, the City shall determine and certify in writing to the Authority and the Trustee that the value of the remaining Leased Premises after removal of the Released Premises is at least equal to the net present value of remaining Lease Payments. (d) In the case of a substitution, the City shall certify in writing to the Authority and the Trustee that the estimated useful life of the Substitute Leased Premises at least extends to the date on which the final Lease Payment becomes due and payable hereunder. (e) In the case of a substitution, the City shall obtain a CLTA policy of title insurance meeting the requirements of Section 5.6 with respect to any real property portion of the Substitute Leased Premises. (f) In the case of a substitution, the substitution of the Substitute Leased Premises shall not cause the City to violate any of its covenants, representations and warranties made herein. (g) The City shall obtain and cause to be filed with the Trustee and the Authority an opinion of Bond Counsel stating that such substitution or release is permitted hereunder and does not cause interest on the Series A Bonds to become includable in the gross income of the Bond Owners for federal income tax purposes if there are outstanding Series A Bonds at the time of such substitution. From and after the date on which all of the foregoing conditions precedent to such substitution or release are satisfied, the Term of this Lease Agreement shall cease with respect to the Released Premises, as applicable, and shall be continued with respect to the Substitute Leased Premises and the remaining Leased Premises and all references herein to the Released Premises shall apply with full force and effect to the Substitute Leased Premises. The City shall not be entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever solely by reason of such substitution or release. Page 136 60285.00031\31483807.7 12 ARTICLE V MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS; AND OTHER MATTERS Section 5.1. Maintenance, Utilities, Taxes and Assessments. Throughout the Term of this Lease Agreement, as part of the consideration for the rental of the Leased Premises, all improvement, repair and maintenance of the Leased Premises shall be the responsibility of the City and the City shall pay for or otherwise arrange for the payment of all utility services supplied to the Leased Premises which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, water and all other utility services, and shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Leased Premises resulting from ordinary wear and tear or want of care on the part of the City or any assignee or sublessee thereof. In exchange for the Lease Payments herein provided, the Authority agrees to provide only the Leased Premises, as hereinbefore more specifically set forth. The City waives the benefits of subsections 1 and 2 of Section 1932 and subsection 4 of Section 1933 of the California Civil Code, but such waiver shall not limit any of the rights of the City under the terms of this Lease Agreement. The City shall also pay or cause to be paid all taxes and assessments of any type or nature, if any, charged to the Authority or the City affecting the Leased Premises or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the Term of this Lease Agreement as and when the same become due. The City may, at the City’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 shall notify the City that, in the opinion of independent counsel, by nonpayment of any such items, the interest of the Authority in the Leased Premises will be materially endangered or the Leased Premises or any part thereof will be subject to loss or forfeiture, in which event the City 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. Section 5.2. Modification of Leased Premises. The City shall, at its own expense, have the right to make additions, modifications and improvements to the Leased Premises. All additions, modifications and improvements to the Leased Premises shall thereafter comprise part of the Leased Premises and be subject to the provisions of this Lease Agreement. Such additions, modifications and improvements shall not in any way damage the Leased Premises, or result in an abatement of Lease Payments or cause the Leased Premises to be used for purposes other than those authorized under the provisions of State and federal law. In the event the City shall at any time before or during the term of this Lease cause any improvements or other work to be done or performed or materials to be supplied, in or upon the Leased Premises, 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, Page 137 60285.00031\31483807.7 13 upon or about the Leased Premises and which may be secured by any mechanics’, materialmen’s or other liens against the Leased Premises or the Authority’s interest therein, and will cause any 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 the City may in good faith contest any lien filed or established against the Leased Premises, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide the Authority with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Authority. The Authority will cooperate fully in any such contest, upon the request and at the expense of the City. Section 5.3. Public Liability and Property Damage Insurance. The City shall maintain or cause to be maintained throughout the Term of this Lease Agreement, but only if and to the extent available from reputable insurers at reasonable cost in the reasonable opinion of the City, a standard comprehensive general insurance policy or policies in protection of the Authority, City, and their respective members, officers, agents, employees and assigns. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $100,000 (subject to a deductible clause of not to exceed $25,000) for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy or policies in the amount of $3,000,000 (subject to a deductible clause of not to exceed $25,000) covering all such risks. Such policy or policies shall provide coverage in such liability limits and be subject to such deductibles as the City shall deem adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City, subject to the provisions of Section 5.7, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. In the case of the City’s self-insurance of public liability and workers’ compensation, the City may maintain a self-insured retention, and pay up to $500,000 of each liability claim and up to $350,000 of each worker’s compensation claim, so long as such insurance is maintained pursuant to Section 5.7(b) hereof. The proceeds of such liability insurance shall be applied by the City toward extinguishment or satisfaction of the liability with respect to which such liability insurance is paid. Section 5.4. Casualty Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of this Lease Agreement, insurance against loss or damage to any Facilities by fire and lightning, with extended coverage and vandalism and malicious mischief insurance. Said extended coverage insurance, if required, shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance, and shall include earthquake coverage if such coverage is available at reasonable cost from reputable insurers in the judgment of the City’s risk manager. Such insurance shall be in an amount at least equal to the lesser of (a) one hundred percent (100%) of the replacement cost of the Facilities; or (b) the aggregate unpaid principal components of the Lease Payments. Such insurance may be subject to such deductibles as the City shall deem prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The Net Proceeds of such insurance shall be applied as provided in Section 6.1. Page 138 60285.00031\31483807.7 14 Each policy of insurance to be maintained by the City pursuant to this Section 5.4 shall (a) provide for the full payment of insurance proceeds up to the applicable dollar limit in connection with damage to the Leased Premises and shall, under no circumstances, be contingent upon the degree of damage sustained at other facilities owned or leased by the City; and (b) explicitly waive any co-insurance penalty. Section 5.5. Rental Interruption Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of this Lease Agreement, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of the Leased Premises, as a result of any of the hazards covered by the insurance required by Section 5.4, in an amount at least equal to the maximum Lease Payments coming due and payable during any future twenty-four (24) month period. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The proceeds of such insurance, if any, shall be paid to the Trustee and deposited in the Bond Fund, and shall be applied for the uses and purposes set forth in Article V of the Indenture. Section 5.6. Recordation Hereof; Title Insurance. On or before the Closing Date the City shall, at its expense, (a) cause this Lease Agreement, or a memorandum hereof in form and substance approved by Bond Counsel, to be recorded in the office of the San Bernardino County Recorder; and (b) obtain a CLTA policy of title insurance insuring the Authority’s leasehold estate and the City’s sub-leasehold estate hereunder, subject only to Permitted Encumbrances, in an amount at least equal to the aggregate principal amount of the Bonds. All Net Proceeds received under said policy shall be deposited with the Trustee in the Insurance and Condemnation Fund and shall be applied, as set forth in Section 6.1 hereof. Section 5.7. Net Proceeds of Insurance; Form of Policies. (a) Each policy of insurance maintained pursuant to Sections 5.4, 5.5 and 5.6 shall name the Trustee as loss payee so as to provide that all proceeds thereunder shall be payable to the Trustee. The Authority, the City and the Trustee shall be named insureds of the policy. The City shall pay or cause to be paid when due the premiums for all insurance policies required by this Lease Agreement. All such policies shall provide that the Trustee shall be given thirty (30) days’ notice of each expiration, any intended cancellation thereof or reduction of the coverage provided thereby. The Trustee shall not be responsible for the sufficiency or amount of any insurance or self-insurance herein required and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss. (b) In the event that any insurance maintained pursuant to Section 5.3 shall be provided in the form of self-insurance, the City shall file with the Trustee annually, by June 30 of each year, a statement of the risk manager of the City or an independent insurance adviser engaged by the City identifying the extent of such self-insurance and stating the determination that the City maintains sufficient reserves with respect thereto. In the event that any such insurance shall be provided in the form of self-insurance by the City, the City shall not be obligated to make any payment with respect to any insured event except from such reserves. The Trustee shall not be responsible for the sufficiency or adequacy of any insurance herein required and shall be fully Page 139 60285.00031\31483807.7 15 protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the Trustee. (c) If the City shall fail to perform any of its obligations under this Article V, the Authority or the Trustee may, but shall not be obligated to, take such action as may be necessary to cure such failure, including the advancement of money, and the City shall be obligated to repay all such advances as soon as possible, with interest at the rate payable by the Authority on the Bonds from the date of the advance to the date of repayment. (d) The City shall annually (by June 30 of each fiscal year) certify in writing to the Trustee that all insurance policies required to be maintained under this Lease are in full force and effect. Section 5.8. Installation of Personal Property. The City may, at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed items of equipment or other personal property in or upon any portion of the Leased Premises. All such items shall remain the sole property of the City, in which neither the Authority nor the Trustee shall have any interest, and may be modified or removed by the City at any time provided that the City shall repair and restore any and all damage to the Leased Premises resulting from the installation, modification or removal of any such items. Nothing in this Lease Agreement shall prevent the City from purchasing or leasing items to be installed pursuant to this Section 5.8 under a lease or conditional sale agreement, 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 Leased Premises. Section 5.9. Liens. Neither the City nor the Authority shall, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to any portion of the Leased Premises, other than the respective rights of the Authority and the City as provided herein and other than Permitted Encumbrances; except that, the City may in good faith contest any lien filed or established against the Leased Premises, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide the Authority with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Authority. The Authority will cooperate fully in any such contest, upon the request and at the expense of the City. Except as expressly provided in this Article V, the City and the Authority shall promptly, at their own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is responsible, if the same shall arise at any time. The City shall reimburse the Authority for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim. Page 140 60285.00031\31483807.7 16 Section 5.10. Tax Covenants. (a) Private Activity Bond Limitation. The City shall assure that the proceeds of the Series A Bonds are not so used as to cause the Series A Bonds to satisfy the private business tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax Code. (b) Federal Guarantee Prohibition. The City shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause any of the Series A Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Tax Code. (c) No Arbitrage. The City shall not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Series A Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date would have caused the Series A Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Tax Code. (d) Maintenance of Tax-Exemption. The City shall take all actions necessary to assure the exclusion of interest on the Series A Bonds from the gross income of the Owners of the Series A Bonds to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the Closing Date. Section 5.11. Payment of Rebatable Amounts. The City agrees to furnish all information to, and cooperate fully with, the Authority and their respective officers, employees, agents and attorneys, in order to assure compliance with the provisions of Section 6.07(e) of the Indenture. In the event that the Authority shall determine, pursuant to Section 6.07(e) of the Indenture, that any amounts are due and payable to the United States of America thereunder and that neither the Authority nor the Trustee has on deposit an amount of available moneys (excluding moneys on deposit in the funds and accounts established for the payment of the principal of or interest or redemption premium, if any, on the Series A Bonds) to make such payment, the Authority shall promptly notify the City of such fact. Upon receipt of any such notice, the City shall promptly pay the amounts determined by the Authority to be due and payable to the United States of America under such Section 6.07(e), such payments to be made in accordance with the applicable provisions of the Tax Code. Section 5.12. Continuing Disclosure. The City and Authority hereby covenant and agree that they will comply with and carry out all of the provisions of its Undertaking to Provide Continuing Disclosure with respect to the Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. Notwithstanding any other provision of this Lease Agreement, failure of the City to comply with such Undertaking to Provide Continuing Disclosure shall not be considered an Event of Default; however, any Bondholder may take such actions, as provided in such Undertaking to Provide Continuing Disclosure, as may be necessary and appropriate to cause the City to comply with its obligations under such Undertaking to Provide Continuing Disclosure. Page 141 60285.00031\31483807.7 17 ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS Section 6.1. Application of Net Proceeds. (a) Deposit in Insurance and Condemnation Fund. Pursuant to Section 5.07 of the Indenture, the Trustee shall deposit the Net Proceeds of any insurance required by Section 5.4 hereof and the proceeds of the title insurance required by Section 5.6 hereof in the Insurance and Condemnation Fund promptly upon receipt thereof. The City and/or the Authority shall transfer to the Trustee any other Net Proceeds received by the City and/or Authority in the event of any taking by eminent domain or condemnation with respect to the Leased Premises, for deposit in the Insurance and Condemnation Fund. (b) Disbursement for Replacement or Repair of the Leased Premises. Upon receipt of the certification described in paragraph (1) below and the requisition described in paragraph (2) below, the Trustee is required by the Indenture to disburse moneys in the Insurance and Condemnation Fund to the person, firm or corporation named in the requisition as provided in Section 5.07 of the Indenture. (1) Certification. An Authorized Representative of the City must provide to the Authority and the Trustee a certificate stating that: (i) Sufficiency of Net Proceeds. The Net Proceeds available for such purpose, together with any other funds supplied by the City for such purpose, are sufficient to repair or replace the Leased Premises to a use which will have an annual fair rental value not less than the maximum annual Lease Payments and Miscellaneous Rent through the term of the Lease (assuming that the Miscellaneous Rent due in the future will equal the Miscellaneous Rent paid prior to such date) due hereunder, and (ii) Timely Completion. In the event that damage, destruction, title defect or taking results in an abatement of Lease Payments, such replacement or repair can be fully completed within a period not in excess of the period in which rental interruption insurance proceeds as described in Section 5.5 hereof, together with other legally available funds, will be available to pay in fill all Lease Payments coming due during such period. (2) Requisition. An Authorized Representative of the City must state with respect to each payment to be made (i) the requisition number, (ii) the name and address of the person, firm or corporation to whom payment is due, (iii) the amount to be paid, and (iv) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund, has not been the basis of any previous withdrawal, and specifying in reasonable detail the nature of the obligation. Any balance of the Net Proceeds remaining after such replacement or repair has been completed shall be disbursed as provided in Section 5.07 of the Indenture. Page 142 60285.00031\31483807.7 18 (c) Disbursement for Prepayment. If an Authorized Representative of the City notifies the Trustee in writing of the City’s determination that the certification provided in Section 6.1(b)(1) hereof cannot be made or replacement or repair of any portion of the Leased Premises is not economically feasible or in the best interest of the City to repair or replace the Leased Premises, then the City shall deposit with the Trustee an amount which when combined with the Net Proceeds will prepay enough Lease Payments and result in a corresponding prepayment of such that the fair rental value of the remaining portion of the Leased Premises is sufficient to provide for payment of the Lease Payments remaining under the Lease Agreement and that Bonds which remain Outstanding under the Indenture correspond to the remaining Lease Payments, after such Net Proceeds and such deposit by the City are applied to redeem Bonds and under the Indenture. The Trustee is required by the Indenture to promptly transfer the Net Proceeds in respect of such portion to the Redemption Fund as provided in Section 5.07 of the Indenture and apply them to the prepayment of Lease Payments as provided in Section 4.5 hereof which shall cause the redemption of the Bonds as provided in Section 4.01(c) of the Indenture. Section 6.2. Abatement of Lease Payments in the Event of Damage or Destruction. The Lease Payments allocable to the Leased Premises shall be abated during any period in which by reason of damage or destruction (other than by eminent domain which is hereinbefore provided for) there is substantial interference with the use and occupancy of the Leased Premises or any portion thereof. The amounts of the Lease Payments under such circumstances shall be proportionate to the usable portion of the Leased Premises. If it is certain that the fair rental value of the portions of the Leased Premises not damaged or destroyed, based upon the opinion of an MAI appraiser with expertise in valuing such properties or other appropriate method of valuation, is less than the amount of Lease Payments being made, the Lease Payments shall be further abated such that they represent said fair rental value. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, this Lease Agreement shall continue in full force and effect and the Authority waives any right to terminate this Lease Agreement by virtue of any such damage and destruction. Notwithstanding the foregoing, there may be no abatement of Lease Payments to the extent that (a) the proceeds of rental interruption insurance, are available to pay Lease Payments; or (b) amounts in the Bond Fund are available to pay Debt Service payable from Lease Payments which would otherwise be abated. Any such Debt Service payments made from the Bond Fund shall be credit against the applicable Lease Payment(s). ARTICLE VII DISCLAIMER OF WARRANTIES; ACCESS Section 7.1. Disclaimer of Warranties. Neither the Authority nor the Trustee makes any warranty or representation, either express or implied, as to the value, design, condition, merchantability or fitness for any particular purpose or fitness for the use contemplated by the City of the Leased Premises, or any other representation or warranty with respect to the Leased Premises. In no event shall the Authority, the Trustee, and their respective assigns be liable for incidental, indirect, special or consequential damages in connection with or arising out of this Lease Agreement or the Indenture for the existence, furnishing, functioning or the City’s use of the Leased Premises. Page 143 60285.00031\31483807.7 19 Section 7.2. Rights of Access. The City agrees that the Authority and any Authorized Representative of the Authority, and the Authority’s successors or assigns, shall have the right at all reasonable times to enter upon and to examine and inspect the Leased Premises. The City further agrees that the Authority, any Authorized Representative of the Authority, and the Authority’s successors or assigns shall have such rights of access to the Leased Premises as may be reasonably necessary to cause the proper maintenance of the Leased Premises in the event of failure by the City to perform its obligations hereunder. Section 7.3. Release and Indemnification Covenants. The City shall and hereby agrees to indemnify and save the Authority, and the Trustee, and their respective officers, agents, successors and assigns, harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of (a) the use, maintenance, condition or management of, or from any work or thing done on the Leased Premises by the City; (b) any breach or default on the part of the City in the performance of any of its obligations under this Lease Agreement; (c) any act or negligence of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Leased Premises; (d) the use, presence, storage, disposal of any Hazardous Substances, on or about the Leased Premises; (e) the Trustee’s acceptance or administration of the trust of the Indenture, or the exercise or performance of any of its powers or duties thereunder or under any of the documents, including this Lease Agreement, to which it is a party relating to the Bonds; or (f) any act or negligence of any sublessee of the City with respect to the Leased Premises. No indemnification is made under this Section 7.3 or elsewhere in this Lease Agreement for willful misconduct or negligence under this Lease Agreement by the Authority or the Trustee or any of their respective officers, agents, employees, successors or assigns. The Trustee’s rights under Section 4.8(b) and this Section shall survive the termination of this Agreement and the registration or removal of the Trustee. In the event of abatement pursuant to this Section 6.2, the City shall use its best efforts to the extent permissible under the laws of the State of California to make all Lease Payments in excess of the amount of rental interruption insurance, if necessary, in order to ensure the reconstruction, repair, restoration, modification or improvement of the Lease Premises. ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT Section 8.1. Assignment by the Authority. The Authority’s rights under this Lease Agreement (other than Sections 7.3 and 9.4 hereof), including the right to receive and enforce payment of the Lease Payments to be made by the City under this Lease Agreement, have been pledged and assigned to the Trustee for the benefit of the Owners of the Bonds pursuant to the Indenture. The City understands and agrees that all Lease Payments have been assigned by the Authority to the Trustee in trust, pursuant to the Indenture, for the benefit of the Owners of the Bonds, and the City hereby assents to such assignment. The Authority hereby directs the City, and the City hereby agrees, to pay all of the Lease Payments to the Trustee at its Office. The assignment of this Lease Agreement to the Trustee is solely in its capacity as Trustee under the Indenture and the duties, powers and liabilities of the Trustee in acting hereunder shall be subject to the provisions of the Indenture, including, without limitation, the provisions of Article VIII thereof. Page 144 60285.00031\31483807.7 20 Section 8.2. Assignment and Subleasing by the City. This Lease Agreement may not be assigned by the City. The City may sublease the Leased Premises or any portion thereof, but only with the written consent of the Authority and subject to all of the following conditions: (a) this Lease Agreement and the obligation of the City to make Lease Payments hereunder shall remain obligations of the City; (b) the City shall, within thirty (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 Leased Premises to be used for a purpose other than as may be authorized under the provisions of the laws of the State; and (d) the City shall furnish the Authority and the Trustee with a written opinion of Bond Counsel, stating that such sublease is permitted by this Lease Agreement and the Indenture, and will not cause the interest on the Series A Bonds to become included in gross income for federal income tax purposes; provided, however, if the City enters into a sublease without the consent of the Authority, without furnishing a written opinion of Bond Counsel as set forth in subsection (d) above or fails to deliver such sublease in accordance with subsection (b) above, entry into such sublease shall not constitute an Event of Default so long as the provisions of subsections (a) and (c) above and Section 5.10 herein are met and such sublease does not cause the City to violate any other term or condition set forth in this Lease Agreement. Section 8.3. Amendment Hereof. The Authority and the City may at any time amend or modify any of the provisions of this Lease Agreement, but only (a) with the prior written consent of a majority in aggregate principal amount of the Outstanding Bonds, or (b) without the consent of any of the Bond Owners, but only if such amendment or modification is for any one or more of the following purposes: (a) to add to the covenants and agreements of the City contained in this Lease Agreement, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power herein reserved to or conferred upon the City; (b) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein, or in any other respect whatsoever as the Authority and the City may deem necessary or desirable, provided that, in the opinion of Bond Counsel, such modifications or amendments will not materially adversely affect the interests of the Owners of the Bonds; (c) to amend any provision thereof relating to the Tax Code, to any extent whatsoever but only if and to the extent such amendment will not adversely affect the exclusion from gross income of interest on the Series A Bonds under the Tax Code, in the opinion of Bond Counsel; Page 145 60285.00031\31483807.7 21 (d) to amend the description of the Leased Premises set forth in Exhibit A hereto to reflect accurately the property originally intended to be included therein, or in connection with any substitution or release pursuant to Section 4.9; or (e) to obligate the City to pay additional amounts of rental hereunder for the use and occupancy of the Leased Premises, provided that (A) no Event of Default has occurred and is continuing under this Lease, (B) such additional amounts of rental do not cause the total rental payments made by the City hereunder to exceed the fair rental value of the Leased Premises, as set forth in a certificate of an Authorized Representative of the City filed with the Trustee and the Authority, (C) the City shall have obtained and filed with the Trustee and the Authority a Written Certificate of an Authorized Representative of the City showing that the fair rental value of the Leased Premises is not less than the sum of the aggregate unpaid principal components of the Lease Payments and the aggregate principal components of such additional amounts of rental, and (D) such additional amounts of rental are pledged or assigned for the payment of any bonds, notes, leases or other obligations the proceeds of which shall be applied to finance any purpose authorized pursuant to the laws of the State. ARTICLE IX EVENTS OF DEFAULT; REMEDIES Section 9.1. Events of Default Defined. The following shall be “Events of Default” under this Lease Agreement: (a) Failure by the City to pay any Lease Payment required to be paid hereunder at the time specified herein. (b) Failure by the City to make any Miscellaneous Rent payment required hereunder and the continuation of such failure for a period of thirty (30) days. (c) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in the preceding clauses (a) or (b), for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Authority or the Trustee; provided, however, that if in the reasonable opinion of the City the failure stated in the notice can be corrected, but not within such sixty (60) day period, such failure shall not constitute an Event of Default if the City shall commence to cure such failure within such sixty (60) day period and thereafter diligently and in good faith shall cure such failure in a reasonable period of time. (d) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted Page 146 60285.00031\31483807.7 22 under the provisions of applicable federal bankruptcy law, or under any similar acts which may hereafter be enacted. Section 9.2. Remedies on Default. Whenever any Event of Default referred to in Section 9.1 shall have happened and be continuing, it shall be lawful for the Authority to exercise any and all remedies available pursuant to law or granted pursuant to this Lease Agreement; provided, however, that notwithstanding anything to the contrary herein or in the Indenture, there shall be no right under any circumstances to accelerate the Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due and payable or to terminate this Lease Agreement or to cause the leasehold interest of the Authority or the subleasehold interest of the City in the Site to be sold, assigned or otherwise alienated. Each and every covenant hereof to be kept and performed by the City is expressly made a condition and upon the breach thereof the Authority may exercise any and all rights of entry and re-entry upon the Leased Premises. In the event of such default and notwithstanding any re-entry by the Authority, the City shall, as herein expressly provided, continue to remain liable for the payment of the Lease Payments and/or damages for breach of this Lease Agreement and the performance of all conditions herein contained, and in any event such rent and damages shall be payable to the Authority at the time and in the manner as herein provided, to wit: (a) The City agrees to and shall remain liable for the payment of all Lease Payments and the performance of all conditions herein contained and shall reimburse the Authority for any deficiency arising out of the re-leasing of the Leased Premises, or, in the event the Authority is unable to relet the Leased Premises, then for the full amount of all Lease Payments to the end of the Term of this Lease Agreement, but said Lease Payments and/or deficiency shall be payable only at the same time and in the same manner as hereinabove provided for the payment of Lease Payments hereunder, notwithstanding such entry or re-entry by the Authority or any suit in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such re-entry or obtaining possession of the Leased Premises or the exercise of any other remedy by the Authority. (b) The City hereby irrevocably appoints the Authority as the agent and attorney-in-fact of the City to enter upon and re-lease the Leased Premises in the event of default by the City in the performance of any covenants herein contained to be performed by the City and to remove all personal property whatsoever situated upon the Leased Premises to place such property in storage or other suitable place in the County of San Bernardino, for the account of and at the expense of the City, and the City hereby exempts and agrees to save harmless the Authority from any costs, loss or damage whatsoever arising or occasioned by any such entry upon and re-leasing of the Leased Premises and the removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. (c) The City hereby waives any and all claims for damages caused or which may be caused by the Authority in re-entering and taking possession of the Leased Premises as herein provided and all claims for damages that may result from the destruction of or injury to the Leased Premises and all claims for damages to or loss of any property belonging to the City that may be in or upon the Leased Premises. Page 147 60285.00031\31483807.7 23 (d) The City agrees that the terms of this Lease Agreement constitute full and sufficient notice of the right of the Authority to re-lease the Leased Premises 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 releasing shall constitute a surrender or termination of this Lease Agreement irrespective of the term for which such re-leasing is made or the terms and conditions of such re-leasing, or otherwise. (e) The City further waives the right to any rental obtained by the Authority in excess of the Lease Payments and hereby conveys and releases such excess to the Authority as compensation to the Authority for its services in re-leasing the Leased Premises. Section 9.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive and every such remedy shall be cumulative and shall, except as herein expressly provided to the contrary, be in addition to every other remedy given under this Lease Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Authority to exercise any remedy reserved to it in this Article IX it shall not be necessary to give any notice, other than such notice as may be required in this Article IX or by law. Section 9.4. Agreement to Pay Attorneys’ Fees and Expenses. In the event either party to this Lease Agreement should default under any of the provisions hereof and the nondefaulting party should employ attorneys or incur other expenses for the collection of moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it will on demand therefor pay to the nondefaulting party the reasonable fees of such attorneys and such other expenses so incurred by the nondefaulting party. Section 9.5. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Lease Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. Section 9.6. Trustee and Bondholder to Exercise Rights. Such rights and remedies as are given to the Authority under this Article IX have been assigned by the Authority to the Trustee under the Indenture, to which assignment the City hereby consents. Such rights and remedies shall be exercised by the Trustee and the Owners of the Bonds as provided in the Indenture. ARTICLE X MISCELLANEOUS Section 10.1. Notices. All written notices to be given under this Lease Agreement shall be given by first class mail, personal delivery, overnight mail or email pdf. to the party entitled thereto at its address set forth below, or at such address as the party may provide to the other party in writing from time to time. Notice shall be effective either (a) upon transmission by facsimile Page 148 60285.00031\31483807.7 24 transmission or other form of telecommunication; (b) 48 hours after deposit in the United States mail, postage prepaid; or (c) otherwise, upon actual receipt. The Authority, the City or the Trustee may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder. If to the Authority: Rancho Cucamonga Public Finance Authority 10500 Civic Center Drive Rancho Cucamonga, CA 91730 Attention: Executive Director Fax: (909) 477-2700 If to the City: City of Rancho Cucamonga 10500 Civic Center Drive Rancho Cucamonga, CA 91730 Attention: City Manager Fax: (909) 477-2700 If to the Trustee: Wells Fargo Bank, N.A 707 Wilshire Boulevard, 17th Floor Los Angeles, CA 90017 Attention: __________ Fax: (213) 614-3355 Section 10.2. Binding Effect. This Lease Agreement shall inure to the benefit of and shall be binding upon the Authority and the City and their respective successors and assigns. Section 10.3. Severability. In the event any provision of this Lease Agreement 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 10.4. Net-net-net Lease. This Lease Agreement shall be deemed and construed to be a “net-net-net lease” and the City hereby agrees that the Lease Payments shall be an absolute net return to the Authority, free and clear of any expenses, charges or set-offs whatsoever. Section 10.5. Further Assurances and Corrective Instruments. The Authority and the City agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Leased Premises hereby leased or intended so to be or for carrying out the expressed intention of this Lease Agreement. Section 10.6. Execution in Counterparts. This Lease Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 10.7. Applicable Law. This Lease Agreement shall be governed by and construed in accordance with the laws of the State. Page 149 60285.00031\31483807.7 25 Section 10.8. Authorized Representatives. Whenever under the provisions of this Lease Agreement the approval of the Authority or the City is required, or the Authority or the City is required to take some action at the request of the other, such approval or such request shall be given for the Authority by an Authorized Representative of the Authority and for the City by an Authorized Representative of the City, and any party hereto shall be authorized to rely upon any such approval or request. Section 10.9. Captions. The captions or headings in this Lease Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Section of this Lease Agreement. (Signature page follows) Page 150 60285.00031\31483807.7 S-1 IN WITNESS WHEREOF, the Authority has caused this Lease Agreement to be executed in its corporate name by its duly authorized officers and the City has caused this Lease Agreement to be executed in its name by its duly authorized officers, as of the date first above written. RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY By________________________________ L. Dennis Michael Chairperson ATTEST: ______________________________ Janice C. Reynolds Secretary CITY OF RANCHO CUCAMONGA By_________________________________ L. Dennis Michael Mayor ATTEST: ______________________________ Janice C. Reynolds City Clerk -Signature Page- Lease Agreement Page 151 60285.00031\31483807.7 A-1 EXHIBIT A DESCRIPTION OF THE LEASED PREMISES Page 152 60285.00031\31483807.7 B-1 EXHIBIT B SCHEDULE OF LEASE PAYMENTS Date Principal Interest Lease Payment Annual Lease Payment Page 153 60285.00031\31483807.7 B-2 EXHIBIT B-1 SERIES A BONDS LEASE PAYMENTS Date Principal Interest Lease Payment Annual Lease Payment Page 154 60285.00031\31483807.7 B-3 EXHIBIT B-2 SERIES B BONDS (TAXABLE) LEASE PAYMENTS Date Principal Interest Lease Payment Annual Lease Payment Page 155 60285.00031\31483807.7 i ARTICLE I DEFINITIONS AND EXHIBITS Section 1.1. Definitions........................................................................................................ 2 Section 1.2. Exhibits ............................................................................................................ 3 ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.1. Representations, Covenants and Warranties of the City .................................. 3 Section 2.2. Representations, Covenants and Warranties of Authority ............................... 5 ARTICLE III THE BONDS Section 3.1. The Bonds ........................................................................................................ 6 Section 3.2. Financing of Project ......................................................................................... 6 Section 3.3. Payment of Costs of Issuance .......................................................................... 6 ARTICLE IV LEASE; TERM OF THIS LEASE AGREEMENT; RENTAL PAYMENTS Section 4.1. Lease by Authority and Lease Back to City .................................................... 7 Section 4.2. Term of Lease Agreement ............................................................................... 7 Section 4.3. Lease Payments; Security Deposit ................................................................... 7 Section 4.4. [Intentionally Reserved]................................................................................... 9 Section 4.5. Optional Prepayment ....................................................................................... 9 Section 4.6. Quiet Enjoyment ............................................................................................ 10 Section 4.7. Title ................................................................................................................ 10 Section 4.8. Miscellaneous Rent ........................................................................................ 10 Section 4.9. Substitution or Release of Leased Premises .................................................. 11 ARTICLE V MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS; AND OTHER MATTERS Section 5.1. Maintenance, Utilities, Taxes and Assessments ............................................ 12 Section 5.2. Modification of Leased Premises ................................................................... 13 Section 5.3. Public Liability and Property Damage Insurance .......................................... 13 Section 5.4. Casualty Insurance ......................................................................................... 14 Section 5.5. Rental Interruption Insurance ........................................................................ 14 Section 5.6. Recordation Hereof; Title Insurance .............................................................. 14 Section 5.7. Net Proceeds of Insurance; Form of Policies ................................................. 14 Section 5.8. Installation of Personal Property .................................................................... 15 Section 5.9. Liens ............................................................................................................... 15 Section 5.10. Tax Covenants ............................................................................................... 16 Section 5.11. Payment of Rebatable Amounts..................................................................... 16 Section 5.12. Continuing Disclosure ................................................................................... 16 Page 156 60285.00031\31483807.7 ii ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS Section 6.1. Application of Net Proceeds .......................................................................... 17 Section 6.2. Abatement of Lease Payments in the Event of Damage or Destruction ........ 18 ARTICLE VII DISCLAIMER OF WARRANTIES; ACCESS Section 7.1. Disclaimer of Warranties ............................................................................... 19 Section 7.2. Rights of Access ............................................................................................ 19 Section 7.3. Release and Indemnification Covenants ........................................................ 19 ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT Section 8.1. Assignment by the Authority ......................................................................... 20 Section 8.2. Assignment and Subleasing by the City ........................................................ 20 Section 8.3. Amendment Hereof ........................................................................................ 20 ARTICLE IX EVENTS OF DEFAULT; REMEDIES Section 9.1. Events of Default Defined ............................................................................. 21 Section 9.2. Remedies on Default ...................................................................................... 22 Section 9.3. No Remedy Exclusive.................................................................................... 23 Section 9.4. Agreement to Pay Attorneys’ Fees and Expenses ......................................... 23 Section 9.5. No Additional Waiver Implied by One Waiver ............................................. 24 Section 9.6. Trustee and Bondholder to Exercise Rights ................................................... 24 ARTICLE X MISCELLANEOUS Section 10.1. Notices ........................................................................................................... 24 Section 10.2. Binding Effect ................................................................................................ 24 Section 10.3. Severability .................................................................................................... 24 Section 10.4. Net-net-net Lease ........................................................................................... 25 Section 10.5. Further Assurances and Corrective Instruments ............................................ 25 Section 10.6. Execution in Counterparts.............................................................................. 25 Section 10.7. Applicable Law .............................................................................................. 25 Section 10.8. Authorized Representatives ........................................................................... 25 Section 10.9. Captions ......................................................................................................... 25 EXHIBIT A – DESCRIPTION OF THE LEASED PREMISES ............................................. A-1 EXHIBIT B – SCHEDULE OF LEASE PAYMENTS .............................................................B-1 Page 157 PRELIMINARY OFFICIAL STATEMENT DATED _____________, 2019 NEW ISSUE - BOOK ENTRY ONLY RATING: S&P: “____” See “RATING” In the opinion of Best Best & Krieger LLP, Riverside, California, Bond Counsel, subject, however, to certain qualifications described herein, under existing statutes, regulations, rules and court decisions and assuming certain representations and compliance with certain covenants and requirements described herein, the interest on the Series A Bonds is excluded from gross income for federal income tax purposes, and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. Interest payable on the Series B Bonds is subject to all applicable federal income taxation. Interest on the Series A Bonds and the Series B Bonds is exempt from State of California personal income taxes. See the caption “TAX MATTERS.” RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 Lease Revenue Bonds (FIBER OPTIC PROJECT) $_____________* Series A Bonds (Tax-Exempt) $_____________* Series B Bonds (Taxable) Dated: Date of Delivery Due: May 1, as shown on inside cover The 2019 Lease Revenue Bonds, (Fiber Optic Project) issued as Series A Bonds (Tax-Exempt) (the “Series A Bonds”) and as Series B Bonds (Taxable) (the “Series B Bonds,” and together with the Series A Bonds, the “Bonds”) of the Rancho Cucamonga Public Finance Authority (the “Authority”) will be issued as fully registered bonds in book-entry form only, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York. Purchasers will not receive certificates representing their interest in the Bonds. Individual purchases will be in integral multiples of $5,000. Interest payable on the Bonds will be payable on May 1 and November 1 of each year, commencing November 1, 2019, and principal payable on the Bonds will be payable annually on May 1 of each year commencing May 1, 2020 by Wells Fargo Bank, N.A., Los Angeles, California, as trustee for the Bonds (the “Trustee”), to DTC for subsequent disbursement to DTC Participants who will remit such payments to the beneficial owners of the Bonds. The Bonds are being issued by the Authority for (i) the purpose of financing the acquisition, design, construction and equipping of an expansion to the City’s existing fiber optic network (the “Project”) within the City of Rancho Cucamonga (the “City”) and (ii) paying the costs incurred in connection with the issuance of the Bonds. The Bonds are limited obligations of the Authority payable primarily from and secured by certain revenues (the “Revenues”) consisting of certain Lease Payments with respect to the Leased Premises (as described in the Official Statement) by the City pursuant to a Lease Agreement, dated as of February 1, 2019 (the “Lease Agreement”) between the City and the Authority. The Lease Payments are structured to produce Revenues sufficient to pay principal of and interest on the Bonds when due. The City has covenanted in the Lease Agreement to make all Lease Payments provided for therein, to include all such payments in its annual budgets, and to make the necessary annual appropriations for such Lease Payments. The City’s obligation to make Lease Payments is subject to abatement in the event of damage to, destruction or condemnation of, or title defects relating to, the Leased Premises described herein. See “SECURITY FOR THE BONDS” and “RISK FACTORS.” The City has the right to incur other obligations payable from its general revenues without the consent of the Owners of the Bonds. The Revenues are to be received by the Authority and deposited pursuant to an Indenture of Trust, dated as of February 1, 2019 (the “Indenture”) between the City and the Trustee. Neither the City nor the Authority will create or maintain a debt service reserve account with respect to the Lease Payments or for the Bonds. The Bonds are subject to redemption prior to maturity as described herein. See “THE BONDS – Redemption.” This cover page contains information for general reference only. It is not a summary of the security or terms of this issue. Investors must read the entire Official Statement, including the section entitled “RISK FACTORS,” for a discussion of special factors which should be considered, in addition to the other matters set forth herein, in considering the investment quality of the Bonds. Capitalized terms used on this cover page and not otherwise defined shall have the meanings set forth in the Official Statement. The Bonds are limited obligations of the Authority payable solely from the revenues and other funds held under the Indenture. The Bonds are not a debt, obligation or liability of the Members (as defined in this Official Statement), the County of San Bernardino, the State of California or any of its political subdivisions (other than the Authority), nor do they constitute a pledge of the faith and credit or the taxing power of any of the foregoing (including the Authority and the City). The Authority does not have any taxing power. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. The City’s obligation to make Lease Payments is an obligation payable from the City’s General Fund or any other source of funds legally available to the City to make Lease Payments. The obligation of the City to make Lease Payments does not constitute a debt of the City within the meaning of any constitutional or statutory debt limit or restriction or any obligation 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. The Bonds are offered, when, as and if issued and received by the Underwriter, subject to the approval of legality by Best Best & Krieger LLP, Riverside, California, Bond Counsel. Certain legal matters will be passed upon for the Authority and the City by Richards Watson & Gershon, A Professional Corporation, Los Angeles, California, as Authority Counsel and City Attorney and by Best Best & Krieger LLP, Riverside, California, as Disclosure Counsel. Kutak Rock LLP, Irvine, California, will act as Underwriter’s Counsel. It is expected that the Bonds, in book-entry form, will be available through the facilities of DTC on or about February 14, 2019. Dated: * Preliminary, subject to change. This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. Page 158 MATURITY SCHEDULE Base CUSIP†: ______ Series A Bonds (Tax-Exempt) $_________* Serial Bonds Maturity Date (May 1) Principal Amount Interest Rate Yield Price CUSIP† $______ _____% Term Bond Due May 1, 20___, Yield ____% Price ____ CUSIP†_____ $______ _____% Term Bond Due May 1, 20___, Yield ____% Price ____ CUSIP†_____ Series B Bonds (Taxable) $_________* Serial Bonds Maturity Date (May 1) Principal Amount Interest Rate Yield Price CUSIP† $______ _____% Term Bond Due May 1, 20___, Yield ____% Price ____ CUSIP†_____ * Preliminary, subject to change. † CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of American Bankers Association by S&P Capital IQ. Copyright© 2019 CUSIP Global Services. All rights reserved. This data is not intended to create a database and does not serve in any way a substitute for the CUSIP Service Bureau. CUSIP® numbers are provided for convenience of reference only. The Authority, the City and the Underwriter do not take any responsibility for the accuracy of the CUSIP® numbers. Page 159 RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY AUTHORITY BOARD OF DIRECTORS L. Dennis Michael, Chairperson Lynne Kennedy, Vice Chairperson Ryan Hutchison, Member Kristine Scott, Member Sam Spagnolo, Member RANCHO CUCAMONGA CITY COUNCIL L. Dennis Michael, Mayor Lynne Kennedy, Mayor Pro Tem Ryan Hutchison, Council Member Kristine Scott, Council Member Sam Spagnolo, Council Member AUTHORITY/CITY STAFF John R. Gillison, Executive Director/City Manager Lori Sassoon, Deputy City Manager/Administrative Services Tamara L. Layne, Treasurer/Finance Director Janice C. Reynolds, Secretary/City Clerk James Markman, Authority Counsel/City Attorney SPECIAL SERVICES Bond Counsel & Disclosure Counsel Best Best & Krieger LLP Riverside, California Municipal Advisor Fieldman, Rolapp & Associates, Inc. Irvine, California Trustee Wells Fargo Bank, N.A. Los Angeles, California Page 160 No dealer, broker, salesperson or other person has been authorized by the City, the Authority or the Underwriter to give any information or to make any representations, other than those contained in this Official Statement, and if given or made, such information or representation must not be relied upon as having been authorized by any of the foregoing. 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 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information and expressions of opinion in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the Bonds shall under any circumstances create any implication that there has been no change in the affairs of the City or the Authority or other matters described in this Official Statement since the date hereof. Certain statements contained in this Official Statement reflect not historical facts but forecasts and “forward-looking statements.” No assurance can be given that the future results discussed in this Official Statement will be achieved, and actual results may differ materially from the forecasts described herein. In this respect, the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe” and similar expressions are intended to identify forward-looking statements. All projections, forecasts, assumptions, expressions of opinions, estimates and other forward-looking statements are expressly qualified in their entirety by the cautionary statements set forth in this Official Statement. The Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon an exemption contained in such Act. The Bonds have not been registered or qualified under the securities laws of any state. This Official Statement and the information contained herein are subject to completion or amendment without notice. These securities may not be sold nor may an offer to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. 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. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE INSIDE FRONT COVER PAGE OF THIS OFFICIAL STATEMENT AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. The City maintains a website, with certain information relating to the City and/or the Authority contained therein. However, the information presented on such website is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. Page 161 TABLE OF CONTENTS -i- INTRODUCTION ............................................................... 1 General .......................................................................... 1 The City ......................................................................... 1 The Authority ................................................................ 2 Security for the Bonds ................................................... 2 No Reserve Account...................................................... 3 Abatement ..................................................................... 3 Redemption ................................................................... 3 Continuing Disclosure ................................................... 3 Summary of Terms ........................................................ 3 THE FINANCING PLAN ................................................... 4 The Project .................................................................... 4 Sources and Uses of Funds ............................................ 8 Debt Service Schedule .................................................. 8 THE LEASED PREMISES ................................................. 9 The Leased Premises ..................................................... 9 Substitution and Release of Leased Premises ................ 9 Assignment and Subleasing of Leased Premises ................................................................ 10 THE BONDS .................................................................... 11 Description of the Bonds ............................................. 11 Redemption ................................................................. 11 Book-Entry System ..................................................... 13 SECURITY FOR THE BONDS ....................................... 14 General ........................................................................ 14 Lease Payments ........................................................... 14 Additional Bonds ........................................................ 15 Appropriation; Use of Leased Premises ...................... 15 Abatement ................................................................... 16 Action on Default ........................................................ 16 Miscellaneous Rent ..................................................... 16 Insurance ..................................................................... 17 No Reserve Account.................................................... 17 CITY FINANCIAL INFORMATION .............................. 18 Accounting Policies and Financial Reporting ............. 18 Budgetary Process and Current Budget ....................... 18 General Fund Balance Sheet, Statements of Revenues and Expenditures and Fund Balances ................................................................ 21 Historic General Fund Revenues ................................. 23 Sales and Use Tax ....................................................... 25 Property Taxes ............................................................ 25 Other Taxes and Fees .................................................. 26 City Investment Policy ................................................ 27 Risk Management ........................................................ 27 Employees and Labor Relations .................................. 28 Retirement Program .................................................... 28 Outstanding Long Term Obligations ........................... 34 STATE BUDGET OF CALIFORNIA .............................. 34 State Budget ................................................................ 34 2018/19 State Budget .................................................. 34 Future State Budgets ................................................... 35 RISK FACTORS ............................................................... 36 Lease Payments Not City Debt ................................... 36 No Tax Pledge ............................................................. 36 Appropriation .............................................................. 36 No Limit on Additional General Fund Obligations ............................................................ 37 Abatement and Eminent Domain ................................ 37 No Reserve Account.................................................... 37 Sufficiency of Lease Payments ................................... 37 Limitation on Enforcement of Remedies; No Acceleration .......................................................... 37 Seismic, Topographic and Climatic Conditions .......... 38 Hazardous Substances ................................................. 38 Public Debt Burden on Leased Premises ..................... 39 Risk of Uninsured Loss ............................................... 39 Property Tax Allocation by the State; Changes in Law ................................................................... 39 Bankruptcy and Foreclosure ........................................ 40 Federal Tax-Exempt Status of the Series A Bonds .................................................................... 41 Secondary Market Risk ............................................... 41 Substitution and Removal of Leased Premises ............ 41 No Liability of Authority to the Owners ..................... 42 Cybersecurity .............................................................. 42 Risk Management and Insurance................................. 42 State Law Limitations on Appropriations ................... 42 Changes in the Law ..................................................... 43 CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS ...................................................... 43 Limitations on Revenues ............................................. 43 Expenditures and Appropriations ................................ 45 Voter Initiatives ........................................................... 45 Unitary Property .......................................................... 46 Future Initiatives ......................................................... 47 TAX MATTERS ............................................................... 47 CONTINUING DISCLOSURE ........................................ 48 CERTAIN LEGAL MATTERS ........................................ 48 LITIGATION .................................................................... 48 MUNICIPAL ADVISOR .................................................. 48 PROFESSIONAL FEES ................................................... 49 FINANCIAL STATEMENTS .......................................... 49 RATING ............................................................................ 49 UNDERWRITING ............................................................ 49 MISCELLANEOUS.......................................................... 50 APPENDIX A – CITY ECONOMIC AND DEMOGRAPHIC INFORMATION .................... A-1 APPENDIX B – CITY’S AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR 2017/18 ... B-1 APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ....................................... C-1 APPENDIX D – FORMS OF OPINIONS OF BOND COUNSEL ........................................................... D-1 APPENDIX E – FORM OF CONTINUING DISCLOSURE AGREEMENT ............................ E-1 APPENDIX F – BOOK ENTRY PROVISIONS .......... F-1 Page 162 [LOCATION MAP] Page 163 1 OFFICIAL STATEMENT RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 LEASE REVENUE BONDS (FIBER OPTIC PROJECT) $_____________* Series A Bonds (Tax-Exempt) $_____________* Series B Bonds (Taxable) INTRODUCTION General This Official Statement, including the cover page, inside cover and appendices, is provided to furnish information in connection with the sale by the Rancho Cucamonga Public Finance Authority (the “Authority”) of 2019 Lease Revenue Bonds, Series A (Fiber Optic Project) issued as $_____________* aggregate principal amount Series A Bonds (Tax-Exempt) (the “Series A Bonds”) and as $_____________* aggregate principal amount Series B Bonds (Taxable) (the “Series B Bonds” and together with the “Series A Bonds,” the “Bonds”). The Bonds are being issued pursuant to the Constitution and laws of the State of California (the “State” or “California”), including Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “JPA Law”) and pursuant to an Indenture of Trust, dated as of February 1, 2019 (the “Indenture”), between the Authority and Wells Fargo Bank, N.A. (the “Trustee”). Proceeds of the Bonds will be used to finance the acquisition, design, construction and equipping of an expansion to the City’s existing fiber optic network within the boundaries of the City (the “Project”) and to pay costs of issuance of the Bonds. See “THE FINANCING PLAN,” “THE LEASED PREMISES” and “SOURCES AND USES OF BOND PROCEEDS.” The Bonds are limited obligations of the Authority payable primarily from and secured by certain revenues (the “Revenues”) consisting of certain Lease Payments to be paid by the City pursuant to a Lease Agreement (the “Lease Agreement”), dated as of February 1, 2019, between the City and the Authority, for certain real property and the improvements thereon commonly known as the Goldy S. Lewis Community Center, the James L. Brulte Senior Center and adjacent parking lot (the “Leased Premises”). See “THE LEASED PREMISES.” The City is also required to pay any taxes, assessment charges, utility charges, maintenance and repair costs of the Leased Premises. The Lease Payments have been structured to produce Revenues sufficient to pay principal of and interest on the Bonds when due. The City has covenanted in the Lease Agreement to make all Lease Payments provided for therein, to include all such payments in its annual budgets, and to make the necessary annual appropriations for such rental payments. The City’s obligations to make Lease Payments is subject to abatement in the event of damage to, destruction or condemnation of, or title defects relating to, the Leased Premises, as described herein. (See “SECURITY FOR THE BONDS”). The Revenues are to be received by the Authority and deposited pursuant to the Indenture. Terms used in this Official Statement and not otherwise defined shall have the meaning given to them in APPENDIX C. The City The City is located in the foothills of the Los Angeles-San Bernardino Basin in the western portion of San Bernardino County (the “County”), approximately 40 miles east of the City of Los Angeles and 18 miles west of the City of San Bernardino. The City covers approximately 40.2 square miles and is bordered by Ontario on the * Preliminary, subject to change. Page 164 2 south, Upland on the west, Fontana to the east and to the north by Cucamonga Peak and Mount Baldy. The City was incorporated on November 30, 1977, as a general law city operating under the council-manager form of government. It is governed by a five-member City Council (the “Council”), which includes a Mayor. Prior to the November 2016 General Election, all City officials were elected at large including a Mayor and four Council members, a City Clerk, and a City Treasurer. On November 8, 2016, the residents of the City voted to approve Measure Q which was then carried, adopted, and ratified by the Council on December 7, 2016. Measure Q approved the Council be elected by geographic districts with the Mayor elected at large. Four districts were created based on a map approved in May 2016. Districts 2 and 3 held elections in November 2018. Districts 1 and 4 will hold elections in 2020. The Mayor and Council members are elected on a staggered basis for a term of four years. The Council appoints the City Manager and the City Attorney. The City Manager is responsible for the daily administration of City affairs and for implementing Council policy and program decisions. The estimated population of the City was 176,671 as of January 1, 2018. For other selected information concerning the City, see “THE CITY” and “CITY FINANCIAL INFORMATION,” APPENDIX A – “CITY ECONOMIC AND DEMOGRAPHIC INFORMATION” and APPENDIX B – “AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR 2017/18.” The Authority The Authority was established pursuant to a Joint Exercise of Powers Agreement dated April 22, 1999, between the City, the Rancho Cucamonga Fire Protection District (the “Fire District”) and the former Rancho Cucamonga Redevelopment Agency (collectively with the City, the “Members”). The Authority was created for the purpose of providing financing for public capital improvements for the Members, including by issuing its obligations and making loans to the Members. Under the JPA Law, the Authority has the power to issue bonds to pay the costs of such public capital improvement. Security for the Bonds The Bonds are payable solely from, and are secured by, the Revenues (as defined under “SECURITY FOR THE BONDS”), which primarily consist of the Lease Payments. The Lease Payments are payable for the use of the Leased Premises, leased to the City pursuant to the Lease Agreement, from any legally available funds of the City. The City has covenanted in the Lease Agreement to include the Lease Payments in its annual budgets. The City has further covenanted to make the necessary annual appropriations for all such Lease Payments, and said covenants have been deemed to be duties imposed by law. Any legislative enactment or State constitutional amendment having the effect of reducing property tax, sales taxes or other taxes allocable to the City would necessarily reduce the amount of general revenues available to the City to pay the Lease Payments. Likewise, broadened property tax or sales tax exemptions could have a similar effect. See “RISK FACTORS” and “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS” for discussion of certain other matters which may affect the collection of Revenues. The Authority does not have any power to levy and collect taxes. The City has the right to incur other obligations payable from its general revenues without the consent of the Owners of the Bonds. In addition, the Indenture allows the Authority to issue certain additional obligations secured by the Revenues, and the Lease Agreement allows the City to pay additional amounts of rent for the use and occupancy of the Leased Premises if certain conditions are met. See “SECURITY FOR THE BONDS” herein. The Bonds are limited obligations of the Authority payable solely from the revenues and other funds held under the Indenture. The Bonds are not a debt, obligation or liability of the Members, the County, the State of California (the “State”) or any of its political subdivisions (other than the Authority), nor do they constitute a pledge of the faith and credit or the taxing power of any of the foregoing (including the Authority and the City). The Authority does not have any taxing power. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. The City’s obligation to make Lease Payments is an obligation payable from the City’s general fund (the “General Fund”) or any other source of funds legally available to the City to make Lease Payments. The obligation Page 165 3 of the City to make Lease Payments does not constitute a debt of the City within the meaning of any constitutional or statutory debt limit or restriction or any obligation 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. No Reserve Account Neither the City nor the Authority will create or maintain a debt service reserve account with respect to the Lease Payments or for the Bonds. Abatement Except to the extent of amounts on deposit in the Bond Fund, or otherwise available from an insurance or eminent domain award, the Lease Payments due under the Lease Agreement and, correspondingly, the amount available to pay the principal of and interest on the Bonds, will be subject to abatement during any period in which, by reason of damage or destruction or eminent domain, there is substantial interference with the use and possession by the City of the Leased Premises. See “RISK FACTORS - Abatement and Eminent Domain.” Amounts on deposit in the Bond Fund constitute a special fund for payment of debt service on the Bonds, and shall be available for debt service payments on the Bonds in the event there is substantial interference with the use and possession of the Leased Premises. Redemption The Bonds are subject to optional redemption, mandatory sinking fund redemption, and special mandatory redemption as further described in “THE BONDS – Redemption.” Continuing Disclosure The City has covenanted for the benefit of owners of the Bonds, on behalf of itself and the Authority, to provide certain financial information and operating data relating to the City and the Authority by not later than March 1 of each year, commencing with the report for the Fiscal Year 2018/19 (the “Annual Report”) and to provide notices of the occurrence of certain enumerated events. The Annual Report and notices of material events will be filed by the City with the Municipal Securities Rulemaking Board (the “MSRB”). These covenants have been made in order to assist the Underwriter in complying with Securities Exchange Commission Rule 15c2- 12(b)(5) (the “Rule”). The specific nature of the information to be contained in the Annual Report or the notices of enumerated events by the City is summarized in APPENDIX E – “FORM OF CONTINUING DISCLOSURE AGREEMENT.” For a discussion of the City and its related entities’ compliance with continuing disclosure obligations in recent years, see “CONTINUING DISCLOSURE.” Summary of Terms Brief descriptions of the Bonds, the Indenture, the Lease Agreement, the Authority, the City and the Leased Premises are included in this Official Statement. Such descriptions do not purport to be comprehensive or definitive. All references herein to the Indenture, the JPA Law and the Constitution and the laws of the State, as well as the proceedings of the City with respect to the Leased Premises and the Bonds, are qualified in their entirety by reference to such documents. References herein to the Bonds are qualified in their entirety by reference to the form thereof included in the Indenture. Copies of the documents described herein will be available at the Finance Department of the City located at 10500 Civic Center Drive, Rancho Cucamonga, California 91730. Page 166 4 THE FINANCING PLAN The Project The City plans on constructing the Project, which includes the acquisition, design, construction and equipping of an expansion of the City’s existing fiber optic network, over a ten year time period. Currently the City maintains a fiber optic network system which includes 25 miles of backbone fiber optic cable serving certain City facilities. The existing fiber optic network also contains approximately five miles of available but unused fiber which provides one gigabyte per second Ethernet link between facilities to provide voice, data and internet services to such City facilities. The Project will expand the existing fiber optic network to service additional governmental needs of the City and provide services to residential and commercial properties within the City. The implementation of the Project will allow the City to operate a fiber optic enterprise technology and network environment to support the City’s internal operations as follows: (a) support connectivity for a City-wide public safety video network for use by the City’s police and fire departments; (b) allow communication with message boards and provide information to vehicles to improve traffic flow and travel systems within the City; (c) enable the City to utilize remote monitoring via wireless cameras and remotely control lighting for parks; (d) enable WiFi services in park and recreation areas; (e) provide electric distribution monitoring and advanced meter infrastructure for the Rancho Cucamonga Municipal Utility which would enable additional data management, communication networks with the customer, energy management systems, a function which would alarm and alert the utility and allow for rerouting power as needed; and (f) create small cell networks to improve cellular phone coverage. Additionally, the expansion of backbone connections throughout the City to allow private connectivity to the fiber optic network is projected to generate revenues for the City as described below. The City anticipates constructing the Project in multiple phases. Phase 1 construction is anticipated to be completed in 2019 and will utilize the City’s existing underground conduit to place a fiber-optic cable backbone network that can reach up to 512 business establishments, and up to 300 residential premises in an existing development within the City. Additionally, during Phase 1 the City will acquire and install data center equipment in an existing City facility. In Phase 1 the City will also acquire, install and configure optical network electronics as required to provide broadband transmission and internet access for the City and to enable the provision of internet services for businesses and residents along the routes by a private provider. Phase 2, which is anticipated to commence in 2020 and be completed in 2022, will deploy new underground conduit and place fiber optic cable that can reach up to 2,438 additional business establishments and up to 1,735 residences in planned development. Phase 3, which is anticipated to commence in 2027 and be completed in 2029, will deploy new underground conduit and place fiber optic cable that can reach up to 2,626 additional business establishments and up to 2,159 residences in planned developments. Phase 3 consists of the installation of (a) optic dropped cables to the backbone network and (b) customer premise equipment to enable internet connectivity as business and residential subscribers signup for internet service. In total, existing and new underground conduit, and fiber optic cable will be able to reach up to 4,194 residences, and up to 5,576 businesses. The City anticipates the total costs of the Project at maximum capacity to be approximately $22 million dollars. The following table shows the estimated cost per phase. TABLE 1 CITY OF RANCHO CUCAMONGA FIBER OPTIC PROJECT COSTS Phase Estimate Phase 1 $ 12,644,150 Phase 2 2,481,183 Phase 3 6,520,128 Total $21,645,461 _____________________ Source: Magellan Advisors. Page 167 5 The City anticipates financing Phase 1 and Phase 2 of the Project as described above through the proceeds of the Bonds and funds on hand, and anticipates financing Phase 3 through revenues generated from the Project. Proceeds of the Series A Bonds shall solely be utilized to finance the portions of the Project related to the expansion of the governmental use of the fiber optic network by the City. Proceeds of the Series B Bonds may be used to finance portions of the Project related to the expansion of the City’s existing fiber optic network for commercial and governmental uses. The City has entered into a licensing and servicing agreement (the “Licensing Agreement”) with Inyo Networks Inc. (“Inyo”), a retail broadband service provider. Inyo provides residential and commercial high speed internet, ethernet and voice over IP services to a number of communities throughout California, including several in the neighboring city of Ontario. Pursuant to the Licensing Agreement, Inyo will have the right to provide residential and business internet, phone, video/television and fiber transport services utilizing the Project for an initial period of five years with automatic renewal for five-year terms. As compensation for the license, Inyo has agreed to pay to the City varying percentages (between 50-60%) of gross revenues from all internet and transport services provided by Inyo utilizing the Project. In addition, the City will receive a franchise fee of 5% on all gross video revenues with an additional 1% of all gross video revenues to support the City’s public education and governmental operations. The City engaged Magellan Advisors (“Magellan”) to prepare the Fiber Master Plan dated May 2017 (the “Fiber Master Plan”) and provide financial modeling for the Project. The following table shows the projected gross revenues and costs of services for the Project, excluding any debt service on the Bonds and costs of capital expenditures. Projected revenues are based upon assumed demand rates which were calculated based upon a residential property absorption report prepared by Empire Economics on January 8, 2018 for the City. Magellan estimated commercial absorption for development proposed to occur on the former site of the Empire Lakes golf course based upon the same residential absorption forecast provided by the developer of such property. The same percentage of residential absorption was applied to the small and medium business (SME) enterprises planned for the development on an annual basis. Such residential and commercial development projections include, but are not limited to, an expansion of the City’s premier retail mall Victoria Gardens, the addition of 250 hotel rooms which occurred in December 2018, City approval of an additional 200 hotel rooms and 600 new single family residential units and 500 units of multi-family luxury apartments which have either been approved by the City or are currently under construction. Additionally, following the preparation of the Fiber Master Plan, the City has commenced proceedings related to the environmental impact of the annexation of 5,000 acres of unincorporated territory from the County to the City. If successful, the annexation area is projected to contain 3,000 new single family homes which will be served by the Project. The connectivity was timed based on funding availability for backbone construction into the development. Supporting data was provided through presentations and other related information provided to the City by private land developers in 2018. Residential and SME customer demand for the service was estimated based on the following: (a) rates achieved by other municipal utility broadband providers in the United States of America; (b) Inyo’s onsite survey in the pilot area to determine the numbers of potential subscribers; and (c) Inyo’s ability to provide a low-cost gigabit internet service, which is unavailable in the City. Although the Bonds are solely secured by the Lease Payments, the City anticipates utilizing net revenues as identified in the following table to pay the principal of and interest on the Bonds. The City can give no assurances that the projections set forth in the table will be achieved. Page 168 6 TABLE 2 CITY OF RANCHO CUCAMONGA PROJECTED REVENUES AND OPERATING EXPENSES FOR THE PROJECT (Calendar Years 2019 through 2028)(11) 2019(1) 2020(2) 2021(3) 2022(4) 2023(5) 2024(6) 2025(7) 2026(8) 2027(9) 2028(10) Revenues: Services $ 76,814 $529,182 $1,108,367 $1,585,374 $1,760,880 $2,010,642 $2,201,816 $2,889,309 $3,925,744 $4,703,341 Installation - 8,750 7,140 9,800 9,800 8,568 10,710 57,834 17,479 100,503 Total Revenues $ 76,814 $537,932 $1,115,507 $1,595,174 $1,770,680 $2,019,210 $2,212,526 $2,947,143 $3,943,222 $4,803,844 Expenses: Operating Costs $ 260,913 $286,715 $ 293,984 $ 300,324 $ 303,470 $ 307,451 $ 310,848 $ 319,211 $ 331,065 $ 340,334 Net Revenues: $(184,100) $251,217 $ 821,524 $1,294,941 $1,467,210 $1,711,758 $1,901,678 $2,627,932 $3,612,157 $4,463,510 __________________________ (1) Assumes cumulative demand of approximately 40% of total market share of residential demand and 25% of small and medium business demand. (2) Assumes cumulative demand of approximately 60% of total market share of residential demand, 30% of small and medium business demand and 1% of light pole access demand and 0.21% of light pole transport and dark fiber demand. (3) Assumes cumulative demand of approximately 70% of total market share of residential demand, 35% of small and medium business demand and 1% of light pole access demand and 0.42% of light pole transport and dark fiber demand. (4) Assumes cumulative demand of approximately 70% of total market share of residential demand, 40% of small and medium business demand and 2% of light poles access demand and 0.63% of light pole transport and dark fiber demand. (5) Assumes cumulative demand of approximately 70% of total market share of residential demand, 40% of small and medium business demand, 1% of transport and 3% of light pole access demand and 0.84% of light pole transport and dark fiber demand. (6) Assumes cumulative demand of approximately 70% of total market share of residential demand, 40% of small and medium business demand, 1% of transport and 4% of light pole access demand and 1.05% of light pole transport and dark fiber demand. (7) Assumes cumulative demand of approximately 70% of total market share of residential demand, 40% of small and medium business demand, 1% of transport and 5% of light pole access demand and 1.26% of light pole transport and dark fiber demand. (8) Assumes cumulative demand of approximately 70% of total market share of residential demand, 40% of small and medium business demand, 1% of transport and 6% of light pole access demand and 1.47% of light pole transport and dark fiber demand. (9) Assumes cumulative demand of approximately 70% of total market share of residential demand, 40% of small and medium business demand, 2% of transport and 7% of light pole access demand and 1.68% of light pole transport and dark fiber demand. (10) Assumes cumulative demand of approximately 70% of total market share of residential demand, 40% of small and medium business demand, 2% of transport and 7% of light pole access demand and 1.88% of light pole transport and dark fiber demand. (11) Excludes capital expenditures for expansion of the Project and debt service payments on the Bonds. Source: Magellan Advisors. Page 169 7 Sources and Uses of Funds The table below sets forth the estimated sources and uses of funds with respect to the Bonds. Source of Funds Series A Bonds Series B Bonds Total Principal Amount of Bonds Plus/Less: Net Premium/Original Issue Discount Total Uses of Funds Acquisition and Construction Fund Underwriter’s Discount Costs of Issuance Fund(1) Total _____________________ (1) Costs of Issuance includes printing costs, rating agencies, fees of Municipal Advisor, bond counsel and disclosure counsel, trustee’s fees and expenses and other costs relating to the issuance of the Bonds. Debt Service Schedule The following table presents the debt service schedule for the Bonds based on the maturity date and interest rate set forth on the cover of this Official Statement, assuming no redemptions other than mandatory sinking fund redemptions are made. RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY DEBT SERVICE SCHEDULE Bond Year Ending (May 1) Series A Bonds Principal Series A Bonds Interest Series B Bonds Principal Series B Bonds Interest Total Annual Debt Service 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 Page 170 8 THE LEASED PREMISES The Leased Premises The Leased Premises are located at 11200 Baseline Road and encompass approximately 30 acres within the City’s 103 acre Central Park project. The Leased Premises, constructed in 2004, consist of a 57,000 square- foot building which is home to the Goldy S. Lewis Community Center and the James L. Brulte Senior Center (collectively the “Facility”) and easternly parking lot located at the northwest corner of Base Line Road and Milliken Avenue. The Facility consists of a wide variety of event spaces including two main event halls which can be combined with the open courtyard to accommodate an exposition or conference. The Facility serves as a recreation center for youth, adult and senior programs and is available for special event rentals. The insured value of the Leased Premises is estimated at approximately $15 million. The Leased Premises are located across three assessor parcels of property (the “Assessor’s Parcels”), which include land other than the Leased Premises. The Lease Agreement will initially place a lien encumbering the Assessor’s Parcels. The City intends on engaging a surveyor to prepare a metes and bounds description of the Leased Premises to release those portions of the Assessor’s Parcels which do not constitute the Leased Premises from such lien once the metes and bounds description is prepared in accordance with the provisions described below in “—Substitution and Release of Leased Premises.” Following such release, a lien will be placed solely on approximately 30 acres of real property and improvements thereon which consist of the Facility and the adjacent parking lot. Substitution and Release of Leased Premises Pursuant to the Lease Agreement, the City has the option at any time to substitute other land, facilities or improvements for the Leased Premises or any portion thereof (the “Substitute Leased Premises”) or to release a portion of the Leased Premises (the “Released Premises”) from the lien of the Lease Agreement, provided that the City shall provide written notification to the Trustee and Authority of such substitution or release and shall satisfy all of the following requirements: (a) For Substitutions: (i) The City shall take all actions and shall execute all documents required to subject the Substitute Leased Premises to the terms and provisions of the Lease Agreement, including the filing with the Authority and the Trustee of an amended Exhibit A to the Lease Agreement which adds a description of the Substitute Leased Premises and deletes the description of the Released Premises, as applicable; (ii) The City shall determine and certify in writing to the Authority and the Trustee that the fair rental value of the Substitute Leased Premises is at least equal to the net present value of remaining Lease Payments. (iii) The City shall certify in writing to the Authority and the Trustee that the estimated useful life of the Substitute Leased Premises at least extends to the date on which the final Lease Payment becomes due and payable under the Lease Agreement. (iv) The City shall obtain a CLTA policy of title insurance meeting the requirements of the Lease Agreement with respect to any real property portion of the Substitute Leased Premises; (v) The Substitute Leased Premises shall not cause the City to violate any of its covenants, representations and warranties made in the Lease Agreement. Page 171 9 (b) For Releases: (i) The City shall determine and certify to the Authority and the Trustee that the fair rental value of the remaining Leased Premises after removal of the Released Leased Premises is at least equal to the then remaining Lease Payments. Additionally, the City shall obtain and cause to be filed with the Trustee and the Authority an opinion of Bond Counsel stating that such substitution or release is permitted and does not cause interest on the Series A Bonds to become includable in the gross income of the Bond Owners for federal income tax purposes. From and after the date on which all of the foregoing conditions precedent to such substitution or release are satisfied, the Lease Agreement shall cease with respect to the Former Leased Premises or Released Leased Premises, as applicable, and shall be continued with respect to the Substitute Leased Premises and the remaining Leased Premises. The City shall not be entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such substitution or release. In addition, the Lease Agreement may be amended to allow the City to pay additional rental payments for the purpose of securing additional obligations of the Authority, to the extent of excess value of the Leased Premises. See “SECURITY FOR THE BONDS.” Assignment and Subleasing of Leased Premises Pursuant to the Lease Agreement, the City may not assign the Lease Agreement. The City may sublease all or any portion of the Leased Premises, but only with the written consent of the Authority and subject to all of the following conditions: (a) this Lease Agreement and the obligation of the City to make Lease Payments shall remain obligations of the City; (b) the City shall, within 30 days after the delivery of a sublease, 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 Leased Premises to be used for a purpose other than as may be authorized under the provisions of the laws of the State; and (d) the City shall furnish the Authority and the Trustee with a written opinion of Bond Counsel, stating that such sublease is permitted by this Lease Agreement and the Indenture, and will not cause the interest on the Series A Bonds to become included in gross income for federal income tax purposes; provided, however, if the City enters into a sublease without the prior written consent of the Authority, without furnishing a written opinion of Bond Counsel in accordance with subsection (d) above or fails to deliver a copy of such sublease to the Authority and Trustee in accordance with subsection (b) above, entry into such sublease shall not constitute an Event of Default so long as such sublease complies with the provisions of subsections (a) and (c) above and does not cause the City to violate the tax covenants set forth in the Lease Agreement or any other term or condition set forth in the Lease Agreement. Page 172 10 THE BONDS Description of the Bonds The Bonds will be issued only in the form of fully registered Bonds without coupons, in integral multiples of $5,000. The Bonds will be dated the date of delivery to the Underwriter, will mature on May 1 in the years and in the respective principal amounts, and will bear interest at the respective rates per annum, all as set forth on the inside front cover of this Official Statement. Interest on the Bonds will be paid on May 1 and November 1 of each year, commencing November 1, 2019, by check mailed on the Interest Payment Date to the registered owners of the Bonds as of the applicable Record Date (the fifteenth day of the month preceding each Interest Payment Date); provided however, that payment of interest may be 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 shall furnish written wire instructions to the Trustee at least five days before the applicable Record Date. The principal of each Bond will be payable upon the surrender of such Bond, at maturity or upon redemption prior to maturity, at the principal corporate trust office of the Trustee in Los Angeles, California. Redemption Optional Redemption. The Series A Bonds maturing on or before May 1, 20__* shall not be subject to redemption prior to their respective stated maturities. The Series A Bonds maturing on or after May 1, 20__*, shall be subject to redemption at the option of the Authority as a whole or in part, on any date on or after May 1, 20__*, from any available source of funds, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. The Series B Bonds maturing on or before May 1, 20__* shall not be subject to redemption prior to their respective stated maturities. The Series B Bonds maturing on or after May 1, 20__*, shall be subject to redemption at the option of the Authority as a whole or in part, on any date on or after May 1, 20__*, from any available source of funds, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. Sinking Account Redemption. The Series A Term Bonds are subject to mandatory redemption, in part by lot, from Sinking Account payments set forth in the following schedules commencing on May 1, 20__with respect to Series A Term Bonds maturing May 1, 20__ and May 1, 20__, with respect to Series A Term Bonds maturing May 1, 20__, and each respective May 1 thereafter at a redemption price equal to the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption; provided, however, that if some but not all of the Series A Term Bonds have been redeemed pursuant to optional or special mandatory redemption, the total amount of Sinking Account payments to be made subsequent to such redemption shall be reduced in an amount equal to the principal amount of the Series A Term Bonds so redeemed by reducing each such future Sinking Account payment on a pro rata basis (as nearly as practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice filed by the Authority with the Trustee. Series A Term Bonds Maturing May 1, 20__ Mandatory Sinking Fund Redemption Date (May 1) Principal Amount to Be Redeemed * Preliminary, subject to change. Page 173 11 Series A Term Bonds Maturing May 1, 20__ Mandatory Sinking Fund Redemption Date (May 1) Principal Amount to Be Redeemed The Series B Term Bonds are subject to mandatory redemption, in part by lot, from Sinking Account payments set forth in the following schedules commencing on May 1, 20__with respect to Series B Term Bonds maturing May 1, 20__ and May 1, 20__with respect to Series B Term Bonds maturing May 1, 20__, and each respective May 1 thereafter at a redemption price equal to the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption; provided, however, that if some but not all of the Series B Term Bonds have been redeemed pursuant to optional or special mandatory redemption, the total amount of Sinking Account payments to be made subsequent to such redemption shall be reduced in an amount equal to the principal amount of the Series B Term Bonds so redeemed by reducing each such future Sinking Account payment on a pro rata basis (as nearly as practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice filed by the Authority with the Trustee. Series B Term Bonds Maturing May 1, 20__ Mandatory Sinking Fund Redemption Date (May 1) Principal Amount to Be Redeemed Series B Term Bonds Maturing May 1, 20__ Mandatory Sinking Fund Redemption Date (May 1) Principal Amount to Be Redeemed In lieu of such redemption, the Trustee may apply amounts in the Sinking Account to the purchase of Term Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as may be directed by the Authority prior to the selection of Bonds for redemption, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Term Bonds, as set forth in a written request of the Authority. Special Mandatory Redemption From Insurance or Condemnation Proceeds. The Bonds shall also be subject to redemption as a whole or in part on any date, from net proceeds of insurance or condemnation proceeds required to be used for such purpose as provided in the Indenture, at a redemption price equal to the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium. SEE, APPENDIX C – “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS,” for information regarding the use of insurance or condemnation proceeds to prepay the Lease Payments. Selection of Bonds for Redemption. Whenever provision is made for the redemption of less than all of the Bonds, the Trustee shall select the Bonds to be redeemed from all Bonds or such given portion thereof not previously called for redemption from such series and maturities as shall be set forth in a Written Request of the Page 174 12 Authority filed with the Trustee, or in the absence of such designation of maturities by the Authority, then on a pro rata basis among maturities, and in any case, by lot within a maturity in any manner which the Trustee in its sole discretion shall deem appropriate and fair. Notice of Redemption. The Authority shall give notice to the Trustee of its intent to redeem Bonds at least forty-five (45) days prior to the date set for redemption. Notice of redemption shall be sent (by first class mail, postage prepaid, or such other means as acceptable to the recipient thereof) not less than thirty (30) nor more than sixty (60) days before any redemption date, to the respective Owners of any Bonds designated for redemption at their addresses appearing on the registration books, and to the securities depositories and to one or more of the information services. Each notice of redemption shall state the date of the notice, the redemption date, the place or places of redemption, whether less than all of the Bonds (or all Bonds of a single maturity) are to be redeemed, the CUSIP numbers and, if less than all of the Bonds of a maturity are to be redeemed, Bond numbers of the Bonds to be redeemed, the maturity or maturities of the Bonds to be redeemed and in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Notice of redemption shall be given only if moneys sufficient to pay the Redemption Price are on deposit with the Trustee or available for such purpose on the date that notice of redemption is given or if such notice expressly states that such redemption is conditional on receipt by the Trustee of such sufficient moneys. Each such notice shall also state that on the redemption date there will become due and payable on each of said Bonds the redemption price thereof, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered. Neither the failure to receive any notice nor any defect therein shall affect the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date. See “Book Entry System” below. Effect of Redemption. Notice of redemption having been duly given, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, the Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so called for redemption shall become due and payable, interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to any benefit or security under the Indenture, and the Owners of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. Book-Entry System So long as Cede & Co. is the registered owner of the Bonds, transfer or exchange of Bonds may only be through the facilities of DTC. See APPENDIX F with respect to DTC procedures for transfer and exchange of ownership interests in the Bonds. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered bonds registered in the name of Cede & Co., (DTC’s partnership nominee). One fully- registered Bond will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. See APPENDIX F – “BOOK ENTRY PROVISIONS” herein. The Authority, the City and the Trustee cannot and do not give any assurances that DTC, DTC Participants or others will distribute payments of principal, interest or premium with respect to the Bonds 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 Authority, the City and the Trustee are not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner with respect to the Bonds or an error or delay relating thereto. SECURITY FOR THE BONDS General The Indenture provides that, subject to certain rights of the Trustee, the Bonds are payable from and secured by a first lien on and pledge of all Revenues and a pledge of all of the moneys held in any fund or account Page 175 13 established under the Indenture, including all amounts derived from the investment of such moneys. “Revenues,” as defined in the Indenture, generally means (a) all amounts received by the Authority or the Trustee pursuant to or with respect to the Lease Agreement, including, without limiting the generality of the foregoing, all of the Lease Payments and the Miscellaneous Rent (including both timely and delinquent payments, any late charges, and without regard to the source of payment), but excluding any amounts payable under Section 4.8(d) of the Lease Agreement; and (b) all interest, profits or other income derived from the investment of amounts in any fund or account established pursuant to the Indenture. The principal payable with respect to the Lease Payments is $__________. The City is obligated to pay Lease Payments under the Lease Agreement from any legally available moneys, including its General Fund. Under California law, the obligation of the City to make Lease Payments is contingent upon the availability of the Leased Premises for use and occupancy by the City. See “Abatement” below. See “THE LEASED PREMISES.” Under the Indenture, the Authority is authorized under certain conditions to issue additional obligations secured by the Revenues. See “Additional Bonds” below. Under the Lease Agreement, the City is allowed to pay additional amounts of rent for the use and occupancy of the Leased Premises if certain conditions are met. The Revenues and other funds pledged under the Indenture are the sole security for the Bonds, and the Authority has no other source of funds, other than the Lease Payments, to pay debt service on the Bonds. See APPENDIX C for a summary of the terms of the Indenture and the Lease Agreement. The Bonds are limited obligations of the Authority payable solely from the Revenues and other funds held under the Indenture. The Bonds are not a debt, obligation or liability of the Members, the County, the State or any of its political subdivisions (other than the Authority), nor do they constitute a pledge of the faith and credit or the taxing power of any of the foregoing (including the Authority and the City). The Authority does not have any taxing power. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. The City’s obligation to make Lease Payments is an obligation payable from the City’s General Fund or any other source of funds legally available to the City to make Lease Payments. The obligation of the City to make Lease Payments does not constitute a debt of the City within the meaning of any constitutional or statutory debt limit or restriction or any obligation 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. Lease Payments The City has covenanted under the Lease Agreement to make Lease Payments for the use and possession of the Leased Premises. So long as the Leased Premises are available for the City’s use, the City has covenanted to take such action each year as may be necessary to include all Lease Payments in its annual budget and annually to appropriate an amount necessary to make such Lease Payments (see “Abatement” below). The amounts payable to the Trustee as Lease Payments are to be used to make the payments of principal and interest on the Bonds. The obligation of the City to make Lease Payments (other than to the extent that funds to make Lease Payments are available in the Bond Fund or otherwise available from an insurance or eminent domain award) may be abated in whole or in part if the City does not have use and possession of the Leased Premises. Lease Payments are required to be made by the City under the Lease Agreement at least 15 days prior to each Interest Payment Date (individually, a “Lease Payment Date”), for use and possession of the Leased Premises to the next occurring Lease Payment Date. The amount of such Lease Payment shall be credited with amounts on deposit in the Bond Fund, the Interest Account, the Sinking Account or the Principal Account other than amounts resulting from the prepayment of the Lease Payments in part) on such Lease Payment Date. Lease Payments are required to be deposited in the Bond Fund maintained by the Trustee. Pursuant to the Indenture, on each Interest Page 176 14 Payment Date the Trustee will withdraw from the Bond Fund amounts to make principal and interest payments on the Bonds. The Lease Payments are structured to produce Revenues sufficient to pay principal of and interest on the Bonds when due. While the Lease Payments are subject to optional prepayment, Revenues resulting from such action will be used to redeem a corresponding amount of the Bonds, so that the remaining Lease Payments will be sufficient to pay the scheduled principal and interest payments on the Bonds. Scheduled Lease Payments relating to the Bonds are set forth herein under the heading “SOURCES AND USES OF BOND PROCEEDS – Debt Service Schedule.” Additional Bonds The Authority is authorized, without the consent of the Bondholders, in the Indenture to issue additional obligations secured by a pledge of the Revenues on a parity to the pledge securing the outstanding Bonds, provided the Lease Agreement is amended to obligate the City to pay additional amounts of rental thereunder for the use and occupancy of the Leased Premises and provided that (A) no Event of Default has occurred and is continuing under the Lease Agreement, (B) such additional amounts of rental do not cause the total rental payments made by the City thereunder to exceed the fair rental value of the Leased Premises, as set forth in a certificate of a City representative filed with the Trustee and the Authority, (C) the City obtains and files with the Trustee and the Authority a written certificate of an authorized representative of the City showing that the fair rental value of the Leased Premises is not less than the sum of the aggregate unpaid principal components of the Lease Payments and the aggregate principal components of such additional amounts of rental, and (D) such additional amounts of rental are pledged or assigned for the payment of any bonds, notes, leases or other obligations the proceeds of which may finance any purpose that is authorized pursuant to the laws of the State. Appropriation; Use of Leased Premises The City has covenanted to take such action as may be necessary to include all Lease Payments due under the Lease Agreement in each of its proposed annual budgets and its final adopted annual budgets and to make the necessary appropriations for such Lease Payments and Miscellaneous Rent, except to the extent such payments are abated (see “Abatement” below). The foregoing covenant on the part of the City shall be deemed to be and shall be construed to be a duty 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 its covenants and agreements in the Lease Agreement. The obligation of the City to pay Lease Payments shall constitute a current expense of the City and shall not in any way be construed to be a debt of the City, or the State, or any political subdivision thereof, in contravention of any applicable constitutional or statutory limitation or requirements concerning the creation of indebtedness by the City, the State, or any political subdivision thereof, nor shall such obligations constitute a pledge of general revenues, funds or moneys of the City beyond the Fiscal Year for which the City has appropriated funds to pay Lease Payments or an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Abatement Except to the extent that proceeds of the type described in the following paragraph are available, the amount of Lease Payments and Miscellaneous Rent shall be abated during any period in which there is substantial interference with the use or possession of all or a portion of the Leased Premises by the City by condemnation, damage, destruction or title defect. The amounts of the Lease Payments under such circumstances shall be proportionate to the usable portion of the Leased Premises. If it is determined that the amount abated is less than the fair rental value of the portions of the Leased Premises not damaged or destroyed, based upon the opinion of an MAI appraiser with expertise in valuing such properties or other appropriate method of valuation is less than Page 177 15 the amount of Lease Payments being made, the Lease Payments shall further be abated such that they represent said fair rental value. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. Notwithstanding the foregoing, there may be no abatement of Lease Payments to the extent that (a) the proceeds of rental interruption insurance, are available to pay Lease Payments; or (b) amounts in the Bond Fund are available to pay Debt Service payable from Lease Payments which would otherwise be abated. Any such Debt Service payments made from the Bond Fund shall be credit against the applicable Lease Payment(s). Except as provided in the Lease Agreement, in the event of any such interference with use or possession, the Lease Agreement shall continue in full force and effect and the City waives the benefits of Civil Code Sections 1932(1), 1932(2) and 1933(4) any right to terminate the Lease Agreement by virtue of any such interference. See “Insurance” below for a discussion of rental interruption insurance to be provided by, or on behalf of, the City. Notwithstanding these efforts, the moneys legally available to the Trustee following the occurrence of an event which gives rise to an abatement of Lease Payments, including proceeds of rental interruption insurance, if any, may not be sufficient to pay principal of and interest on the Bonds. In such event, all Bondowners would forfeit interest attributable to abated Lease Payments payable during the period of abatement and, to the extent Bonds mature or are to be subject to mandatory redemption during a period of abatement, the Bondowners would forfeit principal attributable to such abated Lease Payments. The failure to make such payments of principal and interest would not under such circumstances constitute a default under the Indenture, the Lease Agreement or the Bonds. Action on Default Should the City default under the Lease Agreement, the Trustee, as assignee of the Authority under the Lease Agreement may exercise any and all remedies available pursuant to law. However, the Trustee may not accelerate the Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due and payable or terminate the Lease or cause the leasehold interest of the Authority or the sub-leasehold interest of the City in the Leased Premises to be sold, assigned or otherwise alienated. The City expressly agrees that in the event of any default it will remain liable for the payment of all Lease Payments and the performance of all conditions contained in the Lease Agreement and will reimburse the Authority for any deficiency arising out of the re-leasing of the Leased Premises or, in the event the Authority is unable to re-lease the Leased Premises, then for the full amount of all Lease Payments to the end of the term of the Lease Agreement. See “RISK FACTORS.” For a description of the events of default and permitted remedies of the Trustee (as assignee of the Authority) contained in the Lease Agreement and the Indenture, see APPENDIX C. Miscellaneous Rent For the right to the use and occupancy of the Leased Premises, the Lease Agreement requires the City to pay, in addition to the Lease Payments, the reasonable expenses of the Authority, and any reimbursement of amounts advanced and owing in connection with the Lease Agreement and the Indenture or in connection with the issuance of the Bonds. Insurance The Lease Agreement contains the insurance covenants described below. No assurance can be given that insurance proceeds will be available or, if available, adequate in an amount sufficient to avoid an interruption of Lease Payments. Under such a situation, an abatement of Lease Payments is likely to occur. See “Abatement” above. The Lease Agreement requires the City to obtain a standard comprehensive general liability insurance policy or policies in protection of the Authority and the City, including their respective members, officers, agents, employees and assigns. Said policy or policies must provide coverage in the minimum liability limits of Page 178 16 $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $150,000 for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 (subject to a deductible clause of not to exceed $150,000) covering all such risks. The Lease Agreement also requires the City to maintain, or cause to be maintained, casualty insurance insuring the facilities on the Leased Premises against loss or damage by fire and lightning, with extended coverage and vandalism and malicious mischief insurance and all other risks in an amount equal to the lesser of 100% of the replacement cost of the facilities or the aggregate unpaid principal components of the Lease Payments allocable to the facilities. Such insurance may be subject to such deductibles as the City deems prudent. The Lease Agreement further requires the City to cause to be maintained, throughout the term of the Lease Agreement, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of the Leased Premises as a result of any of the hazards covered by the insurance in an amount at least equal to the maximum Leased Payments allocable to the facilities coming due and payable during any future 24 month period. The Lease Agreement allows the City to maintain any such insurance as part of or in conjunction with any other insurance coverage carried by the City or, in whole or in part, in the form of self-insurance by the City or through participation by the City in a joint powers agency or other program providing pooled insurance. The City is a member of the Public Agency Risk Sharing Authority of California (“PARSAC”), a joint powers authority, which provides insurance covering automobile, general liability, error’s and omission losses, worker’s compensation and property claims. The City has a $500,000 retention limit for liability with PARSAC being responsible for losses above $500,000 up to $1,000,000. PARSAC provides the City with an excess Commercial Liability Policy of $25,000,000 in excess of its $1,000,000 retention limit to cover losses. PARSAC also provides $1 billion aggregate per occurrence property coverage to the City. The Lease Agreement also requires the City to obtain a CLTA policy of title insurance insuring the City’s leasehold estate, subject only to Permitted Encumbrances, in an amount at least equal to the aggregate principal amount of the Bonds. See APPENDIX C – “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Lease Agreement – Insurance.” Insurance proceeds are required to be applied to the repair of the Leased Premises; or if the proceeds are insufficient to repair or replace the Leased Premises, the City may prepay the related Lease Payments and thereby cause the redemption of outstanding Bonds. No Reserve Account Neither the City nor the Authority will create or maintain a debt service reserve account with respect to the Lease Payments or for the Bonds. Page 179 17 CITY FINANCIAL INFORMATION The following is a description of the City’s budget process, current budget, historical budget information, changes in fund balance, balance sheets, major revenues and expenditures, indebtedness, investments and certain other financial information relating to the City. Accounting Policies and Financial Reporting The City’s accounting records are organized and operated on a “fund” basis, which is the basic fiscal and accounting unit in governmental accounting. The operations of the different funds are accounted for with separate sets of self-balancing accounts showing assets, liabilities, fund balance or equity, and revenues and expenses. The basis of accounting for all funds is more fully explained in the City’s Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2018 contained in APPENDIX B. The City, all its funds and the Authority, are audited annually by a certified public accounting firm. The firm of Lance, Soll & Lunghard, LLP, Brea, California, is the City’s current auditor. The auditor has not been requested to review such audited financial statements prior to inclusion in this Official Statement. Audited financial statements for prior fiscal years are available upon request from the Finance Department of the City or on the City’s website. The City General Fund finances the legally authorized activities of the City not provided for in other restricted funds. General Fund revenues are derived from such sources as taxes; licenses and permits; fines and forfeitures; use of money and property; aid from other governmental agencies; charges for current services; and other revenue. General Fund expenditures and encumbrances are classified by the functions of general government, public safety – police, public safety – animal center, community development community services, engineering and public works. Amounts on deposit in the Bond Fund held by the Trustee are pledged to payment of Lease Payments and are not available for other uses by the City. Budgetary Process and Current Budget The City develops an annual operating budget for planning purposes and appropriates funds annually for operations and to fund the capital improvement program prior to the start of each fiscal year. The City Council conducts a public hearing (workshop) prior to adopting the budget. Supplemental appropriations, where required during the fiscal year, are also approved by the City Council. The authority for budgetary control is at the department level. A department head may transfer appropriations within the department. The Council, by the affirmative vote of three members, may amend the budget to add or delete appropriations, transfer between appropriations within a fund or change appropriations transfers between funds. An item of Required Supplementary Information, pursuant to GASB 34, is a Budgetary Comparison Schedule of the Original Adopted Budget and the Final Budget for the General Fund and all major Special Revenue Funds with explanations of the major changes. That schedule is included in the City’s audited financial report in APPENDIX B for Fiscal Year 2017/18. The City’s Adopted Budget for Fiscal Year 2018/19 (the “Adopted Budget”) projects General Fund revenues to be 3.92% higher than in Fiscal Year 2017/18. The Adopted Budget projects a 1.34% increase in sales tax revenues, 2.53% increase in property tax revenues and 20.56% increase in the transient occupancy taxes over such Fiscal Year 2017/18 revenues. The large increase in projected transient occupancy tax revenues is attributable to the addition of two new hotels. The Adopted Budget identifies a number of multi-year priorities for the City which include, but are not limited to, proactively developing public safety programs and facilities to meet community needs, planning and development of major park and recreational projects, expanding the Biane library to include an interactive discovery space, conducting a review of administrative services fees and developing a public art installation and maintenance program. Page 180 18 Set forth in Table 3 are the adopted and final General Fund budgets for Fiscal Years 2016/17 and 2017/18, the adopted General Fund Budget for Fiscal Year 2018/19, the audited General Fund results for Fiscal Years 2016/17 and 2017/18. During the course of each Fiscal Year, the budget is amended and revised as necessary by the City Council. The adopted budget for each fiscal year shown below is the final adopted budget as adjusted by the City Council. The City Council adopted a balanced Fiscal Year 2018/19 budget, with the planned use of reserves for certain capital expenditures and leave payouts and which reflects an approximately 2.53% increase in annual growth of secured property taxes and 1.34% increase in sales taxes and maintains current spending levels for services and law enforcement, as compared to the Fiscal Year 2017/18 budget. The City believes it has conservatively budgeted expected revenues. Page 181 19 TABLE 3 CITY OF RANCHO CUCAMONGA GENERAL FUND BUDGET (Fiscal Years 2016/17 through 2018/19)(1)(2) Adopted Fiscal Year 2016/17 Budget Final Fiscal Year 2016/17 Budget Audited Fiscal Year 2016/17 Results Variances Between Final Budget and Audited Results(3) Adopted Fiscal Year 2017/18 Budget Final Fiscal Year 2017/18 Budget Audited Fiscal Year 2017/18 Results Variances Between Final Budget and Audited Results(3) Adopted Fiscal Year 2018/19 Budget Revenues: Taxes $64,595,300 $ 64,473,050 $64,297,386 $ (175,664) $67,594,100 $ 67,619,140 $70,214,951 $2,595,811 $70,288,230 Licenses and permits 4,159,220 4,053,930 4,006,360 (47,570) 4,283,360 4,512,670 4,377,007 (135,663) 4,598,150 Intergovernmental 545,450 579,550 654,672 75,122 584,250 526,840 500,029 (26,811) 523,610 Charges for services 3,558,070 2,881,180 2,895,445 14,265 3,546,390 3,308,970 3,645,491 336,521 3,464,100 Use of money and property 1,239,630 1,259,280 612,665 (646,615) 1,270,000 1,567,310 737,977 (829,333) 1,798,880 Fines, forfeitures and penalties 1,095,010 1,057,380 1,169,246 111,866 1,062,520 1,331,410 1,536,583 205,173 1,345,250 Contributions 82,660 82,660 120,850 38,190 82,660 82,660 103,644 20,984 86,660 Miscellaneous 2,935,890 3,352,560 2,682,266 (670,294) 2,792,840 3,235,250 3,478,005 242,755 2,539,990 Transfer In 1,557,260 1,557,260 1,557,260 - 1,591,310 1,837,260 1,835,545 (1,715) 1,578,680 Proceeds from sale of capital asset 50,070 90,000 148,958 58,958 50,070 76,240 68,196 (8,044) 50,070 Total Revenues $79,818,560 $ 79,386,850 $78,145,108 $(1,241,742) $82,857,500 $ 84,097,750 $86,497,428 $2,399,678 $86,273,620 Expenditures: Personnel Services $27,627,600 $ 27,533,438 $25,898,036 $(1,635,402) $29,116,450 $ 27,931,530 $27,006,001 $(925,529) $29,472,050 Operations & Maintenance 53,875,930 56,616,820 51,249,991 (5,366,829) 55,930,510 58,318,645 54,911,645 (3,407,000) 58,458,650 Capital Outlay 5,922,500 7,672,352 3,676,301 (3,996,051) 3,571,890 4,338,447 3,789,064 (549,383) 8,078,780 Debt Service 41,170 41,520 33,677 (7,843) 41,960 35,250 25,691 (9,559) 15,500 Cost Allocation (5,161,110) (5,161,110) (5,161,110) - (5,378,980) (5,378,980) (5,376,960) 2,020 (5,527,170) Transfer Out 3,549,540 3,009,240 2,773,837 (235,403) 3,158,060 3,414,980 3,025,210 (389,770) 2,997,100 Total Expenditures $85,855,630 $ 89,712,260 $78,470,732 $(11,241,528) $86,439,890 $ 88,659,872 $83,380,651 $(5,279,221) $93,494,910 Planned Use of Reserves: $ (6,240,560) $(10,539,660) - n/a $ (3,810,420) $(19,855,022) - n/a $ (7,438,940) _______________________ (1) The City’s presentation of General Fund in its Comprehensive Annual Financial Reports includes various reserve funds associated with the General Fund. Expenditures reflected in these other funds are funded by reserves specifically set aside for their operations and do not represent normal recurring operating costs. These expenditures are noted above as ‘Planned Use of Reserves’. (2) Interfund activity between the General Fund and the various reserve funds associated with the General Fund has been removed from the adopted budget similar to the elimination performed for such activity in the Comprehensive Annual Financial Report as such activity is solely operational and inclusion of such amounts would result in an overstatement of funds. (3) Variances between Final Budget and Audited Results exclude encumbrances. Encumbrances are estimations of costs related to unperformed contracts for goods and services. They represent the estimated amount of the expenditure ultimately to result if unperformed contracts in process at year-end are completed. They do not constitute expenditures or estimated liabilities for such fiscal year. Encumbrances for Fiscal Year 2016/17 are $5,239,097 and Fiscal Year 2017/18 are $2,209,598. Source: City of Rancho Cucamonga. Page 182 20 General Fund Balance Sheet, Statements of Revenues and Expenditures and Fund Balances The following tables provide a five-year history of the City’s Comparative Balance Sheet, and summarize General Fund revenues, expenditures, transfers, and ending fund balances for the City for Fiscal Years 2013/14 through 2017/18. See also “Budgetary Process and Current Budget” above for estimated revenues and expenses for the current Fiscal Year. TABLE 4 CITY OF RANCHO CUCAMONGA GENERAL FUND COMPARATIVE BALANCE SHEET (For Fiscal Years Ended June 30) 2014 2015 2016 2017 2018 Assets: Cash and investments $ 91,511,232 $ 97,211,254 $ 95,632,375 $ 99,890,569 $92,441,556 Receivables: Accounts, Net of Allowances 663,684 1,465,481 1,622,057 872,551 1,144,610 Taxes 6,747,414 7,775,381 9,173,547 6,571,979 6,847,078 Accrued Interest 91,605 155,288 64,898 196,052 296,339 Other Loans - - - - 9,911 Grants - - - - 10,176 Prepaid Costs 275,862 181,839 200,477 775,397 312,852 Deposits 20,000 20,000 20,000 20,000 20,000 Due from Other Funds 788,428 1,019,558 1,046,303 528,361 711,898 Advances to Other Funds 4,449,029 3,822,987 6,084,182 5,240,070 16,637,859(2) Due from Successor Agency 149,338 - - - - Advances to Successor Agency 9,521,227(1) - - - - Due from External Parties/Agency Funds 123,162 376,711 128,735 203,575 - Pension Rate Stabilization Program - - - 1,911,795 2,034,481 Total Assets $114,340,981 $112,028,499 $113,972,574 $116,210,349 $120,466,760 Liabilities, Deferred Inflows of Resources, and Fund Balances: Liabilities: Accounts Payable $ 1,992,151 $ 1,681,280 $ 1,987,180 $ 2,669,077 $ 3,219,952 Accrued Liabilities 1,189,419 1,175,433 1,385,495 1,532,997 1,802,942 Unearned Revenues - - 40,000 - 7,500 Deposits Payable 42,959 42,959 42,959 42,959 42,959 Due to Other Governments - - - - - Due to Other Funds - 1,972 - - - Due to Successor Agency 6,641 305,314 - - 305,314 Advances from Other Funds - - - - - Total Liabilities $ 3,231,170 $ 3,206,958 $ 3,455,634 $ 4,245,033 $ 5,378,667 Deferred Inflows of Resources: Unavailable Revenues $ 1,917,335 $ 2,670,788 - - $ 6,000 Total Deferred Inflows of Resources $ 1,917,335 $ 2,670,788 - - $ 6,000 Fund Balances: Nonspendable $ 14,266,118(1) $ 4,024,826(1) $ 6,304,659 $ 6,035, 467 $ 16,980,622(2) Restricted 1,527,198 3,091,255 4,256,949 8,152,268 6,351,557 Committed 68,857,871 74,310,635 75,193,291 69,939,616 71,335,361 Assigned 24,541,289 24,724,037 24,762,041 27,837,965 20,414,553 Unassigned - - - - - Total Fund Balances $109,192,476 $106,150,753 $110,516,940 $111,965,316 $115,082,093 Total Liabilities, Deferred Inflows of Resources, and Fund Balances $114,340,981 $112,028,499 $113,972,574 $116,210,349 $120,466,760 __________________ (1) In November 2015, the State Department of Finance determined that certain advances made by the City to the former Rancho Cucamonga Redevelopment Agency were not enforceable obligations. As a result, such advances to Successor Agency in the amount of $9,521,227 were written off as of June 30, 2015, decreasing the nonspendable fund balance for Fiscal Year 2014/15. (2) During Fiscal Year 2017/18, the City made advances to its Lighting Districts Fund to provide funding for the purchase, acquisition and retrofitting of streetlights. The outstanding balance for such advances amounted to $12,593,504 at June 30, 2018, resulting in a corresponding increase in the nonspendable fund balance. Source: City of Rancho Cucamonga Comprehensive Annual Financial Reports for Fiscal Years Ended June 30, 2014-2018; City of Rancho Cucamonga. Page 183 21 TABLE 5 CITY OF RANCHO CUCAMONGA STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GENERAL FUND (For Fiscal Years Ended June 30) 2014 2015 2016 2017 2018 Revenues: Taxes $ 56,947,193 $ 60,564,721 $ 65,148,696 $ 64,297,386 $ 70,214,951 Licenses and Permits 3,773,347 3,919,093 4,041,565 4,006,360 4,377,007 Intergovernmental 591,253 390,032 654,768 654,672 500,029 Charges for Services 4,054,598 3,250,622 3,302,750 2,895,445 3,645,491 Use of Money and Property 1,550,481 1,166,514 1,203,940 612,665 737,977 Fines and Forfeitures 1,160,217 1,402,246 1,090,684 1,169,246 1,536,583 Contributions 46,130 35,658 80,541 120,850 103,644 Miscellaneous 5,596,801 3,167,846 2,527,104 2,682,266 3,478,005 Total Revenues $ 73,720,020 $ 73,896,732 $ 78,050,048 $ 76,438,890 $ 84,593,687 Expenditures: Current: General Government(1) $ 10,621,211 $ 11,825,566 $ 13,973,640 $ 12,687,581 $ 14,363,340 Public Safety – Police(2) 30,110,634 31,213,894 33,256,123 35,817,260 37,546,281 Public Safety – Fire Protection(3) - - - - - Public Safety – Animal Center 2,569,847 2,745,903 2,924,840 3,007,643 3,113,889 Community Development 4,261,418 4,108,849 4,464,219 4,540,048 4,979,496 Community Services 4,143,912 4,212,357 4,477,673 4,571,035 4,793,457 Engineering and Public Works 10,947,971 10,666,160 10,734,740 11,132,770 11,744,223 Capital Outlay 397,199 1,161,719 4,193,860 3,676,301 3,789,064 Debt Service: Principal Retirement 8,848 8,885 9,394 9,681 8,292 Interest and Fiscal charges 5,410 5,572 693 23,996 17,399 Total Expenditures $ 63,066,450 $ 65,948,905 $ 74,035,182 $ 75,466,315 $ 80,355,441 Excess (Deficiency) of Revenues Over (Under) Expenditures $ 10,653,570 $ 7,947,827 $ 4,014,866 $ 972,575 $ 4,238,246 Other Financial Sources (Uses): Transfers In $ 1,186,770 $ 1,185,360 $ 1,255,350 $ 1,557,260 $ 1,835,545 Transfers Out (2,856,310) (2,676,405) (2,992,654) (2,773,837) (3,025,210) Sales of Capital Assets 81,943 22,721 25,331 148,958 68,196 Contributions to Other Governments - - - (230,580)(4) - Total Other Financing Sources (Uses) $ (1,587,597) $ (1,468,324) $ (1,711,973) $ (1,298,199) $(1,121,469) Extraordinary Gain/(Loss) - (9,521,226)(5) - - - Net Change in Fund Balances $ 9,065,973 $ (3,041,723) $ 2,302,893 $ (325,624) $ 3,116,777 Fund Balances: Beginning of Year $100,126,503 $109,192,476 $106,150,753 $110,516,940 $111,965,316 Restatements - - 2,063,294 1,774,000 - Beginning of Year, as Restated $100,126,503 109,192,476 $108,214,047 $112,290,940 $111,965,316 End of Year $109,192,476 $106,150,753 $110,516,940 $111,965,316 $115,082,093 _____________________ (1) General government costs increased in Fiscal Year 2015/16 due to the City prefunding its CalPERS unfunded liability in the amount of $1,774,000 through the establishment of a Section 115 Trust. See “-Retirement Program” below. In Fiscal Year 2017/18, general government costs included a one-time litigation settlement in the amount of $800,000 related to a lawsuit filed against the City in March 2016 alleging that the at-large election system was in violation of the California Voting Rights Act. (2) Public safety costs generally increase from year to year due to negotiated labor contract increases and increases in retirement costs. Periodic increases in staffing levels occur as well contributing to increases in the contract costs. (3) Fire Safety Services are provided to the City by the Fire District. (4) The “Contributions to Other Governments” was inaccurately reported as another financing use for Fiscal Year 2016/17 as GASB Statement No. 34, paragraph 88, specifically identifies what may be reported in the other financing sources and uses category. This item was properly categorized as a functional expenditure for Fiscal Year 2017/18 and will be reported as such prospectively. (5) In November 2015, the State Department of Finance made a determination that certain advances from the City to the former Rancho Cucamonga Redevelopment Agency were not enforceable obligations. As a result, such advances were written as of June 30, 2015. Source: City of Rancho Cucamonga Comprehensive Annual Financial Reports for Fiscal Years Ended June 30, 2014-2018; City of Rancho Cucamonga. Page 184 22 Table 6 below shows the components of the General Fund balances for Fiscal Years 2013/14 through 2017/18. TABLE 6 CITY OF RANCHO CUCAMONGA GENERAL FUND BALANCES (For Fiscal Years Ended June 30)(1)(2) Fiscal Year 2014 Fiscal Year 2015 Fiscal Year 2016 Fiscal Year 2017 Fiscal Year 2018 Nonspendable(3) $ 14,266,118(5) $ 4,024,826(5) $ 6,304,659 $ 6,035,467 $ 16,980,622(6) Restricted(4) 1,527,198 3,091,255 4,256,949 8,152,268 6,351,557 Committed 68,857,871 74,310,635 75,193,291 69,939,616 71,335,361 Assigned 24,541,289 24,724,037 24,762,041 27,837,965 20,414,553 Total Fund Balance $109,192,476 $106,150,753 $110,516,940 $111,965,316 $115,082,093 _____________________ (1) Audited. (2) There are five separate components of fund balance, each of which identifies the extent to which the City is bound to honor constraints on the specific purposes for which amounts can be spent. Nonspendable fund balance is inherently non-spendable; restricted fund balance has externally enforced limitations on use; committed fund balance has Council imposed limitations on use; assigned fund balance has limitations for intended use set by the City Manager or Finance Director; and unassigned fund balance is the residual net resources. The City does not report unassigned fund balance for the General Fund based on internal policies to direct the use of fund balance. (3) Nonspendable components of fund balance include prepaid costs, deposits, notes and loans receivable, and advances to other funds. These items are shown on the General Fund’s balance sheet as assets; however, they are not readily available for spending in the next fiscal year. (4) Restricted components of fund balance include resources accumulated through the collection of fees restricted by City Ordinance or State legislation; resources set aside for contractual commitments; and resources being held by a fiscal agent that are restricted as to their use (i.e., pension funding). (5) In November 2015, the State Department of Finance determined that certain advances made by the City to the former Rancho Cucamonga Redevelopment Agency were not enforceable obligations. As a result, such advances to Successor Agency in the amount of $9,521,227 were written off as of June 30, 2015, decreasing the nonspendable fund balance for Fiscal Year 2014/15. (6) During Fiscal Year 2017/18, the City made advances to its Lighting Districts’ Fund to provide funding for the purchase, acquisition and retrofitting of streetlights. The outstanding balance for such advances amounted to $12,593,504 at June 30, 2018, resulting in a corresponding increase in the nonspendable fund balance. Source: City of Rancho Cucamonga; City of Rancho Cucamonga Comprehensive Annual Financial Report for Fiscal Years 2013/14 through 2017/18. Historic General Fund Revenues Taxes received by the City include property taxes, sales taxes, franchise fees, property transfer taxes and transient occupancy taxes. Of such taxes, property taxes and sales taxes constitute the major sources of revenues. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – ARTICLE XIIIC and ARTICLE XIIID of the California Constitution” and “ – Voter Initiative,” – “Proposition 62” and – Proposition 218” for a discussion of certain general taxes imposed by the City that may be affected by initiatives approved by the California voters. A significant revenue source of the City is State payments and other payments in-lieu of taxes. Payment of State assistance depends on the adoption by the State of its budget, including the appropriations therein providing for local assistance. These revenues are shown in the accompanying financial statements as “intergovernmental revenues.” Page 185 23 The following table illustrates revenue sources of the City’s General Fund for Fiscal Years 2008/09 through 2017/18. TABLE 7 CITY OF RANCHO CUCAMONGA HISTORICAL GENERAL FUND REVENUES (Fiscal Years 2008/09 through 2017/18)(1) Fiscal Year Ended June 30 Sales Tax Revenues Property Tax Revenues Other Taxes Licenses and Permits Charges for Services Other Revenue Total Revenues 2009 $23,436,430 $19,907,882 $ 9,086,053 $3,156,830 $2,217,042 $ 9,879,202 $67,683,439 2010 21,219,089 18,904,386 7,295,049 3,419,014 2,175,274 8,935,019 61,947,831 2011 22,315,603 18,543,036 7,470,250 3,035,648 2,819,732 15,941,218(5) 70,125,487 2012 24,759,654 18,712,532 7,752,279 3,209,362 2,254,688 14,690,637(5) 71,379,152 2013 26,580,975 29,632,618(2) 8,064,826 3,346,189 2,955,873 26,685,551(6) 97,266,032 2014 26,218,300 21,852,130 8,876,763 3,773,347 4,054,598(3) 10,213,595 74,988,733 2015 27,290,042 23,946,244 9,328,435 3,919,093 3,250,622 7,370,377 75,104,813 2016 30,902,193(4) 24,738,802 9,507,701 4,041,565 3,302,750 6,837,718 79,330,729 2017 29,288,387 25,317,781 9,691,218 4,006,360 2,895,445 6,945,917 78,145,108 2018 31,478,294 28,481,801 10,254,856 4,377,007 3,645,491 8,259,979 86,497,428 __________________________ (1) Audited. (2) As a result of the dissolution of the former Redevelopment Agency, the City received non-recurring distributions from the County for its share of post-redevelopment agency residual balance receipts. The General Fund received approximately $9.355 million for the Fiscal Year Ended June 30, 2013. (3) Engineering fees have steadily increased since 2008 as a direct result of new development within the City; however, development was especially high during Fiscal Year 2013/14 compared to the prior fiscal years presented above. During that year, the City received development fees for three particularly large developments. (4) The City has generally experienced growth in the sales and use tax receipts from all major industry groups. During Fiscal Year 2015/16, the “Triple Flip”, established by the State to fund bond issuances from Proposition 57, the California Economic Recovery Bond Act, ended. As a result, the City received a final non-recurring true-up disbursement from the State. (5) In 2011, the former Rancho Cucamonga Redevelopment Agency made an interest payment on its advance from the City in the amount of $7.5 million. In 2012, a second interest payment was made in the same amount. (6) In 2013, the Fire District repaid funds advanced by the General Fund in the amount of $19,292,698, including interest. The City provided financial support for District operations for 14 consecutive years. The source of repayment was one-time revenues that the District received from prior Redevelopment Agency reserves. Source: City of Rancho Cucamonga. Page 186 24 Sales and Use Tax The sales tax is an excise tax imposed on retailers for the privilege of selling or leasing tangible personal property. The use tax is an excise tax imposed for the storage, use, or other consumption of tangible personal property purchased from any retailer. The total sales tax rate within the City is currently 7.750% with the City receiving 1% of this amount. Sales tax revenues constitute the largest revenue source of the City in most fiscal years. The California Department of Tax and Fee Administration (“CDTFA”) administers collection of the sales and use tax. Under its procedures, the CDTFA projects receipts of the sales and use tax on a quarterly basis and remits an advance of the receipts of the sales and use tax to the City on a monthly basis. The amount of each monthly advance is based upon the CDTFA’s quarterly projection. During the last month of each quarter, the CDTFA adjusts the amount remitted to reflect the actual receipts of the sales and use tax for the previous quarter. The CDTFA receives an administrative fee based on the cost of services provided by the Board to the City in administering the City’s sales tax, which is deducted from revenue generated by the sales and use tax before it is distributed to the City. Factors that have historically affected sales tax revenues include the overall economic growth of the County Area, competition from neighboring cities, the growth of specific industries within the City, the City’s business attraction and retention efforts, and catalog and internet sales. In Fiscal Year 2017/18, revenues from sales and use taxes increased by 7.5% from Fiscal Year 2016/17. Property Taxes Property tax receipts of $28,481,801 provided the second largest tax revenue source of the City in Fiscal Year 2017/18, contributing approximately 32.9% of General Fund revenues during Fiscal Year 2017/18. See Table A-2 in APPENDIX A – “CITY ECONOMIC AND DEMOGRAPHIC INFORMATION.” Property in the State which is subject to ad valorem taxes is classified as “secured” or “unsecured.” The secured classification includes property on which any property tax levied by a county becomes a lien on that property. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens, arising pursuant to State law, on the secured property, regardless of the time of the creation of other liens. The valuation of property is determined as of January 1 each year, and installments of taxes levied upon secured property become delinquent on the following December 10th and April 10th of the subsequent calendar year. Taxes on unsecured property are due July 1 and become delinquent August 31. Secured and unsecured properties are entered separately on the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property. The exclusive means of forcing the payment of delinquent taxes with respect to property on the secured roll is the sale of the property securing the taxes of the State for the amount of taxes that are delinquent. The taxing authority has four methods of collecting unsecured personal property taxes: (1) filing a civil action against the taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for recording in the 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 taxable to the assessee. The County has adopted a Teeter Plan with respect to property tax disbursements, however, the City has elected not to participate. A 10% penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, beginning on the July 1 following a delinquency, interest begins accruing at the rate of 1.5% per month on the amount delinquent. Such property may thereafter be redeemed by the payment of the delinquent taxes and the 10% penalty, plus interest at the rate of 1.5% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the county tax collector. A 10% penalty also applies to the delinquent taxes or property on the unsecured roll, and Page 187 25 further, an additional penalty of 1.5% per month accrues with respect to such taxes beginning on the varying dates related to the tax billing date. Legislation enacted in 1984 (Section 25 et seq. of the California Revenue and Taxation Code), provides for the supplemental assignment and taxation of property as of the occurrence of a change in ownership or completion of new construction. Previously, statutes enabled the assessment of such changes only as of the next tax lien date following the change and thus delayed the realization of increased property taxes from the new assessment for up to 14 months. Collection of taxes based on supplemental assessments occurs throughout the year. Taxes due are prorated according to the amount of time remaining in the tax year, with the exception of tax bills dated January 1 through May 31, which are calculated on the basis of the remainder of the current Fiscal Year and the full 12 months of the next Fiscal Year. For a number of years, the State Legislature has shifted property taxes from cities, counties and special districts to the Educational Revenue Augmentation Fund (“ERAF”). In Fiscal Years 1993 and 1994, in response to serious budgetary shortfalls, the State Legislature and administration permanently redirected over $3 billion of property taxes from cities, counties, and special districts to schools and community college districts pursuant to ERAF shifts. The City last paid ERAF in 1995 and 1996, but was not required to pay any ERAF in later years when it has been imposed on other agencies. On November 2, 2004, State voters approved Proposition 1A, which amended the State Constitution to significantly reduce the State’s authority over major local government revenue sources. Under Proposition 1A, the State may not: (i) reduce local sales tax rates or alter the method of allocating the revenue generated by such taxes; (ii) shift property taxes from local governments to schools or community colleges; (iii) change how property tax revenues are shared among local governments without two-thirds approval of both houses of the State Legislature; or (iv) decrease Vehicle License Fee (“VLF”) revenues without providing local governments with equal replacement funding. In 2004, the State Legislature reduced the VLF rate from 2.00% to 0.65% and cities and counties are compensated for such revenue losses with property tax revenues on a dollar-for-dollar basis. See, “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Voter Initiatives.” Beginning in Fiscal Year 2009, the State may shift to schools and community colleges a limited amount of local government property tax revenue if certain conditions are met, including: (a) a proclamation by the Governor that the shift is needed due to a severe financial hardship of the State; and (b) approval of the shift by the State Legislature with a two-thirds vote of both houses. Under such a shift, the State must repay local governments for their property tax losses, with interest, within three years. Proposition 1A does allow the State to approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Other Taxes and Fees Franchise Fees. The City levies a franchise fee on its cable television, trash collection and utility franchises. Transient Occupancy Taxes. The City levies a 10% transient occupancy tax on hotel and motel bills, and short-term residential vacation rentals. Property Transfer Taxes. A documentary stamp tax is assessed by the County and remitted to the City for recordation of real property transfers. Documentary Transfer Tax. The County imposes a $1.10 per $1,000 of value of any documented sale or transfer of real property within the City. The tax is due when the transfer is recorded with the County. Title companies collect the tax as part of the sale closing process and remit the funds to the County when sales or transfers are finalized. The County remits the amounts due monthly, and the amounts are credited to the General Fund. Page 188 26 City Investment Policy The City may invest public funds until such time as the funds are needed to pay the obligations of the City. The City maintains an Investment Policy which sets forth guidelines of the City Treasurer’s investment of such funds. The Treasurer is a trustee and therefore a fiduciary subject to the prudent investor standards, and the primary objective shall be to safeguard the principal of the funds under its control. The secondary objective shall be to meet liquidity needs, and the third objective shall be to achieve a market rate of return. The City matches its investments with anticipated cash flow requirements. Pursuant to the California Government Code, maximum maturities shall not exceed five years, without specific approval of the City Council. The City’s investment policy limits the investment of the City’s funds by specifying term, diversification and credit quality. The requirements of the City’s policy regarding these investments are either the same as or more restrictive than the requirements of State law. The City’s investment portfolio had a market value as of September 30, 2018 of $260,780,969.16. The following table presents a breakdown of the City’s investment portfolio by type of security as of that date. Investments Market Value % of Portfolio Certificates of Deposit – Bank $ 735,000.00 0.28% Local Agency Investment Fund 37,876,795.93 14.27 Federal Agency Issues – Coupon 176,192,892.83 67.85 Treasury Securities – Coupon 15,718,278.50 6.01 Passbook/Checking Accounts 208,462.40 0.08 Municipal Bonds 5,122,890.00 1.96 Corporate Notes 16,158,215.00 6.18 Supranational Securities 8,768,434.50 3.37 $260,780,969.16 100.00% _____________________ Source: City Finance Department. As of September 30, 2018, the average life of the City’s investment portfolio was 683 days. Cash on deposit for the City equals $3,585.69. Risk Management The City is a member of the PARSAC. PARSAC is a joint powers authority, which provides joint protection programs for public entities covering automobile, general liability, errors and omission losses, workers' compensation, and property claims. Under the program, the City and the Fire District have a $500,000 retention limit for liability, which is similar to a deductible, with PARSAC being responsible for losses above that amount up to $1,000,000. PARSAC carries an excess commercial liability policy of $25,000,000 in excess of its $1,000,000 retention limit to cover losses through affiliated risk management authorities. PARSAC also provides one billion dollars aggregate per occurrence property coverage to its members with such coverage provided by purchased insurance. The City and the Fire District have a $250,000 retention limit for workers compensation. PARSAC covers workers' compensation claims in excess of the $250,000 retention limit up to $500,000. The Local Agency Workers Compensation Excess Pool provides excess coverage to statutory limits. The City pays an annual premium to PARSAC and may share in any surplus revenues or may be required to pay additional assessments based upon PARSAC's operating results. The City’s portion of the total claims liability is $1,890,492 (for both workers compensation and general liability) as of June 30, 2018 and it is based on the requirements of GASB Statement No. 30, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is Page 189 27 probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Employees and Labor Relations The City currently employs 752 full-time and part-time employees. The Fire District, which provides fire safety services to the City, employs 113 fire safety personnel. Additionally, the City contracts with the County Sheriff’s Department (the “Sherriff’s Department”) to employ 138 sworn and 41 non-sworn employees to provide police services. The following table presents the number of full-time and part-time City employees for the Fiscal Years 2015/16 through 2018/19. TABLE 8 CITY OF RANCHO CUCAMONGA FULL-TIME AND PART-TIME CITY EMPLOYEES (Fiscal Years 2015/16 through 2018/19) Fiscal Year Number of Employees Contract Employees(1) 2015/16 730 174 2016/17 739 179 2017/18 764 179 2018/19 752 180 _____________________ (1) Represents Sheriff’s Department staff. Such employees do not participate in the City’s Retirement Program. Source: City of Rancho Cucamonga. Approximately 44% of regular City employees are represented by various associations, and labor relations have been generally amicable. There have not been any recent major strikes, work stoppages, or other similar incidents. Labor negotiations are currently in progress for Teamsters Local 1932. The following table provides a list of employee organizations in the City and the number of employees they represent as of January 1, 2018. TABLE 9 CITY OF RANCHO CUCAMONGA EMPLOYEE ORGANIZATIONS (As of January 1, 2018) Organization Employees Represented Expiration of Contract Rancho Cucamonga City Employees Association 233 June 30, 2020 Teamsters Local 1932 97 June 30, 2018 Total 330 _____________________ Source: City of Rancho Cucamonga. Retirement Program This caption contains certain information relating to the California Public Employees Retirement System (“CalPERS”). The information is primarily derived from information produced by CalPERS, its independent accountants and actuaries. The City and the Authority have not independently verified the information provided by CalPERS and neither make any representations nor express any opinions as to the accuracy of the information provided by CalPERS. The comprehensive annual financial reports of CalPERS are available on its Internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and Page 190 28 other information concerning benefits and other matters. Such information is not incorporated by reference herein. Neither the City nor the Authority can guarantee the accuracy of such information. Actuarial assessments are forward looking statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. Actuarial assessments will change with the future experience of the pension plans. CalPERS Plan Description. All qualified permanent and probationary employees of the City, excluding employees of the Fire District, which are covered by that agency’s retirement program, are eligible to participate in the City’s Miscellaneous Employee Pensions Plans (the “City Plan”), agent sharing multiple-employer defined benefit pension plans administered by CalPERS. Inasmuch as the City contracts with the Sheriff’s Department for police services, that agency manages pension obligations for such employees, which is included in the City’s police services contract. Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Benefits Provided. CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible for non-duty disability benefits after 10 years of service. The provisions and benefits of the Plan that were in effect at June 30, 2018, are summarized as follows: CITY MISCELLANEOUS PLAN Tier 1* Tier 2* Tier 3* PEPRA Hire Date Prior to September 1, 2010 September 1, 2010 but prior to July 3, 2011 July 4, 2011 but prior to January 1, 2013 January 1, 2013 and after Benefit Formula 2.5% @ 55 2.5% @ 55 2.0% @ 55 2.0% @ 62 Benefit Vesting Schedule 5 years’ service 5 years’ service 5 years’ service 5 years’ service Benefit Payments Monthly for life Monthly for life Monthly for life Monthly for life Retirement Age Minimum 50 yrs Minimum 50 yrs Minimum 50 yrs Minimum 52 yrs Monthly Benefits, as a % of Eligible Compensation 2.000% - 2.500% 50 yrs – 55+ yrs, respectively 2.000% - 2.500% 50 yrs – 55+ yrs, respectively 1.426% - 2.418% 50 yrs – 63+ yrs, respectively 1.000% - 2.500% 52 yrs – 67+ yrs, respectively Required Employee Contribution Rates 8.000% 8.000% 7.000% 6.000% Required Employer Contribution Rates 16.695% 16.695% 16.695% 16.695% The City is required to contribute at an actuarially determined rate of annual covered payroll, plus a fixed payment of unfunded liability. The actuarially determined rates and amounts for the Plan for the Fiscal Years ended June 30, 2017 through June 30, 2021, are as follows: City’s Required Employer Contribution Rate Fiscal Year 2016/17 Fiscal Year 2017/18 Fiscal Year 2018/19* Fiscal Year 2019/20* Fiscal Year 2020/21* Employer Normal Cost Employer Payment of Unfunded Liability Employer Normal Cost Employer Payment of Unfunded Liability Employer Normal Cost Employer Payment of Unfunded Liability Employer Normal Cost Employer Payment of Unfunded Liability Employer Normal Cost Rate Employer Payment of Unfunded Liability $2,221,324 $1,971,181 $2,328,295 $2,313,837 $2,581,280 $2,856,898 $2,900,683 $3,421,053 $3,205,620 $3,876,000 ____________________________ * Projected. Source: City of Rancho Cucamonga Comprehensive Annual Financial Reports for Fiscal Years Ended June 30, 2017 and 2018; CalPERS Actuarial Reports Dated July 2018. On July 12, 2018, CalPERS announced preliminary investment returns for the 12-month period ended June 30, 2017, of 8.6%. Based on these preliminary fiscal year returns, the funded status of the overall CalPERS Page 191 29 fund is an estimated 71%, an increase of 3 percentage points from the previous fiscal year. This estimate is based on a 7% discount rate. The City’s total contributions to the Plan in Fiscal Years 2014/15, 2015/16, 2016/17 and 2017/18 which were recognized as a reduction to the net position liability for the Plan was as follows: Fiscal Year (Ended June 30) Total City Contribution 2014/15 $3,433,074 2015/16 3,745,756 2016/17 4,192,505 2017/18 4,642,132 In previous fiscal years, the City has made 100% of required contributions. The City has established an irrevocable trust pursuant to Internal Revenue Code Section 115 to fund future pension contributions and liabilities. As of September 30, 2018, the balance of monies in such trust was $2,086,608. The City is not obligated to make regular contributions to such trust. Funded Status. The following table sets forth the schedule of funding for the City’s Plan for the fiscal years ended June 30, 2016, 2017 and 2018 based on valuation dates as of June 30, 2014, 2015 and 2016. Miscellaneous Plan Fiscal Year Ended (June 30) Total Pension Liability Plan Fiduciary Net Position Net Pension Liability Plan Fiduciary Net Position as a Percentage of Total Pension Liability(1) 2016 $181,218,179 $149,724,028 $31,494,151 82.62% 2017 190,899,646 149,674,797 41,224,849 78.40 2018 212,888,198 164,876,366 48,011,832 77.45 ___________________________ (1) Based on the market value of assets. Source: City of Rancho Cucamonga Comprehensive Annual Financial Report for Fiscal Year 2017/18. Changes in Net Pension Liability. The following table shows the changes in net pension liability recognized over the Fiscal Year 2016/17 measurement period for the City Miscellaneous Plan. Total Pension Liability (a) Plan Fiduciary Net Position (b) Net Pension Liability/(Assets) (c) = (a)-(b) Balance at: 6/30/2016 (Valuation Date) $190,899,646 $149,674,797 $41,224,849 Changes Recognized for the Measurement Period: Service Cost 4,743,810 - 4,743,810 Interest on the Total Pension Liability 14,301,966 - 14,301,966 Changes of Benefit Terms - - - Difference between Expected and Actual Experience (1,926,722) - (1,926,722) Changes of Assumptions - - - Contributions from the Employer - 4,207,753 (4,207,753) Contributions from Employees - 2,150,126 (2,150,126) Net Investment Income - 16,691,043 (16,691,043) Benefit Payments including Refunds of Employee Contributions (7,626,368) (7,626,368) - Administrative Expense - (220,985) 220,985 Net Changes During 2016/17 21,988,552 15,201,569 6,786,983 Balance at: 6/30/2017 (Measurement Date) $212,888,198 $164,876,366 $48,011,832 Source: City of Rancho Cucamonga Comprehensive Annual Financial Report for Fiscal Year 2017/18. Recent Actions Taken by CalPERS. At its April 17, 2013, meeting, CalPERS’ Board of Administration (the “Board of Administration”) approved a recommendation to change the CalPERS amortization and smoothing Page 192 30 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. As a result, CalPERS now employs an amortization and smoothing policy that will pay for all gains and losses 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% @ 50, fire 3% @ 55, and miscellaneous 2.7% @ 55 and 3% @ 60, which will increase costs for those groups. As a result of these changes, rates increased beginning in Fiscal Year 2017/18 (based on the June 30, 2014 valuation) with full impact in Fiscal Year 2020/21. 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 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 CalPERS’ website at the following website address: https//www.calpers.ca.gov/page/newsroom/calpers-news/2015/adopts-funding-risk-mitigation-policy. The reference to this Internet website is provided for reference and convenience only. The information contained within the website may not be current, has not been reviewed by the City or the Authority and is not incorporated in this Official Statement by reference. On December 21, 2016, the Board of Administration voted to lower its discount rate from the current 7.5% to 7.0% over the next three years according to the following schedule: Fiscal Year Discount Rate 2017/18 7.375% 2018/19 7.250 2019/20 7.000 For public agencies like the City, the new discount rate took effect on July 1, 2018. Lowering the discount rate means employers that contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013, under the Public Employees’ Pension Reform Act will also see their contribution rates rise. The three-year reduction of the discount rate will result in average employer rate increases of about 1 percent to 3 percent of normal cost as a percent of payroll for most miscellaneous retirement plans, and a 2 percent to 5 percent increase for most safety plans. Additionally, many CalPERS employers will see a 30 to 40 percent increase in their current unfunded accrued liability payments. These payments are made to amortize unfunded liabilities over 20 years to bring the pension fund to a fully funded status over the long-term. Implementation of GASB Nos. 68 and 71. In June 2012 and November 2013, the Governmental Accounting Standards Board issued GASB Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27 (“GASB Statement No. 68”) and GASB No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – An Amendment of GASB Statement No. 68 (“GASB Statement No. 71”), respectively. The primary objective of GASB Statement No. 68, as amended, is to improve accounting and financial reporting by state and local governments for pensions and improve information Page 193 31 provided by state and local governmental employers about financial support for pensions that is provided by other entities. GASB Statement No. 68, as amended, revised the accounting treatment of defined benefit pension plans, changing the way expenses and liabilities are calculated and how state and local government employers report those expenses and liabilities in their financial statements. Major changes include: (i) the inclusion of unfunded pension liabilities on the government’s balance sheet (previously, such unfunded liabilities were typically included as notes to the government’s financial statements); (ii) pension expense incorporates more rapid recognition of actuarial experience and investment returns and is no longer based on the employer’s actual contribution amounts; (iii) lower actuarial discount rates that are required to be used for underfunded plans in certain cases for purposes of the financial statements; (iv) closed amortization periods for unfunded liabilities that are required to be used for certain purposes of the financial statements; and (v) the difference between expected and actual investment returns to be recognized over a closed five-year smoothing period. The reporting requirements took effect in Fiscal Year 2014/15. Based on the adoption of the new accounting standards, beginning with the Fiscal Year 2014/15 actuarial valuation, the annual required contribution and the annual pension expense will be different. GASB Statement No. 68, as amended, changes the reporting and disclosure requirements for financial statement accounting purposes, but it does not change the City’s pension plan funding obligations and, therefore, had no effect on the General Fund. Information shown in this section that has been sourced from a CalPERS Actuarial Valuation Report has not been prepared in accordance with GASB Statement No. 68, as amended. For a presentation of additional information that is required by GASB Statement No. 68, see Note 9 to the City’s Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2018, which is attached as APPENDIX B. Public Agency Retirement Services (“PARS”). The City sponsors a PARS Retirement Enhancement Plan (the “PARS Plan”). The PARS Plan provides pension benefits to miscellaneous members (Tier 1) and City Council members (Tier 2). Benefits are equal to a percentage of highest pay multiplied by years of service, with the percentage varying by retirement age based on a 3% at 60 target offset by CalPERS 2.5% at 55 formula. Sample rates are as follows: Age Tier 1 and Tier 2 55 0.000% 56 0.100 57 0.200 58 0.300 59 0.400 60+ 0.500 The City has the right to amend, modify or terminate the Plan at any time. Benefits are increased by a 2% annual cost of living adjustment after retirement. There are no employee contributions for either tier. PARS provides supplemental retirement benefits to eligible employees of the City. Employees are eligible to receive benefits under the plan if they meet the following requirements: 1) a miscellaneous employee of the City or member of the City Council on or after December 1, 2002, 2) at least 56 years of age, 3) has completed 10 or more years of full-time continuous employment at the City, 4) has terminated employment with the City and has concurrently retired under CalPERS if an active CalPERS member, and 5) has applied for benefits under the PARS Plan. Benefits shall be in an amount equal to one-twelfth of the product of the number of full and partial years of full-time continuous employment with the City completed as of the member’s retirement times Page 194 32 the member’s final pay, times the PARS benefit factor. The total combined CalPERS age factor and PARS benefit factor at retirement may not exceed three percent (3.0%). Hire date Benefit formula On or after December 1, 2002 one-twelfth of the product of the number of full and partial years of full-time continuous employment with the City completed as of the Member’s retirement times the Member’s final pay, times the PARS benefit factor Benefit vesting schedule 10 years of service Benefit payments Monthly for life Retirement age Minimum 56 years Monthly benefits, as a % of eligible compensation N/A – not based on % of eligible compensation Required employee contribution rates 0.000% Required employer contribution rates 3.900% As of the measurement period ended June 30, 2017, the following employees were covered by the benefit terms of the Plan: Description Number of Members Active Members 247 Retired members 112 Total 359 Contribution Description. The total plan contributions are determined through the PARS’ annual actuarial valuation process. 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. Due to the City’s pre-funding of its pension liability with PARS, the PARS Plan had a net pension asset as of the June 30, 2016 actuarial valuation which positively impacted the actuarially determined rate. For the year ended June 30, 2018, the employer contributions recognized as a decrease to the net pension liability were $278,740. Net Pension Asset. The net pension asset for the PARS Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of the PARS Plan is measured as of June 30, 2017, using an annual actuarial valuation as of June 30, 2016. The following table shows the changes in net pension asset recognized over the measurement period. Total Pension Liability Plan Fiduciary Net Position Net Pension Liability (Assets) Balance at: 6/30/2016 (Valuation Date) $28,101,153 $27,882,695 $ 218,458 Changes Recognized for the Measurement Period: Service Cost 774,673 - 774,673 Interest on the Total Pension Liability 1,639,662 - 1,639,662 Changes of Benefit Terms (4,236) - (4,236) Difference between Expected and Actual Experience - - - Changes of Assumptions - - - Contributions from the Employer - 279,830 (279,830) Net Investment Income - 2,872,751 (2,872,751) Benefit Payments including Refunds of Employee Contributions (719,919) (719,919) - Administrative Expenses - (52,639) (52,639) Net Changes During 2016/17 1,690,180 2,380,023 (689,843) Balance at: 6/30/2017 (Measurement Date) $29,791,333 $30,262,718 $ (471,385) For additional information on the PARS Plan, including actuarial assumptions and discount rates, see Note 10 of the City’s Comprehensive Annual Financial Report for Fiscal Year ended June 30, 2018 attached hereto as APPENDIX B. Page 195 33 Outstanding Long Term Obligations In January 2019, the City entered into two financing leases with Dell Financial Services to finance the acquisition of equipment and software for the City’s data center. Each financing lease has a five-year term. The payment schedules are follows: Equipment Financing Lease Software Financing Lease Payment Date Principal Interest Total Principal Interest Total 2/1/2019 $ 399,347.52 $ 0.00 $ 399,347.52 $127,982.80 $ 0.00 $127,982.80 2/1/2020 325,191.00 74,156.52 399,347.52 96,816.84 31,165.96 127,982.80 2/1/2021 342,327.38 57,020.14 399,347.52 103,812.84 24,169.96 127,982.80 2/1/2022 360,366.79 38,980.73 399,347.52 111,314.38 16,668.42 127,982.80 2/1/2023 379,356.80 19,990.72 399,347.52 119,357.97 8,624.83 127,982.80 Total $1,806,589.49 $190,148.11 $1,996,737.60 $559,284.83 $80,629.17 $639,914.00 Advances from the Successor Agency. During the formation of Community Facilities District 2000-01 (CFD 2000-01), a number of meetings were held with property owners within the proposed boundaries to discuss participation in CFD 2000-01 and benefits to their property. As a result of those meetings, the approved boundary map was modified at the landowners’ request to exclude certain properties from the CFD 2000-01 boundaries. Property owners that were excluded from CFD 2000-01 boundaries, but will be receiving direct benefit from the improvements constructed by CFD 2001-01, were advised that reimbursement would be required when their properties are developed. The Redevelopment Agency advanced the pro-rata share for properties that will receive benefit from the improvements but are not participating in CFD 2000-01. At June 30, 2018, the outstanding amount of the advance was $3,953,624. Such amounts are not required to be repaid by the General Fund but from reimbursements from developer reimbursement solely. STATE BUDGET OF CALIFORNIA Particularly in periods of economic recessions, the State budget can have significant impacts on the finances of California cities. The following discussion provides a description of the State budget process, the current State budget situation and the potential impacts on the City. State Budget Information about the State budget is regularly available at various State-maintained websites. Text of proposed and adopted budgets may be found at the website of the Department of Finance, www.dof.ca.gov, under the heading “California Budget.” An impartial analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. In addition, various State official statements, many of which contain a summary of the current and past State budgets and the impact of those budgets on cities in the State, 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 City, and the City can take no responsibility for the continued accuracy of these internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by these references. 2018/19 State Budget On June 27, 2018, the Governor adopted the State budget for Fiscal Year 2018/19 (the “2018/19 State Budget”). The 2018/19 State Budget estimates that general fund revenues available in Fiscal Year 2017/18 totaled approximately $129.82 billion (including a prior year balance of $5.70 billion) and total expenditures in Fiscal Year 2017/18 totaled approximately $127.05 billion. The 2018/19 State Budget projects total general fund revenues available for Fiscal Year 2018/19 of $133.33 billion (including a prior year balance of $8.483 billion). The 2018/19 State Budget projects total general fund expenditures of $138.69 billion. The 2018/19 State Budget proposes to allocate $200 million of the State’s general fund’s projected fund balance to the State’s reserve for Page 196 34 liquidation of encumbrances and $2.6 billion of such fund balance to the State’s Constitutional rainy day fund (the “Special Fund for Economic Uncertainties”). According to the Legislative Analyst’s Office, the 2018/19 State Budget proposes to end Fiscal Year 2018/19 with $15.3 billion in total reserves, which includes $13.8 billion in the Special Fund for Economic Uncertainties. Such budget would increase the Special Fund for Economic Uncertainties by over $5 billion in Fiscal Year 2018/19, including an optional $2.6 billion deposit. The 2018/19 State Budget deposits into the Special Fund for Economic Uncertainties results in such fund reaching its constitutional maximum. The Legislative Analyst’s Office advises that this approach may be prudent in light of economic and federal budget uncertainty, but comes with trade-offs for the State, including requiring rainy day reserves in excess of 10 percent to be spent on infrastructure projects. The City does not provide assurances regarding the 2018/19 State Budget nor can it predict the impact that the 2018/19 State budget, or subsequent budgets, will have on its finances and operations. The full summary of the 2018/19 State Budget can be viewed at www.ebudget.ca.gov or www.dof.ca.gov. Future State Budgets No prediction can be made by the City as to whether the State will encounter budgetary problems in future fiscal years, and if it were to do so, it is not clear what measures would be taken by the State to balance its budget, as required by law. In addition, the City cannot predict the final outcome of future State budget negotiations, the impact that such budgets will have on City finances and operations or what actions will be taken in the future by the State Legislature and the Governor to deal with changing State revenues and expenditures. There can be no assurance that actions taken by the State to address its financial condition will not materially adversely affect the financial condition of the City. Current and future State budgets will be affected by national and State economic conditions and other factors, including the current economic downturn, over which the City has no control. Page 197 35 RISK FACTORS The following factors, along with other information in this Official Statement, should be considered by potential investors in evaluating the risks in the purchase of the Bonds. However, the following does not purport to be an exhaustive listing of risk factors and other considerations which may be relevant to an investment in the Bonds. Additionally, there can be no assurance that other risk factors will not become evident at any future time. Lease Payments Not City Debt The obligation of the City to make the Lease Payments does not constitute a debt of the City or of the State or of any political subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the City or the State is obligated to levy or pledge any form of taxation or for which the City or the State has levied or pledged any form of taxation. 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 Lease Payments from any source of legally available funds and the City has covenanted in the Lease Agreement that it will take such action as may be necessary to include all Lease Payments in its annual budgets and to make necessary annual appropriations therefor. The City is currently liable and may become liable on other obligations payable from general revenues, some of which may have a priority over the Lease Payments. The City has the capacity to enter into other obligations which may constitute additional charges against its revenues. To the extent that additional obligations are incurred by the City, the funds available to make Lease 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 lease Payments and other payments due under the Lease Agreement. No Tax Pledge The obligation of the City to pay the Lease Payments does not constitute an obligation of the City for which the City has levied or pledged any form of taxation. The obligation of the City to pay Lease Payments does not constitute a debt or indebtedness of the City, the State or any of its political subdivisions, within the meaning of any constitutional or statutory debt limit or restriction. Appropriation 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, so long as the Leased Premises are available for its use and possession, to pay Lease Payments from any source of legally available funds (subject to certain exceptions) and has covenanted in the Lease Agreement that, for so long as the Leased Premises are available for its use, it will make the necessary annual appropriations within its budget for all Lease Payments. See APPENDIX A – “CITY ECONOMIC AND DEMOGRAPHIC INFORMATION” and the financial statements included in APPENDIX B. However, the Lease Agreement does not prohibit the City from incurring additional obligations payable from general revenues. In the event the City’s revenue sources are less than its total obligations, the City could choose to fund other municipal services before making Lease Payments and other payments due under the Lease Agreement, except from amounts on deposit in the Bond Fund. The City’s ability to collect, budget and appropriate various revenues is subject to current and future State laws and constitutional provisions, and it is possible that the interpretation and application of these provisions could result in an inability of the City to pay Lease Payments when due (see “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS” below). Page 198 36 No Limit on Additional General Fund Obligations The City has the ability to enter into other obligations which may constitute additional charges against its general revenues. To the extent that such additional obligations are incurred by the City, the funds available to make Lease Payments may be decreased. See also “SECURITY FOR THE BONDS – Additional Bonds” herein. Abatement and Eminent Domain Lease Payments are to be paid by the City in each rental period for and in consideration of the right to use and occupy the Leased Premises during each such period. The obligation of the City to make Lease Payments (other than to the extent that funds to make Lease Payments are available in the Bond Fund created under the Indenture) may be abated in whole or in part if the City does not have use and possession of the Leased Premises. The amount of Lease Payments due under the Lease Agreement will be adjusted or abated during any period in which by reason of damage or destruction or eminent domain there is interference with the use and occupancy by the City of the Leased Premises. Such adjustment or abatement will end with the substantial completion or replacement, repair or reconstruction of the Leased Premises. If damage or destruction or eminent domain proceedings with respect to the Leased Premises result in abatement of Lease Payments and the resulting Lease Payments are insufficient to make all payments of principal and interest due on the Bonds during the period that the Leased Premises is being replaced, repaired or reconstructed, then such payments of principal and interest may not be made and no remedy is available to the Trustee or the Owners of the Bonds, under the Lease Agreement or Indenture, for nonpayment under such circumstances. No Reserve Account Neither the City nor the Authority will create or maintain a debt service reserve account with respect to the Lease Payments or for the Bonds. Sufficiency of Lease Payments The Lease Payments are structured to produce Revenues sufficient to pay principal of, and interest on, the Bonds when due. While the Lease Payments are subject to optional prepayment, Revenues resulting from such actions will be sufficient to redeem a corresponding amount of the Bonds, so that the remaining Lease Payments will be sufficient to pay remaining debt service on the Bonds. The Authority has no other source of funds available to pay principal of and interest on the Bonds. Limitation on Enforcement of Remedies; No Acceleration The enforcement of any remedies provided in the Lease Agreement and Indenture could prove both expensive and time consuming. Although the Lease Agreement provides that the Trustee may take possession of the Leased Premises and lease it if there is a default by the City, and the Lease Agreement provides that the Trustee may have such rights of access to the Leased Premises as may be necessary to exercise any remedies, portions of such Leased Premises may not be easily subject to reletting and could be of little value to others. Furthermore, it is not certain whether a court would permit the exercise of the remedies of repossession and leasing with respect thereto. In the event of a default under the Lease Agreement, there is no available remedy of acceleration of the total Lease Payments due over the term of the Lease Agreement. The City will only be liable for Lease Payments on an annual basis as they come due, and the Trustee would be required to seek separate judgments for the Lease Payments as they come due. In addition, any such suit for money damages could be subject to limitations on legal remedies against public agencies in California, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest and a limitation on enforcement of judgments against funds of a fiscal year other than the fiscal year in which the Lease Payments were due. Page 199 37 Seismic, Topographic and Climatic Conditions The value of the Leased Premises, and the financial stability of the City, can be adversely affected by a variety of factors, particularly those which may affect infrastructure and other public improvements and private improvements and the continued habitability and enjoyment of such improvements. Such additional factors include, without limitation, geologic conditions (such as earthquakes), topographic conditions (such as earth movements and floods) and climatic conditions (such as droughts and tornadoes). The area encompassed by the City, like that in much of California, may be subject to unpredictable seismic activity. The City is located near two active faults, the San Andreás and San Jacinto Faults. The northern portion of the City is also located on the Cucamonga Fault line. The Red Hill Fault line traverses the City and is located within 2 miles of the Leased Premises. The Leased Premises are located approximately 7 miles away from a fault identified as approximate by the Alquist-Priolo Fault Zone map. All of the City is located within an alluvial plain and liquefaction area. Several special seismic studies have been completed in the vicinity of the City. If there were to be an occurrence of severe seismic activity in the City, there could be an abatement or adverse impact on the City's ability to pay the Lease Payments. The City is not obligated to maintain earthquake insurance with respect to the Leased Premises. Building codes require that some of these factors be taken into account, to a limited extent, in the design of improvements, including improvements of the Leased Premises, which were constructed in 2004. Some of these factors may also be taken into account, to a limited extent, in the design of other infrastructure and public improvements neither designed nor subject to design approval by the City. Design criteria in any of these circumstances are established upon the basis of a variety of considerations and may change, leaving previously- designed improvements unaffected by more stringent subsequently established criteria. In general, design criteria reflect a balance at the time of protection and the future costs of lack of protection, based in part upon a present perception of the probability that the condition will occur and the seriousness of the condition should it occur. Conditions may occur and may result in damage to improvements of varying seriousness, such that the damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances, the actual value of the Leased Premises, as well as public and private improvements within the City in general, may well depreciate or disappear, notwithstanding the establishment of design criteria for any such condition. See “Abatement and Eminent Domain” above. The City is exposed to wildfire hazard conditions. The portions of the City located north of Interstate 210 have been designated a high fire hazard area by the State. The areas surrounding the City to the north have experienced wildfires in the past 10 years, the most significant being the Etiwanda Fire in April 2014 which burned over 2,100 acres of open space and destroyed one structure. The Leased Premises are located south of Interstate 210 and are not considered at significant risk. Currently, fire hazard severity is a function of fuel conditions, historic climate, wind conditions, and topography. Population density or the number of structures in a particular region are not currently used to determine the fire hazard severity for a particular region. The fact that an area is in a low to moderate hazard area does not mean it cannot experience a damaging fire; it means only that the probability is reduced, generally because the number of days a year that the area has “fire weather” is less. Hazardous Substances An environmental condition that may result in the reduction in the assessed value of parcels would be the discovery of any hazardous substance that would limit the beneficial use of a property within the City, or the value of the Leased Premises. In general, the owners and operators of a property may be required by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner (or Page 200 38 operator) is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should the Leased Premises or any substantial amount of property within the City be affected by a hazardous substance, would be to reduce the marketability and value of the property by the costs of, and any liability incurred by, remedying the condition, since the purchaser, upon becoming an owner, will become obligated to remedy the condition just as is the seller. Such reduction could adversely impact the property tax revenues received by the City and deposited in the General Fund, which could significantly and adversely affect the operations and finances of the City. The City and the Authority do not believe that the use of any of such substances has adversely affected the value of the Leased Premises. Public Debt Burden on Leased Premises The ability of land owners within the City to pay property tax installments as they come due could be affected by the existence of other taxes and assessments, imposed upon the land. In addition, other public agencies whose boundaries overlap those of the City could, without consent of the City, and in certain cases without the consent of the owners of the land within the City, impose additional taxes or assessment liens on the property within the City to finance public improvements to be located inside of or outside of the City. See APPENDIX A – “CITY ECONOMIC AND DEMOGRAPHIC INFORMATION” for a statement of direct and overlapping debt on property within the City. Risk of Uninsured Loss The City covenants under the Lease Agreement to cause to be maintained certain insurance policies on the Leased Premises. These insurance policies do not cover all types of risk. For instance, the City does not covenant to maintain earthquake insurance. The City may self-insure in certain circumstances. Moreover, the insurance maintained by the City may provide for deductible amounts. The Leased Premises could be damaged or destroyed due to earthquake or other casualty for which the Leased Premises are uninsured. Under these circumstances, an abatement of Lease Payments could occur and could continue indefinitely. There can be no assurance that the providers of the City’s liability and rental interruption insurance will in all events be able or willing to make payments under the respective policies for such loss should a claim be made under such policies. Further, there can be no assurances that amounts received as proceeds from insurance or from condemnation of the Leased Premises will be sufficient to prepay the Lease Payments which secure the Bonds. Property Tax Allocation by the State; Changes in Law The responsibility for allocating general property taxes was assigned to the State by Proposition 13, which stated that property taxes were to be allocated “according to law.” The formula for such allocation was contained in Assembly Bill 8 (“AB 8”), adopted in 1978, which allocates property taxes among cities, counties, and school districts. The formulas contained in AB 8 were designed to allocate property taxes in proportion to the share of property taxes received by a local entity prior to Proposition 13. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Limitations on Revenues.” Additionally, there are general means by which assessed values can be reassessed or appealed. Appeals may be based on Proposition 8 of November 1978, which requires that for each January 1 lien date, the taxable value of real property must be the lesser of its base year value, annually adjusted by the inflation factor pursuant to Article XIIIA of the California Constitution, or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. Under California law, property owners may apply for a Proposition 8 reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the County board of equalization or assessment appeals board. In most cases, the appeal is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. Page 201 39 Any reduction in the assessment ultimately granted as a result of such appeal applies to the year for which application is made and during which the written application was filed. These reductions are subject to yearly reappraisals and are adjusted back to their original values, adjusted for inflation, when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. A second type of assessment appeal involves a challenge to the base year value of an assessed property. Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date. Proposition 8 reductions may also be unilaterally applied by the county assessor. The City cannot predict the changes in assessed values that might result from pending or future appeals by taxpayers or by reductions initiated by the county assessor. No assurance can be given that property tax appeals in the future will not significantly reduce the assessed valuation of property within the City. Beginning in its fiscal year 1992/93, in response to its own budgetary shortfalls, the State began to permanently redirect billions of dollars of property taxes Statewide from cities, counties, and certain special districts to schools and community college districts. These redirected funds reduced the State's funding obligation for K-14 school districts by a commensurate amount. In response, Proposition 1A of 2004, approved by State voters in November 2004 and generally effective in Fiscal Year 2006/07, provided that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain limitations. However, pursuant to Proposition 1A and beginning in Fiscal Year 2008/09, the State could, upon gubernatorial proclamation of fiscal hardship and following approval of two-thirds of both houses of the legislature, and it did, shift to schools and community colleges up to 8% of local government ad valorem property tax revenues, which amount must be repaid, with interest, within three years. The State could also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. In November 2010, State voters approved Proposition 22, which amends the State's constitution to eliminate the State’s authority to temporarily shift additional ad valorem property taxes from cities, counties and special districts to schools, among other things. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS, -Voter Initiatives.” No assurance can be given that the State, the County’s or the City electorate will not at some future time adopt initiatives, or that the State Legislature will not enact legislation that will amend the laws of the State in a manner that could result in a reduction of the City’s property tax allocations or its other revenues and therefore a reduction of the funds legally available to the City to pay Lease Payments and other payments due under the Lease Agreement. See, for example, “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Article XIIIC and Article XIIID of the State Constitution.” Bankruptcy and Foreclosure The enforceability of the rights and remedies of the Owners and the obligations of the Authority and the City may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect; usual equitable principles which may limit the specific enforcement under state law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy proceedings, or the exercising of powers by the federal or state government, if initiated, could subject the Owners to judicial discretion and interpretation of their rights in bankruptcy or otherwise and consequently may entail risks of delay, limitation, or modification of their rights. Additionally, failure by major property owners to pay property taxes when due will have an adverse impact on Page 202 40 revenues of the City available to pay Lease Payments, and would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel’s approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Federal Tax-Exempt Status of the Series A Bonds Tax-Exempt Status of Interest on the Series A Bonds. The Internal Revenue Code of 1986, as amended (the “Code”) imposes a number of requirements that must be satisfied for interest on state and local obligations, such as the Bonds, to be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of Series A Bond proceeds, limitations on the investment earnings on Series A Bonds proceeds prior to expenditure, a requirement that certain investment earnings on the Series A Bond proceeds be paid periodically to the United States and a requirement that the issuers file an information report with the Internal Revenue Service (the “IRS”). The Authority and the City have covenanted in certain of the documents referred to herein that they will comply with such requirements. Failure to comply with the requirements stated in the Code and related regulations, rulings and policies may result in the treatment of interest on the Series A Bonds as taxable, retroactively to the date of issuance of such Series A Bonds. Audit. As a part of a larger reorganization of 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 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 is expected to increase significantly under the TE/GE Division. There is no assurance that an IRS examination of the Series A Bonds, if one is undertaken, will not adversely affect the tax-exempt status or market value of such Series A Bonds. Secondary Market Risk There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. Substitution and Removal of Leased Premises The Authority and the City may, under the terms of the Lease Agreement, substitute alternate real property for any portion of the Leased Premises or release a portion of the Leased Premises from the Lease Agreement, upon compliance with all of the conditions set forth in the Lease Agreement. After a substitution or release, the portion of the Leased Premises for which the substitution or release has been effected shall be released from the leasehold encumbrance of the Lease Agreement. See “THE LEASED PREMISES - Substitution of Leased Premises” herein. 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 Bonds with respect to the payment when due of the Lease 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. Page 203 41 Cybersecurity As a recipient and provider of personal, private and sensitive information, the City and its departments face multiple cyber threats including, but not limited to, hacking, viruses, malware and other attacks on computers and other sensitive digital networks and systems. The City has been the target of multiple attempts to breach the City’s digital estate. The most common attack vectors are phishing e-mails, which have been both indiscriminately distributed and occasionally targeted towards specific stakeholders. Through the use of industry standard digital security tools, conservative administrative governance policies, and continued end user training on cyber vigilance, the City has mitigated or prevented a significant data breach or interruption of City services as a result of these persistent attacks. No assurances can be given that the City’s security and operational control measures will be successful in guarding against any and each cyber threat and attack. The results of any attack on the City’s computer and information technology systems could impact its operations and damage the City’s digital networks and systems, and the costs of remedying any such damage could be substantial. Additionally, the City has implemented six cyber security policies to protect against cyber attacks which govern the following: (a) information systems operations, (b) computerized information security and data breach reporting policy, (c) remote access computer services, (d) bring your own device, (e) portable electronic communication device and (f) internet acceptable use. Risk Management and Insurance The Lease Agreement obligates the City to maintain and keep in force various forms of insurance, subject to deductibles, on the Leased Premises for repair or replacement in the event of damage or destruction to the Leased Premises. The City is also required to maintain rental interruption insurance in an amount at least equal to 24 months of Lease Payments. The Lease allows the City to insure against any or all risks, except rental interruption and title defects, through an alternative risk management program such as self-insurance. The City makes no representation as to the ability of any insurer to fulfill its obligations under any insurance policy provided for in the Lease Agreement and no assurance can be given as to the adequacy of any such insurance to fund necessary repair or replacement or to pay principal of and interest on the Series 2018 Bonds when due. The City employs a full-time Risk Management Coordinator, as well as safety and loss control professionals, for the prevention and mitigation of property, liability and employee claims for injury or damage. For information concerning the self-insurance and risk management programs of the City, see “CITY FINANCIAL INFORMATION.” State Law Limitations on Appropriations Article XIII B of the California Constitution limits the amount that local governments can appropriate annually. The ability of the City to make Lease Payments may be affected if the City should exceed its appropriations limit. The State may increase the appropriation limit of counties in the State by decreasing the State’s own appropriation limit. The City does not anticipate exceeding its appropriations limit in the foreseeable future. See “CONSTITUTIONAL AND STATUTORY TAX LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS – Expenditures and Appropriations” and “–Article XIII B of the California Constitution.” Changes in the Law The City cannot provide any assurance that the State Legislature will not enact legislation that will result in a reduction of the General Fund revenues and therefore a reduction of the funds legally available to the City to make Lease Payments. See, for example, “CITY FINANCIAL INFORMATION” and “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.” The security for payment of the principal of and interest on the Bonds also may be adversely affected by actions taken (or not taken) by voters. Under the State Constitution, the voters of the State have the ability to initiate legislation and require a public vote on legislation passed by the State Legislature through the powers of Page 204 42 initiative and referendum, respectively. The City is unable to predict whether any such initiatives might be submitted to or approved by the voters, the nature of such initiatives, or their potential impact on the City. CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS Limitations on Revenues Article XIIIA of the California Constitution. Article XIIIA of the California Constitution, adopted and known as Proposition 13, was approved by the voters in June 1978. Section 1(a) of Article XIIIA limits the maximum ad valorem tax on real property to one percent of “full cash value,” and provides that such tax shall be collected by the counties and apportioned according to State law. Section 1(b) of Article XIIIA provides that the one-percent limitation does not apply to ad valorem taxes levied to pay interest and redemption charges on (i) indebtedness approved by the voters prior to July 1, 1978, or (ii) bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast on the proposition, or (iii) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Section 2 of Article XIIIA defines “full cash value” to mean the county assessor’s valuation of real property as shown on the fiscal year 1975-76 tax bill, or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred. The full cash value may be adjusted annually to reflect inflation at a rate not to exceed two percent per year, or to reflect a reduction in the consumer price index or comparable data for the area under taxing jurisdiction, or may be reduced in the event of declining property value caused by substantial damage, destruction or other factors. Legislation enacted by the State Legislature to implement Article XIIIA provides that, notwithstanding any other law, local agencies may not levy any ad valorem property tax except the 1% base tax levied by each county and taxes to pay debt service on indebtedness approved by the voters as described above. Since its adoption, Article XIIIA has been amended a number of times. These amendments have created a number of exceptions to the requirement that property be reassessed when purchased, newly constructed or a change in ownership has occurred. These exceptions include certain transfers of real property between family members, certain purchases of replacement dwellings for persons over age 55 and by property owners whose original property has been destroyed in a declared disaster, and certain improvements to accommodate disabled persons and for seismic upgrades to property. These amendments have resulted in marginal reductions in the property tax revenues of the City. Both the California State Supreme Court and the United States Supreme Court have upheld the validity of Article XIIIA. Article XIIIC and Article XIIID of the California Constitution. On November 5, 1996, the voters of the State approved Proposition 218, known as the “Right to Vote on Taxes Act.” Proposition 218 adds Articles XIIIC and XIIID to the California Constitution and contains a number of interrelated provisions affecting the ability of the City to levy and collect both existing and future taxes, assessments, fees and charges. On November 2, 2010, California voters approved Proposition 26, entitled the “Supermajority Vote to Pass New Taxes and Fees Act.” Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as “fees.” Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. The amendments to Article XIIIC define “taxes” that are subject to voter approval as “any levy, charge, or exaction of any kind imposed by a local government,” with certain exceptions. Page 205 43 Taxes. 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 (“general taxes”) require a majority vote; taxes for specific purposes (“special taxes”), even if deposited in the General Fund, require a two-thirds vote. The voter approval requirements of Proposition 218 reduce the flexibility of the City to raise revenues for the General Fund, and no assurance can be given that the City will be able to impose, extend or increase such taxes in the future to meet increased expenditure needs. Property-Related Fees, Charges and Assessments. Article XIIID also adds several provisions making it generally more difficult for local agencies to levy and maintain property-related fees, charges, and assessments for municipal services and programs. These provisions include, among other things, (i) a prohibition against assessments which exceed the reasonable cost of the proportional special benefit conferred on a parcel, (ii) a requirement that assessments must confer a “special benefit,” as defined in Article XIIID, over and above any general benefits conferred, (iii) a majority protest procedure for assessments which involves the mailing of notice and a ballot to the record owner of each affected parcel, a public hearing and the tabulation of ballots weighted according to the proportional financial obligation of the affected party, and (iv) a prohibition against fees and charges which are used for general governmental services, including police, fire or library services, where the service is available to the public at large in substantially the same manner as it is to property owners. Reduction or Repeal of Taxes, Fees and Charges. Article XIIIC also removes limitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. No assurance can be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges currently comprising a substantial part of the General Fund. If such repeal or reduction occurs, the City’s ability to pay debt service on the Bonds could be adversely affected. Burden of Proof. Article XIIIC provides that local government “bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity.” Similarly, Article XIIID provides that in “any legal action contesting the validity of a fee or charge, the burden shall be on the agency to demonstrate compliance” with Article XIIID. Impact on the General Fund. The approval requirements of Articles XIIIC and XIIID reduce the flexibility of the City to raise revenues for the General Fund, and no assurance can be given that the City will be able to impose, extend or increase the taxes, fees, charges or taxes in the future that it may need to meet increased expenditure needs. The City does not believe that any material source of General Fund revenue is subject to challenge under Articles XIIIC or XIIID. Judicial Interpretation. The interpretation and application of Articles XIIIC and XIIID will ultimately be determined by the courts with respect to a number of the matters discussed below, and it is not possible at this time to predict with certainty the outcome of such determination. Expenditures and Appropriations Article XIIIB of the California Constitution. In addition to the limits Article XIIIA imposes on property taxes that may be collected by local governments, certain other revenues of the State and local governments are subject to an annual “appropriations limit” or “Gann Limit” imposed by Article XIIIB of the State Constitution, which effectively limits the amount of such revenues that government entities are permitted to spend. Article XIIIB, approved by the voters in June 1979, was modified substantially by Proposition 111 in 1990. The appropriations limit of each government entity applies to “proceeds of taxes,” which consist of tax revenues, state subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed “the cost reasonably borne by such entity in providing the regulation, product or Page 206 44 service.” “Proceeds of taxes” exclude tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on the appropriation of funds that are not “proceeds of taxes,” such as reasonable user charges or fees, and certain other non-tax funds. Article XIIIB also does not limit appropriation of local revenues to pay debt service on bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990, levels. The appropriations limit may also be exceeded in cases of emergency; however, the appropriations limit for the three years following such emergency appropriation must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster declared by the Governor, and the expenditure is approved by two-thirds of the legislative body of the local government. The State and each local government entity each have their own appropriations limits. Each year, each limit is adjusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or from another government entity of financial responsibility for providing services. Proposition 111 requires that each agency’s actual appropriations be tested against its limit every two years. If the aggregate “proceeds of taxes” for the preceding two-year period exceed the aggregate limit, the excess must be returned to the agency’s taxpayers through tax rate or fee reductions over the following two years. If the State’s aggregate “proceeds of taxes” for the preceding two-year period exceeds the aggregate limit, 50% of the excess is transferred to fund the State’s contribution to school and college districts. Voter Initiatives Under the California Constitution, the power of initiative is reserved to the voters for the purpose of enacting statutes and constitutional amendments. Since 1978, the voters have exercised this power through the adoption of Proposition 13 and similar measures, the most recent of which was approved as Proposition 22 in the general election held on November 2, 2010. Any such initiative may affect the collection of fees, taxes and other types of revenue by local agencies. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the Lease Payments. Proposition 62. On November 4, 1986, California voters adopted Proposition 62, which requires that (i) any local tax for general governmental purposes (a “general tax”) must be approved by a majority vote of the electorate; (ii) any local tax for specific purposes (a “special tax”) must be approved by a two-thirds vote of the electorate; (iii) any general tax must be proposed for a vote by two-thirds of the legislative body; and (iv) proceeds of any tax imposed in violation of the vote requirements must be deducted from the local agency’s property tax allocation. Most of the provisions of Proposition 62, which was a statutory initiative, were affirmed by the 1995 California Supreme Court decision in Santa Clara County Local Transportation Authority v. Guardino, which invalidated a special sales tax for transportation purposes because less than two-thirds of the voters voting on the measure had approved the tax. Claims for taxpayer relief where a local entity may have violated Proposition 62 are subject to a three-year statute of limitations, created by statute. In the case Howard Jarvis Taxpayers Association v. City of La Habra (2001), the California Supreme Court determined that this statute of limitations begins to run anew every time the city collects the challenged tax. Proposition 1A of 2004. Proposition 1A of 2004, proposed by the Legislature in connection with the State’s Fiscal Year 2004-05 Budget, approved by the voters in November 2004 and generally effective in Fiscal Year 2006-07, provided that the State may not reduce any local sales tax rate, limit existing local government Page 207 45 authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A of 2004 generally prohibited the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any Fiscal Year , as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county had to be approved by two-thirds of both houses of the Legislature. Proposition 1A of 2004 provided, however, that beginning in Fiscal Year 2008/09, the State may shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaimed that the shift is needed due to a severe state financial hardship, the shift was approved by two-thirds of both houses and certain other conditions were met. The State could also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Pending certain State actions, a Prop 1A shift could occur in State fiscal year in future fiscal years. Proposition 22. Proposition 22, entitled “The Local Taxpayer, Public Safety and Transportation Protection Act,” was approved by the voters of the State in November 2010. Proposition 22 eliminates or reduces the State’s authority to (i) temporarily shift property taxes from cities, counties and special districts to schools, (ii) use vehicle license fee revenues to reimburse local governments for State-mandated costs (the State will have to use other revenues to reimburse local governments), (iii) redirect property tax increment from redevelopment agencies to any other local government, (iv) use State fuel tax revenues to pay debt service on State transportation bonds, or (v) borrow or change the distribution of State fuel tax revenues. Unitary Property AB 454 (Chapter 921, Statutes of 1986) provides that revenues derived from most utility property assessed by the State Board of Equalization (“Unitary Property ”), commencing with the 1988-89 Fiscal Year, are allocated as follows: (i) each jurisdiction will receive up to 102% of its prior year State-assessed revenue; and (ii) if county- wide revenues generated from Unitary Property are less than the previous year’s revenues or greater than 102% of the previous year’s revenues, each jurisdiction will share the burden of the shortfall or benefit of the excess revenues by a specified formula. This provision applies to all Unitary Property except railroads, whose valuation will continue to be allocated to individual tax rate areas. The provisions of AB 454 do not constitute an elimination of the assessment of any State-assessed properties nor a revision of the methods of assessing utilities by the State Board of Equalization. Generally, AB 454 allows valuation growth or decline of Unitary Property to be shared by all jurisdictions in a county. Future Initiatives Article XIIIA, Article XIIIB, Article XIIIC, Article XIIID, and Propositions 1A of 2004, 22, 26 and 62 were each adopted as measures that qualified for the ballot through California’s initiative process. From time to time, other initiative measures could be adopted, further affecting the City or its revenues or the ability of the City to expend revenues. TAX MATTERS In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Series A Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel is of the further opinion that interest on the Series A Bonds is not a specific preference item for purposes of the federal individual alternative minimum taxes. Page 208 46 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 A Bonds. The City has covenanted to comply with certain restrictions designed to insure that interest on the Series A Bonds will not be included in federal gross income. Failure to comply with these covenants may result in interest on the Series A Bonds being included in federal gross income, possibly from the date of original issuance of the Series A Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Series A Bonds may adversely affect the value of, or the tax status of interest on, the Series A Bonds. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Series A Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Bond Owners from realizing the full current benefit of the tax status of such interest. For example, from time to time there are legislative proposals which generally would limit the exclusion from gross income of interest on obligations like the Series A Bonds to some extent for taxpayers who are individuals and whose income is subject to higher marginal income tax rates. Other proposals have been made that could significantly reduce the benefit of, or otherwise affect, the exclusion from gross income of interest on obligations like the Series A Bonds. The introduction or enactment of any such legislative proposals, clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Series A Bonds. Prospective purchasers of the Series A Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, and regarding the impact of future legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. Certain requirements and procedures contained or referred to in the Indenture, the Tax Certificate, and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Series A Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to the exclusion from gross income of interest on any Bond if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than Best Best & Krieger LLP. The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax- exempt bond issues, including both random and targeted audits. It is possible that the Series A Bonds will be selected for audit by the IRS. It is also possible that the market value of the Series A Bonds might be affected as a result of such an audit of the Series A Bonds (or by an audit of other similar bonds). Although Bond Counsel is of the opinion that interest on the Series A Bonds is excluded from gross income for federal income tax purposes and the interest on the Series A Bonds and the Series B Bonds is exempt from State personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on (a) the Series A Bonds may otherwise affect a Bond Owner’s federal tax liability or (b) the Series A Bonds and/or the Series B Bonds may otherwise affect a Bond Owner’s state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Bondholder or the Bond Owner’s other items of income or deduction, and Bond Counsel expresses no opinion regarding any such other tax consequences. A copy of the proposed forms of opinion of Bond Counsel is attached hereto as APPENDIX D. CONTINUING DISCLOSURE The City and the Authority will undertake responsibilities for continuing disclosure to Owners of the Bonds as described below, and will act as Dissemination Agent, as described in the Continuing Disclosure Certificate. See “APPENDIX G - FORM OF CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). Page 209 47 The City and certain of its related entities have entered into previous continuing disclosure undertakings. A review of compliance with continuing disclosure undertakings for filings required by the City and its related entities within the past five years indicates that the City and its related entities have failed to fully comply with prior continuing disclosure undertakings under Securities and Exchange Commission Rule 15c2-12. Identification of the below described events does not constitute a representation by the City or its related entities that the late filings were material. The review indicated that failure to comply fell into three general categories: (i) failure to provide significant event notices with respect to changes in the ratings of outstanding indebtedness, primarily related to changes in the ratings of various bond insurers insuring the indebtedness of the City or its related entities; (ii) missing, incomplete, or late filing of annual reports with respect to a number of the City or its related entities outstanding bond issues; and (iii) late filing of audited financial reports. Based on the review, the City and its related entities have made additional filings to provide certain previously omitted information and completed corrective filings. The City has adopted policies for continuing disclosure compliance and has retained Willdan Financial Services to serve as dissemination agent for its bond issues and the bond issues of its constituent agencies, including the Authority. CERTAIN LEGAL MATTERS Best Best & Krieger LLP, Riverside, California, Bond Counsel, will render an opinion with respect to the validity and enforceability of the Indenture and the Lease Agreement, and as to the validity of the Bonds. Best Best & Krieger LLP, Riverside, California has acted as disclosure counsel for the Authority in connection with the issuance of the Bonds. Certain matters will be passed upon for the Authority and the City by Richards Watson & Gershon, A Professional Corporation, as Authority Counsel and City Attorney, respectively. Certain matters will be passed on for the Underwriter by Kutak Rock LLP. LITIGATION To the best knowledge of the City and the Authority, there is no action, suit or proceeding pending or, to the knowledge of City or Authority officials, threatened, restraining or enjoining the execution or delivery of the Bonds, the Lease Agreement, or the Indenture, or in any way contesting or affecting the validity of the foregoing or any proceedings of the Authority or the City taken with respect to any of the foregoing. MUNICIPAL ADVISOR The Authority has retained Fieldman, Rolapp & Associates, Inc., Irvine, California, as Municipal Advisor for the sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. Fieldman, Rolapp & Associates, Inc. is an independent advisory firm and is not engaged in the business of underwriting, trading, or distributing municipal or other public securities. PROFESSIONAL FEES In connection with the issuance of the Bonds, fees payable to Wells Fargo Bank, N.A., as Trustee, and Kutak Rock LLP, as Underwriter’s Counsel, are contingent upon the issuance of the Bonds. FINANCIAL STATEMENTS The general purpose financial statements of the City for the Fiscal Year ending June 30, 2018, pertinent sections of which are included in APPENDIX B to this Official Statement, have been audited by Lance, Soll and Lunghard, LLP, Brea, California, independent certified public accountants, as stated in their report appearing in APPENDIX B. The City has not requested, and the auditor has not provided, any consent to the inclusion of its Page 210 48 report herein or any update or review of its report in connection with its inclusion in this Official Statement. See APPENDIX B hereto. RATING S&P Global Ratings (“S&P”) has assigned its municipal bond rating of “____” to the Bonds. The rating reflects only the views of such organization, and an explanation of the significance of such rating may be obtained from S&P. There is no assurance that any rating will continue for any given period of time for the Bonds or that it will not be revised downward or withdrawn entirely by such rating agency, if, in the judgment of such rating agency, circumstances so warrant. The Authority and the City undertake no responsibility to oppose any downward revision or withdrawal of any rating obtained. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds. UNDERWRITING The Authority has agreed to sell the Bonds to Stifel, Nicolaus & Company, Incorporated (the “Underwriter”), and the Underwriter has agreed, subject to certain conditions, to purchase the Bonds. The purchase price of the Series A Bonds is $_______ (the principal amount of the Series A Bonds, less a Underwriter’s discount in the amount of $________, and [plus/less net premium/original issue discount] of $_________). The purchase price of the Series B Bonds is $_______ (the principal amount of the Series B Bonds, less an Underwriter’s discount in the amount of $________, and [plus/less net premium/original issue discount] of $_________). The obligations of the Underwriter are subject to certain conditions precedent, and it will be obligated to purchase all such Bonds if any such Bonds are purchased. The public offering prices of the Bonds may be changed from time to time by the Underwriter. MISCELLANEOUS References are made herein to certain documents and reports which are brief summaries and do not purport to be complete or definitive. Prospective purchasers of the Bonds are advised to refer to such documents and reports for full and complete statements of their contents. Copies of the Indenture, the Lease Agreement and other documents are available, upon request, and upon payment to the City of a charge for copying and mailing, from the City Clerk at the City of Rancho Cucamonga. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority and the purchasers or Owners of any of the Bonds. The execution of this Official Statement and its use in connection with the offering of the Bonds for sale have been authorized by the Authority and the City. RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY By: ____________________________________________ Executive Director CITY OF RANCHO CUCAMONGA By: : ___________________________________________ City Manager Page 211 49 Page 212 A-1 APPENDIX A CITY ECONOMIC AND DEMOGRAPHIC INFORMATION The information herein is subject to change without notice, and neither delivery of this Official Statement nor any sale thereafter of the 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 Bonds are payable solely from the sources described herein (see “SECURITY FOR THE BONDS”). The taxing power of the City of Rancho Cucamonga, the County, the State or any political subdivision thereof is not pledged to the payment of the Bonds. See the information under the caption “THE BONDS.” General The City is located in the foothills of the Los Angeles-San Bernardino Basin in the western portion of the County, approximately 40 miles east of the City of Los Angeles and 18 miles west of the City of San Bernardino. The City covers approximately 40.2 square miles and is bordered by Ontario on the south, Upland on the west and Fontana to the east and to the north by Cucamonga Peak and Mount Baldy. The City was incorporated on November 30, 1977, as a general law city operating under the council-manager form of government. It is governed by a five-member City Council (the “Council”), which includes a Mayor. Prior to the November 2016 General Election, all City officials were elected at large including a Mayor and four Council members, a City Clerk, and a City Treasurer. On November 8, 2016, the residents of the City voted to approve Measure Q which was then carried, adopted, and ratified by the Council on December 7, 2016. Measure Q approved the Council be elected by geographic districts with the Mayor elected at large. Four districts were created based on a map approved in May 2016. Districts 2 and 3 held elections in November 2018. Districts 1 and 4 will hold elections in 2020. The Mayor and Council members are elected on a staggered basis for a term of four years. The Council appoints the City Manager and City Attorney. The City Manager is responsible for the daily administration of City affairs and for implementing Council policy and program decisions. The estimated population of the City was 176,671 as of January 1, 2018. Major ground transportation routes in and out of Southern California and the LA/Ontario International Airport are nearby. Retail, office, civic and cultural uses are contained in Victoria Gardens. Community venues include an adult sports complex, community center, cultural center, two libraries, and over 150 miles of hiking, biking and equestrian trails which have attracted families to live in the City. Population Population figures for the City, the County and the State for the current and previous four years are shown in the following table. TABLE A-1 CITY OF RANCHO CUCAMONGA AND COUNTY OF SAN BERNARDINO Population Estimates (As of January 1) Year City of Rancho Cucamonga County of San Bernardino State of California 2014 171,622 2,100,689 38,568,628 2015 172,029 2,120,672 38,912,464 2016 173,241 2,133,906 39,179,627 2017 175,282 2,155,590 39,500,973 2018 176,671 2,174,938 39,809,693 _____________________ Page 213 A-2 Source: State Department of Finance estimates (as of January 1). Page 214 A-3 Assessed Valuations As discussed under “Property Taxes” above, the City receives a share of ad valorem taxes levied on real property within its boundaries. The basic levy is equal to 1% of the assessed value of secured and unsecured property. The City receives approximately 5.11% of the basic levy. The following table shows the assessed valuation of the City from Fiscal Years 2008/09 through 2017/18. TABLE A-2(1) CITY OF RANCHO CUCAMONGA SCHEDULE OF ASSESSED PROPERTY (For Fiscal Years Ended June 30) 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Residential $17,775,114 $16,641,454 $16,063,674 $15,244,895 $13,988,519 $13,346,484 $13,121,710 $12,893,924 $13,026,765 $14,162,263 Commercial 2,559,971 2,354,367 2,261,894 2,229,715 2,221,814 2,318,264 2,385,782 2,515,904 2,487,441 2,291,045 Industrial 2,976,956 2,802,918 2,667,060 2,504,695 2,402,218 2,279,456 2,244,509 2,314,277 2,441,705 2,316,429 Dry Farm 977 957 943 920 920 902 884 878 880 863 Gov’t Owned 3,659 3,587 7,839 7,745 7,732 4,613 4,080 4,050 4,059 3,980 Institutional 45,531 43,495 42,113 41,023 49,286 43,504 42,727 47,866 50,359 45,316 Irrigated 3,552 3,483 3,433 3,366 3,439 3,372 3,306 3,286 2,855 2,798 Miscellaneous 55,920 294,036 18,964 23,805 27,365 29,486 17,908 27,470 25,112 27,113 Recreational 32,634 44,814 40,343 41,663 47,757 47,419 52,076 42,123 48,077 47,071 Vacant 408,907 374,179 350,353 327,609 330,538 348,323 387,514 412,960 543,857 586,409 SBE Nonunitary 24,483 24,173 28,682 22,485 26,591 36,691 54,451 55,151 48,621 42,196 Unsecured 1,075,088 1,154,119 1,233,623 1,190,416 1,111,254 1,125,986 1,092,355 1,152,570 1,219,275 1,179,919 Unknown - - - - - 16,326 49,698 - - - TOTALS $24,962,792 $23,741,582 $22,718,921 $21,638,337 $20,217,433 $19,600,826 $19,457,000 $19,470,459 $19,899,006 $20,705,402 __________________________ (1) In the thousands. Source: The City of Rancho Cucamonga. Page 215 A-4 Set forth in Table A-3 are property tax, levies and collections in the City as of June 30 for Fiscal Years 2008/09 through 2017/18. The County operates under a statutory program entitled the Alternate Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”). Under the Teeter Plan local taxing entities receive 100% of their tax levies net of delinquencies, but do not receive interest or penalties on delinquent taxes collected by the County. The City elected not to enroll in the Teeter Plan; accordingly, the City’s receipt of its property tax revenues is impacted by delinquencies in payment, as off-set by the collection of interest and penalties on past delinquencies. TABLE A-3 CITY OF RANCHO CUCAMONGA PROPERTY TAX LEVIES AND COLLECTIONS (For Fiscal Years Ended June 30) Collected within the Fiscal Year of Levy Fiscal Year Ended June 30 Taxes Levied for the Fiscal Year(1) Amount Collected Percent of Levy Collected 2009 $ 98,855,469 $ 95,515,265 96.62% 2010 98,181,404 95,149,733 96.91 2011 95,051,899 89,513,493 94.17 2012 93,318,030 86,742,369 92.95 2013 93,235,913 85,131,812 91.31 2014 95,016,035 93,063,071 97.94 2015 100,428,866 98,457,115 98.04 2016 105,120,614 103,112,427 98.09 2017 108,069,418 107,991,619 99.93 2018 112,950,393 114,778,741 101.62 _____________________ (1) Data provided by the County Auditor-Controller for collection of prior years’ taxes does not segregate the information by fiscal year. Therefore, the City is not able to provide this information in the above schedule. Does not include penalties and delinquencies. Source: City of Rancho Cucamonga. Page 216 A-5 Direct and Overlapping Debt Contained within the City are numerous overlapping local agencies providing public services. These local agencies have outstanding obligations issued in the form of general obligation, lease, revenue and special assessment bonds. The following is a listing of direct and overlapping bonded debt on property in the City together with lease obligation debt of agencies in the area, as of June 30, 2018. TABLE A-4 DIRECT AND OVERLAPPING DEBT CITY OF RANCHO CUCAMONGA Total Debt City’s Share of OVERLAPPING TAX AND ASSESSMENT DEBT: 6/30/18 % Applicable(1) Debt 6/30/18 Metropolitan Water District $ 60,600,000 0.911% $ 552,066 Chaffey Community College District 138,940,000 23.791 33,055,215 Chaffey Union High School District 389,572,765 44.577 173,659,851 Alta Loma School District 29,046,793 98.783 28,693,294 Central School District 35,670,100 97.959 34,942,073 Cucamonga School District Community Facilities District No. 97-1 4,630,000 100. 4,630,000 Etiwanda School District 45,995,326 68.353 31,439,185 Etiwanda School District Community Facilities District No. 3 730,000 100. 730,000 Etiwanda School District Community Facilities District No. 7 8,320,000 21.530 1,791,296 Etiwanda School District Community Facilities District No. 8 4,525,000 68.006 3,077,272 Etiwanda School District Community Facilities District No. 9 7,670,000 70.844 5,433,735 Etiwanda School District Community Facilities District Nos. 2004-2 and 2007-1 16,105,000 100. 16,105,000 Etiwanda School District Rancho Etiwanda Public Finance Authority Community Facilities District No. 1 11,380,000 100. 11,380,000 Fontana Unified School District 189,557,259 0.370 701,362 Upland Unified School District 89,769,550 0.121 108,621 City of Rancho Cucamonga Community Facilities Districts 69,328,000 100. 69,328,000 City of Rancho Cucamonga 1915 Act Bonds 1,005,000 100. 1,005,000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $416,631,970 DIRECT AND OVERLAPPING GENERAL FUND DEBT: San Bernardino County General Fund Obligations $368,015,000 12.042% $ 44,316,366 San Bernardino County Pension Obligation Bonds 336,106,248 12.042 40,473,914 San Bernardino County Flood Control District General Fund Obligations 68,325,000 12.042 8,227,697 Chaffey Community College District General Fund Obligations 31,725,000 23.791 7,547,695 Cucamonga School District Certificates of Participation 6,385,000 40.702 2,598,823 Fontana Unified School District Certificates of Participation 31,370,000 0.370 116,069 City of Rancho Cucamonga 0 100. 0 West Valley Vector Control District Certificates of Participation 2,556,686 32.882 840,689 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $104,121,253 OVERLAPPING TAX INCREMENT DEBT (Successor Agency): $272,735,000 100. % $272,735,000 TOTAL DIRECT DEBT $0 TOTAL OVERLAPPING DEBT $793,488,223 COMBINED TOTAL DEBT $793,488,223(2) _____________________ (1) 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 district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Qualified Zone Academy Bonds are included based on principal due at maturity. Ratios to 2017-18 Assessed Valuation: Total Overlapping Tax and Assessment Debt ....................................................................................... 1.67% Total Direct Debt ............................................................................................................................... 0.00% Combined Total Debt ............................................................................................................................ 3.18% Ratios to Redevelopment Successor Agency Incremental Valuation ($10,732,775,670): Total Overlapping Tax Increment Debt ................................................................................................ 2.54% Source: City of Rancho Cucamonga. Page 217 A-6 Largest Taxpayers A list of the principal property taxpayers in the City is set forth below: TABLE A-5 CITY OF RANCHO CUCAMONGA PRINCIPAL PROPERTY TAXPAYERS(1) (Fiscal Year 2017/18) Property Owner Description Assessed Valuation Percent of Total Homecoming I at Terra Vista LLC Multi-Family Housing $269,828,279 1.08% Rancho Mall LLC Retail Stores 261,954,095 1.05 Prologis California I LLC/Catellus Industrial Building 180,897,740 0.72 Frito-Lay North America Inc Food Production Facility 158,335,800 0.63 MFREVF II - Empire Lakes LLC Apartment Building 132,652,334 0.53 GS Rancho LLC Multi-Family Housing 109,801,781 0.44 WNG Rancho Cucamonga 496 LLC Restaurant 107,130,994 0.43 EQR Fanwell 2007 LP Multi-Family Housing 104,659,915 0.42 Knickerbocker Barrington Place LLC Apartments 102,500,000 0.41 Goodman Rancho SPE LLC Industrial Building 90,461,940 0.36 $1,518,222,878 6.08% _____________________ Source: City of Rancho Cucamonga. Retail and Total Taxable Sales The following table presents the retail taxable transactions of the City of Rancho Cucamonga for the calendar years 2012 through 2016. TABLE A-6 CITY OF RANCHO CUCAMONGA TAXABLE RETAIL SALES ($ in thousands) Retail Stores Total All Outlets Number of Permits on August 1 Taxable Transactions Number of Permits on August 1 Taxable Transactions 2012 2,558 $1,736,078 3,951 $2,284,432 2013 2,445 1,781,006 3,829 2,281,985 2014 2,566 1,826,325 3,995 2,391,505 2015 2,768 1,854,177 4,670 2,431,145 2016(1) 2,727 1,894,037 4,665 2,486,030 ________________ (1) Last year such data is available. Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax). Page 218 A-7 Construction Activity Provided below are the building permits and valuations for the City for calendar years 2013 through 2017. TABLE A-7 CITY OF RANCHO CUCAMONGA TOTAL BUILDING PERMIT VALUATIONS (Valuations in Thousands)(1) 2013 2014 2015 2016 2017 Permit Valuation New Single-family $ 71,160 $71,733 $ 98,145 $54,842 $ 74,833 New Multi-family 45,177 3,027 9,362 226 Res. Alterations/Additions 10,074 1,357 2,964 9,526 8,820 Total Residential $126,411 $76,116 $110,472 $64,368 $ 83,878 New Commercial/Industrial $ 10,463 $85,259 $ 49,410 $23,446 $ 98,322 New Other 26,895 519 150 344 127 Com. Alterations/Additions 32,344 12,017 16,302 18,442 80,644 Total Nonresidential $ 69,702 $97,794 $ 65,862 $42,231 $179,093 New Dwelling Units Single Family 311 324 407 176 120 Multiple Family 94 31 46 0 192 TOTAL 405 355 453 176 312 ______________________ (1) Totals may not add due to rounding. Source: City of Rancho Cucamonga. Income Levels The following table shows the personal income and per capita personal income within the City. TABLE A-8 CITY OF RANCHO CUCAMONGA DEMOGRAPHIC AND ECONOMIC STATISTICS (Last Ten Calendar Years) Calendar Year Population Personal Income (in Thousands) Per Capita Personal Income Unemployment Rate 2008 175,627 $5,167,755 $29,425 5.1% 2009 177,051 5,080,143 28,693 8.6 2010 178,904 5,377,675 30,059 9.4 2011 169,498 5,190,707 30,624 8.7 2012 171,058 5,341,115 31,224 6.2 2013 172,299 5,335,755 30,968 5.4 2014 174,064 5,402,772 31,039 6.0 2015 175,251 5,365,133 30,613 4.8 2016 177,324 5,317,032 29,984 4.2 2017 176,671 5,586,992 31,623 3.9 ________________________ Source: City of Rancho Cucamonga. Page 219 B-1 APPENDIX B CITY’S AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR 2017/18 Page 220 C-1 APPENDIX C SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS Page 221 D-1 APPENDIX D FORM OF SERIES A BOND COUNSEL OPINION [Closing Date] Rancho Cucamonga Public Finance Authority 10500 Civic Center Drive Rancho Cucamonga, CA 91730 Re: $_____________ Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds, Series A (Tax-Exempt) (Fiber Optic Project) Ladies and Gentlemen: We have reviewed the Constitution and laws of the State of California and certain proceedings taken by the Rancho Cucamonga Public Finance Authority (the “Authority”) in connection with the issuance by the Authority of the Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project) being $_____________ Series A (Tax-Exempt) (the “Bonds”). Such Bonds are issued concurrently with the Authority’s $_____________ 2019 Lease Revenue Bonds, Series B (Taxable) (the “Series B Bonds”), pursuant to the provisions of Article 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Law”) and pursuant to an Indenture of Trust, dated as of February 1, 2019 (the “Indenture of Trust”), by and between Wells Fargo bank, N.A., as trustee (the “Trustee”), and the Authority. The proceeds of the Bonds will be applied by the Authority to finance improvements to public safety facilities within the City of Rancho Cucamonga (the “City”). The Authority and the City have entered into a Lease Agreement, dated as of February 1, 2019 (the “Lease Agreement”), whereby the City has leased from the Authority certain City facilities and property (the “Leased Premises”) and the City will make Lease Payments for the Leased Premises to the Authority. Pursuant to the Indenture of Trust, the Lease Payments have been assigned by the Authority to the Trustee and will be used by the Trustee to pay the principal of and interest on the Bonds. We have examined the Indenture of Trust, the Lease Agreement and such certified proceedings and other documents and materials as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, that: The Authority is a joint powers authority duly organized and validly existing under the laws of the State of California, with power to enter into the Indenture of Trust and the Lease Agreement, to perform the agreements on its part contained therein and to issue the Bonds; The Bonds constitute the valid and legally binding special obligations of the Authority enforceable in accordance with their terms and payable solely from the sources provided therefor in the Indenture of Trust; The Indenture of Trust and the Lease Agreement have been duly approved by the Authority and constitute the valid and legally binding obligations of the Authority enforceable against the Authority in accordance with their respective terms; The Indenture of Trust establishes a lien on and pledge of the Revenues (as such term is defined in the Indenture of Trust) which consist of Lease Payments and other funds pledged thereby for the security of the Bonds, in accordance with the terms of the Indenture of Trust; Page 222 D-2 Interest on the Bonds is exempt from California personal income taxation. The Internal Revenue Code of 1986, as amended (the “Code”), sets forth certain investment, rebate and related requirements which must be met subsequent to the delivery of the Bonds for the interest received by the owners of the Bonds to be and remain excluded from gross income for purposes of federal income taxation. Noncompliance with such requirements could cause the interest on the Bonds to be subject to federal income taxation retroactive to the date of delivery of the Bonds. Pursuant to the Indenture of Trust the Authority has covenanted to comply with the requirements of the Code. Assuming compliance with the aforementioned covenant, we are of the opinion that, under existing statutes, regulations, rulings and court decisions, the interest on the Bonds is excluded from gross income for purposes of federal income taxation. Interest on the Bonds is not a specific preference item for purposes of the alternative minimum tax provisions of the Code. We are further of the opinion that interest on the Bonds received by corporations will be included in corporate adjusted current earnings, a portion of which may increase the alternative minimum taxable income of such corporations. Although the interest on the Bonds is excluded from gross income for purposes of federal income taxation, the accrual or receipt of interest on the Bonds, or any portion thereof, may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend on the recipient’s particular tax status or other items of income or deduction. We express no opinion regarding any such consequences. Our opinions, expressed herein, may be affected by action taken (or not taken) on events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or occur. The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture of Trust may be subject to bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted and their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity. Respectfully submitted, Page 223 D-3 FORM OF SERIES B BOND COUNSEL OPINION [Closing Date] Rancho Cucamonga Public Finance Authority 10500 Civic Center Drive Rancho Cucamonga, CA 91730 Re: $_____________ Rancho Cucamonga Public Finance Authority Lease Revenue Bonds, 2019 Series B (Taxable) (Fiber Optic Project) Ladies and Gentlemen: We have reviewed the Constitution and laws of the State of California and certain proceedings taken by the Rancho Cucamonga Public Finance Authority (the “Authority”) in connection with the issuance by the Authority of the Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project) being $_____________ Series B (Taxable) (the “Bonds”). Such Bonds are issued concurrently with the Authority’s $_____________ 2019 Lease Revenue Bonds, Series A (Tax-Exempt) (the “Series A Bonds”), pursuant to the provisions of Article 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Law”) and pursuant to an Indenture of Trust, dated as of February 1, 2019 (the “Indenture of Trust”), by and between Wells Fargo Bank, N.A., as trustee (the “Trustee”), and the Authority. The proceeds of the Bonds will be applied by the Authority to finance the acquisition of property within the City of Rancho Cucamonga (the “City”). The Authority and the City have entered into a Lease Agreement, dated as of February 1, 2019 (the “Lease Agreement”), whereby the City has leased from the Authority certain City facilities and property (the “Leased Premises”) and the City will make Lease Payments for the Leased Premises to the Authority. Pursuant to the Indenture of Trust, the Lease Payments have been assigned by the Authority to the Trustee and will be used by the Trustee to pay the principal of and interest on the Bonds. We have examined the Indenture of Trust, the Lease Agreement and such certified proceedings and other documents and materials as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, that: The Authority is a joint powers authority duly organized and validly existing under the laws of the State of California, with power to enter into the Indenture of Trust and the Lease Agreement, to perform the agreements on its part contained therein and to issue the Bonds; The Bonds constitute the valid and legally binding special obligations of the Authority enforceable in accordance with their terms and payable solely from the sources provided therefor in the Indenture of Trust; The Indenture of Trust and the Lease Agreement have been duly approved by the Authority and constitute the valid and legally binding obligations of the Authority enforceable against the Authority in accordance with their respective terms; The Indenture of Trust establishes a lien on and pledge of the Revenues (as such term is defined in the Indenture of Trust) which consist of Lease Payments and other funds pledged thereby for the security of the Bonds, in accordance with the terms of the Indenture of Trust; Interest on the Bonds is exempt from California personal income taxation. Page 224 D-4 Interest on the Bonds is not excluded from gross income for federal income tax purposes. Except as stated in the preceding three paragraphs, we express no opinion as to any federal or state tax consequences of the ownership or disposition of the Bonds. Furthermore, we express no opinion as to any federal, state or local tax law consequences with respect to the Bonds, or the interest thereon, if any action is taken with respect to the Bonds or the proceeds thereof predicated or permitted upon the advice or approval of bond counsel other than ourselves. Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may hereafter come to our attention or to reflect any changes in any law that may hereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. Our opinions, expressed herein, may be affected by action taken (or not taken) on events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or occur. The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture of Trust may be subject to bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted and their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity. Respectfully submitted, Page 225 E-1 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (the “Disclosure Agreement”) is executed and delivered by the City of Rancho Cucamonga (the “City”) and the Rancho Cucamonga Public Finance Authority (the “Authority”) in connection with the issuance of the Authority’s $_________ aggregate principal amount 2019 Lease Revenue Bonds (Fiber Optic Project) (the “Bonds”). The Bonds have been issued pursuant to an Indenture of Trust dated as of February 1, 2019, between the Authority and Wells Fargo Bank, N.A., as trustee (the “Trustee”) (the “Indenture”). The City and the Authority covenant and agree as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the City and the Authority for the benefit of the holders and beneficial owners of the Bonds. Section 2. Definitions. (a) “Annual Report” means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. (b) “Dissemination Agent” means, initially, Willdan Financial Services, as Dissemination Agent, or any successor Dissemination Agent designated in writing by the City which has filed with the City a written acceptance of such designation. (c) “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, or any other financial institution required to comply with the Rule in connection with the reoffering of the Bonds. (d) “Official Statement” means the Official Statement dated _____________, 2019, prepared in connection with the issuance of the Bonds. (e) “Repository” means the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access (EMMA) system, and any other Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. (f) “Rule” means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. (g) “Significant Events” shall mean any of the events listed in Section 5 of this Disclosure Agreement. (h) “MSRB” means the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934. (i) “SEC” means the Securities and Exchange Commission. Section 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than March 1 in each year while the Bonds are outstanding commencing on March 1, 2020, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than fifteen (15) business days prior to said date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). The Annual Report may be submitted as a single document or separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report. Page 226 E-2 (b) If the City is unable to provide to the Repository an Annual Report by the date required in subsection (a), the City shall send a notice to the MSRB in a timely manner in substantially the form attached as Exhibit A hereto. (c) The Dissemination Agent shall: (i) Determine each year prior to the date for providing the Annual Report the name and address of the Repository; and (if the Dissemination Agent is other than the City). (ii) File a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all Repositories to which it was provided. Section 4. Content of Annual Reports. The City’s Annual Report shall contain or incorporate by reference the following: (a) A copy of its annual financial statements prepared in accordance with generally accepted accounting principles, audited by a firm of certified public accountants. If audited annual financial statements are not available by the time specified in Section 3(a) above, unaudited financial statements will be provided as part of the Annual Report and audited financial statements will be provided when and if available. In such an event, the Disclosure Agreement shall contain a statement as to the estimated date on which the City’s audited financial statements are expected to be available. (b) The following information, to the extent not included in the audited financial statements of the City, shall include the following: (i) information showing the balance sheet of the General Fund of the City as of the close of the most recently completed Fiscal Year, including categorized assets, liabilities and reserved and unreserved fund balances (Table 4); (ii) information concerning the actual revenues, expenditures and beginning and ending fund balances relating to the General Fund of the City for the most recently completed Fiscal Year, including information showing tax revenue collections by source (Table 5); and (iii) information showing the aggregate principal amount of long-term bonds, leases and other obligations of the City which are payable out of the General Fund of the City, as of the close of the most recently completed Fiscal Year. (c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the City shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the City or related public entities, which have been submitted to each of the Repositories or the SEC. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The City shall clearly identify each such document incorporated by reference. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the City and the Authority 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 in excess of 10 business days after the occurrence of the event: 1. principal and interest payment delinquencies. Page 227 E-3 2. tender offers. 3. defeasances. 4. rating changes. 5. adverse tax opinions, or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, or Notices of Proposed Issue (IRS Form 5701-TEB). 6. unscheduled draws on the debt service reserves reflecting financial difficulties. 7. unscheduled draws on credit enhancement reflecting financial difficulties. 8. substitution of the credit or liquidity providers or their failure to perform. 9. bankruptcy, insolvency, receivership or similar event of the City or Authority. For the purposes of the event identified in this Section 5(a)(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 or Authority 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 Authority, 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 or Authority. (b) Pursuant to the provisions of this Section 5, the City and Authority shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: 1. non-payment related defaults. 2. modifications to rights of bondholders. 3. bond calls. 4. unless described under Section 5(a)(5) above, material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds. 5. release, substitution or sale of property securing repayment of the Bonds. 6. the consummation of a merger, consolidation, or acquisition involving the City or Authority or the sale of all or substantially all of the assets of the City or Authority, 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 paying agent with respect to the Bonds or the change of name of such a trustee or paying agent. (c) Whenever the City or Authority obtains knowledge of the occurrence of a Listed Event under Section 5(b) hereof, the City or Authority shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the City or Authority determines that knowledge of the occurrence of a Listed Event under Section 5(c) hereof would be material under applicable federal securities laws, the City or Authority shall (i) file Page 228 E-4 a notice of such occurrence with the Repository in a timely manner not in excess of 10 business days after the occurrence of the event or (ii) provide notice of such reportable event to the Dissemination Agent in format suitable for filing with the Repository in a timely manner not in excess of 10 business days after the occurrence of the event. The Dissemination Agent shall have no duty to independently prepare or file any report of Listed Events. The Dissemination Agent may conclusively rely on the City’s or Authority’s determination of materiality pursuant to Section 5(c). Section 6. Termination of Reporting Obligation. The City’s and the Authority’s obligations under this Disclosure Agreement shall be in effect from and after the execution and delivery of the Bonds and shall extend to the earlier of (i) the date all principal and interest on the Bonds shall have been deemed paid pursuant to the terms of the Indenture; (ii) the date that the City and the Authority shall no longer constitute an “obligated person” within the meaning of the Rule. Section 7. Enforcement. The obligations of the City and the Authority hereunder shall be for the benefit of the Participating Underwriter and the Owners of the Bonds, including Beneficial Owners of the Bonds. Unless otherwise required by law, no owners of the Bonds shall be entitled to damages for the City’s or the Authority’s non-compliance with its undertakings set forth in this Disclosure Agreement; however, the Participating Underwriter, and Owners of the Bonds, including Beneficial Owners of the Bonds, may enforce specific performance of such undertakings by any judicial proceeding available. Breach of the undertakings of the City and the Authority hereunder shall not constitute an event of default under the Indenture and none of the rights and remedies provided by the Indenture with respect to an event of default, shall be available to the Participating Underwriter, Owners of the Bonds, including Beneficial Owners. Section 8. Dissemination Agent; Duties. The City or the Authority may, from time to time, appoint or engage a Dissemination Agent to assist the City in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement. The obligations of the City under this Disclosure Agreement shall survive resignation or removal of the Dissemination Agent. The Dissemination Agent shall be paid compensation by the Authority for its services provided hereunder in accordance with its schedule of fees as amended from time to time and shall be reimbursed by the Authority all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. Neither the Dissemination Agent nor the Trustee shall have any duty or obligation to review any information provided to it hereunder or shall be deemed to be acting in any fiduciary capacity for the Authority, the owners of the Bonds or any other party. 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 document or any further act. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City and the Authority may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, if (i) such amendment or waiver does not, in and of itself, cause the undertakings herein to violate the Rule, but taking into account any subsequent change in or official interpretation of the Rule and the amendment or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Owners or Beneficial Owners of the Bonds. The City shall provide notice of any such amendment or waiver to each Repository. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, Page 229 E-5 if the amendment related to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5 and (ii) the Annual Report for the year in which the change is made should represent 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 formed accounting principles. Section 10. Default. In the event of a failure of the City or the Authority to comply with any provision of this Disclosure Agreement, the Trustee at the written direction of the Participating Underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Bonds, shall, or any Owner 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 Agreement, but only to the extent funds have been provided to it or it has been otherwise indemnified to its satisfaction from any cost, liability, expense or additional charges of the Trustee whatsoever, including, without limitation, fees and expenses of its attorney. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement shall be an action to compel performance. Section 11. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City of the Authority from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of an event other than a Significant Event, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of the occurrence of an event other than a Significant Event in addition to what is specifically required by this Disclosure Agreement, the City shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Significant Event. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Authority, the Trustee, the Dissemination Agent, the Underwriter and Owners and Beneficial Owners from time to time of the Bonds, and shall create not rights in any other person or entity. Page 230 E-6 Section 13. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. DATE: CITY OF RANCHO CUCAMONGA By: Authorized Signature RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY By: Authorized Signature ACCEPTED BY: WILLDAN FINANCIAL SERVICES, as Dissemination Agent By: Authorized Signature Page 231 E-7 EXHIBIT A NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Rancho Cucamonga Public Finance Authority (the “Issuer”) Issue: 2019 Lease Revenue Bonds (Fiber Optic Project) Date of Delivery: ________________, 2019 NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with respect to the above-referenced Bonds as required by resolution of the governing board of the Issuer and by the Continuing Disclosure Agreement executed on ____________ by the Issuer and the City of Rancho Cucamonga. The Issuer anticipates that the Annual Report will be filed on or before ___________________. Dated: ___________________ RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY By: Authorized Signature Page 232 F-1 APPENDIX F BOOK ENTRY PROVISIONS The information in this Appendix concerning DTC and DTC’s book-entry only system has been obtained from sources that the Authority and the Underwriter believe to be reliable, but neither the Authority or the Underwriter take any responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of ____. 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. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive bonds representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Page 233 F-2 Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Trustee’s DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical 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, bonds will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT Page 234 F-3 THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. Page 235 1 RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 LEASE REVENUE BONDS (FIBER OPTICS PROJECT) $_____________ Series A Bonds (Tax-Exempt) $_____________ Series B Bonds (Taxable) BOND PURCHASE AGREEMENT _____________, 2019 Rancho Cucamonga Public Finance Authority 10500 Civic Center Drive Rancho Cucamonga, California 91730 City of Rancho Cucamonga 10500 Civic Center Drive Rancho Cucamonga, California 91730 Ladies and Gentlemen: Stifel, Nicolaus & Company, Incorporated (the “Underwriter”), hereby offers to enter into this Bond Purchase Agreement with you, the City of Rancho Cucamonga (the “City”) and the Rancho Cucamonga Public Finance Authority (the “Authority”), for the purchase by the Underwriter and the delivery by you of the Bonds specified below. The Bonds are being issued by the Authority to (i) finance the acquisition, design, construction and equipping of a fiber optic network within the boundaries of the City; and (ii) pay the costs of issuing the Bonds. This offer is made subject to acceptance by you prior to 11:59 p.m., Los Angeles time, on the date hereof. Upon such acceptance, this Bond Purchase Agreement shall be in full force and effect in accordance with its terms and shall be binding upon you and the Underwriter. 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements hereinafter set forth, the Underwriter agrees to purchase from the Authority, and the Authority agrees to sell to the Underwriter, all (but not less than all) of the $__________ aggregate principal amount of the Authority’s 2019 Lease Revenue Bonds, Series A (Fiber Optics Project) (Tax-Exempt) (the “Series A Bonds”) and all (but not less than all) of the $__________ aggregate principal amount of the Authority’s 2019 Lease Revenue Bonds, Series B (Fiber Optics Project) (Taxable) (the “ Series B Bonds,” and together with the Series A Bonds, the “Bonds”) The purchase price for the Series A Bonds shall be $_______ (being the principal amount of the Series A Bonds, less an Underwriter’s discount in the amount of $______, and plus net original issue premium of $_______) and the purchase price for the Series B Bonds shall be $_______ (being the principal amount of the Series B Bonds, and less an Underwriter’s discount in the amount of $______). Page 236 2 The Bonds will be dated the date of delivery thereof, and will have the maturities and bear interest at the rates set forth on Exhibit A hereto. The Bonds will be subject to redemption as set forth in the Indenture and Official Statement herein described. The Bonds will be issued in book-entry form only. It is anticipated that CUSIP identification numbers will be inserted on the Bonds, but neither the failure to provide such numbers nor any error with respect thereto shall constitute a cause for failure or refusal by the Underwriter to accept delivery of the Bonds in accordance with the terms of this Bond Purchase Agreement. 2. Authorizing Instruments and Law. The Bonds shall be issued pursuant to the provisions of a resolution (the “Resolution”) adopted by the Authority on _______, 201_ authorizing the issuance of the Bonds and the Marks-Roos Local Bond Pooling Act of 1985, constituting Section 6584 et seq. of the California Government Code (the “JPA Act”). The Bonds are issued pursuant to an Indenture, dated as of ________ 1, 2019 (the “Indenture”), between the Authority and Wells Fargo Bank, N.A., as trustee (the “Trustee”), and shall be as described in the Indenture. The Bonds are limited obligations of the Authority payable primarily from and secured by certain lease payments (the “Lease Payments”) to be paid by the City pursuant to a Lease Agreement, dated as of ________ 1, 2019, between the City and the Authority (the “Lease”), for certain real property and the improvements thereon (the “Leased Premises”). 3. Offering the Bonds. The Underwriter agrees to offer all the Bonds to the public initially at the prices (or yields) set forth on the cover pages of the Official Statement of the Authority pertaining to the Bonds, dated __________, 2019 (the Official Statement, together with all appendices thereto, and with such changes therein and supplements thereto as are consented to in writing by the Authority, the City, the Underwriter or its legal counsel in accordance with the provisions of Sections 6(j) and 7(j) hereof or otherwise consented to by the Underwriter pursuant to Section 10(b)(v), are herein called the “Official Statement”). Subsequent to the initial public offering of the Bonds, the Underwriter reserves the right to change the public offering prices (or yields) as they deem necessary in connection with the marketing of the Bonds. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. “Public Offering” shall include an offering to a number of institutional investors or registered investment companies, regardless of the number of such investors to which the Bonds are sold. The City and the Authority acknowledge and agree that (i) the purchase and sale of the Bonds pursuant to this Bond Purchase Agreement is an arm’s-length commercial transaction between the City, the Authority and the Underwriter, and that the Underwriter has financial and other interests that differ from those of the City and the Authority, (ii) in connection with such transaction the Underwriter is not acting as a municipal advisor, financial advisor or fiduciary to the City and the Authority or any other person or entity and have not assumed a fiduciary responsibility in favor of the City or the Authority with respect to the offering of the Bonds or the process leading thereto (whether or not the Underwriter has advised or are currently advising the City or the Authority on other matters), (iii) the only contractual obligations the Underwriter has to the City and the Authority with respect to the transaction contemplated hereby expressly are set forth in this Bond Purchase Agreement, except as otherwise provided by applicable rules and regulations of the SEC or the rules of the Municipal Securities Rulemaking Board (the “MSRB”) and (iv) the City and the Authority have consulted with their own legal and other professional advisors to the extent they deemed appropriate in connection with the offering of the Bonds. The City and the Authority acknowledge that they have previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the MSRB relating to disclosures concerning the Page 237 3 Underwriter’s role in the transaction, disclosures concerning the Underwriter’s compensation, conflict disclosures, if any, and disclosures concerning complex municipal securities financing, if any. 4. Delivery of Official Statement. The Authority shall deliver to the Underwriter two (2) copies of the Official Statement manually executed on behalf of the Authority and the City. The Authority shall also deliver copies of the Official Statement in such quantities as the Underwriter may reasonably request in order to enable the Underwriter to distribute a single copy of each Official Statement to any potential customer of the Underwriter requesting an Official Statement during the time period beginning when the Official Statement becomes available and ending on the End Date (defined below). The Authority shall deliver these copies to the Underwriter within seven (7) business days after the execution of this Bond Purchase Agreement and in sufficient time to accompany or precede any sales confirmation that requests payment from any customer of the Underwriter. The Authority and the Underwriter hereby agree that the end of the underwriting period shall be the date of Closing (as defined below) unless the Underwriter informs the Authority in writing of a different end of the underwriting period. “End Date” as used herein is that date which is the earlier of: (a) twenty-five (25) days after the end of the underwriting period, as defined in SEC Rule 15c2-12 originally adopted by the Securities and Exchange Commission on June 28, 1989, as amended (“Rule 15c2-12”); or (b) the time when the Official Statement becomes available from the MSRB, but in no event less than twenty-five (25) days after the underwriting period (as defined in Rule 15c2-12) ends. The Underwriter acknowledges that the “End Date” will be the date of Closing unless the Underwriter otherwise notifies the Authority and the City in writing that the Underwriter still own some or all of the Bonds. The Authority and the City have authorized the use of the Official Statement in connection with the public offering of the Bonds. The Authority and the City also have consented to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement dated _______, 2019, relating to the Bonds in connection with the public offering of the Bonds, (which, together with all appendices thereto, is herein called the “Preliminary Official Statement”). Authorized officers of the City and the Authority have certified to the Underwriter that such Preliminary Official Statement was deemed to be final as of its date for purposes of Rule 15c2-12, with the exception of certain final pricing and related information referred to in Rule 15c2-12. The Underwriter has distributed a copy of each Preliminary Official Statement to potential customers on request. 5. The Closing. At 9:00 A.M., California time, on _______, 2019, or at such other time or on such earlier or later business day as shall have been mutually agreed upon by the Authority, the City and the Underwriter, the Authority, upon receipt of the purchase price thereof, will deliver (i) the Bonds in book-entry form through the facilities of The Depository Trust Company (“DTC”), and (ii) the closing documents hereinafter mentioned at the offices of Best Best & Krieger LLP, Riverside, 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 from the Authority. The Underwriter will pay the purchase price of the Bonds as set forth in Section 1 hereof Page 238 4 by wire transfer of immediately available funds. This payment and delivery, together with the delivery of the aforementioned documents, is herein called the “Closing.” 6. City Representations, Warranties and Covenants. The City represents, warrants and covenants to the Underwriter that: (a) The City is a municipal corporation of the State of California (the “State”) organized and operating pursuant to the law of the State with power and authority to enter into and perform its duties under the Lease, the Continuing Disclosure Certificate, dated the date of Closing (the “Continuing Disclosure Certificate”), the Official Statement and this Bond Purchase Agreement (collectively, the “City Documents”). (b) To the best knowledge of the City, neither the approval, execution and delivery of the City Documents, and compliance with the provisions on the City’s part contained therein, nor the consummation of any other of the transactions herein and therein contemplated, nor the fulfillment of the terms hereof and thereof, materially conflicts with or constitutes a material breach of or default under nor materially contravenes any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject, nor does any such execution, delivery, adoption or compliance result in a security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the City under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the City Documents. (c) The City Documents have been duly authorized, executed and delivered by the City, and, assuming due authorization, execution and delivery by the other parties thereto, constitute legal, valid and binding agreements of the City enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other laws affecting the enforcement of creditors’ rights generally, and by the application of equitable principles if sought, by the exercise of judicial discretion, and by the limitations on legal remedies imposed on actions against cities in the State. (d) Except as may be required under blue sky or other securities laws of any state, there is no material consent, approval, authorization or other order of, or filing with, or certification by, any regulatory agency having jurisdiction over the City required for the execution and delivery of the Bonds or the consummation by the City of the other transactions contemplated by the Official Statement and this Bond Purchase Agreement. (e) To the best of the knowledge of the City, there is, and on the Closing there will be, no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending (notice of which has been received by the City) or threatened against the City to restrain or enjoin the delivery of any of the Bonds, or the payments to be made pursuant to the Lease, or in any way contesting or affecting the validity of the City Documents or the Bonds or the authority of the City to approve this Bond Purchase Agreement, or enter into the City Documents or contesting the powers of the City to enter into or perform its obligations under any of the foregoing or in any way contesting the powers of the City in connection with any action contemplated by this Bond Purchase Agreement or to restrain or enjoin the execution, sale and delivery of the Bonds, contesting the completeness or accuracy of the Preliminary Official Statement Page 239 5 as of its date or the Official Statement or any supplement or amendment thereto wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the City Documents to be executed by it or asserting that the Preliminary Official Statement as of its date or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of all the circumstances under which they were made, not misleading, or, except as described in the Preliminary Official Statement and the Official Statement, nor is there any basis for any such action, suit, proceeding or investigation. (f) The Preliminary Official Statement provided to the Underwriter has been deemed final by the City, as required by Rule 15c2-12. As of the date thereof and at all times subsequent thereto up to and including the Closing, the information relating to the City, the Bonds, the Leased Premises and the City Documents contained in the Official Statement was and will be materially complete for its intended purposes. The information relating to the City, the Bonds, the Leased Premises and the City Documents contained in the Official Statement as of the date hereof is true and correct in all material respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect. (g) The City agrees to cooperate with the Underwriter in endeavoring to qualify the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions of the United States as the Underwriter may request; provided, however, that the City will not be required to execute a special or general consent to service of process in any jurisdiction in which it is not now so subject or to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified. The Underwriter shall be responsible for all costs relating to such qualification of the Bonds under blue sky or similar laws. (h) By official action of the City prior to or concurrently with the execution hereof, the City has duly approved the distribution of the Official Statement, and has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations on its part contained in the City Documents and the consummation by it of all other transactions contemplated by the Official Statement and this Bond Purchase Agreement. (i) To the best knowledge of the City, it is not in any material respect in breach of or default under any material applicable law or administrative regulation of the State or the United States or any material applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject and in connection with which the City is obligated to make payments from its own funds, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument the consequence of which could materially and adversely affect the performance of the City under the City Documents. (j) If between the date of this Bond Purchase Agreement and the End Date an event occurs, of which the City has knowledge, which might or would cause the information relating to the City, the City’s finances, the Leased Premises, or the City’s functions, duties and responsibilities contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was Page 240 6 presented, not misleading in any material respect, the City will notify the Underwriter, and if, in the opinion of the Underwriter, the City or their respective legal counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will cooperate with the Underwriter in the preparation of an amendment or supplement to the Official Statement in a form and in a manner approved by the Underwriter, provided all expenses thereby incurred will be paid for by the City. (k) If the information relating to the Leased Premises, the City, its functions, duties and responsibilities contained in the Official Statement is amended or supplemented pursuant to the immediately preceding subparagraph, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date of the Closing, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading in any material respect. (l) The City covenants that it will comply with all tax covenants relating to it in the City Documents and the Tax Certificate of the City. (m) Substantially all the proceeds from the sale of the Bonds (after deducting the expenses of issuance and sale of the Bonds paid for from such proceeds) will be used as set forth in the Indenture and as described in the Official Statement, and the City will not take or omit to take any action which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to that provided in the Indenture and the Lease, as amended from time to time. (n) Any certificate signed by a duly authorized official of the City and delivered to the Underwriter shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein. (o) As of the time of acceptance hereof and as of the Closing, the City does not and will not have outstanding any indebtedness which is payable from the City’s general fund except as disclosed in the Official Statement. (p) Between the date of this Bond Purchase Agreement and the date of Closing, the City will not, and except as disclosed in the Official Statement, offer or issue any certificates, notes or other obligations for borrowed money, or, other than in the normal course of its operations, incur any material liabilities, direct or contingent, secured by or payable from the City’s general fund. (q) The City will undertake, pursuant to the Continuing Disclosure Certificate, to provide or cause to be provided annual financial reports and notices of certain events; a description of this undertaking is set forth in the Official Statement. Except as disclosed in the Preliminary Official Statement and Official Statement, the City and its related entities have not failed to comply in any material respect with a continuing disclosure undertaking under Rule 15c2-12 during the previous five years. Page 241 7 (r) The financial statements of, and other financial information regarding the City in the Official Statement fairly present the financial position and results of the operations of the City as of the dates and for the periods therein set forth and the audited financial statements have been prepared in accordance with generally accepted accounting principles applicable to cities. 7. Authority Representations, Warranties and Covenants. The Authority represents, warrants and covenants to the City and the Underwriter that: (a) The Authority is a joint powers authority, duly organized and existing under the Constitution (the “Constitution”) and laws of the State, including the JPA Act, with full right, power and authority to enter into, execute and deliver the Authority Documents (defined below) and to perform its obligations hereunder. (b) By all necessary official action, the Authority has duly authorized and approved the execution and delivery of, and the performance by the Authority of the obligations on its part contained in the Bond Purchase Agreement, the Bonds, the Indenture, and the Lease (collectively, the “Authority Documents”), and has approved the use by the Underwriter of the Preliminary Official Statement, and the Official Statement and, as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered by the parties hereto, the Authority Documents will constitute the legally valid and binding obligations of the Authority enforceable upon the Authority in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting creditors rights generally, to the exercise of judicial discretion and to the limitations on legal remedies against joint powers authorities in California. The Authority has complied, and will at the Closing be in compliance in all respects, with the terms of the Authority Documents. (c) The Bonds, when issued in accordance with the Indenture, will be valid and binding limited obligations of the Authority, entitled to the benefits of the Indenture and enforceable in accordance with their terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors’ rights generally, to the exercise of judicial discretion and to the limitations on legal remedies against joint powers authorities in California. (d) As of the time of acceptance hereof and as of the time of the Closing, except as otherwise disclosed in the Official Statement, to the best knowledge of the Authority, the Authority is not and will not be in any material respect in breach of or in default under any law or administrative rule or regulation of the State or the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument which breach, default or event could have an adverse effect on the Authority’s ability to perform its obligations under the Authority Documents; and, as of such times, except as disclosed in the Official Statement, the authorization, execution and delivery of the Authority Documents and compliance by the Authority with the provisions thereof do not and will not conflict with or constitute a breach of or default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States or any applicable judgment, decree, license, permit, trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority is subject, or by which it or any of its Page 242 8 properties is bound, nor will any such authorization, execution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of its assets or properties under the terms of any such law, regulation or instrument except as provided in the Authority Documents. (e) As of the time of acceptance hereof and the Closing, except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending (notice of which has been received by the Authority), or to the best knowledge of the Authority threatened against the Authority in any material respect: (i) affecting the existence of the Authority or the titles of the officers of the Authority to their respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin the issuance or delivery of any of the Bonds, or the payment or collection of any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity of the Authority Documents or the consummation of the transactions on the part of the Authority contemplated thereby, or contesting the exclusion of the interest on the Bonds from Federal or State taxation, as applicable, or contesting the powers of the Authority or its authority to enter into the Lease and to pledge the Lease Payments for repayment of the Bonds; (iii) which may result in any material adverse change relating to the financial condition of the Authority; (iv) contesting the completeness or accuracy of the Preliminary Official Statement as of its date or the Official Statement or any supplement or amendment thereto or asserting that the Preliminary Official Statement as of its date or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of all the circumstances under which they were made, not misleading; or (v) challenging the ability of the Authority to sell the Bonds to the Underwriter. (f) The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order to qualify the Bonds for offer and sale under the blue sky laws or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and will use its best efforts to continue such qualification in effect so long as required for distribution of the Bonds; provided however, that in no event shall the Authority be required to take any action which would subject it to general or unlimited service of process in any jurisdiction in which it is not now so subject. (g) Any certificate signed by a duly authorized officer of the Authority and delivered to the Underwriter shall be deemed to be a representation and warranty by the Authority to the Underwriter as to the statements made therein. Page 243 9 (h) As of the time of acceptance hereof and as of the date of Closing, except as otherwise disclosed in the Official Statement, the Authority has complied with the filing requirements of the JPA Act. (i) The Authority will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement from the delivery of the Official Statement to the End Date, and will not effect or consent to any such amendment or supplement without prior consultation with the Underwriter. The Authority will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds. (j) For a period beginning on the date hereof and continuing until the End Date, (a) the Authority will not adopt any amendment of, or supplement to, the Official Statement without prior consultation with the Underwriter and Kutak Rock LLP, counsel to the Underwriter (“Underwriter’s Counsel”) and (b) if any event relating to or affecting the Authority shall occur as a result of which it is necessary, in the opinion of the Underwriter and Underwriter’s Counsel, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to a purchaser of the Bonds, the Authority will forthwith cause the City to prepare and furnish to the Underwriter a reasonable number of copies of an amendment of, or supplement to, the Official Statement (in form and substance satisfactory to Underwriter’s Counsel) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser of the Bonds, not misleading. 8. Establishment of Issue Price. (a) The Underwriter agrees to assist the Authority in establishing the issue price of the Series A Bonds and shall execute and deliver to the Authority 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 Authority 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 Series A Bonds. (b) Except as otherwise set forth in Exhibit A attached hereto, the Authority will treat the first price at which 10% of each maturity of the Series A Bonds (the “10% test”) is sold to the public as the issue price of that maturity. At or promptly after the execution of this Bond Purchase Agreement, the Underwriter shall report to the Authority the price or prices at which it has sold to the public each maturity of Series A Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Series A Bonds, the Underwriter agrees to promptly report to the Authority the prices at which it sells the unsold Series A Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until either (i) the Underwriter has sold all Series A Bonds of that maturity or (ii) the 10% test has been satisfied as to the Series A Bonds of that maturity, provided that, the Underwriter’s reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Authority or Bond Counsel. For purposes of this Section, if Series A Bonds mature on the same date but have different interest rates, each separate CUSIP number within that maturity will be treated as a separate maturity of the Series A Bonds. Page 244 10 (c) The Underwriter confirms that it has offered the Series A Bonds to the public on or before the date of this Bond Purchase Agreement at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, as of the date of this Bond Purchase Agreement, the maturities, if any, of the Series A Bonds for which the Underwriter represents that (i) the 10% test has been satisfied (assuming orders are confirmed by the close of the business day immediately following the date of this Bond Purchase Agreement) and (ii) the 10% test has not been satisfied and for which the Authority and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Authority 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 A Bonds, the Underwriter will neither offer nor sell unsold Series A 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: (A) the close of the fifth (5th) business day after the sale date; or (B) the date on which the Underwriter has sold at least 10% of that maturity of the Series A Bonds to the public at a price that is no higher than the initial offering price to the public. The Underwriter will advise the Authority promptly after the close of the fifth (5th) business day after the sale date whether it has sold 10% of that maturity of the Series A Bonds to the public at a price that is no higher than the initial offering price to the public. (d) The Underwriter confirms that: (i) any selling group agreement and any third-party distribution agreement relating to the initial sale of the Series A Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker- dealer that is a party to such third-party distribution agreement, as applicable: (A)(i) to report the prices at which it sells to the public the unsold Series A Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Series A Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Series A Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be reasonable periodic intervals or otherwise upon request of the Underwriter and (ii) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter, (B) to promptly notify the Underwriter of any sales of Series A Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Series A Bonds to the public (each such term being used as defined below), and (C) to acknowledge that, unless otherwise advised by the dealer or broker-dealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public. Page 245 11 (ii) any selling group agreement relating to the initial sale of the Series A Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the Series A Bonds to the public to require each broker-dealer that is a party to such third-party distribution agreement to (A) report the prices at which it sells to the public the unsold Series A Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Series A Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the Series A Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold- the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires. (e) The Authority acknowledges that, in making the representation set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Series A Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the Series A Bonds, including, but not limited to, its agreement to comply with the hold-the-offering- price rule, if applicable to the Series A Bonds, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a third-party distribution agreement was employed in connection with the initial sale of the Series A Bonds to the public, the agreement of each broker- dealer that is a party to such agreement to comply with the requirements for establishing issue price of the Series A Bonds, including, but not limited to, its agreement to comply with the hold-the- offering-price rule, if applicable to the Series A Bonds, as set forth in the third-party distribution agreement and the related pricing wires. The Authority 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 third-party distribution agreement, to comply with its corresponding agreement to comply with the requirements for establishing issue price of the Series A Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Series A Bonds. (f) The Underwriter acknowledges that sales of any Series A Bonds to any person that is a related party to an underwriter participating in the initial sale of the Series A Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section. Further, for purposes of this section: a. “public” means any person other than an underwriter or a related party; b. “underwriter” means (A) any person that agrees pursuant to a written contract with the Authority (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Series A 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 Series A Bonds to the public (including a member of a selling group or a party to a third- party distribution agreement participating in the initial sale of the Series A Bonds to the public); c. a purchaser of any of the Series A Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common 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), (B) more than 50% common ownership Page 246 12 of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) 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 d. “sale date” means the date of execution of this Bond Purchase Agreement by all parties. 9. Closing Conditions. The Underwriter has entered into this Bond Purchase Agreement in reliance upon the representations, warranties and covenants herein and the performance by the Authority and the City of their respective obligations hereunder, both as of the date hereof and as of the date of the Closing. The Underwriter’s obligations hereunder are and shall be subject to the following additional conditions: (a) Bring-Down Representation. The representations, warranties and covenants of the Authority and the City contained herein shall be true and correct at the date hereof and at the time of the Closing, as if made on the date of the Closing. (b) Executed Agreements and Performance Thereunder. At the time of the Closing: (i) the City Documents and the Authority Documents shall be in full force and effect, and shall not have been amended, modified or supplemented except with the prior written consent of the Underwriter; (ii) there shall be in full force and effect such resolutions (the “Authorizing Resolutions”) as, in the opinion of Bond Counsel, shall be necessary in connection with the transactions on the part of the Authority and the City contemplated by the City Documents and the Authority Documents; (iii) the Authority shall perform or have performed its obligations required or specified in the Authority Documents to be performed at or prior to Closing; (iv) the City shall perform or have performed its obligations required as specified in the City Documents to be performed at or prior to Closing; and (v) the Official Statement shall not have been supplemented or amended, except pursuant to Paragraph 6(j) or 7(j), or as otherwise may have been agreed to in writing by the Underwriter. (c) No Default. At the time of the Closing, no default shall have occurred or be existing under the Authority Documents or the City Documents and neither the Authority nor the City shall be in default in the payment of principal or interest on any of its bonded indebtedness or other obligations payable from the City’s general fund which default shall adversely impact the ability of the Authority to make payments on the Bonds or the City to make payments pursuant to the Lease. (d) Termination Events. The Underwriter shall have the right to terminate this Bond Purchase Agreement, without liability therefor, by written notification to the Authority and the Page 247 13 City if at any time at or prior to the Closing the market price or marketability of the Bonds, or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall have been materially adversely affected in the reasonable judgment of the Underwriter (evidenced by a written notice to the City and the Authority terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds) by reason of any of the following: (i) an amendment to the Constitution of the United States or by any legislation in or by the Congress of the United States or by the State, or the amendment of legislation pending as of the date of the Authority Documents or the City Documents in the Congress of the United States, or the recommendation to Congress or endorsement for passage (by press release, other form of notice or otherwise) of legislation by the President of the United States, the Treasury Department of the United States, the Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives, or the proposal for consideration of legislation by either such Committee, or the presentment of legislation for consideration as an option by either such Committee, or by the staff of the Joint Committee on Taxation of the Congress of the United States, or the favorable reporting for passage of legislation to either House of the Congress of the United States by a Committee of such House to which such legislation has been referred for consideration, or any decision of any Federal or State court or any ruling or regulation (final, temporary or proposed) or official statement on behalf of the United States Treasury Department, the Internal Revenue Service or other Federal or State authority materially adversely affecting the Federal or State tax status of the Authority or the City, or the interest on bonds or notes or obligations of the general character of the Bonds; or (ii) any legislation, ordinance, rule or regulation shall be introduced in, or be enacted by any governmental body, department or agency of the States or a decision by any court of competent jurisdiction within the State or any court of the United States shall be rendered which, in the reasonable opinion of the Underwriter, materially adversely affects the market price of the Bonds; or (iii) legislation shall be enacted by the Congress of the United States, or a decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or official statement by, or on behalf of, the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall be issued or made to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the issuance, offering or sale of the Bonds, including all underlying obligations, as contemplated hereby or by the Official Statement, is in violation or would be in violation of, or that obligations of the general character of the Bonds, or the Bonds, are not exempt from registration under, any provision of the federal securities laws, including the Securities Act of 1933, as amended and as then in effect, or that the Indenture needs to be qualified under the Trust Indenture Act of 1939, as amended and as then in effect; or (iv) the New York Stock Exchange or other national securities exchange, or any governmental or regulatory 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 the Underwriter; or Page 248 14 (v) a general banking moratorium shall have been established by federal or State authorities; or (vi) the United States has become engaged in hostilities which have resulted in a declaration of war or a national emergency or there has occurred any escalation of current or other outbreak or escalation of hostilities or a national or international calamity or crisis, financial or otherwise, the effect of such outbreak, escalation, calamity or crisis on the financial markets of the United States being such as, in the reasonable opinion of the Underwriter, would affect materially and adversely the ability of the Underwriter to market the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; or (vii) the commencement of any action, suit or proceeding described in Paragraphs 6(e) or 7(e) hereof; or (viii) there shall be in force a general suspension of trading on the New York Stock Exchange; or (ix) any event occurring or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue or incorrect in any material respect any statement or information contained in the Preliminary Official Statement or in the Official Statement or has the effect that the Preliminary Official Statement or the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (x) any rating of the Bonds or other obligations of the City shall have been downgraded, suspended or withdrawn or placed on negative outlook or negative watch by a national rating service, which, in the Underwriter’s reasonable opinion, materially adversely affects the marketability or market price of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; or (xi) any proceeding shall be pending or threatened by the Securities and Exchange Commission against the Authority or the City; or (xii) a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; or (xiii) a decision by a court of the United States shall be rendered, or a stop order, release, regulation or no-action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Bonds, including the underlying obligations as contemplated by this Bond Purchase Agreement or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds, is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act, the Exchange Act and the Trust Indenture Act. (e) Closing Documents. At or prior to the Closing, the Underwriter shall receive with respect to the Bonds (unless the context otherwise indicates) the following documents: Page 249 15 (1) Bond Opinion. The approving opinions of Bond Counsel dated the date of Closing and substantially in the forms included as APPENDIX D to the Official Statement and a reliance letter(s) thereon dated the date of Closing addressed to the Underwriter and the Trustee. (2) Supplemental Opinion. A supplemental opinion of Bond Counsel dated the date of Closing, addressed to the Underwriter, to the effect that: (A) the statements on the cover of the Official Statement and in the Official Statement under the captions “INTRODUCTION” (excluding the following subheadings: “- Forward-Looking Statements,” and “- Summary of Terms”), “THE BONDS,” “THE LEASED PREMISES,” “SECURITY FOR THE BONDS,” and “TAX MATTERS,” and in “APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” and “APPENDIX D – FORMS OF OPINIONS OF BOND COUNSEL,” 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 Bonds, the Lease, the Indenture, and Bond Counsel’s final opinion concerning certain federal tax matters relating to the Series A Bonds, are accurate in all material respects as of the date of Closing; provided, that Bond Counsel need not express any opinion with respect to any financial or statistical data contained therein or with respect to DTC or the book- entry system in which the Bonds are initially delivered; (B) The Lease, the Continuing Disclosure Certificate and this Bond Purchase Agreement have been duly authorized, executed and delivered by the City and the Authority, as applicable, and are valid, legal and binding agreement of the City and the Authority enforceable in accordance with their terms, except that the rights and obligations under the Lease, the Continuing Disclosure Certificate and this Bond 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. (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. (3) Negative Assurance Letter of Disclosure Counsel. A letter of Best Best & Krieger LLP, Disclosure Counsel to the Authority and the City dated the date of Closing and addressed to the Authority, the City, and the Underwriter to the effect that based upon their participation in the preparation of the Official Statement as Disclosure Counsel to the Authority and without having undertaken to determine independently the accuracy or completeness of the contents in the Official Statement, such counsel has no reason to believe that the Preliminary Official Statement (except for the completion of pricing information and any other matters or terms of the Bonds relating thereto) as of its date or as of ________, 2019 or the Official Statement as of its date or as of the date of the Closing (except that no opinion is expressed as to any financial, statistical, economic, engineering or demographic data or forecasts, numbers, charts, tables, graphs, maps, estimates, projections, assumptions or expressions of opinion, any information about feasibility, valuation, appraisals, assessed values, market absorption, real estate, ownership, environmental or archaeological matters, Appendices B, C, D, or F thereto, or any information about book entry, The Page 250 16 Depository Trust Company, debt service requirements or tax exemption included or referred to therein, which we expressly exclude from the scope of this paragraph and as to which we 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. (4) Opinion of City Attorney. An opinion of the City Attorney, dated the date of the Closing and addressed to the Authority, the Trustee and the Underwriter, to the effect that: (A) the City is a municipal corporation duly organized and validly existing under the Constitution and laws of the State of California; (B) the resolution of the City approving and authorizing the execution and delivery of the City Documents and approving and authorizing the issuance of the Bonds and the delivery of the Official Statement and other actions of the City was duly adopted at a meeting of the governing body of the City which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the resolution is now in full force and effect and has not been amended or superseded in any way; (C) there is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court or public body pending with respect to which the City has been served or, to such counsel’s knowledge, threatened against or affecting the City, except as may be disclosed in the Official Statement, which would materially adversely impact the City’s ability to complete the transactions contemplated by the City Documents, the Official Statement or any other document or certificate related to such transactions, restrain or enjoin the collection of Lease Payments with respect to the Lease, or in any way contesting or affecting the validity of the Bonds, the Official Statement or the City Documents; (5) Authority Counsel Opinion. An opinion of counsel to the Authority, dated the date of the Closing and addressed to the City, the Trustee and the Underwriter, to the effect that: (A) the Authority is a joint exercise of powers authority organized and existing under the laws of the State of California; (B) the resolution of the Authority approving and authorizing the execution and delivery of the Authority Documents, the Bonds and the Official Statement and other actions of the Authority was duly adopted at a meeting of the governing body of the Authority which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the resolution is now in full force and effect and has not been amended or superseded in any way; (C) to the knowledge of such counsel, there is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court or public body pending with respect to which the Authority has been served or, to the such counsel’s knowledge, threatened against or affecting the Authority, except as may be disclosed in the Official Statement, which would materially adversely impact the Authority’s ability to complete the transactions contemplated by the Authority Documents, the Official Statement or any other document or certificate related to such transactions, restrain or enjoin the collection of Lease Payments with respect to the Lease, or in any Page 251 17 way contesting or affecting the validity of the Bonds, the Official Statement, the Authority Documents or the transactions described in and contemplated thereby wherein an unfavorable decision, ruling or finding would materially adversely affect the validity and enforceability of the Bonds or the Authority Documents or in which a final adverse decision could materially adversely affect the operations of the Authority; (D) to the knowledge of such counsel, 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; (6) Trustee Counsel Opinion. An opinion of counsel to the Trustee, dated the date of the Closing, addressed to the City, the Authority and the Underwriter, in form and substance acceptable to the City and Underwriter. (7) Underwriter’s Counsel Opinion. An opinion of Underwriter’s Counsel, dated the date of the Closing addressed to the Underwriter, in such form as may be acceptable to the Underwriter. (8) City Certificate. A certificate, dated the date of Closing, signed by a duly authorized official of the City satisfactory in form and substance to the Underwriter to the effect that: (a) the representations, warranties and covenants of the City contained in this Bond Purchase Agreement are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing; (b) the City has complied with all agreements, covenants and conditions to be complied with by the City at or prior to the Closing under the City Documents; (c) to the best of such official’s knowledge, no event affecting the City has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the Closing the statements or information contained in the Official Statement or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein, in the light of the circumstances under which they were made, not misleading in any material respect. (9) Authority Certificate. A certificate of the Authority, dated the date of the Closing, signed on behalf of the Authority by the President or other duly authorized officer of the Authority to the effect that (a) the representations, warranties and covenants of the Authority contained herein and in the Authority Documents are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing; (b) the Authority has complied with all agreements, covenants and conditions to be complied with by the Authority at or prior to the Closing under the Authority Documents and (c) to the best of such official’s knowledge, no event affecting the Authority has occurred since the date of the Official Statement which has not been disclosed therein or in any supplement or amendment thereto which event should be disclosed in the Official Statement in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (10) Trustee’s Certificate. A Certificate of the Trustee, dated the date of Closing, in form and substance acceptable to counsel for the Underwriter to the effect that (a) the Trustee is duly organized and existing as a national banking association in good standing under the Page 252 18 laws of the United States, having the full power and authority to accept and perform its duties under the Indenture; (b) subject to the provisions of the Indenture, the Trustee will apply the proceeds from the Bonds to the purposes specified in the Indenture; and (c) the Trustee has duly authorized and executed the Indenture. (11) Title Policy. A copy of a CLTA or ALTA title insurance policy in an amount equal to the principal amount of the Bonds, insuring the City’s leasehold interest in the Leased Premises, subject only to Permitted Encumbrances (as defined in the Lease) or such other acceptable encumbrances. (12) Transcripts. Two CD transcripts of the proceedings prepared by Bond Counsel relating to the authorization and issuance of the Bonds will be delivered in due course after the Closing. (13) Official Statement. The Official Statement and each supplement or amendment, if any, thereto, executed on behalf of the Authority by a duly authorized officer of each. (14) Documents. An original executed or certified copy of each of the Authority Documents, the City Documents and the Joint Exercise of Powers Agreement (the “JPA Agreement”), dated as of April 22, 1999, between the City, the Rancho Cucamonga Fire Protection District and the former Rancho Cucamonga Redevelopment Agency. (15) City Resolution. Certified copy by the City Clerk, of each resolution of the City relating to the City Documents, the actions contemplated thereby, provided that such resolutions may be contained in the transcripts. (16) Authority Resolution. Certified copy by the Secretary or Assistant Secretary of the Authority, of each resolution of the Authority relating to the Authority Documents, the Bonds and the transactions contemplated thereby, provided that such resolutions may be contained in the transcripts. (17) IRS Form 8038-G. Evidence that the federal tax information form 8038-G has been prepared for filing. (18) Tax/Arbitrage Certificate. A tax/arbitrage certificate in form satisfactory to Bond Counsel, including the Issue Price Certificate in the form attached hereto as Exhibit B. (19) Ratings. Evidence as of the Closing satisfactory to the Underwriter that the Bonds have received the ratings set forth in the Official Statement and that such ratings have not been reduced or withdrawn. (20) CDIAC Statement. A copy of the Notice of Final Sale required to be delivered to the California Debt and Investment Advisory Commission pursuant to Section 53583 of the Government Code and Section 8855(g) of the Government Code. (21) Additional Documents. Such additional certificates, instruments and other documents as the Underwriter and Bond Counsel may reasonably deem necessary. Page 253 19 If the Authority or the City shall be unable to satisfy the conditions contained in this Bond Purchase Agreement, or if the obligations of the Underwriter shall be terminated for any reason permitted by this Bond Purchase Agreement, this Bond Purchase Agreement may be terminated by the Underwriter, and none of the Underwriter, the Authority or the City shall be under further obligation hereunder. 10. Expenses. Except as otherwise provided in this Section, the Underwriter shall be under no obligation to pay, and the Authority or the City shall pay or cause to be paid, the expenses incident to the performance of the obligations of the Authority and the City hereunder including but not limited to: (a) the costs of the preparation and printing, or other reproduction (for distribution on or prior to the date hereof) of the City Documents and the Authority Documents and the cost of preparing, printing, issuing and delivering the Bonds; (b) the fees and disbursements of any counsel, municipal advisors, accountants or other experts or consultants retained by the Authority or the City; (c) the fees and disbursements of Bond Counsel and Disclosure Counsel; (d) the cost of preparation and printing the Preliminary Official Statement and any supplements and amendments thereto and the cost of preparation and printing of the Official Statement, including a reasonable number of copies thereof for distribution by the Underwriter; and (e) charges of rating agencies for the rating of the Bonds. The Underwriter shall pay all expenses incurred by the Underwriter in connection with the public offering and distribution of the Bonds including, but not limited to: (i) the fees and disbursements of Underwriter’s Counsel; and (ii) all out-of-pocket disbursements and expenses incurred by the Underwriter in connection with the offering and distribution of the Bonds (including other expenses, fees of the California Debt and Investment Advisory Commission, CUSIP Service Bureau fees, and any other fees and expenses), except as otherwise provided in the preceding paragraph or otherwise agreed to by the Underwriter, the Authority and the City in writing. Any meals in connection with or adjacent to meetings, rating agency presentations, pricing activities or other transaction-related activities shall be considered an expense of the transaction and included in the expense component of the Underwriter’s discount. 11. Notice. Any notice or other communication to be given to the Underwriter may be given by delivering the same to Stifel, Nicolaus & Company, Incorporated, One Montgomery Street, 35th Floor, San Francisco, California 94104, Attention: Public Finance. Any notice or other communication to be given to the Authority or the City pursuant to this Bond Purchase Agreement may be given by delivering the same in writing to such entity, at the addresses set forth on the cover page hereof. 12. Entire Agreement. This Bond Purchase Agreement, when accepted by the Authority and the City, shall constitute the entire agreement among the Authority, the City and the Underwriter and is made solely for the benefit of the Authority, the City and the Underwriter (including the successors or assigns of any Underwriter). Except as provided in Section 16 below, no other person shall acquire or have any right hereunder by virtue hereof, except as provided herein. Page 254 20 All the Authority’s and the City’s representations, warranties and agreements in this Bond Purchase Agreement shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Underwriter, until the earlier of (a) delivery of and payment for the Bonds hereunder, and (b) any termination of this Bond Purchase Agreement. 13. Definitions. Terms not otherwise defined herein shall have the same meaning as when used in the Indenture or the Lease. 14. 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. 15. State of California Law Governs. The validity, interpretation and performance of the Authority Documents shall be governed by the laws of the State. 16. No Assignment. The rights and obligations created by this Bond Purchase Agreement shall not be subject to assignment by the Underwriter, the Authority or the City without the prior written consent of the other parties hereto. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Page 255 S-1 17. Counterparts. This Bond Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. STIFEL, NICOLAUS & COMPANY, INCORPORATED By: Managing Director The foregoing is hereby agreed to and accepted as of the date first above written: RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY By: Title: Time of Execution: _____________ p.m. California time CITY OF RANCHO CUCAMONGA By: Title: Time of Execution: _____________ p.m. California time [EXECUTION PAGE OF BOND PURCHASE AGREEMENT] Page 256 A-1 EXHIBIT A MATURITY SCHEDULE RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 LEASE REVENUE BONDS (FIBER OPTICS PROJECT) $_____________ Series A Bonds (Tax-Exempt) MATURITY SCHEDULE Maturity (November 1) Principal Amount Interest Rate Yield Price 10% Test Satisfied* 10% Test Not Satisfied Subject to Hold-The- Offering- Price Rule 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 20__(T) 20__(T) (T) Term Bond. (C) Priced to optional call at [par] on November 1, 20__. * At the time of execution of this Bond Purchase Agreement and assuming orders are confirmed by the close of the business day immediately following the date of this Bond Purchase Agreement. Page 257 A-2 RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 LEASE REVENUE BONDS (FIBER OPTICS PROJECT) $_____________ Series B Bonds (Taxable) MATURITY SCHEDULE Maturity (November 1) Principal Amount Interest Rate Yield Price 2020 2021 2022 2023 2024 2025 Page 258 B-1 EXHIBIT B FORM OF ISSUE PRICE CERTIFICATE RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 LEASE REVENUE BONDS (FIBER OPTICS PROJECT) $_____________ Series A Bonds (Tax-Exempt) ISSUE PRICE CERTIFICATE [TO COME FROM BOND COUNSEL] Page 259 60285.00031\31718666.1 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Best Best & Krieger LLP Attention: Mrunal Shah, Esq. 3390 University Avenue, 5th Floor Riverside, CA 92501 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. RELEASE OF LIEN AND TERMINATION This RELEASE OF LIEN AND TERMINATION (this “Release”) is made as of January 16, 2019 by the City of Rancho Cucamonga (the “City”). WITNESSETH: WHEREAS, the City previously entered into the agreements listed below in (a), (b) and (c), each such document creates an encumbrance on the real property described in Exhibit A attached hereto (the “Property”) for the purpose of refinancing the acquisition of a certain park known as Central Park described therein (the “1988 Certificates”) as follows: (a) Lease Agreement dated as of October 1, 1988, by and between the City of Rancho Cucamonga, a California municipal corporation, and the California Cities Financing Corporation, a California non-profit public benefit corporation (“CCFC”), under the terms and provisions contained therein, recorded October 4, 1988, as Document No. 88-333217 of Official Records of San Bernardino County; and (b) Site Lease, dated as of October 1, 1988, between CCFC and the City, recorded October 4, 1988, as Document No. 88-333216; and (c) An Assignment Agreement, dated as of October 1, 1988, between CCFC and the Trustee, recorded October 4, 1988, as Document No. 88-333218. WHEREAS, for purposes of this Release, each of the documents referred to in (a) through (c) above will be referred to collectively as the “Agreements;” and WHEREAS, the City has refinanced the 1988 Certificates and the Property is no longer required to secure the 1988 Certificates; and Page 260 2 60285.00031\31718666.1 WHEREAS, CCFC was subsequently dissolved in 2013 without releasing the Agreements therefor there is no signature available to sign a Release; and WHEREAS, the City desires to cause the filing of this Release in the official records of the Recorder of the County of San Bernardino to release and terminate any and all liens and encumbrances on the Property created by the Agreements upon payment in full of the 1998 Certificates. NOW, THEREFORE, the parties hereto hereby agree as follows: 1. The Resolution No. ____ attached hereto as Exhibit B confirms the above facts. 2. The foregoing recitals are true and correct and by this reference are incorporated herein. The parties hereto acknowledge and agree that any lien or encumbrance for their respective part on the Property created by the Agreements is hereby terminated and released without recourse, representation or warranty, and each of the Agreements is hereby terminated. 3. This Release shall be binding on and inure to the benefit of the parties and their successors and assigns. 4. This Release shall be governed by the laws of the State of California. (Signature page follows) Page 261 S-1 60285.00031\31718666.1 IN WITNESS WHEREOF, each of the parties hereto have caused this Release to be executed by the respective duly authorized officers as of the day and year first above written. CITY OF RANCHO CUCAMONGA By: ______________________________________ John Gillison City Manager ATTEST: By: Janice C. Reynolds City Clerk -Signature Page- Release of Lien and Termination Page 262 A-1 60285.00031\31718666.1 EXHIBIT A DESCRIPTION OF THE PROPERTY That parcel of land in the City of Rancho Cucamonga, County of San Bernardino, State of California, described as follows: LOTS 1 THROUGH 11, INCLUSIVE OF TRACT 12809, AS SHOWN ON PAGES 1, 2, AND 3 BOOK NO. 175 OF RECORDS IN THE OFFICE OF THE COUNTY RECORDER IN THE COUNTY OF SAN BERNARDINO, CALIFORNIA. EXCEPT THEREFROM ALL OIL, GAS, MINERALS, HYDROCARBON AND KINDRED SUBSTANCES LYING BELOW A DEPTH OF 500 FEET, BUT WITHOUT THE RIGHT OF SURFACE ENTRY, AS GRANTED TO WESTERN SUPPLY CORP. BY DEED RECORDED SEPTEMBER 17, 1979 IN BOOK 9772 PAGE 1262 OF OFFICIAL RECORDS. ALSO EXCEPTING THEREFROM ALL OIL, GAS, MINERALS, HYDROCARBON AND KINDRED SUBSTANCES LYING BELOW A DEPTH OF 500 FEET, BUT WITHOUT THE RIGHT OF SURFACE IN BOOK 7563, PAGE 227 OF OFFICIAL RECORDS. Page 263 B-1 60285.00031\31718666.1 EXHIBIT B RESOLUTION NO. ___ OF THE CITY OF RANCHO CUCAMONGA Page 264 60285.00031\31718666.1 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 ) ) COUNTY OF ________________ ) On ___________________, before me, _____________________________, a 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) Page 265 60285.00031\31718666.1 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 ) ) COUNTY OF ________________ ) On ___________________, before me, _____________________________, a 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) Page 266 D AT E : J anuary 16, 2019 T O:Chair and Members of the Board F RO M :J ohn R . Gillison, Executive D irector INIT IAT E D B Y:Tamara L . L ayne, F inance D irector Noah Daniels, F inance Manager S UB J E C T:C O NS ID E RAT I O N T O AP P RO V E T HE I S S UANC E O F B O ND S AND L E G AL D O C UM E NT S RE L AT E D T O T HE F INANC I NG O F T HE D E S IG N, C O NS T RUC T I O N AND AC Q UIS IT IO N O F I M P RO V E M E NT S T O T HE C I T Y O F RANC HO C UC AM O NG A'S E X I S T I NG F I B E R O P T I C NE T WO RK. RE COMMENDAT ION: I t is recommended that the Board of Directors of the R ancho C ucamonga P ublic F inance A uthority (the “A uthority”) adopt the resolution to approve the issuance of its 2019 L ease R evenue Bonds (F iber Optic Project), Series A B onds (Tax-E xempt) and Series B Bonds (Taxable) (the “B onds”) in an amount not to exceed $14,500,000 to f inance improvements to the C ity of Rancho Cucamonga’s (the “City”) existing fiber optic network (the “P roject”) and approve all related legal documents, a preliminary official statement, a bond purchase agreement and a continuing disclosure agreement by adopting a resolution. BACKGROUND: At its September 20, 2017 meeting, the C ity C ouncil adopted the City’s Fiber Optic Master P lan that was prepared by Magellan A dvisors. T he Master Plan showed that the opportunity to provide gigabit broadband service is important not only in positioning the City f or f uture economic development, but to attract businesses and commerce into the City. As noted in the staf f report, P hase 1 of the Master P lan incorporates several important objectives including: Establishing a formal memorandum of understanding with a private broadband provider to partner with the C ity in establishing and marketing the proposed broadband utility (approved by C ity Council at its March 21, 2018 meeting); Beginning the first phase of the network design in repurposing existing assets and filling in gaps in our network infrastructure (in process); and I mplementing a six-year capital investment plan in which the conduit gaps between the C ity and traf f ic conduits will be connected, interconnect to the C ity’s new data center and expand the conduit infrastructure to key strategic areas throughout the City (in process). I n furtherance of the F iber O ptic Master P lan, the City plans to f inance the acquisition, design, construction and equipping of a f iber optic network (the “Project”) throughout the C ity. P ursuant to the laws of the State of C alif ornia, the City cannot directly issue bonds which are secured by payments from the City’s General F und for a period in excess of one year. However, a joint powers authority created pursuant to J oint Exercise of P owers Act, Government Code S ection 6500 et. seq. (the “A ct”) may issue bonds to finance capital improvements of its member agencies. As such, it is proposed that the Authority will issue the Page 267 Bonds to finance approximately $13.5 million (representing Phase 1 of the P roject) of the estimated $21.6 million aggregate price to acquire, design, construct and equip the Project. The B onds will be issued under the J oint E xercise of Powers Act, Government Code S ection 6500 et. seq. (the “Act”) and a portion of the Bonds will be issued as tax-exempt obligations. The Bonds will be repaid pursuant to the payments made by the City to the Authority pursuant to the L ease A greement described below. Under S tate law and certain court case decisions, the C ity is authorized to enter into a lease financing so long as such financing is subject to non-appropriation and/or abatement. T he L ease Agreement is subject to non-appropriation and abatement. On D ecember 5, 2018, the City C ouncil set a public hearing regarding the f inancing of the design, construction and acquisition of a f iber optic network for December 19, 2018 as required by the Act. Sections 6586 and 6586.5 of the Act state that the City may participate in the financing with the A uthority so long as it (1) makes a determination that the financing will provide significant public benef its such as: (a) demonstrable savings in the effective interest rate, bond preparation, bond underwriting and/or bond issuance costs; or (b) more ef f icient delivery of local agency services to residential and commercial development; or (c) employment benefits from undertaking the Project in a timely fashion; or (d) more ef f icient delivery of local agency services to residential and commercial development; and (2) calls a public hearing. City staff believes that the P roject will allow for more ef f icient delivery of C ity services to residential and commercial development. T he City C ouncil conducted such hearing on D ecember 19, 2018 and has made the required determinations. ANALY S IS: T he attached resolution authorizes the issuance of the Bonds and entry by the Authority into certain agreements. I ndenture of Trust: T he I ndenture provides f or the manner of payment of the Bonds, maturity dates and interest rates, early redemption provisions; and establishes the f unds and accounts specifically pledged to the repayment of the Bonds and the remedies upon an event of default. L ease Agreement: T he L ease Agreement provides the terms and conditions pursuant to which the C ity will lease to the Authority the Goldy S. L ewis Community C enter and the J ames L . B rulte Senior Center and accompanying parking lot (the “L eased Premises). I n consideration of such lease, the Authority will provide proceeds of the B onds to f inance the Project. T he Authority will then lease the L eased Premises to the C ity for its use for which the City will make certain payments to the A uthority which are subject to abatement and annual appropriation. Such payments serve as the source of repayment of the Bonds. C ontinuing Disclosure Agreement: T his Agreement is included as an appendix to the P reliminary Official Statement and outlines the inf ormation that the Authority and City will agree to provide, on an annual basis, to the municipal bond markets. D isclosure is required annually and on a timely basis f or enumerated material events. Official S tatement: T he Official S tatement describes the general terms of the B onds, security f or repayment and discloses potential risks to prospective investors including disclosure on the stipulated judgment. I t will describe, among other things, inf ormation regarding the Authority, the C ity’s general fund revenues and expenditures, characteristics of the P roject and inherent known risk f actors associated with the B onds. T he P O S is distributed to prospective investors prior to the sale so that they can make informed decisions on whether to purchase the Bonds. Bond P urchase Agreement: T he A uthority and C ity will enter into a Bond P urchase Agreement with S tifel, Nicolaus & C ompany, I ncorporated, as the underwriter (the “Underwriter”), which sets f orth the terms and conditions pursuant to which the Underwriter will purchase the Bonds f rom the A uthority. F ollowing approval of the resolution, C ity staf f will authorize the sale of the B onds to the Underwriter, and it is anticipated that the B onds will be sold on or about F ebruary 14, 2019. No further action will be required by the C ity C ouncil. Page 268 FISCAL IMPACT: T he C ity is required to make the annual L ease P ayments from its General F und, excess revenues from the Project or any other source of funds legally available to the C ity to make L ease P ayments. T he Authority is not required to make payment f rom any sources. COUNCIL GOAL(S) ADDRE S S E D: T he implementation and f inancing of the F iber Optic Master Plan will enhance the C ity’s position as the premier community in our region by expanding the availability of high speed broadband services to businesses within the program’s service area which will improve economic development. T he A uthority was established to assist with the f inancing of capital improvements of its member agencies including the C ity. AT TAC HM E NT S : D escription Attachment 1 - R esolution A uthorizing I ssuance of B onds Attachment 2 - F orm of I ndenture of Trust Attachment 3 - F orm of L ease A greement Attachment 4 - F orm of P reliminary Official S tatement (includes C ontinuing Disclosure Agreement) Attachment 5 - F orm of B ond Purchase A greement Page 269 Page 1 of 8 60285.00031\31485515.7 RESOLUTION NO. PFA 2019-001 RESOLUTION OF THE BOARD OF DIRECTORS OF THE RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY AUTHORIZING THE ISSUANCE OF ITS LEASE REVENUE BONDS IN THE ORIGINAL PRINCIPAL AMOUNT OF NOT TO EXCEED $14,500,000 IN CONNECTION WITH THE FINANCING OF THE ACQUISITION, DESIGN, CONSTRUCTION AND EQUIPPING OF A FIBER OPTIC NETWORK, AUTHORIZING AND DIRECTING EXECUTION OF AN INDENTURE OF TRUST, A LEASE AGREEMENT, A BOND PURCHASE AGREEMENT AND AUTHORIZING AN OFFICIAL STATEMENT AND OTHER OFFICIAL ACTIONS AND EXECUTION OF RELATED DOCUMENTS WHEREAS, the Rancho Cucamonga Public Finance Authority (the “Authority”) has been formed pursuant to a Joint Exercise of Powers Agreement by and among the City of Rancho Cucamonga (the “City”), the Rancho Cucamonga Fire Protection District, and the Former Rancho Cucamonga Redevelopment Agency and is authorized under said Agreement and under the laws of the State of California to finance the acquisition and construction of public capital improvements for the City; and WHEREAS, the City has requested the Authority to issue its bonds for the purpose of providing funds to enable the City to finance certain improvements of benefit to the City, specifically the costs of acquisition, design, construction and equipping of a fiber optic network within the City (the “Project”); and WHEREAS, to provide such financing for the Project, the Authority proposes to issue its revenue bonds in an aggregate principal amount of not to exceed $14,500,000 under the provisions of Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “Act”), such Bonds may be issued as one or more series of tax-exempt bonds and/or taxable bonds in such amounts as may be determined by the City as stated herein, and which are proposed to be payable from the revenues to be derived by the Authority from lease payments to be made by the City for the lease of certain facilities pursuant to a Lease Agreement relating to the financing of the Project and the lease of the Leased Premises, defined below (the “Lease Agreement”); and WHEREAS, the City Council of the City has determined that the facility consisting of the Goldy S. Lewis Community Center and James L. Brulte Senior Center and accompanying parking lot should be the leased assets under the Lease Agreement (the “Leased Premises”); and WHEREAS, a portion of the proceeds of the Bonds will be deposited in the Acquisition and Construction Fund to be established pursuant to the Indenture of Trust, by and between the Authority and Wells Fargo Bank, N.A. (the “Indenture”), which is hereinafter approved, and will be applied by the Authority and the City to the acquisition, Page 270 Page 2 of 8 60285.00031\31485515.7 design, construction and installation of the Project pursuant to the Lease Agreement; and WHEREAS, Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) has proposed to purchase and underwrite the Bonds and has presented to the Authority a form of Bond Purchase Agreement for the Bonds, to be entered into among the Authority, the City and the Underwriter (the “Purchase Agreement”), and there is also presented to the Authority a proposed form of Official Statement describing the Bonds, to be used in connection with the marketing thereof by the Underwriter; and WHEREAS, Section 5852.1 of the Government Code of the State of California (“Section 5852.1”) provides that the Authority 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 Bonds, good faith estimates of: (a) the true interest cost of the Bonds, (b) the finance charge of the Bonds, meaning the sum of all fees and charges paid to third parties, (c) the amount of proceeds of the Bonds received less the finance charge described above and any reserves or capitalized interest paid or funded with proceeds of the Bonds and (d) the sum total of all debt service payments on the Bonds calculated to the final maturity of the Bonds plus the fees and charges paid to third parties not paid with the proceeds of the Bonds; and WHEREAS, in accordance with Section 5852.1, the Authority has obtained such good faith estimates from Fieldman, Rolapp & Associates, Inc., the Authority’s municipal advisor (the “Municipal Advisor”), and such estimates are disclosed in Exhibit A attached hereto; and WHEREAS, the Authority wishes at this time to authorize all proceedings relating to the issuance and sale of the Bonds and all other agreements and documents relating thereto. WHEREAS, the Board of Directors of the Authority (the “Board”) has duly considered such transactions and has determined that it approves said transactions in the public interests of the City and the Authority; NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED by the Board of Directors of the Rancho Cucamonga Public Finance Authority as follows: 1. Findings and Determinations. (a) Pursuant to the Act, the Board hereby finds and determines that the issuance of the Bonds will result in significant public benefits within the contemplation of Section 6586.5 of the Act. (b) The Board finds and determines that the above recitals are true and correct and that the fair rental value of Leased Premises exceeds the net present value of Lease Payments to be made under the Lease Agreement. (c) The Board finds that a negotiated sale with the Underwriter will result in time savings and sale effectiveness for the Bonds. Page 271 Page 3 of 8 60285.00031\31485515.7 2. Issuance of Bonds. The Board hereby authorizes the issuance of the Bonds for the purpose of funding the Project under and pursuant to the Act, in the maximum original principal amount not to exceed $14,500,000. The Bonds will be issued as two series of Bonds, the “Tax-Exempt Series A Bonds” and the “Taxable Series B Bonds” provided that the provisions of Sections 2 and 4 of this Resolution shall have been met on the date of sale. 3. Approval of Financing Documents. The Board hereby approves each of the following documents in substantially the respective forms on file with the Secretary, together with such additions thereto and changes therein as Bond Counsel shall deem necessary, desirable or appropriate, the execution of which by the Chairperson, the Vice Chairperson, the Executive Director, or the Treasurer (the “Authorized Officers”) shall be conclusive evidence of the approval of any such additions and changes: (1) the Indenture of Trust relating to the issuance of the Bonds and to the Project, by and between Wells Fargo Bank, N.A. (the “Trustee”) and the Authority; (2) the Lease Agreement relating to the lease and sub-lease of the Leased Premises between the City and the Authority for the purpose of financing the Project; and (3) the Purchase Agreement by and among the Authority, the City and the Underwriter. The Authorized Officers are each hereby authorized and directed to execute, and the Secretary is hereby authorized and directed to attest and affix the seal of the Authority to, the final form of each of the foregoing documents and agreements for and in the name and on behalf of the Authority. The Board hereby authorizes the delivery and performance of each of the foregoing documents and agreements. 4. Sale of Bonds. The Board hereby approves the sale of the Bonds by the Authority by negotiation with the Underwriter, pursuant to the Purchase Agreement in substantially the form on file with the Secretary, together with such additions thereto and changes therein as Bond Counsel shall deem necessary, desirable or appropriate, the execution of which by an Authorized Officer shall be conclusive evidence of the approval of any such additions and changes. The Authorized Officers are hereby authorized and directed to execute the final form of the Purchase Agreement for and in the name and on behalf of the Authority upon the submission of an offer by the Underwriter to purchase the Bonds, which offer is consistent with the requirements of this Resolution. (a) The amount of Underwriter’s discount for the Tax-Exempt Series A Bonds shall be not more than 0.65% of the aggregate principal amount thereof and the true interest cost to be represented by the Tax Exempt Series A Bonds (taking into account any original issue discount or premium on the sale thereof) shall not exceed 4.50%. Page 272 Page 4 of 8 60285.00031\31485515.7 (b) The amount of Underwriter’s discount for the Taxable Series B Bonds shall be not more than 0.65% of the aggregate principal amount thereof and the true interest cost to be represented by the Taxable Series B Bonds (taking into account any original issue discount or premium on the sale thereof) shall not exceed 4.50%. 5. Official Statement; Continuing Disclosure. The Board hereby approves the preparation of, and hereby authorizes the Executive Director or the Treasurer to deem final within the meaning of Rule 15c2-12 of the Securities and Exchange Commission except for permitted omissions, a preliminary form of Official Statement of the Bonds. The Executive Director or the Treasurer is hereby authorized to execute the final Official Statement in the name and on behalf of the Authority, including any modifications resulting from additions thereto and changes therein as Disclosure Counsel shall deem necessary, desirable or appropriate, with the execution of the final Official Statement by the Chairperson, Executive Director or the Treasurer to be conclusive evidence of the approval of any such additions and changes. The Board hereby authorizes the Underwriter to distribute a preliminary form of the Official Statement to potential investors upon authorization by the Executive Director or his designee. The Executive Director or the Treasurer is further authorized to sign on behalf of the Authority a continuing disclosure agreement with respect to the financing, in such form as may be approved by Bond Counsel. 6. Appointment of Professionals. The following professionals are hereby approved to provide services in connection with the issuance of the Bonds: (a) Trustee. Wells Fargo Bank, N.A. is appointed as Trustee pursuant to the Indenture to take any and all action provided therein to be taken by the Trustee; (b) Municipal Advisor. Fieldman, Rolapp & Associates, Inc., is hereby appointed to provide municipal advisory services; and (c) Bond and Disclosure Counsel. Best Best & Krieger LLP is hereby appointed as bond and disclosure counsel in connection with the issuance of the Bonds. 7. Official Actions. The Authorized Officers, the Secretary, and any and all other officers of the Authority are hereby authorized and directed, for and in the name and on behalf of the Authority, to do any and all things and take any and all actions, including obtaining title insurance for the Leased Premises, obtaining a rating on the Bonds and/or a municipal bond insurance policy and a debt reserve fund surety bond, and including execution and delivery of any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they, or any of them, may deem necessary or advisable in connection with the issuance and sale of the Bonds. Page 273 Page 5 of 8 60285.00031\31485515.7 8. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. PASSED, APPROVED, and ADOPTED this 16th day of January 2019. AYES: NOES: ABSENT: ABSTAINED: L. Dennis Michael, Chairperson ATTEST: Janice C. Reynolds, Secretary Page 274 Page 6 of 8 60285.00031\31485515.7 I, JANICE C. REYNOLDS, SECRETARY of the Rancho Cucamonga Public Finance Authority, do hereby certify that the foregoing Resolution was duly passed, approved and adopted by the Board of Directors of the Rancho Cucamonga Public Finance Authority at a Regular Meeting of said Board of Directors held on the 16th day of January 2019. Executed this ____ day of ______________, 2019, at Rancho Cucamonga, California. Janice C. Reynolds, Secretary Page 275 Page 7 of 8 60285.00031\31485515.7 EXHIBIT A GOOD FAITH ESTIMATES The good faith estimates set forth herein are provided with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the Authority by the Municipal Advisor in consultation with the Underwriter. Principal Amount. The Municipal Advisor has informed the Authority that, based on the financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the Bonds to be sold is $12,160,000 (the “Estimated Principal Amount”), which excludes approximately $1,393,156.05 of net premium estimated to be generated based on current market conditions. Net premium is generated when, on a net aggregate basis for a single issuance of bonds, the price paid for such bonds is higher than the face value of the bonds. True Interest Cost of the Bonds. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the 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 Bonds, is 3.75%. Finance Charge of the Bonds. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $291,794. Amount of Proceeds to be Received. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the Authority, on behalf of the City, for the sale of the Bonds, less the finance charge of the Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the Bonds, is $13,261,362. Total Payment Amount. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates 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 Bonds, plus the finance charge for the Bonds, as described above, not paid with the proceeds of the Bonds, calculated to the final maturity of the Bonds, is $19,780,470 (excluding any offsets from reserves or capitalized interest). Page 276 Page 8 of 8 60285.00031\31485515.7 The foregoing estimates constitute good faith estimates only. The actual principal amount of the Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being different from the Estimated Principal Amount, (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the financing plan or finance charges, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the Authority, on behalf of the City, based on the timing of the need for proceeds of the Bonds and other factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the Authority. Page 277 60285.00031\31484041.4 ______________________________________________________________________________ INDENTURE OF TRUST Dated as of __________ 1, 2019 by and between WELLS FARGO BANK, N.A. as trustee and the RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY Authorizing the Issuance of Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project) $__________ Series A (Tax-Exempt) and $__________ Series B (Taxable) ______________________________________________________________________________ Page 278 60285.00031\31484041.4 INDENTURE OF TRUST This INDENTURE OF TRUST (this “Indenture”), made and entered into __________ 1, 2019, is by and between the RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY, a joint powers authority duly organized and existing under the laws of the State of California (the “Authority”), and WELLS FARGO BANK, N.A., a national banking association, organized and existing under the laws of the United States of America, as trustee (the “Trustee”); WI T N E S S E T H : WHEREAS, the Authority is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement by and among the City of Rancho Cucamonga (the “City”), and the Rancho Cucamonga Fire Protection District (the “District”); and WHEREAS, under Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Bond Law”) the Authority is authorized to borrow money for the purpose of financing the acquisition of bonds, notes and other obligations of, or for the purpose of making loans to, public entities including the City, and to provide financing and refinancing for public capital improvements of public entities including the City; and WHEREAS, the City has requested the Authority to issue its 2019 Lease Revenue Bonds (Fiber Optic Project), which are designated as $__________ Series A (Tax-Exempt) (the “Series A Bonds”) and $__________ Series B (Taxable) (the “Series B Bonds,” and together with the Series A Bonds, the “Bonds”) for the purpose of providing moneys for the Authority to finance the acquisition, design, construction and equipping of a fiber optic network in the City; and WHEREAS, in order to provide a source of revenues to enable the Authority to pay the principal of and interest and premium, if any, on the Bonds when due, the City proposes to lease to the Authority certain land and facilities owned by the City and to lease back said land and facilities (the “Leased Premises”) from the Authority, all pursuant to a Lease Agreement dated as of __________ 1, 2019 (the “Lease Agreement”) by and between the Authority and the City and to pay semiannual lease payments in consideration thereof to its Authority, all in the manner and on the terms provided in the Lease Agreement; and WHEREAS, the Authority has determined that 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 and interest and premium (if any) thereon, the Authority has authorized the execution and delivery of this Indenture; and WHEREAS, the Authority hereby certifies that all acts and proceedings required by law necessary to make the Bonds, when executed by the Authority, authenticated and delivered by the Trustee, and duly issued, the valid, binding and legal special obligations of the Authority, and to constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of the Indenture have been in all respects duly authorized; Page 279 60285.00031\31484041.4 2 NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the payment of the principal of and the interest and premium (if any) 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 considerations, the receipt and adequacy whereof is hereby acknowledged, the Authority does hereby covenant and agree with the Trustee, for the benefit of the respective Owners from time to time of the Bonds, as follows: ARTICLE I DEFINITIONS; RULES OF INTERPRETATION SECTION 1.01 Definitions. Unless the context otherwise requires, the terms defined in this Section 1.01 shall, for all purposes of this Indenture and of any supplemental indenture hereto and of any certificate, opinion or other document herein mentioned, have the meanings herein specified, to be equally applicable to both the singular and plural forms of any of the terms herein defined. In addition, all capitalized terms used herein and not otherwise defined in this Section 1.01 shall have the respective meanings given such terms in the Lease Agreement. “Acquisition and Construction Fund” means the Acquisition and Construction Fund established pursuant to Section 3.04 hereof. “Authority” means the Rancho Cucamonga Public Finance Authority, a joint powers authority duly organized and existing under the laws of the State. “Authorized Representative” means: (a) with respect to the Authority, its Chairperson, Vice Chairperson, Executive Director, Treasurer or Secretary or any other person designated as an Authorized Representative of the Authority by a Written Certificate of the Authority signed by its Chairperson, Vice Chairperson, Executive Director or Treasurer and filed with the Secretary of the Authority and the Trustee; and (b) with respect to the City, its Mayor, Mayor Pro Tem, City Manager, Finance Director, City Clerk, or any other person designated as an Authorized Representative of the City by a Written Certificate of the City signed by its Mayor, Mayor Pro Tem, City Manager, Finance Director or Finance Manager, and filed with the Secretary of the Authority and the Trustee. “Bond Counsel” means (a) Best Best & Krieger LLP, or (b) any other attorney or firm of attorneys appointed by or acceptable to the Authority of nationally-recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Tax Code. “Bond Fund” means the fund by that name established and held by the Trustee pursuant to Section 5.01. “Bond Law” means the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State, as in existence on the Closing Date or as thereafter amended from time to time. Page 280 60285.00031\31484041.4 3 “Bond Year” means each twelve-month period extending from [May] 2 in one calendar year to [May 1] of the succeeding calendar year, both dates inclusive; except that the first Bond Year shall commence on the Closing Date and extend to and including [May 1, 2019]. “Bonds” means the $__________ aggregate principal amount of Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project), Series A (Tax- Exempt) and the $__________ aggregate principal amount of Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project), Series B (Taxable) authorized by and at any time Outstanding pursuant to this Indenture. “Book-Entry Depository” means DTC or any successor as Book-Entry Depository for the Bonds, appointed pursuant to Section 2.11. “Business Day” means a day (other than a Saturday or a Sunday) on which banks are not required or authorized to remain closed in the city in which the Office of the Trustee is located. “City” means the City of Rancho Cucamonga, a municipal corporation organized under the laws of the State. “Closing Date” means __________, 2019, being the date of delivery of the Bonds to the Original Purchaser. “Costs of Issuance” means all expenses incurred in connection with the authorization, issuance, sale and delivery of the Bonds and the application of the proceeds of the Bonds, including but not limited to all compensation, fees and expenses (including but not limited to fees and expenses for legal counsel) of the Authority or the City, initial fees and expenses of the Trustee and its counsel, title insurance premiums, appraisal fees, compensation to any financial consultants or underwriters, legal fees and expenses, filing and recording costs, rating agency fees, costs of preparation and reproduction of documents and costs of printing. “Costs of Issuance Fund” means the fund by that name established and held by the Trustee pursuant to Section 3.03. “Debt Service” means, during any period of computation, the amount obtained for such period by totaling the following amounts: (a) the principal (b) sinking fund payments required to be made pursuant to Section 4.01(b) for the Term Bonds; amount of all Outstanding Serial Bonds coming due and payable by their terms in such period; and (c) the interest which would be due during such period on the aggregate principal amount of Bonds which would be Outstanding in such period if the Bonds are retired as scheduled, but deducting and excluding from such aggregate amount the amount of Bonds no longer Outstanding. “DTC” means The Depository Trust Company, New York, New York, and its successors and assigns. “Event of Default” means any of the events specified in Section 7.01. “Fair Market Value” means, with respect to any investment, the price at which a willing buyer would purchase such investment from a willing seller in a bona fide, arm’s length transaction Page 281 60285.00031\31484041.4 4 (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of Section 1273 of the Tax Code) and, otherwise, the term “Fair Market Value” means the acquisition price in a bona fide arm’s length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, or (iii) the investment is a United States Treasury Security - State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt. “Federal Securities” means: (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), the payment of principal of and interest on which are unconditionally and fully guaranteed by the United States of America; (b) any obligations the principal of and interest on which are unconditionally guaranteed by the United States of America; and (c) pre-refunded municipal obligations defined as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice: and (i) which are rated, based on the escrow, in the highest rating category of S&P and Moody’s or any successors thereto; or (ii)(A) which are fully secured as to principal and interest and redemption premium, if any, by a fund consisting only of cash or obligations described in paragraphs (a) or (b) above, which fund may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (B) which fund is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to above, as appropriate. “Fiscal Year” means any twelve-month period extending from July 1 in one calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve-month period selected and designated by the Authority as its official fiscal year period. “Indenture” means this Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture pursuant to the provisions hereof. Page 282 60285.00031\31484041.4 5 “Independent Accountant” means any certified public accountant or firm of certified public accountants appointed and paid by the Authority or the City, and who, or each of whom (a) is in fact independent and not under domination of the Authority or the City; (b) does not have any substantial interest, direct or indirect, in the Authority or the City; and (c) is not connected with the Authority or the City as an officer or employee of the Authority or the City but who may be regularly retained to make annual or other audits of the books of or reports to the Authority or the City. “Information Services” means in accordance with then-current guidelines of the Securities and Exchange Commission, the Electronic Municipal Market Access System (referred to as “EMMA”), a facility of the Municipal Securities Rulemaking Board (at http://emma.msrb.org), or such service or services as the Authority may designate in a certificate delivered to the Trustee. “Insurance and Condemnation Fund” means the fund by that name established and held by the Trustee pursuant to Section 5.07. “Interest Account” means the account by that name established in the Bond Fund pursuant to Section 5.02. “Interest Payment Date” means each [May 1] and [November 1] commencing [May 1, 2019]. “Lease Agreement” means that certain Lease Agreement, dated as of __________ 1, 2019, by and between the Authority, as lessor and the City, as lessee. “Miscellaneous Rent” means the amounts of additional rental which are taxable by the City pursuant to Section 4.8 of the Lease Agreement. “Moody’s” means Moody’s Investors Service, its successors and assigns. “Net Proceeds” means all amounts derived from any policy of casualty insurance or title insurance with respect to the Leased Premises, or the proceeds of any taking of the Leased Premises or any portion thereof in eminent domain proceedings (including sale under threat of such proceedings), to the extent remaining after payment therefrom of all expenses incurred in the collection and administration thereof. “Office” means with respect to the Trustee, the corporate trust office of the Trustee at _______________, Attention: Corporate Trust Department, or at such other or additional offices as may be specified in writing to the Authority and the City, except 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. “Original Purchaser” means Stifel, Nicolaus & Company, Incorporated, as the original purchaser of the Bonds upon their delivery by the Trustee on the Closing Date. “Outstanding,” when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 11.09) all Bonds theretofore, or thereupon being, authenticated and Page 283 60285.00031\31484041.4 6 delivered by the Trustee under this Indenture except: (a) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds with respect to which all liability of the Authority shall have been discharged in accordance with Section 10.02, including Bonds (or portions thereof) described in Section 11.10; 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,” whenever used herein with respect to a Bond, means the person in whose name the ownership of such Bond is registered on the Registration Books. “Permitted Investments” means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein: 1. Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. 2. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): a. Farmers Home Administration (FmHA) Certificates of beneficial ownership b. Federal Housing Administration Debentures (FHA) c. General Services Administration Participation certificates d. Government National Mortgage Association (GNMA or “Ginnie Mae”) GNMA - guaranteed mortgage-backed bonds GHMA - guaranteed pass-through obligations (participation certificates) (not acceptable for certain cash-flow sensitive issues.) e. U.S. Maritime Administration Guaranteed Title XI financing f. U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds 3. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): a. Federal Home Loan Bank System Page 284 60285.00031\31484041.4 7 Senior debt obligations (Consolidated debt obligations) b. Federal Home Loan Mortgage Corporation (FHLMC or “Freddie Mae”) Participation Certificates (Mortgage-backed securities) Senior debt obligations c. Federal National Mortgage Association (FNMA or “Fannie Mae”) Mortgage-backed securities and senior debt obligations (excluded are stripped mortgage securities which are valued greater than par on the portion of unpaid principal). d. Student Loan Marketing Association (SLMA or “Sallie Mae”) Senior debt obligations e. Resolution Funding Corp. (REFCORP) Only the interest component of REFCORP strips which have been stripped by request to the Federal Reserve Bank of New York in book entry form are acceptable. f. Farm Credit System Consolidated systemwide bonds and notes 4. Money market funds registered under the Federal Investment Company of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G; AAAm, or AA-m and if rated by Moody’s rated Aaa, Aa1 or Aa2, including funds for which the Trustee, its parent holding company, if any, or any affiliates or subsidiaries of the Trustee provided investment advisory or other management services. 5. Certificates of deposit secured at all times by collateral described in (1) and/or (2) above. CD’s must have a one year or less maturity. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks whose term obligations are rated “A-1” or better by S&P and “Prime-1” by Moody’s which may include the Trustee and its affiliates. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral. 6. Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, or fully secured at all times by collateral described in (1) and/or (2) above. 7. Investment agreements with a domestic or foreign bank or corporation, the long- term debt or financial strength of which, or, in the case of a guaranteed corporation the long-term debt, or, in the case of a monoline financial guarantee insurance company, financial strength, of the guarantor is rated in at least the “double A” category by Moody’s and S&P, and by the terms of the investment agreement: Page 285 60285.00031\31484041.4 8 a. interest payments are to be made to the Trustee at all times and in the amounts as necessary to pay debt service (or, if the investment agreement is for the construction fund, construction draws) on the Bonds; b. the invested funds are available for withdrawal without penalty or premium, at any time upon not more than seven days’ prior notice; the Issuer and the Trustee hereby agree to give or cause to be given notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid; c. the investment agreement shall state that it is the unconditional and general obligation of; and is not subordinated to any other obligation of, the provider thereof or, if the provider is a bank, the agreement or the opinion of counsel shall state that the obligation of the provider to make payments thereunder ranks pari passu with the obligations of the provider to its other depositors and its other unsecured and unsubordinated creditors; d. the Issuer or the Trustee receives the opinion of domestic counsel (which opinion shall be addressed to the Issuer and Trustee) that such investment agreement is legal, valid, binding and unenforceable upon the provider in accordance with its terms and of foreign counsel (if applicable) in a form and substance acceptable by the Issuer; e. the investment agreement shall provide that if during its term i) the provider’s rating by either S&P or Moody’s falls below “AA-” or “Aa3”, respectively, the provider shall, at its option, within 10 days of receipt of publication of such downgrade, either (a) collateralize the investment agreement by delivering or transferring in accordance with the applicable state and federal laws (other than by means of entries on the provider’s books) to the Issuer, the Trustee or a third party acting solely as agent therefor (the “Holder of the Collateral”) collateral free and clear of any third party liens or claims the market value of which collateral is maintained at levels and upon such conditions as would be acceptable to S&P and Moody’s to maintain an “A” rating in an “A” rated structured financing (with a market value approach); or (b) repay the principal of and accrued but unpaid interest on the investment (including such other amounts as are required to permit the Trustee to receive the initially contemplated yield through the term of the Agreement), or (c) assign its obligations thereunder to a financial counter-party, acceptable to the Issuer, and rated in the double A category by both Moody’s and S&P; and ii) the provider’s rating by either S&P or Moody’s is withdrawn or suspended or falls below “A-” or “A3”, respectively, the provider must, at the direction of the Issuer or the Trustee (who shall give such direction if so directed by the Issuer), within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the Issuer or Trustee. f. the investment agreement shall state and an opinion of counsel shall be rendered, in the event collateral is required to be pledged by the provider under the terms Page 286 60285.00031\31484041.4 9 of the investment agreement, at the time such collateral is delivered, that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession); or g. the investment agreement must provide that if during its term i) the provider shall default in its payment obligations, the provider’s obligation under the investment agreement shall, at the direction of the Issuer or the Trustee (who shall give such direction if so directed by the Issuer), be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the Issuer or Trustee, as appropriate; and ii) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. (“event of insolvency”), the provider’s obligations shall automatically be accelerated and the amounts invested and accrued but unpaid interest thereon shall be repaid to the Issuer or Trustee, as appropriate. 8. Commercial paper rated at the time of purchase “Prime-1” by Moody’s and “A-1” or better by S&P. 9. Bonds or notes issued by any state or municipality which are rated by Moody’s and S&P in the highest long-term rating categories assigned by such agencies unless such obligations are issued by the State, in which case such obligations are rated in one of the two highest long- term rating categories of S&P and Moody’s. 10. Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of “Prime-1” or “A3” or better by Moody’s and “A-1”, “A-” or better by S&P. 11. Repurchase agreements with financial institutions insured by the FDIC or FSLIC; or any broker-dealer with “retail customers” which falls under the jurisdiction of the Securities Investors Protection Corporation (SIPC); or a bank or other financial institution rated in the top two rating categories by two or more rating agencies; provided that: (a) the over-collateralization is at one hundred and two percent (102%) computed weekly, consisting of such securities as described in this section, item (1) through (4); (b) a third party custodian, the Trustee or the Federal Reserve Bank shall have possession of such obligations; (c) the Trustee shall have perfected a first priority security interest in such obligations; and (d) failure to maintain the requisite collateral percentage will require the Trustee to liquidate the collateral. 12. Pre-refunded municipal bonds rated “Aaa” by Moody’s and “AAA” by S&P. If, however, the issue is only rated by S&P (i.e., there is no Moody’s rating), then the pre-refunded bonds must have been pre-refunded with cash, direct U.S. or U.S. guaranteed obligations, or AAA rated pre-refunded municipals to satisfy this condition. 13. State of California Local Agency Investment Fund (LAIF). Page 287 60285.00031\31484041.4 10 “Principal Account” means the account by that name established in the Bond Fund pursuant to Section 5.02. “Project” means the public capital improvements described in Exhibit C attached hereto as such description may be amended from time to time. “Project Costs” means all costs of payment of, or reimbursement for, acquisition, construction and financing of the Project, including but not limited to, architect and engineering fees, construction contractor payments, costs of feasibility and other reports, inspection costs, permit fees, filing and recording costs, printing costs, reproduction and binding costs, fees and charges of the Trustee, legal fees and charges, financial and other professional consultant fees in connection with the foregoing. “Record Date” means, with respect to any Interest Payment Date, the fifteenth (15th) calendar day of the month preceding such Interest Payment Date whether or not such day is a Business Day. “Redemption Fund” means the fund by that name established pursuant to Section 5.06. “Registration Books” means the records maintained by the Trustee pursuant to Section 2.05 for the registration and transfer of ownership of the Bonds. “Representation Letter” means the letter of representations from the Authority to, or other instrument or agreement of the Authority with, a Book-Entry Depository in which the Authority, among other things, makes certain representations to such Depository with respect to the Bonds, the payment thereof and delivery of notices with respect thereto. “Revenues” means: (a) all amounts received by the Authority or the Trustee pursuant to or with respect to the Lease Agreement, including, without limiting the generality of the foregoing, all of the Miscellaneous Rent (including both timely and delinquent payments, any late charges, and whether paid from any source), but excluding any amounts payable under Section 4.8(d) of the Lease Agreement; and (b) all interest, profits or other income derived from the investment of amounts in any fund or account established pursuant to this Indenture. “S&P” means Standard & Poor’s Ratings Services, a division of Standard & Poor’s Financial Services LLC business, its successors and assigns. “Securities Depositories” means The Depository Trust Company, 55 Water Street, 50th Floor, New York, NY 10041-0099, Attention: Call Notification Department, Fax (212) 855-7232; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the Authority may designate in a Written Certificate of the Authority delivered to the Trustee. “Serial Bonds” means the Series A Bonds maturing on [May 1] in each of the years 20__ through 20__, inclusive and the Series B Bonds maturing on [May 1] in each of the years 20__ through 20__, inclusive. Page 288 60285.00031\31484041.4 11 “Series A Bonds” means the $__________ aggregate principal amount of Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project), Series A (Tax-Exempt). “Series B Bonds” means the $__________ aggregate principal amount of Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project), Series B (Taxable). “Sinking Account” means the account by that name established pursuant to Section 5.02. “State” means the State of California. “Supplemental Indenture” means any indenture hereafter duly authorized and entered into between the Authority and the Trustee, supplementing, modifying or amending this Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder. “Tax Code” means the Internal Revenue Code of 1986, as amended. “Tax Regulations” means temporary and permanent regulations promulgated under or with respect to Sections 103 and 141 through 150, inclusive, of the Tax Code. “Term Bonds” means the Series A Bonds maturing [May 1], 20__ and [May 1], 20__ and the Series B Bonds maturing [May 1], 20__ and [May 1], 20__. “Trustee” means Wells Fargo Bank, N.A., a national banking association organized and existing under the laws of the United States of America, or its successor, as Trustee hereunder as provided in Section 8.01. “Undertaking to Provide Continuing Disclosure” means, as applicable, that certain Certificate of the Authority or the City, as applicable, by that name and dated as of the Closing Date and referred to, in the case of the Authority, in Section 6.10 hereof, and in the case of the City, in Section 5.12 of the Lease Agreement. “Written Certificate,” “Written Request” and “Written Requisition” of the Authority or the City mean, respectively, a written certificate, request or requisition signed in the name of the Authority or the City by its Authorized Representative. Any such instrument and supporting opinions or representations, if any, 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 Interpretation. (a) Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to include the neuter, masculine or feminine gender, as appropriate. Page 289 60285.00031\31484041.4 12 (b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof. (c) All references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Indenture; the words “herein”, “hereof”, “hereby”, “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or subdivision hereof. ARTICLE II THE BONDS SECTION 2.01 Authorization of Bonds. The Authority hereby authorizes the issuance hereunder of the Bonds, which shall constitute special obligations of the Authority, for the purpose of providing funds to the Authority to finance the lease by the Authority of the Leased Premises and the construction and acquisition of the Project. The Bonds are hereby designated the “Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project), Series A (Tax-Exempt)” and “Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project), Series B (Taxable).” The Bonds shall initially be issued and Outstanding under this Indenture as Series A Bonds in the aggregate principal amount of ____________________ Dollars ($__________) and as Series B Bonds in the aggregate principal amount of ____________________ Dollars ($__________). This Indenture constitutes a continuing agreement with the Trustee and the Owners from time to time of the Bonds to secure the full payment of the principal of and interest and premium (if any) on all the Bonds, subject to the covenants, provisions and conditions herein contained. SECTION 2.02 Terms of the Bonds. (a) Series A Bonds. The Series A Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof. The Series A Bonds shall mature on [May 1] in each of the years and in the amounts set forth below and shall bear interest on each Interest Payment Date at the rates set forth below: Maturity Date (May 1) Principal Amount Interest Rate (b) Series B Bonds. The Series B Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof. The Series B Bonds shall Page 290 60285.00031\31484041.4 13 mature on [May 1] in each of the years and in the amounts set forth below and shall bear interest on each Interest Payment Date at the rates set forth below: Maturity Date (May 1) Principal Amount Interest Rate Interest on the Bonds shall be payable semi-annually calculated based on a 360-day year of twelve thirty day months on each Interest Payment Date to the person whose name appears on the Registration Books as the Owner thereof as of the Record Date immediately preceding each such Interest Payment Date, such interest to be paid by check of the Trustee mailed on the applicable Interest Payment Date by first class mail to the Owner at the address of such Owner as its appears on the Registration Books; provided however, that payment of interest may be 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 shall furnish written wire instructions to the Trustee at least five (5) days before the applicable Record Date. Principal of any Bond and any premium upon redemption shall be paid by check of the Trustee upon presentation and surrender thereof at the Office of the Trustee. Principal of and interest and premium (if any) on the Bonds shall be payable in lawful money of the United States of America. Each Bond shall be dated as of the date of authentication thereof, and shall bear interest from the Interest Payment Date next preceding the 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 shall bear interest from such Interest Payment Date, or (b) unless it is authenticated on or before [April 15], 2019, in which event it shall 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 shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. SECTION 2.03 Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred on 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 approved by the Trustee. Transfer of any Bond shall not be permitted by the Trustee during the period established by the Trustee for selection of Bonds for redemption or if such Bond has been selected for redemption pursuant to Article IV. Whenever any Bonds or Bonds shall be surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and shall deliver a new Bond or Bonds for a like series, aggregate principal amount and of like maturity. The Trustee may require the Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. The cost of printing Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer shall be paid by the Authority. SECTION 2.04 Exchange of Bonds. Any Bond may be exchanged at the Office of the Trustee for a like series, aggregate principal amount of Bonds of other authorized denominations Page 291 60285.00031\31484041.4 14 and of like maturity. Exchange of any Bond shall not be permitted during the period established by the Trustee for selection of Bonds for redemption or if such Bond has been selected for redemption pursuant to Article IV. The Trustee shall require the Bond Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. The cost of printing Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer shall be paid by the Authority. SECTION 2.05 Registration Books. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the Bonds, which shall at all reasonable times be open to inspection during regular business hours with reasonable prior notice by the Authority, the City and the Owners; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as hereinbefore provided. SECTION 2.06 Form and Execution of Bonds. The Bonds shall be signed in the name and on behalf of the Authority with the manual or facsimile signature of its Chairperson and attested with the manual or facsimile signature of its Secretary or any assistant duly appointed by the Authority, under the printed seal of the Authority, and shall be delivered to the Trustee for authentication by it. In case any officer of the Authority who shall have signed any of the Bonds shall cease to be such officer before the Bonds so signed 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 the individual who signed the same had continued to be such officer of the Authority. Also, any Bond may be signed on behalf of the Authority by any individual who on the actual date of the execution of such Bond shall be the proper officer although on the nominal date of such Bond such individual shall not have been such officer. Only such of the Bonds as shall bear thereon a certificate of authentication in substantially the form set forth in Exhibits A and B, 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 the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly authenticated and delivered hereunder and are entitled to the benefits of this Indenture. SECTION 2.07 Temporary Bonds. The Bonds may be issued in temporary form exchangeable for definitive Bonds when ready for delivery. Any temporary Bonds may be printed, lithographed or typewritten, shall be of such 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 it will execute and deliver definitive Bonds as promptly thereafter as practicable, and thereupon the temporary Bonds 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 authorized denominations and series. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Indenture as definitive Bonds authenticated and delivered hereunder. Page 292 60285.00031\31484041.4 15 SECTION 2.08 Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor 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 cancelled by it and destroyed. 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 be satisfactory to it and indemnity satisfactory to it shall be given, the Authority, at the expense of the Owner of such lost, destroyed or stolen Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall have been called for redemption, instead of issuing a substitute Bond, the Trustee may pay the same without surrender thereof). The Trustee may require payment by the Owner of a sum not exceeding the actual cost of preparing each new Bond issued under this Section 2.08 and of the expenses which may be incurred by the City, the Authority and the Trustee in the premises. Any Bond issued under the provisions of this Section 2.08 in lieu of any Bond 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 secured by this Indenture. SECTION 2.09 Cancellation of Bonds. All Bonds properly surrendered to the Trustee for payment upon maturity or for redemption shall upon payment therefor or redemption thereof be cancelled immediately as more particularly provided in Section 11.05 hereof. SECTION 2.10 CUSIP Numbers. “CUSIP” identification numbers shall be imprinted on the Bonds, but such numbers shall not constitute a part of the contract evidenced by the Bonds and any error or omission with respect thereto shall not constitute cause for refusal of any purchaser to accept delivery of and pay for the Bonds. In addition, failure on the part of the Authority to use such CUSIP numbers in any notice to Owners shall not constitute an Event of Default or any violation of the Authority’s contract with such Owners and shall not impair the effectiveness of any such notice. SECTION 2.11 Book-Entry Bonds. (a) The Bonds shall be initially issued in the form of a single, separate fully registered Bond (which may be typewritten) in the full aggregate principal amount for each maturity of the Bonds, and upon initial issuance, the ownership of such Bonds shall be registered in the Bond register in the name of Cede & Co., as nominee of DTC, the initial Book-Entry Depository. Except as provided in the immediately preceding sentence or in subsection (e) of this Section, all of the Bonds shall be registered in the Bond register in the name of Cede & Co., or such other nominee of DTC or any successor Book-Entry Depository or the nominee thereof, as shall be specified pursuant to the applicable Representation Letter. (b) With respect to Bonds registered in the Bond register in the name of the Book-Entry Depository, or its nominee, the Authority shall have no responsibility or obligation to any Participant or to any person on behalf of which such a Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the Authority shall have no responsibility Page 293 60285.00031\31484041.4 16 or obligation with respect to the accuracy of the records of the Book-Entry Depository, the nominee of the Book-Entry Depository or any Participant with respect to any ownership interest in the Bonds, the delivery to any Participant or any other Person, other than a Holder as shown in the Bond register, of any notice with respect to the Bonds, or the payment to any Participant or any other person, other than an Owner as shown in the Bond register, of any amount with respect to principal of or interest on the Bonds. The Authority may treat and consider the person in whose name each Bond is registered in the Bond register as the Owner and absolute owner of such Bond for the purpose of payment of principal and interest on such Bond and for all other purposes whatsoever. (c) The Trustee shall pay all principal of and interest on the Bonds only to or upon the order of the respective Owners, as shown in the Bond register on the applicable Record Date, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to satisfy and discharge fully the obligations with respect to the payment of principal of and interest on the Bonds under this Indenture and the Bonds to the extent of the sums so paid. Upon delivery by the Book-Entry Depository to the Authority of written notice to the effect that the Book-Entry Depository has determined to substitute a new nominee in place of the incumbent nominee, and subject to the provisions herein with respect to Record Dates, the word nominee in this Indenture shall refer to such new nominee of the Book-Entry Depository. (d) In order to qualify the Bonds for the Book-Entry Depository’s book-entry system, the Executive Director or the Treasurer of the Authority is hereby authorized to execute and deliver on behalf of the Authority to the Book-Entry Depository a Representation Letter representing such matters as shall be necessary to so qualify the Bonds. The execution and delivery of the Representation Letter shall not in any way limit the provisions of subsection (b) of this Section or in any other way impose upon the Authority any obligation whatsoever with respect to persons having interests in the Bonds other than the Owners as shown in the Bond register. In addition to the execution and delivery of the Representation Letter, the officers of the Authority, and their authorized representatives, each are hereby authorized to take any other actions, not inconsistent with this Indenture, to qualify the Bonds for each Book-Entry Depository’s book-entry program. (e) In the event (i) the incumbent Book-Entry Depository determines not to continue to act as Book-Entry Depository for the Bonds, or (ii) the Authority determines that the incumbent Book-Entry Depository shall no longer so act, and delivers a written certificate to the incumbent Book-Entry Depository to that effect, then the Authority will discontinue the book-entry system for the Bonds with the incumbent Book-Entry Depository. If the Authority determines to replace the incumbent Book-Entry Depository with another qualified Book-Entry Depository, the Authority shall prepare or direct the preparation of and execute, and the Trustee shall authenticate and deliver, a new single, separate fully registered bond (which may be typewritten) for the aggregate outstanding principal amount for each maturity of the Bonds held by the incumbent Book-Entry Depository, registered in the name of such successor or substitute qualified Book- Entry Depository or its nominee, or make such other arrangement acceptable to the Authority and the successor Book-Entry Depository as are not inconsistent with the terms of this Indenture. If the Authority fails to identify another qualified successor Book-Entry Depository to replace the incumbent Book-Entry Depository, then the Bonds shall no longer be restricted to being registered in the Bond register in the name of the Book-Entry Depository or its nominee, but shall be registered in whatever name or names the Book-Entry Depository or its nominee shall designate. Page 294 60285.00031\31484041.4 17 In such event the Authority shall prepare or direct the preparation of and execute, and the Trustee shall authenticate and deliver to the Owners thereof, such Bonds as are necessary to carry out the transfers and exchanges provided in this Indenture. All such Bonds shall be in fully registered form in denominations authorized hereunder. (f) Notwithstanding any other provision of this Indenture to the contrary, so long as any Bond is registered in the name of the Book-Entry Depository or its nominee, all notices and payments with respect to principal of and interest on such Bond shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Book-Entry Depository. ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS SECTION 3.01 Issuance of the Bonds. At any time after the execution of this Indenture, the Authority may execute and the Trustee shall authenticate and, upon the Written Request of the Authority, deliver Series A Bonds in the aggregate principal amount of $__________ and Series B Bonds in the aggregate principal amount of $__________. SECTION 3.02 Application of Proceeds at Closing. (a) Series A Bonds. The proceeds received from the sale of the Series A Bonds (being $__________ in par amount of Series A Bonds, [less/plus] $__________ in [original issue discount/net premium] and less $__________ in Original Purchaser’s discount) shall be deposited in trust with the Trustee, who shall forthwith deposit on the Closing Date the amount of $__________ to the Series A Account of the Acquisition and Construction Fund and $__________ to the Costs of Issuance Fund. (b) Series B Bonds. The proceeds received from the sale of the Series B Bonds (being $__________ in par amount of Series B Bonds, [less/plus] $__________ in [original issue discount/net premium] and less $__________ in Original Purchaser’s discount) shall be deposited in trust with the Trustee, who shall forthwith deposit on the Closing Date the amount of $__________ to the Series B Account of the Acquisition and Construction Fund and $__________ to the Costs of Issuance Fund. For record keeping purposes, the Trustee may establish such accounts as may be necessary to reflect such transfer of proceeds. SECTION 3.03 Establishment and Application of Costs of Issuance Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the “Costs of Issuance Fund.” The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee to pay the Costs of Issuance upon submission of Written Requisitions of the Authority to the Trustee stating the person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred and that such payment is a proper charge against said fund. Each such Written Request of the Authority 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. On May 1, 2019, or upon the earlier Written Request of the Authority, all amounts remaining in the Costs of Page 295 60285.00031\31484041.4 18 Issuance Fund shall be transferred by the Trustee to the Series A Account of the Acquisition and Construction Fund. SECTION 3.04 Acquisition and Construction Fund. The Trustee shall establish, maintain and hold in trust a separate fund to be known as the “Acquisition and Construction Fund” and within such Fund there shall be established the “Series A Account” and the “Series B Account.” Except as otherwise provided herein, moneys in the Acquisition and Construction Fund shall be used solely for the acquisition and construction by the City of a portion of the Project. The Trustee shall disburse moneys in the Acquisition and Construction Fund to pay Project Costs (or to reimburse the Authority or the City, for payment of Project Costs) within three (3) Business Days of receipt by the Trustee of a Written Requisition of the Authority or the City which: (a) states with respect to each disbursement to be made (i) the requisition number, (ii) the name and address of the person, firm or corporation to whom payment will be made, (iii) the amount to be disbursed, (iv) that each obligation mentioned therein is a proper charge against the Acquisition and Construction Fund and has not previously been disbursed by the Trustee from amounts in the Acquisition and Construction Fund, (v) that the amount of such disbursement is for a Project Cost and (b) specifies in reasonable detail the nature of the obligation, in the form set forth in Exhibit D attached hereto. 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. Upon the filing with the Trustee of a Written Certificate of the City stating that the Project has been completed or that all Written Requisitions intended to be filed by the City have been filed, the Trustee shall withdraw all amounts then on deposit in the Acquisition and Construction Fund and transfer such amounts to the Bond Fund. Any funds deposited into the Bond Fund shall cause a corresponding proportionate credit to Lease Payments due from the City. Amounts on remaining deposit in the Series A Account of the Acquisition and Construction Fund shall be solely used to make Debt Service payments on the Series A Bonds. Amounts on remaining deposit in the Series B Account of the Acquisition and Construction Fund shall be solely used to make Debt Service payments on the Series B Bonds. Notwithstanding the foregoing provisions of this Section 3.04, upon the occurrence and continuation of an Event of Default under and as defined in Section 7.01(a) or (b), the Trustee shall immediately withdraw all amounts then on deposit in the Acquisition and Construction Fund and apply such amounts in accordance with the provisions of Section 7.03. SECTION 3.05 Validity of Bonds. The validity of the authorization and issuance of the Bonds is not dependent on and shall not be affected in any way by any proceedings taken by the Authority or the Trustee with respect to or in connection with the Lease Agreement. The recital contained in the Bonds that the same are issued pursuant to the Constitution and laws of the State shall be conclusive evidence of their validity and of compliance with the provisions of law in their issuance. ARTICLE IV REDEMPTION OF BONDS SECTION 4.01 Terms of Redemption. (a) Optional Redemption. Page 296 60285.00031\31484041.4 19 (i) The Series A Bonds maturing on or before [May 1], 20__ shall not be subject to redemption prior to their respective stated maturities. The Series A Bonds maturing on or after [May 1], 20__, shall be subject to redemption at the option of the Authority as a whole or in part, on any date on or after [May 1], 20__, from any available source of funds, a redemption price equal to the principal amount of the Series A Bonds to be redeemed together with accrued interest thereon to the date fixed for redemption. (ii) The Series B Bonds maturing on or before [May 1], 20__ shall not be subject to redemption prior to their respective stated maturities. The Series B Bonds maturing on or after [May 1], 20__, shall be subject to redemption at the option of the Authority as a whole or in part, on any date on or after [May 1], 20__, from any available source of funds, a redemption price equal to the principal amount of the Series B Bonds to be redeemed together with accrued interest thereon to the date fixed for redemption (b) Mandatory Sinking Fund Redemption. (i) The Series A Term Bonds are subject to mandatory redemption, in part by lot, from Sinking Account payments set forth in the following schedules on [May 1] in each year commencing [May 1], 20__ with respect to Series A Term Bonds maturing [May 1], 20__ and [May 1], 20__, with respect to Series A Term Bonds maturing [May 1], 20__ at a redemption price equal to the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption; provided, however, that if some but not all of the Series A Term Bonds have been redeemed pursuant to subsections (a) or (c), the total amount of Sinking Account payments to be made subsequent to such redemption shall be reduced in an amount equal to the principal amount of the Series A Term Bonds so redeemed pursuant to this subsection (a) by reducing each such future Sinking Account payment on a pro rata basis (as nearly as practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice filed by the Authority with the Trustee. Series A Term Bonds Maturing [May 1], 20__ Mandatory Sinking Fund Redemption Date (May 1) Principal Amount to Be Redeemed (maturity) Page 297 60285.00031\31484041.4 20 Series A Term Bonds Maturing [May 1], 20__ Mandatory Sinking Fund Redemption Date (May 1) Principal Amount to Be Redeemed (maturity) (ii) The Series B Term Bonds are subject to mandatory redemption, in part by lot, from Sinking Account payments set forth in the following schedules on [May 1] in each year, commencing [May 1], 20__ with respect to Series B Term Bonds maturing [May 1], 20__ and [May 1], 20__ with respect to Series B Term Bonds maturing [May 1], 20__ at a redemption price equal to the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption; provided, however, that if some but not all of the Series B Term Bonds have been redeemed pursuant to subsections (a) or (c), the total amount of Sinking Account payments to be made subsequent to such redemption shall be reduced in an amount equal to the principal amount of the Series B Term Bonds so redeemed pursuant to this subsection (a) by reducing each such future Sinking Account payment on a pro rata basis (as nearly as practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice filed by the Authority with the Trustee. Series B Term Bonds Maturing [May 1], 20__ Mandatory Sinking Fund Redemption Date (May 1) Principal Amount to Be Redeemed (maturity) Series B Term Bonds Maturing [May 1], 20__ Mandatory Sinking Fund Redemption Date (May 1) Principal Amount to Be Redeemed (maturity) In lieu of such redemption, the Trustee may apply amounts in the Sinking Account to the purchase of Term Bonds at public or private sale, as and when and at such prices (including Page 298 60285.00031\31484041.4 21 brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as may be directed by the Authority prior to the selection of Bonds for redemption, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Term Bonds, as set forth in a Written Request of the Authority. (c) Special Mandatory Redemption From Insurance or Condemnation Proceeds. The Bonds shall also be subject to redemption as a whole or in part on any date, from Net Proceeds required to be used for such purpose as provided in Section 5.07, at a redemption price equal to the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium. SECTION 4.02 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 or such given portion thereof not previously called for redemption from such series and maturities as shall be set forth in a Written Request of the Authority filed with the Trustee, or in the absence of such designation of series and maturities by the Authority, then on a pro rata basis among maturities, and in any case, by lot within a maturity in any manner which the Trustee in its sole discretion shall deem appropriate and fair. For purposes of such selection, the Trustee shall treat each Bond as consisting of separate $5,000 portions and each such portion shall be subject to redemption as if such portion were a separate Bond. SECTION 4.03 Notice of Redemption. The Authority shall give notice to the Trustee of its intent to redeem Bonds pursuant to Section 4.01(a) at least forty-five (45) days prior to the date set for redemption. Notice of redemption shall be sent (by first class mail, postage prepaid, or such other means as acceptable to the recipient thereof) not less than thirty (30) nor more than sixty (60) days before any redemption date, to the respective Owners of any Bonds designated for redemption at their addresses appearing on the Registration Books, and to the Securities Depositories and to one or more of the Information Services. Each notice of redemption shall state the date of the notice, the redemption date, the place or places of redemption, whether less than all of the Bonds (or all Bonds of a single maturity) are to be redeemed, the CUSIP numbers and, if less than all of the Bonds of a maturity are to be redeemed, Bond numbers of the Bonds to be redeemed, the maturity or maturities of the Bonds to be redeemed and in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on the redemption date there will become due and payable on each of said Bonds the redemption price thereof, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered. Neither the failure to receive any notice nor any defect therein shall affect the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date. Notice of redemption of Bonds shall be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority. SECTION 4.04 Partial Redemption of Bonds. Upon surrender of any Bonds redeemed in part only, the Authority shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered. SECTION 4.05 Conditional Notice of Optional Redemption of Bonds. With respect to the optional redemption of the Bonds pursuant to 4.01(a) the Authority may instruct the Trustee to Page 299 60285.00031\31484041.4 22 include a statement in the notice of such redemption that shall state that such redemption is conditioned upon the receipt by the Trustee on or before the date fixed for such redemption of sufficient funds for such purpose from any issue of refunding bonds. In the event that sufficient funds shall not have been deposited with the Trustee on or before the date fixed for redemption, the Trustee shall promptly send a notice to the Owners rescinding the notice of redemption in the same manner that the notice of redemption was sent and thereupon such redemption and the notice thereof shall be deemed to be canceled and rescinded. SECTION 4.06 Effect of Redemption. Notice of redemption having been duly given as aforesaid, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, the Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so called for redemption shall become due and payable, interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to any benefit or security under this Indenture, and the Owners of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. All Bonds redeemed pursuant to the provisions of this Article shall be cancelled by the Trustee upon surrender thereof and destroyed in accordance with Section 11.05 hereof. ARTICLE V REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST SECTION 5.01 Pledge and Assignment; Bond Fund. (a) 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 Revenues and any other amounts (including proceeds of the sale of the Bonds) held in any fund or account established pursuant to this Indenture are hereby pledged to secure the payment of the principal of and interest on the Bonds in accordance with their terms and the provisions of this Indenture. Said pledge shall constitute a lien on and security interest in such assets and shall attach, be perfected and be valid and binding from and after the Closing Date, without any physical delivery thereof or further act. (b) The Authority hereby transfers in trust, grants a security interest in and assigns to the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the Revenues and all of the rights of the Authority in the Lease Agreement (other than the rights of the Authority under Sections 4.8, 7.3 and 8.3 thereof). The Trustee shall be entitled to and, subject to Article VIII hereof, shall collect and receive all of the Revenues, and any Revenues collected or received by the Authority shall be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee also shall be entitled to and shall, subject to the provisions of Article VIII, take all steps, actions and proceedings which the Trustee determines to be reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all of the obligations of the City under the Lease Agreement. Page 300 60285.00031\31484041.4 23 (c) Subject to Section 5.08, all Revenues shall be promptly deposited by the Trustee upon receipt thereof in a special fund designated as the “Bond Fund” which the Trustee shall establish, maintain and hold in trust; except that all moneys received by the Trustee and required hereunder or under the Lease Agreement to be deposited in the Redemption Fund or the Insurance and Condemnation Fund shall be promptly deposited in such Funds. All Revenues deposited with the Trustee shall be held, disbursed, allocated and applied by the Trustee only as provided in this Indenture. SECTION 5.02 Allocation of Revenues. On or before each date on which principal of or interest on the Bonds becomes due and payable, the Trustee shall transfer from the Bond Fund and deposit into the following respective accounts (each of which the Trustee shall establish and maintain within the Bond Fund), the following amounts in the following order of priority, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority: (a) The Trustee shall deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to be at least equal to the amount of interest becoming due and payable on such date on all Bonds then Outstanding. (b) The Trustee shall deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the Bonds maturing on such date. (c) The Trustee shall deposit in the Sinking Account an amount required to cause the aggregate amount on deposit in the Sinking Account to equal the next mandatory sinking fund payment due on such date. SECTION 5.03 Application of Interest Account. All amounts in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity pursuant to this Indenture). SECTION 5.04 Application of Principal Account. All amounts in the Principal Account shall be used and withdrawn by the Trustee solely to pay the principal amount of the Bonds at their respective maturity dates. SECTION 5.05 Application of Sinking Account. All amounts deposited into the Sinking Account shall be used and withdrawn by the Trustee solely to pay Mandatory Sinking Account Payments on the Term Bonds due pursuant to Section 4.01(b) hereof. SECTION 5.06 Application of Redemption Fund. When required, the Trustee shall establish and maintain the Redemption Fund, amounts in which shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of and interest on the Bonds to be redeemed pursuant to Sections 4.01(a) or (c); provided, however, that at any time prior to giving notice of redemption of any such Bonds, the Trustee may apply such amounts to the purchase of Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as shall be Page 301 60285.00031\31484041.4 24 directed pursuant to a Written Request of the Authority received prior to the selection of Bonds for redemption, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Bonds. SECTION 5.07 Insurance and Condemnation Fund. (a) Establishment of Fund. Upon the receipt of any proceeds of insurance or eminent domain with respect to any portion of the Leased Premises, the Trustee shall establish and maintain a separate Insurance and Condemnation Fund, to be held and applied as hereinafter set forth in this Section 5.07. (b) Application of Insurance Proceeds. Any proceeds of insurance against accident to or destruction of the Leased Premises collected by the City in the event of any such accident or destruction shall be applied in accordance with Section 6.1(a) of the Lease Agreement. The City shall cause any such proceeds to be paid to the Trustee for deposit in the Insurance and Condemnation Fund. If the City fails to determine and notify the Trustee in writing of its determination, within forty-five (45) days following the date of such deposit, to replace, repair, restore, modify or improve the Leased Premises, then such proceeds shall be promptly transferred by the Trustee to the Redemption Fund and applied to the redemption of Bonds pursuant to Section 4.01(c); provided, however, that such redemption will occur only if the fair rental value of the remaining portion of the Leased Premises is sufficient to allow the City to continue to make Lease Payments in amounts sufficient to pay debt service on the Bonds that remain Outstanding after such redemption. Notwithstanding the foregoing sentence, however, in the event of damage or destruction of the Leased Premises in full, the proceeds of such insurance shall be used by the City to rebuild or replace the Leased Premises if such proceeds are not sufficient, together with other available funds then held by the Trustee, to redeem all of the Outstanding Bonds. All proceeds deposited in the Insurance and Condemnation Fund and not so transferred to the Redemption Fund shall be applied to the prompt replacement, repair, restoration, modification or improvement of the damaged or destroyed portions of the Facilities by the City, upon receipt of Written Requisitions of the City as agent for the Authority (i) stating with respect to each payment to be made (A) the requisition number, (B) the name and address of the person to whom payment is due, (C) the amount to be paid and (D) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund, has not been the basis of any previous withdrawal; (ii) specifying in reasonable detail the nature of the obligation; and (iii) accompanied by a bill or a statement of account for such obligation. Each such Written Request of the Authority shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. Any balance of the proceeds remaining after such work has been completed as certified by the City as agent for the Authority shall be paid to the City. (c) Application of Eminent Domain Proceeds. If all or any part of the Leased Premises shall be taken by eminent domain proceedings (or sold to a government threatening to exercise the power of eminent domain) the proceeds therefrom shall be applied in accordance with Section 6.1(a) of the Lease Agreement. The City shall cause any such proceeds to be paid to the Trustee for deposit in the Insurance and Condemnation Fund, to be applied and disbursed by the Trustee as follows: Page 302 60285.00031\31484041.4 25 (i) If the City has not given written notice to the Trustee, within forty-five (45) days following the date on which such proceeds are deposited with the Trustee, of its determination that such proceeds are needed for the replacement of the Leased Premises or such portion thereof, the Trustee shall transfer such proceeds to the Redemption Fund to be applied towards the redemption of the Bonds pursuant to Section 4.01(b). (ii) If the City has given written notice to the Trustee, within forty-five (45) days following the date on which such proceeds are deposited with the Trustee, of its determination that such proceeds are needed for replacement of the Leased Premises or such portion thereof, the Trustee shall pay to the City, or to its order, from said proceeds such amounts as the City may expend for such replacement, upon the filing of Written Requisitions of the City as agent for the Authority in the form and containing the provisions set forth in subsection (b) of this Section 5.07 and upon which the Trustee may conclusively rely. SECTION 5.08 Investments. All moneys in any of the funds or accounts established with the Trustee pursuant to this Indenture shall be invested by the Trustee solely in Permitted Investments. Such investments shall be directed by the Authority pursuant to a Written Request of the Authority filed with the Trustee at least two (2) Business Days in advance of the making of such investments (which Written Request shall certify that the investments constitute Permitted Investments). In the absence of any such directions from the Authority, the Trustee shall invest any such moneys in Permitted Investments described in clause (4) of the definition thereof. Permitted Investments purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account. All interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder shall be deposited in the Bond Fund. For purposes of acquiring any investments hereunder, the Trustee may commingle funds held by it hereunder. The Trustee, or an affiliate, may act as principal or agent in the acquisition or disposition of any investment and may impose its customary charges therefor. The Trustee shall incur no liability for losses arising from any investments made pursuant to this Section 5.08. Permitted Investments that are registered securities shall be registered in the name of the Trustee. The Authority covenants that all investments of amounts deposited in any fund or account created by or pursuant to this Indenture, or otherwise containing proceeds of the Bonds, shall be acquired and disposed of at the Fair Market Value thereof. The Trustee shall furnish the Authority with periodic cash transaction statements which include detail for all investment transactions effected by the Trustee or brokers selected by the Authority. Upon the Authority’s election, such statements will be delivered via the Trustee’s online service and upon electing such service, paper statements will be provided only upon request. The Authority waives the right to receive brokerage confirmations of security transactions effected by the Trustee as they occur, to the extent permitted by law. The Authority further understands that trade confirmations for securities transactions effected by the Trustee will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker. Page 303 60285.00031\31484041.4 26 SECTION 5.09 Valuation and Disposition of Investments. For the purpose of determining the amount in any fund or account, all Permitted Investments credited to such fund or account shall be valued at the Fair Market Value thereof; provided, however, that investments in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Tax Code shall be valued at their present value (within the meaning of Section 148 of the Tax Code), consisting generally of the cost thereof. The Trustee shall have no duty in connection with the determination of Fair Market Value other than to follow the (i) investment directions of the Authority and (ii) its normal practices in the purchase, sale and determining the value of Permitted Investments. ARTICLE VI PARTICULAR COVENANTS SECTION 6.01 Punctual Payment. The Authority shall punctually pay or cause to be paid the principal of and interest and premium (if any) on all 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 Revenues and other assets pledged for such payment as provided in this Indenture. SECTION 6.02 Extension of Payment of Bonds. The Authority shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default hereunder, to the benefits of this Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing in this Section 6.02 shall be deemed to limit the right of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an extension of maturity of the Bonds. SECTION 6.03 Against Encumbrances. The Authority shall not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets pledged or assigned under this Indenture while any of the Bonds are Outstanding, except the pledge and assignment created by this Indenture. Subject to this limitation, the Authority expressly reserves the right to enter into one or more other indentures for any of its corporate purposes, and reserves the right to issue other obligations for such purposes. SECTION 6.04 Power to Issue Bonds and Make Pledge and Assignment. The Authority is duly authorized pursuant to law to issue the Bonds and to enter into this Indenture and to pledge and assign the Revenues and other assets purported to be pledged and assigned, respectively, under this Indenture in the manner and to the extent provided in this Indenture. The Bonds and the provisions of this Indenture are and will be the legal, valid and binding special obligations of the Authority in accordance with their terms, and the Authority and the Trustee shall at all times, subject to the provisions of Article VIII and to the extent permitted by law, defend, preserve and protect said pledge and assignment of Revenues and other assets and all the rights of the Owners under this Indenture against all claims and demands of all persons whomsoever. Page 304 60285.00031\31484041.4 27 SECTION 6.05 Accounting Records and Financial Statements. The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with corporate trust industry standards, in which complete and accurate entries shall be made of all transactions made by it relating to the proceeds of Bonds, the Revenues, the Lease Agreement and all funds and accounts established pursuant to this Indenture. Such books of record and account shall be available for inspection by the Authority and the City, during business hours and under reasonable circumstances. The Trustee shall deliver a monthly account of the funds and accounts hereunder to the Authority in accordance with Section 5.08 hereof, provided that the Trustee shall not be obligated to deliver any accounting of any fund or account that (a) has a balance of zero and (b) has not had any activity since the last reporting date. SECTION 6.06 Additional Obligations. The Authority may issue additional bonds, notes or other indebtedness which are payable out of the Revenues in whole or in part pursuant to Section 9.01(b)(v) hereof, for any purpose under the laws of the State of California so long as no Event of Default hereunder has occurred and is continuing and provided that the conditions of Section 8.3(e) of the Lease Agreement have been satisfied. SECTION 6.07 Tax Covenants. (a) Private Activity Bond Limitation. The Authority shall assure that the proceeds of the Series A Bonds are not so used as to cause the Series A Bonds to satisfy the private business tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax Code. (b) Federal Guarantee Prohibition. The Authority shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause any of the Series A Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Tax Code. (c) No Arbitrage. The Authority shall not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Series A Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date would have caused the Series A Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Tax Code. (d) Maintenance of Tax-Exemption. The Authority shall take all actions necessary to assure the exclusion of interest on the Series A Bonds from the gross income of the Owners to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the Closing Date. (e) Rebate of Excess Investment Earnings. The Authority shall calculate or cause to be calculated all amounts of excess investment earnings with respect to the Series A Bonds which are required to be rebated to the United States of America pursuant to Section 148(f) of the Tax Code, at the times and in the manner required pursuant to the Tax Code. The Authority shall pay or cause to be paid when due an amount equal to excess investment earnings to the United States of America in such amounts, at such times and in such manner as may be required pursuant to the Tax Code, such payments to be made from amounts provided by the City for such purpose pursuant to Section 5.11 of the Lease Agreement. The Authority shall keep or cause to be kept, and retain Page 305 60285.00031\31484041.4 28 or cause to be retained for a period of six (6) years following the retirement of the Series A Bonds, records of the determinations made pursuant to this subsection (e). The Trustee shall have no duty to monitor the compliance by the Authority with any of the covenants contained in this subsection (e). SECTION 6.08 Lease Agreement. Subject to Article VIII hereof, the Trustee shall promptly collect all amounts due from the City pursuant to the Lease Agreement. Subject to the provisions of Article VIII, the Trustee shall enforce, and take all steps, actions and proceedings which the Trustee determines to be reasonably necessary for the enforcement of all of its rights thereunder as assignee of the Authority and for the enforcement of all of the obligations of the City under the Lease Agreement. SECTION 6.09 Waiver of Laws. The Authority shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at any time hereafter in force that may affect the covenants and agreements contained in this Indenture or in the Bonds, and all benefit or advantage of any such law or laws is hereby expressly waived by the Authority to the extent permitted by law. SECTION 6.10 Further Assurances. The Authority will make, execute and deliver any and all such further indentures, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming the rights and benefits provided in this Indenture to the Owners. ARTICLE VII EVENTS OF DEFAULT AND REMEDIES SECTION 7.01 Events of Default. The following events shall be Events of Default hereunder: (a) Default in the due and punctual payment of the principal of any Bonds when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise. (b) Default in the due and punctual payment of any installment of interest on any Bonds when and as the same shall become due and payable. (c) Default by the Authority in the observance of any of the other covenants, agreements or conditions on its part in this Indenture or in the Bonds contained, if such default shall have continued for a period of thirty (30) days after written notice thereof, specifying such default and requiring the same to be remedied, shall have been given to the Authority by the Trustee; provided, however, that if in the reasonable opinion of the Authority the default stated in the notice can be corrected, but not within such thirty (30) day period, such default shall not constitute an Event of Default hereunder if the Authority shall commence to cure such default within such sixty (60) day period and thereafter diligently and in good faith cure such failure in a reasonable period of time. (d) The occurrence and continuation of an Event of Default under and as defined in the Lease Agreement. Page 306 60285.00031\31484041.4 29 SECTION 7.02 No Acceleration Upon Event of Default. If any Event of Default shall occur there shall not be any right on the part of the Trustee or the Owners to declare the principal of all of the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately. SECTION 7.03 Application of Revenues and Other Funds After Default. Notwithstanding anything to the contrary contained herein, if an Event of Default shall occur and be continuing, all Revenues and any other funds then held or 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 the principal of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping or otherwise noting thereon of the payment if only partially paid, or surrender thereof if fully paid) in accordance with the provisions of this Indenture, as follows: First: To the payment to the persons entitled thereto of all installments of interest then due in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and Second: To the payment to the persons entitled thereto of the unpaid principal of any Bonds which shall have become due, whether at maturity or by acceleration or redemption, with interest on the overdue principal at the rate borne by the respective Bonds (to the extent permitted by law), and, if the amount available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference. SECTION 7.04 Trustee to Represent Owners. The Trustee is hereby irrevocably appointed (and the successive respective Owners, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney-in-fact of the Owners for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds, this Indenture and applicable provisions of any law. Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the Owners, the Trustee may, or upon the written request of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, and upon being indemnified to its satisfaction therefor, the Trustee shall, proceed to protect or enforce its rights or the rights of such Owners by such appropriate action, Page 307 60285.00031\31484041.4 30 suit, mandamus or other proceedings as it shall deem most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee or in such Owners under the Bonds, this Indenture or any other law. Upon instituting such proceeding, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver of the Revenues and other assets pledged under this Indenture, pending such proceedings. 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 all the Owners of such Bonds, subject to the provisions of this Indenture. SECTION 7.05 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 that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture, and that the Trustee shall have the right to decline to follow any such direction which in the opinion of the Trustee would expose it to liability. SECTION 7.06 Limitation on Owners’ Right to Sue. Notwithstanding any other provision hereof, no Owner of any Bonds 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 Lease Agreement 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 Owners shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee shall have failed to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee; and (e) no direction inconsistent with such written request shall have been given to the Trustee during such sixty (60) day period by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding. 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 Bonds of any remedy hereunder or under law; it being understood and intended that no one or more Owners of Bonds 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 of Bonds, or to enforce any right under the Bonds, this Indenture, the Lease Agreement 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 of the Outstanding Bonds, subject to the provisions of this Indenture. Page 308 60285.00031\31484041.4 31 SECTION 7.07 Absolute Obligation of Authority. Nothing in Section 7.06 or in any other provision of this Indenture or in the Bonds contained shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the principal of and interest and premium (if any) on the Bonds to the respective Owners at their respective dates of maturity, or upon call for redemption, as herein provided, but only out of the Revenues and other assets herein pledged therefor, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds. SECTION 7.08 Termination of Proceedings. In case any proceedings taken by the Trustee or any one or more Owners on account of any Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee or the Owners, then in every such case the Authority, the Trustee and the Owners, 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 Authority, the Trustee and the Owners shall continue as though no such proceedings had been taken. SECTION 7.09 Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Owners is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or otherwise. SECTION 7.10 No Waiver of Default. No delay or omission of the Trustee or of any Owner of the Bonds to exercise any right or power arising upon the occurrence of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and every power and remedy given by this Indenture to the Trustee or to the Owners may be exercised from time to time and as often as may be deemed expedient. ARTICLE VIII THE TRUSTEE SECTION 8.01 Duties, Immunities and Liabilities of Trustee. (a) The Trustee shall, prior to an Event of Default, and after the curing 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 and no implied duties or covenants shall be read into this Indenture against the Trustee. The Trustee shall, during the existence of any Event of Default (which has not been cured), exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) The Authority may remove the Trustee at any time unless an Event of Default shall have occurred and then be continuing, and the Authority shall remove the Trustee if at any time requested to do so by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or if at any time the Trustee shall cease to be eligible in accordance with subsection (e) of this Section 8.01, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its Page 309 60285.00031\31484041.4 32 property shall be appointed, or any public officer shall take control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of such removal to the Trustee and the City and thereupon shall appoint a successor Trustee by an instrument in writing. Any such removal shall be made upon at least thirty (30) days’ prior written notice to the Trustee. Upon giving such written notice of removal, the Authority shall promptly appoint a successor Trustee by an instrument in writing. (c) The Trustee may at any time resign by giving written notice of such resignation to the Authority and to the City, and by giving the Owners notice of such resignation by mail at the addresses shown on the Registration Books. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee by an instrument in writing. (d) Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee; provided, however, that no removal resignation or termination of the Trustee shall take effect until a successor shall be appointed. If no successor Trustee shall have been appointed and have accepted appointment within forty-five (45) days of giving notice of removal or notice of resignation as aforesaid, the Authority shall, and the Trustee may, petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under this Indenture, shall signify its acceptance of such appointment by executing and delivering to the Authority 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 or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under 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. Upon request of the successor Trustee, the Authority shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in this subsection, the Authority shall mail or cause the successor Trustee to mail a notice of the succession of such Trustee to the trusts hereunder to the Owners at the addresses shown on the Registration Books. If the Authority fails to mail such notice within fifteen (15) days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Authority. (e) Any Trustee appointed under this Indenture shall be a corporation or association organized and doing business under the laws of any state or the United States of America or the District of Columbia, authorized under such laws to exercise corporate trust powers, which shall have (or, in the case of a corporation included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least Seventy-Five Million Dollars ($75,000,000), and subject to supervision or examination by federal or State agency, so Page 310 60285.00031\31484041.4 33 long as any Bonds are Outstanding. If such corporation publishes a report of condition at least annually pursuant to law or to the requirements of any supervising or examining agency above referred to then for the purpose of this subsection (e), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this subsection (e), the Trustee shall resign immediately in the manner and with the effect specified in this Section. (f) The Authority covenants that it will maintain a Trustee qualified under the provisions of the foregoing subsection (e), so long as any Bonds are Outstanding. SECTION 8.02 Merger or Consolidation. Any bank, association or trust company into which the Trustee may be merged or converted or with which it may be consolidated or any bank, association or trust company resulting from any merger, conversion or consolidation to which it shall be a party or any bank, association or trust company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such bank, association or trust company shall be eligible under subsection (e) of Section 8.01 shall be the successor to such Trustee, without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. SECTION 8.03 Liability of Trustee. (a) The recitals of facts herein and in the Bonds contained shall not be taken as statements of the Authority, and the Trustee shall not assume responsibility for the correctness of the same, or make any representations as to the validity or sufficiency of this Indenture, the Bonds or the Lease Agreement, nor shall the Trustee incur any responsibility in respect thereof, other than as expressly stated herein in connection with the respective duties or obligations herein or in the Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence. The Trustee may become the Owner of Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Owners, whether or not such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding. (b) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (c) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture. Page 311 60285.00031\31484041.4 34 (d) The Trustee shall not be liable for any action taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. (e) The Trustee shall not be deemed to have knowledge of any Event of Default hereunder, or any other event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default hereunder unless and until it shall have actual knowledge thereof, or shall have received written notice thereof, at its Office. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance by the Authority or the City of any of the terms, conditions, covenants or agreements herein, under the Lease Agreement or of any of the documents executed in connection with the Bonds, or as to the existence of an Event of Default or an event which would, with the giving of notice, the passage of time, or both, constitute an Event of Default. The Trustee shall not be responsible for the validity, effectiveness or priority of any collateral given to or held by it. Without limiting the generality of the foregoing, the Trustee shall not be required to ascertain or inquire as to the performance or observance by the City and the Authority of the terms, conditions, covenants or agreements set forth in the Lease Agreement, other than the covenants of the City to make Additional Lease Payments to the Trustee when due and to file with the Trustee, when due, such reports and certifications as the City is required to file with the Trustee thereunder. (f) 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, if it is not assured to its satisfaction that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (g) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (h) 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 Owners pursuant to this Indenture, unless such Owners shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. No permissive power, right or remedy conferred upon the Trustee hereunder shall be construed to impose a duty to exercise such power, right or remedy. (i) Whether or not therein expressly so provided, every provision of this Indenture and the Lease Agreement relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of Section 8.01(a), this Section 8.03 and Section 8.04 hereof. (j) The Trustee shall not be concerned with or accountable to anyone for the subsequent use or application of any moneys which shall be released or withdrawn in accordance with the provisions hereof. Page 312 60285.00031\31484041.4 35 (k) The Trustee makes no representation or warranty, expressed or implied as to the title, value, design, compliance with specifications or legal requirements, quality, durability, operation, condition, merchantability or fitness for any particular purpose for the use contemplated by the Authority or the City of the Leased Premises. In no event shall the Trustee be liable for incidental, indirect, special or consequential damages in connection with or arising from the Lease Agreement or this Indenture for the existence, furnishing or use of the Leased Premises. (l) The Trustee may establish such funds and accounts hereunder as it deems necessary or appropriate to perform its obligations hereunder. (m) The Trustee agrees to accept and act upon e-mail pdf or facsimile transmission of written instructions and/or directions pursuant to this Indenture provided, however, that: (a) such executed instructions and/or directions shall be signed by a person as may be designated and authorized to sign for the party signing such instructions and/or directions, and (b) the Trustee shall have received a current incumbency certificate containing the specimen signature of such designated person. (n) The Trustee shall not be considered in breach of or in default in its obligations hereunder or progress in respect thereto in the event of enforced delay (“unavoidable delay”) in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, Acts of God or of the public enemy or terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or supplies in the open market, litigation or arbitration involving a party or others relating to zoning or other governmental action or inaction pertaining to the Project, malicious mischief, condemnation, and unusually severe weather or delays of suppliers or subcontractors due to such causes or any similar event and/or occurrences beyond the control of the Trustee. (o) The Trustee shall have no responsibility or liability with respect to any information, statements or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of these Bonds. SECTION 8.04 Right to Rely on Documents. The Trustee shall be protected in acting upon any notice, resolution, request, requisition, consent, order, certificate, report, opinion, bonds or other paper or document believed by them to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel who may be counsel of or to the Authority, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. The Trustee may treat the Owners appearing in the Registration Books as the absolute owners of the Bonds for all purposes and the Trustee shall not be affected by any notice to the contrary. Whenever in the administration of the trusts imposed upon it by this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or Page 313 60285.00031\31484041.4 36 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, Written Request or Written Requisition of the Authority or the City, and such Written Certificate, Written Request or Written Requisition shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of this Indenture in reliance upon such Written Certificate, Written Request or Written Requisition, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may deem reasonable. SECTION 8.05 Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of this Indenture shall be retained in their respective possession and shall be subject at all reasonable times to the inspection of the Authority, the City and any Bond Owner, and their agents and representatives duly authorized in writing, at reasonable hours and under reasonable conditions. SECTION 8.06 Compensation and Indemnification. The Authority shall pay to the Trustee (solely from Miscellaneous Rent) from time to time the compensation for all services rendered under this Indenture and also all reasonable expenses and disbursements, incurred in and about the performance of its powers and duties under this Indenture, including, without limitation, reasonable attorneys’ fees. The Authority shall indemnify, defend and hold harmless the Trustee and its officers, directors, agents and employees, against any loss, liability or expense incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust, including reasonable costs and reasonable expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers hereunder. As security for the performance of the obligations of the Authority under this Section 8.06 and the obligation of the City to make Additional Rental Payments to the Trustee, the Trustee shall have a lien prior to the lien of the Bonds upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of or interest on particular Bonds. The rights of the Trustee and the obligations of the Authority under this Section 8.06 shall survive the discharge of the Bonds and this Indenture and the resignation or removal of the Trustee. ARTICLE IX MODIFICATION OR AMENDMENT HEREOF SECTION 9.01 Amendments Permitted. (a) This Indenture and the rights and obligations of the Authority and of the Owners and of the Trustee may be modified or amended from time to time and at any time by an indenture or indentures supplemental thereto, which the Authority and the Trustee may enter into when the written consent of the Owners of a majority in aggregate principal amount of all Bonds then Outstanding shall have been filed with the Trustee. No such modification or amendment shall (i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or extend the time of payment, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, 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 Page 314 60285.00031\31484041.4 37 effect any such modification or amendment, or permit the creation of any lien on the Revenues and other assets pledged under this Indenture prior to or on a parity with the lien created by this Indenture except as permitted herein, or deprive the Owners of the lien created by this Indenture on such Revenues and other assets (except as expressly provided in this Indenture), without the consent of the Owners of all of the Bonds then Outstanding. It shall not be necessary for the consent of the Owners to approve the particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof. (b) This Indenture and the rights and obligations of the Authority, of the Trustee and the Owners may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the Authority and the Trustee may enter into without the consent of any Owners, if the Trustee has been furnished an opinion of counsel that the provisions of such Supplemental Indenture shall not materially adversely affect the interests of the Owners, including, without limitation, for any one or more of the following purposes: (i) to add to the covenants and agreements of the Authority contained in this Indenture or to add 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; (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 matters or questions arising under this Indenture, as the Authority may deem necessary or desirable, provided that such modification or amendment does not materially adversely affect the interests of the Owners, in the opinion of Bond Counsel filed with the Trustee; (iii) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute; (iv) to modify, amend or supplement this Indenture in such manner as to cause interest on the Bonds to remain excludable from gross income under the Tax Code; or (v) to facilitate the issuance of additional bonds of the Authority secured by Lease Payments of the City pursuant to Section 8.3(e) of the Lease Agreement. (c) The Trustee may in its discretion, but shall not be obligated to, enter into any such Supplemental Indenture authorized by subsections (a) or (b) of this Section 9.01 which materially adversely affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise. (d) Prior to the Trustee entering into any Supplemental Indenture hereunder, there shall be delivered to the Trustee an opinion of Bond Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance with the requirements of this Indenture and that the adoption of such Supplemental Indenture will not, in and of itself, adversely affect the exclusion from gross income for purposes of federal income taxes of interest on the Bonds. Page 315 60285.00031\31484041.4 38 SECTION 9.02 Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture pursuant to this Article IX, 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 Trustee and all Owners of Bonds Outstanding 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 9.03 Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after the execution of any Supplemental Indenture pursuant to this Article may, and if the Trustee so determines shall, bear a notation by endorsement or otherwise in form approved by the Authority and the Trustee as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand on the Owner of any Bonds Outstanding at the time of such execution and presentation of his Bonds for the purpose at the Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation shall be made on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Authority and the Trustee, to any modification or amendment contained in such Supplemental Indenture, shall be prepared and executed by the Authority and authenticated by the Trustee, and upon demand on the Owners of any Bonds then Outstanding shall be exchanged at the Office of the Trustee, without cost to any Bond Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate principal amount of the same series and maturity. SECTION 9.04 Amendment of Particular Bonds. The provisions of this Article IX shall not prevent, any Bond Owner from accepting any amendment as to the particular Bonds held by him. ARTICLE X DEFEASANCE SECTION 10.01 Discharge of Indenture. Any or all of the Outstanding Bonds may be paid by the Authority in any of the following ways, provided that the Authority also pays or causes to be paid any other sums payable hereunder by the Authority: (a) by paying or causing to be paid the principal of and interest and premium (if any) on such Bonds, as and when the same become due and payable; (b) by depositing with the Trustee (or another fiduciary or escrow agent), in trust, at or before maturity, money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem such Bonds; or (c) by delivering to the Trustee, for cancellation by it, all of such Bonds. If the Authority shall also pay or cause to be paid all other sums payable hereunder by the Authority, then and in that case, at the election of the Authority (evidenced by a Written Certificate of the Authority, filed with the Trustee, signifying the intention of the Authority to discharge all such indebtedness and this Indenture), and notwithstanding that any of such Bonds shall not have been surrendered for payment, this Indenture and the pledge of Revenues and other assets made Page 316 60285.00031\31484041.4 39 under this Indenture with respect to such Bonds and all covenants, agreements and other obligations of the Authority under this Indenture with respect to such Bonds shall cease, terminate, become void and be completely discharged and satisfied. In such event, upon the Written Request of the Authority, the Trustee shall execute and deliver to the Authority all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over, transfer, assign or deliver to the City all moneys or securities or other property held by it pursuant to this Indenture which are not required for the payment or redemption of any of such Bonds not theretofore surrendered for such payment or redemption. SECTION 10.02 Discharge of Liability on Bonds. Upon the deposit with the Trustee, in trust, at or before maturity, of money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem any Outstanding Bonds (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to maturity, notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice, then all liability of the Authority in respect of such Bonds shall cease, terminate and be completely discharged, and the Owners thereof shall thereafter be entitled only to payment out of such money or securities deposited with the Trustee as aforesaid for their payment, subject, however, to the provisions of Sections 10.04 and 10.05. The Authority may at any time surrender to the Trustee for cancellation by it any Bonds previously issued and delivered, which the Authority may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. SECTION 10.03 Deposit of Money or Securities with Trustee. Whenever in this Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee money or securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be deposited or held may include money or securities held by the Trustee in the funds and accounts established pursuant to this Indenture and shall be: (a) lawful money of the United States of America in an amount equal to the principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice, the amount to be deposited or held shall be the principal amount of such Bonds and all unpaid interest thereon to the redemption date; or (b) non-callable Federal Securities, the principal of and interest on which when due will, in the written opinion of an Independent Accountant filed with the City, the Authority and the Trustee, provide money sufficient to pay the principal of and interest and premium (if any) on the Bonds to be paid or redeemed, as such principal, interest and premium become due, provided that in the case of Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice; Page 317 60285.00031\31484041.4 40 provided, in each case, that (i) the Trustee shall have been irrevocably instructed (by the terms of this Indenture or by Written Request of the Authority) to apply such money to the payment of such principal, interest and premium (if any) with respect to such Bonds, and (ii) the Authority shall have delivered to the Trustee an opinion of Bond Counsel to the effect that such Bonds have been discharged in accordance with this Indenture (which opinion may rely upon and assume the accuracy of the Independent Accountant’s opinion referred to above). SECTION 10.04 Unclaimed Funds. Notwithstanding any provisions of this Indenture, and subject to applicable provisions of State law, any moneys held by the Trustee in trust for the payment of the principal of, or interest on, any Bonds and remaining unclaimed for two (2) years after the principal of such Bonds has become due and payable (whether at maturity or upon call for redemption or by acceleration as provided in this Indenture), if such moneys were so held at such date, or two (2) years after the date of deposit of such moneys if deposited after said date when such Bonds became due and payable, shall be repaid to the Authority free from the trusts created by this Indenture, and all liability of the Trustee with respect to such moneys shall thereupon cease; provided/ however, that before the repayment of such moneys to the Authority as aforesaid, the Trustee may (at the cost of the City) first mail to the Owners of Bonds which have not yet been paid, at the addresses shown on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the Authority of the moneys held for the payment thereof. ARTICLE XI MISCELLANEOUS SECTION 11.01 Liability of Authority Limited to Revenues. Notwithstanding anything in this Indenture or in the Bonds contained, the Authority shall not be required to advance any moneys derived from any source other than the Revenues and other assets pledged under this Indenture for any of the purposes in this Indenture mentioned, whether for the payment of the principal of or interest on the Bonds or for any other purpose of this Indenture. Nevertheless, the Authority may, but shall not be required to, advance for any of the purposes hereof any funds of the Authority which may be made available to it for such purposes. SECTION 11.02 Limitation of Rights to Parties and Owners. Nothing in this Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any person other than the Authority, the Trustee, the City and the Owners, any legal or equitable right, remedy or claim under or in respect of this Indenture or any covenant, condition or provision therein or herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Authority, the Trustee, the City and the Owners. SECTION 11.03 Funds and Accounts. Any fund or account required by this Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee, either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records with respect to all such funds and accounts shall at all times be maintained in accordance with corporate trust industry standards to the extent practicable, and with Page 318 60285.00031\31484041.4 41 due regard for the requirements of Section 6.05 and for the protection of the security of the Bonds and the rights of every Owner thereof. SECTION 11.04 Waiver of Notice; Requirement of Mailed Notice. Whenever in this Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any such case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Whenever in this Indenture any notice shall be required to be given by mail, such requirement shall be satisfied by the deposit of such notice in the United States mail, postage prepaid, by first class mail. SECTION 11.05 Destruction of Bonds. Whenever in this Indenture provision is made for the cancellation by the Trustee and the delivery to the Authority of any Bonds, the Trustee shall, in lieu of such cancellation and delivery, destroy such Bonds as may be allowed by law, and deliver a certificate of such destruction to the Authority. SECTION 11.06 Severability of Invalid Provisions. If any one or more of the provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Indenture and such invalidity, illegality or unenforceability shall not affect any other provision of this Indenture, and this Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Authority hereby declares that it would have entered into this Indenture and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of this Indenture may be held illegal, invalid or unenforceable. SECTION 11.07 Notices. All written notices to be given under this Indenture shall be given by first class mail, personal delivery, overnight mail or e-mail pdf to the party entitled thereto at its address set forth below, or at such address as the party may provide to the other party in writing from time to time. Notice shall be effective either (a) upon transmission by facsimile transmission, e-mail pdf, or other form of telecommunication, (b) 48 hours after deposit in the United States mail, postage prepaid, or (c) otherwise, upon actual receipt. The Authority, the City or the Trustee may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder. If to the Authority: Rancho Cucamonga Public Finance Authority 10500 Civic Center Drive Rancho Cucamonga, California 91730 Attention: Executive Director If to the City: City of Rancho Cucamonga 10500 Civic Center Drive Rancho Cucamonga, California 91730 Attention: City Manager Page 319 60285.00031\31484041.4 42 If to the Trustee: Wells Fargo Bank, N.A. [TO COME] SECTION 11.08 Evidence of Rights of Owners. Any request, consent or other instrument required or permitted by this Indenture to be signed and executed by Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such Owners in person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, or of the holding by any person of Bonds transferable by delivery, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee and the Authority if made in the manner provided in this Section 11.08. The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer. The ownership of Bonds shall be proved by the Registration Books. Any request, consent, or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Authority in accordance therewith or reliance thereon. SECTION 11.09 Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are known by the Trustee to be owned or held by or for the account of the Authority or the City, or by any other obligor on the Bonds, or by any person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or the City or any other obligor on the Bonds, 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 or any other obligor on the Bonds. 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 request of the Trustee, the Authority and the City shall specify in a certificate to the Trustee those Bonds designated pursuant to this Section and the Trustee may conclusively rely on such certificate. SECTION 11.10 Money Held for Particular Bonds. The money held by the Trustee for the payment of the interest or principal due on any date with respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owners entitled Page 320 60285.00031\31484041.4 43 thereto, subject, however, to the provisions of Section 10.04 hereof but without any liability for interest thereon. SECTION 11.11 Waiver of Personal Liability. No member, officer, agent or employee of the Authority shall be individually or personally liable for the payment of the principal of or interest or premium (if any) on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law or by this Indenture. SECTION 11.12 Limitations of Claims. Nothing in this Indenture expressed or implied is intended or shall be construed to confer upon, or to give or grant to, any person or entity, other than the Authority, the Trustee and the registered Owners, any right, remedy or claim under or by reason of this Indenture or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Indenture contained by and on behalf of the Authority shall be for the sole and exclusive benefit of the Authority, the Trustee and the registered Owners. SECTION 11.13 Successor Is Deemed Included in All References to Predecessor. Whenever in this Indenture either the Authority or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Indenture contained by or on behalf of the Authority or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. SECTION 11.14 Execution in Several Counterparts. This Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the Authority and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. SECTION 11.15 Governing Law. This Indenture shall be governed by and construed in accordance with the laws of the State. [Signature page follows] Page 321 60285.00031\31484041.4 S-1 IN WITNESS WHEREOF, the RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY has caused this Indenture to be signed in its name by its Chairperson and attested to by its Secretary, and WELLS FARGO BANK, N.A., 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. RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY By: ______________________________________ L. Dennis Michaels, Chairperson ATTEST: By: _________________________________ Janice C. Reynolds, Secretary WELLS FARGO BANK, N.A., as Trustee By: ______________________________________ Authorized Officer -Signature Page- Indenture of Trust Page 322 60285.00031\31484041.4 A-1 EXHIBIT A FORM OF SERIES A BOND UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE INDENTURE OF TRUST) TO THE TRUSTEE FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY BOND AUTHENTICATED AND DELIVERED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. No. R-_____ ***$________*** UNITED STATES OF AMERICA STATE OF CALIFORNIA RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 LEASE REVENUE BONDS (FIBER OPTIC PROJECT) SERIES A (TAX-EXEMPT) INTEREST RATE MATURITY DATE DATED DATE CUSIP REGISTERED OWNER: PRINCIPAL AMOUNT: ___________________________________________DOLLARS The RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY, a joint powers authority duly organized and existing under and by virtue of the laws of the State of California (the “Authority”), for value received, hereby promises to pay to the Registered Owner specified above or registered assigns (the “Registered Owner”), on the Maturity Date specified above (subject to any right of prior redemption hereinafter provided for), the Principal Amount specified above, in lawful money of the United States of America, and to pay interest thereon in like lawful money from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication of this Bond unless (i) this Bond is authenticated on or before an Interest Payment Date and after the close of business on the fifteenth day of the month preceding such interest payment date, in which event it shall bear interest from such Interest Payment Date, or (ii) this Bond is authenticated on or before [April 15], 2019 in which event it shall bear interest from the Dated Date; 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 Page 323 60285.00031\31484041.4 A-2 has previously been paid or made available for payment on this Bond, at the Interest Rate per annum specified above, payable semiannually on each [May 1] and [November 1], commencing [May 1, 2019] (collectively, the “Interest Payment Dates”), calculated on the basis of a 360-day year composed of twelve 30-day months. Principal hereof and premium, if any, upon early redemption hereof are payable upon presentation and surrender hereof at the corporate trust office (the “Office”) of Wells Fargo Bank, N.A., as trustee (the “Trustee”), in Los Angeles, California or such other place, as designated by the Trustee. Interest hereon is payable by check of the Trustee mailed to the Registered Owner hereof at the Registered Owner’s address as it appears on the registration books of the Trustee as of the close of business on the fifteenth day of the month preceding each Interest Payment Date (a “Record Date”), or, upon written request filed with the Trustee (at least five days prior) to such Record Date by a Registered Owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer in immediately available funds to an account in the United States designated by such Registered Owner in such written request. This Bond is one of a duly authorized issue of bonds of the Authority designated as the “Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project), Series A (Tax-Exempt)” (the “Bonds”), in an aggregate principal amount of ______________________________ Dollars ($__________), all of like tenor and date (except for such variation, if any, as may be required to designate varying numbers, maturities, interest rates or redemption provisions) and all issued pursuant to the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “Bond Law”), and pursuant to an Indenture of Trust, dated as of __________ 1, 2019, by and between the Authority and the Trustee (the “Indenture”) and a resolution of the governing body of the Authority adopted on ____________, 2018, authorizing the issuance of the Bonds. Reference is hereby made to the Indenture (copies of which are on file at the office of the Authority) and all supplements thereto for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Revenues, and the rights thereunder of the owners of the Bonds and the rights, duties and immunities of the Trustee and the rights and obligations of the Authority thereunder, to all of the provisions of which the Registered Owner of this Bond, by acceptance hereof, assents and agrees. Concurrently, with the issuance of the Bonds, the Authority is issuing its $__________ aggregate principal amount of “Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project), Series B (Taxable)” (the “Series B Bonds”) payable from Revenues under the Indenture on the same lien and priority with the Bonds. The Bonds have been issued by the Authority to aid the City in financing of certain public facilities. This Bond and the interest and premium, if any, hereon and all other Bonds and the interest and premium, if any, thereon (to the extent set forth in the Indenture) are special obligations of the Authority, and are payable from, and are secured by a charge and lien on the Revenues as defined in the Indenture, consisting primarily of lease payments payable by the City for the use and possession of certain land and improvements (the “Leased Premises”) pursuant to a Lease Agreement dated as of __________ 1, 2019, by and between the City and the Authority (the “Lease Agreement”). As and to the extent set forth in the Indenture, all of the Revenues are exclusively and irrevocably pledged in accordance with the terms hereof and the provisions of the Indenture, to the payment of the principal of and interest and premium (if any) on the Bonds. Page 324 60285.00031\31484041.4 A-3 The rights and obligations of the Authority and the owners of the Bonds may be modified or amended at any time in the manner, to the extent and upon the terms provided in the Indenture, but no such modification or amendment shall extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the owner of each Bond so affected. The Bonds maturing on or before [May 1], 20___, are not subject to redemption prior to their respective stated maturities. The Bonds maturing on or after [May 1], 20___, are subject to redemption at the option of the Authority as a whole or in part, on any date on or after [May 1], 20___ from any available source of funds, at a redemption price equal to the principal amount of the Bonds to be redeemed, without premium, together with accrued interest thereon to the date fixed for redemption. The Bonds maturing [May 1], 20__ and [May 1], 20__ are subject to mandatory redemption, in part by lot, from Sinking Account payments set forth in the Indenture on [May 1], 20__ and [May 1], 20__, respectively, and on each [May 1] in each year thereafter at a redemption price equal to the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption. The Bonds are also subject to redemption as a whole or in part, on any date, from any Net Proceeds (as such term is defined in the Indenture) of hazard or title insurance proceeds not used to repair or replace any portion of the Leased Premises or condemnation proceeds received with respect to the Project and elected by the City to be used for such purpose pursuant to the Lease Agreement, at a redemption price equal to the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium. As provided in the Indenture, notice of redemption shall be mailed by the Trustee by first class mail not less than thirty (30) nor more than sixty (60) days prior to the redemption date to the respective owners of any Bonds designated for redemption at their addresses appearing on the registration books of the Trustee, but neither failure to receive such notice nor any defect in the notice so mailed shall affect the sufficiency of the proceedings for redemption or the cessation of accrual of interest thereon from and after the date fixed for redemption. Notice of redemption may be rescinded by the Authority in the event that funds are not sufficient to cause such optional redemption. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, interest shall cease to accrue hereon from and after the date fixed for redemption. If an Event of Default, as defined in the Indenture, shall occur, the principal of all Bonds may be declared due and payable upon the conditions, in the manner and with the effect provided in the Indenture, but such declaration and its consequences may be rescinded and annulled as further provided in the Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation Page 325 60285.00031\31484041.4 A-4 of this Bond. Upon registration of such transfer, a new Bond or Bonds, of authorized denomination or denominations, for the same aggregate principal amount and of the same maturity will be issued to the transferee in exchange herefor. This Bond may be exchanged at the Office of the Trustee for Bonds of the same tenor, aggregate principal amount, interest rate and maturity, of other authorized denominations. The Authority and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary. This Bond is not a debt of the City of Rancho Cucamonga (the “City”), the County of San Bernardino, the State of California, or any of its political subdivisions, and neither the City, said County, said State, nor any of its political subdivisions, is liable hereon nor in any event shall this Bond be payable out of any funds or properties of the Authority other than the Revenues as such term is defined in the Indenture. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF WHICH FURTHER PROVISIONS SHALL, FOR ALL PURPOSES, HAVE THE SAME EFFECT AS IF SET FORTH IN THIS PLACE. It is hereby certified, recited and declared by the Authority that all of the things, conditions and acts required to exist, to have happened or to have been performed precedent to and in the issuance of this Bond do exist, have happened or have been performed in due and regular time, form and manner as required by the Bond Law and the laws of the State of California and that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Bond Law or any laws of the State of California, and is not in excess of the amount of Bonds permitted to be issued under the Indenture. This Bond shall not be entitled to any benefit under the Indenture or become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been signed by the Trustee. (Signature page follows) Page 326 60285.00031\31484041.4 A-5 IN WITNESS WHEREOF, the Rancho Cucamonga Public Finance Authority has caused this Bond to be executed in its name and on its behalf with the facsimile signature of its Chairperson and attested to by the facsimile signature of its Secretary, all as of the Dated Date specified above. RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY By: _________________________________ L. Dennis Michaels, Chairperson ATTEST: ______________________________ Janice C. Reynolds, Secretary Page 327 60285.00031\31484041.4 A-6 CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the within-mentioned Indenture. Dated: WELLS FARGO BANK, N.A., as Trustee By: _________________________________ Authorized Signatory Page 328 60285.00031\31484041.4 A-7 (FORM OF ASSIGNMENT) For value received the undersigned do(es) hereby sell, assign and transfer unto_________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ (Name, Address and Tax Identification or Social Security Number of Assignee) the within Bond and do(es) hereby irrevocably constitute and appoint ______________________ _________________________________________ attorney, to transfer the same on the books of the Trustee, with full power of substitution in the premises. Dated: _______________________ Note: Signature guarantee shall be made by a guarantor institution participating in the Securities Transfer Agents Medallion Program or in such other guarantee program acceptable to the Trustee. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular, without alteration or enlargement or any change whatsoever. Page 329 60285.00031\31484041.4 B-1 EXHIBIT B FORM OF SERIES B BOND UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE INDENTURE OF TRUST) TO THE TRUSTEE FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY BOND AUTHENTICATED AND DELIVERED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. No. R-_____ ***$________*** UNITED STATES OF AMERICA STATE OF CALIFORNIA RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 LEASE REVENUE BONDS (FIBER OPTIC PROJECT) SERIES B (TAXABLE) INTEREST RATE MATURITY DATE DATED DATE CUSIP REGISTERED OWNER: PRINCIPAL AMOUNT: ___________________________________________DOLLARS The RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY, a joint powers authority duly organized and existing under and by virtue of the laws of the State of California (the “Authority”), for value received, hereby promises to pay to the Registered Owner specified above or registered assigns (the “Registered Owner”), on the Maturity Date specified above (subject to any right of prior redemption hereinafter provided for), the Principal Amount specified above, in lawful money of the United States of America, and to pay interest thereon in like lawful money from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication of this Bond unless (i) this Bond is authenticated on or before an Interest Payment Date and after the close of business on the fifteenth day of the month preceding such interest payment date, in which event it shall bear interest from such Interest Payment Date, or (ii) this Bond is authenticated on or before [April 15], 2019 in which event it shall bear interest from the Dated Date; 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 has previously been paid or made available for payment on this Bond, at the Interest Rate per Page 330 60285.00031\31484041.4 B-2 annum specified above, payable semiannually on each [May 1] and [November 1], commencing [May 1, 2019] (collectively, the “Interest Payment Dates”), calculated on the basis of a 360-day year composed of twelve 30-day months. Principal hereof and premium, if any, upon early redemption hereof are payable upon presentation and surrender hereof at the corporate trust office (the “Office”) of Wells Fargo Bank, N.A., as trustee (the “Trustee”), in Los Angeles, California or such other place, as designated by the Trustee. Interest hereon is payable by check of the Trustee mailed to the Registered Owner hereof at the Registered Owner’s address as it appears on the registration books of the Trustee as of the close of business on the fifteenth day of the month preceding each Interest Payment Date (a “Record Date”), or, upon written request filed with the Trustee (at least five days prior) to such Record Date by a Registered Owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer in immediately available funds to an account in the United States designated by such Registered Owner in such written request. This Bond is one of a duly authorized issue of bonds of the Authority designated as the “Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project), Series B (Taxable)” (the “Bonds”), in an aggregate principal amount of ______________________________ Dollars ($__________), all of like tenor and date (except for such variation, if any, as may be required to designate varying numbers, maturities, interest rates or redemption provisions) and all issued pursuant to the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “Bond Law”), and pursuant to an Indenture of Trust, dated as of __________ 1, 2019, by and between the Authority and the Trustee (the “Indenture”) and a resolution of the governing body of the Authority adopted on ____________, 2019, authorizing the issuance of the Bonds. Reference is hereby made to the Indenture (copies of which are on file at the office of the Authority) and all supplements thereto for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Revenues, and the rights thereunder of the owners of the Bonds and the rights, duties and immunities of the Trustee and the rights and obligations of the Authority thereunder, to all of the provisions of which the Registered Owner of this Bond, by acceptance hereof, assents and agrees. Concurrently, with the issuance of the Bonds, the Authority is issuing its $__________ aggregate principal amount of “Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project), Series A (Tax-Exempt)” (the “Series A Bonds”) payable from Revenues under the Indenture on the same lien and priority with the Bonds. The Bonds have been issued by the Authority to aid the City in financing of certain public facilities. This Bond and the interest and premium, if any, hereon and all other Bonds and the interest and premium, if any, thereon (to the extent set forth in the Indenture) are special obligations of the Authority, and are payable from, and are secured by a charge and lien on the Revenues as defined in the Indenture, consisting primarily of lease payments payable by the City for the use and possession of certain land and improvements (the “Leased Premises”) pursuant to a Lease Agreement dated as of __________ 1, 2019, by and between the City and the Authority (the “Lease Agreement”). As and to the extent set forth in the Indenture, all of the Revenues are exclusively and irrevocably pledged in accordance with the terms hereof and the provisions of the Indenture, to the payment of the principal of and interest and premium (if any) on the Bonds. Page 331 60285.00031\31484041.4 B-3 The rights and obligations of the Authority and the owners of the Bonds may be modified or amended at any time in the manner, to the extent and upon the terms provided in the Indenture, but no such modification or amendment shall extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the owner of each Bond so affected. The Bonds maturing on or before [May 1], 20__, are not subject to redemption prior to their respective stated maturities. The Bonds maturing on or after [May 1], 20__, are subject to redemption at the option of the Authority as a whole or in part, on any date on or after [May 1], 20__ from any available source of funds, at a redemption price equal to the principal amount of the Bonds to be redeemed, without premium, together with accrued interest thereon to the date fixed for redemption. The Bonds maturing [May 1], 20__ and [May 1], 20__, are subject to mandatory redemption, in part by lot, from Sinking Account payments set forth in the Indenture on [May 1], 20__ and [May 1], 20__, respectively, and on each [May 1] in each year thereafter at a redemption price equal to the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption. The Bonds are also subject to redemption as a whole or in part, on any date, from any Net Proceeds (as such term is defined in the Indenture) of hazard or title insurance proceeds not used to repair or replace any portion of the Leased Premises or condemnation proceeds received with respect to the Project and elected by the City to be used for such purpose pursuant to the Lease Agreement, at a redemption price equal to the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium. As provided in the Indenture, notice of redemption shall be mailed by the Trustee by first class mail not less than thirty (30) nor more than sixty (60) days prior to the redemption date to the respective owners of any Bonds designated for redemption at their addresses appearing on the registration books of the Trustee, but neither failure to receive such notice nor any defect in the notice so mailed shall affect the sufficiency of the proceedings for redemption or the cessation of accrual of interest thereon from and after the date fixed for redemption. Notice of redemption may be rescinded by the Authority in the event that funds are not sufficient to cause such optional redemption. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, interest shall cease to accrue hereon from and after the date fixed for redemption. If an Event of Default, as defined in the Indenture, shall occur, the principal of all Bonds may be declared due and payable upon the conditions, in the manner and with the effect provided in the Indenture, but such declaration and its consequences may be rescinded and annulled as further provided in the Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation Page 332 60285.00031\31484041.4 B-4 of this Bond. Upon registration of such transfer, a new Bond or Bonds, of authorized denomination or denominations, for the same aggregate principal amount and of the same maturity will be issued to the transferee in exchange herefor. This Bond may be exchanged at the Office of the Trustee for Bonds of the same tenor, aggregate principal amount, interest rate and maturity, of other authorized denominations. The Authority and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary. This Bond is not a debt of the City of Rancho Cucamonga (the “City”), the County of San Bernardino, the State of California, or any of its political subdivisions, and neither the City, said County, said State, nor any of its political subdivisions, is liable hereon nor in any event shall this Bond be payable out of any funds or properties of the Authority other than the Revenues as such term is defined in the Indenture. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF WHICH FURTHER PROVISIONS SHALL, FOR ALL PURPOSES, HAVE THE SAME EFFECT AS IF SET FORTH IN THIS PLACE. It is hereby certified, recited and declared by the Authority that all of the things, conditions and acts required to exist, to have happened or to have been performed precedent to and in the issuance of this Bond do exist, have happened or have been performed in due and regular time, form and manner as required by the Bond Law and the laws of the State of California and that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Bond Law or any laws of the State of California, and is not in excess of the amount of Bonds permitted to be issued under the Indenture. This Bond shall not be entitled to any benefit under the Indenture or become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been signed by the Trustee. (Signature page follows) Page 333 60285.00031\31484041.4 B-5 IN WITNESS WHEREOF, the Rancho Cucamonga Public Finance Authority has caused this Bond to be executed in its name and on its behalf with the facsimile signature of its Chairperson and attested to by the facsimile signature of its Secretary, all as of the Dated Date specified above. RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY By_________________________________ L. Dennis Michaels, Chairperson ATTEST: ______________________________ Janice C. Reynolds, Secretary Page 334 60285.00031\31484041.4 B-6 CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the within-mentioned Indenture. Dated: WELLS FARGO BANK, N.A., as Trustee By_________________________________ Authorized Signatory Page 335 60285.00031\31484041.4 B-7 (FORM OF ASSIGNMENT) For value received the undersigned do(es) hereby sell, assign and transfer unto_________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ (Name, Address and Tax Identification or Social Security Number of Assignee) the within Bond and do(es) hereby irrevocably constitute and appoint ______________________ _________________________________________ attorney, to transfer the same on the books of the Trustee, with full power of substitution in the premises. Dated: _______________________ Note: Signature guarantee shall be made by a guarantor institution participating in the Securities Transfer Agents Medallion Program or in such other guarantee program acceptable to the Trustee. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular, without alteration or enlargement or any change whatsoever. Page 336 60285.00031\31484041.4 C-1 EXHIBIT C DESCRIPTION OF PROJECT Costs Estimates Project Component Cost Page 337 60285.00031\31484041.4 D-1 EXHIBIT D RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 LEASE REVENUE BONDS (FIBER OPTIC PROJECT) REQUISITION NO.___ PERTAINING TO DISBURSEMENTS FROM ACQUISITION AND CONSTRUCTION FUND The undersigned hereby states and certifies: (i) that she/he is the duly appointed, qualified and acting ____________________ of the City of Rancho Cucamonga; (ii) that, pursuant to Section 3.04 of the Indenture of Trust dated as of __________ 1, 2019 (the “Indenture”), between Wells Fargo Bank, N.A., as trustee (the “Trustee”) and Treasurer of the Rancho Cucamonga Public Finance Authority (the “Authority”), the undersigned hereby requests the Trustee to disburse from the [Series A/Series B] Account of the Acquisition and Construction Fund established under the Indenture to each of the payees designated and the amounts on Exhibit A, attached hereto and incorporated herein by this reference such payments shall be made by check or wire transfer in accordance with the payment instructions set forth in Exhibit A attached and the Trustee may rely on such payment instructions though given by the Authority with no duty to investigate or inquire as to the authenticity of the invoice or the payment instructions contained therein; and (iii) that each obligation mentioned in Exhibit A is a proper charge against the Acquisition and Construction Fund and has not previously been disbursed by the Trustee from amounts in the Acquisition and Construction Fund, all conditions precedent set forth in the Indenture with respect to such disbursement have been satisfied, and that the amount of such disbursement is for a designated capital improvement to the Project. Dated: CITY OF RANCHO CUCAMONGA By: Tamara Layne Finance Director Page 338 60285.00031\31484041.4 D-2 EXHIBIT A PROJECT COSTS PAYEE DESCRIPTION AMOUNT Page 339 TABLE OF CONTENTS Page 26353.00011\9297499.7 i 60285.00031\31484041.4 ARTICLE I DEFINITIONS; RULES OF INTERPRETATION SECTION 1.01 Definitions.................................................................................................. 2 SECTION 1.02 Interpretation ............................................................................................ 12 ARTICLE II THE BONDS SECTION 2.01 Authorization of Bonds ............................................................................ 12 SECTION 2.02 Terms of the Bonds .................................................................................. 12 SECTION 2.03 Transfer of Bonds .................................................................................... 13 SECTION 2.04 Exchange of Bonds .................................................................................. 14 SECTION 2.05 Registration Books ................................................................................... 14 SECTION 2.06 Form and Execution of Bonds ................................................................. 14 SECTION 2.07 Temporary Bonds..................................................................................... 14 SECTION 2.08 Bonds Mutilated, Lost, Destroyed or Stolen ............................................ 15 SECTION 2.09 Cancellation of Bonds .............................................................................. 15 SECTION 2.10 CUSIP Numbers....................................................................................... 15 SECTION 2.11 Book-Entry Bonds ................................................................................... 15 ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS SECTION 3.01 Issuance of the Bonds .............................................................................. 17 SECTION 3.02 Application of Proceeds at Closing .......................................................... 17 SECTION 3.03 Establishment and Application of Costs of Issuance Fund ...................... 17 SECTION 3.04 Acquisition and Construction Fund ......................................................... 18 SECTION 3.05 Validity of Bonds ..................................................................................... 18 ARTICLE IV REDEMPTION OF BONDS SECTION 4.01 Terms of Redemption .............................................................................. 19 SECTION 4.02 Selection of Bonds for Redemption ......................................................... 21 SECTION 4.03 Notice of Redemption .............................................................................. 21 SECTION 4.04 Partial Redemption of Bonds ................................................................... 21 SECTION 4.05 Conditional Notice of Optional Redemption of Bonds............................ 22 SECTION 4.06 Effect of Redemption ............................................................................... 22 ARTICLE V REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST SECTION 5.01 Pledge and Assignment; Bond Fund ........................................................ 22 SECTION 5.02 Allocation of Revenues ............................................................................ 23 SECTION 5.03 Application of Interest Account ............................................................... 23 SECTION 5.04 Application of Principal Account ............................................................ 23 Page 340 TABLE OF CONTENTS (continued) Page 60285.00031\31484041.4 ii SECTION 5.05 Application of Sinking Account .............................................................. 23 SECTION 5.06 Application of Redemption Fund............................................................. 23 SECTION 5.07 Insurance and Condemnation Fund ......................................................... 24 SECTION 5.08 Investments .............................................................................................. 25 SECTION 5.09 Valuation and Disposition of Investments ............................................... 26 ARTICLE VI PARTICULAR COVENANTS SECTION 6.01 Punctual Payment..................................................................................... 26 SECTION 6.02 Extension of Payment of Bonds ............................................................... 26 SECTION 6.03 Against Encumbrances............................................................................. 26 SECTION 6.04 Power to Issue Bonds and Make Pledge and Assignment ....................... 26 SECTION 6.05 Accounting Records and Financial Statements........................................ 27 SECTION 6.06 Additional Obligations ............................................................................. 27 SECTION 6.07 Tax Covenants ......................................................................................... 27 SECTION 6.08 Lease Agreement ..................................................................................... 28 SECTION 6.09 Waiver of Laws ........................................................................................ 28 SECTION 6.10 Further Assurances................................................................................... 28 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES SECTION 7.01 Events of Default ..................................................................................... 28 SECTION 7.02 No Acceleration Upon Event of Default .................................................. 29 SECTION 7.03 Application of Revenues and Other Funds After Default ........................ 29 SECTION 7.04 Trustee to Represent Owners ................................................................... 29 SECTION 7.05 Owners’ Direction of Proceedings ........................................................... 30 SECTION 7.06 Limitation on Owners’ Right to Sue ........................................................ 30 SECTION 7.07 Absolute Obligation of Authority ............................................................ 31 SECTION 7.08 Termination of Proceedings ..................................................................... 31 SECTION 7.09 Remedies Not Exclusive .......................................................................... 31 SECTION 7.10 No Waiver of Default............................................................................... 31 ARTICLE VIII THE TRUSTEE SECTION 8.01 Duties, Immunities and Liabilities of Trustee.......................................... 31 SECTION 8.02 Merger or Consolidation .......................................................................... 33 SECTION 8.03 Liability of Trustee .................................................................................. 33 SECTION 8.04 Right to Rely on Documents .................................................................... 35 SECTION 8.05 Preservation and Inspection of Documents.............................................. 36 SECTION 8.06 Compensation and Indemnification ......................................................... 36 Page 341 TABLE OF CONTENTS (continued) Page 60285.00031\31484041.4 iii ARTICLE IX MODIFICATION OR AMENDMENT HEREOF SECTION 9.01 Amendments Permitted ............................................................................ 37 SECTION 9.02 Effect of Supplemental Indenture ............................................................ 38 SECTION 9.03 Endorsement of Bonds; Preparation of New Bonds ................................ 38 SECTION 9.04 Amendment of Particular Bonds .............................................................. 38 ARTICLE X DEFEASANCE SECTION 10.01 Discharge of Indenture ............................................................................. 39 SECTION 10.02 Discharge of Liability on Bonds .............................................................. 39 SECTION 10.03 Deposit of Money or Securities with Trustee .......................................... 39 SECTION 10.04 Unclaimed Funds ..................................................................................... 40 ARTICLE XI MISCELLANEOUS SECTION 11.01 Liability of Authority Limited to Revenues ............................................. 41 SECTION 11.02 Limitation of Rights to Parties and Owners ............................................. 41 SECTION 11.03 Funds and Accounts ................................................................................. 41 SECTION 11.04 Waiver of Notice; Requirement of Mailed Notice ................................... 41 SECTION 11.05 Destruction of Bonds ............................................................................... 41 SECTION 11.06 Severability of Invalid Provisions ............................................................ 41 SECTION 11.07 Notices ..................................................................................................... 42 SECTION 11.08 Evidence of Rights of Owners ................................................................. 42 SECTION 11.09 Disqualified Bonds................................................................................... 43 SECTION 11.10 Money Held for Particular Bonds ............................................................ 43 SECTION 11.11 Waiver of Personal Liability .................................................................... 43 SECTION 11.12 Limitations of Claims .............................................................................. 43 SECTION 11.13 Successor Is Deemed Included in All References to Predecessor ........... 43 SECTION 11.14 Execution in Several Counterparts........................................................... 44 SECTION 11.15 Governing Law ........................................................................................ 44 EXHIBIT A - FORM OF SERIES A BOND ........................................................................... A-1 EXHIBIT B – FORM OF SERIES B BOND ........................................................................... B-1 EXHIBIT C – DESCRIPTION OF PROJECT ......................................................................... C-1 EXHIBIT D – REQUISITION PERTAINING TO DISBURSEMENTS ................................ D-1 Page 342 60285.00031\31483807.7 ______________________________________________________________________________ ______________________________________________________________________________ LEASE AGREEMENT Dated as of ___________ 1, 2019 by and between the CITY OF RANCHO CUCAMONGA, as lessor and sub-lessee and the RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY, as lessee and sub-lessor Relating to Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project) ______________________________________________________________________________ ______________________________________________________________________________ Page 343 60285.00031\31483807.7 LEASE AGREEMENT THIS LEASE AGREEMENT (this “Lease Agreement”), dated as of ___________ 1, 2019, is by and between the CITY OF RANCHO CUCAMONGA, a municipal corporation organized and existing under the laws of the State of California, as lessor and sub-lessee (the “City”), and the RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY, a joint powers authority organized and existing under the laws of the State of California, as lessee and sub-lessor (the “Authority”); WI T N E S S E T H : WHEREAS, the Authority is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement by and between the City and the Rancho Cucamonga Fire Protection District; and WHEREAS, under Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Bond Law”) the Authority is authorized to borrow money for the purpose of financing the acquisition of bonds, notes and other obligations of, or for the purpose of making loans to, public entities including the City, and to provide financing for public capital improvements of public entities including the City and to lease and lease back such public capital improvements; and WHEREAS, the City intends to lease certain public improvements owned by the City (the “Leased Premises”) to the Authority and lease the Leased Premises back from the Authority; and WHEREAS, the Leased Premises constitute a public capital improvement, as that term is defined in the Bond Law; and WHEREAS, the Authority and the City propose to enter into this Lease Agreement for the purpose of providing amounts sufficient to pay the principal and interest on Bonds (defined herein), the proceeds of which will be used to pay for the acquisition, design, construction and equipping of a fiber optic network in the City (collectively, the “Project”); and WHEREAS, the Authority proposes to issue its 2019 Lease Revenue Bonds (Fiber Optic Project) issued as $__________ aggregate principal amount of Series A Bonds (Tax-Exempt) (the “Series A Bonds”) and as $__________ aggregate principal amount of Series B Bonds (Taxable) (the “Series B Bonds” and together with the Series A Bonds, the “Bonds”) under an Indenture of Trust dated as of ___________ 1, 2019 (the “Indenture”), by and between the Authority and the Trustee for the purpose of financing public capital improvements of the City; and WHEREAS, all conditions to the execution and delivery of this Lease Agreement have been satisfied and the Authority and the City are duly authorized to execute and deliver this Lease Agreement; NOW, THEREFORE, for and in consideration of the premises and the material covenants hereinafter contained, the parties hereto hereby formally covenant, agree and bind themselves as follows: Page 344 60285.00031\31483807.7 2 ARTICLE I DEFINITIONS AND EXHIBITS Section 1.1. Definitions. Unless the context clearly otherwise requires or unless otherwise defined herein, the capitalized terms in this Lease Agreement shall have the respective meanings specified in Section 1.01 of the Indenture. In addition, the following terms heretofore defined in this Lease Agreement and the following terms defined in this Section 1.1 shall, for all purposes of this Lease Agreement, have the respective meanings herein specified. “Event of Default” means any of the events of default defined as such in Section 9.1. “Facilities” means all of the buildings, improvements and facilities at any time situated on the Site and described in Exhibit A attached hereto and by this reference incorporated herein. “Fiscal Year” means the twelve-month period beginning on July 1 of any year and ending on June 30 of the next succeeding year, or any other twelve-month period established by the City as its fiscal year pursuant to written notice filed with the Authority and the Trustee. “Hazardous Substance” means any substance, pollutant or contamination included in such (or any similar) term under any federal, state or local statute, law, ordinance, code or regulation now in effect or hereafter enacted or amended. “Indenture” means the Indenture of Trust dated as of ___________ 1, 2019, by and between the Authority and the Trustee, together with any duly authorized and executed amendments thereto. “Lease Payment Date” means, with respect to any Interest Payment Date, the business day prior to such Interest Payment Date. “Lease Payments” means the amounts payable by the City pursuant to Section 4.3(a), including any prepayment thereof pursuant hereto and including any amounts payable upon a delinquency in the payment thereof. “Leased Premises” means, collectively, the Site and the Facilities, subject to the provisions of Section 4.9. “Miscellaneous Rent” means the amounts of additional rental which are payable by the City pursuant to Section 4.8. “Permitted Encumbrances” means, as of any time: (a) liens for general ad valorem taxes, special taxes and assessments, if any, not then delinquent, or which the City may permit to remain unpaid pursuant to Article V; (b) this Lease Agreement, the Indenture and any other agreement or other document contemplated hereunder to be recorded against the Leased Premises including any amendment to this Lease pursuant to Section 8.3(e) hereof; (c) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law; (d) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist pursuant to the policy of title insurance obtained Page 345 60285.00031\31483807.7 3 pursuant to Section 5.6, (e) such minor defects, irregularities, encumbrances and clouds on title as normally exist with respect to property similar in character to the Leased Premises and as do not materially impair the use intended to be made of property affected thereby; and (f) easements, right of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions, of which the City certifies in writing will not materially impair the use of the Leased Premises for their intended purposes. “Project” means the acquisition, design, construction and equipping of a fiber optic network. “Site” means all of the land described in Exhibit A attached hereto and by this reference incorporated herein. “Term” means the time during which this Lease Agreement is in effect, as provided in Section 4.2. “Trustee” means Wells Fargo Bank, N.A., or any successor thereto acting as Trustee pursuant to the Indenture. Section 1.2. Exhibits. The following exhibits are attached to, and by this reference made a part of, this Lease Agreement. Exhibit A: Description of the Leased Premises. Exhibit B: Schedule of Lease Payments. ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.1. Representations, Covenants and Warranties of the City. The City makes the following covenants, representations and warranties to the Authority as of the date of the execution and delivery of this Lease Agreement: (a) Due Organization and Existence. The City is a municipal corporation duly organized and validly existing under the laws of the State, has full legal right, power and authority under the laws of the State to enter into this Lease Agreement and to carry out and consummate all transactions contemplated hereby and thereby, and by proper action the City has duly authorized the execution and delivery of this Lease Agreement. (b) Due Execution. The representatives of the City executing this Lease Agreement have been fully authorized to execute the same pursuant to a resolution duly adopted by the City Council of the City. (c) Valid, Binding and Enforceable Obligations. This Lease Agreement has been duly authorized, executed and delivered by the City and constitutes the legal, valid and binding agreement of the City enforceable against the City in accordance with the terms hereof, except to the extent that such enforceability may be limited by any applicable Page 346 60285.00031\31483807.7 4 bankruptcy, insolvency, debt adjustment, receivership, fraudulent conveyance or transfer, moratorium, reorganization, arrangements or other laws 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 public entities in the State or other laws or equitable principles affecting the enforcement of creditors’ rights generally. (d) No Conflicts. The execution and delivery of this Lease Agreement, the consummation of the transactions herein contemplated and the fulfillment of or compliance with the terms and conditions hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the City is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the City, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease Agreement or the financial condition, assets, properties or operations of the City. (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the City or of the voters of the City, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Lease Agreement, or the consummation of any transaction herein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending and notice of which has been served upon and received by the City or, to the knowledge of the City after reasonable investigation, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Lease Agreement, or upon the financial condition, assets, properties or operations of the City, and the City is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease Agreement or the financial conditions, assets, properties or operations of the City. (g) Status of Leased Premises. The Lease Premises are fully functional, operational, and in sound condition, excepting only reasonable wear and tear. No event which constitutes, or which with the passage of time if not cured would constitute, an Event of Default has occurred and is continuing. Page 347 60285.00031\31483807.7 5 Section 2.2. Representations, Covenants and Warranties of Authority. The Authority makes the following covenants, representations and warranties to the City as of the date of the execution and delivery of this Lease Agreement: (a) Due Organization and Existence. The Authority is a joint powers authority duly organized and existing under and by virtue of the laws of the State; has power to enter into this Lease Agreement and the Indenture; is possessed of full power to lease and lease back the same; and has duly authorized the execution and delivery of each of the aforesaid agreements. (b) Valid, Binding and Enforceable Obligations. The Lease Agreement and Indenture constitute the legal, valid and binding agreements of the Authority, enforceable against the Authority in accordance with their respective terms, except to the extent that such enforceability may be limited by any applicable bankruptcy, insolvency, debt adjustment, receivership, fraudulent conveyance or transfer, moratorium, reorganization, arrangements or other laws 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 public entities in the State or other laws or equitable principles affecting the enforcement of creditors’ rights generally. (c) Due Execution. The representatives of the Authority executing this Lease Agreement and the Indenture are fully authorized to execute the same pursuant to official action taken by the governing body of the Authority. (d) No Conflicts. The execution and delivery of this Lease Agreement and the Indenture, the consummation of the transactions herein and therein contemplated and the fulfillment of or compliance with the terms and conditions hereof and thereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the Authority is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Authority, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease Agreement and the Indenture or the financial condition, assets, properties or operations of the Authority. (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the Authority, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Lease Agreement or the Indenture, or the consummation of any transaction herein or therein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending Page 348 60285.00031\31483807.7 6 and notice of which has been served upon and received by the Authority or, to the knowledge of the Authority after reasonable investigation, threatened against or affecting the Authority or the assets, properties or operations of the Authority which, if determined adversely to the Authority or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Lease Agreement or the Indenture, or upon the financial condition, assets, properties or operations of the Authority, and the Authority is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease Agreement or the Indenture or the financial conditions, assets, properties or operations of the Authority. ARTICLE III THE BONDS Section 3.1. The Bonds. The Authority has authorized the issuance of the Bonds pursuant to the Indenture in the aggregate principal amount of _________________________ Dollars ($__________). The Authority agrees that the proceeds of sale of the Bonds shall be paid to the Trustee on the Closing Date for deposit and application pursuant to the terms and conditions of the Indenture. The City hereby approves the Indenture, and the issuance of the Bonds by the Authority thereunder. Section 3.2. Financing of Project. In order to pay the Authority’s lease payment for the Leased Premises hereunder, on the Closing Date, the Authority shall cause a portion of the proceeds of the Bonds to be deposited in the Acquisition and Construction Fund for the financing of the Project pursuant to the Indenture. Section 3.3. Payment of Costs of Issuance. Payment of all Costs of Issuance shall be made from the moneys deposited with the Trustee in the Costs of Issuance Fund, which moneys shall be disbursed for such purpose in accordance with Section 3.03 of the Indenture. Any Costs of Issuance for the payment of which insufficient funds shall be available on deposit in the Costs of Issuance Fund, shall be paid by the City. ARTICLE IV LEASE; TERM OF THIS LEASE AGREEMENT; RENTAL PAYMENTS Section 4.1. Lease by Authority and Lease Back to City. (a) In consideration of the payment of a lease payment of $__________ by the Authority less the Original Purchaser’s discount, and in consideration of the execution of this Lease Agreement by the City, and other good and valuable consideration, the City hereby leases Page 349 60285.00031\31483807.7 7 to the Authority, and the Authority hereby leases from the City, the Leased Premises for the Term of this Lease Agreement, plus one week following the end of the Term of this Lease Agreement. (b) The Authority hereby leases the Leased Premises to the City, and the City hereby leases the Leased Premises from the Authority, upon the terms and conditions set forth in this Lease Agreement. (c) The City hereby takes possession of the Leased Premises on the Closing Date. Section 4.2. Term of Lease Agreement. The Term of this Lease Agreement shall commence on the Closing Date and shall end on [May 1], 20___, unless such term is extended as hereinafter provided or unless Lease Payments have been paid or prepaid in full or provision shall have been made for such payment pursuant to Section 4.3(f) hereof. If on [May 1], 20___, the Indenture shall not be discharged by its terms or if the Lease Payments payable hereunder shall have been abated at any time and for any reason, then the Term of this Lease Agreement shall be extended until the earlier of [May 1], 20___, or the date the Indenture shall be discharged by its terms. If prior to [May 1], 20___, the Indenture shall be discharged by its terms and any amounts then owed to the Trustee have been paid in full, the Term of this Lease Agreement shall thereupon end. Section 4.3. Lease Payments; Security Deposit. (a) Obligation to Pay. In consideration of the lease and lease back by the Authority of the Leased Premises and in consideration of the issuance of the Bonds by the Authority for the purpose of acquiring, designing, constructing and equipping the Project, and subject to the provisions of Section 6.1 and Section 6.2, the City agrees to pay to the Authority, its successors and assigns, as rental for the use and occupancy of the Leased Premises during each Fiscal Year, the Lease Payments (denominated into components of principal and interest) for the Leased Premises in the respective amounts specified in Exhibit B hereto, to be due and payable on the fifteenth day prior to each respective Lease Payment Date specified in Exhibit B hereto. Any amount held in the Bond Fund, the Interest Account, the Sinking Account or the Principal Account (other than amounts resulting from the prepayment of the Lease Payments in part but not in whole pursuant to Section 4.5) on any Lease Payment Date shall be credited towards the Lease Payment then due and payable. The Lease Payments coming due and payable in any Fiscal Year shall be for the use of the Leased Premises for such Fiscal Year. (b) Effect of Prepayment. In the event that the City prepays all Lease Payments in full pursuant to Section 4.5 or 6.01 (or the Bonds shall be redeemed in full from other sources of funds pursuant to Section 4.01 of the Indenture), the City’s obligations under this Lease Agreement shall thereupon cease and terminate, including but not limited to the City’s obligation to pay Lease Payments under this Section 4.3. In the event that the City prepays the Lease Payments in part but not in whole pursuant to Section 4.5 or 6.01 (or the Bonds shall be redeemed in part from other sources of funds pursuant to Section 4.01 of the Indenture), the Authority shall provide, or cause to be provided, to the Trustee and the City a revised schedule of Lease Payments due after such partial prepayment, which revised schedule of Lease Payments shall be sufficient to provide for the scheduled payment of remaining principal of and interest on the Bonds, and which schedule Page 350 60285.00031\31483807.7 8 shall represent an adjustment to the schedule of Lease Payments set forth in Exhibit B hereto after taking into account said partial prepayment. (c) Rate on Overdue Payments. In the event the City should fail to make any of the payments required in this Section 4.3, the payment in default shall continue as an obligation of the City until the amount in default shall have been fully paid, and the City agrees to pay the same with interest thereon, to the extent permitted by law, from the date of default to the date of payment at the rate per annum equal to the actual interest rate on the Bonds. (d) Fair Rental Value. The Lease Payments and Miscellaneous Rent (described in Section 4.8 below) coming due and payable hereunder in each Fiscal Year shall constitute the total rental for the Leased Premises for each Fiscal Year and shall be paid by the City in each Fiscal Year for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of, the Leased Premises during such Fiscal Year. The parties hereto have agreed and determined that the net present value of such Lease Payments and the annual payment of Miscellaneous Rent for the Leased Premises do not exceed the fair rental value of the Leased Premises. In making such determination, consideration has been given to the obligations of the parties under this Lease Agreement, the uses and purposes which may be served by the Leased Premises and the benefits therefrom which will accrue to the City and the general public. (e) Source of Payments; Budget and Appropriation. The Lease Payments shall be payable from any source of available funds of the City, subject to the provisions of Section 6.1 and Section 6.2. The City covenants to take such action as may be necessary to include all Lease Payments and Miscellaneous Rent due in a Fiscal Year hereunder in each of its budgets for such Fiscal Year during the Term of this Lease Agreement and to make the necessary annual appropriations for all such Lease Payments and Miscellaneous Rent. The covenants on the part of the City herein contained shall be deemed to be and shall be construed to be ministerial duties imposed by law and it shall be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in this Lease Agreement agreed to be carried out and performed by the City. The City and the Authority understand and intend that the obligation of the City to pay Lease Payments, Miscellaneous Rent, and other payments hereunder constitutes a current expense of the City and shall not in any way be construed to be a debt of the City in contravention of any applicable constitutional or statutory limitation or requirement concerning the creation of indebtedness by the City, nor shall anything contained herein constitute a pledge of the general tax revenues, funds or moneys of the City. Lease Payments and Miscellaneous Rent due hereunder shall be payable only from current funds which are budgeted and appropriated, or otherwise legally available, for the purpose of paying Lease Payments, Miscellaneous Rent, or other payments due hereunder as consideration for use of the Leased Premises during the Fiscal Year for which such funds were budgeted and appropriated or otherwise made legally available for such purpose. This Lease Agreement shall not create an immediate indebtedness for any aggregate payments which may become due hereunder. The City has not pledged the full faith and credit of the City, the State or any agency or department thereof to the payment of the Lease Payments or any other payments due hereunder, the Bonds or the interest thereon. Page 351 60285.00031\31483807.7 9 (f) Security Deposit. Notwithstanding any other provision of this Lease Agreement, the City may on any date secure the payment of the Lease Payments in whole or in part by depositing with the Trustee (or another fiduciary or escrow agent) an amount of cash which, together with other available amounts, is either (i) sufficient to pay such Lease Payments, including the principal and interest components thereof, in accordance with the related Lease Payment schedule set forth in Exhibit B, or (ii) invested in whole or in part in non-callable Federal Securities in such amount as will, in the opinion of an Independent Accountant, together with interest to accrue thereon and together with any cash which is so deposited, be fully sufficient to pay such Lease Payments when due hereunder or on any optional prepayment date pursuant to Section 4.5 and Section 10.01 of the Indenture, as the City shall instruct at the time of said deposit. Said security deposit shall be deemed to be and shall constitute a special fund for the payment of Lease Payments in accordance with the provisions of this Lease Agreement. In connection with the making of any such security deposit, the Authority shall take, and shall cause the Trustee to take, any actions necessary to remove such appropriate portions of the Leased Premises from the lien of this Lease Agreement. (g) Delinquent Lease Payments. Any delinquent Lease Payment shall be made to the Trustee for application as set forth in the Indenture. Section 4.4. [Intentionally Reserved]. Section 4.5. Optional Prepayment. The City shall have the option to prepay the principal components of the Lease Payments in whole, or in part in any integral multiple of $5,000, on any date on or after _______________, with respect to the Lease Payments, by paying a prepayment price equal to the aggregate principal components of the Lease Payments to be prepaid, together with a prepayment premium equal to the premium (if any) required to be paid on the corresponding redemption of the Bonds pursuant to Section 4.01(a) of the Indenture and together with accrued interest to the prepayment date. Such prepayment price (except the interest portion thereof, which shall be deposited into the Interest Account) shall be deposited by the Trustee in the Redemption Fund to be applied to the optional redemption of Bonds pursuant to Section 4.01(a) of the Indenture. The City shall give the Authority and the Trustee written notice of its intention to exercise its option not less than fifteen (15) days in advance of the date of exercise. Notwithstanding any such prepayment, as long as any Bonds remain Outstanding or any Miscellaneous Rent payments remain unpaid, the City shall not be relieved of its obligations hereunder as to such Bonds or such Miscellaneous Rent. Section 4.6. Quiet Enjoyment. During the Term of this Lease Agreement, the Authority shall provide the City with quiet use and enjoyment of the Leased Premises, and the City shall, during such Term, peaceably and quietly have and hold and enjoy the Leased Premises without suit, trouble or hindrance from the Authority, except as expressly set forth in this Lease Agreement. The Authority will, at the request of the City and at the City’s cost, join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Authority may lawfully do so. Notwithstanding the foregoing, the Authority shall have the right to inspect the Leased Premises as provided in Section 7.2. Section 4.7. Title. During the Term of this Lease Agreement, the Authority shall hold a leasehold in the Leased Premises, and in any and all additions which comprise fixtures, repairs, Page 352 60285.00031\31483807.7 10 replacements or modifications to the Leased Premises, except for those fixtures, repairs, replacements or modifications which are added to the Leased Premises by the City at its own expense and which may be removed without damaging the Leased Premises and except for any items added to the Leased Premises by the City pursuant to this Lease Agreement. All right, title and interest of the Authority in and to the Leased Premises shall be transferred to and vested in the City if (a) the City pays all of the Lease Payments and Miscellaneous Rent during the Term of this Lease Agreement as the same become due and payable, or if the City posts a security deposit for payment of the Lease Payments pursuant to Section 4.3(f) or prepays the Lease Payments pursuant to Section 4.5, and (b) if the City has paid in full all of the Miscellaneous Rent coming due and payable as of the date of such prepayment; provided, however, any such transfer shall not constitute a waiver of any Event of Default that shall have occurred and be continuing. The Authority agrees to take any and all steps and execute and record any and all documents reasonably required by the City to consummate any such transfer of title. Section 4.8. Miscellaneous Rent. In addition to the Lease Payments, the City shall pay when due the following items of Miscellaneous Rent: (a) all fees and expenses incurred by the Authority in connection with or by reason of its leasehold estate in the Leased Premises as and when the same become due and payable; (b) all reasonable compensation to the Trustee pursuant to Section 8.06 of the Indenture for all services rendered under the Indenture and for all reasonable expenses, charges, costs, liabilities, legal fees and other disbursements incurred in and about the performance of its powers and duties under the Indenture; (c) the reasonable fees and expenses of such accountants, consultants, attorneys and other experts as may be engaged by the Authority to prepare audits, financial statements, reports, opinions or provide such other services required under this Lease Agreement or the Indenture; and (d) the reasonable out-of-pocket expenses of the Authority in connection with the execution and delivery of this Lease Agreement or the Indenture, or in connection with the issuance of the Bonds, including, but not limited to, amounts payable pursuant to Section 5.11 and including but not limited to any and all expenses incurred in connection with the authorization, issuance, sale and delivery of the Bonds, or incurred by the Authority in connection with any litigation which may at any time be instituted involving this Lease Agreement, the Bonds, the Indenture or any of the other documents contemplated hereby or thereby, or otherwise incurred in connection with the administration of this Lease Agreement. Section 4.9. Substitution or Release of Leased Premises. The City shall have, and is hereby granted, the option at any time and from time to time during the Term of this Lease Agreement, to substitute other land, facilities or improvements (the “Substitute Leased Premises”) for the Leased Premises or any portion thereof (the “Released Premises”) from the lien of this Lease Agreement, provided that the City shall satisfy all of the following requirements which are hereby declared to be conditions precedent to such substitution or release: Page 353 60285.00031\31483807.7 11 (a) The City shall provide written notification of such substitution or release to the rating agencies, which notice shall contain the certification that all conditions set forth in this Section 4.9 are met with respect to such substitution or release. (b) The City shall take all actions and shall execute all documents required to subject the Substitute Leased Premises to the terms and provisions of this Lease Agreement, including the filing with the Authority and the Trustee an amended Exhibit A which adds thereto a description of the Substitute Leased Premises and deletes therefrom the description of the Released Premises, as applicable. (c) (i) In the case of a substitution, the City shall determine and certify in writing to the Authority and the Trustee that the fair rental value of the Substitute Leased Premises is at least equal to the net present value of remaining Lease Payments. (ii) In the case of a release, the City shall determine and certify in writing to the Authority and the Trustee that the value of the remaining Leased Premises after removal of the Released Premises is at least equal to the net present value of remaining Lease Payments. (d) In the case of a substitution, the City shall certify in writing to the Authority and the Trustee that the estimated useful life of the Substitute Leased Premises at least extends to the date on which the final Lease Payment becomes due and payable hereunder. (e) In the case of a substitution, the City shall obtain a CLTA policy of title insurance meeting the requirements of Section 5.6 with respect to any real property portion of the Substitute Leased Premises. (f) In the case of a substitution, the substitution of the Substitute Leased Premises shall not cause the City to violate any of its covenants, representations and warranties made herein. (g) The City shall obtain and cause to be filed with the Trustee and the Authority an opinion of Bond Counsel stating that such substitution or release is permitted hereunder and does not cause interest on the Series A Bonds to become includable in the gross income of the Bond Owners for federal income tax purposes if there are outstanding Series A Bonds at the time of such substitution. From and after the date on which all of the foregoing conditions precedent to such substitution or release are satisfied, the Term of this Lease Agreement shall cease with respect to the Released Premises, as applicable, and shall be continued with respect to the Substitute Leased Premises and the remaining Leased Premises and all references herein to the Released Premises shall apply with full force and effect to the Substitute Leased Premises. The City shall not be entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever solely by reason of such substitution or release. Page 354 60285.00031\31483807.7 12 ARTICLE V MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS; AND OTHER MATTERS Section 5.1. Maintenance, Utilities, Taxes and Assessments. Throughout the Term of this Lease Agreement, as part of the consideration for the rental of the Leased Premises, all improvement, repair and maintenance of the Leased Premises shall be the responsibility of the City and the City shall pay for or otherwise arrange for the payment of all utility services supplied to the Leased Premises which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, water and all other utility services, and shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Leased Premises resulting from ordinary wear and tear or want of care on the part of the City or any assignee or sublessee thereof. In exchange for the Lease Payments herein provided, the Authority agrees to provide only the Leased Premises, as hereinbefore more specifically set forth. The City waives the benefits of subsections 1 and 2 of Section 1932 and subsection 4 of Section 1933 of the California Civil Code, but such waiver shall not limit any of the rights of the City under the terms of this Lease Agreement. The City shall also pay or cause to be paid all taxes and assessments of any type or nature, if any, charged to the Authority or the City affecting the Leased Premises or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the Term of this Lease Agreement as and when the same become due. The City may, at the City’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 shall notify the City that, in the opinion of independent counsel, by nonpayment of any such items, the interest of the Authority in the Leased Premises will be materially endangered or the Leased Premises or any part thereof will be subject to loss or forfeiture, in which event the City 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. Section 5.2. Modification of Leased Premises. The City shall, at its own expense, have the right to make additions, modifications and improvements to the Leased Premises. All additions, modifications and improvements to the Leased Premises shall thereafter comprise part of the Leased Premises and be subject to the provisions of this Lease Agreement. Such additions, modifications and improvements shall not in any way damage the Leased Premises, or result in an abatement of Lease Payments or cause the Leased Premises to be used for purposes other than those authorized under the provisions of State and federal law. In the event the City shall at any time before or during the term of this Lease cause any improvements or other work to be done or performed or materials to be supplied, in or upon the Leased Premises, 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, Page 355 60285.00031\31483807.7 13 upon or about the Leased Premises and which may be secured by any mechanics’, materialmen’s or other liens against the Leased Premises or the Authority’s interest therein, and will cause any 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 the City may in good faith contest any lien filed or established against the Leased Premises, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide the Authority with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Authority. The Authority will cooperate fully in any such contest, upon the request and at the expense of the City. Section 5.3. Public Liability and Property Damage Insurance. The City shall maintain or cause to be maintained throughout the Term of this Lease Agreement, but only if and to the extent available from reputable insurers at reasonable cost in the reasonable opinion of the City, a standard comprehensive general insurance policy or policies in protection of the Authority, City, and their respective members, officers, agents, employees and assigns. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $100,000 (subject to a deductible clause of not to exceed $25,000) for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy or policies in the amount of $3,000,000 (subject to a deductible clause of not to exceed $25,000) covering all such risks. Such policy or policies shall provide coverage in such liability limits and be subject to such deductibles as the City shall deem adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City, subject to the provisions of Section 5.7, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. In the case of the City’s self-insurance of public liability and workers’ compensation, the City may maintain a self-insured retention, and pay up to $500,000 of each liability claim and up to $350,000 of each worker’s compensation claim, so long as such insurance is maintained pursuant to Section 5.7(b) hereof. The proceeds of such liability insurance shall be applied by the City toward extinguishment or satisfaction of the liability with respect to which such liability insurance is paid. Section 5.4. Casualty Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of this Lease Agreement, insurance against loss or damage to any Facilities by fire and lightning, with extended coverage and vandalism and malicious mischief insurance. Said extended coverage insurance, if required, shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance, and shall include earthquake coverage if such coverage is available at reasonable cost from reputable insurers in the judgment of the City’s risk manager. Such insurance shall be in an amount at least equal to the lesser of (a) one hundred percent (100%) of the replacement cost of the Facilities; or (b) the aggregate unpaid principal components of the Lease Payments. Such insurance may be subject to such deductibles as the City shall deem prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The Net Proceeds of such insurance shall be applied as provided in Section 6.1. Page 356 60285.00031\31483807.7 14 Each policy of insurance to be maintained by the City pursuant to this Section 5.4 shall (a) provide for the full payment of insurance proceeds up to the applicable dollar limit in connection with damage to the Leased Premises and shall, under no circumstances, be contingent upon the degree of damage sustained at other facilities owned or leased by the City; and (b) explicitly waive any co-insurance penalty. Section 5.5. Rental Interruption Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of this Lease Agreement, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of the Leased Premises, as a result of any of the hazards covered by the insurance required by Section 5.4, in an amount at least equal to the maximum Lease Payments coming due and payable during any future twenty-four (24) month period. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The proceeds of such insurance, if any, shall be paid to the Trustee and deposited in the Bond Fund, and shall be applied for the uses and purposes set forth in Article V of the Indenture. Section 5.6. Recordation Hereof; Title Insurance. On or before the Closing Date the City shall, at its expense, (a) cause this Lease Agreement, or a memorandum hereof in form and substance approved by Bond Counsel, to be recorded in the office of the San Bernardino County Recorder; and (b) obtain a CLTA policy of title insurance insuring the Authority’s leasehold estate and the City’s sub-leasehold estate hereunder, subject only to Permitted Encumbrances, in an amount at least equal to the aggregate principal amount of the Bonds. All Net Proceeds received under said policy shall be deposited with the Trustee in the Insurance and Condemnation Fund and shall be applied, as set forth in Section 6.1 hereof. Section 5.7. Net Proceeds of Insurance; Form of Policies. (a) Each policy of insurance maintained pursuant to Sections 5.4, 5.5 and 5.6 shall name the Trustee as loss payee so as to provide that all proceeds thereunder shall be payable to the Trustee. The Authority, the City and the Trustee shall be named insureds of the policy. The City shall pay or cause to be paid when due the premiums for all insurance policies required by this Lease Agreement. All such policies shall provide that the Trustee shall be given thirty (30) days’ notice of each expiration, any intended cancellation thereof or reduction of the coverage provided thereby. The Trustee shall not be responsible for the sufficiency or amount of any insurance or self-insurance herein required and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss. (b) In the event that any insurance maintained pursuant to Section 5.3 shall be provided in the form of self-insurance, the City shall file with the Trustee annually, by June 30 of each year, a statement of the risk manager of the City or an independent insurance adviser engaged by the City identifying the extent of such self-insurance and stating the determination that the City maintains sufficient reserves with respect thereto. In the event that any such insurance shall be provided in the form of self-insurance by the City, the City shall not be obligated to make any payment with respect to any insured event except from such reserves. The Trustee shall not be responsible for the sufficiency or adequacy of any insurance herein required and shall be fully Page 357 60285.00031\31483807.7 15 protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the Trustee. (c) If the City shall fail to perform any of its obligations under this Article V, the Authority or the Trustee may, but shall not be obligated to, take such action as may be necessary to cure such failure, including the advancement of money, and the City shall be obligated to repay all such advances as soon as possible, with interest at the rate payable by the Authority on the Bonds from the date of the advance to the date of repayment. (d) The City shall annually (by June 30 of each fiscal year) certify in writing to the Trustee that all insurance policies required to be maintained under this Lease are in full force and effect. Section 5.8. Installation of Personal Property. The City may, at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed items of equipment or other personal property in or upon any portion of the Leased Premises. All such items shall remain the sole property of the City, in which neither the Authority nor the Trustee shall have any interest, and may be modified or removed by the City at any time provided that the City shall repair and restore any and all damage to the Leased Premises resulting from the installation, modification or removal of any such items. Nothing in this Lease Agreement shall prevent the City from purchasing or leasing items to be installed pursuant to this Section 5.8 under a lease or conditional sale agreement, 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 Leased Premises. Section 5.9. Liens. Neither the City nor the Authority shall, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to any portion of the Leased Premises, other than the respective rights of the Authority and the City as provided herein and other than Permitted Encumbrances; except that, the City may in good faith contest any lien filed or established against the Leased Premises, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide the Authority with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Authority. The Authority will cooperate fully in any such contest, upon the request and at the expense of the City. Except as expressly provided in this Article V, the City and the Authority shall promptly, at their own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is responsible, if the same shall arise at any time. The City shall reimburse the Authority for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim. Page 358 60285.00031\31483807.7 16 Section 5.10. Tax Covenants. (a) Private Activity Bond Limitation. The City shall assure that the proceeds of the Series A Bonds are not so used as to cause the Series A Bonds to satisfy the private business tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax Code. (b) Federal Guarantee Prohibition. The City shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause any of the Series A Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Tax Code. (c) No Arbitrage. The City shall not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Series A Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date would have caused the Series A Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Tax Code. (d) Maintenance of Tax-Exemption. The City shall take all actions necessary to assure the exclusion of interest on the Series A Bonds from the gross income of the Owners of the Series A Bonds to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the Closing Date. Section 5.11. Payment of Rebatable Amounts. The City agrees to furnish all information to, and cooperate fully with, the Authority and their respective officers, employees, agents and attorneys, in order to assure compliance with the provisions of Section 6.07(e) of the Indenture. In the event that the Authority shall determine, pursuant to Section 6.07(e) of the Indenture, that any amounts are due and payable to the United States of America thereunder and that neither the Authority nor the Trustee has on deposit an amount of available moneys (excluding moneys on deposit in the funds and accounts established for the payment of the principal of or interest or redemption premium, if any, on the Series A Bonds) to make such payment, the Authority shall promptly notify the City of such fact. Upon receipt of any such notice, the City shall promptly pay the amounts determined by the Authority to be due and payable to the United States of America under such Section 6.07(e), such payments to be made in accordance with the applicable provisions of the Tax Code. Section 5.12. Continuing Disclosure. The City and Authority hereby covenant and agree that they will comply with and carry out all of the provisions of its Undertaking to Provide Continuing Disclosure with respect to the Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. Notwithstanding any other provision of this Lease Agreement, failure of the City to comply with such Undertaking to Provide Continuing Disclosure shall not be considered an Event of Default; however, any Bondholder may take such actions, as provided in such Undertaking to Provide Continuing Disclosure, as may be necessary and appropriate to cause the City to comply with its obligations under such Undertaking to Provide Continuing Disclosure. Page 359 60285.00031\31483807.7 17 ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS Section 6.1. Application of Net Proceeds. (a) Deposit in Insurance and Condemnation Fund. Pursuant to Section 5.07 of the Indenture, the Trustee shall deposit the Net Proceeds of any insurance required by Section 5.4 hereof and the proceeds of the title insurance required by Section 5.6 hereof in the Insurance and Condemnation Fund promptly upon receipt thereof. The City and/or the Authority shall transfer to the Trustee any other Net Proceeds received by the City and/or Authority in the event of any taking by eminent domain or condemnation with respect to the Leased Premises, for deposit in the Insurance and Condemnation Fund. (b) Disbursement for Replacement or Repair of the Leased Premises. Upon receipt of the certification described in paragraph (1) below and the requisition described in paragraph (2) below, the Trustee is required by the Indenture to disburse moneys in the Insurance and Condemnation Fund to the person, firm or corporation named in the requisition as provided in Section 5.07 of the Indenture. (1) Certification. An Authorized Representative of the City must provide to the Authority and the Trustee a certificate stating that: (i) Sufficiency of Net Proceeds. The Net Proceeds available for such purpose, together with any other funds supplied by the City for such purpose, are sufficient to repair or replace the Leased Premises to a use which will have an annual fair rental value not less than the maximum annual Lease Payments and Miscellaneous Rent through the term of the Lease (assuming that the Miscellaneous Rent due in the future will equal the Miscellaneous Rent paid prior to such date) due hereunder, and (ii) Timely Completion. In the event that damage, destruction, title defect or taking results in an abatement of Lease Payments, such replacement or repair can be fully completed within a period not in excess of the period in which rental interruption insurance proceeds as described in Section 5.5 hereof, together with other legally available funds, will be available to pay in fill all Lease Payments coming due during such period. (2) Requisition. An Authorized Representative of the City must state with respect to each payment to be made (i) the requisition number, (ii) the name and address of the person, firm or corporation to whom payment is due, (iii) the amount to be paid, and (iv) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund, has not been the basis of any previous withdrawal, and specifying in reasonable detail the nature of the obligation. Any balance of the Net Proceeds remaining after such replacement or repair has been completed shall be disbursed as provided in Section 5.07 of the Indenture. Page 360 60285.00031\31483807.7 18 (c) Disbursement for Prepayment. If an Authorized Representative of the City notifies the Trustee in writing of the City’s determination that the certification provided in Section 6.1(b)(1) hereof cannot be made or replacement or repair of any portion of the Leased Premises is not economically feasible or in the best interest of the City to repair or replace the Leased Premises, then the City shall deposit with the Trustee an amount which when combined with the Net Proceeds will prepay enough Lease Payments and result in a corresponding prepayment of such that the fair rental value of the remaining portion of the Leased Premises is sufficient to provide for payment of the Lease Payments remaining under the Lease Agreement and that Bonds which remain Outstanding under the Indenture correspond to the remaining Lease Payments, after such Net Proceeds and such deposit by the City are applied to redeem Bonds and under the Indenture. The Trustee is required by the Indenture to promptly transfer the Net Proceeds in respect of such portion to the Redemption Fund as provided in Section 5.07 of the Indenture and apply them to the prepayment of Lease Payments as provided in Section 4.5 hereof which shall cause the redemption of the Bonds as provided in Section 4.01(c) of the Indenture. Section 6.2. Abatement of Lease Payments in the Event of Damage or Destruction. The Lease Payments allocable to the Leased Premises shall be abated during any period in which by reason of damage or destruction (other than by eminent domain which is hereinbefore provided for) there is substantial interference with the use and occupancy of the Leased Premises or any portion thereof. The amounts of the Lease Payments under such circumstances shall be proportionate to the usable portion of the Leased Premises. If it is certain that the fair rental value of the portions of the Leased Premises not damaged or destroyed, based upon the opinion of an MAI appraiser with expertise in valuing such properties or other appropriate method of valuation, is less than the amount of Lease Payments being made, the Lease Payments shall be further abated such that they represent said fair rental value. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, this Lease Agreement shall continue in full force and effect and the Authority waives any right to terminate this Lease Agreement by virtue of any such damage and destruction. Notwithstanding the foregoing, there may be no abatement of Lease Payments to the extent that (a) the proceeds of rental interruption insurance, are available to pay Lease Payments; or (b) amounts in the Bond Fund are available to pay Debt Service payable from Lease Payments which would otherwise be abated. Any such Debt Service payments made from the Bond Fund shall be credit against the applicable Lease Payment(s). ARTICLE VII DISCLAIMER OF WARRANTIES; ACCESS Section 7.1. Disclaimer of Warranties. Neither the Authority nor the Trustee makes any warranty or representation, either express or implied, as to the value, design, condition, merchantability or fitness for any particular purpose or fitness for the use contemplated by the City of the Leased Premises, or any other representation or warranty with respect to the Leased Premises. In no event shall the Authority, the Trustee, and their respective assigns be liable for incidental, indirect, special or consequential damages in connection with or arising out of this Lease Agreement or the Indenture for the existence, furnishing, functioning or the City’s use of the Leased Premises. Page 361 60285.00031\31483807.7 19 Section 7.2. Rights of Access. The City agrees that the Authority and any Authorized Representative of the Authority, and the Authority’s successors or assigns, shall have the right at all reasonable times to enter upon and to examine and inspect the Leased Premises. The City further agrees that the Authority, any Authorized Representative of the Authority, and the Authority’s successors or assigns shall have such rights of access to the Leased Premises as may be reasonably necessary to cause the proper maintenance of the Leased Premises in the event of failure by the City to perform its obligations hereunder. Section 7.3. Release and Indemnification Covenants. The City shall and hereby agrees to indemnify and save the Authority, and the Trustee, and their respective officers, agents, successors and assigns, harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of (a) the use, maintenance, condition or management of, or from any work or thing done on the Leased Premises by the City; (b) any breach or default on the part of the City in the performance of any of its obligations under this Lease Agreement; (c) any act or negligence of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Leased Premises; (d) the use, presence, storage, disposal of any Hazardous Substances, on or about the Leased Premises; (e) the Trustee’s acceptance or administration of the trust of the Indenture, or the exercise or performance of any of its powers or duties thereunder or under any of the documents, including this Lease Agreement, to which it is a party relating to the Bonds; or (f) any act or negligence of any sublessee of the City with respect to the Leased Premises. No indemnification is made under this Section 7.3 or elsewhere in this Lease Agreement for willful misconduct or negligence under this Lease Agreement by the Authority or the Trustee or any of their respective officers, agents, employees, successors or assigns. The Trustee’s rights under Section 4.8(b) and this Section shall survive the termination of this Agreement and the registration or removal of the Trustee. In the event of abatement pursuant to this Section 6.2, the City shall use its best efforts to the extent permissible under the laws of the State of California to make all Lease Payments in excess of the amount of rental interruption insurance, if necessary, in order to ensure the reconstruction, repair, restoration, modification or improvement of the Lease Premises. ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT Section 8.1. Assignment by the Authority. The Authority’s rights under this Lease Agreement (other than Sections 7.3 and 9.4 hereof), including the right to receive and enforce payment of the Lease Payments to be made by the City under this Lease Agreement, have been pledged and assigned to the Trustee for the benefit of the Owners of the Bonds pursuant to the Indenture. The City understands and agrees that all Lease Payments have been assigned by the Authority to the Trustee in trust, pursuant to the Indenture, for the benefit of the Owners of the Bonds, and the City hereby assents to such assignment. The Authority hereby directs the City, and the City hereby agrees, to pay all of the Lease Payments to the Trustee at its Office. The assignment of this Lease Agreement to the Trustee is solely in its capacity as Trustee under the Indenture and the duties, powers and liabilities of the Trustee in acting hereunder shall be subject to the provisions of the Indenture, including, without limitation, the provisions of Article VIII thereof. Page 362 60285.00031\31483807.7 20 Section 8.2. Assignment and Subleasing by the City. This Lease Agreement may not be assigned by the City. The City may sublease the Leased Premises or any portion thereof, but only with the written consent of the Authority and subject to all of the following conditions: (a) this Lease Agreement and the obligation of the City to make Lease Payments hereunder shall remain obligations of the City; (b) the City shall, within thirty (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 Leased Premises to be used for a purpose other than as may be authorized under the provisions of the laws of the State; and (d) the City shall furnish the Authority and the Trustee with a written opinion of Bond Counsel, stating that such sublease is permitted by this Lease Agreement and the Indenture, and will not cause the interest on the Series A Bonds to become included in gross income for federal income tax purposes; provided, however, if the City enters into a sublease without the consent of the Authority, without furnishing a written opinion of Bond Counsel as set forth in subsection (d) above or fails to deliver such sublease in accordance with subsection (b) above, entry into such sublease shall not constitute an Event of Default so long as the provisions of subsections (a) and (c) above and Section 5.10 herein are met and such sublease does not cause the City to violate any other term or condition set forth in this Lease Agreement. Section 8.3. Amendment Hereof. The Authority and the City may at any time amend or modify any of the provisions of this Lease Agreement, but only (a) with the prior written consent of a majority in aggregate principal amount of the Outstanding Bonds, or (b) without the consent of any of the Bond Owners, but only if such amendment or modification is for any one or more of the following purposes: (a) to add to the covenants and agreements of the City contained in this Lease Agreement, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power herein reserved to or conferred upon the City; (b) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein, or in any other respect whatsoever as the Authority and the City may deem necessary or desirable, provided that, in the opinion of Bond Counsel, such modifications or amendments will not materially adversely affect the interests of the Owners of the Bonds; (c) to amend any provision thereof relating to the Tax Code, to any extent whatsoever but only if and to the extent such amendment will not adversely affect the exclusion from gross income of interest on the Series A Bonds under the Tax Code, in the opinion of Bond Counsel; Page 363 60285.00031\31483807.7 21 (d) to amend the description of the Leased Premises set forth in Exhibit A hereto to reflect accurately the property originally intended to be included therein, or in connection with any substitution or release pursuant to Section 4.9; or (e) to obligate the City to pay additional amounts of rental hereunder for the use and occupancy of the Leased Premises, provided that (A) no Event of Default has occurred and is continuing under this Lease, (B) such additional amounts of rental do not cause the total rental payments made by the City hereunder to exceed the fair rental value of the Leased Premises, as set forth in a certificate of an Authorized Representative of the City filed with the Trustee and the Authority, (C) the City shall have obtained and filed with the Trustee and the Authority a Written Certificate of an Authorized Representative of the City showing that the fair rental value of the Leased Premises is not less than the sum of the aggregate unpaid principal components of the Lease Payments and the aggregate principal components of such additional amounts of rental, and (D) such additional amounts of rental are pledged or assigned for the payment of any bonds, notes, leases or other obligations the proceeds of which shall be applied to finance any purpose authorized pursuant to the laws of the State. ARTICLE IX EVENTS OF DEFAULT; REMEDIES Section 9.1. Events of Default Defined. The following shall be “Events of Default” under this Lease Agreement: (a) Failure by the City to pay any Lease Payment required to be paid hereunder at the time specified herein. (b) Failure by the City to make any Miscellaneous Rent payment required hereunder and the continuation of such failure for a period of thirty (30) days. (c) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in the preceding clauses (a) or (b), for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Authority or the Trustee; provided, however, that if in the reasonable opinion of the City the failure stated in the notice can be corrected, but not within such sixty (60) day period, such failure shall not constitute an Event of Default if the City shall commence to cure such failure within such sixty (60) day period and thereafter diligently and in good faith shall cure such failure in a reasonable period of time. (d) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted Page 364 60285.00031\31483807.7 22 under the provisions of applicable federal bankruptcy law, or under any similar acts which may hereafter be enacted. Section 9.2. Remedies on Default. Whenever any Event of Default referred to in Section 9.1 shall have happened and be continuing, it shall be lawful for the Authority to exercise any and all remedies available pursuant to law or granted pursuant to this Lease Agreement; provided, however, that notwithstanding anything to the contrary herein or in the Indenture, there shall be no right under any circumstances to accelerate the Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due and payable or to terminate this Lease Agreement or to cause the leasehold interest of the Authority or the subleasehold interest of the City in the Site to be sold, assigned or otherwise alienated. Each and every covenant hereof to be kept and performed by the City is expressly made a condition and upon the breach thereof the Authority may exercise any and all rights of entry and re-entry upon the Leased Premises. In the event of such default and notwithstanding any re-entry by the Authority, the City shall, as herein expressly provided, continue to remain liable for the payment of the Lease Payments and/or damages for breach of this Lease Agreement and the performance of all conditions herein contained, and in any event such rent and damages shall be payable to the Authority at the time and in the manner as herein provided, to wit: (a) The City agrees to and shall remain liable for the payment of all Lease Payments and the performance of all conditions herein contained and shall reimburse the Authority for any deficiency arising out of the re-leasing of the Leased Premises, or, in the event the Authority is unable to relet the Leased Premises, then for the full amount of all Lease Payments to the end of the Term of this Lease Agreement, but said Lease Payments and/or deficiency shall be payable only at the same time and in the same manner as hereinabove provided for the payment of Lease Payments hereunder, notwithstanding such entry or re-entry by the Authority or any suit in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such re-entry or obtaining possession of the Leased Premises or the exercise of any other remedy by the Authority. (b) The City hereby irrevocably appoints the Authority as the agent and attorney-in-fact of the City to enter upon and re-lease the Leased Premises in the event of default by the City in the performance of any covenants herein contained to be performed by the City and to remove all personal property whatsoever situated upon the Leased Premises to place such property in storage or other suitable place in the County of San Bernardino, for the account of and at the expense of the City, and the City hereby exempts and agrees to save harmless the Authority from any costs, loss or damage whatsoever arising or occasioned by any such entry upon and re-leasing of the Leased Premises and the removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. (c) The City hereby waives any and all claims for damages caused or which may be caused by the Authority in re-entering and taking possession of the Leased Premises as herein provided and all claims for damages that may result from the destruction of or injury to the Leased Premises and all claims for damages to or loss of any property belonging to the City that may be in or upon the Leased Premises. Page 365 60285.00031\31483807.7 23 (d) The City agrees that the terms of this Lease Agreement constitute full and sufficient notice of the right of the Authority to re-lease the Leased Premises 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 releasing shall constitute a surrender or termination of this Lease Agreement irrespective of the term for which such re-leasing is made or the terms and conditions of such re-leasing, or otherwise. (e) The City further waives the right to any rental obtained by the Authority in excess of the Lease Payments and hereby conveys and releases such excess to the Authority as compensation to the Authority for its services in re-leasing the Leased Premises. Section 9.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive and every such remedy shall be cumulative and shall, except as herein expressly provided to the contrary, be in addition to every other remedy given under this Lease Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Authority to exercise any remedy reserved to it in this Article IX it shall not be necessary to give any notice, other than such notice as may be required in this Article IX or by law. Section 9.4. Agreement to Pay Attorneys’ Fees and Expenses. In the event either party to this Lease Agreement should default under any of the provisions hereof and the nondefaulting party should employ attorneys or incur other expenses for the collection of moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it will on demand therefor pay to the nondefaulting party the reasonable fees of such attorneys and such other expenses so incurred by the nondefaulting party. Section 9.5. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Lease Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. Section 9.6. Trustee and Bondholder to Exercise Rights. Such rights and remedies as are given to the Authority under this Article IX have been assigned by the Authority to the Trustee under the Indenture, to which assignment the City hereby consents. Such rights and remedies shall be exercised by the Trustee and the Owners of the Bonds as provided in the Indenture. ARTICLE X MISCELLANEOUS Section 10.1. Notices. All written notices to be given under this Lease Agreement shall be given by first class mail, personal delivery, overnight mail or email pdf. to the party entitled thereto at its address set forth below, or at such address as the party may provide to the other party in writing from time to time. Notice shall be effective either (a) upon transmission by facsimile Page 366 60285.00031\31483807.7 24 transmission or other form of telecommunication; (b) 48 hours after deposit in the United States mail, postage prepaid; or (c) otherwise, upon actual receipt. The Authority, the City or the Trustee may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder. If to the Authority: Rancho Cucamonga Public Finance Authority 10500 Civic Center Drive Rancho Cucamonga, CA 91730 Attention: Executive Director Fax: (909) 477-2700 If to the City: City of Rancho Cucamonga 10500 Civic Center Drive Rancho Cucamonga, CA 91730 Attention: City Manager Fax: (909) 477-2700 If to the Trustee: Wells Fargo Bank, N.A 707 Wilshire Boulevard, 17th Floor Los Angeles, CA 90017 Attention: __________ Fax: (213) 614-3355 Section 10.2. Binding Effect. This Lease Agreement shall inure to the benefit of and shall be binding upon the Authority and the City and their respective successors and assigns. Section 10.3. Severability. In the event any provision of this Lease Agreement 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 10.4. Net-net-net Lease. This Lease Agreement shall be deemed and construed to be a “net-net-net lease” and the City hereby agrees that the Lease Payments shall be an absolute net return to the Authority, free and clear of any expenses, charges or set-offs whatsoever. Section 10.5. Further Assurances and Corrective Instruments. The Authority and the City agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Leased Premises hereby leased or intended so to be or for carrying out the expressed intention of this Lease Agreement. Section 10.6. Execution in Counterparts. This Lease Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 10.7. Applicable Law. This Lease Agreement shall be governed by and construed in accordance with the laws of the State. Page 367 60285.00031\31483807.7 25 Section 10.8. Authorized Representatives. Whenever under the provisions of this Lease Agreement the approval of the Authority or the City is required, or the Authority or the City is required to take some action at the request of the other, such approval or such request shall be given for the Authority by an Authorized Representative of the Authority and for the City by an Authorized Representative of the City, and any party hereto shall be authorized to rely upon any such approval or request. Section 10.9. Captions. The captions or headings in this Lease Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Section of this Lease Agreement. (Signature page follows) Page 368 60285.00031\31483807.7 S-1 IN WITNESS WHEREOF, the Authority has caused this Lease Agreement to be executed in its corporate name by its duly authorized officers and the City has caused this Lease Agreement to be executed in its name by its duly authorized officers, as of the date first above written. RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY By________________________________ L. Dennis Michael Chairperson ATTEST: ______________________________ Janice C. Reynolds Secretary CITY OF RANCHO CUCAMONGA By_________________________________ L. Dennis Michael Mayor ATTEST: ______________________________ Janice C. Reynolds City Clerk -Signature Page- Lease Agreement Page 369 60285.00031\31483807.7 A-1 EXHIBIT A DESCRIPTION OF THE LEASED PREMISES Page 370 60285.00031\31483807.7 B-1 EXHIBIT B SCHEDULE OF LEASE PAYMENTS Date Principal Interest Lease Payment Annual Lease Payment Page 371 60285.00031\31483807.7 B-2 EXHIBIT B-1 SERIES A BONDS LEASE PAYMENTS Date Principal Interest Lease Payment Annual Lease Payment Page 372 60285.00031\31483807.7 B-3 EXHIBIT B-2 SERIES B BONDS (TAXABLE) LEASE PAYMENTS Date Principal Interest Lease Payment Annual Lease Payment Page 373 60285.00031\31483807.7 i ARTICLE I DEFINITIONS AND EXHIBITS Section 1.1. Definitions........................................................................................................ 2 Section 1.2. Exhibits ............................................................................................................ 3 ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.1. Representations, Covenants and Warranties of the City .................................. 3 Section 2.2. Representations, Covenants and Warranties of Authority ............................... 5 ARTICLE III THE BONDS Section 3.1. The Bonds ........................................................................................................ 6 Section 3.2. Financing of Project ......................................................................................... 6 Section 3.3. Payment of Costs of Issuance .......................................................................... 6 ARTICLE IV LEASE; TERM OF THIS LEASE AGREEMENT; RENTAL PAYMENTS Section 4.1. Lease by Authority and Lease Back to City .................................................... 7 Section 4.2. Term of Lease Agreement ............................................................................... 7 Section 4.3. Lease Payments; Security Deposit ................................................................... 7 Section 4.4. [Intentionally Reserved]................................................................................... 9 Section 4.5. Optional Prepayment ....................................................................................... 9 Section 4.6. Quiet Enjoyment ............................................................................................ 10 Section 4.7. Title ................................................................................................................ 10 Section 4.8. Miscellaneous Rent ........................................................................................ 10 Section 4.9. Substitution or Release of Leased Premises .................................................. 11 ARTICLE V MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS; AND OTHER MATTERS Section 5.1. Maintenance, Utilities, Taxes and Assessments ............................................ 12 Section 5.2. Modification of Leased Premises ................................................................... 13 Section 5.3. Public Liability and Property Damage Insurance .......................................... 13 Section 5.4. Casualty Insurance ......................................................................................... 14 Section 5.5. Rental Interruption Insurance ........................................................................ 14 Section 5.6. Recordation Hereof; Title Insurance .............................................................. 14 Section 5.7. Net Proceeds of Insurance; Form of Policies ................................................. 14 Section 5.8. Installation of Personal Property .................................................................... 15 Section 5.9. Liens ............................................................................................................... 15 Section 5.10. Tax Covenants ............................................................................................... 16 Section 5.11. Payment of Rebatable Amounts..................................................................... 16 Section 5.12. Continuing Disclosure ................................................................................... 16 Page 374 60285.00031\31483807.7 ii ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS Section 6.1. Application of Net Proceeds .......................................................................... 17 Section 6.2. Abatement of Lease Payments in the Event of Damage or Destruction ........ 18 ARTICLE VII DISCLAIMER OF WARRANTIES; ACCESS Section 7.1. Disclaimer of Warranties ............................................................................... 19 Section 7.2. Rights of Access ............................................................................................ 19 Section 7.3. Release and Indemnification Covenants ........................................................ 19 ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT Section 8.1. Assignment by the Authority ......................................................................... 20 Section 8.2. Assignment and Subleasing by the City ........................................................ 20 Section 8.3. Amendment Hereof ........................................................................................ 20 ARTICLE IX EVENTS OF DEFAULT; REMEDIES Section 9.1. Events of Default Defined ............................................................................. 21 Section 9.2. Remedies on Default ...................................................................................... 22 Section 9.3. No Remedy Exclusive.................................................................................... 23 Section 9.4. Agreement to Pay Attorneys’ Fees and Expenses ......................................... 23 Section 9.5. No Additional Waiver Implied by One Waiver ............................................. 24 Section 9.6. Trustee and Bondholder to Exercise Rights ................................................... 24 ARTICLE X MISCELLANEOUS Section 10.1. Notices ........................................................................................................... 24 Section 10.2. Binding Effect ................................................................................................ 24 Section 10.3. Severability .................................................................................................... 24 Section 10.4. Net-net-net Lease ........................................................................................... 25 Section 10.5. Further Assurances and Corrective Instruments ............................................ 25 Section 10.6. Execution in Counterparts.............................................................................. 25 Section 10.7. Applicable Law .............................................................................................. 25 Section 10.8. Authorized Representatives ........................................................................... 25 Section 10.9. Captions ......................................................................................................... 25 EXHIBIT A – DESCRIPTION OF THE LEASED PREMISES ............................................. A-1 EXHIBIT B – SCHEDULE OF LEASE PAYMENTS .............................................................B-1 Page 375 PRELIMINARY OFFICIAL STATEMENT DATED _____________, 2019 NEW ISSUE - BOOK ENTRY ONLY RATING: S&P: “____” See “RATING” In the opinion of Best Best & Krieger LLP, Riverside, California, Bond Counsel, subject, however, to certain qualifications described herein, under existing statutes, regulations, rules and court decisions and assuming certain representations and compliance with certain covenants and requirements described herein, the interest on the Series A Bonds is excluded from gross income for federal income tax purposes, and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. Interest payable on the Series B Bonds is subject to all applicable federal income taxation. Interest on the Series A Bonds and the Series B Bonds is exempt from State of California personal income taxes. See the caption “TAX MATTERS.” RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 Lease Revenue Bonds (FIBER OPTIC PROJECT) $_____________* Series A Bonds (Tax-Exempt) $_____________* Series B Bonds (Taxable) Dated: Date of Delivery Due: May 1, as shown on inside cover The 2019 Lease Revenue Bonds, (Fiber Optic Project) issued as Series A Bonds (Tax-Exempt) (the “Series A Bonds”) and as Series B Bonds (Taxable) (the “Series B Bonds,” and together with the Series A Bonds, the “Bonds”) of the Rancho Cucamonga Public Finance Authority (the “Authority”) will be issued as fully registered bonds in book-entry form only, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York. Purchasers will not receive certificates representing their interest in the Bonds. Individual purchases will be in integral multiples of $5,000. Interest payable on the Bonds will be payable on May 1 and November 1 of each year, commencing November 1, 2019, and principal payable on the Bonds will be payable annually on May 1 of each year commencing May 1, 2020 by Wells Fargo Bank, N.A., Los Angeles, California, as trustee for the Bonds (the “Trustee”), to DTC for subsequent disbursement to DTC Participants who will remit such payments to the beneficial owners of the Bonds. The Bonds are being issued by the Authority for (i) the purpose of financing the acquisition, design, construction and equipping of an expansion to the City’s existing fiber optic network (the “Project”) within the City of Rancho Cucamonga (the “City”) and (ii) paying the costs incurred in connection with the issuance of the Bonds. The Bonds are limited obligations of the Authority payable primarily from and secured by certain revenues (the “Revenues”) consisting of certain Lease Payments with respect to the Leased Premises (as described in the Official Statement) by the City pursuant to a Lease Agreement, dated as of February 1, 2019 (the “Lease Agreement”) between the City and the Authority. The Lease Payments are structured to produce Revenues sufficient to pay principal of and interest on the Bonds when due. The City has covenanted in the Lease Agreement to make all Lease Payments provided for therein, to include all such payments in its annual budgets, and to make the necessary annual appropriations for such Lease Payments. The City’s obligation to make Lease Payments is subject to abatement in the event of damage to, destruction or condemnation of, or title defects relating to, the Leased Premises described herein. See “SECURITY FOR THE BONDS” and “RISK FACTORS.” The City has the right to incur other obligations payable from its general revenues without the consent of the Owners of the Bonds. The Revenues are to be received by the Authority and deposited pursuant to an Indenture of Trust, dated as of February 1, 2019 (the “Indenture”) between the City and the Trustee. Neither the City nor the Authority will create or maintain a debt service reserve account with respect to the Lease Payments or for the Bonds. The Bonds are subject to redemption prior to maturity as described herein. See “THE BONDS – Redemption.” This cover page contains information for general reference only. It is not a summary of the security or terms of this issue. Investors must read the entire Official Statement, including the section entitled “RISK FACTORS,” for a discussion of special factors which should be considered, in addition to the other matters set forth herein, in considering the investment quality of the Bonds. Capitalized terms used on this cover page and not otherwise defined shall have the meanings set forth in the Official Statement. The Bonds are limited obligations of the Authority payable solely from the revenues and other funds held under the Indenture. The Bonds are not a debt, obligation or liability of the Members (as defined in this Official Statement), the County of San Bernardino, the State of California or any of its political subdivisions (other than the Authority), nor do they constitute a pledge of the faith and credit or the taxing power of any of the foregoing (including the Authority and the City). The Authority does not have any taxing power. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. The City’s obligation to make Lease Payments is an obligation payable from the City’s General Fund or any other source of funds legally available to the City to make Lease Payments. The obligation of the City to make Lease Payments does not constitute a debt of the City within the meaning of any constitutional or statutory debt limit or restriction or any obligation 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. The Bonds are offered, when, as and if issued and received by the Underwriter, subject to the approval of legality by Best Best & Krieger LLP, Riverside, California, Bond Counsel. Certain legal matters will be passed upon for the Authority and the City by Richards Watson & Gershon, A Professional Corporation, Los Angeles, California, as Authority Counsel and City Attorney and by Best Best & Krieger LLP, Riverside, California, as Disclosure Counsel. Kutak Rock LLP, Irvine, California, will act as Underwriter’s Counsel. It is expected that the Bonds, in book-entry form, will be available through the facilities of DTC on or about February 14, 2019. Dated: * Preliminary, subject to change. This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. Page 376 MATURITY SCHEDULE Base CUSIP†: ______ Series A Bonds (Tax-Exempt) $_________* Serial Bonds Maturity Date (May 1) Principal Amount Interest Rate Yield Price CUSIP† $______ _____% Term Bond Due May 1, 20___, Yield ____% Price ____ CUSIP†_____ $______ _____% Term Bond Due May 1, 20___, Yield ____% Price ____ CUSIP†_____ Series B Bonds (Taxable) $_________* Serial Bonds Maturity Date (May 1) Principal Amount Interest Rate Yield Price CUSIP† $______ _____% Term Bond Due May 1, 20___, Yield ____% Price ____ CUSIP†_____ * Preliminary, subject to change. † CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of American Bankers Association by S&P Capital IQ. Copyright© 2019 CUSIP Global Services. All rights reserved. This data is not intended to create a database and does not serve in any way a substitute for the CUSIP Service Bureau. CUSIP® numbers are provided for convenience of reference only. The Authority, the City and the Underwriter do not take any responsibility for the accuracy of the CUSIP® numbers. Page 377 RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY AUTHORITY BOARD OF DIRECTORS L. Dennis Michael, Chairperson Lynne Kennedy, Vice Chairperson Ryan Hutchison, Member Kristine Scott, Member Sam Spagnolo, Member RANCHO CUCAMONGA CITY COUNCIL L. Dennis Michael, Mayor Lynne Kennedy, Mayor Pro Tem Ryan Hutchison, Council Member Kristine Scott, Council Member Sam Spagnolo, Council Member AUTHORITY/CITY STAFF John R. Gillison, Executive Director/City Manager Lori Sassoon, Deputy City Manager/Administrative Services Tamara L. Layne, Treasurer/Finance Director Janice C. Reynolds, Secretary/City Clerk James Markman, Authority Counsel/City Attorney SPECIAL SERVICES Bond Counsel & Disclosure Counsel Best Best & Krieger LLP Riverside, California Municipal Advisor Fieldman, Rolapp & Associates, Inc. Irvine, California Trustee Wells Fargo Bank, N.A. Los Angeles, California Page 378 No dealer, broker, salesperson or other person has been authorized by the City, the Authority or the Underwriter to give any information or to make any representations, other than those contained in this Official Statement, and if given or made, such information or representation must not be relied upon as having been authorized by any of the foregoing. 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 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information and expressions of opinion in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the Bonds shall under any circumstances create any implication that there has been no change in the affairs of the City or the Authority or other matters described in this Official Statement since the date hereof. Certain statements contained in this Official Statement reflect not historical facts but forecasts and “forward-looking statements.” No assurance can be given that the future results discussed in this Official Statement will be achieved, and actual results may differ materially from the forecasts described herein. In this respect, the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe” and similar expressions are intended to identify forward-looking statements. All projections, forecasts, assumptions, expressions of opinions, estimates and other forward-looking statements are expressly qualified in their entirety by the cautionary statements set forth in this Official Statement. The Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon an exemption contained in such Act. The Bonds have not been registered or qualified under the securities laws of any state. This Official Statement and the information contained herein are subject to completion or amendment without notice. These securities may not be sold nor may an offer to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. 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. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE INSIDE FRONT COVER PAGE OF THIS OFFICIAL STATEMENT AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. The City maintains a website, with certain information relating to the City and/or the Authority contained therein. However, the information presented on such website is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. Page 379 TABLE OF CONTENTS -i- INTRODUCTION ............................................................... 1 General .......................................................................... 1 The City ......................................................................... 1 The Authority ................................................................ 2 Security for the Bonds ................................................... 2 No Reserve Account...................................................... 3 Abatement ..................................................................... 3 Redemption ................................................................... 3 Continuing Disclosure ................................................... 3 Summary of Terms ........................................................ 3 THE FINANCING PLAN ................................................... 4 The Project .................................................................... 4 Sources and Uses of Funds ............................................ 8 Debt Service Schedule .................................................. 8 THE LEASED PREMISES ................................................. 9 The Leased Premises ..................................................... 9 Substitution and Release of Leased Premises ................ 9 Assignment and Subleasing of Leased Premises ................................................................ 10 THE BONDS .................................................................... 11 Description of the Bonds ............................................. 11 Redemption ................................................................. 11 Book-Entry System ..................................................... 13 SECURITY FOR THE BONDS ....................................... 14 General ........................................................................ 14 Lease Payments ........................................................... 14 Additional Bonds ........................................................ 15 Appropriation; Use of Leased Premises ...................... 15 Abatement ................................................................... 16 Action on Default ........................................................ 16 Miscellaneous Rent ..................................................... 16 Insurance ..................................................................... 17 No Reserve Account.................................................... 17 CITY FINANCIAL INFORMATION .............................. 18 Accounting Policies and Financial Reporting ............. 18 Budgetary Process and Current Budget ....................... 18 General Fund Balance Sheet, Statements of Revenues and Expenditures and Fund Balances ................................................................ 21 Historic General Fund Revenues ................................. 23 Sales and Use Tax ....................................................... 25 Property Taxes ............................................................ 25 Other Taxes and Fees .................................................. 26 City Investment Policy ................................................ 27 Risk Management ........................................................ 27 Employees and Labor Relations .................................. 28 Retirement Program .................................................... 28 Outstanding Long Term Obligations ........................... 34 STATE BUDGET OF CALIFORNIA .............................. 34 State Budget ................................................................ 34 2018/19 State Budget .................................................. 34 Future State Budgets ................................................... 35 RISK FACTORS ............................................................... 36 Lease Payments Not City Debt ................................... 36 No Tax Pledge ............................................................. 36 Appropriation .............................................................. 36 No Limit on Additional General Fund Obligations ............................................................ 37 Abatement and Eminent Domain ................................ 37 No Reserve Account.................................................... 37 Sufficiency of Lease Payments ................................... 37 Limitation on Enforcement of Remedies; No Acceleration .......................................................... 37 Seismic, Topographic and Climatic Conditions .......... 38 Hazardous Substances ................................................. 38 Public Debt Burden on Leased Premises ..................... 39 Risk of Uninsured Loss ............................................... 39 Property Tax Allocation by the State; Changes in Law ................................................................... 39 Bankruptcy and Foreclosure ........................................ 40 Federal Tax-Exempt Status of the Series A Bonds .................................................................... 41 Secondary Market Risk ............................................... 41 Substitution and Removal of Leased Premises ............ 41 No Liability of Authority to the Owners ..................... 42 Cybersecurity .............................................................. 42 Risk Management and Insurance................................. 42 State Law Limitations on Appropriations ................... 42 Changes in the Law ..................................................... 43 CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS ...................................................... 43 Limitations on Revenues ............................................. 43 Expenditures and Appropriations ................................ 45 Voter Initiatives ........................................................... 45 Unitary Property .......................................................... 46 Future Initiatives ......................................................... 47 TAX MATTERS ............................................................... 47 CONTINUING DISCLOSURE ........................................ 48 CERTAIN LEGAL MATTERS ........................................ 48 LITIGATION .................................................................... 48 MUNICIPAL ADVISOR .................................................. 48 PROFESSIONAL FEES ................................................... 49 FINANCIAL STATEMENTS .......................................... 49 RATING ............................................................................ 49 UNDERWRITING ............................................................ 49 MISCELLANEOUS.......................................................... 50 APPENDIX A – CITY ECONOMIC AND DEMOGRAPHIC INFORMATION .................... A-1 APPENDIX B – CITY’S AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR 2017/18 ... B-1 APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ....................................... C-1 APPENDIX D – FORMS OF OPINIONS OF BOND COUNSEL ........................................................... D-1 APPENDIX E – FORM OF CONTINUING DISCLOSURE AGREEMENT ............................ E-1 APPENDIX F – BOOK ENTRY PROVISIONS .......... F-1 Page 380 [LOCATION MAP] Page 381 1 OFFICIAL STATEMENT RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 LEASE REVENUE BONDS (FIBER OPTIC PROJECT) $_____________* Series A Bonds (Tax-Exempt) $_____________* Series B Bonds (Taxable) INTRODUCTION General This Official Statement, including the cover page, inside cover and appendices, is provided to furnish information in connection with the sale by the Rancho Cucamonga Public Finance Authority (the “Authority”) of 2019 Lease Revenue Bonds, Series A (Fiber Optic Project) issued as $_____________* aggregate principal amount Series A Bonds (Tax-Exempt) (the “Series A Bonds”) and as $_____________* aggregate principal amount Series B Bonds (Taxable) (the “Series B Bonds” and together with the “Series A Bonds,” the “Bonds”). The Bonds are being issued pursuant to the Constitution and laws of the State of California (the “State” or “California”), including Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “JPA Law”) and pursuant to an Indenture of Trust, dated as of February 1, 2019 (the “Indenture”), between the Authority and Wells Fargo Bank, N.A. (the “Trustee”). Proceeds of the Bonds will be used to finance the acquisition, design, construction and equipping of an expansion to the City’s existing fiber optic network within the boundaries of the City (the “Project”) and to pay costs of issuance of the Bonds. See “THE FINANCING PLAN,” “THE LEASED PREMISES” and “SOURCES AND USES OF BOND PROCEEDS.” The Bonds are limited obligations of the Authority payable primarily from and secured by certain revenues (the “Revenues”) consisting of certain Lease Payments to be paid by the City pursuant to a Lease Agreement (the “Lease Agreement”), dated as of February 1, 2019, between the City and the Authority, for certain real property and the improvements thereon commonly known as the Goldy S. Lewis Community Center, the James L. Brulte Senior Center and adjacent parking lot (the “Leased Premises”). See “THE LEASED PREMISES.” The City is also required to pay any taxes, assessment charges, utility charges, maintenance and repair costs of the Leased Premises. The Lease Payments have been structured to produce Revenues sufficient to pay principal of and interest on the Bonds when due. The City has covenanted in the Lease Agreement to make all Lease Payments provided for therein, to include all such payments in its annual budgets, and to make the necessary annual appropriations for such rental payments. The City’s obligations to make Lease Payments is subject to abatement in the event of damage to, destruction or condemnation of, or title defects relating to, the Leased Premises, as described herein. (See “SECURITY FOR THE BONDS”). The Revenues are to be received by the Authority and deposited pursuant to the Indenture. Terms used in this Official Statement and not otherwise defined shall have the meaning given to them in APPENDIX C. The City The City is located in the foothills of the Los Angeles-San Bernardino Basin in the western portion of San Bernardino County (the “County”), approximately 40 miles east of the City of Los Angeles and 18 miles west of the City of San Bernardino. The City covers approximately 40.2 square miles and is bordered by Ontario on the * Preliminary, subject to change. Page 382 2 south, Upland on the west, Fontana to the east and to the north by Cucamonga Peak and Mount Baldy. The City was incorporated on November 30, 1977, as a general law city operating under the council-manager form of government. It is governed by a five-member City Council (the “Council”), which includes a Mayor. Prior to the November 2016 General Election, all City officials were elected at large including a Mayor and four Council members, a City Clerk, and a City Treasurer. On November 8, 2016, the residents of the City voted to approve Measure Q which was then carried, adopted, and ratified by the Council on December 7, 2016. Measure Q approved the Council be elected by geographic districts with the Mayor elected at large. Four districts were created based on a map approved in May 2016. Districts 2 and 3 held elections in November 2018. Districts 1 and 4 will hold elections in 2020. The Mayor and Council members are elected on a staggered basis for a term of four years. The Council appoints the City Manager and the City Attorney. The City Manager is responsible for the daily administration of City affairs and for implementing Council policy and program decisions. The estimated population of the City was 176,671 as of January 1, 2018. For other selected information concerning the City, see “THE CITY” and “CITY FINANCIAL INFORMATION,” APPENDIX A – “CITY ECONOMIC AND DEMOGRAPHIC INFORMATION” and APPENDIX B – “AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR 2017/18.” The Authority The Authority was established pursuant to a Joint Exercise of Powers Agreement dated April 22, 1999, between the City, the Rancho Cucamonga Fire Protection District (the “Fire District”) and the former Rancho Cucamonga Redevelopment Agency (collectively with the City, the “Members”). The Authority was created for the purpose of providing financing for public capital improvements for the Members, including by issuing its obligations and making loans to the Members. Under the JPA Law, the Authority has the power to issue bonds to pay the costs of such public capital improvement. Security for the Bonds The Bonds are payable solely from, and are secured by, the Revenues (as defined under “SECURITY FOR THE BONDS”), which primarily consist of the Lease Payments. The Lease Payments are payable for the use of the Leased Premises, leased to the City pursuant to the Lease Agreement, from any legally available funds of the City. The City has covenanted in the Lease Agreement to include the Lease Payments in its annual budgets. The City has further covenanted to make the necessary annual appropriations for all such Lease Payments, and said covenants have been deemed to be duties imposed by law. Any legislative enactment or State constitutional amendment having the effect of reducing property tax, sales taxes or other taxes allocable to the City would necessarily reduce the amount of general revenues available to the City to pay the Lease Payments. Likewise, broadened property tax or sales tax exemptions could have a similar effect. See “RISK FACTORS” and “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS” for discussion of certain other matters which may affect the collection of Revenues. The Authority does not have any power to levy and collect taxes. The City has the right to incur other obligations payable from its general revenues without the consent of the Owners of the Bonds. In addition, the Indenture allows the Authority to issue certain additional obligations secured by the Revenues, and the Lease Agreement allows the City to pay additional amounts of rent for the use and occupancy of the Leased Premises if certain conditions are met. See “SECURITY FOR THE BONDS” herein. The Bonds are limited obligations of the Authority payable solely from the revenues and other funds held under the Indenture. The Bonds are not a debt, obligation or liability of the Members, the County, the State of California (the “State”) or any of its political subdivisions (other than the Authority), nor do they constitute a pledge of the faith and credit or the taxing power of any of the foregoing (including the Authority and the City). The Authority does not have any taxing power. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. The City’s obligation to make Lease Payments is an obligation payable from the City’s general fund (the “General Fund”) or any other source of funds legally available to the City to make Lease Payments. The obligation Page 383 3 of the City to make Lease Payments does not constitute a debt of the City within the meaning of any constitutional or statutory debt limit or restriction or any obligation 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. No Reserve Account Neither the City nor the Authority will create or maintain a debt service reserve account with respect to the Lease Payments or for the Bonds. Abatement Except to the extent of amounts on deposit in the Bond Fund, or otherwise available from an insurance or eminent domain award, the Lease Payments due under the Lease Agreement and, correspondingly, the amount available to pay the principal of and interest on the Bonds, will be subject to abatement during any period in which, by reason of damage or destruction or eminent domain, there is substantial interference with the use and possession by the City of the Leased Premises. See “RISK FACTORS - Abatement and Eminent Domain.” Amounts on deposit in the Bond Fund constitute a special fund for payment of debt service on the Bonds, and shall be available for debt service payments on the Bonds in the event there is substantial interference with the use and possession of the Leased Premises. Redemption The Bonds are subject to optional redemption, mandatory sinking fund redemption, and special mandatory redemption as further described in “THE BONDS – Redemption.” Continuing Disclosure The City has covenanted for the benefit of owners of the Bonds, on behalf of itself and the Authority, to provide certain financial information and operating data relating to the City and the Authority by not later than March 1 of each year, commencing with the report for the Fiscal Year 2018/19 (the “Annual Report”) and to provide notices of the occurrence of certain enumerated events. The Annual Report and notices of material events will be filed by the City with the Municipal Securities Rulemaking Board (the “MSRB”). These covenants have been made in order to assist the Underwriter in complying with Securities Exchange Commission Rule 15c2- 12(b)(5) (the “Rule”). The specific nature of the information to be contained in the Annual Report or the notices of enumerated events by the City is summarized in APPENDIX E – “FORM OF CONTINUING DISCLOSURE AGREEMENT.” For a discussion of the City and its related entities’ compliance with continuing disclosure obligations in recent years, see “CONTINUING DISCLOSURE.” Summary of Terms Brief descriptions of the Bonds, the Indenture, the Lease Agreement, the Authority, the City and the Leased Premises are included in this Official Statement. Such descriptions do not purport to be comprehensive or definitive. All references herein to the Indenture, the JPA Law and the Constitution and the laws of the State, as well as the proceedings of the City with respect to the Leased Premises and the Bonds, are qualified in their entirety by reference to such documents. References herein to the Bonds are qualified in their entirety by reference to the form thereof included in the Indenture. Copies of the documents described herein will be available at the Finance Department of the City located at 10500 Civic Center Drive, Rancho Cucamonga, California 91730. Page 384 4 THE FINANCING PLAN The Project The City plans on constructing the Project, which includes the acquisition, design, construction and equipping of an expansion of the City’s existing fiber optic network, over a ten year time period. Currently the City maintains a fiber optic network system which includes 25 miles of backbone fiber optic cable serving certain City facilities. The existing fiber optic network also contains approximately five miles of available but unused fiber which provides one gigabyte per second Ethernet link between facilities to provide voice, data and internet services to such City facilities. The Project will expand the existing fiber optic network to service additional governmental needs of the City and provide services to residential and commercial properties within the City. The implementation of the Project will allow the City to operate a fiber optic enterprise technology and network environment to support the City’s internal operations as follows: (a) support connectivity for a City-wide public safety video network for use by the City’s police and fire departments; (b) allow communication with message boards and provide information to vehicles to improve traffic flow and travel systems within the City; (c) enable the City to utilize remote monitoring via wireless cameras and remotely control lighting for parks; (d) enable WiFi services in park and recreation areas; (e) provide electric distribution monitoring and advanced meter infrastructure for the Rancho Cucamonga Municipal Utility which would enable additional data management, communication networks with the customer, energy management systems, a function which would alarm and alert the utility and allow for rerouting power as needed; and (f) create small cell networks to improve cellular phone coverage. Additionally, the expansion of backbone connections throughout the City to allow private connectivity to the fiber optic network is projected to generate revenues for the City as described below. The City anticipates constructing the Project in multiple phases. Phase 1 construction is anticipated to be completed in 2019 and will utilize the City’s existing underground conduit to place a fiber-optic cable backbone network that can reach up to 512 business establishments, and up to 300 residential premises in an existing development within the City. Additionally, during Phase 1 the City will acquire and install data center equipment in an existing City facility. In Phase 1 the City will also acquire, install and configure optical network electronics as required to provide broadband transmission and internet access for the City and to enable the provision of internet services for businesses and residents along the routes by a private provider. Phase 2, which is anticipated to commence in 2020 and be completed in 2022, will deploy new underground conduit and place fiber optic cable that can reach up to 2,438 additional business establishments and up to 1,735 residences in planned development. Phase 3, which is anticipated to commence in 2027 and be completed in 2029, will deploy new underground conduit and place fiber optic cable that can reach up to 2,626 additional business establishments and up to 2,159 residences in planned developments. Phase 3 consists of the installation of (a) optic dropped cables to the backbone network and (b) customer premise equipment to enable internet connectivity as business and residential subscribers signup for internet service. In total, existing and new underground conduit, and fiber optic cable will be able to reach up to 4,194 residences, and up to 5,576 businesses. The City anticipates the total costs of the Project at maximum capacity to be approximately $22 million dollars. The following table shows the estimated cost per phase. TABLE 1 CITY OF RANCHO CUCAMONGA FIBER OPTIC PROJECT COSTS Phase Estimate Phase 1 $ 12,644,150 Phase 2 2,481,183 Phase 3 6,520,128 Total $21,645,461 _____________________ Source: Magellan Advisors. Page 385 5 The City anticipates financing Phase 1 and Phase 2 of the Project as described above through the proceeds of the Bonds and funds on hand, and anticipates financing Phase 3 through revenues generated from the Project. Proceeds of the Series A Bonds shall solely be utilized to finance the portions of the Project related to the expansion of the governmental use of the fiber optic network by the City. Proceeds of the Series B Bonds may be used to finance portions of the Project related to the expansion of the City’s existing fiber optic network for commercial and governmental uses. The City has entered into a licensing and servicing agreement (the “Licensing Agreement”) with Inyo Networks Inc. (“Inyo”), a retail broadband service provider. Inyo provides residential and commercial high speed internet, ethernet and voice over IP services to a number of communities throughout California, including several in the neighboring city of Ontario. Pursuant to the Licensing Agreement, Inyo will have the right to provide residential and business internet, phone, video/television and fiber transport services utilizing the Project for an initial period of five years with automatic renewal for five-year terms. As compensation for the license, Inyo has agreed to pay to the City varying percentages (between 50-60%) of gross revenues from all internet and transport services provided by Inyo utilizing the Project. In addition, the City will receive a franchise fee of 5% on all gross video revenues with an additional 1% of all gross video revenues to support the City’s public education and governmental operations. The City engaged Magellan Advisors (“Magellan”) to prepare the Fiber Master Plan dated May 2017 (the “Fiber Master Plan”) and provide financial modeling for the Project. The following table shows the projected gross revenues and costs of services for the Project, excluding any debt service on the Bonds and costs of capital expenditures. Projected revenues are based upon assumed demand rates which were calculated based upon a residential property absorption report prepared by Empire Economics on January 8, 2018 for the City. Magellan estimated commercial absorption for development proposed to occur on the former site of the Empire Lakes golf course based upon the same residential absorption forecast provided by the developer of such property. The same percentage of residential absorption was applied to the small and medium business (SME) enterprises planned for the development on an annual basis. Such residential and commercial development projections include, but are not limited to, an expansion of the City’s premier retail mall Victoria Gardens, the addition of 250 hotel rooms which occurred in December 2018, City approval of an additional 200 hotel rooms and 600 new single family residential units and 500 units of multi-family luxury apartments which have either been approved by the City or are currently under construction. Additionally, following the preparation of the Fiber Master Plan, the City has commenced proceedings related to the environmental impact of the annexation of 5,000 acres of unincorporated territory from the County to the City. If successful, the annexation area is projected to contain 3,000 new single family homes which will be served by the Project. The connectivity was timed based on funding availability for backbone construction into the development. Supporting data was provided through presentations and other related information provided to the City by private land developers in 2018. Residential and SME customer demand for the service was estimated based on the following: (a) rates achieved by other municipal utility broadband providers in the United States of America; (b) Inyo’s onsite survey in the pilot area to determine the numbers of potential subscribers; and (c) Inyo’s ability to provide a low-cost gigabit internet service, which is unavailable in the City. Although the Bonds are solely secured by the Lease Payments, the City anticipates utilizing net revenues as identified in the following table to pay the principal of and interest on the Bonds. The City can give no assurances that the projections set forth in the table will be achieved. Page 386 6 TABLE 2 CITY OF RANCHO CUCAMONGA PROJECTED REVENUES AND OPERATING EXPENSES FOR THE PROJECT (Calendar Years 2019 through 2028)(11) 2019(1) 2020(2) 2021(3) 2022(4) 2023(5) 2024(6) 2025(7) 2026(8) 2027(9) 2028(10) Revenues: Services $ 76,814 $529,182 $1,108,367 $1,585,374 $1,760,880 $2,010,642 $2,201,816 $2,889,309 $3,925,744 $4,703,341 Installation - 8,750 7,140 9,800 9,800 8,568 10,710 57,834 17,479 100,503 Total Revenues $ 76,814 $537,932 $1,115,507 $1,595,174 $1,770,680 $2,019,210 $2,212,526 $2,947,143 $3,943,222 $4,803,844 Expenses: Operating Costs $ 260,913 $286,715 $ 293,984 $ 300,324 $ 303,470 $ 307,451 $ 310,848 $ 319,211 $ 331,065 $ 340,334 Net Revenues: $(184,100) $251,217 $ 821,524 $1,294,941 $1,467,210 $1,711,758 $1,901,678 $2,627,932 $3,612,157 $4,463,510 __________________________ (1) Assumes cumulative demand of approximately 40% of total market share of residential demand and 25% of small and medium business demand. (2) Assumes cumulative demand of approximately 60% of total market share of residential demand, 30% of small and medium business demand and 1% of light pole access demand and 0.21% of light pole transport and dark fiber demand. (3) Assumes cumulative demand of approximately 70% of total market share of residential demand, 35% of small and medium business demand and 1% of light pole access demand and 0.42% of light pole transport and dark fiber demand. (4) Assumes cumulative demand of approximately 70% of total market share of residential demand, 40% of small and medium business demand and 2% of light poles access demand and 0.63% of light pole transport and dark fiber demand. (5) Assumes cumulative demand of approximately 70% of total market share of residential demand, 40% of small and medium business demand, 1% of transport and 3% of light pole access demand and 0.84% of light pole transport and dark fiber demand. (6) Assumes cumulative demand of approximately 70% of total market share of residential demand, 40% of small and medium business demand, 1% of transport and 4% of light pole access demand and 1.05% of light pole transport and dark fiber demand. (7) Assumes cumulative demand of approximately 70% of total market share of residential demand, 40% of small and medium business demand, 1% of transport and 5% of light pole access demand and 1.26% of light pole transport and dark fiber demand. (8) Assumes cumulative demand of approximately 70% of total market share of residential demand, 40% of small and medium business demand, 1% of transport and 6% of light pole access demand and 1.47% of light pole transport and dark fiber demand. (9) Assumes cumulative demand of approximately 70% of total market share of residential demand, 40% of small and medium business demand, 2% of transport and 7% of light pole access demand and 1.68% of light pole transport and dark fiber demand. (10) Assumes cumulative demand of approximately 70% of total market share of residential demand, 40% of small and medium business demand, 2% of transport and 7% of light pole access demand and 1.88% of light pole transport and dark fiber demand. (11) Excludes capital expenditures for expansion of the Project and debt service payments on the Bonds. Source: Magellan Advisors. Page 387 7 Sources and Uses of Funds The table below sets forth the estimated sources and uses of funds with respect to the Bonds. Source of Funds Series A Bonds Series B Bonds Total Principal Amount of Bonds Plus/Less: Net Premium/Original Issue Discount Total Uses of Funds Acquisition and Construction Fund Underwriter’s Discount Costs of Issuance Fund(1) Total _____________________ (1) Costs of Issuance includes printing costs, rating agencies, fees of Municipal Advisor, bond counsel and disclosure counsel, trustee’s fees and expenses and other costs relating to the issuance of the Bonds. Debt Service Schedule The following table presents the debt service schedule for the Bonds based on the maturity date and interest rate set forth on the cover of this Official Statement, assuming no redemptions other than mandatory sinking fund redemptions are made. RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY DEBT SERVICE SCHEDULE Bond Year Ending (May 1) Series A Bonds Principal Series A Bonds Interest Series B Bonds Principal Series B Bonds Interest Total Annual Debt Service 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 Page 388 8 THE LEASED PREMISES The Leased Premises The Leased Premises are located at 11200 Baseline Road and encompass approximately 30 acres within the City’s 103 acre Central Park project. The Leased Premises, constructed in 2004, consist of a 57,000 square- foot building which is home to the Goldy S. Lewis Community Center and the James L. Brulte Senior Center (collectively the “Facility”) and easternly parking lot located at the northwest corner of Base Line Road and Milliken Avenue. The Facility consists of a wide variety of event spaces including two main event halls which can be combined with the open courtyard to accommodate an exposition or conference. The Facility serves as a recreation center for youth, adult and senior programs and is available for special event rentals. The insured value of the Leased Premises is estimated at approximately $15 million. The Leased Premises are located across three assessor parcels of property (the “Assessor’s Parcels”), which include land other than the Leased Premises. The Lease Agreement will initially place a lien encumbering the Assessor’s Parcels. The City intends on engaging a surveyor to prepare a metes and bounds description of the Leased Premises to release those portions of the Assessor’s Parcels which do not constitute the Leased Premises from such lien once the metes and bounds description is prepared in accordance with the provisions described below in “—Substitution and Release of Leased Premises.” Following such release, a lien will be placed solely on approximately 30 acres of real property and improvements thereon which consist of the Facility and the adjacent parking lot. Substitution and Release of Leased Premises Pursuant to the Lease Agreement, the City has the option at any time to substitute other land, facilities or improvements for the Leased Premises or any portion thereof (the “Substitute Leased Premises”) or to release a portion of the Leased Premises (the “Released Premises”) from the lien of the Lease Agreement, provided that the City shall provide written notification to the Trustee and Authority of such substitution or release and shall satisfy all of the following requirements: (a) For Substitutions: (i) The City shall take all actions and shall execute all documents required to subject the Substitute Leased Premises to the terms and provisions of the Lease Agreement, including the filing with the Authority and the Trustee of an amended Exhibit A to the Lease Agreement which adds a description of the Substitute Leased Premises and deletes the description of the Released Premises, as applicable; (ii) The City shall determine and certify in writing to the Authority and the Trustee that the fair rental value of the Substitute Leased Premises is at least equal to the net present value of remaining Lease Payments. (iii) The City shall certify in writing to the Authority and the Trustee that the estimated useful life of the Substitute Leased Premises at least extends to the date on which the final Lease Payment becomes due and payable under the Lease Agreement. (iv) The City shall obtain a CLTA policy of title insurance meeting the requirements of the Lease Agreement with respect to any real property portion of the Substitute Leased Premises; (v) The Substitute Leased Premises shall not cause the City to violate any of its covenants, representations and warranties made in the Lease Agreement. Page 389 9 (b) For Releases: (i) The City shall determine and certify to the Authority and the Trustee that the fair rental value of the remaining Leased Premises after removal of the Released Leased Premises is at least equal to the then remaining Lease Payments. Additionally, the City shall obtain and cause to be filed with the Trustee and the Authority an opinion of Bond Counsel stating that such substitution or release is permitted and does not cause interest on the Series A Bonds to become includable in the gross income of the Bond Owners for federal income tax purposes. From and after the date on which all of the foregoing conditions precedent to such substitution or release are satisfied, the Lease Agreement shall cease with respect to the Former Leased Premises or Released Leased Premises, as applicable, and shall be continued with respect to the Substitute Leased Premises and the remaining Leased Premises. The City shall not be entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such substitution or release. In addition, the Lease Agreement may be amended to allow the City to pay additional rental payments for the purpose of securing additional obligations of the Authority, to the extent of excess value of the Leased Premises. See “SECURITY FOR THE BONDS.” Assignment and Subleasing of Leased Premises Pursuant to the Lease Agreement, the City may not assign the Lease Agreement. The City may sublease all or any portion of the Leased Premises, but only with the written consent of the Authority and subject to all of the following conditions: (a) this Lease Agreement and the obligation of the City to make Lease Payments shall remain obligations of the City; (b) the City shall, within 30 days after the delivery of a sublease, 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 Leased Premises to be used for a purpose other than as may be authorized under the provisions of the laws of the State; and (d) the City shall furnish the Authority and the Trustee with a written opinion of Bond Counsel, stating that such sublease is permitted by this Lease Agreement and the Indenture, and will not cause the interest on the Series A Bonds to become included in gross income for federal income tax purposes; provided, however, if the City enters into a sublease without the prior written consent of the Authority, without furnishing a written opinion of Bond Counsel in accordance with subsection (d) above or fails to deliver a copy of such sublease to the Authority and Trustee in accordance with subsection (b) above, entry into such sublease shall not constitute an Event of Default so long as such sublease complies with the provisions of subsections (a) and (c) above and does not cause the City to violate the tax covenants set forth in the Lease Agreement or any other term or condition set forth in the Lease Agreement. Page 390 10 THE BONDS Description of the Bonds The Bonds will be issued only in the form of fully registered Bonds without coupons, in integral multiples of $5,000. The Bonds will be dated the date of delivery to the Underwriter, will mature on May 1 in the years and in the respective principal amounts, and will bear interest at the respective rates per annum, all as set forth on the inside front cover of this Official Statement. Interest on the Bonds will be paid on May 1 and November 1 of each year, commencing November 1, 2019, by check mailed on the Interest Payment Date to the registered owners of the Bonds as of the applicable Record Date (the fifteenth day of the month preceding each Interest Payment Date); provided however, that payment of interest may be 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 shall furnish written wire instructions to the Trustee at least five days before the applicable Record Date. The principal of each Bond will be payable upon the surrender of such Bond, at maturity or upon redemption prior to maturity, at the principal corporate trust office of the Trustee in Los Angeles, California. Redemption Optional Redemption. The Series A Bonds maturing on or before May 1, 20__* shall not be subject to redemption prior to their respective stated maturities. The Series A Bonds maturing on or after May 1, 20__*, shall be subject to redemption at the option of the Authority as a whole or in part, on any date on or after May 1, 20__*, from any available source of funds, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. The Series B Bonds maturing on or before May 1, 20__* shall not be subject to redemption prior to their respective stated maturities. The Series B Bonds maturing on or after May 1, 20__*, shall be subject to redemption at the option of the Authority as a whole or in part, on any date on or after May 1, 20__*, from any available source of funds, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. Sinking Account Redemption. The Series A Term Bonds are subject to mandatory redemption, in part by lot, from Sinking Account payments set forth in the following schedules commencing on May 1, 20__with respect to Series A Term Bonds maturing May 1, 20__ and May 1, 20__, with respect to Series A Term Bonds maturing May 1, 20__, and each respective May 1 thereafter at a redemption price equal to the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption; provided, however, that if some but not all of the Series A Term Bonds have been redeemed pursuant to optional or special mandatory redemption, the total amount of Sinking Account payments to be made subsequent to such redemption shall be reduced in an amount equal to the principal amount of the Series A Term Bonds so redeemed by reducing each such future Sinking Account payment on a pro rata basis (as nearly as practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice filed by the Authority with the Trustee. Series A Term Bonds Maturing May 1, 20__ Mandatory Sinking Fund Redemption Date (May 1) Principal Amount to Be Redeemed * Preliminary, subject to change. Page 391 11 Series A Term Bonds Maturing May 1, 20__ Mandatory Sinking Fund Redemption Date (May 1) Principal Amount to Be Redeemed The Series B Term Bonds are subject to mandatory redemption, in part by lot, from Sinking Account payments set forth in the following schedules commencing on May 1, 20__with respect to Series B Term Bonds maturing May 1, 20__ and May 1, 20__with respect to Series B Term Bonds maturing May 1, 20__, and each respective May 1 thereafter at a redemption price equal to the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption; provided, however, that if some but not all of the Series B Term Bonds have been redeemed pursuant to optional or special mandatory redemption, the total amount of Sinking Account payments to be made subsequent to such redemption shall be reduced in an amount equal to the principal amount of the Series B Term Bonds so redeemed by reducing each such future Sinking Account payment on a pro rata basis (as nearly as practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice filed by the Authority with the Trustee. Series B Term Bonds Maturing May 1, 20__ Mandatory Sinking Fund Redemption Date (May 1) Principal Amount to Be Redeemed Series B Term Bonds Maturing May 1, 20__ Mandatory Sinking Fund Redemption Date (May 1) Principal Amount to Be Redeemed In lieu of such redemption, the Trustee may apply amounts in the Sinking Account to the purchase of Term Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as may be directed by the Authority prior to the selection of Bonds for redemption, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Term Bonds, as set forth in a written request of the Authority. Special Mandatory Redemption From Insurance or Condemnation Proceeds. The Bonds shall also be subject to redemption as a whole or in part on any date, from net proceeds of insurance or condemnation proceeds required to be used for such purpose as provided in the Indenture, at a redemption price equal to the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium. SEE, APPENDIX C – “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS,” for information regarding the use of insurance or condemnation proceeds to prepay the Lease Payments. Selection of Bonds for Redemption. Whenever provision is made for the redemption of less than all of the Bonds, the Trustee shall select the Bonds to be redeemed from all Bonds or such given portion thereof not previously called for redemption from such series and maturities as shall be set forth in a Written Request of the Page 392 12 Authority filed with the Trustee, or in the absence of such designation of maturities by the Authority, then on a pro rata basis among maturities, and in any case, by lot within a maturity in any manner which the Trustee in its sole discretion shall deem appropriate and fair. Notice of Redemption. The Authority shall give notice to the Trustee of its intent to redeem Bonds at least forty-five (45) days prior to the date set for redemption. Notice of redemption shall be sent (by first class mail, postage prepaid, or such other means as acceptable to the recipient thereof) not less than thirty (30) nor more than sixty (60) days before any redemption date, to the respective Owners of any Bonds designated for redemption at their addresses appearing on the registration books, and to the securities depositories and to one or more of the information services. Each notice of redemption shall state the date of the notice, the redemption date, the place or places of redemption, whether less than all of the Bonds (or all Bonds of a single maturity) are to be redeemed, the CUSIP numbers and, if less than all of the Bonds of a maturity are to be redeemed, Bond numbers of the Bonds to be redeemed, the maturity or maturities of the Bonds to be redeemed and in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Notice of redemption shall be given only if moneys sufficient to pay the Redemption Price are on deposit with the Trustee or available for such purpose on the date that notice of redemption is given or if such notice expressly states that such redemption is conditional on receipt by the Trustee of such sufficient moneys. Each such notice shall also state that on the redemption date there will become due and payable on each of said Bonds the redemption price thereof, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered. Neither the failure to receive any notice nor any defect therein shall affect the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date. See “Book Entry System” below. Effect of Redemption. Notice of redemption having been duly given, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, the Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so called for redemption shall become due and payable, interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to any benefit or security under the Indenture, and the Owners of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. Book-Entry System So long as Cede & Co. is the registered owner of the Bonds, transfer or exchange of Bonds may only be through the facilities of DTC. See APPENDIX F with respect to DTC procedures for transfer and exchange of ownership interests in the Bonds. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered bonds registered in the name of Cede & Co., (DTC’s partnership nominee). One fully- registered Bond will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. See APPENDIX F – “BOOK ENTRY PROVISIONS” herein. The Authority, the City and the Trustee cannot and do not give any assurances that DTC, DTC Participants or others will distribute payments of principal, interest or premium with respect to the Bonds 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 Authority, the City and the Trustee are not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner with respect to the Bonds or an error or delay relating thereto. SECURITY FOR THE BONDS General The Indenture provides that, subject to certain rights of the Trustee, the Bonds are payable from and secured by a first lien on and pledge of all Revenues and a pledge of all of the moneys held in any fund or account Page 393 13 established under the Indenture, including all amounts derived from the investment of such moneys. “Revenues,” as defined in the Indenture, generally means (a) all amounts received by the Authority or the Trustee pursuant to or with respect to the Lease Agreement, including, without limiting the generality of the foregoing, all of the Lease Payments and the Miscellaneous Rent (including both timely and delinquent payments, any late charges, and without regard to the source of payment), but excluding any amounts payable under Section 4.8(d) of the Lease Agreement; and (b) all interest, profits or other income derived from the investment of amounts in any fund or account established pursuant to the Indenture. The principal payable with respect to the Lease Payments is $__________. The City is obligated to pay Lease Payments under the Lease Agreement from any legally available moneys, including its General Fund. Under California law, the obligation of the City to make Lease Payments is contingent upon the availability of the Leased Premises for use and occupancy by the City. See “Abatement” below. See “THE LEASED PREMISES.” Under the Indenture, the Authority is authorized under certain conditions to issue additional obligations secured by the Revenues. See “Additional Bonds” below. Under the Lease Agreement, the City is allowed to pay additional amounts of rent for the use and occupancy of the Leased Premises if certain conditions are met. The Revenues and other funds pledged under the Indenture are the sole security for the Bonds, and the Authority has no other source of funds, other than the Lease Payments, to pay debt service on the Bonds. See APPENDIX C for a summary of the terms of the Indenture and the Lease Agreement. The Bonds are limited obligations of the Authority payable solely from the Revenues and other funds held under the Indenture. The Bonds are not a debt, obligation or liability of the Members, the County, the State or any of its political subdivisions (other than the Authority), nor do they constitute a pledge of the faith and credit or the taxing power of any of the foregoing (including the Authority and the City). The Authority does not have any taxing power. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. The City’s obligation to make Lease Payments is an obligation payable from the City’s General Fund or any other source of funds legally available to the City to make Lease Payments. The obligation of the City to make Lease Payments does not constitute a debt of the City within the meaning of any constitutional or statutory debt limit or restriction or any obligation 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. Lease Payments The City has covenanted under the Lease Agreement to make Lease Payments for the use and possession of the Leased Premises. So long as the Leased Premises are available for the City’s use, the City has covenanted to take such action each year as may be necessary to include all Lease Payments in its annual budget and annually to appropriate an amount necessary to make such Lease Payments (see “Abatement” below). The amounts payable to the Trustee as Lease Payments are to be used to make the payments of principal and interest on the Bonds. The obligation of the City to make Lease Payments (other than to the extent that funds to make Lease Payments are available in the Bond Fund or otherwise available from an insurance or eminent domain award) may be abated in whole or in part if the City does not have use and possession of the Leased Premises. Lease Payments are required to be made by the City under the Lease Agreement at least 15 days prior to each Interest Payment Date (individually, a “Lease Payment Date”), for use and possession of the Leased Premises to the next occurring Lease Payment Date. The amount of such Lease Payment shall be credited with amounts on deposit in the Bond Fund, the Interest Account, the Sinking Account or the Principal Account other than amounts resulting from the prepayment of the Lease Payments in part) on such Lease Payment Date. Lease Payments are required to be deposited in the Bond Fund maintained by the Trustee. Pursuant to the Indenture, on each Interest Page 394 14 Payment Date the Trustee will withdraw from the Bond Fund amounts to make principal and interest payments on the Bonds. The Lease Payments are structured to produce Revenues sufficient to pay principal of and interest on the Bonds when due. While the Lease Payments are subject to optional prepayment, Revenues resulting from such action will be used to redeem a corresponding amount of the Bonds, so that the remaining Lease Payments will be sufficient to pay the scheduled principal and interest payments on the Bonds. Scheduled Lease Payments relating to the Bonds are set forth herein under the heading “SOURCES AND USES OF BOND PROCEEDS – Debt Service Schedule.” Additional Bonds The Authority is authorized, without the consent of the Bondholders, in the Indenture to issue additional obligations secured by a pledge of the Revenues on a parity to the pledge securing the outstanding Bonds, provided the Lease Agreement is amended to obligate the City to pay additional amounts of rental thereunder for the use and occupancy of the Leased Premises and provided that (A) no Event of Default has occurred and is continuing under the Lease Agreement, (B) such additional amounts of rental do not cause the total rental payments made by the City thereunder to exceed the fair rental value of the Leased Premises, as set forth in a certificate of a City representative filed with the Trustee and the Authority, (C) the City obtains and files with the Trustee and the Authority a written certificate of an authorized representative of the City showing that the fair rental value of the Leased Premises is not less than the sum of the aggregate unpaid principal components of the Lease Payments and the aggregate principal components of such additional amounts of rental, and (D) such additional amounts of rental are pledged or assigned for the payment of any bonds, notes, leases or other obligations the proceeds of which may finance any purpose that is authorized pursuant to the laws of the State. Appropriation; Use of Leased Premises The City has covenanted to take such action as may be necessary to include all Lease Payments due under the Lease Agreement in each of its proposed annual budgets and its final adopted annual budgets and to make the necessary appropriations for such Lease Payments and Miscellaneous Rent, except to the extent such payments are abated (see “Abatement” below). The foregoing covenant on the part of the City shall be deemed to be and shall be construed to be a duty 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 its covenants and agreements in the Lease Agreement. The obligation of the City to pay Lease Payments shall constitute a current expense of the City and shall not in any way be construed to be a debt of the City, or the State, or any political subdivision thereof, in contravention of any applicable constitutional or statutory limitation or requirements concerning the creation of indebtedness by the City, the State, or any political subdivision thereof, nor shall such obligations constitute a pledge of general revenues, funds or moneys of the City beyond the Fiscal Year for which the City has appropriated funds to pay Lease Payments or an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Abatement Except to the extent that proceeds of the type described in the following paragraph are available, the amount of Lease Payments and Miscellaneous Rent shall be abated during any period in which there is substantial interference with the use or possession of all or a portion of the Leased Premises by the City by condemnation, damage, destruction or title defect. The amounts of the Lease Payments under such circumstances shall be proportionate to the usable portion of the Leased Premises. If it is determined that the amount abated is less than the fair rental value of the portions of the Leased Premises not damaged or destroyed, based upon the opinion of an MAI appraiser with expertise in valuing such properties or other appropriate method of valuation is less than Page 395 15 the amount of Lease Payments being made, the Lease Payments shall further be abated such that they represent said fair rental value. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. Notwithstanding the foregoing, there may be no abatement of Lease Payments to the extent that (a) the proceeds of rental interruption insurance, are available to pay Lease Payments; or (b) amounts in the Bond Fund are available to pay Debt Service payable from Lease Payments which would otherwise be abated. Any such Debt Service payments made from the Bond Fund shall be credit against the applicable Lease Payment(s). Except as provided in the Lease Agreement, in the event of any such interference with use or possession, the Lease Agreement shall continue in full force and effect and the City waives the benefits of Civil Code Sections 1932(1), 1932(2) and 1933(4) any right to terminate the Lease Agreement by virtue of any such interference. See “Insurance” below for a discussion of rental interruption insurance to be provided by, or on behalf of, the City. Notwithstanding these efforts, the moneys legally available to the Trustee following the occurrence of an event which gives rise to an abatement of Lease Payments, including proceeds of rental interruption insurance, if any, may not be sufficient to pay principal of and interest on the Bonds. In such event, all Bondowners would forfeit interest attributable to abated Lease Payments payable during the period of abatement and, to the extent Bonds mature or are to be subject to mandatory redemption during a period of abatement, the Bondowners would forfeit principal attributable to such abated Lease Payments. The failure to make such payments of principal and interest would not under such circumstances constitute a default under the Indenture, the Lease Agreement or the Bonds. Action on Default Should the City default under the Lease Agreement, the Trustee, as assignee of the Authority under the Lease Agreement may exercise any and all remedies available pursuant to law. However, the Trustee may not accelerate the Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due and payable or terminate the Lease or cause the leasehold interest of the Authority or the sub-leasehold interest of the City in the Leased Premises to be sold, assigned or otherwise alienated. The City expressly agrees that in the event of any default it will remain liable for the payment of all Lease Payments and the performance of all conditions contained in the Lease Agreement and will reimburse the Authority for any deficiency arising out of the re-leasing of the Leased Premises or, in the event the Authority is unable to re-lease the Leased Premises, then for the full amount of all Lease Payments to the end of the term of the Lease Agreement. See “RISK FACTORS.” For a description of the events of default and permitted remedies of the Trustee (as assignee of the Authority) contained in the Lease Agreement and the Indenture, see APPENDIX C. Miscellaneous Rent For the right to the use and occupancy of the Leased Premises, the Lease Agreement requires the City to pay, in addition to the Lease Payments, the reasonable expenses of the Authority, and any reimbursement of amounts advanced and owing in connection with the Lease Agreement and the Indenture or in connection with the issuance of the Bonds. Insurance The Lease Agreement contains the insurance covenants described below. No assurance can be given that insurance proceeds will be available or, if available, adequate in an amount sufficient to avoid an interruption of Lease Payments. Under such a situation, an abatement of Lease Payments is likely to occur. See “Abatement” above. The Lease Agreement requires the City to obtain a standard comprehensive general liability insurance policy or policies in protection of the Authority and the City, including their respective members, officers, agents, employees and assigns. Said policy or policies must provide coverage in the minimum liability limits of Page 396 16 $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $150,000 for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 (subject to a deductible clause of not to exceed $150,000) covering all such risks. The Lease Agreement also requires the City to maintain, or cause to be maintained, casualty insurance insuring the facilities on the Leased Premises against loss or damage by fire and lightning, with extended coverage and vandalism and malicious mischief insurance and all other risks in an amount equal to the lesser of 100% of the replacement cost of the facilities or the aggregate unpaid principal components of the Lease Payments allocable to the facilities. Such insurance may be subject to such deductibles as the City deems prudent. The Lease Agreement further requires the City to cause to be maintained, throughout the term of the Lease Agreement, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of the Leased Premises as a result of any of the hazards covered by the insurance in an amount at least equal to the maximum Leased Payments allocable to the facilities coming due and payable during any future 24 month period. The Lease Agreement allows the City to maintain any such insurance as part of or in conjunction with any other insurance coverage carried by the City or, in whole or in part, in the form of self-insurance by the City or through participation by the City in a joint powers agency or other program providing pooled insurance. The City is a member of the Public Agency Risk Sharing Authority of California (“PARSAC”), a joint powers authority, which provides insurance covering automobile, general liability, error’s and omission losses, worker’s compensation and property claims. The City has a $500,000 retention limit for liability with PARSAC being responsible for losses above $500,000 up to $1,000,000. PARSAC provides the City with an excess Commercial Liability Policy of $25,000,000 in excess of its $1,000,000 retention limit to cover losses. PARSAC also provides $1 billion aggregate per occurrence property coverage to the City. The Lease Agreement also requires the City to obtain a CLTA policy of title insurance insuring the City’s leasehold estate, subject only to Permitted Encumbrances, in an amount at least equal to the aggregate principal amount of the Bonds. See APPENDIX C – “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Lease Agreement – Insurance.” Insurance proceeds are required to be applied to the repair of the Leased Premises; or if the proceeds are insufficient to repair or replace the Leased Premises, the City may prepay the related Lease Payments and thereby cause the redemption of outstanding Bonds. No Reserve Account Neither the City nor the Authority will create or maintain a debt service reserve account with respect to the Lease Payments or for the Bonds. Page 397 17 CITY FINANCIAL INFORMATION The following is a description of the City’s budget process, current budget, historical budget information, changes in fund balance, balance sheets, major revenues and expenditures, indebtedness, investments and certain other financial information relating to the City. Accounting Policies and Financial Reporting The City’s accounting records are organized and operated on a “fund” basis, which is the basic fiscal and accounting unit in governmental accounting. The operations of the different funds are accounted for with separate sets of self-balancing accounts showing assets, liabilities, fund balance or equity, and revenues and expenses. The basis of accounting for all funds is more fully explained in the City’s Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2018 contained in APPENDIX B. The City, all its funds and the Authority, are audited annually by a certified public accounting firm. The firm of Lance, Soll & Lunghard, LLP, Brea, California, is the City’s current auditor. The auditor has not been requested to review such audited financial statements prior to inclusion in this Official Statement. Audited financial statements for prior fiscal years are available upon request from the Finance Department of the City or on the City’s website. The City General Fund finances the legally authorized activities of the City not provided for in other restricted funds. General Fund revenues are derived from such sources as taxes; licenses and permits; fines and forfeitures; use of money and property; aid from other governmental agencies; charges for current services; and other revenue. General Fund expenditures and encumbrances are classified by the functions of general government, public safety – police, public safety – animal center, community development community services, engineering and public works. Amounts on deposit in the Bond Fund held by the Trustee are pledged to payment of Lease Payments and are not available for other uses by the City. Budgetary Process and Current Budget The City develops an annual operating budget for planning purposes and appropriates funds annually for operations and to fund the capital improvement program prior to the start of each fiscal year. The City Council conducts a public hearing (workshop) prior to adopting the budget. Supplemental appropriations, where required during the fiscal year, are also approved by the City Council. The authority for budgetary control is at the department level. A department head may transfer appropriations within the department. The Council, by the affirmative vote of three members, may amend the budget to add or delete appropriations, transfer between appropriations within a fund or change appropriations transfers between funds. An item of Required Supplementary Information, pursuant to GASB 34, is a Budgetary Comparison Schedule of the Original Adopted Budget and the Final Budget for the General Fund and all major Special Revenue Funds with explanations of the major changes. That schedule is included in the City’s audited financial report in APPENDIX B for Fiscal Year 2017/18. The City’s Adopted Budget for Fiscal Year 2018/19 (the “Adopted Budget”) projects General Fund revenues to be 3.92% higher than in Fiscal Year 2017/18. The Adopted Budget projects a 1.34% increase in sales tax revenues, 2.53% increase in property tax revenues and 20.56% increase in the transient occupancy taxes over such Fiscal Year 2017/18 revenues. The large increase in projected transient occupancy tax revenues is attributable to the addition of two new hotels. The Adopted Budget identifies a number of multi-year priorities for the City which include, but are not limited to, proactively developing public safety programs and facilities to meet community needs, planning and development of major park and recreational projects, expanding the Biane library to include an interactive discovery space, conducting a review of administrative services fees and developing a public art installation and maintenance program. Page 398 18 Set forth in Table 3 are the adopted and final General Fund budgets for Fiscal Years 2016/17 and 2017/18, the adopted General Fund Budget for Fiscal Year 2018/19, the audited General Fund results for Fiscal Years 2016/17 and 2017/18. During the course of each Fiscal Year, the budget is amended and revised as necessary by the City Council. The adopted budget for each fiscal year shown below is the final adopted budget as adjusted by the City Council. The City Council adopted a balanced Fiscal Year 2018/19 budget, with the planned use of reserves for certain capital expenditures and leave payouts and which reflects an approximately 2.53% increase in annual growth of secured property taxes and 1.34% increase in sales taxes and maintains current spending levels for services and law enforcement, as compared to the Fiscal Year 2017/18 budget. The City believes it has conservatively budgeted expected revenues. Page 399 19 TABLE 3 CITY OF RANCHO CUCAMONGA GENERAL FUND BUDGET (Fiscal Years 2016/17 through 2018/19)(1)(2) Adopted Fiscal Year 2016/17 Budget Final Fiscal Year 2016/17 Budget Audited Fiscal Year 2016/17 Results Variances Between Final Budget and Audited Results(3) Adopted Fiscal Year 2017/18 Budget Final Fiscal Year 2017/18 Budget Audited Fiscal Year 2017/18 Results Variances Between Final Budget and Audited Results(3) Adopted Fiscal Year 2018/19 Budget Revenues: Taxes $64,595,300 $ 64,473,050 $64,297,386 $ (175,664) $67,594,100 $ 67,619,140 $70,214,951 $2,595,811 $70,288,230 Licenses and permits 4,159,220 4,053,930 4,006,360 (47,570) 4,283,360 4,512,670 4,377,007 (135,663) 4,598,150 Intergovernmental 545,450 579,550 654,672 75,122 584,250 526,840 500,029 (26,811) 523,610 Charges for services 3,558,070 2,881,180 2,895,445 14,265 3,546,390 3,308,970 3,645,491 336,521 3,464,100 Use of money and property 1,239,630 1,259,280 612,665 (646,615) 1,270,000 1,567,310 737,977 (829,333) 1,798,880 Fines, forfeitures and penalties 1,095,010 1,057,380 1,169,246 111,866 1,062,520 1,331,410 1,536,583 205,173 1,345,250 Contributions 82,660 82,660 120,850 38,190 82,660 82,660 103,644 20,984 86,660 Miscellaneous 2,935,890 3,352,560 2,682,266 (670,294) 2,792,840 3,235,250 3,478,005 242,755 2,539,990 Transfer In 1,557,260 1,557,260 1,557,260 - 1,591,310 1,837,260 1,835,545 (1,715) 1,578,680 Proceeds from sale of capital asset 50,070 90,000 148,958 58,958 50,070 76,240 68,196 (8,044) 50,070 Total Revenues $79,818,560 $ 79,386,850 $78,145,108 $(1,241,742) $82,857,500 $ 84,097,750 $86,497,428 $2,399,678 $86,273,620 Expenditures: Personnel Services $27,627,600 $ 27,533,438 $25,898,036 $(1,635,402) $29,116,450 $ 27,931,530 $27,006,001 $(925,529) $29,472,050 Operations & Maintenance 53,875,930 56,616,820 51,249,991 (5,366,829) 55,930,510 58,318,645 54,911,645 (3,407,000) 58,458,650 Capital Outlay 5,922,500 7,672,352 3,676,301 (3,996,051) 3,571,890 4,338,447 3,789,064 (549,383) 8,078,780 Debt Service 41,170 41,520 33,677 (7,843) 41,960 35,250 25,691 (9,559) 15,500 Cost Allocation (5,161,110) (5,161,110) (5,161,110) - (5,378,980) (5,378,980) (5,376,960) 2,020 (5,527,170) Transfer Out 3,549,540 3,009,240 2,773,837 (235,403) 3,158,060 3,414,980 3,025,210 (389,770) 2,997,100 Total Expenditures $85,855,630 $ 89,712,260 $78,470,732 $(11,241,528) $86,439,890 $ 88,659,872 $83,380,651 $(5,279,221) $93,494,910 Planned Use of Reserves: $ (6,240,560) $(10,539,660) - n/a $ (3,810,420) $(19,855,022) - n/a $ (7,438,940) _______________________ (1) The City’s presentation of General Fund in its Comprehensive Annual Financial Reports includes various reserve funds associated with the General Fund. Expenditures reflected in these other funds are funded by reserves specifically set aside for their operations and do not represent normal recurring operating costs. These expenditures are noted above as ‘Planned Use of Reserves’. (2) Interfund activity between the General Fund and the various reserve funds associated with the General Fund has been removed from the adopted budget similar to the elimination performed for such activity in the Comprehensive Annual Financial Report as such activity is solely operational and inclusion of such amounts would result in an overstatement of funds. (3) Variances between Final Budget and Audited Results exclude encumbrances. Encumbrances are estimations of costs related to unperformed contracts for goods and services. They represent the estimated amount of the expenditure ultimately to result if unperformed contracts in process at year-end are completed. They do not constitute expenditures or estimated liabilities for such fiscal year. Encumbrances for Fiscal Year 2016/17 are $5,239,097 and Fiscal Year 2017/18 are $2,209,598. Source: City of Rancho Cucamonga. Page 400 20 General Fund Balance Sheet, Statements of Revenues and Expenditures and Fund Balances The following tables provide a five-year history of the City’s Comparative Balance Sheet, and summarize General Fund revenues, expenditures, transfers, and ending fund balances for the City for Fiscal Years 2013/14 through 2017/18. See also “Budgetary Process and Current Budget” above for estimated revenues and expenses for the current Fiscal Year. TABLE 4 CITY OF RANCHO CUCAMONGA GENERAL FUND COMPARATIVE BALANCE SHEET (For Fiscal Years Ended June 30) 2014 2015 2016 2017 2018 Assets: Cash and investments $ 91,511,232 $ 97,211,254 $ 95,632,375 $ 99,890,569 $92,441,556 Receivables: Accounts, Net of Allowances 663,684 1,465,481 1,622,057 872,551 1,144,610 Taxes 6,747,414 7,775,381 9,173,547 6,571,979 6,847,078 Accrued Interest 91,605 155,288 64,898 196,052 296,339 Other Loans - - - - 9,911 Grants - - - - 10,176 Prepaid Costs 275,862 181,839 200,477 775,397 312,852 Deposits 20,000 20,000 20,000 20,000 20,000 Due from Other Funds 788,428 1,019,558 1,046,303 528,361 711,898 Advances to Other Funds 4,449,029 3,822,987 6,084,182 5,240,070 16,637,859(2) Due from Successor Agency 149,338 - - - - Advances to Successor Agency 9,521,227(1) - - - - Due from External Parties/Agency Funds 123,162 376,711 128,735 203,575 - Pension Rate Stabilization Program - - - 1,911,795 2,034,481 Total Assets $114,340,981 $112,028,499 $113,972,574 $116,210,349 $120,466,760 Liabilities, Deferred Inflows of Resources, and Fund Balances: Liabilities: Accounts Payable $ 1,992,151 $ 1,681,280 $ 1,987,180 $ 2,669,077 $ 3,219,952 Accrued Liabilities 1,189,419 1,175,433 1,385,495 1,532,997 1,802,942 Unearned Revenues - - 40,000 - 7,500 Deposits Payable 42,959 42,959 42,959 42,959 42,959 Due to Other Governments - - - - - Due to Other Funds - 1,972 - - - Due to Successor Agency 6,641 305,314 - - 305,314 Advances from Other Funds - - - - - Total Liabilities $ 3,231,170 $ 3,206,958 $ 3,455,634 $ 4,245,033 $ 5,378,667 Deferred Inflows of Resources: Unavailable Revenues $ 1,917,335 $ 2,670,788 - - $ 6,000 Total Deferred Inflows of Resources $ 1,917,335 $ 2,670,788 - - $ 6,000 Fund Balances: Nonspendable $ 14,266,118(1) $ 4,024,826(1) $ 6,304,659 $ 6,035, 467 $ 16,980,622(2) Restricted 1,527,198 3,091,255 4,256,949 8,152,268 6,351,557 Committed 68,857,871 74,310,635 75,193,291 69,939,616 71,335,361 Assigned 24,541,289 24,724,037 24,762,041 27,837,965 20,414,553 Unassigned - - - - - Total Fund Balances $109,192,476 $106,150,753 $110,516,940 $111,965,316 $115,082,093 Total Liabilities, Deferred Inflows of Resources, and Fund Balances $114,340,981 $112,028,499 $113,972,574 $116,210,349 $120,466,760 __________________ (1) In November 2015, the State Department of Finance determined that certain advances made by the City to the former Rancho Cucamonga Redevelopment Agency were not enforceable obligations. As a result, such advances to Successor Agency in the amount of $9,521,227 were written off as of June 30, 2015, decreasing the nonspendable fund balance for Fiscal Year 2014/15. (2) During Fiscal Year 2017/18, the City made advances to its Lighting Districts Fund to provide funding for the purchase, acquisition and retrofitting of streetlights. The outstanding balance for such advances amounted to $12,593,504 at June 30, 2018, resulting in a corresponding increase in the nonspendable fund balance. Source: City of Rancho Cucamonga Comprehensive Annual Financial Reports for Fiscal Years Ended June 30, 2014-2018; City of Rancho Cucamonga. Page 401 21 TABLE 5 CITY OF RANCHO CUCAMONGA STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GENERAL FUND (For Fiscal Years Ended June 30) 2014 2015 2016 2017 2018 Revenues: Taxes $ 56,947,193 $ 60,564,721 $ 65,148,696 $ 64,297,386 $ 70,214,951 Licenses and Permits 3,773,347 3,919,093 4,041,565 4,006,360 4,377,007 Intergovernmental 591,253 390,032 654,768 654,672 500,029 Charges for Services 4,054,598 3,250,622 3,302,750 2,895,445 3,645,491 Use of Money and Property 1,550,481 1,166,514 1,203,940 612,665 737,977 Fines and Forfeitures 1,160,217 1,402,246 1,090,684 1,169,246 1,536,583 Contributions 46,130 35,658 80,541 120,850 103,644 Miscellaneous 5,596,801 3,167,846 2,527,104 2,682,266 3,478,005 Total Revenues $ 73,720,020 $ 73,896,732 $ 78,050,048 $ 76,438,890 $ 84,593,687 Expenditures: Current: General Government(1) $ 10,621,211 $ 11,825,566 $ 13,973,640 $ 12,687,581 $ 14,363,340 Public Safety – Police(2) 30,110,634 31,213,894 33,256,123 35,817,260 37,546,281 Public Safety – Fire Protection(3) - - - - - Public Safety – Animal Center 2,569,847 2,745,903 2,924,840 3,007,643 3,113,889 Community Development 4,261,418 4,108,849 4,464,219 4,540,048 4,979,496 Community Services 4,143,912 4,212,357 4,477,673 4,571,035 4,793,457 Engineering and Public Works 10,947,971 10,666,160 10,734,740 11,132,770 11,744,223 Capital Outlay 397,199 1,161,719 4,193,860 3,676,301 3,789,064 Debt Service: Principal Retirement 8,848 8,885 9,394 9,681 8,292 Interest and Fiscal charges 5,410 5,572 693 23,996 17,399 Total Expenditures $ 63,066,450 $ 65,948,905 $ 74,035,182 $ 75,466,315 $ 80,355,441 Excess (Deficiency) of Revenues Over (Under) Expenditures $ 10,653,570 $ 7,947,827 $ 4,014,866 $ 972,575 $ 4,238,246 Other Financial Sources (Uses): Transfers In $ 1,186,770 $ 1,185,360 $ 1,255,350 $ 1,557,260 $ 1,835,545 Transfers Out (2,856,310) (2,676,405) (2,992,654) (2,773,837) (3,025,210) Sales of Capital Assets 81,943 22,721 25,331 148,958 68,196 Contributions to Other Governments - - - (230,580)(4) - Total Other Financing Sources (Uses) $ (1,587,597) $ (1,468,324) $ (1,711,973) $ (1,298,199) $(1,121,469) Extraordinary Gain/(Loss) - (9,521,226)(5) - - - Net Change in Fund Balances $ 9,065,973 $ (3,041,723) $ 2,302,893 $ (325,624) $ 3,116,777 Fund Balances: Beginning of Year $100,126,503 $109,192,476 $106,150,753 $110,516,940 $111,965,316 Restatements - - 2,063,294 1,774,000 - Beginning of Year, as Restated $100,126,503 109,192,476 $108,214,047 $112,290,940 $111,965,316 End of Year $109,192,476 $106,150,753 $110,516,940 $111,965,316 $115,082,093 _____________________ (1) General government costs increased in Fiscal Year 2015/16 due to the City prefunding its CalPERS unfunded liability in the amount of $1,774,000 through the establishment of a Section 115 Trust. See “-Retirement Program” below. In Fiscal Year 2017/18, general government costs included a one-time litigation settlement in the amount of $800,000 related to a lawsuit filed against the City in March 2016 alleging that the at-large election system was in violation of the California Voting Rights Act. (2) Public safety costs generally increase from year to year due to negotiated labor contract increases and increases in retirement costs. Periodic increases in staffing levels occur as well contributing to increases in the contract costs. (3) Fire Safety Services are provided to the City by the Fire District. (4) The “Contributions to Other Governments” was inaccurately reported as another financing use for Fiscal Year 2016/17 as GASB Statement No. 34, paragraph 88, specifically identifies what may be reported in the other financing sources and uses category. This item was properly categorized as a functional expenditure for Fiscal Year 2017/18 and will be reported as such prospectively. (5) In November 2015, the State Department of Finance made a determination that certain advances from the City to the former Rancho Cucamonga Redevelopment Agency were not enforceable obligations. As a result, such advances were written as of June 30, 2015. Source: City of Rancho Cucamonga Comprehensive Annual Financial Reports for Fiscal Years Ended June 30, 2014-2018; City of Rancho Cucamonga. Page 402 22 Table 6 below shows the components of the General Fund balances for Fiscal Years 2013/14 through 2017/18. TABLE 6 CITY OF RANCHO CUCAMONGA GENERAL FUND BALANCES (For Fiscal Years Ended June 30)(1)(2) Fiscal Year 2014 Fiscal Year 2015 Fiscal Year 2016 Fiscal Year 2017 Fiscal Year 2018 Nonspendable(3) $ 14,266,118(5) $ 4,024,826(5) $ 6,304,659 $ 6,035,467 $ 16,980,622(6) Restricted(4) 1,527,198 3,091,255 4,256,949 8,152,268 6,351,557 Committed 68,857,871 74,310,635 75,193,291 69,939,616 71,335,361 Assigned 24,541,289 24,724,037 24,762,041 27,837,965 20,414,553 Total Fund Balance $109,192,476 $106,150,753 $110,516,940 $111,965,316 $115,082,093 _____________________ (1) Audited. (2) There are five separate components of fund balance, each of which identifies the extent to which the City is bound to honor constraints on the specific purposes for which amounts can be spent. Nonspendable fund balance is inherently non-spendable; restricted fund balance has externally enforced limitations on use; committed fund balance has Council imposed limitations on use; assigned fund balance has limitations for intended use set by the City Manager or Finance Director; and unassigned fund balance is the residual net resources. The City does not report unassigned fund balance for the General Fund based on internal policies to direct the use of fund balance. (3) Nonspendable components of fund balance include prepaid costs, deposits, notes and loans receivable, and advances to other funds. These items are shown on the General Fund’s balance sheet as assets; however, they are not readily available for spending in the next fiscal year. (4) Restricted components of fund balance include resources accumulated through the collection of fees restricted by City Ordinance or State legislation; resources set aside for contractual commitments; and resources being held by a fiscal agent that are restricted as to their use (i.e., pension funding). (5) In November 2015, the State Department of Finance determined that certain advances made by the City to the former Rancho Cucamonga Redevelopment Agency were not enforceable obligations. As a result, such advances to Successor Agency in the amount of $9,521,227 were written off as of June 30, 2015, decreasing the nonspendable fund balance for Fiscal Year 2014/15. (6) During Fiscal Year 2017/18, the City made advances to its Lighting Districts’ Fund to provide funding for the purchase, acquisition and retrofitting of streetlights. The outstanding balance for such advances amounted to $12,593,504 at June 30, 2018, resulting in a corresponding increase in the nonspendable fund balance. Source: City of Rancho Cucamonga; City of Rancho Cucamonga Comprehensive Annual Financial Report for Fiscal Years 2013/14 through 2017/18. Historic General Fund Revenues Taxes received by the City include property taxes, sales taxes, franchise fees, property transfer taxes and transient occupancy taxes. Of such taxes, property taxes and sales taxes constitute the major sources of revenues. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – ARTICLE XIIIC and ARTICLE XIIID of the California Constitution” and “ – Voter Initiative,” – “Proposition 62” and – Proposition 218” for a discussion of certain general taxes imposed by the City that may be affected by initiatives approved by the California voters. A significant revenue source of the City is State payments and other payments in-lieu of taxes. Payment of State assistance depends on the adoption by the State of its budget, including the appropriations therein providing for local assistance. These revenues are shown in the accompanying financial statements as “intergovernmental revenues.” Page 403 23 The following table illustrates revenue sources of the City’s General Fund for Fiscal Years 2008/09 through 2017/18. TABLE 7 CITY OF RANCHO CUCAMONGA HISTORICAL GENERAL FUND REVENUES (Fiscal Years 2008/09 through 2017/18)(1) Fiscal Year Ended June 30 Sales Tax Revenues Property Tax Revenues Other Taxes Licenses and Permits Charges for Services Other Revenue Total Revenues 2009 $23,436,430 $19,907,882 $ 9,086,053 $3,156,830 $2,217,042 $ 9,879,202 $67,683,439 2010 21,219,089 18,904,386 7,295,049 3,419,014 2,175,274 8,935,019 61,947,831 2011 22,315,603 18,543,036 7,470,250 3,035,648 2,819,732 15,941,218(5) 70,125,487 2012 24,759,654 18,712,532 7,752,279 3,209,362 2,254,688 14,690,637(5) 71,379,152 2013 26,580,975 29,632,618(2) 8,064,826 3,346,189 2,955,873 26,685,551(6) 97,266,032 2014 26,218,300 21,852,130 8,876,763 3,773,347 4,054,598(3) 10,213,595 74,988,733 2015 27,290,042 23,946,244 9,328,435 3,919,093 3,250,622 7,370,377 75,104,813 2016 30,902,193(4) 24,738,802 9,507,701 4,041,565 3,302,750 6,837,718 79,330,729 2017 29,288,387 25,317,781 9,691,218 4,006,360 2,895,445 6,945,917 78,145,108 2018 31,478,294 28,481,801 10,254,856 4,377,007 3,645,491 8,259,979 86,497,428 __________________________ (1) Audited. (2) As a result of the dissolution of the former Redevelopment Agency, the City received non-recurring distributions from the County for its share of post-redevelopment agency residual balance receipts. The General Fund received approximately $9.355 million for the Fiscal Year Ended June 30, 2013. (3) Engineering fees have steadily increased since 2008 as a direct result of new development within the City; however, development was especially high during Fiscal Year 2013/14 compared to the prior fiscal years presented above. During that year, the City received development fees for three particularly large developments. (4) The City has generally experienced growth in the sales and use tax receipts from all major industry groups. During Fiscal Year 2015/16, the “Triple Flip”, established by the State to fund bond issuances from Proposition 57, the California Economic Recovery Bond Act, ended. As a result, the City received a final non-recurring true-up disbursement from the State. (5) In 2011, the former Rancho Cucamonga Redevelopment Agency made an interest payment on its advance from the City in the amount of $7.5 million. In 2012, a second interest payment was made in the same amount. (6) In 2013, the Fire District repaid funds advanced by the General Fund in the amount of $19,292,698, including interest. The City provided financial support for District operations for 14 consecutive years. The source of repayment was one-time revenues that the District received from prior Redevelopment Agency reserves. Source: City of Rancho Cucamonga. Page 404 24 Sales and Use Tax The sales tax is an excise tax imposed on retailers for the privilege of selling or leasing tangible personal property. The use tax is an excise tax imposed for the storage, use, or other consumption of tangible personal property purchased from any retailer. The total sales tax rate within the City is currently 7.750% with the City receiving 1% of this amount. Sales tax revenues constitute the largest revenue source of the City in most fiscal years. The California Department of Tax and Fee Administration (“CDTFA”) administers collection of the sales and use tax. Under its procedures, the CDTFA projects receipts of the sales and use tax on a quarterly basis and remits an advance of the receipts of the sales and use tax to the City on a monthly basis. The amount of each monthly advance is based upon the CDTFA’s quarterly projection. During the last month of each quarter, the CDTFA adjusts the amount remitted to reflect the actual receipts of the sales and use tax for the previous quarter. The CDTFA receives an administrative fee based on the cost of services provided by the Board to the City in administering the City’s sales tax, which is deducted from revenue generated by the sales and use tax before it is distributed to the City. Factors that have historically affected sales tax revenues include the overall economic growth of the County Area, competition from neighboring cities, the growth of specific industries within the City, the City’s business attraction and retention efforts, and catalog and internet sales. In Fiscal Year 2017/18, revenues from sales and use taxes increased by 7.5% from Fiscal Year 2016/17. Property Taxes Property tax receipts of $28,481,801 provided the second largest tax revenue source of the City in Fiscal Year 2017/18, contributing approximately 32.9% of General Fund revenues during Fiscal Year 2017/18. See Table A-2 in APPENDIX A – “CITY ECONOMIC AND DEMOGRAPHIC INFORMATION.” Property in the State which is subject to ad valorem taxes is classified as “secured” or “unsecured.” The secured classification includes property on which any property tax levied by a county becomes a lien on that property. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens, arising pursuant to State law, on the secured property, regardless of the time of the creation of other liens. The valuation of property is determined as of January 1 each year, and installments of taxes levied upon secured property become delinquent on the following December 10th and April 10th of the subsequent calendar year. Taxes on unsecured property are due July 1 and become delinquent August 31. Secured and unsecured properties are entered separately on the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property. The exclusive means of forcing the payment of delinquent taxes with respect to property on the secured roll is the sale of the property securing the taxes of the State for the amount of taxes that are delinquent. The taxing authority has four methods of collecting unsecured personal property taxes: (1) filing a civil action against the taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for recording in the 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 taxable to the assessee. The County has adopted a Teeter Plan with respect to property tax disbursements, however, the City has elected not to participate. A 10% penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, beginning on the July 1 following a delinquency, interest begins accruing at the rate of 1.5% per month on the amount delinquent. Such property may thereafter be redeemed by the payment of the delinquent taxes and the 10% penalty, plus interest at the rate of 1.5% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the county tax collector. A 10% penalty also applies to the delinquent taxes or property on the unsecured roll, and Page 405 25 further, an additional penalty of 1.5% per month accrues with respect to such taxes beginning on the varying dates related to the tax billing date. Legislation enacted in 1984 (Section 25 et seq. of the California Revenue and Taxation Code), provides for the supplemental assignment and taxation of property as of the occurrence of a change in ownership or completion of new construction. Previously, statutes enabled the assessment of such changes only as of the next tax lien date following the change and thus delayed the realization of increased property taxes from the new assessment for up to 14 months. Collection of taxes based on supplemental assessments occurs throughout the year. Taxes due are prorated according to the amount of time remaining in the tax year, with the exception of tax bills dated January 1 through May 31, which are calculated on the basis of the remainder of the current Fiscal Year and the full 12 months of the next Fiscal Year. For a number of years, the State Legislature has shifted property taxes from cities, counties and special districts to the Educational Revenue Augmentation Fund (“ERAF”). In Fiscal Years 1993 and 1994, in response to serious budgetary shortfalls, the State Legislature and administration permanently redirected over $3 billion of property taxes from cities, counties, and special districts to schools and community college districts pursuant to ERAF shifts. The City last paid ERAF in 1995 and 1996, but was not required to pay any ERAF in later years when it has been imposed on other agencies. On November 2, 2004, State voters approved Proposition 1A, which amended the State Constitution to significantly reduce the State’s authority over major local government revenue sources. Under Proposition 1A, the State may not: (i) reduce local sales tax rates or alter the method of allocating the revenue generated by such taxes; (ii) shift property taxes from local governments to schools or community colleges; (iii) change how property tax revenues are shared among local governments without two-thirds approval of both houses of the State Legislature; or (iv) decrease Vehicle License Fee (“VLF”) revenues without providing local governments with equal replacement funding. In 2004, the State Legislature reduced the VLF rate from 2.00% to 0.65% and cities and counties are compensated for such revenue losses with property tax revenues on a dollar-for-dollar basis. See, “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Voter Initiatives.” Beginning in Fiscal Year 2009, the State may shift to schools and community colleges a limited amount of local government property tax revenue if certain conditions are met, including: (a) a proclamation by the Governor that the shift is needed due to a severe financial hardship of the State; and (b) approval of the shift by the State Legislature with a two-thirds vote of both houses. Under such a shift, the State must repay local governments for their property tax losses, with interest, within three years. Proposition 1A does allow the State to approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Other Taxes and Fees Franchise Fees. The City levies a franchise fee on its cable television, trash collection and utility franchises. Transient Occupancy Taxes. The City levies a 10% transient occupancy tax on hotel and motel bills, and short-term residential vacation rentals. Property Transfer Taxes. A documentary stamp tax is assessed by the County and remitted to the City for recordation of real property transfers. Documentary Transfer Tax. The County imposes a $1.10 per $1,000 of value of any documented sale or transfer of real property within the City. The tax is due when the transfer is recorded with the County. Title companies collect the tax as part of the sale closing process and remit the funds to the County when sales or transfers are finalized. The County remits the amounts due monthly, and the amounts are credited to the General Fund. Page 406 26 City Investment Policy The City may invest public funds until such time as the funds are needed to pay the obligations of the City. The City maintains an Investment Policy which sets forth guidelines of the City Treasurer’s investment of such funds. The Treasurer is a trustee and therefore a fiduciary subject to the prudent investor standards, and the primary objective shall be to safeguard the principal of the funds under its control. The secondary objective shall be to meet liquidity needs, and the third objective shall be to achieve a market rate of return. The City matches its investments with anticipated cash flow requirements. Pursuant to the California Government Code, maximum maturities shall not exceed five years, without specific approval of the City Council. The City’s investment policy limits the investment of the City’s funds by specifying term, diversification and credit quality. The requirements of the City’s policy regarding these investments are either the same as or more restrictive than the requirements of State law. The City’s investment portfolio had a market value as of September 30, 2018 of $260,780,969.16. The following table presents a breakdown of the City’s investment portfolio by type of security as of that date. Investments Market Value % of Portfolio Certificates of Deposit – Bank $ 735,000.00 0.28% Local Agency Investment Fund 37,876,795.93 14.27 Federal Agency Issues – Coupon 176,192,892.83 67.85 Treasury Securities – Coupon 15,718,278.50 6.01 Passbook/Checking Accounts 208,462.40 0.08 Municipal Bonds 5,122,890.00 1.96 Corporate Notes 16,158,215.00 6.18 Supranational Securities 8,768,434.50 3.37 $260,780,969.16 100.00% _____________________ Source: City Finance Department. As of September 30, 2018, the average life of the City’s investment portfolio was 683 days. Cash on deposit for the City equals $3,585.69. Risk Management The City is a member of the PARSAC. PARSAC is a joint powers authority, which provides joint protection programs for public entities covering automobile, general liability, errors and omission losses, workers' compensation, and property claims. Under the program, the City and the Fire District have a $500,000 retention limit for liability, which is similar to a deductible, with PARSAC being responsible for losses above that amount up to $1,000,000. PARSAC carries an excess commercial liability policy of $25,000,000 in excess of its $1,000,000 retention limit to cover losses through affiliated risk management authorities. PARSAC also provides one billion dollars aggregate per occurrence property coverage to its members with such coverage provided by purchased insurance. The City and the Fire District have a $250,000 retention limit for workers compensation. PARSAC covers workers' compensation claims in excess of the $250,000 retention limit up to $500,000. The Local Agency Workers Compensation Excess Pool provides excess coverage to statutory limits. The City pays an annual premium to PARSAC and may share in any surplus revenues or may be required to pay additional assessments based upon PARSAC's operating results. The City’s portion of the total claims liability is $1,890,492 (for both workers compensation and general liability) as of June 30, 2018 and it is based on the requirements of GASB Statement No. 30, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is Page 407 27 probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Employees and Labor Relations The City currently employs 752 full-time and part-time employees. The Fire District, which provides fire safety services to the City, employs 113 fire safety personnel. Additionally, the City contracts with the County Sheriff’s Department (the “Sherriff’s Department”) to employ 138 sworn and 41 non-sworn employees to provide police services. The following table presents the number of full-time and part-time City employees for the Fiscal Years 2015/16 through 2018/19. TABLE 8 CITY OF RANCHO CUCAMONGA FULL-TIME AND PART-TIME CITY EMPLOYEES (Fiscal Years 2015/16 through 2018/19) Fiscal Year Number of Employees Contract Employees(1) 2015/16 730 174 2016/17 739 179 2017/18 764 179 2018/19 752 180 _____________________ (1) Represents Sheriff’s Department staff. Such employees do not participate in the City’s Retirement Program. Source: City of Rancho Cucamonga. Approximately 44% of regular City employees are represented by various associations, and labor relations have been generally amicable. There have not been any recent major strikes, work stoppages, or other similar incidents. Labor negotiations are currently in progress for Teamsters Local 1932. The following table provides a list of employee organizations in the City and the number of employees they represent as of January 1, 2018. TABLE 9 CITY OF RANCHO CUCAMONGA EMPLOYEE ORGANIZATIONS (As of January 1, 2018) Organization Employees Represented Expiration of Contract Rancho Cucamonga City Employees Association 233 June 30, 2020 Teamsters Local 1932 97 June 30, 2018 Total 330 _____________________ Source: City of Rancho Cucamonga. Retirement Program This caption contains certain information relating to the California Public Employees Retirement System (“CalPERS”). The information is primarily derived from information produced by CalPERS, its independent accountants and actuaries. The City and the Authority have not independently verified the information provided by CalPERS and neither make any representations nor express any opinions as to the accuracy of the information provided by CalPERS. The comprehensive annual financial reports of CalPERS are available on its Internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and Page 408 28 other information concerning benefits and other matters. Such information is not incorporated by reference herein. Neither the City nor the Authority can guarantee the accuracy of such information. Actuarial assessments are forward looking statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. Actuarial assessments will change with the future experience of the pension plans. CalPERS Plan Description. All qualified permanent and probationary employees of the City, excluding employees of the Fire District, which are covered by that agency’s retirement program, are eligible to participate in the City’s Miscellaneous Employee Pensions Plans (the “City Plan”), agent sharing multiple-employer defined benefit pension plans administered by CalPERS. Inasmuch as the City contracts with the Sheriff’s Department for police services, that agency manages pension obligations for such employees, which is included in the City’s police services contract. Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Benefits Provided. CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible for non-duty disability benefits after 10 years of service. The provisions and benefits of the Plan that were in effect at June 30, 2018, are summarized as follows: CITY MISCELLANEOUS PLAN Tier 1* Tier 2* Tier 3* PEPRA Hire Date Prior to September 1, 2010 September 1, 2010 but prior to July 3, 2011 July 4, 2011 but prior to January 1, 2013 January 1, 2013 and after Benefit Formula 2.5% @ 55 2.5% @ 55 2.0% @ 55 2.0% @ 62 Benefit Vesting Schedule 5 years’ service 5 years’ service 5 years’ service 5 years’ service Benefit Payments Monthly for life Monthly for life Monthly for life Monthly for life Retirement Age Minimum 50 yrs Minimum 50 yrs Minimum 50 yrs Minimum 52 yrs Monthly Benefits, as a % of Eligible Compensation 2.000% - 2.500% 50 yrs – 55+ yrs, respectively 2.000% - 2.500% 50 yrs – 55+ yrs, respectively 1.426% - 2.418% 50 yrs – 63+ yrs, respectively 1.000% - 2.500% 52 yrs – 67+ yrs, respectively Required Employee Contribution Rates 8.000% 8.000% 7.000% 6.000% Required Employer Contribution Rates 16.695% 16.695% 16.695% 16.695% The City is required to contribute at an actuarially determined rate of annual covered payroll, plus a fixed payment of unfunded liability. The actuarially determined rates and amounts for the Plan for the Fiscal Years ended June 30, 2017 through June 30, 2021, are as follows: City’s Required Employer Contribution Rate Fiscal Year 2016/17 Fiscal Year 2017/18 Fiscal Year 2018/19* Fiscal Year 2019/20* Fiscal Year 2020/21* Employer Normal Cost Employer Payment of Unfunded Liability Employer Normal Cost Employer Payment of Unfunded Liability Employer Normal Cost Employer Payment of Unfunded Liability Employer Normal Cost Employer Payment of Unfunded Liability Employer Normal Cost Rate Employer Payment of Unfunded Liability $2,221,324 $1,971,181 $2,328,295 $2,313,837 $2,581,280 $2,856,898 $2,900,683 $3,421,053 $3,205,620 $3,876,000 ____________________________ * Projected. Source: City of Rancho Cucamonga Comprehensive Annual Financial Reports for Fiscal Years Ended June 30, 2017 and 2018; CalPERS Actuarial Reports Dated July 2018. On July 12, 2018, CalPERS announced preliminary investment returns for the 12-month period ended June 30, 2017, of 8.6%. Based on these preliminary fiscal year returns, the funded status of the overall CalPERS Page 409 29 fund is an estimated 71%, an increase of 3 percentage points from the previous fiscal year. This estimate is based on a 7% discount rate. The City’s total contributions to the Plan in Fiscal Years 2014/15, 2015/16, 2016/17 and 2017/18 which were recognized as a reduction to the net position liability for the Plan was as follows: Fiscal Year (Ended June 30) Total City Contribution 2014/15 $3,433,074 2015/16 3,745,756 2016/17 4,192,505 2017/18 4,642,132 In previous fiscal years, the City has made 100% of required contributions. The City has established an irrevocable trust pursuant to Internal Revenue Code Section 115 to fund future pension contributions and liabilities. As of September 30, 2018, the balance of monies in such trust was $2,086,608. The City is not obligated to make regular contributions to such trust. Funded Status. The following table sets forth the schedule of funding for the City’s Plan for the fiscal years ended June 30, 2016, 2017 and 2018 based on valuation dates as of June 30, 2014, 2015 and 2016. Miscellaneous Plan Fiscal Year Ended (June 30) Total Pension Liability Plan Fiduciary Net Position Net Pension Liability Plan Fiduciary Net Position as a Percentage of Total Pension Liability(1) 2016 $181,218,179 $149,724,028 $31,494,151 82.62% 2017 190,899,646 149,674,797 41,224,849 78.40 2018 212,888,198 164,876,366 48,011,832 77.45 ___________________________ (1) Based on the market value of assets. Source: City of Rancho Cucamonga Comprehensive Annual Financial Report for Fiscal Year 2017/18. Changes in Net Pension Liability. The following table shows the changes in net pension liability recognized over the Fiscal Year 2016/17 measurement period for the City Miscellaneous Plan. Total Pension Liability (a) Plan Fiduciary Net Position (b) Net Pension Liability/(Assets) (c) = (a)-(b) Balance at: 6/30/2016 (Valuation Date) $190,899,646 $149,674,797 $41,224,849 Changes Recognized for the Measurement Period: Service Cost 4,743,810 - 4,743,810 Interest on the Total Pension Liability 14,301,966 - 14,301,966 Changes of Benefit Terms - - - Difference between Expected and Actual Experience (1,926,722) - (1,926,722) Changes of Assumptions - - - Contributions from the Employer - 4,207,753 (4,207,753) Contributions from Employees - 2,150,126 (2,150,126) Net Investment Income - 16,691,043 (16,691,043) Benefit Payments including Refunds of Employee Contributions (7,626,368) (7,626,368) - Administrative Expense - (220,985) 220,985 Net Changes During 2016/17 21,988,552 15,201,569 6,786,983 Balance at: 6/30/2017 (Measurement Date) $212,888,198 $164,876,366 $48,011,832 Source: City of Rancho Cucamonga Comprehensive Annual Financial Report for Fiscal Year 2017/18. Recent Actions Taken by CalPERS. At its April 17, 2013, meeting, CalPERS’ Board of Administration (the “Board of Administration”) approved a recommendation to change the CalPERS amortization and smoothing Page 410 30 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. As a result, CalPERS now employs an amortization and smoothing policy that will pay for all gains and losses 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% @ 50, fire 3% @ 55, and miscellaneous 2.7% @ 55 and 3% @ 60, which will increase costs for those groups. As a result of these changes, rates increased beginning in Fiscal Year 2017/18 (based on the June 30, 2014 valuation) with full impact in Fiscal Year 2020/21. 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 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 CalPERS’ website at the following website address: https//www.calpers.ca.gov/page/newsroom/calpers-news/2015/adopts-funding-risk-mitigation-policy. The reference to this Internet website is provided for reference and convenience only. The information contained within the website may not be current, has not been reviewed by the City or the Authority and is not incorporated in this Official Statement by reference. On December 21, 2016, the Board of Administration voted to lower its discount rate from the current 7.5% to 7.0% over the next three years according to the following schedule: Fiscal Year Discount Rate 2017/18 7.375% 2018/19 7.250 2019/20 7.000 For public agencies like the City, the new discount rate took effect on July 1, 2018. Lowering the discount rate means employers that contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013, under the Public Employees’ Pension Reform Act will also see their contribution rates rise. The three-year reduction of the discount rate will result in average employer rate increases of about 1 percent to 3 percent of normal cost as a percent of payroll for most miscellaneous retirement plans, and a 2 percent to 5 percent increase for most safety plans. Additionally, many CalPERS employers will see a 30 to 40 percent increase in their current unfunded accrued liability payments. These payments are made to amortize unfunded liabilities over 20 years to bring the pension fund to a fully funded status over the long-term. Implementation of GASB Nos. 68 and 71. In June 2012 and November 2013, the Governmental Accounting Standards Board issued GASB Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27 (“GASB Statement No. 68”) and GASB No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – An Amendment of GASB Statement No. 68 (“GASB Statement No. 71”), respectively. The primary objective of GASB Statement No. 68, as amended, is to improve accounting and financial reporting by state and local governments for pensions and improve information Page 411 31 provided by state and local governmental employers about financial support for pensions that is provided by other entities. GASB Statement No. 68, as amended, revised the accounting treatment of defined benefit pension plans, changing the way expenses and liabilities are calculated and how state and local government employers report those expenses and liabilities in their financial statements. Major changes include: (i) the inclusion of unfunded pension liabilities on the government’s balance sheet (previously, such unfunded liabilities were typically included as notes to the government’s financial statements); (ii) pension expense incorporates more rapid recognition of actuarial experience and investment returns and is no longer based on the employer’s actual contribution amounts; (iii) lower actuarial discount rates that are required to be used for underfunded plans in certain cases for purposes of the financial statements; (iv) closed amortization periods for unfunded liabilities that are required to be used for certain purposes of the financial statements; and (v) the difference between expected and actual investment returns to be recognized over a closed five-year smoothing period. The reporting requirements took effect in Fiscal Year 2014/15. Based on the adoption of the new accounting standards, beginning with the Fiscal Year 2014/15 actuarial valuation, the annual required contribution and the annual pension expense will be different. GASB Statement No. 68, as amended, changes the reporting and disclosure requirements for financial statement accounting purposes, but it does not change the City’s pension plan funding obligations and, therefore, had no effect on the General Fund. Information shown in this section that has been sourced from a CalPERS Actuarial Valuation Report has not been prepared in accordance with GASB Statement No. 68, as amended. For a presentation of additional information that is required by GASB Statement No. 68, see Note 9 to the City’s Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2018, which is attached as APPENDIX B. Public Agency Retirement Services (“PARS”). The City sponsors a PARS Retirement Enhancement Plan (the “PARS Plan”). The PARS Plan provides pension benefits to miscellaneous members (Tier 1) and City Council members (Tier 2). Benefits are equal to a percentage of highest pay multiplied by years of service, with the percentage varying by retirement age based on a 3% at 60 target offset by CalPERS 2.5% at 55 formula. Sample rates are as follows: Age Tier 1 and Tier 2 55 0.000% 56 0.100 57 0.200 58 0.300 59 0.400 60+ 0.500 The City has the right to amend, modify or terminate the Plan at any time. Benefits are increased by a 2% annual cost of living adjustment after retirement. There are no employee contributions for either tier. PARS provides supplemental retirement benefits to eligible employees of the City. Employees are eligible to receive benefits under the plan if they meet the following requirements: 1) a miscellaneous employee of the City or member of the City Council on or after December 1, 2002, 2) at least 56 years of age, 3) has completed 10 or more years of full-time continuous employment at the City, 4) has terminated employment with the City and has concurrently retired under CalPERS if an active CalPERS member, and 5) has applied for benefits under the PARS Plan. Benefits shall be in an amount equal to one-twelfth of the product of the number of full and partial years of full-time continuous employment with the City completed as of the member’s retirement times Page 412 32 the member’s final pay, times the PARS benefit factor. The total combined CalPERS age factor and PARS benefit factor at retirement may not exceed three percent (3.0%). Hire date Benefit formula On or after December 1, 2002 one-twelfth of the product of the number of full and partial years of full-time continuous employment with the City completed as of the Member’s retirement times the Member’s final pay, times the PARS benefit factor Benefit vesting schedule 10 years of service Benefit payments Monthly for life Retirement age Minimum 56 years Monthly benefits, as a % of eligible compensation N/A – not based on % of eligible compensation Required employee contribution rates 0.000% Required employer contribution rates 3.900% As of the measurement period ended June 30, 2017, the following employees were covered by the benefit terms of the Plan: Description Number of Members Active Members 247 Retired members 112 Total 359 Contribution Description. The total plan contributions are determined through the PARS’ annual actuarial valuation process. 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. Due to the City’s pre-funding of its pension liability with PARS, the PARS Plan had a net pension asset as of the June 30, 2016 actuarial valuation which positively impacted the actuarially determined rate. For the year ended June 30, 2018, the employer contributions recognized as a decrease to the net pension liability were $278,740. Net Pension Asset. The net pension asset for the PARS Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of the PARS Plan is measured as of June 30, 2017, using an annual actuarial valuation as of June 30, 2016. The following table shows the changes in net pension asset recognized over the measurement period. Total Pension Liability Plan Fiduciary Net Position Net Pension Liability (Assets) Balance at: 6/30/2016 (Valuation Date) $28,101,153 $27,882,695 $ 218,458 Changes Recognized for the Measurement Period: Service Cost 774,673 - 774,673 Interest on the Total Pension Liability 1,639,662 - 1,639,662 Changes of Benefit Terms (4,236) - (4,236) Difference between Expected and Actual Experience - - - Changes of Assumptions - - - Contributions from the Employer - 279,830 (279,830) Net Investment Income - 2,872,751 (2,872,751) Benefit Payments including Refunds of Employee Contributions (719,919) (719,919) - Administrative Expenses - (52,639) (52,639) Net Changes During 2016/17 1,690,180 2,380,023 (689,843) Balance at: 6/30/2017 (Measurement Date) $29,791,333 $30,262,718 $ (471,385) For additional information on the PARS Plan, including actuarial assumptions and discount rates, see Note 10 of the City’s Comprehensive Annual Financial Report for Fiscal Year ended June 30, 2018 attached hereto as APPENDIX B. Page 413 33 Outstanding Long Term Obligations In January 2019, the City entered into two financing leases with Dell Financial Services to finance the acquisition of equipment and software for the City’s data center. Each financing lease has a five-year term. The payment schedules are follows: Equipment Financing Lease Software Financing Lease Payment Date Principal Interest Total Principal Interest Total 2/1/2019 $ 399,347.52 $ 0.00 $ 399,347.52 $127,982.80 $ 0.00 $127,982.80 2/1/2020 325,191.00 74,156.52 399,347.52 96,816.84 31,165.96 127,982.80 2/1/2021 342,327.38 57,020.14 399,347.52 103,812.84 24,169.96 127,982.80 2/1/2022 360,366.79 38,980.73 399,347.52 111,314.38 16,668.42 127,982.80 2/1/2023 379,356.80 19,990.72 399,347.52 119,357.97 8,624.83 127,982.80 Total $1,806,589.49 $190,148.11 $1,996,737.60 $559,284.83 $80,629.17 $639,914.00 Advances from the Successor Agency. During the formation of Community Facilities District 2000-01 (CFD 2000-01), a number of meetings were held with property owners within the proposed boundaries to discuss participation in CFD 2000-01 and benefits to their property. As a result of those meetings, the approved boundary map was modified at the landowners’ request to exclude certain properties from the CFD 2000-01 boundaries. Property owners that were excluded from CFD 2000-01 boundaries, but will be receiving direct benefit from the improvements constructed by CFD 2001-01, were advised that reimbursement would be required when their properties are developed. The Redevelopment Agency advanced the pro-rata share for properties that will receive benefit from the improvements but are not participating in CFD 2000-01. At June 30, 2018, the outstanding amount of the advance was $3,953,624. Such amounts are not required to be repaid by the General Fund but from reimbursements from developer reimbursement solely. STATE BUDGET OF CALIFORNIA Particularly in periods of economic recessions, the State budget can have significant impacts on the finances of California cities. The following discussion provides a description of the State budget process, the current State budget situation and the potential impacts on the City. State Budget Information about the State budget is regularly available at various State-maintained websites. Text of proposed and adopted budgets may be found at the website of the Department of Finance, www.dof.ca.gov, under the heading “California Budget.” An impartial analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. In addition, various State official statements, many of which contain a summary of the current and past State budgets and the impact of those budgets on cities in the State, 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 City, and the City can take no responsibility for the continued accuracy of these internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by these references. 2018/19 State Budget On June 27, 2018, the Governor adopted the State budget for Fiscal Year 2018/19 (the “2018/19 State Budget”). The 2018/19 State Budget estimates that general fund revenues available in Fiscal Year 2017/18 totaled approximately $129.82 billion (including a prior year balance of $5.70 billion) and total expenditures in Fiscal Year 2017/18 totaled approximately $127.05 billion. The 2018/19 State Budget projects total general fund revenues available for Fiscal Year 2018/19 of $133.33 billion (including a prior year balance of $8.483 billion). The 2018/19 State Budget projects total general fund expenditures of $138.69 billion. The 2018/19 State Budget proposes to allocate $200 million of the State’s general fund’s projected fund balance to the State’s reserve for Page 414 34 liquidation of encumbrances and $2.6 billion of such fund balance to the State’s Constitutional rainy day fund (the “Special Fund for Economic Uncertainties”). According to the Legislative Analyst’s Office, the 2018/19 State Budget proposes to end Fiscal Year 2018/19 with $15.3 billion in total reserves, which includes $13.8 billion in the Special Fund for Economic Uncertainties. Such budget would increase the Special Fund for Economic Uncertainties by over $5 billion in Fiscal Year 2018/19, including an optional $2.6 billion deposit. The 2018/19 State Budget deposits into the Special Fund for Economic Uncertainties results in such fund reaching its constitutional maximum. The Legislative Analyst’s Office advises that this approach may be prudent in light of economic and federal budget uncertainty, but comes with trade-offs for the State, including requiring rainy day reserves in excess of 10 percent to be spent on infrastructure projects. The City does not provide assurances regarding the 2018/19 State Budget nor can it predict the impact that the 2018/19 State budget, or subsequent budgets, will have on its finances and operations. The full summary of the 2018/19 State Budget can be viewed at www.ebudget.ca.gov or www.dof.ca.gov. Future State Budgets No prediction can be made by the City as to whether the State will encounter budgetary problems in future fiscal years, and if it were to do so, it is not clear what measures would be taken by the State to balance its budget, as required by law. In addition, the City cannot predict the final outcome of future State budget negotiations, the impact that such budgets will have on City finances and operations or what actions will be taken in the future by the State Legislature and the Governor to deal with changing State revenues and expenditures. There can be no assurance that actions taken by the State to address its financial condition will not materially adversely affect the financial condition of the City. Current and future State budgets will be affected by national and State economic conditions and other factors, including the current economic downturn, over which the City has no control. Page 415 35 RISK FACTORS The following factors, along with other information in this Official Statement, should be considered by potential investors in evaluating the risks in the purchase of the Bonds. However, the following does not purport to be an exhaustive listing of risk factors and other considerations which may be relevant to an investment in the Bonds. Additionally, there can be no assurance that other risk factors will not become evident at any future time. Lease Payments Not City Debt The obligation of the City to make the Lease Payments does not constitute a debt of the City or of the State or of any political subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the City or the State is obligated to levy or pledge any form of taxation or for which the City or the State has levied or pledged any form of taxation. 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 Lease Payments from any source of legally available funds and the City has covenanted in the Lease Agreement that it will take such action as may be necessary to include all Lease Payments in its annual budgets and to make necessary annual appropriations therefor. The City is currently liable and may become liable on other obligations payable from general revenues, some of which may have a priority over the Lease Payments. The City has the capacity to enter into other obligations which may constitute additional charges against its revenues. To the extent that additional obligations are incurred by the City, the funds available to make Lease 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 lease Payments and other payments due under the Lease Agreement. No Tax Pledge The obligation of the City to pay the Lease Payments does not constitute an obligation of the City for which the City has levied or pledged any form of taxation. The obligation of the City to pay Lease Payments does not constitute a debt or indebtedness of the City, the State or any of its political subdivisions, within the meaning of any constitutional or statutory debt limit or restriction. Appropriation 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, so long as the Leased Premises are available for its use and possession, to pay Lease Payments from any source of legally available funds (subject to certain exceptions) and has covenanted in the Lease Agreement that, for so long as the Leased Premises are available for its use, it will make the necessary annual appropriations within its budget for all Lease Payments. See APPENDIX A – “CITY ECONOMIC AND DEMOGRAPHIC INFORMATION” and the financial statements included in APPENDIX B. However, the Lease Agreement does not prohibit the City from incurring additional obligations payable from general revenues. In the event the City’s revenue sources are less than its total obligations, the City could choose to fund other municipal services before making Lease Payments and other payments due under the Lease Agreement, except from amounts on deposit in the Bond Fund. The City’s ability to collect, budget and appropriate various revenues is subject to current and future State laws and constitutional provisions, and it is possible that the interpretation and application of these provisions could result in an inability of the City to pay Lease Payments when due (see “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS” below). Page 416 36 No Limit on Additional General Fund Obligations The City has the ability to enter into other obligations which may constitute additional charges against its general revenues. To the extent that such additional obligations are incurred by the City, the funds available to make Lease Payments may be decreased. See also “SECURITY FOR THE BONDS – Additional Bonds” herein. Abatement and Eminent Domain Lease Payments are to be paid by the City in each rental period for and in consideration of the right to use and occupy the Leased Premises during each such period. The obligation of the City to make Lease Payments (other than to the extent that funds to make Lease Payments are available in the Bond Fund created under the Indenture) may be abated in whole or in part if the City does not have use and possession of the Leased Premises. The amount of Lease Payments due under the Lease Agreement will be adjusted or abated during any period in which by reason of damage or destruction or eminent domain there is interference with the use and occupancy by the City of the Leased Premises. Such adjustment or abatement will end with the substantial completion or replacement, repair or reconstruction of the Leased Premises. If damage or destruction or eminent domain proceedings with respect to the Leased Premises result in abatement of Lease Payments and the resulting Lease Payments are insufficient to make all payments of principal and interest due on the Bonds during the period that the Leased Premises is being replaced, repaired or reconstructed, then such payments of principal and interest may not be made and no remedy is available to the Trustee or the Owners of the Bonds, under the Lease Agreement or Indenture, for nonpayment under such circumstances. No Reserve Account Neither the City nor the Authority will create or maintain a debt service reserve account with respect to the Lease Payments or for the Bonds. Sufficiency of Lease Payments The Lease Payments are structured to produce Revenues sufficient to pay principal of, and interest on, the Bonds when due. While the Lease Payments are subject to optional prepayment, Revenues resulting from such actions will be sufficient to redeem a corresponding amount of the Bonds, so that the remaining Lease Payments will be sufficient to pay remaining debt service on the Bonds. The Authority has no other source of funds available to pay principal of and interest on the Bonds. Limitation on Enforcement of Remedies; No Acceleration The enforcement of any remedies provided in the Lease Agreement and Indenture could prove both expensive and time consuming. Although the Lease Agreement provides that the Trustee may take possession of the Leased Premises and lease it if there is a default by the City, and the Lease Agreement provides that the Trustee may have such rights of access to the Leased Premises as may be necessary to exercise any remedies, portions of such Leased Premises may not be easily subject to reletting and could be of little value to others. Furthermore, it is not certain whether a court would permit the exercise of the remedies of repossession and leasing with respect thereto. In the event of a default under the Lease Agreement, there is no available remedy of acceleration of the total Lease Payments due over the term of the Lease Agreement. The City will only be liable for Lease Payments on an annual basis as they come due, and the Trustee would be required to seek separate judgments for the Lease Payments as they come due. In addition, any such suit for money damages could be subject to limitations on legal remedies against public agencies in California, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest and a limitation on enforcement of judgments against funds of a fiscal year other than the fiscal year in which the Lease Payments were due. Page 417 37 Seismic, Topographic and Climatic Conditions The value of the Leased Premises, and the financial stability of the City, can be adversely affected by a variety of factors, particularly those which may affect infrastructure and other public improvements and private improvements and the continued habitability and enjoyment of such improvements. Such additional factors include, without limitation, geologic conditions (such as earthquakes), topographic conditions (such as earth movements and floods) and climatic conditions (such as droughts and tornadoes). The area encompassed by the City, like that in much of California, may be subject to unpredictable seismic activity. The City is located near two active faults, the San Andreás and San Jacinto Faults. The northern portion of the City is also located on the Cucamonga Fault line. The Red Hill Fault line traverses the City and is located within 2 miles of the Leased Premises. The Leased Premises are located approximately 7 miles away from a fault identified as approximate by the Alquist-Priolo Fault Zone map. All of the City is located within an alluvial plain and liquefaction area. Several special seismic studies have been completed in the vicinity of the City. If there were to be an occurrence of severe seismic activity in the City, there could be an abatement or adverse impact on the City's ability to pay the Lease Payments. The City is not obligated to maintain earthquake insurance with respect to the Leased Premises. Building codes require that some of these factors be taken into account, to a limited extent, in the design of improvements, including improvements of the Leased Premises, which were constructed in 2004. Some of these factors may also be taken into account, to a limited extent, in the design of other infrastructure and public improvements neither designed nor subject to design approval by the City. Design criteria in any of these circumstances are established upon the basis of a variety of considerations and may change, leaving previously- designed improvements unaffected by more stringent subsequently established criteria. In general, design criteria reflect a balance at the time of protection and the future costs of lack of protection, based in part upon a present perception of the probability that the condition will occur and the seriousness of the condition should it occur. Conditions may occur and may result in damage to improvements of varying seriousness, such that the damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances, the actual value of the Leased Premises, as well as public and private improvements within the City in general, may well depreciate or disappear, notwithstanding the establishment of design criteria for any such condition. See “Abatement and Eminent Domain” above. The City is exposed to wildfire hazard conditions. The portions of the City located north of Interstate 210 have been designated a high fire hazard area by the State. The areas surrounding the City to the north have experienced wildfires in the past 10 years, the most significant being the Etiwanda Fire in April 2014 which burned over 2,100 acres of open space and destroyed one structure. The Leased Premises are located south of Interstate 210 and are not considered at significant risk. Currently, fire hazard severity is a function of fuel conditions, historic climate, wind conditions, and topography. Population density or the number of structures in a particular region are not currently used to determine the fire hazard severity for a particular region. The fact that an area is in a low to moderate hazard area does not mean it cannot experience a damaging fire; it means only that the probability is reduced, generally because the number of days a year that the area has “fire weather” is less. Hazardous Substances An environmental condition that may result in the reduction in the assessed value of parcels would be the discovery of any hazardous substance that would limit the beneficial use of a property within the City, or the value of the Leased Premises. In general, the owners and operators of a property may be required by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner (or Page 418 38 operator) is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should the Leased Premises or any substantial amount of property within the City be affected by a hazardous substance, would be to reduce the marketability and value of the property by the costs of, and any liability incurred by, remedying the condition, since the purchaser, upon becoming an owner, will become obligated to remedy the condition just as is the seller. Such reduction could adversely impact the property tax revenues received by the City and deposited in the General Fund, which could significantly and adversely affect the operations and finances of the City. The City and the Authority do not believe that the use of any of such substances has adversely affected the value of the Leased Premises. Public Debt Burden on Leased Premises The ability of land owners within the City to pay property tax installments as they come due could be affected by the existence of other taxes and assessments, imposed upon the land. In addition, other public agencies whose boundaries overlap those of the City could, without consent of the City, and in certain cases without the consent of the owners of the land within the City, impose additional taxes or assessment liens on the property within the City to finance public improvements to be located inside of or outside of the City. See APPENDIX A – “CITY ECONOMIC AND DEMOGRAPHIC INFORMATION” for a statement of direct and overlapping debt on property within the City. Risk of Uninsured Loss The City covenants under the Lease Agreement to cause to be maintained certain insurance policies on the Leased Premises. These insurance policies do not cover all types of risk. For instance, the City does not covenant to maintain earthquake insurance. The City may self-insure in certain circumstances. Moreover, the insurance maintained by the City may provide for deductible amounts. The Leased Premises could be damaged or destroyed due to earthquake or other casualty for which the Leased Premises are uninsured. Under these circumstances, an abatement of Lease Payments could occur and could continue indefinitely. There can be no assurance that the providers of the City’s liability and rental interruption insurance will in all events be able or willing to make payments under the respective policies for such loss should a claim be made under such policies. Further, there can be no assurances that amounts received as proceeds from insurance or from condemnation of the Leased Premises will be sufficient to prepay the Lease Payments which secure the Bonds. Property Tax Allocation by the State; Changes in Law The responsibility for allocating general property taxes was assigned to the State by Proposition 13, which stated that property taxes were to be allocated “according to law.” The formula for such allocation was contained in Assembly Bill 8 (“AB 8”), adopted in 1978, which allocates property taxes among cities, counties, and school districts. The formulas contained in AB 8 were designed to allocate property taxes in proportion to the share of property taxes received by a local entity prior to Proposition 13. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Limitations on Revenues.” Additionally, there are general means by which assessed values can be reassessed or appealed. Appeals may be based on Proposition 8 of November 1978, which requires that for each January 1 lien date, the taxable value of real property must be the lesser of its base year value, annually adjusted by the inflation factor pursuant to Article XIIIA of the California Constitution, or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. Under California law, property owners may apply for a Proposition 8 reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the County board of equalization or assessment appeals board. In most cases, the appeal is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. Page 419 39 Any reduction in the assessment ultimately granted as a result of such appeal applies to the year for which application is made and during which the written application was filed. These reductions are subject to yearly reappraisals and are adjusted back to their original values, adjusted for inflation, when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. A second type of assessment appeal involves a challenge to the base year value of an assessed property. Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date. Proposition 8 reductions may also be unilaterally applied by the county assessor. The City cannot predict the changes in assessed values that might result from pending or future appeals by taxpayers or by reductions initiated by the county assessor. No assurance can be given that property tax appeals in the future will not significantly reduce the assessed valuation of property within the City. Beginning in its fiscal year 1992/93, in response to its own budgetary shortfalls, the State began to permanently redirect billions of dollars of property taxes Statewide from cities, counties, and certain special districts to schools and community college districts. These redirected funds reduced the State's funding obligation for K-14 school districts by a commensurate amount. In response, Proposition 1A of 2004, approved by State voters in November 2004 and generally effective in Fiscal Year 2006/07, provided that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain limitations. However, pursuant to Proposition 1A and beginning in Fiscal Year 2008/09, the State could, upon gubernatorial proclamation of fiscal hardship and following approval of two-thirds of both houses of the legislature, and it did, shift to schools and community colleges up to 8% of local government ad valorem property tax revenues, which amount must be repaid, with interest, within three years. The State could also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. In November 2010, State voters approved Proposition 22, which amends the State's constitution to eliminate the State’s authority to temporarily shift additional ad valorem property taxes from cities, counties and special districts to schools, among other things. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS, -Voter Initiatives.” No assurance can be given that the State, the County’s or the City electorate will not at some future time adopt initiatives, or that the State Legislature will not enact legislation that will amend the laws of the State in a manner that could result in a reduction of the City’s property tax allocations or its other revenues and therefore a reduction of the funds legally available to the City to pay Lease Payments and other payments due under the Lease Agreement. See, for example, “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Article XIIIC and Article XIIID of the State Constitution.” Bankruptcy and Foreclosure The enforceability of the rights and remedies of the Owners and the obligations of the Authority and the City may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect; usual equitable principles which may limit the specific enforcement under state law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy proceedings, or the exercising of powers by the federal or state government, if initiated, could subject the Owners to judicial discretion and interpretation of their rights in bankruptcy or otherwise and consequently may entail risks of delay, limitation, or modification of their rights. Additionally, failure by major property owners to pay property taxes when due will have an adverse impact on Page 420 40 revenues of the City available to pay Lease Payments, and would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel’s approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Federal Tax-Exempt Status of the Series A Bonds Tax-Exempt Status of Interest on the Series A Bonds. The Internal Revenue Code of 1986, as amended (the “Code”) imposes a number of requirements that must be satisfied for interest on state and local obligations, such as the Bonds, to be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of Series A Bond proceeds, limitations on the investment earnings on Series A Bonds proceeds prior to expenditure, a requirement that certain investment earnings on the Series A Bond proceeds be paid periodically to the United States and a requirement that the issuers file an information report with the Internal Revenue Service (the “IRS”). The Authority and the City have covenanted in certain of the documents referred to herein that they will comply with such requirements. Failure to comply with the requirements stated in the Code and related regulations, rulings and policies may result in the treatment of interest on the Series A Bonds as taxable, retroactively to the date of issuance of such Series A Bonds. Audit. As a part of a larger reorganization of 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 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 is expected to increase significantly under the TE/GE Division. There is no assurance that an IRS examination of the Series A Bonds, if one is undertaken, will not adversely affect the tax-exempt status or market value of such Series A Bonds. Secondary Market Risk There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. Substitution and Removal of Leased Premises The Authority and the City may, under the terms of the Lease Agreement, substitute alternate real property for any portion of the Leased Premises or release a portion of the Leased Premises from the Lease Agreement, upon compliance with all of the conditions set forth in the Lease Agreement. After a substitution or release, the portion of the Leased Premises for which the substitution or release has been effected shall be released from the leasehold encumbrance of the Lease Agreement. See “THE LEASED PREMISES - Substitution of Leased Premises” herein. 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 Bonds with respect to the payment when due of the Lease 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. Page 421 41 Cybersecurity As a recipient and provider of personal, private and sensitive information, the City and its departments face multiple cyber threats including, but not limited to, hacking, viruses, malware and other attacks on computers and other sensitive digital networks and systems. The City has been the target of multiple attempts to breach the City’s digital estate. The most common attack vectors are phishing e-mails, which have been both indiscriminately distributed and occasionally targeted towards specific stakeholders. Through the use of industry standard digital security tools, conservative administrative governance policies, and continued end user training on cyber vigilance, the City has mitigated or prevented a significant data breach or interruption of City services as a result of these persistent attacks. No assurances can be given that the City’s security and operational control measures will be successful in guarding against any and each cyber threat and attack. The results of any attack on the City’s computer and information technology systems could impact its operations and damage the City’s digital networks and systems, and the costs of remedying any such damage could be substantial. Additionally, the City has implemented six cyber security policies to protect against cyber attacks which govern the following: (a) information systems operations, (b) computerized information security and data breach reporting policy, (c) remote access computer services, (d) bring your own device, (e) portable electronic communication device and (f) internet acceptable use. Risk Management and Insurance The Lease Agreement obligates the City to maintain and keep in force various forms of insurance, subject to deductibles, on the Leased Premises for repair or replacement in the event of damage or destruction to the Leased Premises. The City is also required to maintain rental interruption insurance in an amount at least equal to 24 months of Lease Payments. The Lease allows the City to insure against any or all risks, except rental interruption and title defects, through an alternative risk management program such as self-insurance. The City makes no representation as to the ability of any insurer to fulfill its obligations under any insurance policy provided for in the Lease Agreement and no assurance can be given as to the adequacy of any such insurance to fund necessary repair or replacement or to pay principal of and interest on the Series 2018 Bonds when due. The City employs a full-time Risk Management Coordinator, as well as safety and loss control professionals, for the prevention and mitigation of property, liability and employee claims for injury or damage. For information concerning the self-insurance and risk management programs of the City, see “CITY FINANCIAL INFORMATION.” State Law Limitations on Appropriations Article XIII B of the California Constitution limits the amount that local governments can appropriate annually. The ability of the City to make Lease Payments may be affected if the City should exceed its appropriations limit. The State may increase the appropriation limit of counties in the State by decreasing the State’s own appropriation limit. The City does not anticipate exceeding its appropriations limit in the foreseeable future. See “CONSTITUTIONAL AND STATUTORY TAX LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS – Expenditures and Appropriations” and “–Article XIII B of the California Constitution.” Changes in the Law The City cannot provide any assurance that the State Legislature will not enact legislation that will result in a reduction of the General Fund revenues and therefore a reduction of the funds legally available to the City to make Lease Payments. See, for example, “CITY FINANCIAL INFORMATION” and “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.” The security for payment of the principal of and interest on the Bonds also may be adversely affected by actions taken (or not taken) by voters. Under the State Constitution, the voters of the State have the ability to initiate legislation and require a public vote on legislation passed by the State Legislature through the powers of Page 422 42 initiative and referendum, respectively. The City is unable to predict whether any such initiatives might be submitted to or approved by the voters, the nature of such initiatives, or their potential impact on the City. CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS Limitations on Revenues Article XIIIA of the California Constitution. Article XIIIA of the California Constitution, adopted and known as Proposition 13, was approved by the voters in June 1978. Section 1(a) of Article XIIIA limits the maximum ad valorem tax on real property to one percent of “full cash value,” and provides that such tax shall be collected by the counties and apportioned according to State law. Section 1(b) of Article XIIIA provides that the one-percent limitation does not apply to ad valorem taxes levied to pay interest and redemption charges on (i) indebtedness approved by the voters prior to July 1, 1978, or (ii) bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast on the proposition, or (iii) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Section 2 of Article XIIIA defines “full cash value” to mean the county assessor’s valuation of real property as shown on the fiscal year 1975-76 tax bill, or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred. The full cash value may be adjusted annually to reflect inflation at a rate not to exceed two percent per year, or to reflect a reduction in the consumer price index or comparable data for the area under taxing jurisdiction, or may be reduced in the event of declining property value caused by substantial damage, destruction or other factors. Legislation enacted by the State Legislature to implement Article XIIIA provides that, notwithstanding any other law, local agencies may not levy any ad valorem property tax except the 1% base tax levied by each county and taxes to pay debt service on indebtedness approved by the voters as described above. Since its adoption, Article XIIIA has been amended a number of times. These amendments have created a number of exceptions to the requirement that property be reassessed when purchased, newly constructed or a change in ownership has occurred. These exceptions include certain transfers of real property between family members, certain purchases of replacement dwellings for persons over age 55 and by property owners whose original property has been destroyed in a declared disaster, and certain improvements to accommodate disabled persons and for seismic upgrades to property. These amendments have resulted in marginal reductions in the property tax revenues of the City. Both the California State Supreme Court and the United States Supreme Court have upheld the validity of Article XIIIA. Article XIIIC and Article XIIID of the California Constitution. On November 5, 1996, the voters of the State approved Proposition 218, known as the “Right to Vote on Taxes Act.” Proposition 218 adds Articles XIIIC and XIIID to the California Constitution and contains a number of interrelated provisions affecting the ability of the City to levy and collect both existing and future taxes, assessments, fees and charges. On November 2, 2010, California voters approved Proposition 26, entitled the “Supermajority Vote to Pass New Taxes and Fees Act.” Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as “fees.” Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. The amendments to Article XIIIC define “taxes” that are subject to voter approval as “any levy, charge, or exaction of any kind imposed by a local government,” with certain exceptions. Page 423 43 Taxes. 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 (“general taxes”) require a majority vote; taxes for specific purposes (“special taxes”), even if deposited in the General Fund, require a two-thirds vote. The voter approval requirements of Proposition 218 reduce the flexibility of the City to raise revenues for the General Fund, and no assurance can be given that the City will be able to impose, extend or increase such taxes in the future to meet increased expenditure needs. Property-Related Fees, Charges and Assessments. Article XIIID also adds several provisions making it generally more difficult for local agencies to levy and maintain property-related fees, charges, and assessments for municipal services and programs. These provisions include, among other things, (i) a prohibition against assessments which exceed the reasonable cost of the proportional special benefit conferred on a parcel, (ii) a requirement that assessments must confer a “special benefit,” as defined in Article XIIID, over and above any general benefits conferred, (iii) a majority protest procedure for assessments which involves the mailing of notice and a ballot to the record owner of each affected parcel, a public hearing and the tabulation of ballots weighted according to the proportional financial obligation of the affected party, and (iv) a prohibition against fees and charges which are used for general governmental services, including police, fire or library services, where the service is available to the public at large in substantially the same manner as it is to property owners. Reduction or Repeal of Taxes, Fees and Charges. Article XIIIC also removes limitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. No assurance can be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges currently comprising a substantial part of the General Fund. If such repeal or reduction occurs, the City’s ability to pay debt service on the Bonds could be adversely affected. Burden of Proof. Article XIIIC provides that local government “bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity.” Similarly, Article XIIID provides that in “any legal action contesting the validity of a fee or charge, the burden shall be on the agency to demonstrate compliance” with Article XIIID. Impact on the General Fund. The approval requirements of Articles XIIIC and XIIID reduce the flexibility of the City to raise revenues for the General Fund, and no assurance can be given that the City will be able to impose, extend or increase the taxes, fees, charges or taxes in the future that it may need to meet increased expenditure needs. The City does not believe that any material source of General Fund revenue is subject to challenge under Articles XIIIC or XIIID. Judicial Interpretation. The interpretation and application of Articles XIIIC and XIIID will ultimately be determined by the courts with respect to a number of the matters discussed below, and it is not possible at this time to predict with certainty the outcome of such determination. Expenditures and Appropriations Article XIIIB of the California Constitution. In addition to the limits Article XIIIA imposes on property taxes that may be collected by local governments, certain other revenues of the State and local governments are subject to an annual “appropriations limit” or “Gann Limit” imposed by Article XIIIB of the State Constitution, which effectively limits the amount of such revenues that government entities are permitted to spend. Article XIIIB, approved by the voters in June 1979, was modified substantially by Proposition 111 in 1990. The appropriations limit of each government entity applies to “proceeds of taxes,” which consist of tax revenues, state subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed “the cost reasonably borne by such entity in providing the regulation, product or Page 424 44 service.” “Proceeds of taxes” exclude tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on the appropriation of funds that are not “proceeds of taxes,” such as reasonable user charges or fees, and certain other non-tax funds. Article XIIIB also does not limit appropriation of local revenues to pay debt service on bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990, levels. The appropriations limit may also be exceeded in cases of emergency; however, the appropriations limit for the three years following such emergency appropriation must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster declared by the Governor, and the expenditure is approved by two-thirds of the legislative body of the local government. The State and each local government entity each have their own appropriations limits. Each year, each limit is adjusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or from another government entity of financial responsibility for providing services. Proposition 111 requires that each agency’s actual appropriations be tested against its limit every two years. If the aggregate “proceeds of taxes” for the preceding two-year period exceed the aggregate limit, the excess must be returned to the agency’s taxpayers through tax rate or fee reductions over the following two years. If the State’s aggregate “proceeds of taxes” for the preceding two-year period exceeds the aggregate limit, 50% of the excess is transferred to fund the State’s contribution to school and college districts. Voter Initiatives Under the California Constitution, the power of initiative is reserved to the voters for the purpose of enacting statutes and constitutional amendments. Since 1978, the voters have exercised this power through the adoption of Proposition 13 and similar measures, the most recent of which was approved as Proposition 22 in the general election held on November 2, 2010. Any such initiative may affect the collection of fees, taxes and other types of revenue by local agencies. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the Lease Payments. Proposition 62. On November 4, 1986, California voters adopted Proposition 62, which requires that (i) any local tax for general governmental purposes (a “general tax”) must be approved by a majority vote of the electorate; (ii) any local tax for specific purposes (a “special tax”) must be approved by a two-thirds vote of the electorate; (iii) any general tax must be proposed for a vote by two-thirds of the legislative body; and (iv) proceeds of any tax imposed in violation of the vote requirements must be deducted from the local agency’s property tax allocation. Most of the provisions of Proposition 62, which was a statutory initiative, were affirmed by the 1995 California Supreme Court decision in Santa Clara County Local Transportation Authority v. Guardino, which invalidated a special sales tax for transportation purposes because less than two-thirds of the voters voting on the measure had approved the tax. Claims for taxpayer relief where a local entity may have violated Proposition 62 are subject to a three-year statute of limitations, created by statute. In the case Howard Jarvis Taxpayers Association v. City of La Habra (2001), the California Supreme Court determined that this statute of limitations begins to run anew every time the city collects the challenged tax. Proposition 1A of 2004. Proposition 1A of 2004, proposed by the Legislature in connection with the State’s Fiscal Year 2004-05 Budget, approved by the voters in November 2004 and generally effective in Fiscal Year 2006-07, provided that the State may not reduce any local sales tax rate, limit existing local government Page 425 45 authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A of 2004 generally prohibited the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any Fiscal Year , as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county had to be approved by two-thirds of both houses of the Legislature. Proposition 1A of 2004 provided, however, that beginning in Fiscal Year 2008/09, the State may shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaimed that the shift is needed due to a severe state financial hardship, the shift was approved by two-thirds of both houses and certain other conditions were met. The State could also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Pending certain State actions, a Prop 1A shift could occur in State fiscal year in future fiscal years. Proposition 22. Proposition 22, entitled “The Local Taxpayer, Public Safety and Transportation Protection Act,” was approved by the voters of the State in November 2010. Proposition 22 eliminates or reduces the State’s authority to (i) temporarily shift property taxes from cities, counties and special districts to schools, (ii) use vehicle license fee revenues to reimburse local governments for State-mandated costs (the State will have to use other revenues to reimburse local governments), (iii) redirect property tax increment from redevelopment agencies to any other local government, (iv) use State fuel tax revenues to pay debt service on State transportation bonds, or (v) borrow or change the distribution of State fuel tax revenues. Unitary Property AB 454 (Chapter 921, Statutes of 1986) provides that revenues derived from most utility property assessed by the State Board of Equalization (“Unitary Property ”), commencing with the 1988-89 Fiscal Year, are allocated as follows: (i) each jurisdiction will receive up to 102% of its prior year State-assessed revenue; and (ii) if county- wide revenues generated from Unitary Property are less than the previous year’s revenues or greater than 102% of the previous year’s revenues, each jurisdiction will share the burden of the shortfall or benefit of the excess revenues by a specified formula. This provision applies to all Unitary Property except railroads, whose valuation will continue to be allocated to individual tax rate areas. The provisions of AB 454 do not constitute an elimination of the assessment of any State-assessed properties nor a revision of the methods of assessing utilities by the State Board of Equalization. Generally, AB 454 allows valuation growth or decline of Unitary Property to be shared by all jurisdictions in a county. Future Initiatives Article XIIIA, Article XIIIB, Article XIIIC, Article XIIID, and Propositions 1A of 2004, 22, 26 and 62 were each adopted as measures that qualified for the ballot through California’s initiative process. From time to time, other initiative measures could be adopted, further affecting the City or its revenues or the ability of the City to expend revenues. TAX MATTERS In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Series A Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel is of the further opinion that interest on the Series A Bonds is not a specific preference item for purposes of the federal individual alternative minimum taxes. Page 426 46 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 A Bonds. The City has covenanted to comply with certain restrictions designed to insure that interest on the Series A Bonds will not be included in federal gross income. Failure to comply with these covenants may result in interest on the Series A Bonds being included in federal gross income, possibly from the date of original issuance of the Series A Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Series A Bonds may adversely affect the value of, or the tax status of interest on, the Series A Bonds. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Series A Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Bond Owners from realizing the full current benefit of the tax status of such interest. For example, from time to time there are legislative proposals which generally would limit the exclusion from gross income of interest on obligations like the Series A Bonds to some extent for taxpayers who are individuals and whose income is subject to higher marginal income tax rates. Other proposals have been made that could significantly reduce the benefit of, or otherwise affect, the exclusion from gross income of interest on obligations like the Series A Bonds. The introduction or enactment of any such legislative proposals, clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Series A Bonds. Prospective purchasers of the Series A Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, and regarding the impact of future legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. Certain requirements and procedures contained or referred to in the Indenture, the Tax Certificate, and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Series A Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to the exclusion from gross income of interest on any Bond if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than Best Best & Krieger LLP. The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax- exempt bond issues, including both random and targeted audits. It is possible that the Series A Bonds will be selected for audit by the IRS. It is also possible that the market value of the Series A Bonds might be affected as a result of such an audit of the Series A Bonds (or by an audit of other similar bonds). Although Bond Counsel is of the opinion that interest on the Series A Bonds is excluded from gross income for federal income tax purposes and the interest on the Series A Bonds and the Series B Bonds is exempt from State personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on (a) the Series A Bonds may otherwise affect a Bond Owner’s federal tax liability or (b) the Series A Bonds and/or the Series B Bonds may otherwise affect a Bond Owner’s state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Bondholder or the Bond Owner’s other items of income or deduction, and Bond Counsel expresses no opinion regarding any such other tax consequences. A copy of the proposed forms of opinion of Bond Counsel is attached hereto as APPENDIX D. CONTINUING DISCLOSURE The City and the Authority will undertake responsibilities for continuing disclosure to Owners of the Bonds as described below, and will act as Dissemination Agent, as described in the Continuing Disclosure Certificate. See “APPENDIX G - FORM OF CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). Page 427 47 The City and certain of its related entities have entered into previous continuing disclosure undertakings. A review of compliance with continuing disclosure undertakings for filings required by the City and its related entities within the past five years indicates that the City and its related entities have failed to fully comply with prior continuing disclosure undertakings under Securities and Exchange Commission Rule 15c2-12. Identification of the below described events does not constitute a representation by the City or its related entities that the late filings were material. The review indicated that failure to comply fell into three general categories: (i) failure to provide significant event notices with respect to changes in the ratings of outstanding indebtedness, primarily related to changes in the ratings of various bond insurers insuring the indebtedness of the City or its related entities; (ii) missing, incomplete, or late filing of annual reports with respect to a number of the City or its related entities outstanding bond issues; and (iii) late filing of audited financial reports. Based on the review, the City and its related entities have made additional filings to provide certain previously omitted information and completed corrective filings. The City has adopted policies for continuing disclosure compliance and has retained Willdan Financial Services to serve as dissemination agent for its bond issues and the bond issues of its constituent agencies, including the Authority. CERTAIN LEGAL MATTERS Best Best & Krieger LLP, Riverside, California, Bond Counsel, will render an opinion with respect to the validity and enforceability of the Indenture and the Lease Agreement, and as to the validity of the Bonds. Best Best & Krieger LLP, Riverside, California has acted as disclosure counsel for the Authority in connection with the issuance of the Bonds. Certain matters will be passed upon for the Authority and the City by Richards Watson & Gershon, A Professional Corporation, as Authority Counsel and City Attorney, respectively. Certain matters will be passed on for the Underwriter by Kutak Rock LLP. LITIGATION To the best knowledge of the City and the Authority, there is no action, suit or proceeding pending or, to the knowledge of City or Authority officials, threatened, restraining or enjoining the execution or delivery of the Bonds, the Lease Agreement, or the Indenture, or in any way contesting or affecting the validity of the foregoing or any proceedings of the Authority or the City taken with respect to any of the foregoing. MUNICIPAL ADVISOR The Authority has retained Fieldman, Rolapp & Associates, Inc., Irvine, California, as Municipal Advisor for the sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. Fieldman, Rolapp & Associates, Inc. is an independent advisory firm and is not engaged in the business of underwriting, trading, or distributing municipal or other public securities. PROFESSIONAL FEES In connection with the issuance of the Bonds, fees payable to Wells Fargo Bank, N.A., as Trustee, and Kutak Rock LLP, as Underwriter’s Counsel, are contingent upon the issuance of the Bonds. FINANCIAL STATEMENTS The general purpose financial statements of the City for the Fiscal Year ending June 30, 2018, pertinent sections of which are included in APPENDIX B to this Official Statement, have been audited by Lance, Soll and Lunghard, LLP, Brea, California, independent certified public accountants, as stated in their report appearing in APPENDIX B. The City has not requested, and the auditor has not provided, any consent to the inclusion of its Page 428 48 report herein or any update or review of its report in connection with its inclusion in this Official Statement. See APPENDIX B hereto. RATING S&P Global Ratings (“S&P”) has assigned its municipal bond rating of “____” to the Bonds. The rating reflects only the views of such organization, and an explanation of the significance of such rating may be obtained from S&P. There is no assurance that any rating will continue for any given period of time for the Bonds or that it will not be revised downward or withdrawn entirely by such rating agency, if, in the judgment of such rating agency, circumstances so warrant. The Authority and the City undertake no responsibility to oppose any downward revision or withdrawal of any rating obtained. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds. UNDERWRITING The Authority has agreed to sell the Bonds to Stifel, Nicolaus & Company, Incorporated (the “Underwriter”), and the Underwriter has agreed, subject to certain conditions, to purchase the Bonds. The purchase price of the Series A Bonds is $_______ (the principal amount of the Series A Bonds, less a Underwriter’s discount in the amount of $________, and [plus/less net premium/original issue discount] of $_________). The purchase price of the Series B Bonds is $_______ (the principal amount of the Series B Bonds, less an Underwriter’s discount in the amount of $________, and [plus/less net premium/original issue discount] of $_________). The obligations of the Underwriter are subject to certain conditions precedent, and it will be obligated to purchase all such Bonds if any such Bonds are purchased. The public offering prices of the Bonds may be changed from time to time by the Underwriter. MISCELLANEOUS References are made herein to certain documents and reports which are brief summaries and do not purport to be complete or definitive. Prospective purchasers of the Bonds are advised to refer to such documents and reports for full and complete statements of their contents. Copies of the Indenture, the Lease Agreement and other documents are available, upon request, and upon payment to the City of a charge for copying and mailing, from the City Clerk at the City of Rancho Cucamonga. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority and the purchasers or Owners of any of the Bonds. The execution of this Official Statement and its use in connection with the offering of the Bonds for sale have been authorized by the Authority and the City. RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY By: ____________________________________________ Executive Director CITY OF RANCHO CUCAMONGA By: : ___________________________________________ City Manager Page 429 49 Page 430 A-1 APPENDIX A CITY ECONOMIC AND DEMOGRAPHIC INFORMATION The information herein is subject to change without notice, and neither delivery of this Official Statement nor any sale thereafter of the 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 Bonds are payable solely from the sources described herein (see “SECURITY FOR THE BONDS”). The taxing power of the City of Rancho Cucamonga, the County, the State or any political subdivision thereof is not pledged to the payment of the Bonds. See the information under the caption “THE BONDS.” General The City is located in the foothills of the Los Angeles-San Bernardino Basin in the western portion of the County, approximately 40 miles east of the City of Los Angeles and 18 miles west of the City of San Bernardino. The City covers approximately 40.2 square miles and is bordered by Ontario on the south, Upland on the west and Fontana to the east and to the north by Cucamonga Peak and Mount Baldy. The City was incorporated on November 30, 1977, as a general law city operating under the council-manager form of government. It is governed by a five-member City Council (the “Council”), which includes a Mayor. Prior to the November 2016 General Election, all City officials were elected at large including a Mayor and four Council members, a City Clerk, and a City Treasurer. On November 8, 2016, the residents of the City voted to approve Measure Q which was then carried, adopted, and ratified by the Council on December 7, 2016. Measure Q approved the Council be elected by geographic districts with the Mayor elected at large. Four districts were created based on a map approved in May 2016. Districts 2 and 3 held elections in November 2018. Districts 1 and 4 will hold elections in 2020. The Mayor and Council members are elected on a staggered basis for a term of four years. The Council appoints the City Manager and City Attorney. The City Manager is responsible for the daily administration of City affairs and for implementing Council policy and program decisions. The estimated population of the City was 176,671 as of January 1, 2018. Major ground transportation routes in and out of Southern California and the LA/Ontario International Airport are nearby. Retail, office, civic and cultural uses are contained in Victoria Gardens. Community venues include an adult sports complex, community center, cultural center, two libraries, and over 150 miles of hiking, biking and equestrian trails which have attracted families to live in the City. Population Population figures for the City, the County and the State for the current and previous four years are shown in the following table. TABLE A-1 CITY OF RANCHO CUCAMONGA AND COUNTY OF SAN BERNARDINO Population Estimates (As of January 1) Year City of Rancho Cucamonga County of San Bernardino State of California 2014 171,622 2,100,689 38,568,628 2015 172,029 2,120,672 38,912,464 2016 173,241 2,133,906 39,179,627 2017 175,282 2,155,590 39,500,973 2018 176,671 2,174,938 39,809,693 _____________________ Page 431 A-2 Source: State Department of Finance estimates (as of January 1). Page 432 A-3 Assessed Valuations As discussed under “Property Taxes” above, the City receives a share of ad valorem taxes levied on real property within its boundaries. The basic levy is equal to 1% of the assessed value of secured and unsecured property. The City receives approximately 5.11% of the basic levy. The following table shows the assessed valuation of the City from Fiscal Years 2008/09 through 2017/18. TABLE A-2(1) CITY OF RANCHO CUCAMONGA SCHEDULE OF ASSESSED PROPERTY (For Fiscal Years Ended June 30) 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Residential $17,775,114 $16,641,454 $16,063,674 $15,244,895 $13,988,519 $13,346,484 $13,121,710 $12,893,924 $13,026,765 $14,162,263 Commercial 2,559,971 2,354,367 2,261,894 2,229,715 2,221,814 2,318,264 2,385,782 2,515,904 2,487,441 2,291,045 Industrial 2,976,956 2,802,918 2,667,060 2,504,695 2,402,218 2,279,456 2,244,509 2,314,277 2,441,705 2,316,429 Dry Farm 977 957 943 920 920 902 884 878 880 863 Gov’t Owned 3,659 3,587 7,839 7,745 7,732 4,613 4,080 4,050 4,059 3,980 Institutional 45,531 43,495 42,113 41,023 49,286 43,504 42,727 47,866 50,359 45,316 Irrigated 3,552 3,483 3,433 3,366 3,439 3,372 3,306 3,286 2,855 2,798 Miscellaneous 55,920 294,036 18,964 23,805 27,365 29,486 17,908 27,470 25,112 27,113 Recreational 32,634 44,814 40,343 41,663 47,757 47,419 52,076 42,123 48,077 47,071 Vacant 408,907 374,179 350,353 327,609 330,538 348,323 387,514 412,960 543,857 586,409 SBE Nonunitary 24,483 24,173 28,682 22,485 26,591 36,691 54,451 55,151 48,621 42,196 Unsecured 1,075,088 1,154,119 1,233,623 1,190,416 1,111,254 1,125,986 1,092,355 1,152,570 1,219,275 1,179,919 Unknown - - - - - 16,326 49,698 - - - TOTALS $24,962,792 $23,741,582 $22,718,921 $21,638,337 $20,217,433 $19,600,826 $19,457,000 $19,470,459 $19,899,006 $20,705,402 __________________________ (1) In the thousands. Source: The City of Rancho Cucamonga. Page 433 A-4 Set forth in Table A-3 are property tax, levies and collections in the City as of June 30 for Fiscal Years 2008/09 through 2017/18. The County operates under a statutory program entitled the Alternate Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”). Under the Teeter Plan local taxing entities receive 100% of their tax levies net of delinquencies, but do not receive interest or penalties on delinquent taxes collected by the County. The City elected not to enroll in the Teeter Plan; accordingly, the City’s receipt of its property tax revenues is impacted by delinquencies in payment, as off-set by the collection of interest and penalties on past delinquencies. TABLE A-3 CITY OF RANCHO CUCAMONGA PROPERTY TAX LEVIES AND COLLECTIONS (For Fiscal Years Ended June 30) Collected within the Fiscal Year of Levy Fiscal Year Ended June 30 Taxes Levied for the Fiscal Year(1) Amount Collected Percent of Levy Collected 2009 $ 98,855,469 $ 95,515,265 96.62% 2010 98,181,404 95,149,733 96.91 2011 95,051,899 89,513,493 94.17 2012 93,318,030 86,742,369 92.95 2013 93,235,913 85,131,812 91.31 2014 95,016,035 93,063,071 97.94 2015 100,428,866 98,457,115 98.04 2016 105,120,614 103,112,427 98.09 2017 108,069,418 107,991,619 99.93 2018 112,950,393 114,778,741 101.62 _____________________ (1) Data provided by the County Auditor-Controller for collection of prior years’ taxes does not segregate the information by fiscal year. Therefore, the City is not able to provide this information in the above schedule. Does not include penalties and delinquencies. Source: City of Rancho Cucamonga. Page 434 A-5 Direct and Overlapping Debt Contained within the City are numerous overlapping local agencies providing public services. These local agencies have outstanding obligations issued in the form of general obligation, lease, revenue and special assessment bonds. The following is a listing of direct and overlapping bonded debt on property in the City together with lease obligation debt of agencies in the area, as of June 30, 2018. TABLE A-4 DIRECT AND OVERLAPPING DEBT CITY OF RANCHO CUCAMONGA Total Debt City’s Share of OVERLAPPING TAX AND ASSESSMENT DEBT: 6/30/18 % Applicable(1) Debt 6/30/18 Metropolitan Water District $ 60,600,000 0.911% $ 552,066 Chaffey Community College District 138,940,000 23.791 33,055,215 Chaffey Union High School District 389,572,765 44.577 173,659,851 Alta Loma School District 29,046,793 98.783 28,693,294 Central School District 35,670,100 97.959 34,942,073 Cucamonga School District Community Facilities District No. 97-1 4,630,000 100. 4,630,000 Etiwanda School District 45,995,326 68.353 31,439,185 Etiwanda School District Community Facilities District No. 3 730,000 100. 730,000 Etiwanda School District Community Facilities District No. 7 8,320,000 21.530 1,791,296 Etiwanda School District Community Facilities District No. 8 4,525,000 68.006 3,077,272 Etiwanda School District Community Facilities District No. 9 7,670,000 70.844 5,433,735 Etiwanda School District Community Facilities District Nos. 2004-2 and 2007-1 16,105,000 100. 16,105,000 Etiwanda School District Rancho Etiwanda Public Finance Authority Community Facilities District No. 1 11,380,000 100. 11,380,000 Fontana Unified School District 189,557,259 0.370 701,362 Upland Unified School District 89,769,550 0.121 108,621 City of Rancho Cucamonga Community Facilities Districts 69,328,000 100. 69,328,000 City of Rancho Cucamonga 1915 Act Bonds 1,005,000 100. 1,005,000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $416,631,970 DIRECT AND OVERLAPPING GENERAL FUND DEBT: San Bernardino County General Fund Obligations $368,015,000 12.042% $ 44,316,366 San Bernardino County Pension Obligation Bonds 336,106,248 12.042 40,473,914 San Bernardino County Flood Control District General Fund Obligations 68,325,000 12.042 8,227,697 Chaffey Community College District General Fund Obligations 31,725,000 23.791 7,547,695 Cucamonga School District Certificates of Participation 6,385,000 40.702 2,598,823 Fontana Unified School District Certificates of Participation 31,370,000 0.370 116,069 City of Rancho Cucamonga 0 100. 0 West Valley Vector Control District Certificates of Participation 2,556,686 32.882 840,689 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $104,121,253 OVERLAPPING TAX INCREMENT DEBT (Successor Agency): $272,735,000 100. % $272,735,000 TOTAL DIRECT DEBT $0 TOTAL OVERLAPPING DEBT $793,488,223 COMBINED TOTAL DEBT $793,488,223(2) _____________________ (1) 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 district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Qualified Zone Academy Bonds are included based on principal due at maturity. Ratios to 2017-18 Assessed Valuation: Total Overlapping Tax and Assessment Debt ....................................................................................... 1.67% Total Direct Debt ............................................................................................................................... 0.00% Combined Total Debt ............................................................................................................................ 3.18% Ratios to Redevelopment Successor Agency Incremental Valuation ($10,732,775,670): Total Overlapping Tax Increment Debt ................................................................................................ 2.54% Source: City of Rancho Cucamonga. Page 435 A-6 Largest Taxpayers A list of the principal property taxpayers in the City is set forth below: TABLE A-5 CITY OF RANCHO CUCAMONGA PRINCIPAL PROPERTY TAXPAYERS(1) (Fiscal Year 2017/18) Property Owner Description Assessed Valuation Percent of Total Homecoming I at Terra Vista LLC Multi-Family Housing $269,828,279 1.08% Rancho Mall LLC Retail Stores 261,954,095 1.05 Prologis California I LLC/Catellus Industrial Building 180,897,740 0.72 Frito-Lay North America Inc Food Production Facility 158,335,800 0.63 MFREVF II - Empire Lakes LLC Apartment Building 132,652,334 0.53 GS Rancho LLC Multi-Family Housing 109,801,781 0.44 WNG Rancho Cucamonga 496 LLC Restaurant 107,130,994 0.43 EQR Fanwell 2007 LP Multi-Family Housing 104,659,915 0.42 Knickerbocker Barrington Place LLC Apartments 102,500,000 0.41 Goodman Rancho SPE LLC Industrial Building 90,461,940 0.36 $1,518,222,878 6.08% _____________________ Source: City of Rancho Cucamonga. Retail and Total Taxable Sales The following table presents the retail taxable transactions of the City of Rancho Cucamonga for the calendar years 2012 through 2016. TABLE A-6 CITY OF RANCHO CUCAMONGA TAXABLE RETAIL SALES ($ in thousands) Retail Stores Total All Outlets Number of Permits on August 1 Taxable Transactions Number of Permits on August 1 Taxable Transactions 2012 2,558 $1,736,078 3,951 $2,284,432 2013 2,445 1,781,006 3,829 2,281,985 2014 2,566 1,826,325 3,995 2,391,505 2015 2,768 1,854,177 4,670 2,431,145 2016(1) 2,727 1,894,037 4,665 2,486,030 ________________ (1) Last year such data is available. Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax). Page 436 A-7 Construction Activity Provided below are the building permits and valuations for the City for calendar years 2013 through 2017. TABLE A-7 CITY OF RANCHO CUCAMONGA TOTAL BUILDING PERMIT VALUATIONS (Valuations in Thousands)(1) 2013 2014 2015 2016 2017 Permit Valuation New Single-family $ 71,160 $71,733 $ 98,145 $54,842 $ 74,833 New Multi-family 45,177 3,027 9,362 226 Res. Alterations/Additions 10,074 1,357 2,964 9,526 8,820 Total Residential $126,411 $76,116 $110,472 $64,368 $ 83,878 New Commercial/Industrial $ 10,463 $85,259 $ 49,410 $23,446 $ 98,322 New Other 26,895 519 150 344 127 Com. Alterations/Additions 32,344 12,017 16,302 18,442 80,644 Total Nonresidential $ 69,702 $97,794 $ 65,862 $42,231 $179,093 New Dwelling Units Single Family 311 324 407 176 120 Multiple Family 94 31 46 0 192 TOTAL 405 355 453 176 312 ______________________ (1) Totals may not add due to rounding. Source: City of Rancho Cucamonga. Income Levels The following table shows the personal income and per capita personal income within the City. TABLE A-8 CITY OF RANCHO CUCAMONGA DEMOGRAPHIC AND ECONOMIC STATISTICS (Last Ten Calendar Years) Calendar Year Population Personal Income (in Thousands) Per Capita Personal Income Unemployment Rate 2008 175,627 $5,167,755 $29,425 5.1% 2009 177,051 5,080,143 28,693 8.6 2010 178,904 5,377,675 30,059 9.4 2011 169,498 5,190,707 30,624 8.7 2012 171,058 5,341,115 31,224 6.2 2013 172,299 5,335,755 30,968 5.4 2014 174,064 5,402,772 31,039 6.0 2015 175,251 5,365,133 30,613 4.8 2016 177,324 5,317,032 29,984 4.2 2017 176,671 5,586,992 31,623 3.9 ________________________ Source: City of Rancho Cucamonga. Page 437 B-1 APPENDIX B CITY’S AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR 2017/18 Page 438 C-1 APPENDIX C SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS Page 439 D-1 APPENDIX D FORM OF SERIES A BOND COUNSEL OPINION [Closing Date] Rancho Cucamonga Public Finance Authority 10500 Civic Center Drive Rancho Cucamonga, CA 91730 Re: $_____________ Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds, Series A (Tax-Exempt) (Fiber Optic Project) Ladies and Gentlemen: We have reviewed the Constitution and laws of the State of California and certain proceedings taken by the Rancho Cucamonga Public Finance Authority (the “Authority”) in connection with the issuance by the Authority of the Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project) being $_____________ Series A (Tax-Exempt) (the “Bonds”). Such Bonds are issued concurrently with the Authority’s $_____________ 2019 Lease Revenue Bonds, Series B (Taxable) (the “Series B Bonds”), pursuant to the provisions of Article 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Law”) and pursuant to an Indenture of Trust, dated as of February 1, 2019 (the “Indenture of Trust”), by and between Wells Fargo bank, N.A., as trustee (the “Trustee”), and the Authority. The proceeds of the Bonds will be applied by the Authority to finance improvements to public safety facilities within the City of Rancho Cucamonga (the “City”). The Authority and the City have entered into a Lease Agreement, dated as of February 1, 2019 (the “Lease Agreement”), whereby the City has leased from the Authority certain City facilities and property (the “Leased Premises”) and the City will make Lease Payments for the Leased Premises to the Authority. Pursuant to the Indenture of Trust, the Lease Payments have been assigned by the Authority to the Trustee and will be used by the Trustee to pay the principal of and interest on the Bonds. We have examined the Indenture of Trust, the Lease Agreement and such certified proceedings and other documents and materials as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, that: The Authority is a joint powers authority duly organized and validly existing under the laws of the State of California, with power to enter into the Indenture of Trust and the Lease Agreement, to perform the agreements on its part contained therein and to issue the Bonds; The Bonds constitute the valid and legally binding special obligations of the Authority enforceable in accordance with their terms and payable solely from the sources provided therefor in the Indenture of Trust; The Indenture of Trust and the Lease Agreement have been duly approved by the Authority and constitute the valid and legally binding obligations of the Authority enforceable against the Authority in accordance with their respective terms; The Indenture of Trust establishes a lien on and pledge of the Revenues (as such term is defined in the Indenture of Trust) which consist of Lease Payments and other funds pledged thereby for the security of the Bonds, in accordance with the terms of the Indenture of Trust; Page 440 D-2 Interest on the Bonds is exempt from California personal income taxation. The Internal Revenue Code of 1986, as amended (the “Code”), sets forth certain investment, rebate and related requirements which must be met subsequent to the delivery of the Bonds for the interest received by the owners of the Bonds to be and remain excluded from gross income for purposes of federal income taxation. Noncompliance with such requirements could cause the interest on the Bonds to be subject to federal income taxation retroactive to the date of delivery of the Bonds. Pursuant to the Indenture of Trust the Authority has covenanted to comply with the requirements of the Code. Assuming compliance with the aforementioned covenant, we are of the opinion that, under existing statutes, regulations, rulings and court decisions, the interest on the Bonds is excluded from gross income for purposes of federal income taxation. Interest on the Bonds is not a specific preference item for purposes of the alternative minimum tax provisions of the Code. We are further of the opinion that interest on the Bonds received by corporations will be included in corporate adjusted current earnings, a portion of which may increase the alternative minimum taxable income of such corporations. Although the interest on the Bonds is excluded from gross income for purposes of federal income taxation, the accrual or receipt of interest on the Bonds, or any portion thereof, may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend on the recipient’s particular tax status or other items of income or deduction. We express no opinion regarding any such consequences. Our opinions, expressed herein, may be affected by action taken (or not taken) on events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or occur. The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture of Trust may be subject to bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted and their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity. Respectfully submitted, Page 441 D-3 FORM OF SERIES B BOND COUNSEL OPINION [Closing Date] Rancho Cucamonga Public Finance Authority 10500 Civic Center Drive Rancho Cucamonga, CA 91730 Re: $_____________ Rancho Cucamonga Public Finance Authority Lease Revenue Bonds, 2019 Series B (Taxable) (Fiber Optic Project) Ladies and Gentlemen: We have reviewed the Constitution and laws of the State of California and certain proceedings taken by the Rancho Cucamonga Public Finance Authority (the “Authority”) in connection with the issuance by the Authority of the Rancho Cucamonga Public Finance Authority 2019 Lease Revenue Bonds (Fiber Optic Project) being $_____________ Series B (Taxable) (the “Bonds”). Such Bonds are issued concurrently with the Authority’s $_____________ 2019 Lease Revenue Bonds, Series A (Tax-Exempt) (the “Series A Bonds”), pursuant to the provisions of Article 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Law”) and pursuant to an Indenture of Trust, dated as of February 1, 2019 (the “Indenture of Trust”), by and between Wells Fargo Bank, N.A., as trustee (the “Trustee”), and the Authority. The proceeds of the Bonds will be applied by the Authority to finance the acquisition of property within the City of Rancho Cucamonga (the “City”). The Authority and the City have entered into a Lease Agreement, dated as of February 1, 2019 (the “Lease Agreement”), whereby the City has leased from the Authority certain City facilities and property (the “Leased Premises”) and the City will make Lease Payments for the Leased Premises to the Authority. Pursuant to the Indenture of Trust, the Lease Payments have been assigned by the Authority to the Trustee and will be used by the Trustee to pay the principal of and interest on the Bonds. We have examined the Indenture of Trust, the Lease Agreement and such certified proceedings and other documents and materials as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, that: The Authority is a joint powers authority duly organized and validly existing under the laws of the State of California, with power to enter into the Indenture of Trust and the Lease Agreement, to perform the agreements on its part contained therein and to issue the Bonds; The Bonds constitute the valid and legally binding special obligations of the Authority enforceable in accordance with their terms and payable solely from the sources provided therefor in the Indenture of Trust; The Indenture of Trust and the Lease Agreement have been duly approved by the Authority and constitute the valid and legally binding obligations of the Authority enforceable against the Authority in accordance with their respective terms; The Indenture of Trust establishes a lien on and pledge of the Revenues (as such term is defined in the Indenture of Trust) which consist of Lease Payments and other funds pledged thereby for the security of the Bonds, in accordance with the terms of the Indenture of Trust; Interest on the Bonds is exempt from California personal income taxation. Page 442 D-4 Interest on the Bonds is not excluded from gross income for federal income tax purposes. Except as stated in the preceding three paragraphs, we express no opinion as to any federal or state tax consequences of the ownership or disposition of the Bonds. Furthermore, we express no opinion as to any federal, state or local tax law consequences with respect to the Bonds, or the interest thereon, if any action is taken with respect to the Bonds or the proceeds thereof predicated or permitted upon the advice or approval of bond counsel other than ourselves. Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may hereafter come to our attention or to reflect any changes in any law that may hereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. Our opinions, expressed herein, may be affected by action taken (or not taken) on events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or occur. The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture of Trust may be subject to bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted and their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity. Respectfully submitted, Page 443 E-1 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (the “Disclosure Agreement”) is executed and delivered by the City of Rancho Cucamonga (the “City”) and the Rancho Cucamonga Public Finance Authority (the “Authority”) in connection with the issuance of the Authority’s $_________ aggregate principal amount 2019 Lease Revenue Bonds (Fiber Optic Project) (the “Bonds”). The Bonds have been issued pursuant to an Indenture of Trust dated as of February 1, 2019, between the Authority and Wells Fargo Bank, N.A., as trustee (the “Trustee”) (the “Indenture”). The City and the Authority covenant and agree as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the City and the Authority for the benefit of the holders and beneficial owners of the Bonds. Section 2. Definitions. (a) “Annual Report” means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. (b) “Dissemination Agent” means, initially, Willdan Financial Services, as Dissemination Agent, or any successor Dissemination Agent designated in writing by the City which has filed with the City a written acceptance of such designation. (c) “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, or any other financial institution required to comply with the Rule in connection with the reoffering of the Bonds. (d) “Official Statement” means the Official Statement dated _____________, 2019, prepared in connection with the issuance of the Bonds. (e) “Repository” means the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access (EMMA) system, and any other Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. (f) “Rule” means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. (g) “Significant Events” shall mean any of the events listed in Section 5 of this Disclosure Agreement. (h) “MSRB” means the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934. (i) “SEC” means the Securities and Exchange Commission. Section 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than March 1 in each year while the Bonds are outstanding commencing on March 1, 2020, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than fifteen (15) business days prior to said date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). The Annual Report may be submitted as a single document or separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report. Page 444 E-2 (b) If the City is unable to provide to the Repository an Annual Report by the date required in subsection (a), the City shall send a notice to the MSRB in a timely manner in substantially the form attached as Exhibit A hereto. (c) The Dissemination Agent shall: (i) Determine each year prior to the date for providing the Annual Report the name and address of the Repository; and (if the Dissemination Agent is other than the City). (ii) File a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all Repositories to which it was provided. Section 4. Content of Annual Reports. The City’s Annual Report shall contain or incorporate by reference the following: (a) A copy of its annual financial statements prepared in accordance with generally accepted accounting principles, audited by a firm of certified public accountants. If audited annual financial statements are not available by the time specified in Section 3(a) above, unaudited financial statements will be provided as part of the Annual Report and audited financial statements will be provided when and if available. In such an event, the Disclosure Agreement shall contain a statement as to the estimated date on which the City’s audited financial statements are expected to be available. (b) The following information, to the extent not included in the audited financial statements of the City, shall include the following: (i) information showing the balance sheet of the General Fund of the City as of the close of the most recently completed Fiscal Year, including categorized assets, liabilities and reserved and unreserved fund balances (Table 4); (ii) information concerning the actual revenues, expenditures and beginning and ending fund balances relating to the General Fund of the City for the most recently completed Fiscal Year, including information showing tax revenue collections by source (Table 5); and (iii) information showing the aggregate principal amount of long-term bonds, leases and other obligations of the City which are payable out of the General Fund of the City, as of the close of the most recently completed Fiscal Year. (c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the City shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the City or related public entities, which have been submitted to each of the Repositories or the SEC. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The City shall clearly identify each such document incorporated by reference. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the City and the Authority 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 in excess of 10 business days after the occurrence of the event: 1. principal and interest payment delinquencies. Page 445 E-3 2. tender offers. 3. defeasances. 4. rating changes. 5. adverse tax opinions, or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, or Notices of Proposed Issue (IRS Form 5701-TEB). 6. unscheduled draws on the debt service reserves reflecting financial difficulties. 7. unscheduled draws on credit enhancement reflecting financial difficulties. 8. substitution of the credit or liquidity providers or their failure to perform. 9. bankruptcy, insolvency, receivership or similar event of the City or Authority. For the purposes of the event identified in this Section 5(a)(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 or Authority 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 Authority, 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 or Authority. (b) Pursuant to the provisions of this Section 5, the City and Authority shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: 1. non-payment related defaults. 2. modifications to rights of bondholders. 3. bond calls. 4. unless described under Section 5(a)(5) above, material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds. 5. release, substitution or sale of property securing repayment of the Bonds. 6. the consummation of a merger, consolidation, or acquisition involving the City or Authority or the sale of all or substantially all of the assets of the City or Authority, 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 paying agent with respect to the Bonds or the change of name of such a trustee or paying agent. (c) Whenever the City or Authority obtains knowledge of the occurrence of a Listed Event under Section 5(b) hereof, the City or Authority shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the City or Authority determines that knowledge of the occurrence of a Listed Event under Section 5(c) hereof would be material under applicable federal securities laws, the City or Authority shall (i) file Page 446 E-4 a notice of such occurrence with the Repository in a timely manner not in excess of 10 business days after the occurrence of the event or (ii) provide notice of such reportable event to the Dissemination Agent in format suitable for filing with the Repository in a timely manner not in excess of 10 business days after the occurrence of the event. The Dissemination Agent shall have no duty to independently prepare or file any report of Listed Events. The Dissemination Agent may conclusively rely on the City’s or Authority’s determination of materiality pursuant to Section 5(c). Section 6. Termination of Reporting Obligation. The City’s and the Authority’s obligations under this Disclosure Agreement shall be in effect from and after the execution and delivery of the Bonds and shall extend to the earlier of (i) the date all principal and interest on the Bonds shall have been deemed paid pursuant to the terms of the Indenture; (ii) the date that the City and the Authority shall no longer constitute an “obligated person” within the meaning of the Rule. Section 7. Enforcement. The obligations of the City and the Authority hereunder shall be for the benefit of the Participating Underwriter and the Owners of the Bonds, including Beneficial Owners of the Bonds. Unless otherwise required by law, no owners of the Bonds shall be entitled to damages for the City’s or the Authority’s non-compliance with its undertakings set forth in this Disclosure Agreement; however, the Participating Underwriter, and Owners of the Bonds, including Beneficial Owners of the Bonds, may enforce specific performance of such undertakings by any judicial proceeding available. Breach of the undertakings of the City and the Authority hereunder shall not constitute an event of default under the Indenture and none of the rights and remedies provided by the Indenture with respect to an event of default, shall be available to the Participating Underwriter, Owners of the Bonds, including Beneficial Owners. Section 8. Dissemination Agent; Duties. The City or the Authority may, from time to time, appoint or engage a Dissemination Agent to assist the City in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement. The obligations of the City under this Disclosure Agreement shall survive resignation or removal of the Dissemination Agent. The Dissemination Agent shall be paid compensation by the Authority for its services provided hereunder in accordance with its schedule of fees as amended from time to time and shall be reimbursed by the Authority all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. Neither the Dissemination Agent nor the Trustee shall have any duty or obligation to review any information provided to it hereunder or shall be deemed to be acting in any fiduciary capacity for the Authority, the owners of the Bonds or any other party. 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 document or any further act. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City and the Authority may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, if (i) such amendment or waiver does not, in and of itself, cause the undertakings herein to violate the Rule, but taking into account any subsequent change in or official interpretation of the Rule and the amendment or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Owners or Beneficial Owners of the Bonds. The City shall provide notice of any such amendment or waiver to each Repository. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, Page 447 E-5 if the amendment related to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5 and (ii) the Annual Report for the year in which the change is made should represent 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 formed accounting principles. Section 10. Default. In the event of a failure of the City or the Authority to comply with any provision of this Disclosure Agreement, the Trustee at the written direction of the Participating Underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Bonds, shall, or any Owner 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 Agreement, but only to the extent funds have been provided to it or it has been otherwise indemnified to its satisfaction from any cost, liability, expense or additional charges of the Trustee whatsoever, including, without limitation, fees and expenses of its attorney. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement shall be an action to compel performance. Section 11. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City of the Authority from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of an event other than a Significant Event, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of the occurrence of an event other than a Significant Event in addition to what is specifically required by this Disclosure Agreement, the City shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Significant Event. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Authority, the Trustee, the Dissemination Agent, the Underwriter and Owners and Beneficial Owners from time to time of the Bonds, and shall create not rights in any other person or entity. Page 448 E-6 Section 13. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. DATE: CITY OF RANCHO CUCAMONGA By: Authorized Signature RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY By: Authorized Signature ACCEPTED BY: WILLDAN FINANCIAL SERVICES, as Dissemination Agent By: Authorized Signature Page 449 E-7 EXHIBIT A NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Rancho Cucamonga Public Finance Authority (the “Issuer”) Issue: 2019 Lease Revenue Bonds (Fiber Optic Project) Date of Delivery: ________________, 2019 NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with respect to the above-referenced Bonds as required by resolution of the governing board of the Issuer and by the Continuing Disclosure Agreement executed on ____________ by the Issuer and the City of Rancho Cucamonga. The Issuer anticipates that the Annual Report will be filed on or before ___________________. Dated: ___________________ RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY By: Authorized Signature Page 450 F-1 APPENDIX F BOOK ENTRY PROVISIONS The information in this Appendix concerning DTC and DTC’s book-entry only system has been obtained from sources that the Authority and the Underwriter believe to be reliable, but neither the Authority or the Underwriter take any responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of ____. 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. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive bonds representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Page 451 F-2 Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Trustee’s DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical 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, bonds will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT Page 452 F-3 THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. Page 453 1 RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 LEASE REVENUE BONDS (FIBER OPTICS PROJECT) $_____________ Series A Bonds (Tax-Exempt) $_____________ Series B Bonds (Taxable) BOND PURCHASE AGREEMENT _____________, 2019 Rancho Cucamonga Public Finance Authority 10500 Civic Center Drive Rancho Cucamonga, California 91730 City of Rancho Cucamonga 10500 Civic Center Drive Rancho Cucamonga, California 91730 Ladies and Gentlemen: Stifel, Nicolaus & Company, Incorporated (the “Underwriter”), hereby offers to enter into this Bond Purchase Agreement with you, the City of Rancho Cucamonga (the “City”) and the Rancho Cucamonga Public Finance Authority (the “Authority”), for the purchase by the Underwriter and the delivery by you of the Bonds specified below. The Bonds are being issued by the Authority to (i) finance the acquisition, design, construction and equipping of a fiber optic network within the boundaries of the City; and (ii) pay the costs of issuing the Bonds. This offer is made subject to acceptance by you prior to 11:59 p.m., Los Angeles time, on the date hereof. Upon such acceptance, this Bond Purchase Agreement shall be in full force and effect in accordance with its terms and shall be binding upon you and the Underwriter. 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements hereinafter set forth, the Underwriter agrees to purchase from the Authority, and the Authority agrees to sell to the Underwriter, all (but not less than all) of the $__________ aggregate principal amount of the Authority’s 2019 Lease Revenue Bonds, Series A (Fiber Optics Project) (Tax-Exempt) (the “Series A Bonds”) and all (but not less than all) of the $__________ aggregate principal amount of the Authority’s 2019 Lease Revenue Bonds, Series B (Fiber Optics Project) (Taxable) (the “ Series B Bonds,” and together with the Series A Bonds, the “Bonds”) The purchase price for the Series A Bonds shall be $_______ (being the principal amount of the Series A Bonds, less an Underwriter’s discount in the amount of $______, and plus net original issue premium of $_______) and the purchase price for the Series B Bonds shall be $_______ (being the principal amount of the Series B Bonds, and less an Underwriter’s discount in the amount of $______). Page 454 2 The Bonds will be dated the date of delivery thereof, and will have the maturities and bear interest at the rates set forth on Exhibit A hereto. The Bonds will be subject to redemption as set forth in the Indenture and Official Statement herein described. The Bonds will be issued in book-entry form only. It is anticipated that CUSIP identification numbers will be inserted on the Bonds, but neither the failure to provide such numbers nor any error with respect thereto shall constitute a cause for failure or refusal by the Underwriter to accept delivery of the Bonds in accordance with the terms of this Bond Purchase Agreement. 2. Authorizing Instruments and Law. The Bonds shall be issued pursuant to the provisions of a resolution (the “Resolution”) adopted by the Authority on _______, 201_ authorizing the issuance of the Bonds and the Marks-Roos Local Bond Pooling Act of 1985, constituting Section 6584 et seq. of the California Government Code (the “JPA Act”). The Bonds are issued pursuant to an Indenture, dated as of ________ 1, 2019 (the “Indenture”), between the Authority and Wells Fargo Bank, N.A., as trustee (the “Trustee”), and shall be as described in the Indenture. The Bonds are limited obligations of the Authority payable primarily from and secured by certain lease payments (the “Lease Payments”) to be paid by the City pursuant to a Lease Agreement, dated as of ________ 1, 2019, between the City and the Authority (the “Lease”), for certain real property and the improvements thereon (the “Leased Premises”). 3. Offering the Bonds. The Underwriter agrees to offer all the Bonds to the public initially at the prices (or yields) set forth on the cover pages of the Official Statement of the Authority pertaining to the Bonds, dated __________, 2019 (the Official Statement, together with all appendices thereto, and with such changes therein and supplements thereto as are consented to in writing by the Authority, the City, the Underwriter or its legal counsel in accordance with the provisions of Sections 6(j) and 7(j) hereof or otherwise consented to by the Underwriter pursuant to Section 10(b)(v), are herein called the “Official Statement”). Subsequent to the initial public offering of the Bonds, the Underwriter reserves the right to change the public offering prices (or yields) as they deem necessary in connection with the marketing of the Bonds. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. “Public Offering” shall include an offering to a number of institutional investors or registered investment companies, regardless of the number of such investors to which the Bonds are sold. The City and the Authority acknowledge and agree that (i) the purchase and sale of the Bonds pursuant to this Bond Purchase Agreement is an arm’s-length commercial transaction between the City, the Authority and the Underwriter, and that the Underwriter has financial and other interests that differ from those of the City and the Authority, (ii) in connection with such transaction the Underwriter is not acting as a municipal advisor, financial advisor or fiduciary to the City and the Authority or any other person or entity and have not assumed a fiduciary responsibility in favor of the City or the Authority with respect to the offering of the Bonds or the process leading thereto (whether or not the Underwriter has advised or are currently advising the City or the Authority on other matters), (iii) the only contractual obligations the Underwriter has to the City and the Authority with respect to the transaction contemplated hereby expressly are set forth in this Bond Purchase Agreement, except as otherwise provided by applicable rules and regulations of the SEC or the rules of the Municipal Securities Rulemaking Board (the “MSRB”) and (iv) the City and the Authority have consulted with their own legal and other professional advisors to the extent they deemed appropriate in connection with the offering of the Bonds. The City and the Authority acknowledge that they have previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the MSRB relating to disclosures concerning the Page 455 3 Underwriter’s role in the transaction, disclosures concerning the Underwriter’s compensation, conflict disclosures, if any, and disclosures concerning complex municipal securities financing, if any. 4. Delivery of Official Statement. The Authority shall deliver to the Underwriter two (2) copies of the Official Statement manually executed on behalf of the Authority and the City. The Authority shall also deliver copies of the Official Statement in such quantities as the Underwriter may reasonably request in order to enable the Underwriter to distribute a single copy of each Official Statement to any potential customer of the Underwriter requesting an Official Statement during the time period beginning when the Official Statement becomes available and ending on the End Date (defined below). The Authority shall deliver these copies to the Underwriter within seven (7) business days after the execution of this Bond Purchase Agreement and in sufficient time to accompany or precede any sales confirmation that requests payment from any customer of the Underwriter. The Authority and the Underwriter hereby agree that the end of the underwriting period shall be the date of Closing (as defined below) unless the Underwriter informs the Authority in writing of a different end of the underwriting period. “End Date” as used herein is that date which is the earlier of: (a) twenty-five (25) days after the end of the underwriting period, as defined in SEC Rule 15c2-12 originally adopted by the Securities and Exchange Commission on June 28, 1989, as amended (“Rule 15c2-12”); or (b) the time when the Official Statement becomes available from the MSRB, but in no event less than twenty-five (25) days after the underwriting period (as defined in Rule 15c2-12) ends. The Underwriter acknowledges that the “End Date” will be the date of Closing unless the Underwriter otherwise notifies the Authority and the City in writing that the Underwriter still own some or all of the Bonds. The Authority and the City have authorized the use of the Official Statement in connection with the public offering of the Bonds. The Authority and the City also have consented to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement dated _______, 2019, relating to the Bonds in connection with the public offering of the Bonds, (which, together with all appendices thereto, is herein called the “Preliminary Official Statement”). Authorized officers of the City and the Authority have certified to the Underwriter that such Preliminary Official Statement was deemed to be final as of its date for purposes of Rule 15c2-12, with the exception of certain final pricing and related information referred to in Rule 15c2-12. The Underwriter has distributed a copy of each Preliminary Official Statement to potential customers on request. 5. The Closing. At 9:00 A.M., California time, on _______, 2019, or at such other time or on such earlier or later business day as shall have been mutually agreed upon by the Authority, the City and the Underwriter, the Authority, upon receipt of the purchase price thereof, will deliver (i) the Bonds in book-entry form through the facilities of The Depository Trust Company (“DTC”), and (ii) the closing documents hereinafter mentioned at the offices of Best Best & Krieger LLP, Riverside, 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 from the Authority. The Underwriter will pay the purchase price of the Bonds as set forth in Section 1 hereof Page 456 4 by wire transfer of immediately available funds. This payment and delivery, together with the delivery of the aforementioned documents, is herein called the “Closing.” 6. City Representations, Warranties and Covenants. The City represents, warrants and covenants to the Underwriter that: (a) The City is a municipal corporation of the State of California (the “State”) organized and operating pursuant to the law of the State with power and authority to enter into and perform its duties under the Lease, the Continuing Disclosure Certificate, dated the date of Closing (the “Continuing Disclosure Certificate”), the Official Statement and this Bond Purchase Agreement (collectively, the “City Documents”). (b) To the best knowledge of the City, neither the approval, execution and delivery of the City Documents, and compliance with the provisions on the City’s part contained therein, nor the consummation of any other of the transactions herein and therein contemplated, nor the fulfillment of the terms hereof and thereof, materially conflicts with or constitutes a material breach of or default under nor materially contravenes any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject, nor does any such execution, delivery, adoption or compliance result in a security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the City under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the City Documents. (c) The City Documents have been duly authorized, executed and delivered by the City, and, assuming due authorization, execution and delivery by the other parties thereto, constitute legal, valid and binding agreements of the City enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other laws affecting the enforcement of creditors’ rights generally, and by the application of equitable principles if sought, by the exercise of judicial discretion, and by the limitations on legal remedies imposed on actions against cities in the State. (d) Except as may be required under blue sky or other securities laws of any state, there is no material consent, approval, authorization or other order of, or filing with, or certification by, any regulatory agency having jurisdiction over the City required for the execution and delivery of the Bonds or the consummation by the City of the other transactions contemplated by the Official Statement and this Bond Purchase Agreement. (e) To the best of the knowledge of the City, there is, and on the Closing there will be, no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending (notice of which has been received by the City) or threatened against the City to restrain or enjoin the delivery of any of the Bonds, or the payments to be made pursuant to the Lease, or in any way contesting or affecting the validity of the City Documents or the Bonds or the authority of the City to approve this Bond Purchase Agreement, or enter into the City Documents or contesting the powers of the City to enter into or perform its obligations under any of the foregoing or in any way contesting the powers of the City in connection with any action contemplated by this Bond Purchase Agreement or to restrain or enjoin the execution, sale and delivery of the Bonds, contesting the completeness or accuracy of the Preliminary Official Statement Page 457 5 as of its date or the Official Statement or any supplement or amendment thereto wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the City Documents to be executed by it or asserting that the Preliminary Official Statement as of its date or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of all the circumstances under which they were made, not misleading, or, except as described in the Preliminary Official Statement and the Official Statement, nor is there any basis for any such action, suit, proceeding or investigation. (f) The Preliminary Official Statement provided to the Underwriter has been deemed final by the City, as required by Rule 15c2-12. As of the date thereof and at all times subsequent thereto up to and including the Closing, the information relating to the City, the Bonds, the Leased Premises and the City Documents contained in the Official Statement was and will be materially complete for its intended purposes. The information relating to the City, the Bonds, the Leased Premises and the City Documents contained in the Official Statement as of the date hereof is true and correct in all material respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect. (g) The City agrees to cooperate with the Underwriter in endeavoring to qualify the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions of the United States as the Underwriter may request; provided, however, that the City will not be required to execute a special or general consent to service of process in any jurisdiction in which it is not now so subject or to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified. The Underwriter shall be responsible for all costs relating to such qualification of the Bonds under blue sky or similar laws. (h) By official action of the City prior to or concurrently with the execution hereof, the City has duly approved the distribution of the Official Statement, and has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations on its part contained in the City Documents and the consummation by it of all other transactions contemplated by the Official Statement and this Bond Purchase Agreement. (i) To the best knowledge of the City, it is not in any material respect in breach of or default under any material applicable law or administrative regulation of the State or the United States or any material applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject and in connection with which the City is obligated to make payments from its own funds, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument the consequence of which could materially and adversely affect the performance of the City under the City Documents. (j) If between the date of this Bond Purchase Agreement and the End Date an event occurs, of which the City has knowledge, which might or would cause the information relating to the City, the City’s finances, the Leased Premises, or the City’s functions, duties and responsibilities contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was Page 458 6 presented, not misleading in any material respect, the City will notify the Underwriter, and if, in the opinion of the Underwriter, the City or their respective legal counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will cooperate with the Underwriter in the preparation of an amendment or supplement to the Official Statement in a form and in a manner approved by the Underwriter, provided all expenses thereby incurred will be paid for by the City. (k) If the information relating to the Leased Premises, the City, its functions, duties and responsibilities contained in the Official Statement is amended or supplemented pursuant to the immediately preceding subparagraph, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date of the Closing, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading in any material respect. (l) The City covenants that it will comply with all tax covenants relating to it in the City Documents and the Tax Certificate of the City. (m) Substantially all the proceeds from the sale of the Bonds (after deducting the expenses of issuance and sale of the Bonds paid for from such proceeds) will be used as set forth in the Indenture and as described in the Official Statement, and the City will not take or omit to take any action which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to that provided in the Indenture and the Lease, as amended from time to time. (n) Any certificate signed by a duly authorized official of the City and delivered to the Underwriter shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein. (o) As of the time of acceptance hereof and as of the Closing, the City does not and will not have outstanding any indebtedness which is payable from the City’s general fund except as disclosed in the Official Statement. (p) Between the date of this Bond Purchase Agreement and the date of Closing, the City will not, and except as disclosed in the Official Statement, offer or issue any certificates, notes or other obligations for borrowed money, or, other than in the normal course of its operations, incur any material liabilities, direct or contingent, secured by or payable from the City’s general fund. (q) The City will undertake, pursuant to the Continuing Disclosure Certificate, to provide or cause to be provided annual financial reports and notices of certain events; a description of this undertaking is set forth in the Official Statement. Except as disclosed in the Preliminary Official Statement and Official Statement, the City and its related entities have not failed to comply in any material respect with a continuing disclosure undertaking under Rule 15c2-12 during the previous five years. Page 459 7 (r) The financial statements of, and other financial information regarding the City in the Official Statement fairly present the financial position and results of the operations of the City as of the dates and for the periods therein set forth and the audited financial statements have been prepared in accordance with generally accepted accounting principles applicable to cities. 7. Authority Representations, Warranties and Covenants. The Authority represents, warrants and covenants to the City and the Underwriter that: (a) The Authority is a joint powers authority, duly organized and existing under the Constitution (the “Constitution”) and laws of the State, including the JPA Act, with full right, power and authority to enter into, execute and deliver the Authority Documents (defined below) and to perform its obligations hereunder. (b) By all necessary official action, the Authority has duly authorized and approved the execution and delivery of, and the performance by the Authority of the obligations on its part contained in the Bond Purchase Agreement, the Bonds, the Indenture, and the Lease (collectively, the “Authority Documents”), and has approved the use by the Underwriter of the Preliminary Official Statement, and the Official Statement and, as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered by the parties hereto, the Authority Documents will constitute the legally valid and binding obligations of the Authority enforceable upon the Authority in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting creditors rights generally, to the exercise of judicial discretion and to the limitations on legal remedies against joint powers authorities in California. The Authority has complied, and will at the Closing be in compliance in all respects, with the terms of the Authority Documents. (c) The Bonds, when issued in accordance with the Indenture, will be valid and binding limited obligations of the Authority, entitled to the benefits of the Indenture and enforceable in accordance with their terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors’ rights generally, to the exercise of judicial discretion and to the limitations on legal remedies against joint powers authorities in California. (d) As of the time of acceptance hereof and as of the time of the Closing, except as otherwise disclosed in the Official Statement, to the best knowledge of the Authority, the Authority is not and will not be in any material respect in breach of or in default under any law or administrative rule or regulation of the State or the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument which breach, default or event could have an adverse effect on the Authority’s ability to perform its obligations under the Authority Documents; and, as of such times, except as disclosed in the Official Statement, the authorization, execution and delivery of the Authority Documents and compliance by the Authority with the provisions thereof do not and will not conflict with or constitute a breach of or default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States or any applicable judgment, decree, license, permit, trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority is subject, or by which it or any of its Page 460 8 properties is bound, nor will any such authorization, execution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of its assets or properties under the terms of any such law, regulation or instrument except as provided in the Authority Documents. (e) As of the time of acceptance hereof and the Closing, except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending (notice of which has been received by the Authority), or to the best knowledge of the Authority threatened against the Authority in any material respect: (i) affecting the existence of the Authority or the titles of the officers of the Authority to their respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin the issuance or delivery of any of the Bonds, or the payment or collection of any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity of the Authority Documents or the consummation of the transactions on the part of the Authority contemplated thereby, or contesting the exclusion of the interest on the Bonds from Federal or State taxation, as applicable, or contesting the powers of the Authority or its authority to enter into the Lease and to pledge the Lease Payments for repayment of the Bonds; (iii) which may result in any material adverse change relating to the financial condition of the Authority; (iv) contesting the completeness or accuracy of the Preliminary Official Statement as of its date or the Official Statement or any supplement or amendment thereto or asserting that the Preliminary Official Statement as of its date or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of all the circumstances under which they were made, not misleading; or (v) challenging the ability of the Authority to sell the Bonds to the Underwriter. (f) The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order to qualify the Bonds for offer and sale under the blue sky laws or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and will use its best efforts to continue such qualification in effect so long as required for distribution of the Bonds; provided however, that in no event shall the Authority be required to take any action which would subject it to general or unlimited service of process in any jurisdiction in which it is not now so subject. (g) Any certificate signed by a duly authorized officer of the Authority and delivered to the Underwriter shall be deemed to be a representation and warranty by the Authority to the Underwriter as to the statements made therein. Page 461 9 (h) As of the time of acceptance hereof and as of the date of Closing, except as otherwise disclosed in the Official Statement, the Authority has complied with the filing requirements of the JPA Act. (i) The Authority will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement from the delivery of the Official Statement to the End Date, and will not effect or consent to any such amendment or supplement without prior consultation with the Underwriter. The Authority will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds. (j) For a period beginning on the date hereof and continuing until the End Date, (a) the Authority will not adopt any amendment of, or supplement to, the Official Statement without prior consultation with the Underwriter and Kutak Rock LLP, counsel to the Underwriter (“Underwriter’s Counsel”) and (b) if any event relating to or affecting the Authority shall occur as a result of which it is necessary, in the opinion of the Underwriter and Underwriter’s Counsel, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to a purchaser of the Bonds, the Authority will forthwith cause the City to prepare and furnish to the Underwriter a reasonable number of copies of an amendment of, or supplement to, the Official Statement (in form and substance satisfactory to Underwriter’s Counsel) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser of the Bonds, not misleading. 8. Establishment of Issue Price. (a) The Underwriter agrees to assist the Authority in establishing the issue price of the Series A Bonds and shall execute and deliver to the Authority 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 Authority 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 Series A Bonds. (b) Except as otherwise set forth in Exhibit A attached hereto, the Authority will treat the first price at which 10% of each maturity of the Series A Bonds (the “10% test”) is sold to the public as the issue price of that maturity. At or promptly after the execution of this Bond Purchase Agreement, the Underwriter shall report to the Authority the price or prices at which it has sold to the public each maturity of Series A Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Series A Bonds, the Underwriter agrees to promptly report to the Authority the prices at which it sells the unsold Series A Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until either (i) the Underwriter has sold all Series A Bonds of that maturity or (ii) the 10% test has been satisfied as to the Series A Bonds of that maturity, provided that, the Underwriter’s reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Authority or Bond Counsel. For purposes of this Section, if Series A Bonds mature on the same date but have different interest rates, each separate CUSIP number within that maturity will be treated as a separate maturity of the Series A Bonds. Page 462 10 (c) The Underwriter confirms that it has offered the Series A Bonds to the public on or before the date of this Bond Purchase Agreement at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, as of the date of this Bond Purchase Agreement, the maturities, if any, of the Series A Bonds for which the Underwriter represents that (i) the 10% test has been satisfied (assuming orders are confirmed by the close of the business day immediately following the date of this Bond Purchase Agreement) and (ii) the 10% test has not been satisfied and for which the Authority and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Authority 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 A Bonds, the Underwriter will neither offer nor sell unsold Series A 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: (A) the close of the fifth (5th) business day after the sale date; or (B) the date on which the Underwriter has sold at least 10% of that maturity of the Series A Bonds to the public at a price that is no higher than the initial offering price to the public. The Underwriter will advise the Authority promptly after the close of the fifth (5th) business day after the sale date whether it has sold 10% of that maturity of the Series A Bonds to the public at a price that is no higher than the initial offering price to the public. (d) The Underwriter confirms that: (i) any selling group agreement and any third-party distribution agreement relating to the initial sale of the Series A Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker- dealer that is a party to such third-party distribution agreement, as applicable: (A)(i) to report the prices at which it sells to the public the unsold Series A Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Series A Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Series A Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be reasonable periodic intervals or otherwise upon request of the Underwriter and (ii) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter, (B) to promptly notify the Underwriter of any sales of Series A Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Series A Bonds to the public (each such term being used as defined below), and (C) to acknowledge that, unless otherwise advised by the dealer or broker-dealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public. Page 463 11 (ii) any selling group agreement relating to the initial sale of the Series A Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the Series A Bonds to the public to require each broker-dealer that is a party to such third-party distribution agreement to (A) report the prices at which it sells to the public the unsold Series A Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Series A Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the Series A Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold- the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires. (e) The Authority acknowledges that, in making the representation set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Series A Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the Series A Bonds, including, but not limited to, its agreement to comply with the hold-the-offering- price rule, if applicable to the Series A Bonds, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a third-party distribution agreement was employed in connection with the initial sale of the Series A Bonds to the public, the agreement of each broker- dealer that is a party to such agreement to comply with the requirements for establishing issue price of the Series A Bonds, including, but not limited to, its agreement to comply with the hold-the- offering-price rule, if applicable to the Series A Bonds, as set forth in the third-party distribution agreement and the related pricing wires. The Authority 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 third-party distribution agreement, to comply with its corresponding agreement to comply with the requirements for establishing issue price of the Series A Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Series A Bonds. (f) The Underwriter acknowledges that sales of any Series A Bonds to any person that is a related party to an underwriter participating in the initial sale of the Series A Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section. Further, for purposes of this section: a. “public” means any person other than an underwriter or a related party; b. “underwriter” means (A) any person that agrees pursuant to a written contract with the Authority (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Series A 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 Series A Bonds to the public (including a member of a selling group or a party to a third- party distribution agreement participating in the initial sale of the Series A Bonds to the public); c. a purchaser of any of the Series A Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common 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), (B) more than 50% common ownership Page 464 12 of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) 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 d. “sale date” means the date of execution of this Bond Purchase Agreement by all parties. 9. Closing Conditions. The Underwriter has entered into this Bond Purchase Agreement in reliance upon the representations, warranties and covenants herein and the performance by the Authority and the City of their respective obligations hereunder, both as of the date hereof and as of the date of the Closing. The Underwriter’s obligations hereunder are and shall be subject to the following additional conditions: (a) Bring-Down Representation. The representations, warranties and covenants of the Authority and the City contained herein shall be true and correct at the date hereof and at the time of the Closing, as if made on the date of the Closing. (b) Executed Agreements and Performance Thereunder. At the time of the Closing: (i) the City Documents and the Authority Documents shall be in full force and effect, and shall not have been amended, modified or supplemented except with the prior written consent of the Underwriter; (ii) there shall be in full force and effect such resolutions (the “Authorizing Resolutions”) as, in the opinion of Bond Counsel, shall be necessary in connection with the transactions on the part of the Authority and the City contemplated by the City Documents and the Authority Documents; (iii) the Authority shall perform or have performed its obligations required or specified in the Authority Documents to be performed at or prior to Closing; (iv) the City shall perform or have performed its obligations required as specified in the City Documents to be performed at or prior to Closing; and (v) the Official Statement shall not have been supplemented or amended, except pursuant to Paragraph 6(j) or 7(j), or as otherwise may have been agreed to in writing by the Underwriter. (c) No Default. At the time of the Closing, no default shall have occurred or be existing under the Authority Documents or the City Documents and neither the Authority nor the City shall be in default in the payment of principal or interest on any of its bonded indebtedness or other obligations payable from the City’s general fund which default shall adversely impact the ability of the Authority to make payments on the Bonds or the City to make payments pursuant to the Lease. (d) Termination Events. The Underwriter shall have the right to terminate this Bond Purchase Agreement, without liability therefor, by written notification to the Authority and the Page 465 13 City if at any time at or prior to the Closing the market price or marketability of the Bonds, or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall have been materially adversely affected in the reasonable judgment of the Underwriter (evidenced by a written notice to the City and the Authority terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds) by reason of any of the following: (i) an amendment to the Constitution of the United States or by any legislation in or by the Congress of the United States or by the State, or the amendment of legislation pending as of the date of the Authority Documents or the City Documents in the Congress of the United States, or the recommendation to Congress or endorsement for passage (by press release, other form of notice or otherwise) of legislation by the President of the United States, the Treasury Department of the United States, the Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives, or the proposal for consideration of legislation by either such Committee, or the presentment of legislation for consideration as an option by either such Committee, or by the staff of the Joint Committee on Taxation of the Congress of the United States, or the favorable reporting for passage of legislation to either House of the Congress of the United States by a Committee of such House to which such legislation has been referred for consideration, or any decision of any Federal or State court or any ruling or regulation (final, temporary or proposed) or official statement on behalf of the United States Treasury Department, the Internal Revenue Service or other Federal or State authority materially adversely affecting the Federal or State tax status of the Authority or the City, or the interest on bonds or notes or obligations of the general character of the Bonds; or (ii) any legislation, ordinance, rule or regulation shall be introduced in, or be enacted by any governmental body, department or agency of the States or a decision by any court of competent jurisdiction within the State or any court of the United States shall be rendered which, in the reasonable opinion of the Underwriter, materially adversely affects the market price of the Bonds; or (iii) legislation shall be enacted by the Congress of the United States, or a decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or official statement by, or on behalf of, the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall be issued or made to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the issuance, offering or sale of the Bonds, including all underlying obligations, as contemplated hereby or by the Official Statement, is in violation or would be in violation of, or that obligations of the general character of the Bonds, or the Bonds, are not exempt from registration under, any provision of the federal securities laws, including the Securities Act of 1933, as amended and as then in effect, or that the Indenture needs to be qualified under the Trust Indenture Act of 1939, as amended and as then in effect; or (iv) the New York Stock Exchange or other national securities exchange, or any governmental or regulatory 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 the Underwriter; or Page 466 14 (v) a general banking moratorium shall have been established by federal or State authorities; or (vi) the United States has become engaged in hostilities which have resulted in a declaration of war or a national emergency or there has occurred any escalation of current or other outbreak or escalation of hostilities or a national or international calamity or crisis, financial or otherwise, the effect of such outbreak, escalation, calamity or crisis on the financial markets of the United States being such as, in the reasonable opinion of the Underwriter, would affect materially and adversely the ability of the Underwriter to market the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; or (vii) the commencement of any action, suit or proceeding described in Paragraphs 6(e) or 7(e) hereof; or (viii) there shall be in force a general suspension of trading on the New York Stock Exchange; or (ix) any event occurring or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue or incorrect in any material respect any statement or information contained in the Preliminary Official Statement or in the Official Statement or has the effect that the Preliminary Official Statement or the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (x) any rating of the Bonds or other obligations of the City shall have been downgraded, suspended or withdrawn or placed on negative outlook or negative watch by a national rating service, which, in the Underwriter’s reasonable opinion, materially adversely affects the marketability or market price of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; or (xi) any proceeding shall be pending or threatened by the Securities and Exchange Commission against the Authority or the City; or (xii) a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; or (xiii) a decision by a court of the United States shall be rendered, or a stop order, release, regulation or no-action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Bonds, including the underlying obligations as contemplated by this Bond Purchase Agreement or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds, is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act, the Exchange Act and the Trust Indenture Act. (e) Closing Documents. At or prior to the Closing, the Underwriter shall receive with respect to the Bonds (unless the context otherwise indicates) the following documents: Page 467 15 (1) Bond Opinion. The approving opinions of Bond Counsel dated the date of Closing and substantially in the forms included as APPENDIX D to the Official Statement and a reliance letter(s) thereon dated the date of Closing addressed to the Underwriter and the Trustee. (2) Supplemental Opinion. A supplemental opinion of Bond Counsel dated the date of Closing, addressed to the Underwriter, to the effect that: (A) the statements on the cover of the Official Statement and in the Official Statement under the captions “INTRODUCTION” (excluding the following subheadings: “- Forward-Looking Statements,” and “- Summary of Terms”), “THE BONDS,” “THE LEASED PREMISES,” “SECURITY FOR THE BONDS,” and “TAX MATTERS,” and in “APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” and “APPENDIX D – FORMS OF OPINIONS OF BOND COUNSEL,” 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 Bonds, the Lease, the Indenture, and Bond Counsel’s final opinion concerning certain federal tax matters relating to the Series A Bonds, are accurate in all material respects as of the date of Closing; provided, that Bond Counsel need not express any opinion with respect to any financial or statistical data contained therein or with respect to DTC or the book- entry system in which the Bonds are initially delivered; (B) The Lease, the Continuing Disclosure Certificate and this Bond Purchase Agreement have been duly authorized, executed and delivered by the City and the Authority, as applicable, and are valid, legal and binding agreement of the City and the Authority enforceable in accordance with their terms, except that the rights and obligations under the Lease, the Continuing Disclosure Certificate and this Bond 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. (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. (3) Negative Assurance Letter of Disclosure Counsel. A letter of Best Best & Krieger LLP, Disclosure Counsel to the Authority and the City dated the date of Closing and addressed to the Authority, the City, and the Underwriter to the effect that based upon their participation in the preparation of the Official Statement as Disclosure Counsel to the Authority and without having undertaken to determine independently the accuracy or completeness of the contents in the Official Statement, such counsel has no reason to believe that the Preliminary Official Statement (except for the completion of pricing information and any other matters or terms of the Bonds relating thereto) as of its date or as of ________, 2019 or the Official Statement as of its date or as of the date of the Closing (except that no opinion is expressed as to any financial, statistical, economic, engineering or demographic data or forecasts, numbers, charts, tables, graphs, maps, estimates, projections, assumptions or expressions of opinion, any information about feasibility, valuation, appraisals, assessed values, market absorption, real estate, ownership, environmental or archaeological matters, Appendices B, C, D, or F thereto, or any information about book entry, The Page 468 16 Depository Trust Company, debt service requirements or tax exemption included or referred to therein, which we expressly exclude from the scope of this paragraph and as to which we 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. (4) Opinion of City Attorney. An opinion of the City Attorney, dated the date of the Closing and addressed to the Authority, the Trustee and the Underwriter, to the effect that: (A) the City is a municipal corporation duly organized and validly existing under the Constitution and laws of the State of California; (B) the resolution of the City approving and authorizing the execution and delivery of the City Documents and approving and authorizing the issuance of the Bonds and the delivery of the Official Statement and other actions of the City was duly adopted at a meeting of the governing body of the City which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the resolution is now in full force and effect and has not been amended or superseded in any way; (C) there is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court or public body pending with respect to which the City has been served or, to such counsel’s knowledge, threatened against or affecting the City, except as may be disclosed in the Official Statement, which would materially adversely impact the City’s ability to complete the transactions contemplated by the City Documents, the Official Statement or any other document or certificate related to such transactions, restrain or enjoin the collection of Lease Payments with respect to the Lease, or in any way contesting or affecting the validity of the Bonds, the Official Statement or the City Documents; (5) Authority Counsel Opinion. An opinion of counsel to the Authority, dated the date of the Closing and addressed to the City, the Trustee and the Underwriter, to the effect that: (A) the Authority is a joint exercise of powers authority organized and existing under the laws of the State of California; (B) the resolution of the Authority approving and authorizing the execution and delivery of the Authority Documents, the Bonds and the Official Statement and other actions of the Authority was duly adopted at a meeting of the governing body of the Authority which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the resolution is now in full force and effect and has not been amended or superseded in any way; (C) to the knowledge of such counsel, there is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court or public body pending with respect to which the Authority has been served or, to the such counsel’s knowledge, threatened against or affecting the Authority, except as may be disclosed in the Official Statement, which would materially adversely impact the Authority’s ability to complete the transactions contemplated by the Authority Documents, the Official Statement or any other document or certificate related to such transactions, restrain or enjoin the collection of Lease Payments with respect to the Lease, or in any Page 469 17 way contesting or affecting the validity of the Bonds, the Official Statement, the Authority Documents or the transactions described in and contemplated thereby wherein an unfavorable decision, ruling or finding would materially adversely affect the validity and enforceability of the Bonds or the Authority Documents or in which a final adverse decision could materially adversely affect the operations of the Authority; (D) to the knowledge of such counsel, 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; (6) Trustee Counsel Opinion. An opinion of counsel to the Trustee, dated the date of the Closing, addressed to the City, the Authority and the Underwriter, in form and substance acceptable to the City and Underwriter. (7) Underwriter’s Counsel Opinion. An opinion of Underwriter’s Counsel, dated the date of the Closing addressed to the Underwriter, in such form as may be acceptable to the Underwriter. (8) City Certificate. A certificate, dated the date of Closing, signed by a duly authorized official of the City satisfactory in form and substance to the Underwriter to the effect that: (a) the representations, warranties and covenants of the City contained in this Bond Purchase Agreement are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing; (b) the City has complied with all agreements, covenants and conditions to be complied with by the City at or prior to the Closing under the City Documents; (c) to the best of such official’s knowledge, no event affecting the City has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the Closing the statements or information contained in the Official Statement or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein, in the light of the circumstances under which they were made, not misleading in any material respect. (9) Authority Certificate. A certificate of the Authority, dated the date of the Closing, signed on behalf of the Authority by the President or other duly authorized officer of the Authority to the effect that (a) the representations, warranties and covenants of the Authority contained herein and in the Authority Documents are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing; (b) the Authority has complied with all agreements, covenants and conditions to be complied with by the Authority at or prior to the Closing under the Authority Documents and (c) to the best of such official’s knowledge, no event affecting the Authority has occurred since the date of the Official Statement which has not been disclosed therein or in any supplement or amendment thereto which event should be disclosed in the Official Statement in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (10) Trustee’s Certificate. A Certificate of the Trustee, dated the date of Closing, in form and substance acceptable to counsel for the Underwriter to the effect that (a) the Trustee is duly organized and existing as a national banking association in good standing under the Page 470 18 laws of the United States, having the full power and authority to accept and perform its duties under the Indenture; (b) subject to the provisions of the Indenture, the Trustee will apply the proceeds from the Bonds to the purposes specified in the Indenture; and (c) the Trustee has duly authorized and executed the Indenture. (11) Title Policy. A copy of a CLTA or ALTA title insurance policy in an amount equal to the principal amount of the Bonds, insuring the City’s leasehold interest in the Leased Premises, subject only to Permitted Encumbrances (as defined in the Lease) or such other acceptable encumbrances. (12) Transcripts. Two CD transcripts of the proceedings prepared by Bond Counsel relating to the authorization and issuance of the Bonds will be delivered in due course after the Closing. (13) Official Statement. The Official Statement and each supplement or amendment, if any, thereto, executed on behalf of the Authority by a duly authorized officer of each. (14) Documents. An original executed or certified copy of each of the Authority Documents, the City Documents and the Joint Exercise of Powers Agreement (the “JPA Agreement”), dated as of April 22, 1999, between the City, the Rancho Cucamonga Fire Protection District and the former Rancho Cucamonga Redevelopment Agency. (15) City Resolution. Certified copy by the City Clerk, of each resolution of the City relating to the City Documents, the actions contemplated thereby, provided that such resolutions may be contained in the transcripts. (16) Authority Resolution. Certified copy by the Secretary or Assistant Secretary of the Authority, of each resolution of the Authority relating to the Authority Documents, the Bonds and the transactions contemplated thereby, provided that such resolutions may be contained in the transcripts. (17) IRS Form 8038-G. Evidence that the federal tax information form 8038-G has been prepared for filing. (18) Tax/Arbitrage Certificate. A tax/arbitrage certificate in form satisfactory to Bond Counsel, including the Issue Price Certificate in the form attached hereto as Exhibit B. (19) Ratings. Evidence as of the Closing satisfactory to the Underwriter that the Bonds have received the ratings set forth in the Official Statement and that such ratings have not been reduced or withdrawn. (20) CDIAC Statement. A copy of the Notice of Final Sale required to be delivered to the California Debt and Investment Advisory Commission pursuant to Section 53583 of the Government Code and Section 8855(g) of the Government Code. (21) Additional Documents. Such additional certificates, instruments and other documents as the Underwriter and Bond Counsel may reasonably deem necessary. Page 471 19 If the Authority or the City shall be unable to satisfy the conditions contained in this Bond Purchase Agreement, or if the obligations of the Underwriter shall be terminated for any reason permitted by this Bond Purchase Agreement, this Bond Purchase Agreement may be terminated by the Underwriter, and none of the Underwriter, the Authority or the City shall be under further obligation hereunder. 10. Expenses. Except as otherwise provided in this Section, the Underwriter shall be under no obligation to pay, and the Authority or the City shall pay or cause to be paid, the expenses incident to the performance of the obligations of the Authority and the City hereunder including but not limited to: (a) the costs of the preparation and printing, or other reproduction (for distribution on or prior to the date hereof) of the City Documents and the Authority Documents and the cost of preparing, printing, issuing and delivering the Bonds; (b) the fees and disbursements of any counsel, municipal advisors, accountants or other experts or consultants retained by the Authority or the City; (c) the fees and disbursements of Bond Counsel and Disclosure Counsel; (d) the cost of preparation and printing the Preliminary Official Statement and any supplements and amendments thereto and the cost of preparation and printing of the Official Statement, including a reasonable number of copies thereof for distribution by the Underwriter; and (e) charges of rating agencies for the rating of the Bonds. The Underwriter shall pay all expenses incurred by the Underwriter in connection with the public offering and distribution of the Bonds including, but not limited to: (i) the fees and disbursements of Underwriter’s Counsel; and (ii) all out-of-pocket disbursements and expenses incurred by the Underwriter in connection with the offering and distribution of the Bonds (including other expenses, fees of the California Debt and Investment Advisory Commission, CUSIP Service Bureau fees, and any other fees and expenses), except as otherwise provided in the preceding paragraph or otherwise agreed to by the Underwriter, the Authority and the City in writing. Any meals in connection with or adjacent to meetings, rating agency presentations, pricing activities or other transaction-related activities shall be considered an expense of the transaction and included in the expense component of the Underwriter’s discount. 11. Notice. Any notice or other communication to be given to the Underwriter may be given by delivering the same to Stifel, Nicolaus & Company, Incorporated, One Montgomery Street, 35th Floor, San Francisco, California 94104, Attention: Public Finance. Any notice or other communication to be given to the Authority or the City pursuant to this Bond Purchase Agreement may be given by delivering the same in writing to such entity, at the addresses set forth on the cover page hereof. 12. Entire Agreement. This Bond Purchase Agreement, when accepted by the Authority and the City, shall constitute the entire agreement among the Authority, the City and the Underwriter and is made solely for the benefit of the Authority, the City and the Underwriter (including the successors or assigns of any Underwriter). Except as provided in Section 16 below, no other person shall acquire or have any right hereunder by virtue hereof, except as provided herein. Page 472 20 All the Authority’s and the City’s representations, warranties and agreements in this Bond Purchase Agreement shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Underwriter, until the earlier of (a) delivery of and payment for the Bonds hereunder, and (b) any termination of this Bond Purchase Agreement. 13. Definitions. Terms not otherwise defined herein shall have the same meaning as when used in the Indenture or the Lease. 14. 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. 15. State of California Law Governs. The validity, interpretation and performance of the Authority Documents shall be governed by the laws of the State. 16. No Assignment. The rights and obligations created by this Bond Purchase Agreement shall not be subject to assignment by the Underwriter, the Authority or the City without the prior written consent of the other parties hereto. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Page 473 S-1 17. Counterparts. This Bond Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. STIFEL, NICOLAUS & COMPANY, INCORPORATED By: Managing Director The foregoing is hereby agreed to and accepted as of the date first above written: RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY By: Title: Time of Execution: _____________ p.m. California time CITY OF RANCHO CUCAMONGA By: Title: Time of Execution: _____________ p.m. California time [EXECUTION PAGE OF BOND PURCHASE AGREEMENT] Page 474 A-1 EXHIBIT A MATURITY SCHEDULE RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 LEASE REVENUE BONDS (FIBER OPTICS PROJECT) $_____________ Series A Bonds (Tax-Exempt) MATURITY SCHEDULE Maturity (November 1) Principal Amount Interest Rate Yield Price 10% Test Satisfied* 10% Test Not Satisfied Subject to Hold-The- Offering- Price Rule 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 20__(T) 20__(T) (T) Term Bond. (C) Priced to optional call at [par] on November 1, 20__. * At the time of execution of this Bond Purchase Agreement and assuming orders are confirmed by the close of the business day immediately following the date of this Bond Purchase Agreement. Page 475 A-2 RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 LEASE REVENUE BONDS (FIBER OPTICS PROJECT) $_____________ Series B Bonds (Taxable) MATURITY SCHEDULE Maturity (November 1) Principal Amount Interest Rate Yield Price 2020 2021 2022 2023 2024 2025 Page 476 B-1 EXHIBIT B FORM OF ISSUE PRICE CERTIFICATE RANCHO CUCAMONGA PUBLIC FINANCE AUTHORITY 2019 LEASE REVENUE BONDS (FIBER OPTICS PROJECT) $_____________ Series A Bonds (Tax-Exempt) ISSUE PRICE CERTIFICATE [TO COME FROM BOND COUNSEL] Page 477 City of Rancho Cucamonga 2019 Lease Revenue Bonds (Fiber Optic Project) January 16, 2019 2 Overview of Fiber Optic Project •Fiber Optic Master Plan adopted at September 20, 2017 City Council meeting •In furtherance of Fiber Optic Master Plan, the City plans to finance the acquisition, design, construction and equipping of a fiber optic network (the “Project”) throughout the City Project constructed over 3 phases for a total cost of $21.6 million Anticipated Phase 1 will be funded from bond proceeds and Phases 2 and 3 through revenues generated from the Project 3 R. C. Public Finance Authority •Pursuant to the laws of the State of California, the City cannot directly issue bonds which are secured by payments from the City’s General Fund for a period in excess of one year •However, a joint powers authority created pursuant to Joint Exercise of Powers Act, Government Code Section 6500 et. seq. (the “Act”) may issue bonds to finance capital improvements of its member agencies. •Rancho Cucamonga Public Finance Authority (the “Authority”) was established pursuant to a Joint Exercise of Powers Agreement dated April 22, 1999 among the City, the former Redevelopment Agency and the Fire Protection District 4 Financing of Fiber Optic Project •Propose that the Authority issue the 2019 Lease Revenue Bonds (the “2019 Bonds”) to finance approximately $13.5 million to fund Phase 1 of the Project 2019 Bonds to be issued under the Act 2019 Bonds to be secured by Lease Payments with respect to the Leased Premises, comprised of the Goldy S. Lewis Community Center, the James L. Brulte Senior Center and accompanying parking lot •On December 19, 2018, City Council conducted public hearing regarding the financing of the Project as required by the Act 5 Tonight’s Agenda Items -City •City’s Action Items Adopt City Resolution authorizing proceedings and agreements relating to the financing, approving issuance and sale of bonds by the Authority, approving an Official Statement, and authorizing official actions Adopt City Resolution authorizing the execution and recordation of that certain release of lien and termination of agreements related to the Central Park property 6 Tonight’s Agenda Item -Authority •Authority’s Action Item Adopt Authority Resolution authorizing the issuance of its lease revenue bonds in the original principal amount of not to exceed $14,500,000 in connection with the financing, authorizing and directing execution of an Indenture of Trust, a Lease Agreement, a Bond Purchase Agreement and authorizing an Official Statement and other related documents 7 Bond Documentation •Overview of Legal Documents: Indenture of Trust –Between the Authority and Trustee, setting forth the terms and provisions relating to the 2019 Bonds, including establishment of the amortization schedule, redemption provisions, repayment accounts and event of default remedies Lease Agreement –Between the Authority and the City, under which the City leases property to the Authority and the Authority leases property back to City Preliminary Official Statement -Describes the general terms of the 2019 Bonds, identified security for repayment and discloses potential risks to prospective investors o Continuing Disclosure Agreement -Included as an appendix to the Preliminary Official Statement and outlines the annual information the Authority and City will agree to provide to the municipal bond markets 8 Bond Documentation (cont’d) •Overview of Legal Documents: Bond Purchase Agreement -By and among the Authority, City and Underwriter that sets the terms and conditions pursuant to which the Underwriter will purchase the 2019 Bonds from the Authority Release of Lien and Termination Agreement o Lien placed on the Leased Premises in connection with 1988 Certificates of Participation (the “1988 COPs”) o 1988 COPs have been fully prepaid and the lien needs to be removed from the property as it was not done at such time 9 Overview of 2019 Bonds •Based on credit rating presentation to Standard & Poors (S & P) by the City financing team on Jan 7, 2019, the 2019 Bonds have been rated AA by S&P Rating Agency •Secured by Revenues, consisting primarily of Lease Payments to be made under the terms of the Lease Agreement •No debt service reserve fund •Comprised of Tax-Exempt and Taxable portions •Par size of 2019 Bonds will not exceed $14.5 million, true interest rate will not exceed 4.5% and Underwriter’s Discount will not exceed 0.65% 10 Estimated Sources and Uses of 2019 Bond Proceeds* •Level Debt Service; 20-year term Estimated average annual debt service of approximately $960,000 •Interest payments on 11/1 and 5/1, commencing 11/1/19 •Principal payments on 5/1, commencing 5/1/20 *Preliminary; subject to change. Based on market conditions as of 12/13/18 Sources Series A Series B Total Bond Proceeds: Par Amount $9,650,000 $2,315,000 $11,965,000 Premium 1,588,243 1,588,243 11,238,243 2,315,000 13,553,243 $11,238,243 $2,315,000 $13,553,243 Uses Project Fund Deposits: Project Fund $11,006,930 $2,254,432 $13,261,362 Delivery Date Expenses: Cost of Issuance $174,349 $46,903 $221,252 Underwriter's Discount 56,964 13,665 70,629 231,313 60,568 291,881 $11,238,243 $2,315,000 $13,553,243 11 Financing Schedule* January 16, 2019 (Tonight) City Council approves legal and financing documents January 31, 2019 Pricing February 14, 2019 Closing *Preliminary; subject to change •The proposed bond issuance schedule is as follows: 12 Recommendation •Staff recommends City Council/Authority: Adopt City Resolution No. 19-002 Approving the Financing Adopt City Resolution No. 19-003 Approving the Release of Lien Adopt Authority Resolution No. PFA 2019-001 Authorizing Issuance of Lease Revenue Bonds