HomeMy WebLinkAbout14 - Fire Station No. 2 — Authorizing the Preparation, Sale and Delivery of Certificates of Participation, and Award of ContractQ �EwPpRT
CITY OF
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<,FORN'P City Council Staff Report
November 10, 2020
Agenda Item No. 14
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: David A. Webb, Public Works Director - 949-644-3311,
dawebb@newportbeachca.gov
Carol Jacobs, Acting Finance Director - 949-644-3313
cjacobs@newportbeachca.gov
PREPARED BY: Peter Tauscher, Senior Civil Engineer - 949-644-3316
ptauscher@newportbeachca.gov
Steve Montano, Deputy Finance Director — 949-644-3240
smontano@newportbeachca.gov
Fire Station No. 2 — Financing Plan and Resolution Authorizing the
TITLE: Preparation, Sale and Delivery of Not to Exceed $10,000,000 Principal
Amount of Certificates of Participation, and Award of Fire Station
No. 2 Construction Contract No. 8269-2 (15F13)
Staff has received acceptable bids for the Fire Station No. 2 project. This new Fire Station
No. 2, located at the corner of 28th Street and Newport Boulevard, will replace the current
Lido Fire Station No. 2 on 32nd Street, which has exceeded its useful life. Staff is
requesting City Council approval to award the construction contract to Robert Clapper
Construction Services, Inc. (RCC) of Rialto, California and approve the supporting
professional consultant service agreement and specified project financing as requested.
This report also describes the contours of a financing plan and its conformance to the
City's Debt Policy and seeks City Council approval of a resolution which sets forth the
terms and conditions for the sale of City of Newport Beach Certificates of Participation
2020A for the Fire Station No. 2 project.
RECOMMENDATION:
a) Find this project exempt from the California Environmental Quality Act (CEQA)
pursuant to Section 15332 (In -Fill Development Projects) of the CEQA Guidelines.
This exemption applies to in -fill development projects in urban areas that are
consistent with the General Plan and applicable development standards. In addition,
the proposed development must occur on a site of no more than five acres, have no
value as habitat for endangered, rare or threatened species, be adequately served by
all utilities and public services, and must not result in any significant effects relating to
traffic, air quality, water quality, or any other significant effect on the environment due
to an unusual circumstance;
14-1
Fire Station No. 2 — Financing Plan and Resolution Authorizing the Preparation, Sale
and Delivery of Not to Exceed $10,000,000 Principal Amount of Certificates of
Participation, and Award of Fire Station No. 2 Construction Contract No. 8269-2 (15F13)
November 10, 2020
Page 2
b) Adopt Resolution No. 2020-96, A Resolution of the City Council of the City of Newport
Beach, California, Authorizing the Preparation, Sale and Delivery of Not to Exceed
$10,000,000 Principal Amount of Certificates of Participation, Series 2020A (Fire
Station No. 2 Project) and Approving Certain Documents and Authorizing Certain
Actions in Connection Therewith;
c) Approve the project drawings and specifications;
d) Award Contract No. 8269-2 to R.C. Construction Services, Inc. for the total bid price
of $6,289,000, and authorize the Mayor and City Clerk to execute the contract;
e) Establish a contingency of $628,900 (approximately ten percent) to cover the cost of
unforeseen work not included in the original contract; and
f) Approve Amendment No. 2 to the current Professional Services Agreement with WLC
Architects Inc. for a not to exceed fee of $92,000 for construction support services,
and authorize the Mayor and City Clerk to execute the Agreement.
BACKGROUND:
Constructed 68 years ago, Lido Fire Station No. 2 has exceeded its service life and
requires frequent repairs. In the 2014 Facility Maintenance Management Program
Report, this building received a low Condition Index rating and was identified as in need
of replacement. Additionally, Lido Fire Station No. 2 does not meet current building codes
or expectations for a modern Fire Department.
On November 22, 2016, Council awarded a Professional Services Agreement (PSA) in
the amount of $525,800 to WLC Architects (WLC) for the design of a new Fire Station on
the current 32nd Street site.
In lieu of demolishing and constructing a new fire station on the existing property (which
would also require constructing and relocating the fire station operation to a temporary
facility), the City had the opportunity to purchase a 17,693 square -foot property located
at 2807 Newport Boulevard where the new Fire Station No. 2 facility could be constructed
while the existing station remained operational. In January 2018, the new property was
purchased by the City and all planning and design efforts for the new station were then
directed at this property.
Fire Station No. 2 replacement design focuses on a land efficient layout that meets Fire
Department and community programming needs, including the ability to increase
staffing/equipment levels during peak periods. The project design team, Public Works
and Fire Department staff prepared multiple conceptual designs for consideration and
worked extensively with the community, including conducting District Townhall meetings,
Planning Commission and City Council meetings, as well as other public outreach
activities that sought comments and suggestions on the community needs regarding the
new planned facility.
14-2
Fire Station No. 2 — Financing Plan and Resolution Authorizing the Preparation, Sale
and Delivery of Not to Exceed $10,000,000 Principal Amount of Certificates of
Participation, and Award of Fire Station No. 2 Construction Contract No. 8269-2 (15F13)
November 10, 2020
Page 3
The general design and layout were ultimately approved by the community. On
October 22, 2019, City Council reviewed and approved the conceptual design that
included a fire station and separate public restroom facility as requested by the
community. The final contract documents are for construction of an 11,649 SF fire station
building and detached 148 SF public restroom building. During the design process, Fire
Department staff were instrumental in determining the most efficient layout of the
proposed fire station.
Additionally, on June 9, 2020, City Council awarded a Professional Services Agreement
(PSA) with Erickson Hall Construction (EHC) for the Fire Station No. 2 construction
management contract for a not -to -exceed price of $371,150. To date EHC has been able
to assist the City by providing design and constructability reviews of the bid packages and
utility coordination.
FUNDING REQUIREMENTS:
Planning and construction of this project has been included within the City Facility
Financing Plan (FFP) for many years. The adopted FY 2020-21 Capital Improvement
Program budget includes sufficient funding for award of the construction contract, related
construction oversight and testing work, and other incidental cost. These construction
costs will be expensed to Fire Station Fund Account No. 53201-980000-15F13.
Total overall current and estimated remaining project costs (excluding land purchase) are
as follows:
Vendor
WLC Architects
Erickson Hall Construction
R.C. Construction Services, Inc
R.C. Construction Services, Inc
WLC Architects
Geocon West, Inc.
Various*
Various
Various
Various
Various
City of Newport Beach
Purpose
Amount
Design
$
525,800
Construction Management
$
371,150
Construction Contract
$
6,289,000
Construction Contingency
$
628,900
Construction Support Services
$
92,000
Testing/Inspecting/Geotech
$
72,000
Roadway and Signal Improvements*
$
735,000'
Fire Communication System
$
130,000
Utilities Connections
$
50,000
Specialty Equipment/Service
$
40,000
Incidentals
$
100,000
Permitting Fees
$
16,500
Total: $ 9,050,350
*Portion of the Balboa Peninsula Crosswalk Improvement Project, Contract No. 7288-2
14-3
Fire Station No. 2 — Financing Plan and Resolution Authorizing the Preparation, Sale
and Delivery of Not to Exceed $10,000,000 Principal Amount of Certificates of
Participation, and Award of Fire Station No. 2 Construction Contract No. 8269-2 (15F13)
November 10, 2020
Page 4
PROJECT FINANCING:
On May 12, 2020, the City Council reviewed the Proposed FY 2020-21 Capital
Improvement Program budget. As part of the steps taken to address the estimated
revenue losses due to the global pandemic, some capital projects were proposed to be
delayed. During the discussion, Mayor O'Neill proposed moving forward with the Fire
Station No. 2 project, to be financed for a term not to exceed 10 years. This would allow
the City to take advantage of a very favorable interest rate environment, free up General
Fund resources during a time of economic uncertainty and allow the City to continue to
move forward with the project. With Council Member Muldoon recusing himself, there was
a unanimous straw vote to support evaluating financing for the Fire Station No. 2 project.
The City proposes to issue certificates of participation (COPs) to finance project costs
and costs related to the issuance of the COPs. The COPs will be structured with a 10 -
year term or final maturity of July 1, 2030. Though the term of the COPs may be
considered less than the useful life of the project, the accelerated repayment conforms to
the City's Debt Policy by reducing the debt burden and total borrowing costs. Annual debt
service payments are level and conform with the Debt Policy. Current market rates
estimate annual repayment is approximately $962,000 for total debt service of
approximately $9,618,000. To provide a cost ceiling for the Resolution to authorize
COPs, as required by the Debt Policy, we assume a 2% maximum true interest cost,
which would equate to a maximum annual debt service of $1,073,700.
Other structuring elements are market driven. The COPs assume serial, current interest
certificates and premium coupons (i.e. the coupon rate is greater than the yield rate). All
help improve the cost effectiveness of the borrowing as well as conform to the Debt Policy.
The City's Debt Policy recommends an optional par call provision no later than 10 years.
Because the term of the COPs is 10 years, the market standard 10 -year call option does
not apply. To maximize repayment flexibility, a shorter call provision may be considered,
but is likely to make the COPs less attractive.
No additional funding is needed for a reserve or capitalized interest. The City benefits
from the highest lease credit ratings (Aa1/AA+/AA+), so the municipal market will not
require a debt service reserve fund. In line with the Debt Policy, there will be no
capitalized interest to defer debt service until project completion. The COPs will be
secured through the lease -lease -back structure, whereby the City will lease to and lease-
back from the Newport Beach Public Facilities Corporation, the Corona Del Mar Fire
Station and the Santa Ana Heights Fire Station properties to effectuate lease payments
securing the COPs.
In accordance with the Debt Policy, please see Attachment D for an independent analysis
of all financing scenarios considered with respect to this financing including the specific
recommendation for the COPs. The draft resolution authorizing the sale of COPs, and
proposed parameters staff is authorized to negotiate when the COPs priced, is in
Attachment E.
14-4
Fire Station No. 2 — Financing Plan and Resolution Authorizing the Preparation, Sale
and Delivery of Not to Exceed $10,000,000 Principal Amount of Certificates of
Participation, and Award of Fire Station No. 2 Construction Contract No. 8269-2 (15F13)
November 10, 2020
Page 5
Below is a Sources and Uses Table for the financing, which is preliminary based on
current market rates. The issuance of COPs will generate $9.235 million in proceeds
through a combination of principal and premium. The proceeds will be allocated
accordingly: $9.050 million to the Fire Station No. 2 project, and $185,000 to issuance
costs.
COP Proceeds Principal Amount $7,955,000
COP Proceeds Premium 1,280,356
TOTAL SOURCES $9,235,356
Project Fund Deposits
Project Fund
$9,050,350
Delivery Date Expenses
Cost of Issuance
146,800
Delivery Date Expenses
Underwriter's Discount
35,002
Other Uses of Funds
Rounding Proceeds
3,204
TELACU Construction Management
TOTAL USES
$9,235,356
The Finance Committee reviewed the contours of the proposed financing plan and its
conformance to the City's Debt Policy on September 24, 2020.
DISCUSSION:
On October 22, 2020, at 2 p.m. the City Clerk opened and read the following electronic
bids for this project:
After the bid opening, staff received a bid protest letter from the second lowest bidder,
PCN3, Inc., claiming that the low bidder's bid was non-responsive. According to the bid
protest letter, PCN3 suggests RCC is not self -performing at least 50 -percent of the
contract work. The low bidder then submitted a response to the bid protest. Staff has
reviewed the bid protest as well as the low bidder's response and determined the low
bidder does comply with the contract specifications for this project. Staff recommends
the City Council declare RCC as the lowest responsive bidder and award a contract to
RCC for the construction of Fire Station No. 2.
14-5
BIDDER
TOTAL BID AMOUNT
Low
Robert Clapper Construction Services, Inc.
$
6,289,000.00
2
PCN3, Inc.
$
6,790,000.00
3
TELACU Construction Management
$
6,839,897.00
4
AMG & Associates, Inc.
$
6,941,900.00
5
Barnhart -Reese Construction, Inc.
$
7,135,584.00
6
P. H. Hagopian Contractor
$
7,137,300.00
7
Act 1 Construction, Inc.
$
7,178,000.00
8
CALIBA, Inc.
$
7,548,000.00
9
Woodcliff Corporation
$
7,593,000.00
10
Horizons Construction Company Int'I Inc.
$
7,639,300.00
11
Royal Construction Corporation
$
7,777,000.00
12
Kemcorp Construction, Inc.
$
8,599,000.00
After the bid opening, staff received a bid protest letter from the second lowest bidder,
PCN3, Inc., claiming that the low bidder's bid was non-responsive. According to the bid
protest letter, PCN3 suggests RCC is not self -performing at least 50 -percent of the
contract work. The low bidder then submitted a response to the bid protest. Staff has
reviewed the bid protest as well as the low bidder's response and determined the low
bidder does comply with the contract specifications for this project. Staff recommends
the City Council declare RCC as the lowest responsive bidder and award a contract to
RCC for the construction of Fire Station No. 2.
14-5
Fire Station No. 2 — Financing Plan and Resolution Authorizing the Preparation, Sale
and Delivery of Not to Exceed $10,000,000 Principal Amount of Certificates of
Participation, and Award of Fire Station No. 2 Construction Contract No. 8269-2 (15F13)
November 10, 2020
Page 6
The bid amount submitted by RCC is 26 percent below the Engineer's Estimate of
$7,900,000. RCC possesses a California State General Building "B" Contractors License,
as required by the project specifications. Staff has performed background and reference
checks and has received good reports including their satisfactory completion of essential
facility projects for local agencies including Monterey Park, Rancho Cucamonga, and
Ontario.
Pursuant to the contract specifications, RCC is allotted 12 -months to complete the work.
Liquidated damages in the amount of $2,500.00 per calendar day may be assessed in
case of tardy completion.
Additional Consulting Services needed during Construction:
In addition to approving the construction contract with RCC, a contract amendment with
the project's design consultant, WLC Architects is necessary for $92,000. Additional
architectural oversite services are necessary to review construction submittals, respond
to requests for information and attend construction job site meetings.
Furthermore, Public Works invited four professional geotechnical firms to propose on
providing the necessary materials testing and special inspections required for this project.
Staff received and reviewed four proposals and selected Geocon West, Inc. (Geocon) as
the top team to meet the City's needs based on their experience and proposal
recommendations. Geocon's $72,000 testing and inspection proposal is cost effective
and reasonable for this project. Public Works will utilize their current on-call contract to
provide for the necessary geotechnical and material testing for this project.
ENVIRONMENTAL REVIEW:
On October 22, 2019, City Council found this project exempt from the California
Environmental Quality Act (CEQA) pursuant to Section 15332 (In -Fill Development
Projects) of the CEQA Guidelines. This exemption applies to in -fill development projects
in urban areas that are consistent with the General Plan and applicable development
standards.
On June 18, 2020, Planning Commission approved Site Development Review
No. SD2019-002 and Coastal Development Permit No. CD2019-039 (PA2019-098).
NOTICING -
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the Item). Moreover, Public Works has
presented and discussed this project at several prior City Council meetings, two District
1 Town Hall meetings, at a Planning Commission meeting, as well as sent notification
letters regarding proposed 28th Street frontage and parking modification to the affected
28th Street property owners.
14-6
Fire Station No. 2 — Financing Plan and Resolution Authorizing the Preparation, Sale
and Delivery of Not to Exceed $10,000,000 Principal Amount of Certificates of
Participation, and Award of Fire Station No. 2 Construction Contract No. 8269-2 (15F13)
November 10, 2020
Page 7
ATTACHMENTS:
Attachment A —
Attachment B —
Attachment C —
Attachment D —
Attachment E —
Attachment F —
Attachment G —
Attachment H —
Attachment I —
Attachment J —
Attachment K —
Attachment L —
Attachment M —
Location Map
Professional Service Agreement with WLC
PCN3, Inc. Bid Protest Letter and RCC Response Letter
Municipal Advisor's Analysis of Financing Scenarios
Resolution No. 2020-96
Site Lease
Lease -Purchase Agreement
Trust Agreement
Continuing Disclosure Agreement
Agency Agreement
Assignment Agreement
Certificate Purchase Agreement
Preliminary Official Statement
14-7
Attachment A
14-7
LENGEND
FIRE STATION No. 2
o
29TH STREET
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09
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28TH
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NOT 70 SCALE
LIDO FIRE STATION NO. 2
CITY OF NEWPORT BEACH
PUBLIC WORKS DEPARTMENT
REPLACEMENT
LOCATION MAP
C-8169-2
14-7
ATTACHMENT B
AMENDMENT NO. TWO TO
PROFESSIONAL SERVICES AGREEMENT
WITH WOLF F/LANG/CHRISTOPHER ARCHITECTS, INCORPORATED DBA WLC
ARCHITECTS, INC. FOR
FIRE STATION NO. 2 ARCHITECTURAL/ENGINEERING SERVICES
THIS AMENDMENT NO. TWO TO PROFESSIONAL SERVICES AGREEMENT
("Amendment No. Two") is made and entered into as of this 10th day of November, 2020
("Effective Date"), by and between the CITY OF NEWPORT BEACH, a California
municipal corporation and charter city ("City"), and WOLFF/LANG/CHRISTOPHER
ARCHITECTS, INCORPORATED, a California corporation DBA WLC ARCHITECTS,
INC. ("Consultant"), whose address is 8163 Rochester Avenue, Suite 100, Rancho
Cucamonga, California 91730, and is made with reference to the following:
RECITALS
A. On November 22, 2016, City and Consultant entered into a Professional Services
Agreement ("Agreement") for to engage Consultant to provide architectural and
engineering design services to prepare contract documents for Fire Station No. 2,
located at 475 32nd Street ("Project").
B. On December 31, 2019, City and Consultant entered into Amendment No. One to
the Agreement ("Amendment No. One") to extend the term of the Agreement and
to update insurance requirements.
C. The parties desire to enter into this Amendment No. Two to reflect additional
Services not included in the Agreement, as amended, to extend the term of the
Agreement to December 31, 2022 and to increase the total compensation.
NOW, THEREFORE, it is mutually agreed by and between the undersigned parties
as follows:
1. TERM
Section 1 of the Agreement is amended in its entirety and replaced with the
following: "The term of this Agreement shall commence on the Effective Date, and shall
terminate on December 31, 2022, unless terminated earlier as set forth herein."
2. SERVICES TO BE PERFORMED
Exhibit A to the Agreement shall be supplemented to include the Scope of
Services, attached hereto as Exhibit A and incorporated herein by reference ("Services"
or "Work"). Exhibit A to the Agreement and Exhibit A to this Amendment No. Two shall
collectively be known as "Exhibit A." The City may elect to delete certain Services within
the Scope of Services at its sole discretion.
ME
3. COMPENSATION TO CONSULTANT
Section 4.1 of the Agreement is amended in its entirety and replaced with the
following: "City shall pay Consultant for the Services on a time and expense not -to -
exceed basis in accordance with the provisions of this Section and the Schedule of Billing
Rates attached hereto as Exhibit B and incorporated herein by reference. Consultant's
compensation for all Work performed in accordance with this Agreement, including all
reimbursable items and subconsultant fees, shall not exceed Six Hundred Seventeen
Thousand Eight Hundred Dollars and 00/100 ($617,800.00), without prior written
authorization from City. No billing rate changes shall be made during the term of this
Agreement without the prior written approval of City."
The total amended compensation reflects Consultant's additional compensation
for additional Services to be performed in accordance with this Amendment No. Two,
including all reimbursable items and subconsultant fees, in an amount not to exceed
Ninety Two Thousand Dollars and 00/100 ($92,000.00).
4. INTEGRATED CONTRACT
Except as expressly modified herein, all other provisions, terms, and covenants
set forth in the Agreement shall remain unchanged and shall be in full force and effect.
[SIGNATURES ON NEXT PAGE]
Wolff/Lang/Christopher Architects, Incorporated DBA WLC Architects, Inc. Page 2
14-9
IN WITNESS WHEREOF, the parties have caused this Amendment No. Two to be
executed on the dates written below.
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
Date: !-0/2
By: di—� gt" {
Aaron C. Harp
City Attorney
ATTEST:
Date:
AW -
CITY OF NEWPORT BEACH,
a California municipal corporation
Date:
By:
Will O'Neill
Mayor
CONSULTANT: Wolff/Lang/Christopher
Architects, Incorporated, a California
corporation, DBA WLC Architects, Inc.
Date:
Leilani I. Brown James P. Dicamillo
City Clerk Chief Executive Officer
Date:
By:
Kelley Needham
Chief Financial Officer
[END OF SIGNATURES]
Attachments: Exhibit A — Scope of Services
Wolff/Lang/Christopher Architects, Incorporated DBA WLC Architects, Inc. Page 3
14-10
EXHIBIT A
SCOPE OF SERVICES
I. Construction Administration Phase
The Consultant shall conduct job site meetings at two (2) week intervals in order
to generally review and evaluate the construction schedule, monitor weekly
performance, review quality control standards, and provide assistance for any
clarification or revision to the contract for construction. Shop drawings and related
submittals shall be reviewed and returned to the Consultant for appropriate action.
The Project contractor's requests for information, proposal requests, and related
communications shall be attended to on a regular basis. The project contractor's
pay requests shall be reviewed by the Consultant on a monthly basis in
accordance with the amount of work completed and in accordance with the
contract documents. At every job site meeting, minutes shall be prepared,
published and distributed by the Consultant to all parties concerned, specifically
noting current action items and related responsibilities. Upon completion of the
Construction Phase, the Consultant shall organize and conduct a final walk-
through and review. A final punch list for all required corrections and remaining
work shall be prepared by the Consultant.
During the Construction Phase of the Project, the following services shall be
furnished:
A. Preconstruction Conference
A preconstruction conference shall be organized and conducted by the
Consultant to brief all parties concerned with general and special requirements
of the contract for construction. Procedural matters, routing of information, and
Project representatives shall be defined. Attendees shall include
representatives from the Newport Beach Fire Department, the Consultant, the
Project contractor, and all major Project subcontractors.
B. Job Site Meetings
Job site meetings at two (2) week intervals shall be scheduled and conducted
by the Consultant for the same day and time through the duration of the Project.
Scheduling, coordination, requests for information, and changes to the contract
for construction shall be routinely monitored. The Consultant shall publish and
distribute a field report for each job site meeting, documenting the progress of
construction and specifically noting current and delinquent action items. The
following number of meetings are anticipated to be required for the Project:
Wolff/Lang/Christopher Architects, Incorporated DBA WLC Architects, Inc. Page A-1 14-11
• Civil (2)
• Mechanical (3)
• Architectural (24)
• Electrical (3)
• Structural (3)
• Landscaping (3)
C. Submittal and Shop Drawing Review
The Consultant shall review all required shop drawings and related submittals
as required by the Project contract documents.
D. Project Closeout
At the completion of the Construction Phase, a final job site meeting and review
of the entire facility shall be conducted. A final punch list will be published and
distributed by the Consultant to all parties concerned, specifically noting
required corrections, non -conforming work, and work remaining to be
completed. A second walk-through shall be conducted when all punch list items
have been corrected, at which time a Final Notice of Completion shall be filed
by the City.
E. Record Documents
A set of final record documents will be created from the Project contractor's as -
built drawings.
Wolff/Lang/Christopher Architects, Incorporated DBA WLC Architects, Inc. Page A-2 14-12
Attachment C
PCN3, Inc. Bid Protest Letter and RCC Response Letter
14-13
PCN3
11082 Winners Circle, Unit B, Los Alamitos, Ca 90720 Phone: 562-493-4124 Fax: 562-493-4129, License#: 786518
October 26, 2020
Via Email
Via FedEx
To: Peter Tauscher, P.E.
City of Newport Beach
Public Works Department
100 Civic Center Dr.
Newport Beach, CA, 92660
ptauscher@newportbeachca.gov
Re: Bid Protest on bid proposal from Robert Clapper Construction Services, Inc. on Newport Beach
Fire Station No. 2 with project No. 15F13 and Contract No. C8269-2
Dear Mr. Tauscher:
am writing this letter in order to file bid protest against the bid proposal from Robert Clapper Construction
Services, Inc. with California contractor's license number 716719 hereinafter known as "RC Construction" on
above mentioned project for the reasons which I will explain below:
Per page 1 on 18 of Special provisions "All work necessary for the completion of this contract shall be done in
accordance with ...... (7) Standard Specifications for Public works Construction (2015 Edition) including
Supplements (Green Book)" (exhibit #1), which dictates in Part 1 — General Provisions; Section 2 — Scope and
Control of the Work; 2-3.2- Self Performance, "The Contractor Shall perform , with its own organization,
contract work amounting to at least 50 percent of the Contract Price..." (exhibit 2). The only exception would
be items identified by the city in the "bid" or "special Provisions" as "Specialty Items" No such "Specialty Items"
were identified by the city in the "bid" or "special Provisions". Thus, The Contractor needs to self -perform at
least 50 percent of the Contract price. RC Construction's bid as submitted on October 22nd, 2020, documented
that Subcontractors were performing 74.04% of the work (exhibit 3). Since RC Construction is not self -
performing 50% of the contract with its own work force then it's bid on abovementioned project is non-
responsive
As I have shown above Bid proposals from RC Construction is non-responsive, therefore, PCN3 is the lowest
responsive bidder on this project and the contract for this project should be awarded to PCN3. The name,
address, and telephone number of the person representing PCN3 is as follows:
Brian Abghari
11082 Winners Circle, Unit B, Los Alamitos, CA, 90720
Tel: 562-493-4124 X 407
Email: babghari@pcn3.com
Regards,
Brian Abghari
President
14-14
CITY OF NEWPORT BEACH
PUBLIC WORKS DEPARTMENT
SPECIAL PROVISIONS
Newport Beach Fire Station No. 2
PROJECT NO. 15F13
CONTRACT NO. C8269-2
INTRODUCTION
All work necessary for the completion of this contract shall be done in accordance with
(1) the ARCHITECT'S TECHNICAL SPECIFICATIONS attached hereto; (2) these
Special Provisions; (3) the Plans (Drawing No. B -5280-S); (4) the Building Materials
Survey Report; (5) Cal OSHA and SCAQMD Rules and Procedures; (6) the City's
Standard Special Provisions and Standard Drawings for Public Works Construction
(Current Edition) htt ://www.new ortbe s/ ublic-
works/resources ) Standard Specifications for Public Works Construction (2015
Edition), including supplements (Green Book)' (8) the applicable o es s ov -o�
merican u lic Wor s ssocia ion Standard Drawings, Latest Edition; and
(10) Building Permits.
Copies of the Standard Specifications for Public Works Construction may be purchased
online at www.bnibooks.com/products/standard-specifications-public-works-construction
or call 888-BNI BOOK (888-264-2665).
The following Special Provisions supplement or modify the Standard
Specifications for Public Works Construction as reference tated
hereinafter: /
PART 1 - GENERAL PROVISIONS
SECTION 00 — PRE-BID MEETING
00-1 JOBWALK
Type of job walk: VOLUNTARY
Where: 2807 Newport Boulevard, Newport Beach, 92663
When: October 8, 2020 at 10:00 AM
Requests for Information Due: October 13, 2020 at 1:00 p.m.
SECTION 1 — TERMS, DEFINITIONS, ABBREVIATIONS, UNITS OF MEASURE, AND
SYMBOLS
Page 1 of 18
14-15
14 ,► Greenbook 2018
SECTION 3 - CONTROL OF THE WORK
3-1 ASSIGNMENT. No Contract or portion thereof may be assigned without the consent of the
Board, except that the Contractor may assign money due or which will accrue to it under the Contract. If
given written notice, such assignment will be recognized by the Board to the extent permitted by law.
Any assignment of money shall be subject to all proper withholdings in favor of the Agency and, to all
deductions provided for in the Contract. All money withheld, whether assigned or not, shall be subject
to v e gency or comp e ' uld the Contractor be in default.
3-2 SELF -PERFORMANCE. The Contractor shall perform, with its own organization, Uonuract-
work amounting to at least 50 percent of the Contract Price except that any designated "Specialty Items"
may be performed by subcontract and the amount of any such "Specialty Items" so performed will be
deducted from the Contract Price before computing the amount required to be performed by the
Contractor with its own organization. "Specialty Items" will be identified by the Agency in the Bid or in
the Special Provisions. Where an entire item is subcontracted, the value of work subcontracted will be
based on the Contract Unit Price. When a portion of an item is subcontracted, the value of work
subcontracted will be based on the estimated percentage of the Contract Unit Price. This will be
determined from information submitted by the ,to a roval by the Engineer. /
3-3 SUBCONTRACTORS. The Contractor shall give personal attention to the fulfillment of -til
Contract. The Contractor shall keep the Work under its control. Subcontractors shall be considered
employees of the Contractor, and the Contractor shall be responsible for their work.
In addition to the requirements of 1-6.2, before the work of any Subcontractor is started, the
Contractor shall submit to the Engineer for approval a written statement listing the name, contractor
license number, and business address of each Subcontractor and a description and value of each portion
of the Work to be so subcontracted.
3-4 AUTHORITY OF THE BOARD AND THE ENGINEER. The Board has the final authority
in all matters affecting the Work. Within the scope of the Contract, the Engineer has the authority to
enforce compliance with the Plans and Specifications. The Contractor shall promptly comply with
instructions from the Engineer.
The decision of the Engineer is final and binding on all questions relating to: quantities; acceptability
of material, equipment, or work; execution, progress or sequence of work; and interpretation of the
Plans, Specifications, or other Contract Documents. This shall be precedent to any payment under the
Contract, unless otherwise ordered by the Board.
3-5 INSPECTION. The Work is subject to inspection and approval by the Engineer. The
Contractor shall notify the Engineer before noon of the Working Day before inspection is required.
Work shall be done only in the presence of the Engineer, unless otherwise approved. Any work done
without proper inspection will be subject to rejection. The Engineer and any authorized representatives
shall at all times have access to the Work during its construction at shops and yards and while in storage,
as well as to the Work site. The Contractor shall provide every reasonable facility for ascertaining that
the materials and workmanship conform to the Contract Documents. Inspection of the Work shall not
relieve the Contractor of the obligation to fulfill all conditions of the Contract.
3-6 THE CONTRACTOR'S REPRESENTATIVE. Before starting the Work, the Contractor
shall designate in writing a representative who shall have complete authority to act for it. An alternative
representative may be designated as well. The representative or alternate shall be present at the Work
site whenever work is in progress or whenever actions of the elements necessitate its presence to take
measures necessary to protect the Work, persons, or property. Any order or communication given to this
14-16
City of Newport Beach
$6,280,000.00
Page 1
Newport Beach Fire Station No. 2 (8269-2), bidding on October 22, 2020 2:00 PM (Pacific)
Printed 10/22/2020
Bid Results
LS 1
$4,000.00
Bidder Details
3 Provide As -Built Plans and Close -Out Documents
Vendor Name R.C. Construction Services Inc
LS 1
$5,000.00
Address 2223 N Locust Ave
L / C -� 3
Subtotal
Rialto, CA 92377
Total
United States
Subcontractors
Respondee Brooke Wollam
Name & Address Description License Num
CADIR
Respondee Title Preconstruction Services
Commercial Roofing Systems, Roofing 591222
1000000838
Phone 909-829-3688 Ext.
Inc.
Email bids@rcconstruction.com
11735 Goldring Road
Vendor Type CADIR
Arcadia, CA 91006
License # 716719
United States
CADIR 1000002662
PianotBids, Inc.
Bid Detail
Bid Format Electronic
Submitted October 22, 2020 1:54:03 PM (Pacific)
Delivery Method
Bid Responsive
Bid Status Submitted
Confirmation # 231867
Ranking 0
Respondee Comment
Buyer Comment
Attachments
File Title
File Name
File Type
Bid Submittal C-8269-2 RC Construction
Bid Submittal C-8269-2 RC Construction. pdf
General Attachment
Bid Bond C-8269-2 RC Construction
Bid Bond C-8269-2 RC Construction.pdf
Bid Bond
Line Items
Type Item Code UOM
Qty Unit Price
Line Total Comment
Section 1
1 Fire Station No. 2 Building
LS 1
$6,280,000.00
$6,280,000.00
2 60 -Day Planet Establishment and Maintenance Period
LS 1
$4,000.00
$4,000.00
3 Provide As -Built Plans and Close -Out Documents
LS 1
$5,000.00
$5,000.00
Subtotal
$6,289,000.00
Total
$6,289,000.00
Subcontractors
Name & Address Description License Num
CADIR
Amount Type
Commercial Roofing Systems, Roofing 591222
1000000838
$92,553.00 CADIR
Inc.
11735 Goldring Road
Arcadia, CA 91006
United States
PianotBids, Inc.
City of Newport Beach Page 2
Newport Beach Fire Station No. 2 (8269-2), bidding on October 22, 2020 2:00 PM (Pacific) Printed 10/22/2020
Bid Results
Name & Address
Description
License Num
CADIR
Amount
Type
Optima RPM
Finish Carpentry
961714
1000013611
$320,000.00
CADIR✓
17945 Sky Park Circle
Suite D
Irvine, CA 92614
United States
Newhouse Construction
Masonry
648103
1000548424
$87,098.43
Services
10704 Valley Drive
Riverside, CA 92505
' /
United States
V
Bennett Landscape
Landscape &Irrigation
479003
1000006863
$38,000.00
25889 Belle Porte Avenue
Harbor City, CA 90710
United States
Oak Hollow Restoration, Inc.
Rough Carpentry & Siding
1051967
1000364957
$975,300.00
32438 Oak Hollow Ct.
Wildomar, CA 92595
/
United States
Inland Pacific Coatings
Painting
585185
1000043948
$46,424.00
3556 Lytle Creek Rd.
Lytle Creek, CA 92358
United States
Shelton Fire Protection
Fire Suppresion
677631
1000004535
$57,520.00
VII,
'/
Company
22745 La Palma Ave.
Yorba Linda, CA 92887
United States
/
Upland Contracting Inc.
Rebar
481317
1000002198
$60,859.00
✓
P O Box 3877
Ontario , CA 91761
United States
PGC Construction Inc
Sheet Metal
829086
1000036314
$101,500.00
42309 Winchester Rd.
Ste. C
Temecula, CA 92591
United States
STONCOR GROUP INC.
Epoxy Flooring
256840
1000010163
$94,500.00
1000 East park ave. maple
shade
maple shade, NJ 08052
United States
Slater Glass & Mirror
Glazing
893323
1000004146
$89,900.00
"
145 E. Saint Joseph St.
Arcadia, CA 91006
United States
National Garage Door Co.
Four -Fold Doors
902465
1000004144
$137,612.00
3185 Fitzgerald Rd
Rancho Cordova, CA 95742
United States
Troy's Ornamental Iron Craft,
Structural Steel & Metal Fab
945177
1000412581
$243,800.00
Inc.
8150 Electric Ave
Stanton, CA 90680
United States
INLAND OVERHEAD DOOR CO
Overhead Doors
492369
1000017098
$54,000.00
12401 S La Cadena Dr
Colton, CA 92324
United States
Apple Valley
Communications, Television
542642
1000002294
$92,000.00
Communications
Signal Distribution System,
21845 Hwy 18
Network Wire and Cabling
Apple Valley, CA 92307
System
United States
Prospectra Contract Flooring
Flooring
740392
1000002810
$59,100.00
11
(/
17405-B Valley View
Cerritos , CA 30722
United States
planetBies, Inc.
City of Newport Beach
Newport Beach Fire Station No. 2 (8269-2), bidding on October 22, 2020 2:00 PM (Pacific)
Bid Results
Name & Address
Description
License Num
Howard Contracting Inc
Demo & Grading V
466400
12354 Carson St.
Hawaiian Gardens, CA 90716
United States
Mack P&S Construction Inc.
Building & Site Plumbing
995324
32020 Corydon Road
Wildomar, CA 92525
United States
Guirguis Electric
Electrical
967653
1109 W San Bernardino Rd
Suite 120
Covina, CA 91722
United States
Westnet Inc.
Alerting System
990723
15542 Chemical Ln
Huntington Beach, CA 92649
United States
JNB Interiors, Inc.
Drywall & Plaster
898774
9070 Cajalco Rd.
Corona, CA 92881
United States
Floored Tile & Stone
Ceramic Tile
791250
7200 Helena Place
Fontana, CA 92336
United States
Mathews Mechanical
HVAC
886716
17450 EI Mineral Road
Lake Mathews, CA 92879
United States
CONTRACTORS DOOR
Doors, Frames, Hardware
996525
SUPPLY CO INC
1060 Calle Cordillera
Suite 106
San Clemente, CA 92673
United States
PlanetBids, Inc.
Page 3
Printed 10/22/2020
CADIR Amount Type
1000006979 $134,714.00
1000015976 $486,000.00 v
1000432320 $680,000.00 C
1000015976 $132,186.16 �
1000047388 $244,395.00 Z
1000010695 $88,500.00 v
1000006955 $230,000.00 I/
1000013428 $110,307.00
10.28.2020
Peter Tauscher P.E.
City of Newport Beach
Public Works Department
loo Civic Center Dr
Newport Beach CA 9266o
ptauscher@newportbeachca.gov
Re: PCN3 Protest Response Letter for the Newport Beach Fire Station No 2
Mr. Tauscher,
In review of the Protest letter from PCN3 we have found their protest to be invalid.
First, the Architects Technical Specifications creates a discrepancy with the Greenbook by indicating the
specialty work must be performed by subcontractors that specialize in that particular trade.
The Quality Assurance and Qualification standards in the technical specifications essentially require
specialty work to be performed by subcontractors and that is inconsistent with the requirement that R.C.
Construction perform more than 50% of all of the work on the project. Since the technical specs are more
restrictive regarding quality assurance for the specialty trade work, those requirements supersede the
Greenbook if a conflict or discrepancy exists. Consequently, the Greenbook self -performance requirement
would not apply. The requirements in the Architect Technical Specification directing R.C. Construction to
use specialty Subcontractors would apply.
Second, even if the self -performance requirements did apply to the project, the Architect Technical
Specifications provide "Specialty Items" to subtract from the bid price for Calculating R.C. Construction's
self -performance. I have attached a quick list of trades that require specialized subcontractors or specific
licenses to perform the work. These trade items would need to be subtracted from the bid amount total if
doing any self -performance calculations. We have also included a copy of our Sublisting where we have
lined out these specialty items that would not be included in such calculation, if it was required. With
these line outs R.C. Construction would be well within the threshold if it was required.
We stand ready to complete this project and request that you move forward with the award of the contract
to R.C. Construction.
Thank you for your time and consideration in this important matter. We look forward to working with the
City of Newport Beach on this project. We respectfully request notice of any further hearing where the
project award or any other determination regarding this bid protest will be made.
Notice can be provided by email to R.C. Construction and its legal counsel at: Jon Wollam, VP General
Contracting — jon.wollam(@rcconstruction.com and Matthew J. Kraus — mkrausplc-lawyers.com
Sincerely,
�tus�M. V "'
Robert W. Clapper, President
'To a job big or small, Dv 2t right or not at all"
14-20
Specification Sections that call for specialized installers and licenses and therefore cannot be self performed
Document Section Trade
14-21
1.6 Quality Assurance A. Installer: Company Specializing in sheet
addendum 1
76100
Sheet Metal Roofing
metal roof installations with five years experience
Sheet Metal Flashing
1.4 Quality Assurance A. Applicator Company Specializing in Sheet
addendum 1
76200
and Trim
metal flashing work with five years minimum experience
1.3 Qualifications A. Applicator Company Specializing in epoxy
addendum 1
96723
Resinous Epxoy Flooring
matris floor applications with five years documented experience
Fire Station Alerting
1.01 Summary B. The FSAS System equipment shall be provided and
addendum 1
275130
System
installed by the FSAS Contractor
1.4 Quality Assurance A. Manufacturer Qualifications; Company
with a minimum of ten years experience and a min of five projects
with similar scope and size to those specified in this section B.
Installer Qualifications: Installer trained and certified by the
manufacturer with a min of five years experience in installing
addendum 1
122413
Roller Shades
products comparable to those specified in this section
Architect
1.5 Quality Assurance B. Door Manfacturer shall have at least 10
Technical
years experience in manufacturing door type specified C. Door
Specification
83500
Four Fold Doors
installer to be certified by the Manufacturer
Architect
1.6 Qualifications B. Installer Qualifications: All products specified in
Technical
Fiber Cement Cladding
this section are to be installed by a single installer trained by the
Specification
74249
System
manufacturer with Minimum 5 years documented experience
Architect
2.1 Fabricators A. Active member of the woodwork institute
Technical
licensed by WI to provide the WI certified compliance certificate
Specification
62000
Finish Carpentry
and labels for the products and materials specified in this section.
Architect
Technical
Gypsum Board
1.3 Quality Assurance A. Applicator company specializing in gypsum
Specification
92116
Assemblies
board systems work with five years documented experience.
Architect
1.6 Qualifications B. Applicator Company Specializing in performing
Technical
Mod Bit Membrane
the work of this section with five years documented experience and
Specification
75200
Roofing
approved by systems manufacturer
Architect
1.4 Qualifications A works certificates: Submit under provisions of
Technical
Section 013300 Certifying welders employed on the work verifying
Specification
55000
metal fabrications
AWS certification within the previous 12 months
Architect
Technical
manufactured copper
1.4 Quality Assurance A. Applicator company specializing in copper
Specification
77120
gutters and downspouts
gutter and downspout work with three years minimum experience
14-21
Architect
1.7 Qualifications B. Installer Company Specializing in performing
Technical
Sectional Overhead
the work of this section with minimum 5 years documented
Specification
83613
Door
experience and approved by the manufacturer
1.4 Quality Assurance C. Hardware Installer: Company specializing
in the installtion of commercial door hardware with five years
Architect
documented experience. D. Hardware Supplier personnel: Employ
Technical
an Architectural Hardware Consultant AHC to assist in the work of
Specification
87100
Door Hardware
this section
Architect
Technical
1.3 Quality Assurance A. Applicator company specializing in cement
Specification
92400
Cement Plaster
plaster work with five years documented experience.
Architect
Technical
1.5 Qualifications B Installer: Company specializing in applying the
Specification
93012
Ceramic Tile
work of this section with min five years experience
Architect
Technical
1.3 Quality Assurance B. Installer Company with five years
Specification
95113
Acoustical Ceilings
minimum documented experience, approved by manufacturer
Architect
1.6 Qualifications A. Installer Company Specializing in applying the
Technical
Resilient Athletic
work of this section with minimum five years experience, approved
Specification
96566
Flooring
by the manufacturer
Architect
1.6 Quality Assurance B. Applicator: Company specializing in
Technical
commercial painting and finishing with 5 years documented
Specification
99000
Painting
experience
1.6 Quality Assurance A. Installer Qualifications 1. Installers
responsibilty include designing, fabricating, and installing sprinkler
systems and providing professional engineering services needed to
assume engineering responsibilty. Base Calculations on results on
Architect
fire hydrant flow test. a. Engineering Responsibility: Preperation of
Technical
Wet-Pipe Spinkler
working plans calculations, and field test reports by a qualified
Specification
211313
Systems
professional engineer.
1.2 General Requirements J. Shop Drawing/Product Submittals 6.
Shop drawings shall include a copy of the Contractors Current C-10
license For Low Voltage systems the submittal shall include copies
Architect
of the Contractors Current C-7 License and copues of certificates
Technical
General Electrical
identifying the low voltage contractor as a licensed
Specification
1 2600001
Requirements
distributor/installer of the equipment included in the submittal
14-22
14-23
1.3 General Requirements A. The installing Communications
Contractor shall hold a valid State of CA C-7 license, shall have
completed at least 20 projects of equal scope, shall have been in
business of furnishing and installing communication systems of this
type for at least five years and capable of being bonded to assure
the owner of performance and satisfactory service during the
guarantee period. B The installing Communications Contractor shall
be a factory authorized distributor and warrantee station for the
brand of equiment offered and shall maintain a fully equipped
Architect
service organization capable of funishing adequate repair service to
Technical
the equipment. C. Installing Contractor shall be Systimax GigaSpeed
Specification
271343
Communications
certified installer
Architect
1.4 Quality Assurance C. All of the television system equipment
Technical
television signal
shall be furnished and installed by the authorized factory
Specification
270523
distribution system
Distributor of the Equipment.
Architect
Technical
Operation and
1.2 Quality Assurance A. The Contractors representative shall have
Specification
320190
Maintenance of Planting
a C-27 license and be experienced in Landscape maintenance.
Architect
1.6 Qualifications A. Installer: Company specializing in installing the
Technical
work of this section with minimum five years documented
Specification
323130
Automatic Gates
experience, approved by the manufacturer.
14-23
City of Newport Beach
Newport Beach Fire Station No. 2 (8269-2), bidding on October 22, 2020 2:00 PM (Pacific)
Bid Results
Bidder Details
Roofing
Vendor Name
R.C. Construction Services lnc
Address
2223 N Locust Ave
Arcadia, CA 91006
Rialto, CA 92377
United States
United States
Respondee
Brooke Wollam
Respondee Title
Preconstruction Services
Phone
909-829-3688 Ext.
Email
bids@rcconstruction.com
Vendor Type
CADIR
License #
716719
CADIR
1000002662
Bid Detail
Bid Responsive
Line Items
Num Item Code UOM
Section 1
1 l=ire Station No. 2 Building
LS
2 60 -Day Planet Establishment and Maintenance Period
LS
3 Provide As -Built Plans and Close -Out Documents
LS
Subcontractors
Name & Address Description
Commercial Rooting Systems,
Roofing
Inc.
11735 Goldring Road
Arcadia, CA 91006
United States
Optima RPM
Finish Carpentry
17945 Sky Park Circle
Suite D
Irvine, CA 92614
United States
Newhouse Construction
Masonry
Services
10704 Valley Drive
Riverside, CA 92505
United States
Bennett Landscape
Landscape &Irrigation
25889 Belle Porte Avenue
Harbor City, CA 90710
United States
Oak Hollow Restoration, Inc.
Rough Carpentry & Siding
32438 Oak Hollow Ct.
Wildomar, CA 92595
United States
Inland Pacific Coatings
Painting
3556 Lytle Creek Rd.
Lytle Creel(, CA 92358
Qty
Page t
Printed 1012712020
Unit Price Line Total Comment
1 $6,280,000.00 $6,280,000.00
1 $4,000.00 $4,000.00
1 $5,000.00 $5,000.00
Subtotal $6,289,000.00
Total $6,289,000.00
License Num CADIR Amount Type
648103 1000548424 $87,098.43
14-24
City of Newport Beach
Newport Beach Fire Station No. 2 (8269-2), bidding on October 22, 2020 2:00 PM (Pacific)
Bid Results
Name & Address Description
Shelton Fire Protection
Fire Suppresion
Company
Signal Distribution System,
22745 La Palma Ave.
Network Wire and Cabiing
Yorba Linda, CA 92887
System
United States
Upland Contracting Inc.
Rebar
P O Box 3877
Ontario, CA 91761
United States
PGC Construction Inc
Sheet Metal
42309 Winchester Rd.
Ste. C
Temecula, CA 92591
United States
Building & Site Plumbing
STONCOR GROUP INC.
Epoxy Flooring
1000 East park ave. maple
shade
maple shade, NJ 08052
Electrical
United States
Slater Glass & Mirror
Glazing
145 E. Saint Joseph St.
Arcadia, CA 91006
United States
Alerting System
National Garage Door Co.
Four -Fold Doors
3185 Fitzgerald Rd
Rancho Cordova, CA 95742
United States
Drywall & Plaster
Troy's Ornamental Iron Craft
Structural Steel & Metal Fab
Inc.
8150 Electric Ave
Stanton, CA 90680
United States
INLAND OVERHEAD DOOR CO Overhead Doors
12401 S La Cadena Dr
Calton, CA 92324
United States
Apple Valley
Communications, Television
Communications
Signal Distribution System,
21845 Hwy 18
Network Wire and Cabiing
Apple Valley, CA 92307
System
United States
Prospectra Contract Flooring
Flooring
17405-B Valley View
Cerritos, CA 30722
United States
Howard Contracting Inc
Demo & Grading
12354 Carson St.
Hawaiian Gardens, CA 90716
United States
Mack P&S Construction Inc.
Building & Site Plumbing
32020 Corydon Road
Wildomar, CA 92525
United States
Guirguis Electric
Electrical
1109 W San Bernardino Rd
Suite 120
Covina, CA 91722
United States
Westnet Inc.
Alerting System
15542 Chemical Ln
Huntington Beach, CA 92649
United States
JNB Interiors, Inc.
Drywall & Plaster
9070 Cajalco Rd.
Corona, CA 92881
United States
Page 2
Printed 1012712020
License Num CADIR Amount Type
481317 1000002198 $60,859.00
_... � W-1
893323 1000004146 $89,900.00
M�I.
—NIN id,
466400 1000006979 $134,714.00
995324 1000015976 $486,000.00
14-25
City of Newport Beach
Newport Beach Fire Station No. 2 (8269-2), bidding on October 22, 2020 2:00 PM (Pacific)
Bid Results
Nance & Address
Floored Tile & Stone
7200 Helena Place
Fontana, CA 92336
United States
Mathews Mechanical
17450 El Mineral Road
Lake Mathews, CA 92879
United States
CONTRACTORS DOOR
SUPPLY CO INC
1060 Catle Cordillera
Suite 106
San Clemente, CA 92673
United States
Description
Ceramic Tile
HVAC
Page 3
Printed 10127/2020
License Num CADIR Amount Type
886716 1000006955 $230,000.00
Doors, Frames, Hardware,
14-26
K�N
public finance
ATTACHMENT D
Date: September 16, 2020
To: Dan Matusiewicz, Finance Director, City of Newport Beach
From: Mark Young and Larry Lom, KNN Public Finance
Re: Financing Scenario Analyses for the Certificates of Participation 2020A (Lido Fire
Station Project)
The City of Newport Beach will issue certificates of participation (bonds) to finance its Lido Fire
Station project of $9,500,000. KNN Public Finance, as Municipal Advisor, has analyzed various
financing scenarios to help evaluate costs and options available to the City. The following discussion
details the approach and analyses undertaken.
Initial Analysis of Financing Scenarios
Upon the City's request, our initial analysis as of May 2020 included four scenarios for different
financing terms: 10, 15, 20 and 30 years. Other assumptions, such as project size, costs of issuance
and level debt service structure, were the same across scenarios. The objective was to evaluate
borrowing costs and debt burden in terms of annual debt service payments. A summary of the results
is provided in the table below; please see Exhibit A for an expanded table.
Financing Scenarios
As illustrated, total borrowing costs increase as the term of the debt becomes longer. Estimated total
debt service was $10.5 million for a 10 -year borrowing and $14.5 million for a 30 -year borrowing. The
debt burden, however, declined with longer term debt. Annual debt service was $1 million for a 10 -
year borrowing and $490,000 for a 30 -year borrowing. Therefore, a recommended financing scenario
2054 University Avenue, Suite 300 I Berkeley, CA 94704 1 Main 510-839-8200 Fax 510-208-8282
1451 Quail Street, Suite 200 I New ort Beach, CA 92660 1 Main 949-346-4900 Fax 510-208-8282
5901 W. Century Boulevard, Suite 750 Los Angeles, CA 90045 I Main 310-348-2901 I Fax 510-208-8282
A Limited Liability Company 14-27
10 -Year
15 -Year
20 -Year
30 -Year
Par Amount
8,530,000.00
8,475,000.00
8,500,000.00
9,060,000.00
Premium
1,191,500.75
1,245,224.85
1,218,807.10
663,771.55
Total Sources
9,721,500.75
9,720,224.85
9,718,807.10
9,723,771.55
Project Fund
9,500,000.00
9,500,000.00
9,500,000.00
9,500,000.00
Cost of Issuance
167,750.00
167,750.00
167,750.00
167,750.00
Underwriter's Discount
51,180.00
50,850.00
51,000.00
54,360.00
Rounding Proceeds
2,570.75
1,624.85
57.10
1,661.55
Total Uses
9,721,500.75
9,720,224.85
9,718,807.10
9,723,771.55
True Interest Cost (TIC)
1.563%
2.180%
2.598%
2.887%
Average Coupon
4.000%
4.000%
4.000%
3.352%
Total Debt Service
10,516,000
11,433,600
12,511,600
14,579,600
Maximum Annual Debt Service
1,053,200
764,800
628,600
488,550
Average Annual Debt Service
1,051,600
762,240
625,580
485,987
As illustrated, total borrowing costs increase as the term of the debt becomes longer. Estimated total
debt service was $10.5 million for a 10 -year borrowing and $14.5 million for a 30 -year borrowing. The
debt burden, however, declined with longer term debt. Annual debt service was $1 million for a 10 -
year borrowing and $490,000 for a 30 -year borrowing. Therefore, a recommended financing scenario
2054 University Avenue, Suite 300 I Berkeley, CA 94704 1 Main 510-839-8200 Fax 510-208-8282
1451 Quail Street, Suite 200 I New ort Beach, CA 92660 1 Main 949-346-4900 Fax 510-208-8282
5901 W. Century Boulevard, Suite 750 Los Angeles, CA 90045 I Main 310-348-2901 I Fax 510-208-8282
A Limited Liability Company 14-27
Financing Scenario Analyses for COPS (Lido Fire Station Project) I pg. 2
would need to balance the City's desire to keep total borrowing costs low and the capacity of the
General Fund to make annual debt service payments. For example, borrowing long to reduce annual
debt service pressure on the General Fund may be desirable as the costs for long term bonds are at
historic lows and the interest rate difference (or spread) along the yield curve has narrowed.
Many of the other structuring elements of the bonds are market driven and thus achieve cost
effectiveness. For example, we assume across scenarios: serial and term bonds; semi-annual current
interest; premium coupons (i.e. the coupon rate is greater than the yield rate); and a 10 -year par call
where applicable. Also, we assume no additional funding for a debt service reserve fund or capitalized
interest. The City benefits from the highest lease credit ratings (Aa1 /AA+/AA+), so the municipal
market will not require a debt service reserve fund. In line with the Debt Policy, there will be no
capitalized interest to defer debt service until project completion. This is accomplished by the lease -
lease -back structure, whereby the City will lease -back from the Newport Beach Public Facilities
Corporation the Corona Del Mar Fire Station and the Santa Ana Heights Fire Station properties to
effectuate lease payments securing the bonds. All help improve the cost effectiveness of the
borrowing.
Updated Analysis of Financing Scenarios
We updated our analysis in August 2020 by eliminating the 30 -year term scenario. We also updated
the scenarios for current market rates and assumed one rating to reduce cost of issuance by
approximately $20,000. The City has historically issued bonds with all three ratings from Moody's,
S&P and Fitch. However, because the financing is relatively small, being under $10 million in par, one
rating will be sufficient to market bonds. We assume S&P only because they have an explicit policy of
not penalizing the credit for no reserve funds and they are well received by investors. This rating
approach was recommended in several underwriter proposals and reconfirmed by the selected
underwriter, Stifel, Nicolaus & Company, Inc. A summary of the results is provided in the table
below; please see Exhibit B for an expanded table.
Financing Scenarios
Par Amount
10 -Year 15 -Year 20 -Year
8,185, 000.00 7, 950, 000.00 7, 920, 000.00
Premium 1, 500, 326.05 1, 731, 980.25 1, 764, 010.55
Total Sources 9,685,326.05 9,681,980.25 9,684,010.55
Project Fund
Cost of Issuance
Underwriter's Discount
Rounding Proceeds
Total Uses
True Interest Cost (TIC)
Average Coupon
Total Debt Service
Maximum Annual Debt Service
Average Annual Debt Service
9, 500, 000.00 9, 500, 000.00 9, 500, 000.00
146, 800.00 146, 800.00 146, 800.00
36, 014.00 34, 980.00 34, 848.00
2.512.05 200.25 2.362.55
9,685,326.05 9,681,980.25 9,684,010.55
0.621%
1.245%
1.802%
4.000%
4.000%
4.000%
9,958,938
10, 586,150
11, 499,160
998,400
708,400
578,560
995,894
705,743
574,958
B _
public
financc
14-28
Financing Scenario Analyses for COPS (Lido Fire Station Project) I pg. 3
After reviewing and discussing the various financing scenarios, the City ultimately decided to proceed
with the 10 -year term financing or final maturity of July 1, 2030. At the time of the analysis, annual
debt service is approximately $995,000 for total debt service of approximately $9,950,000. Though the
term of the bonds may be considered less than the useful life of the project, the accelerated repayment
conforms to the City's Debt Policy by reducing the total borrowing costs.
Method of Sale
The City has experience selling bonds through a public negotiated sale as well as a privately placed
negotiated sale. We recommended a public negotiated sale because of the small size of the bonds,
historically low market rates, and active retail account participation in the current market. We believe
the public offering will maximize retail participation to drive borrowing costs lower. The ultimate
decision by the City to use a 10 -year term further positions the bonds as a "retail" product. We
solicited 23 underwriters through a formal RFP process and received five responses. Stifel, Nicolaus
& Company, Inc. was selected to sell the bonds based on the high quality of their proposal and their
significant experience in the municipal market, particularly with certificates of participation and lease
revenue bonds.
WillVN
public finance
14-29
Financing Scenario Analyses for COPS (Lido Fire Station Project) I pg. 4
Exhibit A
Financing Scenarios
10 -Year 15 -Year 20 -Year 30 -Year
Par Amount 8,530,000.00 8,475,000.00 8,500,000.00 9,060,000.00
Premium 1,191,500.75 1,245,224.85 1,218,807.10 663,771.55
Total Sources 9,721,500.75 9,720,224.85 9,718,807.10 9,723,771.55
Project Fund
9,500,000.00
9,500,000.00
9,500,000.00
9,500,000.00
Cost of Issuance
167,750.00
167,750.00
167,750.00
167,750.00
Underwriter's Discount
51,180.00
50,850.00
51,000.00
54,360.00
Rounding Proceeds
2,570.75
1,624.85
57.10
1,661.55
Total Uses
9,721,500.75
9,720,224.85
9,718,807.10
9,723,771.55
Cost of Issuance Breakout (est.)
10 -Year
15 -Year
20 -Year
30 -Year
Bond and Disclosure Counsel
60,000
60,000
60,000
60,000
Financial Advisor
40,000
40,000
40,000
40,000
Moody's Rating Agency
23,000
23,000
23,000
23,000
S&P Rating Agency
20,750
20,750
20,750
20,750
Title Insurer Company
9,000
9,000
9,000
9,000
Trustee
7,500
7,500
7,500
7,500
Printer
2,500
2,500
2,500
2,500
Contingency
5,000
5,000
5,000
5,000
Total
167,750
167,750
167,750
167,750
Additional Fitch rating is $21,000
Arbitrage Yield
1.463%
1.867%
2.097%
2.728%
True Interest Cost (TIC)
1.563%
2.180%
2.598%
2.887%
Average Coupon
4.000%
4.000%
4.000%
3.352%
Total Debt Service
10,516,000
11,433,600
12,511,600
14,579,600
Maximum Annual Debt Service
1,053,200
764,800
628,600
488,550
Average Annual Debt Service
1,051,600
762,240
625,580
485,987
Annual Debt Service Schedules
10 -Year
15 -Year
20 -Year
30 -Year
11/1/2021
1,051,200
764,000
620,000
485,950
11/1/2022
1,052,800
762,000
623,800
484,350
11/1/2023
1,053,200
764,400
627,000
487,550
11/1/2024
1,052,400
761,000
624,600
485,350
11/1/2025
1,050,400
762,000
626,800
487,950
11/1/2026
1,052,200
762,200
628,400
485,150
11/1/2027
1,052,600
761,600
624,400
487,150
11/1/2028
1,051,600
760,200
625,000
483,750
11/1/2029
1,049,200
763,000
625,000
485,150
11/1/2030
1,050,400
759,800
624,400
486,150
11/1/2031
0
760,800
628,200
486,750
11/1/2032
0
760,800
626,200
486,950
11/1/2033
0
764,800
628,600
486,750
11/1/2034
0
762,600
625,200
486,150
11/1/2035
0
764,400
626,200
485,150
11/1/2036
0
0
626,400
483,750
11/1/2037
0
0
625,800
486,950
11/1/2038
0
0
624,400
484,550
11/1/2039
0
0
627,200
486,750
11/1/2040
0
0
624,000
488,350
11/1/2041
0
0
0
484,350
11/1/2042
0
0
0
488,550
11/1/2043
0
0
0
487,300
11/1/2044
0
0
0
485,750
11/1/2045
0
0
0
483,900
11/1/2046
0
0
0
486,750
11/1/2047
0
0
0
484,150
11/1/2048
0
0
0
486,250
11/1/2049
0
0
0
487,900
11/1/2050
0
0
0
484,100
K r N
public finance
14-30
Financing Scenario Analyses for COPS (Lido Fire Station Project) I pg. 5
Exhibit B
Financing Scenarios
,J I<N
public finance
14-31
10 -Year
15 -Year
20 -Year
Par Amount
8,185,000.00
7,950,000.00
7,920,000.00
Premium
1, 500, 326.05
1, 731, 980.25
1, 764, 010.55
Total Sources
9,685,326.05
9,681,980.25
9,684,010.55
Project Fund
9,500,000.00
9,500,000.00
9,500,000.00
Cost of Issuance
146,800.00
146,800.00
146,800.00
Underwriter's Discount
36,014.00
34,980.00
34,848.00
Rounding Proceeds
2,512.05
200.25
2,362.55
Total Uses
9,685,326.05
9,681,980.25
9,684,010.55
Cost of Issuance Breakout (est.)
10 -Year
15 -Year
20 -Year
Bond and Disclosure Counsel
75,000
75,000
75,000
Financial Advisor
32,500
32,500
32,500
S&P Rating Agency
16,750
16,750
16,750
Title Insurer Company
9,000
9,000
9,000
Trustee
3,550
3,550
3,550
Printer
2,500
2,500
2,500
DAC
2,500
2,500
2,500
Contingency
5,000
5,000
5,000
Total
146,800
146,800
146,800
Arbitrage Yield
0.547%
0.880%
1.121%
True Interest Cost (TIC)
0.621%
1.245%
1.802%
A\,erage Coupon
4.000%
4.000%
4.000%
Total Debt Service
9,958,938
10,586,150
11,499,160
Maximum Annual Debt Service
998,400
708,400
578,560
Average Annual Debt Service
995,894
705,743
574,958
Annual Debt Service Schedules
10 -Year
15 -Year
20 -Year
7/1/2021
995,538
704,350
578,560
7/1/2022
996,200
703,200
577,000
7/1/2023
998,200
707,000
576,000
7/1/2024
994,000
705,000
574,600
7/1/2025
993,800
707,400
572,800
7/1/2026
997,400
704,000
575,600
7/1/2027
994,600
705,000
572,800
7/1/2028
995,600
705,200
574,600
7/1/2029
995,200
704,600
575,800
7/1/2030
998,400
708,200
576,400
7/1/2031
0
705,800
576,400
7/1/2032
0
707,600
575,800
7/1/2033
0
708,400
574,600
7/1/2034
0
703,200
572,800
7/1/2035
0
707,200
575,400
7/1/2036
0
0
572,200
7/1/2037
0
0
573,400
7/1/2038
0
0
573,800
7/1/2039
0
0
573,400
7/1/2040
0
0
577,200
,J I<N
public finance
14-31
ATTACHMENT E
RESOLUTION NO. 2020-96
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
NEWPORT BEACH, CALIFORNIA, AUTHORIZING THE
PREPARATION, SALE AND DELIVERY OF NOT TO
EXCEED $10,000,000 PRINCIPAL AMOUNT OF
CERTIFICATES OF PARTICIPATION, SERIES 2020A (FIRE
STATION NO. 2 PROJECT) AND APPROVING CERTAIN
DOCUMENTS AND AUTHORIZING CERTAIN ACTIONS IN
CONNECTION THEREWITH
WHEREAS, the City of Newport Beach ("City") and the Newport Beach Public
Facilities Corporation ("Corporation") desire to enter into a Site Lease dated as of
December 1, 2020 ("Site Lease"), and a Lease/Purchase Agreement, dated as of
December 1, 2020 ("Lease"), whereby the City, as agent of the Corporation, shall cause
the acquisition, improvement and equipping of a new Fire Station No. 2, as described
therein ("Project"), and the City has agreed to lease the Leased Premises (defined below)
from the Corporation, the forms of which have been presented to this City Council at the
meeting of which the Resolution has been adopted;
WHEREAS, in order to finance the Project, the City and the Corporation desire to
authorize the sale of the City of Newport Beach Certificates of Participation 2020A (Fire
Station No. 2 Project) (the "Certificates") evidencing fractional interests in the Lease
Payments made by the City under the Lease;
WHEREAS, Section 5450 et seq. of the California Government Code
("Government Code") provides statutory authority for pledging collateral for the payment
of principal or prepayment price of, and interest on, any agreement, including certificates
of participation, and the Government Code creates a continuing perfected security
interest which shall attach immediately to such collateral irrespective of whether the
parties to the pledge document have notice of the pledge and without the need for any
physical delivery, recordation, filing or further act, and, therefore, the City and the
Corporation hereby warrant and represent that pursuant to the Lease, the Trust
Agreement, to be dated as of December 1, 2020, by and among The Bank of New York
Mellon Trust Company, N.A., as trustee ("Trustee"), the City and the Corporation ("Trust
Agreement"), and the Government Code, the Trustee will have a first priority perfected
security interest in the Lease Payments described in the Lease represented by the
Certificates pursuant to the Government Code;
14-32
Resolution 2020 -
Page 2 of 6
WHEREAS, the City Council desires to consent to the assignment of certain of the
Corporation's rights, title and interest in and to the Site Lease and the Lease Agreement,
including the right to receive such lease payments from the City, to the Trustee pursuant
to an Assignment Agreement, between the Corporation and the Trustee, to be dated as
of December 1, 2020 ("Assignment Agreement"), the form of which together with the form
of the Trust Agreement, are attached to Resolution PFC2020-2, and have been presented
to this City Council at the meeting at which this Resolution has been adopted;
WHEREAS, the City Council desires to approve the form of a Purchase Agreement
("Purchase Agreement"), by and among the Corporation, the City and Stifel, Nicolaus &
Company, Incorporated ("Purchaser"), pursuant to which the Purchaser will agree to buy
the Certificates on the terms and conditions set forth therein, the form of which is attached
to Resolution PFC2020-2, and has been presented to this City Council at the meeting at
which this Resolution has been adopted;
WHEREAS, the City Council desires to approve the form of a Preliminary Official
Statement relating to the Certificates ("Preliminary Official Statement") to be distributed
to potential investors, for the purposes of facilitating the sale of the Certificates at the
lowest feasible interest rate, the form of which has been presented to this City Council at
the meeting at which this Resolution has been adopted;
WHEREAS, the City Council desires to approve the form of a Continuing
Disclosure Agreement ("Disclosure Agreement") between the City and Digital Assurance
Certification, LLC, the form of which has been presented to this City Council at the
meeting at which the Resolution has been adopted;
WHEREAS, the City Council desires to approve the form of an Agency Agreement
between the City and the Corporation, the form of which has been presented to this City
Council at the meeting at which the Resolution has been adopted; and
WHEREAS, in compliance with Section 5852.1 of the Government Code, the City
has obtained from KNN Public Finance, LLC, the City's municipal advisor, the required
good faith estimates and such estimates are disclosed and set forth in Exhibit A attached
hereto.
NOW, THEREFORE, the City Council of the City of Newport Beach resolves as
follows:
Section 1: The City Council hereby finds and determines that the total rental to
be paid under the Lease Agreement does not exceed the fair rental value of the leased
property identified in Exhibit A to the Lease (collectively, the "Leased Premises").
14-33
Resolution 2020 -
Page 3 of 6
Section 2: This City Council hereby consents to the preparation, sale and
delivery of the Certificates in an aggregate amount of not to exceed $10,000,000 in
accordance with the terms and provisions of the Trust Agreement, to pay the costs of the
Project and to pay all associated costs in connection therewith. The proceeds of the
Certificates shall be expended to finance the costs of the Project and to provide for a
reserve fund, if any, and the costs of the preparation, sale and delivery of the Certificates.
Section 3: The Bank of New York Mellon Trust Company, N.A. is hereby
appointed as Trustee on behalf of the owners of the Certificates, with the duties and
powers of such Trustee as set forth in the Trust Agreement.
Section 4: The forms of the Site Lease, the Lease Agreement, the Trust
Agreement, the Disclosure Agreement, the Agency Agreement and the Assignment
Agreement presented at this meeting are hereby approved. Each of the Mayor, the City
Manager, the Finance Director and the City Clerk is hereby authorized for and in the name
of the City to execute the Site Lease, the Lease Agreement, the Disclosure Agreement,
the Agency Agreement and the Trust Agreement in substantially the forms on file with the
City Clerk, hereby approved, with such additions thereto and changes therein as are
recommended or approved by Stradling Yocca Carlson & Rauth, a Professional
Corporation, as Special Counsel to the City ("Special Counsel"), or the City Attorney and
the officer or officers executing the same. Approval of such changes shall be conclusively
evidenced by the execution and delivery of the foregoing documents by one or more of
the authorized officers. The Mayor, the City Manager, the Finance Director and the City
Clerk each is hereby authorized to execute, acknowledge and deliver any and all
documents required to consummate the transactions contemplated by the Site Lease, the
Lease Agreement, the Disclosure Agreement, the Trust Agreement, the Agency
Agreement and the Assignment Agreement.
Section 5: The form of the Purchase Agreement presented at this meeting and
the sale of the Certificates pursuant thereto are hereby approved, and each of the Mayor,
the City Manager and the Finance Director is hereby authorized to evidence the City's
acceptance of the terms and provisions of the Purchase Agreement by executing and
delivering the Purchase Agreement in the form presented to the City at this meeting, with
such additions thereto and changes therein as are recommended or approved by the City
Attorney and the officers executing the same. Approval of such additions and changes
shall be conclusively evidenced by the execution and delivery of the Purchase
Agreement; provided, however, that the Purchase Agreement shall be signed only if:
(a) the aggregate principal amount of the Certificates does not exceed $10,000,000;
(b) the aggregate true interest cost of the Certificates does not exceed 2.0% per annum;
(c) the interest rate with respect to the Certificates does not exceed 4.0% per annum; and
14-34
Resolution 2020 -
Page 4 of 6
(d) an underwriting discount for the purchase of the Certificates does not exceed 0.5% of
the principal amount of the Certificates. The City Manager or the Finance Director, or their
designees, are authorized to reject any terms presented by the Purchaser if determined
not to be in the best interest of the City.
Section 6: The form of the Certificates as set forth in the Trust Agreement (as
the Trust Agreement may be modified pursuant to Section 4 hereof) are hereby approved.
Section 7: In addition to the parameters relating to the Certificates set forth in
Sections 1 and 6 of this Resolution, the Certificates shall mature no later than July 1,
2030, and may be subject to all or certain of the proposed prepayment provisions relating
to the Certificates set forth in Exhibit B of this Resolution, as determined by the City
Manager or the Finance Director.
Section 8: Based on current market conditions, KNN Public Finance, LLC, the
City's Municipal Advisor, has projected maximum annual debt service with respect to the
Certificates to be $964,000 and estimated the costs of delivery of the Certificates to be in
the amount provided in Exhibit A under the subheading "Finance Charge of the
Certificates."
Section 9: The form of the Preliminary Official Statement presented at this
meeting is hereby approved, and the Preliminary Official Statement may be distributed to
prospective purchasers in the form so approved, together with such additions thereto and
changes therein as are determined necessary by the Finance Director, or his designee,
to make such Preliminary Official Statement final as of its date for purposes of Rule 15c2-
12 of the Securities and Exchange Commission. Each of the Mayor, the City Manager
and the Finance Director is hereby authorized to execute a final Official Statement in the
form of the Preliminary Official Statement, together with such changes as are determined
necessary by the Finance Director, or his designee, and the officer executing the same
to make such Official Statement complete and accurate as of its date. The Purchaser is
further authorized to distribute the final Official Statement for the Certificates to the
purchasers thereof upon its execution by an officer of the City as described above. The
City Manager, the Finance Director and their written designees are hereby authorized
and directed to take whatever steps are necessary to comply with the requirements of
Rule 15c2-12 applicable to the Certificates following their execution and delivery.
14-35
Resolution 2020 -
Page 5 of 6
Section 10: The Mayor, the City Manager, the Finance Director and the City Clerk
are hereby authorized, jointly and severally, to do any and all things and to execute and
deliver any and all documents which they may deem necessary and advisable in order to
consummate the sale and delivery of the Certificates, as approved as to form by the City
Attorney, and otherwise effectuate the purposes of this Resolution (including but not
limited to the execution and delivery of any consents or agreements to remove
encumbrances to title with respect to the Leased Premises and to substitute, remove or
add property to the Leased Premises that is determined by the City Manager to be in the
best interests of the City) and such actions previously taken by such officers are hereby
ratified and confirmed. In the event the Mayor is unavailable or unable to execute and
deliver any of the above -referenced documents, any other member of the City Council
may validly execute and deliver such document, and, in the event the City Clerk is
unavailable or unable to execute and deliver any of the above -referenced documents,
any deputy clerk may validly execute and deliver such document in her place.
Section 11: In connection with the execution and delivery of the Certificates, the
City has engaged Stradling Yocca Carlson & Rauth, a Professional Corporation, to act as
Special Counsel and Disclosure Counsel to the City, Stifel, Nicolaus & Company,
Incorporated to act as the underwriter and KNN Public Finance, LLC, to act as Municipal
Advisor to the City.
Section 12: The recitals provided in this resolution are true and correct and are
incorporated into the operative part of this resolution.
Section 13: If any section, subsection, sentence, clause or phrase of this
Resolution is, for any reason, held to be invalid or unconstitutional, such decision shall
not affect the validity or constitutionality of the remaining portions of this Resolution. The
City Council hereby declares that it would have passed this Resolution, and each section,
subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or
more sections, subsections, sentences, clauses or phrases be declared invalid or
unconstitutional.
Section 14: The City Council finds the adoption of this resolution is not subject to
the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2) (the
activity will not result in a direct or reasonably foreseeable indirect physical change in the
environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378)
of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3,
because it has no potential for resulting in physical change to the environment, directly or
indirectly.
14-36
Resolution 2020 -
Page 6 of 6
Section 15: This resolution shall take effect immediately upon its adoption by the
City Council, and the City Clerk shall certify the vote adopting the resolution.
ADOPTED this 10th day of November, 2020.
Will O'Neill
Mayor
ATTEST:
Leilani I. Brown
City Clerk
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
Aaron C. Harp
City Attorney
Attachments: Exhibit A - Good Faith Estimates
Exhibit B - Prepayment Provisions
14-37
PY141PIT A
GOOD FAITH ESTIMATES
The good faith estimates set forth herein are provided with respect to the
Certificates in accordance with California Government Code Section 5852.1. Such good
faith estimates have been provided to the City by KNN Public Finance, LLC, the City's
Municipal Advisor (the "Municipal Advisor").
Principal Amount. The Municipal Advisor has informed the City that, based on the
City's financing plan and current market conditions, its good faith estimate of the
aggregate principal amount of the Certificates to be sold is $7,935,000 (the "Estimated
Principal Amounts").
True Interest Cost of the Certificates. The Municipal Advisor has informed the City
that, assuming that the respective Estimated Principal Amounts of the Certificates are
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 Certificates, 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 Certificates, is 0.94%.
Finance Charge of the Certificates. The Municipal Advisor has informed the City
that, assuming that the Estimated Principal Amounts of the Certificates are 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 Certificates, which means the sum of all
fees and charges paid to third parties (or costs associated with the Certificates), is
$182,165.
Amount of Proceeds to be Received. The Municipal Advisor has informed the City
that, assuming that the Estimated Principal Amounts of the Certificates are 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 City for
sale of the Certificates, less the finance charge of the Certificates, as estimated above,
and any capitalized interest on the Certificates paid or funded with proceeds of the
Certificates, is $9,030,317.
Total Payment Amount. The Municipal Advisor has informed the City that,
assuming that the Estimated Principal Amounts of the Certificates are 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 City
will make to pay debt service on the Certificates, plus the finance charge for the
Certificates, as described above, not paid with the respective proceeds of the Certificates,
calculated to the final maturity of the Certificates, is $9,617,967 and the annual cost to
administer the Certificates, not paid with proceeds of the Certificates is $3,750.
A-1
14-38
The foregoing estimates constitute good faith estimates only and are based on
market conditions prevailing at the time of preparation of such estimates on October 26,
2020. The actual principal amount of the Certificates 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 Certificates being different than the date assumed
for purposes of such estimates, (b) the actual principal amount of Certificates sold being
different from the respective Estimated Principal Amounts, (c) the actual amortization of
the Certificates being different than the amortization assumed for purposes of such
estimates, (d) the actual market interest rates at the time of sale of the Certificates being
different than those estimated for purposes of such estimates, (e) other market
conditions, or (f) alterations in the City's financing plan, or a combination of such factors.
The actual date of sale of the Certificates and the actual principal amount of Certificates
sold will be determined by the City based on various factors. The actual interest rates
borne by the Certificates will depend on market interest rates at the time of sale thereof.
The actual amortization of the Certificates 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.
A-2
14-39
EXHIBIT B
PREPAYMENT PROVISIONS
Pursuant to the City's Debt Management Policy, it should be noted that the below
optional prepayment provision provides for a call at par less than ten years after the
delivery of the Certificates.
Extraordinary Prepayment from Net Proceeds. The 2020 Certificates are
subject to prepayment prior to their respective maturity dates on any date, in whole or in
part, from Net Proceeds which the Trustee deposits in the Prepayment Fund as provided
in the Lease Agreement at least 45 days prior to the date fixed for prepayment and
credited toward the prepayment made by the City pursuant to the Lease Agreement, at a
prepayment price equal to the principal amount thereof together with the accrued interest
to the date fixed for prepayment, without premium.
For extraordinary prepayment of 2020 Certificates pursuant to the Trust
Agreement, the Trustee will select 2020 Certificates for prepayment so that the Net
Proceeds will be applied to prepay a proportionate amount of 2020 Certificates and
Additional Certificates based on the Outstanding principal amount and by lot within any
maturity or sinking account prepayment. The Trustee will promptly notify the City and the
Corporation in writing of the 2020 Certificates so selected for prepayment by mailing to
the City and the Corporation copies of the notice of prepayment provided for in the Trust
Agreement. The City will provide the Trustee with a revised sinking fund schedule upon
any prepayments.
"Net Proceeds" means any proceeds of any insurance, performance bonds or
taking by eminent domain or condemnation paid with respect to the Leased Premises
remaining after payment therefrom of any expenses (including attorneys' fees) incurred
in the collection thereof.
Optional Prepayment. The 2020 Certificates are not expected to be subject to
optional prepayment prior to maturity.
14-40
ATTACHMENT F
RECORDING REQUESTED BY:
City of Newport Beach
AND WHEN RECORDED MAIL TO:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attn: Brian P. Forbath, Esq.
Stradling Yocca Carlson & Rauth
Draft of 10/29/20
[Space above for Recorder's use.]
This document is recorded for the benefit of the City of Newport
Beach and recording is fee -exempt under §27383 of the
Government Code.
SITE LEASE
by and between
CITY OF NEWPORT BEACH
and
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Dated as of December 1, 2020
Relating to
CITY OF NEWPORT BEACH
CERTIFICATES OF PARTICIPATION 2020A
(FIRE STATION NO. 2)
NG-U9ZQVMF2/483 8-4700-1797x3/022459-0033
14-41
SITE LEASE
This SITE LEASE, dated as of December 1, 2020, by and between the CITY OF NEWPORT
BEACH, a chartered city duly organized and existing under and by virtue of the Constitution and
laws of the State of California (the "City"), and the NEWPORT BEACH PUBLIC FACILITIES
CORPORATION, a 501(c)(4) nonprofit public benefit corporation duly organized and existing under
and by virtue of the laws of the State of California (the "Corporation");
WITNESSETH:
WHEREAS, the Corporation has agreed to enter into this Site Lease (the "Site Lease") with
the City wherein the City will lease the real property described in Exhibit A hereto and the existing
improvements thereon (the "Leased Premises") to the Corporation; and
WHEREAS, the Corporation intends to lease back to the City the Leased Premises pursuant
to a Lease/Purchase Agreement to be executed and entered into as of the date hereof (the "Lease");
and
WHEREAS, by resolutions the City and the Corporation have agreed to execute this Site
Lease, and to deliver it upon performance and compliance by each party with all terms or conditions
of this Site Lease to be performed concurrently herewith, including, without limitation, the delivery
of the City of Newport Beach Certificates of Participation 2020A (Fire Station No. 2) (the
"Certificates") executed and delivered pursuant to a Trust Agreement, dated as of the date hereof (the
"Trust Agreement"), by and among the City, the Corporation, and The Bank of New York Mellon
Trust Company, N.A., as trustee (the "Trustee"); and
WHEREAS, all acts, conditions and things required by law to exist, to have happened and to
have been performed precedent to and in connection with the execution and entering into of the Site
Lease do exist, have happened and have been performed in regular and due time, form and manner as
required by law, and the parties hereto are now duly authorized to execute and enter into the Site
Lease.
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF THE
MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER
VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS
FOLLOWS:
Section 1. Definitions. All terms not otherwise defined herein shall have the definitions
given such terms in the Trust Agreement.
Section 2. The Leased Premises. The City hereby leases to the Corporation and the
Corporation hereby leases from the City, on the terms and conditions hereinafter set forth, the Leased
Premises; provided that the Lease is duly executed and delivered by the parties hereto
simultaneously herewith.
Section 3. Term. The term of this Site Lease shall commence as of the date of execution
hereof and shall remain in effect until the later of July 1, 2030 or the Term, as defined in the Lease,
NG-U9ZQVMF2/483 8-4700-1797x3/022459-0033
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expires as provided therein, unless such term is sooner terminated as hereinafter provided; provided,
however, that in the event of a default by the City under the Lease and the Corporation's election to
terminate the Lease under Section 9.2(b) thereof, the term of this Site Lease shall not terminate until
such time as all amounts payable by the City under the Lease and the Trust Agreement have been
paid in full.
Section 4. Rental. The Corporation, and any assignee or successor in interest of the
Corporation under this Site Lease, shall pay to the City a single rental payment of $ , from
proceeds of sale of the Certificates, by causing such amount to be deposited to the Project Fund
under and as further specified in the Trust Agreement.
Section 5. Purpose. The Corporation shall use the Leased Premises solely for the
purpose of leasing back such Leased Premises to the City pursuant to the Lease and for such
purposes as may be incidental thereto; provided, that in the event of default by the City under the
Lease or termination pursuant thereto, the Corporation may exercise the remedies of repossession of
the Leased Premises, as provided in the Lease.
Section 6. Interest in Leased Premises. The City warrants and covenants that it has
sufficient interest in the Leased Premises to lease it hereunder. In the event of a title defect in the
Leased Premises that impairs the right to use and occupy the Leased Premises, the City covenants
that it will exercise its power, including but not limited to, its condemnation powers to the extent
permitted by law, to obtain the necessary rights in the Leased Premises and to cure such defect and
limitation of the right to use and occupancy.
Section 7. Assignments and Subleases. The City acknowledges and affirms the
assignment by the Corporation of its rights under this Site Lease to the Trustee, under the terms of
the Assignment Agreement dated as of the date hereof, for the benefit of the Owners of the
Certificates. This Site Lease may also be assigned and the Leased Premises subleased, as a whole or
in part, by the Corporation without necessity of obtaining the consent of the City, if any event of
default occurs under the Lease.
Section 8. Termination. The Corporation agrees, upon the termination of this Site
Lease, to quit and surrender the Leased Premises in the same good order and condition as the same
was in at the time of commencement of the term hereunder, reasonable wear and tear excepted, and
agrees that any permanent improvements and structures existing upon the Leased Premises at the
time of the termination of this Site Lease shall remain thereon and title thereto shall vest in the City.
Upon the exercise by the City of its option to purchase a portion of the Leased Premises, as
set forth in Section 7.3 of the Lease and upon payment therefor, a corresponding portion of the
Leased Premises may be released from this Site Lease.
Upon payment by the City of all Lease Payments and all Additional Payments due during the
term of the Lease, as provided for in Article IV thereof, the term of this Site Lease shall terminate.
Under no circumstances may the City terminate this Site Lease as a remedy for a default by
the Corporation in the performance of any obligation of the Corporation hereunder.
Section 9. Quiet Enjoy. The Corporation at all times during the term of this Site
Lease shall peaceably and quietly have, hold and enjoy all of the Leased Premises; provided,
2
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however, that the City shall have the right to demolish some or all of the existing improvements on
the Leased Premises in order to complete the Project or to replace or renovate some or all of the
existing improvements with new improvements of equivalent or greater value.
Section 10. Default. In the event the Corporation shall be in default in the performance of
any obligation on its part to be performed under the terms of this Site Lease, which default continues
for 30 days following written notice and demand for correction thereto by the City, the City may
exercise any and all remedies granted by law; provided, however, that no merger of this Site Lease
and the Lease shall be deemed to occur as a result thereof and, so long as any Certificates and
Additional Certificates are outstanding, the Site Lease shall not be terminated except as provided in
Section 8 hereof.
Section 11. Taxes. Subject to the provisions of Section 7.7 of the Lease, the City
covenants and agrees to pay any and all assessments of any kind or character and also all taxes,
including possessory interest taxes, levied or assessed upon the Leased Premises.
Section 12. Eminent Domain. In the event the whole or any part of the Leased Premises
is taken by eminent domain proceedings, the interest of the Corporation shall be recognized and is
hereby determined to be the amount of unpaid Lease Payments and all Additional Payments due the
Corporation under the Lease.
Section 13. Partial Invalidity. If any one or more of the terms, provisions, covenants or
conditions of this Site Lease shall to any extent be declared invalid, unenforceable, void or voidable
for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of
which becomes final, none of the remaining terms, provisions, covenants and conditions of this Site
Lease shall be affected thereby, and each provision of this Site Lease shall be valid and enforceable
to the fullest extent permitted by law.
Section 14. Applicable Law. This Site Lease shall be governed by and construed in
accordance with the laws of the State of California.
Section 15. Representatives. Whenever under the provisions of this Site Lease the
approval of the Corporation or the City is required, or the Corporation 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 City by
the City Manager or the Assistant City Manager, or their written designees, as representative, and for
the Corporation by its President, Vice -President, Secretary, Assistant Secretary or Chief Financial
Officer, or their written designees, as representative, and any party hereto shall be authorized to rely
upon any such approval or request.
Section 16. Captions. The captions or headings in this Site Lease are for convenience
only and in no way define, limit or describe the scope of intent of any provision or Section of this
Site Lease.
Section 17. Execution in Counterparts. This Site Lease may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of which shall constitute but
one and the same instrument.
Section 18. Amendments. This Site Lease may be amended in writing as may be
mutually agreed by the City and the Corporation; provided, however, that no such amendment which
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14-44
materially adversely affects the rights of the Owners of the Certificates and any Additional
Certificates shall be effective unless it shall have been consented to by the Trustee and the Owners of
a majority in aggregate principal amount of the Certificates then Outstanding.
Section 19. Incorporation. This Site Lease shall be subject to all the terms and conditions
of the Lease.
Section 20. Warranties of the City as to the Leased Premises. The City covenants and
warrants to the Corporation that:
(a) except for Permitted Encumbrances, the Leased Premises is not subject to any
dedication, easement, right of way, reservation in patent, covenant, condition, restriction, lien
or encumbrance which would prohibit or materially interfere with the financing as
contemplated by the Lease;
(b) all taxes, assessments, or impositions of any kind with respect to the Leased
Premises, except current taxes, have been paid in full;
(c) the Leased Premises is properly zoned for its intended purposes; and
(d) the Leased Premises is necessary to the City in order for the City to perform
its governmental functions.
[REMAINDER OF PAGE INTENTIONALLYLEFT BLANK]
M
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IN WITNESS WHEREOF, the parties have caused this Site Lease to be executed by their
duly authorized officers as of the date and year first above written.
CITY OF NEWPORT BEACH
[SEAL] By:
Its:
ATTEST:
City Clerk
ATTEST:
Secretary
NG-U9ZQVMF2/483 8-4700-1797x3/022459-0033
City Manager
NEWPORT BEACH PUBLIC FACILITIES
CORPORATION
By:
Its: Chief Financial Officer
S-1
14-46
[Site Lease Signature Pages Continued]
APPROVED AS TO FORM:
OFFICE OF THE CITY ATTORNEY:
Aaron C. Harp, City Attorney
NG-U9ZQVW2/4838-4700-1797x3/022459-0033
14-47
CERTIFICATE OF ACCEPTANCE
This is to certify that the interest in the Leased Premises conveyed under the foregoing to the
Newport Beach Public Facilities Corporation (the "Corporation"), a 501(c)4 nonprofit public benefit
corporation duly organized under the laws of the State of California, is hereby accepted by the
undersigned officer or agent on behalf of the Corporation, pursuant to authority conferred by
resolution of the said Corporation adopted on November 10, 2020, and the grantee consents to
recordation thereof by its duly authorized officer.
Dated: , 2020 NEWPORT BEACH PUBLIC FACILITIES
CORPORATION
Bv:
Its: Chief Financial Officer
[SEAL]
ATTEST:
Secretary
NG-U9ZQVMF2/483 8-4700-1797x3/022459-0033
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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 ORANGE
On , before me, , Notary Public,
personally appeared , who proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
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14-49
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 ORANGE
On , before me, , Notary Public,
personally appeared , who proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
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14-50
EXHIBIT A
DESCRIPTION OF THE LEASED PREMISES
Real property and improvements thereon in the City of Newport Beach, County of Orange,
State of California, described as follows:
A-1
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ATTACHMENT G
Stradling Yocca Carlson & Rauth
Draft of 1012 712 0
LEASE/PURCHASE AGREEMENT
by and between
NEWPORT BEACH PUBLIC FACILITIES CORPORATION,
as Lessor
and
CITY OF NEWPORT BEACH,
as Lessee
Dated as of December 1, 2020
Relating to
CITY OF NEWPORT BEACH
CERTIFICATES OF PARTICIPATION 2020A
(FIRE STATION NO. 2)
NG-U9ZQVMF2/4835-4704-3 525x5/022459-0033
14-52
Section 1.1.
Section 1.2.
Section 2.1.
Section 2.2.
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND EXHIBITS
Definitions and Rules of Construction............................................................. 2
Exhibits............................................................................................................. 3
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Representations, Covenants and Warranties of the City .................................. 3
Representations, Covenants and Warranties of the Corporation ...................... 5
ARTICLE III
APPLICATION OF PROCEEDS
Section 3.1. Deposit of Certificate Proceeds........................................................................ 7
Section 3.2. Defeasance of Refunded Certificates............................................................... 7
Section 3.3. Payment of Project and Delivery Costs............................................................ 7
Section 3.4. Further Assurances and Corrective Instruments ............................................... 8
ARTICLE IV
AGREEMENT TO LEASE; TERM OF LEASE; LEASE PAYMENTS
Section4.1.
Lease................................................................................................................. 9
Section4.2.
Term.................................................................................................................
9
Section 4.3.
Extension of Lease Term..................................................................................
9
Section 4.4.
Lease Payments................................................................................................ 9
Section 4.5.
No Withholding..............................................................................................10
Section 4.6.
Fair Rental Value............................................................................................10
Section 4.7.
Budget and Appropriation..............................................................................11
Section 4.8.
Assignment of Lease Payments......................................................................
l l
Section 4.9.
Use and Possession.........................................................................................
l l
Section 4.10.
Abatement of Lease Payments and Additional Payments ..............................
l l
Section 4.11.
Additional Payments......................................................................................12
Section 4.12.
Net -Net -Net Lease..........................................................................................12
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TABLE OF CONTENTS
(continued)
Page
ARTICLE V
INSURANCE
Section 5.1. Public Liability and Leased Premises Damage..............................................13
Section 5.2. Workers' Compensation.................................................................................13
Section 5.3. Casualty and Theft Insurance.........................................................................13
Section 5.4. Rental Interruption Insurance.........................................................................14
Section 5.5. Title Insurance................................................................................................14
Section 5.6. General Insurance Provisions.........................................................................15
Section5.7. Cooperation....................................................................................................16
ARTICLE VI
DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS
Section 6.1. Application of Net Proceeds...........................................................................16
ARTICLE VII
COVENANTS WITH RESPECT TO THE LEASED PREMISES
Section 7.1.
Use of the Leased Premises............................................................................17
Section 7.2.
Interest in the Leased Premises and the Lease...............................................17
Section 7.3.
Option to Purchase.........................................................................................18
Section7.4.
Quiet Enjoyment.............................................................................................18
Section 7.5.
Installation of the City's Personal Property ....................................................18
Section 7.6.
Access to the Leased Premises.......................................................................18
Section 7.7.
Maintenance, Utilities, Taxes and Assessments.............................................19
Section 7.8.
Modification of the Leased Premises.............................................................19
Section 7.9.
Encumbrances; Alternative Financing Methods.............................................20
Section 7.10.
Corporation's Disclaimer of Warranties........................................................
21
Section 7.11.
The City's Right to Enforce Warranties of Vendors or Contractors ..............
21
Section 7.12.
Substitution or Release of the Leased Premises .............................................
22
Section 7.13.
Compliance with Law, Regulations, Etc ........................................................
23
Section 7.14.
Environmental Compliance............................................................................
23
Section 7.15.
Condemnation of Leased Premises................................................................
25
ARTICLE VIII
ASSIGNMENT, SUBLEASING AND AMENDMENT
Section 8.1. Assignment by the Corporation...................................................................... 25
Section 8.2. Assignment and Subleasing by the City ......................................................... 25
ii
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TABLE OF CONTENTS
(continued)
Page
Section 8.3. Amendments and Modifications..................................................................... 26
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
Section 9.1. Events of Default Defined.............................................................................. 26
Section 9.2. Remedies on Default...................................................................................... 26
Section 9.3. No Remedy Exclusive.................................................................................... 28
Section 9.4. Agreement to Pay Attorneys' Fees and Expenses .......................................... 28
Section 9.5. No Additional Waiver Implied by One Waiver .............................................. 29
Section 9.6. Application of the Proceeds from the Re -Lease of the Leased Premises ....... 29
Section 9.7. Trustee and Owners to Exercise Rights.......................................................... 29
ARTICLE X
PREPAYMENT OF LEASE PAYMENTS
Section 10.1. Security Deposit............................................................................................. 29
Section 10.2. Extraordinary Prepayment.............................................................................. 29
Section 10.3. Optional Prepayment......................................................................................29
ARTICLE XI
MISCELLANEOUS
Section11.1.
Notices............................................................................................................30
Section 11.2.
Binding Effect................................................................................................
30
Section11.3.
Severability.....................................................................................................30
Section 11.4.
Execution in Counterparts..............................................................................
30
Section 11.5.
Applicable Law..............................................................................................
30
Signatures...................................................................................................................... S-1
EXHIBIT A SCHEDULE OF LEASE PAYMENTS.......................................................A-1
EXHIBIT B DESCRIPTION OF THE LEASED PREMISES ......................................... B-1
EXHIBIT C DESCRIPTION OF THE PROJECT........................................................... C-1
EXHIBIT D LEASE SUPPLEMENT FORM................................................................... D-1
EXHIBIT E FORM OF CERTIFICATE OF SUBSTITUTION OR ADDITION OF
PROJECT COMPONENT........................................................................... E-1
Im
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LEASE/PURCHASE AGREEMENT
THIS LEASE/PURCHASE AGREEMENT, dated as of December 1, 2020, by and between
the NEWPORT BEACH PUBLIC FACILITIES CORPORATION, a 501(c)(4) nonprofit public
benefit corporation duly organized and existing under the laws of the State of California, as lessor
(the "Corporation"), and the CITY OF NEWPORT BEACH, a chartered city duly organized and
existing under the Constitution and laws of said State, as lessee (the "City");
WITNESSETH. -
WHEREAS, the City may enter into leases and agreements relating to real property and
buildings to be used by the City; and
WHEREAS, the Corporation and the City wish to provide financing for the acquisition,
improving and equipping of a new Fire Station, all as described in Exhibit C hereto (the "Project") by
entering into this Lease/Purchase Agreement (this "Lease") and authorizing and directing the
execution and delivery of the City of Newport Beach Certificates of Participation 2020A (Fire
Station No. 2) (the "Certificates") evidencing fractional interests in Lease Payments (as defined in
the Trust Agreement) to be made by the City under this Lease; and
WHEREAS, the City has entered into a Site Lease of even date herewith (the "Site Lease")
with the Corporation under which the City has agreed to lease the real property described in
Exhibit B hereto, including any improvements thereon (the "Leased Premises"), to the Corporation,
and which Site Lease provides that the title to the Leased Premises shall vest in the City at the
expiration of the Site Lease (as provided in Section 8 thereof), and contains other terms and
conditions as the governing board of the City deems to be in the best interest of the City; and
WHEREAS, in consideration of the Lease Payments to be paid by the City to the Corporation
hereunder, the Corporation will lease to the City the Leased Premises and will grant to the City a
right to purchase the Corporation's interest in the Leased Premises; and
WHEREAS, the Corporation is authorized pursuant to the laws of the State of California and
its formation documents to provide financial assistance to the City by acquiring, constructing and
financing various public facilities, land and equipment and the leasing of facilities, land and
equipment for the use, benefit and enjoyment of the public; and
WHEREAS, all acts, conditions and things required by law to exist, to have happened and to
have been performed precedent to and in connection with the execution and entering into of this
Lease do exist, have happened and have been performed in regular and due time, form and manner as
required by law, and the parties hereto are now duly authorized to execute and enter into this Lease;
NOW, THEREFORE, in consideration of the above premises and of the mutual covenants
hereinafter contained and for other good and valuable consideration, the parties hereto agree as
follows:
1
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ARTICLE I
DEFINITIONS AND EXHIBITS
Section 1.1. Definitions and Rules of Construction. Unless the context otherwise requires,
the capitalized terms used herein shall, for all purposes of this Lease, have the meanings specified in
the Trust Agreement related to the Certificates (the "Trust Agreement"), dated as of the date hereof,
by and among The Bank of New York Mellon Trust Company, N.A., as Trustee thereunder, the
Corporation, and the City, together with any amendments thereof or supplements thereto permitted to
be made thereunder; and the additional terms defined in this Section shall, for all purposes of this
Lease, have the meanings herein specified. Unless the context otherwise indicates, words importing
the singular number shall include the plural number and vice versa. The terms "hereby," "hereof,"
"hereto," "herein," "hereunder" and any similar terms, as used in this Lease, refer to this Lease as a
whole.
"Completion Certificate" means the certificate of the City filed with the Trustee and signed
by a City Representative, as prescribed by Section 3.4 hereof.
"Environmental Regulations" shall mean all Laws and Regulations, now or hereafter in
effect, with respect to Hazardous Materials, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended (42 U.S.C. Section 9601, et
seMc .) (together with the regulations promulgated thereunder, "CERCLA"), the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Section 6901, et seMc .) (together with the
regulations promulgated thereunder, "RCRA"), the Emergency Planning and Community Right -to -
Know Act, as amended (42 U.S.C. Section 11001, et SeMc .) (together with the regulations promulgated
thereunder, "Title III"), the Clean Water Act, as amended (33 U.S.C. Section 1321 et sec .) (together
with the regulations promulgated thereunder, "CWA"), the Clean Air Act, as amended (42 U.S.C.
Section 7401, et seMc .) (together with the regulations promulgated thereunder, "CAA") and the Toxic
Substances Control Act, as amended (15 U.S.C. Section 2601 et s�Mc.) (together with the regulations
promulgated thereunder, "TSCA"), and any state or local similar laws and regulations and any so-
called local, state or federal "superfund" or "superlien" law.
"Interest Component" means the portion of each Lease Payment designated in Exhibit A
hereto as the Interest Component.
"Leased Premises" means the site described in Exhibit B hereto and any improvements
thereon being leased to the City by the Corporation.
"Permitted Encumbrances" means, as of any particular time: (i) liens for general ad valorem
taxes and assessments, if any, not then delinquent, or which the City may, pursuant to provisions of
Section 7.7 hereof, permit to remain unpaid; (ii) the Assignment Agreement; (iii) this Lease; (iv) the
Site Lease; (v) any contested right or claim of any mechanic, laborer, materialman, supplier or
vendor filed or perfected in the manner prescribed by law to the extent permitted under
Section 7.8(b) hereof, (vi) easements, rights of way, mineral rights, drilling rights and other rights,
reservations, covenants, conditions, liens or restrictions which exist of record as of the Closing Date,
which the City hereby certifies will not materially impair the use of the Leased Premises by the City;
and (vii) easements, rights of way, mineral rights, drilling rights and other rights, reservations,
covenants, conditions or restrictions established following the date of recordation of this Lease and to
which the Corporation and the City consent in writing.
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"Principal Component" means the portion of the Lease Payments designated in Exhibit A
hereto as the Principal Component.
"Project" means the improvements described in Exhibit C hereto, and any and all additions or
substitutions thereto made as provided in Section 3.5 hereof, and any additional improvements
financed with the proceeds of Additional Certificates.
Section 1.2. Exhibits. The following Exhibits are attached to, and by reference made a
part of, this Lease:
Exhibit A: Schedule of Lease Payments to be paid by the City to the Corporation, showing
the Lease Payment Date and amount of each Lease Payment.
Exhibit B: Legal Description of the Leased Premises.
Exhibit C: Description of the Project
Exhibit D: Lease Supplement Form.
Exhibit E: Form of Certificate of Substitution or Addition of Project Component.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 2.1. Representations, Covenants and Warranties of the City. The City represents,
covenants and warrants to the Corporation as follows:
(a) Due Organization and Existence. The City is a municipal corporation and a
chartered city duly organized and existing under the Constitution and laws of the State.
(b) Authorization; Enforceability. The Constitution and laws of the State
authorize the City to enter into this Lease, the Site Lease, the Trust Agreement, the Agency
Agreement and the Continuing Disclosure Agreement, and to enter into the transactions
contemplated by and to carry out its obligations under all of the aforesaid leases and agreements; the
City has duly authorized and executed all of the aforesaid leases and agreements. This Lease, the
Site Lease, the Trust Agreement, the Agency Agreement and the Continuing Disclosure Agreement
constitute the legal, valid and binding obligations of the City enforceable in accordance with their
respective terms, except to the extent limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles affecting the rights of creditors generally.
(c) No Conflicts or Default; No Liens or Encumbrances. Neither the execution
and delivery of this Lease, the Site Lease, the Continuing Disclosure Agreement, the Agency
Agreement or the Trust Agreement, nor the fulfillment of or compliance with the terms and
conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or
thereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction
or any agreement or instrument to which the City is now a party or by which the City is bound, or
constitutes a default under any of the foregoing, or results in the creation or imposition of any lien,
charge or encumbrance whatsoever upon any of the property or assets of the City, or upon the Leased
Premises except for Permitted Encumbrances and the pledges contained in the Trust Agreement.
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(d) Execution and Delivery. The City has duly authorized and executed this
Lease in accordance with the Constitution and laws of the State.
(e) Indemnification of Corporation. The City covenants to defend, indemnify
and hold harmless the Corporation and its directors, officers, employees and assigns (collectively, the
"Indemnified Parry") against any and all losses, claims, damages or liabilities, joint or several,
including fees and expenses incurred in connection therewith, to which such Indemnified Party may
become subject under any statute or at law or in equity or otherwise in connection with the
transactions contemplated by this Lease, and shall reimburse any such Indemnified Parry for any
legal or other expenses incurred by it in connection with investigating any claims against it and
defending any actions, insofar as such losses, claims, damages, liabilities or actions arise out of the
transactions contemplated by this Lease. In particular, without limitation, the City shall and hereby
agrees to indemnify and save the Indemnified Party harmless from and against all claims, losses and
damages, including legal fees and expenses, arising out of (i) the use, maintenance, condition or
management of, or from any work or thing done on the Leased Premises by the City, (ii) any breach
or default on the part of the City in the performance of any of its obligations under this Lease, (iii)
any act of negligence of the City or of any of its agents, contractors, servants, employees or licensees
with respect to the Leased Premises, (iv) any act of negligence of any assignee or sublessee of the
City with respect to the Leased Premises, or (v) the completion of the Project or the authorization of
payment of the Project Costs by the City. No indemnification is made under this Section or
elsewhere in this Lease for claims, losses or damages, including legal fees and expenses, arising out
of the willful misconduct or negligence under this Lease by the Corporation, its directors, officers,
agents, employees, successors or assigns.
(f) General Tax and Arbitrage Covenant. The City hereby covenants that,
notwithstanding any other provision of this Lease, it shall not take any action, or fail to take any
action, if any such action or failure to take action would adversely affect the exclusion from gross
income of interest due with respect to the Certificates or any Additional Certificates (to the extent
such Certificates are executed and delivered as tax exempt Certificates) under Section 103 of the
Internal Revenue Code of 1986, as amended (the "Code"). The City shall not, directly or indirectly,
use or permit the use of proceeds of the Certificates, any Additional Certificates (to the extent such
Certificates are executed and delivered as tax exempt Certificates), the Project or the Leased
Premises, or any portion thereof, by any person other than a governmental unit (as such term is used
in Section 141 of the Code), in such manner or to such extent as would result in the loss of exclusion
from gross income for federal income tax purposes of interest with respect to the Certificates or any
Additional Certificates (to the extent such Certificates are executed and delivered as tax exempt
Certificates).
The City shall not take any action, or fail to take any action, if any such action or failure to
take action would cause the Certificates or any Additional Certificates (to the extent such Certificates
are executed and delivered as tax exempt Certificates) to be "private activity bonds" within the
meaning of Section 141 of the Code, and in furtherance thereof, shall not make any use of the
proceeds of the Certificates, any Additional Certificates (to the extent such Certificates are executed
and delivered as tax exempt Certificates) or the Leased Premises, or any portion thereof, or any other
funds of the City, that would cause the Certificates or any Additional Certificates (to the extent such
Certificates are executed and delivered as tax exempt Certificates) to be "private activity bonds"
within the meaning of Section 141 of the Code. To that end, so long as any Certificates or any
Additional Certificates (to the extent such Certificates are executed and delivered as tax exempt
Certificates) are outstanding, the City, with respect to such proceeds, the Leased Premises and the
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Project and such other funds, will comply with applicable requirements of the Code and all
regulations of the United States Department of the Treasury issued thereunder and under Section 103
of the Code, to the extent such requirements are, at the time, applicable and in effect.
The City shall not, directly or indirectly, use or permit the use of any proceeds of the
Certificates, any Additional Certificates (to the extent such Additional Certificates are executed and
delivered as tax exempt Certificates) or of the Leased Premises, or other funds of the City, or take or
omit to take any action, that would cause the Certificates or any Additional Certificates (to the extent
such Additional Certificates are executed and delivered as tax exempt Certificates) to be "arbitrage
bonds" within the meaning of Section 148 of the Code. To that end, the City shall comply with all
requirements of Section 148 of the Code and all regulations of the United States Department of the
Treasury issued thereunder to the extent such requirements are, at the time, in effect and applicable to
the Certificates or any Additional Certificates (to the extent such Additional Certificates are executed
and delivered as tax exempt Certificates).
The City shall not make any use of the proceeds of the Certificates, any Additional
Certificates (to the extent such Additional Certificates are executed and delivered as tax exempt
Certificates) or any other funds of the City, or take or omit to take any other action, that would cause
the Certificates or any Additional Certificates (to the extent such Additional Certificates are executed
and delivered as tax exempt Certificates) to be "federally guaranteed" within the meaning of
Section 149(b) of the Code.
(g) Flood Plain. The City hereby represents that the Leased Premises are not in a
100 year flood plain.
(h) Essentiality of the Leased Premises. The City hereby represents that the
Leased Premises are essential for the City's performance of its governmental functions.
(i) Zoning Environmental and Safety Ordinance Compliance. The City hereby
represents that the Leased Premises comply in all respects with applicable zoning, environmental and
safety ordinances.
0) Title Insurance. The City hereby represents that the Leased Premises are the
same property which is the subject of the ALTA title insurance policy (with western regional
exceptions) or CLTA title insurance policy issued by First American Title Insurance Company
pursuant to Section 5.5 hereof.
Section 2.2. Representations, Covenants and Warranties of the Corporation. The
Corporation represents, covenants and warrants to the City as follows:
(a) Due Organization and Existence; Enforceability. The Corporation is a
501(c)(4) nonprofit public benefit corporation duly organized, existing and in good standing under
and by virtue of the laws of the State, has the power to enter into this Lease, the Assignment
Agreement, the Site Lease, the Agency Agreement and the Trust Agreement; is possessed of full
power to own and hold real and personal property, and to lease and sell the same; and has duly
authorized the execution and delivery of all of the aforesaid leases and agreements. This Lease, the
Assignment Agreement, the Site Lease, the Agency Agreement and the Trust Agreement constitute
the legal, valid and binding obligations of the Corporation, enforceable in accordance with their
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respective terms, except to the extent limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles affecting the rights of creditors generally.
(b) No Conflicts or Defaults; No Liens or Encumbrances. Neither the execution
and delivery of this Lease, the Assignment Agreement, the Site Lease, the Agency Agreement or the
Trust Agreement, nor the fulfillment of or compliance with the terms and conditions hereof or
thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or
results in a breach of the terms, conditions or provisions of the joint powers agreement of the
Corporation or any restriction or any agreement or instrument to which the Corporation is now a
party or by which the Corporation is bound, or constitutes a default under any of the foregoing, or
results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the
property or assets of the Corporation, or upon the Leased Premises except by Permitted
Encumbrances and by the pledge contained in the Trust Agreement.
(c) Execution and Delivery. The Corporation has duly authorized and executed
this Lease in accordance with the laws of the State.
(d) Maintenance of Existence. To the extent permitted by law, the Corporation
agrees that during the term hereof it will maintain its existence as a 501(c)(4) nonprofit public benefit
corporation, will not combine or consolidate with or merge into any other entity or permit one or
more other entities to consolidate with or merge into it.
(e) General Tax and Arbitrage Covenant. The Corporation covenants that,
notwithstanding any other provision of this Lease, it shall not take any action if any such action
would adversely affect the exclusion from gross income of interest due with respect to the
Certificates or any Additional Certificates under Section 103 of the Code (to the extent such
Additional Certificates are executed and delivered as tax exempt Certificates). To the extent that the
Corporation may control the Leased Premises or the proceeds of the Certificates or any Additional
Certificates, the Corporation shall not, directly or indirectly, use or permit the use of proceeds of the
Certificates, any Additional Certificates (to the extent such Additional Certificates are executed and
delivered as tax exempt Certificates), the Project or the Leased Premises by any person other than a
governmental unit (as such term is used in Section 141 of the Code), in such manner or to such extent
as would result in the loss of exclusion from gross income for federal income tax purposes of interest
with respect to the Certificates or any Additional Certificates (to the extent such Additional
Certificates are executed and delivered as tax exempt Certificates).
The Corporation shall not take any action if any such action would cause the Certificates or
any Additional Certificates (to the extent such Additional Certificates are executed and delivered as
tax exempt Certificates) to be "private activity bonds" within the meaning of Section 141 of the
Code, and in furtherance thereof, to the extent that the Corporation may control the Leased Premises
or the proceeds of the Certificates or any Additional Certificates (to the extent such Additional
Certificates are executed and delivered as tax exempt Certificates), shall not make any use of the
proceeds of the Certificates, any Additional Certificates (to the extent such Additional Certificates
are executed and delivered as tax exempt Certificates), the Project or the Leased Premises, or any
portion thereof, or any other funds of the City, that would cause the Certificates or any Additional
Certificates to be "private activity bonds" within the meaning of Section 141 of the Code. To that
end, so long as any Certificates or any Additional Certificates (to the extent such Additional
Certificates are executed and delivered as tax exempt Certificates) are outstanding, to the extent that
the Corporation may control the Leased Premises or the proceeds of the Certificates or any
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Additional Certificates (to the extent such Additional Certificates are executed and delivered as tax
exempt Certificates), the Corporation, with respect to such proceeds, the Leased Premises, the Project
and such other funds, will comply with applicable requirements of the Code and all regulations of the
United States Department of the Treasury issued thereunder and under Section 103 of the Code, to
the extent such requirements are, at the time, applicable and in effect.
To the extent that the Corporation may control the Leased Premises or the proceeds of the
Certificates or any Additional Certificates, the Corporation shall not, directly or indirectly, use or
permit the use of any proceeds of any Certificates or any Additional Certificates (to the extent such
Additional Certificates are executed and delivered as tax exempt Certificates), or of the Project, the
Leased Premises, or other funds available to it, or take or omit to take any action, that would cause
the Certificates or any Additional Certificates (to the extent such Additional Certificates are executed
and delivered as tax exempt Certificates) to be "arbitrage bonds" within the meaning of Section 148
of the Code. To that end, to the extent that the Corporation may control the Leased Premises or the
proceeds of the Certificates or any Additional Certificates (to the extent such Additional Certificates
are executed and delivered as tax exempt Certificates), the Corporation shall comply with all
requirements of Section 148 of the Code and all regulations of the United States Department of the
Treasury issued thereunder to the extent such requirements are, at the time, in effect and applicable to
the Certificates or any Additional Certificates (to the extent such Additional Certificates are executed
and delivered as tax-exempt Certificates).
To the extent that the Corporation may control the proceeds of the Certificates or any
Additional Certificates, the Corporation shall not make any use of the proceeds of the Certificates or
any Additional Certificates (to the extent such Additional Certificates are executed and delivered as
tax-exempt Certificates) or any other of its funds, or take or omit to take any other action, that would
cause the Certificates or any Additional Certificates (to the extent such Additional Certificates are
executed and delivered as tax-exempt Certificates) to be "federally guaranteed" within the meaning
of Section 149(b) of the Code.
ARTICLE III
APPLICATION OF PROCEEDS
Section 3.1. Deposit of Certificate Proceeds. On the Closing Date for the Certificates and
on the Closing Date for any Additional Certificates, the Corporation agrees to pay or cause to be paid
to the Trustee the proceeds of the sale of the Certificates and Additional Certificates, which moneys,
in the case of the Certificates, shall be deposited with the Trustee as provided in Section 2.05 of the
Trust Agreement, or in the case of Additional Certificates as provided in any Supplemental Trust
Agreement which relates to such Additional Certificates.
Section 3.2. Completion of the Project. The Corporation and the City agree to execute
and deliver the Agency Agreement pursuant to which the City, as the agent of the Corporation, will
acquire, construct, deliver and install the Project. The City and the Corporation each covenants and
agrees to comply with the terms of the Agency Agreement.
Section 3.3. Payment of Project and Delivery Costs. Payment of the Project Costs and
Delivery Costs shall be made from the moneys deposited with the Trustee in the Project Fund as
provided in Section 3.1 hereof and Section 2.05 of the Trust Agreement, which shall be disbursed in
accordance and upon compliance with Article III of the Trust Agreement.
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Section 3.4. Completion Certification. The City and the Corporation expect that the
Project will be substantially completed in accordance with plans and specifications described in the
Agency Agreement on or prior to the dates specified in Section 3 to the Agency Agreement. Upon
the completion of acquisition, construction, delivery and installation of the portion of the Project to
be financed with the proceeds of the Certificates, and upon the completion of the improvements to be
financed with each series of Additional Certificates, the City shall deliver to the Trustee a
Completion Certificate with respect thereto. A separate Completion Certificate will be filed with
respect to the portion of the Project to be financed from the Certificates and the portion to be
financed with each series of Additional Certificates.
On the date of filing a Completion Certificate, all excess moneys remaining in the Project
Fund for the Certificates or issue of Additional Certificates for which such Completion Certificate is
delivered shall be applied in accordance with the provisions of Section 3.04 of the Trust Agreement.
Section 3.5. Substitution of or Addition to the Project. The City shall have the right to
substitute alternate items for any portion of the Project listed in Exhibit C hereto or provide for
additional components of the Project by providing the Trustee with a written certificate in the form
contained in Exhibit E hereto, so long as such substitution or addition does not cause, in and of itself,
the Interest Component evidenced by the Certificates or any Additional Certificates (to the extent
such Certificates are executed and delivered as tax exempt Certificates) to be included in gross
income for federal income tax purposes or result in a reduction in the fair rental value of the Leased
Premises.
Section 3.6. Compliance with Law.
(a) Public Bidding. Except as otherwise provided by City Charter and the City of
Newport Beach Municipal Code, the City shall comply with all applicable provisions for bids and
contracts prescribed by law, including, without limitation, the Public Contract Code and the
Government Code of the State.
(b) Wage Rates and Working ours. Except as otherwise provided by City
Charter and the City of Newport Beach Municipal Code, the City shall comply with all provisions
relating to prevailing wage rates and working hours applicable to it under the laws of the State.
(c) Plans and Specifications. Except as otherwise provided by City Charter and
the City of Newport Beach Municipal Code, the City shall prepare and adopt plans and specifications
for the acquisition, construction and installation of the Project pursuant to the Government Code and
Public Contracts Code of the State.
Section 3.7. Further Assurances and Corrective Instruments. The Corporation 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.
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ARTICLE IV
AGREEMENT TO LEASE; TERM OF LEASE; LEASE PAYMENTS
Section 4.1. Lease. The Corporation hereby leases the Leased Premises to the City, and
the City hereby leases the Leased Premises from the Corporation, upon the terms and conditions set
forth herein. This Lease shall not operate as a merger of the City's leasehold estate in the Leased
Premises pursuant to this Lease and its fee estate in the Leased Premises and shall not cause the
extinguishment of the leasehold interest granted to the Corporation under the Site Lease.
Section 4.2. Term. The Term of this Lease shall commence on the date of execution
hereof and shall end on July 1, 2030, unless extended pursuant to Section 4.3 hereof, or unless
terminated prior thereto upon the earliest of any of the following events:
(a) Default and Termination. A default by the City and the Corporation's
election to terminate this Lease under Section 9.2(b) hereof;
(b) Payment of All Lease Payments. The payment by the City of all Lease
Payments required under Section 4.4 hereof and any Additional Payments required under
Section 4.11 hereof,
(c) Prepavment. The deposit of funds or Government Obligations with the
Trustee in amounts sufficient to pay all Lease Payments as the same shall become due, as provided in
Section 10.1 hereof and in Section 14.01 of the Trust Agreement; or
(d) Purchase. Upon the exercise by the City of its option to purchase all of the
Corporation's interest in the Leased Premises as provided in Section 7.3 hereof; provided, however,
that upon exercise by the City of its option to purchase the Corporation's interest in a portion of the
Leased Premises, as provided in Section 7.3, the Lease shall be terminated only with respect to the
portion of the Leased Premises purchased.
Section 4.3. Extension of Lease Term. The Term of this Lease may be extended in
connection with the execution and delivery of any Additional Certificates. If on the final maturity
date of the Certificates or any Additional Certificates all Interest Components and Principal
Components represented thereby shall not be fully paid by the City as a result of a default in the
payment of Lease Payments, or because the Lease Payments hereunder shall have been abated at any
time as permitted by the terms hereof, then the Term shall be extended until all Certificates and
Additional Certificates shall be fully paid, except that the Term shall in no event be extended beyond
the tenth anniversary of the final scheduled maturity of any Certificate or Additional Certificate.
Section 4.4. Lease Pam.
(a) Time and Amount. Subject to the provisions of Section 4.10 (regarding
abatement in event of loss of use of any portion of the Leased Premises), Section 7.3 (regarding
option to purchase) and Article X (regarding prepayment of Lease Payments), the City agrees to pay
to the Corporation, its successors and assigns, as annual rental for the use and possession of the
Leased Premises, the Lease Payments (denominated into components of principal and interest, the
Interest Component of such Lease Payment being paid semiannually) in the amounts specified in
Exhibit A, to be due and payable in arrears on the fifteenth (15th) day of the month (or if such day is
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not a Business Day, the next succeeding Business Day) specified in Exhibit A (the "Lease Payment
Date") which are sufficient in both time and amount to pay when due the annual principal and
interest represented by the Certificates. In the event that any Additional Certificates are executed and
delivered pursuant to the Trust Agreement, the City and the Trustee shall execute an amendment to
Exhibit A to state the Lease Payments due hereunder as a result of the execution and delivery of such
Additional Certificates.
The obligation of the City to pay Lease Payments shall commence on the Closing Date for
the Certificates.
In the event the City does not pay a Lease Payment due on the respective Lease Payment
Date, the Trustee shall provide prompt written notice to the City of such failure to pay; provided,
however, that failure to give such notice shall not excuse any event of default under Section 9.1
hereof.
(b) Credits. Any amount held in the Lease Payment Fund on any Lease Payment
Date (other than capitalized interest, which shall be credited in accordance with Section 5.03 of the
Trust Agreement, and other than amounts resulting from the prepayment of the Lease Payments in
part but not in whole pursuant to Section 10.2 hereof and other amounts required for payment of
principal with respect to any Certificates or Additional Certificates that have matured or been called
for payment and have not been presented for payment or interest) shall be credited towards the
applicable Lease Payment then due and payable. The City need not transfer additional cash to the
Trustee on any Lease Payment Date if the amounts then held in the Lease Payment Fund (other than
those amounts excluded under the prior sentence) are at least equal to the Lease Payment then
required to be paid.
(c) Rate on Overdue Payments. In the event the City should fail to make any of
the Lease Payments required in this Section, the Lease 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 such amount was
originally payable at the rate equal to the original interest rate payable with respect to each
Certificate or Additional Certificate, as applicable, represented by such delinquent Lease Payment.
Section 4.5. No Withholding. Notwithstanding any dispute between the Corporation and
the City, including a dispute as to the failure of any portion of the Leased Premises in use by or
possession of the City to perform the task for which it is leased, the City shall make all Lease
Payments and Additional Payments when due and shall not withhold any Lease Payments pending
the final resolution of such dispute.
Section 4.6. Fair Rental Value. The Lease Payments and Additional Payments shall be
paid by the City in consideration of the right of possession of, and the continued quiet use and
enjoyment of, the Leased Premises during each such period for which said Lease Payments are to be
paid. The parties hereto have agreed and determined that such total rental represents the fair rental
value of the Leased Premises. In making such determination, consideration has been given to the fair
market value and replacement cost of the Leased Premises, other obligations of the parties under this
Lease (including but not limited to costs of maintenance, taxes and insurance), 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, and the transfer of the Corporation's leasehold interest in the Leased
Premises at the end of the Term.
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Section 4.7. Budget and Appropriation. The City covenants to take such action as may be
necessary to include all Lease Payments and Additional Payments (to the extent the amounts of such
Additional Payments are known to the City at the time its annual budget is proposed), due hereunder
in its annual budget and to make the necessary annual appropriations therefor, and to maintain such
items to the extent unpaid for that Fiscal Year in its budget throughout such Fiscal Year. To the
extent the amount of such payments becomes known after the adoption of the annual budget, such
amounts shall be included and maintained in such budget as amended. During the Term, the City
will furnish annually, on or before August 1 of each year, to the Trustee a certificate of the City
Representative stating that all Lease Payments and Additional Payments due hereunder for the
applicable Fiscal Year have been included in its annual budget and the amount so included. The
covenants on the part of the City herein contained shall be deemed to be and shall be construed to be
duties imposed by law and it shall be the ministerial 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 agreed to be carried out and performed by the City.
The obligation of the City to pay Lease Payments and Additional Payments hereunder 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 anything contained herein 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 and Additional Payments hereunder 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.
Section 4.8. Assignment of Lease Payments. Certain of the Corporation's rights under
this Lease, including the right to receive and enforce payment of the Lease Payments, Additional
Payments and Prepayments, to be made by the City hereunder, have been assigned absolutely to the
Trustee, subject to certain exceptions, pursuant to the Assignment Agreement, to which assignment
the City hereby consents. The Corporation hereby directs the City, and the City hereby agrees, to
pay to the Trustee at the Trustee's corporate trust office designated in the Trust Agreement, or to the
Trustee at such other place as the Trustee shall direct in writing, all Lease Payments, Additional
Payments or Prepayments thereof payable by the City hereunder. The Corporation will not assign or
pledge the Lease Payments or other amounts derived from the Leased Premises and from its other
rights under this Lease except as provided under the terms of this Lease, the Assignment Agreement
and the Trust Agreement, or its duties and obligations except as provided under this Lease.
Section 4.9. Use and Possession. The total Lease Payments due in any Fiscal Year shall
be for the City's right to use and possession of the Leased Premises for such Fiscal Year. During the
Term of this Lease, the City shall be entitled to the exclusive use and possession of the Leased
Premises, subject only to the Permitted Encumbrances.
Section 4.10. Abatement of Lease Payments and Additional Pam.
(a) In the Event of Damage, Destruction, Condemnation or Title Defect. Except
to the extent that proceeds of the type described in the following paragraph are available, the amount
of Lease Payments and Additional Payments shall be abated during any period in which by reason of
damage, destruction or taking by eminent domain or condemnation of the Leased Premises or defects
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in the title with respect to the Leased Premises there is substantial interference with the use and
possession of all or a portion of the Leased Premises by the City. The amount of such abatement
shall be such that the resulting Lease Payments, exclusive of the amounts described in the following
paragraph, do not exceed the fair rental value (as determined by an independent real estate appraiser
selected by the City, who is not an employee of the City) for the use and possession of the portion of
the Leased Premises not damaged, destroyed, interfered with or taken. Such abatement shall
continue for the period commencing with such damage, destruction, interference or taking and
ending with the substantial completion of the replacement or work of repair or the removal of the title
defect causing such interference with use. Except as provided herein, in the event of any such
damage, destruction, interference or taking, this Lease shall continue in full force and effect and the
City waives any right to terminate this Lease by virtue of any such damage, destruction, interference
or taking.
Notwithstanding a substantial interference with the use and possession of all or a portion of
the Leased Premises, the City shall remain obligated to make Lease Payments which would
otherwise be abated (i) to the extent that moneys derived from any person as a result of any delay in
the reconstruction, replacement or repair of the Leased Premises, or any portion thereof, are available
to pay the amount which would otherwise be abated; and (ii) to the extent that moneys are available
in the Lease Payment Fund to pay the amount which would otherwise be abated. The Lease
Payments shall be payable from such amounts paid under (i) and (ii) above as an obligation of the
City payable from a special fund.
(b) Repair or Replacement. In the event of such abatement, unless the abatement
will be avoided as a result of a prepayment of Lease Payments from Net Proceeds pursuant to Section
6.1(c), the City will use its best efforts to repair or replace the damaged or destroyed or taken portion
of the Leased Premises, as the case may be, from Net Proceeds or special funds of the City or other
moneys the application of which would, in the opinion of Special Counsel addressed to the Trustee,
the City and the Corporation, not result in the obligations of the City hereunder constituting
indebtedness of the City in contravention of the Constitution and laws of the State.
Section 4.11. Additional Payments. In addition to the Lease Payments, the City shall also
pay such amounts ("Additional Payments") as shall be required for the payment of all administrative
costs of the Corporation relating to the Leased Premises, the Certificates and any Additional
Certificates, including without limitation all expenses, compensation and indemnification of the
Trustee payable by the City under the Trust Agreement, taxes of any sort whatsoever payable by the
Corporation as a result of its interest in the Leased Premises or undertaking of the transactions
contemplated herein or in the Trust Agreement, fees of auditors, accountants, attorneys or engineers
and any and all other necessary administrative costs of the Corporation or charges required to be paid
by it in order to comply with the terms of the Certificates and any Additional Certificates or of the
Trust Agreement including premiums or insurance maintained pursuant to Article V hereof or to
indemnify the Corporation and its employees, officers and directors and the Trustee. All such
Additional Payments to be paid hereunder shall be paid when due directly by the City to the
respective parties to whom such Additional Payments are owing.
Section 4.12. Net -Net -Net Lease. This Lease 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 Corporation, free and clear of any expenses, taxes, fees, insurance premiums, rebate payments,
reserve deposits, costs associated with the Leased Premises, charges or set -offs whatsoever, except as
expressly provided herein.
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ARTICLE V
INSURANCE
Section 5.1. Public Liability and Leased Premises Damage.
(a) Coverage. The City shall maintain or cause to be maintained, throughout the
Term hereof, a standard comprehensive general public liability and property damage insurance policy
or policies in protection of the City and the Corporation and their officers, agents and employees.
Said policy or policies shall provide for indemnification of said parties against direct or contingent
loss or liability for damages for bodily and personal injury, death or property damage occasioned by
reason of the use or operation of any City property or portion thereof.
(b) Limits. 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
$500,000 for damage to property resulting from each accident or event (in each case subject to a
deductible clause of not to exceed $500,000). Such public liability and property damage insurance
may, however, be in the form of a single limit policy covering all such risks in an amount equal to
the liability limits set forth herein.
(c) Joint or Self -Insurance. Such liability insurance, including the deductible,
may be maintained as part of or in conjunction with any other insurance coverage carried by the City,
and, subject to compliance with Section 5.6(e) hereof, may be maintained in the form of self-
insurance by the City. Insurance obtained through a California joint powers authority of which the
City is a member shall not be deemed to be self-insurance.
(d) Payment of Net Proceeds. The proceeds of such liability insurance shall be
applied toward extinguishment or satisfaction of the liability with respect to which the insurance
proceeds shall have been paid.
Section 5.2. Workers' Compensation. The City shall also maintain workers'
compensation insurance issued by a responsible carrier authorized under the laws of the State to
insure its employees against liability for compensation under the Workers' Compensation Insurance
and Safety Act now in force in the State, or any act hereafter enacted as an amendment or supplement
thereto (with provision for self-insurance).
Section 5.3. Casualty and Theft Insurance.
(a) Casualty and Theft Insurance; Coverage. The City shall procure and
maintain, or cause to be procured and maintained, throughout the Term of this Lease, insurance
against loss or damage to any portion of the Leased Premises caused by fire and lightning, with
extended coverage and theft, vandalism and malicious mischief insurance. Said extended coverage
insurance 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, excluding
flood and earthquake. The City shall not be required to purchase or maintain earthquake or flood
insurance with respect to the Leased Premises.
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(b) Amount. Such insurance shall be in an amount not less than the replacement
cost of the Leased Premises, subject to a "deductible clause" not to exceed five hundred thousand
dollars ($500,000) for any one loss or, in the case of a flood and earthquake rider, ten percent (10%)
of the coverage obtained. The term "full replacement value" as used in this Section 5.3 shall mean
the actual replacement cost of the improvements constituting the Leased Premises.
(c) Joint or Self -Insurance. Such insurance may be maintained as part of or in
conjunction with any other insurance carried or required to be carried by the City, and, subject to
compliance with Section 5.6(e) hereof, may be maintained in the form of self-insurance by the City.
Insurance obtained through a California joint powers authority of which the City is a member shall
not be deemed to be self-insurance.
(d) Payment of Net Proceeds. The Net Proceeds of such insurance shall be paid
to the Trustee and deposited in the Net Proceeds Fund and applied as provided in Section 6.1.
Section 5.4. Rental Interruption Insurance.
(a) Coverage and Amount. Upon delivery of the Leased Premises to it for
occupancy, the City shall maintain or cause to be maintained rental income or use and occupancy
insurance in an amount not less than the maximum remaining scheduled Lease Payments in any
future 24 -month period, to insure against loss of rental income from the Leased Premises caused by
perils covered by the insurance required to be maintained as provided in Section 5.3 hereof. Such
rental interruption insurance shall name the Trustee and the Corporation as additionally insured
parties and the Trustee as the loss payee.
(b) Joint Insurance. Such insurance may be maintained as part of or in
conjunction with any other rental income or use and occupancy insurance carried by the City but may
not be maintained in the form of self-insurance by the City.
(c) Payment of Net Proceeds. The Net Proceeds of such rental interruption
insurance shall be paid to the Trustee and deposited in the Lease Payment Fund, to be credited
towards the payment of the Lease Payments in the order in which such Lease Payments come due
and payable if there are insufficient Net Proceeds to pay all Lease Payments due in any such
Certificate Year.
Section 5.5. Title Insurance. The City shall obtain and, throughout the Term of this Lease,
maintain or cause to be maintained title insurance on the Leased Premises, in the form of an ALTA
title policy (with western regional exceptions) or in the form of a CLTA title policy, in an amount
equal to the aggregate principal amount of the Certificates and Additional Certificates Outstanding,
issued by a company of recognized standing, duly authorized to issue the same, payable to the
Trustee for the benefit of the Owners, subject only to Permitted Encumbrances. Said policy or
policies shall insure the City's leasehold estate hereunder in the Leased Premises, subject only to
Permitted Encumbrances. All Net Proceeds received under said policy or policies shall be deposited
with the Trustee and applied as provided in Section 7.01 of the Trust Agreement. So long as any of
the Certificates and Additional Certificates remain Outstanding, each policy of the title insurance
obtained pursuant hereto or required hereby shall provide that all proceeds thereunder shall be
payable to the Trustee for the benefit of the Certificate Owners and the owners of any Additional
Certificates. The Net Proceeds of such insurance shall be applied as provided in Section 6.1.
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Section 5.6. General Insurance Provisions.
(a) Form of Policies. All policies of insurance required to be procured and
maintained pursuant to this Lease and any statements of self-insurance shall be in a form certified by
the City Representative or an insurance agent, broker or consultant to the City to comply with the
provisions hereof. All such policies shall provide that the insured parties shall be given thirty (30)
days' notice of each expiration, any intended cancellation thereof or reduction of the coverage
provided thereby. Each policy of insurance required to be procured and maintained pursuant to
Section 5.3 (regarding casualty and theft insurance), Section 5.4 (regarding rental interruption
insurance) and Section 5.5 (regarding title insurance) shall provide that all proceeds thereunder shall
be payable to the Trustee for the benefit of the Owners. All required insurance policies must be
provided by a commercial insurer rated A by Best or A- and A3 by S&P and Moody's, respectively.
All policies shall name the City, the Corporation and the Trustee as insureds and the Trustee as a loss
payee.
(b) Payment of Premiums. The City shall pay or cause to be paid when due the
premiums for all insurance policies required by this Lease, and shall promptly furnish or cause to be
furnished to the Trustee a certificate to such effect, as described in paragraph (d) below.
(c) Protection of the Trustee. The Trustee shall not be responsible for the
sufficiency or adequacy of any 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
agreed to by the Trustee.
(d) Evidenc
annually on or before August 1
are in full force and effect.
of Insurance. The City shall cause to be delivered to the Trustee
a certificate stating that the insurance policies required by this Lease
(e) Self Insurance. The City may only elect to self insure pursuant to
Sections 5.1 and 5.2 hereof if and to the extent such self-insurance method or plan of protection shall
afford reasonable protection to the Corporation and the Trustee, in light of all circumstances, giving
consideration to cost, availability and similar plans or methods of protection adopted by other cities
in the State other than the City. Insurance provided through a California joint powers authority of
which the City is a member or with which the City contracts for insurance shall not be deemed to be
self-insurance for purposes hereof. Any self-insurance maintained by the City pursuant to this
Article V shall comply with the following terms:
(i) The self-insurance program shall be approved in writing by the City's
City Manager or Assistant City Manager and an independent insurance consultant in accordance with
the California Labor Code and the California Government Code;
(ii) The self-insurance program shall include an actuarially sound claims
reserve fund out of which each self-insured claim shall be paid; the adequacy of such fund shall be
evaluated on an annual basis by the City Representative in a certified statement delivered to the
Trustee; and any deficiencies in any self-insured claims reserve fund shall be remedied in accordance
with the recommendation of the City Representative; and
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(iii) In the event the self-insurance program shall be discontinued, the
actuarial soundness of its claims reserve fund, as determined by the City Representative, shall be
maintained.
Section 5.7. Cooperation. The Corporation shall cooperate fully with the City at the
expense of the City in filing any proof of loss with respect to any insurance policy maintained
pursuant to this Article and in the prosecution or defense of any prospective or pending
condemnation proceeding with respect to the Leased Premises or any portion thereof.
ARTICLE VI
DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS
Section 6.1. Application of Net Proceeds.
(a) Deposit in Net Proceeds Fund. The City shall remit promptly to the Trustee
any Net Proceeds received by the City and the Trustee as provided in Section 5.3 (regarding casualty
and theft insurance) and Section 5.5 (regarding title insurance) promptly upon receipt thereof, and
pursuant to Section 7.01 of the Trust Agreement, the Trustee shall deposit such Net Proceeds of
insurance in the Net Proceeds Fund. The City and/or the Corporation shall transfer to the Trustee
any other Net Proceeds (other than Net Proceeds paid under Sections 5.1, 5.2 and 5.4 hereof which
shall be applied as described in such sections) received by the City and/or Corporation in the event of
any accident, destruction, theft or taking by eminent domain or condemnation with respect to the
Leased Premises, for deposit in the Net Proceeds Fund.
(b) Disbursement for Replacement or Repair of the Leased Premises. Upon
receipt of the certification described in paragraph (i) below and the requisition described in paragraph
(ii) below, the Trustee shall disburse moneys in the Net Proceeds Fund to the person, firm or
corporation named in the requisition as provided in paragraph (ii) below.
(i) Certification. The City Representative must certify to the Corporation
and the Trustee that:
(x) Sufficiency of Net Proceeds. The Net Proceeds available for
such purpose, together with any other funds supplied by the City to the Trustee in a subaccount of the
Net Proceeds Fund for such purpose, are expected to equal at least 100% of the projected costs of
replacement or repair, as demonstrated in an attached reconstruction budget, and
(y) Timely Completion. In the event that damage, destruction or
taking results, or is expected to result, 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 5.4 together with other identified available moneys, will
be available to pay in full all Lease Payments coming due during such period as demonstrated in an
attached reconstruction schedule.
(ii) Requisition. The City Representative must deliver to the Trustee a
requisition stating with respect to each payment to be made (1) the requisition number, (2) the name
and address of the person, firm or corporation to whom payment is due, (3) the amount to be paid and
(4) that each obligation mentioned therein has been properly incurred, is a proper charge against the
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Net Proceeds Fund, has not been the basis of any previous withdrawal, and specifying in reasonable
detail the nature of the obligation. Each such cost requisition 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 Net Proceeds remaining after such replacement or repair has been
completed and after payment or provision for payment of all Certificates as provided in Section 7.01
of the Trust Agreement and all Additional Certificates as provided in any Supplemental Trust
Agreement pursuant to which such Additional Certificates are executed and delivered shall be paid to
the City after payment of amounts due the Trustee pursuant to Sections 9.6 and 9.7 of the Trust
Agreement.
(c) Disbursement for Prepayment. If the City Representative notifies the Trustee
in writing of the City's determination that the certification provided in Section 6.1(b)(i) cannot be
made or that replacement or repair of any portion of the Leased Premises is not economically feasible
or in the best interest of the City, then the Trustee shall promptly transfer the Net Proceeds to the
Prepayment Fund as provided in Section 7.01 of the Trust Agreement and apply them to prepayment
of the Certificates as provided in Section 4.02 of the Trust Agreement and Additional Certificates as
provided in a Supplemental Trust Agreement and prepayment of Lease Payments as provided in
Section 10.2 hereof, provided that in the event of damage or destruction in whole of the Leased
Premises and in the event such Net Proceeds, together with funds then on hand in the Lease Payment
Fund are not sufficient to prepay all the Certificates and Additional Certificates then Outstanding,
then the City shall not be permitted to certify that repair, replacement or improvement of all of the
Leased Premises is not economically feasible or in the best interest of the City. In such event, the
City shall proceed to repair, replace or improve the Leased Premises as described herein from legally
available funds in the then -current Fiscal Year and shall make the required notification to the Trustee
pursuant to Section 7.01 of the Trust Agreement and the Trustee shall disburse moneys in the Net
Proceeds Fund to the person, firm, or corporation named in the requisition as provided therein.
ARTICLE VII
COVENANTS WITH RESPECT TO THE LEASED PREMISES
Section 7.1. Use of the Leased Premises. The City represents and warrants that it has an
immediate need for, and expects to make immediate use of, all of the Leased Premises, which need is
not temporary or expected to diminish in the foreseeable future.
Section 7.2. Interest in the Leased Premises and the Lease.
(a) Corporation Holds Leasehold Interest During. During the Term of this
Lease, the Corporation does and shall hold a leasehold interest in the Leased Premises pursuant to the
Site Lease. The City shall take any and all actions reasonably required, including but not limited to
executing and filing any and all documents reasonably required, to maintain and evidence such title
and interest at all times during the Term of this Lease.
(b) Title Transferred to the City at End of Term. Upon expiration of the Term as
provided in Section 4.2(b) or 4.2(c) hereof, all right, title and interest of the Corporation in and to all
of the Leased Premises shall be transferred to and vest in the City, without the necessity of any
additional document of transfer.
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Section 7.3. Option to Purchase. The City may exercise an option to purchase the
Corporation's interest under the Site Lease and this Lease in the Leased Premises by depositing with
the Trustee cash and/or Government Obligations as provided in Section 14.01 of the Trust
Agreement. In such event, all or a portion of the obligations of the City under this Lease, and the
security provided by this Lease for said obligations or said portion of the obligations, shall cease and
terminate as provided in Section 4.2 hereof, excepting in the case all of the Corporation's interest has
been purchased, only the obligation of the City to make, or cause to be made, such Lease Payments
from such deposit. In the event Lease Payments and Additional Payments under this Lease have
been paid in full, on the date of said deposit, the Corporation's interest in the Leased Premises shall
revert and transfer to the City automatically and without further action by the City or the
Corporation, and the Corporation shall execute and deliver such further instruments and take such
further action as may reasonably be requested by the City for carrying out the reversion and transfer
of the Corporation's interests in the Leased Premises. In the event Lease Payments under this Lease
have been paid in part only, on the date of said deposit, the City shall specify a discrete portion of the
Corporation's interest in the Leased Premises for reversion and transfer to the City and the
Corporation shall execute and deliver such further instruments and take such further action as may
reasonably be requested by the City for carrying out the reversion and transfer of such portion of the
Corporation's interest in the Leased Premises; provided, that such portion shall revert and transfer to
the City only if the reduction in the fair rental value of the Leased Premises resulting from such
reversion and transfer at the time of such reversion and transfer (as determined by an independent
appraisal acceptable to the Corporation) is proportionately less than or equal to the reduction in the
maximum annual Lease Payments under this Lease resulting from such purchase. Any such deposit
shall be deemed to be and shall constitute a special fund for the payment of Lease Payments in
accordance with Section 4.4 hereof.
Section 7.4. Quiet Enjoyment. During the Term, the Corporation 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
Corporation, or any person or entity claiming under or through the Corporation except as expressly
set forth in this Lease. The Corporation will, at the request of the City, join in any legal action in
which the City asserts its right to such possession and enjoyment to the extent the Corporation may
lawfully do so. Notwithstanding the foregoing, the Corporation shall have the right to inspect the
Leased Premises as provided in Section 7.6 hereof.
Section 7.5. Installation of the City's Personal PropertX. 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 other
items of equipment or other property in or upon any portion of the Leased Premises. All such items
shall remain the sole property of the City, regardless of the manner in which the same may be affixed
to such portion of the Leased Premises, in which neither the Corporation 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 such portion of the Leased Premises resulting from the
installation, modification or removal of any such items of equipment. Nothing in this Lease shall
prevent the City from purchasing items to be installed pursuant to this Section, provided that no lien
or security interest shall attach to any part of the Leased Premises.
Section 7.6. Access to the Leased Premises. The City agrees that the Corporation, any
Corporation Representative and the Corporation's successors, assigns or designees shall have the
right at all reasonable times to enter upon the Leased Premises or any portion thereof to examine and
inspect the Leased Premises. The City further agrees that the Corporation, any such Corporation
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Representative, and the Corporation's successors, assigns or designees 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 7.7. Maintenance, Utilities, Taxes and Assessments.
(a) Maintenance; Repair and Replacement. Throughout the Term of this Lease,
as part of the consideration for the rental of the Leased Premises, all 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 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 sublessee thereof. In
exchange for the Lease Payments herein provided, the Corporation 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 of the California Civil Code, but such waiver shall not limit any of the rights
of the City under the terms of this Lease.
(b) Tax and Assessments; Utility Charges. The City shall also pay or cause to be
paid all taxes and assessments, including but not limited to utility charges, of any type or nature
charged to the Corporation or the City or levied, assessed or charged against any portion of 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 as and when the same become due.
(c) Contests. The City may, at its 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; provided that prior to such nonpayment it shall furnish the
Corporation and the Trustee with the opinion of an Independent Counsel acceptable to the
Corporation, to the effect that, by nonpayment of any such items, the interest of the Corporation in
such portion of the Leased Premises will not be materially endangered and that the Leased Premises
will not be subject to loss or forfeiture. Otherwise, the City shall promptly pay such taxes,
assessments or charges or make provisions for the payment thereof in form satisfactory to the
Corporation. The Corporation will cooperate fully in such contest, upon the request and at the
expense of the City.
Section 7.8. Modification of the Leased Premises.
(a) Additions, Modifications and Improvements. The City shall, at its own
expense, have the right to make additions, modifications, and improvements to any portion of the
Leased Premises if such improvements are necessary or beneficial for the use of such portion of the
Leased Premises. All such additions, modifications and improvements shall thereafter comprise part
of the Leased Premises and be subject to the provisions of this Lease. Such additions, modifications
and improvements shall not in any way cause an abatement of Lease Payments with respect to the
Leased Premises or cause it to be used for purposes other than those authorized under the provisions
of State and federal law or in any way which would impair the State tax-exempt status or the
exclusion from gross income for federal income tax purposes of the interest with respect to the
Certificates and Additional Certificates (to the extent such Additional Certificates were executed and
delivered as tax exempt Certificates); and the Leased Premises, upon completion of any additions,
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modifications and improvements made pursuant to this Section, shall have an annual fair rental value
which is not less than the annual Lease Payments.
(b) No Liens. Except for Permitted Encumbrances, the City will not permit any
mechanic's or other lien to be established or remain against the Leased Premises for labor or
materials furnished in connection with any additions, modifications or improvements made by the
City pursuant to this Section; provided that if any such lien is established and the City shall first
notify or cause to be notified the Corporation of the City's intention to do so, 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 Corporation with full security against any loss or
forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the
Trustee (as assignee of the Corporation). The Corporation will cooperate fully in any such contest,
upon the request and at the expense of the City.
(c) Replacements, Redevelopment and Renovation. The City shall, at its own
expense, or with the proceeds of Additional Certificates, have the right to make replacements,
redevelopment or renovation of all or a portion of the Leased Premises if the following conditions
precedent are satisfied:
(i) The City receives an opinion of Special Counsel, a copy of which the
City shall furnish to the Corporation and the Trustee, that (1) such replacement does not adversely
affect the federal income tax exclusion or the State tax-exempt status of the interest with respect to
the Certificates and Additional Certificates (to the extent such Additional Certificates were executed
and delivered as tax exempt Certificates), and (2) the Lease will remain the legal, valid, binding and
enforceable obligation of the City;
(ii) In the event such replacement, redevelopment or renovation would
result in the temporary abatement of Lease Payments as provided in Section 4.10 hereof the City
shall have notified any rating agency then providing a rating on the Certificates and shall deposit
moneys with the Trustee in advance for payment of Lease Payments from the proceeds of Additional
Certificates or from special funds of the City or other moneys, the application of which would not, in
the opinion of Special Counsel (a copy of which shall have been delivered to the Trustee), result in
such Lease Payments constituting indebtedness of the City in contravention of the Constitution and
laws of the State;
(iii) The City shall certify to the Trustee that it has sufficient funds to
complete such replacement, redevelopment or renovation; and
(iv) In the case of replacement(s), redevelopment or renovation other than
from the proceeds of Additional Certificates, the City and the Trustee receive an independent
appraisal from a California certified general appraiser that the annual fair rental value of the Leased
Premises following the replacement, redevelopment or renovation will be at least equal to the annual
Lease Payments immediately prior to such replacement, redevelopment or renovation.
Section 7.9. Encumbrances; Alternative Financing Methods.
(a) Encumbrances. Except as provided in this Article VII (including without
limitation Section 7.8 hereof and this Section 7.9), the City shall not, directly or indirectly, create,
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incur, assume or suffer to exist any mortgage, pledge, liens, charges, encumbrances or claims, as
applicable, on or with respect to the Leased Premises, other than Permitted Encumbrances and other
than the respective rights of the Corporation and the City as herein provided. Except as expressly
provided in this Article VII, the City shall promptly, at its 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; provided that the City may
contest such liens if it desires to do so. The City shall reimburse the Corporation for any expense
incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance
or claim.
(b) Alternative Financing Methods. Notwithstanding the foregoing, the City may
create or suffer to create any mortgage, pledge, liens, charges, encumbrances or claims upon the
Leased Premises or any improvements thereto, provided that (1) any such mortgage, pledge, liens,
charges, encumbrances or claims shall at any time while any of the Certificates or Additional
Certificates remain Outstanding be and remain subordinate in all respects to the Site Lease and Lease
and any security interest given to the Trustee for the benefit of the Owners and (2) the City shall have
first delivered to the Trustee an opinion of Special Counsel substantially to the effect that such
mortgage, pledge, liens, charges, encumbrances or claims would not result in the inclusion of the
interest with respect to the Certificates and the Additional Certificates (to the extent such Additional
Certificates are executed and delivered as tax exempt Certificates) in the gross income of the owners
thereof for purposes of federal income taxation or impair the State tax-exempt status of such interest
payments.
Section 7.10. Corporation's Disclaimer of Warranties. THE CORPORATION MAKES
NO 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 PORTION THEREOF. THE CITY ACKNOWLEDGES THAT THE CITY
IS LEASING THE LEASED PREMISES AS IS. In no event shall the Corporation be liable for
incidental, indirect, special or consequential damages, in connection with or arising out of this Lease,
the Site Lease, the Assignment Agreement, the Agency Agreement or the Trust Agreement for the
existence, furnishing, functioning or the City's use and possession of the Leased Premises.
Section 7.11. The City's Right to Enforce Warranties of Vendors or Contractors. The
Corporation hereby irrevocably appoints the City its agent and attorney-in-fact during the Term of
this Lease, so long as the City shall not be in default hereunder, to assert from time to time whatever
claims and rights, including without limitation, warranty claims, claims for indemnification and
claims for breach of any representations, respecting the Leased Premises which the Corporation may
have against any vendor or contractor. The City's sole remedy for the breach of any such warranty,
indemnification or representation shall be against the vendor or contractor with respect thereto, and
not against the Corporation, nor shall such matter have any effect whatsoever on the rights and
obligations of the Corporation with respect to this Lease, including the right to receive full and timely
Lease Payments and all other payments due hereunder. The City shall be entitled to retain any and
all amounts recovered as a result of the assertion of any such claims and rights. The Corporation
shall, upon the City's request and at the City's expense, do all things and take all such actions as the
City may request in connection with the assertion of any such claims and rights.
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Section 7.12. Substitution or Release of the Leased Premises.
(a) The City shall have the right to substitute alternate real property for any
portion of the Leased Premises described in Exhibit B hereto or to release a portion of the Leased
Premises from the lien of this Lease by providing the Trustee with a supplement to this Lease
substantially in the form attached as Exhibit D hereto and by satisfying the conditions set forth in
paragraphs (i) through (vi) of this Section 7.12. All costs and expenses incurred in connection with
such substitution or release shall be borne by the City. Notwithstanding any substitution pursuant to
this Section, there shall be no reduction in or abatement of the Lease Payments due from the City
hereunder as a result of such substitution. No substitution or release shall be permitted hereunder
unless:
(i) in the case of a substitution, the City provides the Trustee with a
certificate that the substituted real property has an equivalent or greater useful life as the Leased
Premises to be released and that the useful life of the substituted Leased Premises exceeds the
remaining term of the Lease Payments hereunder;
(ii) the City provides the Trustee with a certificate certifying that the
Leased Premises following any release or substitution has an annual fair rental value greater than or
equal to the corresponding Lease Payments due hereunder so that the Lease Payments payable by the
City pursuant to the Lease will not be abated.
(iii) the City obtains or causes to be obtained an ALTA title insurance
policy (with western regional exceptions) or CLTA title insurance policy with respect to any
substituted property, with an endorsement so as to be payable to the Trustee for the benefit of the
Owners, showing no prior liens thereon other than Permitted Encumbrances. Such policy shall
comply with Section 5.5 hereof, shall be in the amount equal to the principal component of Lease
Payments attributable to the substituted property, and shall insure the leasehold interest or the fee
simple interest of the Corporation or the City, as applicable, to the substituted property;
(iv) the City provides the Corporation and the Trustee with an opinion of
Special Counsel that such substitution or release does not cause, in and of itself, the interest
evidenced and represented by the Certificates and any Additional Certificates (to the extent such
Additional Certificates are executed and delivered as tax exempt Certificates) to be included in gross
income for federal income tax purposes;
(v) the City shall give, or cause to be given, any notice of the occurrence
of such substitution or release required to be given pursuant to the Continuing Disclosure Agreement;
and
(vi) upon the substitution of any real property and improvements thereon
for all or a portion of the Leased Premises then existing, or the release of any portion of the Leased
Premises, the City, the Corporation and the Trustee shall execute and the City shall record with the
office of the County Recorder, County of Orange, California, any document necessary to reconvey to
the City the portion of the Leased Premises being released and to include any substituted real
property and/or improvements as all or a portion of the Leased Premises.
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Section 7.13. Compliance with Law, Regulations, Etc.
(a) Except as described in subsection (b) below, the City has, after due inquiry,
no knowledge and has not given or received any written notice indicating that the past or present use
of the Leased Premises or any practice, procedure or policy employed by it in the conduct of its
business materially violates any applicable law, regulation, code, order, rule, judgment or consent
agreement, including, without limitation, those relating to zoning, building, use and occupancy, fire
safety, health, sanitation, air pollution, ecological matters, environmental protection, hazardous or
toxic materials, substances or wastes, conservation, parking, architectural barriers to the
handicapped, or restrictive covenants or other agreements affecting title to the Leased Premises
(collectively, "Laws and Regulations"). Without limiting the generality of the foregoing, to the best
of its knowledge, after due inquiry, neither the City nor any prior or present owner, tenant or
subtenant of the Leased Premises has, other than as set forth in subsections (a) and (b) of this Section
or as may have been remediated in accordance with Laws and Regulations, (i) used, treated, stored,
transported or disposed of any material amount of flammable explosives, polychlorinated biphenyl
compounds, heavy metals, chlorinated solvents, cyanide, radon, petroleum products, asbestos,
methane, radioactive materials, pollutants, hazardous materials, hazardous wastes, hazardous, toxic,
or regulated substances or related materials, as defined in CERCLA, RCRA, CWA, CAA, TSCA and
Title III, and the regulations promulgated pursuant thereto, and in all other Environmental
Regulations applicable to the City, the Leased Premises or the business operations conducted by the
City thereon (collectively, "Hazardous Materials") on, from or beneath the Leased Premises, (ii)
pumped, spilled, leaked, disposed of, emptied, discharged or released (hereinafter collectively
referred to as "Release") any material amount of Hazardous Materials on, from or beneath the Leased
Premises, or stored any material amount of petroleum products at the Leased Premises in
underground storage tanks.
(b) Excluded from the representations and warranties in subsection (a) hereof
with respect to Hazardous Materials are those Hazardous Materials in the amounts ordinarily found
in the inventory of, or used in the maintenance of the City's City Hall or related buildings, the use,
treatment, storage, transportation and disposal of which has been and shall be in compliance with all
Laws and Regulations (the "Permitted Use").
(c) No portion of the Leased Premises located in an area of high potential
incidence of radon has an unventilated basement or subsurface portion which is occupied or used for
any purpose other than the foundation or support of the improvements to the Leased Premises.
Section 7.14. Environmental Compliance.
(a) Other than the Permitted Use, the City shall not use or permit the Leased
Premises or any part thereof to be used to generate, manufacture, refine, treat, store, handle, transport
or dispose of, transfer, produce or process Hazardous Materials, except, and only to the extent, if
necessary to maintain the improvements on the Leased Premises and then, only in compliance with
all Environmental Regulations, and any state equivalent laws and regulations, nor shall it permit, as a
result of any intentional or unintentional act or omission on its part or by any tenant, subtenant,
licensee, guest, invitee, contractor, employee and agent, the storage, transportation, disposal or use of
Hazardous Materials or the Release or threat of Release of Hazardous Materials on, from or beneath
the Leased Premises or onto any other Leased Premises excluding, however, those Hazardous
Materials in those amounts ordinarily found in the inventory of a municipal corporation, the use,
storage, treatment, transportation and disposal of which shall be in compliance with all
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Environmental Regulations. Upon the occurrence of any Release or threat of Release of Hazardous
Materials other than the Permitted Use, the City shall promptly commence and perform, or cause to
be commenced and performed promptly, without cost to the Trustee, all investigations, studies,
sampling and testing, and all remedial, removal and other actions necessary to clean up and remove
all Hazardous Materials so released, on, from or beneath the Leased Premises, in compliance with all
Environmental Regulations. Notwithstanding anything to the contrary contained herein,
underground storage tanks shall only be permitted subject to compliance with subsection (d) and only
to the extent necessary to maintain the improvements on the Leased Premises.
(b) The City shall comply with, and shall cause all tenants, subtenants, licensees,
guests, invitees, contractors, employees and agents on the Leased Premises to comply with, all
Environmental Regulations, and shall keep the Leased Premises free and clear of any liens imposed
pursuant thereto; provided, however, that notwithstanding that a portion of this covenant is limited to
the City's use of its best efforts, the City shall remain solely responsible for ensuring such
compliance and such limitation shall not diminish or affect in any way the City's obligations
contained in subsection (c) hereof as provided in subsection (c) hereof. Upon receipt of any notice
from any person with regard to the Release of Hazardous Materials other than the Permitted Use on,
from or beneath the Leased Premises, the City shall give prompt written notice thereof to the Trustee
prior to the expiration of any period in which to respond to such notice under any Environmental
Regulation.
(c) Irrespective of whether any representation or warranty contained in
Section 7.13 is not true or correct, the City shall, to the extent permitted by law, defend, indemnify
and hold harmless the Trustee, the Owners, the Corporation and each of their respective employees,
agents, officers, directors, trustees, successors and assigns, from and against any claims, demands,
penalties, fines, attorneys' fees (including, without limitation, attorneys' fees incurred to enforce the
indemnification contained in this Section 7.14, consultants' fees, investigation and laboratory fees,
liabilities, settlements (five Business Days' prior notice of which the Trustee shall have delivered to
the City) court costs, damages, losses, costs or expenses of whatever kind or nature, known or
unknown, contingent or otherwise, occurring in whole or in part, arising out of, or in any way related
to, (i) the presence, disposal, Release, threat of Release, removal, discharge, storage or transportation
of any Hazardous Materials on, from or beneath the Leased Premises, (ii) any personal injury
(including wrongful death) or Leased Premises damage (real or personal) arising out of or related to
such Hazardous Materials, (iii) any lawsuit brought or threatened, settlement reached (five Business
Days' prior notice of which the Trustee shall have delivered to the City), or governmental order
relating to Hazardous Materials on, from or beneath the Leased Premises, (iv) any violation of
Environmental Regulations or subsection (a) or (b) hereof by it or any of its agents, tenants,
employees, contractors, licensees, guests, subtenants or invitees, and (v) the imposition of any
governmental lien for the recovery of environmental cleanup or removal costs. To the extent that the
City is strictly liable under any Environmental Regulation, its obligation under the foregoing
indemnification shall likewise be without regard to fault on its part with respect to the violation of
any Environmental Regulation which results in liability to any indemnitee. The obligations and
liabilities under this Section 7.14(c) shall survive the payment and satisfaction of all Certificates and
Additional Certificates or resignation or removal of the Trustee.
(d) The City shall conform to and carry out a reasonable program of maintenance
and inspection of all underground storage tanks, and shall maintain, repair, and replace such tanks
only in accordance with Laws and Regulations, including but not limited to Environmental
Regulations.
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Section 7.15. Condemnation of Leased Premises. The City hereby covenants and agrees, to
the extent it may lawfully do so, that, except as described in Section 6 of the Site Lease, so long as
any of the Certificates or Additional Certificates remain outstanding and unpaid, the City will not
exercise the power of condemnation with respect to the Leased Premises. The City further covenants
and agrees, to the extent it may lawfully do so, that if for any reason the foregoing covenant is
determined to be unenforceable or if the City shall fail or refuse to abide by such covenant and
condemns the Leased Premises, then the appraised value of the Leased Premises shall not be less
than the sum of; (i) as to Certificates and Additional Certificates then subject to optional
prepayment, the principal and interest components of such Certificates and Additional Certificates
outstanding through the date of their prepayment, and (ii) as to Certificates and Additional
Certificates not then subject to optional prepayment, the amount necessary to defease such
Certificates and Additional Certificates to the first available prepayment date in accordance with the
Trust Agreement.
ARTICLE VIII
ASSIGNMENT, SUBLEASING AND AMENDMENT
Section 8.1. Assignment by the Corporation. Except as provided herein, in the Trust
Agreement and the Assignment Agreement, the Corporation will not assign this Lease to any other
person, firm or corporation so as to impair or violate the representations, covenants and warranties
contained in Section 2.2 hereof.
Section 8.2. Assignment and Subleasing by the City.
(a) Assignment. This Lease may be assigned by the City, so long as such
assignment does not, in the opinion of Special Counsel, adversely affect the State tax-exempt status
or the exclusion from gross income for federal income tax purposes of the interest with respect to the
Certificates and any Additional Certificates (to the extent such Additional Certificates are executed
and delivered as tax exempt Certificates) or affect the validity of this Lease. In the event that this
Lease is assigned by the City, the obligation to make Lease Payments hereunder shall remain the
obligation of the City.
(b) Sublease. The City may sublease all or any portion of the Leased Premises
subject to all of the following conditions:
(i) This Lease and the obligation of the City to make Lease Payments
and Additional Payments hereunder shall remain obligations of the City;
(ii) The City shall, within thirty (30) days after the delivery thereof,
furnish or cause to be furnished to the Corporation and the Trustee, a true and complete copy of such
sublease; and
(iii) The City shall furnish to the Corporation and the Trustee, an opinion
of Special Counsel to the effect that the sublease will not cause the interest due with respect to the
Certificates and any Additional Certificates (to the extent such Additional Certificates are executed
and delivered as tax exempt Certificates) to be subject to State personal income tax or adversely
affect the exclusion from gross income for federal income tax purposes of such amounts, provided
that no such opinion shall be required with respect to the subleases in effect upon the Date of
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Delivery or with respect to any lease with respect to the use of the auditorium, soundstage and
recording studio.
Section 8.3. Amendments and Modifications. This Lease may be amended or any of its
terms modified with the written consent of the City, the Corporation and the Trustee, in accordance
with Article X of the Trust Agreement.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
Section 9.1. Events of Default Defined. The following shall be "events of default" under
this Lease and the terms "events of default" and "default" shall mean, whenever they are used in this
Lease, any one or more of the following events:
(a) Payment Default. Failure by the City to pay any Lease Payment required to
be paid hereunder by the corresponding Lease Payment Date; and
(b) Covenant Default. Failure by the City to observe and perform any warranty,
covenant, condition or agreement on its part to be observed or performed hereunder or otherwise
with respect hereto or in the Trust Agreement or in the Site Lease, other than as referred to in clause
(a) of this Section, for a period of 30 days after written notice specifying such failure and requesting
that it be remedied has been given to the City by the Corporation, the Trustee, or the Owners of not
less than twenty percent (20%) in aggregate principal amount of Certificates and Additional
Certificates then Outstanding; provided, however, if the failure stated in the notice cannot be
corrected within the applicable period, the Corporation, the insurer of any Additional Certificates or
such Owners, as the case may be, shall not unreasonably withhold their consent to an extension of
such time if corrective action is instituted by the City within the applicable period and diligently
pursued until the default is corrected.
(c) Bankruptcy or Insolvency. The filing by the City of a case in bankruptcy, or
the subjection of any right or interest of the City under this Lease to 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
under the provisions of the federal bankruptcy code, as amended, or under any similar act which may
hereafter be enacted.
Section 9.2. Remedies on Default. Whenever any event of default referred to in
Section 9.1 hereof shall have happened and be continuing, it shall be lawful for the Corporation to
exercise any and all remedies available pursuant to law or granted pursuant to this Lease.
Notwithstanding anything herein or in the Trust Agreement to the contrary, 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. After the occurrence of an event of default hereunder, the
City will surrender possession of the Leased Premises to the Corporation, if requested to do so by the
Corporation, the Trustee or the Owners, in accordance with the provisions of the Trust Agreement.
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(a) No Termination; Repossession and Re-Lease on Behalf of The City. In the
event the Corporation does not elect to terminate this Lease in the manner hereinafter provided for in
subparagraph (b) hereof, the Corporation may, with the consent of the City, which consent is hereby
irrevocably given, repossess the Leased Premises and re-lease it for the account of the City, in which
event the City's obligation will accrue from year to year in accordance with this Lease and the City
will continue to receive the value of the use of the Leased Premises from year to year in the form of
credits against its obligation to pay Lease Payments. The obligations of the City shall remain the
same as prior to such default, to pay Lease Payments and Additional Payments whether the
Corporation re-enters or not. The City agrees to and shall remain liable for the payment of all Lease
Payments and Additional Payments and the performance of all conditions contained herein and shall
reimburse the Corporation for any deficiency arising out of the re-leasing of the Leased Premises, or,
in the event the Corporation is unable to re-lease the Leased Premises, then for the full amount of all
Lease Payments and Additional Payments to the end of the Term of this Lease, but said Lease
Payments and Additional Payments and/or deficiency shall be payable only at the same time and in
the same manner as provided above for the payment of Lease Payments and Additional Payments
hereunder, notwithstanding such repossession by the Corporation or any suit brought by the
Corporation for the purpose of effecting such repossession of the Leased Premises or the exercise of
any other remedy by the Corporation.
The City hereby irrevocably appoints the Corporation as the agent and attorney-in-fact of the
City to repossess and re-lease the Leased Premises in the event of default by the City in the
performance of any covenants contained herein 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 Orange, for the account of and at the expense of the City, and
the City hereby exempts and agrees to save harmless the Corporation from any costs, loss or damage
whatsoever arising or occasioned by any such repossession and re-leasing of the Leased Premises.
The City hereby waives any and all claims for damage caused or which may be caused by the
Corporation in repossessing the Leased Premises as provided herein and all claims for damages that
may result from the destruction of or the 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.
The City agrees that the terms of this Lease constitute full and sufficient notice of the right of
the Corporation to re-lease the Leased Premises in the event of such repossession without effecting a
surrender of this Lease, and further agrees that no acts of the Corporation in effecting such re-leasing
shall constitute a surrender or termination of this Lease irrespective of the term for which such re-
leasing is made or the terms and conditions of such re-leasing, or otherwise, but that, on the contrary,
in the event of such default by the City the right to terminate this Lease shall vest in the Corporation
to be effected in the sole and exclusive manner provided for in subparagraph (b) below.
The City shall retain the portion of rental obtained by the Trustee, as assignee of the
Corporation, that is in excess of the Lease Payments and Additional Payments, the fees, expenses and
costs of the Trustee of re-leasing the Leased Premises, and all amounts payable by the City under this
Lease and the Trust Agreement.
In the event that the liability of the City under this subsection (a) is held to constitute
indebtedness or liability in any year exceeding in any year the income and revenue provided for such
year, the Corporation, or the Trustee or the Owners, as assignees of the Corporation, shall not
exercise the remedies provided in this subsection (a).
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(b) Termination; Repossession and Re -Lease. In the event of the termination of
this Lease by the Corporation at its option and in the manner hereinafter provided on account of
default by the City (and notwithstanding any repossession of the Leased Premises by the Corporation
in any manner whatsoever or the re-leasing of the Leased Premises), the City nevertheless agrees to
pay to the Corporation all costs, losses or damages howsoever arising or occurring payable at the
same time and in the same manner as is provided herein in the case of payment of Lease Payments
and Additional Payments. Any proceeds of the re -lease or other disposition of the Leased Premises
by the Corporation shall be deposited into the Lease Payment Fund and be applied in accordance
with the provisions of Section 5.04 of the Trust Agreement. Any surplus received by the Trustee, as
assignee of the Corporation, from such re-leasing over total Lease Payments shall be remitted to the
City. Additional Payments that would have been due hereunder and the fees, expenses and costs of
the Trustee as assignee of the Corporation on re-leasing the Leased Premises shall be remitted to the
City. Neither notice to pay rent or to deliver up possession of the Leased Premises given pursuant to
law nor any proceeding taken by the Corporation to recover possession of the Leased Premises shall
of itself operate to terminate this Lease, and no termination of this Lease on account of default by the
City shall be or become effective by operation of law, or otherwise, unless and until the Corporation
shall have given written notice to the City of the election on the part of the Corporation to terminate
this Lease. The City covenants and agrees that no surrender of the Leased Premises for the
remainder of the Term hereof or any termination of this Lease shall be valid in any manner or for any
purpose whatsoever unless stated or accepted by the Corporation by such written notice. No such
termination shall be effected either by operation of law or act of the parties hereto, except only in the
manner herein expressly provided.
(c) Opinion of Special Counsel. The re-leasing of the Leased Premises as
provided herein shall be subject to the opinion of Special Counsel that such re-leasing will not cause
the interest with respect to the Certificates and any Additional Certificates (to the extent such
Additional Certificates are executed and delivered as tax-exempt Certificates) to be subject to State
personal income tax or adversely affect the exclusion from gross income for federal income tax
purposes of such amounts.
(d) No Termination by The City. Under no circumstances may the City terminate
this Lease as a remedy for a default by the Corporation in the performance of any obligation of the
Corporation hereunder.
Section 9.3. No Remedy Exclusive. No remedy conferred herein upon or reserved to the
Corporation is intended to be exclusive and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Lease 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
Corporation to exercise any remedy reserved to it in this Article it shall not be necessary to give any
notice, other than such notice as may be required in this Article or by law.
Section 9.4. Agreement to Pay Attorneys' Fees and Expenses. In the event either party to
this Lease 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 of
performance or observance of any obligation or agreement on the part of the defaulting party
contained herein, the defaulting party agrees that it will pay on demand to the nondefaulting party the
reasonable fees of such attorneys and such other expenses so incurred by the nondefaulting party.
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Section 9.5. No Additional Waiver Implied by One Waiver. In the event any agreement
contained in this Lease 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. Application of the Proceeds from the Re -Lease of the Leased Premises. All
amounts received by the Corporation under this Article IX shall, subject to Section 13.03 of the Trust
Agreement, be deposited by the Trustee in the Lease Payment Fund and credited towards the Lease
Payments in order of Lease Payment Dates.
Section 9.7. Trustee and Owners to Exercise Rights. Such rights and remedies as are
given to the Corporation under this Article IX have been assigned by the Corporation to the Trustee
under the Assignment Agreement, to which assignment the City hereby consents. Such rights and
remedies shall be exercised by the Trustee and the Owners as provided in the Trust Agreement. In
addition to the rights and remedies assigned by the Corporation to the Trustee, to the extent that the
Trust Agreement and this Lease confer upon or gives or grants to the Trustee any right, remedy or
claim under or by reason of the Trust Agreement or this Lease, the Trustee is hereby explicitly
recognized as being a third party beneficiary hereunder and may enforce any such right, remedy or
claim conferred given or granted.
ARTICLE X
PREPAYMENT OF LEASE PAYMENTS
Section 10.1. Security Deposit. Notwithstanding any other provision of this Lease, the City
may, on any date, secure the payment of Lease Payments and Additional Payments by a deposit by it
with the Trustee of cash and/or Government Obligations as provided in Section 14.01 of the Trust
Agreement. In such event, and provided that the City has paid any other amounts due and owing
under this Lease and the Trust Agreement, all obligations of the City under this Lease, and all
security provided by this Lease for said obligations, shall cease and terminate, excepting only the
obligation of the City to make, or cause to be made, Lease Payments and Additional Payments from
such deposit. On the date of said deposit title to the Leased Premises shall vest in the City
automatically and without further action by the City or the Corporation (except as provided herein).
Said 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. The Corporation shall execute and deliver
such further instruments and take such further action as may reasonably be requested by the City for
carrying out the title transfer of the Leased Premises.
Section 10.2. Extraordinary Prepayment. The City shall be obligated to prepay the Lease
Payments in whole or in part on any date, from and to the extent of any Net Proceeds or other
moneys theretofore deposited in the Prepayment Fund (at least 45 days prior to the date fixed for
prepayment of the Certificates and any Additional Certificates) pursuant to Section 4.02 of the Trust
Agreement. The City and the Corporation hereby agree that such Net Proceeds or other moneys shall
be credited towards the City's obligations hereunder (except in the case of such Prepayment of the
Lease Payments in whole) pro rata among Lease Payments so that following Prepayment, the
remaining annual Lease Payments will be proportional to the initial annual Lease Payments.
Section 10.3. fReservedl.
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ARTICLE XI
MISCELLANEOUS
Section 11.1. Notices. All notices, certificates or other communications hereunder shall be
sufficiently given and shall be deemed to have been received on the earlier of the day of actual
receipt or five Business Days after deposit in the United States mail in first-class or certified form,
postage prepaid, to the City or the Corporation, as the case may be, at the addresses indicated in
Section 14.05 of the Trust Agreement. The Corporation, the City, and the Trustee, by notice given
hereunder, may designate different addresses to which subsequent notices, certificates or other
communications will be sent.
Section 11.2. BindingEffect. ffect. This Lease shall inure to the benefit of and shall be binding
upon the Corporation and the City and their respective successors and assigns.
Section 11.3. Severability. In the event any provision of this Lease shall be held invalid or
unenforceable by a court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
Section 11.4. Execution in Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be an original and all of which shall constitute but one and the same
instrument.
Section 11.5. Applicable Law. This Lease shall be governed by and construed in
accordance with the laws of the State.
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IN WITNESS WHEREOF, the Corporation has caused this Lease to be executed in its name
by its duly authorized officer, and the City has caused this Lease to be executed in its name by its
duly authorized officer, as of the date first above written.
NEWPORT BEACH PUBLIC FACILITIES
CORPORATION, as Lessor
By:
Its: Chief Financial Officer
Attest:
Secretary
CITY OF NEWPORT BEACH,
as Lessee
By:
Its:
Attest:
City Clerk
APPROVED AS TO FORM:
OFFICE OF THE CITY ATTORNEY:
Aaron C. Harp, City Attorney
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City Manager
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CERTIFICATE OF ACCEPTANCE
This is to certify that the interest in the Leased Premises conveyed under the foregoing to the
City of Newport Beach, a chartered city duly organized under the Constitution and the laws of the
State of California, is hereby accepted by the undersigned officer or agent on behalf of the City
Council of the City of Newport Beach, pursuant to authority conferred by resolution of the said City
Council adopted on November 10, 2020, and the grantee consents to recordation thereof by its duly
authorized officer.
Dated: '2020 CITY OF NEWPORT BEACH
By:
Its:
ATTEST:
By:
Its: City Clerk
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City Manager
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EXHIBIT A
SCHEDULE OF LEASE PAYMENTS
Principal Interest
Date Component Component Lease Payments
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EXHIBIT B
DESCRIPTION OF THE LEASED PREMISES
Real property and improvements located thereon in the City of Newport Beach, County of
Orange, State of California, described as follows:
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EXHIBIT C
DESCRIPTION OF THE PROJECT
The acquisition, improvement and equipping of a new Fire Station No. 2 consisting of a two
story building of approximately 7,084 square feet located within the City and including all design,
engineering and soft costs associated therewith.
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EXHIBIT D
LEASE SUPPLEMENT FORM
There is hereby subjected to the terms of that certain Lease/Purchase Agreement, dated as of
December 1, 2020, by and between the Newport Beach Public Facilities Corporation and the City of
Newport Beach (the "City") the following items which shall comprise a portion of the Leased
Premises, as defined therein:
Description of Substituted Leased Premises
[Insert Description]
Cost
I, the City Representative, hereby certify that:
(1) the fair rental value (based on the attached appraisal by an independent real estate
appraiser) and the useful life of the above-described portion of the Leased Premises, as substituted, at
least equals the fair rental value and the useful life of the portion of the Leased Premises for which it
was substituted;
(2) the above-described portion of the Leased Premises will be used by the City for
authorized public purposes and can be leased under the provisions of the Lease and the Government
Code;
(3) the above-described portion of the Leased Premises is currently owned by the City;
and
(4) the above-described portion of the Leased Premises is of approximately the same
degree of essentiality to the City as the portion of the Leased Premises being replaced.
I, the City Representative, hereby certify that the portion of the Leased Premises being
substituted is free and clear of all liens or claims of others, except for Permitted Encumbrances
referred to in the Lease.
CITY OF NEWPORT BEACH
By: f signature]
City Representative
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EXHIBIT E
FORM OF CERTIFICATE OF SUBSTITUTION
OR ADDITION OF PROJECT COMPONENT
I, of the City of Newport Beach (the "City") hereby certify
that project is to become a part of the Project as defined under
the Lease/Purchase Agreement, dated as of December 1, 2020 (the "Lease"), by and between the City
and the Newport Beach Public Facilities Corporation (the "Corporation") [in addition to the
components of the Project as defined in the Lease or in substitution for
component of the Project as defined in the Lease]. This
Certificate shall be filed with the Trustee under the Trust Agreement, dated as of December 1, 2020,
by and among the City, the Corporation and The Bank of New York Mellon Trust Company, N.A.,
as trustee thereunder, until such time as the Lease is terminated.
City Representative
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ATTACHMENT H
Stradling Yocca Carlson & Rauth
Draft of 10129120
TRUST AGREEMENT
Dated as of December 1, 2020, 2020
by and among
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Trustee
and
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
and
CITY OF NEWPORT BEACH
Relating to the
CITY OF NEWPORT BEACH
CERTIFICATES OF PARTICIPATION 2020A
(FIRE STATION NO. 2)
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01. Definitions and Rules of Construction....................................................................... 2
Section1.02. Authorization............................................................................................................. 9
Section1.03. Equal Security............................................................................................................ 9
ARTICLE II
THE CERTIFICATES OF PARTICIPATION
Section2.01.
Authorization............................................................................................................. 9
Section 2.02.
Description of Certificates.......................................................................................10
Section 2.03.
Form of Certificates.................................................................................................11
Section2.04.
Execution.................................................................................................................11
Section 2.05.
Application of Proceeds and Other Amounts..........................................................11
Section 2.06.
Transfer and Exchange............................................................................................11
Section 2.07.
Certificates Mutilated, Lost, Destroyed or Stolen...................................................12
Section 2.08.
Execution of Documents and Proof of Ownership..................................................12
Section 2.09.
Certificate Register..................................................................................................13
Section 2.10.
Book -Entry System..................................................................................................13
Section 2.11.
Destruction of Cancelled Certificates......................................................................16
Section 2.12.
Additional Certificates.............................................................................................
16
ARTICLE III
PROJECT FUND
Section 3.01. Establishment of Project Fund.................................................................................18
Section3.02. Purpose.....................................................................................................................18
Section 3.03. Deposit of Moneys; Payment of Project Costs and Delivery Costs ......................... 18
Section 3.04. Transfers of Unexpended Proceeds.........................................................................18
ARTICLE IV
PREPAYMENT FUND
Section 4.01. Establishment of Prepayment Fund.........................................................................19
Section 4.02. Extraordinary Prepayment.......................................................................................19
Section 4.03. Prepayment.............................................................. Error! Bookmark not defined.
Section 4.04. Selection of Certificates for Prepayment.................................................................19
Section 4.05. Notice of Prepayment..............................................................................................19
Section 4.06. Partial Prepayment of Certificates........................................................................... 20
Section 4.07. Effect of Notice of Prepayment............................................................................... 20
Section4.08. Surplus..................................................................................................................... 20
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TABLE OF CONTENTS
(continued)
ARTICLE V
LEASE PAYMENTS; LEASE PAYMENT FUND
Section 5.01. Security Provisions ..............................
Section 5.02. Establishment of Lease Payment Fund
Section 5.03. Deposits ...............................................
Section 5.04. Application of Moneys ........................
Section 5.05. Surplus .................................................
ARTICLE VI
[RESERVED]
ARTICLE VII
NET PROCEEDS FUND
Section 7.01. Establishment of Net Proceeds Fund: Deposits
Section 7.02. Cooperation.......................................................
ARTICLE VIII
MONEYS IN FUNDS; INVESTMENT
Section 8.01.
Held in Trust .............................................
Section 8.02.
Investments Authorized ............................
Section 8.03.
Crediting of Investments ...........................
Section 8.04.
Accounting ................................................
Section 8.05.
Valuation and Disposition of Investments
Section 8.06.
Commingling of Moneys in Funds ...........
Section 8.07.
Tax Covenants ..........................................
Section 8.08.
Rebate Fund ..............................................
ARTICLE IX
THE TRUSTEE
Page
21
21
22
22
22
22
23
............................................ 23
............................................ 24
............................................ 25
............................................ 25
............................................ 25
............................................ 25
............................................ 25
............................................ 26
Section 9.01.
Appointment of Trustee...........................................................................................
28
Section 9.02.
Merger or Consolidation..........................................................................................
28
Section 9.03.
Protection of the Trustee..........................................................................................
29
Section 9.04.
Rights of the Trustee................................................................................................
29
Section 9.05.
Standard of Care......................................................................................................
30
Section 9.06.
Compensation of the Trustee...................................................................................
30
Section 9.07.
Indemnification of Trustee.......................................................................................
30
Section 9.08.
Trustee's Disclaimer of Warranties.........................................................................
32
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TABLE OF CONTENTS
(continued)
Page
ARTICLE X
MODIFICATION OR AMENDMENT OF AGREEMENTS
Section 10.01. Amendments Permitted............................................................................................ 32
Section 10.02. Procedure for Amendment with Written Consent of the Owners ............................ 33
Section 10.03. Disqualified Certificates.......................................................................................... 34
Section 10.04. Effect of Supplemental Agreement.......................................................................... 34
Section 10.05. Endorsement or Replacement of Certificates Delivered After Amendments .......... 34
Section 10.06. Amendatory Endorsement of Certificates................................................................ 35
Section 10.07. Copies of Amendments Delivered to Rating Agencies ........................................... 35
ARTICLE XI
COVENANTS; NOTICES
Section 11.01.
Compliance With and Enforcement of the Lease ....................................................
35
Section 11.02.
Payment of Taxes.....................................................................................................
35
Section 11.03.
Observance of Laws and Regulations......................................................................
35
Section 11.04.
Prosecution and Defense of Suits............................................................................
35
Section11.05.
City Budgets............................................................................................................
36
Section 11.06.
Further Assurances..................................................................................................
36
Section 11.07.
Continuing Disclosure.............................................................................................
36
ARTICLE XII
LIMITATION OF LIABILITY
Section 12.01. Limited Liability of the City.................................................................................... 36
Section 12.02. No Liability of the City or Corporation for Trustee Performance ........................... 36
Section 12.03. Limitation of Rights to Parties and Certificate Owners ........................................... 37
Section 12.04. No Liability of Corporation to the Owners.............................................................. 37
ARTICLE XIII
EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS
Section 13.01.
Assignment of Rights...............................................................................................
37
Section 13.02.
Events of Default.....................................................................................................
37
Section 13.03.
Application of Funds...............................................................................................
38
Section 13.04.
Institution of Legal Proceedings..............................................................................
38
Section13.05.
Non-Waiver.............................................................................................................
39
Section 13.06.
Remedies Not Exclusive..........................................................................................39
Section 13.07.
Power of Trustee to Control Proceedings................................................................
39
Section 13.08.
Limitation on Certificate Owners' Right to Sue ......................................................
39
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TABLE OF CONTENTS
(continued)
Page
ARTICLE XIV
MISCELLANEOUS
Section14.01.
Defeasance...............................................................................................................
40
Section 14.02.
Non -Presentment of Certificates..............................................................................
41
Section 14.03.
Acquisition of Certificates by City..........................................................................
41
Section14.04.
Records....................................................................................................................
41
Section14.05.
Notices.....................................................................................................................
41
Section 14.06.
Governing Law........................................................................................................
42
Section 14.07.
Binding Effect: Successors.....................................................................................
42
Section 14.08.
Execution in Counterparts.......................................................................................
43
Section14.09.
Headings..................................................................................................................
43
Section 14.10.
Waiver of Notice......................................................................................................
43
Section 14.11.
Separability of Invalid Provisions............................................................................
43
Signatures
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EXHIBIT A FORM OF 2020A CERTIFICATE........................................................................ A-1
EXHIBIT B -I FORM OF WRITTEN DELIVERY COST REQUISITION..............................B-1-1
EXHIBIT B-2 FORM OF WRITTEN PROJECT COST REQUISITION.................................B-2-1
LMA
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TRUST AGREEMENT
THIS TRUST AGREEMENT, is dated as of December 1, 2020, 2020, and entered into by
and among THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking
association organized under the laws of the United States of America, as trustee (the "Trustee"), the
NEWPORT BEACH PUBLIC FACILITIES CORPORATION, a 501(c)(4) nonprofit public benefit
corporation duly organized and existing under the laws of the State of California, as lessor under the
Lease hereinafter referred to (the "Corporation"), and the CITY OF NEWPORT BEACH, a chartered
city duly organized and existing under the Constitution and laws of the State of California, as lessee
under the Lease (the "City");
WITNESSETH. -
WHEREAS, the City and the Corporation have entered into a Lease/Purchase Agreement,
dated as of December 1, 2020, 2020 (the "Lease"), whereby the City, as agent of the Corporation,
shall cause the acquisition of certain property, as described therein (the "Project"), and the City has
agreed to lease the Leased Premises (defined below) from the Corporation; and
WHEREAS, in order to finance the Project, the City and the Corporation have authorized the
sale of the $ City of Newport Beach Certificates of Participation 2020A (Fire Station No. 2)
(the "Certificates"); and
WHEREAS, as security for the Certificates, the Corporation has assigned the rights to
receive all Lease Payments described in the Lease, and the Corporation and the City have granted a
security interest in all moneys held by the Trustee hereunder (other than the Rebate Fund as
described herein) to the extent described herein to the Trustee for the benefit of the Owners of
Certificates and any Additional Certificates executed and delivered hereunder; and
WHEREAS, Section 5420 et seq. of the California Government Code (the "Government
Code") provides statutory authority for pledging collateral for the payment of principal or
prepayment price of, and interest on, any agreement, including certificates of participation, and the
Government Code creates a continuing perfected security interest which shall attach immediately to
such collateral irrespective of whether the parties to the pledge document have notice of the pledge
and without the need for any physical delivery, recordation, filing or further act, and, therefore, the
City and the Corporation hereby warrant and represent that pursuant to the Lease, this Trust
Agreement and the Government Code, the Trustee has a first priority perfected security interest in the
Lease Payments described in the Lease represented by the Certificates pursuant to the Government
Code; and
WHEREAS, the Trustee has agreed to apply the proceeds of the Certificates deposited in the
Project Fund to pay certain Project Costs and Delivery Costs (as such terms are defined herein).
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the parties hereto hereby agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.01. Definitions and Rules of Construction. Unless the context otherwise requires,
the terms defined in this Section shall, for all purposes of this Trust Agreement, have the meanings
herein specified. Unless the context otherwise indicates, words importing the singular number shall
include the plural number and vice versa. The terms "hereby," "hereof," "hereto," "herein,"
"hereunder" and any similar terms, as used in this Trust Agreement, refer to this Trust Agreement as
a whole.
"Additional Certificates" means certificates of participation authorized by a Supplemental
Agreement that are executed and delivered by the Trustee under and pursuant to Section 2.12.
"Additional Pam" means all amounts payable by the City as Additional Payments as
defined in Section 4.11 of the Lease.
"Assignment Agreement" means the Assignment Agreement, dated as of the date hereof, by
and between the Trustee and the Corporation, and any duly authorized and executed amendments
thereto.
"Beneficial Owner" means any person which (a) has the power, directly or indirectly, to vote
or consent with respect to, or to dispose of ownership of, any Certificates (including persons holding
Certificates through nominees, depositories or other intermediaries), or (b) is treated as the owner of
any Certificates for federal income tax purposes.
"Business Day" means any day other than (i) a Saturday or Sunday, or (ii) a day on which
banking institutions in the State of New York or the State of California are authorized or required by
law or executive order to remain closed.
"Certificates" means the $ City of Newport Beach Certificates of Participation
2020A (Fire Station No. 2) to be executed and delivered by the Trustee pursuant to this Agreement.
"Certificate of Completion" means a certificate of the City Representative delivered pursuant
to Section 3.4 of the Lease stating that all components of the Project have been completed or
concluded in conformity with the requirements of the Lease.
"Certificate Year" means the period extending from July 2 each year to July 1 of the
subsequent calendar year, provided that the first Certificate Year shall commence on the Closing
Date and end on July 1, 2021.
"CC" means the City of Newport Beach, a chartered city organized and existing under the
laws and Constitution of the State, and its successors and assigns.
"City Representative" means the City Manager of the City, the Assistant City Manager or
any other person authorized by the City Manager of the City to act on behalf of the City with respect
to the Lease or this Trust Agreement.
"Closing Date" means the date on which the Certificates, duly executed by the Trustee, are
delivered to the Original Purchaser thereof.
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"Code" means the Internal Revenue Code of 1986, and the regulations issued thereunder, as
the same may be amended from time to time, and any successor provisions of law. Reference to a
particular section of the Code shall be deemed to be a reference to any successor to any such section.
"Continuing Disclosure Agreement" means that certain Continuing Disclosure Agreement
dated as of December 1, 2020, 2020, by and between the City and the Digital Assurance
Certification, LLC as Dissemination Agent, as it may be amended from time to time in accordance
with the terms thereof.
"Corporation" means the Newport Beach Public Facilities Corporation, a 501(c)(4) nonprofit
public benefit corporation organized under the laws of the State, its successors and assigns.
"Corporation Representative" means the President, Vice President, Secretary, Chief Financial
Officer of the Corporation, or any other person authorized to act on behalf of the Corporation under
or with respect to the Lease.
"Delivery Cost Requisition" means a written requisition substantially in the form attached
hereto as Exhibit B-1.
"Delivery Costs" means and includes all items of expense directly or indirectly payable by or
reimbursable to the City or the Corporation relating to the financing of the Project or prepayment of
the Refunded Certificates from the proceeds of the Certificates, including but not limited to costs
provided in the contract of purchase with the Original Purchaser, filing and recording costs,
settlement costs, printing costs, word processing costs, reproduction and binding costs, initial fees
and charges of the Trustee, including its first annual administration fee and the fees of its counsel,
legal fees and charges, financing and other professional consultant fees, fees of auctioning the
Certificates, costs of rating agencies and costs of providing information to such rating agencies, any
computer and other expenses incurred in connection with the Certificates, fees for execution,
transportation and safekeeping of the Certificates and charges and fees in connection with the
foregoing.
"Delivery Costs Subaccount" means the fund by that name established and held by the
Trustee pursuant to Section 3.01 hereof.
"Delivery Date" means December _, 2020.
"Depository" means the securities depository acting as depository pursuant to Section 2.10
hereof.
"DTC" means The Depository Trust Company, New York, New York, a limited purpose trust
company organized under the laws of the State of New York in its capacity as securities depository
for the Certificates.
"Event of Default" means an event of default under the Lease, as defined in Section 9.1
thereof.
"Fiscal Year" means the fiscal year of the City commencing July 1 and ending June 30 of the
next year.
"Fitch" means Fitch Ratings Group or any successors or assigns thereto.
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"Government Obli.at�" means Permitted Investments of the type described in paragraphs
(A) or (B) of the definition thereof.
"Independent Counsel" means an attorney duly admitted to the practice of law before the
highest court of the state in which such attorney maintains an office and who is not an employee of
the Corporation, the Trustee or the City.
"Interest Payment Date" means July 1 and January 1 of each year commencing July 1, 2021.
"Lease" means the Lease/Purchase Agreement related to the Certificates, dated as of the date
hereof, by and between the City and the Corporation, and any duly authorized and executed
amendments thereto.
"Lease Payment" means any of the Lease Payments required to be paid by the City to the
Corporation pursuant to Section 4.4 of the Lease.
"Lease Payment Date" means the Lease Payment Date defined in Section 4.4(a) of the Lease,
which shall be each December 15 and June 15 commencing June 15, 2021.
"Lease Payment Fund" means the fund by that name established and held by the Trustee
pursuant to Section 5.02 hereof.
"Leased Premises" has the meaning set forth in the Lease.
"Letter of Representations" means the letter of the City delivered to and accepted by the
Depository on or prior to delivery of the Certificates as book -entry certificates making reference to
the DTC Operational Arrangements memorandum, as it may be amended from time to time, setting
forth the basis on which the Depository serves as depository for such book -entry certificates, as such
letters were originally executed or as they may be supplemented or revised or replaced by letters
from the City and the Trustee delivered to and accepted by the Depository.
"Mood" means Moody's Investors Service or any successors or assigns thereto.
"Net Proceeds" means any proceeds of any insurance, performance bonds or taking by
eminent domain or condemnation paid with respect to the Leased Premises remaining after payment
therefrom of any expenses (including attorneys' fees) incurred in the collection thereof.
"Net Proceeds Fund" means the fund by that name established and held by the Trustee
pursuant to Section 7.01 hereof.
"Nominee" means the nominee of the Depository, which may be the Depository, as
determined from time to time pursuant to Section 2.10 hereof.
"Original Purchaser" means Stifel, Nicolaus & Company, Incorporated, as representative of
original purchasers of the Certificates on the Closing Date, or the original purchaser of any Series of
Additional Certificates.
"Outstanding" when used as of any particular time with respect to Certificates, means
(subject to the provisions of Section 10.03 hereof) all Certificates or Additional Certificates
theretofore executed and delivered by the Trustee under this Trust Agreement except:
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(1) Certificates or Additional Certificates theretofore cancelled by the Trustee or
surrendered to the Trustee for cancellation;
(2) Certificates or Additional Certificates for the payment or prepayment of which funds
or Government Obligations, together with interest earned thereon, in the necessary
amount shall have theretofore been deposited with the Trustee (whether upon or prior
to the maturity or prepayment date of such Certificates or Additional Certificates),
provided that, if such Certificates are to be prepaid prior to maturity, notice of such
prepayment shall have been given as provided in Section 4.05 hereof or provision
satisfactory to the Trustee shall have been made for the giving of such notice; and
(3) Certificates or Additional Certificates in lieu of or in exchange for which other
Certificates or Additional Certificates shall have been executed and delivered by the
Trustee pursuant to Sections 2.06 and 2.07 hereof.
"Owner" or "Certificate Owner" or "Owner of a Certificate", or any similar term, when used
with respect to a Certificate means the person in whose name such Certificate is registered on the
registration books maintained by the Trustee.
"Participants" means those broker-dealers, banks and other financial institutions from time to
time for which the Depository holds book -entry certificates as securities depository.
"Permitted Investments" means, if and to the extent permitted by law and by any policy
guidelines promulgated by the City:
A. 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.
B. 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):
1. Farmers Home Administration (FmHA)
Certificates of beneficial ownership
2. Federal Housing Administration Debentures (FHA)
3. General Services Administration
Participation certificates
4. Government National Mortgage Association (GNMA or "Ginnie
Mae")
GNMA-guaranteed mortgage-backed bonds
GNMA-guaranteed pass-through obligations
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U.S. Maritime Administration
Guaranteed Title XI financing (qualified under the Ship Financing
Act of 1972)
6. U.S. Department of Housing and Urban Development (HUD)
Project Notes
Local Corporation Bonds
C. 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):
Federal Home Loan Bank S
Senior debt obligations
2. Federal Home Loan Mortgage Corporation (FHLMC or "Freddie
Mac")
Participation certificates
Senior debt obligations
Federal National Mortgage Association (FNMA or "Fannie Mae")
Mortgage-backed securities and senior debt obligations (excluding
stripped mortgage securities which are valued greater than par on the
portion of unpaid principal)
4. Student Loan Marketing Association (SLMA or "Sallie Mae")
Senior debt obligations
Resolution Funding Corp (REFCORP)
The interest only component of REFCORP strips which have been
stripped by request to the Federal Reserve Bank of New York
6. Farm Credit System Cor?. - Consolidated system -wide bonds and
notes
D. Money market funds registered under the Investment Company Act of 1940,
whose shares are registered under the Securities Act of 1933, and having a rating by Standard
& Poor's of "AAAm-G," "AAAm" or "AAm" and by Moody's of "Aaa," "Aal" or "Aa2,"
including funds for which the Trustee, its parent holding company, if any, or any affiliates or
subsidiaries of the Trustee provide investment advisory or other management services.
E. Certificates of deposit secured at all times by collateral described in (A)
and/or (B) above and having a maturity of one year or less. Such certificates must be issued
by commercial banks, savings and loan associations or mutual savings banks whose short-
term obligations are rated "A-1+" by Standard & Poor's and "Prime -I" 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.
F. Certificates of deposit, savings accounts, deposit accounts or money market
deposits which are fully insured by FDIC (including those of the Trustee and its affiliates).
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G. Commercial paper rated at the time of investment "Prime - 1" by Moody's
and "A- W' or better by Standard & Poor's.
H. Investment agreements, including guaranteed investment agreements,
acceptable to the Trustee.
I. Bonds or notes issued by any state or municipality which are rated by
Moody's and Standard & Poor's in one of the two highest rating categories assigned by such
agencies.
J. Federal funds or bankers acceptances with a maximum term of one year of
any bank which has an unsecured, uninsured or unguaranteed obligation rating of "Prime - 1"
or "A3" or better by Moody's and "A-1+" or better by Standard & Poor's, including those of
the Trustee and its affiliates.
K. Repurchase agreements rated "AA" or better by Standard and Poor's and that
provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to
the Trustee (buyer/lender), and the transfer of cash from the Trustee to the dealer bank or
securities firm with an agreement that the dealer bank or securities firm will repay the cash
plus a yield to the Trustee, in exchange for the securities at a specified date or dates.
L. Any guaranteed investment contract, including forward delivery agreements
("FDAs") and forward purchase agreements ("FPAs"), with a financial institution or
insurance company which has at the date of execution thereof an outstanding issue of
unsecured, uninsured and unguaranteed debt obligations or a claims -paying ability rated
within the two highest rating categories of Standard & Poor's and Moody's. Only Permitted
Investments described in clauses A, B or C above and having maturities equal to or less than
30 years from their date of delivery will be considered eligible for any
collateralization/delivery purposes for guaranteed investment contracts, FDAs or FPAs;
M. Pre -refunded municipal bonds rated "Aaa" by Moody's and "AAA" by
Standard & Poor's. If, however, the issue is only rated by Standard & Poor's (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.
N. The Local Agency Investment Fund of the State, provided that the Trustee
may deposit and withdraw monies in its own name.
O. Any other investment which the City is permitted by law to make (including
investment agreements and forward delivery or forward purchase agreements).
"Value" of the above investments shall be determined by the manner currently
employed by the Trustee or any other manner consistent with industry standard.
"Prepayment" means any payment made by the City pursuant to Article X of the Lease as a
prepayment of Lease Payments.
"Prepayment Fund" means the fund by that name established and held by the Trustee
pursuant to Section 4.01 hereof.
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"Principal Office or Corporate Trust Office" means the corporate trust office of the Trustee at
400 South Hope Street, Suite 500, Los Angeles, California 90071, Attention: Corporate Trust
Services, or such other or additional offices as may be designated by the Trustee; provided, however,
that for the purposes of payment, transfer or exchange of Certificates such term means the office or
agency of the Trustee at which, at any particular time its corporate trust agency business shall be
conducted.
"Project" has the meaning set forth in the Lease.
"Project Cost Requisition" means a written requisition substantially in the form attached
hereto as Exhibit B-2.
"Project Costs" means, with respect to any item or portion of the Project, the contract price
paid or to be paid therefor upon acquisition, construction, procurement or improvement thereof, in
accordance with a purchase order or contract therefor. Project Costs include, but are not limited to,
the administrative, engineering, interior decorating, fixtures, furnishings and equipment, legal,
financial and other costs incurred by the City and the Corporation in connection with the acquisition,
construction, procurement, remodeling or improvement of the Project, all applicable sales taxes and
other charges resulting from such construction, procurement, remodeling or improvement of the
Project and the costs associated with making rebate calculations required by the Code. Project Costs
shall not include any costs of the City or the Corporation to enforce remedies hereunder or under the
Lease.
"Project Fund" means the fund by that name established and held by the Trustee pursuant to
Section 3.01 hereof.
"Record Date" means the close of business on the fifteenth day of the month preceding each
Interest Payment Date, whether or not such fifteenth day is a Business Day.
"Series" means the Certificates and such Additional Certificates which are secured by Lease
Payments.
"S&P" or "Standard & Poor's" means S&P Global Ratings, a Standard & Poor's Financial
Services LLC business, or any successors or assigns thereto.
"Site Lease" means the Site Lease related to the Certificates, dated the date hereof, by and
between the Corporation and the City.
"Special Counsel" means Stradling Yocca Carlson & Rauth, a Professional Corporation, or
any other attorney or firm of attorneys of nationally recognized standing in matters pertaining to the
tax-exempt status of interest on obligations issued by states and their political subdivisions and
acceptable to the City.
"State" means the State of California.
"Supplemental Agreement" means a supplement to this Trust Agreement providing for the
execution and delivery of Additional Certificates pursuant to Section 2.12.
"Tax Certificate" means the Tax Certificate, dated as of the Closing Date, concerning matters
pertaining to the use and investment of proceeds of the Certificates executed and delivered to the
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City on the date of execution and delivery of the Certificates, including any and all exhibits attached
thereto.
"Term" means the time during which the Lease is in effect, as provided in Section 4.2 of the
Lease.
"Trustee" means The Bank of New York Mellon Trust Company, N.A., a national banking
association duly organized and existing under the laws of the United States of America, and any
successor trustee.
"Trust Agreement" or "Agreement" means this Trust Agreement, together with any
amendments hereof or supplements hereto permitted to be made hereunder.
Section 1.02. Authorization. Each of the parties hereby represents and warrants that it has
full legal authority and is duly empowered to enter into this Trust Agreement, and has taken all
actions necessary to authorize the execution of this Trust Agreement by the officers and persons
signing it.
Section 1.03. Equal Security. In consideration of the acceptance of the Certificates by the
Owners, this Trust Agreement shall be deemed to be and shall constitute a contract between the
Trustee and the Owners to secure the full and final payment of the interest, if any, and principal
represented by the Certificates and any Additional Certificates which may be executed and delivered
hereunder, subject to each of the agreements, conditions, covenants and terms contained herein; and
all agreements, conditions, covenants and terms contained herein required to be observed or
performed by or on behalf of the Trustee shall be for the equal and proportionate benefit, protection
and security of all Owners without distinction, preference or priority as to security or otherwise of
any Certificates or Additional Certificates of a Series over any other Certificates or Additional
Certificates of a Series by reason of the number or date thereof or the time of execution or delivery
thereof or for any cause whatsoever, except as expressly provided herein or therein. All of the
Certificates and any Additional Certificates of a Series are equally secured as provided in this
Section 1.03, except as may be otherwise expressly provided in this Trust Agreement.
ARTICLE II
THE CERTIFICATES OF PARTICIPATION
Section 2.01. Authorization. Upon written request of the City Representative, the Trustee
will execute and deliver to the Original Purchaser Certificates in an aggregate principal amount of
$ representing proportionate ownership interests in the Lease Payments and the Prepayments.
The Certificates shall be initially executed and delivered as book -entry certificates.
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Section 2.02. Description of Certificates.
(a) Each Certificate shall be dated the Delivery Date and shall mature on July 1
in each of the years and in the amounts, and shall bear interest (calculated on the basis of a 360 -day
year of twelve 30 -day months) at the rates, as follows:
Maturity Principal Interest
Jul 1 Amount Rate
The Certificates shall be delivered in fully registered form, numbered from one
upwards in consecutive numerical order (with such alphabetical prefix as the Trustee shall
determine). The Certificates shall be executed and delivered in the denominations of $5,000 and any
integral multiple thereof.
Each Certificate and any Additional Certificates shall bear interest from the Interest Payment
Date next preceding the date of execution thereof, unless (i) it is executed during the period from the
day after the Record Date for an Interest Payment Date to and including such Interest Payment Date,
in which event it shall bear interest from such Interest Payment Date, or (ii) it is executed on or prior
to the Record Date for the first Interest Payment Date, in which event interest shall be payable from
the Delivery Date; provided, however, that if, at the time of execution of any Certificate or any
Additional Certificates interest with respect to such Certificate or Additional Certificate is in default,
such Certificate or Additional Certificate shall bear interest from the Interest Payment Date to which
interest has been paid or made available for payment with respect to such Certificate or Additional
Certificate.
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(b) Payment Provisions. Interest with respect to any Certificate shall be payable
in lawful money of the United States of America by check or draft of the Trustee, mailed no later
than the Interest Payment Date to the Owner at his address as it appears, on the Record Date, on the
registration books maintained by the Trustee or at such other address as has been furnished to the
Trustee in writing by the Owner on or prior to such Record Date; provided, however, that at the
written request of the Owner of at least $1,000,000 in aggregate principal amount of Outstanding
Certificates or Additional Certificates filed with the Trustee prior to any Record Date, interest with
respect to such Certificates shall be paid to such Owner on each succeeding Interest Payment Date
(unless such request has been revoked in writing) by wire transfer of immediately available funds to
an account in the continental United States designated in such written request. Payments of defaulted
interest with respect to the Certificates or Additional Certificates shall be paid by check or draft to
the registered Owners of the Certificates or Additional Certificates as of a special record date to be
fixed by the Trustee, notice of which special record date shall be given to the registered Owners of
the Certificates or any Additional Certificates no less than ten days prior thereto. The principal of
and premium, if any, on the Certificates or Additional Certificates is payable when due upon
surrender thereof at the Principal Office in lawful money of the United States of America.
Section 2.03. Form of Certificates. The Certificates and the assignment to appear thereon
shall be substantially in the forms set forth in Exhibit A attached hereto and by this reference
incorporated herein with such appropriate additions, modifications, and insertions as are permitted or
required by this Trust Agreement. Pending the preparation of definitive Certificates the Certificates
may be executed and delivered in temporary form exchangeable for definitive Certificates when
ready for delivery. If the Trustee delivers temporary Certificates, it shall execute and deliver
definitive Certificates in an equal aggregate principal amount of authorized denominations, when
available, without additional charge, and thereupon the temporary Certificates shall be surrendered to
the Trustee at its Principal Office. Until so exchanged, the temporary Certificates shall be entitled to
the same benefits under this Trust Agreement as definitive Certificates. The form of any Additional
Certificates shall be as set forth in the Supplemental Agreement relating to such Additional
Certificates.
Section 2.04. Execution. The Certificates shall be executed by and in the name of the
Trustee by the manual signature of any authorized signatory of the Trustee. The Trustee shall insert
the date of execution of each Certificate in the place provided thereon.
Section 2.05. Application of Proceeds and Other Amounts. The proceeds from the sale of
the Certificates in the amount of $ (representing the par amount of the Certificates of
$ , plus original premium of $ , less Original Purchaser's discount of $) shall be
deposited with the Trustee as follows: $ shall be deposited to the Delivery Costs Subaccount
of the Project Fund for the payment of Delivery Costs, and $ to the Project Fund.
The Trustee may, in its discretion, establish a temporary fund or account in its books or
records to facilitate such deposits and transfers.
Section 2.06. Transfer and Exchanize.
(a) Transfer of Certificates. Any Certificate may, in accordance with its terms,
be transferred upon the books required to be kept pursuant to the provisions of Section 2.09 by the
person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of
such Certificate for cancellation at the Principal Office accompanied by delivery of a written
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instrument of transfer in a form acceptable to the Trustee, duly executed. Whenever any Certificate
or Certificates shall be surrendered for transfer, the Trustee shall execute and deliver a new
Certificate or Certificates of the same tenor and maturity, for like aggregate principal amount in
authorized denominations. The cost of printing Certificates and any services rendered or expenses
incurred by the Trustee in connection with any transfer shall be paid by the City. The Trustee shall
require the payment by the Owner requesting such transfer of any tax or other governmental charge
required to be paid with respect to such transfer, and there shall be no other charge to any Owner for
any such transfer.
(b) Exchange of Certificates. Certificates may be exchanged at the Principal
Office for a like aggregate principal amount of Certificates of other authorized denominations of the
same tenor and maturity. The Trustee may require the payment by the Certificate Owner requesting
such exchange of any tax or other governmental charge required to be paid with respect to such
exchange. The cost of printing Certificates and any services rendered or expenses incurred by the
Trustee in connection with any exchange shall be paid by the City. All Certificates surrendered
pursuant to the provisions of this Section shall be cancelled and destroyed by the Trustee and shall
not be redelivered.
(c) Time for Transfer or Exchange. The Trustee shall not be obligated to transfer
or exchange any Certificate after a Record Date and before the following Interest Payment Date, or
during the period in which it is selecting Certificates for prepayment, or after notice of prepayment
has been given as provided in Section 4.05.
Section 2.07. Certificates Mutilated, Lost, Destroyed or Stolen. If any Certificate shall
become mutilated, the Trustee, at the expense of the Owner of said Certificate, shall execute and
deliver a new Certificate of like tenor, maturity and principal amount in exchange and substitution
for the Certificate so mutilated, but only upon surrender to the Trustee of the Certificate so mutilated.
Every mutilated Certificate so surrendered to the Trustee shall be cancelled by it. If any Certificate
shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the
Trustee, and, if such evidence is satisfactory to the Trustee and, if an indemnity, satisfactory to the
Trustee indemnifying the Trustee, the Corporation and the City, shall be given, the Trustee, at the
expense of the Certificate Owner, shall execute and deliver a new Certificate of like tenor, maturity
and principal amount and numbered as the Trustee shall determine in lieu of and in substitution for
the Certificate so lost, destroyed or stolen. The Trustee may require payment of an appropriate fee
for each new Certificate delivered under this Section and of the expenses which may be incurred by
the Trustee in carrying out the duties under this Section. Any Certificate executed under the
provisions of this Section in lieu of any Certificate alleged to be lost, destroyed or stolen shall be
equally and proportionately entitled to the benefits of this Trust Agreement with all other Certificates
secured by this Trust Agreement. Notwithstanding any other provision of this Section, in lieu of
delivering a new Certificate in place of one which has been mutilated, lost, destroyed or stolen, and
which has matured, or has been called for prepayment, the Trustee may make payment with respect
to such Certificate upon receipt of the above-mentioned indemnity.
Section 2.08. Execution of Documents and Proof of Ownership. Any request, direction,
consent, revocation of consent, or other instrument in writing required or permitted by this Trust
Agreement to be signed or executed by Certificate Owners may be in any number of concurrent
instruments of similar tenor, and may be signed or executed by such Owners in person or by their
attorneys or agents appointed by an instrument in writing for that purpose, or by any bank, trust
company or other depository for such Certificates. Proof of the execution of any such instrument, or
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of any instrument appointing any such attorney or agent, and of the ownership of Certificates shall be
sufficient for any purpose of this Trust Agreement (except as otherwise herein provided), if made in
the following manner:
(a) The fact and date of the execution by any Owner or his attorney or agent of
any such instrument and of any instrument appointing any such attorney or agent, may be proved by
a certificate, which need not be acknowledged or verified, of an officer of any bank or trust company
located within the United States of America, or of any notary public, or other officer authorized to
take acknowledgments of deeds to be recorded in such jurisdictions, that the persons signing such
instruments acknowledged before him the execution thereof. Where any such instrument is executed
by an officer of a corporation or association or a member of a partnership on behalf of such
corporation, association or partnership, such certificate shall also constitute sufficient proof of his
authority.
(b) The fact of the ownership of Certificates by any person, the amount and
numbers of such Certificates and the date of execution shall be proved by the registration books
maintained pursuant to Section 2.09 hereof.
Nothing contained in this Article II shall be construed as limiting the Trustee to such proof, it
being intended that the Trustee may accept any other evidence of the matters herein stated which the
Trustee may deem sufficient in its sole discretion. Any request or consent of the Owner of any
Certificate shall bind every future Owner of the same Certificate in respect of anything done or to be
done by the Trustee in pursuance of such request or consent.
Section 2.09. Certificate Re ig ster. The Trustee will keep or cause to be kept at its Principal
Office or another office designated by the Trustee sufficient books for the registration and transfer of
the Certificates which shall, during normal working hours and upon reasonable notice, be open to
inspection by the City and the Corporation; 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 said books, Certificates as hereinbefore provided. The City, the
Corporation and the Trustee shall be entitled to treat the registered owner of a Certificate as the
absolute owner thereof for all purposes, whether or not a Certificate shall be overdue and the City,
the Corporation and the Trustee shall not be affected by any notice to the contrary.
Section 2.10. Book -Entry System.
(a) Election of Book -Entry System. Prior to the execution and delivery of the
Certificates, the City may provide that such Certificates shall be initially executed and delivered as
book -entry Certificates. If the City shall elect to deliver any Certificates in book -entry, then the City
shall cause the delivery of a separate single fully registered Certificate (which may be typewritten)
for each maturity date of such Certificates in an authorized denomination corresponding to that total
principal amount of the Certificates designated to mature on such date. Upon initial execution and
delivery, the ownership of each such Certificate shall be registered in the Certificate register in the
name of the Nominee, as nominee of the Depository, and ownership of the Certificates, or any
portion thereof, may not thereafter be transferred except as provided in Section 2.10(d).
With respect to book -entry Certificates, the City and the Trustee shall have no responsibility
or obligation to any Participant or to any person on behalf of which such a Participant holds an
interest in such book -entry Certificates. Without limiting the immediately preceding sentence, the
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City and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the
records of the Depository, the Nominee, or any Participant with respect to any ownership interest in
book -entry Certificates, (ii) the delivery to any Participant or any other person, other than an Owner
as shown in the Certificate register, of any notice with respect to book -entry Certificates, including
any notice of prepayment, (iii) the selection by the Depository and its Participants of the beneficial
interests in book -entry Certificates to be prepaid in the event the City prepays the Certificates in part,
or (iv) the payment by the Depository or any Participant or any other person, of any amount with
respect to principal, premium, if any, or interest evidenced and represented by book -entry
Certificates. The City and the Trustee may treat and consider the person in whose name each book -
entry Certificate is registered in the Certificate register as the absolute Owner of such book -entry
Certificate for the purpose of payment of principal, premium and interest with respect to such
Certificate, for the purpose of giving notices of prepayment and other matters with respect to such
Certificate, for the purpose of registering transfers with respect to such Certificate, and for all other
purposes whatsoever. The Trustee shall pay all principal, premium, if any, and interest evidenced
and represented by the Certificates only to or upon the order of the respective Owner, as shown in the
Certificate register, or his respective attorney duly authorized in writing, and all such payments shall
be valid and effective to fully satisfy and discharge the City's obligations with respect to payment of
principal, premium, if any, and interest evidenced and represented by the Certificates to the extent of
the sum or sums so paid. No person other than an Owner, as shown in the Certificate register, shall
receive a Certificate evidencing the obligation to make payments of principal, premium, if any, and
interest evidenced and represented by the Certificates. Upon delivery by the Depository to the
Owner and the Trustee, of written notice to the effect that the Depository has determined to substitute
a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record
Dates, the word "Nominee" in this Trust Agreement shall refer to such nominee of the Depository.
(b) Delivery of Letter of Representations. In order to qualify the book -entry
Certificates for the Depository's book -entry system, the City shall execute and deliver to the
Depository a Letter of Representations. The execution and delivery of a Letter of Representations
shall not in any way impose upon the City any obligation whatsoever with respect to persons having
interests in such book -entry Certificates other than the Owners, as shown on the Certificate register.
In addition to the execution and delivery of a Letter of Representations, the City shall take such other
actions, not inconsistent with this Trust Agreement, as are reasonably necessary to qualify book -entry
Certificates for the Depository's book -entry program.
(c) Selection of Depository. In the event (i) the Depository determines not to
continue to act as securities depository for book -entry Certificates, or (ii) the City determines that
continuation of the book -entry system is not in the best interest of the beneficial owners of the
Certificates or the City, then the City will discontinue the book -entry system with the Depository. If
the City determines to replace the Depository with another qualified securities depository, the City
shall prepare or direct the preparation of a new single, separate, fully registered Certificate for each
of the maturity dates of such book -entry Certificates, registered in the name of such successor or
substitute qualified securities depository or its Nominee as provided in subsection (d) hereof. If the
City fails to identify another qualified securities depository to replace the Depository, then the
Certificates shall no longer be restricted to being registered in such Certificate register in the name of
the Nominee, but shall be registered in whatever name or names the Owners transferring or
exchanging such Certificates shall designate, in accordance with the provisions of Section 2.06
hereof.
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(d) Payments to Depository. Notwithstanding any other provision of this Trust
Agreement to the contrary, so long as all Outstanding Certificates are held in book -entry and
registered in the name of the Nominee, all payments with respect to principal, prepayment premium,
if any, and interest evidenced and represented by such Certificate and all notices with respect to such
Certificate shall be made and given, respectively to the Nominees, as provided in the Letter of
Representations or as otherwise instructed by the Depository and agreed to by the Trustee
notwithstanding any inconsistent provisions herein.
(i) The Certificates shall be initially executed and delivered as provided
in Section 2.01 hereof. If such Certificates are initially registered in the name of the
Nominee, then registered ownership of such Certificates, or any portions thereof, may not
thereafter be transferred except:
(A) to any successor of DTC or its nominee, or of any substitute
depository designated pursuant to clause (B) of subsection (i) of this Section 2.10(d)
("Substitute Depository"); provided that any successor of DTC or Substitute
Depository shall be qualified under any applicable laws to provide the service
proposed to be provided by it;
(B) to any Substitute Depository, upon (1) the resignation of DTC
or its successor (or any Substitute Depository or its successor) from its functions as
depository, or (2) a determination by the City that DTC (or its successor) is no longer
able to carry out its functions as depository; provided that any such Substitute
Depository shall be qualified under any applicable laws to provide the services
proposed to be provided by it; or
(C) to any person as provided below, upon (1) the resignation of
DTC or its successor (or any Substitute Depository or its successor) from its
functions as depository, or (2) a determination by the City that DTC or its successor
(or Substitute Depository or its successor) is no longer able to carry out its functions
as depository.
(ii) In the case of any transfer pursuant to clause (A) or clause (B) of
subsection (i) of this Section 2.10(d), upon receipt of all Outstanding Certificates by the
Trustee, together with a written request of the City to the Trustee designating the Substitute
Depository, a single new Certificate, which the City shall prepare or cause to be prepared,
shall be executed and delivered for each maturity of Certificates then Outstanding, registered
in the name of such successor or such Substitute Depository or their Nominees, as the case
may be, all as specified in such written request of the City. In the case of any transfer
pursuant to clause (C) of subsection (i) of this Section 2.10(d), upon receipt of all
Outstanding Certificates by the Trustee, together with a written request of the City to the
Trustee, new Certificates, which the City shall prepare or cause to be prepared, shall be
executed and delivered in such denominations and registered in the names of such persons as
are requested in such written request of the City, subject to the limitations of Section 2.01
hereof, provided that the Trustee shall not be required to deliver such new Certificates within
a period of less than sixty (60) days from the date of receipt of such written request from the
City.
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(iii) In the case of a partial prepayment or an advance refunding of any
Certificates evidencing a portion of the principal maturing in a particular year, DTC or its
successor (or any Substitute Depository or its successor) shall make an appropriate notation
on such Certificates indicating the date and amounts of such reduction in principal, in form
acceptable to the Trustee, all in accordance with the Letter of Representations. The Trustee
shall not be liable for such Depository's failure to make such notations or errors in making
such notations.
(iv) The City and the Trustee shall be entitled to treat the person in whose
name any Certificate is registered as the Owner thereof for all purposes of this Trust
Agreement and any applicable laws, notwithstanding any notice to the contrary received by
the Trustee or the City; and the City and the Trustee shall not have responsibility for
transmitting payments to, communicating with, notifying, or otherwise dealing with any
beneficial owners of the Certificates. Neither the City nor the Trustee shall have any
responsibility or obligation, legal or otherwise, to any such beneficial owners or to any other
party, including DTC or its successor (or Substitute Depository or its successor), except to
the Owner of any Certificates, and the Trustee may rely conclusively on its records as to the
identity of the Owners of the Certificates.
Section 2.11. Destruction of Cancelled Certificates. Whenever in this Trust Agreement
provision is made for the surrender or cancellation by the Trustee and the delivery to the City of any
Certificates, the Trustee will cancel and destroy such Certificates and deliver a certificate of such
destruction to the City upon its request.
Section 2.12. Additional Certificates. Subsequent to the execution and delivery by the
Trustee of the Certificates, the Trustee shall, upon written request or requests of the City
Representative and of the Corporation Representative, execute and deliver from time to time one or
more series of Additional Certificates in such aggregate principal amount as may be set forth in such
written request or requests, provided that there shall have been compliance with all of the following
conditions, which are hereby made conditions precedent to the preparation, execution and delivery of
such Additional Certificates:
(a) The parties to this Trust Agreement shall have executed a Supplemental
Agreement which sets forth the terms and provisions of such Additional Certificates, including the
establishment of such funds and accounts, which may be separate and apart from the funds and
accounts established hereunder for the Certificates, as shall be necessary or appropriate;
(b) The scheduled principal and interest payable with respect to such Additional
Certificates shall be payable only on Interest Payment Dates applicable to the Certificates;
(c) The Lease shall have been amended, if necessary, to (i) increase or adjust the
Lease Payments due and payable on each Lease Payment Date to an amount sufficient to pay the
principal, premium (if any) and interest payable with respect to all Outstanding Certificates,
including all Additional Certificates as and when the same mature or become due and payable
(except to the extent such principal, premium and interest may be payable out of moneys then on
deposit with the Trustee in accordance with this Trust Agreement), (ii) if appropriate, amend the
definition of "Leased Premises" to include as part of the Leased Premises all or any portion of
additions, betterments, extensions, improvements or replacements, or such other real or personal
property (whether or not located upon the Leased Premises as such Leased Premises is constituted as
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of the date of this Trust Agreement), to be financed, acquired or constructed by the preparation,
execution and delivery of such Additional Certificates, and (iii) make such other revisions to the
Lease as are necessitated by the execution and delivery of such Additional Certificates (provided,
however, that such other revisions shall not materially prejudice the rights of the Owners of
Outstanding Certificates as granted them under the terms of this Trust Agreement);
(d) There shall have been delivered to the Trustee a counterpart of the
amendments required by subsection 2.12(c) hereof,
(e) The Trustee shall have received a certificate of the City Representative that
the Lease Payments as increased or adjusted do not exceed in any year the fair rental value of the
Leased Premises (as such term is defined in the amended Lease);
(f) The Trustee shall have received an opinion of Special Counsel substantially
to the effect that (i) said Supplemental Agreement and said amendments to the Lease comply in all
respects with the requirements of this Section 2.12, (ii) said Supplemental Agreement and said
amendments to the Lease have been duly authorized, executed and delivered by the City and the
Corporation, as applicable, (provided that said opinion of Special Counsel, in rendering the opinions
set forth in this clause (ii), shall be entitled to rely upon one or more other opinions of counsel,
including counsel to any of the respective parties to said Supplemental Agreement or said
amendments to the Lease), (iii) assuming that no Event of Default has occurred and is continuing,
this Trust Agreement, as amended by said Supplemental Agreement, and the Lease, as amended by
the respective amendments thereto, constitute the legal, valid and binding obligations of the City and
Corporation, as applicable, enforceable against said parties in accordance with their respective terms
(except to the extent that enforcement thereof may be limited by bankruptcy, insolvency,
moratorium, debt adjustment or other laws affecting creditors' rights generally, and except to the
extent that enforcement thereof may be limited by general principles of equity, regardless of whether
enforcement is sought in a legal or equitable proceeding) and (iv) the execution of such Supplemental
Agreement and said amendments to the Lease, and performance by the parties thereunder, will not
result in the inclusion of the interest portion of any Lease Payments payable with respect to any
Certificates, including Additional Certificates (to the extent such Additional Certificates are executed
and delivered as tax exempt Certificates), theretofore prepared, executed and delivered, in the gross
income of the Owners of the Certificates or the owners of any Additional Certificates (to the extent
such Additional Certificates are executed and delivered as tax exempt Certificates) for purposes of
federal income taxation;
(g) There shall have been delivered to the Trustee an endorsement to or
reissuance of the title insurance policy delivered under Section 5.5 of the Lease providing that the
insured amount is at least equal to the aggregate principal amount of all of the Certificates and
Additional Certificates outstanding upon the execution and delivery of such Additional Certificates;
and
(h) Such other conditions shall have been satisfied, and such other instruments
shall have been duly executed and delivered to the Trustee, as the City or the Corporation shall have
reasonably requested.
Upon delivery to the Trustee of the foregoing instruments, the Trustee shall cause to be
executed and delivered Additional Certificates of a Series representing the aggregate principal
amount specified in such Supplemental Agreement, and such Additional Certificates shall be equally
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and ratably secured with all Certificates of like Series, including any Additional Certificates,
theretofore prepared, executed and delivered, all without preference, priority or distinction (other
than with respect to maturity, payment, prepayment or sinking fund payment (if any)) of any one
Certificate of a Series, including Additional Certificates, over any other; provided, however, that no
provision of this Trust Agreement shall require the City to consent to or otherwise permit the
preparation, execution and delivery of Additional Certificates, it being understood and agreed that
any such consent or other action of the City to permit the preparation, execution and delivery of
Additional Certificates, or lack thereof, shall be in the sole discretion of the City.
ARTICLE III
PROJECT FUND
Section 3.01. Establishment of Project Fund. The Trustee shall establish a special fund
designated as the "City of Newport Beach (2020A Certificates) Project Fund," referred to herein as
the "Project Fund." Within the Project Fund, there shall be established a Delivery Costs Subaccount.
The Trustee shall keep the Project Fund separate and apart from all other funds and moneys held by
it; and shall administer such fund as herein provided. The Project Fund shall be held and applied by
the Trustee in accordance herewith.
Section 3.02. PuMose. Moneys in the Project Fund shall be expended for Project Costs and
Delivery Costs.
Section 3.03. Deposit of Moneys; Pqyment of Project Costs and Delivery Costs.
(a) Deposits. There shall be credited to the Project Fund the following amounts:
(1) the proceeds of sale of the Certificates required to be deposited therein pursuant to Section 2.05
hereof; (2) all investment earnings on moneys held in the Project Fund, which shall remain in the
Project Fund until expended for Project Costs or applied to the prepayment of Certificates, as
described in Section 3.04 below; and (3) any other funds from time to time deposited with the
Trustee to pay Project Costs.
(b) Disbursements. The Trustee shall disburse moneys in the Project Fund from
time to time to pay Project Costs directly or to reimburse the City for payment of Project Costs, upon
receipt by the Trustee of a Project Cost Requisition signed by the City Representative. The Trustee
shall have no duty or liability to monitor the application of any moneys disbursed hereunder. The
Trustee shall disburse moneys from the Delivery Costs Subaccount to pay Delivery Costs or to
reimburse the City for payment of such Delivery Costs upon receipt by the Trustee of a Delivery
Cost Requisition signed by the City Representative. The Trustee shall be absolutely protected in
making any disbursement from the Project Fund in reliance upon a Project Cost Requisition or
Delivery Cost Requisition signed by the City Representative. Each such Project Cost Requisition
and Delivery Cost Requisition 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 remaining balance in
the Delivery Costs Subaccount after 1, 2021 shall be transferred by the Trustee to the Project
Fund as directed in writing by City Representative and the Delivery Costs Subaccount shall be
closed.
Section 3.04. Transfers of Unexpended Proceeds. Upon the filing with the Trustee of the
Certificate of Completion pursuant to Section 3.4 of the Lease, the Trustee shall withdraw all
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remaining moneys in the Project Fund (other than any moneys retained therein to pay Project Costs
not then due and payable and certified by the City Representative) and shall transfer such moneys to
the Lease Payment Fund to be applied to the payment of principal and interest with respect to the
applicable Series of Certificates as prescribed in Section 5.04 hereof or, at the written election of the
City Representative delivered to the Trustee, together with an opinion of Special Counsel that such
transfer will not cause interest due with respect to the Certificates to be included in gross income for
federal income tax purposes, shall transfer such moneys to the City for the purpose of capital
expenditures of the City, and following such transfer, the Project Fund shall be closed.
ARTICLE IV
PREPAYMENT FUND
Section 4.01. Establishment of Prepayment Fund. The Trustee shall establish a special
fund designated as the "City of Newport Beach (2020A Certificates) Prepayment Fund," referred to
herein as the "Prepayment Fund"; shall keep such fund separate and apart from all other funds and
moneys held by it; and shall administer such fund as herein provided. Moneys to be used for
prepayment of the Certificates and Additional Certificates shall be deposited into the Prepayment
Fund established for such Series and used solely for the purpose of prepaying the applicable
Certificates or Additional Certificates in advance of their maturity on the date designated for
prepayment and upon presentation and surrender of such Certificates or Additional Certificates to the
Trustee.
Section 4.02. Extraordinary Prepayment. The Certificates are subject to prepayment prior
to their respective maturity dates on any date, in whole or in part, from Net Proceeds which the
Trustee shall deposit in the Prepayment Fund as provided in Section 6.1(c) of the Lease at least 45
days prior to the date fixed for prepayment and credited towards the prepayment made by the City
pursuant to Section 10.2 of the Lease, at a prepayment price equal to the principal amount thereof
together with accrued interest to the date fixed for prepayment, without premium.
Section 4.03. Reserved .
Section 4.04. Selection of Certificates for Prepayment. For extraordinary prepayment of
Certificates pursuant to Section 4.02 hereof, the Trustee shall select Certificates for prepayment so
that the Net Proceeds will be applied to prepay a proportionate amount of Certificates and Additional
Certificates based on the Outstanding principal amount and by lot within any maturity or sinking
account prepayment. The Trustee shall promptly notify the City and the Corporation in writing of
the Certificates so selected for prepayment by mailing to the City and the Corporation copies of the
notice of prepayment provided for in Section 4.05.
Section 4.05. Notice of Prepayment.
(a) Content. When prepayment is authorized or required pursuant to this Article
IV, the Trustee shall give notice of the prepayment of the Certificates. Such notice shall specify:
(a) the prepayment date, (b) the prepayment price, (c) if less than all of the Outstanding Certificates
of a maturity are to be prepaid, the Certificate numbers (and in the case of partial prepayment, the
respective principal amounts), (d) the CUSIP numbers of the Certificates to be prepaid, (e) the place
or places where the prepayment will be made, and (f) the original date of execution and delivery of
the Certificates. Such notice shall further state that on the specified date there shall become due and
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payable upon each Certificate to be prepaid, the portion of the principal amount of such Certificate to
be prepaid, together with interest accrued to said date, and that from and after such date, provided
that moneys therefor have been deposited with the Trustee, interest with respect thereto shall cease to
accrue and be payable.
(b) Recipients, Timing. Notice of such prepayment shall be sent by first class
mail or delivery service postage prepaid, or by telecopy, to the Depository on the date of mailing of
notice to the Owners by first class mail and by first class mail, postage prepaid, to the Corporation
and the respective Owners of any Certificates designated for prepayment at their addresses appearing
on the Certificate registration books, at least thirty (30) days, but not more than sixty (60) days, prior
to the prepayment date; provided that neither failure to receive such notice nor any defect in any
notice so mailed shall affect the sufficiency of the proceedings for the prepayment of such
Certificates. Under no circumstances shall the Trustee have any liability to any party for any
inaccurate CUSIP number.
Section 4.06. Partial Prepayment of Certificates. Upon surrender by the Owner of a
Certificate for partial prepayment at the Principal Office, payment of such partial prepayment of the
principal amount of a Certificate will be paid to such Owner. Upon surrender of any Certificate
prepaid in part only, the Trustee shall execute and deliver to the registered Owner thereof, at the
expense of the City, a new Certificate or Certificates which shall be of authorized denominations
equal in principal amount to the unprepaid portion of the Certificate surrendered and of the same
tenor and maturity. Such partial prepayment shall be valid upon payment of the amount thereby
required to be paid to such Owner, and the City, the Corporation and the Trustee shall be released
and discharged from all liability to the extent of such payment.
Section 4.07. Effect of Notice of Prepayment. Notice having been given to the Owners of
the Certificates as set forth in Section 4.05 hereof, and the moneys for the prepayment (including, the
interest to the applicable date of prepayment), having, been set aside in the Prepayment Fund, the
Certificates shall become due and payable on said date of prepayment, and, upon presentation and
surrender thereof at the Principal Office, said Certificates shall be paid at the prepayment price with
respect thereto, plus interest accrued and unpaid to said date of prepayment.
If, on the date of a prepayment, moneys for the prepayment of all the Certificates to be
prepaid, together with interest to said date of prepayment, shall be held by the Trustee so as to be
available therefor on such date of prepayment, and, if notice of prepayment thereof shall have been
given as set forth in Section 4.05 hereof, then, from and after said date of prepayment, interest with
respect to the Certificates to be prepaid shall cease to accrue and become payable. All moneys held
by or on behalf of the Trustee for the prepayment of Certificates shall be held in trust for the account
of the Owners of the Certificates so to be prepaid, without liability for interest thereon.
All Certificates paid at maturity or prepaid prior to maturity pursuant to the provisions of this
Article shall be cancelled upon surrender thereof and destroyed.
Section 4.08. Surplus. Any funds remaining in the Prepayment Fund after prepayment and
payment of all Certificates Outstanding, including accrued interest and payment of any applicable
fees and expenses to the Trustee pursuant to Sections 9.06 and 9.07 hereof and any other Additional
Payments payable under the Lease or provision made therefor satisfactory to the Trustee, and
provision for any amounts required to be transferred to the Rebate Fund pursuant to Sections 8.07
and 8.08 hereof, shall be withdrawn by the Trustee and remitted to the City.
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ARTICLE V
LEASE PAYMENTS; LEASE PAYMENT FUND
Section 5.01. Security Provisions.
(a) Assignment of Rights in Lease. The Corporation has, pursuant to the
Assignment Agreement, absolutely assigned and set over to the Trustee certain of its rights in the
Lease, including but not limited to all of the Corporation's rights to receive and collect all of the
Lease Payments, the Prepayments and all other amounts required to be deposited in the Lease
Payment Fund pursuant to the Lease or pursuant hereto. All Lease Payments, Prepayments and such
other amounts to which the Corporation may at any time be entitled (other than amounts due to the
Corporation under Section 4.11 of the Lease) shall be paid directly to the Trustee, and all of the
Lease Payments and Prepayments collected or received by the Corporation shall be deemed to be
held and to have been collected or received by the Corporation as the agent of the Trustee and if
received by the Corporation at any time shall be deposited by the Corporation with the Trustee within
five (5) Business Days after the receipt thereof, and all such Lease Payments shall be forthwith
deposited by the Trustee upon the receipt thereof in the Lease Payment Fund, all such Prepayments
shall be forthwith deposited by the Trustee upon the receipt thereof in the Prepayment Fund.
(b) Security Interest in Moneys and Funds. The Corporation and the City, as
their interests may appear, hereby grant to the Trustee for the benefit of the Owners of the
Certificates and all Additional Certificates a lien on and a security interest in all moneys in the
following funds or accounts held by the Trustee under this Trust Agreement (excepting only the
Rebate Fund and any moneys to be deposited into the Rebate Fund), including without limitation, the
Lease Payment Fund, the Prepayment Fund and the Net Proceeds Fund, and all such moneys shall be
held by the Trustee in trust and applied to the respective purposes specified herein and in the Lease.
(c) Pledge of Lease Payments and Proceeds. The Lease Payments are hereby
irrevocably pledged to and shall be used for the punctual payment of the interest and principal
represented by the Certificates (and Additional Certificates to the extent provided in a Supplemental
Agreement). Any proceeds from the re -letting or any other disposition of the Leased Premises
pursuant to Article IX of the Lease (the "Lease Proceeds") are hereby irrevocably pledged equally to
the Certificates and any Additional Certificates. Except as permitted under Section 2.12 hereof with
respect to Additional Certificates, the Lease Payments and Lease Proceeds shall not be used for any
other purpose while any of the Certificates remain Outstanding. This pledge shall constitute a first
lien on the Lease Payments and Lease Proceeds in accordance with the terms hereof, subject to
Section 13.03 hereof and subject to Section 2.12 hereof.
Section 5.02. Establishment of Lease Payment Fund. The Trustee shall establish a special
fund designated as the "City of Newport Beach (2020A Certificates) Lease Payment Fund," referred
to herein as the "Lease Payment Fund." All moneys at any time deposited by the Trustee in the
Lease Payment Fund shall be held by the Trustee in trust for the benefit of the Owners of the
Certificates. So long as any Certificates are Outstanding, neither the City nor the Corporation shall
have any beneficial right or interest in the Lease Payment Fund or the moneys deposited therein,
except only as provided in this Trust Agreement, and such moneys shall be used and applied by the
Trustee as hereinafter set forth.
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Section 5.03. Deposits. There shall be deposited in the Lease Payment Fund all Lease
Payments and in the Prepayment Fund all Prepayments received by the Trustee, including any
moneys received by the Trustee for deposit therein pursuant to Section 2.05 hereof and Section 4.4 of
the Lease, including without limitation Section 5.4(c) of the Lease (regarding proceeds of rental
interruption insurance) or pursuant to this Trust Agreement, which moneys shall be applied as a
credit towards any Lease Payment then due.
Section 5.04. Application of Moneys. Except as provided in this Section 5.04 and Section
5.05, all amounts in the Lease Payment Fund shall be used and withdrawn by the Trustee solely for
the purpose of paying the principal and interest with respect to the Certificates as the same shall
become due and payable, in accordance with the provisions of Article II and Article IV hereof,
subject to the requirement that certain investment earnings may be transferred to the Rebate Fund, as
provided in Section 8.08 hereof.
On or before each Interest Payment Date, the Trustee shall set aside an amount sufficient to
pay the interest becoming due and payable on such Interest Payment Date on all Outstanding
Certificates and Additional Certificates. Moneys so set aside shall be used and withdrawn by the
Trustee solely for the purpose of paying the interest with respect to the Certificates as it shall become
due and payable (including, accrued interest with respect to any Certificates prepaid prior to
maturity).
On or before each Interest Payment Date on which the principal of the Certificates shall be
payable, the Trustee shall set aside an amount equal to (i) the principal amount of the Certificates and
Additional Certificates coming due and payable on such Interest Payment Date pursuant to
Section 2.02, and (ii) the prepayment price of the Certificates and Additional Certificates (consisting
of the principal amount thereof and any applicable premiums) required to be prepaid on such Interest
Payment Date pursuant to any of the provisions of Article IV hereof. Moneys so set aside shall be
used and withdrawn by the Trustee solely for the purpose of (i) paying the principal of the
Certificates and Additional Certificates at the maturity thereof, or (ii) paying the principal of and
premium (if any) on any Certificates and Additional Certificates upon the prepayment thereof
pursuant to Section 4.03 hereof.
Section 5.05. Surplus. Any funds remaining in the Lease Payment Fund after payment of
all Certificates Outstanding, including accrued interest and payment of any applicable fees to the
Trustee pursuant to Sections 9.06 and 9.07 hereof and any other Additional Payments due under the
Lease, or provision made therefor satisfactory to the Trustee, and provision for any amounts required
to be transferred to the Rebate Fund pursuant to Section 8.08 hereof, shall be withdrawn by the
Trustee and remitted to the City.
ARTICLE VI
[RESERVED]
ARTICLE VII
NET PROCEEDS FUND
Section 7.01. Establishment of Net Proceeds Fund: Deposits. The Trustee shall establish
when required a special fund designated as the "City of Newport Beach (2020A Certificates) Net
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Proceeds Fund," referred to herein as the "Net Proceeds Fund," to be maintained and held in trust for
the benefit of the Owners, subject to disbursement therefrom as provided herein. The Trustee shall
deposit Net Proceeds in the Net Proceeds Fund as provided in Section 6.1(a) of the Lease.
(a) Casualty Insurance. The Trustee shall disburse Net Proceeds for replacement
or repair of the Leased Premises as provided in Section 6.1(b) of the Lease, or transfer such proceeds
to the Prepayment Fund upon notification of the City Representative as provided in Section 6.1(c) of
the Lease. Pending such application, such Net Proceeds may be invested by the Trustee as directed
by the City Representative in Permitted Investments that mature not later than such times moneys are
expected to be needed to pay such costs of repair or replacement. After all of the Certificates have
been paid and the entire amount of principal and interest with respect to the Certificates has been
paid in full, or provision made for payment satisfactory to the Trustee, including provision for all
amounts required to be transferred to the Rebate Fund pursuant to Section 8.08 hereof, the Trustee
shall pay any remaining moneys in the Net Proceeds Fund to the City after payment of any amounts
due to the Trustee pursuant to Sections 9.06 and 9.07 hereof and any other Additional Payments due
under the Lease.
(b) Title Insurance. Proceeds of any policy of title insurance received by the
Trustee with respect to the Leased Premises shall be applied and disbursed by the Trustee upon the
Written Request of the City as follows:
(i) If the City determines that the title defect giving rise to such proceeds
has not substantially interfered with its use and occupancy of the Leased Premises and will
not result in an abatement of Lease Payments and Additional Payments payable by the City
under the Lease (such determination to be certified by the City in writing), such proceeds
shall be remitted to the City and used for any lawful purpose thereof, or
(ii) If the City determines that the title defect giving rise to such proceeds
has substantially interfered with its use and occupancy of the Leased Premises and will result
in an abatement of Lease Payments and Additional Payments payable by the City under the
Lease; then the Trustee shall immediately deposit such proceeds in the Prepayment Fund and
such proceeds shall be applied to the prepayment of Certificates in the manner provided in
Section 4.02 hereof.
Section 7.02. Cooperation. The Corporation and the Trustee shall cooperate fully with the
City at the expense of the City in filing any proof of loss with respect to any insurance policy
maintained pursuant to Article V of the Lease and in the prosecution or defense of any prospective or
pending condemnation proceeding with respect to the Leased Premises or any item or portion
thereof; provided, however, the Trustee shall not be obligated to take any action hereunder if it is not
indemnified to its satisfaction from and against any liability or expense arising therefrom.
ARTICLE VIII
MONEYS IN FUNDS; INVESTMENT
Section 8.01. Held in Trust. The moneys and investments held by the Trustee under this
Trust Agreement, other than in the Rebate Fund, are irrevocably held in trust for the benefit of the
respective Owners and, in the case of the Rebate Fund, for payment as required to the United States
Treasury, and for the purposes herein specified, and such moneys, and any income or interest earned
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thereon, shall be expended only as provided in this Trust Agreement, and shall not be subject to levy
or attachment or lien by or for the benefit of any creditor of the Corporation, the Trustee or the City,
or any of them.
Section 8.02. Investments Authorized.
(a) By Trustee. Subject to the further provisions of this Article VIII, moneys
held by the Trustee hereunder shall be invested and reinvested on maturity thereof by the Trustee
pursuant to Section 8.02(b). The Trustee will report any such investments to the City on a monthly
basis in its regular statements.
(b) Upon Direction of the City. The City Representative shall direct by
facsimile, to the designated trust officer responsible for the administration of this Trust Agreement,
followed by oral notification and distribution by U.S. Mail or overnight courier service of such
notice, such investment in specific Permitted Investments not less than two Business Days prior to
the date that such Permitted Investment is to take effect. Such investments and reinvestments shall
be made giving full consideration for the time at which funds are required to be available based
among other things, scheduled completion of the various components of the Project. In the event that
the City Representative does not so direct the Trustee, the Trustee shall invest in the Permitted
Investments described in paragraph (D) of the definition thereof contained in Section 1.01.
Investments purchased with funds on deposit in the Lease Payment Fund and
Prepayment Fund shall mature not later than the Interest Payment Date or prepayment date, as
appropriate, immediately succeeding the investment. Investments instructed by the City
Representative to be purchased with funds on deposit in the Project Fund shall mature not later than
the dates upon which such funds shall be needed to be expended for the payment of Project Costs.
The Trustee may conclusively rely upon the written instructions of the City Representative as to both
the suitability and legality of the directed investments.
(c) Registration. Such investments, if registrable, shall be registered in the name
of the Trustee for the benefit of the Owners and held by the Trustee or its nominee.
(d) Trustee as Purchaser or Agent. The Trustee may purchase or sell to itself or
any affiliate, as principal or agent, investments authorized by this Section. The Trustee may act as
purchaser or agent in the making or disposing of any investment. The Trustee or any of its affiliates
may act as a sponsor of, or as an advisor to any provider of, Permitted Investments hereunder. The
City and Corporation acknowledge that to the extent regulations of the Comptroller of the Currency
or other applicable regulatory entity grant the City and the Corporation the right to receive brokerage
confirmations of security transactions as they occur, the City and the Corporation specifically waive
receipt of such confirmations to the extent permitted by law. The Trustee will furnish the City
periodic cash transaction statements which shall include detail for all investment transactions made
by the Trustee hereunder.
(e) Trustee Standard of Care. Except as otherwise provided in Section 9.05, the
Trustee shall not be responsible or liable for any consequences of any investment of funds or sale of
such investment made by it in accordance with this Section or disposition made by it in accordance
with Section 8.05(b).
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Section 8.03. Crediting of Investments. Except as otherwise provided in this Trust
Agreement, any income, profit or loss on the investment of moneys held by the Trustee hereunder
shall be credited to the respective fund for which it is held.
Section 8.04. Accounting. The Trustee shall furnish to the City, not less than monthly, an
accounting (which may be in the form of its regular statements) of all investments made by the
Trustee and all funds and amounts held by the Trustee; provided, that the Trustee shall not be
obligated to deliver an accounting for any fund or account that (i) has a balance of zero and (ii) has
not had any activity since the last reporting date. The Trustee shall keep accurate records of all funds
administered by it and of all Certificates paid and discharged.
Section 8.05. Valuation and Disposition of Investments.
(a) Valuation. Subject to the provisions of Section 8.08 hereof, for the purpose
of determining the amount in any fund, all Permitted Investments (except investment agreements)
credited to such fund shall be valued at the lower of the cost or the market price, exclusive of accrued
interest. With respect to all funds and accounts, investments shall be valued by the Trustee not less
often than annually nor more often than monthly. In making any such valuations, the Trustee may
utilize, and conclusively rely upon such valuation services as may be available to the Trustee,
including those within its regular accounting system.
(b) Disposition. Subject to the provisions of Section 8.08 hereof, the Trustee
shall sell, or present for prepayment, any Permitted Investment so purchased by the Trustee
whenever it shall be necessary in order to provide moneys to meet any required payment, transfer,
withdrawal or disbursement from the fund to which such Permitted Investment is credited.
Section 8.06. Commingling of Moneys in Funds. The Trustee may, and upon the written
request of the City Representative shall, commingle any of the funds held by it pursuant to this Trust
Agreement into a separate fund or funds for investment purposes only; provided, however, that all
funds or accounts held by the Trustee hereunder shall be accounted for separately notwithstanding
such commingling by the Trustee. The City shall ensure that any such commingling complies with
Section 1.148-4 of the Treasury Regulations, and shall provide direction to the Trustee accordingly.
In no event shall the Trustee have any duty or obligation, at any time and in any manner to monitor
compliance with any governmental regulations relating to commingling of accounts.
Section 8.07. Tax Covenants.
(a) General. The City and the Corporation hereby covenant with the holders of
the Certificates that, notwithstanding any other provisions of this Trust Agreement, (to the extent that
the Corporation may have control over the Project, the Leased Premises or the proceeds of the
Certificates) they shall not take any action, or fail to take any action, if any such action or failure to
take action would adversely affect the exclusion from gross income of interest with respect to the
Certificates under Section 103 of the Code. The City and the Corporation (to the extent that the
Corporation may have control over the Project, the Leased Premises or the proceeds of the
Certificates) shall not, directly or indirectly, use or permit the use of proceeds of the Certificates, the
Leased Premises or the Project, or any portion thereof, by any person other than a governmental unit
(as such term is used in Section 141 of the Code), in such manner or to such extent as would result in
the loss of exclusion from gross income for federal income tax purposes of interest due with respect
to the Certificates.
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(b) Use of Proceeds. The City and the Corporation (to the extent that the
Corporation may have control over the Project, the Leased Premises or the proceeds of the
Certificates) shall not take any action, or fail to take any action, if any such action or failure to take
action would cause the Certificates to be "private activity bonds" within the meaning of Section 141
of the Code, and in furtherance thereof, shall not make any use of the proceeds of the Certificates, the
Leased Premises or the Project, or any portion thereof, or any other funds of the City, that would
cause the Certificates to be "private activity bonds" within the meaning of Section 141 of the Code.
To that end, so long as any Certificates are outstanding, the City and the Corporation, with respect to
such proceeds, the Leased Premises and the Project and such other funds, will comply with
applicable requirements of the Code and all regulations of the United States Department of the
Treasury issued thereunder and under Section 103 of the Code, to the extent such requirements are, at
the time, applicable and in effect. The City shall establish reasonable procedures necessary to ensure
continued compliance with Section 141 of the Code and the continued qualification of the
Certificates as "governmental bonds."
(c) Arbitrage. The City and the Corporation (to the extent that the Corporation
may have control over the Project or the proceeds of the Certificates) shall not, directly or indirectly,
use or permit the use of any proceeds of any Certificates, the Leased Premises or of the Project, or
other funds of the City, or take or omit to take any action, that would cause the Certificates to be
"arbitrage bonds" within the meaning of Section 148 of the Code. To that end, the City and the
Corporation shall comply with all requirements of Section 148 of the Code and all regulations of the
United States Department of the Treasury issued thereunder to the extent such requirements are, at
the time, in effect and applicable to the Certificates.
(d) Federal Guarantee. The City and the Corporation (to the extent that the
Corporation may have control over the proceeds of the Certificates) shall not make any use of the
proceeds of the Certificates or any other funds of the City, or take or omit to take any other action,
that would cause the Certificates to be "federally guaranteed" within the meaning of Section 149(b)
of the Code.
(e) Compliance with Tax Certificate. In furtherance of the foregoing tax
covenants of this Section, the City covenants that it will comply with the provisions of the Tax
Certificate, which is incorporated herein as if fully set forth herein. These covenants shall survive
payment in full or defeasance of the Certificates.
Section 8.08. Rebate Fund.
(a) General. The Trustee shall establish a special fund designated the "City of
Newport Beach (2020A Certificates) Rebate Fund" (the "Rebate Fund"). All amounts at any time on
deposit in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the
requirement to make rebate payments to the United States (the "Rebate Requirement") pursuant to
Section 148 of the Code and the Treasury Regulations promulgated thereunder (the "Treasury
Regulations"). Such amounts shall be free and clear of any lien under this Trust Agreement and shall
be governed by this Section and Section 8.07 of this Trust Agreement and by the Tax Certificate
executed by the City. The Trustee shall be deemed conclusively to have complied with the Rebate
Requirement if it follows the directions of the City, and shall have no independent responsibility to,
or liability resulting from its failure to, enforce compliance by the City with the Rebate Requirement.
The Trustee shall have no independent responsibility to, or liability resulting from its failure to,
enforce compliance by the City with the terms of this Section 8.08 or the Tax Certificate.
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(i) Within 45 days of the end of the fifth Certificate Year and each fifth
Certificate Year thereafter, (1) the City shall calculate or cause to be calculated with respect
to the Certificates the amount that would be considered the "rebate amount" within the
meaning of Section 1.148-3 of the Treasury Regulations, and (2) the City shall make an
Additional Payment under Section 4.11 of the Lease and transfer to the Trustee for deposit in
the Rebate Fund, if and to the extent required, amounts sufficient to cause the balance in the
Rebate Fund to be equal to the "rebate amount" so calculated.
(ii) The City shall not be required to deposit any amount to the Rebate
Fund in accordance with preceding sentence if the amount on deposit in the Rebate Fund
prior to the deposit required to be made under this subsection (a) equals or exceeds the
"rebate amount" calculated in accordance with the preceding sentence. Such excess may be
withdrawn from the Rebate Fund to the extent permitted under subsection (f) of this Section.
(b) Withdrawal Following Payment of Certificates. Any funds remaining in the
Rebate Fund after prepayment of all the Certificates and any amounts described in paragraph (ii) of
subsection (c) of this Section, or provision made therefor satisfactory to the Trustee, including
accrued interest and payment of any applicable fees to the Trustee, shall be withdrawn by the Trustee
and remitted to the City.
(c) Withdrawal for Payment of Rebate. Upon the City's written direction, but
subject to the exceptions contained in subsection (a) of this Section to the requirement to calculate
the "rebate amount" and make deposits to the Rebate Fund, the Trustee shall pay to the United States,
from amounts on deposit in the Rebate Fund, not later than 60 days after the end of (1) the fifth
Certificate Year, and (2) each fifth Certificate Year thereafter, an amount that, together with all
previous rebate payments, is equal to at least 90% of the `rebate amount" calculated as of the end of
such Certificate Year in accordance with Section 1.148-3 of the Treasury Regulations.
(d) Rebate Payments. Each payment required to be made pursuant to subsection
(c) of this Section shall be made to the Internal Revenue Service Center, Ogden, Utah 84201 on or
before the date on which such payment is due, and shall be accompanied by Internal Revenue Service
Form 8038-T, which shall be completed by the arbitrage rebate consultant for execution by the City
and provided to the Trustee.
(e) Deficiencies in the Rebate Fund. In the event that, prior to the time any
payment is required to be made from the Rebate Fund, the amount in the Rebate Fund is not
sufficient to make such payment when such payment is due, the City shall calculate the amount of
such deficiency and direct the Trustee to deposit an amount received from the City equal to such
deficiency into the Rebate Fund prior to the time such payment is due.
(f) Withdrawals of Excess Amounts. In the event that immediately following the
calculation required by subsection (a) of this Section, but prior to any deposit made under said
subsection, the amount on deposit in the Rebate Fund exceeds the "rebate amount" calculated in
accordance with said subsection, upon written instructions from the City, the Trustee shall withdraw
the excess from the Rebate Fund and credit such excess to the Lease Payment Fund.
(g) Record Keeping. The City shall retain records of all determinations made
hereunder until six years after the complete retirement of the Certificates.
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(h) Survival after Defeasance. Notwithstanding anything in this Trust Agreement
to the contrary, the Rebate Requirement shall survive the payment in full or defeasance of the
Certificates.
ARTICLE IX
THE TRUSTEE
Section 9.01. Appointment of Trustee.
(a) Appointment. The Bank
national banking association organized under the
appointed Trustee by the Corporation and the City.
of New York Mellon Trust Company, N.A., a
laws of the United States of America, is hereby
(b) Qualifications. The Corporation and the City agree that they will maintain a
Trustee having a corporate trust office in New York, New York, San Francisco, California, Santa
Ana, California, or Los Angeles, California capable of exercising trust powers in the State of
California, with a combined capital (exclusive of borrowed capital) and a surplus of at least Seventy -
Five Million Dollars ($75,000,000), or be a member of a bank holding company system, which 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 authority, so long as any Certificates are
Outstanding. If such bank, corporation or trust company publishes a report of condition at least
annually pursuant to law or to the requirements of any supervising or examining authority above
referred to then for the purpose of this Section the combined capital and surplus of such bank,
corporation or trust company shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published.
(c) Removal. So long as there is no Event of Default, the City may remove the
Trustee initially appointed, and any successor thereto, and may appoint a successor or successors
thereto.
(d) Resignation. The Trustee may, upon written notice to the City and the
Corporation, resign; provided that such resignation shall not take effect until the successor Trustee is
appointed as provided in this Section 9.01. Upon receiving such notice of resignation, the City shall
promptly appoint a successor Trustee. In the event the City does not name a successor Trustee
within thirty (30) days of receipt of notice of the Trustee's resignation, then the Trustee may petition
a federal or state court to seek the immediate appointment of a successor Trustee and be reimbursed
by the City for all costs incurred in connection therewith.
(e) Successor. Any successor Trustee shall be a bank, corporation or trust
company meeting the qualifications as set forth in Subsection (b) above. Any resignation or removal
of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of
appointment by the successor Trustee. Upon such acceptance, the successor Trustee shall mail notice
thereof to the Owners at their respective addresses set forth on the Certificate registration books
maintained pursuant to Section 2.12.
Section 9.02. Merger or Consolidation. Any company or banking association into which
the Trustee may be merged or converted or with which it may be consolidated or any company
resulting from any merger, conversion or consolidation to which it shall be a party or any company to
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which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided
that such company shall be eligible under Section 9.01, shall be the successor to the Trustee without
the execution or filing of any paper or further act, anything herein to the contrary notwithstanding.
Section 9.03. Protection of the Trustee.
(a) Reliance Upon Papers or Documents. The Trustee shall be protected and
shall incur no liability in acting or proceeding in good faith upon any resolution, notice, telegram,
facsimile, request, consent, direction, waiver, certificate, statement, affidavit, voucher, bond,
requisition or other paper or document which it shall in good faith believe to be genuine and to have
been passed or signed by the proper board or person or to have been prepared and furnished pursuant
to any of the provisions of this Trust Agreement, and the Trustee shall be under no duty to make any
investigation or inquiry as to any statements contained or matters referred to in any such instrument,
but may, in the absence of bad faith on its part, accept and rely upon the same as conclusive evidence
of the truth and accuracy of such statements. In the event the Trustee shall make any investigation
into the content of any such certifications, the Trustee shall not thereby be deemed to have expanded
the scope of its duties.
(b) Reliance Upon Opinions of Counsel. The Trustee may consult with its
counsel or counsel to the City 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 in accordance therewith. Before being required to take any action, the
Trustee may require an opinion of Independent Counsel acceptable to the Trustee which opinion
shall be made available to the other parties hereto upon request, which counsel may be counsel to any
of the parties hereto, or a verified certificate of any party hereto, or both, concerning the proposed
action and the opinion of such counsel shall be full and complete authorization and protection in
respect of any action taken by the Trustee in reliance thereon and the City shall promptly reimburse
the Trustee for such costs.
(c) Reliance Upon Requested Certificates. Whenever in the administration of its
duties under this Trust Agreement, the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed), in the absence of bad faith on its part,
shall be deemed to be conclusively proved and established by the certificate of the City
Representative or the Corporation Representative and such certificate shall be full warranty to the
Trustee for any action taken or suffered under the provisions of this Trust Agreement in reliance
thereon, 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 seem reasonable, provided however that the duties
and obligations of the Trustee shall not be deemed expanded thereby.
Section 9.04. Rights of the Trustee.
(a) Ownership of Certificates. The Trustee may become an Owner with the same
rights it would have if it were not Trustee; may acquire and dispose of other bonds or evidence of
indebtedness of the City with the same rights it would have if it were not the Trustee; and may act as
a 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 the majority in principal amount of the Certificates then
Outstanding.
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(b) Attorneys, Agents, Receivers. The Trustee may execute any of the trusts or
powers hereof and perform the duties required of it hereunder by or through attorneys, agents, or
receivers, shall not be responsible for the actions or omissions of such attorneys, agents or receivers
if appointed by it with reasonable care, and shall be entitled to advice of counsel concerning all
matters of trust and its duty hereunder.
(c) Funds and Accounts. In addition to the funds and accounts established or
required to be established pursuant to this Trust Agreement, the Trustee may establish such
additional funds and accounts as it deems necessary or appropriate to perform its duties hereunder,
and shall have the right to close such accounts in its discretion.
Section 9.05. Standard of Care. The Trustee shall not be liable in connection with the
performance of its duties hereunder, except for its own negligence or willful misconduct. The
Trustee shall only perform those duties specifically set forth herein and no implied duties, covenants
or obligations whatsoever shall be read into this Trust Agreement. In the event of and during the
continuance of an Event of Default, the Trustee shall exercise such care in performing its duties
hereunder as a prudent person would exercise under the circumstances in the conduct of its own
affairs. No action by the Trustee shall be construed or deemed to expand the limitations on the scope
of the Trustee's duties. The Trustee shall not be considered in breach of or in default in its
obligations hereunder in the event of a 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 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.
Section 9.06. Compensation of the Trustee. As an Additional Payment under Section 4.11
of the Lease, the City shall, from time to time, pay such amounts as are specified in any written
agreement with the City and, on demand, pay to the Trustee to the extent not covered by such
agreement reasonable compensation for its services and the services of any accountants, consultants,
attorneys and other experts as may be engaged by the Trustee to provide services under this Trust
Agreement pursuant to a written agreement between the City and the Trustee. Further, in the event
of a default hereunder, the City agrees that the Trustee's fees and costs shall be deemed to be a
substantial contribution to the trust and bankruptcy estate, if applicable. The City's obligation
hereunder shall remain valid and binding notwithstanding maturity and payment of the Certificates or
resignation and removal of the Trustee.
Section 9.07. Indemnification of Trustee. The City shall, to the extent permitted by law,
indemnify and save the Trustee and its officers, directors, agents, and employees harmless from and
against (whether or not litigated) all claims, losses, costs, expenses, liability and damages, including
legal fees and expenses, arising out of (i) the use, maintenance, condition or management of, or from
any work or thing done on, the Leased Premises by the City, (ii) any breach or default on the part of
the City in the performance of any of its obligations under this Trust Agreement and any other
agreement made and entered into for purposes of the Leased Premises, (iii) any act of the City or of
any of its agents, contractors, servants, employees or licensees with respect to the Leased Premises,
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(iv) any act of any assignee of, or purchaser from, the City or of any of its or their agents,
contractors, servants, employees or licensees with respect to the Leased Premises, (v) the
construction or acquisition of the Project or the expenditure of Project Costs, (vi) the exercise and
performance by the Trustee of its powers and duties hereunder or any related document, (vii) the sale
of the Certificates and the carrying out of any of the transactions contemplated by the Certificates or
this Trust Agreement, or (viii) any untrue statement or alleged untrue statement of any material fact
or omission or alleged omission to state a material fact necessary to make the statements made in
light of the circumstances in which they were made, not misleading in any official statement or other
disclosure document utilized in connection with the sale of the Certificates. The indemnification set
forth in this Section 9.07 shall extend to the Trustee's officers, agents, employees, successors and
assigns. No indemnification will be made under this Section or elsewhere in this Trust Agreement or
other agreements for willful misconduct or negligence by the Trustee, its officers, agents, employees,
successors or assigns. The City's obligations hereunder shall remain valid and binding
notwithstanding maturity and payment of the Certificates, or the resignation or removal of the
Trustee.
In accepting the trust hereby created, the Trustee acts solely as Trustee for the Owners and
not in its individual capacity, and all persons, including, without limitation, the Owners, Corporation
and the City, having any claim against the Trustee arising from the Trust Agreement shall look only
to the funds and accounts held by the Trustee hereunder for payment, except as otherwise provided
herein or where the Trustee has breached its standard of care as described in Section 9.05 hereof.
Under no circumstances shall the Trustee be liable in its individual capacity for the obligations
evidenced by the Certificates.
No provision of this Trust Agreement shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of its duties hereunder or in the
exercise of any of its rights or powers.
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 Certificates at the time Outstanding relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee or in the exercise of any right
hereunder. In the event of conflicting instructions hereunder, the Trustee shall have the right to
decide the appropriate course of action and be protected in so doing.
The Trustee is authorized and directed to execute, in its capacity as Trustee, the Assignment
Agreement.
Every provision of this Trust Agreement, the Lease, the Site Lease and the Assignment
Agreement relating to the conduct or liability of the Trustee shall be subject to the provisions of this
Trust Agreement, including without limitation, this Article IX.
The Trustee shall have no responsibility or liability with respect to any information,
statement or recital in any official statement, offering memorandum or any other disclosure material
prepared or distributed in any respect relating to the Certificates.
The Trustee shall not to be deemed to have knowledge of any Event of Default hereunder or
under the Lease unless it has actual knowledge thereof at its Principal Office.
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Before taking any action under Article XIII or this Article at the request of the Owners, the
Trustee may require that a satisfactory indemnity bond be furnished by the Owners for the
reimbursement of all expenses to which it may be put and to protect it against all liability, except
liability which is adjudicated to have resulted from its negligence or willful misconduct in connection
with any action so taken.
Section 9.08. Trustee's Disclaimer of Warranties. THE TRUSTEE MAKES NO
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 PORTION THEREOF. THE CITY ACKNOWLEDGES THAT THE CITY
IS LEASING THE LEASED PREMISES AS IS. In no event shall the Trustee be liable for
incidental, indirect, special or consequential damages, in connection with or arising out of the Lease,
the Site Lease, the Assignment Agreement or this Trust Agreement for the existence, furnishing,
functioning or the City's use and possession of the Leased Premises.
ARTICLE X
MODIFICATION OR AMENDMENT OF AGREEMENTS
Section 10.01. Amendments Permitted.
(a) With Consent. This Trust Agreement and the rights and obligations of the
Owners, and the Lease and the rights and obligations of the parties thereto, may be modified or
amended at any time, with notice to any rating agency then rating the Certificates by a Supplemental
Agreement or amendment thereto which shall become effective when the written consents of the
Owners of a majority in aggregate principal amount of the Certificates then Outstanding, exclusive of
Certificates disqualified as provided in Section 10.03 hereof, shall have been filed with the Trustee.
No such modification or amendment shall:
(i) extend or have the effect of extending the maturity of any
Certificate or reducing the fixed interest rate with respect thereto or extending the
time of payment of interest, or reducing the amount of principal thereof or reducing
any premium payable upon the prepayment thereof, without the express consent of
the Owner of such Certificates being affected, or
(ii) reduce or have the effect of reducing the percentage of
Certificates required for the affirmative vote or written consent to an amendment or
modification of the Lease, or
(iii) modify any of the rights or obligations of the Trustee without
its written assent thereto, or
(iv) amend this Section 10.01 without the prior written consent of
the Owners of all Certificates then outstanding.
The Trustee shall have the right to require such opinions of counsel as it deems necessary concerning
(i) the lack of material adverse effect of the amendment on Owners and (ii) the fact that the
amendment will not affect the tax status of interest with respect to the Certificates or any Additional
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Certificates. Any such Supplemental Agreement or amendments thereto shall become effective as
provided in Section 10.02 hereof.
(b) Without Consent. This Trust Agreement and the rights and obligations of the
Owners, and the Lease and the rights and obligations of the parties thereto, may be modified or
amended at any time by a Supplemental Agreement or amendments thereto or a supplement or
amendment to the Lease, without the consent of any such Owners, but only to the extent permitted by
law and only:
(i) to add to the covenants and agreements of the City hereunder,
(ii) to cure, correct or supplement any ambiguous or defective
provision contained herein or therein,
(iii) in regard to matters arising hereunder or thereunder, as the
parties hereto or thereto may deem necessary or desirable (which may be based upon
opinions as provided in Section 9.03(b)), shall not materially adversely affect the
interest of the Owners,
(iv) to substitute the Leased Premises, or a portion thereof, in
accordance with Sections 3.5 and 7.12 of the Lease,
(v) to make such additions, deletions or modifications as may be
necessary or appropriate to assure the exclusion from gross income for federal
income tax purposes of the interest component of Lease Payments and the interest
payable with respect to the Certificates,
(vi) to add to the rights of the Trustee,
(vii) to maintain the rating or ratings assigned to the Certificates, or
(viii) to provide for the execution and delivery of Additional
Certificates in accordance with the provisions of Section 2.12 hereof.
No such modification or amendment, however, shall modify any of the rights or obligations
of the Trustee without its written assent thereto. Any such Supplemental Agreement shall become
effective upon execution and delivery by the parties hereto or thereto as the case may be.
The Trustee shall have the right to require such opinions of counsel as it deems necessary
concerning (i) the lack of material adverse effect of the amendment on Owners and (ii) the fact that
the amendment will not affect the tax status of interest with respect to the Certificates or any
Additional Certificates. Any such Supplemental Agreement or amendments thereto shall become
effective as provided in Section 10.02 hereof.
Section 10.02. Procedure for Amendment with Written Consent of the Owners. This Trust
Agreement or the Lease may be amended by Supplemental Agreement as provided in this
Section 10.02 in the event the consent of the Owners is required pursuant to Section 10.01(a) hereof.
A copy of the form of such Supplemental Agreement, together with a request to the Owners for their
consent thereto, shall be mailed by the Trustee to each Owner of a Certificate at his address as set
forth in the Certificate registration books maintained pursuant to Section 2.09 hereof, but failure to
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receive copies of such Supplemental Agreement and request so mailed shall not affect the validity of
the Supplemental Agreement when assented to as in this Section provided.
Such Supplemental Agreement shall not become effective unless there shall be filed with the
Trustee the written consent of the Owners of at least a majority in aggregate principal amount of the
Certificates then Outstanding (exclusive of Certificates disqualified as provided in Section 10.03
hereof) and notices shall have been mailed as hereinafter in this Section provided. Any such consent
shall be binding upon the Owner of the Certificate giving such consent and on any subsequent Owner
(whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing
by the Owner giving such consent or a subsequent Owner by filing such revocation with the Trustee
prior to the date when the notice hereinafter in this Section provided for has been mailed.
After the Owners of the required percentage of Certificates shall have filed their consent to
such Supplemental Agreement, the Trustee shall mail a notice to the Owners of the Certificates in the
manner hereinbefore provided in this Section for the mailing of such Supplemental Agreement,
stating in substance that such Supplemental Agreement has been consented to by the Owners of the
required percentage of Certificates and will be effective as provided in this Section (but failure to
mail copies of said notice shall not affect the validity of such Supplemental Agreement or consents
thereto). A record, consisting of the papers required by this Section to be filed with the Trustee, shall
be proof of the matters therein stated until the contrary is proved. The Trustee may obtain and
conclusively rely on an opinion of counsel with regard to such matters.
Section 10.03. Disqualified Certificates. Certificates or Additional Certificates owned or
held by or for the account of the City or the Corporation or by any person directly or indirectly
controlled or controlled by, or under direct or indirect common control with the City or the
Corporation (except any Certificates or Additional Certificates held in any pension or retirement
fund) shall not be deemed Outstanding for the purpose of any vote, consent, waiver or other action or
any calculation of Outstanding Certificates provided for in this Trust Agreement, and shall not be
entitled to vote upon, consent to, or take any other action provided for in this Trust Agreement.
The City or the Trustee may adopt appropriate regulations to require each Owner, before his
consent provided for in this Article X shall be deemed effective, to reveal if the Certificates or
Additional Certificates as to which such consent is given are disqualified as provided in this
Section 10.03 hereof. Upon request of the Trustee, the City and Corporation shall specify to the
Trustee those Certificates and Additional Certificates disqualified pursuant to this Section and the
Trustee may conclusively rely on such certificate.
Section 10.04. Effect of Supplemental Agreement. From and after the time any
Supplemental Agreement becomes effective pursuant to this Article X, this Trust Agreement or the
Lease, as the case may be, shall be deemed to be modified and amended in accordance therewith, the
respective rights, duties and obligations of the parties hereto or thereto and all Owners of Certificates
Outstanding, as the case may be, 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
Supplemental Agreement shall be deemed to be part of the terms and conditions of this Trust
Agreement or the Lease, as the case may be, for any and all purposes.
Section 10.05. Endorsement or Replacement of Certificates Delivered After Amendments.
The Trustee may determine that Certificates delivered after the effective date of any action taken as
provided in this Article X shall bear a notation, by endorsement, in form approved by the Trustee, as
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to such action. In that case, upon demand of the Owner of any Outstanding Certificate at such
effective date and presentation of his Certificate for such purpose at the Principal Office, a suitable
notation shall be made on such Certificate. The Trustee may determine that new Certificates, so
modified as in the opinion of the Trustee is necessary to conform to such Owner's action, shall be
prepared, executed and delivered. In that case, upon demand of the Owner of any Certificate then
Outstanding, such new Certificate shall be exchanged in the Principal Office without cost to such
Owner, for a Certificate of the same character then Outstanding, upon surrender of such Certificate.
Section 10.06. Amendatory Endorsement of Certificates. Subject to Section 10.01 hereof,
the provisions of this Article X shall not prevent an Owner from accepting any amendment as to the
particular Certificates held by him, provided that due notification thereof is made on such
Certificates.
Section 10.07. Copies of Amendments Delivered to Rating _ Agencies. Copies of any
modifications or amendments to this Agreement, the Lease, the Site Lease or the Assignment
Agreement shall be delivered by the City to any rating agency then rating the Certificates at least 10
days prior to the effective date thereof.
ARTICLE XI
COVENANTS; NOTICES
Section 11.01. Compliance With and Enforcement of the Lease. The City covenants and
agrees with the Owners to perform all obligations and duties imposed on it under the Lease. The
Corporation covenants and agrees with the Owners to perform all obligations and duties imposed on
it under the Lease.
The City will not do or permit anything to be done, or omit or refrain from doing anything, in
any case where any such act done or permitted to be done, or any such omission of or refraining from
action, would or might be a ground for cancellation or termination of the Lease by the Corporation
thereunder. The Corporation and the City, immediately upon receiving or giving any notice,
communication or other document in any way relating to or affecting their respective estates, or
either of them, in the Leased Premises, which may or can in any manner affect such estate of the
City, will deliver the same, or a copy thereof, to the Trustee.
Section 11.02. Payment of Taxes. The City shall pay all taxes as provided in Section 7.7(b)
of the Lease.
Section 11.03. Observance of Laws and Regulations. The City will well and truly keep,
observe and perform all valid and lawful obligations or regulations now or hereafter imposed on it by
contract, or prescribed by any law of the United States, or of the State, or by any officer, board or
commission having jurisdiction or control, as a condition of the continued enjoyment of any and
every right, privilege or franchise now owned or hereafter acquired by the City, including its right to
exist and carry on business as a municipal corporation, to the end that such rights, privileges and
franchises shall be maintained and preserved, and shall not become abandoned, forfeited or in any
manner impaired.
Section 11.04. Prosecution and Defense of Suits. The City shall promptly, and also upon
request of the Trustee or any Owner, from time to time take such action as may be necessary or
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proper to remedy or cure any defect in or cloud upon the title to the Leased Premises, whether now
existing or hereafter developing and shall prosecute all such suits, actions and other proceedings as
may be appropriate for such purpose.
Section 11.05. City Budgets. In accordance with Section 4.7 of the Lease, the City
Representative shall certify to the Trustee on or before August 1 of each year that the City has
included all Lease Payments (other than Lease Payments of advance rental), Additional Payments
due under the Lease in the Fiscal Year covered by its annual budget and the amount so included. If
the City fails to certify that it has included all such Lease Payments and Additional Payments in such
annual budget, the Trustee shall promptly provide the City written notice specifying that the City has
failed to observe and perform its covenant and agreement in such Section 4.7 and requesting that
such failure be remedied within 30 days, or such failure shall constitute an Event of Default under
Section 9.1(b) of the Lease. The Trustee shall forward a copy of such notice to the Corporation.
Upon receipt of such notice, the City shall notify the Trustee in writing of the proceedings proposed
to be taken by the City, and shall keep the Trustee advised in writing of all proceedings thereafter
taken by the City.
Section 11.06. Further Assurances. The Corporation and the City will make, execute and
deliver any and all such further resolutions, instruments and assurances as may be reasonably
necessary or proper to carry out the intention or to facilitate the performance of this Agreement, and
for the better assuring and confirming unto the Owners the rights and benefits provided herein.
Section 11.07. Continuing Disclosure. The City hereby covenants and agrees that it will
comply with and carry out all of the provisions of the Continuing Disclosure Agreement.
Notwithstanding any other provision of this Trust Agreement, failure of the City to comply with the
Continuing Disclosure Agreement shall not be considered an Event of Default hereunder; however,
any Owner or Beneficial Owner 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 Section and the Continuing Disclosure Agreement.
ARTICLE XII
LIMITATION OF LIABILITY
Section 12.01. Limited Liability of the City. Except for the payment of Lease Payments,
Additional Payments and Prepayments when due in accordance with the Lease and the performance
of the other covenants and agreements of the City contained herein and in the Lease, the City shall
have no obligation or liability to any of the other parties hereto or to the Owners with respect to this
Trust Agreement or the terms, execution, delivery or transfer of the Certificates, or the distribution of
Lease Payments to the Owners by the Trustee.
Section 12.02. No Liability of the City or Corporation for Trustee Performance. Except as
expressly provided herein, neither the City nor the Corporation shall have any obligation or liability
to any other parties hereto or to the Owners with respect to the performance by the Trustee of any
duty imposed upon it under this Trust Agreement.
(a) No Investment Advice. The Trustee shall have no obligation or responsibility
for providing information to the Owners concerning the investment character of the Certificates.
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(b) Sufficiency of this Trust Agreement or Lease Payments. The Trustee makes
no representations as to the validity or sufficiency of the Certificates, shall incur no responsibility or
liability in respect thereof, other than in connection with the duties or obligations herein or in the
Certificates assigned to or imposed upon it. The Trustee shall not be responsible or liable for the
sufficiency or enforceability of the Lease, the Site Lease or the Assignment Agreement. The Trustee
shall not be liable for the sufficiency or collection of any Lease Payments or other moneys required
to be paid to it under the Lease (except as provided in this Trust Agreement), its right to receive
moneys pursuant to said Lease, or the value of or title to the Leased Premises.
(c) Actions of Corporation and City. The Trustee shall have no obligation or
liability to any of the other parties or the Owners with respect to this Trust Agreement or failure or
refusal of any other parry to perform any covenant or agreement made by any of them under this
Trust Agreement or the Lease, but shall be responsible solely for the performance of the duties and
obligations expressly imposed upon it hereunder as provided in Section 9.05.
(d) Recitals and Agreements of Corporation and City. The recitals of facts,
covenants and agreements herein and in the Certificates contained shall be taken as statements,
covenants and agreements of the City or the Corporation (as the case may be), and the Trustee
assumes no responsibility for the correctness of the same.
Section 12.03. Limitation of Rights to Parties and Certificate Owners. Nothing in this Trust
Agreement or in the Certificates expressed or implied is intended or shall be construed to give any
person other than the City, the Corporation, the Trustee and the Owners, any legal or equitable right,
remedy or claim under or in respect of this Trust Agreement or any covenant, condition or provision
hereof; and all such covenants, conditions and provisions are and shall be for the sole and exclusive
benefit of the City, the Corporation, the Trustee and the Owners.
Section 12.04. No Liability of Corporation to the Owners. Except as expressly provided
herein, the Corporation shall not have any obligation or liability to the Owners with respect to the
payment when due of the Lease Payments by the City or with respect to the observance or
performance by the City of the other agreements, conditions, and covenant imposed upon the City by
the Lease or by this Trust Agreement.
ARTICLE XIII
EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS
Section 13.01. Assignment of Rights. The parties hereto acknowledge that pursuant to the
Assignment Agreement the Corporation has transferred, assigned and set over to the Trustee for the
benefit of the Owners, certain of the Corporation's rights under the Lease.
Section 13.02. Events of Default.
(a) Remedies. If an Event of Default shall happen, then, and in each and every
such case during the continuance of such Event of Default, the Trustee may exercise any and all
remedies available pursuant to law or granted pursuant to the Lease; provided, however, that
notwithstanding anything herein or in the Lease to the contrary, THERE SHALL BE NO RIGHT
UNDER ANY CIRCUMSTANCES TO ACCELERATE THE MATURITIES OF THE
CERTIFICATES OR OTHERWISE TO DECLARE ANY LEASE PAYMENTS NOT THEN IN
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DEFAULT TO BE IMMEDIATELY DUE AND PAYABLE. Section 9.2 of the Lease is hereby
incorporated by reference.
(b) Actual Knowledge. The Trustee shall not be deemed to have knowledge of
any Event of Default unless and until the trust officer responsible for the administration of this Trust
Agreement shall have actual knowledge thereof, or shall have received written notice thereof at the
Principal Office.
Section 13.03. Application of Funds. All moneys received by the Trustee pursuant to any
right given or action taken under the provisions of this Article XIII or of Article IX of the Lease,
shall be deposited into the Lease Payment Fund and be applied by the Trustee after payment of all
amounts due and payable under Sections 9.06 and 9.07 hereof and Section 4.11 of the Lease in the
following order upon presentation of the Certificates, and the stamping thereon of the payment if
only partially paid, or upon the surrender thereof if fully paid -
First, Costs and Expenses: to the payment of the costs, fees and expenses of the
Trustee in declaring such Event of Default and in performing its duties and obligations hereunder,
including reasonable compensation to its agents, attorneys and counsel and then to any such amounts
incurred by the Owners;
Second, Interest: to the payment to the persons entitled thereto of all installments of
interest then due in the order of the maturity of such installment, 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
Third, Principal: to the payment to the persons entitled thereto of the unpaid principal
with respect to any Certificates which shall have become due, whether at maturity or by call for
prepayment, in the order of their due dates, with interest on the overdue principal and interest at a
rate equal to the rate paid with respect to the Certificates and, if the amount available shall not be
sufficient to pay in full all the amounts due with respect to the Certificates on any date, 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 13.04. Institution of Legal Proceedings. If one or more Events of Default shall
happen and be continuing, the Trustee may, and upon the written request of the Owners of a majority
in principal amount of the Certificates then Outstanding, and upon being indemnified to its
satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Owners by a
suit in equity or action at law, either for the specific performance of any covenant or agreement
contained herein or in the Lease, or in aid of the execution of any power herein granted, or by
mandamus or other appropriate proceeding for the enforcement of any other legal or equitable
remedy as the Trustee shall deem most effectual in support of any of its rights or duties hereunder;
provided that such written request shall not be otherwise than in accordance with provisions of law
and this Trust Agreement and that the Trustee shall have the right to decline to follow any such
written request if the Trustee shall be advised by counsel that the action or proceeding so requested
may not be taken lawfully or if the Trustee in good faith shall determine that the action or proceeding
so requested would be unjustly prejudicial to the Certificate Owners not a party to such written
request or expose the Trustee to liability. In no event shall counsel to the Trustee be deemed counsel
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to the Owners, and any communications between the Trustee and its counsel shall be deemed
confidential and privileged.
Section 13.05. Non -Waiver. Nothing in this Article XIII or in any other provision of this
Trust Agreement or in the Certificates shall affect or impair the obligation of the City to pay or
prepay the Lease Payments as provided in the Lease. No delay or omission of the Trustee or of any
Owner of any of the Certificates to exercise any right or power arising upon the happening 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 Article
XIII to the Trustee or to the Owners may be exercised from time to time and as often as shall be
deemed expedient by the Trustee or the Owners.
Section 13.06. 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, and every such remedy
shall be cumulative and shall be in addition to every other remedy given hereunder or now or
hereafter existing, at law or in equity or by statute or otherwise.
Section 13.07. Power of Trustee to Control Proceedings. In the event that the Trustee, upon
the happening of an Event of Default, shall have taken any action, by judicial proceedings or
otherwise, pursuant to its duties hereunder, whether upon its own discretion or upon the request of
the Owners of a majority in principal amount of the Certificates then Outstanding, it shall have full
power, in the exercise of its discretion for the best interest of the Owners of the Certificates, with
respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of
such action; provided, however, that the Trustee shall not, unless there no longer continues an Event
of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation
pending at law or in equity, if at the time there has been filed with it a written request signed by the
Owners of at least a majority in principal amount of the Outstanding Certificates hereunder opposing
such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation.
Section 13.08. Limitation on Certificate Owners' Right to Sue. No Owner of any Certificate
executed hereunder shall have the right to institute any suit, action or proceeding at law or in equity,
for any remedy under or upon this Trust Agreement, unless (a) such Owner shall have previously
given to the Trustee written notice of the occurrence of an Event of Default under the Lease; (b) the
Owners of a majority in aggregate principal amount of all the Certificates then Outstanding shall
have made written request upon the Trustee to exercise the powers hereinbefore granted or to
institute such action, suit or proceeding in its own name; (c) said 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 refused or omitted to comply with such request for a
period of 60 days after such written request shall have been received by, and said tender of indemnity
shall have been made to, the Trustee; and (e) there shall have been a default in the payment of such
Owner's proportionate interest in the Lease Payments as the same become due.
Such notification, request, tender of indemnity, refusal or omission, and default are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of any remedy
hereunder; it being understood and intended that no one or more Owners shall have any right in any
manner whatever by his or their action to enforce any right under this Trust Agreement, except in the
manner herein provided and for the equal benefit of all Owners of the Outstanding Certificates.
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The right of any Owner of any Certificate to receive payment of said Owner's proportionate
interest in the Lease Payments as the same become due, or to institute suit for the enforcement of
such payment, shall not be impaired or affected without the consent of such Owner, notwithstanding
the foregoing provisions of this Section or any other provision of this Trust Agreement.
ARTICLE XIV
MISCELLANEOUS
Section 14.01. Defeasance.
(a) Methods. If and when any Outstanding Certificates shall be paid and
discharged in any one or more of the following ways:
(i) Payment or Prepayment: by well and truly paying or causing to be
paid the principal, interest and prepayment premiums (if any) with respect to such
Certificates Outstanding, as and when the same become due and payable;
(ii) Cash: by depositing with the Trustee, in trust, an amount of cash
which (together with cash then on deposit in the Lease Payment Fund together with the
interest to accrue thereon, in the event of payment or provision for payment of all
Outstanding Certificates) is sufficient to pay such Certificates Outstanding, including all
principal and interest and premium, if any; or
(iii) Government Obligations: _ by irrevocably depositing with the Trustee,
in trust, Government Obligations together with cash, if required, in such amount as will, in
the opinion of an independent certified public accountant, together with interest to accrue
thereon (and, in the event of payment or provision for payment of all Outstanding
Certificates, moneys then on deposit in the Lease Payment Fund together with the interest to
accrue thereon), be fully sufficient to pay and discharge such Certificates (including all
principal and interest represented thereby and prepayment premiums if any) at or before their
maturity or prepayment date;
and all other amounts due hereunder have been paid in full, then, notwithstanding that any
Certificates shall not have been surrendered for payment, all obligations of the Corporation, the
Trustee and the City with respect to such Certificates shall cease and terminate, except only the
obligation of the City and the Corporation to comply with the provisions of Sections 8.07 and 8.08
hereof and the obligation of the Trustee to pay or cause to be paid, from Lease Payments paid by or
on behalf of the City from funds deposited pursuant to paragraphs (ii) and (iii) of this Section, to the
Owners of the Certificates not so surrendered and paid all sums due with respect thereto, and in the
event of deposits pursuant to paragraphs (ii) and (iii) of this Section, the Certificates shall continue to
represent direct and proportionate interests of the Owners thereof in applicable Lease Payments
under the Lease.
(b) Surplus Mone. Any funds held by the Trustee, at the time of payment or
provision for payment of all Outstanding Certificates pursuant to one of the procedures described in
paragraphs (a)(i) through (a)(iii) of this Section, which are not required for the payment to be made
to the Owners, shall be paid over to the City, after the payment of any amounts due to the Trustee
pursuant to Sections 9.06 and 9.07 hereof and any other Additional Payments due under the Lease.
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(c) Surviving Provisions. Notwithstanding the satisfaction and discharge hereof,
the Trustee shall retain such rights, powers and privileges hereunder as may be necessary or
convenient for the payment of the principal, interest and prepayment premium, if any, on the
Certificates and for the registration, transfer and exchange of the Certificates.
(d) Opinions and Reports. Prior to any defeasance becoming effective under this
Section, the City shall cause to be delivered (i) unless the defeasance is to be accomplished solely
through a cash deposit, an executed copy of a report, addressed to the Trustee, the City, in form and
substance acceptable to the City of a nationally recognized firm of certified public accountants,
verifying that the Government Obligations and cash, if any, satisfy the requirements of
Section 14.01(a) above, (ii) a copy of the escrow deposit agreement entered into in connection with
such defeasance, and (iii) a copy of an opinion of Special Counsel, dated the date of such defeasance
and addressed to the Trustee and the City, in form and substance acceptable to the City, to the effect
that such Certificates are no longer Outstanding under the Trust Agreement.
Section 14.02. Non -Presentment of Certificates. In the event any Certificate shall not be
presented for payment when the principal with respect thereto becomes due, either at maturity, or at
the date fixed for prepayment thereof, if moneys sufficient to pay such Certificate shall have been
deposited in the Prepayment Fund or Lease Payment Fund, as applicable, all liability of the City and
the Trustee to the Owner thereof for payment of such Certificate shall forthwith cease, terminate and
be completely discharged, and thereupon it shall be the duty of the Trustee to hold such moneys,
without liability for interest thereon, for the benefit of the Owner of such Certificate who shall
thereafter be restricted exclusively to such moneys, for any claim of whatever nature on his or her
part under this Trust Agreement or on, or with respect to, said Certificate.
Any moneys so deposited with and held by the Trustee not so applied to the payment of
Certificates within two (2) years after the date on which the same shall have become due shall be
paid by the Trustee to the City, free from the trusts created by this Trust Agreement. Prior to
forwarding any such moneys to the City, the Trustee may publish notice of its intention to transfer
such funds in The Bond Buyer or another financial newspaper of general circulation in New York,
New York. In addition, Trustee shall be indemnified from and against any and all liabilities to third
parties resulting from its actions under this Section. Thereafter, Owners shall be entitled to look only
to the City for payment, and then only to the extent of the amount so repaid by the Trustee. The City
shall not be liable for any interest on the sums paid to it pursuant to this section and shall not be
regarded as a trustee or trustees of such money.
Section 14.03. Acquisition of Certificates by City. All Certificates acquired by the City,
whether by purchase, gift or otherwise, shall be surrendered by the City to the Trustee for
cancellation.
Section 14.04. Records. The Trustee shall keep complete and accurate records of all moneys
received and disbursed by it under this Trust Agreement until four years after no Certificate is
Outstanding (or such longer period as required by the Trustee's policies and procedures, or by
applicable law), which shall be available for inspection by the City, the Corporation and any Owner,
or the agent of any of them, at any time during regular business hours upon reasonable prior notice.
Section 14.05. Notices. Except as specifically provided otherwise in this Trust Agreement,
all written notices to be given under this Trust Agreement shall be given by mail or personal delivery
to the parry entitled thereto at its address set forth below, or at such address as the party may provide
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to the other party in writing from time to time. Notice shall be deemed to have been received upon
the earlier of actual receipt or five Business Days after deposit in the United States mail, in certified
form, postage prepaid or, in the case of personal delivery, upon delivery to the address set forth
below:
If to the City:
If to the Corporation
If to the Trustee
If to S&P:
If to Moody's
If to Fitch:
City of Newport Beach
100 Civic Center Drive
Newport Beach, California 92660
Attention: City Manager
Newport Beach Public Facilities Corporation
100 Civic Center Drive
Newport Beach, California 92660
Attention: Secretary
The Bank of New York Mellon Trust Company, N.A.
400 S. Hope St., Ste. 500
Los Angeles, CA 90071
Attention: Corporate Trust Department
S&P Global Ratings
55 Water Street
New York, New York 10004
Attention: Public Finance Department
Moody's Investors Service
7 World Trade Center
250 Greenwich Street
New York, NY 10007
Attention: Structured Finance Group -
Fully Supported
Fitch Ratings, Inc.
One State Street Plaza
New York, New York 10004
Attention: Public Finance
Finance Group
Department, Municipal Structured
Section 14.06. Governing Law. This Trust Agreement shall be construed and governed in
accordance with the laws of the State.
Section 14.07. Binding Effect: Successors. This Trust Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns. Whenever in this Trust
Agreement either the Corporation, the City 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 Trust Agreement contained by or on behalf of the Corporation, the City or the Trustee shall bind
and inure to the benefit of the respective successors and assigns thereof whether so expressed or not.
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Section 14.08. Execution in Counterparts. This Trust 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
agreement.
Section 14.09. Headings. The headings or titles of the several Articles and Sections hereof,
and any table of contents appended to copies hereof, shall be solely for convenience of reference and
shall not affect the meaning, construction or effect of this Trust Agreement. All references herein to
"Articles", "Sections" and other subdivisions are to the corresponding Articles, Sections or
subdivisions of this Trust Agreement; and the words "herein," "hereof," "hereunder" and other words
of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section
or subdivision hereof.
Section 14.10. Waiver of Notice. Whenever in this Trust Agreement 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 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.
Section 14.11. Separability of Invalid Provisions. In case any one or more of the provisions
contained in this Trust Agreement or in the Certificates shall for any reason be held to be invalid,
illegal or unenforceable in any respect, then such invalidity, illegality or unenforceability shall not
affect any other provision of this Trust Agreement, and this Trust Agreement shall be construed as if
such invalid or illegal or unenforceable provision had never been contained herein. The parties
hereto hereby declare that they would have entered into this Trust Agreement and each and every
other section, paragraph, sentence, clause or phrase hereof and authorized the delivery of the
Certificates pursuant thereto irrespective of the fact that any one or more sections, paragraphs,
sentences, clauses or phrases of this Trust Agreement may be held illegal, invalid or unenforceable.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year
first above written.
THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as Trustee
By:
Its: Authorized Officer
NEWPORT BEACH PUBLIC FACILITIES
CORPORATION
By:
Its:
ATTEST:
Secretary
Chief Financial Officer
CITY OF NEWPORT BEACH
By:
Its:
ATTEST:
City Clerk
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City Manager
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[Trust Agreement Signature Pages Continued]
APPROVED AS TO FORM:
OFFICE OF THE CITY ATTORNEY:
Aaron C. Harp, City Attorney
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EXHIBIT A
FORM OF 2020A CERTIFICATE
R- $
UNLESS THIS CERTIFICATE IS PRESENTED BY ANA UTHORIZED REPRESENTATIVE OF
THE DEPOSITORY (AS DEFINED IN THE TRUST AGREEMENT) TO THE TRUSTEE FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED 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 ENTITYAS 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.
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF ORANGE
CITY OF NEWPORT BEACH
CERTIFICATE OF PARTICIPATION 2020A
(FIRE STATION NO. 2)
Evidencing the Fractional Interest of the Owner Hereof
In Lease Payments to be Made by the
CITY OF NEWPORT BEACH
As Rental for Certain Leased Premises
Pursuant to a Lease/Purchase Agreement With the
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
INTEREST RATE MATURITY DATE DELIVERY DATE CUSIP
% , 2020
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: AND NO/100 DOLLARS
THIS IS TO CERTIFY THAT the registered owner named above, or registered assigns, as
the Registered Owner of this Certificate of Participation (the "Certificate") is the owner of a
fractional and undivided interest in the right to receive certain Lease Payments thereof under and as
defined in that certain Lease/Purchase Agreement dated as of December 1, 2020, 2020 (the "Lease"),
by and between the Newport Beach Public Facilities Corporation, a 501(c)(4) nonprofit public
benefit corporation duly organized and existing under the laws of the State of California (the
"Corporation') and the City of Newport Beach, a chartered city organized and existing under and by
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virtue of the laws and Constitution of the State of California (the "City"), which Lease Payments and
certain other rights and interests under the Lease have been assigned to The Bank of New York
Mellon Trust Company, N.A., as trustee (the "Trustee").
The Registered Owner of this Certificate is entitled to receive, subject to the terms of the
Lease, on the maturity date specified above, the principal amount specified above, representing a
portion of the Lease Payments designated as principal coming due during the preceding twelve
months, and to receive on July 1 and January 1 of each year (the "Payment Dates") until payment in
full of said portion of principal, the Registered Owner's portion of the Lease Payments designated as
interest coming due during the six months immediately preceding each of the Payment Dates
provided that interest with respect hereto shall be payable from the Payment Date next preceding the
date of execution of this Certificate unless (i) this Certificate is executed during the period from the
day after the fifteenth day of the month preceding a Payment Date (the "Record Date") to and
including such Payment Date, in which event interest shall be payable from such Payment Date, or
(ii) unless this Certificate is executed on or prior to [June 15, 2021], in which event interest shall be
payable from the Delivery Date hereof. The portion of the Lease Payments designated as interest is
computed on the basis of a 360 -day year of twelve 30 -day months and is the result of the
multiplication of the aforesaid portion of the Lease Payments designated as principal by the rate per
annum identified above. Said amounts are payable in lawful money of the United States of America.
The amount representing principal payable at maturity or upon prepayment in whole or in part is
payable to the Registered Owner upon presentation and surrender of this Certificate at the Principal
Office. The amounts representing interest are payable by check mailed by the Trustee by first class
mail to the Registered Owner hereof as of the Record Date preceding the Payment Date at his address
as it appears on the registration books of the Trustee. Interest with respect to any Certificates may, at
the option of any Owner of Certificates in an aggregate principal amount of $1,000,000 or more
evidenced by the written request of such Owner to the Trustee, be paid to such Owner by wire
transfer to the bank and account number on file with the Trustee as of the Record Date.
This Certificate is one of the $ aggregate principal amount of Certificates of
Participation 2020A (Fire Station No. 2) (the "Certificates") which have been executed and delivered
by the Trustee pursuant to the terms of a Trust Agreement dated as of December 1, 2020, 2020 (the
"Trust Agreement"), by and among the Trustee, the Corporation and the City. The City is authorized
to enter into the Lease and the Trust Agreement under the Constitution and laws of the State of
California. Reference is hereby made to the Lease and the Trust Agreement (copies of which are on
file at the Principal Office) for a description of the terms on which the Certificates are delivered, the
rights thereunder of the Registered Owners of the Certificates, the rights, duties and immunities of
the Trustee and the rights and obligations of the City under the Lease, to all of the provisions of
which Lease and Trust Agreement the Registered Owner of this Certificate, by acceptance hereof,
assents and agrees.
The City is obligated to pay Lease Payments from any source of legally available funds, and
the City has covenanted in the Lease to make the necessary annual appropriations therefor. The
obligation of the City to pay the Lease Payments does not constitute an obligation of the City for
which the City is obligated to levy or pledge any form of taxation or for which the City has levied or
pledged any form of taxation. The obligation of the City to pay Lease Payments does not constitute a
debt of the City, the State of California or any of its political subdivisions within the meaning of any
Constitutional or statutory debt limitation or restriction. The City's obligation to pay Lease
Payments may be completely or partially abated during any period in which, by reason of
noncompletion of the Project by the date specified in the Lease or material damage, destruction, title
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defect, or taking by eminent domain or condemnation there is substantial interference with the use
and right of possession by the City of the Leased Premises. Failure of the City to pay Lease
Payments during any such period shall not constitute a default under the Lease, the Trust Agreement
or this Certificate.
To the extent and in the manner permitted by the terms of the Trust Agreement, the
provisions of the Trust Agreement may be amended by the parties thereto with the written consent of
the Registered Owners of at least a majority in aggregate principal amount of the Certificates then
Outstanding, and may be amended, without such consent of the Registered Owners under certain
circumstances. No such modification or amendment shall (i) extend or have the effect of extending
the maturity of any Certificate or reducing the interest rate with respect thereto or extending the time
of payment of interest, or reducing the amount of principal thereof or reducing any premium payable
upon the prepayment thereof, without the express consent of the Registered Owner of such
Certificate being affected, or (ii) reduce or have the effect of reducing the percentage of Certificates
required for the affirmative vote or written consent to an amendment or modification of the Lease,
(iii) modify any of the rights or obligations of the Trustee without its written assent thereto, or
(iv) amend the section of the Trust Agreement dealing with permitted amendments thereof without
the prior written consent of the owners of all Certificates.
This Certificate is transferable by the Registered Owner hereof, in person or by his duly
authorized attorney, at the Principal Office, but only in the manner, subject to the limitations and
upon payment of the charges provided in the Trust Agreement and upon surrender and cancellation
of this Certificate. Upon such transfer a new Certificate or Certificates, of an authorized
denomination or denominations, for the same aggregate principal amount, maturity and interest rate,
will be delivered to the transferee. This Certificate also may be exchanged for a like aggregate
principal amount of Certificates of other authorized denominations as prescribed in the Trust
Agreement. The City, the Corporation, and the Trustee may treat the Registered Owner hereof as the
absolute owner hereof for all purposes whether or not this Certificate shall be overdue, and the City,
the Corporation and the Trustee shall not be affected by any notice to the contrary.
The Trustee shall not be required to transfer any Certificate selected for prepayment or be
required to transfer any Certificate during the period in which the Trustee is selecting Certificates for
prepayment or after notice of prepayment has been given in accordance with the Trust Agreement.
The Certificates are subject to prepayment, on any date, in whole or in part, from Net
Proceeds deposited by the Trustee in the Prepayment Fund established under the Trust Agreement at
least forty-five (45) days prior to the date fixed for prepayment, at a prepayment price equal to the
principal amount thereof together with accrued interest to the dated fixed for prepayment, without
premium.
In the event that Net Proceeds are to be applied to the prepayment of Certificates when
Certificates and Additional Certificates, if any, are Outstanding, the Net Proceeds will be applied to
prepay a proportionate amount of Certificates and Additional Certificates based on the Outstanding
principal amount and by lot within any maturity or sinking account prepayment.
As provided in the Trust Agreement, notice of prepayment shall be mailed, not less than 30
nor more than 60 days before the prepayment date, to the Registered Owner of this Certificate, but
neither failure to receive such notice nor any defect in the notice so mailed shall affect the sufficiency
of the proceedings for prepayment. If this Certificate is called for prepayment and payment is duly
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provided therefor as specified in the Trust Agreement, interest shall cease to accrue with respect
hereto from and after the date fixed for prepayment.
The City has certified that all acts, conditions and things required by the statutes of the State
of California and the Trust Agreement to exist, to have happened and to have been performed
precedent to and in connection with the execution and delivery of this Certificate do exist, have
happened and have been performed in regular and due time, form and manner as required by law, and
that the Trustee is duly authorized to execute and deliver this Certificate, and that the amount of this
Certificate, together with all other Certificates executed and delivered under the Trust Agreement, is
not in excess of the amount of Certificates authorized to be executed and delivered thereunder.
Terms used herein which are not otherwise defined shall have the respective meanings
assigned thereto in the Trust Agreement.
The Trustee has no obligation or liability to the Registered Owners to make payments of
principal or interest with respect to this Certificate except from Lease Payments paid to the Trustee
and from the various funds and accounts established under the Trust Agreement. The Trust
Agreement provides that the recitals of facts, covenants and agreements in this Certificate shall be
taken as statements, covenants and agreements of the City, and the Trustee assumes no responsibility
for the correctness of the same. The Trustee has executed this Certificate solely in its capacity as
Trustee under the Trust Agreement and not in its individual or personal capacity.
IN WITNESS WHEREOF, this Certificate has been executed and delivered by the Trustee,
acting pursuant to the Trust Agreement.
Date of Execution: THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as Trustee
Authorized Officer
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[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(print or typewrite name, address, including postal zip code, and social
security or other identifying number of Transferee)
the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints
to transfer the within
Certificate on the books kept for registration thereof, with full power of substitution in the premises.
Dated:
Signature Guaranteed
NOTICE: Signature(s) guarantee should be
made by a guarantor institution participating
in the Securities Transfer Agents Medallion
Program or such other guarantee program
acceptable to the Trustee.
NG-U9ZQVMF2/4824-3 896-0837x5/022459-0033
NOTICE: The signature to this assignment
must correspond with the name as it appears
upon the face of the within Certificate in
every particular, without alteration or
enlargement or any change whatever.
A-5
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EXHIBIT B-1
FORM OF WRITTEN DELIVERY COST REQUISITION
The Bank of New York Mellon Trust Company, N.A., as Trustee
RE: Disbursement from the Project Fund pursuant to Section 3.03 of the Trust Agreement related
to the City of Newport Beach Certificates of Participation 2020A (Fire Station No. 2), dated
as of December 1, 2020, 2020 (the "Agreement"), by and among you, as trustee, the Newport
Beach Public Facilities Corporation and the City of Newport Beach (the "City")
REQUISITION NO.
You are hereby instructed to pay to the City, or to at
$ as a Delivery Cost from the Project Fund as provided in
Section 3.03 of the Agreement. This Delivery Cost has been properly incurred, is a proper charge
against the Project Fund and has not been the basis of any previous disbursements.
The amount remaining in the Project Fund, together with interest earnings on the Project
Fund plus investment earnings on other funds that will be transferred into the Project Fund, will, after
payment of the amount set forth in this requisition, be sufficient to pay all remaining Delivery Costs
and Project Costs as presently estimated.
Very truly yours,
City Representative
B-1-1
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EXHIBIT B-2
FORM OF WRITTEN PROJECT COST REQUISITION
The Bank of New York Mellon Trust Company, N.A., as Trustee
RE: Disbursement from the Project Fund pursuant to Section 3.03 of the Trust Agreement related
to the City of Newport Beach Certificates of Participation 2020A (Fire Station No. 2), dated
as of December 1, 2020, 2020 (the "Agreement"), by and among you, as trustee, the Newport
Beach Public Facilities Corporation and the City of Newport Beach (the "City")
REQUISITION NO.
You are hereby instructed to pay to the City, or to at
$ as a Project Cost from the Project Fund as provided in Section 3.03 of the Agreement.
This Project Cost has been properly incurred, is a proper charge against the Project Fund and has not
been the basis of any previous disbursements.
The amount remaining in the Project Fund, together with other moneys available to the City
and together with interest earnings on the Project Fund plus investment earnings on other funds that
will be transferred into the Project Fund, will, after payment of the amount set forth in this
requisition, be sufficient to pay all remaining Delivery Costs and Project Costs as presently
estimated.
Very truly yours,
City Representative
B-2-1
NG-U9ZQVMF2/4824-3 896-0837x5/022459-0033
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ATTACHMENT I
Stradling Yocca Carlson & Rauth
Draft of 09/15/20
CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement, dated as of December 1, 2020 (the "Disclosure Agreement")
is executed and delivered by the City of Newport Beach (the "City") and Digital Assurance Certification,
L.L.C. (the "Dissemination Agent") in connection with the execution and delivery of the $ City of
Newport Beach Certificates of Participation 2020A (Fire Station No. 2) (the "Certificates"). The Certificates
are being executed pursuant to a Trust Agreement, dated as of December 1, 2020, by and among the City, The
Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), and the Newport Beach Public
Facilities Corporation (the "Corporation"). The City covenants as follows:
SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed
and delivered by the City for the benefit of the Holders and Beneficial Owners of the Certificates and in order
to assist the Participating Underwriter in complying with the Rule.
SECTION 2. Defmitions. In addition to the definitions set forth in the Trust Agreement, which apply
to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the
following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Comprehensive Annual Financial Report provided by the City
pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.
"Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to vote or
consent with respect to, or to dispose of ownership of, any Certificates (including persons holding Certificates
through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Certificates for
federal income tax purposes.
"Disclosure Representative" shall mean the City Manager of the City, the Assistant City Manager of
the City, the Finance Director or their designee, or such other officer or employee as the City shall designate in
writing from time to time.
"Dissemination Agent" shall mean Digital Assurance Certification, L.L.C., or any successor
Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance
of such designation.
"Financial Obligation" shall mean, for purposes of the Listed Events set out in Section 5(a)(10) and
Section (5)(b)(8), a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as
security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The
term "Financial Obligation" shall not include municipal securities (as defined in the Securities Exchange Act
of 1934, as amended) as to which a final official statement (as defined in the Rule) has been provided to the
MSRB consistent with the Rule.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.
"Official Statement" shall mean the Official Statement relating to the Certificates, dated ,
2020.
"Participating Underwriter" shall mean the original underwriter of the Certificates required to comply
with the Rule in connection with the offering of the Certificates.
"Repository" shall mean the Municipal Securities Rulemaking Board, which can be found at
http:Hemma.msrb.org.
4834-0085-3200v1/022459-0033
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"Rule" shall mean Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as the same may be amended from time to time.
"State" shall mean the State of California.
SECTION 3. Provision of Annual Reports.
(a) The City shall, or, upon delivery of the Annual Report to the Dissemination Agent, shall
cause the Dissemination Agent to, not later than 270 days after the end of the City's fiscal year (which
presently ends on June 30), commencing with the report for the fiscal year ending June 30, 2020, provide to
the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure
Agreement. The Annual Report may be submitted as a single document or as 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 and later than the date required above for the filing of the Annual Report if they are not
available by that date. If the City's fiscal year changes, it shall give notice of such change in the same manner
as for a Listed Event under Section 5(c).
(b) 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). If the City is unable to provide to the Repository an
Annual Report by the date required in subsection (a) above, the Dissemination Agent shall in a timely manner
send a notice to the Repository in substantially the form attached as Exhibit A.
(c) The Dissemination Agent shall:
(i) confirm the electronic filing requirements of the Municipal Securities
Rulemaking Board for the Annual Report the name and address of each Repository; and
(ii) (if the Dissemination Agent is other than the City), file a report with the City
certifying that the Annual Report has been provided pursuant to this Disclosure Agreement
and stating the date it was provided.
SECTION 4. Content of Annual Reports. The City's Annual Report shall contain or include by
reference the following:
(a) The City's audited financial statements, prepared in accordance with generally accepted
auditing standards for municipalities in the State of California. If the City's audited financial statements are
not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report
shall contain unaudited financial statements in a format similar to the financial statements contained in the
final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual
Report when they become available.
(b) Numerical and tabular information for the immediately preceding Fiscal Year of the type
contained in Appendix A to the Official Statement, in the following charts and tables: Tables 1 through 4, 6, 7,
and 8. With respect to Table 1, the adopted budget for the fiscal year in during which the Annual Report is
filed need not be reported.
Financial information relating to the City referenced in Section 4(b) may be updated from time to
time, and such updates may involve displaying data in a different format or table or eliminating data that is no
longer available.
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The City has not undertaken in this Disclosure Agreement to provide all information an investor may
want to have in making decisions to hold, sell or buy Certificates but only to provide the specific information
listed above.
Any or all of the items listed above may be included by specific reference to other documents,
including official statements of debt issues of the City or related public entities, which have been submitted to
the MSRB or the Securities and Exchange Commission. If the document included by reference is a final
official statement, it must be available from the MSRB. The City shall clearly identify each such other
document so included by reference.
SECTION 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of
the occurrence of any of the following events with respect to the Certificates in a timely manner not more than
ten (10) Business Days after the event:
principal and interest payment delinquencies;
2. unscheduled draws on debt service reserves reflecting financial difficulties;
unscheduled draws on credit enhancements reflecting financial difficulties;
4. substitution of credit or liquidity providers, or their failure to perform;
5. adverse tax opinions, the issuance by the Internal Revenue Service of proposed or
final determinations of taxability or Notices of Proposed Issue (IRS Form 5701 TEB);
6. tender offers;
7. defeasances;
ratings changes;
9. bankruptcy, insolvency, receivership or similar proceedings; or
10. default, event of acceleration, termination event, modification of terms, or other
similar events under the terms of a Financial Obligation of the obligated person, any of which reflect financial
difficulties.
Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur
when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated
person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law
in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or
business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental
body and officials or officers in possession but subject to the supervision and orders of a court or governmental
authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or
governmental authority having supervision or jurisdiction over substantially all of the assets or business of the
obligated person.
(b) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of
the occurrence of any of the following events with respect to the Certificates, if material:
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I . unless described in Section 5(a)(5), other notices or determinations by the Internal
Revenue Service with respect to the tax status of the Certificates or other events affecting the tax status of the
Certificates;
2. modifications to the rights of Certificate holders;
3. optional, unscheduled or contingent Certificate redemptions;
4. release, substitution or sale of property securing repayment of the Certificates;
5. non payment related defaults;
6. the consummation of a merger, consolidation, or acquisition involving the City or the
sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry
into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to
any such actions, other than pursuant to its terms;
7. appointment of a successor or additional trustee or the change of the name of a
trustee; or
8. incurrence of a Financial Obligation of the obligated person, or agreement to
covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the
obligated person, any of which affect security holders.
(c) If the City determines that knowledge of the occurrence of a Listed Event under Section 5(b)
would be material under applicable federal securities laws, and if the Dissemination Agent is other than the
City, the City shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the
Dissemination Agent to file a notice of such occurrence with the MSRB in an electronic format as prescribed
by the MSRB in a timely manner not more than ten (10) Business Days after the event.
(d) If the City determines that the Listed Event under Section 5(b) would not be material under
applicable federal securities laws and if the Dissemination Agent is other than the City, the City shall so notify
the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence.
(e) The City hereby agrees that the undertaking set forth in this Disclosure Agreement is the
responsibility of the City and, if the Dissemination Agent is other than the City, the Dissemination Agent shall
not be responsible for determining whether the City's instructions to the Dissemination Agent under this
Section 5 comply with the requirements of the Rule.
SECTION 6. Termination of Reporting Obligation. The City's obligations under this Disclosure
Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the
Certificates. If such termination occurs prior to the final maturity of the Certificates, the City shall give notice
of such termination in the same manner as for a Listed Event under Section 5(c).
SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The
Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by
the City pursuant to this Disclosure Agreement. The Dissemination Agent may resign by providing thirty days
written notice to the City and the Trustee (if the Dissemination Agent is other than the Trustee). The
Dissemination Agent shall not be responsible for the content of any report or notice prepared by the City and
shall have no duty to review any information provided to it by the City. The Dissemination Agent shall have
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no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any
report not provided to it by the City in a timely manner and in a form suitable for filing.
SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement
may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or
waiver is permitted by the Rule; provided, the Dissemination Agent shall have first consented to any
amendment that modifies or increases its duties or obligations hereunder. 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, if the amendment relates 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(c), and (ii) the Annual Report for the year in which
the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form)
between the financial statements as prepared on the basis of the new accounting principles and those prepared
on the basis of the former accounting principles.
SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to
prevent the City 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 a Listed 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
occurrence of a Listed Event in addition to that which 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 Listed Event.
SECTION 10. Filings with the MSRB. All financial information, operating data, financial
statements, notices, and other documents provided to the MSRB in accordance with this Disclosure Agreement
shall be provided in an electronic format prescribed by the MSRB and shall be accompanied by identifying
information as prescribed by the MSRB.
SECTION 11. Default. In the event of a failure of the City to comply with any provision of this
Disclosure Agreement, any Holder or Beneficial Owner of the Certificates 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. A default under this Disclosure Agreement
shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure
Agreement in the event of any failure of the City to comply with this Disclosure Agreement shall be an action
to compel performance.
No Certificate holder or Beneficial Owner may institute such action, suit or proceeding to compel
performance unless they shall have first delivered to the City satisfactory written evidence of their status as
such, and a written notice of and request to cure such failure, and the City shall have refused to comply
therewith within a reasonable time.
SECTION 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent
shall have only such duties as are specifically set forth in this Disclosure Agreement, and the City agrees, to
the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees
and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the
exercise or performance of its powers and duties hereunder, including the costs and expenses (including
attorney's fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination
Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the City
for its services provided hereunder in accordance with its schedule of fees as amended from time to time and
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all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its
duties hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be
acting in any fiduciary capacity for the City, the Certificate holders, or any other party. The obligations of the
City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the
Certificates.
SECTION 13. Notices. Any notices or communications to or among any of the parties to this
Disclosure Agreement may be given as follows:
To the City: City of Newport Beach
100 Civic Center Drive
Newport Beach, California 92660
Attention: City Manager
To the Dissemination Agent: Digital Assurance Certification, L.L.C.
Attention:
315 East Robinson Street
Orlando, Florida 32801
SECTION 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City,
the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time
of the Certificates, and shall create no rights in any other person or entity.
SECTION 15. Signature. This Disclosure Agreement has been executed by the undersigned on the
date hereof, and such signature binds the City to the undertaking herein provided.
CITY OF NEWPORT BEACH
City Manager
DIGITAL ASSURANCE CERTIFICATION, L.L.C., as
Dissemination Agent
Authorized Officer
rel
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Stradling Yocca Carlson & Rauth
Draft of 09/15/20
EXHIBIT A
NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Newport Beach
Name of Certificate Issue: $ City of Newport Beach
Certificates of Participation 2020A (Fire Station No. 2)
Date of Issuance: '2020
NOTICE IS HEREBY GIVEN that the City has not provided an Annual Report with respect to the above-
named Certificates as required by the Continuing Disclosure Agreement executed by the City on the date of
issuance of the Certificates. The City anticipates that the Annual Report will be filed by
Dated:
DIGITAL ASSURANCE CERTIFICATION, L.L.C.,
as Dissemination Agent
A-1
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ATTACHMENT J
Stradling Yocca Carlson & Rauth
Draft of 10129120
AGENCY AGREEMENT
by and between
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
and
CITY OF NEWPORT BEACH
Relating to
CITY OF NEWPORT BEACH
CERTIFICATES OF PARTICIPATION 2020A
(FIRE STATION NO. 2)
Dated as of December 1, 2020
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AGENCY AGREEMENT
THIS AGENCY AGREEMENT (the "Agency Agreement"), dated as of December 1, 2020,
is entered into by and between NEWPORT BEACH PUBLIC FACILITIES CORPORATION, a
501(c)(4) nonprofit public benefit corporation duly organized and existing under and by virtue of the
Constitution and laws of the State of California (the "Corporation"), and the CITY OF NEWPORT
BEACH, a chartered city duly organized and existing under and by virtue of the Constitution and
laws of the State of California (the "City");
WITNESSETH:
WHEREAS, the Corporation and the City have entered into a Lease/Purchase Agreement,
dated as of December 1, 2020 (the "Lease"), whereby the Corporation has leased to the City certain
real property and the existing improvements thereon (the "Leased Premises") in connection with the
execution and delivery of the $ City of Newport Beach Certificates of Participation 2020A
(Fire Station No. 2) (the "Certificates"); and
WHEREAS, the Corporation desires to appoint the City as its agent for the purposes of the
acquisition, construction, delivery and installation of the improvements to be constructed with the
proceeds of the Certificates (collectively, the "Project"); and
WHEREAS, all acts, conditions and things required by law to exist, to have happened and to
have been performed precedent to and in connection with the execution and entering into of this
Agency Agreement do exist, have happened and have been performed in regular and due time, form
and manner as required by law, and the parties hereto are now duly authorized to execute and enter
into this Agency Agreement;
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL AGREEMENTS AND
COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION, THE
PARTIES HERETO DO HEREBY AGREE AS FOLLOWS:
Section 1. City to Act as Agent for the Corporation. The Corporation hereby appoints
the City as its agent in connection with the acquisition, construction, delivery and installation of the
Project. The City, as the agent of the Corporation for the foregoing purpose, shall cause the
acquisition, construction, delivery and installation of the Project to be completed on or before the
dates set forth in Section 3 of this Agency Agreement and otherwise in accordance with the Lease
and all other laws applicable to the Project.
The appointment by the Corporation of the City as its agent as provided in this Section and
the acceptance by the City of such appointment results in the assumption by the City of duties,
responsibilities and liabilities which are separate and apart from its duties, responsibilities and
liabilities under the Lease, and such assignment does not include or transfer to the City any of the
rights of the Corporation under the Lease which have been assigned by the Corporation to the
Trustee pursuant to the Assignment Agreement. It is recognized by the parties that the Corporation
has appointed the City for the purposes specified in this Agency Agreement, rather than appoint
another firm or entity for said purposes, based upon the Corporation's and the City's determination
that the City is suitable to perform the duties, responsibilities and liabilities delegated to and assumed
NG-U9ZQVMF2/483 8-0582-9574x3/022459-0033
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by it pursuant to this Agreement due to the expertise, knowledge and ability of the City's personnel
with respect to similar undertakings.
Section 2. Acceptance. The City, for one dollar ($1.00) and other good and valuable
consideration in hand received, does hereby accept the foregoing appointment as agent of the
Corporation for the purposes set forth in Section 1 hereof.
Section 3. Time of Completion. The construction and equipping of the Project shall be
completed on or prior to 1, 2023.
Section 4. Construction and Acquisition of the Project. The City agrees to oversee the
construction, acquisition, delivery and installation of the Project in accordance with the following
terms:
(a) Construction and Completion. The City agrees to proceed with all due
diligence to complete the construction, acquisition, delivery and installation of the Project. The City
shall comply with all statutes and laws applicable to the performance of its obligations hereunder,
including all public laws applicable thereto and all laws regarding the approval, acquisition and
construction of public projects by cities in the State of California. The City shall make certain that
each contract relating to the Project is awarded in accordance with applicable law and contains a
scheduled completion date which requires completion on or before the scheduled completion date
referred to in Section 3 above;
(b) Change Orders. Subject to any other restrictions imposed upon the City, the
City may approve any changes to the Project so long as any change does not, and all such changes as
a whole do not, (i) substantially alter the nature of the Project, (ii) delay the completion of the Project
beyond its scheduled completion date, or (iii) increase the total Project Costs to an amount in excess
of the amount in the Project Fund unless the City has sufficient reserves in an amount equal to such
excess or unless there has been deposited with the City a certificate of a City Representative, together
with a revised construction budget demonstrating that the total amount on deposit to pay for the
Project is adequate to allow the completion of the Project as planned;
(c) Payment of Project Costs. Payment of the portion of the Project Costs being
financed by the City shall be made from moneys deposited in the Project Fund [and from moneys on
deposit in certain City reserves], and shall be disbursed for such purpose in accordance and upon
compliance with the Trust Agreement. Neither the Corporation nor the City shall be liable for the
payment of Costs of the Project other than from amounts on deposit in the Project Fund;
(d) Unexpended Monies. The City agrees that unexpended moneys remaining in
the Project Fund shall, upon payment in full of all Costs of the Project, be applied solely in
accordance with the provisions of the Trust Agreement; and
(e) Partial Invalidity. If any one or more of the terms, provisions, covenants or
conditions of this Agency Agreement shall to any extent be declared invalid, unenforceable, void or
voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or
decree of which becomes final, none of the remaining terms, provisions, covenants and conditions of
this Agency Agreement shall be affected thereby, and each provision of this Agency Agreement shall
be valid and enforceable to the fullest extent permitted by law.
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Section 5. Applicable Law. This Agency Agreement shall be governed by and
construed in accordance with the laws of the State.
Section 6. Representatives. Whenever under the provisions of this Agency Agreement
the approval of the Corporation or the City is required, or the Corporation 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
Corporation by an Authorized Representative of the Corporation 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 7. Notices. All notices or other communications hereunder shall be sufficiently
given and shall be deemed to have been received five days after deposit in the United States mail in
registered or certified form, postage prepaid:
If to the City: City of Newport Beach
100 Civic Center Drive
Newport Beach, California 92660
Attention: City Manager
If to the Corporation: Newport Beach Public Facilities Corporation
c/o City of Newport Beach
100 Civic Center Drive
Newport Beach, California 92660
Attention: Secretary
If to the Trustee: The Bank of New York Mellon Trust Company, N.A.
400 South Hope Street, Suite 500
Los Angeles, California 90017
Attention: Corporate Trust Department
The Corporation, the City and the Trustee, by notice given hereunder, may designate
different addresses to which subsequent notices or other communications will be sent.
Section 8. Captions. The captions or headings in this Agency Agreement are for
convenience only and in no way define, limit or describe the scope or intent of any provision or
section of this Agency Agreement.
Section 9. Execution in Counterparts. This Agency Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original but all together shall
constitute but one and the same instrument.
Section 10. Amendment. The terms of this Agency Agreement shall not be waived,
altered, modified, supplemented or amended in any manner whatsoever, except by written instrument
signed by the Corporation and the City, with the prior written consent of the Trustee for the
Certificates. The City hereby irrevocably appoints the Authorized Representative of the City to act
as its attorney-in-fact for purposes of providing the foregoing consent.
Section 11. Definitions. Capitalized terms not otherwise defined herein shall have the
definitions set forth in the Trust Agreement or the Lease.
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IN WITNESS WHEREOF, the parties hereto have executed this Agency Agreement as of the
day and year first written above.
CITY OF NEWPORT BEACH
Un
ATTEST:
M.
City Clerk
City Manager
NEWPORT BEACH PUBLIC FACILITIES
CORPORATION
M.
ATTEST:
Secretary
S-1
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Chief Financial Officer
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[Agency Agreement Signature Pages Continues]
APPROVED AS TO FORM:
OFFICE OF THE CITY ATTORNEY:
Un
Aaron C. Harp, City Attorney
S-2
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ATTACHMENT K
RECORDING REQUESTED BY:
City of Newport Beach
AND WHEN RECORDED MAIL TO:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attn: Brian P. Forbath, Esq.
Stradling Yocca Carlson & Rauth
Draft of 10/27/11
[Space above for Recorder's use.]
This document is recorded for the benefit of the City of Newport
Beach and recording is fee -exempt under §27383 of the
Government Code.
ASSIGNMENT AGREEMENT
by and between
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Trustee
Dated as of December 1, 2020
Relating to
CITY OF NEWPORT BEACH
CERTIFICATES OF PARTICIPATION 2020A
(FIRE STATION NO. 2)
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ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT, dated as of December 1, 2020, by the NEWPORT
BEACH PUBLIC FACILITIES CORPORATION, a 501(c)(4) nonprofit public benefit corporation
duly organized and existing under and by virtue of the laws of the State of California (the
"Corporation"), and accepted by THE BANK OF NEW YORK MELLON TRUST COMPANY,
N.A., a national banking association organized under the laws of the United States of America, as
trustee under the Trust Agreement (defined below) (the "Trustee");
WITNESSETH. -
WHEREAS, the Corporation and the City of Newport Beach, a chartered city duly organized
and existing under and by virtue of the Constitution and laws of the State of California (the "City"),
have executed and entered into a Site Lease (the "Site Lease") and a Lease/Purchase Agreement (the
"Lease"), each dated as of the date hereof and recorded concurrently herewith, whereby, respectively,
the City has agreed to lease certain real property of the City described in Exhibit A to the Site Lease
and in Exhibit A hereto, including the existing improvements thereon (the "Leased Premises"), to the
Corporation and the Corporation has agreed to lease back such Leased Premises to the City, as
provided therein; and
WHEREAS, under and pursuant to the Lease, the City is obligated to make Lease Payments,
as defined therein, to the Corporation for the lease of the Leased Premises; and
WHEREAS, the Corporation desires to assign absolutely, without recourse, all of its rights to
receive the Lease Payments scheduled to be paid by the City under and pursuant to the Lease to the
Trustee and certain of its other rights, title and interest under the Lease as described herein; and
WHEREAS, the Corporation desires to assign absolutely, without recourse, all of its rights
to, under and pursuant to the Site Lease to the Trustee; and
WHEREAS, in consideration of such absolute assignment and the execution and entering
into of a Trust Agreement (the "Trust Agreement") dated as of the date hereof, by and among the
Trustee, the Corporation and the City, the Trustee has agreed to execute and deliver certificates of
participation designated as the City of Newport Beach Certificates of Participation 2020A (the
"Certificates") in an aggregate principal amount equal to the aggregate principal component of such
Lease Payments; and
WHEREAS, each party has determined that all acts conditions and things required by law to
exist, to have happened and to have been performed precedent to and in connection with its execution
and entering into of this Assignment Agreement (the "Assignment Agreement') do exist, have
happened and have been performed in regular and due time, form and manner as required by law and
it is now duly authorized to execute and enter into the Assignment Agreement.
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF THE
MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER
VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS
FOLLOWS:
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Section 1. Assignment.
(a) Site Lease. The Corporation hereby transfers, assigns absolutely and sets
over to the Trustee, for the benefit of the Owners (as defined in the Trust Agreement) of the
Certificates and any Additional Certificates executed and delivered under the Trust Agreement, all of
the Corporation's rights, title, and interest under the Site Lease.
(b) Lease. The Corporation hereby transfers, assigns absolutely and sets over to
the Trustee, for the benefit of the owners of the Certificates and any Additional Certificates executed
and delivered under the Trust Agreement, all of the Corporation's rights, title and interest under the
Lease (excepting only the Corporation's rights to indemnity and the payment of its fees and expenses
under Sections 2.1(e), 4.11, 7.9, 7.14 and 9.4 of the Lease), including, without limitation, (1) the right
to receive and collect all of the Lease Payments, Prepayments and Additional Payments (except to
the extent payable to the Corporation) (as such terms are defined in the Trust Agreement) from the
City under the Lease or the Trust Agreement, as applicable, (2) the right to receive and collect any
proceeds of any insurance maintained thereunder, or any condemnation award rendered with respect
to the Leased Premises, or of any lease of the Leased Premises in the event of a default by the City
under the Lease, (3) the right to take all actions and give all consents under the Lease, including
without limitation, Section 8.2(b) (regarding subleases), Section 8.3 (regarding amendments of the
Lease) and Section 9.2 (regarding defaults), (4) the right to exercise such rights and remedies
conferred on the Corporation pursuant to the Lease as may be necessary or convenient (i) to enforce
payment of the Lease Payments, Prepayments and Additional Payments and any other amounts
required to be deposited in the Lease Payment Fund, the Prepayment Fund or the Net Proceeds Fund
established under the Trust Agreement, or (ii) otherwise to protect the interests of the Corporation in
the event of a default by the City under the Lease, and (5) the right of the Corporation to receive
rental in excess of Lease Payments as compensation for re-leasing the Leased Premises upon events
of default under the Lease, as provided in Section 9.2(a) and (b) of the Lease. Notwithstanding the
foregoing, only owners of Certificates and Additional Certificates secured by Lease Payments (as set
forth in a Supplemental Agreement) shall have any right, interest and security in the Lease Payments
and Prepayments.
(c) Assignment for Owners of Certificates. All rights assigned by the
Corporation shall be administered by the Trustee as assignee thereof according to the provisions of
the Trust Agreement and for the equal and proportionate benefits of the Owners of the Certificates
and any Additional Certificates.
Section 2. Acceptance. The Trustee hereby accepts the foregoing assignment for the
benefit of the Owners of the Certificates and any Additional Certificates, subject to the conditions
and terms of the Trust Agreement, and all such Lease Payments shall be applied and all such rights
so assigned shall be exercised by the Trustee under and pursuant to the Trust Agreement.
Section 3. Conditions. The Assignment Agreement shall confer no rights and shall
impose no obligations upon the Trustee beyond those expressly provided in the Trust Agreement.
The Trustee does not warrant the accuracy of the recitals hereto. The Trustee shall not be responsible
for any representations, covenants or warranties of the Corporation. The assignment hereunder is to
the Trustee solely in its capacity as Trustee under the Trust Agreement and not in its individual or
personal capacity. The Trustee is not responsible for any representations, warranties or covenants
made by the assignor under the Lease or the Site Lease.
2
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Section 4. No Other Claim. The Corporation hereby represents and warrants that there
are no present and outstanding claims on Lease Payments or any other moneys assigned by the
Corporation to the Trustee hereunder.
Section 5. Counterparts. This Assignment Agreement may be executed in any number
of counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.
Section 6. Applicable Law. This Assignment Agreement shall be governed by and
construed in accordance with the laws of the State of California.
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IN WITNESS WHEREOF, the parties hereto have executed and entered into the Assignment
Agreement by their officers thereunto duly authorized as of the day and year first above written.
NEWPORT BEACH PUBLIC FACILITIES
CORPORATION
By:
Its: Chief Financial Officer
ATTEST:
Secretary
Accepted by:
THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as Trustee
Bv:
Its: Authorized Officer
S-4
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[Assignment Agreement Signature Pages Continued]
APPROVED AS TO FORM:
OFFICE OF THE CITY ATTORNEY:
Un
Aaron C. Harp, City Attorney
S-5
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14-169
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 ORANGE
On , before me, , Notary Public,
personally appeared , who proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
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14-170
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, , Notary Public,
personally appeared , who proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
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EXHIBIT A
DESCRIPTION OF THE LEASED PREMISES
Real property and improvements thereon in the City of Newport Beach, County of Orange,
State of California, described as follows:
A-1
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14-172
ATTACHMENT L
CITY OF NEWPORT BEACH
CERTIFICATES OF PARTICIPATION 2020A
(FIRE STATION NO. 2)
CERTIFICATE PURCHASE AGREEMENT
, 2020
City of Newport Beach
100 Civic Center Drive
Newport Beach, CA 92660
Ladies and Gentlemen:
The undersigned, Stifel, Nicolaus & Company, Incorporated (the "Underwriter"), hereby
offers to enter into this Certificate Purchase Agreement (the "Purchase Agreement") with the City
of Newport Beach (the "City") for the purchase by the Underwriter of $ aggregate principal
amount of City of Newport Beach Certificates of Participation 2020A (Fire Station No. 2), (the
"Certificates"). Upon acceptance of this offer by the City, this Purchase Agreement will be binding
upon the City and the Underwriter. The offer made hereby is subject to acceptance by the City (by
delivery to the Underwriter of an executed counterpart hereof by the City) at or before 11:59 p.m.,
California time, on the date hereof or at such later time and date as shall have been consented to by
the Underwriter.
The City acknowledges and agrees that: (a) the purchase and sale of the Certificates pursuant
to this Purchase Agreement is an arm's-length commercial transaction between the City and the
Underwriter; (b) the Underwriter is acting solely as underwriter and principal in connection with the
process leading to, the matters contemplated by and all communications under this Purchase
Agreement, and is not acting as the agent or fiduciary of the City; (c) the Underwriter has neither
assumed an advisory or fiduciary responsibility in favor of the City or its advisors with respect to the
offering of the Certificates or the process leading thereto (whether or not the Underwriter, or any
affiliate of the Underwriter, has advised or is currently advising the City on other matters) nor has it
assumed any other obligation to the City except the obligations expressly set forth in this Purchase
Agreement; (d) the Underwriter has financial and other interests that differ from those of the City;
and (e) in connection with the purchase and sale of the Certificates, the City has consulted its own
financial and other advisors to the extent it has deemed appropriate. The City also acknowledges that
it previously received from the Underwriter a letter regarding Municipal Securities Rulemaking
Board ("MSR -B") Rule G-17 Disclosures, and that it has provided to the Underwriter an
acknowledgement of such letter.
The Certificates are being executed and delivered pursuant to a Trust Agreement, dated as of
December 1, 2020 (the "Trust Agreement"), by and among The Bank of New York Mellon Trust
Company, N.A., as trustee (the "Trustee"), the Newport Beach Public Facilities Corporation (the
"Corporation") and the City. Capitalized but undefined terms used herein shall have the meanings
ascribed thereto in the Preliminary Official Statement (defined below).
14-173
1. Purchase and Purchase Price; Terms of Certificates. Upon the terms and
conditions and in reliance upon the representations, warranties and agreements set forth herein, the
City agrees to cause the Trustee to execute and deliver to the Underwriter, and the Underwriter
agrees to purchase, all (but not less than all) of the Certificates at an aggregate purchase price of
$ (representing the aggregate principal amount evidenced by the Certificates, plus a net
original issue premium of $ , less an Underwriter's discount of $�.
The Certificates shall be dated the Closing Date. The Certificates shall have the principal
payment dates and evidence interest at the rates per annum as provided in the Official Statement and
as set forth in Exhibit A hereto.
The Certificates shall be substantially in the form described in, shall be executed and
delivered under and pursuant to, and shall be payable and subject to prepayment as provided in, the
Trust Agreement, substantially in the form previously submitted to the Underwriter, with only such
changes therein as shall be mutually agreed upon by the Underwriter, the City and the Corporation.
The proceeds of the Certificates will be used to (a) finance a portion of the costs of the
acquisition, improvement and equipping of a new Fire Station No. 2 and (ii) pay the costs of issuance
incurred in connection with the execution and delivery of the Certificates.
The City hereby ratifies, confirms and approves the use by the Underwriter, prior to the date
hereof, of the Preliminary Official Statement of the City, dated , 2020, relating to the
Certificates (the "Preliminary Official Statement"), which Preliminary Official Statement the City
deemed final and so certified as of its date for purposes of Rule 15c2-12 promulgated under the
Securities Exchange Act of 1934, as amended ("Rule 15c2-12"), except for information permitted to
be omitted therefrom by Rule 15c2-12. The City hereby agrees to deliver or cause to be delivered to
the Underwriter, within seven business days after the date hereof and at least two (2) business days
prior to the Closing Date (as hereinafter defined), whichever occurs first, copies of the final Official
Statement substantially in the form of the Preliminary Official Statement and with only such
additions thereto, deletions therefrom and changes therein as the Underwriter shall approve (the
"Official Statement"), (a) in "designated electronic format" (as defined in Rule G-32 of the
Municipal Securities Rulemaking Board), and (b) in printed form in such reasonable quantity as the
Underwriter shall request. The City hereby approves of the use and distribution by the Underwriter of
the Preliminary Official Statement and the Official Statement in connection with the offer and sale of
the Certificates. The City will undertake, pursuant to the Trust Agreement and the Continuing
Disclosure Agreement, to provide certain annual financial information and notices of the occurrence
of certain enumerated events. A description of such undertaking is set forth in the Official Statement.
The City hereby further authorizes the Underwriter to use, in connection with the offer and
sale of the Certificates, the following documents: the Trust Agreement, the Lease/Purchase
Agreement, dated as of December 1, 2020 (the "Lease"), by and between the Corporation and the
City, the Site Lease, dated as of December 1, 2020 (the "Site Lease"), by and between the
Corporation and the City, the Assignment Agreement, dated as of December 1, 2020 (the
"Assignment Agreement"), by and between the Trustee and the Corporation and the Continuing
Disclosure Agreement (collectively, the "Certificate Documents") and all information contained
herein and therein and all of the documents, certificates or statements furnished by the City to the
Underwriter in connection with the transactions contemplated by this Purchase Agreement.
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The Underwriter agrees that, in connection with the public offering and initial delivery of the
Certificates to the purchasers thereof from the Underwriter, the Underwriter will deliver or cause to
be delivered to each purchaser a copy of the Official Statement. It shall be a condition to the
Underwriter's obligation to purchase, accept delivery of and pay for the Certificates that the entire
principal amount of the Certificates shall be sold and delivered by the City on the Closing Date.
2. Closing Date; Certificates. At 8:30 a.m. California Time, on , 2020, or at
such other time or on such earlier or later date as the Underwriter and the City mutually agree upon
(the "Closing Date"), the City will deliver or cause to be delivered the executed certificates, opinions
and other documents required by Section 4(d) below at the offices of Stradling Yocca Carlson &
Rauth, a Professional Corporation ("Special Counsel") in Newport Beach, California, or at such
other place as shall have been mutually agreed upon by the Underwriter and the City.
On the Closing Date, the City will deliver or cause to be delivered to the Underwriter,
through the facilities of The Depository Trust Company ("DTC") in New York, New York, or at
such other place as the City and the Underwriter may mutually agree upon, the Certificates in fully
registered book -entry form, duly executed and registered in the name of Cede & Co., as nominee of
DTC, and at the offices of Special Counsel, in Newport Beach, California, the other documents
hereinafter mentioned; and the Underwriter will accept such delivery and pay the purchase price of
the Certificates identified in Section I above on the Closing Date in immediately available funds to
the account or accounts designated by the City.
3. Covenants, Representations and Warranties of the City. The City hereby
covenants, represents and warrants to the Underwriter that:
(a) The City is duly organized and validly existing as a municipal corporation under the
constitution and laws of the State of California. The City has all necessary power and authority and
has taken all official actions necessary to execute and deliver the Official Statement and to execute,
deliver and perform its duties under this Purchase Agreement and each of the Certificate Documents
to which it is a party, and this Purchase Agreement and each of the Certificate Documents to which
the City is a party has been duly authorized, has or will be executed and delivered by the City and,
assuming the due authorization, execution and delivery by the other respective parties thereto, when
executed and delivered by the City will constitute legally valid and binding obligations of the City
enforceable against the City in accordance with their respective terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or
limiting creditors' rights generally or principles of equity involving judicial discretion.
(b) The City is not in material breach of, or default under, any applicable constitutional
provision, law or administrative rule or regulation of the State of California or the United States of
America material to the conduct of its governmental or financial functions or any applicable
judgment or decree or any loan agreement, indenture, bond, certificate, note, resolution or other
agreement or instrument to which the City is a party or to which the City or any of its properties 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 an event of default under any of the foregoing;
and the authorization, execution and delivery of this Purchase Agreement, the Certificate Documents
to which the City is a party and the Certificates, and compliance with the provisions hereof and
thereof, will not conflict with or constitute a material breach of or default under any constitutional
provision, law, administrative rule or regulation, or any judgment, decree, license, permit, loan
agreement, indenture, bond, certificate, note, resolution, agreement or other instrument to which the
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City (or any of its officers in their respective capacities as such) is subject or by which it or any of its
properties is bound, nor will any such authorization, execution, delivery or compliance result in the
creation or imposition of any lien, charge or other security interest or encumbrance of any nature
whatsoever upon any of its assets or properties or under the terms of any such law, regulation or
instrument except as may be provided by the Certificates or the Certificate Documents to which the
City is parry.
(c) To the best knowledge of the City, there is no consent, approval, authorization or
other order of, or filing with, or certification by, any regulatory entity having jurisdiction over the
City required for the execution and delivery of this Purchase Agreement or the Certificate
Documents to which the City is a party, or the execution and sale of the Certificates or the
consummation by the City of the transactions contemplated herein, in the Official Statement or in the
Certificate Documents to which the City is party, which has not been duly obtained or made on or
prior to the date hereof.
(d) There is no action, suit, proceeding, inquiry or investigation, at law or in equity,
before or by any court or governmental or public entity pending or, to the best knowledge of the City,
threatened against the City which affects or seeks to prohibit, restrain or enjoin the execution or
delivery of the Certificates, this Purchase Agreement or the Certificate Documents to which the City
is party, or contesting the validity of this Purchase Agreement, the Certificates or any of the
Certificate Documents to which the City is party or the powers of the City to enter into or perform its
obligations under this Purchase Agreement or the Certificate Documents to which it is a party or the
existence or powers of the City, or which, if determined adversely to the City, would materially
impair the City's ability to meet its obligations under the Lease or materially and adversely affect the
City's financial condition.
(e) The Preliminary Official Statement, as of the date thereof, did not contain any untrue
statement of a material fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the City makes no representation or
warranty as to the statements or information contained in or omitted from the Preliminary Official
Statement regarding DTC or in reliance upon and in conformity with information furnished in
writing to the City by or on behalf of the Underwriter through a representative of the Underwriter
specifically for inclusion therein.
(f) As of its date and as of the date of the Closing, the Official Statement 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 the statements therein, in light of the circumstances under which they were made
not misleading; provided, however, that the City makes no representation or warranty as to the
statements or information contained in or omitted from the Official Statement regarding DTC or in
reliance upon and in conformity with information furnished in writing to the City by or on behalf of
the Underwriter through a representative of the Underwriter specifically for inclusion therein.
(g) From the date hereof until twenty-five (25) days after the End of the Underwriting
Period, the City will amend or supplement the Official Statement in any manner necessary to make
the Official Statement not misleading in light of the circumstances existing at the time it is delivered
to a purchaser, and (at the expense of the City) shall deliver in the electronic format designated by the
MSRB each amendment of or supplement to the Official Statement (in form and substance
reasonably satisfactory to the Underwriter) which will amend or supplement the Official Statement
0
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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, not misleading. As used herein, the term
"End of the Underwriting Period" means the later of such time as (i) the Closing Date, or (ii) the
Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance
of the Certificates for sale to the public. Unless the Underwriter gives notice to the contrary, the End
of the Underwriting Period shall be deemed to be the date of the Closing Date. Any notice delivered
pursuant to this provision shall be written notice delivered to the City at or prior to the Closing Date,
and shall specify a date (other than the Closing Date and not more than 25 days after the Closing
Date) to be deemed the "End of the Underwriting Period."
(h) The proceeds from the sale to the Underwriter of the Certificates will be applied in
the manner and for the purposes specified in Section 1 hereof, the Trust Agreement and as described
in the Official Statement.
(i) Any certificate signed by any official of the City and delivered in connection with the
transactions contemplated by the Official Statement and this Purchase Agreement shall be deemed to
be a representation by the City to the Underwriter as to the statements made therein.
0) The City agrees to cooperate with the Underwriter in endeavoring to qualify the
Certificates for offer and sale under the securities or Blue Sky laws of such jurisdictions of the
United States as the Underwriter may reasonably request; provided, however, that the City will not
be required to consent to service of process in any such jurisdiction or to qualify as a foreign
corporation in connection with any such qualification in any jurisdiction and that the Underwriter
shall be solely responsible for the cost of such qualification.
(k) The City has complied with the Internal Revenue Code of 1986, as amended, with
respect to the Certificates.
(1) The financial statements of, and other financial information regarding, the City
contained 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, to the best of the City's
knowledge, (i) the audited financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied, and (ii) the other financial information has been
determined on a basis substantially consistent with that of the City's audited financial statements
included in the Official Statement.
(m) Except as described in the Official Statement, within the last five years the City has
not failed to comply in all material respects with any prior continuing disclosure obligations entered
into pursuant to Rule 15c2-12.
(n) Between the date of this Purchase Agreement and the date of Closing, the City will
not, without the prior written consent of the Underwriter, and except as disclosed in the Official
Statement, offer or issue any certificates, notes or other obligations for borrowed money, or incur any
material liabilities, direct or contingent, secured by or payable from the City's general fund.
4. Conditions to the Obligations of the Underwriter. The obligation of the
Underwriter to accept delivery of and pay for the Certificates on the Closing Date shall be subject, at
the option of the Underwriter, to the accuracy in all material respects of the representations,
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warranties and agreements on the part of the City contained herein as of the date hereof and as of the
Closing Date, to the accuracy in all material respects of the statements of the officers and other
officials of the City, the Corporation and the Trustee made in any certificates or other documents
furnished pursuant to the provisions hereof or the Certificate Documents, and to the performance by
the City, the Corporation and the Trustee of their respective obligations to be performed hereunder
and under the Certificate Documents at or prior to the Closing Date, and to the following additional
conditions:
(a) At the Closing Date, the Certificates, the Certificate Documents and the Official
Statement shall have been duly authorized, and the Certificate Documents and the Official Statement
shall have been executed and delivered by the respective parties thereto, in substantially the forms
heretofore submitted to the Underwriter with only such changes as shall have been agreed to by the
Underwriter, and said documents shall not have been amended, modified or supplemented, except as
may have been agreed to by the Underwriter, and there shall have been taken in connection
therewith, with the execution and delivery of the Certificates and with the transactions contemplated
thereby and by this Purchase Agreement, all such actions as Special Counsel, shall deem to be
necessary and appropriate;
(b) The representations and warranties of the City contained in this Purchase Agreement
shall be true, correct and complete in all material respects on the date hereof and on the Closing Date,
as if made again on the Closing Date, and the Official Statement (as the same may be supplemented
or amended with the written approval of the Underwriter) shall be true, correct and complete in all
material respects and such information shall not contain any untrue statement of fact or omit to state
any fact required to be stated therein or necessary to make the statements therein relating to the City,
in light of the circumstances under which such statements were made, not misleading;
(c) Between the date hereof and the Closing Date, the Underwriter shall have the right to
cancel its obligation to purchase the Certificates if the market price or marketability of the
Certificates or the ability of the Underwriter to enforce contracts for the sale of the Certificates shall
be materially adversely affected, in the reasonable judgment of the Underwriter, by the occurrence of
any of the following:
(1) legislation enacted or introduced in the Congress or recommended for
passage by the President of the United States, or a decision rendered by a court established
under Article III of the Constitution of the United States or by the Tax Court of the United
States, or an order, ruling, regulation (final, temporary or proposed) or official statement
issued or made:
(i) by or on behalf of the Treasury Department of the United States or the
Internal Revenue Service with the purpose or effect, directly or indirectly (except as
described in the Official Statement), of imposing federal income taxation upon such
interest as would be received by the owners of the Certificates, or
(ii) by or on behalf of the Securities and Exchange Commission, or any
other governmental entity having jurisdiction of the subject matter, to the effect that
obligations of the general character of the Certificates, or the Certificates, including
any or all underlying arrangements, are not exempt from registration under the
Securities Act of 1933, as amended, or that the Trust Agreement is not exempt from
qualification under the Trust Indenture Act of 1939, as amended;
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(2) legislation enacted by the legislature of the State or a decision rendered by a
Court of the State, or a ruling, order, or regulation (final or temporary) made by State
authority, which would have the effect of changing, directly or indirectly, the State tax
consequences of interest on obligations of the general character of the Certificates in the
hands of the holders thereof,
(3) there shall have occurred (1) an outbreak or escalation of hostilities or the
declaration by the United States of a national emergency or war or (2) any other calamity or
crisis in the financial markets of the United States or elsewhere or the escalation of such
calamity or crisis;
(4) the declaration of a general banking moratorium by federal, New York or
California authorities;
(5) the imposition by the New York Stock Exchange or other national securities
exchange, or any governmental entity, of any material restrictions not now in force with
respect to the Certificates or obligations of the general character of the Certificates or
securities generally, or the material increase of any such restrictions now in force, including
those relating to the extension of credit by, or the charge to the net capital requirements of,
the Underwriter;
(6) an order, decree or injunction of any court of competent jurisdiction, or order,
filing, regulation or official statement by the Securities and Exchange Commission, or any
other governmental entity having jurisdiction of the subject matter, issued or made to the
effect that the issuance, offering or sale of obligations of the general character of the
Certificates, or the execution, delivery, offering or sale of the Certificates, including any or
all underlying obligations, as contemplated hereby or by the Official Statement, is or would
be in violation of the federal securities laws as then in effect;
(7) the occurrence of any adverse change of a material nature of the financial
condition, results of operation or properties of the City;
(8) any rating of the Certificates or other debt obligations of the City has been
downgraded, suspended or withdrawn by a national rating service or a negative qualification
(e.g., "credit watch" or "negative outlook" designation) or other announcement made by a
national rating service that the Certificates or other debt obligations of the City are under
review without indication of a potentially favorable result, which, in the reasonable opinion
of the Underwriter, materially adversely affects the marketability or market price of the
Certificates;
(9) any event occurring, or information becoming known which, in the
reasonable judgment of the Underwriter, makes untrue in any material respect any statement
or information contained in the Official Statement, or has the effect that the Official Statement
contains any untrue statement of 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;
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(10) the marketability of the Certificates or the market price thereof, in the opinion
of the Underwriter, has been materially and adversely affected by disruptive events,
occurrences or conditions in the securities or debt markets;
(11) the suspension by the Securities and Exchange Commission of trading in the
outstanding securities of the City;
(12) the purchase of and payment for the Certificates by the Underwriter, or the
resale of the Certificates by the Underwriter, on the terms and conditions herein provided shall
be prohibited by any applicable law, governmental authority, board, agency or commission;
(13) any state Blue Sky or securities commission, or other governmental agency or
body, shall have withheld registration, exemption or clearance of the offering of the
Certificates as described herein, or issued a stop order or similar ruling relating thereto;
(14) the occurrence of a material disruption in securities settlement payment or
clearance services;
(15) a general suspension of trading on the New York Stock Exchange or other
major exchange shall be in force, or minimum or maximum prices for trading shall have been
fixed and be in force, or maximum ranges for prices for securities shall have been required
and be in force on any such exchange, whether by virtue of determination by that exchange
or by order of the SEC or any other governmental authority having jurisdiction; or
(16) any amendment shall have been made to the federal or State Constitution or
action by any federal or State court, legislative body, regulatory body, or other authority
materially adversely affecting the tax status of the City or its property, income securities (or
interest thereon).
(d) At or prior to the Closing Date, the Underwriter shall have received the following
documents, in each case satisfactory in form and substance to the Underwriter:
(1) the Official Statement and each of the Certificate Documents, duly executed
and delivered by the respective parties thereto, with such amendments, modifications or
supplements as may have been agreed to by the Underwriter;
(2) the unqualified approving opinion of Special Counsel, dated the Closing Date
and addressed to the City, in substantially the form attached to the Official Statement as
Appendix D;
(3) a letter dated as of the date of Closing and addressed to the Underwriter of
Special Counsel to the effect that the Underwriter may rely upon the letter described in
(4)(d)(2) above;
(4) the supplemental opinion of Special Counsel, dated the Closing Date and
addressed to the Underwriter, substantially to the effect that (i) the Certificates are not subject
to the registration requirements of the Securities Act of 1933, as amended, and the Trust
Agreement is exempt from qualification pursuant to the Trust Indenture Act of 1939, as
amended, (ii) this Purchase Agreement and the Continuing Disclosure Agreement have been
duly executed and delivered by, and constitute valid and binding obligations of, the City
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enforceable in accordance with their respective terms, and (iii) the statements contained in
the Official Statement under the captions "THE 2020 CERTIFICATES" "SECURITY AND
SOURCES OF PAYMENT FOR THE 2020 CERTIFICATES" and "TAX MATTERS" and
in "APPENDIX C — SUMMARY OF PRINCIPAL LEGAL DOCUMENTS," excluding any
material that may be treated as included under such captions by cross-reference or reference
to other documents or sources, insofar as such statements expressly summarize certain
provisions of the Certificates, the Lease, the Site Lease, the Trust Agreement, and the form
and content of Special Counsel's final legal opinion concerning the validity of the Lease and
certain other matters, are accurate in all material respects;
(5) the letter of Stradling Yocca Carlson & Rauth, a Professional Corporation,
Newport Beach, California, as Disclosure Counsel, dated the Closing Date and addressed to
the City and Underwriter, substantially to the effect that based on such counsel's participation
in conferences with representatives of the Underwriter, the City and others, during which
conferences the contents of the Official Statement and related matters were discussed, and in
reliance thereon and on the records, documents, certificates and opinions described therein,
such counsel advises the City, as a matter of fact and not opinion, that during the course of its
engagement as Disclosure Counsel no information came to the attention of such counsel's
attorneys rendering legal services in connection with such representation which caused such
counsel to believe that the Preliminary Official Statement, as of its date and as of the date of
the Purchase Agreement and the Official Statement, as of its date and as of the Closing Date
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 (provided that Disclosure Counsel need not express any opinion
with respect to (i) any information contained in the appendices to the Official Statement, (ii)
financial or statistical data or forecasts, numbers, charts, estimates, projections, assumptions
or expressions of opinion contained in the Official Statement, including in any of the
appendices thereto, (iii) information with respect to DTC or its book -entry only system
included therein, (iv) any CUSIP numbers or information relating thereto, (v) any
information with respect to the Underwriter or underwriting matters with respect to the
Certificates; and (vi) any information with respect to the rating on the Certificates and the
rating agency referenced therein, including, but not limited to, information under the caption
"RATINGS), as to which such counsel need express no opinion or view);
(6) an opinion of the City Attorney, in substantially the form of Exhibit B
attached hereto, dated the Closing Date and addressed to the City, the Underwriter and the
Trustee;
(7) an opinion of City Attorney, in substantially the form of Exhibit C attached
hereto, dated the Closing Date, addressed to the Corporation, the City, the Underwriter and
the Trustee;
(8) an opinion of counsel to the Trustee, dated the Closing Date, addressed to the
City and the Underwriter, to the effect that (i) the Trustee is a duly organized and validly
existing national banking association in good standing under the laws of the United States
and has full power and authority to undertake the trust of the Trust Agreement and the
Assignment Agreement, (ii) the Trustee has duly authorized, executed and delivered the Trust
Agreement and the Assignment Agreement and by all proper corporate action has authorized
the acceptance of the trust of the Trust Agreement and the Assignment Agreement, (iii) the
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Trust Agreement and the Assignment Agreement constitute legally valid and binding
agreements of the Trustee, enforceable against the Trustee in accordance with their terms,
(iv) the Certificates have been validly executed and delivered by the Trustee and are entitled
to the benefits of the Trust Agreement, (v) no authorization, approval, consent, or other order
of any governmental authority or agency having jurisdiction over the Trustee is required for
the valid authorization, execution, delivery and performance by the Trustee of the Trust
Agreement and the Assignment Agreement, and (vi) the execution and delivery of the Trust
Agreement and the Assignment Agreement and compliance by the Trustee with the
provisions thereof, under the circumstances contemplated thereby, do not and will not in any
material respect conflict with or constitute on the part of the Trustee a breach or default under
any agreement or other instrument to which the Trustee is a parry (and of which such counsel
is aware after reasonable investigation) or by which it is bound (and of which such counsel is
aware after reasonable investigation) or any existing law, regulation, court order or consent
decree to which the Trustee is subject;
(9) a certificate of the Trustee dated the Closing Date, signed by a duly
authorized officer of the Trustee, to the effect that (i) the Trustee is a national banking
association organized and existing under and by virtue of the laws of the Unites States,
having the full power and being qualified to enter into and perform its duties under the Trust
Agreement and the Assignment Agreement and to execute and deliver the Certificates to the
Underwriter pursuant to the Trust Agreement, (ii) when delivered to and paid for by the
Underwriter on the Closing Date, the Certificates will have been duly executed and delivered
by the Trustee, (iii) the execution and delivery of the Trust Agreement and the Assignment
Agreement, and compliance with the provisions on the Trustee's part contained therein, will
not conflict in any material respect with or constitute a breach of or default under any law,
administrative regulation, judgment, decree, material agreement, or other material instrument
to which the Trustee is a party or is otherwise subject (except that no representation, warranty
or agreement is made with respect to any federal or state securities or blue sky laws or
regulations), nor will any such execution, delivery, adoption or compliance result in the
creation or imposition of any lien, charge or other security interest or encumbrance of any
nature whatsoever upon any of the properties or assets held by the Trustee pursuant to the
lien created by the Trust Agreement under the terms of any such law, administrative
regulation, judgment, decree, material agreement, or other material instrument, except as
provided by the Trust Agreement, (iv) the Trust Agreement and the Assignment Agreement
have been duly authorized, executed and delivered by Trustee and constitute the legal, valid
and binding obligations of the Trustee, enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting the
enforcement of creditors' rights generally and by the application of equitable principles, if
equitable remedies are sought and (v) to the knowledge of the Trustee, there is no action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental
or public entity pending or, threatened against the Trustee, affecting the existence of the
Trustee, or the titles of its officers to their respective offices or seeking to prohibit, restrain or
enjoin the execution and delivery of the Certificates, or in any way contesting or affecting the
validity or enforceability of the Trust Agreement or the Assignment Agreement, or contesting
the powers of the Trustee or its authority to enter into, adopt or perform its obligations under
any of the foregoing to which it is a party, wherein an unfavorable decision, ruling or finding
would materially adversely affect the validity or enforceability of the Trust Agreement or the
Assignment Agreement or the ability of the Trustee to perform its obligations thereunder;
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(10) a certificate of the City, dated the Closing Date, signed by an authorized
officer thereof, to the effect that (i) such officials are authorized to execute this Purchase
Agreement and the Certificate Documents to which it is a parry, (ii) the representations and
warranties of the City contained in the Purchase Agreement and in the Certificate Documents
to which it is a party are true and correct in all material respects as of the Closing Date as if
made on the Closing Date, (iii) the City has complied with all the terms of the Certificate
Documents and this Purchase Agreement to be complied with by the City prior to or
concurrently with the Closing Date, and, as to the City, such documents are in full force and
effect, (iv) such City officials have reviewed the Official Statement and on such basis certify
that the Official Statement (excluding therefrom information regarding DTC and its book -
entry only system) does not contain any untrue statement of a material fact required to be
stated therein or omit to state a material fact necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading, and (v) 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 Date the statements or information (except
for statements and information regarding DTC) 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 (except for statements and information regarding DTC) therein
not misleading in any material respect;
(11) a certificate of the Corporation, dated the Closing Date, signed by an
authorized officer thereof, to the effect that (i) the Corporation is a nonprofit public benefit
corporation duly organized and validly existing under the laws of the State of California, (ii)
the Corporation has all necessary power and authority and has taken all official actions
necessary to execute, deliver and perform its duties under each of the Certificate Documents
to which it is a parry, and each of the Certificate Documents to which the Corporation is a
party has been duly authorized, executed and delivered by the Corporation and, assuming the
due authorization, execution and delivery by the other respective parties thereto, will
constitute legally valid and binding obligations of the Corporation enforceable against the
Corporation in accordance with their respective terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or
limiting creditors' rights generally or principles of equity involving judicial discretion, (iii)
the Corporation is not in material breach of, or default under, any applicable constitutional
provision, law or administrative rule or regulation of the State of California or the United
States of America material to the conduct of its functions or any applicable judgment or
decree or any loan agreement, indenture, bond, certificate, note, resolution or other
agreement or instrument to which the Corporation is a party or to which the Corporation or
any of its properties 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 an
event of default under any of the foregoing; and the authorization, execution and delivery of
the Certificate Documents to which the Corporation is a parry, and compliance with the
provisions thereof, will not conflict with or constitute a breach of or default under any
constitutional provision, law, administrative rule or regulation, or any judgment, decree,
license, permit, loan agreement, indenture, bond, certificate, note, resolution, agreement or
other instrument to which the Corporation (or any of its officers in their respective capacities
as such) is subject or by which it or any of its properties is bound, nor will any such
authorization, execution, delivery or compliance result in the creation or imposition of any
lien, charge or other security interest or encumbrance of any nature whatsoever upon any of
its assets or properties or under the terms of any such law, regulation or instrument except as
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may be provided by the Certificate Documents, (iv) there is no consent, approval,
authorization or other order of, or filing with, or certification by, any regulatory entity having
jurisdiction over the Corporation required for the execution and delivery of the Certificate
Documents to which the Corporation is a parry, or the consummation by the Corporation of
the transactions contemplated in the Official Statement or in the Certificate Documents,
which has not been duly obtained or made on or prior to the date hereof, (v) there is no
action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court or
governmental or public entity pending or, to the knowledge of the Corporation, threatened
against the Corporation which affects or seeks to prohibit, restrain or enjoin the execution or
delivery of the Certificates or any of the Certificate Documents, or contesting the validity of
the Certificates or any of the Certificate Documents or the powers of the Corporation to enter
into or perform its obligations under the Certificate Documents to which it is a party or the
existence or powers of the Corporation, and (vi) no event affecting the Corporation has
occurred since the date of the Official Statement which either makes untrue or incorrect in
any material respect as of the Closing Date the statements or information regarding the
Corporation 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
regarding the Corporation not misleading in any material respect;
(12) a certified copy of the Resolution of the City Council authorizing the
execution and delivery of the Certificate Documents to which the City is a party and other
matters pertaining thereto;
(13) a certified copy of the Resolution of the governing board of the Corporation
authorizing the execution and delivery of the Certificate Documents to which the Corporation
is a party and other matters pertaining thereto;
(14) a copy of the Certificate of Status issued by the Secretary of State of the State
of California, a certified copy of the articles of incorporation of the Corporation, and a
certified copy of the Bylaws of the Corporation;
(15) a certified copy of the general resolution of the Trustee authorizing the
execution and delivery of the Certificate Documents to which the Trustee is a party;
(16) evidence that any ratings described in the Official Statement are in full force
and effect as of the Closing Date;
(17) a copy of the Notices of Sale required to be delivered to the California Debt
and Investment Advisory Commission pursuant to Section 8855 of the California
Government Code;
(18) evidence of arrangements for the issuance of a binder for a CLTA title
insurance policy or policies (with western regional exceptions) providing the title insurance
required by the Lease, in form and substance acceptable to the Underwriter;
(19) a tax certificate of the City relating to the Certificates in form and substance
acceptable to Special Counsel dated as of the Closing Date;
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(20) evidence that the federal tax information Form 8038-G with respect to the
Certificates has been prepared for filing, delivered and signed as of the Closing Date;
(21) an opinion of Kutak Rock LLP, Irvine, California, counsel to the Underwriter
("Underwriter's Counsel"), dated the Closing Date and addressed to the Underwriter in
form reasonably satisfactory to the Underwriter; and
(22) such additional legal opinions, certificates, proceedings, instruments and
other documents as the Underwriter or Special Counsel may reasonably request to evidence
compliance by the Trustee, the Corporation and the City with legal requirements, the truth
and accuracy, as of the Closing Date, of the representations of the Trustee, the Corporation
and the City, and the due performance or satisfaction by the Trustee, the Corporation and the
City at or prior to such time of all agreements then to be performed and all conditions then to
be satisfied by the Trustee, the Corporation and the City.
If the City shall be unable to satisfy the conditions to the Underwriter's obligations contained
in this Purchase Agreement or if the Underwriter's obligations shall be terminated for any reason
permitted herein, all obligations of the Underwriter hereunder may be terminated by the Underwriter
at, or at any time prior to, the Closing Date by written notice to the City and the Underwriter shall
have no further obligations hereunder.
5. Establishment of Issue Price.
A. The Underwriter agrees to assist the City in establishing the issue price of the
Certificates and shall execute and deliver to the City at the Closing Date an "issue price" or similar
certificate, together with the supporting pricing wires or equivalent communications, substantially in
the form attached hereto as Exhibit D, with such modifications as may be appropriate or necessary, in
the reasonable judgment of the Underwriter, the City and Special Counsel, to accurately reflect, as
applicable, the sales price or prices or the initial offering price or prices to the public of the
Certificates.
B. Except as otherwise set forth in Exhibit A attached hereto, the City will treat
the first price (meaning single) at which 10% of each maturity of the Certificates (the "10% test") is
sold to the public as the issue price of that maturity. At or promptly after the execution of this
Purchase Agreement, the Underwriter shall report to the City the price or prices at which it has sold
to the public each maturity of Certificates. If at that time the 10% test has not been satisfied as to any
maturity of the Certificates, the Underwriter agrees to promptly report to the City the prices at which
it sells the unsold Certificates 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 Certificates
of that maturity or (ii) the 10% test has been satisfied as to the Certificates 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 City or Special Counsel. For purposes of this Section, if
Certificates 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 Certificates.
C. The Underwriter confirms that it has offered the Certificates to the public on
or before the date of this Purchase Agreement at the offering price or prices (the "initial offering
price"), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as
otherwise set forth therein. Exhibit A also sets forth, as of the date of this Purchase Agreement, the
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maturities, if any, of the Certificates 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 Purchase Agreement) and (ii) the 10% test has not been satisfied and for
which the City and the Underwriter agree that the restrictions set forth in the next sentence shall
apply, which will allow the City to treat the initial offering price to the public of each such maturity
as of the sale date as the issue price of that maturity (the "hold -the -offering -price rule"). So long as
the hold -the -offering -price rule remains applicable to any maturity of the Certificates, the
Underwriter will neither offer nor sell unsold Certificates of that maturity to any person at a price that
is higher than the initial offering price to the public during the period starting on the sale date and
ending on the earlier of the following:
(1) the close of the fifth (5th) business day after the sale date; or
(2) the date on which the Underwriter has sold at least 10% of that maturity of
the Certificates to the public at a price that is no higher than the initial
offering price to the public.
The Underwriter will advise the City promptly after the close of the fifth (5th) business day
after the sale date whether it has sold 10% of that maturity of the Certificates 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 Certificates to the public, together with the related pricing wires, contains or
will contain language obligating each dealer who is a member of the selling group and each broker-
dealer that is a parry to such third -party distribution agreement, as applicable:
(A)(i) to report the prices at which it sells to the public the unsold
Certificates of each maturity allocated to it, whether or not the Closing Date has occurred, until either
all Certificates 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 Certificates 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 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 Certificates that, to
its knowledge, are made to a purchaser who is a related party to an underwriter participating in the
initial sale of the Certificates 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.
(ii) any selling group agreement relating to the initial sale of the Certificates to the
public, together with the related pricing wires, contains or will contain language obligating each
dealer that is a party to a third -parry distribution agreement to be employed in connection with the
initial sale of the Certificates 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
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Certificates of each maturity allocated to it, whether or not the Closing Date has occurred, until either
all Certificates 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 Certificates 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 City 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 Certificates 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 Certificates,
including, but not limited to, its agreement to comply with the hold -the -offering -price rule, if
applicable to the Certificates, as set forth in a selling group agreement and the related pricing wires,
and (ii) in the event that a third -parry distribution agreement was employed in connection with the
initial sale of the Certificates to the public, the agreement of each broker-dealer that is a parry to such
agreement to comply with the requirements for establishing issue price of the Certificates, including,
but not limited to, its agreement to comply with the hold -the -offering -price rule, if applicable to the
Certificates, as set forth in the third -party distribution agreement and the related pricing wires. The
City further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is
a member of a selling group, or of any broker-dealer that is a party to a third -party distribution
agreement, to comply with its corresponding agreement to comply with the requirements for
establishing issue price of the Certificates, including, but not limited to, its agreement to comply with
the hold -the -offering -price rule, if applicable to the Certificates.
F. The Underwriter acknowledges that sales of any Certificates to any person
that is a related party to an underwriter participating in the initial sale of the Certificates 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 City (or with the lead underwriter to form an underwriting syndicate) to participate
in the initial sale of the Certificates 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 Certificates 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 Certificates to the public);
C. a purchaser of any of the Certificates is a "related parry" 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 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
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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 Purchase Agreement
by all parties.
6. Fees and Expenses. Except as provided in the following paragraph, the City shall
pay all costs and expenses incurred in connection with or relating to the execution and sale of the
Certificates, including but not limited to (a) the fees and expenses of Special Counsel, (b) the fees
and expenses of Disclosure Counsel, (c) the fees and expenses of counsel to the City and the
Corporation, (d) all expenses and costs of the City incident to the performance of its obligations
hereunder and in connection with the authorization, execution and sale of the Certificates, (e) the
costs of printing, distributing and delivering the Preliminary Official Statement and the Official
Statement, (f) the fees and expenses of the Trustee and its counsel, and (g) rating agency fees for
rating the Certificates.
The Underwriter shall pay any advertising expenses incurred in connection with the public
offering of the Certificates, the fees of the California Debt and Investment Advisory Commission,
fees of the Municipal Securities Rulemaking Board, fees of Underwriter's Counsel and, except as
provided in the preceding paragraph, all other expenses incurred by the Underwriter in connection
with the public offering and sale of the Certificates.
7. Notices. All notices, certificates and other communications provided for hereunder
shall be in writing and, if to the City, mailed, certified, return receipt requested, or delivered to it,
addressed to it at:
City of Newport Beach
100 Civic Center Drive
Newport Beach, CA 92660
Attention: City Manager
and if to the Underwriter, mailed, certified, return receipt requested, or delivered to it, addressed to it
at:
Stifel, Nicolaus & Company, Incorporated
One Montgomery Street, 35th Floor
San Francisco, CA 94104
Attention: Sara Oberlies Brown, Managing Director
or such other address as shall be designated by any such party in a written notice to each of the other
parties.
8. Survival of Representations, Warranties and Agreements. All representations,
warranties and agreements of the City in this Purchase Agreement shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the Underwriter and shall
survive the delivery of the Certificates hereunder.
9. Applicable Law. This Purchase Agreement shall be interpreted, governed and
enforced in accordance with the laws of the State of California.
16
10. Effectiveness. This Purchase Agreement shall become effective upon its execution
by duly authorized officers of the Underwriter and the City and shall be valid and enforceable from
and after the time of such execution.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
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11. Counterparts. This Purchase 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.
The foregoing is hereby agreed to and accepted as
of the date first above written:
STIFEL, NICOLAUS & COMPANY,
INCORPORATED
LOW
Authorized Officer
CITY OF NEWPORT BEACH
Authorized Representative
Time of Execution:
California time
ATTEST:
R -M
City Clerk
APPROVED AS TO FORM:
Office of the City Attorney
Assistant City Attorney
p.m.
[EXECUTION PAGE OF CERTIFICATE PURCHASE AGREEMENT — CITY OF NEWPORT
BEACH CERTIFICATES OF PARTICIPATION 2020A]
S-1
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Principal
Payment Date
(July 1)
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
20 (T)
Principal Interest
Amount Rate
EXHIBIT A
MATURITY SCHEDULE
10% Test
Yield Price Satisfied*
10% Test
Not
Satisfied
Subject to
Hold -The -
Offering -Price
Rule
(marked if
used)
(T) Term Certificate.
(c) Priced to optional call at [par] on July 1, 20_.
* At the time of execution of this Purchase Agreement and assuming orders are confirmed by the close of the
business day immediately following the date of this Purchase Agreement.
M
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EXHIBIT B
FORM OF OPINION
OF CITY ATTORNEY
, 2020
City of Newport Beach
Newport Beach, California
The Bank of New York Mellon Trust Company, N.A.
Los Angeles, California
Stifel, Nicolaus & Company, Incorporated
San Francisco, California
Re: City of Newport Beach Certificates of Participation 2020A (Fire Station No. 2)
Ladies and Gentlemen:
We have acted as counsel to the City of Newport Beach (the "City") in connection with the
execution and delivery of $ aggregate principal amount of City of Newport Beach Certificates
of Participation 2020A (Fire Station No. 2) (the "Certificates").
In connection with rendering this opinion, we have examined documents, obtained
certificates and undertaken other actions as we have determined necessary to render this opinion. We
have examined the following documents: a Lease/Purchase Agreement, dated as of December 1,
2020 (the "Lease"), by and between the City and the Newport Beach Public Facilities Corporation
(the "Corporation"); a Trust Agreement, dated as of December 1, 2020 (the "Trust Agreement"), by
and among The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), the
Corporation and the City; a Site Lease, dated as of December 1, 2020 (the "Site Lease"), by and
between the City and the Corporation; a Continuing Disclosure Agreement, dated , 2020 (the
"Continuing Disclosure Agreement'), executed by the City; a Certificate Purchase Agreement, dated
2020 (the "Purchase Agreement'), by and between the City and Stifel, Nicolaus &
Company, Incorporated (the "Underwriter"); a Resolution adopted by the City Council of the City on
2020 (the "Resolution") relating to the Certificates; an Official Statement, dated ,
2020 (the "Official Statement'), which describes, among other things, the Certificates and the City;
and the certificates and certifications of the City, the Trustee, the Corporation and others as to certain
factual matters and such other documents and matters to the extent we deemed necessary to render
the opinions set forth herein. Based on the foregoing and without having made independent inquiry,
we are of the opinion that:
1. The City is a municipal corporation duly organized and validly existing under the
Constitution and laws of the State of California with full legal right, power and authority to execute,
deliver and perform all of its obligations under the Purchase Agreement, the Trust Agreement, the
Lease, the Site Lease, and the Continuing Disclosure Agreement (collectively, the "City
Documents"), and to participate in the transactions contemplated by the Official Statement.
I
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2. The Resolution was duly adopted at a meeting of the City Council of the City, which
was called and held pursuant to law and with all public notice required by law and at which a quorum
was present and acting throughout, and the Resolution is in full force has not been modified,
amended or rescinded.
3. The City has duly authorized the distribution of the Official Statement and the City
Documents have been duly authorized, executed and delivered and, assuming due authorization,
execution and delivery by the other parties thereto, constitute the legally valid and binding
obligations of the City enforceable against the City in accordance with their respective terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally and by the application of equitable
principles, if equitable remedies are sought.
4. 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 or, to our knowledge,
threatened: (a) which would materially adversely affect the financial position of the City;
(b) affecting, contesting or seeking to prohibit, restrain or enjoin the execution and delivery of the
Certificates or in any way contesting or affecting the validity of or security of the Certificates or the
City Documents or the consummation of the transactions contemplated thereby, or contesting the
powers of the City or its authority to execute and deliver the City Documents or perform its
obligations thereunder; or (c) contesting the completeness or accuracy of the Official Statement, or
any supplement or amendment thereto or asserting that the Official Statement contains any untrue
statement of a material fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstance under which they were made,
not misleading.
5. The City is not in breach of or default under any applicable judgment or decree or any
loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is
a party or to which it or any of its property or assets is otherwise subject, which breach or default
would materially adversely affect the City's ability to enter into or perform its obligations under the
City Documents and no event has occurred and is continuing which, with the passage of time or the
giving of notice, or both, would constitute such a breach or default; and the execution and delivery by
the City of the City Documents, and compliance with the provisions thereof, under the circumstances
contemplated thereby, do not and will not in any material respect conflict with or constitute on the
part of the City a breach of or default under any agreement or other instrument to which the City is a
party or by which it is bound or any court order or consent decree to which the City is subject.
This letter is not to be used, circulated, quoted, or otherwise referred to for any purpose other
than the offering of the Certificates and may not be relied upon other than by the addresses hereof
without our express written permission.
Respectfully submitted,
W -Mi
14-193
EXHIBIT C
FORM OF OPINION
OF COUNSEL TO THE CORPORATION
, 2020
City of Newport Beach
Newport Beach, California
The Bank of New York Mellon Trust Company, N.A.
Los Angeles, California
Stifel, Nicolaus & Company, Incorporated
San Francisco, California
Re: City of Newport Beach Certificates of Participation 2020A (Fire Station No. 2)
Ladies and Gentlemen:
We have acted as counsel to the Newport Beach Public Facilities Corporation (the
"Corporation") in connection with the execution and delivery of $ aggregate principal amount
of City of Newport Beach Certificates of Participation 2020A (Fire Station No. 2) (the
"Certificates"). In connection with rendering this opinion, we have examined documents, obtained
certificates and undertaken other actions as we have determined necessary to render this opinion. We
have examined the following documents: a Resolution of the Board of Directors of the Corporation
adopted on , 2020 (the "Resolution") relating to the Certificates; the Lease/Purchase
Agreement, dated as of December 1, 2020 (the "Lease"), by and between the City and the
Corporation; a Site Lease, dated as of December 1, 2020 (the "Site Lease"), by and between the City
and the Corporation; the Trust Agreement, dated as of December 1, 2020 (the "Trust Agreement"),
by and among The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), the
Corporation and the City; the Assignment Agreement, dated as of December 1, 2020 (the
"Assignment Agreement"), by and between the Trustee and the Corporation; the certificates and
certifications of the City, the Trustee, the Corporation and others as to certain factual matters; and
such other documents and matters to the extent we deemed necessary to render the opinions set forth
herein.
With your permission we have assumed, without undertaking to verify the same by
independent investigation, the following: (a) the authenticity of original documents and the
genuineness of all signatures; (b) the conformity to the originals of all documents submitted to us as
copies; (c) the truth, accuracy, and completeness of the information, representations, and warranties
contained in these documents, certificates, records and papers we have reviewed; and (d) compliance
with all covenants and agreements contained in such documents.
Based on the foregoing, we are of the opinion that:
1. The Corporation is a nonprofit public benefit corporation organized and existing
under and by virtue of the laws and the Constitution of the State of California and has full legal
C-1
14-194
power and lawful authority to execute and deliver and perform all obligations under the Lease, the
Site Lease, the Assignment Agreement and the Trust Agreement (collectively, the "Corporation
Documents") and to participate in the transactions contemplated by the Official Statement.
2. The Resolution has been duly adopted at a meeting of the Board of Directors of the
Corporation, 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 in full force and
effect and has not been modified, amended or rescinded.
3. The Corporation has duly authorized, executed and delivered the Corporation
Documents and, assuming due authorization, execution and delivery by the parties thereto other than
the Corporation, the Corporation Documents constitute the legally valid and binding obligations of
the Corporation enforceable against the Corporation in accordance with their respective terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally and by the application of equitable
principles, if equitable remedies are sought.
4. 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 or, to our knowledge after
reasonable investigation, threatened:
(a) which would materially adversely affect the financial position of the
Corporation;
(b) affecting, contesting or seeking to prohibit, restrain or enjoin the execution
and delivery of any of the Certificates or the Corporation Documents, or in any way
contesting or affecting the validity of or security for the Certificates or the Corporation
Documents or the consummation of the transactions contemplated thereby, or contesting the
powers of the Corporation or its authority to execute and deliver the Corporation Documents
or perform its obligations thereunder; or
(c) contesting the completeness or accuracy of the Official Statement or asserting
that the Official Statement contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
and to our knowledge there is no basis for any action, suit, proceeding, inquiry or investigation of the
nature described in subparagraphs (a) through (c) of this Paragraph 4.
5. The Corporation is not in material breach of or default under any applicable
judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other
instrument to which the Corporation is a party or to which the Corporation or any of its property or
assets is otherwise subject, and no event has occurred or 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; and the execution and delivery of the Corporation Documents and compliance with the
provisions thereof by the Corporation, will not result in a violation of, a breach of, or a default under
the articles of incorporation or bylaws of the Corporation or any indenture, mortgage, deed of trust,
note agreement, or other agreement or instrument to which the Corporation is a parry or by which it
C-2
14-195
or any of its property is bound, or any order of any court or other governmental body having
jurisdiction of the Corporation.
This letter is not to be used, circulated, quoted, or otherwise referred to for any purpose other
than the offering of the Certificates and may not be relied upon other than by the addresses hereof
without our express written permission.
Respectfully submitted,
C-3
14-196
EXHIBIT D
CITY OF NEWPORT BEACH
CERTIFICATES OF PARTICIPATION 2020A
(FIRE STATION NO. 2)
CERTIFICATE OF THE UNDERWRITER
[TO COME FROM SPECIAL COUNSEL]
Schedule
14-197
ATTACHMENT M Stradling Yocca Carlson & Rauth
Draft of 10/29/20
PRELIMINARY OFFICIAL STATEMENT DATED 12020
NEW ISSUE - BOOK -ENTRY -ONLY RATINGS: S&P: "
(See "RATINGS" herein)
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California ("Special Counsel') under
existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and
requirements described in this Official Statement, interest (and original issue discount) with respect to the 2020 Certificates is excluded from
gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum
tax imposed on individuals. In the further opinion of Special Counsel, interest (and original issue discount) due with respect to the 2020
Certificates is exempt from State of California personal income tax. See "TAX MATTERS" herein.
Dated: Date of Delivery
CITY OF NEWPORT BEACH
Certificates of Participation 2020A
(Fire Station No. 2)
Evidencing Undivided Proportionate Interests in 2020A Lease Payments to be Made by the
CITY OF NEWPORT BEACH, CALIFORNIA
Pursuant to a Lease with the
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Due: July 1, as shown on the inside cover
The City of Newport Beach Certificates of Participation 2020A (Fire Station No. 2) (the "2020 Certificates") are being executed and
delivered to (i) finance the costs of the acquisition, improvement and equipping of a new Fire Station No. 2 (the "Project"), as further described herein,
and (ii) pay the costs of issuance incurred in connection with the execution and delivery of the 2020 Certificates. See "DESCRIPTION OF THE
LEASED PREMISES." The 2020 Certificates represent undivided proportionate interests of the Owners in certain lease payments (the "Lease
Payments") each to be made by the City to the Newport Beach Public Facilities Corporation (the "Corporation"), under the Leas a/Purchase Agreement,
dated as of December 1, 2020, by and between the City and the Corporation (the "Lease") pursuant to which the City has leased from the Corporation
the Corona Del Mar Fire Station and the Santa Ana Heights Fire Station properties and all improvements thereto (collectively, the "Leased Premises").
See "DESCRIPTION OF THE LEASED PREMISES" herein.
The 2020 Certificates will be executed and delivered in the principal amount of $5,000 and any integral multiple thereof pursuant to a Trust
Agreement, dated as December 1, 2020 (the "Trust Agreement") by and among the City, the Corporation and The Bank of New York Mellon Trust
Company, N.A., as trustee (the "Trustee"). Interest represented by the 2020 Certificates is payable semiannually on January 1 and July 1 of each year,
commencing on July 1, 2021. See "THE 2020 CERTIFICATES — General" herein.
The 2020 Certificates will be executed and delivered in book -entry form only and, when delivered, will be registered in the name of Cede &
Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the 2020 Certificates.
Individual purchases of the 2020 Certificates will be made in book -entry form only. Principal, premium, if any, and interest payments due with respect
to the 2020 Certificates are payable directly to DTC by U.S. Bank National Association, as Trustee. Upon receipt of payments of principal, premium,
if any, and interest, DTC will in turn distribute such payments to the beneficial owners of the 2020 Certificates. See Appendix F — "DTC BOOK -
ENTRY SYSTEM" herein.
No reserve fund has been established in connection with the issuance of the 2020 Certificates.
The 2020 Certificates are subject to extraordinary prior to maturity, as described herein. See "THE 2020 CERTIFICATES –
Prepayment" herein.
THE 2020 CERTIFICATES DO NOT CONSTITUTE AN OBLIGATION OF THE CORPORATION OR THE CITY FOR WHICH THE
CORPORATION OR THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CORPORATION
OR THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS
UNDER THE LEASE DOES NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR
PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. NEITHER THE
2020 Certificates NOR THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS CONSTITUTES AN INDEBTEDNESS OF THE
CORPORATION, THE CITY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF
ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.
The purchase of the 2020 Certificates involves certain risks which should be considered by investors. See "RISK FACTORS" for a
discussion of certain risk factors that should be considered in addition to the other matters set forth herein.
This cover page contains information for quick reference only. It is not a summary of this issue. Potential purchasers must read the
entire Official Statement to obtain information essential to making an informed investment decision.
The 2020 Certificates will be offered when, as and if executed and delivered, and received by the Underwriter, subject to the approval as to
their legality by Stradling Yocca Carlson & Routh, a Professional Corporation, Newport Beach, California, Special Counsel, and certain other
conditions. Certain legal matters will be passed upon for the City and the Corporation by the City Attorney and by Stradling Yocca Carlson & Rauth,
a Professional Corporation, as Disclosure Counsel, for the Underwriter by its counsel, Kutak Rock LLC, Irvine, California, and for the Trustee by its
counsel. It is anticipated that the 2020 Certificates will be available in book -entry form for delivery to DTC in New York, New York, on or about
December—, 2020.
STIFEL
Dated: , 2020
* Preliminary; subject to change.
4812-4137-1847v9/022459-0033
14-198
$
CITY OF NEWPORT BEACH
Certificates of Participation 2020A
(Fire Station No. 2)
Maturity Schedule
(Base CUSIPt:
$ Serial Certificates
Maturity Principal
(July 1) Amount Interest Rate Yield
2021 $ % %
2022
2023
2024
2025
2026
2027
2028
2029
2030
Preliminary; subject to change.
CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein are provided by CUSIP Global
Services, managed on behalf of the American Bankers Association by S&P Global Market Intelligence. CUSIP numbers
have been assigned by an independent company not affiliated with the District and are included solely for the convenience
of the holders of the 2020 Certificates. None of the City, the Corporation, the Municipal Advisor or the Underwriter is
responsible for the selection or use of these CUSIP numbers and no representation is made as to their correctness on the
2020 Certificates or as indicated above. The CUSIP number for a specific maturity is subject to being changed after the
issuance of the 2020 Certificates as a result of various subsequent actions including, but not limited to, a refunding in whole
or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar
enhancement by investors that is applicable to all or a portion of the 2020 Certificates.
4812-4137-1847x9/022459-0033
14-199
CITY OF NEWPORT BEACH
COUNTY OF ORANGE, CALIFORNIA
CITY COUNCIL
Will O'Neill, Mayor, District 7
Brad Avery, Mayor Pro Tem, District 2
Diane B. Dixon, Councilmember; District I
Duffy Duffield, Councilmember, District 3
Kevin Muldoon, Councilmember, District 4
Jeff Herdman, Councilmember; District S
Joy Brenner, Councilmember, District 6
CITY OFFICIALS
Grace Leung, City Manager
Aaron Harp, City Attorney
Leilani I. Brown, City Clerk
Carol Jacobs, Assistant City Manager/Interim Finance Director
Dave Webb, Public Works Director
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
BOARD OF DIRECTORS
Will O'Neill, Chairperson
Brad Avery, Vice Chairperson
Diane B. Dixon
Duffy Duffield
Kevin Muldoon
Jeff Herdman
Joy Brenner
Grace Leung, President
Carol Jacobs, Interim Chief Financial Officer
Aaron Harp, City Attorney
Leilani I. Brown, Secretary
SPECIAL COUNSEL AND DISCLOSURE COUNSEL
Stradling Yocca Carlson & Rauth,
a Professional Corporation
Newport Beach, California
MUNICIPAL ADVISOR
KNN Public Finance, LLC.
Los Angeles, California
TRUSTEE
The Bank of New York Mellon Trust Company, N.A.
Los Angeles, California
4812-4137-1847x9/022459-0033
14-200
No dealer, broker, salesperson or other person has been authorized by the City or the Corporation to give any
information or to make any representations in connection with the offer or sale of the 2020 Certificates other than those contained
herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the
City or the Corporation. 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 2020 Certificates by a person in any jurisdiction in which it is unlawful for such person to make such an
offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers or owners of the 2020 Certificates.
Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly
so described herein, are intended solely as such and are not to be construed as representations of fact.
The Underwriter has provided the following sentence for inclusion in this Official Statement:
The Underwriter has reviewed the information in this Official Statement in accordance with, and as
a part of, its responsibilities to investors under the federal securities laws as applied to the facts and
circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of
such information.
This Official Statement and the information contained herein are subject to completion or amendment without notice
and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the City or any other parties described herein since the date hereof.
These securities may not be sold nor may an offer to buy be accepted prior to the time the Official Statement is delivered in final
form. This Official Statement is being submitted in connection with the sale of the 2020 Certificates referred to herein and may
not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the City. All summaries of
documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such
provisions.
Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking
statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United
States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended.
Such statements are generally identifiable by the terminology used such as a "plan," "expect," "estimate," "project," "budget,"
"intend" or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the
information under the captions "DESCRIPTION OF THE PROJECT" and "CITY FINANCIAL INFORMATION."
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS
DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE CITY DOES
NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET
FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING SUCH STATEMENTS, POTENTIAL INVESTORS
SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR
RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING
STATEMENTS.
IN CONNECTION WITH THE OFFERING OF THE 2020 CERTIFICATES, THE UNDERWRITER MAY
OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
2020 CERTIFICATES 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 2020 CERTIFICATES TO CERTAIN DEALERS AND DEALER
BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING
PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED
FROM TIME TO TIME BY THE UNDERWRITER.
THE 2020 CERTIFICATES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT AND HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
The City maintains a website; however, information presented there is not a part of this Official Statement and should
not be relied upon in making an investment decision with respect to the 2020 Certificates.
4812-4137-1847x9/022459-0033
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TABLE OF CONTENTS
PAGE
INTRODUCTION................................................................................................................................................ 1
General...........................................................................................................................................................
l
Security and Sources of Payment for the 2020 Certificates...........................................................................
l
The2020 Certificates.....................................................................................................................................
2
AdditionalCertificates...................................................................................................................................
2
Prepayment....................................................................................................................................................
3
TaxExemption...............................................................................................................................................
3
ContinuingDisclosure....................................................................................................................................
3
Professionals Involved in the Offering..........................................................................................................
3
CertificateOwners' Risks..............................................................................................................................
3
Miscellaneous................................................................................................................................................
3
DESCRIPTION OF THE PROJECT....................................................................................................................
4
DESCRIPTION OF THE LEASED PREMISES.................................................................................................
4
ESTIMATED SOURCES AND USES OF FUNDS............................................................................................
5
THE 2020 CERTIFICATES.................................................................................................................................
5
General...........................................................................................................................................................
5
Prepayment....................................................................................................................................................
6
PrepaymentProcedures..................................................................................................................................
6
PartialPrepayment.........................................................................................................................................
7
SECURITY AND SOURCES OF PAYMENT FOR THE 2020 CERTIFICATES .............................................
7
General...........................................................................................................................................................
7
LeasePayments..............................................................................................................................................
8
NoReserve Fund............................................................................................................................................
8
AdditionalPayments......................................................................................................................................
9
Insurance........................................................................................................................................................
9
CERTIFICATE PAYMENT SCHEDULE...........................................................................................................
9
THECITY..........................................................................................................................................................
10
THECORPORATION.......................................................................................................................................
10
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS ............11
Article XIIIA of the California Constitution................................................................................................
l l
Legislation Implementing Article XIIIA.....................................................................................................11
SplitRoll Initiative.......................................................................................................................................
11
Article XIIIB of the California Constitution................................................................................................12
Proposition62..............................................................................................................................................12
PropositionIA .............................................................................................................................................13
Proposition22..............................................................................................................................................13
Proposition26..............................................................................................................................................14
Proposition218............................................................................................................................................14
UnitaryProperty ...........................................................................................................................................
15
PossibleFuture Initiatives............................................................................................................................
15
RISKFACTORS................................................................................................................................................
15
COVID-19 Pandemic...................................................................................................................................15
NoPledge of Taxes or Revenues.................................................................................................................
16
Additional Obligations of the City...............................................................................................................16
Default..........................................................................................................................................................17
Releaseor Substitution of Property ..............................................................................................................17
Abatement....................................................................................................................................................18
NoReserve Fund..........................................................................................................................................
18
i
4812-4137-1847x9/022459-0033
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TABLE OF CONTENTS
PAGE
SeismicActivity...........................................................................................................................................18
Climate Change and Sea Level Rise............................................................................................................19
HazardousSubstances..................................................................................................................................19
Cybersecurity...............................................................................................................................................19
Limitations on Remedies; Bankruptcy.........................................................................................................
20
StateBudget Information.............................................................................................................................
21
TAXMATTERS.................................................................................................................................................
23
CERTAIN LEGAL MATTERS.........................................................................................................................
24
LITIGATION.....................................................................................................................................................
25
RATING.............................................................................................................................................................
25
UNDERWRITING.............................................................................................................................................
25
MUNICIPALADVISOR...................................................................................................................................
25
CONTINUING DISCLOSURE..........................................................................................................................
25
FINANCIAL STATEMENTS OF THE CITY...................................................................................................26
MISCELLANEOUS...........................................................................................................................................
26
APPENDIX A THE CITY OF NEWPORT BEACH.............................................................................A-1
APPENDIX B THE CITY OF NEWPORT BEACH AUDITED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2019 ..................................................... B-1
APPENDIX C SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ................................................ C-1
APPENDIX D FORM OF LEGAL OPINION....................................................................................... D-1
APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT .......................................... E-1
APPENDIX F DTC BOOK -ENTRY SYSTEM......................................................................................F-1
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CITY OF NEWPORT BEACH
Certificates of Participation 2020A
(Fire Station No. 2)
Evidencing Undivided Proportionate Interests in 2020A Lease Payments to be Made by the
CITY OF NEWPORT BEACH, CALIFORNIA
Pursuant to a Lease with the
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
INTRODUCTION
This introduction contains only a brief summary of certain of the terms of the 2020 Certificates being
offered, and a brief description of the Official Statement. All statements contained in this introduction are
qualified in their entirety by reference to the entire Official Statement. References to, and summaries of,
provisions of the Constitution and laws of the State of California and any documents referred to herein do not
purport to be complete and such references are qualified in their entirety by reference to the complete
provisions. Capitalized terms used in this Official Statement and not defined elsewhere herein have the
meanings given such terms in Appendix C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" herein.
This Official Statement speaks only as of its date, and the information contained herein is subject to change.
General
This Official Statement, including the cover page and the Appendices attached hereto (the "Official
Statement"), provides certain information concerning the execution and delivery of the City of Newport Beach
Certificates of Participation 2020A (Fire Station No. 2) (the "2020 Certificates") in an aggregate principal
amount of $ *. The 2020 Certificates will be executed and delivered pursuant to a Trust Agreement,
dated as of December 1, 2020 (the "Trust Agreement"), by and among the City of Newport Beach (the "City"),
the Newport Beach Public Facilities Corporation (the "Corporation") and The Bank of New York Mellon Trust
Company, N.A., as trustee (the "Trustee"). The 2020 Certificates represent proportionate undivided interests
of the registered owners thereof (the "Owners") in certain Lease Payments (the "Lease Payments") to be made
by the City to the Corporation under that certain Lease/Purchase Agreement, dated as of December 1, 2020
(the "Lease"), by and between the Corporation, as lessor, and the City, as lessee. See "DESCRIPTION OF
LEASED PREMISES" and "SECURITY AND SOURCES OF PAYMENT FOR THE 2020 CERTIFICATES
—Lease Payments."
The 2020 Certificates are being delivered to (i) provide funds to finance the costs of the acquisition,
improvement and equipping of a new Fire Station No. 2 (the "Project"), as described herein, and (ii) pay the
costs of issuance incurred in connection with the execution and delivery of the 2020 Certificates. See
"DESCRIPTION OF THE PROJECT" and "DESCRIPTION OF THE LEASED PREMISES" herein. The
City is located in the County of Orange (the "County"). See Appendix A —"THE CITY OF NEWPORT
BEACH" herein.
Security and Sources of Payment for the 2020 Certificates
The 2020 Certificates are being executed and delivered pursuant to the Trust Agreement. The City
has leased certain real property and the existing improvements thereon (referred to herein as the "Property" or
the "Leased Premises") consisting of the City's Corona Del Mar Fire Station No. 5 and Santa Ana Heights Fire
Station No. 7 to the Corporation pursuant to a Site Lease between the City, as lessor, and the Corporation, as
lessee, dated as of December 1, 2020 (the "Site Lease"). Under the Lease, the Corporation has leased the
Property back to the City. The City is required under the Lease to pay Lease Payments for the use and
possession of the Leased Premises, as further described under the caption "DESCRIPTION OF THE LEASED
*
Preliminary; subject to change.
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PREMISES" herein. The City is also required to pay any taxes and assessments and the cost of maintenance
and repair of the Leased Premises.
Pursuant to an Assignment Agreement, dated as of December 1, 2020 (the "Assignment Agreement"),
by and between the Corporation and the Trustee, the Corporation has assigned to the Trustee, for the benefit of
the Owners, substantially all of its rights under the Lease, including its rights to receive and collect Lease
Payments and prepayments from the City under the Lease and rights as may be necessary to enforce payment
of Lease Payments and prepayments. All rights assigned by the Corporation pursuant to the Assignment
Agreement will be administered by the Trustee in accordance with the provisions of the Trust Agreement for
the equal and proportionate benefit of all Owners.
The 2020 Certificates evidence proportionate undivided interests in the right to receive Lease
Payments and prepayments thereof to be made by the City to the Corporation under the Lease. The Lease
Payments are calculated to be sufficient to pay, when due, the principal and interest with respect to the 2020
Certificates. The City has covenanted in the Lease that it will take such action as may be necessary to include
the Lease Payments and other payments due under the Lease in its annual budgets and to make the necessary
annual appropriations therefor as required by the Lease. The City's obligation to make Lease Payments is
subject to complete or partial abatement in the event of the taking of, damage to or loss of use and possession
of the Leased Premises. See "RISK FACTORS — Abatement" herein.
The obligation of the City to make Lease Payments does not constitute an obligation of the City
for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or
pledged any form of taxation. Neither the 2020 Certificates nor the obligation of the City to make Lease
Payments constitutes an indebtedness of the City, the Corporation, the State of California or any of its
political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction.
The 2020 Certificates
Interest represented by the 2020 Certificates is payable semiannually on January 1 and July 1 of each
year, commencing on July 1, 2021 (each an "Interest Payment Date"). See "THE 2020 CERTIFICATES —
General" herein. The 2020 Certificates will be executed and delivered in book -entry form only and, when
delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New
York, New York ("DTC"), which will act as securities depository for the 2020 Certificates. Individual
purchases of the 2020 Certificates will be made in book -entry form only. Purchasers of the 2020 Certificates
will not receive certificates representing their ownership interests in the Certificates purchased. The
Certificates will be executed and delivered in the principal amount of $5,000 and integral multiples thereof.
Principal, premium, if any, and interest payments due with respect to the Certificates are payable directly to
DTC by the Trustee. Upon receipt of payments of principal, premium, if any, and interest, DTC will in turn
distribute such payments to the beneficial owners of the Certificates. See "THE 2020 CERTIFICATES —
General" and Appendix F —"DTC BOOK -ENTRY SYSTEM" herein.
Additional Certificates
Pursuant to the Trust Agreement, the City may cause Additional Certificates to be executed and
delivered without the consent of the Owners of the Certificates if certain conditions precedent are satisfied. In
connection with the execution and delivery of Additional Certificates, the Lease Payments due under the Lease
would be increased. The Certificates and the Additional Certificates will be secured on a parity under the
Trust Agreement by Lease Payments and other amounts held in the funds established thereunder other than the
Project Fund and the Rebate Fund. See Appendix C—"SUMMARY OF PRINCIPAL LEGAL
DOCUMENTS—Additional Certificates."
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Prepayment
The Certificates are subject to extraordinary prepayment prior to maturity, as described herein. See
"THE 2020 Certificates —Prepayment" herein.
Tax Exemption
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach,
California ("Special Counsel"), under existing statutes, regulations, rulings and judicial decisions, and
assuming certain representations and compliance with certain covenants and requirements described herein, the
interest (and original issue discount) due with respect to the 2020 Certificates is excluded from gross income
for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal
alternative minimum tax imposed on individuals. In the further opinion of Special Counsel, the interest (and
original issue discount) due with respect to the Certificates is exempt from State of California personal income
tax. See "TAX MATTERS" herein.
Continuing Disclosure
The City has covenanted for the benefit of the holders and beneficial owners of the 2020 Certificates
to provide, or cause to be provided, to the Municipal Securities Rulemaking Board for purposes of Rule 15c2 -
12(b)(5) (the "Rule") adopted by the Securities and Exchange Commission certain annual financial
information and operating data and, in a timely manner, notice of certain material events. These covenants
have been made in order to assist the Underwriter in complying with the Rule. See "CONTINUING
DISCLOSURE" herein for a description of the specific nature of the annual report and notices of material
events and a summary description of the terms of the disclosure agreement pursuant to which such reports are
to be made.
Professionals Involved in the Offering
The Bank of New York Mellon Trust Company, N.A., Los Angeles, California, will act as Trustee
with respect to the 2020 Certificates. The 2020 Certificates will be delivered subject to the approval as to their
legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Special
Counsel. Certain legal matters will be passed upon for the City and the Corporation by the City Attorney and
by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure
Counsel, and for the Trustee by its counsel. Certain legal matters will be passed upon for the Underwriter by
Kutak Rock, LLP, Irvine, California. The City's financial statements for the fiscal year ended June 30, 2019
included as Appendix B hereto have been audited by White Nelson Diehl Evans LLP, Irvine, California (the
"Auditor"). See Appendix B — "THE CITY OF NEWPORT BEACH AUDITED FINANCIAL
STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019" herein. The City's financial statements
are public documents and are included within this Official Statement without the prior approval of the Auditor.
Accordingly, the Auditor has not performed any post -audit of the financial condition of the City.
Certificate Owners' Risks
Certain events could affect the ability of the City to make the Lease Payments when due. See "RISK
FACTORS" for a discussion of certain factors that should be considered, in addition to other matters set forth
herein, in evaluating an investment in the 2020 Certificates.
Miscellaneous
It is anticipated that the 2020 Certificates in book -entry form will be available for delivery to DTC on
or about December _, 2020 (the "Delivery Date").
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The description herein of the Trust Agreement, the Lease, the Site Lease, the Assignment Agreement
and any other agreements relating to the 2020 Certificates are qualified in their entirety by reference to such
documents, and the descriptions herein of the 2020 Certificates are qualified in their entirety by the form
thereof and the information with respect thereto included in the aforementioned documents. See Appendix C
"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" herein. Copies of the documents are on file and
available for inspection at the offices of the Trustee at 400 South Hope Street, Suite 500, Los Angeles,
California 90071, Attention: Global Corporate Trust Services.
All capitalized terms used in this Official Statement and not otherwise defined herein have the
meanings given such terms in Appendix C "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" herein.
The information and expressions of opinion herein speak only as of their date and are subject to
change without notice. Neither the delivery of this Official Statement nor any sale made hereunder nor any
future use of this Official Statement shall, under any circumstances, create any implication that there has been
no change in the affairs of the City since the date hereof.
The presentation of information, including tables of receipt of revenues, is intended to show recent
historical information and, except for the estimated actual results for fiscal year 2019-20, is not intended to
indicate future or continuing trends in the financial position or other affairs of the City. No representation is
made that past experience, as it might be shown by such financial and other information, will necessarily
continue or be repeated in the future.
DESCRIPTION OF THE PROJECT
The Project to be financed from the proceeds of the 2020 Certificate consists of the acquisition,
improvement and equipping of a new Fire Station No. 2 (the "Fire Station"). The Fire Station is expected to be
a two-story, 7,084 square foot fire station building to be built in the City located on a 0.4 -acre site. The Fire
Station was designed to replace the existing fire station that is located near by the site of the new Fire Station.
The Fire Station is designed to accommodate 10 fire fighters in an individual dormitory setting. The Fire
Station will have features that include a 4,316 square foot apparatus bay, shop, turnabout locker room, medical
supply storage, laundry room and various support spaces typical of a fire station.
The Fire Station site will also include firefighter parking spaces, an emergency generator and a trash
enclosure. The Project also includes two stand-alone public restrooms which are situated just outside the
secured area of the Fire Station. The Project also includes off-site improvements consisting of a new traffic
signal at Newport Boulevard and 28t1i Street, as well frontage improvements and upgrades to certain existing
traffic signals.
The City estimates the total cost of the Project to be approximately $9,050,000, with construction
scheduled to begin in the first quarter of 2021 and estimated to be completed in the spring of 2022. However,
no assurances can be made as to the cost and timing of such completion. Through October 2020, the City had
spent approximately $900,000 in design and other preliminary costs associated with the Project.
DESCRIPTION OF THE LEASED PREMISES
Pursuant to the terms of the Site Lease, the City intends to lease the Leased Premises to the
Corporation. Pursuant to the terms of the Lease, the Corporation intends to lease the Leased Premises back to
the City, and the City will make Lease Payments in consideration for the use and occupancy of the Leases
Premises. The Leased Premises will also include any additional improvements constructed on the Leased
Premises which are financed with the proceeds of any Additional Certificates. See "INTRODUCTION —
Additional Certificates."
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The Leased Premises will initially consist of the Corona Del Mar Fire Station No. 5 and the Santa Ana
Heights Fire Station No. 7.
The joint Corona Del Mar Fire Station No. 5 and Corona Del Mar Branch Library is a 10,314 square -
foot facility located at 410 Marigold Avenue in the City known as the "Fibrary." The Fibrary is a two-story
structure featuring a 2 -bay single apparatus room with drive-through capability and includes dormitories for a
crew of six. The structure also contains administrative offices, a kitchen and dining room and exercise room
and various support space. The library portion of the facility includes areas for children, teens and adults, a
staff workroom, storage and a public restroom. Construction was completed in the fall of 2019 at a cost of
approximately $8,100,000.
The Santa Ana Heights Fire Station No. 7 is an 11,027 square -foot facility located at 20402 Acacia
Avenue in the City. The Santa Ana Heights Fire Station No. 7 is primarily a single -story structure that houses,
among other things, an apparatus room, a shop, storage rooms, administrative offices, a kitchen, a dining room,
a fitness room, dormitories and a training room on 91,912 square feet of land. Constructed in 2007, the Santa
Ana Heights Fire Station No. 7 is valued at approximately $11.3 million.
Pursuant to the Lease, the City and the Corporation have agreed and determined that the Lease
Payments required to be made under the Lease represent the fair rental value of the Leased Premises. Under
the terms of the Lease, the City may substitute other property for the Leased Premises, or any portion thereof,
and may release portions of the Leased Premises provided that certain conditions set forth in the Lease are met.
See Appendix C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Covenants with Respect to the
Property — Substitution or Release of the Leased Premises" and "RISK FACTORS — Release or Substitution
of Property" herein.
ESTIMATED SOURCES AND USES OF FUNDS
The following table summarizes the estimated sources and uses of 2020 Certificate proceeds:
Sources of Funds
Principal Amount of 2020 Certificates $
Premium _
Total Sources $
Uses of Funds
Project Fund $
Costs of IssuanceM
Total Uses $
(1) Includes underwriter's discount, Special Counsel fees, title insurance, rating fees and other issuance costs.
THE 2020 CERTIFICATES
General
The 2020 Certificates will be executed and delivered in the form of fully registered 2020 Certificates
in principal amounts of $5,000 each or any integral multiple thereof. The 2020 Certificates will be dated their
date of delivery and mature on July 1 in the years set forth on the inside cover page hereof. Each 2020
Certificate will be payable with respect to interest on January I and July 1 of each year, commencing on July
1, 2021, at the respective rates of interest set forth on the inside front cover page hereof.
The 2020 Certificates will be executed and delivered in book -entry form only and, when delivered,
will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New
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York ("DTC"), which will act as securities depository for the 2020 Certificates. Individual purchases of the
2020 Certificates will be made in book -entry form only. Purchasers of the 2020 Certificates will not receive
certificates representing their ownership interests in the 2020 Certificates purchased. Principal, premium, if
any, and interest payments due with respect to the 2020 Certificates are payable directly to DTC by the
Trustee. Upon receipt of payments of principal, premium, if any, and interest, DTC will in turn distribute such
payments to the beneficial owners of the 2020 Certificates. See Appendix F — "DTC BOOK -ENTRY
SYSTEM" herein.
Prepayment
Extraordinary Prepayment from Net Proceeds. The 2020 Certificates are subject to prepayment
prior to their respective maturity dates on any date, in whole or in part, from Net Proceeds which the Trustee
deposits in the Prepayment Fund as provided in the Lease at least 45 days prior to the date fixed for
prepayment and credited toward the prepayment made by the City pursuant to the Lease, at a prepayment price
equal to the principal amount thereof together with the accrued interest to the date fixed for prepayment,
without premium.
For extraordinary prepayment of 2020 Certificates pursuant to the Trust Agreement, the Trustee will
select 2020 Certificates for prepayment so that the Net Proceeds will be applied to prepay a proportionate
amount of 2020 Certificates and Additional Certificates based on the Outstanding principal amount and by lot
within any maturity or sinking account prepayment. The Trustee will promptly notify the City and the
Corporation in writing of the 2020 Certificates so selected for prepayment by mailing to the City and the
Corporation copies of the notice of prepayment provided for in the Trust Agreement. The City will provide the
Trustee with a revised sinking fund schedule upon any prepayments.
"Net Proceeds" means any proceeds of any insurance, performance bonds or taking by eminent
domain or condemnation paid with respect to the Leased Premises remaining after payment therefrom of any
expenses (including attorneys' fees) incurred in the collection thereof.
Prepayment Procedures
When prepayment is authorized or required pursuant to the Trust Agreement, the Trustee will give
notice of the prepayment of the 2020 Certificates. Such notice will specify: (a) the prepayment date, (b) the
prepayment price, (c) if less than all of the Outstanding 2020 Certificates are to be prepaid, the 2020
Certificate numbers (and in the case of partial prepayment, the respective principal amounts), (d) the CUSIP
numbers of the 2020 Certificates to be prepaid, (e) the place or places where the prepayment will be made, and
(f) the original date of execution and delivery of the 2020 Certificates. Such notice will further state that on
the specified date there will become due and payable upon each 2020 Certificate to be prepaid, the portion of
the principal amount of such 2020 Certificate to be prepaid, together with interest accrued to said date and that
from and after such date, provided that moneys therefor have been deposited with the Trustee, interest with
respect thereto will cease to accrue and be payable.
Notice of prepayment will be sent by first class mail or delivery service postage prepaid, or by
telecopy, to the Depository on the date of mailing of notice to the Owners by first class mail and by first class
mail, postage prepaid, to the Corporation and the respective Owners of any 2020 Certificates designated for
prepayment at their addresses appearing on the 2020 Certificate registration books, at least 30 days, but not
more than 60 days, prior to the prepayment date; provided that neither failure to receive such notice nor any
defect in any notice so mailed will affect the sufficiency of the proceedings for the prepayment of such 2020
Certificates. Under no circumstances will the Trustee have any liability to any party for any inaccurate CUSIP
number.
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So long as DTC is the registered Owner of the 2020 Certificates, all such notices will be provided to
DTC as the Owner, without respect to the beneficial ownership of the 2020 Certificates. See Appendix F —
"DTC BOOK -ENTRY SYSTEM" herein.
Notice having been given to the Owners of any 2020 Certificates being prepaid, and the moneys for
the prepayment (including the interest to the applicable date of prepayment), having been set aside in the
Prepayment Fund, the 2020 Certificates will become due and payable on the date of prepayment, and upon
presentation and surrender thereof at the Principal Office of the Trustee such 2020 Certificates will be paid at
the prepayment price with respect thereto, plus interest accrued and unpaid to the date of prepayment.
If, on the date of prepayment moneys for the prepayment of all the 2020 Certificates to be prepaid,
together with interest to the date of prepayment, are held by the Trustee so as to be available therefor on such
date of prepayment, and, if notice of prepayment thereof has been given as described above, then, from and
after the date of prepayment, interest with respect to the 2020 Certificates to be prepaid will cease to accrue
and become payable. All moneys held by or on behalf of the Trustee for the prepayment of 2020 Certificates
will be held in trust for the account of the Owners of the 2020 Certificates so to be prepaid, without liability for
interest thereon.
All 2020 Certificates paid at maturity or prepaid prior to maturity pursuant to the provisions of the
Trust Agreement will be cancelled upon surrender thereof and destroyed.
Partial Prepayment
Upon surrender by the Owner of a 2020 Certificate for partial prepayment at the Principal Office of
the Trustee, payment of such partial prepayment of the principal amount of a 2020 Certificate will be paid to
such Owner. Upon surrender of any 2020 Certificate prepaid in part only, the Trustee will execute and deliver
to the registered Owner thereof, at the expense of the City, a new 2020 Certificate or 2020 Certificates which
shall be of authorized denominations equal to the unprepaid portion of the 2020 Certificate surrendered and of
the same tenor and maturity. Such partial prepayment will be valid upon payment of the amount thereby
required to be paid to such Owner, and the City, the Corporation and the Trustee will be released and
discharged from all liability to the extent of such payment.
SECURITY AND SOURCES OF PAYMENT FOR THE 2020 CERTIFICATES
Neither the Certificates nor the obligation of the City to make Lease Payments constitutes an
obligation of the City for which the City is obligated to levy or pledge, or for which the City has levied or
pledged, any form of taxation. Neither the Certificates nor the obligation of the City to make Lease Payments
constitutes an indebtedness of the Corporation, the City, the State of California or any of its political
subdivisions within the meaning of any constitutional limitation or violates any statutory debt limitation or
restriction.
General
Each 2020 Certificate represents a proportionate undivided interest in the Lease Payments and
prepayments to be made by the City to the Trustee under the Lease. The Certificates are secured under the
Trust Agreement by the respective Lease Payments and other amounts held in the respective funds established
thereunder for such series of Certificates other than the Project Fund and the Rebate Fund. The City is
obligated to pay Lease Payments from any source of legally available funds, and has covenanted in the Lease
to include all Lease Payments coming due in its annual budgets and to make the necessary annual
appropriations therefor. The Corporation, pursuant to the Assignment Agreement, has assigned all of its rights
under the Lease (excepting certain rights as specified therein), including the right to receive Lease Payments
and prepayments, to the Trustee for the benefit of the respective Owners. By the fifteenth day of each June
and December (if such day is not a Business Day, the next succeeding Business Day), the City must pay to the
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Trustee a Lease Payment (to the extent required under the Lease) which is expected to equal the amount
necessary to pay the principal and interest with respect to the Certificates (including the 2020 Certificates) on
the next succeeding Interest Payment Date.
The City's obligation to make Lease Payments will be abated in whole or in part, and to the extent of,
substantial interference with use and possession of the Leased Premises arising from damage, destruction, title
defect or taking by eminent domain or condemnation of the Leased Premises. Abatement would not constitute
a default under the Lease and the Trustee would not be entitled in such event to pursue remedies against the
City. See "RISK FACTORS — Abatement" herein.
Under the Lease, the City agrees to pay certain taxes, assessments, utility charges, and insurance
premiums charged with respect to the Leased Premises, the Certificates and any Additional Certificates and
fees and expenses of the Trustee. The City is responsible for repair and maintenance of the Leased Premises
during the term of the Lease. The City may at its own expense in good faith contest such taxes, assessments
and utility and other charges if certain requirements set forth in the Lease are satisfied, including obtaining an
opinion of counsel that the Leased Premises will not be subjected to loss or forfeiture.
Should the City default under the Lease, the Trustee, as assignee of the Corporation, may terminate
the Lease and re -lease the Leased Premises or may retain the Lease and hold the City liable for all Lease
Payments thereunder on an annual basis. Under no circumstances will the Trustee have the right to
accelerate Lease Payments. The exercise of the remedies provided to the Trustee is subject to various
limitations on the enforcement of remedies against public agencies. See "RISK FACTORS — Default"
herein.
Lease Payments
Subject to the provisions of the Lease regarding complete or partial abatement in the event of loss of
use and possession of any portion of the Leased Premises (see "RISK FACTORS — Abatement" herein) and
prepayment of Lease Payments (see the provisions relating to prepayment under the caption "THE
CERTIFICATES" above), the City agrees to pay to the Corporation, its successors and assigns, the Lease
Payments as annual rental for the use and possession of the Leased Premises. The Lease Payments are due and
payable on June 15 and December 15 of each year (each, a "Lease Payment Date").
Any monies held in an account of the Lease Payment Fund on any Lease Payment Date (other than
amounts resulting from the prepayment of the Lease Payments in part but not in whole pursuant to the Lease
and other amounts required for payment of past due principal or interest with respect to any Certificates not
presented for payment) shall be credited to the payment of the respective Lease Payments due and payable on
such Lease Payment Date to which such account of the Lease Payment Fund applies.
The Trust Agreement requires that Lease Payments be deposited in the Lease Payment Fund
maintained by the Trustee. The Lease Payment will be deposited in the Lease Payment Fund. Pursuant to the
Trust Agreement, on January 1 and July 1 of each year, commencing [July 1, 2021], the Trustee will apply
such amounts in the respective accounts of the Lease Payment Fund as are necessary to make interest and
principal payments, respectively, with respect to the Certificates as the same shall become due and payable, in
the amounts specified in the Lease.
No Reserve Fund
The City has not established a reserve fund in connection with the execution and delivery of the 2020
Certificates. In the event of abatement of Lease Payments, only proceeds of rental interruption insurance or
net proceeds of insurance may be available to pay Lease Payments. See the caption "RISK FACTORS—
Abatement."
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Additional Payments
Under the Lease, the City is to pay such amounts ("Additional Payments") as are required for the
payment of all administrative costs of the Corporation relating to the Leased Premises or the Certificates,
including, without limitation, all expenses, compensation and indemnification of the Trustee payable by the
City under the Trust Agreement, taxes of any sort whatsoever payable by the Corporation as a result of its
leasehold interest in the Leased Premises or undertaking of the transactions contemplated in the Lease or in the
Trust Agreement, fees of auditors, accountants, attorneys or engineers and all other necessary administrative
costs of the Corporation or charges required to be paid by it in order to comply with the terms of the
Certificates or of the Trust Agreement, including premiums on insurance required to be maintained by the
Lease or to indemnify the Corporation and its officers and directors.
Insurance
Pursuant to the Lease, the City is required to obtain either an ALTA leasehold title insurance policy
(with Western Regional Exceptions) or a CLTA leasehold title insurance policy on the Leased Premises in an
amount equal to the aggregate principal component of unpaid Lease Payments. The Lease also requires that
the City maintain casualty insurance on the Leased Premises in amount equal to replacement value and rental
interruption insurance to insure against loss of Lease Payments caused by loss or damage to the Leased
Premises covered under the City's casualty insurance. The rental interruption insurance is to be in an amount
not less than the maximum remaining scheduled Lease Payments in any future two-year period. The City also
is obligated under the Lease to obtain a standard comprehensive general public liability and property damage
insurance policy or policies and workers' compensation insurance. See "CITY FINANCIAL INFORMATION
— Insurance" and Appendix C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — INSURANCE"
herein.
The proceeds of any rental interruption insurance will be deposited in the Lease Payment Fund to be
credited towards the payment of the Lease Payments in the order in which such Lease Payments become due
and payable. The Lease requires the City to apply the Net Proceeds of any insurance award either to replace or
repair the Leased Premises or to prepay Certificates and Additional Certificates, if any, if certain certifications
with respect to the adequacy of the Net Proceeds to make repairs, and the timing thereof, cannot be made. See
Appendix C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — DAMAGE, DESTRUCTION
AND EMINENT DOMAIN; USE OF NET PROCEEDS." The amount of Lease Payments will be abated and
Lease Payments due under the Lease may be reduced during any period in which by reason of damage,
destruction, title defect or taking by eminent domain or condemnation there is substantial interference with the
City's use and possession of all or part of the Leased Premises. See "RISK FACTORS —Abatement" herein.
CERTIFICATE PAYMENT SCHEDULE
Lease Payments are required to be made by the City under the Lease on or before June 15 and
December 15 of each year for the use and possession of the Leased Premises for the period commencing as of
the date of delivery of the Certificates and terminating on July 1, 2030, or a later date if such date is extended
as provided in the Lease. The Interest Payment Dates with respect to the Certificates are January 1 and July 1,
commencing July 1, 2021. The aggregate annual amounts of Certificate payments, comprising interest and
principal payable to the Owners, are set forth below for each annual period ending on July 1 of the years
indicated.
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Annual Period
(Ending July 1) 2020 Certificates
Principal Interest Total
2021 $ $ $
2022
2023
2024
2025
2026
2027
2028
2029
2030 _
Totals $ $ $
THE CITY
The City of Newport Beach (the "City") was incorporated under the general laws of the State of
California (the "State") on September 1, 1906. The City is located in the coastal center of the County of
Orange (the "County"), approximately 89 miles north of San Diego, 15 miles south of Long Beach and
45 miles southwest of Los Angeles. As of 2020, the City had an estimated population of 85,708, which
typically grows to over 100,000 during the summer months, in addition to 20,000 to 100,000 tourists daily.
For financial and demographic information regarding the City see APPENDIX A"THE CITY OF
NEWPORT BEACH."
A copy of the financial statements of the City for the fiscal year ended June 30, 2019 is attached
hereto as Appendix C which should be read in its entirety. See APPENDIX C—"AUDITED FINANCIAL
STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30,2019."
THE CORPORATION
The Corporation was incorporated on March 9, 1992, and is a nonprofit public benefit corporation
duly organized and existing under the California Nonprofit Public Benefit Corporation Law for the purpose,
among other things, of rendering financial assistance to the City by financing, acquiring, constructing,
improving, leasing and selling buildings, building improvements, equipment, electrical, water, sewer, road and
other improvements, lands and any other real or personal property, tangible and intangible, for the benefit of
residents of the City and surrounding areas.
The Corporation has no taxing authority. The Corporation has no liability to the Owners of the
Certificates and has pledged none of its assets toward the Lease Payments or Prepayments under the Lease, or
toward the payment of any amount due in connection with the Certificates.
The Corporation is a separate legal entity from the City. It is governed by a seven member Board of
Directors (the "Board of Directors") appointed by the City Council. The Corporation has no employees. All
staff work is performed by employees of the City. The members of the Corporation's Board of Director are
the members of the City Council in their ex officio capacity.
The Corporation has not entered into any material financing arrangement with respect to the
Certificates other than those referred to in this Official Statement. Further information concerning the
Corporation may be obtained from the Corporation's office at 100 Civic Center Drive, Newport Beach,
California 92660.
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CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS
Principal of and interest on the 2020 Certificates are payable from Lease Payments made from the
City's General Fund. See the caption "SECURITY AND SOURCES OF PAYMENT FOR THE 2020
CERTIFICATES." Articles XIIIA, XIIIB, XIIIC and XIIID of the State Constitution, Propositions 62, 111,
218, IA and 22, and certain other provisions of law discussed below are included in this Official Statement to
describe the potential effect of these Constitutional and statutory measures on the ability of the City to levy
taxes and spend tax proceeds for operating and other purposes.
Article XIIIA of the California Constitution
On June 6, 1978, State voters approved Proposition 13, which added Article XIIJA to the State
Constitution. Article XIIIA, as amended, limits the amount of any ad valorem tax on real property to 1% of
the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service: (i) on
indebtedness approved by the voters prior to December 1, 1978; (ii) on bonded indebtedness approved by a
two-thirds vote on or after December 1, 1978, for the acquisition or improvement of real property; or
(iii) bonded indebtedness incurred by a school district, community college district or county office of
education for the construction, reconstruction, rehabilitation or replacement of school facilities, including the
furnishing and equipping of school facilities or the acquisition or lease of real property for school facilities,
approved by 55% of the voters voting on the proposition. Article XIIIA defines full cash value to mean "the
county assessor's valuation of real property as shown on the 1975-76 tax bill under "full cash value," or
thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership
has occurred after the 1975 assessment." This full cash value may be increased at a rate not to exceed 2% per
year to account for inflation.
Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the
event of declining property values caused by damage, destruction or other factors, including a general
economic downturn, to provide that there would be no increase in the "full cash value" base in the event of
reconstruction of property damaged or destroyed in a disaster, and in other minor or technical ways.
Legislation Implementing Article XIIIA
Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA.
Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay
voter -approved indebtedness). The 1% property tax is automatically levied by counties and distributed
according to a formula among taxing agencies.
Increases in assessed valuation resulting from reappraisals of property due to new construction,
change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions in the
"taxing area" based upon their respective "situs." Any such allocation made to a local agency continues as part
of its allocation in future years.
All taxable property is shown at full cash value on the tax rolls. Consequently, the tax rate is
expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is
shown at 100 percent of taxable value (unless noted differently) and all tax rates reflect the $1 per $100 of
taxable value.
Split Roll Initiative
An initiative measure (the "Split Roll Initiative") to amend Article XIIIA has qualified for the State's
November 2020 ballot. If adopted, the Split Roll Initiative would base property taxes for commercial and
industrial properties on market values beginning in tax year 2020-21. Such market values would be reassessed
by the applicable county assessor's office at least once every three years. The Split Roll Initiative includes
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exceptions for businesses with a total market value of less than $2 million (adjusted for inflation), which would
continue to be subject to property taxes based on purchase price, and exempts from property tax assessments
up to $500,000 of the value of personal property, or all personal property for businesses with fewer than 50
employees. There can be no assurance that the Split Roll Initiative will be adopted. Moreover, if the Split
Roll Initiative is adopted, the City is unable to predict how it would affect the level of commercial building
activity within the City and the relationship of the assessed value between land use types (i.e. residential versus
commercial) in the City, or what other impacts the Split Roll Initiative might have on the local economy or the
City's financial condition. The City does however expect an increase in property tax revenues if the Split Roll
Initiative were to pass.
Article XIIIB of the California Constitution
In addition to the limits that Article XIIIA imposes on property taxes that may be collected by local
governments, certain other revenues of the State and most local governments are subject to an annual
"appropriations limit" imposed by Article XIIIB which effectively limits the amount of such revenues that
such 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 and the investment proceeds thereof, 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
service." "Proceeds of taxes" excludes tax refunds and some benefit payments such as unemployment
insurance. No limit is imposed on the appropriation of funds which 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 as of October 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 case of emergency; however, the appropriations limit
for the next 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 has its own appropriations limit. Each year, the 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 local government's actual appropriations be tested against its limit every two years.
If the aggregate "proceeds of taxes" for the preceding two-year period exceeds the aggregate limit, the
excess must be returned to the agency's taxpayers through tax rate or fee reductions over the following two
years.
The City's appropriations have never exceeded the limitation on appropriations under Article XIIIB.
Proposition 62
Proposition 62 was adopted by the voters at the November 4, 1986, general election and: (a) requires
that any new or higher taxes for general governmental purposes imposed by local governmental entities such
as the City be approved by a two-thirds vote of the governmental entity's legislative body and by a majority
vote of the voters of the governmental entity voting in an election on the tax; (b) requires that any special tax
(defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity
be approved by a two-thirds vote of the voters of the governmental entity voting in an election on the tax;
(c) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax
was imposed; (d) prohibits the imposition of ad valorem taxes on real property by local governmental entities
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except as permitted by Article XIIIA; (e) prohibits the imposition of transaction taxes and sales taxes on the
sale of real property by local governmental entities; and (f) requires that any tax imposed by a local
governmental entity on or after July 1, 1985, be ratified by a majority vote of the voters voting in an election
on the tax within two years of the adoption of the initiative or be terminated by November 15, 1988.
On September 28, 1995, the California Supreme Court, in the case of Santa Clara County Local
Transportation Authority v. Guardino, upheld the constitutionality of Proposition 62. In this case, the court
held that a countywide sales tax of one-half of one percent was a special tax that, under Section 53722 of the
Government Code, required a two-thirds voter approval. Because the tax received an affirmative vote of only
54.1 %, this special tax was found to be invalid. The decision did not address the question of whether or not it
should be applied retroactively.
Following the California Supreme Court's decision upholding Proposition 62, several actions were
filed challenging taxes imposed by public agencies since the adoption of Proposition 62, which was passed in
November 1986. On June 4, 2001, the California Supreme Court released its decision in one of these cases,
Howard Jarvis Taxpayers Association v. City of La Habra, et al. In this case, the court held that a public
agency's continued imposition and collection of a tax is an ongoing violation, upon which the statute of
limitations period begins anew with each collection. The court also held that, unless another statute or
constitutional rule provided differently, the statute of limitations for challenges to taxes subject to Proposition
62 is three years. Accordingly, a challenge to a tax subject to Proposition 62 may only be made for those taxes
received within three years of the date the action is brought.
The City has not experienced any substantive adverse financial impact as a result of the passage of
Proposition 62.
Proposition 1A
Proposition IA was approved by the voters at the November 2, 2004 election. Proposition IA
amended the State Constitution to, among other things, reduce the Legislature's authority over local
government revenue sources by placing restrictions on the State's access to local governments' property, sales,
and vehicle license fee revenues as of November 3, 2004. Beginning with Fiscal Year 2008-09, the State may
borrow up to eight percent of local property tax revenues, but only if the Governor proclaims such action is
necessary due to a severe State fiscal hardship, and two—thirds of both houses of the Legislature approves the
borrowing. The amount borrowed is required to be paid back within three years. The State also will not be
able to borrow from local property tax revenues for more than two fiscal years within a period of 10 fiscal
years. In addition, the State cannot reduce the local sales tax rate or restrict the authority of local governments
to impose or change the distribution of the statewide local sales tax.
Many of the provisions of Proposition lA have been superseded by Proposition 22 enacted in
November 2010 and described below.
Proposition 22
On November 2, 2010, the voters of the State approved Proposition 22, known as "The Local
Taxpayer, Public Safety, and Transportation Protection Act" ("Proposition 22"). Proposition 22, among other
things, broadens the restrictions established by Proposition IA. While Proposition IA permits the State to
appropriate or borrow local property tax revenues on a temporary basis during times of severe financial
hardship, Proposition 22 amends Article XIII of the State Constitution to prohibit the State from appropriating
or borrowing local property tax revenues under any circumstances. The State can no longer borrow local
property tax revenues on a temporary basis even during times of severe financial hardship. Proposition 22 also
prohibits the State from appropriating or borrowing proceeds derived from any tax levied by a local
government solely for the local government's purposes. Furthermore, Proposition 22 restricts the State's
ability to redirect redevelopment agency property tax revenues to school districts and other local governments
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and limits uses of certain other funds although this provision no longer has any meaningful impact given the
statewide dissolution of redevelopment agencies. Proposition 22 is intended to stabilize local government
revenue sources by restricting the State government's control over local revenues. The City cannot predict
whether Proposition 22 will have a beneficial effect on the City's financial condition.
Proposition 26
On November 2, 2010, State voters also approved Proposition 26. Proposition 26 amends
Article XIIIC of the State Constitution to expand the definition of "tax" to include "any levy, charge, or
exaction of any kind imposed by a local government" except the following: (a) a charge imposed for a specific
benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which
does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege;
(b) a charge imposed for a specific government service or product provided directly to the payor that is not
provided to those not charged, and which does not exceed the reasonable costs to the local government of
providing the service or product; (c) a charge imposed for the reasonable regulatory costs to a local
government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing
agricultural marketing orders, and the administrative enforcement and adjudication thereof; (d) a charge
imposed for entrance to or use of local government property, or the purchase, rental or lease of local
government property; (e) a fine, penalty or other monetary charge imposed by the judicial branch of
government or a local government as a result of a violation of law; (f) a charge imposed as a condition of
property development; and (g) assessments and property -related fees imposed in accordance with the
provisions of Article XIIID. Proposition 26 provides that the local government bears the burden of proving by
a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more
than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those
costs are allocated to a payor bear a fair or reasonable relationship to the payor's burdens on, or benefits
received from, the governmental activity. The City does not believe that Proposition 26 will adversely affect
its General Fund revenues.
Proposition 218
On November 5, 1996, California voters approved Proposition 218—Voter Approval for Local
Government Taxes—Limitation on Fees, Assessments, and Charges—Initiative Constitutional Amendment.
Proposition 218 added Articles XIIIC and XIIID to the California Constitution, imposing certain vote
requirements and other limitations on the imposition of new or increased taxes, assessments and property -
related fees and charges. Proposition 218 states that all taxes imposed by local governments are deemed to be
either general taxes or special taxes. Special purpose districts, including school districts, have no power to
levy general taxes. No local government may impose, extend or increase any general tax unless and until such
tax is submitted to the electorate and approved by a majority vote. No local government may impose, extend
or increase any special tax unless and until such tax is submitted to the electorate and approved by a two-thirds
vote.
Proposition 218 also provides that no tax, assessment, fee or charge may be assessed by any agency
upon any parcel of property or upon any person as an incident of property ownership except: (i) the ad
valorem property tax imposed pursuant to Article XIII and Article XIIIA of the California Constitution,
(ii) any special tax receiving a two-thirds vote pursuant to the California Constitution, and (iii) assessments,
fees and charges for property related services as provided in Proposition 218. Proposition 218 then goes on to
add voter requirements for assessments and fees and charges imposed as an incident of property ownership,
other than fees and charges for sewer, water, and refuse collection services. In addition, all assessments and
fees and charges imposed as an incident of property ownership, including sewer, water, and refuse collection
services, are subjected to various additional procedures, such as hearings and stricter and more individualized
benefit requirements and findings. The effect of such new provisions will presumably be to increase the
difficulty a local agency will have in imposing, increasing or extending such assessments, fees and charges.
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Proposition 218 also extended the initiative power to reducing or repealing any local taxes,
assessments, fees and charges. This extension of the initiative power is not limited to taxes imposed on or
after November 6, 1996, the effective date of Proposition 218, and could result in retroactive repeal or
reduction in any existing taxes, assessments, fees and charges, subject to overriding federal constitutional
principles relating to the impairments of contracts. Legislation implementing Proposition 218 provides that the
initiative power provided for in Proposition 218 "shall not be construed to mean that any owner or beneficial
owner of a municipal security, purchased before or after (the effective date of Proposition 218) assumes the
risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of
contractual rights" protected by the United States Constitution. However, no assurance can be given that the
voters of the City will not, in the future, approve an initiative which reduces or repeals local taxes,
assessments, fees or charges that currently are deposited into the City's General Fund.
Although a portion of the City's General Fund revenues are derived from general taxes purported to
be governed by Proposition 218, all of such taxes were either imposed, extended or increased prior to the
effective date of Proposition 218 or in accordance with the requirements of Proposition 218. No assurance can
be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or
repeal local taxes, assessments, fees or charges, such as the transient occupancy tax and the utility tax which
support the City's General Fund. In fiscal year 2021, the City has budgeted to receive approximately
$6,434,115 in General Fund revenues from the transient occupancy tax. The transient occupancy tax, and
other local taxes, assessments, fees and charges could be subject to reduction or repeal by initiative under
Proposition 218.
Unitary Property
Some amount of property tax revenue of the City is derived from utility property which is considered
part of a utility system with components located in many taxing jurisdictions ("unitary property"). Under the
State Constitution, such property is assessed by the State Board of Equalization ("SBE") as part of a "going
concern" rather than as individual pieces of real or personal property. State -assessed unitary and certain other
property is allocated to the counties by SBE, taxed at special county -wide rates, and the tax revenues
distributed to taxing jurisdictions (including the City) according to statutory formula generally based on the
distribution of taxes in the prior year.
Possible Future Initiatives
Articles XIIIA, XIIIB, XIIIC and XIIID and Propositions 218, 111, 62, 1A, 22 and 26 were each
adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time
other initiative measures could be adopted, further affecting revenues of the City or the City's ability to expend
revenues. The nature and impact of these measures cannot be anticipated by the City.
RISK FACTORS
The following factors, along with all other information in this Official Statement, should be
considered by potential investors in evaluating the 2020 Certificates.
COVID-19 Pandemic
The COVID-19 Pandemic is materially adversely affecting the local, state and world economies. The
City cannot currently predict the extent or duration of the outbreak or what ultimate impact it may have on the
City's financial condition or operations, although the City believes it will be material and adverse. See
"INFORMATION REGARDING THE CITY OF NEWPORT BEACH—COVID-19 Pandemic Impact" and
"CITY FINANCIAL INFORMATION—Budget Procedure, Current Budget and Historical Budget
Information—Fiscal Year 2020-21 Revised Budget" in APPENDIX A for a discussion of current and potential
impacts of COVID-19 on the City's operations and finances.
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No Pledge of Taxes or Revenues
The obligation of the City to pay the Lease Payments and Additional Payments does not constitute an
obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the
City has levied or pledged any form of taxation. The obligation of the City to pay Lease Payments and
Additional Payments does not constitute a debt or indebtedness of the Corporation, the City, the State of
California or any of its political subdivisions within the meaning of any constitutional or statutory debt
limitation or restriction.
Although the Lease does not create a pledge, lien or encumbrance upon the funds of the City, the City
is obligated under the Lease to pay Lease Payments and Additional Payments from any source of legally
available funds (subject to certain exceptions) and the City has covenanted in the Lease that, for as long as the
Leased Premises is available for its use and possession, it will make the necessary annual appropriations within
its budget for all Lease Payments and Additional Payments. The City is currently liable on other obligations
payable from general revenues, including the City's Certificates of Participation 2010B (Federally Taxable
Direct Pay Build America Bonds) (Civic Center Project), currently outstanding in the aggregate principal
amount of $97,630,000. In the event of a shortfall in revenues, a court might require that the City first set
aside revenues to pay the other obligations of the City or to make expenditures necessary to preserve the health
and welfare of City residents. See "CITY FINANCIAL INFORMATION — Long -Term Liabilities" in
Appendix A of this Official Statement.
Certain taxes, assessments, fees and charges presently imposed by the City, such as the City utility tax
and the transient occupancy tax, could be reduced or eliminated by initiative pursuant to Article XIIIC of the
State Constitution, and new taxes, assessments fees and charges subject to the voter approval requirements of
Article XIIID of the State Constitution may not be approved by voters. The City does not believe that
Article XIIIC grants to the voters the power to reduce or repeal local taxes, assessments, fees and charges
received by the City to an extent that would prevent the City from performing its existing contractual
obligations. However, it is possible that the initiative power could be exercised in a manner that would have a
material adverse effect on the financial condition of the City, including its General Fund. Although the City
does not currently anticipate that the provisions of Article XIIIC and Article XIIID of the State Constitution
would adversely affect its ability to pay the principal of and interest with respect to the 2020 Certificates, as
and when due, and its other obligations payable from the General Fund, no assurance can be given regarding
the ultimate interpretation or effect of Article XIIIC and Article XIIID of the State Constitution on the City's
finances. See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS — Proposition 218" herein and CITY FINANCIAL INFORMATION — Major
Revenues" in Appendix A.
Additional Obligations of the City
The City is permitted to enter into other obligations which constitute additional charges against its
revenues without the consent of Owners of the 2020 Certificates. To the extent that additional obligations are
incurred by the City, the funds available to pay Lease Payments may be decreased.
The Lease Payments and other payments due under the Lease (including payment of costs of repair
and maintenance of the Leased Premises, taxes and other governmental charges levied against the Leased
Premises) are payable from funds lawfully available to the City. In the event that the amounts which the City
is obligated to pay in a fiscal year exceed the City's revenues for such year, the City may choose to make some
payments rather than making other payments, including Lease Payments and Additional Payments, based on
the perceived needs of the City. The same result could occur if, because of California Constitutional limits on
expenditures, the City is not permitted to appropriate and spend all of its available revenues or is required to
expend available revenues to preserve the public health, safety and welfare.
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Default
Whenever any event of default referred to in the Lease happens and continues, the Trustee, as the
assignee of the Corporation, is authorized under the terms of the Lease to exercise any and all remedies
available pursuant to law or granted pursuant to the Lease; provided, however, that notwithstanding anything
therein or in the Trust Agreement to the contrary, THERE SHALL BE NO RIGHT UNDER ANY
CIRCUMSTANCES TO ACCELERATE THE LEASE PAYMENTS OR OTHERWISE DECLARE ANY
LEASE PAYMENTS NOT THEN DUE OR PAST DUE TO BE IMMEDIATELY DUE AND PAYABLE.
NEITHER THE CORPORATION NOR ITS ASSIGNEE SHALL HAVE ANY RIGHT TO REENTER OR
RELET THE LEASED PREMISES EXCEPT FOLLOWING A DEFAULT UNDER THE LEASE. Following
an event of default, the Trustee, as the assignee of the Corporation, may elect either to terminate the Lease and
seek to collect damages from the City or to maintain the Lease in effect and seek to collect the Lease Payments
as they become due. The Lease further provides that so long as an event of default exists under the Lease, the
Corporation, or its assignee, may re-enter the Leased Premises for the purpose of taking possession of any
portion of the Leased Premises and to re -let the Leased Premises and, in addition, at its option, with or without
such entry to terminate the Lease as described therein. See Appendix C — "SUMMARY OF PRINCIPAL
LEGAL DOCUMENTS — LEASE — Remedies On Default."
No assurance can be given that the Trustee will be able to re -let the Leased Premises so as to provide
rental income sufficient to pay principal and interest evidenced by the 2020 Certificates in a timely manner or
that such re -letting will not adversely affect the exclusion of interest due with respect to the 2020 Certificates
from gross income for federal or State income tax purposes. Furthermore, due to the fact that the Leased
Premises are needed to provide essential public services to residents of the City, it is not certain whether a
court would permit the exercise of the remedies of repossession and re -letting with respect to the Leased
Premises.
In the event of a default, there is no remedy of acceleration of the total Lease Payments due over the
term of the Lease and the Trustee is not empowered to sell the Leased Premises and use the proceeds of such
sale to prepay the 2020 Certificates or pay debt service with respect thereto. The City will be liable only for
Lease Payments on an annual basis and, in the event of a default, the Trustee would be required to seek a
separate judgment each year for that year's defaulted Lease Payments. Any such suit for money damages
would be subject to limitations on legal remedies against municipalities in California, including a limitation on
enforcement of judgments against funds of a fiscal year other than the fiscal year in which the Lease Payments
were due and against funds needed to serve the public welfare and interest.
Release or Substitution of Property
The City has the right from time to time to add other real property and improvements (subject only to
Permitted Encumbrances) or to substitute other real property or improvements (subject only to Permitted
Encumbrances) for all or a portion of the Leased Premises or to release a portion of the real property or
improvements constituting the Leased Premises, subject to the conditions precedent to such addition,
substitution or release as set forth in the Lease. No addition, substitution or release under the Lease will be, by
itself, the basis for any reduction in or abatement of the Lease Payments due from the City thereunder. A
release could, however, result in a reduction in the fair rental value of the Leased Premises which would result
in less security for the Owners should it be necessary to relet the Leased Premises to cure a default in Lease
Payments. See Appendix C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — COVENANTS
WITH RESPECT TO THE PROPERTY — Substitution or Release of the Leased Premises" herein.
In connection with a substitution or release, all interests of the Corporation, and its assignee, in the
portion of the Leased Premises released shall terminate and the Corporation and its assignee shall execute and
record with the County Recorder of the County all documents deemed necessary by the City to evidence such
termination of interest. Upon satisfaction by the City of the conditions set forth in the Lease, the Trustee also
will execute a Lease Supplement and will not impose on the City any further conditions or prerequisites to the
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requested addition, substitution or release. The City will cause the Lease Supplement, or another document
substantially in the form of the Lease Supplement, to be recorded in the real property records of the County.
All costs and expenses incurred in connection with such addition, substitution or release will be borne
by the City.
Abatement
The City's obligation to make Lease Payments will be subject to full or partial abatement and could
result in the Trustee having inadequate funds to pay the principal and interest with respect to the 2020
Certificates under certain circumstances related to damage, destruction, condemnation or title defects which
cause a substantial interference with the use and occupancy of the Leased Premises. In addition, if Additional
Certificates are sold to finance additional improvements to the Leased Premises, failure to complete the
improvements on or before the date to which capitalized interest is funded on the Additional Certificates could
incur an abatement and result in the Trustee having inadequate funds to pay the principal and interest with
respect to the Certificates and Additional Certificates when due.
Insurance. The Lease obligates the City to obtain and keep in force various forms of insurance to
assure the repair or replacement of the Leased Premises in the event of damage or destruction to the Leased
Premises (see Appendix C — "SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS — THE LEASE
AGREEMENT — Insurance" herein). 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. In addition, the City is not required
under the Lease Agreement to obtain earthquake and flood insurance. The City does currently maintain
earthquake and flood insurance with respect to the Leased Premises, but does not make any assurances about
its ability or willingness to maintain such insurance in the future.
In the event the Leased Premises are partially or completely damaged or destroyed due to any
uninsured or underinsured event, it is likely that Lease Payments will be partially or completely abated. Apart
from the proceeds of insurance, the City and the Corporation will have no obligation to expend any funds to
repair or replace such damaged or destroyed property. If the Leased Premises so damaged or destroyed are not
repaired or replaced within the period during which the proceeds of rental interruption insurance are available,
any such abatement could result in the Trustee having insufficient funds to pay the principal of and interest
with respect to the 2020 Certificates as scheduled.
See Appendix C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — AGREEMENT TO
LEASE; TERM OF LEASE; LEASE PAYMENTS — Abatement of Lease Payments in the Event of Loss of
Use" herein.
No Reserve Fund
The City has not established a reserve fund in connection with the issuance of the 2020 Certificates.
In the event of abatement, funds available to pay debt service on the 2020 Certificates will be limited to
proceeds of insurance (including rental interruption insurance). In addition, if annual appropriations to pay
Lease Payments are not made (for example, due to delay in adoption of an annual budget), no funds would be
available to pay debt service on the 2020 Certificates until such appropriations were available.
Seismic Activity
Generally, within the State, some level of seismic activity occurs on a regular basis. Periodically, the
magnitude of a single seismic event can cause significant ground shaking and damage to property located at or
near the center of such seismic activity. An earthquake along one of the faults in the vicinity, either known or
unknown, could cause a number of casualties and extensive property damage. The effects of such a quake
could be aggravated by aftershocks and secondary effects such as fires, landslides, dam failure, liquefaction
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and other threats to public health, safety and welfare. The potential direct and indirect consequences of a
major earthquake can easily exceed the resources of the City and would require a high level of self-help,
coordination and cooperation.
Portions of the City are located above active earthquake faults, heightening the risks associated with
seismic events. The City currently maintains earthquake insurance coverage for certain City -owned property,
including the Leased Premises. However, the Lease does not require that the City maintain earthquake
insurance coverage on the Leased Premises and such coverage may be discontinued by the City at any time.
See "INFORMATION REGARDING THE CITY OF NEWPORT BEACH— Risk Management" in Appendix
A hereto for more information with respect to the City's earthquake insurance coverage.
Climate Change and Sea Level Rise
The State has historically been susceptible to wildfires and hydrologic variability. As greenhouse gas
emissions continue to accumulate in the atmosphere as a result of economic activity, climate change is
expected to intensify, increasing the frequency, severity and timing of extreme weather events such as coastal
storm surges, drought, wildfires, floods and heat waves, and raising sea levels.
Current science indicates that sea level rise is directly linked to climate change, and sea level is
expected to increase over time. The City has [10 miles] of shoreline and other coastal and inland areas that are
threatened by sea level rise. The Newport Beach community is vulnerable to coast erosion of its protective
beaches and flooding from wave run-up (particularly from large waves associated with coastal storms). Sea
level rise threatens the inland areas by exacerbating flooding of very high tides and by contributing to flooding
from extreme rainfall events.
The future fiscal impact of climate change or sea level rise on the City is difficult to predict, but it
could be significant and it could have a material adverse effect on the General Fund by requiring greater
expenditures to counteract the effects of climate change or sea level rise or by changing the operations and
activities of City residents and business establishments.
Hazardous Substances
The City knows of no existing hazardous substances which require remedial action on or near the
Leased Premises. However, it is possible such substances do currently or potentially exist and that the City is
not aware of them.
Owners and operators of real 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 operator) is obligated to
remedy a hazardous substance whether or not the owner (or operator) has anything to do with creating or
handling the hazardous substance. Further, such liabilities may arise not simply from the existence of a
hazardous substance but from the method of handling it. All of these possibilities could significantly and
adversely affect the operations and finances of the City, may result in the reduction in the assessed value of
property, and therefor property tax revenue.
Cybersecurity
The City relies on computers and technology to conduct its operations. The City and its departments
face cyber threats from time to time including, but not limited to, hacking, viruses, malware and other forms of
technology attacks. The City owns and operates its own enterprise class data network serving the municipal
city government and its operations. The City has retained information technology professionals to support,
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maintain and protect these operations locally in a purpose-built and physically secure environment. This
network and its operations are governed by and in compliance with all applicable governmental regulations as
well as the City's own administrative regulations. Within the City's operations and guidance is an active
cyber -security program designed to protect from, and to quickly identify and mitigate, a multitude of complex
security threats. While no network is completely immune from all possible compromise, the City exercises its
due diligence in protecting the data it possesses and the systems it operates. To date, there have been no
significant cyber -attacks on the City's computers and technologies.
While the City is routinely maintaining its technology systems and continuously implementing new
information security controls, no assurances can be given that the City's security and operational control
measures will be successful in guarding against all cyber threats and attacks. The results of any attack on the
City's computer and technology could negatively impact the City's operations, and the costs related to such
attacks could be substantial.
Limitations on Remedies; Bankruptcy
The enforceability of the rights and remedies of the owners of the 2020 Certificates and the
obligations of 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 of California and its governmental
bodies in the interest of servicing a significant and legitimate public purpose.
Under Chapter 9 of the United States Bankruptcy Code (Title 11, United States Code) (the
"Bankruptcy Code"), which governs bankruptcy proceedings of public entities such as the City, no involuntary
bankruptcy petition may be filed against a public entity. However, upon satisfaction of certain prerequisite
conditions, a voluntary bankruptcy petition may be filed by the City. The filing of a bankruptcy petition
results in a stay against enforcement of remedies under agreements to which the bankrupt entity is a party. A
bankruptcy filing by the City could thus limit remedies under the Lease. A bankruptcy debtor may choose to
assume or reject executory contracts and leases, such as the Lease. In the event of rejection of a lease by
debtor lessee, the leased property is returned to the lessor and the lessor has a claim for a limited amount of the
resulting damages.
Under the Trust Agreement, the Trustee holds a security interest in all moneys held in the fands and
accounts (except for the Rebate Fund and moneys on deposit therein) established under the Trust Agreement,
including Lease Payments, for the benefit of the owners of the 2020 Certificates, but such security interest
arises only when the Lease Payments are actually received by the Trustee following payment by the City. The
Leased Premises are not subject to a security interest, mortgage or any other lien in favor of the Trustee for the
benefit of owners of the 2020 Certificates. In the event of a bankruptcy filed by the City and the subsequent
rejection of the Lease by the City, the Trustee, as assignee of the Corporation, would recover possession of the
Leased Property and would have a claim for damages against the City. The Trustee's claim would constitute a
secured claim only to the extent of moneys in the possession of the Trustee; the balance of such claim would
be unsecured.
Bankruptcy proceedings would subject the owners of the 2020 Certificates to judicial discretion and
interpretation of their rights in bankruptcy or otherwise, and consequently entail risks of delay, limitation, or
modification of their rights with respect to the 2020 Certificates. In a bankruptcy case, the amount recovered
by owners of the 2020 Certificates could be affected by whether the Lease is determined to be a "true lease" or
a loan or other financing arrangement (a "financing lease"), and the owners' recovery could be reduced in
either case. If the Lease is determined by the bankruptcy court to constitute a "true lease" (rather than a
financing lease), the City could choose not to perform under the Lease by rejecting it and the claim of the
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Owners could be substantially limited pursuant to Section 365 of the Bankruptcy Code to a fraction of the
scheduled amount of Lease Payments, and that reduced claim amount could be impaired as an unsecured claim
under a plan of adjustment. If a bankruptcy court were to treat the Lease as a financing lease then, under a
plan of adjustment, the priority, payment terms, collateral, payment dates, payment sources, covenants and
other terms or provisions of the Lease and the 2020 Certificates may be altered. Such a plan could be
confirmed even over the objections of the Trustee and the owners, and without their consent. For example, the
amount of the Lease Payments from the City might be substantially reduced because of the power of the
bankruptcy court under the Bankruptcy Code to adjust secured claims to the value of their collateral, which, as
described above, could be limited to the moneys held by the Trustee. In addition there can be a substantial
disparity in treatment based on the nature of the Leased Premises. Whether the Lease is characterized by the
bankruptcy court as a true lease or a financing lease, either scenario could result in the Owners not receiving
the full amount of the principal and interest due with respect to the 2020 Certificates. See "RISK FACTORS
— Default" herein.
State Budget Information
A number of the City's revenues are collected and dispersed by the State (such as sales tax and motor -
vehicle license fees) or allocated in accordance with State law (most importantly, property taxes). Therefore,
State budget decisions can have an impact on City finances. In the event of a material economic downturn in
the State, there can be no assurance that any resulting revenue shortfalls to the State will not reduce revenues
to local governments (including the City) or shift financial responsibility for programs to local governments as
part of the State's efforts to address any such related State financial difficulties.
The COVID-19 pandemic is materially adversely impacting the financial condition of the State. In
addition, there are a number of other budget risks that threaten the financial condition of the State, including
the onset of recession and the significant unfunded liabilities of the two main retirement systems managed by
State entities, PERS and the California State Teachers' Retirement System ("STRS"). The State also has a
significant unfunded liability with respect to other post -employment benefits.
On June 29, 2020, the Governor signed into law the State budget for fiscal year 2020-21 (the "2020-21
Budget"). The following information is drawn from the State Department of Finance's (the "DOF") summary
of the 2020-21 Budget.
As with the Governor's May revision (the "May Revision") to the proposed State budget, the 2020-21
Budget acknowledges that the rapid onset of COVID-19 has had an immediate and severe impact on the
State's economy. The ensuing recession has caused significant job losses, precipitous drops in family and
business income, and has exacerbated inequality. The May Revision forecast included a peak unemployment
rate of 24.5% in the second quarter of 2020 and a decline in personal income of nearly 9%. The 2020-21
Budget reports that the official unemployment rate exceeded 16% in both April and May of 2020.
The 2020-21 Budget includes a number of measures intended to address a projected deficit of $54.3
billion identified by the May Revision, and occasioned principally by declines in the State's three main tax
revenues (personal income, sales and use, and corporate). The measures included in the 2020-21 Budget, and
described below, are intended to close this deficit and set aside $2.6 billion in the State's traditional general
fund reserve, including $716 million for the State to respond to the changing conditions of the COVID-19
pandemic:
• Draw Down of Reserves – The 2020-21 Budget draws down $8.8 billion in total State reserves,
including $7.8 billion from the State's Budget Stabilization Account (the "BSA"), $450 million from the
Safety Net Reserve and all funds in the State's Public School System Stabilization Account.
• Triggers – The 2020-21 Budget includes $11.1 billion in reductions and deferrals that would be restored
if at least $14 billion in federal funds are received by October 15, 2020. If the State receives less than
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this amount, reductions and deferrals would be partially restored. The triggers includes $6.6 billion in
deferred spending on education, $970 million in funding for the California State University and
University of California systems, $2.8 billion in State employee compensation and $150 million for
courts, as well as funding for various other State programs. The triggers would also fund an additional
$250 million for county programs to backfill revenue losses.
• Federal Funds — The 2020-21 Budget relies on $10.1 billion in federal funds, including $8.1 billion of
which has already been received. This relief includes recent congressional approval for a temporary
increase in the federal government's share of Medicaid costs, a portion of the State's Coronavirus Relief
Fund allocation pursuant to the CARES Act and federal funds provided for childcare programs.
• Borrowing/Transfers/Deferrals — The 2020-21 Budget relies on $9.3 billion in special fund borrowing
and transfers, as well as deferrals to K-14 education discussed further herein. Approximately $900
million of special fund borrowing is associated with reductions to State employee compensation and is
subject to the triggers discussed above.
• Increased Revenues — The 2020-21 Budget temporarily suspends for three years net operating loss tax
deductions for medium and large businesses and limits business tax credits, with an estimated increase
in tax revenues of $4.3 billion in fiscal year 2020-21.
• Cancelled Expansions, Updated Assumptions and Other Measures — The 2020-21 Budget includes an
additional $10.6 billion of measures, including cancelling multiple programmatic expansions,
anticipated governmental efficiencies, higher ongoing revenues above the forecast included in the May
Revision, and lower health and human services caseload costs than assumed by the May Revision.
For fiscal year 2019-20, the 2020-21 Budget projects total general fund revenues and transfers of
$137.6 billion and authorizes expenditures of $146.9 billion. The State is projected to end the 2019-20 fiscal
year with total available general fund reserves of $17 billion, including $16.1 billion in the BSA and $900
million in the Safety Net Reserve Fund. For fiscal year 2020-21, the 2020-21 Budget projects total general
fund revenues and transfers of $137.7 billion and authorizes expenditures of $133.9 billion. The State is
projected to end the 2020-21 fiscal year with total available general fund reserves of $11.4 billion, including
$2.6 billion in the traditional general fund reserve (of which $716 million is earmarked for COVID-related
responses), $8.3 billion in the BSA and $450 million in the Safety Net Reserve Fund
Current and future State budgets will be significantly affected by the COVID-19 pandemic and other
factors over which the City has no control. The City cannot determine what actions will be taken in the future
by the State Legislature and the Governor to deal with the COVID-19 pandemic and resulting changing State
revenues and expenditures. There can be no assurance that, as a result of the COVID-19 pandemic or
otherwise, the State will not significantly reduce revenues to local governments (including the City) or shift
financial responsibility for programs to local governments as part of its efforts to address State financial
conditions. There can be no assurance that State actions to respond to the COVID-19 pandemic will not
materially adversely affect the financial condition of the City.
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 DOF, http://www.dof.ca.gov, under the
heading "California Budget." An impartial analysis of the budget is posted by the Legislative Analyst's Office
(the "LAO") at http://www.lao.ca.gov. In addition, various State official statements, many of which contain a
summary of the current and past State budgets and the impact of those budgets on cities in the State, may be
found at the website of the State Treasurer, http://www.treasurer.ca.gov. The information referred to is
prepared by the respective State agency maintaining each website and not by the City or the Underwriter, and
neither the City nor the Underwriter takes any 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.
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TAX MATTERS
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach,
California, Special Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming
the accuracy of certain representations and compliance with certain covenants and requirements described
herein, interest (and original issue discount) on the 2020 Certificates is excluded from gross income for federal
income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative
minimum tax imposed on individuals. In the further opinion of Special Counsel, interest (and original issue
discount) with respect to the 2020 Certificates is exempt from State of California personal income tax.
The difference between the issue price of a 2020 Certificate (the first price at which a substantial
amount of the 2020 Certificates of a maturity is to be sold to the public) and the stated redemption price at
maturity with respect to the 2020 Certificates constitutes original issue discount. Original issue discount
accrues under a constant yield method, and original issue discount will accrue to the owner of the 2020
Certificate before receipt of cash attributable to such excludable income. The amount of original issue
discount deemed received by the owner of a 2020 Certificate will increase the owner's basis in the applicable
2020 Certificate. In the opinion of Special Counsel, the amount of original issue discount that accrues to the
owner of a 2020 Certificate is excluded from the gross income of such owner for federal income tax purposes,
is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals. In
the opinion of Special Counsel, the amount of original issue discount that accrues to the Beneficial Owner of a
2020 Certificate is exempt from State of California personal income tax.
Special Counsel's opinion as to the exclusion from gross income for federal income tax purposes of
interest (and original issue discount) due with respect to the 2020 Certificates is based upon certain
representations of fact and certifications made by the City and others and is subject to the condition that the
City and the Corporation comply with all requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), that must be satisfied subsequent to the execution and delivery of the 2020 Certificates to assure that
the portions of each Lease Payment constituting interest (and original issue discount) will not become
includable in gross income for federal income tax purposes. Failure to comply with such requirements of the
Code might cause interest (and original issue discount) due with respect to the 2020 Certificates to be included
in gross income for federal income tax purposes retroactive to the date of execution and delivery of the 2020
Certificates. The City and the Corporation will covenant to comply with all such requirements applicable to
each, respectively.
The amount by which an owner's original basis for determining loss on sale or exchange in the
applicable 2020 Certificate (generally, the purchase price) exceeds the amount payable on maturity (or on an
earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the
Code; such amortizable bond premium reduces the Beneficial Owner's basis in the applicable 2020 Certificate
(and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The
basis reduction as a result of the amortization of bond premium may result in an owner realizing a taxable gain
when a 2020 Certificate is sold by the Beneficial Owner for an amount equal to or less (under certain
circumstances) than the original cost of the 2020 Certificate to the owner. Purchasers of the 2020 Certificate
should consult their own tax advisors as to the treatment, computation and collateral consequences of
amortizable bond premium.
Special Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not
occurring) after the date hereof. Special Counsel has not undertaken to determine, or to inform any person,
whether any such actions or events are taken or do occur. The Trust Agreement, the Lease and the Tax
Certificate relating to the 2020 Certificates permit certain actions to be taken or to be omitted if a favorable
opinion of a Special Counsel is provided with respect thereto. Special Counsel expresses no opinion as to the
effect on the exclusion from gross income for federal income tax purposes of interest (and original issue
discount) due with respect to any 2020 Certificates if any such action is taken or omitted based upon the advice
of counsel other than Special Counsel.
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Although Special Counsel will render an opinion that interest (and original issue discount) with
respect to the 2020 Certificates is excluded from gross income for federal income tax purposes provided that
the City and the Corporation each continues to comply with certain requirements of the Code, the ownership of
the 2020 Certificates and the accrual or receipt of interest (and original issue discount) with respect to the 2020
Certificates may otherwise affect the tax liability of certain persons. Special Counsel expresses no opinion
regarding any such tax consequences. Accordingly, before purchasing any of the 2020 Certificates, all
potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the
2020 Certificates.
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 2020 Certificates will be
selected for audit by the IRS. It is also possible that the market value of the 2020 Certificates might be
affected as a result of such an audit of the 2020 Certificates (or by an audit of similar bonds). No assurance
can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not
change the Code (or interpretation thereof) subsequent to the issuance of the 2020 Certificates to the extent that
it adversely affects the exclusion from gross income of interest (and original issue discount) with respect to the
2020 Certificates or their market value.
SUBSEQUENT TO THE ISSUANCE OF THE 2020 CERTIFICATES THERE MIGHT BE
FEDERAL, STATE, OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY
CHANGES TO OR INTERPRETATIONS OF FEDERAL, STATE, OR LOCAL LAW) THAT AFFECT THE
FEDERAL, STATE, OR LOCAL TAX TREATMENT OF THE 2020 CERTIFICATES INCLUDING THE
IMPOSITION OF ADDITIONAL FEDERAL INCOME OR STATE TAXES BEING IMPOSED ON
OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE 2020 CERTIFICATES.
THESE CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE
2020 CERTIFICATES. NO ASSURANCE CAN BE GIVEN THAT SUBSEQUENT TO THE DELIVERY
OF THE 2020 CERTIFICATES STATUTORY CHANGES WILL NOT BE INTRODUCED OR ENACTED
OR JUDICIAL OR REGULATORY INTERPRETATIONS WILL NOT OCCUR HAVING THE EFFECTS
DESCRIBED ABOVE. BEFORE PURCHASING ANY OF THE 2020 CERTIFICATES, ALL POTENTIAL
PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY
CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR
COLLATERAL TAX CONSEQUENCES RELATING TO THE 2020 CERTIFICATES.
The form of Special Counsel's proposed opinion with respect to the 2020 Certificates is attached
hereto in Appendix D.
CERTAIN LEGAL MATTERS
Certain legal matters incident to the authorization, sale, execution and delivery of the 2020
Certificates are subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation,
Newport Beach, California, Special Counsel. A complete copy of the proposed form of opinion of Special
Counsel is contained in Appendix D hereto. Special Counsel has not undertaken any responsibility to the
Owners for the accuracy, completeness or fairness of this Official Statement or other offering materials
relating to the 2020 Certificates and expresses no opinion relating thereto. Certain legal matters will be passed
upon for the City and the Corporation by the City Attorney and by Stradling Yocca Carlson & Rauth, a
Professional Corporation, as Disclosure Counsel, and for the Trustee by its counsel. Certain legal matters will
be passed upon for the Underwriter by Kutak Rock LLP. Compensation of Special Counsel is contingent upon
the execution and delivery of the 2020 Certificates.
Special Counsel represents the City in connection with the execution and delivery of the 2020
Certificates. From time -to -time Special Counsel represents the Underwriter in connection with other
financings and matters unrelated to the 2020 Certificates. Special Counsel does not represent the Underwriter
or any other party with respect to the execution and delivery of the 2020 Certificates other than the City.
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LITIGATION
To the best knowledge of the City, there is no action, suit or proceeding known to be pending, or
threatened, restraining or enjoining the execution or delivery of the 2020 Certificates, the Trust Agreement, the
Lease, the Assignment Agreement or any other document relating to the 2020 Certificates, or in any way
contesting or affecting the validity of the foregoing.
There are a number of lawsuits and claims pending against the City. In the opinion of the City, such
suits and claims as are presently pending will not have a material adverse effect on the ability of the City to
make Lease Payments.
RATING
S&P Global Ratings, a Standard & Poor's Financial Services LLC business ("S&P") has assigned the
rating of " " to the 2020 Certificates. S&P, has also assigned an issuer rating of " "to the City. Such
ratings reflect only the view of such organizations and any desired explanations of the significance of such
ratings should be obtained from S&P, at the following address: Standard & Poor's Corporation, 55 Water
Street, New York, New York 10041. Generally, a rating agency bases its rating on the information and
materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such
ratings will continue for any given period of time or that such ratings will not be revised downward or
withdrawn entirely by the rating agencies, if in the judgment of such rating agencies, circumstances so warrant.
Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of
the 2020 Certificates.
UNDERWRITING
The 2020 Certificates were sold to Stifel, Nicolaus & Company, Incorporated (the "Underwriter") at
negotiated sale. The 2020 Certificates are being purchased by the Underwriter for $ (representing
the par amount of the 2020 Certificates, plus premium of $ , less an underwriter's discount of
$ ). The Underwriter is committed to purchase all of the 2020 Certificates if any are purchased.
The Underwriter may offer and sell the 2020 Certificates to certain dealers (including dealers depositing 2020
Certificates into investment trusts) and others at prices lower than the offering prices stated on the cover of this
Official Statement. After the initial public offering, the public offering prices of the 2020 Certificates may be
changed from time to time by the Underwriter.
MUNICIPAL ADVISOR
KNN Public Finance, LLC, Los Angeles, California (the "Municipal Advisor"), served as municipal
advisor to the City with respect to the sale of the 2020 Certificates. The Municipal Advisor will receive
compensation contingent upon the sale and delivery of the 2020 Certificates. 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.
The Municipal Advisor is an independent advisory firm and is not engaged in the business of
underwriting, trading or distributing municipal or other public securities.
CONTINUING DISCLOSURE
The City has agreed to execute a Continuing Disclosure Agreement (the "Disclosure Agreement") in
connection with the delivery of the 2020 Certificates for the benefit of the Underwriter, holders and beneficial
owners of the 2020 Certificates to provide certain financial information and operating data relating to the City
by no later than 270 days following the end of the City's fiscal year (the "Annual Report") and to provide
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notices of the occurrence of certain enumerated events (the "Listed Events"). The Annual Reports will be filed
on behalf of the City by Digital Assurance Certification L.L.C. (the "Dissemination Agent") with the
Municipal Securities Rulemaking Board (the "Repository"). Notices of Listed Events will be filed by the
Dissemination Agent with the Repository. The specific nature of the information to be included in the Annual
Report and the notices of Listed Events is set forth in APPENDIX E—"FORM OF CONTINUING
DISCLOSURE AGREEMENT." The City has agreed to execute the Disclosure Agreement in order to assist
the Underwriter in complying with Securities and Exchange Commission Rule 15c2 -12(b)(5) (the "Rule").
See APPENDIX E—"FORM OF CONTINUING DISCLOSURE AGREEMENT."
Within the past five years, the City has not failed to comply in all material respects with any previous
undertaking with regard to the Rule to provide annual reports or notices of Listed Events. The full text of the
Disclosure Agreement is set forth in Appendix E.
FINANCIAL STATEMENTS OF THE CITY
Included herein as Appendix B are the audited financial statements of the City as of and for the year
ended June 30, 2019, together with the report thereon dated December 18, 2019 of White Nelson Diehl Evans
LLP (the "Auditor"). Such audited financial statements have been included herein in reliance upon the report
of the Auditor. The Auditor has not undertaken to update the audited financial statements of the City or its
report or to take any action intended or likely to elicit information concerning the accuracy, completeness or
fairness of the statements made in this Official Statement, and no opinion is expressed by the Auditor with
respect to any event subsequent to its report dated December 18, 2019.
MISCELLANEOUS
Included herein are brief summaries of certain documents and reports, which summaries do not
purport to be complete or definitive, and reference is made to such documents and reports for full and complete
statements of the contents thereof. 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 City and the purchasers or Owners of
any of the 2020 Certificates.
The execution and delivery of this Official Statement has been duly authorized by the City.
CITY OF NEWPORT BEACH
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APPENDIX A
CITY OF NEWPORT BEACH
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APPENDIX A
THE CITY OF NEWPORT BEACH
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TABLE OF CONTENTS
Page
INFORMATION REGARDING THE CITY OF NEWPORT BEACH.......................................................................1
COVID-19 Pandemic Impacts.......................................................................................................................................................... 1
General...................................................................................................................................................................................... 4
Government.............................................................................................................................................................................. 5
CityManagement...................................................................................................................................................................... 5
Employeeand Employee Relations.......................................................................................................................................... 6
RiskManagement..................................................................................................................................................................... 6
CITY FINANCIAL INFORMATION...........................................................................................................................7
Accounting and Financial Reporting........................................................................................................................................ 7
CityBlended Component Units................................................................................................................................................ 8
Budget Procedure, Current Budget and Historical Budget Information.................................................................................... 8
Comparative Change in Fund Balance of the City General Fund........................................................................................... 13
Comparative General Fund Balance Sheets of the City .......................................................................................................... 14
MajorRevenues...................................................................................................................................................................... 14
PropertyTaxes........................................................................................................................................................................ 15
SalesTaxes............................................................................................................................................................................. 19
TransientOccupancy Tax....................................................................................................................................................... 19
Chargesfor Services............................................................................................................................................................... 20
OtherTaxes............................................................................................................................................................................. 20
PropertyIncome...................................................................................................................................................................... 20
OtherRevenues....................................................................................................................................................................... 20
State of California Motor Vehicle In -Lieu Payments.............................................................................................................. 21
Long -Term Liabilities............................................................................................................................................................. 21
CapitalImprovement Program................................................................................................................................................ 22
FinancialPolicies.................................................................................................................................................................... 22
RetirementSystem.................................................................................................................................................................. 24
OtherPost -Employment Benefits........................................................................................................................................... 32
ECONOMIC AND DEMOGRAPHIC INFORMATION...........................................................................................35
Population............................................................................................................................................................................... 35
BuildingActivity .................................................................................................................................................................... 35
PersonalIncome...................................................................................................................................................................... 36
Employment............................................................................................................................................................................ 38
CommercialActivity ............................................................................................................................................................... 40
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APPENDIX A
INFORMATION REGARDING THE CITY OF NEWPORT BEACH
COVID-19 Pandemic Impacts
General. The City of Newport Beach's (the "City") General Fund revenue sources have been
adversely impacted by the health-related and economic impacts of the COVID-19 pandemic. Efforts to
respond to and mitigate the spread of COVID-19 have had a severe impact on the State and local economy and
triggered a recession. There have been many fiscal challenges attributed to the global COVID-19 pandemic,
including a projected gross domestic product decline, historic increases in unemployment claims in the region,
travel restrictions and a decline in consumer spending resulting from closures of non-essential goods and
services. The COVID-19 pandemic and the efforts to mitigate its spread has resulted in significant declines in
City revenues from recent levels. Additionally, uncertainty exists with inflation, and state, local, federal and
international policies that may result in further declines in the future.
On March 19, 2020, the Governor issued Executive Order N-33-20, a mandatory Statewide shelter -in-
place order applicable to all non-essential services. The State has implemented a four stage reopening plan for
cities and counties depending on certain metrics related to COVID-19 (the "California Resilience Roadmap").
On May 4, 2020, the Governor issued Executive Order N-60-20 to allow reopening of lower -risk business and
spaces as part of Stage Two of the California Resilience Roadmap, and then to allow the reopening of high-risk
businesses and spaces as part of Stage Three of such plan.
On July 13, 2020, as a result of the regression of COVID-19 indicators, the Governor issued another
order requiring all counties within the State to close indoor operations in certain sectors, including dine -in
restaurants, wineries and tasting rooms, movie theatres, family entertainment centers, zoos and museums and
cardrooms. The Governor's July 13, 2020 order also required certain counties (including the County of
Orange (the "County")) to shut down additional industries and activities, including gyms and fitness centers,
places of worship and cultural ceremonies (such as wedding and funerals), offices for non-critical
infrastructure sectors, personal care services (such as nail salons, body waxing and tattoo parlors) and shopping
malls.
The temporary closures caused by COVID-19 have led to a stark increase in unemployment across the
County and the nation. Depending on the length and the breadth of the impacts of COVID-19, the economic
costs may be very significant for the City and the region's economy. As more restaurants, retail stores and
other non-essential businesses temporarily or permanently close, unemployment figures could continue to
remain elevated. [According to the State Employment Development Department, the County's unemployment
rate was 13.7% in June 2020, down from 14.7% in May 2020. The unemployment rate of the City, County
and State in September 2020 was 6.6%, 9% and 10%, respectively.
There are many variables that will continue to contribute to the economic impact of the COVID-19
pandemic and the recovery therefrom, including the length of time social distancing measures are in place, the
effectiveness of State and Federal governments' relief programs and the timing for the containment and
treatment of COVID-19, and the City cannot predict the extent or duration of such impacts.
Service Impacts. The City has continued to provide core services including public safety (police and
fire), and water and sewer services without disruption during the COVID-19 pandemic. However, the
COVID-19 pandemic has impacted certain other services that the City provides. During periods when the stay
at home orders have been in effect, City Hall and the City's public libraries and community centers are closed
for public use. The City has implemented an Emergency Telecommuting Policy that specifies the conditions
under which employees are allowed to telecommute and the rules for doing so. The City has also mandated
that City employees work A/ B shifts to ensure continuity of operations, accommodate social distancing and
reduce viral load within City Hall.
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City Hall closed to the public beginning July 13, based on concerns for the health and safety of
employees and the public as COVID-19 cases increase throughout the state and County of Orange. All City
services continue through phone, email and drop-off/pickup. For planning, building, public works or fire
permit applications, customers are asked to leave applications in a designated drop box outside City Hall. Plan
checks and revisions can be submitted for review by email or drop box. The Cashier's Office will accept
payments online, by phone and by drop box. The Newport Beach Public Library will continue to provide
pickup and drop-off services through newportbeachlibrary.org. In alignment with City Hall, the City's Police
Department has closed its front -counter service to the public. However, all essential police services will
continue and communications are being handled by phone and email. All Recreation centers will continually
evaluate their in-person programming in conjunction with the existing emergency orders and provide on-line
programing and instruction for the benefit of the community. Until such time as gatherings are allowed, all
facilities remain closed to the public. The public is encouraged to participate in City Council and commission
meetings through the live web stream at newportbeachca.gov and can comment live by phone. These
measures will be in place until further notice. The City, in coordination with Orange County health
department, will monitor COVID-19 data for indications that COVID-19 cases are flattening or declining.
Financial Impacts. The closure of businesses and public facilities has negatively impacted various
sources of City revenues, including sales tax and transient occupancy tax revenues, which are generally two of
the City's largest tax revenue sources. See "CITY FINANCIAL INFORMATION—Fiscal Year 2021 Revised
Budget" and "—Major Revenue Sources" below.
The State has delayed the deadline for the filing and payment of sales and use taxes by 90 days for all
but the largest taxpayers. Businesses with less than $5 million in taxable annual sales are authorized to defer
up to $50,000 in sales tax and enter into a 12 -month, zero interest payment plan. The Governor has also issued
an Executive Order for waivers of late penalties on property taxes. On March 25, 2020, the Orange County
Treasurer Tax Collector Shari Freidenrich announced her plan to grant waivers on penalties to taxpayers as
allowed by existing law to assist them during these challenging times, providing that for taxpayers that do not
make payment of property taxes due to COVID-19 virus by April 10, such taxpayers would be expected to
submit to the Treasurer a Penalty Cancellation Request Form and documentation to support the cancellation of
penalties as allowed in limited circumstances under State law, allowing for waiver of penalties, costs and other
charges when failure to make a timely payment is due to reasonable cause and circumstances beyond the
taxpayer's control, and occurred notwithstanding the exercise of ordinary care in the absence of willful neglect.
Such efforts to relieve the financial impact of the COVID-19 pandemic on taxpayers have resulted in delayed
revenue collection by the City.
More significantly, hoteliers suffered a sudden and dramatic decline in occupancy in the fourth quarter
of Fiscal Year 2019-2020. Transient occupancy taxes finished roughly $4 million below the original projected
budget and service fees fell short of original projections by $2.5 million. In all, the financial impact of
COVID-19 in the fourth quarter of Fiscal Year 2019-2020 proved to be less impactful to the City than was
previously feared. At the onset of the pandemic City Management lowered revenue estimates by $10 million,
reduced operating budgets by $5 million, enacted a selective hiring freeze and deferred a significant amount of
capital spend to avoid a significant use of reserves. In the end General Fund revenues finished at nearly the
original estimate of $229 million roughly $10 million above the revised revenue estimate of $219 million.
However, the negative impacts from the COVID-19 pandemic on the City's revenues in fiscal year
2019-20 are expected to continue into fiscal year 2020-21 and potentially several fiscal years beyond
depending on the pace of recovery of the local economy and the return of conventions and tourism activity to
the levels which existed prior to the outbreak of the COVID-19 pandemic. While certain businesses and
industries have begun to reopen, social distancing protocols currently remain intact. These protocols could
continue to limit the capacity of businesses, and many other tourism and sales tax generating activities for the
City. See "—Fiscal Year 2021 Revised Budget" and "—Major Revenue Sources."
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Impact to the Fiscal Year 2020-2021 Budget. The General Fund operating revenue estimates for
Fiscal Year 2020-21 were reduced to $199.6 million nearly $30 million below 2018-19 and 2019-20 actuals.
The City's original property tax estimate is 4.2 percent over the prior year revised budget. In a press release on
June 29, 2020, the Orange County Assessors' Office revealed that the Newport Beach assessed property tax
roll grew by 4.7% confirming the City's conservative estimate of its largest source of revenue. Property taxes
are likely to be among the least affected revenue sources by the pandemic (at least in the short term). While
there may be slightly higher than normal property tax payment delinquencies, the City's property tax revenue
growth estimate of 4.2% still appears to be conservative. Overall, assessed valuation (AV) has been stable
during the current and previous economic downturns with growth in each of the last 26 years and is among the
highest in the county. Property taxes are the least volatile and last to show a deceleration due to the inherent
lag in the annual assessed property valuation process. The City's sales tax base is largely generated from three
main industry categories including Autos and Transportation, General Consumer Goods, and
Restaurants/Hotels. Due to the severe impacts on economic activity that is projected across all industry
categories, the City is projecting a 16.6 percent reduction in sales tax from the prior year revised budget.
Transient occupancy tax revenue is the most severely impacted revenue source as most major hotels within the
City were temporarily closed and expected to remain under full capacity for some time. The City is planning
for a prolonged impact on tourism, allowing for a 66 percent, or $12.6 million reduction in transient occupancy
taxes from the prior year revised budget. For the months of July and August 2020, commercial hoteliers have
been approximately 55% below 2019 actuals. Two hotels, the Renaissance Newport Beach and The Fashion
Island Hotel remain closed for business.
The City carefully reviewed the pandemic's impact on businesses, real estate and the tourism industry;
discussed potential outcomes with economic consultants and developed a conservative revenue forecast based
on what was known at that time. The City continues to monitor the virus outbreak, related government
mandated closures, and other developing events to ensure its revenue projections are on track. The City also
reviews the actual revenues received on a monthly basis, and continues to meet regularly with subject matter
experts, both internally (department budget analysts) and externally (economic advisors, businesses, Chamber
of Commerce, local tourism experts) — to determine the continuing impacts of COVID-19 to the City's current
and future revenues and operations. Additional assessments will be made informally after the first quarter of
the fiscal year is complete, which may result in revised forecasts at that time.
Prior to making any recommended budget adjustments, the City estimated a budgetary shortfall of
approximately $33.2 million. To balance the projected deficit, a short-term or "bridge" solution was
developed that relies on a combination of targeted reductions in operating accounts with underutilization
trends, deferred capital project spending, reduced transfers to other funds and a partial suspension of the City's
discretionary pension payment to Ca1PERS, pending Council reinstatement if the fiscal outlook improves. Due
to the City's long-term planning practices, short-term adjustments were made to provide the City time to
determine the longer-term impacts and develop service level adjustments, including changes to personnel and
service delivery models, if necessary. This will prevent the City from having to make unnecessarily deep City
service cuts in the near-term that severely impact the community and the organization. The General Fund
budget for Fiscal Year 2019-20 was balanced and included total sources and uses of $230.9 million. Sources
include prior year surplus, operating revenues (net of restricted revenues) and interfund transfers -in. Total uses
include operating expenditures and transfers -out. The City is fortunate to have been in excellent financial
health prior to the global pandemic. Conservative budgeting and sound financial policies have resulted in a
trend of General Fund operating surpluses and strong reserve levels for several years. Due to the significant
impact to the City's revenue base resulting from the global pandemic, it was necessary to appropriate the prior
year surplus of $12.1 million to fund General Fund operations in Fiscal Year 2020-21. Expenditure decreases
in the amount of $3.9 million include a $2 million reduction for anticipated salary savings for the hiring freeze
for non-essential positions until January 2021; and departmental reductions in the amount of $1.9 million
based on underutilization trends. One-time reductions to transfers were used to balance the projected deficit.
Inter -fund transfers or "transfers -out" include resources transferred to other funds, which are used to
accumulate resources for long-term liabilities or replace capital assets. The City has deferred certain
noncritical public works projects for at least one year. There are numerous projects in progress that will
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remain funded and new projects are funded in the Fiscal Year 2020-21 Budget because they are considered
active and essential for maintenance of the City's critical capital assets and infrastructure. The Public Works
and Utilities Departments will continue the effective operation, maintenance and repair of the City's water
system, sewer system, storm drain system, streets, sidewalks, and beaches. In order to balance the budget and
under the emergency provisions of Policy F-2 (Reserves Policy), the Fiscal Year 2020-21 budget has a $2.3
million draw from the Contingency Reserve. Pursuant to policy, staff will present a plan to City Council to
replenish the reserve within five years after the economy has stabilized. Fiscal Year 2019-20 revenues came in
$10.9 million higher than anticipated after the outbreak of the COVID-19 pandemic and is indicative of the
City's economic strength, even during the severe economic downturn the City finds itself in.
Through the end of the first quarter of Fiscal Year 2021, revenues have exceeded the Fiscal Year 2021
Budget by approximately $3.1 million, including sales tax approximately $800,000 higher than projected and
transient occupancy taxes approximately $1,700,000 higher than projected.
COVID-19 Funding. On March 27, 2020, the federal government passed the Coronavirus Aid,
Relief, and Economic Security Act (the "CARES Act") to provide emergency assistance and health care
response for individuals, families, and businesses affected by the COVID-19 pandemic. The CARES Act
provides $150 billion in payments to states and local governments from the Coronavirus Relief Fund ("CRF")
that may only be used to cover costs that: (1) are necessary expenditures incurred due to the public health
emergency with respect to the COVID-19; (2) were not accounted for in the budget most recently approved as
of the date of enactment of the CARES Act; and (3) were incurred during the period that begins on March 1,
2020, and ends on December 20, 2020. Governor Newsom directed $500 million of the CARES Act funds to
cities, and $1.3 billion to counties. The County of Orange received $243 million and distributed it to local
governments for expenses related to the COVID-19 response.
The City expects to receive nearly $4 million in CARES Act funding between fiscal years 2019-20
and 2020-21. The City received $72,314 from the U.S. Department of Health & Human Services as part of the
Provider Relief Fund for healthcare related expenses or lost revenues attributable to the coronavirus. The City
received $2.1 million from the County of Orange on June 9, 2020 to provide grants to small business impacted
by the COVID-19 pandemic. The City also received $769,758 on June 23, 2020, from the County of Orange,
to partially offset public safety activities during the pandemic. In fiscal year 2020-21 the City is expected to
receive over $1 million in additional Cares Act funds from the State of California in six equal installments
from July 2020 to December 2020 to offset the cost of the Public Safety response to the pandemic. If
additional CARES act or subsequent stimulus is approved, the City will continue efforts to maximize funds
made available to local governments.
Under federal guidelines, the requirement that expenditures be incurred "due to" the public health
emergency means that expenditures must be used for actions taken to respond to the public health emergency.
The CARES Act funds may not be used to cover shortfalls in government revenue, and communities receiving
these payments are required to certify compliance with federal guidance regarding expenditures of such funds.
Other Funding. The City also filed a $565,000 claim to the Federal Emergency Management Agency
(FEMA) for COVID related overtime, personal protective equipment and related cleaning products and
services. The disposition of FEMA claim will not likely be known for some time.
General
The City was incorporated under the general laws of the State of California (the "State") on
September 1, 1906 and became a chartered city in 1954. The City is located in the coastal center of the County
of Orange (the "County"), approximately 89 miles north of San Diego, 15 miles south of Long Beach and
45 miles southwest of Los Angeles. As of 2020, the City had an estimated population of 85,708, which
typically grows to over 100,000 during the summer months, in addition to 20,000 to 100,000 tourists daily.
Due to the impact of the State and local measures to limit the spread of COVID-19, the City has experienced a
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decline in hotel occupancy and in -door dining patrons but beachgoers continued to flock to local beaches,
residential short-term lodging and select retail establishments.
The City is a full service city providing its residents and visitors with the following services: general
governance, legal, financial, information technology, and administrative management; police, fire, paramedic,
lifeguard, and emergency medical transport services; engineering, construction, and maintenance of public
facilities, public streets, beaches, and parks; planning, zoning, and economic development services; building
inspection, plan check and code enforcement services; libraries and cultural and arts services; recreation and
senior services; and water, wastewater, rubbish disposal, and street light utilities services. The City provides
water and sewer service to most areas within City limits, but it does not provide gas, electrical, or other utility
service. Public elementary and secondary education is provided by school districts, which are separate
government entities.
Government
The City operates pursuant to a City Charter adopted in 1954. The City has a Council -Mayor form of
government. City Council members are elected by district but voted on by the population as a whole, and
serve four-year staggered terms. The City Council consists of the Mayor and six other members and is
responsible for, among other things, policy-making, passing local ordinances, adopting the budget, appointing
committees and hiring the City Manager, the City Attorney, and the City Clerk. The City Manager is
responsible for carrying out the policies and ordinances of the City Council, for overseeing the day to day
operations of the City and for appointing directors of departments.
The members of the City Council and the expiration dates of their respective terms are as follows:
CITY OF NEWPORT BEACH
City Council
Name Term Expires
Will O'Neill, Mayor, District 7 November 2020
Brad Avery, Mayor Pro Tem, District 2 November 2020
Diane B. Dixon, Council Member, District 1 November 2022
Duffy Duffield, Council Member, District 3 November 2022
Kevin Muldoon, Council Member, District 4 November 2022
Jeff Herdman, Council Member, District 5 November 2020
Joy Brenner, Council Member, District 6 November 2022
City Management
A summary of certain City executive staff are described below.
City Manager. Ms. Grace Leung serves as City Manager. Ms. Leung began serving as City Manager
of the City in September 2018. Ms. Leung has over two decades of experience working in local government.
Prior to joining the City, she was the acting city manager of the City of Irvine. Ms. Leung also worked for the
City of Long Beach and the City of Sunnyvale, where she spent 18 years, specializing in municipal finance,
budgeting and administration. Ms. Leung holds a Bachelor's degree from Columbia University in Urban
Studies and Master's degree in Public Policy from the Kennedy School of Government at Harvard University.
She is a member of the International City Manager's Association.
Interim Finance Director/Treasurer. Carol Jacobs serves as the Assistant City Manager/Interim
Finance Director/Treasurer for the City of Newport Beach. Ms. Jacobs has over three decades of professional
experience working in the public and private sectors, leading organizations and managing community
development, municipal accounting, budget, finance and information technology operations. She previously
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served as the Finance Director and City Manager of Stanton, and City Manager in Eastvale and Grand Terrace
and held staff positions in finance and public works for the City of Costa Mesa. Carol also worked in the
private sector as a senior manager for a financial services consulting company. Carol earned a Master's in
Public Administration and a Bachelor of Arts degree from the California State University, Fullerton. She is a
member of the International City/County Managers Association (ICMA) and is an ICMA Credentialed
Manager.
Employee and Employee Relations
As of June 30, 2020, the City had approximately 728 full-time employees and 160 part-time FTE
employees. In accordance with the provisions of California Government Code Section 3500, the City
participates in labor negotiations with its employee associations. The result of the negotiations processes are
memorialized in memoranda of understanding ("MOU's") reached between the City and the City employee
associations. The table below lists the City's 10 employee associations and the approximate membership as of
February 27, 2020, as well as the unrepresented executive employees, and the expiration date of the MOU:
UnitlAffiliation
Newport Beach Firefighters Association
Fire Management Association
Lifeguard Management Association
Police Association
Police Management Association
Association of Newport Beach Ocean Lifeguards
Newport Beach City Employees Association
Newport Beach Employees League
Professional & Technical Association
Part Time Employee Association of Newport Beach
Source: City of Newport Beach.
Terms of expired MOUS remain in effect until new MOUS are executed.
Approximate
Number of
Authorized
FTE's MOU
In Organization Expiration Date
118
December 31, 2021
4
June 30, 2022
13
December 31, 2021
192
June 30, 2021
33
June 30, 2022
28
June 30, 2021
93
December 31, 2021
105
December 31, 2021
79
December 31, 2021
55
December 31, 2021
A total of approximately 87 management and confidential employees are exempt from collective
bargaining. Salaries and benefits for exempt employees are set by the City Council pursuant to the City's Key
and Management Compensation Plan. The City has never experienced a strike, slowdown or work stoppage.
Risk Management
The City is exposed to various risks of loss related to torts, theft of, damage to, and destruction of
assets, errors and omissions, injuries to employees, and natural disasters. The City carries commercial
insurance with independent third parties for loss risks associated with real and personal property, and
automotive liability. The City purchases fidelity bonds for employees in key positions. Settled claims from
these risks have not exceeded commercial insurance coverage for the past three years.
The City utilizes the California State Association of Counties -Excess Insurance Authority ("CSAC-
EIA"), joint powers authority, to provide excess insurance for general liability and workers' compensation
programs. For general liability, the City has excess coverage of $25 million per occurrence with a self-insured
retention ("SIR") of $500,000 per occurrence. For worker's compensation, the City has coverage equal to the
statutory limit per occurrence with a SIR of $500,000.
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The Insurance Reserve Fund was established to account for costs associated with general liability and
workers' compensation. The Insurance Reserve Fund is accounted for as an internal service fund where assets
are set aside for risk management, administration, claim settlements and benefit distribution. A premium is
charged to each fund that accounts for part-time or full-time employees. The total charge allocated to each of
the funds is calculated using trends in actual experience after considering unexpected and unusual claims.
Fund Liabilities are reported when it is probable that a loss has occurred, and the amount of the loss
can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported.
Claims liabilities are calculated considering the effects of inflation, recent claim settlement trends including
frequency and amount of payouts and other economic and social factors. The total liability claims payable
include $23,222,907 which represents the discounted present value at June 30, 2019.
The claims were discounted using an interest rate of three percent.
For the past three years, no payment on any claim or judgment has exceeded the amount of applicable
insurance.
For additional information with respect to the City's risk management program and CSAC-EIA, see
Note 8 to the City's audited financial statements for fiscal year 2018-19 attached hereto as Appendix C.
CITY FINANCIAL INFORMATION
Accounting and Financial Reporting
The City maintains its accounting records in accordance with Generally Accepted Accounting
Principles ("GAAP") and the standards established by the Governmental Accounting Standards Board
("GASB").
The government -wide financial statements are presented using the economic resources management
focus and the accrual basis of accounting. Program revenues include charges for services, special assessment
and payments made by parties outside of the reporting government's citizenry if that money is restricted to a
particular program. Program revenues are netted with program expenses in the statement of activities to
present the net cost of each program.
The underlying accounting system of the City is organized and operated on the basis of separate funds,
each of which is considered a separate accounting entity. In fund financial statements, governmental funds are
presented using the modified -accrual basis of accounting. Their revenues are recognized when they are
measurable and available as net current assets. Measurable means that the amounts can be estimated, or
otherwise determined. Available means that the amounts collected during the reporting period or soon enough
thereafter to be available to finance the expenditures accrued for the reporting period. The City uses an
availability of 60 days revenues.
Property taxes, sales taxes, franchise taxes, gas taxes, motor vehicle license fees, transient occupancy
taxes, grants and interest associated with the current fiscal period are all considered to be subject to accrual and
so have been recognized as revenues of the current fiscal period to the extent normally collected within the
availability period. Other revenue items are considered to be measurable and available when cash is received
by the City. Revenue recognition is subject to the measurability and availability criteria for the governmental
funds in the fund financial statements. In fund financial statements, governmental funds are presented using
the current financial resources measurement focus. This means that only current assets and deferred outflows
of resource, and current liabilities and deferred inflows of resources are generally included on their balance
sheets.
The City Council employs an independent certified public accountant, who, at such time or times as
specified by the City Council, at least annually, and at such other times as they determine, examines the
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financial statements of the City in accordance with generally accepted auditing standards, including tests of the
accounting records and other auditing procedures as such accountant considers necessary. As soon as
practicable, after the end of the fiscal year, a final audit and report is submitted by the independent certified
public accountant to the City Council.
The General Fund is the general operating fund of the City and is used to account for all activities,
except those required to be accounted for in other funds. The City expects to pay Lease Payments from
amounts in the General Fund. Tables 1 through 3 below set forth certain historical and current fiscal year
budget information for the General Fund. Information on the other governmental funds of the City as of
June 30, 2019 is set forth in Appendix C.
City Blended Component Units
General. Under GASB guidelines, component units of a primary government (i.e. the City) generally
include those that are legally separate entities but raise and hold economic resources for the direct benefit of
the primary government. Blended component units, although separate legal entities are, in substance, part of
the government's operations. Their funds are treated similarly to funds of the primary government (other than
the General Fund).
Newport Beach Public Facilities Corporation. The Newport Beach Public Facilities Corporation (the
"Corporation") is a blended component unit of the City. The Corporation was formed for the purpose of
assisting the City in financing public improvements. The Corporation's financial data and transactions are
included in the City's audit in the debt service fund. The debt service fund is used solely to account for the
activities of the Corporation and contains no other City debt financing activities. See Note la to the City's
audited financial statements attached to the Official Statement as Appendix C for more information with
respect to the Corporation. A description of the Corporation is also set forth under the caption "THE
CORPORATION" in the Official Statement.
Budget Procedure, Current Budget and Historical Budget Information
The City prepares and adopts an annual budget as required by the City Charter. The budget is the
operating and capital expenditure plan for the City for the fiscal year beginning on July 1 and ending on
June 30 of the following year and serves as the foundation for the City's financial planning and control.
In November of each year, the Finance Department prepares a budget calendar and issues budget
instructions to each department for use in preparing the budget. The instructions include budget guidelines and,
if necessary, appropriation targets for each department. The guidelines are developed by the Finance Director
and approved by the City Manager. In December, the Finance Department prepares updated revenue estimates
and fund balance projections for the current fiscal year.
By April, the departments submit revenue and expenditure appropriation requests that are summarized
by the Finance Department and presented to the City Manager for review. Following the City Manager's
review and amendment of the department requests, the Finance Department prepares the City Manager's
proposed budget for the next fiscal year, which is then submitted to the City Council and the Finance
Committee. The Finance Committee is then given the opportunity to question staff and discuss the budget
detail on at least two occasions. The City Council is permitted to hold as many budget study sessions as it
deems necessary. As part of the budget process, the City Council and the Finance Committee will hold joint
meeting not later than the second City Council meeting in May to discuss the budget detail. Following the joint
meeting, the Finance Committee provides a recommendation to the City Council regarding the budget detail,
which may include recommendations on items in the proposed budget revisions if specially asked by the City
Council to make such recommendations.
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The City Council can submit itemized proposed changes to the City Manager's proposed budget. On
or before June 30 of each year, the City Council holds the budget hearing and adopts the budget, with any
desired changes proposed by the City Council, as required by the City Charter.
The budget is prepared on a modified accrual basis. All unexpended and unencumbered
appropriations for the operating budget lapse at the end of each fiscal year. All appropriations in the capital
improvement budget for projects currently underway and remaining unexpended at June 30, as approved by
the City Manager, are appropriated to those projects. Incomplete projects may be appropriated by the City
Council during the budget process or by separate Council action.
Fiscal Year 2020-21 Revised Budget. The budget for fiscal year 2020-21 was adopted on June 9,
2020. The Revised Budget for fiscal year 2020-21 is net of the cost allocation of certain General Fund
expenditures to the Tide and Submerged Land Fund for the maintenance and administration of the Tidelands.
Fiscal year 2020-21 General Fund revenues appear as revised in the table below. As described above under
"— COVID-19 Pandemic Impacts," the COVID-19 pandemic has had a material impact on the City's General
Fund revenues. The Revised Budget projects fiscal year 2020-21 General Fund operating revenues of
approximately $201.3 million, which is an approximately $17.7 million decrease (approximately 8.1%) from
the fiscal year 2019-20 final budget (in each case excluding interfund transfers). Property tax revenues
represent the only major General Fund revenue source that is projected to increase in fiscal year 2020-21. In
the Revised Budget, the City is projecting property tax revenues of $117.5 million, which is an approximately
$4.8 million increase (approximately 4.2%) from the fiscal year 2019-20 final budget.
In the Revised Budget, the City anticipates two of the City's major General Fund revenue sources to
decrease significantly. The City is projecting transient occupancy tax revenues of approximately $6.4 million
in fiscal year 2020-21, which is an approximately $12.7 million decrease (approximately 66.3%) from the
fiscal year 2019-20 final budget. Sales tax revenues are projected to be $28.7 million, which is an
approximately $5.7 million decrease (approximately 16.6%) from the fiscal year 2019-20 final budget. See
"—Major Revenues" below.
To mitigate the impact of the COVID-19 pandemic on General Fund revenues, the Revised Budget
appropriates the prior fiscal year surplus of $12.1 million to General Fund operations for fiscal year 2020-21.
In addition, the Revised Budget includes $9.6 million of interfund transfers from other funds to partially
backfill the revenue shortfall for fiscal year 2020-21 and a $2.3 million draw from the City's Contingency
Reserve. However, the financial impact of COVID-19 has been less severe than had been previously
projected, the City is likely to replenish the reserve from the fiscal year 2019-20 surplus. See "—Financial
Policies—Reserve Policy" below.
The Revised Budget projects General Fund expenditures of approximately $207.2 million in fiscal
year 2020-21, which is an increase of approximately $5.9 million (approximately 2.95°/x) from the fiscal year
2019-20 final (revised) budget (in each case excluding interfund transfers). The budgeted expenditures for
fiscal year 2020-21 include all salary and benefit increases approved in the MOU's.
The Revised Budget includes, among others, the following measures with respect to expenditures
which are intended to mitigate the impact of the COVID-19 pandemic on the General Fund's ending fund
balance: (1) a hiring freeze on non-essential positions until January 2021, which is estimated to result in an
approximately $2 million reduction in General fund expenditures; (2) departmental reductions in the amount of
$1.9 million based on underutilization trends; and (3) approximately $1 million in reductions to the General
Fund in prior year one-time costs, one-time grants and funds carried over from the prior year that were
removed from the budget. The Revised Budget sets aside a $5 million reserve in anticipation of adverse
investment results that will increase the City's unfunded CalPERS (as defined herein) liability.
Set forth in Table 1 below are the original adopted, final revised and unaudited General Fund actuals
for fiscal year 2019-20 and the revised budget results for fiscal year 2020-21.
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TABLE 1
CITY OF NEWPORT BEACH
GENERAL FUND BUDGET TO ACTUAL COMPARISON
(Table continued on next page)
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Fiscal Year
Fiscal Year 2019-20
2020-21
Variance with
Final Budget
Original
Final
Unaudited
Positive
Revised
Budget
Budget (1)
Actuals 01
(Negative)
Budget 0)
Revenues:
Taxes and Assessments:
Property
$ 113,601,474
$ 112,723,626
$ 113,313,761
$ 590,135
$ 117,508,227
Sales
35,697,090
34,411,405
36,232,969
1,821,564
28,690,831
Transient Occupancy
24,483,131
19,087,031
20,847,883
1,760,852
6,434,115
Other Taxes
11,591,386
10,834,670
11,868,597
1,033,927
9,674,739
Intergovernmental
1,842,767
2,839,873
3,775,891
936,018
2,797,691
Licenses, Permits and Fees
4,859,712
4,511,573
4,703,758
192,185
4,253,386
Charges for Services
20,477,081
17,981,002
20,386,315
2,405,313
17,325,057
Fines and Forfeitures
3,362,928
2,974,408
3,467,981
493,573
3,530,343
Investment Income
1,505,673
1,505,673
1,295,547
(210,126)
1,112,200
Net Increase in Fair Value of
Investments
-
-
1,404,695
1,404,695
-
Property Income
11,149,239
10,162,463
11,195,560
1,033,097
9,152,696
Donations
116,500
749,965
786,173
36,208
146,570
Other
484,371
1,267,564
653,487
(614,077)
680,156
Total Revenues
$ 229,171,352
$ 219,049,254
$ 229,932,618
$ 10,883,364
$ 201,306,011
Expenditures:
General Government:
City Council
$ 881,199
$ 861,884
$ 678,330
$ 183,555
$ 850,850
City Clerk
1,065,439
1,043,448
975,626
67,822
1,207,489
City Attorney
2,623,784
2,475,079
2,284,088
190,991
2,708,982
City Manager
3,344,155
2,567,271
2,174,546
392,725
3,339,286
Finance
7,231,447
6,167,327
5,918,253
249,075
6,773,782
Human Resources
3,293,238
2,937,503
2,832,585
104,917
3,435,147
Total General Government
$ 18,439,263
$ 16,052,512
$ 14,863,427
$ 1,189,085
$ 18,315,536
(Table continued on next page)
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(Table continued from prior page)
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Fiscal Year
Fiscal Year 2019-20
2020-21
Variance with
Final Budget
Original
Final
Unaudited
Positive
Revised
Budget
Budget (1)
Actuals p)
(Negative)
Budget (1)
Public Safety:
Police
$ 66,040,641
$ 61,360,725
$ 61,502,769
$ (142,044)
$ 64,023,389
Fire
53,193,484
43,731,539
43,949,012
(217,472)
46,572,618
Total Public Safety
$ 119,234,124
$105,092,265
$105,451,781
$ (359,516)
$110,596,007
Public Works:
Public Works — Municipal
Operations
$ 27,194,832
$ 27,703,505
$ 26,000,625
$ 1,702,879
$ 26,611,104
Public Works
10,841,460
9,395,277
8,393,091
1,002,187
8,819,619
Utilities
4,758,696
4,634,105
4,656,884
(22,778)
5,076,422
Total Public Works
$ 42,794,988
$ 41,732,887
$ 39,050,599
$ 2,682,288
$ 40,507,145
Community Development:
Community Development
$ 12,048,980
$ 12,027,859
$ 11,453,714
$ 782,240
$ 11,890,797
Code and Water Quality
1,123,948
1,122,198
1,049,963
72,235
713,613
Enforcement
Total Community
$ 13,172,928
$ 13,150,056
$ 12,503,678
$ 854,475
$ 12,604,410
Development
Community Services:
Parking Operations
$ 2,304,921
$ 2,482,663
$ 1,944,820
$ 537,844
$ 2,487,655
Library Services
9,265,651
9,741,880
9,078,408
663,471
10,190,938
Recreation and Senior Services
13,853,165
12,912,149
12,021,030
891,119
$ 13,412,186
Total Community Services
$ 25,423,736
$ 25,136,692
$ 23,044,258
$ 2,092,434
$ 26,090,779
General Fund Non -Departmental
$ -
$ -
$ -
$ -
$ 130,226
Expense
General Fund Salary Savings
$ -
$
$ -
$ -
$ (1,089,507)
Total Expenditure Savings
$ -
$
$ -
$ -
$ (959,281)
Debt Service:
Principal
$ -
$
$ -
$ -
$ -
InterestandFiscalCharges
46,896
46,896
195,090
(148,194)
$ -
Total Debt Service
$ 46,896
$ 46,896
$ 195,090
$ (148,194)
$ -
Total Expenditures
$ 219,111,935
$201,211,308
$195,108,834
$ 6,310,571
$207,154,596
Excess (Deficiency) of Revenues
$ 10,059,417
$ 17,837,945
$ 34,823,784
$17,193,935
$ (5,848,585)
Over Expenditures
Other Financing Sources (Uses):
Transfers In
$ -
$ -
$ -
$ -
$ 9,623,249
Transfers Out(2)
(31,680,252)
(29,303,571)
(32,346,243)
(3,042,672)
(15,312,706)
Total Other Financing
$ (31,680,252)
$(29,303,571)
$ (32,346,243)
$ (3,042,672)
$ (5,689,457)
Sources
(Uses)
Net Change in Fund Balance
$ (21,620,835)
$ (11,465,626)
$ 2,477,542
$14,151,264
$ (11,538,042)(2)
Fund Balance, Beginning
$ 96,586,138
$ 96,586,138
$ 96,586,138
$ -
$ 99,063,680
Fund Balance, Ended
74,965,303L85.120.512
S 99,063.680
14.151.264
87.525.638
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0) Net of cost allocation of certain General Fund expenditures to the Tide and Submerged Land Fund for the maintenance and
administration of the Tidelands.
(Z) The $11.5 million change in fund balance in fiscal year 2020-21 represents the net result of revenues, expenditures transfers
in and out and the planned use of reserves.
Source: City of Newport Beach Finance Department; Unaudited actual results for fiscal year 2019-20; Revised Budget of City
for fiscal year 2020-21 as amended consistent with footnote (1).
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Comparative Change in Fund Balance of the City General Fund
The table below presents the City's audited General Fund Statement of Revenues, Expenditures and
Change in Fund Balance for fiscal years 2015-16 through 2019-20.
TABLE 2
CITY OF NEWPORT BEACH GENERAL FUND STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
FIVE YEAR COMPARISON
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2015-16
2016-17
2017-18
2018-19
2019-20
(Audited)
(Audited)
(Audited)
(Audited)
(Unaudited
Actuals)
Revenue:
Taxes and Assessments:
Property
$ 91,516,611
$ 96,964,060
$101,593,290
$ 108,365,261
$ 113,313,761
Sales
33,937,986
33,702,895
35,038,846
38,502,470
36,232,969
Sales Tax In -Lieu
2,870,474
-
-
-
-
Transient Occupancy
21,083,199
22,382,361
22,857,737
24,697,446
20,847,883
Other Taxes
8,398,979
8,533,230
11,858,391
11,348,656
11,868,597
Intergovernmental
2,127,317
2,284,666
3,680,149
3,921,340
3,775,891
Licenses, Permits and Fees
4,384,210
5,222,315
4,832,873
5,013,406
4,703,758
Charges for Services
18,817,193
19,191,209
19,817,014
19,456,669
20,386,315
Fines and Forfeitures
3,678,982
3,587,151
3,164,927
3,304,334
3,467,981
Investment Income
584,068
585,152
612,053
1,484,828
1,295,547
Net Increase in Fair Value of
376,310
-
-
1,273,506
1,404,695
Investments
Property Income
9,189,593
10,002,773
10,920,496
10,882,195
11,195,560
Donations
198,129
148,855
129,881
251,265
786,173
Other
1,966,056
1,769,677
2,010,809
1,311,218
653,487
Total Revenue
$199,129,107
$204,374,344
$216,516,466
$ 229,812,594
$ 229,932,618
Expenditures:
Current:
General Government
$ 13,837,082
$ 14,266,027
$ 15,041,710
$ 15,678,952
$ 14,863,427
Public Safety
86,444,910
88,752,387
97,806,150
103,174,815
105,451,781
Public Works
31,612,573
33,036,654
34,297,228
37,152,748
39,050,599
Community Development
10,783,781
11,565,887
11,644,988
12,173,839
12,503,678
Community Services
19,841,460
21,115,067
23,084,476
23,939,196
23,044,258
Capital Outlay
-
-
-
-
-
Debt Service:
Principal
-
-
-
-
-
Interest and Fiscal Charges
188,013
210,170
247,335
195,511
195,090
Total Expenditures
$162,707,819
$168,946,192
$182,121,887
$ 192,315,061
$ 195,108,834
Excess of Revenue Over
$ 36,421,288
$ 35,428,152
$ 34,394,579
$ 37,497,533
$ 34,823,784
Expenditures
Other Financing Sources (Uses):
Transfers In
$ 116,698
$ 462,792
$ 561,100
$ -
$ -
Transfers Out
(44,651,126)
(28,352,305)
(30,420,483)
(34,824,531)
(32,346,243)
Total Other Financing
$(44,534,428)
$ (27,889,513)
$(29,859,483)
$ (34,824,531)
$ (32,346,243)
Sources (Uses)
Net Change in Fund
$ (8,113,140)
$ 7,538,639
$ 4,535,096
$ 2,673,002
$ 2,477,542
Balance
Fund Balances, Beginning
89,952,541
81,839,401
89,378,040
93,913,136
96,586,138
Fund Balances, Ending
81 839 40189.378.040
93.913.136
96.586.13899.063.680
o>
Source: City of Newport Beach Comprehensive Annual
Financial Report for Fiscal Years 2015-16 through 2018-19
and unaudited actual
results for fiscal year 2019-20.
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Comparative General Fund Balance Sheets of the City
The table below presents the City's audited General Fund Balance Sheets for fiscal years 2015-16
through 2019-20.
ASSETS
Cash and Investments
Receivables:
Accounts
Interest
Intergovernmental Receivables
Advances to Other Funds
Due from Other Funds
Prepaid Items
Inventory
Total Assets
LIABILITIES, DEFERRED
INFLOWS AND FUND
BALANCES
Liabilities:
Accounts Payable
Accrued Payroll
Deposits Payable
Unearned Revenue
Due to Other Funds
Total Liabilities
Deferred Inflows of Resources:
Unavailable Revenue
Total Deferred Inflows of
Resources
Fund Balances:
Nonspendable
Restricted
Committed
Assigned
Unassigned
Total Fund Balances
Total Liabilities, Deferred
Inflows, and Fund Balances
TABLE 3
CITY OF NEWPORT BEACH
GENERAL FUND BALANCE SHEET
FIVE YEAR COMPARISON
Fiscal Years 2015-16 through 2019-20
2015-16 2016-17 2017-18 2018-19 2019-20
(Audited) (Audited) (Audited) (Audited) (Unaudited
Actuals)
$ 54,945,171 $ 74,478,501 $ 75,491,561 $ 82,021,959 $ 87,146,943
4,354,804
4,249,630
4,932,016
572,116
755,666
1,107,895
12,559,164
7,215,633
9,207,638
14,809, 559
13,926,659
12,926,659
7,923,338
1,263,462
3,584,795
176,172
268,665
895,075
225,165
238,693
229,196
95.565.48911Q2396.909
4,412,302
&11Q24A35
4,575,580
3,354,031
1,338,884
1,261,074
8,493,678
8,034,496
11,926,659
10,676,658
1,901,947
9,537
981,590
928,899
238,972
258,558
111.479.269
111.670.197
$ 7,147,703
$ 5,999,168
$ 4,650,781
$ 6,290,765
$ 4,670,113
1,958,513
1,715,080
3,787,302
3,965,364
4,031,693
2,322,309
3,226,795
2,717,312
2,573,380
2,394,534
2,222,563
2,077,826
1,971,897
2,063,622
1,260,676
$ 75,000
$ -
$ 1,334,407
$
$ 249,501
$ 75,000
$ -
$ 1,334,407
$
$ 249,501
15,210,896
14,434,017
14,050,930
13,147,221
11,864,116
3,083,133
3,797,009
4,412,302
4,757,437
5,710,436
2,726,020
10,570,638
13,444,487
13,335,675
2,210,811
4,201,311
567,132
590,368
1,199,682
2,598,828
56,618,041
60,009,244
61,415,049
64,146,123
76,679,489
$ 81,839,401
$ 89,378,040
$ 93,913,136
$ 96,586,138
$ 99,063,680
&-9 5,565,489 &102-396 ,909 $ 108,374,835
$ 111,479,269 $ 111,670,197
Source: City of Newport Beach Comprehensive Annual Financial Report for Fiscal Years 2015-16 through Fiscal Year 2018-19
and unaudited actual results for fiscal year 2019-20.
Major Revenues
The City derives its General Fund revenues from a variety of sources including ad valorem property
taxes, sales taxes, transient occupancy taxes, licenses, permits, charges for services provided by the City and
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other miscellaneous revenues. The City's total General Fund revenues for selected major revenue sources for
the past five fiscal years are set forth below.
TABLE 4
CITY OF NEWPORT BEACH
SELECTED MAJOR REVENUE SOURCES
Property Taxes
Property taxes have historically provided the largest tax revenue source for the City. In fiscal year
2018-19, property taxes allocated to the General Fund were approximately $108.4 million, providing 59% of
General Fund tax revenues and approximately 47% of total General Fund revenues. Based on estimated results
for fiscal year 2019-20, the City estimates receiving approximately $113.3 million in property tax revenues
allocated to the General Fund, providing 62% of General Fund tax revenues and approximately 49.5% of total
General Fund revenues. In the Revised Budget, the City is projecting property tax revenues of $117.5 million,
which is approximately 58.9% of budgeted General Fund revenues.
In California, property which is subject to ad valorem taxes is classified as "secured" or "unsecured."
The secured classification includes property on which any property tax levied by a county becomes a lien on
that property. A tax levied on unsecured property does not become a lien against the taxed unsecured property
but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on
secured property has priority over all other liens, arising pursuant to State Law, on the secured property,
regardless of the time of the creation of other liens. The valuation of property is determined as of January 1
each year, and installments of taxes levied upon secured property are due November 1 and February 1 and
become delinquent on the following December 10 and April 10, respectively. 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 enforcing 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
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2015-16
2016-17
2017-18
2018-19
2019-20
(Audited)
(Audited)
(Audited)
(Audited)
(Unaudited
Actuals)
Taxes and Assessments
Revenue Category
Property Tax
$ 91,516,611
$ 96,964,060
$101,593,290
$108,365,261
$113,313,761
Sales Tax
33,937,986
33,702,895
35,038,846
38,502,470
36,232,969
Sales Tax In -Lieu
2,870,474
-
-
-
-
Transient Occupancy
21,083,199
22,382,361
22,857,737
24,697,446
20,847,883
Other Taxes
8,398,979
8,533,230
11,858,391
11,348,656
11,868,597
Intergovernmental
2,127,317
2,284,666
3,680,149
3,921,340
3,775,891
Licenses, Permits and Fees
4,384,210
5,222,315
4,832,873
5,013,406
4,703,758
Charges for Services
18,817,193
19,191,209
19,817,014
19,456,669
20,386,315
Fines and Forfeitures
3,678,982
3,587,151
3,164,927
3,304,334
3,467,981
Investment Income
584,068
585,152
612,053
1,484,828
1,295,547
Net Increase in Fair Value of
Investments
376,310
-
-
1,273,506
1,404,695
Property Income
9,189,593
10,002,773
10,920,496
10,882,195
11,195,560
Donations
198,129
148,855
129,881
251,265
786,173
Other
1,966,056
1,769,677
2,010,809
1,311,218
653,487
Total
$199,129,107
204.374344216.516.466
229.812.594
$229,932,611
Source: City of Newport Beach Comprehensive
Annual Financial
Reports for Fiscal Years 2015-16
through 2018-19;
Unaudited actuals for fiscal Year 2019-20.
Property Taxes
Property taxes have historically provided the largest tax revenue source for the City. In fiscal year
2018-19, property taxes allocated to the General Fund were approximately $108.4 million, providing 59% of
General Fund tax revenues and approximately 47% of total General Fund revenues. Based on estimated results
for fiscal year 2019-20, the City estimates receiving approximately $113.3 million in property tax revenues
allocated to the General Fund, providing 62% of General Fund tax revenues and approximately 49.5% of total
General Fund revenues. In the Revised Budget, the City is projecting property tax revenues of $117.5 million,
which is approximately 58.9% of budgeted General Fund revenues.
In California, property which is subject to ad valorem taxes is classified as "secured" or "unsecured."
The secured classification includes property on which any property tax levied by a county becomes a lien on
that property. A tax levied on unsecured property does not become a lien against the taxed unsecured property
but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on
secured property has priority over all other liens, arising pursuant to State Law, on the secured property,
regardless of the time of the creation of other liens. The valuation of property is determined as of January 1
each year, and installments of taxes levied upon secured property are due November 1 and February 1 and
become delinquent on the following December 10 and April 10, respectively. 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 enforcing 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
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delinquent. The taxing authority has four methods of collecting unsecured personal property taxes: (1) a civil
action against the taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in
order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for
record in the County Recorder's Office in order to obtain a lien on certain property of the taxpayer, and
(4) seizure and sale of personal property, improvement or possessory interest belonging or taxable to the
assessee.
A ten percent penalty is added to delinquent taxes which have been levied with respect to property on
the secured roll. In addition, beginning on the July 1 following a delinquency, interest begins accruing at the
rate of 1 1/2% per month on the amount delinquent. Such property may thereafter be redeemed by the
payment of the delinquent taxes and the ten percent penalty, plus interest at the rate of 1 1/2% per month to the
time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State
and then is subject to sale by the county tax collector. A ten percent penalty also applies to the delinquent
taxes or property on the unsecured roll, and further, an additional penalty of 1 1/2% per month accrues with
respect to such taxes beginning on the varying dates related to the tax billing date.
The County employs an alternate method of property tax apportionment known as the "Teeter Plan",
pursuant to which the County apportions taxing agencies 100% of their levy (adjusted for roll changes) and
retains all delinquent receivables. However, the City is not a participant in the Teeter Plan. Accordingly, the
City receives its property tax receipts as described above and retains all delinquent receivables relating thereto.
However, the City also receives penalties and interest when property taxes are paid late. The City also
receives supplemental taxes throughout the year. As discussed above, under Order N-61-20, the City expects
to receive certain property tax payments for Fiscal Year 2020 later than usual, and without penalties or late
payments, as a result of the COVID-19 pandemic.
Legislation enacted in 1984 (Section 75 et seq. of the Revenue and Taxation Code of the State of
California), provides for the supplemental assignment and taxation of property as of the occurrence of a change
in ownership or completion of new construction. Previously, statutes enabled the assessment of such changes
only as of the next tax lien date following the change and thus delayed the realization of increased property
taxes from the new assessment for up to 14 months. Collection of taxes based on supplemental assessments
occurs throughout the year. Taxes due are prorated according to the amount of time remaining in the tax year,
with the exception of tax bills dated January 1 through May 31, which are calculated on the basis of the
remainder of the current fiscal year and the full 12 months of the next fiscal year.
In the past, the State Legislature has shifted property taxes from cities, counties and special districts to
the Educational Revenue Augmentation Fund. The term "ERAF" is often used as a shorthand reference for
this shift of property taxes. In 1992-93 and 1993-94, in response to serious budgetary shortfalls, the State
Legislature and administration permanently redirected over $3 billion of property taxes from cities, counties,
and special districts to schools and community college districts. The 2004-05 State budget included an
additional $1.3 billion shift of property taxes from certain local agencies, including the City, to occur in fiscal
years 2004-05 and 2005-06. See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES
AND APPROPRIATIONS—Proposition IA" and "—Proposition 22" for a description of certain limitations
on the State's authority over local government revenue sources.
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The following table sets forth the property tax rates for the City for the Fiscal Years 2015-16 through
2019-20.
TABLE 5
CITY OF NEWPORT BEACH
PROPERTY TAX RATES PER $100 OF ASSESSED VALUATION
Fiscal Years 2015-16 through 2019-20
The table below sets forth the secured and unsecured assessed valuations for property in the City for
the fiscal years 2015-16 through 2019-20.
TABLE 6
CITY OF NEWPORT BEACH
ASSESSED VALUATION
FISCAL YEARS 2015-16 THROUGH 2019-200)
2015-16 2016-17
2017-18
2018-19
2019-20
City Direct Rates:0)
Fiscal
City basic rate
1.000 1.000
1.000
1.000
1.000
Total City Direct Rate
1.000 1.000
1.000
1.000
1.000
Overlapping Rates:
$1,394,764,145
$1,465,016,213
$47,388,470,098
2016-17
Water Districts
0.047 0.047
0.047
0.047
0.032
School Districts
0.1826 0.1730
0.1764
0.1612
0.1726
Total Overlapping Rate
0.229 0.219
0.223
0.208
0.204
Total Direct & Overlapping Rate
&-12-29 1.21
L -1 —22a 1
1 2
1.204
00 In 1978, California voters passed Proposition 13, which sets the property
tax rate at a 1.00% fixed amount.
This 1.00% is
shared by all taxing agencies for which the subject property resides. In addition to the 1.00% fixed amount, property owners
are charged taxes as a percentage of assessed
property values for the payment of other debt obligations.
Source: Orange County Assessor 2015/16
- 2019/20 Tax Rate Table.
The table below sets forth the secured and unsecured assessed valuations for property in the City for
the fiscal years 2015-16 through 2019-20.
TABLE 6
CITY OF NEWPORT BEACH
ASSESSED VALUATION
FISCAL YEARS 2015-16 THROUGH 2019-200)
Source: County of Orange Auditor Controller's Office.
Although the County has adopted a Teeter Plan, the City has elected not to participate in the County's
Teeter Plan. Accordingly, the City's receipt of property taxes is dependent on actual collections by the
County. The following table sets forth property tax collections and delinquencies in the City as of June 30 for
fiscal years 2015-16 through 2019-20.
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Secured
Fiscal
Total Taxable
Year
Residential
Commercial
Other
Unsecured
Assessed Value
2015-16
$39,263,791,190
$5,264,898,550
$1,394,764,145
$1,465,016,213
$47,388,470,098
2016-17
41,834,060,284
5,539,551,197
1,398,481,252
1,569,593,832
50,341,686,565
2017-18
44,862,969,434
5,953,148,011
1,499,414,812
1,464,683,763
53,780,216,020
2018-19
48,246,937,786
6,466,645,074
1,474,416,367
1,513,162,553
57,701,161,780
2019-20
50,791,887,238
6,807,750,346
1,552,189,492
1,592,979,478
60,744,806,554
Source: County of Orange Auditor Controller's Office.
Although the County has adopted a Teeter Plan, the City has elected not to participate in the County's
Teeter Plan. Accordingly, the City's receipt of property taxes is dependent on actual collections by the
County. The following table sets forth property tax collections and delinquencies in the City as of June 30 for
fiscal years 2015-16 through 2019-20.
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TABLE 7
CITY OF NEWPORT BEACH
PROPERTY TAX LEVIES AND COLLECTIONS
Fiscal Years 2015-16 through 2019-20
(l) Exclusive of penalty charges.
(2) Delinquent amount collected through October 21, 2020.
Source: County of Orange Auditor Controller's Office.
As of , 2020, the Orange County Treasurer -Tax Collector has reported that the County has
collected [98.4%] of the property tax bills amounts (both installments), which is down [0.7]% from the prior
year. Through , 2020, the County has reported that the County had received approximately [97.5%] of the
second installment of the property tax levy. The County is continuing to receive significant number of
COVID-19 penalty cancellation requests, and these payments are not reflected in the collection totals until they
are processed. See "INFORMATION REGARDING THE CITY OF NEWPORT BEACH — COVID-19
Pandemic Impacts."
The 10 largest property taxpayers in the City as shown on the fiscal year 2019-20 secured tax roll, the
land use, the assessed valuation and the percentage of the City's total assessed valuation attributable to each
are shown in the below table.
TABLE 8
CITY OF NEWPORT BEACH
TEN PRINCIPAL TAXPAYERS
2019-20
% of
Total
Primary
Assessed
Tax
Percent of
Collections
Total
Percent of
Total 0)
Total
Collections as of
Levy
in Subsequent
Tax
Levy
Fiscal Year
Tax Levy
June 30
Collected
Years()
Collections
Collected
2015-16
$84,166,940
$81,762,526
97.14%
$612,863
$82,375,389
97.87%
2016-17
86,264,321
84,019,053
97.40
574,124
84,593,177
98.06
2017-18
92,139,181
90,279,099
97.40
581,969
90,861,068
98.61
2018-19
98,471,700
96,356,203
97.85
646,203(2)
97,002,406
98.51
2019-20
102,636,451
100,701,002
98.11
371,100(2)
101,072,102
98.48
(l) Exclusive of penalty charges.
(2) Delinquent amount collected through October 21, 2020.
Source: County of Orange Auditor Controller's Office.
As of , 2020, the Orange County Treasurer -Tax Collector has reported that the County has
collected [98.4%] of the property tax bills amounts (both installments), which is down [0.7]% from the prior
year. Through , 2020, the County has reported that the County had received approximately [97.5%] of the
second installment of the property tax levy. The County is continuing to receive significant number of
COVID-19 penalty cancellation requests, and these payments are not reflected in the collection totals until they
are processed. See "INFORMATION REGARDING THE CITY OF NEWPORT BEACH — COVID-19
Pandemic Impacts."
The 10 largest property taxpayers in the City as shown on the fiscal year 2019-20 secured tax roll, the
land use, the assessed valuation and the percentage of the City's total assessed valuation attributable to each
are shown in the below table.
TABLE 8
CITY OF NEWPORT BEACH
TEN PRINCIPAL TAXPAYERS
(1) 2019-20 Local Secured Assessed Valuation: $59,151,827,076.
Source: County of Orange Auditor Controller's Office.
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2019-20
% of
Primary
Assessed
Property Owner
Land Use
Valuation
Total 0)
1.
The Irvine Company
Commercial
2.21%
$ 1,308,358,624
2.
PH Finance LLC
Commercial
0.51
301,250,758
3.
Villas at Fashion Island LLC
Residential
0.44
262,841,532
4.
HG Newport Owner LLC
Commercial
0.30
180,030,000
5.
520 Newport Center Drive LLC
Commercial
0.30
177,543,021
6.
650 Newport Center Drive LLC
Commercial
0.27
160,971,896
7.
Newport Bluffs LLC
Residential
0.27
159,552,819
8.
UDR Newport Beach North LP
Residential
0.23
138,091,341
9.
Balboa Bay Club Ventures LLC
Commercial
0.23
134,362,404
10.
Coronado South Apartments LP
Residential
0.22
132,370,407
4.98%
$ 2.955.372,802
(1) 2019-20 Local Secured Assessed Valuation: $59,151,827,076.
Source: County of Orange Auditor Controller's Office.
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Sales Taxes
A sales tax is imposed on retail sales or consumption of personal property. The basic sales tax rate is
established by the State Legislature, and local overrides may be approved by voters. The current sales tax rate
in the City is 7.75%.
During fiscal year 2018-19, sales tax receipts of approximately $38.5 million provided the second
largest tax revenue source for the City, contributing approximately 17% of total General Fund revenues. Sales
tax revenues increased by approximately $3.5 million in fiscal year 2018-19 over fiscal year 2017-18 year-end
results. A significant portion of the increase in fiscal year 2018-19 sales tax receipts are attributable to local
sales tax reporting errors by the California Department of Tax and Fee Administration ("CDTFA"). As a
result of such errors, certain fiscal year 2017-18 sales tax receipts were not reported in such fiscal year and
were instead reported in fiscal year 2018-19.
For fiscal year 2019-20, the City received sales tax revenues of approximately $36 million. In the
Revised Budget the City budgeted sales tax revenues of $28.7 million for fiscal year 2020-21, representing a
16.6% decrease from the final budgeted sales tax revenues for fiscal year 2019-20. The City attributes such
decreases to a reduction in retail activity within the City as a result of the COVID-19 pandemic.
As discussed under the caption "INFORMATION REGARDING THE CITY OF NEWPORT
BEACH — COVID-19 Pandemic Impacts," the Governor extended the deadline to file and pay first quarter
sales and use tax returns by 90 days for all but the very largest taxpayers, and up to 361,000 California
businesses with less than $5 million in taxable annual sales will be allowed to defer up to $50,000 in sales tax
and enter into 12 -month payment plans at zero interest. The extension will result in a delay in the receipt by
the City of its portion of sales tax payments.
Transient Occupancy Tax
Transient occupancy tax receipts are generally the third largest tax revenue source of the City. The
transient occupancy tax accrues to the City at a rate of 10% of room charges with 18% of the collection going
to the local destination marketing organization to promote the City as a tourist destination. The City
distinguishes its transient occupancy tax in two broad categories, commercial and residential property. The
commercial category is composed of approximately 20 inns, motels, hotels and resorts and accounts for 90
percent of transient occupancy tax revenues. The residential category is made up of approximately 1,500
vacation rentals representing 10% of transient occupancy tax revenue.
The number of residential short term lodging properties in the City increased almost 160% since 2011
— due primarily to the introduction of web hosting platforms which facilitated the rental of one's home.
Recently, the City Council, concerned with resident complaints of excessive noise and trash, tightened
restrictions on short term lodging. Among other things, these new restrictions limit the number of occupants
for each unit, prohibits subtenants from renting out on a short term basis, prohibits renting to transient users
under the age of 25, and allows for permit suspensions or revocations for repeated violations. In addition, the
City Council issued Emergency Ordinance 2020-001 on April 3, 2020 (expired May 20, 2020), which
prohibited short term rentals and the issuance of new short term lodging permits. On May 12, 2020,
Emergency Ordinance 2020-004 allowed short term lodging to resume, but required a minimum three night
stay, and re -instated the prohibition of issuing new short term lodging permits. This Emergency Ordinance will
remain in place until the state or local emergency proclamation is terminated, or when repealed by City
Council.
In fiscal year 2018-19, transient occupancy tax receipts were approximately $24.7 million, providing
13.5% of General Fund tax revenues and approximately 11% of total General Fund revenues. Transient
occupancy tax receipts increased by approximately $1.8 million (8%) in fiscal year 2018-19 over fiscal year
2017-18 year-end results. The larger than normal year -over -year revenue variance was attributable to three
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large hotels returning to normal occupancy following consecutive renovations that resulted in lower than
normal revenue in fiscal year 2017-18.
For fiscal year 2019-20, the City received transient occupancy tax revenues of approximately $20.8
million. In the Revised Budget the City estimates transient occupancy tax revenues of $6.4 million for fiscal
year 2020-21. In the Revised Budget, the transient occupancy tax was identified as the revenue source that
was most severely impacted by COVID-19 due to the temporary closure of most major hotels in the City and
the assumption by the City that such hotels will be under full capacity for foreseeable future. The City cannot
predict when, or if, travel and tourism activity will return to the level of such activity which existed prior to the
outbreak of the COVID-19 pandemic. Two of the major hotels in the City, The Renaissance Newport Beach
and The Fashion Island Hotel are currently closed. However, as of the end of the first quarter of Fiscal Year
2021, the City estimates that transient occupancy taxes are approximately $1,700,000 higher than the projected
budget for the first quarter.
Charges for Services
In fiscal year 2018-19, charges of approximately $19.5 million, providing approximately 8.0% of total
General Fund revenues, were collected for services including paramedic and basic life support service fees,
certain police and fire service fees, charges for recreational classes, and library programs, as well as the
General Fund administration fee charged to other funds.
The City received approximately $21 million in revenues from charges for services in fiscal year
2019-20 and approximately $17.3 million is budgeted to be received during fiscal year 2020-21. The City
attributes the decrease to the impact of the COVID-19 pandemic and the constraints on engaging in social
activities.
Other Taxes
In fiscal year 2018-19, amounts collected for other taxes, which include utility franchise taxes, cable
franchise taxes, solid waste franchise taxes, business licenses and certain other taxes, were $11.3 million,
providing approximately 4.9% of total General Fund revenues. The City received approximately $11.9 million
in revenues in other taxes in fiscal year 2019-20 and approximately $9.7 million is budgeted to be received
during fiscal year 2020-21.
Property Income
The City owns and manages a variety of income producing properties, which include, among other
things, apartments, a yacht basin, piers, moorings, on -street parking spaces and parking lots. In addition, the
City also owns and manages several long-term ground leases to concessions, restaurants, hotels and other
businesses and organizations. Some properties are: 1) owned by the State, but managed by the City; 2) owned
by the City, but regulated by State tideland grants and Coastal Commission guidelines; or 3) owned by the
City, and managed pursuant to City Council policy.
In fiscal year 2018-19, amounts collected by the City for the use of property were approximately
$10.9 million providing approximately 4.7% of total General Fund revenues. The City received approximately
$11.2 million in amounts collected for the use of City property in fiscal year 2019-20 and approximately $9.2
million is budgeted to be received during fiscal year 2020-21.
Other Revenues
The balance of revenues in the General Fund are provided by various smaller sources, including, but
are not limited to amounts received for licenses, permits, fees, fines, intergovernmental revenues and other
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miscellaneous revenues. Such revenue sources have historically provided approximately 7% of total General
Fund revenues.
State of California Motor Vehicle In -Lieu Payments
The City also received a portion of Department of Motor Vehicles license fees ("VLF") collected
Statewide. Several years ago, the Statewide VLF was reduced by approximately two-thirds. However, the
State continued to remit to cities and counties the same amount that those local agencies would have received
if the VLF had not been reduced, known as the "VLF backfill." The State VLF backfill was phased out, and as
of fiscal year 2011-12 all of the VLF is now received through an in -lieu payment from State property tax
revenues.
Long -Term Liabilities
Changes in Long -Term Liabilities. The following table summarizes the City's estimated changes in
long-term debt and liabilities as of June 30, 2020. The table below does not include long-term liabilities
related to pension or post -employment benefit plans. See "—Retirement System" and "Other Post -
Employment Benefits" below.
Governmental Activities:
Other Debt:
Certificates of Participation Payable(l)
Bond Premium
Direct borrowing
CBDG Loan
Other long-term liabilities
Workers' compensation payable
Claims and judgments payable
Compensated absences
TABLE 9
CITY OF NEWPORT BEACH
LONG-TERM LIABILITIES
FISCAL YEAR 2019-20
Beginning
Balance
(July 1, 2019) Additions Deductions
$ 104,100,000
120,553
756,000
Ending Balance Due Within
(June 30, 2020) One Year
$ (3,405,000) $ 100,695,000
(120,553) -
(171,000) 585,000
$ 3,065,000
182,000
16,270,000 1,646,315 (2,395,315) 15,521,000 2,867,523
6,951,907 5,158,013 (4,148,972) 7,960,948 2,694,118
12,568,977 2,110,924 (1,609,522) 13,070,379 3,914,566
Long -Term Liabilities of Governmental $ 140,767,437 $ 8,915,252 $ (11,850,362) $ 137,832,327 $ 12,723,207
Activities
Long -Term Debt. The City's long-term obligations payable from the General Fund currently consist
of following.
2010 Certificates of Participation. In 2010, the City and the Corporation entered into a lease
arrangement pursuant to which the City leased certain real property to the Corporation in exchange for
Corporation's agreement to construct a new City Hall and to refinance certain of the City's outstanding
obligations; and the Corporation subleased such property back to the City in exchange for lease payments
payable through July 1, 2040. The City caused the delivery of its Certificates of Participation 2010A (Tax
Exempt) (Civic Center Project/Central Library Refunding) (the "2010A Certificates) and its Certificates of
Participation 2010B (Federally Taxable Direct Pay Build America Bonds) (Civic Center Project) (the "2010B
Certificates" and, together with the 2010A Certificates, the "2010 Certificates") which are secured by the
City's lease payments under the lease arrangement. The 2010A Certificates matured on July 1, 2019.
Principal with respect to the 2010B Certificates is payable on July 1 of each year, through July 1, 2040.
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The City has covenanted in the 2010B Certificates documents to budget and appropriate money
annually for the lease payments payable thereunder from legally available funds, including the General Fund,
on a basis that is substantially similar to the Lease. See the caption "SECURITY AND SOURCES FOR THE
PAYMENT FOR THE 2020 CERTIFICATES."
CDBG Loan. In fiscal year 2002-03, the City received $2,400,000 in loan proceeds to assist with the
funding of the Balboa Village Improvement Program. The loan is collateralized by future Community
Development Block Grant allocations. The original loan was refinanced in fiscal year 2014-15 lowering the
average interest rate from 6.5% to 1.5%. The loan matures on June 30, 2023. The outstanding balance at June
30, 2020 was $585,000.
The City has also issued certain assessment district and community facilities district bonds. Such
bonds are not payable from the City's General Fund. See Note 6 to the City's audited financial statements for
fiscal year 2018-19 attached hereto as Appendix C for a description of the City's outstanding indebtedness.
Short -Term Debt. The City currently has no short-term debt outstanding.
Capital Improvement Program
The City's capital improvement program ("CIP") serves as a plan for the provision of public
improvements, special projects, on-going maintenance programs, and the implementation of the City's master
plans. Projects in the CIP include improvements and major maintenance on arterial highways, local streets,
and alleys; storm drain and water quality improvements; bay, pier, beach and seawall improvements; park and
facility improvements; water and wastewater system improvements; transportation safety and traffic signal
improvements; and planning programs and studies.
The City adopts an annual CIP budget that covers the current and next succeeding five fiscal years.
The CIP is developed by the Public Works Department taking into account City Council priorities and
community needs. The CIP budget is adopted annually along with the City's operating budget. Generally,
sufficient funds are appropriated for the work to be performed one year at a time and follow detailed project
schedules established every July.
The City's adopted fiscal year 2020-21 CIP totals approximately $87.1 million, including $31.4
million in new appropriations and $55.8 million in re -budgeted funds carried forward from fiscal year 2019-20.
Some of which were deferred due to the impacts of the COVID-19 Pandemic. For fiscal year 2020-21, the
major projects include improvements to City buildings and facilities (approximately $12.8 million),
investments in improvements to City streets, alleys, medians, bridges, landscaping, storm drains and tide
structures (approximately $14.0 million), transportation related improvements, including traffic signal
maintenance and improvements, neighborhood traffic management, pedestrian improvements and signage
(approximately $2.6 million), improvements to the City's parks, harbors, docks, wharfs, piers and beaches
(approximately $23.9 million), projects relating to improvements and programs that benefit the City's natural
resources (approximately $3.9 million), improvements to the City's water and wastewater systems
(approximately $15.8 million) and certain other miscellaneous improvements (approximately $2.9 million).
Financial Policies
General. The City has adopted a comprehensive set of financial policies to serve as a guideline for
financial matters as further described below.
Reserve Policy. The City has adopted a reserve policy (the "Reserve Policy") which provides
guidance on the establishment and maintenance of reserve levels for the City's governmental funds and
proprietary funds. The Reserve Policy established a Contingency Reserve that has a target balance of 25% of
General Fund "Operating Budget" as originally adopted. For purposes of the Contingency Reserve, the
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operating budget includes current expenditure appropriations and excludes capital improvement projects,
transfers out and additional discretionary payments to the City's unfunded pension liability. Appropriation of
funds comprising the Contingency Reserve is generally reserved for emergency or unforeseen situations but
may be accessed by the City Council by simple budget appropriations. Emergency or unforeseen situations for
which the Contingency Reserve may be accessed include but are not limited to the following:
• A catastrophic loss of critical infrastructure;
• A State or federally declared state of emergency;
• Any settlement arising from a claim or judgment;
• Deviation from budgeted revenue projections;
• Any action by another government that eliminates or shifts revenues from the City;
• Inability of the City to meet its debt service obligations in any given year;
• Other circumstances deemed necessary by the City Council to meet the claims and
obligations of the City.
If the Contingency Reserve is used, the City Manager is required to present a plan to the City Council
to replenish such amount within five years. The Revised Budget budgets for a transfer of $2.3 million from the
Contingency Reserve to address a portion of the revenue shortfall due to the COVID-19 pandemic. See
"Budget Procedure, Current Budget and Historical Budget Information — Fiscal Year 2020-21 Revised
Budget."
Debt Management Policy. The City has adopted a debt management policy (the "Debt Management
Policy") in compliance with California Government Code Section 8855. The Debt Management Policy sets
forth the purposes for which debt is permitted to be issued and guidance for the structuring of the proposed
obligations.
Investment Policy. The City invests its funds in accordance with the City's investment policy (the
"Investment Policy"). The Investment Policy provides for investment of the City's funds pursuant to City
policies and codes, State statutes and Federal regulations in a manner designed to preserve security of
principal, maintain sufficient liquidity and attain a benchmark rate of return commensurate with the City's
investment risk constraints and the liquidity characteristics of the portfolio. The City Charter provides for
investment of City funds by the Finance Director, who is responsible for establishing and maintaining a system
of internal controls designed to prevent losses of public funds arising from fraud, employee error, and
misrepresentation by third parties, unanticipated changes in financial markets, or imprudent action by City
employees and officers. Pursuant to the Investment Policy, the Director of Finance is also responsible for
submitting to the City Council monthly reports on the investment earnings and performance results of the
City's investment portfolio. The City's investment program is managed using the prudent investor standard set
forth in Section 53600.3 of the California Government Code.
Pursuant to the Investment Policy, the City may deposit and invest in U.S. Treasury issues, federal
agency or federal instrumentality obligations, mortgage-backed securities and asset-backed securities,
medium-term notes, municipal bonds, non-negotiable certificates of deposit, negotiable certificates of deposit,
prime commercial paper, eligible banker's acceptances, repurchase agreements and reverse repurchase
agreements, the State's local agency investment fund, county investment funds (excluding the Orange County
Pool) and money market funds, subject to the provisions of Section 53601 of the California Government Code
and the further conditions and restrictions of the Investment Policy. The Investment Policy provides that any
security type or structure not specifically approved thereby is prohibited, including, but are not limited to,
"exotic" derivative structures such as range notes, dual index notes, inverse floating rate notes, leveraged or
de -leveraged floating rate notes, interest only strips that are derived from a pool of mortgages and any security
that could result in zero interest accrual if held to maturity, or any other complex variable or structured note
with an unusually high degree of volatility risk. The Investment Policy states that the portfolio shall be
diversified, with investments matched with anticipated cash flow requirements and known future liabilities and
no more than 5% of the City's portfolio being invested in the instruments of any one non-governmental issuer,
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subject to certain exceptions. To that end, the Investment Policy provides that the City will not invest in
securities maturing more than five years from the date of trade settlement, unless the City Council has by
resolution granted authority to make such an investment at least three months prior to the date of investment.
The Investment Policy further provides that the City shall not purchase any security rated Al and / or A+ or
below if that security has been placed on "credit watch" for a possible downgrade by a nationally recognized
statistical rating organization. The City is not a party to any swap agreements and has not sustained losses
from investment in any collateralized mortgage obligation.
Table 9 below sets forth the par value, amortized value, fair value, market value and percent of total
investments for each category of the City's investments as of July 30, 2020.
TABLE 9
CITY OF NEWPORT BEACH
SCHEDULE OF INVESTMENTSM
% of Total
Investment Type
Par Value
Amortized Cost
Fair Value
Market Value
Investments
Money Market Funds
3,825,052
3,825,052
3,825,087
1.35%
U.S. Treasuries
55,575,000
55,317,251
57,073,706
57,355,201
20.18%
U.S. Agency Bonds
82,285,000
82,683,546
86,034,172
86,542,627
30.45%
Asset Backed Securities
11,488,343
11,501,782
11,700,404
11,710,177
4.12%
Corporate Bonds
44,900,000
44,875,031
46,355,822
46,701,128
16.43%
Commercial Paper
4,800,000
4,798,159
4,799,578
4,799,578
1.69%
LAIF
61,744,262
61,744,262
61,744,262
21.73%
Local Agency Bonds
2,000,000
2,000,000
2,082,140
2,100,677
0.74%
Supranationals
5,680,000
5,680,200
5,712,297
5,731,696
2.02%
Investments with Fiscal Agent:
Money Market Funds
3,604,065
3,604,065
3,604,084
1.27%
U.S. Treasuries
73,000
73,131
73,627
73,691
0.03%
Totals
206,801,343
276,102,479
283,005,126
284,188,208
100.00%
(1) Excludes cash.
Source: City of Newport Beach.
For additional information with respect to the City's cash and investments, see Note IS to the audited
financial statements for fiscal year 2018-19 attached to the Official Statement as Appendix C.
Retirement System
This caption contains certain information relating to the California Public Employees Retirement
System ("CaIPERS'). The information is primarily derived from information produced by CalPERS, its
independent accountants and actuaries. The City has not independently verified the information provided by
CaIPERS and makes no representations nor expresses any opinion as to the accuracy of the information
provided by CalPERS.
The comprehensive annual financial reports of CalPERS are available on its Internet website at
www.calpers.ca.gov. The CalPERS website also contains CalPERS' most recent actuarial valuation reports
and other information concerning benefits and other matters. Such information is not incorporated by
reference herein. The City cannot guarantee the accuracy of such information. Actuarial assessments are
`forward-looking" statements that reflect the judgment of the fiduciaries of the pension plans, and are based
upon a variety of assumptions, one or more of which may not materialize or be changed in the future.
Actuarial assessments will change with the future experience of the pension plans.
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Summary of Plans. All qualified permanent and probationary employees of the City are eligible to
participate in the City's separate Safety (police and fire) and Miscellaneous (all other) Ca1PERS plans, which
are agent multiple -employer defined benefit pension plans administered by Ca1PERS, which acts as a common
investment and administrative agent for its participating member employers. The City contributes to Ca1PERS,
an agent multiple -employer public employee defined benefit pension plan, on behalf of approximately 440
active City employees who participate in the City's Miscellaneous Plan or the City's Safety Plan. Ca1PERS
provides retirement, disability and death benefits to plan members and beneficiaries. Ca1PERS acts as a
common investment and administrative agent for participating public entities within the State, including the
City. Ca1PERS plan benefit provisions and all other requirements are established by State statute and the City
Council.
Ca1PERS 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 to retire at age 50 to 62 with statutorily reduced benefits. PEPRA miscellaneous members become
eligible for service retirement upon attainment of age 52 with at least 5 years of service. All members are
eligible for non -duty disability benefits after 5 years of service. The death benefit is one of the following: the
Basic Death Benefit, the 1959 Survivor Benefit, the Optional Settlement 2W Death Benefit, or the 1957
Survivor Benefit. Safety members can receive a special death benefit if the member dies while actively
employed and the death is job-related. Fire members may receive the alternate death benefit in lieu of the
Basic Death Benefit or the 1957 Survivor Benefit if the member dies while actively employed and has at least
20 years of total Ca1PERS service. The cost of living adjustments for each plan are applied as specified by the
Public Employees' Retirement Law.
The Plans' provisions and benefits in effect for the measurement period ended June 30, 2019 are
summarized as follows:
As of the June 30, 2018 measurement date, the following employees were covered by the benefit
terms of the plans:
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Prior to
Miscellaneous
On or after
Hire date
Prior to
On or after
On or after
Hire date
November 24, 2012
November 24, 2012
January 1, 2013
Benefit formula
2.5%@55
2.0%@60
2.0%@62
Benefit vesting schedule
5 years service
5 years service
5 years service
Benefit payments
monthly for life
monthly for life
monthly for life
Retirement age
50-55
50-63
52-67
Monthly benefits, as a % of eligible compensation
2.0% to 2.5%
1.092% to 2.418%
1.0% to 2.5%
Required employee contribution rates
12.35% - 13.0%
12.35% -13.0%
12.35% -13.0%
Required employer contribution rates
27.40% - 28.05%
23.98% - 24.63%
22.48% - 23.13%
As of the June 30, 2018 measurement date, the following employees were covered by the benefit
terms of the plans:
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Prior to
On or after
On or after
Hire date
November 24, 2012
November 24, 2012
January 1, 2013
Benefit formula
3.0%@50
2.0%@50; 3.0%@55
2.7%@57
Benefit vesting schedule
5 years service
5 years service
5 years service
Benefit payments
monthly for life
monthly for life
monthly for life
Retirement age
50-55
50-55
50-57
Monthly benefits, as a % of eligible compensation
3.0%
2.0% - 2.7%; 2.4% - 3.0%
2.0% to 2.7%
Required employee contribution rates
12.0% - 14.6%
12.0% -14.6%
12.0% -14.6%
Required employer contribution rates
61.55% - 64.15%
61.55% - 64.15%
63.05% - 65.65%
As of the June 30, 2018 measurement date, the following employees were covered by the benefit
terms of the plans:
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Miscellaneous Safety
Inactive employees or beneficiaries currently receiving benefits 664 437
Inactive employees entitled to but not yet receiving benefits 585 97
Active employees 505 262
Total 1,754 796
Contributions. Section 20814(c) of the California Public Employee's Retirement Law requires that
the employer contribution rates for all public employers be determined on an annual basis by the actuary and
shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are the
estimated amount necessary to finance the costs of benefits earned by employees during the years, with an
additional amount to finance any unfunded accrued liability. The employer is required to contribute the
difference between the actuarially determined rate and the contribution rate of employees.
For the year ended June 30, 2019, the City's contributions to the Miscellaneous Plan and Safety Plan
were $15,797,595 and $26,779,897, respectively. For the year ended June 30, 2020, the City's contributions to
the Miscellaneous Plan and Safety Plan were $16,421,771 and $28,567,117, respectively.
Beginning with fiscal year 2017-18 Ca1PERS began collecting employer contributions toward the
plan's unfunded liability as dollar amounts instead of the prior method of a contribution rate. According to
Ca1PERS, this change was to address potential funding issues that could arise from a declining payroll or
reduction in the number of active members in the plan. Funding the unfunded liability as a percentage of
payroll could lead to the underfunding of the plans. Due to stakeholder feedback regarding internal needs for
total contributions expressed as an estimated percentage of payroll, the Ca1PERS reports include such results in
the contribution projection set forth in the tables below. These results are provided for information purposes
only. Contributions toward the unfunded liability will continue to be collected as set dollar amounts.
The tables below are derived from the City of Newport Beach Annual Valuation Reports with
valuation dates as of June 30, 2019 and delivered in July 2020 for the Miscellaneous and Safety plans
(together, the "2019 Report") and show the required and projected employer contributions (before cost
sharing) for the next six fiscal years. Projected results reflect the adopted changes to the discount rate
described in the 2019 Report. Such projections also assume that all actuarial assumptions will be realized and
that no further changes to assumptions, contributions, benefits, or funding will occur during the projection
period. The projected normal cost percentages in the projections below does not reflect that the normal cost
will decline over the time as new employees are hired into PEPRA or other lower cost benefit tiers.
Illustrative only and based on the projected payroll shown.
Source: Ca1PERS' 2019 Report.
No assurance can be provided that the City's Ca1PERS plan expenses will not increase significantly in
the future.
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Required
Projected Future Employer Contributions
Contribution
(Assumes 7.00%
Return for Fiscal Year 2019-20)
Fiscal Year
2021-22
2022-23
2023-24
2024-25
2025-26
2026-27
Safety Plan
Normal Cost %
19.73%
19.6%
19.4%
19.3%
19.1%
19.0%
UAL Payment
$18,978,126
$19,550,000
$20,136,000
$20,737,000
$21,352,000
$21,931,000
Total as a % of Payroll"
72.15%
72.1%
72.1%
72.1%
72.0%
71.8%
Projected Payroll
$36,206,438
$37,202,116
$38,225,173
$39,276,365
$40,356,465
$41,466,268
Miscellaneous Plan
Normal Cost %
9.79%
9.6%
9.5%
9.4%
9.2%
9.1%
UAL Payment
$11,051,204
$11,395,000
$11,747,000
$12,108,000
$12,477,000
$12,814,000
Total as a % of Payroll'
33.65%
33.6%
33.5%
33.5%
33.4%
33.2%
Projected Payroll
$46,312,765
$47,586,367
$48,894,992
$50,239,603
$51,621,192
$53,040,775
Illustrative only and based on the projected payroll shown.
Source: Ca1PERS' 2019 Report.
No assurance can be provided that the City's Ca1PERS plan expenses will not increase significantly in
the future.
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Net Pension Liability. The City's net pension liability is measured as the total pension liability, less
the pension plan's fiduciary net position. The net pension liability of each of the City's pension plans is
measured as of June 30, 2019, using an annual actuarial valuation as of June 30, 2018 rolled forward to
June 30, 2019 using standard update procedures. For the June 30, 2019 measurement period, total pension
liabilities were based on a June 30, 2018 actuarial valuation date and the following actuarial methods and
assumptions:
0) Net of investment and administrative expenses and includes inflation.
(Z) The mortality table used was developed based on Ca1PERS' specific data. The table includes 15 years of mortality
improvements using Society of Actuaries Scale 90% of MP 2016.
The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2018
valuation were based on the results of a December 2017 actuarial experience study for the period from 1997 to
2011.
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Miscellaneous Safety
Valuation Date
June 30, 2018 June 30, 2018
Measurement Date
June 30, 2019 June 30, 2019
Actuarial Cost Method
Entry -Age Normal Cost Method
Actuarial Assumptions:
Discount Rate
7.15% 7.15%
Inflation
2.75% 2.75%
Payroll growth
3.00% 3.00%
Projected salary Increase
Varies by Entry Age and Service
Investment Rate of Return
7.375% 0) 7.375% 0)
Mortality Rate Table (Z)
Derived using CalPERS' Membership Date for all Funds
Post Retirement Benefit Increase
Contract COLA up to 2.0% until Purchasing Power Protection Allowance Floor
on Purchasing Power applies, 2.5% thereafter
0) Net of investment and administrative expenses and includes inflation.
(Z) The mortality table used was developed based on Ca1PERS' specific data. The table includes 15 years of mortality
improvements using Society of Actuaries Scale 90% of MP 2016.
The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2018
valuation were based on the results of a December 2017 actuarial experience study for the period from 1997 to
2011.
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The following table shows the changes in net pension liability recognized over the measurement
period.
Safety Plan
Balance at June 30, 2018 (Valuation Date)(0
$ 566,357,864
Increase (Decrease)
$ 196,426,065
Changes Recognized for the Measurement Period:
Total Pension
Plan Fiduciary Net
Net Pension
Service Cost
Liability
Position
Liability/(Assets)
Interest on Total Pension Liability
(a)
(b)
(c)=(a)-(b)
Miscellaneous Plan
-
-
-
Balance at June 30, 2018 (Valuation Date)(0
$ 417,442,358
$ 303,385,616
$ 114,056,742
Changes Recognized for the Measurement Period:
-
(1,570)
1,570
Service Cost
7,084,444
-
7,084,444
Interest on Total Pension Liability
29,409,624
-
29,409,624
Changes of Assumptions
-
-
-
Differences Between Expected and Actual Experience
403,676
-
403,676
Plan to Plan Resource Movement
-
1,570
(1,570)
Contributions — Employer
-
15,700,833
(15,700,833)
Contributions — Employees
-
3,955,144
(3,955,144)
Net Investment Income
-
19,895,019
(19,895,019)
Benefit Payments, Including Refunds Of Employee
&590 ,087,083
$ 394,985,375
S195,101,708
Contributions
(20,129,701)
(20,129,701)
-
Administrative Expense
-
(216,502)
216,502
Other Miscellaneous Income/(Expense)
-
700
(700)
Net Changes
16,768,043
19,207,063
(2,439,020)
Balance at: June 30, 2019 (Measurement Date)(0
S 322.592.679
111.617.722
Safety Plan
Balance at June 30, 2018 (Valuation Date)(0
$ 566,357,864
$ 369,931,799
$ 196,426,065
Changes Recognized for the Measurement Period:
Service Cost
9,292,715
-
9,292,715
Interest on Total Pension Liability
40,081,524
-
40,081,524
Changes of Assumptions
-
-
-
Differences Between Expected and Actual Experience
4,798,077
-
4,798,077
Plan to Plan Resource Movement
-
(1,570)
1,570
Contributions — Employer
-
28,344,445
(28,344,445)
Contributions — Employees
-
3,162,044
(3,162,044)
Net Investment Income
-
24,254,890
(24,254,890)
Benefit Payments, Including Refunds of Employee
(30,443,097)
(30,443,097)
-
Contributions
Administrative Expense
-
(263,991)
263,991
Other Miscellaneous Income/(Expense)
-
855
(855)
Net Changes
23,729,219
25,053,576
(1,324,357)
Balance at June 30, 2019 (Measurement Date)(0
&590 ,087,083
$ 394,985,375
S195,101,708
During Fiscal Year 2017-18, as a result of Governmental Accounting Standards Board Statement (GASB) No. 75, Accounting and Financial
Reporting for Postemployment Benefit Plans Other than Pensions (GASB 75), CalPERS reported its proportionate share of activity related
to postemployment benefits for participation in the State of California's agent OPEB plan. Accordingly, CalPERS recorded a one-time
expense as a result of the adoption of GASB 75.
On June 25, 2012, the Governmental Accounting Standards Board approved GASB Statement No. 68
("GASB 68") with respect to pension accounting and financial reporting standards for state and local
governments and pension plans. GASB 68 states that, for pensions within the scope of the statement, a cost-
sharing employer that does not have a special funding situation is required to recognize a net pension liability,
deferred outflows of resources, deferred inflows of resources related to pensions, and pension expense based
on its proportionate share of the net pension liability for benefits provided through the pension plan. While the
new accounting standards change financial statement reporting requirements, they do not impact funding
policies of the pension systems. The audited financial statements of the City for fiscal year 2018-19 reflect the
application of the GASB 68. GASB 68 is a change in accounting reporting standards but it does not change
the City's CalPERS plan funding obligations.
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The following presents the net pension liability of the City's Miscellaneous Plan and Safety Plan as of
the June 30, 2019 measurement date, calculated using the discount rate of 7.15 percent, as well as what the net
pension liability would be if it were calculated using a discount rate that is 1 percentage -point lower (6.15
percent) or 1 percentage -point higher (8.15 percent) than the current rate:
Discount Rate — I% Current Discount Rate Discount Rate + I%
Net Pension Liability (6.15%) (7.15%) (8.15%)
Miscellaneous Plan $ 169,623,775 $ 111,617,722 $ 63,735,602
Safety Plan 272,137,957 195,101,708 131,423,449
Total Net Pension Liability 441.761.732306.719.430 195.159.051
For the year ended June 30, 2020, the City recognized pension expense as follows:
Miscellaneous
$20,891,673
Safety
$31,394,181
Total Plans
$52,285,854
Note that no adjustments have been made for contributions subsequent to the measurement date.
At June 30, 2020, the City reported deferred outflows of resources and deferred inflows of resources
related to pensions from the following sources:
Pension contributions subsequent to measurement date
Differences between expected and actual experience
Changes in assumptions
Net differences between projected and actual earnings on plan
investments
Total Miscellaneous Plan
Pension contributions subsequent to measurement date
Differences between expected and actual experience
Changes in assumptions
Net differences between projected and actual earnings on plan
investments
Total Safety Plan
Grand Total
Miscellaneous Plan
Deferred Outflows Deferred Inflows
of Resources of Resources
$ 16,333,173
1,065,323
17.416.914
(894,937)
(1,526,471)
(2.421.408)
Safety Plan
Deferred Outflows Deferred Inflows
of Resources of Resources
$ 28,531,743
5,344,872
9,103,139
42.979.754
60.396.668
(842,231)
(853,833)
(1,642,117)
(3.338.181)
(5.759.589)
$44,883,334 reported as deferred outflows of resources related to contributions subsequent to the
measurement date will be recognized as a reduction of the net pension liability in the year ended June 30,
2021. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to
pensions will be recognized as pension expense as follows:
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Year Ended
Market Value of
Unfunded
June 30
Misc.
Safety
Total Amount
2020
$1,143,153
$9,331,501
$10,474,654
2021
(2,395,977)
473,112
(1,922,865)
2022
(446,418)
748,964
302,546
2023
343,157
556,253
899,410
2024
-
-
-
Thereafter
-
-
-
For additional information with respect to the discount rate, deferred outflows/(inflows) of resources,
and recognition of gains and losses, see Note 10 to the City's audited financial statements for fiscal year 2018-
19 attached hereto as Appendix C.
Funded Status. The tables below are derived from the 2019 Report and show the funded status of the
Safety Plan and Miscellaneous Plan as of the valuation dates shown.
Safety Plan
Miscellaneous Plan
Market Value of
Unfunded
Annual Covered
Valuation Date
Accrued Liability
Assets
Liability
Funded Ratio
Payroll
06/30/2014
$476,037,681
$312,101,811
$163,935,870
65.6%
$29,907,142
06/30/2015
491,953,837
317,483,254
174,470,583
64.5
30,073,040
06/30/2016
514,282,247
312,487,056
201,795,191
60.8
30,294,815
06/30/2017
542,668,920
340,964,919
201,704,001
62.8
31,698,181
06/30/2018
581,439,882
370,220,958
211,218,924
63.7
32,033,453
06/30/2019
601,593,299
395,102,063
206,491,236
65.7
33,376,463
Miscellaneous Plan
Source: Ca1PERS' 2019 Report.
AB 340, Public Employee Pension Reform Act of 2013 (PEPRA). On September 12, 2012, the
California Governor signed Assembly Bill 340 ("AB 340"), which implements pension reform in California.
Effective January 1, 2013, AB 340: (i) requires public retirement systems and their participating employers to
share equally with employees the normal cost rate for such retirement systems; (ii) prohibits employers from
paying employer -paid member contributions to such retirement systems for employees hired after January 1,
2013; (iii) establishes a compulsory maximum non -safety benefit formula of 2.5% at age 67; (iv) defines final
compensation as the highest average annual pensionable compensation earned during a 36 -month period; and
(v) caps pensionable income at $110,100 ($132,120 for employees not enrolled in Social Security) subject to
Consumer Price Index increases. Other provisions reduce the risk of the City incurring additional unfunded
liabilities, including prohibiting retroactive benefits increases, generally prohibiting contribution holidays, and
prohibiting purchases of additional non-qualified service credit.
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Market Value of
Unfunded
Annual Covered
Valuation Date
Accrued Liability
Assets
Liability
Funded Ratio
Payroll
06/30/2014
$343,832,762
$255,201,637
$88,631,125
74.2%
$37,891,155
06/30/2015
356,419,112
255,215,749
101,203,363
71.6
39,519,829
06/30/2016
373,199,630
253,529,009
119,670,621
67.9
40,671,571
06/30/2017
396,834,941
278,869,980
117,964,961
70.3
41,826,628
06/30/2018
425,538,434
303,622,111
121,916,323
71.4
40,450,784
06/30/2019
442,487,002
322,688,377
119,798,625
72.9
42,692,857
Source: Ca1PERS' 2019 Report.
AB 340, Public Employee Pension Reform Act of 2013 (PEPRA). On September 12, 2012, the
California Governor signed Assembly Bill 340 ("AB 340"), which implements pension reform in California.
Effective January 1, 2013, AB 340: (i) requires public retirement systems and their participating employers to
share equally with employees the normal cost rate for such retirement systems; (ii) prohibits employers from
paying employer -paid member contributions to such retirement systems for employees hired after January 1,
2013; (iii) establishes a compulsory maximum non -safety benefit formula of 2.5% at age 67; (iv) defines final
compensation as the highest average annual pensionable compensation earned during a 36 -month period; and
(v) caps pensionable income at $110,100 ($132,120 for employees not enrolled in Social Security) subject to
Consumer Price Index increases. Other provisions reduce the risk of the City incurring additional unfunded
liabilities, including prohibiting retroactive benefits increases, generally prohibiting contribution holidays, and
prohibiting purchases of additional non-qualified service credit.
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Pursuant to AB 340, the City established new pension tiers: 2.0% at 62 for Miscellaneous and 2.7% at
57 for Safety for employees hired on or after January 1, 2013 who were not previously CalPERS members.
CaIPERS Plan Actuarial Methods. The staff actuaries at CalPERS prepare annually an actuarial
valuation which is typically delivered in the time period from July through October of each year (thus, the
actuarial valuation dated July 2019 covered Ca1PERS' fiscal year ended June 30, 2018). The actuarial
valuations express the City's required contribution which the City must contribute in the fiscal year
immediately following the fiscal year in which the actuarial valuation is prepared (thus, the City's contribution
requirement derived from the actuarial valuation as of June 30, 2018 and shown in the report delivered in July
2019 affects the City's fiscal year 2020-21 required contribution). CalPERS rules require the City to
implement the actuary's recommended rates.
The CalPERS Chief Actuary considers various factors in determining the assumptions to be used in
preparing the actuarial report. Demographic assumptions are based on a study of the actual history of
retirement, rates of termination/separation of employment, years of life expectancy after retirement, disability,
and other factors. This experience study is generally done once every four years. The most recent experience
study was completed in 2017 in connection with the preparation of actuarial recommendations by the CalPERS,
Chief Actuary as described below.
In December 2016, the CalPERS Board approved lowering the funding discount rate to be phased in
over three years: for fiscal year 2018-19 to a rate of 7.375 percent; for fiscal year 2019-20 to a rate of 7.25
percent; and for fiscal year 2020-21 to a rate of 7.0 percent. The funding discount rate includes a 15 basis -
point reduction for administrative expenses, and the remaining decrease is consistent with the change in the
financial reporting discount rate. As noted above, there is an approximately fifteen month lag between the
time that CalPERS provides its annual actuarial valuation and the fiscal year in which the required contribution
therein impacts the City.
On November 18, 2015, the CalPERS Board adopted a Funding Risk Mitigation Policy that seeks to
reduce funding risk over time. It establishes a mechanism whereby CalPERS, investment performance that
significantly outperforms the discount rate triggers adjustments to the discount rate, expected investment
return, and strategic asset allocation targets. Reducing the volatility of investment returns is expected to
increase the long-term sustainability of CalPERS pension benefits for members. In February 2017, the
CalPERS Board revised the Funding Risk Mitigation Policy. The revisions include suspension of the policy
until fiscal year 2020-21, and a decrease of the required first excess investment return threshold from 4% to
2%.
On February 14, 2018, the CalPERS Board of Administration adopted revisions to its actuarial
amortization policy. Major revisions that affect state plans were made to the amortization of investment gains
and losses, as well as to actuarial surplus. For the amortization of investment gains and losses, the
amortization period was reduced from 30 years to 20 years, and the 5 -year direct smoothing process was
removed from the end of the amortization period. Amortization of actuarial surplus was eliminated. These
policy revisions will be applied to the amortization of investment gains and losses, and actuarial surplus,
experienced on or after June 30, 2019. These revisions affect contributions starting in fiscal year 2020-21.
Public Agency Retirement System. The City entered into a defined contribution plan administrated
by the private administrator known as Public Agency Retirement System ("PARS") for all of its part-time
employees. The City Council has the authority for establishing and amending the plan's provisions, including
establishing and amending contribution requirements. In a defined contribution plan, benefits depend solely
on amounts contributed to the plan plus investment earnings. All part-time employees are eligible to
participate from the date of employment. Federal legislation requires contributions of at least 7.5% to a
retirement plan, and City Council resolved to match the employees' contributions of 3.75%. The City's
contributions for each employee (and interest earned by the accounts) are fully vested immediately.
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For the year ended June 30, 2019, the City's covered payroll for employees participating in the plan
was $3,788,052. Employees made contributions of $142,053 (3.75% of current covered payroll), which was
matched by the City in the same amount. For the year ended June 30, 2020, the City's covered payroll for
employees participating in the plan was $3,506,431. Employees made contributions of $131,492 (3.75% of
current covered payroll), which was matched by the City in the same amount. Assets of the plan totaled $
$2,451,992 at June 30, 2020.
Other Post -Employment Benefits
All employees and eligible retirees participate in a Savings ("RHS") Plan sponsored by the City, the
single employer of the plan and held in trust and managed by the International City Management Association
Retirement Corporation ("ICMA-RC"), under IRS Revenue Ruling 2002-41 and IRS Notice 2002-45.
All employees hired after January 1, 2006, and certain employees hired prior to such date, as well as
employees who elected to fully convert to a defined contribution formula, participate in a program that requires
mandatory employee and employer contributions. Once these contributions have been made to the employee's
account, the City has no further funding obligation to the RHS Plan on their behalf, except for the Public
Employees' Medical and Hospital Care Act minimum which is the responsibility of the City.
Certain employees hired prior to January 1, 2006, had the option to retain a hybrid of the former
defined benefit Plan, or to fully convert to the new Plan. Employees electing to retain a hybrid of the former
defined benefit formula participate in a program requiring mandatory defined contributions by employees and
employer, as well as a defined benefit consisting of an ongoing contribution from the City to the participant's
RHS account, each month after retirement. Additionally, these employees are eligible to receive health care
benefits under the City's group health care plans. In order to receive these benefits these employees are
required to pay the City $100 per month up until their retirement to offset the unfunded portion of post -
employment health care benefits existing at the inception of the RHS Plan.
For fully converted employees, the City will make a one-time contribution into their individual RHS
account of $100 per month for every month the employee contributed to the previous defined benefit plan, for
a maximum of 15 years. For employees who elected to retain a hybrid plan, the City will make a one-time
contribution into their individual RHS account of $75 per month for every month the employee contributed to
the previous defined plan for a maximum of 15 years. In order to receive this, the employee must retire from
the City. At June 30, 2020, the estimated liability for the conversion part of the RHS Plan was $1,719,950. It
is not included in the Net OPEB Liability but is included in the compensated absences liability.
Employees who retired prior to January 1, 2006, continue to receive an ongoing defined benefit
consisting of a contribution made by the City to the participant's RHS account each month. The ongoing
defined benefit portion represents another post -employment benefit ("OPEB") of the City. The defined benefit
portion of the plan is closed to new participants.
Employees Covered. As of the measurement date June 30, 2019, the following current and former
employees were covered by the benefit terms under the plan:
Inactive employees, spouses, or beneficiaries currently receiving benefits 605
Inactive employees or beneficiaries entitled to but not yet receiving benefits 54
Active employees 790
Total 1.449
Contributions. Contribution requirements are established by City policy and may be amended by the
City council. The annual contribution is based on the actuarially determined contribution. As of measurement
period June 30, 2019, the City's estimated cash contributions were $3,834,916 to the trust in premium
payments, the estimated implicit subsidy was $626,021, resulting in total payment of $4,460,937.
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Net OPEB Liability. The City's net OPEB liability was measured as of June 30, 2019, and the total
OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated June
30, 2019. The General fund and Tidelands funds have typically been used in prior years to liquidate the net
OPEB liability. The total OPEB liability in the June 30, 2019 actuarial valuation was determined using the
following actuarial assumptions:
The total OPEB liability as of June 30, 2019 actuarial valuation was determined using the following
actuarial assumptions and applied to all periods included in the measurement, unless otherwise specified:
Valuation Date
June 30, 2019
Measurement Date
June 30, 2019
Actuarial Cost Method
Entry -Age Normal Cost Method
Actuarial Assumptions:
Discount Rate
6.50%
Inflation
2.50%
Projected Salary Increase
2.75% per annum, in aggregate
Expected long term investment rate of return
6.50%
Healthcare Cost Trend Rates
6.50% HMO/6.50% PPO
Post Retirement Turnover
Derived from Ca1PERS pension plan
Mortality
Derived from CALPERS pension plan updated to reflect
most recent experience study
The actuarial assumptions used in the June 30, 2019 valuation were based on a standard set of
assumptions the actuary has used for similar valuations, modified as appropriate for the City.
In June 2015, GASB issued Statement No. 75, which became effective for fiscal years beginning after
June 15, 2017. The primary objective of Statement No. 75 is to improve accounting and financial reporting by
state and local governments for postemployment benefits other than pensions (i.e. OPEB). Statement No. 75 is
also intended to improve information provided by state and local governmental employers about financial
support for OPEB that is provided by other entities. Statement No. 75 results from a comprehensive review of
the effectiveness of existing standards of accounting and financial reporting for all postemployment benefits
(pensions and OPEB) with regard to providing decision -useful information, supporting assessments of
accountability and inter -period equity, and creating additional transparency.
More specifically, Statement No. 75 requires the liability of employers to be measured as the portion
of the present value of projected benefit payments to be provided to current active and inactive employees that
is attributed to those employees' past periods of service (total OPEB liability), less the amount of the OPEB
plan's fiduciary net position. Statement No. 75 requires the recognition of the total OPEB liability in the
Statement of Net Position.
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period.
The following table shows the changes in total OPEB liability recognized over the measurement
Balance at June 30, 2018
Changes in the year:
Service cost
Interest on the total OPEB liability
Changes of benefit terms
Changes of assumptions
Differences between expected and actual
experience
Contributions - employer
Contributions - employees
Net investment income
Benefit payments, including refunds of
employee contributions
Administrative expenses
Other expense
Net changes
Balance at June 30, 2019
Source: City.
Increase (Decrease)
Total OPEB
Plan Fiduciary
Net OPEB
Liability
Net Position
Liability
(a)
(b)
(a) - (b)
$ 44,296,670
$ 21,696,948
$ 22,599,722
524,717
2,788,508
114,311
2,754,137
(3,842,531)
524,717
2,788,508
- 114,311
3,834,916
1,507,148
(3,842,531)
(11,446)
2,754,137
(3,834,916)
(1,507,148)
11,446
G,}}y,14L 1,466,V6/ 6J1,VJJ
46.635.812 23.185.035 23.450.777
Sensitivity to Changes in Discount Rate and Healthcare Cost Rate. The following what the total
OPEB liability would be if it were calculated using a discount rate that is 1 -percentage point lower (5.50
percent) or 1 -percentage point higher (7.50 percent) than the current discount rate:
Plan's Total OPEB Liability/(Asset)
I % Decrease
5.50%
Net OPEB Liability $28,135,160
Current Discount Rate I% Increase
6.50% 7.50%
$23,450,777 $19,475,161
The following presents what the total OPEB liability would be if it were calculated using healthcare
cost trend rates that are 1 -percentage point lower and or 1 -percentage point higher than the current healthcare
cost trend rates. The current assumed healthcare trend rates are 6.5% for health maintenance organizations
("HMO") and 6.5% for preferred provider organization ("PPO").
Plan's Total OPEB Liability/(Asset)
I % Decrease Current Healthcare I% Increase
Cost Trend Rates
(5.5%HM0/5.5%PPO (6.5%HM0/6.5%PP0 (7. %HMO/7.5%PPO
decreasing to decreasing to decreasing to
4.0016HM0/4.0916PPO) 5.0%HM0/5.001.PPO) 6.0%HM0/6.0%PP0)
Net OPEB Liability $21,701,918 $23,450,777 $25,875,167
For additional information with respect to the City's OPEB plan, see Note 11 to the audited financial
statements for fiscal year 2018-19 attached hereto as Appendix C.
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ECONOMIC AND DEMOGRAPHIC INFORMATION
Population
The following table offers population figures for the City, the County and the State for 2016 through
2020.
Area 2016 2017 2018 2019
2020
City of Newport Beach 86,557 86,436 86,615 85,706
85,780
County of Orange 3,162,789 3,184,229 3,192,092 3,192,987
3,194,332
State of California 39,214,803 39,504,609 39,740,508 39,927,315
39,782,870
Source: California State Department of Finance, Demographic Research Unit. 2010 Census Benchmark.
182
Building Activity
108
Residential building activity for calendar years 2015 through 2019 for the City
is shown in the
following tables.
78
City of Newport Beach
New Housing Units Building Permits
Source: City of Newport Beach Community Development Department — Building Division
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2015
2016
2017
2018
2019
Single Family Units
122
208
182
140
108
Multifamily Units
49
519
78
54
55
Total Units
171
727
260
194
163
Source: City of Newport Beach Community Development Department — Building Division
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City of Newport Beach
Building Permit Valuations
(Dollars in Thousands)
Personal Income
Personal Income is the income that is received by all persons from all sources. Personal Income is
calculated as the sum of wage and salary disbursements, supplements to wages and salaries, proprietors'
income with inventory valuation and capital consumption adjustments, rental income of persons with capital
consumption adjustment, personal dividend income, personal interest income, and personal current transfer
receipts, less contributions for government social insurance.
The personal income of an area is the income that is received by, or on behalf of, all the individuals
who live in the area; therefore, the estimates of personal income are presented by the place of residence of the
income recipients.
The following tables show the personal income and per capita personal income for the County, the
State and United States from 2011 through 2019.
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2015-16
2016-17
2017-18
2018-19
2019-20
Residential
New Single Family
105,710
173,768
151,152
129,606
112,352
New Multifamily
16,996
115,0589
29,574
22,680
22,226
Res. Alt. & Adds
79,425
92,363
80,957
94,165
92,410
Total Residential
202,131
381,190
261,683
246,451
226,989
Nonresidential
New Commercial
20,311
37,111
12,822
15,270
4,900
New Industrial
N/A
N/A
N/A
N/A
N/A
New Other0)
5,279
352
7,432
650
250
Alters. & Adds.
77,554
70,084
67,555
70,909
45,415
Total Non -Residential
103,144
107,548
87,808
86,828
50,565
Other Valuation:
58,408
68,069
12,728
54,805
66,973
Total All Building
417,151
Q$
X521
religious buildings,
hospitals and institutional buildings,
schools and educational buildings,
0) Includes churches and
residential garages, public
works and utilities
buildings.
Note: "Total All Building" is
the sum of Residential and Nonresidential Building Permit Valuations. Totals
may not add to sum
because of independent
rounding.
Source: The City.
Personal Income
Personal Income is the income that is received by all persons from all sources. Personal Income is
calculated as the sum of wage and salary disbursements, supplements to wages and salaries, proprietors'
income with inventory valuation and capital consumption adjustments, rental income of persons with capital
consumption adjustment, personal dividend income, personal interest income, and personal current transfer
receipts, less contributions for government social insurance.
The personal income of an area is the income that is received by, or on behalf of, all the individuals
who live in the area; therefore, the estimates of personal income are presented by the place of residence of the
income recipients.
The following tables show the personal income and per capita personal income for the County, the
State and United States from 2011 through 2019.
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PERSONAL INCOME
County of Orange, State of California, and United States
2011-2019
0) County figures not available.
Note: Dollars in Thousands.
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
The following table summarizes per capita personal income for the City, the County, the State and the
United States for the years 2010 through 2019. This measure of income is calculated as the personal income of
the residents of the area divided by the resident population of the area.
PER CAPITA PERSONAL INCOMEM
County of Orange, State of California, and United States
2010-2019(2)
County of
Year Orange California United States
2010
County of
$43,634
$40,546
Year
Orange
California
United States
2011
157,105,840
$1,737,940,000
$13,315,478,000
2012
170,496,109
1,852,397,500
13,998,383,000
2013
170,061,957
1,886,379,100
14,175,503,000
2014
178,946,153
2,021,038,500
14,982,715,000
2015
193,081,245
2,171,947,400
15,709,242,000
2016
200,026,649
2,263,889,800
16,111,636,000
2017
208,949,975
2,370,112,400
16,870,106,000
2018
220,684,684
2,514,129,300
17,813,035,000
20190)
N/A
2,633,925,500
18,760,800,000
0) County figures not available.
Note: Dollars in Thousands.
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
The following table summarizes per capita personal income for the City, the County, the State and the
United States for the years 2010 through 2019. This measure of income is calculated as the personal income of
the residents of the area divided by the resident population of the area.
PER CAPITA PERSONAL INCOMEM
County of Orange, State of California, and United States
2010-2019(2)
County of
Year Orange California United States
2010
49,773
$43,634
$40,546
2011
51,495
46,170
42,735
2012
55,348
48,798
44,599
2013
54,717
49,277
44,851
2014
57,165
52,324
47,058
2015
61,219
55,758
48,978
2016
63,086
57,739
49,870
2017
65,709
60,156
51,885
2018
69,268
63,557
54,446
2019(2)
N/A
66,661
N/A
<1) Per capita personal income is the total personal income divided by the total mid -year population estimates of the U.S.
Bureau of the Census. All dollar estimates are in current dollars (not adjusted for inflation).
(2) County and United States figures not available.
Source: U.S. Department of Commerce, Bureau of Economic Analysis and the City of Newport Beach.
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Employment
The following table summarizes the labor force, employment and unemployment figures over the past
five years for the City, the County of Orange, the State of California and the nation as a whole.
LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
Yearly Average for Years 2014 through 2018
Unemployment
Year and Area
Labor Force
Employment()
Unemployment(2)
Rate (0%)(3)
2014
1,553,400
56,400 3.5
State of California
19,205,300
City of Newport Beach
44,900
42,900
2,000
4.5
County of Orange
1,569,000
1,482,900
86,100
5.5
State of California
18,714,700
17,310,900
1,403,800
7.5
United States(4)
155,922,000
146,305,000
9,617,000
6.2
2015
4.0
United States(4) 163,539,000
157,538,000
6,001,000
City of Newport Beach
45,000
43,400
1,700
3.7
County of Orange
1,585,000
1,514,900
70,900
4.5
State of California
18,851,100
17,681,800
1,169,200
6.2
United States(4)
157,130,000
148,834,000
8,296,000
5.3
2016
Source: California Employment Development Department,
based on March 2018 benchmark and U.S. Department of Labor,
City of Newport Beach
45,300
43,700
1,600
3.6
County of Orange
1,598,800
1,534,100
64,700
4.0
State of California
19,044,500
18,002,800
1,041,700
5.5
United States(4)
159,187,000
151,436,000
7,751,000
4.9
411VA
City of Newport Beach
45,100
43,700
1,400 3.2
County of Orange
1,609,800
1,553,400
56,400 3.5
State of California
19,205,300
18,285,500
919,800 4.8
United States(4)
160,320,000
153,337,000
6,982,000 4.4
2018
City of Newport Beach 45,100
43,800
1,200
2.7
County of Orange 1,617,867
1,569,750
48,117
3.0
State of California 19,398,200
18,582,800
815,400
4.2
United States(4) 162,075,000
155,761,000
6,314,000
3.9
2019
City of Newport Beach 45,200
44,100
1,100
2.4%
County of Orange 1,623,442
1,578,333
45,100
2.8
State of California 19,411,600
18,627,400
784,200
4.0
United States(4) 163,539,000
157,538,000
6,001,000
3.7
0) Includes persons involved in labor-management trade disputes.
(2) Includes all persons without jobs who are actively seeking work.
(3) The unemployment rate is computed from unrounded
data; therefore, it
may differ from rates computed
from rounded
figures in this table.
(4) Not strictly comparable with data for prior years.
Note: Data is not seasonally adjusted.
Source: California Employment Development Department,
based on March 2018 benchmark and U.S. Department of Labor,
Bureau of Labor Statistics.
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The table below summarizes employment by industry in the Anaheim -Santa Ana -Irvine Metropolitan
Statistical Area ("MSA") from 2015 to 2019. Service Providing, Professional and Business Services and
Government are the largest employment sectors in the Anaheim -Santa Ana -Irvine MSA.
ANAHEIM -SANTA ANA -IRVINE STATISTICAL AREA
Annual Average Industry Employment 2015-2019
Total Farm
Total Nonfarm
Total Private
Goods Producing
Natural Resources and Mining
Construction
Manufacturing
Service Providing
Trade, Transportation and
Utilities
Wholesale Trade
Retail Trade
Transportation, Warehousing
and Utilities
Information
Financial Activities
Professional and Business
Services
Educational and Health Services
Leisure and Hospitality
Other Services
Government
Total, All Industries
2015
2016
2017
2018
2019
2,400
2,400
2,100
2,000
1,900
1,545,900
1,585,800
1,618,700
1,651,200
1,672,500
1,3 89,500
1,426,200
1,458,500
1,490,000
1,509,600
249,900
255,900
263,000
267,400
266,700
400
300
500
500
500
91,700
97,400
101,800
106,300
106,400
157,800
158,200
160,700
160,700
159,800
1,296,000
1,329,900
1,355,700
1,383,800
1,405,900
257,400
258,500
260,500
261,600
259,400
78,900
78,600
79,000
79,800
79,400
151,600
152,600
153,500
152,600
150,500
26,900
27,200
28,000
29,200
29,500
24,900
26,000
26,800
26,700
26,100
116,400
118,000
119,600
118,700
117,400
289,200
299,300
304,400
317,000
328,200
198,900
206,200
215,900
224,700
231,800
203,800
212,000
218,100
222,600
228,000
48,900
50,500
50,300
51,400
52,000
156,400
159,600
160,200
161,200
162,900
1,548,300
1,588,300
1,620, 800
1,653,200
1,674,400
Source: State of California, Employment Development Department, Labor Market Information Division, Anaheim -Santa Ana -
Irvine Annual Average Labor Force and Industry Employment, March 2018 Benchmark.
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Commercial Activity
The following table summarizes the annual volume of taxable transactions within the City for the
years 2014 through 2019:
CITY OF NEWPORT BEACH
TABLE OF TAXABLE SALES BY CATEGORY
for the Years 2014 through 2019
Adjusted for Economic Data
(000's)
2014 2015 2016 2017 2018 2019
Apparel stores
266,757
264,860
269,914
267,598
274,698
258,576
General merchandise stores
153,623
143,533
116,299
145,367
140,384
136,752
Food Stores
246,462
267,235
269,211
271,720
287,075
293,098
Eating and Drinking places
498,622
522,452
543,732
566,982
597,094
602,749
Building materials
49,656
46,744
48,667
50,043
53,521
50,685
Auto dealers and auto supplies
749,062
768,067
779,178
798,271
905,220
900,187
Service stations
178,306
155,579
136,313
145,487
159,296
166,585
Other Retail stores
344,048
342,131
332,342
325,751
329,670
324,087
Total Retail Outlets
1,266,006
1,283,071
1,296,207
1,305,367
1,370,742
1,461,177
All Other Outlets
501,579
532,547
577,651
566,651
625,989
741,761
3,137,4
2 ^''^ AQM
Sources: California State Board of Equalization, California Department of Taxes and Fees Administration, State Controller's
Office, Avenue Insights and Analytics.
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APPENDIX B
THE CITY OF NEWPORT BEACH AUDITED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
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APPENDIX C
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
The following is a summary of certain provisions of the Trust Agreement and the Lease which are not
described elsewhere. This summary does not purport to be comprehensive and reference should be made to
the respective agreement for a full and complete statement of the provisions thereof.
[TO COME]
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APPENDIX D
FORM OF LEGAL OPINION
Upon the execution and delivery of the 2020 Certificates, Stradling Yocca Carlson & Rauth, a
Professional Corporation, Special Counsel, proposes to render its final approving opinion in substantially the
following form:
[Closing Date]
City Council
City of Newport Beach
Newport Beach, California
Re: $ City of Newport Beach Certificates of Participation 2020A (Fire Station No. 2)
Ladies and Gentlemen:
We have reviewed the Constitution and the laws of the State of California and certain proceedings
taken by the City of Newport Beach (the "City") in connection with the authorization, execution and delivery
by the City of that certain Lease/Purchase Agreement, dated as of December 1, 2020 (the "Lease"), by and
between the Newport Beach Public Facilities Corporation (the "Corporation") and the City. We have also
reviewed that certain Trust Agreement, dated as of December 1, 2020 (the "Trust Agreement"), by and among
The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), the Corporation and the City.
In rendering this opinion, we also have relied upon certain representations of fact and certifications made by
the Corporation and the City, the initial purchaser of the Certificates (defined below) and others. We have not
undertaken to verify through independent investigation the accuracy of the representations and certifications
relied upon by us. All capitalized terms used herein shall have the meaning given them in the Trust Agreement
unless otherwise defined.
Pursuant to the Trust Agreement, the Trustee has agreed to execute and deliver the $ City of
Newport Beach Certificates of Participation 2020A (Fire Station No. 2) (the "Certificates") evidencing
undivided proportionate interests of the owners of the Certificates in certain lease payments (the "Lease
Payments") to be made by the City pursuant to the Lease. Pursuant to that certain Assignment Agreement,
dated as of December 1, 2020 (the "Assignment Agreement"), the Corporation has assigned to the Trustee the
Corporation's right to receive Lease Payments from the City under the Lease.
Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we
deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that:
(1) The obligation of the City to pay Lease Payments in accordance with the terms of the Lease is
a valid and binding obligation payable from the funds of the City lawfully available therefore, except as the
same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other
laws relating to or affecting generally the enforcement of creditors' rights, by equitable principles, by the
exercise of judicial discretion in appropriate cases and by the limitations on legal remedies against
municipalities in the State of California. The obligation of the City to make Lease Payments under the Lease
does not constitute a debt of the City, the State of California or any political subdivision thereof within the
meaning of any statutory or constitutional debt limitation or restriction and does not constitute a pledge of the
faith and credit or taxing power of the City, the State of California or any political subdivision thereof.
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(2) The Lease and the Trust Agreement have been duly authorized, executed and delivered by the
City and constitute valid and legally binding agreements of the City enforceable against the City in accordance
with their terms, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights, by
equitable principles, by the exercise of judicial discretion in appropriate cases and by the limitations on legal
remedies against municipalities in the State of California, except that we express no opinion as to any
provisions in the Lease or the Trust Agreement with respect to indemnification, penalty, contribution, choice
of law, choice of forum or waiver.
(3) Under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy
of certain representations and compliance with certain covenants and requirements described herein, interest
on the Certificates is excluded from gross income for federal income tax purposes and is not an item of tax
preference for purposes of calculating the federal alternative minimum tax imposed on individuals and
corporations. It should be noted that, with respect to corporations, such interest may be included as an
adjustment in the calculation of alternative minimum taxable income, which may affect the alternative
minimum tax liability of such corporations.
(4) Interest (and original issue discount) with respect to the Certificates is exempt from personal
income taxes imposed in the State of California.
(5) The difference between the issue price of a Certificate (the first price at which a substantial
amount of the Certificates of a maturity are to be sold to the public) and the stated payment price at maturity
with respect to such Certificate constitutes original issue discount. Original issue discount accrues under a
constant yield method, and original issue discount will accrue to a Certificate owner before receipt of cash
attributable to such excludable income. The amount of original issue discount deemed received by a
Certificate owner will increase the Certificate owner's basis in the applicable Certificate. Original issue
discount that accrues to a Certificate owner is excluded from the gross income of such owner for federal
income tax purposes, is not an item of tax preference for purposes of calculating the federal alternative
minimum tax imposed on individuals (as described in paragraph (3) above) and is exempt from State of
California personal income tax.
(6) The amount by which a Certificate owner's original basis for determining loss on sale or
exchange in a Certificate (generally, the purchase price) exceeds the amount payable on maturity (or on an
earlier call date) constitutes amortizable Certificate premium, which must be amortized under Section 171 of
the Code; such amortizable Certificate premium reduces the Certificate owner's basis in the applicable
Certificate (and the amount of tax-exempt interest received), and is not deductible for federal income tax
purposes. The basis reduction as a result of the amortization of Certificate premium may result in a Certificate
owner realizing a taxable gain when a Certificate is sold by the owner for an amount equal to or less (under
certain circumstances) than the original cost of the Certificate to the owner.
The opinions expressed in paragraphs (3) and (5) are subject to the condition that the City and the
Corporation comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"),
that must be satisfied subsequent to the delivery of the Certificates to assure that such interest (and original
issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply
with such requirements of the Code might cause interest (and original issue discount) with respect to the
Certificates to be included in gross income for federal income tax purposes retroactive to the date of issuance
of the Certificates. The City and the Corporation have covenanted to comply with all such requirements.
Except as expressly set forth in paragraphs (3), (4), (5) and (6) we express no opinion regarding any
tax consequences with respect to the Certificates.
Certain agreements, requirements and procedures contained or referred to in the Trust Agreement, the
Tax Certificate executed by the City and other documents related to the Certificates may be changed and
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certain actions may be taken or omitted, under the circumstances and subject to the terms and conditions set
forth in such documents, upon the advice or with the approving opinion of counsel nationally recognized in the
area of tax-exempt obligations. We express no opinion as to the effect on the tax consequences on and after
the date on which any such change occurs or action is taken or omitted upon advice or approval of counsel
other than Stradling Yocca Carlson & Rauth, a Professional Corporation.
We have not made or undertaken to make an investigation of the state of title to any of the real
property described in the Lease, the Site Lease and the Assignment Agreement or of the accuracy or
sufficiency of the description of such property contained therein, and we express no opinion with respect to
such matters.
We are admitted to the practice of law only in the State of California and our opinion is limited to
matters governed by the laws of the State of California and federal law. We assume no responsibility with
respect to the applicability or the effect of the laws of any other jurisdiction.
The opinions expressed herein are based upon our analysis and interpretation of existing statutes,
regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities.
The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not
occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any
such actions or events are taken or do occur. Our engagement with respect to the Certificates terminates on the
date of their execution and delivery.
We express no opinion herein as to the accuracy, completeness or sufficiency of the Official
Statement or other offering material relating to the Certificates and expressly disclaim any duty to advise the
owners of the Certificates with respect to matters contained in the Official Statement.
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Respectfully submitted,
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APPENDIX E
FORM OF CONTINUING DISCLOSURE AGREEMENT
Upon execution and delivery of the 2020 Certificates, the City proposes to enter into a Continuing
Disclosure Agreement in substantially the following form:
This Continuing Disclosure Agreement, dated as of December 1, 2020 (the "Disclosure Agreement")
is executed and delivered by the City of Newport Beach (the "City") and Digital Assurance Certification,
L.L.C. (the "Dissemination Agent") in connection with the execution and delivery of the $ City of
Newport Beach Certificates of Participation 2020A (Fire Station No. 2) (the "Certificates"). The Certificates
are being executed pursuant to a Trust Agreement, dated as of December 1, 2020, by and among the City, The
Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), and the Newport Beach Public
Facilities Corporation (the "Corporation"). The City covenants as follows:
SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed
and delivered by the City for the benefit of the Holders and Beneficial Owners of the Certificates and in order
to assist the Participating Underwriter in complying with the Rule.
SECTION 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply
to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the
following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Comprehensive Annual Financial Report provided by the City
pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.
"Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to vote or
consent with respect to, or to dispose of ownership of, any Certificates (including persons holding Certificates
through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Certificates for
federal income tax purposes.
"Disclosure Representative" shall mean the City Manager of the City, the Assistant City Manager of
the City, the Finance Director or their designee, or such other officer or employee as the City shall designate in
writing from time to time.
"Dissemination Agent" shall mean Digital Assurance Certification, L.L.C., or any successor
Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance
of such designation.
"Financial Obligation" shall mean, for purposes of the Listed Events set out in Section 5(a)(10) and
Section (5)(b)(8), a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as
security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The
term "Financial Obligation" shall not include municipal securities (as defined in the Securities Exchange Act
of 1934, as amended) as to which a final official statement (as defined in the Rule) has been provided to the
MSRB consistent with the Rule.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.
"Official Statement" shall mean the Official Statement relating to the Certificates, dated ,
2020.
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"Participating Underwriter" shall mean the original underwriter of the Certificates required to comply
with the Rule in connection with the offering of the Certificates.
"Repository" shall mean the Municipal Securities Rulemaking Board, which can be found at
http:Hemma.msrb.org.
"Rule" shall mean Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as the same may be amended from time to time.
"State" shall mean the State of California.
SECTION 3. Provision of Annual Reports.
(a) The City shall, or, upon delivery of the Annual Report to the Dissemination Agent, shall
cause the Dissemination Agent to, not later than 270 days after the end of the City's fiscal year (which
presently ends on June 30), commencing with the report for the fiscal year ending June 30, 2020, provide to
the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure
Agreement. The Annual Report may be submitted as a single document or as 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 and later than the date required above for the filing of the Annual Report if they are not
available by that date. If the City's fiscal year changes, it shall give notice of such change in the same manner
as for a Listed Event under Section 5(c).
(b) 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). If the City is unable to provide to the Repository an
Annual Report by the date required in subsection (a) above, the Dissemination Agent shall in a timely manner
send a notice to the Repository in substantially the form attached as Exhibit A.
(c) The Dissemination Agent shall:
(i) confirm the electronic filing requirements of the Municipal Securities
Rulemaking Board for the Annual Report the name and address of each Repository; and
(ii) (if the Dissemination Agent is other than the City), file a report with the City
certifying that the Annual Report has been provided pursuant to this Disclosure Agreement and stating
the date it was provided.
SECTION 4. Content of Annual Reports. The City's Annual Report shall contain or include by
reference the following:
(a) The City's audited financial statements, prepared in accordance with generally accepted
auditing standards for municipalities in the State of California. If the City's audited financial statements are
not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report
shall contain unaudited financial statements in a format similar to the financial statements contained in the
final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual
Report when they become available.
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(b) Numerical and tabular information for the immediately preceding Fiscal Year of the type
contained in Appendix A to the Official Statement, in the following charts and tables: Tables 1 through 4, 6, 7,
and 8. With respect to Table 1, the adopted budget for the fiscal year in during which the Annual Report is
filed need not be reported.
Financial information relating to the City referenced in Section 4(b) may be updated from time to
time, and such updates may involve displaying data in a different format or table or eliminating data that is no
longer available.
The City has not undertaken in this Disclosure Agreement to provide all information an investor may
want to have in making decisions to hold, sell or buy Certificates but only to provide the specific information
listed above.
Any or all of the items listed above may be included by specific reference to other documents,
including official statements of debt issues of the City or related public entities, which have been submitted to
the MSRB or the Securities and Exchange Commission. If the document included by reference is a final
official statement, it must be available from the MSRB. The City shall clearly identify each such other
document so included by reference.
SECTION 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of
the occurrence of any of the following events with respect to the Certificates in a timely manner not more than
ten (10) Business Days after the event:
1. principal and interest payment delinquencies;
2. unscheduled draws on debt service reserves reflecting financial difficulties;
3. unscheduled draws on credit enhancements reflecting financial difficulties;
4. substitution of credit or liquidity providers, or their failure to perform;
5. adverse tax opinions, the issuance by the Internal Revenue Service of proposed or
final determinations of taxability or Notices of Proposed Issue (IRS Form 5701 TEB);
6. tender offers;
7. defeasances;
ratings changes;
9. bankruptcy, insolvency, receivership or similar proceedings; or
10. default, event of acceleration, termination event, modification of terms, or other
similar events under the terms of a Financial Obligation of the obligated person, any of which reflect financial
difficulties.
Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur
when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated
person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law
in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or
business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental
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body and officials or officers in possession but subject to the supervision and orders of a court or governmental
authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or
governmental authority having supervision or jurisdiction over substantially all of the assets or business of the
obligated person.
(b) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of
the occurrence of any of the following events with respect to the Certificates, if material:
1. unless described in Section 5(a)(5), other notices or determinations by the Internal
Revenue Service with respect to the tax status of the Certificates or other events affecting the tax status of the
Certificates;
2. modifications to the rights of Certificate holders;
optional, unscheduled or contingent Certificate redemptions;
4. release, substitution or sale of property securing repayment of the Certificates;
non payment related defaults;
6. the consummation of a merger, consolidation, or acquisition involving the City or the
sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry
into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to
any such actions, other than pursuant to its terms;
7. appointment of a successor or additional trustee or the change of the name of a
trustee; or
8. incurrence of a Financial Obligation of the obligated person, or agreement to
covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the
obligated person, any of which affect security holders.
(c) If the City determines that knowledge of the occurrence of a Listed Event under Section 5(b)
would be material under applicable federal securities laws, and if the Dissemination Agent is other than the
City, the City shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the
Dissemination Agent to file a notice of such occurrence with the MSRB in an electronic format as prescribed
by the MSRB in a timely manner not more than ten (10) Business Days after the event.
(d) If the City determines that the Listed Event under Section 5(b) would not be material under
applicable federal securities laws and if the Dissemination Agent is other than the City, the City shall so notify
the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence.
(e) The City hereby agrees that the undertaking set forth in this Disclosure Agreement is the
responsibility of the City and, if the Dissemination Agent is other than the City, the Dissemination Agent shall
not be responsible for determining whether the City's instructions to the Dissemination Agent under this
Section 5 comply with the requirements of the Rule.
SECTION 6. Termination of Reporting Obligation. The City's obligations under this Disclosure
Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the
Certificates. If such termination occurs prior to the final maturity of the Certificates, the City shall give notice
of such termination in the same manner as for a Listed Event under Section 5(c).
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SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The
Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by
the City pursuant to this Disclosure Agreement. The Dissemination Agent may resign by providing thirty days
written notice to the City and the Trustee (if the Dissemination Agent is other than the Trustee). The
Dissemination Agent shall not be responsible for the content of any report or notice prepared by the City and
shall have no duty to review any information provided to it by the City. The Dissemination Agent shall have
no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any
report not provided to it by the City in a timely manner and in a form suitable for filing.
SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement
may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or
waiver is permitted by the Rule; provided, the Dissemination Agent shall have first consented to any
amendment that modifies or increases its duties or obligations hereunder. 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, if the amendment relates 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(c), and (ii) the Annual Report for the year in which
the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form)
between the financial statements as prepared on the basis of the new accounting principles and those prepared
on the basis of the former accounting principles.
SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to
prevent the City 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 a Listed 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
occurrence of a Listed Event in addition to that which 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 Listed Event.
SECTION 10. Filings with the MSRB. All financial information, operating data, financial
statements, notices, and other documents provided to the MSRB in accordance with this Disclosure Agreement
shall be provided in an electronic format prescribed by the MSRB and shall be accompanied by identifying
information as prescribed by the MSRB.
SECTION 11. Default. In the event of a failure of the City to comply with any provision of this
Disclosure Agreement, any Holder or Beneficial Owner of the Certificates 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. A default under this Disclosure Agreement
shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure
Agreement in the event of any failure of the City to comply with this Disclosure Agreement shall be an action
to compel performance.
No Certificate holder or Beneficial Owner may institute such action, suit or proceeding to compel
performance unless they shall have first delivered to the City satisfactory written evidence of their status as
such, and a written notice of and request to cure such failure, and the City shall have refused to comply
therewith within a reasonable time.
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SECTION 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent
shall have only such duties as are specifically set forth in this Disclosure Agreement, and the City agrees, to
the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees
and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the
exercise or performance of its powers and duties hereunder, including the costs and expenses (including
attorney's fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination
Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the City
for its services provided hereunder in accordance with its schedule of fees as amended from time to time and
all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its
duties hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be
acting in any fiduciary capacity for the City, the Certificate holders, or any other party. The obligations of the
City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the
Certificates.
SECTION 13. Notices. Any notices or communications to or among any of the parties to this
Disclosure Agreement may be given as follows:
To the City: City of Newport Beach
100 Civic Center Drive
Newport Beach, California 92660
Attention: City Manager
To the Dissemination Agent: Digital Assurance Certification, L.L.C.
Attention:
315 East Robinson Street, Orlando
Orlando, Florida 32801
SECTION 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City,
the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time
of the Certificates, and shall create no rights in any other person or entity.
SECTION 15. Signature. This Disclosure Agreement has been executed by the undersigned on the
date hereof, and such signature binds the City to the undertaking herein provided.
CITY OF NEWPORT BEACH
LE
City Manager
DIGITAL ASSURANCE CERTIFICATION, L.L.C.,
as Dissemination Agent
M.
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Authorized Officer
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EXHIBIT A
NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Newport Beach
Name of Certificate Issue: $ City of Newport Beach
Certificates of Participation 2020A (Fire Station No. 2)
Date of Issuance: '2020
NOTICE IS HEREBY GIVEN that the City has not provided an Annual Report with respect to the above-
named Certificates as required by the Continuing Disclosure Agreement executed by the City on the date of
issuance of the Certificates. The City anticipates that the Annual Report will be filed by
Dated: DIGITAL ASSURANCE CERTIFICATION, L.L.C.,
as Dissemination Agent
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APPENDIX F
DTC BOOK -ENTRY SYSTEM
The information in this Appendix F concerning DTC and DTC's book -entry system has been obtained
from sources that the City believes to be reliable, but the City takes no responsibility for the completeness or
accuracy thereof. The following description of the procedures and record keeping with respect to beneficial
ownership interests in the 2020 Certificates, payment ofprincipal, premium, if any, accreted value, if any, and
interest on the 2020 Certificates to DTC Participants or Beneficial Owners, confirmation and transfers of
beneficial ownership interests in the 2020 Certificates and other related transactions by and between DTC, the
DTC Participants and the Beneficial Owners is based solely on information provided by DTC.
DTC will act as securities depository for the 2020 Certificates. The 2020 Certificates 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 certificate will be
issued for each annual maturity of the 2020 Certificates, 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 S&P Global Ratings rating of AA+. The DTC Rules applicable to its Participants are on file with the
Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of 2020 Certificates under the DTC system must be made by or through Direct Participants,
which will receive a credit for the 2020 Certificates on DTC's records. The ownership interest of each actual
purchaser of each Certificate (`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 2020 Certificates are to
be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the
2020 Certificates, except in the event that use of the book -entry system for the 2020 Certificates is
discontinued.
To facilitate subsequent transfers, all 2020 Certificates 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
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an authorized representative of DTC. The deposit of 2020 Certificates with DTC and their registration in the
name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has
no knowledge of the actual Beneficial Owners of the 2020 Certificates; DTC's records reflect only the identity
of the Direct Participants to whose accounts such Certificates 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 2020 Certificates may wish to take certain steps to augment
the transmission to them of notices of significant events with respect to the 2020 Certificates, such as
redemptions, tenders, defaults, and proposed amendments to the Certificate documents. For example,
Beneficial Owners of 2020 Certificates may wish to ascertain that the nominee holding the 2020 Certificates
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.
Prepayment notices shall be sent to DTC. If less than all of the 2020 Certificates within an issue are
being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in
such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to 2020
Certificates unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its
usual procedures, DTC mails an Omnibus Proxy to the Corporation 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 2020 Certificates are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Prepayment proceeds, distributions, and dividend payments on the 2020 Certificates 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 Corporation 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 Corporation, 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 Corporation
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 Certificate Owner shall give notice to elect to have its 2020 Certificates purchased or tendered,
through its Participant, to the Trustee, and shall effect delivery of such 2020 Certificates by causing the Direct
Participant to transfer the Participant's interest in the 2020 Certificates, on DTC's records, to the Trustee. The
requirement for physical delivery of 2020 Certificates in connection with an optional tender or a mandatory
purchase will be deemed satisfied when the ownership rights in the 2020 Certificates are transferred by Direct
Participants on DTC's records and followed by a book -entry credit of tendered 2020 Certificates to the
Trustee's DTC account. DTC may discontinue providing its services as depository with respect to the 2020
Certificates at any time by giving reasonable notice to the Corporation 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.
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DTC may discontinue providing its services as depository with respect to the 2020 Certificates at any
time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a
successor depository is not obtained, 2020 Certificate certificates are required to be printed and delivered and
the registration and transfer provisions of the Trust Agreement will apply.
The City may decide to discontinue use of the system of book -entry -only transfers through DTC (or a
successor securities depository). In that event, 2020 Certificate certificates will be printed and delivered to
DTC and the registration and transfer provisions of the Trust Agreement will apply.
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