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AP 07-05-01 / - - ~0r (1\ SOUTH TAHOE PUBLIC UTILITY DISTRICT "Basic Services for a Complex World" . REGULAR BOARD MEETING AGENDA Thursday, July 5, 2001 2:00 P.M. City Council Chambers 1900 Lake Tahoe Boulevard, South Lake Tahoe, California !~~.9~:~g'iii~;~~!~~"'i~~~ij~E.~'~~'~'~:~~;~M!J;li;M#'0;~'li;i,~'!~"(~~'(Wl4!Hmj~~'i.ti$i1Wr>>;)jj;"""""'i';""""""i'...........,.'.'.'.i;.;.;.;.;~.!.;n~i~~.;.~g!i~r.!B.:i.i~~;L~~;:~M.~g~g~:~;. ,..!..:.!.!..:.:.!.!.!...:..;!.!.!.o<. o!:'A.!... .!.I..~. l. !-!.!.~ t!.t... .!-!tB, < , . .. .< <.~ .~!:! t. , "' 1, JJ 1JJ>>JJjW.!.l.!.!W.!)..!;!.!.!.!-!.!t!;t;!.!Vp..!;!.!...~!#!.!:'-!;..@\!l.!;!:!.:.!.!:!.!.\!l.!.\!l.!.!;!:!.!.!.~.!.!;!;!:!.!m' !:!-';!:&::!;!:!<<-!.!.!<.!.!.!.!.!..!. Duane Wallace, President BOARD MEMBERS James R. Jones, Vice President ..:g2Li:::~ge2;~L.~:~i:.=~~~~2).~:.:;g::~;:1~L::.:::::;::::~.::.:::~::i;>:;::::.<):.::~:~~;:Z~:=:~:::~~~~~:~:::~::~~:L:.:.:::~~:~;:gl~~;~;::~::::~:::::~::::::;::::::::::~;::::.~:::::::;:::::::::::::::::::::::=::~~g;~:::::::=g~;~:~::~:::::::~:~::~~:~:~gL::: 1. CALL TO ORDER REGULAR MEETING - PLEDGE OF ALLEGIANCE 2. COMMENTS FROM THE AUDIENCE (Short non-agenda items - 5 minute limit. No action will be taken.) 3. CORRECTIONS TO THE AGENDA OR CONSENT CALENDAR 4. ADOPTION OF CONSENT CALENDAR (Approved by a single vote. Any item can be discussed and considered separately upon request.) 5. CONSENT ITEMS BROUGHT FORWARD FOR ACTION I DISCUSSION 6. ITEMS FOR BOARD ACTION REQUESTED BOARD ACTION a. 1994 LaSalle Bank Loan Refinancing: Water Revenue Refunding Bonds, Series 2001 (Rhonda McFarlane) Adopt Resolution No. 2720-01 Authorizing the Issuance and Sale of Water Revenue Refunding Bonds for the Purpose of Refunding that Certain 1994 Installment Sale Agreement with LaSalle National Bank, and Related Matters REGULAR BOARD MEETING AGENDA - JULY 5, 2001 PAGE - 2 b. Tallac Pump Station Force Main Repair 1Jlm Hoggatt)( -RH S) c. 2000/2001 EI Dorado County Grand Jury Report (Bob Baer) (1) Determine an Emergency Exists Pursuant to Section 1102 of the Public Contract Code; (2) Determine Substantial Evidence has been Presented to Authorize an Exception . be Made to Section 22050 of Public Contract Code that this Emergency will Not Permit a Delay Resulting from a Competitive Solicitation for Bids and that this Action is Necessary to Respond to the Emergency; and (3) Adopt Resolution 2721-01 Delegating Authority to the General Manager to Order any Action Necessary to Respond to this Emergency, and Determine that the Project is Exempt from CEQA Direct Staff Regarding Response () C.,_\ d. Payment of Claims Approve Payment in the Amount of $1,548,583.00 7. BOARD MEMBER COMMITTEE REPORTS a. Executive Committee (Wallace 1 Jones) b. Finance Committee (Wallace 1 Schafer) c. Water & Wastewater Operations Committee (Jones / Strohm) d. Planning Committee (Mosbacher 1 Schafer) 8. BOARD MEMBER AD HOC COMMITTEE REPORTS a. Federal Legislative Ad Hoc Committee (Wallace 1 Jones) b. Park Avenue Redevelopment Ad Hoc Committee (Jones 1 Schafer) c. Lakeside Park Ad Hoc Committee (Jones 1 Strohm) d. Sher Funding Ad Hoc Committee (Jones 1 Strohm) e. Labor Negotiations Ad Hoc Committee (Wallace 1 Strohm) 9. BOARD MEMBER REPORTS 10. GENERAL MANAGER 1 STAFF REPORTS 11. NOTICE OF PAST AND FUTURE MEETINGS 1 EVENTS Past MeetinQs 1 Events 06/25101 - Lake Baikal Visitors Tour of Alpine County Facilities 06/27/01 - Employee Recognition / Longevity Awards Picnic 07/02/01 - Board Workshop - Alpine County Master Plan 07/02/01 - Alpine County Contracts Commission Meeting 07/02/01 - Operations Committee Meeting REGULAR BOARD MEETING AGENDA - JULY 6, 2001 PAGE-3 Future Meetinas I Events 07/16/01 - 4:00 p.m. - Operations Committee Meeting 07/17/01 - 9:00 a.m. - Alpine County Regular Board Meeting in Markleeville 07/19/01 - 2:00 p.m. - STPUD Regular Board Meeting at City Council Chambers 12. CLOSED SESSION (Please note Closed Sessions are not open to the public) I .".c. '. a.. Pursuant to Government Code Section 54956.9(c)/Conference with Leaal Counsel: Anticipated Litiaation (one case) b. Pursuant to Government Code Section 54956.9(a)/Conference with Leaal Counsel Existina Litiaation: Mountain Cascade Inc., and Valley Enaineers, Inc. vs. STPUD Board of Directors and STPUD, County of EI Dorado, Superior Court Case No. SC20000050 ., Pursuant to Government Code Section 54956.9(a)/Conference with Leaal Counsel Existina Litiaation: Schwake vs. STPUD, Federal Case No. CV-N-93-851-DWH d. Pursuant to Government Code Section 54956.8/Conference with Real Property Neaotiators Negotiating Parties: Board of Directors, Robert Baer / General Manager Under Negotiation: Consideration of Property Purchase Property Identification: APN 1-080-53, APN 1-080-54, APN 1-080-56, APN 1-080-60, APN 1-200-01, APN 1-200-10, APN 1-200-11 e ' . ... Pursuant to Government Code Section 54956.9(a)/Conference with Leaal Counsel Existing Litiaation: STPUD vs. ARCO, et ai, San Francisco County Superior Court Case No. 999128 f. Pursuant to Government Code Section 54957.6 (a)/Conference with Labor Neaotiators Unrepresented Employee Position: General Manager Agency Negotiators: Labor Negotiations Ad Hoc Committee 13. ACTION / REPORT ON ITEMS DISCUSSED DURING CLOSED SESSION 14. ADJOURNMENT (The Board will adjourn to the next regular meeting, July 19, 2001, 2:00 p.m.) The South Tahoe Public Utility District Board of Directors regularly meets the first and third Thursday of each month. A complete agenda packet, including all backup information is available for review at the District office during the hours of 8:00 a.m. - 5:00 p.m. Monday through Friday. Items on this agenda are numbered for identification purposes only and will not necessarily be considered in the order in which they appear on the agenda. Designated times are for particular items only. Public hearings will not be called to order prior to the time specified. Participation is encouraged. Public comments on items appearing on the agenda will be taken at the same time the agenda items are heard; comments should be brief and directed to specifics of the item being considered. Comments on items not on the agenda can be heard during "Comments from the Audience;" however, action cannot be taken on items not included on agenda. Please provide the Clerk of the Board with a copy of all written material presented at the meeting. Tape recordings are made of each Board meeting and these tapes are retained in the Board Clerk's office for two years. South Tahoe Public Utility District. 1275 Meadow Crest Drive, South Lake Tahoe, CA 96150. Phone 530.544.6474. Facsimile 530.541.0614 CONSENT CALENDAR j:.. f ., '.:. . . , ~ . ~ ~ ~ . . . ,. .. . ., -. ~'1.'.~';.':.>~}:-:-:::-::::"':,"-. ~;::,~~'>-:"~:~,'::::,<::"''>':_' _. :..-- .q :~:,;:":,: .,.." ','; ~lI1~Ms:::r::. .'. '. .' . . ..... . . REQUESTED ACTION'. '. ; "'. . ~"".':M}WX~~!t~:lim~'!'f!1":m*<:":':""""""""(!!'-ll!*f'.'...:.....Ifi"!"!If!fif(ff!fl:Iff!~.........." ..e.,:,:,:,:,:,:~r~:((...fl.i.fi.ffj.il"f(<'.,~(,:i.li..'.'.,.,.,".":".""i'i':"""';":':!'i!'fi';("~l"tti!.!$.:*%:'1j~'~'i':':':'r:':':I!i'fiT:ti4:..: :;~.;' JULY 5, 2~01 .. a. SLlrplus Vehicle (U.nda Brown) Authorize Nationwide Auction Systems to Sell Surplus Truck 28 b. Tr.uck 28 Replacement (Linda Brown) Authorize Purchase of a 2001 Dodge Pickup Truck Through the California Department of General Services Competitively Bid Contract in the Amount of $24, 131.72 c. Park Avenue Redevelopment Phase 2 Utilities Project (Nlck Zaninovich) (1) Approve Change Order NO.3 for West Valley Construction in a Credit Amount of ${11 ,355.15}; (2) Approve Project Closeout Agreement and Release of Claims; and (3) Authorize Staff to File a Notice of Completion with the EI Dorado County Clerk ~'.;'~'. . :~i;"d: ". :.'". :ArfPWh~ad; Weu :Nb.:a::- l .. . (Rl~h-ard 801bi"ig)'''. . . . _ "", ~ _ , T ": . .':..APprove Agreel};lent wiUi ~ief:fa P:~ojfi:c. ;'.: _, : >::'PoWer" Company tQoProvideEf'New' Electric Service in the Amount of $188 South Tahoe Public Utility District -1275 Meadow Crest Drive, South Lake Tahoe, CA 96150 - Phone 530/544-6474, Facsimile 530/541-0614 SOUTH TAHOE PUBLIC UTILITY DISTRICT BOARD AGENDA ITEM TO: BOARD OF DIRECTORS FR: Linda Brown. Purchasing Agent. John Boyson. Electrical Supervisor RE: BOARD MEETING: July 5. 2001 AGENDA ITEM: ACTION ITEM NO: CONSENT CALENDAR ITEM NO: a. St.,,;;r;;:'''_"U h"h w" tt:.*,-"",,,,~,,,*,~=r;ti;':;:::~~;:l,l'a-=~~~m.,,,,1,,,,"~Sf~1',~,",,,,"S .,., ITEM-PROJECT NAME: TRUCK 28 REPLACEMENT REQUESTED BOARD ACTION: Authorize purchase of a 2001 Dodge pickup truck through the California Department of General Services competitively bid contract in the amount of $24.131. 72 DISCUSSION: Truck 28 is budgeted for replacement in the 2001-2002 fiscal Year. Unfortunately. the truck's transmission is going bad making it unsafe and the wait* for the new state contract very inconvenient. While the ordering period for 2001 vehicles is long aone. the state's contractor. Lasher Auto Center. does have (a few of) the vehicle desired available. It is a 3/4 ton 4X4 pickup truck with a regular cab. For sale-ability to the general public. Lasher added an option package which includes power windows and locks. a decor and light group. 16" aluminum wheels. floor carpeting. and heated mirrors. Staff would not normally order these options which cost an additional $1.463.27. but the alternative of transmission repair costs on the old truck or rental costs of a replacement work truck make less economical sense. Staff recommends purchase of the replacement truck at this time. *Estimated waiting period for a 2002 model off the State contract is six to seven months. SCHEDULE: Purchase immediately COSTS: $24.131.72 BUDGETED AMOUNT REMAINING: ATTACHMENTS: None ACCOUNT NO: 1003-8279 $30.000.00 CONCURRENCE WITH REQUESTE~ON: GENERAL MANAGER: YES NO ! CHIEF FINANCIAL OFFICER: YE~ CATEGORY: GENERAL WATER SEWER X SOUTH TAHOE PUBLIC UTILITY DISTRICT BOARD AGENDA ITEM TO: BOARD OF DIRECTORS FR: Linda Brown. Purchasing Agent RE: BOARD MEETING July 5. 2001 AGENDA ITEM: ACTION ITEM NO: CONSENT CALENDAR ITEM NO: b. ~__xr~"",,-r:.-_~~~ ITEM-PROJECT NAME: SURPLUS VEHICLE REQUESTED BOARD ACTION: Authorize Nationwide Auction Systems to sell surplus Truck 28 DISCUSSION: Truck 28 is a 1985 Ford F250 with 188.243 miles and a bad transmission. Nationwide Auction Systems has been responsive. Quick. and received good returns in their previous sales for the District. SCHEDULE: As soon as possible COSTS: Income less safety check cost and 7% commission ACCOUNT NO: Various BUDGETED AMOUNT REMAINING: ATTACHMENTS: None CONCURRENCE WITH REQUESTED GENERAL MANAGER: YES CHIEF FINANCIAL OFFICER: Y CATEGORY: GENERAL X WATER SEWER SOUTH TAHOE PUBLIC UTILITY DISTRICT BOARD AGENDA ITEM TO: BOARD OF DIRECTORS FR: Nick Zaninovich. Senior Engineer RE: BOARD MEETING July 5. 2001 AGENDA ITEM: ACTION ITEM NO: CONSENT CALENDAR ITEM NO: e, ITEM-PROJECT NAME: PARK AVENUE REDEVELOPMENT PHASE 2 UTILITIES PROJECT REQUESTED BOARD ACTION: (1) Approve Change Order No.3 for West Vallev Construction in a credit amount of $<11.355.15>: (2) Aoprove Proiect Closeout Agreement and Release of Claims: and (3) Authorize staff to file a Notice of Completion with the EI Dorado County Clerk DISCUSSION: (1) Contract Change Order NO.3 includes the balancing change order for adiustments to final constructed auantities. and two additional items. The first item is the result of the District's survey stakes being removed. and a conflict with Marriott's contractor which resulted in a delay to West Valley. The second item was a change made by District staff in the field related to the installation of pipe restraints on the 14" waterline near the tie-in to the existing 10" waterline along side Paul Kennedy's Steak House. District staff intend to seek reimbursement from the City of South Lake Tahoe for both of these items: (2) Staff has held a final insoection on the proiect and has found that West Valley Construction has met or exceeded the requirements of the proiect plans and specifications. Staff recommends approval of the proiect Closeout Agreement and Release of Claims. and to file a Notice of Completion with the EI Dorado County Clerk. SCHEDULE: 100% complete COSTS: $<11.355.15> BUDGETED AMOUNT REMAINING: ATTACHMENTS Change Order No.3. Closeout Agreement: Notice of Completion ACCOUNT NO: 2029-7027/PKWTR2 ~- CONCURRENCE WITH REQUESTED ACTION: GENERAL MANAGER: YES~ NO CHIEF FINANCIAL OFFICER: YE~+=~~ CATEGORY: GENERAL WATER X SEWER JUN-2'5-2001 15:57 SiPUD 53a 541 1361.:l P.l?:4 CHANGE ORDER NUMBER --3-- Projeot PARK AVENUE REDEVELOPMENT PHASE It UTIUTIES Contractor WEST V ~blEY CONSTRUCTION Date July 6. 2001 PO. lQt" Th. Contract Shell Be Changed Aa follow.: , . Adjust BId Item 2A to finol quontity of 736 Lf for. reduction of 284 LF from bid amount 8t .77.00 per IF. Totall~m No. 1 :-= < .20,328.00> 2.. Adju.t aid Item 28 to flnol quantity of 77 LF for an incr.... of 7 Lf from bid .mount at $74.00 per LF. Total Item No. 2:a .518.00 . 278.330.00 . 21.2".32 $ 304.&116.32 a < 7.818.'5 > . 28',870.' 7 61CllendlrOl'fl e, C.I.nder D. . Thl. C_nve Ordw eomUtuWI full end mutu" ~d ..'d ..tl.'lIGtJon for ell time end ell ~ Nlated to m.. chon.. Iy aooeptenn of mit Chen. Or~' the contfIGlOl aQIMI \hit th Chen.. Ord'f ,....ma In equttable HJu.tmont to U. oontr.ct price .nd tllM. and furth.r eo,... to ..VI uti rl~t to filt . oAelm .r1.~ out of Qf .. . f.'uI, of ,hIs chlnge. ..-- - 0..: Autttol'ized By STPUD Bo.rd PrNident r:~- Aooepted Contractor Dlte: (P-Zb 01 ~. Reviewed 8 , -/ Da18: ~a~~/ fiG 39IJd 53Il11Iln 311J15~31NI GE5!;E88!;LL LG:80 IGG~/9~/9G JUri-2~,-2v.lDl 15; 57 ST~UO S3~ 541 ~614 p.es CHANGE ORDE" NUMBER ----3....- Continued P.~2 3. Adjust BId lum 2C to final quantity of 38 Lf far I reduotion of 4 IF from bid amount at $70,00 plr IF. Tot.lltem No.3. < .280.00> 4. Adjust Bid It.m 20 to fin" quantity of 38 IF for I reduction of 4 LF from bid amount at .68.00 per IF. Totalltom No. 4 :c < $272,00> 5. Adjust Bid Item 2Q to final quantity of 4S LF for an Inore... of 1 LF from bid amount at $ 77 .00 par LF. Tot.1 tt.m No.6" < .77,00:> 6. Adjultt Bid It.m 2H to final quantlty of 384 LF for .n Incr.'" of 96 LF from bid amount at ., 28.00 per LF. Totelltem No. 7 - '12.000.00 7. AdJult Bid Item 21 to final quantity of 244 LF for on Incr.... of 44 LF from bid amount It $41,00 per LF. Total Item No, 8. $'.804.00 8. Adju.t Bid ltam 3b to fin.1 quanttty of 3 I!A for an IncrI... of 1 EA from bid amount at .$3,100.00 per EA. Total Item No.9. $3,600.00 90 3~)tjd S3I1IlIln 31tjlS~31NI 0EE,!;E88!;LL L0:S0 T00~/9~/90 JUH-25-2~\J1 1'5:57 \ STPUD 538 541 0614 P.~6 CHANGE ORDER NUMBER -3-. Continued P8ge 3 9. Adjust Bid Ihm 4 to fine- quantity of 3 EA for an Inor.... of 1 EA from bid amount at $5.200.00 p" EA. Tot.-lltem No. 10 - .15,200.00 i O. AdJuat Bid Item 8 to final quantltv ot 3,100 SII for a r.ductlon of 4.400 SF from bId amount at $3.215 p.r SF. Total It.m No. 11 - <.1.,300.00 > ". ExoavatorJoper.tor .tlndby time on May 29. 2001 due to removal of conltructlon ,take. by Marriott ClontrlC1or tor the lump sump of $450.00. Total Itam No. 12 - $480.00 12. Romovel of 1wo Bectlon. of newly in.talled ductll. iron pipe and InataJlatJon of pipe Joint r.straining d.vic.. we.t of St8 10+ 52 tor the lump .um of .3.821.85. Total Item No. 13. '3,521,815 TOTAL AU ITEMS 1 THROUGH 13.-.-( 7/-) /Q./5 ) LB 3911d S3IlIlIln 31111S;:/31NI BE5SE88SLL L0:SB T00~/9~!90 JUN-2S-2001 15:57 STPUD 530 S~l 0614 p.e7 i1!e~te Utility Constr . ors Coal PI\.I1I Dally WOrk ".pOt1 ~ 'OJ L.. -.J..., ,. Ja):l (....i (Rill II 71, "lIpp. I . O'r'ftl~ . ..... '1....~........~ SHEiT 0" ~CCATION 'y'l>.r\.. ~.J t- Q. "-,,,". .v .'~- ... CO~T~CTOR'IJ Joel NO. n\... _ L :r:r C "1 ~ 'l... l "\,,. -r':" \... i..., OATE ~\.J L!.l.....A .,...,...,.. u... ~~ .~/'"V')1 - o <SSCAflil€ WORK Cl.._ ~" l'"' \ ~ c;: f'\ ".. WO~K O~bI!R NO. - .. U l"_ ....v,~,"'7f'" (""'..... ~ 6("" "'C,,...,o('" QIO co. .100 !ST. NO. Q. ft L.~A.\',_1< t')~ u.J to:.JA '("('\;{ , 'r\. CWO NO. ,.APlCEl.. NO. CJY"'\ ~yJ-~ "t:i~ . R.PORT NO. C; I'lINAI. ~EPORT LABO R ! I-IOlJAS FlEPOFmNG cooe NAME C~6S ~Ea lVI Obi T"I /' /' VI/' 1/ /' c OE TIMe TIME TIME TIME ~ \ 1'"1 G.. I.- . l~ ~ L-:l .I' 3 ,'6L. OC / V VI/ V / ~ , / i/ /1/ V / V V /VI/ / ~ ~ 1/ ~ / 7 /v I V ~ / / 7 r/ I / / /./ 1/1/, !OUIPMENT c:oc~ DEiCRIFT'ION MRS. ~030 ~ 1~ (' . c... ..... l!. 4 ..,.. r...... . t~~ '3 al.,'1 rp ! I : I j; ~~ I ... i ! I I I TICK!!T NO. SUPPLIER "-MOUNT I ". ,.. Y. $/. 0/0 ... '. 'l i 1.... ;;<<: i :~3 =s I I I ITIiM p~F\M.1 eUPPL..rER TICKET NO. AMO:.JNT ".. '/.. "I. ./. ' 0/. ':'. l~ !a'J " Q. ;~ ;~ I . ;:MAFiKS /' CH.AJ=lCl E AA~ .,. 'Y. ". ,.. ,;, I .Ie \" 0 ~J\ -\s{). ~ -, '- / 'f AiW,J1l~.A~f!1 gAT'i - "QII"/..nN4,1,1'\0 . .~.~g~~CTC~ <.\)"""'- ~ J,lL. . .. O"TI 5 -el,C1-D\ ~ ~e :38'3d r.1 IRT' .'",...C'r-T_ s::u.nu,n 3L ':J.S~J.NI 13E6!i&SeSU ~E:et !ee'/8t/~e 88 39\:1d S3IlIlIln 31\:1J.Sd31NI 0E:SSjE:8SSjU L0:80 T00~/9~!9G nt JUN-2S-2e01 1S:58 STPUD tate Utility coni~ors ~ Colt Phi' DII\1 Wor'& ".pert 530 541 0614 P.~8 .J. v c. ..J.&. , "W \.&..~ (~" s: 71. !u/JP. : S)1I!T r OF 1- ). __. w. ".s-~'" 'LOCAnON 0 \.- "I'll-' U..",. - \ ~ ~\..,.,.....p;- CONTRAcrOR" .101 NO. ~!'l~:o.....--,'-1"'l1l CAili~,' 1.........u -~~,_" I ~~.I i)~6CAleE WOAt< -<"".......... "u~ -~ ~', .'\a. ... WCRt( ORDiifll NO. " . ~ t. ~~ 't') ~ I,. tJo..~ _~ ":Q' -. noS. '.~<;: 010 CO. .lOll EST. ~O, ....; ~ ... ~~t;\ \ \p_~ t"i. ......~ ~ "" \I'\. - ,~. 1 . CWO NO. P"RCil. NO. 'II A.......lo..~r:.,~~ ~_V'\.....~.l t"'\C I;EPO~TNO ~ FIN~LA~PQRl' ~801'1 I!!I HOURS Re!POATINQ CODE NAME ~'6!: I~ ~~~ "~~e T?~k iT~'1i 1/1/17/i/ / I~~t". ~..~ :lM""i"~VVVI// / ol\U.Aa"'_:S ~ ~,o.~VI71/I/i/'/ c 3/~~171/Vl// / . :u5.4fI/I/i71/1/ /1 t: I~~ I/~/,// / /1 l-r~&. J,~b6:~r/!/i7 / /// HRS~ &r.:l.._ ~.- .. --- ~- iJ(.. '-l · '?"1\00"'. \.):)' ,\'1, '- ~ 4It cr ~. ( ".b, ~ \J o.v","'l t"'tL.'!'l r <"lL ~~o.<" ~o.f i"cn 1(\- . "-"",..,- ~:lI .:) R\" ~h ~~~ .:s Lo.'b ~q-~~ EQUIPMim" coo~ .f DESCRIPTION 0.. c"\,c"') 'i'-'"I G L ~ V ..JrO r ('..b. ~... :I) 5~ C\-c;~ c.~ \...!"Il"..~L1 -:;f ~~\D\\. ~\ ~ \......' ~~ \... ~5 ~~ .30\ t., ~\ r....~~ '4' \L ~ ~ C- ~ "S \J \ '--' C. ,. C)...-u. --; f" l.... :3 4L~~ I ~ ,. 21111&' to.~ .s J '()!J.~ ~.ft),.< -:5' . IO~$P l8.1'lS ~' ~.. ~ 14~.'f5" ~"1- r ""T~ p ~ TiCKET NO. SUPPLlflll ....MOL.NT % %i,... Y. % 'Y. ( ~5 "l. :e " T I ITEM pel=l1--1. vJ ll,.-r \. 6UPPL.IE~ ....'\; s.u~,.,\... ~ f TICKEi NO. I t\MOUNT ~ lil!i ~ I 'Itlfb3.IO _~ 17 ". ,... ,... Y. .f ,.. "7. :! LU ~ ~ . ~Ml1~'~~ll QI~TlNO Ai'll; CAT' / -r'~A L1 - \.. -- CHA~C;E A!=IC % Y. .'" ". ,... ~. .--- ......... " ~~2J"eo ) -J V ~ ~ I '::MARKS 4 '<'Y'\.I..", Go Lv f.a Co ~or ~ ~ 0\ n ~ :\ CY\.. .r......... . ~ . r \ --S---_', ._-\. Co.' 1'\.....10: '-4l \~ l ~\ ,,","-i", ... ~ . , , ,i~~~CTOA"" ~ \-\..1.. C-'TE \, _ , _ (') , ~3 3B':1d S"3IU'Uli ~.1.~.1.5'g3'lT,ti....~----- eE6SEee;LL 9E:~t tGa~/Bt/~~ Sri! 39'11d S3IlIlIlrl 31'11 lSd31NI 0E55E885LL LO:80 T00G/9G/90 INTERSTATE UTILITIES 7759835930 06/26/2001 99:07 w 4 n. INTERSTATE UTILITIES 7759935330 western nevada supply company 1141otesaie D; fbtdc s: PYAnb.`ng. Aw C rdA.ionbig. Ware.l4tvA4, Lama ffun, 1iakzes. A1r7WS. loafs. APPILxOoes. FD19p/ace-5 950 9 ROCK ELV11 - SPARKS /4V . C9.1`11 PHONE (702) 359 -5800 • FAX (A1213:0-4549 SOLO TO: 1NTERST ATE U1LIP/ CCONSTRIICI € S OP/ OF WEST VALLEY CONSTRUCTION P.o- t30X 6059 SAN JOSE, CA 951546059 ANK YOU FOR YCX.IR BUSINESS REMIT TO: P O. BOX 1576. SPARKS. V�2 95170 381 -252 311J669 INVOICE DATE 951 TUN �� TO INTERSTATE UTILITY CONSTRUCTORS 'PARE( AVE nor VA.N SICKLE RD OFF PARK AVE_ SOUTH LAKE TAHOE, CA. 96158 SOW FRON: WESTERN NEVADA SUPPLY - WNS - TAHrJE, CA PURCHASE UAOER 6 CLAN W. 3611.2552 tZXTRA SMtPaEO )ROM: WESTERN NEVADA SUPPLY - WNS • TAHOE, CA SONN, OARNEY OEN KUIiBER J06 OONTACT PNS120d12Q PXZ1200030 WF1131 9)122 WEIIOU2314 DESCRIPTION WiLL CALL VWJOA 3/4 ALL THREAD ROD PLATED 3/4 PLTD HEX NUT 14 1I•U GLAND ti'SS 14 MEGA LUG RET GLAND OT' VWAC C FULL FREIC�I•IT ALLOWED tIU NTtTYVUANTITY0UAN1ITY ORDERED SHIPPED . B.d. 40 32 4 4 417 32 OUTGOING fROGt.T: 4 4 0 0 U U . UNIT PRIGS ZOO 0.44 37.79 17825 06/03310/ pAOE NUMBER 1 OF 1 ORDi� DAM OS/31/01 2a -sz -► nr In '-n w nklE IREQUlRED UU6611DD A1 ItiVAIATE E1(T1340E0 I)iC NET PRICE % AMOUNT Ff 16400 14 10400 -EA 14 08 N 14.08 EA 151 16 N 151 16 EA 713.00 iJ 713.10 FRHON1 TOTAL 11►I80R kwzok ES. good al. ANumsd�SE 10TAL Ftar�cl►sw idwwlesf9S$ *AO receipt d Ole ab+w sin od cowdAioa. Nor sl.rin .c..$ed For cruet witlwui •pprw . r ratorol supped m Randlirg a _ Ira oFpartsoon Oars. Oeliuqurnt accounts writ be charged a 1 112 X Sevka Cheer pet menu (18% 1A1( no snraia+M f/1c;at &doll is wsoes =Wy m collect a cal nQ+i 1 sooausi. purcasser Rarees 0a pay a roasot ds aminwl/s are • OBE computed ALL, RfTUR1' 0 lRATE MUST L AiCGA�IPAIAED BY THE OI21CZiiAt, INVOICE NUMBER ANO WA.__ II/V T O TAL w CD CIFty 14 ON $1,051 00 CLOSEOUT AGREEMENT AND RELEASE OF CLAIMS THIS AGREEMENT ~~ RELEASE OF CLAIMS (Agreement) is made in South Lake Tahoe, California, this Seh day of July, 2001 by and between South Tahoe Public Utility District, (DISTRICT), and West Valley Construction Company, Inc., (CONTRACTOR). KNOW ALL PERSONS BY THESE PRESENTS: 1. That the undersigned, as the authorized representative of CONTRACTOR, and for each of its successors, assigns and partners, for and in consideration of PARK AVENUE REDEVELOPMENT PHASE II UTILITIES ($275,330.00), the oriainal Contract amount, and the sum of Twenty-one ~housand, Th~ee hundred forty-six dollars & seventeen cents($21,346.17) for Contract Change Orders Nos. 1 through 3, receipt of which is acknowledged, does release and forever discharge the DISTRICT, and each of its successors, assigns, directors, officers, agents, servants, volunteers and employees, from any and all rights, claims, causes of action, demands, debts, obligations, liabilities, actions, damages, costs and expenses (including but not limited to attorneys', paralegal and experts' fees, costs and expenses) and other claims, which may be asserted against DISTRICT by reason of any matter or thing which was the subject matter of or basis for: A. The performance of all terms and co~ditions of that certain agreement dated March 15, 2001 for Purchase Order No. 10696/ DISTRICT projecc described as P.~K AVENU~ REDEVELOPMENT PHF_SE II UTILITIES. B. Change Orders Nos. 1 through 3, as approved by the parties, pertaining to Purchase Order No. 10696 and shown in Payment Request No.2, dated June 26, 2001. 2. Nothing contained in this Agreement shall waive or alter the rights, privileges, and powers of the DISTRICT or the duties, liabilities and obligations of the CONTRACTOR and its surety(ies) in respect to any portions of the Contract Documents for Purchase Order No. 10696. 3. The District has received the following claims from the Contractor: Except as expressly provided in this section, the DISTRICT has received no other claims from the CONT~.CTOR. 4. Upon execution of this Agreement, the DISTRICT agrees to promptly record a NOTICE OF COMPLETION with the EI Dorado County Recorder. 5 . The current retention amount is $ 14,662.00 Original Contract amount $275,330.00 Total Change Order Amount $ 21,346.17 Less: Amount Previously Paid (Request Nos. 1 through 3) $(282,014.17) Retainage $( 14,662.00) B~~~~CE: $ 14,662.00 The retainage will be released to the CONTRACTOR at the expiration of thirty-five (35) calendar days after date of ~ecording a NOTICE OF COMPLETION by EI Dorado Cou~ty Recorde~ or whe~ all stop notices have bee~ released, whichever last occurs. The release provided pursuant to this Agreement shall noc apply to CONT~_CTOR'S right to the rete~tion amount until and to the exce~t such amounts are received by CONTRF.CTOR. 6. CONTRP.CTOR and DISTRICT agree that the total adjusted Contract price and time of performance for Purchase Order No. 10696, after the execucion of change orde~s, is as follows: Original Contract Price Original Calendar Days Adjusted Contract Price Adjusted Calendar Days $275,330.00 61 $296,676.17 61 7. It is understood and agreed by Contractor that the facts with respect to which the release provided pursuant to this Agreement is given may turn out to be other than or different from the facts as now known or believed to be, and Contractor -expressly assumes the risk of the facts turning out to be different than they now appear, and agrees that the release provided pursuant to this Agreement shall be, in all respects, effective and not subject to termination or recission by any such difference in facts and Contractor expressly waives any and all rights it has or may have under California Civil Code Section 1542, which provides as follows: "A general release does not extend to claims which the creditor does not know or susDect to exist in his favor .. . at the time of executing the Release which if known by him must have materially affected his settlement with the debtor." 8. The release made by the CONT~_CTOR is not to be construed as an admission or admissions of liability and the Contractor denies any such liability. Contractor agrees that it will forever refrain and forebear from commencing, instituting or prosecuting any lawsuit, action or other proceeding against the District based on, arising out of, or in any way connected with the subject matter of this release. 9. The CONT~_CTOR releases the DISTRICT from all claims, including but not limited to those of its Subcontractors for all delay and impact costs, if any. 10. The CONT~_CTOR represents and warrants to tne DISTRICT t~at the CONTRACTOR has not assigned or transferred or purported to assign or transfer to any persor., firm, corporation, association or entity any of the rights, claims, warranties, de~a~ds, debts, obligations, liabilities, actions, causes of action, damages, costs, expenses and other claims and the CONT~~CTOR agrees to indemnify ane hold harmless the DISTRICT, its successors, assigns, directors, officers, agents, servants, volunteers and employees, from and against, without limitation, any and all rights, claims, warranties, demands, debts, obligations, liabilities, actions, causes of action, damages, costs, expenses and other claims, including but not limited to attorneys' , paralegal and experts' fees, costs and expenses arising out of or connected with any such assignment or transfer or purported assignment or transfer. 11. The parties acknowledge that they have been represented by counsel of their own choice in connection with the preparation and execution of this Agreement. The parties acknowledge and represent that they understand and voluntarily consent and agree to each and every provision contained in this Agreement. 12. The parties further acknowledge and represent that no promise, inducement or agreement, not expressed in this Agreement, have been made and that this Agreement contains the entire agreement among the parties and that the terms of the Agreement are contractual and not a mere recital. 13. The persons executing this Agreement represent and warrant to the other party that the execution and performance of the terms of this Agreement have been duly authorized by all corporate, partnership, individual, or other entity requirements and that said persons have the right, power, legal capacity and authority to execute and enter into this Agreement. SOUTH TAHOE PUBLIC UTILITY DISTRICT ROBERT G. BAER, GENERAL MANAGER DATED ATTEST: KP_THY SF~P, CLERK OF BO~RD DATED APPROVED AS TO FORM Ey: DATED (Name of Contractor) By: DATED By: DATED NOTICE OF COMPLETION Netic: pursuant to Civil Code Section 3093, must be filed within 10 days after completion. (See reverse side far Complete requirements,) Notice is hereby given that: L The undersigned is owner or corporate officer of the owner of the interest or estate stated below in the property hereinafter described: 2. The full name of the owner is SOUTH TAHOE PUBLIC UTILITY DISTRICT , The full address of the owner is 1275 Meadow Crest Drive South Lake Tahoe CA 96150 4. The nature of the interest or estate of the owner is; In fee. (If other than fee. stnke "In fee" ana inser:, fer exa.-npie. "purcnaser unaer contract of purchase." or "lessee") ::. The fuil names and full addresses of ail persons, if any, who hold ti tic with the undersigned as jOint tenants or as tenants in common are: NAMES ADDRESSES A wm 01 Im~rQveme~l an the prG~e:lY hereinafter des:::ced/l2s compie~ed on June 12, 2001 . The wcr~ dane was: PARK AVENUE REDEVELOPMENT PHASE II UTILITIES -Installation of water line - The name of the :cc;~a::or. if arj' for suc~ war:, of i~:rcvE7.e:it was West Valley Construction Co.. Inc. March 15, 2001 fit no ::n::2C::; lor r'lC'~. Jr iii!crG'/e~e:H as J ,lrnaI2. .1'\5:': ",'c~e ',: I,Dal~ ~f ::r::,':::; 3. Tiie :r::e::y :In 'Hhjc.~ saic work of ;'j';~rovE:ne~! '~as ::rT;:le:~: :s :n ~i:E c:tj Jf South Lake Tahoe :J~";jof El Dorado Star: af Calif:"'~la. 3:i: ;s j~~:;it:,j as fcl!ows. PARK AVENUE REDEVELOPMENT PHASE II UTILITIES :. The s:~c:~ acc:ess of S2'0 P:OCE':Y is none If r.G st:~e~ jCcr~~s ,as :::~ 'Jffic.aHy 3ssig:o:e:. InSc!'t '"11cne".; la::':. June 22. 2001 ';e"r;C3i:i..:n f,jr :1'::"I1C:';~; Q'r'fner SIgnat1Jre Jf owner or ccroora(: oH;ce" d :wr.e' named in ~aiagrapn 2 or ,'IS age~t " I. the undersigned. say: I am the VERIF1CA nON Board President ("PreSident of", "Ma~ager at", "A partner at", "Owner at"; etc.) the dedarant of the foregoing notice 01 completion; I ha,e read said notice of compieticn and know the contents thereof; the same is true of my own knowledge. I I declare under penalty of perjury that the foregoing is true and correct. becuted on June 22, (Date of signature.) ,2001,at South Lake Tahoe . California. (Ci ty wher e si gned.) (Personal signature at the individual who is swearing that the contents of the notice of completion are true.l "7";C~ CF C'::::MPL5:TiON-WCLC::i"'"7S FORM t 1 !4-RE,'-I. 6-74 .8 pt. type or larger SOUTH TAHOE PUBLIC UTILITY DISTRICT BOARD AGENDA ITEM TO: BOARD OF DIRECTORS FR: Richard Solbrig. Assistant Manager I Engineer RE: BOARD MEETING July 5. 2001 AGENDA ITEM: ACTION ITEM NO: CONSENT CALENDAR ITEM NO: d. ITEM-PROJECT NAME: ARROWHEAD WELL NO.3 REQUESTED BOARD ACTION: Approve agreement with Sierra Pacific Power Company to provide a new electric service in the amount of $188 DISCUSSION: The Advanced Oxidation Process treatment unit to be installed at the Arrowhead Well No.3 site will reouire a larger electric service than currently exists. This agreement with Sierra Pacific Power Co. will allow them to install the needed facilities. Due to the proiected increase in future power consumption. the costs of which are credited to the District. the new service will only cost the District a $188 hookup fee. SCHEDULE: Construction to commence in late August COSTS: $188 ACCOUNT NO: 2029-8290-AH3TRT BUDGETED AMOUNT REMAINING: $180.964 ATTACHMENTS: Sierra Pacific P~wer Company letter and agreement CONCURRENCE WITH REQUESTED ACTION: GENERAL MANAGER: YES ~ NO f CHIEF FINANCIAL OFFICER: YEst'n l.T=" ~..vJIP CATEGORY: GENERAL WATER X SEWER ~/. Sierra Pacific 1M www.sierrapacific.com 933 Eloise Avenue' South Lake Tahoe, California 96150 . 530.544.5775 . Fax 530.544.4811 . 1.800.782.2498 June 21,2001 South Tahoe Public Utility District 1275 Meadow Crest Drive South Lake Tahoe, CA. 96150 Attn. Richard Solbrig Re: Electric Service Upgrade To: Arrowhead Well #3 South Lake Tahoe, California Contract 01-23660-5 Work Order 01-23660-55 Dear Mr. Solbrig: To provide increased service at the above referenced location will require the installation of 1-45' pole, approximately 91' 3-110 underground primary, 1-225kV A padmounted 14.4kV Delta, 277/480V transformer, and approximately 45' 350QX underground service to feed one (1) 400A panel. See Exhibit "A" enclosed. Also enclosed please find the necessary Rule #15 Line Extension Agreement to provide the electric service. The cost to Sierra Pacific Power Company to provide service to your facilities is $13,074.00. Under the terms of this agreement, you will be granted a "construction allowance" equal to 2.5 times your additional projected annual revenues. Your "construction allowance" is calculated in the amount of $13,074.00. Therefore, a refundable cash advance is not required at this time. Also under the terms of the agreement you will be responsible for any non-refundable cost associated with this electric extension. The non-refundable cost is the tax on the trench and substructure installation cost that will become Sierra Pacific Power Company property once the job is complete, as mandated by the California Public Service Commission. This non-refundable cost is $188.00. If the enclosed agreement meets with your approval, please sign and return with a check in the amount of $188.00 to this office to my attention. A copy of the executed agreement will be returned to you for your files. If you have any questions, please call me at (530)541-1949. Thank You. Sincerely, ~~--~ ~ Jeff Matthews Senior Utility Designer South Tahoe Office Enclosures 1198-0016 (REV. 5/99) ~. ~ierra Pacific UTILITY FACILITY AGREEMENT 'OWER COMPANY AGREEMENT #: 01-23660-5 ;-lIS AGREEMENT is entered into this _ day of June, 20..Q1, by and between SIERRA PACIFIC POWER COMPANY Sierra Pacific"), a Nevada corporation, PO Box 10100, Reno, Nevada 89520 and South Tahoe Public Utility District ("Applicant"). .;Jplicant desires electric service for 1 unites) at the following location(s): Arrowhead Well #3, South lake Tahoe hereinafter referred to as C'Project'}. i'O provide the requested service, it is necessary for Sierra Pacific to extend and/or modify its facilities as described in ~hibit "A" attached hereto. . Now THEREFORE, for good and valuable consideration the sufficiency of which is hereby acknowledged, the parties ]ree as follows: I. PPlICANT'S REFUNDABLE & NON-REFUNDABLE COST RESPONSIBILITY, APPLICANT CREDITS AND BASE ATA; LINE # DESCRIPTION REFUNDABLE ADVANCE: 1. COST 2. FREE ALLOWANCE 3. TAXABLE TOTAL (Line 1 minus 2) 4. TAX GROSS UP ON TAXABLE TOTAL (Line 3) 5. TOTAL REFUNDABLE ELECTRIC $13,074.00 ( $13,074.00 ) $ 0.00 $ 0.00 $ 0.00 $ $ $ $ 188.00 $ 188.00 $ 188.00 ( $ ) ( $ ) $ $ ) $ 188.00 31% $5,230.00 2.5 $ 608.00 NON-REFUNDABLE ADVANCE 3. NON-TAXABLE COST 7. TAXABLE 8. TAX GROSS UP ON TAXABLE COST (line 7) 9. TAX GROSS UP ON CONTRIBUTED FACILITIES (line 20) 10. TOTAL NON-REFUNDABLE 11. TOTAL APPLICANT COST (Lines 5 plus 10) APPUCANT CREDITS i2. APPLICANT INSTALLED FACILITIES 13. OVERSIZED FACILITIES ,4. SERVICE REIMBURSEMENTS '15. TOTAL CREDITS ;.3. TOTAL ADVANCE/CREDIT DU.E (Line 11 plus 15) lASE DATA USED IN CALCULATIONS :7. TAX LIABILITY FACTOR i 8. PROJECTED ANNUAL REVENUE : 9. REVENUE MULTIPLE J. VALUE OF CONTRIBUTED FACILITIES II. TOTAL COST (Section I, Line 1 plus Lines 6 & 7) The total cost for which Applicant is liable, shall be Sierra Pacific's estimated cost, refundable and non-refundable, to provide the requested service. Sierra's estimate includes all costs associated with providing the requested service hereunder and shall include all regulatory, environmental and other fees, engineering, inspection, material, labor, transportation, costs for removal of existing facilities less their salvage value, associated overheads and other charges which are related to the installation or alteration of the required facilities. III. TOTAL ADVANCE/CREDIT DUE (Section I, Line 16) A. Applicant agrees to pay Sierra Pacific's total estimated cost for which the Applicant is liable (Section I, Line 1 plus Lines 6 & 7). Less any applicable free allowance (Section I, Line 2) as detennined by Sierra Pacific for the Project. Plus Tax Liability (Section I, Lines 4,8, & 9). Less the estimated cost of the facilities, provided and installed by Applicant, inclusive of facilities oversized at Sierra's request (Section I, Lines 12 & 13). Less the estimated cost of the service(s) provided by Applicant, that is Sierra Pacific's cost responsibility (Section I, Line 14). This cost will be adjusted to actual installed footages upon project completion, and Applicant will be billed or refunded the difference. Applicant agrees to pay, at the time of the execution of this Agreement, the amount(s) set forth hereunder (Section I, Line 16) or to provide an acceptable surety bond or letter of credit. The bond or letter of credit is to be replaced with cash not less than thirty (30) days prior to construction. However, the cost of materials not normally stocked by Sierra Pacific in the type and quantity required shall be paid for in cash, prior to the ordering of such materials. If the total due (Section I, Line 16) is a credit due Applicant, Sierra requires that a performance bond for that amount, plus Sierra's project costs and the federal tax credit, be collected prior to issuing a check. Applicant may elect to take payment upon completion and acceptance of the installation of the facilities and eliminate the requirement for a performance bond. B. If the total estimated cost of construction to extend the line(s) and/or main(s) to the project exceeds $5,000, the cash advance/credit in Section I, Line 16 will be adjusted to reflect Sierra Pacific's actual cost of construction. The adjustment is limited to that portion of the total cost of the main/line extension pertaining to facilities installed by Sierra Pacific. The cost of those facilities installed by Applicant will not be adjusted. Sierra Pacific shall review its actual cost of construction within four (4) months of completion of said facilities and shall either bill or refund Applicant the difference between the total estimated cash advance/credit and the adjusted cash advance/credit. If such adjustment results in an increased total cash advance requirement, Applicant agrees to pay Sierra Pacific such difference within thirty (30) days of written notice. C. If at any time after twelve (12) months following the date of this Agreement there has been no construction activity on the electric facilities by the Applicant for a period of six (6) months, Sierra Pacific shall not be held to the provisions of this Agreement. Sierra Pacific may return all advanced dollars not required to cover Sierra Pacific's expenditures on the project. To reinstate the project, a new Agreement will be required with updated costs. -2- .'&-0000. WPW Te.p. to... IV. FREE ALLOWANCES The free allowance is calculated on the projected annual revenue and the revenue multiples in Section I, Lines 18 & 19. The projected annual revenue will include only the revenue from monthly billings for basic service, excluding balancing account adjustments, late charges, and tax adjustments. Should actual revenues fall substantially short of the projected revenue used for the free allowance granted, the customer may be required to pay to Sierra Pacific in cash any portion of the free allowance granted but not justified by actual revenues. Such payment will be increased by the tax liability factor noted in Section I, Line 17. The payment shall be made within 30 days of written notification of the revenue deficiency and request for payment by Sierra Pacific. V. REFUNDS (Section I, Line 5) A. ELECTRIC EXTENSIONS 1. All advances and/or contributions made by Applicant under the provisions of this Agreement, which are not classified as a non-refundable by Sierra Pacific, shall be subject to refund, to the party or parties entitled thereto as set forth in this section. (a) Except as indicated in Section V.A.1 (b) of this Agreement, all refunds shall be made without interest. (b) Refunds based on estimated usage levels shall be paid by the utility within ninety (90) days of the date service is initiated. In the event that refunds are not paid in accordance with this section, Sierra Pacific shall pay interest for the period the refund is delayed at the rate currently specified in Section 704.655 of NRS. (c) Refunds hereunder shall be made for new customer connections during the period not to exceed ten (10) years after the date of this Agreement. (d) Except for refunds from customer connections made within ten (10) years of the date of this Agreement, any portion of the advance which remains unrefunded ten (10) years after the date of this Agreement, will be forfeited by Applicant and become the property of Sierra Pacific. 2. Refunding will be based on revenues in excess of the level used as the basis for detennining free allowance, derived from the following customers, who initiate service within ten (10) years of the date of this Agreement. (a) Those served directly from the subject extension or alteration, as long as subject extension or alteration is the first in a series from the original point of supply for which a portion of an advance remains refundable. (b) Those served from subsequent extensions of or additions to the original extension. Refunds based on revenues in this section shall be made to the Applicant having the first extension in series from the original point of supply, for which a portion of an advance remains refundable. 3. The following provisions apply to the refunding process. (a) In those cases where two or more parties make a joint advance/contribution on the same extension, Sierra Pacific shall distribute refundable amounts to such parties in the same proportion as their individual advance/contribution bear to the joint refundable total, unless otherwise directed by all parties. -3- '~a-oooo. WPIlI Teep. fD~e (b) Refundable amounts may be accumulated before refunding to twenty-five dollars ($25.00) minimum or to a total refundable balance if less than twenty-five dollars ($25.00). (c) The total amount refunded hereunder shall not exceed the total amount subject to refund (Section I, Line 5). VI. TAX GROSS UP All applicable Applicant costs, cost adjustments and refunds will be increased to reflect the appropriate tax liability factor indicated in Section I, Line 17. VII. MISCELLANEOUS A. This Agreement has been made by Sierra Pacific pursuant to its rules and regulations goveming all matters contained herein, filed with and approved by the Public Service Commission of Califomia, and this Agreement is subject to any changes or modifications by the Public Service Commission of Califomia as said Commission may from time to time direct in the exercise of its jurisdiction. B. All facilities constructed hereunder shall become property owned, maintained, and controlled by Sierra Pacific. C. The parties agree and understand that Applicant is not in any way an agent, representative, employee, or contractor of Sierra Pacific during the installation of facilities required hereunder, and Applicant agrees to indemnify and save hannless Sierra Pacific from any and all claims which are a result of, or arise out of, construction activities including, but not limited to, trenching and backfill undertaken by Applicant in accordance with this Agreement. D. Applicant agrees that it will grant, or if not the owner, represents that the owner will grant and execute, to and in favor of Sierra Pacific, all necessary easements, conveyances, deeds, rights-of-way, or other documents required or relating in any faction to the placement, installation, operation, maintenance, repair, and replacement of facilities required hereunder or any portion thereof. If any portion of said facilities will be located on property other than that owned by Applicant, Sierra Pacific shall not be obligated to commence construction unless and until permanent rights-of-way therefore are granted to Sierra Pacific that are satisfactory to Sierra Pacific both as to location of easement and fonn document. All rights-of-way shall be obtained without cost to Sierra Pacific. E. All facilities installed by Applicant shall be in accordance with Sierra Pacific Construction Standards, as contained in the "Electric Distribution System Guide," and details as shown on the work order drawings, and applicable local, state, and federal laws and/or regulations. All work performed and all material furnished by the Applicant and his contractor shall be guaranteed against defects in materials and workmanship for a period of one (1) year following final acceptance of work by Sierra Pacific. Applicant agrees that Sierra Pacific may, at its option and upon written notice to Applicant, either (1) repair any defect in materials or workmanship which may develop during the one~year period, or (2) require Applicant to make good any defect in materials or workmanship which may develop during said one-year period. The option and obligation to repair shall extend to any damage to facilities or work caused by the subject defects in materials or workmanship or the repairing of same. All repairs hereunder, whether undertaken by Sierra Pacific or Applicant, shall be done solely at Applicant's expense. -4- ''la-oooo. WPlI T..p. for. Applicant also assumes all responsibilities and liabilities for ten (10) years for facilities installed by the Applicant or facilities installed by Sierra Pacific based on survey and staking provided by the Applicant or Applicant's engineer that are found to be located outside the recorded easement or right-of-way granted for such facilities. F. For Applicant installation of facilities in addition to those normally provided at no expense to Sierra Pacific: 1. Applicant shall provide public liability and property damage insurance coverage in amounts satisfactory to Sierra Pacific and naming Sierra Pacific as an additional insured. 2. Applicant shall provide worker's compensation and unemployment compensation insurance in the form and amounts required by the State of Califomia. 3. Applicant shall perform in accordance with all laws, ordinances, rules, regulations, standards, and codes applicable to the types of installation being undertaken. G. Applicant shall indemnify and hold harmless Sierra Pacific from and against Applicant's failure to conform in any respect to the requirements set forth in Sections E and F above. H. Applicant may assign its right to receive a refund under this Agreement only upon written notification of the assignment to Sierra Pacific. Written notification shall consist of a document transferring the right to receive refunds, signed and notarized by the Assignor and the Assignee. Sierra Pacific may refuse to accept an assignment that is not signed and notarized by the Assignor and the Assignee. No obligation or duty owed by the Applicant to Sierra Pacific may be assigned unless Sierra Pacific consents to such assignment in writing. Under no circumstances shall Sierra Pacific be liable under any contract between the Applicant or Assignor and any Assignee. I. Notices or inquiries conceming this Agreement should be directed to: SIERRA PACIFIC POWER COMPANY Attn. Plant Accounting PO Box 10100 Reno, NV 89520 -5- .~e-oooc. WPW Temp. fora IN WITNESS WHEREOF, the Parties hereto execute this Agreement (Pages 1 through 6 inclusive plus Exhibit A) the day and year first above written. By: PrintedlTyped Name: SIERRA PACIFIC POWER COMPANY By: Typed Name: Jeff Matthews Title: Senior Utility Designer APPLlCANT(S) PrintedlTyped Name: Mailing Address: Tax Identification Number (Required) (Individual) Social Security Number (Business) TIN Bus. Type: Corporation Tax Exempt Partnership Govemmental Agency Other Please be advised that we have selected NOTE: We request your Tax Identification Number and nature of your organization. Due to IRS regulations and under certain situations, if we do not have this information, we are required to withhold 20% of any refund due you. as our Applicant Installed Contractor. FOR OFFICE USE ONLY: Excess revenues generated from this project shall be subject to refund under previous agreement number Planner: Jeff Matthews -6- *'l!-OOOO.WPW Tup. fc~. SOUTH TAHOE PUBLIC UTILITY DISTRICT BOARD AGENDA ITEM TO: BOARD OF DIRECTORS FR: Rhonda McFarlane. Chief Financial Officer RE: BOARD MEETING: July 5. 2001 AGENDA ITEM: ACTION ITEM NO: 6.a CONSENT CALENDAR ITEM NO: ITEM-PROJECT NAME: 1994 LASALLE BANK LOAN REFINANCING: WATER REVENUE REFUNDING BONDS. SERIES 2001 REQUESTED BOARD ACTION: Adopt Resolution No. 2720-01 authorizing the issuance and sale of Water Revenue Refunding Bonds for the purpose of refunding the 1994 Installment Sale Agreement with LaSalle National Bank and related matters. DISCUSSION: In April the Board authorized staff to refinance the 1994 Installment Sale Agreement with LaSalle Bank through a competitive installment sale. The actual size of the offering and the interest rate are dependent on market conditions and will be determined via a bidding process to take place Auaust 2. 2001. Financial advisor. Bartle Wells. estimates the principal of the bonds will be $7.860.000 and the present value of the savinas net of expenses will be $501.260. Although this is the expected savings. the Resolution allows the refunding to go forward with a minimum net savings of $283.000. The Resolution also approves the Indenture of Trust. the Escrow Deposit and Trust Agreement. the Preliminary Official Statement and various other details of the bond sale. Staff has reviewed the documents prepared by bond counsel and the financial advisor and found them to be in order. In addition. disclosures in the Preliminary Continued on Page 2: SCHEDULE: July 10. 2001 mail Preliminary Official Statement to bond underwriters. July 13. 2001 presentations to rating agencies and bond insurers. August 2. 2001 bond sale awarded to lowest bidder. August 16. 2001 closing of sale and receipt of funds NET SAVINGS: $501.260 through 8/1/2014 - $170.000 in fiscal year 2002 ACCOUNT NO: 2039-6710 BUDGETED AMOUNT REMAINING: $838.775 ATTACHMENTS: Resolution No. 2720-01.extensive backup to this item was distributed to Board Members and is available for review upon request to Board Clerk _";"'&"',""=__.._....'''''''''!,'",,.~:,'''''''',; ,."" '<.~>><^ _'R$W'.'-'" ;.:-"-"''''''_,____;;ji'_,_~,Th_':_z___'c.'.,,__''__,.,,.,'x_~,_:,_''''_''n'^''~U'''''~''^'' 'w" " ." ,,, , _"'<i;W";<->k"'~"__'____'____h>~Ui".:_.,i"<'"'" , CONCURRENCE WITH REQUESTED ~TION: GENERAL MANAGER: YES~ NO CHIEF FINANCIAL OFFICER: YEi0 i..r-o IM~O CATEGORY: GENERAL WATER X SEWER Continued from Page 1: Official Statement have been reviewed by Miller. Sher & Sawyer. Net proceeds from the bond sale will be put in escrow until April 30. 2003. when the 1994 Installment Sale Agreement with LaSalle National Bank allows prepayment. Financial advisor. Reed Schmidt. Bartle Wells Associates. and bond counsel. Bill Madison. Jones Hall. Attorneys at Law. will be present at the meeting to answer any Questions the Board might have. South Tahoe Public Utility District Robert G. Baer, General Manager Board Members Christopher H. Strohm James R. Jones Mary Lou Mosbacher Duane Wallace Eric Shafer Memorandum Date: July 2, 2001 To: Board of Directors From: Debbie Henderson .~ Subject: 1994 LaSalle Bank Loan Refinancing Attached you will find a redlined version of resolution 2720-01 which is board action item 6a on the Thursday, July 5, 2001 agenda. I received a phone call from Bill Madison, Bond Council from Jones & Hall on Friday, June 29th. The trustee named in the refinancing documents, U.S. Trust Company, N.A., was acquired BNY Western Trust Company through a merger. As a result of this, it is necessary to replace U.S. Trust with BNY Western Trust in all refinancing documents. According to Mr. Madison, this is simply a name change and does not affect any other details of the transaction. Please replace the copy of resolution 2720-01, which was originally distributed with your board agenda packet, with this redlined version. If you have any questions, please give me a call. cc: Baer Rhonda Gary Kvistad Kathy 0eY\ SOUTH TAHOE PUBLIC UTILITY DISTRICT, CALIFORNIA RESOLUTION NO. 2720-01 A RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF WATER REVENUE REFUNDING BONDS FOR THE PURPOSE OF REFUNDING THAT CERTAIN 1994 INSTALLMENT SALE AGREEMENT WITH LASALLE NATIONAL BANK, AND RELATED MATI'ERS RESOLVED, by the Board of Directors of the South Tahoe Public Utility District, California (the "District"), as follows: WHEREAS, the District entered into an Installment Sale Agreement, dated as of October 31, 1994, between laSalle National Bank and the District (the "1994 Installment Sale Agreement") the proceeds of which were used to finance the construction of certain improvements to the District's water system (the "Improvements"); and WHEREAS, interest rates have declined since the 1994 Installment Sale Agreement was entered into, and the District will receive economic benefit by refunding the 1994 Installment Sale Agreement; and WHEREAS, the District, after due investigation and deliberation, has determined that it is in the interests of the District at this time to provide for the issuance of its water revenue refunding bonds, for the purpose of refunding the 1994 Installment Sale Agreement; WHEREAS, Sections 53570 et seq. and 53580 et seq. of the California Government Code (the "Revenue Refunding Bond Law") authorizes the Dishict to issue its revenue bonds for the purpose of refunding revenue obligations of the District such as the 1994 Installment Sale Agreement; NOW, THEREFORE, it is hereby ORDERED and DETERMINED, as follows: 1. Issuance of Bonds. The Board of Directors hereby authorizes and approves the issuance of a series of bonds under the Revenue Refunding Bond Law to be denominated "South Tahoe Public Utility District Water Revenue Refunding Bonds, Series 2001" (the "Series 2001 Bonds"). 2. Purposes. The purposes for which the Series 2001 Bonds are proposed to be issued are to provide funds for the refunding of the 1994 Installment Sale Agreement, the funding of a reserve fund for the Series 2001 Bonds, and the payment of costs of issuance in connection therewith. 3. Minimum Savinp. The Series 2001 Bonds may be issued and sold by competitive bid pursuant to Section 8 hereof, so long as the net present value savings to be accomplished through the issuance of the Series 2001 Bonds and the refunding of the 1994 Installment Sale Agreement are at least equal to four percent of the outstanding principal amount of the 1994 Installment Sale Agreement, or approximately $283,000. Such savings shall be net of all expenses associated with the issuance of the Series 2001 Bonds. 4. Revenue Bonds. The Series 2001 Bonds are to be revenue bonds, payable exclusively from the revenues of the Water System of the District. Such revenues constitute a trust fund for the security and payment of the principal or redemption price of and interest on the Series 2001 Bonds, as further provided in the Indenture hereinafter approved. 5. Aooroval of Indenture of Trust. The Series 2001 Bonds shall be issued pursuant to and secured by the Indenture of Trust, dated as of August 1, 2001, between u.s. Trtlst C3mpanJ, N.A.BNY Western Trust Company (the "Trustee") and the District (the "Indenture"), which is hereby referred to and incorporated herein by reference. The Indenture, in substantially the form on file with the Clerk of the Board and made a part hereof as though set forth in full herein, is hereby approved by the Board of Directors. The Board acknowledges that the Indenture lists U.S. Trust Company, N.A. as the Trustee, but has been informed that that bank has just merged with the Trustee, and instructs bond counsel to make the necessary revisions to the Indenture (and other documents, such as the Escrow Agreement hereinafter approved) to correct the name of the Trustee. The President (or his designee) and the Clerk of the Board are hereby authorized and directed, for and in the name of the District, to execute and deliver the Indenture in such form, together with such changes, insertions and omissions as may be approved by the General Counsel to the District, Bond Counsel, and the officers executing the Indenture, such execution to be conclusive evidence of such approval; and the Clerk of the Board is hereby authorized and directed to attest such Indenture and affix the seal of the District thereto. The Board of Directors hereby authorizes the delivery and perfonnance of the Indenture. 6. Aooroval of Escrow Deposit and Trust A2reement. The President (or his designee) is hereby authorized and directed, for and in the name and on behalf of the District, to execute, and the Clerk of the Board is authorized to attest her signature and affix the official seal of the District to the Escrow Deposit and Trust Agreement, in the form on file with the Clerk of the Board, together with such changes, insertions and omissions as may be approved by the District Counsel, Bond Counsel, and the officers executing the Escrow Deposit and Trust Agreement, such execution to be conclusive evidence of such approval. The Board hereby authorizes the delivery and perfonnance of the Escrow Deposit and Trust Agreement. 7. Series 2001 Bonds. The Series 2001 Bonds shall be dated, shall bear interest at the rates, shall mature on the dates, shall be issued in the form, shall be subject to redemption, and shall otherwise be issued on the terms and conditions, all as set forth in the Indenture and in accordance with this Resolution. 8. Sale of Series 2001 Bonds. The Board of Directors hereby approves the competitive sale of the Series 2001 Bonds pursuant to the Official Notice of Sale, in substantially the form on file with the Chief Financial Officer, together with any changes therein or additions thereto suggested by the District's financial advisor, Bartle Wells Associates (the "Financial Advisor"), and approved by the Chief Financial Officer, so long as interest savings identified in Section 3 are achieved. The Official Notice of Sale is -2- , .. hereby approved for use in the sale of the Series 2001 Bonds, and the Chief Financial Officer is hereby authorized and directed to award the sale of the Bonds to the firm offering the best bid for the purchase of the Bonds. 9. Official Statement. The Board of Directors hereby approves the preliminary Official Statement describing the Series 2001 Bonds, in substantially the form on file with the Clerk of the Board, together with any changes therein or additions thereto deemed advisable by the Chief Financial Officer or the General Manager. The Board of Directors approves and authorizes the distribution by the Financial Advisor of the preliminary Official Statement to prospective purchasers of the Series 2001 Bonds, and authorizes and directs the Chief Financial Officer and the General Manager, on behalf of the District, to deem "final" pursuant to Rule 15c2-12 under the Securities Exchange Act of 1934 (the "Rule") the preliminary Official Statement prior to its distribution by the Underwriter. The ChiefFinancla1 Officer and the General Manager are authorized and directed to cause the preliminary Official Statement to be brought into the form of a final Official Statement and to execute said final Official Statement, dated as of the date of the sale of the Series 2001 Bonds, and a statement that the facts contained in the final Official Statement, and any supplement or amendment thereto (which shall be deemed an original part thereof for the purpose of such statement) were, at the time of sale of the Series 2001 Bonds, true and correct in all material respects and that the final Official Statement did not, on the date of sale of the Series 2001 Bonds, and does not, as of the date of delivery of the Series 2001 Bonds, contain any untrue statement of a material fact with respect to the District or omit to state material facts with respect to the District required to be stated where necessary to make any statement made therein not misleading in the light of the circumstances under which it was made. The Chief Financial Officer and the General Manager shall take such further actions prior to the signing of the final Official Statement as are deemed necessary or appropriate to verify the accuracy thereof. The execution of the final Official Statement, which shall include such changes and additions thereto deemed advisable by the Chief Financial Officer and the General Manager and such information permitted to be excluded from the preliminary Official Statement pursuant to the Rule, shall be conclusive evidence of the approval of the final Official Statement by the District. The final Official Statement, when prepared, is approved for distribution in connection with the offering and sale of the Series 2001 Bonds. 10. Further Authority. The Chief Financial Officer is authorized to accept on behalf of the District a municipal bond guaranty insurance policy and to restrict Authorized Investments in accordance with the terms of said policy. The officers of this District are hereby authorized and directed to execute all documents and take such actions as they may deem necessary or advisable in order to carry out and perform the purposes of this Resolution, and the execution or taking of such action shall be conclusive evidence of such necessity or advisability. 11. Delivery of Series 2001 Bonds. The Series 2001 Bonds shall be delivered to the purchaser thereof. This District shall execute and the Trustee shall authenticate and deliver the Series 2001 Bonds upon receipt of the purchase price and shall credit the proceeds as provided in the Indenture. -3- .. 12. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. ************** I, the undersigned Clerk of the Board of the South Tahoe Public Utility District, hereby certify that the foregoing is a full, true and correct copy of a resolution duly adopted by the Board of Directors of the District at a meeting thereof on the 5th day of July, 2001, by the following vote of the members thereof: AYES, and in favor thereof: Board Members NOES: Board Members ABSENT: Board Members Clerk of the Board -4- l-)~ ! i 1 2 3 4 5 6 RESOLUTION NO. 2720-01 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE SOUTH TAHOE PUBLIC UTILITY DISTRICT AUTHORIZING THE ISSUANCE AND SALE OF WATER REVENUE REFUNDING BONDS FOR THE PURPOSE OF REFUNDING THAT CERTAIN 1994 INSTALLMENT SALE AGREEMENT WITH LASALLE NATIONAL BANK, AND RELATED MATTERS RESOLVED, by the Board of Directors of the South Tahoe Public Utility District, 7 California (the "District"), as follows: 8 WHEREAS, the District entered into an Installment Sale Agreement, dated as of 9 October 31, 1994, between LaSalle National Bank and the District (the "1994 Installment 1 0 Sale Agreement") the proceeds of which were used to finance the construction of certain 11 improvements to the District's water system (the "Improvements"); and 12 WHEREAS, interest rates have declined since the 1994 Installment Sale Agreement 13 was entered into, and the District will receive economic benefit by refunding the 1 994 14 Installment Sale Agreement; and 15 WHEREAS, the District, after due investigation and deliberation, has determined 16 that it is in the interests of the District at this time to provide for the issuance of its water 17 revenue refunding bonds, for the purpose of refunding the 1 994 Installment Sale 18 Agreement; and 19 WHEREAS, Sections 53570 et seq., and 53580 et seq ., of the California 20 Government Code (the "Revenue Refunding Bond Law") authorizes the District to issue 21 its revenue bonds for the purpose of refunding revenue obligations of the District such as 22 the 1994 Installment Sale Agreement; and 23 NOW, THEREFORE, it is ORDERED and DETERMINED, as follows: 24 1. Issuance of Bonds. The Board of Directors hereby authorizes and approves the 25 issuance of a series of bonds under the Revenue Refunding Bond Law to be denominated 26 "South Tahoe Public Utility District Water Revenue Refunding Bonds, Series 2001" (the 27 "Series 2001 Bonds"). 28 2. Purposes. The purposes for which the Series 2001 Bonds are proposed to be Resolution No. 2720-01 Page 2 1 issued are to provide funds for the refunding of the 1994 Installment Sale Agreement, the 2 funding of a reserve fund for the Series 2001 Bonds, and the payment of costs of issuance 3 in connection therewith. 4 3. Minimum Savings. The Series 2001 Bonds may be issued and sold by 5 competitive bid pursuant to Section 8 hereof, so long as the net present value savings to 6 be accomplished through the issuance of the Series 2001 Bonds and the refunding of the 7 1994 Installment Sale Agreement are at least equal to four percent of the outstanding 8 principal amount of the 1994 Installment Sale Agreement or approximately $283,000. Such 9 savings shall be net of all expenses associated with the issuance ofthe Series 2001 Bonds. 10 4. Revenue Bonds. The Series 2001 Bonds are to be revenue bonds, payable 11 exclusively from the revenues of the Water System of the District. Such revenues constitute 12 a trust fund for the security and payment of the principal or redemption price of and interest 13 on the Series 2001 Bonds, as further provided in the Indenture hereinafter approved. 14 5. Approval of Indenture of Trust. The Series 2001 Bonds shall be issued pursuant 15 to and secured by the Indenture of Trust, dated as of August 1, 2001, between BNY 16 Western Trust Company (the "Trustee") and the District (the "Indenture"), which is hereby 17 referred to and incorporated herein by reference. The Indenture, in substantially the form 18 on file with the Clerk of the Board and made part hereof as though set forth in full herein, 19 is hereby approved by the Board of Directors. The Board acknowledges that the Indenture 20 lists U.S. Trust Company, N.A. as the Trustee, but has been informed that that bank has 21 just merged with the Trustee, and instructs bond counsel to make the necessary revisions 22 to the Indenture (and other documents, such as the Escrow Agreement hereinafter 23 approved) to correct the name of the Trustee. The President (or his designee) and the 24 Clerk of the Board are hereby authorized and directed, for and in the name of the District, 25 to execute and deliver the Indenture in such form, together with such changes, insertions 26 and omissions as may be approved by the Bond Counsel and the officers executing the 27 Indenture, such execution to be conclusive evidence of such approval; and the Clerk of the 28 Board is hereby authorized and directed to attest such Indenture and affix the seal of the Resolution No. 2720-01 Page 3 1 District thereto. The Board of Directors hereby authorizes the delivery and performance of 2 the Indenture. 3 6. Approval of Escrow Deposit and Trust Agreement. The President (or his 4 designee) is hereby authorized and directed, for and in the name and on behalf of the 5 District, to execute, and the Clerk of the Board is authorized to attest her signature and 6 affix the official seal of the District to the Escrow Deposit and Trust Agreement, in the form 7 on file with the Clerk of the Board, together with such changes, insertions and omissions 8 as may be approved by the Bond Counsel and the officers executing the Escrow Deposit 9 and Trust Agreement, such execution to be conclusive evidence of such approval. The 10 Board hereby authorizes the delivery and performance of the Escrow Deposit and Trust 11 12 Ag reement. 7. Series 2001 Bonds. The Series 2001 Bonds shall be dated, shall bear interest 13 at the rates, shall mature on the dates, shall be issued in the form, shall be subject to 14 redemption, and shall otherwise be issued on the terms and conditions, all as set forth in 15 the Indenture and in accordance with this Resolution. 16 8. Sales of Series 2001 Bonds. The Board of Directors hereby approves the 17 competitive sale of the Series 2001 Bonds pursuant to the Official Notice of Sale, in 18 substantially the form on file with the Chief Financial Officer, together with any changes 19 therein or additions thereto suggested by the District's financial advisor, Bartle Wells 20 Associates (the "Financial Advisor"), and approved by the Chief Financial Officer, so long 21 as interest savings identified in Section 3 are achieved. The Official Notice of Sale is 22 hereby approved for use in the sale of the Series 2001 Bonds, and the Chief Financial 23 Officer is hereby authorized and directed to award the sale of the Bonds to the firm offering 24 the best bid for the purchase of the Bonds. 25 9. Official Statement. The Board of Directors hereby approves the preliminary 26 Official Statement describing the Series 2001 Bonds, in substantially the form on file with 27 the Clerk of the Board, together with any changes therein or additions thereto deemed 28 advisable by the Chief Financial Officer or the General Manager. The Board of Directors Resolution No. 2720-01 Page 4 1 approves and authorizes the distribution by the Financial Advisor of the preliminary Official 2 Statement to prospective purchasers of the Series 2001 Bonds, and authorizes and directs 3 the Chief Financial Officer and the General Manager, on behalf of the District, to deem 4 "final" pursuant to Rule 15c1-12 under the Securities Exchange Act of 1934 (the "Rule") the 5 preliminary Official Statement prior to its distribution by the Underwriter. 6 The Chief Financial Officer and the General Manager are authorized and directed 7 to cause the preliminary Official Statement to be brought into the form of a final Official 8 Statement and to execute said final Official Statement, dated as of the date of the sale of 9 the Series 2001 Bonds, and a statement that the facts contained in the final Official 10 Statement, and any supplement or amendment thereto (which shall be deemed an original 11 part thereof for the purpose of such statement) were, at the time of sale of the Series 2001 12 Bonds, true and correct in all material respects and that the final Official Statement did not, 13 on the date of sale ofthe Series 2001 Bonds, and does not, as ofthe date of delivery ofthe 14 Series 2001 Bonds, contain any untrue statement of a material fact with respect to the 15 District or omit to state material facts with respect to the District requ ired to be stated where 16 necessary to make any statement made therein not misleading in the light of the 17 circumstances under which it was made. The Chief Financial Officer and the General 18 Manager shall take such further actions prior to the signing of the final Official Statement 19 as are deemed necessary or appropriate to verify the accuracy thereof. The execution of 20 the final Official Statement, which shall include such changes and additions thereto deemed 21 advisable by the Chief Financial Officer and the General Manager and such information 22 permitted to be excluded from the preliminary Official Statement pursuant to the Rule, shall 23 be conclusive evidence of the approval of the final Official Statement by the District. 24 Thefinal Official Statement, when prepared, is approved for distribution in connection 25 with the offering and sale of the Series 2001 Bonds. 26 10. Further Authority. The Chief Financial Officer is authorized to accept on behalf 27 of the District a municipal bond guaranty insurance policy and to restrict Authorized 28 Investments in accordance with the terms of said policy. Resolution 2720-01 Page 5 1 11. Delivery of Series 2001 Bonds. The Series 2001 Bonds shall be delivered to the 2 purchaser thereof. This District shall execute and the Trustee shall authenticate and deliver 3 the Series 2001 Bonds upon receipt of the purchase price and shall credit the proceeds as 4 provided in the Indenture. 5 12. Effective Date. This Resolution shall take effect from and after the date of its 6 passage and adoption. 7 PASSED AND ADOPTED at a duly held Regular Meeting of the Board of Directors 8 of the South Tahoe Public Utility District on the 5th day of July, 2001 by the following vote: 9 AYES: 10 NOES: 11 ABSENT: 12 13 Duane Wallace, President of the Board South Tahoe Public Utility District 14 15 16 ATTEST: Kathy Sharp, Clerk of the Board and Ex-Officio Secretary of the Board of Directors 17 18 19 20 21 22 23 24 25 26 27 28 .. j <<, rlj'-~ (redlfned) SOUTH TAHOE PUBUC UTILITY DISTRICf, CALIFORNIA RESOLUTION NO. 2720-01 A RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF WATER REVENUE REFUNDING BONDS FOR THE PURPOSE OF REFUNDING THAT CERTAIN 1994 INSTALLMENT SALE AGREEMENT WITH LASALLE NATIONAL BANK, AND RELATED MATfERS RESOLVED, by the Board of Directors oftbe South Tahoe PubJic Utility District, California (the "District"), as follows: WHEREAS, the District entered into an Installment Sale Agreement, dated as of October 31, 1994, between LaSalle National Bank and the District (the "1994 Installment Sale Agreement") the proceeds of which were used to finance the construction of certain improvements to the District's water system (the "Improvements"); and WHEREAS, interest rates have declined since the 1994 Installment Sale Agreement was entered into, and the District will receive economic benefit by refunding the 1994 Installment Sale Agreement; and WHEREAS, the District, after due investigation and deliberation, has detennined that it is in the interests of the District at this time to provide for the issuance of its water revenue refunding bonds, for the purpose of refunding the 1994 Installment Sale Agreement; WHEREAS, Sections 53570 et seq. and 53580 et seq. of the California Government Code (the "Revenue Refunding Bond Law") authorizes the District to issue its revenue bonds for the purpose of refunding revenue obligations of the District such as the 1994 Installment Sale Agreement; NOW, TIlEREFORE, it is hereby ORDERED and DETERMINED, as follows: 1. Issuance of Bonds. The Board of Directors hereby authorizes and approves the issuance of a series of bonds under the Revenue Refunding Bond Law to be denominated "South Tahoe Public Utility District Water Revenue Refunding Bonds, Series 2001" (the "Series 2001 Bonds"). 2. Purooses. The purposes for which the Series 2001 Bonds are proposed to be issued are to provide funds for the refunding of the 1994 Installment Sale Agreement, the funding of a reserve fund for the Series 2001 Bonds, and the payment of costs of issuance in connection therewith. 3. Minimum Savings. The Series 2001 Bonds may be issued and sold by competitive bid pursuant to Section 8 hereof, so long as the net present value savings to be accomplished through the issuance of the Series 2001 Bonds and the refunding of the 1994 Installment Sale Agreement are at least equal to four percent of the outstanding principal amount of the 1994 Installment Sale Agreement, or approximately $283,000. Such savings shall be net of all expenses associated with the issuance of the Series 2001 Bonds. 4. Revenue Bonds. The Series 2001 Bonds are to be revenue bonds, payable exclusively from the revenues of the Water System of the District. Such revenues constitute a trust fund for the security and payment of the principal or redemption price of and interest on the Series 2001 Bonds, as further provided in the Indenture hereinafter approved. 5. Aooroval of Indenture of Trust. The Series 2001 Bonds shall be issued pursuant to and secured by the Indenture of Trust, dated as of August 1, 2001, between U.S. Trust Company, N.A.BNY Western Trost Company (the "Trostee") and the District (the "Indenture"), which is hereby referred to and incorporated herein by reference. The Indenture, in substantially the form on file with the Clerk of the Board and made a part hereof as though set forth in full herein, is hereby approved by the Board of Directors. The Board acknowledges that the Indenture lists u.s. Trost Company, N.A. as the Trustee, but has been informed that that bank has just merged with the Trostee, and instructs bond counsel to make the necessary revisions to the Indenture (and other documents, such as the Escrow Agreement hereinafter approved) to correct the name of the Trostee. The President (or his designee) and the Clerk of the Board are hereby authorized and directed, for and in the name of the District, to execute and deliver the Indenture in such form, together with such changes, insertions and omissions as may be approved by the General Counsel to the District, Bond Counsel, and the officers executing the Indenture, such execution to be conclusive evidence of such approval; and the Clerk of the Board is hereby authorized and directed to attest such Indenture and affix the seal of the District thereto. The Board of Directors hereby authorizes the delivery and performance of the Indenture. 6. APVroval of Escrow Deoosit and Trust Agreement. The President (or his designee) is hereby authorized and directed, for and in the name and on behalf of the District, to execute, and the Clerk of the Board is authorized to attest her signature and affix the official seal of the District to the Escrow Deposit and Trust Agreement, in the form on file with the Clerk of the Board, together with such changes, insertions and omissions as may be approved by the District Counsel, Bond Counsel, and the officers executing the Escrow Deposit and Trost Agreement, such execution to be conclusive evidence of such approval. The Board hereby authorizes the delivery and performance of the Escrow Deposit and Trust Agreement. 7. Series 2001 Bonds. The Series 2001 Bonds shall be dated, shall bear interest at the rates, shall mature on the dates, shall be issued in the form, shall be subject to redemption, and shall otherwise be issued on the terms and conditions, all as set forth in the Indenture and in accordance with this Resolution. 8. Sale of Series 2001 Bonds. The Board of Directors hereby approves the competitive sale of the Series 2001 Bonds pursuant to the Official Notice of Sale, in substantially the form on file with the Chief Financial Officer, together with any changes therein or additions thereto suggested by the District's financial advisor, Bartle Wells Associates (the "Financial Advisor"), and approved by the Chief Financial Officer, so long as interest savings identified in Section 3 are achieved. The Official Notice of Sale is -2- hereby approved for use in the sale of the Series 2001 Bonds, and the Chief Financial Officer is hereby authorized and directed to award the sale of the Bonds to the firm offering the best bid for the purchase of the Bonds. 9. Official Statement. The Board of Directors hereby approves the preliminary Official Statement describing the Series 2001 Bonds, in substantially the form on file with the Clerk of the Board, together with any changes therein or additions thereto deemed advisable by the Chief Financial Officer or the General Manager. The Board of Directors approves and authorizes the distribution by the Financial Advisor of the preliminary Official Statement to prospective purchasers of the Series 2001 Bonds, and authorizes and directs the Chief Financial Officer and the General Manager, on behalf of the District, to deem "final" pursuant to Rule 15c2-12 under the Securities Exchange Act of 1934 (the "Rule") the preliminary Official Statement prior to its distribution by the Underwriter. The ChiefFinancia1 Officer and the General Manager are authorized and directed to cause the preliminary Official Statement to be brought into the form of a final Official Statement and to execute said final Official Statement, dated as of the date of the sale of the Series 2001 Bonds, and a statement that the facts contained in the final Official Statement, and any supplement or amendment thereto (which shall be deemed an original part thereof for the purpose of such statement) were, at the time of sale of the Series 2001 Bonds, true and correct in all material respects and that the final Official Statement did not, on the date of sale of the Series 2001 Bonds, and does not, as of the date of delivery of the Series 2001 Bonds, contain any untrue statement of a material fact with respect to the District or omit to state material facts with respect to the District required to be stated where necessary to make any statement made therein not misleading in the light of the circumstances under which it was made. The Chief Financial Officer and the General Manager shall take such further actions prior to the signing of the final Official Statement as are deemed necessary or appropriate to verify the accuracy thereof. The execution of the final Official Statement, which shall include such changes and additions thereto deemed advisable by the Chief Financial Officer and the General Manager and such information permitted to be excluded from the preliminary Official Statement pursuant to the Rule, shall be conclusive evidence of the approval of the final Official Statement by the District. The final Official Statement, when prepared, is approved for distribution in connection with the offering and sale of the Series 2001 Bonds. 10. Further Authoritv. The Chief Financial Officer is authorized to accept on behalf of the District a municipal bond guaranty insurance policy and to restrict Authorized Invesnnents in accordance with the terms of said policy. The officers of this District are hereby authorized and directed to execute all documents and take such actions as they may deem necessary or advisable in order to carry out and perform the purposes of this Resolution, and the execution or taking of such action shall be conclusive evidence of such necessity or advisability. 11. Delivery of Series 2001 Bonds. The Series 2001 Bonds shall be delivered to the purchaser thereof. This District shall execute and the Trustee shall authenticate and deliver the Series 2001 Bonds upon receipt of the purchase price and shall credit the proceeds as provided in the Indenture. -3- 12. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. ************** I, the undersigned Clerk of the Board of the South Tahoe Public Utility District, hereby certify that the foregoing is a full, true and correct copy of a resolution duly adopted by the Board of Directors of the District at a meeting thereof on the 5th day of July, 2001, by the following vote of the members thereof: AYES, and in favor thereof: Board Members NOES: Board Members ABSENf: Board Members Clerk of the Board -4- ~ ,ii' South Tahoe Public Utility District $7,860,000. Water Revenue Refunding Bonds Series 2001 BANK QUALIFIED Bonds Dated: As of the date of delivery Book Entry Only Bond Ratings: Tax Exemption: Redemption: Security: Purpose: Interest Payment Dates: Closing: Denominations : TrusteelEscrow Agent: Bond Counsel: Financial Advisor District Counsel: Due: August 1, as shown below Standard & Poor's Fitch mCA Interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes. Page 22. The Bonds are subject to redemption prior to their stated date of maturity. Page 2. The Bonds are special obligations of the District, payable solely from net revenues of the Water Enterprise Fund. as defined in the indenture of trust, by and between the District and Trustee. Net revenues consist generally of all revenues after payment of operation and maintenance expenses. Neither the fun faith and credit nor the taxing power of the District is pledged to the payment of the Bonds or interest thereon. Page 4. The Bonds will be used to refund the 1994 Installment Sale Agreement, the funding of a reserve fund., and the payment of issuance costs. Page 3. February 1 and August 1, beginning February 1, 2002. On or about August 16,2001. $5,000 or multiple thereof. U.S. Trust Company, N.A., San Francisco, California Jones Hall, A Professional Law Corporation, San Francisco, California Bartle Wells Associates, Berkeley, California Hatch and Parent, Santa Barbara, California Year Principal Interest Year Principal Interest (Aug. 1) Amount Rate Yield (Aug. 1) Amount Rate Yield 2002 $485,000 _% _% 2009 $615,000 % % 2003 500,000 _% % 2010 640,000 % % 2004 515,000 _% _% 2011 670,000 % % 2005 530,000 % _% 2012 700,000 % % 2006 550,000 _% % 2013 730,000 _% % 2007 570,000 _% _% 2014 760,000 % - % 2008 595,000 % % This official statement, as supplemented or corrected by the District from time to time, is deemed final by the District as of the date hereof (or of any such supplement or correction), for pwposes of compliance with Rule lSc2-12 of the Securities and Exchange Commission. Terms and conditions of the offering are setforth in the Notice Inviting Bids. Bids will be received on August 2, 2001, at the office of Bartle Wells Associates, 1889 Alcatraz Street, Berkeley, California, 94703, telephone 510/653-3399,fax 510/653-3769, up to and including 10:00 a.m. Pacific Time. Following acceptance of a bid, information on interest rates and reofJering prices will be printed in the spaces above. This official statement is dated July 5,2001. . PreliminaIy, subject to change Official Statement SOUTH TAHOE PUBLIC UTILITY DISTRICT 1275 Meadow Crest Drive South Lake Tahoe, California 96150 Organized September 28, 1950 Board of Directors Duane Wallace, President James R Jones, Vice President Christopher H. Strohm, Director Mary Lou Mosbacher, Director Eric W. Schafer, Director District Staff Robert G. Baer, General Manager Richard Solbrig, Assistant General Manager / Engineer Rhonda McFarlane, Chief Financial Officer Kathy Sharp, Clerk of the Board ProCessional Services Hatch and Parent, Santa Barbara, District Counsel Jones Hall, A Professional Law Corporation, San Francisco, Bond Counsel Bartle Wells Associates, Berkeley, Financial Advisor Grant Thornton, Minneapolis, Verification Agent U.S. Trust Company, San Francisco, Trustee and Escrow Agent This official statement provides information about the District and the Bonds. The official statement includes: 1. data supplied by the District and by others, as indicated herein; 2. estimates or projections which mayor may not be realized and which should not be construed as assertions of fact; and 3. summaries and descriptions of legal and financial documents, or their contents, which do not purport to describe such documents completely and which are made expressly subject to the full provisions of the documents cited. This official statement does not constitute a recommendation, express or implied, to purchase or not to purchase the Bonds or any other previous debt of the District. CONTENTS In tro d u ctio n ......................................................1 The Bonds ........................................................ 2 Description of the Bonds...... .................... ..........2 Purpose of the Bonds................................ .........3 Refunding Plan. .................................................3 Application of Proceeds ............................... ......3 Debt Service Schedule.......................................4 Verification................................ .............. .........4 Se1:urity for the Bonds .....................................4 Flow of Funds................ ..... ................... ............ 5 Rate Covenant................ ......................... .......... 5 Revenue Bond Coverage Covenant....................5 Reserve Account................................................ 5 Issuance of Parity Bonds.................................... 6 Bond Insurance Policy .......................................6 District tVater System...................................... 6 Water Supply and Production ............................7 Water Customers............................................... 8 Infrastructure Improvements.............................. 8 District W 3.ter Finances ................................... 9 Financial Statements of Water Enterprise........... 9 Estimate for 2000/01 ....................................... 13 Budget for 2001/02..........................................13 Water Rates and Charges................................. 14 Comparison of Average Monthly Water Bills ..15 Outstanding Debt................ ............................. 15 Debt Service Coverage ....................................16 Management Discussion ..................................17 Constitutional Limitations on Appropriations and Charges ................................................... 18 Article XllIA................................................... 18 Article XIIIB ................................................... 19 Articles XIIIC and XIIID................................. 19 Risk Factors ................................................... 21 General...... ...................................................... 21 Initiatives ... .....................................................21 District Water System - MTBE ..................... 21 Concluding Information................................ 22 Continuing Disclosure................. ................... . 22 Legal Matters .............................. .. .. .. . . .. .. .. . .. .. . 22 Tax Matters ............. .............. ...... ....................22 Absence of Litigation...................................... 23 Interest Deduction for Financial Institutions (Bank Deductibility) ....................................23 Ratings........................................ ................... . 23 Miscellaneous....... ...........................................24 Appendix A - Summary of Certain Provisions of the Indenture Appendix B - Area Statistical Information Appendix C - Audited Financial Statements Appendix D - Form of Continuing Disclosure Certificate Appendix E - Form of Bond Counsel Opinion Appendix F - Book Entry System Appendix G - Bond Insurance INTRODUCTION Issuer: South Tahoe Public Utility District provides water and wastewater service to an area of about 42 square miles in and around the City of South Lake Tahoe, California. The District is located about 100 miles east of Sacramento, California. The District was formed in 1950 under Division 7 of the California Public Utilities Code. A five-member Board of Directors, elected at large for overlapping four-year terms, governs the District. The District operates a water system and a sewer system. Purpose: Proceeds of the Bonds will be used to refund and defease the 1994 Installment Sale Agreement, fund a reserve fund, and pay costs of issuance incurred in connection with the issuance of the Bonds. Security: The Bonds are special obligations of the District, payable solely from net revenues of the Water Enterprise Fund, as defined in the indenture of trust, and by and between the District and the trustee. Net revenues consist generally of all revenues after the payment of operation and maintenance costs. The District shall fix, prescribe, revise, and collect rates and charges for the water system during each fiscal year, which are at least sufficient, after making allowances for contingencies and error in estimates, to: . pay operation and maintenance costs, debt service on the Bonds, principal and interest on any parity bonds, and any obligations of the District which are payable from gross or net revenues of the water system; and . yield net revenues equal to at least 120% of the debt service on the Bonds and payments on any parity bonds. A reserve account will be established from the bond proceeds and will be held and main- tained by the trustee. If the balance in the reserve account is less than the reserve require- ment, the deficiency shall be restored by transfers from the first moneys which become available (after payment of operating costs and debt service) in the Water Enterprise Fund to the trustee for deposit to the reserve account. Finances: Water service charges are the major source of revenue for the Water Enterprise Fund. The 2001/02 budget approved by the Board of Directors for the Water Enterprise Fund estimates total operating and nonoperating revenue to be $8.6 million of which $7.0 million would be from water service charges. The Board has the authority to establish water rates and charges and connection fees. The District has increased water rates and charges annually since 1995. The rate increases have averaged 4.7% per year. In the Dis- trict's five-year forecast, rate increases average 3.5% per year. This introduction is not a summary of the official statement. Information presented in this section is treated more completely elsewhere in the official statement, which should be read in its entirety. The official statement speaks only as of its date. Basic documents referred to in the official statement are available from the financial advisor prior to the closing and from the District thereafter. 1 THE BONDS Description of the Bonds Name: South Tahoe Public Utility District $7,860,000 Water Revenue Refunding Bonds Series 2001 Dated: As of the date of delivery Denomination: $5,000 or multiple thereof. l\'Iaturities: August 1,2002 through 2014. Interest: Interest is payable February 1 and August 1 of each year to the respective dates of maturity of the Bonds beginning February 1, 2002. Payment: The Bonds will be executed, sold, and delivered in fully registered form, with- out coupons. The Bonds will be registered in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"), New York, New York, as the initial securities depository for the Bonds. Ownership interests in the Bonds may be purchased in book- entry form only. Purchasers of the Bonds will not receive Bonds representing their own- ership interests in the Bonds purchased. Principal and interest payments with respect to the Bonds are payable directly to DTC by the trustee. Upon receipt of payments ofprin- cipal and interest, DTC will in turn distribute such payments to the beneficial owners of the Bonds. See Appendix F. Optional Redemption: The Bonds maturing on or before August 1, 2009 are not subject to optional redemption prior to maturity. The Bonds maturing on or after August 1,2010 are subject to redemption at the option of the District on any date on or after August 1,2009, as a whole or in part, from any source of available funds, at a redemption price equal to 100 percent of the principal amount of the Bonds to be redeemed together with a premium (expressed as a percentage of the principal amount of the Bonds to be redeemed) as set forth following, plus accrued interest to the date of redemption: Redemption Dates Premium August 1, 2009 through July 31, 2010...... ...... ............... .............. .......... ....... ........... 1% August 1, 2010 and thereafter...... ..................................... ....................................... 0% Redemption from Net Proceeds of Insurance or Condemnation: The Bonds are subject to mandatory redemption in part or in whole on any date from the net proceeds of insurance or eminent domain proceedings, at a redemption price equal to principal amount to be redeemed, without premium, plus accrued interest to the redemption date. 2 Purpose of the Bonds Proceeds of the Bonds will be used to refund and defease the 1994 Installment Sale Agreement, fund a reserve fund, and pay costs of issuance incurred in connection with the issuance of the Bonds. Refunding Plan Prior to or concurrent with the delivery of the Bonds, the District will enter into an escrow deposit and trust agreement with the U. S. Trust Company, N.A as the escrow bank with respect to the outstanding 1994 Installment Sale Agreement to be advance refunded. Under the escrow agreement, a portion of the bond proceeds will be used to establish an escrow fund for the 1994 Installment Sale payments to be held in trust by U.S. Trust, acting as the escrow bank. Proceeds deposited in the escrow fund will be used to purchase direct obligations of the United States of America or other obligations for which the faith and credit of the United States are pledged for the payment of principal and interest. Interest on and principal of the government securities will be used by the escrow bank to pay the installment payments of the 1994 Installment Sale Agreement until redemption or termination as specified in the escrow agreement. Refunding securities held in trust in the escrow fund, including subsequent investment therefrom, will be in amounts sufficient to pay scheduled debt service on the 1994 Installment Sale Agreement until their first call date (April 30, 2003). Upon deposit of such proceeds into the escrow fund, the 1994 Install- ment Sale Agreement will no longer be deemed outstanding. Moneys and government securities deposited into the escrow fund are not available to pay principal and interest of the Bonds. Application of Proceeds The following table sets forth the anticipated allocation of proceeds of the Bonds. Escrow fund..................................................................................................... $7,605,000 Bond insurance, reserve surety bond, and costs of issuance.............................. 176,400 Underwriter discount allowance (1 %) ......................... ........... .......................... 78.600 Total uses.................. ... .................... ................................... ............................. 7,860,000 The purpose of the escrow fund is to pay the installment payments due under the 1994 Installment Sale Agreement when due until the 1994 Installment Sale Agreement is pre- paid in full on April 30, 2003, and to prepay in full the then unpaid principal amount of the 1994 Installment Sale Agreement on April 30, 2003, together with a premium of2%. The reserve account will be funded from bond proceeds in an amount equal to the reserve requirement in the fonn of either cash or a qualified surety bond. Any deficiency in the reserve account shall be replenished from net revenues. Bond proceeds are to be used to pay for the costs of issuance and underwriter's discount. Any funds remaining in the cost of issuance fund on January 1, 2002 shall be transferred by the trustee to the debt service fund. 3 Debt Service Schedule The following table shows the principal and interest payments for the Bonds for each fiscal year. South Tahoe Public Utility District $ Water Revenue Refunding Bonds, Series 2001 Debt Service Year Ending June 30 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 T otaI February 1 Interest August 1 Principal Total Fiscal Year Total Interest Verification Grant Thornton, an independent firm of certified public accountants, will verify certain mathematical computations as to the sufficiency of the refunding securities deposited into the escrow fund, to pay, when due on certain dates designated for prior redemption, the principal ot: interest on, and premiums in connection with the installment payments to be refunded, and as to the yield on the Bonds and on the refunding securities purchased with proceeds of the Bonds and deposited into the escrow fund. SECURITY FOR THE BONDS The Bonds are special obligations of the District, payable solely from net revenues of the "Yater Enterprise Fund, as defmed in the indenture of trust, and by and between the District and the trustee. Net revenues consist generally of all revenues after the payment of opera- tion and maintenance costs. Neither the full faith and credit nor the taxing power of the District is pledged to the payment of the Bonds or the interest thereon. 4 Flow of Funds The District covenants and agrees that all gross revenues received by the District will be deposited in the Water Enterprise Fund, which the District agrees to maintain so long as any of the Bonds remain outstanding. All moneys in the Water Enterprise Fund shall be used in the following order: (i) budgeted operation and maintenance costs of the water system, estimated by the District to become due and payable debt service on the Bonds (ii) (ill) reserve accounts established in accordance with the indenture and the instruments pursuant to any parity Bonds related to the water system surplus and applied for any lawful purpose (iv) In the indenture, the debt service fund, as a special fund, and the redemption account and the reserve account, as special accounts, are created. The debt service fund and the redemp- tion and reserve accounts shall be held and maintained by the trustee. Rate Covenant In the indenture, the District covenants to fix, prescribe, revise, and collect rates and charges for the water system during each fiscal year, which are at least sufficient, after making allowance for contingencies and error in estimates, to pay the following amounts in the following order: (i) all operation and maintenance costs of the water system, estimated by the District to become due and payable in such fiscal year (ii) debt service on the Bonds (iii) all other payments required by the indenture and the instruments pursuant to any parity bonds related to the water system (iv) all payments required to meet any other obligations of the District, which are pay- able from gross or net revenues of the water system. Revenue Bond Coverage Covenant The District shall fix, prescribe, revise, and collect rates and charges for the water system during each fiscal year which are sufficient to yield net revenues equal to at least 120% of the debt service on the Bonds in such fiscal year. Reserve Account Pursuant to the indenture, a reserve account will be established from the bond proceeds and will be held and maintained by the trustee. The reserve requirement is an amount equal to the lesser of maximum annual debt service on the Bonds, 10% of the principal amount of the Bonds, or 125% of average annual debt service on the Bonds. If the bal- ance in reserve account exceeds the reserve requirement, the trustee will transfer the excess to the debt service fund at least semiannually, prior to each interest payment date. 5 If the balance in the reserve account is less than the reserve requirement, the deficiency shall be restored by transfers from the first moneys which become available (after pay- ment of operating costs and debt service) in the Water Enterprise Fund to the trustee for deposit to the reserve account. The District contemplates satisfying the reserve requirement by delivering to the trustee a qualified surety bond, as described and defined in the indenture. The trustee is entitled to draw upon the surety bond when required to make transfers from the reserve account to the debt service fund. Issuance of Parity Bonds The District may issue parity bonds, loans, advances, or indebtedness payable from net revenues from the water system provided that the District is in compliance with all cov- enants of the indenture and that net revenues are at least equal to 120% of the maximum annual debt service on all bonds to be outstanding, and that a reserve account has been established for the parity bonds. The calculated net revenues may, at the option of the District, include an allowance for net revenues from any additions to or improvements or extensions of the water system to be made with the proceeds of the parity bonds and also net revenues from additions, improvements, or extensions made from any source during the latest fiscal year or recent 12 -month period selected by the District ending not more than 60 days prior to the adop- tion of the parity bonds. The net revenue allowance is equal to 90% of the estimated additional average annual net revenues to be derived from such additions, improvements, and extensions for the first 36-month period. The calculated net revenues may, at the option of the District, also include an allowance for earnings due to any increase in water charges which have become effective prior to incurring additional indebtedness. The increased earnings are calculated as if the increase in charges had been in effect during whole fiscal year or a 12-month period. Bond Insurance Policy The District intends to buy municipal bond insurance and will provide information on the policy when known. DISTRICT WATER SYSTEM South Tahoe Public Utility District, a public agency established in 1950, supplies drinking water and provides wastewater collection, treatment and export services. It serves an area of about 42 square miles in and around the City of South Lake Tahoe, California. The District was originally created to operate a wastewater system. During the 1970s and 1980s the District acquired four privately owned water companies. Not every District cus- tomer takes both water and sewer service from the District. Approximately three-quarters of the District's sewer customers are water customers. Those sewer customers not supplied with District water are served by either one of two homeowners' organizations or a privately owned water company. 6 The wastewater collection system consists of 420 miles of collection lines and 39 lift sta- tions and serves 17,000 customers. The District's recycled water system treats and exports about 1.7 billion gallons each year. Recycled water is transported 26 miles out of the Tahoe Basin to a District-owned and -operated reservoir in neighboring Alpine County. The District serves water to more than 12,000 homes and 600 commercial and government locations. Annual water production is more than 2.4 billion gallons. Water Supply and Production The District's water supply is groundwater from 31 wells. Table 1 shows annual water production for 1995/96 through 1999/00. Groundwater is chlorinated, and two wells receive additional chemicals to address manganese in one well and for corrosion control in the second well. Approximately 300 miles of pipeline, rang- ing in size from one inch to 18 inches in diameter, deliver water to the District's customers. Storage is provided by 22 tanks with a total capacity of9.95 million gallons. Table 1 . South Tahoe Public Utility District Water Production, 1996-2000 (millions of gallons) 1995/96 1996/97 1997/98 1998/99 1999/00 2,41 0 2,400 2,217 2,301 2,449 Source: South Tahoe Public Utility District Laboratory Department Methyl tertiary butyl ether (MTBE) has been detected in the District's water supply. MTBE affects the taste and quality of the water. To ensure that the District water customers do not receive water contaminated with MTBE, 13 of the District's water wells have been closed. The District plans to remove MTBE from the affected wells. Water supply to customers has been redirected from the unaffected wells, water conservation programs have been implemented, and long-term solutions are being developed. Presently, the water supplied to its customers does not contain MTBE. In 2000, the District placed into service the new Valhalla well, adding 1.7 million gallons per day (mgd) to the water system. In autumn 2001, a water treatment system will be added to the Arrowhead well, increasing the water supply by an additional 1.2 mgd. In November 1998, the District filed legal action against manufacturers and distributors of gasoline responsible for the MTBE contamination of the District's wells. The lawsuit is pending trial in Superior Court in San Francisco. (See RISK FACTORS.) In March 2000, EI Dorado County by means of a County Ordinance banned MTBE gasoline in the City of South Lake Tahoe and surrounding area of the County. This has removed most sources ofMTBE contamination affecting the District's water supply. 7 Water Customers Table 2 summarizes the District's water customers. In 2000, the District had 13,045 water customers, mostly single family residential. Most residential cus- tomers are unmetered. Most commer- cial and multi-family residential customers are metered. Table 2 . South Tahoe Public Utility District Water Customers as of 12/31/2000 Single family residential Multi-family residential Non-residential Total Source: South Tahoe Public Utility District 11,334 1,106 605 13,045 The ten largest water customers are listed in Table 3. The ten largest water customers rep- resent less than 8.0% of the Water Enterprise's total revenues for 1999/00. Table:3 III South Tahoe Public Utility District Ten Largest Water Customers Fiscal Year Ended June 30, 2000 Customer Name City of South Lake Tahoe Tahoe Verde Sierra Vista I & III Tahoe Pines Heavenly Ski Resort Embassy Suites Timber Cover I Lahoe Tahoe Inn Lake Tahoe Unified School District Embassy Vacation Resorts Lakeland Village Tahoe Seasons Total Business Type City facilities Mobile home park Apartments Ski resort Hotel Hotelltimeshare Education Hotelltimeshare Timeshare Hotelltimeshare Source: South Tahoe Public Utility District Customer Service Department Annual Bills $ 66,428 51,046 62,684 90,759 60,300 38,448 44,759 28,074 57,797 34.171 $ 534,466 Percent of Total Revenues 1.0% 0.8% 0.9% 1.3% 0.9% 0.6% 0.7% 0.4% 0.8% 0.5% 7.9% Infrastructure Improvements The District makes capital improvements to its water system following a capital improve- ment program adopted annually in May by the District Board of Directors. Capital proj- ects include new water pipelines, storage tanks, pump houses, and wells. Over the last five years, the District has spent $14.0 million on water system infrastructure improvements. During 1999/00 the District invested $3.3 million in water system improvements. It antici- pates spending $12.0 million over the next five years. 8 DISTRICf WATER FINANCES South Tahoe Public Utility District maintains two funds: a Sewer Enterprise Fund and a Water Enterprise Fund. Enterprise funds are used to account for operations which are financed and managed in a manner similar to private business enterprises, where the intent of the District Board is that the costs of providing governmental services to the general public on a continuing basis be financed or recovered primarily through user rates and charges. (In addition, the Sewer Enterprise Fund receives $3.7 million from local property taxes annually.) The financial records of the District are maintained on the accrual basis of accounting. Revenues are recognized in the accounting period in which they are earned and become measurable; expenses are recognized in the period incurred. The District develops and adopts an annual budget. As part of the budget review process, District staff prepares a five-year forecast of revenues, expenses, and capital improvements for both enterprise funds. Financial Statements of Water Enterprise Table 4 summarizes the District's revenues and expenses for 1995/96 through 1999/00. The District's primary source of revenue is from service charges for the sale of water, which account for about 97% of total operating revenue. The Water Enterprise Fund does not receive any property taxes. The largest expense category is employee wages and salaries. Operating expenses have increased over the last five fiscal years primarily due to inflation and annual depreciation caused by the addition of new water plant. Other operating expenses increased in 1999/00 because of the increase in the cost for professional services. Table 5 shows the Statement of Cash Flows for 1995/96 through 1999/00. Cash and cash equivalents have been growing during the period. Table 6 shows the Balance Sheets for 1995/96 through 1999/00. Property, plant and equip- ment have increased over the five-year period due to the capital improvements and upgrades made to the water infrastructure. Account receivables increased in 1999/00 due to grant money received from the California Department of Health Services to mitigate MTBE contamination. Notes payable increased in 1998/99 due to an additional borrowing for capital improvements. 9 Table 4 . South Tahoe Public Utility District Water Enterprise Fund Revenue and Expenses 1995/96 1996/97 1997/98 1998/99 1999/00 Operating Revenues Service charges $ 5,655,336 $ 5,973,444 $ 6,143,343 $ 6,436,528 $ 6,823,530 Connection and service fees 143.084 292.584 213.438 198.584 223.502 Total operating revenues 5,798,420 6,266,028 6,356,781 6,635,112 7,047,032 Operating Expenses Salaries, wages and benefits 2,415,968 2,247,824 2,360,469 2,504,250 2,622,296 Depreciation and amortization 759,390 1,041,060 1,182,373 1,197,741 1,262,071 Utilities 510,431 501,279 479,667 411,906 562,373 Repairs and maintenance 571,310 502,381 3n,046 396,330 511,091 Other operating expenses 707.252 699.257 916.201 850.013 1.052.822 Total operating expenses 4,964,351 4,991,801 5,315,756 5,360,240 6,010,653 Net operating income 834,069 1,274,227 1,041,025 1,274,872 1,036,379 Non-Operatlng Revenue (Expense) Interest income 435,282 259,372 278,028 302,630 575,329 Aid from governmental agencies 300,443 238,229 194,374 Other income 75,716 52,933 86,937 102,145 278,076 Penalty charges 56,149 63,214 54,385 58,385 54,289 Interest expense (745,356) (765,489) (649,066) (696,520) (752,982) Other expenses (33.269l (39.091 ) (59.490) (54.108) (42.070) Total (211,478) (429,061) 11,237 (49,239) 307,016 Net !nCl:l rr.a 622,591 845,168 1,052,262 1,225,633 1,343,395 Fund equity, beginning fiscal year 10,706,043 11,358,662 12,263,812 13,403,895 14,737,421 Contributions 30.028 59.984 87.821 107.893 894.354 Fund equity, end of fiscal year $ 11,358,662 $ 12,263,812 $ 13,403,895 $ 14,737,421 $ 16,975,170 Source: South Tahoe Public Utility District, COl1l'rehensive Annual Financial Reports 10 Table 6 . South Tahoe Public Utility District Water Enterprise Fund Statement of Cash Flows 1995/96 1996/97 1997/98 1998/99 1999/00 Cash ftows from operating activities Cash received from customers $ 5,956,005 $ 6,275,950 $ 6,095,330 $ 6,833,308 $ 5,780,656 Penalty charges 56,149 63,214 54,385 58,385 54,289 Other income 75,716 52,933 86,937 102,145 278,076 Cash paid to employees (2,415,968) (2,247,824) (2,360,469) (2,504,250) (2,550,325) Cash paid to suppliers (1,927,426) (1,950,129) (1,531,193) (1,800,688) (2,012,189) Other expenses (33.269) (39.091) (59.490) (53.949) (42.070) Net cash provided by operating activities 1,711,207 2,155,053 2,285,500 2,634,951 1,508,437 Cash ftows from non-capltaJ ftnanclng activities Aid from governmental agencies 300,433 238,229 194,374 Cash ftows from capital and related ftnanclng activities Purchase of property and equipment (4,578,444 ) (3,120,887) (1,001,919) (2,134,774) (3,296,993) Issuance of debt 4,965,000 Repayment of debt (330,421 ) (354,945) (376,952) (374,507) (545,319) Interest paid on notes payable (748,549) (723,024) (692,712) (668,939) (757,489) Contributed capital 30,028 59.984 87 . 820 107,893 894.354 Net cash provided by (used in) capital and financing activities (5,627,386) (4,138,872) (1,983,763) 1,894,673 (3,705,447) Cash ftows from Investing activities Interest and dividends on investments 400,787 311,240 278,028 302,630 575,329 Proceeds from sale or maturities of investments 4,539,020 1,984,649 2,542,698 Purchase of certificate of deposit and pooled investments (10,000) (4,525,099) (30,000) Net cash (used in) provided by investing activities 4,939,807 2,295,889 268,028 (4,222,469) 3,088,027 Net (decrease) Increase In cash and cash equivalents 1,023,628 312,070 870,208 545,384 1,085,391 Cash and cash equivalents Beginning of fiscal year 2.747.701 3.771.329 4.083.399 4.953.607 5.498.991 End of fiscal year $ 3,771,329 $ 4,083,399 $ 4,953,607 $ 5,498,991 $ 6,584,382 Source: South Tahoe Public Utility District, Comprehensive Annual Financial Reports 11 Table 6 . South Tahoe Public Utility District Water Enterprise Fund Balance Sheet 1995/96 1996/97 1997/98 1998/99 1999/00 ASSETS Current Assets Cash and cash equivalents $ 3,771,329 $ 4,083,399 $ 4,953,607 $ 5,498,991 $ 6,584,382 Accounts receivable, net 386,651 292,179 533,714 324,357 1,523,230 Supplies inventory 256,441 240,483 Accrued interest receivable 51,868 Prepaid expenses and deposits 46.420 38.861 44.208 35.620 38.045 Total current assets 4,256,268 4,414,439 5,531,529 6,115,409 8,386,140 Restricted assets Investment securities 2,029,649 45,000 55,000 4,580,099 2,067,401 Property, plant and equipment Land, water rights, plant, equipment, and construction in progress 23,664,953 26,504,138 27,469,156 29,068,823 32,214,743 Less accumulated depreciation and amortization 6.967.342 7,726.700 8,872.173 9.534,807 10.645.805 Total property, plant and equipment 16,697,611 18,m,438 18,596,983 19,534,016 21,568,938 Other assets 24,462 23,118 21,993 47,216 44,523 Total assets 23,007,990 23,259,995 24,205,505 30,276,740 32,067,002 UABIUTIES AND FUND EQUITY Current liabilities Accounts payable 460,191 143,123 466,691 557,486 594,716 Deferred revenue 282,300 197,750 177,834 166,673 99,170 Accrued expenses 224,230 275,479 142,572 179,684 240,325 Current portion of notes payable 354,945 381,382 374,508 545,319 584,670 Current portion of compensated absences 68,000 69,281 69,281 69,281 69,281 Accrued interest payable from restricted assets 93,163 135,628 91.982 119.563 115.056 Total current liabilities 1,482,829 1,202,643 1,322,868 1,638,006 1,703,218 Long-term liabilities Compensated absences 355,644 364,067 419,347 422,236 494,207 Notes payable 9,810.855 9.429.473 9.059.395 13.479.077 12.894.407 Total long-term liabilities 10,166,499 9,793,540 9,478,742 13,901,313 13,388,614 Total liabilities 11,649,328 10,996,183 10,801,610 15,539,319 15,091,832 Fund equity Contributed capital 1,542,292 1,602,276 1,690,096 1,797,988 2,692,342 Retained earnings: Reserved 45,000 45,000 55,000 55,000 70,000 Unreserved 9 771 370 10.616536 11.658 799 12.884 433 14 212.828 Total fund equity 11,358,662 12,263,812 13,403,895 14,737,421 16,975,170 TotalliaCilities andiund equity 23,007,990 23,259,995 24,205,505 30,276,740 32,067,002 Source: South Tahoe Public Utility District, Comprehensive Annual Financial Reports 12 Estimate for 2000/01 Table 7 shows the District's estimate of revenues and expenses for 2000/01 for the Water Enterprise Fund. These estimates were made as part of the District's budget approval process and reflect year-to-date actuals, as of March 31,2001. Revenues for 2000/01 are greater than the prior fiscal year's because of $1.7 million received as settlements from various defendants in the MTBE litigation. The District also increased water rates by 3.5% in 2000/01. Table 7 . South Tahoe Public Utility District Water Enterprise Fund, Estimate 2000/01 Capital Enterprise Outlay Total Fund Reserve Water Fund Revenues [1] $ 8,690,000 $ 1,754,000 $ 10,444,000 Cash outlays: Salaries and benefits [2] 2,497,000 397,000 2,894,000 Operation and maintenance [2] 2,327,000 29,000 2,356,000 Capital outlay 4,178,000 4,178,000 Debt service [3] 884.000 585.000 1.469.000 Total cash outlays 5,708,000 5,189,000 10,897,000 1 - Enterprise Fund revenue is from customer service charges. Capital Outlay Reserve revenue is from connection fees, capital improvement charge, grants, and borrowings. A portion of the capital improvement charge is designated to pay interest expense in the Enterprise Fund. 2 - Capital Outlay Reserve includes the Engineering Depl Enterprise Fund contains all other departments. 3 - Interest expense is paid from the Enterprise Fund. Principal is paid from Capital Outlay Reserve. Source: South Tahoe Public Utility District. Budget for 2001102 Table 8 shows the District's 2001/02 budget for the Water Enterprise Fund, which was adopted on May 17, 2001. The revenues are based on Board-adopted 3.5% increase in water rates and charges. They are less than the prior fiscal year's estimate because the prior period included $1.7 million in MTBE litigation settlements. Salaries and benefits increased from the prior fiscal year's estimate due to a 2.00.10 pay increase adopted by the Board. Total cash outlays decreased from the prior fiscal year because of a reduction in capital expenditures and the elimination of certain one-time costs. 13 Table 8 . South Tahoe Public Utility District Water Budget for 2001/02 Revenues (1] Cash outlays: Salaries and benefits [2] Operation and maintenance (2] Capital outlay Debt service (3] Total cash oullays Enterprise Fund $ 7,725,000 Capital OuUay Reserve $ 892,000 Total Water Fund $ 8,617,000 2,707,000 2,379,000 279,000 50,000 2,789,000 662.000 3,780,000 2,986,000 2,429,000 2,789,000 1.501 .000 9,705,000 839.000 5,925,000 1 - Enterprise Fund revenue is from customer service charges. Capital Oullay Reserve revenue is from connection fees, capital improvement charge, grants, and borrowings. A portion of the capital improvement charge is designated to pay interest expense in the Enterprise Fund. 2 - Capital Outlay Reserve includes the Engineering Dept. Enterprise Fund contains all other departments. 3 -Interest expense is paid from the Enterprise Fund. Principal is paid from Capital Outlay Reserve. Source: South Tahoe Public Utility District, Approved 8udget for 2001/02. Water Rates and Charges Table 9 shows the water rates and charges for the District effective July 1,2001. They were adopted by the Board on May 17, 2001. They were increased by 3.5% over prior rates and charges. The District has annually increased water rates and charges since 1995. The rate increases have averaged 4.7% per year. The District's five-year forecast includes rate increases averaging 3.5%. The District charges water connection fees to new customers connecting to the water system The charge established by the Board for one water capacity unit is currently $1,708, effective January 1,2001. A water capacity unit is defined as 455 gallons of water, the amount of water determined by the District to be the average daily use of a single family home within the District's service area during a peak water production month. Table 9 . South Tahoe Public Utility District Water Rates and Charges Effective July. 1, 2001 Annual Flat Service Single dwelling unit Duplex Triplex Fourplex Each additional unit Business establishment 3/4 inch connection 1 inch connection Metered Service Annual minimum rate: 3/4 inch connection 1 inch connection 1-1/2 inch connection 2 inch connection 3 inch connection 4 inch connection 6 inch connection 8 inch connection 10 inch connection $ 388.20 739.00 1,004.00 1,278.60 210.40 530.60 800.80 220.40 301.60 463.80 717.00 1,434.40 2, 151.40 2,873.60 3,853.40 5,138.80 1.83 Volume charge per 100 cU.ft. Source: Ordinance No. 478-01, dated May 17, 2001. 14 An applicant for a new service connection also pays the actual administrative costs incurred by the District in reviewing and processing the application, the minimum administration fee is $150. The applicant must also pay the cost for and installation of the water meter. Effective January 1,2001 and each year thereafter on January 1, the water capacity unit charge will be adjusted according to the Engineering News-Record Construction Cost Index, National Average, for the prior twelve-month period. Connection fees can only be used for capital purposes. The District uses the fees to pay for projects listed in the capital improvement program. Connection fees may also be used for debt service payments and constitute gross revenues from which the pledged net reve- nues are derived in the calculation of the debt service coverage requirements. The District establishes rates and charges by ordinance. It has the authority to set rates and charges for water service and connection without the approval of any other govern- mental agency. It can terminate service to delinquent customers, require full payment of delinquent accounts, and impose reconnection fees to resume service. It can also place liens on property and turn them over to the County for collection along with payment of property taxes. The District bills its customers for water and sewer service on a quarterly basis. Current charges are billed 90 days in advance and are delinquent if not paid prior to the beginning of the next billing quarter. It is the District's policy to begin the process to discontinue a customer's water service if the bill is not paid within 90 days from the bill's date. A delin- quency charge of 10% is applied as a penalty on the previous billing and an additional late fee of 1.5% is charged on outstanding balances. Comparison of Average Monthly Water Bills Table 10 compares annual water bills for 1999/00 of neighboring water agencies. The District's annual water bill is in the mid-range of the bills. Outstanding Debt As of August 2,2001, the District will have the following outstanding debt re- lated to the Water Enterprise in addition to the Bonds: Table 10 . South Tahoe Public Utility District Comparison of Annual Water Bills 1999/00 Cove Rock Kingsbury North Tahoe South Tahoe PUD Tahoe City Incline Village $ 924 513 385 362 343 222 Source: District's Comprehensive Annual Financial Report for Fiscal Year Ended June 30,2000 · Note payable to the Martin family related to the 1983 acquisition of the Angora Water Company, secured by a first lien on the water revenues received by the District from customers served by the former Angora water system. Angora water revenues are about 14% of the District's total water service revenues. The note is due December 2007 and is payable monthly at an interest of 10.5%. Note payments are $226,000 per year until 2004, and thereafter increases to $234,140 per year until 2007. As of 15 August 1,2001, $1,063,020 is outstanding. (The District operates and accounts for its water system as a single system and the former Angora water system and other District water facilities are interconnected.) · 1999 Installment Sale Agreement with LaSalle Bank National Association, secured by a first lien against all water net revenues; on a parity with the 1994 Installment Sale Agreement, but subordinated to the pledge of Angora revenues to the Angora purchase payments of the Martin family note. The purpose of the 1999 Installment Sale Agreement was to fund water system capital improvements. As of August 1, 2001, $4,679,159 is outstanding and final principal payment is due May 20,2019. There are semi-annual payments of $208,764 including interest at 5.65%. Debt Senrice Coverage Table 11 calculates the historical Water Enterprise debt service coverage for 1995/96 through 1999/00. Coverage ratios have ranged from 2.1 to 2.9. The rate covenants of the 1994 and 1999 Installment Sale Agreements require net revenues equal to or at least 1.2 times annual debt service. During the prior five fiscal years, the District has exceeded this coverage test. Table 11 3 South Tahoe Public Utility District Historical Debt Service Coverage - Water Enterprise Fund 1995/96 1996/97 1997/98 1998/99 1999/00 Gross revenues $ 6,329,677 $ 6,618,486 $ 7,059,908 $ 7,317,961 $ 8,130,395 Operation & maintenance expenses 4,238,230 3.947,237 4.150,934 4.194.935 4.743,143 Net revenue available for debt service 2,091,447 2,671,249 2,908,974 3,123,026 3,387,252 Total debt service 1,020,735 1,074,674 1,110,484 1,071,028 1,298,300 Coverage ratio 2.1 2.5 2.6 2.9 2.6 Source: Comprehensive Annual Financial Reports of South Tahoe Public Utility District. Table 12 projects the coverage ratios on the Series 2001 Bonds for 2001/02 through 2005/06. The calculation of coverage ratios shown in the table are based on the 2001/02 adopted budget and the Water Enterprise five-year forecast prepared by District staff as part of the 2001/02 budget approval process. Key assumptions used in the forecast include: i:'l \Vater rates increase annually 3.5%. '" '-tVater sales grow at 1% per year. l\I Interest income is earned at 5% per year. ::1 Annual connection fee revenue is based on 76 new residential accounts and fees averaging $96,000 per year for new commercial accounts. Connection fee revenue forecasts are consistent with historical amounts. 16 . Expenses are increased at 3% per year, adjusted for specific, known changes. The projected expenses reflect expected increases in power costs offset by the District's implementation of energy efficiency measures to control electric usage and costs. The District purchases its electric power from Sierra Pacific Power Company. . Debt service includes the annual payments for the Martin note (Angora) and the 1999 Installment Sale Agreement with LaSalle and estimated annual debt service payments for the Series 2001 Bonds. Debt service for 2001/02 includes one interest payment on the Bonds. Table 12 . South Tahoe Public Utility District Projected Debt Service Coverage - Water Enterprise Fund 2001/02 2002103 2003/04 2004/05 2005/06 Gross revenues Service charges $ 7,267,000 $ 7,571,000 $ 7,886,000 $ 8,217,000 $ 8,560,000 Interest income 254,000 191,000 157,000 135,000 148,000 Connection and service fees 163,000 199,000 193,000 181,000 324,000 Other charges 244.000 244.000 244.000 244.000 244 000 Total gross revenues 7,928,000 8,205,000 8,480,000 8,m,OOO 9,276,000 Operation & maintenance expenses Salaries and benefits 2,987,000 3,076,000 3,168,000 3,263,000 3,361,000 Other O&M costs 2.429 000 2.479 000 2.543 000 2.616 000 2694.000 Total O&M expenses 5,416,000 5,555,000 5,711,000 5,879,000 6,055,000 Net revenue available for debt service 2,512,000 2,650,000 2,769,000 2,898,000 3,221,000 Debt service - Water Fund Angora Water CO"1'any (Martin Family) 226,000 226,000 230,000 234,000 234,000 1999 Install ment Sale Agreement, LaSalle Bank 418,000 418,000 418,000 418,000 418,000 Water Revenue Refunding Bonds Series 2001 (estimated) 140 000 784.000 784000 783 000 781.000 Total estimated debt service 784,000 1,428,000 1,432,000 1,435,000 1,433,000 Calculated coverage ratio (minimJm 1.20x) 3.20 1.86 1.93 2.02 2.25 Source: Prepared by Bartle Wells Associates based on South Tahoe Public Utility District's Five-Year Water Fund Forecast The projections indicate debt service coverage would range between 1.86 and 3.20 times total annual debt service, including the Series 2001 Bonds, for the five-year period. The estimated debt service coverage satisfies the District's pledge to maintain net revenues of at least 1.2 times annual debt service payments. Management Discussion Water is vital to South Lake Tahoe community. The District states in its Comprehensive Annual Financial Report for 1999/00 that Lake Tahoe is renowned for its magnificent beauty. One part of the District's mission is to protect Lake Tahoe. Another key element of the District's mission is to ensure the community has an adequate supply of high quality water for all of its needs. 17 The Lake Tahoe basin is known for its recreational activities, including boating, gaming, skiing, and hiking. Annually about two million people visit Lake Tahoe, making tourism the area's leading industry. The District provides high-quality water service to satisfy the needs of its customers and visitors to Lake Tahoe. . District infrastructure projects are carefully planned and carried out with a special respon- sibility to protect the Lake Tahoe basin's environment. To address the needs of the com- munity and to apportion District financial resources, the Board of Director adopts five-year plans for water and wastewater system upgrades, replacement, and new construction. The water portion of the current five-year capital improvement program totals $12 million. In 1997, MTBE was first discovered in the District's water supply. Subsequently, the District has closed thirteen water wells. The District has responded to the discovery of MTBE in the groundwater by redirecting water from unaffected wells, drilling two new wells, adding a treatment system to one of the new wells, implementing water conserva- tion programs and developing an engineering plan to counteract the contamination and to insure a high quality and adequate water supply. The District enlisted the aid of the federal government and the State of California. Additionally, EI Dorado County has banned NITBE in the City of South Lake Tahoe and the surrounding area. 11TBE contamination has a financial impact on the District. To recover these costs and pay for damages to the water supply system, the District filed a lawsuit in November 1998 against manufacturers and distributors ofMTBE gasoline. The lawsuit is pending trial in Superior Court in San Francisco. (See RISK FACTORS.) CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES Article XIIIA On June 6, 1978, California voters approved Proposition 13, an initiative constitutional amendment which enacted Article XIllA of the California Constitution. Article XIIIA substantially altered the taxation of real property in California. The article (as amended) limits ad valorem property taxes of all real property to 1 percent of the full cash value of the property except for any taxes above that level required to pay debt service on certain Bonds approved by the voters. The article defines "full cash value" as the assessor's appraised value of real property as of March 1, 1975 subject to annual adjustment to reflect increases, not to exceed 2 percent per year, in the consumer price index or com- parable local data. Article XIIIA permits establishment of a new "full cash value" for new construction or a change in ownership. While the District receives a share of the 1 percent general property tax levy, the Water Enterprise Fund receives no property taxes. The Sewer Enterprise Fund does receive property taxes. 18 Article XIIIB Article XIIIB of the California Constitution limits the annual appropriations of the state and of any city, county, school district, authority, or other political subdivision of the state to the level of appropriations of the particular governmental entity for the prior fiscal year, adjusted for changes in the cost of living and population. The "base year" for establishing such appropriations limit is 1978/79 and the limit is to be adjusted annually to reflect changes in population and consumer prices. Adjustments in the appropriations limit of any entity may also be made if (i) the financial responsibility for a service is trans- ferred to another public entity or to a private entity; (ii) the financial source for the provi- sion of services is transferred from taxes to other revenues, or (Hi) the voters of the entity approve a change in the limit for a period of time not to exceed four years. Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the state or other entity oflocal government, exclusive of certain state subventions or refunds of taxes. "Proceeds of taxes" include, but are not limited to, all tax revenues and the proceeds to an entity of government from (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity's revenues in any year exceed the amounts permitted to be spent, the excess must be returned by revising tax rates or fee schedules over the two subsequent years. Certain expenditures are excluded from the appropriations limit including payments of indebtedness existing or legally authorized as of January 1, 1979, or of bonded indebted- ness thereafter approved by the voters and payments required to comply with court or federal mandates which without discretion require an expenditure for additional services or which unavoidably make the providing of existing services more costly. The District believes that its water charges do not exceed the costs it reasonably bears in providing such services and therefore are not subject to the limits of Article XIllB. The District covenants in the indenture that it will prescribe rates and charges sufficient to provide for the debt service payments each year. Articles XIllC and XIllD On November 5, 1996, California voters approved Proposition 218, the so-called "Right to Vote on Taxes Act." Proposition 218 adds Articles XIIIC and XIIID to the State Constitution which affect the ability of local governments to levy and collect both existing and future taxes, assessments, fees and charges. Under Article XIllD, revenues derived from a "fee" or "charge" (defined as "any levy other than an ad valorem tax, a special tax or an assessment, imposed by an agency upon a parcel or upon a person merely as an incident of property ownership, including user fees or charges for a property-related service") may not exceed the funds required to provide the "property-related service" and may not be used for any purpose other than that for which the fee or charge was imposed. Further, the amount of a "fee" or "charge" may not exceed the proportional cost of the service attributable to the parcel, no "fee" or "charge" may be imposed for a service unless that service is actually used by, or is 19 immediately available to, the owner of the property in question, and no "fee" or "charge" may be imposed for general governmental services where the service is "available to the public at large in substantially the same manner as it is to the property owners." All new and existing property-related fees and charges must conform to specific require- ments and prohibitions set forth in the Article. Further, before any property-related fee or charge may be imposed or increased, written notice must be given to the record owner of each parcel of land affected by such fee or charge. The entity must then hold a hearing upon the proposed imposition or increase, and if written protests against the proposal are presented by a majority of the owners of the identified parcels, the entity may not impose or increase the fee or charge. Moreover, except for fees or charges for sewer, water and refuse purposes, no property-related fee or charge may be imposed or increased without majority approval by the property owners subject to the fee or charge or, at the option of the entity, two-thirds voter approval by the electorate residing in the affected area. The District believes that Proposition 218 does not apply to its existing system of water service charges because the charges are not imposed upon a parcel of land or charged merely as an "incident of ownership," but instead are based on a service provided to a customer at the customer's request. This position has also been taken by the California Attorney General in an opinion released in 1997. Moreover, the District believes its charges are sized only to recover its reasonable or actual costs to provide water service. Accord- ingly, the District has not followed the procedures described above when increasing its water rates and charges. However, no court has addressed the issue and the principal drafters of Proposition 218 have publicly stated that they believe that the proposition does apply to water charges. Under Article XIIIC, Section 3, the initiative power is expressly extended to matters of local taxes, assessments, fees and charges. This means that the voters of the District could, by future initiative, repeal or reduce existing local taxes, assessments, fees and charges. This power is arguably limited in the case oflevies directly pledged to bonded indebtedness, such as the net revenues securing the Bonds. Legislation adopted by the state legislature in 1997 provides that Article XIIIC shall not be construed to mean that any owner or beneficial owner of a municipal security assumes the risk of, or consents to, any initiative measure which would constitute an impairment of contractual rights under the Contracts Clause of the United States Constitution. Tne District does not believe that any of its water rates and charges or revenue sources from which debt service payments would be payable are subject to Proposition 218. However, there can be no assurance that the voters of the District will not, in the future, approve an initiative which attempts to reduce water rates or curtail their increase. 20 RISK FACTORS The following section describes certain special considerations and risk factors affecting the payment of and security for the Bonds. The following discussion is not meant to be an exhaustive list of the risks associated with the purchase of any Bonds and does not necessarily reflect the relative importance of the various risks. Potential investors are advised to consider the following special factors along with all other information in the official statement in evaluating the Bonds. There can be no assurance that other con- siderations will not arise in the future. General The debt service on the Bonds are payable solely from and secured solely by the net reve- nues pledge therefor under the indenture, together with amounts on deposit from time to time in certain funds and accounts held by the trustee. Iffor any reason, the District does not col- lect sufficient net revenues to pay the principal and interest, the District will not be obli- gated to use any of its other funds, other than amounts on deposit in the reserve account and certain other amounts on deposit in the funds and accounts established under the inden- ture to pay debt service on the Bonds. Initiatives In recent years several initiative measures have been proposed or adopted which affect the ability of local governments to increase taxes and rates. There is no assurance that the electorate or the state legislature will not at some future time approve additionallimita- tions which could affect the ability of the District to implement future rate increases which could reduce net revenues and adversely affect the security for the Bonds. District Water System - MTBE The District's drinking water system contains 31 wells and 15 booster stations throughout its service area. In 1997, the District identified the contaminant MfBE in some of its wells. To the date of this official statement, MTBE contamination or threat of contamination has resulted in the partial or full closure of 11 of the District's wells, representing approximately 17% of the District's total water production capacity. The District is presently working to prevent further contamination and to ensure an adequate water supply. The District has retained an engineering consulting firm to advise the District on its capital improvements and operating costs for MTBE water treatment. In November 1998, the District filed legal action against the manufacturers and distrib- utors ofMfBE. During fiscal year 2000, the District settled with one of the MTBE dis- tributors for $100,000. In fiscal year 2001, the District received an additional $1.7 million in settlements. Two additional settlements totaling $4.85 million have been agreed to and are awaiting court approval. The MTBE litigation trial is scheduled to begin in July 2001 with the remaining defendants. The costs and ultimate loss associated with the contamination cannot be estimated at this time. District management believes the measures that the District has adopted will allow the District to continue meeting the water needs of its customers. 21 CONCLUDING INFORMATION Continuing Disclosure The District has covenanted in a continuing disclosure certificate for the benefit of the holders and beneficial owners of the Bonds to provide certain financial information and operating data relating to the District by not later than nine months following the end of the District's fiscal year (currently June 30), commencing with the report to be filed April 1, 2002 for the fiscal year ending June 30, 2001 and to provide notices of the occurrence of certain enumerated events, if material. The District will file the annual report and the notices of material events with each nationally recognized municipal securities information repository. The specific information to be included in the annual report and the notice of material events is set forth in Appendix D to this official statement, "Form of Continuing Disclosure Certificate." The District has never failed to comply with a continuing disclosure undertaking. Legal Matters Jones Hall, A Professional Law Corporation, San Francisco, California, bond counsel will render an opinion with respect to the validity and enforceability of the indenture of trust and the escrow deposit and trust agreement. A copy of the legal opinion will accompany the original delivery of each bond. The form of the legal opinion proposed to be delivered by bond counsel is included as Appendix E to this official statement. Certain legal matters will be passed upon for the District by its District counsel. Payment of the fees and expenses of Jones Hall as bond counsel is contingent upon the sale and delivery of the Bonds. Tax Matters In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, bond counsel, subject, however to the qualifications set forth below, under existing law, the portion of Bonds designated as and comprising interest and received by the owners of the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal individual and corporate alternative minimum taxes, although it is included in certain income and earnings in computing the alternative minimum tax imposed on certain corporations. In the further opinion of bond counsel, such interest is exempt from California personal income taxes. In the event that prior to the delivery of the Bonds (a) the interest on other obligations of the same type and character shall be declared to be taxable (either at the time of such declaration or at any further date) under any federal income tax authority or official which is followed by the IRS, or by decision of any federal tax court, or (b) any federal income tax law is adopted which will have a substantial adverse effect upon owners of the Bonds as such, the successful bidder for the Bonds may, at its option, prior to the tender of the Bonds, be relieved of its obligation to purchase the Bonds, and in such case the deposit accompany- ing its proposal will be returned. The opinions set forth in the preceding paragraph are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the delivery of the indenture of trust in order that such interest be, or continue to be, excluded from gross income for federal income tax 22 purposes. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of delivery of the indenture of trust. Owners of the Bonds should also be aware that the ownership or disposition of: or the accrual or receipt of interest with respect to, the Bonds may have federal or state tax consequences other than as described above. Bond counsel expresses no opinion regard- ing any federal or state tax consequences with respect to the indenture of trust and the Bonds other than as expressly described above. Absence of Litigation There is no action, suit, or proceeding known to be pending or threatened, restraining or enjoining the execution or delivery of the Bonds or indenture of trust, or in any way contesting or affecting the validity of the foregoing or any proceedings of the District taken with respect to any of the foregoing. Interest Deduction for Financial Institutions (Bank Deductibility) The 1994 Installment Sale Agreement was designated by the District for the purposes of paragraph (3) of section 265(b) of the Internal Revenue Code of 1986, as amended, and not more than $10,000,000 aggregated principal amount of obligations the interest on which is excludable (under section 103(a) of the Code) from gross income for federal income tax purposes (excluding (i) private activity Bonds, as defined in section 141 of the Code, except qualified 50 1 (c)(3) Bonds as defined in section 145 of the Code, and (ii) current refunding obligations to the extent the amount of the refunding obligations does not exceed the outstanding amount of the refunded obligation), including the 1994 Installment Sale Agreement, were issued by the District, including all subordinate entities of the District during the calendar year (1994) in which the 1994 Installment Sale Agreement was executed and delivered. The average maturity date ( ) of the Water Revenue Refund- ing Bonds, Series 2001 is not later than the average maturity date ( ) of the 1994 Installment Sale Agreement. The last maturity date ( ) of the Water Revenue Refunding Bonds, Series 2001 is not more than thirty (30) years after the date of issuance of the 1994 Installment Sale Agreement. The aggregate face amount of the Water Revenue Refunding Bonds, Series 2001 are deemed designated as "qualified tax-exempt obligations" for purposes of paragraph (3) of section 265(b) of the Code. Ratings Standard & Poor's, a division of the McGraw-Hill Companies, Inc., and Fitch mCA have assigned their municipal bond ratings of and , respectively, to the Bonds. Such ratings reflect only the views of such organizations and any desired explanation of the significance of such ratings should be obtained from the rating agency furnishing the same, at the following addresses: Standard & Poor's, 55 Water Street, New York NY 10041, and Fitch mCA, 650 California St, San Francisco CA 94108. Generally, a rating agency bases its ratings on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that such ratings will continue for any given period of time or that such ratings will not be revised downward or with- 23 drawn entirely by the rating agencies, if in the judgment of such rating agencies, circum- stances so warrant. Any downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. Miscellaneous The quotations from, and summaries and explanations of the indenture of trust, the escrow deposit and trust agreement, statutes and other documents contained herein do not purport to be complete, and reference is made to such documents and statutes for full and com- plete statements of their provisions. Complete copies of the documents are available upon request from the financial advisor prior to the closing and from the District thereafter. This official statement is submitted only in connection with the sale of the Bonds by the District. All estimates, assumptions, statistical information, and other statements contained herein, while taken from sources considered reliable, are not guaranteed by the District. The information contained herein should not be construed as representing all conditions affecting the District or the Bonds. All information contained in this official statement pertaining to the District has been furnished by the District, and the execution and deliv- ery of this official statement have been duly authorized by the District. At the time of payment for and delivery of the Bonds, the District will provide a statement executed by the proper officer of the District to the effect that to the best of his knowledge and belief the statements in the official statement as of its date and as of the date of its delivery are true and correct in all material respects and the official statement does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in the light of the circum- stances under which they were made, not misleading. South Tahoe Public Utility District Is! 24 APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF THE INDENfURE OF TRUST Certain provisions of the Indenture are summarized below. This summary does not purport to be complete or definitive and is qualified in its entirety by reference to the full terms of the Indenture. Definitions "An~ora Purchase Aljp"eement" means that certain Agreement of Sale and Purchase of Stock of Angora Water Co., dated as of November 3, 1983 by and between Donald L. Martin and MaIjorie L. Martin, Gerald E. Martin and Thelma V. Martin, Stanley L. Martin and Louise A. Martin, and the District. .. Aniora Purchase P~ents" means the purchase price payments provided for in the Angora Purchase Agreement, without giving any effect to any amendment or modification thereof after the effective date of the Angora Purchase Agreement. .. Aniora Revenues" means the gross income and revenue derived by the District from the sale of water from the Angora Water System after deducting all sums expended for the cost of acquisition of water and of the necessary and reasonable maintenance and operation of the Angora Water System, which costs shall include the reasonable expense of management, operation, repair, and other expenses necessary to maintain and preserve the Angora Water System in good repair and working order. .. An~ora Water System" means the complete water supply, storage and distribution system operated by Angora Water Co. inunediately prior to the date on which all of the outstanding shares of the Angora Water Co. were acquired by the District pursuant to the Angora Purchase Agreement. Expansions, additions and improvements to such system after the effective date of the Angora Purchase Agreement shall not be considered part of the Angora Water System unless the same constitutes a repair or replacement made in the course of regularly scheduled repair and maintenance work or an ongoing capital improvement program paid for solely with Angora Revenues. "Authorized Investments" means any of the following. but only to the extent that the same are acquired at Fair Market Value, which at the time of investment are legal investments under the laws of the State of California and under the District's investment policy for the moneys proposed to be invested therein: (a) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of the Treasury of the United States of America; (b) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America. including: (i) Export- Import Bank; (ii) Farm Credit System Financial Assistance Corporation, (ill) Farmers Home Administration; (iv) General Services Administration; (v) U.S. Maritime Administration; (vi) Small Business Administration; (vii) Government National Mortgage Association (GNMA); (viii) U.S. Department of Housing & Urban Development (PHA's); (ix) Federal Housing Administration and (x) Federal Financing Bank; A-I (c) senior debt obligations rated" Aaa" by Moody's and "AAA" by S&P Jssued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, senior debt obligations of other government-sponsored agencies approved by AMBAC Indemnity, obligations of the Resolution Funding Corporation (RFFCORP); (d) U.S. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks (including the Trustee and its affiliates) which have a rating on their short term certificates of deposit on the date of purchase of "P-l" by Moody's and "A-I" or "A-l +" by S&P and maturing no more than 360 days after the date of purchase, provided that ratings on holding companies are not considered as the rating of the bank; (e) commercial paper which is rated at the time of purchase in the single highest classification, "P-I" by Moody's and "A-l+" by S&P, and which matures not more than 270 days after the date of purchase; (1) investments in a money market fund rated "AAAm" or "AAAm-G" or better by S&P, including any such money market fund from which the Trustee or its affiliates receive fees for services to such fund; (g) pre-refunded municipal obligations defIned as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (i) which are rated, based upon an irrevocable escrow account or fund (the "escrow"), in the highest rating category of Moody's and S&P or any successors thereto; or (ii) (A) which are fully secured as to principal and interest and redemption premiwn, if any. by an escrow consisting only of cash or obligations described in paragraph (a) above, which escrow may be applied only to the payment of such principal of and interest and redemption premiwn, if any. on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (B) which escrow is sufficient, as verified by a nationally recognized independent certif1ed public accountant, to pay principal of and interest and redemption premiwn, if any. on the bonds or other obligations described in this paragraph on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to above, as appropriate; (h) investment agreements supported by appropriate opinions of counsel, between the Trustee and a tlnancial institution whose long-term debt has a MinimwniRating; (i) Repurchase agreements ("repos") that provide for the transfer of securities from a dealer bank or securities flI11l (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 fInn will repay the cash plus a yield to the Trustee in exchange for the securities at a specified date. Repurchase Agreements must satisfy the following criteria: 1. Repos must be between the Trustee and a dealer bank or securities flI11l. A-2 a. Primary dealers on the Federal Reserve reporting dealer list which fall under the jurisdiction of the SIPC and which are rated A or better by S&P and Moody's, or b. Banks rated" A" or above by S&P and Moody's. 2. The written repo contract must include the following: a. Securities which are acceptable for transfer are: (1) Direct U.S. governments (2) Federal agencies backed by the full faith and credit of the U.S. government (and FNMA and FHLMC) b. The term of the repo may be up to 30 days c. The collateral must be delivered to the Trustee (if the Trustee is not supplying the collateral) or third party acting as agent for the Trustee (if the Trustee is supplying the collateral) before/simultaneous with payment (perfection by possession of certificated securities). d. The Trustee has a perfected fIrst priority security interest in the collateral. e. Collateral is free and clear of third-party liens and in the case of an SIPC broker was not acquired pursuant to a repo or reverse repo. f. Failure to maintain the requisite collateral percentage, after a two day restoration period. will require the Trustee to liquidate collateral. g. Valuation of Collateral (1) The securities must be valued by such dealer bank or securities fIrm weekly. marked-to-market at current market price plus accrued interest (a) The value of collateral must be equal to 104% of the amount of cash transferred by the Trustee to the dealer bank or security fIrm under the repo plus accrued interest If the value of securities held as collateral slips below 104% of the value of the cash transferred by the Trustee, then additional cash and/or acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105%. 3. A legal opinion must be delivered to the Trustee to the effect that the Repo meets guidelines under state law for legal investment of public funds. (j) the Local Agency Investment Fund maintained by the State of California; and (k) Shares in a California common law trust established pursuant to Title 1, Division 7, Chapter 5 of the California Government Code which invests exclusively in A-3 investments permitted by Section 53635 of Title 5, Division 2, Chapter 4 of the California Government Code, as it may be amended, including but not limited to the California Asset Management Program (CAMP). "A vera~e Annual Debt Service" means the total aggregate Debt Service for the entire period during which the Bonds are Outstanding divided by the number of Fiscal Years or portions thereof during which the Bonds are Outstanding. "Bond Counsel" means any attorney at law or firm of attorneys, of nationally recognized standing in matters pertaining to the federal tax exemption of interest on bonds issued by states and political subdivisions, and duly admitted to practice law before the highest court of any state of the United States of America. "Bond Law" means Sections 53570 et seq. and 53580 et seq. of the California Government Code, as in effect on the Closing Date. "Chaflies" means fees, tolls, assessments, rates and charges prescribed by the Board for the services and facilities of the Water System furnished by the District. "Continuini Disclosure Certificate" means that certain Continuing Disclosure Certificate executed by the District and dated the date of original execution and delivery of the Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. "Debt Service" means, during any period of computation, the amount obtained for such period by totaling the following amounts: (a) The principal amount of all Outstanding Serial Bonds payable by their terms in such period; (b) The principal amount of all Outstanding Term Bonds scheduled to be paid or redeemed by operation of mandatory Sinking Fund Installments in such period; and (c) The interest which would be due during such period on the aggregate principal amount of Bonds which would be Outstanding in such period if the Bonds are paid or redeemed as scheduled. "Defea~ance Obliiations" means (a) cash, (b) non-callable direct obligations of the United States of America ("Treasuries"), (c) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated or (d) pre-refunded municipal obligations rated "AM" and "Aaa" by S&P and Moody's, respectively (or any combination thereot). "Escrow A~eement" means the Escrow Deposit and Trust Agreement, dated the Closing Date, by and among the District and the Escrow Bank, with respect to the establishment and administration of the Escrow Fund for the purpose of providing for the payment and prepayment of the Installments due under the 1994 Installment Sale Agreement. "Escrow "Bank" means U.S. Trust Company, N.A, a national banking association organized and existing under and pursuant to the laws of the United States of America. A-4 "Escrow Fund" means the Escrow Fund established and held by the Escrow Bank pursuant to the Escrow Agreement. "Event of Default" means any of the events described as "events of default" in the Indenture. "Federal Securities" means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein: (a) direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treaswy of the United States of America): and (b) obligations of any department, agency or instrumentality of the United States of America the timely payment of principal of and interest on which are unconditionally and fully guaranteed by the United States of America. "Fiscal Year" means the period commencing on July 1 of each year and terminating on the next succeeding June 30. "Gross Revenues" means, for any period of computation, all gross charges received for. and all other gross income and revenues derived by the District from, the ownership or operation of the Water System or otherwise arising from the Water System during such period. including but not limited to (a) all Charges received by the District for use of the Water System. (b) all receipts derived from the investment of funds held by the Chief Financial Officer or the Trustee under the Indenture, (c) transfers from (but exclusive of any transfers to) any stabilization reserve accounts, and (d) all moneys received by the District from other public entities whose inhabitants are served pursuant to contracts with the District. "Improvement" means any addition, extension, improvement, equipment, machinery or other facilities to or for the Water System. "Indenture" means the Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified or amended pursuant to the provisions thereof. "Independent Certified Public Accountant" means any certified public accountant or firm of such accountants appointed and paid by the District, and who, or each of whom- (a) is in fact independent and not under domination of the District: (b) does not have any substantial identity of interest, direct or indirect, with the District; and (c) is not and no member of which is connected with the District as an officer or employee of the District, but who may be regularly retained to make annual or other audits of the books of or reports to the District. "Independent Consultant" means any financial or engineering consultant (including without limitation any Independent Certified Public Accountant) with an established reputation in the field of municipal finance or firm of such consultants appointed and paid by the District, and who, or each of whom- A-5 (a) is in fact independent and not under domination of the District; (b) does not have any substantia1identity of interest, direct or indirect, with the District; and (c) is not and no member of which is connected with the District as an officer or employee of the District, but who may be regularly retained to make annual or other audits of the books of or reports to the District "Information Services" means Financial Information, Inco's "Daily Called Bond Service", 30 Montgomery Street, lOth Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny Information Services' .Called Bond Service., 55 Broad Street, 28th Floor, New York, New York. 10004; Moody's Investors Service .MunIcipal and Government,. 99 Church Street, 8th Floor, New York. New York 10007, Attention: Municipal News Reports; Standard & Poor's Corporation .Called Bond Record: 25 Broadway, 3rd Floor, New York, New York 10004; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other services providing information with respect to called bonds as the District may designate in a Request of the District delivered to the Trustee. "Interest Payment Date. means, with respect to the Series 2001 Bonds, August 1 and February 1 in each year, beginning February 1,2002, and with respect to any Parity Bonds, any date on which interest is due and payable thereon, and continuing so long as any Bonds or Parity Bonds remain Outstanding. "Interest Requirement" means, as of any particular date of calculation, the amount equal to any unpaid interest then due and payable, plus an amount which will on the next succeeding Interest Payment Date be equal to the interest to become due and payable on the Bonds on such next succeeding Interest Payment Date. "Maintenance and Operation Costs" means the reasonable and necessary costs spent or incurred by the District for maintaining and operating the Water System, calculated in accordance with sound accounting principles, including the cost of supply of water, gas and electric energy under contracts or otherwise, the funding of reasonable reserves, and all reasonable and necessary expenses of management and repair and other expenses to maintain and preserve the Water System in good repair and working order, and including all reasonable and necessary administrative costs of the District attributable to the Water System and the Bonds, such as salaries and wages and the necessary contribution to retirement of employees, overhead, insurance, taxes (if any), expenses, compensation and indemnification of the Trustee, and fees of auditors, accountants, attorneys or engineers, and including all other reasonable and necessary costs of the District or charges required to be paid by It to comply with the terms of the Bonds or the Indenture, but excluding depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature. "Maximum Annual Debt Service. means, as of the date of calculation, the maximum amount of Debt Service for the current or any future Fiscal Year. "Net Revenues. means, with respect to the Water System, for any period of computation, the amount of the Gross Revenues received from the Water System during such period, less the amount of Maintenance and Operation Costs of the Water System becoming payable during such period. A-6 "1994 Installment Sale Aereement" means that certain Installment Sale Agreement:. dated as of October 31, 1994, between the District and laSalle National Bank. "1999 Installment Sale Aereement" means that certain Installment Sale Agreement, dated as of May 20, 1999, between the District and LaSalle National Bank, in the principal amount of $4,965,000. "Parity Bonds" means all bonds, notes or other obligations (including without limitation long-term contracts, loans, sub-leases or other legal financing arrangements) of the District payable from and secured by a pledge of and lien upon any of the Net Revenues issued or incurred pursuant to the Indenture. "Parity Bonds Instrument" means the resolution, trust indenture or installment sale agreement adopted, entered into or executed and delivered by the District, and under which Parity Bonds are issued. "Principal Installment" means, with respect to any particular Principal Installment Date, an amount equal to the sum of (i) the aggregate principal amount of Outstanding Serial Bonds payable on such Principal Installment Date as determined by the applicable Parity Bonds Instrument (but not including Sinking Fund Installments) and (il) the aggregate of Sinking Fund Installments with respect to all Outstanding Term Bonds payable on such Principal Installment Date as determined by the applicable Parity Bonds Instrument "Oualified Surety Bond" means any irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank or insurance company and deposited with the Trustee pursuant to the Indenture, provided that all of the following requirements are met at the time of acceptance thereof by the Trustee: (a) the long-term credit rating of such bank or insurance company is · A" or better from each rating agency which then maintains a rating on the Bonds; (b) such letter of credit or surety bond has a term of at least twelve (12) months: (c) such letter of credit or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released pursuant to the Indenture: and (d) the Trustee is authorized pursuant to the terms of such letter of credit or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the Debt Service Fund for the purpose of making payments required pursuant to the Indenture. "Redemption Price" means, with respect to any Bond, the principal amount thereof. plus the applicable premium, if any, payable upon redemption thereof pursuant to the Indenture and the Parity Bonds Instrument pursuant to which the same was issued. "Request of the District" means a request in writing signed by the District Manager. Chief Financial Officer or Assistant District Manager of the District, or by any other officer of the District duly authorized by the Board for that purpose. "Reserve Account" means the Account by that name established and held by the Trustee pursuant to the Indenture. "Reserve Requirement" means, for any particular Series, an amount equal to the lesser of: (i) Maximum Annual Debt Service on such Series; (ii) ten percent (10%) of the principal amount of such Series: or (ill) 125% of Average Annual Debt Service on such Series. .~" means the State of California. A-7 "Water System" means the existing water system of the District. comprising all facilities for the transportation, treatment and distribution of water for the residential, commercial and industrial consumers of water in the District Funds and Accounts Reserve Account On the Closing Date the District shall satisfy the Reserve Requirement by depositing. or causing to be deposited with the Trustee, either: (i) proceeds from the Bonds in an amount equal to the Reserve Requirement; or (il) a Qualified Surety Bond. The Reserve Requirement for an issue of Parity Bonds may be increased to an amount greater than the Reserve Requirement by any Parity Bonds Instrument under which any Parity Bonds are issued. Escrow Fund. There is created in the Escrow Agreement a fund to be known as the "South Tahoe Public Utility District Water Revenue Refunding Bonds Escrow Fund". to be held in trust by the Escrow Bank. The Escrow Bank shall disburse moneys in the Escrow Fund to pay the Installment Payments due under the 1994 Installment Sale Agreement from the Closing Date until April 30, 2003, and to prepay the remaining Installment Purchase Payments due under the 1994 Installment Sale Agreement in full on April 30, 2003. Any amounts remaining in the Escrow Fund after the date of payment in full of the 1994 Installment Sale Agreement shall be transferred by the Escrow Bank to the Trustee, for deposit to the Debt Service Fund. All interest earnings and profits or losses on the investment of amounts in the Escrow Fund shall be deposited in or charged to the Escrow Fund and applied to the purposes thereof. Cost of Issuance Fund. There is created in the Indenture a fund to be known as the "South Tahoe Public Utility District Water Revenue Refunding Bonds, Series 2001 Cost of Issuance Fund" (the "Cost of Issuance Fund"), which shall be held in trust by the Trustee and used solely for the purpose of the payment of Costs of Issuance upon receipt by the Trustee of Requests of the District therefor, on or after the Closing Date. Any funds remaining in the Cost of Issuance Fund on February 1, 2002, shall be transferred by the Trustee to the Debt Service Fund. Issuance of Parity Bonds. In addition to the Series 2001 Bonds, the District may, by Parity Bonds Instrument. issue or incur other loans, advances or indebtedness payable from Net Revenues, to provide fmancing for the Water System, in such principal amount as shall be determined by the District The District may issue or incur any such Parity Bonds, subject to the following specific conditions, which are conditions precedent to the issuance and delivery of such Parity Bonds: (a) The District shall be in compliance with all covenants set forth in the Indenture. (b) The Net Revenues of the Water System, calculated on sound accounting principles, as shown by the books of the District for the latest Fiscal Year or any more recent twelve (12) month period selected by the District ending not more than sixty (60) days prior to the adoption of the Parity Bonds Instrument pursuant to which such Parity Bonds are issued, as shown by the books of the District. plus, at the option of the District. any or all of the items hereinafter in this paragraph designated (i), and (il). shall at least equal One Hundred Twenty percent (120%) of Maximum Annual Debt Service, with Maximum Annual Debt Service calculated on all Bonds to be Outstanding A-8 immediately subsequent to the issuance of such Parity Bonds which have a lien on Net Revenues of the Water System. The items any or all of which may be added to such Net Revenues for the purpose of issuing or incurring Parity Bonds under the Indenture are the following: (i) An allowance for Net Revenues from any additions to or improvements or extensions of the System to be made with the proceeds of such Parity Bonds, and also for Net Revenues from any such additions, improvements or extensions which have been made from moneys from any source but in any case which, during all or any part of such Fiscal Year or such twelve (12) month period, were not in service, all in an amount equal to ninety percent (90%) of the estimated additional average annual Net Revenues to be derived from such . additions, improvements and extensions for the first thirty-six (36) month period in which each addition, improvement or extension is respectively to be in operation, all as shown in the written report of an Independent Consultant engaged by the District; and (ii) An allowance for earnings arising from any increase in the Charges which has become effective prior to the incurring of such additional indebtedness but which, during all or any part of such Fiscal Year or such twelve (12) month period, was not in effect, in an amount equal to the amount by which the Net Revenues would have been increased if such increase in Charges had been in effect during the whole of such Fiscal Year or such twelve (12) month period, all as shown in the written report of an Independent Consultant engaged by the District. (c) The Parity Bonds Instrument providing for the issuance of such Parity Bonds under the Indenture shall provide that (i) The proceeds of such Parity Bonds shall be applied to the acquisition, construction, improvement, fmancing or refmancing of additional facilities, improvements or extensions of existing facilities within the Water System, or otherwise for facilities, improvements or property which the District determines are of benefit to the Water System, or for the purpose of refunding any Bonds in whole or in part, including all costs (including costs of issuing such Parity Bonds and including capitalized interest on such Parity Bonds during any period which the District deems necessary or advisable) relating thereto; (ii) Interest on such Parity Bonds shall be payable on an Interest Payment Date; (ill) The principal of such Parity Bonds shall be payable on August 1 in any year in which principal is payable; and (iv) Money or a Qualified Surety Bond as authorized by the Indenture shall be deposited in a reserve account for such Parity Bonds from the proceeds of the sale of such Parity Bonds or otherwise equal to the Reserve Requirement. State Loans. The District may borrow money from the State to fmance improvements to the Water System, without complying with the provisions of paragraphs (c) (ii), (ill) or (Iv) above, relating to the issuance of Parity Bonds, and the obligation of the District to make payments to the State under the loan agreement memorializing said loan (the "State Loan") may be treated as Parity Bonds for purposes of the Indenture; provided that the District shall not A-9 make a payment on such State Loan (except as hereinafter expressly provided) to the extent it would have the effect of causing the District to fail to make a timely payment on the Bonds. In the event the District's Water Enterprise Fund does not contain sufficient funds to make the full amount of payments on the Bonds and such State Loan, the District shall make payments on the Bonds and such State Loan on a pro rata basis. Subordinate Bonds. Nothing in the Indenture shall prohibit or impair the authority of the District to issue bonds or other obligations secured by a lien on Gross Revenu~ or Net Revenues which is subordinate to the lien established under the Indenture, upon such terms and in such principal amounts as the District may determine; provided, that the District may issue or incur any such Subordinate Bonds, subject to the following specific conditions. which are conditions precedent to the issuance and delivery of such Subordinate Bonds: (a) The District shall be in compliance with all covenants set forth in the Indenture. (b) The Net Revenues of the Water System, calculated on sound accounting principles. as shown by the books of the District for the latest Fiscal Year or any more recent twelve (12) month period selected by the District ending not more than sixty (60) days prior to the adoption of the Subordinate Bonds Instrument pursuant to which such Subordinate Bonds are issued, as shown by the books of the District, plus. at the option of the District, any or all of the items hereinafter in this paragraph designated (i) and (ii). shall at least equal One Hundred percent (100%) of Maximum Annual Debt Service. with Maximum Annual Debt Service calculated on all Bonds to be Outstanding immediately subsequent to the issuance of such Subordinate Bonds which have a lien on Net Revenues of the Water System. The items any or all of which may be added to such Net Revenues for the purpose of issuing or incurring Subordinate Bonds under the Indenture are the following: (i) An allowance for Net Revenues from any additions to or improvements or extensions of the Water System to be made with the proceeds of such Subordinate Bonds, and also for Net Revenues from any such additions. improvements or extensions which have been made from moneys from any source but in any case which. during all or any part of such Fiscal Year or such twelve (12) month period, were not in service, all in an amount equal to ninety percent (90%) of the estimated additional average annual Net Revenues to be derived from such additions, improvements and extensions for the fIrst thirty-six (36) month period in which each addition, improvement or extension is respectively to be in operation, all as shown in the written report of an Independent Consultant engaged by the District; and (ii) An allowance for earnings arising from any increase in the Charges which has become effective prior to the incurring of such additional indebtedness but which, during all or any part of such Fiscal Year or such twelve (12) month period. was not in effect, in an amount equal to the amount by which the Net Revenues would have been increased if such increase in Charges had been in effect during the whole of such Fiscal Year or such twelve (12) month period, all as shown in the written report of an Independent Consultant engaged by the District (c) The Subordinate Bonds Instrument providing for the issuance of such Subordinate Bonds under the Indenture shall provide that A-I0 (i) The proceeds of such Subordinate Bonds shall be applied to the acquisition, construction, improvement, financing or refinancing of additional facilities, improvements or extensions of existing facilities within the Water System, or otherwise for facilities, improvements or property which the District determines are of benefit to the Water System, or for the purpose of refunding any Bonds in whole or in part, including all costs (including costs of issuing such Subordinate Bonds and including capitalized interest on such Subordinate Bonds during any period which the District deems necessary or advisable) relating thereto; (ii) Interest on such Subordinate Bonds shall be payable on an Interest Payment Date; and (ill) The principal of such Subordinate Bonds shall be payable on August 1 in any year in which principal is payable. Pled~e or Net Revenues: Water Enterprise Fund (a) The District has transferred, placed a charge upon, assigned and set over to the Trustee, for the benefit of the Owners, that portion of the Net Revenues which is necessary to pay the principal or Redemption Price of and interest on the Bonds in any Fiscal Year. together with all moneys on deposit in the Debt Service Fund, and such portion of the Net Revenues has been irrevocably pledged to the punctual payment of the principal or Redemption Price of and interest on the Bonds, excepting only the Angora Revenues, with respect to which such pledge shall be subordinate to the pledge of the Angora Revenues to the Angora Purchase Payments. The Net Revenues shall not be used for any other purpose while any of the Bonds remain Outstanding, except that out of Net Revenues there may be apportioned and paid such sums for such purposes, as are expressly permitted by the Indenture. Said pledge shall constitute a first, direct and exclusive charge and lien on the Net Revenues (other than the Angora Revenues, as to which such lien shall be subordinate to the pledge of the Angora Revenues to the Angora Purchase Payments). for the payment of the principal or Redemption Price of and interest on the Bonds in accordance with the terms thereof. (b) The Net Revenues constitute a trust fund for the security and payment of the principal or Redemption Price of and interest on the Bonds. The general fund of the District is not liable and the credit or taxing power of the District is not pledged for the payment of the principal or Redemption Price of and interest on the Bonds. The Owner of the Bonds shall not compel the exercise of the taxing power by the District or the forfeiture of its property. The principal or Redemption Price of and interest on the Bonds are not a debt of the District, nor a legal or equitable pledge, charge, lien or encumbrance, upon any of its property, or upon any of its income, receipts, or revenues except the Net Revenues of the Water System. Receipt and Deposit of Revenues. The District covenants and agrees that all Gross Revenues, when and as received, will be received and held by the District in trust under the Indenture and will be deposited by the District in the Water Enterprise Fund (which has heretofore been created and now exists in the District Treasury) and will be accounted for through and held in trust in the Water Enterprise Fund, and the District shall only have such beneficial right or interest in any of such money as in the Indenture provided. All such Gross Revenues shall be transferred. disbursed. allocated and applied solely to the uses and purposes provided in the Indenture, and shall be accounted for separately and apart from all other money, funds. accounts or other resources of the District A-ll Establishment of Funds and Accounts and Allocation of Revenues Thereto. The Debt Service Fund, as a special Fund, and the Redemption Account and the Reserve Account, as special Accounts therein, have been created under the Indenture. The Debt Service Fund and the Redemption Account and the Reserve Account therein shall be held and maintained by the Trustee. All Gross Revenues shall be held in trust by the Chief Financial Officer in the Water Enterprise Fund and shall be applied, transferred, used and withdrawn only for the purposes permitted in the Indenture. (2) Operatini Costs. The Chief Financial Officer shall fIrst pay from the moneys in the Water Enterprise Fund the budgeted Maintenance and Operation Costs as such Costs become due and payable. (3) Debt Service Fund. On or before the second Business Day prior to each Interest Payment Date, beginning January 30, 2002, the Chief Financial Officer shall transfer from the Water Enterprise Fund to the Trustee for deposit in the Debt Service Fund (i) an amount equal to the aggregate amount of interest to become due and payable on all Outstanding Bonds on the next succeeding Interest Payment Date, plus (ii) on or before the second Business Day prior to each Principal Installment Date, beginning July 30, 2002 an amount equal to the aggregate amount of Principal Installments (including any Sinking Fund Installments) becoming due and payable on all Outstanding Bonds on the next succeeding Principal Installment Date. All interest earnings and profIts or losses on the investment of amounts in the Debt Service Fund shall be deposited in or charged to the Debt Service Fund and applied to the purposes thereof. No transfer and deposit need be made into the Debt Service Fund if the amount contained therein. taking into account investment earnings and profIts, is at least equal to the Principal Installments or Principal Installments and interest to become due on the next Interest Payment Date or Principal Installment Date upon all Outstanding Bonds. (4) Reserve Account. After making the payments, allocations and transfers provided for in subsections (2) and (3) above, if the balance in the Reserve Account is less than the Reserve Requirement, the defIciency shall be restored by transfers from the frrst moneys which become available in the Water Enterprise Fund to the Trustee for deposit in the Reserve Account, such transfers to be made no later than the times provided in the Indenture. (5) Sut:Plus. As long as all of the foregoing payments. allocations and transfers are made at the times and in the manner set forth above in subsections (2) to (4), inclusive, any moneys remaining in the Water Enterprise Fund may at any time be treated as surplus and applied as provided in the Indenture. A9olication of Debt Service Fund. (a) The Trustee shall withdraw from the Debt Service Fund, prior to each Interest Payment Date, an amount equal to the Interest Requirement payable on such Interest Payment Date. and shall cause the same to be applied to the payment of said interest when due and is hereby authorized to apply the same to the payment of such interest by check or draft (or by wire transfer, as the case may be), as provided in the Indenture. (b) The Trustee shall withdraw from the Debt Service Fund, prior to each Principal Installment Date, an amount equal to the principal amount of the Outstanding Serial Bonds. if any, maturing on said Principal Installment Date and any Sinking Fund Installments due and payable on said Principal Installment Date, and shall cause the same to be applied to the A-12 payment of the principal of said Bonds when due and is hereby authorized to apply the same to such payment upon presentation and surrender of the Bonds as they become due and payable, as provided in the Indenture. (c) All withdrawals and transfers under the provisions of subsection (a) or subsection (b) above shall be made not earlier than one (1) day prior to the Interest Payment Date or Principal Installment. Date to which they relate, and the amount so withdrawn or transferred shall, for the purposes of the Indenture, be deemed to remain in and be part of the appropriate Account untll such Interest Payment Date or Principal Installment Date. Awlication of Reserve Account. (a) In General. If at any time there shall not be sufficient amounts in the Debt Service Fund to make payment of Principal Installments or Redemption Price of or interest on the Bonds, the Trustee shall provide notice of such fact to the DJstrlct (by telephone, confIrmed in writing, provided that no such notice shall be required to be given with respect to a withdrawal of amounts in excess of the Reserve Requirement or of withdrawals in connection with the refunding of the Bonds in whole or in part) and withdraw from the Reserve Account. pursuant to a draw on the Reserve Account Surety pursuant to its terms, and pay into the appropriate Fund or Account the amount of the deficiency. Any amounts in the Reserve Account in excess of the Reserve Requirement (whether derived from interest or gain on investments or otherwise) shall, on August 2 of each year, prior to completion of the 2001 Project, be transferred to the 2001 Project Fund, and thereafter. shall be paid by the Trustee to the Chief Financial Officer for deposit in the Water Enterprise Fund. (b) OualifIed Surety Bond. Any Qualified Surety Bond shall provide that the Trustee is entitled to draw amounts thereunder when required by the provisions of the Indenture to make transfers from the Reserve Account to the Debt Service Fund in the event of a defIciency in any such account. provided that. in any such event. the Trustee shall fIrst apply to any such deficiency the amount of cash (including cash represented by investments) then on deposit in the Reserve Account. (c) Cash to the District. To the extent that the Reserve Requirement has been satisfIed by delivery of a QualifIed Surety Bond under the Indenture (other than the Reserve Account Surety). or any cash or Authorized Investments on deposit in the Reserve Account shall be paid by the Trustee to the District Application of Redemption Account. On or before the date which is at least forty-fIve (45) days prior to any Interest Payment Date on which Series 2001 Bonds are subject to redemption pursuant to the Indenture or on which any Parity Bonds are subject to optional redemption pursuant to the provisions of the Parity Bonds Instrument authorizing such Parity Bonds, the Chief Financial Officer shall transfer from the Water Enterprise Fund to the Trustee for deposit in the Redemption Account an amount at least equal to the Redemption Price (excluding accrued interest, which is payable from the Debt Service Fund) of such Bonds to be redeemed on such Interest Payment Date. In addition, the Chief Financial Officer shall transfer to the Trustee for deposit in the Redemption Account all amounts required to redeem any Series 2001 Bonds which are subject to redemption pursuant to the Indenture and any Parity Bonds which are subject to redemption pursuant to any similar provision of the Parity Bonds Instrument authorizing such Parity Bonds, when and as such amounts become available. Amounts in the Redemption Account shall be applied ~y the Trustee solely for the purpose of paying the Redemption Price of Series 2001 Bonds to be redeemed pursuant to the Indenture and to pay the purchase price in the same manner and subject to the same limitation as purchasers of Bonds under the Indenture or the Redemption Price of any Parity Bonds to be A-13 redeemed pursuant to similar provisions of the Parity Bonds Instrument authorizing such Parity Bonds. If after all of the Bonds have been paid or deemed to have been paid. there are moneys remaining in the Redemption Account. such moneys shall be transferred by the Trustee to the Chief Financial Officer for deposit in the Water Enterprise Fund. SUWlus. Moneys remaining in the Water Enterprise Fund after making the payments, allocations and transfers provided for in the Indenture may be applied by the District for any lawful purpose. Investments. All moneys in the Water Enterprise Fund may be invested by the District from time to time in any investments authorized for the investment of public moneys under the laws of the State of California. consistent with the District's Investment Policy. All moneys in the Debt Service Fund and Cost of Issuance Fund shall be invested by the Trustee solely in Authorized Investments. as directed pursuant to a Request of the District In the absence of any such Request of the District. the Trustee may (but shall not be required to) invest any such moneys in money market funds whose investments are restricted to Federal Securities, selected by the Trustee, which by their terms mature prior to the date on which such moneys are required to be paid out under the Indenture. Obligations purchased as an investment of moneys in any Fund or Account shall be deemed to be part of such Fund or Account. and all interest or gain derived from the investment of amounts in any of the Funds or Accounts established under the Indenture shall be deposited in the Fund or Account from which such hlvestment was made; and shall be accounted for and applied as provided in the Indenture (with respect to the Debt Service Fund) and the Indenture (with respect to the Reserve Account). For purposes of acquiring any investments under the Indenture, the Trustee may commingle funds held by it under the Indenture with the written approval of the District The Trustee may act as principal or agent in the acquisition of any investment. The Trustee shall incur no liability for losses arising from any investments made pursuant to this Section. Covenants of the District: Special Tax Covenants Punctual Payment: Compliance With Documents. The District shall punctually payor cause to be paid the interest and principal to become due with respect to all of the Bonds in strict conformity with the terms of the Bonds and of the Indenture, and will faithfully observe and perform all of the conditions, covenants and requirements of the Indenture and all Parity Bonds Instruments. A~ainst Encumbrances. The District will not mortgage or otherwise encumber, pledge or place any charge upon the Water System or any part thereof, or upon any of the Net Revenues, except as provided in the Indenture; provided. however. that nothing in the Indenture shall be construed to prevent the District from entering into long-term contracts to fmance supplies of water, gas, or electric energy, payments under which are accounted for as Maintenance and Operation Costs. Dischar~e of Claims. The District covenants that in order to fully preserve and protect the priority and security of the Bonds the District shall pay from the Net Revenues and discharge all lawful clai."lls for labor. materials and supplies furnished for or in connection with the Water System which. if unpaid, may become a lien or charge upon the Net Revenues prior or superior to the lien of the Bonds and impair the security of the Bonds. The District shall also pay from the Net Revenues all taxes and assessments or other governmental charges lawfully levied or assessed upon or in respect of the Water System or upon any part thereof or upon any of the Net Revenues therefrom. A-14 Acouisition. Construction or Flnandn~ of any Profect and Improvements to the Water System. The District will acquire, construct, or finance any Project, as defined in a Parity Bonds Instrument, and hnprovement to the Water System to be financed with the proceeds of any Parity Bonds with all practicable cllspatch, and such Project and Improvement will be made in an expeditious manner and in conformity with laws so as to complete the same as soon as possible. Maintenance and Operation of Water System In Efficient and Economical Manner. The District covenants and agrees to maintain and operate the Water System in an efficient and economical manner and to operate, maintain and preserve the Water System in good repair and working order. A~ainst Sale. Eminent Domain. (a) The District will not sell, lease or otherwise dispose of the Water System or any part thereof essential to the proper operation of the Water System or to the maintenance of the Net Revenues except as herein expressly permitted. The District will not enter into any lease or agreement which impairs the operation of the Water System or any part thereof necessary to secure adequate Net Revenues for the payment of the interest on and principal or Redemption Price, if any, on the Bonds, or which would otherwise impair the rights of the Holders with respect to the Net Revenues or the operation of the Water System. Any real or personal property which has become non-operative or which is not needed for the efficient and proper operation of the Water System, or any material or equipment which has worn out, may be disposed of as the District determines. (b) If all or any part of the Water System shall be taken by eminent domain proceedings, the Net Proceeds realized by the District therefrom shall be deposited by the District with the Trustee in a special fund in trust and applied by the District to the cost of acquiring or constructing or fmancing hnprovements to the Water System if (A) the District fIrst secures and fIles with the Trustee a Certificate of the District showing (i) the estimated loss in annual Net Revenues, if any. suffered, or to be suffered, by the District by reason of such eminent domain proceedings, (il) a general description of the Improvements to the Water System then proposed to be acquired or constructed by the District from such Net Proceeds, and (iii) an estimate of the additional Net Revenues to be derived from such Improvements; and (B) the Trustee. on the basis of such Certificate of the District, determines that such additional Net Revenues will sufficiently offset the loss of Net Revenues, resulting from such eminent domain proceedings so that the ability of the District to meet its obligations under the Indenture will not be substantially impaired, which determination shall be fmal and conclusive. If the foregoing conditions are met, the District shall then promptly proceed with the acquisition or construction or financing of such Improvements substantially in accordance with such Certificate of the District and payments therefor shall be made by the Trustee from such Net Proceeds and from other moneys of the District lawfully available therefor, and any balance of such Net Proceeds not required by the District for the purposes aforesaid shall be deposited in the Water Enterprise Fund. If the foregoing conditions are not met, then such Net Proceeds shall be applied by the Trustee pro rata to the redemption or purchase of the Bonds of each Series then Outstanding in the proportion which the principal amount of the Outstanding Bonds of each Series bears to the aggregate principal amount of all Bonds then Outstanding. If the Trustee is unable to purchase or redeem Bonds in amounts sufficient to exhaust the available moneys allocable to each such Series, the remainder of such moneys for each such Series shall be held in trust by the Trustee and applied to the payment of the Bonds of such Series as the same become due by their terms, and, pending such application, such remaining moneys may be invested by the Trustee in the manner provided in the Indenture for the investment of moneys in the Reserve Account. A-I5 Insurance. The District covenants that it shall at all times maintain such insurance on the Water System as is customarily maintained with respect to works and properties of like character against accident to, loss of or damage to such works or properties. If any useful part of the Water System shall be damaged or destroyed, such part shall be restored to use. The Net Proceeds of insurance against accident to or destruction of the physical Water System shall be used for repairing or rebuilding the damaged or destroyed portions of the Water System, (to the extent that such repair or rebuilding is determined by the District to be useful or of continuing value to the Water System) and to the extent not so applied, shall be applied to the redemption of the Outstanding Bonds issued on a pro rata basis, and for such purpose shall be paid into the Redemption Account Any such insurance shall be in the form of policies or contracts for insurance with - insurers of good standing and shall be payable to the District, or may be in the form of self- insurance by the District The District shall establish such fund or funds or reserves as it determines, in its sole judgement, are necessary to provide for its share of any such self- insurance. Records and Accounts. The District covenants that it shall keep proper books of record and accounts of the Water System, separate from all other records and accounts, in which complete and correct entries shall be made of all transactions relating to the Water System. Said books shall, upon reasonable request, be subject to the inspection of the Owners of not less than ten percent (10%) of the Outstanding Bonds or their representatives authorized in writing. The District covenants that it will cause the books and accounts of the Water System to be audited annually by an Independent Certified Public Accountant and will make available for inspection by the Bond Owners at the office of the Trustee in San Francisco, California, upon reasonable request. a copy of the report of such Independent Certified Public Accountant. The District covenants that it will cause to be prepared annually, not more than one hundred eighty (180) days after the close of each Fiscal Year, as a part of its regular annual fmandal report. a summary statement showing the amount of Gross Revenues and the amount of all other funds collected which are required to be pledged or othexwise made available as security for payment of principal of and interest on the Bonds, the disbursements from the Gross Revenues and other funds in reasonable detail, and a general statement of the fmancial and physical condition of the Water System. The District shall furnish a copy of the statement to the Trustee. and upon written request, to any Bond Owner. Protection of Security and Rilihts of Owners. The District will preserve and protect the security of the Bonds and the rights of the Owners, and will warrant and defend their rights against all claims and demands of all persons. From and after the sale and delivery of any Parity Bonds by the District. such Parity Bonds shall be incontestable by the District. A~ainst Competitive Facilities. The District will not acquire, construct, operate or maintain the Water System or utility within the service area of the District that would be competitive with the Water System. PaV1'T'e:nt of Taxes. Etc. The District will pay and discharge all taxes, assessments and otber governmental charges which may hereafter be lawfully imposed upon the Water System or any part thereof or upon any Revenues when the same shall become due. The District will duly observe and conform with all valid requirements of any governmental authority relative to the Water System or any part thereof, and will comply with all requirements with respect to any state or federal grants received to assist in paying for the costs of the acquisition, construction or fmancing of any Improvements to the Water System. A-16 Rates and Charies. (a) The District shall fix, prescribe, revise and collect Charges for the Water System during each Fiscal Year which are at least sufficient. after making allowances for contingencies and error in the estimates, to pay the following amounts in the following order: (i) all Maintenance and Operation Costs of the Water System estimated by the District to become due and payable in such Fiscal Year, (ii) the Debt Service on the Bonds; (Iii) all other payments required for compliance with this Indenture and the instruments pursuant to which any Parity Bonds relating to the Water System shall have been issued; and (iv) all payments required to meet any other obligations of the District which are charges, liens, encumbrances upon or payable from the Gross Revenues of the Water System or the Net Revenues of the Water System. (b) In addition, the District shall fIX. prescribe, revise and collect Charges for the Water System during each Fiscal Year which are sufficient to yield Net Revenues of the Water System at least equal to one hundred twenty percent (120%) of the amounts payable under the preceding clause (a) (ii) in such Fiscal Year for Bonds which have a lien on such Net Revenues. No Priority for Additional Obliiations. The District has covenanted that no additional bonds or other obligations shall be issued or incurred having any priority in payment of principal or interest out of the Net Revenues over the Bonds. Nothing in the Indenture shall prohibit or impair the authority of the District to issue bonds or other obligations secured by a lien on Gross Revenues or Net Revenues which is subordinate to the lien established under the Indenture, upon such terms and in such principal amounts as the District may detennine. No Arbitraie. The District shall not take, nor permit nor suffer to be taken any action with respect to the proceeds of any of the Bonds which would cause any of the Bonds to be "arbitrage bonds. within the meaning of the Tax Code. Information Report. The Chief Financial Officer is hereby directed to assure the f1ling of an information report for the Series 2001 Bonds in compliance with Section 149 (e) of the Tax Code. Private Business Use Limitation. Not more than ten percent (10%) of the Net Proceeds of the Series 2001 Bonds shall be used in a manner which would cause the Series 2001 Bonds to become .private activity bonds. under and within the meaning of Section 141 (a) of the Tax Code. Private Loan Limitation. Not more than five percent (5%) of the Net Proceeds of the Series 2001 Bonds shall be used, directly or indirectly, to make or fmance a loan (other than loans constituting Nonpurpose Obligations or assessments) to persons other than state or local government units. Federal Guarantee Prohibition. The District shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause any of the Series 2001 Bonds to be .federally guaranteed" within the meaning of section 149(b) of the Tax Code. A-l1 Further Assurances. The District will adopt, 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 the Indenture, and for the better assuring and confirming unto the Owners of the Bonds the rights and benefits provided in the Indenture. Rebate Requirement. The District shall take any and all actions necessary to assure compliance with section 148(1) of the Tax Code, relating to the rebate of excess investment earnings, if any. to the federal government, to the extent that such section is applicable to the Bonds. Maintenance of Tax-Exemption. The District shall take all actions necessary to assure the e..xclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same e..xtent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the date of issuance of the Bonds. Contimlin2 Disclosure. The District will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Modification and Amendment of the Indenture Amendment by Consent of Bond Owners. The Indenture and the rights and obligations of the District and of the Owners of the Bonds may be modified or amended at any time by a Supplement to the Indenture which shall become binding when the written consent of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding. exclusive of Bonds disqualified as provided in the Indenture. are f1led with the Trustee. No such modification or amendment shall (a) extend the maturity of or reduce the interest rate on any Bond or otherwise alter or impair the obligation of the District to pay the principal. interest or redemption premiums at the time and place and at the rate and in the currency provided therein of any Bond without the express written consent of the Owner of such Bond. (b) reduce the percentage of Bonds required for the written consent to any such amendment or modification, or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee. Amendment Without Consent of Bondholders. The Indenture and the rights and obligations of the District and of the Owners of the Bonds may also be modified or amended at any time by a Supplement to the Indenture, which shall become binding upon execution and delivery. without consent of any Bond Owners. but only to the extent permitted by law and only for anyone or more of the following purposes- (a) to add to the covenants and agreements of the District in the Indenture contained. other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power herein reserved to or conferred upon the District: or (b) to make such provisions for the purpose of curing any ambiguity. or of curing, correcting or supplementing any defective provision contained in the Indenture, or in any other respect whatsoever as the District may deem necessary or desirable, provided under any circumstances that such modifications or amendments shall not adversely affect the interests of the Owners of the Bonds; (c) to provide for the issuance of any Parity Bonds, and to provide the terms and conditions under which such Parity Bonds may be issued, including but not limited to A-IS the establishment of special funds and accounts relating to such Parity Bonds and any other provisions relating solely to such Parity Bonds, subject to and in accordance with the provisions of the Indenture: or (d) to make such additions, deletions or modifications as may be necessary or desirable to assure exemption from federal income taxation of interest on the Bonds. Disqualified Bonds. Bonds owned or held by or for the account of the District (but excluding Bonds held in any employees' retirement fund) shall not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Bonds in this article provided for, and shall not be entitled to consent to, or take any other action in this article provided for. Endorsement or Replacement of Bonds After Amendment. After the effective date of any action taken as hereinabove provided, the District may detennine that the Bonds shall bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his Bond for that purpose at the Trust Office of the Trustee, a suitable notation as to such action shall be made on such Bond. If the District shall so determine, new Bonds so modified as, in the opinion of the District, shall be necessary to conform to such Bond Owners' action shall be prepared and executed, and in that case upon demand of the Owner of any Bond Outstanding at such effective date such new Bonds shall be exchanged at the Trust Office of the Trustee, without cost to each Bond Owner, for Bonds then Outstanding, upon surrender of such Outstanding Bonds. Amendment by Mutual Consent. The provisions of this Article vn shall not prevent any Bond Owner from accepting any amendment as to the particular Bond held by him, provided that due notation thereof is made on such Bond. Events of Default and Remedies of Bond Owners Events of Default and Acceleration of Maturities. The following events shall be Events of Default under the Indenture: (a) Default in the due and punctual payment of the principal of any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by declaration or otherwise: (b) Default in the due and punctual payment of any installment of interest on any Bond when and as such interest installment shall become due and payable: (c) Default by the District in the observance of any of the covenants, agreements or conditions on its part in the Indenture or in any Parity Bonds Instrument or in the Bonds contained, and such default shall have continued for a period of sixty (60) days after the District shall have been given notice in writing of such default by the Trustee; or (d) The fIling by the District of a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law of the United States of America, or if a court of competent jurisdiction shall approve a petition, filed with or without the consent of the District, seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America, or if, under the provisions of any other law for the relief or aid of debtors, any court of A-19 competent jurisdiction shall assume custody or control of the District or of the whole or any substantial part of its property. Upon the occurrence of an Event of Default. the Trustee may, and shall. at the direction of the owners of a majority of the principal amount of the Bonds, by written notice to the District. declare the principal of the Bonds to be immediately due and payable, whereupon that portion of the principal of the Bonds thereby coming due and there interest thereon accrued to tIle date of payment shall, without further action, become and be immediately due and payable, anything in the Indenture or in the Bonds to the contrary notwithstanding. This provision, however, is subject to the condition that if, at any time after the principal of the Bonds shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the District shall deposit with the Trustee a sum sufficient to pay all of the principal of and interest on the Bonds having come due prior to such declaration, with interest on such overdue principal and interest calculated at the rate of interest per annum then borne by the Outstanding Bonds, and the reasonable fees and expenses of the Trustee and those of its attorneys, and any and all other defaults known to the Trustee (other than in the payment of the principal of and interest on the Bonds having come due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been made therefor. then, and in every such case, the Owners of a majority in aggregate principal amount of the Bonds at the time Outstanding may, by written notice to the District and to the Trustee. on behalf of the Owners of all of the Outstanding Bonds. rescind and annul such declaration and its consequences. However. no such rescission and annulment shall extend to or shall affect any subsequent default, or shall impair or exhaust any right or power consequent L'1ereon. Application of Funds Upon Acceleration. All amounts received by the Trustee pursuant to any right given or action taken by the Trustee under the provisions of the Indenture shall be applied by the Trustee in the following order upon presentation of the several Bonds. and the stamping thereon of the amount of the payment if only partially paid. or upon the surrender thereof if fully paid - ~ to the payment of the costs and expenses of the Trustee and of Bond Owners in declaring such Event of Default, including reasonable compensation to their agents, attorneys and counsel. and to the payment of the costs and expenses of the Trustee. if any. in carrying out the provisions of this Article VIII, including reasonable compensation to its agents, attorneys and counsel; and Second. to the payment of the whole amount then owing and unpaid upon the Bonds for interest and principal, with interest on such overdue amounts to the extent permitted by law at the rate of interest then borne by the Outstanding Bonds. and in case such moneys shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds. then to the payment of such interest, principal and interest on overdue amounts without preference or priority among such interest, principal and interest on overdue amounts ratably in proportion to the aggregate of such interest. principal and interest on overdue amounts. Other Remedies: Rilihts of Bond Owners. Upon the occurrence of an Event of Default. the Trustee may pursue any available remedy, in addition to the remedy specified in the Indenture, at law or in equity to enforce the payment of the principal of, premium, if any. and interest on the Outstanding Bonds, and to enforce any rights of the Trustee under or with respect to the Indenture. A-20 If an Event of Default shall have occurred and be continuing and if requested so to do by the Owners of at least twenty-five percent (25%) in aggregate principal amount of Outstanding Bonds and indemnified as provided in the Indenture, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Article vm, as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Bond Owners. No remedy by the terms of the Indenture conferred upon or reserved to the Trustee (or to the Bond Owners) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or to the Bond Owners under the Indenture or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon 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 acquiescence therein; such right or power may be exercised from time to time as often as may be deemed expedient Power of Trustee to Control Proceedines. In the event that the Trustee, upon the happening of an Event of Default. shall have taken any action, by judiclal proceedings or otherwise. pursuant to its duties under the Indenture, whether upon its own discretion or upon the request of the Owners of a majority in principal amount of the Bonds then Outstanding. it shall have full power. in the exercise of its discretion for the best interests of the Owners of the Bonds. 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 a majority in principal amount of the Outstanding Bonds under the Indenture opposing such discontinuance. withdrawal. compromise. settlement or other disposal of such litigation. Any suit, action or proceeding which any Owner of Bonds shall have the right to bring to enforce any right or remedy under the Indenture may be brought by the Trustee for the equal benefit and protection of all Owners of Bonds similarly situated and the Trustee is hereby appointed (and the successive respective Owners of the Bonds issued under the Indenture, by taking and holding the same. shall be conclusively deemed so to have appointed it) the true and lawful attorney-in-fact of the respective Owners of the Bonds for the purpose of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the respective Owners of the Bonds as a class or classes. as may be necessary or advisable in the opinion of the Trustee as such attorney-in-fact. Appointment of Receivers. Upon the occurrence of an Event of Default under the Indenture, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Bond Owners under the Indenture, the Trustee shall be entitled, as a matter of right. to the appointment of a receiver or receivers of the Net Revenues and other amounts pledged under the Indenture. pending such proceedings, with such powers as the court making such appointment shall confer. Non-Waiver. Nothing in the Indenture, or in the Bonds. shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respective Owners of the Bonds at the respective dates of maturity. as herein provided, out of the Net Revenues and other moneys herein pledged for such payment A waiver of any default or breach of duty or contract by the Trustee or any Bond Owners shall not affect any subsequent default or breach of duty or contract. or impair any A-21 rights or remedies on any such subsequent default or breach. No delay or omission of the Trustee or any Owner of any of the Bonds 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 of any such default or an acquiescence therein; and every power and remedy conferred upon the Trustee or Bond Owners by the Bond Law or by this Article vm may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Bond Owners. as the case may be. If a suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Bond Owners, the District and the Bond Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. Riihts and Remedies of Bond Owners. No Owner of any Bond issued under the Indenture shall have the right to institute any suit, action or proceeding at law or in equity. for any remedy under or upon the Indenture, unless (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all the Bonds 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 indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by. and said tender of indemnity shall have been made to. the Trustee. Such notification, request. tender of indemnity and refusal or omission are hereby declared, in every case. to be conditions precedent to the exercise by any Owner of Bonds of any remedy under the Indenture; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatever by his or their action to enforce any right under the Indenture. except in the manner herein provided. and that all proceedings at law or in equity to enforce any provision of the Indenture shall be instituted. had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Bonds. The right of any Owner of any Bond to receive payment of the principal of and interest and premium (if any) on such Bond as herein provided or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the written consent of such Owner. notwithstanding the foregoing provisions or any other provision of the Indenture. Termination of Proceedinis. In case the Trustee shall have proceeded to enforce any right under the Indenture by the appointment of a receiver or otherwise. and such proceedings shall have been discontinued or abandoned for any reason, or shall have been detennined adversely. then and in every such case, the District, the Trustee and the Bond Owners shall be restored. to their former positions and rights under the Indenture. respectively, with regard to the property subject to the Indenture. and all rights. remedies and powers of the Trustee shall continue as if no such proceedings had been taken. Miscellaneous Limited Liability of District. Notwithstanding anything in the Indenture contained. the District shall not be required to advance any moneys derived from any source of income other than the Net Revenues for the payment of the principal of or interest on the Bonds. or any premiums upon the redemption thereof. or for the performance of any covenants herein contained (except to the extent any such covenants are expressly payable under the Indenture A-22 from the Gross Revenues). The District may, however, advance funds for any such purpose. provided that such funds are derived from a source legally available for such purpose and may be used by the District for such purpose without incurring indebtedness. Benefits of Indenture Limited to Parties. Nothing in the Indenture. expressed or implied, is intended to give to any person other than the District, the Trustee and the Owners of the Bonds, any right, remedy or claim under or by reason of the Indenture. Any covenants, stipulations. promises or agreements in the Indenture contained by and on behalf of the District shall be for the sole and exclusive benefit of the Trustee and the Owners of the Bonds. Discharee of Indenture. If the District shall pay and discharge any or all of the Outstanding Bonds in anyone or more of the following ways: (a) by well and truly paying or causing to be paid the principal of and interest and premium (if any) on such Bonds, as and when the same become due and payable; (b) by depositing with the Trustee. in trust, at or before maturity. money which. together with the available amounts then on deposit in the funds and accounts established pursuant to the Indenture, is fully sufficient to pay such Bonds. including all principal. interest and redemption premiums; or (c) by depositing with a qualified escrow holder, in trust, Defeasance Obligations in such amount as the District (verified by an Independent Certified Public Accountant) shall determine will, together with the interest to accrue thereon and available moneys then on deposit in the Funds and Accounts established pursuant to the Indenture, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums. if any) at or before their respective maturity dates; and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been mailed pursuant to the Indenture or provision satisfactory to the Trustee shall have been made for the mailing of such notice. then. at the election of the District. and notwithstanding that any of such Bonds shall not have been surrendered for payment, the pledge of the Net Revenues and other funds provided for in the Indenture with respect to such Bonds, and all other pecuniary obligations of the District under the Indenture with respect to all such Bonds. shall cease and terminate, except only the obligation of the District to payor cause to be paid to the Owners of such Bonds not so surrendered and paid all sums due thereon from amounts set aside for such purpose as aforesaid, and all expenses and costs of the Trustee. Notice of such election shall be f1led with the Trustee. Any funds thereafter held by the Trustee. which are not required for said purposes, shall be paid over to the District Refunding bonds may be issued at any time without regard to whether an Event of Default exists. To accomplish defeasance the District shall cause to be delivered (i) a report of an Independent Certified Public Accountant verifying the sufficiency of the escrow established to pay the Bonds in full on the maturity or earlier redemption date ("Verification"), (ii) an escrow deposit agreement, and (ill) an opinion of nationally recognized bond counsel to the effect that the Bonds are no longer "Outstanding" under the Indenture; each Verification and defeasance opinion shall be acceptable in form and substance, and addressed, to the District and the Trustee. A-23 APPENDIX B AREA STATISTICAL INFORMATION South Tahoe Public Utility District is located about 100 miles east of Sacramento in EI Dorado County. It is located on U.S. Highway 50 at the southern end of Lake Tahoe at the California-Nevada border. A five-member Board of Directors governs the District. The directors are elected at large for overlapping four-year terms. The Board selects the president from its members, gen- erally for a one-year term. The Board appoints the general manager, who is responsible for the management of the District staff. Recreation and tourism are leading industries in the Lake Tahoe basin. The area offers a diverse array of recreational activities including skiing, gaming, hiking, biking, and boat- ing. Lake Tahoe receives about two million visitors annually. Population Table B-1 shows California Department of Finance population estimates for the City of South Lake Tahoe and EI Dorado County. The population of the City of South Lake Tahoe is estimated at 23,950 as of January 1, 2001. This represents an increase of about 11% in the City's population since 1990. The City of South Lake Tahoe comprises about 15% of the total population ofEI Dorado County. EI Dorado County's population as of Jan- uary 1, 2001 is 159,700. The County's population has increased about 27% since 1990. Table 8-1 Jan 1 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 . Population City of South Lake Tahoe 21,586 21,750 22,100 22,300 22,550 23,000 23,050 22,650 23,000 23,050 23,900 23,950 EJ Dorado County 125,995 130,000 134,100 137,900 140,900 142,900 144,500 144,000 148,800 151,300 157,200 159,700 Source: California Department of Finance. B-1 Income Table B-2 lists median household effective buying income (EBI) for EI Dorado County, the State of California, and the United States for the period 1995 through 1999. Data shown on the tabl,e was taken from Sales & Marketing Management's "Survey of Buying Power". In 1999, the latest full year for which data is available, EI Dorado County's EBI was $41,653, over 5% greater than median household EBI for the State of California. Table B-2 . Median Effective Buying Income EI Dorado County State of California United States 1995 1996 $ 35,202 $ 35,831 34,533 35,216 32,238 33,482 1997 $ 37,414 36,483 34,618 1998 $ 38,945 37,091 35,377 1999 $ 41,653 39,492 37,233 Source: Sales & Marketing Management, "Survey of Buying Power." Taxable Sales Table B-3 summarizes taxable sales for the City of South Lake Tahoe and EI Dorado County as computed by the California State Board of Equalization for the years 1995 through 1999. Taxable sales in the City of South Lake Tahoe increased by an average of 4% annually over the period shown. From 1998 to 1999, the City's taxable sales increased by $24.4 million, or about 9%. The City's taxable sales accounted for about 24% of total taxable sales in EI Dorado County in 1999. Taxable sales in EI Dorado County have increased by an average of about 7% annually from 1995 to 1999. Taxable sales in the County rose by 15% between 1998 to 1999. Table B-3 . Taxable Sales ($000) 1995 1996 1997 1998 1999 City of South Lake Tahoe Retail stores $ 205,870 $ 209,568 $ 212,961 $ 216,604 $ 237,361 All other outlets 37.721 39 .633 41.192 40.988 44.690 Total 243,591 249,201 254,153 257,592 282,051 EI Dorado County Retail stores $ 654,015 $ 679,603 $ 701,638 $ 711,083 $ 803,857 All other outlets 270.747 299.779 309.584 330.571 389.820 Total 924,762 979,382 1,011,222 1,041,654 1,193,677 Source: State Board of Equalization. Employment Table B-4 shows a five-year history ofEI Dorado County's labor force employment and unemployment, and a breakdown of employment by sector. Based on the data provided by the California State Employment Development Department, the unemployment rate in EI Dorado County was 3.9 % in 1999, 1.3% lower than the comparable rate in California. From 1995 to 1999, employment in the County increased by about 13.5%. Services accounted for almost one-third of County employment by place of work in 1999. Major Employers The ten largest employers in EI Dorado County are listed on Table B-5. Many residents of the City of South Lake Tahoe are employed by local ski resorts and casinos. B-2 Table B-4 ~ El Dorado County Employment and Unemployment 1995 1996 1997 1998 1999 Labor Force Civilian labor force 72,700 74,200 76,300 77 ,400 79,900 Employment 67,700 69,600 72,100 73,600 76,800 Une~loyment 5,000 4,600 4,100 3,800 3,100 Une~loyment rate 6.9% 6.2% 5.4% 5.0% 3.9% Califomia unemployment rate 7.8% 7.2% 6.3% 5.9% 5.2% Employment by Place of Work Total agriculture 300 400 400 300 300 Construction and mining 2,300 2,600 2,100 3,100 3,500 Manufacturing 2,100 2,200 1,300 1,300 1,500 Transportation & public utilities 1,100 1,100 1,200 1,300 1,300 Wholesale trade 1,000 900 900 1,000 1,000 Retail trade 8,300 8,300 8,400 8,600 9,100 Finance, insurance & real estate 1,500 1,400 1,400 1,600 1,700 Services 8,900 9,500 10,400 12,600 13,600 Government 7,900 8,200 8,400 8,500 8,900 Total, all industries 33,400 34,600 35,900 39,000 41 ,400 Source: California State Employment Development Department. Table 8-5 :'Jl El Dorado County Major Employers Product or Service Government Paper and electronic statements Healthcare Healthcare General Contractor Education Outsourced customer services Grocery retailer Grocer retailer Telecorrmunications manufacturer Employees 1,855 1,153 750 708 525 449 300-400 300 282 250 Employer EI Dorado County Output Technology Solutions Barton Memorial Hospital Marshall Hospital . RoebbelenlKleeman Roebbelen Construction El Dorado County Office of Education Fortune 800 Inc. Safeway Inc. Raley's Endwave Corp. Source: Sacramento Business Journal. B-3 New Residential & Non-Residential Units and Valuations Table B-6 shows new residential and non-residential valuations for the City of South Lake Tahoe. The addition of new residential units is limited by the Tahoe Regional Planning Agency (TRP A) to protect the environment in the Tahoe Basin. Table B-6 . City of South Lake Tahoe New Residential and Commercial Valuations ($000) 1996 1997 1998 1999 2000 Single family $ 3.430 $ 2,685 $ 7,076 $ 5,419 $ 6,513 Multiple family 195 3,972 650 305 Commercial 13,316 7,856 2,019 6,959 7,739 Total 16,940 10,540 13,067 13,028 14,556 Source: City of South Lake Tahoe. B-4 APPENDIX C SOUTH TAHOE PUBLIC UTILITY DISTRICT EXCERPTS FROM AUDITED COl\'IPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2000 ENTERPRISE FUNDS The following pages present excerpts from the District's financial statements for the fiscal year ending June 30,2000. The statements present financial information on the District's water and sewer enterprise funds. A complete copy of the District's Comprehensive Annual Financial Report for the fiscal year ended June 30, 2000 is available from the District. C-I COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND EQUITY - ALL PROPRIETARY FUNDS For the year ended June 30, 2000 Sewer Water Enterprise Enterprise Eliminating Fund Fund Entries Total Operating revenue: Service charges 57,335,527 5 6,823,530 (519,259) $ 14,139,798 Connection and service fees 1,193,077 223,502 1,416.579 Total operating revenue 8,528,604 7,047,032 (19,259) 15,556,377 Operating expenses: Salaries, wages and employee benefits 4,745,8J5 2.622,296 7,368,111 Depreciation and amortization 3,605,249 1,262,071 4,867,320 Utilities 1,677,801 562,373 (19,259) 2,220,915 Repairs and maintenonce 722.283 511,091 J ,233,374 Other operating expenses 1,077,677 1,052,822 r46,955) 2,083.544 Total operating expenses 11,828,825 6,010,653 (66,214) 17,773,264 Net operating income (loss) (3,300,221) 1,036,379 46,955 (2,216,887) Non-operating revenue (expense): Tax revenue 3,477,951 3,477,951 Investment income 903,248 575,329 1,478,577 Aid from governmental agencies 194,374 194.374 Other income 670,596 278,076 (46,955) 901,717 Penalty charges 63,538 54,289 117,827 IntereST expense (212,852) (752,982) (965,33.1) Other exoenses 1292,506\ (42,0701 133.1.57c': T otai non.operating re'lenue (expense) 4,609.975 307,016 (.16,95.5; 4,870030 NE7 INCOME 1,J09,75..! 1,343,395 2,653, i ~c Fund equity, beginning of f,sc::1 jeer 93,386,633 1.1.737,.12 ) 108,12.1:59 Contributions 1,320,087 89.1.35.1 2,21 ~,.lj 1 Fund equity, end or risc:J1 year S96,0 16,470 516.975.170 51 !2,991.6.10 For the year ended June 30, 1999 Operating revenue: Service cnarges 5 7,047,375 S 6,436.523 (S; S, 980\ 5 13,46.1,9:3 ConneCTion and ser/ice fees 1.182,890 198,584 1,381,474 Total operating revenue 8,230,265 6,635,112 (18,9801 J .1.846,397 Operating expenses: Salaries, wages and employee benefits 4,661,393 2,504,250 7,165,643 Depreciation and amortization 3,431,959 1,197,741 4,629,700 Utilities 1,242,34 ] 41] ,906 (18,980) ] ,635,267 Repacrs and maintenance 755,323 396,330 1,151,653 Other operating expenses l.l41,171 850,013 (21,232) 1,969,952 Total operating expenses 11,232,187 5,360,240 (40,212) 16,552,215 Net operating income (loss) (3.001 ,9221 1,274,872 21,232 (1,705,8l8! Non-operating revenue (expense): Tax revenue 3,268,198 3,268,198 Investment income 434,747 302,630 737,377 Aid from governmental agencies 238,229 238,229 Other income 268,859 102,145 (21,232) 349,772 Penalty charges 70,490 58,385 128,875 Interest expense (59.619) (696,520) (756,139) Other expenses (192.207) (54.1081 i246,3151 Total non-operating revenue (expense) 3.790.468 (49,239) 121,2321 3,719,997 NEi INCOME, os restated 788,546 1,225,633 2,014,179 Fund equity, beginning of fiscal year 86,301,766 13,403,895 99,705,661 Contributions 6.296.326 107,893 6.404,219 Fund equity, end of fiscal year 593,386,638 514,737,421 5 S 1 08, 124.059 C-2 COMBINING BALANCE SHEET - ALL PROPRIETARY FUNDS June 30, 2000 Sewer Enterprise Fund ASSETS Current assets: Cash and cash equivalents Investments Accounts receivable, net Supplies inventory Accrued mterest receivable Prepaid expenses and deposits Total current assets Water Enterprise Fund Eliminating Entries Total S 5,150.665 S 6,584,382 S 1,992,190 1,687.412 1,523,230 216,583 240,483 376,700 57,583 38,045 9,481,133 8,386,140 220,976 2.067,401 2,288,377 4,650,903 614,026 5,264,929 1,668,308 1,668,308 123,291,534 28,622,551 151,914,085 1, 939,617 1,309,858 3,249,475 129.882.054 32,214,743 162,096,797 48,275,083 10,645,805 58.920,882 81,606.971 21.568,938 103.175.900 91,419 91,4: 9 1 J,633,985 ] 1,633.925 292.06C 44,523 JJ6.53: 12,017,J64 44.523 12,001.98:- S 1 OJ J2c 5J.! S.32 ';6 -; 002 S' 35 303 5.1,:; long-term liabilities: Compensated absences 838,810 494,207 Nates payable 1,137,849 12,894,407 T otcllong-term liabilities ] ,976,659 13,388,614 T orclliabilities 7,310,065 15,091,832 Fund equity: Contribured capitol 62,847,066 2,692,342 Retcined earnings Reserved fcr deposits 140,000 70,000 Reserved for speciel assessment distrids 80,976 Unreserved 32,948,437 14,212,828 Total fund equity 96,016,479 16,975,170 Tata/liobilities and fund equity 5103.326,544 532.067,002 S Restricted assets: Certificates of deposit and pooled investments Property, plant and equipment: Land and easements Water rights Plant and equipment Construction in progress Less accumulated deprec:ahon and amortiZaTIon T eral prooeriy, plant and equipment Other assets: Long.rerm omounts recel'fcble Inves;ments (.ther deie:r~d excenses T erel ether cssers T Gicl cssers L1A8111TIES AND FUND EQUITY Current liabilities: ,AcJunts paycble 5 1.243,6.1-1 625,1-18 407.927 2,886,166 131,868 38,653 5,333,406 Uererrea revenue AC:~1Jed expenses Currenr porrion or notes pcyoble Current porrion or compensated absences Accrued interest payable Total current liabdities C-3 5 11,735,047 1,992.] 90 3,210,642 457,066 376,700 95,628 17,867,273 5 594,716 99,170 240,325 584,670 69,281 115,056 U03,218 s 1/838,3cC 72-1,3 i 3 648,252 3,470,836 201,149 153,709 7,036,62-'! 1,333,017 14,032,256 15,365,273 22,401,897 65,539,408 210,000 80,976 47,161,265 112,991,649 $135.393.546 COMBINING STATEMENT OF CASH FLOWS - ALL PROPRIETARY FUNDS For the year ended June 30, 2000 Sewer Water Enterprise Enterprise Eliminating Fund Fund Entries Total Cash flows from operating activities: Cash received fram custamers 57,659,025 55,780,656 5 $13,439,681 Penalty charges 63,538 54,289 117,827 Other incame 670,596 278,076 (46,955) 901.717 Cash paid to employees for services (4.708,312) (2,550,325) (7,258,637) Cash paid to suppliers (2.794,651) (2,012,189) 46,955 (4.759,885) Other expenses (292,506) (42,070) (334,576) Net cash provided by operating activities 597,690 1,508,437 2.106,127 Cash flows from non-capital financing activities: Tax revenue 3,477,951 3,477,951 Aid from governmental agencies 194,374 194,374 Net cash flows provided by non- capitol financing activities 3,477,951 194,374 3,672.325 Cash flows from capital and related financing activities: Purchase of properly and equipment (2,368,414) (3,296,993) (5,665,407) Repayment of debt (476,663) (545,319) (1,021,982) Interest paid on notes payable (210,604) (757,489) (968,093) Contributed capital 1,320,087 894,354 2,214,441 Net cosh used In cooltol and related finanCing ac:ivlties (1.735.594) 13,705,447] 15,441,041) Cash flows from investing activities: Inrerest and diVidends on investments 769.761 575,329 1,345,090 Proceeds from sale or cerTificate of depOSit and pooled Investments 64,000 2,5.12,698 2,606,698 P'Jrc;,ose of cerTificate of depOSit and pooled investments (30,000) (30,OCO) Purc;,ase of Investments (13626,1751 113,626,1751 Ner cosh prOVided by (used in) Investing octivlries (12.792.414) 3,088,027 19,704,387\ Net increase (decrease) in cash and cash equivalents (10,452,367) 1,085,391 (9,366,976) Cash and cosh equivalents, beginning of fiscal year 15,603,032 5.498,991 21,102,023 Cosh and cash equivalents, end of fiscal year 55,150,665 56,584,382 5 511.735,047 Reconciliation of net operating income (loss) to net cash provided by operations: Net operating income (loss) (53,300,221 ) 51,036,379 546,955 (52,216,887) Adjustments to reconcile net operating income (loss) to net cash provided by operating activities: Depreciation and amortization 3,605,249 1,262,071 4,867,320 Increase in accounts and amounts receivable (624,279) (1,198,873) (1,823,152) Decrease in inventory 15,563 15,958 31,521 Increase in prepaid expenses and deposits (4,153) (2,425) (6,578) Decrease in other deferred expenses 2,693 2,693 Increase in accounts payable 737,773 37,230 775,003 Decrease in deferred revenue (245,300) (67,503) (31 2,803) (Decrease) increase in other payables (26,322) 128,105 101 ,783 Other non-operating revenue expense), net 439,380 294,802 (46,955) 687,227 Net cosh provided by operating activities S 597,690 $1,508.437 $ $2.106,127 C-4 APPENDIX D FORM OF CONTINUING DISCLOSURE CERTIFICATE $ SOUTH T AlIOE PUBUC UTlUTY DISTRICT Water Revenue Refunding Bonds. Series 2001 This Continuing Disclosure Certificate (this "Disclosure Certificate") is executed and delivered by the South Tahoe Public Utility District (the "District") in connection with the issuance of its $ Water Revenue Refunding Bonds. Series 2001 (the "Bonds"). The Bonds are being issued pursuant to that certain Indenture of Trust. dated as of April 1. 2001 (the "Indenture"). by and between the District and U.S. Trust Company. N.A.. as trustee (the "Trustee") and a resolution adopted by the District Board of Directors of the District on July 5.2001. The District covenants and agrees as follows: Section 1. Puroose of the Disclosure Certificate. This Disclosure Certificate is being e..'Cecuted and delivered by the District for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2-1 2(b) (5). Section 2. Definitions. In addition to the definitions set forth in the Resolution of Issuance which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section. the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the District pursuant to. and as described in. Sections 3 and 4 of this Disclosure Certificate. "Dissemination Agent" shall mean any Dissemination Agent designated in writing by the District and which has flied with the District a written acceptance of such designation. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. Information on the National Repositories as of a particular date is available on the Internet at www.sec.gov/consumer/nrmsir.htm. "Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository" shall mean each National Repository and each State Repository. "Rule" shall mean Rule lSc2-l2(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 tiIne. "State Repository" shall mean any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Certificate. there is no State Repository. D-l Section 3. Provision of Annual Renorts. (a) The District shall, or shall cause the Dissemination Agent to, not later than seven (7) months after the end of the District's Fiscal Year, commencing with the report for the 2000-01 Fiscal Year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than fifteen (15) Business Days prior to said date, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the District 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 not available by that date. If the District's Fiscal Year changes, it shall give notice of such change in the same manner as for a Usted Event under Section 5(c). (b) If the District is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the District shall send a notice to the Municipal Securities Rulemaking Board and the appropriate State Repository, if any, in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and (ii) if the Dissemination Agent is other than the District, file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided. Section 4. Content of Annual Reports. The District's Annual Report shall contain the following information: (a) Audited Financial Statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District'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 fmancial 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) (i) a schedule of water rates in effect as of the close of the preceding Fiscal Year; and (ii) total Net Revenues received by the District during the preceding Fiscal Year, and the amount by which such Net Revenues provide coverage for the debt service payments coming due in such Fiscal Year with respect to the Bond payments and any other Parity Debt. D-2 (c) In addition to any of the information expressly required to be provided under provisions of this Section, the District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Any or all of the items listed above may be included by specific reference to other documents, :tr:cluding official statements of debt issues of the District or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The District shall clearly identify each such other document so included by reference. Section 5. Reoortln~ of Si~ificant Events. (a) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Principal and interest payment delinquencies. Non-payment related defaults. Unscheduled draws on debt service reserves reflecting fmancial difficul ties. Unscheduled draws on credit enhancements reflecting fmancial difficul ties. Substitution of credit or liquidity providers, or their failure to perform. Adverse tax opinions or events affecting the tax-exempt status of the security. Modifications to rights of security holders. Contingent or unscheduled bond calls. Defeasances. Release, substitution, or sale of property securing repayment of the securities. Rating changes. (b) Whenever the District obtains knowledge of the occurrence of a Listed Event, the District shall as soon as possible determine if such event would be material under applicable Federal securities law. (c) If the District determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the District shall promptly fIle a notice of such occurrence with the Municipal Securities Rulemaking Board and each State Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections (a) (viii) and (iv) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds pursuant to the Resolution of Issuance. Section 6. Termination of Reoortin'l Obli'lation. The District's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the fmal maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). 0-3 Section 7. Dissemination Allent The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent. with or without appointing a successor Dissemination Agent Section 8. Amendment Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 3 (a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted: (b) the undertakings herein, as proposed to be amended or waived. would. in the opinion of nationally recognized bond counsel. have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Resolution of Issuance. or (ii) does not. in the opinion of the Fiscal Agent or nationally recognized bond counsel. materially impair the interests of the holders or beneficial owners of the Bonds. If the annual fmancial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof. the first annual fmancial information fIled pursuant hereto containing the amended operating data or fmancial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or fmancial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing fmancial statements, the annual financial information for the year in which the change is made shall present a comparison between the fmancial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information in order to provide information to investors to enable them to evaluate the ability of the District to meet its obligations. To the extent reasonable feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 5 (c). Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information. using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event. in addition to that which is required by this Disclosure Certificate. If the District 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 Certificate. the District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event D-4 Section 10. Default. In the event of a fallure of the District to comply with any provision of this Disclosure Certificate any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, includJng seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture or any Supplemental Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance. Section 11. Duties. Immunities and Liabilities of Dissemination Aient. The Dissemination Agent shall have only duties as are specifically set forth in this Disclosure- Certificate, and the District agrees 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 attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct The obligations of the District under this Section shall swvive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 13. Future Determination of Oblillated Persons. In the event that the Securities Exchange Commission amends, clarifies or supplements the Rule in such a manner that requires any landowner within the District to be an obligated person as defined in the Rule. nothing contained herein shall be construed to require the District to meet the continuing disclosure requirements of the Rule with respect to such obligated person and nothing in this Disclosure Certificate shall be deemed to obligate the District to disclose information concerning any owner of land within the District except as required as part of the information required to be disclosed by the District pursuant to Section 4 and Section 5 hereof. Date: August _,2001 SOUTH TAHOE PUBLIC UTILITY DISTRICT By: Chief Financial Officer 0-5 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD AND EACH STATE REPOSITORY OF FAILURE TO Fll.E ANNUAL REPORT Name of Issuer: SOUTH TAHOE PUBLIC UTILITY DISTRICT Name of Issue; $ Water Revenue Refunding Bonds. Series 2001 Date of Issuance: August__ 2001 NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to the above-named Certificates as required by the Indenture of Trust. dated as of April 1.2001, by and between U.S. Trust Company. N.A.. as trustee and the District. The District anticipates that the Annual Report will be filed by Dated: SOUTH TAHOE PUBLIC UTILITY DISTRICT By cc: Trustee D-6 APPENDIX E PROPOSED FORM OF BOND COUNSEL OPINION [LETTERHEAD OF JONES HALL] August -' 2001 Board of Directors South Tahoe Public Utility District 1275 Meadow Crest Drive South Laka Tahoe, CA 96150 OPINION: $ South Tahoe Public Utility District Water Revenue Refundin~ Bonds. Series 2001 Members of the Board: We have acted as bond counsel in connection with the issuance by the South Tahoe Public Utility District (the "District") of the $ South Tahoe Public Utility District Water Revenue Refunding Bonds, Series 2001 (the "Bonds"), pursuant to Sections 53570 et seq. and 53580 et seq. of the California Government Code (the "Revenue Refunding Bond Law"), an Indenture of Trust, dated as of August I, 2001, by and between the District and U.S. Trust Company, N.A., as trustee (the "Indenture"), and a resolution of the Board of Directors of the District (the "Resolution") adopted on July 5, 2001. We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the District contained in the Indenture and in the certified proceedings and certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: E-l South Tahoe Public Utility District August -' 2001 Page 2 1. The District is duly created and validly existing as a public utility district with the power to enter into the Indenture, perform the agreements on its part contained therein, and issue the Bonds. 2. The Indenture has been duly approved by the District and constitutes a valid and binding obligation of the District enforceable upon the District 3. Pursuant to the Revenue Refunding Bond Law, the Indenture creates a valid lien on the Net Revenues pledged by the Indenture for the security of the Bonds. 4. The Bonds have been duly authorized, executed and delivered by the District and are valid and binding special obligations of the District, payable solely from the sources provided therefor in the Indenture. 5. The interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations: it should be noted, however, that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings. The Bonds are "qualified tax-exempt obligations" within the meaning of section 26S(b)(3) of the Internal Revenue Code of 1986 (the "Code"), and, in the case of certain financial institutions (within the meaning of section 265 (b)(S) of the Code), a deduction is allowed for 80 percent of that portion of such fmancial institutions' interest expense allocable to interest payable on the Bonds. The opinions set forth in the preceding sentences are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The District has covenanted to comply with each such requirement Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds. 6. The interest on the Bonds is exempt from personal income taxation imposed by the State of California. The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases. Respectfully submitted, A Professional Law Corporation E-2 APPENDIX F BOOK ENTRY SYSTEM The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully registered bond will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC 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 17 A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities Bonds. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds and DTC's records. The ownership interest of each actual purchaser of each bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written con- fmnation from DTC of their purchase, but Beneficial Owners are 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 Olfvuer entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Bene- ticial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are reg- istered in the name ofDTC's partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no change in benefi- cialownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; F-1 DTe's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited which mayor may not be the Beneficial Owners. The 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 Par- ticipants 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. Redemption notices shall be sent to Cede & Co. If less than all of the Bonds within a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. 's consenting or voting right to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Bonds will be made to DTC. DTC's practice is to credit Direct Participants' accounts on payable date in accordance with their respective holdings shown on DTC s records unless DTe has reason to believe that it will not receive payment on payable date. 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 ofDTC, Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the District or Agent, disburse- ment of such payments to Direct Participants shall be the responsibility ofDTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the District or Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bonds are required to be printed and delivered The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof. F-2 NOTICE OF SALE $ SOUTH TAHOE PUBLIC UTILITY DISTRICT WATER REVENUE REFUNDING BONDS Series 2001 BANK QUALIFIED NOTICE IS HEREBY GIVEN by the South Tahoe Public Utility District (the "District") that sealed and faxed bids will be received by a representative of the District as follows: Place: Bartle Wells Associates, 1889 Alcatraz Avenue, Berkeley, California 94703 (tel: 510/653-3399) FAX: 510/653-3769 Time: 10:00 a.m. Pacific Time Date: Thursday, August 2, 2001 for the purchase of $ aggregate principal amount of water revenue refunding bonds designated the Water Revenue Refunding Bonds, Series 2001 (the "Bonds"). The District may postpone the date or change the time of the sale to any subsequent date or any other time by providing notification through Thomson Municipal Market Monitor (www.tm3.com) or Bloomberg Business News 24 hours prior to the scheduled date and time of sale. The Bonds will be issued pursuant to the provisions of a Trust Indenture, dated as of August 1, 2001 (the "Trust Indenture"), by and between the the District and U.S. Trust Company, N.A., as trustee (the "Trustee"), DESCRIPTION OF THE BONDS PURPOSE: The proceeds of the Bonds will be applied for the purpose of refunding an $8,829,000 Installment Sale Agreement, dated as of October 31, 1994, between LaSalle National Bank and the District (the "1994 Installment Sale Agreement") the proceeds of which were used to finance the construction of certain improvements to the District's water system. FORM OF BONDS: The Bonds will be issued in fully registered form in denominations of $5,000 or authorized integral multiples thereof, to be dated initially as of the date of original delivery of the Bonds. MA TURlTIES: The Bonds will mature, or be subject to mandatory sinking fund redemption, on August 1 in each of the years and in the amounts, as set forth in the following table. The final principal amount of the Bonds, and the final amount of each maturity of the Bonds, shall be subject to increase or reduction as described below under the heading "Adjustment of Principal Amounts", Each bidder is required to specify in its bid whether, for any particular year, the Bonds will mature or, alternately, be subject to mandatory sinking fund redemption in such year. No maturities prior to August 1, 2012 may be designated for mandatory sinking fund redemption. Maturity Date (August 1) Principal Amount 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 $485,000 500,000 515,000 530,000 550,000 570,000 595,000 615,000 640,000 670,000 700,000 730,000 760,000 PAYMENT PROVISIONS: Interest represented by the Bonds will be payable on August I and February 1 in each year beginning February 1, 2002 (the "Interest Payment Dates"), to the registered owners by check or draft of the Trustee or, in the case of the owner of Bonds in an aggregate principal amount of at least $1,000,000, at the written request of such owner by wire transfer. Principal and premium (if any) represented by any Bond will be paid upon presentation and surrender thereof at the corporate trust office of the Trustee in San Francisco, California. The principal of, and interest and premium (if any) on the Bonds are payable in lawful money of the United States of America. OPTIONAL REDEMPTION: The Bonds maturing on or before August I, 2009 are not subject to optional redemption prior to the respective stated maturities. The Bonds maturing on or after August 1, 2010 are subject to optional redemption in whole or in part (among maturities on such basis as the District shall designate) on any date on or after August 1, 2009, at the option of the District pursuant to the Trust Indenture, Bonds shall be subject to such redemption at a redemption price (expressed as percentages of the principal amount of Bonds or portions thereof to be prepaid) set forth in the following table, in each case with accrued interest represented thereby to the redemption date: Redemption Dates August I, 2009 through July 31, 20 I 0 August 1, 2010 and thereafter Redemption Price 101 % 100 REDElHPTlON FROM NET PROCEEDS OF INSURANCE OR CONDEMNATION. The Bonds are subject to mandatory redemption, in whole or in part (on a pro rata basis among maturities) on any date, from the net proceeds of insurance, condemnation or sale with respect to the Water Enterprise, at a redemption price equal to the principal amount represented by the Bonds to be prepaid, without premium, together with accrued interest to the date fixed for redemption. 2 SINKING FUND REDEMPTION: Any bidder may, at its option, specify that one or more maturities of the Bonds (commencing with the August 1,2012 maturity) will consist of term Bonds which are subject to mandatory sinking fund redemption in consecutive years immediately preceding the maturity thereof, as designated in the bid of such bidder. In the event that the bid of the successful bidder specifies that any maturity of Bonds will be term Bonds, such term Bonds will be subject to mandatory sinking fund redemption on August 1 in each year so designated in the bid, in the respective amounts for such years as set forth above under the heading "MATURITIES", at a redemption price equal to the principal amount thereof to be prepaid together with accrued interest thereon to the redemption date, without premium. SECURITY: The Bonds are payable from and secured by a first pledge of and lien on the Net Revenues of the Water Enterprise, subject to the prior lien on the Angora Revenues to pay the Angora Purchase Payments (as defined in the Indenture). The District is permitted to . incur additional debt on a parity with the pledge and lien which secures the Bonds, pursuant to the Trust Indenture. Bidders should be aware of certain factors affecting the payment of principal of and interest on the Bonds, and bidders are referred to the Trust Indenture and the Official Statement for further details, CONTINUING DISCLOSURE: In order to assist bidders in complying with S.E.C. Rule 15c2-12(b)(5), the District will undertake, pursuant to the Trust Indenture and a Continuing Disclosure Certificate, to provide annual reports and notices of certain events. A description of this undertaking is set forth in the form of the Continuing Disclosure Certificate appended to the Preliminary Official Statement, which Continuing Disclosure Certificate will also be appended to the Final Official Statement. BANK QUALIFIED: The District has designated the Bonds as "qualified tax-exempt obligations" for the purposes of Section 265(b )(3) of the Internal Revenue Code of 1986. TAX-EXEMPT STATUS: In the opinion of Jones Hall, A Professional Law Corporation, acting as Bond Counsel to the District, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided. however, that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings_ In the further opinion of bond counsel, such interest is exempt from California personal income taxes. In the event that prior to the delivery of the Bonds (a) the interest on other obligations of the same type and character shall be declared to be taxable (either at the time of such declaration or at any future date) under any federal income tax laws, either by the terms of such laws or by ruling of a federal income tax authority or official which is followed by the Internal Revenue Service, or by decision of any federal court, or (b) any federal income tax law is adopted which will have a substantial adverse effect upon owners of the Bonds as such, the successful bidder for the Bonds may, at its option, prior to the tender of the Bonds, be relieved of its obligation under the contract to purchase the Bonds, and in such case the deposit accompanying its proposal will be returned. LEGAL OPINION: The legal opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, approving the validity of the Bonds and the Trust Indenture, will be furnished to the original purchaser of the Bonds without cost. A copy of the legal opinion, certified by the official in whose office the original is filed, will be printed on, or attached to each Bond, at the expense of the District. FURTHER INFORMATION: A copy of the Preliminary Official Statement describing the Bonds, and any other information concerning the proposed financing, will be furnished upon 3 request to the financial advisor to the District, Bartle Wells Associates, 1889 Alcatraz A venue, Berkeley, California 94703, telephone: 510/653-3399. MUNICIPAL BOND INSURANCE: The District has received a commitment from to issue a policy insuring the payment when due of principal of and interest on the Bonds. The premium for such insurance and the costs of any related ratings will be paid by the District. TERMS OF SALE SUBMISSION OF BIDS: Bids may be delivered (for receipt not later than the time set forth above) to District, c/o Bartle Wells Associates, 1889 Alcatraz Avenue, Berkeley, California 94703, Attention: South Tahoe Public Utility District Bid Opening. All bids must be accompanied by a good faith deposit as more fully described be/ow under the caption "GOOD FAITH DEPOSIT". Any bidder may submit its bid by telefax, provided that such telefax and the good faith deposit (described below) must be received at the place and by the time set for receipt of bids. Neither the District nor its representatives take any responsibility for any difficulties in receiving fax transmittals prior to the deadline for receipt of bids. A bid will be deemed received if the bid form is in the process of printing in the facsimile machine in the offices of Bartle Wells Associates by the deadline of 10:00 a.m. Please allow sufficient time for the bid to be transmitted, as there is a time delay (typically 2-3 minutes) between the sending and receipt of facsimile transmissions. The fax number to be used for this purpose is 510/653-3769. FORM OF BID; MAXIMUM DISCOUNT: Each bidder must submit a bid for the purchase of all of the Bonds. The proposal of any bidder must be for not less than all of the Bonds hereby offered for sale. The purchase price of the Bonds may not be less than ninety-nine percent (99%) of the par value thereof and accrued interest represented thereby to the delivery date. The amount of any discount specified shall not exceed one percent (1 %) of the aggregate principal amount of the Bonds. DESIGNATION OF INTEREST RATES: Each bidder must specify the rate or rates of interest to be represented by the Bonds. The maximum rate bid on any Bonds may not exceed eight percent (8%) per annum. A bidder will be permitted to bid different rates of interest for the Bonds, provided that the following conditions are met: (i) each interest rate specified must be in a multiple of 1/20th or 1/8lh of one percent, (ii) the interest rate for each maturity of Bonds shall be equal to or greater than the interest rate on each preceding maturity, (iii) the maximum rate bid for any maturity of the Bonds may not exceed the minimum rate bid for any maturity by more than three percentage points (3%). (iv) no Bond shall represent more than one rate of interest, (v) interest on each Bond shall be computed from the date of original delivery of the Bonds to the stated maturity (or to its sinking fund redemption date, in the case of term Bonds) at the interest rate specified in the bidder's proposal, payable on the Interest Payment Dates as set forth above, 4 (vi) all Bonds maturing at anyone time shall represent the same rate of interest, and (vii) any premium must be paid as part of the purchase price, and no proposal will be accepted which contemplates the waiver of any interest or other concession by the bidder as a substitute for payment in full of the purchase price. DETERMINATION OF BEST BID: The Bonds will be awarded to the bidder whose proposal produces the lowest true interest rate, determined as hereinafter described. The true interest rate specified in any bid will be that rate which, when used in computing the present worth of all payments of principal and interest to be paid on all Bonds from the date of original delivery thereof (which shall be assumed for computational purposes to be August 16, 200 l), to their respective maturity dates or mandatory sinking fund redemption dates, produces an amount equal to the purchase price specified in such bid. For purposes of computing the true interest rate represented by any proposal, the purchase price specified in such proposal shall be equal to the par amount of the Bonds less any discount or plus any premium specified in such proposal, and the true interest rate shall be calculated by the use of a semiannual interval of compounding interest based on the Interest Payment Dates for the Bonds. All interest will be computed on a thirty (30) day month, 360-day year basis. ADJUSTMENT OF PRINCIPAL MATURITIES: The District reserves the right to increase or decrease the principal amount of any maturity of the Bonds (or, in the case of the term Bonds, the principal amount thereof which is subject to mandatory sinking fund redemption on August 1 in any year for the purpose of ensuring approximately level debt service. The aggregate principal amount of the Bonds will be equal to $ notwithstanding any such adjustment). Notice of such increase or decrease shall be given to the successful bidder as soon as practicable following the notification of award, as described below. No such adjustment will have the effect of altering the basis upon which the best bid is determined. RIGHT OF REJECTION: The District reserves the right, in its discretion, to reject any and all proposals and to waive any irregularity or informality in any proposal. TIME OF AWARD: The District Board of Directors of the District has authorized certain designated officers, on behalf of the District, to accept the best responsible bid for the purchase of the Bonds and to accept such bid, for and in the name of the District, by notice to the successful bidder. The District will award the Bonds or reject all bids not later than 24 hours after the expiration of the time prescribed for the receipt of proposals unless such time of award is waived by the successful bidder; provided, that the award may be made after the expiration of the specified time if the bidder has not given the District notice in writing of the withdrawal of such proposal. PLACE OF DELIVERY; CANCELLATION FOR LATE DELIVERY: It is expected that the Bonds will be delivered to DTC for the account of the successful bidder on or about August 16, 2001. The successful bidder shall have the right to cancel the contract of purchase if the Bonds are not tendered for delivery within sixty (60) days from the date of the sale thereof, and in such event the successful bidder shall be entitled to the return of the deposit accompanying his bid. GOOD FAITH DEPOSIT: A certified or cashier's check drawn on a responsible bank or trust company or a financial surety bond in the amount of $75,000, payable to the order of the District, must accompany each proposal as a guaranty that the bidder, if successful, will accept and pay for the Bonds in accordance with the terms of its proposal. If a financial surety bond is used, it must be from an insurance company licensed to issue such a bond in the State of California, and such bond must be submitted to the District or its financial adviser prior to the opening of the proposals. If the Bonds are awarded to a bidder utilizing a financial surety bond, such purchaser is 5 required to submit its deposit to the District in the form of a cashier's check not later than 3 :30 p.m. Pacific Time on the next business day following the award. Alternatively, if the Bonds are awarded to a bidder utilizing a financial surety bond, such purchaser may submit its deposit to the District by wire trartsfer, not later than 3:30 p.m. Pacific Time on the next business day following the award, to the following account of the District: Bank Office , South Lake Tahoe, California ABA: Beneficiary: South Tahoe Public Utility District Beneficiary Account Number: If such deposit is not received by that time, the financial surety bond may be drawn by the District to satisfy the deposit requirement. No interest on the good faith deposit will accrue to the purchaser. The good faith deposit will be cashed by the District and either applied to the purchase price of the Bonds or, at the election of the District, surrendered back to the purchaser against payment of the purchase price of the Bonds in full. In the event the purchaser fails to honor its accepted proposal, the good faith deposit will be cashed and retained by the District. STATElrfENT OF TRUE INTEREST RATE: Each bidder is requested, but not required, to state in its proposal the percentage true interest rate represented by its proposal, determined as described above, which shall be considered as informative only and not binding on either the bidder or the District. CERTIFICATION OF REOFFERING PRICE: The successful bidder shall be required, as a condition to the delivery of the Bonds, to deliver to the District a Bond, in form and substance satisfactory to the District, stating (i) that, as of the date of award, the Bonds were expected to be reoffered in a bona fide public offering, (ii) the initial offering price at which a substantial amount (at least 10(%) of each maturity of the Bonds were sold to the public, and (iii) that no Bonds of a single maturity were offered at one price to the general public and at a discount from that price to institutional or other investors. NO LITIGATION: There is no litigation pending concerning the validity of the Trust Indenture or the Bonds, the corporate existence of the District, or the entitlement of the officers thereof to their respective offices, and the purchaser will be furnished a no-litigation certificate certifying to the foregoing as of and at the time of delivery of the Bonds. CUSIP NWHBERS: It is anticipated that CUSIP numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bonds nor any error with respect thereto will constitute cause for a failure or refusal by the purchaser to accept delivery of and pay for the Bonds in accordance with the terms hereof. All expenses in relation to the printing of CUSIP numbers on the Bonds will be paid for by the District; provided, however, that the CUSIP Service Bureau charge for the assignment of said numbers will be the responsibility of and shall be paid for by the purchaser. CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION FEES: All fees payable to the California Debt and Investment Advisory Commission in connection with the issuance of the Bonds shall be the responsibility of the purchaser of the Bonds. OFFICIAL STATEMENT: The District Board of Directors has approved the Official Statement relating to the Bonds. Copies of the Preliminary Official Statement will be distributed 6 to the bidders prior to the sale in a form "deemed final" by the District for purposes of Rule 15c2- 12 under the Securities Exchange Act of 1934 (the "Rule") and approved for distribution by resolution of the District Board. Within seven business days from the sale date, the District will deliver to the purchaser copies of the final Official Statement (not to exceed 100 copies), executed by an authorized representative of the District and dated the date of delivery thereof to the purchaser, in sufficient number to allow the purchaser to comply with paragraph (b)( 4) of the Rule and to satisfy the Municipal Securities Rulemaking Board (the "MSRB") Rule 0-32 or any other rules adopted by the MSRB, which shall include information permitted to be omitted by paragraph (b)( 1) of the Rule and such other amendments or supplements as shall have been approved by the District (the "Final Official Statement"). Dated: July 10, 2001 SOUTH TAHOE PUBLIC UTILITY DISTRICT By /s/ Rhonda McFarlane Chief Financial Officer 7 INDENTURE OF TRUST by and between the SOUTH TAHOE PUBLIC UTILITY DISTRICT and U.S. TRUST COMPANY, N.A. as Trustee Dated as of August 1, 2001 Relating to South Tahoe Public Utility District $ Water Revenue Refunding Bonds, Series 2001 TABLE OF CONTENTS ARTICLE I 'DEFINITIONS; AUTHORIZATION AND PURPOSE OF BONDS; EQUAL SECURITY SECTION 1.01. Definitions....................................................,....................................,................ 3 SECTION 1.02. Rules of Construction.......................................................................................... 13 SECTION 1.03. Authorization and Purpose of Series 2000 Bonds.................................................. 13 SECTION 1.04. Equal Security................................................................................................... 13 ARTICLE II ISSUANCE OF SERIES 2000 BONDS SECTION 2.01. Terms of Series 2000 Bonds. ................................................................................ 14 SECTION 2.02. Redemption of Series 2000 Bonds. ....................................................................... 15 SECTION 2.03. Form of Series 2000 Bonds................................................................................... 17 SECTION 2.04. Execution of Series 2000 Bonds............................................................................ 17 SECTION 2.05. Transfer of Series 2000 Bonds.............................................................................. 17 SECTION 2.06. Exchange of Series 2000 Bonds.............,.............................................................. 18 SECTION 2.07. Temporary Bonds.................... ........... ...... ................................ .......................... 18 SECTION 2.08. Bond Registration Books.................................................................................... 18 SECTION 2.09. Bonds Mutilated, Lost, Destroyed or Stolen. ....................................................... 18 SECTION 2.10. Payment Procedure Pursuant to Municipal Bond Insurance Policy.......................... 18 SECTION 2.11. Book Entry System ,................. .................................................................... ....... 20 ARTICLE III 'ISSUE OF SERIES 2000 BONDS; PARITY BONDS' SECTION 3.01. Issuance of Series 2000 Bonds............................................................ ........,......... 22 SECTION 3.02. Application of Proceeds of Sale of Series 2000 Bonds........................................... 22 SECTION 3.03. Reserve Account.........,.................................,.......................................... ........... 22 SECTION 3.04. 2000 Project Fund............. ................................. ......... .................... .............. ....... 22 SECTION 3.05. Cost of Issuance Fund..............................,........................................................... 22 SECTION 3.06. Issuance of Parity Bonds..................................................................................... 23 SECTION 3.07. State Loans........... ..... ..... ....................... ............... ............................................ 24 SECTION 3.08. Subordinate Bonds...... ..... ................................................... ............................... 24 SECTION 3.09. Validity of Bonds.............................................................................................. 25 ARTICLE IV 'PLEDGE OF NET REVENUES; FUNDS AND ACCOUNTS' SECTION 4.01. Pledge of Net Revenues, Revenue Fund. .............................................................. 26 SECTION 4.02. Receipt and Deposit of Revenues....... ......... ...... ..... ............................................. 26 SECTION 4.03. Establishment of Funds and Accounts and Allocation of Revenues Thereto............ 26 SECTION 4.04. Application of Debt Service Fund....................................................................... 27 SECTION 4.05. Application of Reserve Account.......................................................................... 27 SECTION 4.06. Application of Redemption Account. .................................................................. 28 SECTION 4.07. Investments....................................................................................................... 28 SECTION 4.08. Valuation; Investments...................................................................................... 29 ARTICLE V 'COVENANTS OF THE DISTRICT; SPECIAL TAX COVENANTS' SECTION 5.01. Punctual Payment; Compliance With Documents. ............................................... 30 SECTION 5.02. Against Encumbrances........................................................................................ 30 - i - SECTION 5.03. Discharge of Claims. ............. ..... ............................................................. .......... 30 SECTION 5.04. Acquisition, Construction or Financing of Improvements to the Water System....... 30 SECTION 5.05. Maintenance and Operation of Water System in Efficient and Economical Manner. ............................................................................................................. 30 SECTION 5.06. Against Sale, Eminent Domain....... .................................................................... 30 SECTION 5.07. Insurance........................................................................................................... 31 SECTION 5.08. Records and Accounts. ........................................................................................ 31 SECTION 5.09. Protection of Security and Rights of Owners........................................................ 32 SECTION 5.10. Against Competitive Facilities. ........................................................................ 32 SECTION 5.11. Payment of Taxes, Etc. ....................................................................................... 32 SECTION 5.12. Rates and Charges............................................................................................. 32 SECTION 5.13. No Priority for Additional Obligations.............................................................. 32 SECTION 5.14. No Arbitrage.......................... ........ ..... ..... ...... ........., ...... ........ ........ ........ ...........32 SECTION 5.15. Information Report. ........................................................................................... 32 SECTION 5.16. Private Activity Bond Limitation ......................................................................33 SECTION 5.17. Federal Guarantee Prohibition. .................................,....................................... 33 SECTION 5.18. Further Assurances. ........................................................................................... 33 SECTION 5.19. Continuing Disclosure, ....................................................................................... 33 SECTION 5.20. Rebate Requirement...........,......................................,..........................,............. 33 SECTION 5.21. Maintenance of Tax Exemption........................................................................... 33 SECTION 5.22. Small Issuer Exemption from Bank Nondeductibility Restriction......................... 33 ARTICLE VI THE TRUSTEE SECTION 6.01. Appointment of Trustee...................................................................................... 34 SECTION 6.02. Acceptance of Trusts........ ................................................ ........ ................ ...........34 SECTION 6.03. Fees, Charges and Expenses of Trustee. ............ ..................... .............................. 36 SECTION 6.04. Notice to Bond Owners of Default. ..................................................................... 36 SECTION 6.05. Removal of Trustee... .............. .......... ........ ...... .................... ...... ......................... 36 SECTION 6.06. Resignation by Trustee.... ................ ........................................................ ........... 36 SECTION 6.07. Appointment of Successor Trustee. ...................,.................................................. 37 SECTION 6.08. Merger or Consolidation............,........................................................................ 37 SECTION 6.09. Concerning any Successor Trustee. ....................................................................... 37 SECTION 6.10. Appointment of Co-Trustee. ............................................................................... 37 SECTION 6.11. Indemnification; Limited Liability of Trustee. ................................................... 38 ARTICLE VII MODIFICATION AND AMENDMENT OF THE INDENTURE SECTION 7.01. Amendment by Consent of Bond Owners. ................... .............................., ........... 39 SECTION 7.02, Amendment Without Consent of Bondholders..................................................... 39 SECTION 7.03. Disqualified Bonds..................................................,......................................... 39 SECTION 7.04. Endorsement or Replacement of Bonds After Amendment..................................... 40 SECTION 7.05. Amendment by Mutual Consent................................................................,.......... 40 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS SECTION 8.01. Events of Default and Acceleration of Maturities................................................ 41 SECTION 8.02. Application of Funds Upon Acceleration............................................................. 41 SECTION 8.03. Other Remedies; Rights of Bond Owners. ........................................................... 42 SECTION 8.04. Power of Trustee to Control Proceedings. ............................................................. 42 SECTION 8.05. Appointment of Receivers.................................................................................. 43 SECTION 8.06. Non-Waiver.. ........ .......................................,................... ............... .... .......... ...43 SECTION 8.07. Rights and Remedies of Bond Owners................................................................. 43 SECTION 8.08. Termination of Proceedings. ............ ................................ ................................... 44 - ii - SECTION 8.09. Municipal Bond Insurer as Third-Party Beneficiary............................................ 44 SECTION 8.10. Rights of Municipal Bond Insurer ....................................................................... 44 SECTION 8.11. Effect on Municipal Bond Insurance Policy.......................................................... 44 ARTICLE IX MISCELLANEOUS SECTION 9.01. Limited Liability of District. ............................................................................ 45 SECTION 9.02. Parties Interested Herein................................................................................... 45 SECTION 9.03. Discharge of Indenture....................................................................................... 45 SECTION 9.04. Content of Certificates....................................................................................... 46 SECTION 9.05. Execution of Documents by Bond Owners.............. ............... ...... ....... ......... ........... 46 SECTION 9.06. Waiver of Personal Liability............................................................................. 47 SECTION 9.07. Partial Invalidity............................................................................................. 47 SECTION 9.08. Destruction of Cancelled Bonds .......................................................................... 47 SECTION 9.09. Funds and Accounts. ....................................................................,...................... 48 SECTION 9.10. Notices.........................................................................................,................... 48 SECTION 9.11. Notices to be Given to the Municipal Bond Insurer ............................................... 48 SECTION 9.12. Unclaimed Moneys. .........................,................................................................. 48 EXHIBIT A: Form of Series 2001 Bond - Hi - INDENTURE OF TRUST THIS INDENTURE OF TRUST, made and entered into as of August 1, 2001, by and between the SOUTH TAHOE PUBLIC UTILITY DISTRICT, a public utility district organized and existing under the constitution and laws of the State of California (the "District"), and U.S. Trust Company, N.A., a national banking association organized and existing under the laws of the United States of America, with a corporate trust office in San Francisco, California, and being qualified to accept and administer the trusts hereby created, as trustee (the "Trustee"); WITNESSETH: WHEREAS, the District entered into an Installment Sale Agreement, dated as of October 31, 1994, between LaSalle National Bank and the District (the "1994 Installment Sale Agreement") the proceeds of which were used to finance the construction of certain improvements to the District's water system (the "Improvements"); and WHEREAS, interest rates have declined since the 1994 Installment Sale Agreement was entered into, and the District will receive economic benefit by refunding the 1994 Installment Sale Agreement; and WHEREAS, the District, after due investigation and deliberation, has determined that it is in the interests of the District at this time to provide for the issuance of its water revenue refunding bonds under this Indenture for the purpose refunding the 1994 Installment Sale Agreement, and to that end the Board of Directors has heretofore adopted its Resolution No. 2720-01, approving and authorizing the issuance of its South Tahoe Public Utility District Water Revenue Refunding Bonds, Series 2001 (the "Series 2001 Bonds") for such purposes; WHEREAS, in order to provide for the authentication and delivery of the Series 2001 Bonds, to establish and declare the terms and conditions upon which the Series 2001 Bonds are to be issued and secured, and to secure the payment of the principal thereof and of the interest and premium, if any, thereon, the Board of Directors has authorized the execution and delivery of this Indenture; WHEREAS, all of the Series 2001 Bonds will be secured by a pledge of the Net Revenues of the District's Water System, as defined herein, and certain other moneys and securities held by the District and the Trustee hereunder; and WHEREAS, all acts and proceedings required by law necessary to make the Series 2001 Bonds, when executed by the District, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal special obligations of the District, and to constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth, in accordance with its terms, have been done and taken; and the execution and delivery of this Indenture have been in all respects duly authorized; NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the payment of the principal of and the interest and premium (if any) on all Bonds at any time issued and Outstanding under this Indenture, according to their tenor, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be issued and received, and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the Owners thereof, and for other valuable considerations, the receipt whereof is hereby acknowledged, the District does -1- ARTICLE I DEFINITIONS; AUTHORIZATION AND PURPOSE OF BONDS; EQUAL SECURITY SECTION 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes of this Indenture and of any Parity Bonds Instrument and of the Bonds and of any certificate, opinion, request or other documents herein mentioned have the meanings herein specified. "Angora Purchase Agreement" means that certain Agreement of Sale and Purchase of Stock of Angora Water Co., dated as of November 3, 1983 by and between Donald L. Martin and Marjorie L. Martin, Gerald E. Martin and Thelma V. Martin, Stanley L. Martin and Louise A. Martin, and the District. "Angora Purchase Payments" means the purchase price payments provided for in Section 2.2 of the Angora Purchase Agreement, without giving any effect to any amendment or modification thereof after the effective date of the Angora Purchase Agreement. "Angora Revenues" means the gross income and revenue derived by the District from the sale of water from the Angora Water System after deducting all sums expended for the cost of acquisition of water and of the necessary and reasonable maintenance and operation of the Angora Water System, which costs shall include the reasonable expense of management, operation, repair, and other expenses necessary to maintain and preserve the Angora Water System in good repair and working order. "Angora Water System" means the complete water supply, storage and distribution system operated by Angora Water Co. immediately prior to the date on which all of the outstanding shares of the Angora Water Co. were acquired by the District pursuant to the Angora Purchase Agreement. Expansions, additions and improvements to such system after the effective date of the Angora Purchase Agreement shall not be considered part of the Angora Water System unless the same constitutes a repair or replacement made in the course of regularly scheduled repair and maintenance work or an ongoing capital improvement program paid for solely with Angora Revenues. "Authorized Investments" means any of the following, but only to the extent that the same are acquired at Fair Market Value, which at the time of investment are legal investments under the laws of the State of California for the moneys proposed to be invested therein: (a) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of the Treasury of the United States of America; (b) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America, including: (i) Export- Import Bank; (ii) Farm Credit System Financial Assistance Corporation, (iii) Farmers Home Administration; (iv) General Services Administration; (v) U.S. Maritime Administration; (vi) Small Business Administration; (vii) Government National Mortgage Association (GNMA); (viii) U.S. Department of Housing & Urban Development (PHA's); (ix) Federal Housing Administration and (x) Federal Financing Bank; (c) senior debt obligations rated "Aaa" by Moody's and "AAA" by S&P issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, senior debt obligations of other government-sponsored agencies approved -3- by AMBAC Indemnity, obligations of the Resolution Funding Corporation (RFFCORP) and senior debt obligations of other government sponsored agencies; (d) u.s. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks (including the Trustee and its affiliates) which have a rating on their short term certificates of deposit on the date of purchase of "P_l" by Moody's and "A-l" or "A-l+" by S&P and maturing no more than 360 days after the date of purchase, provided that ratings on holding companies are not considered as the rating of the bank; (e) commercial paper which is rated at the time of purchase in the single highest classification, "P-l" by Moody's and "A-l+" by S&P, and which matures not more than 270 days after the date of purchase; (f) investments in a money market fund rated "AAAm" or "AAAm-G" or better by S&P, including any such money market fund from which the Trustee or its affiliates receive fees for services to such fund; (g) pre-refunded municipal obligations defined as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (i) which are rated, based upon an irrevocable escrow account or fund (the "escrow"), in the highest rating category of Moody's and S&P or any successors thereto; or (ii)(A) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (a) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (B) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to above, as appropriate; (h) investment agreements, supported by appropriate opinions of counsel, between the Trustee and a financial institution whose long-term debt has a Minimum Ra ting; (i) Repurchase agreements ("repos") 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. Repurchase Agreements must satisfy the following criteria: 1. Repos must be between the Trustee and a dealer bank or securities firm. a. Primary dealers on the Federal Reserve reporting dealer list which fall under the jurisdiction of the SIPC and which are rated A or better by S&P and Moody's, or b. Banks rated "A" or above by S&P and Moody's. -4- 2. The written repo contract must include the following: a. Securities which are acceptable for transfer are: (1) Direct U.S. governments (2) Federal agencies backed by the full faith and credit of the U.S. government (and FNMA and FHLMC) b. The term of the repo may be up to 30 days c. The collateral must be delivered to the Trustee (if the Trustee is not supplying the collateral) or third party acting as agent for the Trustee (if the Trustee is supplying the collateral) before/simultaneous with payment (perfection by possession of certificated securities). d. The Trustee has a perfected first priority security interest in the collateral. e. Collateral is free and clear of third-party liens and in the case of an SIPC broker was not acquired pursuant to a repo or reverse repo. f. Failure to maintain the requisite collateral percentage, after a two day restoration period, will require the Trustee to liquidate collateral. g. Valuation of Collateral (1) The securities must be valued by such dealer bank or securities firm weekly, marked-to-market at current market price plus accrued interest. (a) The value of collateral must be equal to 104% of the amount of cash transferred by the Trustee to the dealer bank or security firm under the repo plus accrued interest. If the value of securities held as collateral slips below 104% of the value of the cash transferred by the Trustee, then additional cash and/or acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105%. 3. A legal opinion must be delivered to the Trustee to the effect that the Repo meets guidelines under state law for legal investment of public funds. (j) the Local Agency Investment Fund maintained by the State of California; and (k) Shares in a California common law trust established pursuant to Title I, Division 7, Chapter 5 of the California Government Code which invests exclusively in investments permitted by Section 53635 of Title 5, Division 2, Chapter 4 of the California Government Code, as it may be amended, including but not limited to the California Asset Management Program (CAMP). "Authorized Official" means the General Manager, Chief Financial Officer, or any other officer of the District duly authorized by the Board of Directors for that purpose. -5- "Average Annual Debt Service" means the total aggregate Debt Service for the entire period during which the Bonds are Outstanding divided by the number of Fiscal Years or portions thereof during which the Bonds are Outstanding. "Board of Directors" means the Board of Directors of the District or any other legislative body of the District hereafter provided for pursuant to law. "Bond Counsel" means any attorney at law or firm of attorneys, of nationally recognized standing in matters pertaining to the federal tax exemption of interest on bonds issued by states and political subdivisions, and dilly admitted to practice law before the highest court of any state of the United States of America. "Bond Law" means Sections 53570 et seq. and 53580 et seq. of the California Government Code, as in effect on the Closing Date. "Bond Registration Books" means the books maintained by the Trustee pursuant to Section 2.08 for the registration and transfer of ownership of the Bonds. "Bonds" means, collectively, the Series 2001 Bonds and any Parity Bonds issued and at any time Outstanding hereunder and under a Parity Bonds Instrument. "Bond Year" means the twelve-month period beginning on the anniversary of the Closing Date in each year and ending on the day prior to the anniversary date of the Closing Date in the following year except that (i) the first Bond Year shall begin on the Closing Date, and (ii) the last Bond Year may end on a redemption date prior to mahuity of the Bonds. "Business Day" means any day other than a Saturday, Sunday or a day on which the Trustee is authorized by law to remain closed. "Certificate of the District" means a certificate in writing signed by an Authorized Official of the District, or by any other officer of the District duly authorized by the Board of Directors for that purpose. "Charges" means fees, tolls, assessments, rates and charges prescribed by the Board of Directors for the services and facilities of the Water System furnished by the District. "Closing Date" means the date upon which there is an exchange of the Series 2001 Bonds for the proceeds representing the purchase of such Series by the Original Purchaser thereof. "Continuing Disclosure Certificate" means that certain Continuing Disclosure Certificate executed by the District and dated the date of original execution and delivery of the Series 2001 Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. "Cost of Issuance Fund" means the Fund by that name established pursuant to Section 3.05, "Costs of Issuance" means all expenses incurred in connection with the authorization, issuance, sale and delivery of the Series 2001 Bonds, including but not limited to compensation, fees and expenses of the District and the Trustee and their respective counsel, compensation to any financial consultants and underwriters, legal fees and expenses, municipal bond insurance or surety bond premiums, filing and recording costs, rating agency fees, costs of preparation and reproduction of documents and costs of printing. -6- "Debt Service" means, during any period of computation, the amount obtained for such period by totaling the following amounts: (a) The principal amount of all Outstanding Serial Bonds payable by their tenns in such period; (b) The principal amount of all Outstanding Term Bonds scheduled to be paid or redeemed by operation of mandatory Sinking Fund Installments in such period; and (c) The interest which would be due during such period on the aggregate principal amount of Bonds which would be Outstanding in such period if the Bonds are paid or redeemed as scheduled. "Debt Service Fund" means the fund by that name established and held by the Trustee pursuant to Section 4.03. "Defeasance Obligations" means (a) cash, (b) non-callable Federal Securities described in paragraph (a) of the definition thereof ("Treasuries"), (c) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated or (d) pre-refunded municipal obligations rated "AAA" and "Aaa" by S&P and Moody's, respectively (or any combination thereof). "Depository" means (a) initially, DTC, and (b) any other Securities Depositories acting as Depository pursuant to Section 2.11. "Depository System Participant" means any participant in the Depository's book-entry system. "District" means the South Tahoe Public Utility District, a public utilities district organized and existing under the Constitution and laws of the State, and any successor thereto. "DTC" means The Depository Trust Company, New York, New York, and its successors and assigns. "Escrow Agreement" means the Escrow Deposit and Trust Agreement, dated the Closing Date, by and among the District and the Escrow Bank, with respect to the establishment and administration of the Escrow Fund for the purpose of providing for the payment and prepayment of the Installments due under the 1994 Installment Sale Agreement. "Escrow Bank" means U.S. Trust Company, N.A., a national banking association organized and existing under and pursuant to the laws of the United States of America. "Escrow Fund" means the Escrow Fund established and held by the Escrow Bank pursuant to the Escrow Agreement. "Event of Default" means any of the events described in Section 8.01. "Fair Market Value" means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section 1273 of the Tax Code) and, otherwise, the term "Fair Market Value" means the acquisition price in a bona fide arm's length -7- transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, (iii) the investment is a United States Treasury Security--State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) any commingled investment fund in which the District and related parties do not own more than a ten percent (10%) beneficial interest therein if the return paid by the fund is without regard to the source of the investment. "Federal Securities" means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein: (a) direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America); and (b) obligations of any department, agency or instrumentality of the United States of America the timely payment of principal of and interest on which are unconditionally and fully guaranteed by the United States of America. "Fiscal Year" means the period commencing on July 1 of each year and terminating on the next succeeding June 30. "Gross Revenues" means, for any period of computation, all gross charges received for, and all other gross income and revenues derived by the District from, the ownership or operation of the Water System or otherwise arising from the Water System during such period, including but not limited to (a) all Charges received by the District for use of the Water System, (b) all receipts derived from the investment of hmds held by the District or the Trustee under this Indenture, (c) transfers from (but exclusive of any transfers to) any rate stabilization reserve accounts, and (d) all moneys received by the District from other public entities whose inhabitants are served pursuant to contracts with the District. "Improvement" means any addition, extension, improvement, equipment, machinery or other facilities to or for the Water System. "Indenture" means this Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified or amended by any Parity Bonds Instrument pursuant to the provisions hereof. "Independent Certified Public Accountant" means any certified public accountant or firm of such accountants appointed and paid by the District, and who, or each of whom- (a) is in fact independent and not under domination of the District; (b) does not have any substantial identity of interest, direct or indirect, with the District; and (c) is not and no member of which is connected with the District as an officer or employee of the District, but who may be regularly retained to make annual or other audits of the books of or reports to the District. "Independent Consultant" means any financial or engineering consultant (including without limitation any Independent Certified Public Accountant) with an established reputation -8- in the field of municipal finance or firm of such consultants appointed and paid by the District, and who, or each of whom- (a) is in fact independent and not under domination of the District; (b) does not have any substantial identity of interest, direct or indirect, with the District; and (c) is not and no member of which is connected with the District as an officer or employee of the District, but who may be regularly retained to make annual or other audits of the books of or reports to the District. "Information Services" means Financial Information, Inc.'s "Daily Called Bond Service", 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny Information Services' "Called Bond Service", 55 Broad Street, 28th Floor, New York, New York 10004; Moody's Investors Service "Municipal and Government," 99 Church Street, 8th Floor, New York, New York 10007, Attention: Municipal News Reports; Standard & Poor's Corporation "Called Bond Record," 25 Broadway, 3rd Floor, New York, New York 10041; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/ or such other services providing information with respect to called bonds as the District may designate in a Request of the District delivered to the Trustee. "Interest Payment Date" means, with respect to the Series 2001 Bonds, February 1 and August 1 in each year, beginning February 1, 2002, and with respect to any Parity Bonds, any date on which interest is due and payable thereon, and continuing so long as any Bonds or Parity Bonds remain Outstanding. "Interest Requirement" means, as of any particular date of calculation, the amount equal to any unpaid interest then due and payable, plus an amount which will on the next succeeding Interest Payment Date be equal to the interest to become due and payable on the Bonds on such next succeeding Interest Payment Date. "Maintenance and Operation Costs" means the reasonable and necessary costs spent or incurred by the District for maintaining and operating the Water System, calculated in accordance with sound accounting principles, and all reasonable and necessary expenses of management and repair and other expenses to maintain and preserve the Water System in good repair and working order, and including all reasonable and necessary administrative costs of the District attributable to the Water System and the Bonds, such as salaries and wages and the necessary contribution to retirement of employees, overhead, insurance, taxes (if any), expenses, compensation and indemnification of the Trustee, and fees of auditors, accountants, attorneys or engineers, and including all other reasonable and necessary costs of the District or charges required to be paid by it to comply with the terms of the Bonds or this Indenture, but excluding depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature. "Maximum Annual Debt Service" means, as of the date of calculation, the maximum amount of Debt Service for the current or any future Fiscal Year. "Minimum Rating" means a long-term rating of A or better from S&P or Moody's or a short-term rating which is in the highest general rating category of S&P and Moody's, in any event determined without regard to any refinement or gradation of such rating by a numerical modifier, a plus or a minus sign, or otherwise. "Moody's" means Moody's Investors Service, a corporation duly organized and existing under and by virtue of the laws of the State of Delaware, and its successors or assigns, except -9- that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency selected by the District. "Municipal Bond Insurance Policy" means the municipal bond insurance policy issued by the Municipal Bond Insurer insuring the payment, when due, of the principal of and interest on the Bonds. "Municipal Bond Insurer" means assigns. , and its successors and "Net Proceeds", when used with reference to any insurance or condemnation award or sale of property, means the gross proceeds from the sale of property or insurance or condemnation award with respect to which that term is used remaining after payment of all expenses (including attorneys' fees and any extraordinary expenses of the Trustee) incurred in the collection of such gross proceeds. "Net Revenues" means, with respect to the Water System, for any period of computation, the amount of the Gross Revenues received from the Water System during such period, less the amount of Maintenance and Operation Costs of the Water Systembecoming payable during such period. "Nominee" means CD & Co. Inc., and its successors and assigns. "1999 Installment Sale Agreement" means that certain Installment Sale Agreement, dated as of May 20, 1999, between the District and LaSalle National Bank, in the principal amount of $4,965,000. "Original Purchaser" means Bonds from the District. , the first purchaser of the Series 2001 "Outstanding", when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 7.03) all Bonds theretofore executed, issued and delivered by the District tmder this Indenture except- (a) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cancella tion; (b) Bonds paid or deemed to have been paid within the meaning of Section 9.03; and (c) Bonds in lieu of or in substitution for which other Bonds shall have been executed, issued and delivered by the District pursuant to this Indenture or any Parity Bonds Instrument. "Owner" or "Bond Owner" or "Bondowner", when used with respect to any Bond, means the person in whose name the ownership of such Bond shall be registered on the Bond Registration Books. "Parity Bonds" means all bonds, notes or other obligations (including without limitation long-term contracts, loans, sub-leases or other legal financing arrangements) of the District payable from and secured by a pledge of and lien upon any of the Net Revenues issued or incurred pursuant to Section 3.06 or 3.07. -10- "Parity Bonds Instrument" means the resolution, trust indenture or installment sale agreement adopted, entered into or executed and delivered by the District, and under which Parity Bonds are issued. "Participating Underwriter" has the meaning ascribed thereto in the Continuing Disclosure Certificate. "Principal Corporate Trust Office" means the corporate trust office of the Trustee at the address set forth in Section 9.10, or such other or additional offices as may be designated by the Trustee from time to time. "Principal Installment" means with respect to any particular Principal Installment Date, an amount equal to the sum of (i) the aggregate principal amount of Outstanding Serial Bonds payable on such Principal Installment Date as determined by the applicable Parity Bonds Instrument (but not including Sinking Fund Installments) and (ii) the aggregate of Sinking Fund Installments with respect to all Outstanding Term Bonds payable on such Principal Installment Date as determined hereby and by the applicable Parity Bonds Instrument. "Principal Payment Date" means the date on which Principal Payments are required to be made pursuant to Section 2.01. "Oualified Surety Bond" means an irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank or insurance company and deposited with the Trustee pursuant to Section 4.05(b), provided that all of the following requirements are met at the time of acceptance thereof by the Trustee: (a) the long-term credit rating of such bank or insurance company is "A" or better from each rating agency which then maintains a rating on the Bonds; (b) such letter of credit or surety bond has a term of at least twelve (12) months; (c) such letter of credit or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released pursuant to Section 4.05(b); and (d) the Trustee is authorized pursuant to the terms of such letter of credit or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the Debt Service Fund for the purpose of making payments required pursuant to Section 4.04. "Rating Agency" means, as of any date, each of the following rating agencies which then maintains a rating on any of the Bonds: (a) Moody's and (b) S&P. "Record Date" means, with respect to the Series 2001 Bonds, the fifteenth (15th) calendar day of the month inunediately preceding an Interest Payment Date or, with respect to any Parity Bonds, any other date established in the applicable Parity Bonds Instrument. "Redemption Account" means the Account by that name established and held by the Trustee pursuant to Section 4.03. "Redemption Price" means, with respect to any Bond, the principal amount thereof, plus the applicable premium, if any, payable upon redemption thereof pursuant to this Indenhrre and the Parity Bonds Instrument pursuant to which the same was issued. "Request of the District" means a request in writing signed by an Authorized Official of the District, or by any other officer of the District duly authorized by the Board of Directors for tha t purpose. "Reserve Account" means the Account by that name established and held by the Trustee pursuant to Section 4.03. -11- "Reserve Requirement" means, for any particular Series, an amount equal to the lesser of: (i) Maximum Annual Debt Service on such Series; (ii) ten percent (10%) of the principal amount of such Series; or (ill) 125% of Average Annual Debt Service on such Series. "S&P" means Standard & Poor's Corporation, a corporation duly organized and existing under and by virtue of the laws of the State of New York, and its successors or assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term "S&P" shall be deemed to refer to any other nationally recognized securities rating agency selected by the District. "Serial Bonds" means all Bonds other than Term Bonds. "Series" when used with respect to less than all of the Bonds, means and refers to all of the Bonds delivered on original issuance in a simultaneous transaction, regardless of variations in maturity, interest rate or other provisions, and any Bond thereafter delivered in lieu of or substitution for any of such Bonds pursuant to Sections 2.02(i), 2.05, 2.06, 2.07, 2.09 and 7.04. "Series 2001 Bonds" means the South Tahoe Public Utility District Water Revenue Refunding Bonds, Series 2001, issued and at any time Outstanding hereunder. "Sinking Fund Installment" means, with respect to any particular date, the amount of money required hereby or by or pursuant to a Parity Bonds Instrument to be paid by the District on such date toward the retirement of any particular Term Bonds prior to their respective stated maturities. "State" means the State of California. "Subordinate Bonds" means all bonds, notes or other obligations (including without limitation long-term contracts, loans, sub-leases or other legal financing arrangements) of the District payable from and secured by a pledge of and lien upon any of the Net Revenues issued or incurred pursuant to Section 3.08. "Subordinate Bonds Instrument" means the resolution, trust indenture or installment sale agreement adopted, entered into or executed and delivered by the District, and under which Subordinate Bonds are issued. "Supplemental Indenture" means any supplement or amendment to this Indenture which complies with the provisions of Section 7.01 or 7.02. "Tax Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of the Bonds or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the date of issuance of the Bonds, together with applicable proposed, temporary and final regulations promulgated, and applicable official public guidance published, under the Tax Code. "Tax Regulations" means temporary and permanent regulations promulgated under the Tax Code. "Term Bonds" means, with respect to any Series 2001 Bonds or any Parity Bonds, such Series 2001 Bonds or Parity Bonds which are payable prior to their stated maturity by operation of Sinking Fund Installments. "Trustee" means U.S. Trust Company, N.A., appointed by the District to act as trustee hereunder pursuant to Section 6.01, and its assigns or any other corporation or association which may at any time be substituted in its place, as provided in Section 6.01. -12- "Water System" means the existing water system of the District, comprising all facilities for the collection, transmission, transportation, treatment and distribution of water for the residents, commercial and industrial consumers of water in the District. SECTION 1.02. Rilles of Construction. All references in this Indenture to "Articles," "Sections," and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Indenture; and the words "herein/' "hereof," "hereunder," and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or subdivision hereof. Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. Unless the context shall otherwise indicate, words importing the singular number shall include the plural number and vice versa, and words importing persons shall include corporations and associations, including public bodies, as well as natural persons. SECTION 1.03. Authorization and Purpose of Series 2001 Bonds. The District has reviewed all proceedings heretofore taken relative to the authorization of the Series 2001 Bonds and has found, as a result of such review, and hereby finds and determines that all things, conditions, and acts required by law to exist, happen and/or be performed precedent to and in the issuance of the Series 2001 Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and the District is now authorized, as an exercise of the municipal affairs power of the District as a chartered District under the constitution and laws of the State and pursuant to the Bond Law and each and every requirement of law, to issue the Series 2001 Bonds in the manner and form provided in this Indenture. Accordingly, the District hereby authorizes the issuance of the Series 2001 Bonds pursuant to the Bond Law and this Indenture for the purpose of providing funds to refund the 1994 Installment Sale Agreement, to fund the Reserve Account for the Series 2001 Bonds, and to pay Costs of Issuance of the Series 2001 Bonds. SECTION 1.04. Equal Security. In consideration of the acceptance of the Bonds by the Owners thereof, this Indenture shall be deemed to be and shall constitute a contract among the District, the Trustee and the Owners from time to time of the Bonds; and the covenants and agreements herein set forth to be performed on behalf of the District shall be for the equal and proportionate benefit, security and protection of all Owners of the Bonds without preference, priority or distinction as to security or otherwise of any of the Bonds over any of the others by reason of the number or date thereof or the time of sale, execution or delivery thereof, or otherwise for any cause whatsoever, except as expressly provided therein or herein. -13- ARTICLE II ISSUANCE OF SERIES 2001 BONDS SECTION 2.01. Terms of Series 2001 Bonds. The Series 2001 Bonds authorized to be issued by the District under and subject to the Bond Law and the terms of this Indenture shall be designated the "South Tahoe Public Utility District Water Revenue Refunding Bonds, Series 2001", and shall be issued in the original principal amount of Dollars ($-------). The Series 2001 Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof, so long as no Series 2001 Bond shan have more than one maturity date. The Series 2001 Bonds shall mature on August 1 in each of the years and in the amounts, and shall bear interest at the rates, as follows: Maturity Date (Augustl ) Principal Amount Interest Rate Per Annum 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 % Interest on the Series 2001 Bonds shall be payable on each Interest Payment Date to the person whose name appears on the Bond Registration Books as the Owner thereof as of the Record Date immediately preceding each such Interest Payment Date, such interest to be paid by check or draft of the Trustee mailed by first class mail to the Owner or, at the option of any Owner of at least $1,000,000 aggregate principal amount of the Bonds with respect to which written instructions have been filed with the Trustee prior to the Record Date, by wire transfer, at the address of such Owner as it appears on the Bond Registration Books. In the event there exists a default in payment of interest due on such Interest Payment Date, such interest shall be payable on a payment date established by the Trustee to the persons in whose names the Bonds are registered at the close of business on a special record date for the payment of such defaulted interest established by notice mailed by the Trustee to the registered Owners of the Bonds not less than 15 days preceding such special record date. Principal of and premitun (if any) on any Series 2001 Bond shall be paid upon presentation and surrender thereof at the Principal Corporate Trust Office of the Trustee in San Francisco, California. Both the principal of and interest and premium (if any) on the Series 2001 Bonds shall be payable in lawful money of the United States of America. The Series 2001 Bonds shall be dated August 1, 2001 and bear interest based on a 360- day year comprised of twelve 30-day months from the Interest Payment Date next preceding the date of authentication thereof, unless said date of authentication is an Interest Payment -14- Date, in which event such interest is payable from such date of authentication, and unless said date of authentication is prior to January 15,2002, in which event such interest is payable from August I, 2001; provided, however, that if, as of the date of authentication of any Series 2001 Bond, interest thereon is in default, such Series 2001 Bond shall bear interest from the date to which interest has previously been paid or made available for payment thereon in full. SECTION 2.02. Redemption of Series 2001 Bonds. (a) Optional Redemption. The Bonds maturing on or before August 1, 2009 are not subject to optional redemption prior to maturity. The Bonds maturing on or after August 1, 2010 are subject to redemption prior to their respective maturity dates, at the option of the District, as a whole or in part on any date, in any order directed by the District, and if the District fails to direct the order, pro rata among maturities, and by lot within a maturity, on any date on or after August 1, 2009, from any source of available funds, at the following respective Redemption Prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Redemption Periods August 1, 2009 through July 31, 2010 August 1, 2010 and thereafter Redemption Prices 101% 100% The District shall be required to give the Trustee written notice of its intention to redeem Series 2001 Bonds under this subsection (a), and shall deposit all amounts required for such redemption with the Trustee at least one (1) day prior to the date fixed for such redemption. (b) Special Mandatory Redemption From Insurance or Condemnation Proceeds. The Series 2001 Bonds shall also be subject to redemption as a whole or in part on any date, in any order directed by the District, and if the District fails to direct the order, pro rata among maturities, and by lot within a maturity, to the extent of the Net Proceeds of hazard insurance not used to repair or rebuild the Water System or the Net Proceeds of condemnation awards received with respect to the Water System to be used for such purpose pursuant to Sections 5,04 or 5.05, at a Redemption Price equal to the principal amount of the Series 2001 Bonds plus interest accrued thereon to the date fixed for redemption, without premium. (c) Additional Bonds. Any Parity Bonds issued pursuant to Section 3.06 of this Indenture may be made subject to redemption prior to maturity, as a whole or in part, at such time or times, and upon payment of the principal amount thereof and accrued interest thereon plus such premium or premiums, if any, as may be determined by the District in the applicable Parity Bonds Instrument. (d) Notice of Redemption. Unless waived by any Owner of Bonds to be redeemed, notice of any redemption of Bonds shall be given, at the expense of the District, by the Trustee by mailing a copy of a redemption notice by first class mail at least 30 days and not more than 60 days prior to the date fixed for redemption to the Owner of the Bond or Bonds to be redeemed at the address shown on the Bond Registration Books; provided, that neither the failure to receive such notice nor any immaterial defect in any notice shall affect the sufficiency of the proceedings for the redemption of the Bonds. (e) Contents of Notice. All notices of redemption shall be dated and shall state: (i) the redemption date, (ii) the Redemption Price, -15- (iii) if fewer than all Outstanding Bonds are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the Bonds to be redeemed, (iv) that on the redemption date the Redemption Price will become due and payable with respect to each such Bond or portion thereof called for redemption, and that interest with respect thereto shall cease to accrue from and after said date, and (v) the place or places where such Bonds are to be surrendered for payment of the Redemption Price, which places of payment may include the Principal Corporate Trust Office of the Trustee. (f) Deposit of Money. At least one (1) day prior to any redemption date, the District shall deposit with the Trustee an amount of money sufficient to pay the Redemption Price of all the Bonds or portions of Bonds which are to be redeemed on that date. (g) Consequences of Notice. Notice of redemption having been given as aforesaid, the Bonds or portions of Bonds so to be redeemed shall, on the redemption date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the District shall default in the payment of the Redemption Price) such Bonds or portions of Bonds shall cease to have interest accrue thereon. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Trustee at the Redemption Price. Installments of interest due on or prior to the redemption date shall be payable as herein provided for payment of interest. Upon surrender for any partial redemption of any Bond, there shall be prepared for the Owner a new Bond or Bonds of the same maturity in the amount of the unredeemed principal. All Bonds which have been redeemed shall be cancelled and destroyed by the Trustee and shall not be redelivered. Neither the failure of any Bond Owner to receive any notice so mailed nor any defect therein shall affect the sufficiency of the proceedings for redemption of any Bonds nor the cessation of accrual of interest thereon. (h) Additional Notice. In addition to the foregoing notice, further notice shall be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed: (i) Each further notice of redemption given hereunder shall contain the information required above for an official notice of redemption plus (A) the CUSIP numbers of all Bonds being redeemed; (B) the stated interest rate with respect to each Bond being redeemed; (C) the maturity date of each Bond being redeemed; and (D) any other descriptive information needed to identify accurately the Bonds being redeemed. (ii) Each further notice of redemption shall be sent at least 35 days before the redemption date by registered or certified mail or overnight delivery service to all registered securities depositories then in the business of holding substantial amounts of instruments of types comprising the Bonds, and, on the date notice is mailed to Bond Owners, to one or more Information Services. (iii) Upon the payment of the Redemption Price of the Bonds being redeemed, each check or other transfer of funds issued for such purpose shall bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. (i) Partial Redemption of Bonds. In the event only a portion of any Bond is called for redemption, then upon surrender of such Bond redeemed in part only, the District shall execute and the Tmstee shall authenticate and deliver to the Owner, at the expense of the District, a -16- new Bond or Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond or Bonds. (j) Manner of Redemption. Whenever any Bonds are to be selected for redemption, the Trustee shall determine, by lot, the numbers of the Bonds to be redeemed, and shall notify the District thereof. (k) Purchase of Bonds in lieu of Redemption. In lieu of redemption of Bonds as provided in subsection (a) above, amounts in the Redemption Account of the Debt Service Fund may also be used and withdrawn by the Trustee at any time, upon the Request of the District filed with the Trustee no later than April 15 in any year, for the purchase of Bonds at public or private sale as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Debt Service Fund) as the District may in its discretion determine, but not to exceed the principal amount of such Bonds plus the redemption premium applicable on the next ensuing optional redemption date. The District shall, at the time of any such purchase, pay to the Trustee for deposit in the Debt Service Fund the amount of any deficiency in such Fund which may be caused by such purchase. All Bonds purchased pursuant to this Section shall be cancelled. All Bonds redeemed pursuant to this Section and all Bonds purchased by the District pursuant to this subsection (k) shall be cancelled and destroyed pursuant to Section 9.08. SECTION 2.03. Form of Series 2001 Bonds. The Series 2001 Bonds, the Trustee's certificate of authentication, and the assignment to appear thereon, shall be substantially in the respective forms set forth in Exhibit A attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Indenhrre. SECTION 2.04. Execution of Series 2001 Bonds, The Series 2001 Bonds shall be signed in the name and on behalf of the District with the manual or facsimile signatures of its President and its Chief Financial Officer and attested by the manual or facsimile signature of the Clerk of the Board under the seal of the District. Such seal may be in the form of a facsimile of the District's seal and shall be imprinted or impressed upon the Series 2001 Bonds. The Series 2001 Bonds shall then be delivered to the Trustee for authentication by it. In case any officer who shall have signed any of the Series 2001 Bonds shall cease to be such officer before the Series 2001 Bonds so signed shall have been authenticated or delivered by the Trustee or issued by the District, such Series 2001 Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the District as though the individual who signed the same had continued to be such officer of the District. Also, any Series 2001 Bond may be signed on behalf of the District by any individual who on the actual date of the execution of such Series 2001 Bond shall be the proper officer although on the nominal date of such Series 2001 Bond such individual shall not have been such officer. Only such of the Series 2001 Bonds as shall bear thereon a certificate of authentication in substantially the form set forth in Exhibit A, manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the Trustee shall be conclusive evidence that the Series 2001 Bonds so authenticated have been duly authenticated and delivered hereunder and are entitled to the benefits of this Indenture. SECTION 2.05. Transfer of Series 2001 Bonds. Any Series 2001 Bond may, in accordance with its terms, be transferred upon the Bond Registration Books by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Series 2001 Bond for cancellation, accompanied by delivery of a written instrument of transfer in a form approved by the Trustee, duly executed. Whenever any Series 2001 Bond shall be surrendered for transfer, the District shall execute and the Trustee shall thereupon -17- authenticate and deliver to the transferee a new Bond or Bonds of like tenor, maturity and aggregate principal amount. No Series 2001 Bonds the notice of redemption of which has been mailed pursuant to Section 2.02(d) shall be subject to transfer pursuant to this Section. SECTION 2.06. Exchange of Series 2001 Bonds. Series 2001 Bonds may be exchanged at the Principal Corporate Trust Office of the Trustee, for Series 2001 Bonds of the same tenor and maturity and of other authorized denominations. No Series 2001 Bonds the notice of redemption of which has been mailed pursuant to Section 2.02(d) shall be subject to exchange pursuant to this Section. SECTION 2.07. Temporary Bonds. The Bonds may be issued initially in temporary form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the District and may contain such reference to any of the provisions of this Indenture as may be appropriate. Every temporary Bond shall be executed by the District and be registered and authenticated by the Trustee upon the same conditions and in substantially the same manner as the definitive Bonds. If the District issues temporary Bonds, it will execute and furnish definitive Bonds without delay, and thereupon the temporary Bonds may be surrendered, for cancellation, in exchange therefor at the Principal Corporate Trust Office of the Trustee, and the Trustee shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Indenture as definitive Bonds authenticated and delivered hereunder. SECTION 2.08. Bond Registration Books. The Trustee will keep or cause to be kept at its trust office sufficient Bond Registration Books for the registration and transfer of the Bonds, which shall at all times during regular business hours be open to inspection by the District; 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, Bonds as hereinbefore provided. SECTION 2.09. Bonds Mutilated, Lost. Destroyed or Stolen. If any Bond shall become mutilated, the District, at the expense of the Owner of said Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like maturity and principal amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled by it and delivered to, or upon the order of, the District. If any Bond issued hereunder shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the District and the Trustee and, if such evidence be satisfactory to them and indemnity satisfactory to them shall be given, the District, at the expense of the Bond Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like maturity and principal amount in lieu of and in substitution for the Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall have been called for redemption, instead of issuing a substitute Bond the Trustee may pay the same without surrender thereof upon receipt of indemnity satisfactory to the Trustee). The District may require payment of a reasonable fee for each new Bond issued under this Section and of the expenses which may be incurred by the District and the Trustee. Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original contractual obligation on the part of the District whether or not the Bond alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Indenhlre with all other Bonds secured by this Indenture. SECTION 2.10. Payment Procedure Pursuant to Municipal Bond Insurance Policy. -18- (a) In the event that, on the second Business Day, and again on the Business Day, prior to each Interest Payment Date, the Trustee has not received sufficient moneys (following a draw on the Reserve Account Surety Bond) to pay all principal of and interest on the Bonds due on the second following or following, as the case may be, Business Day, the Trustee shall immediately notify the Municipal Bond Insurer or its designee on the same Business Day by telephone or telecopy, confirmed in writing by registered or certified mail, of the amount of the deficiency. (b) If the deficiency is made up in whole or in part prior to or on the Interest Payment Date, the Trustee shall so notify the Municipal Bond Insurer or its designee. (c) In addition, if the Trustee has written notice that any Owner has been required to disgorge payments of principal of or interest on the Bonds to a trustee in bankruptcy or creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes a voidable preference to such Owner within the meaning of any applicable bankruptcy laws, then the Trustee shall notify the Municipal Bond Insurer or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified mail. (d) The Trustee is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for the Owners as follows: (i) If and to the extent there is a deficiency in amounts required to pay interest on the Bonds, the Trustee shall (A) execute and deliver to State Street Bank and Trust Company, N.A., or its successors under the Municipal Bond Insurance Policy (the "Insurance Trustee"), in form satisfactory to the Insurance Trustee, an instrument appointing the Municipal Bond Insurer as agent for such Owners in any legal proceeding related to the payment of such interest and an assignment to the Municipal Bond Insurer of the claims for interest to which such deficiency relates and which are to be paid by the Municipal Bond Insurer, (B) receive, on behalf of the respective Owners in accordance with the tenor of the Municipal Bond Insurance Policy, payment from the Insurance Trustee with respect to the claims for interest so assigned, and (C) disburse the same to such respective Owners, and (ii) If and to the extent of a deficiency in amounts required to pay principal of the Bonds, the Trustee shall (A) execute and deliver to the Insurance Trustee in form satisfactory to the Insurance Trustee an instrument appointing the Municipal Bond Insurer as agent for such Owner in any legal proceeding relating to the payment of such principal and an assignment to the Municipal Bond Insurer of any of the Bond surrendered to the Insurance Trustee of so much of the principal amount thereof as has not previously been paid or for which moneys are not held by the Trustee and available for such payment (but such assignment shall be delivered only if payment from the Insurance Trustee is received), (B) receive, on behalf of the respective Owners in accordance with the tenor of the Municipal Bond Insurance Policy, payment therefor from the Insurance Trustee, and (C) disburse the same to such Owners. (e) Payments with respect to claims for interest on and principal of the Bonds disbursed by the Trustee from proceeds of the Municipal Bond Insurance Policy shall not be considered to discharge the obligation of the District on such Bonds, and the Municipal Bond Insurer shall become the owner of such Bonds and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of subsection (d)(iii) or otherwise. -19- (f) Irrespective of whether any such assignment is executed and delivered, the District and the Trustee hereby agree for the benefit of the Municipal Bond Insurer that, (i) They recognize that to the extent the Municipal Bond Insurer makes payments, directly or indirectly (as by paying through the Trustee), on account of principal of or interest on the Bonds, the Municipal Bond Insurer will be subrogated to the rights of such Owners to receive from the District the amount of such principal and interest so paid, with interest thereon and solely from the sources stated in this Trust Indenture and the Bonds; and (ii) They will accordingly pay to the Municipal Bond Insurer the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the Municipal Bond Insurance Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in this Trust Indenture and the Bonds, but only from the sources and in the manner provided herein for the payment of principal and interest with respect to the obligations to Owners, and will otherwise treat the Municipal Bond Insurer as the owner of such rights to the amount of such principal and interest. SECTION 2.11. Book Entry System. (a) Original Delivery. The Bonds shall be initially delivered in the form of a separate single fully registered Bond (which may be typewritten) for each maturity of the Bonds. Upon initial delivery, the ownership of each such Bond shall be registered on the Bond Registration Books maintained by the Trustee pursuant to Section 2.08 hereof in the name of the Nominee. Except as provided in subsection (c), the ownership of all of the Outstanding Bonds shall be registered in the name of the Nominee on such Bond Registration Books. With respect to Bonds the ownership of which shall be registered in the name of the Nominee, the District and the Trustee shall have no responsibility or obligation to any Depository System Participant or to any person on behalf of which the District holds an interest in the Bonds. Without limiting the generality of the immediately preceding sentence, the District 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 Depository System Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Depository System Participant or any other person, other than a Bond Owner as shown in the Registration Books, of any notice with respect to the Bonds, including any notice of redemption, (Hi) the selection by the Depository of the beneficial interests in the Bonds to be redeemed in the event the District elects to redeem the Bonds in part, (iv) the payment to any Depository System Participant or any other person, other than a Bond Owner as shown in the Registration Books, of any amount with respect to principal, premium, if any, or interest represented by the Bonds or (v) any consent given or other action taken by the Depository as Owner of the Bonds. The District and the Trustee may treat and consider the person in whose name each Bond is registered as the absolute owner of such Bond for the purpose of payment of principal, premium, if any, and interest represented by such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers of ownership of such Bond, and for all other purposes whatsoever. The Trustee shall pay the principal, interest and premium, if any, represented by the Bonds only to the respective Owners or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge all obligations with respect to payment of principal, interest and premium, if any, represented by the Bonds to the extent of the sum or sums so paid. No person other than a Bond Owner shall receive a Bond evidencing the obligation of the District to make payments of principal, interest and premium, if any, pursuant to this Trust Indenture. Upon delivery by the Depository to the Nominee of written notice to the effect that the Depository -20- has determined to substitute a new Nominee in its place, such new nominee shall become the Nominee hereunder for all purposes; and upon receipt of such a notice the District shall promptly deliver a copy of the same to the Trustee. (b) Representation Letter. In order to qualify the Bonds for the Depository's book-entry system, the District shall execute and deliver to such Depository a letter representing such matters as shall be necessary to so qualify the Bonds. The execution and delivery of such letter shall not in any way limit the provisions of subsection (a) above or in any other way impose upon the District or the Trustee any obligation whatsoever with respect to persons having interests in the Bonds other than the Bond Owners. Upon the written acceptance by the Trustee, the Trustee shall agree to take all action reasonably necessary for all representations of the Trustee in such letter with respect to the Trustee to at all times be complied with. In addition to the execution and delivery of such letter, the District may take any other actions~ not inconsistent with this Trust Indenture, to qualify the Bonds for the Depository's book-entry program. (c) Transfers Outside Book-Entry System. In the event that either (i) the Depository determines not to continue to act as Depository for the Bonds, or (ii) the District determines to terminate the Depository as such, then the District shall thereupon discontinue the book-entry system with such Depository. In such event, the Depository shall cooperate with the District and the Trustee in the execution of replacement Bonds by providing the Trustee with a list showing the interests of the Depository System Participants in the Bonds, and by surrendering the Bonds, registered in the name of the Nominee, to the Trustee on or before the date such replacement Bonds are to be issued. The Depository, by accepting delivery of the Bonds, agrees to be bound by the provisions of this subsection (c). If, prior to the termination of the Depository acting as such, the District fails to identify another Securities Depository to replace the Depository, then the Bonds shall no longer be required to be registered in the Registration Books in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging Bonds shall designate, in accordance with the provisions hereof. In the event the District determines that it is in the best interests of the beneficial owners of the Bonds that they be able to obtain certificated Bonds, the District may notify the Depository System Participants of the availability of such certificated Bonds through the Depository. In such event, the Trustee will execute, transfer and exchange Bonds as required by the Depository and others in appropriate amounts; and whenever the Depository requests, the Trustee and the District shall cooperate with the Depository in taking appropriate action (y) to make available one or more separate certificates evidencing the Bonds to any Depository System Participant having Bonds credited to its account with the Depository, or (z) to arrange for another Securities Depository to maintain custody of a single certificate evidencing such Bonds, all at the District's expense. (d) Payments to the Nominee. Notwithstanding any other provision of this Trust Indenture to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal, interest and premium, if any, represented by such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the letter described in subsection (b) of this Section or as otherwise instructed by the Depository. -21- ARTICLE III ISSUE OF SERIES 2001 BONDS; PARITY BONDS SECTION 3.01. Issuance of Series 2001 Bonds. Upon the execution and delivery of this Indenture, the District shall execute and deliver Series 2001 Bonds in the aggregate principal amount of Dollars ($ ) to the Trustee for authentication and delivery to the Original Purchaser thereof upon the Request of the District. SECTION 3.02. Application of Proceeds of Sale of Series 2001 Bonds. Upon the receipt of payment for the Series 2001 Bonds on the Closing Date in the amount of $ (being an amount equal to the principal amount of the Series 2001 Bonds ($ ), plus accrued interest from August I, 2001 to the Closing Date, ($ ) less: (i) original issue discount ($ ); (ii) underwriter's discount ($ ); and (iii) the Municipal Bond Insurance Policy premium equal to $ , paid by the Underwriter directly to the Municipal Bond Issuer, the Trustee shall apply the proceeds of sale thereof as follows: (a) The Trustee shall deposit in the Debt Service Fund the amount of $ , representing accrued interest on the Series 2001 Bonds; (b) the Trustee shall deposit in the Reserve Account the amount of $ (c) the Trustee shall transfer to the Escrow Bank, for deposit to the Escrow Fund, and amount equal to $ ; and (d) The Trustee shall deposit in the Cost of Issuance Fund the remainder of such proceeds, in an amount equal to $ SECTION 3.03. Reserve Account. On the Closing Date the Trustee shall deposit in the Reserve Account the amount specified in Section 3.02(b), which is equal to the Reserve Requirement. Any deficiency therein shall be replenished from available Net Revenues pursuant to Section 4.03(3). The Reserve Requirement for an issue of Parity Bonds may be increased by any Parity Bonds Instrument establishing any Parity Bonds pursuant to Section 3.06. SECTION 3.04. Escrow Fund. There is created under the Escrow Agreement the "South Tahoe Public Utility District Water Revenue Refunding Bonds Escrow Fund", therein referred to as the "Escrow Fund", to be held in trust by the Escrow Bank. The Escrow Bank has been instructed by the District to invest and disburse moneys in the Escrow Fund for the purpose of paying the Installment Payments due under the 1994 Installment Sale Agreement when due until the 1994 Installment Sale Agreement is prepaid in full on April 30, 2003, and to prepay in full the then unpaid principal amount of the 1994 Installment Sale Agreement on April 30, 2003, together with a premium of 2%, as specified in Section 9.02 of the 1994 Installment Sale Agreement. SECTION 3.05. Cost of Issuance Fund. There is hereby created a fund to be known as the "South Tahoe Public Utility District Water Revenue Refunding Bonds, Series 2001 Cost of Issuance Fund" (the "Cost of Issuance Fund"), which the District hereby covenants and agrees to cause to be maintained and which shall be held in trust by the Trustee. The moneys in the Cost of Issuance Fund shall be used in the manner provided by law solely for the purpose of the payment of Costs of Issuance upon receipt by the Trustee of Requests of the District therefor, on or after the Closing Date. Any funds remaining in the Cost of Issuance Fund on January I, 2002, shall be transferred by the Trustee to the Debt Service Fund. -22- SECTION 3.06. Issuance of Parity Bonds. In addition to the Series 2001 Bonds, the District may, by Parity Bonds Instrument, issue or incur other loans, advances or indebtedness payable from Net Revenues to be derived from the Water System, to provide financing for the Water System, in such principal amount as shall be determined by the District. The District may issue or incur any such Parity Bonds subject to the following specific conditions which are hereby made conditions precedent to the issuance and delivery of such Parity Bonds: (a) The District shall be in compliance with all covenants set forth in this Indenture. (b) The Net Revenues of the Water System, calculated on sound accounting principles, as shown by the books of the District for the latest Fiscal Year or any more recent twelve (12) month period selected by the District ending not more than sixty (60) days prior to the adoption of the Parity Bonds Instrument pursuant to which such Parity Bonds are issued, as shown by the books of the District, plus, at the option of the District, any or all of the items hereinafter in this paragraph designated (i) and (ii), shall at least equal One Hundred Twenty percent (120%) of Maximrun Annual Debt Service, with Maximrun Annual Debt Service calculated on all Bonds to be Outstanding immediately subsequent to the issuance of such Parity Bonds which have a lien on Net Revenues of the Water System. The items any or all of which may be added to such Net Revenues for the purpose of issuing or incurring Parity Bonds hereunder are the following: (i) An allowance for Net Revenues from any additions to or improvements or extensions of the System to be made with the proceeds of such Parity Bonds, and also for Net Revenues from any such additions, improvements or extensions which have been made from moneys from any source but in any case which, during all or any part of such Fiscal Year or such twelve (12) month period, were not in service, all in an amount equal to ninety percent (90%) of the estimated additional average annual Net Revenues to be derived from such additions, improvements and extensions for the first thirty-six (36) month period in which each addition, improvement or extension is respectively to be in operation, all as shown in the written report of an Independent Consultant engaged by the District; and (ii) An allowance for earnings arising from any increase in the Charges which has become effective prior to the incurring of such additional indebtedness but which, during all or any part of such Fiscal Year or such twelve (12) month period, was not in effect, in an amount equal to the amount by which the Net Revenues would have been increased if such increase in Charges had been in effect during the whole of such Fiscal Year or such twelve (12) month period, all as shown in the written report of an Independent Consultant engaged by the Dis trict. (c) The Parity Bonds Instrument providing for the issuance of such Parity Bonds under this Section 3.06 shall provide that: (i) The proceeds of such Parity Bonds shall be applied to the acquisition, construction, improvement, financing or refinancing of additional facilities, improvements or extensions of existing facilities within the Water System, or otherwise for facilities, improvements or property which the District determines are of benefit to the Water System, or for the purpose of refunding any Bonds in whole or in part, including all costs (including costs of issuing such Parity Bonds and including capitalized interest on such Parity Bonds during any period which the District deems necessary or advisable) relating thereto; -23- Date; (ii) Interest on such Parity Bonds shall be payable on an Interest Payment (iii) The principal of such Parity Bonds shall be payable on August 1 in any year in which principal is payable; and (iv) Money or a Qualified Surety Bond as authorized by Section 4.05(b) shall be deposited in a reserve account for such Parity Bonds from the proceeds of the sale of such Parity Bonds or otherwise equal to the Reserve Requirement. SECTION 3.07. State Loans. The District may borrow money from the State to finance improvements to the Water System, without complying with the provisions of Section 3.06 (c) (ii), (ill) or (iv), and the obligation of the District to make payments to the State under the loan agreement memorializing said loan (the "State Loan") may be treated as a Parity Bond for purposes of this Indenture; provided that the District shall not make a payment on such State Loan (except as hereinafter expressly permitted) to the extent it would have the effect of causing the District to fail to make a timely payment on the Bonds. SECTION 3.08. Subordinate Bonds. Nothing in this Indenture shall prohibit or impair the authority of the District to issue bonds or other obligations secured by a lien on Gross Revenues or Net Revenues which is subordinate to the lien established hereunder, upon such terms and in such principal amounts as the District may determine; provided, that the District may issue or incur any such Subordinate Bonds subject to the following specific conditions which are hereby made conditions precedent to the issuance and delivery of such Subordinate Bonds: (a) The District shall be in compliance with all covenants set forth in this Indenture. (b) The Net Revenues of the Water System, calculated on sound accotmting principles, as shown by the books of the District for the latest Fiscal Year or any more recent twelve (12) month period selected by the District ending not more than sixty (60) days prior to the adoption of the Subordinate Bonds Instrument pursuant to which such Subordinate Bonds are issued, as shown by the books of the District, plus, at the option of the District, any or all of the items hereinafter in this paragraph designated (i) and (ii), shall at least equal One Hundred percent (100%) of Maximum Annual Debt Service, with Maximum Annual Debt Service calculated on all Bonds to be Outstanding immediately subsequent to the issuance of such Subordinate Bonds which have a lien on Net Revenues of the Water System. The items any or all of which may be added to such Net Revenues for the purpose of issuing or incurring Subordinate Bonds hereunder are the following: (i) An allowance for Net Revenues from any additions to or improvements or extensions of the System to be made with the proceeds of such Subordinate Bonds, and also for Net Revenues from any such additions, improvements or extensions which have been made from moneys from any source but in any case which, during all or any part of such Fiscal Year or such twelve (12) month period, were not in service, all in an amount equal to ninety percent (90%) of the estimated additional average annual Net Revenues to be derived from such additions, improvements and extensions for the first thirty-six (36) month period in which each addition, improvement or extension is respectively to be in operation, all as shown in the written report of an Independent Consultant engaged by the District; and -24- (ii) An allowance for earnings arising from any increase in the Charges which has become effective prior to the incurring of such additional indebtedness but which, during all or any part of such Fiscal Year or such twelve (12) month period, was not in effect, in an amount equal to the amount by which the Net Revenues would have been increased if such increase in Charges had been in effect during the whole of such Fiscal Year or such twelve (12) month period, all as shown in the written report of an Independent Consultant engaged by the District. (c) The Subordinate Bonds Instrument providing for the issuance of such Subordinate Bonds under this Section 3.08 shall provide that: (i) The proceeds of such Subordinate Bonds shall be applied to the acquisition, construction, improvement, financing or refinancing of additional facilities, improvements or extensions of existing facilities within the Water System, or otherwise for facilities, improvements or property which the District determines are of benefit to the Water System, or for the purpose of refunding any Bonds in whole or in part, including all costs (including costs of issuing such Subordinate Bonds and including capitalized interest on such Subordinate Bonds during any period which the District deems necessary or advisable) relating thereto; (ii) Interest on such Subordinate Bonds shall be payable on an Interest Payment Date; and (iii) The principal of such Subordinate Bonds shall be payable on August 1 in any year in which principal is payable. SECTION 3.09. Validity of Bonds. The validity of the authorization and issuance of the Bonds shall not be affected in any way by any proceedings taken by the District in connection with the Water System, and the recital contained in the Bonds that the same are issued pursuant to the Bond Law shall be conclusive evidence of their validity and of the regularity of their issuance. -25- ARTICLE IV PLEDG E OF NET REVENUES; FUNDS AND ACCOUNTS SECTION 4.01. Pledge of Net Revenues; Water Enterprise Fund. (a) The District hereby transfers, places a charge upon, assigns and sets over to the Trustee, for the benefit of the Owners, that portion of the Net Revenues which is necessary to pay the principal or Redemption Price of and interest on the Bonds in any Fiscal Year, together with all moneys on deposit in the Debt Service Fund, and such portion of the Net Revenues is hereby irrevocably pledged to the punctual payment of the principal or Redemption Price of and interest on the Bonds, on a parity with the 1999 Installment Sale Agreement and any Parity Bonds, excepting only the Angora Revenues, with respect to which this pledge shall be subordinate to the pledge of the Angora Revenues to the Angora Purchase Payments. The Net Revenues shall not be used for any other purpose while any of the Bonds remain Outstanding, except that out of Net Revenues there may be apportioned and paid such sums for such purposes, as are expressly permitted by this Article. Said pledge shall constitute a first, direct and exclusive charge and lien on the Net Revenues (other than the Angora Revenues, as to which such lien shall be subordinate to the pledge of the Angora Revenues to the Angora Purchase Payments), for the payment of the principal or Redemption Price of and interest on the Bonds in accordance with the terms thereof, on a parity with the 1999 Installment Sale Agreement and any Parity Bonds. (b) The Net Revenues constitute a trust fund for the security and payment of the principal or Redemption Price of and interest on the Bonds. The general fund of the District is not liable and the credit or taxing power of the District is not pledged for the payment of the principal or Redemption Price of and interest on the Bonds. The Owner of the Bonds shall not compel the exercise of the taxing power by the District or the forfeiture of its property. The principal or Redemption Price of and interest on the Bonds are not a debt of the District, nor a legal or equitable pledge, charge, lien or encumbrance, upon any of its property, or upon any of its income, receipts, or revenues except the Net Revenues of the Water System. SECTION 4.02. Receipt and Deposit of Revenues, The District covenants and agrees that all Gross Revenues, when and as received, will be received and held by the District in trust hereunder and will be deposited by the District in the Water Enterprise Fund and will be accounted for through and held in trust in the Water Enterprise Fund, and the District shall only have such beneficial right or interest in any of such money as in this Indenture provided. All such Gross Revenues shall be transferred, disbursed, allocated and applied solely to the uses and purposes hereinafter in this Article set forth, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the District. SECTION 4.03. Establishment of Funds and Accounts and Allocation of Revenues Thereto. The Debt Service Fund, as a special fund, and the Redemption Account and the Reserve Account, as special accounts therein, are hereby created. The Debt Service Fund and the Redemption Account and the Reserve Account therein shall be held and maintained by the Trustee. All Gross Revenues shall be held in trust by the Chief Financial Officer in the Water Enterprise Fund and shall be applied, transferred, used and withdrawn only for the purposes hereinafter authorized in this Article. -26- (1) Operating Costs. The Chief Financial Officer shall first pay from the moneys in the Water Enterprise Fund the budgeted Maintenance and Operation Costs as such Costs become due and payable. (2) Debt Service Fund. On or before the second Business Day prior to each Interest Payment Date, beginning January 30, 2002, the Chief Financial Officer shall transfer from the Water Enterprise Fund to the Trustee for deposit in the Debt Service Fund (i) an amount equal to the aggregate amount of interest to become due and payable on all Outstanding Bonds on the next succeeding Interest Payment Date, plus (ii) on or before the second Business Day prior to each Principal Installment Date, beginning July 30, 2002, an amount equal to the aggregate amount of Principal Installments (including any Sinking Fund Installments) becoming due and payable on all Outstanding Bonds on the next succeeding Principal Installment Date. All interest earnings and profits or losses on the investment of amounts in the Debt Service Fund shall be deposited in or charged to the Debt Service Fund and applied to the purposes thereof. No transfer and deposit need be made into the Debt Service Fund if the amount contained therein, taking into account investment earnings and profits, is at least equal to the Interest Requirement or Principal Installments to become due on the next Interest Payment Date or Principal Installment Date upon all Outstanding Bonds. (3) Reserve Account. After making the payments, allocations and transfers provided for in subsections (1) and (2) above, if the balance in the Reserve Account is less than the Reserve Requirement, the deficiency shall be restored by transfers from the first moneys which become available in the Water Enterprise Fund to the Trustee for deposit in the Reserve Account, such transfers to be made no later than the times provided in Section 4.08(a). (4) Surplus. As long as all of the foregoing payments, allocations and transfers are made at the times and in the manner set forth above in subsections (2) to (3), inclusive, any moneys remaining in the Water Enterprise Fund may at any time be treated as surplus and applied for any lawful purpose. SECTION 4.04. Application of Debt Service Fund. (a) The Trustee shall withdraw from the Debt Service Fund, prior to each Interest Payment Date, an amount equal to the Interest Requirement payable on such Interest Payment Date, and shall cause the same to be applied to the payment of said interest when due and is hereby authorized to apply the same to the payment of such interest by check or draft (or by wire transfer, as the case may be), as provided in Section 2.01. (b) The Trustee shall withdraw from the Debt Service Fund, prior to each Principal Installment Date, an amount equal to the principal amount of the Outstanding Serial Bonds, if any, maturing on said Principal Installment Date and any Sinking Fund Installments due and payable on said Principal Installment Date, and shall cause the same to be applied to the payment of the principal of said Bonds when due and is hereby authorized to apply the same to such payment upon presentation and surrender of the Bonds as they become due and payable, as provided in Section 2.01. (c) All withdrawals and transfers under the provisions of subsection (a) or subsection (b) of this Section shall be made not earlier than one (1) day prior to the Interest Payment Date or Principal Installment Date to which they relate, and the amount so withdrawn or transferred shall, for the purposes of this Indenture, be deemed to remain in and be part of the appropriate Account until such Interest Payment Date or Principal Installment Date. SECTION 4.05. Application of Reserve Account. -27- (a) In General. If at any time there shall not be sufficient amounts in the Debt Service Fund to make payment of Principal Installments or Redemption Price of or interest on the Bonds, the Trustee shall provide notice of such fact to the District, provided that no such notice shall be required to be given with respect to a withdrawal of amounts in excess of the Reserve Requirement or of withdrawals in connection with the refunding of the Bonds in whole or in part) and draw on the Reserve Account and pay into the appropriate Fund or Account the amount of the deficiency. Any amounts in the Reserve Account in excess of the Reserve Requirement (whether derived from interest or gain on investments or otherwise) shall, on August 2 of each year, be paid by the Trustee to the District for deposit in the Water Enterprise Fund. (b) Oualified Surety Bond. In the event the District satisfies the Reserve Requirement by delivering to the Trustee a Qualified Surety Bond, such Qualified Surety Bond, and any subsequent Qualified Surety Bond, shall provide that the Trustee is entitled to draw amounts thereunder when required by the provisions of this Indenture to make transfers from the Reserve Account to the Debt Service Fund in the event of a deficiency in any such account, provided that, in any such event, the Trustee shall first apply to any such deficiency the amount of cash (including cash represented by investments) then on deposit in the Reserve Account. (c) Cash to the District. To the extent that the Reserve Requirement has been satisfied by delivery of a Qualified Surety Bond under Section 4.05(b), any cash or Authorized Investments on deposit in the Reserve Account shall be paid by the Trustee to the District. SECTION 4.06. Application of Redemption Account. On or before the date which is at least two Business Days prior to any Interest Payment Date on which Series 2001 Bonds are subject to redemption pursuant to Section 2.02(a) or on which any Parity Bonds are subject to optional redemption pursuant to the provisions of the Parity Bonds Instrument authorizing such Parity Bonds, the Chief Financial Officer shall transfer from the Water Enterprise Fund to the Tmstee for deposit in the Redemption Account an amount at least equal to the Redemption Price (excluding accmed interest, which is payable from the Debt Service Fund) of such Bonds to be redeemed on such Interest Payment Date. In addition, the Chief Financial Officer shall transfer to the Trustee for deposit in the Redemption Account all amounts required to redeem any Series 2001 Bonds which are subject to redemption pursuant to Section 2.02 (b) and any Parity Bonds which are subject to redemption pursuant to any similar provision of the Parity Bonds Instrument authorizing such Parity Bonds, when and as such amounts become available, Amounts in the Redemption Account shall be applied by the Trustee solely for the purpose of paying the Redemption Price of Series 2001 Bonds to be redeemed pursuant to Sections 2.02 (a) or (b) and to pay the purchase price in the same manner and subject to the same limitation as purchasers of Bonds under Section 2.02(k) or the Redemption Price of any Parity Bonds to be redeemed pursuant to similar provisions of the Parity Bonds Instrument authorizing such Parity Bonds. If after all of the Bonds have been paid or deemed to have been paid, there are moneys remaining in the Redemption Account, such moneys shall be transferred by the Trustee to the Chief Financial Officer for deposit in the Water Enterprise Fund. SECTION 4.07. Investments. All moneys in the Water Enterprise Fund may be invested by the District from time to time in any investments authorized by law, consistent with the District's investment policy. All moneys in the Escrow Fund, the Debt Service Fund and Cost of Issuance Fund shall be invested by the Trustee solely in Authorized Investments, as directed pursuant to a Request of the District. In the absence of any such Request of the District, the Tmstee may (but shall not be required to) invest any such moneys in money market funds whose investments are restricted to Federal Securities, selected by the Trustee, which by their terms mature prior to the date on which such moneys are required to be paid out hereunder. Obligations purchased as an investment of moneys in any Fund or Account shall be deemed to be part of such Fund or Account, and all interest or gain derived from the investment of amounts in any of the Funds or Accounts established hereunder shall be deposited in the Fund -28- or Account from which such investment was made; and shall be accounted for and applied as provided in Section 4.04(c) (with respect to the Debt Service Fund) and Section 4.05(a) (with respect to the Reserve Account). For purposes of acquiring any investments hereunder, the Trustee may conuningle funds held by it hereunder with the written approval of the District. The Trustee may act as principal or agent in the acquisition of any investment. The Trustee shall incur no liability for losses arising from any investments made pursuant to this Section. SECTION 4.08. Valuation: Investments. (a) Method of Valuation and Frequency of Valuation. In computing the amount in any Fund or Account, Authorized Investments shall be valued at Fair Market Value. With respect to all Funds and Accounts, valuation shall occur quarterly, except in the event of a withdrawal from the Reserve Account, whereupon securities shall be valued immediately after such- withdrawal. If amounts on deposit in the Reserve Account shall, at any time, be less than the Reserve Requirement, such deficiency shall be made up from the first available moneys received after making the required deposits to the Debt Service Fund (i) over a period of not more than four (4) months, in four (4) substantially equal payments, in the event such deficiency results from a decrease in the market value of the Authorized Investments on deposit in the Reserve Account or (ii) over a period of not more than twelve (12) months, in twelve (12) substantially equal payments, in the event such deficiency results from a withdrawal from such Account. (b) Investment of Amounts Representing Accrued Interest. All amounts representing accrued interest shall be held by the Trustee in the Debt Service Fund, pledged solely to the payment of interest on the Bonds and invested only in Federal Securities maturing at such times and in such amounts as are necessary to match the interest payments to which they are pledged. (c) Additional Limitations. Except as otherwise provided in the following sentence, the District covenants that all investments of amounts deposited in any fund or account created by or pursuant to this Indenture, or otherwise containing gross proceeds of the Bonds (within the meaning of section 148 of the Tax Code) shall be acquired, disposed of, and valued (as of the date that valuation is required by this Indenture or the Tax Code) at Fair Market Value. Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Tax Code and (unless valuation is undertaken at least annually) investments in the Reserve Account shall be valued at their present value (within the meaning of section 148 of the Tax Code). -29- ARTICLE V COVENANTS OF THE DISTRICT; SPECIAL TAX COVENANTS SECTION 5.01. Punctual Payment: Compliance With Documents. The District shall punctually payor cause to be paid the interest and principal to become due with respect to all of the Bonds in strict conformity with the terms of the Bonds and of this Indenture, and will faithfully observe and perform all of the conditions, covenants and requirements of this Indenture and all Parity Bonds Instruments. SECTION 5.02. Against Encumbrances. The District will not mortgage or otherwise encumber, pledge or place any charge upon the Water System or any part thereof, or upon any of the Net Revenues, which would have the effect of materially impairing the Net Revenues. SECTION 5.03. Discharge of Claims. The District covenants that in order to fully preserve and protect the priority and security of the Bonds the District shall pay from the Net Revenues and discharge all lawful claims for labor, materials and supplies furnished for or in connection with the Water System which, if unpaid, may become a lien or charge upon the Net Revenues prior or superior to the lien of the Bonds and impair the security of the Bonds. The District shall also pay from the Net Revenues all taxes and assessments or other governmental charges lawfully levied or assessed upon or in respect of the Water System or upon any part thereof or upon any of the Net Revenues therefrom. SECTION 5.04. Acquisition, Construction or Financing of Improvements to the Water System. The District will acquire, construct, or finance Improvements to the Water System to be financed with the proceeds of any Parity Bonds with all practicable dispatch, and such Improvements will be made in an expeditious manner and in conformity with laws so as to complete the same as soon as possible. SECTION 5.05. Maintenance and Operation of Water System in Efficient and Economical Manner. The District covenants and agrees to maintain and operate the Water System in an efficient and economical manner and to operate, maintain and preserve the Water System in good repair and working order. SECTION 5.06. Against Sale, Eminent Domain, (a) The District will not sell, lease or otherwise dispose of the Water System or any part thereof essential to the proper operation of the Water System or to the maintenance of the Net Revenues except as herein expressly permitted. The District will not enter into any lease or agreement which impairs the operation of the Water System or any part thereof necessary to secure adequate Net Revenues for the payment of the interest on and principal or Redemption Price, if any, on the Bonds, or which would otherwise impair the rights of the Holders with respect to the Net Revenues or the operation of the Water System. Any real or personal property which has become non-operative or which is not needed for the efficient and proper operation of the Water System, or any material or equipment which has worn out, may be disposed of in such a manner as the District determines. (b) If all or any part of the Water System shall be taken by eminent domain proceedings, the Net Proceeds realized by the District therefrom shall be deposited by the District with the Trustee in a special fund in trust and applied by the District to the cost of acquiring or constructing or financing Improvements to the Water System if (A) the District first secures and files with the Trustee a Certificate of the District showing (i) the estimated loss in annual Net Revenues, if any, suffered, or to be suffered, by the District by reason of such eminent domain proceedings, (ii) a general description of the Improvements to the Water System then proposed -30- to be acquired or constructed by the District from such Net Proceeds, and (iii) an estimate of the additional Net Revenues to be derived from such Improvements; and (B) the Trustee, on the basis of such Certificate of the District, determines that such additional Net Revenues will sufficiently offset the loss of Net Revenues, resulting from such eminent domain proceedings so that the ability of the District to meet its obligations hereunder will not be substantially impaired, which determination shall be final and conclusive. If the foregoing conditions are met, the District shall then promptly proceed with the acquisition or construction or financing of such Improvements substantially in accordance with such Certificate of the District and payments therefor shall be made by the Trustee from such Net Proceeds and from other moneys of the District lawfully available therefor, and any balance of such Net Proceeds not required by the District for the purposes aforesaid shall be deposited in the Water Enterprise Fund. If the foregoing conditions are not met, then such Net Proceeds shall be applied by the Trustee pro rata to the redemption or purchase of the Bonds of each Series then Outstanding in the proportion which the principal amount of the Outstanding Bonds of each Series bears to the aggregate principal amount of all Bonds then Outstanding. If the Trustee is unable to purchase or redeem Bonds in amounts sufficient to exhaust the available moneys allocable to each such Series, the remainder of such moneys for each such Series shall be held in trust by the Trustee and applied to the payment of the Bonds of such Series 2001s the same become due by their terms, and, pending such application, such remaining moneys may be invested by the Trustee in the manner provided in Section 4.08 for the investment of moneys in the Reserve Account. SECTION 5.07. Insurance. The District covenants that it shall at all times maintain such insurance on the Water System as is customarily maintained with respect to works and properties of like character against accident to/ loss of or damage to such works or properties. If any useful part of the Water System shall be damaged or destroyed, such part shall be restored to use. The Net Proceeds of insurance against accident to or destruction of the physical Water System shall be used for repairing or rebuilding the damaged or destroyed portions of the Water System, (to the extent that such repair or rebuilding is determined by the District to be useful or of continuing value to the Water System) and to the extent not so applied, shall be applied to the redemption of the Outstanding Bonds issued on a pro rata basis, and for such purpose shall be paid into the Redemption Account. Any such insurance shall be in the form of policies or contracts for insurance with insurers of good standing and shall be payable to the District, or may be in the form of self- insurance by the District. The District shall establish such fund or funds or reserves as it determines, in its sole judgement, are necessary to provide for its share of any such self- insurance. SECTION 5.08. Records and Accounts. The District covenants that it shall keep proper books of record and accounts of the Water System, separate from all other records and accounts, in which complete and correct entries shall be made of all transactions relating to the Water System. Said books shall, upon reasonable request, be subject to the inspection of the Owners of not less than ten percent (10%) of the Outstanding Bonds or their representatives authorized in writing. The District covenants that it will cause the books and accounts of the Water System to be audited annually by an Independent Certified Public Accountant and will make available for inspection by the Bond Owners at the office of the Trustee in San Francisco, California, upon reasonable request, a copy of the report of such Independent Certified Public Accountant. The District covenants that it will cause to be prepared annually, not more than one hundred eighty (180) days after the close of each Fiscal Year, as a part of its regular annual financial report, a summary statement showing the amount of Gross Revenues and the amount of all other funds collected which are required to be pledged or otherwise made available as security for payment of principal of and interest on the Bonds, the disbursements from the -31- Gross Revenues and other funds in reasonable detail. The District shall furnish a copy of the statement to the Trustee, and upon written request, to any Bond Owner. SECTION 5.09. Protection of Security and Rights of Owners. The District will preserve and protect the security of the Bonds and the rights of the Owners, and will warrant and defend their rights against all claims and demands of all persons. From and after the sale and delivery of any Parity Bonds by the District, such Parity Bonds shall be incontestable by the District. SECTION 5.10. Against Competitive Facilities. The District will not acquire, construct, operate or maintain the Water System or utility within the service area of the District that would be competitive with the Water System. SECTION 5.11, Payment of Taxes, Etc. The District will pay and discharge all taxes, assessments and other governmental charges which may hereafter be lawfully imposed upon the Water System or any part thereof or upon any Revenues when the same shall become due. The District will duly observe and conform with all valid requirements of any governmental authority relative to the Water System or any part thereof, and will comply with all requirements with respect to any state or federal grants received to assist in paying for the costs of the acquisition, construction or financing of any Improvements to the Water System. SECTION 5.12. Rates and Charges. (a) The District shall fix, prescribe, revise and collect Charges for the Water System during each Fiscal Year which are at least sufficient, after making allowances for contingencies and error in the estimates, to pay the following amounts in the following order: (i) all Maintenance and Operation Costs of the Water System estimated by the District to become due and payable in such Fiscal Year; (ii) the Debt Service on the Bonds; (iii) all other payments required for compliance with this Indenhrre and the instruments pursuant to which any Parity Bonds relating to the Water System shall have been issued; and (iv) all payments required to meet any other obligations of the District which are charges, liens, encumbrances upon or payable from the Gross Revenues of the Water System or the Net Revenues of the Water System. (b) In addition, the District shall fix, prescribe, revise and collect Charges for the Water System during each Fiscal Year which are sufficient to yield Net Revenues of the Water System at least equal to one hundred twenty percent (120%) of the amounts payable under the preceding clause (a)(ii) in such Fiscal Year for Bonds which have a lien on such Net Revenues. SECTION 5.13. No Priority for Additional Obligations. The District covenants that no additional bonds or other obligations shall be issued or incurred having any priority in payment of principal or interest out of the Net Revenues over the Bonds. SECTION 5.14. No Arbitrage. The District shall not take, nor permit nor suffer to be taken any action with respect to the proceeds of any of the Bonds which would cause any of the Bonds to be "arbitrage bonds" within the meaning of the Tax Code. SECTION 5.15. Information Report. The Chief Financial Officer is hereby directed to assure the filing of an information report for the Series 2001 Bonds in compliance with Section 149 (e) of the Tax Code. -32- SECTION 5.16. Private Activity Bond Limitation. The District shall assure that the proceeds of the Bonds are not so used as to cause the Bonds to satisfy the private business tests of section 141(b) of the Tax Code or the private loan financing test of section 141(c) of the Tax Code. SECTION 5.17. Federal Guarantee Prohibition. The District shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause any of the Series 2001 Bonds to be "federally guaranteed" within the meaning of section 149(b) of the Tax Code. SECTION 5.18. Further Assurances. The District will adopt, 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 Indenture, and for the better assuring and confirming unto the Owners of the Bonds the rights and benefits provided in this Indenture. SECTION 5.19. Continuing Disclosure. The District hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of this Indenture, failure of the District to comply with the Continuing Disclosure Certificate shall not be considered an Event of Default; however, the Trustee, at the written request of any Participating Underwriter or the holders of at least 25% aggregate principal amount of Outstanding Bonds, shall, but only to the extent indemnified to its satisfaction from any liability or expense, including, without limitation fees and expenses of its attorneys, or any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. SECTION 5.20. Rebate Requirement. The District shall take any and all actions necessary to assure compliance with section 148(f) of the Tax Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the Bonds. SECTION 5.21. Maintenance of Tax-Exemption. The District shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the date of issuance of the Bonds. SECTION 5.22. Small Issuer Exemption from Bank Nondeductibility Restriction. The 1994 Installment Sale Agreement was designated by the District for purposes of paragraph (3) of section 265(b) of the Code, and not more than $10,000,000 aggregate principal amount of obligations the interest on which is excludable (under section 103(a) of the Code) from gross income for federal income tax purposes, including the 1994 Installment Sale Agreement, were issued by the District during the calendar year in which the 1994 Installment Sale Agreement was issued. The average maturity date ( ) of the Bonds is not later than the average maturity date ( ) of the 1994 Installment Sale Agreement. The last maturity date of the Bonds (August 1, 2014) is not more than thirty (30) years after the date of issuance of the 1994 Installment Sale Agreement. The aggregate face amount of the Bonds does not exceed $10,000,000. By reason of the statements set forth in this subparagraph, the Bonds are deemed designated for purposes of paragraph (3) of section 265(b) of the Code. -33- ARTICLE VI THE TRUSTEE SECTION 6.01. Appointment of Trustee. U.S. Trust Company, N.A., with an office in San Francisco, California, a banking corporation organized and existing under and by virtue of the laws of the United States of America, is hereby appointed Trustee by the District for the purpose of receiving all moneys required to be deposited with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenhrre. The District agrees that it will maintain a Trustee having a corporate trust office in California, with a combined capital and surplus of at least One Hundred Million Dollars ($100,000,000), and subject to supervision or examination by federal or State authority, so long as any Bonds are Outstanding. If such bank or trust company publishes a report of condition at least annually pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this Section 5.01 the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Trustee is hereby authorized to pay the Bonds when duly presented for payment at maturity, or on redemption or purchase prior to maturity, and to cancel all Bonds upon payment thereof. The Trustee shall keep accurate records of all funds administered by it and of all Bonds paid and discharged. SECTION 6.02. Acceptance of Trusts. The Trustee hereby accepts the trusts imposed upon it by this Indenhrre, and agrees to perform said trusts, but only upon and subject to the following express terms and conditions: (a) The Trustee, prior to the occurrence of an Event of Default and after curing all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenhrre. In case an Event of Default hereunder has occurred (which has not been cured or waived) the Trustee may exercise such of the rights and powers vested in it by this Indenture, and shall use the same degree of care and skill in their exercise, as a prudent and reasonable man would exercise or use under the circumstances in the conduct of his own affairs. (b) 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 but shall be answerable for the selection of the same in accordance with the standard specified above, and shall be entitled to rely conclusively on advice of counsel of its choice concerning all matters of trust and its duty hereunder. (c) The Trustee shall not be responsible for any recital herein, or in the Bonds, or for the validity of this Indenhrre or any of the supplements thereto or instruments of further assurance, or for the sufficiency of the security for the Bonds issued hereunder or intended to be secured hereby and the Trustee shall not be bound to ascertain or inquire as to the observance or performance of any covenants, conditions or agreements on the part of the District hereunder. The Trustee shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with Section 4.08. (d) The Trustee shall not be accountable for the use of any proceeds of sale of the Bonds delivered hereunder. The Trustee may become the Owner of Bonds secured hereby with the same rights which it would have if not the Trustee; may acquire and dispose of other bonds or evidence of indebtedness of the District with the same rights it -34- would have if it were not the Trustee; and may act as a depositary 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 of Bonds, whether or not such committee shall represent the Owners of the majority in principal amount of the Bonds then Outstanding. (e) In the absence of bad faith on its part, the Trustee shall be protected in acting upon any notice, request, consent, certificate, order, affidavit, letter, telegram or other paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons. Any action taken or omitted to be taken by the Trustee pursuant to this Indenhrre upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the Owner of any Bond, shall be conclusive and binding upon all future Owners of the same Bond and upon Bonds issued in exchange therefor or in place thereof. The Trustee shall not be bound to recognize any person as an Owner of any Bond or to take any action at his request unless the ownership of such Bond by such person shall be reflected on the Bond Registration Books. (f) As to the existence or non-existence of any fact or as to the sufficiency or validity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a Certificate of the District as sufficient evidence of the facts therein contained and prior to the occurrence of an Event of Default herennder of which the Trustee has been given notice or is deemed to have notice, as provided in Section 6,02(h) hereof, shall also be at liberty to accept a similar certificate to the effect that any particular dealing, transaction or action is necessary or expedient, but may at its discretion secure such further evidence deemed by it to be necessary or advisable, but shall in no case be bonnd to secure the same. The Trustee may accept a Certificate of the District to the effect that an authorization in the form therein set forth has been adopted by the District, as conclusive evidence that such authorization has been duly adopted and is in full force and effect. (g) The permissive right of the Trustee to do things enumerated in this Indenhrre shall not be construed as a duty and it shall not be answerable for other than its negligence or willful default. The immunities and exceptions from liability of the Trustee shall extend to its officers, as finally adjudicated by a court of law, directors, employees and agents. (h) The Trustee shall not be required to take notice or be deemed to have notice of any Event of Default hereunder except failure by the District to make any of the payments to the Trustee required to be made by the District pursuant hereto or failure by the District to file with the Trustee any document required by this Indenhrre to be so filed subsequent to the issuance of the Bonds, unless the Trustee shall be specifically notified in writing of such default by the District or by the Owners of at least twenty- five percent (25%) in aggregate principal amount of the Bonds then Outstanding and all notices or other instruments required by this Indenture to be delivered to the Trustee must, in order to be effective, be delivered at the Principal Corporate Trust Office of the Trustee, and in the absence of such notice so delivered the Trustee may conclusively assume there is no Event of Default hereunder except as aforesaid. (i) At any and all reasonable times the Trustee, and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right fully to inspect the Water System, including all books, papers and records of the District pertaining to the Water System and the Bonds, and to take such memoranda from and with regard thereto as may be desired but which is not privileged by statute or by law. -35- (j) The Trustee shall not be required to give any bond or surety in respect of the execution of the said trusts and powers or otherwise in respect of the premises. (k) Notwithstanding anything elsewhere in this Indenture with respect to the execution of any Bonds, the withdrawal of any cash, the release of any property, or any action whatsoever within the purview of this Indenture, the Trustee shall have the right, but shall not be required, to demand any showings, certificates, opinions, appraisals or other information, or corporate action or evidence thereof, as may be deemed desirable for the purpose of establishing the right of the District to the execution of any Bonds, the withdrawal of any cash, or the taking of any other action by the Trustee. (1) Before taking the action referred to in Section 8.03 the Trustee may require that an indemnity bond satisfactory in terms and amount be furnished for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is finally adjudicated by a count of law to have resulted from its negligence or willful default in connection with any such action. (m) All moneys received by the Trustee shall, until used or applied or invested as herein provided, be held in trust for the purposes for which they were received but need not be segregated from other funds except to the extent required by law. The Tmstee shall not be under any liability for interest on any moneys received hereunder except such as it may agree to in writing. SECTION 6.03. Fees, Charges and Expenses of Trustee, The Trustee shall be entitled to payment and reimbursement for reasonable fees for its services rendered hereunder and all advances, cOlmsel fees (including expenses) and other expenses reasonably and necessarily made or incurred by the Trustee in connection with such services. Upon the occurrence of an Event of Default hereunder, but only upon an Event of Default, the Tmstee shall have a first lien with right of payment prior to payment of any Bond upon the amounts held hereunder for the foregoing fees, charges and expenses incurred by it respectively. SECTION 6.04. Notice to Bond Owners of Default. If an Event of Default hereunder occurs with respect to any Bonds, of which the Trustee has been given or is deemed to have notice, as provided in Section 6.02(h) hereof, then the Tmstee shall promptly give written notice thereof by first-class mail to the Owner of each such Bond, unless such Event of Default shall have been cured before the giving of such notice; provided, however, that unless such Event of Default consists of the failure by the District to make any payment when due, the Trustee may elect not to give such notice if and so long as the Trustee in good faith determines that it is in the best interests of the Bond Owners not to give such notice. SECTION 6.05. Removal of Trustee. The Owners of a majority in aggregate principal amount of the Outstanding Bonds may at any time, and the District may so long as no Event of Default shall have occurred and then be continuing, remove the Tmstee initially appointed, and any successor thereto, by an instrument or concurrent instruments in writing delivered to the Tmstee (where applicable), whereupon the District or such Owners, as the case may be, shall appoint a successor or successors thereto; provided that any such successor shall be a bank or trust company meeting the requirements set forth in Section 6.01 hereof. SECTION 6.06. Resignation by Trustee. The Trustee and any successor Trustee may at any time resign by giving thirty (30) days' written notice by registered or certified mail to the District. Upon receiving such notice of resignation, the District shall promptly appoint a successor Trustee. 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 -36- such acceptance, the District shall cause notice thereof to be given by first class mail to the Bond Owners at their respective addresses set forth on the Bond Registration Books. No resignation of the Trustee shall take effect until a successor is appointed and has accepted. SECTION 6.07. Appointment of Successor Trustee. In the event of the removal or resignation of the Trustee pursuant to Sections 6.06 or 6.07, respectively, the District shall promptly appoint a successor Trustee. In the event the District shall for any reason whatsoever fail to appoint a successor Trustee within forty-five (45) days following the delivery to the Trustee of the instrument described in Section 6.06 or within forty-five (45) days following the receipt of notice by the District pursuant to Section 6.07, the Trustee may apply to a court of competent jurisdiction for the appointment of a successor Trustee meeting the requirements of Section 6.01 hereof. Any such successor Trustee appointed by such court shall become the successor Trustee hereunder notwithstanding any action by the District purporting to appoint a successor Trustee following the expiration of such forty-five-day period. The Trustee may be removed at any time, upon thirty (30) days' written notice, at the request of the Municipal Bond Insurer with the consent of the District, for any breach of the trust set forth herein. The Municipal Bond Insurer shall receive prior written notice of any Trustee resignation. Notwithstanding any other provision of this Trust Indenture, no removal, resignation or termination of the Trustee shall take effect until a successor, acceptable to the Municipal Bond Insurer, shall be appointed; provided, however, that if for any reason whatsoever no successor Trustee shall have been appointed within 45 days following receipt of notice by the District pursuant to Section 6.07 above, the Trustee may apply to a court of competent jurisdiction for the appointment of a successor Trustee which meets the requirements of Section 6,01 hereof, and such appointment shall be binding upon the Municipal Bond Insurer. SECTION 6.08. Merger or Consolidation. Any company 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 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 6.01), shall be the successor to the Trustee and vested with all of the title to the trust estate and all of the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. SECTION 6.09. Concerning any Successor Trustee. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to the District an instrument in writing accepting such appointment hereunder and thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessors; but such predecessor shall, nevertheless, on the Request of the District, or of its successor, execute and deliver an instrument transferring to such successor all the estates, properties, rights, powers and trusts of such predecessor hereunder; and every predecessor Trustee shall deliver all securities and moneys held by it as the Trustee hereunder to its successor. Should any instrument in writing from the District be required by any successor Trustee for more fully and certainly vesting in such successor the estate, rights, powers and duties hereby vested or intended to be vested in the predecessor, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the District. SECTION 6.10. Appointment of Co-Trustee. It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction (including particularly the law of the State) denying or restricting the right of banking corporations or associations to transact business as Trustee in such jurisdiction. It is recognized that in the case of litigation under this -37- Indenture, and in particular in case of the enforcement of the rights of the Trustee on default, or in the case the Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Trustee or hold title to the properties, in trust, as herein granted, or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Trustee appoint an additional individual or institution as a separate or co-trustee. The following provisions of this Section 6.11 are adopted to these ends. In the event that the Trustee appoints an additional individual or institution as a separate or co-trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest in such separate or co-trustee but only to the extent necessary to enable such separate or co:. trustee to exercise such powers, rights and remedies, and every covenant and obligation necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable by either of them. Should any instrument in writing from the District be required by the separate trustee or co-trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the District. In case any separate trustee or co-trustee, or a successor to either, shall become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate trustee or co-trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a new trustee or successor to such separate trustee or co- trus tee, SECTION 6.11. Indemnification: Limited Liability of Trustee. The District shall indemnify and hold the Trustee harmless from and against all claims, losses, costs, expenses, liabilities and damages including legal fees and expenses arising from the exercise and performance of its duties hereunder and the termination of this Indenture. Such indemnity shall survive the resignation or removal of the Trustee hereunder. No provision in this Indenture shall require the Trustee to risk or expend its own funds or otherwise incur any financial liability hereunder if it shall have reasonable grounds for believing repayment of such funds or adequate indemnity against such liability or risk is not assured to it. The Trustee shall not be liable for any action taken or omitted to be taken by it in accordance with the direction of a majority of the Owners of the principal amount of Bonds Outstanding relating to the time, method and place of conducting any proceeding or remedy available to the Trustee under this Indenture. -38- ARTICLE VII MODIFICATION AND AMENDMENT OF THE INDENTURE SECTION 7.01. Amendment by Consent of Bond Owners. This Indenture and the rights and obligations of the District and of the Owners of the Bonds may be modified or amended at any time by a Supplemental Indenture which shall become binding when the written consent of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 7.03 hereof, are filed with the Trustee. No such modification or amendment shall (a) extend the maturity of or reduce the interest rate on any Bond or otherwise alter or impair the obligation of the District to pay the principal, interest or redemption premiwns at the time and place and at the rate and in the currency provided therein of any Bond without the express written consent of the Owner of such Bond, (b) reduce the percentage of Bonds required for the written consent to any such amendment or modification, or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee. SECTION 7.02. Amendment Without Consent of Bondholders. This Indenhrre and the rights and obligations of the District and of the Owners of the Bonds may also be modified or amended at any time by a Supplemental Indenhrre which shall become binding upon execution and delivery, without consent of any Bond Owners, but only to the extent permitted by law and only for anyone or more of the following purposes- (a) to add to the covenants and agreements of the District in this Indenture contained, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power herein reserved to or conferred upon the District; or (b) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in this Indenhrre, or in any other respect whatsoever as the District may deem necessary or desirable, provided under any circumstances that such modifications or amendments shall not adversely affect the interests of the Owners of the Bonds; (c) to provide for the issuance of any Parity Bonds, and to provide the tenns and conditions under which such Parity Bonds may be issued, including but not limited to the establishment of special funds and accounts relating to such Parity Bonds and any other provisions relating solely to such Parity Bonds, subject to and in accordance with the provisions of Section 3.06; or (d) to make such additions, deletions or modifications as may be necessary or desirable to assure exemption from federal income taxation of interest on the Bonds. Any amendments which require Bond Owner consent pursuant to this Section 10.02 shall also require the prior written consent of the Municipal Bond Insurer. Notices regarding any such proposed amendments shall be provided to the Department of the Municipal Bond Insurer at SECTION 7.03. Disqualified Bonds. Bonds owned or held by or for the account of the District (but excluding Bonds held in any employees' retirement fund) shall not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Bonds in this article provided for, and shall not be entitled to consent to, or take any other action in this article provided for. -39- SECTION 7.04. Endorsement or Replacement of Bonds After Amendment. After the effective date of any action taken as hereinabove provided, the District may determine that the Bonds shall bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his Bond for that purpose at the Principal Corporate Trust Office of the Trustee, a suitable notation as to such action shall be made on such Bond. If the District shall so determine, new Bonds so modified as, in the opinion of the District, shall be necessary to conform to such Bond Owners' action shall be prepared and executed, and in that case upon demand of the Owner of any Bond Outstanding at such effective date such new Bonds shall be exchanged at the Principal Corporate Trust Office of the Trustee, without cost to each Bond Owner, for Bonds then Outstanding, upon surrender of such Outstanding Bonds. SECTION 7.05. Amendment by Mutual Consent. The provisions of this Article VII shall not prevent any Bond Owner from accepting any amendment as to the particular Bond held by him, provided that due notation thereof is made on such Bond. -40- ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS SECTION 8.01. Events of Default and Acceleration of Maturities. The following events shall be Events of Default hereunder: (a) Default in the due and punctual payment of the principal of any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by declaration or otherwise; (b) Default in the due and punctual payment of any installment of interest on any Bond when and as such interest installment shall become due and payable; (c) Default by the District in the observance of any of the covenants, agreements or conditions on its part in this Indenture or in any Parity Bonds Instrument or in the Bonds contained, and such default shall have continued for a period of sixty (60) days after the District shall have been given notice in writing of such default by the Trustee; or (d) The filing by the District of a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law of the United States of America, or if a court of competent jurisdiction shall approve a petition, filed with or without the consent of the District, seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America, or if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the District or of the whole or any substantial part of its property. Upon the occurrence of an Event of Default, the Trustee may, with the consent of the Municipal Bond Insurer, and shall, at the direction of the owners of a majority of the principal amount of the Bonds, with the consent of the Municipal Bond Insurer, by written notice to the District, declare the principal of the Bonds to be immediately due and payable, whereupon that portion of the principal of the Bonds thereby coming due and the interest thereon accrued to the date of payment shall, without further action, become and be immediately due and payable, anything in this Indenture or in the Bonds to the contrary notwithstanding. This provision, however, is subject to the condition that if, at any time after the principal of the Bonds shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the District shall deposit with the Trustee a sum sufficient to pay all of the principal of and interest on the Bonds having come due prior to such declaration, with interest on such overdue principal and interest calculated at the rate of interest per annum then borne by the Outstanding Bonds, and the reasonable fees and expenses of the Trustee and those of its attorneys, and any and all other defaults known to the Trustee (other than in the payment of the principal of and interest on the Bonds having come due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been made therefor, then, and in every such case, the Owners of a majority in aggregate principal amount of the Bonds at the time Outstanding may, by written notice to the District and to the Trustee, on behalf of the Owners of all of the Outstanding Bonds, rescind and annul such declaration and its consequences. However, no such rescission and annuhnent shall extend to or shall affect any subsequent default, or shall impair or exhaust any right or power consequent thereon. SECTION 8.02. Application of Funds Upon Acceleration. All amounts received by the Trustee pursuant to any right given or action taken by the Trustee under the provisions of this Indenture shall be applied by the Trustee in the following order upon presentation of the several -41- Bonds, and the stamping thereon of the amount of .the payment if only partially paid, or upon the surrender thereof if fully paid - First, to the payment of the costs and expenses of the Trustee and of Bond Owners in declaring such Event of Default, including reasonable compensation to their agents, attorneys and counsel, and to the payment of the costs and expenses of the Trustee, if any, in carrying out the provisions of this Article Vill, including reasonable compensation to its agents, attorneys and counsel; and Second, to the payment of the whole amount then owing and unpaid upon the Bonds for interest and principal, with interest on such overdue amounts to the extent permitted by law at the rate of interest then borne by the Outstanding Bonds, and in case such moneys shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then to the payment of such interest, principal and interest on overdue amounts without preference or priority among such interest, principal and interest on overdue amounts ratably in proportion to the aggregate of such interest, principal and interest on overdue amounts. SECTION 8.03. Other Remedies; Rights of Bond Owners. Upon the occurrence of an Event of Default, the Trustee may pursue any available remedy, in addition to the remedy specified in Section 8.01, at law or in equity to enforce the payment of the principal of, premium, if any, and interest on the Outstanding Bonds, and to enforce any rights of the Trustee under or with respect to this Indenture. If an Event of Default shall have occurred and be continuing and if requested so to do by the Owners of at least twenty-five percent (25%) in aggregate principal amount of Outstanding Bonds and indemnified as provided in Section 6.02 (1), the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Article VIll, as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Bond Owners. No remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or to the Bond Owners) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or to the Bond Owners hereunder or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon 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 acquiescence therein; such right or power may be exercised from time to time as often as may be deemed expedient. Notwithstanding any other provisions of the Trust Indenture, the Municipal Bond Insurer shall have the right, so long as it is not in default under the Municipal Bond Insurance Policy, to direct the remedies to be taken upon any Event of Default hereunder and the j'vlu...'1icipal Bond Insurer's consent shall be required for remedial action taken by the Trustee or the Authority hereunder. SECTION 8.04. 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 Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds, 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 -42- written request signed by the Owners of a majority in principal amount of the Outstanding Bonds hereunder opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation. Any suit, action or proceeding which any Owner of Bonds shall have the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal benefit and protection of all Owners of Bonds similarly situated and the Trustee is hereby appointed (and the successive respective Owners of the Bonds issued hereunder, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney-in-fact of the respective Owners of the Bonds for the purpose of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the respective Owners of the Bonds as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorney-in-fact. SECTION 8.05. Appointment of Receivers. Upon the occurrence of an Event of Default hereunder, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Bond Owners under this Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Net Revenues and other amounts pledged hereunder, pending such proceedings, with such powers as the court making such appointment shall confer. SECTION 8.06. Non-Waiver. Nothing in this Article VITI or in any other provision of this Indenture, or in the Bonds, shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respective Owners of the Bonds at the respective dates of maturity, as herein provided, out of the Net Revenues and other moneys herein pledged for such payment. A waiver of any default or breach of duty or contract by the Trustee or any Bond Owners shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission of any Owner of any of the Bonds 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 of any such default or an acquiescence therein; and every power and remedy conferred upon the Trustee or Bond Owners by the Bond Law or by this Article VIII may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Bond Owners, as the case may be. If a suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Bond Owners, the District and the Bond Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. SECTION 8.07. Rights and Remedies of Bond Owners. No Owner of any Bond issued hereunder shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Indenture, tmless (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all the Bonds 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 indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy hereunder; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatever by his or their action to enforce any right under this -43- Indenture, except in the manner herein provided, and that all proceedings at law or in equity to enforce any provision of this Indenture shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Bonds. The right of any Owner of any Bond to receive payment of the principal of and interest and premium (if any) on such Bond as herein provided or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the written consent of such Owner, notwithstanding the foregoing provisions of this Section or any other provision of this Indenture. SECTION 8.08. Termination of Proceedings. In case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case, the District, the Trustee and the Bond Owners shall be restored to their former positions and rights hereunder, respectively, with regard to the property subject to this Indenture, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken. SECTION 8.09. Municipal Bond Insurer as Third-Party Beneficiary. To the extent that this Indenture confers upon or gives or grants to the Municipal Bond Insurer any right, remedy or claim under or by reason of this Indenture, the Municipal Bond Insurer is hereby explicitly recognized as being a third-party beneficiary hereunder and may enforce any such right remedy or claim conferred, given or granted hereunder. SECTION 8.10. Rights of Municipal Bond Insurer. Anything in this Indenture to the contrary notwithstanding, upon the occurrence and continuation of an Event of Default, the Municipal Bond Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted hereunder to the Bond Owners, or to the Trustee for the benefit of the Bond Owners, including but not limited to, rights and remedies granted pursuant to Section 8.01 and 8.03 and, including but not limited to, the right to approve all waivers of any Events of Default. The rights granted to the Municipal Bond Insurer hereunder shall be deemed terminated and shall not be exercisable by the Municipal Bond Insurer during any period during which Municipal Bond Insurer shall be in default under the Municipal Bond Insurance Policy. SECTION 8.11. Effect on Municipal Bond Insurance Policy. Notwithstanding any other provision of this Indenture, in determining whether the rights of the Bondholders will be adversely affected by any action taken pursuant to the terms and provisions of this Indenture, the Trustee shall consider the effect on the Bondholders as if there were no Municipal Bond Insurance Policy. -44- ARTICLE IX MISCELLANEOUS SECTION 9.01. Limited Liability of District. Notwithstanding anything in this Indenture contained, the District shall not be required to advance any moneys derived from any source of income other than the Net Revenues for the payment of the principal of or interest on the Bonds, or any premiums upon the redemption thereof, or for the performance of any covenants herein contained (except to the extent any such covenants are expressly payable hereunder from the Gross Revenues). The District may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose and may be used by the District for such purpose without incurring indebtedness. SECTION 9.02. Parties Interested Herein. (a) Nothing in this Trust Indenture expressed or implied is intended or shall be construed to confer upon, or to give to, any person or entity, other than the District, the Trustee, the Municipal Bond Insurer and the Owners any right, remedy or claim under or by reason of this Trust Indenture, or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Trust Indenture contained by and on behalf of the District shall be for the sole and exclusive benefit of the District, the Trustee, the Municipal Bond Insurer and the Owners. (b) Notwithstanding any other provision of this Trust Indenture, in determining whether the rights of the Owners will be adversely affected by any action taken pursuant to the terms and provisions of this Trust Indenture, the Trustee shall consider the effect on the Owners as if there was no Municipal Bond Insurance Policy. SECTION 9.03. Discharge of Indenture. If the District shall pay and discharge any or all of the Outstanding Bonds in anyone or more of the following ways: (a) by well and truly paying or causing to be paid the principal of and interest and premium (if any) on such Bonds, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money which, together with the available amounts then on deposit in the funds and accounts established pursuant to this Indenture, is fully sufficient to pay such Bonds, including all principal, interest and redemption premiums; or (c) by depositing with a qualified escrow holder, in trust, Defeasance Obligations in such amount as the District (verified by an Independent Certified Public Accountant) shall determine will, together with the interest to accrue thereon and available moneys then on deposit in the Funds and Accounts established pursuant to this Indenture, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums, if any) at or before their respective maturity dates; and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been mailed pursuant to Section 2.02(d) or provision satisfactory to the Trustee shall have been made for the mailing of such notice, then, at the election of the District, and notwithstanding that any of such Bonds shall not have been surrendered for payment, the pledge of the Net Revenues and other funds provided for in this Indenture with respect to such Bonds, and all other pecuniary obligations of the District under this Indenture with respect to all such Bonds, shall cease and terminate, except only the obligation of the District to payor -45- cause to be paid to the Owners of such Bonds not so surrendered and paid all sums due thereon from amounts set aside for such purpose as aforesaid, and all expenses and costs of the Trustee. Notice of such election shall be filed with the Trustee. Any funds thereafter held by the Trustee, which are not required for said purposes, shall be paid over to the District. Refunding bonds may be issued at any time without regard to whether an Event of Default exists. To accomplish defeasance the District shall cause to be delivered (i) a report of an Independent Certified Public Accountant verifying the sufficiency of the escrow established to pay the Bonds in full on the maturity or earlier redemption date ("Verification"), (ii) an escrow deposit agreement, and (iii) an opinion of nationally recognized bond counsel to the effect that the Bonds are no longer "Outstanding" under this Indenture; each Verification and defeasance opinion shall be acceptable in form and substance, and addressed, to the District and the Trustee. Notwithstanding anything herein to the contrary, in the event that the principal of and/ or interest on the Bonds shall be paid by the Municipal Bond Insurer pursuant to the Municipal Bond Insurance Policy, the Bonds shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the District, and the assignment and pledge of the Tax Revenues and all covenants, agreements and other obligations of the District to the registered owners shall continue to exist and shall run to the benefit of the Municipal Bond Insurer, and the Municipal Bond Insurer shall be subrogated to the rights of such registered owners. SECTION 9.04. Content of Certificates. Every certificate with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that the person or persons making or giving such certificate have read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate are based; (c) a statement that, in the opinion of the signers, they have made or caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of the signers, such condition or covenant has been complied with. Any such certificate made or given by an officer of the District may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate may be based, as aforesaid, are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. Any such certificate or opinion or representation made or given by counsel may be based, insofar as it relates to factual matters, on information with respect to which is in the possession of the District, upon the certificate or opinion of or representations by an officer or officers of the District, unless such counsel knows that the certificate or opinion or representations with respect to the matters upon which his certificate, opinion or representation may be based, as aforesaid, are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. SECTION 9.05. Execution of Documents by Bond Owners. Any request, consent or other instrument required by this Indenture to be signed and executed by Bond Owners may be in any number of concurrent writings of substantially similar tenor and may be signed or executed by such Bond Owners in person or by agent or agents dilly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing -46- appointing any such agent, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee and of the District if made in the manner provided in this Section 9.05. The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument or writing acknowledged to him the execution thereof. The ownership of Bonds shall be provided by the Bond Registration Books. Any request, consent or vote of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of any Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the District in pursuance of such request, consent or vote. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are owned or held by or for the account of the District (but excluding Bonds held in any employees' retirement fund) shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, provided, however, that for the purpose of determining whether the Trustee shall be protected in relying on any such demand, request, direction, consent or waiver, only Bonds which the Trustee knows to be so owned or held shall be disregarded. In lieu of obtaining any demand, request, direction, consent or waiver in writing, the Trustee may call and hold a meeting of the Bond Owners upon such notice and in accordance with such rules and obligations as the Trustee considers fair and reasonable for the purpose of obtaining any such action. SECTION 9.06. Waiver of Personal Liability. No officer, agent or employee of the District shall be individually or personally liable for the payment of the interest on or principal of the Bonds; but nothing herein contained shall relieve any such officer, agent or employee from the performance of any official duty provided by law. SECTION 9.07. Partial Invalidity. If anyone or more of the covenants or agreements, or portions thereof, provided in this Indenture on the part of the District (or of the Trustee) to be performed should be contrary to law, then such covenant or covenants, such agreement or agreements, or such portions thereof, shall be null and void and shall be deemed separable from the remaining covenants and agreements or portions thereof and shall in no way affect the validity of this Indenture or of the Bonds; but the Bond Owners shall retain all rights and benefits accorded to them under the Bond Law or any other applicable provisions of law. The District hereby declares that it would have entered into this Indenture and each and every other section, paragraph, subdivision, sentence, clause and phrase hereof and would have authorized the issuance of the Bonds pursuant hereto irrespective of the fact that anyone or more sections, paragraphs, subdivisions, sentences, clauses or phrases of this Indenture or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid. SECTION 9.08. Destruction of Cancelled Bonds. Whenever in this Indenture provision is made for the surrender to the District of any Bonds which have been paid or cancelled pursuant to the provisions of this Indenture, the Trustee shall destroy such Bonds and furnish to the District a certificate of such destruction. -47- SECTION 9.09. Funds and Accounts. Any Fund or Account required by this Indenture to be established and maintained by the District or the Trustee may be established and maintained in the accounting records of the District or the Trustee, as the case may be, either as a Fund or an Account, and may, for the purpose of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a Fund or as an Account. All such records with respect to all such Funds and Accounts held by the District shall at all times be maintained in accordance with generally accepted accounting principles and all such records with respect to all such Funds and Accounts held by the Trustee shall be at all times maintained in accordance with industry practices; in each case with due regard for the protection of the security of the Bonds and the rights of every Owner thereof. SECTION 9.10. Notices. Any notice, request, complaint, demand, communication or other paper shall be sufficiently given and shall be deemed given when delivered or mailed by registered or certified mail, postage prepaid, or sent by telegram, addressed as follows: if to the District, to South Tahoe Public Utility District, 1275 Meadow Crest Drive, South Lake Tahoe, CA 96150, Attention: Chief Financial Officer; and if to the Trustee, at U.S. Trust Company, N.A., One Embarcadero Center, Suite 2050 San Francisco, CA 94111, Attention: Corporate Trust Department. The District and the Trustee may designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. SECTION 9.11. Notices to be Given to the Municipal Bond Insurer. While the Municipal Bond Insurance Policy is in effect, the District shall furnish, or cause to be furnished, to the Municipal Bond Insurer: (a) a copy of any notice to be given to the Owners and any certificate rendered pursuant to this Trust Indenture relating to the security for the Bonds; (b) notice of resignation of the Trustee; and (c) such additional information the Municipal Bond Insurer may reasonably request. The Trustee shall notify the Municipal Bond Insurer of any failure of the District to provide notices and Certificates required to be provided by the District to the Trustee hereunder. The Trustee shall notify S&P of all consents given by the Municipal Bond Insurer hereunder. The District will permit the Municipal Bond Insurer to discuss the affairs, finances and accounts of the District or any information the Municipal Bond Insurer may reasonably request regarding the security for the Bonds with appropriate officers of the District. The Trustee or the District, as appropriate, will permit the Municipal Bond Insurer to have access to the Enterprise and have access to and to make copies of all books and records relating to the Bonds at any reasonable time upon reasonable notice. Notwithstanding any other provision of this Trust Indenture, the Trustee shall, as soon as practicable, notify the Municipal Bond Insurer if a Responsible Officer of the Trustee has actual knowledge of the occurrence of any Event of Default. SECTION 9.12. Unclaimed Moneys. Anything in this Indenture to the contrary notwithstanding, any moneys held by the Trustee in trust for the payment and discharge of any of the Bonds which remain unclaimed for one (1) year after the date when such Bonds have become due and payable, either at their stated maturity dates or by call for earlier redemption, if such moneys were held by the Trustee at such date, or for one (1) year after the date of deposit of such moneys if deposited with the Trustee after said date when such Bonds become -48- due and payable, shall, at the Request of the District, be repaid by the Trustee to the District, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Bond Owners shall look only to the District for the payment of such Bonds; provided, however, that before being required to make any such payment to the District, the Trustee shall, at the expense and direction of the District, cause to be mailed to the Owners of all such Bonds, at their respective addresses appearing on the Bond Registration Books, a notice that said moneys remain unclaimed and that, after a date named in said notice, which date shall not be less than thirty (30) days after the date of mailing of such notice, the balance of such moneys then unclaimed will be returned to the District. -49- IN WITNESS WHEREOF, the SOUTH TAHOE PUBLIC UTILITY DISTRICT has caused this Indenture to be signed in its name by its President and its seal to be affixed hereon and attested by the Clerk of the Board and U.s. Trust Company, N.A., in token of its acceptance of the trust created hereunder, has caused this Indenture to be signed in its corporate name by its officer identified below, all as of the day and year first above written. SOUTH TAHOE PUBLIC UTILITY DISTRICT By President [S E A L] Attest: By Clerk of the Board of Directors U.s. Trust Company, N.A., as Trustee By Authorized Officer -50- EXHIBIT A FORM OF SERIES 2001 BOND UNITED STATES OF AMERICA STATE OF CALIFORNIA SOUTH TAHOE PUBLIC UTILITY DISTRICT WATER REVENUE REFUNDING BOND Series 2001 NO. R-_ $ INTEREST RATE MATURITY DATE DATED DATE CUSIP August 1, _ August 1, 2001 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: *** DOLLARS*** Under and by virtue of Sections 53570 et seq. and 53580 et seq. of the California Government Code (the "Bond Law"), the South Tahoe Public Utility District (the "District"), for value received, will (subject to any right of prior redemption hereinafter provided for), on the Maturity Date specified above, pay to the Registered Owner named above, or registered assigns (the "Owner"), the Principal Amount stated above, in lawful money of the United States of America, and pay interest thereon in like lawful money from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication of this Bond (unless (i) this Bond is authenticated on an Interest Payment Date, in which event it shall bear interest from such date of authentication, or (ii) this Bond is authenticated prior to January 15, 2002, in which event it shall bear interest from the Dated Date stated above; provided, however, that if at the time of authentication of this Bond, interest is in default on this Bond, this Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment on this Bond) until payment of such Principal Amount in full, at the Interest Rate per annum stated above, payable on August 1 and February 1 in each year, commencing February I, 2002 (each an "Interest Payment Date"), calculated on the basis of a 360-day year comprised of twelve 30-day months. Principal hereof and premium, if any, upon early redemption hereof are payable at the corporate trust office of U.S. Trust Company, N.A. (the "Trustee"), in Los Angeles, California. Interest hereon (including the final interest payment upon maturity or earlier redemption) is payable by check or draft of the Trustee mailed by first class mail to the Owner at the Owner's address as it appears on the registration books maintained by the Trustee as of the close of business on the fifteenth (15th) day of the month next preceding such Interest Payment Date (the "Record Date"); provided, that at the option of any Owner of at least $1,000,000 aggregate principal amount of the Series 2001 Bonds with respect to which written instructions have been filed with the Trustee prior to the Record Date, such interest may be paid by wire transfer. This Bond is one of a duly authorized issue of Bonds of the District designated as its "Water Revenue Refunding Bonds, Series 2001" (the "Series 2001 Bonds") issued under and Exhibit A-l- pursuant to the Bond Law and under an Indenture of Trust (the "Indenture") by and between the District and the Trustee, dated as of August I, 2001, and approved by the District by Resolution No. 2720-01, adopted by the Board of Directors of the District on July 5, 2001 (the "Resolution"). Copies of the Indenture are on file at the office of the Clerk of the Board and at the above-mentioned office of the Trustee, and reference to the Indenture and any and all supplements thereto and modifications and amendments thereof and to the Bond Law is made for a description of the terms on which the Series 2001 Bonds are issued, the provisions with regard to the nature and extent of the Net Revenues, as that term is defined in the Indenture, and the rights of the Owners of the Series 2001 Bonds. All the terms of the Indenture and the Bond Law are hereby incorporated herein and constitute a contract between the District and the Owner from time to time of this Series 2001 Bond, and to all the provisions thereof the Owner of this Series 2001 Bond, by acceptance hereof, consents and agrees. Each taker and subsequent Owner hereof shall have recourse to all of the provisions of the Bond Law and the Indenture and shall be bound by all of the terms and conditions thereof. The Series 2001 Bonds are being issued for the purpose of refunding an Installment Sale Agreement, dated as of October 31, 1994, between LaSalle National Bank and the District, executed and delivered in the original principal amount of $8,829,000 (the "1994 Installment Sale Agreement"), (ii) to hmd a reserve fund for the Series 2001 Bonds, and (iii) to pay certain costs of issuing the Series 2001 Bonds. The Series Series 2001 Bonds are special obligations of the District and are secured by amolmts held from time to time in the Debt Service Fund established and held by the Trustee under the Indenture and, subject to certain restrictions set forth in the Indenture, a pledge of and lien on certain Net Revenues (as defined in the Indenture) generated by the District's Water System, subject to the prior lien on Angora Revenues to pay the Angora Purchase Payments (as those terms are defined in the Indenture). Neither the general fund, the full faith and credit, nor the taxing power of the District, the State of California or any other political subdivision thereof is pledged to the payment of the Series 2001 Bonds. The Series 2001 Bonds are not secured by a legal or equitable pledge of or charge, lien or encumbrance upon any property of the District or any of its income or receipts except the Net Revenues. The District covenants in the Indenture that it will fix, prescribe, revise and collect Charges (as defined in the Indenture) for the Water System in each Fiscal Year which are sufficient to pay 120 percent of principal of and interest payable in that fiscal year on all outstanding Bonds (the Series 2001 Bonds and any Parity Bonds) payable from Net Revenues of the Water System. The Series 2001 Bonds maturing on or before August I, 2009 are not subject to optional redemption prior to maturity. The Series 2001 Bonds maturing on or after August 1, 2010 are subject to redemption prior to their respective maturity dates, at the option of the District, as a whole or in part on any date, in any order directed by the District, and if the District fails to direct the order, pro rata among maturities, and by lot within a maturity, on any date on or after August I, 2009, from any source of available funds, at the following respective Redemption Prices (expressed as percentages of the principal amount of the Series 2001 Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Redemption Periods August I, 2009 through July 31, 2010 August I, 2010 and thereafter Redemption Prices 101% 100% Exhibit A-2- The District shall be required to give the Trustee written notice of its intention to redeem Series 2001 Bonds under this subsection (a), and shall deposit all amounts required for such redemption with the Trustee at least one (1) day prior to the date fixed for such redemption. The Series 2001 Bonds are subject to redemption as a whole or in part on any date, in any order selected by the District, and if the District fails to so order, pro rata among maturities, and by lot within a maturity, to the extent of the net proceeds of hazard insurance not used to repair or rebuild the Wastewater System or the net proceeds of condemnation awards received with respect to the Water System to be used for such purpose pursuant to the Indenture, at a Redemption Price equal to the principal amount of the Series 2001 Bonds plus interest accrued thereon to the date fixed for redemption, without premium. Any Parity Bonds issued pursuant to the Indenture may be made subject to redemption prior to maturity, as a whole or in part, at such time or times, and upon payment of the principal amount thereof and accrued interest thereon plus such premium or premiums, if any, as may be determined by the District in the applicable Parity Bonds Instrument. Unless waived by any Owner of Series 2001 Bonds to be redeemed, notice of any redemption of Series 2001 Bonds shall be given, at the expense of the District, by the Trustee by mailing a copy of a redemption notice by first class mail at least 30 days and not more than 60 days prior to the date fixed for redemption to the Owner of the Bond or Series 2001 Bonds to be redeemed at the address shown on the Bond Registration Books; provided, that neither the failure to receive such notice nor any immaterial defect in any notice shall affect the sufficiency of the proceedings for the redemption of the Series 2001 Bonds. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, interest shall cease to accrue hereon from and after the date fixed for redemption. The Series 2001 Bonds are issuable as fully registered Bonds, without coupons, in denominations of $5,000 or any integral multiple thereof. Subject to the limitations and conditions and upon payment of the charges, if any, as provided in the Indenture, Series 2001 Bonds may be exchanged for a like aggregate principal amount of Series 2001 Bonds of other authorized denominations and of the same mahuity. This Bond is transferable by the Owner hereof, in person, or by his attorney duly authorized in writing, at said office of the Trustee in Minneapolis, Minnesota, but only in the manner and subject to the limitations provided in the Indenture, and upon surrender and cancellation of this Bond. Upon registration of such transfer a new Bond or Bonds, of any authorized denomination or denominations, for the same aggregate principal amOtmt and of the same maturity will be issued to the transferee in exchange herefor. The District and the Trustee may treat the Owner hereof as the absolute Owner hereof for all purposes, and the District and the Trustee shall not be affected by any notice to the contrary. The Indenture may be amended without the consent of the Owners of the Series 2001 Bonds to the extent set forth in the Indenture. It is hereby certified that all of the things, conditions and acts required to exist, to have happened or to have been performed precedent to and in the issuance of this Bond do exist, have happened or have been performed in due and regular time and manner as required by the laws of the State of California and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any limit prescribed by any laws of the State of Exhibit A-3- California, and is not in excess of the amount of Series 2001 Bonds permitted to be issued under the Indenhrre. This Bond shall not become valid or obligatory for any purpose or be entitled to the benefits of the Indenture until the certificate of authentication and registration hereon shall have been manually signed by an authorized officer or signatory of the Trustee. Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the District or its agent 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 DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), 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. IN WITNESS WHEREOF, the South Tahoe Public Utility District has caused this Series 2001 Bond to be executed in its name and on its behalf with the facsimile signatures of its Mayor and its seal to be reproduced hereon and attested by the facsimile signature of its Clerk of the Board, all as of the 1st day of August, 2001. SOUTH TAHOE PUBLIC UTILITY DISTRICT By President A TIEST: By Clerk of the Board Exhibit A-4- CERTIFICATE OF AUTHENTICATION This is one of the Series 2001 Bonds described in the within-mentioned Indenture, Dated: August 16, 2001 U.S. TRUST COMPANY, N.A., as Trustee By: Authorized Signatory Exhibit A-S- ASSIGNMENT For value received the undersigned hereby sells, assigns and transfers unto whose address and social security or other tax identifying number is , the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: Signature Guaranteed: Note: Signature(s) must be guaranteed by an eligible guarantor institution (banks, stockbrokers, saving and loan associations and credit unions with membership in an approved signature medallion program) pursuant to Securities and Exchange Agency Rule 17 Ad-IS. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Certificate in every particular without alteration or enlargement or any change whatsoever. Exhibit A-6- ESCROW DEPOSIT AND TRUST AGREEMENT by and between the SOUTH TAHOE PUBLIC UTILITY DISTRICT and U.S. TRUST COMPANY, N.A., as Escrow Bank Dated as of August 1, 2001 Relating to the refunding and defeasance of the $8,829,000 SOUTH TAHOE PUBLIC UTILITY DISTRICT 1994 INSTALLMENT SALE AGREEMENT FINANCING WITH LASALLE NATIONAL BANK Section I. Section 2. Section 3. Section 4. Section 5. Section 6 Section 7. Section 8. Section 9. Section 10. Section lI. Section 12. Section 13. Section 14. Section 15. Section 16. TABLE OF CONTENTS Page Definition of Federal Securities...................... ....................................................1 Establishment of Escrow Fund. ................................ .............. ..... ......... ...... .......2 Deposit into Escrow Fund......................................................... ........................2 Instructions as to Application of Deposit.........................................................2 Investment of Any Remaining Moneys ..............................................................3 Substitution or Withdrawal of Federal Securities .............................................4 Application of Certain Terms of Prior Bond Resolutions. ................................4 Optional Call Right Reservation........ ................................................................4 Compensation and Indemnification to Escrow Bank........................................4 Resignation of Escrow Bank. ...................................................... .......................4 Amendment........ ................................................................................................5 Successors. .........................................................................................................5 Execution in Counterparts. ................................................................................5 Applicable Law. ................................................................................................5 Immunities and Liability of Escrow Bank. ........................................................5 Termination of Agreement. ......................................................................,.........6 EXHIBIT A - IDENTIFICATION OF ORIGINAL FEDERAL SECURITIES -i- ESCROW DEPOSIT AND TRUST AGREEMENT This ESCROW DEPOSIT AND TRUST AGREEMENT (this "Agreement") is made and entered into as of August 1, 2001 by and between the SOUTH TAHOE PUBLIC UTILITY DISTRICT, a public utility district duly organized and existing under the Constitution and laws of the State of California (the "District"), and U.s. Trust Company, N.A., a national banking association organized and existing under the laws of the United States of America, acting as escrow bank hereunder (the "Escrow Bank"); WITNESSETH: WHEREAS, the District entered into an Installment Sale Agreement, dated as of October 31, 1994, between LaSalle National Bank and the District (the "1994 Installment Sale Agreement") the proceeds of which were used to finance the construction of certain improvements to the District's water system (the "Improvements"); and WHEREAS, interest rates have declined since the 1994 Installment Sale Agreement was entered into, and the District will receive economic benefit by refunding the 1994 Installment Sale Agreement; and WHEREAS, the District has determined that it is in the economic interests of the District at this time to provide for the refunding of the 1994 Installment Sale Agreement, and to that end the District has authorized the issuance of its South Tahoe Public Utility District Water Revenue Refunding Bonds, Series 2001, in the aggregate principal amount of $_________ (the "Refunding Bonds") pursuant to a resolution adopted by the Board of Trustees of the District on July 5, 2001 (the "Refunding Bond Resolution"); and WHEREAS, the District and the Escrow Bank wish to enter into this Agreement for the purpose of providing the terms and conditions relating to the deposit and application of moneys and federal securities to provide for the payment and prepayment of the 1994 Installment Sale Agreement, in accordance with Section 9.02 of the 1994 Installment Sale Agreement; NOW, THEREFORE, in consideration of the above premises and of the mutual promises and covenants herein contained and for other valuable consideration, the parties hereto do hereby agree as follows: SECTION 1. Definition of Federal Securities. As used herein, the term "Federal Securities" means non-callable United States Treasury notes, bonds, bills or certificates of indebtedness, or any other obligations the timely payment of which is directly or indirectly guaranteed by the faith and credit of the United States of America. SECTION 2. Appointment of Escrow Bank. The District hereby appoints the Escrow Bank as escrow bank for all purposes of this Agreement and in accordance with the terms and provisions of this Agreement, and the Escrow Bank hereby accepts such appointment. SECTION 3. Establishment of Escrow Fund. There is hereby created a fund (the "Escrow Fund") to be held by the Escrow Bank as an irrevocable escrow securing the payment of the Installment Payments due under the 1994 Installment Sale Agreement, subject to and in accordance with the provisions of this Agreement. SECTION 4. Deposit into Escrow Fund; Investment of Amounts. Concurrently with delivery of the Refunding Bonds on August 16, 2001 (the "Refunding Bond Issuance Date"), the District shall cause to be transferred to the Escrow Bank for deposit into the Escrow Fund, from the proceeds of the Refunding Bonds, the amount of $ in immediately available funds. Upon receipt of said amount, the Escrow Bank is hereby directed to deposit said amount into the Escrow Fund. The total amount deposited to the Escrow Fund on the Refunding Bond Issuance Date shall equal $ The Escrow Bank shall invest $ of the amounts so deposited into the Escrow Fund in the Federal Securities set forth in the verification report for the Refunding Bonds prepared by Grant Thornton LLP and included elsewhere in the transcript for the Refunding Bonds, and by this reference incorporated herein (the "Original Federal Securities"). The Escrow Bank shall hold the remaining $_ of such amount in cash which shall be uninvested. All Federal Securities and cash shall be deposited with and held by the Escrow Bank in the Escrow Fund solely for the uses and purposes set forth herein. The Escrow Bank shall have no lien upon or right of set off against the Federal Securities and cash at any time on deposit in the Escrow Fund. SECTION 5. Instructions as to Application of Deposit. From and after the Refunding Bond Issuance Date, all cash and Federal Securities in the Escrow Fund shall be and are hereby irrevocably pledged as a special fund for the payment of the Installment Payments due under the 1994 Installment Sale Agreement. For such purpose, the total amount of Federal Securities and cash deposited in the Escrow Fund pursuant to Section 4 shall be applied by the Escrow Bank for the sole purpose of paying the Installment Payments due under the 1994 Installment Sale Agreement at the times and in the amounts set forth in the verification report for the Refunding Bonds prepared by Grant Thornton LLP and included elsewhere in the transcript for the Refunding Bonds, and by this reference incorporated herein. Such amounts due under the 1994 Installment Sale Agreement shall be paid directly by the Escrow Bank to LaSalle National Bank ("LaSalle"), as obligee under the 1994 Installment Sale Agreement, or its assigns, as instructed by LaSalle. If at any time the Escrow Bank shall receive actual knowledge that the cash and Federal Securities in the Escrow Fund will not be sufficient to make any payment required by this Section 5, the Escrow Bank shall notify the District of such fact and the District shall immediately cure such deficiency from any source of legally available funds. Following payment in full of the Installment Payments due under the 1994 Installment Sale Agreement, all amounts on deposit in the Escrow Fund shall be transferred by the Escrow Bank to the Trustee for deposit to the Interest Account held under the Indenture. SECTION 6. Investment of Any Remaining Moneys. (a) Generally. Following the Refunding Bond Issuance Date, at the written direction of the District, the Escrow Bank shall invest and reinvest any cash received from any of the Federal Securities, and the cash originally deposited into the Escrow Fund, for a period ending not later than the date on which such cash is required for the purposes specified in Section 4, in additional Federal Securities; provided, however, that with respect to any such reinvestment, such written directions of the District shall be accompanied by: (a) a certification of an independent certified public accountant or firm of certified public accountants of favorable national reputation experienced in the refunding of obligations of political subdivisions (an "Independent Accountant") stating such investment or reinvestment will not cause the amounts on deposit in the Escrow Fund to be insufficient to make the payments specified in Section 5; and (b) an opinion of nationally recognized bond counsel ("Bond Counsel") that investment in accordance with such directions will not affect, for federal income tax purposes, the exemption from federal income taxes of the interest component of the Installment Payments due under the 1994 Installment Sale Agreement or the Refunding Bonds. In the event any such investment or reinvestment is required to be made in United States Treasury Securities - State and Local -2- Government Series (/lSLGS"), the District shall at its cost cause to be prepared all necessary subscription forms therefor in sufficient time to enable the Escrow Bank to acquire such SLGS. In the event that the District shall fail to file any such written directions with the Escrow Bank concerning the reinvestment of any such proceeds, such proceeds shall be held uninvested by the Escrow Bank. Any interest income resulting from investment or reinvestment of moneys pursuant to this Section 6, except to the extent required to make any payment required pursuant to Section 5 as set forth in the certification of an Independent Accountant rendered pursuant to the foregoing provisions of this Section 6, shall, at the written direction of the District filed with the Escrow Bank, be paid to the District as its sole property free and clear of the pledge established hereunder, to be used for any lawful purposes of the District after payment of any amounts then owed to the Escrow Bank. (b) Administration of Uninvested Funds. In the absence of written instructions from the District, the Escrow Bank is hereby authorized and empowered to hold such moneys uninvested. SECTION 7. Substitution or Withdrawal of Federal Securities. Following the Refunding Bond Issuance Date, the District may at any time direct the Escrow Bank to substitute Federal Securities for any or all of the Federal Securities then deposited in the Escrow Fund, or to withdraw and transfer to the District any portion of the Federal Securities then deposited in the Escrow Fund, provided that any such direction and substitution or withdrawal shall be accompanied by: (a) a certification of an Independent Accountant that the Federal Securities then to be so deposited in the Escrow Fund together with interest to be derived therefrom, or in the case of withdrawal the Federal Securities to be remaining in the Escrow Fund following such withdrawal together with the interest to be derived therefrom, shall be in an amount at all times at least sufficient to make the payments specified in Section 5; and (b) an opinion of Bond Counsel that the substitution or withdrawal will not affect, for Federal income tax purposes the exclusion from gross income for federal income tax purposes of the interest component of the Installment Payments due under the 1994 Installment Sale Agreement or the Authority Bonds. In the event that, following any such substitution of Federal Securities pursuant to this Section 7, there is an amount of moneys or Federal Securities in excess of an amount sufficient to make the payments required by Section 5, as set forth in the certification of an Independent Accountant rendered pursuant to the foregoing provisions of this Section 7, such excess shall be paid to (or at the written direction of) the District as its sole property free and clear of the pledge established hereunder, to be used for any lawful purposes of the District. SECTION 8. Application of Certain Terms of 1994 Installment Sale Agreement, All of the terms of the 1994 Installment Sale Agreement relating to the making of Installment Payments due under the 1994 Installment Sale Agreement are incorporated in this Agreement as if set forth in full herein. SECTION 9. Compensation and Indemnification to Escrow Bank. The District shall pay the Escrow Bank full compensation for its duties under this Agreement, including out-of-pocket costs such as publication costs, prepayment expenses, legal fees and other costs and expenses relating hereto and, in addition, all fees, costs and expenses relating to the purchase of any Federal Securities after the date hereof. The District agrees to indemnify and hold the Escrow Bank, its officers, employees, directors and agents hannless from and against any and all losses, costs, expenses, claims and liabilities whatsoever (including, without limitation, fees and expenses of attorneys) which may be imposed on, asserted against or incurred by the Escrow Bank related to or arising from the acceptance and performance by the Escrow Bank of its duties hereunder. -3- The obligations of the District under this Section shall survive the termination or discharge of this Agreement. SECTION 10. Resignation of Escrow Bank. The Escrow Bank may at any time resign by giving written notice to the District of such resignation. The District shall promptly appoint a successor Escrow Bank by the resignation date. Resignation of the Escrow Bank will be effective only upon acceptance of appointment by a successor Escrow Bank. If the District does not appoint a successor, the Escrow Bank may at the expense of the District petition any court of competent jurisdiction for the appointment of a successor Escrow Bank, which court may thereupon, after such notice, if any, as it may deem proper and prescribe and as may be required by law, appoint a successor Escrow Bank. After receiving a notice of resignation of Escrow Bank, the District may appoint a temporary Escrow Bank to replace the resigning Escrow Bank until the District appoints a successor Escrow Bank. Any such temporary Escrow Bank so appointed by the District, shall immediately and without further act be superseded by the successor Escrow Bank so appointed. SECTION 11. Amendment. This Agreement may be amended by the parties hereto, but only if there shall have been filed with the District and the Escrow Bank a written opinion of Bond Counsel stating that such amendment will not materially adversely affect the interests of the owners of the 1994 Installment Sale Agreement, and that such amendment will not cause interest component of the Installment Payments due under the 1994 Installment Sale Agreement to become includable in the gross income of the owners thereof for federal income tax purposes. SECTION 12. Successors. Whenever in this Agreement either the District or the Escrow Bank 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 Agreement contained by or on behalf of the District or the Escrow Bank shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. Any company into which the Escrow Bank may be merged or converted or with which may be consolidated or any company resulting from any merger, conversion or consolidation to which its shall be a party or any company to which the Escrow Bank may sell or transfer all or substantially all of its corporate trust business, shall be the successor hereunder to the Escrow Bank without the execution or filing of any paper or any further act. SECTION 13. Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 14. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. SECTION 15. Immunities and Liability of Escrow Bank. The Escrow Bank undertakes to perform only such duties as are expressly set forth in this Agreement and no implied duties, covenants or obligations shall be read into this Agreement against the Escrow Bank. The Escrow Bank shall not have any liability hereunder except to the extent of its gross negligence or willful misconduct. In no event shall the Escrow Bank be liable for any special, indirect or consequential damages. The Escrow Bank shall not be liable for any loss from any investments or substitution of Federal Securities made by it in accordance with the terms of this Agreement. -4- The Escrow Bank may consult with legal cOWlSel of its own choice and the Escrow Bank shall not be liable for any action taken or not taken by it in good faith in reliance upon the opinion or advice of such counsel. The Escrow Bank shall not be liable for the recitals or representations contained in this Agreement and shall not be responsible for the validity of this Agreement, the sufficiency of the Escrow Fund or the moneys and Federal Securities or any substitute Federal Securities to pay the Installment Payments and prepayment premium due and payable upon prepayment of the Installment Payments due under the 1994 Installment Sale Agreement. Whenever in the administration of this Agreement the Escrow Bank shall deem it necessary or desirable that a matter be proved or established prior to taking or not taking any action, such matter may be deemed to be conclusively proved and established by a certificate of an authorized representative of the District and shall be full protection for any action taken or not taken by the Escrow Bank in good faith reliance thereon. The Escrow Bank may conclusively rely as to the truth and accuracy of the statements and correctness of any opinions or calculations provided to it in connection with this Agreement and shall be protected in acting, or refraining from acting, upon any notice, instruction, request, certificate, document, opinion or other writing furnished to the Escrow Bank in connection with this Agreement and believed by the Escrow Bank to be signed by the proper party, and it need not investigate any fact or matter stated therein. SECTION 16. Tennination of Agreement. Upon payment in full of the Installment Payments and prepayment premium of the 1994 Installment Sale Agreement and all fees, expense and charges of the Escrow Bank as described above, this Agreement shall terminate and the Escrow Bank shall be discharged from any further obligation or responsibility hereunder. -5- IN WITNESS WHEREOF, the District and the Escrow Bank have each caused this Agreement to be executed by their duly authorized officers all as of the date first above written. SOUTH TAHOE PUBLIC UTILITY DISTRICT By President U.S. TRUST COMPANY, N.A., as Escrow Bank By Authorized Officer -6- SOUTH TAHOE PUBLIC UTILITY DISTRICT BOARD AGENDA ITEM TO: BOARD OF DIRECTORS FR: Jim Hoggatt. Construction Manager I Engineer RE: BOARD MEETING July 5. 2001 AGENDA ITEM: ACTION ITEM NO: 6.b CONSENT CALENDAR ITEM NO: ITEM-PROJECT NAME: TALLAC PUMP STATION FORCE MAIN REPAIR REQUESTED BOARD ACTION: (1) Determine an Emergency exists Dursuant to Section 1102 of the Public Contract Code: (2) Determine substantial evidence has been presented to authorize an exceotion be made to Section 22050 of the Public Contract Code that this emergency will not permit a delay resultina from a competitive solicitation for bids and that this action is necessary to respond to the emergency: and (3) Adopt Resolution 2721-01 delegating authority to the General Manager to order any action necessary to respond to ths emergency. and determine that the proiect is exempt from CEQA. DISCUSSION: Due to odor complaints from neighboring residences. District crews determined on June 29.2001. that the Tallac Pump Station Force Main. where it crosses the bridge on Venice Drive. was damaged. After a concrete cap was removed. the pipe line itself was discovered to have a hole in it due to hydrogen sulfide corrosion. To prevent the possibility of a raw sewage spill from occurring. District staff determined that a bypass could be installed uDstream from the bridge crossing into the St. Moritz Pump Station collection system. The St. Mortiz Pump Station has the capacity to pump the additional flow from Tallac to the Tahoe Keys Pump Station. The byoass piping needs to be installed immediately. In addition. piping on the bridge crossing needs to be exposed and disassembled sufficiently to allow inspection of the Dipe interior to Continued on Page 2: SCHEDULE: June 25. 2001 - July 12. 2001 COSTS: $40.000 to $50.000 ACCOUNT NO: 1002-7395-TALLAC BUDGETED AMOUNT REMAINING: ATTACHMENTS: Resolution 2721-01 to be distributed to Board prior to meeting CONCURRENCE WITH REQUESTEF GENERAL MANAGER: YES NO CHIEF FINANCIAL OFFICER: YES NO CATEGORY: GENERAL WATER X SEWER Continued from Page 1: to determine the extent of corrosion damage. A larger repair proiect is thus anticipated for later in this construction season. Funds to cover the cost of the emergency work. and any future repairs deemed necessary. shall come from Capital Reserves. since this proiect was unanticipated at budget preparation time. ( , '--'c r n\ 1 2 3 RESOLUTION NO. 2721-01 4 5 6 BE IT RESOLVED, by the Board of Directors of the South Tahoe Public Utility District, A Resolution of the South Tahoe Public Utility District Declaring an Emergency, Authorizing Contracts Without Bids, Delegating Authority to Order Emergency Action and Determining CEQA Exemption Tallac Pump Station Force Main Repair 7 County of EI Dorado, State of California, as follows: 8 WHEREAS, the Tallac Pump Station Force Main carries raw sewage from the western 9 side of the District's service area, including Fallen Leaf Lake, USFS facilities, and Camp 10 Richardson, to the Tahoe Keys Pump Station; and 11 WHEREAS, the holding capacity of the Tallac Pump Station is approximately eight 12 hours; and 13 WHEREAS, bypass pipe lines between the Tallac Pump Station Force Main and the 14 St. Moritz Pump Station Collection system would provide continued safe delivery of the raw 15 sewage to the Tahoe Keys Pump Station; and 16 WHEREAS, all sewage within the District's service area shall be transported for 17 treatment to the District's WWTP prior to export from the Lake Tahoe Basin; and 18 WHEREAS, the District recently discovered a failed section of pipe on the Tallac Pump 19 Station Force Main; and 20 WHEREAS, substantial evidence has been provided to the Districtwhich demonstrates 21 immediate action is necessary to prevent any spills of raw sewage from reaching soils, surface 22 water and/or groundwater; and 23 WHEREAS, any delay in not constructing the bypass pipe lines immediately poses a 24 substantial risk that a release of raw sewage could occur from the Tallac Pump Station Force 25 Main and cause contamination to soils, surface water and/or groundwater; and 26 WHEREAS, the District must enter in an agreements with contractors and vendors to 27 construct the bypass pipe lines; and 28 WHEREAS, emergency projects are exempt from the requirements of the California Resolution No. 2721-01 Page 2 1 Environmental Quality Act (CEQA) pursuant to CEQA guidelines sections 15269 and 15369. 2 NOW, THEREFORE BE IT RESOLVED, AS FOLLOWS: 3 1. The circumstances concerning the substantial risk for raw sewage contamination 4 of soils, surface water and/or groundwater which recently came to the attention 5 of the District constitutes an emergency within the meaning of the Public 6 Contract Code Sections 1102 and 22050 and Public Resources Code Section 7 20160.3. 8 2. The construction of bypass pipe lines constitutes an emergency project exempt 9 from the requirements of CEQA. 10 3. The emergency will not permit a delay resulting from a competitive solicitation 11 for bids. 12 4. Immediate actions directly related to the emergency, including construction of 13 the bypass pipe lines and related work, and actions to procure the necessary 14 equipment, services and supplies as necessary to respond to the emergency 15 shall be made without competitive bidding to let contracts. 16 5. The General Manager of the District is authorized and directed to order any 17 action necessary and appropriate to respond to the emergency. 18 6. This Resolution shall take effect immediately. 19 WE, THE UNDERSIGNED, do hereby certify that the above and foregoing Resolution 20 was duly and regularly adopted and passed by the Board of Directors of South Tahoe Public 21 Utility District at a regular meeting held on July 5, 2001, by the following vote: 22 AYES: 23 NOES: 24 ABSENT: 25 /II II II /II II /II /II 26 /II II /II /II //11/11 27 II /II II II /II /11/11 28 /II /II II /II II II /II Resolution 2721-01 Page 3 1 2 3 4 A nEST: 5 6 Duane Wallace, President of the Board South Tahoe Public Utility District Kathy Sharp, Clerk of the Board 7 South Tahoe Public Utility District 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SOUTH TAHOE PUBLIC UTILITY DISTRICT BOARD AGENDA ITEM TO: BOARD OF DIRECTORS FR: Sob Saer. General Manaqer RE: BOARD MEETING July 5, 2001 AGENDA ITEM: ACTION ITEM NO: 6.c CONSENT CALENDAR ITEM NO: ~:::::::::::::~::~::::::~::::::::::::~;::;::::::::~::::~:::::::::::~:::::::':::':;::::::;;::~;;;::;;;;:::::::M:~:':;::::~~;;"""""~;~"""""""""";~-::;;;""",,,,~,....;;.:::;;::::.~&;:;:;:;:;.;;;;;;;;;;;;;;-;:::::;:::;:::;:;:';~::::;;;;::::'~x$:~%-;;;'~';;::::';::;;"""""........~;;;::::;;;;;::::;;::::::::::::::;;:~~;::::::;;;.:::::::::::.:;;;;;:::::~:;;;::;;;;::::;::;;;:: ITEM-PROJECT NAME: 2000/20001 EI Dorado County Grand Jury Report REQUESTED BOARD ACTION: Direct staff reqardinq response DISCUSSION: The Grand Jury released their 2000/2001 report and listed the District as a "respondent" in the section pertaininq to the EI Dorado County Water Agency. Each respondent is required by law to respond to reach Finding and each Recommendation and forward the information to the Superior Court. Attached are the District's preliminary responses and comments and includes feedback from Director Mosbacher. SCHEDULE: Respond within 60-days of release of Report COSTS: N/A ACCOUNT NO: N/A BUDGETED AMOUNT REMAINING: ATTACHMENTS: 2000/2001 EI Dorado County Grand Jury Report: Cover letter to Respondents, Section pertaininq to the EI Dorado County Water Aqency. District comments. Cover letter to Judqe Lasarow *:::i:~:i:i::::~:!:!::::::;::;:!:t:~:::~:i:::!:::::::::!:.:::::!:i::;:!:::,:~:!t.:!:.:::>,J:I:I:!:!:!:~\;~;~);I:~:!:!:!:!~:!:!~)i!;;m):<<~'::imJ)J.~*-:!:I:!:~:!:~:!i!i!:!:~:@:::~~~:!:::::~.~~:!:!:~:i:ii:i:(i:!:M:ii:i:(i~:!:!;!:!i!:~:M:?~;:;::;i:i:i:j:j:i:r:!:i:!:!:!:~~;:;;~:::j:j:j:i:::.:j:j:j:::j:li:i:i:!:!:!:!:!:!:!:!~:!;::::::;:!:::::!:::!:!:!:!t:::!:::::;:::!:!~:!:i:!:i:i:i:j:!:!:::::::;:: CONCURRENCE WITH REQUEST:~:: GENERAL MANAGER: YES NO CHIEF FINANCIAL OFFICER: YE ~~ _NO CATEGORY: GENERAL WATER X SEWER EI Dorado County Grand Jury PO Box 472 Placerville, CA 95633 22 June 2001 Dear Respondent: Attached is your advance copy of the 2000/2001 EI Dorado County Grand Jury Report. . We wish to remind you that California Penal Code Section 933.05(f) states: "A grand jury shall provide to the affected agency a copy of the portion of the grand jury report relating to that person or entity two working days prior to its public release and after the approval of the presiding judge. No officer, agency, department, or governing body of a public agency shall disclose any contents of the report prior to the public release of the final report." The public release of the report is tentatively scheduled for 1300 hours Wednesday 27 June 2001. This release will be effective with the release of the Grand Jury Report to the local media. The report is scheduled to be posted on the Grand Jury web site as soon as practically possible after the release date and time noted above. The legally mandated format for response to the Grand Jury Report is contained within the report. Please familiarize yourself with the required format as well as time deadlines required by law. This will assist you in the preparation of your response. My designee or I will remain available for comment or clarification of the Grand Jury's recommendations for the next 45 days, Please feel free to contact me at my home or through the Grand Jury secretary, Judicial Assistant Holly Warren at 621-6451. Sincerely, Kenn Womack Foreman EL DORADO couNTY GRAND JURY REPORT 2000-2001 \ ~ <;jY1~11"r. ~" ',~' ((i:<{,;f~~~~t)' . ,,'- <.j." ..." . . '1..-.' LAKE TAHOE Special Districts Committee Planning & Environment Committee EJ Dorado County Water Agency Reason for the Report Members of the Special Districts Committee and the Planning & Environment Committee of the 2000/2001 Grand Jury separately and independently became concerned about the water and power supplies available to residents ofEl Dorado County. They decided, in light of that shared concern, to join together in investigating whether potential growth or increases in per capita usage within the County were likely to outstrip the water and power supplies necessary to service those needs, and if so, what if anything could be done about it. Scone of Investigation These Committees interviewed: . The current General Manager of the El Dorado County Water Agency ("Agencv")' - . , . The present and past General Managers of the El Dorado Irrigation District ("EID"); ., All of the members of the 1999/2000 Board of Supervisors; . . A member of El Dorado Citizens for Water; and . A private attorney with extensive experience in representing water and power clients. Additionally, these Committees reviewed: . The El Dorado County Water Agency Act; . The Placer County Water Agency Act; and . Senate Bi11428, 2001 Legislative Term, California State Senate. Findings Fl. The El Dorado County Water Agency was created and operates pursuant to Chapter 2139 of the 1959 Statutes of California, as amended, knovvn as the EI Dorado County Water Agency Act ("Act"). The Agency's governing authority appears at Chapter 96 of the Appendix to the California Water Code. All further section references in these fmdings are to provisions contained in the Appendices to the Water Code. ~~c. ~ jp...1~\f-i'..JT"" to F- -n-i~ ~ 145 ~:!('- F2. ~~n... S -rr.-.-~M (..J.) \"" a.t- -n1-iL LAW The Agency was created because the California Legislature found, in 1959, that "water problems in the county r~quire county-wide water conservation, flood control and development of water resources," and that the then existing "county water districts, municipalities, and water conservation districts" were "unable alone to economically develop an adequate water supply and control the floods of the county." The Legislature further found that it was "necessary to have a political entity coextensive with the geographical limits of the entire county," that conditions within the COWlty were "peculiar to it," and that the Act was "necessary for the conservation, development, control and use of said water for the public good and for the protection of life and property" within the County. (Section 96-103.) F3. The territorial jurisdiction of the Agency consists of "all the territory lying within the ~c..c...u.!u-..~ exterior boundaries of the County ofEl Dorado." (Section 96-2.) -E:iIA- Til.f\.fJ..\ I F4. The Agency has the authority to acquire real and personal property, both by exercise of the power of eminent domain and by grant, purchase, gift, devise and lease. (Sections ~-f'../-^{2.J~.~'" 96-8 and 96-9.) The Agency has exercised this power only sparingly, and in those S~-''VJ'~-Jl instances in which it has exercised the power, it has subsequently transferred ownership of the property thus acquired to water purveyors within the County rather than retaining it. F5. f>-r..-2.u. J 2p....,-'1t.- .~~~ ' -:-r~-oz.}-I\J.~i F6. ~i2Pn'L -6~~t\'E:'.c( The Agency has the power, except as otherwise expressly limited by the Act, "to do any and every laVvful act necessary in order that sufficient water may be available for any present or future beneficial use or uses of the lands or inhabitants" Vvithin the Agency's territory, "including, but not limited to, irrigation, domestic, fire protection, municipal, commercial, industrial, recreational, and all other beneficial uses and purposes." C?ection 96-11.) The Agency has not exercised this power aggressively. The Agency presently has the folloVv"ing statutory powers, among others: a. "[TJo construct, operate and maintain works to develop hydroelectric energy as a means of assisting in financing the construction, operation and maintenance of its projects for the control, conservation, diversion and transmission of water," and "to enter into contracts for the sale of such energy... at wholesale rates to any public agency or private entity engaged in the sale or use of electric energy. " (Section 96-12.) "Incidental to the construction and operation of the works of the agency, the agency shall have the power to contract for the sale of the right to use falling water for power purposes with any public or private entity." (Section 96-22.); b. "[T]o control the flood and storm waters of the agency" and "to conserve such waters for beneficial and useful purposes" (Section 96-13.); c. "[TJo store water in surface or Wlderground reservoirs;" "to conserve and reclaim water;" "to appropriate and acquire water and water rights, and import water into 146 F7. c::::.,-- _1:..11:::.- ~ l~~--:; C~..t.,'-ll F8. :=:'{~-l':.. A..,-7F~ ,4..t~..r:; ~_U\J;,rll 7"0 F9. k. f2tEL o !.., the Agency;" to engage in any "action or proceeding involving or affecting the ownership or use of waters and water rights" in which the Agency has an interest; "to prevent interference with or diminution of, or to declare, rights in the natw'al flow of any stream or surface or subterranean supply of waters;" "to prevent unlawful exportation of water;" and "to prevent contamination [and] pollution" of waters (Section 96-14.); d. "[TJo construct, purchase, lease, or otherwise acquire works and ... water and water rights, useful or necessary to make use of water for any purposes authorized" by the Act (Section 96-15), including but not limited to "pipes, pipelines, flumes, [and] tunnels and other conduits, including facilities for the transmission of electric energy to the works of the agency" (Section 96-18.); e. "[T]o operate, repair, improve, maintain, renew, replace and extend all works and property of the agency" (Section 96-16.); f. To "enter into contracts v,rith any member unit" of the Agency as defined in the Act (Section 96-24.); g. "[T]o cooperate and contract with the United States ... for the purposes of construction of works, ... or for the acquisition, purchase, extension, operation and maintenance of such works, whether for irrigation, drainage, or flood control, ... or for a water supply for any purposes" (Section 96-30.); and h. To hold legal title to property (Section 96-42.). The Agency has failed, either totally or at least substantially, to exercise the powers set forth in subsections "a" through "e" of the preceding Finding. It has, instead, deferred to water purveyors within the County for primary activity in those areas. The Agency has the duty, among others, "to equitably apportion the benefits of the agency to the lands within the [various] zones" located within the Agency. (Section 96- 46(a).). The Agency has delegated the majority portion of that authority to EID. EID, however, may in the future have significant potential disputes with the Georgeto'Nn- Divide Public Utilities District concerning the diversion and allocation of water from the South Fork of the American River at Folsom Lake. Those potential disputes may ultimately result in a conflict of interest on the part of Ell, betvveen its inter-district water allocation role and its role as a water supplier to its own customers. At the present time, the Board of Supervisors of the County ("BOS ") is, ex officio, the Board of Directors of the Agency ("Board"). Each member of the BOS serves as a member of the Board without additional compensation, except for expense reimbursement. (Section 96-33.) This Board composition is counter-productive to the long-term interests of water and power development within the County, because the normal planning focus of BOS members is relatively short-term and is diluted by 147 competing planning interests unrelated to the development of water and power, whereas the appropriate and required planning focus of Agency Board members must necessarily be long-term in nature, i.e., 20 to 40 years or more in the future. FI0. By contrast, and by way of example, the composition of the Board of Directors of the --::n\-!c... 'I> ;n2..l - Placer County Water Agency, which is authorized in Section 81-7 et seq. of the -I =S1 ~\ Appendix to the California Water Code, is significantly more flexible, in that the '.L.? tJ.Oi original directors, members of the Board of Supervisors ex officio, have been replaced ~i.1 1..-1 "..e by directors who are elected from the five supervisorial districts \Vithin Placer County. \.1'1 \ -rJ- (See Section 81-7.1.) The Placer County Water Agency has the reputation of being an 6ifA ~ efficiently organized, managed and operating entity. Other water and/or power Q-?- "'i'i~_ suppliers which have similar reputations for efficiency include the Turlock Irrigation ~ fV..l.C-I~S District, the Modesto Irrigation District, the Nevada Irrigation District, the Northern L-\?n.O California Power Agency, the M-S-R Power Authority, and the Sacramento Municipal Utility District. FI1. Senator Rico Oller has introduced proposed legislation, SB 428, which would amend Section 96-33. In its form as of April 11, 2001, SB 428 would revise the composition of the Board of Directors of the Agency by providing for a five-member Board, three of whom would be members of the Board of Supervisors, \Vith specific consideration being given to the Supervisor representing a district that includes the largest area in the county not served by a water district. The other two Agency directors would be appointed by the water districts within the County, with one director being from either the South Lake Tahoe Public Utility District or the Tahoe City Public Utility District, and the other being from either Eill, the Grizzly Flats Community Services Disrrict or the Georgeto\\lIl Divide Public Utility District. Eill, however, would have a representative filling this position on at least an every other term basis. The BOS has adopted a r~solution supporting this proposed legislation. r)\? --;i2.\ LT .-s!~Cpa Z-.7? J ..; .&7. J7~~H)~ F12. The Grand Jury agrees in concept, and \Vithout taking a specific position on the details ?~..t.. of Senator Oller's proposed legislation, with the principles that water purveyors, and 4.,......,~.~j..)- unaffiliated members of the public to the extent reasonably possible, \Vithin the County GO)jJI}/'\l.:Jv-'- should be represented on the Agency's Board of Directors. F13. The Agency does not presently have a current county-wide water plan. A draft plan was prepared in 1993, but that plan was never completed. Projections of demand have D\~2..i,_:r significantly changed since 1993. At the Agency's request, the BOS has authorized a 6~pp r;;'~ request for proposals for the preparation of an updated county water plan, showing jl4.L._ options for actions to meet projected demand through 2020, and projections of those 7"\ . . '. estimates to 2050, but also requiring identification and consideration of environmental I.lV) fi:.uq'J IN:.'..ttoncerns along with economic and technical issues. The Grand Jury supports the D1- A- preparation, and ultimate adoption, of such a Plan. Such a Plan need not necessarily (.,.0 IJ M'T11 - envision any particular degree or extent of population growth within the County, if \r;}1 () ~ increases in water and/or power usage can reasonably be anticipated to occur for reasons f\.Ai\f other than growth. _ _' ('1+t. 'D I ~:::;/l2...to ~ ~~i'1.. Y ~ol\.p L!'';-~..O ^- J.J'\ A-""'.:i-Il:.-e \ ..)LA.l\J f--1e?-14.. I~ v"'~~L ~1..'f<'i:::.71t."'(\'. ~ f...At..'~:l:T'fj<- ~ r::.Q.(<.. T""~.D\'?ll'U~T ~ 148 A---P,NL r~\ 1-\ \\ ~c::,. \"'-~ ~G..." H~ O..;.._,,~ \...D'~f:;:''<F.j). F14. The Court of Appeal, Third Appellate District, State of California, in County of Amador v. El Dorado County Water A~encv, 76 Cal.App.4th 931, has held that the adoption of A- CMM~ - environmental documents pertaining to specific water development plans are 'vr-\ \ (J~ impermissible unless and until a countywide general plan has been adopted. 6t ,~~ Accordingly, the absence of a formally adopted countywide general plan inhibits action (). A on any county water plan, which may be appropriate for the benefit of the residents of ''''l,rl.+-tJ the County. In the interim, water resources to which EI Dorado County has, or may I ~ have, potential development rights may be lost to potential water users downstream ~lJla..e..f)from the County, or in the San Joaquin Valley, in Southern California, and elsewhere'. For that reason, among others, it is necessary that a countywide general plan be adopted and plat into place at the earliest possible opportunity. F 15. The County's present water difficulties have resulted from a history of the BOS, sitting as the Agency's Board of Directors, having played politics with the issue, sacrificing A-&-t/2.e..L - water development needs to other, more immediate and politically beneficial, purposes. kna.4 Plans for water development and power generation have been created and then, for \",:\ various reasons, have failed to be implemented. As a result, significant opportunities for nf-.h" -f'\ such develop:nent and ~en~ration have been .los.t and, with changin? ~onditions, c~ot I'iC,..L.'d (L~J Inow be reclauned. ActlOn IS necessary at this tune to ensure that slIDllar opportumtles, which may presently exist, are not lost by reason of inertia, conflict or other causes of delay. F16. <Sue ~ TT ~4.l:.--D ~_AHV..u:r In summary, the Grand Jury has concluded that the El Dorado County Water Agency, which has existing statutory authority to play a major role in the acquisition and de'/elopment of water and power resources within the County, has not been exercising that authority to its maximum efficiency, but instead has been delegating that authority t9 individual water purveyors whose interests may (or may not) conflict. Recommendations The composition of the Board of Directors of the El Dorado County Water Agency should be changed, to include one or more representative(s) of water purveyors, and one or more representative(s) of the public who have more than minimal knowledge of water and power issues within the County. The BOS should support legislation to provide for ~\~t~"'i isuch a change. Rl. -? c.. ~ ~~l.L.f.r) R2. ~lt2t.t ;"'~ Members of the Board of the Agency should communicate with staff members and/or Board members of the Placer County Water Agency, the Turlock Irrigation District, the Modesto Irrigation District, the Nevada Irrigation District, the Northern California Power Agency, the M-S-R Power Authority, the Sacramento Municipal Utility District, and other efficiently operating water and power developers and suppliers. These communications should be undertaken for the purpose of learning how water and power supplies can be developed and operated in coordinated ways that are efficient and equitable but that also appropriately respect reasonable environmental considerations. 149 -,",,-. - ~"-_.- .<> .}P-.1I!'IlI!l!,__....W~"W~,_'"""____,.. _M ~iT..nr_...""'Wdl'::.'f.;::~......!,..'I'''''''~..r.,..''IL..._._...... ...... R3. 6~ ~~ ~A.rT R4. -'S~ Go#J\Mk.t..('r \2-::" RS, ~JUC- The budget of the Agency should be increased in order to enable the Agency to undertake a significantly greater exercise of its statutorily authorized powers. The Agency should hire an Assistant General Manager at the earliest possible opportunity. In doing so, the Agency should look for a person with existing experience with water and power issues and who also can reasonably be expected to remain active with the Agency for a significant number of years in the future, with a possible goal of promoting that person to General Manager when the current General Manager retires. The Agency should undertake studies directed toward the development of water storage facilities, to be filled during the winter and spring months when excess water is "spilled" " into Folsom Lake without being beneficially used either in EI Dorado County or t-:;~H-I-...j.J elsewhere, for subsequent use during summer and fall months when usage demands for ~~M.~\I water are high. R6. The Agency should also undertake studies directed toward the development of hydro- c electric power from water storage facilities. Those studies should include, but not be -'~ limited to, communication with the staff and/or Board of EID concerning the use and A'iit.l.e\-t(.....O operation of Project 184. Co IJ..Nt '-0.1 'I R7. In summary, the Grand Jury recommends that the Agency expand its activities to more ~~ fully exercise its statutory role. ':.2..ow\.I'I1.6..I .,. [2..R~Donses ReQuired for Findin2"s F1 through F16: EI Dorado County Water Agency Board of Directors EI Dorado County Board of Supervisors EI Dorado Irrigation District Board of Directors Georgetown-Divide Public Utility District Board of Direc!ors Grizzly Flat Public Utility District Board of Directors South Lake Tahoe Public Utility District Board of Directors Tahoe City Public Utility District Board of Directors ReSDonses ReQuired for Recommendations R1 through R7: EI Dorado County Water Agency Board of Directors EI Dorado County Board of Supervisors EI Dorado Irrigation District Board of Directors Georgetown-Divide Public Utility District Board of Directors Grizzly Flat Public Utility District Board of Directors South Lake Tahoe Public Utility District Board of Directors Tahoe City Public Utility District Board of Directors 150 South Tahoe Public Utility District Responses for Findings and Recommendations Pertaining to EI Dorado County Grand Jury 2000/2001 Report Special District's Committee Planning & Environment Committee EI Dorado County Water Agency Page Comment District's Comment No. No. 147 F7. We believe the EI Dorado County Water Agency ("Agency") has made the decision not to exercise many of the powers set forth in the Act. The Agency has a very limited staff. In . order to accomplish some of the County's goals, it has been necessary to delegate to the water purveyors who have larger staffs and greater expertise. 147 F8. The District is not familiar with this issue. 148 F12. The Oller legislation includes water purveyors as directors. The legislation does not include unaffiliated members of the public. The District believes the proposed legislation has the best chance of being passed and implemented. 149 F16. See comment F-7. 149 R1. The Board of Supervisors should support the proposed Oller legislation 150 R3. The income for the Agency comes from ad valorem property taxes. To increase the budget, the income must also increase. Under Prop. 218, increasing property taxes may require voter approval. With the Agency's past track record, obtaining voter approval may be very difficult. Also the Agency has several million dollars in reserve and contingency funds. Once the new Agency board is seated, their first goal should be to develop a strategic plan. The strategic plan should not only outline the projects required to implement the Agency's objectives, but a schedule for implementation, complete with the necessary budget and staffing needs. The strategic plan should also identify the partners need to insure success. 150 R5. The District has limited knowledge of this issue, therefore we cannot provide meaningful input. 150 R6. The District has completed study for the development of hydroelectric power on the pipeline that transports the recycled water to Alpine County. We would like the support of the Agency in developing financing plans for the project. South Tahoe Public Utility District 1275 Meadow Crest Drive · South Lake Tahoe · CA 96150 Phone 530 544-6474. Fax 530541-0614 July 6, 2001 Honorable Jerald M. Lasarow Supervising Grand Jury Judge EI Dorado County Superior Court 1354 Johnson Boulevard South Lake Tahoe, CA 96150 Subject: Response to 2000/2001 Grand Jury Report Pertaining to EI Dorado County Water Aqency Dear Judge Lasarow: The District is pleased to be included as a respondent to the 2000/2001 Grand Jury's investigation of the EI Dorado County Water Agency ("Agency"); however, we are disappointed that the investigating committee did not contact the District during the investigation. We believe the District could have provided additional background material, as well as an "East Slope" perspective on the Agency. One of the reasons the District supports the Oller legislation is that an East Slope representative will always be an Agency director. This will require the other directors to be aware of East Slope issues such as MTBE contamination, the impacts that the proposed arsenic and radon rules will have on our water supplies, as well as Lake Tahoe water allocation issues. We believe adding a director from the East Slope will truly make the Agency "county-wide." The District feels strongly that adding directors whose main focus is water issues will make the Agency become more focused and effective. The Oller legislation is the outcome of a decade of work between the Board of Supervisors, the water purveyors, and members of the public. This legislation should be supported without change in order that it be enacted next year. In order for the Agency to be effective it will need to develop a strategic plan that is supported by its directors. The Agency must provide effective leadership and expertise in the county-wide water issues. Enclosed is the District's response in the legally mandated format as indicated. Sincerely, Robert G. Baer General Manager Action Item 6.d Payment of Claims July 5, 2001 Ck# Amount Name FOR APPROVAL JULY 5,2001 Total Payroll 6-27-01 Total Payroll Transfer 6-21-01 Total Payroll $307,689.51 23,789.03 $331,478.54 Cost Containment Lasalle Total Vendor EFT $39,798.22 208,763.74 $248,561.96 Accounts Payable Checks Sewer Fund Accounts Payable Checks Water Fund Accounts Payable Checks Self-funded Ins Accounts Payable Checks Grant Funds Total Accounts Payable $352,968.51 422,976.00 11 ,409.38 181,188.61 $968.542.50 Grand Total $1,548,583.00 PAYROLL RELATED CHECKS 06/27/01 EFT EFT EFT #36616 EFT EFT EFT EFT EFT #36615 #36617 EFT EFT URM & Dependent Care/AFLAC Employment Dev Dept Direct Deposit Child Support Collection Program The Hartford ManuLife Pension Loan Payments ManuLife Pension Orchard Trust Co. US Bank Stanislaus Co Family Support Div Stationary Engineers Local 39 Time Out Fitness United Way Net Payroll Adjustments (Payroll Transfer 6-21-01) 2.114.11 13,677.42 114,108.52 37.50 1,373.84 6,932.85 41,819.52 10,448.56 83,147.19 172.00 2.753.28 56.00 77.18 54,760.57 (23,789.03) Sub-total $307,689.51 ":"CCT\A nQP5PREAO\PMTOFCLM. WB229-JuI"l-01 Payment of Claims July 5, 2001 Page 2 PAYROLL RELATED CHECKS 06/27/01 EFT EFT EFT # EFT EFT EFT EFT EFT # # EFT EFT URM & Dependent Care/AFLAC Employment Dev Dept Direct Deposit Child Support Collection Program The Hartford ManuLife Pension Loan Payments ManuLife Pension Orchard Trust US Bank Stanislaus Co Family Support Div Stationary Eng Local 39 Time Out Fitness United Way Net Payroll Adjustments 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 23,789.03 0.00 Sub-total $23,789.03 *Transfer to Payroll Account to cover Diane Noble's Final Check. H .\ACCTIA T\QPSPREAOIPMTOFCLM .WB229-Jun-01 1 Y T . 1 -1.4L en --req: DARLENE—leg GL JL--1,-;c• ON,.)1fL- Cg509 ‹AA06)--report CKRECSPC • Defiault-SelectiOm; Check Stock ID AP ; Check Types MO,HW.RV,VH .1-T] - • _ .. _ ___. _ _ _____ ._... • Vendor Name Account # Department Deiicription Amount Check It Type L2i.i ==_ ========= === = ====== -,.---A-C W A seRvIces-coRr-tA$C )- 10-00-,2510 GENERAL S ADMINI7TRATION----EMPLOYEE-VISrON INS ' :!;2547-.1.2 '..1 Check Total: 2,254.12 -00047113 MW '..:.,-. 8 AFtAC 10-00-2538 GENERAL 4-ADMINISTRATION- -AFLAC-FEE -DEDUCTION Pru.00' yiT 10-00-2532 GENERAL & ADMINISTRATION INSURANCE SUPPLEMENT 1,010.00 574 Total: 1,150.00 00047114 MW ALPEN SIERRA COFFEE COMPANY .. ., r 10-00-6520 GENERAL 4 ADMINISTRATION SUPPLIES 99.60 - • 20-00-6520 GENERAL 4 ADMINISTRATION SUPPLIES 6640 .: ... Che-Or-Tatal.: 1667-0-0 001/4(11b r1U Y 7t'.11,1 JANITORIAL SUPPLIES INVENTOR 147.66 4 G --- - - check T0Tel. 71-4T.6-6- 0004(116"MV-- • • ' '' 261 ALPINE SANITARY SUPPLY 10-00-0422 GENERAL & ADMINISTRATION AMERICAS - SO LAKE TAHOE • ANGUS-HAMER NETWORKING ij 10-20-6042 ALPINE COUNTY . • ::..,-iil • GROUNDS S MAINTENANCE ' 60.00 ; ,: •: ,,-.,:-,,, - - - - - - -CM4-cr TdraT . 6u .i3U auu4 rtrr— NV 1'2 250.00 fz1 -check-Tat-AI f -77-72,517110 , 0004 r :1 1 10-37-4440 INFORMATION SYSTEMS ADVISORY AVAYA FINANCIAL SERVICES 10-39-6709 FINANCE 10 39 6710 FINANCE LOAN PRINCIPAL PAYMENTS . • - INTEREfIT-EXPENSt Check rot-al 10-00-6350- GENERAL 4 ADMINISTRATION - -NATURAL GAS 20-00-6350 GENERAL 6 AOMINISTftATION NATURAL GAS BARKLEY MEAT COMPANY 10-21-6621 ADMINISTRATION 20-21-6621 ADMINISTRATION 114T43 3 -7 Check INCENTIVE 4 RECOGNITION PRGR INCENTIVE 4 RECOGNITION PRGR Chect-Toral. 689.98 00047119 MW 21.97 .89.58. 00047120, MW J44, 109.19 72.78 -18t-797 00-6471-2-1-7-1114- I. BARTLETT, CLIFFORD W 10-05-6200 EQUIPMENT REPAIR TRAVEL/MEETINGS/EDUCATION. 24.00 20 05-620-0 EQUIPMENT REPAIR-- TRAVEL/MPETINGStEDUCNTIOtt Check Total: 48.00 00047122 MW km r,7,1 1 BAY-1OOL-74 SUP/31-Y- INC -10-00-0421 GENERAL & ADMINISTRATION SHOP SUPPLY INVENTORr .-2-27.46-- 10-00-0421 GENERAL 4 ADMINISTRATION SMALL TOOLS INVENTORY 114.92 .... ,.,, , .4 i Check Total.: 342.38 00047123 MW ---'-'1' BELSON OUTDOORS INC 10-20-6042 ALPINE COUNTY GROUNDS 3 MAINTENANCE Check Total: BERGSOHN, IVO 20-02-6200 PUMPS TRAVEL/MEETINGS/EDUCATION Check Total: L41 1,525.20 1,625.20 00047124 MW 216.78 216,78 00047125 MW BERRY-HINCKLEY INDUSTRIES 10-00-0415 GENERAL & ADMINISTRATION GASOLINE INVENTORY BING MATERIALS 10-28-6042 ALPINE COUNTY Check Total: 2,548.70 2,548.70 00047126 MW . 1-4 lJ• GROUNDS 4 MAINTENANCE 2;394.45 jj- L Default Selection: Check Stock Vendor Name SLAKES HOUSE 13, - t-31 . . 1e,I) L'.211".85 vJ4I:'27---pr-og: CR509 <1A06)--report id: CKRECSPC ID: AP ; Check Types: MW,HW,RV,VH Account 11 Department Description BLUE OCEAN SOFTWARE INC 17,1 :21 20-016-052 UNDERGROUND-REPAIR PIPE, COVERS, & MAT1IYLES Check Total 10-21"6021 ADMINISTRATION 20-e1-6621 ADMINISTRATION 10-21-6520 ADMINISTRATION 20-21-6520 ADMINISTRATION Amount Check # Type = - - 948.85 3,343.30 INCENTIVE 4' RECOGNITITON-PRGR INCENTIVE & RECOGNITION PRGR 40.00 Check Total: 100.00 SUPPLIES SUPPLIES Chet-k-Tof:51` 20-37-4840 INFORMATION SYSTEMS DISTRICT COMPUTER SUPPLIES Effeck Total: BLUE RIBBON TEMP PERSONNEL 10-39-4405 FINANCE 20-39-4405 FINANCE 10-38-4405 CUSTOMER SERVICE BOYLE ENGINEERING CORP 20-29-8290 ENGINEERING cSRMA CONTRACTUAL SERVICES CONTRACTUAL SERV =— CONTRACTUAL SERVICES Check Total: TREATMENT, ARROWHEAD 'Wt. #3 Check Total: 008471272* 00044903 HW 20.55 .13.69 34.24 000 359.00 279,67 181-745 596.40 1,062.52 00047130 MW 46,37333 40,373.33 .000471-2197-111T-7-7729 30 .3 10-00-0305 GENERAL & ADMINISTRATION WORKER'S COMPENSATION PREPAI lc 10-00-2516 GENERAL & ADMINISTRATION WORKER'S COMP INS PAYABLE Check-Total: 1 CALIF DEPT OF HEALTH SERVICES 10-01-6250 UNDERGROUND REPAIR DUES S MEMBERSHIPS 10-02-6250 PUMPS TUE5--MEMUER8NIPS 10-21-6250 ADMINISTRATION DUES 4 MEMBERSHIPS 10-06-6250 OPERATIONS DUES 4 MEMBERSHIPS C1e-C7k Tota177 141 • CALIFORNIA OVERNIGHT 10-07-4810 LABORATORY 20-0f-4810- tABORATORY 10-07-6110 LABORATORY ! 41 CANADA LIFE POSTAGE EXPENSES P sTA-G-E-rx7ENSEF MONITORING 217,547.00 -24,314.00 80.00 "." 000471312'.MW 35 36 31 39 401 45 Check Total: • '.•• 10-00-2539 GENERAL S ADMINISTRATION LONG TERM DISABILITY, UNION 30-00-6744 SELF FUNDED INSURANCE EXCESS INS SELF INSURED MCI) 10-00-2512 GENERAL4--ADMINISTRATION LIFE INSURANCE 10-00-e525 GENERAL 4 ADMINISTRATION LIFE 1NSUPANCE-MGMT Check Total: '4 CAROLLO ENGINEERS 90-98-8829 EXPORT PIPELINE GRANT 90-98-8928 EXPORT PIPELINE GRANT 20-28-7821 ENGINEERING 10-29-7024 ENGINEERING 10-29-8235 ENGINEERING 140.00 120.00 660,00 41.80 e3770 37.50 102.50 .F? —10004713-71T1-77-1 00047134 MW BLINE PHASE 11 DIP TO END BLINE PHIS III LPPS-CAMPGROUN RUMP-HOUSE, -GARD-MTN WEIE: REHAB DIGESTER,'SLUDG STRG TN DEUATERING IMP EFeCTT-T-cTral-I 5,071.33, 9,273.62 66-27E5 358.78 15,365.98 00047135 MW • 3,302.85 ' 1L6 481 28,46.62 00047136 1114---- ■6' 10,666.18 ET75578-0 4,381.50 7,140.09 ( •e‘, 01!“ 4 ; _Leg 221G8 RJ4227---proy: CK509 <1A06)--report id: CKRECSPC Default Selection: Check Stock ID: AP ; Check Types: MU,HU,RV,VH Vendor Name CARbON tIJMP di Account # Department 20-02-6050 PUMPS- 'CENT AL BUTNESS 10-3a-4s0 CUSTOMER- SER-VICE 20-38-4820 CUSTOMER SERVICE ‚4 is ■6 CHARTS INC CHEVRON USA COBRA PRO !2. • u. Description Amount Check Type =■■==■ ===.==== Check Total: 3,978.00 3,978,00 00047137 ,110,.-121 • OFFICE SUPPLIES Check Total: 7.,0 5.00 12.50 00047138 MU , . LiLe 14 12 ;11 17 10-06-4760 OPERATIONS LABORATORY SUPPLIES Check Total: 104.16. 104.36 MU 10-04-4610 HEAVY MAINTENANCE GASOLINE Check Total' 73.56 73.56 00047140 mW 10-22-4405 HUMAN RESOURCES CONTRACTUAL SERVICES 20-22-4405 HUMAN RESOURCES DIRECTOR CONTRACTUAL SERVICES CheCT-TRTFEI: 22 24 22 , a 407-00 00047141 Ti 20 COCKING, DENNIS 10-27-6200 DISTRICT INFORMATION TRAVEL/MEETINGS/EDUCATION 103.91 20-27-6200 DISTRICT INFORMATION - "TRAVEL/MEET/NtS/EDUCAT/ON m Check Total: . 173.19 • 0004714E; : tit.? -1------CaS1-CtrNTA-TNMENT-CONCEET5 INC 30-00-G741 SELF FUNDED INSURKNCE ADM. NTS T R ATTINT-F E F.: 1,808.7t -I, - 30-00-6742 SELF FUNDED INSURANCE PRO FEE 327.00 38( .„ - Check Total: 3 COSTCO WHOLESALE .3 4 S DAVI LABORATORIES 10-27-6620 DISTRICT INFORMATION 20-07-6110 LABORATORY 2,135.76 00047143 MW 4-07 PUBLIC RELATIONS EXPENSE Check Total: MONITORING Check Total: DRIVER CO INC. ROBERT F 10-00-0301 GENERAL & ADMINISTRATION - INSURANCE PREPAID 20-00-0301 GENERAL & ADMINISTRATION INSURANCE PREPAID ---CW-e-carr 2,7 0.00-=-6104-6ii-ii"-9 E N S RESOURCES INC 10-21-4405 ADMINISTRATION CONTRACTUAL SERVICES 2,725.50 :416 1 20-,21-440S ADMINISTRATION -CONTRACTUAL SERVICES Check Total: 4,542.50 ..0064714710,- 60 157 30 -157-.300004744M 45 380.00 380.00 00047145 MW -NPD1NTE TSt4tOtES - 11-07-482-0 LABORATORY OFFICE SUPFCIE5 10-06-4820 OPERATIONS OFFICE SUPPLIES 10-37-4820 INFORMATION SYSTEMS OFFICE SUPPLIES 20-37-4820 INFORMATION-SYSTEMS OFFICE SUPPLIES Check Total: *-ENVIRD-TECH -20-0Z-6-050 PUMPS WELLS - Check Total: 224.84 00047149. MW 51.36 30.82 20.54 154.08 21 es 6.4 00047148 -MW • Gti , d24.4 12 300.00- 300.00 000471E:0' '1144' 10-27-6620-D/STRICT• INFORMATION- -PUBUTC-RELATIONS-EXPENSE Check Total: Default Selection: Check Stock Vendor Name • . . , • • , ; - - • ; _ .... • , uNSITE----job. 221685 CK509 <1A061--report id: CKREGSPC ID: AP ; Check Types- MU,HW,RV,VH Account # Dep,:a-tment 5 FISHER SCIENTIFIC FOYE,,IJILLIAM G B CONSTRUCTION :.GRAINGER INC, W. W. GUAKDIAN,' THE --Mei—THOMAS- - 1-0-3-4S10-71NANCE 20-39-4310 FINANCE 10-27-4810 DISTRICT INFORMATION t0-e7-4!:111) DISTRICT INFORMATION 20-29-8890 ENGINEERING 20-07-4810 LABORATORY 10-2E-4810 -HUMAN RESOURCES 20-82-1310 HUMAN RESOURCES DIRECTOR 20-89-4810 ENGINEERING ao-'al-7crei ENGINEERING- 20-29-7031 ENGINEERING 10-38-4810 CUSTOMER SERVICE 80-38-4810-CUSTOMER- SERV1-CE- 20-29.-8083 ENGINEERING 10-07-4760 LABORATORY 10-37-6200 INFORMATION SYSTEMS 20-37-6200 INFORMATION SYSTEMS 20-01-6052 UNDERGROUND REPAIR 10-04-6042 HEAVY MAINTENANCE 10 0ls-604e OPERATIONS 10-06-6073 OPERATIONS 10-02-6051 PUMPS 10-00-2531 GENERAL & ADMINISTRAT 10 37 4318 INFORMATION SYSTEM3- 20-37-4312 INFORMATION SYSTEMS 10-39-4312 FINANCE 20-39-1312 FINANCE- 10-06-4760 OPERATIONS 11-00-2605 10-28-8036 Deecription -71 Amount Check # Type POSTAGE:EXPENSES CI.E3 POSTAGE EXPENSES 49.70 POSTAGE EXPENSES 9.90 POSTAGE-EXPENSES 6-7EU TREATMENT, ARROWHEAD WL #3 14.82 POSTAGE EXPENSES 13.83 POSTAGE-EXPENf..iES T770-- POSTAGE EXPENSES .5.26 POSTAGE EXPENSES -WATERLIVE-, -PARK-AVE-PHASE 11 IROQUOIS TANK REHAB 6.58 POSTAGE EXPENSES 8.47 -POSTAGE -EXPENSES :576:4 TANK, FOREST MTN - REPLACE , 6'.58 Check Total: 181.39 LABORATORY SUPPLIES Check Total: TRAVEL/MEETINGS/EDUCATION TRAVEL/MEETINGS/EDUCATION Chect-Totaf. PIPE, COVERS, & MANHOLES Check-To-cal:, GROUNDS & MAINTENANCE GROUNDS-1,-1'A INTEMAtit SMALL TOOLS PUMP STATIONS het.) -11-11 '13 14 21 F2-2 23 34 -23 00047151.'-MW 28.25 26.25 00047152 MW g72 41.40 34 1 27.60 . 39 28,342.00 2871-42 ,D0 0rol4r154,777mw 44, • 187.25 ION LONG TERM DISABILITY, MGMT -1tONG-TERM DISABIt/TY, MGMT LONG TERM DISABILITY, MGMT LONC TERM DISABILITY, MGMT 46 156.72 47. 111.17 49 63-4-7-18 004T1-SS « MW _ 1,596.83 4.16 2.91 39.52 -LONG- TERM-DISABILITY; MGMT Check Total: 1,669.98 00047156 ,..MW LABORATORY-SUPPtIES Check Total: 2617.14 52 260.14 00047157 MW GENERAL & ADMINISTRATION -A-CCRD-CONT---RETNGE ALPINE COUNTY BUILDING, OFFICE/EQUIP STORA Check Total; HIGH SIERRA BUSINESS SYSTEMS 10-39-6030 FINANCE 20-39-6030 FINANCE SERVICE CONTRACTS SERVICE CONTRACTS 'C1ieck -rural. -1,511.95 '30,279.07 :' 28;765,12 '00047156- MW 900.70 600.46 17;1 1 NF p41 • L Ji-07/05/2001 Page 5 J•N ■23, euoi, oaKLENL---Ieg GL ONSITE----job. 221685 CK509 (1A06)--report id: CKRECSPG - Default Selection: Check Stock Vendor Name ID: AP ; Check Types: MW,HW.RV.VH Account # Department 'J —*tome—sere - --HYDRA-STOP INC. .,t A IN-SITU INC 13, Description 10-04-6042 HEAVY MAINTENANCE 20-,01-6052-UNDERCROUND rcrATR 10-21-,4405 ADMINISTRATION 20-21-4405 ADMINISTRATION 20-02-6050 PUMPS -GROUNDS-&-MAINTENANCE - Check Total: r I PE , C0`,TERS ;& MANHOLES Check Total . V Amount Check # Type • 251,63 00047160 t11.11:. -47221.29 13 4,221.29 00047161 MW 14 CONTRACTUAL-SERVTCES CONTRACTUAL SERVICES Check Total: WELLS 3,000.00 , . 2,000.00 5,000.00 00047162 '1.1 Check Total; 254.57 254.57 00047163 MW 1 ?3, 24 INTERSTATE SAFETY & ,SUPPLY 10-00-0425 GENERAL & ADMINISTRATION SAFETY SUPPLIES INVENTORY ' 10-06-4760 OPERATIONS LABORATORY SUPPLIES heck ot-ai. J & L PRO KLEEN INC 10-39-6074 FINANCE 20-39-6074 FINANCE- 1 3OHNSON-PER-111145-,4-ASSOC. INC -10-2882-85-ALPINE-COUNTY - INT-P-OUER-8--EttPLOYEE 10-2T-4405 ABMINISTRATION ''-4 20-21-4405 ADMINISTRATION .. . _ . 4 KRLT&KOWLRADIO 20-27-6660 DISTRICT INFORMATION .1; _ KENNEDY/JENKS CONSULTANTS INC 10-28-8285 ALPINE COUNTY 10-28-8168 ALPINE COUNTY t0-28-4475 -ALPINE-COUNTY JANITORIAL SERVICES -JANTTORTAL-SERVILLS , Check Total.: ALP T11 17Nrr-11-NST..K PL-A1,1- Check Total: ,205.48 • . 1 05 .34 . tiliO4(164--M 1,615.80 2 10,350.00 10,350.00 00047166 MW CONTRACTUAL-SERVTCES CONTRACTUAL SERVICES Check Total:, 1 , bb3 2,756.e5 00047167 WATER CONSERVATION EXPENSE Check Total: ALPINE 'OTT MASTER PLAN ICR STUDY CECAL-SPECTAL VfUTECTS Check Total: M-C-T-WORLDetTr 10-0-0-6310 GENERAL' S ADMINTSTITATION--TELEPHONE 3 DTA-kit-SON-LAB --20-0T=47-60 LABORATORY 10-07-4760 LABORATORY MC MASTERCARR'SUPPLY CO 10-06-6012 OPERATIONS 840.00 840.00 00047168 MW SI , 083.23 187.50 11,1 62,466.73 00047169 MW Check Total: --CABORATORT-7TIPPETES LABORATORY SUPPLIES Check Total: 15 _79 „ 57 " t 00047170 MW 54 91./4 137.62 229.36 00047171 MW GROUNDS & MAINTENANCE Check Total: 1,634.04 1,634..04 00047172, METROCALL 10-28-6310 ALPINE COUNTY 10-37-6310 INFORMATION SYSTEMS 20-37=61TV TNFORMATION-SYSTEM5-- 10-29-6310 ENGINEERING TELEPHONE TELEPHONE --TEEEPHONE TELEPHONE 4.00 3,21 e.lb 10.35 73 74] 75 7/0 L6, 2001, . L L. A I 1; PCPORT 06/22/2001-07/0S/2001 Page 6 4.42 Pn --rE.g. DARLENE—leg. CL JL--loc. ONS/TE--job: E.21635 414227—prog; C14509 (1A06)--report id: CKRECSPC - Default Selection: Check Stock ID: AP ; Check Types: MW,HU,RV,VH Vendor Name Account # Department Description "-4-1 Amount Check # Type 20-29-6310 ENGINEERING -TELEPHONE 6.91 1--J ,J! 10-05-6310 EQUIPMENT REPAIR TELEPHONE 50..29 20-05-6310 EQUIPMENT REPAIR TELEPHONE 50.29 _ w: Chock Total: 127.20 00047173 MW ;7? 13 -.-:: MID MOUNTAIN MOBILE COMM. 20-05-6011 EQUIPMENT REPAIR fl-n. AUTOMOTIVE 4 GENERATORS 60.00 1 ti Check Total: 60.00 00041T74 M44 , 17 . 16 MONTGOMERY WATSON LABORATORIES 10-.07-6110 LABORATORY MONITORING 267.00.1: 20-07-6110 LABORATORY mom/ronrac--- 178.00 17 Check Total. 445.00 00047175 MW, '.!.2. 26 16 9L ---NEWARK-ErEC1R1INTCS - , I0-03-6051-ELECTRICAL-SHOP 15-UMP-.ST7TIONS -365.98 .•' .‘:: _ ..,.i 25 19 10-03-6071 ELECTRICAL SHOP SHOP SUPPLIES 97 75 - , Check Total-': -': 463 ,,67, 00047176 :1114,- , 1 CL 16 20 21 NUROCK, DOUG 10-06-5250 OPERATIONS DUES & MEMBERSHIPS 178.60 i4 Check Total: 178.60 00047177 MW ) . OFFICE DEPOT BUSINESS SERV DIV 10-37-4820 INFORMATION SYSTEMS OFFICE SUPPLIES 44.56- 20-37-4820 INFORMATION SYSTEMS OFFICE SUPPLIES ' 89,68 m I0-19-4820 FINANCE aFFIcE-survLrEs 278.63 .; 20-39-4820 FINANCE OFFICE SUPPLIES 185.75 Jo S 10-00-0428 GENERAL & ADMINISTRATION OFFICE SUPPLIES INVENTORY 1,409.96 10-03-4820-ELECTRICAL- SHOP OFFICE SUFPLTES-. ' , '.„ : 45721 , ,i--• 20-03-1820 ELECTRICAL SHOP OFFICE SUPPLIES 45 21 ,3 - ., 10-21-4820 ADMINISTRATION OFFICE SUPPLIES ' ,. ' '''' '21.41,1;.":, 14 , 20-21-1820 ADMINISTRATION OFFTCE SUPPUTES 1T'7 10-38-4820 CUSTOMER SERVICE OFFICE SUPPLIES r4i 50.02 16 20-38-4820 CUSTOMER SERVICE OFFICE SUPPLIES 33.36 1, 45, 17 Cife-ek-701711 .. e,.thuTim 00047T77- MW A , - + P D *STEEL'. 10-04-6022 HEAVY MAINTENANCE SECONDARY EQUIPMENT - . , --1. ''_1 • Check T-cit-d1---: .---714.58 00047180 mw ' .1 -I PACIFIC BELL 10-00-6320 GENERAL 1 ADMINISTRATION e , SIGNAL CHARGES 279,15 56. :1 20320-tENERAL-6 ADMINISTRATTONT --SIDNAL CHARGES ---E22.03 10-00-6310 GENERAL 6, ADMINISTRATION TELEPHONE 41 10-02-6310 PUMPS TELEPHONE ---. 6i 20-1)2=6310-PUMR5- TELEPHOPE- 41T 2133- • • 10-39-6310 FINANCE TELEPHONE 8.84 so 07 6 ( 20-39-6310 FINANCE TELEPHONE 5.89 e c V. Tolal: 1,171.80 00047--MW --4 . „ -• - PARSONS NBA 90-98-8828 EXPORT PIPELINE GRANT BLINE PHI III LPPS-CAMPGROUN 16.;90:01 a! . .. 21 --neck lot-51-7- -----6-W01104718-*E—M 66j , PIP' PRINTING 5, 6 71 10-22-4820 HUMAN RESOURCES OFFICE SUPPLIES -20-2--4s2o HUMAN-RESOURCES-DIRECTOR OFFICE-SDPPUTES Check Total: al 166.92 111.2s 278.20 00047183 .:MW 751 4, 3 ; q. UANLENL---leg! GL Default SeleCtion: Check Stock ID: AP ; Check Types: MU,HW,RV,VH Vendor Name 13-114•E NC- CT, _ CK509 (1A06)--report id; CKRECSPC Th Account # Department Description PRECISION-SCIENTIFIC- INC - PRO LEISURE 191 15,1 -1 QUENVOLD'S 10-06-4720-OPERATIONS • -POLYMER 10•07-6025 LABORATORY- 20-07-6025 LABORATORY 10-21-6621 ADMINISTRATION eo-el-6621 ADMINISTRATION R SUPPLY 0 7- ,11 SHACK RANDYS LOCKSMITH Amount Check It Type = =- ==== -F7'IT070-0- ...' • . . - Check Total: 1,19000 00047184: MW:.., 11 , 11 - - LABORAIORY EQUIPMENT LABORATORY EQUIPMENT 19.71 . . Check Total: 49.31 00047185 MU FA -------,e----------..„--„t_:. . 0 INCENTIVE c!. RECOGNITION PRGR . INCENTIVE & RECOGNITION PRGR' T.N: • . . ,• , 19 11. ..'. ,. .. . CMeck-totalw e"..s./.21 v0v4rT86--MU----.1 10-04-6075 HEAVY MAINTENANCE SAFETY EDUIPMENT/PHYSICALS 156.75 - - -- -- Check-Tot-at: TS6. (5 20-01-6052 UNDERGROUND REPAIR PIPE, COVERS, & MANHOLES :759,25 20-01-6073 UNDERGROUND-REPAIR- -ShAtt. TOtS . Check Total: 896.85 00047188 MW io-u7-48ea INFORMATION -SYSTEMS -OFF-ME-SUPPLIES- : - 20-37-4820 INFORMATION SYSTEMS OFFICE SUPPLIES Check Total .. ,',21-,39.;00047189, 1.14.,,, 10-28-6042 ALPINE COUNTY GROUNDS & MAINTENANCE 33.24 Check Total: 33.24 00047190 MW 7,1 crawrraTi, mt4777---72 ; RENO GAZETTE-JOURNAL 20-29-8083 ENGINEERING 20-29-7031 ENGINEERING SAFEWAY INC #1824 .1? SCHRAUBEW, KYLE TAN(, FOREST MTN - REPLACE IROQUOIS TANK REHAB -CheLk Tatat. 153 89 :44 0r7-77-8 00047191 10-00-20oa GENERAL & ADMINISTRATION UTILITY BILLING SUSPENSE -61,366.00 47 To Check- Total • - - -r6-173-6-67-0"0---0-0-04-5-7577.77Rif-7'— 10-04-6075 HEAVY MAINTENANCE . SAFETY EQUIPMENT/PHYSICALS 163.71 — -Chuck Toral• 16-3.717--O-o-04T192-7MW'' I,... SIERRA ENVIRONMENTAL 10-07-6110 LABORATORY MONI i-1 TORING 316.00 e ' Check-Tatar:- -7-31-670-0-771TO 9(:73 MW7.-17 SIERRA PACIFIC POWER 10-00-6330 GENERAL & ADMINISTRATION ELECTRICITY . .36,631.80 20-00-6330 GENERAL & ADMINISTRATION- ELECTRICITY Check Total: 59,873.71 00047194 MW +----SIERRA-PACTFTC-POWER SIERRA SPRING WATER CO -20-29-8290 ENGINEERING- TREA7MEN7-; ARROUNEAo Wtlt3 ldO0 -7-7 10-01-6520 UNDERGROUND REPAIR ee-01-6520 -UNDERGROUND REPAIR 10-02-6520 PUMPS SUPPLIES SUPPLIES SUPPLIES Check Total: 188.00 00047195 11 Vendor-Total-. 60,061.71 33.77 33.77 qm 22,52 . . ' , • .11._--toc, 0W1 TE----jc)b. -c2C11. LK-Suv Ao6)--reporI ia: • Default Selection: Check Stock ID: AP ; Check Types: MU,HW,RV,VH . V: • Vendor Name Account # Department Description Amount Check # Type -C r i - _=== = . _ = = 1-; 10--03-6520 ELECTRICAL-SHOP --SUPPLTES 11-.26 20-03-5520 ELECTRICAL SHOP SUPPLIES 11 .2 -.- _ 6 10-04-6520 HEAVY MAINTENANCE SUPPLIES 45.03 1(Y-06-6520 OPERATIONS SUPPLIES -457-0-4 19 10-05-6520 EQUIPMENT REPAIR SUPPLIES 11.26 20-05-6520 EQUIPMENT REPAIR SUPPLIES 11.26 qg 15 Check Toter: 225717 0004fr91S-7WT----7'- 7 SOUNDSTRATEGIES 20-27-6660 DISTRICT INFORMATION WATER CONSERVATION EXPENSE 98.00, ',. ...,.. , . Chee1F-Tot-ATT 98.000W0 .1‘ : • 8 SOUTH TAHOE TOWING SPEED PHOTO ?3, ?.8 SPORTS .LTD 1 19 SPRINGMEYER, MARJORIE A J ' . ' ' „' ;■ ' 19 STANLEY, WANDA . 10-29-6200 ENGINEERING TRAVEL/MEETINGS/EDUCATION ! ' ' 314.96. * 2-0-29-6200 ENGINEERI tr.- -TRA-VELINEETINGS-TEDUCATTOg---- ZD9.9f Check Total 524.93 00047202 MW ',-1: ;---SUBSTITUTE-T-ERSONNtL (1 t0-06-44-0S-OPERATTONS LUNTRA-CTUAL SERVTCES -1 20-01-4405 UNDERGROUND REPAIR 10-01-4405 UNDERGROUND REPAIR CONTRACTUAL SERVICES 5 CONTRACTUAL SERVICES Cheti-Total: ,114 SUNGARD BI-TECH INC. 10-37-6030 INFORMATION SYSTEMS SERVICE CONTRACTS 520.83 20-'37-6030 INFORMATION SYSTEMS SERVICE-CONTRKCTS -7------3-47:2'2 ., 0 Check TotaIr , 865.05 00047204., MW 'tiTER s0crnres7—ffr1vn F0-727-440-5 DISTRICT INFORMATIDN CONTRA=UAL SERITT-CET 1,399.80- 2-1 20-27-4405 DISTRICT INFORMATION CONTRACTUAL SERVICES 933.20 - Check Total: 2,333.00 00047205 MW 10-05-6011 EQUIPMENT REPAIR AUTOMOTIVE & GENERATORS -Check-Tot-WT-7 130.00 130.011---'11004/1,./ M 10-21-4820 ADMINISTRATION OFFICE SUPPLIES 19,19 2U-7.1-4820 'ADMINISTRATION' OFFICE-5-UFPLIE5- 1218 10-01-5520 UNDERGROUND REPAIR SUPPLIES 4.06 20-01-6520 UNDERGROUND REPAIR SUPPLIES :-41.;. 20-02-6520 PUMPS YUPPLJE ' „ 10-21-6621 ADMINISTRATION INCENTIVE & RECOGNITION PRGR ., '' 11.73 ... , ..- S ._„ 20-21-6621 ADMINISTRATION INCENTIVE a RECOGNITION PRGR - 7.84 20-2927-ENSINEEPING - --ITATERLTNE, PA-RN-AVE-PHASE fl 12.39 20-29-8100 ENGINEERING WATERLINE, GARDNER MTN PHS I 21.56 90-98-8829 EXPORT PIPELINE GRANT BLINE PHASE II DIP TO END 16.01 7C-heffl-C-Tot-TFT - 20-03-6071 ELECTRICAL SHOP 21 10-00-2002 GENERAL & ADMINISTRATION UTILITY BILLING SUSPENSE 47 .4a 'Check ToniTT- e18.6s 7061 49 511 501 , SHOP SUPPLIES Cha-Elt 93 C4 35 118.0-r . 9004(1719-711 4, 46 8.65 89781 8,113.01 00047203 MW 7, 0,68 82 o7C, 70. TC M DIGITAL SOLUTIONS 10-21-6030 ADMINISTRATION • SERVICE CONTRACTS 73 . 7Cy' Default Selection: Check Stock ID• AP , Check Types: MW,HW,RV,VH Vendor Name Account 4 Department = = = = =a T R P A ,. 20 -29 -8290 ENGINEERING T R P A 90 -98 -8828 EXPORT PIPELINE GRANT r51 101 TAHOE CARSON AREA NEWS TAHOE FIRE CONTROL TAHOE f ISHIMG-GI7IDE • 10 -39 -4930 FINANCE 20 -39 -4930 FINANCE 20- 29- 7.031 - ENGINEERING T13- 22 -G07S ALPINE•- COUNTY U:iJ5i001 dye• d 41.1427 -- -prop: CK509 <1A06) -- report id: CKRECSPC Description Amount Check # Type =a = - -- ChecT; -Total 204.31' 00047206 MW TREATMENT, ARROWHEAD LJL 43 .345:00' Checj: Total: 345.00 00044901 HW BLINE PHS LII LPPS- CAMPGROUN Check TotaT: Vendor Total: 1,700.00 1,700700 00044902 2,04''3.00 6 2 un 11 r1 1.13 14 . ,n 20 ADS / LFGAL NOTICES 48.90 ADS /LEGAL NOTICES 32.59 IROQUOTS- TN1C R-EFHA-13 56 . Check Total: 138,27 00047207 -. MW T_:TCFETY ET1171311ENT7PFFIYSICATS 369.05 Check Total: 369.05 00047208 MW 22 24 23 26 n 1 -0 -27- 6620' DISTRICT- INFORMATTOII- PUBLT4 1tECATION EXPENSE Check Total ��'rANOE SAND �' GR -1VEL 20=01 = 6-052 UNDERGROUND REPAIR - -TEIOr1 - CO1't$TRUC R- S -ITYG' ____.___ - -_. t0- 01' ="605S UNDERGROUND REPAIR -' - "'-- THATCHER-CO RNET"; ROBER i -10 -06 -4720 OPERATIONS 10 -04 -6200 HEAVY --MAINTENANCE U 5 A gL-UE -pooX TO-0G -6042 OPERATIONS 20.00 -1605 GENERAL - -& ADMINISTRATT'ON ` --U . S . TRUST-'CBMP'RNT, N.A. iMEMOTO, DORi -- -ih W�HfTRORAfii Q1Y ' - WEDCO INC FTPE COVERS M7SN1iQLES Check Total: 350.00 350.00 00047209 MW' 1,540.15 1,540.45 00047210 MW TNF I LT RATION- 1I- TNFLDW Check Total: POLYMER Check Total: 7,400.00 1,25.0-0 1,925.00 00047212 MW 0004721,1; 3 36 TRAVEL7MEETT7'7G57EUU-CATION 48.00 Check Total: 48.00. 00047213 MW 40 s, :3 GROUNDS N -11X7 TrENANLr 64.65 Check Total: 64.65 00047214 M11 le0 0- 1-REFI CD TS DEFERRED bOD.UU 57 Check Total: 500700 00047275 MW _ ae coy 20- 00=3540- GENERAL' & ADMINISTRATION OTHER `MISCECLANED' -INCDT1E` r21- T.75°' 61 Check Total: 747.75 00047216 MW r; 1007 -4760 LABORATORY - LABORATORY - SUPPLIES 2s9T8b 20-07 -4760 LABORATORY LABORATORY SUPPLIES ,159.92 _" Check Total: 399.78 00047217 kw ...' ;es 65 20 -29 -7099 ENGINEERING WELL - GARDNER MTN 4,352.12_ ° 20 -03 -6054 ELECTRICAL SHOP REPAIR /MNTC WATER TANKS 61.38 1 t4 -03- 6050" ELECTRICAL-SHOP- WELLS 60-77, f 10- 03•-6051 ELECTRICAL SHOP PUMP STATIONS 73.67 A S r, “ , L A I HEPURf Ou/201-07/05/2001 Page 10 4.42 Di;PLENE---ley ONSITE----job: 221685 0.14227---prog; CK509 (1A06>--report id: CKRECSPC Default Selection: Check Stock ID: AP ; Check Types: MW.HW,RV,VH 6 Vendor Name Account tt Department WEST-VALLEY CONSTRUCTION INC- WESTERN 6, Descripti 10-03-6071 ELECTRICAL-SHOP -SHOP SURF' 20-29-7027 ENGINEERING -WATERLINE 10-29-7032 ENGINEERING SEWER MAI 20-00-2605 GENERAL & ADMINISTRATION ACCRD CON NEVADA SUPPLY 20-01-6052 UNDERGROUND REPAIR PIPE, 'COV 10 01 6071-UNDERGROUND-REPAIR SHOP-51-1PP 10-04-6042 HEAVY MAINTENANCE GROUNDS & 10-02-6071 PUMPS SHOP SUPP 20-02-607t-PUMPS- SHOP -SURF 10-04-6073 HEAVY MAINTENANCE SMALL TOO 20-02-6073 PUMPS SMALL TOO WESTERN POWER & EQUIP 10-05-6011 EQUIPMENT REPAIR AUTOMOTIV 20-05-6011-EQUfPMENT REPAIR Au1'tmoT1 ----WESTERW-TRAeT-1-04-- -20-05-,6011 -EQUIPMENT REPAIR -AUTONCTIV '1--,--WHI-TE-ROCK7C-ONSTRUCTION 20-00-2605-GENERAL- ADMINISTRATtON- -ACCRD-CON 20-29-8100 ENGINEERING WATERLINE 90-98-2605 EXPORT PIPELINE GRANT ACCRD CON 90-98-8829-EXPORT-PIPELINE- -GRANT ntiNE PHA- WITHROW-0GEN-SEWUCE- 10-07-4760 LABORATORY LABORATOR 20-07-4760 LABORATORY LABORATOR 10-02-6071 PUMPS SHOP SUPP 20 02-6071 PUMRS SH0P-t*;UPP 10-01-8024 HEAVY MAINTENANCE 10-04-6071 HEAVY MAINTENANCE 10 0A-6073-HEAVY- MAINTENANCE 10-04-6075 HEAVY MAINTENANCE ZELLMER, DAVE 10-28-6042 ALPINE COUNTY FURNA(X. E SHOP f:WPPL1ES -smAtt ToaLs SAFETY EQUIPMENT/PHYSICALS Check Total: • 1 GROUNDS MAINTENANCE ZYMAX ENVIROTECHNOLOGY 20-07-6110 LABORATORY MONITORING 10-07-6110 LABORATORY MONITORING 18.19 664.88 '192.60 '993.44 00047223 MW 1,740.00 Check Total: 1,740.00 00047224 MW -Ctreck-Td-raI. 13,513.50 , s 4;283.50', 1,,717771717--0r00n47225--71w Grand Tot a I-:- 768T542.-50 on Amount Check # Type .--i LIE_ -41.us Check Total: 4,588.42 00047218. MW il . - PARK AVE FHASE r/ 74,887710 N, PARK AV PHASE 2 6,381.85 1+ 1-6 ST. RETNGE 5,878.73 - -Check 10741: --97-7T4T-01:1"0-4721-9-711W-, , [I; '. -..a ERS, & MANHOLES . . , 1,826.10' —I MAINTENANCE 32.96 , = _IES 26.75 ':2111 _S 6:40 t5:50 .' . , tile k Tor-1. , .78 04,2c0 111r 3 i'. & GENERATORS 0.00 a, E-&-GENERATORS-7 ' ., 1-5774 Check Total: ' ' 1$7.41 %001141221 ,P1W-. 34 , . 7-4-2-GENERATORS T5(.4t 37 Check Total: -157.41 00047110 RV 6 !.T RETNGE . , -- -584711I7- GARDNER MTN PHS I 189,035,44 :IT RETNGE -17;617:05 '43 .E ti DTP 70 END 671-70745 46 Check Total: 347,024.74 00047222 MW ,i r-SUPPLIE4) 2-878-0 , _ . , ..• SUPPLIES „ . _TES 25.20 if7S- ---16.80 GROUNDS MAINTENANCE ZYMAX ENVIROTECHNOLOGY 20-07-6110 LABORATORY MONITORING 10-07-6110 LABORATORY MONITORING 18.19 664.88 '192.60 '993.44 00047223 MW 1,740.00 Check Total: 1,740.00 00047224 MW -Ctreck-Td-raI. 13,513.50 , s 4;283.50', 1,,717771717--0r00n47225--71w Grand Tot a I-:- 768T542.-50 r'!;~~+,~, SOUTH TAHOE PUBLIC UTILITY DISTRICT BOARD AGENDA ITEM TO: BOARD OF DIRECTORS FR: Robert Baer. General Manager RE: BOARD MEETING ACTION ITEM NO: July 5. 2001 AGENDA ITEM: 12.a CONSENT CALENDAR ITEM NO: SCHEDULE: COSTS: BUDGETED AMOUNT REMAINING: ATTACHMENTS: ACCOUNT NO: CONCURRENCE WITH REQUESTED ACTION: GENERAL MANAGER: YES~ NO CHIEF FINANCIAL OFFICER: YE~,vvH.O CATEGORY: GENERAL WATER SEWER cc_.~,,~c SOUTH TAHOE PUBLIC UTILITY DISTRICT BOARD AGENDA ITEM TO: c BOARD OF DIRECTORS FR: Richard Solbrig. Assistant Manager I Engineer RE: BOARD MEETING July 5. 2001 AGENDA ITEM: 12.b ACTION ITEM NO: CONSENT CALENDAR ITEM NO: ITEM-PROJECT NAME: CONFERENCE WITH LEGAL COUNSEL - EXISTING LITIGATION: MOUNTAIN CASCADE. INC.. AND VALLEY ENGINEERS. INC. VS. STPUD BOARD OF DIRECTORS AND STPUD. COUNTY OF EL DORADO. SUPERIOR COURT CASE NO. SC20000050 REQUESTED BOARD ACTION: Direct staff DISCUSSION: Pursuant to Government Code Section 54956.9(a). Closed Session may be held for conference with legal counsel regarding existing litigation. SCHEDULE: COSTS: BUDGETED AMOUNT REMAINING: ATTACHMENTS: ACCOUNT NO: CONCURRENCE WITH REQUESTED ACTION: GENERAL MANAGER: YES ~ NO CHIEF FINANCIAL OFFICER: YEsA'""I.- ~o CATEGORY: GENERAL WATER X SEWER ,"'~~:" SOUTH TAHOE PUBLIC UTILITY DISTRICT BOARD AGENDA ITEM TO: BOARD OF DIRECTORS FR: Robert Baer. General Manager RE: BOARD MEETING ACTION ITEM NO: Julv 5. 2001 AGENDA ITEM: 12.c CONSENT CALENDAR ITEM NO: ITEM-PROJECT NAME: CONFERENCE WITH LEGAL COUNSEL - EXISTING LITIGATION: SCHWAKE VS. STPUD. FEDERAL CASE NO. CV-N-93-851-DWH REQUESTED BOARD ACTION: Direct staff DISCUSSION: Pursuant to Government Code Section 54956.9(a). Closed Session may be held for conference with legal counsel regarding existing litigation. SCHEDULE: COSTS: BUDGETED AMOUNT REMAINING: A TT ACHMENTS: ACCOUNT NO: CONCURRENCE WITH REQUESTED ACTION: GENERAL MANAGER: YE*,,-, NO CHIEF FINANCIAL OFFICER: YE ~O ~ CATEGORY: GENERAL WATER SEWER X -.'-. "-'::;~!'''';'~~1'~;;~7,':'?lt''-;'~~T SOUTH TAHOE PUBLIC UTILITY DISTRICT BOARD AGENDA ITEM TO: BOARD OF DIRECTORS FR: Robert Baer. General Manager RE: BOARD MEETING July 5. 2001 AGENDA ITEM: 12.d - ACTION ITEM NO: CONSENT CALENDAR ITEM NO: ITEM-PROJECT NAME: CONFERENCE WITH REAL PROPERTY NEGOTIATORS REQUESTED BOARD.ACTION: Direct negotiators DISCUSSION: Pursuant to Government Code Section 54956.8. Closed Session may be held for conference regarding prooerty negotiations. Negotiating Parties: Board of Directors. Robert Baer I General Manager Under Negotiation: Consideration of Property Purchase Prooerty Identification: APN 1-080-53 APN 1-080-54 APN 1-080-56 APN 1-080-60 APN 1-200-01 APN 1-200-10 APN 1-200-11 SCHEDULE: COSTS: BUDGETED AMOUNT REMAINING: ATTACHMENTS: ACCOUNT NO: >;(,;""_._,~_.,,-,;w-,,,'!#.;x,...c>,. CONCURRENCE WITH REQUESTED GENERAL MANAGER: YES CHIEF FINANCIAL OFFICER: YE NO CATEGORY: GENERAL WATER X SEWER ---- ....",.,,..~,._,'..,,.v~~"'" .,. SOUTH TAHOE PUBLIC UTILITY DISTRICT BOARD AGENDA ITEM TO: BOARD OF DIRECTORS FR: Robert Baer. General Manager RE: BOARD MEETING ACTION ITEM NO: July 5. 2001 AGENDA ITEM: 12.e CONSENT CALENDAR ITEM NO: ITEM-PROJECT NAME: CONFERENCE WITH LEGAL COUNSEL - EXISTING LITIGATION: STPUD VS. ARCO. ET AL. SAN FRANCISCO COUNTY SUPERIOR COURT CASE NO. 999128 REQUESTED BOARD ACTION: Direct staff DISCUSSION: Pursuant to Government Code Section 54956.9(a). Closed Session may be held for conference with legal counsel regarding existing litigation. SCHEDULE: COSTS: BUDGETED AMOUNT REMAINING: ATTACHMENTS: ACCOUNT NO: CONCURRENCE WITH REQUESTED ACTION: GENERAL MANAGER: YES ~ NO CHIEF FINANCIAL OFFICER: YE~ CATEGORY: GENERAL WATER X SEWER ..".,.t~'~';<:~~',,~ ,--~ ~ < --!"!~\:'*r:";:-:':'';' -"""~iP' '~ SOUTH TAHOE PUBLIC UTILITY DISTRICT BOARD AGENDA ITEM TO: BOARD OF DIRECTORS FR: Labor Negotiations Ad Hoc Committee (Wallace/Strohm) RE: BOARD MEETING ACTION ITEM NO: July 5. 2001 AGENDA ITEM: 12.f _ " ""'"' ~ _~mIZ1""~}'i;;;~ :W;~ ,b~,~~f;;;,"",,,~'<"'I~~.z0~:%.,.,~J;f~~~-m:0il:U~~~~~~ ~"" CONSENT CALENDAR ITEM NO: ITEM-PROJECT NAME: CONFERENCE WITH LABOR NEGOTIATORS REQUESTED BOARD ACTION: Direct negotiators. DISCUSSION: Pursuant to Section 54957.6 (a) of the California Government Code. Closed Session may be held regarding contract negotiations for unrepresented emplovee position Unrepresented Emoloyee Position: General Manager Agencv Negotiators: Labor Negotiations Ad Hoc Committee ;' SCHEDULE: COSTS: BUDGETED AMOUNT REMAINING: ATTACHMENTS: ACCOUNT NO: CONCURRENCE WITH REQUESTE~N: GENERAL MANAGER: YES, NO CHIEF FINANCIAL OFFICER: YE~ CATEGORY: GENERAL X WATER SEWER