Resolution 2784-04
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RESOLUTION NO. 2784-04
RESOLUTION OF THE BOARD OF DIRECTORS OF THE
SOUTH TAHOE PUBLIC UTILITY DISTRICT AUTHORIZING
THE ISSUANCE AND SALE OF SEWER REVENUE CERTIFICATES
IN THE PRINICPAL AMOUNT OF $15,000,000 TO PROVIDE
FINANCING FOR ACQUISITION AND CONSTRUCTION OF SEWER
SYSTEM IMPROVEMENTS, AND APPROVING RELATED
DOCUMENTS AND ACTIONS
BE IT RESOLVED and ordered by the Board of Directors of the South Tahoe
Public Utility District as follows:
WHEREAS, the South Tahoe Public Utility District (the "District") owns and
operates a system for the collection, treatment and disposal of wastewater within the
service area of the District (the "Sewer Enterprise"), and the District wishes to provide
funds at this time for the purpose of financing the costs of acquiring and constructing
improvements to the Sewer Enterprise (the "Sewer System Improvements"); and
WHEREAS, the District wishes to authorize the issuance and sale of certificates
of participation in the aggregate principal amount of $15,000,000 at this time for the
purpose of financing the Sewer System Improvements, and the District has requested
that the Public Property Financing Corporation of California (the "Corporation") assist it
in such proceedings; and
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WHEREAS, the Corporation has been formed for the purpose of providing
financial assistance to public agencies such as the District in the financing of public
capital improvements;
NOW, THEREFORE, the Board of Directors of the South Tahoe Public Utility
District hereby resolves as follows:
Section 1. Approval of Financing Plan and Related Documents. The Board
of Directors hereby approves the issuance and sale of Sewer Revenue Certificates,
Series 2004 in the aggregate principal amount of $15,000,000 (the "Certificates") for the
purposes described above. To that end, the Board of Directors hereby approves each
of the following financing documents in substantially the respective forms on file with
the Clerk of the Board, together with any changes therein or additions thereto approved
by the Board President:
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. Installment Sale Agreement dated as of May 1, 2004, between the
District and the Corporation, under which the Corporation agrees to
provide financing for the Sewer System Improvements, and to sell the
Sewer System Improvements back to the District in consideration of
the payment by the District of semiannual installment payments as the
purchase price, to be made from the net revenues of the Sewer .
Enterprise.
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Resolution 2784-04
Page 2
· Trust Agreement dated as of May 1, 2004, among the District, the
Corporation and BNY Western Trust Company, as trustee (the
"Trustee"), whereby the Trustee agrees to execute and deliver the
Certificates and to deposit the proceeds thereof in a construction fund
to be applied to the payment of project costs upon requisitions of the
District.
The Board President is hereby authorized and directed for and in the name and
on behalf of the District to execute the final form of each of the foregoing documents,
and the Clerk of the Board is hereby authorized and directed to attest and affix the seal
of the District to the final form of each of the foregoing documents. Execution of each
of the foregoing documents by the Board President shall be conclusive evidence of the
approval of any changes therein or additions thereto by an Authorized Officer. The
schedule of installment payments attached to the Installment Sale Agreement shall
correspond to the payments of principal and interest represented by the Certificates, to
be determined upon the sale thereof as set forth in Section 2.
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Section 2. Sale of Certificates. The Board of Directors hereby authorizes and
directs the sale of the Certificates by competitive public bidding. Bids shall be received,
and the Certificates shall be sold, subject to the terms and conditions set forth in the
Notice of Sale, in substantially the form on file with the Clerk of the Board, together with
any additions thereto or changes therein deemed advisable by the Chief Financial
Officer. The Chief Financial Officer is hereby authorized and directed to accept the
best bid determined in accordance with the Notice of Sale, in the name and on behalf of
the District.
Pursuant to 53692 of the Government Code, the law firm of Jones Hall, as bond
counsel to the District, is hereby authorized and directed to cause an appropriate notice
of the District's intention to sell the Certificates to be published once in The Bond Buyer.
Such publication shall be made not later than 15 days prior to the date set for receipt of
bids on the Certificates.
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Section 3. Official Statement. The Board of Directors hereby approves and
deems nearly final within the meaning of Rule 15c2-12 of the Securities Exchange Act
of 1934, the preliminary Official Statement describing the Certificates in the form on file
with the Clerk of the Board. The Chief Financial Officer is hereby authorized, at the
request of the purchaser of the Certificates, to execute an appropriate certificate
affirming the Board of Directors' determination that the preliminary Official Statement
has been deemed nearly final within the meaning of such Rule. Distribution of the
preliminary Official Statement by the financial advisor is hereby approved. The Chief
Financial Officer is hereby authorized and directed to approve any changes in or
additions to a final form of said Official Statement, and the execution thereof by an
Authorized Officer shall be conclusive evidence of approval of any such changes and
additions. The Board of Directors hereby authorizes the distribution of the final Official
Statement by the winning bidder for the Certificates. The final Official Statement shall
be executed in the name and on behalf of the District by the Chief Financial Officer.
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Resolution 2784-04
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Section 4. Official Action. The Board President, the Vice President, the
General Manager, the Chief Financial Officer and all other appropriate officials of the
District are hereby authorized and directed to execute such other agreements,
documents and certificates as may be necessary to effect the purposes of this
resolution and the financing herein authorized.
Section 5. Effective Date. This Resolution shall take effect upon its adoption
by this Board of Directors.
PASSED AND ADOPTED by the Board of Directors of South Tahoe Public Utility
District at a duly held regular meeting on the 15th day of April 2004, by the following
vote:
AYES:
NOES:
ABSENT:
Directors Wallace, Schafer, Jones, Comte, Mosbacher
None
None
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Jam~s R. Jones, pJesident
~rd of Directortf
ATTEST:
id. #:J,t ~- i-
c..: ~ C1.1> A"J
Kathy Sharp, rk of Board cand
Ex-Officio Secretary to the Board of Directors
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NOTICE OF SALE
$15,000,000
SoUTH TAHOE PuBLIC UTILITY DISTRICT
SEWER REvENuE CERTIFICATES
. Series 2004
NOTICE IS HEREBY GIVEN by the South Tahoe Public Utility District (the "District")
that electronic and faxed bids will be received as follows:
Sale Date:
May 5, 2004'
Time: .
Up to and including 10:00 a.m. Pacific Time* -
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Electronic Bids (Via PARITY):
Bids may be submitted electronically via PARITY in a~cordance
with the Official Notice of Sale. To the extent any instructions or
directions set forth in PARITY conflict with this Official Notice of
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Sale, the terms of this Official Notice of Sale control. Neither the .
District not Bartle Wells Associates is responsible for any
problem in receipt of electronic bids via PARITY. For further
information about P ARITY@, potential bidders may contact
Bartle' Wells Associates at (510) 653-3399, ext. 111 (Reed
Schmidt), or ext. 109 (Alex Handlers).
Fax Bids:
At the offices ofBartl~ Wells Associates
1889 Alcatraz Avenue .
Berkeley, California 94703
Tel: (510) 653-3399
Fax: (510) 653-3769
Neither the District nor Bartle Wells Associates is responsible for
any problem iri receipt of bids by fax.
Ratings:
Standard & Poor's:
Fitch:
for the purchase of $15,000,000 aggregate principal amount .of certificates of participation
designated the Sewer. Revenue Certificates, Series 2004 (the I/C~c~tes"), . 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 Munifacts News Service or Bloomberg Business News 24 hours
prior to the schedUled date and time of sale.
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Or at such other time and date as may be communicated by the District through Munifacts News
Service or Bloomberg Business News at least 24 hOlirs prior to the time that bids axe to be received.
The Certificates represent the directJ tindivided fractional interests of the owners thereof
in insta1lme~t payments to be'made by the District under an InstaDment Sale Agreement dated
as of May 1, 2004 (the "Installment Sale Agreement"), by and betwe~ the Public Property
Financing Corporation of California (the 'JCorporation") 'and the District. The Certificates will
be delivered under the provisionS of a Trust Agreement dated as of May 1, 2004 (the J'Trust
Agreement"), by and among the Authority, the District and BNY Western Trust Company, as
trustee (the "Trustee"). .
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DESCRIPTION OF THE CERTIFICATES
, . PURPOSE: The proceeds o~ the Certificates will be applied for the purpose of financing
the cost of acquisition and construction of improvements to the sewer system of the District
(the "Sewer Enterprise").
FORM OF CERTIFICATES: The Certificates will be issued in fully registered fon;n in
denominations of $5,000 9r authorized integral multiples thereof, to be dated initially as of th~
date of original delivery of the Certificates. ' .
MATIIR.ITIES: The Certificates will mature, or be subject to mandatory sinking fund
prepayment, on June 1 in each of the' years and in the amounts, as set forth in the fpllowing
table. The final principal amount of the CertificatesJ and the final amount of each maturity of
the Certificates, shall be subject to increase or reduction as described below under the heading
1/ Adjustment of Principa1i\mounts". Each'bidder is required to. specify in its bid whether, for any
particular year, the Certificates will mature or, alternately,. be subject to mandatory sinking fund
prepayment in such year. No matUrities prior to June 1, 2017 may be designated for mandatory sinking
fund prepayment.
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~aturityDate Principal Maturity Date Principal
aune 1) . Amount crune 1) Amount
2005 $530JOOO 2015 $ 730,000
2006 560,000 2016 760,000
20J!7 .... 570,000 2017 790,000
2008 580,000 2018 825,000
2009 5~5,OOO 2019 860,000
2010 610,000 2020 900,000
2011 630,000 2021 940JOOO.
2012 650,000 2022 985,000
2013 675,000 2023 1J030 ,000
2014 700,000 2024 1,080JOOO
PAYMENT PROVISIONS: Interest represented by the Certificates ~. be payable on
June 1 and December l' in each year beginning December 1, 2004 (the "Tnterest Payment
Dates"), to the regiStered oWners by check or draft of the TruStee orJ in the case ,?f the owner of
Certificates in an aggregate prindpal amount of at least $1JOOO,OOOJ at .the' written request of
such owner by wire transfer. Principal and premium (if any) represented by any Certificate will
~e paid upon presentation and SUII'ender there.of at the corporate trust office of the Trustee in
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San Francisco, California; The pr:i.ncipal, interest and premium (if any) represented by the
Certi[:j.cates are payable in lawful money of the United States of America. .
OPTIONAL PREPAYMENT: The Certificates maturing on or before June 11. 2012, are not
subject to optional prepayment prior to the .respective stated maturities. The Certificates
maturing on or after June 1,2013, are subject to optional prepayment in whole or in part (among
maturities on such basis as the District shall designate) on any date on or after June 1, 2012,
fro~ prepaymentS of the Installment Payments made at the option of the District pursuant to
the Installment Sale Agreement. Certificates shall. be subject to such prepayment at a
prepayment price .( expressed as percentages of the principal amount of Certificates or portions
. thereof to be prepaid) set forth in the following table, in each case with accrued interest
represented thereby to the prepayment date:
Prepayment
Dates
Prepayment
Price
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, June 1, 2012 through May 31, 2013
June 1, 2013 and thereafter
101%
100
PREPAYMENT FROM NET.PROCEEDS OF INSURANCE OR CONDEMNATION. The
. Certific~tes are subject to . mandatory prepayment, in whole or in part (on a pro rata basis
amont~ maturities) on any. date,frbm the net pro.ceeds of insurance, condemriation or sale with
respect to the Sewer' Enterprise, at a. prepayment price equal to the principal amount'
. represented by the Certificates to be prepaid, without premium, together With accrued interest
to the date fixed (or prepayment.
SINKING FUND PREPAYMENT: Any bidder rriay, at its option, specify t1J.at one or more
maturities of the' Certificates (commencing with the June 1, 2017 maturity) will consist of term
Certificates which are subject to mandatory sinking fund prepayment in consecutive yeq.rs immediately
preceding the maturity thereof, as designated -in' the bid of such bi~. In the event that the bid' of the
succe~sfu1 bidder sp~cifies that any ~turity of Certificates will be term Certificates, such term
Certificates will be subject to mandatory sinking fund prepayment- on "June 1 .in each year. so
designated. in..the bid, in the respective amounts for sq.ch years as set forth above under the
heading "MATURITIEs", at a prepaymen.t price equal to the principal amount thereof to be
prepaid together with accrued interest thereon to the prepayment date, Without pre:rriium. _ .
SEClIRlTY: The Certificates represent the direct, undivided fractional interests of the
owners thereof in Installment Payments (~e "Installment Payments") to be made by the District
under the Installment Sale Agreement ~ the purchase price for certain Sewer Enterprise
facilities to be acquired and constructed from the proceeds of the Certificates. The Installment
Payments are payable from and secured by a first pledge of and lien on the Net Revenues of the
Sewer EnterPrise. "The District is permitted to incur ~dditiona1 debt on a parity with the pledge
and lien which secures the Installment Payments, pursuant to the Installment Sale Agreement
Bidders should be aware of certain: factors affecting the payn;tent of Installment Payments in
amounts and at times sufficient to pay the principal and interest represented by the Certificates,
and bidders are referred to the Trust Agreement, the Installment Sale Agreement, and the
Official Statement for further details.
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. CONTINlIING 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 Agreement and a Continuing
'Disclosure C~cate, to provide annual reports and notices of certain events. A'description of
this und~g is set forth .in the form of the Continuing Disclosure Certificate appended to
the Preliminary Official Statement, which Continuing Disc1osu:te Certificate will also be
appended to the Final Official Statement. .
TAX-EXEMPT S~ATUS: In the opinion .of Jones Hall, A Professional Law Corporation,
acting as Bond Counsel to the District, the portion of Installment Payments designated as and
comprising inter~st and received by the owners of the Certificates is excluded from gross
income for federal income tax purposes and is not an item of tax preference for purposes of the
federal alternative minimUIJ? tax imposed on individuals and corporations, provided, howeoer,
that, for ~e 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 cotinSel, such interest is exempt
from California personal income'taxes. In the event that prior to the delivery of the Certificates
(a) the interest on other obligations of the same type and <;:haracter shall be declared to be
taxable (either' at the t::i.ri1e 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 wbich is f<?llowed by the Internal Revenue Service, or by decisiqn of aIi.y federal court, or
(b) any federal income tax law is adopted which will have a substantial adverse effect upon
owners of the Certificates as such, the successful bidder for the Cei:iificates may, at its option,
prior to the tender of the Certificates, be relieved of its obligation under the contract to purchase
the Certificates, 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 Trust Agreement and the Installment Sale
Agreement, will be furnished to the original purchaser of the Certificates without cost. Acopy
of the legal opinion,. certified by the official in whose office the origiI\ai is filed, will be printed
on, or attached to each Cert:$cate at the expense of the District.
FURTHER INFORMATION: A copy of the Preliminary' Official Statement describing the
Certificates, and any other information concerning the proposed financirig, will be furnished
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upon request to the financial ac;ivisor to the District, Bartle Wells Associates, 1889 Alcatraz
Avenue, Berkeley, California 94703, telephone: 510j65S:-3399.
MUNICIPAL BOND INSURANCE;: The District expects to receive a commitment from
one or more'bond insurance provideJ:'s to issue a policy insuring.the payment when due of
principal of and interest with respecf to the Certificates. The name of the bond insurance
company, if any, selected by the District will be announced on Bloomberg Business News or
Thomson Municipal Market Monitor prior to the sci1e of the Bonds. The premium for such
insUl'ance and the ~osts of any related ratings will be paid by the District. .
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TERMS OF SALE
. FORM OF BID: Bids must be submitted 'on the Official Bid Form accompanying this
Notice of Sale or on the form provided by PARITY if the bid is submitted via the PARITY
el~onic bidding system. The bids must be for all of the Bonds and for not less than 99.25% of
the principal amount thereof, plus accrued interest to the date of delivery. Each bid must be in
accordance with the terms and conditions set forth herein. .
. TELEFAX BID: Bidders may submit their bid by te1efax to Bartle Wells Associates, on or
before 10:00 a.m. on the date of sal~. Neither the l?istrict nor Bartle Wells Associates takes any
responsibility for any difficulties in receiving fax transmittals prior to the deadline for receipt of
bids.. The fax number to be used for this purpose is (510) 653-3769. All bids must. be
accompanied by a good faith deposit as described in the "Good Faith Deposit" section herein
ELECTRONIC BIDS ('Dia PA.R11Y): Bids may be submitted electronically via PARITY in
accordance with this Official Notice of Sale, on or before 10:00 a.m. on the date of sale. To-the
extent any instructions or directions set forth in PARITY conflict with this Official Notice of
Sale, the temis of this Official Notice of Sale' controL Neither the District nor Bartle Wells
Associates takes any responsibility for any difficulties in receiving electronic bids via PARITY
prior to :the deadline for receipt of bids. For further infoI'IIllition ~bo~t PARITY, potential
bidders may contact Bartle Wells Associates at (510) 653-3399. All bids must be accompanied by
a good faith deposit.as described in the "Good Faith Deposit" section herein.
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FORM OF BID; .MA.X:lMlIM'DISCOUNT: Each bidder must submit a bid for the purchase
of all of the Certificates. The proposal of any bidder must be for not less than all b! the
Certificates hereby offered for sale. The purchase price of the Certificates. may not be less than
ninety-nine and one quarter of one percent (99.25%) of the par value thereof and accrued
interest rep:r:esented thereby to :the' delivery date. The amount of any discount specified shall
not exceed three-quarters of one percent (0.75%) of the aggregate principai amount of the
Certificates. . . '.
DESIGNATION - OF INri:R:EST RATES: Each bidder must specify the rate or rates of
interest tQ.pe..represented by the Certificates. 'The maximum rate bid on any Certificates may
. not exceed six percent (6%) per annum. A bidder will be permitted to bid different rates of
interest for the Certificates, provided that the following conditions are met
(i) each interest rate specified must be in a multiple of 1/20th or l/Sth of
one percent,
(ii) the interest rate for each maturity of Certificates shall be equal to or .
greater than the interest rate on each prece4ing maturity, .
(ill) the maximum. rate bid for' any maturity of the Certificates may not
exceed the miilimum. rate bid for any maturity by more than four percentage
points (4%).
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(iv) no Certificate shall represent more than one rate of interest,
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(v) interest represented by each Certificate shall be computed from the.
date of original delivery of the Certificates to the stated maturity (or to its sinking
fund redemption dateJ in the case of term Certificates) at the. interest rate
specified ii1. the bidder's proposal, payable on the Interest Payment Dates as set
forth above, .
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(vi) all Certificates 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
c,?ncession by the bidder as a substitute for payinent in full of the purchase price.
DETERMINATION OF BEST BID: The Certificates will be awarded to the bidder whose
proposal produces ~~ 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 Certificates frC?m the date of
original delivery thereof (which shall be assumed for computational purposes to be May 20,
2004)J . to their respective. maturity dates or mandatory sinking fund prepayment 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 Certificates less any discount or plus any'
premium specified in such proposaJ., and the .true interest rate shall be calculated by the use of a . .. )
seIIriannual interval of compounding interest based on the Interest Payment Dates for the ...
Certificates. All intere~t will be computed ona thirty (30) day month, 360-day year basis.
ADJUSTMENT OF ~R1NCIPAL MATURITIES: The District reserves the right to increase or
decrease'the principal'amount 'of any maturity of the Certificates (or, in the case of the-term
Certificat~s, the principal 'amount thereof' which is subject to mandatory sinking . fund
redemption on June 1 'in any year), by up to 10% of the maturity amount of Certificates
maturing in a particular year, for the purpose of ensuring approximately level debt service. The
aggregate principal amount of the Certificates will be equal to $15JOOO,OOO notwithstanding any
such adj~iFte.J1t). Notice of such increase or decreas~ shall be given to the successful bidder as
soon as. practicable following the notification of. awardJ as des~bed 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 A WARD: . The 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 Certificates and to accept such bid, for and in the name of the District, by notice to the
successful bidder. The District will award the Certificates or reject all bids not later than 24
hours after the expiration'of the time preScribed for the r~~pt of proposals unless such tiine of
award is waived by the successful bidder; provid~d, 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 .",
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PLACE OF DELIVERY; CANCELLATION FOR LATE DELIVERY: It is expected that .the
Certificates will be delivered to DTC for the accoUnt of the successful bidder on or about May
20, 2004. The successful bidder shall'have the right to cancel the' contract of pUrchase if the
Certificates are not tendered for delivery within sixty (60) days from the date of the sale thereof,
and . in ~u~ 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 Certificates in accordance with the t~ 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 subriritted to the District or its financial adviser prior to the'
. operiing of the proposals. If the Certificates are awarded to a bidder utilizing a financial surety
bond,su~ purchaser is required to submit its deposit to the District in the form of a cashier's
check not later than 3:30 p.rn. Pacific Time on the next business day following the award.
Alternanve1y,.if the Certificates are awarded to a bidder utilizing a financial surety bond, such
purchaser may submit its deposit to the District by wire transfer, not later than 3:30 p.rn. Pacific
Time on the'next business day following the award, to the following account of the District:
u.s. Bank
2850 Lake Tahoe Blvd. Office
South Lake Tahoe, California
. ABA: 121122676
Beneficiary: South Tahoe Public Utility District
Ben~ciary Account Ntunber: 153490373625
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 Certificates or, at the election o! the District, surrendered back to. i:?e
purchaser against payment of the purchase price of the Certificates in full. In the event the
purchase]; .faYs to honor its accepted' proposal, the good faith deposit will be cashed and
retained by the Distric;t.
STATEMENT 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, determmed as
described abov~, 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 Certificates, to deliver to ~e District a certificate, in form. and
. substance satisfactory- to the District, stating (i) that, as of the date of award, the Certificates
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 or the Certificates were sold to the
public, and (ill) that no Certificates of a single maturity were offered at one price to the general .
public and at a discount from that price to insti~tional or other investors.
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NO LmGATION: There is no litigation pending concerning the validity of the
Installment Sale Agreement, the Trust Agreement or the Certificates, the corporate existence of
the District or the corporation, or the entitlement of the officers thereof to their respective
offices, and the purchaser will be furnished a no-litigation ceri:ificate certifying to the foregofug
as 'of and at the time of delivery of the Certificates. .
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CUSIP NUMBERS: It is anticipated that CUSlP numbers' will be printed on the
Certificates, but neither the failure to print such numbers on any Ceri:i.ficates 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 Certificates in accordance with the terms hereof. All expenses in relation to the
printing of CUSIP numbers on the Certificates wfi.l- be paid for by the' District; providedJ
howeverJ 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 Califoinia Debt arid. Investment Advisory Commission in connection with the issuance of
the Certificates .shall be the responsibility of the purchaser of the Certificates.
OFFICIAL.STATEMENT: The. Board of Directors of the District has adopted an Official
Statement relating to the Cert:i.flcates. Copies of a Pre~ Official Statement will be
ciistributed to the .bidders prior to the sale in a form" deemed final" by the District for purposes
of. Rule 15c2-12 under the Seci.nities Ex~ge Act of 1934 (the "Rule") and approved for
distribution by resolution of the Board of Directors of the District. Within seven business days . ...
from the sale date, the District will deliver to the purchaser copies of the final Official Statement .. j
. (not to exceed 100 copies), executed by an authorized representative of the District and dated
the p.ate of delivery thereof to the purchaser, in su.ff.icient number to allow the purchaser to
comply with paragraph (b)(4) of the Rule and to satisfy the Municipal Securities Ruleinaking
Board (the "MSRB") Rule G-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: ApP.:l21, 2004
SOUTH TAHOE PUBUC UTILITY DISTRICT
By /s/RhondaMcFarlane
Chief Financial Officer
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BID FOR THE PURCHASE OF
$15,000,000
South Tahoe Public Utility District
Sewer Revenue Certificates of Participation
Series 2004
Sale Date: May 5, 2004
Time: On or before 10:00 a.m. Pacific Time
South Tahoe Public Utility District
c/o Bartle Wells Associates
1889 AlcatrazAvenue
Berkeley, CA 94703
This bid form may be
sent by fax to
(510) 653-3769
Phone: (510) 653-3399
Bids are also accepted electronically via the PARITY electronic
bidding system.
Subject to all the tenns and conditions of the Official Notice of Sale
dated April 21, 2004, we offer to purchase all of the Bonds, maturing
and bearing interest as follows:
Principal Sinking
Payment Datel Principal Fund Interest
(June!) Amount Payment Rate2
2005 $530,000 N/A
2006 560,000 N/A
2007 570,000 N/A
2008 580,000 N/A
.....,. 2009 595,000 N/A
2010 610,000 N/A
2011 630,000 N/A
2012 650,000 N/A ,
2013 675,000 N/A
2014 700,000 N/A
2015 730,000 N/A
2016 760,000 N/A
2017 79Q..000....
2018 825,000
2019 860,000
2020 900,000
2021 940,000.
2022 985,000
2023 1,030,000
2024 1,080,000
'-"lease bracket any term bond maturities.
2. No coupon.may exceed 60/0. The difference between the highest and
the lowest interest rate specified shall not exceed 4%; the interest
rate for each maturity must be the same or higher than the interest
rate for the prior maturity; rates must be stated in multiples of 1/8
or 1/20 of 1 %; no maturity shall have more than one rate of
interest. .
Purchase Price: We will purchase the Bonds for the par amount
thereof plus a: premium of $ or less a discount of
$
Minimum Purchase Price: $14,887,500 (99.~5% of par).
Good Faith Deposit: (check one) 0 Cashier's or certified check in the
amount of $75,000 payable to the order of ~outh Tahoe Public Utility
District or 0 a good faith deposit financial surety bond in the amount of
$75,000 naming the District as the beneficiary.
Check No. or Surety Bond ill. No.:'
Official Statement: We hereby request that printed copies
of an Official Statement pertaining to the Bonds be furnished us in
accordance with the terms of said Notice of Sale. Amounts in excess of
100 must be paid for by purchaser.
Calculation of True Interest Cost: For informational purposes only,
and not constituting any part of the foregoing offer, the true mterest cost,
in accordance with the above bid, is: .
True interest cost .....................................
%
Submitted by:
(Authorized Signature)
Printed Name:
Firm Name:
Firm Address:
Telephone No.:
Fax Number:
Other Members of the Syndicate are:
Name, telephone number, and address of bidder's representative to be
contacted regarding closing procedures:
Name:
Telephone No.:
Fax Number:
Address:
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29072-26
JH:WHM
Final
INSTALLMENT SALE AGREEMENT
Dated as of May I, 2004
between the
PUBLIC PROPERTY FINANCING CORPORATION OF
CALIFORNIA,
as Seller
and the
SOUTH TAHOE PUBLIC UTILITY DISTRICT,
as Purchaser
Relating to
$15,000,000
Sewer Revenue Certificates,
Series 2004
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SECTION 1.1.
SECTION 1.2.
SECTION 2.1.
SECTION 2.2.
SECTION 3.1.
SECTION 3.2.
SECTION 3.3.
SECTION 3.4.
SECTION 3.5.
SECTION 3.6.
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SECTION 4.1.
SECTION 4.2.
SECTION 4.3.
SECTION 4.4.
SECTION 4.5.
SECTION 4.6.
SECTION 4.7.
SECTION 4.8.
SECTION 5.1.
SECTION 5.2.
SECTION 5.3.
SECTION 5.4.
SECTION 5.5.
SECTION 5.6.
SECTION 5.7.
SECTION 5.8.
SECTION 5.9.
. SECTION 5.10.
SECTION 5.11.
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SECTION 6.1.
TABLE OF CONTENTS
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ARTICLE I
Definitions; Rules of Interpretation
Definitions........................................................................................................ ..2
Interpretation.. .......... .........................................................................................2
ARTICLE IT
Representations, Covenants and Warranties
Representations, Covenants and Warranties of the District ............................2
Representations, Covenants and Warranties of Corporation...........................4
ARTICLE ill
Issuance of Certificates;
Application of Proceeds
The Certificates..... ....... ............... .................... ...................................................5
. Deposit and Application of Funds. ..................................................................5
Acquisition and Construction of the Sewer System Improvements..................5
Appointment of District as Agent.................. ..................... ..............................5
Plans and Specifications............................... ........................ ................. ............6
Certificate of Completion............................................................................... ...6
ARTICLE IV
. Sale of Sewer System Improvements
Installment Payments
Sale......................................... ............................................................................6
Term ...................................................................................... .......................... ...6
Title.......... ..........................................................................................................6
Installment Payments...................................................................................... ...6
Pledge and Application of Net Revenues..........................................................7
Establishment of Rate Stabilization Fund.........................................................8
Special Obligation of the District; Obligations Absolute..................................9
Additional Payments.......................................................................................1 0
ARTICLE V
Covenants of the District
Disclaimer of Warranties............................................................... ..................10
Release and Indemnification Covenants..........................................................1 0
Sale or Eminent Domain of Sewer Enterprise..................................................11
Insurance....... ...... .......... .................... ........................ ................................... ....11
Records and Accounts................................... ................................................ ..11
Rates and Charges..... ............................................................................... ...... .12
Superior and Subordinate Obligations ............................................................12
Issuance of Parity Debt.................................. ....................................... ........ ...12
Operation of Sewer Enterprise in Efficient and Economical Manner .............13
Deposit of Property Taxes into the Sewer Fund.............................................13
Assignment and Amendment Hereof ..............................................................13
ARTICLE VI
Events of Default
Events of Default Defined ..... ............................................... ........ ...................13
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SECTION 6.2.
SECTION 6.3.
SECTION 6.4.
SECTION 6.5.
SECTION 6.6.
SECTION 7.1.
SECTION 7.2.
SECTION 7.3.
SECTION 7.4.
SECTION 8.1.
SECTION 8.2.
SECTION 8.3.
SECTION 8.4.
SECTION 8.5.
SECTION 8.6.
SECTION 8.7.
SECTION 8.8.
SECTION 8.9.
SECTION 8.10.
Remedies on Default. .............................................................................. ..... ....14
No Remedy Exclusive ............................ ..... ............................... ........... ....... ....15
Agreement to Pay Attorneys' Fees and Expenses...........................................15
No Additional Waiver Implied by One Waiver ..............................................15
Trustee, the Insurer and Certificate Owners to Exercise Rights......................15
ARTICLE VII
Prepayment of Installment Payments
Security Deposit...................... ............................... ...................................... ....16
Optional Prepayment............. ............ ...... ...... .............................. .............. .... .16
Mandatory Prepayment From Proceeds of Insurance, Sale or
Condemnation.. ................................................... ........................ .................... .16
Credit for Amounts on Deposit... ............................................................... .....16
ARTICLE VIII
Miscellaneous
Further Assurances......................................................................................... .17
Notice............................... .................... ..................... ........... ........................... .17
Governing Law.... ...... .................... ......................................... ....... ................. ..17
. Binding Effect............. ...... .......... ...... ............ ............ .... ............. ......... ............. .18
Severability of Invalid Provisions......................... ................................... ....... .18
Article and Section Headings and References......................................;..........18
Payment on Non-Business Days ................. ................ ........ ............................18
Execution of Counterparts. ...... ... ........ ... ... ... ............ .............. ...... ...... ... ...... ... ..18
Waiver of Personal Liability ........................................ ........ ........ ........ ............18
Trustee and the Insurer as Third Party Beneficiaries ......................................18
APPENDIX A Schedule Of Installment Payments
APPENDIX B Description Of Sewer System Improvements
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INSTALLMENT SALE AGREEMENT
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This INSTALLMENT SALE AGREEMENT (this "Agreement"), dated as of May 1, 2004, is
between the PUBLIC PROPERTY FINANCING CORPORATION OF CALIFORNIA, a nonprofit
public benefit corporation duly organized and existing under the laws of the State of California
(the "CorporationJl), as seller, and the SOUTH TAHOE PUBLIC UTILITY DISTRICT, a public
utility district duly organized and existing under the laws of the State of California (the
JlDistrictJl), as purchaser.
BACKGROUND:
1. The District presently owns and operates facilities and property for the collection,
treatment and disposal of wastewater within the service area of the District (the "Sewer
EnterpriseJl), and the District wishes to provide funds at this time for the purpose of financing
the costs of acquiring and constructing various improvements to the Sewer Enterprise, more
particularly described in Exhibit B (the "Sewer System ImprovementsJl).
2. The Corporation has been formed for the purpose of assisting public agencies such
as the District in the financing of facilities and property useful to such agencies, and the
Corporation has proposed to enter into this Agreement with the District under which the
Corporation has agreed to acquire and construct the Sewer System Improvements and sell the
Sewer System Improvements back to the District in consideration of the agreement by the
District to pay the purchase price of the Sewer System Improvements in semiannual
installments (the "Installment PaymentsJl).
3. For the purpose of obtaining the moneys required to finance the Sewer System
Improvements in accordance with the terms hereof and of the Installment Sale Agreement, the
Corporation has assigned and transferred certain of its rights under this Agreement to the
Trustee under a Trust Agreement dated as of May 1, 2004, among the District, the Corporation
and the Trustee, under which the Trustee will execute and deliver Sewer Revenue Certificates,
Series 2004 in the aggregate principal amount of $15,000,000, evidencing direct, undivided
fractional interests in the Installment Payments.
A G R E E MEN T:
In consideration of the foregoing and the material covenants hereinafter contained, the
District and the Corporation formally covenant, agree and bind themselves as follows:
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ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION
SECTION 1.1. Definitions. Unless the context clearly otherwise requires or unless
otherwise defined herein, the capitalized terms in this Agreement have the respective meanings
given them in Appendix A to the Trust Agreement.
SECTION 1.2. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular shall
include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for
convenience only and shall be deemed to include the neuter, masculine or feminine gender, as
appropriate.
(b) Headings of articles and sections herein and the table of contents hereof are solely
for convenience of reference, do not constitute a part hereof and shall not affect the meaning,
construction or effect hereof.
(c) All references herein to "Articles," "Sections" and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Agreement; the words "herein,"
"hereof," "hereby," "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or subdivision hereof.
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ARTICLE II
REPRESENTATIONS, COVENANTS AND
WARRANTIES
SECTION 2.1. Representations, Covenants and Warranties of the District. The District
represents, covenants and warrants to the Corporation and the Insurer as follows:
(a) Due Organization and Existence. The District is a public utility district
duly organized and validly existing under the laws of the State of
California, has full legal right, power and authority under said laws to
enter into this Agreement and the Trust Agreement and to carry out and
consummate all transactions contemplated hereby and thereby, and by
proper action the District Council of the District has duly authorized the
execution and delivery of this Agreement and the Trust Agreement.
(b) Due Execution. The representatives of the District executing this
Agreement and the Trust Agreement are fully authorized to execute the
same.
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(c) Valid. Binding and Enforceable Obligations. This Agreement and the Trust
Agreement have been duly authorized, executed and delivered by the
District and constitute the legal, valid and binding agreements of the
District enforceable against the District in accordance with their respective
terms; except as the enforceability thereof may be subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting
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creditors' rights heretofore or hereafter enacted and except as such
enforceability may be subject to the exercise of judicial discretion in
accordance with principles of equity.
No Conflicts. The execution and delivery of this Agreement and the Trust
Agreement, the consummation of the transactions herein and therein
contemplated and the fulfillment of or compliance with the terms and
conditions hereof and thereof, do not and will not conflict with or
constitute a violation or breach of or default (with due notice or the
passage of time or both) under any applicable law or administrative rule or
regulation, or any applicable court or administrative decree or order, or any
indenture, mortgage, deed of trust, lease, contract or other agreement or
instrument to which the District is a party or by which it or its properties
are otherwise subject or bound, or result in the creation or imposition of
any prohibited lien, charge or encumbrance of any nature whatsoever upon
any of the property or assets of the District, which conflict, violation,
breach, default, lien, charge or encumbrance would have consequences that
would materially adversely affect the consummation of the transactions
contemplated by this Agreement and the Trust Agreement or the financial
conc;Ution, assets, properties or operations of the District, including but not
limited to the performance of the District's obligations under this
Agreement and the Trust Agreement.
(e) Consents and Approvals. No consent or approval of any trustee or holder
of any indebtedness of the District or of the voters of the District, and no
consent, permission, authorization, order or license of, or filing or
registration with, any governmental authority is necessary in connection
with the execution and delivery of this Agreement or the Trust Agreement,
or the consummation of any transaction herein or therein contemplated,
except as have been obtained or made and as are in full force and effect.
(d)
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(g)
(f) No Litigation. There is no action, suit, proceeding, inquiry or investigation
before or by any court or federal, state, municipal or other governmental
authority pending or, to the knowledge of the District after reasonable
investigation, threatened against or affecting the District or the assets,
properties or operations of the District which, if determined adversely to
the District or its interests, would have a material and adverse effect upon
the consummation of the transactions contemplated by or the validity of
this Agreement or the Trust Agreement, or upon the financial condition,
assets, properties or operations of the District, and the District is not in
default with respect to any order or decree of any court or any order,
regulation or demand of any federal, state, municipal or other governmental
authority, which default might have consequences that would materially
adversely affect the consummation of the transactions contemplated by
this Agreement or the Trust Agreement, or the financial conditions, assets,
properties or operations of the District, including but not limited to the
payment and performance of the District's obligations under this
Agreement and the Trust Agreement.
Prior Indebtedness. The District has not issued or incurred any obligations
which are currently outstanding having any priority in payment out of the
Gross Revenues or the Net Revenues over the payment of the Installment
Payments as provided herein.
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SECTION 2.2. Representations, Covenants and Warranties of Corporation. The Corporation
'-' represents, covenants and warrants to the District and the Insurer as follows:
(a) Due Organization and Existence. The Corporation is a nonprofit public
benefit corporation organized and existing under the laws of the State of
California, and has power to enter into this Agreement and the Trust
Agreement and to perform the duties and obligations imposed on it
hereunder and thereunder. The Board of Directors of the Corporation has
duly authorized the execution and delivery of this Agreement and the Trust
Agreement.
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(b) Due Execution. The representatives of the Corporation executing this
Agreement and the Trust Agreement are fully authorized to execute the
same.
(c) Valid. Binding and Enforceable Obligations. This Agreement and the Trust
Agreement have been duly authorized, executed and delivered by the
Corporation and constitute the legal, valid and binding agreements of the
Corporation with the Corporation, enforceable against the Corporation in
acc~rdance with their respective terms; except as the enforceability thereof
may be subject to bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting creditors' rights heretofore or hereafter enacted
and except as such enforceability may be subject to the exercise of judicial
discretion in accordance with principles of equity.
(d) No Conflicts. The execution and delivery hereof and of the Trust
Agreement, the consummation of the transactions herein and therein
contemplated and the fulfillment of or compliance with the terms and
conditions hereof and thereof, do not and will not conflict with or
constitute a violation or breach of or default (with due notice or the
passage of time or both) under any applicable law or administrative rule or
regulation, or any applicable court or administrative decree or order, or any
indenture, mortgage, deed of trust, lease, contract or other agreement or
instrument to which the Corporation is a party or by which it or its
properties are otherwise subject or bound, or result in the creation or
imposition of any prohibited lien, charge or encumbrance of any nature
whatsoever upon any of the property or assets of the Corporation, which
conflict, violation, breach, default, lien, charge or encumbrance would have
consequences that would materially adversely affect the consummation of
the transactions contemplated hereby and by the Trust Agreement or the
financial condition, assets, properties or operations of the Corporation,
including but not limited to the performance of the Corporation's
obligations under this Agreement and the Trust Agreement.
(e) Consents and Approvals. No consent or approval of any trustee or holder
of any indebtedness of the Corporation, and no consent, permission,
authorization, order or license of, or filing or registration with, any
governmental authority is necessary in connection with the execution and
delivery hereof or of the Trust Agreement, or the consummation of any
transaction herein or therein contemplated, except as have been obtained or
made and as are in full force and effect.
(f) No Litigation. There is no action, suit, proceeding, inquiry or investigation
before or by any court or federal, state, municipal or other governmental
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authority pending or, to the knowledge of the Corporation after reasonable
investigation, threatened against or affecting the Corporation or the assets,
properties or operations of the Corporation which, if determined adversely
to the Corporation or its interests, would have a material and adverse
effect upon the consummation of the transactions contemplated by or the
validity of this Agreement or the Trust Agreement, or upon the financial
condition, assets, properties or operations of the Corporation, and the
Corporation is not in default with respect to any order or decree of any
court or any order, regulation or demand of any federal, state, municipal or
other governmental authority, which default might have consequences that
would materially adversely affect the consummation of the transactions
contemplated by this Agreement or the Trust Agreement or the financial
conditions, assets, properties or operations of the Corporation, including
but not limited to the performance of the Corporation's obligations
hereunder and under the Trust Agreement.
ARTICLE III
ISSUANCE OF CERTIFICA TESi
APPLICATION OF PROCEEDS
SECTION 3.1. The Certificates. The Corporation shall cause the Certificates to be
executed and delivered under the Trust Agreement in the aggregate principal amount of
$15,000,000. The Corporation agrees that the proceeds of sale of the Certificates shall be paid
to the Trustee on the Closing Date for deposit under the Trust Agreement. The District hereby
approves the Trust Agreement, the assignment thereunder to the Trustee of certain rights of the
Corporation, and the execution and delivery of the Certificates.
SECTION 3.2. Deposit and Application of Funds. The proceeds received by the Trustee
from the sale of the Certificates to the Original Purchaser shall be deposited in the respective
funds and accounts, and in the respective amounts, as set forth in Section 3.01 of the Trust
Agreement.
SECTION 3.3. Acquisition and Construction of the Sewer System Improvements. The
District hereby agrees with due diligence to supervise and provide for, or cause to be supervised
and provided for, the acquisition, cons~ction and installation of the Sewer System
Improvements in accordance with the plans and specifications, purchase orders, construction
contracts and other documents relating thereto under all applicable requirements of law. All
contracts for, and all work relating to, the acquisition, construction and installation of the Sewer
System Improvements are subject to all applicable provisions of law relating to the acquisition
and construction of public works by the District. The failure of the District to complete the
Sewer System Improvements does not constitute an Event of Default hereunder or a grounds for
termination hereof, nor may such failure result in the diminution, abatement or extinguishment
of the obligations of the District hereunder to pay the Installment Payments when due
hereunder.
SECTION 3.4. Appointment of District as Agent. The Corporation hereby appoints the
District as its agent to carry out all phases of the acquisition, construction and installation of
the Sewer System Improvements under and in accordance with the provisions hereof. The
District hereby accepts such appointment and assumes all rights, liabilities, duties and
responsibilities of the Corporation regarding the acquisition, construction and installation of the
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Sewer System Improvements. As agent of the Corporation hereunder, the District shall enter
into, administer and enforce all purchase orders or other contracts relating to the Sewer System
Improvements. Payment of Project Costs shall be made by the District from amounts held by
the Trustee in the Project Fund in accordance with the provisions of this Agreement and the
provisions of the Trust Agreement.
SECTION 3.5. Plans and Specifications. The District has the right to specify the exact
scope, nature and identification of the Sewer System Improvements and the respective
components thereof. Before any payment is made for the Sewer System Improvements or any
component thereof from amounts on deposit in the Project Fund, the District must prepare
detailed plans and specifications relating thereto. The District may from time to time amend
any such plans and specifications, and thereby change or modify the description of the Sewer
System Improvements or any component thereof.
SECTION 3.6. Certificate of Completion. Upon the completion of the Sewer System
Improvements, but in any event not later than 30 days following such completion, the District
Representative must execute and deliver to the Corporation, the Insurer and the Trustee a
written certificate of the District Representative which (a) states that the construction of the
Sewer System Improvements has been substantially completed, (b) identifies the total Project
Costs thereof, and (c) identifies the amounts, if any, to be reserved in the Project Fund for
payment of future Project Costs.
ARTICLE IV
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SALE OF PROJECT;
INSTALLMENT PAYMENTS
SECTION 4.1. Sale. The Corporation hereby sells, bargains and conveys the Sewer
System Improvements to the District, and the District hereby purchases the Project from the
Corporation, upon the terms and conditions set forth in this Agreement.
SECTION 4.2. Term. The Term of this Agreement commence on the Closing Date, and
end on June 1, 2024, or such later or earlier date on which the Certificates shall cease to be
Outstanding under and within the meaning of the Trust Agreement. Notwithstanding the
foregoing provisions of this Section 4.2, the Term of this Agreement shall not end so long as any
amounts are owed to the Insurer with respec:t to the Certificate Insurance Policy.
SECTION 4.3. Title. Title to the Sewer System Improvements, and eaCh component
thereof, shall be deemed conveyed by the Corporation to and vested in the District on the
Closing Date. Title to the Sewer System Improvements, and each component thereof, shall be
deemed conveyed by the Corporation to and vested in the District upon the completion of the
acquisition, construction and installation thereof. The Corporation and the District shall
execute, deliver and cause to be recorded any and all documents reasonably required by the
District to consummate such transfer of title.
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SECTION 4.4. Installment Payments.
(a) Obligation to Pay. The District hereby agrees to pay to the Corporation, as the
purchase price of the Project hereunder, the aggregate principal amount of $15,000,000 together
with interest (calculated on the basis of a 360-day year of twelve 30-day months) on the
unpaid principal balance thereof, payable in semiannual Installment Payments in the respective
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amounts and on the respective Interest Payment Dates specified in Appendix A hereto. The
Installment Payment coming due and payable on any Interest Payment Date shall be deposited
by the District with the Trustee, as assignee of the Corporation under the Trust Agreement, on
the related Installment Payment Date in an amount which, together with amounts then held by
the Trustee in the Installment Payment Fund, is equal to the full amount of such Installment
Payment. The Installment Payments shall be secured by and payable solely from the sources
specified in Section 4.5.
Notwithstanding anything herein or in the Trust Agreement to the contrary, amounts
paid by the Insurer under the Certificate Insurance Policy do not relieve the District from its
obligations hereunder to pay the Installment Payments when due.
(b) Effect of Prepayment. In the event. that the District prepays all remaining
Installment Payments in full under Section 7.2 or Section 7.3, the District's obligations under
this Agreement shall thereupon cease and terminate, including but not limited to the District's
obligation to pay Installment Payments therefor under this Section 4.4; provided, however, that
the District's obligations to compensate and indemnify the Trustee under Sections 4.8 and 5.2
shall survive such prepayment. In the event that the District prepays the Installment Payments
in part but not in whole under Section 7.2 or Section 7.3, the principal component of each
succeeding Inst~ent Payment shall be reduced as provided in such Sections, and the interest
component of each remaining Installment Payment shall be reduced by the aggregate
corresponding amount of interest which would otherwise be payable with respect to the
Certificates thereby prepaid under the applicable provisions of Section 4.01 of the Trust
Agreement.
(c) Rate on Overdue Payments. In the event the District should fail to make any of the
payments required in this Section 4.4 and Section 4.8, the payment in default shall continue as
an obligation of the District until the amount in default shall have been fully paid, and the
District agrees to pay the same with interest thereon, from the date of default to the date of
payment, at the Overdue Rate.
(d) Assignment. The District understands and agrees that certain rights of the
Corporation, including but not limited to the right of the Corporation to receive payment of the
Installment Payments, have been assigned by the Corporation to the Trustee in trust under the
Trust Agreement, for the benefit of the Insurer and the Owners of the Certificates, and the
District hereby consents to such assignment. The Corporation hereby directs the District, and
the District hereby agrees, to pay to the Trustee at its Trust Office, all payments payable by the
District under this Section 4.4 and all amounts payable by the District under Article VII.
SECTION 4.5. Pledge and Application of Net Revenues.
(a) Pledge. All of the Net Revenues and all moneys on deposit in any of the funds and
accounts established and held by the Trustee under the Trust Agreement are hereby irrevocably
pledged, charged and assigned to the punctual payment of the Installment Payments. Such
pledge, charge and assignment shall constitute a lien on the Net Revenues and such other
moneys for the payment of the Installment Payments in accordance with the terms hereof, which
lien shall be on a parity with the pledge and lien which secures any Parity Debt.
(b) Deposit of Net Revenues Into Sewer Fund: Transfers to Make Payments. The
District has heretofore established the Sewer Fund, which the District agrees to continue to hold
and maintain for the purposes and uses set forth herein. All of the Gross Revenues shall be
deposited by the District immediately upon receipt in the Sewer Fund. Amounts in the Sewer
Fund shall be applied as set forth.in this Agreement and any Parity Debt Documents. Amounts
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on deposit in the Sewer Fund shall be applied by the District to pay when due the following
'-' amounts in the following order of priority: .
(i) all Operation and Maintenance Costs;
(ii) the Installment Payments and all payments of principal of and interest on
any Parity Debt;
(ill) to the Trustee the amount of any deficiency in the Reserve Fund established
for the Certificates and in any reserve fund established for Parity Debt, the
notice of which deficiency has been to the District in accordance with the
Trust Agreement and the related Parity Debt Documents, respectively;
(iv) any other payments required to comply with the provisions of this
Agreement and any Parity Debt Documents; and
(v) any other purposes authorized under subsection (d) of this Section 4.5.
(c) No Preference or Priority. Payment of the Installment Payments and the principal
of and interest on any Parity Debt shall be made without preference or priority among the
Installment Payments and such Parity Debt. In the event that the amount of Net Revenues on
deposit in the Sewer Fund are any time insufficient to enable the District to pay when due the
Installment Payments and the principal of and interest on any Parity Debt, such payments shall
be made on a pro rata basis.
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(d) Other Uses of Net Revenues Permitted. The District shall manage, conserve and
apply the Net Revenues on deposit in the Sewer Fund in such a manner that all deposits
required to be made under the preceding subsection (b) will be made at the times and in the
amounts so required. Subject to the foregoing sentence, so long as no Event of Default shall
have occurred and be continuing hereunder, the District may use and apply moneys in the Sewer
Fund for (i) the payment of any subordinate obligations or any unsecured obligations, (ii) the
acquisition and construction of improvements to the Sewer Enterprise, (ill) the prepayment of
any other obligations of the District relating to the Sewer Enterprise, or (iv) any other lawful
purposes of the District.
(e) Budget and Appropriation of Installment Payments. During the Term of this
Agreement, the District shall adopt all necessary budgets and make all necessary
appropriations of the Installment Payments from the Net Revenues. In the event any
Installment Payment requires the adoption by the District of any supplemental budget or
appropriation, the District shall promptly adopt the same. The covenants on the part of the
District contained in this subsection (e) shall be deemed to be and shall be construed to be
duties imposed by law and it shall be the duty of each and every public official of the District
to take such actions and do such things as are required by law in the performance of the official
duty of such officials to enable the District to carry out and perform the covenants and
agreements in this subsection (e).
SECTION 4.6. Establishment of Rate Stabilization Fund. The District has the right at any
time to establish a fund to be held by it and administered in accordance with this Section 4.6,
for the purpose of stabilizing the rates and charges imposed by the District with respect to the
Sewer Enterprise. From time to time the District may deposit amounts in the Rate Stabilization
Fund, from any source of legally available funds, including but not limited to Net Revenues
which are released from the pledge and lien which secures the Installment Payments and any
Parity Debt, as the District may determine.
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t.,.
\.;
The District may, but is not he required to, withdraw any amounts on deposit in the
Rate Stabilization Fund and deposit such amounts in the Sewer Fund in any Fiscal Year for the
purpose of paying the Installment Payments or the principal of and interest on any Parity Debt
coming due and payable in such Fiscal Year. Amounts so transferred from the Rate
Stabilization Fund to the Sewer Fund shall constitute Gross Revenues for such Fiscal Year
(except as otherwise provided herein), and shall be applied for the purposes of the Sewer Fund.
Amounts on deposit in the Rate Stabilization Fund shall not be pledged to or otherwise secure
the Installment Payments or any Parity Debt. All interest or other earnings on deposits in the
Rate Stabilization Fund shall be retained therein or, at the option of the District, be applied for
any other lawful purposes. The District has the right at any time to withdraw any or all
amounts on deposit in the Rate Stabilization Fund and apply such amounts for any other
lawful purposes of the District.
SECTION 4.7. Special Obligation of the District; Obligations Absolute. The District's
obligation to pay the Installment Payments and any other amounts coming due and payable
hereunder shall be a special obligation of the District limited solely to the Net Revenues. Under
no circumstances shall the District be required to advance moneys derived from any source of
income other than the Net Revenues and other sources specifically identified herein for the
payment of the Installment Payments and such other amounts, nor shall any other funds or
property of the District be liable for the payment of the Installment Payments and any other
amounts coming due and payable hereunder.
The obligations of the District to make the Installment Payments from the Net Revenues
and to perform and observe the other agreements contained herein shall be absolute and
unconditional, and shall not be subject to any defense or any right of set-off, counterclaim or
recoupment arising out of any breach by the Corporation or the Trustee of any obligation to the
District or otherwise with respect to the Sewer Enterprise, whether hereunder or otherwise, or
out of indebtedness or liability at any time owing to the District by the Corporation or the
Trustee. Until such time as all of the Installment Payments, all of the Additional Payments and
all other amounts coming due and payable hereunder shall have been fully paid or prepaid, the
District (a) will not suspend or discontinue payment of any Installment Payments, Additional
Payments or such other amounts, (b) will perform and observe all other agreements contained in
this Agreement, and (c) will not terminate this Agreement for any cause, including, without
limiting the generality of the foregoing, the occurrence of any acts or circumstances that may
constitute failure of consideration, eviction or constructive eviction, destruction of or damage to
the Sewer Enterprise, failure to complete the acquisition and construction of the Project by the
estimated completion date thereof, sale of the Sewer Enterprise, the taking by eminent domain
of title to or temporary use of any component of the Sewer Enterprise, commercial frustration of
purpose, any change in the tax or law other laws of the United States of America or the State of
California or any political subdivision of either thereof or any failure of the Corporation or the
Trustee to perform and observe any agreement, whether express or implied, or any duty,
liability or obligation arising out of or connected with the Trust Agreement or this Agreement.
Nothing contained in this Section 4.7 shall be construed to release the Corporation from
the performance of any of the agreements on its part contained herein or in the Trust Agreement,
and in the event the Corporation shall fail to perform any such agreements, the District may
institute such action against the Corporation as the District may deem necessary to compel
performance so long as such action does not abrogate the obligations of the District contained in
the preceding paragraph. The District may, however, at the District's own cost and expense
and in the District's own name or in the name of the Corporation prosecute or defend any
action or proceeding or take any other action involving third persons which the District deems
reasonably necessary in order to secure or protect the District's rights hereunder, and in such
event the Corporation hereby a~ees to cooperate fully with the District and to take such action
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necessary to effect the substitution of the District for the Corporation in such action or
"" proceeding if the District may request.
SECTION 4.8. Additional Payments. In addition to the Installment Payments, the
District shall pay when due the following amounts to the following parties:
(a) to the Corporation, all costs and expenses incurred by the Corporation to
comply with the provisions of this Agreement and the Trust Agreement;
and
(b) to the Trustee upon request therefor, all of its costs and expenses payable
as a result of the performance of and compliance with its duties hereunder
or under the Trust Agreement or any related documents;
(c) to the Corporation and the Trustee, all amounts required to indemnify the
Corporation and the Trustee under Section 5.2 hereof and Section 10.03 of
the Trust Agreement; and
. (d) all costs and expenses of auditors, engineers and accountants.
Subject to the provisions of Section 7.03 of the Trust Agreement, the Additional
Payments shall be payable from, but shall not be secured by a pledge or lien upon, the Net
Revenues. The rights of the Trustee and the Corporation under this Section 4.8, and the
obligations of the District under this Section 4.8, shall survive the termination of this Agreement.
\.,
ARTICLE V
COVENANTS OF THE DISTRICT
SECTION 5.1. Disclaimer of Warranties. The Corporation makes no warranty or
representation, either express or implied, as to the value, design, condition, merchantability or
fitness for any particular purpose or fitness for the use contemplated by the District of the
Project or any component thereof, or any other representation or warranty with respect to any
of the Project or any component thereof. In no event shall the Corporation be liable for
incidental, indirect, special or consequential damages, in connection with or arising out of this
Agreement or the Trust Agreement for the existence, furnishing, functioning or use of the Project.
SECTION 5.2. Release and Indemnification Covenants. The District agrees to indemnify
the Corporation, the Trustee and the Insurer, and their respective officers, agents, successors
and assigns, against all claims, losses and damages, including legal fees and expenses, arising
out of (a) the use, maintenance, condition or management of, or from any work or thing done on
or about the Sewer Enterprise by the District, (b) any breach or default on the part of the
District in the performance of any of its obligations under this Agreement or the Trust
Agreement, (c) any act or omission of the District or of any of its agents, contractors, servants,
employees or licensees with respect to the Sewer Enterprise, and (d) any act or omission of any
lessee of the District with respect to the Sewer Enterprise. No indemnification is made under
this Section 5.2 or elsewhere in this Agreement for willful misconduct or negligence under this
Agreement by the Corporation, the Trustee or the Insurer, or their respective officers, agents,
employees, successors or assigns. The provisions of this Section 5.2 shall survive the expiration
of the Term of this Agreement.
\.,
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SECTION 5.3. Sale or Eminent Domain of Sewer Enterprise. Except as provided herein,
the District covenants that the Sewer Enterprise shall not be encumbered, sold, leased, pledged,
any charge placed thereon, or otherwise disposed of, as a whole or substantially as a whole if
such encumbrance, sale, lease, pledge, charge or other disposition would materially impair the
ability of the District to pay the Installment Payments or the principal of or interest on any
Parity Debt, or would materially adversely affect its ability to comply with the terms of this
Agreement or any Parity Debt Documents. The District may not enter into any agreement which
impairs the operation of the Sewer Enterprise or any part of it necessary to secure adequate Net
Revenues to pay the Installment Payments or any Parity Debt, or which otherwise would impair
the rights of the Certificate Owners or the Trustee with respect to the Net Revenues. If any
substantial part of the Sewer Enterprise shall be sold, the payment therefor shall either (a) be
used for the acquisition or construction of improvements and extensions or replacement
facilities or (b) be applied on a pro rata basis to (i) prepay the Installment Payments on the
next available prepayment date under Section 7.3, and (ii) redeem any Parity Debt in
accordance with the related Parity Debt Documents.
Any amounts received as awards as a result of the taking of all or any part of the Sewer
Enterprise by the lawful exercise of eminent domain, if and to the extent that such right can be
exercised against such property of the District, shall either (a) be used for the acquisition or
construction of improvements and extension of the Sewer Enterprise, or (b) be applied on a pro
rata basis to (i) prepay the Installment Payments on the next available prepayment date under
Section 7.3, and (ii) redeem any Parity Debt in accordance with the related Parity Debt
Documents.
SECTION 5.4. Insurance. The District shall at all times maintain with responsible
insurers all such insurance on the Sewer Enterprise as is customarily maintained with respect to
works and properties of like character against accident to, loss of or damage to the Sewer
Enterprise. All amounts collected from insurance against accident to or destruction of any
portion of the Sewer Enterprise shall he used, at the option of the District, either (a) to repair or
rebuild such damaged or destroyed portion of the Sewer Enterprise, or (b) to prepay on a pro
rata basis (i) the Installment Payments on the next available prepayment date under Section
7.3, and (ii) any Parity Debt in accordance with the related Parity Debt Documents.
The District shall also maintain, with responsible insurers, worker's compensation
insurance and insurance against public liability and property damage to the extent reasonably
necessary to protect the District, the Corporation, the Trustee and the Owners of the
Certificates.
Any policy of insurance required under this Section 5.4 may be maintained as part of or
in conjunction with any other insurance coverage carried by the District, and may be maintained
in whole or in part in the form of self-insurance by the District or in the form of the
participation by the District in a joint powers agency or other program providing pooled
insurance.
SECTION 5.5. Records and Accounts. The District shall keep proper books of record and
. accounts of the Sewer Enterprise in which complete and correct entries shall be made of all
transactions relating to the Sewer Enterprise. Said books shall, upon prior request, be subject to
the reasonable inspection of the Owners of not less than 10% of the Outstanding Certificates, or
their representatives authorized in writing, upon not less than 2 Business Days' prior notice to
the District.
The District shall cause the books and accounts of the Sewer Enterprise to be audited
annually by an Independent Accountant not more than 9 months after the close of each Fiscal
Year, and shall make a copy of such report available for inspection by the Certificate Owners at
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the office of the District and at the Trust Office of the Trustee. Such report may be part of a
combined financial audit or report covering all or part of the District's finances.
SECTION 5.6. Rates and Charges. The District shall fix, prescribe, revise and collect
rates, fees and charges for the services and facilities furnished by the Sewer Enterprise during
each Fiscal Year, which are at least sufficient, when added to property taxes estimated to be
received by the District during such Fiscal Year, after making allowances for contingencies and
error in the estimates, to yield Gross Revenues sufficient to pay the following amounts in the
following order of priority:
(a) All Operation and Maintenance Costs estimated by the District to become
due and payable in such Fiscal Year;
(b) All Installment Payments and all payments of principal of and interest on
any Parity Debt as they become due and payable during such Fiscal Year,
without preference or priority;
(c) All amounts, if any, required to restore the balance in the Reserve Fund to
the full amount of the Reserve Requirement; and
(d) All payments, including but not limited to Additional Payments, required to meet
any other obligations of the District which are charges, liens, encumbrances upon,
or which are otherwise payable from, the Gross Revenues or the Net Revenues
during such Fiscal Year.
In addition, the District shall fix, prescribe, revise and collect rates, fees and charges for
the services and facilities furnished by the Sewer Enterprise during each Fiscal Year which are
sufficient to yield Net Revenues which are at least equal to 120% of the amount described in the
preceding clause (b) for such Fiscal Year.
SECTION 5.7. Superior and Subordinate Obligations. The District may not issue or incur
any additional bonds or other obligations during the Term of this Agreement having any priority
in payment of principal or interest out of the Gross Revenues or the Net Revenues over the
Installment Payments. Nothing herein is intended or shall he construed to limit or affect the
ability of the District to issue or incur (a) Parity Debt under Section 5.8, or (b) obligations which
are either unsecured or which are secured by an interest in the Net Revenues which is junior and
subordinate to the pledge of and lien upon the Net Revenues established hereunder.
SECTION 5.8. Issuance of Parity Debt. Except for obligations incurred to prepay or
discharge the Installment Payments or any Parity Debt, the District mat not issue or incur any
Parity Debt during the Term hereof unless:
(a) No Event of Default has occurred and is continuing;
(b) The Net Revenues, calculated in accordance with sound accounting
principles, as shown by the books of the District for the most recent
completed Fiscal Year for which audited financial statements of the
District are available, or for any more recent consecutive 12 month period
selected by the District, in either case verified by an Independent
Accountant or a Financial Consultant or shown in the audited financial
statements of the District, plus (at the option of the District) any
Additional Revenues, less any transfers made to the Sewer Enterprise Fund
from the Rate Stabilization Fund during such 12 month period, at least
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equal 120% of Maximum Annual Debt Service (taking into account the
Parity Debt then proposed to be issued); and
There shall be established from the proceeds of such Parity Debt a reserve
fund for the security of such Parity Debt (which may be funded with cash
or a surety bond), in an amount equal to the lesser of (i) the maximum
amount of debt service required to be paid by the District with respect to
such Parity Debt during any Fiscal Year, or (ii) the maximum amount then
permitted under the Tax Code.
SECTION 5.9. Operation of Sewer Enterprise in Efficient and Economical Manner. The
District covenants and agrees to operate the Sewer Enterprise in an efficient and economical
manner and to operate, maintain and preserve the Sewer Enterprise in good repair and working
order.
(c)
SECTION 5.10. Deposit of Property Taxes into the Sewer Fund. The District covenants to
deposit all property taxes received by the District into the Sewer Fund, and to apply such
property taxes to the payment of Maintenance and Operation Expenses as the same become
due and payable.
SECTION 5.11. Assignment and Amendment Hereof This Agreement may not be
assigned by the District in whole or in part. This Agreement may be amended by the District
and the Corporation, but only (a) for the purpose of providing for the issuance of any Parity
Debt under and in accordance with Section 5.8, or (b) otherwise under the circumstances and to
the extent permitted under Sections 8.01 or 8.02 of the Trust Agreement.
\.,
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. Events of Default Defined. The following events shall be Events of Default
hereunder:
\.,
(a) Failure by the District to pay any Installment Payment when due and
payable hereunder.
(b) Failure by the District to pay any Additional Payment when due and
payable hereunder, and the continuation of such failure for a period of 30
days.
(c) Failure by the District to observe and perform any covenant, condition or
agreement on its part to be observed or performed, other than as referred to
in the preceding clauses (a) or (b), for a period of 30 days after written
notice specifying such failure and requesting that it be remedied has been
given to the District by the Corporation, the Insurer or the Trustee; provided,
however, that if the District notifies the Corporation and the Trustee that in
its reasonable opinion the failure stated in the notice can be corrected, but
not within such 3D-day period, such failure shall not constitute an event of
default hereunder if the District commences to cure such failure within such
30 day period and thereafter diligently and in good faith cures the failure in
a reasonable period of time.
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(d) The filing by the District of a voluntary petition in bankruptcy, or failure by
the District promptly to lift any execution, garnishment or attachment, or
adjudication of the District as a bankrupt, or assignment by the District for
the benefit of creditors, or the entry by the District into an agreement of
composition with creditors, or the approval by a court of competent
jurisdiction of a petition applicable to the District in any' proceedings
instituted under the provisions of the Federal Bankruptcy Code, as
amended, or under any similar acts which may hereafter be enacted.
(e) The occurrence of any event defined to be an event of default under any
Parity Debt Documents.
For purposes of determining whether any Event of Default has occurred under and as
descnbed in the preceding clause (a), no effect shall be given to payments made by the Insurer
under the Certificate Insurance Policy.
SECTION 6.2. Remedies on Default. Whenever any Event of Default shall have
happened and be continuing, the Trustee as assignee of the Corporation shall have the right, at
its option and without any further demand or notice, to take anyone or more of the following
actions: .
(a) Declare all principal components of the unpaid Installment Payments,
together with accrued interest thereon at the Overdue Rate from the
immediately preceding Interest Payment Date on which payment was
made, to be immediately due and payable, whereupon the same shall
immediately become due and payable. Notwithstanding the foregoing
provisions of this subsection (a), however, if, at any time after the principal
components of the unpaid Installment Payments shall have been so
declared due and payable under this subsection (a), 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 principal components of the Installment Payments
coming due prior to such declaration and all matured interest components
(if any) of the Installment Payments, with interest on such overdue
principal and interest components calculated at the Overdue Rate, and the
reasonable expenses of the Trustee (including any fees and expenses of its
attorneys), and any and all other defaults known to the Trustee (other than
in the payment of the principal and interest components of the Installment
Payments due and payable solely by reason of such declaration) shall have
been made good, then, and in every such case, the Trustee shall 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 thereon. As
provided in Section 6.6, the Trustee shall be required to exercise the
remedies provided herein in accordance with the Trust Agreement.
(b) Take whatever action at law or in equity may appear necessary or desirable
to collect the Installment Payments then due or thereafter to become due
during the Term of this Agreement, or enforce performance and observance
of any obligation, agreement or covenant of the District under this
Agreement.
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(c) As a matter of right, in connection with the filing of a suit or other
commencement of judicial proceedings to enforce the rights of the Trustee
and the Certificate Owners hereunder, cause the appointment of a receiver
or receivers of the Gross Revenues and other amounts pledged hereunder,
with such powers as the court making such appointment may confer.
SECTION 6.3. No Remedy ExclUSive. No remedy herein conferred upon or reserved to
the Corporation is intended to be exclusive and every such remedy shall be cumulative and shall
be in addition to every other remedy given under this Agreement or now or hereafter existing at
law or in equity. No delay or omission to exercise any right or power accruing upon any default
shall impair any such right or power or shall be construed to be a waiver thereof, but any such
right and power may be exercised from time to time and as often as may be deemed expedient.
In order to entitle the Corporation to exercise any remedy reserved to it in this Article VI, it shall
not be necessary to give any notice, other than such notice as may be required in this Article VI
or by law.
SECTION 6.4. Agreement to Pay Attorneys' Fees and Expenses. In the event either party to
this Agreement should default under any of the provisions hereof and the nondefaulting party,
the Trustee or the Owner of any Certificates should employ attorneys or incur other expenses
for the collection of moneys or the enforcement or performance or observance of any obligation
or agreement on the part of the defaulting party herein contained, the defaulting party agrees
that it will on demand therefor pay to the nondefaulting party, the Trustee or such Owner, as
the case may be, the reasonable fees of such attorneys and such other expenses so incurred. The
provisions of this Section 6.4 shall survive the expiration of the Term of this Agreement.
SECTION 6.5. No Additional Waiver Implied by One Waiver. In the event any agreement
contained in this Agreement should be breached by either party and thereafter waived by the
other party, such waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach hereunder.
SECTION 6.6. Trustee, the Insurer and Certificate Owners to Exercise Rights. Such rights
and remedies as are given to the Corporation under this Article VI have been assigned by the
Corporation to the Trustee under the Trust Agreement, to which assignment the District hereby
consents. Such rights and remedies shall be exercised by the Trustee, the Insurer and the
Owners of the Certificates as provided in the Trust Agreement.
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ARTICLE VII
PREPAYMENT OF INSTALLMENT PAYMENTS
SECTION 7.1. Security Deposit. Notwithstanding any other provision hereof, the
District may on any date secure the payment of Installment Payments, in whole or in part, by
irrevocably depositing with the Trustee an amount of cash which, together with other available
amounts, is either (a) sufficient to pay all such Installment Payments, including the principal
and interest components thereof, when due under Section 4.4(a), or (b) invested in whole or in
part in non-callable Defeasance Securities in such amount as will, in the opinion of an
Independent Accountant (which opinion shall be addressed and delivered to the Trustee and
the Insurer), together with interest to accrue thereon and together with any cash which is so
deposited, be fully sufficient to pay all such Installment Payments when due under Section
4.4(a) or when due on any optional prepayment date under Section 7.2, as the District instructs
at the time of said deposit. In the event of a security deposit under this Section for the payment
of all remaining Installment Payments, all obligations of the District hereunder, and the pledge
of Net Revenues and all other security provided by this Agreement for said obligations, shall
cease and terminate, excepting only the obligation of the District to make, or cause to be made,
all Installment Payments from such security deposit. Said security deposit shall be deemed to
be and shall constitute a special fund for the payment of such Installment Payments in
accordance with the provisions hereof.
\..
Payments made by the Insurer under the Certificate Insurance Policy shall not be
considered in determining whether the District has paid and discharged any or all of the
Installment Payments under the preceding provisions of this Section 7.1.
\., SECTION 7.2. Optional Prepayment. The District may exercise its option to prepay the
principal components of the Installment Payments in whole or in part on any date on or after
June 1, 2012. Such option shall be exercised by payment of a prepayment price equal to the
sum of (a) the aggregaterrincipal components of the Installment Payments to be prepaid, (b)
the interest component 0 the Installment Payment required to be paid on or accrued to such
date, and (c) the premium (if any) then required to be paid upon the corresponding prepayment
of the Certificates under Section 4.01(a) of the Trust Agreement. Such prepayment price shall
be deposited by the Trustee in the Installment Payment Fund to be applied to the prepayment
of Certificates under Section 4.01(a) of the Trust Agreement. In the event of prepayment of the
Installment Payments in part but not in whole, the principal components shall be prepaid
among such maturities and in such integral multiples of $5,000 as the District designates in
written notice to the Trustee. The District shall give the Trustee and the Insurer written notice of
its intention to exercise its option not less than 60 days in advance of the date of exercise.
SECTION 7.3. Mandatory Prepayment From Proceeds of Insurance, Sale or Condemnation.
The District shall prepay the Installment Payments on any date, in whole, or in part among
maturities on a pro rata basis in any integral multiple of $5,000, from and to the extent of any
proceeds of insurance, sale or condemnation awards with respect to the Sewer Enterprise
theretofore paid to the Tnistee for such purpose under Sections 5.3 or 5.4. The District and the
Corporation hereby agree that such proceeds, to the extent remaining after payment of any
delinquent Installment Payments, shall be deposited in the Installment Payment Fund and
credited towards the District's obligations under this Section 7.3.
SECTION 7.4. Credit for Amounts on Deposit. In the event of prepayment of the
Installment Payments in full under tJ:ris Article Vll, such that the Trust Agreement shall be
discharged by its terms as a result of such prepayment, and upon payment in full of all
Additional Payments and other amounts then due and payable hereunder, all available
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amounts then on deposit in the funds and accounts established under the Trust Agreement shall
_ \., be credited towards the amounts then required to be so prepaid.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Further Assurances. The District agrees that it will execute and deliver
any and all such further agreements, instruments, financing statements or other assurances as
may be reasonably necessary or requested by the Corporation, the Insurer or the Trustee to carry
out the intention or to facilitate the performance of this Agreement, including, without
limitation, to perfect and continue the security interests herein intended to be created.
SECTION 8.2. Notices. Any notice, request, complaint, demand or other communication
under this Agreement shall be given by first class mail or personal delivery to the party entitled
thereto at its address set forth below, or by telecopier or other form of telecommunication, at its
number set forth below. Notice shall be effective either (a) upon transmission by fax or other
form of telecommunication, (b) upon actual receipt after deposit in the United States of
America mail, postage prepaid, or (c) in the case of personal delivery to any person, upon
actual receipt. The Corporation, the District, the Trustee or the Insurer may, by written notice
to the other parties, from time to time modify the address or number to which communications
are to be given hereunder.
\.;
If to the District
South Tahoe Public Utility District
1275 Meadow Crest Drive
South Lake Tahoe, CA 96150
Attention: Chief Financial Officer
Fax: (530) 541-4253
If to the Corporation:
Public Property Financing Corporation of California
23945 Calabasas Road, Suite 103
Calabasas, CA 91302
Attention: Secretary/Treasurer
Fax: (818) 224-4789
If to the Trustee:
BNY Western Trust Company
550- Kearny Street, Suite 600
San Francisco, CA 94108-2527
Attention: Corporate Trust
Fax: (415) 399-1647
If to the Insurer:
XL Capital Assurance Inc.
1221 Avenue of the Americas
New York, NY 10020
Fax: (212) 478-3587
SECTION 8.3. Governing Law. This Agreement shall be construed in. accordance with
and governed by the laws of the State of California.
\..;
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SECTION 8.4. Binding Effect. This Agreement shall inure to the benefit of and shall be
binding upon the Corporation, the District, the Insurer and their respective successors and
assigns, subject, however, to the limitations contained herein.
SECTION 8.5. Severability of Invalid Provisions. If anyone or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in
any respect, then such provision or provisions shall be deemed severable from the remaining
provisions contained in this Agreement and such invalidity, illegality or unenforceability shall
not affect any other provision of this Agreement, and this Agreement shall be construed as if
such invalid or illegal or unenforceable provision had never been contained herein. The
Corporation and the District each hereby declares that it would have entered into this
Agreement and each and every other Section, paragraph, sentence, clause or phrase hereof
irrespective of the fact that anyone or more Sections, paragraphs, sentences, clauses or phrases
of this Agreement may be held illegal, invalid or unenforceable.
SECTION 8.6. Article and Section Headings and References. The headings or titles of the
several Articles and Sections hereof, and any table of contents appended to copies hereof, shall
be solely for convenience of reference and shall not affect the meaning, construction or effect of
this Agreement. All references herein to "Articles," "Sections" and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Agreement; the words "herein,"
"hereof," "hereby," "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or subdivision hereof; and words of the
masculine gender shall mean and include words of the feminine and neuter genders.
SECTION 8.7. Payment on Non-Business Days. Whenever any payment is required to be
made hereunder on a day which is not a Business Day, such payment shall be made on the
immediate preceding Business Day.
SECTION 8.8. Execution of Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall for all purposes be deemed to be an original and all
of which shall together constitute but one and the same instrument.
SECTION 8.9. Waiver of Personal Liability. No member of the District Board of
Directors, officer, agent or employee of the District has any individual or personal liability for
the payment of Installment Payments or Additional Payments or be subject to any personal
liability or accountability by reason of this Agreement; but nothing herein contained shall relieve
any such member of the District Board of Directors, officer, agent or employee from the
performance of any official duty provided by law or by this Agreement.
SECTION 8.10. Trustee and the Insurer as Third Party Beneficiaries. The Trustee and the
Insurer are hereby made a third party beneficiaries hereof and shall be entitled to the benefits of
this Agreement with the same force and effect as if the Trustee and the Insurer were a party
hereto.
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IN WITNESS WHEREOF, the Corporation and the District have caused this Agreement
to be executed in their respective names by their duly authorized officers. all as of the date first
above written.
PUBLIC PROPERTY FINANCING
CORPORATION OF CALIFORNIA, as Seller
BY~./~
v Secretary lTreasure
SOUTH TAHOE PUBLIC UTILITY DISTRICT, as
Purchaser
By
President
ATTEST:
By:
Clerk of the Board
~
IN WITNESS WHEREOF, the Corporation and the District have caused this Agreement
to be executed in their respective names by their duly authorized officers, all as of the date first
above written.
ATTEST:
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BY~~~~
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PUBLIC PROPERTY FINANCING
CORPORATION OF CALIFORNIA, as Seller
By
Secretary /Treasurer
SOUTH TAHOE PUBLIC UTILITY DISTRICT, as
Purchaser
By
APPENDIX A
\., SCHEDULE OF INSTALLMENT PAYMENTS
Installment Payment Principal Interest Total
Date(1) Component Component Payment
12/01/04 $335,828.40 $ 335,828.40
06/01/05 $530,000 316,487.50 846,487.50
12/01/05 307,875.00 307,875.00
06/01/06 560,000 307,875.00 867,875.00
12/01/06 298,775.00 298,775.00
06/01/07 570,000 298,775.00 868,775.00
12/01/07 289,512.50 289,512.50
06/01/08 580,000 289,512.50 869,512.50
12/01/08 280,087.50 280,087.50
06/01/09 595,000 280,087.50 875,087.50
12/01/09 270,418.75 270,418.75
06/01/10 610,000 270,418.75 880,418.75
12/01/10 260,048.75 260,048.75
06/01/11 630,000 260,048.75 890,048.75
12/01/11 248,393.75 248,393.75
06/01/12 650,000 248,393.75 898,393.75
12/01/12 235,718.75 235,718.75
06/01/13 675,000 235,718.75 910,718.75
12/01/13 222,218.75 222,218.75
06/01/14 700,000 222,218.75 922,218.75
12/01/14 207,868.75 207,868.75
-. 06/01/15 730,000 207,868.75 937,868.75
12/01/15 192,356.25 192,356.25
06/01/16 760,000 192,356.25 952,356.25
12/01/16 175,731.25 175,731.25
06/01/17 790,000 175,731.25 965,731.25
12/01/17 157,956.25 157,956.25
06/01/18 825,000 157,956.25 982,956.25
12/01/18 138,981.25 138,981.25
06/01/19 860,000 138,981.25 998,981.25
12/01/19 118,771.25 118,771.25
06/01/20 900,000 118,771.25 1,018,771.25
12/01/20 97,396.25 97,396.25
06/01/21 940,000 97,396.25 1,037,396.25
12/01/21 75,071.25 75,071.25
06/01/22 985,000 75,071.25 1,060,071.25
12/01/22 51,431.25 51,431.25
06/01/23 1,030,000 51,431.25 1,081,431.25
12/01/23 26,325.00 26,325.00
06/01/24 1,080,000 26,325.00 1,106,325.00
(1) Installment Payment Dates are due the fifth (5th) Business Day immediately
preceding each Interest Payment Date shown in the table.
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APPENDIX B
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DESCRIPTION OF SEWER SYSTEM IMPROVEMENTS
The largest project that will be undertaken with the Sewer Revenue Certificates, Series
2004, is completion of the Export Pipeline within the Tahoe basin. The Export Pipeline is the
centerpiece of the District's Recycled Water System. The Export Pipeline is a 24 and 3Q..inch
pipeline that travels 26 miles from the wastewater treatment plant to the District owned
Harvey Place Dam in Alpine County. The original pipeline was laid in the late 1960s to comply
with State environmental law. Eight years ago, the District began replacing the aging leak prone
pipeline in phases. The final and most challenging phase, from an engineering perspective, will
begin in May 2004 and should be complete by late October 2004. This last 6,OOO-foot phase
traverses steep terrain, forestland and stream environment zones. The District worked
cooperatively with local, state and federal stakeholders to arrive at a new pipeline route that is
responsible to our customers, as well as sensitive to the environment. This project, when
complete, will have cost in excess of $37 million. The District's 17,400 customers are locally
funding more than 70% of these costs with the remainder of the funding from the Federal
government. In addition, other improvements to the Recycled Water System will include
improving the ditch systems that transport the recycled water from the Harvey Place Dam to
ranch land irrigation and completing a master-planning document for the system.
Adjacent to the Harvey Place Dam is Indian Creek Reservoir. The recreational reservoir
was formally used for storing tertiary treated recycled water. Now a fresh water reservoir, the
District is responsible for complying with State water quality requirements. Borrowing proceeds
will enable the District to improve aeration in the reservoir and create a riparian habitat to filter
nutrients in the reservoir.
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Improvements will also be made to the District's 7.7 mgd Wastewater Treatment Plant.
The District is in the process of completing an $11 million Bio-solids and Odor Control project.
The final 16% of the cost will come from the borrowing. This project converts the treatment
facility from sludge incineration to bio-solids composting reuse disposal. Improvements include
a new sludge tank, two new high-speed centrifuges, a three-stage chemical scrubber, a new
biosolids building and covers for the two primary clarifiers. Another significant Wastewater
Treatment Plant project is the hypochlorite conversion project. This project will eliminate the
use of chlorine in wastewater treatment process and replace it with the safer hypochlorite. This
project is a result of a Board of Directors' policy decision that the added capital costs and
maintenance and operating costs are worth the benefit of protecting the community from a
potential terrorist target.
Other anticipated improvements include additional security measures, upgrading sewer
pumping stations and collection lines, and preparing master planning documents to address
future sewer system needs.
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JH:WHM
Final
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TRUST AGREEMENT
Dated as of May 1, 2004
among
BNY WESTERN TRUST COMPANY,
as Trustee
PUBLIC PROPERTY FINANCING CORPORATION OF CALIFORNIA,
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and the
SOUTH TAHOE PUBLIC UTILITY DISTRICT
Relating to
$15,000,000
Sewer Revenue Certificates,
Series 2004 .
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Section 1.01.
Section 1.02.
Section 1.03.
Section 2.01.
Section 2.02.
Section 2.03.
Section 2.04.
Section 2.05.
Section 2.06.
Section 2.07.
Section 2.08.
Section 2.09.
Section.2.10.
Section 2.11.
Section 2.12.
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Section 3.01.
Section 3.02.
Section 3.03.
Section 3.04.
Section 4.01.
Section 4.02.
Section 4.03.
Section 4.04.
Section 4.05.
Section 4.06.
Section 5.01.
Section 5.02.
Section 5.03.
Section 5.04.
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Section 6.01.
Section 6.02.
Section 6.03.
TABLE OF CONTENTS
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ARTICLE I
Definitions
Definitions......................................................................................... .2
Authorization.. ......... ................ ......... ........... .............................. ........2
Interpretation.. ......... ....... ............. ........... ................................. ..........2
ARTICLE II
The Certificates of Participation
Authorization.. ...... .......... ...................................................................2
Date.............................................................................................. ......2
Terms of Certificates. ..... ................ ....................................................3
Fully Registered Form; Interest... ... .... ......... ... ... ..... ......... .............. ......3
Book Entry System.......................................... ............. ............ ..........3
Form. and Execution of Certificates ...................... ...................... .......5
Transfer and Exchange ......................... ........ ........ ................ .............5
Certificates Mutilated, Lost, Destroyed or Stolen ............................5
. Payment....... ......... ..................... ........... .............................................6
Execution of Documents and Proof of Ownership ...........................6
Registration Books. ........ ..... .................. ........................ .....................7
Payments Under the Policy...............................................................7
ARTICLE ill
Disposition of Proceeds; Project Fund
Costs of Issuance Fund and Reserve Fund
Application of Proceeds..... ........... ............. ........... ............... .............8
Costs of Issuance Fund........................ ..............................................9
Project Fund. .......... ........................................ ....................... .............9
Reserve Fund ......................................... .......... ...................................9
ARTICLE IV
Prepayment of Certificates
Prepayment............... ................ .........................................................10
Selection of Certificates for Prepayment...........................................l 0
Notice of Prepayment............ ............................................... ........ .....1 0
Partial Prepayment of Certificates....................................................l1
Effect of Notice of Prepayment.........................................................l1
Purchase of Certificates ................. ........ ............................. ...............11
ARTICLE V
Installment Payments; Installment Payment Fund
Assignment of Rights in Installment Sale Agreement ........................12
Establishment of Installment Payment Fund.....................................12
Application of Moneys.................. ................ ........................ ........... .12
Surplus.... ............. ......... ............................................. ........... ............ .12
ARTICLE VI
Moneys in Funds; Investment
Held in Trust............. ....... ..... .......... ....................................... ........... .13
Investments Authorized.......... ............. ........................................... ...13
Accounting...... ................ ............. .......... ........ ........................ ........... .13
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Section 6.04.
Section 6.05.
Section 7.01.
Section 7.02.
Section 7.03.
Section 7.04.
Section 7.05.
Section 7.06.
Section 7.07.
Section 7.08.
Section 7.09.
Section 7.10.
Section 7.11.
Section 7.12.
Section 7.13.
Section 8.01.
Section 8.02.
Section 8.03.
Section 8.04.
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Section 8.05.
Section 9.01.
Section 9.02.
Section 9.03.
Section 9.04.
Section 9.05.
Section 9.06.
Section 10.0l.
Section 10.02.
Section 10.03.
Section 10.04.
Section 10.05.
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Section 11.0t.
Section 11.02.
Section 11.03.
Section 11.04.
Section 11.05.
Section 11.06.
Section 11.07.
Allocation of Earnings. ........ ........ .......................................... ......... ...13
Valuation and Disposition of Investments........................................14
ARTICLE vn
The Trustee
Appointnlent of Trustee .............. ........ ........ ......................................15
Acceptance of Trusts. .......................................... .................. ............15
Fees, Charges and Expenses of Trustee.............................................18
Notice to Insurer and Certificate Owners of Default........................18
Removal of Trustee ................... ................... ........ ......... ............... ......19
Resignation by Trustee ................................. ........ ..............................19
Appointnlent of Successor Trustee.............. ......................................19
Merger or Consolidation .............................................. ....... .............. .19
Concerning any Successor Trustee .....................................................19
Non-Liability of Trustee.................. .................... ............................. .20
Nature of Trust Engagement........................ ..... .................................20
Insurer's Exercise of Rights Relating to the Trustee...........................20
Subrogation. ............. ............ .......................... ....... ....... .......... ...... ......20
ARTICLE VIII
Modification or Amendment of Agreements
Amendments Permitted Without Consent of Owners ......................20
Amendments Permitted Without Consent of Owners ......................21
Effect of Supplemental Agreement................................................ ....22
Endorsement or Replacement of Certificates Delivered After
Amendments..... ............ ................................................ ................... ..22
Amendatory Endorsement of Certificates.........................................22
ARTICLE IX
Other Covenants
Compliance With and Enforcement of Installment Sale Agreement .23
Observance of Laws and Regulations ...............................................23
Recordation and Filing ......... ......... ................ ................ .....................23
Tax Covenants.............. ................ ................ .................................... .23
Continuing Disclosure ................... ........ ........ ................ .....................24
Furth.er Assurances........................................................................... .24
ARTICLE X
Limitation of Liability
Limited Liability of District and Corporation ..................................24
No Liability for Trustee Performance................................................24
Indemnification of Corporation and Trustee.....................................24
Opinion of Counsel....... .....................................................................25
Limitation of Rights to Parties and Certificate Owners....................25
ARTICLE XI
Events of Default and Remedies of Certificate Owners
Assignment of Rights..... .................................................................. ..26
Remedies............ ............. .............. ...... .......... ........ .... ..................... ....2 6
Application of Funds. ...... ........... ........................... ........ ....................26
Institution of Legal Proceedings............. ............................................26
Non-waiver.... ................................... .................................................27
Remedies Not Exclusive..... ....... .......... .......... .................... .................27
Power of Trustee to Control Proceedings..........................................27
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Section 11.08.
Section 11.09.
Section 12.0l.
Section 12.02.
Section 12.03.
Section 12.04.
Section 12.05.
Section 12.06.
Section 12.07.
Section 12.08.
Section 12.09.
Section 12.10.
Section 12.11.
Section 12.12.
Section 12.13.
Section 12.14.
APPENDIX A
APPENDIX B
Limitation on Certificate Owners' Right to Sue.................................27
Rights of Insurer .................................................................................2 8
ARTICLE XII
Miscellaneous
Discharge of this Trust Agreement ............. .................. ........ .............28
Notices........................... ...................................... ..............................29
Records. .......................................... ....................................................30
Disqualified Certificates. ................... ................................................30
Payment of Certificates After Discharge.......................................... .30
Governing Law........................................ ........................ .......... .........30
Binding Effect; Successors; Benefits Limited to Parties....................30
Third-Party Beneficiary............................ ........................................ .31
Execution in Counterparts ............................................ ............... ......31
Delivery of Cancelled Certificates ....................... ........................ ......31
Corporation and District Representatives ........................................31
Headings ........... .................................... ............. ................. .............. .31
Waiver of Notice ........................... .................................................... .31
Severability of Invalid Provisions ................................................ ......31
Definitions
Form of Certificate of Participation
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TRUST AGREEMENT
This TRUST AGREEMENT, made and entered into as of May 1, 2004, is among BNY
WESTERN TRUST COMPANY, a banking corporation organized and existing under the laws of
the State of California, as trustee (the "Trustee"), the PUBUC PROPERTY FINANCING
CORPORATION OF CALIFORNIA, a nonprofit public benefit corporation organized and
existing under the laws of the State of California (the "Corporation"), and the SOUTH TAHOE
PUBUC UTILITY DISTRICT, a public utility district du1y organized and existing under and by
virtue of the laws of the State of California (the "District").
BACKGROUND:
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1. The District presently owns and operates facilities and yroperty for the collection,
treatment and disposal of wastewater within the service area 0 the District (the "Sewer
Enterprise"), and the District wishes to provide funds at this time for the purpose of financing
the costs of acquiring and constructing various improvements to the Sewer Enterprise, more
particularly described in Exhibit B to the Installment Sale Agreement (the "Sewer System
Improvements"). .
2. The Corporation has been formed for the purpose of assisting public agencies such
as the District in the financing of facilities and property useful to such. agencies, and the
Corporation has proposed to enter into this Agreement with the District under which the
Corporation has agreed to acquire and constmct the Sewer System Improvements and sell the
Sewer System Improvements back to the District in consideration of the agreement by the
District to pay the purchase price of the Sewer System Improvements in semiannual
installments (the "Installment Payments").
3. For the purpose of obtaining the moneys required to finance the Sewer System
Improvements in accordance with the terms hereof and of the Installment Sale Agreement, the
Corporation wishes to assign and transfer certain of its rights under the Installment Sale
Agreement to the Trustee, and at the written direction of the Corporation the Trustee will
execute and deliver Sewer Revenue Certificates, Series 2004 in the aggregate principal amount of
$15,000,000, evidencing direct, undivided fractional interests in the Installment Payments.
AGREEMENT:
In consideration of the foregoing and the material covenants hereinafter contained, the
District, the Corporation and the Trustee formally covenant, agree and bind themselves as
follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Unless the context clearly otherwise requires or unless
otherwise defined herein, the capitalized terms defined in Appendix A attached to this Trust
Agreement have the respective meanings specified in that Appendix when used in this Trust
Agreement.
SECTION 1.02. Authorization. Each of the parties hereby represents and warrants that
it has full legal authority and is duly empowered to enter into this Trust Agreement, and has
taken all actions necessary to authorize the execution hereof by the officers and persons signing
it.
SECTION 1.03. Interpretation.
. (a) Unless the context otherwise indicates, words expressed in the singular shall
include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for
convenience only and shall be deemed to include the neuter, masculine or feminine gender, as
appropriate.
(b) Headings of articles and sections herein and the table of contents hereof are solely
for convenience of reference, do not constitute a part hereof and shall not affect the meaning,
construction or effect hereof.
(c) All references herein to "Articles," "Sections" and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Trust Agreement; the words "herein,"
"hereof," "hereby," "hereunder" and other words of similar import refer to this Trust
Agreement as a whole and not to any particular Article, Section or subdivision hereof.
ARTICLE II
THE CERTIFICATES OF PARTICIPATION
SECTION 2.01. Authorization. The Trustee is hereby authorized and directed upon
written request from the Corporation to regi$ter, execute and deliver, to the Original Purchaser,
Certificates in an aggregate principal amount of $15,000,000, which represent the direct,
undivided fractional ownership interests of the Owners thereof in the Installment Payments.
SECTION 2.02. Date. Each Certificate shall be dated as of the Closing Date. Interest
represented by a: Certificate is payable from the Interest Payment Date next preceding the date
of execution thereof, unless:
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(a) it is executed after a Record Date and on or before the following Interest
Payment Date, in which event interest represented thereby is payable from
such Interest Payment Date; or
(b) it is executed on or before the first Record Date, in which event interest
represented thereby is payable from the Closing Date; or
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(c) interest represented by such Certificate is in default as of the date of its
execution, in which event interest represented thereby is payable from the
Interest Payment Date to which interest represented thereby has previously
been paid or made available for payment.
SECTION 2.03. Terms of Certificates. Principal represented by the Certificates is payable
on June 1 in each of the respective years and in the respective amounts, and interest represented
thereby will be computed at the respective rates, as follows:
Maturity Date Principal Interest Maturity Date Principal Interest
(June I) Amount R,lte (June 1) Amollnt Rate
2005 $530,000.00
2006 560,000.00
2007 570,000.00
2008 580,000.00
2009 595,000.00
2010 610,000.00
2011 630,000.00
2012 650,000.00
2013 675,000.00
2014 700,000.00
3.250% 2015 $ 730,000.00 4.250%
3.250% 2016 760,000.00 4.375%
3.250% 2017 790,000.00 4.500%
3.250% 2018 825,000.00 4.600%
3.250% 2019 860,000.00 4.700%
3.400% 2020 900,000.00 4.750%
3.700% 2021 940,000.00 4.750%
3.900% 2022 985,000.00 4.800%
4.000% 2023 1,030,000.00 4.875%
4.100% 2024 1,080,000.00 4.875%
SECTION 2.04. Fully Registered Form; Interest. The Certificates shall be delivered in the
form of fully registered Certificates without coupons in the authorized denominations of $5,000
or any integral multiple thereof, except that no Certificate shall represent principal payable in
more than one year. The Certificates shall be assigned such alphabetical and numerical
designation as shall be deemed appropriate by the Trustee.
Interest represented by the Certificates is payable on each Interest Payment Date to and
including the date of maturity or prepayment, whichever is earlier, as provided in Section 2.09.
Said interest shall represent the portion of Installment Payments designated as interest and
coming due on each of the respective Interest Payment Dates. The share of the portion of
Installment Payments designated as interest with respect to any Certificate shall be computed
by multiplying the portion of Installment Payments designated as principal represented by such
Certificate by the rate of interest represented by such Certificate (on the basis of a 360-day year
of twelve 30-day months).
SECTION 2.05. Book Entry System. .
(a) Original Delivery. The Certificates shall be initially delivered in the form of a
separate single fully registered Certificate (which may be typewritten) for each maturity of the
Certificates. Upon initial delivery, the ownership of each such Certificate shall be registered on
the Registration Books in the name of the Nominee. Except as provided in subsection (c), the
ownership of all of the Outstanding Certificates shall be registered in the name of the Nominee
on the Registration Books.
With respect to Certificates 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 Certificates. 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
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Participant with respect to any ownership interest in the Certificates, (ii) the delivery to any
Depository System Participant or any other person, other than a Certificate Owner as shown in
the Registration Books, of any notice with respect to the Certificates, including any notice of
prepayment, (ill) the selection by the Depository of the beneficial interests in the Certificates to
be redeemed in the event the District elects to redeem the Certificates in part, (iv) the payment
to any Depository System Participant or any other person, other than a Certificate Owner as
shown in the Registration Books, of any amount with respect to principal, premium, if any, or
interest represented by the Certificates or (v) any consent given or other action taken by the
Depository as Owner of the Certificates. The District and the Trustee may treat and consider
the person in whose name each Certificate is registered as the absolute owner of such Certificate
for the purpose of payment of principal, premium, if any, and interest represented by such
Certificate, for the purpose of giving notices of prepayment and other matters with respect to
such Certificate, for the purpose of registering transfers of ownership of such Certificate, and
for all other purposes whatsoever. The Trustee shall pay the principal, interest and premium, if
any, represented by the Certificates 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 Certificates to the extent of the sum or sums so paid. No person other than
a Certificate Owner shall receive a Certificate evidencing the obligation of the District to make
payments of pri,ncipal, interest and premium, if any, under this Trust Agreement. Upon
delivery by the Depository to the Nominee of written notice to the effect that the Depository
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 Certificates for the Depository's
book-entry system, the District and the Trustee shall execute and deliver to such Depository a
letter representing such matters as shall be necessary to so qualify the Certificates. 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 Certificates other than the Certificate Owners.
Upon the written acceptance by the Trustee, the Trustee shall agree to take all action reasonably
necessary for all representations of the District 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 Agreement, to qualify the
Certificates 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 Certificates, 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 issuance of replacement Certificates by providing the
Trustee with a list showing the interests of the Depository System Participants in the
Certificates, and by surrendering the Certificates, registered in the name of the Nominee, to the
Trustee on or before the date such replacement Certificates are to be issued. The Depository, by
accepting delivery of the Certificates, 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 Certificates 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 Certificates 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 Certificates. that they be able to obtain certificated Certificates, the District may notify
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the Depository System Participants of the availability of such certificated Certificates through
the Depository. In such event, the Trustee will execute, transfer and exchange Certificates 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 Certificates to any
Depository System Participant having Certificates credited to its account with the Depository,
or (z) to arrange for another Securities Depository to maintain custody of a single certificate
evidencing such Certificates, all at the District's expense.
(d) Payments to the Nominee. Notwithstanding any other provision of this Trust
Agreement to the contrary, so long as any Certificate is registered in the name of the Nominee,
all payments with respect to principal, interest and premium., if any, represented by such
Certificate and all notices with respect to such Certificate 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.
SECTION 2.06. Form and Execution of Certificates. The Certificates shall be substantially
in the form set forth in Appendix A attached hereto and by this reference incorporated herein.
The Certificates shall be executed by and in the name of the Trustee by the manual signature of
an authorized signatory of the Trustee. If any person whose signature appears on any
Certificate ceases to be an authorized signatory before the date of delivery of said Certificate,
such signature shall nevertheless be as effective as if such person had remained an authorized
signatory until such date.
SECTION 2.07. Transfer and Exchange.
(a) Transfer of Certificates. The registration of any Certificate may, in accordance with
its terms, be transferred upon the Registration Books by the person in whose name it is
registered, in person or by a duly authorized attorney, upon surrender of such Certificate for
cancellation at the Trust Office of the Trustee, accompanied by delivery of a written instrument
of transfer in a form acceptable to the Trustee, duly executed. Whenever any Certificate or
Certificates shall be surrendered for registration of transfer, the Trustee shall execute and
deliver a new Certificate or Certificates representing the same maturity, interest rate and
aggregate principal amount, in any authorized denominations. The District shall pay all costs
of the Trustee incurred in connection with any such transfer, except that the Trustee may require
the payment by the Certificate Owner of any tax or other governmental charge required to be
paid with respect to such transfer.
(b) Exchange of Certificates. Certificates may be exchanged at the Trust Office of the
Trustee, for a like aggregate principal amount of Certificates representing other authorized
denominations of the same interest rate and maturity. The District shall pay all costs of the
Trustee incurred in connection with any such exchange, except that the Trustee may require the
payment by the Certificate Owner requesting such exchange of any tax or other governmental
charge required to be paid with respect to such exchange.
(c) Limitations on Transfer or Exchange. The Trustee may refuse to transfer or
exchange either (i) any Certificate during the period established by the Trustee for the selection
of Certificates for prepayment, or (ii) the portion of any Certificate which the Trustee has
selected for prepayment under the provisions of Section 4.02.
. SECTION 2.08. Certificates Mutilated, Lost., Destroyed or Stolen. If any Certificate shall
l become mutilated, the Trustee, at the expense of the Owner of such Certificate, shall execute
..., and deliver a new Certificate of like principal amount, interest rate and maturity in replacement
for the Certificate so mutilated, but only upon surrender to the Trustee of the Certificate so
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mutilated. Every mutilated Certificate so surrendered to the Trustee shall be cancelled by it and
destroyed by the Trustee, who shall, upon request of the District, deliver a certificate of
destruction to the District. If any Certificate shall be lost, destroyed or stolen, evidence of such
loss, destruction or theft must be submitted to the Trustee, and, if such evidence is satisfactory
to the Trustee and, if an indemnity satisfactory to the Trustee shall be given, the Trustee, at the
expense of the Certificate Owner, shall execute and deliver a new Certificate of like principal
amount, interest rate and maturity and numbered as the Trustee shall determine in lieu of and in
replacement for the Certificate so lost, destroyed or stolen. The Trustee may require payment of
an appropriate fee for each replacement Certificate delivered under this Section 2.08 and of the
expenses which may be incurred by the Trustee in carrying out the duties under this Section
2.08. Any Certificate issued under the provisions of this Section 2.08 in lieu of any Certificate
alleged to be lost, destroyed or stolen shall be equally entitled to the benefits of this Trust
Agreement with all other Certificates secured by this Trust Agreement. The Trustee shall not be
required to treat both the original Certificate and any replacement Certificate as being
Outstanding for the purpose of determining the principal amount of Certificates which may be
executed and delivered hereunder or for the purpose of determining any percentage of
Certificates Outstanding hereunder, but both the original and replacement Certificate shall be
treated as one and the same. Notwithstanding any other provision of this Section 2.08, in lieu
of delivering a replacement for a Certificate which has been mutilated, lost, destroyed or stolen,
and which has ~tured, the Trustee may make payment with respect to such Certificate upon
receipt of indemnity satisfactory to the Trustee and the District.
SECTION 2.09. Payment. Payment of interest represented by any Certificate on any
Interest Payment Date shall be made to the person appearing on the Registration Books as the
Owner thereof as of the close of business on the Record Date immediately preceding such
Interest Payment Date, such interest to be paid by check mailed to such Owner, by first class
mail postage prepaid, at such Owner's address as it appears on the Registration Books;
provided, however, that at the written request of the Owner of Certificates in an aggregate
principal amount of at least $1,000,000, which written request shall be on file with the Trustee
as of the Record Date preceding any Interest Payment Date, interest represented by such
Certificates coming due and payable on such Interest Payment Date shall be paid by wire
transfer in immediately available funds to such account in the United States as shall be
specified in such written request. The principal and prepayment price represented by any
Certificate at maturity or upon prior prepayment is payable in lawful money of the United
States of America upon surrender of such Certificate at the Trust Office of the Trustee.
SECTION 2.10. Execution of Documents and Proof of Ownership. Any request, direction,
consent, revocation of consent, or other instrument in writing required or permitted by this Trust
Agreementto be signed or executed by Certificate Owners may be in any number of concurrent
instruments of similar tenor, and may be signed or executed by such Owners in person or by
their attorneys or agents appointed by an instrument in writing for that purpose, or by any
bank, trust company or other depository for such Certificates. Proof of the execution of any
such instrument, or of any instrument appointing any such attorney or agent, and of the
ownership of Certificates shall be sufficient for any purpose of this Trust Agreement (except as
otherwise herein provided), if made in the following manner:
(a) The fact and date of the execution by any Owner, attorney or agent of any such
instrument and of any instrument appointing any such attorney or agent, may be proved by a
certificate, which need not be acknowledged or verified, of an officer of any bank or trust
company located within the United States of America, or of any notary public, or other officer
authorized to take acknowledgments of deeds to be recorded in such jurisdictions, that the
persons signing such instruments acknowledged before him the execution thereof. Where any
such instrument is executed by an officer of a corporation or association or a member of a
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partnership on behalf of such corporation, association or partnership, such certificate shall also
'-' constitute sufficient proof of authority.
(b) The fact of the ownership of Certificates by any person and the amount, the
maturity and the numbers of such Certificates and the date of holding the same shall be proved
by the Registration Books. .
Nothing contained in this Section 2.10 limits the Trustee to such proof, it being intended
that the Trustee may accept any other evidence of the matters herein stated which the Trustee
may deem sufficient. Any request or consent of the Owner of any Certificate binds every future
Owner of the same Certificate in respect of anything done or suffered to be done by the Trustee
under such request or consent.
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SECTION 2.11. Registration Books. The Trustee shall keep or cause to be kept sufficient
records for the registration and registration of transfer of the Certificates, which shall at all
reasonable times upon prior notice be open to inspection by the District, the Corporation and
Insurer during regular business hours; 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 the Registration Books, Certificates as hereinbefore provided.
SECTION '2.12. Payments Under the Policy. If, on the third Business Day prior to the
related scheduled interest payment date or principal payment date ("Payment Date"), there is
not on deposit with the Trustee under the Trust Agreement, after making all transfers and
deposits required under the Trust Agreement, moneys sufficient to pay the principal of, and
interest on, Certificates due on such Payment Date, the Trustee shall give notice to the Insurer
and to its designated agent (if any) (the "Insurer's Fiscal Agent"), by telephone or telecopy, of
the amount of such deficiency by 10:00 a.m., New York City time, on such Business Day. If, on
the Business Day prior to the related Payment Date, there is not on deposit with the Trustee
moneys sufficient to pay the principal of, and interest on, the Certificates due on such Payment
Date, the Trustee shall make a claim under the Insurance Policy and give notice to the Insurer
and the Insurer's Fiscal Agent (if any) by telephone of the amount of any deficiency in the
amount available to pay principal and interest, and the allocation of such deficiency between
the amount required to pay interest on the Certificates and the amount required to pay
principal of the Certificates, confirmed in writing to the related Insurer and the Insurer's Fiscal
Agent by 10:00 a.m., New York City time, on such Business Day, by delivering the Notice of
Nonpayment and Certificate.
For the purposes of the preceding paragraph, "Notice" means telephonic or telecopied
notice, subsequently confirmed in a signed writing, or written notice by registered or certified
mail, from the Trustee to the Insurer, which notice shall specify (a) the name of the entity
making the claim, (b) the policy number, (c) the claimed amount and (d) the date such claimed
amount will become Due for Payment. "Nonpayment" means the failure of the District to have
provided sufficient funds to the Trustee for payment in full of all principal of, and interest on,
the Insurer Certificates that are Due for Payment. "Due for Payment", when referring to the
principal of Insured Certificates, means when the stated maturity date or mandatory .
redemption date for the application of a required sinking fund installment has been reached and
does not refer to any earlier date on which payment is due by reason of call for redemption
(other than by application of required sinking fund installments, acceleration or other
advancement of maturity, unless the Insurer shall elect, in its sole discretion, to pay such
principal due upon such acceleration; and when referring to interest on Certificates, means when
the stated date for payment of interest has been reached. "Certificate" means a certificate in
form and substance satisfactory to the Insurer as to the Trustee's right to receive payment under
the Certificate Insurance Policy.
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The Trustee shall designate any portion of payment of principal on Certificates paid by
the Insurer at maturity on its books as a reduction in the principal amount of Certificates
registered to the then current Certificateholder, whether DTC or its nominee or otherwise, and
shall issue a replacement Insured Certificate to the Insurer, registered in the name of the Insurer,
as the case may be, in a principal amount equal to the amount of principal so paid (without
regard to authorized denominations); provided that the Trustee's failure to so designate any
payment or issue any replacement Insured Certificate shall have no effect on the amount of
principal or interest payable by the District on any Insured Bond or the subrogation rights of the
Insurer.
The Trustee shall keep a complete and accurate record of all funds deposited by the
Insurer into the Policy Payments Account (as hereinafter defined) and the allocation of such
funds to payment of interest on and principal paid with respect to any Insured Certificate. The
Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to
the Trustee.
Upon payment of a claim under the Certificate Insurance Policy, the Trustee shall
establish a separate special purpose trust account for the benefit of holders of Certificates
referred to herein as the "Policy Payments Account" and over which the Trustee shall have
exclusive control and sole right of withdrawal. The Trustee shall receive any amount paid
under Insurance Policy in trust on behalf of holders of Certificates and shall deposit any such
amount in the Policy Payments Account and distribute such amount only for purposes of
making the payments for which a claim was made. Such amounts shall be disbursed by the
Trustee to holders of Certificates in the same manner as principal and interest payments are to
be made with respect to the Certificates under the sections hereof regarding payment of
Certificates. It shall not be necessary for such payments to be made by checks or wire transfers
separate from the check or wire transfer used to pay debt service with other funds available to
make such payments.
Funds held in the Policy Payments Account shall not be invested by the Trustee and
may not be applied to satisfy any costs, expenses or liabilities of the Trustee.
Any funds remaining in the Policy Payments Account following an Insured Bond
payment date shall promptly be remitted to the Insurer.
ARTICLE III
DISPOSITION OF PROCEEDS; PROJECT FUND;
COSTS OF ISSUANCE FuND AND RESERVE FUND
SECTION 3.01. Application of Proceeas. At the direction of the District, which is hereby
given to the Trustee, the Trustee shall deposit the proceeds received from the sale of the
Certificates to the Original Purchaser on the Closing Date as follows:
(a) The Trustee will deposit the Reserve Account Credit Instrument in the
Reserve Fund.
(b) The Trustee will deposit the amount of $130,085.44 in the Costs of
Issuance Fund.
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(c) The Trustee will deposit the amount of $14,635,000, constituting the
remainder of such proceeds, in the Project Fund. Including the $75,000.00
good faith deposit received by the District upon the sale of the Certificates
and transferred to the Trustee on or before the Oosing Date, the balance in
the Project Fund on the Closing Date will equal $14,710,000.
SECTION 3.02. Costs of Issuance Fund. The Trustee shall establish and maintain a
special fund designated as the "Costs of Issuance Fund" to be held by the Trustee in trust for
the benefit of the District and the Owners of the Certificates, and applied solely as provided
herein. The Trustee shall disburse amounts in the Costs of Issuance Fund to pay Costs of
Issuance from time to time upon the receipt of a written requisition of the District which states
(i) the amounts to be disbursed for payment or reimbursement of Costs of Issuance, (ii) the
name and address of the person or persons to whom said amounts are to be disbursed, and (ill)
that all amounts to be disbursed are for Costs of Issuance properly chargeable to the Costs of
Issuance Fund. The Trustee shall withdraw any funds remaining in the Costs of Issuance Fund
on September 1, 2004, and transfer those funds to the Project Fund.
SECTION 3.03. Project Fund. The Trustee shall establish and maintain a separate fund
to be known as the "Project Fund". Except as otherwise provided herein, moneys in the Project
Fund shall be U&ed solely for the payment of the Project Costs. The Trustee shall disburse
moneys in the Project Fund from time to time to pay Project Costs (or to reimburse the District
for payment of Project Costs) in accordance with written requisitions filed by the District with
the Trustee. Each such written requisition shall be signed by a District Representative and shall
state, with respect to each payment to be made thereby, (i) the naine of the firm or corporation
to whom such payment is to be made, (ii) the amount and purpose of such payment and (ill)
that such constitutes payment of a Project Cost. In any case, all invoices and Project Costs will
be available for review by interested parties in accordance with California public records law.
The Trustee has no responsibility for payments made in accordance with this Section 3.03. The
District shall maintain accurate records showing all disbursements from the Project Fund.
Upon the receipt by the Trustee of a written certificate of a District Representative
under Section 3.6 of the Installment Sale Agreement, stating that the Sewer System
Improvements has been substantially completed, the Trustee shall withdraw from the Project
Fund and deposit in the Installment Payment Fund all amounts remaining on deposit in the
Project Fund, other than amounts estimated by the District (as identified in such written
certificate) to be required to pay future Project Costs. Upon the filing with the Trustee of a
written certificate of the District stating that no further amounts are intended to be
requisitioned from the Project Fund, the Trustee shall thereupon close the Project Fund and
transfer all remaining amounts therein to the- Installment Payment Fund. If and to the extent so
directed in writing by a District Representative, the Trustee shall apply all or a portion of the
amounts so transferred from the Project Fund to the Installment Payment Fund to the
prepayment of Installment Payments under Section 7.2 of the Installment Sale Agreement and
the corresponding redemption of the Certificates under Sections 4.01(a).
SECTION 3.04. Reserve Fund. The Trustee shall establish and maintain a special fund
designated as the "Reserve Fund", to be held by the Trustee in trust for the benefit of the
District and the Owners of the Certificates. The Trustee shall deposit the Qualified Reserve
Fund Credit Instrument in the Reserve Fund on the Closing Date. The Qualified Reserve Fund
Credit Instrument shall be held in trust as a reserve for the payment when due of the Installment
Payments on behaH of the District. If on any Interest Payment Date the moneys available in the
Installment Payment Fund are not at least equal to the amount of the Installment Payment then
coming due and payable, the Trustee shall draw on the Qualified Reserve Fund Credit
Instrument in accordance with its terms and apply the moneys resulting from such draw to
make such payments on behaH of the District by transferring the amount necessary for this
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purpose to the Installment Payment Fund. Any deficiency in Installment Payments which are
paid from a claim on the Qualified Reserve Fund Credit Instrument and thereafter deposited
with the Trustee by the District will be paid to the Insurer as a reimbursement for the draw on
the Qualified Reserve Fund Credit Instrument.
ARTICLE IV
PREPAYMENT OF CERTIFICATES
SECTION 4.01. Prepayment.
(a) Optional Prepayment. The Certificates maturing on or before June 1, 2012, are not
subject to optional prepayment prior to the respective stated maturities. The Certificates
maturing on or after June 1, 2013, are subject to optional prepayment in whole on any date on
or after June 11 20121 or in partl from prepayments of the Installment Payments made at the
option of the District under Section 7.2 of the Installment Sale Agreement. Certificates shall be
subject to prepayment under this subsection at a prepayment price (expressed as percentages
of the principal amount of Certificates or portions thereof to be prepaid) set forth in the
following table, in each case with accrued interest represented thereby to the prepayment date:
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Prepayment
Dates
June 1, 2012 through May 311 2013
June 1, 2013 and thereafter
Prepayment
Price
101%
100
In the event of the prepayment of Certificates in part but not in wholel the Certificates
shall be selected for prepayment among maturities on such basis as the District designates in
written notice to the Trustee, and by lot within a maturity.
(b) Prepayment From Net Proceeds of Insurance. Sale and Condemnation. The
Certificates are subject to mandatory prepayment, on any date, in whole, or in part on a pro
rata basis among maturitiesl from the net proceeds of insurance, sale or condemnation credited
towards the prepayment of the Installment Payments by the District under Section 7.3 of the
Installment Sale Agreement. Certificates shall be subject to prepayment under this subsection at
a prepayment price equal to the principal amount represented thereby to be prepaid, without
premium, together with accrued interest represented thereby to the prepayment date.
SECTION 4.02. Selection of Certificates for Prepayment. Whenever provision is made
herein for the prepayment of Certificates and less than all Outstanding Certificates of any one
maturity are called for prepayment, the Trustee shall select Certificates for prepayment within
such maturity by lot in any manner deemed fair by the Trustee. For the purposes of such
selection, Certificates shall be deemed to be composed of $5,000 portionsl and any such portion
may be separately prepaid. The Trustee shall promptly notify the District and the Corporation
in writing of the Certificates or portions thereof so selected for prepayment. The selection by
the Trustee of any Certificates for prepayment shall be final and conclusive.
.. SECTION 4.03. Notice of Prepayment. When prepayment is authorized or required under
.' .., Section 4.01, the Trustee shall give notice of the prepayment of the Certificates on behalf and at
the expense of the District. Such notice shall state the prepayment date and prepayment price
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and, if less than all of the then Outstanding Certificates of any maturity are to be called for
prepayment, shall designate the numbers of the Certificates to be prepaid by giving the
individual number of each Certificate or by stating that all Certificates between two stated
numbers, both inclusive, have been called for prepayment or by stating that all of the
Certificates of one or more maturities have been called for prepayment, and shall require that
such Certificates be surrendered on the designated prepayment date at the Trust Office of the
Trustee for prepayment at said prepayment price, giving notice also that further interest
represented by the Certificates will not accrue from and after the prepayment date. Such notice
shall further state that on the specified date there shall become due and payable upon each
Certificate, the principal and premium, if any, together with interest accrued to said date, and
that from and after such date interest with respect thereto shall cease to accrue and be payable.
Notice of such prepayment shall be mailed by first class mail with postage prepaid, to
(a) one or more of the Information Services, (b) Insurer, and (c) the Owners of Certificates
designated for prepayment at their respective addresses appearing on the Registration Books.
Such notice shall be mailed at least 30 days but not more than 60 days prior to the prepayment
date. In addition, notice of prepayment shall be given by telecopy or certified, registered or
overnight mail to each of the Securities Depositories at least 2 days prior to such mailing to the
Certificate Owners. Such notice shall, in addition to setting forth the above information, set
forth, in the case pf each Certificate called only in part, the portion of the principal represented
thereby which is to be prepaid; provided, however, that neither failure to receive such notice so
mailed nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for
the prepayment of such Certificates or the cessation of accrual of interest represented thereby
from and after the date fixed for prepayment.
SECTION 4.04. Partial Prepayment of Certificates. Upon surrender of any Certificate
prepaid in part only, the Trustee shall execute and deliver to the Owner thereof, at the expense
of the District, a new Certificate or Certificates of authorized denominations equal in aggregate
principal amount to the unprepaid portion of the Certificate surrendered and of the same
interest rate and the same maturity.
SECTION 4.05. Effect of Notice of Prepayment. Moneys for the prepayment (including the
interest to the applicable date of prepayment) of Certificates having been set aside in the
Installment Payment Fund, the Certificates shall become due and payable on the date of such
prepayment, and, upon presentation and surrender thereof at the Trust Office of the Trustee,
said Certificates shall be paid at the unpaid principal amount (or applicable portion thereof)
represented thereby plus any applicable premium and plus interest accrued and unpaid to said
date of prepayment.
If, on said date of prepayment, moneys for the prepayment of all the Certificates to be
prepaid, together with interest represented thereby to said date of prepayment, shall be held by
the Trustee so as to be available therefor on such date of prepayment, then, from and after said
date of prepayment, interest represented by the Certificates shall cease to accrue and become
payable. All moneys held by the Trustee for the prepayment of Certificates shall be held in
trust for the account of the Owners of the Certificates so to be prepaid, and shall be held by the
Trustee in trust uninvested.
All Certificates paid at maturity or prepaid prior to maturity under the provisions of
this Article N shall be cancelled upon surrender thereof and destroyed under Section 12.10.
SECTION 4.06. Purchase of Certificates. In lieu of prepayment of Certificates as provided
in this Article N, amounts held by the Trustee for such prepayment shall, at the written request
of the District Representative received by the Trustee no later than 60 days prior to the
prepayment date, be applied by the Trustee to the purchase of Certificates at public or private
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sale as and when and at such prices (including brokerage, accrued interest and other charges) as
the District may in its discretion direct, but not to exceed the prepayment price which would be
payable if such Certificates were prepaid. The aggregate principal amount of Certificates of the
same maturity purchased in lieu of prepayment under this Section 4.06 may not exceed the
aggregate principal amount of Certificates of such maturity which would otherwise be subject to
such prepayment.
ARTICLE V
INSTALLMENT P A YMENTSi INSTALLMENT PAYMENT FUND
SECTION 5.01. Assignment of Rights in Installment Sale Agreement. The Corporation
hereby irrevocably transfers, assigns and sets over to the Trustee, without recourse to the
Corporation, all of its rights in the Installment Sale Agreement (excepting only the Corporation's
rights under Sections 4.8,.5.2 and 6.4 thereof), including but not limited to all of the
Corporation's rights to receive and collect all of the Installment Payments and all other amounts
required to be deposited in the Installment Payment Fund. The Trustee hereby accepts such
assignment; provided, however, that such assignment shall neither create any obligations nor give
rise to any duties on the part of the Trustee other than those obligations and duties contained
herein and shall not be liable for any covenants, representations or warranties of the
Corporation. All Installment Payments and such other amounts to which the Corporation may
at any time be entitled shall be paid directly to the Trustee, and all of the Installment Payments
collected or received by the Corporation shall be deemed to be held and to have been collected
or received by the Corporation as the agent of the Trustee, and if received by the Corporation at
any time shall be deposited by the Corporation with the Trustee within one (1) Business Day
after the receipt thereof, and all such Installment Payments and such other amounts shall be
forthwith deposited by the Trustee upon the receipt thereof in the Installment Payment Fund.
SECTION 5.02. Establishment of Installment Payment Fund. The Trustee shall establish
and maintain a special fund designated as the "Installment Payment Fund", into which the
Trustee shall deposit all amounts paid to the Trustee for such purpose under the Installment
Sale Agreement. All moneys at any time deposited by the Trustee in the Installment Payment
Fund shall be held by the Trustee in trust for the benefit of the District and the Owners of the
Certificates. So long as any Certificates are Outstanding, neither the District nor the
Corporation shall have any beneficial right or interest in the Installment Payment Fund or the
moneys deposited therein, except only as pr<?vided in the Installment Sale Agreement or herein,
and such moneys shall be used and applied by the Trustee as hereinafter set forth.
SECTION 5.03. Application of Moneys. Except as provided in Section 5.04, amounts in
the Installment Payment Fund shall be used and withdrawn by the Trustee solely for the
purpose of paying the principal, interest and prepayment premiums (if any) represented by the
Certificates as the same shall become due and payable, in accordance with the provisions of
Article II and Article IV.
SECTION 5.04. Surplus. At the written request of the District any surplus remaining in
the Installment Payment Fund, after prepayment and payment of all Certificates, including all
premiums and accrued interest (if any) and payment of any applicable fees and expenses to the
Trustee and any amounts then due and payable to Insurer, or provision for such prepayment or
payment having been made in accordance with Section 12.01, shall be withdrawn by the Trustee
and remitted to the District.
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ARTICLE VI
MONEYS IN FUNDS; INVESTMENT
SECTION 6.01. Held in Trust. The moneys and Permitted Investments held by the
Trustee under this Trust Agreement are irrevocably held in trust for the benefit of the District,
Insurer and the Owners of the Certificates solely for the purposes herein specified, and such
moneys, and any income or interest earned thereon, shall be expended only as provided in this
Trust Agreement, and shall not be subject to levy or attachment or lien by or for the benefit of
any creditor of the Corporation, the Trustee, the District, Insurer or the Owner of any
Certificates.
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SECTION 6.02. Investments Authorized. Upon the written request of the District filed
with the Trustee from time to time, moneys held by the Trustee in any fund or account
established hereunder shall be invested and reinvested by the Trustee in Permitted Investments
which mature not later than the date such moneys are required or estimated by the District to be
required to be expended hereunder. In the absence of any written request of the District
directing the investment of uninvested moneys held by the Trustee hereunder, the Trustee shall
invest such moneys in Permitted Investments described in clause (d) of the definition thereof,
which mature not later than the date such moneys are required or estimated by the Trustee to be
required to be expended hereunder. Such investments, if registrable, shall be registered in the
name of the Trustee, as trustee or in the name of its nominee, and shall be held by the Trustee.
The Trustee may purchase or sell to itself or any affiliate, as principal or agent, investments
authorized by this Section 6.02 and shall be entitled to its customary fee therefor. Such
investments and reinvestments shall be made giving full consideration to the time at which
funds are required to be available. The Trustee may act as purchaser or agent in the making or
disposing of any investment. Whenever in this Trust Agreement any moneys are required to be
transferred by the District to the Trustee, such transfer may be accomplished by transferring a
like amount of Permitted Investments. For purposes of acquiring any investments hereunder,
the Trustee may commingle funds held by it 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 this Section 6.02.
Amounts held by the District in any fund or account established hereunder or under the
Installment Sale Agreement shall be invested by the District in any investments which are
authorized for the investment of District funds under the laws of the State of California.
SECTION 6.03. Accounting. The Trustee shall furnish to the District, not less than
monthly, an accounting (in the form customarily used by the Trustee) of all investments and
other transactions made by the Trustee under this Trust Agreement. The District acknowledge
that to the extent regulations of the Comptroller of the Currency or other applicable regulatory
entity grant the District the right to receive brokerage confirmations of security transactions as
they occur, the District specifically waives receipt of such confirmations to the extent permitted
by law.
SECTION 6.04. Allocation of Earnings. Any income, profit or loss on such investments
shall be deposited in or charged to the respective funds from which such investments were
made.
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SECTION 6.05. Valuation and Disposition of Investments.
(a) Except as otherwise provided in subsection (b) of this Section, the District
covenants that all investments of amounts deposited in any fund or account created by or
under this Trust Agreement, or otherwise containing gross proceeds of the Certificates (within
the meaning of Section 148 of the Tax Code) shall be acquired, disposed of and valued by the
District (as of the date that valuation is required by this Trust Agreement or the Tax Code) at
Fair Market Value as such term is defined in subsection (d) below. The Trustee shall have no
duty in connection with the determination of Fair Market Value other than to follow the
investment directions of the District in any written directions of a District Representative.
(b) For the purpose of determining the amount in any fund, the value of Permitted
Investments credited to such fund shall be valued by the Trustee at least quarterly at the Fair
Market Value thereof. The Trustee may sell or present for prepayment, any Permitted
Investment so purchased by the Trustee whenever it shall be necessary in order to provide
moneys to meet any required payment, transfer, withdrawal or disbursement from the fund to
which such Permitted Investment is credited, and the Trustee shall not be liable or responsible
for any loss resulting from any such Permitted Investment. In making any valuations of
investments hereunder, the Trustee may utilize and rely on computerized securities pricing
services that may be available to it, including those available through its regular accounting
system.
(c) For purposes of this Section 6.05, the term "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 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, (ill) 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 any 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.
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ARTICLE VII
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THE TRUSTEE
SECTION 7.01. Appointment of Trustee. BNY Western Trust Company is hereby
appointed Trustee by the Corporation and 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 herein. The District agrees that it will maintain a Trustee having a corporate trust
office in California, with a reported capital and surplus of at least $50,000,000, duly
authorized to exercise trust powers and subject to supervision or examination by Federal or
state authority, so long as any Certificates are Outstanding. If such bank or trust company
publishes a report of condition at least annually under law or to the requirements of any
supervising or examining authority above referred to then for the purpose of this Section 7.01
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 District and the Corporation covenant that they will maintain a Trustee acceptable
to Insurer and qualified under the provisions of the foregoing provisions of this Section 8.01, so
long as any Certificates are Outstanding.
The Trustee is hereby authorized to payor prepay the Certificates when duly presented
for payment at maturity, or on prepayment, or on purchase by the Trustee as directed by the
District prior to maturity in accordance with Section 4.06, and to cancel all Certificates upon
payment thereof. The Trustee shall keep accurate records of all funds administered by it and of
all Certificates paid and discharged. The Trustee shall be compensated for its services rendered
under the provisions hereof.
\.,
SECTION 7.02. Acceptance of Trusts. The Trustee hereby accepts the trusts imposed
upon it hereby, 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
of all Events of Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth herein, and no
implied covenants or obligations shall be read into this Trust Agreement
against the Trustee. In case an Event of Default has occurred (which has
not been cured or waived), the Trustee may exercise such of the rights and
powers vested in it hereby, and. shall use the same degree of care and skill
in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
\...
(b) No provision hereof shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if the
repayment of such funds or adequate indemnity against such risk or
liability is not assured to it. The Trustee shall be entitled to interest on any
amounts advanced by it in the performance of its duties hereunder.
(c) 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 and the Trustee shall not be responsible for any misconduct or
negligence on the part of any attorney, agent or receiver appointed with due
care by it hereunder. The Trustee shall be entitled to advice of counsel
-15-
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\.,
concerning all matters of trust and its duty hereunder and shall be
protected in any action taken or suffered by it hereunder in reliance on such
advice.
The Trustee is not responsible for the validity hereof or for any recital
herein, or in the Certificates, or for any of the supplements thereto or
instruments of further assurance, or for the sufficiency of the security for
the Certificates issued hereunder or intended to be secured hereby and the
Trustee is not bound to ascertain or inquire as to the observance or
performance of any covenants, conditions or agreements on the part of the
Corporation or the District under the Installment Sale Agreement. The
Trustee is not responsible or liable for any loss suffered in connection with
any investment of funds made by it in accordance with Article VI hereof.
The Trustee is not accountable for the use or application of any Certificates
or the proceeds thereof. The Trustee may become the Owner of Certificates
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 would have if it were not the Trustee; and
may act as a depository for and permit any of its officers or directors to
act as a member of, or in any other capacity with respect to, any committee
formed to protect the rights of Owners of Certificates, whether or not such
committee shall represent the Owners of the majority in aggregate principal
amount of the Certificates then Outstanding.
(f) In the absence of bad faith on its part, Trustee shall be protected in acting
upon any notice, request, consent, certificate, order, requisition, affidavit,
letter, telegram, facsimile transmission, electronic mail 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 in good faith pursuant hereto 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 Certificate, shall be
conclusive and binding upon all future Owners of the same Certificate and
upon Certificates issued in exchange therefor or in place thereof.
(d)
(e)
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 signed by an Corporation Representative
or a District Representative as sufficient evidence of the facts therein
contained and prior to the occurrence of an Event of Default of which the
Trustee has been given notice or is deemed to have notice, as provided in
Section 7.02(i), 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 bound to secure the
same. The Trustee may accept a certificate of an Corporation
Representative or a District Representative . to the effect that an
authorization in the form therein set forth has been. adopted by the
Corporation or the District, as the case may be, as conclusive evidence that
such authorization has been duly adopted, and is in full force and effect.
\., (h) The permissive right of the Trustee to do things enumerated herein shall not
be construed as a duty and it shall not be answerable for other than its
(g)
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'-'
'"
\.,
negligence or willful misconduct. The immunities and exceptions from
liability of the Trustee shall extend to its officers, directors, employees and
agents.
The Trustee is not 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 Installment Payments to the Trustee required to be made by the
District under the Installment Sale Agreement or failure by the Corporation
or the District to file with the Trustee any document required hereby or by
the Installment Sale Agreement to be so filed subsequent to the delivery of
the Certificates, unless the Trustee is specifically notified in writing of such
default by the Corporation, the District, Insurer or the Owners of at least
25% in aggregate principal amount of Certificates then Outstanding and all
notices or other instruments required hereby or by the Installment Sale
Agreement to be delivered to the Trustee must, in order to be effective, be
delivered at the 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 except as aforesaid.
At any and all reasonable times the Trustee, and its duly authorized
agents, attorneys, experts, engineers, accountants and representatives, have
the right (but not the duty) to inspect the Sewer Enterprise including all
books, papers and records of the District pertaining to the Sewer
Enterprise and the Certificates, and to take such memoranda from and
with regard thereto as may be desired.
(k) The Trustee is not 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.
(i)
(j)
(I) Notwithstanding anything elsewhere herein with respect to the execution of
any Certificates, the withdrawal of any cash, the release of any property,
or any action whatsoever within the purview hereof, the Trustee has the
right, but shall not be required, to demand any showings, certificates,
opinions, appraisals or other information, or corporate action or evidence
thereof, in addition so that by the terms hereof required as a condition of
such action, by the Trustee deemed desirable for the purpose of
establishing any right to the execution of any Certificates, the withdrawal
of any cash, or the taking of any other action by the Trustee.
(m) Before taking any action referred to in Section 11.02 at the direction of
Insurer or the Certificate Owners, the Trustee may require that a
satisfactory indemnity bond or other indemnification acceptable to the
Trustee be furnished by Insurer or the Certificate Owners, or any of them,
for the reimbursement of all expenses to which it may be put and to protect
it against all liability, except liability which is adjudicated to have resulted
from its negligence or willful misconduct in connection with any such
action. .
(n) 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 Trustee has no liability for interest on any moneys
received hereunder except such as may be agreed upon.
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~
(0) The Trustee is not responsible for the sufficiency of the Installment Sale
Agreement or its right to receive moneys under the Installment Sale
Agreement.
(p)
The Trustee is not liable with respect to any action taken or omitted to be
taken by it in good faith in accordance with the direction of Insurer or the
Owners of a majority in aggregate principal amount of the Outstanding
Certificates relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, hereunder.
'"
The Trustee is not liable for any error of judgment made in good faith by a
responsible officer of the Trustee unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts relating thereto.
(r) The Trustee shall not be considered in breach of or in default in its
obligations hereunder or progress in respect thereto in the event of enforced
delay ("unavoidable delay") in the performance of such obligations due to
unforeseeable causes beyond its control and without its fault or negligence,
including, but not limited to, Acts of God or of the public enemy or
terrorists, acts of a government, acts of the other party, fires, floods,
epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes,
explosion, mob violence, riot, inability to procure or general sabotage or
rationing of labor, equipment, facilities, sources or energy, material or
supplies in the open market, litigation or arbitration involving a party or
others relating to zoning or other governmental action or inaction pertaining
to the project, malicious mischief, condemnation, and unusually severe
weather or delays of suppliers or subcontractors due to such causes or any
similar event and/ or occurrences beyond the control of the Trustee.
(q)
(s) The Trustee agrees to accept and act upon facsimile transmission of written
instructions and/or directions pursuant to this Trust Agreement provided,
however, that: (i) subsequent to such facsimile transmission of written
instructions and/ or directions the Trustee shall forthwith receive the
originally executed instructions and/or directions, (ii) such originally
executed instructions and/ or directions shaUbe signed by a person as may
be designated and authorized to sign for the party signing such instructions
and/ or directions, and (ill) the Trustee shall have received a current
incumbency certificate containing the specimen signature of such designated
person.
SECTION 7.03. Fees, Charges and Expenses of Trustee. The Trustee is entitled to payment
and reimbursement from the District and the Corporation for reasonable fees for its services
rendered hereunder and all advances, counsel 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, but only upon such occurrence, the Trustee shall
have a first lien with right of payment prior to payment on account of principal, premium, if.
any, and interest represented by any Certificate upon the amounts held hereunder for the
foregoing fees, charges and expenses incurred by it respectively.
l SECTION 7.04. Notice to Insurer and Certificate Owners of Default. If an Event of Default
'" occurs of which the Trustee has been given or is deemed to have notice, as provided in Section
7.02(i), then the Trustee shall promptly give written notice thereof by first class mail, postage
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\.
'-'
prepaid, (a) to Insurer by telephone confirmed in writing, and (b) by first class mail, postage
prepaid, to the Owner of each Outstanding Certificate, 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 Installment Payment when due, the Trustee
may elect not to give such notice to the Certificate Owners if and so long as the Trustee in good
faith determines that it is in the best interests of the Certificate Owners not to give such notice.
SECTION 7.05. Removal of Trustee. So long as no Event of Default has occurred and is
continuing the District may, upon at least 30 days' prior written notice and with the consent of
the Corporation and Insurer, remove the Trustee initially appointed, and any successor thereto,
by an instrument or concurrent instruments in writing delivered to the Trustee, the Corporation
and Insurer, and may appoint a successor or successors thereto; provided that any such
successor shall be a commercial bank or trust company meeting the requirements set forth in
Section 7.01.
'-'
SECTION 7.1J6. Resignation by Trustee. The Trustee and any successor Trustee may at
any time resign by giving written notice by registered or certified mail to the District and Insurer.
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 such
acceptance, the District shall mail notice thereof to Insurer and to the Certificate Owners at
their respective addresses set forth on the Registration Books.
SECTION 7.07. Appointment of Successor Trustee. In the event of the removal or
resignation of the Trustee under Sections 7.05 or 7.06, respectively, with the prior written
consent of Insurer the District shall promptly appoint a successor Trustee. In the event the
District for any reason whatsoever fails to appoint a successor Trustee within 30 days
following the delivery to the Trustee of the instrument described in Section 7.05 or within 30
days following the receipt of notice by the District under Section 7.06, at the expense of the
District Insurer or the Trustee may apply to a court of competent jurisdiction for the
appointment of a successor Trustee meeting the requirements of Section 7.01. 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 30 day period.
SECTION 7.08. Merger or Consolidation. Any company or association into which the
Trustee may be merged or converted or with which it may be consolidated or any company
resulting from any merger, conversion or consolidation to which it shall be a party or any
company or association to which the Trustee may sell or transfer all or substantially all of its
corporate trust business, provided that such company or association shall be eligible under
Section 7.01, 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 7.09. Concerning any Successor Trustee. Every successor Trustee appointed
hereunder shall execute, acknowledge and deliver to its predecessor and also to Insurer, the
Corporation and 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 written request of the
Corporation, 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
-19-
hereunder to its successor. Should any inshument in writing from the Corporation 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
Corporation.
SECTION 7.10. Non-Liability of Trustee. The recitals, statements and representations by
the District and the Corporation contained herein or in the Certificates shall be taken and
construed as made by and on the part of the District and the Corporation, as the case may be,
and not by the Trustee, and the Trustee does not assume, and shall not have" any responsibility
or obligation for the correctness of any thereof.
The Trustee makes no representation or warranty, express or implied as to the title,
value, design, compliance with specifications or legal requirements, quality, durability,
operation, condition, merchantability or fitness for any particular purpose or fitness for the use
contemplated by the District of the Sewer Enterprise. In no event shall the Trustee be liable for
special or consequential damages in connection with or arising from the Installment Sale
Agreement for the existence, furnishing or use of the Sewer Enterprise.
SECTION 7.11. Nature of Trust Engagement. The Trustee undertakes to perform such
duties and only such duties as are specifically set forth herein and no implied covenants or
obligations shall be read into the Trust Agreement against the Trustee. In accepting the trusts
hereby created, the Trustee acts solely as Trustee and not in its individual capacity and all
persons, including without limitation Insurer, the Certificate Owners, the District and the
Corporation having any claim against the Trustee arising from the Trust Agreement shall look
only to the funds and accounts hereunder for payment except as otherwise provided herein.
Under no circumstances shall the Trustee be liable in its individual capacity for the obligations
.represented by the Certificates.
\"
SECTION 7.12. Insurer's Exercise of Rights Relating to the Trustee. Insurer shall be deemed
to be the sole holder of the Certificates insured by it for the purpose of exercising any voting
right or privilege or giving any consent or direction or taking any other action that the Owners
are entitled to take under this Article VIT.
SECTION 7.13. Subrogation. If principal and/or interest due with respect to the
Certificates shall be paid by the Insurer, the Certificates shall remain outstanding under the
Trust Agreement for all purposes, and shall not be deemed defeased or otherwise satisfied, or
paid by the District, and the assignment and pledge of the trust estate and all covenants,
agreements and other obligations of the District to the Owners shall continue to exist and shall
run to the benefit of the Insurer, and the Insurer shall be subrogated to the rights of such
Owners.
ARTICLE VIII
MODIFICATION OR AMENDMENT OF AGREEMENTS
\.,
SECTION 8.01. Amendments Permitted Without Consent of Owners. This Trust Agreement
and the rights and obligations of the Owners of the Certificate, and the Installment Sale
Agreement and the rights and obligations of the respective parties thereto, may be modified or
amended at any time by a supplemental agreement, with the prior written consent of Insurer but
-20-
-..
without the consent of any of the Certificate Owners, only to the extent permitted by law and
only for anyone or more of the following reasons:
(a) to add to the covenants and agreements of any party, other covenants to be
observed, or to surrender any right or power herein reserved to the District,
(b) to cure, correct or supplement any ambiguous or defective provision
contained herein or therein,
~
(c) in any respect whatsoever in regard to questions arising hereunder or
thereunder, as the parties hereto or thereto may deem necessary or
desirable and which shall not, in the opinion of Bond Counsel, materially
adversely affect the interests of the Owners of the Certificates,
(d) to provide for matters relating to the issuance of Parity Debt, or
(e) if and to the extent permitted in the opinion of Bond Counsel filed with the
Trustee, the District and the Corporation, to delete or modify any of the
provisions hereof or thereof relating to the exemption from federal income
taxa~on of interest represented by the Certificates.
Any such supplemental agreement entered into under this Section will become effective
upon execution and delivery by the parties hereto or thereto as the case may be.
SECTION 8.02. Amendments Permitted Without Consent of Owners. Except as permitted
under Section 8.01, this Trust Agreement and the rights and obligations of the Owners of the
Certificates, and the Installment Sale Agreement and the rights and obligations of the parties
thereto, may be modified or amended at any time by a supplemental agreement which will
become effective when the written consents of Insurer and the Owners of a majority in aggregate
principal amount of the Certificates then Outstanding, exclusive of Certificates disqualified as
provided in Section 12.03, have been filed with the Trustee.
No modification or amendment under this Section 8.01 may (a) extend or have the effect
of extending the fixed maturity of any Certificate or reducing the interest rate with respect
thereto or extending the time of payment of interest, or reducing the amount of principal thereof
or reducing any premium payable upon the prepayment thereof, without the express consent of
the Owner of such Certificate, or (b) reduce or have the effect of reducing the percentage of
Certificates required for the affirmative vote or written consent to an amendment or
modification of the Installment Sale Agreement, without the consent of the Owners of 100% in
aggregate principal amount of the Outstanding Certificates, or (c) modify any of the rights or
obligations of the Trustee without its written assent thereto.
Any such supplemental agreement may not become effective unless there is filed with the
Trustee the written consents of the Owners of a majority in aggregate principal amount of the
Certificates then Outstanding (exclusive of Certificates disqualified as provided in Section
12.04) and the Trustee has given the notice required below. Each such consent shall be effective
only if accompanied by proof of ownership of the Certificates for which such consent is given,
which proof shall be such as is permitted by Section 2.10. Any such consent shall be binding
upon the Owner of the Certificate giving such consent and on any subsequent Owner (whether
or not such subsequent Owner has notice thereof) unless such consent is revoked in writing by
the Owner giving such consent or a subsequent Owner by filing such revocation with the Trustee
\..,. prior to the date when the notice hereinafter in this Section provided for has been mailed.
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\.,
'-'
After Insurer and the Owners of the required percentage of Certificates have filed their
consents to such supplemental agreement, the Trustee shall mail a notice to the Owners of the
Certificates in the manner hereinbefore provided in this Section for the mailing of such
supplemental agreement of the notice of adoption thereof, stating in substance that such
supplemental agreement has been consented to by the Owners of the required percentage of
Certificates and will be effective as provided in this Section (but failure to mail copies of said
notice shall not affect the validity of such supplemental agreement or consents thereto). A
record, consisting of the papers required by this Section to be filed with the Trustee, shall be
conclusive proof of the matters therein stated. Such supplemental agreement shall become
effective upon the mail of such last-mentioned notice, and such supplemental agreement shall be
deemed conclusively binding upon the parties hereto, Insurer and the Owners of all Certificates
at the expiration of 60 days after such filing, except in the event of a final decree of a court of
competent jurisdiction setting aside such consent in a legal action or equitable proceeding for
such purpose commenced within such 60 day period.
SECTION 8.03. Effect of Supplemental Agreement. From and after the time any
supplemental agreement becomes effective under this Article VITI, this Trust Agreement or the
Installment Sale Agreement, as the case may be, shall be deemed to be modified and amended
in accordance therewith, the respective rights, duties and obligations of the parties hereto or
thereto and all Owners of Certificates Outstanding, as the case may be, shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such modification and
amendment, and all the terms and conditions of any supplemental agreement shall be deemed
to be part of the terms and conditions of this Trust Agreement or the Installment Sale
Agreement for any and all purposes.
SECTION 8.04. Endorsement or Replacement of Certificates Delivered After Amendments.
The Trustee may determine that Certificates shall bear a notation, by endorsement or otherwise,
in form approved by the Trustee, as to such action. In that case, upon demand of the Owner of
any Certificate Outstanding at such effective date and presentation of such Owner's Certificate
for the purpose at the Trust Office of the Trustee, a suitable notation shall be made on such
Certificate. The Trustee may determine that the delivery of substitute Certificates, so modified
as in the opinion of the Trustee is necessary to conform to such Certificate Owners' action,
which substitute Certificates shall thereupon be prepared, executed and delivered at the
expense of the District. In that case, upon demand of the Owner of any Certificate then
Outstanding, such substitute Certificate shall be exchanged at the Trust Office of the Trustee,
without cost to such Owner, for a Certificate of the same character then Outstanding, upon
surrender of such Outstanding Certificate. .
SECTION 8.05. Amendatory Endorsement of Certificates. The provisions of this Article vm
shall not prevent any Certificate Owner from accepting any amendment as to the particular
Certificates held by such Owner, provided that proper notation thereof is made on such
Certificates.
"
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ARTICLE IX
~
OTHER COVENANTS
SECTION 9.01. Compliance With and Enforcement of Installment Sale Agreement. The
District covenants and agrees with the Trustee, for the benefit of the Owners of the Certificates,
to perform all obligations and duties imposed on it under the Installment Sale Agreement.
SECTION 9.02. Observance of Laws and Regulations. The District will well and truly keep,
observe and perform all valid and lawful obligations or regulations now or hereafter imposed on
it by contract, or prescribed by any law of the United States, or of the State of California, or by
any officer, board or commission having jurisdiction or control, as a condition of the continued
enjoyment of any and every right, privilege or franchise now owned or hereafter acquired by the
District, including its right to exist and carry on business as a public agency, to the end that
such rights, privileges and franchises shall be maintained and preserved, and shall not become
abandoned, forfeited or in any manner impaired.
SECTION 9.03. Recordation and Filing. The District shall record and file all such
documents as may be required by law (and shall take all further actions which may be
necessary or be reasonably required by the Trustee), all in such manner, at such times and in
such places as may be required by law in order fully to preserve, protect and perfect the
security of the Trustee, Insurer and the Certificate Owners.
SECTION 9.04. Tax Covenants.
~
(a) Private Business Use Limitation. The District shall assure that the proceeds of the
Certificates are not used in a manner which would cause any of the obligations of the District
under the Installment Sale Agreement to become "private activity bonds" under and within the
meaning of Section 141(a) of the Tax Code.
(b) Private Loan Limitation. The District shall assure that no more than 5% of the
aggregate amount of the proceeds of the Certificates are used, directly or indirectly, to make or
finance a loan (other than loans constituting nonpurpose obligations as defined in the Tax Code
or constituting assessments) to persons other than state or local government units.
(c) 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 the obligations of the
District under the Installment Sale Agreement to be "federally guaranteed" within the meaning
of Section 149(b) of the Tax Code."
(d) No Arbitrage. The District shall not take, or permit or suffer to be taken by the
Trustee or otherwise, any action with respect to the proceeds of the Certificates or of any other
obligations which, if such action had been reasonably expected to have been taken, or had been
deliberately and intentionally taken, on the Closing Date, would have caused the obligations of
the District under the Installment Sale Agreement to be II arbitrage bonds" within the meaning of
Section 148(a) of the Tax Code.
~
(e) Rebate of Excess Investment Earnings to United States. The District shall calculate
or cause to be calculated the Excess Investment Earnings in all respects at the times and in the
manner required under the Tax Code. The District shall pay the full amount of Excess
Investment Earnings to the United States of America in such amounts, at such times and in such
manner as may be required under the Tax Code. Such payments shall be made by the District
from any source of legally available funds of the District.
-23-
'"
The District shall keep or cause to be kept, and retain or cause to be retained for a
period of 6 years following the retirement of the Certificates, records of the determinations
made under this subsection (e). In order to provide for the administration of this subsection (e),
the District may provide for the employment of independent attorneys, accountants and
consultants compensated on such reasonable basis as the District may deem appropriate. The
Trustee shall have no duty or obligation to monitor or enforce compliance by the District of any
of the requirements herein.
SECTION 9.05. Continuing Disclosure. The District hereby covenants and agrees that it
will comply with and carry out all of the provisions of that certain Continuing Disclosure
Certificate executed by the District as of the Closing Date, as originally executed and as it may
be amended from time to time in accordance with its terms. Notwithstanding any other
provision of this Trust Agreement, failure of the District to comply with such Continuing
Disclosure Certificate shall not constitute an Event of Default; provided, however, that any
Participating Underwriter (as such term is defined in such Continuing Disclosure Certificate) or
any Owner or beneficial owner of the Certificates may take such actions as may be necessary
and appropriate to compel performance by the District of its obligations under this Section,
including seeking mandate or specific performance by court order.
SECTION 9.06. Further Assurances. The Corporation and the District will make, execute
and deliver any and all such further resolutions, instruments and assurances as may be
reasonably necessary or proper to carry out the intention or to facilitate the performance hereof
and of the Installment Sale Agreement, and for the better assuring and confirming unto Insurer
and the Owners of the Certificates the rights and benefits provided herein.
\..
ARTICLE X
LIMITATION OF LIABILITY
SECTION 10.01. Limited Liability of District and Corporation. Except for the payment of
Installment Payments when due in accordance with the Installment Sale Agreement and the
performance of the other covenants and agreements of the District contained in the Installment
Sale Agreement and herein, the District has no pecuniary obligation or liability to. the
Corporation, the Trustee, Insurer or the Owners of the Certificates with respect hereto or the
terms, execution, delivery or transfer of the Certificates, or the distribution of Installment
Payments to the Owners by the Trustee, except as expressly set forth herein.
The Corporation has no pecuniary obligation or liability to Insurer, the District or the
Trustee, or to any of the Owners of the Certificates, with respect to the performance by the
District of its obligations under the Installment Sale Agreement or this Trust Agreement, with
respect hereto or the terms, execution, delivery or transfer of the Certificates, or with respect to
the distribution of Installment Payments to the Owners by the Trustee.
SECTION 10.02. No Liability for Trustee Performance. Neither the District nor the
Corporation shall have any obligation or liability to any of the other parties or to Insurer or the
Owners of the Certificates with respect to the performance by the Trustee of any duty imposed
upon it hereunder.
\.., SECTION 10.03. Indemnification of Corporation and Trustee. The District shall indemnify
and save the Corporation and Trustee, and their respective officers, agents and employees,
-24-
harmless from and against all claims, losses, costs, expenses, liability and damages, including
'-' legal fees and expenses, arising out of or in connection with any of the following:
(a) the use, maintenance, condition or management of, or from any work or
thing done on, the Sewer Enterprise by the District,
(b) any breach or default on the part of the District in the performance of any
of its obligations hereunder and any other agreement made and entered into
for purposes of the Sewer Enterprise,
(c) any act of the District or of any of its agents, contractors, servants,
employees, licensees with respect to the Sewer Enterprise,
(d) any act of any assignee of, or purchaser from the District or of any of its
agents, contractors, servants, employees or licensees with respect to the
Sewer Enterprise,
(e) the actions of any other party, including but not limited to the ownership,
operation or use of the Sewer Enterprise by the District,
(f) the Trustee's exercise and performance of its powers and duties hereunder,
or
\..,
(g) the execution, delivery and sale of the Certificates.
No indemnification will be made under this Section or elsewhere herein for willful
misconduct or negligence hereunder by the Trustee or the Corporation, or their respective
officers, agents, employees, successors or assigns. The District's obligations under this Section
10.03 shall remain valid and binding notwithstanding maturity and payment of the Certificates.
SECTION 10.04. Opinion of Counsel. Before being required to take any action, the
Trustee may require an opinion of counsel acceptable to the Trustee, or an opinion of Bond
Counsel acceptable to the Trustee with respect to any federal tax matters, or a verified
certificate of any party hereto, or both, concerning the proposed action. If it does so in good
faith, Trustee shall be absolutely protected in relying on any such opinion or certificate obtained
by the Trustee.
SECTION 10.05. Limitation of Rights to Parties and Certificate Owners. Nothing herein or
in the Certificates expressed or implied is iJ'ltended or shall be construed to give any person
other than the District, the Corporation, the Trustee, Insurer and the Owners of the Certificates,
any legal or equitable right, remedy or claim under or in respect hereof or any covenant,
condition or provision hereof; and all such covenants, conditions and provisions are and shall
be for the sole and exclusive benefit of the District, the Corporation, the Trustee, Insurer and the
Owners.
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ARTICLE XI
-..
EVENTS OF DEFAULT AND REMEDIES
OF CERTIFICATE OWNERS
\.,.
SECTION 11.01. Assignment of Rights. Under Section 5.01, the Corporation transfers,
assigns and sets over to the Trustee all of the Corporation's rights in and to the Installment Sale
Agreement (excepting only the Corporation's rights under Sections 4.8, 5.2 and 6.4 thereof),
including without limitation all of the Corporation's rights to exercise such rights and remedies
conferred on the Corporation under the Installment Sale Agreement as may be necessary or
convenient (a) to enforce payment of the Installment Payments and any other amounts required
to be deposited in the Installment Payment Fund, and (b) otherwise to exercise the
Corporation's rights and take any action to protect the interests of the Trustee, Insurer or the
Certificate Owners upon the occurrence of an Event of Default.
SECTION 11.02. Remedies. If an Event of Default shall happen, then and in each and
every such case during the continuance of such Event of Default, with the prior written consent
of Insurer the Trustee may, and at the written direction of Insurer or (with the prior written
consent of Insurer) at the prior written direction of the Owners of a majority in aggregate
principal amount of the Certificates then Outstanding the Trustee (to the extent indemnified as
provided herein) shall, exercise any and all remedies available under law or granted under the
Installment Sale Agreement.
SECTION 11.03. Application of Funds. All moneys received by the Trustee under any
right given or action taken under the provisions of this Article XI or Article VI of the Installment
Sale Agreement shall be applied by the Trustee in the following order:
First, to the payment of the fees, costs and expenses of the Trustee and of
the Certificate Owners in declaring and enforcing such Event of Default,
including reasonable compensation to its or their agents, attorneys and counsel;
\.
Second. to the payment of the whole amount then owing and unpaid with
respect to the Certificates for principal and interest, with interest on the overdue
principal and installments of interest at the Overdue Rate (but such interest on
overdue installments of interest shall be paid only to the extent funds are
available therefor following payment of principal and interest and interest on
overdue principal, as aforesaid), and in case such moneys shall be insufficient to
pay in full the whole amount so. owing and unpaid with respect to the
Certificates, then to the payment of such principal and interest without
preference or priority of principal over interest, or of interest over principal, or of
any installment of interest over any other installment of interest, ratably to the
aggregate of such principal and interest.
Third, to the payment of any amounts due or to become due to Insurer
under the Certificate Insurance Policy.
SECTION 11.04. Institution of Legal Proceedings. If one or more Events of Default shall
happen and be continuing, with the prior written consent of Insurer the Trustee in its discretion
may, and upon the written request of Insurer or (with the prior written consent of Insurer) at the
written request of the Owners of a majority in principal amount of the Certificates then
Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect
or enforce its rights or the rights of Insurer or the Owners of Certificates by a suit in equity or
action at law, either for the specific performance of any covenant or agreement contained herein,
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or in aid of the execution of any power herein granted, or by mandamus or other appropriate
proceeding for the enforcement of any other legal or equitable remedy as the Trustee shall deem
most effectual in support of any of its rights or duties hereunder.
SECTION 11.05. Non-waiver. Nothing in this Article XI or in any other provision hereof
or in the Certificates, shall affect or impair the obligation of the District, which is absolute and
unconditional, to payor prepay the Installment Payments as provided in the Installment Sale
Agreement, or affect or impair the right of action, which is also absolute and unconditional, of
fusurer and the Certificate Owners to institute suit to enforce and collect such payment. No
delay or omission of the Trustee or of Insurer or any Owner of any of the Certificates to exercise
any right or power arising upon the happening of any Event of Default shall impair any such
right or power or shall be construed to be a waiver of any such Event of Default or an
acquiescence therein, and every power and remedy given by this Article XI to the Trustee,
Insurer or the Owners of Certificates may be exercised from time to time and as often as shall be
deemed expedient by the Trustee, Insurer or the Certificate Owners.
SECTION 11.06. Remedies Not Exclusive. No remedy herein conferred upon or reserved
to the Trustee or the Certificate Owners is intended to be exclusive of any other remedy, and
every such remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing, at law or in equity or by statute or otherwise.
SECTION 11.07. Power of Trustee to Control Proceedings. In the event that the Trustee,
upon the happening of an Event of Default, shall have taken any action, by judicial proceedings
or otherwise, under its duties hereunder, whether upon its own discretion or upon the request of
Insurer or the Owners of a majority in aggregate principal amount of the Certificates then
Outstanding, it shall have full power, in the exercise of its discretion for the best interests of
Insurer and the Owners of the Certificates, with respect to the continuance, discontinuance,
withdrawal, compromise, settlement or other disposal of such action.
'-'
SECTION 11.08. Limitation on Certificate Owners' Right to Sue. No Owner of any
Certificate 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 Trust Agreement, unless:
(a) such Owner shall have previously given to the Trustee written notice of the
occurrence of an Event of Default hereunder;
(b) the Owners of a majority in aggregate principal amount of all the
Certificates then Outstanding shall have made written request upon the
Trustee to exercise the powers hereinbefore granted or to institute such
action, suit or proceeding in its own name;
(c) said Owners shall have tendered to the Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred in compliance with
such request; and
(d) the Trustee shall have refused or omitted to comply with such request for a
period of 60 days after such written request shall have been received by,
and said tender of indemnity shall have been made to, the Trustee.
Such notification, request, tender of indemnity and refusal or omission are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of Certificates
.. . of any remedy hereunder; it being understood and intended that no one or more Owners of
.." Certificates shall have any right in any manner whatever by its or their action to enforce any
right hereunder, except in the manner herein provided, and that all proceedings at law or in
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equity with respect to an Event of Default shall be instituted, had and maintained in the
manner herein provided and for the equal benefit of Insurer and all Owners of the Outstanding
Certificates. .
The right of any Owner of any Certificate to receive payment of said Owner's direct,
undivided fractional interest in the Installment Payments as the same become due, or to
institute suit for the enforcement of such payment, shall not be impaired or affected without the
consent of such Owner, notwithstanding the foregoing provisions of this Section or any other
provision hereof.
SECTION 11.09. Rights of Insurer. Anything in this Trust Agreement to the contrary
notwithstanding, upon the occurrence and continuation of an Event of Default, Insurer is
entitled to control and direct the enforcement of all rights and remedies granted hereunder to the
Certificate Owners, or to the Trustee for the benefit of the Certificate Owners, including but not
limited to the right to approve all waivers of any Events of Default. The rights granted to
Insurer hereunder shall be deemed terminated and shall not be exercisable by Insurer during any
period during which Insurer is in payment default under the Certificate Insurance Policy.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Discharge of this Trust Agreement. If and when the obligations
represented by any Outstanding Certificates are paid and discharged in anyone or more of the
following ways:
(a) by paying or causing to be paid the principal of and interest and
prepayment premiums (if any) represented by such Certificates
Outstanding, as and when the same become due and payable; or
(b) by irrevocably depositing with the Trustee or any other fiduciary, under an
escrow deposit and trust agreement, security for the payment of
Installment Payments relating to such Certificates as more particularly
descnbed in Section 7.1 of the Installment Sale Agreement, said security to
be held by the Trustee on behalf of the District to be applied by the Trustee
or by such other fiduciary to payor prepay such Installment Payments as
the same become due, under Section 7.1 of the Installment Sale Agreement;
then, notwithstanding that such Certificates shall not have been surrendered for payment, all
rights hereunder of the Owners of such Certificates and all obligations of the Corporation, the
Trustee and the District with respect to such Certificates shall cease and terminate, except only
the obligations of the Trustee under Sections 2.07 and 2.08, and the obligation of the Trustee to
payor cause to be paid, from Installment Payments paid by or on behalf of the District from
funds deposited under the preceding paragraph (b) of this Section, to the Owners of. such
Certificates not so surrendered and paid all sums represented thereby when due and m the
event of deposits under the preceding paragraph (b), such Certificates shall continue to
represent direct, undivided fractional interests of the Owners thereof in the Installment
Payments.
\.,. Any funds held by the Trustee, at the time of discharge of the obligations represented by
all Outstanding Certificates as a result of one of the events described in the preceding
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\.,
paragraphs (a) or (b) of this Section, which are not required for the payment to be made to
.. .. Owners, shall, upon payment in full of all fees and expenses of the Trustee (including attorneys'
.., fees) then due, be paid over to the District.
To accomplish the discharge of the obligations represented by the Certificates under this
Section 12.01, the District shall cause to be delivered (i) a report of an Independent Accountant
verifying the sufficiency of the escrow established to pay the Certificates in full on the maturity
or earlier prepayment date, (ii) an escrow deposit agreement, and (ill) an opinion of Bond
Counsel to the effect that the Certificates are no longer Outstanding under this Trust Agreement.
Each such report and opinion shall be acceptable in form. and substance, and addressed, to the
District, the Trustee and Insurer. In the event a forward purchase agreement will be employed
in the refunding, such agreement shall be subject to the approval of Insurer and shall be
accompanied by such opinions of counsel as may be required by Insurer. Insurer shall be
provided with final drafts of the above-referenced documentation not less than five (5)
Business Days prior to the funding of the escrow.
Notwithstanding the foregoing provisions of this Section 12.01, in the event that the
principal and interest represented by the Certificates shall be paid by Insurer under the
Certificate Insurance Policy, (a) the Certificates shall remain Outstanding and shall not be
deemed to have been paid and discharged under this Section 12.01, (b) the obligations of the
Trustee and the District shall continue in full force and effect with respect to such Certificates,
and (c) Insurer shall be fully subrogated to the rights of all Owners of the Certificates so paid.
SECTION 12.02. Notices. Any notice, request, complaint, demand or other
communication hereunder shall be given by first class mail or personal delivery to the party
entitled thereto at its address set forth below, or by telecopier or other form of
telecommunication, at its number set forth below. Notice shall be effective either (a) upon
transmission by fax or other form of telecommunication, (b) upon actual receipt after deposit in
the United States mail, postage prepaid, or (c) in the case of personal delivery to any person,
upon actual receipt. The District, the Corporation, the Trustee or Insurer may, by written notice
to the other parties, from time to time modify the address or number to which communications
are to be given hereunder.
If to the District:
South Tahoe Public Utility District
1275 Meadow Crest Drive
South Lake Tahoe, CA 96150
Attention: Chief Financial Officer
Fax: (530) 541-4253
If to the Seller:
..
Public Property Financing Corporation of California
23945 Calabasas Road, Suite 103
Calabasas, CA 91302
Attention: Secretary/Treasurer
Fax: (818) 224-4789
\.,
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If to the Trustee:
BNY Western Trust Company
550 Kearny Street, Suite 600
San Francisco, California 94108-2527
Attention: Corporate Trust Department
Fax: (415) 399-1647
'-'
If to Insurer:
XL Capital Assurance, Inc.
1221 Avenue of the Americas
New York, NY 10020
Fax: (212) 478-3587
Any notices required to be given by any party should also be given to the Insurer,
Attn: Surveillance.
SECTION 12.03. Records. The Trustee shall keep complete and accurate records of all
moneys received and disbursed hereunder, which shall be available for inspection by the
District, the Corporation, Insurer and any Owner, or the agent of any of them, upon prior
written request during regular business hours.
SECTION 12.04. Disqualified Certificates. In determining whether the Owners of the
requisite aggregate principal amount of Certificates have concurred in any demand, request,
direction, consent or waiver hereunder, Certificates which are owned or held by or for the
account of the District or the Corporation (but excluding Certificates 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
\.,- Certificates which the Trustee knows to be so owned or held shall be disregarded.
SECTION 12.05. Payment of Certificates After Discharge. Notwithstanding any provisions
hereof, but subject to any applicable laws of the State of California relating to the escheat of
funds or property, any moneys held by the Trustee for the payment of the principal or interest
represented by any Certificates and remaining unclaimed for 2 years after the principal
represented by all of the Certificates has become due and payable (whether at maturity or
upon call for prepayment or by acceleration as provided herein), if such moneys were so held at
such date, or 2 years after the date of deposit of such moneys if deposited after said date when
all of the Certificates became due and payable, shall be repaid to the District free from the
trusts created hereby upon receipt of an indemnification agreement acceptable to the District
and the Trustee indemnifying the Trustee with respect to claims of Owners of Certificates which
have not yet been paid, and all liability of the Trustee with respect to such moneys shall
thereupon cease; provided, however, that before the repayment of such moneys to the District as
aforesaid, the Trustee may (at the cost of the District) first mail, by first dass mail postage
prepaid, to the Owners of Certificates which have not yet been paid, at the respective
addresses shown on the Registration Books, a notice, in such form as may be deemed
appropriate by the Trustee with respect to the Certificates so payable and not presented and
with respect to the provisions relating to the repayment to the District of the moneys held for
the payment thereof. Any moneys so held by the Trustee shall be held uninvested.
SECTION 12.06. Governing Law. This Trust Agreement shall be construed and governed
in accordance with the laws of the State of California.
\.,
SECTION 12.07. Binding Effect; Successors; Benefits Limited to Parties. This Trust
Agreement shall be binding upon and inure to the benefit of the parties, and their respective
successors and assigns. Whenever herein either the Corporation, the District, Insurer or the
Trustee is named or referred to, such reference shall be deemed to include the successors or
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\.,.
assigns thereof, and all the covenants and agreements contained herein by or on behalf of the
Corporation, the District, Insurer or the TruStee shall bind and inure to the benefit of the
respective successors and assigns thereof whether so expressed or not. Nothing herein
expressed or implied is intended or shall be construed to confer upon, or to give to, any person
or entity, other than the Corporation, the District, the Trustee, Insurer or the Certificate Owners,
any right, remedy or claim hereunder or by reason hereof or of any covenant, condition or
stipulation contained herein. All covenants, stipulations, promises and agreements contained
herein by or on behalf of the Corporation or the District shall be for the sole and exclusive
benefit of the Corporation, the District, the Trustee, Insurer and the Certificate Owners.
SECTION 12.08. Third-Party Beneficiary. Insurer shall be deemed to be a third-party
beneficiary of this Trust Agreement.
SECTION 12.09. Execution in Counterparts. This Trust Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall constitute but one
and the same agreement.
SECTION 12.10. Delivery of Cancelled Certificates. Whenever provision is made herein for
the surrender to or cancellation by the Trustee of any Certificates, the Trustee shall cancel and
destroy such Certificates and shall deliver a certificate of destruction with respect thereto to the
District. .
SECTION 12.11. Corporation and District Representatives. Whenever under the provisions
hereof the approval of the Corporation or the District is required, or a written certificate,
requisition, direction or order is required to be delivered by the District or the Corporation to
the Trustee, or the Corporation or the District is required to take some action at the request of
the other, such approval or such request shall be given, and such certificate, requisition,
direction or order shall be executed, for the Corporation by an Corporation Representative and
for the District by a District Representative, and any party hereto shall be authorized to rely
upon any such approval, request, certificate, requisition, direction or order.
SECTION 12.12. Headings. The headings or titles of the several Articles and Sections
hereof, and any table of contents appended to copies hereof, shall be solely for convenience of
reference and shall not affect the meaning, construction or effect hereof. All references herein to
"Articles", "Sections", and other subdivisions are to the corresponding Articles, Sections or
subdivisions hereof; and the words "herein", "hereof', "hereunder" and other words of similar
import refer to this Trust Agreement as a whole and not to any particular Article, Section or
subdivision hereof.
SECTION 12.13. Waiver of Notice. Whenever the giving of notice by mail or otherwise is
required hereunder, the giving of such notice may be waived in writing by the person entitled to
receive such notice and in any case the giving or receipt of such notice shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
SECTION 12.14. Severability of Invalid Provisions. In case anyone or more of the
provisions contained herein or in the Certificates shall for any reason be held to be invalid,
illegal or unenforceable in any respect, then such invalidity, illegality or unenforceability shall
not affect any other provision hereof, and this Trust Agreement shall be construed as if such
invalid or illegal or unenforceable provision had never been contained herein. The parties hereto
hereby declare that they would have entered into this Trust Agreement and each and every
other section, paragraph, sentence, clause or phrase hereof and authorized the delivery of the
I . Certificates pursuant thereto irrespective of the fact that anyone or more sections, paragraphs,
"'" sentences, clauses or phrases hereof may be held illegal, invalid or unenforceable.
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IN WITNESS WHEREOF, the parties have executed this Trust Agreement as of the date
and year first above written.
BNY WESTERN TRUST COMPANY, as Trustee
By
PPI)~
Authorized Officer
PUBLIC PROPERTY FINANCING CORPORA nON
OF CALIFORNIA
By
Secretary /Treasurer
SOUTH TAHOE PUBLIC UTILITY DISTRICT
By
ATTEST:
BY--#..Lhfi' ~ ~
CI of the Boar .
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'-'
~
\.,
IN WITNESS WHEREOF, the parties have executed this Trust Agreement as of the date
and year first above written.
BNY WESTERN TRUST COMPANY, as Trustee
By
Authorized Officer
PUBLIC PROPERTY FINANCING CORPORATION
OF CALIFORNIA
By
SOUTH TAHOE PUBLIC UTILITY DISTRICT
By
President
ATTEST:
By,
Clerk of the Board
APPENDIX A
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DEFINITIONS
Unless the context clearly otherwise requires or unless otherwise defined herein, the
capitalized terms in this Trust Agreement have the respective meanings specified in this
Appendix A.
"Additional Payments" means the amounts payable by the District under Section 4.8 of
the Installment Sale Agreement.
"Additional Revenues" means, with respect to the issuance of any Parity Debt, any or
all of the following amounts:
(i) An allowance for Net Revenues from any additions or improvements to or
extensions of the Sewer Enterprise to be made by the District during the 36
month period following the issuance of such Parity Debt, in an amount
equal to 100% of the estimated additional average annual Net Revenues to
be derived from all properties which are improved with a structure the
construction of which has been completed prior to the date of issuance of
such Parity Debt and to which service will be provided by such additions,
improvements and extensions, all as shown by the certificate or opinion of
a Fiscal Consultant.
\.,
(ii) An allowance for Net Revenues arising from any increase in the charges
made for service from the Sewer Enterprise which has become effective
prior to the incurring of such Parity Debt but which, during all or any part
of the most recent completed Fiscal Year for which audited financial
statements of the District are available, or for any more recent consecutive
12 month period selected by the District under Section 5.8(b) of the
Installment Sale Agreement, was not in effect, in an amount equal to the
total 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 12 month period, all as shown by the certificate or opinion of a Fiscal
Consultant.
"Adjusted Operation and Maintenance Expenses" means, for any period, Operation
and Maintenance Expenses incurred during said period, less property taxes received by the
District during said period which are deposited into the Sewer Fund.
"Bond Counsel" means (a) Jones Hall, A Professional Law Corporation, or (b) any other
attorney or firm of attorneys of nationally recognized expertise with respect to legal matters
relating to obligations the interest on which is excludable from gross income for purposes of
federal income taxation under Section 103 of the Tax Code.
"Business Day" means a day which is not a Saturday, Sunday or legal holiday on which
banking institutions in the State of California, or in any state in which the Trust Office of the
Trustee is located, are closed.
\."
"Certificate Insurance Policy" or "Policy" means the policy of municipal bond insurance
issued by Insurer, insuring payment when due of principal and interest represented by the
Certificates.
A-1
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. "Certificates" means the $15,000,000 aggregate principal amount of certificates of
participation, designated the Sewer Revenue Certificates, Series 2004, executed and delivered
pursuant hereto and at any time Outstanding hereunder.
"Corporation" means the Public Property Financing Corporation of California, a
nonprofit public benefit corporation duly organized and existing under the laws of the State of
California.
"Corporation Representative" means the Chairman and Secretary/Treasurer of the
Corporation, or any other person authorized by resolution of the Board of Directors of the
Corporation to act on behalf of the Corporation under or with respect to the Installment Sale
Agreement and this Trust Agreement.
"District" means the South Tahoe Public Utility District, a public utility district duly
organized and existing under the laws of the State of California.
\.,
"District Representative" means the General Manager, the Chief Financial Officer or
President of the Board of the District, or any other person authorized by resolution of the Board
of Directors of the District to act on behalf of the District under or with respect to the
Installment Sale Agreement and this Trust Agreement.
"Closing Date" means May 20, 2004, being the day when the Certificates, duly executed
by the Trustee, are delivered to the Original Purchaser.
"Costs of Issuance" means all items of expense directly or indirectly payable by or
reimbursable to the District relating to the execution and delivery of the Installment Sale
Agreement or the execution, sale and delivery of the Certificates, including but not limited to
filing and recording costs, settlement costs, underwriter's discount and original issue discount
(if any), printing costs, reproduction and binding costs, initial fees and charges of the Trustee
and its counsel, initial charges of the Corporation, out-of-pocket expenses incurred by the
District, financing discounts, legal fees and charges, financial and other professional consultant.
fees, costs of rating agencies for credit ratings, fees for execution, transportation and
safekeeping of the Certificates and charges and fees in connection with the foregoing.
"Costs of Issuance Fund" means the fund by that name established and held by the
Trustee under Section 3.02.
"Depository System Participant" means any participant in the Depository's book-entry
system.
"Defeasance Securities" means any of the following:
1. u.S. Treasury Certificates, Notes and Bonds (including State and Local
Government Series - (SLGs)).
2. Direct obligations of the U.s. Treasury which have been stripped by the U.S.
Treasury itself.
3. Resolution Funding Corp. ("REFCORP"). Only the interest component of
REFCORP strips which have been stripped by request to the Federal Reserve
Bank of New York in book entry form are acceptable.
\.
4.
Pre-refunded municipal bonds rated" Aaa" by Moody's and "AAA" by S&P. If,
however, the issue is only rated by S&P (i.e., there is no Moody's rating> then the
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pre-refunded bonds must have been pre-refunded with cash, direct U.S. or U.S.
guaranteed obligations, or AAA rated pre-refunded municipals to satisfy this
condition.
5.
Obligations issued by the following agencies which are backed by the full faith
and credit of the U.S.:
(a) U.s. Export-Import Bank (Eximbank)
Direct obligations or fully guaranteed certificates of beneficial ownership
(b) Farmers Home Administration (FmHA)
(c) Federal Financing Bank
(d) General Services Administration
Participation Certificates
(e) U.S. Maritime Administration
Guaranteed Title XI financing
(f) U.S. Department of Housing and Urban Development (HUD)
Project Notes
Local Authority Bonds
New Communities Debentures
"DTC" means The Depository Trust Company, New York, New York, and its
\..r successors and assigns.
"Event of Default" means an event of default under the Installment Sale Agreement, as
described in Section 6.1 thereof.
"Federal Securities" means: (a) any direct general obligations of the United States of
America (including obligations issued or held in book entry form on the books of the
Department of the Treasury of the United States of America), for which the full faith and credit
of the United States of America are pledged; (b) obligations of any agency, department or
instrumentality of the United States of America, the timely payment of principal and interest on
which are directly or indirectly secured or guaranteed by the full faith and credit of the United
States of America.
"Financial Consultant" means any consultant or firm of such consultants appointed by
the District and who, or each of whom: (a) is judged by the District to have experience in
matters relating to the financing of sewer system enterprises; (b) is in fact independent and not
under domination of the District; (c) does not have any substantial interest, direct or indirect,
with the District other than as purchaser of the Certificates or any Parity Debt; and (d) is not
connected with the District as an officer or employee of the District, but who may be regularly
retained to make reports to the District.
"Fiscal Year" means the twelve-month period beginning on July 1 of any year and ending
on June 30 of the next succeeding year, or any other twelve-month period selected by the
District as its fiscal year.
\., "Fitch" means Fitch Ratings, and its successors and assigns.
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"Gross Revenues" means all gross charges (including surcharges, if any) received for, and
all other gross income and receipts derived by the District from, the ownership and operation of
the Sewer Enterprise or otherwise arising from the Sewer Enterprise, including but not limited to
(a) connection charges, (b) any amounts transferred to the Sewer Fund from a Rate Stabilization
Fund in accordance with Section 4.6 of the Installment Sale Agreement, and (c) investment
earnings on amounts held in the Sewer Fund or in any other fund established with respect to the
Sewer Enterprise. Gross Revenues does not include (i) refundable deposits made to establish
credit, (ii) the proceeds of any ad valorem property taxes, and (ill) the proceeds of any special
assessments or special taxes levied upon real property within any improvement district served
by the District for the purpose of paying special assessment bonds or special tax obligations of
the District relating to the Sewer Enterprise.
"Independent Accountant" means any 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 interest, direct or
indirect, with the District; and (c) is not 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.
\.,
"Informa~on Services" means Financial Information, Inc.'s "Daily Called Bond Service",
30 Montgomery Street, 10th Floor, Jersey District, New Jersey 07302, Attention: Editor; Kenny
Information Services' "Called Bond Service," 65 Broadway, 16th Floor, New York, New York
10006; 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, 3' 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 written request delivered to the Trustee.
"Installment Payment" means all payments required to be paid by the District on any
date under Section 4.4 of the Installment Sale Agreement, including any amounts payable upon
delinquent installments and including any prepayment thereof under Section 7.2 or 7.3 of the
Installment Sale Agreement.
"Installment Payment Date" means, with respect to any Interest Payment Date, the 5th
Business Day preceding such Interest Payment Date.
"Installment Payment Fund" means the fund by that name established and held by the
Trustee under Section 5.02.
"Installment Sale Agreement" means the Installment Sale Agreement, dated as of May 1,
2004, between the District and the Corporation, together with any duly authorized and
executed amendments thereto.
"Insurer" means XL Capital Assurance Inc. (XLCA), a New York stock insurance
company, including its successors, as issuer of the Certificate Insurance Policy and the Qualified
Reserve Fund Credit Instrument.
"Interest Payment Date" means, with respect to any Certificate, December 1, 2004, and
each June 1 and December 1 thereafter to and including the date of maturity or the date of
prepayment of such Certificate.
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"Maximum Annual Debt Service" means, as of the date of any calculation, the
maximum sum obtained for the current or any future Fiscal Year so long as any of the
Certificates remain Outstanding by totaling the following amounts for such Fiscal Year:
(a) the aggregate amount of the Installment Payments coming due and payable
in such Fiscal Year pursuant hereto, except to the extent payable from any
security deposit under Section 7.1 of the Installment Sale Agreement;
(b) the principal amount of all outstanding Parity Debt, if any, coming due and
payable by their terms in such Fiscal Year; and
(c) the amount of interest which would be due during such Fiscal Year on the
aggregate principal amount of all outstanding Parity Debt, if any, which
would be outstanding in such Fiscal Year if such Parity Debt are retired as
scheduled; provided, however, that with respect to any Parity Debt which
bear interest at an adjustable rate, such interest shall be calculated at an
assumed rate equal to the average rate of interest per annum for each of the
five previous whole calendar years as shown by the J. J. Kenny Index (or, in
the event and to the extent such index is not maintained for all or any
por~on of such period, any similar index of variable rate interest for tax-
exempt obligations as may be selected by the District in its sole discretion).
"Net Revenues" means, for any period, an amount equal to all of the Gross Revenues
received during such period, minus the amount required to pay all Adjusted Operation and
Maintenance Costs becoming payable during such period.
"Nominee" means (a) initially, Cede & Co. as nominee of DTC, and (b) any other
nominee of the Depository designated under Section 2.05(a).
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"Operation and Maintenance Costs" means the reasonable and necessary costs and
expenses paid by the District to maintain and operate the Sewer Enterprise, including but not
limited to (a) costs of treating wastewater, (b) costs of electricity and other forms of energy
supplied to the Sewer Enterprise, (c) the reasonable expenses of management and repair and
other costs and expenses necessary to maintain and preserve ~e Sewer Enterprise in good
repair and working order, and (d) the reasonable administrative costs of the District
attributable to the operation and maintenance of the Sewer Enterprise. Operation and
Maintenance Costs does not include (i) Debt Service payable on obligations incurred by the
District with respect to the Sewer Enterprise, including but not limited to the Installment
Payments and any Parity Debt, (ii) depreciation, replacement and obsolescence charges or
reserves therefor, and (ill) amortization of intangibles or other bookkeeping entries of a similar
nature.
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"Original Purchaser" means Morgan Stanley & Co. Incorporated, as original purchaser of
the Certificates at the competitive public sale thereof.
"Outstanding", when used as of any particular time with respect to Certificates, means
(subject to the provisions of Section 12.05) all Certificates theretofore executed and delivered
by the Trustee hereunder except (a) Certificates theretofore cancelled by the Trustee or
surrendered to the Trustee for cancellation; (b) Certificates paid and discharged in accordance
with Section 12.01, provided that, if such Certificates are to be prepaid prior to maturity, notice
of such prepayment shall have been given as provided in Section 4.03 or provision satisfactory
to the Trustee shall have been made for the giving of such notice; and (c) Certificates in lieu of or
in exchange for which other Certificates shall have been executed and delivered by the Trustee
under Section 2.08.
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"Overdue Rate" means the highest rate of interest represented by any of the
Outstanding Certificates.
"Owner", when used with respect to a Certificate, means the person in whose name the
ownership of such Certificate shall be registered on the Registration Books.
"Parity Debt Documents" means, collectively, the indenture of trust, trust agreement or
other document authorizing the issuance of any Parity Debt or any securities which evidence
Parity Debt.
"Pari~ Debt" means any bonds, notes, leases, installment sale agreements or other
obligations 0 the District payable from and secured by a pledge of and lien upon any of the
Net Revenues on a parity with the Installment Payments, entered into or issued under and in
accordance with Section 5.8 of the Installment Sale Agreement.
"Permitted Investments" means any of the following:
A. Direct obligations of the United States of America (including obligations issued
or held in book-entry form on the books of the Department of the Treasury, and
CATS and TIGRS) or obligations the principal of and interest on which are
unconditionally guaranteed by the United States of America.
B.
Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed
by any of the following federal agencies and provided such obligations are
backed by the full faith and credit of the Untied States of America (stripped
securities are only permitted if they have been stripped by the agency itself):
1. U.S. Export-Import Bank (Eximbank)
Direct obligations or fully guaranteed certificates of beneficial ownership
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2. Farmers Home Administration (FmHA)
Certificates of Beneficial Ownership
3. Federal Financing Bank
4. Federal Housing Administration Debentures (FHA)
5. General Services Administration
Participation Certificates
6. Government National Mortgage Association (GNMA or Ginnie Mae)
GNMA - guaranteed mortgage-backed bonds
GNMA - guaranteed pass-through obligations
(these obligations are not acceptable for certain cash-JIow sensitive
issues)
7. U.S. Maritime Administration
Guaranteed Title XI financing
8.
U.S. Department of Housing and Urban Development (HUD)
Project Notes
Local Authority Bonds
New Communities Debentures - U.S. government guaranteed debentures
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c.
u.s. Public Housing Notes and Bonds - U.S. government guaranteed
public housing notes and bonds
Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed
by any of the following federal agencies which are not backed by the full faith
and credit of the United States of America (stripped securities are only
permitted if they have been stripped by the agency itself):
1. Federal Home Loan Bank System
Senior debt obligations
2. Federal Home Loan Mortgage Coq>oration (FHLMC or Freddie Mac)
Participation Certificate
Senior debt obligations
3. Federal National Mortgage Association (FNMA or Fannie Mae)
Mortgage-backed securities and senior debt obligations
4. Student Loan Marketing Association (SLMA or Sallie Mae)
Senior debt obligations
5. Resolution Funding Corp. (REFCORP) obligations
6. Farm Credit System
Consolidated systemwide bonds and notes
Money market funds registered under the Federal Investment Company Act of
1940, whose shares are registered under the Federal Securities Act of 1933, and
having a rating by S&P of AAAm-G; AAA-m; or AA-m and if rated by Moody's
rated Aaa, Aa1 or Aa2, including funds for which the Trustee or its affiliates
provides investment advisory or other management services.
D.
E. Certificates of deposit secured at all times by collateral described in (A) and/or
(B) above. Such certificates must be issued by commercial banks, savings and
loan associations or mutual savings banks. The collateral must be held by a third
party and the bondholders must have a perfected first security interest in the
collateral.
F. Certificates of deposit, saviJ.:'lgs accounts, deposit accounts or money market
deposits which are fully insured by FDIC, including BIP and SAIF, including
those of the Trustee and its affiliates.
G. Investment Agreements, including GIC's, Forward Purchase Agreements and
Reserve Fund Put Agreements acceptable to XLCA.
H. Commercial paper rated, at the time of purchase, "Prime -1" by Moody's and
" A-1" or better by S&P.
L Bonds or notes issued by any state or municipality which are rated by Moody's
and S&P in one of the two highest rating categories assigned by such rating
agencies.
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J.
Federal funds or bankers acceptances with a maximum term of one year of any
bank which has an unsecured, uninsured and unguaranteed obligation rating of
"Prime -1" or "A3" or better by Moody's and "A-l" or "A" or better by S&P.
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K. Repurchase Agreements ("Repos") for 30 days or less must follow the following
criteria. Repos which exceed 30 days must be acceptable to XLCA (criteria
available upon request).
Repos provide for the transfer of securities from a dealer bank or securities firm
(seller/borrower) to a municipal entity (buyer/lender), and the transfer of cash from a
municipal entity 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 municipal entity in
exchange for the securities at a specified date.
1. Repos must be between the municipal entity and a dealer bank or
securities firm.
a. Primary dealers on the Federal Reserve reporting dealer list which
are rated A or better by S&P and A2 or better by Moody's, or
b. Banks rated" A" or better by S&P and A2 or better by Moody's.
2. The written repurchase agreement must include the following:
a. Securities which are acceptable for transfer are:
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(1)
Direct obligations of the United States of America referred
to in Section A above, or
(2) Obligations of federal agencies referred to in Section B
above
(3) Obligations of FNMA and FHLMC
b. The term of the Repos may be up to 30 days.
c. The collateral must be delivered to the municipal entity, trustee (if
trustee is not supplying the collateral) or third party acting as
. agent for the trustee is (if the trustee is supplying the collateral)
before/simultaneous with payment (perfection by possession of
certificated securities).
d. Valuation of Collateral.
(1) the securities must be valued weekly, marked-to-market at current
market price plus accrued interest.
(2)
The value of collateral must be equal to 104% of the amount of
cash transferred by the municipal entity 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 municipal entity, then additional cash
and/ or acceptable securities must be transferred. If, however, the
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securities used as collateral are FNMA or FHLMC, then the value
of collateral must equal 105%.
A legal opinion which must be delivered to the municipal entity
that states that the Repo meets guidelines under state law for legal
investment of public funds.
L. 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
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);
3.
M. The Local Agency Investment Fund of the State of California, created pursuant
to section 16429.1 of the California Government Code, to the extent the Trustee
is authorized to register such investment in its name. The Trustee may restrict
investments in the Local Agency Investment Fund if required to keep monies
available for the purposes of this Trust Agreement; and
N. Any other investment permitted in writing by the Insurer.
"Project Fund" means the fund by that name established and held by the Trustee under
Section 3.03.
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"Project Costs" means, with respect to the Sewer System Improvements, all costs of the
acquisition, construction and installation thereof which are paid from moneys on deposit in the
Project Fund, including but not limited to:
(a) all costs required to be paid to any person under the terms of any
agreement for or relating to the acquisition, construction and installation of
the Sewer System Improvements;
(b) obligations incurred for labor and materials in connection with the
acquisition, construction and installation of the Sewer System
Improvements;
(c) the cost of performance or other bonds and any and all types of insurance
that may be necessary or appropriate to have in effect in connection with
the acquisition, construction. and installation of the Sewer System
Improvements;
(d) all costs of engineering and architectural services, including the actual out-
of-pocket costs for test borings, surveys, estimates, plans and
specifications and preliminary investigations therefor, development fees,
sales commissions, and for supervising construction, as well as for the
performance of all other duties required by or consequent to the proper .
acquisition, construction and installation of the Sewer System
Improvements;
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(e) any sums required to reimburse the District for advances made for any of
the above items or for any other costs incurred and for work done which
are properly chargeable to the acquisition, construction and installation of
the Sewer System Improvements;
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(f) all financing costs incurred in connection with the acquisition, construction
and installation of such Sewer System Improvements; and
(g) the interest components of the Installment Payments during the period of
acquisition, construction and installation of the Sewer System
Improvements.
"Oualified Reserve Fund Credit Instrument" means the irrevocable debt service reserve
insurance policy issued on the Closing Date by the Insurer in an amount equal to the Reserve
Requirement.
"Rate Stabilization Fund" means any fund established and held by the District as a
fund for the stabilization of rates and charges imposed by the District with respect to the Sewer
Enterprise, which fund is established, held and maintained in accordance with Section 4.6 of
the Installment Sale Agreement.
"Rating Ageno/' means, as of any date, each nationally-recognized municipal bond
rating agency which then maintains a rating on the Certificates.
"Record Date" means the close of business on the 15th day of the month preceding each
Interest Payment Date, whether or not such 15th day is a Business Day.
"Registration Books" means the records maintained by the Trustee under Section 2.11
for registration of the ownership and transfer of ownership of the Certificates.
"Reserve Fund" means the fund by that name established and held by the Trustee under
Section 3.04.
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"Reserve Requirement" means, as of the date of calculation, an amount equal to the
maximum amount of Installment Payments payable by the District under the Installment Sale
Agreement in the current or any future Fiscal Year.
"Securities Depositories" means The Depository Trust Company; and, in accordance
with then current guidelines of the Securities and Exchange Commission, such other addresses
and/ or such other securities depositories as the District may designate in a written request of
the District delivered to the Trustee.
"Sewer Enterprise" means the entire system of the District for the collection, storage,
treatment and disposal of wastewater within the service area of the District, including but not
limited to all facilities, properties, lands, rights, entitlements and other property useful in
connection therewith, together with all extensions thereof and improvements thereto at any time
acquired, constructed or installed by the District.
"Sewer Fund" means the fund or funds established and held by the District with respect
to the Sewer Enterprise for the receipt and deposit of Gross Revenues.
"Sewer System Improvements" means the facilities, improvements and other property
described more fully in Appendix B attached to the Installment Sale Agreement, as that
Appendix may be amended from time to time in accordance with the Installment Sale
Agreement.
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"S&P" means Standard & Poor's Corporation, its successors and assigns.
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"Tax Code" means the Internal Revenue Code of 1986 as in effect on the Closing Date or
(except as otherwise referenced herein) as it may be amended to apply to obligations issued on
the Oosing Date, together with applicable proposed, temporary and final regulations
promulgated, and applicable official guidance published, under the Tax Code.
"Term" means, when used with respect to the Installment Sale Agreement, the time
during which the Installment Sale Agreement is in effect, as provided in Section 4.2 thereof.
"Trust Agreement" means this Trust Agreement, together with any amendments or
supplements hereto permitted to be made hereunder.
"Trust Office" means, with respect to the Trustee, the corporate trust office of the
Trustee at its address set forth in Section 12.02; provided, however, that for purposes of the
payment, prepayment, cancellation, surrender, transfer or exchange of certificates, such term
meant the corporate trust office of the Trustee located in San Francisco, California or at such
other or additional offices as may be specified by the Trustee in writing to the District.
"Trustee" means BNY Western Trust Company, or any successor thereto acting as
Trustee pursuant hereto.
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APPENDIX B
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[FORM OF CERTIFICATE OF PARTICIPATION]
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.........$
.........
SEWER REVENUE CERTIFICATE,
SERIES 2004
Evidencing the Direct, Undivided Fractional Interest of the
Owner Hereof in Installment Payments to be Made by the
SOUTH TAHOE PUBLIC UTILITY DISTRICT,
SOUTH LAKE TAHOE, CALIFORNIA
.As the Purchase Price For Certain Property Pursuant to an
Installment Sale Agreement with the
Public Property Financing Corporation of California
RATE OF INTEREST: MATURITY DATE:
ORIGINAL ISSUE DATE:
May 20, 2004
CUSIP:
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT:
DOLLARS
TInS IS TO CERTIFY THAT the Registered Owner identified above, or registered
assigns, as the registered owner (the "Registered Owner") of this Certificate of Participation
(this "Certificate") is the owner of a direct, undivided fractional interest in Installment
Payments (the "Installment Payments") payable by the South Tahoe Public Utility District, a
public utility district duly organized and existing under the laws of the State of California (the
"District") under an Installment Sale Agreement dated as of May 1, 2004, (the "Installment Sale
Agreement") by and between the District and the Public Property Financing Corporation of
California, a nonprofit public benefit corporation duly organized and existing under the laws of
the State of California (the "Corporation"), as the purchase price for certain property which is
to be used in the wastewater collection, treatment and disposal system of the District (the
''Wastewater System"). The Installment Payments and certain other rights and interests under
the Installment Sale Agreement have been assigned to BNY Western Trust Company, as trustee
(the "Trustee"), having a corporate trust office in San Francisco, California (the "Trust Office").
The Registered Owner of this Certificate is entitled to receive, subject to the terms of the
Installment Sale Agreement, on the Maturity Date identified above, or any earlier prepayment
date, the Principal Amount identified above representing a direct, undivided fractional share of
the portion of the Installment Payments designated as principal, and to receive on June 1 and
December 1 of each year commencing December 1, 2004 (the "Interest Payment Dates") until
payment in full of said principal, the Registered Owner's direct, undivided fractional share of
the Installment Payments designated as interest coming due during the interest period
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immediately preceding each of the Interest Payment Dates. Interest represented hereby shall be
payable from the Interest Payment Date next preceding the date of execution of this Certificate
unless (a) this Certificate is executed after the close of business on the fifteenth (15th) day of the
month immediately preceding an Interest Payment Date and on or before such Interest Payment
Date, in which event interest shall be payable from such futerest Payment Date, or (b) unless
this Certificate is executed on or before November 15, 2004, in which event interest shall be
payable from the Original Issue Date identified above. The Registered Owner's share of the
portion of the Installment Payments designated as interest is the result of the multiplication of
the aforesaid share of the portion of the Installment Payments designated as principal by the
Rate of futerest per annum identified above, calculated on the basis of a 360-day year
comprised of twelve 30-day months. Principal and prepayment premium (if any) represented
hereby is payable in lawful money of the United States of America upon surrender hereof at the
Trust Office of the Trustee. futerest represented hereby is payable by check mailed by first class
mail by the Trustee on each Interest Payment Date to the Registered Owner at such Owner's
address as it appears on the registration books of the Trustee as of the close of business on the
fifteenth (15th) day of the preceding month; provided, however, that at the written request of the
owner of Certificates in an aggregate principal amount of at least $1,000,000, which written
request is on file with the Trustee as of the fifteenth (15th) day of the month preceding an
futerest Payment Date, interest represented by such Certificates shall be paid on such Interest
Payment Date by wire transfer in immediately available funds to such account within the
United States of America as shall be specified in such request.
This Certificate has been executed and delivered by the Trustee pursuant to the terms of
a Trust Agreement dated as of May 1, 2004, by and among the Trustee, the Corporation and
the District (the "Trust Agreement"). The District has certified that it is authorized to enter
into the Installment Sale Agreement and the Trust Agreement under the laws of the State of
California, for the purpose of financing the acquisition, construction and improvement of
. properties used for the public purposes of the District relating to the Sewer Enterprise.
Reference is hereby made to the Installment Sale Agreement and the Trust Agreement (copies of
which are on file at the Trust Office of the Trustee) for a description of the terms on which the
Certificates are delivered, the rights thereunder of the owners of the Certificates, the rights,
duties and immunities of the Trustee and the rights and obligations of the District under the
Installment Sale Agreement, to all of the provisions of the Installment Sale Agreement and the
Trust Agreement the Registered Owner of this Certificate, by acceptance hereof, assents and
agrees.
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The District is obligated under the Installment Sale Agreement to pay the Installment
Payments from the Net Revenues of the Sewer Enterprise (as such terms are defined in the
Installment Sale Agreement). The obligatioI.1 of the District to pay the Installment Payments
does not constitute an obligation of the District for which the District is obligated to . levy or
pledge any form of taxation or for which the District has levied or pledged any form of
taxation. The obligation of the District to pay the Installment Payments does not constitute a
debt of the District, the State of California or any of its political subdivisions, and does not
constitute an indebtedness within the meaning of any constitutional or statutory debt limitation
or restriction.
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The Certificates maturing on or before June 1, 2012, are not subject to optional
prepayment prior to the respective stated maturities. The Certificates maturing on or after Jtme
1, 2013, are subject to optional prepayment in whole on any date on or after June 1, 2012, or in
part, from prepayments of the Installment Payments made at the option of the District
pursuant to the Installment Sale Agreement, at a prepayment price (expressed as percentages of
the principal amount of Certificates or portions thereof to be prepaid) set forth in the following
table, in each case with accrued interest represented thereby to the prepayment date:
Prepayment
Dates
June 1, 2012 through May 31, 2013
June 1, 2013 and thereafter
Prepayment
Price
101%
100
The Certificates are subject to mandatory prepayment on any Interest Payment Date, in
whole, or in part among maturities on a pro rata basis and by lot within a maturity, from the
net proceeds of insurance, sale or condemnation proceedings with respect to the Wastewater
System which are credited towards the prepayment of the Installment Payments pursuant to
the Installment Sale Agreement, at a prepayment price equal to 100% of the principal amount to
be prepaid, together with accrued interest represented thereby to the date fixed for prepayment,
without premi~
As provided in the Trust Agreement, notice of prepayment shall be mailed by the
Trustee by first class mail, postage prepaid, not less than thirty (30) nor more than sixty (60)
days before the prepayment date, to the registered owners of the Certificates to be prepaid, but
neither failure to receive such notice nor any defect in the notice so mailed shall affect the
sufficiency of the proceedings for prepayment or the cessation of accrual of interest represented
thereby. If this Certificate is called for prepayment and payment is duly provided therefor as
specified in the Trust Agreement, interest represented hereby shall cease to accrue from and
after the date fixed for prepayment.
This Certificate is transferable by the Registered Owner hereof, in person or by his
attorney duly authorized in writing, at the Trust Office of the Trustee, but only in the manner,
subject to the limitations and upon payment of the charges, if any, provided in the Trust
Agreement and upon surrender and cancellation of this Certificate. Upon such transfer a new
Certificate or Certificates, of authorized denomination or denominations, representing the same
aggregate principal amount and representing the same rate of interest, will be delivered to the
transferee in exchange herefor. The District, the Corporation and the Trustee may treat the
Registered Owner hereof as the absolute owner hereof for all purposes, whether or not this
Certificate shall be overdue, and the District, the Corporation and the Trustee shall not be
affected by any notice to the contrary.
To the extent and in the manner permitted by the terms of the Trust Agreement, the
provisions of the Trust Agreement may be amended by the parties thereto with the written
consent of the owners of a majority in aggregate principal amount of the Certificates then
outstanding, and may be amended without such consent under certain circumstances; provided
that no such amendment shall extend the fixed maturity of any Certificate or reduce the interest
or principal represented thereby, without the express consent of the owner of such Certificate.
The District has certified, recited and declared that all things, conditions and acts
required by the laws of the State of California, the Installment Sale Agreement and the Trust
Agreement to exist, to have happened and to have been performed precedent to and in the
delivery of the Certificates, do exist, have happened and have been performed in due time, form
and manner as required by law.
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The Trusteeis sole obligations are to administer the various funds and accounts
established under the Trust Agreement and to perform the other duties expressly imposed upon
it under the Trust Agreement, and the Trustee has no obligation or liability to make payment
with respect to the Certificates except from amounts on deposit for such purpose with the
Trustee.
IN WITNESS WHEREOF, this Certificate has been executed and delivered by BNY
Western Trust Company, as trustee, acting pursuant to the Trust Agreement.
Execution Date:
BNY WESTERN TRUST COMPANY, as
Trustee
By:
Authorized Signatory
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STATEMENT OF INSURANCE
XL Capital Assurance Inc. ("XLCA"), New York, New York, has delivered its municipal
bond insurance policy (the "Policy") with respect to the scheduled payments due of principal of
and interest on this Certificate to BNY Western Trust Company, San Francisco, California or its
successor, as paying agent (the ''Paying Agent") for the South Tahoe Public Utility District
Sewer Revenue Certificates, Series 2004. Said Policy is on file and available for inspection at
the principal office of the Paying Agent and a copy thereof may be obtained from XLCA or
the Paying Agent.
ASSIGNMENT
For value received the undersigned doe es) hereby sell, assign and transfer unto
(Name, Address and Tax Identification or Social Security Number of Assignee)
the within registered Certificate 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 Commission 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.
B-5
South Tahoe Public Utility District
'- ~l Dorado County, California
Sewer Revenue Certificates of Participation, Series 2004
$15,000,000
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Sale Date: May 5, 2004
Bartle Wells Associates
Official Statement
ADDENDUM - CUSIP FOR 2009 MATURITY CORRECTED TO 840506 BF5
South Tahoe Public Utility District )X~CAPltt\L ASSURANCE'
$15,000,000 Sewer Revenue Certificates of Participation
Series 2004
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Certificates Dated: As of the date of delivery
Book Entry Only
Due: June 1, as shown below
Bond Ratings:
Tax Exemption:
Insurance:
Redemption:
Security:
Purpose:
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Interest Payment Dates:
Closing:
Denominations:
Trustee:
Bond Counsel:
Financial Advisor:
District Counsel:
Insured
Underlying
Standard & Poor's: AAA
Standard & Poor's: A+
Fitch Ratings: AAA
Fitch Ratings: AA
Interest on the Certificates is excluded from gross income for federal income tax
purposes and is exempt from State of California personal income taxes. Page 26.
The scheduled payment of principal of and interest on the Certificates when due will be
guaranteed under an insurance policy to be issued concurrently with the delivery of the
Certificates by XL Capital Assurance Inc. Page 7.
The Certificates are subject to redemption prior to their stated date of maturity. Page 2.
The Certificates are special obligations of the District, payable solely from net revenues of
the Sewer Enterprise Fund, as defined in the installment sale agreement, by and between
the District and Trustee. Net revenues consist generally of all revenues after payment
of adjusted operation and maintenance expenses. Adjusted operation and maintenance
expenses-.are defined herein. Neither the full faith and credit nor the taxing power of the
District is pledged to the payment of the Certificates or interest thereon. Page 5.
The Certificates will be used for to :finai1ce the construction of sewer system improvements,
fund a reserve fund, purchase bond insurance, and pay issuance costs. Page 3.
June 1 and December 1, beginning December 1, 2004.
On or about May 20, 2004.
$5,000 or multiple thereof.
BNY Western Trost Company, 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 CUSIP Year Principal Interest CUSIP
(JWle 1) Amonnt Rate Yield 840506 (JWle 1) AmOWlt Rate Yield 840506
2005 $530,000 3.250% 1.400% BB4 2015 $ 730.000 4.250% 4.250% BMO
2006 560,000 3.250% 1.900% BC2 2016 760.000 4.375% 4.375% BN8
2007 570.000 3.250% 2.400% BDO 2017 790.000 4.500% 4.500% BP3
2008 580,000 3.250% 2.800% BE8 2018 825.000 4.600% 4.600% BQ1
2009 595.000 3.250% 3.150% BF5 2019 860,000 4.700% 4.700% BR9
2010 610,000 3.400% 3.400% BG3 2020 900,000 4.750% 4.750% BS7
2011 630,000 3.700% 3.700% BH1 2021 940,000 4.750% 4.800% BT5
2012 650,000 3.900% 3.900% BJ7 2022 . 985,000 4.800% 4.850% BU2
2013 675,000 4.000% 4.000% BK4 2023 1,030,000 4.875% 4.875% BVO
2014 700,000 4.100% 4.100% BL2 2024 1,080,000 4.875% 4.875% BW8
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 purposes of compliance with Rule 15c2-12 of the Securities
and Exchange Commission.
... This official statement is dated May 5,2004.
Morgan Stanley DW Inc.
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South Tahoe Public Utility District >X4bCAPITAL ASSURANCE'
$15,000,000 Sewer Revenue Certificates of Participation
Series 2004
Certificates Dated: As of the date of delivery
Book Entry Only
Due: June 1, as shown below
Bond Ratings:
Tax Exemption:
Insurance:
Redemption:
Security:
Purpose:
\.,
Interest Payment Dates:
Closing:
Denominations:
Trustee:
Bond Counsel:
Financial Advisor:
District Counsel:
Insured
Underlying
Standard & Poor's: AAA
Standard & Poor's: A+
Fitch Ratings: AAA
Fitch Ratings: AA
Interest on the Certificates is excluded from gross income for federal income tax
purposes and is exempt from State of California personal income taxes. Page 26.
The scheduled payment of principal of and interest on the Certificates when due will be
guaranteed under an insurance policy to be issued concurrently with the delivery of the
Certificates by XL Capital Assurance Inc. Page 7.
The Certificates are subject to redemption prior to their stated date of maturity. Page 2.
The Certificates are special obligations of the District, payable solely from net revenues of
the Sewer Enterprise Fund, as defmed in the installment sale agreement, by and between
the District and Trustee. Net revenues consist generally of all revenues after payment
of adjusted operation and maintenance expenses. Adjusted operation and maintenance
expenses are defmed herein. Neither the full faith and credit nor the taxing power of the
District is pledged to the payment of the Certificates or interest thereon. Page 5.
The Certificates will be used for to finance the construction of sewer system improvements,
fund a reserve fund, purchase bond insurance, and pay issuance costs. Page 3.
June 1 and December 1, beginning December 1,2004.
On or about May 20, 2004.
$5,000 or multiple thereof.
BNY Western Trust Company, 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 CUSIP Year Principal Interest CUSIP
(June 1) Amount Rate Yield 840506 (June 1) Amount Rate Yield 840506
2005 $530,000 3.250% 1.400% BB4 2015 $ 730,000 4.250% 4.250% BMO
2006 560,000 3.250% 1.900% BC2 2016 760,000 4.375% 4.375% BN8
2007 570,000 3.250% 2.400% BDO 2017 790,000 4.500% 4.500% BP3
2008 580,000 3.250% 2.800% BE8 2018 825,000 4.600% 4.600% BQl
2009 595,000 3.250% 3.150% BE5 2019 860,000 4.700% 4.700% BR9
2010 610,000 3.400% 3.400% Bm 2020 900,000 4.750% 4.750% BS7
2011 630,000 3.700% 3.700% BHl 2021 940,000 4.750% 4.800% BT5
2012 650,000 3.900% 3.900% BJ7 2022 985,000 4.800% 4.850% BU2
2013 675,000 4.000% 4.000% BK4 2023 1,030,000 4.875% 4.875% BVO
2014 700,000 4.100% 4.100% BL2 2024 1,080,000 4.875% 4.875% BW8
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 purposes of compliance with Rule 15c2-12 of the Securities
and Exchange Commission.
~
This official statement is dated May 5, 2004.
Morgan Stanley DW Inc.
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South Tahoe Public Utility District
provides water and wastewater services in
and around the City of South Lake Tahoe,
California. The District serves
approximately 13,000 water customers and
17,000 wastewater customers. The District
is located about 100 miles east of
Sacramento, California, the state capital,
and 50 miles south of Reno, Nevada. The
District's service area encompasses about
42 square miles and borders the southern
shore of Lake Tahoe.
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Nevada
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South Lake Tahoe
l
California
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Official Statement
SOUTH TAHOE PUBLIC UTILITY DISTRICT
1275 Meadow Crest Drive
South Lake Tahoe, California 96150
Organized September 28, 1950
Board of Directors
Jim Jones, President
Eric Schafer, Vice President
Thomas Comte, Director
Mary Lou Mosbacher, Director
Duane Wallace, Director
District Staff
Richard H. Solbrig, General Manager
Rhonda McFarlane, Chief Financial Officer
Kathy Sharp, Clerk of the Board
Professional Services
Hatch and Parent, Santa Barbara, District Counsel
Jones Hall, A Professional Law Corporation, San Francisco, Bond Counsel
Bartle Wells Associates, Berkeley, Financial Advisor
BNY Western Trust Company, San Francisco, Trustee
This official statement provides information about the District and the Certificates. The
official statement includes:
I. 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 Certificates or any other previous debt of the District.
CONTENTS
"""
In tro d u ctio n ..................... ............... ....... ..... ....... 1
The Certificates .................................................2
Description ofthe Certificates ............................ 2
Purpose of the Certificates .................................. 3
Construction Program ...... .................... ............... 3
Sources and Uses of Funds ................................. 3
Installment Payment Schedule............................ 4
Security for the Certificates ............................. 5
Flow of Funds ......... ..... .... ................ ....... ............ 5
Rate Covenant .... ....... ....... ...... ............ ................. 5
Revenue Certificate Coverage Covenant............ 6
Reserve Account .................................................6
Issuance of Parity Debt ....................................... 6
Certificate Insurance Policy................................ 7
The District ........................................................ 8
District Sewer System......................................... 8
Infrastructure Improvements............................... 9
District Sewer Finances .................................. 10
Financial Statements of Sewer Enterprise ........ 10
Budget for 2003/04 ...........................................14
Financial Performance in Current Fiscal Year.. 15
Sewer Rates and Charges.................................. 16
Property Tax Revenues ..................................... 17
Comparison of Average Monthly Sewer Bills.. 18
Outstanding Debt .............................................. 18
Debt Service Coverage ..................................... 18
Management Discussion ................................... 20
Constitutional Limitations on Appropriations
and Charges ..................................................... 22
Article XIIIA..................... ....... .......... ... ............22
Article XIIIB ..................................................... 22
Articles XIIIC and XIIID.................................. 23
Risk Factors ..................................................... 25
General.............................................................. 25
Initiatives........................................................... 25
The Teeter Plan................................................. 25
Property Taxes ................... ...............................25
Concluding Information ................................. 26
Continuing Disclosure...... ...................... ...........26
Legal Matters.................................................... 26
Tax Matters ........ .......................... ............ ......... 26
Absence of Litigation........................................ 28
Ratings .............................................................. 28
Miscellaneous.................................................... 28
APPENDIX A - Summary Of Principal Legal
Documents
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
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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 Certificates will be used to fmance the construction of sewer
system improvements, fund a reserve fund, purchase bond insurance, and pay costs of
issuance incurred in connection with the issuance of the Certificates. The District
intends to fund the reserve fund through the purchase of a reserve surety bond.
Security: The Certificates are special obligations of the District, payable solely from net
revenues ofthe Sewer Enterprise Fund. Net revenues consist generally of all revenues
after the payment of adjusted operation and maintenance costs. Adjusted operation and
maintenance costs are operation and maintenance costs less property taxes received by
the District which are deposited in the District's Sewer Enterprise Fund.
The District shall fix, prescribe, revise, and collect rates and charges for the sewer system
during each fiscal year, which are at least sufficient, after making allowances for
contingencies and error in estimates, to:
. pay adjusted operation and maintenance costs, installment payments on the
Certificates, principal and interest on any parity debt, and any obligations of the
District which are payable from gross or net revenues of the sewer system; and
. yield net revenues equal to at least 120 percent of the installment payments on the
Certificates and payments on any parity debt.
A reserve account will be established from the Certificate proceeds or a surety bond and
will be held and maintained by the trustee. 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 payment of operating costs and installment
payments) in the Sewer Enterprise Fund to the trustee for deposit to the reserve account.
Finances: Sewer service charges are the largest source of revenue for the Sewer
Enterprise Fund. The 2003/04 budget approved by the Board of Directors for the Sewer
Enterprise Fund estimates total operating and nonoperating revenue to be $14.5 million of
which $8.2 million would be from sewer service charges. The Sewer Enterprise Fund is
also entitled to receive property tax revenues. The property tax revenues allocated to the
District are presently protected from reduction or reallocation by special state legislation.
Property tax revenues are expected to be $4.4 million in the 2003/04 fiscal year. The
Board has the authority to establish sewer rates and charges and connection fees.
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 andfrom the District thereafter.
1
THE CERTIFICATES
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Description of the Certificates
Name: South Tahoe Public Utility District
$15,000,000 Sewer Revenue Certificates of Participation
Series 2004
Dated: As of the date of delivery
Denomination: $5,000 or multiple thereof.
Maturities: June 1,2005 through 2024.
Interest: Interest is payable June I and December I of each year to the respective dates
of maturity of the Certificates beginning December 1,2004.
Payment: The Certificates will be executed, sold, and delivered in fully registered form,
without coupons. The Certificates will be registered in the name of Cede & Co., as nom-
inee of the Depository Trust Company ("DTC"), New York, New York, as the initial
securities depository for the Certificates. Ownership interests in the Certificates may be
purchased in book-entry form only. Purchasers of the Certificates will not receive
Certificates representing their ownership interests in the Certificates purchased. Principal
and interest payments with respect to the Certificates are payable directly to DTC by the ~
trustee. Upon receipt of payments of principal and interest, DTC will in turn distribute
such payments to the beneficial owners of the Certificates. See Appendix F.
Optional Redemption: The Certificates maturing on or before June 1,2012 are not
subject to optional redemption prior to maturity. The Certificates maturing on or after
June I, 2013 are subject to redemption at the option of the District on any date on or after
June I, 2012, 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 Certificates to be redeemed
together with a premium (expressed as a percentage of the principal amount of the
Certificates to be redeemed) as set forth following, plus accrued interest to the date of
redemption:
Redemption Dates
Premium
June 1,2012 through May 31, 2013 ........................................................................... 1%
June 1, 2013 and thereafter ....... .................... ............................................ .................. 0%
Redemption from Net Proceeds oflnsurance or Condemnation: The Certificates 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.
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Purpose of the Certificates
Proceeds of the Certificates will be used to finance the construction of sewer system
improvements, fund a reserve fund (in the form of either cash or a qualified surety bond),
and pay costs of issuance incurred in connection with the issuance of the Certificates.
Construction Program
The construction program funded by the Certificates consists of the preparation of planning
documents, projects to improve the collection system, pumping stations, recycled water
system, and treatment plant, and engineering. The Certificates will fund approximately 90
percent of the construction program; the remainder will be funded with District capital
reserves.
The single largest project included in the construction program is an upgrade to the
District's recycled water export system, through which all sewer treatment plant effluent is
exported out of the Lake Tahoe watershed as required by state mandate.
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Planning documents ......... ........ ........ ........ ........ ........ ........ ........ .......................... $2,125,000
Collection system improvements ..... ........ ........ ........ ........ ........ ....... ................... 1,725,000
Pump station improvements.................................................................................. 995,000
Recycled water system improvements ..... ........ ........ ................ .......................... 7,140,000
Treatment plant improvements ........ ........ ........ ........ ........ .................................. 3,495,000
Other improvements........................................................................................... 200,000
Engineering (in-house)....................................................................................... 740.000
Total construction program............................................................................... .$16,420,000
Sources and Uses of Funds
The following table sets forth the anticipated allocation of proceeds of the Certificates.
Sources
Par amount of Certificates ....... ........ ........ .......... ...... ............. ............................ $15,000,000
Original issue premium..................................................................................... 40.327
Total sources .... ........ ........ ........ ........ ........ ........ ................................................. $15,040,327
Uses
Project fund....................................................................................................... .$14,710,000
Underwriter's discount....................................................................................... 152,827
Bond insurance premium. ........ ........ ........ .......................................................... 35,591
Reserve surety bond premium ........................................................................... 11,823
Issuance costs and contingency.............. ......... ................................................. 130.086
Total uses.......................................................................................................... $15,040,327
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The project fund will be used to fund construction of several sewer system
improvements, including the preparation of planning documents, and improvements to
the collection system, pumping station, recycled water system, and treatment plant.
3
The reserve account will be funded from Certificate proceeds in an amount equal to the
reserve requirement in the form of either cash or a qualified surety bond. Any deficiency
in the reserve account shall be replenished from net revenues.
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Certificate 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 1,2005 shall be
transferred by the trustee to the project fund.
Installment Payment Schedule
The following table shows the principal and interest payments for the Certificates for each
fiscal year.
South Tahoe Public Utility District
$15,000,000 Sewer Certificates of Participation, Series 2004 Installment Payments
Fiscal Year December 1 June 1 Fiscal Year
Ending June 30 Interest Principal Interest Subtotal Debt Service Coupon
2005 335,828.40 $530,000.00 316,487.50 846,487.50 1,182,315.90 3.250%
2006 307,875.00 560,000.00 307,875.00 867,875.00 1,175,750.00 3.250%
2007 298,775.00 570,000.00 298,775.00 868,775.00 1,167,550.00 3.250%
2008 289,512.50 580,000.00 289,512.50 869,512.50 1,159,025.00 3.250%
2009 280,087.50 595,000.00 280,087.50 875,087.50 1,155,175.00 3.250%
2010 270,418.75 610,000.00 270,418.75 880,418.75 1,150,837.50 3.400% .J
2011 260,048.75 630,000.00 260,048.75 890,048.75 1,150,097.50 3.700%
2012 248,393.75 650,000.00 248,393.75 898,393.75 1,146,787.50 3.900%
2013 235,718.75 675,000.00 235,718.75 910,718.75 1,146,437.50 4.000%
2014 222,218.75 700,000.00 222,218.75 922,218.75 1,144,437.50 4.100%
2015 207,868.75 730,000.00 207,868.75 937,868.75 1,145,737.50 4.250%
2016 192,356.25 760,000.00 192,356.25 952,356.25 1,144,712.50 4.375%
2017 175,731.25 790,000.00 175,731.25 965,731.25 1,141,462.50 4.500%
2018 157,956.25 825,000.00 157,956.25 982,956.25 1,140,912.50 4.600%
2019 138,981.25 860,000.00 138,981.25 998,981.25 1,137,962.50 4.700%
2020 118,771.25 900,000.00 118,771.25 1,018,771.25 1,137,542.50 4.750%
2021 97,396.25 940,000.00 97,396.25 1,037,396.25 1,134,792.50 4.750%
2022 75,071.25 985,000.00 75,071.25 1,060,071.25 1,135,142.50 4.800%
2023 51,431.25 1,030,000.00 51,431.25 1,081,431.25 1,132,862.50 4.875%
2024 26.325.00 1.080.000.00 26.325.00 1.106.325.00 1.132.650.00 4.875%
Total $3,990,765.90 $15,000,000.00 $3,971,425.00 $18,971,425.00 $22,962,190.90
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SECURITY FOR THE CERTIFICATES
The Certificates are special obligations of the District, payable from and secured by a
first pledge of and lien on the net revenues of the Sewer Enterprise Fund. Net revenues
consist generally of all revenues (including connection fees) after the payment of adjusted
operation and maintenance costs. Adjusted operation and maintenance costs are
operation and maintenance costs less property taxes received by the District which are
deposited in the District's Sewer Enterprise Fund. Neither the full faith and credit nor the
taxing power of the District is pledged to the payment of the Certificates or the interest
thereon, although property taxes do form a portion of the District's revenues available for
payment of operation and maintenance costs.
Flow of Funds
The District covenants and agrees that all gross revenues received by the District,
including property tax revenues, will be deposited in the Sewer Enterprise Fund, which
the District agrees to maintain so long as any of the Certificates remain outstanding. All
moneys in the Sewer Enterprise Fund shall be used in the following order:
all operation and maintenance costs of the sewer system, estimated by the District
to become due and payable;
installment payments on the Certificates and all payments of principal of and
interest on parity debt;
to the trustee the amount of any deficiency in the reserve fund established for the
Certificates and in any reserve fund established for parity debt;
any other payments required to comply with the provisions of the installment sale
agreement and any parity debt documents; and
surplus and applied for any lawful purpose
;
(i)
(ii)
~ (iii)
(iv)
(v)
In the installment sale agreement, the installment payment fund, as a special fund, is
created as a special account. The installment payment fund and reserve account shall be
held and maintained by the trustee.
Rates and Charges
In the installment sale agreement, the District agrees to fix, prescribe, revise, and
collect rates and charges for the sewer system, when added to property taxes estimated to
be received by the District 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 sewer system, estimated by the District
to become due and payable in such fiscal year
(ii) installment payments on the Certificates
(iii) all other payments required by the installment sale agreement and the instruments
pursuant to any parity debt related to the sewer system
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(iv) all payments required to meet any other obligations of the District, which are pay- .. ..,a
able from gross or net revenues of the sewer system. ~
Revenue Certificate Coverage Covenant
The District shall fix, prescribe, revise, and collect rates and charges for the sewer system
and collect property taxes during each fiscal year that are sufficient to yield net revenues
equal to at least 120 percent of the installment payments on the Certificates in such fiscal
year.
Reserve Account
Pursuant to the trust agreement, a reserve account will be established from the Certificate
proceeds or a surety bond and will be held and maintained by the trustee. The reserve
requirement is an amount equal to the lesser of maximum annual installment payment on
the Certificates, 10 percent of the principal amount of the Certificates, or 125 percent of
average annual installment payment on the Certificates. If the balance in the reserve
account exceeds the reserve requirement, the trustee will transfer the excess to the
installment payment fund at least semiannually, prior to each interest payment date.
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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 installment payment) in the Sewer Enterprise Fund to the
trustee for deposit to the reserve account.
The District will satisfy the reserve requirement by delivering to the trustee a qualified
surety bond, as described and defined in the trust agreement. The trustee is entitled to
draw upon the surety bond when required to make transfers from the reserve account to
the installment payment fund. XL Capital Insurance will issue on the closing date a
Municipal Bond Debt Service Reserve Insurance Policy.
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Issuance of Parity Debt
The District may issue parity bonds, loans, advances, or indebtedness payable from net
revenues from the sewer system provided that the District is in compliance with all cov-
enants of the installment sale agreement and that net revenues are at least equal to 120
percent of the maximum annual debt service on all debt to be outstanding, and that a
reserve account has been established for the parity debt.
The calculated net revenues may include an allowance for net revenues from any
additions or improvements to or extensions of the sewer system to be made by the
District during the 36 month period following the issuance of such parity debt, in an
amount equal to 100% of the estimated additional average annual net revenues to be
derived from all properties which are improved with a structure the construction of which
has been completed prior to the date of issuance of such parity debt and to which service
will be provided by such additions, improvements and extensions, all as shown by the
certificate or opinion of a financial consultant.
The calculated net revenues may also include an allowance for net revenues arising from
any increase in the charges made for service from the sewer system which has become
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effective prior to the incurring of such parity debt but which, during all or any part of the
most recent completed fiscal year for which audited financial statements of the District
are available, or for any more recent consecutive 12-month period selected by the
District, was not in effect, in an amount equal to the total 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 12-month period, all as shown by the certificate or opinion
of a financial consultant.
The calculated net revenues are less any transfer made to the Sewer Enterprise Fund from
the Rate Stabilization Fund during such 12-month period. .
The calculated net revenues may, at the option of the District, also include an allowance
for earnings due to any increase in sewer charges that 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.
Certificate Insurance Policy
Concurrently with the execution and delivery of the Certificates, XL Capital Assurance
Inc. will issue its Municipal Bond Insurance Policy (the "Policy") for the Certificates.
The insurance policy guarantees the scheduled payment of principal of and interest on the
Certificates when due as set forth in the form of the policy included in Appendix G to this
official statement. Information provided by the insurer is included in Appendix G.
7
THE DISTRICT
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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 receives 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.
District Sewer System
The District's sewer system collects and
treats wastewater, and exports all
treatment plant effluent as recycled water
out of the Lake Tahoe drainage basin.
Table I shows annual sewer flows for
1998/99 through 2002/03. Although
population within the District has grown
and over 700 sewer permits have been
issued over this time period, sewer flows
have gradually decreased due to water
conservation efforts.
Table 1 . South Tahoe Public Utility District
Sewer Flows, 1999-2003
(millions of gallons)
1998/99
1999/00
2000/01
2001/02
2002/03
1,792
1,728
1,663
1,642
1,584
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Source: South Tahoe Public Utility District
Laboratory Department
Approximately 420 miles of sewer lines
and a network of 39 lift stations connect
over 17,000 connections to the District's treatment plant. All influent is treated through
advanced secondary treatment, and all effluent complies with the strict California Title 22
regulations qualifying it as recycled water for all uses except human consumption. Permitted
treatment capacity of the treatment plant is 7.7 million gallons per day. The Lake Tahoe
region's seasonal tourism results in wide fluctuations in daily wastewater flows.
The District, like all sewer collection and treatment agencies within the Lake Tahoe
drainage basin, is required by state law to discharge treatment plant effluent outside of
the Lake Tahoe drainage basin, to prevent the flow of any treated water back into the
lake. To comply with this requirement, the District uses a 26-mile export pipe, which
pumps recycled water produced at the treatment plant to the District-owned and -
operated Harvey Place Dam and Reservoir in neighboring Alpine County. After a limited
period of storage in the Harvey Place Reservoir, recycled water is used for irrigation on
property used for cattle grazing.
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Sewer Customers
Table 2 summarizes the District's sewer
customers. In 2003, the District had
17,429 sewer customers, mostly single
family residential.
Table 2 . South Tahoe Public Utility District
Sewer Customers, 2003
Single family residential
Multi-family residential
Non-residential
Total
The District's ten largest sewer customers
are listed in Table 3. Rates and charges
collected from the ten largest sewer
customers represent approximately 5.3
percent of the Sewer Enterprise Fund's
operating revenues, or 3.7 percent of total revenues, for 2002/03.
15,350
1,334
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17,429
Source: South Tahoe Public Utility District
Table 3 . South Tahoe Public Utility District
Ten Largest Sewer Customers
Fiscal Year Ended June 30,2003
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Customer Name
Tahoe Verde
City of South lake Tahoe
Marriott Timberlodge
lake Tahoe Unified School District
Embassy Vacation Resorts
Marriott Grand Residence
Embassy Suites
Camp Richardson
Forest Inn
Heavenly Valley
Total
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Business Type
Mobile home park
Government
Timeshares
Education
Hotel I Timeshares
Timeshares
Hotel
Resort
Hotel
Ski Resort
Annual
Sewer
Bills
$74,542
71,960
71,896
62,874
58,270
57,058
47,524
45,702
39,212
38.186
$567,224
Source: South Tahoe Public Utility District Customer Service Department
Percent
of Total
Revenues
0.5%
0.5%
0.5%
0.4%
0.4%
0.4%
0.3%
0.3%
0.3%
0.2%
3.7%
Infrastructure Improvements
The District makes capital improvements to its sewer system following a capital improve-
ment program adopted annually in May by the District Board of Directors. Capital proj-
ects include new collection pipelines, treatment plant upgrades, pump stations, and
export facilities. Over the last five fiscal years through 2002/03, the District has spent
approximately $27.9 million on sewer system infrastructure improvements and capital
spending. During 2002/03 the District invested $10.4 million in sewer system
improvements. It anticipates spending $22.8 million on sewer system capital projects in
fiscal years 2003/04 through 2005/06.
\.
9
DISTRICT SEWER FINANCES
...J
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 $4.4 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 ten-year forecast of revenues, expenses, and capital improvements
for both enterprise funds.
Financial Statements of Sewer Enterprise
Table 4 summarizes the District's revenues and expenses of the sewer enterprise for
1998/99 through 2002/03. The District's primary source of revenue is from service
charges for the provision of sewer collection, treatment, and export, which account for
about 74 percent of operating revenue and 51 percent of total revenues. Connection and
service fees make up 24 percent of operating revenue and 16 percent of total revenues.
Property taxes represent 27 percent of total revenues.
.J
The largest expense category is employee salaries, wages, and benefits. Operating
expenses have increased over the last five fiscal years primarily due to inflation, rising
labor costs, and annual depreciation caused by the addition of new sewer infrastructure.
...
Table 5 shows the Statement of Cash Flows for 1998/99 through 2002/03. Cash and cash
equivalents have fluctuated during the period due to the exclusion of certain investments
from cash equivalents. The District has generated an average of $4.6 million of positive
net cash flow before capital and investing activities over the past five fiscal years.
Table 6 shows the Balance Sheets for 1998/99 through 2002/03. The Balance Sheet
demonstrates a steady increase in capital assets as depreciation is funded and improvements
and upgrades are made to the sewer system. Over the past five years, capital expenditures
have exceeded depreciation by approximately $9.4 million. The District's only major long-
term sewer debt was retired in 2001/02.
.l
10
.~~
'-' Table 4 . South Tahoe Public Utility District
Sewer Enterprise Fund
Revenue and Expenses
1998/99 1999/00 2000/01 2001/02 2002103
Operating Revenues
Service charges $ 7,047,375 $ 7,335,527 $ 7,533,127 $ 7,717,216 $ 7,992,332
Connection and service fees 1,182,890 1,193,077 883,335 1,111,350 2,551,090
Penalty charges 70,490 63,538 65,850 66,367 70,600
Other operating income 149.418
Total operating revenues 8,300,755 8,592,142 8,482,312 8,894,933 10,763,440
Operating Expenses
Salaries, wages and benefits 4,846,075 4,745,815 5,084,498 5,213,246 5,835,233
Depreciation and amortization 3,431,959 3,605,249 3,753,804 3,786,797 3,915,627
Utilities 1,242,341 1,677,801 1,374,704 1,323,029 1 ,758,431
Repairs and maintenance 755,323 722,283 542,309 534,592 601,498
Other operating expenses 1.147.561 1.077.677 1.036.913 1.060.809 1.388.044
Total operating expenses 11,423,259 11,828,825 11,792,228 11,918,473 13,498,833
l
Net operating income (loss) (3,122,504) (3,236,683) (3,309,916) (3,023,540) (2,735,393)
Non-Operating Revenue (Expense)
Tax revenue 3,268,198 3,477,951 3,658,139 4,018,637 4,279,470
Investment earnings 434,747 903,248 1,264,010 882,490 360,536
Aid from governmental agencies 45,616 49,562 32,351
Other income 268,859 670,596 521,016 534,525 147,307
\.., Interest expense (59,619) (212,852) (70,593) (11,130) (768)
Other expenses (192.207) (292.506) (177.981) (220.334) (212.839)
Total 3,719,978 4,546,437 5,240,207 5,253,750 4,606,057
Income before contributions 597,474 1,309,754 1,930,291 2,230,210 1,870,664
Capital contributions 6.296.326 1.320.087 3.507.351 290.627 238.239
Change in net assets 6,893,800 2,629,841 5,437,642 2,520,837 2,108,903
Net assets, beginning of fiscal year 86,301,766 93,386,638 96,016,479 101,454,121 103,974,958
Net assets, end of fiscal year $ 93,195,566 $ 96,016,479 $ 101,454,121 $103,974,958 $106,083,861
---...----
Source: South Tahoe Public Utility District, Comprehensive Annual Financial Reports
11
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11
Table 5 . South Tahoe Public Utility District .J
Sewer Enterprise Fund
Statement of Cash Flows
1998/99 1999/00 2000/01 2001/02 2002/03
Cash flows from operating activities
Cash received from customers $ 7,726,283 $ 7,659,025 $ 8,776,696 $10,722,183 $ 9,768,817
Penalty charges 70,490 63,538 65,850 66,367 70,600
Other income 268,858 670,596 521,016 534,525 296,725
Cash paid to employees (4,661,393) (4,708,312) (4,982,399) (5,116,569) (5,744,628)
Cash paid to suppliers (4,492,874) (2,794,651) (3,282,720) (2,932,549) (3,292,561 )
Other expenses (192.198) (292.506) (177.981) (220.334) (169.818)
Net cash provided by operating
activities (1,280,834) 597,690 920,462 3,053,623 929,135
Cash flows from non-capltal
financing activities
Tax revenues 3,268,198 3,477,951 3,658,140 4,018,637 4,279,470
Aid from govemmental agencies 45.616 49.562 32.351
Net cash provided by non-capital
financing activities 3.268.198 3.477.951 3.703.756 4.068.199 4.311.821
Net cash provided by operating and
non-capital activites 1,987,364 4,075,641 4,624,218 7,121,822 5,240,956
Cash flows from capital and
related financing activities
Purchase of capital assets (5,131,269) (2,368,414) (4,954,275) (5,059,336) (10,381,078) ""
Issuance of debt 4,941,062
Repayment of debt (782,612) (476,663) (2,228,917) (1,782,726) (7,653)
Interest paid on notes payable (59,619) (210,604) (93,886) (26,490) (768)
Contributed capital 6.296.326 1.320.087 3.507.351 290.627 238.239 "
Net cash provided by (used in)
capital and financing activities 5,263,888 (1,735,594) (3,769,727) (6,577,925) (10,151,260)
Cash flows from investing activities
Interest and dividends on investments 358,186 769,761 1,276,457 854,713 471,104
Proceeds from sale or maturities
of investments 64,000 12,922,890 11,502,065 11,296,218
Purchase of certificate of deposit
and investments - ( 13.626.175) (30.00m (22.040.000) (1.598)
Net cash provided by (used in)
investing activities 358,186 (12,792,414) 14,169,347 (9,683,222) 11,765,724
Net Increase in cash
and cash equivalents 7,609,438 (10,452,367) 15,023,838 (9,139,325) 6,855,420
Cash and cash equivalents
Beginning of fiscal year 7.993.594 15.603.032 5.150.665 20.174.503 11.035.178
End of fiscal year $15,603,032 $ 5,150,665 $20,174,503 $11,035,178 $17,890,598
----------
Source: South Tahoe Public Utility District, Comprehensive Annual Financial Reports
\,
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'-' Table 6 . South Tahoe Public Utility District
Sewer Enterprise Fund Balance Sheet
1998/99* 1999/00* 2000/01* 2001/02 2002103
ASSETS
Current assets
Cash and cash equivalents $15,603,032 $ 5,150,665 $20,174,503 $11,035,178 $17,890,598
Investments 1,992,190 703,283 1,002,027
Accounts receivable, net 1,068,005 1,687,412 1,769,923 352,743 396,929
Property tax receivable 3,658,139 3,686,708 3,903,491 4,239,561
Supplies inventory 232,146 216,583 210,692 201,869
Accrued interest receivable 243,213 376,700 364,253 392,030
Prepaid expenses and deposits 53,430 57,583 50,286 36,724
Other current assets 544.590
Total current assets 17,199,826 13,139,272 26,959,648 16,924,062 23,071,678
Noncurrent assets
Restricted assets:
Investment securities 284,976 220,976 250,976 195,976 197,575
Long-term accounts receivable 86,547 91 ,419 113,721 89,530 74,568
Other deferred expenses 340,737 292,060 243,383 194,706 146,029
Long-term investments 11,633,985 10,294,191
Capital assets 128,242,701 129,882,054 134,702,970 139,485,102 149,220,790
Less accumulated depreciation (45,447.572) (48.275.083) (51.846.851 ) (55.307.767) (58.529.327\
Total capital assets 82.795. 129 81.606.971 82.856.119 84.177.335 90.691.463
Total noncurrent assets 83,507,389 93,845,411 83,464,199 94,951,738 91,109,635
Total net assets 100,707,215 106,984,683 110,423,847 111,875,800 114,181,313
LIABILITIES AND FUND EQUITY
Current liabilities
/ Accounts payable 505,871 1,243,644 952,492 1,026,116 1,406,768
Deferred revenue 870,448 625,148 1,090,195 1,542,440 5,036,621
Property tax deferred revenue 3,658,139 3,686,708 3,903,491
Accrued expenses 474,000 407,927 357,096 246,969 389,285
Accrued interest payable 36,405 38,653 15,360
Compensated absences - current 131,868 131,868 140,741 149,431 357,905
Long-term debt - current 2.376.665 2.886.166 1.782.728 7.653 4.719
Total current liabilities 4,395,257 8,991,545 8,025,320 6,876,100 7,195,298
Noncurrent lIablilities
Compensated absences 801,307 838,810 932,036 1,020,023 902,154
Long-term debt 2.124.013 1.137.849 12.370 4.719
Total long-term liabilities 2,925,320 1,976,659 944,406 1,024,742 902,154
Total liabilities 7,320,577 10,968,204 8,969,726 7,900,842 8,097,452
Net assets
Invested in capital assets, net
of related debt 78,294,451 77,582,956 81,061,021 84,164,963 90,686,745
Restricted 284,976 220,976 250,976 195,976 197,575
Unrestricted 14.807.211 18.212.547 20.142.124 19.614.019 15.199.541
Total net assets 93,386,638 96,016,479 101,454,121 103,974,958 106,083,861
Total liabilities and net assets 100,707,215 106,984,683 110,423,847 111,875,800 114,181,313
..-...------...
*1998/99 - 2000/01 results restated to comply with GASa 34 requirements as implemented for 2001/02 and onward.
Source: South Tahoe Public Utility District, Comprehensive Annual Financial Reports
\..,
13
Budget for 2003/04 ...J
Table 7 shows the District's budgeted revenues, expenses, and capital outlays for 2003/04
for the Sewer Enterprise Fund. The District's budget was adopted May 15,2003. The
budget reflects a new cost-sharing allocation between the Sewer and Water Enterprise
fund. The Sewer Enterprise Fund's allocation of shared costs has been decreased from
60 percent to 50 percent.
Revenues excluding proceeds from borrowing are budgeted for at $14.5 million, a 5
percent increase over the 2002/03 budgeted amount. Service charge revenues are
expected to stay relatively flat, with no rate increase implemented since the past fiscal
year. Property taxes are budgeted to rise as property values increase and assessments
rise proportionately. Connection fee revenue is expected to fall after the completion of
a major City of South Lake Tahoe redevelopment project in the past year, while non-
operating income composed primarily of investment income is also budgeted to fall due
to low earnings on investments.
Table 7 . South Tahoe Public Utility District
Sewer Enterprise Fund Budget for 2003/04
Capital
Enterprise Outlay Total
Fund Reserve Sewer Fund
Revenues [1) $13,231,000 $ 1,307,100 $ 14,538,100 ......
Borrowings 12,506.000 12,506.000 \
Total revenues and borrowings 13,231,000 13,813,100 27,044,100
Cash outlays:
Salaries and benefits (2) 5,542,376 449,300 5,991,676
Operation and maintenance (2) 4,777,475 47,700 4,825,175
Capital outlay 10,582,900 10,582,900
Debt service for 2004 COPs (3) 539,300 408,525 947.825
Total cash outlays 10,859,151 11,488,425 22,347,576
.----..----...-----
1 - Enterprise Fund revenue is from customer service charges. Capital Outlay Reserve revenue is
from connection fees, capital improvement charge, and grants.
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 Budget for 2003/04.
.J
14
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Financial Performance in Current Fiscal Year
Table 8 shows the District's actual financial performance in the first six months of the
current fiscal year, compared to budget and the comparable period of the previous fiscal
year. Revenues exceed budgeted amounts by approximately 2 percent due to higher than
expected property tax and connection and service fees revenues, while being offset
slightly by lower than expected service charges. Expenses are also lower than budgeted,
due mainly to the timing of payday and unpaid earned salaries and benefits affecting the
tabulation of salaries and benefits, and the delay of debt issuance to the second half of the
year. Property tax revenues are up over the comparable period for the previous year due
to increased property valuation. Service charge revenues are level, while connection and
service fees are down because of the completion of a major City of South Lake Tahoe
redevelopment project in the District's service area.
Table 8 . South Tahoe Public Utility District
Sewer Enterprise Fund Actual Results For Six Months Ending 12/31/2003
it
Actual Budget Actual
FY 2002/03 FY 2003/04 FY 2003/04
Six months Six months Six months
Ending 12/31/02 Ending 12/31/03 Ending 12/31/03
Revenues
Service charges $ 4,053,000 $ 4,100,000 $ 4,055,000
Connection and service fees 1,742,000 898,000 1,114,000
~ Property tax revenue 2,286,000 2,143,000 2,408,000
Other operating revenue 48,000 33,000 50,000
Other non-operating revenue 89.000 344.000 59.000
Total revenues 8,218,000 7,518,000 7,686,000
Expenses [1]
Salaries and benefits [2] 2,664,000 2,945,000 2,618,000
Operation and maintenance 2,131,000 2,298,000 2,249,000
Depreciation and amortization 1,955,000 1,982,000 1,962,000
Other non-operating expense [3] 141.000 391.000 127.000
Total cash outlays 6,891,000 7,616,000 6,956,000
Net income 1,327,000 (98,000) 730,000
----..----
1- Excludes capital projects.
2- Interim financial statements are on the accrual basis except for salaries and benefits, which are on a cash basis.
3- Includes debt service.
Source: South Tahoe Public Utility District.
\.
15
The Board adopted the new rates and
charges on May 16, 2002. They were
increased by 2 percent over prior rates and
charges. The District has increased sewer
rates and charges every year from
1998/99 through 2002/03. These rate
increases averaged 2.6 percent. A rate
increase in 2003/04 was deemed
unnecessary by the Board. The District's ten-year forecast includes annual rate increases
of 3.5 percent beginning in 2005/06.
Sewer Rates and Charges
Table 9 shows the sewer rates and charges
per unit for the District effective July I,
2002. A typical single-family residence has
three sewer units, resulting in an annual bill
of$289.68.
~
Table 9 . South Tahoe Public Utility District
Sewer Rates and Charges
Effective July 1, 2002
Annual Service Charge Per Unit
Homes and apartments
Motelslhotelsltimeshares
Restaurants
Service stations
Trailer/mobile home parks & campgrounds
Laundromats
Automobile service garages
Taverns without food facilities
All other commercial establishments
$ 96.56
93.94
100.56
100.56
93.42
100.56
100.56
100.56
100.56
Source: Ordinance No. 483-02, dated May 16, 2002.
,
The District charges sewer connection fees to new customers connecting to the sewer
system. The charge established by the Board for one sewer capacity unit is currently
$2,393, with new construction required to pay fees for a minimwn of three sewer units, or
$7,179. A sewer capacity unit is defined as a single kitchen or bathroom, or equivalent.
An applicant for a new service connection also pays a sewer permit fee of $50, and is
required to prepay for the first year of service.
..,
Effective January 1,2001 and each year thereafter on January I, the sewer capacity unit
charge is 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 installment 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 sewer 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 reswne 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 collection process of all
delinquent accounts and to terminate service if necessary. A delinquency charge of 10
percent is applied as a penalty on the previous billing and an additional late fee of 1.5
percent is charged on outstanding balances.
\
'fill
16
~
Property Tax Revenues
The Sewer Enterprise Fund receives a portion of property taxes collected within the
boundaries of the District. Property taxes for the District were approved by a vote of
District customers in 1950 at the time of District formation. As required by state
legislation (Water Code, Division 7, Chapter 12, ~13951), the District is required to
pump all sewer treatment plant effluent out of the Lake Tahoe watershed. The allocation
of property taxes is intended to offset the additional costs incurred by the District in order
to meet this requirement.
"
Property taxes are collected by E1 Dorado County as a part of the County's one percent
general levy . A portion of the collected property taxes is then allocated to the District
according to an allocation formula specified in state law. The County uses the Teeter
method of property tax distribution. Under this method, the County pays the District 100
percent of property tax due to the District and retains any penalties or delinquencies
collected to offset such gross payment.
,I
Pursuant to implementation of Article XIIIA of the California Constitution, tax
allocations to individual counties have twice been reduced or reallocated, for the fiscal
years 1992/93 and 1993/94. The District's allocated property taxes are subject to special
protection from these and any future provisions to reduce or reallocate property tax
revenues away from the District (Revenue and Taxation Code, Division I, ~97.34).
'"
Table 10 shows the District's property tax levies and assessed valuation for the Sewer
Enterprise Fund for the past ten fiscal years. The assessed valuation of property within
the District has risen steadily over this period, with an average annual increase of about
five percent over the past ten years.
Table 10 . South Tahoe Public Utility District
Property Tax Assessments and Levies - Sewer Enterprise Fund ($000)
Secured Total
Assessed Assessed County
Fiscal Year Valuation Levy Valuation Levy Admin. Fee Net Levy
1993/94 $2,325,173 $2,762 $2,418,390 $2,873 ($100) $2,773
1994/95 2,364,887 2,795 2,431,005 2,873 ( 112) 2,761
1995/96 2,435,532 2,839 2,507,258 2,923 (109) 2,814
1996/97 2,531,062 2,951 2,601,395 3,033 (1 07) 2,926
1997/98 2,611,810 3,023 2,685,205 3,108 (99) 3,009
1998/99 2,733,843 3,132 2,809,100 3,218 (99) 3,119
1999/00 2,874,501 3,278 2,959,680 3,375 (106) 3,269
2000/01 2,974,019 3,383 3,068,322 3,490 (109) 3,381
2001/02 3,203,852 3,656 3,295,365 3,760 (115) 3,645
2002/03 3,479,425 3,890 3,577,072 3,999 (141 ) 3,858
------------------
\r Source: EI Dorado County Auditor - Controller's Office
17
Table II shows all direct and overlapping property tax rates levied in the District.
~
Table 11 . South Tahoe Public Utility District
Direct and Overlying Property Tax Rates (percent)
Fiscal Year
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
County
General Levy
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
Source: California Municipal Statistics, Inc.
Lake Tahoe
Unified School District
0.0243
0.0242
0.0237
0.0219
0.0213
0.0195
0.0304
0.0292
0.0271
0.0248
Total
1.0243
1.0242
1.0237
1.0219
1.0213
1.0195
1.0304
1.0292
1.0271
1.0248
<It
"
Outstanding Debt
As of January 15, 2004, the District has
had no outstanding debt related to the
Sewer Enterprise. The District has a
policy of minimizing debt to the extent possible, and has retired debt early when funds
became available. The District's last sewer notes' final maturity was in fiscal year
2001/02; in each of the previous three years, the District prepaid a portion of its
outstanding notes and retired them before their maturities.
Comparison of Average
Monthly Sewer Bills
Table 12 compares annual sewer bills for
2002/03 of neighboring sewer agencies.
The District's annual sewer bill is the
lowest of the five agencies.
Table 12 . South Tahoe Public Utility District
Comparison of Annual Sewer Bills
2002103
..J
Kingsbury
Tahoe City
Incline Village
North Tahoe
South Tahoe PUD
$432
382
318
303
290
~
.
Source: District's Comprehensive Annual Financial
Report for Fiscal Year Ended June 30, 2003
~.
\c
Debt Service Coverage
Table 13 calculates the historical Sewer Enterprise debt service coverage for 1998/99
through 2002/03. Coverage ratios have ranged from 2.5 to 7.4 before substantially all
remaining debt was retired in 2001/02; coverage ratios excluding early payment of debt
in fiscal years 1998/99 through 2000/0 I are much higher. Debt service coverage for the
2003/04 fiscal year is expected to be approximately equal to the previous fiscal year, as
no installment payments on the Certificates are required until fiscal year 2004/05.
'It
..I
18
\.,
,
~
j
r
\.
Table 13
. South Tahoe Public Utility District
Historical Debt Service Coverage - Sewer Enterprise Fund
1998/99 1999/00 2000/01 2001102
$12,250,887 $13,596,428 $13,937,211 $14,380,147
2002/03
$15,583,104
Gross revenues
Operation & maintenance
expenses
Net revenue available for
debt service
Total debt service
7.973.895 8.497.377 8.199.341 8.352.010
4,276,992 5,099,051 5,737,870 6,028,137
843,233 689,524 2,299,509 1,793,856
5.1 7.4 2.5 3.4
28.7 25.4 38.1 3.4
9.796.045
5,787,059
8,421
687.2
Coverage ratio
Coverage ratio (excluding
early retirement of debt)
687.2
Source: Comprehensive Annual Financial Reports of South Tahoe Public Utility District.
Table 14 projects the coverage ratios on the Series 2004 Certificates for 2004/05 through
2008/09. The calculation of coverage ratios shown in the table are based on the 2003/04
adopted budget and year-to-date actual revenues and expenses, and the Sewer Enterprise
ten-year forecast prepared by District staff as part of the 2004/05 budget approval
process. Key assumptions used in the forecast include:
. Sewer rates increase annually 3.5 percent beginning in 2005/06.
. Sewer customer base grows at I percent per year through 2005/06, and 0.5 percent
per year thereafter.
. Investment income is earned at 2.5 percent in 2004/05,3 percent in 2005/06, and 3.5
percent thereafter.
. Annual connection fee revenue is based on 110 new residential allocations and 80
new sewer units for other projects in 2004/05, decreasing to 55 new residential
allocations and 80 other units in 2005/06, and annual adjustments thereafter. Connec-
tion fee revenue forecasts are reduced in 2005/06 and thereafter to allow for changes
in the Tahoe Regional Planning Area's building allocation rules.
. Salaries are increased at 2.5 percent per year, while other operating expenses are
increased at 2 percent per year, adjusted for specific, known changes.
19
The projections indicate debt service coverage would range between 3.20 and 3.53 times
total annual debt service, composed solely of the 2004 Certificates, 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 installment payments on the Certificates.
Management Discussion
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 and wastewater
service to satisfy the needs of its customers and visitors to Lake Tahoe.
"
Due to Lake Tahoe's unique ecology and its status as a well-known natural landmark and
attraction, special state regulations have been created specifically to protect the lake from
environmental threats. One of these regulations that has a direct impact on the District is
a restriction from releasing any wastewater treatment plant effluent in the lake's
watershed. Under provisions of the 1968 Porter-Cologne Water Quality Control Act,
California's premier water quality legislation, the District transports the recycled water
\
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20
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\.,
\.
produced at the treatment plant nearly 26 miles out of the Tahoe basin for disposal in
neighboring Alpine County.
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 ten-year
plans for water and wastewater system upgrades, replacement, and new construction. The
sewer portion of the current ten-year capital improvement program totals about $47.2
million.
A focus on long-term financial planning, along with careful stewardship of financial
resources, provides the District with a firm financial base. District management is
hallmarked by stable leadership and a fiscally conservative approach that has established
excellent fiscal health for the District. The District has historically funded depreciation
and maintained reserves, and intends to continue these practices. The District also has a
conservative approach to debt, minimizing borrowing and retiring debt early when
feasible. Finally, the District develops long-term planning documents to minimize annual
rate changes and avert large rate fluctuations.
21
CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS
AND CHARGES
.J
Article XIIIA
On June 6, 1978, California voters approved Proposition 13, an initiative constitutional
amendment which enacted Article XIIIA 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 I 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 I, 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.
The Sewer Enterprise Fund receives a portion of property taxes collected by El Dorado
County through its general county levy. Special legislation has been enacted to protect
the Sewer Enterprise Fund's property tax allocation from any reduction or reallocation
such as those enacted for fiscal years 1992/93 and 1993/94.
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 J
state to the level of appropriations of the particular governmental entity for the prior
fiscal year, adjusted for changes in the cost ofliving 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 (iii) 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 of local 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 I, 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.
22
\." The District believes that its sewer charges do not exceed the costs it reasonably bears in
providing such services and therefore are not subject to the limits of Article XIIIB.
Furthermore, the District's actual appropriations for fiscal year 2003/04 of$26 million
fall well below the appropriation limitation of $42.2 million, if the District's sewer
charges were found to be subject to this article. The District covenants in the installment
sale agreement that it will prescribe rates and charges sufficient to provide for the
installment payments each year.
Articles XIIIC and XIIID
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 XIIID, 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
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 sewer
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 sewer service. Accord-
ingly, the District has not followed the procedures described above when increasing its
sewer rates and charges. However, no court has addressed the issue and the principal drafters
23
of Proposition 218 have publicly stated that they believe that the proposition does apply . . ...
to sewer 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 of levies directly pledged to bonded indebtedness,
such as the net revenues securing the Certificates.
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.
The District does not believe that any of its sewer rates and charges or revenue sources from
which installment 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 sewer rates or curtail their increase.
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RISK FACTORS
The following section describes certain special considerations and risk factors affecting
the payment of and security for the Certificates. The following discussion is not meant to
be an exhaustive list of the risks associated with the purchase of any Certificates 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 Certificates. There can be no
assurance that other considerations will not arise in the future.
General
The installment payments on the Certificates are payable solely from and secured solely
by the net revenues pledge therefor under the installment sale agreement, together with
amounts on deposit from time to time in certain funds and accounts held by the trustee. If for
any reason, the District does not collect sufficient net revenues to pay the principal and
interest, the District will not be obligated 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 installment sale agreement to pay installment payments
on the Certificates.
~
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 Certificates.
The Teeter Plan
The current practice of EI Dorado County under the Teeter Plan is to pay the District 100
percent of the gross property tax payable annually to the District and to retain any
penalties or delinquencies collected to offset such gross payment. There can be no
assurances that the County will continue this practice in the future, or that the County will
not discontinue the Teeter Plan or remove the District or the property tax payable to the
District from the Teeter Plan in the future.
\r
Property Taxes
The District currently receives property taxes collected as a portion of EI Dorado
County's general tax levy. This tax allocation was voted by District customers at the
time of District formation, and has subsequently been specifically protected from
reduction or reallocation under state law. There can be no assurance that such legislation
will not be amended, overturned, or revoked; if any of these occur, there can be no
assurance that the state will not reallocate, reduce, or seize property tax revenues, either
temporarily or permanently, which would be due to the District. In the event that
property tax receipts are reduced or eliminated, the District's Board of Directors has the
authority to raise rates to replace any deficiency in revenues.
25
CONCLUDING INFORMATION
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Continuing Disclosure
The District has covenanted in a continuing disclosure certificate for the benefit of the
holders and beneficial owners of the Certificates 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 I, 2005 for the fiscal year ending June 30, 2004 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,
"F orm 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 installment sale
agreement and trust agreement. A copy of the legal opinion will accompany the original
delivery of each Certificate. 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 ... .Ai
of Jones Hall as bond counsel is contingent upon the sale and delivery of the Certificates. ..
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 Certificates designated as and comprising interest and received by the
owners of the Certificates 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.
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 (the "Code"),
as amended, that must be satisfied subsequent to the delivery of the installment purchase
agreement in order that such interest 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 of the District 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 installment sale agreement.
If the initial offering price to the public (excluding Certificate houses and brokers) at
which a Certificate is sold is less than the amount payable at maturity thereof, then such
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26
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difference constitutes "original issue discount" for purposes offederal income taxes and
State of California personal income taxes. If the initial offering price to the public
(excluding bond houses and brokers) at which each Certificate is sold is greater than the
amount payable at maturity thereof, then such difference constitutes "original issue
premium" for purposes of federal income taxes and State of California personal income
taxes. Deminimis original issue discount is disregarded.
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Under the Code, original issue discount is treated as interest excluded from federal gross
income and exempt from State of California personal income taxes to the extent properly
allocable to each owner thereof subject to the limitations described in the first paragraph
of this section. The original issue discount accrues over the term to maturity of the
Certificate on the basis of a constant interest rate compounded on each interest or
principal payment date (with straightline interpolations between compounding dates).
The amount of original issue discount accruing during each period is added to the
adjusted basis of such Certificates to determine taxable gain upon disposition (including
sale, redemption, or payment on maturity) of such Certificate. The Code contains certain
provisions relating to the accrual of original issue discount in the case of purchasers of
the Certificates who purchase the Certificates after the initial offering of a substantial
amount of such maturity. Owners of such Certificates should consult their own tax
advisors with respect to the tax consequences of ownership of Certificates with original
issue discount, including the treatment of purchasers who do not purchase in the original
offering, the allowance of a deduction for any loss on a sale or other disposition, and the
treatment of accrued original issue discount on such Certificates under federal individual
and corporate alternative minimum taxes.
Under the Code, original issue premium is amortized on an annual basis over the term of
the Certificate (said term being the shorter of the Certificate's matUrity date or its call
date). The amount of original issue premium amortized each year reduces the adjusted
basis of the owner of the Certificate for purposes of determining taxable gain or loss upon
disposition. The amount of original issue premium on a Certificate is amortized each
year over the term to maturity of the Certificate on the basis of a constant interest rate
compounded on each interest or principal payment date (with straightline interpolations
between compounding dates). Amortized Certificate premium is not deductible for
federal income tax purposes. Owners of Premium Certificates, including purchasers who
do not purchase in the original offering, should consult their own tax advisors with
respect to State of California personal income tax and federal income tax consequences
of owning such Certificates.
In the further opinion of Special Counsel, interest payable with respect to the Certificates
is exempt from California personal income taxes.
\"
Owners of the Certificates should also be aware that the ownership or disposition of, or
the accrual or receipt of interest with respect to, the Certificates may have federal or
state tax consequences other than as described above. Bond counsel expresses no
opinion regarding any federal or state tax consequences with respect to the installment
sale agreement and the Certificates other than as expressly described above.
27
Bond Counsel expects to deliver an opinion at the time of issuance of the Certificates in . ..a
substantially the same form set forth in Appendix E. ...
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 Certificates or installment purchase
agreement, 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.
Ratings
Standard & Poor's, a division of the McGraw-Hill Companies, Inc., and Fitch Ratings
have assigned their municipal bond ratings of AAA and AAA, respectively, to the
Certificates with the understanding that upon delivery of the Certificates a policy
insuring the payment of principal and interest represented by the Certificates will be
issued by XL Capital Assurance.
In addition, Standard & Poor's and Fitch Ratings have assigned underlying, without
regard to bond insurance, of A+ and AA, respectively. 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 Ratings,
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 withdrawn entirely by the rating agencies, if in the judgment of
such rating agencies, circumstances so warrant. Any downward revision or withdrawal
of such ratings may have an adverse effect on the market price of the Certificates.
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Miscellaneous
The quotations from, and summaries and explanations of the installment purchase agreement,
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 complete 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 Certificates 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 Certificates. All information contained in this
official statement pertaining to the District has been furnished by the District, and the
execution and delivery of this official statement have been duly authorized by the .J
District.
28
\.,; At the time of payment for and delivery of the Certificates, the District will provide a state-
ment 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
circumstances under which they were made, not misleading.
South Tahoe Public Utility District
/s/
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APPENDIX A
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
The following is a brief summary of the provISIOns of the principal legal
documents. Such summary is not intended to be definitive. Reference is made to the
actual documents (copies of which are available from the District) for the complete terms
thereof.
DEFINED TERMS
The following terms have the following meanings, notwithstanding that any
such terms may be elsewhere defined in this Official Statement. Any terms not
expressly defined in this Summary but previously defined in this Official Statement
have the respective meanings previously given.
"Additional Revenues" means, with respect to the issuance of any Parity Debt,
any or all of the following amounts:
\.
(i) An allowance for Net Revenues from any additions or
improvements to or extensions of the Sewer Enterprise to be made
by the District during the 36 month period following the issuance of
such Parity Debt, in an amount equal to 100% of the estimated
additional average annual Net Revenues to be derived from all
properties which are improved with a structure the construction of
which has been completed prior to the date of issuance of such
Parity Debt and to which service will be provided by such
additions, improvements and extensions, all as shown by the
certificate or opinion of a Financial Consultant.
(ii) An allowance for Net Revenues arising from any increase in the
charges made for service from the Sewer Enterprise which has
become effective prior to the incurring of such Parity Debt but
which, during all or any part of the most recent completed Fiscal
Year for which audited financial statements of the District are
available, or for any more recent consecutive 12 month period
selected by the District under Section 5.8(b) of the Installment Sale
Agreement, was not in effect, in an amount equal to the total
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 12 month period, all as shown by the certificate or
opinion of a Financial Consultant.
\.
A-1
"Adjusted Operation and Maintenance Expenses" means, for any period,
Operation and Maintenance Expenses incurred during said period, less property taxes
received by the District during said period which are deposited into the Sewer Fund.
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"Bond Counsel" means (a) Jones Hall, A Professional Law Corporation, or (b)
any other attorney or firm of attorneys of nationally recognized expertise with respect to
legal matters relating to obligations the interest on which is excludable from gross
income for purposes of federal income taxation under Section 103 of the Tax Code.
"Business Day" means a day which is not a Saturday, Sunday or legal holiday on
which banking institutions in the State of California, or in any state in which the Trust
Office of the Trustee is located, are closed.
"Certificate Insurance Policy" means the municipal bond insurance policy issued
by the Insurer, insuring payment when due of principal and interest represented by the
Certificates.
"Closing Date" means the date of original execution and delivery of the
Certificates.
"Corporation" means the Public Property Financing Corporation of California, a
nonprofit public benefit corporation duly organized and existing under the laws of the
State of California.
"Corporation Representative" means the Chairman and Secretary/Treasurer of
the Corporation, or any other person authorized by resolution of the Board of Directors
of the Corporation to act on behalf of the Corporation under or with respect to the
Installment Sale Agreement and the Trust Agreement.
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"Federal Securities" means: (a) any direct general obligations of the United States
of America (including obligations issued or held in book entry form on the books of the
Department of the Treasury of the United States of America), for which the full faith and
credit of the United States of America are pledged; (b) obligations of any agency,
department or instrumentality of the United States of America, the timely payment of
principal and interest on which are secured or guaranteed by the full faith and credit of
the United States of America.
"Financial Consultant" means any consultant or firm of such consultants
appointed by the District and who, or each of whom: (a) is judged by the District to have
experience in matters relating to the financing of sewer system enterprises; (b) is in fact
independent and not under domination of the District; (c) does not have any substantial
interest, direct or indirect, with the District other than as purchaser of the Certificates or
any Parity Debt; and (d) is not connected with the District as an officer or employee of
the District, but who may be regularly retained to make reports to the District.
"Fiscal Year" means each twelve-month period beginning on July 1 in any year ...... !
during the term of the Installment Sale Agreement and ending on the next succeeding ...
June 30.
A-2
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"Fitch" means Fitch, its successors and assigns.
"Gross Revenues" means all gross charges (including surcharges, if any) received
for, and all other gross income and receipts derived by the District from, the ownership
and operation of the Sewer Enterprise or otherwise arising from the Sewer Enterprise,
including but not limited to (a) connection charges, (b) any amounts transferred to the
Sewer Fund from a Rate Stabilization Fund in accordance with Section 4.6, and (c)
investment earnings on amounts held in the Sewer Fund or in any other fund
established with respect to the Sewer Enterprise. Gross Revenues does not include (i)
refundable deposits made to establish credit, (ii) the proceeds of any ad valorem property
taxes, and (ill) the proceeds of any special assessments or special taxes levied upon real
property within any improvement district served by the District for the purpose of
paying special assessment bonds or special tax obligations of the District relating to the
Sewer Enterprise.
"Installment Payment Date" means, with respect to any Interest Payment Date,
the 3rd Business Day preceding such Interest Payment Date.
"Insurer" means XL Capital Assurance Inc. (XLCA), a New York stock insurance
company, including its successors, as issuer of the Certificate Insurance Policy and the
Qualified Reserve Fund Credit Instrument.
\..,
"Maximum Annual Debt Service" means, as of the date of any calculation, the
maximum sum obtained for the current or any future Fiscal Year so long as any of the
Certificates remain Outstanding by totaling the following amounts for such Fiscal Year:
(a) the aggregate amount of the Installment Payments coming due and
payable in such Fiscal Year pursuant hereto, except to the extent
payable from any security deposit under Section 7.1 of the
Installment Sale Agreement;
(b) the principal amount of all outstanding Parity Debt, if any, coming
due and payable by their terms in such Fiscal Year; and
'-
(c) the amount of interest which would be due during such Fiscal Year
on the aggregate principal amount of all outstanding Parity Debt, if
any, which would be outstanding in such Fiscal Year if such Parity
Debt are retired as scheduled; provided, however, that with respect to
any Parity Debt which bear interest at an adjustable rate, such
interest shall be calculated at an assumed rate equal to the average
rate of interest per annum for each of the five previous whole
calendar years as shown by the J. J. Kenny Index (or, in the event
and to the extent such index is not maintained for all or any portion
of such period, any similar index of variable rate interest for tax-
exempt obligations as may be selected by the District in its sole
discretion).
A-3
"Net Revenues" means, for any period, an amount equal to all of the Gross .. ,j
Revenues received during such period minus the amount required to pay all Adjusted .."
Operation and Maintenance Costs becoming payable during such period.
"Operation and Maintenance Costs" means the reasonable and necessary costs
and expenses paid by the District to maintain and operate the Sewer Enterprise,
including but not limited to (a) costs of treating wastewater, (b) costs of electricity and
other forms of energy supplied to the Sewer Enterprise, (c) the reasonable expenses of
management and repair and other costs and expenses necessary to maintain and
preserve the Sewer Enterprise in good repair and working order, and (d) the reasonable
administrative costs of the District attributable to the operation and maintenance of the
Sewer Enterprise. Operation and Maintenance Costs does not include (i) Debt Service
payable on obligations incurred by the District with respect to the Sewer Enterprise,
including but not limited to the Installment Payments and any Parity Debt, (ii)
depreciation, replacement and obsolescence charges or reserves therefor, and (iii)
amortization of intangibles or other bookkeeping entries of a similar nature.
"Owner" means, with reference to any Certificate, the person in whose name the
Ownership of such Certificate is registered on the registration books maintained by the
Trustee for such purpose.
"Parity Debt" means any bonds, notes, leases, installment sale agreements or
other obligations of the District payable from and secured by a pledge of and lien upon
any of the Net Revenues on a parity with the Installment Payments, entered into or ...,;
issued under and in accordance with Section 5.8 of the Installment Sale Agreement.
"Permitted Investments" means any of the following 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 the United States of America (including obligations issued
or held in book-entry form on the books of the Department of the Treasury, and
CATS and TIGRS) or obligations the principal of and interest on which are
unconditionally guaranteed by the United States of America.
B. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed
by any of the following federal agencies and provided such obligations are
backed by the full faith and credit of the Untied States of America (stripped
securities are only permitted if they have been stripped by the agency itself):
1. U.S. Export-Import Bank (Eximbank)
Direct obligations or fully guaranteed certificates of beneficial
ownership
2.
Farmers Home Administration (FmHA)
Certificates of Beneficial Ownership
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3. Federal Financing Bank
A-4
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4.
Federal Housing Administration Debentures (FHA)
5. General Services Administration
Participation Certificates
6. Government National Mortgage Association (GNMA or Ginnie
Mae)
GNMA - guaranteed mortgage-backed bonds
GNMA - guaranteed pass-through obligations
(these obligations are not acceptable for certain cash-flow sensitive
issues)
7. U.s. Maritime Administration
Guaranteed Title XI financing
8. U.S. Department of Housing and Urban Development (HUD)
Project Notes
Local Authority Bonds
New Communities Debentures - U.S. government guaranteed
debentures
U.S. Public Housing Notes and Bonds - U.S. government
guaranteed public housing notes and bonds
\.-
C. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed
by any of the following federal agencies which are not backed by the full faith
and credit of the United States of America (stripped securities are only permitted
if they have been stripped by the agency itself):
1. Federal Home Loan Bank System
Senior debt obligations
2. Federal Home Loan Mortgage Corporation (FHLMC or Freddie
Mac)
Participation Certificate
Senior debt obligations
3. Federal National Mortgage Association (FNMA or Fannie Mae)
Mortgage-backed securities and senior debt obligations
4. Student Loan Marketing Association (SLMA or Sallie Mae)
Senior debt obligations
5. Resolution Funding Corp. (REFCORP) obligations
6.
Farm Credit System
Consolidated systemwide bonds and notes
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D. Money market funds registered under the Federal Investment Company Act of .Ai
1940, whose shares are registered under the Federal Securities Act of 1933, and ..
having a rating by S&P of AAAm-G; AAA-m; or AA-m and if rated by Moody's
rated Aaa, Aa1 or Aa2.
E. Certificates of deposit secured at all times by collateral described in (A) and/or
(B) above. Such certificates must be issued by commercial banks, savings and
loan associations or mutual savings banks. The collateral must be held by a third
party and the bondholders must have a perfected first security interest in the
collateral.
F. Certificates of deposit, savings accounts, deposit accounts or money market
deposits which are fully insured by FDIC, including BIF and SAIF.
G. Investment Agreements, including GIC's, Forward Purchase Agreements and
Reserve Fund Put Agreements acceptable to XLCA.
H. Commercial paper rated, at the time of purchase, "Prime -1" by Moody's and
"A-1" or better by S&P.
1. Bonds or notes issued by any state or municipality which are rated by Moody's
and S&P in one of the two highest rating categories assigned by such rating
agencies.
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J. Federal funds or bankers acceptances with a maximum term of one year of any
bank which has an unsecured, uninsured and unguaranteed obligation rating of
"Prime - 1" or " A3" or better by Moody's and" A-1" or " A" or better by S&P.
K. Repurchase Agreements ("Repos") for 30 days or less must follow the following
criteria. Repos which exceed 30 days must be acceptable to XLCA (criteria
available upon request).
Repos provide for the transfer of securities from a dealer bank or
securities firm (seller/borrower) to a municipal entity (buyer/lender), and the
transfer of cash from a municipal entity 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 municipal entity in exchange for the securities at a specified date.
1. Repos must be between the municipal entity and a dealer bank or securities
firm.
a. Primary dealers on the Federal Reserve reporting dealer list which are
rated A or better by S&P and A2 or better by Moody's, or
b. Banks rated" A" or better by S&P and A2 or better by Moody's.
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2. The written repurchase agreement must include the following:
A-6
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a.
Securities which are acceptable for transfer are:
(1) Direct obligations of the United States of America referred to in
Section A above, or
(2) Obligations of federal agencies referred to in Section B above
(3) Obligations of FNMA and FHLMC
b. The term of the Repos may be up to 30 days.
c. The collateral must be delivered to the municipal entity, trustee (if trustee
is not supplying the collateral) or third party acting as agent for the
trustee is (if the trustee is supplying the collateral) before/simultaneous
with payment (perfection by possession of certificated securities).
d. Valuation of Collateral.
(1) the securities must be valued weekly, marked-to-market at current
market price plus accrued interest.
\.,
(2) The value of collateral must be equal to 104% of the amount of cash
transferred by the municipal entity 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
municipal entity, 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 which must be delivered to the municipal entity that
states that the Repo meets guidelines under state law for legal investment
of public funds.
L.
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 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).
~
M. The Local Agency Investment Fund of the State of California,
created pursuant to section 16429.1 of the California Government
Code, to the extent the Trustee is authorized to register such
investment in its name. The Trustee may restrict investments in the
Local Agency Investment Fund if required to keep monies available
for the purposes of the Trust Agreement.
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N. Any other investment permitted in writing by the Insurer.
oJ
"Project Costs" means, with respect to the Sewer System Improvements, all costs
of the acquisition, construction and installation thereof which are paid from moneys on
deposit in the Project Fund, including but not limited to:
(a) all costs required to be paid to any person under the terms of any
agreement for or relating to the acquisition, construction and
installation of the Sewer System Improvements;
(b) obligations incurred for labor and materials in connection with the
acquisition, construction and installation of the Sewer System
Improvements;
(c) the cost of performance or other bonds and any and all types of
insurance that may be necessary or appropriate to have in effect in
connection with the acquisition, construction and installation of the
Sewer System Improvements;
(d) all costs of engineering and architectural services, including the
actual out-of-pocket costs for test borings, surveys, estimates, plans
and specifications and preliminary investigations therefor,
development fees, sales commissions, and for supervising
construction, as well as for the performance of all other duties
required by or consequent to the proper acquisition, construction
and installation of the Sewer System Improvements;
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(e) any sums required to reimburse the District for advances made for
any of the above items or for any other costs incurred and for work
done which are properly chargeable to the acquisition, construction
and installation of the Sewer System Improvements;
(f) all financing costs incurred in connection with the acquisition,
construction and installation of such Sewer System Improvements;
and
(g) the interest components of the Installment Payments during the
period of acquisition, construction and installation of the Sewer
System Improvements.
"Qualified Reserve Fund Credit Instrument" means the irrevocable debt service
reserve insurance policy issued on the Closing Date by the Insurer in an amount equal to
the Reserve Requirement.
"Rate Stabilization Fund" means any fund established and held by the District as
a fund for the stabilization of rates and charges imposed by the District with respect to . ...
the Sewer Enterprise, which fund is established, held and maintained in accordance ...
with the Installment Sale Agreement.
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\.., "Rating Agency" means, as of any date, each nationally-recognized municipal
bond rating agency which then maintains a rating on the Certificates.
"Reserve Requirement" means, as of the date of calculation, an amount equal to
the maximum amount of Installment Payments payable by the District under the
Installment Sale Agreement in the current or any future Fiscal Year.
"S&P" means Standard & Poor's Corporation, and its successors and assigns.
"Sewer Enterprise" means the entire system of the District for the collection,
storage, treatment and disposal of wastewater within the service area of the District,
including but not limited to all facilities, properties, lands, rights, entitlements and other
property useful in connection therewith, together with all extensions thereof and
improvements thereto at any time acquired, constructed or installed by the District.
"Sewer Fund" means the fund or funds established and held by the District with
respect to the Sewer Enterprise for the receipt and deposit of Gross Revenues.
"Sewer System Improvements" means the facilities, improvements and other
property described more fully in Appendix B attached to the Installment Sale
Agreement, as that Appendix may be amended from time to time in accordance with the
Installment Sale Agreement.
\.,
"Tax Code" means the Internal Revenue Code of 1986 as in effect on the Closing
Date or (except as otherwise referenced herein) as it may be amended to apply to
obligations issued on the Closing Date, together with applicable proposed, temporary
and final regulations promulgated, and applicable official guidance published, under
the Tax Code.
INSTALLMENT SALE AGREEMENT
Acquisition and Construction of the Sewer System Improvements
The District, as agent of the Corporation, agrees to supervise the acquisition,
construction and installation of the Sewer System Improvements in accordance with
plans and specifications, purchase orders, construction contracts and other documents
relating thereto. The failure of the District to complete the Sewer System Improvements
by that date does not constitute an Event of Default or a grounds for termination of the
Installment Sale Agreement, nor may such failure result in the diminution, abatement or
extinguishment of the obligations of the District to pay the Installment Payments when
due.
\.
The Corporation appoints the District as its agent to carry out all phases of the
acquisition, construction and installation of the Sewer System Improvements under and
in accordance with the provisions of the Installment Sale Agreement. Upon the
completion of the Sewer System Improvements, the District is required to execute and
deliver to the Corporation, the Trustee and the Insurer a written certificate which (a)
A-9
states that the construction of the Sewer System Improvements has been substantially
completed, (b) identifies the total Project Costs thereof, and (c) identifies the amounts, if
any, to be reserved in the Project Fund for payment of future Project Costs.
.J
Sale of Sewer System Improvements; Term
The Corporation agrees to sell the completed Sewer System Improvements to the
District pursuant to the Installment Sale Agreement. The Installment Sale Agreement
terminates on the date on which the District has paid all of the Installment Payments
and all other amounts due and payable thereunder, including any amounts due and
owing to the Insurer under the Certificate Insurance Policy. Title to the Sewer System
Improvements, and each component thereof, is deemed conveyed to and vested in the
District on the date of completion thereof.
Installment Payments
The District agrees to pay Installment Payments as the purchase price of the
Sewer System Improvements. The Installment Payment are payable solely from the Net
Revenues and other funds pledged under the Installment Sale Agreement. All of the
Gross Revenues will be deposited by the District immediately upon receipt in the Sewer
Fund which has previously been established by the District and which will continue to
be held and maintained by the District at all times during the term of the Installment
Sale Agreement. The District covenants and agrees that all Gross Revenues will be held
by the District in the Sewer Fund in trust for the benefit of the Trustee (as assignee of the ."fIll
rights of the Corporation), the Insurer and the Certificate Owners, and for the benefit of
the owners of any Parity Debt.
Deposit of Revenues to Make Payments
The District agrees that all Gross Revenues will be held by the District in the
Sewer Fund in trust for the benefit of the Trustee (as assignee of the rights of the
Corporation), the Insurer and the Certificate Owners and for the benefit of the owners of
the owners and insurers (if any) of any Parity Debt. Amounts on deposit in the Sewer
Fund shall be applied by the District to pay when due the following amounts in the
following order of priority:
. all Operation and Maintenance Costs, when due;
. the Installment Payments and all payments of principal of and
interest on any Parity Debt;
· to the Trustee the amount required to repay the Insurer for any draw
on the Qualified Reserve Fund Credit Instrument and to replenish a
deficiency in any reserve fund established for Parity Debt, the notice
of which repayment requirement or deficiency has been sent to the
District in accordance with the Trust Agreement and the related
Parity Debt Documents, respectively;
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A-I0
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· any other payments required to comply with the provisions of the
Installment Sale Agreement and the documents authorizing the Parity
Debt; and
· any other authorized purposes as described in the next paragraph.
The District agrees to manage, conserve and apply the Gross Revenues on
deposit in the Sewer Fund in such a manner that all deposits required to be made
pursuant to the preceding paragraph will be made at the times and in the amounts so
required. Subject to the foregoing sentence, so long as no Event of Default has occurred
and is continuing under the Installment Sale Agreement, the District may use and apply
moneys in the Sewer Fund for (i) the payment of any subordinate obligations or any
unsecured obligations, (ii) the acquisition and construction of improvements to the
Sewer Enterprise, (ill) the prepayment of any other obligations of the District relating to
the Sewer Enterprise, or (iv) any other lawful purposes of the District.
No Preference or Priority
Payment of the Installment Payments and the principal of and interest on any
Parity Debt will be made without preference or priority. In the event that the amount of
Net Revenues on deposit in the Sewer Fund are any time insufficient to enable the
District to pay when due the Installment Payments and the principal of and interest on
any Parity Debt, such payments will be made on a pro rata basis.
\.,
Budget and Appropriation of Installment Payments
During the term of the Installment Sale Agreement, the District is required to
adopt all necessary budgets and make all necessary appropriations of the Installment
Payments from the Net Revenues. In the event any Installment Payment requires the
adoption by the District of any supplemental budget or appropriation, the District will
promptly adopt the same. Such covenants of the District are deemed to be and shall be
construed to be duties imposed by law and it is the duty of each and every public official
of the District to take such actions and do such things as are required by law in the
performance of the official duty of such officials to enable the District to carry out and
perform such covenants.
Option to Prepay
The District has the option to prepay the Installment Payments or post a security
deposit to pay the Installment Payments, in whole or in part, in the amounts and on the
dates set forth in the Installment Sale Agreement. The optional prepayment dates and
prices have been determined to correspond to the optional prepayment dates and prices
applicable to the Certificates under the Trust Agreement.
Establishment of Rate Stabilization Fund
'-'
The District has the right at any time to establish a fund to be held by it for the
purpose of stabilizing the rates and charges imposed by the District with respect to the
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Sewer Enterprise. From time to time the District may deposit amounts in the Rate .. ..
Stabilization Fund, from any source of legally available funds, including but not limited ..
to Net Revenues which are released from the pledge and lien which secures the
Installment Payments and any Parity Debt, as the District may determine.
The District may, but is not be required to, withdraw from any amounts on
deposit in the Rate Stabilization Fund and deposit such amounts in the Sewer Fund in
any Fiscal Year for the purpose of paying the Installment Payments or the principal of
and interest on any Parity Debt coming due and payable in such Fiscal Year. Amounts
so transferred from the Rate Stabilization Fund to the Sewer Fund will constitute Gross
Revenues for such Fiscal Year (except as otherwise provided herein), and shall be
applied for the purposes of the Sewer Fund. Amounts on deposit in the Rate
Stabilization Fund are not pledged to or otherwise secure the Installment Payments or
any Parity Debt. All interest or other earnings on deposits in the Rate Stabilization Fund
will be retained therein or, at the option of the District, be applied for any other lawful
purposes. The District has the right at any time to withdraw any or all amounts on
deposit in the Rate Stabilization Fund and apply such amounts for any other lawful
purposes of the District.
Superior and Subordinate Obligations
The District will not issue or incur any additional bonds or other obligations
during the term of the Installment Sale Agreement having any priority in payment of
principal or interest out of the Gross Revenues or the Net Revenues over the Installment 'IrfIIIII
Payments. Nothing limits or affects the ability of the District to issue or incur (a) Parity . ....
Debt, or (b) obligations which are either unsecured or which are secured by an interest
in the Gross Revenues or the Net Revenues which are junior and subordinate to the
pledge and lien established under the Installment Sale Agreement.
Issuance of Parity Debt
Except for obligations incurred to prepay or post a security deposit for the
payment of Installment Payments or Parity Debt, the District will not issue or incur any
Parity Debt during the term of the Installment Sale Agreement unless:
. No Event of Default has occurred and is continuing;
· The Net Revenues, calculated in accordance with sound accounting
principles, as shown by the books of the District for the most recent
completed Fiscal Year for which audited financial statements of the
District are available, or for any more recent consecutive 12 month
period selected by the District, in either case verified by an
Independent Accountant or a Financial Consultant or shown in the
audited financial statements of the District, plus (at the option of the
District) any Additional Revenues, less any transfers made to the
Sewer Enterprise Fund from the Rate Stabilization Fund during such
12 month period, at least equal 120% of Maximum Annual Debt
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A-12
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Service (taking into account the Parity Debt then proposed to be
issued); and
.
There shall be established from the proceeds of such Parity Debt a
reserve fund for the security of such Parity Debt, in an amount equal
to the lesser of (i) the maximum amount of debt service required to be
paid by the District with respect to such Parity Debt during any Fiscal
Year, or (ii) the maximum amount then permitted under the Tax
Code; and
Rates and Charges
The District covenants to fix, prescribe, revise and collect rates, fees and charges
for the services and facilities furnished by the Sewer Enterprise during each Fiscal Year,
which are at least sufficient, when added to property taxes estimated to be received by
the District during such Fiscal Year, after making allowances for contingencies and error
in the estimates, to yield Gross Revenues (excluding any amounts transferred from a
Rate Stabilization Fund) sufficient to pay the following amounts in the following order
of priority:
(a) All Operation and Maintenance Costs estimated by the District to
become due and payable in such Fiscal Year;
'-'
(b) All Installment Payments and all payments of principal of and
interest on any Parity Debt as they become due and payable during
such Fiscal Year, without preference or priority;
(c) All amounts, if any, required to repay the Insurer for a draw on the
Qualified Reserve Fund Credit Instrument; and
(d) All payments, including but not limited to Additional Payments,
required to meet any other obligations of the District which are
charges, liens, encumbrances upon, or which are otherwise payable
from, the Gross Revenues or the Net Revenues during such Fiscal
Year.
In addition, the District is required to fix, prescribe, revise and collect rates, fees
and charges for the services and facilities furnished by the Sewer Enterprise during each
Fiscal Year which are sufficient to yield Net Revenues (including any amounts
transferred from a Rate Stabilization Fund) which are at least equal to 120% of the
amount described in the preceding clause (b) for such Fiscal Year.
Deposit of Property Taxes into the Sewer Fund
\."
The District covenants to deposit all property taxes received by the District into the
Sewer Fund, and to apply such property taxes to the payment of Operation and
Maintenance Expenses as the same become due and payable.
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Sale or Eminent Domain of Sewer Enterprise
..j
The District covenants that the Sewer Enterprise shall not be encumbered, sold,
leased, pledged, any charge placed thereon, or otherwise disposed of, as a whole or
substantially as a whole; provided that the District shall be authorized to dispose of any
facilities constituting a part of the Sewer Enterprise which the District determines are
not essential or of no continuing usefulness to the operation of the Sewer Enterprise
Neither the Net Revenues nor any other funds pledged or otherwise made available to
secure payment of the Installment Payments shall be mortgaged, encumbered, sold,
leased, pledged, any charge placed thereon, or disposed or used except as authorized by
the terms of the Installment Sale Agreement. The District may not enter into any
agreement which impairs the operation of the Sewer Enterprise or any part of it
necessary to secure adequate Revenues to pay the Installment Payments, or which
otherwise would impair the rights of the Certificate Owners with respect to the Net
Revenues. If any substantial part of the Sewer Enterprise is sold, the payment therefor
will either (a) be used for the acquisition or construction of improvements, extensions or
replacements of facilities constituting part of the Sewer Enterprise, or (b) be applied on a
pro rata basis to payor prepay the Installment Payments and any Parity Debt.
Any amounts received as awards as a result of the taking of all or any part of the
Sewer Enterprise by the lawful exercise of eminent domain, if and to the extent that such
right can be exercised against such property of the District, shall either (a) be used for
the acquisition or construction of improvements to the Sewer Enterprise, or (b) be
applied on a pro rata basis to payor prepay the Installment Payments and any Parity .. ..a
Debt. """
Insurance
The District will at all times maintain with responsible insurers all such
insurance on the Sewer Enterprise 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 Sewer Enterprise is damaged or destroyed, such
part must be restored to use. All amounts collected from insurance against accident to
or destruction of any portion of the Sewer Enterprise will be used to repair or rebuild
such damaged or destroyed portion of the Sewer Enterprise, and to the extent not so
applied, will be applied on a pro rata basis to payor prepay the Installment Payments
and any Parity Debt.
The District will also maintain worker's compensation insurance and insurance
against public liability and property damage to the extent reasonably necessary to
protect the District.
Any such policy of insurance may be maintained as part of or in conjunction
with any other insurance coverage carried by the District, and may be maintained in
whole or in part in the form of self-insurance by the District or in the form of the
participation by the District in a joint powers agency or other program providing pooled
insurance. 'ttttII
A-14
-f!'
~
Assignment and Amendment of Installment Sale Agreement
The Installment Sale Agreement may not be assigned by the District in whole or
in part. The Installment Sale Agreement may be amended by the District and the
Corporation, but only (a) for the purpose of providing for the issuance of any Parity
Debt in accordance with the Installment Sale Agreement, or (b) otherwise under the
circumstances and to the extent permitted under the Trust Agreement. See "TRUST
AGREEMENT - Amendment of Trust Agreement or Installment Sale Agreement" below.
Events of Default
Each of the following constitutes an event of default under the Installment Sale
Agreement:
· Failure by the District to pay any Installment Payment when due and
payable. Amounts paid by the Insurer will not be deemed to
constitute payment of the Installment Payments for purposes of this
provision.
· Failure by the District to pay any other payment due under the
Installment Sale Agreement when due and payable, and the
continuation of such failure for a period of 30 days.
\.,
· Failure by the District to observe and perform any covenant,
condition or agreement on its part to be observed or performed, other
than as referred to in the preceding clauses (a) or (b), for a period of
60 days after written notice specifying such failure and requesting
that it be remedied has been given to the District by the Corporation,
the Insurer or the Trustee; provided, Iwwever, that if the District shall
notify the Corporation and the Trustee that in its reasonable opinion
the failure stated in the notice can be corrected, but not within such
60-day period, such failure shall not constitute an event of default
hereunder if the District shall commence to cure such failure within
such 60 day period and thereafter diligently and in good faith cure
such failure in a reasonable period of time.
· Certain events relating to the insolvency or bankruptcy of the District.
· The occurrence of any event defined to be an event of default under
the instruments authorizing the issuance of any Parity Debt.
Remedies on Default
\.,
Whenever any event of default has happened and is continuing, the Trustee as
assignee of the Corporation has the right, at its option and without any further demand
or notice, to:
A-15
. declare all principal components of the unpaid Installment Payments,
together with accrued interest thereon at the respective rates of
interest per annum represented by the outstanding Certificates from
the immediately preceding Interest Payment Date on which payment
was made, to be immediately due and payable, whereupon the same
will immediately become due and payable;
.,J
. take whatever action at law or in equity may appear necessary or
desirable to collect the Installment Payments then due or thereafter to
become due during the term of the Installment Sale Agreement, or
enforce performance and observance of any obligation, agreement or
covenant of the District under the Installment Sale Agreement; and
. as a matter of right, in connection with the filing of a suit or other
commencement of judicial proceedings to enforce the rights of the
Trustee and the Certificate Owners, cause the appointment of a
receiver or receivers of the Gross Revenues and other amounts
pledged, with such powers as the court making such appointment
may confer.
No remedy conferred upon or reserved to the Corporation under the Installment
Sale Agreement is intended to be exclusive and every such remedy will be cumulative
and shall be in addition to every other remedy given under the Installment Sale
Agreement or at any time existing at law or in equity. No delay or omission to exercise 'IfIfIII
any right or power accruing upon any default will impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient.
In the event any agreement contained in the Installment Sale Agreement should
be breached by either party and thereafter waived by the other party, such waiver shall
be limited to the particular breach so waived and shall not be deemed to waive any
other breach thereunder.
Such rights and remedies as are given to the Corporation under the Installment
Sale Agreement have been assigned by the Corporation to the Trustee under the Trust
Agreement, and will be exercised by the Trustee, the Insurer and the Owners of the
Certificates as provided in the Trust Agreem~nt.
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A-16
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TRUST AGREEMENT
Trustee
The Trustee is appointed pursuant to the Trust Agreement and is authorized to
prepare, execute and deliver the Certificates thereunder, and to act as a depository of
amounts held thereunder. The Trustee is required to make deposits into and
withdrawals from funds, and invest amounts held under the Trust Agreement in
accordance with the District's instructions.
Funds
The Trust Agreement creates the Installment Payment Fund and the Reserve
Fund to be held in trust by the Trustee, and the Project Fund to be held by the District.
Installment Payment Fund. There will be deposited in the Installment Payment
Fund, when received by the Trustee, all Installment Payments and prepayments thereof
(except reimbursement for funds drawn from the Reserve Fund, as described below).
Moneys on deposit in the Installment Payment Fund will be used to pay principal and
interest represented by the Certificates when due and payable. Any earnings on
investment of moneys in the Installment Payment Fund will remain therein. Any
surplus remaining in the Installment Payment Fund after the payment of all Certificates,
or provision for their payment has been made, will be paid to the District.
\.,
Project Fund. The Trustee will establish and maintain a separate fund to be
known as the "Project Fund". Moneys in the Project Fund will be used solely for the
payment of the Project Costs. The Trustee will disburse moneys in the Project Fund
from time to time to pay Project Costs (or to reimburse the District for payment of
Project Costs) in accordance with such procedures as shall be established by the District
from time to time. Any amounts remaining on deposit in the Project Fund and not
required to complete the Acquisition and Construction of the Sewer System
Improvements will be transferred by the Trustee in the Installment Payment Fund.
Reserve Fund. The Qualified Reserve Fund Credit Instrument will be deposited
into the Reserve Fund on the Oosing Date. If on any Interest Payment Date, there are
insufficient moneys in any Installment Payment Fund to pay principal and interest then
due, the Trustee is required make a cl~im on the Qualified Reserve Fund Credit
Instrument, and to transfer such amount as is necessary to make such payment. Any
deficiency in Installment Payments which are paid from a claim on the Qualified
Reserve Fund Credit Instrument and thereafter deposited with the Trustee by the
District will be paid to the Insurer as a reimbursement for the draw on the Qualified
Reserve Fund Credit Instrument.
Investment of Funds
\.,
The Trustee is required to invest and reinvest all moneys held under the Trust
Agreement, at the written direction of the District, in Permitted Investments maturing
not later than the date moneys are expected to be required for expenditure. In the
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absence of any written request of the District directing the investment of uninvested A
moneys held by the Trustee, the Trustee will invest such moneys in Permitted ..,.,
Investments constituting money market funds, which mature not later than the date
such moneys are required or estimated by the Trustee to be required to be expended.
Such investments, if registrable, shall be registered in the name of the Trustee, as trustee
or in the name of its nominee, and shall be held by the Trustee. The Trustee may
purchase or sell to itself or any affiliate, as principal or agent, investments authorized by
the Trust Agreement. Such investments and reinvestments shall be made giving full
consideration to the time at which funds are required to be available. The Trustee may
act as purchaser or agent in the making or disposing of any investment. For purposes of
acquiring any investments under the Trust Agreement, the Trustee may in its sole
discretion commingle funds held by it.
All earnings on the investment of amounts on deposit in the funds and accounts
established under the Trust Agreement will be deposited in such funds and accounts.
Amendment of Agreements
Amendments Permitted With Owners' Consent. The Trust Agreement and the
rights and obligations of the Owners of the Certificates and the Installment Sale
Agreement and the rights and obligations of the parties thereto, may be modified or
amended at any time with the written consents of the Insurer and the Owners of a
majority in aggregate principal amount of the Certificates then outstanding. No such
modification or amendment may (a) extend or have the effect of extending the fixed ..,J
maturity of any Certificate or reducing the interest rate with respect thereto or extending
the time of payment of interest, or reducing the amount of principal thereof or reducing
any premium payable upon the prepayment thereof, without the express consent of the
Owner of such Certificate, or (b) reduce or have the effect of reducing the percentage of
Certificates required for the affirmative vote or written consent to an amendment or
modification of the Installment Sale Agreement, or (c) modify any of the rights or
obligations of the Trustee without its written consent.
Amendments Permitted Without Owners' Consent. The Trust Agreement and
the rights and obligations of the Owners of the Certificates and the Installment Sale
Agreement and the rights and obligations of the respective parties thereto, may be
modified or amended at any time by a supplemental agreement, with the prior written
consent of the Insurer but without the consent of any such Owners, only to the extent
permitted by law and only for one of more of the following purposes:
(a) to add to the covenants and agreements of any party, other
covenants to be observed, or to surrender any right or power
reserved to the Corporation or the District,
(b) to cure, correct or supplement any ambiguous or defective
provision contained therein,
(c) in any respect whatsoever in regard to questions arising thereunder,
as the parties thereto may deem necessary or desirable and which
.J
A-IS
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do not, in the opinion of Bond Counsel, materially adversely affect
the interests of the Owners of the Certificates,
(d)
(e)
to provide for matters relating to the issuance of Parity Debt, or
if and to the extent permitted in the opinion of Bond Counsel filed
with the Trustee, the District and the Corporation, to delete or
modify any of the provisions thereof relating to the exclusion from
gross income for federal income tax purposes of interest
represented by the Certificates.
Notwithstanding any other provision of the Trust Agreement, the determination
of whether the rights of the Certificate Owners will be materially adversely affected by
any proposed modification or amendment may be made as if there were no Certificate
Insurance Policy in effect. Any such supplemental agreement becomes effective upon
execution and delivery by the parties thereto.
Remedies Upon Event of Default
'-'
Remedies Generally. If an event of default occurs under and as defined in the
Installment Sale Agreement, then and in each and every such case during the
continuance of such event of default, with the prior written consent of the Insurer the
Trustee may, and at the written direction of the Insurer or (with the prior written
consent of the Insurer) at the written direction of the Owners of a majority in aggregate
principal amount of the Certificates then outstanding the Trustee shall, exercise any and
all remedies available pursuant to law or granted pursuant to the Installment Sale
Agreement. The Trustee must immediately notify the Insurer and the Certificate
Owners upon the occurrence of any event of default of which the Trustee has knowledge
in accordance with the Trust Agreement.
Application of Funds. All moneys received by the Trustee pursuant to any right
given or action taken under the provisions of the Trust Agreement or the Installment
Sale Agreement will be applied by the Trustee in the order following upon presentation
of the several Certificates, and the stamping thereon of the payment if only partially
paid, or upon the surrender thereof if fully paid -
First, to the payment of the fees, costs and expenses of the Trustee and of
the Certificate Owners in declaring and enforcing such event of
default, including reasonable compensation to its or their agents,
attorneys and counsel;
\.,
Second, to the payment of the whole amount then owing and unpaid with
respect to the Certificates for principal and interest, with interest on
the overdue principal and installments of interest at the respective
rates represented by the outstanding Certificates (but such interest
on overdue installments of interest will be paid only to the extent
funds are available therefor following payment of principal and
interest and interest on overdue principal, as aforesaid), and in case
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such moneys are insufficient to pay in full the whole amount so
owing and unpaid with respect to the Certificates, then to the
payment of such principal and interest without preference or
priority of principal over interest, or of interest over principal, or of
any installment of interest over any other installment of interest,
ratably to the aggregate of such principal and interest.
.j
Institution of Legal Proceedings. If one or more events of default happen and are
continuing, the Trustee in its discretion may, and upon the written request of the Insurer
or (with the prior written consent of the Insurer) upon the written request of the Owners
of a majority in principal amount of the Certificates then outstanding, and upon being
indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or
the rights of the Owners of Certificates by a suit in equity or action at law, either for the
specific performance of any covenant or agreement or in aid of the execution of any
power granted, or by mandamus or other appropriate proceeding for the enforcement of
any other legal or equitable remedy as the Trustee deems most effectual in support of
any of its rights or duties under the Trust Agreement.
Remedies Not Exclusive. No remedy conferred upon or reserved to the Trustee,
to the Insurer or to the Certificate Owners is intended to be exclusive of any other
remedy, and every such remedy will be cumulative and will be in addition to every
other remedy given under the Trust Agreement or at any time existing, at law or in
equity or by statute or otherwise.
Power of Trustee to Control Proceedings. In the event that the Trustee, upon the
happening of an event of default, has taken any action, by judicial proceedings or
otherwise, pursuant to its duties under the Trust Agreement, whether upon its own
discretion or upon the request of the Insurer or of the Owners of a majority in aggregate
principal amount of the Certificates then outstanding, it will have full power, in the
exercise of its discretion for the best interests of the Owners of the Certificates, with
respect to the continuance, discontinuance, withdrawal, compromise, settlement or
other disposal of such action; provided, however, that the Trustee may not discontinue,
withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or
in equity, without the consent of the Insurer.
.J
Limitation on Certificate Owners' Right to Sue. No Owner of any Certificate has
the right to institute any suit, action or proceeding at law or in equity, for any remedy
under or upon the Trust Agreement, unless (a) such Owner has 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 Certificates then outstanding have
made written request upon the Trustee to exercise its powers or to institute such action,
suit or proceeding in its own name; (c) said Owners have tendered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request; and (d) the Trustee has refused or failed to comply with
such request for a period of 60 days after such written request has been received by, and
said tender of indemnity has been made to, the Trustee.
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A-20
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\..
\..,
Rights of the Insurer
Upon the occurrence and continuation of an Event of Default, the Insurer is
entitled to control and direct the enforcement of all rights and remedies granted to the
Certificate Owners, or to the Trustee for the benefit of the Certificate Owners. The rights
granted to the Insurer will be terminated and will not be exercisable by the Insurer
during any period during which the Insurer is in default under the Certificate Insurance
Policy .
Defeasance
Upon payment of the outstanding Certificates in whole, or upon the deposit of
cash or non-callable Federal Securities with the Trustee sufficient with other available
funds to retire the obligations represented by such Certificates at or before maturity, all
rights thereunder of the Owners of such Certificates and all obligations of the
Corporation, the Trustee and the District with respect to the Certificates ceases and
terminates, except only the obligation of the Trustee to payor cause to be paid, from
Installment Payments paid by or on behalf of the District from funds so deposited, all
sums represented thereby when due.
Notwithstanding the foregoing prOVIsIons, in the event that the principal,
interest and prepayment premium (if any) represented by the Certificates are paid by
the Insurer pursuant to the Certificate Insurance Policy, the obligations of the
Corporation, the Trustee and the District will continue in full force and effect and the
Insurer will be fully subrogated to the rights of all Owners of the Certificates so paid.
A-2I
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APPENDIX B
AREA STATISTICAL INFORMATION
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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 23,850
as of January 1,2003. This represents
an increase of about 7 percent in the
City's population since 1993. The City
of South Lake Tahoe comprises about 14
percent of the total population of EI
Dorado County. EI Dorado County's
population as of January I, 2003 is
166,000. The County's population has
increased about 20 percent since 1993.
Table B-1
. Population
City of
South
Lake Tahoe
22,300
22,550
23,000
23,050
22,650
23,000
23,050
23,900
23,950
23,950
23,850
EI Dorado
County
137,900
140,900
142,900
144,500
144,000
148,800
151,300
157,200
160,200
163,600
166,000
Jan 1
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
~
Source: California Department of Finance.
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 1998 through 2002. Data shown
on the table was taken from Sales & Marketing Managements "Survey of Buying Power".
In 2002, the latest full year for which data is available, El Dorado County's EBI was
$46,768, over 10 percent greater than median household EBI for the State of California.
\.,;
B-1
..,
Table B-2. Median Effective Buying Income
EI Dorado County
State of California
United States
1998
$38,945
37,091
35,377
1999
$41,653
39,492
37,233
2000
$47,050
44,464
39,129
2001
$41,848
43,532
38,365
2002
$46,768
42,484
38,035
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 1998 through 2002.
Taxable sales in the City of South Lake Tahoe increased by an average of 3 percent
annually over the period shown. From 2001 to 2002, the City's taxable sales decreased
by $5.2 million, or about 2 percent. The City's taxable sales accounted for about 21
percent of total taxable sales in EI Dorado County in 2002. Taxable sales in EI Dorado
County have increased by an average of about 8 percent annually from 1998 to 2002.
Taxable sales in the County rose by 2 percent between 200 I and 2002.
Table B-3 . Taxable Sales ($000) .J
1998 1999 2000 2001 2002
City of South Lake Tahoe
Retail stores $ 216,604 $ 237,361 $ 259,199 $ 259,306 $ 256,370
All other outlets 40.988 44.690 48.626 47.569 45.263
Total 257,592 282,051 307,825 306,875 301,633
EI Dorado County
Retail stores $711,083 $ 803,857 $ 891,966 $ 964,304 $ 994,293
All other outlets 330.571 389.820 432.450 457.794 457.041
Total 1,041,654 1,193,677 1,324,416 1,422,098 1,451,334
------------------
Source: State Board of Equalization.
Employment
Table B-4 shows a five-year history ofEl 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 5.0 percent in 2002,33.5 percent lower than the comparable rate
in California. From 1998 to 2002, employment in the County increased by about 5.2 percent.
Services and trade accounted for almost 40 percent of County employment by place of
work in 2002.
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B-2
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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.
Table 8-4 . EI Dorado County
Employment and Unemployment
1998 1999 2000 2001 2002
Labor Force
Civilian labor force 76,700 79,100 77,100 78,500 80,800
Employment 72,900 76,000 73,900 75,300 76,700
Unemployment 3,800 3,100 3,200 3,200 4,100
Unemployment rate 5.0% 3.9% 4.1% 4.0% 5.0%
California unemployment rate 5.9% 5.2% 4.9% 5.4% 6.7%
Employment by Place of Work
Total agriculture 400 400 500 400 300
Construction and mining 3,100 3,900 4,500 4,900 4,700
Manufacturing 2,000 2,200 2,300 2,400 2,200
Transportation & public utilities 1,200 1,300 1,200 1,300 1 ,400
Wholesale trade 700 800 800 800 900
Retail trade 5,300 5,500 5,900 5,900 6,000
\.; Finance, insurance & real estate 1,500 1,700 1,900 2,300 3,000
Services 16,500 17,100 18,200 18,600 19,300
Government 8,500 8,900 8,900 9,100 9,400
Total, all industries 39,200 41,800 44,200 45,700 47,200
--------------------
Source: California State Employment Development Department
Table 8-5 . EI Dorado County
Major Employers
Employer
EI Dorado County
International Billing Services
Marshall Hospital
Barton Memorial Hospital
Leatherbys Family Creamery
Fortune 800 Inc.
Sierra Pacific Industries
Lake Tahoe Community College District
Black Oak Mine
R Systems Inc.
Product or Service
Government
Accounting and bookkeeping
Healthcare
Healthcare
Food Processing
Telephone services
Sawmills and planing mills
Junior college
Mining
Computer consulting services
Employee
1,875
982
760
558
500
300
300
250
200
250
\w
Source: EI Dorado County
B-3
Total Assessed Values for City of South Lake Tahoe
Table B-6 shows total assessed values for the City of South Lake Tahoe over the previous
five fiscal years. Assessed values have increased over the five-year period, even though
additional new residential units are limited by the Tahoe Regional Planning Agency
(TRPA) to protect the environment in the Tahoe Basin.
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Table B-6 . City of South Lake Tahoe
Total Assessed Value ($000)
Total assessed value
Percent change
1999/00
$ 2,004,922
2000/01
$ 2,152,065
7.3%
2001/02
$ 2,283,678
6.1%
2002103
$ 2,474,576
8.4%
2003/04
$ 2,826,948
14.2%
Source: County of EI Dorado, Auditor-Controller Office.
Median Home Prices
Table B-7 shows median home prices in the South Tahoe region for the past four years.
Median home prices have risen consistently, increasing over 70% between 2000 and
2003.
.J
Table B-7 . South Tahoe Public Utility District
Median Single Family Home Sales Price
Median Home Sales Price
Percent change
2000
$189,000
2001
$245,000
29.6%
2002
$272,000
11.0%
2003
$324,000
19.1%
Source: South Tahoe Association of Realtors.
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B-4
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APPENDIX C
SOUTH TAHOE PUBLIC UTILITY DISTRICT
EXCERPTS FROM AUDITED
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FISCAL YEAR ENDED JUNE 30, 2003 ENTERPRISE FUNDS
The following pages present excerpts from the District's financial statements for the fiscal
year ending June 30, 2003. 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 30,2003 is available from the District.
C-l
South Tahoe Public Utility District
BALANCE SHEET
Proprietary Funds J
June 30, 2003
(With comparative totals for June 30, 2002)
Business-type Activities
Enterprise Funds Total
ASSETS Sewer Water 2003 2002
Current assets:
Cash and cash equivalents $ 17,890,598 $ 12,919,050 $ 30,809,648 $ 20,4 12,536
I nvestmen ts 1,002,027
Accounts receivable, net of allowance
for doubtful occounts 396,929 661,930 1,058,859 873,233
Property tax receivable 4,239,561 4,239,561 3,903,491
Other current assets 544,590 322,718 867,308 948,364
Total current assets 23,071,678 13,903,698 36,975,376 27,139,651
Noncurrent assets:
Restricted assets:
Cash and cash equivalents 23,853,284>- 23,853,284
Certificate of deposit 197,575 65,000 262,575 260,976
Accounts receivable 3,350,000
Investments 12,141,553 12,141,553 16,983,575
Total restricted assets 197,575 36,059,837 36,257,4 12 20,594,551
Long-term accounts receivable 74,568 74,568 89,530
Other deferred expenses 146,029 23,736 169,765 226,224
Long-term investments 10,294,191 .J
Capital assets 149,220,790 43,464,402 192,685,192 178,702,773
Less accumulated depreciation (58,529,327) 113,321,868) (71,851,1951 (67,742,024)
Total capital assets 90,691,463 30,142,534 120,833,997 110,960,749
Total noncurrent assets 91,109,635 66,226,107 157,335,742 142,165,245
Total assets $ 114,181,313 $ 80,129,805 $ 194,311,118 $ 169,304,896
LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable $ 1,406,768 $ 747,640 $ 2,154,408 $ 1,658,069
Deferred revenue 5,036,621 242,611 5,279,232 5,823,994
Accrued expenses 389,285 326,439 715,724 2,279,444
Accrued interest payable 139,973 139,973 146,821
Compensated absences - current 357,905 231,443 589,348 246,877
Long-term debt - current 4,719 758,911 763,630 715,335
Total'current liabilities 7,195,298 2,447,017 9,642,315 10,870,540
Noncurrent liabilities:
Compensated absences 902,154 562,964 1,465,118 1,649,534
Long-term debt 10,187,768 10,187,768 10,918,138
Total noncurrent liabilities 902,154 10,750,732 11,652,886 12,567,672
T otalliabilities 8,097,452 13,197,749 21,295,201 23,438,212
Net ossets:
Invested in capital assets, net of related debt 90,686,745 19,195,854 109,882,599 99,327,274
Restricted 197,575 36,059,837 36,257,4 12 20,594,551
Unrestricted 15,199,541 11,676,365 26,875,906 25,944,859 vJ
Total net assets 106,083,861 66,932,056 173,015,917 145,866,684
T otalliabilifies and net assets $ 114,181,313 $ 80,129,805 $194,311,118 $ 169,304,896
C-2
South Tahoe Public Utility District
\., STATEMENT OF REVENUE, EXPENSES AND CHANGES IN NET ASSETS
Proprietary Funds
For the year ended June 30, 2003
(With comparative totals for the year ended June 30, 2002)
Business-type Activities
Enterprise Funds Total
Sewer Water 2003 2002
Operoting revenues:
Charges for sales and services:
Service charges $ 7,992,332 $ 7,465,333 $ 15,457,665 $ 15,125,793
Connection and service fees 2,551,090 653,446 3,204,536 1,325,160
Penolty charges 70,600 63,121 133,721 121,795
Other operating income 149,418 144,072 293,490 471,871
Total operating revenues 10,763,440 8,325,972 19,089,412 . 17,044,619
Operating expenses:
Salaries, wages and employee benefits 5,835,233 3,300,700 9,135,933 8,099,329
Depreciation and amortization 3,915,627 1,031,092 4,946,719 4,750,301
Utilities 1,758,431 612,591 2,371,022 1,827,455
Repairs and maintenance 601,498 411,681 1,013,179 894,984
Other operating expenses 1,388,044 1,149,004 2,537,048 1,962.434
'-' Total operating expenses 13,498,833 6,505,068 20,003,901 17,534,503
Operating income (loss1 (2,735,393l 1,820,904 1914,489) (489,884)
Nonoperating revenues (expensesl:
Tax revenue 4,279,470 4,279,470 4,018,637
Investment earnings 360,536 1,272,212 1,632,748 1,851,340
Aid from governmental agencies 32,351 246,21 3 278,564 264,885
Other nonoperating income 147,~07 32,332,685 32.479,992 35,130,098
Interest expense (7681 1620,942) 1621,710) (683,7941
Other expense (212,8391 (10,010,7421 (10,223,581). 113,331,3881
Total nonoperating revenues 4,606,057 23,219,426 27,825,483""'" 27,2Lt9,77"8.
Income before contributions 1,870,664 25,040,330 26,910,994 26,759,894
Capital contributions 238,239 238,239 163,220
CHANGE IN NET ASSETS 2,108,903 25,040,330 27,149,233 26,923,114
Total net assets - beginn'ing 103,974,958 41,891,726 145,866,684 118,943,570
Total net assets - ending $ 106,083,861 $ 66,932,056 $ 173,015,917 $ 145,866,684
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C-3
South Tahoe Public Utility District
STATEMENT OF CASH FLOWS ~
Proprietary Funds
For the year ended June 30, 2003
(With comparative totals for the year ended June 30, 2002)
Business-type Activities
Enterprise Funds Total
Sewer Water 2003 2002
Cosh flows from operating activities:
Cosh received from customers $ 9,768,817 $ 7,841,887 $ 17,610,704 $ 18,396,277
Penalty charges 70,600 63,121 133,721 121,795
Other income 296,725 35,826,757 36,123,482 32,251,969
Cosh paid to employees for services 15,744,6281 13,233,179) 18,977,807) (7,918,310)
Cosh paid to suppliers (3,292,5611 (3,715,2161 (7,007,7771 13,410,446)
Other expenses (169,818) (10,056,4171 (10,226,2351 (13,439,5401
Net cosh provided by operating
activities 929,135 26,726,953 27,656,088 26,001,745
Cosh flows from non-capital financing activities:
Tax revenue 4,279,470 4,279,470 4,018,637
Aid from governmental agencies 32,351 246,213 278,564 264,885
Net cash provided by non-capital
financing activities 4,311,821 246,213 4,558,034 4,283,522
Cash flows from capitol and related financing activites: ~
Purchase of capital assets (10,381,0781 (4,390,2121 (14,771,290) (8,122,5381
Repayment of debt (7,653) (751,167) (758,8201 (10,330,7941
Issuance of debt 29,139 29,139 7,274,762
Interest paid on notes payable /7681 (580,1841 (580,952) 1662, 1731
Contributed capitol 238,239 238,239 163,220
Net cash used in capital and
related financing activities 110,151,260) 15,692,424) (15,843,6841 (11,677,523)
Cosh flows from investing activities:
Interest and dividends on investments 471,104 1,272,212 1,743,316 1,823,563
Proceeds from sole of certificate of
depasit and investments 11,296,218 17,842,022 29,138,240 1 1,522,065
Purchase of certificate of deposit and
investments 11,598) (13,000,000) (13,001,598) (39,023,575)
Net cosh provided by (used in)
investing activities 11,765,724 6,114,234 17,879,958 (25,677,947)
NET INCREASE (DECREASEl IN
CASH AND CASH EQUIVALENTS 6,855,420 27,394,976 34,250,396 (7,070,203)
Cosh and cosh equivalents, beginning
/including $-0- reported in restricted assets
forWaterl 11,035,178 9,377,358 20,41 2,536 27,482,739
Cosh and cosh equivalents, ending .."j
/including $23,853,284 reported in restricted
assets for Water) $ 17,890,598 $ 36,772,334 $ 54,662,932 $ 20,412,536
C-4
South Tahoe Public Utility District
STATEMENT OF CASH FLOWS - CONTINUED
Proprietary Funds
For the year ended June 30, 2003
(With comparative totals for the year ended June 30, 2002)
\.
Reconciliation of operating income (Iossl to
net cash provided by operating activities:
Operating income (loss)
Adjustments to reconcile operating income
(/oss) to net cash provided by operating
activities:
Depreciation and amortization
(Increase\ decrease in accounts
and amounts receivable
Increase in properly tax receivable
(lncreasel decrease in other assets
Increase (decreasel in accounts payable
Increase (decrease) in deferred revenue
Increase in properly tax deferred revenue
Increase {decrease} in other poyables
Other non-operating revenue, net
\.
Net cash provided by operating
activities
Business-type Activities
Enterprise Funds
Sewer Water
Total
2003
2002
$ (2,735,3931
$
$
(489,884)
$ 1,820,904
(914,4891
3,915,627 1,031,092 4,946,719 4,750,301
(29,225\ 3,208,560 3,179,335 11,952,562)
(336,0701 (336,0701 (216,7831
(24,5351 2,805 (21,7301 17,971
380,652 115,687 496,339 (13,5241
(745,380) (135,4521 (880,832) 547,886
336,070 336,070 216,783
232,921 11,645,434) (1,412,5131 1,364,468
165,532} 22,328,791 22,263,259 21,777,089
$ 929,135 $ 26,726,953 $ 27,656,088 $ 26,001,745
Non-cash capital and related financing activities:
Disposal of fixed assets $ 716,365 $ 143,481 $ 859,846 $ 391 ,492
Non-cash investing activities:
Increase in fair value of investments $ 131,922 $ 23,178 $ 155,100 $ 284,481
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APPENDIX D
FORM OF CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (this "Disclosure Certificate") is executed and
delivered by the South Tahoe Public Utility District (the "District") in connection with
the execution and delivery of$15,000,000 aggregate principal amount of Sewer Revenue
Certificates, Series 2004 (the "Certificates"). The Certificates evidence the direct,
undivided fractional interests of the owners thereof in installment payments to be made
by the District under an Installment Sale Agreement dated as of May 1,2004 (the
"Installment Sale Agreement") between the Public Property Financing Corporation of
California (the "Corporation") as seller and the District as purchaser. The Certificates
will be delivered under and subject to the terms and provisions of a Trust Agreement
dated as of May 1,2004 (the "Trust Agreement") by and among the District, the
Corporation and BNY Western Trust Company, as trustee (the "Trustee"). The District
covenants and agrees as follows:
Section I. Purpose of the Disclosure Certificate. This Disclosure Certificate is being
executed and delivered by the District for the benefit of the holders and beneficial owners
of the Certificates and in order to assist the Participating Underwriters in complying with
Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended.
'-
Section 2. Definitions. In addition to the definitions set forth in the Trust Agreement,
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
meanmgs:
"Annual Report" means any Annual Report provided by the District pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Certificate.
"Dissemination Agent" means the Trustee or any successor Dissemination Agent
designated in writing by the District and which has filed with the District a written
acceptance of such designation.
"Listed Events" means any of the events listed in Section 5(a) of this Disclosure
Certificate.
"National Repository" means any Nationally Recognized Municipal Securities
Information Repository for purposes of the Rule.
"Participating Underwriter" means any of the original underwriters of the Certificates
required to comply with the Rule in connection with offering of the Certificates.
~
"Repository" means each National Repository and each State Repository.
D-l
"Rule" means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission . ,..
under the Securities Exchange Act of 1934, as the same may be amended from time to ...
time.
"State Repository" means any public or private repository or entity designated by the
State of Cali fomi a 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.
Section 3. Provision of Annual Rel'orts.
(a) The District shall, or shall cause the Dissemination Agent to, not later than nine
months after the end of the District's fiscal year (which currently would be the first day
of April), commencing April I, 2005 with the report for the 2003/04 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 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 givec ..~
notice of such change in the same manner as for a Listed 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 or
incorporate by reference the following:
(a) Audited Financial Statements prepared in accordance with generally
accepted accounting principles as promulgated to apply to governmental
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D-2
-..
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 financial statements in a format
similar to the financial statements contained in the final Official
Statement, and the audited financial statements shall be filed in the same
manner as the Annual Report when they become available.
(b) To the extent not contained in the audited fmancial statements filed
pursuant to the preceding clause (a), the Annual Report shall contain
information showing the following:
(i) a schedule of sewer rates in effect as of the close of the
preceding fiscal year;
(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 payments of debt service coming due in
such fiscal year with respect to the Installment Payments and any
other Parity Debt; and
\r
(Hi) for each customer whose total billings in the preceding fiscal
year represent 10% or more the Gross Revenues of the Sewer
Enterprise, (I) the total amount of Gross Revenues derived from
such customer and (2) the percent of total Gross Revenues
represented by such customer for such fiscal year.
(c) In addition to any of the information expressly required to be provided
under paragraphs (a) and (b) 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, including 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. Reporting of Significant Events.
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(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
Certificates, if material:
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(1) Principal and interest payment delinquencies.
(2) on-payment related defaults.
Q) Unscheduled draws on debt service reserves reflecting
financial difficulties.
(1) Unscheduled draws on credit enhancements reflecting
financial difficulties.
(~ Substitution of credit or liquidity providers, or their failure
to perform.
(2) Adverse tax opinions or events affecting the tax-exempt
status of the security.
(1) Modifications to rights of security holders.
(~) Contingent or unscheduled bond calls.
(2.) Defeasances.
(lQ) Release, substitution, or sale of property securing repayment
of the securities.
(ill Rating changes.
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(b) Whenever the District obtains knowledge of the occurrence ofa 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)(8) and (9) need not be given under this subsection any earlier than the
notice (if any) of the underlying event is given to holders of affected Certificates pursuant
to the Trust Agreement.
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Section 6. Termination of Reporting Obligation. The District's obligations under this
Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or
payment in full of all of the Certificates. If such termination occurs prior to the final
maturity of the Certificates, the District shall give notice of such termination in the same
manner as for a Listed Event under Section 5( c).
Section 7. Dissemination Agent. 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:
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(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
Certificates, 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
Certificates, 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 Certificates in the manner provided in the Trust Agreement for
amendments to the Trust Agreement with the consent of holders, or (ii)
does not, in the opinion of the Trustee or nationally recognized bond
counsel, materially impair the interests of the holders or beneficial owners
of the Certificates.
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If the annual financial information or operating data to be provided in the Annual Report
is amended pursuant to the provisions hereof, the first annual financial information filed
pursuant hereto containing the amended operating data or financial information shall
explain, in narrative form, the reasons for the amendment and the impact of the change in
the type of operating data or financial information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be
followed in preparing financial statements, the annual financial information for the year
in which the change is made shall present a comparison between the financial 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 reasonably 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).
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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
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Certificate to update such information or include it in any future Annual Report or notice
of occurrence of a Listed Event.
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Section 10. Default. In the event of a failure of the District to comply with any provision
of this Disclosure Certificate any holder or beneficial owner of the Certificates may take
such actions as may be necessary and appropriate, including seeking mandate or specific
performance by court order, to cause the 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 Trust Agreement, 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 II. Duties. Immunities and Liabilities of Dissemination Agent. The
Dissemination Agent shall have only such 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 ofliability, but excluding liabilities due to the
Dissemination Agent's negligence or willful misconduct. The obligations of the District
under this Section shall survive resignation or removal of the Dissemination Agent and
payment of the Certificates.
Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of ..,J
the District, the Dissemination Agent, the Participating Underwriters and holders and
beneficial owners from time to time of the Certificates, and shall create no rights in any
other person or entity.
Date: May 20, 2004
SOUTH TAHOE PUBLIC
UTILITY DISTRICT
By
Rhonda McFarlane
Chief Financial Officer
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EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name oflssuer: South Tahoe Public Utility District
Name oflssue: $15,000,000 Sewer Revenue Certificates of Participation, Series 2004
Date of Issuance: May 20, 2004
NOTICE IS HEREBY GIVEN that the South Tahoe Public Utility District (the
"District") has not provided an Annual Report with respect to the above-named
Certificates as required by Section 9.05 of the Trust Agreement dated as of May 1,2004
among the Public Property Financing Corporation of California, the District and BNY
Western Trust Company, as trustee. The District anticipates that the Annual Report will
be filed by
Dated:
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SOUTH TAHOE PUBLIC
UTILITY DISTRICT
By
Name:
Title:
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[THIS PAGE INTENTIONALLY LEFT BLANKI
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APPENDIX E
FORM OF BOND COUNSEL OPINION
[LETTERHEAD OF JONES HALL]
May 20, 2004
Board of Directors
South Tahoe Public Utilities District
1275 Meadow Crest Drive.
South Lake Tahoe, California 96150
OPINION: $15,000,000 South Tahoe Public Utilities District Sewer
Revenue Certificates. Series 2004
Members of the Board of Directors:
We have acted as special counsel in connection with the delivery by the South
Tahoe Public Utilities District, California (the "District"), of the Installment Sale
Agreement dated as of May 1, 2004 (the "Installment Sale Agreement") between the
Public Property Financing Corporation of California (the "Corporation") as seller and
the District as purchaser. Pursuant to the Trust Agreement dated as of May 1, 2004
(the "Trust Agreement") among the District, the Corporation and BNY Western Trust
Company, as trustee thereunder (the "Trustee"), the Trustee has executed and delivered
$15,000,000 aggregate principal amount of Installment Purchase Certificates of
Participation, Series 2004 (the "Certificates") evidencing the direct, undivided fractional
interests of the owners thereof in installment payments to be made by the District
pursuant to the Installment Sale Agreement (the "Installment Payments") which have
been assigned by the Corporation to the Trustee pursuant to the Trust Agreement. 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 Installment Sale Agreement and the Trust
Agreement, and in certified proceedings and other 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:
1. The District is a municipal corporation duly organized and validly existing
under the laws of the State of California with the full power to enter into the Installment
Sale Agreement and the Trust Agreement and to perform the agreements on its part
contained therein.
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District Council
South Tahoe Public Utilities District
May 20, 2004
Page 2
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2. The Installment Sale Agreement and the Trust Agreement have been duly
approved by the District and constitute valid and binding obligations of the District
enforceable against the District in accordance with their respective terms.
3. The Certificates have been validly executed and delivered by the Trustee
pursuant to the Trust Agreement and, by virtue of the assignment made pursuant to the
Trust Agreement, the owners of the Certificates are entitled to the benefits of the
Installment Sale Agreement.
4. The portion of the Installment Payments designated as and comprising
interest and received by the owners of the Certificates 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 such corporations (as defined for federal income tax purposes), such interest is
required to be taken into account in determining certain income and earnings.
The opinions set forth in the preceding paragraph are subject to the condition
that the District comply with all requirements of the Tax Code that must be satisfied
subsequent to the delivery of the Installment Sale Agreement in order that such interest
be, or continue to be, excluded from gross income for federal income tax purposes. The
District has covenanted in the Installment Sale Agreement and the Trust Agreement and
other instruments relating to the Certificates to comply with each of such requirements. .",I
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 Installment Sale Agreement. We express no opinion regarding other
federal tax consequences arising with respect to the Installment Sale Agreement and the
Certificates.
5. The portion of the Installment Payments designated as and comprising
interest and received by the owners of the Certificates is exempt from personal income
taxation imposed by the State of California.
The rights of the owners of the Certificates and the enforceability of the
Installment Sale Agreement and the Trust Agreement 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 accordance with principles of equity or otherwise in appropriate cases.
Respectfully submitted,
Jones Hall,
A Professional Law Corporation
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APPENDIX F
BOOK ENTRY SYSTEM
The Depository Trust Company ("DTC"), New York, NY, will act as securities depository
for the Certificates. The Certificates will be issued as fully registered securities registered in
the name of Cede & Co. (DTC's partnership nominee). One fully registered Certificate
will be issued for each maturity of the Certificates, each in the aggregate principal
amount of such maturity, and will be deposited with DTC.
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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 Certificates. 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 Rilles applicable to
DTC and its Participants are on file with the Securities and Exchange Commission.
Purchases of Certificates under the DTC system must be made by or through Direct Partici-
pants, which will receive a credit for the Certificates and DTC's records. The ownership
interest of each actual purchaser of each Certificate ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, 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 Owner entered into the transaction. Transfers of ownership interests
in the Certificates are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive Certificates
representing their ownership interests in Certificates, except in the event that use of the
book-entry system for the Certificates is discontinued.
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To facilitate subsequent transfers, all Certificates deposited by Participants with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
Certificates with DTC and their registration in the name of Cede & Co. effect no change
in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the
Certificates; DTC's records reflect only the identity of the Direct Participants to whose
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accounts such Certificates 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.
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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. Ifless than all of the Certificates
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 Certificates. 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 & Coo's consenting or voting right
to those Direct Participants to whose accounts the Certificates are credited on the record
date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Certificates will be made to DTC. DTC's practice
is to credit Direct Participants' accounts on payable date in accordance with their respec-
tive holdings shown on DTC s records unless DTC 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 of DTC, 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 of DTC, and
disbursement of such payments to the Beneficial Owners shall be the responsibility of
Direct and Indirect Participants.
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DTC may discontinue providing its services as securities depository with respect to the
Certificates 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,
Certificates 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, Certificates 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.
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APPENDIX G
BOND INSURANCE
FORM OF STANDARD DISCLOSURE
Dated as of March 29, 2004
DESCRIPTION OF THE INSURER
The following information has been supplied by the Insurer for inclusion in this official
statement. No representation is made by South Tahoe Public Utility District as to the accuracy
or completeness of the information.
The Insurer accepts no responsibility for the accuracy or completeness of this official
statement or any other information or disclosure contained herein, or omitted herefrom, other
than with respect to the accuracy of the information regarding the Insurer and its affiliates set
forth under this heading. In addition, the Insurer makes no representation regarding the
Certificates or the advisability of investing in the Certificates.
General
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XL Capital Assurance Inc. (the "Insurer" or "XLCA") is a mono line financial guaranty
insurance company incorporated under the laws of the State of New York. The Insurer is
currently licensed to do insurance business in, and is subject to the insurance regulation and
supervision by, the State of New York, forty-eight other states, the District of Columbia, Puerto
Rico, the U.S. Virgin Islands and Singapore. The Insurer has a license application pending with
the State of Wyoming, the only state in which it is not currently licensed.
The Insurer is an indirect wholly owned subsidiary of XL Capital Ltd, a Cayman Islands
corporation ("XL Capital Ltd"). Through its subsidiaries, XL Capital Ltd is a leading provider
of insurance and reinsurance coverages and financial products to . industrial, commercial and
professional service firms, insurance companies and other enterprises on a worldwide basis. The
common stock of XL Capital Ltd is publicly traded in the United States and listed on the New
York Stock Exchange (NYSE: XL). XL Capital Ltd is not obligated to pay the debts of or
claims against the Insurer.
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The Insurer was formerly known as The London Assurance of America Inc. ("London"),
which was incorporated on July 25, 1991 under the laws of the State of New York. On February
22,2001, XL Reinsurance America Inc. ("XL Re") acquired 100% of the stock of London. XL
Re merged its former financial guaranty subsidiary, known as XL Capital Assurance Inc.
(formed September 13, 1999) with and into London, with London as the surviving entity.
London immediately changed its name to XL Capital Assurance Inc. All previous business of
London was 100% reinsured to Royal Indemnity Company, the previous owner at the time of
acquisition.
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Reinsurance
The Insurer has entered into a facultative quota share reinsurance agreement with XL
Financial Assurance Ltd ("XLF A"), an insurance company organized under the laws of
Bermuda, and an affiliate of the Insurer. Pursuant to this reinsurance agreement, the Insurer
expects to cede up to 90% of its business to XLF A. The Insurer may also cede reinsurance to
third parties on a transaction-specific basis, which cessions may be any or a combination of
quota share, first loss or excess of loss. Such reinsurance is used by the Insurer as a risk
management device and to comply with statutory and rating agency requirements and does not
alter or limit the Insurer's obligations under any financial guaranty insurance policy. With
respect to any transaction insured by XLCA, the percentage of risk ceded to XLF A may be less
than 90% depending on certain factors including, without limitation, whether XLCA has
obtained third party reinsurance covering the risk. As a result, there can be no assurance as to
the percentage reinsured by XLF A of any given financial guaranty insurance policy issued by
XLCA, including the Policy.
Based on the audited financials of XLF A, as of December 31, 2003, XLF A had total
assets, liabilities, redeemable preferred shares and shareholders' equity of $831,762,000,
$401,123,000, $39,000,000 and $391,639,000, respectively, determined in accordance with
generally accepted accounting principles in the United States. XLF A's insurance financial
strength is rated "Aaa" by Moody's and "AAA" by S&P and Fitch Inc. In addition, XLFA has ..J
obtained a financial enhancement rating of"AAA" from S&P.
The obligations of XLF A to the Insurer under the reinsurance agreement described above
are unconditionally guaranteed by XL Insurance (Bermuda) Ltd ("XLI"), a Bermuda company
and one of the world's leading excess commercial insurers. XLI is a wholly owned indirect
subsidiary of XL Capital Ltd. In addition to A.M. Best's rating of "A+" (Negative Outlook),
XLI's insurance financial strength rating is "Aa2" by Moody's, "AA-" by Standard & Poor's and
"AA" by Fitch. The ratings of XLF A and XLI are not recommendations to buy, sell or hold
securities, including the Certificates and are subject to revision or withdrawal at any time by
Moody's, Standard & Poor's or Fitch.
Notwithstanding the capital support provided to the Insurer described in this section, the
holders of the Certificates will have direct recourse against the Insurer only, and neither XLF A
nor XLI will be directly liable to the holders of the Certificates.
Financial Strength and Financial Enhancement Ratings of XLCA
The Insurer's insurance financial strength is rated "Aaa" by Moody's and "AAA" by
Standard & Poor's and Fitch, Inc. ("Fitch"). In addition, XLCA has obtained a financial
enhancement rating of "AAA" from Standard & Poor's. These ratings reflect Moody's, Standard
& Poor's and Fitch's current assessment of the Insurer's creditworthiness and claims-paying
ability as well as the reinsurance arrangement with XLF A described under "Reinsurance" above.
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The above ratings are not recommendations to buy, sell or hold securities, including the
Certificates and are subject to revision or withdrawal at any time by Moody's, Standard & Poor's
or Fitch. Any downward revision or withdrawal of these ratings may have an adverse effect on
the market price of the Certificates. The Insurer does not guaranty the market price of the
Certificates nor does it guaranty that the ratings on the Certificates will not be revised or
withdrawn.
Capitalization of the Insurer
Based on the audited statutory financial statements for XLCA as of December 31, 2002
filed with the State of New York Insurance Department, XLCA has total admitted assets of
$180,993,189, total liabilities of $58,685,217 and total capital and surplus of $122,307,972
determined in accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities ("SAP"). Based on the unaudited statutory financial statements
for XLCA as of December 31, 2003 filed with the State of New York Insurance Department,
XLCA has total admitted assets of $329,701,823, total liabilities of $121,635,535 and total
capital and surplus of $208,066,288 determined in accordance with SAP.
For further information concerning XLCA and XLFA, see the financial statements of
XLCA and XLF A, and the notes thereto, incorporated by reference in this official statement.
The financial statements of XLCA and XLF A are included as exhibits to the periodic reports
filed with the Securities and Exchange Commission (the "Commission") by XL Capital Ltd and
may be reviewed at the EDGAR website maintained by the Commission. All financial
statements of XLCA and XLF A included in, or as exhibits to, documents filed by XL Capital
Ltd pursuant to Section 13 (a), 13 (c), 14 or 15(d) of the Securities Exchange Act of 1934 on or
prior to the date of this official statement, or after the date of this official statement but prior to
termination of the offering of the Certificates, shall be deemed incorporated by reference in this
official statement. Except for the financial statements of XLCA and XLF A, no other information
contained in XL Capital Ltd's reports filed with the Commission is incorporated by reference.
Copies of the statutory quarterly and annual statements filed with the State of New York
Insurance Department by XLCA are available upon request to the State of New York Insurance
Department.
Regulation of the Insurer
The Insurer is regulated by the Superintendent of Insurance of the State of New York. In
addition, the Insurer is subject to regulation by the insurance laws and regulations of the other
jurisdictions in which it is licensed. As a financial guaranty insurance company licensed in the
State of New York, the Insurer is subject to Article 69 of the New York Insurance Law, which,
among other things, limits the business of each insurer to financial guaranty insurance and
related lines, prescribes minimum standards of solvency, including minimum capital
requirements, establishes contingency, loss and unearned premium reserve requirements,
requires the maintenance of minimum surplus to policyholders and limits the aggregate amount
of insurance which may be written and the maximum size of any single risk exposure which may
be assumed. The Insurer is also required to file detailed annual financial statements with the
New York Insurance Department and similar supervisory agencies in each of the other
jurisdictions in which it is licensed.
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The extent of state insurance regulation and supervision varies by jurisdiction, but New
York and most other jurisdictions have laws and regulations prescribing permitted investments
and governing the payment of dividends, transactions with affiliates, mergers, consolidations,
acquisitions or sales of assets and incurrence of liabilities for borrowings.
THE FINANCIAL GUARANTY INSURANCE POLICIES ISSUED BY THE
INSURER, INCLUDING THE POLICY, ARE NOT COVERED BY THE
PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76
OF THE NEW YORK INSURANCE LAW.
The principal executive offices of the Insurer are located at 1221 Avenue of the
Americas, New York, New York 10020 and its telephone number at this address is (212) 478-
3400.
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>Xtb CAPITAL ASSURANCE
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1221 Avenue of the Americas
New York, New York 10020
Telephone: (212) 478-3400
MUNICIPAL BOND
INSURANCE POLICY
ISSUER:
Policy No: [
BONDS:
Effective Date: [
XL Capital Assurance Inc. (XLCA), a New York stock insurance company, in consideration of the payment of the
premium and subject to the terms of this Policy (which includes each endorsement attached hereto), hereby agrees
unconditionally and irrevocably to pay to the trustee (the "Trustee") or the paying agent (the "Paying Agent") (as set forth in
the documentation providing for the issuance of and securing the Bonds) for the benefit of the Owners of the Bonds or, at the
election of XLCA, to each Owner, that portion of the principal and interest on the nds that shall become Due for Payment
but shall be unpaid by reason of Nonpayment.
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XLCA will pay such amounts to or for the benefit of the Owner th day on which such principal and
interest becomes Due for Payment or one (I) Business Day followin e B in on w . ch XLCA shall have received
Notice of Nonpayment (provided that Notice will be deemed receiv on gi ay it is received prior to 10:00
a.m. Pacific time on such Business Day; otherwise it will be ee e re lve n e ext usiness Day), but only upon
receipt by XLCA, in a form reasonably satisfactory to it, f VI e 0 the r' right to receive payment of the
principal or interest then Due for Payment and (b) evide p riate' struments of assignment, that all of
the Owner's rights with respect to payment of suc is e for Payment shall thereupon vest in
XLCA. Upon such disbursement, XLCA shall beco 0 , y appurtenant coupon to the Bond or the
right to receipt of payment of principal and i eres fully subrogated to the rights of the Owner,
including the Owner's right to receive payme s e on t t of any payment by XLCA hereunder. Payment
by XLCA to the Trustee or Paying Age e nefit ofill 0 all, to the extent thereof, discharge the obligation of
XLCA under this Policy.
notice hat any payment of principal or interest on a Bond which has
e y or on behalf of the Issuer of the Bonds has been recovered from
a ourt competent jurisdiction that such payment constitutes an avoidable
applicable bankruptcy law, such Owner will be entitled to payment from
ds are not otherwise available.
The following meanings specified for all purposes of this Policy, except to the extent such terms
are expressly modified by ent to this Policy. "Business Day" means any day other than (a) a Saturday or Sunday
or (b) a day on which bank ins tions in the State of California, the State of New York or the Insurer's Fiscal Agent are
authorized or required by law or executive order to remain closed. "Due for Payment", when referring to the principal of
Bonds, is when the stated maturity date or a mandatory redemption date for the application of a required sinking fund
installment has been reached and does not refer to any earlier date on which payment is due by reason of call for redemption
(other than by application of required sinking fund installments), acceleration or other advancement of maturity, unless
XLCA shall elect, in its sole discretion, to pay such principal due upon such acceleration; and, when referring to interest on
the Bonds, is when the stated date for payment of interest has been reached. "Nonpayment" means the failure of the Issuer to
have provided sufficient funds to the Trustee or Paying Agent for payment in full of all principal and interest on the Bonds
which are Due for Payment. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or
written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to XLCA which notice shall
specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such
claimed amount became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of
Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or
any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.
L.,
XLCAP-005 (Muni Spec - California 12-2001)
I
XLCA may, by giving written notice to the Trustee and the Paying Age
Fiscal Agent") for purposes of this Policy. From and after the date of receipt bee and the Paying Agent of such
notice, which shall specify the name and notice address of the Insurer's Fisc ent, 0 . s of all notices required to be
delivered to XLCA pursuant to this Policy shall be simultaneously deliv Q t Ins e Fl al Agent and to XCLA and ..,J
shall not be deemed received until received by both and (b) all paym ts r ir 0 de b XLCA under this Policy
may be made directly by XLCA or by the Insurer's Fiscal Agent 0 0 C e s ' iscal Agent is the agent
ofXLCA only and the Insurer's Fiscal Agent shall in no event be 0 y t of the Insurer's Fiscal Agent
or any failure of XLCA to deposit or cause to be deposited s lC aK Que hereunder.
Except to the extent expressly modified by an
(b) the Premium on this Policy is not refundable
or other acceleration payment which at any tim
XLCA, nor against any risk other than No
modified, altered or affected by any othe gree
a Ii'" licy is non-cancelable by XLCA, and
lic e not insure against loss of any prepayment
c of any Bond, other than at the sole option of
o the full undertaking of XLCA and shall not be
mg any modification or amendment thereto.
E INSOLVENT, ANY CLAIMS ARISING UNDER
A GUARANTY INSURANCE FUND SPECIFIED IN
CE CODE.
olicy to be executed on its behalfby its duly authorized officers.
SPECIMEN
Name:
Title:
Name:
Title:
."
XLCAP-005 (Muni Spec - California 12-2001)
2
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>X4b CAPITAL ASSURANCE
'-'
1221 Avenue of the Americas
New York, New York 10020
Telephone: (212) 478-3400
DEBT SERVICE RESERVE
INSURANCE POLICY
ISSUER:
Policy No.:
BONDS:
Effective Date:
Premium:
\.,
o the later of the Business Day
r h usiness Day next following the
onpayment, in a form reasonably
r eived on a given Business Day if it is
o s c usiness Day; otherwise, it will be deemed
payment received by XLCA is incomplete or
Po ICY, it shall be deemed not to have been received
ence d XLCA shall promptly so advise the Beneficiary,
'ce of Nonpayment. Payment by XLCA to the Beneficiary
XL CAPITAL ASSURANCE INC. ("XLCA"), a New York stock in r
received, hereby unconditionally and irrevocably agrees to pa
"Beneficiary") under the documentation (the "Bond Docu
securing the Bonds, for the benefit of the Owners, subject y to
each endorsement hereto), that portion of the principal 0 d' er
for Payment but shall be unpaid by reason of Non pay en th
The amount available under this Policy for payment shall not exceed the Policy Limit. The amount
available at any particular time to be paid to the Beneficiary under the terms of this Policy shall
automatically be reduced by any payment under this Policy. However, after such payment, the amount
available under this Policy shall be reinstated in full or in part, but only up to the Policy Limit, to the
extent of the reimbursement of such payment (exclusive of interest and expenses) to XLCA by or on
behalf of the Issuer. Within three Business Days of such reimbursement, XLCA shall provide the
Beneficiary and the Issuer with notice of the reimbursement and reinstatement.
'-'
Payment under this Policy shall not be available with respect to (a) any Nonpayment that occurs prior to
the Effective Date or after the Termination Date of this Policy or (b) Bonds that are not outstanding under
the Bond Document. If the amount payable under this Policy is also payable under another insurance
policy or surety bond insuring the Bonds, payment first shall be made under this Policy to the extent of ...,j
the amount available under this Policy up to the Policy Limit. In no event shall XLCA incur duplicate
liability for the same amounts owing with respect to the Bonds that are covered under this Policy and any
other insurance policy or surety bond that XLCA has issued.
Except to the extent expressly modified by an endorsement hereto, the following terms shall have the
meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a
Saturday or Sunday or (b) a day on which banking institutions in the State of California or the State of
New York are, or the Insurer's Fiscal Agent is, authorized or required by or executive order to remain
closed. "Due for Payment' means (a) when referring to the princi 0 nd, payable on the stated
maturity date thereof or on a mandatory sinking fund redemptio ate d the Bond or the Bond
Document and does not refer to any earlier date on which pay tIe by' re 0 f call for redemption
(other than by mandatory sinking fund redemption), acceler on ot e d erne of maturity unless
XLCA shall elect, in its sole discretion, to pay such p . a du po s h cc ation together with
any accrued interest to the date of acceleration and h n rri to' es on a Bond, payable on
the date stated in the Bond for payment of int est. I ara Agreement' means the
Financial Guaranty Agreement dated as of the c 'v res ct of this Policy, as the same
may be amended or supplemented from ti e t ti eans, in respect of a Bond, the
failure of the Issuer to have provided su lcien ull of all principal and interest that
is Due for Payment on such Bond. "N pIC de, in respect of a Bond, any payment
of principal or interest that is Du or m t m ner by or on behalf of the Issuer that has
been recovered from such ner ur t ten a States Bankruptcy Code by a trustee in
bankruptcy in accordance , n n ea abl order of a court having competent jurisdiction.
"Notice" means teleco ed notI , su qu firmed in a signed writing, or written notice by
registered or certifi il,~m h B fici to XLCA substantially in the form of Attachment I """
which notice sh spe' .(~th per n 0 entity making the claim, (b) the Policy Number, (c) the
claimed amount at uch cl 'med amount became Due for Payment. "Owner" means, in
respect of a Bond, e person nt who, at the time of Nonpayment, is entitled under the terms of such
Bond to payment of . lp I rest thereunder, except that "Owner" shall not include the Issuer or
any person or entity w se ire t or indirect obligation constitutes the underlying security for the Bonds.
"Policy Limit' shall be ar amount of the debt service reserve fund required to be maintained for
the Bonds by the Bond Document from time to time (the "Debt Service Reserve Requirement'), but in no
event shall the Policy Limit exceed $[Amount of Debt Reserve]. The Policy Limit shall automatically
and irrevocably be reduced from time to time by the amount of each reduction in the Debt Service
Reserve Requirement, as provided in the Bond Document. "Termination Date" means the earlier of (i)
[Final Maturity of Bonds] and (ii) the date the Bonds are no longer outstanding under the Bond
Document.
XLCA may appoint a fiscal agent (the "Insurer's Fiscal Agent') for purposes of this Policy by giving
written notice to the Beneficiary specifying the name and notice address of the Insurer's Fiscal Agent.
From and after the date of receipt of such notice by the Beneficiary, (a) copies of all notices required to be
delivered to XLCA pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent
and to XLCA pursuant to this Policy and shall not be deemed received until received by both and (b) all
payments required to be made by XLCA under this Policy may be made directly by XLCA or by the
Insurer's Fiscal Agent on behalfofXLCA. The Insurer's Fiscal Agent is the agent ofXLCA only and the
Insurer's Fiscal Agent shall in no event be liable to any Owner for any act of the Insurer's Fiscal Agent or
any failure of XLCA to deposit or cause to be deposited sufficient funds to make payments due under this
Policy.
oJ
~
To the fullest extent pennitted by applicable law, XLCA agrees not to assert, and hereby waives, only for
the benefit of each Owner, all rights (whether by counterclaim set or otherwise) and defenses
(including, without limitation, the defense of fraud) whether acqu' ed brogation, assignment or
otherwise, to the extent that such rights and defenses may be avai Ie t C to avoid payment of its
obligations under this Policy in accordance with the express pro si fthis Ii .
ork, and any suit
n by the Issuer or the
Ice of Nonpayment can be
This Policy shall be governed by and interpreted under
hereunder in connection with any amount due her u
Beneficiary and only within one year after the dat n
made pursuant to the tenns of this Policy.
This Policy sets forth in full the undertaking XL
agreement or instrument, including any mod'fic tio
an endorsement hereto, (a) any premiu pa
including payment, or provision being ad or
canceled or revoked.
odified, altered or affected by any other
ill o. Except to the extent expressly modified by
cy is nonrefundable for any reason whatsoever,
nds prior to maturity and (b) this Policy may not be
IN THE EVENT
POLICY ARE NOT CO
12119(b) OF THE CALIF
COME INSOLVENT, ANY CLAIMS ARISING UNDER THIS
IA GUARANTY INSURANCE FUND SPECIFIED IN ARTICLE
'-'
'-'
SPECIMEN
Name:
Title:
is Policy to be executed on
In witness whereof, XL CAPITAL ASSURANCE INC.
its behalf by its duly authorized officers.
XL CAPITAL ASSURANCE INC.
~
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\.
\.
j
,
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Attachment I
Policy No. [.............. ...]
NOTICE OF NONPAYMENT
XL CAPITAL ASSURANCE INC.
1221 Avenue of the Americas
New York, New York 10020
Attention:
Reference is made to the Policy No. [.................] (the"
Assurance Inc. ("XLCA"). The terms which are capitalized el
have the meanings specified in the Policy unless the context rwl
'cy") issued by XL Capital
not otherwise defined
q res.
The Beneficiary hereby certifies that:
1. $
$
2. The amount
, which is $
e to pay such amount IS
e "Deficiency Amounf');
3. The Beneficiary he
exceed the lesser of (i) the lci
the Policy which in no ev 11
which amount does not
.. the amount available to be drawn under
Limit;
requests that payment of the amount specified in 3. above be
and directs that payment under the Policy be made to the
. re transfer of federal or other immediately available funds in
the Policy:
[Beneficiary's Account]
[Beneficiary]
u nce Company Or Other
n ining Any Materially
ifo tion Concerning
ich And Shall Also
'he Stated Value
. luded in the case of
.J
[Any Person Who Knowingly And With Intent To Defraud An
Person File An Application For Insurance Or Statement 0 1a
False Information; Or Conceals For The Purpose Of is ing.
Any Fact Material Thereto, Commits A Fraudulent 1. sur c t,
Be Subject To A Civil Penalty Not To Exceed Fi d
Of The Claim For Each Such Violation.] [Fo ua e t
issuers in certain states.]
By:
Its:
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