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Agenda Report - July 8, 1988 (8)
(TICACTIVE)93930A,002,002 St 93930A FmC 93930A JEFFRIES GP.Y. (D. (1) (213)742-0800 Comp; 08 -Jul -88 20:23 Seq: I ' CITY OF LODI /OS TR1P4 N Chk 106201 Outout (OA) 08 -Jul -88 20-.26 KBQ Printer's proof Cf 3uty 8, 1988 002 PRELIMINARY OFFICIAL STAT EMEN F DATED JULY-- 1988 1444 ZAR 4m c NEW ISSUE � C a 3 In the opinion ofJones Hail Hill & White. .4 Professional Law Corporation, San Francisco. California, Special Counsel, subject. however. ro certain qualifications described herein. under existing law, rhe portion of the installment payments designated as and comprising Interest s _ and receiresl b hh�� C rnf tate Owners is excluded jMom grass incomeforfederal income tax purposes and is not an item of tax preference fir m > purposes of tRJ(eder individualand corporate altrrnative minimum taxes, although it is included in adjusted ner nook income and current o m earnings in computing thealternarive minimum tax imposed on certain corporations. In the further opinion of Special Counsel. such interest is o „ o exempt fern Calijornia personal income taxes. See "TAXEXEMPTION" herein. �`o r w $9,220,000* A O E� o CERTIFICATES OF PARTICIPATION (1988 WASTEWATER TREATMENT PLANT E,-iPANSION PROJECT) m« M � 4 Evidencing the Direct, Undivided Fractional Interests of the _m sons Owners Thereof in Installment Payments to be Made by the CITY OF LODI, CALIFORNIA 0 o u a 2 0 o m .5 Cr AS the Purchase Price for Certain Property Pursuant to an Installment Sale Agreement with the • M O r a LODI PUBLIC 1WROVEMENT CORPORATION o Qg Dated. August 1, 1988 Due: August I, as shown below v; = rc The Certificates abeing executed and delivered to finaneethe expansion of the City of Lodi's White Slough Warer Pollution Control o Facilit (the "Project") and to pay expenses of the transaction, as more fully described herein. The Project will e sold by the Lodi Public 3c Improvement Corporation (the "Corporation") to the City of Lodi. California (the "City") pursuant to an Installment Sale Agreement. ' Intemt due with respect to the Certificates is payable semiannually on each February I and August 1, commencing Febuary 1, 1989,by E a m check or draft of Bank of America National 7hst and Saving Association, San Francisco. California, the 7bstse, mailed to the registered �= `; owner of record as of the fifteenth (15th) day of the month prior to such interest payment date at the address shown on the Certificate oon books. Principalof the Certificates will be payable at the principal office of the Tbztee. The Certificates arc being delivered as registered certificates witbout coupons in the denominations of$5,000 each or any integral multiple thereof. TkeCertiftcaies are subject o m optional and mandatory redemption prior to maturity as described herein. -2,30 e The City is legally required under the Installment Sale Agreement to make installment payments from a first and prior lien on the net revenues of the sewer syston of the City, (the "Sewer system"). Installment payments are scheduled in an amount sufficient to pay, when S due, the annual principal and interest with respect to the Certificates. The City has covenanted under the Installment Sale Agreement to u o prescribe, revise and collect such charges from theservices and facilities of the Sewer System which will produce grow revenues sufficient in y te ahFiscal Yto provide net revenuesInstallment revenues less maintenancetion and ox )lival to siitimes dinualpaymentrequirements with respect o the Sale Agree-ment and any panty obligations such Fiscal Year, including replenishment of the R o m e Fund as quited by the Trust Agreement r. Neither theCettificates tsar the obUgation of the City tcv make installment payments under the Installment Sale Agreement constitutes a o ` 1 debt or indebtedness of the City, the State of CaUfornia or any of its political subdivisions within the meaning of nay constitutional or statutory debt limitation or restriction, or a pledge of the faith and audit of the City. ;MATURITY SCHEDULE" a L Maturity Matatity '-4 gate Principal Interest Price Date Principal Interest Price Aawant Rate or Yield (Anent 1) Animist Rare or Yield g 1989 S 95,000 % % 1997 $150,000 % 1990 100,000 1998 160,000 E .:4 1991 105,000 1999 175,000 o 9 1992 110,000 2000 185,000 E -- 1993 115,000 2001 200.000 w 1994 125,000 2002 215,000 1995 130,000 2003 235.000 1996 140,000 a 3 $6,980,000 ..........% Certificates Due August t, 2018; Price ..........% & T3 (Plus accrued interest froin August 1, 1988) The Certificates are offered when. as and if executed and delivered and received by the Underwriter, subject to rhe delivery of the legs( °O 3 op inion ofJones Nall IM& White, A Professional Law Corporation, San Francisco. California. Special Counseland certain other conditions. c rj Cenain legal matters will be passed upon. for the Underwriter by Mudge Rose Guthrie ; tlexander & Ferdor,, New York .Yew York andfor rhe si o a City by the City Attorney, It is anticipated that the Certificates indeJinitiveform will be available for delivery in Los .4ngeles, California, on or Q o about Augwl 25. 1988. AO A Seidller-Fitzgerald Public Finance ,;:.e Dated: July ..... 1988 a *Subject to change (TiCACTIVE)93930A.003,006 St 93930A Faj� 93930A JEFFRIES C.P.Y CO. (1) (213)752-8800 Cama 07 -Ail -88 2313 CITY CF LODI /OS TRI P4 Chic 172473 Outout (CO) 07 -Jul -98 23:18 - 503 No dealer; broker. salesperson or otherperson has been authorized by the City of Lodi. California. co:z togive anv in ortnation or to make an representations other than those contained herein and i tven Nr.P g f Y P .fS or made. such other information or representation must not be relied upon as having been uuthorized by the City. This Official Statement does not constitute an offer to sell or rhe solicitation of an olfer to buy norshall there be any sale ofthe Certificates by a person in anyjurisdicrion in which it is unlawful far such person to make such an offer, solicitation or sale. This Official Statement is not be construed as a contract with the purchasers of the Certificates. Statements conrained in thisOfficial Statement which involve estimates. forecasts or matters of opinion, whether or not expressly so described herein. are intended solely as such aril are not be construed as a representation offacts- The information set forth herein has been obtained from sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness. and is not be construed as a representation by the Underwriter. The information and expression of opinions herein are subject to change without notice and neither delivery of this Oficial Statement nor any sale made hereunder shall. under any circumstances, create anv implication that there has been no change in the affairs of the Sewer System or the City since the date hereof. TABLE OF CONTENTS Seo: 1 Xec FM Page SUMMARY STATEMENT ............................. 11 THE CORPORATION ......................... 17 CITY OF LODI AREA MAP ........................ iii INSTALLMENT SALE AGREEMENT......... IS INTRODUCTION .......................................... I Term............................................................. 18 THE PROJECT ............................................... 2 Deposit of Proceeds..................................... IS General......................................................... 2 Construction of Project ............................... IS Cost of Project ............................................. 2 Installment Payments: Rate Covenant ....... 18 ESTIMATEDSE OF PROCEEDS .............. 3 Parity Obligations........................................ Is THE CERTIFICATES .._._._._._._.______ 3 Maintenance. Taxes. Assessments and General Provisions .... ...... _.... _.... _.... _.... 3 Modifications ............................................ 19 OptionalRedemption .................................. 3 insurance...................................................... 19 Insurance and Condemnation Redemption 4 Eminent Domain .......................... ....... 20 Mandatory Redemption .............................. 4 Assignment; Sale or Lease of the Project... 20 Selection of Certificates for Redemption... 4 Events of Default ......................................... 20 Notice of Redemption 5 TRUST AGREEMENT ----------------------- 21 Source of Payment for the Certificates ...... 5 Trustee....................................................... 21 Installment Payments •-------•------ 7 Fun............................................................. 71 Row of Funds .............................................. 9 Event of Default .......................................... 23 Limitations on Remedies Available tin the Amendment .................................................. 23 Owners of the Certificates and the Defeasance.................................................... 24 Trustee....................................................... 9 Limitations of Liability............................... 24 THE SEWER SYSTEM ._______.__----- 9 ASSIGNMENT AGREEMENT ...................... 24 History.......................................................... 9 TAX EXEMPTION ......................................... 24 Wastewater Treatment Facilities ................. 10 CERTAIN LEGAL MATTERS 25 Sewer Collection System to ABSENCE OF 'LITIGATION ......................... 25 Sewer System Operation I i UNDERWRITING ......................................... 26 Capital Program ........................................... t 1 AVAILABILITY OF DOCUMENTS .............. 26 Sewer Rates .................................................. 11 MISCELLANEOUS ......................................... 26 Financial Statements .................................... 12 APPENDIX A — The City of Lodi .............. A-1 Results ....................................... rojecte Operating Results ........................ 15 16 APPENDIX R — Proposed Form of Legal Opinion........................................................ B- i Sewer System Users ______________ 17 IN CONNECTION WITH TM OFFERING, THE UNDERWRITER MAY OVER -ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. Seo: 1 Xec 004 " ooco VAR Ivn (TICACTIVE793930A,003,006 St 93930A Fmt 93930A JEFFRIES C.P Y 00. (1) (213) 742-8800 Como 08 -At -88 :647 CITY OF 1001 'OS TR/P4 CNC 063535 i tout (0)) 08 -At -88 1706 SUNIMARY STATE bIEN 7 THIS SUNINIARY ST.kTE,'vIENI IN SUBJECT IN ALL RESPECTS TO THE timORE COM- PLETE INFORMATION IN THIS OFFICUtL STATEMENT :a.:vD THE OFFERING OF THE CERTIFICATES TO POTENCTL.� L INVESTORS IS MADE ONLY BY IMEANS OF THE ENURE OFFICIAL STATEMENT - Purpose ..................... Proceeds from the sale of the Certificates will be used to expand the City of Lodi's White slough Water Pollution Control Facilitv (the "Protect") and to pay expenses of the transaction, as more fully described herein: Security for the Certificates.......... Form of Certificates. Redemption ............. The City ................... ' Subject to change. Each Certificate represents the direct. undivided and fractional interest of th registered owners thereofin installmentpayments Ko be made by the City from a first and prior lien on the net revenues of its sewer system (the "Sewer System"). The installment payments consritute the purchase price for the Project pursuant to an Installment Sale Agreement with the Lodi Public Improvement Corpora- tion (the "Corporation"), as seller. Under the installment Sale Agreement. the City has pledged to the Corporation the net revenues derived from the operation of the Sewer System to the making of installment payments thereunder. The City has covenanted under the Installment Sale Agreement Ko prescribe. revise 3nd collect such charges forthe services and facilities of the Sevrer System which will produce gross revenues sufficient in each Fiscal Year to provide net revenues (gross revenues less operation and maintenance expenses) equal to at least 1.10 times the aggregateannual payment requirements with respect to the Installment Sale Agreement and any parity obligations in such Fiscal Year, including replen- ishment of the Reserve Fund as required by the Trust Agreement. A Reserve Fund initially in the amount of 5830,313', representing the maximum annual installment payment due in the current or any future yearas ofthe date of closing, is established for the benefit of the registered owners as security for payment of the installment payments. Payment of the Certificates will be additionally se- cured by an Assignment Agreement whereby the Corporation has assigned to the Trustee for the benefit of the registered owners of the Certificates certain of its rights under the Installment Sale Agreement. including (i) its rights to amounts payable by the City under the Installment Sale Agreement and (ii) its rights to enforce payment of amounts due upon default. The installment payments are not secured by. and the registered owners of the Certificate have no security interest in or mor— .!.age on. the Sewer System. The Certificates will be delivered in fully registered ferns without coupons in the denormnation of 55,000 each or in any integral multiple thereof. The Certificates are sub ect to optional and mandatory redemption, as more fully described herein. The City, incorporated as a general law city in 1906, is 3 community of 9.04 square miles and is located in San Joaquin County, 35 miles south of Sacra- mento, 90 miles east of San Francisco and 15 miles north of Stockton. The City operates under a Council -Manager form of government and has an estimated 1988 population of 48,200. [Vil THE OBLIGATION OFTITZ CM TO MAKE INSTALLIENTPA"IENTS UNDER THE INSTALLMENT SALE AGREENIENT IS A SPECIAL OBLIGATION OF THE CITY, PAYABLE SOLELY FROM NET REVENUES OFTHE SEWER SYSTENI AND OTHER SOURCES IDENTI- FIED IN THE INSTALLMENT SALE AGREEMENT. THE OBLIGATION OF THE CITY TO MAKE SUCH PAYMEN'T'S DOEE3 NOT CONSTITUTE AN INDEBTEDNESS OFTHE CITY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITIMONAL OR STATUTORYDEBT LIMITATION OR RESTRIC- TION. NEITHER THE MEMBE RS OF THE CITY COUNCIL NOR ANY PERSON EXECUTING THE INSTALLMENT SALEAGREEMENT SHALL BE LIABLE PERSONALLY FOR INSTALL- MENTPAYNIENTSORSUBJEfTTO ANY PERSONAL LIABILTIY OH ACCOUNTABILITY BY Iva REASON OF THE AUTHORIZ:kTION OR EXECUTION THEREOF. Hi Seq: 2 XEC ... :.....: k? : 005 0000 (TICACTIVE)93930A,003,006 St 93930A Fmt 93930A JEFFRIES CRY. CO. (1) (213)742-8800 Comp: 27 -May -88 16:12 Seq: 3 ' CITY OF LODI /OS TR! P4 N Chk: 135103 Output (OA) 27 -May -88 21:27 XBB 99 • HEALDSBURG • SACRAMENTO ,,toil !. 80 • VALLEJO L O ® I t7 a CONCORD • STOCKTON 680 5 OAY.LAND • t20 SAN FRANCISCO LAM DA 580 �f HAYWARD MODESTO• O 99 SAN MATEO� 260 33 t • SAN JOSE 1♦0 1101, ii SANTA • CRUZ PACIFIC OCEAN 111 (TICACTIV093930A,007.029 Sc 93930A Fmr 93930A JEFFRIES C.P.Y. CO. (1) (213)742-8800'`' Coma 08-JUI-88 1648 sea 1 CITY OF L001 :OS TR/P4 N Cha: 051160 output (OX) 08 -Jul -s9 17:08 XSr 007 OFFICIAL STATEMENT 7ODR LAR $9,220,000* CERTIFICATES OF PARTICIPATION (1988 WASTEWATER TREATMENT PI-AVN'T EXPANSION PROJECT) Evidencing the Direct. Undivided Fractional Interests of the Owners Thereof in Installment Payments to be Made by the CITY OF LODI, CALIFORNIA As the Purchase Price For Certain Property Pursuatti to an Installment Sale Agreement with the LODI PUBLIC VVIPROVEiWENT CORPORATION INTRODUCTION The purpose of this Official Statement, which includes the cover page, Table of Contents and Appendices (the "Official Statement"), is to provide certain information concerning the sale and delivery of Certificates of Participation ( 1988 Wastewater Treatment Plant Expansion Project) (the "Certificates"), in aggregate principal amount of $9,220,000", representing the direct, undivided fractional interests of the registered owners thereof (the "Owners") in installment payments (the "Installment Payments") to be made by the City of Lodi, California (the "City"), as the purchase pries for certain capital improvements (the "Project") to the sewer system of the City (the "Sewer System"), pursuant to an Installment Sale Agreement. dated as of August I, 1988 (the "Installment Sale Agreement"), between the City and the Lodi Public Improvement Corporation (the"Corpora- tion"). The Certificates are being executed and delivered pursuant to a Trust Agreement. dated as of August I, 1988 (the "Trust Agreement"), by and among the City, the Corporation and Bank of America National Trust and Savings Association, San Francisco, California, as trustee (the "Trustee") and will be paid from Installment Payments payable by the City, as purchaser, to the Corporation. as seller, pursuant to the Installment Sale Agreement. Payment of the Certificates will be additionally secured by an Assignment Agreement, dated as of August I, 1988, between the Corporation and the Trustee (the "Assignment Agreement"), whereby the Corporation has assigned to the Trustee, for the benefit of the Owners, certain of its rights under the Installment Sale Agreement including (i) its right to amounts payable by the City under the Installment Sale Agreement and (ii) its rights to enforce payment cf amounts due upon default. In general. the City is required to pay to the Trustee. from a first and prior lien on the net revenues of the Sewer System. Installment Payments which are designed to be sufficient in both time and amount to pay, when due, the principal and interest With respect to the Certificates. The City has covenanted in the Installment Sale Agreement to prescribe, revise and collect such charges from the services and facilities of the Sewer System which will produce gross revenues sufficient in tach Fiscal Year to provide net revenues (gross revenues )—s operation and maintenance expenses ("Net Revenues") equal to at least 1.10 times the aggregate annual payment requirements with respect to the Installment Sale Agreement and any parity obligations in such Fiscal Year, including renienish- ment of the Reserve Fund as required by the Trust Ajeernent. A F. -serve Fund in�'..Aly in the amount of $830,313*, representing the maximum annual installment payment due lit the current or any future year as of the date of closing, is established for the benefit of the Owners as security for the payment of the installment payments. The obligation of the City to make Installment Payments constitutes a special obligation of the City payable solely from the Net Revenues of the Sewer System pledged under the Installment Sale Agreement and does not constitute an obligation of the City for which the City is obligated to levy or pledge any form cf taxation or for which the City has levied or * Subject to change. (TICACTIYE)93930A,007,029 St 93930A F - 93930A JEFFRIES C.P.Y. CO. (1) (213)742-8800 =anp: 08 -Jul -88 1&1'48 CM OF LCOI /OS TW P4 Ch)c 040364 Output (OX) 08 -Jul -88 17:08 pledged any form of taxation. The obligation of the City to make Installment Payments does not constitute an indebtedness of the City, the State of California, or any of its political subdivisions ooe within the meaning of any constitutional or statutory debt limitation or restriction. For certain RCP financial information with respect to the Sewer System. see the heading "THE SEWER SYSTEM — Operating Resuits" herein. For certain financial information with respect to the City, see "appendix A" here.a. THE PROJECT General The Project involves the expansion of the domestic treatment system capacity of the City's White Slough Water Pollution Control Facility (the "Facility"), The Facility is the City's only wastewater treatment facility and includes parallel systems for domestic/cornmercial and industrial wastewater. See "THE SEWER SYSTEM" herein for a fr.:her description of the Facility and the Sewer System. The Project includes improvements relating to the treatment of domestic wastewater and the disposal of resulting sludge. Treatment improvements include acquisition of two new primary clarifiers, a new aeration basin and two new secundary clarifiers, conversion of existing secondary clarifiers to chlorine contact tanks, and other treatment process improvemnets. Sludge disposal improvements include acq)tisition of a new sludge digester. expansion and modification of existing sludge storage lagoons, modifications to the irrigation conveyance system, piping and plumbing impro,vments, installation of groundwat r monitoring wells and of one-time transfer of existing sludge to a landfill operated by the County of San Joaquin. The Project also includes acquisiton of a 250 kilowatt generator to produce power from the eanbustionof digester gases. The City expects to w e this power on-site to reduce the operating costs of the Facility. When the Pnsjeet is completed, the Facility will have a domestic treatment system capacity of S.5 million gallons per day (mgd), 3n increase of 2.3 mgd over the current capacity of 6.2 ingd. Based on current growth estimates, the City expects the Facility. as so improved, to meet the demand on the domestic treatment system for the next ten to fifteen years. 009 Cost of the Project 47^7 LAR j The City expects the total cost of the Project to be approximately $10,950,000. The following shows the expected costs relating to the Project, as estimated by the City: Expansion of Facility.......................................................................... S 8,885,t'm LandAcquisition................................................................................. 1,100,000 Contract Administration/ Inspection .................................................. 544,000 Lasigiand Permits............................................................................ 328.000 Start-up Services.................................................................................. 22,000 Contingencies....................................................................................... 71.000 Total Project Cost.......................................................................... S 10.950.000 The City plans to solicit bids on a construction contract for the Project in April, 1989. The City has received, or expects to receive, all licenses and permits necessary for operation cf the Project. 2 Seq: 2 x8c (TICAt'rIYE393930k007,029 St 93930A Fmt 93930A JEFC:RIES C.P_Y. CO. (1) (213)702-8800— Coma 08-.x:1-88 M48 CITY OF 1001 %OS TRI P4 '^N Chic 123025 output (OX) 08 -Jul -88 17,08 ESTIMATED USE OF PROCEEDS' The proceeus to be received from the sale of the Certificates (accrued interest from August 1, 1988 to the closing date is not a pari of the purchase price to be paid by the Underwriter) are anticipated to be applied as Coliows: Project Costs........................................................................................ S 10,950,000 (1) Less: reinvestment Earnings During Construction .......................... (1,123,035)(2) City Contribution...................................................................... (2,000,000) Subtotal.................................................................................. 7,826,965 ReserveFund........................................................................................ 830,313 (3) Costs of Issuance................................................................................. 562,722 (4) Principal Amount of the Certificates ................................... 5-9,220,00n (1) Estimated by the City. (2) Assumes a reinvestment rate of 7.00% on the Construction Fund and Reserve Fund balances. (3) Equal to the Reserve Requirement as of date of closing. (4) Includes Certificate Discount. 010 THE CERTIFICATES 159 i 1AR General Provisions The Certificates will be executed and delivered in the aggregate principal amount of 59,220,000*, will be dated August 1, 1988, will be payable as to interest f=n August 1, 1988, at the rates per annum set forth on .�e cover page hereof, payable semiannually on each February i and August i (each, an "Interest Payment Dare"), commencing February 1, 1989, and will mature on August I, in each of the designated years in the principal amounts shown below: yew a Mndpai Year of Principal Hataritr Amowt' Maturity Awmet• 1989 ................................... S 95,000 1997 ................................... S 150.000 1990 ................................... 100.000 1998 ................................... 160,000 199 ................................... 105.000 1999 ................................... 175,000 1992 ................................... !10,000 2000 ................................... 185.000 1993----- — 115,000 200I ................................... 200.000 1994 ................................... 125,000 2002 ................................... 215,000 995 ................................... 130,000 7003 ................................... 235.000 1996 140,000 2018— 6,980,000 Interest due with respect to the Certificates is payable by check cr draft of Bank of America National Mnt and Savings Association. San Francisco, California, the Trustee, mailed to the Owner of record as of the fifteenth (15th)day of the month prior to the Interest Payment Date at the address shown on the Certiftcate registration books. Principal of the Certificates will be payable at the peacipal office ofthe 9% in San Francisco, California, The Certificates are being delivered as futiy registered certificates without coupons in denominations of 35,000 each or any integral multiple thereof. Optional Redemption The Certificates maturing on or before August 1. 1993 are not subject to optional redemption prior to maturity. The Certificates maturing on and after August 1, 1994 are subject to redemption in whole or in part from time to time (but not in a total redemption amount of le -,,s than $5,000 at any one time) in inverse order of maturity and by lot within 3 maturity on any Interest Payment Date on or after • Subject to change. Sect.- 3 XBC CTICACT1VE193930A,007,029 St 93930A -mt 939t0A JEFFRIES C.P.Y. OO. (1) (213)742 -8800 --Comp: 08-.lul-88 1648 CITY OF LOOI /OS TPJP4 C.hk 134041 Output (OX) 08 -Jul -88 17:08 August L. 1993, at the principal amount with respect thereto. together with tate premium set forth below (expressed as a percentage n°.iie total principal amount to be redeemed), and accrued i-ITC.est to the date fixed for redemption from the proceeds of optional prepayments made by the City pursuant to the installment Sale Agreement: nate ai Redemption Premium Xugust 1, 1993 and February 1, 1994 ....................................................... " % August 1, 1994 and February 1, 1995 ........................................................ August 1, 1995 and February I. 1996 ........................................................ August 1, 1996 and February I, 1997 ........................................................ August 1, 1997 and each February 1 and August ! thereafter ................. 0 Insurance and Condemnation Redemption The Certificates are subject to mandatory redemption (but not in a total redemption amount of less than $5,000 at any one time) on any August i or .February 1 on or after February 1, 1989, in whole or in part from time to time, from the net proceeds of any insurance or condemnation award deposited in the Installment Payment Fund and credited toward the prepayment made by the City pursuant to the installment Sale Agreement, at a redemption puce equal to the principal amount thereof, together with accrued interest to the date fixed for.redemption, without premium. Oil NUndatory Redemption LAR The Certificates maturing August 1, 2018 are subject to mandatory redemption on August I of each year on and after August 1, 2004, from the principal components of the Installment Payments required to be paid by the City pursuant to the Installment Sale Agreement with respect to each such redemption date, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium as follows: v7tadaWry Mandatory Redemption Hate Principal Redemption Date Principal (Aaitest 11 Amount*_ (August 1) Amount' 2004 ................................ S250,000 2012 ................................ 5475,000 2005 ................................ 275,008 2013 ................................ 515,000 2006 ................................ 295,000 2014 ................................ 555,000 2007 ................................ 320,000 2015 605,000 2008 ................................ 345,000 2016 ................................ 655,000 2009 .....— 375.000 2017 ................................ 705,000 2010 ................................ 405,000 2018................................ 765,0001 2011 440,000 t Final maturity. In the event that any Certificates maturing on August t, 2013 are redeemed pursuant to the optional redemption or insurance and condemnation redemption provisions. the amount of Certifi- cates to be redeemers in each subsequent year pursuant to the matxlatory redemption provisions shall be moc ifiedto correspond to the principal components of the installment Payments payable follow- ing such redemption. Selection of Certificates for Redemption It leess than all outstanding Certificates are called for redemption, the 4hs6ae shall select GlBrUfit orredemption, from the outstanding Certificate not previously called for redemption in inverse order of maturity and by lot within a maturity in any manner which the Trustee shall in its soie discretion dean appropriate and fair. * Subject to change. 4 Sem 4 ' Xec (TiCACT)VE)93930A.007 029 St 93930A Fmt. 939305. JEFFRIES C P Y 00. (1) (213)742-8800 —. Comte 08 -Jut -88 16AB k'S 5 CITY CF L00I /OS TR/P4 N Chic 004314 Output (OX) 08 -Jul -88 17:08 XBC Notice of Redemption Notice of any redemption shalt be given by the Triistee on behalf of the City by mailing a copy of an official redemption notice by first class mail at least thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption to the Owner of the Certificate or Certificates to be redeemed at the address shown on the certificate registration books or at such other address 3s is furnished in writing by such Owner to the Trustee. ,A11 official notices of redemption shall be. dared and shall state: l0 the redemption date. (iij the redemption price. (iii) if less than all outstanding Certificates are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the Certificates to be redeemed, (iv) that on the redemption date the redemption price will become due and payable upon each such Certificate or portion thereof called for redemption. acd that interest with respect thereto shall cease to accrue from and after said date, and (v) the place where such Certificates 3re to be surrendered for payment of the redemption price. which place of payment shall be the principal corporate trust office of the Trustee in San Francisco, California. In addition to the foregoing notice. further notice shall be given by the Trustee. at least thirty-five (35) days before the redemption date, by telecopy. registered. certified or overnight mail to certain securities depositories and to one or more information services, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any m-ttver defeat the effectiveness of a call for redemption if notice thereof is given as prescribed above. Neither the failure by any Owner to receive notice 3s hereinabove provided nor anJ defect in any notice shall affect the sufficiency of the proceedings for the redemption of Certificates. Source of Payment for the Certificates Each Certificate represents a direct, undivided and fractional interest in Installment Payments to be made by the City to the Corporation under the Installment Sale Agreement. The Corporation, pursuant to the Assignment Agreement, will assign certain of its rights uader the Installment Sale Agreement to the Trustee for the benefit of the Ovrners, including its right to receive Installment Payments and prepayments made under the Installment Sate Agreement and its rights to enforce payment of the Installment Payments when due in the event of a default by the City. The obligation of the City to make Installment Payments constitutes a special obligation of the City payable solely from a first and prior lien on the Net Revenues; certain net proceeds of insurance or condemnation proceedings pertaining to the Project to the extent that such net proceeds are not used for the repair, reconstruction or replacement of the Project pursuant to the Installment Sate Agreement; and certain interest and other income derived from the investment of funds and accounts held by the Trustee for the City pursuant to the Trust Agreement. Net Revenues are gross revenues of the Sewer System (i.e-, all income, rents, rates, fees, charges and other moneys received by the City from the ownership 2nd operation of the Sewer System), less operation and maintenance expenses. Operation and maintenance expenses include ail expenses and costs of management, operation, maintenance and repair of the Sewer System and all incidental costs. fees and expenses properly chargeable to the Sewer System except for depreciation expense. The City has covenanted that it will prescribe. revise and collect such charges for the services and facilities of the Sewer System which will produce gross revenues sufficient in each Fiscal Year to provide Net Revenues equal to at least 1. t 0 times the aggregate annual payment requirements with respect to the Installment Sale Agreement and any parity obligations in such Fiscal Year, including replenishment of the Reserve Fund as required by the -Trust Agreement_ If the City does not meet the rate Covenant, the City has covenanted to hire an independent consultant to reeonmrid renis -td rates and fees and the City will, to the extent practicable and subject to applicable requirements and restrictions imposed by law and subject to a good faith determination by the City that such recommendations are in the best interests of the City, implement such revised rates so as to produce the necessary Net Revenues. (TICACTIYE93930A,007,029 St: 93930A Pmt: 93930A JEFFRIES C.P Y. 00. (2) (213)742 -8800 -- Comp: 07 -Jut -88 -18:44 CITY OF LODI i 05 TW P4 V ChM 015577 Output (FC) 07-b1-88 18:51 a1z The City has the right to issue or incur panty debt, on a parity with the Installment Sale CARS Agreement, provided: (i) The City is not in default under the terms of the Installment Sale Agreement: - (i)) Net Revenues, calculated on sound accounting principles, as shown by the books of the City for the latest fiscal year of the City, currently July I to June 30 in the succeeding year (the "Fiscal Year"), or any more recent twelve ( 12) month period selected by the City ending not more than sixty (60) days prior to the adoption of the resolution pursuant to which instrument such Parity Debt is issued or incurred, as shown by the books G f the City, plus, at the option of the City, either or both of the items below designated (1) and (2), shall have amounted to at least 1.10 times the sum of the maximum Installment Payments corning due and payable in any future Fiscal Year and the maximum annual debt service on all Parity Debt outstanding immediately subsequent to the incurring of such additional obligations. Either or both of the following items may be added to Net Revenues for the purpose of applying the restriction contained above: (t) An allowance for revenues from any additions to or improvements or extensions of the Sewer System to be made with the proceeds of such additional obligations, and also for net revenues from any such additions. improvements or extensions which have been made from moneys frcmany source but which, during all or any part of such Fiscal Year, were not in service, all in an amount equal to 70% of the estimated additional average annual Net Revenues to be derived from such additions. improvements and extensions for the first 36 -month period following closing of the proposed Parity Debt, all as shown by the certificate or opinion of a qualified independent engineer employed by the City. (2) An allowance for earnings arising from any increase in the charges made for service from the Water System which has become effective prior to the incurring of such additional obligations but which. during all or any part of such Fiscal Year, was not in effect, in an amount equal to 100% of the amount by which Net Revenues would have been increased if such increase in charges had been in effect during the whoie of such Fiscal Year and any period prior to the incurring of such additional obligations, as shown by the certificate or opinion of a qualified independent engineer employed by the City; and (iii) A reserve fund shall be funded for such Parity Debt which is at least equal to the amount resulting from the application on the closing date of such Parity Debt of the formula contained in the definition of "Reserve Requirement" contained in the Installment Sale Agreement. The obligation of the City to make Installment Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Neither the Certificates nor the obligation of the City to make Installment Payments constitutes an indebtedness of the City, the State of California or any of its political subdivisionswithin the meaning of the Constitution of the State of California nor a pledge of the faith and credit of the City. Tn the event the City fails to make any Installment Payment when due, the Installment Payment in default shall continue as an obligation of the City and the City shall pay the same with interest thereon, to the extent permitted by law. from the date thereof at the rate of interest payable with respect to the Certificates. Should the City default under the Installment Sale Agreement, the Trustee, as assignee of the Corporation, has the right to: (i) declare all principal components of the unpaid Installment Payments, together with accrued interest at the rate or rates specified in the respective outstanding Certificates, from the immediately preceding Installment Payment date on which pay- ment was made, to be immediately due and payable, whereupon the same shall be due and payable, and (ii) take whatever action at law or in equity may appear necessary or desirable to collect the Installment Payments then due or thereafter to become dins, or enforce performance and observance 6 Seq: 6 X5 (TICACTIVE)93930A,007,029 St 93930A FmC 93930A JEFFRIES C.P.Y.. CO. (1) (213)742-8800 - Comp: 08 -Jul -88 21.08 CITY OF t00I /05 TPJP4 N Chk 166760 output (CO) 08 -Jul -88 21:10 of any obligation, agreement or covenant of the City under the Installment Sale Agreement. The City's liability to pay the Installment Payments is limited solely to Net Revenues. In the event Net Revenues are insufficient to pay an installment Payment in full, the City shall not be liable to pay any such Installment Payment other than from Net Revenues. The City has covenanted to procure insurance on the Project to the extent set forth herein under the heading "INSTALLMENT SALE AGREEMENT — Insurance" and certain insurance proceeds are required to be applied, at the option of the City, to the repair of the Project or to the prepayment of Installment Payments. A Reserve Fund is established by the Trust Agreement and is required to be funded from proceeds of the Certificates in an amount, as of any date of calculation, equal to the lesser of (i) ten percent of the aggregate original Principal component of Instailment Payments, (ii) the maximum arnuunt of Installment Payments due in the current or any future year or (iii) 125% of the average amount of Instailment Payments due in the current or any future year (the "Reserve Requirement"). The City is required to maintain the Reserve Fund at an amount equal to the Reserve Requirement. If, on any date of computation. amounts on hand in the Reserve Fund are less than the Reserve Requirement because of a transfer therefrom, the City is required to restore the Reser-;e Fund to the Reserve Requirement within one year, from Net Revenues. Amounts in the Reserve Fund are to be used only for the payment of Installment Payments to the extent amounts in the Installment Payment Fund are insufficient therefor. Whenever any amounts are withdrawn from the Reserve Fund for transfer to the Installment Payment Fund, then upon receipt of the delinquent Installment Payment, such Installment Payment shall be deposited in the Reserve Fund to the extent of such transfer. Prior to the completion of the construction of the Project, interest income on investments credited to the Reserve Fund are to be periodically transferred to -the Construction Fund, provided that the Reserve Fund is funded at the Reserve Requirement. Following completion of construction of the Project. amounts from investment earnings accumulating in the Reserve Fund in excess of the Reserve Requirement are to be transferred to the Installment Payment Fund on or prior to February I and August 1 of each year. 013 Installment Payments 469A NCP Installment Payments are required to be made by the City under the Installment Sale Agreement on the fifteenth (15th) day of each January and July, commencing January 15, 1989 (each a "Due Date"), in an amount, on each such date equal to the scheduled Installment Payment due on the succeeding August I and February 1. 7 Seo: 7 XBC (TICA=VE)93930A,007,029 St 93930A Fmt 93930A JEFFRIES C.P.Y. CO. (11 (213)792-8600-1_Comp; 08 -Jul -8a 21:08 CITY OF LOOP IOS TWP4 CNC 031063 hutput (CO) 08-81-88 21:10 The Trust Agreement requires that Installment Payments be deposited in the Installment Pay- ment Fund maintained by the Trustee. Pursuant to the Trust Agreement. the Trustee will apply such amounts in the Installment Payment Fund as are necessary to make principal and interest payments due with respect to the Certificateson February 1 and August I of each year.commencing February I. 1989. sufficient to meet the following annual amortization schedule: Ylabuity ........... 1Angmt tj 1989 ................................................. 1990 ................................................. 1991 ................................................. 1992 ................................................. 1993 ................................................. s1994 ................................................. I1995 ................................................. ( 1996 1997 ................................................. 1998 ................................................. 1999 ................................................. ' 2000 ............................. ................... 2001 ................................................. 2002 ................................................. 2003 ................................................. 2004 ............... _.......................... _ 2005 ................................................. 2006 ................................................. 2007 ................................................ 2008 ................................................. 2009 ................................................. 2010 ................................................. 2011 ................................................. 2012 ....................... . ........................ 2013 ................................................. 2014 ................................................. 2015 ................................................. 2016 ................................................. 2017 ................................................. 2018 ................................................. Totals................................... " Subject to change. - prindpw- ... Total serials Term ... ,._„. _ _ Intemst• Payments* 5 95.000 S 734,940.00 5 829,940.00 100.000 729,952.50 829,952.50 105,000 724,452.50 829,452.50 11.0,000 718,415.00 828,415.00 115.000 711,815.00 826,815.00 125.000 704,627.50 829,627.50 130.000 696,502.50 826,502.50 140,000 687,727.50 827,727.50 150.000 677.927.50 827,927.50 160,000 667,12.7.50 827.127.50 175.000 655,287,50 830,287.50 185,000 641,987.50 826,987.50 200.000 627,650.00 827,650.00 215,000 611,850.00 826,850.00 235,000 594,650.00 829,650.00 S 250,000 575,850.00 825.850.00 275.000 555,225.00 830,225.00 293.000 532,537.50 827,537.50 320.000 508,200.00 828,200.00 345.000 481,800.00 826,800.00 375.000 453,337.50 828,337.50 405.000 422,400.00 827,400.00 440,000 388,987.50 828,987.50 475.000 352,687.50 827,687.50 515.000 313,500.00 828,500.00 555.000 271.012-50 826,012.50 605.000 225,225.00 830,225.00 655.000 175.312.50 830,312.50 705.000 121,275.00 826,275.00 765.000 63.1 12.50 828,112.50 S2.240.000 56,980,000 S15,625,375.00 824,845.375.00 Se -Cr a xeC (TICACTTVE)93930A,007,029 St 93930A Fmt 93930A JEFFFIES C.P.Y. CO. (1) (213)742-8800 �COMIr 08 -Jul -88 21:08 CITY OF LODI 'GS TR/P4 Chic )3100 lutput (CO) 08 -Jul -88 21:10 The Trust Agreement requires that Installment Payments be deposited in the Installment Pay- ment Fund :maintained by the Trustee. Pursuant to the Trust Agreement. the Trustee will apply such amounts in the Installment Payment Fund as are necessary to make pnncipai and interest payments due with respect to the Certificateson February I and August I of each r-ear.commencing February 1. 1989. sufficient to meet the following annual amortization schedule: Maturity (Augwt I) 1989 ................................................. 1990 ................................................. 1991 ................................................. 1992 ................................................. i993................................................. 1994 ................................................. 1995 ................................................. 1996 ................................................. 1997 ................................................. 1998 ................................................. 1999 ................................................. 2000 ................................................. 2001 ................................................. 2002 ................................................. 2003 ................................................. 2004 ................................................. 2005 ................................................. 2006 ................................................. 2007 ................................................. 2008 ................................................. I2009 ................................................. 2010 2011 ................................................. 2012 ................................................. 2013 ................................................. 2014 ................................................. 2015 ................................................. 2016 ................................................. 2017 ................................................. 2018 ................................................. Totals................................. * Subject to change. Principal' Serials Term S 95.000 5 100.000 105.000 1 10.000 115.000 125,000 130.000 130.000 150,000 160.000 175.000 185.000 200.000 215.000 235.000 S 250.000 275.000 295.000 320.000 345.000 375.000 405.000 440,000 475.000 515.000 555.000 605.000 655.000 705.000 765,000 52,240,000 56,980,000 Intemt• 734,940.00 729,952.50 724,452.50 718,415.00 711,815.00 704,627.50 696,502.50 687,727.50 677,927.50 667,127.50 655,287.50 64I,987.50 627,650.00 611,850.00 594,650.00 575,850.00 555,225.00 532,537.50 508,200.00 48 !,800.00 453,337.50 422,400.00 388,987.50 352,687.50 313,500.00 271,012.50 225,225.00 175.3 12.50 221,275.00 ('t 117 in 315,625,375.00 Total Payments' 5 829,940.00 829,952.50 529.4 5 2.50 828.4 15.00 826,815.00 829,627.50 826,502.50 827,727.50 827,927.50 827,127.50 830,287.50 826.987.50 827,650.00 826,850.00 329,650.00 825.850.00 830,225.00 827,537.50 828.200.00 826,800.00 828,337.50 827,400.00 828,987.50 827,687.50 823; 500.00 826,012.50 830,225.00 830,3 12.50 826,275.00 82&I I2.50 $24,845,375.00 sic: s . X8C 014 .010 V%(V 020 7EM NCP MCACFIV093930A,007,029 St 93930A Fmt 93930A JEFFRIES C.P y. CO. (1) (213)742-8800 _ Comlx C8 -Jul -88 16 49 CITY OF LOOI !OS TWP4 Ch1c 062135 ' utput (Ox) 08 -Jut -88 ;7:08 Flow of Funds From the proceed-. of the sale of the Certificates, the Trustee shalt (i) deposit into the Reserve Fund an amount equal IJ the Reserve Requirement as of the Closing Date, (ii) deposit a specified amount in the Delivery Costs Fund, and (iii) deposit the balance of such proceeds in the Construction Fund - Pursuant to the terms of the Installment Sale Agreement. on the tifteenth day of each January and July, the City is legally required to make Installment Payments to the Trustee from Net Revenues. equal to the amount necessary for the Trustee to pay the principal and interest with respect to the Cenificates due and payable on each February I and August 1. Pursuant to the terms of the Trust Agreement, (i) all Installment Payments received by the Trustee from the City, (ii) certain net proceeds awarded in insurance or eminent domain proceeding to the extent not used to repair or replace the Project, and (iii) any other moneys required to be deposited pursuant to the Installment Sale Agreement or the Trust Agreement, shall be deposited in the Installment Payment Fund: except to the extent required to be deposited in the Reserve Fund to remedy 3 deficiency therein resuiting from 3 primer draw. The Trustee shall promptly distribute on February I, 1989. and on each ,august I and February 1 thereafter, the funds on deposit in the Installment Payment Fund to the Owners in payment of priLcipal and interest then due with respect to the Ce;;tiftcates- If on any January 20 or July 20, on or after January 20. 1989, the amount of the Installment Payments then due and unpaid exceeds the amount on hand in the Installment Payment Fund, the Trustee will transfer the necessary amount from the Reserve Fund. and in the event a deficiency remains in the Installment Payment Fund, the Trustee shall apply amounts transferred from the Reserve Fund. together with all other moneys on hand in the Installment Payment Fund first to the payment of interest past due with respect to all outstanding Certificates, pro rata if necessary, and second to the payment of the unpaid principal balance with respect to each Certificate which is then past due, pro rata if necessary. Any surplus remaining in the Installment Payment Fund after redemption and payment of all Certificates, including accrued interest, if any, and payment of any applicable fees to the Trustee, or provision for such redemption or payment having been made to the satisfaction of the Trustee. shall then be remitted to the City. Limitations on Remedies Available to Owners of the Certificates and the T rustee The enforceability of the rights and remedies of the Owners of the Certificates and the Trustee. and the obligations incurred by the City, may be subject to the following: the Federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under state law of certain remedies: the exercise by the United States of America of the pourers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State of California and its governmental bodies in the interest of serving 3 sigai6cant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government. if initiated. could subject the Owners of the Certificates to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitations, or modification of their rights. THE SEWER SYSTEM History The City of Lodi constructed its first wastewater treatment plant in 1923. This plant remained in service without expansion until 1952, when the service area consisted of approximately 3.33 square miles. At that time, and again in 1956, the treatment plant was expanded to achieve a capacity of 3.6 seq. 9 x8c 021 77FS Ncp (TICACTIVE)93930A,007,029 ;c 93930A Pmt 93930A JEFFRIES Cy Y. CO. (1) (213)742-8800 ,_ Camp: 07 -Jul -88 20:58 CITY OF LODI /OS TR/P4 Chk 122,143 )u[put (CO) 07-&I-88 21:05 mgd. Cannery waste was mixed with treatment plant effluent and disposed of by irrigation at the pre scat Site of the Facility. In 1967 the City completed construction of the Facility. The Facility was e.>Lpr; ::J, d in late 1977 to increase the capacity of the domestic treatment facilities from 3.5 mgd to 5.8 angd. In addition more pasture iands were purchased for summer irrigation. thus eliminating summer discharges into the San Joaquin -Sacramento River Delta System. The Facility now serves the City's entire area of 9.45 square miles. Wastewater Treatment Facilities All wastewater generated in the City of Lodi is collected and treated at the Facility, situated 6.5 miles southwest of central Lodi. or about 4.5 miles beyond the present City limits. This agricultural area is about 2 miles east of White Slough, a component of eastern portion of the San Joaquin - Sacramento River Delta System. The Facility, initially constructed in 1967, includes parallel treat- ment systems for domestic/commercial and industrial wastewater, although some industrial users discharge into the domestic system. The existing Facility consists of an activated sludge system presently having an approximately 6.2 mgd capacity for domestic wastes, and, an aerated lagoon and storage pond system having an approximately 3.75 mgd capacity for industrial waste. Preliminary treatment of the domestic waste- water is accomplished by cornminutors and detritors. Primary treatment consists of three rectangular clarifiers. Secondary treatment facilities consist of three activated sludge aeration basins with a fine bubble aeration system, and five rectangular secondary clarifiers. The aeration system is driven by three rotary blowers. The treated effluent is then disinfected through chlorine contact tanks and dechlorinated prior to surface water discharge. Industrial effluent and a portion of the treated domestic effluent (averaging 28 percent, between 1983 and 1986) are used For irrigation of an adjacent 655 acres of City -owned agricultural land The remaining treated domestic effluent is discharged to Dredger Cut, a waterway connecting to White Slough. Sludge is thickened and digested and then stored in lagoons, to be periodically removed for use ou local agricultural land. Waste methane gases from the treatment process are used for space and digester heating or flared at the plant site. Sewer Collection System The existing collection system, not including the outfall to the treatment plant, consists of approximately 146 miles of 4" to 48" sewers constructed of clay, concrete, and PVC plastic materials. Included in this system are five lift stations which serve outlying portions of the City and one industrial waste pumping station. The collection system currently serves over 18,325 dwelling units, 1,372 acres of commercial/ industrial development, and 250 acres of schools. Over 50% of the sewers arc 6" in diameter. The condition of the trunk sewers is generally good. The following is a tabulation of the sewers. Sewer Size Total Sewer Size (inches) Feet (inches) 48 .......................... 31,910 15 .......................... 42 .......................... 8,900 14 .............. _...... 30 .......................... 7,399 12 .......................... 24 14,417 10 .......................... 21 .......................... 17,332 8 18 .......................... 33,308 6 .......................... 16 .......................... 7,636 4.......................... Sources: City of Lodi. Taal Feet 15,600 7,015 38,411 49,560 109,223 425,253 5,211 Seq.: 10 XSC MCACTIVO93930A L+1' 029 St 93930A �j+�t 93930A JEFFRIES C.P.Y. 00. (2) (213)742.8800�,.� Coma 07-Jti68$ :8:44 CITY OF LOOS r OS TR(P4 V Chic 160572 Output (FC) 07-Au1-88 18:51 o:z Sewer System Operation ao05 NKY The domestic wastewater collection system conveys ail domestic and commercial flows and limited industrial Rows. The industrial wastewater system conveys the waste contributed by major industries, except General Mills which discharges its pre-treated waste into the domestic system. The wastewater collection system serves all of the developed property within the City limits. Presently, City ordinance does not allow service outside the City limits. The maintenance program for these facilities is accomplished by City crews. This program includes the systematic hydrocieaning, smoke testing and Tying of mains throughout the City. Capital Program In addition to pursuing completion of the Project, the City is pursuing a number of additional capital projects relating to the maintenance and improvement of the Sower System. T -he most recent Five Year Capital Improvement Plan. dated June 30, 1987, calls for approximately SS07.000 in capital expenditures over the five year period ending June 30, 1992. In addition. the City may undertake repairs and extensions to certain sewer mains of approximately 5200,000 during this period. Decisions on funding these projects are anticipated to occur over the next four years. The City expects to finance all such costs through Sewer System revenues. Sewer Rates Tine sewer rates for the entire sewer system are set by the City and are not subject to review by any state of local government agency. in the Wit. rate changes have been enacted by the City Council bzsed upon the recommendations of staff or a private sewer engineering consultant. The most recent revision to the City's sewer rate structure was established by a resolution of the City Council and implemented on October 1, 198§.. Pursuant to such resolution, the fees for the Domestic System an3 Holding Tank Wastes are to be automatically increased by 15%annually on October 1 of each year (commencing October 1, 1987) until the Pnorject is completed or such resolution is superceded. The following table outlines the current rate structure. 023 CITY OF LODI 25ENCP SEWER CHARGES NCP DONIESTIC SYSTEM .k Residential a Sewer Service Charge Number of bedrooms Koatltt7 Rue 1 S 3.51 2 4.68 3 5.85 4 7.03 5 8.19 6 9.36 7 10.51 b. Connection Flee $1,380.00 per unit* Sewage Service Unit, defined as each increment of flow equal to the flow of a typical two-bedroom residence. Sea: 11 XBC (TICACTIVE)9 MA,007,C29 St 93930A Fmt 93930A jEFFRIES C_P Y CO Cl) (213)742-aeOO Comex 08-.w1-88 16:48 CI'il' OF LOO! IOS TRI P4 Y Chk 127210 Output (OX) 08-J61-88 17-08 S. Commercial a. :;nnuai Sewage Service b. Connection Fee C. Industrial a. Annual Sewage Service iTnit item Flow — miliion gal, ,ns (MG) Biochemical Oxygen Demand (BOD) — 1,000 lbs. Suspended Solids (SS) — 1,000 lbs. b. Connection Fee Moderate Strength User High Strength User Unit Item Flow — MG BOD — 1,000 lbs - SS — 1,000 tbs. A Annual Sewage Service I r,.ie leans Flow — MG BOD — 1,000 lbs. B. Connection Fee A. Dumping Charge A. Storm Drain Disposal Charge Source. City of Lodi. Fim inial Statements 556.17 per unit per year 51,380.00 Ger unit Unit Charge 5270.25 per MG 132.25 per 1.000 tbs. 108.10 per 1,000 lbs. 51,380.00 per unit Unit Chwge 5446.20 per yiG 184.00 per 1,000 lbs. 82.80 per 1,000 tbs. INDUSTRIAL SYSTEM Unit Charge To be determined annually by the Public Works Director. To be determined annually by the Public Works Director. HOLDING TANK WASTES $41.40 per 1,000 gal. STORM DRAIN SYSTEM $50.08 per MG The following tables present the City's Sewer System's Balance Sheet and Statement of Revenues, Expenses and Changes in Retained Earnings prepared by the City of Lodi from audited financial statements for fiscal years 1985-86 and 1986-87 as taken from the City's audited fiwx+ai statements. The City's audited financial statements dated October 28, 1987 for the fiscal year ended June 30, 1987 which includes the Sewer System, is available from the City. An opinion letter was issued by the City's auditor. The records of the enterprise funds were incomplete as to fixed assets and related depreciation. Because the City's auditor was unable to satisfy itself by appropriate audit tests or by other means as a result of such incomplete records, it was inable to express an opinion on the financial Statementsof the enterprise funds. Consequently, the City's auditor excluded the enterprise funds from its opinion as to the fair presentation of the City's finaneialcondition in conformity with generally accepted accounting principles. 12 Sea 12 X8C (TICACTIVE)93930A,007,029 St.- 93930A 93930A JEFFRIES C.P.Y. CO. (2) (223)742-8800 COMP. 07 -Jut -88 18.44 CITY OF LODI /OS TR/P4 1 Ch1-- 051431 'Output CFC) O7 -Jul -88 18;51 C24 CITY OF LODI 14CP SEWER FL -4D NCF BAI. UNCE SHEET For the Years Ended June 30, ASSETS Cash and certificates of deposit .................................... Investments...................................................................... Receivables (net of allowances for ungollectibles): Utility........................................................................... Miscellaneous bills collectible ..................................... Interest.......................................................................... Due from other fund of Zovernmental agencies ........... Suppliesinventory........................................................... Otherassets...................................................................... Fixedassets ... :.................................................................. Accumulated depreciation ............................................... TotalAssets............................................................... LIABMITIES AND RETMNED EARNINGS Accounts payable and other liabilities ........................... Accrued salaries and wages .......................................... Dueto other funds.......................................................... Accrued compensated absences ...--.--.--.--.---.--.-. Total Liabilities........................................................ RETAINED EARNINGS ................................................ Total Liabilities and Retained Earnings ................. (1) Estimated -- Source: City of Lodi. 1986 1987 198811) S 1.129,696 S 1,611,598 S 1,868,618 481,386 686,714 775,987 58,011 73,954 53,568 7,i 17 489 553 16,662 21,244 24,006 0 4.998 5.648 9.553 5.875 6.639 17,250 15.150 17,120 10,458,031 10,521.1 31 11,888,378 (3,104,254) (3,479,868) (3,932,251) S 9,068,452 S 9.461290 S10.738.766 S 55,913 S 43,802 15,329 17,939 0 7.861 94,950 110,789 166,192 180.391 8,902,260 9,280,899 S 9,461,290 S 49.496 20.271 8,883 125,192 203,842 !0.5 34,924 S 10.738.766 SeT. 13 XBC MCAC,71Y093930A,007,029 St 93930A Fm$: 93930A JEFFRIES CPY. CO. (2) (213)742-8800 _-COMP: ...................... 9Q,671 07 -Ju{ -88 '.8:44 Seo: 14 ' CITY OF LOOI /05 TR/P4 1.710.138 Chic 001007 232.548 Mput (FC) 07 -Jul -88 18:51 x8c 025 CITY OF LODI My SEWER FUND C8 STITEMEN7' OF REVENUES, EXPENSES AND CH.A"NGES IN RETAINED EA LN- INGS Fop the Years Ended June 30, OPERATING REVENUES Charges for services ........................... OPERATING EXPENSES Personal Services ............................... Supplies, materials and ser-tices....... Electric, sewer and water ................. Depreciation ......................................... total Operating Expenses .............. Net Operating Income (Loss)...... NONOPERATMG REVENUES Taxes -bond redemption ........................ Interest Revenue .................................... Rent......................................................... Other..................................................... Total Nonoperating Revenues .......... Income Before Operating Transfers Operating transfer out ............................... NetIncome ........................................... Retained earnings — beginning of year Retained earnings — end of ye.r .......... Source: City cf Lodi. 19" IM S1,400,927 51,932,686 588,607 640,790 ..................... 436,833 542,94 ...................... 9Q,671 212,010 ............•••••• 373,433 314,384 .................... I.491,544 1.710.138 ...................... (90,617) 232.548 .................... 275,684 247,590 .................... 106,914 1123,222 .............•••••• 83.825 66,071 ...................... 10,098 9,033 .................. 476,524 445,916 ...................... 385.307 668,464 ...................2( 80,745) 289,525 ................. 105;162 378.639 ...................... 8.797.098 8.902,260 ...................... S8,902,260 59.230,899 (TICACTIVE)93930A.007,029 St 93930A Fv- 939304 JEFFRIES CAY, CO (2: ('.13)742-8800 ,-Jana 07 -Jul -88 :8:44 CITY OF L001 /05 TR/P4 CIN 034423 uiput (XX) 07 -Jul -88 1"I 02b Operating Results A140 YKY The following ta:jie prezznts a five year comparison of revenues and expenses of the Sewer Fund as taken from the City's audited financial statements. The following table exludes depreciation charged to the Sewer Fund and transfers to other funds. CITY OF LODI SEWER FUND STATEMENTS OF REVENUES AND EXPENSES For Fiscal Years Ended June 30, 1983 1984 1985 1486 1"7 OPERATING REVENUES Charges for Services .............. OPERATING EXr ENSES Personal se: vices ................... Supplies, material and services ...... ......— Electric, sewer and water ...... Total Operating Expenses.. Net Operating income .............. NONOPERATING REVENUES (EXPENSES) Taxes — Bond Redemption. Intertest Revenue .................... Rent........................................ Other ----...-------...----- Total Nonoperating Revenues (Expenses)...... Net Revenue ............................. Source: City of Lodi. S1.167,688 S1,194,036 $1,367,130 S 366,339 424.938 548,414 133,143 178.270 199,91S 314,680 308,819 136,546 400,927 S1,932-686 588,607 640,799 436.333 542,94 92.671 212.010 814.762 912,027 884.875 1,118,1.11 1,395,754 352,926 232.009 482.252 282,816 536,932 Seo: IS ' XBC 289.851 289,102 275.623 375,684 247.590 85.459 90,753 104,999 106,914 123,222 50.235 70.875 65,975 83.528 66.071 (299,803) (542,804} (2,748) 10,098 9.033 125,742 (92,076) 443,849 476.524 445,916 S 478,668 5 1899933 $ 926,101 S 759,340 S 982,848 (TICACTIVE)93930A,007,029 St 9'930A F-nt 93930A JEFFRIES C.P.Y. GO. (1) (213)742_8800Coma 08-.ut-a8 =6:48 CITY OF LODI /Os TW P4 .-� N CW 171153 _ , Output (OX) 08 -Jut -88 17:08 027 Pwiected Operating Results 405 KY The following is a projection of the revenues and expenses of the City for tive fiscal years as prepared by the City. These projections exclude depreciation charged to the Sewer Fund and transfers to other funds. The projection of operating revenues are based upon assumed rate increase of 15'•.'o in October, 1988 and October. 1989 as described above under "THE SEWER SYSTEM - Sewer Rates". These projections are based upon the City's current circumstances and available information that the City believes to be reasonable. The assumptions may be affected by numerous factors and there can be no assurance that such projections will be achieved. CITY OF LODI SEWER FUND PROJECTED SUMMARY STATEMENT OF REVENUES, EXPENSES AND DEBT SERVICE COVERAGE For Fiscal Years Ending June 30, 1988 1989 199E/ 1991 1992 OPERATING REVENUES CrI2xjes for Service ............... NONOPERATING REVENUES Connection Fees .................... Property Tax ......................... Interest................................... Rent........................................ Miscellaneous Total Nonoperating Revenues ......................... TOTAL REVENUES ................ EXPENSES Administration F-ngineering ............................ Plant Maintenance ................ sanitary System ..................... Industrial System ................... Insurance .... _.... _... _.... _..... Interfund................................ Existing Debt Service ............ Routine Capital ..................... Taal expenses ................... Net Revenues Available for Installment Sale Payment ..... Installment Sale Payment I Debt Service ._.._._._._._._._ Coverage.................................... Source: City of Lodi, 51,524,255 51,772,000 92,090,960 92,247,782 $2,250,000 977,470 1,087,435 865,000 53.000 50,000 279,500 284,000 175.000 178,000 175,900 194.315 210,000 252,000 469,038 530,238 73,760 66,865 70,000 72,500 75,000 969 2,000 4,250 4.500 4,750 _ 1,531,005 1,650,300 `1,366,250 774,038 835,878 3,005,26 3,422,300 3,457,210 3,021,820 3,085,878 91,350 118,130 124.037 130,238 136,750 6,970 19,425 20,396 21,416 22.487 756,906 804,330 875.410 955,820 1,102,332 140, 815 142,800 149,940 157.437 165,309 3,515 3,555 4,048 4.250 4,40 15,195 17,000 17,850 18.743 19.680 109,535 113.9851 119.684 125.668 131,952 281,255 284,000 175,000 178,000 175,900 100,00© 275.000 _ 105,000 110,250 115,763 1,505,541 1,778,525 1,591,364 1,701,82-7 1,874,635 5t,549 -,'t9• $1,643,775 31,865,546 81,319,998 51,211,243 367,470 827,446 527,203 826,434 4.47x 2.25x 1.60x 1.47x Sea 16 ' X8C 028 461E NKY 029 234E Cay. (TICACTIYE)93930A,007,029 St: 93930A Fmc 93930A JEFFRIES C-P.Y CO. (2) (213)742-88W— Goma 07 -Jut -88 18:44 Sep: 17 ` CITY CF LOOI /OS TR/P4 N Chk 051615 output (XX) 07•Jul-88 14:01 XBC Sewer System Users The top ten Sewer System users accounted for 14.9% of total usage. The largest user, Pacific Coast Producers, accounted for 3.4`7 of total usage. The following are the top ten users of the Sewer System and their annual usage: CITY OF LODI TEN LkRGEST USERS OF THE SEWER SYSTEM 12 Months Through March 31, 1988 Source: City of Lodi. THE CORPORATION The Lodi Public Improvement Corporation was organized in 1988 pursuant to Nonprofit Public Benefit Corporation Law of the State of California (Title 1, Division 2, Part 2 of the California Corporation Code), for the purpose of rendering financial assistance to the City by financing, refinancing. acquiring, constructing, improving, leasing and selling buildings. building improvements. equipment, electrical, water, sewer, road and other public improvements, lands and any other real or personal property for the benefit of the residents of the City and surrounding areas. 17 12 v[onth Usage Customers (100 Go Uom) Pacific Coast Producers......................................................................... 2,01 1,000 General Mills — Turner Road............................................................. 495,000 HolzRubber........................................................................................... 341,000 General Mills — SBG........................................................................... 150,000 Lodi Memorial Hospital........................................................................ 150.000 Tokay High School................................................................................ 135,000 .Lodi High School................................................................................... 119.000 Lustre -Cal Nameplate............................................................................ 76,000 E1& Car Wash....................................................................................... 50.000 ValleyIndustries................................................................................. .................... 50,000 Source: City of Lodi. THE CORPORATION The Lodi Public Improvement Corporation was organized in 1988 pursuant to Nonprofit Public Benefit Corporation Law of the State of California (Title 1, Division 2, Part 2 of the California Corporation Code), for the purpose of rendering financial assistance to the City by financing, refinancing. acquiring, constructing, improving, leasing and selling buildings. building improvements. equipment, electrical, water, sewer, road and other public improvements, lands and any other real or personal property for the benefit of the residents of the City and surrounding areas. 17 X'(TICACTIVE)93930A,030.036 St 93930A Fmt 93930A JEFFRIES C.P.Y. CO. (1) (213)742-8800 Comp. 08 -Jul -88 16'49 CITY OF LODI /OS TR+Pi N Chic 116773 -lutput (OX) 08 -Jul -83 17:07 030 INSTALLIMENr SALE AGREEMENT saa3 KKY The following is a brief outline of certain provisions contained in the Installment Sale.-tgreement between rhr City and the Corporation. and is not to be considered a fill statement pertaining thereto. Term The term of the Installment Sale Agreement is for 3 period commencing August I, 1988, -and ending on August I, 7018 or such earlier or later date (but not later than August 1, 2028) as is ten days after the Trust Agreement shall be discharged by its terms. Deposit of Proceeds The Corporation agrees under the Instaiiment Sale Agreement to deposit, or cause to be deposited, with the Trustee 38,759,000.'Of such amount, the Trustee is required to deposit (i) 5830,313* into the Reserve Fund, (ii) $101,722* into the Delivery Costs Fuad and (iv) the balance. X7;826;965*, into the Construction Fund. The City has covenanted to pay. from any legally available source of funds, any construction costs in excess of the Certificate proceeds available therefor. Construction of Project The cost of construction of the Project will be made from amounts held by :he Trustee in the Construction Fund. The City will acquire and construct the Project as agent of the Corporation pursuant to the Installment Sale Agreement. InstalIment Payments; Rate Covenant Under no circumstances shall the City be required to advance any moneys derived from any source of income other than Net Revenues to make the Installment Payments. The City covenants to prescribe, revise and collect all income, rents. rates, fees. charges and other moneys derived from the owncrship or operation of the SewerSystem which will ensure gross revenues sufficient in each Fiscal Year to pro -vide Net Revenues equal to at least I.10 times the aggregate annual payment requirements with respect to the Installment Safe Agreement and any panty obligations in such Fiscal Year. including replenishment of the Reserve Fund as required by the Trust Agreement. Parity Obligations The City has the right to issue parity debt on a panty with the Installment Sale Agreement, provided (i) The City is not in default under the terms of the Installment Saie Agreement; (ii) Net Revenues, calculated on sound accounting principles, as shown by the books of the City for the latest Fiscal Year or any more recent twelve (12) month period selected by the City ending not more than sixty (60) days prior to the adoption of the resolution pursuant to which instrument such Parity Debt is issued or incurred, as shown by the books of the City, plus. at the option of the City, either or both of the items below designated (1) and (2). shall have amounted to at least 1.10 times the sum of the maximum Installment Payments coming due and payable in any future Fiscal Year and the maximum annual debt service on all Panty Debt outstanding immediately subsequent to the incurring of such additional obligations. Either or both of the following items may be added to Net Revenues for the purpose of applying the restriction contained above: (1) An allowance for revenues from any additions to or improvements or extensions of the Sewer System to be made with the proceeds of such additional obligations. and also for net revenues from any such additions, improvements or extensions which have been made from moneys from any source but which, during all or any part of such Fiscal Year, were not * Subject to change 18 Seq I X9C (TICACTIVE)93930A,030,036 SC 93930A Eayc 93930A JE`rFRIES C.P.Y. CO. (1) (213)742-8800'" Comp: 07-.)u1-88 2049 CITY CF LOD1 '05 TPJ P4 N C:�c 034153 Output (CO) 57 -hi -88 21:02 in service, all in an amount equal to 70% of the estimated additional average annual (iNez Revenues to be derived from such additions. improvements and extensions for the first 36 - month period following closing of the proposed Parity Debt, all as shown by the certificate or opinion of a qualified independent engineer employed Dy the City. (2) An allowance for earnings arising from any increase in the charges made for service from the Sewer System which has become effemive prior to the incurring of such additional obligations but which. during all or any part of such Fiscal Year, was not in effect. in an amount equal to 1001/oof the amount by which Net Revenues would have been increased if such increase in charges had been in effect during the whole of such Fiscal Year and any period prior to the incurring of such additional obligations, as shown by the certificate or opinion of a qualified independent engineer employed by the City; and (iii) A reserve fund shall be funded for such Party Debt which is at Least equal to the amount resulting from the application on the closing date of such Parity Debt of the formula contained in the definition of "Reserve Requirement" contained in the Installment Sale Agreement. Maintenance. Taxes, :assessments and Modifications The City, at its own expense, has agreed to maintain the Sewer System in good repair, the Corporation has no responsibility for such repair. The City has the power to make modifications and improvements to the Project which do not damage the Project or reduce the value of the Project to a value substantially less than that which existed prior to such modification or improvement. Any such modifications or improvements to the Project (except equipment or other personal property of the City) will automatically become subject to the Instaliment Sale Agreement. The City must pay or cause to be paid all taxes and assessments with respect to the Sewer System; provided that the City may in good faiih contest any such taxes and assessments and may permit such taxes and assessments to remain unpaid during the period of such contest and any appeal therefrom. Insurance The Installment Sale Agreement requires the City to maintain or cause to be maintained the - following insurance against risk of physical damage to Sewer System structures and other risks for the protection of the `'erti&ate Owners, the City, and the Trustee: (i) Public Liability and Property Damage. Minimum coverages shall be S 1,000,000 for personal injury or death per P: - -1 and$3,000,000 for personal injury or deaths of two or more persons in each accident or event. and property damage insurance in the minimum coverage of $250,000 per event, subject to a maximum $200,000 deductible per accident. Such insurance may be maintained in the form of a minimum $3,000,000 single limit policy covering all such risks. Such insurance may be carried in conjunction with any jiber liability insurance coverage 031 carried or required to be carried by the City and may be maintained (and shall be obtained if ps,l°E such insurance is not obtained in the open market because it is unavailable at commercially reasonable rates, as described above) in the form of self-insurance by the City. If the City shall maintain self-insurance. it shall supply to the Trustee a statement of sufficiencyby an independ- ent insurance consultant or the City's risk manager on an annual basis. Such insurance shall be required only if in the opinion of the City such insurance is available at reasonable cost on the open market from reputable insurance companies. (ii) Fire and Extended Coverage Insurance. Insurance against loss or damage to any struc- tures, excluding transmission and distribution lines and equipment in public and private rights- of-way, constituting any part of the Sewer System (excluding transmission and distribution pipelines and equipment in public and private rights-of-way). by tire and lightning, with extended coverage insurance. Such insurance shalt be in an amount equal to either (a) the greater of 100% of the replacement cost of the Project or(b) the then outstanding principal amount of Certificates (but only if in the opinion of the Citv such insurance is available at reasonable cost on the open 19 SefV 2 ' ABC (TICACTIVE)93930A,030,036 St 93930A Fmt• 93930A JEFFRIES C.PY. M. (2) (213)142_8800 Coma 07 -At -88 :8:46 Seq. 3 C TY CF L001 105 TR/P4 V ChiC 070156 Output (FC) 07-h1-88 '9:02 XEC market from reputable insurance companies). For insurance described in (a)above, a maximum deductible of ten percent of said replacement cost for any one loss and, for insurance described in (b) above, of S 100,000 for any one loss, shall be allowable. Such insurance may be carried in conjunction with any other fire and extended coverage insurance carried or required to be carried by the City, and may be maintained (and shall be obtained if such insurance is not obtained in the open market because it is unavailable at commercially reasonable rates. as described above) in the form of self-insurance by the City. If the City shall maintain self-insurance, it shall supply to the Trustee a statement ofsutficiency by an independent insurance consultant or the City's risk manager on an annual basis. All policies of insurance (except the policy of public liability and property damage insurance) must provide that the net proceeds thereof shall be payable to the Trustee Ior the benefit of the Certificate Owners. Certain net proceeds of fire and extended coverage insurance shall be deposited in the Insurance and Condemnation Fund to be applied to rebuild the Project or redeem outstanding Certificates. The City has agreed to pay or cause to be paid when due the premiums on all insurance policies and furnish evidence of compliance with the insurance requirements of the Installment Sale Agreement annually to the Trustee. Eminent Domain In the event of the exercise of eminent domain with respect to the Project or any portion thereof, the City is required to deposit the net proceeds of any condemnation award in the Insurance and Condemnation Fund held by the Trustee. Such proceeds shall be applied to the repair or rehabilita- tion of the Project by the City, or shall be withdrawn from the Insurance and Condemnation Fund and applied to retire all or a portion ofoutstanding Certificates. pursuant to the Trust Agreement. In the event less than all of the Project shall be condemned. the Installment Sale Agreement shall continue in full force and effect and shall not be terminated by virtue of such taking, and there shall be a proportionate reduction in the amount of the Installment Payments. but in any event suck that the resulting Installment Payments will be sufficient to pay the principal of and interest on the Certificates then outstanding. Assignment; Sale or Lease of the Project The Corporation has assigned to the Trustee. pursuant to the Trust Agreement, certain of its rights under the Installment Sale Agreement, including the right to receive and enforce payment of the Installment Payments to be made by the City. The City may not assign any of its rights or sell the Project or any portion thereof during the term of the Installment Sale Agreement. The City may lease the Project in whole or in part under the conditions contained in the Installment Sale Agreement, including the condition that the City shall continue to be obligated to make Installment Payments. and that such lease not cause the interest component of the Installment Payments to be subject to federal or California income taxes. Events of Default The following are "events of default" under the Installment Sale Agreement: (i) Failure by the City to pay any Installment Payment by the Installment Payment Date or failure to make any other payment required under the Installment Sale Agreement at the time specified therein; (ii) Failure by the City to observe and perform any covenant. condition or agreement on its part to be observed or performed in the Installment Sale Agreement or the Trust Agreement, other than as referred to in (i) above, for a period of thirty (3 0) days after written notice thereof has been given to the City by the Trustee, the Corporation. or the Owners of not less than 5% in aggregate principal amount of outstanding Certificates; provided that if such failure cannot be corrected within the applicable period. the Trustee, the Corporation or such Owners shall not 20 (TiCACTIVE)93930A,030.036 SC 93930A Fmt: 93930A JEFFRIES C.P.v ro. (2) (213)732-8800 _ Coma 07-0-88 18:46 seq: 4 CITY OF LODI /OS TW P4 4 Chk: 131212 Output (FC) 07 -hi -88 1902 XBC unreasonably withhold their consent to an extension of such time if corrective action is instituted by the City within the applicable period and diligently pursued until the default is corrected; and (iii) Certain events relating to bankruptcy or insolvency of the City. Upon the occurrence and continuance of any event of default, the Corporation shall have the right to (a) declare all principal components of the unpaid Installment Payments, plus accrued interest, to be immediately due and payable, and (b) rake whatever action at law or in equity may appear necessary or desirable to collect the installment Payments or enforce performance of any 032 obligation or covenant of the City under the Installment Sale Agreement. The Corporation has 90° assigned certain of its rights under the Installment Sale Agreement to the Trustee under the Trust Agreement, including its rights in the event of default. TRUST AGREEMENT The following is a briefoutli�re of certain provisions contained in the Trust Agreement by and among the City. the Corporation and the Trustee, and is not to be considered a full statement pertaining thereto. Trustee The Trustee is appointed pursuant to the Trust Agreement to prepare, execute and deliver the Certificates and to act as a depository of amounts held thereunder. The Trustee is required to invest amounts held under the Trust Agreement in accordance with instructions of the City. Funds The Trus* Agre&::-_ilt creates the Constrtmction Fund, the Delivery Costs Fund, the installment Payment Fund, the Reserve Fund, the Insurance and Condemnation Fund and the Rebate Fund to be held by the Trustee. Construction Rend. Payments for the costs of the Project will be disbursed from the Construc- tion Fund upon direction of the City, as agent of the Corporation. Upon payment of the total cost of the Project, any moneys remaining in the Construction Fund are required to be transferred to the Installment Payment Fund and applied to pay the Installment Payments as they come due. Delivery Costs Fund. The moneys in the Delivery Costs Fund shall be disbursed by the Trustee to pay expenses directly or indirectly payable by or reimbursable to the City or the Corporation relating to the financing of the Project from the proceeds of the Certificates (the "Delivery Costs") upon receipt of a requisition signed by the City representative setting forth the amounts to be disbursed for payment or reimbursement of Delivery Costs and the name and address of the person or persons to whom said amounts are to be disbursed. stating that amounts to be disbursed are for Delivery Costs properly chargeable to the Delivery Costs Fund which have not been the subject of a previous requisition. Installment Payment Fund. All Installment Payments and prepayments received by the Trustee. and any other moneys required to be deposited therein. shall be deposited by the Trustee in the Installment Payment Fund, which shall be held by the Trustee in trust for the benefit of the Owners. All amounts in the Installment Payment Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the principal and interest and redemption premiums, if any, with respect to the Certificates as the Same shall become due and payable. Reserve Fund. Moneys in the Reserve Fund shall be used solely for the purpcse of paying principal and interest due with respect to the Certificates in the event that the moneys in the Installment Payment F ,.nd are insufficient therefor and for that purpose the Trustee shall withdraw and transfer moneys from the Reserve Fund to the Installment Payment Fund. iTICACTIVE393930A,030,036 St 93930A Fmt 93930A JEFFRIES C.P.Y, CO. t2) (213)742-0800Comm-. 07-ju{-88 ;8:46 Seq: 5 CrrY OF 1001 /OS TR/P4 ^V Chk 106542 _ Outout (FC) 07 -Jul -a8 19702 Xac Irsurance and Condemnation Fund. The Trust Agreement creates the Insurance and Condemna- tion Fund into which the net proceeds of certain. insurance policies and eminent domain proceedings with respect to the Project are to be deposited by the Trustee. Rebate Rmd. The Trust Agreement requires the annual computation and segregation by the City of excess investment earnings for ultimate rebate to the United States in accordance with the provisions of the Internal Revenue Code of 1986. The Trustee is also required to deposit certain net proceeds of hre and extended coverage insurance collected due to an accident to or destrucrion of all or part of the Project into the insurance and Condemnation Fund to be used to rebuild or repair the Projecr. if requested by the City, or to be used to redeem outstanding Certificates. If all or any part of the Project shall be taken by eminent domain proceedings (or sold under threat thereof), the net proceeds therefrom shall be deposited with the Trustee in the Insurance and Condemnation Fund and disbursed as follows: (a) to the Installment Payment Fund as a credit toward prepayment of Installment Payments, if the City determines that such proceedings have not materially affected the operation of the Project or the ability of the City to meet its obligations under the Instailment Sale Agreement, and the City determines that such proceeds are not needed for repair or rehabilitation of the Project; (b) to be used to rebuild or repair the Project if the City determines that such proceedings have not materially affected the operation of such Project or the ability of the City to meet its obligations under the Installment Sale Agreement, and the City determines that such proceeds are needed for repair or rehabilitation of the Project; and (c) to be used to redeem 033 Certificates if all of :he Project is taken or if such proceedings have materially affected the operation Osv of the Project or the ability of the My to meet its obligations under the Installment Sale Agreement. Investment efrunds. Moneys held by the, Trustee under rhe Trust Agreement are required to be invested and reinvested in permitted investments. 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) any of the following which are noncallable (the "Federaf Securities"): (f) direct obliga- tions of (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), or obligations the payment of principal of and interest on which are unconditionally guaranteed by, the United States of America, including State and Local Government Series obligations; or (2) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America: (i) Farmers Home Administration: (ii) General Services Administration; (iii) U.S. Maritime Admin- istration; (iv) Small Business Administration; (v) Government National Mortgage Association: (vi) U.S. Department of Housing & Urban Development; (vii) Federal Housing Administration: (viii) Export -Import Bank of the United States; and (ix) Federal Financing Bank; (b) U.S. Dollar denominated deposit accounts fully insured to the holder (up to the $100,000 maximum coverage) by the Federal Deposit Insurance Corporation or by the Federal Savings and Loan Insurance Corporation; (c) U.S. Dollar denominated deposit accounts. federal funds and banker's acceptances with commercial banks (foreign or domestic) which have a rating on their short term certificates of deposit on the date of purchase of "A -I" or "A -If" by Standard& Poor's Corporation and "P-1" by Moody's Investors Service and maturing no more than 360 days after the date of purchase: (d) Money market funds rated in the highest rating category of any nationally recognized rating agency. which are monitored quarterly and, for amounts of less than $100,000, money market funds maintained by the banking department of the Trustee, so long as the Trustee, or its parent, has a combined capital and surplus of at least 550,000,000; 22 (TICACiIVE)93930A.030,036 St 93930A FrrC 93930A JEFFR,ES C.P.Y. Co. (Z) (213)732-8800— Comp: 07-.fu1-88 !8;46 sea: 6 CITY OF LO01 /OS TRf P4 Y Chic 345720 Output (FC) 07 -.Jul -88 :9:02 XBC (e) Pre -refunded municipal obligations defined a follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state (1) which are not callable at the option of the obligor prior to maturity or as to which irrevocable notice has been given by the obligor to call on the date specified in the notice, and (ii) which are fully secured as to principal and interest and redemption premium, it' any, by a fund consisting only of cash or obligations described in (a) above, which fund may be applied only to the payment of such principal of and interest and redemption premium. if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate. and (iii) which fund is sufficient, as verified by an independent certified public accountant. to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this clause (e) on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to in (i) above, as appropriate, and (iv) which are rated, based OR the escrow. in the highest rating category of Standard & Poor's Corporation and Moody's Investors Service or any successors thereto: and (f) written repurchase agreements with any bank, savings institution or trust companv (including the Trustee) which is insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan -insurance Corporation, or With any broker-dealer with retail customers xh*ch falls under Securities Investors Protection Corporation protection, provided that such repurchase agreements are fully secured by (a) above or obligations of any agency or instrumen- tality of the United States of America. and provided further that (i) such collateral is held by the Trustee or any agent acting solely for the Trustee during the term of such repurchase agreement. (ii) such collateral is not subject to Liens or claims of third parties, (iii) such collateral has a market vaiue (determined at least once every 30 days) at least equal to the amount invested in the repurchase agreement, (iv) the Trustee has a perfected first security interest in the collateral, (v) the agreement shall be for a term not longer than 270 days and (vi) the failure to maintain such collateral at the level required in (iii) above will require the Trustee to serve notice to the other party to correct such deficiency. If such deficiency is not corrected. the 7Wea is directed to liquidate the collateral. Event of Default Upon the occurrence oian event of default by the City under the Installment Sale Agreement, the Trustee may exercise any and all zem9dies available under the Trust Agreement pursuant to law or granted pursuant to the Installment Sale Agreement. Upon the Occurrence of an event of default. the Trustee may, and shall, at the direction of the Owners of a majority of the outstanding principal amount of Certificates, declare the principal of the Installment Payments to be immediately due and payable. In the event the Trustee fails to take sufficient actions to eliminate such default, an Owner may institute any suit, action, mandamus or other proceeding in equity or at Iaw for any xvn* dy under the Trust Agreement if and oniy if such Owner and the Owners of a majority in aggregate principal amount of the Certificates then outstanding shall have first made written request of the Trustee to exercise the powers therein gmntcd or granted under the law or to institute such action, suit or proceeding in its name, and, in addition. unless the Trustee shall have been offered reasonable indemnity against the cost, expenses and liabilities to be incurred therein or thereby, and the Trustee shall have refused or neglected to comply with such request for 3 period of sixty (60) days after receiving such request and tender of indemnity. Amendment The Trust Agreement may be amended only by agreement among the City, the Trustee and the Corporation but no amendment shall become effective as to the Owners of the Certificates then outstanding without the written consent of sixty percent (60%) in aggregate dollar amount of the Certificates, provided, however, that in no '.vent shall any such amendment extend the fixed maturity of any Certificate. reduce the interest rate w ;th respect thereto. extend the time of payment of interest 'TICACTIVE)93930A,030,03d St 93930A Fmt 93930A ;EFFRIES C P Y CO (1) (213)742-8800 Coma 08 -Jul -88 :649 CrrY OF LOOI /OS TWP4 N Chir 003715 Output (Ox) 08--U-88 1707 or reduce the amount of principal (or premium) thereof without the express consent of the Owner of such Certificate. Notwithstanding the foregoing, the Trust Agreement may be amended without such Owners' consent but only for the purpose of (i) curing any ambiguity or correcting defects, or (ii) in regard to questions arising under the Trust Agreement. provided that such amendment does not adversely affect the interest of the Owners of the Certificates, or (iii) to assure compliance with the Internal Revenue Code of 1486 or to assure the federal tax exemption of the interest component of the Installment Payments. Defeasance Upon payment of all outstanding Certificates. either 3t or before maturity, or upon the deposit of cash filly insured by the Federal Deposit Insurance Corporation or Federal Securities (as defined in the Trust Agreement) with the Trustee which together with the amount of earnings calculated to accrue on any investment of such moneys or Federal Securities to maturity or applicable redemption dates. will be sufficient, with other available funds, to retire the outstanding Certificates at or before maturity, upon giving or providing for such notice, the Trust Agreement will be terminated subject to the payment of the Certificates. Limitations of Liability The Trust Agreement contains certain provisions Limiting the liability of the parties thereto. including the following provisions: (i) Except for the payment of Installment Payments and prepayments when due in accor- dance with the Installment Sale Agreement and the performance of the other covenants and agreements of the City contained in the Installment Sale Agreement and the Trust Agreement, the City shall have no pecuniary obligation or liability to the Corporation. the Trustee or the Owners with respect to the Trust Agreement or the terms, execution, delivery or transfer of the Certifi- cates or the distribution of Installment Payments to the Owners by the Trustee except as expressly set forth in the Trust Agreement; (ii) Neither the City nor the Corporation shall have any obligation or liability to each other, the Trustee or the Owners with respect to the performance by the Trustee of any duty imposed upon it by the Trust Agreement; and (iii) The Trustee shall have no obligation or liability to the Owners with respect to the failure or refusal of any other party to perform any covenant or agreement under the Trust .Agreement or the Installment Sale Agreement. ASSIGNMENT AGREEMENT The following is a brief outline of certain provisions contained in the assignment Agreement j between the Corporation. as assignor, and the Trustee, as assignee, and is not to be considered a full statement pertaining (hereto. Under the Assignment Agreement, the Corporation has assigned to the Trustee far tke benefit of the Owners of the Certificates. and the Trustee has accepted, all of the Corporation's rights and interest in the Installment Sale Agreement (except certain rights to repayment and indemnification), including, without limitation, the rights to receive and collect Installment Payments from the City under the Installment Sale Agreement. the rights to the pledge of Net Revenues, :he right to receive insurance and condemnation proceeds, and the right to exercise rights and remedies under the Installment Sale Agreement, including enforcement of Installment Payments. 034 TAX EXEMVnON IEC4 NCP In the opinion of Jones Hall Hill & White, A Professional Law Corporation, San Francisco. California, Special Counsel. subject, however. to the qualifications set forth below. under existing taw. the portion of the Installment Payments designated as and comprising interest rind received by the 24 SM 7 XBC (TICACTIVE)93930A,030,036 St 93930A Fmt 93930A :EFFRIES C.P.Y. CO. t2) :2133742-6800 Coma 07-JUI.88 t&46 Seq: a CITY OF LODI JOS TR/Pa Chic 054457 Mput (FC) 07 -All -88 19:02 ABC 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 adjusted net book income (adjusted current earnings for taxable years beginning after December 31. 1989). The opinions set forth in the preceding paragraph are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 (the "Code") that must be satisfied subsequent to the delivery of the Installment Sale Agreement in order that such inrerest be. or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with each such requirement. Failure to comply with certain of such require- ments 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. special Counsel expresses no opinion regarding other federal tax consequences arising with respect to the Certificates Prospective purchasers of the Certificates should be aware that (i) section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Certifica,es or, in the case of a financial institution. that portion of the Owner's interest expense allocated to interest payable with respect to the Certificates, (ii) with respect to insurance companies subject to th,, tax imposed by section 531 of the Code. section 332(b)(5)(B)(i) reduces the deduction for toss reserves by 15 percent of the sum of certain items, including interest payable with respect to the Certificates, (iii) for taxable years beginning before January I, 1992, interest payable with respect to the Certifi- cates earned by some corporations could be subject to the environmental tax imposed by section 59A of the Code, (iv) interest payable with respect to the Certificates eamed by certain foreign corpora- tions doing business in the United States could be subject to a branch profits tax imposed by section 884 of the Code, (v) passive investment income, including interest payable with respect to the Certificates. may be subject to federal income taxation under section 1375 of the Code for Sub- chapter S corporations that have Subchapter C earnings and profits at the close of the taxable year if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income and (vi) seeticn 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining the taxability of such benefits, receipts or accruals of interest payable with respect to the Certificates. In the further opinion of Special Counsel, interest payable with respect to the Certificates is exempt from California personal income taxes. CERTAIN LEGAL MATTERS Jones Hall Hill & White. A Professional Law Corporation, San Francisco, California. Special Counsel, will render an opinion with respect to the validity and enforceability of the Installment Sale Agreement. the Trust Agreement and the Assignment Agreement, the draft form of which opinion is set forth in Appendix B. A copy of such approving opinion will appear on the reverse of rich Certificate. Certain legal matters will be passed upon for the Underwriter by Mudge Rose Guthrie Alexander & Ferdon, New York, New York and for the City and the Corporation by the City Attorney. ABSENCE OF UrIGATION There is no litigation pending against the City, nor, to the knowledge of the officers or attorneys of the City, threatened, in any court or other tribunal of competent jurisdiction, state or federal. in any way (i) restraining or enjoining the issuance, sale or delivery of any of the Certificates, or (ii) questioning or affecting the validity ofthe Certificates or (iii) questioning or affecting the validity of any of the proceedings for the authorization, safe. execution or delivery of the Certificates, or (iv) questioning or affecting the validity or enforceability of the Installment Sale Agreement or Trust Agreement. 25 (TICACTIVE)93930A,030,036 St: 93930A FmC 93930A JEFFRIES C.P.Y. CO. (2) (213)342-8800. Coma 07 -Jul -88 23:13 Seq: 9 CITY of WDI !OS TRI P4 4 Chk 141334 Output (CO) 07 -Jut -88 23:18 XBC - 036 UNDERWRITING 604E '+CP The Certificates are being purchased by Seidler -Fitzgerald Public Finance (A Division of Seidler .-Xmdec Securities Inc.) (the"Under»riter"). The Underwriter has agreed to purchase the Certificates at a price of S ................. (which includes an Original Issue Discount of S ................. ) . The purchase agreement for the Certificates provides that the Underwriter will purchase all of the Certificates at the price indicated above if any are purchased the obligation to make such purchase being subject to certain terms and conditions set forth in the purchase agreement. the approval of certain legal matters by counsel and certain other conditions. Under the terms of the purchase agreement the Underwriter is nor obligated to, nor will it pay to the City, accrued interest from august 1, 1988 to the closing date. The Underwriter may offer and sell Certificates to certain dealers and others at a price lower than the offering price stared on the Cover Page hereof. The offering price may be changed from time to time by the Underwriter. AVNILABILM OF DOCUMENTS Copies of the Insta?lment Sale Agreement, the Trust Agreement, and the Assignment Agreement will be available, upon written request, from the City Clerk of the City of Lodi, City Hail, 221 West Pine Street, Lodi, California 95240. MISCELLAIti'EOUS References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statements of the contents thereof. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stared. are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or Owners of any of the Certificates. The execution and delivery of this Official Statement has been duly authorized by the City. CITY OF LODI, CALIFORNIA By: Dated: July ....., 1988 Mayor 26 (TICACTIVD939308,002,015 Sr 939308 Fmt 939308 JEFFRIES C.P.Y. Co. (2) (213)742-8800^ Camp: 07-1u1-88 '_8:47 Seq: 1 CITY OF L00I /OS TRI P4 N Chic 006643 Output (FC) 07 -Jul -88 19:05 XBC 002 APPENDIX a tFC9 CSV THE CITY OF LODI Neither the Certificates nor the obligation of the Citv to make Installment Payments under the Installment Sale ,agreement constitute a debt of the C ky of Lodi under California law. The following information has been supplied by the City. The Underwriter makes no representations as to the accuracy of such information or any changes subsequent hereto. The following financial information with respect to the City is presented for information purposes only 003 General IOAE C5V Lodi was incorporated as a General Law city on December 6, 1906. Located in San Joaquin County, California, the City is 35 miles south of Sacramento, 90 miles east of San Francisco and 15 miles north ofStockton. Total acres within the City limits number 5,785 or 9.04 square miles. It is located on the main line of the Southern Pacific Railroad and is within five miles of interstate 5. The City operates under a Council -Manager form of government. Lodi is a major agricultural shipping center in the San Joaquin Valley. The prime agricultural land surrounding Lodi is a major producer of wine and brandy grapes, primarily the Flame Tokay variety. In addition to the local wineries, a large cannery, Pacific Coast Producers, is a prominent employer. The City is also the home of the west coast General Mills plant for the production of cereals and food mixes. 004 Population A-1 OON The following table presents population statistics for the City for the years 1983 through 1988. CITY OF LODI POPUL.I,TION For 7de 1983 through 1938 Year (.Taaaary 1) ropulatica 1983................................................................................. 38,050 1984................................................................................. 39,550 1985................................................................................. 40,950 1986................................................................................. 43,300 1987 ................................................................................. 45,800 1988................................................................................. 48,200(1) Source: State Department of Finance. (1) City of Lodi estimate. A-1 (TICACTTYp939308,002,015 St- 939308 F -t_ 939308 *EFFRIES C.P.Y. CO. (2) (213)742-8800 COMP: 07 -hi -88 18:47 CITY Of LOOT /05 TW P4 9 Chk- 010112 Output (FC) 07-b1-88 19.05 Building Activity The following table provides a summary of building permit valuation and the number of new dwelling units authorized in the City for the years 1982 through 1986. CITY OF LODI BUILDING PERMIT VALUATION For Years 1982 through 1986 1ort9 IWA —12&.L-1oAS 1984 Valuation (in thousands) Residential.................................................... 820,464 $29,757 524,887 536,827 5 40,628 Nonresidential .............................................. 15-107 8,043 7,035 36,650 ?4,486 T o ..= ..................................................... 535,771 $37.800 S31.925 563.477 S 65,114 New Dwelling Units Single Family ................................................ 226 262 147 261 369 Multiple Family ............................................ 195 439 483 321 296 Total.......................................................... 42I 701 630 682 665 Source: "California Construction Trends," Security Pacific National Bank. Employment Labor figures for the City are unavailable. However, the civilian labor force in San Joaquin County increased to an annual average of 199,300 in 1987, up 2.9 percent from the 1986 average of 183,900. The following table summarizes the labor force, employment and unemployment figures for the years 1983 through 1987 for the County, the State of California and the nation as a whole. ec5 SAN JOAQUIN COUNTY AMP` LABOR FORCE, Ei✓IPLOYMEN"r AND UNEMPLOYMENT Yearly Average for Years :983 through 1987 Year snd Arca 1983 San Joaquin County ........ _...... _...... _... California............................................... United States ......................................... 1984 San Joaquin County ............................. California............................................... United States ......................................... 1985 San Joaquin County ............................. California............................................... United States ......................................... 1986 San Joaquin County ............................. California............................................... United States .......................................... 1987 San Joaquin County ............................. California............................................... United States ......................................... Civilian Uremp�pysaent tabor Force Employment Unemployment Rate 177,700 149.800 27,900 15.7% 12,333,000 11,1.41,000 1.192.000 9.7 1I1,550,000 100,534,000 10,717,000 9.6 181,700 157,800 23.900 13.1 12,503,000 11,532,000 971,000 7.8 113,544,000 105,005,000 8,539,000 7.5 181,400 158,100 23,200 12.8 12,938,000 12,007,000 931,000 7.2 115,461,000 107,150,000 8,311,000 7.2 183,900 162,600 31,300 11.6 13,365,000 12,373,000 892,000 6.7 119,540,000 111,303,000 5,237,000 6.9 189,300 170.600 18,700 9.9 13,746,400 12,954,900 791,500 5.3 119,865,000 112,440,000 7,425,000 6.2 Seq: 2 XBC (TICACTIVID939308,002,015 St 939308 F 939303 JEFFRIES C.P.Y. CO. (2) (213)742-8800 - Comp; 07-&1-88 18:47 Seq. 3 CITY OF LO01 /05 TR/P4 1 Chic 116771 Output (FC) 07-bf-88 1405 XBC The largest private sector employers located within the City of Lodi area are shown in the following :able: Source: City of Lodi. CITY OF L.ODI Largest Private Sector Employers As of .Tune 1, 1988 Employers Activity Employees General Mills Cereals and Food Mixes 950 Lodi Memorial Hospital General Surgery and Medical 610 Care Goehring Meat Meat Processing and Packing 5335 Pacific Coast Producers Can Manufacturer and 300-1,500 (Seasonal) Cannery California Cushion Cushion/Seat Covers 280 Valley Industries Trailer Hitches 260 Doctor's Hospital of Lodi General Surgery and Medical 250 Care Guild Winery Winery 210 Lodi Fab Industrial Storage Racking 193 Holz Rubber Rubber Products 170 Source: City of Lodi. (TICACT1:J939308,002,015 SC 939308 Fmt 939308 JEFFRIES C.R . CO. (2) (213)742.8800.., Comp: 07 -.jut -88 18:47 CITY OF LL9I /0S TR/P4 N CNC 073565 Output (FC) 07 -Jut -88 :9:05 006 income ?000 The City experienced a 13.6 percent increase in its median househoid effective buying income between 1382 and 1986, as compared to 16.4 percent for the State and 12.0 percent for the nation for the same period. The following chart shows the yearly median household effective buying income and the total effective buying income for the City, the State of California and the nation for the fears 1982 through 1986. PERSONAL INCOME For Years 1982 through 1986 Total Effective Median Household Burying Income Effecrive Year and Area (000's omitted) Buying Income 1982 Cityof Lodi................................................................................ S 368.845 s21.220 California.................................................................................... 261,868.372 24.360 United States.............................................................................. 2,169,679,337 22.000 1933 Cityof Lodi.......................................................................... ...... 39( -.a -i6 22,683 California.................................................................................... 284,288.701 26.040 United Stares.............................................................................. 2,329,209,922 23,420 1984 City of Lodi................................................................................ 437.515 23.618 California.................................................................................... 313,805,815 28,348 United States.............................................................................. 2,575,533,380 25,496 1985(1) Cityof Lodi................................................................................ 513,281 22,137 California.................................................................................... 346.2 80,970 26.557 United States.............................................................................. 2,900,258,883 23,680 1986 City of Lodi................................................................................. 569,303 24,103 California................................................................................... 38-3,811,129 28,227 United States.............................................................................. 2,981,720.801 24,633 Source: Sales and Marketii:g Management Survey of Buying Power. (1) Commencing in 1985, Sales and Marketing Management Survey of Buying Power revised the method by which median household effective buying income is calculated, resulting in an average 12%, downward revision of the 1985 and 1986 figures. seq 4 XBC (TICACTND939308,002,013 SC 939306 Fmt 939308 JEFFRIES C P•V. CO. (2's (213)702.8800 Coma 07 -Jul -88 :8:47 CITY OF LGL' 105 TR/ P4 . I Chic 003021 ~� Output WC) 07 -Jul -88 19•.05 - 007 Retail Sales 0000 The table below presents the City's retail sales for the years 1982 through 1986. CITY OF LODI TAXABLE TRAI SACTIONS For Years 1982 through 1986 (in thousands) 1982 1983 1984 1985 1986 Apparel stores .......................................... 5 5.953 5 6.369 S 6.883 5 7.259 5 7.733 General merchandise stores .................... 22,0.13 23,600 26,521 31.7i4 33.630 Drug stores ............................................... 12,556 13.463 12.980 13.412 13,504 Foots stores ............................................... 15,046 t8.166 21,461 24,148 25,140 Package liquor stores ............................... 6,933 7,328 7,174 5,960 5,669 Eating and drinking places ...................... 21,675 23.811 25,235 27,911 32,166 Home furnishings and appliances........... 7,538 9.712 11.186 11,467 15.988 Building materials and farm implements ............................................ 15,315 20,640 25,610 23,880 27,902 Automobile dealers and auto supplies.... 45,569 59,178 67,584 65.651 87,179 Service stations ........................................ 22,227 22,055 24,158 24.528 19,220 Other retail stores .................................... 16,408 16,647 17,509 16.592 17.822 Total Retail Outlets ................... I91,383 221,471 245.601 252,552 285,957 All other outlets ....................................... 50,097 50.867 62,1 63.183 64,778 Total all outlets ........................................ $241.480 $272.338 S308.781 5315,735 5350,735 Source: California State Board of Equalization. Dos Direct and Overlapping Debt FBAb cev The direct and overlapping bonded debt of the City as of June 1, 1988 is shown below - CM OF LODI ESUNUTED DIRECT AND OVERLAPPING BONDED DEBT As cF June 1, 1988 1987-88 Assessed Valuation: S1,504,761.791 DIRECT AND OVERLAPPING BONDED DEBT: 6 Applicable Debt 6/1/88 Lodi Unified School District............................................................... 42.372% $3.336,795 Cityof Lodi.......................................................................................... 100. 2.435.000(1) City of Lodi 1915 Act Bonds.............................................................. 100. 1.300.000 TOTAL DIRECT AND OVERLAPPING BONDED DEBT .... S7,071.795 (1) Excludes the certificates of participation to be sold hereby. Ratios to Assessed Valuation: Direct Debt ........................... 0.16% Total Debt ............................. 0.47% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30(87: $985,881 `.aurce: California Municipal Statistics. A-5 Seq: } XBC (TICACTIVE9393C8,002,015 St: 939308 Fmt_ 939308 EFFRIES C,P y 00. (2) (213)742-8800 Cana 07-,1it.88 18:47 CITY OF LODI /OS TPI P4 1 Chic 020100 )utput (FC) 07-M-88 :9.05 009 Constitutional Amendments _1lfecting City Revenues 3348 cav On June 6. 1978 California voters approved Proposition 13, the Jarvis -Gann initiative, which added Article XIII A to the California Constitution, The principal thrust of Article XIII A is to limit the amount of ad valorem taxes on real property to 1% of "full cash value" as determined by the County Assessor. Article XIII A defines "full cash value" to mean "the County Assessor's valuation of real property as shown on the 1975-76 tax roll under 'full cash value', or thereafter, the appraised value of real property when purchased, needy constructed, or a change in ownership has occurred after the 1975 assessment period." Furthermore, ail real property valuation may b•� increased to, reflect the inflationary rate, as shown by the consumer price index, not to exceed 2`no per year, or may be reduced. Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage. destruction or other factors. and to provide that there would be no incrtase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster. Article XIIIA exempts from the 1`tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 1978, and requires a vote of two-thirds of the qualified electorate to impose special taxes while totally precluding the imposition of any additional ad valorem, sales or transaction tag on real property. In addition, Article XIIIA requires the approval of two-thirds of all members of the State Legislature to change any State tax laws resulting in increased tax revenues. On June 3, 1986, California voters approved an amendment to Article XIIW of the Cal fo:nia Constitution to allow local governments to raise their property tax rates above the constitutionally mandated 17c ceiling for the purpose of paying certain new general obligation debt issued for the acquisition or improvement of real property and approved by two-thirds of the votes cast by the qualified electorate. On September 22, 1978, the California Supreme Court upheld the general validity of Article XIIIA against a series of challenges which attacked the Jarvis -Gann initiative as a whole (Amador Valley Joint Union School District vs. Stare Board of Equalization. 22 Cal. 3d 208 ( 1973)). The Court found that is was premature to rule on the claim that Article XIIIA impermissibly interfered with contracts in violation of the U.S. Constitution, stating that such a challenge must come when a specific contract or obligation is impaired. On November 6, 1979, California voters approved Proposition 4, the Gann initiative, which added Article XIIIB to the California Constitution. The principal effect of Article XIIIB is to limit the 010 annual appropriations of the State and any city, county. school district, authority or other political RCP subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the governmental entity. The "base year" for establishing such appropriation limit is the 1975-79 fiscal year and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies. Appropriations subject to Article XIIIB include generally the proceeds of taxes levied by the State or other entity of local government. exclusive of certain State subventions. refunds of taxes, benefit payments from retirement. unemployment insurance and disability insurance funds. "Pro- ceeds of taxes" include. but are not limited to, all tax revenues and the proceeds to an entity of government from (1) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (2) 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 would have to be returned by revising tax rates or fee schedules over the subsequent two years, On March 18, 1987, the City determined its annual appropriation limit for the fiscal year 198b- 57 to be $22,654,787. The limitation applies only to proceeds of taxes and therefore does not apply to service fees and charges. investment earnings on non -proceeds of taxes. fines, revenue from the sale of property and taxes received from the State and Federal governments that are tied to special programs. A-6 Seq: 6 X8C (TICACTIYE)939308,002,015 St 939308 Fmt 939306 JEFFRIES C.P.Y. CO. (2) (213)742-8800 Comp; 07-,w1-88 18:47 Seq: 7 CITY OF LODI /OS TW P4 V Chk 014330 Wtput (FC) 07 -Ail -88 19:05 XBC Based on the 1986-87 budget. the funds subject to limitation (total General Operating Budget minus non -proceeds of taxes, debt service. and 1985-86 carry over) are S 10,622,668 below the Gann limit. Initiative Limiting Local Taxes A statutory initiative ("Proposition 62") was adopted by the voters at the November 4, 1986, General Election which (a) requires new or higher taxes to be approved by two-thirds of the governmental agency's legislative body and a majority vote of the electorate of the governmental entity; (b) requires the inclusion of specific information in all local ordinances or resolutions proposing new or higher general or special taxes: (c) penalizes local agencies that fail to comply with the foregoing and (d) requires local agencies to stop collecting any new or higher general taxes adopted after July 31, 1985, unless a majority of the voters approve the tax by November 5, 1988. The California Legislative Analyst and Director of Finance. in assessing the fiscal impact of this initiative on state and local governments. had indicated prior to voter approval that adoption of this 01: initiative "would make it more difficult for city governments to impose new taxes in the future since 7000 under current law city general purposes taxes may be imposed or increased by 3 vote" of :he city council. The City is unable to predict the potential adverse financial impact, if any, of the initiative on the City. Assessed Woation and Tau Collections In California, property which is subject to ad valorem taxes is classified as "secured" or "unsecured". Secured and unsecured property are entered on separate parts of the assessment roll maintained by the county assessor. The "secured roll" is that part of the assessment roll containing State assessed property and property the taxes on which are a lien on real property sufficient, in the opinion of the assessor, to secure payment of the taxes. Other property is placed on the "unsecured roil". The method of collecting delinquent taxes is substantially different for the two classifications of property. The taxing authority has fourways of collecting unsecured personal property taxes: (a) tiling a civil action against the taxpayer, (b) filing a certificate in the office of the county clerk specifying certain facts in order to obtain 3 judgment lien on certain property of the taxpayer. (c) filing a certificate of delinquency for record in the county recorder's office. in order to obtain a lien an certain property of the taxpayer, and (d) seizure and sale of personal property improvements or possessory interest belonging or assessed to the assessee. The exclusive means of enforcing the payment of delinquent taxes in respect of property on the secured roll is the sale of the property securing the taxes to the State for the amount of taxes which are delinquent. A 10`Ao penalty is added to delinquent taxes which have been levied in respect of property on the secured roll. In addition property on the secured roil with respect to which taxes are delinquent is sold to the State on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquent penalty, plus 3 redemption penalty of 1.5% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the county tax collector. A 10% penalty also attaches to delinquent taxes in respect of property on the unsecured roll, and further, an additional penalty of 1.5% per month begins to accrue in respect of such taxes beginning the first day of the third month following the delinquency date. The valuation of property is determined as of March l each year and installments of taxes levied upon secured property become delinquent on the following December 10 and April 10. Taxes on unsecured property arc due March 1 and become delinquent August 31, and such taxes are levied at the prior year's secured tax rate. A-7 (TICACTIVE)9393CB,002.015 St 939308 Fr^t: 939308 JEFFRIES C.P.Y. OD. (2) (213)742-8800 Comp: 07-&I-88 :8:47 Seq: 8 CITY OF IOOI /OS TR/P4 Chic 15.4561 Mput (FC) 07 -Jul -88 I9:05 XBC - 012 CITY OF LODE 10F5 Current Tau Levies and Tax Collections NCP For Fiscal Years 1977-1978 through 1986-1987 Total current Totai current Total current Fiscal Year levy collection uncollected 1977-78........................................................................... 52.084,094 $2,073,674 S10,420 1978 -79 ......................................................... ...... .......... 1,143,149 1.137,433 5.714 1979-80........................................................................... 1,595,060 1,587,085 7,975 1980-81........................................................................... 2,202,571 2,191, 558 11,013 i 981-82........................................................................... 2,411,417 2,399,360 12.057 1982-83....................................................................... ?.564,413 2,551,591 12.822 1983-84........................................................................... 3,060,554 3,045.251 15,303 1984-85........................................................................... 3,076,430 3,061,048 15,382 I985-86........................................................................... 3,234,907 3,268,482 16,425 1986-87........................................................................... 3,596,928 3,578,943 17,985 Source: City of Lodi Finance Department. The tax roll for the City for 1987-83 indicates a full market valuation of 51,568,408,455. In addition to a ten year record of assessed and estimated full market valuations, the table below shows the City tax Ievies, collections, and delinquency percentages for the applicable fiscal years. CITY OF LODI ASSESSED VALUATION For Fiscal Years 1977-78 through 2987-88 Fm3J Yea Common Property Public Utility Unsecured Valuation Tots1 1977-78 ................ S 1I0,143,948 S 5,084,930 5 9,903,809 S !25,132,687 1978-79 ................ 128,794,339 5,540,420 12,988,415 147,323,174 1979-80 ................ 145,280, 112 5,082,480 13,297,948 163,660,540 1980-81 ................ 171,463,908 5,783,960 9,121,725 136,369,593 1981-82(1)............ 779,573,787 25,027,380 4I,017,963 845,619.130 1982-83 ................ 880,404,304 29,632,490 50,766,238 960,803,032 1983-84 ................ 939,820,723 31,454,630 54,728,419 1,026,003,772 1984-85 ................ 1,054,325,513 32,779,340 61,577,671 1,148,977,404 1985-86 ................ 1,171,959,370 36,845.170 67,722,679 1,276,527.219 1986-87 ................ 1,323,238,850 39,917,090 72.21 1,125 1,435,367,065 1987-88 ................ 19442,628,01I 41,897,460 83,882,984 1,568,408,455 (1) Beginning in fiscal year 1981-82, assessed valuations are stated at 100% of adjusted market values, formerly at 25%. Salva: Auditor -Controller reports, San Joaquin County. A-8 (TICACTIVE3939308,002,015 St 939308 F�`t 939308 JEFFRIES C.P.Y. CO. (2) (213)742-8800 ,_ Comp: 07-k1-88 18:47 CITY CF L00I /OS TR/P4 Y Chic 075671 Output (FC) 07-k1-88 19:05 - 013 Labor Relations .SAE NCP The following table provides a list of employee organizations in the City and the number of employees they represent as of July 1. 1988: CTIY OF LODI EMPLOYEE ORGANIZATIONS Organization International Brotherhood of Electrical Workers Local 1245 (Maintenance andOperators Unit).......................................................................................... San Joaquin County Employees Association (General Services)--_- Police ervices)____._Police Officers Association of Lodi...................................................................... United Firefighters of Lodi.................................................................................. International Brotherhood of Electrical Workers Local 1245 (Electric Unit) --- Police Dispatchers Association of Lodi............................................................... Source: City of Lodi. A-9 Number of Members 81 73 45 40 24 19 sem 9 XBC (TICACTIVE) 939306,002. 0 15 St 939308 F•—tz, 939308 .IEFFPIES C.P.Y. CO. (1) (213)742-8800 --.Coma 08 -Jut -88 16:52 CTf CF L00I /05 TWP4 i Chk: 106140 3utFut (OX) 08-)u1-88 17:07 015 APPENDIX B ;AR [PROPOSED FORM OF LEGAL OPiNIONj [Closing Dare] Citv Council City of Lodi 221 West Pine Street Lodi, California 95240 OPINION: 59,220,000* Certificates of Participation( 1958 Wastewater Treatment Plant Expan- sion Project) Evidencing the Direct, Undivided Fractional Interests of the Owners thereof in Installment Payments to be made by the City of Lodi, California, as the Purchase Price for Certain Property Pursuant to a Installment Sale Agreement with the Lodi Public Improvement Corporation Members of the City Council: We have acted as special counsel in connection with the delivery by the City of Lodi. California (the "City"), of the $9,220,000* InstsWment Sale Agreement, dared as of August 1, 1988. between the Lodi Public Improvement Corporation (the "Corporation") and the City (the "installment Sale Agreement") pursuant to Section 37350 of the California Government Code. The Corporation has, pursuant to the Assignment Agreement. dated as of August I, 1983 (the "Assignment Agreement"), between the Corporationand Bank oiAmerica National Trust and Savings Association, San Francis- co, California, as trustee (thc "Trustee"), assigned certain of its rights under the Installment Sale Agreement, including the right to receive installment payments made by the City thereunder (the "Installment Payments'), to the Trustee. Pursuant to the Trust Agreement, dated as of August 1, 1988, among the Taig rrie, the Corporation and the City (the "Trust Agreement"), the Trustee has executed and delivered certificates of participation (the "Certificates") evidencing undivided frac- tional interests of the owners tbereof in Installment Payments. 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 City contained in the Installment Sale Agreement, the Trust Agreement and the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify the same by indepecdent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The City is duly created and validly existing as a municipal corporation and general law city with the power to enter into the Installment Sale Agreement and the Trust Agreement and to perform the agreements on its part contained therein. seq: 10 xac (TICACTIV0939306,002,015 SL 939308 Fr1 939308 JEFFRIES CPI. co i2) (223)742-880e Coma 07 -Jul -88 .8:47 CITY OF LOOt 'OS TRY P4 I Chic 110212 )utput (FC) 07 -Jul -88 :4.05 City of Lodi [Closing Dare] Page 21 ?. The installment Sale (Agreementhas been duly authorized. executed and delivered by the City and ;s an obligation of the City valid. binding and enforceable against the City to accordance with its terms. 3. The Trust Agreement and the Assignment Agreement are valid. binding and enforceable in accordance with their terms. 4. Sub,ect to the terms and provisions of the Installment Sale Agreement. the Installment Payments are payable from a first and prior lien on the Net Revenues of the Enterprise (as such terms are defined to the Installment Sale Agreement). By virtue of the Assignment Agreement, the owners of the Certificates are entitled to receive their fractional share of the Installment Payments in accordance with the terms and provisions of the Trust Agreement. 5. 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 t�K imposed on individuals and corporations; it should be noted, however, that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted net book income (adjusted current earnings for taxable years beginning after December 31, 1989). The opinions set forth in the preceding sentences are subject to the condition that the City comply with ail requirements of the Internal Revenue Code of 1986 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 City has covenanted to comply with each such requirement. Failure to comply with certain of Bach 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. 6. 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, the Trust Agreement and the Assignment 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 appropriate cases. Respectfully submitted, Jones Hall Hill & White, A Professional Law Corporation B -z S<q: ll xac MRGA&F Draft 7/5/0'8 PURCHASE AGREEMENT dated July , 198E relating to S CERTIFICATES OF PARTICIPATION (1988 WASTEWATER TREATMENT PLANT EXPANSION PROJECT) Evidencing the Undivided Fractional Interests of the Owners Thereof in Installment Payments to be Made by the CITY OF L O D I, CALIFORNIA As the Purchase Price for Certain Property Pursuant to an Installment Sale Agreement with the L 0 D I PUBLIC IIVIPROVEM ENT CORPORATION between SEIDLER-FITZGERALD PUBLIC FINANCE (A Division of Seidler Amdec Securities Inc.) and t h e CITY OF LODI, CALIFORNIA CERTIFICATES OF PARTICIPATION PURCHASE AGREL--TE?JT (the "Purchase Agreement") , ed July , 1985, between Seidler -Fitzgerald Public Finance (A Division of Seidler Amdec Securities inc.) (the "Underc-triter") and the City of Lodi, California (the "City"), for the Sale and delivery of $ aggregate principal ,amount of certificates of Participation (1980 Wastewater Treatment Plant Expansion Project) (the "Certificates"), each evidencing an undivided frac- tional interest of the owner thereof in installment payments to he rade by the City, as purchaser, under the Installment Sale Agreement, dated as of August 1, 1980 (the "Installment Sale Agreement") , .with the Lodi Public Improvement Corporation, as 'seller (the "Corporation") . WHEREAS, the City proposes to finance certain capital improvements to its sewer system, more particularly described in Exhibit B to the Installment Sale Agreement (the "Project"), by pur- chasing the Project from the Corporation pursuant to the Installment Sale Agreement; and WHEREAS, in crder to provide funds to finance the Project, the City and the Corporation will cause Bank of America National Trust and Savings Association, as trustee (the "Trustee"), to execute and deliver certificates of participation evidencing undivided frac- tional interests of the owners thereof in payments to be made by the City to the Corporation under the Installment Sale Agreement (the "Certificates") , pursuant to a Trust Agreement, dated as of August 1, 1988 among the Corporation, the City and the Trustee (the "Trust Agreement") ; and [JHEREAS, pursuant to the Constitution and laws of the State of California and resolutions of the City, duly adopted (the "Resolution") , the city will purchase the Project from the Corporation pursuant to the Installment Sale Agreement; and WHEREAS, Installment Payments (as defined in the Installment Sale Agreement), and the rights of the Corporation there- to, will be assigned by the Corporation to the Trustee pursuant to an Assignment Agreement, dated as of August 1, 1988, by and between the Corporation and the Trustee (the "Assignment Agreement") for the pur- pose of making principal and interest payments with respect to the Certificates; and WHEREAS, the City will direct the Trustee to execute and deliver the Certificates to the Underwriter for offering to the public; and 94920.58.2867.01:12 U"HEREAS, the Corporation is a nonprofit public benefit corporation duly organized and existing under the laws of the State of California and is authorized to buy, sell and lease real and per- sonal property; NO'N, THEREFORE, in consideration of the premises, the par- ties hereto do hereby agree as Follows: Section 1. Obligation to purchase=,. Upon the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to pur- chase for offering to the public, and the City agrees to cause the Trustee to execute and deliver, $ aggregate principal amount of Certificates, as described in the Official Statement relat- ing to the Certificates, dated the date hereof, including the Appendices thereto (the "Officiaf Statement") . The Underwriter shall have no obligation under this Purchase Agreement to purchase less than all of the $ aggregate principal amount of Certificates. Neither the Certificates nor the obligation of the City to make Installment Payments constitutes an indebtedness of the City for which the City is obligated to levy or ple 1ge any form of taxation or for which the City has levied or pledged any form of taxation or an indebtedness of the State of California or any of its political sub- divisions within the meaning of any constitutional or statutory debt limitation or restriction. Section 2. Purchase Price, The purchase price of the Certificates shall be $ , which is percent of the aggregate principal amount thereof, calculated as follows: S aggrega-ce principal amount of Certificates, less S of Original Issue Discount on the Certificates maturing in the year , less Underwriter's Discount in the amount of $ 'The Original Issue Discount does not constitute compen- sation to the Underwriter. The purchase price does not include, and the Underwriter is not obligated to pay, accrued interest from August 1, 1988 to the date of delivery. Section 3. Delivery of and Payment for the Certificates, The closing shall take place at 9:00 A.M., Pacific Time, on August 25, 1988 (the "Closing") in Los Angeles, California, or at such other time and place as nay be mutually agreeable to the City and the Underwriter. At the Closing, the City shall cause the Trustee to deliver the Certificates to the Underwriter in definitive form, duly executed, together with the other documents hereinafter mentioned, against delivery of a Federal funds check, payable to the order of the Trustee, in the amount of S Section 4. The_ _Certificates. The Certificates shall be delivered under the provisions of the Trust Agreement. The Certificates shall be in fully registered form without coupons, in the denomination of $5,000 each or in any integral multiple thereof and registered in such nares as the Underwriter shall request, and shall he made available to the Underwriter for checking, in Los Angeles, California, at least one business day prior to the Closing. Payment: with respect to the Certificates shall be made in the amounts, at the interest. rates and on the dates set forth in Exhibit A attached hereto. Section 5. Representations and Warranties of the City_ The City represents and warrants to the Underi.,riter that: (1) The City is a general law city, duly organized and existing pursuant to the Constitution and laws of the State of California, and has all necessary power and authority to adopt the Resolution, to enter into and perform its duties under the Trust Agreement, the Installment Sale Agreement and this Purchase Agreement, and, when executed and delivered by the respective parties thereto, the 'Trust Agreement, the Installment Sale Agreement and this Purchase Agreement will constitute legal, valid and binding obliga- tions of the City enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, reorganization, insolvency, moratorium or other laws affecting the enforcenent of creditors' rights generally. (2) The execution and delivery of this Purchase Agreement, the Installment Sale,Agreement and the Trust Agreement, the adoption of the Resolution and compliance with the provisions thereof, includ- ing, but not limited to, the pledge of Net Revenues (as defined in the Installment Sale Agreement), will not conflict with the City's duties under, or constitute a breach of or default ander, said docu- ments or any law, administrative regulation, court decree, resolu- tion, charter, by-laws or other a(_rreement to which the City is subject to or by which It is bound. (3) Except as nay be required under the securities or "blue sky" laws of any state, there is no consent, approval, authorization or other order of, filing with, or certification by, any regulatory authority having jurisdiction over the City required for the execu- tion, delivery and sale of the Certificates or the consummation by the City of the other transactions contemplated by this Purchase AgreemFnt . (4) There is no action, suit, proceeding or investigation at, law or in equity before or by any court or governmental agency or body, or to the best knowledge of the City, pending or threatened against the City to restrain or enjoin the authorization, execution or delivery of the Certificates, or the pledge of the Net Revenues, or the collection of the payments to be made pursuant to the Installment Sale Agreement, or in any t-ay contesting or affecting the validity of this purchase Agreement, the Trust Agreement, the Certificates cr the Installment Sale Agreement or contesting the powers of the City to enter into or perform its obligations under any of the foregoing. _:5} The information under the captions "Introduction", "Estimated Uses of Proceeds", "The Froipct", "The Sewer System" =Abgence of Litigation" and in Appendix A contained in the Official Statement is, and on the closing date shall be, true and correct in all material respects, and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (6) The City agrees to cooperate with the Underwriter in endeavoring to qualify the Certificates for offering and sale under the securities or "blue sky" laws of such jurisdictions of the United States as the Underwriter may request; provided, however, that the City will not be required to execute a special or general consent to service of process or qualify as a fcreign corporation in connection with any such qualification in any jurisdiction. Section-6. Conditions Precedent to Closing. Conditions precedent to the Closing are as follows: (1) Execution and delivery of the Trust Agreement, the Installment Sale Agreement and the Arsignment Agreement in form and substance acceptable to Jones Hail H i 11 & White, A Professional Law Corporation ("Special Counsel") , Mudge Rose Guthrie Alexander & Ferdon ("Underwriter's Counsel") and counsel to the Trustee and delivery of a certified copy of the Resolution. (2) An opinion of Special Counsel, dated the date of Closing, addressed to the City, in the form set forth in Appendix B to the Official Statement, together with a reliance letter addressed to the Underwriter. (3) An opinion of Special Counsel, dated the date of Closing, addressed to the Underwriter, to the effect that (i)the Trust Agreement and the Installment Sale Agreement have each been duly authorized executed and delivered by, and each constitutes a legal, valid and binding agreement of, the City in accordance with its terms, (ii) the Certificates have been validly executed and delivered by the Trustee pursuant to the Trust Agreement and are entitled to the benefits of the Trust Agreement, (iii) based upon its participation in the preparation of the Official Statement, nothing has come to its attention that would lead it to believe that the -4- Official statement (except as to financial information and statistical data included therein, including Appendix A thereto, as to �vjhich no opinion need be expressed) contains any untrue statement of a material fact or omits to state a-;'iterial fact required to be stated therein or necessary to make the :statements therein, in light of the circumstances under which they ve-2 made, not misleading, (iv) the Certificates are exempt from registration under the Securities Act of I933, as amended, and the Trust Agreement is exempt from qual- ification under the Trust Indenture Act of 1939, as amended, (v) the information in tne. Official StateM:ent under the captions "Introduction", "The Certificates" , "Tnstallment Sale Agreement" , "Trust Agreement", "Assignment Agreement", "Tax Exemption", "Certain Legal Matters" and "Miscellaneous" insofar as they describe the Certificates, the financing documents or the exclusion from gross income for purpcses of federal income taxation of interest due with respect to the Certificates, is true and correct, and otherwise being in form and substance acceptable to Under:ariter's Counsel and (vi) they have examined an executed Certificate and it is in the form required by the provisions of the Trust Agreement. (y) An opinion of Unaerwriter's Counsel, dated the date of Closing, addressed to the Underwriter, to the effect that (i)based upon their participation in the preparation of the Official statement, nothing has come to their attention that would lead them to believe that the Official Sta-,:ement (except as to financial infor- mation and statistical data included therein, including Appendices A and B thereto, as to which no opinion need be expressed) contains any untrue statement of a material f,=�ct or omits to state a material fact required to be stated therein r necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, (ii) it is not necessary to register the Certificates under the Securities Act of 1333, as amended, and (iii) the Trust Agreement is exempt from qualification under the Trust Indenture Act of 1939, as ame-Aed. (5) An opinion of the City Attorney, dated the late of Closing, addressed to the City, the Corporation and the Underwriter, to the effect that (i)the City is a general law city, duly organized and existing pursuant to the Constitu�ion and laws of the State of California, and has all necessary power to adopt the Resolution and to enter into and perform its duties under the Trust Agreement and the Installment Sale Agreement, (ii) the Resolution has been duly adopted by the City, is in full fcrce and effect, and has not been rescinded or modified in any manner, (iii) the Installment Sale Agreement, the Trust Agreement and this Purchase Contract have been duly authorized, executed and delivered by the City and constitute legal, valid and binding obligations of the City enforceable in accordance with their terms, except as such enforceability may be limited by bankruptcy, reorganization, insolvency, moratorium or other laws affecting the enforcement of creditors' rights generally, 94920.58.2867.,01:12 0.c (iv) the execution and delivery of the Trust Agreement, the Installment Sale Agreement and this Purchase Agreement by the City and compliance by the City with the provisions thereof, will not con- flict with the city's duties under, or constitute a breach or default under, said documents or any 1k., administrative reyulation, court decree, resolution, charter, t,;--la.:s or other agreement to which the City __, subject or by :which it is bound, (v) there is no action, suit, proceeding or investigation at lata or in equity before )r by any court or governmental agency or body pending or, to the best of their knowledge, threatened against the City to restrain or enjoin the collection of the payrmients to be made pursuant to the Installment Sale Agreement, or in any way contesting or affecting the validity of the Trust Agreement, the Installment. Sale Agreement or this Purchase Agreement or contesting the powers of the City to enter into or per- form its obligations under any of the foregoing, (vi) nothing has come 'to his attention to lead him to believe that the material con- tained in the Official Statement relating to the City contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the state- ments therein, in light of the circumstances under which they were made, not misleading, and (vii) the infornation under the captions "Introduction", "Estimated Uses of Proceeds", "The Project" , "The Sewer System", "Absence of Litigation." and "Availability o'f Documents" in the Official Statement is true and correct in all mate- rial respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the cir- cumstances under which they were made, not misleading; provided, that no opinion need be expressed with respect to any statistical or financial information found in the Official Statement, and otherwise being in form and substance acceptable to Underwriter's Counsel. (6) An opinion of counsel to the Trustee, dated the date of Closing, addressed to the City and the Underwriter, to the effect that (i)the Trustee is a national banking association duly organized and validly existing and in good standing under the laws of the United States with all requisite power to enter into and perform its obligations under the Trust Agreement and the Assignment Agreement, (ii) the authorization, execution and delivery by the Trustee of the Trust. Agreement and the Assignment Agreement and compliance with the provisions thereof will not conflict with or constitute a default under or breach of the Trustee's articles of incorporation, by-laws, or any rule or regulation or court decree to which the Trustee is bound; (iii) the Trust Agreement and the Assignment Agreement have been duly authorized, executed and delivered by the Trustee and are legal, valid and binding agreements with respect to the duties, obli- g;tions, responsibilities, covenants and representations of the Trustee, and are enforceable in accordance with their terms (subject to the enforceability of remedies' to any applicable bankruptcy, reorganization, insol-ency, moratorium or other laws, decisions or equitable principles affecting the enforcement of creditors' rights genera llyj , (iv) the Trustee has validly esecuted and delivered the Certificates in accordance with the Trust Agreement, and otherwise being in the form an3 substance acceptable to spec=.al Counsel and Under -writer's Counsel. (7) An opinion of the City Attorney acting as counsel to the Corporation, dated the date of Closing, addressed to the City and the Underwriter, to the effect that (i) the Corporation is a duly organized non-profit corporation, duly organized and validly existing tinder the Constitution and lavas of the State of California, and has ail necessary power to enter into and perform its duties under the Trust Agreement, the Installment Sale Agreement and the Assignment Agreement, (ii) the Installment Sale Agreement, the Trust Agreement and the Assignment Agreement have been duly authorized, executed and delivered by the Corporation and constitute legal, valid and binding obligations of the Corporation enforceable in accordance with their terms, except as such enforceability may be limited by bankruptcy, reorganization, insolvency, moratorium or other law affecting the enforcement of creditors' rights generally, (iii) the execution and delivery of the Installment Sale Agreement, the Trust Agreement and the Assignment Agreement by the Corporation and compliance by the Corporation with the provisions thereof, will not conflict with, or constitute a breach of or default under, the Corporation's duties tinder said documents or any law, administrative regulation, court decree, resolution, charter, by-laws or other agreement to which the Corporation is subject or by which it is bound, (iv) there is no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending or, to the best of their knowledge, threatened against the Corporation to restrain or enjoin the collection of the payments to be made pursuant to the Installment Sale Agreement, or in any way contesting or affecting the validity of the Installment Sale Agreement, the Trust Agreement or the Assignment Agreement or contesting the powers of the corporation to enter into or perform its obligations under any of the foregoing, (v) nothing has come to his attention to lead him to believe that the material contained in the Official Statement relat- ing to the Corporation contains any untrue statement 01P material fact or omits to state any material fact required to be stated therein or necessary to make the stztements therein, in light of the circum- stances under which they were made, not misleading, and (vi) the information under the caption "The Corporation" in the Official Statement is true and correct in all material respects and such information does not contain any untrue or misleading statement of a iraterial fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not. misleading, and otherwise being in form and sub- stance acceptable to Special Counsel and Underwriter's Counsel. Orn (8) A Certificate of the Finance Director of the City, dated the date of Closing, substantially to the effect that (i) as to the financial information and statistical data included therein, the material contained in the Official Statement relating to the City as or the date of the Official Statensnt did not, and as of the date of Closing does not, contain any untme statement of a material fact or emit to state any material fact required to be stated therein or nec- essary to mate the statements therein, in light of the circumstances under which they were made, not misleading, (ii) since June 30, 1987, mere has been no material adverse change in the financial condition of the City, and (iii) the infornation in the Official Statement under the captions "The Project", "Estimated Uses of Proceeds", "The Sewer System", "Availability of Documents", and the information relating to the City in Appendix A thereto is true and correct, and otherwise being in form and substance acceptable to Special Counsel and Underwriter's Counsel. (9) Certificate cf an authorized officer of the Trustee to the effect that (i)the Trustee is a national banking association duly organized and in good standing under the laws of the United States of America and has all necessary power and authority to enter into and perform its duties under the Trust Agreement and the Assignment Agreement; (ii) the Trustee is duly authorized to enter into the Trust Agreement and the Assignment Agreement and to execute and deliver the Certificates and, when executed and delivered by the other respective parties thereto, the Trust Agreement and the Assignment Agreement will constitute legal, valid and binding obliga- tions of the Trustee enforceable in accordance with their respective terms; (iii) the Trustee has duly executed and delivered the Certificates and (iv, to the best knowledge of the Trustee, the exe- cution and delivery of the Trust Agreement and the Assignment Agreement and compliance with the provisions thereof, will not con- flict with, or constitute a breach of or default under, the Trustee's duties under said documents or any law, administrative regulation, court decree, resolution, charter, by-law or other agreement to which the Trustee is subject to or by which it is bound. lib representation or warranty need be made as to any state or federal securities law, or the effect on any payment on any Certificate of any federal, state or local tax law. (10) A Certificate of the City, dated the date of Closing, to the effect that the information relating to the City in the Official Statement is, as of the closing date, true and correct in all material respects, and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. am ( 11) Evidence satisfactory to the Underwriter of insurance r, compliance with Sections 5.03 and5.04 of the Installment Sale ;reement (which evidence may be in the foam of a certificate from - e risk manager of the City). (12) Such other certificates, instruments or opinions as Special Counsel or Uncler:•rriter's Counsel may deem necessary or desir- able tc evidence the due authorization, execution and delivery of documents pertaining to -this transaction and the legal, valid and binding nature therecf, as well as compliance of all parties with the terms and conditions hereof. Section 7' Events Permitting the Underwriter to Terminate. The Underwriter may terminate its obligation to purchase the Certificates at .any time before Closing if any of the following occurs: (a) Legislation shall have been introduced in or enacted by the Congress of the United States or adopted by either House thereof, or legislation pending in the Congress of the United States shall have been ainended, or legislation shall have been recommended to the Congress of the United States or otherwise endorsed for passage (by press release, other form of notice or otherwise) by the President of the United States, the Treasury Department cf the United S';:ates, the Internal Revenue Service or the Chairman or ranking minority member of the U.S. Senate Committee on Finance or the U.S. House of Representatives Committee on ways and Means or legislation shall have been proposed for consideration by either such Committee by any member thereof or legislation shall have Seen favorably reported for passage to either House of the Congress of the United States by a Committee of such House to which such legislation has been referred for consideration, or a deci- sion by a court of the United States or the Tax Court of the United States shall be rendered, or a ruling, regula- tion or fiscal action shall be issued or proposed by or on behalf of the Treasury Department of the United States, the internal Revenue Service or other governmental agency with respect to or having the purpose or effect of imposing fed- eral income taxation upon interest received on bonds or obligations of the general character of the Certificates, which, in the reasonable opinion of the Underwriter, mate- rially affects the market for the Certificates or the sale, at the contemplated offering prices, by the Underwriter of the Certificates to be purchased by them; (b) Any action by the Securities and Exchange Commission or a court which would require or could be interpreted to require registration of the Certificates or -9- 94920.5£.2867.01:.12 any instrument securing the Certificates under the Securities Act of 1333, as amended, in connection with the public offering thereof, or qualification of the Trust Agreement under the Trust Indenture Act of 1333, as amended; (c) Anv restriction on trading in securities, or any banking moratorium, or the inception or escalation of any war or major military hostilities which, in the 7udgme t of Underwriter, substantially impairs the ability o7f the Underwriter to market the Certificates; or (d) Any event or condition which, in the judgment of the Underwriter, renders untrue or incorrect, in any mate- rial respect as of the time to `rich the same purports to relate the information, i ncludi; the financial statements, contained in the Official Statement, or which requires that information not reflected in the Official Statement should be reflected therein in order to make the statements and information contained therein not misleading in any mate- rial respect as of such time. Section 8. Fees and Expenses- The Underwriter shall pay the costs and expenses incurred by it in connection with this financ- ing including advertising and selling expenses, and the fees and dis- bursements of Underwriter's Counsel. The City shall pay all other costs in connection with the execution and delivery of the Certificates from the proceeds of the Certificates including the cost of printing or reproducing the Preliminary Official Statement, the Official Statement and the Certificates, the fees and expenses of the Trustee (including counsel fees), the fees and disbursements of Special Counsel, and the fees and disbursements of any other experts or consultants retained by the city. Section 9. Notices, Any notices to be given the Underwriter under this Purchase Agreement shall be given in writing to Seidler -Fitzgerald Public Finance, 515 South Figueroa Street, Los Angeles, California 90071-3396, Attention: Managing Director. Any notices to be given the City under this Purchase Agreement shall be given in writing to City of Lodi, California, 221 West Pine Street, Lodi, California 35240, Attention: City Manager. Section 10. No Assignment. This Purchase Agreement has been made by the City and the Underwriter, and their successors or assigns, and no person other than the foregoing shall acquire or have any right under or by virtue of this Purchase Agreement. A11 of the representations, warranties and agreements contained in this Purchase Agreement shall survive the delivery of and payment of the Certificates and any termination thereof. Section 11. applicable Law_ This Purchase Agreement shall be interpreted, governed and enforced in accordance with the la -%s of the State of California. Section 12. C oiinter an rts" This Purchase Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of cahich shall constitute but one and the same instrument . Section 13. Effectiveness_ This Purchase Agreement shall become effective upon the execution and the acceptance hereof by the Underwriter and the City and shall be valid and enforceable from and after the time of such execution and acceptance. Section 14. Severability. In the event any provision of this Purchase Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. SEIDLER-FITZGERALD PUBLIC FINANCE (A Division of Seidler Amdec Securities Inc.) By: CITY OF LODI , CALIFORNIA Acknowledge receipt of a copy: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: Authorized Officer Exhibit A CITY OF LODI, CALIFORNIA CERTIFICATES OF PARTICIPATION (19-08 WASTEWATER TREATMENT PLANT EXPANSION PROJECT) Maturity Date August 1 1989 1990 1991 1992 1993 1994. 1935 1996 1997 1998 1999 2000 2001 2002 2003 2018 Principal Interest Amount Rate Mandatory Redemption Date Principal August 1 _ Amount 2004 2Q05 2006 2007 _2008 2009 201© 2011 2012 2013 =2014 -2015 2016 2017.:. 2018* * Final Maturity cJ sy^0 58..::286'7,-.''F01:12- To, OFFICIAL RECEIPT Office of Finance Director CITY OF LODI, CALIFORNIA Received From Z' FUND _I G.L. ACCT, NO. OBJ. AMOUNT 1 DESCRIPTION -F '�5210' 0 �4 �d 141 ..No. 7 Date C ! f <: POP