HomeMy WebLinkAboutResolutions - No. 2018-70EXHIBIT A
GOVERNMENT CODE SECTION 5852.1 DISGLOSURE
The following information consists of estimates that have been provided by the Underuvriter,
which has been represented by such party to have been provided in good faith:
(A) True lnterest Cost of the Bonds: 3.15o/o.
(B) Finance Charge of the Bonds (Sum of all fees paid to third parties): $385,152.
(C) Net Proceeds to be Received (net of finance charges, reserves and capitalized interest, if
any): $47,853,391.
(D) Total Payment Amount Through Maturity: 60,933,154.
The foregoing estimates constitute good faith estimates only. The principal amount of the
Bonds, the true interest cost of the Bonds, the finance charges thereof, the amount of proceeds
received therefrom and total payment amount with respect thereto may differ from such good
faith estimates due to (a) the actual date of the sale of the Bonds being different than the date
assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being
different from the estimated amount used for purposes of such estimates, (c) the actual
amortization of the Bonds being different than the amortization assumed for purposes of such
estimates, (d) the actual market interest rates at the time of sale of the Bonds being different
than those estimated for purposes of such estimates, (e) other market conditions, or (f)
alterations in the City's financing plan, or a combination of such factors. The actual date of sale
of the Bonds and the actual principal amount of Bonds sold will be determined by the City
based on the timing of the need for proceeds of the Bonds and other factors. The actual
interest rates borne by the Bonds will depend on market interest rates at the time of sale
thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates
at the time of sale thereof. Market interest rates are affected by economic and other factors
beyond the control of the City.
EXHIBIT B
FORM OF ESCROW DEPOSIT AND TRUST AGREEMENT
Jones Hall, APLC Draft4l10l19
ESGROW DEPOSIT AND TRUST AGREEMENT
Relating to
$60,685,000
Electric System Revenue
Certificates of Participation,
2008 Series A
This Escnow DEpostr AND TRusr Acnreuerur (this "Agreement"), dated as of
June 1 ,2018, is between the Clrv oF LoDt, a general law city and municipal corporation
organized and existing under the Constitution and laws of the State of California (the
"City"), THE BANK oF NEW Yonx Mellott Tnusr Con¡pRNY, N.4., a national banking
association organized and existing under the laws of the United States of America,
acting as escrow agent for the 2008 Certificates described below (the "Escrow Agent")
and as trustee (the "2008 Trustee") for the 2008 Certificates.
BACKGROUND:
1. The City previously entered into an lnstallment Purchase Contract, dated as
of July 1, 2OO8 (the "2008 Installment Purchase Contract") with the Lodi Public
lmprovement Corporation (the "Corporation"), pursuant to which the City agreed to
make certain installment payments in the aggregate principal amount of $60,685,000
(the "2008 lnstallment Payments") and caused execution and delivery of Electric
System Revenue Certificates of Participation, 2008 Series A (the '2008 Certificates"),
pursuant to a Trust Agreement, dated as of July 1, 2008 (the "2008 Trust Agreement"),
between the Corporation and the 2008 Trustee, all for the purpose of (i) currently
refunding the then-outstanding $46,760,000 principal amount of Electric System
Revenue Certificates of Participation 2Q02 Series A Variable Rate Certificates (the "2002
Gertificates"), (ii) paying costs of delivery of the 2008 Certificates, (iii) funding certain
costs relating to termination of the swap agreement relating to the 2002 Cerlificates, (iv)
purchasing a financial guaranty insurance policy for the 2008 Certificates, and (v)
funding a reserve fund for the 2008 Certificates.
2. The proceeds of the 2002 Certificates were used to refund, on an advance
basis, the 1999 Series A Current lnterest Certificates and the 1999 Series B Capital
Appreciation Certificates (together, the "1999 Obligations"). The proceeds of the 1999
Obligations were used to finance the Existing Facilities relating to the Electric System.
3. ln order to take advantage of prevailing bond market conditions, the City
wishes to refinance the 2008 lnstallment Payments maturing on and after July 1,2019
(the "Refinanced 2008 lnstallment Payments") for the purpose of achieving savings for
the benefit of the customers of the Electric System, and to cause a current prepayment
of the related 2008 Certificates (the "Refunded 2008 Certificates"), the City has
proposed to sell the Existing Facilities (as defined in the lndenture) to the Lodi Public
Financing Authority (the "Authority") and the Authority will sell the Existing Facilities
back to the City.
4. ln order to refinance the Refinanced 2008 lnstallment Payments, the
Authority proposes to issue and sell its Lodi Public Financing Authority 2018 Electric
System Revenue Refunding Bonds (the "Bonds"), pursuant to an lndenture of Trust,
dated as of June 1,2018 (the "lndenture").
5. The City wishes to appoint the Escrow Agent for the purpose of establishing
an irrevocable escrow fund to be funded, invested, held and administered for the
purpose of providing for the payment in full of the Refinanced 2008 lnstallment
Payments and the payment in full of the principal and interest and premium (if any) with
respect to the outstanding Refunded 2008 Certificates.
6. As a result of the deposit and investment of funds in accordance with this
Agreement, the Refinanced 2008 lnstallment Payments will be deemed paid and prepaid
under Section 3.02 and Section 9.01 of the 2008 lnstallment Purchase Agreement, and
the Refunded 2008 Certificates will be discharged and defeased in accordance with the
provisions of Article Vlll of the 2008 Trust Agreement and prepaid in accordance with the
provisions of Section 2.04 of the 2008 Trust Agreement.
AGREEMENT
ln consideration of the premises and the material covenants contained herein,
the City and The Bank of New York Mellon Trust Company, N.4., as Escrow Agent and
2008 Trustee, hereby agree as follows:
Srclo¡t 1. Appointment of Escrow Agent; Establishment of Escrow Fund. The
City hereby appoints the Escrow Agent to act as escrow agent for purposes of
administering the funds required to defease and prepay the Refunded 2008 Certificates
in accordance with the 2008 Trust Agreement. The Escrow Agent is directed to
establish an escrow fund (the "Escrow Fund") to be held by the Escrow Agent in trust
as an irrevocable escrow securing the payment of the Refinanced 2008 lnstallment
Payments and the Refunded 2008 Certificates as set forth below. All cash and
securities in the Escrow Fund are hereby irrevocably pledged as a special fund for the
payment of the Refinanced 2008 lnstallment Payments in accordance with the 2008
lnstallment Purchase Agreement and the payment of the principal of and interest and
premium (if any) with respect to the Refunded 2008 Certificates in accordance with the
2008 Trust Agreement.
lf at any time the Escrow Agent receives actual knowledge that the cash and
securities in the Escrow Fund will not be sufficient to make any payment required by
Section 4 in respect of the Refunded 2008 Certificates, the Escrow Agent shall notify the
City of such fact and the City shall immediately cure such deficiency from any source of
legally available funds. The Escrow Agent has no liability for any such insufficiency.
SEcTtoN 2. Deposit and lnvestment of Amounts in Escrow Fund. On June
_,2018 (the "Closing Date"), the Authority, pursuant to the lndenture, will cause to be
transferred to the Escrow Agent for deposit into the Escrow Fund the amount of
$in immediately available funds, to be derived from the proceeds of the
2
Bonds
The Authority will cause to be transferred to the Escrow Agent for deposit into the
Escrow Fund the amount of
ln addition, the City hereby directs the 2008 Trustee to transfer to the Escrow
Agent for deposit into the Escrow Fund the amount of to be derived from
moneys related to the Refunded 2008 Certificates that are available as a result of the
defeasance of the Refunded 2008 Certificates.
On the Closing Date, the Escrow Agent shall invest $- of the
amounts deposited in the Escrow Fund in the federal securities listed on Exhibit A; the
federal securities listed on Exhibit A are "Defeasance Securities" as defined in the 2008
Trust Agreement. The Escrow Agent shall hold the remaining $- in cash,
uninvested.
lf the Escrow Agent learns that the Department of the Treasury or the Bureau of
Fiscal Service will not, for any reason, accept a subscription of state and local
government series securities ('SLGS') that is to be submitted pursuant to this
Agreement, the Escrow Agent shall promptly request alternative written investment
instructions from the City with respect to funds which were to be invested in SLGS. The
City shall promptly deliver such instructions, which shall direct investment in Defeasance
Securities that comply with the requirements of Section 8.01(a)(iii) of the 2008 Trust
Agreement, along with a verification report and defeasance opinion of bond counsel in
form and substance acceptable to Assured Guaranty Municipal Corp., as insurer of the
Refunded 2008 Certificates. The Escrow Agent shall follow such instructions and, upon
the maturity of any such alternative investment, the Escrow Agent shall hold such funds
uninvested and without liability for interest until receipt of further written instructions from
the City. ln the absence of investment instructions from the City, the Escrow Agent shall
not be responsible for the investment of such funds or interest thereon. The Escrow
Agent may conclusively rely upon the City's selection of an alternative investment as a
determination of the alternative investment's legality and suitability and shall not be liable
for any losses related to the alternative investments or for compliance with any yield
restriction applicable thereto.
Srclo¡l 3. Application of Amounts in Escrow Fund. The Escrow Agent is hereby
instructed to withdraw from the Escrow Fund and transfer to the 2008 Trustee an
amount required to pay the principal of and interest and prepayment premium (if any) on
the Refunded 2008 Certificates, in accordance with the schedule attached as Exhibit B
hereto, which payment shall also constitute payment of the Refinanced 2008 lnstallment
Payments.
Following the payment and prepayment of the Refinanced 2008 lnstallment
Payments and the Refunded 2008 Certificates in full, the Escrow Agent shall transfer
any amounts remaining on deposit in the Escrow Fund to MUFG Union Bank, N.4., as
trustee for the Bonds, for deposit in the Bond Fund established under the lndenture, to
be applied to pay interest next coming due and payable on the Bonds.
Srclox 4. lrrevocable Election to Prepay Refunded 2008 Certificates;
Defeasance Notice. The City has irrevocably elected to pay and prepay all of the unpaid
Refinanced 2008 lnstallment Payments and all of the outstanding Refunded 2008
Certificates on the date set forth in Exhibit B, in accordance with the provisions of the
2008 Trust Agreement. Notice of such prepayment, in substantially the form and
3
substance of Exhibit C, has previously been given by the 2008 Trustee in accordance
with the provisions of the 2008 Trust Agreement, at the written direction of the City and
at the expense of the City.
The City further hereby directs the 2008 Trustee to file on the Closing Date the
notice attached as Exhibit D on the Municipal Securities Rulemaking Board's EMMA
system. The notice attached as Exhibit D constitutes the discharge certificate required
by Section 8.01(b)(iv) of the 2008 Trust Agreement. The sole remedy for failure to file
such notice on EMMA shall be an action by the holders of the Refunded 2008
Certificates in mandamus for specific performance or similar remedy to compel
performance.
Srcrrox 5. Compensation to Escrow Agent. The City shall pay the Escrow
Agent full compensation for its services under this Agreement, including out-of-pocket
costs such as publication costs, prepayment expenses, legal fees and other costs and
expenses relating hereto and, in addition, all fees, costs and expenses relating to the
purchase or withdrawal of any securities after the date hereof. Under no circumstances
shall amounts deposited in or credited to the Escrow Fund be deemed to be available for
said purposes. The Escrow Agent has no lien upon or right of set off against the cash
and securities at any time on deposit in the Escrow Fund.
SEcloN 6. lmmunities and Liability of Escrow Agent. The Escrow Agent
undertakes to perform only such duties as are expressly set forth in this Agreement and
no implied duties, covenants or obligations shall be read into this Agreement against the
Escrow Agent. The Escrow Agent shall not have any liability hereunder except to the
extent of its negligence or willful misconduct. ln no event shall the Escrow Agent be
liable for any special, indirect or consequential damages. The Escrow Agent shall not be
liable for any loss from any investment made by it in accordance with the terms of this
Agreement. The Escrow Agent may consult with legal counsel of its own choice and the
Escrow Agent shall not be liable for any action taken or not taken by it in good faith in
reliance upon the opinion or advice of such counsel. The Escrow Agent shall not be
liable for the recitals or representations contained in this Agreement and shall not be
responsible for the validity of this Agreement, the sufficiency of the Escrow Fund or the
moneys and securities to pay the principal, interest and prepayment premium with
respect to the Refunded 2008 Certificates.
Whenever in the administration of this Agreement the Escrow Agent deems it
necessary or desirable that a matter be proved or established prior to taking or not
taking any action, such matter may be deemed to be conclusively proved and
established by a certificate of an authorized representative of the City and shall be full
protection for any action taken or not taken by the Escrow Agent in good faith reliance
thereon.
The Escrow Agent may conclusively rely as to the truth and accuracy of the
statements and correctness of any opinions or calculations provided to it in connection
with this Agreement and shall be protected in acting, or refraining from acting, upon any
notice, instruction, request, certificate, document, opinion or other writing furnished to
the Escrow Agent in connection with this Agreement and believed by the Escrow Agent
to be signed by the proper party, and it need not investigate any fact or matter stated
therein.
4
None of the provisions of this Agreement shall require the Escrow Agent to
expend or risk its own funds or otheruvise to incur any liability, financial or othenruise, in
the performance of any of its duties hereunder. The Escrow Agent may execute any of
the trusts or powers hereunder or perform any duties hereunder either directly or by or
through agents, attorneys, custodians or nominees appointed with due care.
The Escrow Agent may at any time resign by giving 30 days written notice of
resignation to the City. Upon receiving such notice of resignation, the City shall promptly
appoint a successor and, upon the acceptance by the successor of such appointment,
release the resigning Escrow Agent from its obligations hereunder by written instrument,
a copy of which instrument shall be delivered to the resigning Escrow Agent and the
successor. lf no successor shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the resigning
Escrow Agent may petition any court of competent jurisdiction for the appointment of a
successor.
Any bank, corporation or association into which the Escrow Agent may be
merged or converted or with which it may be consolidated, or any bank, corporation or
association resulting from any merger, conversion or consolidation to which the Escrow
Agent shall be a party, or any bank, corporation or association succeeding to all or
substantially all of the corporate trust business of the Escrow Agent shall be the
successor of the Escrow Agent hereunder without the execution or filing of any paper
with any party hereto or any further act on the part of any of the parties hereto except on
the part of any of the parties hereto where an instrument of transfer or assignment is
required by law to effect such succession, anything herein to the contrary
notwithstanding.
The City shall indemnify, defend and hold harmless the Escrow Agent and its
officers, directors, employees, representatives and agents, from and against and
reimburse the Escrow Agent for any and all claims, obligations, liabilities, losses,
damages, actions, suits, judgments, reasonable costs and expenses (including
reasonable attorneys' and agents' fees and expenses) of whatever kind or nature
regardless of their merit, demanded, asserted or claimed against the Escrow Agent
directly or indirectly relating to, or arising from, claims against the Escrow Agent by
reason of its participation in the transactions contemplated hereby except to the extent
caused by the Escrow Agent's negligence or willful misconduct. The provisions of the
foregoing sentence shall survive the termination of this Agreement or the earlier
resignation or removal of the Escrow Agent.
The Escrow Agent shall have the right to accept and act upon instructions,
including funds transfer instructions ("lnstructions') given pursuant to this Agreement
and delivered using Electronic Means ("Electronic Means" means the following
communications methods: e-mail, facsimile transmission, secure electronic transmission
containing applicable authorization codes, passwords and/or authentication keys issued
by the Escrow Agent, or another method or system specified by the Escrow Agent as
available fo'r use in connection with its services hereunder); provided, however, that the
City shall provide to the Escrow Agent an incumbency certificate listing officers with the
authority to provide such lnstructions ("Authorized Officers") and containing specimen
signatures of such Authorized Officers, which incumbency certificate shall be amended
by the City, whenever a person is to be added or deleted from the listing. lf the City
elects to give the Escrow Agent lnstructions using Electronic Means and the Escrow
5
Agent in its discretion elects to act upon such lnstructions, the Escrow Agent's
understanding of such lnstructions shall be deemed controlling. The City understands
and agrees that the Escrow Agent cannot determine the identity of the actual sender of
such lnstructions and that the Escrow Agent shall conclusively presume that directions
that purport to have been sent by an Authorized Officer listed on the incumbency
certificate provided to the Escrow Agent have been sent by such Authorized
Officer. The City shall be responsible for ensuring that only Authorized Officers transmit
such lnstructions to the Escrow Agent and that the City and all Authorized Officers are
solely responsible to safeguard the use and confidentiality of applicable user and
authorization codes, passwords and/or authentication keys upon receipt by the
City. The Escrow Agent shall not be liable for any losses, costs or expenses arising
directly or indirectly from the Escrow Agent's reliance upon and compliance with such
lnstructions notwithstanding such directions conflict or are inconsistent with a
subsequent written instruction. The City agrees: (i) to assume all risks arising out of the
use of Electronic Means to submit lnstructions to the Escrow Agent, including without
limitation the risk of the Escrow Agent acting on unauthorized lnstructions, and the risk
of interception and misuse by third parties; (ii) that it is fully informed of the protections
and risks associated with the various methods of transmitting lnstructions to the Escrow
Agent and that there may be more secure methods of transmitting lnstructions than the
method(s) selected by the City; (iii) that the security procedures (if any) to be followed in
connection with its transmission of lnstructions provide to it a commercially reasonable
degree of protection in light of its particular needs and circumstances; and (iv) to notify
the Escrow Agent immediately upon learning of any compromise or unauthorized use of
the security procedures.
SECTIoN 7. Termination of Agreement. Upon payment in full of the principal of
and interest and prepayment premium on the Refunded 2008 Certificates and all fees,
expenses and charges of the Escrow Agent as described above, this Agreement shall
terminate and the Escrow Agent shall be discharged from any further obligation or
responsibility hereunder.
Srcloru 8. Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall constitute
but one and the same instrument.
Seclox 9. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
SEcloN 10. Third-Party Beneficiary. Assured Guaranty Municipal Corp., as
insurer of the Refunded 2008 Certificates, shall be a third-party beneficiary hereof and
this Agreement shall not be amended in any material respect without its prior written
consent.
[The balance of this page is intentionally left blank.]
b
Seclo¡r 11. Amendments. Subjecl to Section 10, this Agreement may not be
amended except in writing by the parties hereto and with an opinion of nationally
recognized bond counsel to the effect that (a) the amendment will not result in loss of the
exemption from federal income taxes of interest on any of the 2008 Certificates or the
Bonds and (b) such amendment will not have a material adverse etfect on the interests
of the holders of the 2008 Certificates.
CITY OF LODI, A MUNICIPAL
GORPORATION
Stephen Schwabauer, City Manager
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.4., as Escrow
Agent and as 2008 Trustee
Authorized Officer
By
By
7
Type of
Security
Purchase
Date
First lnt Pmt
Date
Par
Amount
EXHIBIT A
ESCROW SECURITIES
Maturity
Date Rate
A-1
EXHIBIT B
ESCROW REQUIREMENTS
Pavment Date
lnterest
Pavment
Principal
Redeemed
Total
Payment
B-1
EXHIBIT C
FORM OF CONDITIONAL NOTICE OF PREPAYMENT
$60,685,000
Electric System Revenue
Certificates of Participation,
2008 Series A
NOTICE lS HEREBY GIVEN, by the City of Lodi (the "City") that there have been
called on a conditional basis the outstanding maturities of the captioned certificates of
participation (the "Refunded 2008 Certificates") for prepayment on July 1,2018 (the
"Prepayment Date"), at a prepayment price equal to the par amount thereof together with
accrued interest thereon to the Prepayment Date, without premium.
The Refunded 2008 Certificates consist of the following:
Maturity Date
Julv 1
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2032
PrincipalAmount
to be Redeemed CUSIP
540240CK2
540240CL0
540240CM8
540240CN6
540240CP1
540240CQ9
540240CR7
540240CS5
540240CT3
540240CU0
540240CY2
lnterest Rate
5.000%
5.000%
4.250o/o
5.000%
5.000%
5.000%
4.500o/o
5.000%
5.000%
4.750o/o
5.000%
$2,740,000
2,875,000
3,020,000
3,150,000
3,305,000
3,470,000
3,645,000
3,8'10,000
4,000,000
4,200,000
18,960,000
On the Prepayment Date, there will become due on each of the Refunded 2008
Certificates the prepayment price thereof, with accrued and unpaid interest thereof to
July 1 , 2018, and after July 1 , 2018, interest thereon shall cease to accrue. Any
Refunded 2008 Certificate to be prepaid will be deemed prepaid on the Prepayment
Date whether or not it is delivered to The Bank of New York Mellon Trust Company,
N.4., as trustee (the "Trustee"). The City expects to prepay the Refunded 2008
Certificates on the Prepayment Date with, among other funds, proceeds of those certain
Lodi Public Financing Authority 2018 Electric System Revenue Refunding Bonds (the
"Refunding Bonds"), which the City expects to receive on June 12, 2018. The City's
ability to prepay the Refunded 2008 Certificates is subject to execution of an indenture of
trust and delivery of the Refunding Bonds. ln the event such funds are not received by
the Prepayment Date, this notice shall be null and void and of no force and effect. The
Refunded 2008 Certificates delivered for prepayment shall be returned to the respective
owners thereof, and said Refunded 2008 certificates shall remain outstanding as though
c-1
this Conditional Notice of Prepayment had not been given. Notice of a failure to receive
funds, and cancellation of this prepayment notice, shall be given by the Trustee by first
class mail, postage prepaid, to the registered owners of the Refunded 2008 Certificates.
Holders of the Bonds are requested to present their Bonds, at the following
addresses:
First Class/Reg istered/Certified
The Bank of New York Mellon
Global Corporate Trust
P.O. Box 396
East Syracuse, New York
1 3057
Express Delivery Onlv
The Bank of New York Mellon
Global Corporate Trust
111 Sanders Creek Parkway
East Syracuse, New York 13057
By Hand Only
The Bank of New York Mellon
Global Corporate Trust
Corporate Trust Window
101 Barclay Street 1st Floor East
New York, New York 10286
Additional information regarding the foregoing actions may be obtained from Ïhe
Bank of New York Mellon Trust Company, N.4., Corporate Trust Department,
Bondholder Relations, telephone number (800) 254-2826.
Payment of interest on the Refunded 2008 Certificates shall be made by check
or, at the option of any owner of at least $1,000,000 aggregate principal amount of
Refunded 2008 Certificates, by wire transfer to a bank account in the United States of
America.
Wofe: The City and the Escrow Agent shall not be responsible for the selection
or use of the CUSIP numbers selected, nor is any representation made as to the
correctness of the CUSIP numbers indicated in the notice or as printed on any Refunded
2008 Certificate. They are included solely for the convenience of the holders.
Dated: _,2018 THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.4., as Escrow Agent
c-2
EXHIBIT D
FORM OF NOTICE OF DEFEASANCE
$60,685,000
Electric System Revenue
Gertificates of Participation,
2008 Series A
NOTICE lS HEREBY GIVEN, by the City of Lodi (the "City") that the outstanding
maturities of the captioned certificates of participation (the .2008 Certificates") have
been defeased and discharged under and within the meaning of the Trust Agreement,
dated as of July 1, 2008, relating to the 2008 Certificates (the "2008 Trust Agreement").
Funds for the payment of the 2008 Certificates have been deposited with The Bank of
New York Mellon Trust Company, N.4., as escrow agent, and the sufficiency of the
funds and investments for the purpose of paying the principal of and interest on the 2008
Certificates has been verified by Causey Demgen & Moore P.C., certified public
accountants.
As a consequence of the foregoing actions and in accordance with the 2008
Trust Agreement, all obligations of The Bank of New York Mellon Trust Company, N.4.,
as trustee for the 2008 Certificates, the Lodi Public lmprovement Corporation and the
City with respect to the 2008 Certificates has ceased and terminated, except the
obligation to use moneys set aside in escrow as described above and, if necessary, from
other legally available funds of the City.
The outstanding 2008 Certificates consist of the following:
Maturity Date
Julv 1
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2032
Principal
Amount
To be Redeemed
$2,740,000
2,875,000
3,020,000
3,150,000
3,305,000
3,470,000
3,645,000
3,810,000
4,000,000
4,200,000
18,960,000
CUSIP
540240CKz
540240CL0
540240CM8
540240CN6
540240CP1
540240CQ9
540240CR7
540240CS5
540240CT3
540240CU0
540240CY2
lnterest
Rate
5.000%
5.000%
4.250o/o
5.000%
5.000%
5.000%
4.500o/o
5.000%
5.000%
4.750o/o
5.000%
D-1
The City has irrevocably elected to prepay all of the outstanding 2008 Certificates
on July 1, 2018, at a prepayment price equal to the par amount thereof together with
accrued interest thereon to the prepayment date, without premium.
Additional information regarding the foregoing actions may be obtained from The
Bank of New York Mellon Trust Company, N.4., Corporate Trust Department,
Bondholder Relations, telephone number (800) 254-2826.
*Note: The City and the Escrow Agent shall not be responsible for the selection
or use of the CUSIP numbers selected, nor is any representation made as to the
carrectness of the CUSIP numbers indicated in the notice or as printed on any Refunded
2008 Certificate. They are included solely for the convenience of the holders.
Dated 2018 THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.4., as Escrow Agent
D-2
EXHIBIT C
FORM OF PRELIMINARY OFFICIAL STATEMENT
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PRELIMINARY OFFICIAL STATEMENT DATED APRIL
-,2018NEW ISSUE - FULL BOOK-ENTRY RATINGS: [Moody's]: (( '')
[Standard&Poor's]:6 "
See ttRatingstt.
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, Caliþrnia, Bond Counsel,
subject, however to certain qualifications described herein, under existing lqw, the interest on the 2018 Bonds
is excluded from gross income þr federal income tax purposes and such interest is not an item of tax
preference for purposes of the federal alternative minimum tax, although, in the case of tex years beginning
prior to January l, 2018, for the purpose of computing the alternative minìmum tax imposed on certain
corporotions, such interest earned by a corporation prior to the end of its tax year in 2018 is taken into
account in determining certain income qnd earnings. In the further opinion of Bond Counsel, such interest is
exemptfrom California personal income taxes. See "TAX MATTERS."
$
LODI PUBLIC FINANCING AUTHORITY
2018 ELECTRIC SYSTEM REVENUE REFUNDING BONDS
Dated: Date of Delivery Due: September 1, as shown on ins¡de cover
AuthorÍty for Issuance. The 2018 Electric System Revenue Refunding Bonds (the "2018 Bonds") are
being issued by the Lodi Public Financing Authority (the "Authority") under a resolution adopted by the Board
of Directors of the Authority on _,2018, and an Indenture of Trust dated as of _ l,2018
(the "Indenture") by and between the Authority and MUFG Union Bank, N.4., as trustee for the 2018 Bonds
(the "Trustee"). See "INTRODUCTION-GeneraI."
Use of Proceeds. The proceeds of the 2018 Bonds will be used to (i) refinance all of the outstanding
$principal amount of Lodi Public Improvement Corporation Electric System Revenue
Certificates of Participation, 2008 Series A (the "Refunded Certificates") and the corresponding portion of the
related installment payment obligation of the City of Lodi (the "City"); and (ii) pay the costs of issuing the
2018 Bonds. See "THE REFINANCING PLAN."
Security for the 2018 Bonds. Under the Indenture, the 2018 Bonds will be payable solely from and
secured by Authority Revenues and certain funds and accounts held under the Indenture. Authority Revenues
consist primarily of 2018 Installment Payments ("2018 Installment Payments") to be made by the City
pursuant to an Installment Purchase Agreement dated as of June 7,2018 (the "2018 Installment Purchase
Agreement") between the City and the Authority. The obligation of the City to make the 2018 Installment
Payments is a special obligation of the City that is secured by a pledge of, and payable solely from, Net
Revenues relating to the City's electric system (the "Electric System"). The general fund of the City is not
liable for, and neither the faith and credit nor the taxing power of the City is pledged to, the payment of the
201 8 Installment Payments.
The City is authorized under the 2018 Installment Purchase Agreement to incur other obligations payable
from Net Revenues on a parity basis with the 2018 Installment Payments and any obligations issued or
incurred by the City, the payment of which constitutes a charge and lien on the Net Revenues and moneys in
the Electric Revenue Fund equal to and on a parity basis with the charge and lien upon the Net Revenues and
moneys in the Electric Revenue Fund for the payment of the 2018 Installment Payments ("Parity
Obligations"). See "SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS" and "THE
ELECTRIC SYSTEM.''
Bond Terms; Book-Entry Onty. The 2018 Bonds will bear interest at the rates shown on the inside cover
page, payable semiannually on March I and September 1 of each year, commencing on March 7,2079,and
will be issued in fully-registered form without coupons in integral multiples of $5,000. The 2018 Bonds will
be issued in book-entry only form, initially registered in the name of Cede & Co., as nominee of The
Depository Trust Company, New York, New York ("DTC"). Purchasers of the 2018 Bonds will not receive
certificates representing their interests in the 2018 Bonds. Payments of the principal of, premium, if any, and
interest on the 2018 Bonds wìll be made to DTC, which is obligated in turn to remit such principal, premium,
if any, and interest to its DTC Participants for subsequent disbursement to the beneficial owners of the 2018
Bonds. See "THE 2018 BONDS - General."
Redemptíon The 2018 Bonds are subject to redemption prior to maturity. See "THE 2018
BONDS-Redemption."
* Preliminary; subject to change.
NEITHER THE 2018 BONDS, NOR THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL
OF OR INTEREST ON THE 2018 BONDS, CONSTITUTES A DEBT OR A LIABILITY OF THE
AUTHORITY, THE CITY, THE STATE OF CALIFORNIA ORANY OF ITS POLITICAL SUBDIVISIONS
WITHIN THE MEANING OF ANY CONSTITUTIONAL LIMITATION ON INDEBTEDNESS, OR A
PLEDGE OF THE FULL FAITH AND CREDIT OF THE CITY. THE 2018 BONDS ARE SECURED
SOLELY BY THE PLEDGE OF AUTHORITY REVENUES AND CERTAIN FUNDS HELD LINDER THE
INDENTURE. THE 2OI8 BONDS ARE NOT SECURED BY A PLEDGE OF THE TAXING POWER OF
THE CITY. THE AUTHORITY HAS NO TAXING POWER.
THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT
IS NOT A SUMMARY OF THIS ISSUE OF 2OI8 BONDS. INVESTORS MUST READ THE ENTIRE
OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN
INFORMED INVESTMENT DECISION WITH RESPECT TO THE PURCHASE OF THE 2018 BONDS.
The 2018 Bonds are offered when, as and if issued and received by the Underwriter and subject to the
approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, Califomia, Bond
Counsel. Certain legal matters will be passed upon for the City by the City Attorney and Stradling Yocca
Carlson & Rauth, a Professional Corporation, Sacramento, California, Disclosure Counsel to the City, for the
Authority by the City Attorney, and for the Underwriter by Hawkins Delafield & Wood LLP, Sacramento,
California. It is anticipated that the 2018 Bonds will be delivered in book-entry form through the facilities of
DTC on or about _,2018.
J.P. Morgan
The date of this Offìcial Statement is: ,2018.
$
LODI PUBLIC FINANCING AUTHORITY
2018 ELECTRIC SYSTEM REVENUE REFUNDING BONDS
MATURITY SCHEDULE
(Base CUSIPT
Maturity Date
(September l)
Principal
Amount
Interest
Rate Yield Price CUSIPT
*Priced to par call date of September 1, 20_
T CUStpO is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is
managed on behalf of the American Bankers Association by S&P Capital IQ. Copyright@ 2018 CUSIP Global
Services. All rights reserved. CUSIP@ data herein is provided by CUSIP Global Services. This data is not
intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP@ numbers
are provided for convenience of reference only. None of the Authority, the City, the Underwriter or their agents or
counsel assume responsibility for the accuracy of such numbers.
LODI PUBLIC FINANCING AUTHORITY
CITY OF LODI
AUTHORITY BOARD/CITY COUNCIL
A lan Nakanishi, Mayor/lVlember
JoAnne Mounce, Mayor Pro Tem/Member
Bob Johnson, Councilmember/ Member
Mark Chandler , Councilmember/ Member
Doug Kuehne, Councilmember/ Member
AUTHORITY/CITY OFFICIALS
Stephen Schwabauer, City Manager/Executive Director
Andrew Keys, Deputy City Manager/Treasurer
Jennifer M. Ferraiolo, City Clerk/Secretary
Janice D. Magdich, City Attomey/Authority Counsel
Elizabeth A. Kirkley, Electric Utility Director
BOND COUNSEL
Jones Hall, A Professional Law Corporation
San Francisco, California
DISCLOSURE COUNSEL
Stradling Yocca Carlson & Rauth, a Professional Corporation
Sacramento, Califomia
MUNICIPAL ADVISOR
Fieldman, Rolapp & Associates, Inc.
Irvine, Califomia
TRUSTEE
MUFG Union Bank, N.A.
San Francisco, Califomia
ESCROW BANK
The Bank ofNew York Mellon Trust Company, N.A
San Francisco, California
VERIFICATION AGENT
Causey Demgen & Moore P.C
Denver, Colorado
No dealer, broker, salesperson or other person has been authorized by the Authority, the City or the
Underwriter to give any information or to make any representations in connection with the offer or sale of the
201 8 Bonds other than those contained herein; and, if given or made, such other information or representations
must not be relied upon as having been authorizedby the Authority, the City or the Underwriter. This Official
Statement does not constitute an offer to sell or the solicitation ofan offer to buy, nor shall there be any sale of
the 2018 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer,
solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers or owners of the 2018
Bonds. Statements contained in this Official Statement that involve estimates, forecasts or matters of opinion,
whether or not expressly so described herein, are intended solely as such and are not to be construed as
representati ons of fact.
The information set forth herein has been obtained from the Authority and the City and from other
sources that the Authority and the City believe to be reliable. The information and expression of opinion
herein are subject to change without notice and neither delivery of the Official Statement nor any sale made
hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of
the City or the Authority or any other parties described herein since the date hereof. All summaries of the
Indenture and 2018 Installment Purchase Agreement or other documents are made subject to the provisions of
such documents and do not purport to be complete statements of any or all of such provisions. Reference is
hereby made to such documents on file with the City for further information in connection therewith.
The Underwriter has provided the following sentence for inclusion in this Official Statement: The
Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its
responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this
transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
In connection with the offering of the 2018 Bonds, the Underwriter may overallot or effect
transactions that stabilize or maintain the market price of such Bonds at a level above that which might
otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The
Underwriter may offer and sell the 2018 Bonds to certain dealers and dealer banks and banks acting as agents
at prices lower than the public offering prices stated on the cover page hereof and said public offering prices
may be changed from time to time by the Underwriter.
The 2018 Bonds have not been registered under the Securities Act of 1933, as amended, in reliance
upon an exemption contained in such act. The 2018 Bonds have not been registered or qualified under the
securities laws of any state.
Certain statements included or incorporated by reference in this Official Statement constitute
"forward-looking statements." Such statements are generally identifiable by the termi.nology used such as
"plafì," "expect," "estimate," "budget" or other similar words. Such forward-looking statements include but
are not limited to certain statements contained in the information in "THE ELECTRIC SYSTEM" in this
Official Statement. The achievement of certain results or other expectations contained in such forward-looking
statements involves known and unknown risks, uncertainties and other factors that may cause actual results,
performance or achievements described to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Neither the Authority nor the City
plans to issue any updates or revisions to those forward-looking statements if or when its expectations or
events, conditions or circumstances on which such statements are based occur.
The City maintains a website. However, the information presented therein is not part of this Official
Statement and should not be relied upon in making an investment decision with respect to the 2018 Bonds.
TABLE OF CONTENTS
Page
INTRODUCTION .t
.l
.2
.1
.2
.2
.2
Outstanding Obligations; Contractual Obligations of the Electric System
Security for the 2018 Bonds..
Additional Parity Obligations
No Reserve Account.............,
Rate Covenant.......................
Continuing Disclosure
Other Matters
Estimated Sources and Uses of Funds......
THE 201 8 Bonds
General
Transfer, Registration and Exchange..................
Redemption.
Selection of Bonds for Redemption
Notice of Redemption; Rescission..................
Effect of Redemption................
Book-Entry Only System.
DEBT SERVICE SCHEDULE
SECURITY AND SOURCES OF PAYMENT FOR THE 2018 Bonds
Pledge of Authority Revenues
20 1 8 Installment Payments..................
J
J
..5
..5
,,5
..6
..6
..6
,'6
7
7
7
8
8
Defined Terms
Pledge of Net Revenues
Rate Covenant..........................
Application of Revenues
No Debt Service Reserve Fund
No Other Cunently Outstanding Parity Obligations ..........
Additional Parity Obligations
Subordinate Obligations
THE ELECTRIC SYSTEM
History of the Electric System
Service Area
Error! Bookmark not defined.
Take-orrPay Obligations. ..........'.......'12
t0
il
12
12
13
t4
t4
9
t4
15
5
6
Governance and Management ...........
Employees
8
Investment Policy ..'....'..18
Power Supply Resources
Joint Powers Agency Resources
Renewable Resources
Future Power Supply Resources
Energy Efficiency and Conservation ...........
Interconnections, Transmission and Distribution Facilities
Forecast of Capital Expenditures
Wholesale Power Trading.......
Rates and Charges
Electric System Operations Since Industry Restructuring
Customers, Sales, Revenues and Demand
Changing Laws and Requirements
Other Factors
THE AUTHORITY
RISK FACTORS
Rate Covenant Not a Guarantee
Statutory and Regulatory Impact ......................
Earthquake, Flood or Other Natural Disasters
No Reserve Account
Limited Recourse on Default...
Effect of Bankruptcy
Loss of Tax Exemption..
Secondary Market..
CONSTITUTIONAL LIMITATIONS ON TAXES AND FEES
Proposition 62
Proposition 218
Proposition 26..
Other Initiatives
TAX MATTERS........
LITIGATION
.20
.24
.25
.26
.26
.26
.27
.27
.28
Joint Powers Agency Obligations
Significant Accounting Policies
Condensed Operating Results and Selected Balance Sheet Information............
RATE REGULATION
FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY
California Climate Change Policy Developments .
Environmental Regulation and Permitting Factors
Regulatory Impact on the California Energy Market
Largest Customers
ISO Markets
29
29
3l
32
JJ
35
35
35
37
38
39
39
..40
..40
..41
..41
..41
.41
.42
.42
.42
.42
.42
.43
.43
.43
.43
.44
.44
.45
.46APPROVAL OF LEGALITY..............
ll
APPENDIX D _ FORM OF OPINION OF BOND COUNSEL
VERIFICATION OF MATHEMATICAL COMPUTATIONS ..47
EXECUTION AND DELIVERY .48
APPENDIX A _ CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION CONCERNING
THE CITY OF LODI.... ..................... A-l
APPENDIX B _AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR
ENDED JLINE 30,2017 .....................8-1
APPENDIX C _ SUMMARY OF PRINCIPAL LEGAL DOCUMENTS c-t
D-1
APPENDIX E - FORM OF CONTINUING DISCLOSURE 4GREEMBNT................. ............E-1
APPENDIX F _ DTC AND THE BOOK-ENTRY ONLY SYSTEM.... ..................F-l
lll
OFFICIAL STATEMENT
LODI PUBLIC FINANCING AUTHORITY
2018 ELECTRIC REVENUE REFUNDING BONDS
INTRODUCTION
This introduction is not a summary of this Official Statement. It is only a brief description of and
guide to, and is qualified by, more complete and detailed information contained in the entire Official
Statement, including the cover page and appendices, and the documents summarized or described in this
Official Statement. A full review should be made of the entire Official Statement. The offering to potential
investors is made only by means of the entire Official Statement.
Capitalized terms used but not defined in this Official Statement have the meanings set forth in the
Indenture (as defined below). See "APPENDIX C - Summary of Principal Legal Documents."
General
The Lodi Public Financing Authority (the "Authority") is issuing its 2018 Electric Revenue Refunding
Bonds (the "2018 Bonds") under Article 4 of Chapter 5 of Division 7 of Title 1 of the Govemment Code of the
State of California, commencing with Section 6584 (the 'oBond Law"), a resolution adopted by the Board of
Directors (the "Board") of the Authority on _, 2018 (the "Authority Resolution"), a
resolution adopted by the City Council (the "City Council") of the City of Lodi (the "City") on
,2018 (the "City Resolution"), and an Indenture of Trust (the "Indenture"), dated as of June 1,2018, by and
between the Authority and MUFG Union Bank, N.4., as trustee (the "Trustee"). The 2018 Bonds will be
issued in fully registered form, registered in the name of The Depository Trust Company, New York, New
York ("DTC"), or its nominee, which will act as securities depository for the 2018 Bonds. Purchasers of the
2018 Bonds will not receive certificates representing the 2018 Bonds that are purchased. See "THE 2018
Bonds - Book-Entry Only System" and "APPENDIX F - DTC AND THE BOOK-ENTRY ONLY SYSTEM."
The 2018 Bonds are being issued to provide funds to (i) refinance all of the outstanding
$principal amount of the Lodi Public Improvement Corporation's Electric System Revenue
Certificates of Participation, 2008 Series A (such amount being refinanced constituting the "Refunded
Certificates") and a related installment payment obligation of the City; and (ii) pay the costs of issuing the
2018 Bonds.
Security for the 2018 Bonds
Under the Indenture, the 2018 Bonds will be payable solely from and secured by Authority Revenues
and certain funds and accounts held under the Indenture. Authority Revenues consist primarily of 2018
Installment Payments ("2018 Installment Payments") to be made by the City pursuant to an Installment
Purchâse Agreement dated as of June l, 2018 (the "201 8 Installment Purchase Agreement"). The obligation of
the City to make the 2018 Installment Payments is a special obligation of the City that is secured by a pledge
of and payable solely from Net Revenues (as defined herein) relating to the City's electric system (the
"Electric System"). The general fund of the City is not liable for, and neither the faith and credit nor the taxing
power of the City is pledged to, the payment of the 2018 Installment Payments.
The obtigation of the City to make the 2018 Installment Payments does not constitute a debt of
the City or of the State of California or of any political subdivision thereof in contravention of any
constitutional or statutory debt limitation or restriction.
* Preliminary; subject to change.
NEITIIER THE 2018 BONDS NOR THE OBLIGATION OF THE AUTHORITY TO PAY
PRINCIPAL OF OR INTEREST ON THE 2018 BONDS CONSTITUTES A DEBT OR A LIABILITY
OF THE AUTHORITY, THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL
SUBDTVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL LIMITATION ON
INDEBTEDNESS, OR A PLEDGE OF THE FULL FAITH AND CREDIT OF THE CITY. THE 2018
BONDS ARE SECURED SOLELY BY THE PLEDGE OF AUTHORITY REVENUES AND CERTÄIN
FUNDS HELD UNDER THE INDENTURE. THE 2018 BONDS ARE NOT SECURED BY A PLEDGE
OF THE TAXING POWER OF THE CITY. THE AUTHORITY HAS NO TAXING POWER.
Outstanding Obligations; Contractual Obligations of the Electric System
The Refunded Certificates are the only currently outstanding obligations of the Electric System
payable from Net Revenues. In addition, the City has an outstanding loan with F&M Bank in the amount of
$1.3 million associated with an LED Streetlight Improvement Project. The annual loan payments will be paid
from the Greenhouse Gas Free Allowance proceeds. The City has substantial contractual obligations with
respect to the Electric System that are payable prior to the 2018 Bonds. See "SECURITY AND SOURCES OF
PAYMENT FOR THE 2018 BONDS-Take-or-Pay Obligations."
Additional Parity Obligations
The City may incur additional obligations payable from and secured by the Net Revenues on parity
with the 2018 Installment Payments ("Parity Obligations"). See "SECURITY AND SOURCES OF
PAYMENT FOR THE 2018 BONDS - Additional Parity Obligations". The 2018 Installment Payments and
any future obligations payable from Net Revenues on a parity with the 2018 Installment Payments constitute
"Parity Obligations."
No Reserve Account
No debt service reserve account has been established with respect to the 2018 Bonds. The Authority
and the City have reserved the right to establish, fund and replenish from Net Revenues, or obtain any debt
service reserve fund surety or guarantee reimbursable from Net Revenues for, debt service reserves for Parity
Obligations. Such reserves, if established, will not be available to pay, and Owners of the 2018 Bonds will
have no claim or lien on, such reserves and the amounts on deposit herein.
Rate Covenant
The City covenants in the 2018 Installment Purchase Agreement that it will, to the maximum extent
permitted by law, fix, prescribe and collect rates, fees and charges and manage the operation of the Electric
System for each Fiscal Year so as to yield
(a) Revenues for such Fiscal Year at least equal to the sum of the following for such Fiscal Year:
(i) Adjusted Maintenance and Operation Costs;
(ii) Adjusted Annual Debt Service with respect to the 2018 Installment Payments and Parity
Obligations, and
(iii) all other payments required to meet any other obligations of the City which are charges,
liens or encumbrances upon or payable from the Electric Revenue Fund, including all amounts owed to any
issuer ofa surety bond credited to a debt service reserve for Parity Obligations then in effect; and
(b) Adjusted Annual Net Revenues for such Fiscal Year equal to at least one hundred twenty percent
(120%) of Adjusted Annual Debt Service with respect to the 2018 Installment Payments and Parity
2
Obligations for such Fiscal Year. For purposes of this requirement, "Adjusted Annual Net Revenues" includes
the amount of Available Reserves on deposit, or which the City has authorized to be deposited, in the Electric
Revenue Fund as of the hrst day of the relevant Fiscal Year. See "SECURITY AND SOURCES OF
PAYMENT FOR THE 2018 BONDS-Rate Covenant".
Continuing l)isclosure
The City has covenanted for the benefit of the Owners and beneficial owners of the 2018 Bonds to
provide certain financial information and operating data relating to the City and the Electric System annually,
and to provide notices of the occurrence of certain enumerated events. See "CONTINUING DISCLOSURE".
Other Matters
The summaries of and references to documents, statutes, reports and other instruments referred to in
this Official Statement do not purport to be complete, comprehensive or definitive, and each such summary
and reference is qualified in its entirety by reference to each document, statute, report or instrument. The
capitalization of any word not conventionally capilalized or otherwise defined in this Official Statement
indicates that such word is defined in a particular agreement or other document and, as used in this Offtcial
Statement, has the meaning given it in such agreement or document. See "APPENDIX C - SUMMARY OF
PRINCIPAL LEGAL DOCUMENTS".
THE REFINANCING PLAN
The 2018 Bonds are being issued to provide funds to (i) refinance the Refunded Certificates and the
corresponding portion of the related installment payment obligation of the City, and (ii) pay the costs of
issuing the 2018 Bonds.
The Refunded Certificates were executed and delivered for the purpose of (i) refinancing, on a current
basis, certain prior obligations payable from revenues of the Electric System (which had been used to finance
capital improvements to the Electric System and refund, on an advance basis, certain installment payments that
financed improvements to the Electric System), (ii) funding a debt service reserve account for the Refunded
Certificates and (iii) paying the costs of execution and delivery of the Refunded Certificates and certain related
costs. The Refunded Certificates consist of the amounts set forth in the following table.
J
Electric System Revenue Certificates of ParticipatÍon' 2008 Series A
Maturity Date
(July l)
Outstanding
Principal
Amount Interest Rate
Redemption
Price
Redemption
Date CUSIPT
201 8
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2032
TOTAL
$2,610,000
2,740,000
2,875,000
3,020,000
3,l5o,ooo
3,305,000
3,470,000
3,645,000
3,810,000
4,000,000
4,200,000
18,960,000
s.00%
s.00
5.00
4.25
5.00
s.00
s.00
4.s0
5.00
5.00
4.75
5.00
100%
100
100
100
100
100
100
100
100
100
100
100
,2018
,2018
,2018
,2018
,2018
,2018
,2018
,2018
,2018
,2018
,2078
Maturity 540240CJ5
540240CK2
s40240cL0
s40240cM8
540240CN6
s40240cPl
s40240cQ9
s40240cP.7
540240CS5
540240CT3
540240CU0
s40240cY2
1
I
1
I
1
I
1
I
I
1
1
J
J
J
J
J
J
J
J
J
J
J
uly
uly
uly
uly
uly
uly
uly
uly
uly
uly
uly
$55,785,000
Upon the execution and delivery of the 2018 Bonds, [[a portion of the proceeds and available moneys
from the Refunded Certificates shall be applied to the purchase of certain direct obligations of the United
States of Americall, which, along with uninvested cash and earnings on the obligations, will satisfy the City's
payment obligations with respect to the Refunded Certificates until July 1, 2018 (the "Redemption Date").
These direct obligations and uninvested cash shall be deposited in an escrow account held by The Bank of
New York Mellon Trust Company, N.4., as escrow agent for the Refunded Certificates (the "Escrow Agent")
under an escrow agreement (the "Escrow Agreement").
The obligations of the United States of America so deposited with the Escrow Agent into the escrow
account for the Refunded Certificates will bear interest at such rates and will be scheduled to mature at such
times and in such amounts that, when paid in accordance with their terms, together with any other funds held
by the Escrow Agent under the Escrow Agreement, will be sufficient to make full and timely payment of the
principal of and interest evidenced and represented by the Refunded Certificates prior to the Redemption Date
and to pay the prepayment price equal to 100o/o of the principal amount of the outstanding Refunded
Certificates plus interest accrued to the Redemption Date. For information on mathematical verification for
the sufficiency of scheduled payments with respect to such obligations of the United States of America and
other funds held by the Escrow Agent to make such payments with respect to the Refunded Certificates, see
"VERIFICATION OF MATHEMATICAL COMPUTATIONS." Upon such iffevocable deposit with the
Escrow Agent and the receipt by the Escrow Agent of irrevocable escrow instructions from the City under the
Escrow Agreement, the Refunded Certificates will be defeased and the owners of the Refunded Certificates
will no longer be entitled to the benefits of the legal documents under which they were executed and delivered.
The amounts held and invested by the Escrow Agent in the Escrow Fund are pledged solely to the
payment of the Refunded Certificates. Neither the funds deposited in the Escrow Fund nor the interest on the
invested funds will be available for the payment of debt'service on the 2018 Bonds.
T CUSPO is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is
managed on behalf of the American Bankers Association by S&P Capital IQ. All rights reserved. CUSIP@ data
herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in
any way as a substitute for the CGS database. CUSIP@ numbers are provided for convenience of reference only.
The City and the Underwriter do not assume any responsibility for the accuracy of such numbers.
4
ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds relating to the 201 8 Bonds are as follows
Sources:
Principal Amount
Plus Original Issue Premium
Less Underwriter's Discount
Plus Available Funds Relating to the Refunded Certificates
Total Sources
Uses:
Escrow Fund
Costs of Issuance (')
Total Uses
Represents funds to be used to pay costs of issuance, which include legal fees, Municipal Advisor fees, printing costs, rating
agency fees and other miscellaneous expenses.
THE 2018 BONDS
General
Bond Terms. The 2018 Bonds will be dated their date of delivery and issued in fully registered form
without coupons in integral multiples of $5,000. The 2018 Bonds will mature in the amounts and on the dates,
and bear interest at the annual rates, set forth on the inside cover page of this Official Statement.
Payments of Principøl and Interest. Interest on the 2018 Bonds will be payable on March I and
September I in each year, beginning March 1,2019 (each an o'Interest Payment Date"). Principal on the 2018
Bonds will be payable on September 1 in the amounts and in the years set forth on the inside front cover of this
Offìcial Statement.
While the 2018 Bonds are subject to the book-entry system, the principal, interest and any prepayment
premium with respect to the 2018 Bonds will be paid by the Trustee to DTC for subsequent disbursement to
beneficial owners of the 2018 Bonds. See APPENDIX F - "DTC AND THE BOOK-ENTRY ONLY
SYSTEM.'
Interest on the 2018 Bonds is payable from the Interest Payment Date next preceding the date of
authentication thereof unless: a 2018 Bond is authenticated on or before an Interest Payment Date and after the
close of business on the preceding Record Date, in which event it will bear interest from such Interest Payment
Date, a 2018 Bond is authenticated on or before the first Record Date, in which event interest thereon will be
payable from the Closing Date, or interest on any 2018 Bond is in default as of the date of authentication
thereof, in which event interest thereon will be payable from the date to which interest has been paid in full,
payable on each Interest Payment Date.
Principal and premium,if any, with respect to each 2018 Bond is payable upon suffender of such
Bond at the Office of the Trustee in San Francisco, Califomia, upon maturity or the earlier redemption thereof.
The principal of; premium, if any, and interest on the 2018 Bonds will be payable in lawful money of the
United States of America. Interest with respect to the 201 8 Bonds will be computed on the basis of a 360-day
year composed of twelve 30-day months.
Transfer, Registration and Exchange
See "APPENDIX C - Summary of Principal Legal Documents" for a description of the provisions of
the Indenture relating to the transfer, registration and exchange ofthe 201 I Bonds.
5
Redemption
The 2018 Bonds maturing on or before September 1,20-, are not subject to optional redemption
prior to their respective stated maturity dates. The 20 1 8 Bonds maturing on or after September 7, 20
-,
are
subject to redemption in whole, or in part at the Written Request of the Authority among maturities ori such
basis as the Authority may designate and within a maturity as set forth in the Indenture, at the option of the
Authority, on any date on or after September 1,20_, from any available source of funds, at a redemption price
equal to 100% of the principal amount of the 2018 Bonds to be redeemed, plus accrued interest to the date of
redemption, without premium.
Selection of Bonds for Redemption
Whenever provision is made in this Indenture for the redemption of less than all of the 201 8 Bonds of
a single maturity, the Trustee shall select the 2018 Bonds of that maturity to be redeemed by lot in any manner
which the Trustee in its sole discretion deems appropriate. For purposes of such selection, the Trustee shall
treat each 2018 Bond as consisting of separate $5,000 portions and each such portion shall be subject to
redemption as if such portion were a separate 2018 Bond.
Notice of Redemption; Rescission
The Trustee shall mail notice of redemption of the 2018 Bonds by first class mail, postage prepaid, not
less than 30 nor more than 60 days before any redemption date, to the respective Owners of any 2018 Bonds
designated for redemption at their addresses appearing on the Registration Books and to one or more Securities
Depositories and to the Municipal Securities Rulemaking Board. Each notice of redemption shall state the date
of the notice, the redemption date, the place or places of redemption, whether less than all of the 2018 Bonds
(or all2018 Bonds of a single maturity) are to be redeemed, the CUSIP numbers and (in the event that not all
2018 Bonds within a maturity are called for redemption) 2018 Bond numbers of the 2018 Bonds to be
redeemed and the maturity or maturities of the 2018 Bonds to be redeemed, and in the case of 2018 Bonds to
be redeemed in part only, the respective poftions of the principal amount thereof to be redeemed. Each such
notice shall also state that on the redemption date there will become due and payable on each of said 2018
Bonds the redemption price thereof, and that from and after such redemption date interest thereon shall cease
to accrue, and shall require that such 2018 Bonds be then surrendered. Neither the failure to receive any notice
nor any defect therein shall affect the sufficiency ofthe proceedings for such redemption or the cessation of
accrual of interest from and after the redemption date. Notice of redemption of 2018 Bonds shall be given by
the Trustee, at the expense of the Authority, for and on behalf of the Authority.
The Authority has the right to rescind any notice of the optional redemption of 2018 Bonds by written
notice to the Trustee on or prior to the date fixed for redemption. Any notice of optional redemption may
provide that it is subject to rescission as desøibed in this paragraph. Any notice of redemption shall be
cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption
for the payment in full of the 2018 Bonds then called for redemption, and such cancellation shall not constitute
an Event of Default. The Authority and the Trustee have no liability to the 2018 Bond Owners or any other
party related to or arising from such rescission of redemption. The Trustee shall mail notice of such rescission
of redemption in the same manner as the original notice of redemption was sent under this Section.
Effect of Redemption
Notice of redemption having been duly given as aforesaid, and moneys for payment of the redemption
price of, together with interest accrued to the date fixed for redemption on, including any applicable premium,
the 2018 Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption
date designated in such notice, the 2018 Bonds (or portions thereof) so called for redemption shall become due
and payable, interest on the 2018 Bonds so called for redemption shall cease to accrue, said 2018 Bonds (or
portions thereof) shall cease to be entitled to any benefit or security under this Indenture, and the Owners of
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said 2018 Bonds shall have no rights in respect thereof except to receive payment of the redemption price
thereof.
Book-Entry Only System
The 2018 Bonds will be issued as fully registered bonds in book-entry only form, registered in the
name of Cede & Co. as nominee of DTC, and will be available to ultimate purchasers in the integral multiples
of $5,000, under the book-entry system maintained by DTC. While the 2018 Bonds are subject to the book-
entry system, the principal, interest and any prepayment premium with respect to a Bond will be paid by the
Trustee to DTC, which in turn is obligated to remit such payment to its DTC Participants for subsequent
disbursement to Beneficial Owners of the 2018 Bonds. Purchasers of the 2018 Bonds will not receive
certificates representing their interests therein, which will be held at DTC.
See "APPENDIX F - DTC AND THE BOOK-ENTRY ONLY SYSTEM" for further information
regarding DTC and the book-entry system.
DEBT SERVICE SCHEDULE
The table below shows annual debt service payments on the 2018 Bonds, assuming no optional
redemption
Year Ending
September I Principal Interest
Total
Debt Service
Total
SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS
The principal of and interest on the 201 I Bonds are not a debt of the Authority (except to the limited
extent described in this Official Statement) or the City, nor a legal or equitable pledge, charge, lien or
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encumbrance, upon any oftheir respective property, or upon any oftheir income, receipts, or revenues except
the Revenues and other amounts pledged under the Indenture.
This section provides summaries of the security for the 2018 Bonds and certain provisions of the
Indenture and the 2018 Installment Purchase Agreement. See "APPENDIX C - Summary of Principal Legal
Documents" for a more complete summary of the Indenture and the 2018 Installment Purchase Agreement.
Capitalized terms used but not defined in this section have the meanings given in APPENDIX C.
Pledge of Authority Revenues
The 2018 Bonds are payable from and secured by apledge of Authority Revenues and certain funds
and accounts established and held by the Trustee under the Indenture. Authority Revenues, as defined in the
Indenture, mean (a) all of the 2018 Installment Payments, and (b) all interest, profits or other income derived
from the investment of amounts in any fund or account established under the Indenture.
THE 2OI8 BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY
FROM AND SECURED BY A PLEDGE OF AUTHORITY REVENUES AND CERTAIN FUNDS AND
ACCOUNTS HELD UNDER THE INDENTURE. THE AUTHORITY HAS NO TAXING POWER. THE
OBLIGATION OF THE CITY TO MAKE 2018 INSTALLMENT PAYMENTS IS PAYABLE SOLELY
FROM NET REVENUES RELATING TO THE CITY'S ELECTRIC SYSTEM. NEITHER THE 2OI8
BONDS NOR THE OBLIGATION OF THE CITY TO MAKE 2018 INSTALLMENT PAYMENTS
CONSTITUTES AN INDEBTEDNESS OF THE CITY, THE COUNTY, THE STATE OF CALIFORNIA
(THE "STATE") OR ANY OF ITS POLITICAL SUBDIVISIONS (INCLUDING ANY MEMBER OF THE
AUTHORITY) IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT
LIMITATIONS.
2018 Installment Payments
The 2018 Installment Purchase Agreement provides that the City's obligation to make the 2018
Installment Payments from Net Revenues and to perform and observe the other agreements contained therein
are absolute and unconditional and are not subject to any defense or any right of set-off, counterclaim or
recoupment arising out of any breach by the Authority or the Trustee of any obligation to the City or otherwise
with respect to the Electric System, or out of indebtedness or liability at any time owing to the City by the
Authority or the Trustee. Until all of the 2018 Installment Payments, all of the Additional Payments and all
other amounts coming due and payable under the 2018 Installment Purchase Agreement are fully paid or
prepaid, the City (a) will not suspend or discontinue payment of any 2018 Installment Payments, Additional
Payments or such other amounts, (b) will perform and observe all other agreements contained in the 2018
Installment Purchase Agreement, and (c) will not terminate the 2018 Installment Purchase Agreement for any
cause, including, without limiting the generality of the foregoing, the occuffence of any acts or circumstances
that may constitute failure of consideration, eviction or constructive eviction, destruction of or damage to the
Electric System, sale of the Electric System, the taking by eminent domain of title to or temporary use of any
component of the Electric System, commercial frustration of purpose, any change in tax law or other laws of
the United States of America or the State of California or any political subdivision of either thereof or any
failure of the Authority or the Trustee to perform and observe any agreement, whether express or implied, or
any duty, liability or obligation arising out of or connected with the Indenture or the 2018 Installment Purchase
Agreement.
Pursuant to the Indenture, the Authority transfers, assigns and sets over to the Trustee all of the 2018
Installment Payments and any and all rights, title, interest and privileges it has in, to and under the 2018
Installment Purchase Agreement (other than its rights to expenses and indemnification), including without
limitation, the right to collect and receive directly all of the 201 I Installment Payments and the right to enforce
the provisions of the 2018 Installment Purchase Agreement. The City consents to such assignment in the 2018
Installment Purchase Agreement and agrees to make payments of the 2018 Installment Payments directly to the
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Trustee. Under the Indenture, The Trustee is also entitled to and shall, subject to the provisions of the
Indenture, take all steps, actions and proceedings which the Trustee determines to be reasonably necessary in
its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all
of the obligations of the City under the 2018 Installment Purchase Agreement. The Trustee is entitled to
indemnifîcation and expenses before taking such action as provided in the Indenture.
The Indenture provides that all of the 2018 Installment Payments received by the Trustee shall be
deposited immediately in the Bond Fund. All of the 2018 Installment Payments are to be held in trust by the
Trustee for the benefit of the Owners of the 2018 Bonds and shall be disbursed and applied only as provided in
the Indenture.
Pledge of Net Revenues
Pursuant to the 2018 Installment Purchase Agreement, all Net Revenues and all amounts on deposit in
the Electric Revenue Fund are irrevocably pledged to the payment of the 2018 Installment Payments, which
pledge shall be on a parity with any pledge of Net Revenues or of moneys in the Electric Revenue Fund
securing Parity Obligations. The 2018 Installment Purchase Agreement provides that such pledge, together
with the pledge of Net Revenues and amounts in the Electric Revenue Fund securing all other Parity
Obligations shall, subject to application as permitted in the 2018 Installment Purchase Agreement, constitute a
first lien on Net Revenues and amounts on deposit in the Electric Revenue Fund.
"Maintenance and Operation Costs" mean the costs paid or incurred by the City for maintaining and
operating the Electric System including, but not limited to, (a) all costs of electric energy and power generated
or purchased by the City for resale, costs of transmission, fuel supply and water supply in connection with the
foregoing, (b) all expenses of management and repair and other expenses necessary to maintain and preserve
the Electric System in good repair and working order, (c) all administrative costs of the City that are charged
directly or apportioned to the operation of the Electric System, such as salaries and wages of employees,
overhead, taxes (if any) and insurance premiums (including payments required to be paid into any self-
insurance funds not maintained from Revenues), (d) all other reasonable and necessary costs of the City or
charges required to be paid by it to comply with the 201 8 Installment Purchase Agreement or of any resolution
authorizing the execution of the Installment Purchase Agreement or of any resolution authorizing the issuance
of any Parity Obligations or of such Parity Obligations, such as compensation, reimbursement and
indemnification of the trustee, remarketing agent fees for Parity Obligations, and fees and expenses of
Independent Accountants and Independent Engineers; (e) all amounts required to be paid by the City under
contracts with a joint powers agency for the purchase of capacity, energy, transmission capability or any other
commodity or service in connection with the foregoing, which contract requires payments to be made by the
City thereunder to be treated as maintenance and operation costs of the Electric System; (f¡ all deposits to be
made for rebate pursuant to the Tax Certificate and all deposits in comparable accounts established with
respect to Parity Obligations required to be deposited pursuant to the proceedings authorizing such Parity
Obligations; and (g) any other cost or expense which, in accordance with Generally Accepted Accounting
Principles, is to be treated as a cost of operating or maintaining the Electric System; but excluding in all cases
depreciation, replacement and obsolescence charges or reserves therefor, amortization of intangibles and City
Transfers.
"Net Revenues" means, for any period of time in question, the Revenues during such period less the
Maintenance and Operation Costs during such period.
"Revenues" means the sum of the following:
(i) All gross income and revenue received or receivable by the City from the ownership or operation
of the Electric System, including all rates and charges for the Electric Service and the other services and
facilities of the Electric System, all proceeds of insurance covering business interuption loss relating to the
Electric System and all other income and revenue howsoever derived by the City from the ownership or
9
operatioq of the Electric System or otherwise arising from the Electric System, including all Payment
Agreement Receipts, and all income from the deposit or investment of any money in the Electric Revenue
Fund (provided that all Payment Agreement Receipts and all income from the deposit or investment of any
money in the Electric Revenue Fund shall be excluded from the definition of "Revenues" for purposes of the
proviiions under "-Additional Parity Obligations" and "-Rate Covenant"), but excluding (i) proceeds of taxes,
ànd (iÐ refundable deposits made to establish credit and advances or contributions in aid of construction and
line extension fees; and
(ii) GHG Revenues available to pay Annual Debt Service or Maintenance and Operation Costs'
"GHG Revenues" means amounts received by the City from the Califomia Air Resources Board
pursuant to the State of California's cap-and-trade program.
The obligation of the City to make the 2018 Installment Payments is a special obligation of the
City payabte solely from the Net Revenues relating to the Electric System, and does not constitute a debt
of the City or of the State of California or of any potitical subdivision thereof in contravention of any
constitutional or statutory debt limitation or restriction.
See "Outstanding Parity Obligations" and "Additional Parity Obligations" below.
Rate Covenant
The 2018 Installment Purchase Agreement provides that the City will at all times, fix, prescribe and
collect rates, fees and charges for the services, facilities and electricity of the Electric System during each
Fiscal Year which will be at least sufficient to yield:
(a) Revenues for such Fiscal Year at least equal to the sum of the following for such Fiscal Year:
(i) Maintenance and Operation Costs;
(iD Adjusted Annual Debt Service with respect to the 2018 Installment Payments and
Parity Obligations, and
(iiD all other payments required to meet any other obligations of the City which are
charges, liens or encumbrances upon or payable from the Electric Revenue Fund, including all amounts owed
to any issuer of a surety bond credited to a debt service reserve for Parity Obligations then in effect;
(b) Adjusted Annual Net Revenues for such Fiscal Year equal to at least one hundred twenty
percent (120%) of Adjusted Annual Debt Service with respect to the 2018 Installment Payments and Parity
Obligations for such Fiscal Year. For the avoidance of doubt, as used in this section of the Installment
Purchase Agreement, the definition of "Adjusted Annual Net Revenues" includes the amount of Available
Reserves on deposit, or which the City has authorized to be deposited, in the Electric Revenue Fund as of the
first day of the relevant Fiscal Year.
"Adjusted Annual Debt Service" means, for any Fiscal Year or any designated twelve-month period in
question, the Annual Debt Service for such Fiscal Year or twelve-month period minus the sum of the amount
of the Annual Debt Service with respect to Outstanding Parity Obligations to be paid during such Fiscal Year
or twelve-month period from the proceeds of Parity Obligations or interest eamed thereon (other than interest
deposited into the Electric Revenue Fund), all as set forth in a Written Certificate of the City.
"Adjusted Annual Net Revenues" means, for any Fiscal Year or any designated twelve-month period
in question, the Adjusted Annual Revenues during such Fiscal Year or twelve-month period less Maintenance
and Operation Costs during such Fiscal Year or twelve-month period.
t0
"Adjusted Annual Revenues" mean, for any Fiscal Year or any designated twelve-month period in
question, the Revenues during such Fiscal Year or twelve-month period plus, for the purposes of determining
compliance with clause (b) of the Rate Covenant described above, the amount of Available Reserves on
deposit, or which the City has authorized to be deposited, in the Electric Revenue Fund as of the first day of
such Fiscal Year or twelve month period.
"Available Reserves" means, as of any date of calculation, the sum of the following:
(i) The amount of unrestricted funds in the Electric Revenue Fund designated as "'Available
Reserves" for purposes of the Installment Purchase Agreement by the City and then available to pay
Maintenance and Operation Costs andlor Annual Debt Service, which may include any funds which are legally
available for deposit in the Electric Revenue Fund.
(iD The amount of unrestricted funds in the Electric Utility Environmental Compliance Fund (or
any successor fund) designated as oo'Available Reserves" for purposes of the Installment Purchase Agreement
by the City and then available to pay Maintenance and Operation Costs and/or Annual Debt Service.
For definitions of additional terms used in the 2018 Installment Purchase Agreement and the
Indenture, see "APPENDIX C - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS- CERTAIN
DEFINITIONS''.
The City may make adjustments from time to time in such fees and charges and may make such
classifications thereofas it deems necessary but shall not reduce the rates and charges then in effect unless the
Adjusted Annual Revenues and the Adjusted Annual Net Revenues from such reduced rates and charges will
at all times be sufficient to meet the requirements of this Section.
Application of Revenues
In order to carry out and effectuate the obligation of the City contained in the 2018 Installment
Purchase Agreement to pay the 2018 Installment Payments, the City agrees and covenants that all Revenues
received by it shall be deposited when and as received in the Electric Revenue Fund, which fund has heretofore
been established by the City and which fund the City agrees and covenants to maintain separate and apart from
other funds of the City so long as any 2018 Installment Payment remains Outstanding under the 2018
Installment Purchase Agreement. All money on deposit in the Electric Revenue Fund shall be applied,
transferred and used only as provided below and in the following order of priority with any deficiency in any
required deposit to be rectified before making any deposit of a lower priority:
(i) To the payment of the Maintenance and Operation Costs then due and payable and the
establishment of a reasonable contingency reserve for Maintenance and Operation Costs.
(iÐ On or before each 2018 Installment Payment Date, a sum equal to the 2018 Installment
Payment becoming due and payable on such date shall be transferred to the Bond Fund. On or before each date
(other than a 2018 Installment Payment Date) on which a 2018 Installment Payment becomes due and payable,
a sum equal to the 2018 Installment Payment becoming due and payable on such date shall be transferred to
the Bond Fund. Notwithstanding the foregoing provisions of this subsection (ii), no such deposits to the Bond
Fund need be made by the City from the Electric Revenue Fund to the extent the Trustee then holds in the
Bond Fund sufficient available funds to pay the 2018 Installment Payment to be paid with such deposit. In
addition, on or before each due date therefor under the instruments and proceedings pursuant to which Parity
Obligations have been issued or incurred, the sum or sums required to be paid or deposited in a debt service or
other payment fund or account with respect to principal, premium, if any, and interest on Parity Obligations (or
in the case of Parity Payment Agreements, the scheduled Net Payments due) shall be transferred or paid
according to the terms of such instruments or proceedings. All transfers and payments to be made pursuant to
ll
this subsection (ii) shall be made without preference or priority, and in the event of any insufficiency of such
moneys shall be transferred or paid ratably without any discrimination or preference.
(iiD To the extent required by the instruments and proceedings pursuant to which Parity
Obligations have been issued or incurred, to any applicable debt service reserve fund or account for any Parity
Obligations, the sum or sums, if any, equal to the amount required to be deposited therein in accordance with
the terms of such Parity Obligations (other than interest on draws on debt service reserve fund sureties or
financial guarantees for such debt service reserves). In the event ofany insufficiency ofsuch moneys shall be
transferred or paid ratably without any discrimination or preference.
(iv) To the extent required by the instruments and proceedings pursuant to which Parity
Obligations have been issued or incurred, to the payment when due of any interest then due on amounts drawn
under any debt service reserve fund surety or guarantee for any Parity Obligations. All transfers and payments
to be made pursuant to this subsection (iv) shall be made without preference or priority, and in the event of any
insufficiency of such moneys shall be transferred or paid ratably \ /ithout any discrimination or preference.
t(v) To the payment of any amounts due to the Bond Insurer not provided by (i), (ii), (iii) or (iv)
above;]
(vi) To the payment when due of any amounts due under a Credit Agreement to the extent not
required to be paid as principal or interest pursuant to subsection (ii) above.
(vii) To the payment when due of any Termination Payment payable by the City upon the
termination of a transaction under a Parity Payment Agreement before its scheduled termination date.
(viii) To the payment of any Subordinate Obligations in accordance instruments and proceedings
pursuant to which such Subordinate Obligations have been authorized.
(ix) To the making of City Transfers.
(x) To any other lawful purpose of the City
No Debt Service Reserve Fund
No debt service reserve fund is being established in connection with the issuance of the 2018 Bonds.
The Authority and the City have reserved the right to establish debt service reserves for Parity Obligations. See
"INTRODUCTION-No Reserve Account."
2018 Bonds Only Currently Outstanding Parity Obligations
Upon the issuance of the 2018 Bonds and the refunding of the Refunded Certificates, the 2018
Installment Purchase Agreement will be no other outstanding obligations payable from Net Revenues on a
parity with the 2018 Bonds.
Take-or-Pay Obligations
The City has entered into certain power sales contracts for the purchase of energy and certain other
agreements for the payment of costs of certain projects in which it is participating, including agreements with
the Western Area Power Administration ("Western") and with the joint powers agencies in which it
participates, the Transmission Agency of Northem California ("TANC") and the Northem Califomia Power
Agency ("NCPA"). The City's obligations under such agreements are payable as Maintenance and Operation
Costs prior to the 2018 Installment Payments and any Parity Obligations. Agreements with Westem and the
joint powers agencies in which the City participates are on a "take-or-pay" basis, which requires payments to
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be made whether or not projects are completed or operable or whether output from such projects is suspended,
interrupted or terminated. The City could enter into additional contracts for the purchase of capacity, energy,
transmission capability or any other commodity or service in connection with the foregoing whose obligations
constitute Maintenance and Operation Costs of the City, subject to the rate covenant described above. Certain
agreements with TANC and NCPA contain "step-up" provisions obligating non-defaulting participants to
assume a share of the obligations and rights of a defaulting participant, if any. The City's (and any non-
defaulting participant's) maximum step-up under those agreements, however, is 25o/o of the City's original
obligation for the project. The City's participation and share of debt service obligation (without giving effect to
any "step up" provisions) for each of the joint powers agency projects in which it participates are shown on the
table titled "Outstanding Debt of Joint Powers Agencies" under "THE ELECTRIC SYSTEM-Joint Powers
Agency Obligations" herein. For a general description of the City's arrangements with joint powers agencies,
see .'THE ELECTRIC SYSTEM-Power Supply Resources; Joint Powers Agency Resources. For a general
description of the City's agreement with 'Western, see "THE ELECTRIC SYSTEM-Purchased Power -
l\/estern,"
In addition to the take-or-pay obligations of the City, the City has entered into, and may from time to
time enter into in the future, other power and fuel purchase agreements pursuant to which the City may be
required to make minimum payments regardless of the amount of power or fuel purchased, or in the event
power or fuel is not available in the amounts contemplated by the arrangements
Additional Parity Obligations
The City is permitted under the 2018 Installment Purchase Agreement to incur Parity Obligations,
subject to satisfaction of the following conditions.
(a)
Agreement:
With respect to a Parity Obligation other than a Parity Payment Agreement or a Credit
(i) during any twelve (12) consecutive calendar months out of the immediately preceding
eighteen (18) calendar month period, the Adjusted Annual Net Revenues were at least equal to one hundred
twenty percent (120%) of the Maximum Annual Debt Service for all Outstanding 2018 Installment Payments
and all Outstanding Parity Obligations; and
(ii) as evidenced by a Certificate of the City or an Engineer' s Report on file with the City, the
projected Adjusted Annual Net Revenues during each of the succeeding five (5) complete Fiscal Years
beginning with the first Fiscal Year following issuance of the Parity Obligation proposed to be executed in
which interest thereon is not capitalized in whole from the proceeds of Parity Obligations, is at least equal to
one hundred twenty percent (120%) of the Maximum Annual Debt Service for all Outstanding 2018
Installment Payments and all Outstanding Parity Obligations plus the Parity Obligation proposed to be
executed.
(b) If the Parity Obligation proposed to be executed is not a Parity Payment Agreement, the
proceeds of such Parity Obligation shall be used solely to finance or refìnance (including reimbursement to the
City of amounts advanced for such costs) one or more additions, betterments, improvements to, or other capital
assets of, the Electric System as designated by the City and to pay any incidental costs and expenses related
thereto (including the costs of issuance, execution or delivery of such proposed Parity Obligation and the
funding ofa debt service reserve fund).
(c) With respect to any Parity Obligation proposed to be executed which is a Parity Payment
Agreement or a Credit Agreement, there shall have been delivered to the City evidence that the incurrence of
such Parity Payment Agreement or Credit Agreement will not in and of itself cause a downgrade of the rating
issued by the Rating Agencies then rating the 2018 Bonds or any Parity Obligation then outstanding.
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(d) There shall have been delivered to the City an Opinion of Counsel substantially to the effect
that (1) subject to standard exceptions and qualifrcations, the Parity Obligation is a valid and binding special
obligation of the City, and (2) such Parity Obligation has been duly and validly authorized, executed and
delivered in accordance herewith.
(e) If required by the terms of such Parity Obligation, a separate reserve has been established for
such Parity Obligation and that provision has been made to fund such reserve.
Notwithstanding the foregoing provisions, neither clause (a) nor clause (b) above shall limit the ability
of the City to execute any Parity Obligations at any time to refund any Outstanding 2018 Installment Payments
or Outstanding Parity Obligations, in each case which results in a net present value savings to the City,
inclusive of all costs of such refunding.
Subordinate Obligations
The 2018 Installment Purchase Agreement permits the City to incur obligations payable from Net
Revenues on a subordinate basis to the 20ls Installment Payments and any future Parity Obligations. There
currently are no outstanding subordinate obligations.
THE ELECTRIC SYSTEM
General
The City of Lodi ("Lodi") is a general law city in the State of Califomia incorporated in 1906. The
City is located in the San Joaquin Valley of California, 35 miles south of the State capital of Sacramento, and
90 miles east of San Francisco.
The City operates under a City Council-Manager form of government and provides the following
services: public safety (police, fire and graffiti abatement), public utilities services (electric, water and sewer),
transportation services (streets, flood control and transit), leisure, cultural and social services (parks and
recreation, library, and community center), and general govemment services (management, human resources
administration, financial administration, building maintenance and equipment maintenance).
As of January I , 2018, the City had an estimated population of 63,791 within an area of approximately
13.98 square miles.
See ..APPENDIX A CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION
CONCERNING THE CITY."
History of the Electric System
The City has owned and operated its electric distribution system since 1910. In order to obtain
generator resources to serve its customers, the City joined NCPA in 1968. The City participates in several
resources developed by NCPA such as geothermal, solar, natural gas, transmission and hydroelectric projects.
In 1982, the City signed a power purchase contract with Western. The City also became a member of TANC
in 1984 and participates in the California- Oregon Transmission Project (the "COTP"). In addition, NCPA
has developed electric dispatch and transmission capabilities that contribute to the City's Electric System
services. Ten NCPA members (the City, Alameda, Biggs, Gridley, Healdsburg, Lompoc, Palo Alto, Port of
Oakland, Ukiah and Plumas-Sierra, collectively the "Ten NCPA Pool Members"), are part of a power pool
operated by NCPA. NCPA balances loads and resources for the Ten NCPA Pool Members pursuant to the
Third Amended and Restated NCPA Metered Subsystem Aggregation Agreement to provide the total electric
power requirements of the Ten NCPA Pool Members at the lowest reasonable cost consistent with reliability,
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safety, expedition, prevention of adverse impacts on neighboring utility systems, and all applicable laws and
governmental rules, regulations and orders.
Service Area
The Electric System serves the entire area of the City (approximately 13.98 square miles) and has
approximately 131 miles of overhead lines and over 123 miles of underground lines. Duringthe fiscal year
ended June 30,2017,the Electric System served 26,152 customers, comprised of 22,870 residential customers,
3,172 commercial/industrial customers and 170 other customers.
Governance and Management
The Electric System is operated as a separate enterprise activity within the City government. This
structure is essentially the same as for its water and wastewater utility enterprises. The Electric System
department is under the direction of the Electric Utility Director who is appointed by the City Manager.
The City is govemed by a five-member City Council comprised of members. The City is converting
to District elections starting in November of 2018 and concluding with the seats open in 2020.Each council
member is elected for four years with staggered terms.
The current City Council members and the expiration dates of their terms are set forth below.
Council Member Title Expiration of Term
Alan Nakanishi
JoAnne Mounce
Bob Johnson
Mark Chandler
Doug Kuehne
Mayor
Mayor Pro Tempore
Council Member
Council Member
Council Member
December 5, 2018
December 2,2020
December 2,2020
December 5,2018
December 5,2018
Following are biographies of certain City staff.
Stephen Schwabauer, City Manager, was appointed to the position by the City Council on June 5,
2014 after serving five-months as the Interim Manager. He had been City Attorney from 2004 to 2014, and
Deputy City Attorney from 2000 to 2004. During his tenure as City Attomey, Steve negotiated the resolution
of a multimillion dollar groundwater contamination action and associated financing scheme. Steve also led
labor negotiations for much of his tenure as City Attorney and developed significant experience with budget
operations and employee rêlations. Steve earned his Bachelor of Arts degree from U. C. Davis in 1990 and his
law degree from U. C. Berkeley in 1994.
Andrew Keys, Deputy City Manager/Internal Services Director, has been the City's Deputy City
Manager/Internal Services Director since March 27,2017, As the City's administrative second-in-command,
Keys oversees the City's Finance, Budget and Treasury, Information Systems and Human Resources
functions. Keys came to the City after a9-year career with the City of Elk Grove, California. In Elk Grove, he
served in various roles within the finance department, including Analyst, Accounting Manager and Budget
Manager, as well as within administration serving as Assistant to the City Manager and Deputy City
Manager. Keys began his career in the municipal finance sector with KNN Public Finance where he served for
a year as an Analyst after receiving his Bachelor of Arts degree in International Relations from UC Davis in
2006. He later received his Master's degree in Business Administration from Davis in 2013.
Elizabeth A. Kirkley, Electric Utility Director. Ms. Kirkley joined the City in June 2010 and has over
18 years of private/public electric utility experience. Ms. Kirkley came to the City after serving as Electric
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Utility Director of the City of Healdsburg, Califomia for 2 years. Previous industry experience includes
serving as an electrical engineer for the City of Ukiah, Califomia, ComEd (Exelon West) in the Chicago area,
and Arizona Public Service Company in Phoenix. Ms. Kirkley has a BSEE specializing in Power System
Analysis from the University of Illinois in Urbana-Champaign and has completed the Executive MBA
coursework from Califomia State University-Stanislaus.
Employees
As of July 1, 2017,51 full-time City employees were assigned specifrcally to the Electric System.
Contract/temporary employees are hired as necessary. Substantially all of the non-management Lodi
personnel assigned to the Electric System are represented by the Intemational Brotherhood of Electrical
Workers, Union 1245 ("IBEW"). The City's contract with IBEW expired on December 31,2017.
Negotiations are ongoing and IBEW workers continue to provide service to the Electric System under the
terms of the prior agreement. There have been no strikes or other union work stoppages at the City, including
the electric utility department.
Retirement benefits to City employees, including those assigned to the Electric System, are provided
through the City's participation in the California Public Employees' Retirement System ("CaIPERS"), an agent
multiple-employer public employee defined benefit pension plan. Participants are required to contribute a
percentage (7%o for employees assigned to the electric utility department) of their annual covered salary. The
City's contribution rate for current service (normal cost) and the Unfunded Accrued Liability (UAL) payment
to make up for shortfalls in the pension system are determined by annual actuarial calculations based on the
benefit formula and the number of employees and their respective salary schedules. For the fiscal year ending
June 30,2018, the Citywide contribution to the CaIPERS miscellaneous plan (of which all Electric System
employees are members) was budgeted to be $ 1,5 I I ,420 in Normal Cost and 52,898,420 in UAL. The Normal
Cost is based on the City's assumption for payroll expense, and the UAL is set by CaIPERS. For the Electric
System's share of such contributions, the budget amount for the Normal Cost share was $393,050 and for the
UAL was $755,390. The contribution requirements of plan members and the City are established and may be
amended by CaIPERS. Assembly Bill 340, the Public Employee's Pension Reform Act ("PEPRA"),
implemented new benefìt formulas and final compensation periods, as well as new contribution requirements
for new employees hired on or after January I , 2013 , who meet the definition of a new member under PEPRA.
As of February 15,2018, there are 74 PEPRA members and37 classic members in the Electric System. As
more PEPRA members are hired in the future, the Normal Cost should be reduced. Because the UAL is tied to
current shortfalls in the pension system it is not directly impacted by the hiring of PEPRA members.
Beginning July l, 2018, CaIPERS will begin phasing in a reduction in the discount rate (assumed rate of return
on investments) used to determine agency contributions. The discount rate is being reduced from 7.5Vo to
7.jYo as follows:
Valuation Date
June 30, 2016
June 30,2017
June 30,2018
Fiscal Year
for Required Contribution
2018-19
2019-20
2020-21
Discount Rate
7.37s%
7.25%
7.00%
The impact of each reduction will be phased in over five years, with the full impact realized in the
2024-25 fiscal year. The City anticipates total pension costs approximately doubling as compared to the
cunent fiscal year during this time. To address the issue, the City has adopted a Pension Stabilization Policy
("PSP") and created a Pension Stabilization Fund ("PSF"). As of December 37,2017,55,229,493 was set
aside in the PSF, an Internal Revenue Service Section 115 (c) trust fund established for the purposes ofpaying
future pension liabilities. The PSP requires 100% of General Fund reserves in excess of the 16Yo General
Fund reserve target be deposited into the PSF, and all other funds invest a proportional share based on the
budgeted pension obligations in that fiscal year. Based on this policy, an additional $4,318,481 will be
invested into the PSF before the end of fiscal year ending June 30, 2018. The PSP remains in effect until the
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funded status of the City's two pension plans for Miscellaneous and Safety employees are at a combined 80%
funded status when considering the Market Value of Assets at CaIPERS and in the PSF. As of the June 30,
2016 actuarial report, the funded status for the Miscellaneous Plan was 68.4Yo, Safety plan was 58.3%o and
combined plans was 63.4%. As of December 31, 2017 , the combined funded status when considering the PSF
assets increases to 64.8%. Based on fÌscal year ending June 30, 2018 combined normal cost and UAL pension
payments, the Electric System is responsible for approximately 1l.l% of the total pension liability for the City.
Copies of the CaIPERS annual financial report may be obtained from the CaIPERS Executive Office, 400 Q
Street, Sacramento, California 958 14.
For additional information regarding the City's retirement plans and other post-employment benefits,
see Appendix B - "AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR
ENDED JUNE 30,2017."
In addition, the City provides certain post-employment benefits other than pensions (OPEB) to City
employees, including those assigned to the Electric System, who retire from the City and receive a CaIPERS
pension through its participation in the CaIPERS medical benefits program. The City has two OPEB plans, the
more expensive of which is a Sick Leave Conversion benefit that is closed to employees hired after 1994. The
closed plan provides monthly compensation in an amount equal to the employer's cost paid for healthcare to
the employee at the time of retirement. The second plan is CaIPERS standard Minimum Contribution Benefit
subsidy plan that provides a fixed monthly amount of premium subsidy for retirees. From the January 1,2014,
actuarial valuation to the January l, 2016 valuation, the Unfunded Actuarial Accrued Liability (UAAL)
increased from $16,879,493 to $39,041,375. Approximately $18 million of this change was due to the
addition of the implicit subsidy liability as required by Revised Actuarial Standard of Practice No. 6 (ASOP 6)
and does not represent an actual increase in the liability. The UAAL is split between the Conversion Benefit,
the CaIPERS Minimum Contribution Benefit and the Implicit Subsidy as follows:
Conversion Benefit $8,761,572
CaIPERS Minimum Contribution Benefit $12J48,193
Imþlicit Subsidv $17"931.610
Total UAAL s39,041,375
ASOP 6 requires disclosure of the implicit subsidy for reports prepared after March of 2015. In Fiscal
Year 2016-17 , The City invested $ I Million in an OPEB trust fund in order to partially fund the OPEB liability.
Prior to that and again in the cunent Fiscal Year 2017-18, contributions to the OPEB benefit are made on a
pay-as-you-go basis. The total amount spent City-wide on pay-as-you-go OPEB benefits in Fiscal Year
2016117 was $1,573,127, of which $1,288,371 was for the Conversion Benefit. As the City addresses the
larger pension problem presented by CaIPERS, pay-as-you-go will remain the strategy going forward. The
portion of the plan's assets allocable to the Electric System employees, which is part of the City's liability
pool, has not been separately calculated. The Electric System employees represent approximately l3%o of
employees of the City. The City has engaged a firm to update the actuarial report based upon a January 1,
2018, census date.
For additional information relating to the City's retirement and other post-employment obligations,
see Note _ to the City's General Purpose Financial Statements for the Year Ended June 30, 2017 included in
Appendix B to this Official Statement.
Payments to PERS and payments with respect to OPEB benefits constitute Maintenance and
Operation Costs of the Electric System.
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Insurance
The City's boiler and machinery operations (including those parts of the Electric System) are insured
by Hartford Steam Boiler for up to $39,986,075 in coverage. The City, including the Electric System, is self-
insured for general liability losses for up to $500,000 and has pooled excess coverage through the California
Joint Powers Risk Management Authority for up to $40 million per occurrence. The City is self-insured for
workers' compensation losses for up to $250,000 and has excess coverage through the Local Agency Workers'
Compensation Excess Authority for statutory coverage.
Investment Policy
The moneys in the Electric Revenue Fund, into which all revenues of the Electric System are initially
deposited, are required to be invested in lawful investments, including Permitted Investments, as provided
under the Installment Purchase Agreement, subject to the City's Investment Policy described herein. See
..APPENDIX D-SUMMARY OF PRINCIPAL LEGAL DOCUMENTS'' herein. PurSuANt tO thc INVCSTMCNT
Policy, the City strives to maintain a level of investment of all idle funds, less required reserves, as near l00o/o
as possible, through daily and projected cash flow determinations. The City's cash management system is
designed to monitor and forecast expenditures and revenue accurately in order to enable the City to invest
funds to the fullest extent possible.
Idle cash management and investment transactions are the responsibility of the Finance Director/City
Treasurer. The Investment Policy, as adopted by the City Council on March 7,2018, permits investment in the
following: U.S. Treasury obligations (bills, notes and bonds); U.S. Government Agency securities and
instrumentalities; bankers acceptances; certificates of deposit; negotiable certificates of deposit; commercial
paper; Califomia State Local Agency Investment Fund; passbook deposits; mutual funds; medium term notes,
obligations of the 50 states and California local agencies, as well as Supranational obligations. The guiding
philosophy outlined in the Investment Policy is the Prudent Investor Standard. The Investment Policy also
provides that safety is given the highest priority, followed by liquidity and yield.
The Investment Policy is reviewed annually but may be changed at any time at the discretion of the
City Council (subject to the State of California law provisions relating to authorized investments) and as the
California Government Code is amended. There can be no assurance, therefore, that the State of California
law and/or the Investment Policy will not be amended in the future to allow for investments which are
currently not permitted under such State law or the Investment Policy, or that the objectives of the City with
respect to investments will not change. All investments, including the Authorized Investments and those
authorized by law from time to time for investments by public agencies, contain a certain degree of risk. Such
risks include, but are not limited to, a lower rate of return than expected and loss or delayed receipt of
principal. The occurrence of these events with respect to amounts held under the Trust Agreement and the
Installment Purchase Agreement, or other amounts held by the City, could have a material adverse effect on
the City's finances.
Power Supply Resources
The City does not independently own any generation assets but has an ownership-like entitlement to a
percentage of the capacity and energy output and attributes of certain NCPA generation projects, as more fully
described below. The City is obligated under these arrangements on a "take-or-pay" basis." See "SECURITY
AND SOURCES OF PAYMENT FOR THE 2018 BONDS - Take-or-Pay Obligations." The City also obtains
power supply resources through contractual arrangements with various entities including Western, Seattle City
Light and Recurrent Energy.
The following table sets forth information conceming the Electric System's power supply resources
and the energy supplied by each during the fiscal year ended June 30,2017 .
18
Source
ELECTRIC SYSTEM
POWER SUPPLY RESOURCES
For the Fiscal Year Ended June 30, 2017
Capacity
Available
(M\ry¡{tttrr
Purchased Power(z):
Western
NCPA
Geothermal Project
Hydroelectric Project
Combustion Turbine Project No
Capital Facilities, Unit One
Lodi Energy Center
Contracts and Exchanges(3)
Total
Total Capacity and Energy Sold at Wholesale
Electric System Requirement for Retail Load(s)
I 1.5
26.2
9.5
19.6
26,6
37.3
19.0
2r.7
0.4
0.4
6.5
44.3
7.2
Actual Energy
Gt{wh)
34,137
83,576
95,710
1,721
1,936
28,554
195,483
o/o of
Total Energy
7.7%
137.9
N/A
128.7
447,017(4)
3,355
100.0%
437,662
(r) NCPA annual resource adequacy filings.(2) Entitlements, frrm allocations and contract amounts.(3) Includes participation in Astoria 2 Solar Project (Recurrent Energy), Seattle City Light Exchange and purchases procured on
behalf of the Electric System through NCPA, including through NCPA's Market Purchase Program.(4) Includes exchanges and line losses.(5) NCPA All Resources Bill.
Source: City of Lodi.
In the fiscal year ended June 30, 2017 , the average cost of power delivered to the Electric System was
8.5 cents per kWh.
Purchased Power
ll/estern. The City is a party to the Contract for Electric Service Base Resource contract with the
Western Area Power Administration (the o'Base Resource Contract"), which is set to expire on December3l,
2024, under which the City takes delivery of 0.5690/o share of the base resource output of the Central Valley
Project ("CVP"). The CVP consists of a series of federal hydroelectric facilities located and interconnected in
Northern Califomia. The amount of energy delivered to the City under the Base Resource Contract is subject
to hydrology variability and water storage levels within the CVP. The Base Resource Contract is structured on
a take -or-pay basis. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS - Take-or-
Pay Obligations." Base Resource energy is scheduled for delivery to the City by NCPA. For the fiscal year
ended June 30,2017, the average melded cost of delivered power under the Base Resource Contract was
approximately 527.04 per MWh.
Other Purch¿s¿s. The City has a 25 MW participation share in the Capacity and Energy Exchange
Agreement between NCPA and Seattle City Light (the "SCL Fxchange Agreement"), pursuant to which
energy is exchanged between the parties based on seasonal requirements. The amount of energy received by
the City during fiscal year 2016-17 is reflected in the Contracts and Exchanges figures listed in the table above.
Energy received under the SCL Exchange Agreement is transmitted to the City using CAISO transmission.
The SCL Exchange is set to expire on May 31,2018. Other power purchases for fiscal year 2016-77, as
reflected in the Contracts and Exchanges figures listed in the table above, are associated with short-term
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purchases. NCPA transacts and schedules daily and hourly (spot) power purchases and sales to balance and
serve the City's native load requirements.
Joint Powers Agency Resources
NCPA. The City has a10.37%o project participation entitlement share of the North Fork Stanislaus
River Hydroelectric Development Project. The City has a39.SYo project participation entitlement share of the
Combustion Turbine Project Number Two Steam Injection Gas Turbine Project. The City has a l4.56Vo
project participation entitlement share of the Geothermal Generating Unit 2 Project, and a 6.00/o project
participation entitlement share of the Geothermal Generating Project Number 3, which are jointly operated as a
single project pursuant to the Amended and Restated Geothermal Operating Agreement. The City has a
20.61% entitlement share in the Geysers Transmission Project, pursuant to which NCPA, on behalf of the City,
delivers output from the geothermal generating assets pursuant to the Agreement of Cotenancy in the Castle
Rock Junction-Lakeville 230-kV Transmission Line. The City has a 13.39Yo project participation entitlement
share in the Combustion Turbine Project Number One (exclusive of the portion acquired by the City of
Roseville). The City has a9.5%o generation entitlement share in NCPA's Lodi Energy Center Project.
See also "Indebtedness; Joint Powers Agency Obligations" below. Following is a brief description of
the certain of the NCPA Projects in which the City participates:
Hvdroelectric Project: The North Fork Stanislaus River Hydroelectric Development Project (the
"Hydroelectric Project") consists of (a) three diversion dams, (b) the 246.86-MW Collierville Powerhouse, (c)
the Spicer Meadow Dam with a 6.0-MV/ powerhouse, and (d) associated tunnels located essentially on the
North Fork Stanislaus River in Alpine, Tuolumne and Calaveras Counties, Califomia, together with required
transmission and related facilities.
The Hydroelectric Project, with the exception of certain transmission facilities, is owned by the
Calaveras County Water District ("Calaveras") and is licensed by FERC, pursuant to a 5O-year License issued
in 1982 to Calaveras. Pursuant to the Power PurChase Contract, NCPA (i) is entitled to the electric output,
including capacity, of the Hydroelectric Project until February 2032, (ii) managed the construction of the
Hydroelectric Project, and (iii) operates the generating and recreational facilities of the Hydroelectric Project. '
After the present FERC License for the Hydroelectric Project expires in the year 2032, NCPA has the
option to continue to purchase the Hydroelectric Project capacity and energy during a subsequent license
renewal period. It is estimated that the price will be significantly less than the comparable altematives at that
time. The purchase option includes all capacity and energy which is surplus to Calaveras' needs for power
within the boundaries of Calaveras County.
As with any hydroelectric generation project, the operation of the Hydroelectric Project is determined
by consideration of its storage capacily, hydrology conditions, and available stream flows and requirements.
The Hydroelectric Project has a 104-year record (1913 to 2017) of storage and stream flows. Based upon the
record, the Hydroelectric Project's average production is estimated to be 470 GWh annually. The
Hydroelectric Project is optimized together with NCPA's other resources as determined by NCPA, to
economically meet the load requirements of the respective Hydroelectric Project Participants, including the
City. The load-following characteristics of the Hydroelectric Project gives NCPA agreat degree of flexibility
in meeting the hourly and daily variations which occur in the Hydroelectric Project Participants' loads. The net
Hydroelectric Project generation for the previous ten fiscal years is as follows:
20
Hydroelectric Project
Historical Net Generation
Fiscal Year
Ended June 30
Total Net
Generation (GWh)
2008
2009
2010
20ll
2012
2013
2014
2015
2016
2017
296
377
s33
852
463
268
197
164
397
94s
Lodi Enersy Center. NCPA owns and operates a natural gas-fired, combined-cycle power generation
plant located in the City (the "Lodi Energy Center"). The electric generation components (the "Power Island")
of the Lodi Energy Center consists of the following components: (I) one natural gas-fired Siemens STGS-
5000F combustion turbine-generator ("CTG"), with an evaporative cooling system and dry low-NOx
combustors to control air emissions; (2) one 3-pressure heat recovery steam generator ("HMG"), (3) a selective
catalytic reduction ("SCR") and carbon monoxide (CO) catalyst to further control NOx and CO emissions,
respectively; (4) one Siemens SST-900RH condensing steam turbine generator ("STG"); (5) one natural gas-
fired auxiliary boiler; (6) one 7-cell draft evaporative cooling tower; and (7) associated support equipment.
The Lodi Energy Center plant is capable of operating at 302 MW (it has been permitted to operate at
this level and it has aranged for the equipment necessary to operate at this level) but is limited to 280 MW of
firm capacity under the terms of the transmission interconnection agreement and full output of the unit as
available on the transmission system with the ISO and PG&E. PG&E has notified NCPA that PG&E intends to
complete reconductoring work on the transmission line limiting the LEC Project Participants' (as defined
below) ability to claim the full capacity for resource adequacy requirements from the Lodi Energy Center in
2018 (actual production from the facility has not been significantly affected by this limitation). In 2016, the
Lodi Energy Center achieved net generation of 1,077 GV/h compared to 1,668 GWh in 2015. The decrease
from 2016 to 2015 was due to a retum to normal hydroelectric conditions. In2015, California experienced one
of the most significant droughts in California and as a result natural gas plants operated at higher output levels
to make up for the loss of hydroelectric generation. In fiscal year ended June 30, 2016, California retumed to
normal rainfall amounts and the natural gas generation decreased accordingly. Fiscal year ended June 30,
2017,LEC output was 300 GWh compared to the 1,077 GV/h for fiscal year ended June 30, 2016. The drop in
generation is directly attributable to the increase in PG&E, gas transportation costs. NCPA negotiated a special
rate for gas transmission for LEC which went into effect fiscal year ending June 30, 2018. LEC has been
running as expected since the new rate went into effect.
Pursuant to a Lodi Energy Center Power Sales Agreement (the "LEC Power Sales Agreement"), by
and among NCPA and (i) the NCPA Member project participants: Biggs, Gridley, Healdsburg, the Coty,
Lompoc, Plumas-Sierra, Santa Clara, Ukiah and BART; and (ii) the non-NCPA Member project participants:
the City of Azusa, the Modesto Irrigation District, the Power and Water Resources Pooling Authority and the
California Department of Water Resources (such entities other than NCPA, collectively the "LEC Project
Participants"), NCPA agreed to construct and operate the Lodi Energy Center and has sold the capacity and
energy of the Lodi Energy Center to the thirteen LEC Project Participants, in accordance with their respective
generation entitlement shares to the capacity and energy of the Lodi Energy Center. Each LEC Project
Participant is responsible for the payment of its respective share of the costs of construction of the Lodi Energy
Center.
2l
The Lodi Energy Center is operated and maintained by NCPA under the general direction of the LEC
Project Participants pursuant to the LEC Power Sales Agreement and the Lodi Energy Center Project
Management and Operations Agreement among NCPA and the LEC Project Participants.
Geothermal Project: NCPA has developed a geothermal project (the "Geothermal Project") located on
federal land in certain areas of Sonoma and Lake Counties, Califomia (the "Geysers Area"). In addition to the
geothermal leasehold, wells, gathering system and related facilities, the Geothermal Project consists of two
electric generating stations (Plant 1 and Plant 2), each with two 55 MW (nameplate rating) turbine generator
units utilizing low pressure, low temperature geothermal steam, associated electrical, mechanical and control
facilities, a heat dissipation system, a steam gathering system, a transmission tapline and other related
facilities. Geothermal steam for the project is derived from the geothermal property, which includes wellpads,
access roads, steam wells and reinjection wells. NCPA formed two not-for-profit corporations controlled by its
Members to own the generating plants of the Geothermal Project. NCPA manages the Geothermal Project for
the corporations and is entitled to all the capacity and energy generated by the Geothermal Project.
As noted above, the Geothermal Project consists of two operating electric generating stations (Plant I
and Plant 2), where Plant I contains two 55 MW (nameplate rating) turbine generator units, and Plant 2
contains one 52.73 MW turbine generator unit. Plant I and Plant 2 werc originally developed and operated as
separate projects referred to as "Geothermal Project Number 2" and "Geothermal Project Number 3,"
respectively. Plant 1 and Plant 2 are now operated together as the Geothermal Project pursuant to the terms of
the Amended and Restated Geothermal Operating Agreement.
Steam for NCPA's geothermal plants comes from lands in the Geysers Area, which are leased by
NCPA from the federal govemment. NCPA operates these steam-supply areas. Operation of the geothermal
plants at high generation levels, together with high steam usage by others in the same area, resulted in a decline
in the steam production from the steam wells aT arate greater than expected. As a result, by April 1988, for the
purpose of slowing the decline in the steam field capability, NCPA changed its steam field production from
base-load to load-following and reduced average annual generation. These changes were effective in reducing
the decline in steam production.
NCPA entered into agreements with other geothermal operators in the Geysers Area to finance and
construct the Southeast Geysers Effluent Pipeline Project, which was completed in September 1997 and began
operating soon thereafter. The 26-mile pipeline collects waste-water from Lake County Sanitation District
treatment plants at Clearlake and Middletown and delivers the wastewater to NCPA and the other Geysers
steam field operator for injection into the steam field. In 2017, NCPA received approximately 55% of the
wastewater for reinjections from this effluent pipeline.
NCPA has also implemented and continues to implement various operating strategies and
modifications to further reduce the rate of decline in steam production. NCPA has modified all of the steam
turbines and the associated steam collection system to enable generation with lower pressure steam and
increased conversion efficiencies ofthe available steam resource.
Average annual generation of the Geothermal Project was approximately 103 MV/ gross ("MWG")
for calendar year ("CY") 2017. Based on cunent operating protocols and forecasted operations, after CY 2017,
both the average and peak capacity are expected to continue to decrease, reaching approximately 99.9 MW in
calendar year 2018 and75.4 MW by calendar year 2039. Under terms of the federal geothermal leasehold
agreements, which became effective August 1,1974, the leasehold had a 10-year primary term with provision
for renewal as long thereafter as geothermal steam is produced or utilized, but not longer than 40 years;
however, in 2013, NCPA renewed the leasehold. At the expiration of that period, if geothermal steam is still
being produced, NCPA has preferential right to renew the leasehold for a second term. The leasehold also
requires NCPA to remove its leasehold improvements including the geothermal plants and steam gathering
system when and if NCPA abandons the leasehold. These decommissioning costs are currently estimated to
total approximately $59.3 million. NCPA has been collecting monies to pay the expected decommissioning
22
costs since 2007 and holds $16.2 million in a reserve for such purpose as of June 30,2017. Collections towards
future decommissioning costs are expected to be approximately $1.8 million for fiscal year 2017'18.
Geysers TransmiSsion Project: In order to meet certain obligations required of NCPA to secure
transmission and other support services for the Geothermal Project, NCPA has undertaken a geysers
transmission project (the "Geysers Transmission Project") with the Geysers Transmission Project participants.
The Geysers Transmission Project includes (i) a co-tenancy interest in PG&E's 230 kV line from Castle Rock
Junction in Sonoma County to the Lakeville Substation (the "Castle Rock to Lakeville Line"), (ii) additional
firm transmission rights in the Castle Rock to Lakeville Line and (iii) the Central Dispatch Facility.
Capital Facilities Project: The NCPA Capital Facilities Project, known as Combustion Turbine Project
Number Two, currently consists of one power generating station, Unit One, with a design rating of 49.9 MW
located in the City. Such power generating station consists of a single natural gas-fired steam injected gas
turbine (STIG), generator, and required auxiliary and electrical interconnection systems.
Unit One is economically dispatched to meet the project participants' load, depending on the amount
of generation available from NCPA's hydroelectric project and prices of alternative electric energy supplies, to
meet other NCPA Members' load or to sell power to third parties depending on natural gas prices and electric
energy prices.
Combustion Turbine Project Number One: The Combustion Turbine Project Number One (the
"Combustion Turbine Project") originally consisted of five combustion turbine units, each nominally raled 25
MV/, 'with two units located in each of Roseville and Alameda and one in the City. Sale of the two units
located in Roseville to the City of Roseville was effective on September l, 2010.
The Combustion Turbine Project provides capacity that is (i) economically dispatched during the peak
load period to the extent permitted by air quality restrictions and (ii) to be used to meet the certain capacity
reserve requirements (e.g., resource adequacy requirements). This resource provides the capacity below current
spot market prices for capacity but as is typical of this type of technology, the average cost for power per kWh
of power delivered to the participants in the Combustion Turbine Project is comparatively expensive.
NCPA, on behalf of the project participants of Combustion Turbine Project Number One and of the
Capital Facilities Project's Unit One, has entered into a Master Transaction Confirmation that is appended to
and made part of a Base Contract for Sale and Purchase of Natural Gas (the "Consolidated Natural Gas
Agreement"), effective on October 30, 2072, with EDF Trading North America, LLC ("EDF"). The
Consolidated Natural Gas Agreement provides gas supply and management services, including the following:
Supply of spot market gas for the full daily output of Combustion Turbine Project Number One
and Unit One of the Capital Facilities Project (approximately 35,136 MMBtu/day); and
Scheduling, nomination, balancing and settlement services for NCPA gas supplies from third
parties.
NCPA also has entitlement rights to natural gas pipeline capacity of approximately 2,743 MMBtu/day
sourced at AECO (Alberta) and sinking at PG&E Citygate (California). The four pipeline segments that are
included in the contiguous pipeline entitlement include pipeline contained in the following natural gas systems:
NOVA, Foothills, GTN, and CTG. NCPA's nãtural gas pipeline is managed by Mercuria Energy America,
Inc., pursuant to an Asset Management Agreement for Pipeline Transport Capacity dated January 1, 2015. For
release of such natural gas pipeline to Mercuria Energy America, Inc., NCPA is paid the value of the unused
pipeline capacity by the pipeline manager.
23
In addition, NCPA and EDF entered into an agreement to provide the gas supply and the nomination,
imbalance and settlement services for NCPA's Lodi Energy Center, which became effective on September l,
2016.
TANC Calíþrnía - Oregon Transmßsìon Project. The City has executed certain agreements to
acquire a participation percentage share of TANC's entitlement of the California-Oregon Transmission Project
("COTP") transfer capability. The City participated in the acquisition of an increased share of transfer
capability of the COTP in connection with the acquisition by TANC in April 2008 of the COTP transmission
assets of the City of Vemon, California ("Vemon"), one of the original owners of the COTP, which acquisition
was financed by TANC through the issuance of additional TANC debt (theooVemon acquisition debt").
On April 2,2014, the Lodi City Council approved a25-year layoff of the City's 26.7 MW share of
COTP transfer capability, effective July 1, 2014, whereby the City and all of the TANC Members who are in
the balancing authority area of the Califomia Independent System Operator Corporation ("CAISO") will lay
off their interests to certain other COTP participants (i.e., Modesto Irrigation District ("MID"), Turlock
Irrigation District ("TID'i) and Sacramento Municipal Utility District ("SMUD")) (subject to certain rights of
the City and the other layoff entities to recall, and certain rights of MID, TID, and/or SMUD to retum, up to
50%o of their respective shares of the entitlement amount laid off). In exchange for their respective increased
right to use of COTP transfer capability, MID and SMUD will pay the City's (and the other layoff entities')
current allocated share of COTP costs. This layoff arrangement does not change the City's membership status
in TANC and does not relieve the City of its obligations under the TANC Agreement in the event of any
default in payment by an acquiring party. See also "Indebtedness; Joint Powers Agency Obligations" below.
TANC Teslø-Mìdwøy Transmission Servíce. TANC and certain TANC Members have arranged for
Pacific Gas & Electric Company ("PG&E") to provide TANC and its members with 300 MV/ of firm bi-
directional transmission capacity on its transmission system between its Midway Substation near
Buttonwillow, Califomia, and its Tesla Substation near Tracy, California, near the southem physical terminus
of the COTP (the "Tesla-Midway Transmission Service") under an agreement known as the South of Tesla
(SOT) Principles. The City's share of this Tesla-Midway Transmission Service is 6.21MW. The City has
utilized its full allocation of Tesla-Midway Transmission Service for firm and non-firm power transactions in
the past. The City is responsible for 2.07Vo of TANC's SOT debt service of approximately $53,000 per year.
Renewable Resources
In addition to cunent renewable contracts and resources, the City expects to procure, either on its own
or through NCPA, additional renewable power resources that satisfy applicable State requirements, the main
provisions of which are currently contained in the California Renewable Energy Resources Act ("SBX1 2"),
the Clean Energy and Pollution Reduction Act of 2015 ("SB 350"), and the California Global Warming
Solutions Act of 2006 (the "GWSA"). See "FACTORS AFFECTING THE ELECTRIC UTILITY
INDUSTRY-Califomia Climate Change Policy Developments" in the front part of this Official Statement.
The City's current renewable power resources include geothermal, solar and small hydro.
With its existing power resources, participation in a new solar energy project (described below), and
historic caffyover, the City anticipates meeting its Renewables Portfolio Standard ("RPS"¡ requirements
through atleast2}2l.
The Astoria 2 Solar Project, which reached commercial operation on December 9,2016, is a 75 MV/
photovoltaic plant developed by Recurrent Energy, located in the southeastern portion of Kem County. The
City entered into a power purchase agreement with Recurrent Energy for a 13.3333Yo, or l0 MW, share of the
output of the Astoria 2 Solar Project, which is enough energy to meet approximately 7% of the Electric
System's retail load.
24
The contract term for the Astoria 2 Solar Project is 20 years. Energy from this project qualifies as
Portfolio Content Category 1 energy under RPS. Combined with existing generation resources and historic
caryover, this project will enable the City to meet its RPS obligations through a|least202l.
The cost of power from the Astoria 2 Solar Project is fixed at $63/MWh for the 2}-year life of the
project. The price is only paid for energy actually delivered. The City does not have any ownership interest in
the project and will not incur any capital expenditures related to the project.
The Antelope Expansion Phase 1 Solar Facility ("Antelope Expansion Project"), which is expected to
reach commercial operation on December 31,2021, is a 5l MW photovoltaic plant developed by Antelope
Expansion 18, LLC, located inthe City of Lancaster, Los Angeles County, California. NCPA, on behalf of
the City and other NCPA members, entered into a power purchase agreement with Antelope Expansion 18,
LLC for a33.78Yo, or 17 MW, share of the output of the Antelope Expansion Project. The City has a 58.82Yo,
or 10 MW, project participation percentage share of the Antelope Expansion Project.
The contract term for the Antelope Expansion Project is 20 years. Energy from this project will
qualify as Portfolio Content Category 1 energy under RPS. The output produced from the project will
contribute to the City's compliance with RPS obligations beyond the 2020 compliance period.
The cost of power from the Antelope Expansion Project is fixed at $39.0044Wh for the2}-yeat life of
the project. The price is only paid for energy actually delivered. The City does not currently have any
ownership interest in the project, and as such will not incur any capital expenditures related to the project'
Pursuant to SBXl-2, during Compliance Period I (January l,20ll to December 31,2013), an average
of 20Yo of the Electric System's retail sales were required to be procured from eligible renewable energy
resources. On June 13,2017, the City received a compliance determination from the California Energy
Commission indicating the City had met the procurement target. The City exceeded the procurement target of
20Yo for Compliance Period 1 , procuring 2l .7yo of its retail sales from eligible renewable energy resources.
During Compliance Period 2 (January 1,2014 to December 31,2016) under SBX1'2, the Electric
System was required to make reasonable progress each year to ensure it achieved 25Yo of retail sales from
eligible renewable energy resources by December 31,2016. The City exceeded the RPS target under SBXI-2
for Compliance Period 2. In calendaÍ year 2014, approximately 21.1% of the City's energy portfolio was
supplied from eligible renewable resources. In calendar year2015, approximately 21% of the City's energy
portfolio was supplied from eligible renewable resources. In calendar year 2016, approximately 24Yo of the
City's energy portfolio was supplied from eligible renewable resources'
During Compliance Period 3 (January l, 2017 to December 31, 2020), with the adoption by the
California Energy Commission ("CEC") of regulations to enforce SBXI-2, the Electric System is required to
procure eligible renewable energy resources equal to a total of 27o/o of its 2017 retail sales, 29%o of its 2018
retail sales, 31% of its 2019 retail sales, and 33% of its 2020 retail sales. Based upon preliminaty data, the City
currently estimates that approximately 30o/o of the City's energy portfolio was supplied from eligible
renewable resources in 2017. The City expects to satisfy the current RPS targets under SBX1'2 for
Compliance Period 3 through 2020.
Future Power Supply Resources
Based upon its current forecasted sales growth, resource mix and market prices, the City believes its
annual balance-of-month, day-ahead, and hour-ahead purchases will be less than 25%o of total energy
requirements for the next two years. The City's interest in multiple NCPA generation projects provides
substantial capacity toward covering the City's net short position in the event that market prices rise above the
respective unit's cost of production. In addition, due to the long lead time in acquiring certain resources'
including renewable resources, the City, through NCPA, continues to consider additional projects that might
25
be included in its resource mix in coordination with NCPA and other NCPA members. On March 21,2018,
the City Council approved a Second Phase Agreement with NCPA to conduct feasibility and planning work
associated with the development of one or more photovoltaic solar projects located in Lodi and throughout
other NCPA member service territories. If successful, the City anticipates siting approximately 5 MW of solar
capacity as part of its distribution system to help meet future RPS requirements and reduce transmission
charges.
Energy Effïciency and Conservation
Since 1998, the City has maintained a public benefits program as required by State law, a component
of which is demand-side management (commonly referred to as energy efficiency and conservation). Under
this program, the City offers customers rebates to incentivize investment in energy efficient products and
improvements, including insulation, replacement windows, improvements to air duct systems, high-efficiency
air conditioners, heat pumps, attic and whole-house fans, refrigeration efficiency improvements, EnergyStar
appliances, web-enabled smart thermostats, pump/motor/process equipment improvements and lighting
retrofits.
The City also provides energy education for residential and non-residential customers, including on-
site energy audits, and hosts a number of programs to promote energy education and customer outreach. As
part of its education and customer outreach efforts, the City provides a school-based energy efficiency
education program for 6th grade elementary school students, offers free energy efficiency measures through its
direct install program and is a sponsor of the annual NorCal Science Festival.
The City utility customers continue to be positively impacted by one or more of the City's public
benefits programs, either in the form of a direct utility rebate or via one of its outreach and educational
programs.
Interconnections, Transmission and Distribution Facilities
The Electric System has approximately 131 miles of overhead lines and over 123 miles of
underground lines. The Electric System is interconnected with the system of PG&E (three 60 kV lines). The
City owns facilities for the distribution of electric power within the city limits of the City, which includes
approximately 14 miles of 60 kV power lines, approximately 240 miles of 12 kV distribution lines
(approximately 5l%o of which are underground) and four substations. The Electric System experiences
approximately 45.6 minutes of outage time per customer per year.
Forecast of Capital Expenditures
The City's five-year capital projection for the electric facilities contemplates potential capital
expenditures for substation upgrades, streetlight improvements, ongoing overhead and underground
maintenance, and related system reliability projects. The City anticipates funding its capital costs from rate
revenues, special development fees and potential additional Parity Obligations. Over the next five years,
capital expenditures (not including the project described in the next paragraph) are estimated to cost
approximately $16 million.
In addition, on March 22, 2018, the California Independent System Operator ("ISO") Board of
Directors approved the ISO 2017-2018 Transmission Plan. It includes a project, the Lockeford-Lodi Area 230
kV Development, to solve thermal overload and voltage issues on the 60-kV network between Pacific Gas and
Electric Company's (PG&E) Lockeford Substation and the Electric System's Industrial Substation. The project
consists of a double-circuit 230 kV line from the PG&E Lockeford Substation to a new 230160 kV substation
to be built by the City. The estimated in-service date is 2023. The cost to the Electric System is currently
estimated to be approximately $30 million, which the City expects to be funded through the issuance of
26
additional Parity Obligations. The project is anticipated to realize a cost savings to the Electric System of
approximately $4 million annually by eliminating the low voltage transmission access charge.
Wholesale Power Trading
For a number of years, the City has used its energy and transmission resources, together with NCPA's
power scheduling capabilities, to buy and sell energy in the western North American market. The principal
reason for wholesale power trading is to optimize the value of the utility's assets and cost-effectively serve its
retail load.
NCPA has an Energy Risk Management Policy and Energy Risk Management Regulatioris in place
intended to set up the confines in which the trading operations undertaken on behalf of its members may occur.
The objectives set forth in these documents include evaluating the creditworthiness of the counterparties, and
monitoring and managing the aggregate credit exposure. The City also adopted a Risk Management and
Compliance Program and established an internal Risk Oversight Committee in January 2006 to govern its
wholesale market activities.
Rates and Charges
The City's fiscal year 2016-17 average rate per kWh for residential service was 17.8 cents. The City's
fiscal year 2016-17 average rate for commercial and industrial service was 14.3 cents per kWh. The City's
fiscal year 2017 -18 average rate per kWh for residential service is projected to be 18.5 cents. The City's fiscal
year 2017-18 average rate for commercial and industrial service is projected to be 14.9 cents per kWh.
The following table presents a recent history of the City's material rate adjustments since 2009. The
last base rate increase took effect July 1,2017.
ELECTRIC SYSTEM
RATE CHANGES
Effective Date Percent Change
December 2017
July 2017
November 2016
September 2015
January 20 1 5
July 201 3
Elimination of Solar Surcharge
Average 2%o inqease across all rate classes
Electric Vehicle rate restructure replacing minimum charge with customer
charge; aligning energy charges with residential rates
City rate restructure replacing minimum charge with customer charge
Residential rate restructure replacing minimum charge with customer
charge; reduction to 3 energy tiers; Mobile home park rate restructure
replacing minimum charge with customer charge and reducing pad discount;
reduction to 3 energy tiers
Extended Economic Development rates
Average 5olo increase across all rate classes
Established Electric Vehicle and Industrial Equipment Charging Rates
Source: City of Lodi.
ln addition, the City Council approved an ordinance on March 21, 2018 revising non-residential
electric rates as it relates to power factor adjustments. The ordinance takes effect July 1, 2018. The change
impacts only approximately 30 large commercial and industrial customers and represents less than a l%
inCrease to their annual eleitric charges. Finally, the City is scheduled to conduct u pubti. hearing on April 4th
to consider introducing an ordinance extending Economic Development Discounts for commercial and
industrial customers. If approved, the ordinance would take effect July l, 2018 and be available for 5 years.
27
The City Council reviews electric system rates periodically and makes adjustments as necessary.
While rate increases are not currently anticipated in the near term, the City annually reviews its financial and
capital planning forecasts to determine compliance with Council approved reserve targets. All customers pay
rates in accordance with the standard rate tariffs published in the Lodi Municipal Code.
The City implemented an Energy Cost Adjustment ("ECA") in August 2007. The purpose of the ECA
is to recover market power costs due to the fluctuations in power market conditions and energy sales. The
ECA is reviewed monthly and is either increased or decreased as market conditions and energy sales change.
The historic, average ECA is listed below.
ENERGY COST ADJUSTMENTS
For Fiscal Years 2012-13 through 2016-L7
X'iscal Year ECA ($ikwh)
2012-13
2013-14
2014-15
2015-16
2016-17
0.0051
0.0082
0.00s7
0.0064
0.00s6
Electric System Operations Since Industry Restructuring
Since the deregulation of the Califomia energy markets, the City has implemented revenue
enhancements, cost containment measures and changes in operating procedures to help mitigate financial risks
associated with changes in market power costs. These actions include the implementation of an Energy Cost
Adjustment (ECA) for all customers. This rate action guarantees coverage of bulk power purchase costs. See
"Rates and Charges" above.
Consistent with the Risk Management and Compliance Program, the City has established guidelines
which provide a time and price triggered tier approach to closing open positions as long as 5 years into the
future. The table below illustrates this approach:
Month Covered Position As 7o of Forecasted Load
0 designates
current month
l-3
3+
6+
9+
12+ months
>60t1'
80-8s%
80-8s%
70-7s%
60-65%
60-6s%
6Oth
85-90%
85o/o
75-80%
65-7OYo
6s-70%
5oth-Median
90%
85-90%
'80-85%
70-75%
70-7s%
2sth
90%
90%
8s-90%
75-80%
75-80%
<2sth
90%
90%
90%
80%
80%
The Risk Management and Compliance Program applies to all aspects of the City's wholesale
procurement and sales activities, long-term contracting associated with energy supplies, and associated
financing related to generation, transmission, transportation, storage, Renewable Energy Credits (RECs),
Greenhouse Gas offsets, Resource Adequacy capacity, ancillary services and participation in Joint Powers
Agencies.
In October 2!017 The City Council adopted a Strategic Plan for the Electric System (the "strategic
Plan"). The Strategic Plan identified strengths and weaknesses of the Electric System and will be used to
guide staff in the development of action plans and recommendations presented to the City Council for
approval. The Strategic Plan will be reviewed during each budget cycle and updated at least every five years.
28
The strengths identified included competitive rates, load and resource diversity, high reliability economy of
scale through participation in NCPA, and customer satisfaction. Weaknesses included billing system
limitations, complex rates, need for a succession plan, and aging infrastructure. The Strategic Plan also
identified potential threats, including unfunded mandate, increased power costs, and cyberþhysical threats.
The Strategic Plan included strategic areas of focus to address potential weaknesses and threats, and also set
forth a number of customer, technology, financial, reliability, workforce and accountability goals.
Customers, Sales, Revenues and l)emand
The number of customers, kWh sales, revenues derived from sales by classification of service and
peak demand during the five fiscal years 2012-13 through 2016-17 , are listed below.
ELECTRIC SYSTEM
CUSTOMERS, SALtrS, REVENUES AND DEMÄND(I)
Fiscal Years Ended June 30'
2013 2014 2015 2016 2017
Number of Customers:
Residential
Commercial
Industrial
Other
Total
Kilowatt Hour (kWh) Sales
Residential
Commercial
Industrial
Other
Total
Revenues from Sale of Energy (2)
Residential
Commercial
Industrial
Other
Total
22,369
2,902
39
246
22,547
2,898
38
2s0
22,355
3,264
40
2s3
22,459
3,296
44
213
22,870
3,071
4t
170
25,556
151,814,834
140,733,500
131,473,405
17,800,726
25,733
148,762,783
146,176,148
130,333,102
12,022,160
25,912
148,950,428
149,380,413
128,814,673
11,635,397
26,012 26,152
151,137,940
150,522,357
125,018,845
70,567,193
146,192,111
149,882,241
118,900,040
10,436,182
435,822,465 437,294,193 438,780,911 437,246,335 425,410,574
925,377,978
27,816,149
14,173,951
1,861,567
s25,270,075
23,127,603
14,381,296
I ,913,833
s25,165,194
23,780,354
14,418,921
1,871,470
s26,525,558
24,693,195
74,469,390
1,819,036
s26,021,916
24,432,075
I 3,852,860
1,540,730
s63,229,645
123.3
$64,692,808
128.7
s65,235,939
134.0
s67,507,179
124.3
$65,847,581
128.7Peak Demand (MW)
(t) Columns may not add to totals due to rounding.(2) Excludes revenues from California Energy Commission Tax.
Sources'. City of Lodi, comprehensive annual fìnancial statements and Customer Information System reports.
The Electric System currently has approximately 500 net energy metering systems within its service
territory, totaling 3.8 megawatts of combined capacity. The City does not permit net energy metering
aggregation (NEMA) within the Electric System's service territory.
Largest Customers
The table below shows the type of business of each of the top ten customers of the Electric System by
energy sales.
29
30
Top Ten Customers
Fiscal Year ending June 300 2017
Business Type
Food/Beverage
Education
Govemment
Plastics Pipe
Healthcare
Canning
Industrial Instruments
Grocery Store
Plastics Film/Sheet
Manufacturing
Total Top Ten
NCPA
Geothermal Project Three
Hydroelectric Project
Capital Facilities Proj ect
Lodi Energy Center, Issue One
TOTAL
Outstanding Lodi's
Debt(r) Participation@)
Revenue
s 3,878,944
2,756,923
2,739,567
2,489,317
2,389,087
2,353,691
7,781,742
1,336,611
1,279,297
l,og5,l40
o/o of Total
5.9%
4.2
4.2
3.8
3.6
3.6
2.7
2.0
1.9
1.6
s 22,029,305 33.s%
Source: City of Lodi.
Joint Powers Agency Obligations
The following table shows the City's participation and share of debt service obligation (without giving
effect to any "step up" provisions) for each of such joint powers agency projects in which it participates. Such
agreements are on a "take-or-pay" basis and are payable as Maintenance and Operation Costs of the
Electric System. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS - Take-
or-Pay Obligations." Certain of these agreements contain "step up" provisions obligating the City to pay
a share of the obligations of a defaulting participant.
ELECTRIC SYSTEM
OUTSTANDING DEBT OF JOINT POWERS AGENCIES
(Dollar Amounts in Millions)
(As ofJune 30,2017)
Lodi's Share of
Outstanding
Debt(t)
s 32.8
343.8
37.4
233.4
s 3.4
36.4
14.8
39.7
10.28%
10.60(3)
39.50
17.03
647.4 100.00%94.3
(r,, Source: NCPA. Outstanding debt does not include unamortized premium/discount. Excludes the City's
participation share of TANC COTP entitlement which has been assigned to other TANC members. See "Joint
Powers Agency Resources - TANC Califomia-Oregon Transmission Project."
Q) Participation obligation is subject to increase upon default of another participant. Such increase shall not exceed,
without the written consent of a non-defaulting participant, an accumulated maximum of 25Yo of such non-
^ defaultingparticipant'soriginal participation.(r) The City's actual payments represent approximately 10.64% of outstanding debt service as a result of credit to
non-participating members with respect to portion of debt obligation.
Source: City ol Lodi.
31
The City estimates its payment obligations for debt service on its joint powers agency debt obligations
aggregated approximately $7.65 million for the fiscal year ended June 30, 2017 and will aggregate
approximately $7.99 million for the fiscal year ending June 30, 2018. It should be noted that these amounts do
not include any COTP amount as the City's share of the debt was laid off effective July 1,2014. A portion of
the joint powers agency debt obligations are variable rate debt, liquidity support for which is provided through
liquidity arrangements with banks. Unreimbursed draws under liquidity arrangements supporting joint powers
agency variable rate debt obligations bear interest at a maximum rate substantially in excess of the current
interest rates on such obligations. Moreover, in certain circumstances, the failure to reimburse draws on the
liquidity agreements may result in the acceleration of scheduled payment of the principal of such variable rate
joint powers agency obligations. In connection with certain of such joint power agency obligations, the
respective joint powers agency has entered into interest rate swap agreements relating thereto for the purposes
of substantially fixing the interest cost with respect thereto. There is no guarantee that the floating rate payable
to the respective joint powers agency pursuant to each of the interest rate swap agreements relating thereto will
match the variable interest rate on the associated variable rate joint powers agency debt obligations to which
the respective interest rate swap agreement relates at all times or at any time. Under certain circumstances, the
swap providers may be obligated to make payments to the applicable joint powers agency under their
respective interest rate swap agreement that is less than the interest due on the associated variable rate joint
powers agency debt obligations to which such interest rate swap agreement relates. In such event, such
insufficiency will be payable as a debt service obligation from the obligated joint powers agency members (a
corresponding amount of which proportionate to its debt service obligations to such joint powers agency could
be due from the City). In addition, under certain circumstances, each of the swap agreements is subject to
early termination, in which event the joint powers agency could be obligated to make a substantial payment to
the applicable swap provider (a corresponding amount of which proportionate to its debt service obligations to
such joint powers agency could be due from the City). For a description of the ootake-or pay" nature of City's
obligations with respect to the foregoing, see "SECURITY AND SOURCES OF PAYMENT FOR THE 2018
BONDS-Take-or-Pay Obligations."
Signifïcant Accounting Policies
The City's most recent CAFR for the fiscal year ended June 30,2017 was audited by Macias, Gini &
O'Connell, LLP, Sacramento, California, in accordance with generally accepted auditing standards, and
contains opinions that the financial statements present fairly the financial position of the various funds
maintained by the City. The reports include certain notes to the financial statements which may not be fully
described below. Such notes constitute an integral part of the audited financial statements. Copies of these
reports are available on request from the City of Lodi, Finance Department, 310 West Elm Street, Lodi,
California 95240. Govemmental accounting systems are organized and operated on a fund basis. A fund is
defined as an independent fiscal and accounting entity with a selfbalancing set ofaccounts recording cash and
other financial resources, together with all related liabilities and residual equities or balances, and changes
therein. Funds are segregated for the purpose of carrying on specific activities or attaining certain objectives in
accordance with special regulations, restrictions or limitations.
The electric system is accounted for as an enterprise fund. Enterprise funds are used to account for
operations (Ð that are financed and operated in a manner similar to private business enterprises (where the
intent ofthe governing body is that the costs (expenses, including depreciation) ofproviding goods or services
to the general public on a continuing basis be financed or recovered primarily through user charges) or (ii)
where the goveming body has decided that periodic determination of revenues earned, expenses incurred
and/or net income is appropriate for capital maintenance, public policy, management control, accountability or
other purposes.
The accounting policies of the City conform to generally accepted accounting principles (GAAP) as
applicable to governments.
32
Condensed Operating Results
The following table sets forth summaries of operating results of the Electric System for the five fiscal
years 2012-13 through 2016-17 . The information for the fiscal years ended June 30, 2013 through June 30,
2017 was prepared by the City on the basis of its audited financial statements for such years.
ELECTRIC SYSTEM
SUMMARY OF OPERATING RESULTS AND SELECTED BALANCE SHEET INFORMATION(I)
($ in 000s)
Fiscal Year ended June 300
2013 2014 2015 2016 20t7
OPERATING REVENUES:
Rate Revenue
ECA Revenue
Other Revenue
Total Operating Revenues
OPERATING EXPENSES:
Purchased Power
Non-Power Costs(2)
Total Operating Expenses
NET REVENUE AVAILABLE FOR
DEBT SERVICE
Debt Service
Debt Service Coverage Ratio(l)
Remaining Revenue After Debt Service
OTHER REVENUES (EXPENSES):
Greenhouse gas allowance
Payments in Lieu of Taxes
Net Cash Flow Before Capital
Expenditure
$ 61,888 $
1,341
745
63,370 $
1,867
l,gg5
61,837 s
2,956
2,451
65,265
2,242
2,933
s 64,114
1,734
1,967
8 63,974 $ 67,144 S 67,132 S 70,440 $ 67,815
$ 39,191
12,018
$ 37,303 S
13,046
38,512 $
13,604
37,788 $
13,417
35,650
16,609
$ 51,209 $ 50,349 $ 52,116 $ 51,205 S 52,259
s12,765 s16,795 s15,016 s19,235 $15,556
s8,414 $8,356 $8,318 $8,289 s5,288
1.52
$4,351
2.01
$8,439
1.81
s6,698
2.32
$10,946
2.94
$10,268
2,018
(6,977)
453
(6,977)
2,323
(7,033)
1,571
(7,082)
2,370
(7,l3l)
$(608)$ I,915 $ 1,988 S5,435 $5,507
ENDING RESERVES(3)s26,642
(r,, Figures shown are calculated in accordance with the documents pursuant to which the City's outstanding electric system
revenue obligations were issued, which may or may not be on the same basis as Generally Accepted Accounting Principles. See
"Indebtedness; Joint Powers Agency Obligations."(2) Non-power costs include costs of services provided by other departments and does not include depreciation and amortization
expense.(J/ Includes reserve funds held locally and available at NCPA. The City used a portion of these funds to pay debt service with
respect to the Refunded Bonds which reduced the balance as of such date to approximately $22.7 million.
Source: City of Lodi.
JJ
Projected Operating Results
The estimated projected operating results for the Electric System for Fiscal Year 2017-18 through
Fiscal Year 2021-22 are set forth below, reflecting certain significant assumptions concerning future events
and circumstances. The financial forecast represents the estimate of projected fìnancial results of the Electric
System based upon the City's judgment of the most probable occurrence of certain important future events.
The assumptions set forth in the footnotes to the chart below are material in the development of the financial
projections of the City, and variations in the assumptions may produce substantially different financial results.
Actual operating results achieved during the projection period may vary from those presented in the forecast
and such variations may be material.
t7n8
Est.
18/19
Budget
19t20
Forecast
20/21
Forecast
2t/22
Forecast
Beginning Reserves(t)
Operating Revenues:
Rate Revenue
ECA Revenue
Other Revenue(2)
Total Operating Revenues
Operating Expenses:
Purchased Power
Non-Power Costs(3)
Total Operating Expenses
Net Revenue Available for Debt Service
Debt Service
2008 COPs
2018 Refunding Bonds
Total Debt Service
Debt Service Coverage Ratio
Other Revenues (Expenses):
Greenhouse Gas Allowance
Impact Fees
Payment in Lieu of Taxes
PERS Stabilization Contribution
Net Cash Flow Before Capital
Expenditures
Capital Funded from Rates
s 26,642,227 s 27,191,421 S 25,278,669 8 26,019,752 $ 25,592,301
s 63,937,970
5,445,500
3.146.090
$ 65,160,780
4,547,370
2.696.450
$ 65,486,584
5,866,899
$ 2"s23.000
$ 73,876,483
$ 65,814,017
6,700,084
$ 2,513,000
s 75,027,101
$ 66,143,087
. 7,530,049
$ 2.883.000
$ 76,556,136s 72,529,560 $ 72,404,600
s 41,377,460
15.892"170
I 40,699,940
17.675.780
s 42,200,234
18.024.871
$ 60,225,105
s 13,651,378
ss 3"849,4s0
$ 3,849,450
3.55
$ 43,215,085
18"490.635
s 44,227,626
18.944.202
s 57,269,630 $ 58,375,720
$ 14,029,990$ 15,259,930
$ 5,297,940 $ 3,978,938
- 1,486.804
$,297,840
2.88
s 5,465,742
2.57
s 61,705,720
$ 13,321,381
$
s 4.285.900
$ 4,285,900
3.11
s 63,171,827
$ 13,384,309
$
s 4.269.250
s 4,2690250
3.14
Remaining Revenue After Debt Service $ 9,962,090 $ 8,563,138 $ 9,801,928 $ 9,035,481 $ 9,115,059
s 769,500 $
$ 143,470 $
$ (7,158,850) $
$ (s40,s 16) $
$ 3,175,694 $
781,670
178,820
(7,197,380)
796,916
100,000
(7,247,762)
645,564
100,000
(7,298,496)
91,801
100,000
(7,349,585)
1,0833,4526,242,3
$
$
$
$
$2,482,549 1,957,274
$ 2,626,500 $ 4,239,000 $ 2,710,000 $ 2,910,000 $ 3,820,000
s 27,191,42t $ 25,278,669 S 26,019,752 $ 25,592,301 S 23,729,575Ending Reserves:
Note: Assumes no rate adjustments(1) Includes local cash and cash held at NCPA in General Operating Reserve (GOR)(2) Includes Greenhouse Gas Allowance revenue estimated to pay eligible Operating Expenses(3) Includes loan repayment for LED Streetlight Project
34
RATE REGULATION
The City sets rates, fees and charges for electric service. The authority of the City to impose and
collect rates and charges for electric power and energy sold and delivered is not subject to the general
regulatory jurisdiction of the Califomia Public Utilities Commission (the "CPUC"), and cunently neither the
CPUC nor any other regulatory authority of the State of California nor FERC approves such rates and charges.
It is possible that future legislative and/or regulatory changes could subject the rates and/or service area ofthe
City to the jurisdiction of the CPUC or to other limitations or requirements. See also "CONSTITUTIONAL
LIMITATIONS ON TAXES AND FEES" for a discussion of certain voter-approved constitutional measures
affecting the imposition of fees and charges by governmental agencies in the State.
FERC potentially could assert jurisdiction over rates of licensees of hydroelectric projects and
customers of such licensees under Part I of the Federal Power Act, although it as a practical matter has not
exercised or sought to exercise such jurisdiction to modify rates that would legitimately be charged. Even if it
did assert such jurisdiction, the City's hydroelectric resources currently constitute less than l0o/oof total City
power resources.
Under sections 210, 2ll, 2ll{, and 212 of the Federal Power Act, FERC has the authority, under
certain circumstances and pursuant to certain procedures, to order certain utilities (municipal, distribution
cooperative or otherwise) to provide transmission access to others at FERC-approved rates. See "OTHER
FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY."
The CEC is authorized to evaluate rate policies for electric energy as related to the goals of the Energy
Resources Conservation and Development Act and to make recommendations to the Governor, the Legislature
and publicly owned electric utilities.
FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY
The following regulatory programs affect the Electric System and the electric utility industry and
should be considered when evaluating the Electric System and considering an investment in the 2018 Bonds.
The City cannot predict at this time whether any additional legislation or rules will be enacted which will
affect the Electric System's operations, and if such laws or rules are enacted, what the costs to the Electric
System might be in the future because of such action.
California Climate Change Policy Developments
State regulatory agencies such as the Califomia Air Resources Board ("CARB") and the CEC are
pursuing a number of regulatory programs designed to reduce greenhouse gas ("GHG") emissions and
encourage or mandate renewable energy generation. The following is a summary of certain programs. See also
"Environmental Regulation and Permitting Factors" below.
GHG Regulations. ln September 2006, then-Governor Schwarzenegger signed into law the California
Global Warming Solutions Act of 2006 or AB 32 (the "Global V/arming Solutions Act"). This law requires a
cut in GHG emissions from within the State by 2020 in order to reduce such emissions back to 1990 levels,
,which represents a reduction of approximately 25%o Statewide. In September 2076, Governor Brown signed
into law an amendment to the Global Warming Solutions Act, or SB 32, that requires a cut in GHG emissions
from within the State by 2030 in order to reduce such emissions to 40% below 1990 levels.
CARB implemented the Global Warming Solutions Act through regulations (the "Cap-and-Trade
Regulations") that imposed aggregate emissions limitations on the electricity generation industry in Califomia
and allocates the aggregate emissions limit through the distribution of allowances, or emission credits.
35
The Cap-and-Trade Regulations require all regulated entities to obtain and submit to CARB
compliance instruments (allowances and/or offsets) with respect to GHG emissions relating to its State
generation activities, as well as for imported electricity from dedicated out-of-state resources. In addition,
NCPA may indirectly bear compliance costs for independent generators that must purchase allowances for
their generation.
The City receives administrative allocations of allowances for some of their expected GHG emissions.
Entities that emit GHGs at levels above those for which they receive administrative allocations, if any, must
purchase the additional allowances they require at the CARB auctions or from other covered entities with
surplus allowances.
In July 2017, CARB adopted amendments to the Cap-and-Trade Regulations, which included revised
allowance allocations to electrical distribution utilities from 2021 to 2030. The City is expected to receive
more than $20 million in proceeds from the sale of these allowances, which will substantially minimize the
impact from CARB's compliance requirements.
In July 2017, CARB issued Board Resolution 17-21, which directs CARB staff to consider requiring
all electric distribution utilities to consign all administratively allocated allowances to auction. Currently, the
investor-owned utilities are required to consign their allowances to CARB's auctions, as well as Publicly-
owned utilities ("POUs") whose generation accesses the Califomia Independent System Operator ("ISO")
Balancing Authority. POUs served by non-lSO Balancing Authorities have the option of placing their
allowances to their compliance account to cover emissions from their generating stations and/or consigning a
portion of allowances to CARB's auctions.
In July 2017, Governor Brown signed into law AB 398 to extend the state's Cap-and-Trade
Regulation from 2021to 2030. The bill cleared both houses with a 2/3 supermajority vote, which protects the
legislation from certain legal challenges. Under AB 398, CARB is directed to address the following: establish
a price ceiling, offer nontradeable allowances at two price containment points below the price ceiling, transfer
current vintages allowances unsold for more than 24 months to the allowance price containment reserve,
evaluate and address allowance over allocation concems, set industry assistance factors for allowance
allocation, and establish allowance banking rules. AB 398 was passed in conjunction with two companion
bills: AB 617, which strengthens the monitoring of criteria air pollutants and toxic air contaminants in local
communities, and ACA 1, which establishes the Greenhouse Gas Reduction Reserve Fund. CARB expects to
initiate a public rulemaking process in early 2018 to amend the Cap-and-Trade Regulation to reflect the
requirements of AB 398.
GHG Emissions Perþrmance Standard and Financial Commiûnent Limits. Pursuant to SB 1368
(Chapter 598, Statutes of 2006), the CEC adopted a GHG emissions performance standard ("EPS") for electric
generating facilities of 1,100 pounds of C02 per MWh for "covered procurements" by POUs. SB 1368 also
prohibits POUs from making any "long-term financial commitment" in connection with "baseload generation"
that does not satisff the EPS. Generally, a oolong term financial commitment" is any new or renewed power
purchase àgreement with a term of five years or more, the purchase of an interest in a new power plant or any
investment, other than routine maintenance, in an existing power plant that extends the life of the plant by
more than five years or results in an increase in its rated capacity. "Baseload generation" means a power plant
that is intended to operate at an annualized capacity factor of60 percent or more.
2030 GHG Emissions Targets. SB 350 requires CARB, in consultation with the CPUC and the CEC,
to establish 2030 GHG emission targets for each electric utility in the state. CARB will establish a process for
setting such targets in early 2018. At present, these targets are non-binding, and primarily intended to help the
state measure progress toward the 2030 statewide goal outlined in SB 32. The targets, however, are expected to
be an input to the development of the Integrated Resource Plans that are required of the State's 16 largest
POUs, which include the four largest NCPA member systems (Santa Clara, Roseville, Redding, and Palo
Alto).
36
Energy Procurement and Efficiency Reporting. SB 1037, signed by then Governor Schwarzenegger in
September 2005, requires that each POU, including the Project Participants, prior to procuring new energy
generation resources, first acquire all available energy efficiency, demand reduction, and renewable resources
that are cost effective, reliable and feasible. SB 1037 also requires each POU to report annually to its
customers and to the CEC its investment in energy efficiency and demand reduction programs. The City is in
compliance with such reporting requirements.
Further, Assembly Bill2021 ("AB 2021"), signed by then Govemor Schwarzenegger on September
29, 2006, requires that POUs establish, report, and explain the basis of the annual energy efficiency and
demand reduction targets by June l, 2007 and every three years thereafter for a ten-year horizon. Assembly
Bill2227 extended the reporting timeframe from three to four years. Pursuant to the foregoing provisions the
City set a total target of 14,965 megawatt hours of electric energy savings from 2018 to 2027, or an average
annual target of 0.34 percent of total projected energy sales during this period. The information obtained from
the POUs is being used by the CEC to present progress made by the State to double energy efficiency savings
in electricity and natural gas final end uses by 2030, to the extent doing so is cost effective, feasible, and does
not adversely impact public health and safety, as prescribed in SB 350.
California Renewable Portþlio Standard. California's legislature and executive branch have been
active in promoting increasingly stringent renewable energy procurement requirements since 2002. Early
efforts established a standard of 20%o of renewable electricity generation by 2017. Since then, both legislative
and executive branch initiatives have raised that standard in multiple phases.
On April 12,201l, Govemor Brown signed into law the California Renewable Energy Resources Act,
or SBX 1-2. SBX 1-2 established procurement targets for three compliance periods to be implemented by the
procurement plan: 20Yo of the utility's retail sales were to be procured from eligible renewable energy
resources by December 1,2013;25%by December 31,2016; and33Yo by December 31,2020.
In October 2015, Govemor Brown signed into law SB 350, which requires the City to make
reasonable progress each year to ensure it achieves 40Yo of retail sales from eligible renewable energy
resources by December 31,2024,45o/o of retail sales from eligible renewable energy resources by December
31,2027, and 50%o of retail sales from eligible renewable energy resources by December 31,2030.
Renewable Energ,t Policy Developmenl. The State Legislature is considering the development of a
Clean Energy Standard for electric utilities, which will require California to meet 100% of its procurement
requirements with zero carbon resources by 2045. SB 100 is the vehicle for this effort and will be debated
further during the 2018 legislative session. The outcome could have a material impact on the Electric System
operations.
Environmental Regulation and Permitting Factors
General. Numerous environmental laws and regulations affect the Electric System's facilities and
operations for which the City is a project participant. The City monitors its compliance with laws and
regulations and reviews its remediation obligations on an ongoing basis. The following topics highlight some
of the major environmental compliance issues affecting the Electric System:
Regulatory Actions Lünder the Clean Air Act. The United States Environmental Protection Agency (the
"EPA") regulates GHG emissions under existing law by imposing monitoring and reporting requirements, and
through its permitting programs. Like other air pollutants, GHGs are regulated under the Clean Air Act
through the Prevention of Significant Deterioration ("PSD") Permit Program and the Title V Permit Program.
A PSD permit is required before commencement of construction of new major stationary sources or major
modifications of a major stationary source and requires best available control technologies ("BACT") to
control emissions at a facility. Title V permits are operating permits for major sources that consolidate all
Clean Air Act requirements (arising, for example, under the Acid Rain, New Source Performance Standards,
37
National Emission Standards for Hazardous Air Pollutants, and/or PSD programs) into a single document and
the permit process provides for review of the documents by the EPA, state agencies and the public. GHGs
from major natural gas-fired facilities are regulated under both permitting programs through performance
standards imposing efficiency and emissions standards.
On October 23,2015, the EPA published the Clean Power Plan and final regulations for (1) carbon
pollution standards for new, modified, and reconstructed power plans, and (2) carbon pollution emission
guidelines for existing electricity utility generating units. The total national emissions reduction goal under the
Clean Power Plan targets an average of a 32 percent reduction from 2005 levels by 2030, with incremental
interim goals for the years from2022 through 2029.The Clean Power Plan allows states multiple options for
measuring reductions and establishes different reduction goals depending upon the regulatory program set
forth in the state plan.
The Clean Power Plan is being challenged in the United States Circuit Court of Appeals for the
District of Columbia. The United States Supreme Court stayed implementation of the Clean Power Plan on
February 9, 2016 for a period of time until the D.C. Circuit renders a decision and the Supreme Court
concludes any proceedings brought before it. Due to the stay, states were not required to submit initial plans by
the original September 2016 deadline. The D.C. Circuit has continued to hold the case in abeyance and has
been requiring EPA to submit 30-day status updates.
On October 16,2017, the Federal Register published EPA's proposal to repeal the Clean Power Plan,
under the premise that it exceeds EPA's statutory authority under Section III of the Clean Air Act.
On December 28,2017, the Federal Register published an Advanced Notice of Proposed Rulemaking
to consider proposing a new GHG emission limit rule from existing generating units. Under the new version of
the proposed rule, EPA will have to determine whether to set a common efficiency standard for the coal fleet
or write guidance for states to set their own standards for individual plants based on age and technology. If the
effort moves down this path, the City would likely be unaffected by this proceeding since its focus is on coal.
Regulatory Impact on the California Energy Market
Any electricity sales or purchases the City (or NCPA on behalf of the City) makes in the wholesale
energy markets operated by the ISO are subject to the ISO tariff, which is a FERC-jurisdictional tariff. ISO's
tariff includes rules governing how sellers may bid electricity (i.e., offer for sale) into the energy markets and
rules governing market power mitigation of sellers. ISO regularly proposes changes to its tariff, subject to
FERC approval. Additionally, FERC can, and does, order changes to ISO's tariff if FERC (on its own
initiative or prompted by a complaint) determines that ISO's tariff is unjust, unreasonable, or unduly
discriminatory. Such regulatory changes can impact prices for electricity and capacity.
During portions of 2000 and 2007, shortly after ISO's energy markets were first established,
wholesale electricity prices were highly volatile and subject to market manipulation. That market dysfunction
resulted in deterioration of credit ratings of many market participants and the bankruptcy of Pacific Gas &
Electric Company. ISO's energy markets have since been redesigned, and Congress has established
mechanisms for policing wholesale markets. Price volatility has since decreased compared to the 2000-2001
period.
In addition to regulatory changes, electricity prices in the State depend on a variety of factors that
affect the supply and demand for electric energy in the western United States. These factors include, but are
not limited to, the adequacy of generation resources to meet peak demands, the availability and cost of
renewable energy, the impact of climate and other clean energy related legislation and regulations, fuel costs
and availability, weather effects on customer demand, transmission congestion, the strenglh of the economy in
the State and surrounding states and levels of hydroelectric generation within the region (including the Pacific
Northwest).
38
The City is unable to predict future reforms to the electric utility industry or the impact on such
entities of recent reforms and proposals.
ISO Markets
The ISO markets are subject to continued change in response to FERC orders, the increased
integration of intermittent renewable resources, changing environmental constraints, the ongoing efforts to
combat market manipulation and evolving reliability requirements. California ISO Tariff changes related to
these and other issues are currently under discussion in California ISO stakeholder processes and in ongoing
FERC proceedings. In most cases, these proposals are not sufficiently final in order to determine their likely
impact on the Electric System. However, the following issues may have significant impacts on the Electric
System or electric utilities generally:
Increased Integrøtion of Renewables. As part of the effort to integrate increased levels of
intermittent renewable resources into the grid, the ISO has proposed an aftay of changes to existing markets
and to the resource adequacy structure that assures that sufficient resources are available to the markets. These
proposals could affect the value of energy sold and purchases in the wholesale markets.
Resource Adequøcy Requíremenfs. Resource adequacy requirements apply to the Electric System to
ensure that market participants have contracted for suffrcient amounts of the right types of capacity to be
available in the markets. To the extent that a load serving entity ("LSE") fails to procure sufficient capacity
resources to meet its loads, it is subject to payment of ISO procurement costs of replacement capacity. To the
extent that a shortfall cannot be attributed to a specific LSE, the costs will be spread as part of market uplift
charges. These risks apply in the same manner to all LSEs. Due to the increased integration of renewables,
discussed above, the ISO is contemplating what could be significant changes to the resource adequacy
framework, with the potential for impacts on market participant costs. It is still too early to assess the potential
impacts on the City. Although it does not appear that ISO is considering proposing a centralized capacity
market at this time, proposals from others are occasionally made.
Trønsmíssion Access Churge Review. The ISO has undertaken a review of its Transmission Access
Charge, with a view to potentially changing the methodology used for allocating transmission costs. Although
it is too early to predict what the impacts might be on market participants, any change of this nature has the
potential to affect the Electric System.
Extensìon of Day Ahead Markets to Energy Imbølance Market. ISO has announced its intention to
propose changes to the Energy Imbalance Market ("EIM") structure that would extend the ISO's day ahead
market into the EIM, rather than leaving it as only a real time market. V/hile these proposals have not yet been
published, much less analyzed, such a change has the impact to affect prices paid in the ISO markets.
Changing Laws and Requirements
On both the state and federal levels, legislation is introduced frequently that would have the effect of
further regulating environmental impacts relating to energy, including the generation of energy using
conventional and unconventional technologies. Issues raised in recent legislative proposals have included
implementation of energy efficiency and renewable energy standards, addressing transmission planning, siting
and cost allocation to support the construction of renewable energy facilities, cyber-security legislation that
would allow FERC to issue interim measures to protect critical electric infrastructure, a federal cap-and-trade
program to reduce GHG emissions, and renewable energy incentives that could provide grants and credits to
municipal utilities to invest in renewable energy infrastructure. It is possible that the 1 1 5th Congress (201 7- I 8)
and the Califomia Legislature (2017-18 session) will pass legislation addressing similar issues.
39
The City is unable to predict at this time whether any of these or other legislative proposals will be
enacted into law and, if so, the impact they may have on the operations and finances of such entities or on the
electric utility industry in general.
Other Factors
The electric utility industry in general has been, or in the future may be, affected by a number of other
factors which could impact the financial condition and competitiveness of many electric utilities and the level
of utilization of generating and transmission facilities. In addition to the factors discussed above, such factors
include, among others, (a) effects of compliance with rapidly changing environmental, safety, licensing,
regulatory and legislative requirements other than those described above (including those affecting nuclear
power plants or potential new energy storage requirements), (b) changes resulting from conservation and
demand-side management programs on the timing and use of electric energy, (c) effects on the integration and
reliability of power supply from the increased usage of renewables, (d) changes resulting from a national
energy policy, (e) effects of competition from other electric utilities (including increased competition resulting
from a movement to allow direct access or from mergers, acquisitions, and "strategic alliances" of competing
electric and natural gas utilities and from competitors transmitting less expensive electricity from much greater
distances over an interconnected system) and new methods of, and new facilities for, producing low-cost
electricity, (f) the repeal of certain federal statutes that would have the effect of increasing the competitiveness
of many IOUs, (g) increased competition from independent power producers and marketers, brokers and
federal power marketing agencies, (h) "self-generation" or "distributed generation" (such as microturbines,
fuel cells and solar installations) by industrial and commercial customers and others, (i) issues relating to the
ability to issue tax-exempt obligations, including severe restrictions on the ability to sell to nongovemmental
entities electricity from generation projects and transmission service from transmission line projects financed
with outstanding tax-exempt obligations, (j) effects of inflation on the operating and maintenance costs of an
electric utility and its facilities, (k) changes from projected future load requirements, (l) increases in costs and
uncertain availability of capital, (m) shifts in the availability and relative costs of different fuels (including the
cost ofnatural gas and nuclear fuel), (n) sudden and dramatic increases in the price ofenergy purchased on the
open market that may occur in times of high peak demand in an area of the country experiencing such high
peak demand, such as has occurred in the past in Califomia, (o) inadequate risk management procedures and
practices with respect to, among other things, the purchase and sale of energy and transmission capacity,
(p) other legislative changes, voter initiatives, referenda and statewide propositions, (q) effects ofthe changes
in the economy, population and demand of customers within a utility's service area, (r) effects of possible
manipulation of the electric markets, (s) acts of terrorism or cyber-terrorism, (t) natural disasters or other
physical calamities, including, but not limited to, earthquakes and floods and (u) changes to the climate. Any
ofthese factors (as well as other factors) could have an adverse effect on the financial condition ofany given
electric utility and likely will affect individual utilities in different ways.
The City is unable to predict what impact such factors will have on the business operations and
financial condition of the Electric System, but the impact could be significant. This Official Statement includes
a brief discussion of certain of these factors. This discussion does not purport to be comprehensive or
definitive, and these matters are subject to change subsequent to the date hereof. Extensive information on the
electric utility industry is available from the legislative and regulatory bodies and other sources in the public
domain, and potential purchasers of the 2018 Bonds should obtain and review such information.
IHE AUTHORITY
The Authority was created in July 2010 by a joint exercise of powers agreement, which was entered
into between the City and Industrial Development Authority of the City ("lDA"), pursuant to the provisions of
the Act. Under the Joint Exercise of Powers Agreement, the Authority is a public entity, separate from the
City and the IDA. The debts, liabilities and obligations of the Authority are not debts, liabilities and
obligations of either the City or the IDA. The Authority is administered by a governing board consisting of the
members of the Lodi City Council.
40
RISKFACTORS
The following factors, which represent certain risk factors, should be considered along with all other
information in this Official Statement by potential investors in evaluating the 2018 Bonds. The following is
not intended to be an exhaustive list and there can be no assurance made that other risk factors do not currently
exist or will not become evident at any future time.
Rate Covenant Not a Guarantee
The ability of the City to make the 2018 Installment Payments and thereby pay the principal of and
interest on the 2018 Bonds depends on the ability of the City to generate Net Revenues in the levels required
by the 2018 Installment Purchase Agreement. Although, as more particularly described herein, the City
expects that sufficient revenues will be generated through the imposition and collection of impact fees, service
fees and other Revenues described herein, there is no assurance that such imposition of impact fees, service
fees, or other Revenues will result in the generation of Net Revenues in the amounts required by the 2018
Installment Purchase Agreement. As a result, the City's covenant does not constitute a guarantee that
sufficient Net Revenues will be available to make debt service payments on the 2018 Bonds.
Statutory and Regulatory Impact
Laws and regulations goveming the operation of the Electric System are enacted and promulgated by
government agencies on the federal, state and local levels. Compliance with these laws and regulations may be
extremely costly, and, as more stringent standards are developed to protect the environment, these costs will
likely increase. See "FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY."
Claims against the City for violations of regulations with respect to its facilities and services could be
significant. Such claims are payable from assets of the Electric System or from other legally available sources.
Although the City has covenanted in the 2018 Installment Purchase Agreement to fix, prescribe and
collect rates, fees and charges during each Fiscal Year at specified levels, no assurance can be given that the
cost of compliance with such laws and regulations will not materially adversely affect the ability of the City to
generate Net Revenues in the amounts required by the 2018 Installment Purchase Agreement and to pay the
2018 Installment Payments. Certain potential increasing regulatory standards could materially increase the
cost to the City of providing electric services.
Earthquake, Flood or Other Natural Disasters
The occurrence of an earthquake, flood or other natural disaster which resulted in the temporary or
permanent closure of major components of the Electric System or resulted in significantly increased costs
could materially adversely affect the ability of the City to operate the Electric System or to generate Net
Revenues at the levels required by the 2018 Installment Purchase Agreement.
Flood. Based on flood risk evaluations prepared by the Federal Emergency Management Agency
(FEMA) for the City and San Joaquin County, effective October 19,2009, flood hazards are a constraint to
development only in two areas of the City: the area immediately adjacent to the Mokelumne River along the
City's northern boundary, and the area around the White Slough Facility. These areas lie within Zone AE,
meaning that they are subject to a lo/o annual (100-year) flood. Flooding depths in this area are generally
greater than three feet. Most of the City lies within Zone X, which describes lands subject to The 0.2%o annual
(500-year) flood zone or that lie within the 1O0-year flood zone, but with flooding depths less than one foot.
4t
No Reserve Account
No debt service reserve account has been established with respect to the 2018 Bonds. The Authority
and the City have reserved the right to establish debt service reserves for Parity Obligations. See
"INTRODUCTION-No Reserve Account."
Limited Recourse on Default
Failure by the City to make the 2018 Installment Payments, when due, constitutes an event of default
under the 2018 Installment Purchase Agreement and the Authority is permitted to pursue remedies at law or in
equity to enforce the City's obligation to make the 2018 Installment Payments. [Although the Trustee, as
assignee of the Authority, has the right to accelerate the total unpaid principal component of the 2018
Installment Payments, there is no assurance that the City will have sufficient Net Revenues to pay the principal
component of the 2018 Installment Payments upon acceleration.]
Effect of Bankruptcy
In addition to the limitations on remedies contained in the 2018 Installment Purchase Agreement and
the Indenture, the rights and obligations under the 201 8 Bonds, the 201 8 Installment Purchase Agreement and
the Indenture may be subject to the following: the United States 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 powers delegated to it
by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, ofthe
police power inherent in the sovereignty of the State of California and its govemmental bodies in the interest
of serving a significant and legitimate public purpose.
Bankruptcy proceedings, or the exercise of powers by the federal or state govemment, if initiated,
could subject the Owners of the 2018 Bonds to judicial discretion and interpretation of their rights in
bankruptcy or otherwise, and consequently may entail risks of delay, limitation or modification of their rights
and may otherwise have material adverse consequences. The opinion of Bond Counsel notes that the rights of
the owners of the 2018 Bonds and the enforceability of the 2018 Bonds and the Indenture are limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors'rights generally,
and by equitable principles, whether considered at law or in equity.
Loss of Tax Exemption
The City has covenanted in the 2018 Installment Purchase Agreement, and the Authority has
covenanted in the Indenture, that each will not take any action, or fail to take any action, ifany such action or
failure to take action would adversely affect the exclusion from gross income of interest or the 2018 Bonds
under Section 103 of the Internal Revenue Code of 1986. In the event either the City or the Authority fails to
comply with the foregoing tax covenant, interest or the 2018 Bonds may be includable in the gross income of
the Owners thereof for federal tax purposes retroactive to the date of issuance of the 2018 Bonds. See "TAX
MATTERS''.
Secondary Market
There can be no guarantee that there will be a secondary market for the 2018 Bonds or, if a
secondary market exists, that any 2018 Bonds can be sold for any particular price. Prices of bond issues for
which a market is being made will depend upon then-prevailing circumstances. Such prices could be
substantially different from the original purchase price. No assurance can be given that the market price for the
2018 Bonds will not be affected by the introduction or enactment of any future legislation (including without
limitation amendments to the Internal Revenue Code), or changes in interpretation of the Intemal Revenue
42
Code, or any action of the Internal Revenue Service, including but not limited to the publication of proposed or
final regulations, the issuance of rulings, the selection of the 2018 Bonds for audit examination, or the course
or r"ruiî of any Internal Revenue Service audit or examination of the 2018 Bonds or obligations that present
similar tax issues as the 2018 Bonds.
CONSTITUTIONAL LIMITATIONS ON TAXES AND FEES
Proposition 62
A statutory initiative ("Proposition 62") was adopted by the voters voting in the State of Califomia at
the November 4, 1986 General Election which (1) requires that any tax for general governmental purposes
imposed by local govemmental entities be approved by resolution or ordinance adopted by two-thirds vote of
the govemmental agency's legislative body and by a majority of the electorate of the govemmental entity, (2)
requires that any special tax (defined as taxes levied for other than general govemmental purposes) imposed by
a local govemmental entity be approved by a two-thirds vote of the voters within that jurisdiction, (3) restricts
the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed,
(4) prohibits the imposition of ad valorem taxes on real property by local govemmental entities except as
permitted by Article XIIIA, (5) prohibits the imposition of transaction taxes and sales taxes on the sale of real
properfy by local governmental entities and (6) requires that any tax imposed by a local govemmental entity on
or after March l, 1985 be ratified by a majority vote of the electorate within two years of the adoption of the
initiative or be terminated by November 15, 1988.
Proposition 218
Proposition 218, a State ballot initiative known as the "Right to Vote on Taxes Act," was approved
by the voters of the State of California on November 5,1996. Proposition 218 added Articles XIIIC and XIIID
to the State Constitution. Article XIIIC imposes a majority voter approval requirement on local govemments
(including the City) with respect to taxes for general purposes, and a two-thirds voter approval requirement
with respect to taxes for special purposes. Article XIIID creates additional requirements for the imposition by
most local govemments of general taxes, special taxes, assessments and "property-related" fees and charges.
Article XIIID explicitly exempts fees for the provision of electric service from the provisions of such article.
Article XIIIC expressly extends the people's initiative power to the reduction or repeal of local taxes,
assessments, and fees and charges imposed prior to its effective date (lllovember 1996). The Califomia
Supreme Court held in Bighorn-Desert View Water Agency v. Verjil, 39 Cal.4fh205 (2006) that, under Article
XIIIC, local voters by initiative may reduce a public agency's water rates and delivery charges, as those are
property-related fees or charges within the meaning of Article XIIID, and noted that the initiative power
described in Article XIIIC may extend to a broader category of fees and charges than the property-related fees
and charges governed by Article XIIID. Moreover, in the case of Bock v. City Council of Lompoc, 109
Cal.App.3d 43 (1980), the Court of Appeal determined that an electric rate ordinance was not subject to the
same constitutional restrictions that are applied to the use of the initiative process for tax measures so as to
render it an improper subject of the initiative process. Thus, electric service charges (which are expressly
exempted from the provisions of Article XIIID) may be subject to the initiative provisions of Article XIIIC,
thereby subjecting such fees and charges to reduction by the electorate. However, the City believes that even if
the electric rates of the City are subject to the initiative power, the electorate of the City would be precluded
from reducing electric rates and charges in a manner adversely affecting the payment of the 2018 Bonds by
virtue of the "impairments clause" of the United States and Califomia Constitutions.
Proposition 26
The California electorate adopted Proposition 26 at the November 2, 2010 election, amending Article
XIIIC of the California Constitution. Proposition 26 was designed to supplement tax limitations California
voters adopted when they approved Proposition 13 in 1978 and Proposition 218 in 1996. Proposition 26
43
applies by its terms to any levy, charge or exaction imposed, increased or extended by a local government on
or after November 3,2010. Proposition 26 deems any such levy, charge or fee to be aootax," requiring voter
approval unless it comes within one of the listed exceptions or further exceptions recognized by the courts.
Proposition 26 expressly excludes from its definition of a "tax," among other things, a charge imposed for a
specific govemment service or product provided directly to the payor that is not provided to those not charged,
and which does not exceed the reasonable costs to the local government of providing the service or product.
Proposition 26 is subject to interpretation by California courts.
Other Initiatives
Articles XIIIC and XIIID and Propositions 62 and 26 were adopted as measures that qualified for the
ballot pursuant to California's initiative process. From time to time, including presently, other initiatives have
been, and could be, proposed, and if qualified for the ballot and approved by voters, could affect the City's
revenues or operations. Neither the nature and impact of these measures nor the likelihood of qualification for
ballot or passage can be anticipated by the City.
TAX MÄTTERS
Federal Tax Status
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, Califomia, Bond
Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the 2018
Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax
preference for purposes of the federal alternative minimum tax, although, in the case of tax years beginning
prior to January 1, 2018, for the purpose of computing the alternative minimum tax imposed on certain
corporations, such interest earned by a corporation prior to the end ofits tax year in 2018 is taken into account
in determining certain income and earnings.
The opinions set forth in the preceding paragraph are subject to the condition that the Authority and
the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Tax Code")
relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as
the 2018 Bonds. The Authority and the City have made certain representations and covenants in order to
comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of
those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes,
which may be retroactive to the date of issuance of the 2018 Bonds.
Tax Treatment of Original Issue Discount and Premium
If the initial offering price to the public at which a2018 Bond is sold is less than the amount payable
at maturity thereof, then such difference constitutes "original issue discount" for purposes of federal income
taxes and State of California personal income taxes. If the initial offering price to the public at which a 2018
Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes "original
issue premium" for purposes of federal income taxes and State of California personal income taxes. De
minimis original issue discount and original issue premium is disregarded.
Under the Tax Code, original issue discount is treated as interest excluded from federal gross income
and exempt from State of California personal income taxes to the extent properly allocable to each owner
thereof subject to the limitations described in the first paragraph of this section. The original issue discount
accrues over the term to maturity of the 20 I 8 Bond on the basis of a constant interest rate compounded on each
interest or principal payment date (with straightline interpolations between compounding dates). The amount
of original issue discount accruing during each period is added to the adjusted basis of such 2018 Bonds to
determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2018
Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of
44
purchasers of the 20 1 I Bonds who purchase the 201 8 Bonds after the initial offering of a substantial amount of
such maturity. Owners of such 2018 Bonds should consult their own tax advisors with respect to the tax
consequences of ownership of 2018 Bonds with original issue discount, including the treatment of purchasers
who do not purchase in the original offering, the allowance of a deduction for any loss on a sale or other
disposition, and the treatment of accrued original issue discount on such 2018 Bonds under federal individual
alternative minimum taxes.
Under the Tax Code, original issue premium is amortized on an annual basis over the term of the 2018
Bond (said term being the shorter of the 2018 Bond's maturity date or its call date). The amount of original
issue premium amortized each year reduces the adjusted basis of the owner of the 2018 Bond for purposes of
determining taxable gain or loss upon disposition. The amount of original issue premium on a 2018 Bond is
amortized each year over the term to maturity of the 2018 Bond on the basis of a constant interest rate
compounded on each interest or principal payment date (with straight-line interpolations between
compounding dates). Amortized 2018 Bond premium is not deductible for federal income tax purposes.
Owners of premium 2018 Bonds, including purchasers who do not purchase in the original offering, should
consult their own tax advisors with respect to State of California personal income tax and federal income tax
consequences ofowning such 2018 Bonds.
California Tax Status
In the further opinion of Bond Counsel, interest on the 2018 Bonds is exempt from California personal
income taxes.
Other Tax Considerations
Current and future legislative proposals, if enacted into law, clarification of the Tax Code or court
decisions may cause interest on the 2018 Bonds to be subject, directly or indirectly, to federal income taxation
or to be subject to or exempted from sfate income taxation, or otherwise prevent beneficial owners from
realizingthe full current benefit ofthe tax status ofsuch interest. The introduction or enactment ofany such
legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or
marketability of, the 2018 Bonds. It cannot be predicted whether or in what form any such proposal might be
enacted or whether, if enacted, such legislation would apply to bonds issued prior to enactment.
The opinions expressed by Bond Counsel are based upon existing legislation and regulations as
interpreted by relevant judicial and regulatory authorities as of the date of such opinion, and Bond Counsel has
expressed no opinion with respect to any proposed legislation or as to the tax treatment of interest on the 201 8
Bonds, or as to the consequences of owning or receiving interest on the 2018 Bonds, as of any future date.
Prospective purchasers of the 2018 Bonds should consult their own tax advisors regarding any pending or
proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no
opinion.
Owners of the 2018 Bonds should also be aware that the ownership or disposition of, or the accrual or
receipt ofinterest on, the 2018 Bonds may have federal or state tax consequences other than as described
above. Otherthan as expressly described above, Bond Counsel expresses no opinion regarding other federal or
state tax consequences arising with respect to the 2018 Bonds, the ownership, sale or disposition of the 2018
Bonds, or the amount, accrual or receipt of interest on the 201 8 Bonds.
LITIGATION
To the knowledge of the City, there is no controversy or litigation of any nature now pending or
threatened restraining or enjoining the execution and delivery of the 2018 Bonds, the Indenture, the 2018
Installment Purchase Agreement or in any way contesting or affecting the validity of the 2018 Bonds or any
proceedings of the City or the Authority taken with respect to the execution and delivery thereof.
45
APPROVAL OF LEGALITY
The 2018 Bonds are offered when, as and if issued and received by the Underwriter and subject to the
approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California' Bond
Counsel. Certain legal matters will be passed upon for the City and the Authority by the City Attorney.
Certain legal matters will be passed upon for the City by its Disclosure Counsel, Stradling Yocca Carlson &
Rauth, a Professional Corporation, Sacramento, California and for the Underwriter by Hawkins Delafield &
Wood LLP, Sacramento, California.
Payment of the fees and expenses of Bond Counsel and Underwriter's Counsel is contingent upon
execution and delivery of the 2018 Bonds.
FINANCIAL STATEMENTS
Macias Gini & O'Connell LLP, Certified Public Accountants (the "Auditor"), audited the fÌnancial
statements of the City for the Fiscal Year ended June 30, 2017. The Auditor's examination was made in
accordance with generally accepted auditing standards and Governmental Auditing Standards, issued by the
Comptroller General of the United States. See "APPENDIX B - Audited Financial Statements of the City for
Fiscal Year Ended June 30, 2017."
The City has not requested nor did the City obtain permission from the Auditor to include the audited
financial statements as an appendix to this Official Statement. Accordingly, the Auditor has not performed any
post-audit review of the financial condition or operations of the City and has not participated in the preparation
of, or reviewed, this Official Statement.
RATINGS
Moody's Investors Service and Fitch Ratings are expected to assign the 2018 Bonds the long-term
ratings of "_" and " _l' respectively.
The ratings reflect only the respective views of the rating agencies, and any explanation of the
significance of such ratings may be obtained only from such rating agencies. There is no assurance that the
ratings will remain in effect for any given period of time or that they will not be revised downward or
withdrawn entirely by such rating agencies, or either of them, it in their respective judgments, circumstances
so warrant. The City undertakes no responsibility to oppose any such revisions or withdrawal. Any downward
revision or withdrawal of any rating may have an adverse effect on the market price of the 2018 Bonds.
CONTINUING DISCLOSURE
The City will covenant for the benefit of owners of the 2018 Bonds to provide certain financial
information and operating data relating to the City by not later than 9 months after the end of each fiscal year
of the City (cunently June 30th), commencing with the report for the 2017-18 Fiscal Year (the "Annual
Report")o and to provide notices of the occurrence of certain enumerated events. Such reports are required to
be filed with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access
system ("EMMA"). The specific nature of the information to be contained in the Annual Report or the notices
of enumerated events is described in "APPENDIX D- Form of Continuing Disclosure Agreement," attached to
this Official Statement. These covenants have been made in order to assist the underwriter of the 2018 Bonds
in complying with Securities Exchange Commission Rule 15c2 l2(b)(5).
The City has entered into a number of continuing disclosure undertakings in connection with City
obligations, including obligations payable from the City's General Fund, as well as obligations payable from
the revenues relating to the City's e[ectric, wastewater and water utilities. During the past five years, the City
has prepared continuing disclosure reports pursuant to these undertakings. For Fiscal Year2015, the financial
46
and operating data to be filed as part of the City's continuing disclosure annual report in connection with
certain of the City's obligations, including in connection with NCPA bonds and the City's direct electric
system obligations, was not filed until approximately 9 to 14 days after the date required for certain of such
filings. For Fiscal Year 2013, the City's annual continuing disclosure filing, when filed in January 2014,was
approximately 27 days after the date required for one issue of the City Electric System obligations. The City's
Fiscal Year 2013 and Fiscal Year 2015 annual reports when filed were also not properly associated on EMMA
with the CUSIPs for all applicable issues of other City of Lodi obligations. In addition, in 2013 and 2074, on
several occasions, the City failed to make "significant event" filings with respect to changes in the ratings of
bond insurers of certain Electric System and other City of Lodi obligations, as well as upgrades of the
underlying ratings.
The City filed a self-report under the Securities and Exchange Commission's Municipalities
Continuing Disclosure Cooperation ("MCDC") initiative regarding statements made in certain of the City's
previous official statements conceming the City's compliance with its continuing disclosure requirements.
[[The City has adopted a disclosure policy intended to assure future compliance with the City's
continuing disclosure requirements. ]]
MUNICIPAL ADVISOR
Fieldman, Rolapp & Associates, Inc. (the "Municipal Advisor") has assisted the City with various
matters relating to the planning, structuring and delivery of the 2018 Bonds. The Municipal Advisor is a
financial advisory firm and is not engaged in the business of underwriting or distributing municipal securities
or other public securities. The Municipal Advisor assumes no responsibility for the accuracy, completeness or
fairness of this Official Statement. The Municipal Advisor will receive compensation from the City contingent
upon the sale and delivery of the 2018 Bonds.
UNDERWRITING
The Underwriter has agreed, subject to certain conditions, to purchase the 2018 Bonds at a price of
$_ (consisting of the aggregate principal amount of the Series 2018 Bonds less an Underwriter's
discount of $and plus net original issue premium of $ ).
The Purchase Contract for the 2018 Bonds provides that the Underwriter will purchase all the 2018
Bonds, if any are purchased. The 2018 Bonds may be offered and sold by the Underwriter to certain dealers
and others at prices lower than the public offering price stated on the inside cover page of this Official
Statement, and such public offering price may be changed, from time to time, by the Underwriter.
The following paragraph has been provided by the Underwriter for inclusion in the Official Statement:
J.P. Morgan Securities LLC ("JPMS"), one of the underwriters of the Series 2018 Bonds, has entered
into negotiated dealer agreements (each, a o'Dealer Agreement") with each of Charles Schwab & Co., Inc.
("CS&Co.") and LPL Financial LLC ("LPL") for the retail distribution of certain securities offerings at the
original issue prices. Pursuant to each Dealer Agreement (if applicable to this transaction), each of CS&Co.
and LPL will purchase Series 2018 Bonds from JPMS at the original issue price less a negotiated portion of the
selling concession applicable to any Series 2018 Bonds that such firm sells.
VERIFICATION OF MATHEMATICAL COMPUTATIONS
Upon delivery of the 2018 Bonds,independent certifi ed public accountants, will
deliver a report stating that the firm has verified the mathematical accuracy of certain computations relating to
the adequacy of the amounts deposited pursuant to the Escrow Agreement to pay the applicable redemption
price of and accrued interest on, the Refunded Certificates on their respective payment and redemption dates.
47
EXECUTION AND DELIVERY
The execution and delivery of this Official Statement have been authorized by the Board of Directors
of the Authority and the City Council of the City.
LODI PUBLIC FINANCING AUTHORITY
Executive Director
CITY OF LODI
City Manager
By
By
48
APPENDIXA
CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION CONCERNING
THE CITY OF LODI
The City is located in the County of San Joaquin (the "County") between Stockton and Sacramento,
and adjacent to U.S. Highway 99, approximately 90 miles east of San Francisco. The City was incorporated as
a General Law City on December 6,1906.
The City operates under a City Council-Manager form of govemment and provides the following
services: public safety (police, fire and graffiti abatement), public utilities services (electric, water and sewer),
transportation services (streets, flood control and transit), leisure, cultural and social services (parks and
recreation, library, and community center), and general govemment services (management, human resources
administration, fìnancial administration, building maintenance and equipment maintenance).
A fïve-year history of assessed valuations in Lodi is as follows:
CITY OF LODI
ASSESSED VALUATIONS
For Fiscal Years 2012-13 through 2016-17
(Dollar Amounts in Thousands)
Fiscal
Year Land
Personal Less
Exemptions
s327,783
s324,439
$326,833
$33 1,562
$334,485
Net
Assessed
ValueTotal
2012-13
2013-14
2014-15
20ts-r6
2016-17
s1,227,969
s1,364,401
sl,469,347
$ 1,601,581
$1,711,208
Improvements
s3,445,328
s3,443,266
$3,610,391
$3,736,867
s3,854,604
$300,290
s321,741
$338,312
s309,861
s294,457
s4,973,587
$5,129,408
$5,418,050
$5,648,309
$5,860,269
s4,645,804
s4,804,969
s5,091,217
s5,316,747
$5,525,784
Source: San Joaquin County Auditor-Controller's Office.
A-l
The following chart indicates the growth in the population of the City of Lodi, the County of San
Joaquin and the State of California since 1970.
CITY OF LODI, COUNTY OF SAN JOAQUIN,
STATE OF CALIFORNIA POPULÄTION ESTIMATES
(1970-ZOl0 as ofApril l;2011-2017 as ofJanuary 1)
City of Lodi County of San Joaquin State of California
1970
1980
1990
2000
2010
2011
2012
2013
2014
201s
2016
2017
28,691
34,850
51,900
57,011
62,134
62,519
62,678
62,747
62,922
63,143
63,396
64,058
291,073
343,500
477,700
563,598
685,306
691,818
698,412
704,727
712,046
723,985
735,677
746,868
19,971,069
23,668,562
29,760,021
33,873,653
37,253,956
37,536,835
37,881,357
38,238,492
38,572,211
38,915,880
39,189,035
39,523,613
and State.
Source: lJ.S. Bureau of Census and Califomia State Department of Finance.
Employmenl. The following table contains certain information conceming employment in the City
CITY OF LODI
UNEMPLOYMENT STATISTICS
City of Lodi
County of San
Joaquin
State of
California
2008
2009
2010
20ll
2012
2013
2014
2015
2016
2017
201 8*
7.80%
I 1.40
15.60
1s.30
13.s0
I 1.60
9.90
8.30
7.60
6.76
7.10
10.40%
14.90
16.50
16.20
14.40
12.30
10.50
8.90
8.10
7.20
7.05
7.30%
71.20
12.20
11.70
10.40
8.90
7.50
6.20
5.50
4.80
4.55
* As ofFebruary 2018
Source: U.S. Bureau of Labor Statistics.
Major Employ¿rs. There are several manufâcturing plants in the community producing a wide variety
of products: cereals, food mixes, wines, rubber products, steel framing and industrial shelving, foundry items,
recreational vehicle components, electronic substrates, and plastic piping and injection molded products. In
addition, Lodi has a number of small businesses located within the City. The main businesses in Lodi,
however, are food processes and plastics.
A-2
The largest employers in Lodi as of June 30,2017 are as follows
CITY OF LODI
LARGEST EMPLOYERS
Employer Business Number of Employees
Lodi Unified School District
Pacific Coast Producers
Lodi Health Hospital
Blue Shield
Walmart
TreeHouse
City of Lodi
Farmers & Merchants Bank
Costco
Target
Residential Valuation
Single Family
Multifamily
TOTAL
New Dwelling Units
Single Family
Multiple Family
TOTAL
Education
Canning
Healthcare
Healthcare
Retail
Specialty Food
Government
Banking
Retail
Retail
3,026
7,630
1,384
858
487
48s
393
33s
237
142
Source: City of Lodi.
Buílding Permìt Actívìty. The following table shows the value of building permits issued in the City
between 2008 and 2015.
CITY OF LODI
BUILDING PERMIT VALUATION
for Fiscal Years Ended June 30, 2011 through 2015
2011 2012 2013 2014 2015
st,204,695
0
sl,526,810 s4,402,87000 s5,587,759
0
$10,483,842
0
sL,204,695 $1,526,810 s4,402,870 $5,587,759 $10,483,842
37
0
37
6
0
6
8
0
8
l7
0
t7
2t
0
21
Source: City of Lodi.
Taxable Søles. The following table indicates taxable transactions in the City by type of business
during the calendar years 2010 through 2014.
A-3
CITY OF LODI
TAXABLE TRANSACTIONS BY TYPE OF BUSINESS
for Calendar Years 2012 through2016
(in Thousands of Dollars)
2012 2013 2014 201s 2016
Retail and Food Services
Motor Vehicle & Parts Dealers
Home Fum. & Appliances
Bldg. Mat. & Garden Equip. & Supplies
Food & Beverage Stores
Service Stations
Apparel Stores
General Merchandise
Food Services & Drinking Places
Other Retail Stores
Retail and Food Services Total
All Other Outlets
s 90,980 $
12,645
67,512
45,769
103,454
21,495
lg7,''108
85,677
s0.300
97,091 $
14,057
81,299
47,400
104,893
23,016
192,894
91,752
48.896
118,874 $
18,261
82,587
49,195
104,399
23,790
190,493
99,122
50.47r
142,283
16,490
87,464
49,395
87,529
25,208
764,697
109,078
55,607
$ 154,630
17,470
93,722
48,171
82,310
30,074
175,325
119,727
58,149
$ 665,538
-::JÆ.ry-
$ 701,339 $
169.983
737,192 $
174.489
737,753
l72.t3s
$ 779,583
___lé8p55
TOTAL ALL OUTLETS $ 805,762 S 871,322 $ 911,681 $ 909,889 $ 947,638
Source: Cal i lorn i a State Board of Equal ization.
Education. The Lodi Unified School District provides K-12 and special education programs. The
area also is served by several private and parochial schools. The University of the Pacific, San Joaquin
Delta Community College, California State University-Stanislaus/TurlocVStockton Center, and the
University of San Francisco satellite center are all within a 2O-minute drive of Lodi. The University of
California-Davis, California State University-sacramento and the University of Southern California
satellite center are within an hour's drive from Lodi.
Trønsportúion. Lodi is served by Interstate highway 5 and State highways 12 and 99 and is
located on the main line of the Union Pacific Railroad. Lodi has Amtrak passenger rail service and local,
regional aúd national bus service. A deep-water seaport and airport with commercial passenger travel are
located approximately l5 miles south.
A-4
APPENDIX B
AUDITED F'INANCIAL STATEMENTS OF THE CITY
FOR THE FISCAL YEAR ENDED JUNE 30,2017
B-1
APPBNDIX C
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
c-l
APPENDIX D
FORM OF OPINION OF BOND COUNSEL
D-1
APPENDIX E
FORM OF' CONTINUING DISCLOSTJRE AGREEMENT
E-1
CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and
delivered by the City of Lodi, a municipal corporation (the o'City") in connection with the issuance of
the $Lodi Public Financing Authority (the "Authority") 2018 Electric System Revenue
Refunding Bonds (the "20l8 Bonds"). The 2018 Bonds will be issued pursuant to an Indenture of
Trust dated as of June l, 2018 (the "Indenture") by and between the Authority and MUFG Union
Bank, N.4., as trustee for the 2018 Bonds (the "Trustee"). In connection therewith the City
covenants and agrees as follows:
SECTION 1. Purpose of this Disclosure Certificate. This Disclosure Certificate is
being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the
2018 Bonds and in order to assist the Participating Underwriter in complying with SEC (hereinafter
defined) Rule 1 5c2- I 2(bX5).
SECTION 2. Definitions. In addition to the definitions set forth above and in the
Trust Agreement, which apply to any capitalized term used in this Disclosure Certificate unless
otherwise defined in this section, the followin g capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the City pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Certificate.
"Beneficial Owner" shall mean any person which has the power, directly or indirectly, to
vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding
Bonds through nominees, depositories or other intermediaries).
"EMMA System" shall mean the MSRB's Electronic Municipal Market Access system, or
such other electronic system designated by the MSRB.
"Listed Event" shall mean any of the events listed in Section 5(a) and 5(b) of this Disclosure
Certificate.
"MSRB" means the Municipal Securities Rulemaking Board.
"Repository" shall mean any Nationally Recognized Municipal Securities Information
Repository for purposes of the Rule. Effective July 1, 2010, the Repository approved by the
Securities and Exchange Commission is the Municipal Securities Rulemaking Board through its
Electronic Municipal Market Access ("EMMA") site.
"Rule" shall mean Rule l5c2-12(bx5) adopted by the SEC under the Securities Exchange Act
of 1934, as the same may be amended from time to time.
66SEC" shall mean the United States Securities and Exchange Commission.
o'State" shall mean the State of California.
"Participating Underwriter" shall mean the original Underwriter of the 2018 Bonds required
to comply with the Rule in connection with offering of the 2018 Bonds,
SECTION 3. Provision of Annual Reports.
(a) The City shall, not later than the last day of the seventh month after the end of
the City's Fiscal Year (presently June 30), commencing with the report for the 2017-18 Fiscal Year,
provide to the Repository, in an electronic format and accompanied by identifying information all as
prescribed by the MSRB, an Annual Report which is consistent with the requirements of Section 4 of
this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate
documents comprising a package, and may cross-reference other information as provided in
Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City
may be submitted separately from the balance of the Annual Report and later than the date required
above for the filing of the Annual Report if they are not available by that date. If the City's Fiscal
Year changes, it shall give notice of such change in the same manner as for a Listed Event under
Section 5(c).
(b) If the City is unable to provide to the Repository an Annual Report by the
date required in subsection (a), the City shall send to the Municipal Securities Rulemaking Board and
to the Repository a notice in substantially the form attached hereto as Exhibit A.
SECTION 4. Content of Annual Reports. The City's Annual Report shall contain
or include by reference the following:
(a) The audited financial statements of the City for the prior Fiscal Year,
prepared in accordance with generally accepted accounting principles as promulgated to apply to
governmental entities from time to time by the Governmental Accounting Standards Board;
pfqvidgd, that if the City's audited financial statements are not available by the time the Annual
Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited
financial statements in a format similar to the financial statements contained in the final Official
Statement, and the audited financial statements shall be filed in the same manner as the Annual
Report when they become available.
(b) An annual updating (to reflect the most recently completed fiscal year) of the
information of the type set forth in the following tables of the Official Statement for the 2018 Bonds,
dated _ _,2078:
1. "Electric System Power Supply Resources"
2. "Electric System Customers, Sales, Revenues And Demand"
3. "Condensed Operating Results"
Any or all of the items listed above may be included by specific reference to other
documents, including official statements of debt issues of the City or related public entities, which
have been submitted to the MSRB.
SECTION 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be
given, notice of the occurïence of any of the following events with respect to the 2018 Bonds in a
timely manner not more than ten (10) business days after the event:
2
1. Principal and interest payment delinquencies;
2. Unscheduled draws on debt service reserves reflecting financial difficulties;
3. Unscheduled draws on credit enhancements reflecting financial difficulties;
4. Substitution of credit or liquidity providers, or their failure to perform;
5 Issuance by the Internal Revenue Service of proposed or final determination
of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB);
Tender offers;
Defeasances;
L Rating changes; or
9. Bankruptcy, insolvency, receivership or similar event of the obligated person.
Note: for the purposes of the event identifred in subparagraph (9), the event is
considered to occur when any of the following occur: the appointment of a receiver,
fiscal agent or similar officer for an obligated person in a proceeding under the U.S.
Bankruptcy Code or in any other proceeding under state or federal law in which a
court or governmental authority has assumed jurisdiction over substantially all of the
assets or business of the obligated person, or if such jurisdiction has been assumed by
leaving the existing governmental body and officials or officers in possession but
subject to the supervision and orders of a court or governmental authority, or the
entry of an order confirming a plan of reorganization, arrangement or liquidation by a
court or governmental authority having supervision or jurisdiction over substantially
all of the assets or business of the obligated person.
(b) Pursuant to the provisions of this Section 5, the City shall give, or cause to be
given, notice of the occurrence of any of the following events with respect to the 2018 Bonds, if
material:
Unless described in Section 5(a)(5), adverse tax opinions or other material
notices or determinations by the Internal Revenue Service with respect to the
tax status of the 2018 Bonds or other material events affecting the tax status
of the 2018 Bonds;
2. Modifications to rights of Bond holders;
3. Optional, unscheduled or contingent Bonds calls;
4. Release, substitution, or sale of property securing repayment of the 2018
Bonds;
5. Non-payment related defaults;
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6.The consummation of a merger, consolidation, or acquisition involving an
obligated person or the sale of all or substantially all of the assets of the
obligated person, other than in the ordinary course of business, the entry into
a definitive agreement to undertake such an action or the termination of a
deflrnitive agreement relating to any such actions, other than pursuant to its
terms; or
Appointment of a successor or additional trustee or the change of name of a
trustee.
(c) Whenever the City obtains knowledge of the occurrence of a Listed Event
described in subsection (b), the City shall determine if such event would be material under applicable
federal securities laws.
(d) If the City determines that knowledge of the occurrence of a Listed Event
under Section 5(b) would be material under applicable federal securities laws, the City shall file a
notice of such occurrence with EMMA in a timely manner not more than ten (10) business days after
the event.
SECTION 6. Termination of Reporting Obligation. The City's obligations under
this Disclosure Certificate shall terminate (a) upon the legal defeasance, prior redemption or payment
in full of all of the 2018 Bonds, or (b) if, in the opinion of nationally recognized bond counsel, the
City ceases to be an "obligated person" (within the meaning of the Rule) with respect to the 2018
Bonds or the 2018 Bonds otherwise cease to be subject to the requirements of the Rule. If such
termination occurs prior to the final maturity of the 2018 Bonds, the City shall give notice of such
termination in the same manner as for a Listed Event under Section 5,
SECTION 7. Amendment: Waiver. Notwithstanding any other provision of this
Disclosure Certifrcate, the City may amend this Disclosure Certificate, and any provision of this
Disclosure Certificate may be waived; plpvidgd, that the following conditions are satisfied:
(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5,
it may only be made in. connection with a change in circumstances that arises from a change in legal
requirements, change in law, or change in the identity, nature or status of an obligated person with
respect to the 201 8 Bonds, or the type of business conducted;
(b) The undertaking, as amended or taking into account such waiver, would, in
the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule
at the time of the original issuance of the 2018 Bonds, after taking into account any amendments or
interpretations of the Rule, as well as any change in circumstances; and
(c) The amendment or waiver either (i) is approved by the Holders of the 2018
Bonds in the same manner as provided in the Trust Agreement for amendments to the Trust
Agreement with the consent of Holders, or (ii) does not, in the opinion of nationally recognized bond
counsel, materially impair the interests of the Holders or Beneficial Owners of the 2018 Bonds.
In the event of any amendment or waiver of a provision of this Disclosure Certificate,
the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a
narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the
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case of a change of accounting principles, on the presentation) of financial information or operating
data being presented by the City. In addition, if the amendment relates to the accounting principles
to be followed in preparing financial statements, (i) notice of such change shall be given in the same
manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the
change is made should present a comparison (in nanative form and also, if feasible, in quantitative
form) between the financial statements as prepared on the basis of the new accounting principles and
those prepared on the basis of the former accounting principles.
SECTION 8. Additional Information. Nothing in this Disclosure Certificate shall
be deemed to prevent the City from disseminating any other information, using the means of
dissemination set forth in this Disclosure Certificate or any other means of communication, or
including any other information in any Annual Report or notice of occurrence of a Listed Event, in
addition to that which is required by this Disclosure Certifrcate. If the City chooses to include any
information in any Annual Report or notice of occurrence of a Listed Event in addition to that which
is specifîcally required by this Disclosure Certifìcate, the City shall have no obligation under this
Disclosure Certificate to update such information or include it in any future Annual Report or notice
of occurrence of a Listed Event.
SECTION 9. Default. In the event of a failure of the City to comply with any
provision of this Disclosure Certifrcate, any Participating Underwriter or any Holder or Beneflicial
Owner of the 2018 Bonds may take such actions as may be necessary and appropriate, including
seeking mandate or specific performance by court order, to cause the City to comply with its
obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be
deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure
Certifîcate in the event of any failure of the City to comply with this Disclosure Certificate shall be
an action to compel performance hereunder.
[The reminder of this page is intentionally left blank.J
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SECTION 11. Beneficiaries. This Disclosure Certificate shall inure solely to the
benefit of the City, the Participating Underwriters and the Holders and Beneficial Owners from time
to time of the 2018 Bonds, and shall create no rights in any other person or entity.
Date: June _,2018.
CITY OF LODI, a municipal corporation
Stephen Schwabauer, City Manager
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EXHIBIT A
NOTICE OF FAILURE TO FILE AIINUAL REPORT
Name of Obligated Person: CITY OF LODI
Name of Issue: $ I.odi Public Financing Authority 2018 Electric System
R-"u"nueRefundingBonds
Date of Issuance: June _, 2018
NOTICE IS HEREBY GIVEN that the City of Lodi has not provided an Annual Report with
respect to the above-named Bonds as required by the 2018 Installment Purchase Agreement executed
and entered into as of June 1,2018, by and between the City of Lodi (the "City") and the Lodi Public
Financing Authority. The City anticipates that the Annual Report will be filed by
Dated:
CITY OF LODI, a municipal corporation
A-1
APPENDIX F
DTC AND THE BOOK-ENTRY ONLY SYSTEM
The information in this Appendix C regarding DTC and its book-entry system has been obtained
from DTC's website, for use in securities offering documents, and the City takes no responsibility for the
accuracy or completeness thereof or for the absence of material changes in such inþrmation øfter the
date hereof.
The Depository Trust Company ("DTC"), New York, New York, acts as securities depository for
the 2018 Bonds. The 2018 Bonds were issued as fully-registered securities registered in the name of
Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized
representative of DTC. One fully-registered bond certificate was issued for each maturity of each series
of the 2018 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with
DTC.
DTC, the world's largest securities depository, is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 174 of the Securities Exchange Act of 1934, as amended. DTC holds and provides asset
servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt
issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct
Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants
of sales and other securities transactions in deposited securities, through electronic computerized book-
entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical
movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers
and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a
wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the
holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing
Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated
subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S.
securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or
maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to Participants
are on file with the Securities and Exchange Commission. More information about DTC can be found at
www.dtcc.com.
Purchases of the 2018 Bonds under the DTC system must be made by or through Direct
Participants, which will receive a credit for the 2018 Bonds on DTC's records. The ownership interest of
each actual purchaser of each 201 8 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their
purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of
the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the
2018 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their
ownership interests in the 2018 Bonds, except in the event that use of the book-entry system for the 2018
Bonds is discontinued.
F-1
To facilitate subsequent transfers, all 2018 Bonds deposited by Direct Participants with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be
requested by an authorized representative of DTC. The deposit of 2018 Bonds with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the 2018 Bonds; DTC's records
reflect only the identity of the Direct Participants to whose accounts such 2018 Bonds are credited, which
may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial Owners of 2018 Bonds may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the 201 I
Bonds, such as redemptions, tenders, defaults and proposed amendments to the 2018 Bond documents.
For example, Beneficial Owners of 2018 Bonds may wish to asceftain that the nominee holding the 2018
Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative,
Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies
of the notices be provided directly to them.
While the 2018 Bonds are in the book-entry-only system, redemption notices will be sent to DTC.
If less than all of the 2018 Bonds of a maturity are being redeemed, DTC's practice is to determine by lot
the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
the 2018 Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures.
Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the 2018 Bonds are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Principal and interest payments on the 2018 Bonds will be made to Cede & Co., or such other
nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct
Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or
the Trustee on the payable date in accordance with their respective holdings shown on DTC's records.
Payments by Participants to Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in bearer form or registered in
'ostreet name," and will be the responsibility of such Participant and not of DTC, the Trustee or the City,
subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of
principal and interest payments to Cede & Co. (or such other nominee as may be requested by an
authorized representative of DTC) is the responsibility of the City or the Trustee, disbursement of such
payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to
the Benefrcial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the 2018 Bonds at any
time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a
successor depository is not obtained, certificates representing the 2018 Bonds are required to be printed
and delivered.
F-2
The City may decide to discontinue use of the system of book-entry-only transfers through DTC
(or a successor securities depository). In that evont, certificates representing the 2018 Bonds will be
printed and delivered to DTC.
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