HomeMy WebLinkAboutAgenda Report - December 6, 2017 I-01CITY OF LODI
COUNCIL COMMUNICATION
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AGENDA ITEM
AGENDA TITLE: Adopt Resolutions and Authorize Documents and Actions Regarding the Current
Refunding of the outstanding 2007 Series A Wastewater Certificates of
Participation (COPS).
(a) Adopt Resolution of the City Council Authorizing Documents and Official
Actions Relating to the Refinancing of an outstanding Installment Payment
Obligation of the City of Lodi relating to its wastewater system, approving an
Installment Purchase Agreement and irrevocable refunding instructions, and
approving final form of financing documents and official actions, and
(b) Adopt Resolution of the Lodi Public Financing Authority Approving and
Directing Execution of an Installment Purchase Agreement and an Assignment
Agreement for the purpose of refinancing an Installment Payment Obligation of the
City of Lodi, and Approving Related Documents and Official Actions
MEETING DATE: December 6, 2017
PREPARED BY: Deputy City Manager and City Attorney
RECOMMENDED ACTION: Adopt Resolutions of the City Council and the Lodi Public Financing
Authority (the "PFA") approving the refinancing of an outstanding
payment obligation that was secured by the 2007 Series A
Wastewater COPS ("2007 COPS"), and the approval of an Installment Purchase Agreement by and
between the Authority and City and an Assignment Agreement by and between the Authority and River
City Bank (the "lender").
BACKGROUND INFORMATION: Favorable market conditions have made it attractive for the City to
refund the remaining portion of outstanding 2007 COPS. A full tax-
exempt refunding was not previously possible because of federal
tax regulations that limit "advance refunding" (an advance refunding is a refunding where the refunding
debt will pay off the refunded debt more than 90 days after the refunding debt is issued). A "current
refunding" (prepayment of 2007 COPS within 90 days of issuance of the refunding debt) is now possible.
The result will achieve savings for the benefit of the customers of the City's wastewater system (the
"Wastewater System").
City staff has determined that a direct private placement funded by a bank is the most efficient and cost-
effective means of refinancing. Approximately 30 banks were contacted and provided written
background related to the potential refinancing; eight responded with letters of interest providing terms,
interest rates and other information. City staff and the financing team have reviewed the proposals and
staff is recommending River City Bank. River City Bank has a combination of lowest interest rate and
other terms most favorable to the City. The term summaries for the eight responsive banks is attached.
If approved, the private placement with River City Bank is scheduled to close on December 14, 2017.
APPROVED:
Manager
SUMMARY OF DOCUMENTS: In order to complete the refinancing, the City and the PFA are required to
approve and execute several key legal documents. The key documents are summarized below.
Resolutions: The Resolutions of the City and the PFA approve the form and the execution of the
proposed legal documents. While the documents are in near -final form, the Resolutions authorize certain
officers of the City and the PFA to make amendments, as necessary. The Resolutions specify the maximum
principal amount for the installment payments, maximum borrowing cost, and other details.
Installment Purchase Agreement: The City will agree to make installment payments to the PFA
under an Installment Purchase Agreement, which payments will then be assigned by the PFA to the
lender pursuant to the Assignment Agreement described below. The Installment Purchase Agreement
documents the key financial obligations of the Wastewater System, which are consistent with existing
obligations of the Wastewater System related to the outstanding prior bonds.
The Installment Purchase Agreement will specify:
• the net revenues of the Wastewater System specifically pledged to the installment payments
(the City is not obligated to make the installment payments from any other City funds);
• the uses of the Wastewater System's gross revenues: briefly, gross revenues are first used to
pay operation and maintenance expenses and then to pay the installment payments, similar to
prior and existing installment payment obligations, and any future Wastewater System debt;
• the promise of the City to charge sufficient rates to Wastewater System customers to pay
operation and maintenance expenses, existing installment payments and any future debt with
a sufficient coverage cushion (the "rate covenant"); and
• the terms under which additional Wastewater System debt can be issued to finance additional
capital improvements to the Wastewater System.
In general, the PFA is a conduit for the installment payments paid by the City and has no
obligations other than to make the assignments made under the Assignment Agreement. The source of
funds for the installment payments is the Wastewater System net revenues (i.e., wastewater revenues
remaining after payment of Wastewater System operations and maintenance expenses).
Irrevocable Refunding Instructions: The Irrevocable Refunding Instructions between the City and
the trustee for the 2007 COPS document and specify the deposit, investment, and application of funds to
refinance the portion of the 2007 COPS that are being refunded.
Assignment Agreement: This agreement, by and between the PFA and the lender provides for the
assignment by the PFA of its rights under the Installment Purchase Agreement, most notably its right to
receive Installment Payments.
FISCAL IMPACT:
The estimated net present value savings (i.e., after deducting all costs of
issuance) for this refinancing are approximately $1.38 million for the
Wastewater Fund. Annual savings average approximately $90,000 per
year through 2038.
There is no impact to the City's General Fund from this transaciton. In
addition, the City's General Fund is not obligated in any way to participate
in the repayment of the current or refinanced debt.
FUNDING AVAILABLE: The debt service for this refinancing is, by definition, already provided for in
the City's budget.
2
Andrew Keys
Janice D'Magdich
Deputy City Manager/Internal Services Director City Attorney
Attachments: Term Summaries
City Council Resolution
Lodi Public Financing Authority Resolution
Installment Purchase Agreement and Appendix
Irrevocable Refunding Instructions and Exhibits
Assignment Agreement and Exhibit
City of Lodi Wastewater Refunding
Summary of Bank Bids
Sank
Response?
Reason For No Bid
Rate
Index
Rate Look
Levi Ex pen sea/Fear Call Feeture)Optio not Redemption
Other Notes
BB&T
Capital One
Mechanics Bank
F&M Bank
River City Bank
City National
Umpqua
Sterling National
Ves
Yes
Yes
Yes
Yes
Yes
Yes
Yes
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
3.42%
3 86% for 5 year call 3.69%
for 10 year call
310%
3.72%
N/A
N/A
N/A
Twenty Year US Treasury
(+105bps)
2 59%(Non-Callable) and 10 Year Treasury + 21%
2.76% (2.76% (non -call) and +.38% (10
callable@par 10 year) year call)
3 74%
3 91%
3-19%
N/A
N/A
10 year LIBOR Swap Rate
45 Days
12/15/2017
All costs will be incurred by the
city
5 Year
5 Year and 10 Year (Listed Rates)
5 Year@100
No formal term sheet sent
No formal term sheet sent
Bank Nos rate will be 3.599%.
11/31/2017, Rate not Origination fee of 9.259% of loan On any date without penalty with 30 days prior Requires rate to go up by
set until Term Sheet amount ($19.375) and $10,000 1.33X the fixed rate d mterest
signed Legal fee Immohe more) written notice is ever included in gross
income tax of bank
75 days
60 days
$10,000 Legal Fee
$7,500 Lender representative
fee, No Counsel Fee
3 weeks prior to closing $10,000 Legal Fee, $10,000
Origination
10 Year
5 Year@ 100
Requires issuer to indemnify
bank in the event that tax-
exempt status is changed or
revoked
Financing proposal is good for
an acceptance no later than
11/17/2017
9 Year Maximum Average
1-3@103%, 4-6@102%, 7-9@101%, 10@100 Life, 10-25bps rate reduction
with a despositary relahooshlp
with bank
12/14/2017 $5,000 6-10 @102% 11-15@101% 15+@100% Ne formal term sheet sent
Bank
Response? Reason for No Bid Rata Index
NA
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
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N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Rate Lock
Legal Expenses/Fess Call Featuro/Optlonat Redemption
Other14ates.
BAC Community Ban k
BAML
Bank of Stockton
Bank of the West
BBVA Compass
Boston Private Bank
Century Bank
Citibank
City National Bank of Florida
Cobiz
Comerica Bank
East West Bank
El Dorado Savings Bank
First Bank
First Internet Bank
First Republic Bank
Five Star Bank
Hancock Whitney Bank
Heartland Financial
HSBC
Huntington Bank
JPMC
Key Government Finance
MUFG Union
NBH
Signature Bank
Zions Bank
Yes
Yes
Ves
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Ves
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
not a fit
term exceeds max
term exceeds max
10yr max term
15yr max final
pricing
pricing target
size
term exceeds max
term exceeds max
term exceeds max
not a fit, require relationship
not what they do
no tax exempt appetite
pricing target
not pursuing direct purchases
not a fit
pricing expectation
pricing
too small
out of market currently
term exceeds max
term exceeds max
too small
pricing target
term exceeds max
term exceeds max
HIA NIA
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City of Lodi Wastewater Refunding
Summary of Bank Bids
Bank
Response? Reason for No Bid Rata Indax Rate Lock Legal Expenses/Fees Call Feature/Optional Redemption Other Notes
American River Rink - 1.4655
Bank of Marin
Bank of Rio Vista
Banner Bank
Bay Commercial Bank
Beneficial State Bank
California Bank of Commerce
Cathay Bank
Central Valley Community Bank
Community 1st Bank
Community Bank of the Bay
Community Business Bank
Exchange Bank
First Community Bank- 57903
First Northern Bank of Dixon
First -Citizens Bank -11063
Folsom Lake Bank
Fremont Bank
Golden Pacific Bank
Heritage Bank of Commerce
Oak Valley Community Bank
Opus Bank
Pacific Western Bank
Pinnacle Public Finance
Rabobank
Summit Bank
Sunwest Bank
erchanif National Sank of Sacra
Tri Counties Bank
TX Capital Bank
United Business Bank
U5 Bank
Wells Fargo
Westamerica Bank
Western Alliance Bank
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
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N/A 3/, 0/4 NIA
Jones Hall, A Professional Law Corporation Draft 11-28-2017
INSTALLMENT PURCHASE AGREEMENT
This Installment Purchase Agreement (this "Agreement"), dated as of December
1, 2017, is between the LODI PUBLIC FINANCING AUTHORITY, a joint exercise of powers
authority duly organized and existing under the laws of the State of California (the
"Authority"), and the CITY OF LODI, a municipal corporation duly organized and existing
under the laws of the State of California, as purchaser (the "City").
BACKGROUND:
1. The City owns and operates a public enterprise for the collection, treatment
and disposal of wastewater within the service area of the City (as defined more
completely below, the "System")
2. The City previously entered into an Installment Purchase Agreement, dated
as of May 1, 2004 (the "2004 Installment Purchase Agreement") with the Lodi Public
Improvement Corporation (the "Corporation"), pursuant to which the City agreed to make
certain installment payments in the aggregate principal amount of $27,360,000 (the
"2004 Installment Payments") and caused execution and delivery of Wastewater System
Revenue Certificates of Participation, 2004 Series A (the "2004 Certificates"), pursuant
to a Trust Agreement, dated as of May 1, 2004 (the "2004 Trust Agreement"), between
the Corporation and MUFG Union Bank, N.A., as successor trustee (the "2004 Trustee"),
all for the purpose of financing certain additions, betterments, extensions, replacements
and improvements to the System (the "2004 Project").
3. The City previously entered into an Installment Purchase Agreement, dated
as of December 1, 2007 (the "2007 Installment Purchase Agreement") with the Lodi
Public Improvement Corporation (the "Corporation"), pursuant to which the City agreed
to make certain installment payments in the aggregate principal amount of $30,320,000
(the "2007 Installment Payments") and caused execution and delivery of Wastewater
System Revenue Certificates of Participation, 2007 Series A (the "2007 Certificates"),
pursuant to a Trust Agreement, dated as of December 1, 2007 (the "2007 Trust
Agreement"), between the Corporation and The Bank of New York Mellon Trust
Company, N.A., as trustee (the "2007 Trustee"), all for the purpose of (i) financing
certain additions, betterments, extensions, replacements and improvements to the
System (the "2007 Project") and (ii) prepaying on a current basis all outstanding
installment payments under an Installment Purchase Agreement, dated as of December
1, 1991, and certain outstanding Certificates of Participation (1991 Wastewater
Treatment Plant Expansion Refunding Project) (the "1991 Certificates"). The 1991
Certificates were executed and delivered to (i) finance certain capital improvements to
the System (the "1991 Project") and (ii) prepay, on an advance basis, certain certificates
of participation that were executed and delivered to finance the expansion of the City's
White Slough Water Pollution Control Facility (the "White Slough Certificates").
4. The City and the Authority previously refinanced a portion of the 2004
Installment Payments and the 2004 Certificates pursuant to an Installment Purchase
Agreement, dated as of September 1, 2012 (the "2012 Installment Purchase
Agreement") and the Authority's Lodi Public Financing Authority 2012 Refunding
Wastewater Revenue Bonds, Series A (the "2012 Bonds"), which were issued under an
Indenture of Trust, dated as of September 1, 2012, by and between the Authority and
MUFG Union Bank, N.A., as trustee (the "2012 Trustee"). Pursuant to the 2012
Installment Purchase Agreement, the City agreed to make certain installment payments
in the aggregate principal amount of $17,105,000 (the "2012 Installment Payments").
5. The City previously entered into an Installment Purchase Agreement, dated
as of March 1, 2016 (the "2016 Installment Purchase Agreement") with the Authority,
pursuant to which the City agreed to make certain installment payments in the aggregate
principal amount of $20,295,000 (the "2016 Installment Payments"). The Authority
issued its Lodi Public Financing Authority 2016 Refunding Wastewater Revenue Bonds,
Series A in the aggregate principal amount of $20,295,000 (the "2016 Bonds") under an
Indenture of Trust, dated as of March 1, 2016 (the "2016 Indenture"), between the
Authority and MUFG Union Bank, N.A., as trustee (the "2016 Trustee"), which are
payable from revenues consisting primarily of the 2016 Installment Payments. A portion
of the proceeds of the 2016 Bonds were used to refinance a portion of the 2007
Installment Payments and corresponding maturities of the then -outstanding 2007
Certificates. The portion of the 2007 Installment Payments refinanced and 2007
Certificates refunded with a portion of the proceeds of the 2016 Bonds was that portion
attributable to the financing of the 2007 Project and the 1991 Project.
6. The City wishes to refinance the remaining 2007 Installment Payments (the
"Refinanced 2007 Installment Payments") and corresponding maturities of the
outstanding 2007 Certificates (the "Refunded 2007 Certificates"). The Refinanced 2007
Installment Payments and Refunded 2007 Certificates are attributable to the refinancing
of the White Slough Certificates.
7. The Authority has been formed for the purpose of assisting the City in the
financing and refinancing of public capital improvements, and in order to accomplish the
refunding plan described in the previous paragraph, the Authority has proposed to enter
into this Agreement with the City.
8. Pursuant to Section 7.1 of the 2007 Installment Purchase Agreement, the
City has the right to prepay all or a portion of the 2007 Installment Payments on any
date, provided that any prepayment of a principal component of the 2007 Installment
Payments to be applied to the prepayment or defeasance of the 2007 Certificates must
be in an amount sufficient to provide for the prepayment or defeasance of the 2007
Certificates in Authorized Denominations (as defined in the 2007 Trust Agreement) and
must be otherwise in accordance with the provisions of the 2007 Trust Agreement.
9. Under Section 9.1 of the 2007 Installment Purchase Agreement, the
Refinanced 2007 Installment Payments will be deemed paid and all obligations of the
City with respect to the Refinanced 2007 Installment Payments will cease and terminate
(except for the obligation to make payment from deposited funds and Defeasance
Securities (as defined in the 2007 Trust Agreement) as provided in Article IX of the 2007
Trust Agreement) when the Refunded 2007 Certificates have been paid or deemed paid
in accordance with Article IX of the 2007 Trust Agreement.
10. The Refunded 2007 Certificates maturing on and after October 1, 2018, are
subject to prepayment, in whole or in part, on any date on and after October 1, 2017, at
2
a prepayment price equal to the principal amount of the Refunded 2007 Certificates plus
unpaid accrued interest to the prepayment date, without premium.
11. Under Article IX of the 2007 Trust Agreement, the obligations of the
Corporation, the 2007 Trustee, and the City with respect to the Refunded 2007
Certificates will cease and terminate when cash and/or Defeasance Securities (as
defined in the 2007 Trust Agreement) have been deposited with the 2007 Trustee in an
amount sufficient to pay the Refunded 2007 Certificates when they become due,
whether at maturity or earlier prepayment.
12. The City wishes at this time to make such deposit of funds for the purpose
of (a) paying and prepaying the Refinanced 2007 Installment Payments and thereby
discharging its obligations under the 2007 Installment Purchase Agreement with respect
to the Refinanced 2007 Installment Payments and (b) defeasing, paying and prepaying
the Refunded 2007 Certificates and thereby discharging its obligations under the 2007
Trust Agreement.
13. The City has determined that to accomplish such financing it is necessary
and desirable to purchase the 2007 Project (subject to the 2016 Installment Purchase
Agreement) from the Authority on an installment basis as provided in this Agreement,
and the Authority has agreed to provide the funds required for acquisition of the 2007
Project (subject to the 2016 Installment Purchase Agreement) in consideration of the
agreement by the City to enter into this Agreement.
14. The City will agree to make installment payments under this Agreement in
order to purchase the 2007 Project (subject to the 2016 Installment Purchase
Agreement) from the Authority.
15. The obligations of the City under this Agreement will be secured by a
pledge of and lien on the System Net Revenues.
16. The rights, title and interest of the Authority hereunder, including the right to
receive the installment payments which are payable by the City hereunder, have been
assigned to River City Bank, a commercial bank duly organized and existing under the
laws of the State of California (the "Assignee") under an Assignment Agreement dated
the date hereof, between the Authority and the Assignee.
AGREEMENT
IN CONSIDERATION OF THE FOREGOING AND THE MATERIAL COVENANTS
HEREINAFTER CONTAINED, THE CITY AND THE AUTHORITY FORMALLY
COVENANT, AGREE AND BIND THEMSELVES AS FOLLOWS:
3
ARTICLE I
DEFINITIONS AND APPENDICES
SECTION 1.1. Definitions. All terms defined in this Section shall for all purposes
of this Agreement have the meanings herein specified.
"Annual Debt Service" means, for any Fiscal Year, the sum of (1) the interest
accruing on all Parity Debt during such Fiscal Year, assuming that all such Parity Debt is
retired as scheduled, plus (2) the principal amount (including principal due as sinking
fund installment payments) allocable to all Parity Debt in such Fiscal Year, calculated as
if such principal amounts were deemed to accrue daily during such Fiscal Year in equal
amounts from, in each case, the immediately preceding payment date for such principal
or, with respect to the initial principal payment date for such Parity Debt, the date of
delivery of such Parity Debt (provided that principal shall not be deemed to accrue for
greater than a 365 -day period prior to any principal payment date), as the case may be,
to the next succeeding payment date for principal, provided, that the following
adjustments shall be made to the foregoing amounts in the calculation of Annual Debt
Service:
(A) with respect to any Parity Debt bearing or comprising interest at
other than a fixed interest rate, the rate of interest used to calculate
Annual Debt Service shall be (i) with respect to such Parity Debt
then outstanding, one hundred ten per cent (110%) of the greater of
(1) the daily average interest rate on such Parity Debt during the
twelve (12) calendar months next preceding the date of such
calculation (or the portion of such twelve (12) calendar months that
such Parity Debt has borne interest) or (2) the most recent effective
interest rate on such Parity Debt prior to the date of such calculation
or (ii) with respect to Parity Debt then proposed to be issued, the
then current Municipal Market Data General Obligation Yield for a
maturity comparable to the maturity of the applicable Parity Debt as
published in The Bond Buyer (or if The Bond Buyer or such yield is
no longer published, such other published similar index as shall be
selected by the City);
(B) with respect to any issue or series of Parity Debt having twenty-five
per cent (25%) or more of the aggregate principal amount thereof
due in any one Fiscal Year, Annual Debt Service shall be calculated
as if the interest on and principal of the Parity Debt of such issue or
series were being paid in substantially equal annual amounts over
the term of such Parity Debt; provided, however that the full amount
of scheduled payments of interest and principal of such Parity Debt
shall be included in Annual Debt Service if the date of calculation is
within 24 months of the date on which such twenty-five percent
(25%) or more of aggregate principal amount becomes due;
(C) with respect to any Parity Debt or portions thereof bearing no
interest but which are sold at a discount and which discount
accretes with respect to such Parity Debt or portions thereof, such
4
accreted discount shall be treated as due when scheduled to be
paid;
(D) Annual Debt Service shall not include interest on Parity Debt which
is to be paid from amounts constituting capitalized interest;
(E) if an interest rate swap agreement is in effect with respect to, and is
payable on a parity with, any Parity Debt, no amounts payable
under such interest rate swap agreement in addition to debt service
payable with respect to such Parity Debt shall be included in the
calculation of Annual Debt Service unless, in the applicable Fiscal
Year, the sum of (i) the interest payable on such Parity Debt, plus
(ii) the amounts payable by the City under such interest rate swap
agreement, less (iii) the amounts receivable by the City under such
interest rate swap agreement, is greater than the interest payable
on such Parity Debt, in which case the net amount of payments to
be made by the City under such interest rate swap agreement that
exceed the interest to be paid on such Parity Debt shall be included
in such calculation, and for this purpose, the variable amount under
any such interest rate swap agreement shall be determined in
accordance with the procedure set forth in subparagraph (A) of this
definition; and
(F) Repayment Obligations payable on a parity with Parity Debt shall be
deemed to be payable at the scheduled amount due under such
Repayment Obligation and for this purpose, the variable interest
amount included in any such Repayment Obligation shall be
determined in accordance with the procedure set forth in
subparagraph (A) of this definition.
"Arbitrage Rebate Fund" means the fund (if any) which is established and held by
the City under Section 5.10(e).
"Assignee" means River City Bank, a commercial bank duly organized and
existing under the laws of the State of California, as assignee of certain rights of the
Authority hereunder, its successors and assigns.
"Assignment Agreement" means the Assignment Agreement dated as of
December 1, 2017, between the Authority and the Assignee, including any authorized
amendments thereto.
"Authorized Representative" means: (a) with respect to the Authority, its Chair,
Executive Director, Treasurer or Secretary, or any other person designated as an
Authorized Representative of the Authority by a Written Certificate of the Authority
signed by its Chair, Executive Director, Treasurer or Secretary and filed with the City;
and (b) with respect to the City, its Mayor, City Manager, Deputy City Manager, City
Attorney or any other person designated as an Authorized Representative of the City by
a Written Certificate of the City signed by its Mayor, City Manager, Deputy City Manager
or City Attorney and filed with the Authority.
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"Bond Counsel" means (a) Jones Hall, A Professional Law Corporation, or (b)
any other attorney or firm of attorneys of nationally recognized expertise with respect to
legal matters relating to obligations the interest on which is excludable from gross
income for purposes of federal income taxation under Section 103 of the Tax Code.
"Business Day" means a day which is not a Saturday, Sunday or legal holiday on
which banking institutions in the State of California are closed.
"City" means the City of Lodi, a municipal corporation duly organized and existing
under the laws of the State of California.
"City Administrative Costs" means those costs and expenses of the City that are
charged directly or apportioned to the operation of the 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 System
Revenues).
"Closing Date" means December , 2017, being the date of execution and
delivery of this Agreement.
"Corporation" means the Lodi Public Improvement Corporation.
"Date of Taxability" means the date from and for the interest component of the
Installment Payments is subject to federal or State income taxation as a result of a
Determination of Taxability.
"Default Rate" means the interest rate set forth in 4.04(a), plus basis points.
"Determination of Taxability" means and shall be deemed to have occurred on
the first to occur of the following:
(i) on that date when the City files any statement, supplemental statement or
other tax schedule, return or document which discloses that an Event of
Taxability shall have occurred;
(ii) on the date when the Assignee notifies the City that it has received a
written opinion from Bond Counsel to the effect that an Event of Taxability
has occurred, which notice shall be accompanied by a copy of such
opinion of Bond Counsel, unless, within 180 days after receipt by the City
of such notification and copy of such opinion from the Assignee, the City
shall deliver to the Assignee a ruling or determination letter issued to or
on behalf of the City by the Commissioner or any District Director of the
Internal Revenue Service (or any other governmental official exercising
the same or a substantially similar function from time to time) to the effect
that, after taking into consideration such facts as form the basis for the
opinion that an Event of Taxability has occurred, an Event of Taxability
shall not have occurred;
(iii) on the date when the City shall be advised in writing by the Commissioner
or any District Director of the Internal Revenue Service (or any other
government official or agent exercising the same or a substantially similar
6
function from time to time) that, based upon any review or audit or upon
any other ground whatsoever, an Event of Taxability has occurred; or
(iv) on that date when the City shall receive notice from the Assignee that the
Internal Revenue Service (or any other government official or agency
exercising the same or a substantially similar function from time to time)
has assessed the interest component of the Installment Payments as
includable in the gross income of the Assignee due to the occurrence of
an Event of Taxability;
provided, however, that no Determination of Taxability shall occur under
subparagraph (iii) or subparagraph (iv) above unless the City has been afforded
the opportunity, at its expense, to contest any such assessment, and, further, no
Determination of Taxability shall occur until such contest, if made, has been
finally determined; provided further, however, that upon demand from the
Assignee, the City shall reimburse the Assignee for any payments, including any
taxes, interest, penalties or other charges, such Assignee shall be obligated to
make as a result of the Determination of Taxability.
"Event of Taxability" means the taking of any action by the City, or the failure to
take any action by the City, or the making by the City of any misrepresentation in this
Agreement or the certificate regarding federal arbitrage which has been executed and
delivered by the City in connection with this Agreement, which has the effect of causing
the interest component of the Installment Payments to be includable, in whole or in part,
in the gross income of the Assignee for federal income tax purposes. A change in
federal tax law or a change in the interpretation of federal tax law after the Closing Date
shall not constitute an Event of Taxability.
"Excess Investment Earnings" means an amount required to be rebated to the
United States of America under Section 148(f) of the Tax Code due to investment of
gross proceeds of the Installment Payments at a yield in excess of the yield on the
Installment Payments.
"Event of Default" means an event of default as described in Section 6.1.
"Federal Securities" means: (a) any direct general obligations of the United
States of America (including obligations issued or held in book entry form on the books
of the Department of the Treasury of the United States of America), for which the full
faith and credit of the United States of America are pledged; and (b) obligations of any
agency, department or instrumentality of the United States of America, the timely
payment of principal and interest on which are directly or indirectly secured or
guaranteed by the full faith and credit of the United States of America.
"Fiscal Consultant" means any consultant or firm of such consultants appointed
by the City and who, or each of whom:
(a) is judged by the City to have experience in matters relating to the
financing of wastewater systems;
(b) is in fact independent and not under domination of the City;
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(c) does not have any substantial interest, direct or indirect, with the
City other than as purchaser of any Parity Debt; and
(d) is not connected with the City as an officer or employee of the City,
but who may be regularly retained to make reports to the City.
"Fiscal Year" means the twelve-month period beginning on July 1 of any year and
ending on June 30 of the next succeeding year, or any other twelve-month period
selected by the City as its fiscal year.
"Generally Accepted Accounting Principles" means the uniform accounting and
reporting procedures set forth in publications of the American Institute of Certified Public
Accountants or its successor, or by any other generally accepted authority on such
procedures, and includes, as applicable, the standards set forth by the Governmental
Accounting Standards Board or its successor.
"Governmental Authority" means any governmental or quasi -governmental entity,
including any court, department, commission, board, bureau, agency, administration,
central bank, service, district or other instrumentality of any governmental entity or other
entity exercising executive, legislative, judicial, taxing, regulatory, fiscal, monetary or
administrative powers or functions of or pertaining to government, or any arbitrator,
mediator or other person with authority to bind a party at law.
"Independent Accountant" means any independent certified public accountant or
firm of independent certified public accountants appointed and paid by the City, and
who, or each of whom: (a) is in fact independent and not under domination of the City;
(b) does not have any substantial interest, direct or indirect, with the City; and (c) is not
connected with the City as an officer or employee of the City, but who may be regularly
retained to make annual or other audits of the books of or reports to the City.
"Installment Payment Date" means April 1 and October 1 in each year,
commencing April 1, 2018.
"Installment Payments" means all payments required to be paid by the City on
any date under Section 4.4, including any amounts payable upon delinquent installments
and including any prepayment thereof under Sections 7.2 or 7.3.
"Irrevocable Refunding Instructions" means the instructions designated the
Irrevocable Refunding Instructions given by the City to the 2007 Trustee and dated the
Closing Date.
"Material Adverse Effect" means an event or occurrence which adversely affects
in a material manner (a) the assets, liabilities, condition (financial or otherwise),
business, facilities or operations of the City, (b) the ability of the City to carry out its
business in the manner conducted as of the date of this Agreement or to meet or
perform its obligations under this Agreement on a timely basis, (c) the validity or
enforceability of this Agreement, or (d) the exclusion of the interest component of the
Installment Payments from gross income for federal income tax purposes or the
exemption of such interest for state income tax purposes.
8
"Material Litigation" means any action, suit, proceeding, inquiry or investigation
against the City in any court or before any arbitrator of any kind or before or by any
Governmental Authority, of which the City has notice or knowledge and which, (1) if
determined adversely to the City, may have a Material Adverse Effect, (ii) seek to
restrain or enjoin any of the transactions contemplated hereby or by this Agreement, or
(iii) may adversely affect (A) the exclusion of the interest component of the Installment
Payments from gross income for federal income tax purposes or the exemption of such
interest for state income tax purposes or (B) the ability of the City to perform its
obligations under this Agreement.
"Maximum Annual Debt Service" means, as of any date of calculation, the largest
Annual Debt Service during the period from the date of such calculation through the final
maturity date of all Parity Debt.
"Net Proceeds" means, when used with respect to any casualty insurance or
condemnation award, the proceeds from such insurance or condemnation award
remaining after payment of all expenses (including attorneys' fees) incurred in the
collection of such proceeds.
"Operation and Maintenance Costs" means the reasonable and necessary costs
paid or incurred by the City for maintaining and operating the System, determined in
accordance with Generally Accepted Accounting Principles, including all reasonable
expenses of management and repair and all other expenses necessary to maintain and
preserve the System in good repair and working order, including all other reasonable
and necessary costs of the City or charges required to be paid by it to comply with the
terms hereof or of any Parity Debt or of any resolution authorizing the execution of any
Parity Obligations, such as compensation, reimbursement, and indemnification of the
Authority and fees and expenses of Independent Certified Public Accountants; but
excluding in all cases (i) payment of Parity Debt and Subordinate Obligations, (ii) costs
of capital additions, replacements, betterments, extensions or improvements which
under Generally Accepted Accounting Principles are chargeable to a capital account, (iii)
depreciation, replacement, and obsolescence charges or reserves therefor and
amortization of intangibles, (iv) City Administrative Costs, and (v) transfers from the
System Revenue Fund to other funds or accounts of the City.
"Parity Debt" means the Installment Payments and any Parity Obligations.
"Parity Obligation Payments" means the payments scheduled to be paid by the
City under and pursuant to the Parity Obligations, which payments are secured by a
pledge of System Net Revenues on a parity basis with the Installment Payments.
"Parity Obligations" means all obligations of the City authorized and executed by
the City, other than the Installment Payments, the Parity Obligation Payments under
which are secured by a pledge of the System Net Revenues on a parity with the
Installment Payments, including but not limited to any Repayment Obligations secured
by System Net Revenues on a parity basis with the Installment Payments. On the
Closing Date, Parity Obligations consist of the 2004 Installment Payments, the 2012
Installment Payments, and the 2016 Installment Payments. Additional Parity Obligations
may be incurred by the City in compliance with the provisions set forth in Section 5.8.
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"Rate Stabilization Fund" means any fund established and held by the City as a
fund for the stabilization of rates and charges imposed by the City with respect to the
System, which fund is established, held and maintained in accordance with Section 4.6.
"Refinanced 2007 Installment Payments" means the 2007 Installment Payments
that are refinanced with proceeds of this Agreement, which correspond to the Refunded
2007 Certificates.
"Refunded 2007 Certificates" means all of the outstanding 2007 Certificates.
"Repayment Obligation" means the reimbursement obligation or any other
payment obligation of the City under a written agreement between the City and a credit
provider to reimburse the credit provider for amounts paid pursuant to a credit facility for
the payment of the principal amount or purchase price of and/or interest on any Parity
Debt.
"System" means the whole and each and every part of the system of the City for
the collection, treatment and disposal of wastewater, including the portion thereof
existing on the date hereof, and including all additions, betterments, extensions, and
improvements to such system or any part thereof hereafter acquired or constructed.
"System Net Revenues" means for any period System Revenues less Operation
and Maintenance Costs for such period; provided that certain adjustments in the amount
of System Net Revenues for a Fiscal Year may be made in connection with amounts
deposited in and transferred from the Rate Stabilization Fund.
"System Revenue Fund" means the fund established and held by the City
pursuant to Section 4.5 of this Agreement.
"System Revenues" means all gross income and revenue received or receivable
by the City from the ownership or operation of the System, determined in accordance
with Generally Accepted Accounting Principles, including all fees (including connection
fees), rates, charges and all amounts paid under any contracts received by or owed to
the City in connection with the operation of the System and all proceeds of insurance
relating to the System and investment income allocable to the System and all other
income and revenue howsoever derived by the City from the ownership or operation of
the System or arising from the System. System Revenues for any Fiscal Year shall
include, for the purposes permitted by this Agreement, amounts transferred to the
System Revenue Fund from the Rate Stabilization Fund during such Fiscal Year.
"Tax Code" means the Internal Revenue Code of 1986 as in effect on the Closing
Date or (except as otherwise referenced herein) as it may be amended to apply to
obligations issued on the Closing Date, together with applicable temporary and final
regulations promulgated, and applicable official guidance published, under the Tax
Code.
"Taxable Rate" means
"Term" means the time during which this Agreement is in effect, as provided in
Section 4.3.
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"2004 Certificates" means the Wastewater System Revenue Certificates of
Participation, 2004 Series A.
"2004 Installment Payments" means the installment payments made by the City
under the 2004 Installment Purchase Agreement.
"2004 Installment Purchase Agreement" means the Installment Purchase
Agreement, dated as of May 1, 2004, between the Corporation and the City.
"2004 Trust Agreement" means the Trust Agreement, dated as of May 1, 2004,
between the Corporation and the 2004 Trustee.
"2004 Trustee" means MUFG Union Bank, N.A., as successor trustee.
"2007 Certificates" means the Wastewater System Revenue Certificates of
Participation, 2007 Series A.
"2007 Installment Payments" means the installment payments made by the City
under the 2007 Installment Purchase Agreement.
"2007 Installment Purchase Agreement" means the Installment Purchase
Agreement, dated as of December 1, 2007, between the Corporation and the City.
"2007 Trust Agreement" means the Trust Agreement, dated as of December 1,
2007, between the Corporation and the 2007 Trustee.
"2007 Trustee" means The Bank of New York Mellon Trust Company, N.A.
"2012 Certificates" means the Lodi Public Financing Authority 2012 Refunding
Wastewater Revenue Bonds, Series A.
"2012 Installment Payments" means the installment payments made by the City
under the 2012 Installment Purchase Agreement.
"2012 Installment Purchase Agreement" means the Installment Purchase
Agreement, dated as of September 1, 2012, between the Authority and the City.
"2012 Indenture of Trust" means the Indenture of Trust, dated as of
September 1, 2012, between the Authority and the 2012 Trustee.
"2012 Trustee" means MUFG Union Bank, N.A.
"2016 Bonds" means the Lodi Public Financing Authority 2016 Refunding
Wastewater Revenue Bonds, Series A, issued by the Authority pursuant to the 2016
Indenture of Trust.
"2016 Installment Payments" means the installments payments made by the City
under the 2016 Installment Purchase Agreement.
"2016 Installment Purchase Agreement" means the Installment Purchase
Agreement, dated as of March 1, 2016, between the Authority and the City.
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"2016 Indenture of Trust" means the Indenture of Trust, dated as of March 1,
2016, between the Authority and the 2016 Trustee.
"2016 Trustee" means MUFG Union Bank, N.A.
SECTION 1.2. Appendices. The following Appendices are attached to, and by
this reference are made a part of, this Agreement:
Appendix A: Installment Payment Schedule
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
SECTION 2.1. Representations, Covenants and Warranties of the City. The City
represents, covenants and warrants to the Authority and the Assignee as follows:
(a) The City is a and municipal corporation duly organized and existing
under the laws of the State of California, and is empowered, among
other things, to maintain and operate the System and to acquire in
the name of the City any interest in real or personal property
necessary or convenient for the operation of the System.
(b) The laws of the State authorize the City to enter into this
Agreement, and to enter into the transactions contemplated hereby
and to carry out its obligations hereunder.
(c) Neither the execution and delivery of this Agreement, nor the
fulfillment of or compliance with the terms and conditions hereof, nor
the consummation of the transactions contemplated hereby,
conflicts with or results in a material breach of the terms, conditions
or provisions of any restriction or any agreement or instrument to
which the City is now a party or by which the City is bound or
constitutes a default under any of the foregoing.
(d) The City has duly authorized, executed and delivered this
Agreement in accordance with the laws of the State of California.
This Agreement is legal, valid and binding obligation of the City,
enforceable in accordance with its terms, subject only to laws
related to insolvency or bankruptcy and general equitable principles.
(e) There is no action, suit, proceeding, inquiry or investigation before
or by any court or federal, state, educational or other Governmental
Authority pending or, to the knowledge of the City after reasonable
investigation, threatened against or affecting the City or the assets,
properties or operations of the City which, if determined adversely to
the City or its interests, would have a material and adverse effect
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upon the consummation of the transactions contemplated by or the
validity of this Agreement and the Assignment Agreement or upon
the financial condition, assets, properties or operations of the City,
and the City is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal, state,
educational or other Governmental Authority, which default might
have consequences that would materially and adversely affect the
consummation of the transactions contemplated by this Agreement
and the Assignment Agreement or the financial conditions, assets,
properties or operations of the City.
The statement of financial position of the System as of June 30,
2016, and the related statement of activities and statement of cash
flows and changes in financial position for the year then ended and
the auditors' reports with respect thereto, copies of which have
heretofore been furnished to the Assignee, are complete and correct
and fairly present the financial condition, changes in financial
position and results of operations of the System at such date and for
such period, and were prepared in accordance with generally
accepted accounting principles. Since the most current date of the
information, financial or otherwise, supplied by the City to the
Assignee:
(i) There has been no change in the assets, liabilities, financial
position or results of operations of the System that might
reasonably be anticipated to cause a Material Adverse Effect.
(ii) The System has not incurred any obligations or liabilities which
might reasonably be anticipated to cause a Material Adverse
Effect.
(iii) The System has not (A) incurred any material indebtedness
that remains outstanding, other than the Installment Payments,
the 2004 Installment Payments, the 2012 Installment
Payments, the 2016 Installment Payments, or as previously
disclosed to Assignee, and trade accounts payable arising in
the ordinary course of the City's business and not past due, or
(B) guaranteed the indebtedness of any other person.
All information, reports and other papers and data furnished by the
City to the Assignee were, at the time the same were so furnished,
complete and accurate in all material respects and insofar as
necessary to give the Assignee a true and accurate knowledge of
the subject matter and were provided in expectation of the
Assignee' reliance thereon in entering into the transactions
contemplated by this Agreement. No fact is known to the City which
has had or, so far as the City can now reasonably foresee, may in
the future have a Material Adverse Effect, which has not been set
forth in the financial statements previously furnished to the Assignee
or in other such information, reports, papers and data or otherwise
disclosed in writing to the Assignee prior to the Closing Date. Any
13
financial, budget and other projections furnished to the Assignee by
the City or its or their agents were prepared in good faith on the
basis of the assumptions stated therein, which assumptions were
fair and reasonable in light of the conditions existing at the time of
delivery of such financial, budget or other projections, and
represented, and as of the date of this representation, represent the
City's best estimate of the System's future financial performance.
No document furnished nor any representation, warranty or other
written statement made to the Assignee in connection with the
negotiation, preparation or execution of this Agreement contains or
will contain any untrue statement of a material fact or omits or will
omit to state (as of the date made or furnished) any material fact
necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were or will
be made, not misleading.
(h) The City has structured fees, estimated revenues and/or taken other
lawful actions necessary to ensure that the pledge of and lien on
System Net Revenues are sufficient to pay all Installment Payments
when due and payable, and such moneys have been and will continue
to be applied in the funds and accounts as required herein and
towards payment of all Installment Payments when due and payable.
The City acknowledges that (i) River City Bank, as the Assignee
under the Assignment Agreement, is acting solely for its own loan
account and not as a fiduciary for the City or in the capacity of
broker, dealer, placement agent, municipal securities underwriter or
municipal advisor, (ii) the Assignee has not provided, and will not
provide, financial, legal (including securities law), tax, accounting or
other advice to or on behalf of the City or with respect to the
Installment Payments, and (iii) the Assignee has expressed no view
regarding the legal sufficiency of its representations for purposes of
compliance with any legal requirements applicable to any other
party, or the correctness of any legal interpretation made by counsel
to any other party with respect to any such matters.
(i)
SECTION 2.2. Representations, Covenants and Warranties of the Authority. The
Authority represents, covenants and warrants to the City and the Assignee as follows:
(a) The Authority is a joint exercise of powers authority organized and
existing under the laws of the State of California, and has power to
enter into this Agreement and the Assignment Agreement and to
perform the duties and obligations impose on it hereunder and
thereunder. The Board of Directors of the Authority has duly
authorized the execution and delivery of this Agreement and the
Assignment Agreement.
(b) Neither the execution and delivery of this Agreement and the
Assignment Agreement nor the fulfillment of or compliance with the
terms and conditions hereof or thereof, nor the consummation of the
transactions contemplated hereby or thereby, conflicts with or
14
results in a material breach of the terms, conditions or provisions of
any restriction or any agreement, instrument, regulation or law to
which the Authority is now a party or by which the Authority is
bound, or constitutes a default under any of the foregoing.
(c) The Authority has good and marketable title to the 2007 Project
(subject to the 2016 Installment Purchase Agreement), which is
otherwise free and clear of encumbrances, except as previously
disclosed to the Assignee and the City.
(d) The Authority has duly authorized, executed and delivered this
Agreement in accordance with the laws of the State of California.
This Agreement is legal, valid and binding obligation of the
Authority, enforceable in accordance with its terms, subject only to
laws related to insolvency or bankruptcy and general equitable
principles.
(e) The Authority shall cooperate fully with the Assignee at the expense
of the City in filing any proof of loss with respect to any insurance
policy maintained pursuant to Article V of this Agreement and shall
cooperate fully with the City in contesting any lien filed or
established against the 2007 Project, upon the request and at the
expense of the City pursuant to Article V of this Agreement.
The Authority (i) is acting solely for its own loan account and not as
a fiduciary for the City or in the capacity of broker, dealer, placement
agent, municipal securities underwriter or municipal advisor, (ii) has
not provided, and will not provide, financial, legal (including
securities law), tax, accounting or other advice to or on behalf of the
City or with respect to the Installment Payments, and (iii) has
expressed no view regarding the legal sufficiency of its
representations for purposes of compliance with any legal
requirements applicable to any other party, or the correctness of any
legal interpretation made by counsel to any other party with respect
to any such matters.
(f)
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ARTICLE III
SALE OF 2007 PROJECT TO AUTHORITY;
REFINANCING OF THE REFINANCED 2007
INSTALLMENT PAYMENTS
SECTION 3.1. Sale of 2007 Project to Authority; Deposit of Moneys. The City
hereby sells and conveys the 2007 Project (subject to the 2016 Installment Purchase
Agreement) to the Authority, and the Authority hereby purchases the 2007 Project
(subject to the 2016 Installment Purchase Agreement) from the City. The purchase price
shall be $
SECTION 3.2. Payment and Prepayment of the Refinanced 2007 Installment
Payments; Defeasance and Prepayment of the Refunded 2007 Certificates. The
proceeds received by the Authority from the assignment of its rights pursuant to the
Assignment Agreement shall be applied as described in the Irrevocable Refunding
Instructions.
SECTION 3.3. No Debt Service Reserve Fund. The City and the Authority
acknowledge that no debt service reserve fund has been established for the Installment
Payments, and that the Assignee shall have no right to the benefit of any debt service
reserve fund established for other Parity Debt.
ARTICLE IV
INSTALLMENT SALE OF 2007 PROJECT BACK TO CITY;
INSTALLMENT PAYMENTS
SECTION 4.1. Sale of 2007 Project to City. The Authority hereby sells and
conveys the 2007 Project (subject to the 2016 Installment Purchase Agreement) back to
the City, and the City hereby purchases the 2007 Project (subject to the 2016 Installment
Purchase Agreement) from the Authority upon the terms and conditions set forth in this
Agreement.
SECTION 4.2. Title; Taxes. Title to the 2007 Project (subject to the 2016
Installment Purchase Agreement) shall be vested in the City on the Closing Date. The
Authority shall take all actions necessary to vest in the City all of the Authority's rights in
and title to the 2007 Project (subject to the 2016 Installment Purchase Agreement).
Such title shall be held by the City in trust pending the satisfaction of the payment
obligations under this Agreement.
The parties to this Agreement contemplate that the 2007 Project will be used for
a governmental or proprietary purpose of the City and, therefore, that the 2007 Project
will be exempt from all property taxes, including any licensing fees. The Installment
Payments payable by the City under this Agreement have been established to reflect the
savings resulting from this exemption from taxation. The City will take such actions
necessary under applicable law to obtain said exemption. Nevertheless, if the use,
possession or acquisition of the 2007 Project is determined to be subject to taxation, or
licensing fees, or later becomes subject to such taxes, or licensing fees, the City shall
16
pay when due all taxes and governmental charges lawfully assessed or levied against or
with respect to the 2007 Project.
SECTION 4.3. Term of this Agreement. The Term of this Agreement commences
on the Closing Date and ends on October 1, 2037 (provided the City has paid all
Installment Payments and other amounts due hereunder through such date), unless
such term is extended or sooner terminated as hereinafter provided.
SECTION 4.4. Installment Payments.
(a) Obligation to Pay. The City agrees to pay to the Authority, its successors
and assigns, as the purchase price of the 2007 Project, the aggregate principal amount
of $ , together with interest (calculated on the basis of a 360 -day year of twelve
30 -day months) on the unpaid principal balance thereof, payable in semiannual
installment payments in the respective amount and on the respective Installment
Payment Dates specified in Appendix A. The Installment Payments shall be secured by
and payable from System Net Revenues as hereinafter provided.
Any Installment Payment which is not paid in full on the applicable Installment
Payment Date shall continue to accrue interest at the rate specified in Section 4.4(c),
subject to the provisions of Article VI.
From and after the Date of Taxability, if applicable, the interest rate with respect
to the Installment Payments shall increase to the Taxable Rate. The City shall inform the
Assignee promptly upon the occurrence of a Determination of Taxability.
(b) Reduction Upon Partial Prepayment. If the City prepays less than all of the
remaining principal components of the Installment Payments under Article VII, the
amount of such prepayment shall be applied to the Installment Payments on a pro rata
basis so as to maintain substantially the same debt service profile.
(c) Rate on Overdue Payments. If the City fails to make any of the payments
required in this Section 4.4 on or before the due date therefor, the Installment Payment
in default shall continue as an obligation of the City until the amount in default shall have
been fully paid and the City agrees to pay the same with interest thereon, to the extent
permitted by law, from the date thereof at the rate of % per annum, or, if lower, the
maximum rate then permitted by law.
(d) Assignment. The City understands and agrees that all Installment
Payments have been assigned by the Authority to the Assignee under the Assignment
Agreement, and the City hereby assents to such assignment. The Authority hereby
directs the City, and the City hereby agrees, to pay to the Assignee all payments
payable by the City under this Section and all amounts payable by the City under Article
VII.
SECTION 4.5. Pledge and Application of System Net Revenues.
(a) Pledge. All System Net Revenues and all amounts on deposit in the
System Revenue Fund are, pursuant to Section 5451 of the Government Code of the
State of California and all laws amendatory thereof or supplemental thereto, hereby
irrevocably pledged to the payment of the Installment Payments and may not be used for
17
any other purpose until all Installment Payments have been fully paid or provision has
been made for such payment in accordance with this Agreement; provided that out of
the System Revenues and amounts on deposit in the System Revenue Fund there may
be apportioned such sums for such purposes as are expressly permitted in this
Installment Sale Agreement. This pledge, together with the pledge of System Net
Revenues and amounts in the System Revenue Fund securing all other Parity
Obligations, shall, subject to application as permitted herein, constitute a first lien on
System Net Revenues and amounts on deposit in the System Revenue Fund.
(b) Deposit of System Revenues Into System Revenue Fund: Transfers to
Make Payments. In order to carry out and effectuate the pledge and lien contained in
this Agreement, the City agrees and covenants that all System Revenues shall be
received by the City in trust hereunder and, except for Net Proceeds, shall be deposited
when and as received in a special fund designated as the "System Revenue Fund",
which fund the City has previously established and which fund the City agrees and
covenants to maintain and to hold separate and apart from other funds until all
Installment Payments have been fully paid. To the extent the City has an existing fund
which satisfies the foregoing requirements, then such fund shall be deemed to be the
"System Revenue Fund" and the City shall not be required to create a new fund. The
City may maintain separate accounts within the System Revenue Fund. The amounts in
the System Revenue Fund may be invested in the discretion of the City. Moneys in the
System Revenue Fund shall be used and applied by the City as provided in this
Agreement.
The City shall, from the moneys in the System Revenue Fund, pay all Operation
and Maintenance Costs (including amounts reasonably required to be set aside in
contingency reserves for Operation and Maintenance Costs, the payment of which is not
then immediately required) as such Operation and Maintenance Costs become due and
payable. Thereafter, all remaining moneys in the System Revenue Fund shall be set
aside by the City at the following times for the transfer to the following respective special
funds in the following order of priority; and all moneys in each of such funds shall be held
in trust and shall be applied, used and withdrawn only for the purposes set forth in this
Section and other documents related to Parity Obligations:
(i)
Installment Payments; Parity Obligation Payments. Not later than
each Installment Payment Date, the City shall, from the moneys in
the System Revenue Fund, transfer to the Authority the Installment
Payment due and payable on that Installment Payment Date. The
City shall also, from the moneys in the System Revenue Fund,
transfer when due to the applicable trustee for deposit in the
respective payment fund, without preference or priority, and in the
event of any insufficiency of such moneys ratably without any
discrimination or preference, any Parity Obligation Payments in
accordance with the provisions of the applicable Parity Obligations.
(ii) Debt Service Reserve Funds. On or before the first Business Day of
each month, the City shall, from the remaining moneys in the
System Revenue Fund, without preference or priority, and in the
event of any insufficiency of such moneys ratably without any
discrimination or preference, transfer to the applicable trustee for
such debt service reserve funds, if any, as may have been
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established in connection with Parity Obligations that sum, if any,
necessary to restore such debt service reserve funds for Parity
Obligations to an amount equal to the amount required to be
maintained therein (including to reimburse the provider for a draw
on a reserve account credit instrument).
(iii) Surplus. Moneys on deposit in the System Revenue Fund not
necessary to make any of the payments required above in a Fiscal
Year may be expended by the City at any time for any purpose
permitted by law, including but not limited to payments with respect
to Subordinate Obligations and deposits to the Rate Stabilization
Fund.
(c) No Preference or Priority. Payment of the Installment Payments and Parity
Obligation Payments shall be made without preference or priority among the Installment
Payments and such Parity Obligation Payments. If the amount of System Net Revenues
on deposit in the System Revenue Fund are at any time insufficient to enable the City to
pay when due the Installment Payments and any Parity Obligation Payments, such
payments will be made on a pro rata basis.
(d) Other Uses of System Net Revenues Permitted. The City shall manage,
conserve and apply the System Net Revenues on deposit in the System Revenue Fund
in such a manner that all deposits required to be made under the preceding subsection
(b) will be made at the times and in the amounts so required. Subject to the foregoing
sentence, so long as no Event of Default has occurred and is continuing, the City may
use and apply moneys in the System Revenue Fund for (i) the payment of any
Subordinate Obligations or any unsecured obligations, (ii) the acquisition and
construction of improvements to the System, (iii) the prepayment of any other obligations
of the City relating to the System, or (iv) any other lawful purposes of the City.
(e) Budget and Appropriation of Installment Payments. During the Term of this
Agreement, the City shall adopt all necessary budgets and make all necessary
appropriations of the Installment Payments from the System Net Revenues. If any
Installment Payment requires the adoption by the City of a supplemental budget or
appropriation, the City shall promptly adopt the same. The covenants on the part of the
City contained in this subsection (e) constitute duties imposed by law and it is the duty of
each and every public official of the City to take such actions and do such things as are
required by law in the performance of the official duty of such officials to enable the City
to carry out and perform the covenants and agreements in this subsection (e).
SECTION 4.6. Establishment of Rate Stabilization Fund. The City previously
established a special fund known as the "Rate Stabilization Fund" which shall be held
and maintained by the City until all Installment Payments have been fully paid. The City
may, subject to the provisions of Section 4.5, during or within 210 days after a Fiscal
Year, transfer surplus System Net Revenues attributable to such Fiscal Year (on the
basis of Generally Accepted Accounting Principles) from the System Revenue Fund to
the Rate Stabilization Fund. The City may at any time transfer moneys from the Rate
Stabilization Fund to the System Revenue Fund.
Notwithstanding anything to the contrary provided in this Agreement, for
purposes of the calculations required under Section 5.8, (i) System Net Revenues
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deposited into the Rate Stabilization Fund shall not be taken into account as System
Revenues for the Fiscal Year to which such deposited System Net Revenues are
attributable and (ii) amounts withdrawn from the Rate Stabilization Fund and deposited
into the System Revenue Fund may be taken into account as System Revenues for the
Fiscal Year in which such deposit into the System Revenue Fund is made; provided that,
for purposes of the calculation required under Section 5.8(c), the amount of System Net
Revenues before any credits for transfers from the Rate Stabilization Fund to the
System Revenue Fund may not be less than 100% of Annual Debt Service for such
Fiscal Year.
SECTION 4.7. Special Obligation of the City; Obligations Absolute. The City's
obligation to pay the Installment Payments and any other amounts coming due and
payable hereunder shall be a special obligation of the City limited solely to the System
Net Revenues. Under no circumstances is the City required to advance moneys derived
from any source of income other than the System Net Revenues and other sources
specifically identified herein for the payment of the Installment Payments and such other
amounts, and no other funds or property of the City are liable for the payment of the
Installment Payments and any other amounts coming due and payable hereunder.
The obligation of the City to pay the Installment Payments, and the obligation of
the City to perform and observe the other agreements contained herein, are absolute
and unconditional and are not subject to any defense or any right of setoff, counterclaim
or recoupment arising out of any breach of the Authority or the Assignee of any
obligation to the City or otherwise with respect to the System, whether hereunder or
otherwise, or out of indebtedness or liability at any time owing to the City by the Authority
or the Assignee. Until such time as all of the Installment Payments have been fully paid
or prepaid, the City:
(i) will not suspend or discontinue payment of any Installment
Payments,
(ii) will perform and observe all other agreements contained in this
Agreement, and
(iii) will not terminate this Agreement for any cause, including, without
limiting the generality of the foregoing, the occurrence of any acts or
circumstances that may constitute failure of consideration, eviction
or constructive eviction, destruction of or damage to the System, the
sale of the System, the taking by eminent domain of title to or
temporary use of any component of the System, commercial
frustration of purpose, any change in the tax 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 to perform
and observe any agreement, whether express or implied, or any
duty, liability or obligation arising out of or connected with this
Agreement.
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ARTICLE V
COVENANTS OF THE CITY
SECTION 5.1. Disclaimer of Warranties. Neither the Authority nor the Assignee
makes any warranty or representation, either express or implied, as to the value, design,
condition, merchantability or fitness for any particular purpose or fitness for the use
contemplated by the City of the 2007 Project or any component thereof, or any other
representation or warranty with respect to any of the 2007 Project or any component
thereof. In no event is the Authority or the Assignee liable for incidental, indirect, special
or consequential damages, in connection with or arising out of this Agreement for the
existence, furnishing, functioning or use of the 2007 Project.
SECTION 5.2. Release and Indemnification Covenants. The City agrees to
indemnify the Authority and the Assignee, and their respective officers, agents,
successors and assigns, against all claims, losses and damages, including legal fees
and expenses, arising out of:
(a) the use, maintenance, condition or management of, or from any
work or thing done on or about the System by the City;
(b) any breach or default on the part of the City in the performance of
any of its obligations under this Agreement,
(c) any act or omission of the City or of any of its agents, contractors,
servants, employees or licensees with respect to the System, and
(d) any act or omission of any lessee of the City with respect to the
System or 2007 Project.
No indemnification is made under this Section 5.2 or elsewhere in this
Agreement for willful misconduct or negligence under this Agreement by the Authority or
the Assignee, or their respective officers, agents, employees, successors or assigns.
The provisions of this Section survive the expiration of the Term of this Agreement.
SECTION 5.3. Sale or Eminent Domain of System. Except as provided herein,
the City covenants that the System will not be encumbered, sold, leased, pledged, any
charge placed thereon, or otherwise disposed of, as a whole or substantially as a whole
if such encumbrance, sale, lease, pledge, charge or other disposition would materially
impair the ability of the City to pay the Installment Payments or any Parity Obligations, or
would materially adversely affect its ability to comply with the terms of this Agreement or
any other Parity Debt. The City may not enter into any agreement which impairs the
operation of the System or any part of it necessary to secure adequate System Net
Revenues to pay the Installment Payments or any Parity Debt, or which otherwise would
impair the rights of the Authority with respect to the System Net Revenues.
If any substantial part of the System is sold, the payment therefor shall, with the
prior written consent of the Assignee, either (a) be used for the acquisition or
construction of improvements and extensions or replacement facilities or (b) be applied
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on a pro rata basis to prepay the Installment Payments and any Parity Obligation
Payments on the next available prepayment date.
Any amounts received as awards as a result of the taking of all or any part of the
Water System by the lawful exercise of eminent domain, if and to the extent that such
right can be exercised against such property of the City shall, with the prior written
consent of the Assignee, either (a) be used for the acquisition or construction of
improvements and extension of the Water System, or (b) be applied on a pro rata basis
to prepay the Installment Payments and any Parity Debt on the next available
prepayment date.
SECTION 5.4. Insurance. The City shall at all times maintain with responsible
insurers all such insurance on the System as is customarily maintained with respect to
works and properties of like character against accident to, loss of or damage to the
System. Such insurance shall include coverage for casualty losses to the facilities
constituting part of the System. All amounts collected from insurance against accident to
or destruction of any portion of the System shall, with the prior written consent of the
Assignee, either (a) be used to repair or rebuild such damaged or destroyed portion of
the System, or (b) be applied on a pro rata basis to prepay the Installment Payments
and any Parity Debt on the next available prepayment date.
The City shall also maintain, with responsible insurers, worker's compensation
insurance and insurance against public liability and property damage to the extent
reasonably necessary to protect the interests of the City and the Authority.
Any policy of insurance required under this Section 5.4 may be maintained as
part of or in conjunction with any other insurance coverage carried by the City, and may
be maintained in whole or in part in the form of self-insurance by the City or in the form
of the participation by the City in a joint powers agency or other program providing
pooled insurance. The City shall file evidence of all insurance policies maintained under
this Section at least annually with the Authority and the Assignee.
SECTION 5.5. Records and Accounts. The City shall keep proper books of record
and accounts of the System in which complete and correct entries shall be made of all
transactions relating to the System. Said books shall, upon prior request, be subject to
the reasonable inspection of the Authority upon not less than two Business Days' prior
notice to the City.
The City shall cause the books and accounts of the System to be audited
annually by an Independent Accountant not more than nine months after the close of
each Fiscal Year, and shall file a copy of such report with the Authority. Such report
may be part of a combined financial audit or report covering all or part of the City's
finances.
SECTION 5.6. Rates and Charges.
(a) The City will, at all times until all Installment Payments have been fully
paid pursuant to Section 8.11, fix, prescribe and collect rates, fees and charges and
manage the operation of the System for each Fiscal Year so as to yield System
Revenues at least sufficient, after making reasonable allowances for contingencies and
errors in the estimates, to pay the following amounts during such Fiscal Year:
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(i) All current Operation and Maintenance Costs.
(ii) The Installment Payments, all other Parity Obligation Payments, and
all payments on Subordinate Obligations as they become due and
payable.
(iii) All payments required for compliance with the terms of the
Assignment Agreement and this Agreement.
(iv) All payments to meet any other obligations of the City which are
charges, liens or encumbrances upon, or payable from, the System
Revenues
(b) In addition to the requirements of the foregoing subsection (a) of this
Section, the City will, at all times until all Installment Payments have been fully paid in
accordance with Section 8.11, to the maximum extent permitted by law, fix, prescribe
and collect rates, fees and charges and manage the operation of the System for each
Fiscal Year so as to yield System Net Revenues during such Fiscal Year equal to at
least 110% per cent of the Annual Debt Service in such Fiscal Year; provided, an
adjustment shall be made to the amount of System Net Revenues as provided in Section
4.6.
(c) The City may make or permit to be made adjustments from time to time in
such rates, fees and charges and may make or permit to be made such classification
thereof as it deems necessary, but shall not reduce or permit to be reduced such rates,
fees and charges below those then in effect unless the System Revenues from such
reduced rates, fees and charges will at all times be sufficient to meet the requirements of
this Section.
SECTION 5.7. Superior and Subordinate Obligations. The City may not issue or
incur any additional bonds or other obligations during the Term of this Agreement having
any preference or priority in payment of principal or interest out of the System Revenues
or the System Net Revenues over the Installment Payments. Nothing herein limits or
affects the ability of the City to issue or incur (a) Parity Debt under and in compliance
with Section 5.8, or (b) obligations which are either unsecured or which are secured by
an interest in the System Net Revenues which is junior and subordinate to the pledge of
and lien upon the System Net Revenues established hereunder.
SECTION 5.8. Issuance of Parity Obligation. The City may at any time enter into
or otherwise incur Parity Obligations in addition to the obligations under this Agreement
and the Parity Payment Obligations under the 2004 Installment Purchase Agreement,
the 2012 Installment Purchase Agreement, and the 2016 Installment Purchase
Agreement; subject to the following conditions precedent:
(a) The City shall be in compliance with all agreements, conditions,
covenants and terms contained in this Agreement required to be
observed or performed by it; and
(b) Any debt service reserve fund established for such Parity Debt shall
satisfy the following criteria: (i) such debt service reserve fund shall
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be held by an independent trustee; (ii) the required amount of such
debt service reserve fund shall not exceed the lesser of the
maximum annual debt service of such Parity Debt (calculated on the
basis of a year ending on the principal payment date of such Parity
Debt) or the maximum amount permitted under the Tax Code,
provided that, if such Parity Debt is a loan from a governmental
agency, then a debt service reserve fund shall be established in the
amount, if any, required or permitted by such governmental agency;
and (iii) the City shall not be required to replenish withdrawals from
such debt service reserve fund in greater than monthly installments
equal to 1/12 of the aggregate amount needed to restore the debt
service reserve fund to the required level; and
(c) The System Net Revenues for the last completed Fiscal Year or any
12 consecutive months within the last 18 months preceding the date
of entry into or incurrence of such Parity Debt, plus an allowance for
increased System Net Revenues arising from any increase in the
rates, fees, and charges of the System which was duly adopted by
the City Council of the City prior to the date of the entry into or
incurrence of such Parity Debt but which, during all or any part of
such 12 month period was not in effect in an amount equal to the
amount by which the System Net Revenues would have been
increased if such increase in rates, fees, and charges had been in
effect during the whole of such 12 month period, shall have
produced a sum equal to at least 110% of the Maximum Annual
Debt Service as calculated after the entry into or incurrence of such
Parity Debt; provided that in the event that all or a portion of such
Parity Debt is to be issued for the purpose of refunding and retiring
any Parity Obligation then outstanding, interest and principal
payments on the Parity Debt to be so refunded and retired from the
proceeds of such Parity Debt being issued shall be excluded from
the foregoing computation of Maximum Annual Debt Service;
provided further, that the City may at any time enter into or incur
Parity Debt without compliance with the foregoing conditions if the
Annual Debt Service for each Fiscal Year during which such Parity
Debt is outstanding will not be increased by reason of the entry into
or incurrence of such Parity Debt; and provided further, an
adjustment shall be made in the amount of System Net Revenues
as provided in Section 4.6 with respect to the Rate Stabilization
Fund.
Nothing contained in this Section 5.8 shall limit the issuance of any revenue
bonds, notes or other evidences of indebtedness or the entry into any installment
purchase agreement by the City payable from the System Net Revenues and secured by
a lien and charge on the System Net Revenues if, after the issuance of such revenue
bonds or entry into such installment purchase agreement, all of the Installment
Payments shall have been fully paid or provision has been made therefor. Furthermore,
nothing contained in this Section 5.8 shall limit the issuance or incurrence of any
obligations payable from System Net Revenues on a subordinate basis.
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SECTION 5.9. Operation of System in Efficient and Economical Manner. The City
shall operate the System in an efficient and economical manner and maintain and
preserve the System in good repair and working order.
SECTION 5.10. Tax Covenants.
(a) Generally. The City shall not take any action or permit to be taken any
action or omission which would cause or which, with the passage of time if not cured
would cause, the interest components of the Installment Payments to become includable
in gross income of the Authority or its Assignee for federal income tax purposes.
(b) Private Activity Bond Limitation. The City shall assure that the proceeds of
the Installment Payments are not so used as to cause the Installment Payments to
satisfy the private business tests of Section 141(b) of the Tax Code or the private loan
financing test of section 141(c) of the Tax Code.
(c) Federal Guarantee Prohibition. The City shall not take any action or permit
or suffer any action to be taken if the result of the same would be to cause the
Installment Payments to be "federally guaranteed" within the meaning of Section 149(b)
of the Tax Code.
(d) No Arbitrage. The City shall not take, or permit or suffer to be taken, any
action with respect to the proceeds of the Installment Payments which, if such action had
been reasonably expected to have been taken, or had been deliberately and
intentionally taken, on the Closing Date would have caused the Installment Payments to
constitute "arbitrage bonds" within the meaning of Section 148(a) of the Tax Code.
(e) Arbitrage Rebate; Arbitrage Rebate Fund. The City shall take any and all
actions necessary to assure compliance with section 148(f) of the Tax Code, relating to
the rebate of excess investment earnings, if any, to the federal government, to the extent
that such section is applicable to this Agreement.
The City may in its discretion establish and maintain a special fund designated as
the "Arbitrage Rebate Fund". The City shall deposit into the Arbitrage Rebate Fund any
amounts provided by the City for that purpose. Amounts on deposit in the Arbitrage
Rebate Fund shall be disbursed by the City for the purpose of making payments of
Excess Investment Earnings in accordance with this subsection (e). If the City
determines that any amounts held by it in the Arbitrage Rebate Fund are not required to
make payments of Excess Investment Earnings, the City may apply amounts in the
Arbitrage Rebate Fund for any other lawful purposes of the City.
(f) Record Retention. The City will retain its records of all accounting and
monitoring it carries out with respect to this Agreement for at least three years after the
payment or prepayment in full of the Installment Payments, whichever is earlier, or for
such lesser period of time as may be permitted under the Tax Code.
(g) Acquisition, Disposition and Valuation of Investments. Except as otherwise
provided in the following sentence, the City covenants that all investments of amounts
deposited in any fund or account created by or under this Agreement, or otherwise
containing gross proceeds of this Agreement (within the meaning of Section 148 of the
Tax Code) shall be acquired, disposed of, and valued (as of the date that valuation is
25
required by this Agreement or the Tax Code) at Fair Market Value. Investments in
funds or accounts (or portions thereof) that are subject to a yield restriction under
applicable provisions of the Tax Code shall be valued at their present value (within the
meaning of section 148 of the Tax Code).
For purposes of this subsection (g), the term "Fair Market Value" means the price
at which a willing buyer would purchase the investment from a willing seller in a bona
fide, arm's length transaction (determined as of the date the contract to purchase or sell
the investment becomes binding) if the investment is traded on an established securities
market (within the meaning of section 1273 of the Tax Code) and, otherwise, the term
"Fair Market Value" means the acquisition price in a bona fide arm's length transaction
(as referenced above) if (i) the investment is a certificate of deposit that is acquired in
accordance with applicable regulations under the Tax Code, (ii) the investment is an
agreement with specifically negotiated withdrawal or reinvestment provisions and a
specifically negotiated interest rate (for example, a guaranteed investment contract, a
forward supply contract or other investment agreement) that is acquired in accordance
with applicable regulations under the Tax Code, (iii) the investment is a United States
Treasury Security — State and Local Government Series that is acquired in accordance
with applicable regulations of the United States Bureau of Public Debt, or (iv) any
commingled investment fund in which the City and related parties do not own more than
a 10% beneficial interest therein if the return paid by the fund is without regard to the
source of the investment.
(h) Small Issuer Exemption from Bank Nondeductibility Restriction. The City
hereby designates this Agreement for purposes of paragraph (3) of section 265(b) of the
Tax Code and represents that not more than $10,000,000 aggregate principal amount of
obligations the interest on which is excludable (under section 103(a) of the Tax Code)
from gross income for federal income tax purposes (excluding (i) private activity bonds,
as defined in section 141 of the Tax Code, except qualified 501(c)(3) bonds as defined in
section 145 of the Tax Code and (ii) current refunding obligations to the extent the
amount of the refunding obligation does not exceed the outstanding amount of the
refunded obligation), including the obligations under this Agreement, has been or will be
issued by the City, including all subordinate entities of the City, during the calendar year
2017.
SECTION 5.11. Disclaimer of Warranties. THE AUTHORITY MAKES NO
WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE
VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE
CITY FOR THE 2007 PROJECT, THE SYSTEM OR ANY ITEM THEREOF, OR ANY
OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE 2007
PROJECT, THE SYSTEM OR ANY ITEM THEREOF. IN NO EVENT SHALL THE
AUTHORITY BE LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THIS
AGREEMENT FOR THE EXISTENCE, FURNISHING, FUNCTIONING OR CITY'S USE
OF THE 2007 PROJECT OR THE SYSTEM.
SECTION 5.12. Access to the System and Records. To the extent permitted by
law, the City agrees that the Authority, any Authorized Representative of the Authority,
and the Authority's successors or assigns, including the Assignee, shall have the right at
all reasonable times to enter upon and to examine and inspect the System. The City
26
further agrees that the Authority, any Authorized Representative of the Authority, and the
Authority's successors or assigns, including the Assignee, shall have such rights of
access to the System as may be reasonably necessary to cause the proper
maintenance of the System in the event of failure by the City to perform its obligations
hereunder. In addition, the City agrees that the Authority, any Authorized
Representative of the Authority, and the Authority's successors or assigns, including the
Assignee, shall have the right at all reasonable times to inspect and examine all books,
papers and records of the City pertaining to the System, to make copies thereof and to
take non -privileged memoranda therefrom or with respect thereto as may be desired.
SECTION 5.13. Assignment by the Authority. The rights and interest of the
Authority in this Agreement and' the Installment Payments have been assigned to the
Assignee under the Assignment Agreement, to which assignment the City hereby
consents. In no event is the City required to allocate any Installment Payment among
more than one person or entity or make a payment to more than one address or wire
transfer destination, and the person or entity to whom Installment Payments are to be
made shall be authorized to give all consents and approvals to be obtained from the
Authority hereunder on behalf of and for all transferees. No further action will be
required by the Authority, any other owner of an interest therein or the City to evidence
any such assignment, but the City shall acknowledge each such assignment in writing if
so requested and shall keep a complete and accurate record of all such assignments in
a manner that complies with section 149(a) of the Tax Code and the regulations
thereunder. Nothing contained herein shall be deemed to be restriction on the sale or
assignability of this Agreement or the rights of the Assignee hereunder. However, the
Assignee agrees to reasonably comply with all applicable rules, laws and regulations,
which may from time to time affect the assignability of this Agreement and the right to
receive Installment Payments made hereunder.
SECTION 5.14. Continuing Disclosure. The City's obligations under this
Agreement are not subject to Securities and Exchange Commission Rule 15c2-12 and,
therefore, the City is not obligated to provide continuing disclosure as contemplated by
that Rule.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Events of Default Defined. Any one or more of the following events
shall constitute Events of Default hereunder:
(a) Failure by the City to pay any Installment Payment by the
Installment Payment Date or failure to make any other payment
required to be paid hereunder at the time specified herein.
(b) Failure by the City to observe and perform any covenant, condition
or agreement on its part to be observed or performed in this
Agreement, including failure to provide financial information, other
than as referred to in clause (a) of this Section, for a period of 30
days after written notice specifying such failure and requesting that
27
it be remedied has been given to the City by the Assignee or the
Authority; provided, however, that if the City notifies the Authority
that in its reasonable opinion the failure stated in the notice can be
corrected, but not within such 30 -day period, such failure will not
constitute an event of default hereunder if the City commences to
cure such failure within such 30 -day period and thereafter diligently
and in good faith cures the failure in a reasonable period of time.
(c) The filing by the City of a petition or answer seeking arrangement or
reorganization under the federal bankruptcy laws or any other
applicable law of the United States of America or any state therein,
or the approval by a court of competent jurisdiction of a petition filed
with or without the consent of the City seeking arrangement or
reorganization under the federal bankruptcy laws or any other
applicable law of the United States of America or any state therein,
or, under the provisions of any other law for the relief or aid of
debtors, any court of competent jurisdiction assumes custody or
control of the City or of the whole or any substantial part of its
property.
(d) The occurrence of any event defined to be an event of default under
any Parity Debt.
(e) Any statement, representation or warranty made by the City in this
Agreement shall prove to have been false, incorrect, misleading or
breached in any material respect on the date when made.
SECTION 6.2. Remedies on Default. Whenever any Event of Default has
happened and is continuing, the Authority shall have the right, at its option and without
any further demand or notice, to take any one or more of the following actions:
(a) declare all principal components of the unpaid Installment
Payments, together with accrued interest thereon to be immediately
due and payable, whereupon the same shall become due and
payable; and
(b) apply to and obtain from any court of competent jurisdiction such
decree or order as may be necessary to require officials of the City
to charge and collect rates for services provided by the City and the
System sufficient to meet all requirements of this Agreement; and
(c) take whatever action at law or in equity, including specific
enforcement, mandamus, or any equitable remedies available, as
may be desirable and permitted by law to collect the Installment
Payments then due or thereafter to become due during the Term of
this Agreement, or enforce performance and observance of any
obligation, agreement or covenant of the City under this Agreement.
So long as there has occurred and is continuing an Event of Default, the interest
under this Agreement shall accrue, at the option of the Assignee, at the Default Rate.
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SECTION 6.3. No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Authority is intended to be exclusive and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this Agreement or
now or hereafter existing at law or in equity. No delay or omission to exercise any right
or power accruing upon any default shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised from
time to time and as often as may be deemed expedient. In order to entitle the Authority
to exercise any remedy reserved to it in this Article VI it shall not be necessary to give
any notice, other than such notice as may be required in this Article VI or by law.
SECTION 6.4. Prosecution and Defense of Suits. The City shall promptly, upon
request of the Authority, the Assignee, or its assignee, from time to time take or cause to
be taken such action as may be necessary or proper to remedy or cure any defect in or
cloud upon the title to the System whether now existing or hereafter developing and shall
prosecute all such suits, actions and other proceedings as may be appropriate for such
purpose.
SECTION 6.5. No Additional Waiver Implied by One Waiver. If any agreement
contained in this Agreement is breached by either party and thereafter waived by the
other party, such waiver is limited to the particular breach so waived and will not be
deemed to waive any other breach hereunder.
SECTION 6.6. Liability Limited to System Net Revenues. Notwithstanding any
provision of this Agreement, the City's liability to pay the Installment Payments and other
amounts hereunder is limited solely to System Net Revenues as provided in Article IV. If
the System Net Revenues are insufficient at any time to pay an Installment Payment in
full, the City is not liable to pay or prepay such Installment Payment other than from
System Net Revenues.
SECTION 6.7. Rights of Assignee. Such rights and remedies as are granted to
the Authority under this Article VI or under this Agreement shall be exercised by the
Assignee, as assignee of the rights of the Authority hereunder, in accordance with the
provisions of the Assignment Agreement.
ARTICLE VII
PREPAYMENT OF INSTALLMENT PAYMENTS
SECTION 7.1. Prepayment. The City has the right to prepay the Installment
Payments, but only in the manner, at the times and in all respects in accordance with the
provisions of this Article VII.
SECTION 7.2. Optional Prepayment. The City has the right at its option to prepay
the Installment Payments in whole or in part, on any date, as set forth in the following
schedule:
[to come]
29
Prepayments of Installment Payments in part shall be applied to the principal
component of remaining Installment Payments in the manner determined by the City.
Notice of prepayment shall be given by the City not less than 30 days prior to the
prepayment date, to the Authority and the Assignee at their respective addresses set
forth in Section 8.1 or at such other address as is furnished to the City in writing by the
Authority or the Assignee. Any notice mailed as provided in this Section shall be
conclusively presumed to have been duly given, whether or not the Authority or the
Assignee receives such notice.
If notice of prepayment is given as aforesaid, the Installment Payments shall
become due and payable at the prepayment price and on the Installment Payment Date
therein designated and if, on the Installment Payment Date, money for the payment of
the prepayment price have been paid, then from and after the prepayment date, interest
on the principal amount of the Installment Payments, shall cease to accrue and become
payable.
SECTION 7.3. Prepayment From Net Proceeds of Insurance or Eminent Domain.
The City may prepay the unpaid principal balance of the Installment Payments in whole
or in part, on any date, if and to the extent the City (with the prior written consent of the
Assignee) determines to apply any proceeds of insurance award or condemnation award
with respect to the System for such purpose in accordance with Sections 5.3 or 5.4, at a
prepayment price equal to 100% of the principal amount to be prepaid plus accrued
interest to the prepayment date, without premium.
SECTION 7.4. No Surrender of Agreement Required. No surrender of this
Agreement shall ever be required as a condition for payment or otherwise. The
Authority, the City, and the Assignee agree that this Agreement shall terminate,
excepting those provisions expressly surviving termination of this Agreement, at the
earliest of as provided in Section 4.3 or as provided in Article VII.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Notices. All notices, certificates or other communications
hereunder shall be in writing and shall be deemed to have been properly given on the
earlier of (i) when delivered in person, (ii) the third Business Day following deposit in the
United States Mail, with adequate postage, and sent by registered or certified mail, with
return receipt requested to the appropriate party at the address set forth below, or (iii)
the first Business Day following deposit with Federal Express, Express Mail or other
overnight delivery service for next day delivery, addressed to the appropriate party at the
address set out below.
30
If to the City:
If to the Authority:
If to the Assignee:
City of Lodi
221 West Pine Street
P.O. Box 333-6700
Lodi, California 95241-1910
Attention: City Manager
Lodi Public Financing Authority
221 West Pine Street
P.O. Box 333-6700
Lodi, California 95241-1910
Attention: Executive Director
River City Bank
Fax:
The Authority, the City and the Assignee, by notice given hereunder, may
designate different addresses to which subsequent notices, certificates or other
communications will be sent.
SECTION 8.2. Third Party Beneficiary. The Assignee is hereby made a third -
party beneficiary under this Agreement with all rights of a third -party beneficiary.
SECTION 8.3. Binding Effect. This Agreement inures to the benefit of and is
binding upon the Authority, the City and the Assignee, and their respective successors
and assigns.
SECTION 8.4. Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, such holding will not invalidate or
render unenforceable any other provision hereof.
SECTION 8.5. Amendments Changes and Modifications. This Agreement may be
amended or any of its terms modified with the written consent of the City and the
Authority.
SECTION 8.6. Net Contract. This Agreement shall be deemed and construed to
be a "net contract" and the City hereby agrees that the Installment Payments shall be an
absolute net return to the Authority, free and clear of any expenses, charges or set -offs
whatsoever.
SECTION 8.7. Further Assurances and Corrective Instruments. The Authority and
the City agree that they will, from time to time, execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, such supplements hereto and such
further instruments as may reasonably be required for correcting any inadequate or
incorrect description of the 2007 Project hereby sold or intended so to be or for carrying
out the expressed intention of this Agreement.
31
SECTION 8.8. 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.
SECTION 8.9. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
SECTION 8.10. Authority and City Representatives. Whenever under the
provisions of this Agreement the approval of the Authority or the City is required, or the
Authority or the City is required to take some action at the request of the other, such
approval or such request shall be given for the Authority by an Authorized
Representative of the Authority and for the City by an Authorized Representative of the
City, and any party hereto shall be authorized to rely upon any such approval or request.
SECTION 8.11. Defeasance. If and when all of the Installment Payments shall be
paid in any one or more of the following ways:
(a) by paying or causing to be paid the principal of and interest and
prepayment premium (if any) with respect to the Installment
Payments as and when the same become due and payable in good
and indefeasible funds via check or wire transfer as may from time
to time be directed by the Assignee or any subsequent Assignee;
(b) by depositing with an escrow agent or other fiduciary, in trust, at or
before the final stated Installment Payment Date, money which is
fully sufficient to pay and discharge the Installment Payments,
including all principal and interest and prepayment premium, (if any)
at or before their respective Installment Payment Dates;
(c) by depositing with an escrow agent or other fiduciary, in trust,
Federal Securities in such amount as an independent certified
public accountant shall determine in writing will, together with the
interest to accrue thereon and without reinvestment, be fully
sufficient to pay and discharge the Installment Payments, including
all principal and interest and prepayment premium, (if any), at or
before their respective Installment Payment Dates; or
(d) by depositing with an escrow agent or other fiduciary, under an
escrow deposit and trust agreement, security for the payment and
discharge of the Installment Payments, including all principal and
interest and prepayment premium (if any) in form and substance
acceptable to the Authority, or its assign, in its sole discretion, said
security to be applied to pay the Installment Payments, including all
principal and interest and prepayment premium (if any) in full on the
earliest possible date;
all obligations of the City with respect to this Agreement shall cease and terminate and
this Agreement shall be discharged, except for any provision herein which expressly
states that it survives termination. The City shall provide to the Authority and the
Assignee 30 days prior written notice of its intent to discharge its obligations with respect
to this Agreement by satisfying the conditions of this Section, and shall provide the
32
Authority and the Assignee with an opinion of Bond Counsel stating that (i) the deposit
and application of funds under this Section does not, of itself, cause the interest
components of the Installment Payments to be includable in gross income for federal tax
purposes, and (ii) as a result of the deposit and application of funds under this Section,
all obligations of the City with respect to this Agreement have ceased and terminated
and this Agreement has been discharged.
SECTION 8.12. Captions. The captions or headings in this Agreement are for
convenience only and in no way define, limit or describe the scope or intent of any
provision, Article or Section of this Agreement.
IN WITNESS WHEREOF, the Authority has caused this Agreement to be
executed in its name by its duly authorized officers; and the City has caused this
Agreement to be executed in its name by its duly authorized officers, as of the date first
above written.
ATTEST:
By
Jennifer M. Ferraiolo, City Clerk
Approved As To Form:
Janice D. Magdich, City Attorney
LODI PUBLIC FINANCING AUTHORITY,
as Seller
By
Stephen Schwabauer, Executive Director
CITY OF LODI, as Purchaser
By
Stephen Schwabauer, City Manager
33
APPENDIX A
INSTALLMENT PAYMENT SCHEDULE
Principal Interest Aggregate
Payment Date Component Component Installment Payment
A-1
11-28-17 Jones Hall Draft
IRREVOCABLE REFUNDING INSTRUCTIONS
Relating to
Wastewater System Revenue Certificates of Participation,
2007 Series A
These IRREVOCABLE REFUNDING INSTRUCTIONS (these "Instructions"), are dated
December 7, 2017, and are given by the CITY OF LODI, a municipal corporation duly
organized and existing under the laws of the State of California (the "City"), to THE BANK
OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association organized
and existing under the laws of the United States of America, acting as trustee for the
within -mentioned Refunded 2007 Certificates (the "2007 Trustee").
BACKGROUND:
1. The City previously entered into an Installment Purchase Agreement, dated
as of December 1, 2007 (the "2007 Installment Purchase Agreement") with the Lodi
Public Improvement Corporation (the "Corporation"), pursuant to which the City agreed
to make certain installment payments in the aggregate principal amount of $30,320,000
(the "2007 Installment Payments") and caused execution and delivery of Wastewater
System Revenue Certificates of Participation, 2007 Series A (the "2007 Certificates"),
pursuant to a Trust Agreement, dated as of December 1, 2007 (the "2007 Trust
Agreement"), between the Corporation and The Bank of New York Mellon Trust
Company, N.A., as trustee (the "2007 Trustee"), all for the purpose of (i) financing
certain additions, betterments, extensions, replacements and improvements to the
System (the "2007 Project") and (ii) prepaying on a current basis all outstanding
installment payments under an Installment Purchase Agreement, dated as of December
1, 1991, and certain outstanding Certificates of Participation (1991 Wastewater
Treatment Plant Expansion Refunding Project) (the "1991 Certificates"). The 1991
Certificates were executed and delivered to (i) finance certain capital improvements to
the System (the "1991 Project") and (ii) prepay, on an advance basis, certain certificates
of participation that were executed and delivered to finance the expansion of the City's
White Slough Water Pollution Control Facility (the "White Slough Certificates").
2. The City previously entered into an Installment Purchase Agreement, dated as
of March 1, 2016 (the "2016 Installment Purchase Agreement") with the Lodi Public
Financing Authority, a joint exercise of powers authority duly organized and existing
under the laws of the State of California (the "Authority"), pursuant to which the City
agreed to make certain installment payments in the aggregate principal amount of
$20,295,000 (the "2016 Installment Payments"). The Authority issued its Lodi Public
Financing Authority 2016 Refunding Wastewater Revenue Bonds, Series A in the
aggregate principal amount of $20,295,000 (the "2016 Bonds") under an Indenture of
Trust, dated as of March 1, 2016 (the "2016 Indenture"), between the Authority and
MUFG Union Bank, N.A., as trustee (the "2016 Trustee"), which are payable from
revenues consisting primarily of the 2016 Installment Payments. A portion of the
proceeds of the 2016 Bonds were used to refinance a portion of the 2007 Installment
Payments and corresponding maturities of the then -outstanding 2007 Certificates. The
portion of the 2007 Installment Payments refinanced and 2007 Certificates refunded with
a portion of the proceeds of the 2016 Bonds was that portion attributable to the financing
of the 2007 Project and the 1991 Project.
1
3. The City wishes to refinance the remaining 2007 Installment Payments (the
"Refinanced 2007 Installment Payments") and corresponding maturities of the
outstanding 2007 Certificates (the "Refunded 2007 Certificates"). The Refinanced 2007
Installment Payments and Refunded 2007 Certificates are attributable to the refinancing
of the White Slough Certificates.
4. Pursuant to Section 7.1 of the 2007 Installment Purchase Agreement, the
City has the right to prepay all or a portion of the 2007 Installment Payments on any
date, provided that any prepayment of a principal component of the 2007 Installment
Payments to be applied to the prepayment or defeasance of the 2007 Certificates must
be in an amount sufficient to provide for the prepayment or defeasance of the 2007
Certificates in Authorized Denominations (as defined in the 2007 Trust Agreement) and
must be otherwise in accordance with the provisions of the 2007 Trust Agreement.
5. Under Section 9.1 of the 2007 Installment Purchase Agreement, the
Refinanced 2007 Installment Payments will be deemed paid and all obligations of the
City with respect to the Refinanced 2007 Installment Payments will cease and terminate
(except for the obligation to make payment from deposited funds and Defeasance
Securities (as defined in the 2007 Trust Agreement) as provided in Article IX of the 2007
Trust Agreement) when the Refunded 2007 Certificates have been paid or deemed paid
in accordance with Article IX of the 2007 Trust Agreement.
6. The Refunded 2007 Certificates maturing on and after October 1, 2018, are
subject to prepayment, in whole or in part, on any date on and after October 1, 2017, at
a prepayment price equal to the principal amount of the Refunded 2007 Certificates plus
unpaid accrued interest to the prepayment date, without premium.
7. Under Article IX of the 2007 Trust Agreement, the obligations of the
Corporation, the 2007 Trustee, and the City with respect to the Refunded 2007
Certificates will cease and terminate when cash and/or Defeasance Securities (as
defined in the 2007 Trust Agreement) have been deposited with the 2007 Trustee in an
amount sufficient to pay the Refunded 2007 Certificates when they become due,
whether at maturity or earlier prepayment.
8. The City wishes at this time to make such deposit of funds for the purpose of
(a) paying and prepaying the Refinanced 2007 Installment Payments and thereby
discharging its obligations under the 2007 Installment Purchase Agreement with respect
to the Refinanced 2007 Installment Payments and (b) defeasing, paying and prepaying
the Refunded 2007 Certificates and thereby discharging its obligations under the 2007
Trust Agreement.
9. The City has determined that to accomplish such financing it is necessary
and desirable to purchase the 2007 Project (subject to the 2016 Installment Purchase
Agreement) from the Authority on an installment basis as provided in the Installment
Purchase Agreement, dated as of December 1, 2017, by and between the City and the
Authority (the "2017 Installment Purchase Agreement"), and the Authority has agreed to
provide the funds required for acquisition of the 2007 Project (subject to the 2016
Installment Purchase Agreement) in consideration of the agreement by the City to enter
into the 2017 Installment Purchase Agreement.
10. A Prepayment Account was established pursuant to Section 3.03(c) of the
2007 Trust Agreement, and the 2007 Trust Agreement provides that all prepayments of
2
the Refinanced 2007 Installment Payments shall be deposited in the Prepayment
Account and applied to the prepayment of the Refinanced 2007 Installment Payments as
directed by the City.
11. The City wishes to give these Instructions to the 2007 Trustee for the
purpose of providing for the prepayment in full of the Refinanced 2007 Installment
Payments and the prepayment in full of the principal and interest represented by the
Refunded 2007 Certificates.
INSTRUCTIONS
In order to provide for the payment and prepayment of the Refunded 2007
Certificates and the defeasance of the Refunded 2007 Certificates, the City hereby
irrevocably directs the 2007 Trustee as follows:
SECTION 1. Deposits into Prepayment Account. Concurrently with the receipt of
proceeds of the 2017 Installment Purchase Agreement on December 14, 2017 (the
"Closing Date"), the City shall cause to be transferred to the 2007 Trustee for deposit
into the Prepayment Account proceeds of the 2017 Installment Purchase Agreement in
the amount of $7,656,738.20.
In addition, on such date, the 2007 Trustee is hereby directed to transfer into the
Prepayment Account all other amounts on deposit in the funds and accounts held by the
Trustee under the 2007 Trust Agreement.
SECTION 2. No Investment of Funds. The 2007 Trustee shall hold all of the
amounts deposited in the Prepayment Account under Section 1 in cash uninvested.
SECTION 3. Application of Funds. The 2007 Trustee shall apply amounts held in
the Prepayment Account to pay the prepayment price of the Refunded 2007 Certificates
on January 8, 2018 (the "Prepayment Date"), as set forth below:
Prepayment Maturing Prepaid Prepayment Total
Date Principal Interest Principal Premium Payment
January 8, $0.00 $[109,145.3] $7,555,000.00 $0.00 $[7,664,145.31]
2018
After payment of the prepayment price as set forth above, the 2007 Trustee shall
transfer any remaining amounts held in the funds and accounts under the Trust
Agreement to the City, and the City shall use such amounts to pay installment payments
under the 2017 Installment Purchase Agreement.
SECTION 4. Proceedings for Prepayment of Refunded 2007 Certificates; Notice
of Defeasance. The City hereby irrevocably elects to prepay all of the Refunded 2007
Certificates on the Prepayment Date. Notice of such prepayment, in substantially the
form and substance of Exhibit A, has previously been given by the 2007 Trustee in
accordance with the provisions of the 2007 Trust Agreement, at the written direction of
the City and at the expense of the City.
The 2007 Trustee is hereby directed to give on the Closing Date a notice of
defeasance through the Municipal Securities Rulemaking Board's EMMA website in the
form attached hereto as Exhibit B. A copy of such notice shall be given to the other
parties entitled to receive such notice pursuant to the 2007 Trust Agreement. The sole
3
remedy for the 2007 Trustee's failure to give such notice through the EMMA website
shall be an action by the holders of the Refunded 2007 Certificates in mandamus for
specific performance or similar remedy to compel performance.
SECTION 5. Application of Certain Terms of 2007 Trust Agreement. All of the
terms of the 2007 Trust Agreement relating to the payment and prepayment of principal,
interest, and prepayment premium on the Refunded 2007 Certificates, and the
protections, immunities and limitations from liability afforded the 2007 Trustee as trustee
for the Refunded 2007 Certificates, are incorporated in these Instructions as if set forth
in full herein.
These Instructions constitute the Written Request of the City and the Certificate
of the City required pursuant to Section 2.07 of the 2007 Trust Agreement and the
Escrow Deposit Agreement required pursuant to Section 9.01(b) of the 2007 Trust
Agreement.
SECTION 6. Compensation to the 2007 Trustee; Indemnification. The City shall
pay the 2007 Trustee compensation for its services under these Instructions, including
out-of-pocket costs such as publication costs, prepayment expenses, legal fees and
other costs and expenses relating hereto, in accordance with the provisions of Section
6.03 of the 2007 Trust Agreement. Under no circumstances shall amounts deposited in
or credited to the Prepayment Account be deemed to be available for said purposes.
The 2007 Trustee has no lien upon or right of set off against the cash and securities at
any time on deposit in the Prepayment Account. The City, to the extent permitted by law,
shall indemnify, defend, and hold harmless the 2007 Trustee against any loss, damages,
liability, or expense incurred without negligence, default, or willful misconduct on the part
of the 2007 Trustee arising out of or in connection with the exercise or performance of
these Instructions, including the 2007 Trustee's costs and expenses (including attorneys'
fees) of defending itself against any claim or liability in connection with the exercise or
performance of any of its powers hereunder.
SECTION 7. Effect of These Instructions. As a result of the deposit and
application of funds in accordance with these Instructions, the Refunded 2007
Certificates shall be defeased under and with the effect set forth in Article IX of the 2007
Trust Agreement, subject to the conditions to defeasance set forth in Article IX of the
2007 Trust Agreement. In accordance with Section 9.1 of the 2007 Installment
Purchase Agreement, the principal components of the Refinanced 2007 Installment
Payments and the interest components of the Refinanced 2007 Installment Payments
related to such principal component shall be deemed paid and all obligations of the City
with respect thereto shall cease and terminate (except for payment from deposited funds
and Defeasance Securities (as defined in the 2007 Trust Agreement) deposited in the
Prepayment Account). These Instructions shall constitute a "certificate of discharge"
within the meaning of Section 9.01(b) of the 2007 Trust Agreement.
4
IN WITNESS WHEREOF, the City has caused these Instructions to be executed
by a duly authorized representative, all as of the date first above written.
ACKNOWLEDGED AND ACCEPTED:
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as 2007
Trustee
By
Authorized Officer
CITY OF LODI
By
Stephen Schwabauer, City Manager
5
App rovwl as to form
City Attorney •
EXHIBIT A
CONDITIONAL NOTICE OF FULL PREPAYMENT
$7,555,000
(Original Principal Amount)
Wastewater System Revenue Certificates of Participation,
2007 Series A
Date of Issuance: December 7, 2017
NOTICE IS HEREBY GIVEN that there have been called on a conditional basis
for full prepayment on January 8, 2018 (the "Prepayment Date") all of the outstanding
above -captioned certificates of participation (the "Certificates"), as listed below, at a
prepayment price equal to the principal amount of the Certificates to be prepaid, without
premium ("Prepayment Price"):
Maturity Date Principal Amount Interest Rate
October 1, 2018 $50,000 4.000%
October 1. 2019 50,000 4.000
October 1, 2020 55, 000 4.125
October 1, 2021 60 000 4.250
October 1, 2022 60.000 4.375
October 1, 2023 65,000 4.375
October 1, 2024 165,000 4.500
October 1, 2025 735,000 5.000
October 1, 2026 775,000 5.000
October 1, 2032 2,645,000 5.000
October 1, 2037 2,895,000 5.000
CUSIP
The Certificates are being called pursuant to the prepayment provisions of the
Trust Agreement, dated as of December 1, 2007, by and between the Lodi Public
Improvement Corporation (the "Corporation") and The Bank of New York Mellon Trust
Company, N.A., as trustee (the "Trustee"), under which the Certificates were executed
and delivered, at the referenced Prepayment Price. On the Prepayment Date, all interest
with respect to the Certificates will cease to accrue and the Prepayment Price will be due
and payable on the Prepayment Date. Any Certificate to be prepaid will be deemed
prepaid on the Prepayment Date whether or not it is delivered to the Trustee.
The City expects to prepay the Certificates on the Prepayment Date with, among
other funds, proceeds of that certain Installment Purchase Agreement (the "Installment
A-1
Purchase Agreement"), by and between the City and the Lodi Public Financing Authority,
dated as of December 1, 2017, which the City expects to receive on December _,
2017. The City's ability to prepay the Certificates is subject to execution of the
Installment Purchase Agreement. In 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
Certificates delivered for prepayment shall be returned to the respective owners thereof,
and said Certificates shall remain outstanding as though this Conditional Notice of Full
Prepayment had not been given. Notice of a failure to receive funds, and cancellation of
this prepayment, shall be given by the Trustee by first class mail, postage prepaid, to the
registered owners of the Certificates.
Holders of the Certificates are requested to present their Certificates, at the
following addresses:
First Class/Registered/Certified
The Bank of New York Mellon
Global Corporate Trust
P.O. Box 396
East Syracuse, New York
13057
Express Delivery Only
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 The
Bank of New York Mellon Trust Company, N.A., Corporate Trust Department,
Bondholder Relations, telephone number (800) 254-2826.
Payment of interest on the Certificates shall be made by check or, at the option
of any owner of at least $1,000,000 aggregate principal amount of Certificates, by wire
transfer to a bank account in the United States of America.
*Note: The City and the Trustee 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 Certificate. They are
included solely for the convenience of the holders.
Dated: December 7, 2017
IMPORTANT TAX NOTICE
Withholding of 28% of gross Prepayment proceeds of any payment made within
the United States may be required by the Jobs and Growth Tax Relief Reconciliation Act
of 2003 (the "Act"), unless the Trustee has the correct taxpayer identification number
(social security or employer identification number) or exemption certificate of the payee.
Please furnish a properly completed Form W-9 or exemption certificate or
equivalent when presenting your securities.
*Note: The City of Lodi, the Lodi Public Improvement Corporation, and Trustee
shall not be responsible for the selection or use of the CUSIP numbers selected, nor is
any representation made as to their correctness indicated in the notice or as printed on
any Certificate. They are included solely for the convenience of the holders.
A-2
EXHIBIT B
NOTICE OF DEFEASANCE
Notice of Defeasance to
$7,555,000
(Original Principal Amount)
Wastewater System Revenue Certificates of Participation,
2007 Series A
Date of Issuance: December 14, 2017
NOTICE IS HEREBY GIVEN, with respect to the above -captioned certificates of
participation (the "Certificates"), that the City of Lodi (the "City") and the Lodi Public
Improvement Corporation (the "Corporation") has on December 14, 2017, from the
proceeds of that certain Installment Purchase Agreement, by and between the City and
the Lodi Public Financing Authority, dated as of December 1, 2017 (the "2017
Installment Purchase Agreement"), irrevocably set aside in the Prepayment Fund
created for such purpose and held by The Bank of New York Mellon Trust Company,
N.A., as trustee (the "Trustee") under the Trust Agreement, dated as of December 1,
2007 (the "Trust Agreement") related to the Certificates, moneys which shall be sufficient
to prepay on January 8, 2018 (the "Prepayment Date") all of the remaining outstanding
Certificates at a prepayment price equal to 100% of the principal amount to be
prepayment, without premium. A schedule of the maturity dates of the outstanding
Certificates and the CUSIP numbers of such Certificates is attached as Schedule 1.
The moneys deposited in the Prepayment Fund, including the earnings derived
from the investment thereof, are irrevocably pledged to the payment of principal or
redemption price of and interest with respect to the Certificates. Said moneys will not be
invested.
As a consequence of the foregoing actions and in accordance with the Trust
Agreement, the Certificate are deemed to have been paid and all obligations under the
Trust Agreement with respect to the Certificates have been released in accordance with
the provisions of Section 9.01 of the Trust Agreement, except that the owners of the
Certificates shall be entitled to the principal and interest represented by the Certificates.
Additional information regarding the foregoing actions may be obtained from The
Bank of New York Mellon Trust Company, N.A., Corporate Trust Department,
Bondholder Relations, telephone number (800) 254-2826.
Dated: December 14, 2017
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee
B-1
Schedule 1
Schedule of Certificates to be Paid from the Prepayment Fund
Maturity ❑ate Principal Amount Interest Rate
October 1, 2018 $50,000 4.000%
October 1, 2019 50,000 4.000
October 1, 2020 55,000 4.125
October 1, 2021 60,000 4.250
October 1, 2022 60,000 4.375
October 1, 2023 65,000 4.375
October 1, 2024 165,000 4.500
October 1, 2025 735,000 5.000
October 1, 2026 775,000 5.000
October 1, 2032 2,645,000 5.000
October 1, 2037 2,895,000 5.000
B-2
CUSIP
Jones Hall, A Professional Law Corporation Draft 11-28-17
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (this "Agreement"), dated as of December 1, 2017,
is between the LODI PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority
duly organized and existing under the laws of the State of California (the "Authority"),
and RIVER CITY BANK, a commercial bank duly organized and existing under the laws of
the State of California, as assignee (the "Assignee").
BACKGROUND:
1. The City of Lodi (the "City") owns and operates a public enterprise for the
collection, treatment and disposal of wastewater within the service area of the City (the
"System").
2. The City previously entered into an Installment Purchase Agreement, dated
as of December 1, 2007 (the "2007 Installment Purchase Agreement") with the Lodi
Public Improvement Corporation (the "Corporation"), pursuant to which the City agreed
to make certain installment payments in the aggregate principal amount of $30,320,000
(the "2007 Installment Payments") and caused execution and delivery of Wastewater
System Revenue Certificates of Participation, 2007 Series A (the "2007 Certificates"),
pursuant to a Trust Agreement, dated as of December 1, 2007 (the "2007 Trust
Agreement"), between the Corporation and The Bank of New York Mellon Trust
Company, N.A., as trustee (the "2007 Trustee"), all for the purpose of (i) financing
certain additions, betterments, extensions, replacements and improvements to the
System (the "2007 Project") and (ii) prepaying on a current basis all outstanding
installment payments under an Installment Purchase Agreement, dated as of December
1, 1991, and certain outstanding Certificates of Participation (1991 Wastewater
Treatment Plant Expansion Refunding Project) (the "1991 Certificates"). The 1991
Certificates were executed and delivered to (i) finance certain capital improvements to
the System (the "1991 Project") and (ii) prepay, on an advance basis, certain certificates
of participation that were executed and delivered to finance the expansion of the City's
White Slough Water Pollution Control Facility (the "White Slough Certificates").
3. The City previously entered into an Installment Purchase Agreement, dated
as of March 1, 2016 (the "2016 Installment Purchase Agreement") with the Authority,
pursuant to which the City agreed to make certain installment payments in the aggregate
principal amount of $20,295,000 (the "2016 Installment Payments"). The Authority
issued its Lodi Public Financing Authority 2016 Refunding Wastewater Revenue Bonds,
Series A in the aggregate principal amount of $20,295,000 (the "2016 Bonds") under an
Indenture of Trust, dated as of March 1, 2016 (the "2016 Indenture"), between the
Authority and MUFG Union Bank, N.A., as trustee (the "2016 Trustee"), which are
payable from revenues consisting primarily of the 2016 Installment Payments. A portion
of the proceeds of the 2016 Bonds were used to refinance a portion of the 2007
Installment Payments and corresponding maturities of the then -outstanding 2007
Certificates. The portion of the 2007 Installment Payments refinanced and 2007
Certificates refunded with a portion of the proceeds of the 2016 Bonds was that portion
attributable to the financing of the 2007 Project and the 1991 Project.
4. The City wishes to refinance the remaining 2007 Installment Payments (the
"Refinanced 2007 Installment Payments") and corresponding maturities of the
outstanding 2007 Certificates (the "Refunded 2007 Certificates"). The Refinanced 2007
Installment Payments and Refunded 2007 Certificates are attributable to the refinancing
of the White Slough Certificates.
2. In order to provide funds to make the required deposit of funds for the
purpose of (a) paying and prepaying the Refinanced 2007 Installment Payments and
thereby discharging its obligations under the 2007 Installment Purchase Agreement with
respect to the Refinanced 2007 Installment Payments and (b) defeasing, paying and
prepaying the Refunded 2007 Certificates and thereby discharging its obligations under
the 2007 Trust Agreement, the City and the Authority have entered into an Installment
Purchase Agreement dated as of December 1, 2017 (the "Installment Purchase
Agreement"), under which the City has agreed to purchase the 2007 Project (subject to
the 2016 Installment Purchase Agreement) from the Authority and to pay semiannual
installment payments (the "Installment Payments") as the purchase price thereof, and
the Authority wishes to assign its rights, title and interest under the Installment Purchase
Agreement, including the right to receive the Installment Payments, to the Assignee as
provided herein.
AGREEMENT:
In consideration of the material covenants contained in this Agreement, the
parties hereto hereby formally covenant, agree and bind themselves as follows:
SECTION 1. Defined Terms. All capitalized terms not otherwise defined herein
have the respective meanings given those terms in the Installment Purchase Agreement.
SECTION 2. Assignment. The Authority hereby assigns to the Assignee all of
the Authority's rights, title and interest under the Installment Purchase Agreement
(excepting only the Authority's duties, obligations, responsibilities and covenants under
Section 5.2 of the Installment Purchase Agreement), including but not limited to:
(a) the right to receive and collect all of the Installment Payments from
the City under the Installment Purchase Agreement,
(b) the right to receive and collect any proceeds of any insurance
maintained thereunder with respect to the 2007 Project (subject to
the 2016 Installment Purchase Agreement), or any eminent domain
award (or proceeds of sale under threat of eminent domain) paid
with respect to the 2007 Project (subject to the 2016 Installment
Purchase Agreement), and
(c) the right to exercise such rights and remedies conferred on the
Authority under the Installment Purchase Agreement as may be
necessary or convenient (i) to enforce payment of the Installment
Payments and any amounts required to be credited to the payment
or prepayment thereof, or (ii) otherwise to protect the interests of the
Authority in the event of a default by the City under the Installment
Purchase Agreement.
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SECTION 3. Authority Representations, Warranties and Covenants. The
Authority hereby represents, warrants and covenants to and with the Assignee that
(a) The Installment Purchase Agreement is free and clear of all claims,
Hens, security interests, encumbrances of any kind or character
created by, through or under the Authority, except the rights of the
City thereunder, and except as contemplated in the Installment
Purchase Agreement. The Installment Purchase Agreement is and
shall remain free of all claims, liens, security interests and
encumbrances arising through any act or omission of the Authority.
(b) The Authority has complied with and performed all of its obligations
under the Installment Purchase Agreement and all related
documents and instruments.
(c) The Installment Purchase Agreement delivered to the Assignee
herewith is an original and constitutes the entire writing, obligation
and agreement between the Authority and City respecting the
Installment Payments due thereunder.
SECTION 4. Acceptance. The Assignee hereby accepts the assignments
made herein.
SECTION 5. Further Assurances. The Authority shall, from time to time at the
request of the Assignee, execute and deliver such further acknowledgments,
agreements and instruments of assignment, transfer and assurance, and do all such
further acts and things as may be necessary or appropriate in the reasonable opinion of
the Assignee to give effect to the provisions hereof and to more perfectly confirm the
rights, titles and interests hereby assigned and transferred to the Assignee.
SECTION 6. Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which is an original and all together constitute one
and the same agreement. Separate counterparts of this Agreement may be separately
executed by the Assignee and the Authority, both with the same force and effect as
though the same counterpart had been executed by the Assignee and the Authority.
SECTION 7. Binding Effect. This Agreement inures to the benefit of and binds
the Authority and the Assignee, and their respective successors and assigns, subject,
however, to the limitations contained herein.
SECTION 8. Successors and Assigns. This Agreement may not be assigned
by the Authority without the written consent of the Assignee. The Agreement, and any
rights of the Assignee to receive Installment Payments hereunder, may be further
assigned by the Assignee provided that such assignment complies with the following
requirements:
(a) any assignee of the Assignee (any such assignee and any further
assignee of such assignee, a "Subsequent Assignee") shall be a
"Qualified Institutional Buyer", as defined in Rule 144A, or an
institutional "Accredited Investor", as defined in Regulation D, each
promulgated under the Securities Act of 1933, as amended; and
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(b) The Authority and City shall be provided at least 30 business days'
prior written notice of any such intended assignment and any
Subsequent Assignee, prior to the effective date of any such
assignment, shall provide to the Authority and City a letter in the
form of Exhibit A hereto, with only such modifications as shall be
acceptable to the Authority and City; and
(c) any such assignment shall be for all of the remaining Installment
Payments payable to the Assignee; and
(d) the Assignee shall be responsible for making any payments to any
Subsequent Assignee and to provide any notices to any
Subsequent Assignee and the City and Authority will continue to
make Installment Payments and any other payments to and provide
any notices only to the Assignee.
SECTION 9. Governing Law. This Agreement is governed by the Constitution
and laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized officers as of the day and year first written above.
Approved as to form
City Attanle! �
LODI PUBLIC FINANCING AUTHORITY, as
Assignor
By
Stephen Schwabauer, Executive Director
RIVER CITY BANK, as Assignee
By
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Exhibit A
[FORM OF LENDER REPRESENTATION LETTER]
[Subsequent Assignee Letterhead]
Lodi Public Financing Authority
221 West Pine Street
P.O. Box 333-6700
Lodi, California 95241-1910
Attention: Executive Director
City of Lodi
221 West Pine Street
P.O. Box 333-6700
Lodi, California 95241-1910
Attention: City Manager
Ladies and Gentlemen:
Reference is hereby made to the Installment Purchase Agreement (the
"Installment Purchase Agreement"), dated as of December 1, 2017, by and between the
City of Lodi (the "City") and the Lodi Public Financing Authority (the "Authority") and the
Assignment Agreement (the "Assignment Agreement"), dated as of December 1, 2017,
by and between the Authority and River City Bank (the "Assignee").
The Assignee has proposed to assign all of its rights under the Assignment
Agreement to the undersigned (the "Subsequent Assignee"). In connection with such
assignment, the Subsequent Assignee makes the certifications, representations,
warranties, acknowledgements and covenants contained in this letter to each of the
addressees hereof, with the express understanding that such certifications,
representations, warranties, acknowledgements and covenants will be relied upon by
such addressees.
The Subsequent Assignee hereby certifies, represents, warrants, acknowledges
and covenants to the City and the Authority as follows:
(a) The Subsequent Assignee is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was incorporated or formed and is
authorized to invest in the Installment Payments being assigned. The person executing
this letter on behalf of the Subsequent Assignee is duly authorized to do so on the
Subsequent Assignee's behalf.
(b) The Subsequent Assignee (MARK APPROPRIATELY).
is a "qualified institutional buyer" (a "Qualified Institutional Buyer") within the
meaning of Rule 144A promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), or
is an "accredited investor" (an "Institutional Accredited Investor") as defined
in Section 501(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities Act.
(ii) the proposed assignment is for all of the remaining Installment Payments payable to
the Assignee.
(c) The Subsequent Assignee is not purchasing the right to receive the
Installment Payments for more than one account, is purchasing the right to receive the
Installment Payments for its own account and is not purchasing the right to receive the
Installment Payments with a view to distributing the them.
(d) The Subsequent Assignee has sufficient knowledge and experience in
financial and business matters, including the purchase and ownership of municipal
securities and other tax-exempt obligations similar to the rights and obligations under the
Installment Purchase Agreement, to be capable of evaluating the merits and risks of an
investment in the right to receive the Installment Payments, and the Subsequent
Assignee is able to bear the economic risks of such an investment.
(e) The Subsequent Assignee recognizes that an investment in the right to
receive the Installment Payments involves significant risks, that there is no established
market for the Installment Payments and that none is likely to develop and, accordingly,
that the Subsequent Assignee must bear the economic risk of an investment in the right
to receive the Installment Payments for an indefinite period of time.
(f) The Subsequent Assignee understands and agrees that rights to receive
Installment Payments may be transferred: (i) only to a person that the Subsequent
Assignee reasonably believes is either: (A) a Qualified Institutional Buyer that is
purchasing such rights for not more than one account, for their own account and not with
a view to distributing such rights; or (B) an Institutional Accredited Investor that is
purchasing such rights for not more than one account for investment purposes and not
with a view to distributing such rights; and (ii) only if such Qualified Institutional Buyer or
Institutional Accredited Investor delivers to the City and Authority a completed and duly
executed letter substantially in the form hereof.
(g) The Subsequent Assignee is not relying upon the City or Authority, or any
of their affiliates, agents or employees, for advice as to the merits and risks of
investment in the right to receive Installment Payments. The Subsequent Assignee
understands that the obligations of the City under the Installment Purchase Agreement
are special, limited obligations payable and secured solely from System Net Revenues
as provided for in the Installment Purchase Agreement. The Subsequent Assignee has
sought such accounting, legal and tax advice as it has considered necessary to make an
informed investment decision.
(h) The Subsequent Assignee has conducted its own independent
examination of, and has had an opportunity to ask questions and receive answers
concerning, the City and Authority, the authorizing resolutions of the City and Authority
with respect to the Installment Purchase Agreement and Assignment Agreement (the
"Resolutions") and the security therefor and the transactions and documents related to
or contemplated by the foregoing.
(i) The Subsequent Assignee has been furnished with all documents and
information regarding the City and Authority, the Resolutions, and the security for the
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Installment Payments and the transactions and documents related to or contemplated by
the foregoing, and all matters related thereto, that it has requested.
Q) The Subsequent Assignee understands and agrees that: (i) the entering
into of the Installment Purchase Agreement is exempt from Rule 15c2 -12(b)(5) adopted
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, pursuant to Section (d) of said Rule; (ii) the rights to receive the Installment
Payments will not be listed on any stock or other securities exchange and were issued
without registration under the provisions of the Securities Act or any state securities
laws; (iii) no official statement or other disclosure document is being prepared in
connection with the Installment Payments; and (iv) the Installment Payments will not
carry any rating from any rating service.
(k) The Subsequent Assignee understands and agrees that the Assignee will
be responsible for making any payments to any Subsequent Assignee and providing any
notices to any Subsequent Assignee and that the City and Authority will continue to
make Installment Payments and any other payments only to and provide any notices
only to the Assignee.
(I) The person executing this letter on behalf of the Subsequent Assignee is
duly authorized to do so on the Subsequent Assignee's behalf.
IN WITNESS WHEREOF, the Subsequent Assignee has executed this letter as
of the date set forth below.
[Date]
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[SUBSEQUENT ASSIGNEE]
By: [Name, Title]
RESOLUTION NO. 2017-220
A RESOLUTION OF THE LODI CITY COUNCIL AUTHORIZING
DOCUMENTS AND OFFICIAL ACTIONS RELATING TO THE
REFINANCING OF AN OUTSTANDING INSTALLMENT PAYMENT
OBLIGATION OF THE CITY OF LODI RELATING TO ITS WASTEWATER
SYSTEM, APPROVING AN INSTALLMENT PURCHASE AGREEMENT AND
IRREVOCABLE REFUNDING INSTRUCTIONS, AND APPROVING FINAL
FORM OF FINANCING DOCUMENTS AND OFFICIAL ACTIONS
WHEREAS, the City of Lodi (the "City") owns and operates facilities and property for the
collection, treatment, and disposal of wastewater within the service area of the City (the
"System"); and
WHEREAS, the City previously entered into an Installment Purchase Agreement, dated
as of December 1, 2007 (the "2007 Installment Purchase Agreement") with the Lodi Public
Improvement Corporation (the "Corporation"), pursuant to which the City agreed to make certain
installment payments in the aggregate principal amount of $30,320,000 (the "2007 Installment
Payments"), and caused execution and delivery of Wastewater System Revenue Certificates of
Participation, 2007 Series A (the "2007 Certificates"), pursuant to a Trust Agreement, dated as
of December 1, 2007 (the "2007 Trust Agreement"), between the Corporation and The Bank of
New York Mellon Trust Company, N.A., as trustee (the "2007 Trustee"), all for the purpose of (i)
financing the costs of certain improvements to the System (the "2007 Project") and (ii)
refinancing, on a current basis, all outstanding installment payments under an Installment Sale
Agreement, dated as of December 1, 1991, with the Corporation, and certain outstanding
Certificates of Participation (1991 Wastewater Treatment Plant Expansion Refunding Project)
(the "1991 Certificates"); and
WHEREAS, the 1991 Certificates were executed and delivered to (i) finance certain
capital improvements to the System (the "1991 Improvements") and (ii) prepay, on an advance
basis, certain certificates of participation that were executed and delivered to finance the
expansion of the City's White Slough Water Pollution Control Facility (the "White Slough
Certificates"); and
WHEREAS, under current economic conditions, it is possible for the City to refinance on
a tax-exempt basis the portion of the 2007 Installment Payments attributable to the refinancing
of the White Slough Certificates (the "Refinanced 2007 Installment Payments") for the purpose
of achieving savings for the benefit of the customers of the System, and to cause a prepayment,
on a current basis for purposes of federal tax law, of the related 2007 Certificates (the
"Refunded 2007 Certificates"); and
WHEREAS, there has been presented to the City Council for approval that certain
Installment Purchase Agreement by and between the City, as purchaser, and the Lodi Public
Financing Authority (the "Authority"), as seller (the "Installment Purchase Agreement"), pursuant
to which the City will make installment payments to the Authority for the purchase price of the
2007 Project; and
WHEREAS, concurrently with the execution of the Installment Purchase Agreement, the
Authority will enter into an Assignment Agreement (the "Assignment Agreement") by and
between the Authority, as assignor, and River City Bank, or such other institution(s) selected by
an Authorized Officer, as defined below (the "Assignee"), as assignee, pursuant to which the
Authority will assign to the Assignee substantially all of the Authority's rights, title and interest
under the Installment Purchase Agreement; and
WHEREAS, there have been presented to the City Council for approval Irrevocable
Refunding Instructions (the Irrevocable Refunding Instructions") to be given by the City to the
2007 Trustee in order to accomplish the prepayment of the Refinanced 2007 Installment
Payments and the Refunded 2007 Certificates; and
WHEREAS, in connection therewith, it is in the public interest and for the common
benefit and municipal purpose that the City authorize and direct execution of the Installment
Purchase Agreement and the Irrevocable Refunding Instructions and certain other financing
documents in connection therewith; and
WHEREAS, the documents specified below have been filed with the City, and the
members of the City Council, with the aid of its staff, have reviewed said documents; and
WHEREAS, the City Council wishes at this time to take action approving such financing
transactions and all related documents and actions.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Lodi as
follows:
Section 1. Installment Purchase Agreement. The City Council hereby approves the
Installment Purchase Agreement relating to the refinancing of the Refinanced 2007 Installment
Payments and the prepayment of the Refunded 2007 Certificates, between the City and the
Authority, in the form thereof on file with the City Clerk together with any changes therein or
additions thereto deemed advisable by the City Manager, Deputy City Manager, or City Attorney
(each, an "Authorized Officer"); provided that the execution thereof by an Authorized Officer
shall be conclusive evidence of the approval of any such changes or additions; provided further
that the purchase price to be funded by the Assignee shall not exceed $8,500,000; provided,
further, that the entering into of the Installment Purchase Agreement, the refinancing of the
Refinanced 2007 Installment Payments and the refunding of the Refunded 2007 Certificates
shall result in net present value debt service savings of at least 3% of the principal amount of
the Refinanced 2007 Installment Payments and the Refunded 2007 Certificates. An Authorized
Officer is hereby authorized and directed for and in the name and on behalf of the City to
execute, and the City Clerk is hereby authorized and directed to attest, the final form of the
Installment Purchase Agreement.
Section 2. Small Issuer Exemption from Bank Nondeductibility Restriction. The City
hereby designates the Installment Purchase Agreement for purposes of paragraph (3) of section
265(b) of the Internal Revenue Code of 1986 (the "Code") and declares that not more than
$10,000,000 aggregate principal amount of obligations the interest on which is excludable
(under section 103(a) of the Code) from gross income for federal income tax purposes
(excluding (i) private activity bonds, as defined in section 141 of the Code, except qualified
501(c)(3) bonds as defined in section 145 of the Code and (ii) current refunding obligations to
the extent the amount of the refunding obligation does not exceed the outstanding amount of
the refunded obligation), including the obligations under the Installment Purchase Agreement,
has been or will be issued by the City, including all subordinate entities of the City, during the
calendar year 2017.
Section 3. Irrevocable Refunding Instructions. The City Council hereby approves the
Irrevocable Refunding Instructions in the form thereof on file with the City Clerk together with
any changes therein or additions thereto deemed advisable by an Authorized Officer. The
execution of the Irrevocable Refunding Instructions by an Authorized Officer shall be conclusive
evidence of the approval of any such changes or additions. An Authorized Officer is hereby
authorized and directed for and in the name and on behalf of the City to execute the final form of
the Irrevocable Refunding Instructions.
Section 4. Assignment by Authority. The City Council hereby approves the assignment
by the Authority of its rights under the Installment Purchase Agreement, including the right to
receive the Installment Payments, to the Assignee. Such assignment shall be made pursuant to
an Assignment Agreement between the Authority and the Assignee in substantially the form on
file with the City Clerk, which the City Council hereby approves.
Section 5. Official Actions. The City Manager, Deputy City Manager, City Attorney, the
City Clerk and all other officers of the City are each authorized and directed in the name and on
behalf of the City to make any and all assignments, certificates, requisitions, agreements,
notices, consents, instruments of conveyance, warrants and other documents, which they or
any of them deem necessary or appropriate in order to consummate any of the transactions
contemplated by the agreements and documents approved under this Resolution. Whenever in
this Resolution any officer of the City is authorized to execute or countersign any document or
take any action, such execution, countersigning or action may be taken on behalf of such officer
by any person designated by such officer to act on his or her behalf in the case such officer is
absent or unavailable.
Section 6. Engagement of Professional Services. In connection with the Installment
Purchase Agreement, the City Council hereby approves the engagement of bond counsel
services with the firm of Jones Hall, A Professional Law Corporation, municipal advisor services
with the firm of Fieldman, Rolapp & Associates, Inc., and placement agent services with Piper
Jaffray & Co. An Authorized Officer is hereby authorized and directed for and in the name and
on behalf of the City to execute an agreement with each of such firms.
Section 7. Effective Date. This Resolution shall take effect immediately upon its
passage and adoption.
Dated: December 6, 2017
I hereby certify that Resolution No. 2017-220 was passed and adopted by the City
Council of the City of Lodi in a regular/joint meeting held December 6, 2017, by the following
vote:
AYES: COUNCIL MEMBERS — Chandler, Johnson, Mounce, Nakanishi, and
Mayor Kuehne
NOES: COUNCIL MEMBERS — None
ABSENT: COUNCIL MEMBERS — None
ABSTAIN. COUNCIL MEMBERS — None
(NNIFER FERRAIOLO
City Clerk
2017-220
RESOLUTION NO. LPFA2017-02
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE
LODI PUBLIC FINANCING AUTHORITY APPROVING AND DIRECTING
EXECUTION OF AN INSTALLMENT PURCHASE AGREEMENT AND
AN ASSIGNMENT AGREEMENT FOR THE PURPOSE OF
REFINANCING AN INSTALLMENT PAYMENT OBLIGATION OF THE
CITY OF LODI, AND APPROVING RELATED ACTIONS
WHEREAS, the City of Lodi owns and operates facilities and property for the collection,
treatment, and disposal of wastewater within the service area of the City (the "System"); and
WHEREAS, the City previously entered into an Installment Purchase Agreement, dated
as of December 1, 2007 (the "2007 Installment Purchase Agreement") with the Lodi Public
Improvement Corporation (the "Corporation"), pursuant to which the City agreed to make certain
installment payments in the aggregate principal amount of $30,320,000 (the "2007 Installment
Payments"), and caused execution and delivery of Wastewater System Revenue Certificates of
Participation, 2007 Series A (the "2007 Certificates"), pursuant to a Trust Agreement, dated as
of December 1, 2007 (the "2007 Trust Agreement"), between the Corporation and The Bank of
New York Mellon Trust Company, N.A., as trustee (the "2007 Trustee"), all for the purpose of (i)
financing the costs of certain improvements to the System (the "2007 Project") and (ii)
refinancing, on a current basis, all outstanding installment payments under an Installment Sale
Agreement, dated as of December 1, 1991, with the Corporation, and certain outstanding
Certificates of Participation (1991 Wastewater Treatment Plant Expansion Refunding Project)
(the "1991 Certificates"); and
WHEREAS, the 1991 Certificates were executed and delivered to (i) finance certain
capital improvements to the System (the "1991 Improvements") and (ii) prepay, on an advance
basis, certain certificates of participation that were executed and delivered to finance the
expansion of the City's White Slough Water Pollution Control Facility; and
WHEREAS, under current economic conditions, it is possible for the City to refinance on
a tax-exempt basis the portion of the 2007 Installment Payments attributable to the refinancing
of the White Slough Certificates (the "Refinanced 2007 Installment Payments") for the purpose
of achieving savings for the benefit of the customers of the System, and to cause a prepayment,
on a current basis for purposes of federal tax law, of the related 2007 Certificates (the
"Refunded 2007 Certificates"); and
WHEREAS, the Authority has been formed for the purpose of assisting the City in the
financing and refinancing of public capital improvements; and
WHEREAS, there has been presented to the Board of Directors for approval an
Installment Purchase Agreement and an Assignment Agreement; and
WHEREAS, the Board of Directors wishes at this time to approve and direct execution of
the Installment Purchase Agreement and the Assignment Agreement and to authorize and
approve other related actions.
NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Lodi Public
Financing Authority as follows:
Section 1. Financing Documents. The forms of the documents listed below are hereby
approved, and the Chair, Executive Director, Treasurer or General Counsel, or an authorized
representative of such persons (each an "Authority Representative") is hereby authorized and
directed to execute such documents in substantially the form of documents on file with the
Secretary of the Authority, together with any additions thereto or changes therein deemed
necessary or advisable by any Authority Representative and whose execution thereof shall be
conclusive evidence of approval of any such additions or changes:
(a) the Installment Purchase Agreement, by and between the Authority and
the City; and
(b) the Assignment Agreement, by and between the Authority and River City
Bank, or such other capital provider identified by the City.
Section 2. Official Actions. Each Authority Representative, and any other duly -
authorized officers or agents of the Authority, is hereby authorized and directed, for and in the
name and on behalf of the Authority, to do any and all things and take any and all actions,
including execution and delivery of any and all assignments, certificates, requisitions,
agreements, notices, consents, instruments of conveyance, warrants and other documents,
which they, or any of them, may deem necessary or advisable in order to effect the purposes of
this resolution and the refinancing.
Section 3. Effective Date. This resolution shall take effect immediately upon its passage
and adoption.
Dated: December 6, 2017
I hereby certify that Resolution No. LPFA2017-02 was passed and adopted by the Board
of Directors of the Lodi Public Financing Authority in a regular/joint meeting held
December 6, 2017, by the following vote:
AYES: BOARD MEMBERS — Chandler, Johnson, Mounce, Nakanishi, and
Mayor Kuehne
NOES: BOARD MEMBERS — None
ABSENT: BOARD MEMBERS — None
ABSTAIN: BOARD MEMBERS — None
NNIFER M. FERRAIOLO
Secretary
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