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HomeMy WebLinkAbout2001-05-14 City Council (6)TO: City of Palo Alto City Manager’s Report HONORABLE CITY COUNCIL 1 1 FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE SERVICES DATE:MAY 14, 2001 CMR:237:01 SUBJECT:APPROVAL OF A RESOLUTION WHICH AUTHORIZES: 1) ISSUANCE AND SALE OF NOT TO EXCEED $9,250,000 PRINCIPAL AMOUNT OF 2001 UNIVERSITY AVENUE OFF-STREET PARKING ASSESSMENT DISTRICT LIMITED OBLIGATION IMPROVEMENT BONDS. BOND PROCEEDS WILL BE USED TO: REFUND AND REFINANCE THE DISTRICT’S 1989 IMPROVEMENT BONDS; PAY REMAINING DEBT SERVICE ON 1977 PARKING BONDS; REIMBURSE THE CITY’S GENERAL AND PARKING IN-LIEU FUNDS FOR STUDY AND PRE-DESIGN EXPENDITURES; AND FUND FINAL DESIGN, ACQUISITION, MANAGEMENT AND BOND ISSUANCE EXPENDITURES; AND 2)OFFICIAL ACTIONS RELATED TO THE BOND ISSUANCE REPORT IN BRIEF With approval of a new University Avenue Off-Street Parking Assessment District on March 19, Council is being asked now to approve the first phase of bond financing for the new downtown parking structures. Staff requests that the Council adopt a Resolution that authorizes issuing bonds and taking the necessary official actions to sell the bonds. The required cash collection period, in which District property owners had the opportunity to pay their assessments before the financing, ended on April 27. On behalf of the District, the City collected $144,754, of which $115,426 will be used toward the parking structure project and the remainder will be returned to property owners. It is recommended that Council approve selling bonds up to an amount not to exceed $9,250,000. Funds from the bond proceeds will be used for: refinancing the District’s 1989 Improvement Bonds; paying remaining debt service on the 1977 Parking Bonds; reimbursing the City’s General Fund for study and pre-design expenditures; and funding final design, acquisition, management and bond issuance expenditures. CMR:296:98 Page 1 of 14 As described in previous reports (CMR: 170:01), this bond issuance represents the first of two fmancing phases in building the parking garages and a non-parking area on the S/L site. The second financing phase, necessary to raise funds for construction, will occur in 2002. CMR:237:01 Page 2 of 8 RECOMMENDATION Staff recommends that the City Council: Adopt a Resolution of the City Council of the City of Palo Alto Authorizing Issuance of Limited Obligation Improvement Bonds. 1 Authorize staff to implement the sale of bonds of an amount not to exceed $9,250,000. These bonds will be used to: re~’mance the District’s 1989 Improvement Bonds; pay remaining debt service on the 1977 Parking Bonds; reimburse the City’s General Fund for study and pre-design expenditures; and fund final design, acquisition, management and bond issuance expenditures BACKGROUND On November 27, 2000, Council approved recommendations to move forward with the construction of two new parking garages. On January 22, 2001, Council adopted two resolutions necessary to begin formation of a new University Avenue Area Off-Street Parking Assessment District (CMR: 170:01). A public hearing and a tabulation of assessment ballots occurred on March 19. Results from the tabulation indicated an approval of 73 percent of those submitting ballots to form an assessment district to finance the new structures. Based upon the balloting (weighted based on dollars of assessment), Council approved a "Resolution Adopting Engineer’s Report, Confirming the Assessment, Ordering the Work and Directing Actions with Respect Thereto." This resolution allowed a minimum 30 day cash payment period during which property owners could elect to pay all or part of their assessments in cash. This cash payment period covers only the assessments for the first series of bonds; a separate cash payment period will be offered for the second series of bonds when they are ready to be issued. Property owners had until April 27 to either pay their assessment in cash or have it financed. At the end of the cash payment period, the City had received $144,754 against the first series of bonds. DISCUSSION Staff is now requesting Council’s authorization to sell up to $9,250,000 in bonds for the first financing phase of the parking structures project, the maximum principal amount that can be assessed to District property owners. As reported in CMR: 114:01 and CMR: 170:01, the financing of the parking structures and the non-parking area on the S/L site will occur in two stages. CMR:237:01 Page 3 of 8 Proceeds ¯ ¯ from the first financing will be used for: refinancing the District’s 1989 Improvement Bonds paying remaining debt service on the 1977 Parking Bonds reimbursing the City’s General Fund for study and pre-design expenditures for the two new parking structures funding final design, acquisition, management and bond issuance expenditures for the parking structures Proceeds from the second financing, expected to occur in Spring 2002, will provide for construction of the garages and the non-parking area on site S/L. Construction is anticipated to begin in Spring 2002. First Financing Based on analysis provided by the City’s financial advisor, it was determined that the District will realize an estimated $120,000 in net present value or 5.0 percentage savings from refunding and refinancing the existing 1989 improvement bonds. Principal remaining on these bonds totals $3.3 million. Staff concurs with this analysis and recommends the refinancing given low interest rates and the need to keep assessment payments at a reasonable level. A part of the bond proceeds also will be used to complete the final payments on the 1977 improvement bonds, which finally mature in July 2002. In addition, funds from the first financing will be used toward: final design, engineering, management and administration costs; acquisition and right of way expenses; bond issuance costs such as attorney, financial advisor, underwriting, and rating agency fees; and the reimbursement of the General Fund for funds advanced for the project. To maximize the quality of the bond issuance and minimize intere.st expense, staff will deliver a rating presentation to Standard and Poor’s on May 15. Staff from Administrative Ser¥ices, Public Works, the City Attorney’s Office as well as the City’s Bond Counsel, Financial Advisor, and Project Engineer will participate in the presentation. Information such as the ability of the University Avenue Off-Street Assessment District to pay prior assessment commitments, the current assessed value of District property, and the overall financial viability of the downtown area will be discussed. A high rating from Standard and Poor’s and the probable use of bond insurance should ensure a safe issue for investors and lower interest costs to the City. Staffwill advise Council of the rating agency’s analysis as soon as it is received. The bonds will be offered at a competitive sale on June 13 with the.assistance of the City’s financial advisor, Stone and Youngberg. A competitive sale means that underwriters or investment banking firms will be asked to bid on the bonds. The bidding process is designed to achieve the lowest interest cost to the issuer and to maintain an open process. Proceeds from the June 13 sale will be delivered to the City around June 26. As in prior assessment bond issues, the City will contract with a Paying Agent to make debt service payments and CMR:237:01 Page 4 of 8 the City will hold all bond proceeds (except those escrowed for refunding) in the required funds and reserves. Required Council Action The Council must adopt the attached Resolution (Attachment A) to allow the Limited Obligation Improvement Bonds, City of Palo Alto, University Avenue Off-Street Parking Assessment District, Series 2001-1 to be authorized, sold and delivered. By adopting this resolution, the City Council authorizes various City officials to complete and execute various documents. The Resolution also approves the forms of the following documents: o O O Preliminary Official Statement, containing information material to the offering and sale of bonds (Exhibit A). The form of the bond (Exhibit t3) The public bond sale documents, including the official Notice of Sale to the investment community seeking bids to be received on June 13, 2001 (Exhibit C).. RESOURCE IMPACT Funding required for the first phase of the parking structure project totals approximately $10,694,000. Attachment 13 shows the sources of funding for the project and their intended uses. The chief sources of funding are bond proceeds, Parking In-Lieu funds, and cash payments fi’om District property owners. Staff will be returning to Council on May 21 with a 13udget Amendment Ordinance to request an appropriation to meet the remainder of project funding needs for final design, architectural, acquisition, engineering, and management expenses. During the 30-day cash collection period, the City collected $144,754 of which $115,426 will be used toward the parking structure project and the remainder will be returned to property owners, These proceeds will be used for project expenditures and will offset the need to borrow funds. The eight property owners who paid their first assessment will not bear costs associated with the first financing. Next spring, staff will send notices to District property owners informing them of a second, 30-day cash payment period for the remainder of their assessment. To date, the City has appropriated $1.4 million toward the Downtown Parking Structures capital project ($.8 million from Parking In-Lieu Fund and $.6 million t~om the General Fund) toward the study and design costs of building the garages and the non-parking area located on the S/L site. From the first series of Improvement Bonds, a part of the proceeds will be used to reimburse the General Fund. Parking In-Lieu funds will not be reimbursed because the sole purpose of those funds is to pay costs associated with providing new parking. Reimbursed Genera! Funds will, in turn, be used to pay for the design, architectural and management costs associated with the non-parking area on the S/L site. These costs are CMR:237:01 Page 5 of 8 estimated at $.4 million. Since this area is not for non-parking purposes, it must be funded from non-Assessment District resources. Property owners in the District will first see an increase in their assessment on the property tax bill in November 2002. Until that time, the current assessment of $.35 per square foot will continue. In November 2003, after the second series of bonds are issued, the full, annual assessment of an estimated $1.45 per square foot will begin to be collected. Under Proposition 218’s requirement that properties of public entities specially benefited by the public improvements must be assessed, the City of Palo Alto will be required to pay an estimated annual assessment of $76,000. POLICY IMPLICATIONS Approval of the bond financing is consistent with prior Council policy direction. TIME LINE 2001 May 14 May 15 May 21 Council adopts Resolution Authorizing the Issuance of Limited Obligation Improvement Bonds. This resolution confirms assessments after any cash payments and approves the bond sale documents required for a public offering of bonds Rating Presentation to Standard and Poor’s Return to Council with a Budget Amendment Ordinance to fund final design, architectural, and management work prior to construction June 13 Bonds sold June 26 May - December 2002 January March Bond proceeds received Design work completed Construction bids solicited Publish and mail notices of second assessment payment to each property owner. Property owners have 30 days to pay cash for all or part of their confirmed assessment. Award construction contract CMR:237:01 Page 6 of 8 Council adopts Resolution Authorizing the Issuance of Limited Obligation Improvement Bonds. This resolution confirms unpaid assessments after the second cash payment, authorizes the second series of bonds-and approves the bond sale documents for the second series. City issues second series of bonds to finance construction of garages and non-parking area Construction begins ENVIRONMENTAL REVIEW An Environmental Impact Report for the parking structures was prepared as part of the PC zoning application and was certified by Council on December 20, 1999, by adoption of Resolution No. 7917. ATTACHMENTS Attachment A:A Resolution of City Council of the City of Palo Alto Authorizing Issuance of Limited Obligation Improvement Bonds. Exhibit A Exhibit B Exhibit C Terms and Conditions or Preliminary Official Statement Form of Bond Public Sale Documents Attachment B:University Avenue Area Off-Street Parking District: Estimated Sources and Uses of Funds for First Financing Phase PREPARED BY: JOE ~CCIO, Deputy Director Admiidstrative Services Department CMR:237:01 Page 7 of 8 DEPARTMENT HEAD APPROVAL: CITY MANAGER APPROVAL: Direc(~~t YEATS" -----"--~e Services HARRISON Assistant City Manager CMR:237:01 Page 8 of 8 ATTACHMENT A RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALO ALTO AUTHORIZING ISSUANCE OF LIMITED OBLIGATION IMPROVEP~/~ BONDS University Avenue Area Off-Street Parking Assessment District Adopted , 2001 TABLE OF CONTENTS ARTICLE I DEFINITIONS; GENERAL Section 1.01~-.-DEFINITIONS ................................................2 Section 1.02. UNPAID ASSESSMENTS .........................................9 Section 1.03. EQUAL SECURITY ............................................i0 Section 2.01 Section 2.02 Section 2.03 Section 2.04 Section 2.05 Section 2.06 Section 2.07 Section 2.08 Section 2.09 Section 2.10 ARTICLE II THE BONDS BONDS AUTHORIZED ...........................................ii TERMS OF BONDS ............................................Ii REDEMPTION ................................................12 FORM OF BONDS .............................................14 EXECUTION AND AUTHENTICATION OF BONDS .....................14 TRANSFER OR EXCHANGE OF BONDS’. ............................14 BOND REGISTER .............................................15 TEMPORARY BONDS ....................................’ .......15 BONDS MUTILATED, LOST, DESTROYED OR STOLEN ................15 BOOK-ENTRY ONLY SYSTEM ....................................16 Section Section Section Section Section Section Section Section Section Section Section Section 3 01 3 02 3 03 3 O4 3 05 3 06 3 07 3 08 3 09 3 i0 3 ii 3 12 ARTICLE III ISSUANCE OF BONDS ISSUANCE AND SALE OF BONDS ................................18 PREPARATION AND DELIVERY OF BONDS .........................18 OFFICIAL STATEMENT ........................................18 VALIDITY OF BONDS .........................................19 PLEDGE OF ASSESSMENTS AND FUNDS ...........................19 LIMITED OBLIGATIONS .......................................19 NO ACCELERATION ...........................................19 REFUNDING OF BONDS ........................................20 AUTHORITIES ...............................................20 CONTINUING DISCLOSURE DOCUMENT(S) ........................20 ACTIONS APPROVED ..........................................20 PARITY BONDS ................................................21 Section 4.01 Section 4.02 Section 4.03 Section 4.04 Section 4.05 Section 4.06 ARTICLE IV FUNDS AND ACCOUNTS APPLICATION OF PROCEEDS OF SALE OF BONDS ..................23 COSTS OF ISSUANCE FUND ....................................23 REDEMPTION FUND ...........................................23 RESERVE FUND ..............................................24 ESCROW FUND ...............................................26 IMPROVEMENT FUND ..........................................26 Section Section Section Section Section Section Section Section Section 5 01 5 02 5 03 5 O4 5 O5 5 06 5 07 5 O8 5 09 ARTICLE V COVENANTS COLLECTION OF ASSESSMENTS .................................27 FORECLOSURE ...............................................28 PUNCTUAL PAYMENT; COMPLIANCE WITH DOCUMENTS ...............28 NO PRIORITY FOR ADDITIONAL OBLIGATIONS ....................28 FURTHER ASSURANCES ........................................29 PRIVATE ACTIVITY BOND LIMITATION ..........................29 FEDERAL GUARANTEE PROHIBITION .............................29 NO ARBITRAGE ..............................................29 REBATE REQUIREMENT ........................................29 Section 5.10. YIELD OF THE BONDS ........................................29 Section 5.11. AMENDMENT .................................................29 Section 5.12. MAINTENANCE OF TAX-EXEMPTION ..............................30 Section 5.13. CONTINUING DISCLOSURE .....................................30 ARTICLE VI INVESTMENT OF FUNDS Section 6.01. DEPOSIT AND INVESTMENT OF MONEYS IN FUNDS .................31 Section 6.02. ACQUISITION, DISPOSITION AND VALUATION OF INVESTMENTS .....32 Section 6.03. LIABILITY OF CITY .........................................32 Section 6.04. EMPLOYMENT OF AGENTS BY CITY ..............................33 Section 7 01 Section 7 02 Section 7 03 Section 7 04 Section 7 05 Section 7 06 ARTICLE VII MODIFICATION OR AMENDMENT AMENDMENTS PERMITTED ......................................34 OWNERS ’ MEETINGS ..........................................34 PROCEDURE FOR AMENDMENT WITH WRITTEN CONSENT OF OWNERS~ o ...35 DISQUALIFIED BONDS .........- ...............................36 EFFECT OF SUPPLEMENTAL RESOLUTION .........................36 ENDORSEMENT OR REPLACEMENT OF BONDS ISSUED AFTER AMENDMENT .................................................36 Section 7.07. AMENDATORY ENDORSEMENT OF BONDS ...........................36 ARTICLE VIII MISCELLANEOUS Section 8.01.BENEFITS OF AGREEMENT LIMITED TO PARITIES .................37 Section 8.02.SUCCESSOR AND PREDECESSOR .................................37 Section 8.03.DISCHARGE OF RESOLUTION ...................................37 Section 8.04 Section 8.05 Section 8.06 Section 8.07 Section 8.08 Section 8.09 Section 8.10 Section 8.11 Section 8.12 Section 8.13 Seczion’8.!4 Section 8.15 Section 8.16 EXECUTION OF DOCUMENTS AND PROOF OF OWNERSHIP .............38 WAIVER OF PERSONAL LIABILITY ..............................38 NOTICES AND DEMANDS .......................................38 PARTIAL INVALIDITY ........................................38 UNCLAIMED MONEYS ..........................................39 APPLICABLE LAW ............................................39 CONFLICT WITH ACT .....................................[...39 CONCLUSIVE EVIDENCE OF REGULARITY; VALIDITY ...............39 PAYMENT ON BUSINESS DAY ...................................39 REPEAL OF INCONSISTENT RESOLUTIONS ........................39 AUTHORITY OF FINANCE DIRECTOR .............................39 CERTIFIED COPIES ..........................................40 EFFECTIVE DATE OF THE RESOLUTION ..........................40 EXHIBIT A EXHIBIT B TERMS AND CONDITIONS FORM OF BOND ii The City Council .(the ~Council")of the City of Palo Alto (the ~City"), County of Santa Clara (the ~County"), State of California, resolves as follows: W~EREAS, on January 22, 2001, this Council adopted its Resolution No. 8034, ~A Resolution of the City Council of the City of Pal.o Alto of Intention to Make Acquisitions and Improvements," (the "Resolution of Intention") under the Municipal Improvement Act of 1913, Division 12 of the Streets and Highways Code of California, as amended and modified by other applicable laws (collectively, the ~Act") to initiate proceedings under the Act in and for the City’s University Avenue Area 0ff-Street Parking Assessment District (the ~Assessment District"); W~EREAS, by the Resolution of Intention, the Council provided that improvement bonds as more particularly described herein (the "Bonds") would be issued thereunder and reference to the Resolution of Intention is hereby expressly made for further particulars; -W~REAS, this Council has completed its proceedings under the Resolution of Intention for the levy of assessments, has caused all recordings and filings to be completed in accordance with the requirements in and for the Assessment District and by the adoption of this Resolution intends to provide for the issuance of the Bonds; and WIKEREAS, this Council now intends to provide for the issuance of the Bonds upon the security of a the unpaid assessments, all as hereinafter provided. NOW, THEREFORE BE XT RESOLVED by the Council of the City of Palo Alto as follows: ARTICLE I DEFINITIONS; GENERAL Section 1.01. DEFINITIONS. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Resolution and of any Supplemental Resolution and of the Bonds and of any certificate, opinion, request or other document herein mentioned, have the meanings herein specified. All references in this Resolution to ~Articles," ~Sections," and ~ther subdlvlslons are to the corresponding .Articles, Sections or subdivisions of this Resolution; and the words "herein," hereof," ~hereunder" and other words of similar import refer to this Resolution as a whole and not to any particular Article, Section or subdivision hereof. Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. Unless the context shall otherwise indicate, words importing the singular -number shall include’ the plural number and vice versa, and words importing persons shall include corporatiqns and associations, including public bodies, as wel! as natural persons. "Act" means the Municipal Improvement Act of 1913, Division 12 of the Streets and Highways Code of California, as amended and modified by other applicable laws "Agent" means U.S. Bank Trust National Association designated in Section 2.01 hereof to perform the duties of authentication, registration, transfer and payment of the Bonds and the Agent’s assigns or any corporation or association which may at any time be substituted in the Agent’s place. "Assessment or Assessments" means the unpaid amounts of the special assessments levied against all taxable real property within the boundaries of the Assessment District pursuant to the Act and the proceedings of the Council under the Resolution of Intention, for the purpose of payihg Debt Service on the Bonds under the Bond Law. "Auditor" means the auditor/controller or tax collector of the County, or such other official of the County who is responsible for preparing real property tax bills. "Authorized Officer" means the Mayor, City Manager, Finance Director, Director of Public Works, City Engineer, City Clerk, City Attorney or any other officer or employee authorized by the City Council of the City or by an Authorized Officer to undertake the action referenced in this Resolution as required to be undertaken by an Authorized Officer. "Available Surplus Funds" means any surplus moneys held by the City at the end of each Fiscal Year in excess of the amounts required to pay lawful municipal obligations incurred in that Fiscal Year. "Bond" or ~Bonds ~ means "Limited Obligation Improvement Bonds, City of Palo Alto, University Avenue Area Off-Street Parking Assessment District, Series 2001-A" issued under this Resolution and the Act, and at any substantially the form in Exhibit B attached. time Outstanding in "Bond Date" means the dated date of the Bonds specified in Exhibit A attached hereto and made a part hereof. "Bond Denomination" means the amount of $5,000 or any integral multiple thereof, which is the minimum amount in which the Bonds may be issued, except that one Bond may contain any odd amount. "Bond Law" means the Improvement Bond Act of 1915, Division 10 of the California Streets and Highways Code. "Bond Purchase Agreement" means the agreement between the City and the Original Purchaser for the sale and purchase of the Bonds. ~Bond Register" means the books maintained by the Agent pursuant to Section 2.07 for the registration and transfer of ownership of the Bonds. ~Bond Year" means the twelve-month period beginning on September 2 in each year and ending on the day prior to September 2 in the following year except that (i) the first Bond Year shall begin on the Closing Date and end on the day prior to the next September 2, and (ii) the last Bond-Year may end on a prior redemption date. ~Business Day" means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the state in which the Agent has its Principal Office are authorized or obligated by law or executive order to be closed. "Capitalized Interest Account" means the account of that name within the Redemphion Fund. ~City" means the City of Palo Alto a municipal corporation and chartered city of the State of California duly organized and validly existing under and by virtue of the Constitution and the laws of the State of California. "City Attorney" means the duly appointed or retained attorney or firm of attorneys to the City for purposes of rendering advice in the conduct of its general municipal affairs. ~City Manager" means the City Manager or the Assistant City Manager of the City. "Clerk" means the City Clerk of the City or Deputy City Clerk or designee thereof. ~Closing Date" means the date upon which there is an exchange of any of the Bonds for the proceeds representing the purchase price of such Bonds by the Original Purchaser thereof. "Continuing Disclosure Certificate" means certificate provided under Section 5.13 hereof. any such - 3 - "Costs of Issuance~ means all expenses incurred in connection with the authorization, issuance, sale and delivery of the Bonds, including but not limited to compensation, fees and expenses of the City and the Agent and their respective counsel, compensation to any financial consultants, engineers, accountants, verification agents, and underwriters (other than those taken as discount on the Closing Date), legal fees and expenses, filing and recording costs, costs of preparation and reproduction of notice of sale documents and other related bond issuance costs, rating agency costs, costs of compliance with the Tax Code relating to any rebate to the United States and continuing disclosures and the costs of printing, mailing and publication of notices with respect to the City. ~Costs of Issuance Fund" means the fund designated "City of Palo Alto, Limited Obligation Improvement Bonds, University Avenue Area Off-Street Parking Assessment District, Series 2001-A, Costs of Issuance Fund established under Section 4.02 hereof. ~Council" means the City Council as the legislative body of the City. "County" means the County of Santa Clara, State of California. "Debt Service" means, for each Bond Year,the sum of (i) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled, and (ii) the principal amount of the Outstanding Bonds and the Sinking Fund Payments due in such Bond Year. "Depository or Securities Depositories" means The Depository Trust Company, 711 Stewart Avenue, Garden City, New York 11530, Fax -(516) 227-4171 or 4190; Philadelphia Depository Trust Company,Reorganization Division,1900 Market Street,Philadelphia, Pennsylvania 19103, Attention: Bond Department, Fax (215) 496-5058; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other, addresses and/or such other securities depositories as the City may designate in an Officer’s Certificate delivered to the Agent "DTC" means the Depository Trust Company, New York, New York and its successors and assigns. "Escrow Agreement" means the Escrow Agreement dated as of the Closing Date, by and between the City and the Escrow Holder, by which the Escrow Fund is established and administered. "Escrow Fund" means the fund designated "Limited Obligation Improvement Bonds, City of Palo Alto, University Avenue Area Off- Street Parking Assessment District, Series 2001-A, Prior Bonds Escrow Fund established and administered under Section 4.05 hereof. "Escrow Holder" means the Agent acting as Escrow Holder under the Escrow Agreement. - 4 - "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 ten percent (10%) beneficial interest if the return paid by such fund is without regard to the source of the investment. "Federal Securities" means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein: (a) direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America); and (b) obligations of any department, agency or instrumentality of the United States of America the timely payment of principal of and interest on which are unconditionally and fully guaranteed by the United States of America. "Finance Director" means the Director of Administrative Services or chief financial officer of the City or designee thereof, including any deputy thereof or assistant thereto. "Fiscal Year" means the period commencing on July 1 of each year and ending on the next succeeding June 30. "Improvement Fund" means the fund designated "City of Palo Alto, Limited Obligation Improvement Bonds, University Avenue Area Off-Street Parking Assessment District, Series 2001-A ~established under Section 4.06 hereof. "Information Services" means Financial Information,Inc.’s "Daily Called Bond Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor;Kenny Information Services’ .Called Bond Service, 55 Broad Street, 28th Floor, New York, New York 10004; Moody’s Investors Service Municipal and Government," 99 Church Street, New York, New York 10007, Attention: Municipal News Reports; Standard & Poor’s - 5 - Corporation "Called Bond Record," 25 Broadway, 3rd Floor, New York, New York 10004; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such services providing information with respect to called bonds as the City may designate in an Officer’s Certificate delivered to the Agent. "Interest Payment Date" means’ each date upon which interest on the Bonds is payable semiannually on each March 2 and September 2 until maturity and beginning on March 2, 2002. "1977 Bonds" means City of Palo Alto, University Avenue Area Parking Bonds of 1977, Series 75-63 dated as of June 2, 1977 and issued in the original principal amount of $791,000. ~1989 Bonds" means City of Palo Alto,University Avenue Area Off-Street Parking Assessment Bonds,1989 Refunding and Improvement Bonds (Lot J Refunding and 250 University Avenue Acquisition)dated as of December I, 1989 and issued in the original principal amount of $6,420,000. "Officer’s Certificate" means a written certificate or similar document executed by an Authorized Officer on behalf of the City. ~Original Purchaser" means the first purchaser of the Bonds from the City. ~Outstanding," when used as of any particular time with reference to Bonds, means all Bonds theretofore executed, issued and delivered by the City and authenticated by the Agent under this Resolution except: (a) Bonds theretofore canceled by surrendered to the Agent for cancellation; the Agent or (b) Bonds paid or deemed to have been paid within the meaning of Section 2.03; and (c) Bonds in lieu of or in substitution for which other Bonds shall have been executed, issued and delivered by the City pursuant to this Resolution or any Supplemental Resolution. ~Owner" or "Registered Owner," when used with respect to any Outstanding Bond, means the person in whose name the ownership of such Bond shall be registered on the Bond Register. "Participating Underwriter" means an underwriter or purchaser of the Bonds under the Continuing Disclosure Certificate. "Parity Bonds" means bonds issued on a parity with the Bonds under Section 3.12 hereof. "Permitted Investments" means the following, but only to the extent that the same are acquired at Fair Market Value: (a) Federal Securities; - 6 - (b) securities (other than those identified paragraphs (a) and (d) of Section 53601 of the Government Code of the State) in which the City may legally invest funds subject to its control, pursuant to Article i, commencing with Section 53600, of Chapter 4 of Part 1 of Division 2 of Title 5 of the Government Code of the State, as now or hereafter amended; in (c) shares in a California common law trust established pursuant to Title i, Division 7, Chapter 5 of the California Government Code which invests exclusively in investments permitted by Section 53635 of Title 5, Division 2, Chapter 4 of the California Government Code, as it may be amended, including but not limited to the California Asset Management Program (CAMP); (d) the Local Agency Investment Fund of the State of California,created pursuant to Section 16429.1 of the California Government Code, to the extent the Finance Director is authorized to register such investment in the City’s name; (e) investment agreements or guaranteed investment contracts, with or guaranteed by a financial entity whose long-term unsecured obligations are rated ~AA" or better by Moody’s Investor’s Service ("Moody’s) and Standard and Poor’s Ratings Group (~S&P"), and whose short term debt is rated no lower than the corresponding level of rating category for such debt- and such agreement or contract shall provide that the financial entity shall deposit collateral with a third party in accordance with criteria established by Moody’s and S&P in the event that the rating of short or long-term debt of the entity is downgraded below then-current requirements of Moody’s and S&P for such agreements or contracts; (f) money market funds which are rated Am or better by S&P; (g) any of the following direct or indirect obligations of the following agencies of the United States of America:(i) direct obligations of the Export-Import Bank; (ii) certificates of beneficial ownership issued by the FarmersHome Administration; (iii) participation certificates issued by the General Services Administration; (iv) mortgage-backed bonds or pass-through obligations issued and guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the Federal Housing Administration; (v) project notes issued by the United States Department of Housing and Urban Development;and (vi) public housing notes and bonds guaranteed by the United States of America; (h) interest-bearing demand or time deposits (including certificates of deposit) in federal or state chartered ~savings and loan associations or in federal or State of California banks (including the Agent), provided that (i) the unsecured short-term obligations of such commercial bank or - 7 - savings and loan association shall be rated A1 or better by S&P, or (ii) such demand or time deposits shall be fully insured by the Federal Deposit Insurance Corporation; (i) commercial paper rated in the highest short-term rating category by S&P, issued by corporations which are organized and operating within the United States of America, and which matures not more than 180 days following the date of investment therein; (j) bankers acceptances, consisting of bills of exchange or time drafts drawn on and accepted by a commercial bank whose short-term obligations are rated in the highest short-term rating category by S&P, which mature not more than 270 days following the date of investment therein; (k) obligations the interest on which is excludable from gross income pursuant to Section 103 of the Tax Code and which are rated A or better by S&P. "Prepayment Account" means the account of that name within the Redemption Fund. "Principal Amount" means the maximum aggregate amount of the Bonds as forth in Exhibit A. principal "Principal Office" means the office of the Agent in San Francisco, California, or such other office as shall be designated by the Agent in writing to the City, or such other office of the Agent designated by the Agent for payment, transfer or exchange of the Bonds. "Prior Bonds" means the 1989 Bonds and the 1997’ Bonds. "Prior Bonds Resolutions" means, collectively, Resolution No. 5395adopted by the Council on May 2, 1977 for the 1977 Bonds and Resolution No. 6840 adopted by the Counci! on November 27, 1989 for the 1989 Bonds, by which the Prior Bonds were authorized and "Project" means, collectively, the acquisitions and improvements funded with all or a portion of the proceeds of the Bonds. "~eassessment or Assessments" means the unpaid amounts of the special Assessments levied against al! taxable real property within the boundaries of the Assessment District pursuant to the Act and the proceedings of the Council under the Resolution of Intention, for the purpose of paying Debt Service on the Bonds under the Bond Law. "Record Date" means, with respect to the Bonds, the fifteenth (15th) day of the calendar month immediately preceding an Interest Payment Date, whether or not a Business Day. "Redemption Fund" means the fund designated "City of Palo Alto, Limited Obligation Improvement Bonds, University Avenue Area - 8 - Off-Street Parking Assessment District , Series 2001-A, Redemption Fund" established under Section 4.03 hereof. ~Redemption Premium" means the percentage of the principal amount of the Bonds payable upon redemption of the Bonds, as set forth in Exhibit A hereto. "Reserve Fund" means the fund designated ~City of Palo Alto, Limited Obligation Refunding Improvement Bond, University Avenue Area Off-Street Parking Assessment District , Series 2001-A, Reserve Fund" established under Section 4.04 hereof. "Reserve Requirement" means as of any date of calculation, an amount not to exceed the lesser of (a) Maximum Annual Debt Service on the Outstanding Bonds or (b) ten percent (10%) of the total of the proceeds of the Bonds deposited under Section 4.01 hereof. ~Resolution"L or "Resolution of Issuance" means this Resolution, as originally adopted or as it may from time to time be supplemented, modified or amended by any Supplemental Resolution pursuant to the provisions hereof. ~Resolution of Intention" means Re’solution No. 8034 ~A Resolution of the City Council of the City of Palo Alto ofIntention to Make Acquisitions and Improvements," adopted by theCouncil on January 22, 2001. "Sinking Fund PaymentsH means amounts specified in Section 2.03 hereof to be paid by the City with respect to any term Bonds, as they may be adjusted pursuant to that Section. ~State" means the State of California. "Supplemental Resolution" means any resolution, agreement, resolution or other instrument hereafter duly adopted or executed by the City in accordance with the provisions of this Resolution. "Tax Code" means the Internal Revenue Code of 1986 as ineffect on the date of issuance of the Bonds or (except asotherwise referenced herein) as it may be amended to apply toobligations issued on the date of issuance of the Bonds, together with applicable proposed, temporary and final regulations promulgated, and applicable official public guidance published, under the Tax Code. "Term Bonds" means those Bonds identified as Term Bonds in Exhibit A. "Treasurer" means the official who is the elected City treasurer, or the deputy or designee thereof, or which official may be the Finance Director. Section 1.02. UNPAID ASSESSMENTS. The Assessments are as shown on the list of unpaid Assessments on file with the Finance Director which list is hereby approved and which is incorporated herein by this reference and made a part hereof. For a particular description of the lots or parcels of land bearing the respective assessment numbers set forth in the list, reference is hereby made - 9 - to the assessment and to the diagram, and any amendments thereto, recorded in the office of the officer of the City who is the Superintendent of Streets of the City after confirmation thereof by the Council. To the extent that any bonds are not issued hereunder upon the security of a portion of the Assessments, this Council hereby expressly reserves jurisdiction to issue additional bonds upon the security of such Assessments at such time(s) and upon such conditions as may be expressly provided by this Council. Section 1.03. EQUAL SECURITY. In Consideration of the acceptance of the Bonds by the Owners thereof, this Resolution shall be deemed to be and shall constitute a contract between the City and the Owners from time to time of the Bonds; and the covenants and agreements herein set forth to be performed on behalf of the City shall be for the equal and proportionate benefit, security and protection of all Owners of the Bonds without preference, priority or distinction as to security or otherwise of any of the-Bonds over any of the others by reason of the number or date thereof or the time of Sale, execution or delivery thereof, or otherwise for any cause whatsoever, except as expressly provided therein or herein. i0 - ARTICLE II THE BONDS Section 2.01. BONDS AUTHORIZED. All acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of the Bonds have existed, happened and been performed in due time, form and manner as required by law, and the Council is now authorized pursuant to each and every requirement of law to issue the Bonds in the manner and form as provided in this Resolution. The Bonds in the Principal Amount are hereby authorized and will be issued as serial and/or term bonds as set forth in Exhibit A hereto. The Agent, at the Principal Office, is hereby designated as the Agent to perform the actions and duties required under this Resolution for the authentication, transfer, registration, and payment of the Bonds. Section 2.02. TERMS OF BONDS. (A) Denominations. The Bonds shall be issued as fully registered Bonds without coupons in the Bond Denomination or any integral multiple thereof, except that the first maturity may contain any odd amount. Bonds shall be lettered and numbered in a customary manner as determined by the Agent. (B) Date of Bonds~ The Bonds shall be dated the Bond Date. (C) CUSIP. "CUSIP" identification numbers shall be imprinted on the Bonds, but such numbers shall not constitute a part of the contract evidenced by the Bonds and any error or omission with respect thereto shall not constitute cause for refusal of any purchaser to accept delivery of and pay for the Bonds. Failure of ’ the City or the Agent to use such CUSIP numbers in any notice to Owners shall not constitute an event of default or any violation of the City’s contract with such Owners and shall not impair the effectiveness of any such notice. (D) Series and Maturities. The Bonds shall consist of the series and mature and become payable on September 2 of each year and shall bear interest at the rates per annum all as set forth in Exhibit B hereto and hereby made a part hereof. (E) Interest. The Bonds shall bear interest at the rates set forth above payable on the Interest Payment Dates in each year. Interest shall be calculated on the basis of a 360-day year composed of twelve 30-day months.Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication and registration thereof unless it is authenticated and registered (i) prior to an Interest Payment Date and after the close of business of the Record Date, in which event it shall bear interest from such Interest Payment Date, or (ii) prior to the close of business on the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from the Dated Date. (F) Method of Payment. Both the principal of and interest and premium (if any) on the Bonds shall be payable in lawful money of the United States of America. Interest on the Bonds (including !i - the final interest payment upon maturity or earlier redemption) is payable by check of the Agent mailed by first class mail to the registered Owner thereof at such registered Owner’s address as it appears on the registration books maintained by the Agent at the close of business on the Record Date preceding the Interest Payment Date, or by wire transfer made on such Interest Payment Date upon written instructions of any Owner o.f $1,000,000 or more in aggregate principal amount of Bonds delivered to the Agent. prior to the applicable Record Date. The principal of the Bonds and any premium on the Bonds are payable in lawful money of the United States of America upon surrender of the Bonds at the Principal Office of the Agent. All Bonds paid by the Agent pursuant this Section shall be canceled by the Agent. The Agent shall destroy the canceled Bonds and, upon request of the City, issue a certificate of destruction of such Bonds to the City. Section 2.03. REDEMPTION. (A) General.~ (i)Bond Law Redemption. Each Outstanding Bond, or any portion of the principal thereof, in the principal amount of $5,000 or any integral multiple thereof, may be redeemed and paid in advance of maturity on any Interest Payment Date in any year by giving at least 30 days written notice to the Owner thereof by registered or certified mail or by personal service and by paying the principal amount thereof together with the Redemption Premium thereon plus interest to the date of redemption, unless sooner surrendered, in which event said interest will be paid to the date of payment, all in the manner and as provided in the Bond Law. The provisions of Part Ii.i of the Bond Law are applicable to the advance payment of Assessments and to the calling of the Bonds. The Agent shall select Bonds for redemption in such a way that the ratio of Outstanding Bonds to issued Bonds shall be approximately the same in each annual series insofar as possible (i.e. on a pro-,rata basis among maturities of the Bonds). Within each annual maturity, the Agent shall select Bonds for retirement by lot. (ii)Mandatory Sinking Fund Redemption. The Term Bonds shall also be subject to mandatory redemption in part by lot, .from Sinking Fund Payments made by the City from the Bond Fund, at a redemption price equal to the principal amount thereof to be redeemed, without premium, in the aggregate respective principal amounts , all as set forth in the table in Exhibit A; provided, however, if some but not all of the Term Bonds of a given maturity have been redeemed pursuant to subsections (i) and (ii) above the total amount of all future Sinking Fund Payments relating to such maturity shall be reduced by the aggregate principal amount of Term Bonds of such maturity so redeemed, to be allocated among such Sinking Fund Payments on a pro rata basis in integral multiples of $5,000 as determined by the Fiscal Agent, notice of which determination shall be given by the Fiscal Agent to the City. 12 - (B) ~-No~ice-to Agent. In event- it is-Transmitting moneys for deposi~ in the Prepayment Account of the Redemption Fund, the City shal~ give the Agent: written: notice of ~the aggregate amount of Bonds expected to be redeemed_pdrsuant.’to rsubsection (A) not less than~forty five (45) days prlork to the ~applicable redemption date ~ ~ ~:~"~ ~¯~ , ~:,~: (C), Redemption Procedure by Agent. The Agent shall select Bonds for .retirement in such a way that~ the ratio of Outstanding Bonds to issued Bonds shall be approximately_ the same in each annual series- insofar as possible.- Within each annual series the Agent shall.~select Bonds for retirement by lot. The Agent shall cause written _notice of any redemption to be given by registered or certified~ mail or by personal service to the respective registered Owners of any Bonds .designated for -redemption, at their addresses appearing on the Bond Register in the Principal Office of the Agent at least 30 days before the applicable Interest Payment Date. -The Agent shall also cause notice of redemption to be sent to the Securities Depositories and to one or more of the Information Services at least one day earlier than the giving of notice to the Owners as aforesaid; provided, however,~ such mailing ~o the Securities Depositories and Ihformation Services shall not be a condition precedent to such redemption. Failure to so mail any notice of redemption, or of any person or entity to receive any such notice, or anydefect in any notice of redemption, shall not affect the validity of the proceeding for the redemption of such Bonds.. Such notice shall state the redemption date and the redemption price and, if less thin all of the then Outstanding Bonds are to be called for redemption, shall designate the CUSIP numbers (if applicable) and Bond numbers of the Bonds to be redeemed by giving the individual CUSIP number and Bond number of each Bond to be redeemed or. shall state that all Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the Bonds of one or more maturities have been called for redemption, shall state as to -any Bond called in part the principal amount thereof .to be redeemed, and shall require that such Bonds be then surrendered at the Principal Office of the Agent for redemption at the said redemption price, and shall state that further interest on such Bonds, or the portion thereof to be redeemed, will not accrue from and after the redemption date. Upon the payment of the redemption price of Bonds being redeemed, each check or other transfer of funds issued for such purpose shall, to the extent practicable, bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. Upon surrender of Bonds redeemed in part only, the City shall execute and the Agent shall authenticateand .deliver to the registered Owner, at the expense of the City, a new Bond or Bonds, of the same series and maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond or Bonds. (D) Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal -13 - of, and interest and any premium on, the Bonds so called for redemption shall have been deposited in the Redemption Fund on. the date fixed for redemption, such Bonds so called shall cease to be entitled to any benefit under this Resolution other than the right to receive payment of the redemption price, and no interest shall accrue thereon on or after the redemption date specified in such notice. All Bonds redeemed by the Agent pursuant to this Section 2.03 shall be canceled by the Agent. The Agent shall destroy the canceled Bonds and, upon request of the Authority, issue a certificate of destruction of such Bonds to the City. Section 2.04. FORM OF BONDS. The Bonds, the form of Agent’s certificate of authentication, and the form of assignment to appear thereon, shall be substantially in the respective form set forth in Exhibit B attached hereto and by this reference incorporated herein, with necessary or appropriate variations, as permitted or required. Section 2.05. EXECUTION AND AUTHENTICATION OF BONDS. The Bonds shall be executed in the name and on behalf of the City with the manual or facsimile signatures of the Treasurer and attested by the manual or facsimile signature of the Clerk. The Bonds shall then be delivered to the Agent for authentication. In case any officer who shall have signed any of the Bonds shall cease to be such officer before the Bonds so signed shall have been authenticated or delivered by the Agent or issued by the City, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the City as though the individual who signed the same had continued to be such officer of the City. Also, any Bond may be signed on behalf of the City by any individual who on the actual date of the execution of such Bond shall be the proper officer although on the nominal date of such Bond such individual shall not have been such officer. Only such of the Bonds as shall bear thereon a certificate of authentication in substantially the form set forth in Exhibit C, manually executed by the Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Resolution, and such certificate of the Agent shall be conclusive evidence that the Bonds so authenticated have been duly authenticated and delivered hereunder and are entitled to the benefits of this Resolution. The Agent’s certificate of authentication on any Bonds shall be deemed to be executed by it if signed by the Agent or by an authorized officer or signatory of the Agent, but. it shall not be necessary that the same officer or signatory sign the certificate of authentication on all of the Bonds issued hereunder. Section 2.06. TRANSFER OR EXCHANGE OF BONDS. Any Bond may, in accordance with its terms, be transferred upon the Bond Register by the registered Owner, in person or by such Owner’s duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer in a form approved by the Agent, duly executed. Whenever any Bond shall be surrendered for transfer, the Agent shall thereupon authenticate and deliver to the transferee a new Bond or Bonds of like tenor, maturity and aggregate principal amount. Bonds may be 14 - exchanged at the Principal Office of the Agent, for Bonds of the~ same tenor and maturity and of other authorized denominations. No Bonds the notice of redemption of which has been given under Section 2.03 shall be subject to transfer or exchange pursuant to this Section. Neither the City nor the Agent shall be required to make such exchange or registration or transfer of Bonds on or after the Record Date or after a Bond has been selected for redemption. For any transfer or exchange under this Section, the City and the Agent may require the payment of a reasonable fee to cover the costs and expenses of the City and the Agent. Section 2.07. BOND REGISTER. The Agent will keep or cause to be kept at its Principal Office a sufficient Bond Register for the registration and transfer of the Bonds, which shall at all times during regular business hours be open to inspection by the City; and, upon presentation for such purpose, the Agent shall,under such reasonable regulations as it may prescribe,register or transfer or cause to be registered or transferred,on the Bond Register, Bonds as provided in this Resolution. Section 2.08. TEMPORARY BONDS. The Bonds may be issued initially in temporary form exchangeable for definitive Bonds when ready for delivery.The temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Council and may contain such reference to any of the provisions of this Resolution as may be appropriate.Every temporary Bond shall be executed by the officers designated and in the manner provided in Section 2.05 hereof and be registered and authenticated by the Agent upon the same conditions and in substantially the same manner as the definitive Bonds.If the City issues temporary Bonds, it will execute and furnish definitive Bonds without delay, and thereupon the temporary Bonds may be surrendered, for cancellation, in exchange therefor at the Principal Office of the Agent, and the Agent shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be .entitled to ’the same benefits under this Resolution as definitive ~on£s authenticated and delivered hereunder. Section 2.09. BONDS MUTILATED, LOST,DESTROYED OR STOLEN. If any Bond shall become mutilated, the Agent shall thereupon authenticate and deliver, a new (Bond of like maturity and principal amount in exchange and substitution for the Bond so mutilated,but only upon surrender to the Agent of the Bond so mutilated.Every mutilate d, Bond so surrendered .to the Agent shall be canceled by it and delivered to, or upon the order of, the City.If any Bond issued hereunder shall be lost, destroyed or stolen,evidence of such loss, destruction or theft may be submitted to the City and the Agent and, if such evidence be satisfactory to them and indemnity satisfactory to them shall be given, the Agent shall thereupon authenticate and deliver, a new Bond of like maturity and principal amount in lieu of and in substitution for the Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall have been called for redemption, instead of issuing a substitute Bond the Agent may pay the same without surrender thereof upon receipt of indemnity satisfactory to the Agent). The City and the Agent may require 15 - payment of a reasonable fee for each new Bond issued under this Section and of the expenses which may be incurred by the City and the Agent. Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original contractual obligation on the part of the City whether or not the Bond alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be equally and proportionately entitled ’to the benefits of this Resolution with al! other Bonds secured by .this Resolution and any Supplemental Resolution. Section 2.10. BOOK-ENTRY ONLY SYSTEM.DTC shall act as the initial Depository for the Bonds. One Bond for each maturity of the Bonds shall be initially executed,authenticated, and delivered as set forth herein with a separate fully registered certificate (in print or typewritten form). Upon initial execution, authentication, and delivery, the ownership of the Bonds shall be registered in the Bond Register-kept by the Agent for the Bonds in the name of Cede & Co., as nominee of DTC or such nominee as DTC shall appoint ’in writing. The Authorized Officers of the City and the Agent are hereby authorized to take any and all actions as may be necessary and not inconsistent with this Resolution to qualify the Bonds for theDepository’s book-entry system, including the execution of theDepository’s required representation letter. With respect to Bonds registered in ’the Bond Register in thename of Cede & Co., as nominee of DTC, neither the City nor the Agent shall have any responsibility or obligation to any broker- dealer, bank, or other financial institution for which DTC holds Bonds as Depository from time to time (the "DTC Participants") or to any person for which a DTC Participant acquires an interest in the Bonds (the "Beneficial Owners"). Without limiting the immediately preceding sentence, neither the City nor the Agent shall have any responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co., or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant, any Beneficial Owner, or any other person, other than DTC, of any notice with respect to the Bonds, including any Bonds to be redeemed in the event the City elect to redeem the Bonds, in part, (iii) the selection by the Depository of the beneficial interests in the Bonds to be redeemed in the event the City elects to redeem the Bonds in part, (iv) the payments to any DTC Participant, any Beneficial Owner, or any person, other than DTC, of any amount with respect to the principal of or interest on the Bonds, or (v) any consent given or other action taken by the Depository as Owner of the Bonds. Except as set forth above, the City and the Agent may treat as and deem DTC to be the absolute Owner of each Bond, for which DTC is acting as Depository for the purpose of payment of the principal or and interest on such Bonds, for the purpose of giving notices of prepayment and other matters with respect to such Bonds, for the purpose of registering transfers with respect to such Bonds, and for all purposes whatsoever. The Agent on behalf of the City shall pay all principal of and interest on the Bonds only to or upon the order of the Owners as shown on the Bond 16 - Register, and all such payments shall be valid and effective to fully satisfy and discharge all obligations with respect to the principal of and interest on the Bonds to the extent of the sums or sums so paid. ~ No person other than an Owner, as shown on the Bond Register, shall receive a physical Bond. Upon delivery by DTC to the City and the Agent of written notice to the effect the DTC has- determined to substitute a new nominee in place of Cede & Co., and subject to the transfer provisions in Section 2.06 hereof, references to ~Cede & Co." in this Section 2.15 shall refer to such new nominee of DTC. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice to the City and to the Agent during any time that the Bonds are- Outstanding, and discharging its responsibilities with respect thereto under applicable law. The City may terminate the services of DTC with respect to the Bonds if it determines that DTC is unable to discharge its responsibilities with respect to the Bonds or that continuation of the system of book-entry transfer through DTC is not in the best interest of the Beneficial Owners, and the City shall mail notice of such termination to the Agent. Upon termination of the services of DTC as provided in the previous paragraph, and if no substitute Depository willing to undertake the functions hereunder can be found which is willing and above to undertake such functions upon reasonable or customary terms, or if the City determines that it is in the best interest if the Beneficial Owners of the Bonds that they be able to obtain certified Bonds, the Bonds shall no longer be restricted to being registered in the Bond Register of the Agent in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name or names the Owners shall designate at that time,in accordance with Section 2.06. To the extent that the Bond Owners as designated as the transferee by the Owners, in accordance with Section 2.10, the Bonds will be delivered to such Beneficial Owners. 17 - ARTICLE III ISSUANCE OF BONDS’ Section 3.01. ISSUANCE AND SALE OF BONDS. After the adoption of this Resolution, the Bonds shall be sold as follows: (A) Sale. The Bonds shall be offered for sale pursuant to the terms contained in the Official Notices of Sale and sold to the highest, best, responsible bidder according to the provisions of the Official Notice of Sale, on the date and at the hour specified in the Official Notice of Sale and the offices of Stone & Youngberg LLC, San Francisco, California, is hereby fixed as the place at which bids will be received for the purchase of the Bonds as described in and subject to the terms and conditions of the Official Notice of Sale. Provisions shall be made for cancellation postponement or rescheduling of the sale in the Official Notice of Sale. (B) Notice.The Authorized Officer is hereby authorized and directed to cause, notice of sale of the Bonds by publication of a notice substantially in the form contained in Exhibit C hereto: (i) in The Palo Alto Weekly, a newspaper of general circulation printed and published within the City, once a week for two successive weeks, with the first publication at least fourteen (14) days before the date of sale as aforesaid; and (ii) in the Bond Buyer, a financial newspaper of statewide circulation, one time, which publication shall occur at least fifteen (15) days before such date of sale. (C) Award. Not later than the hour of 5:00o’clock p.m. (Pacific Daylight Time) on the day of receipt of bids, . the Finance Director (or any other Authorized Officer) is hereby authorized and directed to accept, on behalf of the City, the best responsive bid(s) for the Bonds, provided that such bid shall provide: (i) a Principal Amount of not to exceed $9,360,000; (ii) a true interest cost of not to exceed eight percent (8%) per annum and the price paid for the Bonds shall not be less than 97% par value thereof, or to reject all bids. If such true interest cost and price are acceptable, the Finance Director is hereby authorized and directed to complete and execute- Certificate of Award, substantially in the form contained in Exhibit C hereto and to provide completed and executed copies thereof to the successful bidder, the Clerk and the City. Section 3.02. PREPARATION AND DELIVERY OF BONDS. The Finance Director shall be, and is hereby, directed to cause the Bonds to be prepared, executed, registered and to be delivered to the Original Purchaser upon the City’s receipt of the purchase price therefor and upon the Original Purchaser’s performance of the conditions imposed by the City. The Agent is hereby authorized to deliver the Bonds to the Original Purchaser, upon receipt of a written request of the City indicating compliance with the terms of the sale of the Bonds to the satisfaction of the City. Section 3.03. OFFICIAL STATEMENT. The Council hereby approves the Official Statement describing the financing for the Bonds, in substantially the form on file with the City Clerk together with 18 - any changes therein or additions thereto deemed advisable by the Authorized Officer. The Council approves and authorizes the distribution by the Original Purchaser (as Underwriter) of theOfficial Statement to prospective purchasers of the Bonds,and authorizes and directs the Authorized Officer on behalf of theCity to deem ~final," pursuant to Rule 15c2-12 under theSecurities Exchange Act of 1934 (the ~Rule"),the Official Statement prior to its distribution to prospective purchasers of the Bonds (the Official Statement,as so deemed final, being referred to as the "Preliminary Official Statement"). The execution of the final Official Statement, which shall include such changes and additions to the Preliminary Official Statement as may be permitted by the Rule and deemed advisable by the Authorized Officer and such information permitted to be excluded from the Preliminary Official Statement pursuant to the Rule (the "Official Statement"), shall be conclusive evidence of the approval of the Official Statement by the City. Section 3.04. VALIDITY OF BONDS. The validity of the authorization and issuance of the Bonds shall not be dependent upon the completion of the Project or upon the performance by any person or such person’s obligation with respect to the Project. Section 3.05. PLEDGE OF ASSESSMENTS AND FUNDS. The Bonds shall be secured by a first pledge (which pledge shall be effected in the manner and to the extent herein provided) of all of the Assessments and all moneys deposited in the Redemption Fund (and the Capitalized Interest Account and the Prepayment Account therein) and the Reserve Fund. The Assessments and all moneys deposited into said funds (except as otherwise provided herein) are hereby dedicated to the payment of the principal of (including any Sinking Fund Payments), and interest and any premium on, the Bonds as provided herein and in the Bond Law until all of the Bonds have been paid and retired or until moneys or Federal Securities have been set aside irrevocably for that purpose in under Section 8.03 hereof. Section 3.06. LIMITED OBLIGATIONS. All obligations of theCity under this Resolution and the Bonds shall not be general obligations of the City, but shall be limited obligations,payablesolely from the Assessments and the funds pledged therefore hereunder. Neither the faith and credit of the City nor of the State of California or any political subdivision thereof ispledged to the payment of the Bonds.The Bonds are ~LimitedObligation Improvement Bonds" under the Bond Law and are payable solely from and secured solely by the Assessments and as provided in Section 3.05 herein. Notwithstanding any other provision of this Resolution, the City is not obligated to advance available surplus funds from the City treasury to cure any deficiency in the Redemption Fund; provided, however, the City is not prevented, in its sole discretion, from so advancing funds. Section 3.07. NO ACCELERATION. The principal of the Bonds shall not be subject to acceleration hereunder. Nothing in this Section 3.05 shall in any way prohibit the prepayment or redemption of Bonds under Section 2.03 hereof, or the defeasance 19 - of the Bonds and discharge of this Resolution under Section 8.03 hereof. Section 3.08. REFUNDING OF BONDS. The Bonds may be refunded by the City pursuant to Divisions II or 11.5 of the California Streets and Highways Code upon the conditions as set forth in appropriate proceedings therefor. This Section shall not apply to or in any manner limit advancement of the maturity of any of the Bonds as provided in Parts 8, 9, ii, or ii.I of the Bond Law, nor shall this Section 3.06 apply to or in any manner, limit the redemption and payment of any Bond pursuant to subsequent proceedings providing fo~ the payment of amounts to eliminate previously imposed fixed lien assessments, including the Assessments. Section 3.09. AUTHORITIES. The Authorized Officers are hereby authorized and directed to cause the various documents herein mentioned, including the Escrow Agreement, to be completed and executed with such changes, modifications, deletions or additions as may be approval by the Authorized Officer in consultation with the City’s staff and consultants with respect to these reassessment proceedings, such approval to be conclusively evidenced by the execution of the such documents by the Authorized Officer. The foregoing authorization is expressly conditioned upon the satisfaction of the conditions set forth in Section 3.02 (C) hereof. The Clerk is authorized to complete and to approve changes in any provisions of this Resolution and Exhibit A hereto in order to accomplish the delivery of any of the Bonds on schedule; such changes may be accomplished by attachment of a certificate, executed by the Clerk, to this Resolution on file in the office of the Clerk. Section 3.10. CONTINUING DISCLOSURE DOCUMENT(S). The Council hereby approves the forms of the City’s Continuing Disclosure Certificate and the Owner’s Continuing Disclosure Certificate with respect to the Bonds in substantially the forms thereof attached to the Preliminary Official Statement. The Authorized Officer is hereby authorized and directed to complete and execute the Certificate on behalf of the City with such changes, additions, deletions as may be approved by the Authorized Officer in consultation with the City’s bond counsel. Section 3.11. ACTIONS APPROVED. All actions heretofore taken by the officers and agents of the City with respect to the establishment of the Assessment District and the sale and issuance of the Bonds are hereby approved, confirmed and ratified, and the Authorized Officers of the City are hereby authorized and directed to do any and all things and take any and all actions and execute any and all certificates, agreements, contracts, and other documents, which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the Bonds in accordance with this resolution and any certificate, agreement, contract, and other document described in the documents herein approved. The Authorized Officers are further authorized and directed to complete Exhibit A hereto and make such changes, amendments and corrections to this resolution 20 - ~as~may~ ~e~equired ~o~-provide for the timely ~issua~n’ce~ S~~ e an delivery of the Bonds-and to certify to~ such actions, as required. ~ . Section 3.12. PARITY~ BONDS. In addition~ to the Bonds, theCity may issue Parity Bonds in such principal amount as shall -be determined by the City~ Under a Supplemental Agreement entered into by the City and the~Fiscal Agent. The City may issue such Parity Bonds subject to the following specific conditions~ precedent:~"~ -(A) Compliance The City shall ~e in compliance with allcovenants set forth in ’this Resolutlon and all Supplemental Resolutions; (B) Same Dates. The Supplemental Resolution providing for the issuance of such Parity Bonds shall provide that interest thereon shall be payable on’ the Interest Payment Dates, and principal thereof shall be payable on the ~same date in any year in which principal of the Bonds is payable; ’(C) Separate Funds. The Supplemental Resolution providing for the issuance of such Parity, Bonds may provide for the establishment of separate funds and accounts; ~0 (D) Value. The fair market value of all parcels in the Assessment District subject to the Assessments, including then existing improvements and any facilities to be constructed or acquired with the proceeds of the proposed series of Parity Bonds, as determined by an appraisal performed on a basis consistent with the appraisal or appraisals prepared in connection .with the. issuance of any of the Bonds theretofore issued and outstanding, or, in the alternative, the assessed value of al~ such parcels and improvements thereon as shown on the then current County tax roll, is at least 4.00 times the sum of (i) the aggregate principal amount of all Bonds then outstanding plus (ii) the aggregate principal amount of the series of Parity Bonds proposed to be issued, plus (iii) the aggregate principal amount of any Assessment District bonds then outstanding and payable from assessments to be levied on parcels of land within the Assessment District, plus (iv) a portion of the aggregate principal amount of all other bonds then outstanding and payable at least partially from assessments and/or special taxes to be levied on~ parcels of land within the Assessment District (the "0ther Bonds") equal to the aggregate principal amount of the Other Assessment District Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for the Other Bonds on parcels of land within the Assessment District, and the denominator of which is the total amount of assessments and/or special taxes levied for the Other Bonds on all parcels of land against which the assessments and/or special taxes are levied to pay Other Bonds (such fraction to be determined based upon the assessments ~hich could be levied the year in which maximum annual debt service on the Other Bonds occurs), based upon information from the most recent available fiscal year. (E) Certificates. The Finance Director shall; provide an Officer’s Certificate certifying that the conditions precedent to - 21 - the issuance of such Parity Bonds set forth in subsections (A), (B), (C), and (DE) of this Section 3.12 have been satisfied. 22 - ARTICLE IV FUNDS AND ACCOUNTS Section 4.01. APPLICATION OF PROCEEDS- OF SALE OF BONDS. Upon receipt of the proceeds of sale of the Bonds on the Closing Date, the proceeds thereof shall be forthwith set aside, pa±d over and deposited by the Finance Director, aS set forth in appropriate Officer’s Certlficate(s), Article IV hereof and Exhibit A hereto. S~ction 4.02. COSTS OF ISSUANCE FUND. (A) Establishment of Costs of Issuance Fund. The Costs of Issuance Fund shall be established, held and receive deposits, all as provided in Exhibit A. The moneys in the Costs of Issuance Fund shall be held by the Finance Director for the benefit of the City and shall be disbursed as provided in subsection (B) of this Section 4.02 for the payment or reimbursement of the Costs of Issuance. (B) Disbursement. Amounts in the Costs of Issuance Fund shall be disbursed from time to time to pay .Costs of Issuance as set forth in a requisition therefor containing respective amounts to be paid to the designated payees and delivered to the Finance Director concurrently with the delivery of the Bonds. The Finance Director shall pay all Costs of Issuance upon receipt of an invoice from any such payee which requests payment in an amount which is less than or equal to the amount set forth with respect to such payee in such requisition, or upon receipt of an Officer’s Certificate requesting payment of a Cost of Issuance not listed on the initial requisition delivered to the Finance Director on the Closing Date. (C) Investment. Moneys in the Costs of Issuance Fund shall be invested and deposited under Section 6.01 hereof. Pending its closing under Subsection (B) above, Interest earnings and profits resulting from such investment shall be retained by the Finance Director in the Costs of Issuance Fund to be used for the purposes of such fund, pending the closing of such fund. (D) Closing of Fund. The Finance Director shall maintain the Costs of Issuahce Fund for a period of 90 days from the Closing Date or until the last known Costs of Issuance have been paid, whichever is earlier, and then shall transfer any moneys remaining therein, including any investment earnings thereon, to the Administrative Expense Account of the Improvement Fund and the Costs of Issuance Fund shall be closed. Section 4.03. REDEMPTION FUND. (A) Establishment of Redemption Fund and Account. The Redemption Fund is hereby established as a separate fund to be held by the Finance Director to the credit of which deposits shall be made as required by Section 4.01 and any other amounts required to be deposited therein by this Resolution or the Bond Law. Moneys in the Redemption Fund shall be held by the Finance Director for the benefit of the City and the Bond Owners, shall be - 23 - disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided below. Within the Redemption Fund, the Finance Director shall establish and administer accounts as follows: (i) The Capitalized Interest Account, into which a deposit shall be made under Section 4.01 and from which, disbursements shall be made to pay all or a portion of the interest on the Bonds which is due on the Interest Payment Date(s) set forth in Exhibit A. Upon the final payment of interest as herein provided,any moneys remaining in the Capitalized Interest Account shall be transferred to the Redemption Fund to pay Debt Service and the Capitalized Interest Account shall be closed; and (ii) The Prepayment Account, into which shall be placed any amounts representing the full or partial prepayments of Assessments that occur after the issuance of the Bonds. The Prepayment Account shall be administered in accordance with section 8767 of the Bond Law and shall remain open so long as the Redemption Fund remains open. (B) Disbursements. On or before each Interest Payment Date, the Finance Director shall withdraw from the accounts in the Redemption Fund and forward to the Agent for payment to the Owners of the Bonds, amounts sufficient to pay the principal of, and interest and any premium, then due and payable on the Bonds. Five (5) Business Days prior to each Interest Payment Date, the Finance Director shall determine if the amounts then on deposit in the Redemption Fund are sufficient to pay the Debt Service due on the Bonds on such Interest Payment date. In the event that amounts in the Redemption Fund are insufficient for such purpose, the Finance Director shall cause appropriate withdrawals to be made from the Reserve Fund, to the extent of any funds therein, the amount of such insufficiency, and shall transfer any amounts so withdrawn to the Redemption Fund. Amounts so withdrawn from such reserve fund and deposited in the Redemption Fund shall be .applied to the payment of the Bonds. If, after the foregoing transfers, there are insufficient funds in the Redemption Fund to make the payments provided for in the first sentence of the first paragraph of this Section 4.03(B), the Finance Director shall apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds, and then to payment of principal due on the Bonds by reason of Bonds called for redemption pursuant to Section 2.03 hereof. (C) Investment. Moneys in the Redemption Fund and the accounts therein shall be invested and ~deposited in accordance with Section 6.01. Interest earnings ~and profits resulting from such investment and deposit shall be retained in the Redemption Fund and the accounts therein. (D) Closing of Fund. The Redemption Fund (and the Prepayment Account therein) shall be closed when all of the principal of and interest on the Bonds has been paid. Section 4.04. RESERVE FUND. 24 - (A) Establishment of Reserve Fund. The Reserve Fund is hereby established as a separate fund to be held by the Finance Director to the credit of which a deposit shall be made as required by Section 4.01, and deposits shall be made as provided in the Bond Law. Moneys in the Reserve Fund shall be held by the Finance Director for the benefit of the City and the Bond Owners as a reserve for the payment of principal of, and interest and any premium on, the Bonds. The City shall cause the Reserve Fund to be administered in accordance with Part 16 of the- Bond Law; provided that proceeds from redemption or sale of properties with respect to which payment of delinquent Assessments and interest thereon was made from the Reserve Fund, shall be credited to the Reserve Fund. (B) Use of Fund. Except as otherwise provided in this Section 4.04 all amounts deposited in the Reserve. Fund shall be used and withdrawn by the Finance Director solely for the purpose of making transfers to the Redemption Fund in the event of any deficiency at any time in the Redemption Fund of the amount then required for payment of the principal of, and interest and any premium on, the Bonds or, in accordance with the provisions of this Section 4.04,for the purpose of redeeming Bonds from the Redemption Fund. (C) Transfer Due to Deficiency in Redemption Fund. Transfers shall be made from the Reserve Fund to the’ Redemption Fund in the event of a deficiency in the Redemption Fund, in accordance with Section 4.04(B) hereof. (D) Payment of Assessments. Whenever, after the issuance of the Bonds, a Reassessment is pre-paid, in whole or in part, as providedin the Bond Law, the Finance Director shall transfer from the Reserve Fund to the Redemption Fund an amount specified in such direction equal to the product of the ratio of the original amount of the Assessment securing any Bonds so paid to the original amount of all Assessments securing any Bonds, times the initial Reserve Requirement. (E) Transfer of Excess of Reserve Requirement. Whenever, on any Interest Payment Date, or on any other date as determined by the Finance Director, the amount in the Reserve Fund exceeds the then applicable Reserve Requirement, the Finance Director shall, except as otherwise provided in Section 5.09 hereof for purposes of rebate and as evidenced by an appropriate Officer’s Certificate, transfer on or before such Interest Payment Date an amount equal to the excess from the Reserve Fund to the Redemption Fund to be used in accordance with Part 16 of the Bond Law. (F) Transfer When Balance Exceeds Outstanding Bonds. Whenever the balance in the Reserve Fund is sufficient to retire all the Outstanding Bonds, whether by advance retirement or otherwise, collection of the principal and interest on the Assessments shall be discontinued and the Reserve Fund liquidated by the Finance Director in retirement of the Outstanding Bonds, as directed by an Officer’s Certificate. In the event that the balance in the Reserve Fund at the time of liquidation exceeds the amount required to retire all of the Outstanding Bonds, the excess - 25 - shall be transferred to the City to be used in accordance with the Act and the Bond Law. (G) Investment.Moneys in the Reserve Fund shall be invested and deposited in accordance with Section 6.01.Interest earnings and profits resulting from said investment shall be retained in the Reserve Fund subject to the provisions of Section 4.04(E) hereof. Section 4.05. ESCROW FUND. On the Closing Date, the Escrow Fund shall be established by the Finance Director with the Escrow Holder under the Escrow Agreement with deposit(s) provided under Section 4.01. The purpose of the establishment of the Escrow Fund shall be to assure the timely advance retirement of the Prior Bonds, using a portion of the proceeds of the Bonds and other funds held by the City with respect to the Prior Bonds and investment earnings thereon, all as to be specified by appropriate Certificates of the .City. _. Section 4.06. IMPROVEMENT FUND. (A) Establishment of Improvement Fund. The Improvement Fund is hereby established as a separate fund to be held by the Finance Director to the credit of which deposits shall be made as required by Section 4.01. Moneys in the Improvement Fund shall be held by the Finance Director for the benefit of the City, and shall be disbursed, except as otherwise provided in subsection (D) of this Section, for the payment or reimbursement of costs of the Project. (B) Disbursement. Disbursements from the Improvement Fund shall be made by the Finance Director upon receipt of an Officer’s Certificate, which shall: (i) set forth the amount required to be disbursed, the purpose for which the disbursement is to be made, the person to which the disbursement is to be paid and state that such disbursement is for a Project cost; and (ii) certify that no portion of the amount then being requested to be disbursed was set forth in any Officers Certificate previously filed requesting disbursement; (C)Investment. Moneys in the Improvement Fund shall be invested and deposited under Section 6.01 hereof.Interest earnings and profits from such investment and deposit shall be retained in the Improvement Fund to be used for the purposes of such fund. (D) Closing of Fund. Upon the filing of "ai~ Officer’s Certificate stating that the Project has been completed and that all costs of the Project have been paid or are not required to be paid from the Improvement Fund, the Finance Director shall transfer the amount, if any, remaining in the Improvement Fund as directed in the Officer’s Certificate which dir@ctions shall be pursuan~ to the Resolution of Intention and to the applicable provisions of the Act and the Improvement Fund shall be closed. 26 - ARTICLE V COVENANTS Section 5.01. COLLECTION OF ASSESSMENTS. The City shall comply with all requirements of the Act, the Bond Law and this Resolution to assure the timely collection of the Assessments, including, without limitation, the enforcement of delinquent Assessments. To that end, the following shall apply: (A) Tax Roll Collection. The Assessments as set forth on thelist thereof on file with the Finance Director together with the interest thereto, shall be payable in annual series corresponding in number and proportionate amount to the number of installments and principal amounts of the Bonds maturing or becoming subject to mandatory prior redemption under Section 2.03 hereof. An_ annual proportion of each Reassessment shall be payable in each Fiscal Year preceding the date of maturity or mandatory prior redemption date of each of the Bonds issued sufficient to pay the Bonds when due and such proportion of each Assessment coming due in any year, together with the annual interest thereon, shall be payable in the same manner and at the same time and in the same installments, as the general taxes on real property are payable, and become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interests after delinquency as do the general taxes on real property. All sums received from the collection of the Assessments and of the interest and penalties thereon shall be placed in the Redemption Fund. (B) Auditor Record. The Finance Director shall, before the final date on which the Auditor will accept the transmission of the Assessments for the parcels within the Assessment District for inclusion on the next tax roll, prepare or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the installments of the Assessments on the next secured tax roll. The Finance Director is hereby authorized to employ consultants to assist in computing the installments of the Assessments hereunder and in reconciling Assessments billed to amounts received as provided in the subsection (C) of this Section 5.01. (C) Administrative Costs. In addition to any amounts authorized pursuant to section 8682 of the Bond Law to be included with the annual amounts of installments as aforesaid, the City, pursuant to section 8682.1 of the Bond Law may cause to be entered on the assessment roll on which taxes will next become due, opposite each lot or parcel of land within the Reassessment District in the manner set forth in said section 8682, each lot’s pro rata share of the estimated annual expenses of the City in connection with the administrative duties thereof for the Bonds, including, but not limited to, the costs of registration, authentication, transfer and compliance with the provisions of Article V hereof. Delinquent Assessments shall be subject to foreclosure pursuant to Section 5.02 hereof. 27 - Section 5.02. FORECLOSURE. The City hereby covenants with and for the benefit of the Owners of the Bonds that it will order, and cause to be commenced, and thereafter diligently prosecute an action in the superior court to foreclose the lien of any Reassessment or installment thereof which has been billed, but has not been paid, pursuant to and as provided in sections 8830 and 8835, inclusive of the Bond Law and the conditions specified in this Section 5.02 The Finance Director shall notify the City Attorney of any such delinquency of which the Finance Director is aware, and the City Attorney shall commence, or cause to be commenced, such foreclosure proceedings, Under this Section, "commence" means and includes any actions preparatory to filing of any complaint. The City Attorney is hereby authorized to employ counsel to conduct any such foreclosure proceedings. The following conditions shall apply to the foreclosure proceedings which shall be commenced within 60 days of any of the following determinations which shall be made by the Finance Director not later than October 1 of each Fiscal Year: (A) If the Finance Director determines that there is a delinquency of Assessment of $5,000 or more for a prior Fiscal Year or Years for any single parcel of land in the Assessment District. (B) If the Finance Director determines that the total amount of delinquent Assessments for the prior Fiscal Year for the entire Assessment District, less the total delinquencies under subsection (A) above, exceeds three percent (3%) of the total Assessments due and payable in the prior Fiscal Year, foreclosure shall be commenced against each parcel of land in the Assessment District with a delinquency of $2,500 or more for the prior Fiscal Year or Years. (C) If the Finance Director determines that the total amount of delinquent Reassessment for the prior Fiscal Year for the entire Assessment District, less the total delinquencies under subsections (A) and (B) above, exceeds five percent (5%) of the total Assessments due and payable for the prior Fiscal Year, foreclosure shall be commenced against each parcel of land within the Assessment District with any amount of delinquency for the prior Fiscal Year or Years. Provided, however, that nothing herein shall prevent the Finance Director or the City Attorney from causing the commencement of foreclosure proceedings before the occurrence of any of the foregoing. Section 5.03. PUNCTUAL PAYMENT; COMPLIANCE WITH DOCUMENTS. The City shall punctually pay or cause to be paid the interest and principal to become due with [espect to all of the Bonds in strict conformity with the terms of the Bonds and of this Resolution, and will faithfully observe and perform all of the conditions, covenants and requirements of this Resolution and al! Supplemental Resolutions. Section 5.04. NO PRIORITY FOR ADDITIONAL OBLIGATIONS. The City covenants that no additional bonds or other obligations shall be issued or incurred having any priority over the Bonds in -28 - payment of principal or interest out of the Assessments. Nothing in this Resolution shall prohibit the City from issuing bonds or other obligations on a parity with or subordinate to the Bonds and secured by and payable from the Assessments upon such terms as the City may determine. Section 5.05. FURTHER ASSURANCES. The City will adopt, make, execute and deliver any and all such further resolutions, instru~nents and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Resolution, and for the better assuring and confirming unto the Owners of the Bonds the rights and benefits provided in this Resolution. Section 5.06. PRIVATE ACTIVITY BOND LIMITATION. The City shall assure that the proceeds of the Bonds are not so used as to cause the Bonds to satisfy the private business tests of section 141(b) of the Tax Code or the private loan financing test of section 141(c) of the Tax Code. Section 5.07. 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 any of the Bonds to be "federally guaranteed" within the meaning of section 149(b) of the Tax Code. Section 5.08. NO ARBITRAGE. The city shall not take, or permit or suffer to be taken by the Finance Director or otherwise, any action with respect to the proceeds of the Bonds which,if such action had been reasonably expected to have been taken,or had been deliberately and intentionally taken, on the date of issuance of the Bonds would have caused the Bonds to be "arbitrage bonds" within the meaning of section 148 of the Tax Code. Section 5.09. REBATE REQUIREMENT. 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 the Bonds. Earnings on any reserve fund established under this Resolution shall be used for rebate purposes before any application thereof as credits to the Redemption Fund under Section 4.03(E) . Section 5.10. YIELD OF THE BONDS. In determining the yield of the Bonds to comply with Sections 5.08 and 5.09 hereof, the City will take into account redemption (including premium, if any) in advance of maturity based on the reasonable expectations of the City, as of the Closing Date, regarding prepayments of Assessments and use of prepayments for redemption of the Bonds, without regard to whether or not prepayments are received or Bonds redeemed. Section 5.11. AMENDMENT. Without the consent of the Owners of the Bonds, the City may amend this Resolution to add, modify or delete provisions if necessary or desirable to assure compliance with Section 148(f) of the Tax Code, or as otherwise required, to assure the exemption from federal income taxation of interest on the Bonds. 29 - Section 5.12. MAINTENANCE OF TAX-EXEMPTION. The City shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the date of issuance of the Bonds. Section 5.13. CONTINUING DISCLOSURE. The City hereby covenants and agrees that it will comply with and carry out all of the provisions of any continuing disclosure relating to the Bonds. Notwithstanding any other provision of this Resolution, failure of the City to comply with any continuing disclosure shall not be considered an event of default. 30 - on~ ~whichi.,~such? moneys~,-~ar~e ~;required to;be paid ~out. hereunder. Obligations purchased as. an ,investment ~of moneys~in .any fund shall .~be deemed to~.be ,.part-of,~ such-fund or: account, s~bject, however,,...to the requirements of~ this’..Resolution for- transfer of interest earnings and’ profits.~resulting" from investment of amounts in,funds and.accounts;.~’ ~ ~.~ .~? /~,,~ ~., ,~ ~ -..~ ~ -, ~,~ p~inCipal~ ~or- agent in, ~.the’ acquisition ~. or’, disposition, of any investment.~, .The’ Finance Director shall incur no liability for losses’arising from any investments made pursuant to this Section; .... (C) ~Commingling. Subject i~’ all respects to the provisions of,Secti0n 5.09,, investments in any and all funds and accounts may at the discretion of the .Finance Director be commingled in, a separate fund .,or ,. funds~ for purposes -of making, holding and disposing of investments, ’notwithstanding,provisions herein, for transfer .to or holding~ in. or,to the credit of particular funds or accounts of .amounts; received or held by the Finance Director hereunder, provided that the Finance Director shall at all times account for.such:.investments strictly in accordance with the funds and accounts to which they arecredited and otherwise as provided in this Resolution; (D) Sales.. The. Finance Director shall sell at the highest price reasonably,~ obtainable, -or present for redemption, any investment security whenever_.it shall be necessary to provide moneys to ,meet’~ any._~.required_ payment, . transfer, withdrawal or disbursement from the fund~ or account to which such investment ..security is credited and the-Finance Director shall not be liable or responsible for .any loss resulting from the acquisition or disposition of such investment security in accordance herewith; and ~i ’:’,.,.,, ~- ~,,’ (E)~ Finance Director. For any funds held by the Finance Director, the foregoing provisions of this Section 6.01 shall also apply~,~except ;that an, Officer’s ~Certificate shall not be required. For such.funds~the Finance ~Director shall keep records or accounts 0f all expenditures or disbursements therefrom which records shall ~e available for’inspection during-business hours on any Business Day Upon prior, written request. S~cti~n-6.02’.~I~~U~SITION, ..DISPOSITION AND VALUATION OF i ~I~,,i~.~.~N~’ESTMENTS. ,The. follo~ing.shall apply to investments of funds and . ~;"~’:i.:.~C~ou~s under.th~s~ReSolution: ,Market :Value., Except as otherwise provided in :.’~."s~bse~tion.~ (B)*.~.,0f..!thisSection, the-City covenants that all <">’..:"inVestments of~ounts~deposited i~ any fund or account under this . ..’ Resolution, or otherwise containing gross proceeds of the Bonds . .(under section.,.!48 of.the Tax Code) shall be acquired, disposed of .... an~.,valued.,(as of ~the date. that valuation is required by this Resolution or the T~x-Code)-at Fair. Market Value. , . . -~-*~., (B) Reserve’ Fund’. investments in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable, prcvisions *:of the Tax Code, and (unless valuation is undertaken at least annually) investments in any reserve fund, sha~l be val~ed at their present value (within the meaning of Section 148 of the Tax Code). ~ -- i City shall not incur any r~sponsibiiity in respect of the Bonds or this Resolution other than in connection with the duties or obligations explicitly ~.provided herein or in the Bonds. The City shall not be liable to any .Owner in connection with the performance of its duties hereunder, except for its own negligence or willful default. The City. shall not be _.bound to ascertain or inquire as to the performance or observance of any of the terms,conditions, covenants or agreements of the Agent herein or of any of the documents executed by the Agent in connection with the Bonds, or as to the existence of a default thereunder. Under this Resolution, the following shall apply to the City: (A) Reliance. In the absence of bad faith, the City, including the Finance Director, may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein,’- upon certificates or opinions furnished to the City and conforming to the requirements of this Resolution. The City, including the Finance Director, shall not be liable for any error of judgment made in good faith unless it shall be proved that it was negligent in ascertaining.the pertinent facts; ." (B) Expenditures. No provision of this Resolution shall require the City to expend or risk its own general funds or otherwise_ incur any financial liability (other than with respect to the foreclosure proceedings for delinquent Assessments and the ~payment of fees and costs of the Agent) in the performance of any of. its obligations hereunder or in the exercise of any of its rights or powers, if it shall have .reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it; ....~ (C) Counsel. The City may rely and shall be protected inacting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The City may consult with counsel, who may be the City Attorney, with regard to legal questions, and the opinion of such counsel , :~ L’:.of any action taken or suffered by it hereunder in good faith, and ., ... ~ in accordance therewith; . .:,~[~:.,£~L~~,~ .. ~ .... ~... (D) "Owners. The City i "’,’ shall’ not be .bound to recognize ....... , ’persor~ a~. the~ Owner , Q~_.a. Bond~ unless ,,duly regist,ere.d and_. until -, Such ~6f*dt’i’s s~ub~itte~’~’~’~£’i’~ns~ct~’~-"’"[~’~"re~%96d;" a~ h~~’e thereto slt~sfa-ctIfl~y ~eitabl~sl!d, " ~f d~spuled-; " and ’ ; . [. (i)~. II~i~l~ale. £enever ~I -the --allnlstr/tlon -.of dutxes ’~d~r-thxs ~esolutxDn" the Cxty- "~hall deem -x~’~ecessa~. ’or desfrable ~hat .@_ matter-[ ~e prove’~’. Or " esta~ixshed "prror to ’-takxns or s~£’fer[ng <~an9 ;a~ti~ ’hereuhde£~2’-" such~ m&tt4~- ~ (unless other evide%ce ’ ,in ~espect_ the;eo~ be_. h~ein,,. 9p@c~fically - prescribed) may, . ~’ ’£1~;"a~se~n~~e ~"Wii%’f~l, M~cona~t-’~’ :£he par’t ~:6f. the- City~ . be ’ deemed to ’ be ~’ "~0ne~isi~ely . -pro~ed and " established by ~-~a certificate ~of the _~sent ’_o’r other "~ert"retained-by .the ""Cit~’ for the purposes hereof~ ,and’suc~ ~’ertifi%ate’ sha~l’ be full warraht"-to the City for an9 ac~!-onit~ke~ 0r s~ffered"under~the p~09isiohs ~,-.Of this Resolution o~=~ any Supplemental Resolution upon the’ ~faith thereo~, but in.-itS discretion’ the City -may, in Ii4~~ thereof,, accept other evidenc~ ~_ o~ such matter _ or may re~ire such additi6h~l ’evide~ce as~ t6 I~ may deem reasonable.-.~ ’- e Section " 6.04 ~" ’ EMPLO~ OF "AG~TS BY CITY - ’id- ~ ord~ perfo~ its duties and obligations hereunder, the City may employ such persons or entities as it deems necessary or advisable. The City shall not ~e liable for any of" the acts or omissions of~such persons or entities employed by it with reasonable . care ~’and ’in good faith hereunder, and shall be entitled to rely, and sha-ll fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities. - 33 - :TTED .s ’ Resolution [ ;a~d "~d :0f ~th’e ’ o~ers, of ~he Bonds ’~time by> ot4 " a ~;m~eting, of the ~ggrega~e ~xncxpal ~exclusive ~ of "B0nds "~N~- ~such ~ modificatlod or an~ .Bond pr reduce the ~’or impalr t~ oSligation . ahd the in~erest ~and any ~resS~¢0nsen~ of the O~er of ,. the City of any pledge up@ri0r~ ~ ~r on a parity with-the Lthe?..ben~fit~ ’.of’~’the Bonds (except as ~:Re~iution, the laws 0f ~he .~e~’centage of ~Bonds required ’ . thi~’ Section 7.01. ~y.’ ~ch ~.~e ~.~i~hts~ or obligations ’of the .... ,t:,~-[~:’This..;ReS61ution and the rights ’~the ~ers ~y. also be modified ~Supplementa~ : Reso!utlon, without the to "’the";extent pe~itted by law and ~. ~urposes : provided. Bach’- SUch- consent ~shalI’-be effec~i4e-.~.’.only .if accompanied by proof 0f.’,-own~ship, of "the ~B0nds~ for whi-ch’~.such consent is given, which proof shall he"suCh as ’is permitted by Section 8.04. Any~such"consent’-shall be binding,Upon, the Owner of.- the Bonds’ giving~ such consent and on’-.any’subSequent~ Owner.-.(whether or not Such subsequent-’owner’- has- notice thereof)- unless ¯ such consent _is revoked in-writing ’by ~the Owner giving :such consent a subsequent Owner -by -filing such re~ocation with:ithe~- Agent prior to the date when the noticethereinaft@r in’ this. Section .provided for has been mailed; and ’ ~ (C) ~ot~ceL Af~r.’"the ~Owners of- the .requi~ed_ percentage of Bonds shall have filed -their onsents to the ." Supplemental Resolution, the City-~shall :mail"a "notice to the Owners .in the manner above provided in this’ Section for the mailing of the Supplemental ResolutionJ stat’ing .... -in ~ substance,, that the Supplemental Resolution has been consented to by the Owners of the required percentage"¢’f"B0nds"-’an~-wi~l he"effective .as-provided in this Section but -failure, t~-~mai’l’ copies-~ of"~said notice, shall not affect the validity ~of "the Supplemental::.Resolution. or consents thereto). Proof of~the max~xn~ of suchnotlce shall be filed with the Agent ’ A record,~ c0nsistin~, of:the papers " ~equired by this Section 7.03 to be filed wlth. _the Agent, shall be ,proof of the matters therein stated until the contrary is.’proved.The Supplemental Resolution’s~all become effective upon the filing with the Agent of the proof of ’matters therein of such notice, and the Supplemental Resolution shall be deemed conclusively binding (except as otherwise hereinabove specifically provided in this Article) upon the City and the Owners of all Bonds at the expiration of sixty (60) days after such filing, except in the event’ of a final decre~ of a’" court of-competent . jurisdiction setting aside such consent in a:legal"’ acti~on or equitable proceeding for such purpose commenced’ within such sixty-day period.’ -:. ,~:Sec~!on~-7.94.’ DISQUALIFIED ,BQNDS.~,-Bonds~owned or held for the ~ccount q~-. ~he:~City,-iexcep~ingc any,.pension _or-~retirement’ f~nd, ~iI nqt b~ ~ d~e,~d Qu~sta~ding ~ fqr ~ the p~rpo~e ~?.o.$. a~y~ vote, ~consent or ~other action ,or .a~y~ cal~ul.a~ion of 0ut~tan~ing Bonds provided for ~n th~s Article VII,, and shall not be entitled to vote ~pQ~,::,conse~t .t~,.~.~q~itak~7 ~he~- , action ~ provided, for .in this Article VI,I.- .... ~ :-~-~: ~ ~.~. ~ ,~.,, ,. ~ ; :~ ..... ~_~ ; :, ~ ~ S arian ,7.-05. EFFECT ,OF -SUPPZE~ENTAL: -~- ~fter- ~the time any-, Suppleme~ta~ ~ R~olut~on becomes ~ ~flective ~ur~uant~ t0,~thi~,Articl~VI~,~h~ Res~lutmon _sha~ ~6 deemed ~o b~/~mod~fied~nd-~mended Lin ~ac~o~-danc~therew~t~,~ ~heire~ecti~ rights, duties and. obiSgat±ons U~der th~s Re~olu~o~ _~ ~he C~ty and all ~ Owners~-~ of ~Bonds;-~-,~u~standlng ~sh~ll ~there~fte~ be de~erm~ned~ ~exerc~sed and~ e~f~or~d"~ereunder~- ~d~jec~ "~%n all respects to such modiflcatlons.~and .amendments,_..and-all the terms and conditions of any such Sup~iem~ntal Resolut"ion shall be deemed to be.R~rt.,.of .the, te[~,~and~nditiens of thi~Res9l~ion:.for any and all purposes. :~ :, ~, .,~,~ ,, ~.., ;, _, ~, Section 7 .06 . E RSEMENT OR REPLA EMENT OF BONDS ISSUED AFTER AMENDMENT. The City may determine that Bonds issued and delivered~ ~fter ~he oef$~tive,_~e~,of any action_ taken ~s provided -in this Article .VII shall, be~r ~ a notation, b~ endorsement oct otherwise~ in form approved by.~the City, as to such action.. In that case, upon request of the Owner of any Bond Outstanding at such effective date and presentation of his Bond for that purpose at the Principal 0ffi, ce._of .the~ Agen~ ~or at such other office as the ~City may select ~nd designate for- that purpose, a Suitable notation shall be made on such Bond. ~Th~ City may~ determine that new Bonds, so modified as in~ the opinion of the City is necessary to conform to such Owners’ action, shall be prepared, executed.and delivered. In that case, upon request ~ the Owner of any Bonds then Outstanding,. such new ~Bonds shall be exchanged at the Principal. Office of the A~ent without~ ~ost to any Owner, for Bonds then Outstanding, upon surrender of such Bonds. Section 7.07. AMENDATORY ENDORSEMENT OF BONDS. The provisions of this Article VII shall not prevent any Owner from accepting any amendment as to the particular ~onds held -by such .Owner-, provided that due notation thereof is made. on such-Bonds., ., MISCELLANEOUS Section 8.01. BENEFITS OF AGREEMENT LIMITED TO PARITIES.No~ing in this Resolution, expressed or implied, is intended to give to.any person other than the City, the Agent and the Owners, any right,~ remedy or claim under or by. reason of this Resolution. Any covenants, stipulations, promises or agreements in this Resolution contained by and on behalf of the City shall be for the sole and exclusive benefit of the Owners and the Agent. ~Section 8.02.- SUCCESSOR AND PREDECESSOR. Whenever~ in -th~s R~oiuti~n or any Supplemental Resolution eitherL the City or the .Agent is named or referred to, such reference shall be deemed to include the successors or assigns_ thereof, and all the covenants and agreements in this Resolution containe~ by or on behalf, of the City. shall bind and~.inure to the benefit of the respective successors and assigns thereof whether so expressed or not. Section~ 8.03~ DISCHARGE OF RESOLUTION. subject~ to the provisions of Sectioho 2.03 hereof, if the City shall pay and discharge the entire indebtedness on all Bonds Outstanding in any one.or more of the following ways: (A) Payment~ By paying or causing to be paid the principal of (including any Sinking Fund Payments) and interest and any premium on all Bonds Outstanding, as and when the same become due and payable; (B) Cash~ by depositing with the Agent, in trust, at or before maturity, money which, together with the amounts then on deposit in the Redemption Fund is fully sufficient to pay all Bonds Outstanding, including all principal, interest and any applicable redemption premiums, or; (C) Federal Securities. by irrevocably depositing with the Agent, in trust, cash and Federal Securities in such amount as the City shall determine, as confirmed by -an independent certified public accountant, which will, ’together with the interest to accrue thereon and moneys then on deposit in the Redemption Fund be fully sufficient to pay and discharge the indebtedness on all Bonds, including all principal, interest and any applicable redemption premiums, at or before their respective maturity dates; (D) Actions. If such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been given as in this Resolution¯ provided or provision satisfactory to the Agent shall have been made for the giving of such notice, then, at the election of the City, and notwithstanding that any Bonds shall not have been surrendered for payment, the pledge of the Assessments and other funds provided for in this Resolution and all other obligations of the City under this Resolution with respect to all Bonds Outstanding shall cease and terminate, except only the obligation of the City to pay or cause to be paid to the Owners of the Bonds not so surrendered and paid all sums due thereon, the obligation of the City to assure that no action is - 37 - phrase .hereof and authorized the issue of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses, or phrases of this Resolution may be held.illegal, invalid or unenforceable. Section 8.08. %TNCLAIMED MONEYS. Anything contained herein to the contrary notwithstanding, any moneys held by the Finance Director in trust for the payment and discharge of the principal of, and the interest and any premium on, the Bonds which remains unclaimed for two (2) years after the date when payments of principal, interest and any premium have become payable, .shall be repaid by the Finance Director to the City as its absolute property free from any trust, and the Finance Director shall thereupon be released and discharged with respect thereto .and the Bond Owners shall look only to the City for the payment of the~ principal of, and interest and any premium on, such Bonds.. Section 8.09. APPLICABLE YAW. This Resolutfon shall be governed by and enforced in accordance with the laws of the State of California applicable to contracts made and performed in the State of California. Section 8.10. CONFLICT WITH ACT. In the event of a conflict between any provision of this Resolution with any provision of-the Act, the provision of the Act shall prevail over the conflicting provision of this Resolution. Section 8.11. CONCLUSIVE EVIDENCE OF REGULARITY; VALIDITY. Bonds issued pursuant to this Resolution shall constitute conclusive evidence of the regularity of all proceedings under the Act relative to their issuance and the levy of the Assessments. The validity of the authorization and issuance of the Bonds shall not be dependent upon the completion and/or acquisition of the Project or any part thereof or the performance by any person or such person’s obligation(s) with respect to the Project. Section 8.12. PAYMENT ON BUSINESS DAY. In any case where the date of the maturity of interest or of principal,. (and premium, if any) of the Bonds or the date fixed for redemption of any Bonds’.or the date any action is to be taken pursuant to this Resolution is other than a Business Day, the payment of interest or principal, including Sinking Fund Payments, (and any redemption premium) .or the action need not be made on such date but may be made on the next succeeding day which is a Business Day with the same force and effect as if made on the date required and no additional interest shall accrue from such Interest Payment Date until such Business Day. Section 8.13. REPEAL OF INCONSISTENT RESOLUTIONS. Any resolution of the Council, and any part of such resolution, inconsistent with this Resolution, is hereby ~epealedto the,extent of such inconsistency. Section 8.14. AUTHORITY OF FINANCE DIRECTOR. All actionsmandated by this Resolution to be performed by the Finance Director may be performed by the designee thereof or such other official of the City or independent contractor, consultant or trustee duly authorized by the City to perform such action or - 39 - actions in "f_ur~herance,,~.~of~,,~a~l I~o~,, ~a specific portion of the requirements hereof. ,,r~~. ,, .....,,, . [~,..,.~ .... Section 8 "’’.15. CERTIFIED COPIES. The Clerk shall c~use to be furnished_, a certified-copy ,of this resolution- to the Finance Director, ,to the Agent, and tb the Auditor of the ’County. ,~ ~.Section 8-.16. EFFECTIVE ,-DATE OF ~HE.J RESOLUTION., This Resolution shall, become-effective ,upon the date. Of its adoption. 40 - INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: - Jones Hall, A Professional Law__Corporation By: . ///’///~~~..-~---~ -S t e~h~n~R. ~asa~eggio Counsel APPROVED: Mayor City Manager Director of Public Works Director, Administrative Services Sr.Assistant City Attorney 26005-53 EXHIBIT A 04/09/01 04/23/01 05/09/01 PRELIMINARY OFFICIAL STATEMENT DATED ,2001 NEW ISSUE-FULL BOOK-ENTRY RATING: Standard & Poor’s:_ In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, Califomia, Bond Counsel, subject, however to certain qualifications described herein, under existing law, interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal altemative minimum tax imposed on individuals and corporations, although for purposes of computing the a/temative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See "TAX MA 7-/ERS" herein. $9,360,000* CITY OF PALO ALTO LIMITED OBLIGATION IMPROVEMENT BONDS UNIVERSITY AVENUE AREA OFF-STREET PARKING ASSESSMENT DISTRICT Series 2001-A (Santa Clara County, California) Authority Denominations Redemption Assessments Security Use of Proceeds Dated: Date of Delivery Due: September 2, as shown below The Limited Obligation Improvement Bonds, City of Palo Alto, University Avenue Area Off-Street Parking Assessment ,District, Series 2001-A (the ’Bonds’} .a.re being issued by lhe City.of Palo A, Ito pursuant to the,,pr.ovis!o..ns, ,of theimprovement Bond Act of 1915 consisting of D~vision 10 of the Streezs and Hignways Code of the ~za[e o~ ~alirornia. The Bonds are a first series of assessment bonds authorized for the D strict. See "SECURITY AND SOURCES OFPAYMENT FOR THE BONDS - Parity Bonds’. All of lhe proceedings of the City undertaken to fo.rm the University Avenue Off-Street Parking Assessment District (the ’District’) and to levy the assessm,ents w~e ,undertaken pursuantto the Municipal Improvement Act of 1913 (Division 12 of the California Streets and Hignways L;Oee). Initial purchases of beneficial interests in the Bonds will be made in beok-entw form and the Bonds will be registeredin the name of Cede & Co., as nominee for The Depqsitory Trust Company (’DTC’). Bonds will be !ssue(] indenominations of $5 000 and any integral multiple thereof. Purchasers of beneficial interests in the Bonos will not receive certificates representing their interests in the Bonds and will not be paid direcliy by Ihe Bond t~s!ee. ,As longas Cede & Co. is the registe.re(] owner of the Bonds, payments of the principal of, premium, if any, ano inzeres[ on theBonds will be made directly to DTC, or its nominee, Cede & Co. Disbursements of such payments to DTC’sParticipants is the res~nsibility of DTC and disbursements of such p_ayments to the Beneficial Owners is theresponsibility of DTC’s Participants and Indirect Participants.See ’APPENDIX F--E - The Book-Entw SyStem’herein.-- The Bonds are subject to redemption on any March 2 or September 2 prior to maturity as described herein.See "THE BONDS" herein. The Bonds are payable from assessments levied against certain property, within the District. Assessment installm ,e.n,!sof principal andinterest sufficient to meet annual Bond debt service wdl be included on the regular county tax DillSsent to owners of pro~rty against which there are unpaid assessments. These annual assessment installments areto be paid into the Redemption Fund, to be held by the City and used to pay debt service on the Bonds as it becomes due. See ’SECURITY AND SOURCES OF PAYMENT FOR THE BONDS." The Bonds are not general obligations of the City of Palo Alto and the Bonds are pay.able only from asSessmen.ts and.other specific sources of money available to the City. Unp, aid assessments constitute fixed liens on the lots anoparcels assessed within the District and do not constitute a personal indebtedness of the.respe~ive, o.wne.rsof such lots and p.arcels. Accordingly, in the event of delinquency, proceedings may De conouc~eo omyagainst the padicular parcel of real property securing the delinguent assessment. Thus, the value of the realp.roperty within the District which has been allocated a podlon of the assessment is a critical factor indetermining the investment quality of the Bonds. See "OWNERSHIP AND VALUE OF PROPERTY WITHIN THEDISTRICT."- The proceeds of the Bonds will be used to finance a ~rtion of the design ,and initia! acqu!sition ’an.d co,.nstruction o!public vehicle off-street parking improvements, within the District, to re;uno and de~ease wvo outs[anoing series o; assessment bonds for the District, to provide a reserve fund, to fund certain capitalized interest and ~o pay theissuance costs of the Bonds. See ’PLAN OF FINANCE.’ Additional improvements in the District will be funded from a future series of assessment bonds. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS - PadtyBonds’ herein. This cover page contains certain information for general reference only. It is not a summary of this issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY OF SANTA CLARA, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. THE INFORMATION SET FORTH IN THIS OFFICIAL STATEMENT, INCLUDING INFORMATION UNDER THE HEADING ’BONDOWNERS’ RISKS’, SHOULD BE READ IN ITS ENTIRETY. MATURITY SCHEDULE* Maturity Date Principal Interest Price/ Maturity Date (September g) .;4".kA~hauat;;~-.! ~’,.P~te:,., ~) :,; I. Yteld ~ ..,~ ..(September2) 2002..~- .~ ~, "’!’,:, ,:: i<: ~ ’.) ’,,~."; l,,’i~,:!..:.r~ ’ % ~ ¯ q’, 2009 2003 2010 200~ .,~2011200~;, "’t~" -"2006 .... ,:’2007"~,’~’ ~.,."~ ’)" ~;," ~..’:)-~ ". "~:[ ~.~:’_~ ’,,C~. ’, :)~’ ’:2014 ~",’ 2008 Principal Interest Price/ Amount : ~Rate’Yield $, __% Term Bonds due September 2, 2020, - Price .% % Te~ Bonds due September 2 2030 ~ Price._._.____% -. ,, . ~, ,. The Bonds are o#ered P;,hen~ as and ifis~i~ed and accepted by the Undeiwfiler subject to the approval, as to their legality, ’of Jones Hall, A Professiohal Law Corporation San Francisco, CalifOrnia, Bond Counsel Co/rein legal matters will be also be passed uPon for the City byJones Hall as DiscloSure Counsei. ~ is expected that the Bohds ~w(ll ,beavailable for delivery on or about ,2001. " The Date of this Official Statement is ,2001. , .’ * Preliminary, subject to change. THE CITY OF PALO ALTO Mayor and City Council Sandy Eakins, Mayor Victor Ojakian, Vice Mayor Bern Beecham, Council Member Jim Burch, Council Member Gary Fazzino, Council Member Judy Kleinberg, Council Member Nancy Lytle, Council Member Dena Mossar, Council Member Lanie Wheeler, Council Member City Staff Frank Benest, City Manager Emily Harrison, Assistant City Manager Carl L. Yeats, Director of Administrative Services Joseph Saccio, Deputy Director of Administrative Services Ariel Pierre Calonne, City Attorney Donna G. Rogers, City Clerk Bond Counsel Jones Hall A Professional Law Corporation San Francisco, Ca/ifomia Assessment Engineer Harris & Associates Petaluma, California Financial Advisor Stone & Youngberg LLC San Francisco, California Paying Agent and Transfer Agent U,S. Bank Trust National Association San Francisco, California Verification Agent Causey, Demgen & Moore Inc. Denver, Co/orado Disclosure Counsel Jones Hall, A Professional Law Corporation San Francisco, Ca/ifomia ~ ~ ’ ~, ..,, ~::~ i~, f,~ *~i,,.! GENERAL INFORMATION ABOUT HIS OFFICIAL STATEMENT r " .: Use of ~cial S~teme~L~ This ~¢al Stateme~ i~ submi~ed in conn~Uon wJ~ ~e sale of ~e Bonds refe~ed hereinand may not be repr~u~d or used, in whole or in pad,. for any o~er pu~ose. ~:~" ’~ "~n&u~oHze~ Rep~sentations. No dealer, broker, salespemon or o~er pemon has ~en au~ofized by the Ci~ ~f Palo Alto, 0r ~e Unde~dter to give any informaUon or to make any representaUons o~er than ~ose con~in~ herein and, if given" oP made, su~ o~er info~aUon or mpmsentaSon must not be relied u~n as having b~n au~ofiz~ by any of ~regoing.,-This Offi~al Statement does not ~nsU~te an offer to sell or ~e solicitation of an offer to buy nor shall ~em be any sale of ~e Bonds by a person in any ju~sdiction in which it is unla~l for su~ pemon to make such an offer, solicitaUon or sale. ’~ ~" ’ Estimates and Projections. ~en used in ~is ~cial Statement and in any ~nUnuing disclosure by ~e Dis~ct, in any press release and in any oral statement made wi~ ~e approval of an authorized offi~r of ~e Dis~ct, ~e words or phrases ~ill likely result," "am expected to’, ~ill,~nUnue’, % anUcipated", "esUmate", =project," ~orecas~, =e~ec~, "intend" and similar e~ressions iden~ ~o~aLd I~king statements’;Wi~in~e~meaning of ~e Pdvate ~cudties LitigaUon Refo~ Act of 1995. Such statementsam s~bject to risks ~and un~ainUes ~at ~uld cause actual results to differ materially Wom ~ose ~ntemplated in such fo~ard-looking statement. ~y forecast is subject to such un~ainUes. Inevitably, some assumptions used to develop ~e forecasts will not be realized and unanticipated events and circumstan~s may ~cur. Therefore, there are likely to be differen~s be~een forecasts and actual results, and ~ose differen~s may be material. The info~aUon and expressions of opinion herein are subject to change wi~out noti~, and nei~er the delivew of ~is ~cial Statement nor any sale made hereunder shall, under any circumstan~s, give dse to any implication ~at ~ere has been no change in the affairs of the Ci~ or ~e Diskict sin~ ~e date hereof. Involvement of Underwriter. The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, their responsibilities to investors under the Federal Securities Laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information and expressions of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there I~as been no change in the affairs of the City or the District since the date hereof. All summaries of the Resolution or other documents referred to in this Official Statement, are made subject to the provisions of such documents, respectively, and i:lb not purport to be complete statements of any or all of such provisions. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXCEPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. TABLE OF CONTENTS ~-"~ ~. ~’._, ~ . ’~i,~l,.’r’~ ’,~’l~i~’~,’_ _ _ ~ !~:.,.~. :;~|~.. ~ ~: ~..’~ j ~,~ ~,~o~ r_ ,I ,, ,’ ’. . , .’~ .! r..~,. ,~ .;. ,~, ,, :~ , ~,’..’,- :, ’, : ,~,:,~. ,’ ;’~ ,.’,, ~,,,J,~’,. i~., ~.’,~ .,",.’,~’~ " ,,, ’:,~.PAGE INTR,0DU~T pN ...........° ......""3 ....~ ,.,,"- ’~ ", ¯ ~’~ t-’," ,~-.,..1.....:.~,.,, ....f.<.: .........,...: ................... .........., ..............................................................4 Application of Proceeds of the Bonds ...........................................................................................................................................4 Escrow Fund ,~ .~, .......;..., .........................; ...............................~ .........................................................5 THE B,ONDS:..~..,.. : ::. .....:, .~ ..................................................................~ ........: ......’ .........~ .......................5 ’ ’Denominations ~ , ....and Payment-of the’Bonds ...........:...:....., ............: .................................................................................................5’ 3R d~i Transfer or Exchange of Bonds ....................................................................................................................................................7 ~ Establishmen’t of Special Funds and Accounts .............................................................................................................................8 Defeasance .........................................................................................................; ................................................9 ESTIMATED, ~.OURCE~; AND US~ESOF FUNDS;...~..~,.~.~;~; .......; ..............~: .....~.,..: ...............................................: ...........;..,.:.. .......9 DEBT.SERVICE SCHEDULE .............,..,.,..~..~ ................ ....,... . ;,; ............, .......... ............: ...........10 sECURI.’I’Y AND SOURCESOF PA.YMEN~ ..F,.OR THE BONDS ............................................................... .......................~ ...........i. 11 Limit~e.d Obligation ’ , .: ...... ’I;~ ...................................... ’ Assessments ’ ’ "" .. , , , . ................... : ............................................................. ., ......... 1111 Limited Obligation Upon Delinquency.:- .......! ......i.~ .......:...:~... .......................~. ...................................i..’ ..............................~ .........11 Collection of-Assessments 12 Reserve Fund ’ ’................ . .................o ...................... ............................................................................ ..................12 Covenant to Commence Superior Court Foredlosure...: ...............~..’.’. ..............................." ..........................................................13 Alternative Method of,Tax Apportionment- ,...........:... ........; ........, ....................................................................................: .........13Parity Bonds -,-.......................................... , .............................................................................................................14 Priority of Lien ........................................................................................................................................................15 THE IMPROVEMENT PROJECT ...................................................................................................................................................15The Improvements ...............................................~ ..........~ ............................................................................................15 Cost Estimate ........................................................................................................................................................16Method of Assessment and Assessment Spread .......................................................................................................................16 THE DISTRICT ...............................................................................................................................................................................18 The County of Santa Clara and City of Palo Alto ........................................................................................................................18 18’ 18, 21 Formation of the District Location of the District, Property in the District Largest Assessees Prior Assessments Overlapping Debt ....................... , .................’ ...............................................................................................................21 ....... ; ................................................................................................................................................22 ........................................................................................................................................................ 23 VALUATION OF PROPERTY WITHIN THE DISTRICT .................................................................................................................23 Assessed Valuation of Property ..................................................................................................................................................23 Value to Lien Ratios ........................................................................................................................................................24 Property Tax Status ........................................................................................................................................................26 BONDOWNERS’ RISKS .........’ ................................’. .......................................................................................................................26 General .......................................................................................................................................................26 Owners Not Obligated to Pay Bonds or Assessments..~.., ...........................................................................................................27 Bankruptcy and Foreclosure .......................................................................................................................................................27Availability of Funds to Pay Delinquent Assessment Installments ..............................................................................................27 Limited Obligation Upon Delinquency .........................................................................................................................................28 Collection of the Assessment ......................................................................................................................................................28 Limitations on Enforceability of Remedies ..................................................................................................................................29 Land Values ........................................................................................................................................................29 Ballot Initiatives ........................................................................................................................................................29 Future Overlapping Indebtedness ...............................................................................................................................................29 Future Private Indebtedness .......................................................................................................................................................30 No Acceleration Provision 30 CONSTITUTIONAL LIMITATIONS ON TAXATION AND APPROPRIATIONS ..............................................................................30 Property Tax Rate Limitations - Article XlIIA .................................................................................................................: .............30 -i- Legislation Implementing Article XIIIA ............................: ...........................................................................................................30 Appropriation Limitation - Article XIIIB ........................................................................................................................................31 Property Tax Collection Procedures ...........................................................................................................................................31 Proposition 218 ........................................................................................................................................................32 CONTINUING DISCLOSURE .........................................................................................................................................................32 VERIFICATION REPORT 33 LEGAL OPINION ..............................................................................................................i ..........................................’. ......~; ..........33 TAX MATTERS ...............................................................................................................................................................................33 NO LITIGATION ..............................................................................................................................................................................33 RATING ..........................................................................................................................................................................................34 UNDERWRITING .............................................................:: ......................................................................:~ .....................................34 MISCELLANEOUS ................................................................................................................................;:. ......................................34 APPENDIX A - ^SSESS,MEHT D!AGP~,M ...................................................................................................................A I APPE-N~LISTING OF PARCELS AND ASSESSMENTS ........................................................................’. ....................B_A-I APPENDIX ~-B_- CITY AND COUNTY GENERAL INFORMATION ......................................................................................~_B-I APPENDIX_C~ - FORM OF BOND COUNSEL OPINION ......................................................................................................D_C-I APPENDIX DF= - FORM OF CONTINUING DISCLOSURE CERTIFICATE ...........................................................................B_D-I APPENDIX EG - SPECIMEN MUNICIPAL BOND INSURANCE POLICY ............................................................................GE_-I This Introduction is subject in all respects to the more complete information contained elsewhere in this Official Statbment. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. Cap#a/ized terms used in this Introduction and not otherwise defined herein shall have the respective meanings assigned to them elsewhere in this Official Statement. ’ ~ ...... ~ " ’~’- .,,~ ~ ,,,,,,(:,’,t I ¯’"’~ "~ " ~~’-~" Purpose of Official Statement. The purpose ofthis Official Statement, which includes the cover page and appendices hereto, is tO’ set forth certain information concerning the sale and delivery by the City of Palo Alto, California (the "City".) of its Limited Obligation Improvement Bonds, University Avenue Area Off-Street Parking Assessment District, Series 2001-A (the "Bonds"). The Bonds are issued to fund, in part, certain improvements within the City and University Avenue Off-Street Parking Assessment District (the =District") in the downtown area of the City. The Bonds are a first series of a total assessment bonds authorization in the amount of $45,700,000 in the District. The City plans to issue additional bonds secured by the Assessment in the future. See SECUPJTY AND SOURCES OF PAYMENT FOR THE’BONDS - Parity Bonds" herein. Use of Bond Proceeds. Proceeds from the sale of the Bonds are expected to be used to (i) finance a portion of the construction and acquisition of public vehicle off-street parking improvementsl including the acquisition of all lands, easements, rights-of-way, licenses, franchises, permits and related projects (the "Improvements") as described in the Engineer’s Report (described herein), (ii) to refund all of the outstanding amount of a series of assessment bonds issued by the City for th: 9!stdct !.", !9~9in 1989 for property in the District and to defease all of the outstanding series of assessment bonds issued in 1977 for property in the District, (iii) to provide for a reserve fund with respect to the Bonds, (i$) to fund certain capitalized interest and (v) to pay the costs of issuance of the Bonds. See "PLAN OF FINANCE." See also "THE IMPROVEMENT PROJECT- The Improvements." Authority for Issuance of the Bonds. The Bonds are being issued pursuant to the provisions of the Improvement Bond Act of 1915, consisting of Division 10 of the Streets and Highways’Code of the State of California (the "Bond Law"). All of the proceedings of the City that were originally undertaken to form the District and to levy the original assessments were undertaken pursuant to the Municipal Improvement Act of 1913 (Division 12 of the California Streets and Highways Code) and Article XIIIC and XIIID of the California State Constitution (the =Right to Vote on Taxes Act") (together referred to as the "Act"). * Preliminaxy, subject to change. -3". Security for the Bonds. The Bonds are limited obligations of the City issued upon and are secured by assessments levied against properties in the District, together with interest thereon, and such unpaid assessments together with interest thereon constitute a trust fund for the redemption and payment of the principal of the Bonds and the interest thereon. All the Bonds are secured by the moneys in the Redemption Fund and Reserve Fund (described herein) created pursuant to the Resolution and by the assessments levied. Neither the faith and credit of the City nor of the State of California or any political subdivision thereof is pledged to the payment of the Bonds. The City plans to issue additional bonds secured by the Assessments subject to certain conditions. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS - Padty Bonds" herein. The Assessment District. The City lies on the northern edge of Santa Clara County, California and occupies approximately 26 square miles. The District is comprised of property within the City’s downtown business district. Approximately 274 parcels are in the District, of which 216 have received an assessment. All of the property in the District is developed as a mixed-use area with a combination of offices, retail establishments, restaurants, civic facilities, some high-density residences and other commercial uses consistent with a downtown area. See "THE DISTRICT." Summaries Not Definitive. The summaries and references to the Act, the Bond Law, the Resolution, the Bonds, certain resolutions and to other statutes and documents referred to herein do not purport to be comprehensive or definitive, and are qualified in their entireties by reference to each such statutes and documents. All capitalized terms used herein, unless noted otherwise, shall have the meanings prescribed in the Resolution, as hereinafter defined. The information set forth herein has been furnished by the City and by sources which are believed to be accurate and reliable but is not guaranteed as to accuracy or completeness. Statements contained in this Official Statement which involve estimates, forecasts, or other matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. PLAN OF FINANCE Application of Proceeds of the Bonds The District was established in 1975 and since its inception, the City has issued bonds for the Distdct and has acquired 20 lots and constructed 2 parking garages from financing provided by the District. Those bonds will be paid in full upon issuance of the Bonds. Proceeds from the sale of the Bonds are expected to be used to finance a portion of the design and initial construction and acquisition of certain public improvements, including public vehicle off-street parking improvements, including the acquisition of all lands, easements, rights-of-way, licenses, franchises, permits and any outstanding assessments, the removal of all existing improvements and the construction of all auxiliary work necessary and/or convenient to the accomplishment thereof and related projects within the City (the "Improvements") as described in the Engineer’s Report (described herein). Bond proceeds will also be used to refund and defease, on September 1, 2001, the $3,290,000 outstanding principal amount of the City’s University Avenue Area Off-Street Parking Assessment District 1989 Refunding and Improvement Bonds (Lot J Refunding and 250 University Avenue Acquisition (the "1989 Bonds"). The 1989 Bonds were issued in December 1989 to advance refund all of the outstanding University Avenue Lot J Parking Garage Assessment District Bonds of 1984 and to provide funds for the acquisition of one floor of public parking in a parking structure. All of the improvements financed with the 1984 Bonds have been completed. Bond proceeds will also be used to defeasethe $135,000 outstanding principal amount of the City’s University Avenue Area Parking Bonds of 1977 - Series 75-63 issued in 1977 (the "1977 Bonds" and collectively with the 1989 Bonds the "Prior Bonds"). The 1977 Bonds were issued to finance the cost of offstreet parking improvements and a parking feasibility study for the area. The Prior Bonds were secured by assessments levied against property in the District. Proceeds of the Bonds will also be used to pay the cost of issuance of the Bonds-aP, d, to fund the Reserve Fund-fe~,~=e.-~s_. Prcc~d~ cf the usedand to fund capitalized interest,~ ° -4- ’ ’,, ;The’~3ity~has~nflrmed. a total am’ount,of $45,,7.:29,182 .of-~assessments+,for the District. The Bonds Will ~nance’only a-porti0nof the Imp~ov~ments; the’City anticipates that it will issue additional bonds secured by the Assessments on a padty with the Bonds in the future to complete the Improvements for the District. See "SECURI’[’~._-_AND SOURCESOF PAYMENTI~OR THE’BONDS -Padty Bonds~" "~~+’ ’t~-".,’ ’.,,~-+ I’,11,+ ~’.~ L~ ~’+Tl iI ,2 "¢;f ,l.~ :;~.:.+i .,’<, +" ........ ",’,., For a discussion of the accounts and funds established under the Resolution and related to the Bonds, see "SUMMARY AND SOURCES OF PAYMENT FOR THE BONDS - Establishment of Special Funds and Accounts." For a,schedule of the esUmated sources and uses of funds related to the issuance of the Bonds, see "ESTIMATED SOURCES AND USES OF FUNDS." Escrow Fund . !; ~. -~-r . ..,., .~ ~. ,~ <,I + .’ ’, .~ ! .:’,’ .+’:.. -,,+ i+ .,. ~ {<..’’ ,-..., , Concurrently.+ith the’issuance of the Bonds, the City.wilt establish an+ Escrow Fund. and. deposit therein an amount sufficient, together with interestto be earned thereon, for the defeasance of the,1989 Bonds and will deposit With the current,paying agent, of the°1977 Bonds an amount to satisfy .the ,outstanding 1977 Bonds debt service payment unUI matudty on July 1:, 2002. Amounts deposited in the Escrow Fund and with the paying agent for the 1977 Bonds will be invested solely in direct, non-callable;general obligations of the United States Department of the Treasury, the principal of and interest on which, together with any available cash to be held uninvested, will be verified by Causey, Demgen & Moore (the "Verification Agent") to be sufficient to pay the redemption price of the 1989 Bo.nds upon the optional redemption thereof on September 1, 2001. Assuming the accuracy of the Verification Agent’s computations, as a result of the deposit and’application of funds in the Escrow Fund, the 1989 Bonds and the 1977 Bonds will be defeased and all obligations thereunder discharged. See "VERIFICATION AGENT" herein. THE BONDS Authority For Issuance Proceedings for the issuance of the Bonds were undertaken by the City pursuant to Resolution of Intention No. , adopted by the City Council on (the "Resolution of Intention"). The Bonds are being issued pursuant to the provisions of Resolution No. adopted by the City on ,2001 (the "Resolution") authorizing the issuance of the Bonds. The City has authe~ized-confirmed total assessments (the "Assessments") of $45,729,182 for the District. The Bonds are a first series of bonds to be secured by the Assessments. The City anticipates that it will issue additional bonds secured by the Assessments on a parity with the Bonds in the future to complete the authorized improvements for the District. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS- Padty Bonds." Denominations and Payment of the Bonds The Bonds will be dated the date of original delivery. The Bonds will be issued only as fully registered Bonds without coupons, in the denomination of $5,000 each or any integral multiple thereof and will mature and bear interest at the rates shown on the cover page hereof. The Bonds will be registered in the name of Cede & Co. as nominee of DTC, and will be available to ultimate purchasers under the book-entry system maintained by DTC. See APPENDIX F-E-_ "Book-Entry System.". Interest with respect to the Bonds will be payable to the registered owners of the Bonds on March 2 and September 2 of each year, commencing March 2, 2002 (each, an "Interest Payment Date"). The Bonds shall bear interest at the rates set forth on the cover hereof, payable on the Interest Payment Dates in each year. Interest shall be calculated on the basis of a 360-day year composed of twelve, 30-day months. Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication and registration thereof unless it is authenticated and registered (i) prior to an Interest Payment Date and after the close of business of the Record Date, -5- in which event it shall bear interest from such Interest Payment Date, or (ii) prior to the close of business on the -Record Date preceding Mamh 2, 2002, in which event it shall bear interest from the Dated Date. As long as Cede & Co. is the registered owner of the Bonds, payments of the principal of, premium, if any, and interest on the Bonds will be made directly-to DTC, or its nominee, Cede & Co. Disbursements of such payments to DTC’s Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of DTC’s Participants and Indirect Participants, as more fully described below in the section captioned "Book-Entry System." Payment of interest on the Bonds will be made to the registered owner thereof by check of , .U.S. Bank Trust National Association, as the agent of the City for authentication, registration, transfer and payment of the Bonds (the "Paying Agent"), mailed by first class mail on the Interest Payment Date to the owner at his address as it appears on the registration books maintained by the Paying Agent as of the close of business on the fifteenth day immediately preceding any Interest Payment Date (the "Record Date"), or by wire transfer made on such Interest Payment Date upon wdtten instructions delivered to the Paying Agent before the Record Date preceding the Interest Payment Date, of any owner of $1,000,000 or more in aggregate principal amount of Bonds. Principal with respect to the Bonds will be payable to the registered owners in the amounts and on the maturity dates set forth on the cover page of this Official Statement (subject to the right of prior redemption). Redemption Optional Redemption. Whenever, as of an Interest Payment Date, there are sufficient funds in the Prepayment Account of the Redemption Fund from the proceeds of prepayments of Assessments or from the application of any surplus funds by the Council, Bonds shall be called for redemption. Each Bond, or any portion of the principal thereof in the principal amount of the Bond Denomination or any integral multiple thereof, may be redeemed and paid in advance of maturity on any Interest Payment Date in any year by giving notice as hereafter provided and by paying the principal amount thereof, plus interest to the date of redemption, unless sooner surrendered, in which event said interest will be paid to the date of payment, together with a premium (the "Redemption Premium") as follows: Interest Payment Dates on or before September 2, 2010 March 2, 2011 and September 2, 2011 March 2, 2012 and thereafter 2% 1% 0% The provisions of Part 11.1 of the Bond Law are applicable to the advance payment of Assessments and to the calling of the Bonds. The Agent shall select Bonds for redemption in such a way that the ratio of Outstanding Bonds to issued Bonds shall be approximately the same in each annual series insofar as possible (i.e. on a pro-rata basis among maturities of the Bonds). Within each annual maturity, the Agent shall select Bonds for retirement by lot. Mandatory Sinkin.q Fund Redemption. The Bonds maturing on September 2, 2020 and on September 2, 2030 shall also be subject to mandatory redemption in whole, or in part by lot, on September 2 in each year commencing September 2, __ and September 2, __, respectively, from sinking fund payments, at a redemption price equal to the principal amount thereof to be redeemed, without premium, in the aggregate respective principal amounts and on September 2 in the respective years as set forth in the following tables; provided, however, that if some but not all of the Term Bonds have been otherwise been redeemed, the total amount of all future sinking fund payments shall be reduced by the aggregate principal amount of the Term Bonds so redeemed, to be allocated among maturities and among such sinking fund payments within a maturity in integral multiples of $5,000 on a pro- rata basis. Term Bonds Maturing September 2, 2020 -6- Sinking Fund , Redemption Date ¯ (September 2) =Principal Amount of Bonds to be Redeemed Term Bonds Maturing September 2, 2030 _, Sinking Fund Principal Amount ¯ ’ ,Redemption Date of Bonds to be ;~*~ ~’ (September,2)"" ’-:’Redeemed " Notice of Redemption. So long as Cede & Co. is the registered owner of the Bonds, notice of redemption will only be sent to DTC, as nominee of Cede & Co. See "Book-Entry System" below with respect to DTC procedures regarding notice of redemption. In the event it is transmitting moneys for deposit in the Prepayment Account of the Redemption Fund, the City shall give the Paying Agent written notice of the aggregate amount of Bonds expected to be redeemed not less than forty-five (45) days prior to the applicable redemption date. The Paying Agent shall select Bonds for retirement in such a way that the ratio of Outstanding Bonds to issued Bonds shall be approximately the same in each annual sedes insofar as possible. Within each annual series the Payi.ng Agent shall select Bonds for retirement by lot. The Paying Agent shall cause written notice of any redemption to be given by registered or certified mail or by personal service to the respective registered Owners of any Bonds designated for redemption, at their addresses appearing on the Bond Register in the Principal Office of thePaying Agent at least 30 days before the applicable Interest Payment Date. The Paying Agent shall also cause notice of redemption to be sent to the Securities Depositories and to one or more of the Information Services at least one day earlier than the giving of notice to the Owners as aforesaid; provided, however, such mailing to the Securities Depositories and Information Services shall not be a condition precedent to such redemption. Failure to so mail any notice of redemption, or of any person or entity to receive any such notice, or any defect in any notice of redemption, shall not affect the validity of the proceeding for the redemption of such Bonds. Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on the Bonds so called for redemption, shall have been deposited in the Redemption Fund on the date fixed for redemption, such Bonds so called shall cease to be entitled to any benefit under the Resolution other than the right to receive payment of the redemption price, and no interest shall accrue thereon on or after the redemption date specified in such notice. Transfer or Exchange of Bonds So long as Cede & Co. is the registered owner of the Bonds, transfer or exchange of Bonds may only be through the facilities of DTC. See "Book-Entry System" in an Appendix El; to this Official Statement with respect to DTC procedures for transfer and exchange of ownership interests in the Bonds. Any Bond may, in accordance with its terms, be transferred upon the Bond Register by the registered Owner, in person or by such Owner’s duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a wdtten instrument of transfer in a form approved by the Paying Agent, duly executed. Whenever any Bond shall be surrendered for transfer, the Paying Agent shall thereupon authenticate and deliver to the transferee a new Bond or Bonds of like -7- tenor, matudty and aggregate principal amount. Bonds may be exchanged at the Principal Office of the Paying Agent, for Bonds of the same tenor and matudty and of other authorized denominations. No Bonds the notice of redemption of which has been given under the Resolution shall be subject to transfer or exchange. Neither the City nor the Paying Agent shall be required to make such exchange or registration or transfer of Bonds on or after the Record Date or after a Bond has been selected for redemption. The City and the Agent may require the payment of a reasonable fee to cover the costs and expenses of the City and the Paying Agent for such transfer. Establishment of Special Funds and Accounts The City will establish four funds to be held by the Finance Director (as defined in the Resolution) of the City under the Resolution, known as the Costs of Issuance Fund, the Redemption Fund, Reserve Fund and the Improvement Fund, for the administration of the proceeds of the sale of Bonds and payment of interest and principal on the Bonds. Redemption Fund. The Redemption Fund shall be maintained by the Finance Director. All payments of principal and interest installments on the Assessments, together with redemption premiums shall be deposited in the Redemption Fund, which shall be held for the benefit of the City and the Bondowners. Payment of the Bonds at maturity, or at redemption prior to maturity, and all interest on the Bonds shall be made from the Redemption Fund. Interest earnings and profits resulting from the investment of moneys in the Redemption Fund shall be retained in such fund. Within the Redemption Fund, a Capitalized Interest Account has been established in which a portion of the proceeds of the Bonds will be deposited to provide for the payment of interest on the Bonds through , and a Prepayment Account has been established for the administration of prepayment of Assessments as set forth in the Bond Law. Reserve Fund. There shall initially be deposited into the Reserve Fund the amount of $ (the initial "Reserve Requirement") from the proceeds of the sale of the Bonds. The Reserve Fund shall be maintained at the "Reserve Requirement" which is an amount not to exceed the least of (a) Maximum Annual Debt Service on the Outstanding Bonds, (b) 125% of average annual Debt Service, or (c) ten percent (10%) of the initial principal amount of the Bonds. Moneys in the Reserve Fund shall be held as a reserve for the payment of principal of (including Sinking Fund Payments) and interest on the Bonds. The City shall cause the Reserve Fund to be administered in accordance with the Bond Law; provided that proceeds from redemption or sale of properties with respect to which payment of delinquent Assessments and interest thereon was made from the Reserve Fund, shall be credited to the Reserve Fund. r,. ,; ....~ ~.,..~;.,., ~h~. o ......Fund ’"=~’ D,-...,~ ......~" or c=;h, *~’’ ~" .....~,,h~.~.., .........~"-~ ~ur~ bond rrR ......~ ......,~=-.’,]] Whenever, after the issuance of the Bonds, an assessment is prepaid, in whole or in part, as provided in the Bond Law, the Finance Director shall transfer from the Reserve Fund to the Redemption Fund an amount specified in such direction equal to the product of the ratio of the original amount of the Assessment securing any Bonds so paid to the original amount of all Assessments securing any Bonds, times the Reserve Requirement. Amounts on deposit in the Reserve Fund in excess of the Reserve Requirement on any Interest Payment Date, or on any other date when requested by an Authorized Officer of the City, shall be transferred to the. Redemption Fund to be used for the purposes thereof. Notwithstanding the above, to the extent that the balance in the Reserve Fund is less than the Reserve Requirement, interest earnings of the Reserve Fund will remain therein until amounts in the Reserve Fund equal the Reserve Requirement unless otherwise required to be rebated to the federal government. When the amount in the Reserve Fund equals or exceeds the amount required to redeem the remaining outstanding Bonds (whether by advance redemption or otherwise), the amount of the Reserve Fund shall be transferred to the Redemption Fund and used to redeem the Bonds, and the remaining installments of principal and interest not yet due from assessed property owners shall be canceled without payment. ,’.:~ ~-~,~ Costs’of Issuance Fund.:, A podion~oHhe proceeds of the Bonds will be deposited in the Costs of Issuance Fund to pay the issuance costs of the Bonds. This fund will be maintained by the Finance Director and amounts will be disbursed from it_at the request of an authodzed,ofl~cer of the City.. .... :’;,-. Improvement Fund;j A portion ofthe proceeds of sale of the Bonds shall be deposited’ in the-Improvement Fund to be established and, held by the Finance,Director for the b~nefit of the City~ and sh~ll be disSursed for the payment or reimbursement Of costs of the Improvements ’ Defeasance - ’-’’; ~,. ~.~r ’r ~’ ’ ~.~ ~’. ’ ;;~.1~~" ’.~~.~ " °~ ,The Bonds and the Assessments shall’remain in full force and effect and the Bonds shall be secured by the Assessments until(i)the-Bonds mature and are paid;(ii)Assessments are prepaid and the Bonds are redeemed; (iii) apportionment of the Assessments occurs pursuant to Parts 10.0 and 10.5 of the Bond Law; or (iv)the Assessments are superseded and supplemented by assessments and refunding bonds issued pursuant to Division 11 or Division 11.5 of the California Streets and Highways Code, at which time the refunding escrow shall become the security for any outstanding Bonds not exchanged for refunding bonds. Any proceeds of sale of any refunding bonds may be deposited in escrow or trust with a bank or trust company and shall be secured in accordance with the laws applicable to funds of the City and shall be invested in Federal Securities, as defined in the Resolution. - ESTIMATED SOURCES AND USES OF FUNDS The proceeds from the sale of the Bonds, together with amounts available with respect to the Prior Bonds, are estimated to be disbursed as set forth below: , TABLE NO. 1 SOURCES AND USES OF FUNDS (1) SOURCES: Par Amount of Bonds Money Available From 1977 Bonds Money Available From 1989 Prior Bonds TOTAL SOURCES USES: Deposit to Improvement Fund Deposit to Escrow Fund . Deposit to Paying Agent for 1977 Bonds Deposit to Reserve Fund Costs of Issuance TOTAL USES Includes fees of Bond Counsel, Disclosure Counsel, financial advisor, Underwriter, rating agency, assessment engineer, verification agent, costs of printing and other miscellaneous costs. DEBT SERVICE SCHEDULE The annual scheduled debt service on the Bonds is set forth below. TABLE NO. 2 CITY OF PALO ALTO LIMITED OBLIGATION IMPROVEMENT BONDS UNIVERSITY AVENUE AREA OFF-STREET PARKING ASSESSMENT DISTRICT SERIES 2001-A ANNUAL DEBT SERVICE* Year Ending Bond Bond (Se~t,~Principal Interest TOTAL 2002 i11 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 (1) lnte~ston a podion ofthethispaymentiscapitalizedf~m proceeds ofthe Bonds. * Preliminary, subiect to chan,qe; based on an assumed averaqe interest rate of %. -]0- Limited Obligation ~.~.- ’ All obligations,of the City under the Resolution and the Bonds are not general obligation~ of the Ci~, but shall be limited’obligations, payable solely from ,the ,Assessments and from-the funds pledged therefor under the Resolution. Neither the faith and credit of the City nor of the State of California or any. political subdivision thereof is pledged to the payment of the Bonds. The Bonds are ".Limited Obligation Improvement" Bonds under-section 8769 of the Bond Law and are payable solely from and secured solely by the Assessments and the amounts in the Redemption Fund,and the Reserve Fund created under the Resolution~ .Notwithstanding any other provision of the Resolution, the City is not obligated to advance available Surplus funds from the City treasury to cure any! deficiency in the Redemption Fund; provided, however, the City is not prevented, in its sole discretion, from so advancing funds. The Bonds are issued upon and are secured by the Assessments together with interest thereon, and such unpaid Assessments together with interest thereon constitute a trust fund for the redemption and payment of the principal of the Bonds and the interest thereon. All the Bonds are secured by the moneys in the Redemption Fund and Reserve Fund created pursuant to the Resolution and by the Assessments levied. Principal of and interest on the Bonds are payable exclusively out of the Redemption Fund." r Although the unpaid Assessments constitute fixed liens on the parcels assessed, they do not constitute a personal indebtedness of the respective owners of such pamels. There is no assurance that the owners will be financially able to pay the Assessment installments or that they will pay such installments even though they may be financially able to do so. See "BONDOWNERS’ RISKS." The Assessments will be collected and transferred by the County to the City in approximately equal semi- annual installments, together with interest on the declining balances, and are payable and become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do general property taxes. The properties upon which the Assessments were levied are subject to the same provisions for sale and redemption as are properties for nonpayment of general taxes. Neither the faith and credit nor the taxing power of the City, the County, the State of California or any political subdivision thereof is pledged to the payment of the Bonds. Unpaid Assessments do not constitute a personal indebtedness of the owners of the parcels within the District and the owners are not personally obligated to pay the principal of or interest on the Bonds or to support payment of the Bonds in any manner. In the event of delinquency, proceedings may be conducted only against the real property securing the delinquent Assessment. Thus, the value of the real property within the District is a critical factor in determining the investment quality of the Bonds. Certain information with respect to the County. assessed value of property within the District is included herein. The unpaid Assessments are not required to be paid upon sale of property within the District. There is no assurance the owners shall be able to pay the Assessment installments or that they shall pay such installments even though financially able to do so. Limited Obligation Upon Delinquency THE BONDS ARE LIMITED OBLIGATION IMPROVEMENT BONDS UNDER SECTION 8769 OF THE BOND LAW AND ARE PAYABLE SOLELY FROM AND ARE SECURED SOLELY BY THE ASSESSMENTS AND THE AMOUNTS IN THE REDEMPTION FUND AND THE RESERVE FUND. -11- THE CITY HAS ’NO OBLIGATION TO ADVANCE MONEYS TO PAY BOND DEBT SERVICE IN THE EVENT OF DELINQUENT ASSESSMENT INSTALLMENTS. BONDOWNERS SHOULD NOT RELY UPON THE CITY TO ADVANCE MONEYS TO THE REDEMPTION FUND. NOTWITHSTANDING THE FOREGOING, THE CITY MAY, AT ITS SOLE OPTION AND IN ITS SOLE DISCRETION ELECT TO ADVANCE AVAILABLE SURPLUS FUNDS OF THE CITY TO PAY FOR ANY DELINQUENT INSTALLMENTS PENDING SALE, REINSTATEMENT, OR REDEMPTION OF ANY DELINQUENT PROPERTY. Collection of Assessments Pursuant to the Act and the Bond Law, installments of principal and interest sufficient to meet annual Debt Service on the Bonds will be billed by the County to the owner of each parcel within the Distdct against which there are unpaid Assessments. Upon receipt by the County and transferal to the City, Assessment installments are to be deposited into the Redemption Fund, which shall be held by the Finance Director of the City and used to pay Bond principal and interest payments as they become due. The Assessment installments billed against each parcel each year represent pro rata, shares of the total principal and interest coming due that year, based on the percentage which the Assessment against that parcel bears to the total of Assessments in connection with the financing. Pursuant to the Resolution, payment of the principal of and interest on the Bonds is secured by moneys in the Redemption Fund and the Reserve Fund. The City has no obligation to advance funds to the Redemption Fund except to the extent of moneys available in the Reserve Fund. Additionally, the City has covenanted in certain circumstances to cause the commencement of judicial foreclosure proceedings following a delinquency, and thereafter diligently cause prosecution to completion, court foreclosure proceedings upon the lien of any and all delinquent unpaid Assessments as set forth herein. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS - Covenant to Commence Superior Court Foreclosure." The City is not required to bid at the foreclosure sale. Reserve Fund There shall initially be deposited into the Reserve Fund an amount equal to the Reserve Requirement from the proceeds of the sale of the Bonds. The Reserve Fund shall be maintained at the "Reserve Requirement" which is an amountnot to exceed the least of (a) Maximum Annual Debt Service on the Outstanding Bonds, (b) 125% of average annual Debt Service, or (c) ten percent (10%) of the initial principal amount of the Bonds. Moneys in the Reserve Fund shall be held as a reserve for the payment of principal of (including Sinking Fund Payments) and interest and premium on the Bonds. ~’" .... ~ ~,,,,~,,,., *h~, D ...... =,,,,,~ ,,,;*h h,.,,,~ ..... ,~ ...... h *h,~ r’~, ..... ] See also "THE BONDS Establishment of Special Funds and Accounts - Reserve Fund" above. The moneys in the Reserve Fund shall constitute a trust fund for the benefit of the Owners of the Bonds, shall be held by the Finance Director of the City, and shall be administered in accordance with and pursuant to the provisions of Part 16 of the Bond Law; provided, that proceeds from redemption or sale of the properties with respect to which payment of delinquent Assessment installments and interest thereon was made from the Reserve Fund, shall be credited to the Reserve Fund; and provided further, that for the purposes of complying with federal tax law with respect to the Bonds and providing for reduction of the amount on deposit in the Reserve Fund during the term of the Bonds pursuant to Section 8887 of the Bond Law, all proceeds from investment of moneys in the Reserve Fund in excess of the Reserve Requirement shall be transferred to the Redemption Fund and used for the purposes thereof. THE CITY HAS NO OBLIGATION TO REPIENISH THE RESERVE FUND EXCEPT TO THE EXTENT THAT DELINQUENT ASSESSMENTS ARE PAID OR PROCEEDS FROM FORECLOSURE SALES ARE REALIZED. -12- Covenantto Commence Superior Court Foreolosure~ ....~.-,. , ~’~.’~ ~:~ ,:,. ~,. ,,., :’: ; , ’ ~ The Act provides that in the event any Assessment or installment thereof or any interest thereon is not paid when due; theCity may orders, the institution ,Of a court ’action.to foreclose the lien of the’ unpaid Assessment. In such an action, the real,,propedysubject~to,’the~,unpaid Assessment .may:be;sOld ’at judicial foreclosure sale. ,This foreclosure sal~ procedure is not. mandatory under,~he Act,or.the Bond L~w~ however~ in the Resolution the.City’ covenants with and for the beheld of the Owners of-the--Bonds.that, it will order,, and caus~e.to’ be (~ommenced, and_ thereafter, diligently prosecute an.action in.the,supedor.~court to,foreclose the.lien of any, Assessment or installment thereof, which-has been billed,,.but:has not been. paid, :pursuant to and as,-provided in sections 8830 and 8835; inclusive of the~Bond,Law.and the conditions specified,’in the Resolution, ,.The following;conditions apply to the foreclosure proceedings, which am to .be commenced not later than 60 days of any of the following determinations, which shall be made by the Finance Director not later than October 1 of each Fiscal Year: (A) If the Finance Director determines that there is a delinquency in the payment of an Assessment of $5,000 or more for a prior Fiscal Year or Years for any single parcel of land in the District. (B) If the Finance Director determines that the total amount of delinquent Assessments for the prior Fiscal Year for the entire District, less the total delinquencies under subsection (A) above, exceeds three percent (3%) of the total Assessments due and payable in the prior Fiscal Year, foreclosure shall be commenced against each parcel of land in the District with a delinquency of $2,500 or more for the prior Fiscal Year or Years. ~ ¯ (C) If the Finance Director determines that the total amount of delinquent Assessment for the prior Fiscal Year for the entire District, less the total delinquencies under subsections (A) and (B) above, exceeds three percent (3%) of the total Assessments due and payable for the prior Fiscal Year, foreclosure shall be commenced against each parcel of land within the District with any amount of delinquency for the prior Fiscal Year or Years. Prior to July 1, 1983, the statutory right of redemption from such a judicial foreclosure sale was limited to a period of one year from the date of sale. Legislation effective July 1, 1983 amended this statutory right of redemption to provide that before notice of sale of the foreclosed parcel can be given following court judgment of foreclosure, a redemption period of 120 days must elapse. Furthermore, if the purchaser at the sale is the judgment creditor (here, the City) an action may be commenced by the delinquent property owner within six months after the date of sale to set aside such sale. The constitutionality of the aforementioned legislation which repeals the one-year redemption period has not been tested and there can be no assurance that, if tested, such legislation will be upheld. In the event such Superior Court foreclosure or foreclosures are necessary, there may be a delay in payments to Bondholders pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale; it is also possible that no bid for the purchase of the applicable property would be received at the foreclosure sale. See also "BONDOWNERS’ RISKS - Bankruptcy and Foreclosure" and" - Collection of the Assessment" herein. Alternative Method of Tax Apportionment. "Teeter Plan" The Board of Supervisors of the County have adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan"), as provided for in Section 4701 et. seq. of the ¯ California Revenue and Taxation Code, "to accomplish a simplification of the tax-levying and tax-apportioning process and an increased flexibility in the use of available cash resources." This alternative method will, subject to the following, be used for distribution of the Assessment installments billed to property owners in the District. Pursuant to the Teeter Plan, each taxing entity in the County may draw on the amount of uncollected taxes and assessments credited to its fund, in the same manner as if the amount credited had been collected. Under the Teeter Plan, the County establishes a tax losses reserve fund and a tax resources account. The tax losses reserve fund is used exclusively to cover losses occurring in the amount of tax liens as a result of sales of tax-defaulted -]3- property. Moneys in this fund are dedved from delinquent tax penalty collections. The balance in the County’s tax loss reserve fund as of was $. The amount of taxes extended on a tax-defaulted property determines the cost of redeeming the property. If valuations of tax-defaulted property entered on the roll exceed 1% of the total roll, they are not included in any statement of equalized assessed valuations that are the basis for determining bond debt limitations. When tax- defaulted property is sold, the taxes and assessments which constitute the amount required to redeem the property are prorated between apportioned (Teeter) levies and unapportioned (or non-Teeter) levies. Amounts apportioned to the funds at the time of the levy are distributed to the apportioned tax resources accounts. The pro rata share of redemption penalties or interest collected on amounts levied but not apportioned to funds at the time of the levy is distributed to the respective funds. The balance of redemption penalties or interest, together with delinquency penalties, is apportioned to the tax losses reserve fund. The City will be responsible for entering the annual Assessment installment onto the tax roll. Upon completion of the tax roll, the County Auditor determines the total amount of taxes and assessments actually extended on the roll for each fund for which a tax levy or assessment has been included, and apportions 100% of the tax and assessment levies to that fund’s credit. Such moneys may thereafter be drawn against in the same manner as if the amount credited had been collected. The Board of Supervisors determines which moneys in the County treasury (including those credited to the tax losses reserve fund) shall be available to be drawn on to the extent of the amount of uncollected taxes credited to each fund for which a levy has been included. When amounts are received on the secured tax roll for the current year or for redemption of tax-defaulted property, Teeter Plan moneys are distributed to the apportioned tax resoumes accounts. The Teeter Plan is to remain in effect unless the Board of Supervisors orders its discontinuance or pdor to the commencement of any fiscal year of the County (which commences on July 1), the Board of Supervisors receives a petition for its discontinuance joined in by resolutions adopted by two-thirds of the participating revenue districts in the County, in which event the Board of Supervisors is to order discontinuance of the Teeter Plan effective at the commencement of the subsequent fiscal year. The County has never received a petition from any governing board to discontinue the Teeter Plan. In the event that the Teeter Plan or its application to the City and the Assessments are terminated, the amount of the Assessment installments received by the City would depend upon the actual annual collections of the Assessment installments and delinquency rates experienced with respect to the parcels within the District. The Board of Supervisors may, by resolution adopted not later than July 15 of the fiscal year for which it is to apply, after holding a public hearing on the matter, discontinue the procedure under the Teeter Plan with respect to any tax or assessment levying agency in the County if the rate of secured tax delinquency for that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured rolls in for that agency. Parity Bonds The City has auther-iz-ed-confirmed total Assessments of $45,729,182 millieP,-for the District. T.he Bonds are a first series of bonds to be secured by the Assessments. The City anticipates that it will issue additional bonds secured by the Assessments on a parity with the Bonds ("Parity Bonds") in the future to complete the authorized improvements for the District. The City may issue Parity Bonds pursuant a Supplemental Resolution adopted by the City, subject to specific conditions precedent set forth in the Resolution. The conditions include a condition that the fair market value of all parcels in the District subject to the Assessments, including then existing improvements and any facilities to be constructed or acquired with the proceeds of the proposed series of Parity Bonds, as determined by an MAI appraisal or, in the alternative, the assessed value of all such parcels and improvements thereon as shown on the then current County tax roll (or a combination of such procedures), is at least 4.00 times the sum of (i) the aggregate principal amount of all Bonds then outstanding plus (ii) the aggregate principal amount of the series of Parity Bonds proposed to be issued, plus (iii) the aggregate principal amount of any bonds then outstanding and payable from Assessments or assessment districts other than the District to be levied on parcels of land within the -]4- "District, plusr (iv)’ a portion of theaggregate:pdncipai amount of all other bonds then outstanding,and payable at least- par~ally Imm s~ial taxes to,bo ~vied~’onpamels,~ ofland.within the District ithe-"Other Bonds") ~wal to tl~ -~. aggregate principal amount.of the Other Bonds’m~tiplied by afraction; the numeraiorof .which’ is the amount of ~ s~ial taxes levied for the Other Bondso~i paraSOls of land ~hin tt~e DiStri~, an’d the ~denominator of which is the total amount of ~ .pecial taxes lev ed for the Other Bonds on a pamels of land aga nst which the sp.~ al taxes are lev=ed to pay the’O,th~r Bonds (suCh fraction to be determli~ed based upon the special taxes Which could b~e lewed the year in which maximum an.nual debtservice on the Other Bonds occurs), based upon =nformat~on from the most recent available fiscal year. - The Cit~ currently anticipates that it will iss~J~ P~r~B~n~ls in 2002. r’r.o ,~y"~-r"--~ Of -~n"r"- ,i,~ <,.~...,,, ~ ~., ..... The AsSessment and each !nstallmf~nt thereof an~l a~y inte~st= an~l" ~enalties thereon c~nstitute a li~n against the p~m,~i~ on which they. were im~sed ~until the same are paid: Such lien is subo~’dinate io all,fixe~l special assessment lier~ pre.~,iou~Sly imposed upon the Sam~ property, but has.priodty~vei all privateliens and over all fixed special assessment !iens which may thereafter, be.created against the property. Such lien is co-equal to and independent of the lien fo~general taxes and any lien imposed under the Mello-Roos Community Facilities Act of 1982, as.amended After providing for refunding pf the 1989 Bonds and defeasance of the with proceeds of the Bonds, there will curr~ently be no assessments or special taxes secured by property in the Dist~ct other t~han thee Assessments. See "PLAN OF FINANCE.""~~ " ’ ’~,,, , ,,, ~(~,1,, , L After issuance Of the Bonds, ’there Wiil rerfiain authority for approximately $36,369,182" of ad~litional bonds secured by the Assessments on a parity with the Bonds. The City anticipates that additional series of bonds will be issued to finance the remainder of the Improvements. See "SECURITY FOR THE BONDS - Parity Bonds" above. The fiscal year 2000-01 assessed valuation for all property in the District representing unpaid Assessments is 444544,654,665. Based on the 2000-01 County assessed value, the value of property in the District is 9.7 times the amount of the entire Assessment and 47.48 times the amount of the Bonds. See =VALUATION OF PROPERTY IN THE DISTRICT - Value to Lien Ratios" below and Appendix B-B__hereto. THE IMPROVEMENT PROJECT The Improvements In 1994, the City in cooperation with downtown property owners and the Chamber of Commerce, brought forward a "Comprehensive Parking Plan for Downtown" (the "Comprehensive Plan"). The Comprehensive Plan identified and addressed a deficit of parking in the Downtown area. The Plan recommended the construction of new parking facilities. The City has been working since 1994 to develop plans for construction of new parking garages on surface lots S and L0 near the center of downtown and surface lot R, on the southwesterly side of downtown. Together, the new garages will add approximately 700 new parking spaces to the downtown system. The S/L Garage consists of seven levels, two below grade and five above grade, and ground floor commercial/retail space, within the design. The R Garage includes five levels all above grade and the structure is completely devoted to parking. To date the City has completed planning, environmental documentation and 50-percent design on two new garages. The District was created to generate over $45 million of funding for the construction of the new garages and to refinance the 1989 Bonds and defease the 1977 Bonds. The amount of the currently confirmed Assessment against all parcels in the District is set forth in the Engineer’s Report to be $45,728,678.00. The description of improvements determined by the Assessment Engineer in the Engineer’s Report is referred to herein as the "Improvements" and is as follows: Within the City, the construction and acquisition of the following public vehicle off-street parking improvements, including the acquisition of all lands, easements, rights-of-way, licenses, franchises, permits and any outstanding assessments, the removal of all existing improvements and the construction of all auxiliary work necessary and/or convenient to the accomplishment thereof in accordance with plans and specifications to be approved by the City: 1. The Site S/L Garage to be constructed on a site of approximately 40,400 square feet located in the block bounded by Bryant Street, Lytton Avenue, Florence Avenue and University Avenue and consisting of a reinforced concrete structure of seven levels (five above-ground and two below ground levels) with approximately 692 parking spaces and approximately 8,100 square feet of non-parking space, but excluding any portion of such structure to be used for other than vehicle parking or related uses. 2. The Site R Garage to be constructed on a site of approximately 25,200 square feet located in the block bounded by Alma Street, High Street, University Avenue and Hamilton Avenue and consisting of a reinforced concrete parking structure of five parking levels (all above ground) with approximately 228 parking spaces. The foregoing shall include restrooms, bicycle racks and lockers, elevators, stairs, electric vehicle charging hook-ups, landscaping and architectural treatments. Cost Estimate The amount to be paid for said acquisitions, work and improvements, and the expenses incidental thereto has been prepared by the City is generally as follows: Phase I Phase 2 As Preliminarily As Confirmed And Approved Recorded Project Construction & Acquisitions [$33,330,383]{$33,330,383.0__0] Conlributions $0 $0.00 Total Cost for Assessment District 33,330,383 33,330,383.00 Incidental Cosis 6,876,335 7,639,971.89 Bond Costs 5,697,415 5,697,415.00,. Interest Income 0 (939,091.89) Balance To Assessment $45,904,133 $45,728,678.00 Source: Assessment Engineer. A portion of the amount listed above for cost of construction and acquisition of the project includes the amount necessary for the City to acquire and redeem all of the outstanding 1989 Bonds and to defease the outstanding 1977 Bonds. See "PLAN OF FINANCE." The proceeds of the Bonds will not be sufficient to fund the total cost of the Improvements. The City anticipates that it will issue one or more series of additional bonds secured by the Assessments on a padty with the Bonds to finance a portion of the cost of the Improvements. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS - Parity Bonds." Method of Assessment and Assessment Spread The Act does not define specific formulas for allocation of project costs among the parcels within an assessment district. The Act, however, requires each parcel to be assessed its share of the project costs in accordance with the special benefit conferred on each parcel by construction of the improvements financed through -]6- the assessment district. Assessment spreads are typically based on such factors as land area, actual or adjusted street frontage, Utility service consumption and traffic generation, or a combination thereof. The City caused preparation of an Engineers Report dated , :2001 (the "Engineer’s Report") by’Harris-& Associates, ’Petaluma, Ca!ifomia (the "Asse~ssment Engineer") in connection with the le_vy, of the Assessment. Becausethe assessments will support parking~facilities, the Assessment Engineer spread the costs of the Improvement to be financed together with the associated acquisitions, incidentals and bond issuance costs using the parking requirement, imposed on .Downtown property as the basis of benefit.. This parking requirement, as outlined in the City’s Parking Ordinance is 1 spacefor 250 developed square feet of building area (or 4 spaces per 1000 square feet of developed building area). ’""’shA ...... .,..,.v,v~=* .... ~",,’~" -,,~"~ .... ..-,,.~ ~.~ ....." ""’,"v~’~*" "~’ v~’~*~h"°h"’~"*....~ .,,v, ,.,,~,,.~ .... ..,.,,,,,=*h=" *h~.,,,. . The basis of benefit determined by the Assessment Engineer in the Engineer’s Report is as follows: Special benefit is provided to commercial properties and significant employers within the parking assessment district, because the availability of parking throughout the District allows these properties to comply with City regulations. Without adequate parking, property cannot develop or change use. Compliance with City regulations is a special and unique benefit afforded to those properties within the District and not available to those properties outside of the District. Residential property within the Downtown Area does not receive special benefit from the parking facilities. The parking demand associated with residential property is very low, compared to commercial enterprises and parking is provided onsite. The Downtown Area also includes three churches. The churches are not large employers nor do they draw traffic and parking to the Downtown Area during business hours. A survey of the three churches indicates that their pdmary hours of operation are limited to Sunday mornings and Wednesday evenings. This type of use is not the focus of the parking program and does not represent a significant portion of the land use within the downtown area. Because of their unique use and hours of operation, these existing churches also do not contribute to the parking deficit downtown and will not receive special benefit from new parking facilities and are not subject to the Assessment. The quantification of benefit determined by the Assessment Engineer ih the Engineer’s Report is as follows: The City, through its Parking Ordinance (Palo Alto Municipal Code Section 18.83 et. seq.) has established a variety of parking standards for different types of commercial and industrial land uses. These range from requirements as high as 1 space per 150 square feet to as low as 1 space per 400 square feet. The 1/250 standard represents an "average" demand, between the two extremes. Based on this information, and the City’s long history in the University Avenue Area, a Parking Benefit Unit of four spaces per 1000 square feet is reasonable. In some cases, properties located in the University Avenue Area provide parking on site. Properties with on- site parking with have their Parcel Benefit calculation adjusted to give appropriate credit for on-site parking provided the parking spaces provided meet the design cdteria outlined in the City’s Municipal Code. The benefit formula can be mathematically expressed below ("PBU" = Parcel Benefit Unit): - For Residential Properties: Parcel Benefit (in PBU) = 0 - For existing Churches that do not ordinarily place large parking demands during peak business hours: Parcel Benefit (in PBU) = 0 -For Existing University Avenue Parking Facilities: Parcel Benefit (in PBU) =0 -]?- - For All other Parcels: Parcel Benefit (in PBU) = (Enclosed square footage on a Parcel) x (4 PBU/1,000sf) - Ionsite ,~arkin,~ nrovided~ ^ ........ ~ o..~ ~., ~DO~ ~ ~ IO,,,;,~,-~ r’,,~V~T,-.~.~ Om ~ i., r~,~..~ o .... i ................................................. ) Assessment Rate (~n $/PBU) - (Prolect Cost)/(To[al PBU in District) Parcel Assessment = Assessment Rate x Parcel Benefit ..... I The spread of the Assessment among the parcels in the Distdct is set forth in the table under the caption "OWNE~;~~ VALUE-VALUATION OF PROPERTY WITHIN THE DISTRICT - Value to Lien Ratios" below. THE DISTRICT The County of Santa Clara and City of Palo Alto The City of Palo Alto was incorporated in 1894 and operates as a charter city under the Council-Manager form of government. The City provides a full range of municipal services and maintains municipal electric, water, gas, wastewater collection, wastewater treatment, storm drainage, and refuse utilities for the benefit of City residents and businesses. The population of the City was estimated to be 59,598 as of the end of 2000. See "APPENDIX G-B- CITY AND COUNTY GENERAL INFORMATION." The City is located in the northwest portion of Santa Clara County approximately 30 miles south of San Francisco and occupies 26 square miles. The City has benefited from its being the site of Stanford University and the location of the founding of Hewlett Packard. The City is the location of various enterprises which are a part of California’s "Silicon Valley" technology industry and as such, the City has become a desirable location for high technology business. Formation of the District The District was fe~stablished .by the City in -1~2001 under the authority of the Municipal Improvement Act of 1913 (the Act) and Article XIIID of the California State Constitution. The District was established with the goal of providing safe, convenient parking. The District has worked to create a downtown parking "system" with a variety of parking opportunities, many of which were financed by assessments within the District. See "Prior Assessments" below. The Assessments have been levied in accordance with the Proposition 218 Omnibus Implementation Act (ch. 28, 1997 stats.) as supplemented by the provisions of Section 13.12.050 of the Palo Alto Improvement Procedure Code, Which require that local agencies levy assessments based on the special benefits provided by the project. The City has determined that the levy also conforms with Article XIIID, Section 4, of the State Constitution requires that a parcel’s assessment may not exceed the reasonable cost of the proportional special benefit conferred on that parcel. Location of the District Property subject to the Assessment is in the University Avenue area of the City’s downtown. The University Avenue/Downtown Area is the central business district of the City of Palo Alto. It has been the symbolic center since the City was founded in 1894 and has become a thriving regional hub of commercial and retail activity, which is enhanced by the close proximity of the area to Stanford University. The area is just east of Highway 84 (El Camino Real) and is roughly bordered by Lytton Avenue to the North, Forest Avenue to the South, Alma Street to the West and Webster Street to the East. University Avenue is the central roadway in the area and it links the downtown with Highway 101 to the east and Stanford University, to the west. The City’s downtown is a modern and active area with diverse mixed-uses, including offices, retail establishments, restaurants, civic facilities and residences. The parking support system, financed in part from proceeds of assessments levied within the District in the past, supports the economic vitality of the area by providing essential parking facilities for visitors to the area. -]8- -19- [RESERVED FOR M,~,P OF THE DISTR!CTASSESSMENT DIAGRAM] -20- Property in the District The District includes 274 assessor’s parcels. Assessments to support bonded debt have been levied on 216 of the parcels within the Distdct boundades. The remain[n,~ 58 assessor’s parcels either provide adequate on-site parking (and are not assessed)’Or’,are ~esid~ntial-in ttatuPe dnd~a’ie ~xempt from"~ss~ssment. "The zoning designations within the Distdct are Commercial Downtown ("CD"). The CD district allows various commercial uses within the District and is intended to: ’ ~l’ , .1".-,".1’~, ’ ’ o:-Control amount and size of development ¯:-Preserve and promote ground floor retail uses ’..~Enhance pedestrian activity ¯ :.Create harmonious transitions to residential neighborhoods .,.:.Assist in the preservation of historic buildings The following table shows a summary of the Assessment levied, upon parcels in the District by type of commercial use, as shown on the City’s records as of Figures in the table reflect the entire Assessment for the District; the Bonds are secured by Assessments in the approximate amount of $9,364,857 and the City anticipates issuing additional bonds secured by the Assessment on a parity with the Bonds. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS - Parity Bonds." TABLE 3 PROPERTY SUMMARY Property Type No. of Percent of Total Parcels Assessment Assessed Assessment TOTAL fl) Based on total assessment of $45,729,182; the assessment for the Bonds is estimated by the Assessment Engineer to be $9,364,857. The City anticipates issuing one or more series of bonds in the future secured by the Assessments on a padty with the Bonds. Source: Assessment Engineer. Largest Assessees -21- Prior Assessments " Other than the’ Prior Bonds, ~ere are no additional overlapping prior assessments or Mello-Roos special taxes in the District. ," The Assessments and each installment thereof in the District and any interest and penalties thereon constitute a lien against the parcels of land on which they were imposed until the same are paid. Such liens are subordinate to all fixed special assessment liens previously imposed upon the property, but have pdority over all existing and future private liens and over all fixed special assessment liens, which may thereafter be created against the property. Such liens are coequal to and independent of the lien for general taxes on the parcels comprising the Distdct ’ Confined within ~e Districts ~undades am overlapping local agencies providing public se~i~s, some of which ha~e ou~ndiBg bonds oro~er indeb~dness. ~he dim= andovedapping debt of ~.Distdct.is shown :in the ~ble ~1~..T~dm~nuean~cipat~n notes, mv~ue~nds~and~Sta~ andFeder~wate~contrac~,paymen~,am TABLE 5 2 ;01 Assessed Valuat=on: $431,~94,871 ~ ’ ’ ......" >’ ..... DIRECT AND OVERLAPPING’TAX AND:ASSESSMENT.DEBT: , ~!~ ’" ~" Foothill-De Anza Community College District P,~O Alto Unified School District~t(y ofPalo ~ito Omversity Avenue Off-Street Parking Assessment District Midpeninsula Regional Open Space District TOTAL.DIRECT AND OVERLAPP~ING TAX AND P~SSESg~IENT DEBT .~,Ur~, , ,~ .~, ~--~ Or OVERLAPPING GENERAL FUND OBLIGATION DEBT: , Santa Clara County General Fund Obligations ~ . .. ~ Santa Clara County Board of Education Certificates of Participation Foothill-De Anza Community College District Certificates of Participation City of Palo Alto Certificates of Participation Midpeninsula Regional Park Open Space District General Fund Obligatibna Santa Clara Valley Water District Certificates of Participation TOTAL OVERLAPPING GENERAL.FUI~I.D O~BL!.GATIQN DZBT Applicable 0.816% 3.427 100. 0.507 0. 9% 0.289 0.851 3.766 0.507 0.289 Debt 5/1/01 $ 815,959 4,510,617 3,425,000 200,604". , v . $8,952,181~ \h~-’ h,, ’" :~-$1,~i5,042 55,878 284,319 402,962 369,239 591,121 $3,168,561. (0 COMBINED TOTAL DEBT ’ ’ " " ’~ ’ " O) Excludes assessment bonds to be sold. Excludes tax and revenue anticipation notes, revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. $12,120,741’(2) Ratios to 2000-01 Assessed Valuation: Direct Debt ($3,425,000) ........................................................... Total Direct and Overlapping Tax and Assessment Debt...~ ..................., ......,..2.05% Combined Total Debt ....................................................................; ..................2.77% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/00:$0 Source: California Municipal Statistics.. ’, ]’. ~ ,, -_ ... VALUATION OF PROPERTY WffHIN THE DISTRICT Assessed Valuation of Property The value of the land within the District is a critical factor in determining the investment quality of the Bonds. If a properly owner defaults in the payment of an Assessment installment, the City’s only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Assessment Installments. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS- Covenant to Commence Superior Court Foreclosure" and "BONDOWNERS’ RISKS - Bankruptcy and Foreclosure., Reductions in District property values due to a downturn in the economy, natural disasters such as earthquakes or floods, stricter land use regulations or other events could have an adverse impact on the secudty for payment of the Assessments. -23- ’. The County 2000-2001 assessed valuation for each parcel in the District is set forth in Appendix B-A__hereto,,- together ,with the amount of the Assessment. for each parcel, and value, tolien ,ratios: Assessed valuations do not. necessarily -reflect ’.current market :value. As provided by Article XIII A of the California Constitution, county assessors’ assessed values are to reflect market value as of the date the property was last assessed (or 1975, which ever is more recent), increased by a maximum of 2% per year. Properties may be reassessed bythe County only- upon a change in ownership of existing property, of atleast 51% or new construction. The actual market value of parcels in the Distdct,’,if sold at foreclosure, may be higher or~lower than the Assessor’s assessed values, depending upon the date of the Assessor’s most recent assessment.,’ The actual ~fair market value can be established only- through an arms-length sale or a certified appraisal of the property within the District. Value’to Lierl Ratios Appendix B-A__hereto contains a table ,of value to lien ratios for each parcel .in the District. Value to lien I ratios represent the 2000-01 assessed valuation to the Bonds or to the total Assessment lien, and are-dedved by dividing the assessed valuation of land, plus improvements, of the Assessor, by the unpaid Assessments per.parcel. For example, a 4:1 lien ratio means that the assessed valuation is four times the total Assessment .amount. According to the County Assessor’s tax roll records, the assessed valuation of the land and improvementswithin the Distdct is $444,654,668 for fiscal year 2000-2001. The total Assessment is $45,729,182; accordingly, the. total value to lien for the entire Assessment is 9.7 to 1 based on 2000-01 assessed values.- However, bonds have not yet been issued for the entire Assessment; .the Assessment for the Bonds is estimated, by the Assessment Engineer to be $9,364,857, resulting in a value to lien ratio for the Bonds of 47.48 to 1. The City anticipates issuing one or more series of bonds in the future, provided certain conditions set .forth in the Resolution are met. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS - Parity Bonds." The following tables show~_ a summary of value to lien ratios for the Assessment fcr tho 9c,",d~ :,",d for tho e,~L~e4~sessm~qt. The ratios utilize the County assessed valuation for each parcel in the District, which may not accurately reflect the current market value of the parcels, particularly for parcels which have not changed ownership for many years. TABLE 6 SUMMARY OF VALUE TO LIEN RATIOS Value to Lien Ratio(l) Number Percent of Total Of Parcels Assessment Over 10 to 1 80 34.06% 7.50 - 9.99 to 1 18 8.23% 5.00 - 7.49 to 1 26 15.75% 3.00 - 4.99 to 1 20 8.43% 2.00 - 2.99 to 1 14 5.96% Under 2.00 to 1 58 27.62% (t) Property Value information is taken from the FY 2000/2001 Secured Tax Roll for Santa Clara County. The Secured Tax Roll does not include values for property owned by the City and represents property value for tax purposes, not market value of the real estate. Actual values may be higher or lower than assessed values Source: Harris & Associates. The following table shows a summary of the value to lien ratio for the ten largest property owners in the District. The ratios utilize the County assessed valuation for each parcel in the District, which may not accurately -24- re~ectSnecurrerit~market~ value ~f~tfie;parcels, particularly for parcels which have not changed ownership r many, years. 1 ’=" ~"~";~’~’~,~ TABLE6 VALUE TO LIEN ~TIOS FOR TEN ~RGEST OWNERS 2 3 4 5 7 8 9 Thoits Bros. Inc.480 Lytton $20,052.04 10 $1,198,698 ,"4"h~lifd Brd£~lnc.469 University $100,260.20 $382,074 Thoits Bros. Inc.437 Kipling $10,026.02 $90,980 ThoitsBro~,Jnc.++ ~.,f ,,. ’,’,411Kiplin’g,0:i,~ ’ .$30,078.06 !,$713,900 , Thoits,BroS.in.~ + +~ ’Y.- .l’:-~ ’ " .~27, l.Upiveraity, ! ;+:- _$6~5,!~9.13 ~ ’_. i’ ~.~ $102,042 Thqits Bms:10~c. ~ , ~, ’,, .,, , ,,t56 University, ;+ $496,287 99 . $4~917:6!9 549 Bryant. ~, ., $!80,+468.36 ,~. ~. ~:$~,,153,955 285 Hamilton .,~$8+7,198.69+ ’ ~$2,871,626 200.~,=ni!t,,o~ ,~+$~5~793.~!~.. +. ~149,558 625 Emerson .$135,351.27 ,Thoits B~’os.,lnc. ~; .... Tboi.ts Bros. Inc.r , , , ~. Thoit~ Bros. Inc.~i~Thoits Brd~.. Inc. Totals for Theirs Bros. Inc. Pacific B’ell Real Estate Offic~ 505 Hamilton Avenue Partners 505 H~milton Avenue Parts, LP 505 Hamiltoh Avenue, Partnership, L.P. 505,Hamilton Ave Parts LP Totals for 505 Hamilton Partners C M Capital Corporation ,; City of pale Alto City of Pale Alto City of Pale Alto Totals for City of Pale Alto Cowper Square Partners c/o Webster Financial Casa, OIga Henry Bullock/Richard Holstrom Alhouse-Hamilton Alhouse-Hamilton Totals for Alhouse-Hamilton Seabiscuit LLC Et AI 59.78 Mixed Use-Commercial/Office/Apts. Above 3.81 Retail/Office (under construction) 9.07 619 Emerson $105,273.21 ’ . $86 71!0.82 r $2,295,958.58 $12,301,508 5.36 345 Hamilton ~2,015,2~0.02 ’0.00 505 H~ilton’~ $651,691.30 $~,849,662 10.51 361’Lytton’~$150/~9’0.30’"" $2,333,313 15.~2 181 Lytton ~- ~ $2d~,689.~3 " $6,097,921 22.95- 180 University 525 University 450 Bryant ’ 25’0 Hamil~n 520 Cowper $736,912.47 . $5,433,331 $1,804,683.60 $20,714,227 $1,769p592.5~3,. ... ,$11,684,907. ,. . ~ $ l. 60,4116.32 $220,572.44 .. .... $691,795.38 $1,072,784.14 $1,027,667.05 $12,815,822 7.37 11.48 6.60 , ~.00 0.00 0.00 offices/Processing Equipment Commereml/Office (Bank) Commei’cial/Office (Investment Group) Commercial/Office (Compaq Headquarters) Retail (Ross Clothing) Multi-~to,ry Offiqes _ Ground Floor Commercial/Retail City Senior Center City Hall 12.47 Garden Court Hotel/ll Fomio Restaurant ! 80 Hamilton I $~7.7,53.6t95 ,, 529,B’ryant. , , . ] $91.2,36.7.82 261 Hamilton ;,+ ,+ $7,2687+3.~, , 541 ~R.amg,.na , ,,.’ $b10,28.6.22, I00 Hamilton $797,068.59 S2,728,366... 2,79 S18,900,000 +. 20.72 . $774,297 ~1.07 :r $~45,635 1.32 $919,932 LII $23,063,605 28.94 , EulI-Se~ice Regidential C~e Facility Offices ~Restaurant ,Restaurant Mixed use Retail/Office/Stanford Ap~. Above O) Property Value information is taken from the FY 2000/2001 Secured Tax Roll for Santa Clara County. The Secured Tax Roll does not include values for property owned by the Cit~ and represents property value for tax purposes, not market value of the real estate. Actual values may be higher or lower lhan assessed values. Source: Harris & Associates. ; In comparing the aggregate assessed value of real prope~ within the District and the principal amount of the Bonds, it should be noted that only real property upon which there is a delinquent Assessment can be foreclosed, and the real property within the District cannot be foreclosed upon as a whole to pay delinquent Assessments of the owners of such parcels unless all of the real property within the District is subject to a delinquent Assessment. In any -25- ,event, ,individual parcels ~may be foreclosed upon to pay delinquent installments of the Assessments levied against such parcels. ,- ’ ,.., There:is no, assurance that,-in the event of a foreclosure sale for a delinquent Assessment installment, any , bid ’~would be.,received ~for such ~ property or. that.:any bid received would be ,sufficient to pay such. delinquent installment., The Bond,.Law requires that a~ parcelbe sold for only the delinquent~ installments (plus costs and penalties) and not the entire outstanding Assessment. See "BONDOWNERS’ RISKS - Cotlection of AsseSsment?’ Furthermore, no assurance can be given that any of the foregoing ratios can or will be maintained during the period of time that. the Bonds are outstanding, in that the City has no control over the amount of additional indebtedness that may be issued in the future by other public entities, the payment of which, through the levy of a tax or special tax, is on a parity with the Assessments levied against the land in the District. ~ Property Tax Status The City actually received 100% of the 2000-2001 assessment levy because of the County’s participation in the Teeter Plan. See ’SECURITY AND SOURCES OF PAYMENT FOR THE 2001 BONDS - Alternative Method of Tax Apportionment - Teeter Plan" above. As of June 30, 2000, delinquencies of payment of the assessments [and secured property taxes] for fiscal year 1999-00 totaled approximately $ of over $. million levied. BONDOWNERS’ RISKS The following information should be considered by prospective investors in evaluating the Bonds. However, the following does not purport to be an exhaustive listing of risks and other considerations which may be relevant to investing in the Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. General Under the provisions of the Bond Law, Assessment installments, from which funds for the payment of annual installments of principal of and interest on the Bonds are derived, will be billed to properties against which there are unpaid Assessments on the regular property tax bills sent to owners of such properties. Such Assessment installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Assessment installments made will be in aggregate amounts for the Bonds. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS - Assessments" herein. Payments of Assessment installments made by the owners of parcels will be applied on a pro-rata basis to all Bonds for which the Assessment installments are due and could result in a lesser amount being applied to the Assessment installment due with respect to the Bonds if the amount paid by the property owners is less than the total Assessment installment, A property owner cannot pay the county tax collector less than the full amount due on the tax bill. It should also be noted that the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also in~licate an unwillingness or inability to make regular property tax payments and Assessment installment payments in the future. Unpaid Assessments do not constitute a personal indebtedness of the owners of the parcels within the District. Accordingly, in the event of delinquency, proceedings may be conducted only against the real property securing the delinquent Assessment. Thus, the value of the real property within the District is a critical factor in determining the investment quality of the Bonds. The unpaid Assessments are not required to be paid upon sale of property within the District. There is no assurance the owners shall be able to pay the Assessment installments or that they shall pay such installments even though financially able to do so. See "Owners Not Obligated to Pay Bonds or Assessments" below. -26- ’ ’ i-;~t.r~ ~’,lr~order~to~pay debt service on the Bonds, it is necessary that unpaid installments of Assessments on land within the District are paid in a lJmely manner. Should the installments not be paid on time, the City has established a¯Reserve Eund ,from theproceeds, of the~B~nds to cover~ delinquencies., .~The Assessments are secut’ed by a lien on -they’,parcels ~ithinc, the.District,and-the ,City~ has/covenanted irJ Certain cimumstances to :institute foreclosure preceedin~s to,~ell~parcels,w!th delinquent in.stallments foroamounts sufficient to cover such delinquent installmentsin ,,. ~.~:.:~,~,Failure ,by ~owners;,~f;the ~arcels .to ,pay installrnlents ,of IAsseSsments when .due, depletion of the. Reserve Fund, delay in, foreclosure proceedings, or the inability of the City to sell parcels which have been subject to ~reclosure~pro~:liog~for amounts sufficient to cover the delinquent installments of Assessments levied against such parcels may result in the inability of the City to make full or punctual payments of debt service on the Bonds and ly ",’Bondowners would therefore be.adyerse .affected, Owners Not Obligated to Pay Bonds or Assessments Unpaid Assessments,do not constitute a personal indebtedness of,the ~owners of the parcels within the District and the owners have made no commitment to pay the principal of or interest on the Bonds or to support payment of the Bonds inany manner. There is no assurance that the owners have the ability to pay the Assessment installments or that, even if they have the ability, they will choose to pay such installments. An owner may elect.tonot pay the Assessments when due and cannot be legally compelled to do so. If an owner decides it is not .economically feasible to develop or to continue owning its property encumbered by the lien of the Assessment, or decides that for, any ~ther’reason it does not want rtO retain title to the property, such owner may choose not to pay Assessments and to allow the property to be foreclosed. Such a choice may be made due to a decrease in the market~ value of the property, or for other reasons. ,A foreclosure of the property wig result in such owner’s interest in the property being transferred, to another party. Neither the City nor any Bondowner will have the ability at,any time toseek payment from the owners of property withinthe District of any Assessment or any principal or interest due on the Bonds, or the ability to control who becomes a subsequent owner of any property within the District. Bankruptcy and Foreclosure The payment of Assessments and the ability of the City to foreclose the lien of a, delinquent unpaid Assessment, as discussed in "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS- Covenant to Commence Superior Court Foreclosure," may be limited by bankruptcy, insolvency, or other laws generally affecting creditors’ rights or by State law relating to judicial foreclosure. In addition, the prosecution of a foreclosure could be delayed due to lengthy local court calendars or procedural delays. The various legal opinions to .be delivered concurrently with the delivery of.the Bonds (including Bond Counsel’s approving legal opinion) will be qualified as to the enforceability.of the various legal instruments by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Although bankruptcy proceedings would not cause the Assessments to become extinguished, bankruptcy of a property owner, or anyone else who claims an interest in the property, could result in a delay in prosecuting superior court foreclosure proceedings and could result in delinquent Assessment installments not being paid in full. Such a delay would increase the likelihood of a delay or default in payment of the principal ofand interest on the Bonds. - ., Availability of Funds to Pay Delinquent Assessment Installments The City will establish a Reserve Fund and initially deposit therein a portion of Bond proceeds. As discussed in ’THE BONDS - Establishment of Special Funds and Accounts" herein, if a delinquency occurs in the Redemption Fund, the Fiscal Agent will transfer into the Redemption Fund an amount from the Reserve Fund -27- needed to pay debt service on the Bonds. There is no assurance that the balance in the Reserve Fund will always be adequate,to:pay the debt eervice,oriL-the Bonds in the event of delinquent Assessment installments. If, during the period of delinquency, there are insufficient funds in the Reserve Fund to pay delinquent installments, a delay may occur in payments to the owners of the Bonds:~ Limited Obligation Upon Delinquency ~: ..~ .. The .City’s obligation to advance moneys to pay,Bond debt service in the event of.delinquent Assessment installments sh~ll not exceed the; balance in the~Reserve Fund. The City has made an election in the Resolution of Intention not to’be obligated to advance funds of the City for delinquent Assessment installments pursuant to Section 8769(b) of the Bond Law;the only obligation of the City’is to transfer amounts available in the Reserve Fund. During the period of delinquency if there are insufficient funds in the Reserve Fund, a delay may occur in payments to Bondowners.~ Notwithstanding,:the City may, at its sole option and at its sole. discretion, elect to advance, available surplus funds of the City to pay. for any~ delinquent installments pending sale, reinstatement or. redemption of.any delinquent property ..... Collection of the Assessment In order to pay debt service on the Bonds it is necessary that the Assessment be paid in a timely manner. Should the installments of Assessments not be paid on time, funds in the Reserve Fund and Redemption Fund may be utilized to pay Debt Service on the Bonds to the extent other funds are not available therefor. The Assessment is to be collected in the same manner as ordinary ad valorem real property taxes are collected and, except as provided in the special covenant for foreclosure described herein and in the Act, is to be subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem real property taxes. Pursuant to these procedures, if taxes are unpaid for a period of five years or more, the property may sold to recover amounts due. Pursuant to the Bond Law, in the event of any delinquency in the payment of the Assessment occurs, the City may commence an action in superior court to foreclose the lien therefor within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial foreclosure sale. Such judicial foreclosure action is not mandatory. Amendments to the Bond Law enacted in 1988 and effective January 1, 1989 provide that under certain circumstances property may be sold upon foreclosure at a lesser Minimum Price or without a Minimum Price. "Minimum Price" as used in the Bond Law is the amount equal to the delinquent installments of principal or interest of the Assessment or, together with all interest penalties, costs, fees, charges and other amounts more fully detailed in the Bond Law. The court may authorize a sale at less than the Minimum Price if the court determines that sale at less than the Minimum Price will not result in an ultimate loss to the Bondholders or, under certain circumstances, if holders of 75% or more of the outstanding Bonds consent to such sale. However, there can be no assurance that foreclosure proceedings will occur in a timely manner so as to avoid a delay in payments of debt service on the Bonds. The City has covenanted for the benefit of the owners of the Bonds that under certain circumstances, the City will commence an action in the superior court to foreclose the lien of the delinquent installments of the Assessment against each parcel of land in the District for which such installment has been billed but has not been paid, and will diligently prosecute and pursue such foreclosure proceedings to judgment and sale. In the event that sales or foreclosures of property are necessary, there could be a delay in payments to holders of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the City of the proceeds of sale if the other sources of payment for the Bonds, as set forth in the Resolution, are depleted. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS- Covenant to Commence Superior Court Foreclosure" and "BONDOWNERS’ RISKS - Bankruptcy and Foreclosure" herein. -28- The payment of Assessment installments and the ability of the City to foreclose the iien of a delinquent unpaid Assessment may be limited by bankruptcy, insolvency, or other laws generally affecting creditors’ rights or by the laws of the State relating to judicial foreclosure; Although bankruptcy’ proceedings.,would . not oause.,the Assessment- liens"to’--become ~xti~iguished,’ bankrupt;y,of a property own~,_,or,anyone else wh~),claims: an,lrlterest;inthe property,,-cbuld result~ ih b-delay in foreclosure proceedings. ’,Such delay,.particulady.!rrthe.case’of, a.major landowner inlhe DiStriCt; would ini~rease,the:" likelihood, of !a ~delay~3nd-a default.~in, payment of the~pdndpal’of .and intereston the ’Bo, nds, and the po~s!bility of The value of the land within the District is a cdtical factor in determining the investment quality of the Bonds. If a property owner defaults in the payment of an assessment installment, the City’s only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent assessment installments. Reductions in District property values due to a downturn in the economy, natural disasters such as earthquakes or floods, stricter land use regulations or other events could have an adverse impact on.the secudty for’payment of the. assessments. Assessed valuations do not necessarily reflect current market value. Therefore, the actual’ market. value of pamels in the District, if sold at foreclosure, may be higher or lower than the Assessor’s assessed v~ilu’es~, depending upon the date of the Assessor’s most recent~assessment. The actual fair market value can be ~stablished~ only through an arms-length sale or a certified appraisal of the property within the District. A value determined by the County Assessor is an opinion with respect to the market value. No assurance can be given that if a pamel with delinquent installments of the Assessment is foreclosed, any bid will be received for such property or, if a bid is received, that such bid will be sufficient to pay delinquent installments of unpaid Assessments. Ballot Initiatives From time to time constitutional initiatives or other initiative measures could be adopted by California voters. The adoption of any such initiative might place limitations,on the ability of the State, the County or local districts to increase revenues or to increase appropriations, or on the ability of the landowners to complete their developments. Future Overlapping Indebtedness The ability of an owner of land within the District to pay the Assessments could be affected by the existence of other taxes and assessments imposed upon the property subsequent to the date of issuance of the Bonds. In addition, other public agencies whose boundaries overlap tho~e of the District could, without the consent of the City, and in certain cases without the consent of the owners of the land within the District, impose additional taxes or assessment liens on the property within the District to finance public improvements to be located inside of or outside of the District. The Assessments and each installment thereof and any interest and penalties thereon constitute a lien against the parcels on which they were imposed until the same are paid. Such lien is subordinate to all fixed special assessment liens previously imposed upon the same property, but has priority over all private liens and over all fixed special assessment liens which may thereafter be created against the property. Such lien is co-equal to and independent of the lien for general taxes and any lien imposed under the Mello-Roos Community Facilities Act of 1982, as amended. Currently, there are no Mello-Roos liens or assessments (other than the Assessment) against property in the District. -29- The Resolution does not contain a provision allowing for the acceleration Of the principal of the Bonds in the event of a payment default or o~her default under the terms of the Bonds or the Resolution. CONSTITUTIONAL LIMITATIONS ON TAXATION AND APPROPRIATIONS Property Tax Rate Limitations - Article XIIIA On June 6, 1978, the California voters added Article XIIIA to the California Constitution which limits the amount of any ad valorem taxes on real property to one percent (1%) of its full cash value, except that additional ad valorem property taxes may be levied to pay debt service on indebtedness approved prior to July 1, 1978 and (as a result of an amendment to Article XlllA approved by California voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978, by two-thirds of the voters voting on such indebtedness. Article XIIIA defines full cash value to mean "the county assessor’s valuation of real property as shown on the 1975-76 tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed or a change in ownership has occurred after the 1975 assessment period." This cash value may be increased at a rate not to exceed two percent (2%) per year to account for inflation. The United States Supreme Court has uphe!d the validity of Article XIIIA in a case decided in June 1992. Article XIIIA as originally implemented has been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster and in various other minor or technical ways. Legislation Implementing Article XIIIA Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any ad valorem property tax. The 1% property tax is automatically levied annually by the county and distributed according to a formula among using agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1978. Any special tax to pay voter-approved indebtedness is levied in addition to the basic 1% property tax. Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions in the "taxing area" based upon their respective "situs." Any such allocation made to a local agency continues as part of its allocation in future years. Beginning in the 1981-82 fiscal year, assessors in California no longer record property values on tax rolls at the assessed value of 25% of market value which was expressed as $4.00 per $100 of assessed value~ All tax.able property is now shown at full market value on the tax rolls. Consequently, the basic tax rate is expressed as $1 per $100 of taxable value. -30- Appropriation. LimitaUon,--Article XIIIB On November 6, 1979, the voters of the State approved Proposition 4, known as the Gann Initiative, which added Article XIIIB. On June 5, 1990, the voters approved-Proposition 111, which amended Article XIIIB in certain respects. Under Article XIIIB, as amended, state and local government entities have an annual "appropriations limit" which limits the ability to spend certain moneys which are called "appropria.tions subject to limitation" (consisting.of most tax revenues and certain’ state subventions, together.called ~:proceeds of taxes" and Certain other funds) in an amount higher than the "appropriations limit." ,Article XIIIB does not, affect the appropriat!on of moneys Which are excluded from the-definition of "appropriations limit,’, including debt service on indebtedness existingor authorized as of January 1, 1979, or bonded indebtedness subsequently approved by two:thirds of the voters. ~,. ~ ~. , In general terms,.the ~appropriations limit’ is-to be based on the adjusted fiscal year 1986-87 appropriations limit, which is traced back through an annual adjustment process to the 1978-79 fiscal year. Annual adjustments reflect changes in California per capita personal income (or, at the City’s option, changes in assessed value caused by local nonresidential new construction), population and services provided by these entities. Among other provisions of Article XIIIB, if the revenues of such entities in any fiscal year and the following fiscal year exceed the amounts permitted to be spent in such years, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two,years. , Property Tax Collection Procedures In California, property which is subject to ad valorem taxes is classified as "secured" or "unsecured." The ’secured roll" is that part of the assessment roll containing state-assessed public utilities’ property and property the taxes on which are a lien on real property sufficient, in the opinion of the county assessor, to secure payment of the taxes. A tax levied on unsecured property does not become a lien against such unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens arising pursuant to State law on such secured property, regardless of the time of the creation of the other liens. Secured and unsecured property are entered separately on the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property .... Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a 10% penalty attaches to any delinquent payment. In addition property on the secured roll with respect to which taxes are due is delinquent on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1½% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the county tax collector. Historically, property taxes are levied for each fiscal year on taxable real and personal property situated in the taxing jurisdiction as of the preceding January 1. A bill enacted in 1983, SB 813 (Statutes of 1983, Chapter 498), however, provided for the supplemental assessment and taxation of.property as of the occurrence of a change of ownership or completion of new construction. Thus, this legislation eliminated delays in the realization of increased property taxes from new assessments. As amended, SB 813 provided increased revenue to taxing jurisdictions to the extent that supplemental assessments of new construction or changes of ownership occur subsequent to the January 1 lien date. Property taxes on the unsecured roll are due on the January 1 lien date and become delinquent, if unpaid on the following August 31. A ten percent (10%) penalty is also attached to delinquent taxes in respect of property- on the unsecured roll, and further, an additional penalty of 1-1/2% per month accrues with respect to such taxes beginning the first day of the third month following the delinquency date. The taxing authority has four ways of -3]- collecting unsecured personal property taxes: (1) a civil action against the taxpayer, (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer, (3) filing a certificate of delinquency for record in the county recorder’s office, in order to obtain a lien on certain property of the taxpayer, and (4)seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee. The exclusive means of enforcing the payment of delinquent taxes in respect of property on the secured roll is the sale of the property securing the taxes to the State for the amount of taxes which are delinquent. Proposition 218 On November 5, 1996, the voters of the State approved Proposition 218, the so-called "Right to Vote on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which contain a number of provisions affecting the ability of the City to levy and_collec_t~bOt~existing and future taxes, assessments, fees and - charges. Article XIIID requires that, beginning July 1, ,1997;:the’ proceedings for the levy of any assessment by the City (including, if applicable, any increase in such assessment or any supplemental assessment) must be conducted in conformity with the provisions of Section 4 of Article XIIID... Any challenge (including any constitutional challenge) to the proceedings or the assessment must be brought within 30 days after the date the assessment was levied. All of the Assessments securing the Bonds were levied according to the procedures and approval process requirements of Proposition 218. Article XIIIC removes limitations on the initiative power in matters of local taxes, assessments, fees and charges. Article XlIIC does not define the term "assessment’, and it is unclear whether this term is intended to include assessments (or assessments) levied under the Act. Furthermore, this provision of Article XIIIC is not, by its terms, restricted in its application to assessments which were established or imposed on or after July 1, 1997. In the case of the unpaid Assessments which are pledged as security for payment of the Bonds, the laws of the State provide a mandatory, statutory duty of the City and the County Auditor to post installments on account of the unpaid Assessments to the property tax roll of the County each year while any of the Bonds are outstanding, in amounts equal to the principal of and interest on the Bonds coming due in the succeeding calendar year. The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainly the outcome of such determination. -The City believes that the initiative power cannot be used to reduce or repeal the unpaid Assessments which are pledged as security for payment of the Bonds or to otherwise interfere with performance of the mandatory, statutory duty of the City and the County Auditor with respect to the unpaid Assessments which are pledged as security for payment of the Bonds. CONTINUING DISCLOSURE The City has covenanted for the benefit of owners of the Bonds to provide certain financial information and operating data relating to the Distdct by not later than months after the end of the City’s fiscal year (presently June 30) in each year commencing with its report for the 2000-2001 fiscal year (the "Annual Report") and to provide notices of the occurrence of certain enumerated events. The Annual Report will be filed by the City with each Nationally Recognized Municipal Securities Information Repository. The notices of material events will be filed by the City with the Municipal Securities Rulemaking Board. These covenants have been made in order to assist the Underwriter in complying with Securities Exchange Commission Rule 15c2-12(b)(5). The specific nature of the -32- information to be contained in the Annual Report or the notices of material events by the City is summarized in "APPENDIX E-D- FORM OF CONTINUING DISCLOSURE-CERTIFICATE." VERIFICATION REPORT Causey, Demgen & Moore, Denver, Col0rai:lo, independent accountants, upon delivery of the Bonds, will deliver a report on the mathematical accuracy of certain computati6ns;contained in schedules provided to them on behalf of the City, relating to (a) the sufficiency of the anticipated receipts from the securities deposited into the escrow fund and with the paying agent to pay, when due, the principal, whether at matudty or upon~pdor redemption, interest and redemption premium requirements of the 1989 Bonds and the 1977 Bonds and (b) the "yield" on the escrow securities and on the Bonds considered by Bond Counsel in connection with the opinion rendered by such firm that the Bonds are not "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended. ’ LEGAL OPINION The proceedings in connection with the issuance of the Bonds are subject to the approval as to their legality of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel for the City. A copy of the legal opinion, certified by the official in whose office the original is filed, will be printed on each Bond. Certain legal matters will also be passed upon for the City by Jones Hall as Disclosure Counsel. The fees of Bond Counsel and Disclosure Counsel are contingent upon the issuance and delivery of the Bonds. TAX MATTERS In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, Califomia, Bond Counsel, subject, however, to the qualifications set forth below, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, however, that, for the purpose of computing the altemative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings. The opinion set forth in the preceding sentence is subject to the condition that the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income taxes. Owners of the Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the Bonds other than as expressly described above. NO LITIGATION There is no action, suit, or proceeding known by’ the City to be pending or threatened at the present time restraining or enjoining the delivery of the Bonds or the collection of Assessments levied by the City in the District or -33- ’ ’ ’ -- ’ ’ " 1 ~ ....." ~’’’ It’’ ’’:’" ’ UNDERWRITING Pursuant to a competitiVe bidding process, ’ ~ ’ to.purchase the Bonds from the City, at a purchase pdce of $. ~ the Underwriter of the Bonds, has agreed }, , ,(representing the par’amount of the Bonds less an Underwriter’s discount of $. .... , .... )2 The Underwriter will purchase all of the Bonds if any are’ purchased. The obligation of the Underwriter to make such purchase is subject to certain terms and’conditions set forth in the Notice of Sale pursuant to which the bid was made and accepted by the City. 1 ~ ~ The public offering prices of the Bonds may be changed from time to time by the Underwriter. The Underwriter may offer and sell Bonds to certain dealers and others at a price lower than the offering price stated on the cover page hereof. ’,- ,,, , , ~ ~ ’, ’. "~ : ~MISCELLANEOUS ’ ,,. All quotations from, and summaries and explanations of the Resolution, the Bonds, the Act, the Bond Law or other statutes and documents contained herein do not purport to be complete, and reference is made to said documents and statutes for full and complete statements of their provisions. . This Official Statement iS submitted only in connection with the sale of the Bonds by the City. All estimates, assumptions, statistical information and other statements contained herein, while taken from sources considered reliable, are not guaranteed by the City or the Underwriter. The information contained herein should not be construed as representing all conditions affecting th.e ci.ty or the Bonds. ’ All information contained in this Official Statement pertaining to the City has been fumished by the City and the execution and delivery of this Official Statement has been duly authorized by the City. ~, CITY OF PALO ALTO .’ By: Finance Director APPENDIX A LISTING OF PARCELS ANDASSESSMENTS A-I j 1728v5 8 133 " 23 1,708 170 3,731 35 1 52 I 4 3 1 1 1 2 6 25,732 27.3 million square feet 6.6 18,921 221 9,834 21,975 ’219 1,134 27,533 228 209 37 23,154 170 .No. of Police Patrol Vehicles ~ " No. of Full-Time Positions. : -, ¯ - , No. of Fire Apparatus, " ~ " No. of Fire Hydrants .. Community Services: Acres- Downtown Parks ’cv- . Acres- open Space Parks Golf Course Tennis Courts Athletic Center ’ " Community Centers - Theaters Cultural Center Junior Museum and Zoo Swimming Pools Nature Centers Libraries No. of Housing Units Commercial and Industrial Space Municipal Utility Plants: Water: Millions of CCF Sold. Accounts Miles of Water Mains Wastewater: Millions of Gallons Processed Accounts Miles of Sanitary Sewer Lin~s Electric: Millions of KWH Sold Accounts ’ Pole Miles of Overhead Lines Trench Miles of Underground Lines Gas; Millions of Therms Sold ’ Accounts Miles of Gas Mains Source: City of Pale Alto, Comprehensive Annual Financial Report, FYE June 30, 2000. GB-I ,m and Serwces ..... ......., , l ’ ,k -- ’r rl ~ /,~’,’: ~ The City of Palo Alto was’incorporated in 1894. Its first .C,.harter was granted by the State of :~,?calif0mia in 1909, and Palo Altc~0t~tltih~es,~r~perata~as~a .e, hart~ cir. Chartered cities may establish their own laws and .regulations as long as they do not conflict with those of the’ State. Municipal operations areconducted under thb Council-Manager form of government. The nine Council Members are. e!ect6da~ th’-g~ fd~; fd6f:year~, ~’~g~¢~l-i~{,ms)~Tl~"~/l/i~iM ~nd Vi~e-May0r aieeldcted annually, at the first Cbuncd_~ meehn~g~_ , m~Jiinua~,. ~.,., The~_Mayor_ .~_pres~d~s ...... over all Councff meetmg.s The c~ty Manager ~s ~spo,nslb!e for the_~operatton of all ,mumcipal fun~tton~, except the offices 0~" the C~ty Attorney, C~ty Cl i’.lq -~and C~ty.Aui~!tor.. These offiomls are appomte~ by, and report directly to, tho City Councd,- -~ c:, ~.The City provides a full r~nge of municipal-services .and maintains-mtini¢ipalelectric~ water, gas, wasle~vater c011¢dtion?wastewatbi, trdatm~nt,;storml-drainage~"and r~fuse=~Itil~tieS forthe benefit of City redid.enid’and bu~ifie~gds. The Cits~ pad/s, ~e,’iSr~atibh~arld ealtural hcilities ar~ ~ume/’bus, ai~d inciude 35 parks, ..... a golf course, four commumty centers,., a Cultural,. Center, ~a Commum. ..ty Theater, ...... a Chddren s Theater, and a Janio.rMuseu~.;_ Th~ Cit~ioffers~a: Wide may. of ~o~ia~l,. ieoreational a~d cultural events, in, c!uding human service,s for sen~i0rs ghd youth, subsidized chi!d, care, classes, c~ncerts,~exhibits, team sports. _and. special ev.ents. Th~ City and,the Pale,Alto-Unified SchooL Dislricl have an agreement -to jointly~nd the costs of maintaining and rehabilitating:school athletic fields, recognizing the significant recreational use oflhese facilities by the commianity. In addition, th~ City offei’s a high level of library and public safety servici~s.¯"’~ " - ....Pale Alto has s~x hbrar~es and e~ght fire stat~qns providing se~ices lhroughoulthecorn-mtinity.--:~’ : ’ :’ ~" ~’" ~’ ~ --~- ....~ ¯¯..-N’’ "-. -.~ ’i,’~ -’:’ ’’ Population .~~ -. : ....’.,. -..: The population of the City according toth~ 1990 U.S. Census was 55,900. This was an increase of 675 over the 1980 U.S. Census. ~ " The following table shows a histbrical comparison of the-respective populations of the City, the County and the State of California since~!980. ~ ~ , : CITY OF PALO ALTO~ SANTA CLARA COUNTY~ AND STATE OF .CALIFORNIA ~’~ : Population Comparison City of Year Pale Alto 1980 55,225 1990 55,900 1996 58,500 1997 59~900 1998 60,500 1999 61,200 2000 59,598 Percent Santa Clara Percent State of PercentCo~_q_qp_W- _~California Change .... ;1,295,071 ’--23,668,562 -- |.2% ’ / ~ i,497,577 "15.6%. ~29,760,021 24.9 4.7.~ 1,683,3~)0 .12.4 32,232,000 8.9 2.4 ~" ". 1,671,400 (0.7)32,670,000 1.4 1.0 ~’’" 1,701,400,-!.8 33,226,000,1.7 1.2 ~ ’ 1,717,600 1.0 33,766,000 1.6 (2.6)1,682,585 (2.0)33,871,648 0.3 Sources: U.S. Department of Commerce,,Bureau of the Census (1.980, 1990 and 2000); State Department of Finance (1996- 1999). ’ ’ The number of residential building permits and the total valuation of all permits in the City has shown a steady increase during the 1990’s. The following table shows the number and valuation of building permits in the City for the past ten fiscal years. CITY OF PALO ALTO Building Permits and Valuation (Dollars in Thousands) Commercial & Industrial Residential All Others Fiscal Property No. of No. of No. of Year Values Permits Valuation Permits Valuation Permits Valuation 1991 $6,501,973 348 $80,468 1,088 $41,862 70 $9,935 1992 6,949,429 366 82,902 1,087 38,101 63 2,692 1993 7,443,688 395 71,167 1,079 33,065 65 2,506 1994 7,592,131 400 64,001 1,081 37,284 96 3,823 1995 7,795,396 384 44,471 1,032 35,563 72 7,055 1996 8,058,927 410 72,271 i,194 58,262 89-11,052 1997 8,206,532 377 94,485 1,095 57,617 106 5,874 1998 8,885,623 374 136,761 1,154 61,316 80 6,704 1999 9,623,868 330 73,462 1,167 71,989 106 47,325 2000 10,533,778 428 127,107 1,113 139,674 371 23,113 Source:City of Palo Alto: Planning and Community Environment Department. Property Taxes and Assessed Valuations Taxes are levied for each fiscal year on taxable real and personal property which is situated in the City as of the preceding April 1. For assessment and collection purposes, property is classified as either "secured" or "unsecured," and is listed accordingly on separate parts of the assessment roll. The "secured roll" is that part of the assessment roll containing State assessed property and property secured by a lien on real property which is sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the "unsecured roll." The County of Santa Clara levies a 1% property tax on behalf of all taxing agencies in the County, including the City. The taxes collected are allocated on the basis of a formula established by State law. Under this formula, the City and all other taxing entities ,receive a base year allocation plus an allocation on the basis of "sites" growth in assessed value (new construction, change of ownership and inflation) among the jurisdictions which serve the tax rate areas within which the growth occurs. Tax rate areas are specifically defined geographic areas which were developed to permit the levying of taxes for less than county-wide or less than city-wide special districts. Assessed valuations in the County are established by the County Assessor, except for utility property which is assessed by the State Board of Equalization. Property is assessed at 100% of actual market value. During each County fiscal year, property which is improved or with respect to which a change in ownership occurs, if subject to reassessment. Such increases in assessed value during each County fiscal year are compiled as the County’s "supplemental roll," and supplemental taxes are levied on such increases in assessed value during the County’s fiscal year. State law currently exempts $7,000 of the assessed value of an owner-occupied dwelling, but the City does not suffer any revenue loss because an amount equivalent to the tax on such exempt amount is paid by the State. GB-3 State law also exempts the full value of business inventories from taxation, but provides for reimbursements by the State to local agencies based on their respective shares of the revenues derived from the application of the maximum tax rate, adjusted to reflect changes in population and the consumer price index. Since the County’s 1984-85 fiscal year, the reimbursement for the business inventory exemption has been consolidated into the State motor vehicle in-lieu fee revenue, which currently more than restores the revenue lost through the business inventory exemption. The following entities are the largest payers of property tax in the City for the 1999-00 fiscal year. CITY OF PALO ALTO Largest Locally Secured Taxpayers (Dollars in Thousands) Taxpayer Leland Stanford Jr. University Space Systems/Loral, Inc. Sun Microsystems, Inc. Embarcadero Place Associates Harbor Investment Partners Cowper-Hamilton Associates Embarcadero Bayshore Invtrs. Et A1 Digital Equipment Corporation Hyatt Equities, L.L.C. Seabiscuit LLC Et AI Type of Business University and Ancillary Research and Development Computers and Electronics Offices, Banks and Clinics Offices, Banks and Clinics Offices, Banks and Clinics Offices, Banks and Clinics Offices, Banks and Clinics Offices, Banks and Clinics Offices, Banks and Clinics Assessed Valuation Percent of Total Assessed Valuation $1,795,791 19.91% 194,548 2.16% 69,529 0.77% 62,000 0.69% 54,700 0.61% 38,397 0.43% 29,464 0.33% 25,782 0.29% 23,529 0.26% 22,611 0.25% Totals $2,316,351 25,70% 1999/00 Local Secured Assessed Valuation:$9,020,672 Source: County of Santa Clara, Center for Urban Analysis. Property Taxes, Collections and Delinquencies Property taxes on the secured roll are due in two installments, on November 1 and February 1 of the County’s fiscal year. If unpaid, such taxes become delinquent on Decemberl0 and April 10, respectively, and a 10% penalty attaches to any delinquent payment. In addition, property on the secured roll becomes tax delinquent on June 30 of the County’s fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes plus the delinquency penalty, plus a redemption penalty of 1% per month to the time of redemption. If taxes remain unpaid for a period of five years or more, the property is subject to sale by the County Tax Collector. Property taxes on the unsecured roll are due as of the March 1 lien date and become delinquent, if unpaid, on August 31. A 10% penalty attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of 1% per month begins to accrue on November 1 of the County’s fiscal year. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer, (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer, (3) filing a certificate of delinquency for record in the County Recorder’s office in order to obtain a lien on the certain property of the taxpayer, and (4) seizure and sale of personal property, improvements or possessory interests, belonging or assessed to the taxpayer. GB-4 Each county within the State levies (except for levies to support prior voter-approved indebtedness) and collects all property taxes for property falling within that county’s taxing boundaries. The value of property within the City subject to property taxes and the corresponding amount of property taxes levied and collected for the fiscal years 1990-91 through 1999-00 are set forth in the table below. These figures include data for property within redevelopment project areas. The County and its subsidiary politica! subdivisions operate under the provisions of California Revenue and Taxation Code Sections 4701 through 4717, inclusive, commonly referred to as the "Teeter Plan," with respect to property tax collection and disbursement procedures. These sections provide an alternative method of apportioning secured taxes whereby agencies levying taxes through the County roll may receive from the County 100% of their taxes at the time they are levied. The County treasury’s cash position (from taxes) is insured by a special tax loss reserve fund (the "Tax Loss Reserve Account") accumulated from delinquent penalties. Accordingly, so long as the County maintains its policy of collecting taxes pursuant to said procedures and the Town meets the Teeter Plan requirements, the Town will receive 100% of the annual property taxes levied without regard to actual collections. The procedures under the Teeter Plan may be terminated if the rate of secured tax and assessment delinquency in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured rolls for that agency. A ten-year history of property tax rates in the City is shown below. CITY OF PALO ALTO Property Tax Rates Fiscal County of School Districts Year Santa Clara Total 1991 $1.0390 $0.0040 $1.0430 1992 1.0390 0.0020 1.0410 1993 1.0290 0.0030 1.0320 1994 1.0310 0.0000 1.0310 1995 1.0330 0.0000 1.0330 1996 1.0340 0.0030 1.0370 1997 1.0340 0.1210 1.1550 1998 1.0388 0.0764 1.1152 1999 1.0388 0.0757 1.1145 2000 1.0319 0.0740 1.1059 Source: County of Santa Clara, Tax Rates and Information. The following table shows the special assessment billings and collections in the City for the past ten fiscal years. CITY OF PALO ALTO Special Assessment Billings and Collections Special County Current Delinquent Assessment Fiscal Assessment Assessment & Penalties Billings and Year Due Collected Collections Collections 1991 $1.016 $997 $23 $1,020 1992 994 984 14 998 1993 959 939 11 950 1994 850 850 14 864 1995 1,016 1.016 O)1,016 1996 952 952 (1)952 1997 1,016 1,016 (1)1,016 1998 1.015 1,015 (1)1,015 1999 874 874 (l)874 2000 887 887 O)887 (1) Effective with the fiscal year 1993-94, the City is on the Teeter Plan, under which the County of Santa Clara pays the City the full assessment due. Payment fdr all prior delinquencies was also received in this fiscal year. Source: City of Palo Alto," Administrative Services Department, Accounting Division The table below shows the total property tax levy, current collections, delinquent collections and the assessed value of property being taxed. Because the City participates in the Teeter Plan, after fiscal year 1993-94 the amount of taxes levied equals the amount remitted to the City, with no regard to actual collections. CITY OF PALO ALTO Property Taxes Billed and Collected (Dollars in Thousands) Fiscal Total Tax Current Tax Delinquent Tax Total Property Year Levy Collection Collections Tax Collected Assessed Value of Property Subject to Basic County Wide Tax Rate 1991 $8,192 $7,970 $139 $8,109 1992 8,617 8,372 183 8,555 1993 8,373 8,148 219 8,367 1994 7,310 7,310 427 7,737 1995 7,485 7,485 (1)7,485 1996 7,854 7,854 (1)7,854 1997 7,735 7,735 (1)7,735 1998 8,903 8,903 (1)8,903 1999 9,521 9,521 (0 9,521 2000 10,770 10,770 (l)10,770 $6,501,973 6,949,429 7,443,688 7,592,131 7,795,396 8,058,927 8,206,532 8,885,623 9,623,868 10,553,778 (1)Effective with the fiscal year 1993-94, the City is on the Teeter Plan, under which the County of Santa Clara pays the full tax levy due. All prior delinquent taxes were also received in this fiscal year. Assessed value of property is considered to be an estimate of full market value. Source: County of Santa Clara Assessor’s Office. Santa Clara County Income Owing to the presence of relatively high-wage skilled jobs and wealthy residents, the County historically achieves high rankings among all California counties on a variety of income measurements. As reported in the 2000 Sales & Marketing Management magazine "Survey of Buying Power," the County’s 1999 median household effective buying income of $53,234 was the highest among California counties. Since 1982, the median household effective buying income for the County has consistently exceeded that of California and the United States. "Effective buying income" ("EBI") is a classification developed exclusively by Sales & Marketing Management magazine to distinguish it from other sources reporting income statistics. EBI is defined as "money income" less personal tax and nontax payments- a number often referred to as "disposable" or "after-tax" income. Money income is the aggregate of wages and salaries, net farm and nonfarm self-employment income, interest, dividends, net rental and royalty income, Social Security and railroad retirement income, other retirement and disability income, public assistance income, unemployment compensation, Veterans Administration payments, alimony and child support, military family allotments, net winnings from gambling and other periodic income. Money income does not include money received from the sale of property (unless the recipient is engaged in the business of selling property); the value of "in-kind" income such as food stamps, public housing subsidies, medical care, employer contributions for persons, etc.; withdrawal of bank deposits; money borrowed; tax refunds; exchange of money between relatives living in the same household; gifts and lump-sum inheritances, insurance payments, and other types of lump-sum receipts. EBI is computed by deducting from money income all personal income taxes (federal, state and local), personal contributions to social insurance (Social Security and federal retirement payroll deductions), and taxes on owner-occupied nonbusiness real estate. Note that the methodology for calculating EBI was modified in 1996. Therefore, the figures cited for 1995 and later are not comparable to figures for years prior to 1995. ~B-7 CITY, COUNTY, STATE AND UNITED STATES Effective Buying Income Year Total Effective Buying Area Income ($000) Median Household Effective Buying Income 19950)City of Palo Alto $1,544,186 $48,228 Santa Clara County 29,611,407 45,662 State of California 477,640~503 34,533 United States 3,964,285,118 32,238 1996o)City of Palo Alto $1,725,347 $55,311 Santa Clara County 30,823,435 49,298 State of California 492,516,991 35,216 United States 4,161,512,384 33,482 19970)City of Palo Alto $2,037,829 $62,082 Santa Clara County 36,500,763 54,407 State of California 524,439,600 36,483 United States 4,399,998,035 34,618 19980)City of Palo Alto $2,235,446 $67,180 Santa Clara County 39,640,732 57,144 State of California 551,999,317 37,091 United States 4,621,491,738 35,377 City of Palo Alto $2,295,477 $72,370 Santa Clara County 42,267,784 61,122 State of California 590,376,663 39,492 United States 4,877,786,658 37,233 {1) Due to a change in income calculation methodology, figures for 1995 and later are not comparable to figures for prior years. Source: Sales & Marketing Management "Survey of Buying Power." Employment The following table shows major employers in the Palo Alto area as of March 31, 2000. CITY OF PALO ALTO Major Employers , As of March 31, 2000 Name of Company Stanford Space Systems/LORAL Palo Alto Medical Foundation Foothill College VA Palo Alto Health Care Roche Bioscience Agilent Technologies Hewlett Packard Company Palo Alto Unified School District Stanford University Hospital Products/ Services Education R&D Health Care Education Health Care ¯ Pharmaceutical Mfg. High Tech Electronics Education Health Care No. of Employees 5,000+ 3,000-5,000 1,500+ 1,000-1,500 1,000+ ’ 1,000+ 1,000+ 1,000+ 750 to 1,000 750 to 1,000 Source: Palo Alto Chamber of Commerce The table below outlines labor force information for the City and the County. CITY OF PALO ALTO AND COUNTY OF SANTA CLARA Employment Rates and Employment by Industry 1995 1996 1997 1998 1999 Civilian Labor Force 0)867,000 895,000 937,500 958,000 962,800 Employment 824,200 862,800 909,200 927,100 933,600 Unemployment 42,800 32,200 28,300 30,900 29,200 Unemployment Rate 4.9%3.6%3.0%3.3%3.0% Wage & Salary Employment: Total All Industries (2)836,400 885,000 931,700 961,500 Agriculture 4,500 5,100 5,100 5,200 Nonagricultural Industries 831,900 879,900 926,600 956,300 Mining 100 100 100 100 Construction 28,700 32,700 37,300 41,700 Manufacturing 231,200 245,900 258,200 261,300 Transportation, Public Utilities 24,000 25,400 27,200 ~’8’,300 Wholesale Trade 48,700 52,400 56,000 56,400 Retail Trade 117,400 122,200 126,700 130,100 Finance, Insurance, Real Estate 28,700 30,000 30,600 31,800 Services 265,300 283,900 3 i 0,800 317,800 Government 87,800 87,400 88,500 88,900 974,000 5,200 968,800 100 45 600 249 000 28 400 56 200 133 600 32 800 332 000 91 200 (1)Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2)Induslry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on stdke. Source: State of California Employment Development Department. ~B-9 Commercial Development During the first quarter of calendar year 2000, total taxable sales that were reported in the City amounted to $465,348,000, a 17.9% increase of the total taxable sales of $394,754,000 that were reported for the first quarter of calendar year 1999. The following table shows annual taxable retail store sales in the City in the last five years that figures are available, as reported by the State Board of Equalization. CITY OF PALO ALTO Taxable Retail Sales (in thousands) 1995 1996 1997 1998 1999 Apparel Stores $ 88,777 General Merchandise Stores 228,730 Drug Stores 10,728 Food Stores 27,079 Package Liquor Stores 3,711 Eating and Drinking Places 150,765 Home Furnishings and Appliances 40,422 Building Material and Farm Implements 12,020 Auto Dealers and Auto Supplies 128,775 Service Stations 27,920 Other Retail Stores 178,285 Retail Stores Totals 897,212 All Other Outlets 557,095 Total All Outlets 1,454,307 $97,248 $102,679 $101,541 $109,380 245,357 298,592 295,391 311,006 11,404 o)o)o) 29,356 31,787 33,489 34,172 3,573 ~2)~2)(2) 165,172 177,829 190,343 208,990 42,726 49,849 61,279 71,366 15,777 16,711 16,145 18,203 157,101 195,969 227,558 256,134 32,265 32,411 28,407 31,872 186,041 210,214 221,645 300,726 986,020 1,116,041 1,175,798 1,341,849 542,483 547,013 504,571 537,066 1,528,503 1,663,054 1,680,369 1,878,915 {0 Sales included with "Total Outlets." (2) Beginning in 1997, drug stores and packaged liquor stores have been merged with general merchandise stores. Source: State of California, Board of Equalization. APPENDIX C FORM OF BOND COUNSEL OPINION APPENDIX D APPEND~ FORM OF CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the City of Palo Alto (the "City") in connection with the execution and delivery of its City of Palo Alto Limited Obligation Improvement Bonds, City of Palo Alto, University Avenue Area Off-Street Parking Assessment District, Sedes 2001-A (the "Bonds"), in the aggregate principal amount of $The Bonds are being issued pursuant to the provisions of a Resolution No.adopted by the City on ,2001 (the "Resolution") authorizing the issuance of the Bonds. The City covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2-12(b)(5). Section 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Dissemination Agent’ means the City or any successor Dissemination Agent designated in writing by the City and which has filed with the City a wdtten acceptance of such designation. "Listed Events" means any of the events listed in Section 5(a) of this Disclosure Certificate. "National Repository" means any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. "Participating Underwriter’ means any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository" means each National Repository and each State Repository. "Rule" means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State Repository" means any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is no State Repository. Section 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than seven months after the end of the City’s fiscal year (which fiscal year currently ends on June 30), commencing with the report for the 2000-01 Fiscal Year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than fifteen (15) Business Days pdor to said date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of.this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. If the City’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). (b) If the City is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the City shall send a notice to the Municipal Securities Rulemaking Authority and the appropriate State Repository, if any, in substantially the form attached as Exhibit A, (c)The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and (ii) if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided. Section 4. Content of Annual Reports. The City’s Annual Report shall contain or incorporate by reference the following: 1.Principal amount of Bonds outstanding. 2.Balance in the Improvement Fund or construction account. 3. Balance in debt service reserve fund, and statement of the reserve fund requirement. Statement of projected reserve fund draw, if any. 4.Balance in other funds and accounts held by City related to the Bonds. 5. Additional debt authorized by the City and payable from or secured by assessments with respect to property within the Assessment District. 6. The assessment delinquency rate, total amount of delinquencies, number of parcels delinquent in payment. 7. Notwithstanding the June 30~ reporting date for the Annual Report, the following information shall be reported as of the last day of the month immediately preceding the date of the Annual Report rather than as of June 30t". Identity of each delinquent taxpayer responsible for 5 percent or more of total special tax/assessment levied, and the following information: assessor parcel number, assessed value of applicable properties, amount of Assessment levied, amount delinquent by parcel number and status of foreclosure proceedings. If any foreclosure has been completed, summary of results of foreclosure sales or transfers. E_E-2 I 8.Most recently available assessed value of all parcels subject to the assessment. 9. Audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to govemmental entities from time to time by the Governmental Accounting Standards Board. If the City’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section. 2(a), the Annual Report shall contain unaudited financial statements in a format similar to that used for the City’s audited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available; provided, that in each Annual Report or other filing containing the City’s financial statements, the following statement shall be included in bold type: THE CITY’S ANNUAL FINANCIAL STATEMENT IS PROVIDED SOLELY TO COMPLY WITH THE SECURITIES EXCHANGE COMMISSION STAFF’S INTERPRETATION OF RULE 15C2-12. NO FUNDS OR ASSETS OF THE CITY OF PALO ALTO (OTHER THAN THE PROCEEDS OF THE ASESSMENTS LEVIED FOR THE DISTRICT AND SECURING THE BONDS) ARE REQUIRED TO BE USED TO PAY DEBT SERVICE ON THE BONDS AND THE CITY IS NOT OBLIGATED TO ADVANCE AVAILABLE FUNDS FROM THE CITY TREASURY TO COVER ANY DELINQUENCIES. INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDITION OF THE CITY IN EVALUATING WHETHER TO BUY, HOLD OR SELL THE BONDS. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues with respect to which the City is an "obligated person" (as defined by the Rule), which have been filed with each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The City shall clearly identify each such other document so included by reference. Section 5. Reportin.q of Significant Events. (a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (1)Principal and interest payment delinquencies. (2)Non-payment related defaults. (3)Unscheduled draws on debt service reserves reflecting financial difficulties. (4)Unscheduled draws on credit enhancements reflecting financial difficulties. (5)Substitution of credit or liquidity providers, or their failure to perform. (6)Adverse tax opinions or events affecting the tax-exempt status of the security. (7)Modifications to rights of security holders. (8)Contingent or unscheduled bond calls. (9)Defeasances. (10)Release, substitution, or sale of property securing repayment of the securities. (11)Rating changes. (b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall as soon as possible determine if such event would be material under applicable Federal securities law. (c) If the City determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the City shall promptly file a notice of such occurrence with the Municipal Securities Rulemaking Board and each State Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds pursuant to the Indenture. Section 6. Termination of Reporting Obli,qation. The City’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final matudty of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 7. Dissemination Agent The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in cimumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the pdmary offedng of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Inden{ure for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of the Trustee or nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which .the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles., The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison sha!! be-quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 5(c). Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture or the Lease, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance. Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Date:,2001 CITY OF PALO ALTO By: Finance Director EXHIBIT A Name of Issuer:City of Palo Alto Name of Bond Issue: $. Limited Obligation Improvement University Avenue Area Off-Street Parking Assessment District, Series 2001-A Date of Issuance:,2001 Bonds, City of Palo Alto, NOTICE IS HEREBY GIVEN that the City of Palo Alto (the "City") on behalf of City of Palo Alto ~ o .... , ~ ~ ...... ~,, c~,~ n~÷~ ~,^ !University Avenue Area Off-Street Parking Assessment District has not provided an Annual Report with respect to the above-named Bonds as required by the Resolution No. adopted by the City on ,2001 (the "Resolution") authorizing the issuance of the Bonds. The City anticipates that the Annual Report will be filed by Dated: cc: City of Palo Alto CITY OF PALO ALTO By: Finance Director E_E-6 I APPENDIX FE BOOK-ENTRY SYSTEM The Bonds will be issued in book-entry form. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee). One fully-registered Bond will be issued for each maturity of each Series in the total aggregate principal amount due at maturity and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a =banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a =clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants (the "Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (=Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (the "Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interest in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Participants with .DTC are registered in the name of DTC’s partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to wl~ose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If less than all of the Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent Or vote with respect to the Bonds. Under its usual procedures, DTC will mail an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal of and sinking fund and interest payments on the Bonds will be made to DTC. DTC’s practice is to credit Direct Participants’ accounts on each payable date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on the date payable. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the City, or the Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the City or the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, security certificates are required to be printed and delivered as described in the Indenture. The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bonds will be pdnted and delivered as described in the Indenture. The Authority cannot and does not give any assurances that DTC will distribute to Participants, or that Participants or others will distribute to the Beneficial Owners, payments of principal of and interest and premium, if any, on the Bonds paid or any redemption or other notices or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. Neither the City, the Authority nor the Trustee is responsible or liable for the failure of DTC or any Direct Participant or Indirect Participant to make any payments or give any notice to a Beneficial Owner with respect to the Bonds or any error or delay relating thereto. The foregoing description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal of and interest and other payments with respect to the Bonds to Direct Participants, Indirect Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in such Bonds and other related transactions by and between DTC, the Direct Participants, the Indirect Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the Direct Participants, the Indirect Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters but should instead confirm the same with DTC or the Participants, as the case may be. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE BONDHOLDERS SHALL MEAN CEDE& CO., AS AFORESAID, AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. E_E-2 I E~IBIT B FORM OF BOND County of Registered Number A .... United States of America State of California County of Santa Clara LIMITED OBLIGATION IMPROVEMENT BOND CITY OF PALO ALTO University Avenue Area Off-Street Parking Assessment District Series 2001-A Registered INTEREST RATE MATURITY DATE DATED DATE CUSIP REGISTERED OWNER: PRINCIPAL AMOUNT: ***DOLLARS*** Under and by virtue of the Refunding Act of 1984 for 1915 Improvement Act Bonds of, Division 11.5 (commencing with Section 9500) of the Streets and Highways Code (the "Act"), the City of Palo Alto (the City) County of Santa Clara, State of California, will, out of the redemption fund for the payment of the bonds issued upon the unpaid portion of Assessments. made for the acquisition, work and improvements more fully described in proceedings taken pursuant to Resolution of Intention No. 8034 adopted by the City Council of the City on January 22, 2001, pay to the registered owner named above or registered assigns, on the maturity date stated above, the principal amount stated above, in lawful money of the United States of America and in like manner will pay interest at the rate per annum stated above, payable semiannually on March 2 and September 2 (each an ~Interest Payment Date") in each year commencing on March 2, 2002. This Bond bears interest from the interest payment date next preceding its date of authentication and registration unless it is authenticated and registered (i) prior to an Interest Payment Date and after the close of business of the fifteen day preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (ii) prior to the close of rbusiness on the fifteenth day of the calendar month preceding September 2, 2000, in which event it shall bear interest from its date, until payment of such principal sum shall have been discharged. For the period during which Depository Trust Company of New York, New York, ("DTC") or any successor depository, is the registered owner of this bond, principal, redemption premiums, if any, and interest shall be paid by the City to DTC, or such successor depository, by wire transfer; provided that principal and redemption premiums, if any, shall be paid upon surrender to the City, at the corporate trust office of U.S. Bank Trust National Association, as Authentication Agent, Registrar, Transfer and Paying Agent (the ~Agent"), in Los Angeles, California, of matured bonds or bonds called for redemption prior to maturity. As to any registered owner hereof other than DTC or successor depository, the principal EXHIBIT B Page 1 and redemption premiums, if any, shall be payable at the office of the Agent specified .above and interest shall be paid by check, draft or warrant mailed to DTC, or any successor depository, or in the event of termination of the book-entry system, to the registered owner hereof at the registered owner’s address as it appears on the records of the Agent, or at such address as may have been filed with the Agent, for that purpose, as of the fifteenth day of the calendar month immediately preceding each Interest Payment Date; provided however, upon request in writing of an Owner of $I,000,000 or more in aggregate principal amount of Bonds,~ such request having been made before fifteen days preceding an Interest Payment Date, such interest shall be paid on such Interest Payment Date by wire transfer in immediately available funds to an account in the continental United States designated by such Owner to the Agent. This bond will continue to bear interest after maturity at the rate above stated; provided it is presented at maturity and payment thereof is refused upon the sole ground that there are not sufficient moneys in said redemption fund with which to pay same. If it is not presented at maturity, interest-thereon will run until maturity. This bond shall not be entitled to any benefit under the Act and the Resolution Authorizing of Issuance of Refunding Bonds (the ~Resolution of Issuance") or become valid or obligatory for an~y purpose, until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Agent. This bond is one of several annual series of bonds of like date, tenor, and effect, but differing in amounts, maturities and interest rates, issued by the City under the Act and the Resolution of Issuance for the purpose of providing means for paying for the reassessment bonds described in the proceedings, and is secured by the moneys in the redemption fund and by the unpaid portion of assessments made for the payment of those improvements, and, including principal and interest, is payable exclusively out of the redemption fund. This bond is transferable by the registered owner hereof, in person or by the owner’s attorney duly authorized in writing, at the office of the Agent, subject to the terms and conditions provided in the Resolution of Issuance, including the payment of certain charges, if any, upon surrender and cancellation of this bond. Upon transfer, a new. registered bond or bonds, of any authorized denomination or denominations, of the same maturity, and for the same aggregate principal amount, will be issued to the transferee in exchange therefor. Bonds shall be registered only in the name of an individual (including joint owners), a corporation, a partnership, or a trust. Neither the City nor the Agent shall be required to exchange or to register the transfer of bonds during the 15 days immediately preceding any Interest Payment Date. EXHIBIT B Page 2 The City and the Agent may treat the registered owner hereof as the absolute owner for all purposes, and the City and the Agent shall not be affected by any notice to the contrary. This bond or any portion of it in the amount of five thousand dollars ($5,000), or any integral multiple thereof, may .be rredeemed and paid in advance of maturity upon the second day of March or-September in any year by giving at least 30 days’ notice by registered or Certified mail or personal service to- the registered owner hereof at the registered owner’s address as it appears on the registration books of the Agent and by paying. principal and accrued interest and at a redemption price as follows: EXHIBIT B Page 3 Redemption Dates March 2, 2002 - September 2, 2010 March 2, 2011 - September 2, 2011 March 2, 2012 and thereafter Redemption Price (%) 102 101 I00 The bonds maturing on September 2,are subject to -mandatory redemption, in part by lot, on September 2 in each year, commencing September 2, , from sinking fund payments from the redemption fund at a redemption price equal to the principal amount thereof to be redeemed, without premium, as follows: Sinking Fund Redemption Date (September 2) Principal Amount To Be Redeemed This Bond is a Limited Obligation Refunding Improvement Bond because, under the Resolution of Issuance, the City is not obligated to advance funds from the City treasury to cover any deficiency which may occur in the redemption fund for the bonds; however, the City is not prevented, in its sole discretion, from so advancing funds. Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation (~DTC"), to the Agent for registration of transfer, exchange, or payment~ and any Bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. EXHIBIT B Page 4 IN WITNESS WHEREOF, the City of Palo Alto has caused this bond to be signed in facsimile by the Director of Administrative Services of the City and by its City Clerk, and has cause its corporate seal to be reproduced in facsimile hereon all as of day of , 2001. CITY OF PALO ALTO Director of Administrative Services City Clerk [SEAL] EXHIBIT E Page 5 CERTIFICATE OF AUTHENTICATION AND REGISTRATION This is one of the bonds described in the within mentioned Resolution of Issuance. Dated:, 2001 U.S. BANK TRUST NATIONAL ASSOCIATION, as Agent By: Authorized Officer EXHIBIT Page 6 ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this bond, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM TEN ENT JT TEN as tenants in common as tenants by the entireties as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT -Custodian (Cust)(Minor) under Uniform Gifts to Minors Act (State) Additional abbreviations may also be used though not in the above list For value received, assign and transfer unto ASSIGNMENT the undersigned do(es)hereby sell, (Name, Address and Tax Identification or Social Security Number of Assignee) the within mentioned Bond and hereby irrevocably constitute(s) and appoint(s),attorney,to transfer the same on the registration books of the Agent,with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: The signature(s) on this assignment must correspond with the name(s) as written on the face of the registered Bond in every particular without alteration or enlargement or any change whatsoever. EXHIBIT B Page 7 EXHIBIT C PUBLIC SALE IX)CEMENTS LIMTED OBLIGATION IMPROVEMENT BONDS CITY OF PALOALTO UNIVERSITY AVENUE AREA OFF STREET PARKING ASSESSPIENT DISTRICT SERIES 2001-A OFFICIAL NOTICE OF SALE ...............................................C- 2 OFFICIAL BID FORM .....................................................C- 12 NOTICE INVITING BIDS .........................................~ ........C- 14 NOTICE’ OF INTENTION ...................................................C- 15 CERTIFICATE OF AWARD ........................................~ .........C- 16 CERTIFICATE OF AWARD - Attachment 1 ...................................C- 17 CERTIFICATE OF AWARD - Attachment 2 ...................................C- 18 EXHIBIT C Page 1 OFFICIAL NOTICE OF SALE OF NOT TO EXCEED $I0,000,000 LIMTED OBLIGATION IMPROVEMENT BONDS CITY OF PALOALTO UNIVERSITY AVENUE AREA OFF STREET PARKING ASSESSMENT DISTRICT SERIES 2001-A NOTICE IS HEREBY GIVEN that sealed, fax and electronic bids for the purchase of $9,360,000* par value of the captioned bonds (the ~Bonds") of the City of Palo Alto (the ~City") of Santa Clara, County (the ~County"), California, will be received as follows: TIME: PLACE: Wednesday, June 132001, at i0:00 o’clock a.m. (Pacific Daylight Time) or if no proposals are received or accepted, then with notice of a new sale date and hour to be given by notice in The Bond Buyer not later than 23 hours before the new hour for receipt of bids, until such time as a bid is awarded or notice to the contrary is given. Offices of Stone & Youngberg LLC, 50 . California Street, 35th Floor, San Francisco, CA California, 94111 (the ~Financial Advisor") SEALED BIDS:City of Palo Alto c/o, Stone & Youngberg LLC, 50 California Street, 35th Floor, San Francisco, CA California, 94111 - "Proposal for Limited Obligation Improvement Bonds, City of Palo Alto, University Avenue Area Off-Street Parking Assessment District, Series 2001-A." FAX BIDS: (415) 445-2395 ELECTRONIC BIDS "Parity." See: below. ~Forms of Bids-Electronic Bids," ISSUE:$9,360,000* of the denomination of $5,000 each or any integral multiple thereof, all dated , 2001, and designated,"Limited Obligation Improvement Bonds, City of Palo Alto, University Avenue Area Off-Street Parking Assessment District, ~ Series 2001-A" (the "Bonds"). MATURITIES:The Bonds will mature on September 2 in each of the years and in the amounts as follows: Check Check Year Principal* if Term Interest Year Principal* if Term Interest (SeDtember 2 ) % Amount Bon~% Rate (September 2 ) % Amo~t Bonds% Rate EXHIBIT C Page 2 (plus accrued interest from Closing Date) *Preliminary, subject to adjus~-nt pursuant to Notice of Sale. $Clearly indicate each Term Bo~d as follows: E~ter "Term" in blank for year of initial mandatory sinking fund payment; draw arrow to maturity; enter Interest Rate in blank for year of maturity. EXHIBIT C Page 3 Special Bidder’s Option: The purchaser may elect to combine any number of consecutive maturities of Bonds maturing on or after 2, for which an identical yield to maturity has been specified to comprise term Bonds by indicating such an election on the bid form. The election to create term Bonds in such manner will require the creation of a mandatory sinking fund so that the sinking fund redemption payments shall equal the principal amount of the corresponding serial bond maturities. Adjustment of Principal Amounts: The above principal amounts reflect certain assumptions of the City and The Financial Advisor (the "Financial Advisor") about the expected interest rates of the winning bid(s) and the premium or discount of such bid(s). After the determination of the successful bidder(s), the City reserves the right to increase or decrease the principal .amount of each maturity, in $5,000 increments, provided that the principal amount shall not exceed the aggregate amount shown above. Such adjustments shall be made within the time herein specified for the award after bid opening and in the sole discretion of the Director of Administrative Services of the City upon the recommendation of the Financial Advisor. If an adjustment is made, there shall be no rebidding or recalculation or withdrawal of any bids and the successful bidder shall not be permitted to change any of its interest rate(s);provided, however, that no adjustment shall reduce the amount of any original issue premium, as a percentage of the principal amount, to be retained by the successful bidder based on the initial offering price of each maturity of Bonds. Interest: The Bonds shall bear interest at a rate or rates to be fixed upon the sale thereof but not to exceed eight percent (8%) per annum, payable commencing on March 2, 2002 for the first period, and semi-annually thereafter on each September 2 and March 2 Payment: Principal of the Bonds will be payable upon surrender at U.S. Bank Trust National Association (the "Paying Agent"). Interest on the Bonds will be payable by check or draft mailed to the owner at the address listed on the registration books maintained by the Paying Agent for such purpose. Registration: The Bonds will be issued as fully registered bonds as to both principal and interest. Redemption: The Bonds or any portion in the amount of five thousand dollars ($5,000), or any integral multiple thereof, may be redeemed and paid in advance of maturity upon the second day of March or September in any year by giving at least 30 days’ notice by registered or certified mail or personal service to the registered owner hereof at the registered owner’s address as it appears on the registration books of the Agent and by paying principal and accrued interest together with a redemption price as follows: EXHIBIT C Page 4 Redemption Dates March 2, 2002 - September 2, 2010 March 2, 2011 - September 2, 2011 March 2, 2012 and thereafter Redemption Price (%) 102 I01 100 The bonds maturing on September 2, are subject, to mandatory redemption, in part by lot, on September 2 in each year, commencing September 2, , from sinking fund payments from the redemption fund at a redemption price equal to the principal amount thereof to be redeemed, without premium, as follows: Sinking Fund Redemption Date (September 2) Principal Amount To Be Redeemed Security: The Bonds are special, limited obligations of the City secured by and payable only from the special assessments levied in the Assessment District and from certain funds held by the City for the Assessment District. EXHIBIT C Page 5 TERMS OF S~LE Interest Rate: The maximum rate bid may not exceed 12% per annum. Each rate bid must be a multiple of one twentieth percent (1/20%) or one eighth percent (1/8%) or any’ combination thereof. No Bond shall bear more than one interest rate, and all Bonds of the same maturity shall bear the same rate. Each Bond must .bear interest at the rate specified in the bid from its date to its fixed maturity date. The rate on any maturity~ or group of maturities shall not be more than three percent (3%) higher than the interest rate on any other maturity or group of maturities. Each maturity shall bear a rate of interest equal to or greater than rate of the next previous maturity. Interest will be computed on the basis of a 360-day year of twelve (12) 30-day months. Required Payments by Bidders: Bidders must take into account the following, mandatory payments in preparing thei~ bids: (a) Bid Deposit: A good faith deposit ("Deposit") in the form of a certified or cashier’s check or a financial surety bond (a "Financial Surety Bond") in the amount of $50,000 payable to the order of ~City of Palo Alto, Director of Administrative Services," is required for each bid to be considered. If a check is used, it must accompany each bid. If a Financial Surety Bond is used, it must be form an insurance company licensed to issue such a bond in the State of California, and such bond must be submitted to the City’s financial advisor prior to the opening of the bids. The Financial Surety Bond must identify each bidder whose Deposit is guaranteed by such Financial Surety Bond~ If the Bonds are awarded to a bidder utilizing a Financial Surety Bond, then that bidder is required to submit its Deposit to the City in the form of a cashier’s check (or wire transfer such amount as instructed by the. City) not later than 12:30 p.m. Pacific Daylight Time, on the next business day following the award. If such Deposit is not received by that time, the Financial Surety Bond may be drawn by the City to satisfy the Deposit requirement. In the event the bidder fails to honor its accepted bid, the Deposit will be retained by the City. If the Bonds are awarded to a bidder utilizing a certified or ~ashier’s check, the check accompanying any accepted proposal will be held by the City following the award to the successful bidder. If, ~after the award of the Bonds the successful bidder fails to complete its purchase on the terms stated in its proposal, the check will be cashed by the City and the proceeds thereof will be retained by the City. If the successful bidder completes its purchase of the Bonds on the terms stated in its proposal, its Deposit Will be applied to the purchase of the Bonds on the date of delivery of the Bonds. The check accompanying each unaccepted proposal will be made available for recovery by each unsuccessful bidder. No interest will be paid upon the EXHIBIT C Page 6 deposit made by any bidder. (b) Fees: The successful bidder will be required, pursuant to State law, to pay any fees to the California Debt and Investment Advisory Commission (~CDIAC"). CDIAC will invoice the successful bidder after the closing of the Bonds. Also, the successful bidder must pay all fees required by The Depository Trust Company, Public Securities Association, Municipal Securities Rulemaking Board, and any other similar entity imposing a fee in connection with the issuance of the Bonds. Forms of, Bids: The Bonds shall be sold for cash only. All bids must be for not less than all of the Bonds hereby offered for sale and each bid shall state that the bidder offers par and accrued interest to the date of delivery, the premium, if any, less discount, if any, and the rate or rates not to exceed those specified herein, at which the bidder offers to buy the Bonds. Each bidder shall state in its bid the true interest cost percentage (~TIC") and total interest cost in dollars which shall be considered informative only and not a part of the bid. The following forms of bids are the only forms authorized: (a) Sealed Bids. Each bid, on the Bid Formattached, together with the bid deposit, must be in a sealed envelope, addressed to the City of Palo, c/o Stone & Youngberg LLC, 50 California Street, 35th Floor, San Francisco, CA California, 94111 "Proposal for Limited Obligati-on Improvement Bonds, City of Palo Alto, University Avenue Area Off-Street-Parking Assessment District, Series 2001-A." (b) Fax Bids. Fax Bids will be accepted at the telephone number written on the first page hereof. Fax bids must be completely received by the time appointed for bid opening. Any fax bids in the course of transmission and not completely received at the appointed time will not be accepted. NOTE: Neither the City, the Financial Advisor, nor Bond Counsel assumes and the bidder fully assumes all risk of and responsibility for inaccurate or illegible bids or for delay due to engaged telephone lines and/or equipment failure or malfunction at the place and time of bid opening or for delay f~om the bidders choice to deliver its bids by other than hand delivery. (c) Electronic Bids. Bidders may submit electronic bids using Parity. A bidder intending to use Parity must communicate its bid electronically via Parity on or before 9:00 a.m. Pacific Daylight Time on Wednesday, 2001(the "Parity Bid Deadline"). No bid will be received by Parity for the Bonds after the Parity Bid Deadline. To the extent that any instructions or directions or terms set forth in Parity conflict with this Official Notice of Sale, the terms of this Official Notice of Sale shall control. For further information about Parity, contact the Financial Advisor or Dalcomp at 395 Hudson Street, New York, NY 10014, telephone (212) 806-8304 or 3909 or at 3909 ’Sarita Drive, Fort Worth, TX 76109, telephone (817) 932-5700. For purposes EXHIBIT C Page 7 of the electronic bidding process via Parity (and for no other purposes under this Official Notice of Sale), the time as maintained by Parity shall be the official time Right to Cancel, Postpone or Reschedule Sale: The ’City hereby reserves the right to cancel, postpone or-reschedule the sale of the Bonds upon notice in The Bond Buyer not less than twenty-three (23) hours before the time for receipt of bids. If the sale is postponed, bids will be received at the above place at such date and hour as may be determined, with notihe of such new sale date and hour to be given by The Bond Buyer not later than twenty-three (23) hours before the new hour for receipt of bids. Failure of any bidder to receive such notice or any other form of notice of canceled, postponed or rescheduled sale shall not affect the legality ~or validity of any sale. Determination of Best Bid: Unless all bids are rejected, the Bonds will be awarded to the bidder whose proposal results in the lowest TIC to the City. The TIC will be’ the nominal interest rate which, when compounded semiannually and used to discount all debt service payments on the Bonds to the dated date thereof, results in an amount equal to the price bid for the Bonds (assuming that any term Bonds are redeemed as scheduled by sinking fund redemption payments) at the interest rate or rates specified in the bid. The determination of the bid with the lowest TIC will be made without regard to any adjustments made or contemplated to be .made after award as .described herein under ~Adjustment of Principal Amount," even if such adjustments raise the TIC of the successful bid to a level higher than the bid with the next lowest TIC before adjustment. Right of Rejection: The City reserves the right, in its discretion, to reject any and all bids and to the extent .not prohibited by law to waive any irregularity or informality in any bid. Time of Award: The City has authorized the award of the sale of the Bonds or the rejection of all bids to be made by the Director of Administrative Services of the City not later than 5:00p.m. on the day of the -receipt of bids, provided, that the award may be made after the expiration of the specified time if the bidder shall not have given to the City notice in writing of the withdrawal of such proposal. Certificate Regarding Reoffering Prices:As soon as practicable, but not later than seven days priorto delivery of the Bonds, the successful bidder must submit to the City a certificate specifying for each maturity the reoffering price at which at least 10% of the Bonds of such maturity were sold (or were offered in a bona fide public offering and as of the date of award of the Bonds to the successful bidder reasonably expected to be sold) to the public. Such certificate shall be in form and substance satisfactory to Bond Counsel and shall include such additional information as may be requested by Bond Counsel. Delivery; Cancellation: It is expected that the Bonds will be delivered to the successful bidder in San Francisco within thirty days from the date of sale thereof. Delivery of the Bonds EXHIBIT C Page 8 will be made through DTC upon payment in federal funds. The successful bidder shall have the right, at such bidder’s option, to cancel the contract of purchase if the Bonds are not tendered for delivery within sixty (60) days from the date of the sale thereof, and in such event ~he successful bidder shall be entitled to the return of the deposit accompanying the bid. Change in Tax Exempt Status: At any time before the Bonds are tendered for delivery, the successful bidder may disaffirm and withdraw its proposal if the interest received by private bondowners from the Bonds of the same type and character shall be declared to be taxable income under present federal income tax laws, either by a ruling of the Internal Revenue Service or by a decision of any federal court, or shall be declared taxable, or be required to be taken into’account in computing federal income taxes (except alternative minimum taxes payable by corporations) by any federal income tax law enacted subsequent to the date of this notice. ~- Bond Insurance: the City has designated and the Purchaser understands the City will use Standard & Poor’s Corporation for rating the Bonds and that the cost of rating through any other rating service will be borne entirely by the purchaser. If the Bonds qualify for ~ny policy of municipal bond insurance, the commitment, and any purchase of such insurance or commitment therefor shall be at the sole option and expense of the bidder and any increased costs shall be paid by such bidder. Closing Papers; Bond Preparation:Each proposal will be understood to be conditioned upon the City furnishing to the purchaser, without charge, concurrently with payment for and delivery of the Bonds, the following closing papers, each dated the date of delivery: (a) Bond Counsel: The opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, approving the validity of the Bonds and stating that, under existing law, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of preference for purposes bf the federal alternative minimum tax imposed on certain individuals and corporations; and that such interest is also exempt from personal income taxes of the State of California under present state income tax laws. Other federal tax consequences to owners of the Bonds, if any, is not addressed in the opinion. A copy of the opinion of Bond Counsel, certified by the official in whose office the original is filed, will be printed on each of the’Bonds at no charge to the purchaser. (b) No Arbitrage: A certificate of the City certifying that on the basis of the facts,, estimates and circumstances in existence on the date of issue, it is not expected that the proceeds of the Bonds will be used in a manner that would cause the Bonds to be arbitrage Bonds; (C) Due Execution: A Certificate of the City, signed by officers and representatives of the County, certifying that the officers and representatives have signed the Bonds EXHIBIT C Page 9 whether .by facsimile or manual signature, and that they were respectively duly authorized to execute the same; (d) Receipt: The receipt of the City showing that the p~rchase price of the Bonds, including interest accrued to the date of delivery thereof, has been received by the City; (e) City Opinion: A certificate executed by legal counsel for the City, certifying that there_ is no known litigation threatened or pending affecting the validity of the Bonds; and (f) Official Statement Certificate: A certificate of the City, signed by an officer of the City, acting in such officer’s official capacity, to the effect that at the time of the sale of the Bonds, and at all times subsequent thereto up to and including the time of the delivery of the Bonds, the Official Statement relating to the Bonds did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light, of the circumstances under which they were made, not misleading. CUSIP Numbers: It is anticipated that CUSIP numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bond nor error with respect thereto, shall constitute cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for the Bonds in accordance with Bonds and the CUSIP Service Bureau charge for the assignment of such numbers shall be paid by the successful bidder. Continuing Disclosure. The City has covenanted for the benefit of the holders and beneficial owners of the Bonds to provide certain financial information and operating data relating to the City by not later than nine months following the end of the City’s fiscal year (which currently will be March 31 of the following year) (the ~Annual Report"), commencing with the Annual Report for the 2000-2001 Fiscal Year, and to provide notices of the occurrence of certain enumerated events, if deemed by the City to be material. The Annual Report will be filed by the City with each Nationally recognized Municipal Securities Information Repository and with the State Information Repository, if any. The notices of material events will be filed by the City with the Municipal Securities Rulemaking Board and with the State Information Repository, if any. These covenants have been made in order to assist the Purchaser in complying with Rule 15c2-12(b) (5) of the Securities and Exchange Commission (the ~Disclosure Rule"). Official Statement: The City has authorized an Official Statement relating to the Bonds, a copy of which will be furnished upon request to the Financial Advisor. Such Preliminary Official Statement is in a form ~deemed final" by the City for the purposes of SEC Rule 15C2-12(b) (i) but is subject to revision, amendment and completion. The City will furnish to the successful bidder, at no charge within seven business days of the date of sale, up to two hundred fifty (200) copies of the Official Statement for use in connection with any resale of the Bonds. EXHIBIT C Page 10 DATED as of May 15, 2001 and GIVEN by order of the City Council of the City of Palo Alto , California, adopted May 14, 2001. Title: EXHIBIT C Page 11 OFFICIAL BID FORM Bidding Firm’s Name City of Palo Alto c/o Stone & Youngberg, LLC 50 California Street San Francisco, CA 94111 Fax No. (415445-2395 Authorized Signatory: PROPOSAL FOR THE PURCHASE OF $9,360,000* LIMTED OBLIGATION IMPROVEMENT BONDS CITY OF PALOALTO UNIVERSITY AVENUE AREA OFF STREET PARKING ASSESSPIENT DISTRICT SERIES 2001-A By the authorized signature above, we hereby submit this bid (consisting of the Premium, Discount/Purchase Price and Interest Rate entered below) for the above-described Bonds in accordance with the Official Notice of Sale relating thereto dated as of May 15,2001, which Notice together with all representations and agreements on Page 2 hereof are hereby made part of this bid: Par Value: $-Discount or + Premium $. Purchase Price: $ (plus accrued interest to the date of delivery) Check Check Year Principal*if Term Interest Year Principa!*if Term Interest (September 2 ) %Amour Bon~%Rate (September 2 ) %Amo~t Bonds%~ate. 200,000 2017 400,000 500,000 2018 1,000,000 2005 i00,000 2019 500,000 2006 200,000 2020 900,000 2007 200,000 2021 900,000 ’ 2008 200,000 2022 1,700,000 2014 100,000 2023 2,500,000 2015 500,000 2024 2,000,000 2016 1,0000000 2025 2,100,000 *Preliminary, subject to adjustment pursuant to Notice of Sale. %Clearly indicate each Term Bond as follows: Enter "Term" in blank for year of initial mandatory sinking fund payment; draw arrow to maturity; enter Interest Rate in blank for year of maturity. The interest rate on any maturity or group of maturities is not more than 3% higher than the interest rate on any other maturity or group of maturities. The maximum interest rate bid does not exceed eight percent (8%) per annum. Each interest rate bid is a multiple of 1/8 or 1/20 of 1%. No Bond bears more than one rate and all Bonds of the same maturity bear the same interest rate. Each Bond maturing shall bear a rate of interest equal to or greater than rate of the next previous maturity. Each Bond bears EXHIBIT C Page 12 interest at the interest rate specified from its dated date to its maturity date. We understand that the above principal amounts are subject to adjustment under the terms of the Official Notice of Sale. We will pay therefor the principal amount thereof, less a discount or plus a premium of $plus interest accrued on the Bonds to the date of delivery. This proposal is made subject to all the terms and conditions of the Official Notice of Sale for the Bonds dated as of , 2001, all of which terms and conditions are made a part hereof as fully as though set forth in full in this proposal, including the obligation of the successful bidder to pay fees, charges and costs of issuance as provided in the Official Notice of Sale. This proposal is subject to acceptance, in whole or in part, within twenty-three (23) hours after expiration of the time for the receipt of proposals, as specified in said Official Notice of Sale. There is enclosed herewith a certified or cashier’s check or Financial Surety Bond for $50,000 payable to the order of the City of Palo Alto Director of Administrative Services. We hereby request that printed copies of the Official Statement (not to exceed 200 copies) pertaining to the Bonds be furnished to us in accordance with the terms of the Official Notice of Sale. The following is our computation made as provided in the Notice Inviting Bids, but not constituting any part of the foregoing, of the net interest cost under the foregoing .proposal, to wit: Total Interest Cost Proposed Discount or Premium True Interest Cost The following is a list of the members of our account on whose behalf this bid is made: Respectfully submitted, Name of Bidder: Account Manager: By: Address: Phone: EXHTBTT (~ Page 14 NOTICE INVITING BIDS NOT TO EXCEED $9,360,000* LIMTED OBLIGATION IMPROVEMENT BONDS CITY OF PALO ALTO UNIVERSITY AVENUE AREA OFF STREET PARKING ASSESSMENT DISTRICT SERIES 2001-A NOTICE IS HEREBY GIVEN, that the City of California will receive bids on the captioned bonds on: Alto, WEDNESDAY, JUNE 13, 2001 at i0:00 a.m. (Pacific Daylight Time), at the offices of Stone & Youngberg LLC, 50 California Street, 35th Floor, San Francisco, CA 94111. The sale will be awarded by the Finance Director of the City pursuant to the order of the City Council not later than 5:00 p.m. on the day prescribed for receipt of bids. If no proposal is received or accepted, notice of a new sale date and hour shall be given by notice in not later than 23 hours before the new hour for receipt of bids, until such time as a bid is awarded or notice to the contrary is given. Further information, including copies of the preliminary Official Statement, Official Notice of Sale and form of Bid Proposal, may be obtained from Stone & Youngberg LLC, at the above address or by calling (415) 445-2327. Dated as of May 15, 2001 EXHIBIT C Page 15 NOTICE OF INTENTION NOT TO EXCEED $9,360,000* LIMTED OBLIGATION IMPROVEMENT BONDS CITY OF PALO ALTO UNIVERSITY AVENUE ARF_~ OFF STREET PARKING ASSESSMENT DISTRICT SERIES 2001-A NOTICE IS HEREBY GIVEN, under Section 53692 of the California Government Code, that the City of Palo Alto,California will receive bids on the captioned bonds on: WEDNESDAY,JUNE13,2001 at I0:00 a.m. (Pacific Daylight Time), at the offices of Stone & Youngberg LLC, 35th Floor, 50 California Street, San Francisco, CA 94111. The sale will be awarded by the Finance Director’ of the City pursuant to the order of the City Council not later than .5:00 p.m. on the day prescribed for receipt of bids. If no proposal is received or accepted, notice of a new sale date and hour shall be given by notice in not later than 23 hours before the new hour for receipt" of bid~, until such time as a bid is awarded or notice to the contrary is given. Further information, including copies of the preliminary Official Statement, Official Notice of Sale and form of Bid Proposal, may be obtained from Stone & Youngberg LLC, at the above address or by calling (415) 445-2327. Dated as of May 15, 2001 EXHIBIT C Page 16 CERTIFICATE OF AWARD OF SALE OF BONDS LINTED OBLIGATION IMPROVEMENT BONDS CITY OF PALO ALTO UNIVERSITY AVENUE AREA OFF STREET PARKING ASSESSMENT DISTRICT SERIES 2001-A With respect to the captioned undersigned certifies as follows:Bonds (the ~Bonds") the I. The undersigned is the Director of AdministrativeServices of the City of Palo Alto (the ~City") and makes this certification for and on behalf of the City under the authorization and direction contained in Resolution No. of the Board of Council of the City adopted on May 14, 2001. .2. On , 2001, proposals for the purchase of the captioned bonds (the ~’Bonds"), as summarized on Attachment I hereto,.~were received and opened in accordance with the Official Notice of Sale for the Bonds, dated as of , 2001. 3. The sale thereof is hereby awarded to: Purchaser"), at a %, True Interest Cost of (the "Original the Original Purchaser’s proposal being the best responsible proposal determined by the method of calculation therefor contained in the Official Notice of Sale as follows: 4. All proposals shown on Attachment I, other than that of the Original Purchaser, are hereby rejected. Dated , 2001 Director of Administrative Services, City of Palo Alto EXHIBIT C Page 17 CERTIFICATE OF AWARD OF SALE OF BONDS LIMTED OBLIGATION IMPROVEMENT BONDS CITY OF PALO ALTO UNIVERSITY A%-ENUE AREA OFF STREET PARKING ASSESSM~/TT DISTRICT SERIES 2001-A Attachment I Su~mnaryof Bids Name of Bidder Bidder’s True Interest Cost (TIC) EXHIBIT C Page 18 CERTIFICATE OF AWARD OF SALE OF BONDS LIMTED OBLIGATION IMPROVEMENT BONDS CITY OF PALOALTO UNIVERSITY AVENUE AREA OFF STREET PARKING ASSESSPIENT DISTRICT SERIES 2001-A Attachment II Maturity Schedule $i0,000,000 Principal Amount Maturity Date September 2 Interest Principal Rate EXHIBIT C Page 19 ATTACHMENT B University Avenue Area Off-Street Parking District:Estimated Sources and Uses of Funds for First Financing Phase Sources of Funds: Proceeds from Bond Sale Cash Payments by Property Owners 1989 Assessment District Payments Available Parking In-Lieu Funds $ 9,250,000 116,000 562,000 766,000 Total Sources $10,694,000 Uses of Funds: Project Fund Fund to Reimburse 1977 & 1989 Bonds General Fund Reimbursement Debt Service, Capital Interest and Administrative Allowance Cost of Issuance Underwriter Discount and Bond Insurance Issuance Contingency $4,346,000 3,452,000 604,000 1,486,000 300,000 287,000 219,000 Total Uses $10,694,000