HomeMy WebLinkAboutStaff Report 3753
City of Palo Alto (ID # 3753)
City Council Staff Report
Report Type: Action Items Meeting Date: 5/6/2013
City of Palo Alto Page 1
Summary Title: Library GO Bond Second (2013) Series
Title: Adoption of a Resolution Authorizing the Issuance and Sale of General
Obligation Bonds Series 2013A For Measure N Projects in the Principal
Amount of $20,695,000, Authorizing and Directing the Execution of a Paying
Agent Agreement, and Certain Other Related Documents, and Authorizing
Official Actions Related Thereto
From: City Manager
Lead Department: Administrative Services
RECOMMENDATION
Staff recommends that the City Council approve the attached resolution (Attachment A) to:
1) Authorize staff to issue and sell General Obligation Bonds (Election of 2008, Series
2013A) for Measure N Projects in an amount of $20,695,000 to finance City library
capital improvements
2) Approve Paying Agent Agreement, Official Notice of Sale, Preliminary Official
Statement; and authorize official actions related thereto
MOTION
I move staff’s recommendation.
BACKGROUND
On November 4, 2008, City voters passed Measure N, which gave the City the authority to issue
a maximum amount of $76,000,000 million of General Obligation bonds (the “Bonds”) for
capital improvements to the Mitchell Park, Downtown, and Main libraries and to the Mitchell
Park community center. On May 10, 2010, staff requested and Council authorized the issuance
of up to $60,000,000 in bonds. Based on actual and estimated construction costs just prior to
City of Palo Alto Page 2
the first bond issue, it was anticipated that $55,305,000 in par amount would cover design and
construction costs associated with the Mitchell Park library and community center, downtown
library, and design costs for the Main library, and the first series of the Bonds were issued on
June 30, 2010 in that amount. As a consequence, there remained $20,695,000 in authority to
issue a second series of the Bonds under Measure N, primarily for the Main library project.
DISCUSSION
Staff is requesting Council approval to issue $20,695,000 in General Obligation (GO) Bonds to
make planned improvements to the Main Library and potentially to cover any unanticipated
costs associated with the Mitchell Park library and community center projects. City staff has
kept Council informed about the status and costs associated with the Mitchell Park projects
through periodic reports. The bond amount being requested constitutes the remaining
authority or balance approved by voters under Measure N. To issue Bonds, the Council first will
need to adopt the attached resolution (Attachment A) which:
1. Authorizes the issuance and sale of $20,695,000 in the second series of Bonds (“Series
2013A Bonds”)
2. Approves the required financial documents (Exhibits 1, 2, and 3) which are discussed
below; and
3. Grants staff the authority to take all necessary actions related to the sale of the Series
2013A Bonds
Adoption of the resolution would confer formal approval of the following documents:
Paying Agent Agreement which outlines the responsibilities of the City and U.S. Bank in
all financial transactions related to receipt of bond proceeds, disbursement of funds,
payment of debt service, and payments to bond holders (Exhibit 1)
An official Notice of Sale, which describes the Series 2013A Bonds to the investment
community (potential bidders), for the purpose of seeking bids to be received via an
electronic platform, on or around June 12, 2013 (Exhibit 2)
Preliminary Official Statement containing and discussing information about the City, its
economic and property tax base, the Series 2013A Bonds, and other information
material to the offering and sale of the Bonds, which will be approved by the Council in
near “final” form (i.e., it is complete, except for the interest rates and amount of final
numbers which will result from the sale of the Series 2013A Bonds) (Exhibit 3)
City of Palo Alto Page 3
As with the previous sale in 2010, costs of issuance such as underwriter fees will be paid
through a “premium” instead of a payment, using bond proceeds. This is a consequence of
legal requirements that GO bonds must be sold competitively and that bids be for not less than
the par amount of the bonds. The effect of this requirement is that a “premium” is generated
by configuring the coupon rate higher than the bond yield. “Premium” monies are then used
for the costs of issuance and, if the amount of premium received exceeds the amount needed
to pay costs of issuance, such additional premium will be deposited to the debt service fund
created for the Series 2013A Bonds and applied to offset forthcoming debt service payments.
Based on a par offering of $20,695,000, the underwriter’s discount is estimated at $166,000
and other issuance costs (e.g., financial advisor, bond counsel, disclosure counsel, and paying
agent) are estimated at $200,000. (Attachment B). Precise costs for the underwriter will not be
known until the day of sale. The interest rates on the principal amount of the Series 2013A
Bond sold also will be determined on the day of the sale and will reflect prevailing market
conditions at that time. When the interest rates are established, annual debt service payments
will be calculated and used to determine the 2013-14 assessment for property owners in Palo
Alto. The current levy rate for the first series of bonds is $14.76 per $100,000 of assessed
valuation (AV). At this time, the estimated levy rate for 2013-14 that will include the first and
second series of the Bonds will be $19.98 per $100,000 of AV. This amount is an estimate, and
will be revised, depending upon the interest rates determined at the time of sale. A June bond
sale allows sufficient time to notify the County of the additional levy for next year.
To minimize interest expense and to promote the bond issue, staff will deliver a ratings
presentation to Moody’s and Standard and Poor’s (S&P) on May 6th. The City Manager and
staff from the Administrative Services, Public Works, and Library departments, as well as the
City’s financial advisor and bond counsel, will participate in the presentation. Information on
City demographics, property values, businesses, educational institutions, and financial condition
will be provided to the rating agencies.
This information is factored into each agency’s credit rating, which investors use in determining
whether or not to buy the City’s bonds. A high credit rating results in lower interest costs and
vice versa. The current underlying issuer credit rating for the City’s General Fund is triple A
from Standard and Poor’s, the highest possible. As soon as the ratings are received, staff will
relay the results to Council and the public.
The timeline for selling bonds, receiving bond proceeds, and placing assessments on the county
role is provided below. Receiving Council approval tonight is crucial to maintaining this
timeline.
City of Palo Alto Page 4
RESOURCE IMPACT
Pending Council approval, the City will issue its second series of Measure N General Obligation
bonds in an amount of $20,695,000. The costs of issuance, estimated at $366,000 will be paid
through a “premium” that is discussed above. Actual debt service and the assessment on
property owners will not be determined until the bonds are sold, on or around June 12, 2013.
POLICY IMPLICATIONS
This report is consistent with prior policy direction received from Council.
TIME LINE
May 6, 2013 City Council Action on Financing Documents to Issue Bonds
May 6 Ratings Presentation to S&P and Moody’s
May 13 Award of (Main Library) Contract
Week of May 27 Ratings Received
May 27 Preliminary Official Statement/Underwriter Bid Form Finalized and
Circulated
June 12 Close Bond Issue and Receive Bond Proceeds
August Send Property Assessments to County
ENVIRONMENTAL REVIEW
On July 21, 2008, the Council confirmed the Director of Planning and Community Environment’s
(PCE) approvals of a Mitigated Negative Declaration (MND) for the Mitchell Park Library and
Community Center and a 2007 Addendum to the 2002 final Environmental Impact Report (EIR)
for Main Library.
Attachments:
City of Palo Alto Page 5
Attachment A: Resolution Authorizing the Issuance and Sale of General Obligation Bonds
For Measure N Projects, Authorizing and Directing the Execution of Related Documents,
and (PDF)
Exhibit 1: Paying Agent Agreement (PDF)
Exhibit 2: Official Notice of Sale (PDF)
Exhibit 3: Preliminary Official Statement (POS) Containing and Discussing Information
Material to the Offering and Sale of Bonds (excluding FY 2012 Comprehensive Annual
Financial Report).pdf (PDF)
*NOT YET APPROVED*
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Resolution No. ______
Resolution of the Council of the City of Palo Alto Authorizing the Issuance and
Sale of Its General Obligation Bonds for Measure N Projects in the Principal
Amount of $20,695,000, Authorizing and Directing the Execution of a Paying
Agent Agreement and Certain Other Related Documents, and Authorizing
Actions Related Thereto
R E C I T A L S
A. More than two‐thirds of the qualified voters in the City of Palo Alto (the “City”),
voting at a municipal election on November 4, 2008, approved the issuance of up to
$76,000,000 of general obligation bonds to finance the costs of constructing a new energy
efficient, environmentally friendly Mitchell Park Library and Community Center, renovating and
expanding the Main Library, and renovating the Downtown Library, including enhancements at
all three facilities for seismic safety and disabled access, expanded space for library collections,
meeting and study areas, and new air conditioning, ventilation and lighting systems.
B. Pursuant to the authorization received at such election, and the authorization
contained in the applicable provisions of California law, including Chapter 4 (commencing with
section 43600) of Division 4 of Title 4 of the California Government Code and Section 53506 et
seq. of the California Government Code (collectively, the “Act”), the City issued the first series
of the general obligation bonds authorized as described above (the “Bonds”) in the principal
amount of $55,305,000 on June 30, 2010.
C. Pursuant to the authorization received at such election, and the authorization
contained in the Act, the City intends to issue the second and final series of the Bonds pursuant
to the Paying Agent Agreement (defined below) in a principal amount of $20,695,000, to be
designated as the “City of Palo Alto General Obligation Bonds, Election of 2008, Series 2013A”
(the “Series 2013A Bonds”.
D. The City Council of the City has duly considered such transactions and desires at
this time to approve said transactions and the documents related thereto.
NOW, THEREFORE, THE COUNCIL OF THE CITY OF PALO ALTO does resolve AS FOLLOWS:
SECTION 1. Approval of Paying Agent Agreement. The proposed form of paying agent
agreement dated as of June 1, 2013, by and between the City and U.S. Bank National
Association (the “Paying Agent”), which is on file with the City Clerk (the “Paying Agent
Agreement”) is hereby approved, and the City Manager and Director of Administrative Services
(the “Authorized Officers”, and individually, an “Authorized Officer”) are hereby separately
authorized and directed, for and in the name and on behalf of the City, to execute and deliver
the Paying Agent Agreement in substantially the form, with the additions thereto (including the
insertion of the maturity dates, principal amounts and interest rates of the Series 2013A Bonds)
*NOT YET APPROVED*
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and changes therein as the Authorized Officer may approve, such approval to be conclusively
evidenced by the execution and delivery thereof. The Council hereby authorizes the issuance of
the Series 2013A Bonds pursuant to the Paying Agent Agreement, and the performance by the
City of its obligations under the Paying Agent Agreement. The selection of U.S. Bank National
Association, as Paying Agent, is hereby approved and ratified.
SECTION 2. Approval of Form of Series 2013A Bonds. The form of Series 2013A Bonds
set forth in Exhibit A to the Paying Agent Agreement is hereby approved, and the City Manager
is hereby authorized and directed to execute the Series 2013A Bonds, and the City Clerk to
countersign in the name and on behalf of the City and under its seal, and to cause the delivery
thereof as provided for below.
SECTION 3. Sale and Issuance of Series 2013A Bonds. The Series 2013A Bonds shall be
sold by competitive sale, provided that (a) the true interest cost of the Series 2013A Bonds shall
not exceed 4.2% per annum, (b) the principal amount of the Series 2013A Bonds shall not
exceed $20,695,000, and (c) the final maturity date of the Series 2013A Bonds shall not extend
beyond August 1, 2043. The Authorized Officers are hereby separately authorized and directed
to evidence the City’s acceptance of an offer to purchase the Series 2013A Bonds following
competitive bidding pursuant to the Official Notice of Sale relating to the competitive sale of
the Series 2013A Bonds (the “Official Notice of Sale”). The City Council hereby approves the
Official Notice of Sale in substantially the form on file with the City Clerk.
Jones Hall, A Professional Law Corporation, as bond counsel to the City, is hereby
authorized and directed to cause a Notice of Intention to Sell Bonds, in form and substance
acceptable to the firm, to be published once in The Bond Buyer in accordance with Section
53692 of the California Government Code.
SECTION 4. Approval of Preliminary and Final Official Statement. Quint & Thimmig LLP,
as disclosure counsel to the City, has prepared a preliminary official statement describing the
Series 2013A Bonds (the “Preliminary Official Statement”). The City Council hereby approves
the Preliminary Official Statement in the form presented to the Council at this meeting. The
Authorized Officer is hereby authorized and directed to execute a certificate to the effect that
the Preliminary Official Statement was deemed "final" as of its date for purposes of Rule 15c2‐
12 of the Securities Exchange Act of 1934, and the Authorized Officer is hereby authorized to so
deem such Preliminary Official Statement final.
The execution of the final Official Statement (the “Official Statement”), which shall
include such changes and additions to the Preliminary Official Statement deemed advisable by
the Authorized Officer or any other qualified officer of the City and such information permitted
to be excluded from the Preliminary Official Statement pursuant to the Rule, shall be conclusive
evidence of the approval of the Official Statement by the City. The City Council authorizes the
distribution by Public Financial Management, Inc. (the “Financial Advisor”) of the Official
Statement to prospective purchasers of the Series 2013A Bonds.
*NOT YET APPROVED*
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The Authorized Officer is authorized and directed to execute the Official Statement and
a statement that the facts contained in the Official Statement, and any supplement or
amendment thereto (which shall be deemed an original part thereof for the purpose of such
statement) were, at the time of sale of the Series 2013A Bonds, true and correct in all material
respects and that the Official Statement did not, on the date of sale of the Series 2013A Bonds,
and does not, as of the date of delivery of the Series 2013A Bonds, contain any untrue
statement of a material fact with respect to the City or omit to state material facts with respect
to the City required to be stated where necessary to make any statement made therein not
misleading in the light of the circumstances under which it was made. The Authorized Officer
shall take such further actions prior to the signing of the Official Statement as are deemed
necessary or appropriate to verify the accuracy thereof.
SECTION 5. Delegation of Authority to Authorized Officers. The Authorized Officers are
hereby authorized and directed to execute, sign and deliver any and all approvals, certificates,
statements, requests, requisitions and orders of the City in connection with the sale and
issuance of the Series 2013A Bonds, the purchase of the Series 2013A Bonds and the other
transactions described herein. The Authorized Officers may authorize such other officers of the
City as they deem appropriate to undertake any of the actions which he is authorized or
directed to undertake pursuant hereto.
SECTION 6. General Authority. The officers of the City are hereby authorized and
directed, jointly and severally, to do any and all things and to execute and deliver any and all
documents which they may deem necessary or advisable in order to consummate the
transactions described herein or to otherwise effectuate the purposes of this resolution,
including preparing, or causing to be prepared, and executing all appropriate disclosure
documents relating to the Series 2013A Bonds and agreements necessary to comply with the
disclosure requirements of Rule 15c2‐12, as amended, of the Securities and Exchange
Commission. Any such actions previously taken by such officers are hereby ratified and
confirmed.
SECTION 7. Severability. If any section, paragraph or provision of this resolution shall be
held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not
affect any remaining provisions hereof.
SECTION 8. Effective Date. This resolution shall take effect from and after the date of
its passage and adoption.
//
//
//
//
*NOT YET APPROVED*
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SECTION 9. CEQA Finding. The Council finds that this resolution is not a project under
the California Environmental Quality Act and, therefore, no environmental impact assessment is
necessary.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
__________________________ ______________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
__________________________ ______________________________
Senior Assistant City Attorney City Manager
______________________________
Director of Administrative
Services
I HEREBY CERTIFY that the foregoing resolution was duly and regularly passed and adopted by
the City Council of the City of Palo Alto at a regular meeting thereof held on the _____ day of
_____, 2013, and that the foregoing is a full, true and correct copy of said Resolution.
City Clerk
26005-66 JH:WHM 3/18/13
4/5/13
4/16/13
PAYING AGENT AGREEMENT
By and Between
CITY OF PALO ALTO
and
U.S. BANK NATIONAL ASSOCIATION,
as Paying Agent
Dated as of June 1, 2013
Relating to
$20,695,000
City of Palo Alto
General Obligation Bonds
Election of 2008, Series 2013A
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS; AUTHORITY
Section 1.01. Definitions. ............................................................................................................................... 2
Section 1.02. Authority for this Agreement. ............................................................................................... 5
ARTICLE II
THE BONDS
Section 2.01. Authorization........................................................................................................................... 6
Section 2.02. Terms of Bonds. ....................................................................................................................... 6
Section 2.03. Redemption. ............................................................................................................................. 7
Section 2.04. Form of Bonds. ........................................................................................................................ 9
Section 2.05. Execution of Bonds. ................................................................................................................ 9
Section 2.06. Transfer of Bonds. ................................................................................................................... 9
Section 2.07. Exchange of Bonds. ............................................................................................................... 10
Section 2.08. Bond Register. ........................................................................................................................ 10
Section 2.09. Temporary Bonds. ................................................................................................................. 10
Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen. ..................................................................... 10
Section 2.11. Book-Entry; Limited Obligation of City. ............................................................................ 11
Section 2.12. Representation Letter............................................................................................................ 12
Section 2.13. Transfers Outside Book-Entry System. .............................................................................. 12
Section 2.14. Payments and Notices to the Nominee. ............................................................................. 12
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF BOND PROCEEDS;
SECURITY FOR THE BONDS
Section 3.01. Issuance and Delivery of Bonds. ......................................................................................... 13
Section 3.02. Application of Proceeds of Sale of Bonds. ......................................................................... 13
Section 3.03. Validity of Bonds. .................................................................................................................. 13
Section 3.04. Security for the Bonds. ......................................................................................................... 13
ARTICLE IV
FUNDS AND ACCOUNTS
Section 4.01. Project Fund. .......................................................................................................................... 14
Section 4.02. Debt Service Fund ................................................................................................................. 14
Section 4.03. Administration and Disbursements From Debt Service Fund ....................................... 14
Section 4.04. Bond Service Fund ................................................................................................................ 14
Section 4.05. Costs of Issuance Account ................................................................................................... 14
Section 4.06. Investment of Moneys .......................................................................................................... 14
ARTICLE V
OTHER COVENANTS OF THE CITY
Section 5.01. Punctual Payment. ................................................................................................................ 16
Section 5.02. Extension of Time for Payment. .......................................................................................... 16
Section 5.03. Payment of Claims. ............................................................................................................... 16
Section 5.04. Books and Accounts. ............................................................................................................. 16
Section 5.05. Protection of Security and Rights of Bondowners. ........................................................... 16
Section 5.06. Continuing Disclosure. ......................................................................................................... 16
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Section 5.07. Further Assurances. .............................................................................................................. 17
Section 5.08. No Arbitrage. ......................................................................................................................... 17
Section 5.09. Federal Guarantee Prohibition. ........................................................................................... 17
Section 5.10. Private Activity Bond Limitation. ....................................................................................... 17
Section 5.11. Maintenance of Tax-Exemption .......................................................................................... 17
Section 5.12. Rebate Requirement. ............................................................................................................. 17
Section 5.13. Information Report. .............................................................................................................. 17
ARTICLE VI
THE PAYING AGENT
Section 6.01. Appointment of Paying Agent. ........................................................................................... 18
Section 6.02. Paying Agent May Hold Bonds. ......................................................................................... 18
Section 6.03. Liability of Agents. ................................................................................................................ 18
Section 6.04. Notice to Agents. ................................................................................................................... 19
Section 6.05. Compensation, Indemnification. ......................................................................................... 19
Section 6.06. Funds and Accounts. ............................................................................................................ 20
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES OF BONDOWNERS
Section 7.01. Events of Default. .................................................................................................................. 21
Section 7.02. Application of Funds. ........................................................................................................... 22
Section 7.03. Other Remedies of Bondowners. ........................................................................................ 22
Section 7.04. Non-Waiver. .......................................................................................................................... 22
Section 7.05. Remedies Not Exclusive. ...................................................................................................... 23
ARTICLE VIII
SUPPLEMENTAL AGREEMENTS
Section 8.01. Amendments Permitted. ...................................................................................................... 24
Section 8.02. Owners’ Meetings. ................................................................................................................ 24
Section 8.03. Procedure for Amendment with Written Consent of Owners. ....................................... 25
Section 8.04. Disqualified Bonds. ............................................................................................................... 25
Section 8.05. Effect of Supplemental Agreement. .................................................................................... 25
Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments. ............................ 26
Section 8.07. Amendatory Endorsement of Bonds. ................................................................................. 26
ARTICLE IX
MISCELLANEOUS
Section 9.01. Benefits of Agreement Limited to Parties. ......................................................................... 27
Section 9.02. Successor is Deemed Included in All References to Predecessor. .................................. 27
Section 9.03. Discharge of Agreement. ...................................................................................................... 27
Section 9.04. Execution of Documents and Proof of Ownership by Owners. ...................................... 28
Section 9.05. Waiver of Personal Liability. ............................................................................................... 28
Section 9.06. Notices to and Demands on City and Paying Agent. ...................................................... 28
Section 9.07. Partial Invalidity. ................................................................................................................... 29
Section 9.08. Unclaimed Moneys. .............................................................................................................. 29
Section 9.09. Applicable Law...................................................................................................................... 29
Section 9.10. Conflict with Act. .................................................................................................................. 29
Section 9.11. Conclusive Evidence of Regularity. .................................................................................... 29
Section 9.12. Payment on Business Day. ................................................................................................... 29
Section 9.13. Counterparts. ......................................................................................................................... 30
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EXHIBIT A FORM OF BOND
PAYING AGENT AGREEMENT
This Paying Agent Agreement (the “Agreement”) is made and entered into as of June 1,
2013, by and between the City of Palo Alto, a charter city organized and existing under the laws
of the State of California (the “City”) and U.S. Bank National Association, a national banking
association duly organized and existing under the laws of the United States, as Paying Agent
(the “Paying Agent”)
W I T N E S S ET H:
WHEREAS, an election was duly and regularly held in the City on November 4, 2008 for
the purpose of submitting to the qualified electors of Palo Alto the question whether bonds
should be issued in the principal amount of not to exceed $76,000,000 to finance the costs of
constructing a new energy efficient, environmentally friendly Mitchell Park Library and
Community Center, renovating and expanding the Main Library, and renovating the
Downtown Library, including enhancements at all three facilities for seismic safety and
disabled access, expanded space for library collections, meeting and study areas, and new air
conditioning, ventilation and lighting systems (the “Project”); and
WHEREAS, more than two-thirds of the votes cast at the election were in favor of the
issuance of the bonds; and
WHEREAS, pursuant to the authorization received at such election, and the
authorization contained in Chapter 4 (commencing with section 43600) of Division 4 of Title 4 of
the California Government Code and Section 53506 et seq. of the California Government Code
(together, the “Act”), the City issued its first series of general obligation bonds pursuant to a
resolution adopted on May 10, 2010 and a Paying Agent Agreement, dated as of June 1, 2010, in
a principal amount equal to $55,305,000;
WHEREAS, pursuant to the authorization received at such election, and the
authorization contained in the Act, the City is issuing its second and final series of general
obligation bonds pursuant to a resolution adopted on May 6, 2013 (the “City Resolution”), and
this Agreement in a principal amount equal to $20,695,000 (the “Bonds”);
NOW THEREFORE, the City and the Paying Agent agree as follows:
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ARTICLE I
DEFINITIONS; AUTHORITY
Section 1.01. Definitions. The terms defined in this Section 1.01, as used and
capitalized herein, shall, for all purposes of this Agreement, have the meanings ascribed to them
below, unless the context clearly requires some other meaning.
“Act” means, collectively, Chapter 4 (commencing with section 43600) of Division 4 of
Title 4 of the California Government Code and Section 53506 et seq. of the California
Government Code, as in effect on the date of adoption hereof and as amended hereafter.
“Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections
or subdivisions of this Agreement, and the words “herein,” “hereof,” “hereunder” and other
words of similar import refer to this Agreement as a whole and not to any particular Article,
Section or subdivision hereof.
“Beneficial Owner” means any person who has the power, directly or indirectly, to vote
or consent with respect to, or to dispose of ownership of, any Bonds, including persons holding
Bonds through nominees or depositories including, but not limited to, through the Nominee.
“Bond Counsel” means any attorney or firm of attorneys nationally recognized for
expertise in rendering opinions as to the legality and tax exempt status of securities issued by
public entities.
“Bond Service Fund” means the Series 2013A Bond Service Fund established pursuant
to Section 4.04 hereof.
“Bonds” means the City of Palo Alto General Obligation Bonds, Election of 2008, Series
2013A, Outstanding pursuant to this Agreement.
“Business Day” means a day which is not a Saturday or Sunday or a day on which
banks in San Francisco and Los Angeles, California, and New York, New York, are not required
or permitted to be closed.
“City Representative” means the City Manager, the Director of Administrative Services,
or any other person authorized by resolution of the City Council of the City to act on behalf of
the City with respect to this Agreement.
“City Resolution” has the meaning given to the term in the recitals hereto.
“Closing Date” means the date upon which there is an exchange of Bonds for the
proceeds representing the purchase price of the Bonds by the Purchaser.
“Code” means the Internal Revenue Code of 1986,as amended.
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“Continuing Disclosure Certificate” means that certain Continuing Disclosure
Certificate dated the Closing Date and executed by the City, as originally executed and as it
may be amended from time to time in accordance with the terms thereof.
“Contractor” means the contractor(s) or vendor(s) from whom the City has ordered or
caused to be ordered or with whom the City has contracted or caused to be contracted with
respect to the construction of the Project, or any portion of the Project.
“Costs of Issuance Account” means the account of that name established and held by
the Paying Agent as provided in Section 4.05.
“Debt Service” means the scheduled amount of interest and principal, including
principal paid pursuant to mandatory sinking fund redemption, payable on the Bonds during
the period of computation, excluding amounts scheduled during such period which relate to
principal which has been retired before the beginning of such period.
“Debt Service Fund” means the Series 2013A Debt Service Fund established pursuant to
Section 4.02 hereof.
“Depository” means any securities depository appointed to act as Depository under
Section 2.13 hereof.
“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 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 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 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 the fund is without regard to the source of investment.
“Federal Securities” means Federal agency or United States government-sponsored
enterprise obligations, participations, or other instruments, including those issued by or fully
guaranteed as to principal and interest by federal agencies or United States government-
sponsored enterprises.
“Issuance Expenses” means all items of expense directly or indirectly reimbursable to
the City relating to the execution and delivery of the Bonds, including but not limited to, filing
and recording costs, settlement costs, printing costs, reproduction and binding costs, legal fees
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and charges, bond insurance premiums, fees and expenses of the Paying Agent, financial and
other professional consultant fees, and costs of obtaining credit ratings.
“Moody’s” means Moody’s Investors Service, a corporation organized and existing
under the laws of the State of Delaware, its successors and assigns, except that if such
corporation shall be dissolved or liquidated or shall no longer perform the functions of a
securities rating agency for any reason, the term “Moody’s” shall be deemed to refer to any
other nationally recognized securities rating agency selected by the City.
“Nominee” means the nominee of the Depository as determined from time to time in
accordance with Section 2.13.
“Outstanding,” when used as of any particular time with reference to Bonds, means all
Bonds except:
(a) Bonds theretofore canceled by the Paying Agent or surrendered to the
Paying Agent for cancellation;
(b) Bonds paid or deemed to have been paid within the meaning of Section
9.03 hereof; and
(c) Bonds in lieu of or in substitution for which other Bonds shall have been
authorized, executed, issued and delivered by the City pursuant to the Agreement.
“Owner” or “Bondowner” means any person who shall be the registered owner of any
Outstanding Bond.
“Participant” means those broker-dealers, banks and other financial institutions from
time to time for which the Depository holds Bonds as a securities depository.
“Participating Underwriter” has the meaning assigned to such term in the Continuing
Disclosure Certificate.
“Person” means an individual, corporation, firm, association, partnership, trust or other
legal entity or group of entities, including a governmental entity or any agency or political
subdivision thereof.
“Principal Office” means, with respect to the Trustee, the corporate trust office of the
Paying Agent at One California Street, Suite 1000, San Francisco, California, Attention
Corporate Trust Services (except with respect to the payment of the principal or prepayment
price of the Bonds, in which case Principal Office means Corporate Trust Services of the Paying
Agent, 60 Livingston Avenue, St. Paul, Minnesota, or such other location as designated by the
Paying Agent.
“Project” has the meaning given to the term in the recitals of this Agreement.
“Project Costs” means:
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(a) all costs of payment of, or reimbursement for, acquisition, construction,
installation and equipping of the Project including, but not limited to, architect and
engineering fees, Contractor payments, costs of feasibility and other reports, inspection
costs, performance bond premiums, and permit fees, provided that any such costs are
directly related to the acquisition or improvement of real property;
(b) Issuance Expenses not paid by the Original Purchaser from original issue
premium on the Bonds; and
(c) costs directly related to the administration of the funds and accounts
created under this Agreement.
“Project Fund” means the Series 2013A Project Fund established pursuant to Section
4.01 hereof.
“Purchaser” means __________________.
“Regulations” means temporary and permanent regulations promulgated under the
Code.
“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., a corporation organized and existing under the laws of the State of New York,
its successors and assigns, except that if such corporation shall be dissolved or liquidated or
shall no longer perform the functions of a securities rating agency for any reason, the term
“S&P” shall be deemed to refer to any other nationally recognized securities rating agency
selected by the City.
“Securities Depositories” means: The Depository Trust Company, 711 Stewart Avenue,
Garden City, New York 11530, Fax (516) 277-4039 or 4190; or, in accordance with the then
current guidelines promulgated by the Securities and Exchange Commission at such other
addresses and/or to such other securities depositories as the City may designate in writing to
the Paying Agent.
“Supplemental Agreement” means any agreement supplemental to or amendatory of
this Agreement entered into in accordance with Article VIII hereof.
“Written Request of the City” means an instrument in writing signed by the City
Representative.
Section 1.02. Authority for this Agreement. This Agreement is being entered into
pursuant to the authority set forth in the Act and the City Resolution, constitutes a continuing
agreement with the Owners of all of the Bonds issued or to be issued hereunder and then
Outstanding, to secure the full and final payment of principal of and premiums, if any, and the
interest on the Bonds, all pursuant to the provisions of the Act.
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ARTICLE II
THE BONDS
Section 2.01. Authorization. Bonds in the aggregate principal amount of Twenty
Million Six Hundred Ninety-Five Thousand dollars ($20,695,000) are hereby authorized to be
issued by the City under and subject to the terms of the Act and which may from time to time
be executed and delivered hereunder, subject to the covenants, agreements, provisions and
conditions herein contained. The Bonds shall be designated the “City of Palo Alto General
Obligation Bonds, Election of 2008, Series 2013A”.
Section 2.02. Terms of Bonds.
(a) Form; Numbering. The Bonds shall be issued as fully registered Bonds, without
coupons, in the denomination of $5,000 each or any integral multiple of $5,000, but in an
amount not to exceed the aggregate principal amount of Bonds maturing in the year of maturity
of the Bond for which the denomination is specified. Bonds shall be lettered and numbered as
the Paying Agent shall prescribe.
(b) Date of Bonds. The Bonds shall be dated the Closing Date.
(c) CUSIP Identification Numbers. “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 the Purchaser to accept delivery of and pay for the Bonds. In addition, failure on the
part of the City to use such CUSIP numbers in any notice to Owners of the Bonds 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) Maturities; Interest. The Bonds shall bear interest at the rate or rates set forth
below, payable on February 1 and August 1 of each year, commencing February 1, 2014 (each an
“Interest Payment Date”), and shall mature and become payable as to principal on August 1 of
the years and in the amounts as set forth below:
Maturity
Year
(August 1)
Principal
Amount
Interest
Rate
Maturity
Year
(August 1)
Principal
Amount
Interest
Rate
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Each Bond shall bear interest from the Interest Payment Date next preceding the date of
registration and authentication thereof unless (i) it is registered and authenticated as of an
Interest Payment Date, in which event it shall bear interest from such date, or (ii) it is registered
and authenticated prior to an Interest Payment Date and after the close of business on the
fifteenth day of the month preceding such Interest Payment Date, in which event it shall bear
interest from such Interest Payment Date, or (iii) it is registered and authenticated on or prior to
January 15, 2014, in which event it shall bear interest from the date of original issuance and
authentication of the Bonds; provided, however, that if at the time of registration and
authentication of a Bond, interest is in default thereon, such Bond shall bear interest from the
Interest Payment Date to which interest has previously been paid or made available for
payment thereon.
Interest on the Bonds shall be calculated on the basis of a 360-day year composed of
twelve 30-day months.
(e) Payment. Interest on the Bonds (including the final interest payment upon
maturity or earlier redemption) is payable by check mailed on the applicable Interest Payment
Date to the Owner thereof at his or her address as it appears on the registration books
maintained by the Paying Agent at the close of business on the fifteenth (15th) day of the month
preceding the Interest Payment Date, or at such other address as the Owner may have filed with
the Paying Agent for that purpose; provided that an Owner of $1,000,000 or more aggregate
principal amount of Bonds, or the Owner of all of the Bonds at the time Outstanding, shall, at
his or her option, receive payment of interest by wire transfer to an account in the United States
of America designated by such Owner to the Paying Agent no later than the fifteenth (15) day of
the month immediately preceding the applicable Interest Payment Date. Principal of the Bonds
is payable in lawful money of the United States of America at the Principal Office of the Paying
Agent.
Section 2.03. Redemption.
(a) Optional Redemption. Bonds maturing on or before August 1, 20__ are not
subject to redemption prior to their respective maturity dates. Bonds maturing [after August 1,
20__], shall be subject to redemption prior to their respective maturity dates as a whole or in
part on any date, as designated by the City and, absent any such designation, pro rata among
maturities and by lot within a maturity, from moneys provided at the option of the City, in each
case on and after August 1, 20__, at a redemption price equal to the principal amount of the
Bonds to be redeemed, plus accrued interest to the date of redemption, without premium.
(b) Mandatory Sinking Fund Redemption.
(i) The Bonds maturing August 1, 20__ are subject to mandatory sinking
fund redemption in part, by lot, prior to their stated maturity date, on each August 1 on
and after August 1, 20__, at a redemption price equal to 100% of the principal amount
thereof called for redemption, plus accrued interest to the redemption date, without
premium, as follows:
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Date
(August 1) Amount
(ii) The Bonds maturing August 1, 20__ are subject to mandatory sinking
fund redemption in part, by lot, prior to their stated maturity date, on each August 1 on
and after August 1, 20__, at a redemption price equal to 100% of the principal amount
thereof called for redemption, plus accrued interest to the redemption date, without
premium, as follows:
Date
(August 1) Amount
(iii) The Bonds maturing August 1, 20__ are subject to mandatory sinking
fund redemption in part, by lot, prior to their stated maturity date, on each August 1 on
and after the August 1, 20__, at a redemption price equal to 100% of the principal
amount thereof called for redemption, plus accrued interest to the redemption date,
without premium, as follows:
Date
(August 1) Amount
(c) Redemption Procedure. The Paying Agent shall cause notice of any redemption
to be mailed, first class mail, postage prepaid, at least thirty (30) days but not more than sixty
(60) days prior to the date fixed for redemption, to the respective Owners of any Bonds
designated for redemption, at their addresses appearing on the Bond registration books
maintained by the Paying Agent and to the Securities Depositories; but such mailing shall not
be a condition precedent to such redemption and failure to mail or to receive any such notice
shall not affect the validity of the proceedings for the redemption of such Bonds. The City has
the right to rescind any notice of the redemption of Bonds by written notice to the Paying Agent
on or prior to the dated fixed for redemption. Any notice of redemption shall be cancelled and
annulled if for any reason funds will not be or are not available on the date fixed for redemption
for the payment in full of the Bonds then called for redemption, and such cancellation shall not
constitute an Event of Default. The City and the Paying Agent have no liability to the Bond
Owners or any other party related to or arising from such rescission of notice of redemption.
The Paying Agent shall mail notice of such rescission of notice of redemption in the same
manner as the original notice of redemption was sent under this Section 2.03.
Such notice shall state the redemption date and the redemption price and, if less than all
of the then Outstanding Bonds are to be called for redemption, shall designate the serial
numbers of the Bonds to be redeemed by giving the individual number of each Bond or by
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stating that all Bonds between two stated numbers, both inclusive, or by stating that all of the
Bonds of one or more maturities have been called for redemption, and shall require that such
Bonds be then surrendered at the Principal Office of the Paying Agent for redemption at the
said redemption price, giving notice also that further interest on such Bonds will not accrue
from and after the redemption date.
Upon surrender of Bonds redeemed in part only, the City shall execute and the Paying
Agent shall authenticate and deliver to the Owner, at the expense of the City, a new Bond or
Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal
to the unredeemed portion of the Bond or Bonds.
From and after the date fixed for redemption, if notice of such redemption shall have
been duly given and funds available for the payment of the principal of and interest (and
premium, if any) on the Bonds so called for redemption shall have been duly provided, such
Bonds so called shall cease to be entitled to any benefit under this Agreement 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 pursuant to this Section 2.03 shall be canceled by the Paying Agent,
and a certificate of cancellation shall be submitted by the Paying Agent to the City.
Section 2.04. Form of Bonds. The Bonds, the form of the Paying Agent’s certificate of
authentication and registration and the form of assignment to appear thereon shall be
substantially in the forms, respectively, with necessary or appropriate variations, omissions and
insertions, as permitted or required by this Agreement, as are set forth in Exhibit A attached
hereto.
Section 2.05. Execution of Bonds. The Bonds shall be executed on behalf of the City by
the manual or facsimile signatures of its City Manager, and attested by the manual or facsimile
signature of its City Clerk, who are in office on the date of execution of this Agreement or at any
time thereafter, and the seal of the City shall be impressed, imprinted or reproduced by
facsimile thereon. If any officer whose signature appears on any Bond ceases to be such officer
before delivery of the Bonds to the Purchaser, such signature shall nevertheless be as effective
as if the officer had remained in office until the delivery of the Bonds to the Purchaser. Any
Bond may be signed and attested on behalf of the City by such persons as at the actual date of
the execution of such Bond shall be the proper officers of the City although at the nominal date
of such Bond any such person shall not have been such officer of the City.
Only such Bonds as shall bear thereon a certificate of authentication and registration in
the form set forth in Exhibit A attached hereto, executed and dated by the Paying Agent, shall
be valid or obligatory for any purpose or entitled to the benefits of this Agreement, and such
certificate of the Paying Agent shall be conclusive evidence that the Bonds so registered have
been duly authenticated, registered and delivered hereunder and are entitled to the benefits of
this Agreement.
Section 2.06. Transfer of Bonds. Any Bond may, in accordance with its terms, be
transferred, upon the books required to be kept pursuant to the provisions of Section 2.08
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hereof, by the person in whose name it is registered, in person or by his duly authorized
attorney, upon surrender of such Bond for cancellation at the Principal Office at the Paying
Agent, accompanied by delivery of a written instrument of transfer in a form approved by the
Paying Agent, duly executed. The Paying Agent shall require the payment by the Owner
requesting such transfer of any tax or other governmental charge required to be paid with
respect to such transfer.
Whenever any Bond or Bonds shall be surrendered for transfer, the City shall execute
and the Paying Agent shall authenticate and deliver a new Bond or Bonds, for like aggregate
principal amount.
No transfers of Bonds shall be required to be made (a) fifteen days prior to the date
established for selection of Bonds for redemption or (b) with respect to a Bond after such Bond
has been selected for redemption (except with respect to the unredeemed portion thereof).
Section 2.07. Exchange of Bonds. Bonds may be exchanged at the Principal Office of
the Paying Agent for a like aggregate principal amount of Bonds of authorized denominations
and of the same maturity. The Paying Agent shall require the payment by the Owner
requesting such exchange of any tax or other governmental charge required to be paid with
respect to such exchange.
No exchanges of Bonds shall be required to be made (a) fifteen days prior to the date
established for selection of Bonds for redemption or (b) with respect to a Bond after such Bond
has been selected for redemption (except with respect to the unredeemed portion thereof).
Section 2.08. Bond Register. The Paying Agent shall keep or cause to be kept sufficient
books for the registration and transfer of the Bonds, which shall at all times be open to
inspection by the City upon reasonable notice; and, upon presentation for such purpose, the
Paying Agent shall, under such reasonable regulations as it may prescribe, register or transfer
or cause to be registered or transferred, on the books, Bonds as herein before provided.
Section 2.09. Temporary Bonds. The Bonds may be initially issued 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 City, and may contain such reference to any of the provisions of this Agreement as may be
appropriate. Every temporary Bond shall be executed by the City 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
Paying Agent and the Paying Agent shall 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 pursuant to this
Agreement as definitive Bonds executed and delivered hereunder.
Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become
mutilated the City, at the expense of the Owner of that Bond, shall execute, and the Paying
Agent shall thereupon authenticate and deliver, a new Bond of like maturity and principal
11
amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the
Paying Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Paying
Agent shall be canceled by it and delivered to, or upon the order of, the City. If any Bond shall
be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the
City and, if such evidence be satisfactory to the City and indemnity satisfactory to it shall be
given, the City, at the expense of the Owner, shall execute, and the Paying 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. The City may require payment of a
sum not exceeding the actual cost of preparing each new Bond issued under this Section and of
the expenses which may be incurred by the City and the Paying Agent in the premises. Any
Bond issued under the provisions of this Section 2.10 in lieu of any Bond alleged to be lost,
destroyed or stolen shall constitute an original additional contractual obligation on the part of
the City whether or not the Bond so 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
Agreement with all other Bonds issued pursuant to this Agreement.
Section 2.11. Book-Entry; Limited Obligation of City. The Bonds may be issued in the
form of a separate single fully registered Bond (which may be typewritten) for each maturity.
The ownership of such Bond shall be registered in the registration books kept by the Paying
Agent in the name of the Nominee as nominee of the Depository.
With respect to Bonds registered in the registration books kept by the Paying Agent in
the name of the Nominee, the City and the Paying Agent shall have no responsibility or
obligation to such Participant or to any Person on behalf of which such a Participant holds an
interest in the Bonds. Without limiting the immediately preceding sentence, the City and the
Paying Agent shall have no responsibility or obligation with respect to (i) the accuracy of the
records of the Depository, the Nominee, or any Participant with respect to any ownership
interest in the Bonds, (ii) the delivery to any Participant or any other Person, other than as
shown in the registration books kept by the Paying Agent, of any notice with respect to the
Bonds, including any notice of redemption, (iii) the selection by the Depository and its
Participants of the beneficial interests in the Bonds to be redeemed in the event the Bonds are
redeemed in part, or (iv) the payment to any Participant or any other Person, other than a
Nominee as shown in the registration books kept by the Paying Agent, of any principal of,
premium, if any, or interest on the Bonds. The City and the Paying Agent may treat and
consider the Person in whose name each Bond is registered in the registration books kept by the
Paying Agent as the owner and absolute Owner of such Bond for the purpose of payment of
principal of, premium, if any, and interest on such Bond, for the purpose of giving notices of
prepayment and other matters with respect to such Bond, for the purposes of registering
transfers with respect to such Bond, and for all other purposes whatsoever.
The Paying Agent shall pay all principal, premium, if any, and interest with respect to
the Bonds, only to or upon the order of the respective Owners, as shown in the registration
books kept by the Paying Agent, or their respective attorneys duly authorized in writing, and
all such payments shall be valid and effective to fully satisfy and discharge the City’s
obligations with respect to payment of principal, premium, if any, and interest on the Bonds to
the extent of the sum or sums so paid. No person other than an Owner, as shown in the
registration books kept by the Paying Agent, shall receive a Bond evidencing the obligation of
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the City to make payments of principal, premium, if any, and interest pursuant to this Paying
Agent Agreement. Upon delivery by the Depository to the Nominee, the Paying Agent and the
City of written notice to the effect that the Depository has determined to substitute a new
nominee in place of the Nominee, and subject to the provisions regarding the payment of the
principal of and interest on the Bonds set forth in Section 2.02(e), the word Nominee in this
Agreement shall refer to such new nominee of the Depository.
Section 2.12. Representation Letter. In order to qualify the Bonds for the Depository’s
book-entry system, the City shall execute, seal, countersign and deliver to such Depository a
letter from the City representing such matters as shall be necessary to so qualify the Bonds (the
“Representation Letter”). The execution and delivery of the Representation Letter shall not in
any way limit the provisions of Section 2.12 hereof or in any other way impose upon the City or
the Paying Agent any obligation whatsoever with respect to Persons having interests in the
Bonds other than the Owners, as shown on the registration books kept by the Paying Agent. In
the written acceptance of the Paying Agent, such Paying Agent shall agree to take all actions
necessary for all representations of the City in the Representation Letter with respect to the
Paying Agent to at all times be complied with. In addition to the execution and delivery of the
Representation Letter, the City shall take any other actions, not inconsistent with this
Agreement, to qualify the Bonds for the Depository’s book-entry system.
Section 2.13. Transfers Outside Book-Entry System. The City may, by written request,
at any time or for any reason, remove the Depository and appoint a successor or successors
thereto. In the event (i) the Depository determines not to continue to act as securities depository
for any series of Bonds, or (ii) the City determines that the Depository shall no longer so act,
then the City will discontinue the book-entry system with the Depository. If the City fails to
identify another qualified securities depository to replace the Depository then the Bonds shall
no longer be restricted to being registered in the registration books kept by the Paying Agent in
the name of the Nominee, but shall be registered in whatever name or names Owners of such
Bonds transferring or exchanging such Bonds shall designate, in accordance with the provisions
of Section 2.06.
Section 2.14. Payments and Notices to the Nominee. Notwithstanding any other
provision of this Agreement to the contrary, so long as any Bond is registered in the name of the
Nominee, all payments of principal of, premium, if any, and interest on such Bond and all
notices with respect to such Bond shall be made and given, respectively, as provided in the
Representation Letter or as otherwise instructed in writing by the Depository.
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ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF
BOND PROCEEDS; SECURITY FOR THE BONDS
Section 3.01. Issuance and Delivery of Bonds. At any time after the execution of this
Agreement the City may issue and deliver Bonds in the aggregate principal amount of Twenty
Million Six Hundred Ninety-Five Thousand dollars ($20,695,000).
The Bonds, substantially in the form attached hereto as Exhibit A, shall be printed,
signed and sealed, and delivered to the Purchaser through the Depository on receipt of the
purchase price therefor. The appropriate officials of the City are hereby authorized to take any
and all action any of them deem reasonable in order to enable the City to execute and deliver
the Bonds.
The Paying Agent is hereby authorized to deliver the Bonds to the Purchaser, upon
receipt of a Written Request of the City.
Section 3.02. Application of Proceeds of Sale of Bonds. Upon the receipt of payment
for the Bonds, being $_______________, the proceeds thereof shall be paid to the Paying Agent,
to be transferred or deposited as follows:
(a) The Paying Agent shall deposit $_____________ into the Costs of Issuance
Account; and
(b) The Paying Agent shall transfer to the City, for deposit in the Project
Fund, the remainder of the proceeds of the Bonds, being $_______________.
Section 3.03. 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 of his or her obligation with respect to such Project.
Section 3.04. Security for the Bonds. The Bonds are general obligations of the City and
the City has the power, is obligated and hereby covenants to levy ad valorem taxes upon all
property within the City subject to taxation by the City, without limitation of rate or amount
(except with respect to certain personal property which is taxed at limited rates), for the
payment of the Bonds and the interest thereon, in accordance with all relevant provisions of
law. The City hereby covenants to direct the Board of Supervisors of Santa Clara County to
levy and collect such ad valorem taxes in such amounts and at such times as is necessary to
ensure the timely payment of Debt Service.
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ARTICLE IV
FUNDS AND ACCOUNTS
Section 4.01. Project Fund. There is hereby established with the City as a separate fund,
to be maintained distinct from all other funds of the City, the Series 2013A Project Fund, to the
credit of which a deposit shall be made as required by clause (b) of Section 3.02. Money in the
Project Fund shall be held by the City and disbursed for the payment of Project Costs. If, upon
completion of the Project, amounts remain in the Project Fund, the City shall transfer such
amounts to the Debt Service Fund. At such time that no amounts remain on deposit in the
Project Fund, the City shall close the Project Fund.
Section 4.02. Debt Service Fund. There is hereby established with the City as a separate
fund, to be maintained distinct from all other funds of the City, the Series 2013A Debt Service
Fund. Upon the receipt thereof, the City shall deposit the proceeds of the ad valorem property
taxes levied to pay Debt Service in the Debt Service Fund and, if any, other moneys lawfully
available to pay debt service on the Bonds as provided in Section 3.04. The City shall also
deposit in the Debt Service Fund the amount required by Section 3.02(a) and any other amounts
required by Section 3.04 hereof.
The Debt Service Fund shall be administered and disbursements made in the manner
and in the order set forth in Section 4.03 hereof.
Section 4.03. Administration and Disbursements From Debt Service Fund. All
moneys in the Debt Service Fund shall be used and withdrawn by the City solely for the
purpose of paying the principal of and interest on the Bonds as the same shall become due and
payable. At least five (5) Business Days prior to each Interest Payment Date, commencing
January 25, 2014, the City shall transfer to the Paying Agent moneys on deposit in the Debt
Service Fund for application by the Paying Agent on the next succeeding Interest Payment Date
to the payment of principal of and interest on the Bonds.
Section 4.04. Bond Service Fund. There is hereby established as a separate fund the
Bond Service Fund, to be held by the Paying Agent. All moneys received by the Paying Agent
from the City pursuant to Section 4.03 shall be deposited into the Bond Service Fund. The
moneys on deposit in the Bond Service Fund shall be used solely to pay principal and interest
on the Bonds when due.
Section 4.05. Costs of Issuance Account. There is hereby established as a separate
account the Costs of Issuance Account, to be held by the Paying Agent. There shall be
deposited into the Costs of Issuance Account the amount specified in Section 3.02(b). The
moneys in the Cost of Issuance Account shall be used solely for the purpose of the payment of
Issuance Expenses upon receipt by the Paying Agent of invoices approved by the City, on or
after the Closing Date. Any funds remaining in the Cost of Issuance Account on September 1,
2013, shall be transferred by the Paying Agent to the City, for deposit to the Debt Service Fund.
Section 4.06. Investment of Moneys.
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(a) Subject to the provisions of Section 5.08 hereof, amounts on deposit in the Project
Fund and the Debt Service Fund may be invested by the City in investments selected by the
City, which are included as “Investment Instruments” in the City’s approved Investment Policy
in effect at the time such investment is made, and earnings on such investments shall remain in
the respective fund therein. Such investments shall be purchased at their Fair Market Value.
(b) Subject to the provisions of Section 5.08 hereof, amounts on deposit in the Bond
Service Fund and Costs of Issuance Account may only be invested by the Paying Agent in a
money market fund registered under the Federal Investment Company Act of 1940, whose
shares are registered under the Securities Act of 1933, comprised of investments described in
Federal Securities or of repurchase agreements comprised of such investments, and having a
rating of “AAAm-G” or “AAAm” by S&P or “Aaa” by Moody's, which fund may include a
fund for which the Paying Agent, its affiliates or subsidiaries provide investment, advisory or
other services, and earnings on such investments shall remain in the Bond Service Fund.
(c) The City acknowledges that to the extent that regulations of the Comptroller of the
Currency or other applicable regulatory agency grant the City the right to receive brokerage
confirmations of security transactions, the City waives receipt of such confirmations. The
Paying Agent shall furnish to the City periodic statements of account which shall include detail
of all investment transactions made by the Paying Agent.
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ARTICLE V
OTHER COVENANTS OF THE CITY
Section 5.01. Punctual Payment. The City will punctually pay, or cause to be paid, the
principal of and interest on the Bonds, in strict conformity with the terms of the Bonds and of
this Agreement, and it will faithfully observe and perform all of the conditions, covenants and
requirements of this Agreement and of the Bonds. Nothing herein contained shall prevent the
City from making advances of its own moneys, howsoever derived, to any of the uses or
purposes permitted by law.
Section 5.02. Extension of Time for Payment. In order to prevent any accumulation of
claims for interest after maturity, the City will not, directly or indirectly, extend or consent to
the extension of the time for the payment of any claim for interest on any of the Bonds and will
not, directly or indirectly, approve any such arrangement by purchasing or funding the claims
for interest or in any other manner. In case any such claim for interest shall be extended or
funded, whether or not with the consent of the City, such claim for interest so extended or
funded shall not be entitled, in case of default hereunder, to the benefits of this Agreement,
except subject to the prior payment in full of the principal of all of the Bonds then Outstanding
and of all claims for interest which shall not have so extended or funded.
Section 5.03. Payment of Claims. The City will pay and discharge, or cause to be paid
and discharged, any and all lawful claims for labor, materials or supplies which, if unpaid,
might become a lien or charge upon the Project financed with the proceeds of the Bonds which
might impair the security of the Bonds. Nothing herein contained shall require the City to make
any such payment so long as the City in good faith shall contest the validity of the claims.
Section 5.04. Books and Accounts. The City will keep, or cause to be kept, proper
books of record and accounts, separate from all other records and accounts of the City in which
complete and correct entries shall be made of all transactions relating to the Project financed
with proceeds of the Bonds. Such books of record and accounts shall at all times during
business hours be subject to inspection by the Owners of not less than ten percent (10%) of the
principal amount of the Bonds then Outstanding, or their representatives authorized in writing.
Section 5.05. Protection of Security and Rights of Bondowners. The City will preserve
and protect the security of the Bonds and the rights of the Bondowners, and will warrant and
defend their rights against all claims and demands of all persons. From and after the sale and
delivery of any of the Bonds by the City, the Bonds shall be incontestable by the City.
Section 5.06. Continuing Disclosure. The City hereby covenants and agrees that it will
comply with and carry out all of the terms of the Continuing Disclosure Certificate.
Notwithstanding any other provision of this Agreement, failure of the City to comply with the
Continuing Disclosure Certificate shall not be an Event of Default under Section 7.01 hereof;
provided, however, any Participating Underwriter, any Owner or any Beneficial Owner 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 Section
5.06 and the Continuing Disclosure Certificate.
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Section 5.07. Further Assurances. The City will adopt, make, execute and deliver any
and all such further resolutions, instruments and assurances as may be reasonably necessary or
proper to carry out the intention or to facilitate the performance of this Agreement, and for the
better assuring and confirming unto the Owners of the Bonds of the rights and benefits
provided in this Agreement.
Section 5.08. No Arbitrage. The City shall not take, or permit or suffer to be taken by
the Paying Agent 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 Code.
Section 5.09. Federal Guarantee Prohibition. The City shall not take any action or
permit or suffer any action to be taken if the result of the same would be to cause the Bonds to
be “federally guaranteed” within the meaning of section 149(b) of the Code.
Section 5.10. 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 Code or the private loan financing test of section 141(c) of the Code.
Section 5.11. 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 Code as in effect on the date of issuance of the Bonds.
Section 5.12. Rebate Requirement. The City shall take any and all actions necessary to
assure compliance with section 148(f) of the 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.
Section 5.13. Information Report. The Director of Administrative Services is hereby
directed to assure the filing of an information report for the Bonds in compliance with Section
149(e) of the Code.
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ARTICLE VI
THE PAYING AGENT
Section 6.01. Appointment of Paying Agent. U.S. Bank National Association, at its
Principal Office in St. Paul, Minnesota, or in such other location as approved by the City, is
hereby appointed Paying Agent for the Bonds. The Paying Agent undertakes to perform such
duties, and only such duties, as are specifically set forth in this Agreement, and, even during the
continuance of an Event of Default, no implied covenants or obligations shall be read into this
Agreement against the Paying Agent. The Paying Agent shall signify its acceptance of the
duties and obligations imposed upon it by this Agreement by executing and delivering to the
City this Agreement.
The City may remove the Paying Agent initially appointed, and any successor thereto,
and may appoint a successor or successors thereto, but any such successor shall be a bank or
trust company doing business in the State of California, having (or, if such bank or trust
company is a member of a bank holding company, its parent holding company has) a combined
capital (exclusive of borrowed capital) and surplus of at least fifty million dollars ($50,000,000),
and subject to supervision or examination by federal or state authority. If such bank or trust
company publishes a report of condition at least annually, pursuant to law or to the
requirements of any supervising or examining authority above referred to, then for the
purposes of this Section 6.01 the combined capital and surplus of such bank or trust company
shall be deemed to be its combined capital and surplus as set forth in its most recent report of
condition so published.
The Paying Agent may at any time resign by giving written notice to the City and the
Bondowners of such resignation. Upon receiving notice of such resignation, the City shall
promptly appoint a successor Paying Agent by an instrument in writing. Any resignation or
removal of the Paying Agent and appointment of a successor Paying Agent shall become
effective upon acceptance of appointment by the successor Paying Agent.
Section 6.02. Paying Agent May Hold Bonds. The Paying Agent may become the
owner of any of the Bonds in its own or any other capacity with the same rights it would have if
it were not Paying Agent.
Section 6.03. Liability of Agents. The recitals of facts, covenants and agreements
herein and in the Bonds contained shall be taken as statements, covenants and agreements of
the City, and the Paying Agent assumes no responsibility for the correctness of the same, nor
makes any representations as to the validity or sufficiency of this Agreement or of the Bonds,
nor shall incur any responsibility in respect thereof, other than as set forth in this Agreement.
The Paying Agent shall not be liable in connection with the performance of its duties hereunder,
except for its own negligence or willful default.
In the absence of bad faith, the Paying Agent 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 Paying Agent and conforming to the requirements of this Agreement; but in
the case of any such certificates or opinions by which any provision hereof are specifically
required to be furnished to the Paying Agent, the Paying Agent shall be under a duty to
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examine the same to determine whether or not they conform to the requirements of this
Agreement.
The Paying Agent shall not be liable for any error of judgment made in good faith by a
responsible officer unless it shall be proved that the Paying Agent was negligent in ascertaining
the pertinent facts.
No provision of this Agreement shall require the Paying Agent to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if 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.
The Paying Agent may execute any of the powers hereunder or perform any duties
hereunder either directly or by or through agents or attorneys and the Paying Agent shall not be
responsible for any misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder.
Section 6.04. Notice to Agents. The Paying Agent may rely and shall be protected in
acting 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 Paying Agent may consult with
counsel, who may be of counsel to the City, with regard to legal questions, and the opinion of
such counsel shall be full and complete authorization and protection in respect of any action
taken or suffered by it hereunder in good faith and in accordance therewith.
Whenever in the administration of its duties under this Agreement the Paying Agent
shall deem it necessary or desirable that a matter be proved or established prior to taking or
suffering any action hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of bad faith on the part of the Paying Agent, be
deemed to be conclusively proved and established by a certificate of the City, and such
certificate shall be full warrant to the Paying Agent for any action taken or suffered under the
provisions of this Agreement upon the faith thereof, but in its discretion the Paying Agent may,
in lieu thereof, accept other evidence of such matter or may require such additional evidence as
to it may seem reasonable.
Section 6.05. Compensation, Indemnification. The City shall pay to the Paying Agent
from time to time reasonable compensation for all services rendered under this Agreement, and
also all reasonable expenses, charges, counsel fees and other disbursements, including those of
their attorneys, agents and employees, incurred in and about the performance of their powers
and duties under this Agreement. A City Representative is hereby authorized to execute an
agreement or agreements with the Paying Agent in connection with such fees and expenses.
The City further agrees to indemnify and save the Paying Agent harmless against any liabilities,
costs, claims and expenses of any kind which it may incur in the exercise and performance of its
powers and duties hereunder which are not due to its negligence or bad faith.
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Section 6.06. Funds and Accounts. The Paying Agent may establish such funds and
accounts as it reasonably deems necessary or appropriate to perform its obligations under this
Agreement.
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES OF BONDOWNERS
Section 7.01. Events of Default. If one or more of the following events (“Events of
Default”) shall happen, that is to say:
(a) if default shall be made by the City in the due and punctual payment of
the principal of or redemption premium, if any, on any Bond when and as the same shall
become due and payable, whether at maturity as therein expressed or by declaration or
otherwise;
(b) if default shall be made by the City in the due and punctual payment of
any installment of interest on any Bond when and as such interest installment shall
become due and payable;
(c) if default shall be made by the City in the observance of any of the
covenants, agreements or conditions on its part in this Agreement or in the Bonds
contained, and such default shall have continued for a period of thirty (30) days after
written notice thereof to the City Representative; or
(d) if the City shall file a petition seeking reorganization or arrangement
under the federal bankruptcy laws or any other applicable law of the United States of
America, or if a court of competent jurisdiction shall approve a petition, seeking
reorganization of the City under the federal bankruptcy laws or any other applicable
law of the United States of America, or if, under the provisions of any other law for the
relief or aid of debtors, any court of competent jurisdiction shall assume custody or
control of the City or of the whole or any substantial part of its property;
then, and in each and every event of default and upon written request of the
Owners of not less than sixty percent (60%) in aggregate principal amount of the Bonds
at the time Outstanding, the principal of all of the Bonds then Outstanding, and the
interest accrued thereon, shall be declared to be due and payable immediately, and upon
any such declaration the same shall become and shall be immediately due and payable,
anything in this Agreement or in the Bonds contained to the contrary notwithstanding.
Such declaration may be rescinded by the Owners of not less than sixty percent (60%) in
aggregate principal amount of the Bonds at the time Outstanding provided the City cures such
default or defaults, making the deposit with the Paying Agent of a sum sufficient to pay all
principal on the respective Bonds matured prior to such declaration and all matured
installments of interest (if any) on the Bonds, with interest at the rate of twelve percent (12%)
per annum on such overdue installments of principal and, to the extent such payment of
interest is lawful at that time, on such overdue installments of interest, so that the City is
currently in compliance with all payment, deposit and transfer provisions of this Agreement,
and a sum sufficient to pay any expenses incurred by the Paying Agent in connection with such
default.
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Section 7.02. Application of Funds. All of the sums in the funds and accounts
provided for in Sections 4.02 and 4.03 hereof, upon the date of the Event of Default as provided
in Section 7.01 hereof, and all sums thereafter received by the Paying Agent hereunder, shall be
applied by the Paying Agent in the following order upon presentation of the Bonds, and the
stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully
paid:
First, to the payment of the costs and expenses of the Paying Agent hereunder and of the
costs and expenses of Bondowners in declaring such event of default, including reasonable
compensation to her or their agents, attorneys and counsel;
Second, in case the principal of the Bonds shall not have become due and payable, to the
payment of the interest in default in the order of the seniority of the installments of such
interest, with interest on the overdue installments at the rate of twelve percent (12%) per annum
(to the extent that such interest on overdue installments shall have been collected), such
payments to be made ratably to the persons entitled thereto without discrimination or
preference;
Third, in case the principal of the Bonds shall have become and shall be then due and
payable, all such sums shall be applied to the payment of the whole amount then owing and
unpaid upon the Bonds for principal and interest, with interest on the overdue principal and
installments of interest at the rate of twelve percent (12%) per annum (to the extent that such
interest on overdue installments of interest shall have been collected), and in case such moneys
shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then
to the payment of such principal and interest without preference or priority of principal over
interest, or interest over principal, or of any installment of interest over any other installment of
interest, ratably to the aggregate of such principal and interest.
Section 7.03. Other Remedies of Bondowners. Any Bondowner shall have the right,
for the equal benefit and protection of all Bondowners similarly situated:
(a) by mandamus, suit, action or proceeding, to compel the City and its
members, officers, agents or employees to perform each and every term, provision and
covenant contained in this Agreement and in the Bonds, and to require the carrying out
of any or all such covenants and agreements of the City and the fulfillment of all duties
imposed upon it;
(b) by suit, action or proceeding in equity, to enjoin any acts or things which
are unlawful, or the violation of any of the Bondowners’ rights; or
(c) upon the happening of any event of default (as defined in Section 7.01
hereon, by suit, action or proceeding in any court of competent jurisdiction, to require
the City and its members and employees to account as if it and they were the Paying
Agents of an express trust.
Section 7.04. Non-Waiver. Nothing in this Article VII or in any other provision of this
Agreement, or in the Bonds, shall affect or impair the obligation of the City, which is absolute
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and unconditional, to pay the principal of and interest on the Bonds to the respective Owners of
the Bonds at the respective dates of maturity, as herein provided, or affect or impair the right of
action, which is also absolute and unconditional, of such Owners to institute suit to enforce such
payment by virtue of the contract embodied in the Bonds.
A waiver of any default by any Bondowner shall not affect any subsequent default or
impair any rights or remedies on the subsequent default. No delay or omission of any Owner
of any of the Bonds to exercise any right or power accruing upon any default shall impair any
such right or power or shall be construed to be a waiver of any such default or an acquiescence
therein, and every power and remedy conferred upon the Bondowners by this Article VI may
be enforced and exercised from time to time and as often as shall be deemed expedient by the
Owners of the Bonds.
If a suit, action or proceeding to enforce any right or exercise any remedy be abandoned
or determined adversely to the Bondowners, the City and the Bondowners shall be restored to
their former positions, rights and remedies as if such suit, action or proceeding had not been
brought or taken.
Section 7.05. Remedies Not Exclusive. No remedy herein conferred upon the Owners
of Bonds shall be exclusive of any other remedy and that each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or thereafter
conferred on the Bondowners.
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ARTICLE VIII
SUPPLEMENTAL AGREEMENTS
Section 8.01. Amendments Permitted. This Agreement and the rights and obligations
of the City and of the Owners of the Bonds may be modified or amended at any time by a
Supplemental Agreement pursuant to the affirmative vote at a meeting of Owners, or with the
written consent without a meeting, of the Owners of at least sixty percent (60%) in aggregate
principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in
Section 8.04. No such modification or amendment shall (i) extend the maturity of any Bond or
reduce the interest rate thereon, or otherwise alter or impair the obligation of the City to pay the
principal of, and the interest and any premium on, any Bond, without the express consent of the
Owner of such Bond, or (ii) permit the creation by the City of any pledge or lien upon the ad
valorem taxes of the taxes superior to or on a parity with the pledge and lien created for the
benefit of the Bonds (except as otherwise permitted by the Act, the laws of the State of
California or this Agreement), or reduce the percentage of Bonds required for the amendment
hereof. Any such amendment may not modify any of the rights or obligations of the Paying
Agent without its written consent.
This Agreement and the rights and obligations of the City and of the Owners may also
be modified or amended at any time by a Supplemental Agreement, without the consent of any
Owners, only to the extent permitted by law and only for any one or more of the following
purposes:
(a) to add to the covenants and agreements of the City in this Agreement
contained, other covenants and agreements thereafter to be observed, or to limit or
surrender any right or power herein reserved to or conferred upon the City;
(b) to make modifications not adversely affecting any outstanding series of
Bonds of the City in any material respect;
(c) to make such provisions for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective provision contained in this
Agreement, or in regard to questions arising under this Agreement, as the City and the
Paying Agent may deem necessary or desirable and not inconsistent with this
Agreement, and which shall not adversely affect the rights of the Owners of the Bonds;
and
(d) to make such additions, deletions or modifications as may be necessary or
desirable to assure compliance with Section 148 of the Code relating to required rebate
of excess investment earnings to the United States or otherwise as may be necessary to
assure exclusion from gross income for federal income tax purposes of interest on the
Bonds or to conform with the Regulations.
Section 8.02. Owners’ Meetings. The City may at any time call a meeting of the
Owners. In such event the City is authorized to fix the time and place of said meeting and to
provide for the giving of notice thereof, and to fix and adopt rules and regulations for the
conduct of said meeting.
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Section 8.03. Procedure for Amendment with Written Consent of Owners. The City
and the Paying Agent may at any time adopt a Supplemental Agreement amending the
provisions of the Bonds or of this Agreement or any Supplemental Agreement, to the extent that
such amendment is permitted by Section 8.01, to take effect when and as provided in this
Section. A copy of such Supplemental Agreement, together with a request to Owners for their
consent thereto, shall be mailed by first class mail, by the Paying Agent to each Owner of Bonds
Outstanding, but failure to mail copies of such Supplemental Agreement and request shall not
affect the validity of the Supplemental Agreement when assented to as in this Section provided.
Such Supplemental Agreement shall not become effective unless there shall be filed with
the Paying Agent the written consents of the Owners of at least sixty percent (60%) in aggregate
principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in
Section 8.04) and a notice shall have been mailed as hereinafter in this Section provided. Each
such consent shall be effective only if accompanied by proof of ownership of the Bonds for
which such consent is given, which proof shall be such as is permitted by Section 9.04. 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 or a subsequent Owner by
filing such revocation with the Paying Agent prior to the date when the notice hereinafter in
this Section provided for has been mailed.
After the Owners of the required percentage of Bonds shall have filed their consents to
the Supplemental Agreement, the City shall mail a notice to the Owners in the manner
hereinbefore provided in this Section for the mailing of the Supplemental Agreement, stating in
substance that the Supplemental Agreement has been consented to by the Owners of the
required percentage of Bonds and will be effective as provided in this Section (but failure to
mail copies of the notice shall not affect the validity of the Supplemental Agreement or consents
thereto). Proof of the mailing of such notice shall be filed with the Paying Agent. A record,
consisting of the papers required by this Section 8.03 to be filed with the Paying Agent, shall be
proof of the matters therein stated until the contrary is proved. The Supplemental Agreement
shall become effective upon the filing with the Paying Agent of the proof of mailing of such
notice, and the Supplemental Agreement 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 decree of
a court of competent jurisdiction setting aside such consent in a legal action or equitable
proceeding for such purpose commenced within such sixty-day period.
Section 8.04. Disqualified Bonds. Bonds owned or held for the account of the City,
excepting any pension or retirement fund, shall not be deemed Outstanding for the purpose of
any vote, consent or other action or any calculation of Outstanding Bonds provided for in this
Article VIII, and shall not be entitled to vote upon, consent to, or take any other action provided
for in this Article VIII.
Section 8.05. Effect of Supplemental Agreement. From and after the time any
Supplemental Agreement becomes effective pursuant to this Article VIII, this Agreement shall
be deemed to be modified and amended in accordance therewith, the respective rights, duties
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and obligations under this Agreement of the City and all owners of Bonds Outstanding shall
thereafter be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such Supplemental
Agreement shall be deemed to be part of the terms and conditions of this Agreement for any
and all purposes.
Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments. The
City may determine that Bonds issued and delivered after the effective date of any action taken
as provided in this Article VIII shall bear a notation, by endorsement or otherwise, in form
approved by the City, as to such action. In that case, upon demand of the Owner of any Bond
Outstanding at such effective date and presentation of his Bond for that purpose at the Principal
Office of the Paying Agent or at such other office as the City may select and designate for that
purpose, a suitable notation shall be made on such Bond. The 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 demand of the Owner of any
Bonds then Outstanding, such new Bonds shall be exchanged at the Principal Office of the
Paying Agent without cost to any Owner, for Bonds then Outstanding, upon surrender of such
Bonds.
Section 8.07. Amendatory Endorsement of Bonds. The provisions of this Article VIII
shall not prevent any Owner from accepting any amendment as to the particular Bonds held by
him, provided that due notation thereof is made on such Bonds.
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ARTICLE IX
MISCELLANEOUS
Section 9.01. Benefits of Agreement Limited to Parties. Nothing in this Agreement,
expressed or implied, is intended to give to any person other than the City, the Paying Agent
and the Owners, any right, remedy, claim under or by reason of this Agreement. Any
covenants, stipulations, promises or agreements in this Agreement contained by and on behalf
of the City shall be for the sole and exclusive benefit of the Owners and the Paying Agent.
Section 9.02. Successor is Deemed Included in All References to Predecessor.
Whenever in this Agreement or any Supplemental Agreement either the City or the Paying
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 Agreement contained by or on
behalf of the City or the Paying Agent shall bind and inure to the benefit of the respective
successors and assigns thereof whether so expressed or not.
Section 9.03. Discharge of Agreement. The City shall have the option to pay and
discharge the entire indebtedness on all or any portion of the Bonds Outstanding in any one or
more of the following ways:
(a) by paying or causing to be paid the principal of, and interest and any
premium on, such Bonds Outstanding, as and when the same become due and payable;
(b) by depositing with the Paying Agent, in trust, at or before maturity,
money which, together with, in the event of a discharge of all of the Bonds, the amounts
then on deposit in the funds and accounts provided for in Sections 4.02 and 4.03 is fully
sufficient to pay such Bonds Outstanding, including all principal, interest and
redemption premiums; or
(c) by irrevocably depositing with the Paying Agent, in trust, cash and
Federal Securities in such amount as the City shall determine as confirmed by an
independent certified public accountant will, together with the interest to accrue thereon
and, in the event of a discharge of all of the Bonds, moneys then on deposit in the fund
and accounts provided for in Sections 4.02 and 4.03, be fully sufficient to pay and
discharge the indebtedness on such Bonds (including all principal, interest and
redemption premiums) at or before their respective maturity dates.
If the City shall have taken any of the actions specified in (a), (b) or (c) above, and if such
Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have
been given as in this Agreement provided or provision satisfactory to the Paying 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
funds and moneys provided for in this Agreement and all other obligations of the City under
this Agreement with respect to such Bonds Outstanding shall cease and terminate. Notice of
such election shall be filed with the Paying Agent. Notwithstanding the foregoing, the
obligation of the City to pay or cause to be paid to the Owners of the Bonds not so surrendered
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and paid all sums due thereon and all amounts owing to the Paying Agent pursuant to Section
7.05 shall continue in any event.
Upon compliance by the City with the foregoing with respect to all Bonds Outstanding,
any funds held by the Paying Agent after payment of all fees and expenses of the Paying Agent,
which are not required for the purposes of the preceding paragraph, shall be paid over to the
City.
Section 9.04. Execution of Documents and Proof of Ownership by Owners. Any
request, declaration or other instrument which this Agreement may require or permit to be
executed by Owners may be in one or more instruments of similar tenor, and shall be executed
by Owners in person or by their attorneys appointed in writing.
Except as otherwise herein expressly provided, the fact and date of the execution by any
Owner or his attorney of such request, declaration or other instrument, or of such writing
appointing such attorney, may be proved by the certificate of any notary public or other officer
authorized to take acknowledgments of deeds to be recorded in the state in which he purports
to act, that the person signing such request, declaration or other instrument or writing
acknowledged to him the execution thereof, or by an affidavit of a witness of such execution,
duly sworn to before such notary public or other officer.
Except as otherwise herein expressly provided, the ownership of registered Bonds and
the amount, maturity, number and date of holding the same shall be proved by the registry
books.
Any request, declaration or other instrument or writing of the Owner of any Bond shall
bind all future Owners of such Bond in respect of anything done or suffered to be done by the
City or the Paying Agent in good faith and in accordance therewith.
Section 9.05. Waiver of Personal Liability. No member, officer, agent or employee of
the City shall be individually or personally liable for the payment of the principal of, or interest
or any premium on, the Bonds; but nothing herein contained shall relieve any such member,
officer, agent or employee from the performance of any official duty provided by law.
Section 9.06. Notices to and Demands on City and Paying Agent. Any notice or
demand which by any provision of this Agreement is required or permitted to be given or
served by the Paying Agent to or on the City may be given or served by being deposited
postage prepaid in a post office letter box addressed (until another address is filed by the City
with the Paying Agent) to:
The City of Palo Alto
250 Hamilton Avenue
Palo Alto, California 94301
Attn: Director of Administrative Services
Any notice or demand which by any provision of this Agreement is required or
permitted to be given or served by the City to or on the Paying Agent may be given or served
29
by being deposited postage prepaid in a post office letter box addressed (until another address
is filed by the Paying Agent with the City) to:
U.S. Bank National Association
One California Street, Suite 1000
San Francisco, CA 94111
Attn: Corporate Trust Services
Section 9.07. Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of
this Agreement shall for any reason be held illegal or unenforceable, such holding shall not
affect the validity of the remaining portions of this Agreement. The City hereby declares that it
would have adopted this Agreement and each and every other Section, paragraph, sentence,
clause or 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
Agreement may be held illegal, invalid or unenforceable.
Section 9.08. Unclaimed Moneys. Anything contained herein to the contrary
notwithstanding, any moneys held by the Paying Agent 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 the payments of such principal, interest and premium have
become payable, if such moneys was held by the Paying Agent at such date, shall be repaid by
the Paying Agent to the City as its absolute property free from any trust, and the Paying Agent
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 9.09. Applicable Law. This Agreement 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 9.10. Conflict with Act. In the event of a conflict between any provision of this
Agreement with any provision of the Act as in effect on the Closing Date, the provision of the
Act shall prevail over the conflicting provision of this Agreement.
Section 9.11. Conclusive Evidence of Regularity. Bonds issued pursuant to this
Agreement shall constitute conclusive evidence of the regularity of all proceedings under the
Act relative to their issuance and the levy of the ad valorem taxes securing the payment of the
Bonds.
Section 9.12. 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 Agreement is other than a
Business Day, the payment of interest or principal (and premium, if any) 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 interest shall accrue for
the period from and after such date.
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Section 9.13. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
[Signature Page to Paying Agent Agreement, dated as of June 1, 2013]
IN WITNESS WHEREOF, the City has caused this Agreement to be executed in its
name and the Paying Agent has caused this Agreement to be executed in its name, all as of the
date first written above.
CITY OF PALO ALTO
By:
_______________
City Manager
U.S. BANK NATIONAL ASSOCIATION,
as Paying Agent
By:
Authorized Officer
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No._______________ $______________________
EXHIBIT A
FORM OF BOND
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF SANTA CLARA
CITY OF PALO ALTO
GENERAL OBLIGATION BOND
ELECTION OF 2008, SERIES 2013A
Interest Rate Maturity Date Issue Date CUSIP
August 1, _____ June 26, 2013
REGISTERED OWNER: Cede & Co.
PRINCIPAL SUM:___________ DOLLARS
The CITY OF PALO ALTO, a charter city duly organized and existing under and by
virtue of the Constitution and laws of the State of California (the “City”), for value received
hereby promises to pay to the Registered Owner stated above, or registered assigns (the
“Owner”), on the Maturity Date stated above (subject to any right of prior redemption
hereinafter provided for), the Principal Sum stated above, in lawful money of the United States
of America, and to pay interest thereon in like lawful money from the interest payment date
next preceding the date of authentication of this Bond (unless (i) this Bond is authenticated on
an interest payment date, in which event it shall bear interest from such date of authentication,
or (ii) this Bond is authenticated prior to an interest payment date and after the close of business
on the fifteenth day of the month preceding such interest payment date, in which event it shall
bear interest from such interest payment date, or (iii) this Bond is authenticated on or prior to
January 15, 2014, in which event it shall bear interest from the Issue Date stated above; provided
however, that if at the time of authentication of this Bond, interest is in default on this Bond,
this Bond shall bear interest from the interest payment date to which interest has previously
been paid or made available for payment on this Bond) until payment of such Principal Sum in
full, at the rate per annum stated above, payable on February 1 and August 1 in each year,
commencing February 1, 2014, calculated on the basis of 360-day year composed of twelve 30-
day months. Principal hereof and premium, if any, upon early redemption hereof are payable
at the corporate trust office of U.S. Bank National Association (the “Paying Agent”), in St. Paul,
Minnesota, or in such other location as approved by the City. Interest hereon (including the
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final interest payment upon maturity or earlier redemption) is payable by check mailed on the
applicable Interest Payment Date to the Owner at his or her address as it appears on the
registration books maintained by the Paying Agent as of the close of business on the fifteenth
day of the month next preceding such interest payment date, or at such other address as the
Owner may have filed with the Paying Agent for that purpose.
This Bond is one of a duly authorized issue of bonds of the City designated as “City of
Palo Alto General Obligation Bonds, Election of 2008, Series 2013A” (the “Bonds”), in an
aggregate principal amount of Twenty Million Six Hundred Ninety-Five Thousand dollars
($20,695,000), all of like tenor and date (except for such variation, if any, as may be required to
designate varying numbers, maturities, interest rates or redemption and other provisions) and
all issued pursuant to the provisions of Chapter 4 of Division 4 of Title 4 of the California
Government Code and Section 53506 et seq. of the California Government Code (together, the
“Act”), pursuant to a resolution of the City adopted May 6, 2013 (the “Resolution”), authorizing
the issuance of the Bonds and a Paying Agent Agreement dated as of June 1, 2013 (the
“Agreement”) between the City and the Paying Agent. Reference is hereby made to the
Resolution and the Agreement (copies of which are on file at the office of the Paying Agent) and
the Act for a description of the terms on which the Bonds are issued and the rights thereunder
of the owners of the Bonds and the rights, duties and immunities of the Paying Agent and the
rights and obligations of the City thereunder, to all of the provisions of which Resolution and
Agreement the Owner of this Bond, by acceptance hereof, assents and agrees.
The Bonds have been issued to finance the costs of acquiring and constructing a new
energy efficient, environmentally friendly Mitchell Park Library and Community Center,
renovating and expanding the Main Library, and renovating the Downtown Library, including
enhancements at all three facilities for seismic safety and disabled access, expanded space for
library collections, meeting and study areas, and new air conditioning, ventilation and lighting
systems.
This Bond and the interest hereon and on all other Bonds and the interest thereon (to the
extent set forth in the Agreement) are general obligations of the City and the City has the
power, is obligated and has covenanted to levy ad valorem taxes for the payment of the Bonds
and the interest thereon, in accordance with all relevant provisions of law. The City has
covenanted in the Agreement to direct Santa Clara County to levy and collect such ad valorem
taxes in such amounts and at such times is necessary to ensure the timely payment of debt
service on the Bonds.
Bonds maturing on or before August 1, 20__ are not subject to redemption prior to their
respective maturity dates. Bonds maturing on or after August 1, 20__ shall be subject to
redemption in whole or in part prior to their respective maturity dates on any date, as
designated by the City and, absent any such designation, in pro rata among maturities and by
lot within a maturity, from moneys provided at the option of the City, in each case on and after
August 1, 20__, at a redemption price equal to the principal amount of the Bonds to be
redeemed, plus accrued interest to the date of redemption, without premium.
The Bonds maturing August 1, 20__ are subject to mandatory sinking fund redemption
in part, by lot, prior to their stated maturity date, on each August 1 on and after August 1, 20__,
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at a redemption price equal to 100% of the principal amount thereof called for redemption, plus
accrued interest to the redemption date, without premium, as follows:
Date
(August 1) Amount
The Bonds maturing August 1, 20__ are subject to mandatory sinking fund redemption
in part, by lot, prior to their stated maturity date, on each August 1 on and after August 1, 20__,
at a redemption price equal to 100% of the principal amount thereof called for redemption, plus
accrued interest to the redemption date, without premium, as follows:
Date
(August 1) Amount
The Bonds maturing August 1, 20__ are subject to mandatory sinking fund redemption
in part, by lot, prior to their stated maturity date, on each August 1 on and after the August 1,
20__, at a redemption price equal to 100% of the principal amount thereof called for
redemption, plus accrued interest to the redemption date, without premium, as follows:
Date
(August 1) Amount
As provided in the Agreement, notice of redemption shall be given by mail no less than
thirty (30) nor more than sixty (60) days prior to the redemption date to the respective
registered owners of any Bonds designated for redemption at their addresses appearing on the
Bond registration books maintained by the Paying Agent, but neither failure to receive such
notice nor any defect in the notice so mailed shall affect the sufficiency of the proceedings for
redemption.
If this Bond is called for redemption and payment is duly provided therefor as specified
in the Agreement, interest shall cease to accrue hereon from and after the date fixed for
redemption.
If an Event of Default, as defined in the Agreement, shall occur, the principal of all
Bonds may be declared due and payable upon the conditions, in the manner and with the effect
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provided in the Agreement, but such declaration and its consequences may be rescinded and
annulled as further provided in the Agreement.
The Bonds are issuable as fully registered Bonds, without coupons, in denominations of
$5,000 and any integral multiple thereof. Subject to the limitations and conditions and upon
payment of the charges, if any, as provided in the Agreement, Bonds may be exchanged for a
like aggregate principal amount of Bonds of other authorized denominations and of the same
maturity.
This Bond is transferable by the Owner hereof, in person or by his attorney duly
authorized in writing, at the office of the Paying Agent in St. Paul, Minnesota, but only in the
manner and subject to the limitations provided in the Agreement, and upon surrender and
cancellation of this Bond. Upon registration of such transfer a new Bond or Bonds, of
authorized denomination or denominations, for the same aggregate principal amount and of
the same maturity will be issued to the transferee in exchange herefor.
The City and the Paying Agent may treat the Owner hereof as the absolute owner hereof
for all purposes, and the City and the Paying Agent shall not be affected by any notice to the
contrary.
The Agreement may be amended without the consent of the Owners of the Bonds to the
extent set forth in the Agreement.
Unless this Bond is presented by an authorized representative of The Depository Trust
Company, a New York corporation (“DTC”), to the Paying 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.
It is hereby certified that all of the things, conditions and acts required to exist, to have
happened or to have been performed precedent to and in the issuance of this Bond do exist,
have happened or have been performed in due and regular time and manner as required by the
laws of the State of California, and that the amount of this Bond, together with all other
indebtedness of the City, does not exceed any limit prescribed by any laws of the State of
California, and is not in excess of the amount of Bonds permitted to be issued under the
Agreement.
This Bond shall not be entitled to any benefit under the Agreement or become valid or
obligatory for any purpose until the Certificate of Authentication hereon shall have been signed
by the Paying Agent.
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IN WITNESS WHEREOF, the City of Palo Alto has caused this Bond to be executed in its
name and on its behalf with the facsimile signatures of its City Manager and its City Clerk and
its seal to be reproduced hereon, all as of the Issue Date stated above.
CITY OF PALO ALTO
By:
(S E A L)
ATTEST:
City Clerk
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[FORM OF PAYING AGENT’S CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within-mentioned Agreement.
Date of Authentication: __________ U.S. Bank National Association,
as Paying Agent
Authorized Signatory
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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 Tax
Regulations:
TEN COMM--as tenants in common
TEN ENT--as tenants by the entireties
JT TEN--as joint tenants with right of survivorship and not as tenants in common
COMM PROP--as community property
UNIF TRANS MIN ACT _________________ Custodian _________________
(Cust.) (Minor)
under Uniform Transfers to Minors Act ____________________
(State)
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED THROUGH NOT IN THE LIST
ABOVE
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ASSIGNMENT
For value received, the undersigned do(es) hereby sell, assign and transfer unto the
within
(Name, Address and Tax Identification or Social Security Number of Assignee)
the within Bond and do(es) hereby irrevocably constitute and appoint
______________________,
attorney, to transfer the same on the registration books of the Paying Agent, with full
power of substitution in the premises.
Dated:_______________________ _____________________________________
Notice: The signature(s) on this assignment
must correspond with the name(s) as written
on the face of the within Bond in every
particular without alteration or enlargement or
any change whatsoever.
Signature Guaranteed:
Notice: Signature(s) must be guaranteed by
a qualified guarantor institution
OFFICIAL NOTICE OF SALE
$20,695,000*
CITY OF PALO ALTO
(Santa Clara County, California)
GENERAL OBLIGATION BONDS,
ELECTION OF 2008, SERIES 2013A
(TAX-EXEMPT)
NOTICE IS HEREBY GIVEN by the City of Palo Alto (the “City”) that electronic bids
will be received by the City for the purchase of $20,695,000* City of Palo Alto General
Obligation Bonds, Election of 2008, Series 2013A (the “Bonds”). Only electronic bids will be
accepted, via PARITY®. No hand delivered or facsimile bids will be accepted. The bids will be
received in the manner and up to the time and date specified below:
DATE AND TIME: 9:30 A.M. California Time on Wednesday, June 12, 2013,
(subject to postponement or cancellation in accordance
with this Official Notice of Sale).
ELECTRONIC BIDS: Bid proposals may only be submitted electronically, via i-
Deal LLC’s PARITY® system (“Parity®”), as provided
below.
See “TERMS OF SALE - Warnings Regarding Electronic Bids” herein.
The City reserves the right to postpone or cancel the sale or change the terms thereof
prior to the time on June 12, 2013 when bids are to be received. Notice of such postponement,
cancellation or revision shall be communicated through PARITY® and Thomson Municipal
Market Monitor (www.tm3.com), as soon as practicable following such postponement,
cancellation or revision. See “TERMS OF SALE - Right to Postponement or Cancellation.” If
the sale is postponed, bids will be received on any weekday at such time as the City shall
determine. Notice of the new date or a new date and time for the receipt of bids, if any, will be
given through PARITY® and Thomson Municipal Market Monitor (www.tm3.com).
The City further reserves the right to modify or amend this Official Notice of Sale in any
respect, including, without limitation, the principal amount of the Bonds being offered, upon
notice given as described above. As an accommodation to bidders, telephonic, electronic or
faxed notice of any postponement of the sale date and of the new sale date and time or any
amendment or modification of this Official Notice of Sale will be given to any bidder requesting
such notice from the City’s Financial Advisor: Public Financial Management, Inc., 50 California
Street, Suite 2300, San Francisco, California 94111, Attention: Bob Gamble, email:
gambler@pfm.com, telephone: (415) 982-5544, fax: (415) 982-4513. Failure of any bidder to
receive such supplemental notice shall not affect the sufficiency of any required notice or the
legality of the sale.
* Preliminary, subject to change, as provided herein.
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Notice of any change to the principal payment schedule for the Bonds to be utilized for
the bidding process will be given via PARITY® not later than 1:00 p.m. (California time) on the
day prior to the date prescribed for the receipt of bids. Potential bidders must obtain any such
revised principal payment schedule before bidding on the Bonds. See also “TERMS OF SALE”
“- Adjustment of Principal Amounts” below.
DESCRIPTION OF THE BONDS
DATE; FORM; DENOMINATION: The Bonds will be dated as of the date of their
delivery, and will be authenticated and delivered in non-negotiable, fully registered form,
without coupons, in denomination of $5,000 each or any integral multiple of $5,000. The Bonds
will be delivered in a book-entry only system with no physical distribution of the Bonds to the
public. Depository Trust Company, New York, New York (“DTC”) will act as depository for the
Bonds. The Bonds will be registered in the name of Cede & Co., as nominee for DTC, on behalf
of the participants in the DTC system and the subsequent beneficial owners of the Bonds. The
Bonds are being issued pursuant to a Paying Agent Agreement, dated as of June 1, 2013 (the
“Paying Agent Agreement”), by and between the City and U.S. Bank National Association, as
Paying Agent (the “Paying Agent”). Reference is made to the Paying Agent Agreement for
further details regarding the terms and provisions of the Bonds.
MATURITIES: The Bonds will mature, or be subject to mandatory sinking fund
redemption, on the maturity dates and in the amounts set forth in the following table. Each
bidder is required to specify in its bid whether, for any particular year, the Bonds will mature
or, alternatively, be subject to sinking fund redemption in such year. No serial Bonds may
mature following the commencement of the first mandatory sinking fund payment. For any
term Bonds specified, the principal amount for a given year may be allocated only to a single
term bond and must be part of an uninterrupted annual sequence from the first mandatory
sinking fund payment to the term bond maturity.
Maturity Date
(August 1
Principal
Amount*
Maturity Date
(August 1)
Principal
Amount*
* Preliminary, subject to change, as provided herein.
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2014 $370,000 2029 $ 635,000
2015 375,000 2030 665,000
2016 385,000 2031 700,000
2017 395,000 2032 735,000
2018 405,000 2033 775,000
2019 415,000 2034 815,000
2020 425,000 2035 855,000
2021 440,000 2036 900,000
2022 455,000 2037 945,000
2023 475,000 2038 995,000
2024 495,000 2039 1,045,000
2025 520,000 2040 1,100,000
2026 545,000 2041 1,155,000
2027 575,000 2042 1,215,000
2028 605,000 2043 1,280,000
Following the receipt of bids, the City reserves the right to increase or to decrease the
total principal amount of the Bonds, and the principal amount of any maturity of the Bonds, as
the City deems advisable, based on the actual rates of interest to be borne by the Bonds. Any
such increase or decrease shall be allocated among the various maturities of the Bonds on such
basis as the City deems advisable, and shall result in a proportionate increase or decrease (as the
case may be) in the amount of any premium or discount bid. The total principal amount of the
Bonds and the principal amount of each maturity of the Bonds shall not change by more than
10%. Notice of such increase or decrease shall be given to the successful bidder within 24 hours
of bid opening, as described below. No such adjustment will have the effect of altering the basis
upon which the best bid is determined. In the event of any such adjustment, no re-bidding or re-
calculation of the bids submitted will be required or permitted, and the successful bid or bids
may not be withdrawn, and the successful bidder will not be permitted to change the interest
rate(s) in its bid for the Bonds.
INTEREST: Interest on the Bonds will be payable from their date of delivery at such rate
or rates to be fixed upon the sale thereof, payable semiannually on each February 1 and August
1 (each, an “Interest Payment Date”), commencing February 1, 2014.
PAYMENT: The Bonds and interest thereon are payable in lawful money of the United
States of America, interest being payable by check mailed on each Interest Payment Date to the
registered owners thereof at the address shown on the Bond registration books maintained by
the Paying Agent on the 15th day of the month preceding an Interest Payment Date. Principal
will be payable upon surrender at the principal corporate trust office of the Paying Agent in St.
Paul, Minnesota.
OPTIONAL REDEMPTION: The Bonds are subject to optional redemption prior to
maturity, as follows:
Bonds maturing [on or before August 1, 2023 are not subject to optional redemption
prior to maturity. Bonds maturing [on or after August 1, 2024, shall be subject to redemption
prior to their respective maturity dates, as designated by the City and, absent any such
designation, pro rata among maturities and by lot within a maturity, from moneys provided at
the option of the City, in each case, on any date occurring on or after August 1, 2023, at a
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redemption price equal to the principal amount of the Bonds to be redeemed, plus accrued
interest to the date of redemption, without premium.
MANDATORY REDEMPTION. Term Bonds, if any, are subject to redemption prior to
their respective stated maturity dates, in part, by lot, from mandatory sinking fund payments,
on each August 1, designated by the successful bidder as a date upon which a mandatory
sinking fund payment is to be made, at a redemption price equal to the principal amount
thereof plus accrued interest thereon to the date fixed for redemption, without premium. No
Term Bonds may be redeemed from mandatory sinking fund payments until all Term Bonds
maturing on preceding term maturity dates, if any, have been retired.
PURPOSE: The proceeds of the Bonds will be used to finance the costs of acquiring and
constructing a new Mitchell Park Library and Community Center, renovating and expanding
the Main Library, renovating the Downtown Library, including enhancements at all three
facilities for seismic safety and disabled access, expanded space for library collections, meeting
and study areas, and new air conditioning, ventilation and lighting systems.
SECURITY: The Bonds are general obligations of the City payable from ad valorem taxes
levied by the City and collected by Santa Clara County (the “County”). The City has the power
and is obligated to cause the Board of Supervisors of the County to levy ad valorem taxes for the
payment of the principal of the Bonds and the interest thereon, upon all property within the
City subject to taxation by the City, without limitation of rate or amount (except with respect to
certain personal property which is taxed at limited rates), in accordance with all relevant
provisions of law. The City has covenanted in the Paying Agent Agreement to levy ad valorem
taxes and direct the Board of Supervisors of the County to collect such ad valorem taxes in such
amounts and at such times as is necessary to ensure the timely payment of debt service on the
Bonds.
TAX-EXEMPT STATUS: In the opinion of Jones Hall, A Professional Law Corporation,
San Francisco, California, Bond Counsel, subject, however to certain qualifications, 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
alternative minimum tax imposed on individuals and corporations; although for the purpose of
computing the alternative minimum tax imposed on corporations (as defined for federal income
tax purposes), such interest is taken into account in determining certain income and earnings.
In the further opinion of Bond Counsel, such interest is exempt from California personal income
taxes.
In the event that, prior to the delivery of the Bonds (a) the interest on other obligations of
the same type and character shall be declared to be subject to taxation (either at the time of such
declaration or at any future date) under any federal income tax laws, either by the terms of such
laws or by ruling of a federal income tax authority or official which is followed by the Internal
Revenue Service, or by decision of any federal court, or (b) any federal income tax law is
enacted which will have a substantial adverse effect upon the owners of the Bonds as such, the
successful bidder may, at its option, prior to the tender of the Bonds, be relieved of its obligation
to purchase the Bonds.
LEGAL OPINION: The legal opinion of Jones Hall, A Professional Law Corporation,
San Francisco, California, Bond Counsel, approving the validity of the Paying Agent Agreement
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and the Bonds will be furnished to the successful bidder without cost. A copy of the legal
opinion, certified by the official in whose office the original is filed, will be printed on each
Bond without charge to the successful bidder.
FURTHER INFORMATION: A copy of the preliminary Official Statement describing
the Bonds, and any other information concerning the proposed financing, will be posted
electronically on Parity’s® website and furnished upon request to the City’s Financial Advisor,
Public Financial Management, Inc., 50 California Street, Suite 2300, San Francisco, California
94111, Attention: Bob Gamble, email: gambler@pfm.com, telephone: (415) 982-5544, fax: (415)
982-4513.
TERMS OF SALE
FORM OF BID: All bids must be for not less than all of the Bonds hereby offered for
sale, and for not less than the aggregate par value thereof, plus a net premium of at least
$180,000, for a total minimum bid of at least $20,875,000. The City intends to apply up to
$180,000 of such premium to pay costs of issuance incurred in connection with the issuance of
the Bonds (see “Payment of Costs of Issuance” herein).
Bidders may submit only one bid, electronically through PARITY®.
ELECTRONIC BIDS. Electronic bids must conform with the procedures established by
PARITY®. Electronic bids will be received exclusively through PARITY® in accordance with
this Official Notice of Sale until 9:30 a.m. California time on the sale date, but no bid will be
received after the time specified for receiving bids. To the extent any instructions or directions
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®, including any fees charged by
PARITY®, potential bidders may contact PARITY® directly at (212) 849-5021 or at the Parity®
website: www.newissuehome.i-deal.com.
In the event Parity’s® summary of the terms of sale of the Bonds conflicts with this
Notice of Sale in any particulars, the terms of this Notice of Sale shall control.
THE CITY RETAINS ABSOLUTE DISCRETION TO DETERMINE WHETHER ANY BID
IS TIMELY, LEGIBLE AND COMPLETE. THE CITY TAKES NO RESPONSIBILITY FOR
INFORMING ANY BIDDER PRIOR TO THE TIME FOR RECEIVING BIDS THAT ITS BID IS
INCOMPLETE, ILLEGIBLE OR NOT RECEIVED.
WARNING REGARDING ELECTRONIC BIDS: THE CITY WILL ACCEPT BIDS IN
ELECTRONIC FORM SOLELY THROUGH PARITY®. EACH BIDDER SUBMITTING AN
ELECTRONIC BID UNDERSTANDS AND AGREES BY DOING SO THAT IT IS SOLELY
RESPONSIBLE FOR ALL ARRANGEMENTS WITH PARITY®, AND THAT PARITY® IS NOT
ACTING AS AN AGENT OF THE CITY. INSTRUCTIONS FOR SUBMITTING ELECTRONIC
BIDS MUST BE OBTAINED FROM PARITY®, AND THE CITY ASSUMES NO
RESPONSIBILITY FOR ENSURING OR VERIFYING BIDDER COMPLIANCE WITH THE
PROCEDURES OF PARITY®. THE CITY SHALL ASSUME THAT ANY BID RECEIVED
THROUGH PARITY® HAS BEEN MADE BY A DULY AUTHORIZED AGENT OF THE
BIDDER.
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THE CITY, THE FINANCIAL ADVISOR, BOND COUNSEL AND DISCLOSURE
COUNSEL ASSUME NO RESPONSIBILITY FOR ANY ERROR CONTAINED IN ANY BID
SUBMITTED ELECTRONICALLY, OR FOR FAILURE OF ANY BID TO BE TRANSMITTED,
RECEIVED OR OPENED AT THE OFFICIAL TIME FOR RECEIPT OF BIDS. THE OFFICIAL
TIME FOR RECEIPT OF BIDS WILL BE DETERMINED BY THE CITY AT THE PLACE OF BID
OPENING, AND THE CITY SHALL NOT BE REQUIRED TO ACCEPT THE TIME KEPT BY
PARITY® AS THE OFFICIAL TIME.
INTEREST RATE: Bidders must specify the rate or rates of interest which shall be
payable on the Bonds. The maximum rate bid may not exceed five percent (5%) per annum.
Interest on the Bonds is payable semiannually on each Interest Payment Date. Bidders will be
permitted to bid different rates of interest but (a) each interest rate specified in any bid must be
in a multiple of one-twentieth (1/20) or one-eighth (1/8) of one percent; (b) interest on each
Bond shall be computed from the closing date (expected to be June 26, 2013), to its stated
maturity date, at the interest rate specified in the bid, payable semiannually as set forth above;
(c) interest on all Bonds maturing at any one time shall be payable at the same rate of interest;
and no bid will be accepted which contemplates the waiver of any interest or other concession
by the bidder as a substitute for payment in full of the purchase price.
BEST BID: The Bonds will be awarded to the best responsible bidder therefor,
considering the interest rate or rates specified and the premium offered, if any, or discount
taken, if any, and the best bid will be determined on the basis of the lowest true interest cost.
The true interest cost (“TIC”) will be that nominal annual discount rate which, when discounted
semiannually and when used to discount all payments of principal and interest on the Bonds at
the rate or rates specified in the bid to the estimated closing date of the date of the Bonds, June
26, 2013, results in the amount equal to the purchase price, which is the principal amount of the
Bonds plus the amount of any premium, less the amount of any discount. For the purpose of
calculating the TIC, the mandatory sinking fund payments, if any, shall be treated as serial
maturities in such years. In the event two or more bids setting forth identical interest rates are
received, the City reserves the right to allow its authorized representative to exercise his or her
own discretion and judgment in making the award and may award the Bonds on a pro rata
basis in such denominations as he or she shall determine.
PAYMENT OF COSTS OF ISSUANCE: The successful bidder will be required to
deposit with the Paying Agent on the closing date of the Bonds, the amount of $180,000 from
the premium described above in “Form of Bid”, to be used to pay for costs of issuance.
ADJUSTMENT OF PRINCIPAL AMOUNTS: Following the receipt of bids, the City
reserves the right to increase or to decrease the total principal amount of the Bonds, and the
principal amount of any maturity of the Bonds, as the City deems advisable, based on the actual
rates of interest to be borne by the Bonds. Any such increase or decrease shall be allocated
among the various maturities of the Bonds on such basis as the City deems advisable, and shall
result in a proportionate increase or decrease (as the case may be) in the amount of any
premium or discount bid. The total principal amount and the principal amount of each
maturity of the Bonds shall not change by more than 10% as a result of such adjustment. Notice
of such increase or decrease shall be given to the successful bidder within 24 hours of bid
opening. No such adjustment will have the effect of altering the basis upon which the best bid
is determined. In the event of any such adjustment, no re-bidding or re-calculation of the bids
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submitted will be required or permitted, and the successful bid or bids may not be withdrawn,
and the successful bidder will not be permitted to change the interest rate(s) in its bid for the
Bonds.
RIGHT TO MODIFY OR AMEND: The City reserves the right, in its sole discretion, to
modify or amend this Official Notice of Sale including, but not limited to, the right to adjust and
change the principal amount and principal amortization schedule of the Bonds being offered,
however, such modifications or amendments shall be made not later than 1:00 P.M., California
time, on the business day prior to the bid opening and communicated through PARITY®.
RIGHT TO POSTPONEMENT OR CANCELLATION: The City may postpone or cancel
the sale prior to the time bids are to be received as provided on page one hereof, provided that
notice is communicated to prospective bidders through PARITY® and Thomson Municipal
Market Monitor prior to the time then scheduled for the receipt of such bids. Notice of a new
time, or of a new date and time, if any, will be given through PARITY®, and Thomson
Municipal Market Monitor as soon as practicable following a postponement. In the event of a
postponement of the sale only, any subsequent bid submitted by the bidder will supersede any
prior bid made. Failure of any bidder to receive notice of any postponement or cancellation
shall not invalidate the sufficiency of any such notice.
RIGHT OF REJECTION: The City reserves the right, in its sole discretion, to reject any
and all bids and to waive any irregularity or informality in any bid.
PROMPT AWARD: An authorized representative of the City will take action awarding
the sale of the Bonds or reject all bids not later than twenty-six (26) hours after the expiration of
time herein prescribed for the receipt of bids and until such expiration of time all bids received
shall be irrevocable. Unless such time of award is waived by the successful bidder, 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. Notice of the award will be given
promptly to the successful bidder.
DELIVERY AND PAYMENT: Delivery of the Bonds will be made to the successful
bidder through the facilities of DTC in New York, New York, as soon as the Bonds can be
prepared, which is estimated to be June 26, 2013 (the “Closing Date”). The Bonds will be
delivered in full book-entry form. Payment for the Bonds must be made in immediately
available funds to the Paying Agent. Any expense in providing immediately available funds
shall be borne by the purchaser.
RIGHT OF CANCELLATION: The successful bidder shall have the right, at its option,
to cancel its purchase of the Bonds if the City shall fail to cause the execution and delivery of the
Bonds and tender the same for delivery within 45 days from the date of sale thereof and in such
event the successful bidder shall be entitled to the return of the deposit accompanying its bid.
GOOD FAITH DEPOSIT. The successful bidder will be required to deposit with the
City, within 24 hours of the award of sale of the Bonds, a good faith deposit in the amount of
$206,950 (the “Good Faith Deposit”), to protect the City against any loss resulting from the
successful bidder’s failure to comply with the terms of its bid. The Good Faith Deposit shall be
delivered to the City either in the form of a cashier’s check made out to the City of Palo Alto, or
by wire transfer pursuant to instructions delivered by the City to the successful bidder. No
-8-
interest will be paid upon the Good Faith Deposit. The Good Faith Deposit will become the
property of the City, and if in the form of a check, will be cashed. The Good Faith Deposit will
be held and invested for the exclusive benefit of the City. The Good Faith Deposit, without
interest thereon, will be credited against the purchase price of the Bonds purchased by the
winning bidder at the time of delivery thereof.
ESTIMATE OF TRUE INTEREST COST: Each bidder is requested, but not required, to
state in its bid the true interest cost, as described under the caption “BEST BID” herein, which
shall be considered as informative only and not binding on either the bidder or the City.
CERTIFICATION OF REOFFERING PRICE: The successful bidder will, as of the date
the Bonds are sold pursuant to this Notice of Sale, certify to the City the prices at which it
reasonably expects to initially offer each maturity of the Bonds to the general public (the “Initial
Offering Prices”). For this purpose, the general public does not include bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters or wholesalers.
The successful bidder agrees that, on or prior to the Closing Date, it will actually offer
100% of each maturity of the Bonds to the general public in a bona fide public offering for prices
equal to or less than the Initial Offering Prices.
The successful bidder agrees that, prior to the Closing Date, it will deliver a certificate
dated as of the Closing Date in form and substance attached as Exhibit A and satisfactory to
Bond Counsel.
CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION: The City has
duly notified the California Debt and Investment Advisory Commission of the proposed sale of
the Bonds. Payment of all fees, to the California Debt and Investment Advisory Commission in
connection with the execution, sale and delivery of the Bonds shall be the responsibility of the
successful bidder, and not of the City.
NO LITIGATION: There is no litigation pending concerning the validity of the Bonds,
the existence of the City or the entitlement of the officers thereof to their respective offices, and
the successful bidder will be furnished a no-litigation certificate certifying to the foregoing as of
and at the time of delivery of the Bonds.
CUSIP NUMBERS: It is anticipated that CUSIP numbers will be printed on the Bonds,
but neither the failure to print such numbers on any Bonds nor any 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 the terms hereof. The CUSIP Service Bureau charge for
the assignment of CUSIP numbers shall be the responsibility of and shall be paid for by the
purchaser.
OFFICIAL STATEMENT: The City will approve an Official Statement relating to the
Bonds. Copies of a preliminary Official Statement will be distributed prior to the sale in a form
“deemed final” by the City for purposes of Rule 15c2-12 under the Securities Exchange Act of
1934 (the “Rule”) and approved for distribution by resolution of the City. Within seven
business days from the sale date, the City will deliver to the purchaser up to 100 copies of the
final Official Statement, executed by an authorized representative of the City and dated the date
of sale of the Bonds to the purchaser, to allow the purchaser to comply with paragraph (b)(4) of
-9-
the Rule and to satisfy the Municipal Securities Rulemaking Board (the “MSRB”) Rule G-32 or
any other rules adopted by the MSRB, which shall include information permitted to be omitted
by paragraph (b)(1) of the Rule and such other amendments or supplements as shall have been
approved by the City (the “Final Official Statement”). The successful bidder agrees to supply
the City all pricing information necessary to complete the Final Official Statement within 24
hours after the award of the Bonds. The purchaser agrees that it will not confirm the sale of any
Bonds unless the confirmation of sale is accompanied or preceded by the delivery of a copy of
the Final Official Statement.
CERTIFICATE REGARDING OFFICIAL STATEMENT: A responsible officer of the City will
certify to the original purchaser of the Bonds, as a condition of closing, that based on such
officer’s participation in the preparation of the Official Statement, nothing has come to his or her
attention to lead him or her to believe that the Official Statement (except for certain financial
statements, statistical data and other information) contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
CONTINUING DISCLOSURE: In order to assist bidders in complying with the Rule,
the City has committed to undertake, pursuant to the Paying Agent Agreement and a
Continuing Disclosure Certificate, to provide certain annual financial information and notices of
the occurrence of certain events, if material. A description of this undertaking is set forth in the
preliminary Official Statement and will also be set forth in the final Official Statement. Such
Continuing Disclosure Certificate will be a document required to be delivered at closing by the
City, and the failure by the City to deliver such document in form and substance acceptable to
Bond Counsel and the successful bidder will relieve the successful bidder of its obligation to
purchase the Bonds.
Dated: As of May 29, 2013
CITY OF PALO ALTO
By: /s/ Lalo Perez
Director of Administrative Services
Exhibit A-1
EXHIBIT A
Reoffering Price Certificate
$20,695,000*
CITY OF PALO ALTO
(Santa Clara County, California)
GENERAL OBLIGATION BONDS, ELECTION OF 2008, SERIES 2013A
(TAX-EXEMPT)
CERTIFICATE OF PURCHASER
The undersigned, on behalf of ________________, as underwriter (the “Underwriter”) of
the above-captioned bonds (the “Bonds”), hereby confirms our advice that:
(i) Based upon reasonable expectations and actual facts that existed on June 12,
2013, being the date upon which the City of Palo Alto (the “Issuer”) sold the
Bonds to the Underwriter (the “Sale Date”), the Underwriter reasonably
expected that the first prices at which a substantial amount of each maturity
of the Bonds (being at least 10% of each maturity) would be offered and sold
to the general public (excluding bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters or wholesalers) in a
bona fide public offering at the prices, or in the case of obligations sold on a
yield basis, at the respective yields set forth in Exhibit A attached hereto and
by this reference incorporated herein and shown on the cover or inside
cover of the Official Statement (together, the “Initial Offering Prices”).
(ii) The aggregate of the Initial Offering Prices is $_________________.
(iii) The Initial Offering Prices of the Bonds of each maturity (and stated interest
rate) reflected the assessment by the Underwriter of the fair market prices of
the Bonds as of the Sale Date.
(iv) As of the date hereof, 100% of the Bonds of each maturity were actually
offered to the general public in a bona fide public offering for the Initial
Offering Prices.
(v) As of the Sale Date, the Underwriter, taking into account market conditions,
had no reason to believe any of the Bonds would be initially sold to the
general public at prices greater than the Initial Offering Prices.
(vi) As of the Sale Date, at least 10% of the principal amount of each maturity of
the Bonds initially was sold at the respective Initial Offering Price for that
maturity shown in Exhibit A, except for the Bonds with the following
maturities and stated interest rates.
Maturity Rate
* Preliminary, subject to change, as provided herein.
Exhibit A-2
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed thereto in that certain Paying Agent Agreement, dated as of June 1, 2013, by and
between the Issuer and U.S. Bank National Association, as paying agent, authorizing the
issuance of the Bonds.
Dated: June 26, 2013
as Underwriter
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PRELIMINARY OFFICIAL STATEMENT DATED MAY 29, 2013
NEW ISSUE—-BOOK-ENTRY ONLY RATINGS:
Moody’s: “___”
S&P: “___”
(See “RATINGS” herein)
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain
qualifications described herein, 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;
although for the purpose of computing the alternative minimum tax imposed on certain corporations, interest on the Bonds 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 “LEGAL MATTERS—Tax Matters” herein.
$20,695,000*
(Santa Clara County, California)
General Obligation Bonds,
Election of 2008, Series 2013A
Dated: Date of Delivery Due: August 1 as shown below
The general obligation bonds captioned above (the “Bonds”) are being issued by the City of Palo Alto (the “City”) under the provisions of
Chapter 4 (commencing with section 43600) of Division 4 of Title 4 of the California Government Code and section 53506 et seq. of the
California Government Code, a Resolution adopted by the City Council of the City on May 6, 2013, and a Paying Agent Agreement, dated
as of June 1, 2013, by and between the City and U.S. Bank National Association, as paying agent (the “Paying Agent”).
The Bonds were authorized at an election of the registered voters of the City held on November 4, 2008 (the “Authorization”), at which
more than two-thirds of the persons voting on the proposition voted to authorize the issuance and sale of not to exceed $76,000,000
principal amount of general obligation bonds to finance the costs of constructing a new energy efficient, environmentally friendly Mitchell
Park Library and Community Center, renovating and expanding Main Library, and renovating and the Downtown Library, including
enhancements at all three facilities for seismic safety and disabled access, expanded space for library collections, meeting and study areas,
and new air conditioning, ventilation and lighting systems (the “Project”). See “PLAN OF FINANCE—Purpose of Issue” herein. An initial
series of bonds in the amount of $55,305,000 was issued and sold under the Authorization on June 30, 2010. The Bonds are the second
and final series of bonds to be issued and sold and issued under the Authorization. See “THE BONDS—Authority for Issuance” herein.
The Bonds are general obligations of the City, payable solely from ad valorem property taxes levied by the City and collected by Santa Clara
County (the “County”). The City Council is empowered and is obligated to levy ad valorem taxes for the payment of principal of and
interest on the Bonds upon all property subject to taxation by the City, without limitation of rate or amount (except certain personal
property which is taxable at limited rates). See “SECURITY FOR THE BONDS” herein.
The Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The
Depository Trust Company, New York, New York (“DTC”). The Bonds are issuable as fully registered securities in denominations of
$5,000 or any integral multiple of $5,000. Purchasers of the Bonds (the “Beneficial Owners”) will not receive physical certificates
representing their interest in the Bonds. See “THE BONDS” herein and “APPENDIX F—DTC AND THE BOOK-ENTRY ONLY SYSTEM.”
Interest on the Bonds accrues from the date of delivery and is payable semiannually on February 1 and August 1 of each year,
commencing February 1, 2014. Payments of principal of and interest on the Bonds will be paid by the Paying Agent, to DTC for
subsequent disbursement to DTC Participants, which will remit such payments to the Beneficial Owners of the Bonds. See “THE
BONDS—Description of the Bonds” herein.
The Bonds are subject to redemption prior to maturity. See “THE BONDS—Redemption” herein.
MATURITY SCHEDULE
SEE INSIDE COVER
Bids for the purchase of the Bonds will be received by the City on Wednesday, June 12, 2013, until 9:30 A.M., Pacific Daylight time, as
provided in the Official Notice of Sale, dated May 29, 2013. The Bonds will be sold pursuant to the terms of sale set forth in the Official
Notice of Sale.
This cover page contains information for general reference only. It is not a summary of this issue. Potential purchasers of the Bonds are
advised to read the entire Official Statement to obtain information essential to making an informed investment decision.
The Bonds will be offered when, as and if issued and received by the Underwriter subject to the approval of legality by Jones Hall, A
Professional Law Corporation, San Francisco, California, Bond Counsel. Certain disclosure matters will be passed upon for the City by
Quint & Thimmig LLP, San Francisco, California, Disclosure Counsel. Certain matters will be passed upon for the City by Molly S.
Stump, Esq., the City Attorney. It is expected that the Bonds, in book-entry form, will be available for delivery on or about June 26, 2013.
Dated: June ___, 2013
*Preliminary, subject to change.
$20,695,000*
City of Palo Alto
(Santa Clara County, California)
General Obligation Bonds,
Election of 2008, Series 2013A
MATURITY SCHEDULE*
CUSIP Prefix _________†
Maturity Principal Interest CUSIP Maturity Principal Interest CUSIP
(August 1) Amount Rate Yield Suffix (August 1) Amount Rate Yield Suffix
2014 2029
2015 2030
2016 2031
2017 2032
2018 2033
2019 2034
2020 2035
2021 2036
2022 2037
2023 2038
2024 2039
2025 2040
2026 2041
2027 2042
2028 2043
*Preliminary, subject to change.
† Copyright 2013, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services Bureau,
operated by Standard & Poor’s. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global Services. CUSIP numbers have been assigned
by an independent company not affiliated with the City and are included solely for the convenience of the holders of the Bonds. The City is not responsible for the selection or uses of these
CUSIP numbers, and no representation is made as to their correctness on the Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the
issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio
insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
For purposes of compliance with Rule 15c2-12 of the United States Securities and Exchange
Commission, as amended (“Rule 15c2-12”), this Preliminary Official Statement constitutes an “official
statement” of the City with respect to the Bonds that has been deemed “final” by the City as of its date except for
the omission of no more than the information permitted by Rule 15c2-12.
Use of Official Statement. This Official Statement is submitted in connection with the sale of the
Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This
Official Statement is not a contract between any bond owner and the City or the Underwriter. This Official
Statement and the information contained herein are subject to completion or amendment without notice.
No Offering Except by This Official Statement. No dealer, broker, salesperson or other person has
been authorized by the City or the Underwriter to give any information or to make any representations
other than those contained in this Official Statement and, if given or made, such other information or
representation must not be relied upon as having been authorized by the City or the Underwriter.
No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or
the solicitation of an offer to buy nor may there be any sale of the Bonds by a person in any jurisdiction in
which it is unlawful for such person to make such an offer, solicitation or sale.
Estimates and Projections. When used in this Official Statement and in any continuing disclosure
by the City, in any press release and in any oral statement made with the approval of an authorized officer
of the City, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,”
“estimate,” “project,” “forecast,” “expect,” “intend” and similar expressions identify “forward looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are
subject to risks and uncertainties that could cause actual results to differ materially from those contemplated
in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some
assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances
may occur. Therefore, there are likely to be differences between forecasts and actual results, and those
differences may be material.
Information in Official Statement. The information set forth in this Official Statement has been
furnished by the City and other sources which are believed to be reliable, but it is not guaranteed as to
accuracy or completeness by the City.
The City maintains a website. Unless specifically indicated otherwise, the information presented on
such website is not incorporated by reference as part of this Official Statement and should not be relied
upon in making investment decisions with respect to the Bonds.
Document Summaries. All summaries of the Paying Agent Agreement or other documents
referred to in this Official Statement are made subject to the provisions of such documents and qualified in
their entirety to reference to such documents, and do not purport to be complete statements of any or all of
such provisions.
No Securities Laws Registration. The Bonds have not been registered under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exceptions therein
for the issuance and sale of municipal securities. The Bonds have not been registered or qualified under the
securities laws of any state.
Effective Date. This Official Statement speaks only as of its date, and the information and
expressions of opinion contained in this Official Statement are subject to change without notice. Neither the
delivery of this Official Statement nor any sale of the Bonds will, under any circumstances, give rise to any
implication that there has been no change in the affairs of the City, or the other parties described in this
Official Statement, or the condition of the property within the City since the date of this Official Statement.
CITY OF PALO ALTO
250 Hamilton Avenue, 4th Floor
Palo Alto, California 94301
http://www.cityofpaloalto.org/
CITY COUNCIL MEMBERS
Gregory Scharff, Mayor
Nancy Shepherd, Vice Mayor
Marc Berman, Council Member
Patrick Burt, Council Member
Karen Holman, Council Member
Larry Klein, Council Member
Liz Kniss, Council Member
Gail A. Price, Council Member
Greg Schmid, Council Member
CITY STAFF
James Keene, City Manager
Pamela Antil, Assistant City Manager/Chief Operating Officer
Lalo Perez, Director of Administrative Services/Chief Financial Officer
Joe Saccio, Assistant Director of Administrative Services
Tarun Narayan, Senior Financial Analyst
Molly S. Stump, City Attorney
Donna Grider, City Clerk
SPECIAL SERVICES
Bond Counsel
Jones Hall
A Professional Law Corporation
San Francisco, California
Disclosure Counsel
Quint & Thimmig LLP
San Francisco, California
Financial Advisor
Public Financial Management, Inc.
San Francisco, California
Paying Agent
U.S. Bank National Association
San Francisco, California
i
TABLE OF CONTENTS
INTRODUCTION.....................................................................1
PLAN OF FINANCE...............................................................3
Purpose of Issue.....................................................................3
Sources and Uses of Funds...............................................4
THE BONDS................................................................................4
Authority for Issuance........................................................4
Description of the Bonds...................................................4
Payment....................................................................................5
Redemption.............................................................................5
Registration, Transfer and Exchange of Bonds.....6
Defeasance...............................................................................7
DEBT SERVICE SCHEDULE..............................................8
SECURITY FOR THE BONDS...........................................9
Ad Valorem Taxes................................................................9
Debt Service Fund...............................................................9
Bond Service Fund............................................................10
Limited Obligation...........................................................10
PROPERTY TAXATION...................................................10
Property Tax Collection Procedures........................10
Taxation of State-Assessed Utility Property ........11
Alternative Method of Tax Apportionment -
Teeter Plan..........................................................................11
Assessed Valuation...........................................................12
Tax Rates................................................................................14
Tax Levies and Delinquencies...................................14
Major Taxpayers.................................................................15
Direct and Overlapping Debt....................................15
CONSTITUTIONAL AND STATUTORY
PROVISIONS AFFECTING CITY REVENUES
AND APPROPRIATIONS................................................17
Article XIIIA of the State Constitution.....................17
Legislation Implementing Article XIIIA...............17
Article XIIIB of the State Constitution......................18
Articles XIIIC and XIIID of the State
Constitution........................................................................18
Proposition 62......................................................................19
Proposition 1A.....................................................................20
Possible Future Initiatives............................................20
LEGAL MATTERS................................................................20
Approval of Legal Proceedings.................................20
Absence of Material Litigation...................................21
Tax Matters............................................................................21
CONTINUING DISCLOSURE........................................22
RATINGS...................................................................................22
FINANCIAL ADVISOR .....................................................22
UNDERWRITING.................................................................22
EXECUTION............................................................................23
APPENDIX A - GENERAL DEMOGRAPHIC AND ECONOMIC INFORMATION REGARDING THE
CITY OF PALO ALTO AND SANTA CLARA COUNTY
APPENDIX B - CITY OF PALO ALTO COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE
YEAR ENDED JUNE 30, 2012
APPENDIX C - PROPOSED FORM OF OPINION OF BOND COUNSEL
APPENDIX D - FORM OF CONTINUING DISCLOSURE CERTIFICATE
APPENDIX E - DTC AND THE BOOK-ENTRY ONLY SYSTEM
CITY OF PALO ALTO LOCATION MAP
OFFICIAL STATEMENT
$20,695,000*
CITY OF PALO ALTO
General Obligation Bonds
Election of 2008, Series 2013A
The purpose of this Official Statement, which includes the cover page and attached
appendices, is to set forth certain information concerning the sale and delivery of the bonds
captioned above (the “Bonds”) by the City of Palo Alto (the “City”). All capitalized terms used
in this Official Statement, unless noted otherwise, have the meanings set forth in the Paying
Agent Agreement (as defined below).
INTRODUCTION
This Introduction is not a summary of this Official Statement. It is only a brief
description of and guide to, and is qualified by, more complete and detailed information
contained in the entire Official Statement and the documents summarized or described herein.
A full review should be made of the entire Official Statement. The offering of Bonds to potential
investors is made only by means of the entire Official Statement.
The City. The City is located in northern Santa Clara County (the “County”),
approximately 35 miles south of the City of San Francisco. It is part of the San Francisco Bay
metropolitan area. The City was incorporated in 1894. Its first Charter was granted by the State
of California in 1909, and the City continues to operate as a charter city. Municipal operations
are conducted under the Council-Manager form of government. The City has a current
population of approximately 65,500.
See APPENDIX A—GENERAL DEMOGRAPHIC AND ECONOMIC INFORMATION
REGARDING THE CITY OF PALO ALTO AND SANTA CLARA COUNTY and APPENDIX
B—CITY OF PALO ALTO COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE
YEAR ENDED JUNE 30, 2012, for certain demographic, statistical and financial information
regarding the City.
Authority for Issuance. The Bonds were authorized at an election of the registered voters
of the City held on November 4, 2008, at which more than two-thirds of the persons voting on
the measure voted to authorize the issuance and sale of not to exceed $76,000,000 principal
amount of general obligation bonds (the “Authorization”). An initial series of bonds in the
amount of $55,305,000 was issued and sold under the Authorization on June 30, 2010.
The Bonds are being issued under the provisions of Chapter 4 (commencing with section
43600) of Division 4 of Title 4 of the California Government Code, a Resolution adopted by the
City Council of the City (the “City Council”) on May 6 2013 (the “Bond Resolution”); and a
Paying Agent Agreement (the “Paying Agent Agreement”), dated as of June 1, 2013, by and
between the City and U.S. Bank National Association, as paying agent (the “Paying Agent”).
The Bonds are the second and final series of bonds to be sold and issued under the
Authorization. See “THE BONDS—Authority for Issuance.”
* Preliminary, subject to change.
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Purpose for Issuance. Pursuant to the Authorization, bonds were approved to finance the
costs of constructing a new energy efficient, environmentally friendly Mitchell Park Library and
Community Center, renovating and expanding Main Library, and renovating the Downtown
Library, including enhancements at all three facilities for seismic safety and disabled access,
expanded space for library collections, meeting and study areas, and new air conditioning,
ventilation and lighting systems (the “Project”). An initial series of bonds in the amount of
$55,305,000 was issued and sold under the Authorization on June 30, 2010, to finance the
Project. The Bonds are the second and final series of bonds to be issued and sold and issued
under the Authorization. See “PLAN OF FINANCE—Purpose of Issue.”
Security and Sources of Payment for the Bonds. The Bonds are general obligations of the
City payable solely from ad valorem property taxes levied by the City and collected by the
County. The City Council is empowered and is obligated to annually levy ad valorem taxes for
the payment of the Bonds and the interest thereon upon all property within the City subject to
taxation by the City, without limitation of rate or amount (except with respect to certain
personal property which is taxable at limited rates). See “SECURITY FOR THE BONDS.”
Payment and Registration of the Bonds. The Bonds will be dated their date of original
issuance and delivery (the “Dated Date”) and will be issued as fully registered bonds, without
coupons, in the denominations of $5,000 or any integral multiple of $5,000, registered in the
name of Cede & Co. as nominee of The Depository Trust Company, New York, New York
(“DTC”), and will be available under the book-entry system maintained by DTC, only through
brokers and dealers who are or act through DTC Participants as described below. Beneficial
Owners will not be entitled to receive physical delivery of the Bonds. See “THE BONDS” and
APPENDIX E—DTC AND THE BOOK-ENTRY ONLY SYSTEM.
Interest on the Bonds accrues from the Dated Date and is payable semiannually on
February 1 and August 1 of each year, commencing February 1, 2014. See “THE BONDS—
Description of the Bonds.”
Early Redemption. The Bonds are subject to optional and mandatory sinking fund
redemption prior to their maturity as described in “THE BONDS—Redemption.”
Other Information. This Official Statement speaks only as of its date, and the information
contained herein is subject to change. Copies of documents referred to in this Official Statement
and information concerning the Bonds are available from the City of Palo Alto City Clerk, 250
Hamilton Avenue, Palo Alto, California 94301, (650) 329-2571. The City may impose a charge
for copying, mailing and handling.
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PLAN OF FINANCE
Purpose of Issue
The Project consists of the following components:
• Mitchell Park Library and Community Center. Construction of the Mitchell Park Library
and Community Center is in progress and is expected to be complete in late 2013. The
existing Mitchell Park Library was about 10,000 square feet and is being replaced with a
new facility of approximately 36,000 square feet. The new library has two stories to
accommodate an enlarged collection, a children’s area, an acoustically separated teen
area, group study rooms, staff areas and a program room. Increases in collection,
seating, computers, children’s area and programming space will serve the needs of the
projected population. Technical Services staff located at the Downtown Library will be
relocated to the Mitchell Park Library in order to facilitate the increased intake of new
materials for the entire library system.
The existing Community Center was approximately 10,000 square feet and is being
replaced with a new facility of approximately 15,000 square feet. Similar to the existing
community center, the new building is a one-story building attached to the new library.
By sharing activity space, the joint facility is smaller in size than two independent
buildings and creates a more efficient use of the library/community center site.
• Main Library. The Main Library improvements include small group study rooms that are
acoustically separated from the rest of the existing building and a new program space
that seats 100 people. To accommodate the new program space, the Main Library will
expand by approximately 4,000 square feet from the current 21,000 square feet on the
ground floor of the building. The interior of the existing library will also be reconfigured.
Lighting and other building systems will also be upgraded. All of the improvements will
be made with consideration for the historic nature of the existing building.
• Downtown Library. The Downtown Library renovation was completed in 2011. The
interior space was reconfigured and the technical staff relocated to provide larger public
and program areas. A small program room was added. Systems upgrades, such as
improved lighting and mechanical systems were also provided.
The proceeds of the Bonds, being the second and final series of bonds under the
Authorization, will be used to complete the Project.
-4-
Sources and Uses of Funds
The estimated sources and uses of funds with respect to the Bonds will be applied as
follows:
Sources of Funds
Principal Amount of Bonds
Plus: Original Issue Premium
Less: Underwriter’s Discount
Total Sources
Uses of Funds
Deposit to Project Fund
Deposit to Costs of Issuance Account (1)
Total Uses
(1) Includes Bond Counsel and Disclosure Counsel fees, financial advisor fees, rating fees, printing expenses and other
costs of issuance with respect to the Bonds.
THE BONDS
Authority for Issuance
The Bonds are issued under the provisions of Chapter 4 (commencing with section
43600) of Division 4 of Title 4 of the California Government Code and section 53506 et seq. of
the California Government Code, the Bond Resolution and the Paying Agent Agreement.
Description of the Bonds
Book-Entry Form. The Bonds will be issued in book-entry form only, and will be initially
issued and registered in the name of Cede & Co. as nominee of DTC. Purchasers of the Bonds
(the “Beneficial Owners”) will not receive physical certificates representing their interest in the
Bonds. Payments of principal of and interest on the Bonds will be paid by the Paying Agent to
DTC for subsequent disbursement to DTC Participants which will remit such payments to the
Beneficial Owners of the Bonds.
As long as DTC’s book-entry method is used for the Bonds, the Paying Agent will send
any notice of prepayment or other notices to owners only to DTC. Any failure of DTC to advise
any DTC Participant, or of any DTC Participant to notify any Beneficial Owner, of any such
notice and its content or effect will not affect the validity or sufficiency of the proceedings
relating to the prepayment of the Bonds called for prepayment or of any other action premised
on such notice.
The Paying Agent, the City, and the Underwriter of the Bonds have no responsibility or
liability for any aspects of the records relating to or payments made on account of beneficial
ownership, or for maintaining, supervising or reviewing any records relating to beneficial
ownership, of interests in the Bonds.
See APPENDIX E—DTC AND THE BOOK-ENTRY ONLY SYSTEM.
Interest. Interest on the Bonds is payable semiannually on February 1 and August 1 of
each year (the “Interest Payment Dates”), commencing February 1, 2014.
-5-
Each Bond will bear interest from the Interest Payment Date next preceding the date of
registration and authentication thereof unless (i) it is registered and authenticated prior to an
Interest Payment Date, in which event it will bear interest from such date, or (ii) it is registered
and authenticated prior to a Interest Payment Date and after the close of business on the
fifteenth day of the month preceding such Interest Payment Date, in which event it will bear
interest from such Interest Payment Date, or (iii) it is registered and authenticated prior to
January 15, 2011, in which event it will bear interest from the date of original issuance and
authentication of the Bonds; provided, however, that if at the time of authentication of a Bond,
interest is in default thereon, such Bond will bear interest from the Interest Payment Date to
which interest has previously been paid or made available for payment thereon.
Interest on the Bonds will be calculated on the basis of a 360-day year comprised of
twelve 30-day months.
Denominations and Maturity. The Bonds will be issued in the denomination of $5,000
each or any integral multiple of $5,000. The Bonds mature August 1 in the years 2014 through
2043, in the amounts set forth on the cover page of this Official Statement. See the maturity
schedule on the cover page hereof and “DEBT SERVICE SCHEDULE” below.
Payment
Interest on the Bonds (including the final interest payment upon maturity or early
redemption) is payable by check of the Paying Agent mailed on the Interest Payment Date to
the owner thereof at such owner’s address as it appears on the Bond Register maintained by the
Paying Agent at the close of business on the 15th day of the month preceding the Interest
Payment Date, or at such other address as the owner may have filed with the Paying Agent for
that purpose; provided that an owner of $1,000,000 or more aggregate principal amount of
Bonds, or the owner of all of the Bonds at the time outstanding, will, at his or her option, receive
payment of interest by wire transfer to an account in the United States of America designated
by such owner to the Paying Agent no later than the 15th day of the month immediately
preceding the applicable Interest Payment Date.
Principal of the Bonds is payable in lawful money of the United States of America at the
principal office of the Paying Agent.
Redemption
Optional Redemption. The Bonds maturing on or before August 1, 2023, are not subject
to redemption prior to their fixed maturity dates. The Bonds maturing on or after August 1,
2024, are subject to redemption prior to their respective maturity dates as a whole or in part on
any date, as designated by the City and, absent any such designation, pro rata among
maturities and by lot within a maturity, from money provided at the option of the City, in each
case on and after August 1, 2023, at a redemption price equal to the principal amount of the
Bonds to be redeemed, plus accrued interest to the date of redemption, without premium.
Redemption Procedure. The Paying Agent will cause notice of any redemption to be
mailed, first class mail, postage prepaid, at least 30 days but not more than 60 days prior to
the date fixed for redemption, to the respective Owners of any Bonds designated for
redemption, at their addresses appearing on the bond registration books maintained by the
Paying Agent and to the Securities Depositories (as such term is defined in the Paying Agent
Agreement); but such mailing will not be a condition precedent to such redemption and failure
to mail or to receive any such notice will not affect the validity of the proceedings for the
redemption of such Bonds.
-6-
The Paying Agent will not mail any notice of redemption until it has sufficient moneys
on deposit to pay the redemption price of all Bonds to be redeemed; provided, however, that
such restriction will not apply when the Bonds are redeemed with the proceeds of another
obligation of the City; and provided further that in the event the Bonds are being redeemed with
such proceeds, the City will have the right to cancel the notice of redemption by providing
written notice of such cancellation to the Paying Agent at least seven business days prior to the
date set for redemption.
Such notice will state the redemption date and the redemption price and, if less than all
of the then outstanding Bonds are to be called for redemption, will designate the serial numbers
of the Bonds to be redeemed by giving the individual number of each Bond or by stating that all
Bonds between two stated numbers, both inclusive, or by stating that all of the Bonds of one or
more maturities have been called for redemption, and will require that such Bonds be then
surrendered at the principal office of the Paying Agent for redemption at the said redemption
price, giving notice also that further interest on such Bonds will not accrue from and after the
redemption date.
Partial Redemption. Upon surrender of Bonds redeemed in part only, the City will execute
and the Paying Agent will authenticate and deliver to the owner, at the expense of the City, a
new Bond or Bonds, of the same maturity, of authorized denominations in aggregate principal
amount equal to the unredeemed portion of the Bond or Bonds.
Effect of Redemption. From and after the date fixed for redemption, if notice of such
redemption has been duly given as provided in the Paying Agent Agreement and funds
available for the payment of the principal of and interest (and premium, if any) on the Bonds so
called for redemption will has been duly provided, such Bonds so called will cease to be entitled
to any benefit under the Paying Agent Agreement other than the right to receive payment of the
redemption price, and no interest will accrue thereon on or after the redemption date specified
in such notice.
Registration, Transfer and Exchange of Bonds
If the book-entry system as described above and in Appendix E is no longer used with
respect to the Bonds, the following provisions will govern the registration, transfer, and
exchange of the Bonds.
Bond Register. The Paying Agent will keep or cause to be kept sufficient books for the
registration and transfer of the Bonds (the “Bond Register”), which will at all times be open to
inspection by the City upon reasonable notice; and, upon presentation for such purpose, the
Paying Agent shall, under such reasonable regulations as it may prescribe, register or transfer or
cause to be registered or transferred, on said books, the Bonds.
Transfer. Any Bond may, in accordance with its terms, be transferred, upon the books
required to be kept by the Paying Agent, by the person in whose name it is registered, in person
or by his duly authorized attorney, upon surrender of such Bond for cancellation at the
principal office at the Paying Agent, accompanied by delivery of a written instrument of
transfer in a form approved by the Paying Agent, duly executed. The Paying Agent will require
the payment by the owner requesting such transfer of any tax or other governmental charge
required to be paid with respect to such transfer.
Whenever any Bond or Bonds are surrendered for transfer, the City will execute and the
Paying Agent will authenticate and deliver a new Bond or Bonds, for like aggregate principal
amount.
-7-
No transfers of Bonds will be required to be made (a) 15 days prior to the date
established by the Paying Agent for selection of Bonds for redemption or (b) with respect to a
Bond after such Bond has been selected for redemption (except with respect to the unredeemed
portion thereof).
Exchange. Bonds may be exchanged at the principal office of the Paying Agent for a like
aggregate principal amount of Bonds of authorized denominations and of the same maturity.
The Paying Agent will require the payment by the owner requesting such exchange of any tax or
other governmental charge required to be paid with respect to such exchange.
No exchanges of Bonds will be required to be made (a) 15 days prior to the date
established by the Paying Agent for selection of Bonds for redemption or (b) with respect to a
Bond after such Bond has been selected for redemption (except with respect to the unredeemed
portion thereof).
Defeasance
The City has the option to pay and discharge the entire indebtedness on all or any
portion of the outstanding Bonds in any one or more of the following ways:
(a) by paying or causing to be paid the principal of, and interest and any premium on,
such outstanding Bonds, as and when they become due and payable;
(b) by depositing with the Paying Agent, in trust, at or before maturity, money which,
together with, in the event of a discharge of all of the Bonds, the amounts then on deposit in the
funds and accounts provided for in the Paying Agent Agreement is fully sufficient to pay such
outstanding Bonds, including all principal, interest and redemption premiums; or
(c) by irrevocably depositing with the Paying Agent or other agent designated by the
City, in trust, cash and Federal Securities (as defined below) in such amount as the City will
determine as confirmed by an independent certified public accountant will, together with the
interest to accrue thereon and, in the event of a discharge of all of the Bonds, moneys then on
deposit in the fund and accounts provided for in the Paying Agent Agreement, be fully
sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest
and redemption premiums) at or before their respective maturity dates.
If the City has taken any of the actions specified in (a), (b) or (c) above, and if such
Bonds are to be redeemed prior to the maturity thereof notice of such redemption will have been
given as in the Paying Agent Agreement provided or provision satisfactory to the Paying Agent
will have been made for the giving of such notice, then, at the election of the City, and
notwithstanding that any Bonds will not have been surrendered for payment, the pledge of the
funds and moneys provided for in the Paying Agent Agreement and all other obligations of the
City under the Paying Agent Agreement with respect to such outstanding Bonds will cease and
terminate. Notice of such election will be filed with the Paying Agent. Notwithstanding the
foregoing, 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 and all amounts owing to the Paying Agent
pursuant to the Paying Agent Agreement will continue in any event.
Upon compliance by the City with the foregoing with respect to all bonds outstanding,
any funds held by the Paying Agent after payment of all fees and expenses of the Paying
Agent, which are not required for the purposes of the preceding paragraph, will be paid over to
the City.
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“Federal Securities” means Federal agency or United States government-sponsored
enterprise obligations, participations, or other instruments, including those issued by or fully
guaranteed as to principal and interest by federal agencies or United States government-
sponsored enterprises.
DEBT SERVICE SCHEDULE
The following table shows the debt service schedule with respect to the Bonds (assuming
no optional redemptions).
Year
Ending
August 1
Principal
Payment
Interest
Payment
Total
Bonds
Debt Service
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
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SECURITY FOR THE BONDS
Ad Valorem Taxes
Bonds Payable from Ad Valorem Property Taxes. The Bonds are general obligations of the
City, payable solely from ad valorem property taxes levied by the City and collected by the
County. The City is empowered and is obligated to annually levy ad valorem taxes for the
payment of the Bonds and the interest thereon upon all property within the City subject to
taxation by the City, without limitation of rate or amount (except certain personal property
which is taxable at limited rates).
Levy and Collection. The City will levy and the County will collect such ad valorem taxes in
such amounts and at such times as is necessary to ensure the timely payment of debt service.
Such taxes, when collected, will be deposited into a debt service fund for the Bonds, which is
maintained by the City and which is irrevocably pledged for the payment of principal of and
interest on the Bonds when due. If and to the extent the amount of such ad valorem taxes
collected is insufficient to pay debt service on the Bonds, the City is obligated under the Paying
Agent Agreement to use any other moneys lawfully available therefore to pay debt service on
the Bonds.
City property taxes are assessed and collected by the County in the same manner and at
the same time, and in the same installments as other ad valorem taxes on real property, and will
have the same priority, become delinquent at the same times and in the same proportionate
amounts, and bear the same proportionate penalties and interest after delinquency, as do the
other ad valorem taxes on real property.
Annual Tax Rates. The amount of the annual ad valorem tax levied by the County to
repay the Bonds will be determined by the relationship between the assessed valuation of
taxable property in the City and the amount of debt service due on the Bonds. Fluctuations in
the annual debt service on the Bonds and the assessed value of taxable property in the City
may cause the annual tax rate to fluctuate.
Economic and other factors beyond the City’s control, such as economic recession,
deflation of land values, a relocation out of the City or financial difficulty or bankruptcy by one
or more major property taxpayers, or the complete or partial destruction of taxable property
caused by, among other eventualities, earthquake, flood or other natural disaster, could cause a
reduction in the assessed value within the City and necessitate a corresponding increase in the
annual tax rate.
Debt Service Fund
The City will establish the Debt Service Fund (the “Debt Service Fund”), which will be
established as a separate fund to be maintained distinct from all other funds of the City. Into
the Debt Service Fund will be deposited: (1) the proceeds of ad valorem taxes levied to pay debt
service on the Bonds; and (2) if any, other moneys lawfully available to pay debt service on the
Bonds as provided in the Paying Agent Agreement.
All moneys in the Debt Service Fund will be used and withdrawn by the City solely for
the purpose of paying the principal of and interest on the Bonds as they become due and
payable. At least five Business Days prior to each Interest Payment Date, commencing in
January 1 the City will transfer to the Paying Agent moneys on deposit in the Debt Service Fund
for application by the Paying Agent on the next succeeding Interest Payment Date to the
payment of principal of and interest on the Bonds.
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Bond Service Fund
The Paying Agent Agreement establishes, as a separate fund, the Bond Service Fund, to
be held by the Paying Agent. All moneys received by the Paying Agent from the City from the
Debt Service Fund will be deposited into the Bond Service Fund. The moneys on deposit in the
Bond Service Fund will be used solely to pay principal and interest on the Bonds when due.
Limited Obligation
The Bonds are payable solely from the proceeds of an ad valorem tax levied by the City,
and collected by the County, for the payment of principal and interest on the Bonds. Although
the County is obligated to levy and collect the ad valorem tax for the payment of the Bonds, the
Bonds are not a debt of the County.
PROPERTY TAXATION
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 after 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 delinquent is declared tax defaulted
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 1-1/2% per
month to the time of redemption. If taxes are unpaid for a period of five years or more, the
property is subject to sale by the County.
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, SB813
(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, SB813 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 and result in increased assessed value.
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 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
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following the delinquency date. 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 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 for the amount of
taxes which are delinquent.
Taxation of State-Assessed Utility Property
The State Constitution provides that most classes of property owned or used by
regulated utilities be assessed by the State Board of Equalization (“SBE”) and taxed locally.
Property valued by the SBE as an operating unit in a primary function of the utility taxpayer is
known as “unitary property,” a concept designed to permit assessment of the utility as a going
concern rather than assessment of each individual element of real and personal property owned
by the utility taxpayer. State-assessed unitary and “operating nonunitary” property (which
excludes nonunitary property of regulated railways) is allocated to the counties based on the
situs of the various components of the unitary property. Except for unitary property of
regulated railways and certain other excepted property, all unitary and operating nonunitary
property is taxed at special county-wide rates and tax proceeds are distributed to taxing
jurisdictions according to statutory formulae generally based on the distribution of taxes in the
prior year.
Alternative Method of Tax Apportionment - Teeter Plan
The Board of Supervisors of the County has approved the implementation of 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. Under the Teeter Plan, the County apportions secured property taxes on an accrual basis
when due (irrespective of actual collections) to local political subdivisions, including the City,
for which the County acts as the tax-levying or tax-collecting agency. The Teeter Plan was
effective beginning the fiscal year commencing July 1, 1993.
The Teeter Plan is applicable to all tax levies on secured property for which the County
acts as the tax-levying or tax-collecting agency, or for which the County treasury is the legal
depository of the tax collections.
The ad valorem property tax to be levied to pay the interest on and principal of the Bonds
will be subject to the Teeter Plan, beginning in the first year of such levy in fiscal year 2009-10.
The City will receive 100% of the ad valorem property tax on secured property levied to pay the
Bonds irrespective of actual delinquencies in the collection of the tax by the County.
The Teeter Plan is to remain in effect unless the Board of Supervisors of the County
orders its discontinuance or unless, prior 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 at least 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. If the Teeter Plan is
discontinued subsequent to its implementation, only those secured property taxes actually
collected would be allocated to political subdivisions (including the City) for which the County
acts as the tax-levying or tax-collecting agency.
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Assessed Valuation
Assessed Valuation History. The table below shows a five-year history of the City’s
assessed valuation.
CITY OF PALO ALTO
Assessed Valuations of Taxable Property
Fiscal Years 2007-08 to 2012-13
Fiscal
Year Local Secured Utility Unsecured
Total Before
Redevelopment
Increment
2007-08 $17,382,729,942 $3,174,384 $1,536,583,502 $18,922,487,828
2008-09 19,380,152,340 2,572,716 1,702,884,064 21,085,609,120
2009-10 20,239,349,432 2,572,716 1,638,435,945 21,880,358,093
2010-11 20,458,126,804 2,572,716 1,495,574,504 21,956,274,024
2011-12 20,967,297,668 2,572,716 1,516,837,280 22,486,707,664
2012-13 22,334,464,145 2,572,716 1,355,969,707 23,693,006,568
Source: California Municipal Statistics, Inc.
Assessed Valuation by Land Use. The following table shows the land use of parcels in the
City, according to assessed valuation. As shown, the majority of land in the City is used for
residential purposes.
CITY OF PALO ALTO
Assessed Valuation and Parcels by Land Use
Fiscal Year 2012-13
2012-13
Assessed
Valuation(1)
% of
Total
No. of
Parcels
% of
Total
No. of
Taxable
Parcels
% of
Total
Non-Residential:
Agricultural/Forest $34,814,558 0.16% 48 0.24% 32 0.16%
Commercial 1,144,034,827 5.12 466 2.29 461 2.29
Professional/Office 2,647,123,031 11.85 507 2.49 485 2.41
Industrial/Research & Development 1,954,049,136 8.75 5 0.02 189 0.94
Recreational 46,762,470 0.21 16 0.08 13 0.06
Government/Social/Institutional 62,606,092 0.28 105 0.52 40 0.20
Miscellaneous 9,846,862 0.04 18 0.09 17 0.08
Subtotal Non-Residential $5,899,236,976 26.41% 1,165 5.73% 1,237 6.14%
Residential:
Single Family Residence 12,974,042,711 58.09% 14,918 73.38% 14,870 73.84%
Condominium/Townhouse 1,716,046,590 7.68 2,995 14.73 2,989 14.84
2-4 Residential Units 345,642,993 1.55 513 2.52 513 2.55
5+ Residential Units/Apartments 1,264,534,176 5.66 333 1.64 308 1.53
Subtotal Residential $16,300,266,470 72.98% 18,759 92.28% 18,680 92.76%
Vacant Parcels $134,960,699 0.60% 405 1.99% 221 1.10%
Total $22,334,464,145 100.00% 20,329 100.00% 20,138 100.00%
Source: California Municipal Statistics, Inc.
(1) Local Secured Assessed Valuation; excluding tax-exempt property.
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Assessed Valuation of Single Family Residential Parcels. The following table shows a break
down of the assessed valuations of Single Family Residential parcels in the City, according to
assessed valuation.
CITY OF PALO ALTO
Per Parcel 2012-13 Assessed Valuation
of Single Family Homes
No. of 2012-13 Average Median
Parcels Assessed Valuation Assessed Valuation Assessed Valuation
Single Family Residential 14,870 $12,974,042,711 $872,498 $654,003
2012-13 No. of % of Cumulative Total % of Cumulative
Assessed Valuation Parcels(1) Total % of Total Valuation Total % of Total
$0 - $99,999 1,719 11.560% 11.560% $ 133,245,071 1.027% 1.027%
$100,000 - $199,999 1,952 13.127 24.687 267,951,878 2.065 3.092
$200,000 - $299,999 951 6.395 31.083 237,455,035 1.830 4.923
$300,000 - $399,999 788 5.299 36.382 274,869,785 2.119 7.041
$400,000 - $499,999 805 5.414 41.796 363,316,163 2.800 9.841
$500,000 - $599,999 815 5.481 47.276 447,604,628 3.450 13.291
$600,000 - $699,999 710 4.775 52.051 461,026,908 3.553 16.845
$700,000 - $799,999 650 4.371 56.422 486,717,325 3.751 20.596
$800,000 - $899,999 739 4.970 61.392 629,372,213 4.851 25.447
$900,000 - $999,999 706 4.748 66.140 670,819,782 5.170 30.618
$1,000,000 - $1,099,999 648 4.358 70.498 679,741,352 5.239 35.857
$1,100,000 - $1,199,999 544 3.658 74.156 624,153,570 4.811 40.668
$1,200,000 - $1,299,999 569 3.826 77.983 709,285,340 5.467 46.135
$1,300,000 - $1,399,999 498 3.349 81.332 670,599,984 5.169 51.304
$1,400,000 - $1,499,999 424 2.851 84.183 614,353,307 4.735 56.039
$1,500,000 - $1,599,999 293 1.970 86.153 453,227,422 3.493 59.532
$1,600,000 - $1,699,999 250 1.681 87.835 412,235,173 3.177 62.710
$1,700,000 - $1,799,999 217 1.459 89.294 379,788,024 2.927 65.637
$1,800,000 - $1,899,999 165 1.110 90.403 304,876,011 2.350 67.987
$1,900,000 - $1,999,999 180 1.210 91.614 350,451,706 2.701 70.688
$2,000,000 and greater 1,247 8.386 100.00% 3,802,952,034 29.312 100.00%
Total 14,870 100.000% $12,974,042,711 100.000%
Source: California Municipal Statistics, Inc.
(1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units.
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Tax Rates
The table below summarizes the total ad valorem tax rates levied by all taxing entities in
Tax Rate Area 6-001 for each $100 of assessed valuation during the fiscal years 2007-08
through 2011-12.
CITY OF PALO ALTO
Summary of Ad Valorem Tax Rates
$1 per $100 of Assessed Valuation
Fiscal Years 2008-09 to 2012-13
(Tax Rate Area 6-001)
Ad Valorem Tax 2008-09 2009-10 2010-11 2011-12 2012-13
General 1.00000 1.00000 1.0000 1.0000 1.0000
County Retirement Levy .03880 .03880 .0388 .0388 .0388
County Hospital Bond — .01220 .00950 .00470 .00510
City of Palo Alto — — .01711 .01550 .01290
Palo Alto Unified School District .04040 .04450 .04450 .04560 .09510
Foothill-De Anza Community College District .01230 .03220 .03260 .02970 .02870
Total All Property 1.09150 1.12770 1.14251 1.13430 1.18060
Santa Clara Valley Water District - State Water Project .00590 .00710 .00700 .00630 .00690
Total Land and Improvement .00590 .00710 .00700 .00630 .00690
Source: California Municipal Statistics, Inc.
(1) 2012-13 assessed valuation of TRA 6-001 is $19,301,097,845 which is 81.46% of the City’s total assessed
valuation.
Tax Levies and Delinquencies
The following table is a five-year summary of ad valorem property tax levies, dollars
delinquent and delinquency rates on property within the City. Because the City currently
participates in the Teeter Plan, the amount of ad valorem property taxes received by the City is
equal to the amount levied rather than the amount collected by the County. See “—Alternative
Method of Apportionment—Teeter Plan,” above.
CITY OF PALO ALTO
Total Tax Levies and Collections
(As of June 30)
2007-08 through 2011-12
(In Thousands)
Fiscal
Year
Gross
Tax Levy
Current Tax
Collections
Percentage of
Current Levy
Collected
Delinquent
Tax Collections
Total
Collections
2007-08 $23,084 $23,084 100% — $23,084
2008-09 25,432 25,432 100 — 25,432
2009-10 25,981 25,981 100 — 25,981
2010-11 25,688 25,688 100 — 25,688
2011-12 26,494 26,494 100 — 26,494
Source: Annual Financial Statements, Government Funds, Statement of Revenues, Expenditures and Changes in Fund
Balances.
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Major Taxpayers
The following table shows the largest taxpayers in the City as determined by their
secured assessed valuations in 2012-13:
CITY OF PALO ALTO
Largest 2012-13 Local Secured Taxpayers
2012-13
Assessed % of
Property Owner Primary Land Use Valuation Total(1)
Board of Regents Leland Stanford Jr. University Various Land Uses $3,645,322,693(2) 16.32%
Loral Space & Communications Inc. Industrial 250,323,541 1.12
Arden Realty LP Office Building 114,721,939 0.51
Whisman Ventures LLC Office Building 107,167,819 0.48
SRP Valley LLC Office Building 60,872,322 0.27
Ronald & Ann Williams Charitable Foundation Shopping Center 59,979,717 0.27
PPC Forest Towers LLC Apartments 54,271,862 0.24
Blackhawk Parent LLC Office Building 51,199,907 0.23
529 Bryant St. Partners LLC Office Building 43,488,086 0.19
Park Village Peninsula LLC Apartments 38,283,335 0.17
ECI 2 Bayshore LLC Office Building 37,599,935 0.17
Hohbach Realty Co. LP Apartments 34,917,777 0.16
Dennis A. Levett Apartments 34,275,175 0.15
Thoits Bros. Inc. Office Building 32,557,325 0.15
Hamilton Associates 400 Office Building 30,454,881 0.14
Pacific Hotel Development Venture LP Hotel 29,281,333 0.13
Salvatore And Stella Giovannotto Apartments 29,202,574 0.13
Calif Pacific Commercial Corp. Industrial 28,838,259 0.13
APIP 2007 LLC Apartments 26,347,300 0.12
Inspire Real Estate Holdings LLC Office Building 25,468,944 0.11
TOTAL $4,734,574,724 21.20%
Source: California Municipal Statistics, Inc.
(1) 2012-13 Local Secured Assessed Valuation: $22,334,464,145.
(2) Net taxable valuation.
Direct and Overlapping Debt
Set forth below is a direct and overlapping debt report (the “Debt Report”) prepared by
California Municipal Statistics, Inc. and effective as of March 1, 2013. The Debt Report is
included for general information purposes only. The City has not reviewed the Debt Report for
completeness or accuracy and makes no representation in connection therewith.
The Debt Report generally includes long-term obligations sold in the public credit
markets by public agencies whose boundaries overlap the boundaries of the City in whole or in
part. Such long-term obligations generally are not payable from revenues of the City (except as
indicated) nor are they necessarily obligations secured by land within the City. In many cases,
long-term obligations issued by a public agency are payable only from the general fund or other
revenues of such public agency.
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CITY OF PALO ALTO
STATEMENT OF DIRECT AND OVERLAPPING BONDED DEBT
(As of March 1, 2013)
2012-13 Assessed Valuation: $23,693,006,568
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 3/1/13
Santa Clara County 7.677% $ 24,243,966
Foothill-De Anza Community College District 22.683 140,989,427
Palo Alto Unified School District 89.195 195,849,251
Fremont Union High School District 0.023 57,857
Los Gatos-Saratoga Joint Union High School District 0.010 4,691
Mountain View-Los Altos Union High School District 0.896 616,731
Cupertino Union School District 0.038 63,237
Los Altos School District 1.028 807,140
Mountain View-Whisman School District 0.769 384,500
Saratoga Union School District 0.022 9,459
Whisman School District 1.911 320,832
City of Palo Alto 100.000 53,540,000 (1)
El Camino Hospital District 0.092 130,005
City of Palo Alto Special Assessment Bonds 100.000 31,170,000
Santa Clara Valley Water District Benefit Assessment District 7.677 9,450,387
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $457,637,483
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
Santa Clara County General Fund Obligations 7.677% $ 64,333,017
Santa Clara County Pension Obligations 7.677 29,095,432
Santa Clara County Board of Education Certificates of Participation 7.677 885,926
Foothill-DeAnza Community College District Certificates of Participation 22.683 3,907,147
Los Gatos-Saratoga Joint Union High School District Certificates of
Participation
0.010 859
Mountain View-Los Altos Union High School District Certificates of
Participation
0.896 41,261
Saratoga Union School District Certificates of Participation 0.022 1,219
City of Palo Alto General Fund Obligations 100.000 1,560,000
Santa Clara County Vector Control District Certificates of Participation 7.677 278,675
Midpeninsula Regional Open Space Park District General Fund
Obligations
13.237 17,955,953
TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $118,059,489
COMBINED TOTAL DEBT $575,696,972 (2)
(1) Excludes issue to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease
obligations.
Ratios to Assessed Valuation:
Direct Debt ($53,540,000) 0.23%
Combined Direct Debt ($55,100,000) 0.23%
Total Overlapping Tax and Assessment Debt 1.93%
Combined Total Debt 2.43%
Source: California Municipal Statistics, Inc.
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CONSTITUTIONAL AND STATUTORY PROVISIONS
AFFECTING CITY REVENUES AND APPROPRIATIONS
Principal of and interest on the Bonds are payable from the proceeds of an ad valorem
tax levied by the City for the payment thereof. See “The Bonds—Security for the Bonds” above.
Articles XIIIA, XIIIB, XIIIC and XIIID of the State Constitution, Propositions 62, 111, and 218
and 1A, and certain other provisions of law discussed below are included in this section to
describe the potential effect of these Constitutional and statutory measures on the ability of the
City to levy taxes and spend tax proceeds for operating and other purposes, and it should not
be inferred from the inclusion of such materials that these laws impose any limitation on the
ability of the City to levy taxes for payment of the Bonds. The tax levied by the City for
payment of the Bonds was approved by the City’s voters in compliance with Article XIIIA and
all applicable laws.
Article XIIIA of the State Constitution
On June 6, 1978, California voters approved Proposition 13, which added Article
XIIIA to the State Constitution. Article XIIIA, as amended, limits the amount of any ad
valorem tax on real property to one percent of the full cash value thereof, except that
additional ad valorem taxes may be levied to pay debt service (i) on indebtedness approved
by the voters prior to July 1, 1978, (ii) on bonded indebtedness approved by a two-thirds
vote on or after July 1, 1978, for the acquisition or improvement of real property or (iii)
bonded indebtedness incurred by a school district, community college district or county
office of education for the construction, reconstruction, rehabilitation or replacement of
school facilities, including the furnishing and equipping of school facilities or the acquisition
or lease of real property for school facilities, approved by 55 percent of the voters voting on
the proposition. 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.” This full cash value may be
increased at a rate not to exceed two percent per year to account for inflation.
Article XIIIA has subsequently been amended to permit reduction of the “full cash
value” base in the event of declining property values caused by damage, destruction or other
factors, 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 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
property tax (except to pay voter-approved indebtedness). The one percent property tax is
automatically levied by the County and distributed according to a formula among taxing
agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes
levied prior to 1989.
Increases of assessed valuation resulting from reappraisals of property due to new
construction, change in ownership or from the two percent 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.
All taxable property is shown at full market value on the tax rolls. Consequently, the tax
rate is expressed as $1 per $100 of taxable value. All taxable property value included in this
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Official Statement is shown at 100 percent of market value (unless noted differently) and all
tax rates reflect the $1 per $100 of taxable value.
Article XIIIB of the State Constitution
In addition to the limits Article XIIIA imposes on property taxes that may be collected
by local governments, certain other revenues of the State and most local governments are
subject to an annual “appropriations limit” imposed by Article XIIIB which effectively limits
the amount of such revenues those entities are permitted to spend. Article XIIIB, approved by
the voters in June 1979, was modified substantially by Proposition 111 in 1990. The
appropriations limit of each government entity applies to “proceeds of taxes,” which consist of
tax revenues, State subventions and certain other funds, including proceeds from regulatory
licenses, user charges or other fees to the extent that such proceeds exceed “the cost
reasonably borne by such entity in providing the regulation, product or service.” “Proceeds of
taxes” excludes tax refunds and some benefit payments such as unemployment insurance. No
limit is imposed on the appropriation of funds which are not “proceeds of taxes,” such as
reasonable user charges or fees, and certain other non-tax funds. Article XIIIB also does not
limit appropriation of local revenues to pay debt service on Bonds existing or authorized by
January 1, 1979, or subsequently authorized by the voters, appropriations required to comply
with mandates of courts or the federal government, appropriations for qualified capital outlay
projects, and appropriation by the State of revenues derived from any increase in gasoline taxes
and motor vehicle weight fees above January 1, 1990, levels. The appropriations limit may also
be exceeded in case of emergency; however, the appropriations limit for the next three years
following such emergency appropriation must be reduced to the extent by which it was
exceeded, unless the emergency arises from civil disturbance or natural disaster declared by
the Governor, and the expenditure is approved by two-thirds of the legislative body of the local
government.
The State and each local government entity has its own appropriations limit. Each year,
the limit is adjusted to allow for changes, if any, in the cost of living, the population of the
jurisdiction, and any transfer to or from another government entity of financial responsibility for
providing services. Proposition 111 requires that each agency’s actual appropriations be tested
against its limit every two years.
If the aggregate “proceeds of taxes” for the preceding two-year period exceeds the
aggregate limit, the excess must be returned to the agency’s taxpayers through tax rate or fee
reductions over the following two years.
The City has never exceeded its appropriations limit.
Articles XIIIC and XIIID of the State Constitution
On November 5, 1996, the voters of the State approved Proposition 218, known as the
“Right to Vote on Taxes Act.” Proposition 218 adds Articles XIIIC and XIIID to the California
Constitution and contains a number of interrelated provisions affecting the ability of the City to
levy and collect both existing and future taxes, assessments, fees and charges. The
interpretation and application of Proposition 218 will ultimately be determined by the courts
with respect to a number of the matters discussed below, and it is not possible at this time to
predict with certainty the outcome of such determination.
Article XIIIC requires that all new local taxes be submitted to the electorate before they
become effective. Taxes for general governmental purposes of the City require a majority vote
and taxes for specific purposes, even if deposited in the City’s General Fund, require a two-
thirds vote. The voter approval requirements of Proposition 218 reduce the flexibility of the City
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to raise revenues for the General Fund, and no assurance can be given that the City will be able
to impose, extend or increase such taxes in the future to meet increased expenditure needs.
Article XIIID also adds several provisions making it generally more difficult for local
agencies to levy and maintain property-related fees, charges, and assessments for municipal
services and programs. These provisions include, among other things, (i) a prohibition against
assessments which exceed the reasonable cost of the proportional special benefit conferred on a
parcel, (ii) a requirement that assessments must confer a “special benefit,” as defined in Article
XIIID, over and above any general benefits conferred, (iii) a majority protest procedure for
assessments which involves the mailing of notice and a ballot to the record owner of each
affected parcel, a public hearing and the tabulation of ballots weighted according to the
proportional financial obligation of the affected party, and (iv) a prohibition against fees and
charges which are used for general governmental services, including police, fire or library
services, where the service is available to the public at large in substantially the same manner as
it is to property owners. If the City is unable to continue to collect these revenues, the services
and programs funded with these revenues would have to be curtailed and/or the City’s General
Fund might have to be used to support them. The City is unable to predict whether or not in the
future it will be able to continue all existing services and programs funded by the fees, charges
and assessments in light of Proposition 218 or, if these services and programs are continued,
which amounts (if any) would be used from the City’s General Fund to continue to support
these activities.
Article XIIIC also removes limitations on the initiative power in matters of reducing or
repealing local taxes, assessments, fees or charges. No assurance can be given that the voters of
the City will not, in the future, approve an initiative or initiatives which reduce or repeal local
taxes, assessments, fees or charges currently comprising a substantial part of the City’s General
Fund.
Proposition 62
Proposition 62 was adopted by the voters at the November 4, 1986, general election and
(a) requires that any new or higher taxes for general governmental purposes imposed by local
governmental entities such as the City be approved by a two-thirds vote of the governmental
entity’s legislative body and by a majority vote of the voters of the governmental entity voting
in an election on the tax, (b) requires that any special tax (defined as taxes levied for other than
general governmental purposes) imposed by a local governmental entity be approved by a two-
thirds vote of the voters of the governmental entity voting in an election on the tax, (c) restricts
the use of revenues from a special tax to the purposes or for the service for which the special
tax was imposed, (d) prohibits the imposition of ad valorem taxes on real property by local
governmental entities except as permitted by Article XIIIA, (e) prohibits the imposition of
transaction taxes and sales taxes on the sale of real property by local governmental entities, and
(f) requires that any tax imposed by a local governmental entity on or after August 1, 1985, be
ratified by a majority vote of the voters voting in an election on the tax within two years of the
adoption of the initiative or be terminated by November 15, 1988.
California appellate court cases have overturned the provisions of Proposition 62
pertaining to the imposition of taxes for general government purposes. However, the California
Supreme Court upheld Proposition 62 in its decision on August 28, 1995, in Fresno County
Transportation Authority v. Guardino. This decision reaffirmed the constitutionality of
Proposition 62. Certain matters regarding Proposition 62 were not addressed in the Supreme
Court’s decision, such as what remedies exist for taxpayers subject to a tax not in compliance
with Proposition 62, and whether the decision applies to charter cities. The City has not
experienced any substantive adverse financial impact as a result of the passage of this
initiative.
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Proposition 1A
Proposition 1A, proposed by the Legislature in connection with the State’s Fiscal Year
2004-05 Budget, approved by the voters in November 2004 and generally effective in Fiscal
Year 2006-07, provides that the State may not reduce any local sales tax rate, limit existing
local government authority to levy a sales tax rate or change the allocation of local sales tax
revenues, subject to certain exceptions. Proposition 1A generally prohibits the State from
shifting to schools or community colleges any share of property tax revenues allocated to local
governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004.
Any change in the allocation of property tax revenues among local governments within a county
must be approved by two-thirds of both houses of the Legislature. Proposition 1A provides,
however, that beginning in fiscal year 2008-09, the State may shift to schools and community
colleges up to 8% of local government property tax revenues, which amount must be repaid,
with interest, within three years, if the Governor proclaims that the shift is needed due to a
severe state financial hardship, the shift is approved by two-thirds of both houses and certain
other conditions are met. The State may also approve voluntary exchanges of local sales tax
and property tax revenues among local governments within a county. Proposition 1A also
provides that if the State reduces the motor vehicle license fee rate currently in effect, 0.65
percent of vehicle value, the State must provide local governments with equal replacement
revenues. Further, Proposition 1A requires the State, beginning July 1, 2005, to suspend State
mandates affecting cities, counties and special districts, excepting mandates relating to
employee rights, schools or community colleges, in any year that the State does not fully
reimburse local governments for their costs to comply with such mandates.
Proposition 1A may result in increased and more stable City revenues. The magnitude
of such increase and stability is unknown and would depend on future actions by the State.
However, Proposition 1A could also result in decreased resources being available for State
programs. This reduction, in turn, could affect actions taken by the State to resolve budget
difficulties. Such actions could include increasing State taxes, decreasing spending on other
State programs or other action, some of which could be adverse to the City.
Possible Future Initiatives
Articles XIIIA, XIIIB, XIIIC and XIIID and Propositions 62, 111, 218 and 1A were each
adopted as measures that qualified for the ballot pursuant to the State’s initiative process.
From time to time other initiative measures could be adopted, further affecting revenues of the
City or the City’s ability to expend revenues. The nature and impact of these measures cannot
be anticipated by the City.
LEGAL MATTERS
Approval of Legal Proceedings
The legality of the sale, execution and delivery of the Bonds is subject to the approval of
Jones Hall, A Professional Law Corporation, San Francisco, California, acting as Bond Counsel.
A proposed form of such legal opinion is attached hereto as Appendix C. Quint & Thimmig
LLP, San Francisco, California, is acting as disclosure counsel to the City in connection with the
issuance of the Bonds. Certain matters will be passed upon for the City by Molly S. Stump,
Esq., the City Attorney.
Payment of the fees and expenses of Jones Hall and of Quint & Thimmig LLP are
contingent upon issuance of the Bonds.
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Absence of Material Litigation
No litigation is pending or threatened concerning the validity of the Bonds, and a
certificate to that effect will be furnished to the purchasers at the time of the original delivery of
the Bonds. The City is not aware of any litigation pending or threatened questioning the
political existence of the City or contesting the City’s ability to receive ad valorem taxes or to
collect other revenues or contesting the City’s ability to issue and repay the Bonds.
Tax Matters
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California,
Bond Counsel, subject, however to certain 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; although for the purpose of computing the
alternative minimum tax imposed on certain corporations, interest on the Bonds is taken into
account in determining certain income and earnings.
The opinions set forth in the preceding paragraphs are subject to the condition that the
City comply with all requirements of the Internal Revenue Code of 1986, as amended (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.
If the initial offering price to the public (excluding bond houses and brokers) at which a
Bond is sold is less than the amount payable at maturity thereof, then such difference
constitutes “original issue discount” for purposes of federal income taxes and State of
California personal income taxes. If the initial offering price to the public (excluding bond
houses and brokers) at which each Bond is sold is greater than the amount payable at maturity
thereof, then such difference constitutes “original issue premium” for purposes of federal
income taxes and State of California personal income taxes. De minimis original issue discount
and original issue premium is disregarded. Owners of Bonds with original issue discount or
original issue premium, including purchasers who do not purchase in the original offering,
should consult their own tax advisors with respect to federal income tax and State of California
personal income tax consequences of owning such 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.
A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix
C.
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CONTINUING DISCLOSURE
The City will covenant for the benefit of owners of the Bonds to provide certain financial
information and operating data relating to the City by not later than nine months after the end
of the City’s fiscal year (which date would be the March 31 following the current end of the
City’s fiscal year on June 30), commencing March 31, 2014, with the report for the 2012-13
fiscal year (the “Annual Report”), and to provide notices of the occurrence of certain
enumerated events, if material. The specific nature of the information to be contained in the
Annual Report or the notices of material events is summarized in APPENDIX D—FORM OF
CONTINUING DISCLOSURE CERTIFICATE, attached to this Official Statement. These
covenants have been made in order to assist the Underwriter (as defined below) in complying
with Securities Exchange Commission Rule 15c2-12(b)(5) (the “Rule”).
The City has had no instance in the previous five years in which it failed to comply in all
material respects with any previous continuing disclosure obligation under the Rule.
RATINGS
Moody’s Investor’s Service (“Moody’s) and Standard & Poor’s Ratings Services, a
Standard & Poor’s Financial Services LLC business (“S&P”), have assigned the ratings of ”___”
and “___,” respectively, to the Bonds. Such ratings reflect only the views of Moody’s and S&P
and any desired explanation of the significance of such rating should be obtained from Moody’s
at 7 World Trade Center, 250 Greenwich Street, New York, NY 10007, and from S&P at 55
Water Street, New York, NY 10041. Generally, a rating agency bases it rating on the information
and materials furnished to it and on investigations, studies and assumptions of its own. There
is no assurance such ratings will continue for any given period of time or that such ratings will
not be revised downward or withdrawn entirely by Moody’s and/or S&P, if in the judgment of
Moody’s and/or S&P, circumstances so warrant. Any such downward revision or withdrawal
of such ratings may have an adverse effect on the market price for the Bonds.
FINANCIAL ADVISOR
The City has retained Public Financial Management, Inc., of San Francisco, California, as
financial advisor (the “Financial Advisor”) in connection with the issuance of the Bonds. The
Financial Advisor is not obligated to undertake, and has not undertaken to make, an
independent verification or assume responsibility for the accuracy, completeness, or fairness of
the information contained in this Official Statement.
UNDERWRITING
Under the terms of a competitive bid held on June 12, 2013, ___________ (the
“Underwriter”) has agreed to purchase the Bonds at a price of $_______ (which is equal to the
aggregate principal amount of the Bonds of $________, plus a net original issue premium of
$_________, less an Underwriter’s discount of $__________). The Underwriter will purchase
all of the Bonds if any are purchased, the obligation to make such purchase being subject to
certain terms and conditions set forth in the “Official Notice of Sale,” including the approval of
certain legal matters by counsel and certain other conditions.
The Underwriter intends to offer the Bonds to the public at the offering prices set forth
on the cover page of this Official Statement. The Underwriter may offer and sell to certain
-23-
dealers and others at a price lower than the offering prices stated on the cover page hereof. The
offering price may be changed from time to time by the Underwriter.
EXECUTION
The execution of this Official Statement and its delivery have been approved by the City
Council.
CITY OF PALO ALTO
By
City Manager
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Appendix A
Page 1
APPENDIX A
GENERAL DEMOGRAPHIC INFORMATION REGARDING
THE CITY OF PALO ALTO AND SANTA CLARA COUNTY
The City
The City is located in northern Santa Clara County (the “County”), approximately 35 miles south of
the City of San Francisco. The City has a current population of approximately 65,544. It is part of the San
Francisco Bay metropolitan area. Partly due to the presence of Stanford University, which is adjacent to the
City, the City is considered the birthplace of the high technology industry that has made the County famous
worldwide as Silicon Valley. The Stanford Research Park covers 700-acre and includes prestigious and
innovative high-tech leaders such as Hewlett-Packard, SAP America, Varian Medical Systems, VMware,
Tibco Software, the Electric Power Research Institute and Communications and Power Industries and Skype.
The City is also a major employment center, including U.S. Department of Veteran Affairs’ Palo Alto Health
Care System, Stanford Hospitals and Clinics, Lockheed Martin Missiles and Space, Palo Alto Medical
Foundation, Stanford Shopping Center, the law offices of Wilson Sonsini Goodrich and Rosati, and the Xerox
Palo Alto Research Center.
The City was incorporated in 1894. Its first Charter was granted by the State of California in 1909,
and the City continues to operate as a charter city. Municipal operations are conducted under the Council-
Manager form of government. The nine City Council Members are elected at large for four-year, staggered
terms. The Mayor and Vice Mayor are elected annually at the first City Council meeting in January. The
Mayor presides over all City Council meetings. The City Manager is responsible for the operation of all
municipal functions, except the offices of the City Attorney, City Clerk, and City Auditor. These officials are
appointed by, and report directly to, the City Council.
Appendix A
Page 2
Population
The following table shows a historical comparison of the respective populations of the City, the
County and the State of California since 1970.
CITY OF PALO ALTO, SANTA CLARA COUNTY,
AND STATE OF CALIFORNIA
Population Comparison
Year
City of
Palo Alto
Percent
Change
Santa Clara
County
Percent
Change
State of
California
Percent
Change
1970 56,040 - 1,064,714 - 19,953,134 -
1980 55,225 -1.4% 1,295,071 2.2% 23,667,902 18.6%
1990 55,900 1.2 1,497,577 15.6 29,758,213 25.7
2000 58,598 4.8 1,682,585 12.3 33,873,086 13.8
2001 60,069 2.5 1,690,366 0.4 34,256,789 1.1
2002 59,987 -0.1 1,693,230 0.1 34,725,516 1.3
2003 59,873 -0.1 1,693,752 — 35,163,609 1.2
2004 59,915 — 1,695,602 0.1 35,570,847 1.1
2005 60,723 1.3 1,698,234 0.1 35,869,173 0.8
2006 61,260 0.8 1,706,676 0.4 36,116,202 0.6
2007 61,385 0.2 1,725,066 1.0 36,399,676 0.7
2008 62,173 1.2 1,747,912 1.3 36,704,375 0.8
2009 63,496 2.1 1,767,204 1.1 36,966,713 0.7
2010 65,417 3.0 1,781,427 0.8 37,223,900 0.6
2011 64,853 -0.8 1,794,337 0.7 37,427,946 0.5
2012 65,544 1.0 1,816,486 1.2 37,678,563 0.6
Sources: U.S. Department of Commerce, Bureau of the Census (1980, 1990 and 2000); State of California,
Department of Finance, E-4 Population Estimates for Cities, Counties and the State, 2001-2010, with 2000
& 2010 Census Counts (as of January 1). Benchmark. Sacramento, California, November 2012. State of
California, Department of Finance, E-1 Population Estimates for Cities, Counties and the State, 2011 and
2012. Benchmark, Sacramento, California, May 1, 2012.
History
The earliest record of settlement in Palo Alto was dated 1769. The City is named for the tree by the
banks of the San Francisquito Creek bordering Menlo Park. Many of the Spanish names in the Palo Alto
area represent the local heritage and descriptive terms and former residents. In 1895, Leland Stanford came
to the town of Mayfield (in what is now south Palo Alto), interested in founding his university there, and
creating a train stop near his school. However, he had one condition: alcohol be banned from the town.
Mayfield rejected his requests for reform. This prompted Stanford to drive the formation of Palo Alto in 1895.
Stanford set up his university, Stanford University, and train stop. On July 2, 1925, Palo Alto voters
approved the annexation of Mayfield and the two communities were officially consolidated on July 6, 1925.
Budgetary Policies and Processes
The City Manager submits to the City Council a proposed operating budget for the fiscal year
commencing the following July 1. The operating budget includes proposed expenditures and the means of
financing them. Public hearings are conducted to obtain public comments. The adopted budget is legally
enacted through passage of a budget ordinance for all funds except for agency funds. The City Manager is
authorized to reallocate funds from a contingent account maintained in the General Fund in conformance
with the adopted policies set by the City Council. Additional appropriations to departments in the General
Fund, or to total appropriations for all other budgeted funds, or transfers of appropriations between funds,
require approval by the City Council. Expenditures may not legally exceed budgeted appropriations at the
department level for the General Fund, and at the fund level for special revenue and debt service funds.
Formal budgetary integration is employed as a management control device during the year in all funds
except agency funds and certain debt service funds. Budgets for governmental funds are adopted on a basis
consistent with generally accepted accounting principles for all funds, except that General Fund
Appendix A
Page 3
encumbrances are treated as budgetary expenditures when incurred and stores (materials, parts and
supplies) transactions included in the General Fund are not budgeted. Expenditures for the City’s Capital
Projects Fund are budgeted and managed on a project length basis and budget to actual comparisons for
these expenditures have been excluded from the accompanying financial statements.
Employment
The City is home to a strong mix of large, medium and small firms. The City employment
opportunities are much sought after and include: education at Stanford University, high technology at the
Stanford Research Park, and health care at two medical facilities of national stature. Numerous institutions
that have more than 1,000 employees include: the University, the Veterans Affairs Palo Health Care facility,
the Medical Foundation, Hewlett Packard Company, the Palo Alto Unified School District, and the City.
The largest employers in the City of Palo Alto as of June 30, 2012 are as follows:
CITY OF PALO ALTO
TEN LARGEST EMPLOYERS
2011-12
Employer Number of Employees
Stanford University 10,680
Stanford University Medical Center/Hospital 5,059
Lucile Packard Children’s Hospital 4,750
Veteran’s Affairs Palo Alto Health Care System 3,500
Hewlett-Packard Company 2,201
Palo Alto Medical Foundation 2,200
Space Systems/Loral 1,870
Wilson Sonsini Goodrich Rosati 1,650
Palo Alto Unified School District 1,362
City of Palo Alto 1,017
Source: AtoZdatabases, http://facts.stanford.edu/governance.html, http:facts.stanford.edu/hospital.html,
www.lpch.org/aboutus/, Palo Alto Unified School District 2011-12 Budget, The City of Palo Alto,
A Report to Our Citizens, Business Journal Annual Books of Lists.
Due to the nature of local industry, with its heavy emphasis on electronics, aerospace and research,
the County has attracted many professional people and industrial workers possessing skills well above the
average.
Santa Clara County is a highly developed industrial, research, and educational center of
employment for a labor force that ranks well above the average in educational attainment and income. The
following table presents the annual average wage and salary employment figures by industry
classification for the Santa Clara County for the years 2007 through 2011.
Appendix A
Page 4
SANTA CLARA COUNTY
Industry Employment & Labor Force - by Annual Average
March 2011 Benchmark
2007 2008 2009 2010 2011(1)
Civilian Labor Force 844,700 870,300 875,200 880,800 896,200
Civilian Employment 805,100 818,300 780,500 784,100 809,300
Civilian Unemployment 39,600 52,000 94,600 96,700 86,900
Unemployment Rate 4.7% 6.0% 10.8% 11.0% 9.7%
Agricultural 3,900 3,700 3,500 3,500 3,400
Natural Resources and Mining 300 300 200 200 200
Construction 45,500 42,800 33,400 31,400 30,600
Manufacturing 163,800 165,200 153,300 151,000 155,500
Trade, Transportation and Utilities 137,300 135,300 124,200 123,200 125,000
Information 39,500 42,200 41,500 43,800 48,900
Financial Activities 36,800 34,200 31,200 30,600 31,400
Professional and Business Services 176,600 178,000 160,700 161,300 168,800
Educational and Health Services 102,500 107,200 108,400 112,000 116,600
Leisure and Hospitality 75,300 76,600 73,500 73,800 75,200
Other Services 24,600 25,000 24,100 23,900 23,900
Government 94,300 94,900 93,400 91,500 89,500
Total All Industries 900,300 905,200 847,500 846,200 869,000
Source: California Employment Development Department, Labor Market Information Division.
Note: Totals may not add due to independent rounding.
(1) Latest available full-year data.
The following table sets forth certain information regarding employment in the City from calendar
year 2005 through 2011.
CITY OF PALO ALTO
Average Annual Civilian Labor Force
Employment and Unemployment
Calendar Years 2005-2012
Year Labor Force Employment
Unemployment
Number Rate
2005 29,800 28,900 800 2.8%
2006 30,200 29,400 700 2.3%
2007 30,900 30,100 800 2.5%
2008 31,600 30,600 1,000 3.1%
2009 31,000 29,200 1,800 5.8%
2010 31,200 29,300 1,900 5.9%
2011(1) 32,000 30,300 1,700 5.2%
Source: California Employment Development Department
(1) Latest available full-year data.
Construction Activity
“Single Family Housing” includes detached, semi-detached, rowhouse and townhouse units.
Rowhouses and townhouses are included when each unit is separated from the adjacent unit by an
unbroken ground-to-roof party or fire wall. Condominiums are included in single-family when they are of
zero-lot-line or zero-property-line construction; when units are separated by an air space; or, when units are
separated by an unbroken ground-to-roof party or fire wall. “Multi-Family Housing” includes duplexes, 3-
4-unit structures and apartment-type structures with five units or more. Multi-family housing also includes
Appendix A
Page 5
condominium units in structures of more than one living unit that do not meet the above single-family
housing definition. “Residential Alterations and Additions” means alterations, additions, and conversions
to residential structures, excluding special installation permits for electrical, plumbing, heating, air-
conditioning, or similar mechanical work, or installation of fire escapes, elevators, signs, etc.
“New Commercial” includes new hotels and motels, office and bank buildings, stores and other
mercantile buildings, parking garages, service stations, and amusement and recreational buildings. “New
Industrial” includes manufacturing plants and affiliated buildings. “Other New Nonresidential” includes
churches and religious buildings, hospitals and institutional buildings, schools and educational buildings,
residential garages, public works and utilities buildings, and miscellaneous nonresidential structures.
“Nonresidential Alterations and Additions” means alterations, additions, and conversions to nonresidential
structures, excluding special installation permits for electrical, plumbing, heating, air conditioning, or
similar mechanical work, or installation of fire escapes, elevators and signs, etc.
CITY OF PALO ALTO
Building Permits and Valuation
(Dollars in Thousands)
2007 2008 2009 2010 2011
Permit Valuation:
New Single-family $ 82,769 $ 50,213 $ 30,683 $ 50,946 $ 37,534
New Multi-family 81,679 27,827 7,306 5,000 14,278
Res. Alterations/Additions 34,756 33,897 26,902 33,336 25,170
Total Residential 199,204 111,937 64,891 89,282 76,982
Total Nonresidential 133,547 90,019 83,922 83,394 95,430
Total All Building $332,751 $201,956 $148,814 $172,676 $172,412
New Dwelling Units:
Single Family 195 102 58 144 78
Multiple Family 294 125 27 35 54
Total 489 227 85 179 132
Sources: Construction Industry Research Board: “Building Permit Summary.”
Note: Totals may not add due to independent rounding.
Appendix A
Page 6
Income
The following table summarizes the median household effective buying income for the City, the
County of Santa Clara, the State of California and the nation for the years 2006 through 2012.
CITY, COUNTY, STATE AND UNITED STATES
Effective Buying Income
Year
Area
Total Effective
Buying Income
(000’s Omitted)
Median Household
Effective
Buying Income
2006 City of Palo Alto $ 2,839,023 $77,184
County of Santa Clara 49,261,000 65,458
California 764,120,962 46,275
United States 6,107,092,244 41,255
2007 City of Palo Alto $ 3,000,778 $79,273
County of Santa Clara 52,377,985 67,498
California 814,894,438 48,203
United States 6,300,794,040 41,792
2008 City of Palo Alto $ 3,088,305 $80,515
County of Santa Clara 53,987,635 68,929
California 832,531,445 48,952
United States 6,443,994,426 42,303
2009 City of Palo Alto 3,002,677 81,855
County of Santa Clara 55,561,405 71,077
California 844,823,318 49,736
United States 6,571,536,767 43,252
2010 City of Palo Alto 3,142,000 82,448
County of Santa Clara 53,692,142 68,047
California 801,393,027 47,177
United States 6,365,020,076 41,368
2011 City of Palo Alto 3,220,632 82,199
County of Santa Clara 54,491,135 67,801
California 814,578,457 47,062
United States 6,438,704,663 41,253
2012 City of Palo Alto 4,233,385 89,668
County of Santa Clara 61,464,867 68,852
California 864,088,827 47,307
United States 6,737,867,730 41,358
Source: Nielsen, Inc.
Commercial Activity
Taxable sales in the City of Palo Alto exceed $1.6 billion annually. The County Planning
Department reports that taxable sales per capita in Santa Clara are the highest of any city in Santa Clara
County.
In early 2007 the Board of Equalization began a process of converting business codes of sales and
use tax permit holders to North American Industry Classification System (NAICS) codes. This process is now
complete; over one million permit holders were converted from the previous business coding system to the
NAICS codes. Beginning in 2009, reports summarize taxable sales and permits using the NAICS codes. As a
result of the coding change, however, industry-level data for 2009 are not comparable to that of prior years.
The latest full-year data available from the State is for calendar year 2010.
Appendix A
Page 7
The following summary shows the annual volume of taxable sales within the City since 2006.
CITY OF PALO ALTO
Taxable Transactions
(Dollars in Thousands)
2006 2007 2008
Apparel stores $129,903 $134,920 $173,360
General merchandise 289,288 301,192 230,521
Foods stores 33,495 31,781 28,328
Eating and drinking places 224,276 234,084 239,517
Home furnishings and appliances 68,273 75,510 103,878
Building materials 26,258 24,437 24,143
Automotive Group 202,441 187,342 149,857
Service stations 60,078 63,418 66,214
All other retail stores 250,153 224,463 197,029
Total Retail Outlets 128,465 1,277,147 1,212,847
All other outlets 551,068 629,859 587,667
Total All Outlets $1,835,233 $1,907,006 $1,800,514
2009 (1) 2010 (2)
Retail Store and Food Services
Motor Vehicle and Parts Dealers $ 128,399 $ 143,835
Home Furnishings and Appliance Stores 145,348 156,708
Bldg. Matrl. and Garden Equip. and Supplies 24,317 21,497
Food and Beverage Stores 31,489 34,648
Gasoline Stations 52,025 62,232
Clothing and Clothing Accessories Stores 224,507 246,447
General Merchandise Stores 147,243 152,591
Food Service and Drinking Places 224,651 240,320
Other Retail Group 97,064 102,576
Total Retail and Food Services 1,075,044 1,160,855
All Other Outlets 546,220 514,938
Total All Outlets (3) $1,321,264 $1,675,793
Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax).
(1) Starting in 2009, categories were revised from prior years.
(2) Most recent annual data available.
(3) Totals may not add up due to independent rounding.
Education
The Palo Alto Unified School District provides public schooling from kindergarten through high
school. The Stanford University is the second largest university campus in the world. The University
comprises the Schools of Engineering, Law, Medicine, Education, Business, Earth Sciences and Humanities
and Science. Stanford University’s teaching hospital and clinics are known for excellence.
Community Facilities
The City has some of the most outstanding healthcare facilities in California. Most prominent in the
community is Stanford Hospital & Clinics, which is part of Stanford University Medical Center. With 613
beds for in-patient treatment, emergency care and major surgeries, Stanford Hospital is well known for its
cancer treatment, oncology and transplant services.
Appendix A
Page 8
Medical groups affiliated with Stanford Hospital & Clinics are Stanford Family Practice, Stanford
Medical Group and Menlo Medical Clinic, and also includes the Stanford University School of Medicine and
the Lucile Packard Children’s Hospital.
The Veterans Affairs Palo Alto Health Care System provides the main campus in Palo Alto, a
second campus in Menlo Park and a third campus in Livermore plus seven outpatient clinics in San Jose,
Fremont, Capitola, Monterey, Stockton, Modesto and Sonora.
The Palo Alto Health Care System has 900 operating beds including three nursing homes, a
domiciliary for homeless and/or substance-dependent veterans in Palo Alto and a 100-bed homeless
domiciliary in Menlo Park. The Health Care System is affiliated with the Stanford University School of
Medicine.
The Palo Alto Medical Foundation is a full-service health-care clinic and research institute. Nearly
1,400 physicians provide a range of diagnostic and treatment services in primary care and most medical
specialties.
The City’s Parks and Recreation Department oversees 36 parks and playgrounds covering more
than 4,500 acres of park land within the 26 square miles of the City. Palo Alto’s location on San Francisco Bay
and surrounding natural environment offers the opportunity to enjoy bird and aquatic life in a natural
habitat. There is one municipal golf course located in the City, which is an 18-hole championship length
course.
Transportation
The City is served by the Bayshore Freeway (U.S. Highway 101), which runs southeast from San
Francisco to Los Angeles and is the major freeway connecting San Francisco and San Jose; Highway 84 - the
Dumbarton Bridge and Highway 92, the Hayward-San Mateo Bridge; and Interstate 280, which runs
north/south to San Francisco and State Highway 82. These freeways link the City to all parts of northern
California.
Air transportation is available at both the San Francisco International Airport, approximately 40
miles to the north, and the San Jose Airport, approximately 20 miles to the south. Rail service is provided by
Union Pacific Railroad, on a north/south track linking San Jose and San Francisco, and Cal Train commuter
service to Gilroy and San Francisco.
Within the City, commuter rail transportation is conveniently located and the Palo Alto—
University Avenue stop is one of the most used in the CalTrain system. Alternative transportation options
include numerous bike paths throughout the City and an internal shuttle service is also available.
Utilities and Water Supply
The City is the only municipal utility in California that operates city-owned utility services that
include electric, fiber optic, natural gas, water and wastewater services. Since 1896, the City has been
providing quality services to the citizens and businesses of the City.
Agriculture
The City still supports a thriving agriculture industry, ranging from crops and wine to Leland
Stanford’s horse farm and training facilities, the Dixon Stables, Portola Valley Training Center, and Webb
Ranch are just a few of the equestrian facilities that live up to the area’s rich history. Just a few miles away off
Highway 280, traditional ranches such as Hidden Villa continue to grow and distribute quality products.
Organic grocery stores, such as Whole Foods Market, Piazza’s Market and Trader Joe’s share the market
place with traditional grocery outlets and fresh fruit and vegetable stands.
Local greenhouses and florists provide a diverse selection to help residents and business beautify
their yards and homes. The area also features a number of machinery and equipment outlets to make
agriculture related job feasible.
Appendix A
Page 9
Services
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 City’s parks, recreation and cultural facilities are numerous, and include 36
parks, a golf course, four community centers, a Cultural Center, a Community Theater, a Children’s Theater,
and a Junior Museum. The City offers a wide array of social, recreational and cultural events, including
human services for seniors and youth, subsidized child care, classes, concerts, exhibits, team sports and
special events. The City and the Palo Alto Unified School District have an agreement to jointly fund the costs
of maintaining and rehabilitating school athletic fields, recognizing the significant recreational use of these
facilities by the community. In addition, the City offers a high level of library and public safety services. The
City has five libraries and seven fire stations providing services throughout the community.
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Appendix B
Page 1
APPENDIX B
CITY OF PALO ALTO
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2012
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Appendix C
Page 1
APPENDIX C
PROPOSED FORM OF OPINION OF BOND COUNSEL
[Letterhead of Jones Hall, A Professional Law Corporation]
[Closing Date]
City Council
City of Palo Alto
250 Hamilton Avenue
Palo Alto, California 94301
OPINION: $20,695,000* City of Palo Alto General Obligation Bonds, Election of 2008, Series
2013A
Members of the City Council:
We have acted as bond counsel in connection with the issuance by the City of Palo Alto (the “City”)
of its general obligation bonds captioned above, dated June 26, 2013 (the “Bonds”). The Bonds have been
issued by the City pursuant to the Constitution and laws of the State of California, a resolution adopted by
the City Council of the City on May 6, 2013 (the “Resolution”) and a Paying Agent Agreement dated as of
June 1, 2013 (the “Paying Agent Agreement”) between the City and U.S. Bank National Association, as
paying agent. We have examined the law and such certified proceedings and other papers as we deem
necessary to render this opinion.
As to questions of fact material to our opinion, we have relied upon representations of the City
contained in the Paying Agent Agreement and in the certified proceedings and certifications of public
officials and others furnished to us, without undertaking to verify the same by independent investigation.
Based upon the foregoing, we are of the opinion, under existing law, as follows:
1. The City is duly organized and validly existing as a charter city and municipal corporation
under the Constitution and laws of the State of California, with the power to adopt the Resolution, to execute
and deliver the Paying Agent Agreement and to perform the agreements on its part contained therein, and
to issue the Bonds.
2. The Paying Agent Agreement constitutes a valid and binding obligation of the City, enforceable
against the City in accordance with its terms.
3. The Bonds have been duly authorized, executed and delivered by the City, and are valid and
binding general obligations of the City.
4. The City has the power, is obligated, and in the Paying Agent Agreement has covenanted, to
levy ad valorem taxes upon all property within the City which is subject to taxation by the City, without
limitation of rate or amount (except with respect to certain personal property which is taxed at limited rates),
for the payment of the Bonds and the interest thereon.
* Preliminary, subject to change.
Appendix C
Page 2
5. The interest on the Bonds is excluded from gross income for federal income tax purposes and
is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals
and corporations; although for the purpose of computing the alternative minimum tax imposed on certain
corporations, interest on the Bonds is taken into account in determining certain income and earnings. The
opinions set forth in the preceding sentence are subject to the condition that the City comply with all
requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to the issuance of the
Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal 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 interest on the Bonds in gross income for federal income tax
purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other
federal tax consequences arising with respect to the Bonds.
6. The interest on the Bonds is exempt from personal income taxation imposed by the State of
California.
The rights of the owners of the Bonds and the enforceability of the Bonds are limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights
generally, and by equitable principles, whether considered at law or in equity.
This opinion is given as of the date hereof, and we assume no obligation to revise or supplement
this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in
law that may hereafter occur. Our engagement with respect to this matter has terminated as of the date
hereof.
Respectfully submitted,
A Professional Law Corporation
Appendix D
Page 1
APPENDIX D
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 issuance by the City of its
$20,695,000* aggregate principal amount of City of Palo Alto General Obligation Bonds, Election of 2008,
Series 2013A (the “Bonds”). The Bonds are being issued under Chapter 4 (commencing with section 43600)
of Division 4 of Title 4 of the California Government Code; under a Resolution adopted by the City Council
of the City (the “City Council”) on May 6, 2013 (the “Bond Resolution”), and under a Paying Agent
Agreement (the “Paying Agent Agreement”) dated as of June 1, 2013, by and between the City and U.S.
Bank National Association, as paying agent. The City covenants and agrees as follows:
Section 1. 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 1, the following
capitalized terms shall have the following meanings when used in this Disclosure Certificate:
“Annual Report” shall mean any Annual Report provided by the City pursuant to, and as described
in, Sections 3 and 4 of this Disclosure Certificate.
“Beneficial Owner” shall mean any person who (a) has the power, directly or indirectly, to vote or
consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through
nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal
income tax purposes.
“Dissemination Agent” shall mean the City or any successor Dissemination Agent designated in
writing by the City and which has filed with the City a written acceptance of such designation. In the
absence of such a designation, the City shall act as the Dissemination Agent.
“EMMA” or “Electronic Municipal Market Access” means the centralized on-line repository for
documents to be filed with the MSRB, such as official statements and disclosure information relating to
municipal bonds, notes and other securities as issued by state and local governments.
“Listed Events” shall mean any of the events listed in Section 5(a) or 5(b) of this Disclosure
Certificate.
“MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the
Securities and Exchange Commission as the sole repository of disclosure information for purposes of the
Rule, or any other repository of disclosure information which may be designated by the Securities and
Exchange Commission as such for purposes of the Rule in the future.
“Participating Underwriter” shall mean the original underwriter of the Bonds, required to comply
with the Rule in connection with offering of the Bonds.
“Rule” shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as the same may be amended from time to time.
Section 2. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and
delivered by the City for the benefit of the owners and Beneficial Owners of the Bonds and in order to assist
the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).
* Preliminary, subject to change.
Appendix D
Page 2
Section 3. Provision of Annual Reports.
(a) Delivery of Annual Report. The City shall, or shall cause the Dissemination Agent to, not later
than eight months after the end of the City’s fiscal year (which currently ends on June 30), commencing with
the report for the 2012-13 Fiscal Year, which is due not later than March 1, 2014, file with EMMA, in a
readable PDF or other electronic format as prescribed by the MSRB, an Annual Report that is consistent
with the requirements of Section 4 of this Disclosure Certificate. The filing of the official statement for the
Bonds with EMMA shall satisfy the filing requirement for 2013. The Annual Report may be submitted as a
single document or as separate documents comprising a package and may cross-reference other
information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial
statements of the City may be submitted separately from the balance of the Annual Report and later than
the date required above for the filing of the Annual Report if they are not available by that date.
(b) Change of Fiscal Year. 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), and subsequent Annual Report filings shall be made
no later than nine months after the end of such new fiscal year end.
(c) Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior
to the date specified in subsection (a) (or, if applicable, subsection (b)) of this Section 3 for providing the
Annual Report to EMMA, the City shall provide the Annual Report to the Dissemination Agent (if other
than the City). If by such date the Dissemination Agent has not received a copy of the Annual Report the
Dissemination Agent shall notify the City.
(d) Report of Non-Compliance. If the City is the Dissemination Agent and is unable to file an Annual
Report by the date required in subsection (a) (or, if applicable, subsection (b)) of this Section 3, the City shall
send a notice to EMMA substantially in the form attached hereto as Exhibit A. If the City is not the
Dissemination Agent and is unable to provide an Annual Report to the Dissemination Agent by the date
required in subsection (c) of this Section 3, the Dissemination Agent shall send a notice to EMMA in
substantially the form attached hereto as Exhibit A.
(e) Annual Compliance Certification. The Dissemination Agent shall, if the Dissemination Agent is
other than the City, file a report with the City certifying that the Annual Report has been filed with EMMA
pursuant to Section 3 of this Disclosure Certificate, stating the date it was so provided and filed.
Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference
the following:
(a) Financial Statements. Audited financial statements of the City for the preceding fiscal year,
prepared in accordance generally accepted accounting principles. If the City’s audited financial statements
are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual
Report shall contain unaudited financial statements in a format similar to the financial statements contained
in the final Official Statement, and the audited financial statements shall be filed in the same manner as the
Annual Report when they become available.
(b) Other Annual Information. To the extent not included in the audited final statement or the
Comprehensive Annual Financial Report (CAFR) of the City, the Annual Report shall also include
operating data with respect to the City for preceding fiscal year, substantially similar to that provided in the
corresponding tables and charts in the official statement for the Bonds, as follows:
(i) Assessed Valuations of Taxable Property;
(ii) Assessed Valuation and Parcels by Land Use;
(iii) Per Parcel Assessed valuation of Single Family Homes;
(iv) Summary of Ad Valorem Tax Rates;
(v) Tax Levies and Collections; and
(vi) Largest Local Secured Taxpayers.
(c) Cross References. Any or all of the items listed above may be included by specific reference to
other documents, including official statements of debt issues of the City or related public entities, which are
Appendix D
Page 3
available to the public on EMMA. The City shall clearly identify each such other document so included by
reference.
If the document included by reference is a final official statement, it must be available from EMMA.
(d) Further Information. In addition to any of the information expressly required to be provided
under paragraph (b) of this Section 4, the City shall provide such further information, if any, as may be
necessary to make the specifically required statements, in the light of the circumstances under which they
are made, not misleading.
Section 5. Reporting of Listed Events.
(a) Reportable Events. The City shall, or shall cause the Dissemination Agent (if not the City) to, give
notice of the occurrence of any of the following events with respect to the Bonds:
(1) Principal and interest payment delinquencies.
(2) Unscheduled draws on debt service reserves reflecting financial difficulties.
(3) Unscheduled draws on credit enhancements reflecting financial difficulties.
(4) Substitution of credit or liquidity providers, or their failure to perform.
(5) Defeasances.
(6) Rating changes.
(7) Tender offers.
(8) Bankruptcy, insolvency, receivership or similar event of the obligated person.
(9) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or
final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or
other material notices or determinations with respect to the tax status of the
security, or other material events affecting the tax status of the security.
(b) Material Reportable Events. 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) Non-payment related defaults.
(2) Modifications to rights of security holders.
(3) Bond calls.
(4) The release, substitution, or sale of property securing repayment of the securities.
(5) The consummation of a merger, consolidation, or acquisition involving an
obligated person or the sale of all or substantially all of the assets of the obligated
person, other than in the ordinary course of business, the entry into a definitive
agreement to undertake such an action or the termination of a definitive
agreement relating to any such actions, other than pursuant to its terms.
(6) Appointment of a successor or additional trustee, or the change of name of a trustee.
(c) Time to Disclose. Whenever the City obtains knowledge of the occurrence of a Listed Event, the
City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with
EMMA, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business
Appendix D
Page 4
days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events
described in subsections (a)(5) and (b)(3) above need not be given under this subsection any earlier than the
notice (if any) of the underlying event is given to owners of affected Bonds under the Resolution.
Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA
under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the
MSRB.
Section 7. Termination of Reporting Obligation. The City’s obligations under this Disclosure
Certificate shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds. If
such termination occurs prior to the final maturity 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 8. Dissemination Agent.
(a) Appointment of 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. If the
Dissemination Agent is not the City, the Dissemination Agent shall not be responsible in any manner for
the content of any notice or report prepared by the City pursuant to this Disclosure Certificate. It is
understood and agreed that any information that the Dissemination Agent may be instructed to file with
EMMA shall be prepared and provided to it by the City. The Dissemination Agent has undertaken no
responsibility with respect to the content of any reports, notices or disclosures provided to it under this
Disclosure Certificate and has no liability to any person, including any Bondholder, with respect to any such
reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have any
fiduciary or banking relationship with the City shall not be construed to mean that the Dissemination
Agent has actual knowledge of any event or condition, except as may be provided by written notice from
the City.
(b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by
the City for its services provided hereunder in accordance with its schedule of fees as agreed to between the
Dissemination Agent and the City from time to time and all expenses, legal fees and expenses and
advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The
Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the City, owners or
Beneficial Owners, or any other party. The Dissemination Agent may rely, and shall be protected in acting
or refraining from acting, upon any direction from the City or an opinion of nationally recognized bond
counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to
the City. The Dissemination Agent shall not be liable hereunder except for its negligence or willful
misconduct.
(c) Responsibilities of Dissemination Agent. In addition of the filing obligations of the Dissemination
Agent set forth in Sections 3(e) and 5, the Dissemination Agent shall be obligated, and hereby agrees, to
provide a request to the City to compile the information required for its Annual Report at least 30 days prior
to the date such information is to be provided to the Dissemination Agent pursuant to subsection (c) of
Section 3. The failure to provide or receive any such request shall not affect the obligations of the City under
Section 3.
Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate,
the City may amend this Disclosure Certificate (and the Dissemination Agent shall agree to any
amendment so requested by the City that does not impose any greater duties or risk of liability on the
Dissemination Agent), and any provision of this Disclosure Certificate may be waived, provided that all of
the following conditions are satisfied:
(a) Change in Circumstances. If the amendment or waiver relates to the provisions of Sections 3(a), 4
or 5(a) or (b), it may only be made in connection with a change in circumstances that arises from a change in
legal requirements, change in law, or change in the identity, nature, or status of an obligated person with
respect to the Bonds, or the type of business conducted.
Appendix D
Page 5
(b) Compliance as of Issue Date. The undertaking, as amended or taking into account such waiver,
would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the
Rule at the time of the original issuance of the Bonds, after taking into account any amendments or
interpretations of the Rule, as well as any change in circumstances.
(c) Consent of Holders; Non-impairment Opinion. The amendment or waiver either (i) is approved by
the Bondholders in the same manner as provided in the Resolution for amendments to the Resolution with
the consent of Bondholders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially
impair the interests of the Bondholders or Beneficial Owners.
If this Disclosure Certificate is amended or any provision of this Disclosure Certificate is waived, the
City shall describe such amendment or waiver in the next following Annual Report and shall include, as
applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or
in the case of a change of accounting principles, on the presentation) of financial information or operating
data being presented by the City. In addition, if the amendment relates to the accounting principles to be
followed in preparing financial statements, (i) notice of such change shall be given in the same manner as
for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made
should present a comparison (in narrative form and also, if feasible, in quantitative form) between the
financial statements as prepared on the basis of the new accounting principles and those prepared on the
basis of the former accounting principles.
Section 10. 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 11. Default. In the event of a failure of the City to comply with any provision of this
Disclosure Certificate, any Bondholder or Beneficial Owner 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. 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 12. 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 no implied
covenants or obligations shall be read into this Disclosure Certificate against the Dissemination Agent, 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 and expenses) of defending against any claim of liability, but excluding liabilities due to the
Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall have the same
rights, privileges and immunities hereunder as are afforded to the Paying Agent under the Resolution. The
obligations of the City under this Section 12 shall survive resignation or removal of the Dissemination
Agent and payment of the Bonds.
Appendix D
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Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the
Dissemination Agent, the Participating Underwriter and the owners and Beneficial Owners from time to
time of the Bonds, and shall create no rights in any other person or entity.
Date: [Closing Date]
CITY OF PALO ALTO
By
Authorized Officer
Appendix D
Page 7
EXHIBIT A
NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD
OF FAILURE TO FILE ANNUAL REPORT
Name of Obligor: City of Palo Alto, California
Name of Issue: General Obligation Bonds, Election of 2008, Series 2013A
Date of Issuance: [Closing Date]
NOTICE IS HEREBY GIVEN that the City of Palo Alto has not provided an Annual Report with
respect to the above-named Bonds as required by the Continuing Disclosure Certificate dated [Closing
Date], furnished by the City in connection with the Bond Issue. The City anticipates that the Annual Report
will be filed by _____________.
Dated: __________________
CITY OF PALO ALTO, CALIFORNIA, as
Dissemination Agent
By
Name
Title
cc: Paying Agent
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Appendix E
Page 1
APPENDIX E
DTC AND THE BOOK-ENTRY ONLY SYSTEM
The following description of the procedures and record keeping with respect to beneficial ownership
interests in the Bonds, payment of principal, redemption premium, if any, and interest with respect to the Bonds
to DTC, its Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the
Bonds and other related transactions by and between DTC, its Participants and the Beneficial Owners is based
solely on the understanding of the City of such procedures and record keeping from information provided by
DTC. Accordingly, no representations can be made concerning these matters and neither DTC, its 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 its Participants, as the case may be. The City, the Paying Agent and the
Underwriter understand that the current “Rules” applicable to DTC are on file with the Securities and Exchange
Commission and that the current “Procedures” of DTC to be followed in dealing with Participants are on file
with DTC.
The Depository Trust Company (“DTC”), New York, NY, 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) or such other name as may be requested by an authorized representative of DTC.
One fully-registered Bond certificate will be issued for each maturity of the Bonds, each in the aggregate
principal amount of such maturity, and will be deposited with DTC.
DTC, the world’s largest depository, is a limited-purpose trust company organized under the New
York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York
Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of
the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of
U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from
over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the
post-trade settlement among Direct Participants of sales and other securities transactions in deposited
securities, through electronic computerized book-entry transfers and pledges between Direct Participants’
accounts. This eliminates the need for physical movement of securities certificates. Direct Participants
include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing
Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation
and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTTC is owned by
users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and
non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through
or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect
Participants”). DTC has a Standard & Poor’s rating AA+. The DTC Rules applicable to its Participants are on
file with the Securities and Exchange Commission. More information about DTC can be found at
www.dtcc.com and www.dtc.org.
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 (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records.
Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are,
however, expected to receive written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries
made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in the 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 Direct Participants with DTC are
registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested
by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the
Appendix E
Page 2
name of Cede & Co. or such other DTC nominee do not effect any 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 whose accounts such Bonds are credited, which may or may not be the Beneficial
Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain
steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as
redemptions, tenders, defaults, and proposed amendments to the Trust Agreement. For example, Beneficial
Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed
to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to
provide their names and addresses to the registrar and request that copies of notices be provided directly to
them.
Redemption notices shall be sent to DTC, if less than all of the Bonds within a maturity are being
redeemed. DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in each
issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the
Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual
procedures, DTC mails an Omnibus Proxy to the Issuer 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).
Payments of principal of, premium, if any, and interest on the Bonds will be made to Cede & Co., or
such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit
Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the
City or the Paying Agent, on payable date in accordance with their respective holdings shown on DTC’s
records. Payments by Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of customers in bearer form or
registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Paying
Agent or the City, subject to any statutory or regulatory requirements as may be in effect from time to time.
Payments of principal of, premium, if any, and interest on the Bonds by Cede & Co (or such other nominee
as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying
Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by
giving reasonable notice to the City or the Paying Agent. Under such circumstances, in the event that a
successor depository is not obtained, Bond certificates are required to be printed and delivered.
The City may decide to discontinue use of the system of book-entry transfers through DTC (or a
successor securities depository). In that event, Bond certificates will be printed and delivered.
The foregoing information concerning DTC and DTC’s book-entry system has been provided by
DTC, and neither the City nor the Paying Agent takes any responsibility for the accuracy thereof.
NEITHER THE AUTHORITY NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY
OR OBLIGATION TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS
WITH RESPECT TO THE PAYMENTS OR THE PROVIDING OF NOTICE TO DTC PARTICIPANTS,
INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS OR THE SELECTION OF BONDS FOR
REDEMPTION.
Appendix E
Page 3
Neither the City nor the Paying Agent can give any assurances that DTC, DTC Participants,
Indirect Participants or others will distribute payments of principal of, premium, if any, and interest on the
Bonds paid to DTC or its nominee, as the registered Owner, or any redemption or other notice, to the
Beneficial Owners or that they will do so on a timely basis or that DTC will serve and act in a manner
described in this Official Statement.
In the event that the book-entry system is discontinued as described above, the requirements of the
Trust Agreement will apply.
The City and the Paying Agent cannot and do not give any assurances that DTC, the Participants or
others will distribute payments of principal, interest or premium, if any, evidenced by the Bonds paid to
DTC or its nominee as the registered owner, or will distribute any redemption notices or other notices, to the
Beneficial Owners, 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 nor the Paying Agent are responsible or liable for the failure of
DTC or any Participant to make any payment or give any notice to a Beneficial Owner with respect to the
Bonds or an error or delay relating thereto.
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