HomeMy WebLinkAboutCDC/2010-63
(Note: Companion resolutions
2010-386 and J-56)
RESOLUTION NO. CDC/2010-63
2
RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF
THE CITY OF SAN BERNARDINO MAKING CERTAIN FINDINGS AND
DETERMINATIONS PURSUANT TO HEALTH AND SAFETY CODE
SECTION 33445.1 AND AUTHORIZING ON BEHALF OF THE
REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, THE
BORROWING OF FUNDS FROM THE SAN BERNARDINO JOINT
POWERS FINANCING AUTHORITY IN CONNECTION WITH THE
ISSUANCE OF THE NOT TO EXCEED $7,068,000 RECOVERY ZONE
ECONOMIC DEVELOPMENT BONDS AND $6,000,000 TAX ALLOCATION
BONDS FOR THE 4TH STREET CORRIDOR PROJECT AND FOR THE
NORTHWEST REDEVELOPMENT PROJECT AREA INFRASTRUCTURE
PROJECTS, AUTHORIZING THE FORM OF CERTAIN LEGAL
DOCUMENTS RELATED THERETO AND AUTHORIZING AND
DIRECTING THEIR PREP ARA TION, EXECUTION AND DELIVERY
3
4
5
6
7
8
9
10
11
WHEREAS, the City of San Bernardino, California (the "City"), is a mUlllclpa
12
corporation and charter city, duly organized and existing pursuant to the provisions of th
13
constitution of the State of California; and
14
WHEREAS, the Community Development Commission of the City of San Bernardin
15
(the "Commission") is the governing body of the Redevelopment Agency of the City of Sa
16
Bernardino (the "Agency"), a public body, corporate and politic, organized and existing pursuan
17
to the California Community Redevelopment Law (Health and Safety Code Section 33000, e
18
seq.) (the "CRL"); and
19
WHEREAS, the City and the Agency have heretofore entered into a Joint Exercise 0
Powers Agreement establishing the San Bernardino Joint Powers Financing Authority (th
20
"Authority") for the purpose of issuing bonds, the proceeds of which may be loaned to any of it
21
members to finance activities as may be undertaken by such member; and
22
WHEREAS, Congress passed the American Recovery and Reinvestment Act of 2009 (th
23
"Act") which amends the Internal Revenue Code of 1986 (the "Code") to authorize a city to
24
designate a "recovery zone" for the purpose of issuing Recovery Zone Economic Developmen
25
-I-
I P:\AgendasIResolutionsIResolutions\20tO\12-06-IO Recovery Zone Bond Issuance CDC Reso.doc
CDC/2010-63
Bonds under Section 1400U-2 of the Code, and Recovery Zone Facility Bonds under Sectio
2
1400U-3 of the Code to promote economic recovery within the country; and
3
WHEREAS, pursuant to Resolution No. 2009-328 entitled the "Resolution of the Mayo
4
and Common Council of the City of San Bernardino Designating the City of San Bernardino as
5
Recovery Zone for Purposes of Sections 1400U-l, 1400U-2 and 1400U-3 of the Interna
Revenue Code of 1986," adopted on September 21, 2009, the City designated the entir
6
7
geographical area of the City a "recovery zone," and the City has received an allocation from th
8
State of California in the amount of $7,068,000 for Recovery Zone Economic Developmen
9
Bonds; and
10
WHEREAS, the Agency has requested that the Authority issue, and the Authority desire
to assist the Agency by the issuance of the not to exceed $7,068,000 San Bernardino Join
Powers Financing Authority Tax Allocation Bonds Series 201 OA (4th Street Corridor Project
Federally Taxable Recovery Zone Economic Development Bonds) (the "Series A Bonds") an
11
12
13
not to exceed $6,000,000 Tax Allocation Bonds Series 2010B (Northwest Redevelopmen
14
Project Area Infrastructure Projects) (the "Series B Bonds" and collectively with the Series
15
Bonds, the "Bonds"); and
16
WHEREAS, the proceeds of the Series A Bonds will be loaned to the Agency to financ
street and sidewalk improvements and other infrastructure improvements to the 4th Stree
Corridor within the downtown area of the City from "E" Street west to "H" Street and from 2n
Street north to 5th Street and the proceeds of the Series B Bonds will be loaned to the Agency to
finance Northwest Redevelopment Project Area infrastructure projects (collectively, th
17
18
19
20
21
"Project"); and
22
WHEREAS, the Bonds shall be issued pursuant to the Marks-Roos Local Bond Pool in
Act of 1985, codified at California Government Code Section 6584, et seq. (the "Act") and a
23
24
Indenture of Trust by and between the Authority and U.S. Bank National Association, as truste
25
(the "Trustee"), in form attached hereto as Exhibit "A" (the "Indenture"); and
-2-
P:\Agendas\Resolutions\Resolutions\2010\12-06-10 Recovery Zone Bond Issuance CDC Reso.doc
CDC/2010-63
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
WHEREAS, Kinsell, Newcomb & De Dios, Inc., as prospective purchaser of the Bond
(the "Original Purchaser"), has informed the Authority that it intends to submit an offer t
purchase the Bonds and shall cause to be prepared a Preliminary Official Statement and a
Official Statement, a form of which Preliminary Official Statement attached hereto as Exhibi
"B"; and.
WHEREAS, the Commission has duly considered the terms of such transactions as
contemplated herein and finds that approval of the issuance of the Bonds and the Loan
Agreement at this time is in the best interests of the City and the Agency.
NOW, THEREFORE, THE COMMUNITY DEVELOPMENT COMMISSION OF THE
CITY OF SAN BERNARDINO DOES HEREBY RESOLVE, DETERMINE AND ORDER, AS
FOLLOWS:
Section 1. Findings and Determinations. The Commission hereby finds and determine
that the Recitals contained herein are true and correct and are incorporated herein by thi
reference. The Commission hereby finds and determines that issuance of the Bonds by th
Authority will result in significant public benefits to the Agency, namely favorable interest rates,
Bond preparation, Bond underwriting or Bond issuance costs. The Commission further finds an
determines that pursuant to Health and Safety Code Section 33445.1, the use of the tax incremen
revenues from the Northwest Redevelopment Project Area for the repayment of the Series
Bonds meets the requirements thereof for the following reasons:
(1) the Project is of benefit to the Northwest Redevelopment Project Area, th
Central City Redevelopment Project Area, the Central City North Redevelopment Project Area,
in which the Project is located, the City, and Agency;
(2) no other reasonable means of financing of the improvements is available;
(3) the payment of tax increment revenues from the Northwes
Redevelopment Project Area to fund the Project will assist in the elimination of one or mor
blighting conditions inside the Agency's Northwest Redevelopment Project Area; and
-3-
P:\Agendas\Resolutions\Resollltions\2010\12-06-10 Recovery Zone Bond Issuance CDC Reso.doc
CDC/2010-63
(4) the Project is consistent with the implementation plan adopted pursuant t
2 Community Redevelopment Law Section 33490; and
3
(5)
that the Project is provided for in the redevelopment plan.
4
5
Section 2. Authorization of Loan; Approval of Final Form of Loan Agreement.
Commission hereby authorizes and approves the loan to be made to the Agency by the Authorit
6
pursuant to and in accordance with the terms of the Loan Agreement, attached hereto as Exhibi
7
"C". Proceeds of the loan derived from the Series A Bonds shall be applied to finance street an
sidewalk improvements and other infrastructure improvements to the 4th Street Corridor withi
the downtown area of the City from "E" Street west to "H" Street and from 2nd Street north to 5t
Street. Proceeds of the loan derived from the Series B Bonds shall be applied to financ
Northwest Redevelopment Project Area Infrastructure Projects. The Commission hereby furthe
8
9
10
11
approves the form of Loan Agreement, together with any changes therein or additions thereto a
12
may be approved by the Chair or the Executive Director and as necessary to incorporate th
13
principal amount, interest rate, maturity and prepayment dates and such other terms an
14
conditions when such terms and conditions have been ascertained. The Commission hereb
15
further authorizes and directs that the form of the Loan Agreement as on file be converted into
16
the final form of the Loan Agreement. The Chair, Executive Director or such other members 0
17
representatives of the Commission are hereby authorized and directed to execute and deliver, an
18
the Secretary or Assistant Secretary is hereby authorized and directed to attest to and affix th
19
seal of the Agency to, the final form of the Loan Agreement when the same has been prepare
for and in the name and on behalf of the Agency, and such execution and delivery shall b
deemed to be conclusive evidence of the approval thereof. The Commission hereby authorize
the delivery and performance of the Loan Agreement. The Commission further authorizes an
20
21
22
23
directs Agency Staff together with the Original Purchaser to obtain bids or proposals for an
investment of funds to be held and maintained either within the Loan Agreement or by th
24
25
Agency or held and maintained by the Trustee pursuant to the Indenture of Trust dated as 0
-4-
P:\Agendas\Resolutions\Resolutions\2010\12-06-10 Recovery Zone Bond Issuance CDC Reso.doc
CDC/2010-63
December 1, 2010, by and between the Authority and the Trustee and any other debt servic
2 funds.
3
Section 3. A roval of Final Forms of Bond Purchase Contract and Continuin
4
Disclosure Agreement. The Commission hereby approves the forms of Bond Purchase Contrac
and Continuing Disclosure Agreement (the "Agreements") in the forms on file with th
5
6
Secretary, together with any changes therein or additions thereto as may be approved by th
7
Chair or the Executive Director. The Commission hereby further authorizes and directs th
8
conversion of the forms of the Agreements into the final forms thereof, together with suc
9
changes or modifications as deemed necessary or desirable by the Chair or the Executiv
10
Director upon the recommendation of Bond Counsel. The Chair or the Executive Director 0
such other authorized officer of the Commission is hereby authorized and directed to execute an
11
deliver, and the Secretary or Assistant Secretary is hereby authorized and directed to attest to, th
12
final forms of the Agreements.
13
Section 4. Official Action. The Chair, Vice-Chair, Secretary, Assistant Secretary,
Executive Director, Agency Counsel, Bond Counsel, and any and all other members and officer
14
15
of the Agency are hereby authorized and directed, on behalf of the Agency, to do any and al
16
things and to take any and all actions, including execution and delivery of assignments
17
certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants
18
Bond closing documents and other documents as may be approved by Bond Counsel and as ma
19
be reasonably necessary or advisable in connection with execution and delivery of the Loa
20
Agreement and the consummation of the transactions described herein and therein.
21
The Commission hereby approves the following entities in connection with the financin
22
hereunder:
23
Bond Counsel/Disclosure Counsel
Lewis Brisbois Bisgaard & Smith LLP
24
Trustee
U.S. Bank Trust National Association
25
Underwriter
Kinsell, Newcomb & De Dios, Inc.
-5-
P:\Agendas\Resolutions\Resolutions\2010\12-06-10 Recovery Zone Bond Issuance CDe Reso.doc
Section 5. Effective Date.
2 adoption by this Commission.
3 //1
4 /1/
5 /1/
6 //1
7
/1/
8
/1/
9
/1/
10
/1/
II
/1/
12
13 //1
14 /1/
15 /1/
16 /1/
17 /1/
18 /1/
19 //1
20
//1
21
/1/
22
//1
23
/1/
24
/1/
25
CDC/2010-63
This Resolution shall take effect from and after its date 0
P:\Agendas\Resolutions\Resolutions\2010\12-06-10 Recovery Zone Bond Issuance CDC Reso.doc
-6-
CDC/2010-63
2
RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF
THE CITY OF SAN BERNARDINO MAKING CERTAIN FINDINGS AND
DETERMINATIONS PURSUANT TO HEALTH AND SAFETY CODE
SECTION 33445.1 AND AUTHORIZING ON BEHALF OF THE
REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, THE
BORROWING OF FUNDS FROM THE SAN BERNARDINO JOINT
POWERS FINANCING AUTHORITY IN CONNECTION WITH THE
ISSUANCE OF THE NOT TO EXCEED $7,068,000 RECOVERY ZONE
ECONOMIC DEVELOPMENT BONDS AND $6,000,000 TAX ALLOCATION
BONDS FOR THE 4TH STREET CORRIDOR PROJECT AND FOR THE
NORTHWEST REDEVELOPMENT PROJECT AREA INFRASTRUCTURE
PROJECTS, AUTHORIZING THE FORM OF CERTAIN LEGAL
DOCUMENTS RELATED THERETO AND AUTHORIZING AND
DIRECTING THEIR PREPARATION, EXECUTION AND DELIVERY
3
4
5
6
7
8
9
I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the
joint
Community Development Commission of the City of San Bernardino at a regular meeting
10
11
thereof, held on the ~day of December
, 2010, by the following vote to wit:
12
Commission Members: Ayes Nays Abstain Absent
MARQUEZ X
DESJARDINS X
BRINKER X
-
SHORETT X
KELLEY X
JOHNSON X
MC CAMMACK
13
14
15
16
17
18
19
20
(
y-w:~y fJ.t<{W-k, re ary
-r~
The foregoing resolution is hereby approved this ~day of December
,2010.
21
22
23
24
Approved as to Form and Legal Content:
25
By:
-7-
P:\Agendas\Resolutions\Resolutions\2010\12-06-10 Recovery Zone Bond Issuance CDC Reso.doc
EXHIBIT "A"
INDENTURE OF TRUST
by and between the
SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY
and
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
INDENTURE OF TRUST
by and between the
SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY
and
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
Dated as of December 6,2010
Relating to
$7,068,000
San Bernardino Joint Powers Authority
Tax Allocation Bonds Series 2010A
(4th Street Corridor Project-Federally Taxable Recovery Zone Economic Development Bonds)
$
San Bernardino Joint Powers Authority
Tax Allocation Bonds Series 2010B
(Northwest Redevelopment Project Area)
P:\Agendas\Agenda Attachments\Exhibits\20 1 0\12-06-1 0 Recovery Zone IP A _ CDC Resos - Indenture of Trust (Exhibit A).doc
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; AUTHORIZATION AND PURPOSE OF BONDS;
EQUAL SECURITY. ................... ......... ..................... ........... 3
Section 1.01. Definitions...... ..................................................................... ........... ......................... ....... 3
Section 1.02. Rules of Construction......................................... ..................... ........................... .........14
Section 1.03. Authorization and Purpose of Bonds................................. .......... .............................. ..14
Section 1.04. Equal Security............................................ ................................. ...................... ...........14
ARTICLE II
ISSUANCE OF BONDS ........................................................15
Section 2.01. Authorization of Bonds. ............................. ............................... .............................. .....15
Section 2. 02. Terms of the Bonds...................................................................................................... 15
Section 2.03. Redemption of Bonds.................................................................................................. 16
Section 2.04. Form of Bonds................................................... ....................... .................. ..................17
Section 2.05. Execution of Bonds .............................................................. .......... ............................. .17
Section 2.06. Transfer of Bonds......................... ....... ...... ................................ ................. ..................18
Section 2.07. Exchange of Bonds ......................................................................................................18
Section 2.08 . Temporary Bonds......................................................................................................... 18
Section 2.09. Registration Books.................................................................. ......... ................... .........18
Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen ...............................................................19
Section 2.11. Book Entry Provisions................... ........... ................................ .................................. .19
ARTICLE III
DEPOSIT AND APPLICATION OF PROCEEDS ...................................19
Section 3.01. Issuance of Bonds...................................................................................................... ..19
Section 3.02. Application of Proceeds and Other Funds................................................................... 19
Section 3.03. Project Fund....... ............................................................... ...........................................20
Section 3.04. Reserve Fund.................................. ........................................................... .................. .20
Section 3.05. Withdrawals from the Reserve Fund.......... ............................................ ............... ......23
Section 3.06. Validity of Bonds .................................................................... .....................................24
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of1rust {Exhibit A),doc
ARTICLE IV
REVENUES; FLOW OF FUNDS ................................................24
Section 4.01. Pledge of Revenues; Assignment of Rights ................................................................24
Section 4.02. Receipt, Deposit and Application of Revenues...........................................................25
Section 4.03. Investments................................................................................................................... 27
ARTICLE V
COVENANTS OF THE AUTHORITY............................................28
Section 5.01. Punctual Payment; Extension of Payment of Bonds...................................................28
Section 5.02. Against Encumbrances............................ .................... .............. .................. ................ .28
Section 5.03. Power to Issue Bonds and Make Pledge and Assignment..........................................29
Section 5.04. Accounting Records and Financial Statements...........................................................29
Section 5.05. Additional Obligations................................ .......................... .................... .................. .29
Section 5.06. Tax Covenants ..................................................................... ................................ .........29
Section 5.07. Loan Agreement....... ....... .................................................. ...........................................31
Section 5.08. Further Assurances.................... ......................................................... ..........................31
Section 5.09. Maintenance of Project Area Loan Balances ..............................................................31
Section 5.10. Continuing Disclosure ....................................................... ............................. ............. 31
ARTICLE VI
THE TRUSTEE......................... ................. .....................32
Section 6.01. Appointment of Trustee.......... ...................................................................... ............... 32
Section 6.02. Acceptance of Trusts................... ................................................................................. 32
Section 6.03. Fees, Charges and Expenses of Trustee ......................................................................35
Section 6.04. Notice to Bond Owners of Default........ ............................ ................................. ......... 3 5
Section 6.05. Intervention by Trustee ................... .................................. ..................................... ...... 3 5
Section 6.06. Removal of Trustee.......... ................................................. ........................................... 36
Section 6.07. Resignation by Trustee ................................................................................................36
Section 6.08. Appointment of Successor Trustee.................. .......................................................... ..36
Section 6.09. Merger or Consolidation............................. ................................................................. 3 7
Section 6.1 O. Concerning Any Successor Trustee............... ............ ............ ................................. ..... 3 7
Section 6.11. Appointment of Co-Trustee ........ ......................................... ................ ................ ........ 3 7
Section 6.12. Indemnification; Limited Liability of Trustee ............................................................38
ARTICLE VII
MODIFICATION AND AMENDMENT OF THE INDENTURE.......................39
Section 7.01. Amendment Hereof............................................... .......................................................39
Section 7.02. Effect of Supplemental Agreement................... ..... ..... ................................................40
11
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
Section 7.03. Endorsement or Replacement of Bonds After Effective Date....................................40
Section 7.04. Amendment by Mutual Consent.................. ............................. ...................................40
Section 7.05. Opinion of Counsel............................................................................ ..........................40
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS .....................41
Section 8.01. Events of Default........................ ..................................................... ........................ .....41
Section 8.02. Remedies and Rights of Bond Owners...................................... .................... ..............41
Section 8.03. Application of Revenues and Other Funds After Default...........................................42
Section 8.04. Power of Trustee to Control Proceedings......................... .............................. .............43
Section 8.05. Appointment of Receivers .... ..... ...................................................... ............................43
Section 8.06. Non-Waiver ....................................................................... .................................... .......43
Section 8.07. Rights and Remedies of Bond Owners.. .................................... ..................................43
Section 8.08. Termination of Proceedings ................................................. ............................... .........44
Section 10.01.
Section 10.02.
Section 10.03.
Section 10.04.
Section 10.05.
Section 10.06.
Section 10.07.
Section 10.08.
Section 10.09.
Section 10.10.
Section 10.11.
Section 10.12.
Section 10.13.
Section 10.14.
Section 10.15.
Exhibit A
ARTICLE IX
Reserved
ARTICLE X
MISCELLANEOUS ........... ................................. ...............48
Limited Liability of Authority................................................................................. ..48
Benefits ofIndenture Limited to Parties................................ ...................................49
Discharge of Indenture............................................................................................... 49
Successor Is Deemed Included in All References to Predecessor............................50
Content of Certificates ......................................... ............ .... ......................................50
Execution of Documents by Bond Owners ................................... ............................ 51
Disqualified Bonds.............................................................. ........... ......... ...................51
Waiver of Personal Liability............ ........................................... ................... ............51
Partial Invalidity......................... .................................................................... ............51
Destruction of Cancelled Bonds............... .................. ............................ ............... .... 52
Funds and Accounts ................................................ ....................... ............................52
Payment on Business Days....... ........................................................................ ......... 52
Notices...................................................................................................................... ..52
Unclaimed Moneys ................................................. ............................................ ....... 53
Governing Law............................ ....... .......................................................................53
Form of Bonds ....................................................................................... A-I
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
111
INDENTURE OF TRUST
THIS INDENTURE OF TRUST (this "Indenture") is dated as of December 6,
2010, and is entered into by and between the San Bernardino Joint Powers Financing Authority, a
joint powers authority organized and existing under the laws of the State of California (the
"Authority") and U.S. Bank National Association, a national banking association organized and
existing under the laws of the United States of America, and being qualified to accept and
administer the trusts hereby created, as trustee (the "Trustee").
WITNESSETH:
WHEREAS, the Authority is a joint powers authority duly organized and existing
under and pursuant to that certain Joint Exercise of Powers Agreement dated August 21,1989, by
and between the City of San Bernardino (the "City") and the Redevelopment Agency of the City
of San Bernardino (the "Agency") and under the provisions of Articles 1 through 4 (commencing
with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of
California (the "Act") and is authorized pursuant to Article 4 of the Act to issue its bonds for the
purpose, among others, of making loans to the Agency for the purpose of financing certain
permitted projects; and
WHEREAS, the Agency is a public body, corporate and politic, duly established
and authorized to transact business and exercise powers under and pursuant to the provisions of
Part 1 of Division 24 of the Health and Safety Code of the State of California (the
"Redevelopment Law"); and
WHEREAS, the Agency desires to finance street and sidewalk improvements and
other infrastructure improvements to the 4th Street Corridor within the downtown area of the City
from "E" Street west to "H" Street and from 2nd Street north to 5th Street (the "4th Street Project")
and certain other infrastructure improvements within the Agency's Northwest Redevelopment
Project Area, and has requested that the Authority assist the Agency with said financing; and
WHEREAS, the Authority has determined to issue its $7,068,000 San Bernardino
Joint Powers Financing Authority Tax Allocation Bonds Series 2010A (4th Street Corridor
Project-Federally Taxable Recovery Zone Economic Development Bonds) (the "Series A
Bonds") and $ Tax Allocation Bonds, Series 2010B (Northwest Redevelopment
Project Area) (the "Series B Bonds," and collectively with the Series A Bonds, the "Bonds"),
pursuant to and secured by this Indenture in the manner provided herein; and
WHEREAS, the proceeds of the Bonds shall be loaned to the Agency (the
"Loan") pursuant to that certain Loan Agreement dated as of December 6,2010, by and among
the Authority, Agency and the Trustee (the "Loan Agreement"), and the Bonds will be secured
by payments made by the Agency to the Authority pursuant to the Loan Agreement and Federal
Direct Payments (as herein defined); and
1
P:\Agendas\Agenda Attachments\Exhibits\1010\12-06-10 Recovery Zone JPA_CDC Resos - Indenture of Trust (Exhibit A).doc
WHEREAS, the Loan will be subordinate to the loan securing the $55,800,000
San Bernardino Joint Powers Financing Authority Tax Allocation Revenue Refunding Bonds
Series 2005A (the "2005A Bonds") and on parity with the loans securing the $30,330,000 San
Bernardino Joint Powers Financing Authority 2002 Tax Allocation Refunding Bonds (Secured
by a Junior Lien on Certain Tax Increment Revenues Pledged Under Senior Loan Agreements)
(the "2002A Bonds") and $21,105,000 San Bernardino Joint Powers Financing Authority Tax
Allocation Refunding Bonds Series 2005B (the "2005B Bonds" and collectively with the 2005A
Bonds and the 2002A Bonds, the "Prior Bonds"); and
WHEREAS, in order to provide for the authentication and delivery of the Bonds,
to establish and declare the terms and conditions upon which the Bonds are to be issued and to
secure the payment of the principal thereof, premium, if any, and interest thereon, the Authority
has authorized the execution and delivery of this Indenture; and
WHEREAS, the Authority represents that all acts and proceedings required by law
necessary to make the Bonds, when executed by the Authority, authenticated and delivered by the
Trustee and duly issued, the valid, binding and legal special obligations of the Authority, and to
constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth
in accordance with its terms, have been done and taken, and the execution and delivery of the
Indenture have been in all respects duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure
the payment of the principal of and the interest and premium (if any) on all Bonds at any time
issued and Outstanding under this Indenture, according to their tenor, and to secure the
performance and observance of all the covenants and conditions therein and herein set forth, and
to declare the terms and conditions upon and subject to which the Bonds are to be issued and
received, and in consideration of the premises and of the mutual covenants herein contained and
of the purchase and acceptance of the Bonds by the Owners thereof, and for other valuable
consideration, the receipt whereof is hereby acknowledged, the Authority does hereby grant,
convey, assign, transfer in trust and pledge to the Trustee, and to its successors in trust, and to
them and their assigns forever, all of the Revenues (as hereinafter defined) and all of the right title
and interest of the Authority in the Loan Agreement (as hereinafter defined), to have and to hold
all of the same (hereinafter referred to as the "Trust Estate") with all privileges and appurtenances
hereby granted and assigned, or agreed or intended so to be, to the Trustee and its successors in
trust and to them and their assigns forever, in trust nevertheless, upon the terms and trusts set forth
herein for the equal and proportionate benefit, security and protection of all of the Bondholders,
without privilege, priority or distinction as to lien or otherwise of any of the Bonds over any of the
others except as otherwise provided herein, and for enforcement of the payment of the Bonds in
accordance with their terms, and all other sums payable hereunder or on the Bonds and for the
performance of and compliance with the obligations, covenants and conditions of this Indenture,
as if all the Bonds at any time outstanding had been authenticated, executed and delivered
simultaneously with the execution and delivery of this Indenture, all as herein set forth.
2
P:\Agendas\Agenda Attachments\Exhibits\20 I O\12~06-1 0 Recovery Zone lP A _ CDC ResQs - Indenture of Trust (Exhibit A)_doc
THIS INDENTURE FURTHER WITNESSETH, and it is expressly declared, that
all the Bonds shall be executed and delivered and the Trust Estate shall be dealt with and disposed
of, under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts,
uses and purposes hereinafter expressed, and the Authority does hereby covenant and agree with
the Trustee, for the benefit of the respective Owners from time to time of the Bonds, as follows:
ARTICLE I
DEFINITIONS; AUTHORIZATION AND PURPOSE OF BONDS;
EQUAL SECURITY
Section 1.01. Definitions. Unless the context otherwise requires, the terms
defined in this Section shall for all purposes of this Indenture and of any Supplemental Indenture
and of the Bonds and of any certificate, opinion, request or other documents herein mentioned
have the meanings herein specified. In addition, any terms defined in the Loan Agreement and
not otherwise defined herein shall have the respective meanings given such terms in the Loan
Agreement.
"Act" means Articles 1 through 4 (commencing with Section 6500) of Chapter 5,
Division 7, Title 1 of the Government Code of the State, as in existence on the Delivery Date or as
thereafter amended from time to time.
"Agency" means the Redevelopment Agency of the City of San Bernardino, a
public body corporate and politic organized under the laws of the State, and any successor thereto.
"Agreement" means that certain Joint Exercise of Powers Agreement, dated
August 21, 1989, entered into under the Act by and between the City and the Agency together
with any amendments thereof and supplements thereto.
"Authority" means the San Bernardino Joint Powers Financing Authority, a joint
powers authority duly organized and existing under the Agreement and the laws of the State.
"Board" means the Members of the Board of the Authority.
"Bond Counsel" means Lewis Brisbois Bisgaard & Smith LLP, San Bernardino,
California, or any other attorney or firm of attorneys selected by the Authority of nationally
recognized standing in matters pertaining to the validity of, and exclusion from gross income for
federal income tax purposes of interest on, bonds issued by states and political subdivisions, and
duly admitted to practice law before the highest court of any state of the United States of
America.
"Bond Law" means the Marks-Roos Local Bond Pooling Act of 1985, constituting
Article 4 of the Act (commencing with Section 6584), as in existence on the Delivery Date or as
thereafter amended from time to time.
3
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
"Bond Year" means each twelve-month period extending from October 2 in one
calendar year to October 1 of the succeeding calendar year, both dates inclusive; provided that the
first Bond Year shall commence on the Delivery Date and end on the next succeeding October 1.
"Bonds" means collectively the Series A Bonds and the Series B Bonds issued
hereunder.
"Business Day" means a day of the year on which banks in New York, New York,
and Los Angeles, California, are not required or authorized to remain closed and on which The
New York Stock Exchange is not closed.
"Certificate of the Authority" means a certificate in writing signed by the
Chairman, Secretary or Treasurer of the Authority, or by any other officer of the Authority duly
authorized by the Board for that purpose.
"City" means the City of San Bernardino, a municipal corporation and a charter
city, duly organized and existing under its charter and the Constitution and laws of the State.
"City Council" means the Mayor and Common Council of the City of
San Bernardino, as the legislative body of the City.
"Code" or "Tax Code" means the Internal Revenue Code of 1986, as amended, or
any future Federal tax code. Any reference to a provision of the Tax Code shall include the
applicable Tax Regulations with respect to such provision.
"Continuing Disclosure Agreement" means that certain Continuing Disclosure
Agreement between the Agency and the Trustee dated the date of issuance and delivery of the
Bonds, as originally executed and as it may be amended from time to time in accordance with the
terms thereof.
"Computation Date," for purposes of calculating and paying over to the United
States of America the amount of any arbitrage rebate required to be paid in connection with the
Series B Bonds, means any date selected by the Agency by written notice to the Trustee and the
Authority, provided the first Computation Date is no later than the fifth anniversary of the date of
issue of the Series B Bonds, a subsequent Computation Date is no later than five years after the
previous Computation Date and the final Computation Date is the date the last outstanding Series
B Bond is retired.
"Debt Service" means, during any period of computation, the amount obtained for
such period by totaling (a) the principal amount of all Outstanding Bonds coming due and payable
by their terms in such period, and (b) the interest which would be due during such period on the
aggregate principal amount of Bonds which would be Outstanding in such period if the Bonds are
retired as scheduled, but deducting and excluding from such aggregate amount the amount of
Bonds no longer Outstanding.
"Delivery Date" means December _,2010.
4
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas -Indenture of Trust (Exhibit A).doc
"Depository" means DTC, or any successor or substitute Depository.
"DTC" means the Depository Trust Company, located in New York, New York, a
limited purpose trust company organized under the laws of the State of New York.
"DTC Letter of Representations" means the Letter of Representations addressed to
DTC from the Authority and as accepted by DTC.
"DTC Participant," "Direct Participant," or "Participant" shall mean those broker-
dealers, banks and other financial institutions from time to time for which the Depository holds
Bonds as securities depository and for whom the Depository effects book-entry transfers and
pledges of securities deposited with the Depository.
"Event of Default" means any of the events described in Section 8.01 herein.
"Federal Direct Payments" means the cash subsidy payment from the United
States Department of Treasury equal to 45% of the interest payable on the Series A Bonds on
each interest payment date for the Series A Bonds pursuant to the American Recovery and
Reinvestment Act of 2009 signed into law on February 17, 2009, which shall be transferred to
the Trustee hereunder for the payment of the Series A Bonds.
"Federal Securities" means any direct, noncallable general obligations of the
United States of America (including obligations issued or held in book entry form on the books of
the Department of the Treasury of the United States of America), or other noncallable obligations
of any entity the payment of principal of and interest on which are directly or indirectly
guaranteed by the United States of America.
"Fiscal Year" means any twelve-month period extending from July 1 in one
calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any other
twelve-month period selected and designated by the Authority as its official fiscal year period.
"Indenture" means this Indenture of Trust, as originally executed or as it may from
time to time be supplemented, modified or amended by any Supplemental Indenture pursuant to
the provisions hereof.
"Independent Certified Public Accountant" means any certified public accountant
or firm of certified public accountants appointed and paid by the Authority, and who, or each of
whom:
(a)
or the Agency;
is in fact independent and not under domination of the Authority, the City
(b) does not have any substantial interest, direct or indirect, in the Authority,
the City or the Agency; and
5
P:\Agendas\Agenda Attachments\Exhibits\20 1 0\12-06-1 0 Recovery Zone JP A _ CDC Resas - Indenture of Trust (Exhibit A).doc
(c) is not connected with the Authority, the City or the Agency as an officer or
employee of the Authority, the City or the Agency, but who may be regularly retained to make
annual or other audits of the books of or reports to the Authority, the City or the Agency.
"Information Services" means Financial Information, Inc.' s "Daily Called Bond
Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor;
Kenny Information Service's "Called Bond Service," 65 Broad Street, 16th Floor, New York,
New York 10004; Moody's Investors Service's "Municipal and Government," 99 Church Street,
8th Floor, New York, New York 10007, Attention: Municipal News Reports; Standard & Poor's
Ratings Group "Called Bond Record," 25 Broadway, 3rd Floor, New York, New York 10004;
and, in accordance with then current guidelines of the Securities and Exchange Commission, such
other addresses andlor such other services providing information with respect to called bonds as
the Authority may designate in a Certificate of the Authority delivered to the Trustee.
"Interest Account" means the account by that name established and held by the
Trustee pursuant to Section 4.02(a) herein.
"Interest Payment Date" means April 1 and October 1 in each year, commencing
on April 1, 2011, and continuing thereafter so long as any Bonds remain Outstanding.
"Loan" means the loan made by the Authority to the Agency under and pursuant to
the Loan Agreement.
"Loan Agreement" means the Loan Agreement dated as of December 6, 2010, by
and between the Authority, the Agency and the Trustee, as originally entered into or as amended
or supplemented pursuant to the provisions thereof.
"Maximum Annual Debt Service" means the largest of the sums obtained for any
Bond Year after the computation is made, by totaling the principal and interest of, and sinking
fund payments due for, Bonds payable in such Bond Year.
"Original Purchaser" means Kinsell, Newcomb & De Dios, Inc.
"Outstanding", when used as of any particular time with reference to Bonds,
means (subject to the provisions of Section 10.07) all Bonds theretofore executed, issued and
delivered by the Authority under this Indenture, except:
(a)
for cancellation;
Bonds theretofore cancelled by the Trustee or surrendered to the Trustee
(b)
Section 10.03; and
Bonds paid or deemed to have been paid within the meamng of
(c) Bonds in lieu of or in substitution for which other Bonds shall have been
executed, issued and delivered pursuant to this Indenture or any Supplemental Indenture.
6
P:\Agendas\Agenda Attachments\Exhibits\201O\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
"Owner," "Bondowner," "owner" or "Bondholder" when used with respect to any
Bond, means the person in whose name the ownership of such Bond shall be registered on the
Registration Books.
"Parity Loan" means the loans securing the 2002A Bonds and the 2005B Bonds
or any additional loans incurred for the purpose of paying the debt service requirements on any
tax allocation bonds (including, without limitation, bonds, notes, interim certificates, debentures
or other obligations) issued by the Agency and outstanding as permitted by Section 4.02 of the
Loan Agreement.
"Participating Underwriter" shall have the meanmg ascribed thereto m the
Continuing Disclosure Agreement.
"Permitted Investments" means any of the following to the extent permitted by law
with an appropriate market value and of an appropriate maturity as determined by the Authority:
1. Obligations of, or guaranteed as to principal and interest by the United
States of America, or by any agency or instrumentality thereof hereinafter designated when such
obligations are backed by the full faith and credit of the United States of America. These are
limited to:
U.S. Treasury obligations (all direct or fully guaranteed obligations)
Farmers Home Administration Certificates of Beneficial Ownership
General Services Administration Participation Certificates
U.S. Maritime Administration (Guaranteed Title XI financing)
Small Business Administration (Guaranteed Participation Certificates and
Guaranteed Pool Certificates)
GNMA Guaranteed Mortgage Backed Securities
GNMA Guaranteed Participation Certificates
U.S. Department of Housing & Urban Development Local Authority Bonds
Washington Metropolitan Area Transit Authority Guaranteed Transit Bonds
2.
States of America:
The following obligations of instrumentalities or agencies of the United
Federal Home Loan Mortgage Corporation (FHLMC) Participation Certificates
Debt Obligations
7
P:\Agendas\Agenda Attachments\Exhibits\201 0\12-06-10 Recovery Zone lP A _ CDC Resas - Indenture of Trust (Exhibit A)_doc
Federal Home Loan Banks (FHL Banks) (Consolidated Debt Obligation and Letter
of Credit backed issues)
Federal National Mortgage Association (FNMA) (Debt Obligations and Mortgage
Backed Securities, but excluding Stripped Mortgage Securities which are valued
greater than par on the portion of unpaid principal)
Book entry securities listed in 1 and 2 above must be held in a trust account with the Federal
Reserve Bank or with a clearing corporation or chain of clearing corporations which has an
account with the Federal Reserve Bank.
3. Federal Housing Administration debentures.
4. Commercial paper, payable in the United States of America, having
original maturities of not more than 92 days and which are rated and maintain a rating in the
highest rating category by Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc. ("S&P") and Moody's Investors Service, Inc. ("Moody's").
5. Interest bearing demand or time deposits issued by state banks or trust
companies, savings and loan associations, federal savings banks or any national banking
associations (including the Trustee or any of its affiliates), which deposits are insured by the Bank
Insurance Fund (BIF) or the Savings Association Insurance Fund (SAIF) of the Federal Deposit
Insurance Corporation (FDIC) or any successors thereto. These deposits: (a) must be
continuously and fully insured by BIF or SAIF or (b) must have maturities of less than 366 days
and be deposited with banks the short timer obligations of which are rated and maintain a rating of
A-l+ by S&P and P-l by Moody's.
6. Money market mutual funds rated AAAm or AAAm-G by S&P (including
any money market fund for which the Trustee or any of its affiliates provided management,
sponsorship or investment advisory services).
7. Pre-refunded municipals rated AAA by S&P.
8. Repurchase agreements with (a) any domestic bank, or domestic branch of
a foreign bank, the long term debt of which is rated at least "A" by S&P and Moody's; or (b) any
broker-dealer with "retail customers" or a related affiliate thereof which broker-dealer has, or the
parent company (which guarantees the provider) of which has, long-term debt rated at least "A"
by S&P and Moody's, which broker-dealer falls under the jurisdiction of the Securities Investors
Protection Corporation; or (3) any other entity rated "A" or better by S&P and Moody's, provided
that:
A. The market value of the collateral is maintained at levels and upon such
conditions as would be acceptable to S&P and Moody's to maintain an "A"
rating in an "A" rated structure financing (with a market value approach);
8
P:\Agendas\Agenda Attachments\Exhibits\20 1 0\12-06-1 0 Recovery Zone JP A _ CDC Resas - Indenture of Trust (Exhibit A),doc
B. The Trustee or a third party acting solely as agent for the Trustee or for the
Authority (the "Holder of the Collateral") has possession of the collateral
or the collateral has been transferred to the Holder of the Collateral in
accordance with applicable State and federal laws (other than by means of
entries on the transferor's books);
C. The repurchase agreement shall state and an opinion of counsel shall be
rendered at the time such collateral is delivered that the Holder of the
Collateral has a perfected first priority security interest in the collateral, any
substituted collateral and all proceeds thereof (in the case of bearer
securities, this means the Holder of the Collateral is in possession);
D. All other requirements of S&P in respect of repurchase agreements shall be
met;
E. The repurchase agreement shall provide that if during its term the
provider's rating by either S&P or Moody's is withdrawn or suspended or
falls below "A-" by S&P or "A3" by Moody's, as applicable, the provider
must, at the direction of the Authority or the Trustee within ten (10) days of
receipt of such direction, repurchase all collateral and terminate the
agreement, with no penalty or premium to the Authority or the Trustee.
Notwithstanding the above, if a repurchase agreement has a term of 270 days or
less (with no evergreen provision), collateral levels need not be as specified in A. above, so long
as such collateral levels are 103% or better and the provider is rated at least "A" by S&P and
Moody's, respectively.
9. Investment agreements with a domestic or foreign bank or corporation
(other than a life or property casualty insurance company) the long-term debt of which, or, in the
case of a guaranteed corporation the long-term debt or, in the case of a mono line financial
guaranty insurance company, the claims-paying ability, of the guarantor is rated at least "AA" by
S&P and "Aa" by Moody's; provided that, by the terms of the investment agreement:
A. Interest payments are to be made to the Trustee at times and in amounts as
necessary to pay debt service on the Bonds;
B. The invested funds are available for withdrawal without penalty or
premium, at any time upon not more than seven days' prior notice, the
Authority and the Trustee hereby agreeing to give or cause to be given
notice in accordance with the terms of the investment agreement so as to
receive funds thereunder with no penalty or premium paid;
C. The investment agreement shall state that it is the unconditional and
general obligation of, and is not subordinated to any other obligation of, the
provider thereof, or, if the provider is a bank, the agreement or the opinion
of counsel shall state that the obligation of the provider to make payments
9
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resos - Indenture of Trust (Exhibit A).doc
thereunder ranks in pari passu with the obligations of the provider to its
other depositors and its other unsecured and unsubordinated creditors;
D. The Authority or the Trustee receives the opinion of domestic counsel
(which opinion shall be addressed to the Authority) that such investment
agreement is legal, valid, binding and enforceable upon the provider in
accordance with its terms and of foreign counsel (if applicable);
E. The investment agreement shall provide that if during its term
(i) the provider's rating by either S&P or Moody's falls below "AA-"
or "Aa3", respectively, the provider shall, at its option, within ten
(10) days of receipt of publication of such downgrade, either (a)
collateralize the investment agreement by delivering or transferring
in accordance with applicable State and federal laws (other than by
means of entries on the provider's books) to the Authority, the
Trustee or a third party acting solely as agent therefor (the "Holder
of the Collateral") collateral free and clear of any third-party liens
or claims the market value of which collateral is maintained at
levels and upon such conditions as would be acceptable to S&P and
Moody's to maintain an "A" rating in an "A" rated structured
financing (with a market value approach) or (b) repay the principal
of and accrued but unpaid interest on the investment; and
(ii) the provider's rating by either S&P or Moody's is withdrawn or
suspended or falls below "A-" or "A3", respectively, the provider
must, at the direction of the Authority or the Trustee, within ten
(10) days of receipt of such direction, repay the principal of and
accrued but unpaid interest on the investment, in either case with no
penalty or premium to the Authority or the Trustee;
F. The investment agreement shall state and an opinion of counsel shall be
rendered, in the event collateral is required to be pledged by the provider
under the terms of the investment agreement, at the time such collateral is
delivered, that the Holder of the Collateral has a perfected first priority
security interest in the collateral, and substituted collateral and all proceeds
thereof (in the case of bearer securities, this means the Holder of the
Collateral is in possession); and
G. The investment agreement must provide that if during its term
(i) the provider shall default in its payment obligations, the provider's
obligations under the investment agreement shall, at the direction of
the Authority or the Trustee, be accelerated and amounts invested
and accrued but unpaid interest thereon shall be repaid to the
Authority or the Trustee, as appropriate; and
10
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resos - Indenture of Trust (Exhibit A)_doc
(ii) the provider shall become insolvent, not pay its debts as they
become due, be declared or petition to be declared bankrupt, etc.
("event of insolvency"), the provider's obligations shall
automatically be accelerated and amounts invested and accrued but
unpaid interest thereon shall be repaid to the Authority or the
Trustee, as appropriate.
"Principal Corporate Trust Office" means the office of the Trustee at the address
set forth in Section 9.13 or as otherwise specified in writing by the Trustee, except for purposes
of transfer, exchange, registration, payment and surrender of Bonds means c/o the corporate trust
office of U.S. Bank Trust National Association in St. Paul, Minnesota.
"Project Area" means the territory within the Agency's Northwest Redevelopment
Project Area, described and defined in the Redevelopment Plan.
"Project Fund" means the fund by that name established pursuant to Section 3.03
hereof.
"Rating Agency" means, as of any date, either of the following entities which then
maintains a rating on the Bonds:
(a) Moody's, its successors and assigns;
(b) S&P, its successors and assigns; and
(c) Fitch Investors Service, Inc., its successors and assigns.
"Rebate Account" means the account by that name established and held by the
Trustee for the benefit of the Series B Bondholders pursuant to Section 4.02(e) hereof.
"Record Date" means, with respect to any Interest Payment Date, the fifteenth
(15th) calendar day of the month immediately preceding such Interest Payment Date, whether or
not such day is a Business Day.
"Recovery Act" means the American Recovery and Reinvestment Act of 2009
signed into law on February 17,2009.
"Redemption Date" means the date set for redemption of any Bonds pursuant to a
notice of redemption in accordance with Section 2.03 hereof.
"Redevelopment Plan" means the Redevelopment Plan for the Northwest
Redevelopment Project Area, adopted on July 6, 1982, by Ordinance No. MC-189, which
became effective on August 7, 1982, including any amendment thereof heretofore or hereafter
made pursuant to the Redevelopment Law.
11
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone IPA_CDC Resos - Indenture of Trust (Exhibit A).doc
"Refunding Bonds" means any bonds, notes or other obligations issued by the
Authority for the purpose of refunding any or all of the Outstanding Bonds, in accordance with
Section 5.01.
"Registration Books" means the records maintained by the Trustee pursuant to
Section 2.09 for the registration and transfer of ownership of the Bonds.
"Request of the Authority" means a request or requisition in writing signed by the
Chair, Executive Director, Secretary or Treasurer of the Authority, or by any other officer of the
Authority duly authorized by the Board for that purpose.
"Reserve Funds" means the Series A Reserve Fund and the Series B Reserve
Fund.
"Revenue Fund" means the fund by that name established pursuant to Section 4.02
hereof.
"Revenues" means: (a) all amounts payable by the Agency pursuant to the Loan
Agreement other than (i) administrative fees and expenses and indemnity against claims payable
to the Authority and the Trustee and (ii) amounts payable to the United States of America
pursuant to Section 4.12 of the Loan Agreement; (b) any proceeds of Bonds originally deposited
with the Trustee and all moneys deposited and held from time to time by the Trustee in the funds
and accounts established hereunder; and (c) income and gains with respect to the investment of
amounts on deposit in the funds and accounts established hereunder or under the Loan Agreement
and (d) Federal Direct Payments.
"Series A Bonds" means the $7,068,000 San Bernardino Joint Powers Authority
Tax Allocation Bonds Series 2010 (4th Street Corridor Project-Federally Taxable Recovery Zone
Economic Development Bonds), authorized by and at any time Outstanding pursuant to the Bond
Law and this Indenture.
"Series A Reserve Fund" means the Reserve Fund established for the Series A
Bonds and held hereunder by the Trustee pursuant to Section 3.05 hereof.
"Series A Reserve Requirement" means for an amount equal to maximum annual
debt service on the portion of the Loan representing the Series A Bonds; provided, however, that
at no time shall the Series A Bonds Reserve Requirement exceed an amount equal to the lesser of
(i) ten percent (10%) of the original principal amount of the Loan representing the Series A
Bonds, (ii) the maximum annual principal and interest requirements on the portion of the Loan
representing the Series A Bonds, or (iii) 125% of the average annual principal and interest
requirements on the portion of the Loan representing the Series A Bonds determined with respect
to debt service on the outstanding portion of the Loan on the date of original deposit of amounts
in the Reserve Fund for the Bonds.
12
P:\Agendas\Agenda Attachments\Exhibits\201O\12-06-10 Recovery Zone JPA~CDC Resos - Indenture of Trust (Exhibit A)_doc
"Series B Bonds" means the $
Series 2010B (Northwest Redevelopment Project Area),
Outstanding pursuant to the Bond Law and this Indenture.
Tax Allocation Revenue Bonds,
authorized by and at any time
"Series B Reserve Requirement" means for an amount equal to maximum annual
debt service on the portion of the Loan representing the Series B Bonds; provided, however, that
at no time shall the Series B Bonds Reserve Requirement exceed an amount equal to the lesser of
(i) ten percent (10%) of the original principal amount of the Loan representing the Series B
Bonds, (ii) the maximum annual principal and interest requirements on the portion of the Loan
representing the Series B Bonds, or (iii) 125% of the average annual principal and interest
requirements on the portion of the Loan representing the Series B Bonds determined with respect
to debt service on the outstanding portion of the Loan on the date of original deposit of amounts
in the Reserve Fund for the Bonds.
"Series B Reserve Fund" means the Reserve Fund established for the Series B
Bonds and held hereunder by the Trustee pursuant to Section 3.05 hereof.
"Securities Depositories" means The Depository Trust Company, 711 Stewart
Avenue, Garden City, New York 11530, Fax - (516) 227-4039 or 4190, and, in accordance with
then current guidelines of the Securities and Exchange Commission, such other addresses and/or
such other securities depositories as the Authority may designate in a Certificate of the Authority
delivered to the Trustee.
"Special Fund" means the funds by that name established pursuant to the Loan
Agreement and held by the Agency.
"State" means the State of California.
"Supplemental Indenture" means any indenture, agreement or other instrument
hereafter duly executed by the Authority and the Trustee in accordance with the provisions of the
Indenture.
"Tax Regulations" means temporary and permanent regulations promulgated
under or with respect to the Tax Code.
"Tax Revenues" means that portion of taxes levied upon taxable property within
the Project Area and received by the Agency on or after the effective date of the ordinance
approving the Redevelopment Plan) allocated to and paid into a special fund (as created under
the Loan Agreement) of the Agency pursuant to Article 6 of Chapter 6 of the Redevelopment
Law and Section 16 of Article XVI of the Constitution of the State of California, exclusive of
amounts, if any, (i) required to be deposited into the Low and Moderate Income Housing Fund of
the Agency pursuant to Section 33334.2 and Section 33334.3 of the Redevelopment Law, (ii)
amounts payable to certain taxing agencies pursuant to any existing pass-through agreements
entered into in accordance with Section 33670 of the Redevelopment Law and (iii) amounts
necessary to pay the 2005A Bonds.
13
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
"Trustee" means U.S. Bank National Association and its successors and assigns,
and any other corporation or association which may at any time be substituted in its place as
provided in Article VI.
Section 1.02. Rules of Construction. All references in this Indenture to "Articles,"
"Sections," and other subdivisions are to the corresponding Articles, Sections or subdivisions of
this Indenture; and the words "herein," "hereof," "hereunder," and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or subdivision hereof.
Section 1.03. Authorization and Purpose of Bonds. The Authority has reviewed
all proceedings heretofore taken relative to the authorization of the Bonds and has found, as a
result of such review, and hereby finds and determines that all things, conditions, and acts
required by law to exist, happen and be performed precedent to and in the issuance of the Bonds
do exist, have happened and have been performed in due time, form and manner as required by
law, and the Authority is now authorized hereunder and under the Bond Law and each and every
requirement of law, to issue the Bonds in the manner and form provided in this Indenture.
Accordingly, the Authority hereby authorizes the issuance of the Bonds pursuant to the Bond Law
and this Indenture for the purpose of providing funds to make the Loan to the Agency under the
Loan Agreement.
Section 1.04. Equal Security. In consideration of the acceptance of the Bonds by
the Owners thereof, this Indenture shall be deemed to be and shall constitute a contract between
the Authority and the Trustee on behalf of the Owners from time to time of the Bonds; and the
covenants and agreements herein set forth to be performed on behalf of the Authority shall be for
the equal and proportionate benefit, security and protection of all Owners of the Bonds without
preference, priority or distinction as to security or otherwise of any of the Bonds over any of the
others by reason of the number or date thereof or the time of sale, execution or delivery thereof, or
otherwise for any cause whatsoever, except as expressly provided therein or herein.
ARTICLE II
ISSUANCE OF BONDS
Section 2.01. Authorization of Bonds. The Bonds authorized to be issued by the
Authority under and subject to the Bond Law and the terms of this Indenture shall be designated
the (i) "San Bernardino Joint Powers Financing Authority, Tax Allocation Bonds Series 2010A
(4th Street Corridor Project-Federally Taxable Recovery Zone Economic Development Bonds)"
and the "Tax Allocation Bonds, Series 2010B (Northwest Redevelopment Project Area)," and
shall be issued in the original aggregate principal amount of $7,068,000 and $
respectively. The Bonds shall be held in book entry form as provided in Section 2.11 hereof.
Section 2.02. Terms of the Bonds.
(a) The Bonds shall be dated the Delivery Date. The Bonds shall mature on
the dates and in the principal amounts, and shall bear interest at the respective rates per annum
14
P:\Agendas\Agenda Attachments\Exhibits\20 1 0\12-06-1 0 Recovery Zone IP A _ CDC Resos - Indenture of Trust (Exhibit A),doc
shown below, payable semiannually on April 1 and October 1 in each year, commencing on April
1,2011.
Maturity
October 1
Amount
Rate
(b) General Provisions. Interest on the Bonds shall be calculated on the basis
of a 360-day year of twelve 30-day months. Interest on the Bonds shall be payable on each
Interest Payment Date to the person whose name appears on the Registration Books as the Owner
thereof as of the Record Date immediately preceding each such Interest Payment Date, such
interest to be paid by check of the Trustee mailed by first class mail, postage prepaid, to the
Owner at the address of such Owner as it appears on the Registration Books as of the preceding
Record Date; provided, however, that at the written request of the Owner of at least $1,000,000 in
aggregate principal amount of Outstanding Bonds filed with the Trustee prior to any Record Date,
interest on such Bonds shall be paid to such Owner on each succeeding Interest Payment Date by
wire transfer of immediately available funds to an account in the continental United States
designated in such written request. Principal of and premium, if any, on any Bond shall be paid
upon presentation and surrender thereof, at maturity or the prior redemption thereof, at the
Principal Corporate Trust Office. The principal of and interest and premium, if any, on the Bonds
shall be payable in lawful money of the United States of America.
Each Bond shall bear interest from the Interest Payment Date next preceding the
date of authentication thereof, unless (a) it is authenticated after a Record Date and on or before
the following Interest Payment Date, in which event it shall bear interest from such Interest
Payment Date; or (b) it is authenticated on or before the first Record Date, in which event it shall
bear interest from its dated date; provided, however, that if, as of the date of authentication of any
Bond, interest thereon is in default, such Bond shall bear interest from the Interest Payment Date
to which interest has previously been paid or made available for payment thereon.
Section 2.03. Redemption.
(a) Optional Redemption.
[TO COME]
(b) Mandatory Redemption From Sinking Fund Payments. The Bonds
maturing on October 1, , (the "Term Bonds") are subject to mandatory redemption in part
by lot prior to maturity, from sinking fund payments made on the following dates at a
15
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resos - Indenture of Trust (Exhibit A)_doc
redemption price equal to 100% of the principal amount plus accrued interest, if any, to the
redemption date, without premium, as set forth in the following table:
Term Bonds Maturin2 October 1.
Sinking Fund
Redemption Date
(October 1)
Principal
Amount To
Be Redeemed
In lieu of mandatory sinking fund redemption, the Agency may elect to purchase such
Bonds and tender them to the Trustee for cancellation.
(c) Notice of Redemption. Notice of redemption prior to maturity shall be
given by first-class mail, postage prepaid not less than 30 nor more than 60 days prior to the
redemption date to (i) the owner of such Bond at the address shown on the registration books of
the Trustee; (ii) to the Information Services designated in a Written Request of the Authority
filed with the Trustee, and (iii) the Securities Depositories. The notice of redemption shall (i)
state the date of the notice; (ii) state the redemption date; (iii) state the redemption place; (iv)
state the redemption price; (v) state the CUSIP numbers; (vi) state the numbers and date of
maturity of the Bonds to be redeemed; provided, however, that whenever any call for redemption
includes all of the Outstanding Bonds, the numbers of the Bonds need not be stated, and shall
require that such Bonds be then surrendered at the corporate trust office of the Trustee for
redemption at the redemption price; (vii) state, as to any Bonds redeemed in part only, the Bond
numbers and the principal portion thereof to be redeemed; (viii) state that interest on the
principal portion of the Bonds so designated for redemption shall cease to accrue from and after
such redemption date and that on such date there will become due and payable on each of the
Bonds the principal amount thereof to be redeemed and interest accrued thereon to the
redemption date and (ix) state such other matters as may be appropriate in the circumstances or
which may be requested by the Authority.
Section 2.04. Form of Bonds. The Bonds and the form of Trustee's certificate of
authentication and the form of assignment to appear thereon, shall be substantially in the form set
forth in Exhibit A attached hereto and by this reference incorporated herein, with necessary or
appropriate variations, omissions and insertions, as permitted or required by this Indenture.
Section 2.05. Execution of Bonds. The Bonds shall be signed in the name and on
behalf of the Authority with the manual or facsimile signatures of its Chairman or Vice Chairman
and attested with the manual or facsimile signature of its Secretary or any assistant duly appointed
16
P:\Agendas\Agenda Attachments\Exhibits\201O\12-06.10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A),doc
by the Board, under the printed seal of the Authority, and shall be delivered to the Trustee for
authentication by it. In case any officer of the Authority who shall have signed any of the Bonds
shall cease to be such officer before the Bonds so signed shall have been authenticated or
delivered by the Trustee or issued by the Authority, such Bonds may nevertheless be
authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as
binding upon the Authority as though the individual who signed the same had continued to be
such officer of the Authority. Also, any Bond may be signed on behalf of the Authority by any
individual who on the actual date of the execution of such Bond shall be the proper officer
although on the nominal date of such Bond such individual shall not have been such officer.
Only such of the Bonds as shall bear thereon a certificate of authentication in
substantially the form set forth in Exhibit A, manually executed by the Trustee, shall be valid or
obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the
Trustee shall be conclusive evidence that the Bonds so authenticated have been duly authenticated
and delivered hereunder and are entitled to the benefits of this Indenture.
Section 2.06. Transfer of Bonds. Any Bond may, in accordance with its terms, be
transferred, upon the Registration Books, by the person in whose name it is registered, in person
or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by
delivery of a written instrument of transfer in a form acceptable to the Trustee, duly executed.
Whenever any Bond shall be surrendered for transfer, the Authority shall execute and the Trustee
shall thereupon authenticate and deliver to the transferee a new Bond or Bonds of like tenor,
maturity and aggregate principal amount.
Section 2.07. Exchange of Bonds. Bonds may be exchanged at the Principal
Corporate Trust Office for Bonds of the same tenor and maturity and of other authorized
denominations.
Section 2.08. Temporary Bonds. The Bonds may be issued initially in temporary
form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be
printed, lithographed or typewritten, shall be of such denominations as may be determined by the
Authority and may contain such reference to any of the provisions of this Indenture as may be
appropriate. Every temporary Bond shall be executed by the Authority and be registered and
authenticated by the Trustee upon the same conditions and in substantially the same manner as the
definitive Bonds. If the Authority issues temporary Bonds, it will execute and furnish definitive
Bonds without delay, and thereupon the temporary Bonds shall be surrendered, for cancellation,
in exchange therefor at the Principal Corporate Trust Office, and the Trustee shall authenticate
and deliver in exchange for such temporary Bonds an equal aggregate principal amount of
definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be
entitled to the same benefits under this Indenture as definitive Bonds authenticated and delivered
hereunder.
Section 2.09. Registration Books. The Trustee will keep or cause to be kept at its
Principal Corporate Trust Office sufficient records for the registration and transfer of the Bonds,
which shall at all times during regular business hours be open to inspection by the Authority with
reasonable prior notice; and, upon presentation for such purpose, the Trustee shall, under such
17
P:\Agendas\Agenda Attachments\Exhibits\1010\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
reasonable regulations as it may prescribe, register or transfer or cause to be registered or
transferred, on said records, Bonds as hereinbefore provided.
Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall
become mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the
Trustee shall thereupon authenticate and deliver, a new Bond of like series, tenor and authorized
denomination in exchange and substitution for the Bond so mutilated, but only upon surrender to
the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be
cancelled by it. If any Bond issued hereunder shall be lost, destroyed or stolen, evidence of such
loss, destruction or theft may be submitted to the Trustee and, if such evidence be satisfactory to it
and indemnity satisfactory to it shall be given, the Authority, at the expense of the Bondowner,
shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like series
and tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen (or if any such
Bond shall have matured, instead of issuing a substitute Bond the Trustee may pay the same
without surrender thereof upon receipt of indemnity satisfactory to the Trustee). The Authority
may require payment of a reasonable fee for each new Bond issued under this Section and of the
expenses which may be incurred by the Authority and the Trustee. Any Bond issued under the
provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall
constitute an original contractual obligation on the part of the Authority whether or not the Bond
alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be equally
and proportionately entitled to the benefits of this Indenture with all other Bonds secured by this
Indenture.
Section 2.11. Book Entry Provisions. Notwithstanding any provision of this
Indenture to the contrary, for as long as DTC or its nominee, Cede & Co., is the Owner of a Series
of Bonds, payment of the principal of, premium, if any, and interest on such Series of Bonds will
be made directly to such Owner in accordance with the terms of the DTC Letter of
Representations. Disbursal of such payments to the DTC Participants is the responsibility of
DTC; disbursal of such payment to the Beneficial Owners (as defined in the DTC Letter of
Representations) is the responsibility of the DTC Participants. Notwithstanding anything to the
contrary set forth herein, at all times when the Bonds are held in book -entry form, all payments of
principal, premium, if any, and interest on the Bonds shall be made in accordance with the DTC
Letter of Representations.
ARTICLE III
DEPOSIT AND APPLICATION OF PROCEEDS
Section 3.01. Issuance of Bonds. Upon the execution and delivery of this
Indenture, the Authority shall execute and deliver the Series A Bonds in the principal amount of
$7,068,000 and the Series B Bonds in the principal amount of $ to the Trustee for
authentication and delivery to the Original Purchaser thereof upon receipt of a Request of the
Authority.
18
P:\Agendas\Agenda Attachments\Exhibits\20 I 0\ 12-06.10 Recovery Zone lP A _ CDC Resos - Indenture of Trust (Exhibit A).doc
Section 3.02. Application of Proceeds and Other Funds. Upon delivery of the
Bonds on the Delivery Date, the Trustee shall deposit or transfer, as applicable, the proceeds
thereof, including accrued interest, if any, as follows:
Series A Bonds
(1) To the Costs ofIssuance Fund, the sum of$
(2) To the Series A Reserve Fund, the sum of $
(3) To the Project Fund, the sum of $
Series B Bonds
(1) To the Costs ofIssuance Fund, the sum of$
(2) To the Series B Reserve Fund, the sum of $
(3) To the Project Fund, the sum of $
Section 3.03. Costs of Issuance Fund. There is hereby established a fund to be
held by the Trustee known as the "Costs of Issuance Fund". The moneys in the Costs of
Issuance Fund shall be used to pay Costs of Issuance on the Bonds from time to time upon
receipt of a Request of the Authority. On the date which is one hundred eighty (180) days
following the Closing Date, or upon the earlier receipt by the Trustee of a Request of the
Authority stating that all Costs of Issuance for the respective Bonds have been paid, the Trustee
shall transfer all remaining amounts in the Costs of Issuance Fund to the Interest Account.
Section 3.04. Proiect Fund. There is hereby established a fund to be held by the
Trustee known as the "Project Fund". Upon receipt of a Request of the Agency, monies in the
Project Fund shall be transferred to the Agency or at the direction of the Agency to those
specified in said Request of the Agency. In the event any amounts remain in the Project Fund
six (6) months after the Closing Date, said monies shall be deposited into the Interest Account.
Section 3.05. Reserve Funds.
There are hereby established separate funds to be known as the "Series A Reserve Fund"
and the "Series B Reserve Fund," which shall be held by the Trustee in trust for the benefit of the
Authority and the Owners of the Bonds. The following shall apply to each Reserve Fund.
(a) The amount on deposit in the Reserve Fund shall be maintained at the Reserve
Requirement at all times prior to the payment of the Loan in full pursuant to Section 6.03 of the
Loan Agreement, except to the extent required for the purposes set forth in this Section. The
Reserve Fund shall be funded initially at the Reserve Requirement.
19
P:\Agendas\Agenda Attachments\Exhibits\20 I 0\12-06-1 0 Recovery Zone JP A _ CDC Resos - Indenture of Trust {Exhibit A)_doc
(b) The Reserve Requirement may be fulfilled by a deposit of a credit
instrument in lieu of cash as hereinafter described:
(1) A surety bond or insurance policy issued to the Trustee by a
company licensed to issue an insurance policy guaranteeing the timely payment of the debt
service on the Bonds (a "municipal bond insurer") may be deposited in the Reserve Fund to meet
the Reserve Requirement if the claims paying ability of the issuer thereof shall be rated "AAA" or
"Aaa" by S&P and Moody's, respectively.
(2) A surety bond or insurance policy issued to the Trustee by an entity
other than a municipal bond insurer may be deposited in the Reserve Fund to meet the Reserve
Requirement.
(3) An unconditional irrevocable letter of credit issued to the Trustee
by a bank may be deposited in the Reserve Fund to meet the Reserve Requirement if the issuer
thereof is rated at least "AA" by S&P. The letter of credit shall be payable in one or more draws
upon presentation by the beneficiary of a sight draft accompanied by its certificate that it then
holds insufficient funds to make a required payment of principal or interest on the Bonds. The
draws shall be payable within two days of presentation of the sight draft. The letter of credit shall
be for a term of not less than three years. The issuer of the letter of credit shall be required to
notify the Authority and the Trustee, not later than 30 months prior to the stated expiration date of
the letter of credit, as to whether such expiration date shall be extended, and if so, shall indicate
the new expiration date.
If such notice indicates that the expiration date shall not be extended, the
Authority shall deposit in the Reserve Fund an amount sufficient to cause the cash or permitted
investments on deposit in the Reserve Fund, together with any other qualifying credit instruments,
to equal the Reserve Requirement, such deposit to be paid in equal installments on at least a semi-
annual basis over the remaining term of the letter of credit, unless the respective Reserve Fund
credit instrument is replaced by a Reserve Fund credit instrument meeting the requirements in any
of the items 1-3 above. The letter of credit shall permit a draw in full not less than two weeks
prior to the expiration or termination of such letter of credit if the letter of credit has not been
replaced or renewed. The authorizing document shall, in turn, direct the Trustee to draw upon the
letter of credit prior to its expiration or termination unless an acceptable replacement is in place or
the Reserve Fund is fully funded in its required amount.
(5) The obligation to reimburse the issuer of a Reserve Fund credit
instrument for any fees, expenses, claims or draws upon such Reserve Fund credit instrument
shall be subordinate to the payment of Debt Service on the Bonds. The right of the issuer of a
Reserve Fund credit instrument to payment or reimbursement of its fees and expenses shall be
subordinated to cash replenishment of the Reserve Fund, and, subject to the second succeeding
sentence, its right to reimbursement for claims or draws shall be on a parity with the cash
replenishment of the Reserve Fund. The Reserve Fund credit instrument shall provide for a
revolving feature under which the amount available thereunder will be reinstated to the extent of
any reimbursement of draws or claims paid. If the revolving feature is suspended or terminated
for any reason, the right of the issuer of the Reserve Fund credit instrument to reimbursement will
20
P:\Agendas\Agenda Attachments\Exhibits\20 10\12-06-10 Recovery Zone IPA_ CDC Resas - Indenture of Trust {Exhibit A),doc
be further subordinated to cash replenishment of the Reserve Fund to an amount equal to the
difference between the full original amount available under the Reserve Fund credit instrument
and the amount then available for further draws or claims. If (a) the issuer of a Reserve Fund
credit instrument becomes insolvent or (b) the issuer of a Reserve Fund credit instrument defaults
in its payment obligations thereunder or (c) the claims-paying ability of the issuer of the insurance
policy or surety bond falls below a S&P "AAA" or a Moody's "Aaa" or (d) the rating of the
issuer of the letter of credit falls below a S&P "AA", the obligation to reimburse the issuer of the
Reserve Fund credit instrument shall be subordinate to the cash replenishment of the Reserve
Fund.
(6) If (a) the revolving reinstatement feature described in the preceding
paragraph is suspended or terminated or (b) the rating of the claims paying ability of the issuer of
the surety bond or insurance policy falls below a S&P "AAA" or a Moody's "Aaa" or (c) the
rating of the issuer of the letter of credit falls below a S&P "AA", the Authority shall either (i)
deposit into the Reserve Fund an amount sufficient to cause the cash or permitted investments on
deposit in the Reserve Fund to equal the Reserve Requirement, such amount to be paid over the
ensuing five years in equal installments deposited at least semi-annually or (ii) replace such
instrument with a surety bond, insurance policy or letter of credit meeting the requirements in any
of items 1-3 above within six months of such occurrence. In the event (a) the rating of the claims-
paying ability of the issuer of the surety bond or insurance policy falls below "A", (b) the rating of
the issuer of the letter of credit falls below "A", (c) the issuer of the Reserve Fund credit
instrument defaults in its payment obligations or (d) the issuer of the Reserve Fund credit
instrument becomes insolvent, the Issuer shall either (i) deposit into the Reserve Fund an amount
sufficient to cause the cash or permitted investments on deposit in the Reserve Fund to be equal to
the Reserve Requirement, such amount to be paid over the ensuing year in equal installments on
at least a monthly basis (ii) replace such instrument with a surety bond, insurance policy or letter
of credit meeting the requirements in any of items 1-3 above within six months of such
occurrence.
(7) Where applicable, the amount available for draws or claims under
the Reserve Fund credit instrument may be reduced by the amount of cash or Permitted
Investments deposited in the Reserve Fund pursuant to clause (i) of the preceding item 6.
(8) If the Authority chooses the above described alternatives to a cash-
funded Reserve Fund, any amounts owed by the Authority to the issuer of such credit instrument
as a result of a draw thereon or a claim thereunder, as appropriate, shall be included in any
calculation of Debt Service requirements required to be made pursuant to this Indenture for any
purpose (e.g., a rate covenant or additional bonds test).
(9) The Trustee shall be required to ascertain the necessity for a claim
or draw upon the Reserve Fund credit instrument and to provide notice to the issuer of the
Reserve Fund credit instrument in accordance with its terms not later than three days (or permitted
time period for honoring a draw under the Reserve Fund credit instrument) prior to each Interest
Payment Date.
21
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resos - Indenture of Trust (Exhibit A).doc
(10) Cash on deposit in the Reserve Fund shall be used (or investments
purchased with such cash shall be liquidated and the proceeds applied as required) prior to any
drawing on any Reserve Fund credit instrument. If and to the extent that more than one Reserve
Fund credit instrument is deposited in the Reserve Fund, drawings thereunder and repayments of
costs associated therewith shall be made on a pro rata basis, calculated by reference to the
maximum amounts available thereunder.
Section 3.06. Withdrawals from the Reserve Funds. The following shall apply to
each Reserve Fund.
In the event that the Agency fails to deposit with the Trustee the full amount required to be
deposited pursuant to Section 4.02(a) or (b) on or before the fifteenth (15th) day preceding any
Interest Payment Date, as applicable, the Trustee shall provide any notice required with respect to
the timely liquidation of securities invested in the Reserve Fund and one Business Day prior to the
next Interest Payment Date, the Trustee shall withdraw from the Reserve Funds on a prorate basis
and transfer to the Interest Account and the Principal Account, in such order, an amount equal to
the difference between the amount required to be deposited pursuant to Section 4.02(a) or (b) and
the amount actually deposited by the Agency. To the extent of any deficiencies in the payments
required under Section 4.02(a) and (b), the Trustee may withdraw from each Reserve Fund
prorata, as required, all amounts necessary to make the payments required under said sections.
In the event that the Authority notifies the Agency or if the Agency has actual
notice that the amount on deposit in the Reserve Fund is less than the Reserve Requirement due to
either a devaluation of the investments held in the Reserve Fund, or to the extent of any draws on
the Reserve Fund, the Agency shall deposit amounts required hereunder to restore said balance to
the Reserve Requirement as provided in Section 4.02 hereof.
In the event that the amount on deposit in the Reserve Fund on the fifteenth (15th)
day preceding any Interest Payment Date exceeds the Reserve Requirement, the Trustee shall
thereupon withdraw from the Reserve Fund all amounts in excess of the Reserve Requirement and
credit first to the payment of interest and then to principal coming due, if any, such amounts
towards the deposit then required to be made by the Agency pursuant to Section 4.02(a) or (b).
Withdrawals from the Reserve Fund may also be made by the Trustee in the event
and to the extent of a refunding of the Bonds.
The Trustee shall withdraw all amounts in the Reserve Fund on the Business Day
immediately preceding the final Interest Payment Date and shall transfer such amounts to the
Interest Account and the Principal Account to the extent required to make the deposits then
required to be made pursuant to this Indenture or, if the Agency shall have previously deposited in
those accounts amounts sufficient to make the deposits required under this Indenture, then to the
Agency to be used for any lawful purpose. In the event and to the extent the Agency from time to
time prepays a portion of the Loan pursuant to Section 2.02 of the Loan Agreement in order to
discharge Bonds in accordance with Section 10.03 of this Indenture, the Trustee may withdraw
amounts in the Reserve Fund relating to the Bonds to be discharged and transfer such amounts to
any reserve fund or funds established in connection with the discharge of such Bonds.
22
P:\Agendas\Agenda Attachments\Exhibits\201 0\12-06-1 0 Recovery Zone JP A _ CDC Resas - Indenture of Trust (Exhibit A).doc
For the purpose of determining at any given time the balance in the Reserve Fund,
any such investment constituting a part of the Reserve Fund shall be valued by the Trustee as
provided in Section 4.03 hereof.
Section 3.07. Validity of Bonds. The validity of the authorization and issuance of
the Bonds shall not be affected in any way by any proceedings taken by the Agency with respect
to the application of the proceeds of the Loan, and the recital contained in the Bonds that the same
are issued pursuant to the Bond Law shall be conclusive evidence of their validity and of the
regularity of their issuance.
ARTICLE IV
REVENUES; FLOW OF FUNDS
Section 4.01. Pledge of Revenues; Assignment of Rights.
(a) Security for the Bonds. Subject to the provisions of Section 6.03, the
Bonds shall be secured by a first lien on and pledge (which shall be effected in the manner and to
the extent hereinafter provided) of all of the Revenues which includes a pledge of all of the
moneys in the Interest Account and the Principal Account and all amounts derived from the
investment of such moneys. The Bonds shall be equally secured by a pledge, charge and lien
upon the Revenues without priority for number, date of Bonds, date of execution or date of
delivery; and the payment of the interest on and principal of the Bonds shall be and are secured by
an exclusive pledge, charge and lien upon the Revenues. So long as any of the Bonds are
Outstanding, the Revenues shall not be used for any other purpose; except that out of the
Revenues there may be apportioned such sums, for such purposes, as are expressly permitted by
Section 4.02.
(b) General Assignment Provisions. The Authority hereby transfers in trust
and assigns to the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the
Revenues and all of the right, title and interest of the Authority in the Loan Agreement. The
assignment hereunder is to the Trustee solely in its capacity as Trustee under this Indenture and
not in its individual or personal capacity. The Trustee is not responsible for any representations,
warranties or covenants made by the Authority under the Loan Agreement. The Trustee shall be
entitled to and shall receive all of the Revenues, and any Revenues collected or received by the
Authority shall be deemed to be held, and to have been collected or received, by the Authority as
the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee
also shall be entitled to and shall, subject to the provisions of this Indenture, take all steps, actions
and proceedings reasonably necessary in its judgment to enforce, either jointly with the Authority
or separately, all of the rights of the Authority and all of the obligations of the Agency under the
Loan Agreement.
Section 4.02. Receipt, Deposit and Application of Revenues. There are hereby
created by the Authority and ordered established a Revenue Fund and therein a Principal Account
and an Interest Account. At least thirty (30) days prior to each Interest Payment Date, the
23
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas. Indenture of Irust (Exhibit A).doc
Trustee shall provide written notice to the Agency of the amounts due under this Section. On or
before the fifteenth (15th) day prior to each Interest Payment Date, the Agency shall deposit from
the Special Fund amounts due under this Section to make all of the payments into the funds
required on such Interest Payment Date. Upon receipt, the Trustee shall deposit the Revenues into
the following accounts, or make the payments provided in subsection (d) hereof, in the following
amounts and in the following order of priority:
(a) Interest Account. The Trustee shall deposit in the Interest Account from
transfers received from the Agency as provided in the Loan Agreement an amount required to
cause the aggregate amount on deposit in the Interest Account to equal the amount of interest
coming due and payable on the Bonds on such Interest Payment Date. No deposit need be made
into the Interest Account if the amount contained therein is at least equal to the interest coming
due and payable upon all Outstanding Bonds on the next succeeding Interest Payment Date. All
moneys in the Interest Account shall be applied and withdrawn by the Trustee solely for the
purpose of paying the interest on the as the same shall become due and payable.
(b) Principal Account. The Trustee shall deposit in the Principal Account from
transfers received from the Agency as provided in the Loan Agreement an amount required to
cause the aggregate amount on deposit in the Principal Account to equal the principal amount of
the Bonds coming due and payable on such Interest Payment Date pursuant to Section 2.02 hereof
pursuant to the provisions of Section 2.03. All moneys in the Principal Account shall be
withdrawn and applied by the Trustee solely for the purpose of paying the principal of the Bonds
at the maturity thereof.
(c) Reserve Funds. The Trustee shall deposit into the Reserve Funds the
amount required to be deposited pursuant to Section 3.05 hereof to restore said funds to the
Reserve Requirement for the respective series of Bonds.
(d) Trustee's Fees and Costs. The Trustee shall pay its fees, expenses and
advances pursuant to Section 6.03 hereof.
(e) Rebate Account for the Series B Bonds. Periodically, in the manner and at
the times required under the Tax Code to maintain the federal tax exemption of interest on the
Series B Bonds, and as provided in the Loan Agreement, the Agency shall instruct the Trustee, in
a Request of the Agency, to deposit in the Rebate Account an amount determined by the Agency
to be subject to rebate to the United States of America in accordance with Section 5.08(b), which
amount the Agency shall pay to the Trustee for such purpose pursuant to Section _ of the
Loan Agreement. Amounts in the Rebate Account shall be applied and disbursed by the Trustee
solely for the purposes and at the times set forth in Requests of the Agency filed with the Trustee
pursuant to Section 5.08(b) and neither the Authority, the Agency nor the Bondholders shall have
any rights in or claim to such money. Any moneys remaining in the Rebate Account after the
retirement of the last Series B Bond and payment and satisfaction of any arbitrage rebate and all
outstanding fees and expenses of the Trustee shall be disbursed to the Agency.
On October 2 of each year to the extent not required to pay Debt Service on the
Bonds and as long as the respective Reserve Fund is fully funded to the respective Reserve
24
P:\AgendasIAgenda AttachmentslExhibits\2010112-06-IO Recovery Zone JPA_CDC Resos -Indenture ofTrust (Exhibit A).doc
Requirement and there is no reimbursement required from the Agency, the Trustee shall disburse
said funds to the Agency.
Section 4.03. Investments. All moneys in any of the funds or accounts established
with the Trustee pursuant to this Indenture shall be invested by the Trustee solely in Permitted
Investments pursuant to the written direction of the Authority given to the Trustee in advance of
the making of such investments (which shall be promptly confirmed in writing, as to any such
direction given orally). Moneys in the Reserve Fund and the Revenue Fund (including the
Principal Account and the Interest Account established therein) shall be invested by the Trustee in
Permitted Investments, subject to the following restrictions:
(a) Moneys in the Revenue Fund (including the Interest Account and the
Principal Account) shall be invested only in obligations which will by their terms mature on such
dates as to ensure that before each Interest Payment Date there will be in such fund and the
accounts established therein, from matured obligations and other moneys already in such fund and
the accounts established therein, amounts equal to the interest and principal due and payable on
the Bonds on such dates.
(b) Moneys in the Reserve Fund shall be invested only in obligations which
will by their terms mature in not more than five (5) years, but in no event mature after the
maturity date ofthe Bonds.; and
In the absence of any such direction from the Authority, the Trustee shall invest
any such moneys in obligations described in paragraph (6) of the definition of Permitted
Investments. Obligations purchased as an investment of moneys in any fund shall be deemed to
be part of such fund or account. The Trustee may commingle any amounts in any of the funds
held hereunder with any other amounts held by the Trustee for purposes of making any
investment at the direction of the Agency, provided that the Trustee shall maintain separate
accounting procedures for the investment of all funds held hereunder.
All interest or gain derived from the investment of amounts in any of the funds or
accounts established hereunder shall be deposited in the fund or account from which such
investment was made. For purposes of acquiring any investments hereunder, the Trustee may
commingle funds held by it hereunder. The Trustee may act as principal or agent in the
acquisition of any investment.
For the purpose of determining the amount in any fund established hereunder, all
funds and accounts shall be valued at market value by the Trustee on a semiannual basis on or
before each Interest Payment Date. The Trustee may utilize such computer pricing services as
may be available to it. The Trustee shall incur no liability for losses arising from any investments
made pursuant to this Section. The Authority acknowledges that to the extent regulations of the
Comptroller of the Currency or other applicable regulatory entity grant the Authority the right to
receive brokerage confirmations of security transactions as they occur, the Authority specifically
waives receipt of such confirmations to the extent permitted by law. The Trustee will furnish the
Authority periodic cash transaction statements which include detail for all investment transactions
made by the Trustee hereunder.
25
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
ARTICLE V
COVENANTS OF THE AUTHOroTY
Section 5.01. Punctual Payment; Extension of Payment of Bonds. The Authority
shall punctually payor cause to be paid the principal, interest and premium (if any) to become due
in respect of all the Bonds, in strict conformity with the terms of the Bonds and of this Indenture,
according to the true intent and meaning thereof, but only out of Revenues and other assets
pledged for such payment as provided in this Indenture.
Section 5.02. Against Encumbrances. The Authority shall not create, or permit
the creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets
pledged or assigned under this Indenture while any of the Bonds are Outstanding, except the
pledge and assignment created by this Indenture. Subject to this limitation, the Authority
expressly reserves the right to enter into one or more other indentures for any of its corporate
purposes, including other programs under the Bond Law, and reserves the right to issue other
obligations for such purposes.
Section 5.03. Power to Issue Bonds and Make Pledge and Assignment. The
Authority is duly authorized pursuant to law to issue the Bonds and to enter into this Indenture
and to pledge and assign the Revenues, the Loan Agreement and other assets purported to be
pledged and assigned, respectively, under this Indenture in the manner and to the extent provided
in this Indenture. The Bonds and the provision of this Indenture are and will be the legal, valid
and binding special obligations of the Authority in accordance with their terms, and the Authority
and the Trustee shall at all times, subject to the provisions of this Indenture, and to the extent
permitted by law, defend, preserve and protect said pledge and assignment of Revenues and other
assets and all rights of the Bond Owners under this Indenture against all claims and demands of
all persons whomsoever.
Section 5.04. Accounting Records and Financial Statements. The Trustee shall at
all times keep, or cause to be kept, proper books of record and account, prepared in accordance
with industry standards, in which complete and accurate entries shall be made of all transactions
made by the Trustee relating to the proceeds of Bonds, the Revenues, the Loan Agreement and all
funds and accounts held by it pursuant to this Indenture. Such books of record and account shall
be available for inspection by the Authority and the Agency, during regular business hours with
reasonable prior notice.
Section 5.05. Additional Obligations. The Authority covenants that no additional
bonds, notes or other indebtedness shall be issued or incurred which are payable out of Revenues
derived under this Indenture in whole or in part, except that the Authority may at any time issue
refunding bonds in accordance with applicable provisions of law and Section 5.01 hereof.
Nothing contained herein shall prohibit the Agency from issuing or incurring obligations in the
form of bonds, notes or other indebtedness which constitute Parity Loans as provided in
Section 4.02 and 4.03 of the Loan Agreement.
26
P:\Agendas\Agenda Attachments\Exhibits\20 1 0\12-06-1 0 Recovery Zone JP A _ CDC Resos - Indenture of Trust (Exhibit A).doc
Section 5.06. Election to Designate Series A Bonds as Recovery Zone Economic
Development Bonds. The Authority and the Agency hereby make an irrevocable designation of
the Series A Bonds as "Recovery Zone Economic Development Bonds" pursuant to the
provisions of Section 1400U-2(b)(I)(B) of the Tax Code. The Authority expects to receive a
cash subsidy payment from the United States Department of Treasury pursuant to the Recovery
Act on or about each Interest Payment Date equal to 45% of the interest paid on the Series A
Bonds (the "Federal Direct Payments"). The cash payments to be made by the United States
under the Recovery Act do not constitute a full faith and credit obligation of the United States,
but are required to be paid by the Department of the Treasury under the current provisions of the
Recovery Act if the Authority complies, and continues to comply, with the applicable provisions
of the Tax Code. The cash subsidy payments if and when received by the Authority, or on behalf
of the Authority, shall be transferred to the Trustee or caused to be transferred to the Trustee for
the payment of debt service on the Bonds. The Authority hereby covenants to direct the United
States Department of Treasury to pay said subsidy directly to the Trustee. The Authority is
obligated to make all payments of principal of, and interest on, the Bonds whether or not it
receives cash subsidy payments pursuant to the Recovery Act and the Tax Code. Neither failure
by the Authority to comply with the requirements of the Tax Code, which must be satisfied for
the Authority to receive the cash subsidy payments applicable to the Bonds, nor in any event to
receive any cash subsidy payments applicable to the Bonds, constitutes a default by the
Authority hereunder.
The Authority hereby directs and authorizes any authorized Authority representative and
the Agency hereby directs and authorizes any Authorized Agency Representative to make any
other elections permitted or required pursuant to the provisions of the Tax Code or the Tax
Regulations, as such authorized representative (after consultation with Bond Counsel) deems
necessary or appropriate in connection with the Bonds and in connection with maintaining the
Authority's ability to receive Federal Direct Payments to the extent available for payment to the
Authority.
Section 5.07. Continuing Disclosure. Pursuant to Section 4.12 of the Loan
Agreement, the Agency has undertaken all responsibility for compliance with continuing
disclosure requirements, and the Authority shall have no liability to the Owners of the Bonds or
any other person with respect to such disclosure matters. The Trustee hereby covenants and
agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure
Agreement and Section 4.12 of the Loan Agreement. Notwithstanding any other provision of this
Indenture, failure of the Agency or the Trustee to comply with the Continuing Disclosure
Agreement shall not be considered an Event of Default; however, the Trustee shall at the written
request of any Participating Underwriter or the Owners of at least 25% aggregate principal
amount of Outstanding Bonds, but only to the extent the Trustee has been indemnified to its
satisfaction from any cost, liability or expense including those of its attorneys, or any Owner may
take such actions as may be necessary and appropriate, including seeking mandate or specific
performance by court order, to cause the Agency to comply with its obligations under Section
4.12 of the Loan Agreement or to cause the Trustee to comply with its obligations under this
Section 5.07.
Section 5.08. Tax Covenants with respect to the Series B Bonds.
27
P:\Agendas\Agenda Attachments\Exhibits\201O\12-06-10 Recovery Zone JPA_CDC Resos - Indenture of Trust (Exhibit A),doc
The parties hereby covenant to and for the benefit of the Owners of the Series B Bonds,
as follows:
(a) Arbitrage. The Authority will not directly or indirectly use or permit the
use of proceeds of the Series B Bonds, or any other funds of the Authority from whatever source
derived, to acquire any investment, and it will not take or permit to be taken any other action,
which would cause the Series B Bonds to be characterized as "arbitrage bonds" within the
meaning of Section 148 of the Code or which would otherwise cause the interest on the Series B
Bonds to be includable in gross income for federal income tax purposes. To this end, in the
event that at any time the Authority is of the opinion that, for purposes of this paragraph, it is
necessary to restrict or limit the yield on the investment of any monies held by the Trustee under
this Indenture, the Authority shall take such action as may be necessary.
(b) Rebate. Under the Loan Agreement, the Agency has agreed that within
forty-five (45) days after each arbitrage computation date (the "Computation Date") it will
(i) provide the Trustee with a calculation of the rebate amount for the Series B Bonds for the
period commencing on the date of issue of the Series B Bonds and ending on such Computation
Date, such rebate amount to be calculated in the manner required by Section 148 of the Code and
the Tax Regulations thereunder, and (ii) transfer to the Trustee for deposit in the Rebate Account
an amount equal to such rebate amount. If the Agency fails to provide such calculation or make
such payment to the Trustee, the Trustee shall notify the Authority and the Agency of such fact,
and the Trustee shall demand that: the Agency provide such calculation or make such payment
pursuant to Section 4.12 of the Loan Agreement, such that payments are made to the Rebate
Account from any funds lawfully available therefor.
At the Request of the Agency, within sixty (60) days after each Computation Date
(other than the final Computation Date), the Trustee, on behalf of the Authority, will pay to the
United States government an amount equal to 90% of the rebate amount calculated as of such
date, and within sixty (60) days after the final Computation Date, the Trustee, on behalf of the
Authority, will pay over to the United States government an amount equal to 100% of the rebate
amount calculated as of such date. Such payments shall be made in accordance with Section 148
of the Code and the Tax Regulations thereunder, but only from amounts on deposit in the Rebate
Account. The Issuer shall cooperate with the Trustee in the filing of any forms required by the
Code to be submitted with the rebate payments described in this Section 5.06(b).
For purposes of calculating the amount of any arbitrage rebate required to be paid
to the United States government under this Section 5.06(b), the Trustee shall furnish to the
Agency, or a qualified arbitrage rebate consultant engaged by the Agency, such investment
information as the Agency or arbitrage rebate consultant requests from time to time relating to
any funds held by the Trustee under this Indenture. The Trustee may rely upon and shall not be
responsible for any calculations provided by the Agency under this Section 5.06(b). The
Authority shall keep and retain for a period of six (6) years following the retirement of the Series
B Bonds records of the determinations made pursuant to this Section 5.06(b). Notwithstanding
any other provision in this Indenture, the obligation to pay rebatable arbitrage to the United
States of America and to comply with all other requirements of this Section shall survive the
defeasance or payment in full of the Series B Bonds.
28
P:\Agendas\Agenda Attachments\Exhibits\201 0\12-06-1 0 Recovery Zone JP A_ CDC Resos - Indenture of Trust (Exhibit A)_doc
(c) Information Reporting. The Authority will timely file a federal
information return with respect to the Series B Bonds as required by section 149( e) of the Code.
(d) Federal Guarantee Prohibition. The Authority will take no action, nor
permit or suffer any action to be taken, if the result of the same would be to cause the Series B
Bonds to be "federally guaranteed" within the meaning of Section l49(b) of the Code.
(e) Further Actions. The Authority will take all actions within its power and
permitted by law which are or may be necessary to assure that interest on the Series B Bonds at
all times remains excludable from gross income for federal income tax purposes, including
complying with the provisions of the Authority's Arbitrage and Tax Matters Certificate, the
covenants set forth herein and all requirements of the Code that must be satisfied subsequent to
the issuance of the Series B Bonds for interest on the Series B Bonds to be, or continue to be,
excluded from gross income for federal income tax purposes.
Notwithstanding any provision of this Section 5.08, the Authority may rely
conclusively on an opinion of Bond Counsel in complying, or in any deviation from complying,
with the provisions hereof.
ARTICLE VI
THE TRUSTEE
Section 6.01. Appointment of Trustee. U.S. Bank National Association, a national
banking association, is hereby appointed Trustee by the Authority for the purpose of receiving all
moneys required to be deposited with the Trustee hereunder and to allocate, use and apply the
same as provided in this Indenture. The Authority agrees that it will maintain a Trustee having a
corporate trust office in the State, with a combined capital and surplus of at least Seventy Five
Million Dollars ($75,000,000), and subject to supervision or examination by federal or State
authority, so long as any Bonds are Outstanding. If such bank, trust company or federally
chartered savings institution 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 purpose
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 Trustee is hereby authorized to pay the principal of and interest and on the
Bonds when duly presented for payment at maturity or when such payments are otherwise due
thereon, and to cancel all Bonds upon payment thereof. The Trustee shall keep accurate records of
all funds administered by it and of all Bonds paid and discharged.
29
P:\Agendas\Agenda Attachments\Exhibits\201O\12-06-10 Recovery Zone JPA_CDC Resos - Indenture of Trust (Exhibit A).doc
Section 6.02. Acceptance of Trusts. The Trustee hereby accepts the trusts
imposed upon it by this Indenture, and warrants that (i) it is a trust company or bank in good
standing located in or incorporated under the laws of a State of the United States, (ii) is duly
authorized to exercise trust powers, (iii) is subject to examination by federal or state authority, and
(iv) will maintain a combined capital and surplus as provided in Section 6.01, and the Trustee
agrees to perform said trusts, but only upon and subject to the following express terms and
conditions:
(a) The Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture. In case an Event of Default hereunder has occurred (which
has not been cured or waived), the Trustee may exercise such ofthe rights and powers vested in it
by this Indenture, and shall use the same degree of care and skill and diligence in their exercise, as
a reasonable person would exercise or use under the circumstances in the conduct of such person's
own affairs.
(b) The Trustee may execute any of the trusts or powers hereof and perform
the duties required of it hereunder by or through attorneys, agents, or receivers, and shall be
entitled to advice of counsel concerning all matters of trust and its duty hereunder. The Trustee
may conclusively rely on an opinion of counsel as full and complete protection for any action
taken or suffered by it hereunder.
(c) The Trustee shall not be responsible for any recital herein, or in the Bonds,
or for any of the supplements thereto or instruments of further assurance, or for the sufficiency of
the security for the Bonds issued hereunder or intended to be secured hereby and the Trustee shall
not be bound to ascertain or inquire as to the observance or performance of any covenants,
conditions or agreements on the part of the Authority hereunder. The Trustee may conclusively
rely on an opinion of counsel as full and complete protection for any action taken or suffered by it
hereunder.
(d) The Trustee (or any of its affiliates) may become the Owner of Bonds
secured hereby with the same rights which it would have if it were not the Trustee; may acquire
and dispose of other bonds or evidences of indebtedness of the Authority with the same rights it
would have if it were not the Trustee; and may act as a depositary for and permit any of its
officers or directors to act as a member of, or in any other capacity with respect to, any committee
formed to protect the rights of Owners of Bonds, whether or not such committee shall represent
the Owners of the majority in aggregate principal amount of the Bonds then Outstanding.
(e) The Trustee shall be protected in acting, in good faith and without
negligence, upon any notice, request, consent, certificate, order, affidavit, letter, telegram or other
paper or document believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons. Any action taken or omitted to be taken by the Trustee in good faith
and without negligence pursuant to this Indenture upon the request or authority or consent of any
person who at the time of making such request or giving such authority or consent is the Owner of
any Bond, shall be conclusive and binding upon all future Owners of the same Bond and upon
Bonds issued in exchange therefor or in place thereof. The Trustee shall not be bound to
30
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resos - Indenture of Trust (Exhibit A).doc
recognize any person as an Owner of any Bond or to take any action at his request unless the
ownership of such Bond by such person shall be reflected on the Registration Books.
(f) As to the existence or non-existence of any fact or as to the sufficiency or
validity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a
Certificate of the Authority as sufficient evidence of the facts therein contained and prior to the
occurrence of an Event of Default hereunder of which a Responsible Officer of the Trustee has
been given notice or is deemed to have notice, as provided in Section 6.02(h) hereof, shall also be
at liberty to accept a Certificate of the Authority to the effect that any particular dealing,
transaction or action is necessary or expedient, but may at its discretion secure such further
evidence deemed by it to be necessary or advisable, but shall in no case be bound to secure the
same.
(g) The permissive right of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty and it shall not be answerable for other than its
negligence or willful misconduct. The immunities and exceptions from liability of the Trustee
shall extend to its officers, directors, employees and agents.
(h) The Trustee shall not be required to take notice or be deemed to have
notice of any Event of Default hereunder except failure by the Authority to make any of the
payments to the Trustee required to be made by the Authority pursuant hereto or failure by the
Authority to file with the Trustee any document required by this Indenture to be so filed
subsequent to the issuance of the Bonds, unless the Trustee shall be specifically notified in writing
of such default by the Authority or by the Owners of at least twenty-five percent (25%) in
aggregate principal amount of the Bonds then Outstanding and all notices or other instruments
required by this Indenture to be delivered to the Trustee must, in order to be effective, be
delivered to a Responsible Officer of the Trustee at the Trust Office of the Trustee, and in the
absence of such notice so delivered the Trustee may conclusively assume there is no Event of
Default hereunder except as aforesaid.
(i) At any and all reasonable times the Trustee, and its duly authorized agents,
attorneys, experts, accountants and representatives, shall have the right, but no duty, to fully to
inspect all books, papers and records of the Authority pertaining to the Bonds, and to make copies
of any such books, papers and records such as may be desired but which is not privileged by
statute or by law.
U) The Trustee shall not be required to give any bond or surety in connection
with the execution of the said trusts and powers or otherwise in connection with the premises
hereof.
(k) Notwithstanding anything elsewhere in this Indenture with respect to the
execution of any Bonds, the withdrawal of any cash, the release of any property, or any action
whatsoever within the purview of this Indenture, the Trustee shall have the right, but shall not be
required, to demand any showings, certificates, opinions, appraisals or other information, or
corporate action or evidence thereof, as may be deemed desirable for the purpose of establishing
31
P:\Agendas\Agenda Attachrnents\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
the right of the Authority to the execution of any Bonds, the withdrawal of any cash, or the taking
of any other action by the Trustee.
(1) Before taking the action referred to in Section 8.02, the Trustee may
require that a satisfactory indemnity bond be furnished for the reimbursement of all expenses to
which it may be put and to protect it against all liability, except liability which is adjudicated to
have resulted from its negligence or willful misconduct in connection with any such action.
(m) All moneys received by the Trustee shall, until used or applied or invested
as herein provided, be held in trust for the purposes for which they were received but need not be
segregated from other funds except to the extent required by law.
(n) Every provision of this Indenture and the Loan Agreement relating to the
conduct or liability of the Trustee shall be subject to the provisions of this Indenture, including
without limitation, this Article.
(0) The Trustee shall not be responsible for any official statement or any other
disclosure material prepared and distributed in connection with the Bonds.
Section 6.03. Fees, Charges and Expenses of Trustee. The Trustee shall be
entitled to payment and reimbursement for reasonable fees for its services rendered hereunder and
all advances, counsel fees (including the allocated costs of in-house counsel and expenses) and
other expenses reasonably and necessarily made or incurred by the Trustee in connection with
such services. Upon the occurrence of an Event of Default hereunder, but only upon an Event of
Default, the Trustee shall have a first lien with right of payment prior to payment of any Bond
upon the amounts held hereunder for foregoing fees, charges and expenses incurred by it
respectively, together with interest thereon at the maximum rate permitted by law.
Section 6.04. Notice to Bond Owners of Default. If an Event of Default hereunder
occurs with respect to any Bonds of which the Trustee has been given or is deemed to have
notice, as provided in Section 6.02(h) hereof, then the Trustee shall promptly give written notice
thereof by first-class mail to the Owner of each such Bond, unless such Event of Default shall
have been cured before the giving of such notice; provided, however, that unless such Event of
Default consists of the failure by the Authority to make any payment when due, the Trustee may
elect not to give such notice if and so long as the Trustee in good faith determines that it is in the
best interests of the Bond Owners not to give such notice.
Section 6.05. Intervention by Trustee. In any judicial proceeding to which the
Authority is a party which, in the opinion of the Trustee and its counsel, has a substantial bearing
on the interests of Owners of any of the Bonds, the Trustee may intervene on behalf of such Bond
Owners, and subject to Section 6.02(1) hereof, shall do so if requested in writing by the Owners of
at least twenty-five percent (25%) in aggregate principal amount of such Bonds then Outstanding.
Section 6.06. Removal of Trustee. The Owners of a majority in aggregate
principal amount of the Outstanding Bonds may at any time, and the Authority may (and at the
request of the Agency shall) so long as no Event of Default shall have occurred and then be
32
P:\Agendas\Agenda Attachments\Exhibits\201O\12-06-10 Recovery Zone JPA_CDC Resas -Indenture ofrrust {Exhibit A),doc
continuing, upon not less than thirty (30) days prior written notice, remove the Trustee initially
appointed under one or both series of Bonds, and any successor thereto, by an instrument or
concurrent instruments in writing delivered to the Trustee. The Authority or such Owners, as the
case may be, shall appoint a successor or successors thereto; provided that any such successor
shall be a bank, trust company or federally chartered savings institution meeting the requirements
set forth in Section 6.01.
Section 6.07. Resignation by Trustee. The Trustee and any successor Trustee may
at any time give written notice of its intention to resign as Trustee hereunder under one or both
series of Bonds, such notice to be given to the Authority and the Agency by registered or certified
mail. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor
Trustee. No resignation or removal of the Trustee and appointment of a successor Trustee shall
become effective until a successor Trustee has been appointed and has accepted the duties of
Trustee. Upon such acceptance, the Authority shall cause notice thereof to be given by first class
mail, postage prepaid, to the Bond Owners at their respective addresses set forth on the
Registration Books.
Section 6.08. Appointment of Successor Trustee. In the event of the removal or
resignation of the Trustee pursuant to Sections 6.06 or 6.07, respectively, with the prior written
consent of Agency, the Authority shall promptly appoint a successor Trustee with respect to one
or both series of Bonds, as applicable. In the event the Authority shall for any reason whatsoever
fail to appoint a successor Trustee following the delivery to the Trustee of the instrument
described in Section 6.06 or following the receipt of notice by the Authority pursuant to Section
6.07, the Trustee may, at the expense of the Authority, apply to a court of competent jurisdiction
for the appointment of a successor Trustee meeting the requirements of Section 6.01 hereof. Any
successor Trustee must have combined capital, surplus and undivided profits of at least $75
million. Any such successor Trustee appointed by such court shall become the successor Trustee
hereunder notwithstanding any action by the Authority purporting to appoint a successor Trustee.
In case of the appointment hereunder of a successor Trustee with respect to the
Bonds, the Authority, the Trustee and the successor Trustee with respect to the Bonds shall
execute and deliver a supplemental indenture hereto, wherein the successor trustee shall accept
such appointment and which (1) shall contain such provisions as are necessary and desirable to
transfer, confirm and vest in such successor Trustee all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Bonds of such series to which the appointment of the successor
Trustee relates, (2) if the retiring Trustee is not resigning or being removed as to all series of
Bonds, shall contain such provisions as shall be deemed necessary and desirable to confirm that
all of the rights, powers, trusts and duties of the retiring Trustee as to that series of Bonds for
which it is not resigning or being removed shall continue to be vested in the retiring Trustee, and
(3) shall add to or change such provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one Trustee, it being understood
that nothing hereunder or under such supplemental indenture shall constitute such Trustees co-
trustees of the same trust and that each Trustee shall be a trustee of a separate trust and upon the
execution and delivery of such supplemental indenture the resignation or removal of such retiring
Trustee shall become effective and the successor Trustee shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee with respect to such series of Bonds and the
33
P:\Agendas\Agenda Attachments\Exhibits\201O\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
retiring Trustee shall transfer to such successor Trustee all property and money held by the
retiring Trustee related to the series of Bonds to which the appointment of such successor Trustee
relates.
Section 6.09. Merger or Consolidation. Any company into which the Trustee may
be merged or converted or with which it may be consolidated or any company resulting from any
merger, conversion or consolidation to which it shall be a party or any company to which the
Trustee may sell or transfer all or substantially all of its corporate trust business, provided that
such company shall meet the requirements set forth in Section 6.01, shall be the successor to the
Trustee and vested with all of the title to the trust estate and all of the trusts, powers, discretions,
immunities, privileges and all other matters as was its predecessor, without the execution or filing
of any paper or further act, anything herein to the contrary notwithstanding.
Section 6.10. Concerning Any Successor Trustee. Every successor Trustee
appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to the
Authority an instrument in writing accepting such appointment and warranting certain funds as
provided in Section 6.02 hereof. Thereupon such successor, without any further act, deed or
conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties
and obligations of its predecessors; but such predecessor shall, nevertheless, on the Request of the
Authority, or of the Trustee's successor, execute and deliver an instrument transferring to such
successor all the estates, properties, rights, powers and trusts of such predecessor hereunder; and
every predecessor Trustee shall deliver all securities and moneys held by it as the Trustee
hereunder to its successor. Should any instrument in writing from the Authority be required by
any successor Trustee for more fully and certainly vesting in such successor the estate, rights,
powers and duties hereby vested or intended to be vested in the predecessor Trustee, any and all
such instruments in writing shall, on request, be executed, acknowledged and delivered by the
Authority.
Section 6.11. Appointment of Co-Trustee. It is the purpose of this Indenture that
there shall be no violation of any law of any jurisdiction (including particularly the law of the
State) denying or restricting the right of banking corporations or associations to transact business
as Trustee in such jurisdiction. It is recognized that in the case of litigation under this Indenture,
and in particular in case of the enforcement of the rights of the Trustee on default, or in the case
the Authority or Trustee deem that by reason of any present or future law of any jurisdiction the
Trustee may not exercise any of the powers, rights or remedies herein granted to the Trustee or
hold title to the properties, in trust, as herein granted or take any other action which may be
desirable or necessary in connection therewith, it may be necessary that the Authority or Trustee
appoint an additional individual or institution as a separate co-trustee. The following provisions
of this Section 6.11 are adopted to these ends.
Any co-trustee must have combined capital, surplus and undivided profits of at
least $75 million.
In the event that the Authority or Trustee appoint an additional individual or
institution as a separate or co-trustee, each and every remedy, power, right, claim, demand, cause
of action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be
34
P:\Agendas\Agenda Attachments\Exhibits\201O\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by
and vest in such separate or co-trustee but only to the extent necessary to enable such separate or
co-trustee to exercise such powers, rights and remedies, and every covenant and obligation
necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable by
either of them.
Should any instrument in writing from the Authority be required by the separate
trustee or co-trustee so appointed by the Trustee for more fully and certainly vesting in and
confirming to it such properties, rights, powers, trusts, duties and obligations, any and all such
instruments in writing shall, on request, be executed, acknowledged and delivered by the
Authority. In case any separate trustee or co-trustee, or a successor to either, shall become
incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties
and obligations of such separate trustee or co-trustee so far as permitted by law, shall vest in and
be exercised by the Trustee until the appointment of a new trustee or successor to such separate
trustee or co-trustee.
Section 6.12. Indemnification; Limited Liability of Trustee. The Authority
covenants and agrees to indemnify and save the Trustee and its officers, directors, agents and
employees, harmless against any loss, expense and liabilities which it may incur arising out of or
in the exercise and performance of its powers and duties hereunder, or under the Loan Agreement
including the costs and expenses of defending against any claim of liability, but excluding any
and all losses, expenses and liabilities which are due to the negligence or willful misconduct of
the Trustee, its officers, directors, agents or employees. No provision in this Indenture shall
require the Trustee to risk or expend its own funds or otherwise incur any financial liability
hereunder if repayment of such funds or adequate indemnity against such liability or risk is not
assured to it. The Trustee shall not be liable for any action taken or omitted to be taken by it in
accordance with the direction of the Owners of at least twenty-five percent (25%) in aggregate
principal amount of Bonds Outstanding relating to the time, method and place of conducting any
proceeding or remedy available to the Trustee under this Indenture. The obligations or any trust
or power of the Authority under this paragraph shall survive discharge of the Bonds and the
resignation or removal of the Trustee under this Indenture.
ARTICLE VII
MODIFICA nON AND AMENDMENT OF THE INDENTURE
Section 7.01. Amendment Hereof. This Indenture and the rights and obligations
of the Authority and of the Owners of the Bonds may be modified or amended at any time by a
Supplemental Indenture which shall become binding upon adoption, without consent of any Bond
Owners, to the extent permitted by law but only for anyone or more of the following purposes:
(a) to add to the covenants and agreements of the Authority in this Indenture
contained, other covenants and agreements thereafter to be observed, or to limit or surrender any
rights or powers herein reserved to or conferred upon the Authority so long as such limitation or
surrender of such rights or powers shall not materially adversely affect the Owners of the Bonds;
or
35
P:\Agendas\Agenda Attachments\Exhibits\20 1 0\12-06-1 0 Recovery Zone JP A _ CDC Resas - Indenture of Trust (Exhibit A).doc
(b) to make such provisions for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective provision contained in this Indenture, or in any
other respect whatsoever as the Authority may deem necessary or desirable, provided under any
circumstances that such modifications or amendments shall not materially adversely affect the
interests of the Owners of the Bonds in the reasonable judgment of the Authority; or
(c) to amend any provision hereof relating to the Tax Code, to any extent
whatsoever but only of and to the extent such amendment will not adversely affect the exclusion
from gross income of interest on any of the Bonds under the Tax Code, in the opinion of
nationally-recognized bond counsel.
(d) to evidence and provide for the acceptance of appointment hereunder by a
successor Trustee with respect to the Bonds of one or more series and to add to or change any
provisions of this Indenture as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee.
Except as set forth in the preceding paragraph of this Section 7.01, and subject to
the prior written consent of the Agency, this Indenture and the rights and obligations of the
Authority and of the Owners of the Bonds may only be modified or amended at any time by a
Supplemental Indenture which shall become binding when the written consent of the Owners of a
majority in aggregate principal amount of the Bonds then Outstanding, are filed with the Trustee.
No such modification or amendment shall (a) extend the maturity of or reduce the interest rate on
any Bond or otherwise alter or impair the obligation of the Authority to pay the principal and
interest at the time and place and at the rate and in the currency provided therein of any Bond
without the express written consent of the Owner of such Bond, (b) reduce the percentage of
Bonds required for the written consent to any such amendment or modification, or (c) without its
written consent thereto, modify any of the rights or obligations of the Trustee.
Any rating agency rating the Bonds must receive notice of each amendment and a
copy thereof at least 15 days in advance of its execution or adoption.
Section 7.02. Effect of Supplemental Agreement. From and after the time any
Supplemental Indenture becomes effective pursuant to this Article VII, this Indenture shall be
deemed to be modified and amended in accordance therewith, the respective rights, duties and
obligations of the parties hereto or thereto and all Owners of Outstanding Bonds, as the case may
be, shall thereafter be determined, exercised and enforced hereunder subject in all respects to such
modification and amendment, and all the terms and conditions of any Supplemental Indenture
shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
Section 7.03. Endorsement or Replacement of Bonds After Effective Date. After
the effective date of any action taken as hereinabove provided, the Authority may determine that
the Bonds shall bear a notation, by endorsement in form approved by the Authority, as to such
action, and 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 Trust Office of the Trustee, a suitable notation
as to such action shall be made on such Bond. If the Authority shall so determine, new Bonds so
36
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA~CDC Resas - Indenture of Trust (Exhibit A).doc
modified as, in the opinion of the Authority, shall be necessary to conform to such Bond Owners'
action shall be prepared and executed, and in that case upon demand of the Owner of any Bond
Outstanding at such effective date such new Bonds shall be exchanged at the Trust Office of the
Trustee, without cost to each Bond Owner, for Bonds then Outstanding, upon surrender of such
Outstanding Bonds.
Section 7.04. Amendment by Mutual Consent. The provisions of this Article VII
shall not prevent any Bond Owner from accepting any amendment as to the particular Bond held
by him, provided that due notation thereof is made on such Bond.
Section 7.05. Opinion of Counsel. The Trustee shall be furnished with an opinion
of Bond Counsel to the effect that any supplement or amendment to be executed by the Trustee is
permitted by the terms of this Indenture and all conditions precedent to such execution have been
satisfied and such supplement or amendment does not adversely affect the tax-exempt status of
the Bonds.
ARTICLE VIII
EVENTS OF DEF AUL T AND REMEDIES OF BOND OWNERS
Section 8.01. Events of Default. The following events shall be Events of Default
hereunder:
(a) Default in the due and punctual payment of the principal of any Bond when
and as the same shall become due and payable, whether at maturity as therein expressed by
declaration or otherwise.
(b) Default 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) Failure by the Authority to observe and perform any of the covenants,
agreements or conditions on its part in this Indenture or in the Bonds contained, other than as
referred to in the preceding clauses (a) and (b), for a period of sixty (60) days after written notice,
specifying such failure and requesting that it be remedied has been given to the Authority by the
Trustee, or by the Owners of not less than twenty-five percent (25%) in aggregate principal
amount of the Outstanding Bonds; provided, however, that if in the reasonable opinion of the
Authority the failure stated in such notice (other than failure to pay the Trustee's fees and
expenses as provided herein) can be corrected, but not within such sixty (60) day period, the
Trustee and such Owners shall not unreasonably withhold their consent to an extension of such
time if corrective action is instituted by the Authority within such sixty (60) day period and
diligently pursued until such failure is corrected.
(d) The filing by the Authority of a petItiOn or application seeking
reorganization or arrangement under the federal bankruptcy laws or other debtor relief under the
laws of any jurisdiction, or the Authority becomes a subject of such petition or application which
is not contested by the Authority or otherwise dismissed or discharged within sixty (60) days.
37
P:\Agendas\Agenda Attachments\Exhibits\20 1 0\12-06-1 0 Recovery Zone JP A _ CDC Resos . Indenture of Trust (Exhibit A).doc
(e) The occurrence of an event of default under the Loan Agreement which has
not been cured during the applicable cure period provided therein.
Section 8.02. Remedies and Rights of Bond Owners. Upon the occurrence and
during the continuance of an Event of Default, the Trustee may pursue any available remedy at
law or in equity to enforce the payment of the principal of, premium, if any, and interest on the
Outstanding Bonds, and to enforce any rights of the Trustee under or with respect to this
Indenture.
If an Event of Default shall have occurred and be continuing and if requested so to
do by the Owners of at least twenty-five percent (25%) in aggregate principal amount of
Outstanding Bonds and indemnified as provided in Section 6.02(1), the Trustee shall be obligated
to exercise such one or more of the rights and powers conferred by this Article VIII, as the
Trustee, being advised by counsel, shall deem most expedient in the interests of the Bond Owners.
No remedy by the terms of this Indenture conferred upon or reserved to the Trustee
or to the Bond Owners is intended to be exclusive of any other remedy, but each and every such
remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or to
the Bond Owners hereunder or now or hereafter existing at law or in equity.
No delay or omission to exercise any right or power accruing upon any Event of
Default shall impair any such right or power or shall be construed to be a waiver of any such
Event of Default or acquiescence therein; such right or power may be exercised from time to time
as often as may be deemed expedient.
Section 8.03. Application of Revenues and Other Funds After Default. All
amounts received by the Trustee pursuant to any right given or action taken by the Trustee under
the provisions of this Indenture shall be applied by the Trustee in the following order upon
presentation of the several Bonds, and the stamping thereon of the amount 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 Trustee in declaring
such Event of Default and in carrying out the provisions of this Article VIII in
connection with the Bonds, including reasonable compensation to its agents,
attorneys and counsel;
Second, to the payment of the whole amount of interest on and principal of
the Bonds then due and unpaid, with interest on overdue installments of principal
and interest to the extent permitted by law at the net effective rate of interest then
borne by the Outstanding Bonds; provided, however, that in the event such
amounts shall be insufficient to pay in full the full amount of such interest and
principal, then such amounts shall be applied in the following order of priority:
38
P:\Agendas\Agenda Attachments\Exhibits\201 0\ 12-06-1 0 Recovery Zone JP A _ CDC Resos - Indenture ofTrust (Exhibit A).doc
(a) first, to the payment of all installments of interest on the Bonds then
due and unpaid, on a pro rata basis in the event that the available amounts are
insufficient to pay all such interest in full,
(b) second, to the payment of principal of all installments of the Bonds
then due and unpaid, on a pro rata basis in the event that the available amounts are
insufficient to pay all such principal in full, and
(c) third, to the payment of interest on overdue installments of
principal and interest of the Bonds, on a pro rata basis in the event that the
available amounts are insufficient to pay all such interest in full.
Section 8.04. Power of Trustee to Control Proceedings. In the event that the
Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial
proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion or
upon the request of the Owners of at least a majority in aggregate principal amount of the Bonds
then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of
the Owners of the Bonds, with respect to the continuance, discontinuance, withdrawal,
compromise, settlement or other disposal of such action; provided, however, that the Trustee shall
not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or
settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has
been filed with it a written request signed by the Owners of a majority in aggregate principal
amount of the Outstanding Bonds hereunder opposing such discontinuance, withdrawal,
compromise, settlement or other disposal of such litigation.
Section 8.05. Appointment of Receivers. Upon the occurrence of an Event of
Default hereunder, and upon the filing of a suit or other commencement of judicial proceedings to
enforce the rights of the Trustee and of the Bond Owners under this Indenture, the Trustee shall
be entitled, as a matter of right, to the appointment of a receiver or receivers of the Revenues and
other amounts pledged hereunder, pending such proceedings, with such powers as the court
making such appointment shall confer.
Section 8.06. Non-Waiver. Nothing in this Article VIII or in any other provision
of this Indenture, or in the Bonds, shall affect or impair the obligation of the Authority, which is
absolute and unconditional, to pay the interest on and principal of the Bonds to the respective
Owners of the Bonds at the respective dates of maturity, as herein provided, out of the Revenues
and other moneys herein pledged for such payment.
A waiver of any default or breach of duty or contract by the Trustee or any Bond
Owners shall not affect any subsequent default or breach of duty or contract, or impair any rights
or remedies on such subsequent default or breach. No delay or omission of the Trustee or 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 Trustee or Bond Owners
by the Bond Law or by this Article VIII may be enforced and exercised from time to time and as
often as shall be deemed expedient by the Trustee or the Bond Owners, as the case may be.
39
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-1O Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
Section 8.07. Rights and Remedies of Bond Owners. No Owner of any Bond
issued hereunder shall have the right to institute any suit, action or proceeding at law or in equity,
for any remedy under or upon this Indenture, unless (a) such Owner shall have previously given
to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a
majority in aggregate principal amount of all the Bonds then Outstanding shall have made written
request upon the Trustee to exercise the powers hereinbefore granted or to institute such action,
suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee indemnity
reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in
compliance with such request; and (d) the Trustee shall have refused or omitted to comply with
such request for a period of sixty (60) days after such written request shall have been received by,
and said tender of indemnity shall have been made to, the Trustee.
Such notification, request, tender of indemnity and refusal or omission are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any
remedy hereunder; it being understood and intended that no one or more Owners of Bonds shall
have any right in any manner whatever by his or their action to enforce any right under this
Indenture, except in the manner herein provided, and that all proceedings at law or in equity to
enforce any provision of this Indenture shall be instituted, had and maintained in the manner
herein provided and for the equal benefit of all Owners of the Outstanding Bonds.
The right of any Owner of any Bond to receive payment of the principal of and
interest and premium (if any) on such Bond as herein provided or to institute suit for the
enforcement of any such payment, shall not be impaired or affected without the written consent of
such Owner, notwithstanding the foregoing provisions of this Section or any other provision of
this Indenture.
Section 8.08. Termination of Proceedings. In case the Trustee shall have
proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise,
and such proceedings shall have been discontinued or abandoned for any reason, or shall have
been determined adversely, then and in every such case, the Authority, the Trustee and the Bond
Owners shall be restored to their former positions and rights hereunder, respectively, with regard
to the property subject to this Indenture, and all rights, remedies and powers of the Trustee shall
continue as if no such proceedings had been taken.
ARTICLE IX
RESERVED
ARTICLE X
MISCELLANEOUS
Section 10.01. Limited Liability of Authority. Notwithstanding anything in this
Indenture contained, the Authority shall not be required to advance any moneys derived from any
40
P:\Agendas\Agenda Attachments\Exhibits\2010\12~06-10 Recovery Zone JPA_CDC Resos - Indenture of Trust (Exhibit A).doc
source of income other than the Revenues for the payment of the principal of or interest on the
Bonds, or for the performance of any covenants herein contained (except to the extent any such
covenants are expressly payable hereunder from the Revenues or otherwise from amounts payable
under the Loan Agreement). The Authority may, however, advance funds for any such purpose,
provided that such funds are derived from a source legally available for such purpose and may be
used by the Authority for such purpose without incurring indebtedness.
The Bonds shall be revenue bonds, payable exclusively from the Revenues and
other funds as in this Indenture provided. The general fund of the Authority is not liable, and the
credit of the Authority is not pledged, for the payment of the interest and premium (if any) on or
principal of the Bonds. The Owners of the Bonds shall never have the right to compel the
forfeiture of any property of the Authority. The principal of and interest on the Bonds, shall not
be a legal or equitable pledge, charge, lien or encumbrance upon any property of the Authority or
upon any of its income, receipts or revenues except the Revenues and other funds pledged to the
payment thereof as in this Indenture provided.
Section 10.02. Benefits ofIndenture Limited to Parties. Nothing in this Indenture,
expressed or implied, is intended to give any person other than the Authority, the Trustee, the
Agency and the Owners of the Bonds, any right, remedy or claim under or by reason of this
Indenture. Any covenants, stipulations, promises or agreements in this Indenture contained by
and on behalf of the Authority shall be for the sole and exclusive benefit of the Trustee, the
Agency and the Owners of the Bonds.
Section 10.03. Discharge of Indenture. If the Authority shall pay and discharge
the any or all of the Outstanding Bonds in anyone or more of the following ways:
(a) by and well and truly paying or causing to be paid the principal of and
interest and premium (if any) on such Bonds, as and when the same become due and payable;
(b) by irrevocably depositing with the Trustee, in trust, at or before maturity,
cash which, together with the available amounts then on deposit in the funds and accounts
established with the Trustee pursuant to this Indenture and the Loan Agreement, is fully sufficient
to pay such Bonds, including all principal and interest; or
(c) by irrevocably depositing in escrow certain noncallable investments
referred to in this Section 10.03;
then, at the Request of the Authority and notwithstanding that any of such Bonds shall not have
been surrendered for payment, the pledge of the Revenues and other funds provided for in this
Indenture with respect to such Bonds, and all other pecuniary obligations of the Authority under
this Indenture with respect to all such Bonds, shall cease and terminate, except only the obligation
of the Authority to pay or cause to be paid to the Owners of such Bonds not so surrendered all
sums due thereon from amounts set aside for such purpose as aforesaid, and all expenses and
costs of the Trustee.
41
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resos - Indenture of Trust (Exhibit A).doc
Only (i) cash, (ii) non-callable direct obligations of the United States of America
("Treasuries"), (iii) evidence of ownership of proportionate interests in future interest and
principal payments on Treasuries held by a bank or trust company as custodian, under which the
owner of the investment is the real party in interest and has the right to proceed directly and
individually against the obligor and the underlying Treasures are not available to any person
claiming through the custodian or to whom the custodian may be obligated or (iv) pre-refunded
municipal obligations rated "AAA" and "Aaa" by S&P and Moody's respectively, or any
combination thereof, shall be authorized to be used to effect defeasance of the Bonds. The
deposit in the escrow must be sufficient, without reinvestment, to pay all principal and interest
and call premium, if any, on the Bonds on the maturity.
Any funds held by the Trustee following any payment or discharge of the
Outstanding Bonds pursuant to this Section 10.03, which are not required for said purposes, shall
be paid over to the Authority after payment of amounts due to the Trustee under this Indenture.
Section 10.04. Successor Is Deemed Included in All References to Predecessor.
Whenever in this Indenture or any Supplemental Indenture the Authority is named or referred to,
such reference shall be deemed to include the successor to the powers, duties and functions, with
respect to the management, administration and control of the affairs of the Authority, that are
presently vested in the Authority, and all the covenants, agreements and provisions contained in
this Indenture by or on behalf of the Authority shall bind and inure to the benefit of its successors
whether so expressed or not.
Section 10.05. Content of Certificates. Every certificate with respect to
compliance with a condition or covenant provided for in this Indenture except the certificate of
destruction pursuant to Section 10.10 hereof, shall include (a) a statement that the person or
persons making or giving such certificate have read such covenant or condition and the definitions
herein relating thereto; (b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such certificate are based; (c) a
statement that, in the opinion of the signers, they have made or caused to be made such
examination or investigation as is necessary to enable them to express an informed opinion as to
whether or not such covenant or condition has been complied with; and (d) a statement as to
whether, in the opinion of the signers, such condition or covenant has been complied with.
Any such certificate made or given by an officer of the Authority may be based,
insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel,
unless such officer knows that the certificate or opinion or representations with respect to the
matters upon which his certificate may be based, as aforesaid, are erroneous, or in the exercise of
reasonable care should have known that the same were erroneous. Any such certificate or opinion
or representation made or given by counsel may be based, insofar as it relates to factual matters,
on information which is in the possession of the Authority, or upon the certificate or opinion of or
representations by an officer or officers of the Authority, unless such counsel knows that the
certificate or opinion or representations with respect to the matters upon which his certificate,
opinion or representation may be based, as aforesaid, are erroneous, or in the exercise of
reasonable care should have known that the same were erroneous.
42
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas -Indenture of Trust (Exhibit A).doc
Section 10.06. Execution of Documents by Bond Owners. Any request, consent
or other instrument required by this Indenture to be signed and executed by Bond Owners may be
in any number of concurrent writings of substantially similar tenor and may be signed or executed
by such Bond Owners in person or by their agent or agents duly appointed in writing. Proof of
the execution of any such request, consent or other instrument or of a writing appointing any such
agent, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the
Trustee and of the Authority if made in the manner provided in this Section 10.06.
The fact and date of execution by any person of any such request, consent or other
instrument or writing may be proved by the affidavit of a witness of such execution or by the
certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof
to take acknowledgments of deeds, certifying that the person signing such request, consent or
other instrument or writing acknowledged to him the execution thereof.
The ownership of Bonds shall be proved by the Registration Books. Any request,
consent or vote of the Owner of any Bond shall bind every future Owner of the same Bond and
the Owner of any Bond issued in exchange therefor or in lieu thereof, in respect of anything done
or suffered to be done by the Trustee or the Authority in pursuance of such request, consent or
vote. In lieu of obtaining any demand, request, direction, consent or waiver in writing, the
Trustee may call and hold a meeting of the Bond Owners upon such notice and in accordance
with such rules and obligations as the Trustee considers fair and reasonable for the purpose of
obtaining such action.
Section 10.07. Disqualified Bonds. In determining whether the Owners of the
requisite aggregate principal amount of Bonds have concurred in any demand, request, direction,
consent or waiver under this Indenture, Bonds which are owned or held by or for the account of
the Agency or the Authority (but excluding Bonds held in any employees' retirement fund) shall
be disregarded and deemed not to be Outstanding for the purpose of any such determination;
provided, however, that for the purpose of determining whether the Trustee shall be protected in
relying on any such demand, request, direction, consent or waiver, only Bonds which the Trustee
actually knows to be so owned or held shall be disregarded.
Section 10.08. Waiver of Personal Liability. No officer, agent or employee of the
Authority shall be individually or personally liable for the payment of the interest on or principal
of the Bonds; but nothing herein contained shall relieve any such officer, agent or employee from
the performance of any official duty provided by law.
Section 10.09. Partial Invalidity. If anyone or more of the covenants or
agreements, or portions thereof, provided in this Indenture on the part of the Authority (or of the
Trustee) to be performed should be contrary to law, then such covenant or covenants, such
agreement or agreements, or such portions thereof, shall be null and void and shall be deemed
separable from the remaining covenants and agreements or portions thereof and shall in no way
affect the validity of this Indenture or of the Bonds; but the Bond Owners shall retain all rights
and benefits accorded to them under the Bond Law or any other applicable provisions of law. The
Authority hereby declares that it would have entered into this Indenture and each and every other
section, paragraph, subdivision, sentence, clause and phrase hereof and would have authorized the
43
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
issuance of the Bonds pursuant hereto irrespective of the fact that anyone or more sections,
paragraphs, subdivisions, sentences, clauses or phrases of this Indenture or the application thereof
to any person or circumstance may be held to be unconstitutional, enforceable or invalid.
Section 10.10. Destruction of Cancelled Bonds. Whenever in this Indenture
provision is made for the surrender to the Authority of any Bonds which have been paid or cancel
led pursuant to the provisions of this Indenture, the Trustee shall destroy such Bonds and furnish
to the Authority a certificate of such destruction.
Section 10.11. Funds and Accounts. Any fund or account required by this
Indenture to be established and maintained by the Authority or the Trustee may be established and
maintained in the accounting records of the Authority or the Trustee, as the case may be, either as
a fund or an account, and may, for the purpose of such records, any audits thereof and any reports
or statements with respect thereto, be treated either as a fund or as an account. All such records
with respect to all such funds and accounts held by the Authority shall at all times be maintained
in accordance with generally accepted accounting principles and all such records with respect to
all such funds and accounts held by the Trustee shall be at all times maintained in accordance with
industry practices; in each case with due regard for the protection of the security of the Bonds and
the rights of every Owner thereof.
Section 10.12. Payment on Business Days. Whenever in this Indenture any
amount is required to be paid on a day which is not a Business Day, such payment shall be
required to be made on the Business Day immediately following such day.
Section 10.13. Notices. Any notice, request, complaint, demand, communication
or other paper shall be sufficiently given and shall be deemed given when delivered or mailed by
first class mail, postage prepaid, or sent by telegram, or sent by telecopier and promptly
confirmed by mail, addressed as follows:
If to the Authority:
San Bernardino Joint Powers Financing Authority
201 North "E" Street, Third Floor
San Bernardino, California 92401
Attention: Chair
If to the Agency:
Redevelopment Agency of the City of San Bernardino
201 North "E" Street, Third Floor
San Bernardino, California 92401
Attention: Executive Director
If to the Trustee:
u.S. Bank National Association
550 S. Hope Street, Suite 500
Los Angeles, California 90071
Attention: San Bernardino JPFA-2010
44
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas. Indenture of Trust {Exhibit A),doc
The Authority and the Trustee may designate any further or different addresses to
which subsequent notices, certificates or other communications shall be sent.
Section 10.14. Unclaimed Moneys. Anything in this Indenture to the contrary
notwithstanding, any moneys held by the Trustee in trust for the payment and discharge of any of
the Bonds which remain unclaimed for two (2) years after the date when such Bonds have become
due and payable, either at their stated maturity dates or by call for earlier redemption, if such
moneys were held by the Trustee at such date, or for two (2) years after the date of deposit of such
moneys if deposited with the Trustee after said date when such Bonds become due and payable,
shall, at the Request of the Authority, be repaid by the Trustee to the Authority, as its absolute
property and free from trust, and the Trustee shall thereupon be released and discharged with
respect thereto and the Bond Owners shall look only to the Authority for the payment of such
Bonds; provided, however, that before being required to make any such payment to the Authority,
the Trustee shall, at the expense of the Authority, cause to be mailed to the Owners of all such
Bonds, at their respective addresses appearing on the Registration Books, a notice that said moneys
remain unclaimed and that, after a date named in said notice, which date shall not be less than
thirty (30) days after the date of mailing of such notice, the balance of such moneys then unclaimed
will be returned to the Authority.
Section 10.15. Governing Law. This Agreement shall be construed and governed
in accordance with the laws of the State of California.
45
PlAgendaslAgenda AttachmentslExhibits\20 1 01 12-06-1 0 Recovery Zone JP A _ CDC Resos - Indenture ofTrust (Exhibit A).doc
IN WITNESS WHEREOF, the SAN BERNARDINO JOINT POWERS
FINANCING AUTHORITY has caused this Indenture to be signed in its name by its Chair and
Secretary and U.S. Bank National Association in token of its acceptance of the trust created
hereunder, has caused this Indenture to be signed in its corporate name by its officer identified
below, all as of the day and year first above written.
SAN BERNARDINO JOINT POWERS
FINANCING AUTHORITY
By:
Chair
ATTEST:
By:
Authority Secretary
APPROVED:
By:
Authority Counsel
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
Its Authorized Officer
46
P:\Agendas\Agenda AttachmentslExhibits\2010\12-06-1O Recovery Zone JPA_CDC Resos - Indenture ofTrust (Exhibit A) doc
EXHIBIT A
FORM OF SERIES A BOND
SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY
TAX ALLOCA nON REVENUE BOND
SERIES 201 OA
(4TH STREET CORRIDOR PROJECT-FEDERALLY TAXABLE RECOVERY ZONE
ECONOMIC DEVELOPMENT BONDS)
Rate of
Interest
Maturity Date
October
Delivery
Date
October _,2010
CUSIP
REGISTERED OWNER:
PRINCIP AL AMOUNT:
THE SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY, a
joint powers authority organized and existing under the laws of the State of California (the
"Authority"), for value received, hereby promises to pay (but only out of the Revenues and other
moneys and securities hereinafter referred to) to the Registered Owner identified above or
registered assigns (the "Registered Owner"), on the Maturity Date identified above, the Principal
Amount, identified above in lawful money of the United States of America; and to pay interest
thereon at the rate of interest set forth above, in like lawful money from the date hereof, until
payment of such Principal Amount at the rate and at the times hereinafter provided. This Bond
shall bear interest from the Interest Payment Date (as hereinafter defined) next preceding the date
of authentication of this Bond (unless this Bond is authenticated on or before an Interest Payment
Date and after the fifteenth (15th) calendar day of the month preceding such Interest Payment
Date, in which event it shall bear interest from such Interest Payment Date, or unless this Bond is
authenticated on or prior to the fifteenth (15th) day of the month preceding the first Interest
Payment Date, in which event it shall bear interest from the Delivery Date identified 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 hereon has
previously been paid or made available for payment), payable semiannually on April 1 and
October 1 in each year, commencing on April 1, 2011 (the "Interest Payment Dates") until
payment of such Principal Amount in full. The Principal Amount hereof is payable upon
presentation and surrender hereof at the Principal Corporate Trust Office, as such term is defined
in the Indenture of U.S. Bank National Association, as trustee (the "Trustee"). Interest hereon is
payable by check of the Trustee mailed by first class mail on each Interest Payment Date to the
Registered Owner hereof at the address of the Registered Owner as it appears on the registration
books of the Trustee as of the close of business on the fifteenth (lsth) calendar day of the month
A-47
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_ CDC Resas - Indenture of Trust (Exhibit A).doc
preceding such Interest Payment Date (a "Record Date"); provided, however, that at the written
request of the owner of at least $1,000,000 in aggregate principal amount of the outstanding
Bonds filed with the Trustee prior to any Record Date, interest on such Bonds shall be paid to
such owner on each succeeding Interest Payment Date by wire transfer of immediately available
funds to an account in the continental United States designated in such written request.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS SET
FORTH ON THE REVERSE HEREOF, WHICH PROVISIONS SHALL, FOR ALL
PURPOSES, HAVE THE SAME EFFECT AS IF FULLY SET FORTH HEREIN.
It is hereby certified that all things, conditions and acts required to exist, to have
happened and to have been performed precedent to and in the issuance of this Bond do exist,
have happened and have been performed in due time, form and manner as required by the
Constitution and statutes of the State of California and by the Act (as hereinafter defined), and
that the amount of this Bond, together with all other indebtedness of the Authority, does not
exceed any limit prescribed by the Constitution or statutes of the State of California or by the
Act.
This Bond shall not be entitled to any benefit under the Indenture (as hereinafter
defined), or become valid or obligatory for any purpose, until the certificate of authentication
hereon shall have been manually signed by the Trustee.
IN WITNESS WHEREOF, the Authority has caused this Bond to be executed in
its name and on its behalf by the facsimile signature of its Chair and attested to by the facsimile
signature of its Secretary and its seal to be reproduced hereon, all as of the Original Issue Date
identified above.
SAN BERNARDINO JOINT POWERS
FINANCING AUTHORITY
By:
Chair
Attest:
By:
Secretary
A-48
P:\Agendas\Agenda Attachments\Exhibits\201 0\12-06-1 0 Recovery Zone IP A ~ CDC Resos - Indenture of Trust (Exhibit A).doc
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within-mentioned Indenture.
U.S. Bank National Association, as Trustee
Date:
By:
Authorized Signatory
[FORM OF REVERSE SIDE OF BOND]
This Bond is one of a duly authorized issue of bonds of the Authority designated
the San Bernardino Joint Powers Authority Tax Allocation Bonds Series 2010A (4th Street
Corridor Project-Federally Taxable Recovery Zone Economic Development Bonds) (the
"Bonds"), limited in principal amount to Seven Million Sixty Eight Thousand Dollars
($7,068,000), secured by an Indenture of Trust dated as of December 6, 2010 (the "Indenture"),
by and between the Authority and the Trustee. Reference is hereby made to the Indenture for a
description of the rights thereunder of the owners of the Bonds, of the nature and extent of the
Revenues (as that term is defined in the Indenture), of the rights, duties and immunities of the
Trustee and of the rights and obligations of the Authority thereunder; and all of the terms of the
Indenture are hereby incorporated herein and constitute a contract between the Authority and the
Registered Owner hereof, and to all of the provisions of which Indenture the Registered Owner
hereof by acceptance hereof assents and agrees.
The Bonds are authorized to be issued pursuant to the provisions of the Marks-
Roos Local Bond Pooling Act of 1985, constituting Article 4 (commencing with
Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of
California (the "Act"). The Bonds are special obligations of the Authority and, as and to the
extent set forth in the Indenture, are payable solely from and secured by a first lien and pledge of
the Revenues and certain other moneys and securities held by the Trustee as provided in the
Indenture. All of the Bonds are equally secured by a pledge of, and charge and lien upon, all of
the Revenues and such other moneys and securities, and the Revenues and such other moneys
and securities constitute a trust fund for the security and payment of the principal of and interest
on the Bonds. The full faith and credit of the Authority is not pledged for the payment of the
principal of or interest or redemption premiums (if any) on the Bonds. The Bonds are not
secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the
property of the Authority or any of its income or receipts, except the Revenues and such other
moneys and securities as provided in the Indenture.
The Bonds have been issued to provide funds to make a loan (the "Loan") to the
Redevelopment Agency of the City of San Bernardino (the "Agency") in the aggregate principal
amount of Seven Million Sixty Eight Thousand Dollars ($7,068,000) in order to fund certain
redevelopment projects (as defined in the Indenture). The Loan has been made by the Authority
A-49
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of Tmst {Exhibit A).doc
to the Agency pursuant to that certain Loan Agreement dated as of December 6,2010 (the "Loan
Agreement"), by and among the Agency, the Authority and the Trustee.
The Bonds are issuable as fully registered Bonds without coupons in
denominations of $5,000 or any integral multiple thereof. Subject to the limitations and upon
payment of the charges, if any, provided in the Indenture, fully registered Bonds may be
exchanged at the Principal Corporate Trust Office of the Trustee for a like aggregate principal
amount and maturity of fully registered Bonds of other authorized denominations.
This Bond is transferable by the Registered Owner hereof, in person or by his
attorney duly authorized in writing, at the Principal Corporate Trust Office of the Trustee, but
only in the manner, subject to the limitations and upon payment of the charges provided in the
Indenture, and upon surrender and cancellation of this Bond. Upon such transfer a new fully
registered 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 therefor.
The Authority and the Trustee may treat the Registered Owner hereof as the absolute owner
hereof for all purposes, and the Authority and the Trustee shall not be affected by any notice to
the contrary. The Trustee shall not be required to register the transfer or exchange of any Bond
(1) during the period established by the Trustee for the selection of Bonds for redemption or
(2) selected for redemption.
The Indenture and the rights and obligations of the Authority and of the Owners
of the Bonds and of the Trustee may be modified or amended from time to time and at any time
in the manner, to the extent, and upon the terms provided in the Indenture; provided that no such
modification or amendment shall (a) extend the maturity of or reduce the interest rate on any
Bond or otherwise alter or impair the obligation of the Authority to pay the principal, interest or
redemption premiums (if any) at the time and place and at the rate and in the currency provided
therein of any Bond without the express written consent of the owner of such Bond, (b) reduce
the percentage of Bonds required for the written consent to any such amendment or modification,
or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee,
all as more fully set forth in the Indenture.
A-50
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resos - Indenture of Irust (Exhibit A).doc
ASSIGNMENT
For value received the undersigned do(es) hereby sell, assign and transfer unto
(Name, Address and Tax Identification or Social Security Number of Assignee)
the within-mentioned registered Bond and hereby irrevocably constitute(s) and
appointe s) attorney, to transfer the same on the
registration books of the Trustee with full power of substitution in the premises.
Dated:
Signature Guarantee:
Note: Signature(s) must be guaranteed by
an eligible guarantor.
Note: 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.
A-51
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06.1O Recovery Zone JPA_CDC Resos - Indenture of Trust (Exhibit A),doc
EXHIBIT B
FORM OF SERIES B BOND
SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY
T AX ALLOCATION BOND
SERIES 2010B
(NORTHWEST REDEVELOPMENT PROJECT AREA)
Rate of
Interest
Maturity Date
October
Delivery
Date
October _,2010
CUSIP
REGISTERED OWNER:
PRINCIP AL AMOUNT:
THE SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY, a
joint powers authority organized and existing under the laws of the State of California (the
"Authority"), for value received, hereby promises to pay (but only out of the Revenues and other
moneys and securities hereinafter referred to) to the Registered Owner identified above or
registered assigns (the "Registered Owner"), on the Maturity Date identified above, the Principal
Amount, identified above in lawful money of the United States of America; and to pay interest
thereon at the rate of interest set forth above, in like lawful money from the date hereof, until
payment of such Principal Amount at the rate and at the times hereinafter provided. This Bond
shall bear interest from the Interest Payment Date (as hereinafter defined) next preceding the date
of authentication of this Bond (unless this Bond is authenticated on or before an Interest Payment
Date and after the fifteenth (15th) calendar day of the month preceding such Interest Payment
Date, in which event it shall bear interest from such Interest Payment Date, or unless this Bond is
authenticated on or prior to the fifteenth (15th) day of the month preceding the first Interest
Payment Date, in which event it shall bear interest from the Delivery Date identified 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 hereon has
previously been paid or made available for payment), payable semiannually on April 1 and
October 1 in each year, commencing on April 1, 2011 (the "Interest Payment Dates") until
payment of such Principal Amount in full. The Principal Amount hereof is payable upon
presentation and surrender hereof at the Principal Corporate Trust Office, as such term is defined
in the Indenture of U.S. Bank National Association, as trustee (the "Trustee"). Interest hereon is
payable by check of the Trustee mailed by first class mail on each Interest Payment Date to the
Registered Owner hereof at the address of the Registered Owner as it appears on the registration
books of the Trustee as of the close of business on the fifteenth (15th) calendar day of the month
preceding such Interest Payment Date (a "Record Date"); provided, however, that at the written
A-52
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
request of the owner of at least $1,000,000 in aggregate principal amount of the outstanding
Bonds filed with the Trustee prior to any Record Date, interest on such Bonds shall be paid to
such owner on each succeeding Interest Payment Date by wire transfer of immediately available
funds to an account in the continental United States designated in such written request.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS SET
FORTH ON THE REVERSE HEREOF, WHICH PROVISIONS SHALL, FOR ALL
PURPOSES, HAVE THE SAME EFFECT AS IF FULLY SET FORTH HEREIN.
It is hereby certified that all things, conditions and acts required to exist, to have
happened and to have been performed precedent to and in the issuance of this Bond do exist,
have happened and have been performed in due time, form and manner as required by the
Constitution and statutes of the State of California and by the Act (as hereinafter defined), and
that the amount of this Bond, together with all other indebtedness of the Authority, does not
exceed any limit prescribed by the Constitution or statutes of the State of California or by the
Act.
This Bond shall not be entitled to any benefit under the Indenture (as hereinafter
defined), or become valid or obligatory for any purpose, until the certificate of authentication
hereon shall have been manually signed by the Trustee.
IN WITNESS WHEREOF, the Authority has caused this Bond to be executed in
its name and on its behalf by the facsimile signature of its Chair and attested to by the facsimile
signature of its Secretary and its seal to be reproduced hereon, all as of the Original Issue Date
identified above.
SAN BERNARDINO JOINT POWERS
FINANCING AUTHORITY
By:
Chair
Attest:
By:
Secretary
A-53
P:\Agendas\Agenda Attachments\Exhibits\2010\ 12-06-1 0 Recovery Zone JP A _ CDC Resas - Indenture of Trust (Exhibit A),doc
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one ofthe Bonds described in the within-mentioned Indenture.
Date:
U.S. Bank National Association, as Trustee
By:
Authorized Signatory
[FORM OF REVERSE SIDE OF BOND]
This Bond is one of a duly authorized issue of bonds of the Authority designated
the San Bernardino Joint Powers Authority Tax Allocation Bonds Series 2010B (Northwest
Project Area) (the "Bonds"), limited in principal amount to Dollars
($ ), secured by an Indenture of Trust dated as of December 6, 2010 (the
"Indenture"), by and between the Authority and the Trustee. Reference is hereby made to the
Indenture for a description of the rights thereunder of the owners of the Bonds, of the nature and
extent of the Revenues (as that term is defined in the Indenture), of the rights, duties and
immunities of the Trustee and of the rights and obligations ofthe Authority thereunder; and all of
the terms of the Indenture are hereby incorporated herein and constitute a contract between the
Authority and the Registered Owner hereof, and to all of the provisions of which Indenture the
Registered Owner hereof by acceptance hereof assents and agrees.
The Bonds are authorized to be issued pursuant to the provisions of the Marks-
Roos Local Bond Pooling Act of 1985, constituting Article 4 (commencing with
Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of
California (the "Act"). The Bonds are special obligations of the Authority and, as and to the
extent set forth in the Indenture, are payable solely from and secured by a first lien and pledge of
the Revenues and certain other moneys and securities held by the Trustee as provided in the
Indenture. All of the Bonds are equally secured by a pledge of, and charge and lien upon, all of
the Revenues and such other moneys and securities, and the Revenues and such other moneys
and securities constitute a trust fund for the security and payment of the principal of and interest
on the Bonds. The full faith and credit of the Authority is not pledged for the payment of the
principal of or interest or redemption premiums (if any) on the Bonds. The Bonds are not
secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the
property of the Authority or any of its income or receipts, except the Revenues and such other
moneys and securities as provided in the Indenture.
The Bonds have been issued to provide funds to make a loan (the "Loan") to the
Redevelopment Agency of the City of San Bernardino (the "Agency") in the aggregate principal
amount of Dollars ($ ) in order to fund certain redevelopment projects
(as defined in the Indenture). The Loan has been made by the Authority to the Agency pursuant
to that certain Loan Agreement dated as of December 6, 2010 (the "Loan Agreement"), by and
among the Agency, the Authority and the Trustee.
A-54
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resos - Indenture of Trust (Exhibit A).doc
The Bonds are issuable as fully registered Bonds without coupons in
denominations of $5,000 or any integral multiple thereof. Subject to the limitations and upon
payment of the charges, if any, provided in the Indenture, fully registered Bonds may be
exchanged at the Principal Corporate Trust Office of the Trustee for a like aggregate principal
amount and maturity of fully registered Bonds of other authorized denominations.
This Bond is transferable by the Registered Owner hereof, in person or by his
attorney duly authorized in writing, at the Principal Corporate Trust Office of the Trustee, but
only in the manner, subject to the limitations and upon payment of the charges provided in the
Indenture, and upon surrender and cancellation of this Bond. Upon such transfer a new fully
registered 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 therefor.
The Authority and the Trustee may treat the Registered Owner hereof as the absolute owner
hereof for all purposes, and the Authority and the Trustee shall not be affected by any notice to
the contrary. The Trustee shall not be required to register the transfer or exchange of any Bond
(1) during the period established by the Trustee for the selection of Bonds for redemption or
(2) selected for redemption.
The Indenture and the rights and obligations of the Authority and of the Owners
of the Bonds and of the Trustee may be modified or amended from time to time and at any time
in the manner, to the extent, and upon the terms provided in the Indenture; provided that no such
modification or amendment shall (a) extend the maturity of or reduce the interest rate on any
Bond or otherwise alter or impair the obligation of the Authority to pay the principal, interest or
redemption premiums (if any) at the time and place and at the rate and in the currency provided
therein of any Bond without the express written consent of the owner of such Bond, (b) reduce
the percentage of Bonds required for the written consent to any such amendment or modification,
or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee,
all as more fully set forth in the Indenture.
A-55
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
ASSIGNMENT
For value received the undersigned do(es) hereby sell, assign and transfer unto
(Name, Address and Tax Identification or Social Security Number of Assignee)
the within-mentioned registered Bond and hereby irrevocably constitute(s) and
appointe s) attorney, to transfer the same on the
registration books of the Trustee with full power of substitution in the premises.
Dated:
Signature Guarantee:
Note: Signature(s) must be guaranteed by
an eligible guarantor.
Note: 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.
A-56
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06.10 Recovery Zone JPA_CDC Resas - Indenture of Trust (Exhibit A).doc
EXHIBIT "B"
PRELIMINARY OFFICIAL STATEMENT
c
c
,S
~
Q
~
v c
-: ..8
c ,~
~~
o .~
: .J:.'
" U
"" :J
"'0 if;
c'o
(tj if.
~~
.~ ~
c '=
~ '3
c "
" if,
5~
c; :
c/)~
~ 5
E _~
o~
~' (;
c c
~ .2
~~
if, ro
of 5-
~ .9
'"5i C
~ ~
U _
~~
c ro
5c
U :J
" "
UL
0"0
~ ~
"0 '"
.,~ OJ
~~
C r
" ~
.g2
5 Ej
E '(j
~:..=
~ 0
o ~
C ..:
2~
ti 0
"0..<:
C U
8 s;
.<:
o U
:::.c
~ ::::
B,e
V1 c
~ .g
ro U
::~
~ 'C
" ;:l
..c: '-,
13 ~'
C ro
@ .::;
C If.
o "
u '=
2 B
~ "
ro 'fl
E u
~ ~
,0 "
c-:::
,- '-
" 0
-=: "
"0"
C if,
ro >,
~ C
C ro
~ "
CL
8 "
~ v
C/O-=:
~=
~~
'"' ~
~ 0
t. c,
ro ;;...-,
C ;:l
;:: L
:= 0
V ';:
d:2
~~
.<: C
~ (':\
PRELIMINARY OFFICIAL STATEMENT DATED
,2010
NEW ISSUE - BOOK-ENTRY ONLY
RATINGS:
(See "MISCELLANEOUS" - Ratings") herein
In the opinion of Lewis Brisbois Bisgaard & Smith LLP, Bond Counsel, under existing laws, regulations,
rulings andjudicial decisions, interest on the Bonds (including original issue discount treated as interest) is included
in gross income for federal income tax purposes. However, in the opinion of Bond Counsel, under existing laws,
interest on the Bonds is exempt from all present State of California personal income taxes. See
"MISCELLANEOUS-Tax Matters" herein for a more complete description of the opinions of Bond Counsel and
additional federal tax law consequences.
$7,068,000*
SAN BERNARDINO JOINT POWERS
FINANCING AUTHORITY TAX ALLOCATION
BONDS SERIES 2010A (4TH STREET
CORRIDOR PROJECT-FEDERALLY
TAXABLE RECOVERY ZONE ECONOMIC
DEVELOPMENT BONDS)
$5,250,000*
SAN BERNARDINO JOINT POWERS
FINANCING AUTHORITY TAX ALLOCATION
BONDS SERIES 2010B (NORTHWEST
REDEVELOPMENT PROJECT AREA
INFRASTRUCTURE PROJECTS)
Dated: Date of Delivery
Due: as shown on the inside front cover
The San Bernardino Joint Powers Financing Authority (the "Authority") has determined to issue its
$7,680,000* principal amount of Bonds Series 2010 (4th Street Corridor Project-Federally Taxable Recovery Zone
Economic Development Bonds) (the "Bonds") and the $5,250,000* Tax Allocation Bonds, Series 2010B (Northwest
Redevelopment Project Area Infrastructure Projects) (the "Series B Bonds," and collectively with the Series A
Bonds, the "Bonds") pursuant to the Indenture of Trust, dated as of December 1, 2010 (the "Indenture"), by and
between the Authority and U.S. Bank National Association, as trustee (the "Trustee"). Proceeds of the Bonds will be
used to finance street and sidewalk improvements and other infrastructure improvements to the 4th Street Corridor
within the downtown area of the City from "E" Street west to "H" Street and from 2nd Street north to 5th Street (the
"4th Street Project") and other infrastructure improvements within the Redevelopment Agency of the City of San
Bernardino (the "Agency") Northwest Redevelopment Project Area (the "Northwest Redevelopment Project Area
Infrastructure Projects" and collectively with the 4th Street Project, the "Project").
The Bonds will be delivered as fully registered bonds, registered in the name of Cede & Co., as nominee of
The Depository Trust Company, New York, New York ("DTC"), and will be available to ultimate purchasers
("Beneficial Owners") in the denomination of $5,000 or any integral multiple thereof, under the book-entry system
maintained by DTC. Beneficial Owners will not be entitled to receive delivery of bonds representing their ownership
interest in the Bonds. The principal of, premium if any, and semiannual interest (due April 1 and October 1 of each
year, commencing April 1, 2011) on the Bonds will be payable by the Trustee, to DTC for subsequent disbursement
to DTC participants, so long as DTC or its nominee remains the registered owner of the Bonds.
The Bonds are subject to optional and mandatory sinking fund redemption prior to their respective
maturity dates as described herein.
The Bonds are special obligations of the Authority and are payable solely from and secured by Revenues
consisting primarily of payments made by the Redevelopment Agency of the City of San Bernardino (the "Agency")
under that certain Loan Agreement dated as of December 1, 20 10, by and among the Authority, the Agency and the
Trustee (the "Loan Agreement") evidencing the loan (the "Loan") made by the Authority to the Agency. The Loan is
payable from and secured by Tax Revenues (as defined herein) to be derived from the Agency's Northwest
Redevelopment Project Area and from Federal Direct Payments (as defined herein). The lien of the owners of the
Bonds upon the Tax Revenues (as defined herein) shall be subordinate to the lien on such Tax Revenues of the
owners of the $55,800,000 San Bernardino Joint Powers Financing Authority Tax Allocation Revenue Refunding
Bonds, Series 2005A currently outstanding in the amount of $ I 6,895,927 (the "2005A Bonds"), and shall rank equally
with the $30,330,000 San Bernardino Joint Powers Financing Authority 2002A Tax Allocation Refunding Bonds
(Secured by a Junior Lien on Certain Tax Increment Revenues Pledged Under Senior Loan Agreements) currently
outstanding in the amount of $4,784,171 (the "2002A Bonds") and the $21,105,000 San Bernardino Joint Powers
P:"Agendas\Agenda Attachments\Exhibits\2010\ 12-06-1 0 Recovery Zone JPFA_CDC' - Preliminary Official Statement (Exhibit B).doc
Financing Authority Tax Allocation Refunding Bonds, Series 2005B currently outstanding in the amount of
$4,075,393 (the "2005B Bonds" and collectively with the 2002A Bonds, the "Parity Bonds"). The 2005A Bonds,
2005B Bonds and the 2002A Bonds shall be collectively referred to herein as the "Prior Debt." See "RISK
FACTORS" and "LIMITATIONS ON TAX REVENUES" herein.
THE BONDS ARE NOT A DEBT OF THE CITY OF SAN BERNARDINO, THE STATE OF
CALIFORNIA, OR ANY OF ITS POLITICAL SUBDIVISIONS OTHER THAN THE AUTHORITY, AND
NEITHER THE CITY, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS, OTHER THAN THE
AUTHORITY, IS LIABLE THEREFOR. THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE
BONDS ARE PAYABLE SOLELY FROM LOAN PAYMENTS AND AMOUNTS IN CERTAIN FUNDS AND
ACCOUNTS HELD UNDER THE INDENTURE. NEITHER THE MEMBERS OF THE AUTHORITY, THE
AGENCY, OR THE CITY COUNCIL OF THE CITY, NOR ANY PERSONS EXECUTING THE BONDS ARE
LIABLE PERSONALLY ON THE BONDS BY REASON OF THEIR ISSUANCE.
This cover page contains certain information for quick reference only. It is not intended to be a summary of
all factors relating to an investment in the Bonds. Investors should review the entire Official Statement before
making any investment decision.
The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to the approval as to
their legality by Lewis Brisbois Bisgaard & Smith LLP, San Bernardino, California, Bond Counsel. Certain legal
matters will be passed on for the Authority and the Agency by Lewis Brisbois Bisgaard & Smith LLP, San
Bernardino, California as Disclosure Counsel, and Counsel to the Authority and the Agency. It is anticipated that the
Bonds will be available for delivery to The Depository Trust Company on or about December _,2010.
*Preliminary, subject to change.
KINSEll, NEWCOMB. OE 0105, INC.
lNVt:STMt:NT BANKING
Dated: December _, 2010
P:\Agendas\Agenda Attachments\Exhibits\20 10\ 12.06-1 0 Recovery Zone JPF A _CD(' - Preliminary Official Statement (Exhibit B).doc
MATURITY SCHEDULE
Maturity Date
October
Principal
Amount *
Coupon Rate
Price
CUSIP'
% Term Bonds Maturing October 1, _; Yield %; CUSIP
% Tern1 Bonds Maturing October 1, _; Yield _%; CUSIP
$
$
*
*
*Preliminary, subject to change.
I CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP
Global Services, managed by Standard & Poor's Financial Services LLC on behalf of The American Bankers
Association. This data is not intended to create a database and does not serve in any way as a substitute for the
CUSIP Services. Neither the Underwriter, the City nor the Authority is responsible for the selection or correctness
of the CUSIP numbers set forth herein.
P:\Agendas\Agenda Attachments'\Exhibits\.201 0\ 12-06.] 0 Recover)' Zone lPFA_ CD(' - Preliminary Official Statement (Exhibit B).doc
No dealer, broker, salesman or other person has been authorized to give any information or to
make any representation other than as contained in this Official Statement in connection with the offering
described herein, and if given or made, such other information or representation must not be relied upon
as statements of the Authority, the Agency or the Underwriter. This Official Statement does not
constitute an offer to sell or the solicitation of an offer to buy any securities other than the Bonds offered
hereby, nor shall there be any offer or solicitation of such offer or sale of the Bonds in any jurisdiction in
which it is unlawful for such person to make such offer, solicitation or sale. Neither the delivery of this
Official Statement nor the sale of any of the Bonds implies that the information herein is correct as of any
time subsequent to the date hereof.
This Official Statement is not to be construed as a contract with the purchasers of the Bonds.
Statements contained in this Official Statement that involve estimates, forecasts or matters of opinion,
whether or not expressly so described herein, are intended solely as such and are not to be construed as a
representation of fact.
The information set forth herein has been obtained from the Authority and the Agency and other
sources believed to be reliable, but the accuracy or completeness of such information is not guaranteed
by, and should not be construed as a representation by, the Underwriter. The information and expressions
of opinions herein are subject to change without notice and neither delivery ofthis Official Statement nor
any sale made hereunder shall, under any circumstances, create any implication that there has been no
change in the affairs of the Authority or the Agency since the date hereof. All summaries contained
herein of the Indenture or other documents are made subject to the provisions of such documents and do
not purport to be complete statements of any or all of such provisions.
Upon issuance, the Bonds will not be registered under the Securities Act of 1933, as amended,
and will not be listed on any stock or other securities exchange, and neither the Securities and Exchange
Commission nor any other Federal, state, municipal or other governmental entity (other than the
Authority) shall have passed upon the accuracy or adequacy of this Official Statement.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVERALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREV AIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AND MAY BE RECOMMENCED AT ANY TIME, IN EACH CASE WITHOUT
NOTICE.
P:'Agendas\Agenda Attachments\Exhibits\20 I 0" 12-06-1 0 Recovery Zone JPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY/
REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO
AUTHORITY/AGENCY BOARD OF DIRECTORS
Patrick Morris, Chairman
Virginia Marquez, Member
Jason Desjardins, Member
Tobin Brinker, Member
Fred Shorett, Member
Chas A. Kelley, Member
Rikke Van Johnson, Member
Wendy McCammack, Member
AUTHORITY/AGENCY STAFF
Emil A. Marzullo, Interim Executive Director and Secretary
Donald Gee, Deputy Executive Director
Kathleen Robles, Project Manager
SPECIAL SERVICES
Bond Counsel/Disclosure Counsel
Lewis Brisbois Bisgaard & Smith LLP
San Bernardino, California
Trustee
U. S. Bank National Association
Los Angeles, California
Underwriter
Kinsell Newcomb & DeDios, Inc.
CarIsbad, California
Fiscal Consultant
Rosenow Spevacek Group
P:\Agendas\Agenda Attachments\Exhibits\201 0\ 12-06.1 0 Recovery Zone JPF A ~CD(, - Preliminary Official Statement (Exhibit B).doc
TABLE OF CONTENTS
INTRODUCTORY STATEMENT. ....... ... ............. .................................... ........................................................................ 1
THE PROJECT ................................ .............................. ............ ...... ..................... .... .................... ........................ ..............3
ESTIMATED SOURCES AND USES OF FUNDS .......................................................................................................... 4
THE BONDS ............................... .... ......................... ......... ................................... ..............................................................5
SECURITY FOR THE BONDS ...... .... ...................................... ............................ ......................................... .................... 8
RISK FACTORS.............................................................................................................. ..................................... ...... ..... 14
LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATlONS...............................................l7
THE AUTHORITy.................. ............ ... ....................... .......................................... .......................................... ..............21
THE AGENCy.... ............. ........ ........... ............................. ......... ............................... ................... ...... .... ...........................21
THE PROJECT AREA ..... ............ ......................................... ........ ........................................... ...................... ...... ............21
FINANCIAL STATEMENTS ...... .... ........... ................ ........................... ............... ................... ........................................ 37
APPENDIX A - THE CITY OF SAN BERNARDINO
APPENDIXB- AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR FISCAL YEAR
ENDED JUNE 30, 2009
APPENDIX C - FISCAL CONSULTANT'S REPORT
APPENDIX D - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
APPENDIX E - FORM OF OPINION OF BOND COUNSEL
APPENDIX F - FORM OF CONTINUING DISCLOSURE AGREEMENT
P:IAgendas'Agenda Attachments\Exhibits\20 1 0\ 12-06-1 0 Recovery Zone lPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
OFFICIAL STATEMENT
$7,068,000*
SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY
TAX ALLOCATION BONDS SERIES 2010A
(4TH STREET CORRIDOR PROJECT -FEDERALLY TAXABLE RECOVERY ZONE ECONOMIC
DEVELOPMENT BONDS)
$5,250,000*
SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY
TAX ALLOCATION BONDS SERIES 2010B
(NORTHWEST REDEVELOPMENT PROJECT AREA INFRASTRUCTURE PROJECTS)
INTRODUCTORY STATEMENT
General
The purpose of this Official Statement (which includes the cover page and the appendices hereto) is to set
forth certain information concerning the issuance and sale by the San Bernardino Joint Powers Financing
Authority (the "Authority") of its $7,068,000* Tax Allocation Bonds, Series 201 OA (4th Street Corridor Project-
Federally Taxable Recovery Zone Economic Development Bonds) (the "Series A Bonds") and $5,250,000* Tax
Allocation Bonds, Series 201 OB (Northwest Redevelopment Project Area Infrastructure Projects) (the "Series B
Bonds," and collectively with the Series A Bonds, the "Bonds"). The Bonds are being issued pursuant to the
Constitution and laws of the State of Califomia (the "State"), particularly the Califomia Community
Redevelopment Law, Part 1, Division 24, (commencing with Section 33000 ofthe Health and Safety Code of the
State) (the "Redevelopment Law'"), and the Marks-Roos Local Bond Pooling Act of 1985 constituting Article 4
(commencing with Section 6584), Chapter 5, Division 7, Title 1, of the Government Code of the State (the
"Marks-Roos Act") (collectively, the "Law") and a resolution duly adopted by the Authority on November 15,
2010 (the "Resolution"). The Series A Bonds also are being issued pursuant to Section 1400U-2(b)(1)(B) of the
Internal Revenue Code of 1986, as amended. The Bonds are issued pursuant to an Indenture of Trust dated as of
December 1, 2010 (the "Indenture'"), by and between the Authority and U.S. Bank, as trustee (the "Trustee'").
The proceeds of the Series A Bonds will be applied to finance street and sidewalk improvements and
other infrastructure improvements to the 4th Street Corridor within the downtown area of the City from "E" Street
west to "H" Street and from 2nd Street north to 5th Street (the "4 (h Street ProjecC). The proceeds of the Series B
Bonds will be applied to finance various infrastructure improvements within the Northwest Redevelopment
Project Area (the "Northwest Redevelopment Project Area Infrastructure Projects," and collectively with the 4th
Street Project, the "ProjecC). See "THE PROJECT' herein.
The Bonds will be secured by payments made by the Agency to the Authority pursuant to a loan (the
"Loan'") under a Loan Agreement dated as of December 1, 2010 (the "Loan Agreement"), by and between the
Authority, the Agency and the Trustee, pursuant to which the Agency has agreed to pay the Authority amounts
equal to all principal of and interest coming due on the Bonds. The obligation of the Agency under the Loan
Agreement will be payable solely from the Agency's Tax Revenues from the N0I1hwest Redevelopment Project
Area (the "Project Area'") and from Federal Direct Payments (as defined herein). See "SECURITY FOR THE
BONDS" herein. The lien of the Bonds shall be subordinate to the 2005A Bonds (as defined herein). The lien of
the Bonds shall be on parity with the 2002A Bonds and the 2005B Bonds (as herein defined).
* Preliminary; subject to change.
P:'.Agendas'Agenda Attachments\Exhibits\20 I 0' 12.06.10 Recovery Zone JPF A _ CDC - Preliminary Official Statement {Exhibit B).doc
The Agency is in the initial stages of a merger of its fourteen (14) redevelopment project areas into two
(2) redevelopment project areas, Merged Area A Project Area and Merged Area B Project Area. In the event the
mergers are completed, it is expected that the existing fourteen (14) redevelopment project areas will be within the
Merged Area A Project Area or the Merged Area B Project Area. After the completion of the Merged Area A
Project Area, the 4th Street Project will be within the Merged Area A Project Area, consisting of Central City
North, Southeast Industrial Park, Tri-City, South Valle, Meadowbrook/Central City, Central City South and
Central City Redevelopment Project Areas. The Northwest Redevelopment Project Area, which revenues
constitute the Tax Revenues (as herein defined), will be within the Merged Area B Project Area in the event that
the Merged Area B Project Area is completed.
The proposed mergers will result in increasing the total amount of tax increment revenue that can be
accumulated within each of the merged areas, combining the individual project areas' bonded indebtedness limits
and increasing the total amount of bonded indebtedness that can be accumulated for each of the merged areas, and
with respect to some of the project areas, extending the plan effectiveness by ten (10) years.
In the event that the Merged Area B Project Area is adopted, with respect to the Series A Bonds, the
Indenture and Loan Agreement provide that upon meeting certain conditions, namely, (i) delivery to the Trustee
of a Fiscal Consultant's Report and certification by said Fiscal Consultant demonstrating that the pledged tax
increment revenues from the Merged Area A Project Area are at least equal to the pledged Tax Revenues from the
Northwest Project Area on the original Closing Date, (ii) delivery of an opinion of bond counsel stating that the
pledge is consistent with the provisions of the Trust Indenture and the Loan Agreement, and (iii) confirmation in
writing from S&P that the rating on the Series A Bonds will not be diminished or removed by reason of the
substitution, all references to "Project Area" and "Tax Revenues" with respect to the Series A Bonds shall
become "Merger A Tax Revenues" as defined in the Indenture. See "SECURITY FOR THE BONDS - Merger
of Project Areas" and "THE PROJECT AREA - Planned Merger of Project Area." The Indenture provides that
the Trustee shall disseminate a notice to the Bondholders stating that the substitution has been made.
The Law authorizes the financing of redevelopment projects through the use of tax increment revenues.
This method of financing provides that the taxable valuations of the property within the Project Area on the
property tax roll last equalized prior to the effective date of the ordinance which adopted the redevelopment plan
becomes the base year taxable valuation, and the increase in taxable valuation in subsequent years over the base
year taxable valuation becomes the increment upon which taxes are levied and allocated to the Agency. All taxes
collected thereafter upon the tax increment (the increase in taxable valuation above the base year taxable
valuation) are available to be pledged to the payment of the debt service on Agency obligations, including the
Loan Agreement, any pass-through agreements, and other obligations.
Neither the Agency nor the Authority have any power to levy and collect taxes, and any legislative
property tax de-emphasis or provision of additional sources of income to taxing agencies having the effect of
reducing the property tax rate must necessarily reduce the amount of Tax Revenues available to the Agency to
meet its obligations to the Authority under the Loan Agreement to pay the principal of and interest on the Bonds.
The Agency will covenant for the benefit of the Bondholders to provide certain financial infonnation and
operating data relating to the Agency and the Project Area by not later than six months after the end of the Fiscal
Year to which such infonnation pertains, commencing with the 2009/1 0 Fiscal Year (the "Annual Report"), and
to provide notices of the occurrence of certain enumerated events, if material. The Annual Report will be filed
with the Municipal Securities Rulemaking Board (the "MSRB") and the notices of material events will be filed
with the MSRB. The specific nature of the information to be contained in the Annual Report or the notices of
material events is described in "APPENDIX F - FORM OF CONTINUING DISCLOSURE AGREEMENT"
attached hereto. These covenants will be made in order to assist the Underwriter in complying with Securities and
Exchange Commission Rule 15c2-12(b)(5).
2
P:\Agendas\Agenda Attachments\,Exhibits\2010\12.06-1 0 Recovery Zone JPFA _ COC . Preliminary Official Statement (Exhibit B).doc
This Official Statement contains brief descriptions of, among other things, the Bonds, the Authority, the
Agency, the Project Area and the Security for the Bonds, including the Indenture, the Loan Agreement and the
Continuing Disclosure Agreement. Such descriptions do not purport to be comprehensive or definitive. All
references in this Official Statement to documents are qualified in their entirety by reference to such documents
and to the form of the Bond included in the Indenture. Until the issuance and delivery of the Bonds, copies of the
Indenture, the Loan Agreement, and the Continuing Disclosure Agreement and other documents described in this
Official Statement may be obtained at the principal office of Kinsell, Newcomb & De Dios, Inc., Carlsbad,
California. Copies of these documents may be obtained from the Trustee or the Authority following delivery of
the Bonds.
THE PROJECT
4th Street Proiect
The 4th Street Project is designated as the "4th Street Corridor" in Downtown San Bernardino from "E"
Street west to "H" Street and from 2nd Street north to 5th Street. 4th Street was formerly the major access route to
the Interstate-215 Freeway ("1-215"). The California Department of Transportation ("Caltrans") currently has
underway 1-215 widening and construction and reconfiguration of on- and off-ramps to the 1-215. Due to the
closure of the off-ramps at this location, the Agency plan for this 3 block area is to limit 4th Street to 2 travel lanes
with pedestrian friendly walking areas and limited vehicular access. The Agency proposes to alter the width of
the streets to remove 2 travel lanes plus the current curb-side parking and install decorative paving stones and
other amenities that will denote this area as the "Theater District." The "Theater District" is anchored by the
historic 1,760 seat California Theatre constructed in 1928 and the Agency owned 20-plex theater facility.
The projects the Agency desires to fund within the 4th Street Project with the Series A Bonds include:
ITEMS
4th Street from E Street to H Street - Redesign/construct 4th Street to 2 travel lanes
with pedestrian friendly walking areas, limited vehicular access, restriping, and
streetscape including, but not limited to: landscaping, medians, lighting, signage,
signalization, public areas, water features.
5th Street from E Street to H Street - Freeway gateway and streetscape including, but
not limited to: landscaping, medians, lighting, signage, signalization, public areas,
water features.
Court Street from E Street to Arrowhead Avenue - Streetscape including, but not
limited to: landscaping, medians, lighting, signage, signalization, public areas, water
features.
E Street from 5th Street to 2nd Street - Streetscape including, but not limited to:
landscaping, medians, lighting, signage, signalization, public areas, water features.
F Street - 5th Street to 4th Street - Streetscape including, but not limited to:
landscaping, medians, lighting, signage, signalization, public areas, water features.
Streetscape 2nd Street from 1-215 to E Street - Freeway gateway and streetscape
including, but not limited to: landscaping, medians, lighting, signage, signalization,
public areas, water features.
Theater Square -public areas, utilities, water features development pads
Temporary Bus Facility Infrastructure -streetscape, on-site vehicular infrastructure;
public building renovations
Convention Center - streetscape, utilities, public areas
Reader Board sign
Total:
3
P:'Agendas\Agenda Attachments\Exhibits\201 O\l2~06~ 10 Recovery Zone lPFA_ CDr - Preliminary Official Statement (Exhibit B).doc
ESTIMATED COST
$2,500,000
$1,000,000
$500,000
$500,000
$500,000
$700,000
$750,000
$500,000
$350,000
$950,000
$8,250,000
Northwest Redevelopment Proiect Area Infrastructure Proiects
The Northwest Redevelopment Project Area Infrastructure Projects include vanous infrastructure
improvements within the Northwest Redevelopment Project Area:
ITEMS
Various neighborhood street light and street construction projects
Baseline at California - right-of-way easement, curb/gutter/sidewalk
West Highland Corridor Improvements between Macy Street and California Street -
the design/reconstruction of street including storm drains, sewer, streetscapes,
landscaping, upgrade signage and signalization, utilities, curb and gutter, sidewalk;
fa9ade improvement; demolition of buildings; clearance of parcels along the south
side of West Highland
I-21O/State Street Corridor Infrastructure Improvements from State Street exit to
Lytle Creek - the design/reconstruction of street including storm drains, sewer,
streetscapes, landscaping, upgrade signage and signalization, utilities, curb and
gutter, sidewalk; other development incentives
Various land acquisition/assembly projects, demolition of blighted properties, etc.
Southeast comer of Highland and Medical Center Drive - sidewalk, curb and gutter;
additional street lighting; undergrounding of utilities; upgrade to main sewer
connection
Medical Center Drive South of the Magnolia at Highland Project - sidewalk, curb
and gutter; additional street lighting; undergrounding of utilities; upgrade to main
sewer connection
Highland A venue west of Medical Center Drive - the design/reconstruction of street
including storm drains, sewer, streetscapes, landscaping, upgrade signage and
signalization, utilities, curb and gutter, sidewalk
Total:
ESTIMA TED SOURCES AND USES OF FUNDS
The proceeds from the sale of the Bonds are expected to be used as follows:
Sources of Funds*:
ESTIMATED COST
$1,500,000
$350,000
$800,000
$950,000
$2,300,000
$830,000
$450,000
$1,000,000
$8,180,000
Bond Proceeds
Series A
$7,068,000
Series B
$5,250,000
Total
$12,318,000
TOTAL
$7,068,000
$5,250,000
$12,318,000
Uses of Funds*:
Project Fund
Costs of Issuance
Reserve Fund
$
$
$
$
$
$
$
$
TOTAL
$.~~
~---~,.=
$~------
(I)
(1) Costs of issuance include fees and expenses of Bond Counsel, Disclosure Counsel and the Trustee, rating
agency fees, printing expenses, Underwriter's Discount of $ ('_%)' and other costs of issuance of the
Bonds.
*Preliminary, subject to change.
4
P:\Agendas\Agenda Attachments\Exhibits'201 0\12.06-1 0 Recoyery Zone JPFA~ CDC - Preliminary Official Statement (Exhibit B).doc
THE BONDS
The Bonds are initially available in book-entry form only. So long as Cede & Co. is the registered owner
of the Bonds as nominee of The Deposit01Y Trust Company ("DTC'), New York, New York, references herein to
the Bondholders or registered owners of the Bonds shall mean Cede & Co. and shall not mean the beneficial
owners of the Bonds. In addition, so long as Cede & Co. is the registered owner of the Bonds, purchasers of the
Bonds will not receive cert!ficates representing their interest in the Bonds purchased. Interest on and principal of
the Bonds will be payable by the Trustee to Cede & Co. by wire transfer in immediately available funds in
accordance with the terms of Letter of Representation, by and among the Trustee, the Authority and DTC (the
"Letter of Representation").
General
The Bonds are issuable only in fully registered form in denominations of $5,000 principal amount, or any
integral multiple thereof. The Bonds are dated the date of delivery thereof, bear interest at the rates and will
mature on the dates and in the principal amounts set forth on the inside cover page of this Official Statement.
Interest on the Bonds is computed on the basis of a 360-day year consisting of twelve 30-day months. Interest on
the Bonds is payable semiannually on April 1 and October 1 of each year (each an "Interest Payment Date"),
commencing April 1, 2011 .
Interest on, and principal of, the Bonds will be payable by the Trustee, to Cede & Co. by wire transfer in
immediately available funds in accordance with the terms of the Letter of Representation.
Book-Entry Only System
The Bonds will be held by DTC, as securities depository. The ownership of one fully registered Bond for
each maturity is registered in the name of Cede & Co., as nominee for DTC. DTC is a limited-purpose trust
company organized under the laws of the State of New York, 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 17 A of the Securities Exchange Act of 1934, as amended. DTC
was created to hold securities of its pal1icipants (the "DTC PaI1icipants") and to facilitate the clearance and
settlement of securities transactions among DTC Participants in such securities through electronic book-entry
changes in accounts of the DTC Participants, thereby eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations, some of whom (and/or their representatives) own DTC. Access to
the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a DTC PaI1icipant, either directly or indirectly (the "indirect
PaI1icipants").
Ownership interests in the Bonds may be purchased by or through DTC Participants. Such DTC
PaI1icipants, and the persons for whom they acquire interests in the Bonds as nominees (the "Beneficial
Owners"), will not receive cel1ificated Bonds, but each DTC PaI1icipant will receive a credit balance in the
records of DTC in the amount of such DTC PaI1icipanfs interest in the Bonds, which will be confirmed in
accordance with DTC's standard procedures.
Beneficial Owners are expected to receive a written confirmation of their purchase providing details of
the Bonds acquired. Each Beneficial Owner may desire to make arrangements with such DTC Participant to
receive a credit balance in the records of such DTC Participant, and may desire to make arrangements with such
DTC Participant to have all notices of redemption or other communications to DTC, which may affect such
persons, be forwarded in writing by such DTC Participant and to have notification made of all interest payments.
5
P:\Agendas\Agenda Attachments'"Exhibits201 0'1 2-06.10 Recovery Zone JPF A _(,DC. Preliminary Official Statement (Exhibit B).doc
NEITHER THE AUTHORITY NOR THE TRUSTEE WILL HAVE ANY RESPONSIDILITY OR
OBLIGATION TO THE DTC PARTICIPANTS OR THE BENEFICIAL OWNERS IN RESPECT OF THE
ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT; THE PAYMENT
BY DTC OR ANY DTC PARTICIPANT OF ANY AMOUNT IN RESPECT OF THE PRINCIPAL OR
REDEMPTION PRICE OF OR INTEREST ON THE BONDS; ANY NOTICE WHICH IS PERMITTED OR
REQUIRED TO BE GIVEN TO BONDHOLDERS UNDER THE INDENTURE; THE SELECTION BY DTC
OR ANY DTC P ARTICIP ANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A
PARTIAL REDEMPTION OF THE BONDS; OR ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY
DTC AS BONDHOLDER.
So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, reference herein to the
Bondholders or registered owners of the Bonds shall mean Cede & Co., as aforesaid, and shall not mean the
Beneficial Owners of the Bonds.
The ownership interest of each Beneficial Owner in the Bonds will be recorded on the records of the DTC
Participants, whose ownership interests will be recorded on a computerized book-entry system operated by DTC.
Principal and interest payments on the Bonds will be made to DTC or its nominee, Cede & Co., as
registered owner of the Bonds. Upon receipt of monies, DTC's current practice is to immediately credit the
accounts of the DTC Participants in accordance with their respective holdings shown on the records of DTC.
Payments by DTC Participants and indirect Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is now the case with municipal securities held for the accounts of
customers in bearer form of DTC, the Trustee, or the Authority, subject to any statutory and regulatory
requirements as may be in effect from time to time.
When notices are given to the Bondholders, they will be sent by the Trustee to DTC only (except as
otherwise specifically provided in the Indenture). Conveyance of notices and other communications by DTC to
DTC Participants, by DTC Participants to indirect Participants, and by DTC Participants and indirect Participants
to Beneficial Owners will be governed by arrangements among them, subject to any statutory and regulatory
requirements as may be in effect from time to time. Neither the Trustee nor the Authority is responsible for
sending notices to Beneficial Owners.
Transfers of ownership interests in the Bonds will be accomplished by book entries made by DTC and by
the DTC Participants who act on behalf of the Beneficial Owners. Interest and principal will be paid by the
Trustee to DTC, then paid by DTC to the DTC Participants, and thereafter paid by the DTC Participants to the
Beneficial Owners when due.
For every transfer and exchange of the Bonds, the Trustee may charge DTC, and DTC may charge the
DTC Participants and the DTC Participants may charge the Beneficial Owners, a sum sufficient to cover any tax,
fee or other government charge that may be imposed in relation thereto.
Because DTC can only act on behalf of Participants, indirect Participants and certain banks, the ability of
a Beneficial Owner to pledge such Beneficial Owner's Bonds to persons or entities that do not pat1icipate in the
DTC system, or otherwise take actions in respect of such Bonds, may be limited due to the lack of a certificate for
such Bonds.
DTC has advised the Authority that it will take any action permitted to be taken by a Bondholder under
the Indenture only at the direction of one or more Participants to whose account with DTC the Bonds are credited.
Additionally, DTC has advised that it will take such actions with respect to a principal amount of Bonds only at
the direction of and on behalf of Participants whose holdings include that principal amount of the Bonds. DTC
6
P:'Agendas\Agenda Attachments\Exhibits\20 I 0\ 12-06-10 Reco\'eT)' Zone JPF A_ CDC - Preliminary Official Statement (Exhibit B).doc
may take conflicting actions with respect to other principal amounts of Bonds to the extent that such actions are
taken on behalf of Participants whose holdings include those principal amounts of the Bonds.
DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving
notice to the Authority and the Trustee and discharging its responsibilities with respect thereto under applicable
law. Under such circumstances (if there is not a successor securities depository) Bond certificates are required to
be delivered as described in the Indenture.
The Authority may determine that continuation of the system of book-entry transfers through DTC (or a
successor securities depository) is not in the best interest of the Beneficial Owners. In such event, Bond
certificates will be required to be delivered.
The information in this section concerning DTC and DTC's book-entry system has been obtained from
sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy
thereof.
Redemption
Optional Redemption.
[TO COME]
Mandatory Redemption From Sinking Fund Payments
The Bonds maturing on October 1, _, October 1, _ and October 1, _ (the "Tenn Bonds") are
subject to mandatory redemption in part by lot prior to maturity, from sinking fund payments made on the
following dates at a redemption price equal to 1 00% of the principal amount plus accrued interest, if any, to the
redemption date, without premium, as set forth in the following table.
Term Bonds Maturin2 October 1.
Sinking Fund
Redemption Date
(October 1)
Principal
Amount To
Be Redeemed *
Term Bonds Maturin2 October 1.
Sinking Fund
Redemption Date
(October 1 )
Principal
Amount To
Be Redeemed *
7
P:'..Agendas\Agenda Attachments\Exhibits\201O',J 2.06. 10 Recovery Zone lPFA__C'D('. Preliminary Official Statement (Exhibit B).doc
Term Bonds Maturilli! October 1.
Sinking Fund
Redemption Date
(October 1)
Principal
Amount To
Be Redeemed *
*Preliminary, subject to change.
In lieu of mandatory sinking fund redemption, the Agency may elect to purchase such Bonds and tender
them to the Trustee for cancellation.
Notice of Redemption
The Trustee is required to mail (by first class mail) notice of any redemption at least 30 but not more than
60 days prior to any redemption date to the respective Owners of the Bonds designated for redemption at their
addresses appearing on the Registration Books and to certain information services and securities depositories.
Neither failure to receive any such notice so mailed nor any defect therein shall affect the validity of the
proceedings for redemption of such Bonds or the cessation of the accrual interest thereon.
SECURITY FOR THE BONDS
Revenues and Loan Agreement
The Bonds are special obligations of the Authority payable solely from and secured by Revenues which
are defined in the Indenture to include (i) all amounts payable by the Agency pursuant to the Loan Agreement; (ii)
any proceeds of the Bonds originally deposited with the Trustee and all moneys deposited and held from time to
time in the funds and accounts established under the Indenture, (iii) income and gains with respect to the
investment of amounts on deposit in the funds and accounts established under the Indenture, and (iv) Federal
Direct Payments (as defined herein) received from the United States Department of Treasury with respect to the
Series A Bonds. The Loan is secured by a pledge of and lien on the Tax Revenues, as more fully described under
"SECURITY FOR THE BONDS - Tax Revenues" and the Federal Direct Payments as more fully described
under "SECURITY FOR THE BONDS - Federal Subsidy Payments on Recovery Zone Economic Development
Bonds." The Loan is subordinate to the loan made by the Authority in connection with the 2005A Bonds and the
Loan is on parity with the loan made by the Authority in connection with the 2002A Bonds and 2005B Bonds.
The Agency may, pursuant to the tem1S of the Loan Agreement and the Indenture, issue additional obligations
secured by Tax Revenues on a parity with the Loan and the Parity Loans. See "SECURITY FOR THE BONDS-
Issuance of Additional Debt."
The Agency is in the initial stages of a merger of its fourteen (14) project areas into two project areas. In
the event the mergers are completed, it is expected that the existing project areas will be within a Merged Area A
Project Area or Merged Area B Project Area. After the completion of the mergers, the Project will be within the
Merged Area A Project Area, consisting of Central City North, Southeast Industrial Park, Tri-City, South Valle,
Meadowbrook/Central City, Central City South and Central City Redevelopment Project Areas. The Northwest
8
P:"Agendas\Agenda Attachments\Exhibits\20 10\12-06-10 Recovel)' Zone JPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
Redevelopment Project Area, which revenues constitute the Tax Revenues (as herein defined), will be within the
Merged Area B Project Area in the event that the merger is completed.
The proposed mergers will result in increasing the total amount of tax increment revenue that can be
accumulated within each of the merged areas, combining the individual project areas' bonded indebtedness limits
and increasing the total amount of bonded indebtedness that can be accumulated for each of the merged areas, and
with respect to some of the project areas, extending the plan effectiveness by ten (10) years.
In the event that the Merged Area B Project Area is adopted, with respect to the Series A Bonds, the
Indenture and Loan Agreement provide that upon meeting certain conditions, namely, (i) delivery to the Trustee
of a Fiscal Consultant's Report and certification by said Fiscal Consultant demonstrating that the pledged tax
increment revenues from the Merged Area A Project Area are at least equal to the pledged Tax Revenues from the
Northwest Project Area on the original Closing Date, (ii) delivery of an opinion of bond counsel stating that the
pledge is consistent with the provisions of the Trust Indenture and the Loan Agreement, and (iii) confirmation in
writing from S&P that the rating on the Series A Bonds will not be diminished or removed by reason of the
substitution, all references to "Project Area" and "Tax Revenues" with respect to the Series A Bonds shall
become "Merger A Tax Revenues" as defined in the Indenture. See "SECURITY FOR THE BONDS - Merger of
Project Areas" and "THE PROJECT AREA - Planned Merger of Project Areas." The Indenture provides that the
Trustee shall disseminate a notice to the Bondholders stating that the substitution has been made.
In the event that the Agency can meet the test under the Indenture and Loan Agreement for the
substitution of Tax Revenues with the Merged Area A Tax Revenues, the Bonds would then be secured by said
Merged Area A Tax Revenues.
If the proposed transfer of the security for the Series A Bonds to the Merged Area A Tax Revenues cannot be
accomplished, and the Merged Area B Project Area is completed, the Northwest Project Area Tax Revenues will
become a part of the Merged Area B Project Area Tax Revenues and the Bonds will be paid from said Merged
Area B Project Area Tax Revenues.
Tax Allocation Financing
The Redevelopment Law provides a means for financing redevelopment projects based upon an allocation
of taxes collected within a project area. The taxable valuation of a project area last equalized prior to adoption of
the redevelopment plan, or base roll, is established. Thereafter, except for any period during which the taxable
valuation drops below the base roll, the state and local governments for the benefit of which taxes are levied and
collected on property within the project area receive the taxes produced by the levy of the then current tax rate
upon the base roll. Taxes collected upon any increase in taxable valuation over the base roll are allocated to a
redevelopment agency and may be pledged by a redevelopment agency to the repayment of any indebtedness
incurred in financing or refinancing of a redevelopment project. Redevelopment agencies themselves have no
authority to levy property taxes and must look specifically to the allocation of taxes produced as above indicated.
Further, the Redevelopment Law requires that certain amounts of tax increment be used by a redevelopment
agency for low and moderate income housing projects, and places certain limits on the tax increment which a
redevelopment agency is authorized to receive.
Allocation of Taxes
As provided in the Redevelopment Plan, and pursuant to Article 6 of chapter 6 of the Redevelopment Law
and Section 16 of Article XVI of the Constitution of the State of California, taxes levied upon taxable property in
the Project Area each year by or for the benefit of the State of California and any city, county, city and county,
district or other public corporation (herein collectively referred to as "taxing agencies") for fiscal years beginning
after the effective date of the Project Area are divided as follows:
9
P:\Agendas\Agenda Attachments\Exhibits\201 0 < 12-06-1 0 Recovery Zone JPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
(1) To Taxing Agencies: That portion of the taxes which would be produced by the rate upon which
the tax is levied each year by or for each of said taxing agencies upon the total sum of the
assessed value of the taxable property in the Project Area as shown upon the assessment roll used
in connection with the taxation of such property by such taxing agency last equalized prior to the
effective date of the ordinance approving the Redevelopment Plan shall be allocated to, and when
collected shall be paid into the funds of the respective taxing agencies as taxes by or for said
taxing agencies on all other property are paid; and
(2) To the Agency: Except for taxes which are attributable to a tax rate levy by a taxing agency for
the purpose of producing revenues to repay bonded indebtedness approved by the voters of the
taxing agency on or after January 1, 1989, which shall be allocated to and when collected shall be
paid to such taxing agency, that portion of said levied taxes each year in excess of the amounts
provided for in (1) above, shall be allocated to, and when collected, shall be paid into a special
fund of the Agency to pay the principal of and interest on bonds, loans, moneys advanced to or
indebtedness (whether funded, refunded, assumed, or otherwise) incurred by the Agency to
finance or refinance, in whole or in part the Project Area. Unless and until the total assessed
valuation of the taxable property in the Project Area exceeds the total assessed value of the
taxable property in the Project Area as shown by the last equalized assessment roll referred to in
paragraph (1) above, all of the taxes levied and collected upon the taxable property in the Project
Area shall be paid into the funds of the respective taxing agencies. When said bonds, loans,
advances, and indebtedness, if any, and interest thereon, have been paid, all moneys thereafter
received from taxes upon the taxable property in the Project Area, shall be paid into the funds of
the respective taxing agencies as taxes on all other property are paid.
The Agency is authorized to make pledges of the portion of taxes mentioned in paragraph (2) above to
repay specific advances, loans and indebtedness as appropriate in carrying out the Redevelopment Plan.
Tax Revenues
The "Tax Revenues" which are pledged to the payment of the Loan are defined in the Loan Agreement as
that portion of the taxes levied upon taxable property in the Project Area, allocated and paid into special funds of
the Agency (the "Special Fund"), pursuant to Alticle 6 of Chapter 6 of the Redevelopment Law and Section 16 of
Article XVI of the Constitution of the State, exclusive of: (i) amounts placed into the Low and Moderate Income
Housing Fund of the Agency, pursuant to Sections 33334.2 and 33334.3 of the Redevelopment Law, and (ii)
amounts payable to affected taxing agencies pursuant to any Pass-Through Agreement. See "THE PROJECT
AREAS" herein for a description of the Pass-Through Agreement.
All Tax Revenues received by the Agency are required to be deposited in the Special Fund until such time
as the amounts on deposit in the Special Fund equal the aggregate amounts required to be transferred to the
TlUstee pursuant to the Loan Agreement and any Parity Debt lnstlUment.
The Agency has no power to levy and collect property taxes, and any property tax limitation, Legislative
measure, voter initiative or provisions of additional sources of income to taxing agencies having the effect of
redl'cing the property tax rate, could reduce the amount of Tax Revenues that would otherwise be available to pay
the Loan and, consequently, the principal of, and interest on, the Bonds. Likewise, broadened property tax
exemptions could have a similar effect. See "RISK FACTORS" herein.
THE BONDS ARE NOT A DEBT OF THE CITY OF SAN BERN.t\RDINO, THE STATE OF
CALIFORNIA, OR ANY OF ITS POLITICAL SUBDIVISIONS, AND NEITHER THE CITY OF SAN
BERNARDINO NOR THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS (OTHER THAN THE
10
P:'Agendas\Agenda Attachments'-Exhibits\2010, 12-06-10 Recovery Zone JPFA__CDC - Preliminary Official Statement (Exhibit B).doc
AUTHORITY) IS LIABLE THEREON. NEITHER THE AUTHORITY NOR THE AGENCY HAS ANY
TAXING POWER. THE BONDS ARE REVENUE BONDS, PAY ABLE EXCLUSIVELY FROM THE
REVENUES AND OTHER FUNDS AS PROVIDED IN THE INDENTURE INCLUDING PAYMENTS TO BE
MADE BY THE AGENCY UNDER THE LOAN AGREEMENTS. THE OBLIGATIONS OF THE AGENCY
UNDER THE LOAN AGREEMENTS AND ANY PARITY DEBT OF THE AGENCY ARE PAY ABLE
SOLELY FROM TAX REVENUES ALLOCATED TO THE AGENCY FROM THE PROJECT AREAS. THE
BONDS DO NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION.
Prior Liens
As more fully described below, the Agency has entered into pass-through agreements with respect to the
Project Area. The pledge of Tax Revenues under such pass-through agreements is prior and superior to the lien of
the Bonds. See "THE PROJECT AREA" below.
Housing Set-Aside. Tax Revenues do not include that portion of tax increment revenues payable to the
Agency which are to be deposited into the Agency's Low and Moderate Income Housing Fund pursuant to
Sections 33334.2 and 33334.3 of the Redevelopment Law.
Issuance of Additional Debt
The Authority has covenanted in the Indenture that except for the Bonds, it will not incur any other
indebtedness payable out of Revenues.
The Agency has covenanted in the Loan Agreement that it will not incur any indebtedness which is
payable from all or any part of the Tax Revenues, other than: (i) the loan(s) securing the Prior Debt; (ii) additional
Parity Debt, subject to the conditions described in the Loan Agreement, and (iii) any debt secured by a pledge of
Tax Revenues which is subordinate to the pledge of Tax Revenues created by the Loan Agreement. For a
description of circumstances in which the Agency may issue additional debt on a parity with the Loan, see
"Appendix D - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Loan Agreement."
Existing Parity Debt
As hereinbefore described, the Bonds shall have an equal lien on the Tax Revenues securing the loan
payments on the Series 2002A Bonds and the 2005B Bonds currently outstanding.
Reserve Funds
Reserve FUllds. There is established a separate funds to be known as the "Series A Bonds Reserve Fund"
and "Series B Bonds Reserve Fund," which shall be maintained at the respective Reserve Requirements for said
Bonds at all times prior to payment of the Loan in full pursuant to the Loan Agreement except to the extent
required for the purposes set forth in the Indenture.
Withdrawals ji'om the Reserve FUllds. In the event that the Agency shall fail to deposit with the Trustee
the full amount required to be deposited pursuant to the Indenture on or before the fifteenth (15) Business Day
preceding any Redemption Date or Interest Payment Date, as applicable, the Trustee shall provide any notice
required with respect to the timely liquidation of securities invested in the Reserve Funds and one Business Day
prior to the next Interest Payment Date or Redemption Date, the Trustee shall withdraw from the Reserve Funds
pro rata and transfer to the Interest Account and the Principal Account, in such order, an amount equal to the
difference between the amount required to be deposited pursuant to the Indenture and the amount actually
deposited by the Agency. In the event that the Authority notifies the Agency or if the Agency has actual notice
11
P:\Agendas\Agenda Attachments\Exhlbits'.20 10\ 12-06.) 0 Recovery Zone JPF A_ CDC - Preliminary Official Statement (Exhibit B).doc
that the amount on deposit in one of the Reserve Funds is less than the respective Reserve Requirement due to
either a devaluation of the investments held in said Reserve Fund, or to the extent of any draws on the respective
Reserve Fund, is to deposit amounts required under the Indenture to restore said balance to the respective Reserve
Requirement.
In the event that the amount on deposit in any of the Reserve Funds on the fifteenth (15th) day preceding
any Interest Payment Date exceeds the Reserve Requirement, the Trustee is to thereupon withdraw from said
Reserve Fund all amounts in excess of the respective Reserve Requirement and credit first to the payment of
interest and then to principal coming due, if any, such amounts towards the deposit then required to be made by
the Agency pursuant to the Indenture.
For the purpose of maintaining the Reserve Funds and the Reserve Requirements, the Agency shall be
required to replenish the Reserve Funds to the extent of draws on the Reserve Funds as a result of deficiencies in
the payment of Tax Revenues.
Federal Subsidy Payments on Recovery Zone Economic Development Bonds
The Authority intends to elect to designate the Series A Bonds as "Recovery Zone Economic
Development Bonds" for purposes of the American Recovery and Reinvestment Act of 2009 signed into law on
February 17, 2009 (the "Recovery Act") and to receive a cash subsidy payment from the United States
Department of Treasury equal to 45% of the interest payable on the Series A Bonds on or about each interest
payment date for the Series A Bonds (each such cash subsidy payment, a "Federal Direct Payment").
Pursuant to the Indenture, the Authority has pledged all Federal Direct Payments in connection with the
Series A Bonds to the Trustee to be deposited into the Revenue Fund to be used solely for the purpose of paying
the principal of, and interest on, the Bonds, including the redemption price thereof. The Code imposes
requirements that the Authority must continue to meet after the Bonds are issued in order to receive the Federal
Direct Payments. These requirements generally involve the way that Recovery Zone Economic Development
Bond proceeds must be invested and ultimately used, and the periodic submission of requests for payment. If the
Authority does not meet these requirements, it is possible that the Authority may not receive the Federal Direct
Payments. The Internal Revenue Service ("IRS") has implemented an examination program for Recovery Zone
Economic Development Bonds, and no assurance can be given that the Series A Bonds will not be selected for a
more detailed or comprehensive examination. In the event the IRS files a proposed adverse determination letter
as a result of such an examination, announced IRS policy is to suspend payment to the Authority of the Federal
Direct Payments pending a final determination of the qualification of the Series A Bonds as may be applicable.
Furthermore, in certain circumstances, the Federal Direct Payments may be reduced (offset) by amounts
detennined to be applicable under the Code and regulations promulgated thereunder. For example, offsets may
occur by reason of any past-due legally enforceable debt of the Authority to any Federal agency. The amount of
any such offsets is not predictable, but the Authority does not currently expect that any such offsets will apply to
the credits the Authority expects to receive.
Merger of Project Areas
The Agency is in the initial stages of a merger of its fourteen (14) project areas into two (2) project areas.
It is expected that Merged Area A Project Area will include Central City North, Southeast Industrial Park, Tri-
City, South Valle, Meadowbrook/Central City, Central City South and Central City Redevelopment Project Areas.
It is further expected that the merger would result in:
(1) Merger of the individual project areas and the development of a single merged, amended
and restated redevelopment plan for the project areas that will comprise Merged Area A ("2010 Merged
Area A Plan");
12
P:\Agendas\Agenda Attachments\Exhjbits\2010\12~06-IO Recovery Zone JPFA_CDC' - Preliminary Official Statement (Exhibit B).doc
(2) A combined individual project area tax increment revenue limit and increased total
amount of tax increment revenues that can be accumulated for Merged Area A;
(3) A combined individual project area bonded indebtedness limit and increased total
amount of bonded indebtedness that can be accumulated for Merged Area A;
(4) Added public improvement projects list to the 2010 Merged Area A Plan; and
(5) An extended plan effectiveness for both Central City North and Meadowbrook/Central
City Redevelopment Project Areas by ten (10) years each.
In the event that the merger of the State College, Central City West, Northwest, Uptown, Mt. Vernon
Corridor, and 40th Street Redevelopment Project Areas is completed, those project areas will become Merged
Area B Project Area.. It is expected that the merger would result in:
(1) Merger of the individual project areas and the development of a single merged, amended
and restated redevelopment plan for the project areas that will comprise Merged Area B ("2011 Merged
Area B Plan");
(2) A combined individual project area tax increment revenue limit and increased total
amount of tax increment revenues that can be accumulated for Merged Area B;
(3) A combined individual project area bonded indebtedness limit and increased total
amount of bonded indebtedness that can be accumulated for Merged Area B;
(4) Added public improvement projects list to the 2011 Merged Area B Plan;
(5) An extended plan effectiveness of the State College Redevelopment Project Area by ten
(10) years; and
(6) Added new territory to the Merged Area B.
The Loan Agreement provides that the Agency may substitute Tax Revenues (which are derived from the
tax increment revenues of the Northwest Project Area as herein defined) with Merged Area A Tax Revenues upon
meeting each of the below conditions:
(1) The Agency and the Authority shall have approved by resolution the substitution of the
Tax Revenues for the Series A Bonds with the Merged Area A Tax Revenues and said approval has not
been repealed, amended or modified since its adoption and is in full force and effect on the Substitution
Date;
(2) A Fiscal Consultant's Report (the "FCR") for the Merged Area A Project Area shall be
delivered to the Trustee demonstrating that there is an amount of surplus tax increment revenue from the
Merged Area A at least equal to the tax increment revenue that was pledged from the Northwest Project
Area for the Series A Bonds on the Closing Date;
(3) A certification from a Fiscal Consultant stating that the surplus tax increment revenues
from the Merged Area A Project Area are at least equal to the surplus tax increment from the Northwest
Project Area;
13
P:\Agendas\Agenda Attachments\Exhibits\20 10.12-06-10 Recovery Zone lPF A _CDC - Preliminary Official Statement (Exhibit B).doc
(4) Delivery of an opinion of Bond Counsel that such substitution of tax increment revenues
is consistent with the provisions of the Indenture and the Loan Agreement and that all other required
conditions under the Loan Agreement, including any disclosures to the Bondholders have been made; and
that such substitution is a valid and enforceable obligation of the Agency pursuant to the terms of the
Indenture and the Loan Agreement;
(5) Written verification from the Rating Agency that the rating on the Series A Bonds will
not be diminished or withdrawn by reason of the substitution of tax increment revenues; and
(6) The Agency shall delivery notice to the Trustee that pursuant to the terms of the
Indenture and Loan Agreement, all conditions precedent to the substitution of pledged tax increment
revenues have occurred, together with (i) the FCR for the Merged Area A, (ii) the certification from the
financial consultant, written verification of the continuation of rating by the Rating Agency and (iii) the
supplemental opinion of Bond Counsel, and therein setting forth the Substitution Date.
The Trustee shall disseminate a notice to the bondholders and to the Rating Agency stating that pursuant
to the Indenture and the Loan Agreement, there has been a substitution of pledged tax increment revenues as
authorized by the Indenture and the Loan Agreement.
RISK FACTORS
The following information should be considered by prospective investors in evaluating the Bonds.
However, the following does not purport to be an exhaustive listing of risks and other considerations which may
be relevant to investing in the Bonds. In addition, the order in which the following information is presented is not
intended to reflect the relative importance of any such risks.
To estimate the revenues expected to be available to pay debt service on the Loan and, thus, the Bonds,
the Agency has made certain assumptions with regard to the assessed valuation in the Project Area, future tax
rates and percentage of taxes collected. The Agency believes these assumptions to be reasonable, but to the extent
that the assessed valuation, the tax rates or the percentage of taxes collected are less than the Agency's
assumptions, the Tax Revenues available to pay debt service on the Loan securing the Bonds will, in all
likelihood, be less than those projected.
Reduction in Taxable Value
Tax Revenues allocated to the Agency are detennined by the amount of incremental taxable value in the
Project Area and the current rate or rates at which property in the Project Area is taxed. The reduction of taxable
values of propeliy caused by economic factors beyond the Agency's control, such as a relocation out of one or
more of the Project Area by one or more major property owners, or the transfer, pursuant to Califomia Revenue
and Taxation Code Section 68, of a lower assessed valuation to property within the Project Area by a person
displaced by eminent domain or similar proceedings, or the discovery of hazardous substances on a property
within the Project Area (see "Hazardous Substances," below) or the complete or partial destruction of such
property caused by, among other eventualities, an earthquake, flood or other natural disaster, could cause a
reduction in the Tax Revenues securing the Loan securing the Bonds. Property owners may also appeal to the
County Assessor for a reduction of their assessed valuations or the County Assessor could order a blanket
reduction in assessed valuations based on then current economic conditions. Such a reduction of assessed
valuations and the resulting decline in Tax Revenues or the resulting property tax refunds could have an adverse
effect on the Agency's ability to make timely payments of principal of and interest on the Loan securing the
Bonds. See "Appeals of Assessed Values" below.
14
P:'Agendas\Agenda Attachments\Exhibits"201O\ 12~06-1 0 Recover)' Zone lPF A _ CDC ~ Preliminary Official Statement (Exhibit B).doc
Appeals of Assessed Values
Pursuant to California law, property owners may apply for a reduction of their property tax assessment by
filing a written application, in form prescribed by the State Board of Equalization, with the appropriate county
board of equalization or assessment appeals board.
After the applicant and the assessor have presented their arguments, the Appeals Board makes a final
decision on the proper assessed value. The Appeals Board may rule in the assessor's favor, in the applicant's
favor, or the Board may set their own opinion of the proper assessed value, which may be more or less than either
the assessor's opinion or the applicant's opinion.
Any reduction in the assessment ultimately granted applies to the year for which the application is made
and may also affect the values in subsequent years. Refunds for taxpayer overpayment of property taxes may
include refunds for overpayment of taxes in years after that which was appealed. Current year values may also be
adjusted as a result of a successful appeal of prior year values. Any taxpayer payment of property taxes that is
based on a value that is subsequently adjusted downward will require a refund for overpayment.
Appeals for reduction in the "base year" value of an assessment, if successful, reduce the assessment for
the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion
date of new construction or the date of change of ownership. Any base year appeal must be made within four
years of the change of ownership or new construction date.
Appeals may also be filed under Section 51 of the Revenue and Taxation Code, which requires that for
each lien date the value of real property shall be the lesser of its base year value annually adjusted by the inflation
factor pursuant to Article XlIIA of the State Constitution or its full cash value, taking into account reductions in
value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a
decline in value. Significant reductions have taken place in some counties due to declining real estate values.
Reductions made under this code section may be initiated by the County Assessor or requested by the property
owner. After a roll reduction is granted under this section, the property is reviewed on an annual basis to
determine its full cash value and the valuation is adjusted accordingly. This may result in further reductions or in
value increases. Such increases must be in accordance with the full cash value of the property and it may exceed
the maximum annual inflationary growth rate allowed on other properties under Article XIIIA of the State
Constitution. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the
annual inflationary factor growth rate allowed under Article XlIIA.
Reduction in Inflationary Rate
As described in greater detail below, Article XlIIA of the California Constitution provides that the full
cash value base of real property used in detennining taxable value may be adjusted annually to reflect the
inflationary rate, not to exceed a 2% annual increase, or may be reduced to reflect a reduction in the consumer
price index or comparable local data. Such measure is computed on a calendar year basis. Because Article XIIlA
limits inflationary assessed value adjustments to the lesser of the actual inflationary rate or 2%, there have been
years in which the assessed values were adjusted by actual inflationary rates, which were less than 2%, but greater
than 0%. Since 1978, the annual adjustment for inflation has fallen below the 2% limitation five times from
1983/84, 1995/06, 1996/07, 1999/00 and 2004/05. The Authority and the Agency are unable to predict the
adjustments, if any, to the full cash value base of real property within the Project Area.
Levy and Collection
Neither the Authority nor the Agency has any independent power to levy and collect property taxes. Any
reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could
15
P:\AgendasAgenda Attachments\Exhibits":20 I 0\ 12-06-10 Recovel)' Zone lPF A_ CDC - Preliminary Official Statement (Exhibit B).doc
reduce the Tax Revenues, and accordingly, could have an adverse impact on the ability of the Authority to repay
the Bonds. Likewise, delinquencies in the payment of property taxes could have an adverse effect on the
Agency's ability to make timely debt service payments on the Loan securing the Bonds.
Bankruptcy Risks
The enforceability of the rights and remedies of the owners of the Bonds and the obligations of the
Authority and the Agency may become subject to the following: the federal bankruptcy code and applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of
creditors' rights generally, now or hereafter in effect; usual equitable principles which may limit the specific
enforcement under state law of certain remedies: the exercise by the United States of America of the powers
delegated to it by the federal Constitution; and the reasonable and necessary exercise, in certain exceptional
situations of the police power inherent in the sovereignty of the State of California and its governmental bodies in
the interest of servicing a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of
powers by the federal or state government, if initiated, could subject the owners of the Bonds to judicial discretion
and interpretation of their rights in bankruptcy or otherwise and consequently may entail risks of delay, limitation,
or modification of their rights.
SB 211
In 2001, the California Legislature enacted SB 211, Chapter 741, Statutes 2001, which became effective
January 1, 2002 ("SB 211 "). SB 211 provides, among other things that, at any time after January 1, 2002, the
limitation on incurring indebtedness contained in a redevelopment plan adopted prior to January 1, 1994, may be
deleted by ordinance of the legislative body. However, such deletion triggers statutory tax sharing with those
taxing entities that do not have tax sharing agreements. Tax sharing will be calculated based on the increase in
assessed valuation after the year in which the limitation would otherwise have become effective.
SB 211 also authorizes the amendment of a redevelopment plan adopted prior to January 1, 1994, to
extend for not more than 10 years, the effectiveness of the redevelopment plan, the time to receive tax increment
revenues and to pay indebtedness. Any such extension must meet certain specified requirements, including the
requirement that the public body establish the existence of both physical and economic blight within a specified
geographical area of the redevelopment project and that any additional tax increment revenues received by the
Redevelopment Commission because of the extension be used solely within the designated blighted area.
Education Revenue Augmentation Fund (ERAF)
ERAF and State Budgets and Educational Revenue Augmentation Fund legislation has required
redevelopment agencies, including the Agency, to pay into a special fund for the benefit of local schools for the
1992-93, 1993-94, 1994-95, 2002-03, 2003-04, 2004-05, 2005-06, 2009-10 and 2010-11 fiscal years. It is
possible that, in addition to these payment requirements, and the limitations on Tax Revenues described herein,
the California electorate or Legislature could adopt a constitutional or legislative property tax decrease with the
effect of reducing Tax Revenues payable to the Agency. There is no assurance that the California electorate or
Legislature will not at some future time approve additional limitations that could reduce the Tax Revenues and
adversely affect the security of the Bonds. See "BONDOWNERS' RISKS - State Budgets and Educational
Revenue Augmentation Fund."
Hazardous Substances
An additional environmental condition that may result in the reduction in the assessed value of property
would be the discovery of a hazardous substance that would limit the beneficial use of taxable property within the
Project Area. In general, the owners and operators of a property may be required by law to remedy conditions of
16
P:\Agendas\Agenda Attachments',Exhibits\20 10\ 12-06-1 0 Recovery Zone JPF A _('DC - Preliminary Official Statement (Exhibit B).doc
the property relating to releases or threatened releases of hazardous substances. The owner or operator may be
required to remedy a hazardous substance condition of property whether or not the owner or operator has anything
to do with creating or handling the hazardous substance. The effect, therefore, should any of the property within
the Project Area be affected by a hazardous substance, could be to reduce the marketability and value of the
property by the costs of remedying the condition.
Secondary Market
There can be no guarantee that there will be a secondary market for the Bonds, or, if a secondary market
exists, that such Bonds can be sold for any particular price. Occasionally, because of general market conditions or
because of adverse history or economic prospects connected with a particular issue, secondary marketing
practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for
which a market is being made will depend upon the then prevailing circumstances. Such prices could be
substantially different from the original purchase price.
Federal Subsidy Payments on Recovery Zone Economic Development Bonds
The Authority intends to elect to designate the Series A Bonds as "Recovery Zone Economic
Development Bonds" and intends to elect to designate the Series B Bonds as "Build America Bonds" for purposes
of the American Recovery and Reinvestment Act of 2009 signed into law on February 17, 2009 (the "Recovery
Act'") and to receive a cash subsidy payment from the United States Department of Treasury equal to 45% of the
interest payable on the Series A Bonds on or about each interest payment date for the Series A Bonds (each such
cash subsidy payment, a "Federal Direct Payment").
Pursuant to the Indenture, the Authority has pledged all Federal Direct Payments it receives pursuant to
the Series A Bonds to the Trustee to be deposited into the Revenue Fund to be used solely for the purpose of
paying the principal of and interest on the Bonds, including the redemption price thereof.
The Code imposes requirements that the Authority must continue to meet after the Series A Bonds are
issued in order to receive the Federal Direct Payments. These requirements generally involve the way that
Economic Development Bond proceeds must be invested and ultimately used, and the periodic submission of
requests for payment. If the Authority and the Agency do not meet these requirements, it is possible that the
Authority may not receive the Federal Direct Payments.
The Internal Revenue Service ("IRS") has implemented an examination program for Build America
Bonds, which would include Recovery Zone Economic Development Bonds, and no assurance can be given that
the Series A Bonds will not be selected for a more detailed or comprehensive examination. In the event the IRS
files a proposed adverse determination letter as a result of such an examination, announced IRS policy is to
suspend payment to the Authority of the Federal Direct Payments pending a final determination of the
qualification of the Series A Bonds. Furthennore, in certain circumstances, the Federal Direct Payments may be
reduced (offset) by amounts detem1ined to be applicable under the Code and regulations promulgated thereunder.
For example, offsets may occur by reason of any past-due legally enforceable debt of the Authority to any Federal
agency. The amount of any such offsets is not predictable, but neither the Authority nor the Agency currently
expects that any such offsets will apply to the credits the Authority expects to receive.
LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS
Property Tax Limitations - Article XIIIA
California voters, on June 6, 1978, approved an amendment (commonly known as both Proposition 13
and the Jarvis-Gann Initiative) to the California Constitution. This amendment, which added Article XIIIA to the
17
P:Agendas\Agenda Attachments\Exhibits\20 to\] 2-06-10 Recovel)' Zone JPF A _ CDC . Preliminary Official Statement (Exhibit B).doc
California Constitution, among other things, affects the valuation of real property for the purpose of taxation in
that it defines the full cash value of property 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". The full cash value may be
adjusted annually to reflect inflation at a rate not to exceed 2% per year, or any reduction in the consumer price
index or comparable local data, or any reduction in the event of declining property value caused by damage,
destruction or other factors. The amendment further limits the amount of any ad valorem tax on real property to
1 % of the full cash value except that additional taxes may be levied to pay debt service on indebtedness approved
by the voters prior to July 1, 1978. In addition, an amendment to Article XIII was adopted in June 1986 by
initiative which exempts any bonded indebtedness approved by two-thirds of the votes cast by voters for the
acquisition or improvement of real property from the 1 percent limitation.
In the general election held November 4, 1986, voters of the State of California approved two measures,
Propositions 58 and 60, which further amend Article XIIIA. Proposition 58 amends Article XIIIA to provide that
the terms "purchased" and "change of ownership," for purposes of determining full cash value of property under
Article XIIIA, do not include the purchase or transfer of (1) real property between spouses and (2) the principal
residence and the first $1,000,000 of other property between parents and children.
Proposition 60 amends Article XIIIA to permit the Legislature to allow persons over age 55 who sell their
residence to buy or build another of equal or lesser value within two years in the same county, to transfer the old
residence's assessed value to the new residence. Pursuant to Proposition 60, the Legislature has enacted
legislation permitting counties to implement the provisions of Proposition 60.
Challenges to Article XIIIA
There have been many challenges to Article XIIIA of the California Constitution. The United States
Supreme Court heard the appeal in Nordlinger v. Hahn, a challenge relating to residential property. Based upon
the facts presented in Nordlinger, the United States Supreme Court held that the method of property tax
assessment under Article XIIIA did not violate the federal Constitution. The Authority and the Agency cannot
predict whether there will be any future challenges to California's present system of property tax assessment and
cannot evaluate the ultimate effect on the Agency's receipt of tax increment revenues should a future decision
hold unconstitutional the method of assessing property.
Implementing Legislation
Legislation enacted by the California Legislature to implement Article XlllA (Statutes of 1978, Chapter
292, as amended) provides that, notwithstanding any other law, local agencies may not levy any property tax,
except to pay debt service on indebtedness approved by the voters prior to July 1, 1978, and that each county will
levy the maximum tax pennitted by Article XIIIA.
The apportionment of property taxes in fiscal years after 1978/79 has been revised pursuant to Statutes of
1979, Chapter 282 which provides relief funds from State moneys beginning in fiscal year 1978/79 and is
designed to provide a penn anent system for sharing State taxes and budget surplus funds with local agencies.
Under Chapter 282, cities and counties receive about one-third more of the remaining property tax revenues
collected under Proposition 13 instead of direct State aid. School districts receive a correspondingly reduced
amount of property taxes, but receive compensation directly from the State and are given additional relief.
Future assessed valuation growth allowed under Article XIIIA (new construction, change of ownership,
2% annual value growth) will be allocated on the basis of "situs" among the jurisdictions that serve the tax rate
area within which the growth occurs except for certain utility property assessed by the State Board of Equalization
which is allocated by a different method discussed herein.
18
P:\Agendas\Agenda Attachments',Exhibits\201 0\ 12-06. ) 0 Recoyery Zone lPF A~, CDC - Preliminary Official Statement (Exhibit B).doc
Property Tax Collection Procedures
Classifications. In California, property which is subject to ad valorem taxes is classified as "secured" or
"unsecured." Secured and unsecured property is entered on separate parts of the assessment roll maintained by
the county assessor. The secured classification includes property on which any property tax levied by the County
becomes a lien on that property sufficient, in the opinion of the county assessor, to secure payment of the taxes.
Every tax which becomes a lien on secured property has priority over all other liens on the secured property,
regardless of the time of the creation of other liens. A tax levied on unsecured property does not become a lien
against unsecured property, but may become a lien on certain other property owned by the taxpayer.
Collections. The method of collecting delinquent taxes is substantially different for the two
classifications of property. The taxing authority has four ways of collecting unsecured property taxes in the
absence of timely payment by the taxpayer: (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 the personal property, improvements or possessory
interests belonging or assessed to the assessee.
The exclusive means of enforcing the payment of delinquent taxes with respect to property on the secured
roll is the sale of property securing the taxes to the State for the amount of taxes which are delinquent.
Penalties. A 10% penalty is added to delinquent taxes which have been levied with respect to property on
the secured roll. In addition, property on the secured roll on which taxes are delinquent is declared in default 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 1.5% per month to the time of redemption and a $15
Redemption Fee. If taxes are unpaid for a period of five years or more, the property is recorded in a "Power to
Sell" status and is subject to sale by the county tax collector. A I 0% penalty also applies to the delinquent taxes
on property on the unsecured roll, and further, an additional penalty of 1-1/2% per month accrues with respect to
such taxes beginning the first day of the third month following the delinquency date.
Delinquencies. The valuation of property is detennined as of January I each year and equal installments
of taxes levied upon secured property become delinquent on the following December 10 and June 10. Taxes on
unsecured property are due January 1. Unsecured taxes enrolled by July 31, if unpaid, are delinquent August 31
at 5:00 p.m. and are subject to penalty; unsecured taxes added to roll after July 31, if unpaid, are delinquent on the
last day of the month succeeding the month of enro11ment.
Supplemental Assessments. A bill enacted in 1983, SB 813 (Statutes of 1983, Chapter 498), provides for
the supplemental assessment and taxation of property as of the occurrence of a change in ownership or completion
of new construction. The statute may provide increased revenue to redevelopment agencies to the extent that
supplemental assessments as a result of new construction or changes of ownership occur within the boundaries of
redevelopment projects subsequent to the lien date. To the extent such supplemental assessments occur within the
Project Area, Tax Revenues may increase.
Tax Collec,ion Fees. SB 2557 (Chapter 466, Statutes of 1990) authorizes county auditors to detennine
property tax administration costs proportionately attributable to local jurisdictions and to submit invoices to the
jurisdictions for such costs. Subsequent legislation specifically includes redevelopment agencies among the
entities which are subject to a property tax administration charge.
19
p:'Agendas\Agenda Attachments\Exhibits\20 I 0\12-06-1 0 Recovery Zone lPF A _('DC' - Preliminary Official Statement (Exhibit B).doc
Unitary Property
AB 2890 (Statutes of 1986, Chapter 1457) provides that, commencing with the fiscal year 1988/89,
assessed value derived from State-assessed unitary property (consisting mostly of operational property owned by
utility companies and herein defined as "Unitary Property") is to be allocated county-wide as follows: (i) each tax
rate area will receive the same amount from each assessed utility received in the previous fiscal year unless the
applicable county-wide values are insufficient to do so, in which case values will be allocated to each tax rate area
on a pro-rata basis; and (ii) if values to be allocated are greater than in the previous fiscal year, each tax rate area
will receive a pro-rata share of the increase from each assessed utility according to a specified formula.
Additionally, the lien date on State-assessed property has been changed to January 1. Railroad property will
continue to be assessed and revenues allocated to all tax rate areas where the railroad property is sited.
Appropriations Limitations - Article XIIm
On November 6, 1979, California voters approved Proposition 4, the so-called Gann Initiative, which
added Article XIIIB to the California Constitution. The principal effect of Article XIIIB is to limit the annual
appropriations of the State and any city, county, school district, authority or other political subdivision ofthe State
to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and
services rendered by the government entity.
Effective November 30, 1980, the California Legislature added Section 33678 to the Redevelopment Law
which provided that the allocation of taxes to a redevelopment agency for the purpose of paying principal of, or
interest on, loans, advances, or indebtedness shall not be deemed the receipt by such agency of proceeds of taxes
levied by or on behalf of the agency within the meaning of Article XIIIB, nor shall such portion of taxes be
deemed receipt of taxes by, or an appropriation subject to the limitation of, any other public body within the
meaning or for the purpose of the Constitution and laws of the State, including Section 33678 of the
Redevelopment Law.
Proposition 218
On November 5, 1996, California voters approved Proposition 218-Voter Approval for Local
Government Taxes-Limitation on Fees, Assessments, and Charges-Initiative Constitutional Amendment.
Proposition 218 added Articles XIIIC and XIIIO to the California Constitution, imposing certain vote
requirements and other limitations on the imposition of new or increased taxes, assessments and property-related
fees and charges. Tax Revenues securing the Loan securing the Bonds are derived from property taxes which are
outside the scope of taxes, assessments and property-related fees and charges which were limited by Proposition
218.
AB 1290 and AB 1342
In 1993, the California Legislature enacted Assembly Bill 1290 ("AB 1290'") which contained several
significant changes in the Redevelopment Law. Among the changes made by AB 1290 was a provision which
limits the period of time for incurring and repaying of loans, advances and indebtedness which are payable from
tax increment revenues. In general, a redevelopment plan may tenninate not more than 40 years following the
date of original adoption, and loans, advances and indebtedness may be repaid during a period extending not more
than 10 years following the date of tern1ination of the redevelopment plan. AB 1342 was passed in 1998 and
became effective January 1, 1999. This bill pennits agencies having limits shorter than those pern1itted by AB
1290 to amend their plans to incorporate the maximum permitted limits without complying with the statutory plan
amendment process.
20
P:\Agendas\Agenda Attachments', Exhibits\201 0\ 12-06-1 0 RecO\'ery Zone JPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
Future Initiatives
Article XIIIA, Article XIIIB and certain other propositions affecting property tax levies were each
adopted as measures which qualified for the ballot pursuant to California's initiative process. From time to time
other initiative measures could be adopted, further affecting Agency revenues or the Agency's ability to expand
revenues.
THE AUTHORITY
The San Bernardino Joint Powers Financing Authority was established pursuant to a Joint Exercise of
Powers Agreement dated August 21, 1989, by and between the City and the Agency. The Authority was created
for the purpose of providing financing for redevelopment activities for the City, the Agency, or other local
agencies in the State of California, the acquisition, construction or installation by the Authority of public capital
improvements and/or the purchase by the Authority of public obligation within the meaning of the Marks-Roos
Act. The Authority is authorized pursuant to the Marks-Roos Act to borrow money for the purpose of financing
the acquisition of bonds, notes and other obligation of, or for the purpose of making loans to, the City, the
Agency, or such other local agencies to provide financing for redevelopment activities of the City or the Agency.
Included as Appendix A to this Official Statement is certain general information with respect to the City.
Such information is included for general background purposes only. The Bonds do not constitute a debt to the
City or the Agency, and neither the City, the Agency, the State nor any of its political subdivisions is liable
therefor.
THE AGENCY
The Agency was established pursuant to the Redevelopment Law and activated by the appropriate actions
of the Mayor and Common Council of the City of San Bernardino in 1952. The Agency is responsible for
redeveloping and upgrading blighted areas of the City. The seven members of the Common Council serve as the
governing body of the Agency and exercise all the rights, powers, duties and privileges of the Agency. The
Mayor of the City serves as Agency Chairperson.
All powers of the Agency are vested in its governing body. Pursuant to the Redevelopment Law, the
Agency may exercise broad governmental functions and authority to accomplish its purpose, including, but not
limited to, the right to issue notes and expend their proceeds and the right to acquire, sell, develop, administer or
lease property. The Agency may demolish buildings, clear land and cause to be constructed certain
improvements, including streets, sidewalks and public utilities.
With certain exceptions, the Agency may not construct or develop buildings, with the exception of public
facilities, but must sell or lease clear property to redevelopers for construction and development in accordance
with the Redevelopment Plan.
THE PROJECT AREA
The Redevelopment Plan for the Northwest Project Area was adopted on July 6, 1981, by Ordinance No.
MC-189, which became effective on August 7, 1982. Located in the northwest quadrant of the City of San
Bernardino, the Project Area is divided into Subarea A and Subarea B. The Project Area primarily encompasses
the parcels along thoroughfares in the northwest area of the City. This includes portions of Highland Avenue,
Muscoy Street, and Mount Vernon Avenue.
Subarea A, encompassing 940 acres, is located south of Cajon Boulevard, north of Seventh Street and
west of Interstate 215. This area focuses on commercial corridors along portions of Highland Avenue, Baseline
21
P:'Agendas\Agenda Attachments\Exhibits'.201 0\12-06-1 0 Recovery Zone JPFA_ roc - Preliminary Official Statement (Exhibit B).doc
Avenue, Medical Center Drive and Mount V ernon Avenue. San Bernardino Community Hospital and the
Westside Shopping Center are major employers within this area.
Subarea B, encompassing 500 acres, is located north of Devil's Creek Diversion Channel, southeasterly
of Palm, south ofInterstate-21S, and east and west of Cajon Boulevard. This area is designated for industrial uses
with vacant land available for development. A bridge was built connecting the industrial area to the State College
Business Park industrial area, allowing for better freeway access. The area is in close proximity to Interstate-21S
and Interstate-IS freeway interchange.
The Project Area has a community shopping center, which was constructed with the assistance of the
Agency, a four-story, 100,000 square-foot medical office building, a 316,000 sq. ft. adhesive manufacturing and
distribution center and a 75 unit senior housing complex, among other development.
The California Community Redevelopment Law (California Health and Safety Code 9933000 et seq.)
("CRL") requires the Redevelopment Plan to contain certain time and financial limits governing the
administration and financial operations of the Agency. Time limits include the Agency's ability to incur debt,
undertake Redevelopment Plan activities, and collect tax increment revenue to repay debt. Financial limits
include the amount of bonded indebtedness that may be outstanding at anyone time and the cumulative amount of
gross tax increment that the Agency may collect. The Agency's time limit to incur debt was eliminated by
Ordinance No. MC-llS7 on December 1,2003 pursuant to Senate Bill 211 (Chapter 741, Statutes of 2001). The
time limits on Redevelopment Plan effectiveness and collection of tax increment to repay debt are July 6, 2025
and July 6, 2035, respectively. Both time limits were extended pursuant to Senate Bill 1045 (Chapter 260,
Statutes of 2003) by one year on June 20, 2005 by Ordinance No. MC-1202, and subsequently extended pursuant
to Senate Bill 1096 (Chapter 211, Statutes of 2004) for two additional years on April 20, 2009 by Ordinance No.
MC-1297. These extensions were authorized by state budget trailer bills related to the shift of Agency tax
increment revenues to the Educational Revenue Augmentation Fund in specified years.
All of the Plan limits described above may only be amended by a Redevelopment Plan amendment in
accordance with the CRL. The table below outlines the current Redevelopment Plan limits for the Project Area.
22
P:'.Agendas\Agenda Attachments\Exhibits\201 0\ 12-06-1 0 RecO\"ery Zone JPFA_CDC . Preliminary Official Statement (Exhibit B).doc
TABLEt
Redevelopment Plan Limits
San Bernardino Northwest Redevelopment Proiect
Plan Adoption
July 6, 1982
Time Limits
Incur Debt]
J
Collect Tax Increment/Repay Debt-
Plan Effectiveness2
Eliminated
July 6, 2035
July 6, 2025
Financial Limits
Bonded Indebtedness'
Tax Increment'
$35,000,000
$ 4,500,000 Annually
I The City Council adopted Ordinance No. MC-1157 on December 1, 2003 eliminating the time limit to
incur debt pursuant to SB 211.
2 The City Council adopted Ordinance No. MC-1202 on June 20, 2005 pursuant to SB 1045 extending the
time limits for plan effectiveness and tax increment collection by one year. The City Council adopted
Ordinance No. MC-1297 on April 20, 2009 pursuant to SB 1096 extending the time limits for an additional
two years.
, The City Council adopted Ordinance No. MC-189 on July 6, 1982 adopting the Redevelopment Plan and
establishing financial limits for bonded indebtedness and tax increment.
Source: City of San Bernardino
Pass-through Agreements
The Agency entered into one agreement for the allocation and distribution of the tax increment funds
from the Project Area. The Agency's obligations under the pass-through agreement are senior to the receipt of tax
revenues.
In 1982, the County of San Bernardino and the Agency entered into an Interim Agreement for the Project
Area, which required the mutual reevaluation of the financial impacts of the Project Area within 5 years of the
adoption of the Plan. During the 1988 reevaluation, the County and the Agency failed to come to an agreement
on the financial impact of the Project Area. Failure of these negotiations and the lack of an adopted substitute
agreement between the parties have resulted in the County and the Flood Control District retaining their share of
the 1 % property tax levy for the Project Area. The combined County-Flood Control District share of the 1 % levy
is 34%.
The Agency, in January 2004, extended the time limit for the last date to incur debt, Senate Bill 211,
which then required the Agency to remit pass-through payments to taxing entities within the Project Area. The
Agency's obligation under SB 211 for pass-through payments is senior to receipt of tax revenues.
23
P:\Agendas\Agenda Attachments"Exhibits\20 10\1 2-06-1 0 Recovery Zone JPF A_CD(' - Preliminary Official Statement (Exhibit B).doc
The Project Area's Top 10 Taxpayers are listed below.
TABLE 2
Northwest Redevelopment Project Area
Lan!est Local Secured Taxpavers (2010-11)
Property Owner
1 . Lit Industrial LP
2. SP4 Cajon II LP
3. Industrial Parkway LLC
4. MAPEl Corporation
5. Hollywood Plaza Associates LLC
6. Health Care REIT Inc.
7. VID LLC
8. Calmat Land Co.
9. San Bernardino Steel
10. VESCO Properties LLC
Primary Land Use
Industrial
Industrial
Industrial
Industrial
Industrial
Medical Buildings
Industrial
Industrial
Industrial
Industrial
(1) 2010-11 Local Secured Assessed Valuation: $473,048,839
JC:($450)
Source: California Municipal Statistics, Inc.
2010-11
Assessed Valuation
$115,393,867
50,916,644
43,860,000
18,802,580
15,923,172
11,572,508
10,326,936
10,121,569
8,725,705
8,624,012
%of
Total (1)
22.0%
9.7
8.4
3.60
3.00
2.2
2.00
1.90
1.7
1.60
The Top 10 Taxpayers were identified based upon property owners with the largest taxable assessed
valuation presented by the County Assessor's 2010-11 Assessment Roll. The Top 10 Taxpayers' assessed value
totals $294,266,993 or 56.1 % of the Project Area's total $524,140,460 assessed value for fiscal year 20 I 0-11.
Three of the Top 10 Taxpayers have filed assessment appeals during the past five years. Pending Top 10
Taxpayers appeals comprise $103,410,369 in requested value reductions. The Revenue Projections contained in
the Table below and in the Fiscal Consultants Report attached hereto as Appendix C assume these appeals will be
granted and factor in reductions to fiscal year 20 10-11 assessed value and tax increment revenue using the
methodology outlined in the Fiscal Consultant's Report. See APPENDIX C hereof.
24
P:'Agendas\Agenda Attachments\Exhibits\201 0\12-06-1 0 Recovery Zone lPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
TABLE 3
Revenue Proiections
Non
Housing
Taxing Revenue
Agency Avai]ab]e
Total Incremental Total County Housing Pass Existing for
Plan Fisca] Assessed Assessed Tax Admin. Fund Through Debt Future Debt
Year Year Value Value Increment Fee Deposits Payments Service Service
BY ] 982-83 $34,4]8,78]
29 20]0-] ] 456,946,673 422,527,892 4,450,503 1],]26 890,10] ],20],055 742,055 ] ,606, \ 66
30 20] ]-]2 456,644,879 422,226,098 4,500,000 11,250 900,000 ] ,207,842 743,866 ] ,637,042
31 20]2-13 464,985,622 430,566,84 \ 4,500,000 ] ],250 900,000 ] ,223,884 745,377 ],6 \ 9,489
32 20]3-]4 473,263,502 438,844,72] 4,500,000 11,250 900,000 ],239,806 745,335 1,603,609
33 2014-]5 48],706,940 447,288,]59 4,500,000 \ ],250 900,000 \ ,256,046 744,812 \ ,587,892
34 20]5-]6 490,3] 9,246 455,900,465 4,500,000 ] ],250 900,000 1,272,6] ] 743,763 ],572,376
35 20]6-] 7 499,\03,799 464,685,018 4,500,000 \ ],250 900,000 ] ,289,507 742,]47 ],557,096
36 20]7-\8 508,064,042 473,645,26 ] 4,500,000 ] \,250 900,000 ],306,74] 744,665 ] ,537,343
37 20]8-]9 517,203,49] 482,784,710 4,500,000 ] ],250 900,000 ] ,324,320 74] ,496 1,522,934
38 20] 9-20 526,525,728 492,106,947 4,500,000 ] ],250 900,000 \ ,342,25] 742,649 ] ,503,850
39 2020-2 ] 536,034,410 50\,615,629 4,500,000 ] \,250 900,000 1,360,540 762,299 ],465,9\2
40 202 \ -22 545,733,266 5\ \,3]4,485 4,500,000 1 \,250 900,000 ] ,379,] 95 718,785 1,490,77 ]
41 2022-23 555,626,099 52] ,207,318 4,500,000 1],250 900,000 1,398,222 7] 1,874 ] ,478,654
42 2023-24 565,7]6,788 53] ,298,007 4,500,000 11,250 900,000 \,4]7,631 769,482 ] ,401 ,637
43 2024-25 576,009,292 54] ,590,5] \ 4,500,000 11,250 900,000 1,437,428 712,009 ] ,439,3] 4
44 2025-26 586,507,645 552,088,864 4,500,000 1],250 900,000 1,457,620 511,800 1,6]9,330
45 2026-27 597,215,966 562,797,]85 4,500,000 ] ],250 900,000 1,478,2] 7 2, \ 10,533
46 2027-28 608,] 38,453 573,719,672 4,500,000 ] 1,250 900,000 ] ,499,225 2,089,525
47 2028-29 619,279,389 584,860,608 4,500,000 11,250 900,000 ] ,520,653 2,068,097
48 2029-30 630,643,145 596,224,364 4,500,000 11,250 900,000 1,542,51 ] 2,046,239
49 2030-31 642,234,175 607,815,394 4,500,000 11,250 900,000 ] ,564,805 2,023,945
50 2031-32 654,057,026 6] 9,638,245 4,500,000 11,250 900,000 1,587,545 2,00 \,205
51 2032-33 666,116,334 631,697,553 4,500,000 ] ],250 900,000 ],6] 0,740 1,978,0 I 0
Totals $] 03,450,503 $258,626 $20,690, I 0] $31,918,394 $11,622,412 $38,960,970
I Adjusted for assessment appeals, property sales, and new
construction.
2 Adjusted for assessment appeals and delinquencies; $4,500,000 annual tax
increment cap applied.
Source: Rosenow Spevacek Group, Inc.
P:\Agendas\Agenda Attachments\Exhibits'']OI 0',1 2.06~ to Recovery Zone JPFA_CDC - Preliminary Official Statement (Exhibit B).doc
25
The following Table represents direct and overlapping debt for the Northwest Project Area.
TABLE 4
Direct and Overlapping Debt
City of San Bernardino - Northwest Redevelopment Proiect Area
2010-11 Assessed Valuation: $524,140,460
Base Year Valuation: 34,4 18,781
Incremental Valuation: $489,721,679
DIRECT DEBT:
2002 Subordinated Refunding Tax Allocation Bonds
Refunding Tax Allocation Bonds, Series 2005A
Refunding Tax Allocation Bonds, Series 2005B
Tax Allocation Bonds (20% Set-Aside), Taxable Series 2006
TOTAL DIRECT DEBT
% Applicable
100. %
100.
100.
100.
Ratio to Incremental Valuation: 2.15%
OVERLAPPING TAX AND ASSESSMENT DEBT:
San Bernardino Community College District
San Bernardino City Unified School District
TOTAL OVERLAPPING TAX AND ASSESSMENT DET
1.023%
4.778
OVERLAPPING GENERAL FUND DEBT:
San Bernardino County General Fund Obligations
San Bernardino County Pension Obligations
San Bernardino County Flood Control District General Fund Obligations
City of San Bernardino General Fund Obligations
TOTAL OVERLAPPING GENERAL FUND DEBT
0.030%
0.030
0.030
0.661
COMBINED TOTAL DIRECT AND OVERLAPPING DEBT
Debt 11/1/10
$ 3,194,854
2,044,162
1,461,191
3,807,888
$1 0,508,095( 1)
$ 4,409,332
7.255.547
$11,664,879
$207,222
180,530
33,453
149,221
$570,426
$22,743,400(2)
(1) Excludes issue to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and
non-bonded capital lease obligations
Ratios to 2010-11 Assessed Valuation:
Combined Total Direct and Overlapping Debt............4.64%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/10: $0
KD:($450)
Source: California Municipal Statistics, Inc.
26
P:\Agendas\Agenda Attachments\' Exhibits',201OIJ 2-06-10 Recovery Zone lPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
TABLE 5
Historical Valuations
Northwest Redevelopment Proiect Area
Assessed
Values! 2006-07 2007-08 A 2008-09 A 2009-10 A 2010-11 A
Loca] Secured $235,025,936 $268,852,06 ]4.3% $432,5] 8,26 60.8% $499,933,] 7 15.5% $473,048,89 -5.38%
Utility 488,264 - - -
Unsecured 33,053,940 38,521.600 ]6.5% 41.665.340 8.]6% 53.3] 8,970 27.9% 51.091.62] -4.]8%
Tota] $268,568,] 40 $307,373,66 ]4.4% $474,] 83,60 54.2% $553,252,] 7 ]6.6% $524,]40,40 -5.26%
Assessed
Value
Base Year $(34,695,79) $(34.4]8,78) $(34.4]8,78) $(34.4]8,7]) $(34.4]8,7])
Value
Incrementa] $233,872,34 $272,954,88 16.7% $439,764,89 61.1% $5] 8,833,36 ]7.9% $489,72],69 -5.6]%
Value
Tax Rate 1.16% 1.]6% 1.16% 1.16% 1.16%
Estimated
Revenue
Tax Increment $2,7]2,9]9 $3,] 66,277 $5,]01,272 $6,0] 8,467 $5,680,77]
Revenue
without Cap
Tax Increment $2,712,9]9 $3,] 66,277 $4,500,000 $4,500,000 $4,500,000
Revenue with
Can
County (6,782) (7,9]6) (]] ,250) (11,250) (11,250)
Admin Charge
Pass-Through
Payments
Tota] $2,706,] 37 $3,158,36] ]6.7% $4.488,750 42.1% $4,488,750 0.00% $4,488,750 0.00%
Estimated
Gross
Revenue
Total Actual $3,012,04] $3,701.696 22.9% $4,500,000 21.5% $4,500,000 0.00%
Gross
Receiots2
Allocation to $602.408 $740,339 $900,000 $900,000
Housing
Fund3
1 Values pursuant to San Bernardino County Auditor-Controller Reports
2 According to the San Bernardino Auditor-Controller, actual gross receipts in 2008-09 were $6,958,074. The Agency reported
the overpayment above the Agency's $4,500,000 arumal gross tax increment limit. The overpayment was adjusted for in the
Agency's 2009-10 tax increment revenue allocation.
3 Housing Fund equals 20% of Gross Tax Increment Allocation
Source: Rosenow Spevacek Group, Inc,
27
P:\Agendas\Agenda Attachments\Exhibits"201 0\1 2-06-1 0 Recoyel)' Zone JPFA_ CDC - Preliminary Official Statement (Exhibit B).doc
Teeter Plan
The San Bernardino County Board of Supervisors has adopted the Alternative Method of Distribution of Tax
Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan"), as provided for in Section 4701 et seq., of the
State Revenue and Taxation Code commencing with fiscal year 93-94 with respect to public agencies which receive
and valorem tax revenues. However, the redevelopment agencies within the County are not allowed to be in the
Teeter Plan. As a result, the "Teeter Plan" is not applicable to the Tax Revenues. It is the experience of the Agency
that it receives more Tax Revenues under the existing method, than it would under the Teeter Plan, due to interest
and penalties charged on delinquent taxes.
Tax Rate
The difference between the actual tax rate and the 1.00% tax rate established by Article XIIIA of the
California Constitution represents taxes levied to pay debt approved by the respective voters.
Senate Bill 2557
In 1990, the State enacted Senate Bill 2557 which allows counties to charge fees to local jurisdictions for the
cost of preparing and overseeing the tax roll. Since supplemental revenues historically have offset the administrative
costs, the Historical Valuations showing the available Tax Revenues do not take such administrative costs into
account.
Annual Debt Service
Tax Revenues (as defined in the section "SECURITY FOR THE BONDS") will be received from the
Agency by the Authority pursuant to the Loan Agreement. The Authority will transfer Tax Revenues to the Trustee
to be deposited in the Revenue Fund and applied to the payment of the principal of and interest on the Bonds. The
following Table shows the projected Debt Service on the Bonds and all senior and parity debt outstanding.
28
P:\Agendas\Agenda Attachments\Exhibits\20 1 0\ 12.06.1 0 Recovery Zone JPF A _('DC - Preliminary Official Statement {Exhibit B).doc
Existing
Series
2002 A
Junior
Lien Debt
Service
386,900
388,925
390,206
390,306
389,806
388,706
387,006
389,706
386,506
387,476
407,531
363,981
357,088
414,531
357,006
511,800
TABLE 6
Annual Debt Service*
Northwest
Redevelopment
Project Tax
Increment
Year Revenues(1)
2011 2,348,221.00
2012 2,380,908.00
2013 2,364,866.00
2014 2,348,944.00
2015 2,332,704.00
2016 2,316,139.00
2017 2,299,243.00
2018 2,282,009.00
2019 2,264,430.00
2020 2,246,499.00
2021 2,228,210.00
2022 2,209,555.00
2023 2,190,528.00
2024 2,171,119.00
2025 2,151,322.00
2026 2,131,130.00
2027 2,110,533.00
2028 2,089,525.00
2029 2,068,097.00
2030 2,046,239.00
2031 2,023,945.00
2032 2,001,205.00
2033 1,978,010.00
(1) Net Tax Increment after Housing Set-Aside and Pass Throughs including SB 211 - subject to an annual cap of
$4.5 Million
(2) Assumes the 45% Direct Subsidy will be used to pay debt
servIce
Existing Series
2005 A & B Debt
Service
355,155
354,941
355,171
355,029
355,006
355,057 456,474
355,141 467,503
354,959 472,733
354,990 482,366
355,173 491,201
354,768 499,238
354,804 511,478
354,786 522,721
354,951 532,968
355,003 547,217
560,270
577,127
592,588
611,654
629,124
Source: Rosenow Spevacek Group, Inc.
Preliminary
Series 2010
A Debt
Service(2)
582,167
431,779
440,001
442,624
449,848
339,988
319,788
299,713
284,838
260,038
220,788
237,863
223,613
144,863
169,863
343,613
828,613
797,125
765,375
468,363
P:\Agendas\Agenda Attachments\Exhibits\20 I 0\ 12-06-1 0 Recovery Zone JPF A _ ('DC' - Preliminary Official Statement (Exhibit B).doc
29
Preliminary
Series 2010
B Debt
Service
237,958
406,913
388,763
374,863
360,238
1,540,225
1,529,437
1,517, III
1,508,699
1,493,888
1,482,324
1,468,125
1,458,207
1,447,312
1,429,088
1,415,683
1,405,739
1,389,713
1,377,029
1,097,487
Total
Debt
Service
1,562,180
1,582,558
1,574,140
1,562,821
1,554,897
1.50
1.50
1.50
1.50
1.50
1.50
1.51
1.50
1.50
1.51
1.51
1.50
1.50
1.50
1.86
Coverage
1.50
1.50
1.50
1.50
1.50
Planned Merger of Project Areas
The Agency is in the initial stages of a merger of its fourteen (14) redevelopment project areas into two (2)
redevelopment project areas, Merged Area A Project Area and Merged Area B Project Area. In the event the
mergers are completed, it is expected that the existing fourteen (14) redevelopment project areas will be within a
Merged Area A Project Area or Merged Area B Project Area. After the completion of the Merged Area A Project
Area, the 4th Street Project will be within the Merged Area A Project Area, consisting of Central City North,
Southeast Industrial Park, Tri-City, South Valle, Meadowbrook/Central City, Central City South and Central City
Redevelopment Project Areas. The Northwest Redevelopment Project Area, which revenues constitute the Tax
Revenues (as herein defined), will be within the Merged Area B Project Area in the event that the Merged Area B
Project Area is completed.
The proposed mergers will result in increasing the total amount of tax increment revenue that can be
accumulated within each of the merged areas, combining the individual project areas' bonded indebtedness limits and
increasing the total amount of bonded indebtedness that can be accumulated for each merged area, and with respect
to some of the project areas, extending the plan effectiveness by ten (10) years.
In the event that the Merged Area B Project Area is adopted, with respect to the Series A Bonds, the
Indenture and Loan Agreement provide that upon meeting certain conditions, namely, (i) delivery to the Trustee of a
Fiscal Consultant's Report and certification by said Fiscal Consultant demonstrating that the pledged tax increment
revenues from the Merged Area A Project Area are at least equal to the pledged Tax Revenues from the Northwest
Project Area on the original Closing Date, (ii) delivery of an opinion of bond counsel stating that the pledge is
consistent with the provisions of the Trust Indenture and the Loan Agreement, and (iii) confirmation in writing from
S&P that the rating on the Series A Bonds will not be diminished or removed by reason of the substitution, all
references to "Project Area'. and "Tax Revenues" with respect to the Series A Bonds shall become "Merger A Tax
Revenues" as defined in the Indenture. See "SECURITY FOR THE BONDS - Merger of Project Areas."
MISCELLANEOUS
Enforceability of Remedies
The remedies available to the Trustee or the Authority or the owners of the Bonds upon a default under the
Indenture or the Loan Agreement are in many respects dependent upon judicial actions, which are often subject to
discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically
Title 11 of the United States Code (the Federal Bankruptcy Code) and relevant banking and insurance law, the
remedies provided in the Indenture may not be readily available or may be limited. The various legal opinions to be
delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal
instruments by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the
rights of creditors generally.
Absence of Litigation
As of the date of issuance of the Bonds, officers of the City, the Agency and the Authority will execute
certificates to the effect that there is no controversy or litigation now pending against the City, the Agency or the
Authority, or to the knowledge of its officers threatened, restraining or enjoining the issuance, sale, execution or
delivery of the Bonds, or in any way contesting or affecting the validity of the Bonds.
Ratings
[TO COME]
30
P:\Agendas\Agenda Attachments',Exhibits\20 1 0" t 2-06-1 0 Recovery Zone lPF A _('DC' - Preliminary Official Statement {Exhibit B).doc
Tax Matters
The following is a summary of certain material federal income tax consequences of the purchase, ownership
and disposition of the Bonds for the investors described below and is based on the advice of Lewis Brisbois Bisgaard
& Smith LLP, as Bond Counsel. This summary is based upon laws, regulations, rulings and decisions currently in
effect, all of which are subject to change. The discussion does not deal with all federal tax consequences applicable
to all categories of investors, some of which may be subject to special rules, including but not limited to, partnerships
or entities treated as partnerships for federal income tax purposes, pension plans and foreign investors, except as
otherwise indicated. In addition, this summary is generally limited to investors that are "U.S. holders" (as defined
below) who will hold the Bonds as "capital assets" (generally, property held for investment) within the meaning of
Section 1221 of the Tax Code. Investors should consult their own tax advisors to determine the federal, state, local
and other tax consequences of the purchase, ownership and disposition of Bonds. Prospective investors should note
that no rulings have been or will be sought from the Internal Revenue Service (the "Service") with respect to any of
the federal income tax consequences discussed below, and no assurance can be given that the Service will not take
contrary positions.
As used herein, a "U.S. holder" is a "U.S. person" that is beneficial owner ofa Bond. A "non U.S. holder" is
a holder (or beneficial owner) of a Bond that is not a U.S. person. For these purposes, a "U.S. Person" is a citizen or
resident of the United States, a corporation or partnership created or organized in or under the laws of the United
States or any political subdivision thereof (except, in the case of a partnership, to the extent otherwise provided in the
Treasury Regulations), an estate the income of which is subject to United States federal income taxation regardless of
its source or a trust if (i) a United States court is able to exercise primary supervision over the trust's administration
and (ii) one or more United States persons have the authority to control all of the trust's substantial decisions.
III Gelleral. The Authority intends to elect to designate the Series A Series A Bonds as taxable "Recovery
Zone Economic Development Series A Bonds" pursuant to Section 1400U-2 of the Tax Code. Although the Series A
Series A Bonds are issued by the Authority, interest on the Series A Series A Bonds (including original issue
discount treated as interest) is not excludable from gross income for federal income tax purposes under Section 103
of the Tax Code. Interest on the Series A Series A Bonds (including original issue discount treated as interest) will
be fully subject to federal income taxation. Thus, owners of the Series A Series A Bonds generally must include
interest (including original issue discount treated as interest) on the Series A Series A Bonds in gross income for
federal income tax purposes.
To ensure compliance with Treasury Circular 230, holders of the Series A Bonds should be aware and are
hereby put on notice that: (a) the discussion in this Official Statement with respect to U.S. federal income tax
consequences of owning the Series A Bonds is not intended or written to be used, and cannot be used, by any
taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer; (b) such discussion was written
in connection with the promotion or marketing (within the meaning of Treasury Circular 230) of the transactions or
matters addressed by such discussion; and (c) each taxpayer should seek advice based on its particular circumstances
from an independent tax advisor.
Recovery ZOlle Ecollomic Developmellt Series A BOllds. The Series A Bonds are expected to be issued as
taxable, Recovery Zone Economic Development Series A Bonds as authorized by the Recovery Act. Pursuant to the
Recovery Act, the Authority expects to receive cash subsidy payments from the United States Treasury equal to 45%
of the interest payable on the Series A Bonds. The Tax Code imposes requirements on the Series A Bonds that the
Authority must continue to meet after the Series A Bonds are issued in order to receive the cash subsidy payments.
These requirements generally involve the way that Series A Bond proceeds must be invested and ultimately used, and
the periodic submission of requests for payment. If the Authority does not meet these requirements, it is possible that
the Authority may not receive the cash subsidy payments.
31
P;\Agendas\Agencta Attachments\Exhibits\20 ) 0\12-06-1 0 Recovery Zone JPF A _ CDC - Preliminary Official Statement (Exhibit B}.doc
Characterization of the Trust Estate. Lewis Brisbois Bisgaard & Smith LLP will render on the closing date,
with respect to the Series A Bonds, its opinion to the effect that the Series A Bonds will be treated as debt of the
Authority for federal income tax purposes. Similarly, the Authority intends that the Series A Bonds will be treated as
indebtedness of the Authority for federal income tax purposes. The owners of the Series A Bonds, by accepting such
Series A Bonds, have agreed to treat the Series A Bonds as indebtedness of the Authority for federal income tax
purposes.
Taxation of Interest Income of the Series A Bonds. Payments of interest with regard to the Series A Bonds
will be includible as ordinary income when received or accrued by the holders thereof in accordance with their
respective methods of accounting and applicable provisions of the Tax Code. If the Series A Bonds are deemed to be
issued with original issue discount, Section 1272 of the Tax Code requires the current ratable inclusion in income of
original issue discount greater than a specified de minimis amount using a constant yield method of accounting. In
general, original issue discount is calculated, with regard to any accrual period, by applying the instrument's yield to
its adjusted issue price at the beginning of the accrual period, reduced by any qualified stated interest (as defined in
the Tax Code ) allocable to the period. The aggregate original issue discount allocable to an accrual period is
allocated to each day included in such period. The holder of a debt instrument must include in income the sum of the
daily portions of original issue discount attributable to the number of days he owned the instrument. The legislative
history of the original issue discount provisions indicates that the calculation and accrual of original issue discount
should be based on the prepayment assumptions used by the parties in pricing the transaction.
Payments of interest received with respect to the Series A Bonds will also constitute investment income for
purposes of certain limitations of the Tax Code concerning the deductibility of investment interest expense. Potential
holders of the Series A Bonds should consult their own tax advisors concerning the treatment of interest payments
with regard to the Series A Bonds.
A purchaser (other than a person who purchases a Series A Bond upon issuance at the issue price) who buys
a Series A Bond at a discount from its principal amount (or its adjusted issue price if issued with original issue
discount greater than a specified de minimis amount) will be subject to the market discount rules of the Tax Code. In
general, the market discount rules of the Tax Code treat principal payments and gain on disposition of a debt
instrument as ordinary income to the extent of accrued market discount. Each potential investor should consult his
tax advisor concerning the application of the market discount rules to the Series A Bonds.
Sale or Exchange of the Series A Bonds. If a Series A Bondholder sells a Series A Bond, such person will
recognize gain or loss equal to the difference between the amount realized on such sale and the Series A
Bondholder's basis in such Series A Bond. Ordinarily, such gain or loss will be treated as a capital gain or loss. At
the present time, the maximum capital gain rate for certain assets held for more than twelve months is 15%.
However, if a Series A Bond was subject to its initial issuance at a discount, a portion of such gain will be
recharacterized as interest and therefore ordinary income. In February of 2009, President Barack Obama proposed
increasing the long-tern1 capital gains rate to 20%. The Authority and Series A Bond Counsel cannot predict whether
this increase will receive Congressional approval.
If the tenus of a Series A Bond were materially modified, in certain circumstances, a new debt obligation
would be deemed created and exchanged for the prior obligation in a taxable transaction. Among the modifications
which may be treated as material are those which relate to redemption provisions and, in the case of a nonrecourse
obligation, those which involve the substitution of collateral. Each potential holder of a Series A Bond should
consult its own tax advisor concerning the circumstances in which the Series A Bonds would be deemed reissued and
the likely effects, if any, of such reissuance.
The legal defeasance of the Series A Bonds may result in a deemed sale or exchange of such Series A Bonds
under certain circumstances. Owners of such Series A Bonds should consult their tax advisors as to the federal
income tax consequences of such a defeasance.
32
P;\Agendas'>Agenda Attachments\Exhibits\20 I 0\12-06.10 Recovery Zone jPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
Backup Withholding. Certain purchasers may be subject to backup withholding at the application rate
determined by statute with respect to interest paid with respect to the Series A Bonds, if the purchasers, upon
issuance, fail to supply the indenture trustee or their brokers with their taxpayer identification numbers, furnish
incorrect taxpayer identification numbers, fail to report interest, dividends or other "reportable payments" (as defined
in the Tax Code) properly, or, under certain circumstances, fail to provide the indenture trustee with a certified
statement, under penalty ofpetjury, that they are not subject to backup withholding.
Tax Treatment of Original Issue Discount. The Series A Bonds that have an original yield above their
interest rate, as shown on the inside cover page of this Official Statement, are being sold at a discount (the
"Discounted Obligations"). The difference between the initial public offering prices, as set forth on the inside cover
hereof, of the Discounted Obligations and their stated amounts to be paid at maturity, constitutes original issue
discount treated in the same manner for federal income tax purposes as interest, as described above.
In the case of an owner of a Discounted Obligation, the amount of original issue discount which is treated as
having accrued with respect to such Discounted Obligation is added to the cost basis of the owner in determining, for
federal income tax purposes, gain or loss upon disposition of a Discounted Obligation (including its sale, redemption
or payment at maturity). Amounts received upon disposition of a Discounted Obligation which are attributable to
accrued original issue discount will be treated as taxable interest, rather than as taxable gain, for federal income tax
purposes.
Original issue discount is treated as compounding semiannually, at a rate determined by reference to the
yield to maturity of each individual Discounted Obligation, on days which are determined by reference to the
maturity date of such Discounted Obligation. The amount treated as original issue discount on a Discounted
Obligation for a particular semiannual accrual period is equal to (a) the product of (i) the yield to maturity for such
Discounted Obligation (determined by compounding at the close of each accrual period) and (ii) the amount which
would have been the tax basis of such Discounted Obligation at the beginning of the particular accrual period if held
by the original purchaser, (b) less the amount of any interest payable for such Discounted Obligation during the
accrual period. The tax basis is determined by adding to the initial public offering price on such Discounted
Obligation the sum of the amounts which have been treated as original issue discount for such purposes during all
prior periods. If a Discounted Obligation is sold between semiannual compounding dates, original issue discount
which would have been accrued for that semiannual compounding period for federal income tax purposes is to be
apportioned in equal amounts among the days in such compounding period.
The Tax Code contains additional provisions relating to the accrual of original issue discount in the case of
owners of a Discounted Obligation who purchase such Discounted Obligations after the initial offering. Owners of
Discounted Obligations including purchasers of the Discounted Obligations in the secondary market should consult
their own tax advisors with respect to the detennination for federal income tax purposes of original issue discount
accrued with respect to such obligations as of any date and with respect to the state and local tax consequences of
owning a Discounted Obligation.
Tax Treatmellt of Series A BOlld Premium. The Series A Bonds that have an original yield below their
interest rate, as shown on the inside cover page of this Official Statement, are being sold at a premium (collectively,
the "Premium Obligations"). An amount equal to the excess of the issue price of a Premium Obligation over its
stated redemption price at maturity constitutes premium on such Premium Obligation. An initial purchaser of such
Premium Obligation must amortize any premium over such Premium Obligation's term using constant yield
principles, based on the purchaser's yield to maturity (or, in the case of Premium Obligations callable prior to their
maturity, by amOliizing the premium to the call date, based upon the purchaser's yield to the call date and giving
effect to any call premium). As premium is amortized, it offsets the interest allocable to the corresponding payment
period and the purchaser's basis in such Premium Obligation is reduced by a corresponding amount resulting in an
increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or
33
P:\Agendas\Agenda Attachments\Exhibits\20 10',12.0'6-10' Recoyery Zone JPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
disposition of such Premium Obligation prior to its maturity. Even though the purchaser's basis may be reduced, no
federal income tax deduction is allowed. The same treatment is afforded to the Premium Obligations purchased at a
premium in the secondary market. Purchasers of Premium Obligations should consult with their own tax advisors
with respect to the determination and treatment of amortizable premium for federal income tax purposes and with
respect to the state and local tax consequences of owning such Premium Obligations.
State, Local or Foreign Taxation. No representations are made regarding the tax consequences of purchase,
ownership or disposition of the Series A Bonds under the tax laws of any state, locality or foreign jurisdiction (except
as provided in "Exemption Under State Tax Law"). Investors considering an investment in the Series A Bonds
should consult their own tax advisors regarding such tax consequences.
Tax-Exempt Investors. In general, an entity which is exempt from federal income tax under the provisions
of Section 501 of the Tax Code is subject to tax on its unrelated business taxable income. An unrelated trade or
business is any trade or business which is not substantially related to the purpose which forms the basis for such
entity's exemption. However, under the provisions of Section 512 of the Tax Code, interest may be excluded from
the calculation of unrelated business taxable income unless the obligation which gave rise to such interest is subject
to acquisition indebtedness. However, as noted above, Bond Counsel has rendered its opinion that the Series A
Bonds will be characterized as debt for federal income tax purposes. Therefore, except to the extent any holder of a
Series A Bond incurs acquisition indebtedness with respect to a Series A Bond, interest paid or accrued with respect
to such Series A Bondholder may be excluded by such tax exempt Series A Bondholder from the calculation of
unrelated business taxable income. Each potential tax exempt holder of a Series A Bond is urged to consult its own
tax advisor regarding the application of these provisions.
Certain ERISA COllsiderations. The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain requirements on "employee benefit plans" (as defined in Section 3(3) of ERISA) subject
to ERISA, including entities such as collective investment funds and separate accounts whose underlying assets
include the assets of such plans (collectively, "ERISA Plan") and on those persons who are fiduciaries with respect to
ERISA Plan. Investments by ERISA Plan are subject to ERISA's general fiduciary requirements, including the
requirement of investment prudence and diversification and the requirement that an ERISA Plan's investments be
made in accordance with the documents governing the ERISA Plan. The prudence of any investment by an ERISA
Plan in the Series A Bonds must be detennined by the responsible fiduciary of the ERISA Plan by taking into
account the ERISA Plan's pm1icular circumstances and all of the facts and circumstances of the investment.
Government and non-electing church plans are generally not subject to ERISA. However, such plans may be subject
to similar or other restrictions under state or local law.
In addition, ERISA and the Tax Code generally prohibit certain transactions between an ERISA Plan or a
qualified employee benefit plan under the Tax Code and persons who, with respect to that plan, are fiduciaries or
other "pal1ies in interest" within the meaning of ERISA or "disqualified persons" within the meaning of the Tax
Code. In the absence of an applicable statutory, class or administrative exemption, transactions between an ERISA
Plan and a party in interest with respect to an ERISA Plan, including the acquisition by one from the other of the
Series A Bonds could be viewed as violating those prohibitions. In addition, Tax Code Section 4975 prohibits
transactions between certain tax-favored vehicles such as Individual Retirement Accounts and disqualified persons.
Tax Code Section 503 includes similar restrictions with respect to governmental and church plans. In this regard, the
Authority or any Dealer of the Series A Bonds might be considered or might become a "pm1y in interest" within the
meaning of ERISA or a "disqualified person" within the meaning ofthe Tax Code, with respect to an ERISA Plan or
a plan or arrangement subject to Tax Code Sections 4975 or 503. Prohibited transactions within the meaning of
ERISA and the Tax Code may arise if the Series A Bonds are acquired by such plans or arrangements with respect to
which the Authority or any Dealer is a party in interest or disqualified person.
In all events, fiduciaries of ERISA Plan and plans or arrangements subject to the above Tax Code Sections,
III consultation with their advisors, should carefully consider the impact of ERISA and the Tax Code on an
34
P:\Agendas\Agenda Attachments\Exhibits"20 I 0\ 12-06-10 Recovery Zone jPF A _('DC - Preliminary Official Statement (Exhibit B).doc
investment in the Series A Bonds. The sale of the Series A Bonds to a plan is in no respect a representation by the
Authority or the Underwriter that such an investment meets the relevant legal requirements with respect to benefit
plans generally or any particular plan. Any plan proposing to invest in the Series A Bonds should consult with its
counsel to confirm that such investment is permitted under the plan documents and will not result in a non-
exempt prohibited transaction and will satisfy the other requirements of ERISA, the Tax Code and other
applicable law.
Exemption Under State Tax Law. In the further opinion of Series A Bond Counsel, the Series A Bonds and
the income therefrom are exempt from personal taxation by the State of California.
Cham!es in Federal and State Tax Law. From time to time, there are legislative proposals in the Congress
and in the states that, if enacted, could alter or amend the federal and state tax matters referred to above or adversely
affect the market value of the Series A Bonds. It cannot be predicted whether or in what form any such proposal
might be enacted or whether if enacted it would apply to bonds issued prior to enactment. In addition, regulatory
actions are from time to time announced or proposed and litigation is threatened or commenced which, if
implemented or concluded in a particular manner, could adversely affect the market value of the Series A Bonds. It
cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial
action will be resolved, or whether the Series A Bonds or the market value thereof would be impacted thereby.
Purchasers of the Series A Bonds should consult their tax advisors regarding any pending or proposed legislation,
regulatory initiatives or litigation. The opinions expressed by Series A Bond Counsel are based upon existing
legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and
delivery of the Series A Bonds and Series A Bond Counsel has expressed no opinion as of any date subsequent
thereto or with respect to any pending legislation, regulatory initiatives or litigation.
The form of opinion expected to be delivered by Series A Bond Counsel for the Series A Bonds is set forth in
"APPENDIX E - FORM OF OPINION OF BOND COUNSEL."
Series B Bonds
The Code establishes certain requirements that must be satisfied subsequent to the issuance of the Series B
Bonds in order that interest on the Series B Bonds be and remain not included in gross income for Federal income tax
purposes, including certain limitations on investment earnings and the rebate of certain moneys to the United States.
Noncompliance with such requirements could cause interest on the Series B Bonds to be included in gross income of
the owners thereof retroactive to the date of issuance of the Series B Bonds, regardless of when such noncompliance
occurs. The Arbitrage and Use of Proceeds Certificate of the Authority, which will be delivered concurrently with
the delivery of the Series B Bonds, will contain provisions and procedures regarding compliance with the
requirements of the Code. The Authority, in executing the Arbitrage and Use of Proceeds Certificate, will certify to
the effect that it will comply with the provisions and procedures set forth therein and that it will do and perforn1 all
acts and things necessary or desirable in order to assure that interest on the Series B Bonds shall, for purposes of
Federal income taxation, not be included in gross income.
In the opinion of Lewis Brisbois Bisgaard & Smith, Bond Counsel, assuming continuing compliance with
certain conditions imposed by applicable Federal tax law under existing statutes and court decisions, interest on the
Series B Bonds is not included in gross income for Federal income tax purposes pursuant to Section 103 of the Code.
In addition, such interest will not be treated as a preference item in calculating alternative minimum taxable income
for purposes of the alternative minimum tax imposed by the Code with respect to individuals and corporations; such
interest, however, will be included in the adjusted net book income or adjusted current earnings of a corporation for
purposes of computing the alternative minimum tax imposed on corporations.
Under existing statutes, interest on the Series B Bonds is exempt from present State of California personal
income taxes.
35
P:\Agendas\Agenda Attachments',Exhibits\201 0\12-06.10 Recovery Zone lPFA__CDC . Preliminary Official Statement (Exhibit B}.doc
Underwriting
Kinsell, Newcomb & De Dios, Inc. (the "Underwriter") purchased the Bonds at a purchase pnce of
$ , representing the principal amount of the Bonds, plus a net original issue premium of $ and
an Underwriter's discount of $ . The Underwriter intends to offer the Bonds to the public initially at the
prices set forth on the inside front cover page of this Official Statement, which prices may subsequently change
without any requirement of prior notice.
The Underwriter reserves the right to join with dealers and other underwriters in offering the Bonds to the
public. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into
investment trusts) at prices lower than the public offering prices, and such dealers may reallow any such discounts on
sales to other dealers.
36
P:\Agendas'-Agenda Attachments\Exhibits"20 1 0" 12-06-10 Recovery Zone JPF A_ CDC - Preliminary Official Statement {Exhibit B).doc
FINANCIAL STATEMENTS
The Agency's Financial Statement as of and for the fiscal year ended June 30, 2009 is included in this
Official Statement as APPENDIX B and has been audited by , independent public accountants, as
stated in their report appearing herein.
Miscellaneous
All summaries of the Indenture, the Loan Agreement, applicable legislation, agreements and other
documents are made subject to the provisions of such documents and do not purport to be complete statements of any
or all of such provisions. Reference is hereby made to such documents on file with the Authority for further
information in connection therewith.
Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not
expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the
estimates will be realized.
The execution and delivery ofthis Official Statement has been duly authorized by the Authority.
SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY
By:
Title: Chairman
37
P:\Agendas\Agenda Attachments\Exhibits\20 I 0\ 12-06-1 0 Recovery Zone JPF A _('DC - Preliminary Official Statement (Exhibit B).doc
APPENDIX A
INFORMATION CONCERNING THE CITY OF SAN BERNARDINO
Population
The City's population according to the 2000 Census was 185,382. Following are population
estimates provided by the California Department of Finance:
2000 185,382
2001 187,664
2002 191,563
2003 194,659
2004 196,729
2005 199,502
2006 201,194
2007 204,098
2008 204,249
2009 204,483
Source: State of California Department of Finance
Unemployment
The civilian labor force employment and unemployment for the San Bernardino labor market is
shown on the following table:
San Bernardino County Labor Market
Civilian Labor Force, Employment and Unemployment
Year
2009
2008
2007
2006
2005
2004
Labor Force
864,300
867,100
867,400
865,000
853,100
832,400
Employment
751,600
798,100
819,000
823,400
808,400
784,400
Unemployment
112,700
69,000
48,400
41,600
44,700
48,100
Unemployment
Rate (%)
13
8
5.6
4.8
5.2
5.8
I Source: State of california, Employment D~velopment Department
P:'Agendas\Agenda Attachments\Exhibits\10 I 0" 12-06.1 0 Recovery Zone lPF A__ CDC' - Preliminary Official Statement (Exhibit B).doc
The following lists annual average number of wage and salary employees by industry within San
Bernardino County for 2004 to 2008:
TITLE 2004
Total, All Industries 621,300
Total Farm 3,600
Total Nonfarm 617,800
Goods Producing 111,300
Service Providing 506,500
Source: State of California, Employment Development Department
Employment and Industry
2005
647,100
3,300
643,800
113,400
530,500
2006
664,400
3,100
661,300
113,900
547,400
2007
667,100
3,500
663,700
108,400
555,300
Located within San Bernardino County are several major employers, as set forth below:
2008
644,200
2,400
641,800
95,000
546,800
Employer Name Location (City) Industry
Apple Valley Unified School Apple Valley Schools
Arrowhead Rellional Medical Ctr Colton Hospitals
Big Bear Mountain Resorts Big Bear Lake Skiing Centers & Resorts
Schools-Universities &
California State-San Brnrdn San Bernardino Colleges Academic
Colton Joint Unified Sch Dist Colton Schools
Community Hospital San Bernardino Mental Health Services
Environmental Systems Research Redlands Computer-Software Developers
Kaiser Permanente Medical Ctr Fontana Special Interest Libraries
Loma Linda University Children Loma Linda Hospitals
Lorna Linda University Medical Loma Linda Hospitals
Mountain High Ski Resort Wrightwood Skiing Centers & Resorts
Ontario IntI Airport-Ont Ontario Airports
Redlands Community Hospital Redlands Hospitals
S Ca Permanente Medical Group Redlands Physicians & Surgeons
San Antonio Community Hospital Upland Hospitals
San Bernardino Cnty Schl Supt San Bernardino Schools
San Bernardino Community Hosp San Bernardino Hospitals
San Bernardino County Sheriff San Bernardino Police Departments
San Manuel Band Of Mission San Bernardino Casinos
San Manuel Indian Bingo Casino Highland Office Buildings & Parks
Snow Summit Mountain Resort Big Bear Lake Skiing Centers & Resorts
State Government-
Transportation Dept San Bernardino Transportation Programs
V A Medical Ctr-Loma Linda Loma Linda Hospitals
Wells Fargo Home Mortgage San Bernardino Real Estate Loans
Yrc Bloomington Trucking
Source: State of California, Employment Development Department
P:\Agendas\Agenda Attachments\Exhibits\20 1 0' 12-06-10 Recovel)' Zone lPF A ~ CDC . Preliminary Official Statement {Exhibit B).doc
Permits and Taxable Transactions
The following chart shows the number of permits and valuations of taxable transactions for the
City from 2006 through 2009.
City of San Bernardino
Number of Permits and Valuation of Taxable Transactions
Total All Outlets
Retail Stores
Taxable Valuations of
Year Permits Transactions
2004 2,896 $2,626,955
2005 3,154 2,781,822
2006 3,280 2,707,674
2007 3,141 2,485,908
2008 3,242 2,067,188
2009* 4,446 1,219,042
Source: State Board of Equalization, California
*Year 2009 information is for First, Second and Third Quarter only. Fourth Quarter information not available.
Construction Activity
Taxable
Permits
5,447
5,543
5,448
5,631
5,865
5,584
Valuations of
Transaction
$3,089,685
3,278,406
3,180,325
2,912,419
2,455,331
1,466,572
The following table shows residential and non-residential building permit valuations for the City
from 2004 through 2009.
I 2004 L 2005 2006 L 2007~ 2008 2009
Residential
New single-dwelling $47,064,498 $82,697,102 $52,384,721 $22,162,581 $3,928,031 $1,278,552
New multi-dwelling 464,764 674,457 0 0 0 12,689,169
Additions, alternations 5,286,861 5,452,935 8,048,397 5,903,874 3,297 ,834 2,992,526
Total Residential 52,816,123 88,824,494 60,433,118 28,066,455 7,225,865 16,960,247
Non-Residential
New commercial $21,391,376 $47,548,135 $38,444,473 $33,606,684 $6,011,143 $0
New industrial 33,367,536 34,052,262 17,640,567 94,590,419 10,775,010 0
Other, new non-residential 4,743,629 5,574,123 3,119,214 6,492,583 4,570,631 3,855,030
Additions, alternations 13,928,869 22,807,149 21,581,518 15,812,189 25,772,604 26,499,342
Total Non-Residential 73,431,410 109,981,669 80,785,772 150,501,875 47,129,388 30,354,372
No. of New Dwelling Units
Single-Dwelling 318 467 290 156 21 11
Multi -Dwelling Q Q Q 0 Q 165
Total Units 324 473 290 156 21 176
Source: Construction Industry Research Board
P:\Agendas\Agenda Attachments\Exhibits\20 1 0" 12-06-1 0 Recovery Zone JPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
Transportation
The City's elevation is 1,049 feet above sea level and encompasses the area of approximately
59.3 square miles. San Bernardino is located about 60 miles east of Los Angeles, 120 miles northeast of
metropolitan San Diego, and 55 miles northwest of Palm Springs.
For more than 100 years, the City of San Bernardino has been a major transportation link between
the east and west coasts. With rail, freeway, a nearby International Airport just 30 minutes away, and the
Port of Los Angeles within an hour's drive, San Bernardino is the link to national markets, Mexico, and
the Pacific Rim. Local bus service connects ten cities in a two county area and provides access to trans
continental bus connections.
In 1993, access to the City was further enhanced with the creation of the Metrolink commuter rail
service. It provides long distance transportation to commuters from the San Bernardino area to major
centers of employment, such as downtown Los Angeles, and Orange County, within 90 minutes.
Four Interstate Highways traverse San Bernardino County. Interstate 10 and Interstate 210 cross
the San Bernardino Valley in an east-west direction. Interstate 15 runs north and south, passing through
the cities of San Bernardino and Riverside. Interstate 215 traverses between Temecula in Riverside
County and Devore in San Bernardino County where it joins Interstate 15. Interstate 40 runs easterly
from Barstow into Arizona via Needles.
U.S. Highway 95 serves the eastern sector of the County, and U.S. 395 the western part.
Santa Fe Railroad, Union Pacific Railroad and Southern Pacific Railroad provide regularly
scheduled service, with 24-hour switching service and reciprocal-switching agreements between all three
Railroads. "Piggy-back" service is available. The City is also serviced by AMTRAK and Metrolink.
All major freight lines have terminals in the San Bernardino area, providing daily-scheduled
service to all transcontinental points. Overnight delivery is available to Los Angeles, Long Beach, San
Diego, San Francisco, Northern California, Arizona, and Nevada.
Ontario International Airport (20 miles by freeway) provides complete 24-hour passenger and
cargo servIce.
Greyhound Lines and Continental Trailways provide transcontinental servIce. The Southern
California Rapid Transit District (RTD) provides hourly service throughout the San
Bernardino/Riverside/Ontario Metropolitan Area. The Omnitrans System operated by a Joint Powers
Authority between the County of San Bernardino and the cities of Chino, Colton, Fontana, Lorna Linda,
Montclair, Ontario, Redlands, Rialto, San Bernardino and Upland provides regular service within the City
of San Bernardino and between the ten cities and county areas, from Pomona to California.
Utilities
The City provides domestic water service and sanitary sewer services. The natural gas is supplied
by Southern California Gas Company. Southern California Edison Company provides electrical power.
Telephone service is provided by Verizon Company.
P:\Agendas\Agenda Attachments\Exhibits\20 1 0\ J 2-06-1 0 Recovery Zone JPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
Community Facilities
The two hospitals within the City limits, San Bernardino Community Hospital and St.
Bernardine Medical Center are both state of the art facilities. City residents also have access to the
nearby San Bernardino County Medical Center and the world renowned Lorna Linda University Medical
Center. The City's historic California Theatre, which opened its doors in 1928, is now home to Theatrical
Arts International, which hosts Broadway plays and musicals. The theatre is also the home of the San
Bernardino Symphony Orchestra, under the direction of Maestro Carlo Ponti, Jr.
The City has 34 parks and six community centers which provide playgrounds, swimming and
play pools, adult and youth sports, special interest classes and excursions. The City has a public library
system comprised of one main and three library branches.
San Bernardino Valley College is located two miles from downtown and serves over 11,100
students who are enrolled in occupational training programs, job skill enhancement, and courses leading
to Associate Degrees with transfer credits to four-year colleges. California State University San
Bernardino is one of the Inland Empire's largest trainer of business managers. California State University
San Bernardino's School of Business and Public Administration is accredited by the American Assembly
of Collegiate Schools of Business (AACSB) at both the under graduate and graduate degree levels. It has
more than 17,000 students enrolled.
San Bernardino has several public and private golf courses and is a 30 to 60 minute drive to
mountains, skiing, deserts and beaches. San Bernardino is home to the Inland Empire 66ers of San
Bernardino, a Professional Baseball Club, which in 2006 became part once again of the Los Angeles
Dodgers organization. The Inland Empire 66ers play at the multi-use Arrowhead Credit Union Park
which regularly seats 5,000 people and can be expanded to seat 10,000.
P:\Agendas\Agenda Attachments\Exhibits\20 I O'd 2-06-1 0 Recovery Zone JPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
APPENDIX B
AUDITED FINANCIAL STATEMENTS OF THE AGENCY
FOR FISCAL YEAR ENDED JUNE 30, 2009
P:\Agendas\Agenda Attachments\Exhibits\201 OJ 2-06-10 Recovery Zone JPFA_CDC - Preliminary Official Statement (Exhibit B).doc
APPENDIX C
FISCAL CONSULTANT'S REPORT
P:\Agendas\Agenda Attachments\Exhibits,.201 O\12~06-10 Recovery Zone lPFA_ CDC - Preliminary Official Statement (Exhibit B).doc
APPENDIX D
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
[TO COME]
P:\..Agendas\Agenda Attachments\Exhibits\201 0\12-06-1 0 Recovery Zone lPFA_ CDC - Preliminary Official Statement (Exhibit B).doc
APPENDIX E
FORM OPINION OF BOND COUNSEL
P:\Agendas\Agenda Attachments\Exhibits\20 1 0"'12.06.1 0 Recovel)' Zone JPF A_CD(' - Preliminary Official Statement (Exhibit B).doc
APPENDIX F
FORM OF CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the "Disclosure Agreement") is executed and delivered
by the Redevelopment Agency of the City of San Bernardino (the "Agency") and U.S. Bank National
Association, in its capacities as Trustee and Dissemination Agent (the "Trustee" and the "Dissemination
Agent") in connection with the issuance of $7,068,000* San Bernardino Joint Powers Financing
Authority Tax Allocation Bonds Series 2010A (4th Street Corridor Project-Federally Taxable Recovery
Zone Economic Development Bonds) (the "Series A Bonds") and the $ San Bernardino
Joint Powers Financing Authority Tax Allocation Bonds Series 2010B (Northwest Project Area) (the
"Series B Bonds," and collectively with the Series A Bonds, the "Bonds"). The Bonds are being issued
pursuant to an Indenture of Trust dated as of December 1,2010, between the Agency and the Trustee (the
"Indenture"). Capitalized terms not otherwise defined herein shall be defined as set forth in the Indenture.
Pursuant to the Indenture, the Agency, Dissemination Agent and the Trustee covenant and agree as
follows:
SECTION I. Purpose of the Disclosure Agreement. This Disclosure Agreement is being
executed and delivered by the Agency, Dissemination Agent and the Trustee for the benefit of the
Bondholders (including any beneficial holders thereof) and in order to assist the participating Underwriter
in complying with the Rule (defined below). This Disclosure Agreement does not apply to any other
securities issued or to be issued by the Agency, whether in connection with the Tax Revenues from the
Project Area or otherwise.
The Agency is an "obligated person" under the Rule (as defined below). There are no other
"obligated persons" with respect to the Bonds within the meaning of the Rule. Neither San Bernardino
Joint Powers Financing Authority nor the Trustee is an "obligated person" under the Rule.
SECTION 2. Definitions. In addition to the definitions set forth above and in the Indenture,
which apply to any capitalized tenn used in this Disclosure Agreement unless otherwise defined in this
section, the following capitalized tenns shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the City pursuant to, and as described in,
Sections 3 and 4 of this Disclosure Agreement.
"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 intennediaries); or (b) is treated as the owner of any Bonds for
federal income tax purposes.
"Disclosure Representative" shall mean the City Manager of the City or his or her designee, or such other
officer or employee as the City shall designate in writing to the Dissemination Agent from time to time.
"Dissemination Agent" shall mean the Trustee, acting in its capacity as Dissemination Agent hereunder,
or any successor Dissemination Agent designated in writing by the City and which has filed with the
Trustee a written acceptance of such designation.
"Holder" shall mean either the registered owners of the Bonds or, if the Bonds are registered in the name
of The Depository Trust Company or another recognized depository, any applicable participant in such
depository system.
P:\Agendas\Agenda Attachments\Exhibits\201Od 2-06-10 Recovel)' Zone JPFA~ CDC - Preliminary Official Statement (Exhibit B).doc
"Listed Event" shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.
"MSRB" shall mean the Municipal Securities Rulemaking Board established pursuant to Section
15B(b)(1) of the Securities Exchange Act of 1934 or any other entity designated or authorized by the
Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated
by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through
the Electronic Municipal Marketplace Access (EMMA) web site of the MSRB, currently located at
http://emma.msrb.org.
"Official Statement" shall mean the Official Statement for the Bonds dated December _,2010.
"Participating Underwriter" shall mean any of the original underwriters of the Bonds listed on the cover
page of the Official Statement required to comply with the Rule in connection with offering of the Bonds.
"Rule" shall mean Rule 15c2-12(b )(5) adopted by the SEC under the Securities Exchange Act of 1934, as
the same may be amended from time to time.
"SEC" shall mean the United States Securities and Exchange Commission.
"State" shall mean the State of California.
"Tax-exempt" shall mean that interest on the Bonds is excluded from gross income for federal income tax
purposes, whether or not such interest is includable as an item of tax preference or otherwise includable
directly or indirectly for purposes of calculating any other tax liability, including any alternative
minimum tax or environmental tax.
"Tax Revenues" shall means, with respect to each Project Area, that portion of taxes levied upon taxable
property within the Project Area and received by the Agency on or after the effective date of the
ordinance approving the Redevelopment Plan for the Project Area), allocated to and paid into a special
fund (as created under the Loan Agreement dated as of December 1, 2010, by and among the Authority,
the Agency and the Trustee relating to the Project Area) of the Agency pursuant to Article 6 of Chapter 6
of the Redevelopment Law and Section 16 of Article XVI of the Constitution of the State of California,
exclusive of amounts, if any, required to be deposited into the Low and Moderate Income Housing Fund
of the Agency pursuant to Section 33334.2 and Section 33334.3 of the Redevelopment Law (being Part 1
of Division 24 of the Health and Safety Code of the State of California), and excluding amounts payable
to certain taxing agencies pursuant to any existing pass-through agreements entered into in accordance
with Section 33670 of the Redevelopment Law (said pass-through agreements being hereinafter referred
to as the "Tax Sharing Agreement").
SECTION 3. Provision of Annual Reports.
(a) The Agency shall, or shall cause the Dissemination Agent to, not later than 270
days after the end of the Agency's Fiscal Year (presently June 30), commencing with the rep0l1 for the
2010-11 Fiscal Year, provide to the M SRB an Annual Report which is consistent with the requirements of
Section 4 of this Disclosure Agreement. The Annual Report must be submitted in electronic format,
accompanied by such identifying infonllation as prescribed by the MSRB. 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 Agreement; provided that if the audited
financial statements of the Agency are not available by the date required above for the filing of the
Annual Report, the Agency shall submit the audited financial statements as soon as available. If the
P:\Agendas\Agenda Attachments'.Exhibits\20 I 0\ 12.06-1 0 Recovery Zone lPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
Agency's Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed
Event under Section 5(t).
(b) If the Agency is unable to provide to the MSRB an Annual Report by the date
required in subsection (a), the Agency shall send to the MSRB a notice in substantially the form attached
hereto as Exhibit A.
(c) The Dissemination Agent shall:
(i) determine the electronic filing address of, and then-current procedures
for submitting Annual Reports to, the MSRB each year prior to the date for providing the Annual
Report; and
(ii) file a report with the Agency and (if the Dissemination Agent is not the
Trustee) the Trustee certifying that the Annual Report has been provided to the MSRB pursuant
to this Disclosure Agreement, and stating the date it was provided.
SECTION 4. Content of Annual Reports. The Agency's Annual Report shall contain or include
by reference the following categories or similar categories of information updated to incorporate
information for the most recent fiscal or calendar year, as applicable (the tables referred to below are
those appearing in the Official Statement relating to the Bonds):
(a) The audited financial statements of the Agency for the prior Fiscal Year,
prepared in accordance with Generally Accepted Accounting Principles as promulgated to apply to
governmental entities from time to time by the Governmental Accounting Standards Board. If the
Agency'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) Updated information comparable to the information in the following tables in the
section of the Official Statement entitled "FINANCIAL STATEMENTS":
1. Assessed Valuation History
2. General Fund Balance Sheet
3. Statement of Revenues and Expenditures - General Fund
4. General Fund Revenue Source
5. General Fund Expenditure Source
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 Agency or related public entities, which have been submitted to
the MSRB or the SEC. If any document included by reference is a final official statement, it must be
available from the MSRB. The Agency shall clearly identify each such other document so included by
reference.
SECTION 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this section, the Agency shall give, or cause to be
given, notice of the occurrence of any of the following events with respect to the Bonds, if material:
1. Principal or interest payment delinquencies.
P:"'Agendas\Agenda Attachments',-Exhibits\20 I Od 2.06-1 0 Reco\'ery Zone JPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
2. Non-payment related defaults.
3. Modifications to the rights of the Bondholders.
4. Optional, contingent or unscheduled calls.
5. Defeasances.
6. Rating changes.
7. Adverse tax opinions or events adversely affecting the tax-exempt status
of the Bonds.
8. Unscheduled draws on the debt service reserves reflecting financial
difficulties.
9. Unscheduled draws on the credit enhancements reflecting financial
difficulties.
10. Substitution of the credit or liquidity providers or their failure to perform.
11. Release, substitution or sale of property securing repayment of the
Bonds.
(b) The Dissemination Agent shall, as soon as is reasonably practicable after
obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure
Representative, inform such person of the event, and request that the Agency promptly notify the
Dissemination Agent in writing whether or not to report the event pursuant to Section 5(t). For purposes
of this Disclosure Agreement, "actual knowledge" of the occurrence of such Listed Event shall mean
actual knowledge by the Dissemination Agent, if other than the Trustee, and if the Dissemination Agent is
the Trustee, then by the officer at the corporate trust office of the Trustee with regular responsibility for
the administration of matters related to the Indenture. The Dissemination Agent shall have no
responsibility to determine the materiality of any of the Listed Events.
(c) Whenever the Agency obtains knowledge of the occurrence of a Listed Event,
whether because of a notice from the Dissemination Agent pursuant to Section 5(b) or otherwise, the
Agency shall as soon as possible determine if knowledge of such event would be material under
applicable federal securities laws.
(d) If the Agency detennines that knowledge of the occurrence of a Listed Event
would be material under applicable federal securities laws, the Agency shall promptly notify the
Dissemination Agent in writing and instruct the Dissemination Agent to report the occurrence pursuant to
Section 5(t).
( e) If in response to a request under Section 5(b), the Agency determines that the
Listed Event is not material under applicable federal securities laws, the Agency shall so notify the
Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence
pursuant to Section 5(t).
(t) If the Dissemination Agent has been instructed by the Agency to report the
occurrence of a Listed Event, the Dissemination Agent shall as soon as possible file a notice of such
occurrence with the MSRB. Notwithstanding the foregoing, notice of Listed Events described in Section
5(a)(4) and Section 5(a)(5) need not be given under this subsection any earlier than the notice (if any) of
the underlying event is given to Holders of affected Bonds pursuant to the Indenture.
Section 6. Tennination of Reporting Obligation. The Agency's obligations under this Disclosure
Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the
Bonds. If such termination occurs prior to the final maturity of the Bonds, the Agency shall give notice of
such termination in the same manner as for a Listed Event under Section 5(t).
P:\Agendas\Agenda Attachments\Exhibits\201 OJ 2-06-1 0 Recovery Zone lPF A _ CDC - Preliminary Official Statement {Exhibit B).doc
SECTION 7. Dissemination Agent. The Agency may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. If
at any time there is not any other designated Dissemination Agent, the Trustee, upon notice from the
Agency, shall be the Dissemination Agent. The initial Dissemination Agent shall be the Trustee. The
Dissemination Agent shall not be responsible in any manner for the content of any notice or report
prepared by the Agency pursuant to this Disclosure Agreement. The Dissemination Agent shall receive
compensation for the services provided pursuant to this Disclosure Agreement. The Dissemination Agent
may resign by providing thirty days written notice to the Agency and the Trustee.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the Agency and the Dissemination Agent may amend this Disclosure Agreement, (and, to the
extent that any such amendment does not materially change or increase its obligations hereunder, the
Dissemination Agent shall agree to any amendment so requested by the Agency), and any provision of
this Disclosure Agreement may be waived; provided, that the following conditions are satisfied:
(a) If the amendment or waiver relates to the provisions of Section 3(a), Section 4 or
Section 5(a), 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, or for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective provision;
(b) The undertaking, as amended or taking into account such waiver, would, in the
opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the
time of the original issuance of the Bonds, after taking into account any amendments or interpretations of
the Rule, as well as any change in circumstances; and
(c) The amendment or waiver does not, in the opinion of nationally recognized bond
counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds. In the event of
any amendment or waiver of a provision of this Disclosure Agreement, the Agency shall describe such
amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the
reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting
principles, on the presentation) of financial information or operating data being presented by the Agency.
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(t), and (ii) the Annual Report for the year in which the change is made should present a
comparison (in narrative fonn and also, if feasible, in quantitative fonn) between the financial statements
as prepared on the basis of the new accounting principles and those prepared on the basis of the fonner
accounting principles.
SECTION 9. Filings with the MSRB. All infoffi1ation, operating data, financial statements,
notices and other documents provided to the MSRB in accordance with this Disclosure Agreement shall
be provided in an electronic format prescribed by the MSRB and shall be accompanied by identifying
infoffi1ation as prescribed by the MSRB.
SECTION 10. Additional Infoffi1ation. Nothing in this Disclosure Agreement shall be deemed to
prevent the Agency from disseminating any other information, using the means of dissemination set forth
in this Disclosure Agreement 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 Agreement. If the Agency 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
P:\Agendas\Agenda Attachrnents\Exhibits'20 10\12.06-10 Recovery Zone lPF A __CD(' . Preliminary Official Statement {Exhibit B).doc
Agreement, the Agency shall have no obligation under this Disclosure Agreement 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 Agency or the Dissemination Agent to
comply with any provision of this Disclosure Agreement, the Trustee may (and, at the request of any
Participating Underwriter or the Holders of at least 25% of the aggregate principal amount of Outstanding
Bonds and upon provision of indemnification satisfactory to the Trustee, shall), or any Holder or
Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including
seeking mandate or specific performance by court order, to cause the Agency or the Dissemination Agent,
as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this
Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy
under this Disclosure Agreement in the event of any failure of the Agency or the Dissemination Agent to
comply with this Disclosure Agreement shall be an action to compel performance hereunder.
SECTION 12. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. The
Indenture is hereby made applicable to this Disclosure Agreement as if the Disclosure Agreement were
(solely for this purpose) contained in the Indenture. The Dissemination Agent shall be entitled to the
protections and limitations on liability afforded to the Trustee thereunder. The Dissemination Agent (if
other than the Trustee in its capacity as Dissemination Agent) shall have only such duties as are
specifically set forth in this Disclosure Agreement, and the Agency agrees to indemnify and save the
Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and
liabilities which it may incur arising out of or in the exercise or performance of its powers and duties
hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of
liability, but excluding any loss, expense and liabilities due to the Dissemination Agent's negligence or
willful misconduct. The obligations of the Agency under this Section 12 shall survive resignation or
removal of the Dissemination Agent and payment of the Bonds.
SECTION 13. Notices. Any notices or communications to or among any of the parties to this
Disclosure Agreement may be given as follows:
SECTION 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the
Authority, the Agency, the Trustee, the Dissemination Agent, the Participating Underwriters and the
Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other
person or entity.
P:\Agendas\Agenda Attachments\Exhibits\20 I 0\ I 2-06-1 0 Recovery Zone lPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
SECTION 15. Counterparts. This Disclosure Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the same
instrument.
Date: December _,2010
AGENCY:
REDEVELOPMENT AGENCY OF THE
CITY OF SAN BERNARDINO
By:
Its Interim Executive Director
DISSEMINATION AGENT:
U.S. BANK NATIONAL ASSOCIATION,
as Trustee and Dissemination Agent
By:
Its Authorized Officer
P:'Agendas\Agenda Attachments\Exhibits\201 0\12-06-1 0 Recovery Zone .IPF A _ CDC - Preliminary Official Statement (Exhibit B).doc
EXHIBIT "C"
Northwest Redevelopment Project Area
LOAN AGREEMENT
Dated as of December 1,2010
by and among the
SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY,
REDEVELOPMENT AGENCY OF THE
CITY OF SAN BERNARDINO
and
U.S. BANK NATIONAL ASSOCIATION, as Trustee
Northwest Redevelopment Project Area
LOAN AGREEMENT
Dated as of December 6, 2010
by and among the
SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY,
REDEVELOPMENT AGENCY OF THE
CITY OF SAN BERNARDINO
and
U.S. BANK NATIONAL ASSOCIATION, as Trustee
Relating to:
$7,068,000
San Bernardino Joint Powers Financing Authority
Tax Allocation Bonds Series 2010A
(4th Street Corridor Project-Federally Taxable Recovery Zone Economic Development Bonds)
and
$
San Bernardino Joint Powers Financing Authority
Tax Allocation Bonds Series 2010B
(Northwest Redevelopment Project Area)
The amounts payable to the SAN BERNARDINO JOINT POWERS
FINANCING AUTHORITY (the "Authority") and certain other rights of the Authority under
this Loan Agreement have been pledged and assigned to U.S. Bank National Association, as
trustee (the "Trustee"), under the Indenture of Trust dated as of December 6, 2010, by and
between the Authority and the Trustee.
P:\Agendas\Agenda Attachments\Exhibits\201 0\12-06-1 0 Recovery Zone JP A _ CDC Resos - Loan Agreement (Exhibit C)_doc
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS ...............................................................2
Section 1.01. Definitions.................................................................................................................2
Section 1.02. Rules of Construction...............................................................................................4
ARTICLE II
THE LOAN; REPAYMENT; APPLICATION OF PROCEEDS ........................4
Section 2.01. Authorization............................................................................................................4
Section 2.02. Repayment of Loan...................................................................................................4
Section 2.03. Application of Loan Proceeds...................................................................................5
ARTICLE III
SECURITY FOR LOAN ; APPLICATION OF FUNDS ...............................5
Section 3.01. Pledge of Tax Revenues............................................................................................5
Section 3.02. Special Fund; Deposit of Tax Revenues.......................................... .........................5
Section 3.03. Transfer of Tax Revenues From Special Fund .........................................................5
Section 3.04. [Intentionally omitted] ..............................................................................................6
Section 3.05. Investment of Moneys; Valuation of Investments ....................................................6
ARTICLE IV
OTHER COVENANTS OF THE AGENCY ........................................7
Section 4.01. Punctual Payment...................................................................................................... 7
Section 4.02. Limitation on Superior and Parity Loans..................................................................7
Section 4.03. Additional Pass-Through Agreements............................................... .......................8
Section 4.04. Issuance or Incurrence of Subordinate Debt.............................................................8
Section 4.05. Payment of Claims....................................................................................................8
Section 4.06. Books and Accounts; Financial Statement ...............................................................8
Section 4.07. Protection of Security and Rights....................................................... ........ .............. 9
Section 4.08. Payments of Taxes and Other Charges .....................................................................9
Section 4.09. Disposition of Property............................................................................................. 9
Section 4.10. Maintenance of Tax Revenues........................................ .............. ......... ...................9
Section 4.11. Payment of Expenses; Indemnification ..................................................................10
Section 4.12. Further Assurances..................................................................................................11
Section 4.13. Continuing Disclosure .......................................................................................... ..11
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resos - Loan Agreement (Exhibit C).doc
ARTICLE V
EVENTS OF DEF AUL T AND REMEDIES ......................................11
Section 5.01. Events of Default and Acceleration of Maturities ..................................................11
Section 5.02. Application of Funds Upon Default........................................................................12
Section 5.03 . No Waiver.............................................................................................................. .13
Section 5.04. Remedies Not Exclusive................................ ....................................................... ..13
ARTICLE VI
MISCELLANEOUS .........................................................13
Section 6.01. Benefits Limited to Parties........ ................................. ..................... ........................13
Section 6.02. Successor is Deemed Included in All References to Predecessor ..........................13
Section 6.03. Discharge of Loan Agreement ................................................................................13
Section 6.04. Amendment............................................................................................................ .14
Section 6.05 . Waiver of Personal Liability.......... ........................ ................................................ .14
Section 6.06. Payment of Business Days ......................................................................................14
Section 6.07. Notices................................................................................................................... .14
Section 6.08. Partial Invalidity..................................................................................................... .15
Section 6.09. Governing Law...................................................................................................... .15
Section 6.10. Concerning the Trustee ...........................................................................................15
11
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resos - Loan Agreement (Exhibit C). doc
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Loan Agreement") is dated as of December 6,
2010, and is entered into by and among the SAN BERNARDINO JOINT POWERS
FINANCING AUTHORITY, a joint powers authority organized and existing under the laws of
the State of California (the "Authority"), the REDEVELOPMENT AGENCY OF THE CITY OF
SAN BERNARDINO, a public body corporate and politic duly organized and existing under the
laws of the State of California (the "Agency") and U.S. BANK NATIONAL ASSOCIATION, a
national banking association established under the laws of the United States of America, as
trustee (the "Trustee") under that certain Indenture of Trust dated as of December 6, 2010, by
and between the Authority and the Trustee (the "Indenture");
WIT N E SSE T H:
WHEREAS, the Authority is a joint powers authority, duly established and
authorized to transact business and exercise powers under and pursuant to a Joint Exercise of
Powers Agreement between the City of San Bernardino (the "City") and the Agency which
established the Authority for the purpose of permitting the Authority to issue bonds the proceeds
of which may be used to make loans to, or acquire obligations of, any of its members or any
other local agencies of the State of California to finance public capital improvements of such
members or local agencies; and
WHEREAS, the Agency is a public body, corporate and politic, duly established
and authorized to transact business and exercise powers under and pursuant to the provisions of
Part I of Division 24 of the Health and Safety Code of the State of California (the
"Redevelopment Law"); and
WHEREAS, the Agency desires to finance street and sidewalk improvements and
other infrastructure improvements to the 4th Street Corridor within the downtown area of the City
from "E" Street west to "H" Street and from 2nd Street north to 5th Street (the "4th Street Project")
and certain other infrastructure improvements within the Agency's Northwest Redevelopment
Project Area (the "Agency Projects," and collectively with the 4th Street Project, the "Project"),
and has requested that the Authority assist the Agency with said refinancing; and
WHEREAS, the Authority has determined to issue its $7,068,000 San Bernardino
Joint Powers Financing Authority Tax Allocation Bonds Series 2010A (4th Street Corridor
Project-Federally Taxable Recovery Zone Economic Development Bonds) (the "Series A
Bonds") and $ Tax Allocation Bonds, Series 2010B (Northwest Redevelopment
Project Area) (the "Series B Bonds," and collectively with the Series A Bonds, the "Bonds")
pursuant to and secured by the Indenture in the manner provided therein and herein; and
WHEREAS, the proceeds of the Bonds shall be loaned to the Agency pursuant to
this Loan Agreement and the Bonds will be secured by payments made by the Agency to the
Authority pursuant to this Loan Agreement; and
1
P:\Agendas\Agenda Attachments\Exhibits\201O\12-06-10 Recovery Zone JPA_CDC Resas - Loan Agreement (Exhibit C)_doc
WHEREAS, the Loan will be subordinate to the loan securing the $55,800,000
San Bernardino Joint Powers Financing Authority Tax Allocation Revenue Refunding Bonds
Series 2005A (the "2005A Bonds") and on parity with the loans securing the $30,330,000 San
Bernardino Joint Powers Financing Authority 2002 Tax Allocation Refunding Bonds (Secured
by a Junior Lien on Certain Tax Increment Revenues Pledged Under Senior Loan Agreements)
(the "2002A Bonds") and $21,105,000 San Bernardino Joint Powers Financing Authority Tax
Allocation Refunding Bonds Series 2005B (the "2005B Bonds" and collectively with the 2005A
Bonds and the 2002A Bonds, the "Prior Bonds"); and
WHEREAS, in order to establish and declare the terms and conditions upon
which the Loan is to be made and secured, the Agency and the Authority wish to enter into this
Loan Agreement; and
WHEREAS, all acts and proceedings required by law necessary to make this
Loan Agreement, when executed by the Agency and the Authority, the valid, binding and legal
obligation of the Agency and the Authority, and to constitute this Loan Agreement a valid and
binding agreement for the uses and purposes herein set forth in accordance with its terms, have
been done and taken, and the execution and delivery of this Loan Agreement have been in all
respects duly authorized.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto do hereby agree, as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Unless the context clearly otherwise requires or unless
otherwise defined herein, the capitalized terms in this Loan Agreement shall have the respective
meanings which such terms have in Section 1.01 of the Indenture. In addition, the following
terms defined in this Section 1.01 shall, for all purposes of this Loan Agreement, have the
respective meanings herein specified.
"2002A Bonds" means the $30,330,000 San Bernardino Joint Powers Financing
Authority 2002 Tax Allocation Refunding Bonds (Secured by a Junior Lien on Certain Tax
Increment Revenues Pledged Under Senior Loan Agreements) currently outstanding in the
amount of $4,784,171.
"2005A Bonds" means the $55,800,000 San Bernardino Joint Powers Financing
Authority Tax Allocation Revenue Refunding Bonds Series 2005A currently outstanding in the
amount of $16,895,927.
"2005B Bonds" means the $21,105,000 San Bernardino Joint Powers Financing
Authority Tax Allocation Refunding Bonds Series 2005B currently outstanding in the amount of
$4,075,393.
2
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas - Loan Agreement {Exhibit C)_doc
"Certificate of the Agency" means a certificate in writing signed by the Chairman,
Vice Chairman, Director, Assistant Director, Treasurer or Secretary of the Agency or by any
other officer of the Agency duly authorized by the Agency for that purpose.
"County" means the County of San Bernardino, a county duly organized and
existing under the Constitution and laws of the State.
"Event of Default" means any of the events described in Section 5.01.
"Independent Accountant" means any nationally-recognized accountant or firm of
such accountants duly licensed or registered or entitled to practice and practicing as such under
the laws of the State, appointed by the Agency, and who, or each of whom: (a) is in fact
independent and not under the domination of the Agency; (b) does not have any substantial
interest, direct or indirect, with the Agency; and (c) is not connected with the Agency as an
officer or employee of the Agency, but who may be regularly retained to make reports to the
Agency.
"Independent Financial Consultant" means any consultant or firm of such
consultants appointed by the Agency, and who, or each of whom: (a) is judged by the Agency to
have experience in matters relating to the collection of Tax Revenues or otherwise with respect
to the financing of redevelopment projects; (b) is in fact independent and not under the
domination of the Agency; (c) does not have any substantial interest, direct or indirect, with the
Agency, other than as the Underwriter or as the original purchaser of any "Bonds"; and (d) is not
connected with the Agency as an officer or employee of the Agency, but who may be regularly
retained to make reports to the Agency.
"Parity Loan" means the loans securing the 2002A Bonds and the 2005B Bonds
and any tax allocation bonds (including, without limitation, bonds, notes, interim certificates,
debentures or other obligations) issued or incurred by the Agency as permitted by Section 4.02 of
this Loan Agreement.
"Prior Bonds" means the 2002A Bonds, the 2005A Bonds and the 2005B Bonds.
"Project Area" means the Agency's Northwest Redevelopment Project Area
designated by the Redevelopment Plan.
"Redevelopment Law" means the Community Redevelopment Law of the State,
constituting Part I of Division 24 of the Health and Safety Code of the State, and the acts
amendatory thereof and supplemental thereto.
"Redevelopment Plan" means the Redevelopment Plan for Northwest
Redevelopment Project Area adopted by Ordinance No. 3578 of the City Council of the City on
July 6, 1982, by Ordinance No. MC-189, which became effective on August 7,1982, including
any amendment thereof.
3
P:\Agendas\Agenda Attachments\Exhibits\20 1 0\12-06-1 0 Recovery Zone IP A _ CDC Resos - Loan Agreement (Exhibit C)_doc
"Report" means a document in wntmg signed by an Independent Financial
Consultant and including: (a) a statement that the person or firm making or giving such Report
has read the pertinent provisions of this Loan Agreement to which such Report relates; (b) a brief
statement as to the nature and scope of the examination or investigation upon which the Report is
based; and (c) a statement that, in the opinion of such person or firm, sufficient examination or
investigation was made as is necessary to enable said consultant to express an informed opinion
with respect to the subject matter referred to in the Report.
"Request of the Agency" means a request in writing signed by the Chairman, Vice
Chairman, Director, Assistant Director, Treasurer or Secretary of the Agency or by any other
officer of the Agency duly authorized by the Agency for that purpose.
"Series A Bonds Reserve Requirement" means for an amount equal to maximum
annual debt service on the portion of the Loan representing the Series A Bonds; provided,
however, that at no time shall the Series A Bonds Reserve Requirement exceed an amount equal
to the lesser of (i) ten percent (10%) of the original principal amount of the Loan representing the
Series A Bonds, (ii) the maximum annual principal and interest requirements on the portion of
the Loan representing the Series A Bonds, or (iii) 125% of the average annual principal and
interest requirements on the portion of the Loan representing the Series A Bonds determined
with respect to debt service on the outstanding portion of the Loan on the date of original deposit
of amounts in the Reserve Fund for the Bonds.
"Series B Bonds Reserve Requirement" means for an amount equal to maximum
annual debt service on the portion of the Loan representing the Series B Bonds; provided,
however, that at no time shall the Series B Bonds Reserve Requirement exceed an amount equal
to the lesser of (i) ten percent (10%) of the original principal amount of the Loan representing the
Series B Bonds, (ii) the maximum annual principal and interest requirements on the portion of
the Loan representing the Series B Bonds, or (iii) 125% of the average annual principal and
interest requirements on the portion of the Loan representing the Series B Bonds determined with
respect to debt service on the outstanding portion of the Loan on the date of original deposit of
amounts in the Reserve Fund for the Bonds.
"Special Fund" means the special fund by that name created pursuant to Section
3.02 hereof.
"Subordinate Debt" means any loans, advances or indebtedness issued or incurred
by the Agency, pursuant to and in accordance with the provisions of Section 4.03, which are
either: (a) payable from, but not secured by a pledge or lien upon, any Tax Revenues and which
are expressly subordinate in right of payment to the Loan; or (b) secured by a pledge of or lien
upon the Tax Revenues which is subordinate in all respects to the pledge of and lien upon the
Pledged Revenues hereunder for the security of the Loan.
"Tax Revenue Certificate" means a Certificate of the Agency identifying the
amount of all Tax Revenues received or to be received by the Agency in the then current Fiscal
Year, based on assessed valuation of property in the Project Area as evidenced in a written
document from an appropriate official of the County.
4
P:\Agendas\Agenda Attachments\Exhibits\201O\12-06-10 Recovery Zone JPA_CDC Resas - Loan Agreement (Exhibit C).doc
"Tax Revenues" means that portion of taxes levied upon taxable property within
the Project Area and received by the Agency on or after the effective date of the ordinance
approving the Redevelopment Plan) allocated to and paid into a special fund (as created
hereunder) of the Agency pursuant to Article 6 of Chapter 6 of the Redevelopment Law and
Section 16 of Article XVI of the Constitution of the State of California, exclusive of amounts, if
any, (i) required to be deposited into the Low and Moderate Income Housing Fund of the
Agency pursuant to Section 33334.2 and Section 33334.3 of the Redevelopment Law, (ii)
amounts payable to certain taxing agencies pursuant to any existing pass-through agreements
entered into in accordance with Section 33670 of the Redevelopment Law and (iii) amounts
necessary to pay the 2005A Bonds.
Section 1.02. Rules of Construction. All references herein to "Articles,"
"Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of
this Loan Agreement, and the words "herein," "hereof," "hereunder" and other words of similar
import refer to this Loan Agreement as a whole and not to any particular Article, Section or
subdivision hereof.
ARTICLE II
THE LOAN; REPAYMENT; APPLICATION OF PROCEEDS
Section 2.01. Authorization. The Authority hereby agrees to lend to the Agency
the total aggregate principal amount of $7,068,000 from the proceeds of the Series A Bonds and
$ from the proceeds of the Series B Bonds, under and subject to the terms of this
Loan Agreement, the Bond Law and the Act. This Loan Agreement constitutes a continuing
agreement with the Authority to secure the full and final payment of the Loan, subject to the
covenants, agreements, provisions and conditions herein contained. The proceeds of the Loan
shall be disbursed to the Agency and shall be applied by the Agency as set forth in Section 2.04.
Section 2.02. Repayment of Loan. The Loan shall be payable in installments of
principal, interest and premium, if any, which shall be due and payable by the Agency on each
Interest Payment Date in an amount equal to the principal, interest, premium and other payments
due by the Authority with respect to the Bonds under Section 4.02 of the Indenture. Principal of
and interest and premium (if any) on the Loan shall be payable by the Agency to the Trustee, as
assignee of the Authority under the Indenture, in immediately available funds which constitute
lawful money of the United States of America. Payment of such principal and interest shall be
secured, and amounts for the payment thereof shall be deposited with the Trustee in the amounts
and at the times, as set forth in Article III hereof.
Section 2.03. Optional Prepayment.
[TO COME]
5
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA~CDC Resos - Loan Agreement (Exhibit C).doc
Section 2.04. Application of Loan Proceeds. For and as the Loan, on the Closing
Date the Authority shall cause to be disbursed the proceeds of sale of the Bonds as provided in
Section 3.02 of the Indenture.
ARTICLE III
SECURITY FOR LOAN; APPLICATION OF FUNDS
Section 3.01. Pledge of Tax Revenues and Federal Direct Payments.
(a) The Loan shall be equally secured by a first pledge of and lien on all of the
Tax Revenues and all of the Federal Direct Payments, if any, which are expected to be received
by the Authority for transfer to the Agency. The Tax Revenues and Federal Direct Payments, if
any, are hereby allocated in their entirety to the payment of the principal of, and interest on, the
Loan as provided herein and any other payments required hereunder. Except for the Tax
Revenues, the Federal Direct Payments and the moneys in the Reserve Fund, no funds or
properties of the Agency shall be pledged to, or otherwise liable for, the payment of principal of
or interest or premium (if any) on the Loan.
(b) The Authority and the Agency hereby make an irrevocable designation of the
Series A Bonds as "Recovery Zone Economic Development Bonds" pursuant to the provisions
of Section l400U-2(b)(l)(B) of the Tax Code. The Authority expects to receive a cash subsidy
payment from the United States Depart of Treasury pursuant to the Recovery Act on or about
each Interest Payment Date equal to 45% of the interest paid on the Series A Bonds (the "Federal
Direct Payments"). The Authority and the Agency shall direct the United States Department of
Treasury to pay said subsidy from the Series A Bonds directly to the Trustee. The Authority
hereby directs and authorizes any authorized Authority representative and the Agency hereby
directs and authorizes any Authorized Agency Representative to make any other elections
permitted or required pursuant to the provisions of the Tax Code or the Tax Regulations, as such
authorized representative (after consultation with Bond Counsel) deems necessary or appropriate
in connection with the Bonds and in connection with maintaining the Authority's ability to
receive Federal Direct Payments to the extent available for payment to the Authority.
(c) The Agency acknowledges that the Authority has, pursuant to the
Indenture, transferred and assigned to the Trustee, for the benefit of the Owners of the Bonds, all
of the Tax Revenues and the Federal Direct Payments, and all of the right, title and interest of the
Authority in this Loan Agreement and the Agency hereby consents to such transfer and
assignment.
Section 3.02. Special Fund; Deposit of Tax Revenues. There is hereby
established by the Agency a fund known as the "Special Fund", which shall be held by the
Agency in trust for the benefit of the Owners of all Outstanding Bonds. The Agency shall
deposit all of the Tax Revenues received in any Bond Year in the Special Fund, for use as set
forth in Section 3.03 until such date, (if any) during such Bond Year as the amounts on deposit in
the Special Fund are sufficient to meet all payment obligations of the Agency hereunder for such
Bond Year, whereupon such amounts shall be transferred to the Trustee as provided in Section
6
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resos - Loan Agreement (Exhibit C)_doc
3.03 hereof for deposit to the appropriate accounts held by the Trustee under the Indenture. Any
Tax Revenues received during such Bond Year after such date shall be released from the pledge
and lien hereunder and from the lien of the Indenture and may thereafter be applied for any
lawful purposes of the Agency, provided that no Event of Default shall have occurred and be
continuing. Prior to the payment in full of the principal of and interest and prepayment premium
(if any) on the Loan and the payment in full of all other amounts payable hereunder, the Agency
shall not have any beneficial right or interest in the moneys on deposit in the Special Fund,
except as provided in this Loan Agreement, and such moneys shall be used and applied as set
forth herein.
Section 3.03. Transfer of Tax Revenues From Special Fund. The Agency is
required to withdraw from the Special Fund and transfer to the Trustee for deposit in the various
funds and accounts under the Indenture as provided therein at the following times:
(a) Deposits. Not later than the fifteenth (15th) day preceding each Interest
Payment Date, the Agency shall withdraw from the Special Fund and transfer to the Trustee for
deposit to the various funds and accounts established under the Indenture, an amount equal to the
the principal, interest, premium and other payments due by the Authority with respect to the
Bonds under Section 4.02 of the Indenture, less amounts currently held in such funds and
accounts.
In lieu of depositing cash with the Trustee as payment of any installment of
principal coming due on October 1 of any year pursuant to Section 2.02 of this Loan Agreement,
the Agency shall have the option to tender to the Trustee for cancellation Bonds maturing or
subject to any mandatory sinking fund redemption on October 1 in such year. Such Bonds may
be purchased by the Agency with any source of available moneys (including but not limited to
Tax Revenues not required to be deposited with the Trustee pursuant to this Section), at public or
private sale as and when and at such prices as the Agency may in its discretion determine. The
par amount of any Bonds so purchased by the Agency and tendered to the Trustee in any twelve-
month period ending on April 15 in any calendar year shall be credited towards and shall reduce
the payment required to be made pursuant to this subsection (a) on the fifteenth (15th) day
preceding the next succeeding October 1 in such year.
(b) Surplus. The Agency shall not be obligated to transfer from the Special
Fund to the Trustee for deposit in the principal and interest account of the Revenue Fund in any
Fiscal Year an amount of Tax Revenues which, together with other available amounts in the
Revenue Fund, exceeds the amounts required in such Fiscal Year pursuant to preceding clause
(a) plus any required deposits into the Reserve Fund. In the event that for any reason whatsoever
any amounts shall remain on deposit in the Special Fund on any October 1 after making the
transfer required to be made pursuant to the preceding clause (a), and any payments required
under Section 4.08 hereof, the Agency may withdraw such amounts from the Special Fund and,
after payments of amounts due the Trustee pursuant to Section 4.11 hereof, use such amounts for
any lawful purposes of the Agency.
Section 3.04. [Intentionally Omitted].
7
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-1 0 Recovery Zone JP A ~ CDC Resas - Loan Agreement (Exhibit C),doc
Section 3.05. Investment of Moneys; Valuation of Investments. All moneys in
the Special Fund shall be invested by the Agency only in Permitted Investments to the extent
permitted by the Bond Law and the Redevelopment Law.
Moneys in the Reserve Fund shall be invested by the Trustee in Permitted
Investments to the extent permitted by the Redevelopment Law, the Bond Law and the
Indenture, subject to the following restrictions:
Moneys in the Special Fund shall be invested only in obligations which will by
their terms mature at least fifteen (15) days prior to each Interest Payment Date as to insure that
before each Interest Payment Date there will be in such funds and accounts, from matured
obligations and other moneys already in such funds and accounts, amounts equal to the interest
and principal due and payable on the Bonds on such dates.
In the absence of any such direction from the Agency, any such moneys shall be
invested in obligations described in paragraph (6) of the definition of Permitted Investments.
Obligations purchased as an investment of moneys in any fund established hereunder shall be
credited to and deemed to be part of such fund.
All interest, profits and other income received from the investment of moneys in
any fund established hereunder shall be deposited in such fund. Notwithstanding anything to the
contrary contained in this paragraph, an amount of interest received with respect to any
investment equal to the amount of accrued interest, if any, paid as part of the purchase price of
such investment shall be credited to the fund from which such accrued interest was paid.
ARTICLE IV
OTHER COVENANTS OF THE AGENCY
Section 4.01. Punctual Payment. The Agency will punctually payor cause to be
paid the principal of and interest on the Loan together with any prepayment premiums thereon in
strict conformity with the terms of this Loan Agreement, and it will faithfully observe and
perform all of the conditions, covenants and requirements of this Loan Agreement.
Section 4.02. Limitation on Superior and Parity Loans. While the Loan is
Outstanding, the Agency may not issue or incur debt superior to or on a parity with the Bonds or
debt superior to the Loan. The Agency may incur debt on a parity with the Loan in such
principal amount as shall be determined by the Agency, subject to the provisions hereinafter set
forth. The Agency may incur and deliver any Parity Loan subject to the following specific
conditions which are made conditions precedent to the delivery of such Parity Loan issued in
accordance with this Loan Agreement:
(a) No event of default shall have occurred and be continuing, and the Agency
shall otherwise be in compliance with all covenants set forth in this Loan Agreement.
8
P:\Agendas\Agenda Attachments\Exhibits\201O\12-06-10 Recovery Zone JPA_CDC Resas - Loan Agreement (Exhibit C). doc
(b) Receipt by the Agency of a written document from the following parties
which complies with the requirements set forth below:
(i) Official documentation from an appropriate official of the County
stating (A) the dollar amount of the Tax Revenues either received or to be received for the Fiscal
Year for which such certification is being delivered, based upon the most recent taxable
valuation of property in the Project Area, exclusive of State subventions and taxes levied to pay
outstanding bonded indebtedness, or (B) documentation prepared by Agency staff and verified
by an Independent Financial Consultant to the effect that the dollar amount of Tax Revenues set
forth above, is at least equal to one hundred forty-five percent (145%) of maximum annual debt
service on the Loan and Parity Loans before issuance and one hundred twenty-five percent
(125%) of maximum annual debt service on the Loan and Parity Loans which will be
Outstanding immediately following the issuance of such Parity Loan; provided, however, that the
requirement set forth in this Section 4.02(b )(i) shall not be applicable to any Parity Loan incurred
by the Agency the proceeds of which are utilized to refund debt then outstanding which is
secured on a parity with the Parity Loan.
(ii) An opinion of counsel stating that the Agency is entitled under the
Law and the Redevelopment Plan to receive taxes under Section 33670.
(c) The foregoing certification(s) shall be based upon the following
assumptions, each of which shall be acknowledged by the official executing the same. Tax
Revenues for the applicable Fiscal Year shall:
(i) be net of the requirements set forth in Sections 33334.2 and
33334.3 of the Law for set-asides for low and moderate income housing purposes;
(ii) be net of obligations of the Agency under any pass-through
agreements authorized and executed pursuant to Section 33401 of the Law as at the date of
certification, under whose terms payments are not subordinate to the obligations of the Agency
to make Loan payments hereunder;
(iii) assume that all appeals as to assessed valuation of real property
within the Project Area are settled at the historic average settlement rate for the two Fiscal Years
most recently concluded;
(iv) use a tax rate of one percent (1 %) of assessed valuation;
(v) be adjusted by the actual delinquency rate obtaining for the Fiscal
Year most recently concluded; and
(vi) demonstrate an assessed valuation for the Project Area for that
Fiscal Year (or, if not yet available for that Fiscal Year, for the Fiscal Year most recently
concluded), confirmed in writing by the Auditor of the County.
9
P:\Agendas\Agenda Attachments\Exhibits\20 1 0\12-06-1 0 Recovery Zone lP A_ CDC Resas - Loan Agreement (Exhibit C),doc
(d) For purposes of calculating the amount of Tax Revenues available per
subsections (b) and (c) above, Tax Revenues available for the payment of maximum annual debt
service on the Parity Loan which shall be Outstanding immediately following incurring of the
Parity Loan, shall be reduced by 20% to fulfill the Agency requirements to set-aside moneys
pursuant to Section 33334.2 and Section 33334.3 of the Redevelopment Law. The Agency shall
deliver to the Trustee a Certificate of the Agency certifying that the conditions precedent to the
issuance of such Parity Loan set forth in subsections (a), (b) and (c) above have been satisfied.
For the purposes of compliance with subsections (b) and (c) above, any variable rate Parity Loan
shall be assumed to bear interest at the maximum interest rate permitted under the appropriate
documentation.
Section 4.03. Additional Pass-Through Agreements. Following the Closing
Date, the Agency may at any time, or from time to time, enter into pass-through agreements
pursuant to Section 33401 of the Law which are subordinate to the obligations of the Agency to
make payments under this Loan Agreement. In addition, the Agency may enter into such pass-
through agreements, under which payments are not so subordinate, but only upon the Agency's
meeting the conditions set forth in Section 4.02 as to the incurrence of Parity Debt, for this
purpose treating payments under such pass-through agreements as though they were payments
under a Parity Loan.
Section 4.04. Issuance or Incurrence of Subordinate Debt. The Agency may
issue or incur Subordinate Debt while the Bonds are Outstanding.
Section 4.05. Payment of Claims. The Agency 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 properties owned by the Agency or upon the Tax
Revenues or any part thereof, or upon any funds in the hands of the Trustee, or which might
impair the security of the Loan. Nothing herein contained shall require the Agency to make any
such payment so long as the Agency in good faith shall contest the validity of said claims.
Section 4.06. Books and Accounts; Financial Statement. The Agency will keep,
or cause to be kept, proper books of record and accounts, separate from all other records and
accounts of the Agency and the City, in which complete and correct entries shall be made of all
transactions relating to the Project Area and the Tax Revenues including, but not limited to, the
Special Fund. Such books of record and accounts shall at all times during business hours be
subject, upon prior written request, to the reasonable inspection of the Authority, the Trustee and
the owners of any Outstanding Bond, or their representatives authorized writing.
The Agency will cause to be prepared and delivered to the Trustee annually, the
preliminary budget when prepared and final budget when adopted and within thirty (30) days of
adoption but in no event later than one hundred eighty (180) days after the close of each Fiscal
Year so long as any of the Bonds are Outstanding, complete audited financial statements with
respect to such Fiscal Year showing the Tax Revenues, and a report containing (i) the assessed
valuations in the Project Area, (ii) the annual amount of Tax Revenues, (iii) the annual housing
set-aside amount, (iv) a description of the assessment appeals known to the Agency, if any,
10
P:\Agendas\Agenda Attachments\Exhibits\201O\12-06-10 Recovery Zone JPA_CDC Resos - Loan Agreement (Exhibit C).doc
currently pending or settled within said Fiscal Year, and (v) any pass through obligation as of the
end of such Fiscal Year. The Trustee shall have no duty to review such financial statements.
Section 4.07. Protection of Security and Rights. The Agency shall protect the
security of the Loan and the rights of the Trustee and the Owners of Outstanding Bonds with
respect to the Loan. From and after the Closing Date, the Loan shall be incontestable by the
Agency.
Section 4.08. Payments of Taxes and Other Charges. The Agency will pay and
discharge, or cause to be paid and discharged, all taxes, service charges, assessments and other
governmental charges which may hereafter be lawfully imposed upon the Agency or the
properties then owned by the Agency in the Project Area, when the same shall become due.
Nothing herein contained shall require the Agency to make any such payment so long as the
Agency in good faith shall contest the validity of said taxes, assessments or charges. The
Agency will duly observe and conform to all valid requirements of any governmental authority
relative to its redevelopment activities in the Project Area.
Section 4.09. Disposition of Property. The Agency will not participate in the
disposition of any land or real property in the Project Area to anyone which will result in such
property becoming exempt from taxation because of public ownership or use or otherwise except
property dedicated for public right-of-way and except property planned for public ownership or
use by the Redevelopment Plan in effect on the date of this Loan Agreement so that such
disposition shall, when taken together with other such disposition, (i) aggregate ten percent
(10%) or more of the land area in the Project Area, (ii) aggregate 10% or more of the assessed
value of the Project Area, or (iii) cause the amount of Tax Revenues to be received in the
succeeding Fiscal Year to fall below 125% of maximum annual debt service on the Loan, unless
such disposition is permitted as hereinafter provided in this Section 4.09. If the Agency proposes
to participate in such a disposition, it shall thereupon appoint an Independent Financial
Consultant to report on the effect of said proposed disposition. If the Report of the Independent
Financial Consultant concludes that the security of the Loan or the rights of the Authority, the
Owners of Bonds and the Trustee hereunder will not be materially impaired by said proposed
disposition the Agency may thereafter make such disposition. If said Report concludes that such
security will be materially impaired by said proposed disposition, the Agency shall disapprove
said proposed disposition.
Section 4.10. Maintenance of Tax Revenues. The Agency shall comply with all
requirements of the Redevelopment Law to ensure the allocation and payment to it of the Tax
Revenues, including without limitation the timely filing of any necessary statements of
indebtedness with appropriate officials of the County and (in the case of supplemental revenues
and other amounts payable by the State) appropriate officials of the State. The Agency shall not
enter into any agreement with the County or any other governmental unit, which would have the
effect of reducing the amount of the Tax Revenues available to the Agency for payment of the
Loan, unless the Agency shall first comply with the requirements of Section 4.02 and 4.03
hereof.
11
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resos - Loan Agreement (Exhibit C). doc
Section 4.11. Payment of Expenses; Indemnification. The Agency shall pay to
the Trustee from time to time all compensation for all services rendered under this Loan
Agreement and the Indenture, including but not limited to all reasonable expenses, charges, legal
and consulting fees and other disbursements and those of its attorneys, agents and employees,
incurred in and about the performance of its powers and duties hereunder and thereunder. Upon
the occurrence of an Event of Default, the Trustee shall have a first lien on the Tax Revenues and
the Reserve Fund to secure the payment to the Trustee of all fees, costs and expenses, including
reasonable compensation to its experts, attorneys and counsel incurred in declaring such Event of
Default and in exercising the rights and remedies set forth in Article V. The Agency further
covenants and agrees to indemnify and save the Trustee and its officers, directors, agents and
employees, harmless against any losses, expenses and liabilities which it may incur arising out of
or in the exercise and performance of its powers and duties hereunder, including the costs and
expenses of defending against any claim of liability, but excluding any and all losses, expenses
and liabilities which are due to the negligence or willful misconduct of the Trustee, its officers,
directors, agents or employees. The obligations of the Agency under this paragraph all survive
the resignation or removal of the Trustee under the Indenture, this Loan Agreement and payment
of the Loan and the discharge of this Loan Agreement.
Section 4.12. Continuing Disclosure. The Agency has undertaken all
responsibility for compliance with continuing disclosure requirements contained in the
Continuing Disclosure Agreement, and the Authority shall have no liability to the Holders of the
Bonds or any other person with respect to such disclosure matters. The Trustee hereby
covenants and agrees that it will comply with and carry out all of the provisions of the
Continuing Disclosure Agreement. Notwithstanding any other provision ofthe Indenture, failure
of the Agency or the Trustee to comply with the Continuing Disclosure Agreement shall not be
considered an Event of Default; however, the Trustee shall at the written request of any
Participating Underwriter or the owners of at least 25% aggregate principal amount of
Outstanding Bonds, but only to the extent the Trustee has been indemnified to its satisfaction
from any cost, liability or expense including those it its attorneys or any owner, may take such
actions as may be necessary and appropriate, including seeking mandate or specific performance
by court order, to cause the Agency to comply with its obligations hereunder or to cause the
Trustee to comply with its obligations under the Indenture.
Section 4.13. Compliance with Recovery Act Requirements. Pursuant to the
Indenture, the Authority has pledged all Federal Direct Payments in connection with the Series A
Bonds to the Trustee to be deposited into the Bond Service Fund to be used solely for the
purpose of paying the principal of, and interest on, the Bonds, including the redemption price
thereof. The Code imposes requirements that the Authority and the Agency must continue to
meet after the Bonds are issued in order to receive the Federal Direct Payments. The Authority
and the Agency covenant to use the proceeds of the Series A Bonds, to invest said proceeds as
provided in the Recovery Act and to make such filings as required in connection with the
Recovery Act in order to maintain the Authority's ability to receive Federal Direct Payments to
the extent available for payment to the Authority.
Section 4.14. Compliance With Arbitrage Requirements for the Series B Bonds;
Payment of Rebatable Amounts. The Agency shall not take, or permit or suffer to be taken by
12
P:\Agendas\Agenda Attachments\Exhibits\20 1 0\ 12-06-1 0 Recovery Zone lP A _ CDC Resas - Loan Agreement (Exhibit C)_doc
the Trustee or otherwise, any action with respect to the proceeds of the Loan attributable to the
Series B Bonds, which if such action had been reasonably expected to have been taken, or had
been deliberately and intentionally taken, on the Closing Date would have caused any of the
Series B Bonds to be "arbitrage bonds within the meaning of Section 148( a) of the Tax Code or
to be "private activity bonds" within the meaning of Section 141 of the Tax Code.
The Agency agrees to furnish all information to, and cooperate fully with, the
Authority, the Trustee and their respective officers, employees, agents and attorneys, in order to
assure compliance with the provisions of Section 5.08 of the Indenture. In the event that the
Authority shall determine, pursuant to Section 5.08 of the Indenture, that any amounts are due
and payable to the United States of America thereunder, and that neither the Authority nor the
Trustee has on deposit an amount of available moneys (excluding moneys on deposit in the
Interest Account, the Principal Account, the Series B Reserve Fund or the Series A Reserve
Fund, and excluding any other moneys required to pay the principal of or interest or redemption
premium, if any, on the Outstanding Bonds) to make such payment, the Authority shall promptly
notify the Agency of such fact. Upon receipt of any such notice, the Agency shall promptly pay
to the Trustee from available Tax Revenues or any other source of legally available funds, for
deposit into the Rebate Account, the sum of (a) one hundred percent (100%) of the amounts
determined by the Authority to be due and payable to the United States of America as a result of
the investment of amounts on deposit in any fund or account established hereunder, plus (b) all
other amounts due and payable to the United States of America.
The Agency further agrees and acknowledges that the representations made in the
Tax Certificate dated the Closing Date, executed by the Agency and the Authority, are true and
correct and that the Agency shall take all actions necessary to comply with said certificate.
ARTICLE V
EVENTS OF DEF AUL T AND REMEDIES
Section 5.01. Events of Default and Acceleration of Maturities. The following
events shall constitute Events of Default hereunder.
(a) Failure by the Agency to pay the principal of or interest or prepayment
premium (if any) on the Loan when and as the same shall become due and payable.
(b) Failure by the Agency to observe and perform any of the covenants,
agreements or conditions on its part contained in this Loan Agreement, other than as referred to
in the preceding clause (a), for a period of sixty (60) days after written notice specifying such
failure and requesting that it be remedied has been given to the Agency by the Trustee; provided,
however, that if in the reasonable opinion of the Agency the failure stated in such notice can be
corrected, but not within such sixty (60) day period, the Trustee shall not unreasonably withhold
its consent to an extension of such time if corrective action is instituted by the Agency within
such sixty (60) day period and diligently pursued until such failure is corrected. No grace period
13
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resas - Loan Agreement (Exhibit C). doc
for a covenant default shall exceed thirty (30) days, nor be extended for more than sixty (60)
days.
(c) The filing by the Agency of a petition or answer 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, filed with or without
the consent of the Agency, seeking reorganization 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 Agency or of the whole or any substantial part of its property. This provision, however, is
subject to the condition that if, at any time after the principal of the Loan shall have been so
declared due and payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered, the Agency shall deposit with the Trustee a sum sufficient to
pay all installments of principal on the Loan matured prior to such declaration and all accrued
interest thereon, with interest on such overdue installments of principal and interest at the net
effective rate then borne by the Outstanding Bonds, and the reasonable fees and expenses of the
Trustee (including but not limited to attorneys fees and expenses), and any and all other defaults
known to the Trustee (other than in the payment of principal and interest on the Loan due and
payable solely by reason of such declaration) shall have been made good or cured to the
satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been
made therefor, then, and in every such case, the Owners of a majority in aggregate principal
amount of the Outstanding Bonds may, by written notice to the Trustee and the Agency, rescind
and annul such declaration and its consequences. However, no such rescission and annulment
shall extend to or shall affect any subsequent default, or shall impair or exhaust any right or
power consequent thereon.
If an Event of Default has occurred and is continuing, at the written direction of
the Owners of a majority in aggregate principal amount of the Outstanding Bonds, the Trustee
shall, to the extent indemnified from liability or expense, including without limitation fees and
expenses of its attorneys, exercise any remedies available to the Trustee in law or at equity.
Section 5.02. Application of Funds Upon Default. After the occurrence and
during the continuance of an Event of Default, the Trustee shall have the right to control and
direct all remedies and other actions relating to default hereunder. All amounts received by the
Trustee pursuant to any right given or action taken by the Trustee under the provisions of this
Loan Agreement, otherwise held by the Trustee upon the occurrence of an Event of Default,
shall be applied by the Trustee in the following order:
First, to the payment of the costs and expenses of the Trustee in declaring such
Event of Default and in carrying out the provisions of this Article V, including reasonable
compensation to its agents, attorneys and counsel and
Second, to the payment of the whole amount of interest on and principal of the
Loan then due and unpaid, with interest on overdue installments of principal and interest to the
extent permitted by law at the net effective rate of interest then borne by the Outstanding Bonds;
provided, however, that in the event such amounts shall be insufficient to pay in full the full
14
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resos - Loan Agreement (Exhibit C)_doc
amount of such interest and principal, then such amounts shall be applied in the following order
of priority:
(a) to the payment of all installments of interest on the Loan then due and
unpaid,
(b) to the payment of principal of all installments of the Loan then due and
unpaid,
interest.
(c) to the payment of interest on overdue installments of principal and
Neither failure by the Authority or the Agency to comply with the requirements of
the Tax Code, which must be satisfied for the Authority to receive the cash subsidy payments
applicable to the Bonds, nor in any event to receive any cash subsidy payments applicable to the
Bonds, constitutes a default by the Authority hereunder.
Section 5.03. No Waiver. Nothing in this Article V or in any other provision of
this Loan Agreement, shall affect or impair the obligation of the Agency, which is absolute and
unconditional, to pay from the Tax Revenues and other amounts pledged hereunder, the principal
of and interest and premium (if any) on the Loan to the Trustee as herein provided, or affect or
impair the right of action, which is also absolute and unconditional, of the Trustee to institute suit
to enforce such payment by virtue of the contract embodied in this Loan Agreement.
A waiver of any default by the Trustee shall not affect any subsequent default or
impair any rights or remedies on the subsequent default. No delay or omission of the Trustee 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 a acquiescence therein, and every power
and remedy conferred upon the Trustee by the Act or by this Article V may be enforced and
exercised from time to time and as often as shall be deemed expedient by the Trustee.
If a suit, action or proceeding to enforce any right or exercise any remedy shall be
abandoned or determined adversely to the Trustee, the Agency and the Trustee shall be restored
to their former positions, rights and remedies as if such suit, action or proceeding had not been
brought or taken (except in the event that an action determined adversely to the Trustee was for
removal thereot).
Section 5.04. Remedies Not Exclusive. No remedy herein conferred upon or
reserved to the Trustee is intended to be exclusive of any other remedy. Every such remedy shall
be cumulative and shall be in addition to every other remedy given hereunder now or hereafter
existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting
and without regard to any other remedy conferred by the Act or any other law.
ARTICLE VI
MISCELLANEOUS
15
P:\Agendas\Agenda AttachmentslExhibits\20 I 0\12-06-1 0 Recovery Zone JP A _ CDC Resos - Loan Agreement (Exhibit C).doc
Section 6.01. Benefits Limited to Parties. Nothing in this Loan Agreement,
expressed or implied, is intended to give to any person other than the Agency, the Trustee and
the Authority, any right, remedy or claim under or by reason of this Loan Agreement. All
covenants, stipulations, promises, or agreements in this Loan Agreement contained by and on
behalf of the Agency shall be for the sole and exclusive benefit of the Authority and of the
Trustee acting as trustee for the benefit of the Owners of the Bonds.
Section 6.02. Successor is Deemed Included in All References to Predecessor.
Whenever in this Loan Agreement the Agency, the Authority or the Trustee 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 Loan Agreement contained or on behalf of the Agency, the
Authority or the Trustee shall bind and inure to the benefit of the respective successors and
assigns thereof whether so expressed or not.
Section 6.03. Discharge of Loan Agreement. If the Agency shall pay and
discharge the entire indebtedness on the Loan in anyone or more of the following ways:
(a) by well and truly paying or causing to be paid the principal of and interest
and prepayment premiums (if any) on the Loan, as and when the same become due and payable;
(b) by irrevocably depositing with the Trustee, in trust at or before maturity,
cash in an amount which, together with the available amounts then on deposit in any of the funds
and accounts established pursuant to the Indenture or this Loan Agreement, is fully sufficient to
pay all principal of and interest and prepayment premiums (if any on the Loan); or
(c) by irrevocably depositing with the Trustee or any other fiduciary, in trust,
Federal Securities in such amount as an Independent Certified Public Accountant shall determine
will, together with the interest to accrue thereon and available moneys then on deposit in the
funds and accounts established pursuant to the Indenture or pursuant to this Loan Agreement, be
fully sufficient to pay and discharge the indebtedness on the Loan (including all principal,
interest and prepayment premiums) at or before maturity;
then, upon sufficient notice to the Trustee (as described in Section 2.03 hereof), at the election of
the Agency but only if all other amounts then due and payable hereunder shall have been paid or
provision for their payment made, the pledge of a lien upon the Tax Revenues and other funds
provided for in this Loan Agreement and all other obligations of the Trustee, the Authority and
the Agency under this Loan Agreement with respect to the Loan shall cease and terminate,
except only the obligation of the Agency to payor cause to be paid to the Trustee, from the
amounts so deposited with the Trustee or such other fiduciary, all sums due with respect to the
Loan and all expenses an costs of the Trustee. Notice of such election shall be filed with the
Authority and the Trustee.
Any funds thereafter held by the Trustee hereunder, which are not required for
said purpose, shall be paid over to the Agency.
16
P:\Agendas\Agenda Attachments\Exhibits\1010\12-06-10 Recovery Zone JPA_CDC Resos - Loan Agreement (Exhibit C). doc
Section 6.04. Amendment. This Loan Agreement may be amended by the parties
hereto but only (a) without any effect whatsoever for the purpose of issuing Refunding Bonds, or
(b) otherwise, only with the effect and under the circumstances set forth in the Indenture.
Section 6.05. Waiver of Personal Liability. No member, officer, agent or
employee of the Agency shall be individually or personally liable for the payment of the
principal of or interest on the Loan; but nothing herein contained shall relieve any such member,
officer, agent or employee from the performance of any official duty provided by law.
Section 6.06. Payment of Business Days. Whenever in this Loan Agreement any
amount is required to be paid on a day which is not a Business Day, such payment shall be
required to be made on the Business Day immediately following such day.
Section 6.07. Notices. All written notices to be given under this Loan Agreement
shall be given by first class mail or personal delivery or by telecopier and promptly confirmed by
mail, to the party entitled thereto at its address set forth below, or at such address as the party
may provide to the other party in writing from time to time. Notice shall be effective 48 hours
after deposit in the United States mail, postage prepaid or, in the case of any notice to the Trustee
or in the case of personal delivery to any person, upon actual receipt at the address set forth
below:
To the Agency:
Redevelopment Agency of the City of San Bernardino
201 North "E" Street, Third Floor
San Bernardino, California 92401-1507
Attention: Executive Director
To the Authority:
San Bernardino Joint Powers Financing Authority
201 North "E" Street, Third Floor
San Bernardino, California 92401-1507
Attention: Chair
To the Trustee:
U.S. Bank National Association
550 S. Hope Street, Suite 500
Los Angeles, California 90071
Attention: San Bernardino JPFA-2010
Section 6.08. Partial Invaliditv. If any Section, paragraph, sentence, clause or
phrase of this Loan Agreement shall for any reason be held illegal, invalid or enforceable, such
holding shall not affect the validity of the remaining portions of this Loan Agreement. The
Agency hereby declares that it would have adopted this Loan Agreement and each and every
other section, paragraph, sentence, clause or phrase hereof and authorized the Loan irrespective
of the fact that anyone or more Sections, paragraphs, sentences, clauses, or phrases of this Loan
Agreement may be held illegal, invalid or unenforceable.
Section 6.09. Governing Law. This Loan Agreement shall be construed and
governed in accordance with the laws of the State.
17
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA~CDC Resos - Loan Agreement (Exhibit C). doc
Section 6.10. Concerning the Trustee. The Trustee is entering into this Loan
Agreement solely in its capacity as Trustee and all provisions of the Indenture relating to the
rights, privileges, powers and protections of the Trustee, including without limitation those set
forth in Article VI thereof, shall apply with equal force and effect to all actions taken by the
Trustee in connection with this Loan Agreement.
18
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06.10 Recovery Zone JPA_CDC Resos - Loan Agreement (Exhibit C). doc
IN WITNESS WHEREOF, the Redevelopment Agency of the City of San
Bernardino, the San Bernardino Joint Powers Financing Authority, and U.S. Bank National
Association have caused this Loan Agreement to be signed by their respective officers, all as of
the day and year first above written.
REDEVELOPMENT AGENCY OF THE
CITY OF SAN BERNARDINO
By:
Interim Executive Director
ATTEST:
By:
Secretary
SAN BERNARDINO JOINT POWERS
FINANCING AUTHORITY
By:
Chair
ATTEST:
By:
Secretary
U.S. BANK NATIONAL ASSOCIATION,
Trustee
By:
Authorized Officer
19
P:\Agendas\Agenda Attachments\Exhibits\2010\12-06-10 Recovery Zone JPA_CDC Resos - Loan Agreement (Exhibit C).doc