HomeMy WebLinkAboutFin FY2009-10 Tax and Revenue Anticipation NotesCITY OF�4W
Agenda Item No: 3
Meeting Date: September 8, 2009
SAN RAFAEL CITY COUNCIL AGENDA REPORT
Department: Finance
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Prepared by: Cindy Mosser,
Finance Direc
City Manager Approval:
SUBJECT: Resolution Authorizing and Approving the Borrowing of Funds for Fiscal Year
2009-2010 and the Issuance and Sale of a 2009-2010 Tax and Revenue
Anticipation Note
RECOMMENDATION: Approve the Resolution Authorizing the Issuance of Tax and
Revenue Anticipation Notes for Fiscal Year 2009-2010.
BACKGROUND:
In April 2009, we attempted to participate in a Statewide Financing program through the
California State Association of Counties and League of California Cities. Through this program
an additional source of funding is available annually to the general fund for cash flow needs.
The City has participated in this program several times in previous years. The last year the City
participated in this program was in Fiscal Year 2004-2005. Due to the State's inability to
produce a timely budget and the low credit rating of the State, the program sponsors were
unable to obtain credit enhancement providers.
With the downturn in sales tax receipts, other tax revenues, and the cash flow for this fiscal
year, we would like to participate in a funding alternative that is feasible and prudent. Under the
interpretation of Sections 53850-53858 of the California Government Code and Federal tax law
by the City's bond counsel, Jones Hall, the City may borrow an amount not to exceed the
maximum anticipated cash flow deficit plus five percent of working capital reserve if all the note
proceeds, including investment earnings, are deemed spent within 6 months of the date of the
issue of the notes. This method of financing involves the sale of Tax and Revenue Anticipation
Notes (TRANs) and is a traditional means used by local governments to ensure a consistent
cash flow during the fiscal year.
ANALYSIS:
The attached Resolution, and related supporting documents, authorizes the issuance by the
City of San Rafael of Tax and Revenue Anticipation Notes (TRANs) in an amount not -to -exceed
$8,500,000. The maturity of the TRANS will not exceed a period of thirteen months, and the
notes will be issued effective in September 2009. The interest rate on the notes will depend on
competitive rates at the time of the sale.
FOR CITY CLERK ONLY
File No.:
Council Meeting:
Disposition:
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2
The purpose of the temporary cash borrowing is to increase available cash balances which
provide operating funds to cover cash shortfalls. The cash shortfalls arise due to the timing
differential of expected monthly cash receipts and disbursements throughout the 2009-2010
fiscal year. The TRANs also provide an additional source of revenues because the cost of the
interest paid against the TRANs is less than reinvestment income of the proceeds. This
produces a net gain to the City. The net return is allowable under IRS rules and is one of a very
few tools where the City can actually retain the excess interest earnings without having to
"rebate" the excess back to the federal government.
The attached Resolution authorizes the issuance by the City of San Rafael in 2009 for TRANS
in an amount not to exceed $8,500,000. Staff has calculated our expected level of funding to
be $7,941,000. Enclosed with the report is a Cash Flow Worksheet, which determines our level
of available funding. The result of $7,941,000 is tied to current year expenditures and
revenues, and their impacts on monthly cash flows.
The Resolution authorizes the City Manager, Finance Director and City Attorney to prepare and
execute all necessary documents and agreements related to the TRANS borrowing. The
Resolution also appoints Jones Hall, a Professional Law Corporation, as bond counsel and
disclosure counsel and Northcross, Hill and Ach, Inc. as Financial Advisor to the City in
connection with the issuance and sale of the Notes.
The distribution of the Preliminary Official Statement by the City is subject to federal securities
laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. These
laws require the Preliminary Official Statement to include all facts that would be material to an
investor in the Notes. Material information is information that there is a substantial likelihood
would have actual significance in the deliberations of the reasonable investor when deciding
whether to buy or sell the Notes. If the City Council concludes that the Preliminary Official
Statement includes all facts that would be material to an investor in the Obligations, it must
adopt a resolution that authorizes staff to execute a certificate to the effect that the Preliminary
Official Statement has been deemed final.
The Securities and Exchange Commission (the SEC), the agency with regulatory authority over
the City's compliance with the federal securities laws, has issued guidance as to the duties of
the City Council with respect to its approval of the Preliminary Official Statement. In it's Report
of Investigation in the Matter of County of Orange, California as it Relates to the Conduct of the
Members of the Board of Supervisors (Release No. 36761 / January 24, 1996) (the Release),
the SEC stated that, if a member of the City Council has knowledge of any facts or
circumstances that an investor would want to know about prior to investing in the Notes,
whether relating to their repayment, tax-exempt status, undisclosed conflicts of interest with
interested parties, or otherwise, he or she should endeavor to discover whether such facts are
adequately disclosed in the Preliminary Official Statement. In the Release, the SEC stated that
the steps that a member of the City Council could take include becoming familiar with the
Preliminary Official Statement and questioning staff and consultants about the disclosure of
such facts.
FISCAL IMPACT:
Approving the resolution and moving forward with the TRANs, the proceeds of San Rafael
TRANS would be placed into securities consistent with City investment practices and State law.
Maturities would be matched to payment dates for principal and interest.
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Pa2e: 3
ACTION REQUIRED:
Staff would recommend the Council accept the report and adopt the Resolution as presented,
and direct the staff noted above to execute the necessary documents.
ATTACHMENTS:
Resolution (With Form of Note as Exhibit A)
Cash Flow Worksheet
Draft Preliminary Official Statement (POS)
RESOLUTION NO.
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN
RAFAEL AUTHORIZING AND APPROVING THE BORROWING OF
FUNDS FOR FISCAL YEAR 2009-2010 AND THE ISSUANCE AND
SALE OF 2009-10 TAX AND REVENUE ANTICIPATION NOTES IN
AN AMOUNT NOT TO EXCEED $8,500,000 THEREFOR
THE CITY COUNCIL OF THE CITY OF SAN RAFAEL, CALIFORNIA (the "CITY")
DOES RESOLVE AS FOLLOWS:
WHEREAS, pursuant to Article 7.6 (commencing with section 53850) of Chapter 4 of
Part 1 of Division 2 of Title 5 of the California Government Code (the "Law'), this City Council
(the "Council') has found and determined that moneys are needed for the requirements of the
City, a municipal corporation and charter city duly organized and existing under the laws of
the State of California, to satisfy obligations payable from the General Fund of the City (the
"General Fund"), and that it is necessary that said sum be borrowed for such purpose at this
time by the issuance of temporary notes therefor in anticipation of the receipt of taxes, income,
revenue, cash receipts and other moneys to be received by the City for the General Fund during
or allocable to the fiscal year of the City beginning July 1, 2009 and ending June 30, 2010 ("Fiscal
Year 2009-10");
NOW, THEREFORE, it is hereby DETERMINED and ORDERED as follows:
Section 1. Limitation on Maximum Amount. The principal amount of notes issued
pursuant hereto, when added to the interest payable thereon, shall not exceed eighty-five
percent (85%) of the estimated amount of the uncollected taxes, income, revenue, cash receipts
and other moneys of the City for the General Fund attributable to Fiscal Year 2009-10, and
available for the payment of said notes and the interest thereon (as hereinafter provided).
Section 2. Authorization and Terms of Notes. Solely for the purpose of anticipating taxes,
income, revenue, cash receipts and other moneys to be received by the City for the General
Fund during or allocable to Fiscal Year 2009-10, and not pursuant to any common plan of
financing, the City hereby determines to and shall borrow the principal amount of not -to -
exceed Eight Million Five Hundred Thousand Dollars ($8,500,000) by the issuance of temporary
notes under the Law, designated "City of San Rafael, California 2009-10 Tax and Revenue
Anticipation Notes" (the "Notes'). The Notes shall be dated the date of initial delivery, shall
mature (without option of prior redemption) no later than thirteen months after their date of
issuance, and shall bear interest, payable at maturity and computed on a 30 -day month/360-
day year basis, at an interest rate not in excess of five percent (5%) per annum. Both the
principal of and interest on the Notes shall be payable in lawful money of the United States of
America, as described below.
Section 3. Form of Notes; Book Entry Only System. The Notes shall be issued in fully
registered form, without coupons, and shall be substantially in the form and substance set forth
in Exhibit A attached hereto and by reference incorporated herein, the blanks in said form to be
filled in with appropriate words and figures. The Notes shall be numbered from 1
consecutively upward in order of issuance, shall be in the denomination of $5,000 each or any
integral multiple thereof.
"CUSIP" identification numbers shall be imprinted on the Notes, but such numbers
shall not constitute a part of the contract evidenced by the Notes and any error or omission
with respect thereto shall not constitute cause for refusal of any purchaser to accept delivery of
and pay for the Notes. In addition, failure on the part of the City to use such CUSIP numbers in
any notice to the registered owners of the Notes shall not constitute an event of default or any
violation of the City's contract with such owners and shall not impair the effectiveness of any
such notice.
Except as provided below, the owner of all of the Notes shall be The Depository Trust
Company, New York, New York ("DTC"), and the Notes shall be registered in the name of
Cede & Co., as nominee for DTC. The Notes shall be initially executed and delivered in the
form of a single fully registered Note in the full aggregate principal amount of the Notes. The
City may treat DTC (or its nominee) as the sole and exclusive owner of the Notes registered in
its name for all purposes of this Resolution, and the City shall not be affected by any notice to
the contrary. The City shall not have any responsibility or obligation to any participant of DTC
(a "Participant"), any person claiming a beneficial ownership interest in the Notes under or
through DTC or a Participant (a "Beneficial Owner"), or any other person not shown on the
register of the City as being an owner, with respect to the accuracy of any records maintained
by DTC or any Participant or the payment by DTC or any Participant by DTC or any
Participant of any amount in respect of the principal or interest with respect to the Notes. The
City shall pay all principal and interest with respect to the Notes only to DTC or its nominee,
and all such payments shall be valid and effective to fully satisfy and discharge the City's
obligations with respect to the principal and interest with respect to the Notes to the extent of
the sum or sums so paid. Except under the conditions noted below, no person other than DTC
shall receive a Note. Upon delivery by DTC to the City of written notice to the effect that DTC
has determined to substitute a new nominee in place of Cede & Co., the term "Cede & Co." in
this Resolution shall refer to such new nominee of DTC.
If the City determines that it is in the best interest of the Beneficial Owners that they be
able to obtain Notes and delivers a written certificate to DTC to that effect, DTC shall notify the
Participants of the availability through DTC of Notes. In such event, the City shall issue,
transfer and exchange Notes as requested by DTC and any other owners in appropriate
amounts. DTC may determine to discontinue providing its services with respect to the Notes at
any time by giving notice to the City and discharging its responsibilities with respect thereto
under applicable law. Under such circumstances (if there is no successor securities depository),
the City shall be obligated to deliver Notes to the Beneficial Owners as described in this
Resolution. Whenever DTC requests the City to do so, the City will cooperate with DTC in
taking appropriate action after reasonable notice to (a) make available one or more separate
Notes evidencing the Notes to any DTC Participant having Notes credited to its DTC account or
(b) arrange for another securities depository to maintain custody of Certificates evidencing the
Notes.
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Notwithstanding any other provision of this Resolution to the contrary, so long as any
Note is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to
the principal and interest with respect to such Note and all notices with respect to such Note
shall be made and given, respectively, to DTC as provided as in the representation letter
delivered on the date of issuance of the Notes.
Section 4. Use of Proceeds. The proceeds of the sale of the Notes shall be deposited in a
segregated account in the General Fund and used and expended by the City for any purpose for
which it is authorized to expend funds from the General Fund.
Section 5. Security. The principal amount of the Notes, together with the interest thereon,
shall be payable from taxes, income, revenue, cash receipts and other moneys which are
received by the City for the General Fund for Fiscal Year 2009-10. As security for the payment
of the principal of and interest on the Notes the City hereby pledges the first "unrestricted
moneys' (as hereinafter defined) to be received by the City (a) an amount equal to fifty percent
(50%) of the principal amount of the Notes in the month of January, 2010; (b) an amount equal
to fifty percent (50%) of the principal amount of the Notes in the month of May, 2010; and (c) an
amount sufficient to pay interest as due on the Notes at their maturity, in the month of June,
2010 (such pledged amounts being hereinafter called the "Pledged Revenues"). The principal of
the Notes and the interest thereon shall constitute a first lien and charge thereon and shall be
payable from the Pledged Revenues. To the extent not so paid from the Pledged Revenues, the
Notes shall be paid from any other moneys of the City lawfully available therefor. In the event
that there are insufficient "unrestricted moneys" received by the City to permit the deposit into
the Special Account (as hereinafter defined) of the full amount of the Pledged Revenues to be
deposited in any month by the last business day of such month, then the amount of any
deficiency shall be satisfied and made up from any other moneys of the City lawfully available
for the repayment of the Notes and interest thereon. The term "unrestricted moneys" shall
mean taxes, income, revenue, cash receipts, and other moneys intended as receipts for the
General Fund for Fiscal Year 2009-10 and which are generally available for the payment of
current expenses and other obligations of the City.
Section 6. Special Account. There is hereby created, within the General Fund, a special
account to be designated the "2009-10 Tax and Revenue Anticipation Note Special Account"
(the "Special Account") and applied as directed in this Resolution. Any money placed in the
Special Account shall be for the benefit of the owners of the Notes and, until the Notes and all
interest thereon are paid or until provision has been made for the payment of the Notes at
maturity with interest to maturity, the moneys in the Special Account shall be applied solely for
the purposes for which the Special Account is created.
During the months of January, May and June, 2010, the City shall deposit all Pledged
Revenues in the Special Account. On the maturity date of the Notes, the City shall transfer to
DTC the moneys in the Special Account necessary to pay the principal of and interest on the
Notes at maturity and to the extent said moneys are insufficient therefor an amount of moneys
from the General Fund which will enable payment of the full principal of and interest on the
Notes at maturity. DTC will thereupon make payments of principal of and interest on the Notes
to the DTC Participants who will thereupon make payments to the Beneficial Owners of the
Notes. Any moneys remaining in the Special Account after the Notes and the interest thereon
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have been paid, or provision for such payment has been made, shall be transferred to the
General Fund.
Section 7. Deposit and Investment of Special Account. All moneys held by the City in the
Special Account, if not invested, shall be held in time or demand deposits as pubhc funds and
shall be secured at all times by bonds or other obligations which are authorized by law as
security for public deposits, of a market value at least equal to the amount required by law.
Moneys in the Special Account shall, to the greatest extent possible, be invested by the
City directly, or through an investment agreement, in investments as permitted by the laws of
the State of California as now in effect and as hereafter amended, and the proceeds of any such
investments shall be deposited in the Special Account.
Section 8. Execution of Notes. The City Manager, the Finance Director or the City
Attorney (each an "Authorized Officer') is hereby authorized to execute the Notes by manual
or facsimile signature, and the City Clerk of the City is hereby authorized to countersign the
same by manual or facsimile signature (although at least one of such signatures shall be
manual) and to affix the seal of the City thereto by facsimile impression thereof, and said
officers are hereby authorized to cause the blank spaces thereof to be filled in as may be
appropriate.
Section 9. Transfer of Notes. Any Note may, in accordance with its terms, but only if the
City determines to no longer maintain the book entry only status of the Notes, DTC determines
to discontinue providing such services and no successor securities depository is named or DTC
requests the City to defiver Note certificates to particular DTC Participants, be transferred,
upon the books required to be kept pursuant to the provisions of Section 11 hereof, by the
person in whose name it is registered, in person or by his duly authorized attorney, upon
surrender of such Note for cancellation at the office of the City Clerk, accompanied by delivery
of a written instrument of transfer in a form approved by the City, duly executed.
Whenever any Note or Notes shall be surrendered for transfer, the City shall execute
and defiver a new Note or Notes, for like aggregate principal amount of the Note or Notes
surrendered for transfer.
Section 10. Exchange of Notes. Any Note may, in accordance with its terms, but only if
the City determines to no longer maintain the book entry only status of the Notes, DTC
determines to discontinue providing such services and no successor securities depository is
named or DTC requests the City to deliver Note certificates to particular DTC Participants, be
exchanged at the office of the City Clerk for a like aggregate principal amount of Notes of
authorized denominations and of the same maturity.
Section 11. Note Register. The City shall keep or cause to be kept sufficient books for the
registration and transfer of the Notes if the book entry only system is no longer in effect and, in
such case, the City Clerk shall register or transfer or cause to be registered or transferred, on
said books, Notes as herein before provided. While the book entry only system is in effect, such
books need not be kept as the Notes will be represented by one Note registered in the name of
Cede & Co., as nominee for DTC.
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Section 12. Temporary Notes. The Notes may be initially issued in temporary form
exchangeable for definitive Notes when ready for delivery. The temporary Notes may be
printed, lithographed or typewritten, shall be of such denominations as may be determined by
the City, and may contain such reference to any of the provisions of this Resolution as may be
appropriate. Every temporary Note shall be executed by the City upon the same conditions and
in substantially the same manner as the definitive Notes. If the City issues temporary Notes it
will execute and furnish definitive Notes without delay, and thereupon the temporary Notes
may be surrendered, for cancellation, in exchange therefor at the office of the City Clerk and the
City Clerk shall deliver in exchange for such temporary Notes an equal aggregate principal
amount of definitive Notes of authorized denominations. Until so exchanged, the temporary
Notes shall be entitled to the same benefits pursuant to this Resolution as definitive Notes
executed and delivered hereunder.
Section 13. Notes Mutilated, Lost, Destroyed or Stolen. If any Note shall become
mutilated the City, at the expense of the owner of said Note, shall execute and deliver a new
Note of like maturity and principal amount in exchange and substitution for the Note so
mutilated, but only upon surrender to the City Clerk of the Note so mutilated. Every mutilated
Note so surrendered to the City Clerk shall be canceled and delivered to, or upon the order of,
the City. If any Note shall be lost, destroyed or stolen, evidence of such loss, destruction or theft
may be submitted to the City and, if such evidence be satisfactory to the City and indemnity
satisfactory to it shall be given, the City, at the expense of the owner, shall execute and deliver a
new Note of like maturity and principal amount in lieu of and in substitution for the Note so
lost, destroyed or stolen. The City may require payment of a sum not exceeding the actual cost
of preparing each new Note issued under this Section 13 and of the expenses which may be
incurred by the City in the premises. Any Note issued under the provisions of this Section 13 in
lieu of any Note alleged to be lost, destroyed or stolen shall constitute an original additional
contractual obligation on the part of the City whether or not the Note so alleged to be lost,
destroyed or stolen be at any time enforceable by anyone, and shall be equally and
proportionately entitled to the benefits of this Resolution with all other Notes issued pursuant
to this Resolution.
Section 14. Covenants and Warranties. It is hereby covenanted and warranted by the
City that all representations and recitals contained in this Resolution are true and correct, and
that the City and its appropriate officials have duly taken all proceedings necessary to be taken
by them, and will take any additional proceedings necessary to be taken by them, for the
prompt collection and enforcement of the taxes, income, revenue, cash receipts and other
moneys pledged hereunder in accordance with law and for carrying out the provisions of this
Resolution.
Section 15. Tax Covenants.
(a) No Arbitrage. The City shall not take, nor permit nor suffer to be taken any
action with respect to the proceeds of the Notes which, if such action had been
reasonably expected to have been taken, or had been deliberately and intentionally
taken, on the date of issuance of the Notes (the "Closing Date') would have caused the
Notes to be "arbitrage bonds' within the meaning of section 148 of the Internal Revenue
Code of 1986 (the "Code').
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(b) Rebate Requirement. The City shall take any and all actions necessary to assure
compliance with section 148(f) of the Code, relating to the rebate of excess investment
earnings, if any, to the federal government.
(c) Private Activity Limitation. The City shall assure that proceeds of the Notes are
not so used as to cause the Notes to satisfy the private business tests of section 141(b) of
the Code or the private loan financing test of section 141(c) of the Code..
(d) Federal Guarantee Prohibition. The City shall not take any action or permit or
suffer any action to be taken if the result of the same would be to cause any of the Notes
to be "federally guaranteed" within the meaning of section 149(b) of the Code.
(e) Maintenance of Tax -Exemption. The City shall take all actions necessary to
assure the exclusion of interest on the Notes from the gross income of the owners of the
Notes to the same extent as such interest is permitted to be excluded from gross income
under the Code as in effect on the Closing Date.
Section 16. Official Statement. The City Council hereby approves the Official Statement
describing the Notes, in substantially the form on file with the City Clerk, together with any
changes therein or additions thereto deemed advisable by the Authorized Officer. The City
Council authorizes and directs the Authorized Officer on behalf of the City to deem "finar
pursuant to Rule 15c2-12 under the Securities Exchange Act of 1934 (the "Rule") the Official
Statement prior to its distribution by the financial advisors to the City. The execution of the
Official Statement, which shall include such changes and additions thereto deemed advisable
by the Authorized Officer and such information permitted to be excluded from the Official
Statement pursuant to the Rule, shall be conclusive evidence of the approval of the Official
Statement by the City.
The Authorized Officer is authorized and directed to execute the Official Statement and
a statement that the facts contained in the Official Statement, and any supplement or
amendment thereto (which shall be deemed an original part thereof for the purpose of such
statement) were, at the time of sale of the Notes, true and correct in all material respects and
that the Official Statement did not, on the date of sale of the Notes, and does not, as of the date
of delivery of the Notes, contain any untrue statement of a material fact with respect to the City
or omit to state material facts with respect to the City required to be stated where necessary to
make any statement made therein not misleading in the light of the circumstances under which
it was made. The Authorized Officer shall take such further actions prior to the signing of the
Official Statement as are deemed necessary or appropriate to verify the accuracy thereof. The
Official Statement is approved for distribution in the offering and sale of the Notes.
Section 17. Sale of Notes. The Notes will be sold by a selection process conducted by
Northcross, Hill & Ach, Inc. as Financial Advisor to the City, and sold to the underwriting firm
selected at the conclusion of such process (the "Underwriter'), so long as the interest rate on
the Notes does not exceed 5%, and the compensation paid to the Underwriter does not exceed
one half of one percent (0.50%) of the principal amount of the Notes.
The Authorized Officer is hereby directed to execute a Note Purchase Agreement, dated
the date of sale of the Notes to the Underwriter, between the Underwriter and the City, in
0
substantially the form on file with the Authorized Officers (the 'Bond Purchase Agreement'),
so long as the limitations set forth in the preceding paragraph are not exceeded.
Section 18. Engagement of Professional Services. The City hereby approves the
engagement of Jones Hall, A Professional Law Corporation, as Bond Counsel and Disclosure
Counsel,and Northcross, Hill & Ach, Inc. as Financial Advisor to the City in connection with
the issuance and sale of the Notes.
Section 19. Preparation of Notes; Official Action. Jones Hall, A Professional Law
Corporation, as bond counsel, is directed to cause suitable Notes to be prepared showing on
their face that the same bear interest at the rate specified in the offer submitted by the
successful bidder or bidders, and to cause the blank spaces therein to be filled in to comply
with the provisions of this Resolution, and to procure their execution by the proper officers,
and to cause the Notes to be delivered when so executed to DTC on behalf of the successful
bidder or bidders therefor upon the receipt of the purchase price by the City Treasurer in
accordance with such successful bid or bids.
Each Authorized Officer and the City Clerk, or any of them, are further authorized and
directed to make, execute and deliver such certificates, agreements and other closing
documents as are necessary to consummate the transactions contemplated by this Resolution.
Section 20. Effective Date. This Resolution shall take effect upon its adoption.
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I, ESTHER C. BEIRNE, Clerk of the City of San Rafael, hereby certify that the
foregoing resolution was duly and regularly introduced and adopted at a regular meeting of
the Council of said City on Tuesday, the 8tb of September 2009, by the following vote, to wit:
AYES: COUNCILMEMBERS:
NOES: COUNCILMEMBERS:
ABSENT:COUNCILMEMBERS:
In
ESTHER C. BEIRNE, City Clerk
EXHIBIT A
FORM OF NOTE
No.1
CITY OF SAN RAFAEL, CALIFORNIA
2009-10 TAX AND REVENUE ANTICIPATION NOTE
INTEREST RATE:
OWNER:
PRINCIPAL SUM:
MATURITY DATE:
September J 2010
CEDE & CO.
****
ISSUE DATE:
September J 2009
MILLION DOLLARS****
CUSIP:
The CITY OF SAN RAFAEL, a municipal corporation, duly organized and existing
under and by virtue of the Constitution and laws of the State of California (the "City'), for
value received hereby promises to pay to the Registered Owner stated above, or registered
assigns (the "Owner"), on the Maturity Date stated above, the Principal Sum stated above, in
lawful money of the United States of America, and to pay interest thereon in like lawful money
at the rate per annum stated above, payable on the Maturity Date stated above, calculated on
the basis of 360 -day year composed of twelve 30 -day months. Both the principal of and interest
on this Note shall be payable at maturity to the Owner.
It is hereby certified, recited and declared that this Note is one of an authorized issue of
Notes in the aggregate principal amount of Million Dollars ($ ), all of
like tenor, issued pursuant to the provisions of Resolution No. of the City Council of
the City duly passed and adopted on September 8, 2009 (the "Resolution'), and pursuant to
Article 7.6 (commencing with section 53850) of Chapter 4, Part 1, Division 2, Title 5, of the
California Government Code, and that all things, conditions and acts required to exist, happen
and be performed precedent to and in the issuance of the Notes exist, have happened and have
been performed in regular and due time, form and manner as required by law, and that this
Note, together with all other indebtedness and obligations of the City, does not exceed any
limit prescribed by the Constitution or statutes of the State of California.
The principal amount of the Notes, together with the interest thereon, shall be payable
from taxes, income, revenue, cash receipts and other moneys which are received by the City for
the General Fund of the City for Fiscal Year 2009-10. As security for the payment of the
principal of and interest on the Notes the City has pledged the first "unrestricted moneys" (as
hereinafter defined) to be received by the City (a) an amount equal to fifty percent (50%) of the
principal amount of the Notes in the month of January, 2010; (b) ) an amount equal to fifty
percent (50%) of the principal amount of the Notes in the month of May, 2010; and (c) an
amount sufficient to pay interest as due on the Notes at their maturity, in the month of June,
2010 (such pledged amounts being hereinafter called the "Pledged Revenues'). The principal of
the Notes and .the interest thereon shall constitute a first lien and charge thereon and shall be
payable from the Pledged Revenues. To the extent not so paid from the Pledged Revenues, the
Notes shall be paid from any other moneys of the City lawfully available therefor. In the event
that there are insufficient "unrestricted moneys" received by the City to permit the deposit into
the Special Account (as hereinafter defined) of the full amount of the Pledged Revenues to be
deposited in any month by the last business day of such month, then the amount of any
deficiency shall be satisfied and made up from any other moneys of the City lawfully available
for the repayment of the Notes and interest thereon. The term "unrestricted moneys' shall
mean taxes, income, revenue, cash receipts, and other moneys intended as receipts for the
General Fund of the City for Fiscal Year 2009-10 and which are generally available for the
payment of current expenses and other obligations of the City.
The Notes are issuable as fully registered Notes, without coupons, in denominations of
$5,000 and any integral multiple thereof. Subject to the limitations and conditions as provided
in the Resolution, Notes may be exchanged for a like aggregate principal amount of Notes of
other authorized denominations and of the same maturity.
The Notes are not subject to redemption prior to maturity.
This Note is transferable by the Owner hereof, but only under the circumstances, in the
manner and subject to the limitations provided in the Resolution. Upon registration of such
transfer a new Note or Notes, of authorized denomination or denominations, for the same
aggregate principal amount and of the same maturity will be issued to the transferee in
exchange herefor.
The City may treat the Owner hereof as the absolute owner hereof for all purposes, and
the City shall not be affected by any notice to the contrary.
Unless this Note is presented by an authorized representative of The Depository Trust
Company to the issuer or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name as requested by an
authorized representative of The Depository Trust Company and any payment is made to Cede
& Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has
aninterest herein.
Exhibit A
Page 2
IN WITNESS WHEREOF, the City of San Rafael has caused this Note to be executed by
the City Manager and countersigned by the City Clerk of the City, all as of the Issue Date stated
above.
Countersigned:
[3N
City Clerk
CITY OF SAN RAFAEL
Lai
Exhibit A
Page 3
City Manager
ASSIGNMENT
For value received the undersigned hereby sells, assigns and transfers unto
(Name, Address and Tax Identification or Social Security Number of Assignee)
the within -registered Note and hereby irrevocably constitute(s) and appoints(s)
attorney,
to transfer the same on the Note register of the City with full power of substitution in the
premises.
Signature Guaranteed:
NOTICE: Signature(s) must be guaranteed
by a qualified guarantor.
Exhibit A
Page 4
NOTICE: The signature(s) on this assignment
must correspond with the name(s) as written
on the face of the within Note in every
particular without alteration or enlargement
or any change whatsoever.
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City of San Rafael
2009 TRAN Sizing
Working Capital Reserve Amount
Aggregate 2008-09 General Fund Expenditures $58,933,117
Less: Interfund Transfers Out (3,784,628)
Less: 2008-09 TRAN Repayments 0
Subtotal: $55,148,490
A) Times 5% $2,757,424
B) Average Monthly Beginning Balance from prior year $274,358
Working Capital Reserve (Lesser of A or B) $274,358
TRAN Sizing
Maximum cumulative cash flow deficit in FY 2009-10
$7,667,028
Working Capital Reserve
274,358
Maximum Allowed 2009-10 TRANS Size
$7,941,386
Safe Harbor TRAN Size (Deficit / 0.9):
$8,518,920
Maximum legal TRAN Size:
$8,518,920
2009 TRANS Issued:
$8,500,000
TRAN Coupon (interest rate):
2.50%
29236-03 JH:CKL 9-4-09
PRELIMINARY OFFICIAL STATEMENT DATED SEPTEMBER _, 2009
NEW ISSUE - FULL BOOK ENTRY
RATING: Moody's: "_I
See "Rating."
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject,
however to certain qualifications described in this Official Statement, under existing law, the interest on the Notes is
excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for
purposes of the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of
Bond Counsel, such interest is exempt from California personal income taxes. See "TAX MATTERS."
CITY OF SAN RAFAEL
2009-10 TAX AND REVENUE ANTICIPATION NOTES
Dated: Date of Delivery
Due: 2010
The Notes are to be delivered as fully registered notes without coupons and when delivered will be registered in
the name of The Depository Trust Company, New York, New York, or its nominee. DTC will act as securities
depository for the Notes. Individual purchases of interest in the Notes will be made in book -entry form only in the
principal amount of $5,000 or integral multiples thereof. Purchasers of Notes will not receive the physical Notes when
purchased. Principal and interest are payable at maturity. The principal and interest with respect to the Notes is
payable when due by the City of San Rafael (the "City"), as paying agent, to DTC which will in turn remit such
principal and interest to the actual purchasers of the Notes as described in this Official Statement. The Notes are not
subject to redemption prior to maturity.
The Notes are by statute general obligations of the City, payable solely from taxes, income, revenue, cash
receipts, and other moneys intended as receipts for the General Fund for Fiscal Year 2009-10 and which are
generally available for the payment of current expenses and other obligations of the City (the "Unrestricted Moneys").
The Notes are secured by a pledge of Unrestricted Moneys (as defined in this Official Statement) to be received by
the City in (a) an amount equal to 50% of the principal amount of the Notes in the month of January, 2010; (b) an
amount equal to 50% of the principal amount of the Notes in the month of May, 2010; and (c) an amount sufficient to
pay interest as due on the Notes at their maturity, in the month of June, 2010 (such pledged amounts being
hereinafter called the "Pledged Revenues'). The Pledged Revenues will be deposited and held by the City in a
special account to be designated the "2009-10 Tax and Revenue Anticipation Note Special Account" (the "Special
Account"), and applied as directed in the City Council's Resolution adopted September S, 2009.
The following firm, serving as financial advisor to the City, has structured this issue.
INORTHCROSSIHiLLIACHI
.Finavwia! Advisor> to Py&hi'Agem'hi c
Interest Rate Reoffering Yield CUSIP
The Notes are, to the extent more fully described in this Official Statement, legal investments for
commercial banks in California and are eligible to secure deposits in public monies in the State of California.
This cover page contains certain information for reference only. It is not a summary of this issue.
Investors must read the entire Official Statement to obtain information essential to the making of an informed
investment decision. See "RISK FACTORS."
The Notes will be offered when, as and if issued and received by the Underwriter subject to the approval as to
their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal
matters will also be passed upon by Jones Hall, A Professional Law Corporation, as Disclosure Counsel. It is
anticipated that the Notes will be available for delivery in New York, New York for deposit with The Depository Trust
Company, on or about October_, 2009.
Dated: ,2009
Preliminary, subject to change.
No dealer, broker, salesman or other person has been authorized by the City to give any
information or to make any representations with respect to the Notes other than those contained in this
Official Statement and, if given or made, such information or representation must not be relied upon as
having been authorized by the City. This Official Statement does not constitute an offer to sell nor the
solicitation of an offer to buy, nor shall there be any sale of the Notes by any person to make such offer,
solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the Notes.
Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion,
whether or not expressly so described in this Official Statement, are intended solely as such and are not
to be construed as a representation of facts.
The information set forth in this Official Statement has been obtained from sources that are
believed to be reliable, but is not guaranteed as to accuracy or completeness, and is not to be construed
as a representation by the Underwriter. The information and expressions of opinion stated in this Official
Statement are subject to change without notice and neither delivery of this Official Statement nor any sale
made hereunder shall, under any circumstances, create any implication that there has been no change in
the information or opinions set forth in this Official Statement or in the affairs of the City since the date
hereof. This Official Statement is submitted in connection with the sale of the Notes referred to in this
Official Statement and may not be reproduced or used, in whole or in part, for any purpose, unless
authorized in writing by the City.
The Notes have not been registered under the Securities Act of 1933, in reliance upon an
exemption contained in such Act. The Notes have not been registered under the securities laws of any
state.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR
EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY
OFFER AND SELL THE NOTES TO CERTAIN DEALERS AND BANKS AT PRICES LOWER THAN THE
PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING
PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.
Certain statements included or incorporated by reference in this Official Statement constitute
"forward-looking statements" within the meaning of the United States Private Securities Litigation Reform
Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Section 27A of the United States Securities Act of 1933, as amended (the
"Securities Act"). Such statements are generally identifiable by the terminology used such as "plan,"
"expect," "estimate," "budget" or other similar words.
The Underwriter has provided the following sentence for inclusion in this Official Statement. The
Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its
responsibilities to investors under the federal securities laws as applied to the facts and circumstances of
this transaction, but the Underwriter does not guarantee the accuracy or completeness of such
information.
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN
SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE
OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. THE CITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE
FORWARD-LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS, OR EVENTS, CONDITIONS
OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR.
CITY OF SAN RAFAEL
CITY COUNCIL MEMBERS
Albert J. Boro, Mayor
Barbara Heller, Council Member
Cyr N. Miller, Council Member
Damon Connolly, Council Member
Greg Brockbank, Council Member
CITY STAFF
Ken Nordhoff, City Manager
Jim Schutz, Assistant City Manager
Nancy Mackie, Deputy City Manager
Rob Epstein, Esq., City Attorney
Cindy Mosser, City TreasurerlFinance Director
Esther C. Beirne, City Clerk
PAYING AGENT
City of San Rafael
San Rafael, California
BOND COUNSEL and DISCLOSURE COUNSEL
Jones Hall, A Professional Law Corporation
San Francisco, California
FINANCIAL ADVISOR
Northcross, Hill & Ach, Inc.
San Rafael, California
TABLE OF CONTENTS
INTRODUCTION...........................................................................................................
THENOTES..................................................................................................................
Descriptionof the Notes.............................................................................................
SECURITY FOR AND SOURCES OF PAYMENT OF THE NOTES ..............................
Securityfor the Notes.................................................................................................
Available Sources of Repayment................................................................................
CashFlow..................................................................................................................
CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING CITY
REVENUES AND APPROPRIATIONS....................................................................................7
FOR THE CITY
Property Tax Rate Limitations - Article XIIIA............................................................................7
AUDITED FINANCIAL STATEMENTS OF THE CITY
Appropriation Limitation -Article XI IIB.....................................................................................
8
California Constitution Article XIIIC and Article XIIID (Proposition 218) ...................................8
FORM OF OPINION OF BOND COUNSEL
Proposition62.........................................................................................................................9
DTC AND THE BOOK -ENTRY ONLY SYSTEM
Proposition1A.......................................................................................................................10
FORM OF CONTINUING DISCLOSURE CERTIFICATE
FutureInitiatives....................................................................................................................11
RISKFACTORS.......................................................................................................................11
Bankruptcy Considerations....................................................................................................11
Limitationson Remedies.......................................................................................................12
NaturalDisasters...................................................................................................................12
TAXMATTERS.........................................................................................................................13
LEGALMATTERS.................................:..................................................................................14
RATING....................................................................................................................................14
LITIGATION..............................................................................................................................14
UNDERWRITING.....................................................................................................................14
CONTINUINGDISCLOSURE...................................................................................................15
ADDITIONAL INFORMATION..................................................................................................16
APPENDIX A - FINANCIAL, ECONOMIC AND DEMOGRAPHIC INFORMATION
FOR THE CITY
APPENDIX B -
AUDITED FINANCIAL STATEMENTS OF THE CITY
FOR THE YEAR ENDED JUNE 30, 2008
APPENDIX C -
FORM OF OPINION OF BOND COUNSEL
APPENDIX D -
DTC AND THE BOOK -ENTRY ONLY SYSTEM
APPENDIX E -
FORM OF CONTINUING DISCLOSURE CERTIFICATE
OFFICIAL STATEMENT
CITY OF SAN RAFAEL
2009-10 TAX AND REVENUE ANTICIPATION NOTES
INTRODUCTION
This Official Statement provides information in connection with the issuance by the City
of San Rafael (the "City") of its 2009-10 Tax and Revenue Anticipation Notes (the "Notes").
Authority. The Notes are issued in full conformity with the Constitution and laws of the
State of California (the "State"), including Article 7.6 (commencing with section 53850) of
Chapter 4 of Part 1 of Division 2 of Title 5 of the California Government Code (the "Law").
Issuance of the Notes was approved by a resolution adopted by the City Council on September
8, 2009 (the "Resolution").
The City may, under the Law, issue the Notes only if the principal of and interest on the
Notes will not exceed 85% of the estimated amount of the uncollected Unrestricted Moneys
(described below) which will be available for the payment of said Notes.
Security for the Notes. The Notes are general obligations of the City payable solely from
taxes, income, revenue, cash receipts, and other moneys intended as receipts for the General
Fund for fiscal year 2009-10 and which are generally available for the payment of current
expenses and other obligations of the City (the "Unrestricted Moneys"). See "SECURITY FOR
AND SOURCES OF PAYMENT OF THE NOTES," "APPENDIX A — Financial, Economic and
Demographic Information for the City' and "APPENDIX B — Audited Financial Statements of the
City for the Year Ended June 30, 2008."
Purpose. Proceeds from the sale of the Notes will be used and expended by the City for
any purpose for which it is authorized to expend funds from the General Fund for the fiscal year
2009-10.
Reference to Documents. Brief descriptions of the Notes, the security and sources of
payment for the Notes, the City and its financial status follow. Such descriptions do not purport
to be comprehensive or definitive. All references in this Official Statement to various documents
are qualified in their entirely by reference to the forms thereof, all of which are available for
inspection at the office of the Finance Director of the City.
Preliminary, subject to change.
THE NOTES
Description of the Notes
The Notes will be issued in the principal amount and bear interest at the interest rate
shown on the cover page of this Official Statement. The Notes will be delivered in the form of
fully registered Notes, without coupons, in denominations of $5,000 or any integral multiple
thereof, and will be dated their date of issuance. The Notes will mature on the date set forth on
the cover page of this Official Statement.
The Notes, when issued, will be registered in the name of Cede & Co., as registered
owner and nominee of The Depository Trust Company, New York, New York ("DTC"). So long
as DTC, or Cede & Co. as its nominee, is the registered owner of all Notes, all payments on the
Notes will be made directly to DTC, and disbursement of such payments will be the
responsibility of DTC, and disbursement of such payments will be the responsibility of the Direct
and Indirect Participants, as more fully described in "APPENDIX D — DTC and the Book -Entry
Only System".
SECURITY FOR AND SOURCES OF PAYMENT OF THE NOTES
Security for the Notes
The principal amount of the Notes, together with the interest thereon, is payable from
"Unrestricted Moneys", which are taxes, income, revenue, cash receipts, and other moneys
intended as receipts for the General Fund for Fiscal Year 2009-10 and which are generally
available for the payment of current expenses and other obligations of the City. As security for
the repayment of principal of and interest on the Notes, the City has pledged to deposit in a
special fund within the General Fund designated as the "2009-10 Tax and Revenue Anticipation
Note Special Account" (the "Special Account') the first Unrestricted Moneys to be received by
the City in (a) an amount equal to 50% of the principal amount of the Notes in the month of
January, 2010; (b) an amount equal to 50% of the principal amount of the Notes in the month of
May, 2010; and (c) an amount sufficient to pay interest as due on the Notes at their maturity, in
the month of June, 2010 (collectively, the "Pledged Revenues"). The Notes are equally and
ratably secured by the City's pledge of the Pledged Revenues.
The principal of the Notes and the interest thereon shall constitute a first lien and charge
against and will be paid from such Pledged Revenues. To the extent not paid from Pledged
Revenues, the Notes will be paid from any other moneys of the City lawfully available therefor.
In the event that there are insufficient Unrestricted Moneys received by the City to permit the
deposit into the Special Account of the full amount of the Pledged Revenues to be deposited in
any month by the last business day of such month, then the amount of any deficiency shall be
satisfied and made up from any other moneys of the City lawfully available for the repayment of
the Notes and interest thereon.
During the months of January, May and June, 2010, the City will deposit all Pledged
Revenues in the Special Account for the payment of the principal of and interest on the Notes at
maturity. Amounts deposited by the City in the Special Account will be applied solely for the
purpose of paying the principal of and interest on the Notes. All moneys held by the City in the
Special Account, if not invested, will be held in time or demand deposits as public funds and
shall be secured at all times by bonds or other obligations which are authorized by law as
security for public deposits, of a market value at least equal to the amount required by law.
Moneys in the Special Account will, to the greatest extent possible, be invested by the City
directly, or through an investment agreement, in investments as permitted by the laws of the
State, and the proceeds of any such investments shall be deposited in the Special Account.
See "APPENDIX A — Financial, Economic and Demographic Information for the City" and
"APPENDIX B — Audited Financial Statements of the City for the Year Ended June 30, 2008."
Available Sources of Repayment
The Notes, in accordance with State law, are general obligations of the City, but are
payable only out of Unrestricted Moneys. The City may, under existing law, issue the Notes
only if the principal of, and interest on, the Notes will not exceed 85% of the estimated
uncollected Unrestricted Moneys which will be available for the repayment of the Notes.
The Note coverage ratio is the ratio of estimated Unrestricted Moneys to the amount of
Unrestricted Moneys needed to pay principal of and interest on the Notes. The City expects to
receive a projected $ in Unrestricted Moneys on a cash basis (including carry-
over balances and transfers, and including proceeds of the Notes). The amount needed to
repay the Notes and the interest thereon is $ Based on an amount of
Unrestricted Moneys needed to pay principal of and interest on the Notes, the Note coverage
ratio is :1.
The table below gives detail as to the sources of Unrestricted Moneys and the Note
Coverage Ratio.
City of San Rafael
Estimated Unrestricted General Fund Revenues
Fiscal Year 2009-10
Source Amount
Available Cash Balance , 2009
Taxes
Other Revenue
Proceeds of the Notes
Transfers From Other City Funds
Total Unrestricted Moneys [1]
Principal Plus Interest for Note Payment
Note Coverage Ratio
(1 j Includes proceeds of the Notes.
See also "APPENDIX A — Financial, Economic and Demographic Information for the
City' and "APPENDIX B — Audited Financial Statements of the City for the Year Ended June
30, 2008."
Cash Flow
The City has prepared the accompanying monthly General Fund cash flow statements
covering the 2008-09 fiscal year and the projected 2009-10 fiscal year. The General Fund is
used to finance the ordinary operations of the City and is available for any legal authorized
purposes. While expenditures generally occur evenly throughout the fiscal year, cash receipts
occur unevenly. As a result the General Fund cash balance tends to show a deficit during parts
of the fiscal year. The projections are based on the City's budget as well as the City's current
financial condition.
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CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING CITY REVENUES AND
APPROPRIATIONS
Property Tax Rate Limitations - Article XIIIA
Article XIIIA of the State Constitution, known as Proposition 13, was approved by the
voters in June 1978 and has been amended on occasions, including most recently on
November 7, 2000 to reduce the voting percentage required for the passage of school bonds.
Section 1(a) of Article XIIIA limits the maximum ad valorem tax on real property to 1% of "full
cash value," and provides that such tax shall be collected by the counties and apportioned
according to State statutes. Section 1(b) of Article XIIIA provides that the 1 % limitation does not
apply to ad valorem taxes levied to pay interest or redemption charges on any (1) indebtedness
approved by the voters prior to July 1, 1978, (2) bonded indebtedness for the acquisition or
improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast
by the voters voting on the proposition and (3) bonded indebtedness incurred by a school
district, community college or county office of education district for the construction,
reconstruction, rehabilitation or replacement of school facilities, including the furnishing and
equipping of school facilities or the acquisition or lease of real property for school facilities,
approved by 55% of the voters voting on the proposition.
Section 2 of Article XIIIA defines "full cash value' to mean the county assessor's
valuation of real property as shown on the fiscal year 1975-76 tax bill, or thereafter, the
appraised value of real property when purchased, newly constructed, or a change in ownership
has occurred. The full cash value may be adjusted annually to reflect inflation at a rate not to
exceed 2% per year, or to reflect a reduction in the consumer price index or comparable data for
the taxing jurisdiction, or may be reduced in the event of declining property value caused by
substantial damage, destruction or other factors. Section 51 of the Revenue and Taxation Code
permits County assessors who have reduced the assessed valuation of a property as a result of
natural disasters, economic downturns or other factors, to subsequently "recapture" such value
(up to the pre -decline value of the property) at an annual rate higher than two percent,
depending on the assessor's measure of the restoration of value of the damaged property. The
California courts have upheld the constitutionality of this procedure. Legislation enacted by the
State Legislature to implement Article XIIIA provides that, notwithstanding any other law, local
agencies may not levy any ad valorem property tax except the one percent base tax levied by
each County and taxes to pay debt service on indebtedness approved by the voters as
described above.
Since its adoption, Article XIIIA has been amended a number of times. These
amendments have created a number of exceptions to the requirement that property be
reassessed when it is purchased, newly constructed or undergoes a change in ownership.
These exceptions include certain transfers of real property between family members, certain
purchases of replacement dwellings for persons over age 55 and by property owners whose
original property has been destroyed in a declared disaster, and certain improvements to
accommodate disabled persons and for seismic upgrades to property. These amendments
have resulted in marginal reductions in the property tax revenues of the City.
Both the State Supreme Court and the United States Supreme Court have upheld the
validity of Article XIIIA.
Appropriation Limitation -Article XIIIB
In addition to the limits Article XIIIA imposes on property taxes that may be collected by
local governments, certain other revenues of the State and most local governments are subject
to an annual "appropriations limit" imposed by Article XIIIB which effectively limits the amount of
such revenues those entities are permitted to spend. Article XIIIB, approved by the voters in
June 1979, was modified substantially by Proposition 111 in 1990. The appropriations limit of
each government entity applies to "proceeds of taxes," which consist of tax revenues, State
subventions and certain other funds, including proceeds from regulatory licenses, user charges
or other fees to the extent that such proceeds exceed "the cost reasonably borne by such entity
in providing the regulation, product or service." "Proceeds of taxes" excludes tax refunds and
some benefit payments such as unemployment insurance. No limit is imposed on the
appropriation of funds that are not "proceeds of taxes," such as reasonable user charges or
fees, and certain other non -tax funds. Article XIIIB also does not limit appropriation of local
revenues to pay debt service on bonds existing or authorized by January 1, 1979, or
subsequently authorized by the voters, appropriations required to comply with mandates of
courts or the federal government, appropriations for qualified capital outlay projects, and
appropriation by the State of revenues derived from any increase in gasoline taxes and motor
vehicle weight fees above January 1, 1990, levels. The appropriations limit may also be
exceeded in case of emergency; however, the appropriations limit for the next three years
following such emergency appropriation must be reduced to the extent by which it was
exceeded, unless the emergency arises from civil disturbance or natural disaster declared by
the Governor, and the expenditure is approved by two-thirds of the legislative body of the local
government.
The State and each local government entity has its own appropriations limit. Each year,
the limit is adjusted to allow for changes, if any, in the cost of living, the population of the
jurisdiction, and any transfer to or from another government entity of financial responsibility for
providing services.
Proposition 111 requires that each agency's actual appropriations be tested against its
limit every two years. If the aggregate "proceeds of taxes' for the preceding two-year period
exceeds the aggregate limit, the excess must be returned to the agency's taxpayers through tax
rate or fee reductions over the following two years.
California Constitution Article XIIIC and Article MID (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 XIIID 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. Proposition 218 states
that all taxes imposed by local governments shall be deemed to be either general taxes or
special taxes. Special purpose districts, including school districts, have no power to levy
general taxes. No local government may impose, extend or increase any general tax unless
and until such tax is submitted to the electorate and approved by a majority vote. No local
government may impose, extend or increase any special tax unless and until such tax is
submitted to the electorate and approved by a two-thirds vote.
Proposition 218 also provides that no tax, assessment, fee or charge shall be assessed
by any agency upon any parcel of property or upon any person as an incident of property
ownership except: (i) the ad valorem property tax imposed pursuant to Article XIII and Article
XIIIA of the California Constitution, (ii) any special tax receiving a two-thirds vote pursuant to the
California Constitution, and (iii) assessments, fees and charges for property related services as
provided in Proposition 218. Proposition 218 then goes on to add voter requirements for
assessments and fees and charges imposed as an incident of property ownership, other than
fees and charges for sewer, water, and refuse collection services. In addition, all assessments
and fees and charges imposed as an incident of property ownership, including sewer, water,
and refuse collection services, are subjected to various additional procedures, such as hearings
and stricter and more individualized benefit requirements and findings. The effect of such new
provisions will presumably be to increase the difficulty a local agency will have in imposing,
increasing or extending such assessments, fees and charges.
Proposition 218 also extended the initiative power to reducing or repealing any local
taxes, assessments, fees and charges. This extension of the initiative power is not limited to
taxes imposed on or after November 6, 1996, the effective date of Proposition 218, and could
result in retroactive repeal or reduction in any existing taxes, assessments, fees and charges,
subject to overriding federal constitutional principles relating to the impairments of contracts.
Like its antecedents, Proposition 218 is likely to undergo both judicial and legislative
scrutiny before its impact on the City and its obligations can be determined. Certain provisions
of Proposition 218 may be examined by the courts for their constitutionality under both State
and federal constitutional law. The City is not able to predict the outcome of any such
examination.
Although a portion of the City's General Fund revenues are derived from general taxes
purported to be governed by Proposition 218, all of such taxes (or increases thereof) were either
adopted prior to the effective dates of such propositions or were approved (or ratified) by
majority vote of the electorate. However, if the City is unable to continue to collect certain
property -related fees or assessments currently collected by the City, the services and programs
funded with these revenues would have to be curtailed and/or the City General Fund might have
to be used to support them.
The foregoing discussion of Proposition 218 should not be considered an exhaustive or
authoritative treatment of the issues. The City does not expect to be in a position to control the
consideration or disposition of these issues and cannot predict the timing or outcome of any
judicial or legislative activity in this regard. Interim rulings, final decisions, legislative proposals
and legislative enactments may all affect the impact of Proposition 218 on the City. Legislative
and court calendar delays and other factors may prolong any uncertainty regarding the effects
of Proposition 218.
Proposition 62
On November 4, 1986, California voters adopted Proposition 62, a statutory initiative
which, among other matters, requires: (a) that any tax for general governmental purposes
imposed by local government entities be approved by a majority vote of the voters voting in an
election on the issue, (b) that any special tax (defined as taxes levied for other than general
governmental purposes) imposed by a local government entity be approved by a two-thirds of
the voters voting in an election on the issue and (c) the revenues from a special tax be used for
the purposes or for the services for which the special tax was imposed. Proposition 62 also
provided that any tax imposed by any local government after August 1, 1985 and prior to
November 5, 1986 (the effective date of proposition 62) can continue to be imposed only if
approved by a majority vote of the voters voting in an election on the issue, and that any local
government which fails to seek or obtain such approval shall cease to impose such tax on and
after November 15, 1988.
Following its adoption by the voters, various provisions of Proposition 62 were declared
unconstitutional by the appellate court level. On September 28, 1995, however, the California
Supreme Court, in Santa Clara County Local Transportation Authority v. Guardino, 11 Cal. 4m
220 (1995) ("Guardino"), upheld the constitutionality of the portion of Proposition 62 requiring a
two-thirds vote in order for a local government or district to impose a special tax, and by
implication, upheld a parallel provision requiring a majority vote in order for a local government
or district to impose any general tax. The Guardino decision did not address the question of
whether or not Proposition 62 should be applied retroactively to taxes imposed during the period
that certain of its provisions were held to be unconstitutional.
Following the Guardino decision several actions were filed challenging taxes imposed by
public agencies after the adoption of Proposition 62. On June 4, 2001, the California Supreme
Court rendered its opinion in Howard Jarvis Taxpayers Association v. City of La Habra, et al., 25
Cal. 4th 809 ("La Habra") holding that an action brought in 1996 challenging the imposition of a
1992 utility users tax imposed for general purposes, without voter approval, was not barred by a
three-year statute of limitations period because the continued imposition and collection of the
tax was an ongoing violation upon which the statute of limitations period began anew with each
collection.
The Guardino and La Habra decisions did not decide the question of the applicability of
Proposition 62 to charter cities such as the City. Two cases decided by the California Courts of
Appeals in 1993, Fielder v. City of Los Angeles (1993) 14 Cal. App. 4th 137 (rev. den. May 27,
1993), and Fisher v. County of Alameda (1993) 20 Cal. App. 4th 120 (rev. den. Feb. 24, 1994)
hold that Proposition 62's restrictions on property transfer taxes do not apply to charter cities
because charter cities derive their power to enact taxes under Article XI, Section 5 of the
California Constitution relating to municipal affairs.
Proposition 62, is an initiative statute, does not have the same level of authority as a
constitutional initiative, but is analogous to legislation adopted by the State Legislature (except
that it may be amended only by a vote of the State's electorate). However, Proposition 218, as
a constitutional amendment, is applicable to charter cities and supersedes many of the
provisions of Proposition 62 with respect to taxes imposed after January 1, 1995.
The City believes that no general fund revenues are subject to challenge under
Proposition 62.
Proposition 1A
Proposition 1A, proposed by the Legislature in connection with the State's fiscal year
2004-05 Budget, approved by the voters in November 2004 and generally effective in fiscal year
2006-07, provides that the State may not reduce any local sales tax rate, limit existing local
government authority to levy a sales tax rate or change the allocation of local sales tax
revenues, subject to certain exceptions. Proposition 1A generally prohibits the State from
shifting to schools or community colleges any share of property tax revenues allocated to local
governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004.
Any change in the allocation of property tax revenues among local governments within a county
must be approved by two-thirds of both houses of the Legislature.
1101
Proposition 1A provides, however, that beginning in fiscal year 2008-09, the State may
shift to schools and community colleges up to 8% of local government property tax revenues,
which amount must be repaid, with interest, within three years, if the Governor proclaims that
the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of
both houses and certain other conditions are met. The State may also approve voluntary
exchanges of local sales tax and property tax revenues among local governments within a
county.
Proposition 1A also provides that if the State reduces the motor vehicle license fee rate
currently in effect, 0.65 percent of vehicle value, the State must provide local governments with
equal replacement revenues. Further, Proposition 1A requires the State, beginning July 1,
2005, to suspend State mandates affecting cities, counties and special districts, excepting
mandates relating to employee rights, schools or community colleges, in any year that the State
does not fully reimburse local governments for their costs to comply with such mandates.
Proposition 1A may result in more stable City revenues, although the actual impact of
Proposition 1A will depend on future actions by the State. However, Proposition 1A could also
result in decreased resources being available for State programs. This reduction, in turn, could
affect actions taken by the State to resolve budget difficulties. Such actions could include
increasing State taxes, decreasing spending on other State programs or other action, some of
which could be adverse to the City.
Future Initiatives
From time to time other initiative measures could be adopted, further affecting the City's
finances or the City's ability to raise or expend revenues.
RISK FACTORS
Bankruptcy Considerations
In 1994, Orange County, California issued its 1994-1995 Tax and Revenue Anticipation
Notes (the "Orange County Notes") under the same statutory authority as the Notes. On
December 6, 1994, Orange County filed a petition in bankruptcy. Subsequently, Orange County
declined to set aside the taxes and revenues it had pledged for the repayment of the Orange
County Notes and a noteholder brought suit to compel Orange County to do so.
A March 8, 1995 ruling of the United States Bankruptcy Court for the Central District of
California, held that the lien securing the Orange County Notes did not attach to revenues
received by Orange County after the filing of its bankruptcy petition on December 6, 1994, and
therefore, Orange County was not required to set aside the revenues pledged under the note
resolution following the bankruptcy. The Bankruptcy Court ruled that under the United States
Bankruptcy Code, the lien did not attach to revenues received by Orange County after
December 6, 1994 because the lien was a consensual security interest rather than a statutory
lien.
In July 1995, the United States District Court for the Central District of California
reversed the decision of the Bankruptcy Court. Orange County appealed the decision of the
District Court to the United States Court of Appeals for the Ninth Circuit. Before the Ninth
11
Circuit rendered a decision the parties settled their disputes. Accordingly, if the City were to file
for bankruptcy, it is not clear whether it would be required to set aside revenues pledged under
the Resolution as described above.
In addition, the Pledged Revenues and other moneys that will be set aside to pay the
Notes will be held in the City's General Fund, and these funds will be invested in the pooled
investment fund. Should the City go into bankruptcy, a court might hold that the owners of the
Notes do not have a valid lien on the Pledged Revenues. In that case, unless the owners could
"trace" the funds, the owners would merely be unsecured creditors of the City. There can be no
assurance that the owners of the Notes could successfully "trace" the Pledged Revenues.
Limitations on Remedies
The rights of the owners of the Notes are subject to the limitations on legal remedies
against public agencies in the State, including a limitation on enforcement of judgments against
funds needed to serve the public welfare and interest. Additionally, enforceability of the rights
and remedies of the owners of the Notes and the obligations incurred by the City, 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 creditor's
rights generally, now or hereafter in effect; equity principles which may limit the specific
enforcement under State law of certain remedies; the exercise by the United States of America
of the powers delegated to it by the Constitution; and the reasonable and necessary exercise in
certain exceptional situations, of the police powers inherent in the sovereignty of the State and
its governmental bodies in the interest of serving 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 Notes 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.
Natural Disasters
General. From time to time, the City is subject to naturally occurring vents that may
adversely affect economic activity in the City, which could have a negative impact on City
finances.
Seismic and Other Geologic Risks. The City, like most regions in California, is an area
of significant seismic activity, and is subject to potentially destructive earthquakes, as well as
liquefaction, flow failures, lateral spreading, lurching, differential settlement, landslides,
mudslides, subsidence and expansive soil.
Flood. Subsidence of the areas of the City underlain with bay mud will continue for
several decades. Subsidence or settlement may result in flooding as ground levels are lowered.
Without levee maintenance, flooding poses a serious threat to the east San Rafael area
(bordering the San Francisco Bay). In addition, sandy soils on moderate to steep slopes or
clayey soils on steep slopes are susceptible to erosion when exposed to concentrated surface
water flow. Within the valley areas, stream and river flow erodes the banks and causes the
location of the stream or river to meander. Erosion undercuts the stream banks and leads to
slope instability, causing structural damage.
12
TAX MATTERS
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California,
Bond Counsel, subject, however, to the qualifications set forth below, under existing law, the
interest on the Notes is excluded from gross income for federal income tax purposes and such
interest is not an item of tax preference for purposes of the federal alternative minimum tax
imposed on individuals and corporations.
The opinions set forth in the preceding paragraph are subject to the condition that the
City comply with all requirements of the Internal Revenue Code of 1986 (the "Code") that must
be satisfied subsequent to the issuance of the Notes in order that such interest be, or continue
to be, excluded from gross income for federal income tax purposes. The City has covenanted
to comply with each such requirement. Failure to comply with certain of such requirements may
cause the inclusion of such interest in gross income for federal income tax purposes to be
retroactive to the date of issuance of the Notes.
Purchasers should be aware that the Internal Revenue Service has issued Notice 94-84
which may have federal income tax consequences with respect to the Notes. This Notice
provides generally that, in the case of short-term tax-exempt obligations (such as the Notes),
the Service is studying whether interest payable at maturity on the obligations should, or should
not, be included in stated redemption price at maturity, for purposes of the rule that original
issue discount represents the excess of stated redemption price at maturity over issue price.
Notice 94-84 states that until the Internal Revenue Service provides further guidance,
taxpayers may treat stated interest on certain short-term obligations, such as the Notes, either
as includable in stated redemption price at maturity or as not included in stated redemption price
at maturity. A taxpayer, however, must treat stated interest payable at maturity on all short-term
tax-exempt bonds in a consistent manner. A short-term tax-exempt bond is defined as a tax-
exempt bond with a term that is not more than 1 year from the date of issue.
Purchasers of the Notes are cautioned that the opinion of Bond Counsel does not
identify the amount of interest that is excluded from gross income for federal income tax
purposes.
Purchasers of the Notes should consult their tax advisors regarding effects of Notice 94-
84 upon individual tax circumstances.
Owners of the Notes should also be aware that the ownership or disposition of, or the
accrual or receipt of interest on, the Notes may have federal or state tax consequences other
than as described above. Bond Counsel expresses no opinion regarding any federal or state
tax consequences arising with respect to the Notes other than as expressly described above.
In the further opinion of Bond Counsel, interest on the Notes is exempt from California
personal income taxes.
A copy of the proposed form of opinion of Bond Counsel is attached hereto as
APPENDIX C.
13
LEGAL MATTERS
Bond Counsel's employment is limited to reviewing the legal proceedings required for
the authorization of the Notes and to rendering the opinion set forth in Appendix C hereof.
Jones Hall is also acting as Disclosure Counsel to the City. Jones Hall will receive
compensation from the City contingent upon the sale and delivery of the Notes.
RATING
It is anticipated that, on the date of issuance of the Notes, will assign its
municipal bond rating of "_" to the Notes.
This rating reflects only the views of the rating agency, and an explanation of the
significance of this rating, and any outlook assigned to or associated with this rating, should be
obtained from the rating agency.
Generally, a rating agency bases its rating on the information and materials furnished to
it and on investigations, studies and assumptions of its own. The City has provided certain
additional information and materials to the rating agencies (some of which does not appear in
this Official Statement).
There is no assurance that this rating will continue for any given period of time or that
this rating will not be revised downward or withdrawn entirely by the rating agency, if in the
judgment of the rating agency, circumstances so warrant. The City has not undertaken any
responsibility either to bring to the attention of the owners of the Bonds any proposed change in
or withdrawal of a rating, or to oppose any such proposed revision or withdrawal. Any such
downward revision or withdrawal of any rating on the Notes may have an adverse effect on the
market price or marketability of the Notes.
LITIGATION
[confirm] No litigation is pending or threatened concerning the validity of the Notes. In
the opinion of the City, there are no lawsuits or claims pending against the City that would
impair the ability of the City to repay the Notes.
UNDERWRITING
The Notes are being purchased by (the "Underwriter"). The
Underwriter has agreed to purchase the Notes at a price of $ (which is the
aggregate principal amount of the Notes, plus a net original issue premium of $
less an Underwriter's discount of $ ).
The Underwriter may offer and sell the Notes to certain dealers and others at a price
lower than the offering price stated on the cover page hereof. The offering price may be
changed from time to time by the Underwriter.
14
CONTINUING DISCLOSURE
The City has covenanted for the benefit of the holders of the Notes to provide notices of
the occurrence of certain enumerated events, if material. The notices of material events will be
filed by the City with the Municipal Securities Rulemaking Board. The specific nature of the
information to be contained in the notices of material events is summarized under the caption
"APPENDIX E — Form of Continuing Disclosure Certificate." These covenants have been made
in order to assist the purchaser of the Notes in complying with S.E.C. Rule 15c2 -12(b)(5) (the
"Rule").
[Confirm]The City has not failed to comply with an undertaking under the Rule in any
material respect during the past five years.
15
ADDITIONAL INFORMATION
The purpose of this Official Statement is to supply information to prospective buyers of
the Notes. Quotations from and summaries and explanations of the Notes, the resolutions,
statutes and documents contained in this Official Statement do not purport to be complete, and
reference is made to said documents and statutes for full and complete statements of their
provisions.
Any statement in this Official Statement involving matters of opinion, whether or not
expressly so stated, are intended as such and not as representations of fact. This Official
Statement is not to be construed as a contract or agreement between the City and the
purchasers or owners of any of the Notes.
The delivery of this Official Statement has been duly authorized by the City.
in
16
City Manager
APPENDIX A
FINANCIAL, ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE CITY
General
The City of San Rafael (the "City") is located 17 miles north of San Francisco in Marin
County (the "County"). Protected by its Mediterranean like setting along the shores of the San
Francisco Bay, the City enjoys a mild climate year round. As the County seat, the City is
considered the trade, financial and industrial leader of the County. The City currently has a land
area of 22 square miles which includes 17 square miles of land and five of water and tide lands.
In addition to the City's cultural, park and recreational resources, there are other nearby
attractions including Muir Woods, five State parks, the San Francisco area, Oakland and the
wine country.
The City provides municipal services required by statute or charter, namely: Fire, Police,
Community Development (encompassing Building, Planning and Code Enforcement), Public
Works, Community Services (both Recreational and Child Care Programs), Redevelopment,
Library and General Administrative Services.
Marin County was one of the original counties of California, created in 1850 at the time
of statehood. The County has a total area of 828 miles and, as of January 1, 2009, a population
of approximately 258,618. Geographically, the county forms a large, southward -facing
peninsula, with the Pacific Ocean to the west, San Pablo Bay and San Francisco Bay to the
east, and -- across the Golden Gate -- the city of San Francisco to the south. Marin County's
northern border is with Sonoma County. Most of the county's population resides on the eastern
side, with a string of communities running along the Bay, from Sausalito to Tiburon to San
Rafael to Corte Madera. The interior contains large areas of agricultural and open space; West
Marin, through which California State Route 1 runs alongside the California coast, contains
many small unincorporated communities dependent on agriculture and tourism for their
economies.
Population
Population figures for the City, the County and the State for the last five years are shown
in the following table.
Table No. 1
CITY OF SAN RAFAEL
Population Estimates
Source: State Department of Finance estimates (as of January 1)
A-1
City of
Marin
State of
Year
San Rafael
County
California
2005
57,072
251,820
36,675,346
2006
57,490
253,818
37,114,598
2007
58,047
255,982
37,559,440
2008
58,034
256,511
37,883,992
2009
58,363
258,618
38,292,687
Source: State Department of Finance estimates (as of January 1)
A-1
Municipal Government
The City was incorporated in 1874 and became a charter city in 1913. It has a
council/city manager form of government with the County's only elected mayor and four elected
city council members who serve four-year terms.
The City Council appoints the City Manager who heads the executive branch of the
government. The City Manager's office carries out the policy and directions of the Mayor and
City Council.
CITY FINANCES
The following selected financial information provides a brief overview of the City's
finances. This financial information has been extracted from the City's audited financial
statements and, in some cases, from unaudited information provided by the City's Finance
Department. The most recent audited financial statements of the City with an unqualified
auditor's opinion is included as Appendix B hereto. See "APPENDIX B — Audited Financial
Statements for the City for the Year Ended June 30, 2008."
The City has not sought, and the auditor has not given, its consent to including the
audited financial statements of the City in this Official Statement.
Accounting Policies and Financial Reporting
The accounts of the City are organized on the basis of funds and account groups, each
of which is considered a separate entity. The operations of each fund are accounted for with a
separate set of self -balancing accounts that comprise its assets, liabilities, fund equity,
revenues, and expenditures or expenses, as appropriate. Government resources are allocated
to and accounted for in individual funds based upon the purposes for which they are to be spent
and the means by which the spending activities are controlled. The basis of accounting for all
funds is more fully explained in the "Notes to Financial Statements" contained in Appendix B.
The City Council employs, at the beginning of each fiscal year, an independent certified
public accountant who, at such time or times as specified by the City Council, at least annually,
and at such other times as he or she shall determine, examines the combined financial
statements of the City in accordance with generally accepted auditing standards, including such
tests of the accounting records and such other auditing procedures as such accountant
considers necessary. As soon as practicable after the end of the fiscal year, a final audit and
report is submitted by such accountant to the City Council and a copy of the financial
statements as of the close of the fiscal year is published. The City's Independent Auditor's
Report for fiscal year 2007-08 was prepared by Maze & Associates Accountancy Corporation,
Pleasant Hill, California.
The Governmental Accounting Standards Board ("GASB") published its Statement No.
34 "Basic Financial Statements — and Management's Discussion and Analysis — for State and
Local Governments" on June 30, 1999. Statement No. 34 provides guidelines to auditors, state
and local governments and special purpose governments such as school districts and public
utilities, on new requirements for financial reporting for all governmental agencies in the United
States. Generally, the basic financial statements and required supplementary information should
include (i) Management's Discussion and Analysis; (ii) financial statements prepared using the
economic measurement focus and the accrual basis of accounting and fund financial
UK
statements prepared using the current financial resources measurement focus and the modified
accrual method of accounting and (iii) required supplementary information.
The City was required to implement Statement No. 34 for the fiscal year 2001-02 audited
financial statement. See "APPENDIX B — Audited Financial Statements of the City for the Year
Ended June 30, 2008 — Note 1" for a description of the significant accounting policies of the
City.
General Fund Financial Summary
The audited information contained in the following tables of revenues, expenditures and
changes in fund balances, and assets, liabilities and fund equity has been derived from the
City's audited financial statements for fiscal years 2005-06 through 2007-08.
A-3
Table No. 2.
CITY OF SAN RAFAEL
General Fund -Audited Revenues, Expenditures and Fund Balances
For Fiscal Years 2006-06 through 2007-08
Audited Audited Audited
Fiscal Year Fiscal Year Fiscal Year
2005-06 2006-07 2007-08
Revenues:
6,141,552
6,928,766
7,023,660
Taxes and special assessments
$37,316,540
44,921,449
$48,084,486
Licenses and permits
1,169,927
1,157,434
1,489,748
Fines and forfeitures
622,494
514,278
796,081
Use of money and property
401,632
431,553
224,439
Intergovernmental
6,021,170
6,932,034
7,246,381
Charges for services
1,823,411
1,868,014
2,203,852
Other revenues
223.914
217.968
269.656
Total Revenues
47,579,088
56,042,730
60,314,643
Expenditures:
Current operating
General government
6,141,552
6,928,766
7,023,660
Public safety
27,926,658
30,643,627
34,435,419
Public works and parks
6,318,640
6,914,505
7,602,332
Community development/redevelopment
2,702,210
3,163,138
3,705,928
Cultural and recreation
1,710,065
1,990,631
2,292,848
Capital Outlay
45,249
1,049,181
264,919
Capital improvement/special projects
816,328
213,390
484,926
Capitalized lease obligations\
130,315
--
--
Debt service: principal
103.741
213.598
Total Expenditures
45,791,017
51,006,979
56,023,630
Excess (deficiency) of revenues over
1,788,071
5,035,751
4,291,013
expenditures
Other financing sources (uses):
Operating transfers in
965,780
653,990
933,760
Operating transfers out
(5.278.870)
(5.465.286)
(4.928.005)
Total other financing sources (uses)
(4,313,090)
(4,811,296)
(3,994,245)
Net change in Fund Balance
(2,525,019)
224,455
296,768
Fund balance, July 1
8.222,561
5.697.542
5.921.997
Fund balance, June 30
$5,697,542
$5,921,997
$6,218,765
Source: City of San Rafael; Comprehensive Annual Financial Report (2005-06 through 2007-08).
Table No. 3
CITY OF SAN RAFAEL
General Fund Balance Sheet
As of June 30 for Fiscal Years 2005-06 through 2007-08
2005-06 2006-07 2007-08
ASSETS:
Cash and investments for operations
$2,180,765
$1,102,324
$ 824,055
Restricted cash and investments
66,886
66,886
73,273
Receivables:
Accounts
140,462
90,191
277,511
Taxes
4,186,359
3,996,538
4,365,440
Grants
18,775
Interest
308,875
371,621
285,703
Loans
326,588
19,319
632,316
Due from other funds
--
1,369,492
952,072
Prepaid expenses
--
36.491
55.859
TOTAL ASSETS
7.228.710
$7.052.862
7.466 2?9
LIABILITIES AND FUND BALANCE:
Liabilities:
Accounts payable
$ 1,101,526
555,802
$ 866,126
Deposits payable
31,594
31,483
31,290
Compensated absences- matured
--
78,907
--
Developer bonds payable
398.048
464.673
350.048
TOTAL LIABILITIES
1,531,168
1,130,865
1,247,464
Fund Balance:
Reserved for:
2,335,391
Encumbrances
96,738
181,589
Petty cash
3,395
3,795
Department savings
82,239
--
Project development
619,319
433,202
Loans receivable
36,491
632,316
Prepaid expenses
55,859
Court fine audit
816,119
Assessment districts/open space
66,886
73,273
Unreserved, designated:
Emergency and cash flow
3,086,216
3,437,866
4,078,471
Unreserved, undesignated
275.935
1,579,063
(55,859)
Total fund balance
5,697,542
5,921,997
6,218,765
Total liabilities and fund balance
$7 052862
7 466
Source: City of San Rafael; Basic Financial Statements (2005-06 through
2007-08).
Recent Budgets
Fiscal Year 2008-09. The widespread economic downturn negatively affected the City's
fiscal year 2008-09 budget. Sales tax revenues, the City's largest tax revenue in fiscal year
2007-08, declined by approximately 7%. Retail closures included major car dealerships, multiple
larger store closures (Mervyns, Yardbirds, CompUSA, Circuit City, Elephant Pharmacy and
Papyrus), and restaurant closures.
In July 2008, adopting a balanced budget for fiscal year 2008-09 required, among other
things: (i) suspension of six vacant positions for a total expenditure reduction of $635,400, (ii)
GM
use of excess reserves from the Liability, Worker's Compensation and Vehicle Equipment
Funds of $635,000, and (iii) restructuring of training and scheduling changes in the Police
Department, saving $252,000.
In October 2008 and again in January 2009, the Council addressed further erosion in the
City's tax revenues. In January 2009, the City discussed its services in three categories (those
paid with general taxes, those supported by restricted resources and support/administrative
functions). The City took a three-year outlook, which served as the catalyst for determining how
compensation issues would be addressed in negotiations with several employee bargaining
groups. Based on adjusted tax revenues, the City projected in January 2009 a $2.1 deficit at the
end of fiscal year 2008-09. Because only half of the fiscal year remained to address the deficit,
the City Council took a number of one-time and ongoing actions totaling $1.7 million, as follows:
(i) the City used an additional $400,000 from gas tax revenue to pay for street maintenance, (ii)
the City suspended six additional staff vacation positions, saving $251,000 over the balance of
the fiscal year, (iii) the City reduced funding for sidewalk improvements and fire equipment
($347,000) and (iv) drew upon one-time reserves of $640,600, leaving the General Fund
reserve at $3.1 million (5.5% of operating expenditures).
In February 2009, the City projected a $473,000 deficit for fiscal year 2008-09. Between
January 2009 and June 2009, the City took additional steps to reduce its deficit: it (i) contracted
with the County to provide fire dispatch services as of March 2009, saving $225,000 per year,
(ii) updated its fee schedule, increasing development -related fees (although development is
declining), (iii) reduced staffing in Information Technology and Public Works Engineering, (iv)
completed one-year agreements with all unrepresented managers, mid -managers and elected
officials, resulting in a 5% salary reduction beginning in July 2009 (resulting in approximately
$500,000 of savings for fiscal year 2009-10), and added health care plan cost limitations for
new hires, (v) adopted a Recession Action Plan and Economic Vitality Plan and directed staff to
implement an employee work furlough program for fiscal year 2009-10, (vi) agreed to severance
packages for employees subject to layoff and a voluntary retirement program for eligible
employees and (vii) agreed to share Battalion Chief and Emergency Services resources with the
City of Larkspur. In addition, the City transferred reserves from its Radio Replacement Fund to
the General Fund in the amount of $400,000.
Fiscal Year 2009-10. At the April 29, 2009 special meeting, the City Council ranked
service prioritizations for those City functions that receive general tax revenues. In June 2009,
City staff made recommendations with respect to the City's fiscal year 2009-10 budget. At that
time, the City projected a 6.8% decline in sales tax revenue from fiscal year 2008-09, 0% growth
in property tax revenue from fiscal year 2008-09, and a 9.1 % decrease in transaction and use
tax (Measure S) revenue from fiscal year 2008-09. In July 2009, the City projected a reduction
of $200,000 of property transfer tax revenue and approximately $85,000 of storm water
assessments
The City adopted a fiscal year 2009-10 budget on July 6, 2009. The General Fund
reserve is budgeted to remain at $3.1 million, which remains 5.5% of expenditures. The fiscal
year 2009-10 budget includes (i) a reduction of an additional 20.11 FTEs (resulting in a total
FTE reduction of 28.61 from fiscal year 2007-08), (ii) facility closures of 13 days to implement an
employee furlough, (iii) deferred replacement of non -emergency vehicles and (iv) reset of the
City's projected (and required) Liability and Workers Compensation reserves, providing one-
time General Fund relief of $500,000. The fiscal year 2009-10 budget assumes no cost of living
adjustments for operating expenses (supplies and services remain at fiscal year 2007-08 levels,
except for specific agreements or contracts) and assumes no personnel cost increases for all
051
bargaining groups (except Fire Association and Fire Chief Officers, who are under contract until
June 30, 2011).
[confirm] Based upon information available to it, the City does not believe that the fiscal
year 2009-10 budget requires amendment.
Comparison of Budget to Actual Performance
For purposes of comparison, the following table summarizes the City's adopted budgets
for fiscal years 2007-08 and 2008-09 and sets forth audited revenues and expenditures for fiscal
years 2007-08 and unaudited actuals for 2008-09; it also includes the City's adopted budget for
fiscal year 2009-10.
Table No. 4
CITY OF SAN RAFAEL
General Fund - Comparison of Budgeted and Actual
Revenues, Expenditures and Fund Balances
For Fiscal Years 2006-07 through 2008-09
Fund Balance, July 1 (1)
Revenues: -
Taxes and special assessments
Licenses and permits
Fines and forfeitures
Use of money and property
Intergovernmental
Charges for services
Other revenues
Total Revenues
Expenditures
Budgeted Audited Budgeted Unaudited Budgeted
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
2007-08 2007-08 2008-09 2008-09 2009-10
$5,921,997 $5,921,997
48,153,318
1,386,895
757,750
449,218
6,716,428
2,005,358
110.750
59,579,717
48,084,486
1,489,748
796,081
224,439
7,246,381
2,203,852
269,656
60,314,643
$6,218,765 $6,218,765 $5,188,108
45,560,864
42,950,633
43,680,980
1,288,198
1,467,413
1,274,426
769,070
660,338
1,552,540
199,680
491,561
166,460
7,099,360
7,018,196
6,894,520
2,020,555
1,922,621
1,883,872
161.560
238.229
127.780
57,099,287
54,748,991
55,580,578
General government
7,465,814
7,023,660
6,993,725
6,824,384
7,136,420
Public safety
34,127,011
34,435,419
35,276,803
34,245,768
34,153,420
Public works and parks
7,670,636
7,602,332
- 7,361,116
7,310,112
8,430,670
Community development/redevel.
3,750,707
3,705,928
4,301,415
3,984,032
3,627,760
Cultural and recreation
2,234,087
2,292,848
2,448,378
2,463,775
2,355,370
Capital Outlay
165,470
264,919
84,711
112,192
44,850
Capital improvement/special projects
536,022
484,926
303,900
559,456
- 33,500
Debt service: principal
213.600
213.598
222.020
222.019
230.770
Total Expenditures
56,163,348
56,023,630
56,992,068
55,721,738
56,012,760
Other financing sources (uses):
Operating transfers in
933,760
933,760
2,902,090
2,902,090
2,556,800
Operating transfers out
(4.822.790)
(4.928.005)
(4.039.228)
(4.039.228)
(2.369.720)
Total other financing sources (uses)
(3,889,030)
(3,994,245)
(1,137,138)
(1,137,138)
187,080
Net change in Fund Balance
(472,661)
296,768
(1,029,919)
(2,109,885)
(245,102)
Source: City of San Rafael -
A -7
Tax Receipts
Revenues received by the City include sales taxes, property taxes, transaction/use taxes
(Measure S), business license taxes, property transfer taxes, occupancy taxes, franchise taxes.
business license taxes and other miscellaneous taxes. In fiscal year 2007-08 (audited), sales
and use taxes constituted approximately 30.5% of General Fund revenues, property taxes
constituted approximately 29.3% of General Fund revenues and transaction/use taxes
constituted approximately 7.3% of General Fund revenues. In fiscal year 2008-09 (unaudited),
sales and use taxes constituted approximately 30% of General Fund revenues, property taxes
constituted approximately 31.8% of General Fund revenues and transaction/use taxes
constituted approximately 11.2% of General Fund revenues.
The following table sets forth General Fund revenues received by the City for fiscal
years 2004-05 through 2008-09 by source.
Source:
Sales and use tax (1)
Property taxes (1), (2)
Transaction/Use Tax (3)
Business License Tax
Property Transfer Tax
Transient Occupancy Tax
Franchise Tax
Other Taxes (4)
Licenses and Permits
Fines and forfeitures
Use of Money and Property
Intergovernmental
Charges for Services
Other Revenue
Total
Table No. 5
CITY OF SAN RAFAEL
General Fund Revenues by Source
For Fiscal Years 2004-05 through 2008-09
2004-05
2005-06
2006-07
2007-08
2008-09
$17,132,100
$17,049,855
$18,012,985
$18,426,045
$15,859,530
12, 887, 768
14, 330, 730
15, 819, 824
17, 662, 230
17, 427, 964
0
1,138,669
6,471,371
7,338,412
6,110,732
2,248,198
2,386,124
2,424,636
2,440,544
2,405,934
1,876,872
1,968,744
1,459,213
1,273,448
669,774
1,339,687
1,542,967
1,679,901
1,963,575
1,678,912
2,152,830
2,499,578
2,770,196
2,874,952
2,941,149
149,006
174,079
150,646
200,984
162,128
920,754
1,169,927
1,157,434
1,489,746
1,467,413
1,066,374
622,494
572,432
856,917
660,338
641,566
401,632
431,554
224,438
491,561
3,521,583
2,246,965
3,064,710
3,150,677
2,712,708
1,722,137
1,823,411
1,809,861
2,143,011
1,922,621
260,786
223,913
217,967
269,655
238,229
$45,919,661 $47,579,087 $56,042,728 $60,314,634 $54,748,991
(1) Includes property tax backfill (Triple Flip). See "Impact of State Budget" below. [VERIFY]
(2) Property tax revenue includes secured, unsecured and supplemental property tax revenue along with penalties and interest.
[VERIFY]
(3) Measure "S" Transaction and Use Tax. See "Other Taxes" below.
(4) Other taxes include
Source: City of San Rafael.
M
Sales Taxes
General. Sales tax represented the largest source of revenue to the City in fiscal year
2007-08 and the second largest in fiscal year 2008-09. This section describes the current
system for levying, collecting and distributing sales and use tax revenues in the State.
However, the State budget situation has resulted in a temporary redirection of sales tax
revenues from the City to the State (see " - Impact of State Budget" below).
Sales Tax Rates. The sales tax is governed by the Bradley -Burns Uniform Local Sales
and Use Tax (the "Sales Tax Law"). A sales tax is imposed on retail sales or consumption of
personal property. The fax rate is established by the State Legislature.
Effective April 1, 2009, the statewide tax rate is 8.25%. An additional 0.75% is collected
in Marin County for transportation purposes. The City's share of sales tax was 1%, but is now
0.75% after the passage of Proposition 57. See "- Proposition 57" below. The 0.25% difference
is offset by an increase in the City's share of property tax by a like amount. In addition, the City
receives revenue from the 0.50% Measure S Transactions and Use Tax (approved by the City's
voters in November 2005).
Currently, taxable transactions in the City are subject to the following sales and use tax,
of which the City's share is only a portion. The State collects and administers the tax, and
makes distributions on taxes collected within the City, as follows:
Table No. 6
0.25%
CITY OF SAN RAFAEL
0.50
Sales Tax Rates
0.50
State (General Fund) (1)
6.00%
State Fiscal Recovery Act (Triple Flip)
0.25
Local General Fund (Bradley -Burns)
0.75
Countywide Transportation Fund)
0.25
County Mental Health/Welfare Districts
0.50
Public Safety Augmentation Fund
0.50
Total State-wide Tax
8.25%
Sonoma -Marin Train (SMART)
0.25%
Transportation Authority of Marin
0.50
San Rafael Transactions and Use Tax (Measure S)
0.50
Local Tax Subtotal
1.25%
Total Sales and Use Tax 9.50%
(1) Effective April 1, 2009, the State general fund portion of the sales tax rate has been temporarily increased
by 1.0%. See "Impact of State Budget" below". -
The State's actual administrative costs with respect to the portion of sales taxes
allocable to the City are deducted before distribution and are determined on a quarterly basis.
Sales and use taxes are complementary taxes; when one applies, the other does not. In
general, the statewide sales tax applies to gross receipts of retailers from the sale of tangible
personal property in the State. The use tax is imposed on the purchase, for storage, use or
other consumption in the State of tangible personal property from any retailer. The use tax
generally applies to purchases of personal property from a retailer outside the State where the
M
use will occur within the State. The Sales Tax is imposed upon the same transactions and
items as the statewide sales tax and the statewide use tax.
Certain transactions are exempt from the State sales tax, including sales of the following
products:
• food products for home consumption;
• prescription medicine;
• newspapers and periodicals;
• edible livestock and their feed;
• seed and fertilizer used in raising food for human consumption; and
• gas, electricity and water when delivered to consumers through mains, lines and pipes.
This is not an exhaustive list of exempt transactions. A comprehensive list can be found
in the State Board of Equalization's May 2003 publication entitled "Sales and Use Taxes:
Exemptions and Exclusions," which can be found on the State Board of Equalization's website
at http://www.boe.ca.gov/.
Sales Tax Collection Procedures. Collection of the sales and use tax is administered
by the California State Board of Equalization. According to the State Board of Equalization, it
distributes quarterly tax revenues to cities, counties and special districts using the following
method:
Using the prior year's like quarterly tax allocation as a starting point, the Board first
eliminates nonrecurring transactions such as fund transfers, audit payments and refunds, and
then adjusts for growth, in order to establish the estimated base amount. The State Board of
Equalization disburses 90% to each local jurisdiction in three monthly installments (advances)
prior to the final computation of the quarter's actual receipts. Ten percent is withheld as a
reserve against unexpected occurrences that can affect tax collections (such as earthquakes,
fire or other natural disaster) or distributions of revenue such as unusually large refunds or
negative fund transfers. The first and second advances each represent 30% of the 90%
distribution, while the third advance represents 40%. One advance payment is made each
month, and the quarterly reconciliation payment (clean-up) is distributed in conjunction with the
first advance for the subsequent quarter. Statements showing total collections, administrative
costs, prior advances and the current advance are provided with each quarterly clean-up
payment.
Under the Sales and Use Tax Law, all sales and use taxes collected by the State Board
of Equalization under a contract with any city, city and county, redevelopment agency, or county
are required to be transmitted by the Board of Equalization to such city, city and county,
redevelopment agency, or county periodically as promptly as feasible. These transmittals are
required to be made at least twice in each calendar quarter.
Under its procedures, the State Board of Equalization projects receipts of the sales and
use tax on a quarterly basis and remits an advance of the receipts of the sales and use tax to
the City on a monthly basis. The amount of each monthly advance is based upon the State
Board of Equalization's quarterly projection. During the last month of each quarter, the State
Board of Equalization adjusts the amount remitted to reflect the actual receipts of the sales and
use tax for the previous quarter.
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The Board of Equalization receives an administrative fee based on the cost of services
provided by the Board to the City in administering the City's sales tax, which is deducted from
revenue generated by the sales and use tax before it is distributed to the City.
Proposition 57. On March 2, 2004, the State's voters approved the California
Economic Recovery Bond Act ("Proposition 57"), which authorized the State to issue up to $15
billion of economic recovery bonds to finance the negative State General Fund reserve balance
as of June 30, 2004 and other State General Fund obligations undertaken prior to June 30,
2004. Proposition 57 also called for local sales and use taxes to be redirected to the State,
including 0.25% that would otherwise be available to the City, to pay debt service on the
"economic recovery" bonds, and for an increase in local governments' share of local property
tax by a like amount.
Certain features and consequences of the sales tax redirection could impact the
availability of the City's revenues. First, there may be a timing issue associated with the
"backfill" of redirected sales and use taxes with property tax revenue: while sales and uses
taxes are distributed by the State Board of Equalization on a monthly basis, the County would
only backfill with property taxes on a semi-annual basis. This timing issue would not only
impact the City's cash flow, but would cause the City to lose investment earnings on the sales
and uses taxes it otherwise would have received on a monthly basis.
Second, it is possible that the fees charged by the County for property tax
administration, which are subtracted from property tax revenue collected by the County before it
is allocated to the City, could increase as a result of the various tasks required of the County by
the redirection. In addition, the State Board of Equalization administration fee is likely to
increase as a percentage of local sales and use tax received by the City unless the State Board
of Equalization reduces its fee, which it is unlikely to do because the cost of collecting the sales
and use taxes on a per -transaction basis will not go down.
Third, the redirection of sale and use taxes by the State reflects the vulnerability of local
government to the State budget process. If, in the future, the State elects to further reallocate
sales and use taxes or property tax revenue, or any other source of General Fund revenue, the
City may not know the exact amount of revenue available to it.
Given the short maturity date of the Notes, the City does not anticipate that the State's
Budget situation will negatively impact the City's ability to pay debt service on the Notes.
A-11
History of Taxable Transactions. For the first two quarters of 2008, total taxable
transactions in the City were reported to be $757,410,000, a 4.6% decrease from the
$794,257,000 of taxable transactions that were reported for the first two quarters of 2007. The
following table shows taxable transactions in the City by type of business during calendar years
2003 through 2007. Annual figures are not yet available for 2008.
Table No. 7
CITY OF SAN RAFAEL
Taxable Transactions by Type of Business
For Calendar Years 2003 through 2007
(Dollars in thousands)
Source: State Board of Equalization
Property Taxes
Property taxes represented the second largest source of General Fund revenue in fiscal
year 2007-08 and the largest source of General Fund revenue in fiscal year 2008-09. This
section describes property tax levy and collection procedures and certain information regarding
historical assessed values and major property tax payers in the City.
Property Tax Collection Procedures. In California, property which is subject to ad
valorem taxes is classified as "secured" or "unsecured." The "secured roll" is that part of the
assessment roll containing state assessed public utilities' property and property, the taxes on
which are a lien on real property sufficient, in the opinion of the county assessor, to secure
payment of the taxes. A tax levied on unsecured property does not become a lien against such
unsecured property, but may become a lien on certain other property owned by the taxpayer.
Every tax which becomes a lien on secured property has priority over all other liens arising
pursuant to State law on such secured property, regardless of the time of the creation of the
other liens. Secured and unsecured property are entered separately on the assessment roll
maintained by the county assessor. The method of collecting delinquent taxes is substantially
different for the two classifications of property.
Property taxes on the secured roll are due in two installments, on November 1 and
February 1 of each fiscal year. If unpaid, such taxes become delinquent after December 10 and
April 10, respectively, and a 10% penalty attaches to any delinquent payment. In addition,
property on the secured roll with respect to which taxes are delinquent is declared tax defaulted
on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment
A-12
2003
2004
2005
2006
2007
Retail Stores:
Apparel Stores
$ 20,803
$ 20,953
$ 20,011
$ 19,648
$ 21,820
General Merchandise Stores
121,708
118,611
113,107
117,592
113,702
Food Stores
54,717
54,054
58,740
60,125
64,434
Eating and Drinking Places
86,712
88,543
90,145
91,612
97,339
Home Furnishings and Appliances
87,086
92,473
98,062
99,082
95,163
Bldg. Materials and Farm Implmnts.
223,296
251,915
248,716
246,896
238,357
Auto Dealers and Auto Supplies
391,000
383,276
345,049
336,392
342,336
Service Stations
69,551
75,943
83,414
101,964
95,894
Other Retail Stores
179.778
187,435
190.815
188.718
202.315
Retail Store Totals
1,234,651
1,273,203
1,248,059
1,262,029
1,271,360
All Other Outlets
312.772
314.280
312.333
342.742
371.531
TOTAL ALL OUTLETS
$1,547,423
$1,587,483
$1,560,392
$1,604,771
$1,642,891
Source: State Board of Equalization
Property Taxes
Property taxes represented the second largest source of General Fund revenue in fiscal
year 2007-08 and the largest source of General Fund revenue in fiscal year 2008-09. This
section describes property tax levy and collection procedures and certain information regarding
historical assessed values and major property tax payers in the City.
Property Tax Collection Procedures. In California, property which is subject to ad
valorem taxes is classified as "secured" or "unsecured." The "secured roll" is that part of the
assessment roll containing state assessed public utilities' property and property, the taxes on
which are a lien on real property sufficient, in the opinion of the county assessor, to secure
payment of the taxes. A tax levied on unsecured property does not become a lien against such
unsecured property, but may become a lien on certain other property owned by the taxpayer.
Every tax which becomes a lien on secured property has priority over all other liens arising
pursuant to State law on such secured property, regardless of the time of the creation of the
other liens. Secured and unsecured property are entered separately on the assessment roll
maintained by the county assessor. The method of collecting delinquent taxes is substantially
different for the two classifications of property.
Property taxes on the secured roll are due in two installments, on November 1 and
February 1 of each fiscal year. If unpaid, such taxes become delinquent after December 10 and
April 10, respectively, and a 10% penalty attaches to any delinquent payment. In addition,
property on the secured roll with respect to which taxes are delinquent is declared tax defaulted
on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment
A-12
of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1 1/2% per
month to the time of redemption. If taxes are unpaid for a period of five years or more, the
property is subject to sale by the County.
Property taxes are levied for each fiscal year on taxable real and personal property
situated in the taxing jurisdiction as of the preceding January 1. A bill enacted in 1983, SB813
(Statutes of 1983, Chapter 498), however, provided for the supplemental assessment and
taxation of property as of the occurrence of a change of ownership or completion of new
construction. Thus, this legislation eliminated delays in the realization of increased property
taxes from new assessments. As amended, SB813 provided increased revenue to taxing
jurisdictions to the extent that supplemental assessments of new construction or changes of
ownership occur subsequent to the January 1 lien date and result in increased assessed value.
Property taxes on the unsecured roll are due on the January 1 lien date and become
delinquent, if unpaid on the following August 31. A 10% penalty is also attached to delinquent
taxes in respect of property on the unsecured roll, and further, an additional penalty of 1 1/2%
per month accrues with respect to such taxes beginning the first day of the third month following
the delinquency date. The taxing authority has four ways of collecting unsecured personal
property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the
county clerk specifying certain facts in order to obtain a judgment lien on certain property of the
taxpayer; (3) filing a certificate of delinquency for record in the county recorder's office, in order
to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal
property, improvements or possessory interests belonging or assessed to the assessee. The
exclusive means of enforcing the payment of delinquent taxes in respect of property on the
secured roll is the sale of the property securing the taxes for the amount of taxes which are
delinquent.
Taxation of State -Assessed Utility Property. The State Constitution provides that
most classes of property owned or used by regulated utilities be assessed by the State Board of
Equalization ("SBE") and taxed locally. Property valued by the SBE as an operating unit in a
primary function of the utility taxpayer is known as "unitary property", a concept designed to
permit assessment of the utility as a going concern rather than assessment of each individual
element of real and personal property owned by the utility taxpayer. State -assessed unitary and
"operating nonunitary" property (which excludes nonunitary property of regulated railways) is
allocated to the counties based on the situs of the various components of the unitary property.
Except for unitary property of regulated railways and certain other excepted property, all unitary
and operating nonunitary property is taxed at special county -wide rates and tax proceeds are
distributed to taxing jurisdictions according to statutory formulae generally based on the
distribution of taxes in the prior year.
Historic Secured Property Tax Revenues. Section 4701 through Section 4717 of the
California Revenue and Taxation Code permit counties to use a method of apportioning taxes
(commonly referred to as the "Teeter Plan") whereby local agencies receive from the County
100% of their respective shares of the amount of secured ad valorem taxes levied, without
regard to actual collections of taxes. Due to this allocation method, the cities in the County
receive no adjustments for redemption payments on delinquent collections. The unsecured
taxes are allocated based on actual unsecured tax collections.
Marin County has adopted the Teeter Plan. Consequently, secured property tax
collections allocated to the City do not reflect actual collections.
A-13
Assessed Valuation Information. Set forth below is a listing of the City's assessed
valuations, net of homeowners' and other exemptions, for fiscal years 2001-02 through 2008-09.
Table No. 8
CITY OF SAN RAFAEL
Assessed Valuation
For Fiscal Year 2001-02 through 2008-09
(Dollars in thousands)
Local Secured t' Utility Unsecured Total % Change
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
Source: California Municipal Statistics, Inc.
The following table shows property tax levies and tax collections for fiscal years 2001-02
through 2008-09. Because Marin County has adopted the Teeter Plan, the cities in the County
receive no adjustments for redemption payments on delinquent collections. The unsecured
taxes are allocated based on actual unsecured tax collections.
Table No. 9
CITY OF SAN RAFAEL
Property Tax Levies and Tax Collections
Fiscal Years 2001-02 through 2007-08
(Dollars in thousands)
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
Source: California Municipal Statistics, Inc.
A-14
Total
current
Total
secured &
% of levy
current
unsecured
Adjusted total
Collections of
collected
secured &
Collections as
Outstanding
Delinq. tax
current
current secured &
during fiscal
unsecured
percent of
delinquent
as % of
Fiscal Year tax levv
unsecured taxes (1)
year
collections (2)
current levv
taxes (3)
current levv
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
Source: California Municipal Statistics, Inc.
A-14
The following table lists the top 25 local secured taxpayers in the City of San Rafael for
fiscal year 2008-09.
Table No. 10
CITY OF SAN RAFAEL
Top 20 Local Secured Taxpayers
Fiscal Year 2008-09
% of City's Total
Secured and Unsecured Secured and
Assessed Valuation Unsecured Assessed
Taxpayer of Property Valuation tt
Total
Source: California Municipal Statistics, Inc.
State Legislative Shift of Property Tax Allocation. See "State Budget and its Impact
on the City" below for information about property tax shifts by the State.
Other Taxes
Transactional/Use Tax (Measure S). Transactional/Use Tax (Measure S) revenues
contributed approximately 12.2% to the City's fiscal year 2007-08 General Fund revenues and
11.1 % to the City's fiscal year 2008-09 General Fund revenues. In November 2005, the voters
in the City approved a 0.5% transaction and use tax, to help maintain essential City services.
The tax took effect on April 1, 2006, and the first full year of receipts were received in fiscal year
2006-07. All proceeds of the tax are required to be deposited into the City's General Fund to be
used for all general municipal governmental purposes at the City's discretion. The tax
automatically expires in 2017.
Franchise Tax. The City's Franchise Tax (which generated 4.8% of General Fund
revenues in fiscal year 2007-08 and 5.4% of the City's fiscal year 2008-09 General Fund
revenues) is imposed on the distribution and sales of public utility services. City Charter Article
XIV provides regulations concerning franchised agencies and businesses. Currently, the City
charges PG&E a franchise fee of 1% for gas and 0.50% for electricity. The local cable provider,
Comcast, pays a 5% franchise fee on a quarterly basis to Marin Telecommunications Authority
("MTA"). Under a formation agreement, MTA deducts its budget cost from the received
franchise fees and remits the net to each agency based on relative cable TV subscribers. Marin
Sanitary Service collects and remits a 10% refuse fee for the privilege of being the sole waste
hauler for the City. Under Proposition 218, the rates can only be increased by a vote of the City
residents.
Business License Tax. The Business License Tax generated approximately 4.0% to
the City's fiscal year 2007-08 General Fund revenues and 4.4% to the City's fiscal year 2008-09
General Fund revenues. A Business License Tax is imposed on all business for the privilege of
conducting business within the City. Most retail, wholesale, professional and service industries
pay this tax on a gross receipts basis. A small portion of businesses pay a tax rate based upon
the number of employees. Apartments pay a tax based upon the number of rental units. The
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Business License Tax rates are identified in Municipal Code Section 10.04, subject to indexing
for inflation.
Transient Occupancy Tax. The City's Transient Occupancy Tax contributed
approximately 3.3% to the City's fiscal year 2007-08 General Fund revenues and 3.1% to the
City's fiscal year 2008-09 General Fund revenues. A Transient Occupancy Tax is imposed on
occupants of hotels, inns, motels and other lodging facilities unless such occupancy is for a
period of 30 or more days. The tax is applied to the customer's lodging bill. Taxes are remitted
to the City either monthly or quarterly for all approved lodging operations. The current Transient
Occupancy tax rate is 10%. It was last modified in 1988
Property Transfer Tax. The Property Transfer Tax (which generated 2.1% of General
Fund revenues in fiscal year 2007-08 and 1.2% of the City's fiscal year 2008-09 General Fund
revenues) is imposed on any conveyance of real property when a change in deed is filed with
the County. The City's Property Transfer Tax regulations are set forth in Municipal Code Section
3.22. The tax is imposed at the rate of $2 for each $1,000 or fractional part of $1,000 of value.
Any increase in rates would require voter approval pursuant to Proposition 218.
State Budget and its Impact on the City
Set forth in the following paragraphs are descriptions of the State budget process, the
current State budget situation, and the potential impacts on the City.
The Budget Process. Through the State budget process, the State can enact
legislation that significantly impacts the source, amount and timing of the receipt of revenues by
local agencies, including the City. As in recent years, State budget deficits can result in
legislation that adversely impacts local agency budgets.
The State's fiscal year begins on July 1 and ends on June 30. The annual budget is
proposed by the Governor by January 10 of each year for the next fiscal year (the "Governor's
Budget"). Under State law, the annual proposed Governor's Budget cannot provide for
projected expenditures in excess of projected revenues and balances available from prior fiscal
years. Following the submission of the Governor's Budget, the Legislature takes up the
proposal.
Under the State Constitution, money may be drawn from the Treasury only through an
appropriation made by law. The primary source of the annual expenditure authorizations is the
Budget Act as approved by the Legislature and signed by the Governor. The Budget Act must
be approved by a two-thirds majority vote of each House of the Legislature. The Governor may
reduce or eliminate specific line items in the Budget Act or any other appropriations bill without
vetoing the entire bill. Such individual line item vetoes are subject to override by a two-thirds
majority vote of each House of the Legislature.
Appropriations also may be included in legislation other than the Budget Act. Bills
containing appropriations (except for K-14 education) must be approved by a two-thirds majority
vote in each House of the Legislature and be signed by the Governor. Bills containing K-14
education appropriations only require a simple majority vote. Continuing appropriations,
available without regard to fiscal year, may also be provided by statute or the State Constitution.
Funds necessary to meet an appropriation need not be in the State Treasury at the time
such appropriation is enacted; revenues may be appropriated in anticipation of their receipt.
E.W.
Recent State Budgets. Certain information about the State budgeting process and the
State Budget is available through several State of California sources. A convenient source of
information is the State's website, where recent official statements for State bonds are posted.
The references to internet websites shown below are shown for reference and convenience
only, the information contained within the websites has not been reviewed by the City and is not
incorporated in this Official Statement by reference.
The California State Treasurer's Internet home page at www.treasurer.ca.gov, under the
heading "Financial Information," posts the State's audited financial statements. In addition, the
"Financial Information" section includes the State's Rule 15c2-12 filings for State bond issues.
The "Financial Information" section also includes the "Overview of the State Economy and
Government, State Finances, State Indebtedness, Litigation" from the State's most current
Official Statement, which discusses the State budget and its impact on school districts.
The California Department of Finance's Internet home page at www.dof.ca.gov, under
the heading "California Budget," includes the text of proposed and adopted State Budgets.
The State Legislative Analyst's Office the ("LAO") prepares analyses of the proposed
and adopted State budgets. The analyses are accessible on the Legislative Analyst's Internet
home page at www.lao.ca.gov under the heading "Products."
2008-09 State Budget. On September 23, 2008, the Governor signed the 2008-09
State Budget into law (the "2008-09 Budget"). The 2008-09 Budget resolves the $24.3 billion
budget deficit identified in the May (2008) revision to the Governor's Proposed Budget. The
2008-09 Budget, as adopted, projected revenues of $103.027 billion in fiscal year 2007-08 and
$101.991 billion in fiscal year 2008-09 (representing an increase of $1.837 billion in fiscal year
2007-08 and a decrease of $996 million in fiscal year 2008-09, compared with the May
Revision), provided a modest reserve of $1.7 billion, but projected a deficit of $1.0 billion in
fiscal year 2009-10.
Special Session - Revisions to 2008-09 Budget; 2009-10 Adopted State Budget.
Set forth below is a summary of legislative actions from November 5, 2008 through February 20,
2009, when the Governor signed a budget package addressing the 2008-09 Budget deficit, and
adopting a budget for fiscal year 2009-10.
November 5, 2008. The Governor called the State Legislature into special session to
deal with a budget deficit of $11 billion, which had arisen since the 2008-09 Budget was
adopted principally because of a shortfall in revenues. This special session extended through
February 19, 2009.
January 9, 2009. The Governor submitted his proposed 2009-10 Budget (the "2009-10
Proposed Budget") to the State Legislature. The 2009-10 Proposed Budget assumed that,
without corrective action, the State will face a deficit of $39.6 billion at the end of 2009-10.
Consequently, the 2009-10 Proposed Budget proposed $41.7 billion in budgetary solutions to
close the gap and establish a $2.2 billion reserve, resulting from spending reductions, revenue
increases, accounting changes and debt issuances. Included in the proposals were (i) issuance
of $4.7 billion in revenue anticipation warrants, (ii) lowering the value of the dependent credit for
income tax returns, (iii) capturing savings in K-14 education through spending reductions,
accounting changes and cost deferrals, (iv) raising $5 billion in proceeds with the securitization
of lottery revenues, (v) redirecting $500 million in revenues from Proposition 10 cigarette tax
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and Proposition 63 income tax surcharge, (vi) a temporary increase in the State sales tax rate of
1.5 cents per dollar, and (vii) an extension of the State sales and use tax to include additional
services, as well as an increase of 5 cents on the alcohol excise tax. Many of these proposals
will require voter approval to be implemented.
January 8, 2009. The LAO released its report on the 2009-10 Proposed Budget. The
LAO states that the 2009-10 Proposed Budget is generally reasonable but will likely be subject
to risks associated with continued deterioration of the economy and additional costs that the
State is likely to incur but are not included in the 2009-10 Proposed Budget. In addition, the
2009-10 Proposed Budget relies heavily on State borrowing that is subject to voter approval, the
favorable resolution of legal issues, and the State's access to credit markets.
January 14 2009. The LAO released its report entitled "California's Cash Flow Crisis"
stating that the State's cash flow had deteriorated steadily since the end of calendar year 2007
due to, among other things, sharply weakened General Fund revenues and limited access to
credit markets. In addition, the report predicted that the State would have $3.2 billion in
available cash by the end of January 2009, but warned that this amount would not be sufficient
for normal cash flow operations with budgeted appropriations through the end of fiscal year
2008-09.
February 19, 2009. The California Legislature voted to approve a budget package (the
"Budget Package") addressing the State's $42 billion deficit, which includes $15 billion in State
spending reductions, $12.8 billion in temporary tax increases (including an increase in the
vehicle license fee and an increase in State sales and income taxes), $11.4 billion in borrowing
and a $1 billion reserve. The Budget Package includes revisions to the 2008-09 Budget and
adoption of a budget for fiscal year 2009-10 (the "2009-10 Budget"), addressing spending
reductions, revenue increases, economic stimulus and increasing governmental efficiency.
Certain measures contained in the Budget Package required voter approval at a special State-
wide election which was held on May 19, 2009. Because the voters rejected the three
propositions on the special election ballot that would have helped balance the State's budget,
there will need to be further revisions to the Budget (see "May 14, 2009 Budget Revision"
below). Key provisions of the Budget Package are:
• Sales Tax Increase: A 1 -cent increase in the State sales tax, generating
approximately $5.9 billion (2 years).
Vehicle License Fee Increase: Increasing the fee from 0.65% to 1.15% (2
years).
• State Personal Income Tax Increase: Imposing a 0.25% surcharge on personal
income tax and reducing the dependent tax credit (2 years).
February 13, 2009. The U.S. House of Representatives and the Senate approved the
American Recovery and Reinvestment Act, which commits a total of $787 billion nationwide. A
report issued by the LAO entitled "Federal Economic Stimulus Package: Fiscal Effect on
California" estimates that the State will receive over $31 billion in aid and billions more in
competitive grants. The LAO estimates that about $8 billion of these funds will be available in
2008-09 and 2009-10 to relieve the State's budgetary problems. Of this amount, the State's
health programs will receive the largest share (about $9 billion) and education -related programs
will receive nearly $8 billion. Labor and workforce development and social services programs
will receive about $6 billion and $3.5 billion, respectively. By April 1, 2009 the State Director of
lm
Finance and State Treasurer will re -calculate the $8 billion estimate. If the amount is less than
$10 billion, then annual State program reductions of nearly $1 billion and revenue increases of
about $1.8 billion adopted as part of the 2009-10 Budget will go into effect.
February 20, 2009. The Governor signed the Budget Package. The Governor used his
line item veto authority in an attempt to achieve approximately $1 billion more in State General
Fund savings in the 2009-10 Budget. This includes at lease a 10% reduction in expenditures for
certain State offices through furlough days, elimination of positions, overtime reform and
reducing paid State holidays, replacing State General Fund appropriations with respect to
higher education with federal funds, and finding savings through reforms and cost-saving
measures with the California Department of Corrections and Rehabilitation.
March 13 2009 LAO Report. On March 13, 2009, the LAO updated its revenue forecast
and projects that revenues will fall short of the assumptions in the 2009-10 Budget by $8 billion
and that number of the adopted solutions—revenue increases and spending reductions—are of
a short–term duration. Thus, without corrective actions, the State's huge operating shortfalls will
reappear in future years—growing from $12.6 billion in 2010-11 to $26 billion in 2013.
May 7 2009 LAO Report. On May 7, 2009, the LAO reported that, as result of the
budget and cash pressures of recent months, the General Fund's "cash cushion"—the monies
available to pay State bills at any given time—currently is projected to end fiscal year 2008[109
at a much lower level than normal. Without additional legislative measures to address the
State's fiscal difficulties or unprecedented amounts of borrowing from the short-term credit
markets, the State will not be able to pay many of its bills on time for much of fiscal year
20091110. Deterioration of the state's economic and revenue picture (such as the $8 billion
revenue shortfall the LAO forecast in March 2009) or failure of measures in the May 19 special
election would increase the State's cash flow pressures substantially—potentially increasing the
short-term borrowing requirement to well over $20 billion. The LAO concludes that the State is
likely to have difficulty borrowing anywhere close to the needed amounts from the short-term
bond markets based on the State's own credit. The LAO advised the Legislature to reduce the
State's short-term borrowing need to an amount under $10 billion for fiscal year 2009010, which
would require pursuit of two options: (i) additional actions to increase revenues or decrease
expenditures in order to return the fiscal year 2009010 budget to balance and (ii) additional
actions to delay or defer scheduled payments to schools, local governments, service providers,
and others.
May 14 2009 Budget Revision. Under California law, in May of each year the Governor
issues a revised budget with changes he or she can support, based on the debate, analysis and
changes in the economic forecasts. On May 14, 2009, the Governor released the May Revision,
which includes two alternative proposals to revise the State budget to address the State's
increasing deficit. The specific proposal to be considered depended, in part, on the result of
certain statewide ballot measures decided by the voters on the May 19, 2009 special election
ballot.
Because the voters of the State rejected the three propositions on the special election
ballot that would have helped balance the State's budget, the Governor estimates a budget
shortfall of $21 billion in 2009-10. The Legislature and the Governor will now need to agree to
billions of dollars of additional spending cuts, tax increases or other budgetary solutions to bring
the budget back into balance. Proposals in the May Revision include various expenditure cuts,
borrowings and other measures. Such cuts and other measures may include reducing State
EM
payments to school districts by shortening the school year by 5 to 7.5 days, increasing class
sizes and laying off additional teachers as needed to absorb reduced funding levels. Further
details concerning the Governor's revised budget are expected to be available at
http://www.ebudget.ca.gov/. The District cannot predict the exact impact any such budget
reductions will have on its General Fund operating budget for the coming fiscal year.
May 21 2009 LAO Report. On May 21, 2009, the LAO commented on the May Revision,
stating that the Governor's estimate of a new $21 billion budget problem is reasonable and the
May Revision proposals include major spending reductions and serious efforts for long—term
state efficiencies and savings. The LAO reiterated that by acting quickly and reducing reliance
on some of the Governor's riskiest proposals --such as financing $5.5 billion of the deficit by
issuing revenue anticipation warrants --the Legislature can return the budget to balance, prevent
another state cash crunch, and preserve core funding for what it deems to be California's long—
term priorities. To accomplish these goals, the Legislature now needs to cut lower—priority
programs substantially or eliminate them. To address significant budget deficits forecast in
future years, the Legislature also needs to begin work this year on measures that further
improve the efficiency of state services for 2010-11 and beyond.
Governor Declares Fiscal Emergency; State Begins Issuing IOUs; Budget Compromise
Announced. The Governor announced on July 1 that the budget deficit had grown by $2 billion
to $26.3 billion due to the failure of State lawmakers to adopt immediate education cuts and
money -shifting plans by the June 30 fiscal year end. He declared a fiscal emergency and
ordered a Proposition 58 special session of the Legislature to solve the State's deficit, ordered
State employees to take three unpaid furlough days every month and proposed closing the
additional $2 billion shortfall largely by cutting school spending even further. To address the
State's cash crisis, on July 2 the State began issuing registered warrants, or IOUs, to several
classes of creditors, including certain local governments.
2009-10 State Budget Amendments. On July 24, 2009, the California legislature
approved amendments to the 2009-10 Budget involving 30 separate pieces of legislation to
close the $26.3 billion shortfall. The Governor signed the budget plan on July 28, 2009. Total
general fund spending in fiscal year 2009-10 will be more than $84 billion, down from nearly
$91.7 billion in fiscal year 2008-09 and nearly $103 billion in fiscal year 2007-08. The budget
amendments combine deep spending cuts, borrowing from local governments and accounting
maneuvers.
The $15.3 billion in additional spending cuts include:
- $6.1 billion from the K-14 education budget.
- $2.8 billion from the California State University and University of California systems.
- $1.3 billion in savings by furloughing nearly 200,000 state workers three days out of
each month.
- Approximately $3.2 billion from health and human services, including $1.3 billion in cuts
to Medicaid.
The approved amendments include borrowing from local governments and various
accounting maneuvers to generate additional revenues in the 2009-10:
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- $2 billion borrowed from counties' property tax collections under provisions of
Proposition 1A approved by the voters in 2004, but the State must repay counties with
interest within three years.
- $1.7 billion shift from redevelopment agencies into State funds in exchange for
extending the number of years the agencies could collect tax increment.
- $1 billion in revenues to be generated by selling a portion of the State Compensation
Insurance Fund's workers compensation insurance portfolio.
- $1.2 billion in savings from a one-time deferment of state worker paychecks for one day,
moving them into the next fiscal year.
- $1.7 billion in revenues by requiring taxpayers who make quarterly estimated payments
to pay more in the first six months. This will result in lower revenues in the first half of the
next fiscal year.
- $600 million in revenues by increasing income tax withholdings from paychecks. This
allows the State to grab more tax revenue earlier but will result in lower revenue later
due to higher tax refunds or less taxes owed.
The accounting shifts rely on the assumption that an economic recovery will be well
underway in the next fiscal year and some economists believe that they produce a significant
budget shortfall next year. Additionally, borrowing revenues from local governments is likely to
result in litigation.
The approved budget amendments discarded plans to take $1 billion in gasoline tax
revenues from local governments and failed to approve $100 million in revenue from oil leases
to be sold in the Santa Barbara Channel. Instead, the legislature intended the $1.1 billion
difference to be made up by use of the general fund reserve. The Governor, however, exercised
his line -item veto power to make nearly $500 million in additional cuts to social services, state
prisons and higher education, and to provide for a general fund reserve of $500 million.
Impact on the City. The declaration by the State of California of a fiscal emergency
under Proposition 1A and a subsequent take -away of the equivalent of 8% of fiscal year 2008-
09 property related tax revenues from cities, could have an impact of approximately $
million on the City.
Future State Budgets. The City cannot predict what actions will be taken in future years
by the State Legislature and the Governor to address the State's current or future budget
deficits. Future State budgets will be affected by national and state economic conditions and
other factors over which the City has no control. To the extent that the State budget process
results in reduced revenues to the City, the City will be required to make adjustments to its
budget. Decrease in such revenues may have an adverse impact on the City's ability to pay the
Notes.
Retirement System
Marin County Employees' Retirement Fund. The City participates in the Marin
County Employees' Retirement Fund (the "Fund"). All full-time and permanent part-time
employees who work at least 75% of a full-time position are eligible to participate. The Fund is
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an agent multiple -employer defined benefit retirement plan that acts as a common investment
and administrative agent for various local governmental agencies within the County. The Fund
provides retirement, disability and death benefits based on the employee's years of service,
age, and final compensation. Employees vest after five years of service and are eligible to
receive benefits after 10 years of service and having attained the age of 50; or 30 years of
service (20 years for safety employees) regardless of age. These benefit provisions and all
other requirements are established under the County Employee's Retirement Law of 1937.
The funding policy of the Fund provides for actuarially determined periodic contributions
by the City at rates such that sufficient assets will be available to pay Fund benefits when due.
The City contributed 53.93% and 64.38% of payroll to the Fund for police and fire personnel,
respectively, and 30.32% for other covered employees for the year ended June 30, 2008.
The City's annual cost for the Fund for fiscal years 2007-08, 2006-07 and 2005-06 was
$13,754,798, $11,108,650 and $9,316,354, respectively, which was equal to the City's required
and actual contributions. The annual required contribution was determined as part of the
actuarial study performed as of June 30, 2007. The employer rates for normal cost is
determined using the Entry Age Normal Actuarial Cost Method, projected cost method. It takes
into account those benefits that are expected to be earned in the future as well as those already
accrued. The significant assumptions used in the 2007 actuarial valuation include an assumed
rate of return on invested assets of 8.00%, annual payroll increases reflecting 4.00% for inflation
and an approximate range of 0.50% to 3.00% for merit and longevity. The actual rate of return
on investments was a gain of 12%. The actuarial value of assets was determined using
techniques that smooth the effects of short-term volatility in the market value of investments
over a period of five years. The Fund also uses the level percentage -open method to amortize
the unfunded actuarial liability which was revised to 16 years level in the amortization period. It
is assumed that payroll will increase at an annual inflation rate of 4.00% over the amortization
period.
The Plan's actuarial value (which differs from market value) and funding progress over
the most recent three years available is shown in the table below.
Table No. 11
Funded Status of the
City's Defined Benefit Pension Plan (Fire, Safety, Miscellaneous)
(Dollars in thousands)
Source: Basic Financial Statements for the Year Ended June 30, 2008.
Public Agency Retirement System. The City also contributes to the Public Agency
Retirement system ("PARS"), a defined contribution retirement plan, which provides retirement
benefits in return for services rendered, provides an individual account for each participant, and
specifies how contributions to the individual's accounts are determined (instead of specifying the
amount of benefits the individual is to receive).
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Actuarial
Excess/
Excess
Valuation
Actuarial
Accrued
(Deficit)
Annual
(Deficit) as a
Date
Value of
Liability (AAL)
Assets
Funded
Covered
percentage
June 30
Assets
Entry Ape
Over AAL
Ratio
payroll
of Payroll
2005
$195,698
$265,205
($69,507)
74%
$28,357
(245%)
2006
209,785
306,079
(96,294)
69%
28,606
(337%)
2007
234,930
314,604
(79,674)
75%
28,729
(277%)
Source: Basic Financial Statements for the Year Ended June 30, 2008.
Public Agency Retirement System. The City also contributes to the Public Agency
Retirement system ("PARS"), a defined contribution retirement plan, which provides retirement
benefits in return for services rendered, provides an individual account for each participant, and
specifies how contributions to the individual's accounts are determined (instead of specifying the
amount of benefits the individual is to receive).
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All eligible non -represented employees of the City will become participants in PARS from
the date they were hired. An eligible employee is any employee who, at any time during which
the City maintains this plan, is not accruing a benefit under the Plan discussed above. As
determined by PARS, each participating employee must contribute 3.75% of gross earnings to
PARS. The City contributes and additional 3.75% of the employee's gross earnings.
During fiscal year 2007-08 the City and employees contributed $69,940.The total
covered payroll of employees participating in PARS was $1,865,066.
401(a) Tax Qualified Plan. In addition, the City participates in a 401(a) tax qualified
plan for eligible non -represented management/mid-management employees. This is an
employer -only contribution program separate from the Plan discussed above. The City
Manager, as Plan Administrator, annually determines the percent amount of contribution which
can range from 0% to 5% of base salary of eligible employees. During fiscal year 2007-08, the
City contributed $139,124 to this plan on behalf of eligible employees.
Post -Employment Health Benefits
In April 2004, the Governmental Accounting Standards Board ("GASB") issued
Statement No. 43, "Financial Reporting for Postemployment Benefit Plans Other Than Pension
Plans." Statement No. 43 establishes uniform financial reporting standards for postemployment
healthcare and other nonpension benefits ("OPEB") plans. The approach followed in Statement
No. 43 is generally consistent with the approach adopted for defined benefit pension plans with
modifications to reflect differences between pension plans and OPEB plans. Statement No. 43
became effective for the City's OPEB Plans for the fiscal year ending June 30,
In addition, in June 2004, GASB issued Statement No. 45, Accounting and Financial
Reporting by Employers for Postemployment Benefits Other Than Pensions, which addresses
how state and local governments should account for and report their costs and obligations
related to OPEB. Statement No. 45 generally requires that employers account for and report
the annual cost of OPEB and the outstanding obligations and commitments related to OPEB in
essentially the same manner as they currently do for pensions. Statement No. 45's provisions
may be applied prospectively and do not require governments to fund their OPEB plans. An
employer may establish its OPEB liability at zero as of the beginning of the initial year of
implementation; however, the unfunded actuarial accrued liability is required to be amortized
over future periods. Statement No. 45 also establishes disclosure requirements for information
about the plans in which an employer participates, the funding policy followed, the actuarial
valuation process and assumptions, and, for certain employers, the extent to which the plan has
been funded over time. Statement No. 45 became effective for the City's fiscal year ending
June 30,
The City provides certain health care benefits for retired employees and their spouses.
Substantially all of the City's employees may become eligible for these benefits if they are
receiving a retirement benefit from the Plan discussed above within 120 days of retirement from
City employment. At June 30, 2008, 268 retirees and surviving spouses received these benefits.
The cost of these retiree health care benefits is recognized as an expenditure as claims are
paid. For fiscal year 2007-08, those costs totaled $2,037,878 of which $1,206,071 was
reimbursed from the Marin County Retirement Office Ces%meiilrmet] See Appendix
B, Note 11 for information more about the City's Post -Employment Health Benefit liabilities.
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[summarize actuarial study]
Outstanding General Fund Debt and Lease Obligations
The City currently has outstanding general fund debt and lease obligations described
below. The City has never defaulted on the payment of principal of or interest on any of its
indebtedness. The City has complied with all significant bond covenants relating to reserve and
sinking fund requirements, proofs of insurance, and budgeted revenues and maintenance costs.
2003 Authority Lease Revenue Bonds. In March 2003, the Authority issued 2003
Lease Revenue Bonds in the aggregate principal amount of $7,605,000, which are currently
outstanding in the aggregate principal amount of $6,975,000. The proceeds were used for the
design and construction of a public parking garage. The Lease Revenue Bonds are payable
from lease payments made by the City pursuant to a lease relating to certain public facilities.
Notes Payable. The City was obligated under (i) a note relating to the purchase of
property maturing in November 2024, which had as of June 30, 2009 an outstanding principal
amount of $ and accrued interest of $ and (ii) a note to the Superior Court of the
County of Marin maturing in December 2011, which had as of June 30, 2009 an outstanding
principal amount of $ and accrued interest of $
Capital Lease Obligations. In addition, the City has outstanding capital lease
obligations for two fire trucks and its telephone system. See See Appendix B, Note 6.
[confirm Section 33401 school district tax sharing obligation is an obligation of
the redevelopment agency]
Direct and Overlapping Debt
Contained within the City are overlapping local agencies providing public services which
have issued general obligation Certificates and other types of indebtedness. Direct and
overlapping bonded indebtedness is shown in the following table.
Table No. 12
CITY OF SAN RAFAEL
Statement of Direct and Overlapping Debt As of June 30, 2009
(Unaudited)
Source: California Municipal Statistics, Inc.
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Investment of City Funds
The City may invest moneys not immediately required for operations in a manner
consistent with the City's Statement of Investment Policy (the "Investment Policy").
The Investment Policy. The Investment Policy, adopted by the City Council on June
15, 2009, covers all short-term operating funds and investment activities of the City. These
funds are accounted for in the City's annual audit report and include the General Fund, Special
Revenue Funds, Debt Service Funds, Capital Project Funds, Enterprise Funds, Internal Funds
and Fiduciary Funds. The Investment Policy is adopted by resolution of the City Council
annually. The management responsibility for the City's investment program is delegated
annually by the City Counsel to the Treasurer pursuant to California Government Code Section
53607. The Treasurer may delegate the authority to conduct investment transactions and to
manage the operation of the investment portfolio to other specifically authorized staff members.
The City Manager and the Treasurer jointly develop written administrative procedures
and internal controls, consistent with the Investment Policy. The City may engage the support
services of outside investment advisors, as long as it can be clearly demonstrated that these
services produce a net financial advantage or necessary financial protection of the City's
financial resources. Beginning in January 2005, the City established a contract with MBIA
Municipal Investors Service Corporation to administer cash management services to a portion of
the portfolio. These services include updating the Investment Policy annually, cash flow
administration, procurement of various instruments, and preparing a comprehensive monthly
report.
The Investment Policy establishes five objectives for City investment:
1. Preservation of capital and protection of investment principal.
2. Maintenance of sufficient liquidity to meet anticipated cash flows.
3. Attainment of a market value rate of return.
4. Diversification to avoid incurring unreasonable market risks.
5. Compliance with the City's Municipal Code and with all applicable California statutes
and Federal regulations.
Specific Investment Restrictions. The City is governed by Sections 16429.1, 53600-
53609 and 53630-53686 et seq. of the California Government Code, except that, pursuant to
California Government Code Section 5903(e), proceeds of bonds and any moneys set aside or
pledged to secure payment of bonds may be invested in securities or obligations described in
the ordinance, resolution, indenture, agreement or other instrument providing for the issuance of
the bonds.. The City has further restricted the eligible types of securities and transactions to the
following instruments (with further specific restrictions specified in the Investment Policy):
1. United States Treasury bills, notes and bonds with a final maturity not
exceeding 5 years from the date of purchase.
2. Federal Agency debentures and mortgage-backed securities with a final
maturity not exceeding 5 years from the date of purchase.
3. Federal Instrumentality (government sponsored enterprise) debentures,
discount notes, callable and step-up securities, with a final maturity not
exceeding 5 years from the date of purchase, issued only by Federal Home
Loan Banks, Federal National Mortgage Association, Federal Farm Credit
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Banks, and federal Home Loan Mortgage Corporation and rated at least AAA
or the equivalent.
4. Repurchase Agreements with a final termination date not exceeding one year
collateralized by U.S. Treasury obligations, Federal Agency securities, or
Federal Instrumentality securities listed in items 1, 2 and 3 above with a final
maturity not exceeding 5 years.
5. Prime Commercial Paper with a final maturity not exceeding 270 days from
the date of purchase.
6. Eligible Bankers Acceptances issued by FDIC insured commercial banks.
7. Medium -Term Notes issued by corporations organized and operating within
the United States with a final maturity not exceeding 5 years from the date of
purchase.
8. Negotiable Certificates of Deposit with a final maturity not exceeding 5 years
from the date of purchase.
9. Non -Negotiable Certificates of Deposit and savings deposits with a maturity
not exceeding 180 days.
10. State of California's Local Agency Investment Fund.
11. Money Market Funds.
The above investment categories are more fully described in the Investment Policy
Recent Monthly Report. The City Treasurer submits a monthly report to the City
Council detailing and summarizing all transactions and stating the present status of City
investments (the "Monthly Report"). As of July 31, 2009, the City Treasurer reports that the
annualized return of the City's investment portfolio was 2.77% (based on a 365 -day year) and
the weighted average days to effective maturity was 100 days.
The following table summarizes certain information relating to the City's investment
portfolio as of July 31, 2009:
Table No. 13
CITY OF SAN RAFAEL
Investment Portfolio Summary
(as of July 31, 2009)
Type of Investment Historic Cost
Cash and equivalents $17,570,258
U.S. Treasury 999,453
U.S. Instrumentality 3,989,879
Corporate 496.270
Total $23,055,860
Source: City of San Rafael.
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Market Value
% of Portfolio (z)
$17,570,258
76.2%
1,000,012
4.3
3,995,294
17.3
497.946
2.2
$23,063,510
100.0%
Employee Relations and Collective Bargaining
The employee associations that represent City employees are shown below. Pursuant
to the City's Employee Relations Ordinance and the Meyers -M ill ias-Brown-Act, the City and the
employee associations negotiate wages, hours and conditions of employment.
Employee Group
Service Employees International Union (SEIU)
San Rafael Police Association (SRPA) (Police)
Police Mid -Management
Firefighters' Association
Fire Chief Officers' Association
SEW — Childcare
Association of Professional Employees (WCE)
Local One — Confidential
* Currently being negotiated..
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Employees
Contract Expiration
Date
132
6/30/2010
89
6/30/2009"
6
6/30/2009*
56
6/30/2011
3
6/30/2011
49
10/30/2009
8
6/30/2010
6
6/30/2010
Employment and Industry
The County is included in the San Francisco -San Mateo -Redwood City Metropolitan
Division. The following table summarizes the civilian labor force, employment and
unemployment in the County for the calendar years 2004 through 2008. These figures are
county -wide statistics and may not necessarily accurately reflect employment trends in the City.
During June 2009, the unemployment rate was 9.3% in the Metropolitan Division, 8.2% in Marin
County and 12.1% in the State.
Table 14
SAN FRANCISCO -SAN MATEO-REDWOOD CITY METROPOLITAN DIVISION
Civilian Labor Force, Employment and Unemployment
(Annual Averages)
Civilian Labor Force (1)
Employment
Unemployment
Unemployment Rate
Wage and Salary Employment: (2)
Agriculture
Natural Resources and Mining
Construction
Manufacturing
Wholesale Trade
Retail Trade
Transportation, Warehousing and
Utilities
Information
Finance and Insurance
Real Estate and Rental and Leasing
Professional and Business Services
Educational and Health Services
Leisure and Hospitality
Other Services
Federal Government
State Government
Local Government
Total All Industries (3)
2004
2005
2006
2007
2008
912,700
907,700
919,500
943,800
971,900
864,900
866,300
883,700
906,100
923,700
47,800
41,400
35,800
37,700
48,200
5.2%
4.6%
3.9%
4.0%
5.0%
3,100
2,700
2,800
2,700
2,700
200
200
200
200
200
42,200
41,300
43,100
45,400
44,100
44,100
42,600
43,500
43,500
42,600
26,500
26,100
26,700
27,100
26,700
93,300
93,800
93,600
95,000
93,900
44,900
43,500
42,100
40,600
40,300
43,500
40,800
39,000
39,500
40,000
66,600
66,900
67,500
67,700
65,000
20,800
20,900
21,200
21,100
21,200
176,000
183,000
191,700
203,900
210,600
100,100
100,800
103,200
105,200
106,700
114,000
116,100
119,900
124,300
126,100
36,900
36,900
37,300
38,600
39,200
21,400
20,400
19,900
19,400
19,300
31,100
32,800
34,100
34,900
35,600
77,800
79,800
81,400
82,700
83,500
942,500
948,600
967,200
991,800
997,700
(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household
domestic workers, and workers on strike.
(2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household
domestic workers, and workers on strike.
(3) Totals may not add due to rounding.
Source: State of California Employment Development Department.
�3
Largest Employers
The 25 largest private -sector employers in the County for 2009, listed alphabetically as
follows:
Table 15
COUNTY OF MARIN
Largest Employers
(As of August 2009)
Employer Name
Location
Industry
Autodesk Inc
San Rafael
Computer Software -Manufacturers
Brayton Purcell
Novato
Attorneys
Cagwin & Dorward Landscape
Novato
Landscape Contractors
College of Marin
Kentfield
Schools -Universities & Colleges Academic
Corrections Dept
San Quentin
State Govt -Correctional Institutions
Fireman's Fund Insurance Co
Novato
Insurance
Kaiser Foundation Hospital
San Rafael
Hospitals
Kentfield Rehabilitation Hosp
Kentfield
Hospitals
Kitchen Works Inc
San Rafael
Kitchen Cabinets & Equipment -Household
Leon's Bar B'Q Inc
Mill Valley
Food Products -Retail
Macy's
Corte Madera
Department Stores
Managed Health Network Inc
San Rafael
Health Plans
Marin Community College
Kentfield
Schools -Universities & Colleges Academic
Marin County Sheriffs Dept
San Rafael
Sheriff
Marin General Hospital
Greenbrae
Hospitals
Marin Group
Sausalito
Product Development & Marketing
Marin Independent Journal
Novato
Newspapers (Publishers/Mfrs)
Nordstrom
Corte Madera
Department Stores
Novato Community Hospital
Novato
Hospitals
Rowland Novato Community Hosp
Novato
Hospitals
San Rafael Human Resources
San Rafael
Government Offices -City, Village & Twp
Sonnen Motor Cars
San Rafael
Automobile Dealers -New Cars
Township Building Svc Inc
Novato
Janitor Service
Westamerica Bank
San Rafael
Banks
YMCA
San Rafael
Social Service & Welfare Organizations
Source: State of California Employment Development Department, extracted from The America's Labor
Market Information System (ALMIS) Employer Database, 2009 2ntl Edition.
Effective Buying Income
"Effective Buying Income" is defined as personal income less personal tax and nontax
payments, a number often referred to as "disposable' or "after-tax' income. Personal income is
the aggregate of wages and salaries, other labor -related income (such as employer
contributions to private pension funds), proprietor's income, rental income (which includes
imputed rental income of owner -occupants of non-farm dwellings), dividends paid by
corporations, interest income from all sources, and transfer payments (such as pensions and
welfare assistance). Deducted from this total are personal taxes (federal, state and local),
nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance.
According to U.S. government definitions, the resultant figure is commonly known as
"disposable personal income."
A-29
The following table summarizes the total effective buying income for the City, the
County, the State and the United States for the period 2004 through 2008.
Table No. 16
CITY OF SAN RAFAEL
Effective Buying Income
As of January 1, 2004 through 2008
Source: Sales & Marketing Management Survey of Buying Power for 2004;
Clantas Demographics for 2005 through 2008.
A-30
Total Effective Buying
Median Household
Year
Area
Income (000's Omitted)
Effective Buying Income
2004
City of San Rafael
n/a
n/a
Marin County
$ 9,888,678
61,606
California
705,108,410
43,915
United States
5,692,909,567
39,324
2005
City of San Rafael
$ 1,663,310
$52,871
Marin County
9,505,593
61,624
California
720,798,106
44,681
United States
5,894,663,364
40,529
2006
City of San Rafael
$ 1,769,150
$54,463
Marin County
10,057,703
64,365
California
764,120,963
46,275
United States
6,107,092,244
41,255
2007
City of San Rafael
$ 1,874,323
$57,071
Marin County
10,585,120
67,799
California
814,894,438
48,203
United States
6,300,794,040
41,792
2008
City of San Rafael
$ 1,899,075
$57,466
Marin County
10,769,315
68,816
California
832,531,445
48,952
United States
6,443,994,426
42,303
Source: Sales & Marketing Management Survey of Buying Power for 2004;
Clantas Demographics for 2005 through 2008.
A-30
Construction Activity
Building activity for the past five years in the City is shown in
the following table.
Table No. 17
CITY OF SAN RAFAEL
Total Building Permit Valuations
(valuations in thousands)
Calendar Year 2004 to 2008
2004 2005 2006
2007
2008
Permit Valuation
New Single-family
$14,601.9 $ 10,146.8 $ 6,304.0
$ 4,717.8
$ 1,372.5
New Multi -family
22,057.0 6,238.6 0.0
0.0
0.0
Res. Alterations/Additions
24,562.6 24.914.0 23.466.7
31.202.7
15.212.2
Total Residential
61,221.6 41,299.4 29,770.7
35,920.5
16,584.7
New Commercial
7,475.8 650.0 11,300.0
0.0
17,800.0
New Industrial
0.0 0.0 0.0
0.0
0.0
New Other
538.9 3,983.7 13,231.6
225.4
144.0
Com. Alterations/Additions
15.806.6 14.502.7 11.364.7
16.955.4
30.712.2
Total Nonresidential
23,821.3 19,136.5 35,896.3
17,180.8
$48,656.2
New Dwelling Units
Single Family
78 36 7
4
2
Multiple Family
169 56 0
0
0
Total
247 92 7
4
2
Source: Economic Sciences Corporation, California Building Permit Activity
A-31
APPENDIX B
AUDITED FINANCIAL STATEMENTS OF THE CITY
FOR THE YEAR ENDED JUNE 30, 2008
m
APPENDIX C
FORM OF OPINION OF BOND COUNSEL
C-1
APPENDIX D
DTC AND THE BOOK -ENTRY ONLY SYSTEM
The following description of the Depository Trust Company ("DW"), the procedures and
record keeping with respect to beneficial ownership interests in the Notes, payment of principal,
interest and other payments on the Notes to DTC Participants or Beneficial Owners,
confirmation and transfer of beneficial ownership interest in the Notes and other related
transactions by and between DTC, the DTC Participants and the Beneficial Owners is based
solely on information provided by DTC. Accordingly, no representations can be made
concerning these matters and neither the DTC Participants nor the Beneficial Owners should
rely on the foregoing information with respect to such matters, but should instead confirm the
same with DTC or the DTC Participants, as the case maybe.
Neither the issuer of the Notes (the `Issuer") nor the trustee, fiscal agent or paying agent
appointed with respect to the Notes (the "Agent') take any responsibility for the information
contained in this Appendix.
No assurances can be given that DTC, DTC Participants or Indirect Participants will
distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with
respect to the Notes, (b) certificates representing ownership interest in or other confirmation or
ownership interest in the Notes, or (c) redemption or other notices sent to DTC or Cede & Co.,
its nominee, as the registered owner of the Notes, or that they will so do on a timely basis, or
that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this
Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange
Commission and the current "Procedures" of DTC to be followed in dealing with DTC
Participants are on file with DTC.
1. The Depository Trust Company ("DTC"), New York, NY, will act as securities
depository for the securities (the "Securities"). The Securities will be issued as fully -registered
securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other
name as may be requested by an authorized representative of DTC. One fully -registered
Security certificate will be issued for each issue of the Securities, each in the aggregate
principal amount of such issue, and will be deposited with DTC. If, however, the aggregate
principal amount of any issue exceeds $500 million, one certificate will be issued with respect to
each $500 million of principal amount, and an additional certificate will be issued with respect to
any remaining principal amount of such issue.
2. DTC, the world's largest securities depository, is a limited -purpose trust company
organized under the New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing corporation'
within the meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934.
DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non -U.S. equity
issues, corporate and municipal debt issues, and money market instruments (from over 100
countries) that DTC's participants ("Direct Participants') deposit with DTC. DTC also facilitates
the post -trade settlement among Direct Participants of sales and other securities transactions in
deposited securities, through electronic computerized book -entry transfers and pledges
between Direct Participants' accounts. This eliminates the need for physical movement of
securities certificates. Direct Participants include both U.S. and non -U.S. securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is
D-1
a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is
the holding company for DTC, National Securities Clearing Corporation and Fixed Income
Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users
of its regulated subsidiaries. Access to the DTC system is also available to others such as both
U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing
corporations that clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants'). DTC has Standard & Poor's highest rating:
AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange
Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.
3. Purchases of Securities under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Securities on DTC's records. The ownership
interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded
on the Direct and Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive
written confirmations providing details of the transaction, as well as periodic statements of their
holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into
the transaction. Transfers of ownership interests in the Securities are to be accomplished by
entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates representing their ownership interests in
Securities, except in the event that use of the book -entry system for the Securities is
discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with
DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name
as may be requested by an authorized representative of DTC. The deposit of Securities with
DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect
any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the Securities; DTC's records reflect only the identity of the Direct Participants to whose
accounts such Securities are credited, which may or may not be the Beneficial Owners. The
Direct and Indirect Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities
may wish to take certain steps to augment the transmission to them of notices of significant
events with respect to the Securities, such as redemptions, tenders, defaults, and proposed
amendments to the Security documents. For example, Beneficial Owners of Securities may
wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain
and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to
provide their names and addresses to the registrar and request that copies of notices be
provided directly to them.
6. Redemption notices shall be sent to DTC. If less than all of the Securities within an
issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of
each Direct Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
respect to Securities unless authorized by a Direct Participant in accordance with DTC's MMI
D-2
Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose accounts Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities will be
made to Cede & Co., or such other nominee as may be requested by an authorized
representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's
receipt of funds and corresponding detail information from Issuer or Agent, on payable date in
accordance with their respective holdings shown on DTC's records. Payments by Participants
to Beneficial Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such Participant and not of DTC, Agent, or Issuer,
subject to any statutory or regulatory requirements as may be in effect from time to time.
Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such
other nominee as may be requested by an authorized representative of DTC) is the
responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be
the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be
the responsibility of Direct and Indirect Participants.
9. DTC may discontinue providing its services as depository with respect to the
Securities at any time by giving reasonable notice to Issuer or Agent. Under such
circumstances, in the event that a successor depository is not obtained, Security certificates are
required to be printed and delivered.
10. Issuer may decide to discontinue use of the system of book -entry -only transfers
through DTC (or a successor securities depository). In that event, Security certificates will be
printed and delivered to DTC.
11. The information in this section concerning DTC and DTC's book -entry system has
been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility
for the accuracy thereof.
D-3
APPENDIX E
FORM OF CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and
delivered by the City of San Rafael (the "City") in connection with the issuance by the City of the
$ City of San Rafael 2009-10 Tax and Revenue Anticipation Notes (the "Notes").
The Notes are being issued pursuant to a resolution adopted by the City Council of the City on
, 2009 (the "Resolution"). The City covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being
executed and delivered by the City for the benefit of the holders and beneficial owners of the
Notes and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2 -
12(b)(5).
Section 2. Definitions. In addition to the definitions set forth in the Resolution, which
apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this
Section, the following capitalized terms shall have the following meanings:
"Dissemination Agent' shall mean the City, or any successor Dissemination Agent
designated in writing by the City and which has filed with the City a written acceptance of such
designation.
"Listed Events" shall mean any of the events listed in Section 3(a) of this Disclosure
Certificate.
WSW means the Municipal Securities Rulemaking Board, which has been designated
by the Securities and Exchange Commission as the sole repository of disclosure information for
purposes of the Rule.
"Participating Underwriter" shall mean any of the original underwriters of the Notes
required to comply with the Rule in connection with offering of the Notes.
"Rule" shall mean Rule 15c2 -12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as the same may be amended from
time to time.
Section 3. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 3, the City shall give, or cause to be given,
notice of the occurrence of any of the following events with respect to the Notes, if material:
(1) Principal and interest payment delinquencies.
(2) Non-payment related defaults.
(3) Unscheduled draws on debt service reserves reflecting financial difficulties.
(4) Unscheduled draws on credit enhancements reflecting financial difficulties.
(5) Substitution of credit or liquidity providers, or their failure to perform.
(6) Adverse tax opinions or events affecting the tax-exempt status of the security.
(7) Modifications to rights of security holders.
(8) Contingent or unscheduled bond calls.
(9) Defeasances.
E-1
(10) Release, substitution, or sale of property securing repayment of the securities.
(11) Rating changes.
(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City
shall as soon as possible determine if such event would be material under applicable Federal
securities law.
(c) If the City determines that knowledge of the occurrence of a Listed Event would be
material under applicable Federal securities law, the City shall promptly file a notice of such
occurrence with the MSRB, in an electronic format as prescribed by the MSRB.
Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9)
need not be given under this subsection any earlier than the notice (if any) of the underlying
event is given to holders of affected Notes pursuant to the Resolution.
Section 4. Termination of Reporting Obligation. The City's obligations under this
Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in
full of all of the Notes. If such termination occurs prior to the final maturity of the Notes, the City
shall give notice of such termination in the same manner as for a Listed Event under Section
3(c).
Section 5. Dissemination Agent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate,
and may discharge any such Agent, with or without appointing a successor Dissemination
Agent. The initial Dissemination Agent shall be the City.
Section 6. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure
Certificate may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of Section 3(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 Notes, or type of business conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion
of nationally recognized Bond Counsel, have complied with the requirements of the Rule at the
time of the primary offering of the Notes, after taking into account any amendments or
interpretations of the Rule, as well as any change in circumstances; and
(c) the proposed amendment or waiver either (i) is approved by holders of the Notes, or
(ii) does not, in the opinion of the Trustee or nationally recognized Bond Counsel, materially
impair the interests of the holders or beneficial owners of the Notes.
Section 7. Additional Information. Nothing in this Disclosure Certificate shall be deemed
to prevent the City from disseminating any other information, using the means of dissemination
set forth in this Disclosure Certificate or any other means of communication, or including any
other information in any notice of occurrence of a Listed Event, in addition to that which is
required by this Disclosure Certificate. If the City chooses to include any information in any
notice of occurrence of a Listed Event in addition to that which is specifically required by this
Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to
update such information or include it in any future notice of occurrence of a Listed Event.
E-2
Section 8. Default. In the event of a failure of the City to comply with any provision of
this Disclosure Certificate any holder or beneficial owner of the Notes may take such actions as
may be necessary and appropriate, including seeking mandate or specific performance by court
order, to cause the City to comply with its obligations under this Disclosure Certificate. A default
under this Disclosure Certificate shall not be deemed an Event of Default under the Resolution,
and the sole remedy under this Disclosure Certificate in the event of any failure of the City to
comply with this Disclosure Certificate shall be an action to compel performance.
Section 9. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination
Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and
the City agrees to indemnify and save the Dissemination Agent, its officers, directors,
employees and agents, harmless against any loss, expense and liabilities which it may incur
arising out of or in the exercise or performance of its powers and duties hereunder, including the
costs and expenses (including attorneys fees) of defending against any claim of liability, but
excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The
obligations of the City under this Section shall survive resignation or removal of the
Dissemination Agent and payment of the Notes.
Section 10. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of
the City, the Dissemination Agent, the Participating Underwriters and holders and beneficial
owners from time to time of the Notes, and shall create no rights in any other person or entity.
Date: , 2009
E-3
CITY OF SAN RAFAEL
0
City Manager
29236-03 JH:CKL
CITY OF SAN RAFAEL, CALIFORNIA
2009-10 TAX AND REVENUE ANTICIPATION NOTES
NOTE PURCHASE AGREEMENT
, 2009
City of San Rafael
1400 Fifth Avenue
San Rafael, CA 94901
Ladies and Gentlemen:
9-4-09
The undersigned (the "Underwriter") offers to enter into this Note Purchase Agreement
(the "Note Purchase Agreement') with the City of San Rafael (the "City"). This offer is made
subject to written acceptance by the City prior to 11:59 p.m., Pacific Daylight Time, on the date
hereof, and, upon such acceptance, this Note Purchase Agreement will be binding upon the
City and the Underwriter.
1. Purchase and Sale of the Notes. Upon the terms and conditions and in reliance
upon the representations, warranties and agreements herein set forth, the Underwriter hereby
agrees to purchase from the City for reoffering to the public, and the City hereby agrees to sell
to the Underwriter for such purpose, all (but not less than all) of the City's 2009-10 Tax and
Revenue Anticipation Notes (the "Notes"), in the aggregate principal amount of
$ . The aggregate purchase price to be paid by the Underwriter for the
Notes shall be $ , being the principal amount of the Notes plus a premium of
$ , less an Underwriter's discount of $
2. The Notes. The Notes shall be dated their date of issuance, shall mature on
, 2010, and are being issued under Resolution No. adopted by the City
Council of the City on September 8, 2009 (the "Resolution"), in full conformity with the
Constitution and laws of the State of California including Article 7.6, Chapter 4, Part 1, Division
2, Title 5 (commencing with Section 53850) of the California Government Code (the "Act'), as
amended and supplemented, and particularly Section 53853(b) of the Act. The Notes will bear
interest at the rate of % per annum. The Notes will be registered initially in the name of
"Cede & Co." as nominee of The Depository Trust Company ("DTC") in New York, N.Y., the
securities depository for the Notes.
3. Use of Documents. The City has delivered to the Underwriter copies of its
Preliminary Official Statement dated 2009 (the "Preliminary Official
Statement"). As of its date, such Preliminary Official Statement has been "deemed final" by the
City for purposes of Securities and Exchange Commission Rule 15c2-12 (the "Rule"), except
for information permitted to be omitted by said Rule. The City agrees to deliver to the
Underwriter a final Official Statement, dated the date hereof (the "Official Statement") within 7
business days from the date hereof and in sufficient time to accompany any confirmations
requesting payment sent to purchasers. The number of Official Statements so delivered will be
sufficient to comply with the requirements of paragraph (b)(4) of the Rule and the Rules of the
Municipal Securities Rulemaking Board. The City has approved the distribution by the
Underwriter of the Official Statement and the City hereby authorizes the Underwriter to use, in
connection with the offer and sale of the Notes, the Official Statement and the Resolution and
all information contained herein and therein and all other documents, agreements, certificates
or statements furnished by the City to the Underwriter or entered into in connection with the
transactions contemplated by this Note Purchase Agreement.
The City will undertake, pursuant to a Continuing Disclosure Certificate (the
"Continuing Disclosure Certificate"), to provide notices of the occurrence of certain events, if
material. A description of such undertaking is set forth in the Preliminary Official Statement and
will also be set forth in the Official Statement.
4. Public Offering of the Notes. The Underwriter agrees to make a bona fide public
offering of the Notes at the price or yield set forth on the cover of the Official Statement. The
Underwriter may offer and sell the Notes to certain dealers and banks at prices lower than the
public offering price stated on the cover of the Official Statement and said public offering price
may be changed from time to time by the Underwriter.
5. Closing. At 8:00 a.m., Pacific Daylight Time, on 2009, or at such
other time and on such other date as shall have been mutually agreed upon by the City and the
Underwriter (the "Issue Date"), the City will deliver to the Underwriter, through DTC, the Notes
in registered form duly executed and other documents hereinafter mentioned, and the
Underwriter will accept such delivery and pay the purchase price thereof in immediately
available funds to the order of the City (the "Closing").
6. Representations. Warranties and Agreements of the Citv. The City hereby
represents, warrants and agrees with the Underwriter that:
(A) The City is a general law city and municipal corporation, organized and
existing pursuant to the Constitution and laws of the State of California (the "State"),
and has all requisite right, power and authority to conduct its business, to adopt the
Resolution, to issue the Notes and to execute this Note Purchase Agreement and the
Continuing Disclosure Certificate (collectively, the "Documents"), and to perform its
obligations under each such document or instrument, and to carry out and effectuate the
transactions contemplated by the Documents.
(B) (i) At or prior to the Closing, the City will have taken all actions
required to be taken by it to authorize the issuance and delivery of the Notes; (ii) the
execution and delivery of the Notes and this Note Purchase Agreement, the adoption by
the City of the Resolution, and the performance by the City of the obligations contained
in the Documents, have been duly authorized and such authorization will be in full force
and effect at the time of the Closing; (iii) this Note Purchase Agreement has been duly
executed and delivered and constitutes the valid and legally binding obligation of the
City enforceable against the City in accordance with its terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws
in effect for the protection of debtors and by application of general principles of equity;
(iv) the City Council has duly authorized the consummation by the City of all transactions
contemplated by this Note Purchase Agreement, the Resolution and the Continuing
Disclosure Certificate; and (v) the City has authorized and approved the Preliminary
2
Official Statement and the Official Statement and the distribution thereof by the
Underwriter.
(C) No consent, approval, authorization, license, order, filing, registration,
qualification, election or referendum, of or by any person, organization, court or
governmental agency or public body whatsoever is required for the consummation of the
transactions contemplated hereby, except for such actions as have been taken or as
may be necessary to qualify the Notes for offer and sale under the Blue Sky or other
securities laws and regulations of such states and jurisdictions of the United States as
the Underwriter may designate (except that the City shall not be responsible for the
failure to comply with any such laws of regulations with regard to Blue Sky).
(D) The City has complied in all material respects with the Securities Act of
1933, as amended (the "Securities Acf'), and, in so far as it relates to the Notes, the
Internal Revenue Code of 1986 (the "Code").
(E) To the best knowledge of the City, based upon reasonable inquiry, as of
the time of acceptance hereof, there is no action, suit, proceeding, inquiry or
investigation, at law or in equity, before any court or public body, pending or threatened
against the City: (i) in any way affecting the existence of the City or in any way
challenging the respective powers of the City or the entitlement of the officials of the City
to their respective offices; or (ii) seeking to restrain or enjoin the sale, issuance or
delivery of any of the Notes, the application of the proceeds of the sale of the Notes, or
the collection of revenues or taxes of the City pledged or to be pledged or available to
pay the principal of and interest on the Notes, or the pledge thereof, or in any way
contesting the validity of the Notes or the Note Purchase Agreement, or contesting the
powers or authority of the City with respect to the Notes or the Note Purchase
Agreement; or (iii) in which a final adverse decision could (a) materially adversely affect
the consummation of the transactions contemplated by this Note Purchase Agreement,
(b) declare this Note Purchase Agreement to be invalid or unenforceable in whole or in
material part, or (c) adversely affect the exclusion from gross income of the interest paid
on the Notes for purposes of federal income taxation and the exemption of such interest
from State income taxation.
(F) As of the date thereof, the Preliminary Official Statement with respect to
the information therein regarding the City did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they were
made, not misleading, except for information permitted to be omitted therefrom by the
Rule 15c2-12.
(G) As of the date thereof, the Official Statement with respect to the
information therein regarding the City does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading. If
between the date of the Official Statement and the Closing (i) any event shall occur or
any pre-existing fact or condition shall become known which might or would cause the
Official Statement, as then supplemented or amended, to contain any untrue statement
of a material fact or to omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading,
the City shall promptly notify the Underwriter thereof, and (ii) if in the reasonable opinion
of the Underwriter, such event, fact or condition requires the preparation and publication
of a supplement or amendment to the Official Statement, the City will at its expense
supplement or amend the Official Statement in a form and in a manner jointly approved
by the Underwriter and the City, which approval shall not be unreasonably withheld.
(H) The City undertakes that, for a period beginning with the day on which
the Notes are delivered to the Underwriter and ending on the earlier of (i) the 25th day
following the end of the underwriting period, as defined in the Rule under the Securities
Exchange Act of 1934, or (ii) 90 days following Closing, it will (a) apprise the Underwriter
of all material developments, if any, occurring with respect to the City and (b) if
requested by the Underwriter, prepare a supplement to the Official Statement in respect
of any such material event. The period described in the preceding sentence shall be
reduced to twenty-five (25) days if the Official Statement has been deposited with a
nationally recognized municipal securities information depository and is available from
such depository upon request. The Underwriter hereby agrees to use its best efforts to
deposit the Official Statement with a nationally recognized municipal securities
information depository so that such period will be reduced to twenty-five (25) days.
Unless otherwise notified in writing by the Underwriter, the City may assume that the
end of this underwriting period occurs on the date when the City delivers the Notes to
the Underwriter.
(1) Between the date hereof and the Closing, without the prior written
consent of the Underwriter, the City will not have issued any bonds, notes or other
obligations for borrowed money except as may be described in or contemplated by the
Official Statement.
(J) Any certificates signed by any official of the City and delivered to the
Underwriter shall be deemed a representation and warranty by the City to the
Underwriter as to the statements made therein but not of the person signing the same.
(K) The City will punctually pay or cause to be paid the principal of and
interest to become due on the Notes in strict conformity with the terms of the Resolution
and the Notes and it will faithfully observe and perform all of the conditions, covenants
and requirements of the Notes and the Documents.
(L) The City will furnish such information, execute such instruments and take
such other action in cooperation with the Underwriter if and as the Underwriter may
reasonably request in order (i) to qualify the Notes for offer and sale under the Blue Sky
or other securities laws and regulations of such states and jurisdictions of the United
States as the Underwriter may designate and (ii) to determine the eligibility of the Notes
for investment under the laws of such states and other jurisdictions and will, if requested
by the Underwriter, use its best efforts to continue such qualifications in effect so long
as required for distribution of the Notes; provided that the City shall not be required to
pay any fees in connection with the foregoing or to subject itself to service of process in
any jurisdiction in which it is not presently so subject.
(M) Between the date hereof and the Closing, the City will not modify or
amend the Resolution without the prior written consent of the Underwriter.
(N) The City will enter into the Continuing Disclosure Certificate in order to
provide the information required therein. Except as disclosed in the Official Statement,
the City has not failed to comply in all material respects with a continuing undertaking
under the Rule during the previous five years.
7. Conditions to Obligations of Underwriter at Closing. The Underwriter has
entered into this Note Purchase Agreement in reliance upon the representations and warranties
of the City contained herein and the performance by the City of its obligations hereunder, as of
the date hereof and as of the Closing. The obligation of the Underwriter to purchase the Notes
at the Closing is subject to the following further conditions, any or all of which can be waived by
the Underwriter in writing:
(A) The representations and warranties of the City contained herein shall be
true and correct in all material respects at the date hereof and at and as of the Closing,
as if made at and as of the Closing, and the statements made in all certificates and
other documents delivered to the Underwriter at the Closing and otherwise pursuant
hereto shall be true and correct in all material respects at and as of the Closing;
(B) At and as of the Closing (i) the Official Statement, this Note Purchase
Agreement, the Continuing Disclosure Certificate and the Resolution shall be in full force
and effect and shall not have been amended, modified or supplemented except as may
have been jointly agreed to in writing by the City and the Underwriter; (ii) all actions
under the Act which, in the opinion of Jones Hall, A Professional Law Corporation, Bond
Counsel, shall be necessary in connection with the transactions contemplated hereby,
shall have been duly taken and shall be in full force and effect; and (iii) the City shall
perform or have performed all of its obligations required under or specified in the
Resolution or this Note Purchase Agreement to be performed at or prior to the Closing;
(C) To the best knowledge of the City, based on reasonable inquiry, no
action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any
court or public body, is pending or threatened against the City which has any of the
effects described in Paragraph 6(E) hereof or contesting in any way the completeness
or accuracy of the Official Statement;
(D) No order, decree or injunction of any court of competent jurisdiction, nor
any order, ruling or regulation of the Securities and Exchange Commission, has been
issued or made with the purpose or effect of prohibiting the issuance, offering or sale of
the Notes as contemplated hereby and no legislation has been enacted, or a bill
favorably reported for adoption, or a decision by any court rendered, or a ruling,
regulation, proposed regulation or official statement by or on behalf of the Securities and
Exchange Commission or other governmental agency having jurisdiction of the subject
matter has been made or issued, to the effect that the Notes or any other securities of
the City or of any similar body of the type contemplated herein are not exempt from the
registration, qualification or other requirements of the Securities Act and as then in
effect, or of the Trust Indenture Act of 1939, as amended and as then in effect; and
(E) At or prior to the Closing, the Underwriter shall have received a copy of
the following documents in each case dated at and as of the Closing and satisfactory in
form and substance to the Underwriter:
(1) An approving opinion of Bond Counsel as to the Notes in the form
attached to the Official Statement as Appendix C, addressed to the City and
upon which the Underwriter may rely;
(2) A supplemental opinion of Bond Counsel, addressed to the
Underwriter, to the effect that:
(i) the City Council has full right and lawful authority to adopt
the Resolution and to enter into and perform its obligations thereunder
and under this Note Purchase Agreement, and this Note Purchase
Agreement has been duly authorized, executed and delivered by the City,
and the Resolution and the Note Purchase Agreement (assuming the due
authorization, execution and delivery of such other documents by and the
validity of such other documents against the other party thereto)
constitute valid and binding obligations of the City, enforceable against
the City in accordance with their respective terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting creditors' rights generally and by
principles of equity if equitable remedies are sought and by the limitations
on legal remedies against governmental entities in the State and except
that no opinion need be expressed with respect to any indemnification or
contribution provisions contained in this Note Purchase Agreement;
(ii) the statements contained in the Official Statement on the
cover and in the sections thereof entitled "INTRODUCTION," "THE
NOTES," and "TAX MATTERS," insofar as such statements purport to
summarize certain provisions of the Resolution, the Notes and the
exemption from State of California personal income tax and the exclusion
from gross income for Federal income tax purposes of interest on the
Notes, present an accurate summary of such provisions, such exemption
and such exclusion; and
(iii) the Notes are exempt from registration pursuant to the
Securities Act and the Resolution is exempt from qualification pursuant to
the Trust Indenture Act of 1939, as amended.
(3) The certificate of the City, dated the Closing Date to the effect
that:
(i) the City is a general law city and municipal corporation
duly organized and existing under the Constitution of the laws of the
State;
(ii) the Resolution was duly adopted at a meeting of the City
Council which was called and held pursuant to law with all public notice
required by law and at which a quorum was present and acting
throughout, and the Resolution is in full force and effect and has not been
amended, modified or rescinded;
(iii) the adoption of the Resolution and the execution and
delivery of the Notes, the Continuing Disclosure Certificate and this Note
Purchase Agreement and compliance with the provisions hereof and
thereof, under the circumstances contemplated thereby and hereby, do
not and will not conflict with or constitute on the part of the City a breach
of or default under any agreement or other instrument applicable or
binding upon the City or any of its properties or any existing law,
regulation, court order or consent decree to which the City or any of its
properties is subject;
(iv) the City has full right and lawful authority to deliver the
Official Statement, to execute and deliver the Notes, and to execute and
deliver this Note Purchase Agreement, to adopt the Resolution and the
City has duly authorized, executed and delivered the Official Statement
and this Note Purchase Agreement;
(v) To the best knowledge of the City, based on reasonable
inquiry, there is no action, suit or proceeding, inquiry or investigation
before or by any court, public board or body, other than as disclosed in
the Official Statement pending or, to the knowledge of the City,
threatened against or affecting the City, (a) contesting in any way the
completeness or accuracy of the Official Statement, or wherein an
unfavorable decision, ruling or finding is likely to have a material adverse
effect on the financial condition of the City, the transactions contemplated
by the Note Purchase Agreement, the Continuing Disclosure Certificate,
the Resolution or by the Official Statement, or (b) which is likely to
adversely affect the validity or enforceability of, or the authority or ability
of the City to perform its obligations under the Notes, the Note Purchase
Agreement, the Continuing Disclosure Certificate, the Resolution, or any
other agreement or instrument to which the City is a party and which is
used or contemplated for use in consummation of the transactions
contemplated by the Note Purchase Agreement, the Continuing
Disclosure Certificate, the Resolution or the Official Statement; and
(vi) The representations and warranties of the City herein are
true and correct in all material respects as of the date made and as of the
date of the Closing, and the City has performed all its obligations required
under or specified in the Resolution and this Note Purchase Agreement
to be performed at or prior to the Closing; and
(vii) Such official has reviewed the Official Statement and on
such basis certifies that, to the best of his knowledge after reasonable
inquiry, the Official Statement does not contain any untrue statement of a
material fact and does not omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading;
(4) A certificate of the City Clerk of the City, together with a fully
executed copy of the Resolution, to the effect that:
(i) such copy is a true and correct copy of the Resolution; and
(ii) the Resolution was duly adopted and has not been
modified, amended, rescinded or revoked and is in full force and effect at
and as of the Closing, except for amendments, if any, adopted with the
consent of the Underwriter;
(5) An non -arbitrage certification from the City in form and substance
satisfactory to Bond Counsel, signed by an official of the City;
(6) Evidence satisfactory to the Underwriter that at and as of the
Closing the Notes have the same rating, if any, from Standard & Poor's Ratings
Group as was used on the date of pricing to determine the interest rate for the
Notes;
(7) Certified copies of the Resolution and one executed original of
each of the documents and such additional legal opinions, certificates,
proceedings, instruments and other documents as the Underwriter or Bond
Counsel may reasonably request in order to evidence compliance by the City
with legal requirements, the truth and accuracy, at and as of the Closing, of the
representations, warranties and agreements of the Authority herein contained
and the statements contained in the Official Statement, and the due performance
and satisfaction by the City at or prior to such time of all agreements then to be
performed and all conditions then to be satisfied by the City.
(8) An opinion of Jones Hall, A Professional Law Corporation, as
disclosure counsel to the City, addressed to the Underwriter, to the following
effect: We are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the Official
Statement and make no representation that we have independently verified the
accuracy, completeness or fairness of any such statements. However, in
connection with the Official Statement, we have reviewed certain documents.
During the course of our work on this matter, no facts have come to our attention
that cause us to believe that the Official Statement (except for any financial and
statistical data and forecasts, numbers, estimates, assumptions and expressions
of opinion, and information concerning the Depository Trust Company and the
book -entry system for the Bonds, contained or incorporated by reference in the
Official Statement and the appendices to the Official Statement, which we
expressly exclude from the scope of this sentence) as of the date of the Official
Statement or the date hereof contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
8. Termination of Obligations of Underwriter. If the City shall be unable to satisfy
the conditions set forth in Section 7 to the obligations of the Underwriter contained in this Note
Purchase Agreement, the obligations of the Underwriter under this Note Purchase Agreement
may be terminated by the Underwriter by notice to the City at, or at any time prior to, the
Closing. Notwithstanding any provision herein to the contrary, the performance of any and all
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conditions contained herein for the benefit of the Underwriter may be waived by the Underwriter
in writing in its sole discretion.
The Underwriter shall also have the right to terminate, in its sole discretion, its
obligations under this Note Purchase Agreement, by notice to the City at, or at any time prior to
the Closing, if between the date hereof and the Closing: (i) any event occurs or information
becomes known, which, in the reasonable professional judgment of the Underwriter, makes
untrue any statement of a material fact set forth in the Official Statement or results in an
omission to state a material fact necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading; (ii) the market for the Notes or the
market price for the Notes shall have been materially and adversely affected, in the reasonable
professional judgment of the Underwriter, by (a) legislation enacted by the Congress of the
United States, or passed by either House of Congress or favorably reported for passage to
either House of Congress by any Committee of such House to which such legislation has been
referred for consideration, or formally proposed, or introduced on the floor of either House of
Congress, or by the legislature of the State of California or by the United States Tax Court, or a
ruling, order, or regulation (final, temporary or proposed) made by the Treasury Department of
the United States or the Internal Revenue Service or other federal or State Court or other
authority, which would have the effect of changing, directly or indirectly, the federal income tax
consequences or State income tax consequences of interest on obligations of the general
character of the Notes in the hands of the holders thereof, or (b) any new outbreak or
escalation of hostilities or other national calamity or crisis in the financial markets of the United
States which has a material adverse effect on the market price of the Notes, or (c) a general
suspension of trading on the New York Stock Exchange, or of fixing of minimum or maximum
prices of trading on the New York Stock Exchange, or of fixing of minimum or maximum prices
for trading or maximum ranges for prices for securities on the New York Stock Exchange,
whether by virtue of a determination by that Exchange or by order of the Securities and
Exchange Commission or any other governmental authority having jurisdiction, or (d) a general
banking moratorium declared by either federal or State of New York authorities having
jurisdiction; or (iii) additional material restrictions not in force or being enforced as of the date
hereof shall have been imposed upon trading in securities generally by any governmental
authority or by any national securities exchange which in the reasonable professional judgment
of the Underwriter, materially and adversely affect the market price for the Notes.
9. Conditions to Obligations of the City. The performance by the City of its
obligations under this Note Purchase Agreement with respect to issuance, sale and delivery of
the Notes to the Underwriter is conditioned upon (i) the performance by the Underwriter of its
obligations hereunder; and (ii) receipt by the City and the Underwriter of opinions and
certificates being delivered at or prior to the Closing by persons and entities other than the City.
10. Expenses. (A) The City shall bear all expenses incident to the performance of its
obligations hereunder, including but not limited to: (i) the cost of the preparation and
reproduction of the Resolution; (ii) the fees and disbursements of Bond Counsel and Disclosure
Counsel; (iii) the fees for rating the Notes; (iv) the cost of printing and distribution of the
Preliminary Official Statement and the Official Statement; (v) fees and expenses of
Underwriter's Counsel; and (vi) DTC and CUSIP Bureau costs and fees. To the extent the
Underwriter pays any of the foregoing expenses and fees on behalf of the City, the City shall
reimburse the Underwriter at the Closing.
(B) The Underwriter shall bear all of its own expenses and fees incident to the
purchase and resale of the Notes and costs of qualifying the Notes for sale under the Blue Sky
laws of any state.
11. Notices. Any notice or other communication to be given under this Note
Purchase Agreement (other than the acceptance hereof as specified in the first paragraph
hereof) shall be given by telephone or telex, confirmed in writing, or by delivering the same in
writing, if to the City, to the address first written above, attention: City Treasurer/Finance
Director, or if to the Underwriter, to
12. Parties in Interest: Survival of Representations and Warranties. This Note
Purchase Agreement when accepted by the City in writing as specified herein all constitute
the entire agreement between the City and the Underwriter and is made solely for the benefit of
the City and the Underwriter (including their respective successors and assigns). No other
person shall acquire or have any right hereunder or by virtue hereof. The obligations of the City
arising out of its representations and warranties in this Note Purchase Agreement shall not be
affected by any investigation made by or on behalf of the Underwriter.
13. Execution in Counterparts. This Note Purchase Agreement may be executed in
counterparts, each of which shall be regarded as an original and all of which shall constitute
one and the same document.
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14. Applicable Law. This Note Purchase Agreement shall be interpreted under,
governed by and enforced in accordance with the laws of the State of California.
The foregoing is hereby agreed to
and accepted as of the date first
above written:
CITY OF SAN RAFAEL
City Treasurer/Finance Director
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Very truly yours,
[UNDERWRITER]
a
Authorized Representative