HomeMy WebLinkAbout2011-06-06_cityofsanrafael_15873e546f722409597caea6ff296f3cCITY OF
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Agenda Item No: 1
Meeting Date: June 6, 2011
SAN RAFAEL CITY COUNCIL AGENDA REPORT
Department: Finance
Prepared by: Janet Pendoley
Interim Finance Director
City Manager Approval. 1.
SUBJECT: Resolution Authorizing and Approving the Borrowing of Funds for Fiscal Year
2011-2012 and the Issuance and Sale of a 2011-2012 Tax and Revenue
Anticipation Notes
RECOMMENDATION: Adopt the Resolution Authorizing the Issuance of Tax and
Revenue Anticipation Notes for Fiscal Year 2011-2012.
BACKGROUND:
With the continuing 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
$10,000,000. The maturity of the TRANs will not exceed a period of thirteen months, and the
notes will be issued effective in July 2011. The interest rate on the notes will depend on
competitive rates at the time of the sale.
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 .2011-2012
fiscal year.
The attached 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
FOR CITY CLERK ONLY
File No.:
Council Meeting:
Disposition:
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2
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. Jones Hall and Northcross, Hill and
Ach, Inc. are the team that provided services for past TRANs. Both are knowledgeable of the
City and well qualified firms. Staff took an extra step this year to obtain three competitive
quotes for financial advisor services and determined that Northcross, Hill and Ach, Inc. offered
services at the lowest price.
The Resolution authorizes the issuance by the City of San Rafael in 2011 for TRANs in an
amount not -to -exceed $10,000,000. Staff is working with Northcross, Hill and Ach, Inc. to
finalize the issuance amount. The issuance amount will never be more than cash shortfall.
Jones Hall has drafted the Preliminary Official Statement that is attached to this report. 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 data that is likely to have significance for a
reasonable investor in deliberations of 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 its 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:
Upon approval of the resolution and issuance of the TRANs, the proceeds of San Rafael
TRANs not immediately needed for cash flow purposes would be placed into securities
consistent with City investment practices and State law. Maturities would be matched to
payment dates for principal and interest.
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)
Draft Note Purchase Contract
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 2011-2012 AND THE ISSUANCE AND
SALE OF 2011-12 TAX AND REVENUE ANTICIPATION NOTES IN
AN AMOUNT NOT TO EXCEED $10,000,000 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, 2011 and ending June 30, 2012 ("Fiscal
Year 2011-12");
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 2011-12, 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 2011-12, and not pursuant to any common plan of
financing, the City hereby determines to and shall borrow the principal amount of not -to -
exceed Ten Million Dollars ($10,000,0001) by the issuance of temporary notes under the Law,
designated "City of San Rafael, California 2011-12 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 three percent (3%) 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 2011-12. 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, 2012; (b) an amount equal
to fifty percent (50%) of the principal amount of the Notes in the month of May, 2012; and (c)
an amount sufficient to pay interest as due on the Notes at their maturity, in the month of June,
2012 (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 2011-12 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 "2011-12 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, 2012, 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 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 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 and the Finance Director (each an
"Authorized Officer") are hereby separately 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 deliver 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 deliver 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 Cleric 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. Approval of Preliminary and Final Official Statement. Jones Hall, A
Professional Law Corporation, as disclosure counsel to the City, has prepared a preliminary
official statement describing the Notes (the "Preliminary Official Statement"). The City Council
hereby approves the Preliminary Official Statement in the form presented to the Council at this
meeting. The Authorized Officer is hereby authorized and directed to execute a certificate to the
effect that the Preliminary Official Statement was deemed "final" as of its date for purposes of
Rule 15c2-12 of the Securities Exchange Act of 1934, and the Authorized Officer is hereby
authorized to so deem such Preliminary Official Statement final.
The execution of the final Official Statement (the "Official Statement"), which shall
include such changes and additions to the Preliminary Official Statement deemed advisable by
the Authorized Officer or any other qualified officer of the City and such information permitted
to be excluded from the Preliminary Official Statement pursuant to the Rule, shall be conclusive
evidence of the approval of the Official Statement by the City. The City Council authorizes the
distribution by E.J. De La Rosa & Co., Inc. (the "Underwriter") of the Official Statement to
prospective purchasers of the Notes.
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.
Section 17. Sale of Notes. The Notes are hereby authorized to be sold to the Underwriter
pursuant to the Note Purchase Agreement, between the City and the Underwriter, in
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substantially the form on file with the City Clerk, with such changes or additions as shall be
approved by an Authorized Officer, so long as the interest rate on the Notes does not exceed
3%, and the compensation paid to the Underwriter does not exceed one half of one percent
(0.50%) of the principal amount of the Notes.
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.
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 Monday, the 6th of June, 2011, by the following vote, to wit:
AYES: COUNCILMEMBERS:
NOES: COUNCILMEMBERS:
ABSENT: COUNCILMEMBERS:
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ESTHER C. BEIRNE, City Clerk
No.1
EXHIBIT A
FORM OF NOTE
CITY OF SAN RAFAEL, CALIFORNIA
2011-12 TAX AND REVENUE ANTICIPATION NOTE
INTEREST RATE:
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0
REGISTERED OWNER:
PRINCIPAL SUM:
MATURITY DATE:
_, 2012
CEDE & CO.
****
ISSUE DATE:
July _, 2011
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 June 6, 2011 (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 • 2011-12. 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, 2012; (b) ) an amount equal to fifty
percent (50%) of the principal amount of the Notes in the month of May, 2012; and (c) an
amount sufficient to pay interest as due on the Notes at their maturity, in the month of June,
2012 (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 2011-12 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
an interest 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:
an
City Clerk
CITY OF SAN RAFAEL
In
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.
CITY OF SAN RAFAEL
2011-12 Tax and Revenue Anticipation Notes
Purchase Contract
June _, 2011
City Council
City of San Rafael
1400 Fifth Avenue
San Rafael, California 94109
Members of the Council:
This contract sets forth the terms and conditions of the purchase by E.J. De la
Rosa & Co., Inc. (the "Underwriter") of Tax and Revenue Anticipation Notes (the
"Notes") to be issued by the City of San Rafael (the "City") in conformance with Article
7.6 of the Government code of the State of California commencing with Section 53850
and a Resolution of Issuance adopted by the City.
It is understood and agreed that the Notes will be in the principal amount of
$ and will be due in full plus all interest at the maturity date of
July _, 2012. Payment of interest on and principal of the Notes at maturity will be
made at the Depository Trust Company in New York in immediately available funds.
The Notes will be dated as of their date of delivery.
The Notes will be issued in registered form and will be registrable and
deregistrable as to principal and interest.
The Underwriter hereby agrees to purchase and the City hereby agrees to sell the
Notes at an interest rate of % and a purchase price of %, with a yield of
_%. (Underwriter's compensation of $ earned through a portion of the
premium: % coupon priced to yield % produces $ in premium. The
premium is used to compensate underwriting and pay the costs of issuance.)
Purchase price paid to City is $ which is par, plus premium, less
Underwriter's compensation of $
The City agrees to pay from its own funds any fees to bond counsel, disclosure
counsel, financial advisor and paying agent, and any charges for printing and
distributing the Official Statement describing the Notes and will be responsible for
paying for printing and delivery of the Notes.
It is agreed and understood that the Underwriter's obligation to purchase the
Notes is contingent upon the following conditions as of the Closing Date:
a) That the City is a duly constituted public agency and has the authority
to issue the tax and revenue anticipation notes.
City Council
City of San Rafael
June _, 2011
Page 2
b) That in the unqualified legal opinion of bond counsel, Jones Hall, A
Professional Law Corporation, the Notes have been duly authorized
and are issued in full conformity with the State constitution and laws
and that all interest on the Notes is excluded from Federal and State of
California income.
C) That there is no litigation filed, pending or threatened which would
effect the validity or tax exemption of the Notes.
d) That, according to an appropriate official of the City, that the Official
Statement is accurate and fairly represents applicable and appropriate
information concerning the City, its organization, finances and
economy and does not omit information that if included would more
accurately set forth pertinent facts concerning the City, its finances or
the Note sale.
Sure esGnrs
This Purchase Contract is made solely for the benefit of the City and the
Underwriter (including their successors or assigns) and no other person will acquire
or have any right hereunder or by virtue hereof. The representations, warranties, and
agreements contained herein will remain operative and in full force and effect and
will survive delivery of and payment for the Notes hereunder.
Governing Law
This Purchase Contract will be governed by the laws of the State of California.
Effectiveness
This Purchase Contract will become effective upon the execution of the
acceptance hereof by the City.
E.J. DE LA ROSA & CO., INC.
Vice President
CITY OF SAN RAFAEL
City Manager
Time of Execution:
Jones Hall Draft 5-15-11
PRELIMINARY OFFICIAL STATEMENT DATED JUNE 17, 2011
NEW ISSUE - FULL BOOK ENTRY
BANK QUALIFIED
RATING: Standard Poor's: " "
See "Rating."
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, Califomia, 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; it should be noted, however, that for the purpose of
computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is
taken into account in determining certain income and eamings, and the Notes are "qualified tax-exempt obligations" within the
meaning of section 265(b)(3) of the Internal Revenue Code of 1986s. In the further opinion of Bond Counsel, such interest is
exempt from California personal income taxes. See "TAX MATTERS."
Dated: Date of Delivery
-
CITY OF SAN RAFAEL
2011-12 TAX AND REVENUE ANTICIPATION NOTES
BANK QUALIFIED
Due: , 2012
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 2011-12 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, 2012; (b) an amount equal to 50% of the principal amount of the
Notes in the month of May, 2012; and (c) an amount sufficient to pay interest as due on the Notes at their maturity, in the
month of June, 2012 (such pledged amounts being called the "Pledged Revenues" in this Official Statement). The Pledged
Revenues will be deposited and held by the City in a special account to be designated the "2011-12 Tax and Revenue
Anticipation Note Special Account" (the "Special Account"), and applied as directed in the City Council's Resolution adopted
, 2011.
The following firm, serving as financial advisor to the City, has structured this issue.
NORTHCROSSIHILLIACH
Vinemcial rz1 ,i>c}ts to 1'rrL>lr'c A,cnc'H
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 July
2011.
I NVESTMENT BANKERS
Dated: June—, 2011
Preliminary, subject to change.
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
Use of Official Statement. 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
other purpose. This Official Statement is not to be construed as a contract with the purchasers of the
Notes.
Estimates and Forecasts. When used in this Official Statement and in any continuing
disclosure by the City, in any press release and in any oral statement made with the approval of an
authorized officer of the City, the words or phrases "will likely result," "are expected to "will continue," "is
anticipated," "estimate," "project," "forecast," "expect," "intend" and similar expressions identify "forward
looking statements." Such statements are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in such forward-looking statements. Any forecast is
subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be
realized and unanticipated events and circumstances may occur. Therefore, there are likely to be
differences between forecasts and actual results, and those differences may be material. The information
and expressions of opinion in this Official Statement are subject to change without notice, and neither the
delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, give rise
to any implication that there has been no change in the affairs of the City since the date of this Official
Statement.
Limit of Offering. No dealer, broker, salesperson or other person has been authorized by the
City to give any information or to make any representations in connection with the offer or sale of the
Notes other than those contained in this Official Statement and if given or made, such other information or
representation must not be relied upon as having been authorized by the City or the Underwriter. This
Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be
any sale of the Notes by a person in any jurisdiction in which it is unlawful for such person to make such
an offer, solicitation or sale.
Involvement of Underwriter. The Underwriter has reviewed the information in this Official
Statement in accordance with, and as a 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 information and expressions of
opinions in this Official Statement are subject to change without notice and neither delivery of this Official
Statement nor any sale made under this Official Statement shall, under any circumstances, create any
implication that there has been no change in the affairs of the City since the date hereof. All summaries
of the documents referred to in this Official Statement, are made subject to the provisions of such
documents, respectively, and do not purport to be complete statements of any or all of such provisions.
THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON AN EXCEPTION FROM THE REGISTRATION REQUIREMENTS
CONTAINED IN SUCH ACT. THE NOTES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES LAWS OF ANY STATE.
In connection with the offering of the Notes, the Underwriter may overallot or affect transactions
which stabilize or maintain the market price of the Notes at a level above that 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 dealer banks and banks acting as agent
and others at prices lower than the public offering prices stated on the cover page of this Official
Statement, and the Underwriter may change those public offering prices from time to time.
The City maintains a website. However, the information presented there is not a part of this
Official Statement and should not be relied upon in making an investment decision with respect to the
Notes.
CITY OF SAN RAFAEL
CITY COUNCIL MEMBERS
Albert J. Boro, Mayor
Greg Brockbank, Vice Mayor
Damon Connolly, Council Member
Barbara Heller, Council Member
Marc Levine, Council Member
CITY STAFF
Nancy Mackle, City Manager
Jim Schutz, Assistant City Manager
Rob Epstein, Esq., City Attorney
Janet Pendoley, Interim Finance 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........................................................................................................................1
THENOTES...............................................................................................................................2
Descriptionof the Notes..........................................................................................................
2
SECURITY FOR AND SOURCES OF PAYMENT OF THE NOTES...........................................3
Securityfor the Notes..............................................................................................................3
Available Sources of Repayment.........................................................
CashFlow...............................................................................................................................4
CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING CITY
REVENUES AND APPROPRIATIONS....................................................................................7
Limitationson Revenues.........................................................................................................7
Expenditures and Appropriations.............................................................................................9
FutureInitiatives....................................................................................................................10
RISKFACTORS.......................................................................................................................10
Bankruptcy Considerations....................................................................................................10
Limitationson Remedies.......................................................................................................10
NaturalDisasters...................................................................................................................11
TAXMATTERS.........................................................................................................................11
LEGALMATTERS....................................................................................................................13
RATING....................................................................................................................................13
LITIGATION..............................................................................................................................13
UNDERWRITING.....................................................................................................................13
,,CONTINUING DISCLOSURE...................................................................................................14
ADDITIONAL INFORMATION..................................................................................................14
APPENDIX A - CITY OF SAN RAFAEL GENERAL DEMOGRAPHIC
AND FINANCIAL INFORMATION
APPENDIX B - COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED
JUNE 30, 2010
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
2011-12 TAX AND REVENUE ANTICIPATION NOTES
BANK QUALIFIED
INTRODUCTION
This Official Statement provides information in connection with the issuance by the City
of San Rafael (the "City") of its 2011-12 Tax and Revenue Anticipation Notes (the "Notes").
The City. The City is located 17 miles north of San Francisco in Marin County (the
"County"). Encompassing approximately 22 square miles, of which 5 square miles are water
and tide lands, the City is largely built -out and serves a population of approximately 58,136.
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.
For other selected information concerning the City, see "APPENDIX A - City of San
Rafael General Demographic and Financial Information."
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
, 2011 (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 2011-12 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 — City of
San Rafael General Demographic and Financial Information" and "APPENDIX B —
Comprehensive Annual Financial Report for the Year Ended June 30, 2010."
Bank Qualified. The City has designated the Notes as "qualified tax-exempt
obligations" pursuant to Section 265(b)(3) of the Internal Revenue Code of 1986. Such section
provides an exception to the prohibition against the ability of a "financial institution" (as defined
in the Internal Revenue Code of 1986) to deduct its interest expense allocable to tax-exempt
interest. See "TAX MATTERS."
Preliminary; subject to change.
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 fiscal year
2010-11.
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.
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."
2
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 2011-12 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 "2011-12 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, 2012; (b) an amount equal to 50% of the principal amount of the Notes in the month of
May, 2012; and (c) an amount sufficient to pay interest as due on the Notes at their maturity, in
the month of June, 2012 (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, 2012, 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 — City of San Rafael General Demographic and Financial Information" and
"APPENDIX B — Comprehensive Annual Financial Report for the Year Ended June 30, 2010."
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.
During fiscal year 2011-12, 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 ratio of estimated Unrestricted Moneys to the amount of
Unrestricted Moneys needed to pay principal of and interest on the Notes is :1.
3
The table below gives detail as to the sources of Unrestricted Moneys and the ratio of
Unrestricted Moneys to Note repayment.
City of Sart Rafael
Estimated Unrestricted General Fund Revenues Fiscal Year 2011-12
Source Amount
Available Cash Balance July 1, 2010
Taxes
Other Revenue
Transfers In From Other City Funds
Proceeds of the Notes
Total Unrestricted Moneys(i)
Principal Plus Interest for Note Payment
Ratio of Unrestricted Moneys to Note Repayment
(1) Includes proceeds of the Notes.
See also "APPENDIX A — City of San Rafael General Demographic and Financial
Information" and "APPENDIX B — Comprehensive Annual Financial Report for the Year Ended
June 30, 2010."
Cash Flow
The City has prepared the accompanying monthly General Fund cash flow statements
covering the 2010-11 fiscal year and the projected 2011-12 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
Limitations on Revenues
Article XIIIA of the California Constitution. Article XIIIA of the State Constitution,
adopted and known as Proposition 13, was approved by the voters in June 1978. Section 1(a)
of Article XIIIA limits the maximum ad valorem tax on real property to one percent of "full cash
value," and provides that such tax shall be collected by the counties and apportioned according
to State law. Section 1(b) of Article XIIIA provides that the one -percent limitation does not apply
to valorem taxes levied to pay interest and redemption charges on (i) indebtedness approved
by the voters prior to July 1, 1978, or (ii) bonded indebtedness for the acquisition or
improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast
on the proposition, or (iii) bonded indebtedness incurred by a school district or community
college district for the construction, reconstruction, rehabilitation or replacement of school
facilities or the acquisition or lease of real property for school facilities, approved by 55% of the
voters of the district, but only if certain accountability measures are included in the proposition.
The tax for payment of the City's general obligation bonds falls within the exception for bonds
approved by a two-thirds vote.
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 two percent per year, or to reflect a reduction in the consumer price index or
comparable data for the area under taxing jurisdiction, or may be reduced in the event of
declining property value caused by substantial damage, destruction or other factors. 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 1% 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 purchased, newly constructed or a change in ownership has occurred. 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 California State Supreme Court and the United States Supreme Court have
upheld the validity of Article XIIIA.
Article X111C and Article X111D of the California Constitution. On November 5, 1996,
the voters of the State approved Proposition 218, known as the "Right to Vote on Taxes Act."
Proposition 218 adds Articles XIIIC and MID to the California Constitution and contains a
number of interrelated provisions affecting the ability of the City to levy and collect both existing
and future taxes, assessments, fees and charges.
7
On November 2, 2010, California voters approved Proposition 26, entitled the
"Supermajority Vote to Pass New Taxes and Fees Act". Section 1 of Proposition 26 declares
that Proposition 26 is intended to limit the ability of the State Legislature and local government
to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as
"fees." Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The
amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as
defined in Proposition 26) without a two-thirds vote of the Legislature. The amendments to
Article XIIIC define "taxes" that are subject to voter approval as "any levy, charge, or exaction of
any kind imposed by a local government," with certain exceptions.
Taxes. Article XIIIC requires that all new local taxes be submitted to the electorate
before they become effective. Taxes for general governmental purposes of the City ("general
taxes") require a majority vote; taxes for specific purposes ("special taxes"), even if deposited
in the City's General Fund, require a two-thirds vote. The voter approval requirements of
Proposition 218 reduce the flexibility of the City to raise revenues for the General Fund, and no
assurance can be given that the City will be able to impose, extend or increase such taxes in
the future to meet increased expenditure needs.
Property -Related Fees, Charges and Assessments. Article XIIID also adds several
provisions making it generally more difficult for local agencies to levy and maintain property -
related fees, charges, and assessments for municipal services and programs. These provisions
include, among other things, (i) a prohibition against assessments which exceed the reasonable
cost of the proportional special benefit conferred on a parcel, (ii) a requirement that
assessments must confer a "special benefit," as defined in Article XIIID, over and above any
general benefits conferred, (iii) a majority protest procedure for assessments which involves the
mailing of notice and a ballot to the record owner of each affected parcel, a public hearing and
the tabulation of ballots weighted according to the proportional financial obligation of the
affected party, and (iv) a prohibition against fees and charges which are used for general
governmental services, including police, fire or library services, where the service is available to
the public at large in substantially the same manner as it is to property owners.
Reduction or Repeal of Taxes, Fees and Charges. Article XIIIC also removes limitations
on the initiative power in matters of reducing or repealing local taxes, assessments, fees or
charges. No assurance can be given that the voters of the City will not, in the future, approve
an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges
currently comprising a substantial part of the City's General Fund. If such repeal or reduction
occurs, the City's ability to pay debt service on the Bonds could be adversely affected.
Burden of Proof. Article XIIIC provides that local government "bears the burden of
proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax,
that the amount is no more than necessary to cover the reasonable costs of the governmental
activity, and that the manner in which those costs are allocated to a payor bear a fair or
reasonable relationship to the payor's burdens on, or benefits received from, the governmental
activity." Similarly, Article XIIID provides that in "any legal action contesting the validity of a fee
or charge, the burden shall be on the agency to demonstrate compliance" with Article XIIID.
Impact on City's General Fund. The approval requirements of Articles XIIIC and XIIID
reduce the flexibility of the City to raise revenues for the General Fund, and no assurance can
be given that the City will be able to impose, extend or increase the taxes, fees, charges or
taxes in the future that it may need to meet increased expenditure needs.
E:i
The City does not believe that any material source of General Fund revenue is subject to
challenge under Articles XII IC or XIIID.
Judicial Interpretation. The interpretation and application of Articles XIIIC and MID will
ultimately be determined by the courts with respect to a number of the matters discussed below,
and it is not possible at this time to predict with certainty the outcome of such determination.
Expenditures and Appropriations
Article X111B of the California Constitution. In addition to the limits Article XIIIA
imposes on property taxes that may be collected by local governments, certain other revenues
of the State and local governments are subject to an annual "appropriations limit" or "Gann
Limit" imposed by Article XIIIB of the State Constitution, which effectively limits the amount of
such revenues that government 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" exclude tax
refunds and some benefit payments such as unemployment insurance. No limit is imposed on
the appropriation of funds which are not "proceeds of taxes," such as reasonable user charges
or fees, and certain other non -tax funds.
Article XIIIB also does not limit appropriation of local revenues to pay debt service on
bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters,
appropriations required to comply with mandates of courts or the federal government,
appropriations for qualified capital outlay projects, and appropriation by the State of revenues
derived from any increase in gasoline taxes and motor vehicle weight fees above January 1,
1990, levels. The appropriations limit may also be exceeded in cases of emergency; however,
the appropriations limit for the 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. Each school district is required to establish an appropriations limit each
year. In the event that a school district's revenues exceed its spending limit, the district may
increase its appropriations limit to equal its spending by taking appropriations limit from the
State.
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
exceed the aggregate limit, the excess must be returned to the agency's taxpayers through tax
rate or fee reductions over the following two years. If the State's aggregate "proceeds of taxes"
for the preceding two-year period exceed the aggregate limit, 50% of the excess is transferred
to fund the State's contribution to school and college districts.
Future Initiatives
Article XIIIA, Article XIIIB, Article XIIIC, Article XIIID and Propositions 62 and 111 were
each adopted as measures that qualified for the ballot pursuant to California's initiative process.
From time to time other initiative measures could be adopted, further affecting City revenues or
the City's ability to expend revenues. The nature and impact of these measures cannot be
anticipated by the City.
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
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
10
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 events 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.
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; it should be noted, however, that for the.purpose of
computing the alternative minimum tax imposed on corporations (as defined for federal income
tax purposes), such interest is taken into account in determining certain income and earnings
and the Notes are "qualified tax-exempt obligations" within the meaning of section 265(b)(3) of
the Internal Revenue Code of 1986 (the "Code") such that, in the case of certain financial
'institutions (within the meaning of section 265(b)(5) of the Code), a deduction for federal income
tax purposes is allowed for 80 percent of that portion of such financial institution's interest
expense,allocable to interest payable on the Notes.
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
is
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.
If the initial offering price to the public (excluding bond houses and brokers) at which a
Note is sold is less than the amount payable at maturity thereof, then such difference constitutes
"original issue discount" for purposes of federal income taxes and State of California personal
income taxes. If the initial offering price to the public (excluding bond houses and brokers) at
which each Note is sold is greater than the amount payable at maturity thereof, then such
difference constitutes "original issue premium" for purposes of federal income taxes and State
of California personal income taxes. De minimis original issue discount is disregarded.
Under the Code, original issue discount is treated as interest excluded from federal
gross income and exempt from State of California personal income taxes to the extent properly
allocable to each owner thereof subject to the limitations described in the first paragraph of this
section. The original issue discount accrues over the term to maturity of the Note on the basis
of a constant interest rate compounded on each interest or principal payment date (with
straightline interpolations between compounding dates). The amount of original issue discount
accruing during each period is added to the adjusted basis of such Notes to determine taxable
gain upon disposition (including sale, redemption, or payment on maturity) of such Note. The
Code contains certain provisions relating to the accrual of original issue discount in the case of
purchasers of the Notes who purchase the Notes after the initial offering of a substantial amount
of such maturity. Owners of such Notes should consult their own tax advisors with respect to
the tax consequences of ownership of Notes with original issue discount, including the treatment
of purchasers who do not purchase in the original offering, the allowance of a deduction for any
loss on a sale or other disposition, and the treatment of accrued original issue discount on such
Notes under federal individual and corporate alternative minimum taxes.
Under the Code, original issue premium is amortized on an annual basis over the term of
the Note (said term being the shorter of the Note's maturity date or its call date). The amount of
original issue premium amortized each year reduces the adjusted basis of the owner of the Note
for purposes of determining taxable gain or loss upon disposition. The amount of original issue
premium on a Note is amortized each year over the term to maturity of the Note on the basis of
a constant interest rate compounded on each interest or principal payment date (with
straightline interpolations between compounding dates). Amortized Note premium is not
deductible for federal income tax purposes. Owners of Premium Notes, including purchasers
who do not purchase in the original offering, should consult their own tax advisors with respect
to State of California personal income tax and federal income tax consequences of owning such
Notes.
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.
12
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
Standard & Poor's, a Division of McGraw-Hill Companies ("S&P"), has assigned 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 Notes 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
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 E. J. De La Rosa & Co, Inc. (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.
13
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").
The City has not failed to comply with an undertaking under the Rule in any material
respect during the past five years.
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.
CITY OF SAN RAFAEL
IS
14
City Manager
APPENDIX A
CITY OF SAN RAFAEL
GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION
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 square miles 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, San Francisco and its surrounding
areas, Oakland and the Napa Valley 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, 2011, a population
estimate of 28,136. 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. Its 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. A-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
2007
57,721
254,532
37,463,609
2008
58,063
256,604
37,871,509
2009
58,359
258,602
38,255,508
2010
57,667
252,279
37,223,900
2011
58,136
254,692
37,510,766
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.
Employment and Industry
The, County is included in the 'San Francisco—San Mateo—Redwood City Metropolitan
Division. The unemployment rate in the San Francisco -San Mateo -Redwood City MD was 9.9
percent in March 2010, up from a revised 9.5% in February 2010, and above the year-ago
estimate of 8.2%. This compares with an unadjusted unemployment rate of 13.0% for California
and 10.2% for the nation during the same period. The unemployment rate was 8.8% in Marin
County, 10.3% in San Francisco County, and 9.8% in San Mateo County.
The following table summarizes the civilian labor force, employment and unemployment
in the County for the calendar years 2006 through 2010. These figures are county -wide
statistics and may not necessarily accurately reflect employment trends in the City.
A-2
Table No. A-2
SAN FRANCISCO -SAN MATEO-REDWOOD CITY METROPOLITAN DIVISION
Civilian Labor Force, Employment and Unemployment
(Annual Averages)
Civilian Labor Force (1) (2)
Employment (2)
Unemployment (2)
Unemployment Rate (2)
Wage and Salary Employment: (3)
Agriculture
Mining and Logging
Construction
Manufacturing
Wholesale Trade
Retail Trade
Transportation, Warehousing, 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 (4)
2006
2007
2008
2009
2010
915,600
939,600
967,400
966,100
961,400
880,000
902,300
919,200
882,300
873,800
35,600
37,300
48,200
83,800
87,500
3.9%
4.0%
5.0%
8.7%
9.1%
2,800 2,700 2,700 2,500 2,500
200 200 200 200 200
43,100 45,400 44,300 35,100 32,000
43,500 43,500 42,100 38,100 37,500
26,700 27,100 26,800 24,500 24,100
93,600 95,000 94,000 87,700 86,800
42,100 40,600 39,800 37,800 36,600
39,000 39,500 40,800 39,600 38,500
67,500 67,700 65,600 60,100 57,700
21,200 21,100 21,200 19,500 19,100
191,700 203,900 210,100 198,300 199,000
103,200 105,200 107,400 108,700 108,300
24,200 25,200 26,000 25,900 26,200
119,900 124,300 126,800 122,200 122,300
37,300 38,600 39,400 38,000 37,700
19,900 19,400 19,200 18,900 20,100
34,100 34,900 35,600 35,400 35,300
967,200 991,800 999,300 947,800 937,700
(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household
domestic workers, and workers on strike.
(2) Numbers are currently not available for years 2005 and 2006.
(3) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household
domestic workers, and workers on strike.
(4) Totals may not add due to rounding.
Source: State of California Employment Development Department.
A-3
Largest Employers
Total employment in the City as of June 30, 2010 was 26,873. The largest employers in
the City are as follows:
Table No. A-3
CITY OF SAN RAFAEL
Largest Employers
Fiscal Year 2009-10
Employer
Kaiser Permanente (San Rafael)
Autodesk Inc.
City of San Rafael
Comcast
Safeway
Macy's
Dominican University of California
MHN
Guide Dogs for the Blind
Wells Fargo Bank
Number of Employees
1,311
1,028
630
619
452
445
370
350
287
265
Source: City of San Rafael; State of California Employment Development Department.
Assessed Valuation
See "CITY FINANCES - Property Taxes" below for information regarding the assessed
valuation of properties in the City.
Personal 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-4
The following table summarizes the total effective buying income for the City, the
County, the State and the United States for the period 2005 through 2009. Figures are not yet
available for 2010.
Table No. A-4
CITY OF SAN RAFAEL
Effective Buying Income
As of January 1, 2005 through 2009
Source: Neilson Claritas Demographics
A-5
Total Effective Buying
Median Household
Year
Area
Income (000's Omitted)
Effective Buying Income
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
2009
City of San Rafael
$ 1,914,850
$61,246
Marin County
10,508,733
71,591
California
844, 823, 319
49,736
United States
6,571,536,768
43,252
Source: Neilson Claritas Demographics
A-5
Construction Activity
Building activity for the past five years in the City is shown in the following table. Figures
are not yet available for 2011.
Table No. A-5
CITY OF SAN RAFAEL
Total Building Permit Valuations
(valuations in thousands)
Calendar Year 2006 to 2010
New Dwellina Units
Single Family 7 4 2 2 1
Multiple Family 0 0 0 82 0
Total 7 4 2 84 1
Source: Economic Sciences Corporation, California Building Permit Activity.
A-6
2006
2007
2008
2009
2010
Permit Valuation
New Single-family
$ 6,304.0
$ 4,717.8
$ 1,372.5
$ 695.0
$ 449.0
New Multi -family
0.0
0.0
0.0
17,709.0
0.0
Res. Alterations/Additions
23,466.7
31,202.7
15.212.2
20,424.3
14.675.8
Total Residential
29,770.7
35,920.5
16,584.7
38,828.3
15,124.8
New Commercial
11,300.0
0.0
17,800.0
1,800.0
0.0
New Industrial
0.0
0.0
0.0
0.0
0.0
New Other
13,231.6
225.4
144.0
1,030.2
401.0
Com. Alterations/Additions
11,364.7
16,955.4
30,712.2
36,586.0
15,934.9
Total Nonresidential
35,896.3
17,180.8
$48,656.2
39,416.1
16,335.9
New Dwellina Units
Single Family 7 4 2 2 1
Multiple Family 0 0 0 82 0
Total 7 4 2 84 1
Source: Economic Sciences Corporation, California Building Permit Activity.
A-6
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 — Comprehensive
Annual Financial Report for the Year Ended June 30, 2010."
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 2009-10 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
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 — Comprehensive Annual Financial Report for the Year
Ended June 30, 2010 —Audited Financial Statement — Note 1" for a description of the significant
accounting policies of the City.
�m
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 2006-07 through 2009-10.
Table No. A-7
CITY OF SAN RAFAEL
General Fund - Audited Revenues, Expenditures and Fund Balances
For Fiscal Years 2006-07 through 2009-10
Expenditures:
Current operating:
General government
Audited
Audited
Audited
Audited
Public safety
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Public works and parks
2006-07
2007-08
2008-09
2009-10
Revenues:
3,163,138
3,705,928
4,004,061
3,100,343
Taxes and special assessments
$44,921,449
$48,084,486
$42,951,759
$39,717,752
Licenses and permits
1,157,434
1,489,748
1,467,413
1,515,069
Fines and forfeitures
514,278
796,081
660,338
787,411
Use of money and property
431,553
224,439
156,747
155,196
Intergovernmental
6,932,034
7,246,381
7,018,197
6,736,930
Charges for services
1,868,014
2,203,852
1,923,653
1,936,405
Other revenues
217,968
269,656
238,614
197,843
Total Revenues
$56,042,730
$60,314,643
$54,416,721
$51,046,606
Expenditures:
Current operating:
General government
$ 6,928,766
$ 7,023,660
$ 6,811,591
$ 6,701,085
Public safety
30,643,627
34,435,419
35,056,051
32,218,288
Public works and parks
6,914,505
7,602,332
7,299,137
7,678,081
Community development/redevelopment
3,163,138
3,705,928
4,004,061
3,100,343
Cultural and recreation
1,990,631
2,292,848
2,463,777
2,316,695
Capital Outlay
1,049,181
264,919
159,230
178,887
Capital improvement/special projects
213,390
484,926
518,251
268,801
Debt service: principal
103,741
213,598
222,019
230,772
Total Expenditures
$51,006,979
$56,023,630
$56,534,117
$52,692,952
Excess (deficiency) of revenues over
$5,035,751
$4,291,013
($2,117,396)
($1,646,346)
expenditures
Other financing sources (uses):
Operating transfers in
$ 653,990
$ 933,760
$4,060,090
$3,487,383
Operating transfers out
(5,465,286)
(4,928,005)
(4,265,229)
(2,652,443)
Total other financing sources (uses)
(4,811,296)
(3,994,245)
(205,139)
834,940
Net change in Fund Balance
224,455
296,768
(2,322,535)
(811,406)
Fund balance, July 1 (1)
5,697,542
5,921,997
6,218,765
7.613,201
Fund balance, June 30
$5,921,997
$6,218,765
$3,896,230
$6,801,795
(1) During fiscal year 2009-10, the City transferred the general liability and workers' compensation claims
payable and the
corresponding cash reserves from the Liability Insurance and Workers'
Compensation Internal Service Funds to the General Fund.
The transfer was due to the fact that these claim liabilities.had been settled mostly with resources from the General Fund. As a
result of the above transfer, the beginning fund
balance of the General Fund was increased by $3,716,971. See `APPENDIX B —
Comprehensive Annual Financial Report for the
Year Ended June 30, 2010 — Note 1-M."
Source: City of San Rafael; Comprehensive Annual Financial Reports.
A-8
Table No. A-8
CITY OF SAN RAFAEL
General Fund Balance Sheet
As of June 30 for Fiscal Years 2006-07 through 2009-10
ASSETS:
Cash and investments for operations
Restricted cash and investments
Receivables:
Accounts
Taxes
Interest
Loans
Due from other funds
Prepaid expenses
TOTAL ASSETS
LIABILITIES AND FUND BALANCE:
Liabilities:
Accounts payable
Deposits payable
Compensated absences- matured
Developer bonds payable
TOTAL LIABILITIES
Fund Balance:
Reserved for:
Encumbrances
Petty cash
Department savings
Project _development
Loans receivable
Prepaid expenses
Court fine audit
Assess. districts/open space
Unreserved, designated:
Emergency and cash flow
Contingent liabilities
Unreserved, undesignated
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
2006-07
2007-08
2008-09
2009-10
1,369,492
952,072
36,491
55.859
$1,102,324
$ 824,055
$ 346,217
$ 3,971,946
66,886
73,273
74,896
75,633
90,191
277,511
3,996,538
4,365,440
371,621
285,703
19,319
632,316
1,369,492
952,072
36,491
55.859
$ 555,802
31,483
78,907
464,673
$1,130,865
$ 96,738
3,395
82,239
619,319
36,491
$3,437,866
1.579,063
Total fund balance $5,921,997
Total liabilities and fund balance $7.052.862
Source: City of San Rafael; Basic Financial Statements.
Recent Budgets
$ 866,126
31,290
350,048
$1,247,464
$ 181,589
3,795
433,202
632,316
55,859
816,119
73,273
$4,078,471
(55,859)
$6,218,765
$7.466,229
411,511
3,248,540
133,703
623,863
87,581
48,042
$ 635,495
31,451
61,129
350.048
$1,078,123
$ 350,717
3,645
530,512
623,863
48,042
594,100
74,896
1,670,455
$3,896,230
177,106
3,553,167
65,542
583,300
$ 1,301,396
31,451
320.266
$1,653,113
$ 132,507
3;645
576,995
583,300
28,214
363,328
75,633
1,439,586
3,598,587
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.
P'
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)
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 2009-90. 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 equal to 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
A-10'
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 bargaining groups (except Fire Association and Fire Chief Officers, who are
under contract until June 30, 2011).
Since adopting the fiscal year 2009-10 budget, major economic changes continued to
occur which required further modifications to the adopted revenues and expenditures. The most
significant changes have been the declines in sales and transaction taxes. Tax revenues were
lower than budgeted by approximately $3.1 million. The biggest reduction is for $1.5 million for
the Triple Flip Back -Fill revenue — due in part to the State's overpayment correction of
approximately $750,000 in fiscal year 2008-09. Several study sessions and budget workshops
were held to outline and address the budget deficit and present a series of service reductions
and cost savings to address the deficit. On January 4, 2010 and January 26, 2010,
amendments of approximately $2.7 million were made to the 2009-2010 budget. The
amendments included position eliminations and layoffs totaling 25.55 FTE. The budget is being
monitored and will be amended as necessary for any unforeseen State actions that may occur.
See " - State Budget and its Impact on the City" below.
Fiscal Year 2010-11. The City's revenue has declined 17%, or overall $8 million over
the past two years. The City Council took a series of steps to balance the budget, including
actions at a January 26, 2010 Council meeting. The following are a few of the actions the City
has taken:
Total net reduction of 54 staff positions since fiscal year 2007-08, or 12% of the
workforce, including layoffs, early retirements, and eliminated vacant positions.
Furloughs for fiscal years 2009-10 and 2010-11 for non -safety employees with a
5% reduction in pay. Safety mid -managers reduced compensation by 3% for
fiscal year 2009-10.
Fiscal Year 2011-12.
Comparison of Budget to Actual Performance
For purposes of comparison, the following table summarizes the City's adopted budgets
for fiscal years 2008-09 and 2009-10 and sets forth audited revenues and expenditures for fiscal
years 2008-09 and 2009-10; it also includes the City's adopted budget for fiscal year 2010-11.
A-11
Table No. A-9
CITY OF SAN RAFAEL
General Fund - Comparison of Budgeted and Actual
Revenues, Expenditures and Fund Balances
For Fiscal Years 2008-09 through 2010-11
Budgeted Audited Budgeted Audited Budgeted
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
2008-09 2008-09 2009-10 2009-10 2010-11
Fund Balance, July 1
$6,218,765
$6,218,765
$5,188,108
$5,188,108
Revenues:
35,463,104
35,056,051
34,153,420
32,218,288
Taxes and special assessments
$45,560,864
$42,951,759
$43,680,980
39,717,752
Licenses and permits
1,288,198
1,467,413
1,274,426
1,515,069
Fines and forfeitures
769,070
660,338
1,552,540
787,411
Use of money and property
199,680
156,747
166,460
155,196
Intergovernmental
7,099,360
7,018,197
6,894,520
6,736,930
Charges for services
2,020,555
1,923,653
1,883,872
1,936,405
Other revenues
161,560
238,614
127,780
197,843
Total Revenues
$57,099,287
$54,416,721
$55,580,578
$51,046,606
Expenditures:
General government
$ 6,958,424
$ 6,811,591
$ 7,136,420
$ 6,701,085
Public safety
35,463,104
35,056,051
34,153,420
32,218,288
Public works and parks
7,361,116
7,299,137
8,430,670
7,678,081
Community development/redevel.
4,150;415
4,004,061
3,627,760
3,100,343
Cultural and recreation
2,448,378
2,463,777
2,355,370
2,316,695
Capital Outlay
84,711
159,230
44,850
178,887
Capital improvement/special projects
303,900
518,251
33,500
268,801
Debt service: principal
222,020
222,019
230,770
230,772
Total Expenditures
$56,992,068
$56,534,117
$56,012,760
$52,692,952
Other financing sources (uses):
Operating transfers in
$2,902,090
$4,060,090
$2,556,800
$3,487,383
Operating transfers out
(4,039,229)
(4,265,229)
(2,369,720)
(2,652,443)
Total other financing sources (uses)
$(1,137,139)
(205,139)
$ 187,080
834,940
Net change in Fund Balance $(1,029,921) $(2,322,535) $(245,102) ($811,406)
Source: City of San Rafael.
General Fund Reserves
The City Council has adopted a financial management policy requiring that reserves be
maintained at 10% of general fund expenditures. During the current fiscal year (fiscal year
2010-11), reserves are funded at approximately % (projected) of general fund
expenditures, and are projected to be approximately _% of general fund expenditures in fiscal
year 2011-12. The reserves declined to 3.04% in fiscal year 2008-09, principally due to the
severe economic decline which impacted the City's revenues. As part of the City's long-term
budget and the City Council's desire for a contingency reserve for emergencies, the City plans
to increase reserves as resources become available.
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.
�f±•
The following table sets forth General Fund revenues received by the City for fiscal
years 2006-07 through 20097.10, by source, as well as the percentage of total 2009-10 revenues ;
that each revenue source contributes.
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. A-10
CITY OF SAN RAFAEL
General Fund Revenues by Source
For Fiscal Years 2006-07 through 2009-10
$56,042,728 $60,314,634 $54,416,721
(1) Includes property tax backfill (Triple Flip). See "Impact of State Budget" below.
(2) Property tax revenue includes secured, unsecured, supplemental, homeowner's exemption and VLF property tax backfill
property tax revenue along with penalties and interest.
(3) Measure "S" Transaction and Use Tax. See "Other Taxes" below.
(4) Other taxes include Unitary tax.
Source: City of San Rafael.
A-13
Percent of Total
2009-10
2006-07
2007-08
2008-09 2009-10 Revenues
$18,012,985
$18,426,045
$15,859,530
15, 819, 824
17, 662,230
17,429, 089
6,471,371
7,338,412
6,110,732
2,424,636
2,440,544
2,405,934
1,459,213
1,273,448
669,774
1,679,901
1,963,575
1,678,912
2,770,196
2,874,952
2,941,149
150,646
200,984
162,128
1,157,434
1,489,746
1,467,413
572,432
856,917
660,338
431,554
224,438
156,747
3,064,710
3,150,677
2,712,708
1,809,861
2,143,011
1,923,653
217,967
269,655
238,614
$56,042,728 $60,314,634 $54,416,721
(1) Includes property tax backfill (Triple Flip). See "Impact of State Budget" below.
(2) Property tax revenue includes secured, unsecured, supplemental, homeowner's exemption and VLF property tax backfill
property tax revenue along with penalties and interest.
(3) Measure "S" Transaction and Use Tax. See "Other Taxes" below.
(4) Other taxes include Unitary tax.
Source: City of San Rafael.
A-13
Sales Taxes
General. Sales tax represented the second largest source of revenue to the City in
fiscal year 2008-09 and the largest in fiscal year 2009-10. 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 tax 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. A-11
CITY OF SAN RAFAEL
Sales Tax Rates
State (General Fund)(')
6.00%
State Fiscal Recovery Act (Triple Flip)
0.25
Local General Fund (Bradley -Burns)
0.75
Countywide Transportation Fund)
0.25
County Mental HealthMlelfare 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%. Pending voter approval to extend the temporary sales tax increase, the State General Fund sales
tax rate is scheduled to revert back to 6.25% on July 1, 2011. 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
A-14
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
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.
UNIN
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.
l0G
History of Taxable Transactions. In 2009, the State Board of Equalization converted
the business codes of sales and use tax permit holders to North American Industry
Classification System codes. As a result of the coding change, Retail Sales data for 2009 is not
comparable to that of prior years. A summary of historic taxable sales within the City during the
past five years in which data is available is shown in the following table. Total taxable sales
during calendar year 2009 in the City were reported to be $1,265,950,000, a 15.3% decrease
over the total taxable sales of $1,494,895,000 reported during calendar year 2008. Figures are
not yet available for 2010.
Table No. A-12
CITY OF SAN RAFAEL
Taxable Transactions by Type of Business
For Calendar Years 2005 through 2009
(Dollars in thousands)
(1) Not comparable to prior years. "Retail" category now includes "Food Services".
Source: State Board of Equalization. Taxable Sales in California (Sales & Use Tax).
Property Taxes
Property taxes represented the largest source of General Fund revenue in fiscal year
2008-09 and the largest source of General Fund revenue in fiscal year 2009-10.
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
A-17
Retail Stores
Total All Outlets
Number
Taxable
Number
Taxable
of Permits
Transactions
of Permits
Transactions
2005
1,283
$1,248,059
3,012
$1,560,392
2006
1,275
1,262,029
2,993
1,604,771
2007
1,257
1,271,360
2,940
1,642,891
2008
1,258
1,134,040
2,963
1,494,895
2009 (1)
1,578
980,006
2,727
1,265,950
(1) Not comparable to prior years. "Retail" category now includes "Food Services".
Source: State Board of Equalization. Taxable Sales in California (Sales & Use Tax).
Property Taxes
Property taxes represented the largest source of General Fund revenue in fiscal year
2008-09 and the largest source of General Fund revenue in fiscal year 2009-10.
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
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on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment
of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1 '/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 extenfi 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 Y2% 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.
Assessed Valuation Information. Set forth below is a listing of the City's assessed
valuations, net of homeowners' and other exemptions, for the past five fiscal years.
Table No. A-13
CITY OF SAN RAFAEL
Assessed Valuation
For Fiscal Year 2006-07 through 2010-11
Source: California Municipal Statistics, Inc.
The following table shows historical tax rates in a typical tax rate area of the City (Tax
Rate Area 8-000) for the past five fiscal years
Table No. A-14
CITY OF SAN RAFAEL
Typical Tax Rate per $100 Assessed Value (TRA 8-000)
Local Secured (1)
Utility
Unsecured
Total
% Change
2006-07
$8,608,361,153
$ 650,445
374,547,998
8,983,559,596
8.1%
2007-08
9,167,559,540
650,445
362,055,316
9,530,265,301
6.1
2008-09
9,654,358,349
1,801,713
374,547,995
10,030,708,057
5.3
2009-10
9,761,373,313
1,801,713
' 401,201,906
10,164,376,932
1.3
2010-11
[Ordered 5/11/2011]
Source: California Municipal Statistics, Inc.
The following table shows historical tax rates in a typical tax rate area of the City (Tax
Rate Area 8-000) for the past five fiscal years
Table No. A-14
CITY OF SAN RAFAEL
Typical Tax Rate per $100 Assessed Value (TRA 8-000)
Fiscal Years 2006-07 through 2010-11
2006-07 2007-08 2008-09
2009-10 2010-11
General Tax Rate 1.0000 1.0000 1.0000
1.000
San Rafael Elementary School District .0427 .0414 .0421
.0431 [Ordered 5/11 2011 ]
San Rafael High School District .249 .0244 .0242
.0254
Marin Community College District .0168 .0163 .0042
.0192
Total Tax Rate 1.0844 1.0821 1.0705
1.0877
Source: California Municipal Statistics, Inc.
The following table lists the top 20 local secured taxpayers in the City of San Rafael for
fiscal year 2010-11.
IWE
Table No. A-15
CITY OF SAN RAFAEL
Top 20 Local Secured Taxpayers
Fiscal Year 2010-11
Taxpayer
Source: California Municipal Statistics, Inc.
Secured and Unsecured
Assessed Valuation
of Property
% of City's Total
Secured and
Unsecured Assessed
Valuation (1)
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 [UPDATE WITH ANY TAX INCREASES]
Transactional/Use Tax (Measure S). Transactional/Use Tax (Measure S) revenues
contributed approximately 11.1 % to the City's fiscal year 2008-09 General Fund revenues and
to the City's fiscal year 2009-10 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 5.4% of General Fund
revenues in fiscal year 2008-09 and % of the City's fiscal year 2009-10 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
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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 Article XIIIC of the California Constitution, the rates can only be
increased by a vote of the City residents.
Business License Tax. The Business License Tax generated approximately 4.4% to
the City's fiscal year 2008-09 General Fund revenues and % to the City's fiscal year 2009-
10 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 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 3.1 % to the City's fiscal year 2008-09 General Fund revenues and % to the
City's fiscal year 2009-10 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 1.2% of General
Fund revenues in fiscal year 2008-09 and % of the City's fiscal year 2009-10 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. Prior to the November
2, 2010 California General Election, the Budget Act required approval by a two-thirds majority
vote of each House of the Legislature. On the November 2, 2010, California voters passed
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Proposition 25, which amended this legislative vote requirement to a simple majority. 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.
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 Reoffering Circulars 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 Internet home page at www.treasurer.ca.gov,
under the heading "Bond Information", posts various State of California
Reoffering Circulars, many of which contain a summary of the current State
Budget, past State Budgets, and the impact of those budgets on local
governments in the State.
The California State Treasurer's Office 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 Reoffering Circular, which discusses the State budget and
its impact on local agencies in the State.
• 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 ("LAO") prepares analyses of the proposed
and adopted State budgets. The analyses are accessible on the Legislative
Analyst's Internet homepage at www.lao.ca.gov under the heading "Products."
The State has not entered into any contractual commitment with the City or the owners
of the Notes to provide State budget information to the City or the owners of the Notes.
Although the City believes the State sources of information listed above are reliable, the City
assumes not responsibility for the accuracy of the State budget information set forth or referred
to in this Official Statement.
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Tax Shifts and Triple Flip. Assembly Bill No. 1755 ("AB 1755"), introduced March 10,
2003 and substantially amended June 23, 2003, requires the shifting of property taxes between
redevelopment agencies and schools. On July 29, 2003, the Assembly amended Senate Bill No.
1045 to incorporate all of the provisions of AB 1755, except that the Assembly reduced the
amount of the required the shift away from the Education Revenue Augmentation Fund
("ERAF") to $135 million. Legislation commonly referred to as the "Triple Flip," was approved by
the voters on March 2, 2004, as part of a bond initiative formally known as the "California
Economic Recovery Act." This act authorized the issuance of $15 billion in bonds to finance the
2002-03 and 2003-04 State budget deficits, which are payable from a fund established by the
redirection of tax revenues through the "Triple Flip." Under the "Triple Flip", one-quarter of local
governments' 1 % share of the sales tax imposed on taxable transactions within their jurisdiction
are redirected to the State. In an effort to eliminate the adverse impact of the sales tax revenue
redirection on local governments, the legislation then redirects property taxes in the ERAF to
local governments. Because the ERAF monies were previously earmarked for schools, the
legislation provides for schools to receive other State general fund revenues. The swap of sales
taxes for property taxes will terminate once the deficit financing bonds are repaid, which is
currently expected to occur by 2016.
2010-11 State Budget. Set forth below is a summary of information available with
respect to the 2010-11 State Budget.
Initial LAO Report on Fiscal Year 2010-11. On November 18, 2009, the LAO released a
report entitled "The 2010-11 Budget: California's Fiscal Outlook," in which it forecast that the
State would need to address a general fund budget deficit of $20.7 billion between the date of
such LAO Report and the time the Legislature enacted a fiscal year 2010-11 State budget plan.
The budget deficit consisted of a $6.3 billion projected deficit for fiscal year 2009-10 and a $14.4
billion gap between projected revenues and spending in fiscal year 2010-11.
2010-11 Proposed Budget Submitted by Governor to Legislature. Governor Arnold
Schwarzenegger submitted his 2010-11 Proposed Budget to the State Legislature on January 8,
2010. The 2010-11 Proposed Budget acknowledged a projected budget gap of $19.9 billion,
comprised of a 2009-10 shortfall of $6.6 billion, a 2010-11 budget year shortfall of $12.3 billion
and a modest reserve of $1 billion. The Governor proposed a combination of spending
reductions, alternative funding, fund shifts and additional federal funds to close the $19.9 billion
budget gap. Approximately 40% of the solutions rely upon the federal government for funding
or flexibility, another 40% rely upon reductions in State spending, and the remaining 20%
consist of various fund shifts.
Additional LAO Reports. On January 12, 2010, the LAO commented on the 2010-11
Proposed Budget, stating that Governor Schwarzenegger's estimate of a $18.9 billion budget
problem was reasonable, but such 2010-11 Proposed Budget forecasted a shortfall that was
$3.1 billion smaller than that shortfall estimated by the LAO. The LAO found that the size of the
2010-11 budget shortfall was likely to increase as a result of various lawsuits. The LAO also
noted that the Governor's plan relies heavily on federal relief, which the State is unlikely to
receive in the amounts requested.
ABX8 5 and ABX8 14. Governor Schwarzenegger signed into law ABX8 5 on March 1,
2010, effective immediately. ABX8.5 included several measures meant to allow the State to
manage its cash resources in the fiscal years 2009-10 and 2010-11. For fiscal year 2009-10,
ABX8 5 authorized the deferral of general fund payments to be made to trial court operations,
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the California State University system, the University of California system, and community
college districts ("CCDs") in March 2010 to no sooner than April 15, 2010, but no later than May
1, 2010. Prior to such deferrals, the State Controller, Treasurer, and Director of Finance were
required to review the actual cash situation to determine if the deferrals would be in fact
necessary. Following the effective date of ABX8.5, if such deferrals were implemented, the
Controller, Treasurer and Director of Finance, after April 1, became required to review daily the
actual cash receipts and disbursements to determine when all or a portion of the deferrals can
be paid, and to make such payments as soon as feasible.
To address the cash management issues in fiscal year 2010-11, ABX8 5 further
authorized specific deferrals to K-12 apportionments, Supplemental Security Income/State
Supplementary Payments, local government social services and transportation payments and
trial court operations. These deferrals were allowed only in: (i) July 2010, for no more than 60
days, (ii) October 2010, for no more than 90 days, and (iii) March 2011 for no more than 60
days. Prior to such deferrals, the State Controller, Treasurer, and Director of Finance were
required to review the actual cash situation to determine if the deferrals would be in fact
necessary. Following the effective date of ABX8.5, if such deferrals were implemented, the
Controller, Treasurer and Director of Finance, after July 1, 2010, became required to review
daily the actual cash receipts and disbursements to determine when all or a portion of the
deferrals can be paid, and to make such payments as soon as feasible. Additionally, such
deferrals were able to b e moved forward or backward one month from the dates specified if all
three of the Controller, Treasurer and Director of Finance determine a move to be necessary.
ABX8 5 limited the K-12 deferrals to $2.5 billion at any given time during the fiscal year 2010-11
and set a maximum of three K-12 deferrals during the fiscal year. ABX8 5 provided a hardship
exemption for county offices of education, school districts and charter schools. ABX8 5 further
authorized .the deferral of $200 million from July 2010 to October 2010 and $100 million from
March 2011 to May 2011 for CCDs, and also provided for a hardship exemption for CCDs.
On March 22, 2010, Governor Schwarzenegger signed into law, effective immediately,
ABX8 14 which amended the cash management provisions for 2009-10 and 2010-11 enacted
into law pursuant to ABX8 5. With regard to the 2009-10 cash management issues, ABX8 14
provides a hardship exemption process for the current year deferrals for CCDs and makes them
the first entity to have deferrals paid as soon as funds are available. As to the 2010-11 cash
issues, ABX8 14 clarifies the hardship exemption process for school districts, county offices of
education and charter schools and provides certain other changes pertaining to those
provisions. In addition, ABX8 14 requires the State Controller, State Treasurer; and the Director
of Finance to jointly provide a written declaration of the intended payment deferrals for the 2010-
11 fiscal year no later than March 31, 2010 and also requires approval by the Director of
Finance for hardship exemptions. ABX8 14 states the intent of the legislature that July 2010
deferrals shall first be made from the advance principal apportionment payment. The legislation
also delays the date by which hardship exemption requests must be submitted (including with
respect to 2010-11 CCD deferrals) and provides a second hardship waiver opportunity for the
March 2011 deferral for those districts that did not receive an initial hardship waiver in June
2010.
May 2010 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 (the "May Revision"). Governor Schwarzenegger's May
2010 Budget Revision estimated a general fund budget gap of $19.1 billion, $7.7 billion for the
2009-10 fiscal year, $10.2 billion for the 2010-11 fiscal year, and a modest reserve of $1.2
billion. The May Revision proposed $12.4 billion in spending reductions and alternative funding
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proposals, representing two-thirds of the solution, borrowing and fund shifts representing
approximately 10% of the solution and new revenue representing approximately 5% of the
solution. Major spending reduction proposals included reductions of $4.3 billion of Proposition
98 spending, including the elimination of need -based, subsidized childcare, reductions of $2.1
billion by reducing State employees pay and staffing and shifting pension costs to employees,
and the elimination of the CalWORKs program, which provides cash grants and welfare -to -work
services, representing $1.2 billion in savings.
LAO Report on May 2010 Budget, Revision. On May 18, 2010, the LAO published its
comments on the May Revision stating that Governor Schwarzenegger's estimate of the budget
shortfall was reasonable. However, the LAO Report advised the Legislature to reject the
Governor's most drastic spending cuts, particularly the elimination of CaIWORKs and child care
funding, instituting instead the LAO's alternative spending reduction proposals, and adopting
selective revenue increases from fee increases and other non -tax revenues and targeted tax
increases. Additionally, the LAO Report urged the Legislature to suspend Proposition 98 if the
minimum guarantee would be above the level that the State can afford. The LAO predicted that
even if the Legislature approved all of the painful cuts and realized the savings assumed by the
Governor's May Revision, a multibillion -dollar operating deficit between $4 billion and $7 billion
is likely to persist in future years.
Governor Declares Financial State of Emergenc s Legislative Session Ends Without
Budgot Passage. On July 28, 2010, Governor Schwarzenegger declared a financial state of
emergency and ordered 150,000 State workers to take three furlough days per month. The
2010 legislative session ended on August 31, 2010 and lawmakers voted on two competing
budget proposals — the Governor's and a joint State budget plan of Democratic leaders in the
Assembly and the Senate. Both budget plans failed on party -line votes.
The Democrats' budget proposal included tax proposals of approximately $4.5 billion
from an oil severance tax, delaying corporate tax breaks and income tax increase paired with
reduced sales tax. It cut spending by $8.3 billion, by suspending Prop. 98 and funding schools
at approximately $3 billion'less than required thereunder. The plan also included a tax swap that
would increase some of the personal income tax rates and the vehicle license fee rate and
lower the State's sales tax rate, to raise $1.8 billion in revenues in 2010-11 and $2.2 billion in
2011-12. Had the Democrat's proposal passed the Legislature, Governor Schwarzenegger was
not expected to sign it.
Governor Schwarzenegger issued an order on July 1, 2010 reducing over 200,000
employees' pay to the federal minimum wage until the budget impasse ended. On July 16, 2010
a Sacramento County Superior Court judge denied the administration's request for a temporary
restraining order that would have forced the State Controller to begin paying the minimum wage.
The State Controller said he would not follow the order unless told to do so by a court. On
August 25, 2010, the Sacramento County Superior Court sided with the State Controller, ruling
that the challenge to the governor's minimum wage order has enough merit to require a full
hearing. The hearing, originally scheduled for November 2010, was delayed.
On August 23, 2010, in an effort to conserve cash and delay the need to issue
promissory notes for payment, State officials decided to start delaying school payments of $2.5
billion a month in September through December. This occurred after a $2.5 billion deferral in
July.
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On August 18, 2010, the California Supreme Court issued a stay of a temporary
restraining order of the Alameda County Superior Court issued on August 9, 2010, which would
have prohibited the Governor from imposing three furlough days on State workers. As a result of
the stay, furloughs of State workers were to continue until arguments in a larger case regarding
their legality could be heard on September 8, 2010. On October 4,. 2010, the California Supreme
Court upheld the Governor's authority to furlough State workers when there is no budget in
place.
2010-11 Budget Passed 100 Days Late. The Legislature passed the $87.5 billion
2010-11 Budget on the morning of October 8, 2010 and the Governor signed it that night,
exercising his line -item veto authority to reduce spending by $963 million in order to raise the
reserve level from $375 million to $1.3 billion. Total 2010-11 Budget expenditure reductions
were $8.4 billion. The 2010-11 Budget assumed federal funds of $5.4 billion and other solutions
of almost $5.5 billion.
2010-11 Expenditure Reductions and Related Reforms. Following the passage of the
2010-11 Budget, the following expenditures and related reform actions were undertaken.
Budget and Pension Reform. The Legislature approved a measure to place a budget
reform constitutional amendment before the voters at a future statewide election, intending to
increase the State's budgetary reserves and stabilize the State's financial health over time. The
measure would double the maximum size of the Budget Stabilization Account and provide more
stringent deposit requirements.
The 2010-11 Budget Package includes legislation proposed by Governor
Schwarzenegger to decrease pension benefits for State employees hired in the future. Pension
reform rolls back retirement formulas used to calculate pension payments, permanent increases
in pension contributions, and is designed to prevent pension spiking and improve transparency
of the State's pension liabilities and costs.
Proposition 98 & K-14 Education. The Legislature suspended the Proposition 98
minimum guaranty to provide $49.7 billion, in spending on K-14 Education in 2010-11. Settle -up
funds of $300 million are provided in the 2010-11 Budget to meet the State's outstanding 2009-
10 Proposition 98 settle -up obligation. In addition, related budget bills provide K-12 education
with $1.5 billion in special one-time federal funding. The 2010-11 Budget Package defers $1.9
billion in additional K-14 payments to July 2011.
Employee Compensation, Health and Social Services, Criminal Justice. The 2010-11
Budget provides $1.6 billion in personnel cost reductions from savings from recent agreements
with unions and reductions, anticipated reductions from future union agreements, and the
administration's "workforce cap" which consists of reductions in hiring and reduced operating
costs from the workforce cap. The 2010-11 Budget provides $300 million in reductions to the In -
Home Supportive Services Program and $187 million in savings to Medi -Cal. The 2010-11
Budget package assumes a total of $1.1 billion in general fund savings within the Department of
Corrections.
Federal Funding.. The 2010-11 Budget package assumes that the federal government
will provide federal funding or approval for certain reductions in State costs or service levels
resulting in the ability to reduce general fund costs by $5.4 billion. About $1.3 billion has been
approved by the Congress and the President. Most of the federal funding assumed in the 2010-
11 Budget has yet to be approved by Congress.
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Revenue -Related Solutions. The 2010-11 Budget extends for two additional tax years
the previously enacted temporary suspension of businesses' ability to use net operating losses
to reduce tax liabilities, projected to increase State revenues by $1.2 billion in 2010-11 and by
$400 million in 2011-12. The budget plan assumes $1.2 billion in one-time revenue from the
sale of 11 State office properties. The Budget plan includes $2.7 billion of loans, loan repayment
_extensions, transfers and fund shifts from special funds.
\ Ballot Propositions. On November 2, 2010, voters approved Propositions 22, 25 and 26.
Proposition 22 prohibits State legislators from raiding existing funds allocated to local
government, public safety and transportation. Proposition 25 lowered the vote threshold for
lawmakers to pass the State budget from two-thirds to a simple majority. Proposition 26 requires
a two-thirds affirmative vote in the State Legislature and local governments to pass many fees,
levies, charges and tax revenue allocations that under previous rules could be enacted by a
simple majority vote.
2011-12 State Budget. Set forth below is a summary of information available with
respect to the 2011-12 State Budget.
Initial LAO Report on Fiscal Year 2011-12. In their initial report for Fiscal Year 2011-
12, the LAO forecasted that the State's general fund revenues and expenditures would show a
budget deficit of $25.4 billion, consisting of a $6 billion projected deficit for fiscal year 2010-11
and a $19 billion gap between projected revenues and spending for fiscal year 2011-12. The
LAO projected that the State will continue to face annual budget problems of approximately $20
billion each year through fiscal year 2015-16, and recommended that the Legislature initiate a
multi-year approach to solving the State's recurring structural budget deficit, addressing
permanent revenue and expenditure actions each year, together with temporary budget
solutions, until the structural deficit is eliminated.
Legislature Called into Special Session on Budget Deficit. On December 6, 2010,
lame -duck Governor Schwarzenegger declared a fiscal emergency and called the new
Legislature into special session to address the anticipated 2010-11 general fund deficit (then -
estimated by the LAO to be $6.1 billion). The Governor's proposals would decrease the gap
between revenues and expenditures by $1.9 billion 2010-11 and by $8 billion in 2011-12. The
Governor's proposals consisted of $7.4 billion of expenditure -related reductions and two major
revenue proposals, all of which had been previously rejected by the prior Legislature.
2011-12 Proposed Budget Submitted by Governor Brown to Legislature. On
January 3, 2011, Jerry Brown was sworn in as Governor and warned that his budget plan would
include severe cuts to State spending. On January 10, 2011, Governor Brown submitted his
2011-12 Proposed Budget to the Legislature. The 2011-12 Proposed Budget acknowledged a
$26.4 billion budget deficit, consisting of an $8.2 billion deficit that would remain at the end of
fiscal year 2010-11 (absent budgetary action), and an estimated $17.2 billion shortfall between
current -law revenues and expenditures in 2011-12, with a proposed reserve of $1 billion. The
2011-12 Proposed Budget relies on a plan to submit to the voters at a special election in June a
5 -year extension of the temporary sales tax, income tax, and vehicle license fee increases and
maintaining a lower dependent exemption credit that are set to expire on June 30, 2011. The
2011-12 Proposed Budget also includes $8.2 billion in one-time savings and borrowing. These
include $1.8 billion in borrowing from special funds, $1.7 billion in property tax shifts, shifting
$1.0 billion in Proposition 10 reserves to fund children's programs, and $0.9 million from
Proposition 63 moneys to fund community mental health services. The Governor proposes to
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restructure the state -local relationship by shifting funding and responsibility to local government
for certain services, resulting in a shift of an aggregate amount of $5.9 billion in State program
costs to counties. The Governor also proposes eliminating redevelopment agencies.
The Proposed Budget includes expenditure reductions that touch nearly every area of
the State budget. Proposed reductions include cuts of $1.7 billion to Medi -Cal, $1.5 billion to
California's welfare -to -work program, $1 billion to the University of California and California
State University, $750 million to the Department of Developmental Services, and $580 million to,
state operations and employee compensation. Although the Governor's revenue proposals
result in a $2 billion increase in the Proposition 98 minimum funding guarantee for schools
above the current -law level, the Proposed Budget would result in a small funding decline for K-
12 and more significant reductions for community colleges and child care programs.
The Governor called the Legislature to refer the proposed re -instatement of temporary
tax increases described above to a statewide special election in June 2011, in an attempt to
gain voter approval for the Governor's proposed increases. However, March 31, the deadline for
initiating such a special election, has passed without an agreement in the Legislature about
whether to put such a re -instatement measure on the ballot. The measure may be presented to
California voters at a later date. A 2011 ballot proposition voted on after the July 1 expiration
could still re -instate the approved extensions for an additional five years.
Additional LAO Reports. An LAO report dated January 12, 2011 stated that the
Proposed Budget estimates were reasonable, and the proposed multiyear and ongoing
solutions show great promise of making substantial improvements to the State's overall budget
health. However, the LAO report recognizes that the Governor's realignment and
redevelopment proposals are extremely ambitious, implicating many legal, financial and policy
issues, and that $12 billion of the Governor's proposed solutions are dependent upon voter
approval in June 2011.
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.
Information about State budgets is regularly available at various State -maintained
websites. See: www.dof.ca.gov, under the heading "California Budget". Additionally, an impartial
analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. The
information referred to is prepared by the respective State agency maintaining each website and
not by the City, and the City takes no responsibility for the continued accuracy of the internet
addresses or for the accuracy, completeness or timeliness of information posted there, and
such information is not incorporated in this Official Statement by these references.
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
an agent multiple -employer defined benefit retirement plan that acts as a common investment
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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.
Under the City's plan, 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 50.90% and 58.69% of payroll to the Fund for police and fire personnel,
respectively, and 26.70% for other covered employees for the year ended June 30, 2010.
The City's annual cost for the Fund for fiscal years 2007-08, 2008-09, and 2009-10 was
$13,754,798, $13,746,154, and $12,745,613, 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, 2009. 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 2009 actuarial valuation include an assumed rate of return
on invested assets of 7.75%, annual payroll increases reflecting 3.5% for inflation and an
approximate range of 0.50% to 8.00% for merit and longevity. The actual rate of return on
investments was a loss of 19.8%. 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 Association also uses the level percentage -open method to
amortize the unfunded actuarial liability which was revised to sixteen 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 four years available is shown in the table below.
Table No. A-16
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, 2009 and June 30, 2010.
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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 Age
Over AAL
Ratio
payroll
of Payroll
2006
$209,785
$306,079
($96,294)
69%
$28,606
(279%)
2007
235,756
325,219
(89,463)
72%
30,180
(277%)
2008
262,677
360,298
(97,621)
73%
31,854
(306%)
2009
239,841
379,801
(139,960)
63%
32,413
(432%)
Source: Basic Financial Statements for the Year Ended June 30, 2009 and June 30, 2010.
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Actuarial Review and Analysis as of June 30, 2009. The City recently received an
Actuarial Review and Analysis as of June 30, 2009, dated April 29, 2010, which was prepared
by EFI Actuaries, San Francisco, California for MCERA. Assumptions used in the report include
(but are not limited to): all assets and liabilities are computed as of June 30, 2009, an annual
rate of return on all plan assets of 7.75%, net of investment and administrative expenses, a cost
of living adjustment ("COLA") as measured by the Consumer Price Index of 3.50% per year
(different percentages are used for retiree COLAs), and 3.50% base salary increases.
According to the Actuarial Report, as of June 30, 2009, the City had total plan
membership of 966 with an average pay of $84,306, assets for purposes of the valuation of
$239.8 million (market value of $199.9 million), an actuarial accrued liability of $379.8 million,
and an UAAL of $140.0 million. The employer contribution rate was 46.15% of annual payroll,
comprised of 13.08% for normal costs and 33.07% for amortization of unfunded liability. The
funded ratio was 63.2% using valuation assets, and 52.6% using the market value of assets.
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).
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 an additional 3.75% of the employee's gross earnings.
During fiscal year 2007-08, 2008-09 and 2009-10, the City and employees contributed
$69,940, $71,156 and $60,216, respectively. The total covered payroll of employees
participating in PARS as of June 30, 2010 was $1,605,760, out of a total City payroll of
$38,075,807.
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 years 2007-08
through 2009-10, the City contributed $139,124, $146,524 and $138,629, respectively, 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, 2009.
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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, 2009.
The City provides certain healthcare 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, 2010, 296 retirees and surviving spouses received these benefits.
The cost of these retiree health care benefits is recognized as an expenditure as claims
are paid. The annual required contribution was determined as part of a June 30, 2009 actuarial
valuation using the entry age normal actuarial cost method. For fiscal year 2009-10, the amount
contributed by the City totaled $2,344,000, which represents 53% of the annual required
contribution ($4,390,000).
The following schedule presents trend information about whether the actuarial value of
plan assets is increasing or decreasing over time relative to the actuarial accrued liability for
benefits. Trend data from a June 30, 2010 actuarial study is presented below:
Actuarial
Actuarial
Actuarial
Unfunded Funded Ratio
Covered
Overunded
Valuation
Value of
Accrued
Accrued
Payroll (000s
(Underfunded)
Date
Assets (000s
Liability (000s
Liability (000s
omitted)
Actuarial
omitted)
omitted)
omitted)
Liability as %
of Covered
Payroll
1/1/2007
$14,563
$56,624
$42,061 26%
$38,480
109.31%
8/17/2010
12,763
58,909(46,146)-1--22
36,470
1 126.53
See Appendix B, Note 11 for information more about the City's Post -Employment Health
Benefit liabilities.
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
Ismail
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 a note to the Superior Court of the
County of Marin maturing in December 2011, which had as of June 30, 2010 an outstanding
balance of $363,328
Capital Lease Obligations. In addition, the City has an outstanding capital lease
obligation for its telephone system. See Appendix B, Note 6.
Pension Obligation Bonds. In July, 2010, the City issued its 2010 Taxable Pension
Obligation Bonds, in the amount of $4,490,000.
Fiscal Year 2010-11 Tax and Revenue Anticipation Notes. The City issued fiscal year
2010-11 tax and revenue anticipation notes in the principal amount of $6,080,000. These notes
mature on July 28, 2011.
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. A-17
CITY OF SAN RAFAEL
Statement of Direct and Overlapping Debt As of May 15, 2011
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 March
1, 2010, 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. In February 2010, MBIA restructured its fixed-income asset management
subsidiary and changed their name to Cutwater Asset Management. 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, Federai
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National Mortgage Association, Federal Farm Credit 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 May 1, 2011, the City Treasurer reports that the
annualized return of the City's investment portfolio was % (based on a 365 -day year)
and the weighted average days to effective maturity was days.
The following table summarizes certain information relating to the City's investment
portfolio as of May 1, 2011:
Table No. A-18
CITY OF SAN RAFAEL
Investment Portfolio Summary
(as of May 1, 2011)
Type of Investment Historic Cost
Cash and equivalents
U.S. Treasury
U.S. Instrumentality
Corporate
Total
Source: City of San Rafael.
A-34
Market Value % of Portfolio (2)
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-Millias-Brown-Act, the City and the
employee associations negotiate wages, hours and conditions of employment.
Employee Group
Contract
Employees
Expiration Date
Service Employees International Union (SEIU)
132
06/30/2011
San Rafael Police Association (SRPA) (Police)
89
06/30/2011
Police Mid -Management
6
06/30/2011
Firefighters' Association
56
06/30/2011
Fire Chief Officers' Association
3
06/30/2011
SEW — Childcare
49
10/31/2011
Association of Professional Employees (WCE)
8
06/30/2011
Local One — Confidential
6
06/30/2011
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APPENDIX B
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2010
E
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 ("DTC'), 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 may be.
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
nameas 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 affect
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 2011-12 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
, 2011 (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.
WSRB" 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 Listed Events with respect to the Notes, if
material:
(1) Principal and interest payment delinquencies.
(2) Non-payment related defaults, if material.
(3) Unscheduled draws on debt service reserves reflecting financial
difficulties.
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(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, the issuance by the Internal Revenue Service of
proposed or final determinations of taxability, Notices of Proposed Issue
(IRS Form 5701-TEB) or other material notices or determinations with
respect to the tax status of the security, or other material events affecting
the tax status of the security.
(7) Modifications to rights of security holders, if material.
(8) Bond calls, if material, and tender offers.
(9) Defeasances.
(10) Release, substitution, or sale of property securing repayment of the
securities, if material.
(11) Rating changes.
(12) Bankruptcy, insolvency, receivership or similar event of the City or other
obligated person.
(13) The consummation of a merger, consolidation, or acquisition involving the
City or an obligated person, or the sale of all or substantially all of the
assets of the City or an obligated person (other than in the ordinary
course of business), the entry into a definitive agreement to undertake
such an action, or the termination of a definitive agreement relating to any
such actions, other than pursuant to its terms, if material.
(14) Appointment of a successor or additional trustee or the change of name
of a trustee, if material.
(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City
shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence
with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in
excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the
foregoing, notice of Listed Events described in subsections (a)(8) and (9) above need not be
given under this subsection any earlier than the notice (if any) of the underlying event is given to
holders of affected Bonds under the Resolution.
(c) The City acknowledges that the events described in subparagraphs (a)(2), (a)(7),
(a)(8) (if the event is a bond call), (a)(10), (a)(13), and (a)(14) of this Section 5 contain the
qualifier "if material." The City shall cause a notice to be filed as set forth in paragraph (b)
above with respect to any such event only to the extent that the City determines the event's
occurrence is material for purposes of U.S. federal securities law.
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
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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.
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
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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: , 2011
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CITY OF SAN RAFAEL
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City Manager