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HomeMy WebLinkAboutSan Rafael Joint Powers Finance Authority 2018-03-05 Staff Report ____________________________________________________________________________________ FOR CITY CLERK ONLY File No.: _______________________________ Council Meeting: _______________________ Disposition: ___________________________ Agenda Item No: 1.a Meeting Date: March 5, 2018 SAN RAFAEL JOINT POWERS FINANCING AUTHORITY Department: Finance Prepared by: Mark Moses, Treasurer Executive Director Approval: ____________ TOPIC: AUTHORIZATION TO ISSUE BONDS SUBJECT: RESOLUTION OF THE SAN RAFAEL JOINT POWERS FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF LEASE REVENUE BONDS IN AN INITIAL AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $55,000,000 IN CONNECTION WITH FINANCING CERTAIN PUBLIC CAPITAL IMPROVEMENTS CONSISTING OF PUBLIC SAFETY FACILITIES, AUTHORIZING AND DIRECTING EXECUTION OF AN INDENTURE OF TRUST, A LEASE AGREEMENT, A SITE LEASE AND CERTAIN OTHER DOCUMENTS, AUTHORIZING THE NEGOTIATION FOR THE SALE OF BONDS PURSUANT TO A BOND PURCHASE AGREEMENT, APPROVING AN OFFICIAL STATEMENT, AND AUTHORIZING OTHER RELATED ACTIONS RECOMMENDATION: ADOPT RESOLUTION BACKGROUND: Since the San Rafael City Council approved the Essential Public Safety Facilities Strategic Plan on July 20, 2015, the three phase one projects (Public Safety Center, Fire Station 52 and Fire Station 57) have been funded from a portion of the three-quarter percent Measure E Transactions and Use Tax, of which one-third (1/4 percent of the 3/4 percent) of the proceeds have been, and continue to be, dedicated to these and other essential facilities capital projects. Under a mutual agreement, the County of Marin also provides a share of the funding for Fire Station 57. With the construction of the Public Safety Center now underway, it is important to secure the remainder of the funding for these projects through the issuance of debt. The California Municipal Financing Authority, which replaced the former San Rafael Redevelopment Agency as the other member of the San Rafael Joint Powers Financing Authority (SRJPFA), has indicated that it will give the required administrative approval with respect to this transaction at closing. The approval of the City Council is anticipated at its regular meeting of March 5, 2018. SAN RAFAEL JOINT POWERS FINANCING AUTHORITY REPORT / Page: 2 The content of this report was reviewed and discussed at the Special Joint Meeting of the Finance Committee and City Council held on February 12, 2018, at which time staff was directed to bring this item forward to the Board of the SRJPFA, as well as to conduct an accompanying public hearing item on the agenda of the meeting of the San Rafael City Council. ANALYSIS: Financing Structure. The projects will be financed through the issuance of lease revenue bonds by the Authority. The bonds will be secured through a lease/leaseback structure, under which the City will lease real property and improvements, consisting of the Public Safety Center site and improvements (when completed), to the Authority in return for a one-time site lease payment equal to the proceeds of the bonds received on the closing date from the bond underwriter, Raymond James & Associates, Inc. Simultaneously, the Authority will lease the Public Safety Center site and improvements back to the City in return for semi-annual lease payments, which the Authority will assign to the bond trustee, MUFG Union Bank, for the payment of debt service on the bonds. The documents presented for approval by the Board under the Resolution are as follows: • Site Lease (Exhibit I), between the City, as lessor, and the Authority, as lessee, under which the City will lease the Public Safety Center to the Authority in return for the upfront site lease payment. • Lease Agreement (Exhibit II), between the Authority, as lessor, and the City, as lessee, under which the City will lease the Public Safety Center back from the Authority in return for semi-annual lease payments. Key provisions of the Lease Agreement include the obligation of the City to maintain casualty insurance and rental interruption insurance on the leased property during the term of the Lease Agreement. Rental interruption insurance is required to be maintained in an amount equal to 24 months of debt service. • Indenture of Trust (Exhibit III), between the Authority and the bond trustee, which sets forth the obligations of the Authority with respect to payment of the debt service on the bonds, the terms of the bonds, the rights of the bondholders, and the duties of the bond trustee. Under the Indenture, the bond trustee will hold the net bond proceeds and disburse them to pay the costs of issuing the bonds and the costs of constructing the projects. • Assignment Agreement (Exhibit IV), between the Authority and the bond trustee, under which the Authority assigns to the trustee all of the Authority’s rights to the semi-annual lease payments to be made by the City under the Lease Agreement, which the bond trustee will use to pay debt service on the bonds. • Preliminary Official Statement (Exhibit V), which is the disclosure document prepared by the financing team and City staff for purposes of satisf ying the federal securities laws for the public offering of the bonds (those laws are described in more detail below). The Preliminary Official Statement contains a description of the City, the City’s general fund finances, the three projects being financed, a description of the leased property (the Public Safety Center site and future improvements), and the terms of the SAN RAFAEL JOINT POWERS FINANCING AUTHORITY REPORT / Page: 3 bonds (sources of security, redemption terms, etc.). The Official Statement will be used by the bond underwriter to provide information about the bonds to prospective and actual investors. • Bond Purchase Agreement (Exhibit VI), among the City, the Authority and the bond underwriter, Raymond James, which obligates the bond underwriter to purchase all of the bonds on the closing date. This agreement also contains certain representations of the City and the Authority, and specifies the conditions for closing. Disclosure information pursuant to Government Code Section 5852.1 is provided in Appendix A of the Resolution. This information includes good faith estimates of the true interest cost of the bonds, 3.5%, sum of all fees paid to third parties, $400,000, net proceeds to be received, $53,600,000, and total payment amount through maturity $73,200,000. The City is approving its respective documents as a companion item. Securities Law Responsibilities. The Preliminary Official Statement has been reviewed and approved for transmittal to the Board by the City’s financing team. The distribution of the Preliminary Official Statement and the final Official Statement is subject to the 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 bonds. Material information exists where there is a substantial likelihood that the information would have actual significance in the deliberations of the reasonable investor when deciding whether to buy or sell the bonds. If the Board concludes that the Preliminary Official Statement includes all facts that would be material to an investor, it may adopt the attached Resolution which, among other things, authorizes staff to execute a certificate to the effect that the Preliminary Official Statement has been “deemed final.” The Securities and Exchange Commission (SEC), the agency with regulatory authority over compliance with the federal securities laws, has indicated that if a member of a legislative body, like the Board, has knowledge of any facts or circumstances that an investor would want to know prior to investing in securities such as the bonds, whether relating to the financial condition of the City and its ability to repay the bonds, undisclosed conflicts of interest with interested parties, material disputes involving the City, or otherwise, he or she should endeavor to discover whether such facts are adequately disclosed in the Preliminary Official Statement. The steps that a member of the Board could take to fulfill this obligation include becoming familiar with the preliminary Official Statement and questioning City staff and other members of the financing team about the disclosure of such facts. Terms The proposed bond financing is expected to yield $48.5 million in proceeds that will be available to the Essential Public Safety Facilities projects. The total cost of issuance, including underwriter’s discount is estimated to be $400,000. The issuance of the proposed bonds creates an obligation of the City’s General Fund, and will be paid back over a period of approximately 16 years. Based on current market estimates as of February 8, 2018, debt service on the bonds from Fiscal Year 2019-34 is expected to range between $2,325,000 and $5,505,000 annually, with interest only payable during the construction periods for the respective projects and the debt service thereafter escalating slightly to reflect the expectation of growth in the Measure E tax revenue over time. Debt service payments commence on SAN RAFAEL JOINT POWERS FINANCING AUTHORITY REPORT / Page: 4 June 1, 2018 and end on June 1, 2034.The actual interest rates on the bonds will be determined at the time of the bond pricing. To be conservative and create flexibility, the Resolution sets a true interest cost on the bonds as not to exceed 5.0%. FISCAL IMPACT: The SRJPFA is the issuer of the bonds and, by assigning its rights to the semi- annual lease payments (to be made by the City) to the bond trustee, incurs no fiscal impact from its role in this transaction. RECOMMENDED ACTION: Adopt Resolution authorizing execution of documents and other actions required to issue 2018 lease revenue bonds issued by the San Rafael Joint Powers Financing Authority. ATTACHMENT(S): Resolution with Appendix Exhibits I - VI 41390-03 SM:SRF:REL 01/18/2018 02/09/2018 RESOLUTION NO. FA 18-__ RESOLUTION OF THE SAN RAFAEL JOINT POWERS FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF LEASE REVENUE BONDS IN AN INITIAL AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $55,000,000 IN CONNECTION WITH FINANCING CERTAIN PUBLIC CAPITAL IMPROVEMENTS CONSISTING OF PUBLIC SAFETY FACILITIES, AUTHORIZING AND DIRECTING EXECUTION OF AN INDENTURE OF TRUST, A LEASE AGREEMENT, A SITE LEASE AND CERTAIN OTHER DOCUMENTS, AUTHORIZING THE NEGOTIATION FOR THE SALE OF BONDS PURSUANT TO A BOND PURCHASE AGREEMENT, APPROVING AN OFFICIAL STATEMENT, AND AUTHORIZING OTHER RELATED ACTIONS WHEREAS, the City of San Rafael (the "City") and the California Municipal Finance Authority have entered into an Amended and Restated Joint Exercise of Powers Agreement continuing the existence of the San Rafael Joint Powers Financing Authority (the "Authority") for the purpose, among others, of having the Authority issue its bonds to be used to finance the acquisition, construction and improvement of certain public capital improvements; and WHEREAS, the City has proposed to finance certain public capital improvements of the City, consisting generally of a new public safety center and two replacement fire stations (the “Project”), and WHEREAS, to that end, the City has proposed to lease to the Authority certain real property and improvements (the “Leased Property”) under a Site Lease (the “Site Lease”), in consideration of the payment by the Authority of an upfront rental payment (the “Site Lease Payment”) that is sufficient to provide funds for the acquisition and construction of the Project; and WHEREAS, in order to raise funds equal to the Site Lease Payment, the Authority proposes to authorize the issuance of its Lease Revenue Bonds, Series 2018 (the "Bonds") under Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Bond Law"); and WHEREAS, in order to secure the payments of principal of and interest on the Bonds, the Authority proposes to lease the Leased Property back to the City under a Lease Agreement (the “Lease Agreement”), under which the City is obligated to pay semiannual lease payments as rental for the Leased Property, and the Authority will assign substantially all of its rights under the Lease Agreement to MUFG Union Bank, N.A. (the “Trustee”), as trustee for the Bonds, under an Assignment Agreement by and between the Authority and the Trustee; and WHEREAS, the Authority desires to prepare and make available to potential investors an official statement relating to the Bonds containing information to be used in connection with the sale of Bonds; and -2- WHEREAS, the Bonds will be sold to Raymond James & Associates, Inc., as underwriter of the Bonds (the “Underwriter”), under a bond purchase agreement (the “Bond Purchase Agreement”) among the Authority, the City and the Underwriter; and WHEREAS, the Governing Board (the "Board") of the Authority has duly considered such transactions and wishes at this time to approve said transactions in the public interests of the Authority, and make certain findings regarding significant public benefits to the City with respect to these transactions; and WHEREAS, in accordance with Government Code Section 5852.1, the Board has obtained and disclosed the information set forth in Appendix A hereto; and NOW, THEREFORE, BE IT RESOLVED, by the Governing Board of the San Rafael Joint Powers Financing Authority as follows: Section 1. Findings and Determinations. Pursuant to the Act, the Board hereby finds and determines that the issuance of the Bonds and the transactions related thereto will result in significant public benefits to the City within the contemplation of Section 6586 of the Bond Law. Section 2. Issuance of Bonds. The Board hereby authorizes the issuance of the Bonds in an original principal amount not to exceed $55,000,000. The Bonds shall be issued in accordance with the Bond Law and the Indenture of Trust approved below. Section 3. Approval of Related Financing Agreements. The Authority hereby approves each of the following agreements required for the issuance and sale of the Bonds and the financing of the Project, in substantially the respective forms on file with the Secretary together with any changes therein or additions thereto deemed advisable by the Chair, the Executive Director and the Treasurer and Controller, or the designee of any of them (the “Designated Officers”) and the Authority’s general counsel. Execution of the agreements by a Designated Officer shall be conclusive evidence of the approval of any such changes or additions. Each Designated Officer is hereby authorized and directed for and on behalf of the Authority to execute, and the Secretary is hereby authorized and directed to attest, the final form of each such agreement, as follows: • Indenture of Trust, between the Authority and the Trustee, setting forth the terms and provisions relating to the Bonds. • Site Lease, between the City as lessor and the Authority as lessee, under which the City leases the Leased Property to the Authority in consideration of the payment of the Site Lease Payment. • Lease Agreement, between the Authority as lessor and the City as lessee, under which the Authority leases the Leased Property back to the City and the City agrees to pay semiannual lease payments which are sufficient to provide revenues with which to pay principal of and interest on the Bonds when due. • Assignment Agreement, between the Authority and the Trustee, whereby the Authority assigns certain of its rights under the Lease Agreement to the Trustee for the benefit of the Bond owners. -3- The Board hereby authorizes the performance by the Authority of its obligations under each such agreement. Section 4. Bond Purchase Agreement. The Authority hereby approves the form of the Bond Purchase Agreement on file with the Secretary, with such additions thereto and changes therein as the Designated Officers and the Authority’s general counsel may deem necessary, desirable or appropriate upon consultation with bond counsel, the execution of which by the Authority shall be conclusive evidence of the approval of any such additions or changes, provided that no such addition or change shall increase the original principal amount of Bonds to be in excess of $55,000,000, or shall provide for a true interest cost with respect to the Bonds in excess of 5.00% or an underwriter's discount (exclusive of any original issue discount) of greater than 0.50%. The Designated Officers, each acting alone, are hereby authorized and directed to execute the Bond Purchase Agreement and to take all actions necessary to fulfill the Authority’s obligations thereunder. Section 5. Official Statement. The Board hereby approves the form of Preliminary Official Statement relating to the Bonds (the "Preliminary Official Statement") on file with the Secretary, together with such changes or additions thereto as the Designated Officers and the Authority’s general counsel may deem necessary, desirable or appropriate upon consultation with bond and disclosure counsel, and authorizes the Designated Officers, each acting alone, to deem the Preliminary Official Statement final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934 except for omissions permitted therein. Distribution of the Preliminary Official Statement by the Underwriter is hereby approved. The Designated Officers, each acting alone, are hereby authorized to execute the final form of the Official Statement with such changes or additions as the Designated Officers may deem necessary, desirable or appropriate upon consultation with bond and disclosure counsel, and the execution of the final Official Statement by the Authority shall be conclusive evidence of the approval of any such additions and changes. The Board hereby authorizes the distribution of the final Official Statement. Section 6. Official Actions. The Designated Officers, the Secretary and any and all other officers of the Authority are hereby authorized and directed, for and in the name of and on behalf of the Authority, to do any and all things and take any and all actions, including execution and delivery of any and all documents, assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and documents, which they, or any of them, may deem necessary, advisable, or appropriate upon consultation with bond and disclosure counsel, in order to consummate the lawful issuance and sale of the Bonds and the consummation of the transactions as described herein, including without limitation, such documents, assignments, certificates and agreements as may be required by the Indenture, the Lease Agreement, the Site Lease and any and all other documents and agreement approved hereunder. Any action previously taken by the Designated Officers in furtherance of the foregoing are hereby ratified and approved. Section 7. Effective Date. This Resolution shall take effect immediately upon its passage and adoption. I, LINDSAY LARA, Secretary of the San Rafael Joint Powers Financing Authority, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the San Rafael Joint Powers Financing Authority held on the 5th day of March, 2018, by the following vote, to wit: -4- AYES: BOARD MEMBERS: NOES: BOARD MEMBERS: ABSENT: BOARD MEMBERS: ___________________________________ LINDSAY LARA, Secretary -5- APPENDIX A Government Code Section 5852.1 Disclosure The following information consists of estimates that have been provided by the Underwriter of the Bonds and Municipal Advisor to the Authority, which have been represented by them to have been provided in good faith: (A) True Interest Cost of the Bonds: 3.50% (B) Finance Charge of the Bonds (Sum of all fees/charges paid to third parties): $400,000 (C) Net Proceeds to be received (net of finance charges, reserves and capitalized interest, if any): $53,600,000 (D) Total Payment Amount Through Maturity: $73,200,000 41390-03 SM:SRF:REL 1/08/2018 2/07/2018 TO BE RECORDED AND WHEN RECORDED RETURN TO: Jones Hall A Professional Law Corporation 475 Sansome Street, Suite 1700 San Francisco, California 94111 Attention: Scott R. Ferguson, Esq. THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TAX UNDER SECTION 11929 OF THE REVENUE AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES UNDER SECTION 27383 OF THE CALIFORNIA GOVERNMENT CODE. SITE LEASE This SITE LEASE (this “Site Lease”), dated for convenience as of March 1, 2018, is between the CITY OF SAN RAFAEL, a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California, as lessor (the “City”), and the SAN RAFAEL JOINT POWERS FINANCING AUTHORITY, a joint powers authority duly organized and existing under the laws of the State of California, as lessee (the “Authority”). B A C K G R O U N D : 1. The City of San Rafael (the “City”) wishes to finance the acquisition and construction of certain public safety improvements consisting generally of a new public safety center and two replacement fire stations (collectively, the “Project”). 2. To that end, the City has proposed to lease to the Authority certain real property and improvements, initially consisting of the City’s new public safety facility, the City’s Fire Station 52, and the City’s Fire Station 57, including land and improvements thereon, as more particularly described in Appendix A attached hereto and by this reference incorporated herein (the “Leased Property”), under this Site Lease, in consideration of the payment by the Authority of an upfront rental payment (the “Site Lease Payment”) sufficient to provide funds for the acquisition and construction of the Project. 3. The Authority has authorized the issuance of its San Rafael Joint Powers Financing Authority Lease Revenue Bonds, Series 2018 (Public Safety Facilities Project) in the aggregate principal amount of $___________ (the “Bonds”) under an Indenture of Trust dated as of March 1, 2018 (the “Indenture”), between the Authority and MUFG Union Bank, N.A., as trustee (the “Trustee”), for the purpose of providing the funds to enable the Authority to pay the Site Lease Payment to the City in accordance with this Site Lease. -2- 4. In order to provide revenues which are sufficient to enable the Authority to pay debt service on the Bonds, the Authority has agreed to lease the Leased Property back to the City under a Lease Agreement dated as of the date hereof (the “Lease”), a memorandum of which has been recorded concurrently herewith, under which the City has agreed to pay semiannual Lease Payments as the rental for the Leased Property thereunder. 5. The lease payments made by the City under the Lease have been assigned by the Authority to the Trustee for the security of the Bonds under an Assignment Agreement dated as of the date hereof between the Authority as assignor and the Trustee as assignee, which has been recorded concurrently herewith. A G R E E M E N T : In consideration of the above recitals and of the mutual covenants contained herein, and for other valuable consideration, the parties hereto do hereby agree as follows: SECTION 1. Lease of Property to Authority. The City hereby leases the Leased Property to the Authority and the Authority hereby leases the Leased Property from the City, on the terms and conditions hereinafter set forth. SECTION 2. Term; Possession. The term of this Site Lease commences on the date of recordation of this Site Lease and ends on the date on which the Indenture is discharged in accordance with Section 10.03 thereof, but under any circumstances not later than June 1, 2044. The provisions of this Section 2 are subject in all respects to any other provisions of this Site Lease relating to the termination hereof. SECTION 3. Rental. The Authority shall pay to the City as and for rental of the Leased Property hereunder, the Site Lease Payment equal to $___________. The Site Lease Payment is due and payable upon the issuance of the Bonds and the execution and delivery hereof, and will be paid from the proceeds of the Bonds. The Authority and the City hereby find and determine that the total amount of the Site Lease Payment does not exceed the fair market value of the leasehold interest in the Leased Property which is conveyed hereunder by the City to the Authority. No other amount of rental is due and payable by the Authority for the use and occupancy of the Leased Property under this Site Lease. As provided in the Indenture, a portion of the proceeds of the Bonds will be applied to make the Site Lease Payment by depositing the full amount thereof with the Trustee to be held, invested and administered in accordance with the Indenture for the purpose of financing the acquisition and construction of the Project. SECTION 4. Leaseback to City. The Authority shall lease the Leased Property back to the City under the Lease. SECTION 5. Assignments and Subleases. Unless the City is in default under the Lease, the Authority may not assign its rights under this Site Lease or sublet all or any portion of the Leased Property, except as provided in the Assignment Agreement and in the Lease, without the prior written consent of the City. -3- SECTION 6. Substitution or Release of Property. If the City exercises its option under Section 3.2 of the Lease to substitute property for the Leased Property in whole or in part, such substitution shall also operate to substitute property for the Leased Property which is leased hereunder. If the City exercises its option under Section 3.3 of the Lease to release a portion of the Leased Property from the Lease, such substitution shall also operate to release such portion of the Leased Property hereunder. The description of the Leased Property which is leased under the Lease shall conform at all times to the description of the Leased Property which is leased hereunder. SECTION 7. Right of Entry. The City reserves the right for any of its duly authorized representatives to enter upon the Leased Property, or any portion thereof, at any reasonable time to inspect the same or to make any repairs, improvements or changes necessary for the preservation thereof. SECTION 8. Termination. The Authority agrees, upon the termination of this Site Lease, to quit and surrender the Leased Property in the same good order and condition as the Leased Property was in at the time of commencement of the term hereof, reasonable wear and tear excepted, and agrees that all buildings, improvements and structures then existing upon the Leased Property shall remain thereon and title thereto shall vest thereupon in the City for no additional consideration. SECTION 9. Default. If the Authority defaults in the performance of any obligation on its part to be performed under the terms of this Site Lease, which default continues for 30 days following notice and demand for correction thereof to the Authority, the City may exercise any and all remedies granted by law, except that no merger of this Site Lease and of the Lease shall be deemed to occur as a result thereof and no such remedy may include termination hereof; provided, however, that so long as the Lease remains in effect, the Lease Payments payable by the City under the Lease shall continue to be paid to the Trustee. SECTION 10. Quiet Enjoyment. The Authority at all times during the term of this Site Lease shall peaceably and quietly have, hold and enjoy all of the Leased Property, subject to the provisions of the Lease and subject only to Permitted Encumbrances (as that term is defined in the Lease). SECTION 11. Waiver of Personal Liability. All liabilities under this Site Lease on the part of the Authority are solely corporate liabilities of the Authority as a public entity, and the City hereby releases each and every member and officer of the Authority of and from any personal or individual liability under this Site Lease. No member or officer of the Authority or its governing board shall at any time or under any circumstances be individually or personally liable under this Site Lease for anything done or omitted to be done by the Authority hereunder. SECTION 12. Taxes. The City covenants and agrees to pay any and all assessments of any kind or character and also all taxes, including possessory interest taxes, levied or assessed upon the Leased Property and any improvements thereon. SECTION 13. Eminent Domain. If the whole or any part of the Leased Property or any improvements thereon is taken by eminent domain proceedings, the interest of the Authority shall be recognized and is hereby determined to be the amount of the then -4- unpaid Lease Payments payable under the Lease and the balance of the award, if any, shall be paid to the City. SECTION 14. Partial Invalidity. If any one or more of the terms, provisions, covenants or conditions of this Site Lease shall to any extent be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining terms, provisions, covenants and conditions of this Site Lease shall be affected thereby, and each provision of this Site Lease shall be valid and enforceable to the fullest extent permitted by law. SECTION 15. Notices. Any notice, request, complaint, demand or other communication under this Site Lease shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, or by telecopy, telex or other form of telecommunication, at its number set forth below. Notice shall be effective either (a) upon transmission by telecopy, telex or other form of telecommunication, (b) 48 hours after deposit in the United States mail, postage prepaid, or (c) in the case of personal delivery to any person, upon actual receipt. The City, the Authority and the Trustee may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder. If to the Authority City of San Rafael or the City: 1400 Fifth Avenue San Rafael, CA 94901 Attention: City Manager Email: If to the Trustee: MUFG Union Bank, N.A. 350 California Street, 17th Floor San Francisco, California 94104 Attention: Corporate Trust Department Email:AccountAdministration- Corporate.Trust@unionbank.com SECTION 16. Amendment of this Site Lease. The Authority and the City may at any time amend or modify any of the provisions of this Site Lease, but only (a) with the prior written consent of the Owners of a majority in aggregate principal amount of the Outstanding Bonds; or (b) without the consent of any of the Bond Owners, but only if such amendment or modification is for any one or more of the following purposes: (i) to make clear any ambiguity, or to cure, correct or supplement any defective provision contained herein, or in any other respect whatsoever as the Authority and the City may deem necessary or desirable, provided that, in the opinion of Bond Counsel, such modifications or amendments do not materially adversely affect the interests of the Owners of the Bonds; (ii) to amend any provision hereof relating to the Tax Code, to any extent whatsoever but only if and to the extent such amendment will not -5- adversely affect the exclusion from gross income of interest on the Bonds under the Tax Code, in the opinion of Bond Counsel; (iii) to conform to any amendment of the Indenture which is made thereto in accordance with Section 9.01 of the Indenture; or (iv) for the purpose of effectuating any substitution or release of property under Section 6. SECTION 17. Governing Law. This Site Lease shall be construed in accordance with and governed by the Constitution and laws of the State of California. SECTION 18. Third-Party Beneficiary. The Trustee is hereby made a third-party beneficiary under this Site Lease with all rights of a third-party beneficiary. SECTION 19. Binding Effect. This Site Lease inures to the benefit of and is binding upon the Authority, the City and their respective successors and assigns, subject, however, to the limitations contained herein. SECTION 20. Section Headings. All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision of this Site Lease. SECTION 21. Execution in Counterparts. This Site Lease may be executed in any number of counterparts, each of which shall be deemed to be an original but all together shall constitute but one and the same lease. It is also agreed that separate counterparts of this Site Lease may be separately executed by the Authority and the City, all with the same force and effect as though the same counterpart had been executed by both the Authority and the City. SECTION 22. Defined Terms. All capitalized terms used herein and not otherwise defined have the respective meanings given those terms in the Indenture. -6- IN WITNESS WHEREOF, the City and the Authority have caused this Site Lease to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written. CITY OF SAN RAFAEL, as lessor By City Manager Attest: Interim City Clerk SAN RAFAEL JOINT POWERS FINANCING AUTHORITY, as lessee By Executive Director Attest: Secretary A-1 APPENDIX A DESCRIPTION OF THE LEASED PROPERTY The Leased Property consists of that certain real property situated in the City of San Rafael, County of Marin, State of California, which is more particularly described as follows: 41390-03 SM:SRF:REL 1/04/2018 1/08/2018 1/18/2018 2/07/2018 LEASE AGREEMENT Dated as of March 1, 2018 between the SAN RAFAEL JOINT POWERS FINANCING AUTHORITY, as lessor and the CITY OF SAN RAFAEL, as lessee Relating to $___________ San Rafael Joint Powers Financing Authority Lease Revenue Bonds, Series 2018 (Public Safety Facilities Project) -i- TABLE OF CONTENTS ARTICLE I Definitions; Rules of Interpretation SECTION 1.1. Definitions ...................................................................................................... 2 SECTION 1.2. Interpretation ................................................................................................. 2 ARTICLE II Covenants, Representations and Warranties SECTION 2.1. Covenants, Representations and Warranties of the City .............................. 2 SECTION 2.2. Covenants, Representations and Warranties of the Authority ...................... 4 ARTICLE III Deposit and Application of Funds; Substitution and Release of Property SECTION 3.1. Deposit of Moneys ......................................................................................... 5 SECTION 3.2. Substitution of Property ................................................................................. 5 SECTION 3.3. Release of Property ....................................................................................... 6 ARTICLE IV Lease of Leased Property; Term of This Lease; Lease Payments: SECTION 4.1. Lease of Leased Property ............................................................................. 7 SECTION 4.2. Term .............................................................................................................. 7 SECTION 4.3. Lease Payments ............................................................................................ 7 SECTION 4.4. Source of Payments; Covenant to Budget and Appropriate ......................... 8 SECTION 4.5. Additional Rental Payments .......................................................................... 9 SECTION 4.6. Quiet Enjoyment ............................................................................................ 9 SECTION 4.7. Title ................................................................................................................ 9 ARTICLE V Maintenance; Taxes; Insurance; and Other Matters SECTION 5.1. Maintenance, Utilities, Taxes and Assessments ......................................... 10 SECTION 5.2. Modification of Leased Property .................................................................. 10 SECTION 5.3. Liability and Property Damage Insurance ................................................... 11 SECTION 5.4. Casualty Insurance ...................................................................................... 11 SECTION 5.5. Rental Interruption Insurance ...................................................................... 11 SECTION 5.6. Recordation Hereof; Title Insurance ........................................................... 12 SECTION 5.7. Insurance Net Proceeds; Form of Policies .................................................. 12 SECTION 5.8. Installation of City’s Personal Property ....................................................... 12 SECTION 5.9. Liens ............................................................................................................ 13 SECTION 5.10. Advances ................................................................................................... 13 ARTICLE VI Damage, Destruction and Eminent Domain; Use of Net Proceeds SECTION 6.1. Application of Net Proceeds ........................................................................ 13 SECTION 6.2. Termination or Abatement Due to Eminent Domain ................................... 13 SECTION 6.3. Abatement Due to Damage or Destruction ................................................. 14 ARTICLE VII Other Covenants of the City SECTION 7.1. Disclaimer of Warranties ............................................................................. 14 SECTION 7.2. Access to the Leased Property ................................................................... 14 SECTION 7.3. Release and Indemnification Covenants ..................................................... 14 SECTION 7.4. Assignment and Subleasing by the City ...................................................... 15 SECTION 7.5. Amendment Hereof ..................................................................................... 15 SECTION 7.6. Tax Covenants ............................................................................................ 16 SECTION 7.7. Continuing Disclosure ................................................................................. 17 -ii- ARTICLE VIII Events of Default and Remedies SECTION 8.1. Events of Default Defined ............................................................................ 18 SECTION 8.2. Remedies on Default ................................................................................... 18 SECTION 8.3. No Remedy Exclusive ................................................................................. 20 SECTION 8.4. Agreement to Pay Attorneys' Fees and Expenses ...................................... 20 SECTION 8.5. No Additional Waiver Implied by One Waiver ............................................. 20 SECTION 8.6. Application of Proceeds ............................................................................... 20 SECTION 8.7. Trustee and Bond Owners to Exercise Rights ............................................ 20 ARTICLE IX Prepayment of Lease Payments SECTION 9.1. Security Deposit .......................................................................................... 21 SECTION 9.2. Optional Prepayment ................................................................................... 21 SECTION 9.3. Mandatory Prepayment From Net Proceeds of Insurance or Eminent Domain .................................................................................................... 21 SECTION 9.4. Credit for Amounts on Deposit .................................................................... 22 ARTICLE X Miscellaneous SECTION 10.1. Notices ....................................................................................................... 22 SECTION 10.2. Binding Effect ............................................................................................ 22 SECTION 10.3. Severability ................................................................................................ 22 SECTION 10.4. Net-net-net Lease ...................................................................................... 22 SECTION 10.5. Third Party Beneficiary .............................................................................. 23 SECTION 10.6. Further Assurances and Corrective Instruments ....................................... 23 SECTION 10.7. Execution in Counterparts. ........................................................................ 23 SECTION 10.8. Applicable Law .......................................................................................... 23 SECTION 10.9. Authority and City Representatives ........................................................... 23 SECTION 10.10. Captions .................................................................................................. 23 APPENDIX A DESCRIPTION OF THE LEASED PROPERTY APPENDIX B SCHEDULE OF LEASE PAYMENTS LEASE AGREEMENT This LEASE AGREEMENT (this “Lease”), dated for convenience as of March 1, 2018, is between the SAN RAFAEL JOINT POWERS FINANCING AUTHORITY, a joint powers authority duly organized and existing under the laws of the State of California, as lessor (the “Authority”), and the CITY OF SAN RAFAEL, a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California, as lessee (the “City”). B A C K G R O U N D : 1. The City of San Rafael (the “City”) wishes to finance the acquisition and construction of certain public safety improvements consisting generally of a new public safety center and two replacement fire stations (collectively, the “Project”). 2. To that end, the City has proposed to lease to the Authority certain real property and improvements, initially consisting of the City’s new public safety facility, the City’s Fire Station 52, and the City’s Fire Station 57, including land and improvements thereon, as more particularly described in Appendix A attached hereto and by this reference incorporated herein (the “Leased Property”), under a Site Lease, dated the date hereof (the “Site Lease”), in consideration of the payment by the Authority of an upfront rental payment (the “Site Lease Payment”) sufficient to provide funds for the acquisition and construction of the Project. The Site Lease is being recorded concurrently with a memorandum of this Lease. 3. The Authority has authorized the issuance of its San Rafael Joint Powers Financing Authority Lease Revenue Bonds, Series 2018 (Public Safety Facilities Project) in the aggregate principal amount of $___________ (the “Bonds”) under an Indenture of Trust dated as of March 1, 2018 (the “Indenture”), between the Authority and MUFG Union Bank, N.A., as trustee (the “Trustee”), for the purpose of providing the funds to enable the Authority to pay the Site Lease Payment to the City in accordance with the Site Lease. 4. In order to provide revenues that are sufficient to enable the Authority to pay debt service on the Bonds, the Authority has agreed to lease the Leased Property back to the City under this Lease, under which the City agrees to pay semiannual Lease Payments as the rental for the Leased Property. 5. The lease payments made by the City under this Lease have been assigned by the Authority to the Trustee for the security of the Bonds under an Assignment Agreement dated as of the date hereof, between the Authority as assignor and the Trustee as assignee, which has been recorded concurrently herewith. 6. The City and the Authority have found and determined that all acts and proceedings required by law necessary to make this Lease, when executed by the City and the Authority, the valid, binding and legal obligations of the City and the Authority, and to constitute this Lease a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of this Lease have been in all respects duly authorized. -2- A G R E E M E N T : In consideration of the above recitals and of the mutual covenants contained herein, and for other valuable consideration, the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS; RULES OF INTERPRETATION SECTION 1.1. Definitions. Unless the context clearly otherwise requires or unless otherwise defined herein, the capitalized terms in this Lease have the respective meanings given them in the Indenture. SECTION 1.2. Interpretation. (a) Unless the context otherwise indicates, words expressed in the singular includes the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and includes the neuter, masculine or feminine gender, as appropriate. (b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and do not affect the meaning, construction or effect hereof. (c) All references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Lease; the words “herein,” “hereof,” “hereby,” “hereunder” and other words of similar import refer to this Lease as a whole and not to any particular Article, Section or subdivision hereof. ARTICLE II COVENANTS, REPRESENTATIONS AND WARRANTIES SECTION 2.1. Covenants, Representations and Warranties of the City. The City makes the following covenants, representations and warranties to the Authority, the Trustee as of the date of the execution and delivery of this Lease: (a) Due Organization and Existence. The City is a charter city and municipal corporation duly organized and validly existing under the Constitution and laws of the State of California, has full legal right, power and authority under the laws of the State of California to enter into the Site Lease and this Lease and to carry out and consummate all transactions contemplated hereby, and by proper action the City has duly authorized the execution and delivery of the Site Lease and this Lease. -3- (b) Due Execution. The representatives of the City executing the Site Lease and this Lease have been fully authorized to execute the same under a resolution and ordinance duly adopted by the City Council of the City. (c) Valid, Binding and Enforceable Obligations. The Site Lease and this Lease have been duly authorized, executed and delivered by the City and constitute the legal, valid and binding obligations of the City enforceable against the City in accordance with their respective terms. (d) No Conflicts. The execution and delivery of the Site Lease and this Lease, the consummation of the transactions therein and herein contemplated and the fulfillment of or compliance with the terms and conditions thereof and hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the City is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the City, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Site Lease and this Lease or the financial condition, assets, properties or operations of the City. (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the City or of the voters of the City, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of the Site Lease and this Lease, or the consummation of any transaction therein and herein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of the City after reasonable investigation, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of the Site Lease and this Lease, or upon the financial condition, assets, properties or operations of the City, and the City is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely -4- affect the consummation of the transactions contemplated by the Site Lease and this Lease or the financial conditions, assets, properties or operations of the City. SECTION 2.2. Covenants, Representations and Warranties of the Authority. The Authority makes the following covenants, representations and warranties to the City, the Trustee as of the date of the execution and delivery of this Lease: (a) Due Organization and Existence. The Authority is a joint exercise of powers authority duly organized and existing under a joint powers agreement and the laws of the State of California; has power to enter into this Lease, the Site Lease, the Assignment Agreement and the Indenture; is possessed of full power to own and hold, improve and equip real and personal property, and to lease the same; and has duly authorized the execution and delivery of each of the aforesaid agreements and such agreements constitute the legal, valid and binding obligations of the Authority, enforceable against the Authority in accordance with their respective terms. (b) Due Execution. The representatives of the Authority executing this Lease, the Site Lease, the Assignment Agreement and the Indenture are fully authorized to execute the same pursuant to official act ion taken by the governing body of the Authority. (c) Valid, Binding and Enforceable Obligations. This Lease, the Site Lease, the Assignment Agreement and the Indenture have been duly authorized, executed and delivered by the Authority and constitute the legal, valid and binding agreements of the Authority, enforceable against the Authority in accordance with their respective terms. (d) No Conflicts. The execution and delivery of this Lease, the Site Lease, the Assignment Agreement and the Indenture, the consummation of the transactions herein and therein contemplated and the fulfillment of or compliance with the terms and conditions hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the Authority is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Authority, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease, the Site Lease, the Assignment Agreement and the Indenture or the financial condition, assets, properties or operations of the Authority. (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the Authority, and no consent, -5- permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Lease, the Site Lease, the Assignment Agreement or the Indenture, or the consummation of any transaction herein or therein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of the Authority after reasonable investigation, threatened against or affecting the Authority or the assets, properties or operations of the Authority which, if determined adversely to the Authority or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Lease, the Site Lease, the Assignment Agreement or the Indenture, or upon the financial condition, assets, properties or operations of the Authority, and the Authority is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease, the Site Lease, the Assignment Agreement or the Indenture or the financial conditions, assets, properties or operations of the Authority. ARTICLE III DEPOSIT AND APPLICATION OF FUNDS; SUBSTITUTION AND RELEASE OF PROPERTY SECTION 3.1. Deposit of Moneys. On the Closing Date, the Authority will cause the proceeds of sale of the Bonds to be deposited with the Trustee. The Trustee shall deposit such proceeds in accordance with Section 3.02 of the Indenture. SECTION 3.2. Substitution of Property. The City has the option at any time and from time to time, to substitute other real property (the “Substitute Property”) for the Leased Property or any portion thereof (the “Former Property”), upon satisfaction of all of the following requirements which are hereby declared to be conditions precedent to such substitution: (a) No Event of Default has occurred and is continuing, as certified in writing by the City. (b) The City has filed with the Authority and the Trustee, and caused to be recorded in the office of the Marin County Recorder sufficient memorialization of an amendment hereof that adds the legal description of the Substitute Property to Appendix A and deletes therefrom the legal description of the Former Property, and has filed -6- and caused to be recorded corresponding amendments to the Site Lease and Assignment Agreement. (c) The City has obtained a CLTA policy of title insurance insuring the City’s leasehold estate hereunder in the Substitute Property, subject only to Permitted Encumbrances, in an amount at least equal to the estimated value thereof. (d) The City has certified in writing to the Authority and the Trustee that the Substitute Property serves the municipal purposes of the City and constitutes property which the City is permitted to lease under the laws of the State of California, and has been determined to be essential to the proper, efficient and economic operation of the City and to serve an essential governmental function of the City. (e) The Substitute Property does not cause the City to violate any of its covenants, representations and warranties made herein, as certified in writing by the City. (g) The City has filed with the Authority and the Trustee a written certificate of the City or other written evidence stating that the useful life of the Substitute Property at least extends to June 1, 2034, that the estimated value of the Leased Property, after substitution of the Substitute Property and release of the Former Property, is at least equal to the aggregate Outstanding principal amount of the Bonds, and the fair rental value of the Leased Property, after substitution of the Substitute Property and release of the Former Property, is at least equal to the Lease Payments thereafter coming due and payable hereunder. (h) The City has mailed written notice of such substitution to each rating agency which then maintains a rating on the Bonds. Upon the satisfaction of all such conditions precedent, the Term of this Lease will thereupon end as to the Former Property and commence as to the Substitute Property, and all references to the Former Property will apply with full force and effect to the Substitute Property. The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of any substitution of property under this Section. The Authority and the City will execute, deliver and cause to be recorded all documents required to discharge the Site Lease, this Lease and the Assignment Agreement of record against the Former Property and to cause the Substitute Property to become subject to all of the terms and conditions of the Site Lease, this Lease and the Assignment Agreement. SECTION 3.3. Release of Property. The City has the option at any time and from time to time to release any portion of the Leased Property from this Lease (the “Released Property”) provided that the City has satisfied all of the following requirements which are hereby declared to be conditions precedent to such release: (a) No Event of Default has occurred and is continuing, as certified in writing by the City. -7- (b) The City has filed with the Authority and the Trustee, and caused to be recorded in the office of the Marin County Recorder sufficient memorialization of an amendment hereof, the Site Lease and the Assignment Agreement which removes the Released Property from the Site Lease, the Assignment Agreement and this Lease. (c) The City has certified in writing to the Authority and the Trustee that the value of the property which remains subject to this Lease following such release is at least equal to the aggregate Outstanding principal amount of the Bonds, and the fair rental value of the property which remains subject to this Lease following such release is at least equal to the Lease Payments thereafter coming due and payable hereunder. (d) The City has mailed written notice of such release to each rating agency which then maintains a rating on the Bonds. Upon the satisfaction of all such conditions precedent, the Term of this Lease will thereupon end as to the Released Property. The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such release. The Authority and the City shall execute, deliver and cause to be recorded all documents required to discharge the Site Lease, this Lease and the Assignment Agreement of record against the Released Property. ARTICLE IV LEASE OF LEASED PROPERTY; TERM OF THIS LEASE; LEASE PAYMENTS SECTION 4.1. Lease of Leased Property. The Authority hereby leases the Leased Property to the City and the City hereby leases the Leased Property from the Authority, upon the terms and conditions set forth in this Lease. SECTION 4.2. Term. The Term of this Lease commences on the Closing Date and ends on the date on which the Indenture is discharged in accordance with Section 10.03 thereof, but under any circumstances not later than June 1, 2044. The provisions of this Section are subject to the provisions of Sections 6.2 and 6.3 relating to the taking in eminent domain, damage and destruction of the Leased Property in whole or in part. SECTION 4.3. Lease Payments. (a) Obligation to Pay. Subject to the provisions of Sections 6.2 and 6.3 and the provisions of Article IX, the City agrees to pay to the Authority, its successors and assigns, the Lease Payments in the respective amounts specified in Appendix B attached to this Lease, to be due and payable in immediately available funds on the Interest Payment Dates immediately following each of the respective Lease Payment Dates specified in Appendix B, and to be deposited by the City with the Trustee on each of the Lease Payment Dates specified in Appendix B. Any amount held in the Bond Fund, the Interest -8- Account and the Principal Account on any Lease Payment Date (other than amounts resulting from the prepayment of the Lease Payments in part but not in whole under Article IX, and amounts required for payment of past due principal or interest on any Bonds not presented for payment) will be credited towards the Lease Payment then required to be paid hereunder. The City is not required to deposit any Lease Payment with the Trustee on any Lease Payment Date if the amounts then held in the Bond Fund, the Interest Account and the Principal Account are at least equal to the Lease Payment then required to be deposited with the Trustee. The Lease Payments payable in any Rental Period are for the use of the Leased Property during that Rental Period. (b) Effect of Prepayment. If the City prepays all Lease Payments in full under Sections 9.2 or 9.3, the City’s obligations under this Section will thereupon cease and terminate. If the City prepays the Lease Payments in part but not in whole under Sections 9.2 or 9.3, the principal components of the remaining Lease Payments will be reduced in integral multiples of $5,000 among Lease Payment Dates on a basis which corresponds to the principal maturities of the Bonds which are redeemed thereby; and the intere st component of each remaining Lease Payment will be reduced by the aggregate corresponding amount of interest which would otherwise be payable with respect to the Bonds thereby redeemed under Section 4.01 of the Indenture. (c) Rate on Overdue Payments. If the City fails to make any of the payments required in this Section, the payment in default will continue as an obligation of the City until the amount in default has been fully paid, and the City agrees to pay the same with interest thereon, from the date of default to the date of payment at the highest rate of interest on any Outstanding Bond. (d) Fair Rental Value. The aggregate amount of the Lease Payments and Additional Rental Payments coming due and payable during each Rental Period constitute the total rental for the Leased Property for such Rental Period, and are payable by the City in each Rental Period for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of the Leased Property during each Rental Period. The parties hereto have agreed and determined that the total Lease Payments do not exceed the fair rental value of the Leased Property. In making that determination, consideration has been given to the estimated value of the Leased Property, other obligations of the City and the Authority under this Lease, the uses and purposes which may be served by the Leased Property and the benefits therefrom which will accrue to the City and the general public. (e) Assignment. The City understands and agrees that all Lease Payments have been assigned by the Authority to the Trustee in trust, under the Assignment Agreement, for the benefit of the Owners of the Bonds, and the City hereby assents to such assignment. The Authority hereby directs the City, and the City hereby agrees to pay to the Trustee at its Office, all payments payable by the City under this Section and all amounts payable by the City under Article IX. SECTION 4.4. Source of Payments; Covenant to Budget and Appropriate. The Lease Payments are payable from any source of available funds of the City, subject to the provisions of Section 6.3. The City covenants to take all actions required to include the Lease Payments in each of its budgets during the Term of this Lease and to make the necessary appropriations for all Lease Payments and Additional Rental Payments. The foregoing covenant of the City contained constitutes a duty imposed by law and each and -9- every public official of the City is required to take all actions required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in this Lease agreed to be carried out and performed by the City. SECTION 4.5. Additional Rental Payments. In addition to the Lease Payments, the City shall pay when due the following amounts of Additional Rental Payments in consideration of the lease of the Leased Property by the City from the Authority hereunder: (a) all fees and expenses incurred by the Authority in connection with or by reason of its leasehold estate in the Leased Property, when due, (b) all compensation to the Trustee for all services rendered under the Indenture and for all expenses, charges, costs, liabilities, legal fees and other disbursements incurred in and about the performance of its powers and duties under the Indenture in accordance with Section 8.07 of the Indenture, (c) the reasonable fees and expenses of such accountants, consultants, attorneys and other experts as may be engaged by the Authority or the Trustee to prepare audits, financial statements, reports, opinions or provide such other services required under this Lease or the Indenture, (d) amounts coming due and payable as Excess Investment Earnings in accordance with Section 7.6(e), and (e) the reasonable out-of-pocket expenses of the Authority in connection with the execution and delivery of this Lease or the Indenture, or in connection with the issuance of the Bonds, including but not limited to any and all expenses incurred in connection with the authorization, sale and delivery of the Bonds, or incurred by the Authority in connection with any litigation which may at any time be instituted involving this Lease, the Bonds, the Indenture or any of the other documents contemplated hereby or thereby, or otherwise incurred in connection with the administration of this Lease. SECTION 4.6. Quiet Enjoyment. Throughout the Term of this Lease, the Authority shall provide the City with quiet use and enjoyment of the Leased Property and the City will peaceably and quietly have and hold and enjoy the Leased Property, without suit, trouble or hindrance from the Authority, except as expressly set forth in this Lease. The Authority will, at the request of the City and at the City’s cost, join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Authority may lawfully do so. Notwithstanding the foregoing, the Authority has the right to inspect the Leased Property as provided in Section 7.2. SECTION 4.7. Title. Upon the termination of this Lease (other than under Section 8.2(b) hereof), all right, title and interest of the Authority in and to the Leased Property transfers to and vests in the City. The Authority shall take any and all steps and execute and record any and all documents reasonably required by the City to consummate any such transfer of title. -10- ARTICLE V MAINTENANCE; TAXES; INSURANCE; AND OTHER MATTERS SECTION 5.1. Maintenance, Utilities, Taxes and Assessments. Throughout the Term of this Lease, as part of the consideration for the rental of the Leased Property, all improvement, repair and maintenance of the Leased Property are the responsibility of the City, and the City will pay for or otherwise arrange for the payment of all utility services supplied to the Leased Property, which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, water and all other utility services, and will pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Leased Property resulting from ordinary wear and tear or want of care on the part of the City or any assignee or sublessee thereof. In exchange for the Lease Payments herein provided, the Authority agrees to provide only the Leased Property. The City waives the benefits of subsections 1 and 2 of Section 1932, Section 1933(4) and Sections 1941 and 1942 of the California Civil Code, but such waiver does not limit any of the rights of the City under the terms of this Lease. The City shall also pay or cause to be paid all taxes and assessments of any type or nature, if any, charged to the Authority or the City affecting the Leased Property or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall pay only such installments as are required to be paid during the Term of this Lease as and when the same become due. The City may, at its expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Authority notifies the City that, in its reasonable opinion, by nonpayment of any such items the interest of the Authority in the Leased Property will be materially endangered or the Leased Property or any part thereof will be subject to loss or forfeiture, in which event the City shall promptly pay such taxes, assessments or charges or provide the Authority with full security against any loss which may result from nonpayment, in form satisfactory to the Authority and the Trustee. SECTION 5.2. Modification of Leased Property. The City has the right, at its own expense, to make additions, modifications and improvements to the Leased Property or any portion thereof. All additions, modifications and improvements to the Leased Property will thereafter comprise part of the Leased Property and become subject to the provisions of this Lease. Such additions, modifications and improvements may not in any way damage the Leased Property, or cause the Leased Property to be used for purposes other than those authorized under the provisions of state and federal law; and the Leased Property, upon completion of any additions, modifications and improvements made thereto under this Section, must be of a value which is not substantially less than the value thereof immediately prior to the making of such additions, modifications and improvements. -11- The City will not permit any mechanic’s or other lien to be established or remain against the Leased Property for labor or materials furnished in connection with any remodeling, additions, modifications, improvements, repairs, renewals or replacements made by the City under this Section; except that if any such lien is established and the City first notifies or causes to be notified the Authority of the City’s intention to do so, the City may in good faith contest any lien filed or established against the Leased Property, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide the Authority with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Authority. The Authority will cooperate fully in any such contest, upon the request and at the expense of the City. SECTION 5.3. Liability and Property Damage Insurance. The City shall maintain or cause to be maintained throughout the Term of this Lease, a standard commercial general liability insurance policy or policies in protection of the Authority, the City, and their respective members, officers, agents, employees and assigns. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Leased Property. Such policy or policies shall provide coverage in such liability limits and be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City, subject to the provisions of Section 5.7, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The proceeds of such liability insurance must be applied toward extinguishment or satisfaction of the liability with respect to which paid. SECTION 5.4. Casualty Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of this Lease, casualty insurance against loss or damage to all buildings situated on the Leased Property, in an amount at least equal to the lesser of (a) 100% of the replacement value of the insured buildings, or (b) 100% of the aggregate principal amount of the Outstanding Bonds. Such insurance must, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance may, at the sole discretion of the City, include earthquake insurance if available at reasonable cost from reputable insurers in the judgment of the City. Such insurance may be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained by the City in the form of self-insurance. The Net Proceeds of such insurance must be applied as provided in Section 6.1. SECTION 5.5. Rental Interruption Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of this Lease, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any portion of the Leased Property constituting buildings or other improvements as a result of any of the hazards covered in the insurance required by Section 5.4, in an amount at least equal to the maximum such Lease Payments coming due and payable during any consecutive two Fiscal Years. Such insurance may be maintained as part of or in -12- conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained by the City in the form of self-insurance. The Net Proceeds of such insurance, if any, must be paid to the Trustee and deposited in the Bond Fund, to be applied as a credit towards the payment of the Lease Payments allocable to the insured improvements as the same become due and payable. SECTION 5.6. Recordation Hereof; Title Insurance. On or before the Closing Date the City shall, at its expense, (a) cause the Site Lease, the Assignment Agreement and this Lease, or a memorandum hereof or thereof in form and substance approved by Bond Counsel, to be recorded in the office of the Marin County Recorder, and (b) obtain a CLTA title insurance policy insuring the City’s leasehold estate hereunder in the Leased Property, subject only to Permitted Encumbrances, in an amount at least equal to the aggregate principal amount of the Bonds. All Net Proceeds received under any such title insurance policy must be deposited with the Trustee in the Bond Fund to be credited towards the prepayment of the remaining Lease Payments under Section 9.3. SECTION 5.7. Insurance Net Proceeds; Form of Policies. Each policy of insurance maintained under Sections 5.4, 5.5 and 5.6 must name the Trustee as loss payee so as to provide that all proceeds thereunder are payable to the Trustee. The City shall pay or cause to be paid when due the premiums for all insurance policies required by this Lease. All such policies shall provide that the Trustee is given 30 days’ notice of each expiration, any intended cancellation thereof or reduction of the coverage provided thereby. The City must file with the Trustee annually, within 90 days following the close of each Fiscal Year, a certificate of the City stating that all policies of insurance required hereunder are then in full force and effect. The Trustee has no responsibility for the sufficiency, adequacy or amount of any insurance or self-insurance herein required and is fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss. If any insurance maintained under Section 5.3 is provided in the form of self- insurance, the City must file with the Trustee annually, within 90 days following the close of each Fiscal Year, a statement of the risk manager of the City or an independent insurance adviser engaged by the City identifying the extent of such self-insurance and stating the determination that the City maintains sufficient reserves with respect thereto. If any such insurance is provided in the form of self-insurance by the City, the City has no obligation to make any payment with respect to any insured event except from those reserves. SECTION 5.8. Installation of City’s Personal Property. The City may at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed other items of equipment or other personal property in or upon the Leased Property. All such items shall remain the sole property of the City, in which neither the Authority nor the Trustee has any interest, and may be modified or removed by the City at any time, provided that the City must repair all damage to the Leased Property resulting from the installation, modification or removal of any such items. Nothing in this Lease prevents the City from purchasing or leasing items to be installed under this Section under a lease or conditional sale agreement, or subject to a vendor’s lien or security agreement, as security for the unpaid portion of the purchase price thereof, so long as no such lien or security interest attaches to any part of the Leased Property. -13- SECTION 5.9. Liens. The City may not, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to the Leased Property, other than as herein contemplated and except for such encumbrances as the City certifies in writing to the Trustee do not materially and adversely affect the leasehold estate of the City in the Leased Property hereunder. If any such mortgage, pledge, lien, charge, encumbrance or claim does materially and adversely affect the leasehold estate of the City in the Leased Property hereunder, the City will promptly, at its own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is responsible; provided that the City is not required to do so prior to the time when such mortgage, pledge, lien, charge, encumbrance or claim actually causes such material adverse effect. The City will reimburse the Authority for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim. SECTION 5.10. Advances. If the City fails to perform any of its obligations under this Article V, the Authority may (but is not required to) take such action as it deems necessary to cure such failure, including the advancement of money, and the City shall repay all such advances as Additional Rental Payments hereunder, with interest at the rate set forth in Section 4.3(c). ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS SECTION 6.1. Application of Net Proceeds. The Trustee, as assignee of the Authority under the Assignment Agreement, has the right to receive all Net Proceeds. As provided in the Indenture, the Trustee will deposit all Net Proceeds in the Insurance and Condemnation Fund to be applied as set forth in Section 5.07 of the Indenture. SECTION 6.2. Termination or Abatement Due to Eminent Domain. If the Leased Property is taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the Term of this Lease thereupon ceases as of the day possession is taken. If less than all of the Leased Property is taken permanently, or if the Leased Property is taken temporarily, under the power of eminent domain, then: (a) this Lease shall continue in full force and effect with respect thereto and does not terminate by virtue of such taking, and the parties waive the benefit of any law to the contrary; and (b) the Lease Payments are subject to abatement in an amount determined by the City such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property. -14- SECTION 6.3. Abatement Due to Damage or Destruction. The Lease Payments are subject to abatement during any period in which by reason of damage or destruction (other than by eminent domain which is hereinbefore provided for) there is substantial interference with the use and occupancy by the City of the Leased Property or any portion thereof. The Lease Payments are subject to abatement in an amount determined by the City such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property not damaged or destroyed. Such abatement will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, this Lease continues in full force and effect and the City waives any right to terminate this Lease by virtue of any such damage and destruction. ARTICLE VII OTHER COVENANTS OF THE CITY SECTION 7.1. Disclaimer of Warranties. THE AUTHORITY AND THE TRUSTEE MAKE NO AGREEMENT, WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE CITY OF THE LEASED PROPERTY OR ANY PORTION THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE LEASED PROPERTY OR ANY PORTION THEREOF. THE CITY ACKNOWLEDGES THAT THE AUTHORITY IS NOT A MANUFACTURER OF ANY PORTION OF THE LEASED PROPERTY OR A DEALER THEREIN, THAT THE CITY LEASES THE LEASED PROPERTY AS-IS, IT BEING AGREED THAT ALL OF THE AFOREMENTIONED RISKS ARE TO BE BORNE BY THE CITY. The Authority has no liability for incidental, indirect, special or consequential damages, in connection with or arising out of this Lease for the existence, furnishing, functioning or use of the Leased Property by the City. SECTION 7.2. Access to the Leased Property. The City agrees that the Authority and any Authorized Representative of the Authority, and the Authority’s successors or assigns, have the right at all reasonable times to enter upon and to examine and inspect the Leased Property or any part thereof. The City further agrees that the Authority, any Authority Representative and the Authority’s successors or assigns may have such rights of access to the Leased Property or any component thereof as reasonably necessary to cause the proper maintenance of the Leased Property if the City fails to perform its obligations hereunder; provided, however, that neither the Authority nor any of its assigns has any obligation to cause such proper maintenance. SECTION 7.3. Release and Indemnification Covenants. The City agrees to indemnify the Authority, the Trustee and their respective officers, agents, successors and assigns, against all claims, losses and damages, including legal fees and expenses, arising out of any of the following: (a) the use, maintenance, condition or management of, or from any work or thing done on the Leased Property by the City, -15- (b) any breach or default on the part of the City in the performance of any of its obligations under this Lease, (c) any negligence or willful misconduct of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Leased Property, (d) any intentional misconduct or negligence of any sublessee of the City with respect to the Leased Property, (e) the acquisition, construction, improvement and equipping of the Leased Property, or the authorization of payment of the costs thereof, or (f) the acceptance and performance of the duties of the Trustee under the Indenture, the Assignment Agreement and under this Lease. No indemnification is made under this Section or elsewhere in this Lease for willful misconduct or negligence under this Lease by the Authority, the Trustee or their respective officers, agents, employees, successors or assigns. SECTION 7.4. Assignment and Subleasing by the City. The City may sublease the Leased Property, or any portion thereof, subject to all of the following conditions: (a) this Lease and the obligation of the City to make Lease Payments hereunder must remain obligations of the City, as certified in writing by the City; (b) the City must, within 30 days after the delivery thereof, furnish or cause to be furnished to the Authority and the Trustee a true and complete copy of such sublease; (c) no such sublease by the City may cause the Leased Property to be used for a purpose which is not authorized under the provisions of the laws of the State of California, as certified in writing by the City; and (d) the City must furnish to the Authority and the Trustee a written opinion of Bond Counsel stating that such sublease does not cause the interest on the Bonds to become included in gross income for purposes of federal income taxation or to become subject to personal income taxation by the State of California. SECTION 7.5. Amendment Hereof. The Authority and the City may at any time amend or modify any of the provisions of this Lease, but only: (a) with the prior written consents of the Owners of a majority in aggregate principal amount of the Outstanding Bonds; or (b) without the consent of the Trustee or any of the Bond Owners, but only if such amendment or modification is for any one or more of the following purposes: -16- (i) to add to the covenants and agreements of the City contained in this Lease, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power herein reserved to or conferred upon the City; (ii) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein, to conform to the original intention of the City and the Authority; (iii) to modify, amend or supplement this Lease in such manner as to assure that the interest on the Bonds remains excluded from gross income under the Tax Code; (iv) to amend the description of the Leased Property to reflect accurately the property originally intended to be included therein, or in connection with any substitution or release of property under Sections 3.2 or 3.3; (v) to obligate the City to pay additional amounts of rental for the use and occupancy of the Leased Property, but only if (A) such additional amounts of rental are pledged or assigned for the payment of any bonds, notes, leases or other obligations the proceeds of which are applied to finance or refinance the acquisition or construction of any real or personal property for which the City is authorized to expend funds subject to its control, (B) the City has obtained and filed with the Trustee an appraisal showing that the appraised value of the Leased Property is at least equal to the aggregate principal amount of the Outstanding Bonds and all such other bonds, notes, leases or other obligations, and (C) the City has filed with the Trustee written evidence that the amendments made under this clause (v) will not of themselves cause a reduction or withdrawal of any rating then assigned to the Bonds; or (vi) in any other respect whatsoever as the Authority and the City deem necessary or desirable, if in the opinion of Bond Counsel such modifications or amendments do not materially adversely affect the interests of the Owners of the Bonds. No such modification or amendment may (a) extend or have the effect of extending any Lease Payment Date or reducing any Lease Payment or any premium payable upon the prepayment thereof, without the express consent of the Owners of the affected Bonds, or (b) modify any of the rights or obligations of the Trustee without its written assent thereto. If the Trustee’s consent to such modification or amendment is required, the Trustee shall be entitled to the same documents as it would be entitled to under Article IX of the Indenture for such type of modification or amendment. SECTION 7.6. Tax Covenants. (a) Private Business Use Limitation. The City shall assure that the proceeds of the Bonds are not used in a manner which would cause the Bonds to satisfy the private -17- business tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax Code. (b) Federal Guarantee Prohibition. The City may not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Tax Code. (c) No Arbitrage. The City may not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Bonds or of any other obligations which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date, would have caused the Bonds to be “arbitrage bonds” within the meaning of Section 148(a) of the Tax Code. (d) Maintenance of Tax Exemption. The City shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the Closing Date. (e) Rebate of Excess Investment Earnings to United States. The City shall calculate or cause to be calculated the Excess Investment Earnings in all respects at the times and in the manner required under the Tax Code. The City shall pay the full amount of Excess Investment Earnings to the United States of America in such amounts, at such times and in such manner as may be required under the Tax Code. Such payments shall be made by the City from any source of legally available funds of the City, and shall constitute Additional Rental Payments hereunder. The City shall keep or cause to be kept, and retain or cause to be retained for a period of six years following the retirement of the Bonds, records of the determinations made under this subsection (e). In order to provide for the administration of this subsection (e), the City may provide for the employment of independent attorneys, accountants and consultants compensated on such reasonable basis as the City may deem appropriate. The Trustee has no duty or obligation to monitor or enforce compliance by the City of any of the requirements under this subsection (e). SECTION 7.7. Continuing Disclosure. The City shall comply with and carry out all of the provisions of the Continuing Disclosure Certificate executed by the City as of the Closing Date, as originally executed and as it may be amended from time to time in accordance with its terms. Notwithstanding any other provision of this Lease, failure of the City to comply with such Continuing Disclosure Certificate will not constitute an Event of Default, although any Participating Underwriter (as that term is defined in such Continuing Disclosure Certificate) or any Owner or beneficial owner of the Bonds may take such actions as may be necessary and appropriate to compel performance by the City of its obligations under this Section, including seeking mandate or specific performance by court order. -18- ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES SECTION 8.1. Events of Default Defined. Any one or more of the following events constitute an Event of Default hereunder: (a) Failure by the City to pay any Lease Payment or other payment required to be paid hereunder at the time specified herein. (b) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in the preceding subsection (a), for a period of 30 days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Authority or the Trustee. If in the reasonable opinion of the City the failure stated in the notice can be corrected, but not within such 30-day period, the failure will not constitute an Event of Default if the City commences to cure the failure within such 30-day period and thereafter diligently and in good faith cures the failure in a reasonable period of time, such period of time not to be longer than 180 days after the delivery of such default notice. (c) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the Federal Bankruptcy Code, as amended, or under any similar acts which may hereafter be enacted. SECTION 8.2. Remedies on Default. Whenever any Event of Default has happened and is continuing, the Authority may exercise any and all remedies available under law or granted under this Lease. Notwithstanding anything herein or in the Indenture to the contrary, neither the Authority nor the Trustee may accelerate the Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due and payable. Each covenant hereof to be kept and performed by t he City is expressly made a condition and upon the breach thereof the Authority may exercise any and all rights granted hereunder; except that no termination of this Lease may be effected either by operation of law or acts of the parties hereto, except only in the manner herein expressly provided. Upon the occurrence and during the continuance of any Event of Default, the Authority may exercise each and every one of the following remedies, subject in all respects to the limitations set forth in Section 8.3. (a) Enforcement of Payments Without Termination. If the Authority does not elect to terminate this Lease in the manner hereinafter provided for in subparagraph (b) hereof, the City agrees to and shall remain liable for the payment of all Lease Payments and the performance of all conditions herein contained and shall reimburse the Authority for any deficiency arising out of the re-leasing of the Leased Property, -19- or, if the Authority is unable to re-lease the Leased Property, then for the full amount of all Lease Payments to the end of the Term of this Lease, but said Lease Payments and/or deficiency shall be payable only at the same time and in the same manner as hereinabove provided for the payment of Lease Payments hereunder, notwithstanding such entry or re-entry by the Authority or any suit in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such re-entry or obtaining possession of the Leased Property or the exercise of any other remedy by the Authority. The City hereby irrevocably appoints the Authority as the agent and attorney-in-fact of the City to enter upon and re-lease the Leased Property upon the occurrence and continuation of an Event of Default and to remove all personal property whatsoever situated upon the Leased Property, to place the Leased Property in storage or other suitable place in the County of Marin for the account of and at the expense of the City, and the City hereby exempts and agrees to save harmless the Authority from any costs, loss or damage whatsoever arising or occasioned by any such entry upon and re-leasing of the Leased Property and the removal and storage of the Leased Property by the Authority or its duly authorized agents in accordance with the provisions herein contained. The City agrees that the terms of this Lease constitute full and sufficient notice of the right of the Authority to re-lease the Leased Property in the event of such re-entry without effecting a surrender of this Lease, and further agrees that no acts of the Authority in effecting such re-leasing shall constitute a surrender or termination of this Lease irrespective of the term for which such re- leasing is made or the terms and conditions of such re-leasing, or otherwise, but that, on the contrary, in the event of such default by the City the right to terminate this Lease shall vest in the Authority to be effected in the sole and exclusive manner hereinafter provided for in subparagraph (b) hereof. The City agrees to surrender and quit possession of the Leased Property upon demand of the Authority for the purpose of enabling the Leased Property to be re-let under this paragraph, and the City further waives the right to any rental obtained by the Authority in excess of the Lease Payments and hereby conveys and releases such excess to the Authority as compensation to the Authority for its services in re-leasing the Leased Property. (b) Termination of Lease. If an Event of Default occurs and is continuing hereunder, the Authority at its option may terminate this Lease and re-lease all or any portion of the Leased Property. If the Authority terminates this Lease at its option and in the manner hereinafter provided on account of default by the City (and notwithstanding any re-entry upon the Leased Property by the Authority in any manner whatsoever or the re-leasing of the Leased Property), the City nevertheless agrees to pay to the Authority all costs, loss or damages howsoever arising or occurring payable at the same time and in the same manner as is herein provided in the case of payment of Lease Payments and Additional Rental Payments. Any surplus received by the Authority from such re-leasing shall be deposited in the Bond Fund. Neither notice to pay rent or to deliver up possession of the -20- premises given under law nor any proceeding in unlawful detainer taken by the Authority shall of itself operate to terminate this Lease, and no termination of this Lease on account of default by the City shall be or become effective by operation of law, or otherwise, unless and until the Authority shall have given written notice to the City of the election on the part of the Authority to terminate this Lease. The City covenants and agrees that no surrender of the Leased Property, or of the remainder of the Term hereof or any termination of this Lease shall be valid in any manner or for any purpose whatsoever unless stated or accepted by the Authority by such written notice. (c) Proceedings at Law or In Equity. If an Event of Default occurs and continues hereunder, the Authority may take whatever action at law or in equity may appear necessary or desirable to collect the amounts then due and thereafter to become due hereunder or to enforce any other of its rights hereunder. SECTION 8.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive and every such remedy is cumulative and in addition to every other remedy given under this Lease or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon the occurrence of any Event of Default impairs any such right or power or operates as a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Authority to exercise any remedy reserved to it in this Article VIII it is not necessary to give any notice, other than as expressly required in this Article VIII or by law. SECTION 8.4. Agreement to Pay Attorneys’ Fees and Expenses. If the Authority or the City defaults under any of the provisions of this Lease and the nondefaulting party employs attorneys or incurs other expenses for the collection of moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party will on demand therefor pay to the nondefaulting party the reasonable fees of such attorneys and such other expenses so incurred by the nondefaulting party; provided, however, that the Trustee shall not be required to expend its own funds for any payment described in this Section. SECTION 8.5. No Additional Waiver Implied by One Waiver. If the Authority or the City breaches any agreement in this Lease and thereafter the other party waives the breach, such waiver is limited to the particular breach so waived and does not operate to waive any other breach hereunder. SECTION 8.6. Application of Proceeds. All net proceeds received from the re-lease of the Leased Property under this Article VIII, and all other amounts derived by the Authority or the Trustee as a result of the occurrence of an Event of Default, must be paid to and applied by the Trustee in accordance with Section 7.03 of the Indenture. SECTION 8.7. Trustee and Bond Owners to Exercise Rights. Such rights and remedies as are given to the Authority under this Article VIII have been assigned by the Authority to the Trustee under the Assignment Agreement for the benefit of the Bond Owners, to which assignment the City hereby consents. The Trustee and the Bond Owners shall exercise such rights and remedies in accordance with the Indenture. -21- ARTICLE IX PREPAYMENT OF LEASE PAYMENTS SECTION 9.1. Security Deposit. Notwithstanding any other provision of this Lease, the City may on any date secure the payment of the Lease Payments allocable to the Leased Property in whole or in part by depositing with the Trustee an amount of cash which, together with other available amounts on deposit in the funds and accounts established under the Indenture, is either: (a) sufficient to pay such Lease Payments, including the principal and interest components thereof, in accordance with the Lease Payment schedule set forth in Appendix B, or (b) invested in whole or in part in non-callable Federal Securities in such amount as will, in the opinion of an independent certified public accountant, (which opinion must be addressed and delivered to the Trustee), together with interest to accrue thereon and together with any cash which is so deposited, be fully sufficient to pay such Lease Payments when due under Section 4.3(a), as the City instructs at the time of said deposit. If the City makes a security deposit under this Section with respect to all unpaid Lease Payments, and notwithstanding the provisions of Section 4.2, (a) the Term of this Lease will continue, (b) all obligations of the City under this Lease, and all security provided by this Lease for said Lease Payments, will thereupon cease and terminate, excepting only the obligation of the City to make, or cause to be made all of said Lease Payments from such security deposit, and (c) under Section 4.7, title to the Leased Property will vest in the City on the date of said deposit automatically and without further action by the City or the Authority. Said security deposit constitutes a special fund for the payment of Lease Payments in accordance with the provisions of this Lease. SECTION 9.2. Optional Prepayment. The City has the option to prepay the principal components of the Lease Payments in whole, or in part in any integral multiple of $5,000, from any source of legally available funds, on any date on or after June 1, 20__, at a prepayment price equal to the aggregate principal components of the Lease Payments to be prepaid, together with the interest component of the Lease Payment required to be paid on such Interest Payment Date, and together with a prepayment premium equal to the premium (if any) required to be paid on the resulting redemption of Bonds under Section 4.01(a) of the Indenture. Such prepayment price shall be deposited by the Trustee in the Redemption Fund to be applied to the redemption of Bonds under Section 4.01(a) of the Indenture. The City shall give 10 days’ written notice to the Trustee of its intention to prepay the Lease Payments under this Section. SECTION 9.3. Mandatory Prepayment From Net Proceeds of Insurance or Eminent Domain. The City shall prepay the principal components of the Lease Payments allocable to the Leased Property in whole or in part on any date, from and to the extent of any Net Proceeds of insurance award or eminent domain award with respect to the Leased -22- Property theretofore deposited in the Redemption Fund for that purpose under Article VI hereof and Section 5.07 of the Indenture. Such Net Proceeds, to the extent remaining after payment of any delinquent Lease Payments, will be credited towards the City’s obligations under this Section and applied to the corresponding redemption of Bonds under Section 4.01(b) of the Indenture. SECTION 9.4. Credit for Amounts on Deposit. If the principal components of the Lease Payments are prepaid in full under this Article IX, such that the Indenture is discharged by its terms as a result of such prepayment, at the written election of the City filed with the Trustee any or all amounts then on deposit in the Bond Fund (and the accounts therein) will be credited towards the amounts then required to be so prepaid. ARTICLE X MISCELLANEOUS SECTION 10.1. Notices. Any notice, request, complaint, demand or other communication under this Lease shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, or by facsimile transmission or other form of telecommunication, at its number set forth below. Notice shall be effective either (a) upon transmission by facsimile transmission or other form of telecommunication, (b) 48 hours after deposit in the United States of America first class mail, postage prepaid, or (c) in the case of personal delivery to any person, upon actual receipt. The Authority, the City or the Trustee may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder. If to the Authority City of San Rafael or the City: 1400 Fifth Avenue San Rafael, CA 94901 Attention: City Manager Email: If to the Trustee: MUFG Union Bank, N.A. 350 California Street, 17th Floor San Francisco, California 94104 Attention: Corporate Trust Department Email:AccountAdministration- Corporate.Trust@unionbank.com SECTION 10.2. Binding Effect. This Lease inures to the benefit of and binds the Authority, the City and their respective successors and assigns. SECTION 10.3. Severability. If any provision of this Lease is held invalid or unenforceable by any court of competent jurisdiction, such holding will not invalidate or render unenforceable any other provision hereof. SECTION 10.4. Net-net-net Lease. This Lease is deemed and construed to be a “net-net-net lease” and the City hereby agrees that the Lease Payments are an absolute net return to the Authority, free and clear of any expenses, charges or set-offs whatsoever. -23- SECTION 10.5. Third-Party Beneficiary. The Trustee is hereby made a third-party beneficiary hereunder with all rights of a third party beneficiary. SECTION 10.6. Further Assurances and Corrective Instruments. The Authority and the City shall, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Leased Property hereby leased or intended so to be or for carrying out the expressed intention of this Lease. SECTION 10.7. Execution in Counterparts. This Lease may be executed in several counterparts, each of which is an original and all of which constitute but one and the same instrument. SECTION 10.8. Applicable Law. This Lease is governed by and construed in accordance with the laws of the State of California. SECTION 10.9. Authority and City Representatives. Whenever under the provisions of this Lease the approval of the Authority or the City is required, or the Authority or the City is required to take some action at the request of the other, such approval or such request shall be given for the Authority and for the City by an Authorized Representative thereof, and any party hereto may conclusively rely upon any such approval or request. SECTION 10.10. Captions. The captions or headings in this Lease are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Section of this Lease. -24- IN WITNESS WHEREOF, the Authority and the City have caused this Lease to be executed in their respective names by their duly authorized officers, all as of the date first above written. SAN RAFAEL JOINT POWERS FINANCING AUTHORITY, as lessor By Executive Director Attest: Secretary CITY OF SAN RAFAEL, as lessee By City Manager Attest: Interim City Clerk A-1 APPENDIX A DESCRIPTION OF THE LEASED PROPERTY The Leased Property consists of that certain real property situated in the City of San Rafael, County of Marin, which is more particularly described as follows: B-1 APPENDIX B SCHEDULE OF LEASE PAYMENTS Lease Payment Date* Principal Component Interest Component Aggregate Lease Payment 6/1/2018 12/1/2018 6/1/2019 12/1/2019 6/1/2020 12/1/2020 6/1/2021 12/1/2021 6/1/2022 12/1/2022 6/1/2023 12/1/2023 6/1/2024 12/1/2024 6/1/2025 12/1/2025 6/1/2026 12/1/2026 6/1/2027 12/1/2027 6/1/2028 12/1/2028 6/1/2029 12/1/2029 6/1/2030 12/1/2030 6/1/2031 12/1/2031 6/1/2032 12/1/2032 6/1/2033 12/1/2033 6/1/2034 * Lease Payment Dates are the Business Day immediately preceding each date listed in the schedule 41390-03 SM:SRF:REL 01/18/2018 2/09/2018 INDENTURE OF TRUST Dated as of March 1, 2018 between MUFG UNION BANK, N.A., as Trustee and the SAN RAFAEL JOINT POWERS FINANCING AUTHORITY Authorizing the Issuance of $_______________ San Rafael Joint Powers Financing Authority Lease Revenue Bonds, Series 2018 (Public Safety Facilities Project) -i- TABLE OF CONTENTS ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION SECTION 1.01. Definitions ........................................................................................................... 2 SECTION 1.02. Authorization ....................................................................................................... 2 SECTION 1.03. Interpretation ....................................................................................................... 2 ARTICLE II The Bonds SECTION 2.01. Authorization of Bonds ........................................................................................ 3 SECTION 2.02. Terms of the Bonds ............................................................................................. 3 SECTION 2.03. Transfer and Exchange of Bonds ........................................................................ 5 SECTION 2.04. Book-Entry System ............................................................................................. 5 SECTION 2.05. Registration Books .............................................................................................. 7 SECTION 2.06. Form and Execution of Bonds ............................................................................. 7 SECTION 2.07. Bonds Mutilated, Lost, Destroyed or Stolen ........................................................ 8 ARTICLE III Issuance of Bonds; Application of Proceeds SECTION 3.01. Issuance of the Bonds......................................................................................... 9 SECTION 3.02. Application of Proceeds of Sale of Bonds; Transfer of Prior Funds ..................... 9 SECTION 3.03. Establishment and Application of Costs of Issuance Fund .................................. 9 SECTION 3.04. Establishment and Application of Project Fund ................................................... 9 SECTION 3.05. Validity of Bonds ............................................................................................... 10 ARTICLE IV Redemption of Bonds SECTION 4.01. Terms of Redemption........................................................................................ 10 SECTION 4.02. Selection of Bonds for Redemption ................................................................... 11 SECTION 4.03. Notice of Redemption; Rescission..................................................................... 11 SECTION 4.04. Conditional Redemption; Rescission of Redemption ......................................... 11 SECTION 4.05. Partial Redemption of Bonds ............................................................................. 12 SECTION 4.06. Effect of Redemption ........................................................................................ 12 ARTICLE V Revenues; Funds and Accounts; Payment of Principal and Interest SECTION 5.01. Security for the Bonds; Bond Fund.................................................................... 13 SECTION 5.02. Allocation of Revenues ..................................................................................... 13 SECTION 5.03. Application of Interest Account .......................................................................... 14 SECTION 5.04. Application of Principal Account ........................................................................ 14 SECTION 5.05. Reserved .......................................................................................................... 14 SECTION 5.06. Application of Redemption Fund ....................................................................... 14 SECTION 5.07. Insurance and Condemnation Fund .................................................................. 14 SECTION 5.08. Investments ...................................................................................................... 16 SECTION 5.09. Valuation and Disposition of Investments .......................................................... 17 ARTICLE VI Covenants of the Authority SECTION 6.01. Punctual Payment ............................................................................................. 18 SECTION 6.02. Extension of Payment of Bonds ........................................................................ 18 SECTION 6.03. Against Encumbrances ..................................................................................... 18 SECTION 6.04. Power to Issue Bonds and Make Pledge and Assignment ................................ 18 -ii- SECTION 6.05. Accounting Records .......................................................................................... 18 SECTION 6.06. Limitation on Additional Obligations .................................................................. 19 SECTION 6.07. Tax Covenants .................................................................................................. 19 SECTION 6.08. Enforcement of Lease ....................................................................................... 19 SECTION 6.09. Waiver of Laws ................................................................................................. 19 SECTION 6.10. Further Assurances ........................................................................................... 20 ARTICLE VII Events of Default and Remedies SECTION 7.01. Events of Default ............................................................................................... 20 SECTION 7.02. Remedies Upon Event of Default ...................................................................... 20 SECTION 7.03. Application of Revenues and Other Funds After Default ................................... 21 SECTION 7.04. Trustee to Represent Bond Owners .................................................................. 22 SECTION 7.05. Limitation on Bond Owners' Right to Sue .......................................................... 22 SECTION 7.06. Absolute Obligation of Authority ........................................................................ 22 SECTION 7.07. Termination of Proceedings .............................................................................. 23 SECTION 7.08. Remedies Not Exclusive ................................................................................... 23 SECTION 7.09. No Waiver of Default ......................................................................................... 23 SECTION 7.10. Notice to Bond Owners of Default ..................................................................... 23 ARTICLE VIII The Trustee SECTION 8.01. Appointment of Trustee ..................................................................................... 24 SECTION 8.02. Acceptance of Trusts; Removal and Resignation of Trustee ............................. 24 SECTION 8.03. Merger or Consolidation .................................................................................... 26 SECTION 8.04. Liability of Trustee ............................................................................................. 26 SECTION 8.05. Right to Rely on Documents.............................................................................. 29 SECTION 8.06. Preservation and Inspection of Documents ....................................................... 29 SECTION 8.07. Compensation and Indemnification ................................................................... 29 ARTICLE IX Modification or Amendment Hereof SECTION 9.01. Amendments Permitted ..................................................................................... 30 SECTION 9.02. Effect of Supplemental Indenture ...................................................................... 32 SECTION 9.03. Endorsement of Bonds; Preparation of New Bonds .......................................... 32 SECTION 9.04. Amendment of Particular Bonds ........................................................................ 32 ARTICLE X Defeasance SECTION 10.01. Discharge of Indenture .................................................................................... 32 SECTION 10.02. Discharge of Liability on Bonds ....................................................................... 33 SECTION 10.03. Deposit of Money or Securities with Trustee ................................................... 33 SECTION 10.04. Unclaimed Funds ............................................................................................ 34 ARTICLE XI Miscellaneous SECTION 11.01. Liability of Authority Limited to Revenues ........................................................ 34 SECTION 11.02. Limitation of Rights to Parties and Bond Owners ............................................ 35 SECTION 11.03. Funds and Accounts ....................................................................................... 35 SECTION 11.04. Waiver of Notice; Requirement of Mailed Notice ............................................. 35 SECTION 11.05. Destruction of Bonds ....................................................................................... 35 SECTION 11.06. Severability of Invalid Provisions ..................................................................... 35 SECTION 11.07. Notices ............................................................................................................ 35 SECTION 11.08. Evidence of Rights of Bond Owners ................................................................ 36 SECTION 11.09. Disqualified Bonds .......................................................................................... 36 SECTION 11.10. Money Held for Particular Bonds ..................................................................... 37 -iii- SECTION 11.11. Waiver of Personal Liability ............................................................................. 37 SECTION 11.12. Successor Is Deemed Included in All References to Predecessor .................. 37 SECTION 11.13. Execution in Several Counterparts .................................................................. 37 SECTION 11.14. Payment on Non-Business Day ...................................................................... 37 SECTION 11.15. Governing Law ................................................................................................ 37 APPENDIX A DEFINITIONS APPENDIX B FORM OF BOND INDENTURE OF TRUST This INDENTURE OF TRUST (this “Indenture”), dated for convenience as of March 1, 2018, is between the SAN RAFAEL JOINT POWERS FINANCING AUTHORITY, a joint powers authority duly organized and existing under the laws of the State of California (the “Authority”), and MUFG UNION BANK, N.A., a national banking association organized and existing under the laws of the United States of America, with a corporate trust office in San Francisco, California, being qualified to accept and administer the trusts hereby created (the “Trustee”). B A C K G R O U N D : 1. The City of San Rafael (the “City”) wishes to finance the acquisition and construction of certain public safety improvements consisting generally of a new public safety center and two replacement fire stations (collectively, the “Project”). 2. To that end, the City has proposed to lease to the Authority certain real property and improvements, initially consisting of the City’s new public safety facility, the City’s Fire Station 52, and the City’s Fire Station 57, including land and improvements thereon, as more particularly described in Appendix A attached to the Site Lease (defined below) (the “Leased Property”), under a Site Lease, dated as of the date hereof, by and between the City as lessor and the Authority as lessee (the “Site Lease”), in consideration of the payment by the Authority of an upfront rental payment (the “Site Lease Payment”) sufficient to provide funds for the acquisition and construction of the Project. 3. The Authority wishes to issue its San Rafael Joint Powers Financing Authority Lease Revenue Bonds, Series 2018 (Public Safety Facilities Project) in the aggregate principal amount of $______________ (the “Bonds”) under this Indenture for the purpose of providing the funds to enable the Authority to pay the Site Lease Payment to the City in accordance with the Site Lease. 4. In order to provide revenues which are sufficient to enable the Authority to pay debt service on the Bonds, the Authority has leased the Leased Property back to the City under a Lease Agreement dated the date hereof, by and between the City as lessee and the Authority as lessor (the “Lease”), under which the City has agreed to pay semiannual Lease Payments as the rental for the Leased Property thereunder. 5. The lease payments made by the City under the Lease have been assigned by the Authority to the Trustee for the security of the Bonds under an Assignment Agreement, dated the date hereof, between the Authority as assignor and the Trustee as assignee. 6. In order to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and to secure the payment of the principal thereof, premium (if any) and interest thereon, the Authority has authorized the execution and delivery of this Indenture. 7. The Authority has found and determined, and hereby affirms, that all acts and proceedings required by law necessary to make the Bonds, when executed by the Authority, authenticated and delivered by the Trustee and duly issued, the valid, binding -2- and legal special obligations of the Authority, and to constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of this Indenture have been in all respects duly authorized. A G R E E M E N T : In order to secure the payment of the principal of and the interest and redemption premium (if any) on all the Outstanding Bonds under this Indenture according to their tenor, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be issued and received, and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the Owners thereof, and for other valuable considerations, the receipt of which is hereby acknowledged, the Authority and the Trustee do hereby covenant and agree with one another, for the benefit of the respective Owners from time to time of the Bonds, as follows: ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION SECTION 1.01. Definitions. Unless the context clearly otherwise requires or unless otherwise defined herein, the capitalized terms defined in Appendix A attached to this Indenture have the respective meanings specified in that Appendix when used in this Indenture. SECTION 1.02. Authorization. Each of the parties hereby represents and warrants that it has full legal authority and is duly empowered to enter into this Indenture, and has taken all actions necessary to authorize the execution hereof by the officers and persons signing it. SECTION 1.03. Interpretation. (a) Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to include the neuter, masculine or feminine gender, as appropriate. (b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof. (c) All references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Indenture; the words “herein,” “hereof,” “hereby,” “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or subdivision hereof. -3- ARTICLE II THE BONDS SECTION 2.01. Authorization of Bonds. The Authority has reviewed all proceedings heretofore taken and has found, as a result of such review, and hereby finds and determines that all things, conditions and acts required by law to exist, happen or be performed precedent to and in connection with the issuance of the Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and the Authority is now duly empowered, under each and every requirement of law, to issue the Bonds in the manner and form provided in this Indenture. The Authority hereby authorizes the issuance of Bonds in the aggregate principal amount of $___________ under the Bond Law for the purposes of providing funds to pay the Site Lease Payment to the City and thereby provide funds to pay the costs of the Project. The Bonds are authorized and issued under, and are subject to the terms of, this Indenture and the Bond Law. The Bonds are designated the “San Rafael Joint Powers Financing Authority Lease Revenue Bonds, Series 2018 (Public Safety Facilities Project).” SECTION 2.02. Terms of the Bonds. (a) Payment Provisions. The Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof, so long as no Bond has more than one maturity date. The Bonds shall mature on June 1 in each of the years and in the amounts, and bear interest (calculated on the basis of a 360-day year of twelve 30-day months) at the rates, as follows: -4- Maturity Date (June 1) Principal Amount Interest Rate Interest on the Bonds is payable from the Interest Payment Date next preceding the date of authentication thereof unless: (a) a Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it will bear interest from such Interest Payment Date, (b) a Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the Closing Date, or (c) interest on any Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Interest is payable on each Interest Payment Date to the persons in whose names the ownership of the Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided below. Interest on any Bond which is not punctually paid or duly provided for on any Interest Payment Date is payable to the person in whose name the ownership of such Bond is registered on the Registration Books at the close of business on a special record date for the payment of such defaulted interest to be fixed by the Trustee, notice of which is given to such Owner by first-class mail not less than 10 days prior to such special record date. -5- The Trustee will pay interest on the Bonds by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. At the written request of the Owner of Bonds in an aggregate principal amount of at least $1,000,000, which written request is on file with the Trustee as of any Record Date, the Trustee will pay interest on such Bonds on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account of a financial institution within the United States of America as specified in such written request, which written request will remain in effect until rescinded in writing by the Owner. The Trustee will pay principal of the Bonds in lawful money of the United States of America by check of the Trustee or by wire upon presentation and surrender thereof at the Office of the Trustee. SECTION 2.03. Transfer and Exchange of Bonds. (a) Transfer. Any Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by a duly authorized attorney of such person, upon surrender of such Bond to the Trustee at its Office for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee, duly executed. The Trustee shall require the Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. Whenever any Bond is or Bonds are surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and deliver to the transferee a new Bond or Bonds of like series, interest rate, maturity and aggregate principal amount. The Authority shall pay the cost of printing Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer of Bonds. (b) Exchange. The Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of Bonds of other authorized denominations and of the same series, interest rate and maturity. The Trustee shall require the Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. The Authority shall pay the cost of printing Bonds and any services rendered or expenses incurred by the Trustee in connection with any exchange of Bonds. (c) Limitations. The Trustee may refuse to transfer or exchange, under the provisions of this Section 2.03, any Bonds selected by the Trustee for redemption under Article IV, or any Bonds during the period established by the Trustee for the selection of Bonds for redemption. SECTION 2.04. Book-Entry System. (a) Original Delivery. The Bonds will be initially delivered in the form of a separate single fully registered bond (which may be typewritten) for each maturity of the Bonds. Upon initial delivery, the Trustee shall register the ownership of each Bond on the Registration Books in the name of the Nominee. Except as provided in subsection (c), the ownership of all of the Outstanding Bonds shall be registered in the name of the Nominee on the Registration Books. With respect to Bonds the ownership of which is registered in the name of the Nominee, the Authority and the Trustee have no responsibility or obligation to any -6- Depository System Participant or to any person on behalf of which the Nominee holds an interest in the Bonds. Without limiting the generality of the immediately preceding sentence, the Authority and the Trustee have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee or any Depository System Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Depository System Participant or any other person, other than a Bond Owner as shown in the Registration Books, of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository of the beneficial interests in the Bonds to be redeemed if the Authority elects to redeem the Bonds in part, (iv) the payment to any Depository System Participant or any other person, other than a Bond Owner as shown in the Registration Books, of any amount with respect to principal, premium, if any, or interest on the Bonds or (v) any consent given or other action taken by the Depository as Owner of the Bonds. The Authority and the Trustee may treat and consider the person in whose name each Bond is registered as the absolute owner of such Bond for the purpose of payment of principal of and premium, if any, and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers of ownership of such Bond, and for all other purposes whatsoever. The Trustee shall pay the principal of and the interest and premium, if any, on the Bonds only to the respective Owners or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge all obligations with respect to payment of principal of and interest and premium, if any, on the Bonds to the extent of the sum or sums so paid. No person other than a Bond Owner shall receive a Bond evidencing the obligation of the Authority to make payments of principal, interest and premium, if any, under this Indenture. Upon delivery by the Depository to the Authority of written notice to the effect that the Depository has determined to substitute a new Nominee in its place, and subject to the provisions herein with respect to Record Dates, such new nominee shall become the Nominee hereunder for all purposes; and upon receipt of such a notice the Authority shall promptly deliver a copy of the same to the Trustee. (b) Representation Letter. In order to qualify the Bonds for the Depository’s book-entry system, the Authority shall execute and deliver to such Depository a letter in which the Authority will agree to the Depository’s operational arrangements. To the extent required to do so by the Depository, the Trustee shall also execute such representation letter and agree to the Depository’s operational arrangements. The execution and delivery of such letter shall not in any way limit the provisions of subsection (a) above or in any other way impose upon the Authority or the Trustee any obligation whatsoever with respect to persons having interests in the Bonds other than the Bond Owners. In addition to the execution and delivery of such letter, the Authority may take any other actions, not inconsistent with this Indenture, to qualify the Bonds for the Depository’s book-entry program. (c) Transfers Outside Book-Entry System. If either (i) the Depository determines not to continue to act as Depository for the Bonds, or (ii) the Authority determines to terminate the Depository as such, then the Authority shall thereupon discontinue the book- entry system with such Depository. In such event, the Depository shall cooperate with the Authority and the Trustee in the issuance of replacement Bonds by providing the Trustee -7- with a list showing the interests of the Depository System Participants in the Bonds, and by surrendering the Bonds, registered in the name of the Nominee, to the Trustee on or before the date such replacement Bonds are to be issued. The Depository, by accepting delivery of the Bonds, agrees to be bound by the provisions of this subsection (c). If, prior to the termination of the Depository acting as such, the Authority fails to identify another Securities Depository to replace the Depository, then the Bonds shall no longer be required to be registered in the Registration Books in the name of the Nominee, and, upon transfer or exchange, shall be registered in whatever name or names the Owners transferring or exchanging Bonds designate, in accordance with the provisions hereof. If the Authority determines that it is in the best interests of the beneficial owners of the Bonds that they be able to obtain certificated Bonds, the Authority may notify the Depository System Participants of the availability of such certificated Bonds through the Depository. In such event, the Trustee will issue, transfer and exchang e Bonds as required by the Depository and others in appropriate amounts; and whenever the Depository requests, the Trustee and the Authority shall cooperate with the Depository in taking appropriate action to make available one or more separate certificates evidencing the Bonds to any Depository System Participant having Bonds credited to its account with the Depository, or to arrange for another Securities Depository to maintain custody of a single certificate evidencing such Bonds, all at the Authority’s expense. (d) Payments to the Nominee. Notwithstanding any other provision of this Indenture to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal of and interest and premium, if any, on such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the letter described in subsection (b) of this Section or as otherwise instructed by the Depository. SECTION 2.05. Registration Books. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the Bonds, which shall upon reasonable notice as agreed to by the Trustee, be open to inspection during regular business hours by the Authority; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as hereinbefore provided. SECTION 2.06. Form and Execution of Bonds. The Bonds, the form of Trustee’s certificate of authentication, and the form of assignment to appear thereon, are set forth in Appendix B attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Indenture. The Chair of the Authority shall execute, and the Secretary of the Authority shall attest each Bond. Either or both of such signatures may be made manually or may be affixed by facsimile thereof. If any officer whose signature appears on any Bond ceases to be such officer before the Closing Date, such signature will nevertheless be as effective as if the officer had remained in office until the Closing Date. Any Bond may be signed and attested on behalf of the Authority by such persons as at the actual date of the execution of such Bond are the proper officers of the Authority, duly authorized to execute debt instruments on behalf of the Authority, although on the date of such Bond any such person was not an officer of the Authority. -8- Only those Bonds bearing a certificate of authentication in the form set forth in Appendix B, manually executed and dated by the Trustee, are valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the Trustee is conclusive evidence that such Bonds have been duly authenticated and delivered hereunder and are entitled to the benefits of this Indenture. SECTION 2.07. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond is mutilated, the Authority, at the expense of the Owner of such Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. The Trustee shall cancel every mutilated Bond surrendered to it and deliver such mutilated Bond to, or upon the order of, the Authority. If any Bond is lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory and if indemnity satisfactory to the Trustee and the Authority is given, the Authority, at the expense of the Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen. The Trustee may require payment of a sum not exceeding the actual cost of preparing each new Bond issued under this Section and of the expenses which may be incurred by the Trustee in connection therewith. Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen will constitute an original additional contractual obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Indenture with all other Bonds issued under this Indenture. Notwithstanding any other provision of this Section, in lieu of delivering a new Bond for which principal has become due for a Bond which has been mutilated, lost, destroyed or stolen, the Trustee may make payment of such Bond in accordance with its terms upon receipt of indemnity satisfactory to the Trustee. -9- ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS SECTION 3.01. Issuance of the Bonds. At any time after the execution of this Indenture, the Authority may execute and the Trustee shall authenticate and, upon the Written Request of the Authority, deliver the Bonds to the Original Purchaser. SECTION 3.02. Application of Proceeds of Sale of Bonds; Transfer of Prior Funds. On the Closing Date, the Original Purchaser will pay a purchase price for the Bonds in the amount of $______________, which is equal to the original principal amount of the Bonds ($______________), plus a net original issue premium of $______________, less an underwriter’s discount of $______________. On the Closing Date, the Original Purchaser will wire the purchase price for the Bonds to the Trustee, and the Trustee shall deposit such purchase price on the Closing Date into a temporary account called the Proceeds Fund, which the Trustee shall establish, maintain and hold in trust, and which shall be disbursed in full on the Closing Date (whereupon the Proceeds Fund shall be closed) as follows: (a) the Trustee will deposit $______________ into the Project Fund, and (b) the Trustee will deposit the remaining amount, equal to $______________, into the Costs of Issuance Fund. The Trustee may establish a temporary fund or account in its records to facilitate such deposits or transfers. The deposits described in paragraphs (a) and (b) represent the full amount of the Site Lease Payments under Section 3 of the Site Lease. SECTION 3.03. Establishment and Application of Costs of Issuance Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the “Costs of Issuance Fund” into which the Trustee shall deposit a portion of the proceeds of sale of the Bonds under Section 3.02(b). The Trustee shall disburse amounts in the Costs of Issuance Fund from time to time to pay the Costs of Issuance upon submission of a Written Requisition of the Authority stating the person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred and that such payment is a proper charge against said fund. Each such Written Requisition of the Authority shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. The Trustee may conclusively rely on such Written Requisitions and shall be fully protected in relying thereon. On June 1, 2018, or upon the earlier Written Request of the Authority, the Trustee shall transfer all amounts remaining in the Costs of Issuance Fund to the Interest Account and shall thereupon close the Costs of Issuance Fund. SECTION 3.04. Establishment and Application of Project Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the “Project Fund” into -10- which the Trustee shall deposit a portion of the proceeds of sale of the Bonds under Section 3.02(a). Except as otherwise provided herein, moneys in the Project Fund will be used solely for the payment of the Project Costs. Upon receipt of a requisition signed by the City, substantially in the form of Appendix C hereto, detailing the purposes for which any amounts requisitioned from the Project Fund will be used, the Trustee will disburse moneys in the Project Fund to the City in the amount requested. The Trustee has no responsibility for payments made in accordance with this Section. The City shall maintain copies of any Certificates of the City requisitioning moneys from the Project Fund and accurate records showing the purposes for which moneys requisitioned from the Project Fund were used. Upon the written notice by the City to the Trustee that no further amounts are intended to be requisitioned from the Project Fund, the Trustee shall thereupon close the Project Fund and transfer all remaining amounts to the Interest Account and shall thereupon close the Project Fund. SECTION 3.05. Validity of Bonds. The recital contained in the Bonds that the same are issued under the Constitution and laws of the State of California shall be conclusive evidence of their validity and of compliance with the provisions of law in their issuance. ARTICLE IV REDEMPTION OF BONDS SECTION 4.01. Terms of Redemption. (a) Optional Redemption. The Bonds maturing on or before June 1, 20__, are not subject to optional redemption prior to their stated maturity. The Bonds maturing on or after June 1, 20__, are subject to redemption, as a whole or in part at the election of the Authority among maturities on such basis as designated by the Authority and by lot within a maturity, at the option of the Authority, on June 1, 20__, and on any date thereafter, at a redemption price equal to 100% of the principal amount of Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. The Authority must give the Trustee written notice of its intention to redeem Bonds under this subsection (a), and the manner of selecting such Bonds for redemption from among the maturities thereof, in sufficient time for the Trustee to give notice of such redemption in accordance with Section, and in any event at least 10 days before the notice of redemption must be given under Section 4.03 below. (b) Special Mandatory Redemption From Insurance or Condemnation Proceeds. The Bonds are subject to redemption as a whole, or in part on a pro rata basis among maturities, on any date, from any Net Proceeds required to be used for such purpose as provided in Section 5.07, at a redemption price equal to 100% of the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium. -11- (c) Mandatory Sinking Payment Redemption. The Bonds maturing on June 1, 20__ (the “20__ Term Bonds”), are subject to mandatory sinking payment redemption in part on June 1, 20__, and on each June 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: 20__ Term Bonds Redemption Date (June 1) Sinking Payments 20__ (Maturity) The amounts in the foregoing table shall be reduced pro rata as a result of any prior partial redemption of the Bonds under subsections (a) or (b) above, as specified by the Authority to the Trustee. SECTION 4.02. Selection of Bonds for Redemption. Whenever provision is made in this Indenture for the redemption of less than all of the Bonds of a single maturity, the Trustee shall select the Bonds of that maturity to be redeemed by lot in any manner which the Trustee in its sole discretion deems appropriate. For purposes of such selection, the Trustee shall treat each Bond as consisting of separate $5,000 portions and each such portion shall be subject to redemption as if such portion were a separate Bond. SECTION 4.03. Notice of Redemption; Rescission. The Trustee shall mail notice of redemption of the Bonds by first class mail, postage prepaid, not less than 30 nor more than 60 days before any redemption date, to the respective Owners of any Bonds designated for redemption at their addresses appearing on the Registration Books and to one or more Securities Depositories, and shall file such notice electronically with the Municipal Securities Rulemaking Board. Each notice of redemption shall state the date of the notice, the redemption date, the place or places of redemption, whether less than all of the Bonds (or all Bonds of a single maturity) are to be redeemed, the CUSIP numbers and (in the event that not all Bonds within a maturity are called for redemption) Bond numbers of the Bonds to be redeemed and the maturity or maturities of the Bonds to be redeemed, and in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on the redemption date there will become due and payable on each of said Bonds the redemption price thereof, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered to the Trustee. Neither the failure to receive any notice nor any defect therein shall affect the sufficiency of the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date. Notice of redemption of Bonds shall be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority. SECTION 4.04. Conditional Redemption; Rescission of Redemption. Redemption notices may be conditional. The Authority has the right to rescind any notice of the -12- redemption of Bonds under Section 4.01(a) or Section 4.01(b) by written notice to the Trustee on or prior to the dated fixed for redemption. Any notice of redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute an Event of Default. The Authority and the Trustee have no liability to the Bond Owners or any other party related to or arising from such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under this Section. SECTION 4.05. Partial Redemption of Bonds. Upon surrender of any Bonds redeemed in part only, the Authority shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered. SECTION 4.06. Effect of Redemption. Notice of redemption having been duly given as set forth above, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, including any applicable premium, the Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so called for redemption shall become due and payable, interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to any benefit or security under this Indenture, and the Owners of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. All Bonds redeemed under the provisions of this Article shall be canceled by the Trustee upon surrender thereof and destroyed in accordance with the retention policy of the Trustee then in effect. -13- ARTICLE V REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST SECTION 5.01. Security for the Bonds; Bond Fund. (a) Pledge of Revenues and Other Amounts. Subject only to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein, all of the Revenues and all amounts (including proceeds of the sale of the Bonds) held in any fund or account established under this Indenture are hereby pledged to secure the payment of the principal of and interest and premium (if any) on the Bonds in accordance with their terms and the provisions of this Indenture. Said pledge constitutes a lien on and security interest in the Revenues and such amounts and shall attach, be perfected and be valid and binding from and after the Closing Date, without the need for any physical delivery thereof or further act. (b) Assignment to Trustee. Under the Assignment Agreement, the Authority has transferred to the Trustee all of the rights of the Authority in the Lease (other than the rights of the Authority under Sections 4.5, 5.10, 7.3 and 8.4 thereof and its rights to give approvals and consents thereunder). The Trustee is entitled to collect and receive all of the Revenues, and any Revenues collected or received by the Authority shall be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee is also entitled to and may, subject to the provisions of Article VIII, take all steps, actions and proceedings which the Trustee determines to be reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all of the obligations of the City under the Lease. (c) Deposit of Revenues in Bond Fund. All Revenues shall be promptly deposited by the Trustee upon receipt thereof in a special fund designated as the “Bond Fund” which the Trustee shall establish, maintain and hold in trust; except that all moneys received by the Trustee and required hereunder or under the Lease to be deposited in the Redemption Fund or the Insurance and Condemnation Fund shall be promptly deposited in such funds. All Revenues deposited with the Trustee shall be held, disbursed, allocated and applied by the Trustee only as provided in this Indenture. Any surplus remaining in the Bond Fund, after payment in full of the principal of and interest on the Bonds (or provision having been made therefore under Article X), and payment in full of any applicable fees and expenses owed to the Trustee, shall be withdrawn by the Trustee and remitted to the City. SECTION 5.02. Allocation of Revenues. On or before each Interest Payment Date, the Trustee shall transfer from the Bond Fund and deposit into the following respective accounts (each of which the Trustee shall establish and maintain within the Bond Fund), the following amounts in the following order of priority: (a) Deposit to Interest Account. The Trustee shall deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to be at least equal to the amount of -14- interest becoming due and payable on such Interest Payment Date on all Bonds then Outstanding. (b) Deposit to Principal Account. The Trustee shall deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the Bonds coming due and payable on such Interest Payment Date, including the amount of the Term Bonds payable through mandatory sinking fund redemption on such Interest Payment Date. SECTION 5.03. Application of Interest Account. All amounts in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the Bonds as it comes due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity). SECTION 5.04. Application of Principal Account. All amounts in the Principal Account shall be used and withdrawn by the Trustee solely to pay the principal amount of the Bonds on their respective maturity dates, and the amount of the Term Bonds payable through mandatory sinking fund redemption on their respective redemption dates. If the amounts on deposit in the Principal Account on any Interest Payment Date or date of mandatory sinking fund redemption are insufficient for any reason to pay the aggregate principal amount of, and premium (if any) on, the Bonds then coming due and payable (whether at maturity or upon the mandatory sinking fund redemption thereof), the Trustee shall apply such amounts in the following order of priority: first, to the payment of the principal of the Bonds which mature by their terms on such Interest Payment Date, and second, to the payment of the principal of the Bonds to be redeemed through mandatory sinking payment redemption pursuant to Section 4.01(c), in each case on a pro rata basis. SECTION 5.05. Reserved. SECTION 5.06. Application of Redemption Fund. The Trustee shall establish and maintain the Redemption Fund, into which the Trustee shall deposit a portion of the Revenues received, in accordance with a Written Request of the Authority, amounts in which shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of and interest and premium (if any) on the Bonds to be redeemed under Section 4.01(a) or 4.01(b); provided, however, that at any time prior to the selection of Bonds for redemption, the Trustee may apply such amounts to the purchase of Bonds at public or private sale, when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as shall be directed under a Written Request of the Authority, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Bonds. The Trustee shall be entitled to conclusively rely on any Written Request of the Authority received under this Section 5.06, and shall be fully protected in relying thereon. SECTION 5.07. Insurance and Condemnation Fund. (a) Establishment of Fund. Upon the receipt of proceeds of insurance or eminent domain with respect to the Leased Property, the Trustee shall establish and maintain an -15- Insurance and Condemnation Fund, to be held and applied as hereinafter set forth in this Section 5.07. (b) Application of Insurance Proceeds. Any Net Proceeds of insurance against accident to or destruction of the Leased Property collected by the City or the Authority in the event of any such accident or destruction shall be paid to the Trustee under Section 6.3 of the Lease and deposited by the Trustee promptly upon receipt thereof in the Insurance and Condemnation Fund. If the City fails to determine and notify the Trustee in writing of its determination, within 90 days following the date of such deposit, to replace, repair, restore, modify or improve the Leased Property which has been damaged or destroyed, then such Net Proceeds shall be promptly transferred by the Trustee to the Redemption Fund and applied to the redemption of Bonds under Section 4.01(b). Notwithstanding the foregoing sentence, however, if the Leased Property is damaged or destroyed in full, the Net Proceeds of such insurance shall be used by the City to rebuild or replace the Leased Property if such proceeds are not sufficient to redeem Outstanding Bonds equal in aggregate principal amount to the unpaid Lease Payments allocable to the Leased Property. All proceeds deposited in the Insurance and Condemnation Fund and not so transferred to the Redemption Fund shall be applied to the prompt replacement, repair, restoration, modification or improvement of the damaged or destroyed portions of the Leased Property by the City, upon receipt of a Written Request of the City which: (i) states with respect to each payment to be made (A) the requisition number, (B) the name and address of the person to whom payment is due, (C) the amount to be paid and (D) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund and has not been the basis of any previous withdrawal; and (ii) specifies in reasonable detail the nature of the obligation. Any balance of the proceeds remaining after such work has been completed as certified by the City under a Written Certificate to the Trustee shall be paid to the City. The Trustee shall be entitled to conclusively rely on any Written Request or Written Certificate received under this subsection (b) of this Section 5.07 and in each case, shall be fully protected in relying thereon. (c) Application of Eminent Domain Proceeds. If all or any part of the Leased Property is taken by eminent domain proceedings (or sold to a government threatening to exercise the power of eminent domain) the Authority shall deposit or cause to be deposited with the Trustee the Net Proceeds therefrom, which the Trustee shall deposit in the Insurance and Condemnation Fund under Section 6.2(b) of the Lease and which shall be applied and disbursed by the Trustee as follows: (i) If the City has not given written notice to the Trustee, within 90 days following the date on which such Net Proceeds are deposited with the Trustee, of its determination that such Net Proceeds are needed for the replacement of the Leased Property or such portion thereof, the Trustee shall transfer such Net Proceeds to the Redemption Fund to be applied toward the redemption of the Bonds under Section 4.01(b). -16- (ii) If the City has given written notice to the Trustee, within 90 days following the date on which such Net Proceeds are deposited with the Trustee, of its determination that such Net Proceeds are needed for replacement of the Leased Property or such portion thereof, the Trustee shall pay to the City, or to its order, from said proceeds such amounts as the City may expend for such replacement, upon the filing of Written Requisitions of the City as agent for the Authority. In each case, the Trustee may conclusively rely upon any notice received under this subsection (c)(ii) of this Section and is protected in relying thereon. (d) Reliance on Independent Advice. In making any such determination whether to repair, replace or rehabilitate the Leased Property under this Section 5.07, the City may obtain, but is not required to obtain, at its expense, the report of an independent engineer or other independent professional consultant, a copy of which must be filed with the Trustee. The Trustee shall have no duty to review or examine such report. Any such determination by the City is final. SECTION 5.08. Investments. All moneys in any of the funds or accounts established with the Trustee under this Indenture shall be invested by the Trustee solely in Permitted Investments. Such investments shall be directed by the Authority or an Agent of the Authority in a Written Request of the Authority filed with the Trustee at least 2 Business Days in advance of the making of such investments. In the absence of any such directions from the Authority, the Trustee shall invest any such moneys in Permitted Investments which constitute money market funds; provided, however, that any such investment shall be made by the Trustee only if, prior to the date on which such investment is to be made, the Trustee shall have received a Written Request of the Authority specifying a specific money market fund and, if no such Written Request of the Authority is so received, the Trustee shall hold such moneys uninvested. Permitted Investments purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account. To the extent Permitted Investments are registrable, such Permitted Investments must be registered in the name of the Trustee. All interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder shall be deposited in the Bond Fund. For purposes of acquiring any investments hereunder, the Trustee may commingle funds held by it hereunder. The Trustee or any of its affiliates may act as principal or agent in the acquisition or disposition of any investment and may impose its customary charges therefor. The Trustee shall incur no liability for losses arising from any investments made under this Section 5.08. Subject to applicable law, the Trustee may make any investments hereunder through its own bond or investment department or trust investment department, or those of its parent or any affiliate. The Trustee or any of its affiliates may act as sponsor, advisor or manager to the investment provider in connection with any investments made by the Trustee hereunder. The Trustee is hereby authorized, in making or disposing of any investment permitted by this Section, to deal with itself (in its individual capacity) or with any one or more of its affiliates, whether it or such affiliate is acting as an agent of the Trustee or for any third person or is dealing as a principal for its own account. The Trustee -17- may, from time to time, provide the City and the Authority with a list of investments that are available on the Trustee’s investment platform, but the Trustee will not give investment advice to the City or the Authority, and the City or the Authority may direct the Trustee to purchase investments that are not included on the list provided by the Trustee. The Trustee shall be entitled to rely conclusively on the Authority’s investment direction as to the suitability and legality of the directed investments. The Trustee shall furnish the Authority periodic cash transaction statements which include detail for all investment transactions effected by the Trustee or brokers selected by the Authority. Upon the Authority’s election, such statements will be delivered via the Trustee’s Online Trust and Custody service and upon electing such service, paper statements will be provided only upon request. The Authority waives the right to receive brokerage confirmations of security transactions effected by the Trustee as they occur, to the extent permitted by law. The Authority further understands that trade confirmations for securities transactions effected by the Trustee will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker. SECTION 5.09. Valuation and Disposition of Investments. (a) Except as otherwise provided in subsection (b) of this Section, the Authority covenants that all investments of amounts deposited in any fund or account created by or under this Indenture, or otherwise containing gross proceeds of the Bonds (within the meaning of Section 148 of the Tax Code) shall be acquired, disposed of and valued at Fair Market Value. The Trustee shall have no duty in connection with the determination of Fair Market Value other than to follow the investment directions of the Authority in any Written Request of the Authority. (b) The investments in certain funds or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Tax Code will be valued at their present value (within the meaning of section 148 of the Tax Code). -18- ARTICLE VI COVENANTS OF THE AUTHORITY SECTION 6.01. Punctual Payment. The Authority shall punctually pay or cause to be paid the principal of and interest and premium (if any) on all the Bonds in strict conformity with the terms of the Bonds and of this Indenture, according to the true intent and meaning thereof, but only out of the Revenues and other amounts pledged for such payment as provided in this Indenture. SECTION 6.02. Extension of Payment of Bonds. The Authority shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default hereunder, to the benefits of this Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon which have not been so extended. Nothing in this Section 6.02 limits the right of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds, and such issuance does not constitute an extension of maturity of the Bonds. SECTION 6.03. Against Encumbrances. The Authority shall not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets pledged or assigned under this Indenture while any of the Bonds are Outstanding, except the pledge and assignment created by this Indenture. Subject to this limitation, the Authority expressly reserves the right to enter into one or more other indentures for any of its corporate purposes, and reserves the right to is sue other obligations for such purposes. SECTION 6.04. Power to Issue Bonds and Make Pledge and Assignment. The Authority is duly authorized under law to issue the Bonds and to enter into this Indenture and to pledge and assign the Revenues and other amounts purported to be pledged and assigned, respectively, under this Indenture and under the Assignment Agreement in the manner and to the extent provided in this Indenture and the Assignment Agreement. The Bonds and the provisions of this Indenture are and will be the legal, valid and binding special obligations of the Authority in accordance with their terms, and the Authority and the Trustee shall at all times, subject to the provisions of Article VIII and to the extent permitted by law, defend, preserve and protect said pledge and assignment of Revenues and other assets and all the rights of the Bond Owners under this Indenture against all claims and demands of all persons whomsoever. SECTION 6.05. Accounting Records. The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with corporate industry standards, in which complete and accurate entries shall be made of all transactions made by it relating to the proceeds of Bonds and all funds and accounts established under this Indenture. The Trustee shall make such books of record and account available for inspection by the Authority and the City, during business hours, upon reasonable notice, and under reasonable circumstances. -19- SECTION 6.06. Limitation on Additional Obligations. The Authority covenants that no additional bonds, notes or other indebtedness shall be issued or incurred which are payable out of the Revenues in whole or in part. SECTION 6.07. Tax Covenants. (a) Private Business Use Limitation. The Authority shall assure that the proceeds of the Bonds are not used in a manner which would cause the Bonds to satisfy the private business tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax Code. (b) Federal Guarantee Prohibition. The Authority may not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Tax Code. (c) No Arbitrage. The Authority may not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Bonds or of any other obligations which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date, would have caused the Bonds to be “arbitrage bonds” within the meaning of Section 148(a) of the Tax Code. (d) Maintenance of Tax Exemption. The Authority shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the Closing Date. (e) Rebate of Excess Investment Earnings to United States. The Authority shall calculate or cause to be calculated all amounts of excess investment earnings with respect to the Bonds which are required to be rebated to the United States of America under Section 148(f) of the Tax Code, at the times and in the manner required under the Tax Code. The Authority shall pay when due an amount equal to excess investment earnings to the United States of America in such amounts, at such times and in such manner as may be required under the Tax Code, such payments to be made from amounts paid by the City for that purpose under Section 4.5(d) of the Lease. The Authority shall keep or cause to be kept, and retain or cause to be retained for a period of six years following the retirement of the Bonds, records of the determinations made under this subsection (e). SECTION 6.08. Enforcement of Lease. The Trustee shall promptly collect all amounts (to the extent any such amounts are available for collection) due from the City under the Lease. Subject to the provisions of Article VIII, the Trustee may enforce, and take all steps, actions and proceedings which are determined to be reasonably necessary for the enforcement of all of its rights thereunder as assignee of the Authority and for the enforcement of all of the obligations of the City under the Lease. SECTION 6.09. Waiver of Laws. The Authority shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at any time hereafter in force that may affect the covenants and agreements contained in this Indenture or in the Bonds, and all benefit or advantage of any such law or laws is hereby expressly waived by the Authority to the extent permitted by law. -20- SECTION 6.10. Further Assurances. The Authority will make, execute and deliver any and all such further indentures, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in this Indenture. ARTICLE VII EVENTS OF DEFAULT AND REMEDIES SECTION 7.01. Events of Default. The following events constitute Events of Default hereunder: (a) Failure to pay any installment of the principal of any Bonds when due, whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise. (b) Failure to pay any installment of interest on the Bonds when due. (c) Failure by the Authority to observe and perform any of the other covenants, agreements or conditions on its part contained in this Indenture or in the Bonds, if such failure has continued for a period of 30 days after written notice thereof, specifying such failure and requiring the same to be remedied, has been given to the Authority by the Trustee; provided, however, if in the reasonable opinion of the Authority the failure stated in the notice can be corrected, but not within such 30-day period, such failure shall not constitute an Event of Default if the Authority institutes corrective action within such 30- day period and thereafter diligently and in good faith cures the failure in a reasonable period of time, which period shall end 180 days after the delivery of such default notice. (d) The commencement by the Authority of a voluntary case under Title 11 of the United States Code or any substitute or successor statute. (e) The occurrence and continuation of an event of default under and as defined in the Lease. SECTION 7.02. Remedies Upon Event of Default. If any Event of Default occurs, then, and in each and every such case during the continuance of such Event of Default, the Trustee may, and at the written direction of the Owners of a majority in aggregate principal amount of the Bonds at the time Outstanding shall, in each case, upon receipt of indemnification satisfactory to Trustee against the costs, expenses and liabilities to be incurred in connection with such action, upon notice in writing to the Authority, declare the principal of all of the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Bonds contained to the contrary notwithstanding. -21- Any such declaration is subject to the condition that if, at any time after such declaration and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Authority deposits with the Trustee a sum sufficient to pay all the principal of and installments of interest on the Bonds payment of which is overdue, with interest on such overdue principal at the rate borne by the respective Bonds to the extent permitted by law, and the reasonable fees, charges and expenses (including those of its legal counsel, including the allocated costs of internal attorneys) of the Trustee, and any and all other Events of Default actually known to the Trustee (other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration) have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate has been made therefor, then, and in every such case, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, by written notice to the Authority, the City and the Trustee, may, on behalf of the Owners of all of the Bonds, rescind and annul such declaration and its consequences and waive such Event of Default; but no such rescission and annulment shall extend to or shall affect any subsequent Event of Default, or shall impair or exhaust any right or power consequent thereon. Nothing herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Bondholder any plan of reorganization, arrangement, adjustment, or composition affecting the Bonds or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Bondholder in any such proceeding without the approval of the Bondholders so affected. SECTION 7.03. Application of Revenues and Other Funds After Default. If an Event of Default occurs and is continuing, all Revenues and any other funds then held or thereafter received by the Trustee under any of the provisions of this Indenture shall be applied by the Trustee in the following order of priority: (a) To the payment of reasonable fees, charges and expenses of the Trustee (including reasonable fees and disbursements of its legal counsel including outside counsel and the allocated costs of internal attorneys) incurred in and about the performance of its powers and duties under this Indenture; (b) To the payment of the principal of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping or otherwise noting thereon of the payment if only partially paid, or surrender thereof if fully paid) in accordance with the provisions of this Indenture, as follows: First: To the payment to the persons entitled thereto of all installments of interest then due in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; Second: To the payment to the persons entitled thereto of the unpaid principal of any Bonds which shall have become due, whether -22- at maturity or by acceleration or redemption, with interest on the overdue principal at the rate borne by the respective Bonds (to the extent permitted by law), and, if the amount available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference; and SECTION 7.04. Trustee to Represent Bond Owners. The Trustee is hereby irrevocably appointed (and the successive respective Owners of the Bonds, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney-in-fact of the Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds, this Indenture and applicable provisions of any law. All rights of action under this Indenture or the Bonds may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of all the Owners of such Bonds, subject to the provisions of this Indenture. SECTION 7.05. Limitation on Bond Owners’ Right to Sue. Notwithstanding any other provision hereof, no Owner of any Bonds has the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under this Indenture, the Lease or any other applicable law with respect to such Bonds, unless (a) such Owner has given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of the Bonds then Outstanding have requested the Trustee in writing to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name; (c) such Owner or Owners have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee has failed to comply with such request for a period of 60 days after such written request has been received by, and said tender of indemnity has been made to, the Trustee; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60 day period by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy hereunder or under law; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of this Indenture or the rights of any other Owners of Bonds, or to enforce any right under the Bonds, this Indenture, the Lease or other applicable law with respect to the Bonds, except in the manner herein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of this Indenture. SECTION 7.06. Absolute Obligation of Authority. Nothing herein or in the Bonds contained affects or impairs the obligation of the Authority, which is absolute and unconditional, to pay the principal of and interest and premium (if any) on the Bonds to -23- the respective Owners of the Bonds at their respective dates of maturity, or upon acceleration or call for redemption, as herein provided, but only out of the Revenues and other assets herein pledged therefor, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds. SECTION 7.07. Termination of Proceedings. In case any proceedings taken by the Trustee or by any one or more Bond Owners on account of any Event of Default have been discontinued or abandoned for any reason or have been determined adversely to the Trustee or the Bond Owners, then in every such case the Authority, the Trustee and the Bond Owners, subject to any determination in such proceedings, shall be restored to their former positions and rights hereunder, severally and respectively, and all rights, remedies, powers and duties of the Authority, the Trustee and the Bond Owners shall continue as though no such proceedings had been taken. SECTION 7.08. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee, to the Owners of the Bonds is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or otherwise. SECTION 7.09. No Waiver of Default. No delay or omission of the Trustee or any Owner of the Bonds to exercise any right or power arising upon the occurrence of any default or Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or Event of Default or an acquiescence therein; and every power and remedy given by this Indenture to the Trustee or to the Owners of the Bonds may be exercised from time to time and as often as may be deemed expedient by the Trustee or the Bond Owners. SECTION 7.10. Notice to Bond Owners of Default. Immediately upon obtaining actual knowledge of the occurrence of an Event of Default, but in no event later than five Business Days after the Trustee obtains actual knowledge of such occurrence, the Trustee shall promptly give written notice thereof by first class mail, postage prepaid, to the Owner of each Outstanding Bond, unless such Event of Default has been cured before the giving of such notice; provided, however that except in the case of an Event of Default described in Sections 7.01(a) or 7.01(b), the Trustee may elect not to give such notice to the Bond Owners if and so long as the Trustee in good faith determines that it is in the best interests of the Bond Owners not to give such notice. -24- ARTICLE VIII THE TRUSTEE SECTION 8.01. Appointment of Trustee. MUFG Union Bank, N.A. is hereby appointed Trustee by the Authority for the purpose of receiving all moneys required to be deposited with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture. The Authority will maintain a Trustee which is qualified under the provisions of the foregoing provisions of this Article VIII, so long as any Bonds are Outstanding. SECTION 8.02. Acceptance of Trusts; Removal and Resignation of Trustee. The Trustee hereby accepts the express trusts imposed upon it by this Indenture, and agrees to perform said trusts, but only upon and subject to the following express terms and conditions: (a) The Trustee shall, prior to an Event of Default, and after the curing or waiver of all Events of Default which may have occurred, perform such duties and only such duties as are expressly and specifically set forth in this Indenture and no implied duties or covenants shall be read into this Indenture against the Trustee. If an Event of Default has occurred (which has not been cured), the Trustee shall exercise such of the rights and powers vested in it by hereunder, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) The Authority may remove the Trustee upon 30 days’ prior notice, unless an Event of Default has occurred and is then continuing, and shall remove the Trustee (a) if at any time requested to do so by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or (b) if at any time the Trustee ceases to be eligible in accordance with Section 8.02, or becomes incapable of acting, or is adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property is appointed, or any public officer takes control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. (c) The Trustee may at any time resign by giving written notice of such resignation to the Authority and the City, and by giving the Bond Owners notice of such resignation by mail at the addresses shown on the Registration Books. (d) Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. In the event of the removal or resignation of the Trustee under subsections (b) or (c), respectively, the Authority shall promptly appoint a successor Trustee. -25- If no successor Trustee has been appointed and accepted appointment within 45 days of giving notice of removal or notice of resignation as aforesaid, the retiring Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under this Indenture, must signify its acceptance of such appointment by executing and delivering to the Authority, to its predecessor Trustee a written acceptance thereof, and after payment by the Authority of all unpaid fees and expenses of the predecessor Trustee, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless at the Written Request of the Authority or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to the Leased Property held by such predecessor Trustee under this Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Upon request of the successor Trustee, the Authority shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in this subsection, the Authority shall promptly mail or cause the successor trustee to mail a notice of the succession of such Trustee to the trusts hereunder to each rating agency which is then rating the Bonds and to the Bond Owners at the addresses shown on the Registration Books. If the Authority fails to mail such notice within 15 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Authority. (e) Any Trustee appointed under this Indenture shall be a corporation or association organized and doing business under the laws of any state or the United States of America or the District of Columbia, shall be authorized under such laws to exercise corporate trust powers, shall have (or, in the case of a corporation or association that is a member of a bank holding company system, the related bank holding company has) a combined capital and surplus of at least $50,000,000, and shall be subject to supervision or examination by a federal or state agency, so long as any Bonds are Outstanding. If such corporation or association publishes a report of condition at least annually under law or to the requirements of any supervising or -26- examining agency above referred to, then for the purpose of this subsection (e), the combined capital and surplus of such corporation or association shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If the Trustee at any time ceases to be eligible in accordance with the provisions of this subsection (e), the Trustee shall resign immediately in the manner and with the effect specified in this Section. SECTION 8.03. Merger or Consolidation. Any bank, national banking association, federal savings association, or trust company into which the Trustee may be merged or converted or with which it may be consolidated or any bank, national banking association, federal savings association, or trust company resulting from any merger, conversion or consolidation to which it shall be a party or any bank, national banking association, federal savings association, or trust company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such bank, national banking association, federal savings association, or trust company shall be eligible under subsection (e) of Section 8.02 shall be the successor to such Trustee, without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. SECTION 8.04. Liability of Trustee. (a) The recitals of facts herein and in the Bonds contained shall be taken as statements of the Authority, and the Trustee shall not assume responsibility for the correctness of the same, or make any representations as to the validity or sufficiency of this Indenture, the Bonds or the Lease (including any right to receive moneys thereunder or the value of or title to the premises upon which the Leased Property is located), nor shall the Trustee incur any responsibility in respect thereof, other than as expressly stated herein in connection with the respective duties or obligations of Trustee herein or in the Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Trustee may become the Owner of Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Bond Owners, whether or not such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding. (b) The Trustee is not liable for any error of judgment made by a responsible officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (c) The Trustee is not liable with respect to any action taken or omitted to be taken by it in accordance with the direction of the Owners of a majority in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture or assigned to it under the Assignment Agreement. (d) The Trustee is not liable for any action taken by it and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. -27- (e) The Trustee shall not be deemed to have knowledge of any Event of Default hereunder, or any other event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default hereunder unless and until it shall have actual knowledge thereof, or a corporate trust officer shall have received written notice thereof at its Office from the City, the Authority or the Owners of at least 25% in aggregate principal amount of the Outstanding Bonds. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance by the Authority or the City of any of the terms, conditions, covenants or agreements herein, under the Lease or the Bonds or of any of the documents executed in connection with the Bonds, or as to the existence of a default or an Event of Default or an event which would, with the giving of notice, the passage of time, or both, constitute an Event of Default. The Trustee is not responsible for the validity, effectiveness or priority of any collateral given to or held by it. Without limiting the generality of the foregoing, the Trustee shall not be required to ascertain or inquire as to the performance or observance by the City or the Authority of the terms, conditions, covenants or agreements set forth in the Lease, other than the covenants of the City to make Lease Payments to the Trustee when due and to file with the Trustee when due, such reports and certifications as the City is required to file with the Trustee thereunder. (f) No provision of this Indenture requires the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers. (g) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or through agents, receivers or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent, receiver or attorney appointed with due care by it hereunder. (h) The Trustee has no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of the Bond Owners under this Indenture, unless such Owners have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities (including but not limited to fees and expenses of its attorneys), including, without limitations, any liability arising under federal, state or local environmental laws which might be incurred by it in compliance with such request or direction. No permissive power, right or remedy conferred upon the Trustee hereunder shall be construed to impose a duty to exercise such power, right or remedy. (i) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee is subject to the provisions of Section 8.02(a), this Section 8.04 and Section 8.05, and shall be applicable to the assignment of any rights under the Lease to the Trustee under the Assignment Agreement. (j) The Trustee is not accountable to anyone for the subsequent use or application of any moneys (including the proceeds of the Bonds) which are released or withdrawn in accordance with the provisions hereof. (k) The Trustee makes no representation or warranty, expressed or implied as to the title, value, design, compliance with specifications or legal requirements, quality, durability, operation, condition, merchantability or fitness for any particular purpose for the -28- use contemplated by the Authority or the City of the Leased Property. In no event shall the Trustee be liable for incidental, indirect, special or consequential damages in connection with or arising from the Lease or this Indenture for the existence, furnishing or use of the Leased Property. (l) The Trustee has no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds. (m) The Trustee is authorized and directed to execute the Assignment Agreement in its capacity as Trustee hereunder. (n) The Trustee shall have the right to accept and act upon instructions, including funds transfer instructions (“Instructions”) given pursuant to this Indenture and delivered using Electronic Means ("Electronic Means" shall mean the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Trustee, or another method or system specified by the Trustee as available for use in connection with its services hereunder); provided, however, that the Authority and/or City shall provide to the Trustee an incumbency certificate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the Authority and/or the City whenever a person is to be added or deleted from the listing. If the Authority and/or City elects to give the Trustee Instructions using Electronic Means and the Trustee in its discretion elects to act upon such Instructions, the Trustee’s reasonable understanding of such Instructions shall be deemed controlling. The Authority and City understand and agree that the Trustee cannot determine the identity of the actual sender of such Instructions and that the Trustee shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Trustee have been sent by such Authorized Officer. The Authority and City shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Trustee and that the Authority, City and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the Authority and/or City. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. The Authority and City agree: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Trustee and that there may be more secure methods of transmitting Instructions than the method(s) selected by the Authority and City; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Trustee immediately upon learning of any compromise or unauthorized use of the security procedures. (o) In acting or omitting to act pursuant to the Assignment Agreement, the Lease or the Site Lease, the Trustee shall be entitled to all of the rights, immunities and indemnities accorded to it under this Indenture, including, but not limited to, this Article -29- VIII. Notwithstanding the effective date of this Indenture or anything to the contrary in this Indenture, the Trustee shall have no liability or responsibility for any act or event relating to this Indenture which occurs prior to the date the Trustee formally executes this Indenture and commences acting as Trustee hereunder. (p) The Trustee shall not be liable to the parties hereto or deemed in breach or default hereunder if and to the extent its performance hereunder is prevented by reason of force majeure. The term “force majeure” means an occurrence that is beyond the control of the Trustee and could not have been avoided by exercising due care. Force majeure shall include, but not be limited to, acts of God, terrorism, war, riots, strikes, fire, floods, earthquakes, epidemics or other similar occurrences. SECTION 8.05. Right to Rely on Documents. The Trustee shall be protected and shall incur no liability in acting or refraining from acting in reliance upon any notice, resolution, request, consent, order, certificate, report, opinion, bonds or other paper or document believed by them to be genuine and to have been signed or presented by the proper party or parties. The Trustee is under no duty to make any investigation or inquiry as to any statements contained or matter referred to in any paper or document but may accept and conclusively rely upon the same as conclusive evidence of the truth and accuracy of any such statement or matter and shall be fully protected in relying thereon. The Trustee may consult with counsel, who may be counsel of or to the Authority, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. The Trustee may treat the Owners of the Bonds appearing in the Registration Books as the absolute owners of the Bonds for all purposes and the Trustee shall not be affected by any notice to the contrary. Whenever in the administration of the trusts imposed upon it by this Indenture the Trustee deems it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a Written Certificate, Written Request or Written Requisition of the Authority or the City, and such Written Certificate, Written Request or Written Requisition shall be full warrant to the Trustee for any action taken or suffered under the provisions of this Indenture in reliance upon such Written Certificate, Written Request or Written Requisition, and the Trustee shall be fully protected in relying thereon, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may deem reasonable. SECTION 8.06. Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of this Indenture shall be retained in its respective possession and in accordance with its retention policy then in effect and shall, upon reasonable notice to Trustee, be subject to the inspection of the Authority, the City and any Bond Owner, and their agents and representatives duly authorized in writing, during business hours and under reasonable conditions as agreed to by the Trustee. SECTION 8.07. Compensation and Indemnification. The Authority shall pay to the Trustee from time to time, on demand, the compensation for all services rendered under this Indenture and also all reasonable expenses, advances (including any interest on -30- advances), charges, legal (including outside counsel and the allocated costs of internal attorneys) and consulting fees and other disbursements, incurred in and about the performance of its powers and duties under this Indenture. The Authority shall indemnify the Trustee, its officers, directors, employees and agents against any cost, loss, liability, suit, claim, damages, judgment or expense whatsoever (including but not limited to fees and expenses of its attorneys) incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust and this Indenture, the Assignment Agreement, the Site Lease and the Lease, including costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers hereunder or under the Assignment Agreement or the Lease. As security for the performance of the obligations of the Authority under this Section 8.07 and the obligation of the Authority to make Additional Rental Payments to the Trustee, the Trustee shall have a lien prior to the lien of the Bonds upon all property and funds held or collected by the Trustee as such. The rights of the Trustee and the obligations of the Authority under this Section 8.07 shall survive the resignation or removal of the Trustee or the discharge of the Bonds and this Indenture and the Lease. When the Trustee incurs expenses or renders services after the occurrence of an Event of Default, such expenses and the compensation for such services are intended to constitute expenses of administration under any federal or state bankruptcy, insolvency, arrangement, moratorium, reorganization or other debtor relief law. ARTICLE IX MODIFICATION OR AMENDMENT HEREOF SECTION 9.01. Amendments Permitted. (a) Amendments With Bond Owner Consent. This Indenture and the rights and obligations of the Authority and of the Owners of the Bonds and of the Trustee may be modified or amended from time to time and at any time by Supplemental Indenture, which the Authority and the Trustee may enter into when the written consents of the Owners of a majority in aggregate principal amount of all Bonds then Outstanding are filed with the Trustee. No such modification or amendment may (i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or extend the time of payment, or change the method of computing the rate of interest thereon, or extend the time of paymen t of interest thereon, without the consent of the Owner of each Bond so affected, or (ii) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or permit the creation of any lien on the Revenues and other assets pledged under this Indenture prior to or on a parity with the lien created by this Indenture except as permitted herein, or deprive the Owners of the Bonds of the lien created by this Indenture on such Revenues and other assets (except as expressly provided in this Indenture), without the consent of the Owners of all of the Bonds then Outstanding. It is not necessary for the consent of the Bond Owners to approve the particular form of any Supplemental Indenture, but it is sufficient if such consent approves the substance thereof. -31- (b) Amendments Without Owner Consent. This Indenture and the rights and obligations of the Authority, of the Trustee and the Owners of the Bonds may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the Authority and the Trustee may enter into without the consent of any Bond Owners, if the Trustee has been furnished an opinion of counsel that the provisions of such Supplemental Indenture shall not materially adversely affect the interests of the Owners of the Bonds, including, without limitation, for any one or more of the following purposes: (i) to add to the covenants and agreements of the Authority in this Indenture contained, other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the Authority; (ii) to cure any ambiguity, inconsistency or omission, or to cure or correct any defective provision, contained in this Indenture, or in regard to matters or questions arising under this Indenture, as the Authority deems necessary or desirable, provided that such modification or amendment does not materially adversely affect the interests of the Bond Owners, in the opinion of Bond Counsel filed with the Trustee; (iii) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute; (iv) to modify, amend or supplement this Indenture in such manner as to assure that the interest on the Bonds remains excluded from gross income under the Tax Code; or (v) to facilitate the issuance of additional obligations of the City under the Lease Agreement as provided in Section 7.5(b)(5) thereof. (c) Limitation. The Trustee is not obligated to enter into any Supplemental Indenture authorized by subsections (a) or (b) of this Section 9.01 which materially adversely affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise. (d) Bond Counsel Opinion Requirement. Prior to the Trustee entering into any Supplemental Indenture hereunder, the Authority shall deliver to the Trustee an opinion of Bond Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance with the requirements of this Indenture and that the adoption of such Supplemental Indenture will not, in and of itself, adversely affect the exclusion from gross income for purposes of federal income taxes of interest on the Bonds. (e) Notice of Amendments. The Authority shall deliver or cause to be delivered a draft of any Supplemental Indenture to each rating agency which then maintains a rating on the Bonds, at least 10 days prior to the effective date of such Supplemental Indenture under this Section 9.01. -32- SECTION 9.02. Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture under this Article IX, this Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the Authority, the Trustee and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.03. Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after the execution of any Supplemental Indenture under this Article may, and if the Authority so determines shall, bear a notation by endorsement or otherwise in form approved by the Authority as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand on the Owner of any Bonds Outstanding at the time of such execution and presentation of his Bonds for the purpose at the Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation shall be made on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Authority, to any modification or amendment contained in such Supplemental Indenture, shall be prepared and executed by the Authority and authenticated by the Trustee, and upon demand on the Owners of any Bonds then Outstanding shall be exchanged at the Office of the Trustee, without cost to any Bond Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate principal amount of the same maturity. SECTION 9.04. Amendment of Particular Bonds. The provisions of this Article IX do not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by such Owner. ARTICLE X DEFEASANCE SECTION 10.01. Discharge of Indenture. Any or all of the Outstanding Bonds may be paid by the Authority in any of the following ways, provided that the Authority also pays or causes to be paid any other sums payable hereunder by the Authority: (a) by paying or causing to be paid the principal of and interest and premium (if any) on such Bonds, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money or Defeasance Securities in the necessary amount (as provided in Section 10.03) to pay or redeem such Bonds; or (c) by delivering all of such Bonds to the Trustee for cancellation. -33- If the Authority also pays or causes to be paid all other sums payable hereunder by the Authority, then and in that case, at the election of the Authority (evidenced by a Written Certificate of the Authority, filed with the Trustee, signifying the intention of the Authority to discharge all such indebtedness and this Indenture), and notwithstanding that any of such Bonds shall not have been surrendered for payment, this Indenture and the pledge of Revenues and other assets made under this Indenture with respect to such Bonds and all covenants, agreements and other obligations of the Authority under this Indenture with respect to such Bonds shall cease, terminate, become void and be completely discharged and satisfied, subject to Section 10.02, and except for Section 8.07 hereof, which shall survive. In such event, upon the Written Request of the Authority, the Trustee shall execute and deliver to the Authority all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over, transfer, assign or deliver to the City all moneys or securities or other property held by it under this Indenture which are not required for the payment or redemption of any of such Bonds not theretofore surrendered for such payment or redemption. The Trustee is entitled to conclusively rely on any such Written Certificate or Written Request and, in each case, is fully protected in relying thereon. SECTION 10.02. Discharge of Liability on Bonds. Upon the deposit with the Trustee, in trust, at or before maturity, of money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem any Outstanding Bonds (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to maturity, notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice, then all liability of the Authority in respect of such Bonds shall cease, terminate and be completely discharged, and the Owners thereof shall thereafter be entitled only to payment out of such money or securities deposited with the Trustee as aforesaid for their payment, subject, however, to the provisions of Section 10.04. The Authority may at any time surrender to the Trustee, for cancellation by the Trustee, any Bonds previously issued and delivered, which the Authority may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. SECTION 10.03. Deposit of Money or Securities with Trustee. Whenever in this Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee money or securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be deposited or held may include money or securities held by the Trustee in the funds and accounts established under this Indenture and shall be: (a) lawful money of the United States of America in an amount equal to the principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice, the amount to be deposited or held shall be the principal amount of such Bonds, premium, if any, and all unpaid interest thereon to the redemption date; or -34- (b) non-callable Federal Securities, the principal of and interest on which when due will, in the written opinion of an Independent Accountant filed with the City, the Authority and the Trustee, provide money sufficient to pay the principal of and interest and premium (if any) on the Bonds to be paid or redeemed, as such principal, interest and premium become due, provided that in the case of Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee has been made for the giving of such notice; provided, in each case, that (i) the Trustee shall have been irrevocably instructed (by the terms of this Indenture or by Written Request of the Authority) to apply such money to the payment of such principal, interest and premium (if any) with respect to such Bonds, and (ii) the Authority shall have delivered to the Trustee an opinion of Bond Counsel to the effect that such Bonds have been discharged in accordance with this Indenture (which opinion may rely upon and assume the accuracy of the Independent Accountant’s opinion referred to above). The Trustee shall be entitled to conclusively r ely on such Written Request or opinion and shall be fully protected, in each case, in relying thereon. SECTION 10.04. Unclaimed Funds. Notwithstanding any provisions of this Indenture, any moneys held by the Trustee in trust for the payment of the principal of, or interest on, any Bonds and remaining unclaimed for 2 years after the principal of all of the Bonds has become due and payable (whether at maturity or upon call for redemption or by acceleration as provided in this Indenture), if such moneys were so held at such date, or 2 years after the date of deposit of such moneys if deposited after said date when all of the Bonds became due and payable, shall be repaid (without liability for interest) to the Authority free from the trusts created by this Indenture, and all liability of the Trustee with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the Authority as aforesaid, the Trustee shall (at the cost of the Authority) first mail to the Owners of Bonds which have not yet been paid, at the addresses shown on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the Authority of the moneys held for the payment thereof. ARTICLE XI MISCELLANEOUS SECTION 11.01. Liability of Authority Limited to Revenues. Notwithstanding anything in this Indenture or in the Bonds contained, the Authority is not required to advance any moneys derived from any source other than the Revenues, the Additional Rental Payments and other assets pledged under this Indenture for any of the purposes in this Indenture mentioned, whether for the payment of the principal of or interest on the Bonds or for any other purpose of this Indenture. Nevertheless, the Authority may, but is not required to, advance for any of the purposes hereof any funds of the Authority which may be made available to it for such purposes. -35- SECTION 11.02. Limitation of Rights to Parties and Bond Owners. Nothing in this Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any person other than the Authority, the Trustee, the City and the Owners of the Bonds, any legal or equitable right, remedy or claim under or in respect of this Indenture or any covenant, condition or provision therein or herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Authority, the Trustee, the City and the Owners of the Bonds. SECTION 11.03. Funds and Accounts. Any fund or account required by this Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee, either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records with respect to all such funds and accounts shall at all times be maintained in accordance with corporate industry standards to the extent practicable, and with due regard for the requirements of Section 6.05 and for the protection of the security of the Bonds and the rights of every Owner thereof. The Trustee may establish such funds and accounts as it deems necessary or appropriate to perform its obligations under this Indenture. SECTION 11.04. Waiver of Notice; Requirement of Mailed Notice. Whenever in this Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any such case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Whenever in this Indenture any notice is required to be given by mail, such requirement m ay be satisfied by the deposit of such notice in the United States mail, postage prepaid, by first class mail. SECTION 11.05. Destruction of Bonds. Whenever in this Indenture provision is made for the cancellation by the Trustee, and the delivery to the Authority, of any Bonds, the Trustee shall destroy such Bonds as may be allowed by law and, deliver a certificate of such destruction to the Authority. SECTION 11.06. Severability of Invalid Provisions. If any one or more of the provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Indenture and such invalidity, illegality or unenforceability shall not affect any other provision of this Indenture, and this Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Authority hereby declares that it would have entered into this Indenture and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of this Indenture may be held illegal, invalid or unenforceable. SECTION 11.07. Notices. All notices or communications to be given under this Indenture shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, or at such address as the party may provide to the other party in writing from time to time. Notice shall be effective either (a) upon transmission by facsimile transmission or other form of telecommunication, confirmed by telephone, (b) 48 hours after deposit in the United States mail, postage prepaid, or (c) in the case of personal delivery to any person, upon actual receipt. The Authority, the City or the Trustee may, -36- by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder. If to the Authority City of San Rafael or the City: 1400 Fifth Avenue San Rafael, CA 94901 Attention: City Manager Email: If to the Trustee: MUFG Union Bank, N.A. 350 California Street, 17th Floor San Francisco, California 94104 Attention: Corporate Trust Department Email:AccountAdministration- Corporate.Trust@unionbank.com SECTION 11.08. Evidence of Rights of Bond Owners. Any request, consent or other instrument required or permitted by this Indenture to be signed and executed by Bond Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such Bond Owners in person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, or of the holding by any person of Bonds transferable by delivery, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee and the Authority if made in the manner provided in this Section 11.08. The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer. The ownership of Bonds shall be proved by the Registration Books. Any request, consent, or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Authority in accordance therewith or reliance thereon. SECTION 11.09. Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are actually known by the Trustee to be owned or held by or for the account of the Authority or the City, or by any other obligor on the Bonds, or by any person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or the City or any other obligor on the Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination unless all Bonds are so owned or held, in which case such Bonds shall be considered Outstanding for the purpose of such determination.. Bonds so owned which have been pledged in good faith may be regarded as Outstanding -37- for the purposes of this Section if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to vote such Bonds and that the pledgee is not a person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or the City or any other obligor on the Bonds. In case of a dispute as to such right, the Trustee shall be entitled to rely upon the advice of counsel in any decision by Trustee and shall be fully protected in relying thereon. Upon request, the Authority shall certify to the Trustee those Bonds disqualified under this Section 11.09, and the Trustee may conclusively rely on such certifications. SECTION 11.10. Money Held for Particular Bonds. The money held by the Trustee for the payment of the interest, premium, if any, or principal due on any date with respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owners of the Bonds entitled thereto, subject, however, to the provisions of Section 10.04 but without any liability for interest thereon. SECTION 11.11. Waiver of Personal Liability. No member, officer, agent or employee of the Authority shall be individually or personally liable for the payment of the principal of or interest or premium (if any) on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law or by this Indenture. SECTION 11.12. Successor Is Deemed Included in All References to Predecessor. Whenever in this Indenture either the Authority, the City or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Indenture contained by or on behalf of the Authority, the City or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. SECTION 11.13. Execution in Several Counterparts. This Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the Authority and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. SECTION 11.14. Payment on Non-Business Day. In the event any payment is required to be made hereunder on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and with the same effect as if made on such preceding non-Business Day. SECTION 11.15. Governing Law. This Indenture shall be governed by and construed in accordance with the laws of the State of California. -38- IN WITNESS WHEREOF, the SAN RAFAEL JOINT POWERS FINANCING AUTHORITY has caused this Indenture to be signed in its name by its Executive Director and attested to by its Secretary, and MUFG UNION BANK, N.A., in token of its acceptance of the trusts created hereunder, has caused this Indenture to be signed in its corporate name by its officer thereunto duly authorized, all as of the day and year first above written. SAN RAFAEL JOINT POWERS FINANCING AUTHORITY By Executive Director Attest: Secretary MUFG UNION BANK, N.A., as Trustee By Authorized Officer A-1 APPENDIX A DEFINITIONS “Additional Rental Payments” means the amounts of additional rental which are payable by the City under Section 4.5 of the Lease or which are otherwise identified as Additional Rental Payments under the Lease. “Assignment Agreement” means the Assignment Agreement dated as of March 1, 2018, between the Authority as assignor and the Trustee as assignee, as originally executed or as thereafter amended. “Authority” means the San Rafael Joint Powers Financing Authority, a joint exercise of powers authority duly organized and existing under the laws of the State of California. “Authorized Representative” means: (a) with respect to the Authority, its Chair, Executive Director, General Counsel or any other person designated as an Authorized Representative of the Authority by a Written Certificate of the Authority signed by its Executive Director and filed with the City and the Trustee; and (b) with respect to the City, its Mayor, Vice Mayor, City Manager, Assistant City Manager, City Attorney or any other person designated as an Authorized Representative of the City by a Written Certificate of the City signed by its City Manager and filed with the Authority and the Trustee. “Bond Counsel” means (a) Jones Hall, A Professional Law Corporation, or (b) any other attorney or firm of attorneys appointed by or acceptable to the Authority of nationally- recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Tax Code. “Bond Fund” means the fund by that name established and held by the Trustee under Section 5.01. “Bond Law” means Article 4 of Chapter 5, Division 7, Title 1 (commencing with Section 6584) of the California Government Code. “Bond Year” means each twelve-month period extending from June 2 in one calendar year to June 1 of the succeeding calendar year, both dates inclusive; except that the first Bond Year commences on the Closing Date and extends to and including June 1, 2018. “Bonds” means the $___________ aggregate principal amount of San Rafael Joint Powers Financing Authority Lease Revenue Bonds, Series 2018 (Public Safety Facilities Project) authorized by and at any time Outstanding under this Indenture. “Business Day” means a day (other than a Saturday or a Sunday) on which banks are not required or authorized to remain closed in the city in which the Office of the Trustee is located. “City” means the City of San Rafael, a charter city and municipal corporation organized and existing under the Constitution and laws of the State of California. A-2 “Closing Date” means March _____, 2018, the date of delivery of the Bonds to the Original Purchaser. “Costs of Issuance” means all items of expense directly or indirectly payable by or reimbursable to the City relating to the authorization, issuance, sale and delivery of the Bonds, including but not limited to: printing expenses; rating agency fees; filing and recording fees; initial fees, expenses and charges of the Trustee and their respective counsel, including the Trustee’s first annual administrative fee; fees, charges and disbursements of attorneys, municipal advisors, accounting firms, consultants and other professionals; fees and charges for preparation, execution and safekeeping of the Bonds; and any other cost, charge or fee in connection with the original issuance of the Bonds. “Costs of Issuance Fund” means the fund by that name established and held by the Trustee under Section 3.03. “Defeasance Securities” means securities described in clause (o) of the definition of Permitted Investments. “Depository” means (a) initially, DTC, and (b) any other Securities Depositories acting as Depository under Section 2.04. “Depository System Participant” means any participant in the Depository’s book- entry system. “DTC” means The Depository Trust Company, New York, New York, and its successors and assigns. “Event of Default” means any of the events specified in Section 7.01. “Excess Investment Earnings” means an amount required to be rebated to the United States of America under Section 148(f) of the Tax Code due to investment of gross proceeds of the Bonds at a yield in excess of the yield on the Bonds. "Fair Market Value" means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section 1273 of the Tax Code) and, otherwise, the term "Fair Market Value" means the acquisition price in a bona fide arm's length transaction (as referenced above) if (a) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (b) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, A-3 (c) the investment is a United States Treasury Security--State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (d) any commingled investment fund in which the Authority and related parties do not own more than a 10% beneficial interest therein if the return paid by the fund is without regard to the source of the investment. To the extent required by the applicable regulations under the Code, the term “investment” will include a hedge. “Federal Securities” means: (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), for which the full faith and credit of the United States of America are pledged; (b) obligations of any agency, department or instrumentality of the United States of America, the timely payment of principal and interest on which are directly or indirectly secured or guaranteed by the full faith and credit of the United States of America. “Fiscal Year” means any twelve-month period extending from July 1 in one calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve-month period selected and designated by the Authority as its official fiscal year period. “Indenture” means this Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture under the provisions hereof. “Independent Accountant” means any certified public accountant or firm of certified public accountants appointed and paid by the Authority or the City, and who, or each of whom (a) is in fact independent and not under domination of the Authority or the City; (b) does not have any substantial interest, direct or indirect, in the Authority or the City; and (c) is not connected with the Authority or the City as an officer or employee of the Authority or the City but who may be regularly retained to make annual or other audits of the books of or reports to the Authority or the City. “Insurance and Condemnation Fund” means the fund by that name established and held by the Trustee under Section 5.07. “Interest Account” means the account by that name established and held by the Trustee in the Bond Fund under Section 5.02. “Interest Payment Date” means each June 1 and December 1, commencing June 1, 2018, so long as any Bonds remain unpaid. “Lease” means the Lease Agreement dated as of March 1, 2018, between the Authority as lessor and the City as lessee of the Leased Property, as originally executed and as it may from time to time be supplemented, modified or amended in accordance with the terms thereof and of this Indenture. A-4 “Lease Payment Date” means, with respect to any Interest Payment Date, the Business Day immediately preceding such Interest Payment Date. “Lease Payments” means the amounts payable by the City under Section 4.3(a) of the Lease, including any prepayment thereof and including any amounts payable upon a delinquency in the payment thereof. “Leased Property” means the real property described in Appendix A to the Lease, together with all improvements and facilities at any time situated thereon. “Net Proceeds” means amounts derived from any policy of casualty insurance or title insurance with respect to the Leased Property, or the proceeds of any taking of the Leased Property or any portion thereof in eminent domain proceedings (including sale under threat of such proceedings), to the extent remaining after payment therefrom of all expenses incurred in the collection and administration thereof. “Nominee” means (a) initially, Cede & Co. as nominee of DTC, and (b) any other nominee of the Depository designated under Section 2.04(a). “Office” means the corporate trust office of the Trustee in San Francisco, California, or such other or additional offices as the Trustee may designate in writing to the Authority from time to time as the corporate trust office for purposes of the Indenture; except that with respect to presentation of Bonds for payment or for registration of transfer and exchange such term means the office or agency of the Trustee at which, at any particular time, its corporate trust agency business is conducted. “Original Purchaser” means Raymond James & Associates, Inc., as original purchaser of the Bonds upon their delivery by the Trustee on the Closing Date. “Outstanding”, when used as of any particular time with reference to Bonds, means all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under this Indenture except: (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds with respect to which all liability of the Authority shall have been discharged in accordance with Section 10.02, including Bonds (or portions thereof) described in Section 11.09; and (c) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall have been authenticated and delivered by the Trustee under this Indenture. “Owner”, whenever used herein with respect to a Bond, means the person in whose name the ownership of such Bond is registered on the Registration Books. “Permitted Encumbrances” means, as of any time: (a) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may permit to remain unpaid under Article V of the Lease; (b) the Site Lease, the Lease and the Assignment Agreement; (c) any right or claim of any mechanic, laborer, material man, supplier or vendor not filed or perfected in the manner prescribed by law; (d) the exceptions disclosed in the title insurance policy with respect to the Leased Property issued as of the Closing Date by Stewart Title Guaranty Company; and (e) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record and which the City certifies in writing will not materially impair the use of the Leased Property for its intended purposes. A-5 “Permitted Investments” means any of the following: (a) U.S. Treasury obligations, and obligations the principal and interest of which are backed or guaranteed by the full faith and credit of the U.S. Government. (b) Debt obligations, participations or other instruments issued or fully guaranteed by any U.S. Federal agency, instrumentality, corporation, or government-sponsored enterprise (GSE). (c) U.S. dollar denominated debt obligations of a multilateral organization of governments for which the United States government is a participant, shareholder, and/or voting member with minimum ratings of AA-/Aa3 (or the equivalent) or A-1/P-1 (or the equivalent) by any one rating agency, including but not limited to: the Inter-American Development Bank, International Bank for Reconstruction & Development, African Development Bank, Asian Development Bank, and the International Finance Corporation. (d) Interest-bearing deposit accounts (including certificates of deposit placed by a third party pursuant to a separate agreement between the Authority and the Trustee), time deposits, bank deposit products, trust funds, trust accounts, interest bearing deposits, overnight bank deposits or interest bearing money market accounts in federal or State chartered savings and loan associations or in federal or State of California banks (including the Trustee or any of its affiliates), provided that: (i) the unsecured obligations of such commercial bank or savings and loan association are rated A or better by S&P; or (ii) such deposits are fully insured by the Federal Deposit Insurance Corporation or secured at all times by collateral described in (a) or (b) above. (e) Negotiable bank certificates of deposit, deposit notes or other deposit obligations issued by a nationally or state chartered bank, credit union or savings association, or by a federally or state-licensed branch of a foreign bank or financial institution with minimum ratings of A-/A3 (or the equivalent) or A-1/P-1 (or the equivalent) by any one rating agency. (f) U.S. dollar denominated commercialpaper rated “A-1+” or better by S&P. (g) Federal funds or bankers acceptances with a maximum term of one year of any bank which an unsecured, uninsured and unguaranteed obligation rating of “A-1+” or better by S&P. (h) Money market mutual funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of at least AAAm-G, AAAm or AAm, which funds may include funds for which A-6 the Trustee, its affiliates, parent or subsidiaries provide investment advisory, custodial, transfer agency or other management services, and for which they receive and retain a fee for such services. Money market funds permitted under this paragraph shall not include funds with a floating net asset value. (i) Obligations the interest on which is excludable from gross income pursuant to Section 103 of the Tax Code and which are either (a) rated A or better by S&P, or (b) fully secured as to the payment of principal and interest by Permitted Investments described in clauses (a) or (b). (j) Obligations issued by any corporation organized and operating within the United States of America, which obligations are rated A or better by S&P. (k) Bonds or notes issued by any state or municipality which are rated A or better by S&P. (l) Any investment agreement with, or guaranteed by, a financial institution the long-term unsecured obligations or the claims paying ability of which are rated A or better by S&P at the time of initial investment, by the terms of which all amounts invested thereunder are required to be withdrawn and paid to the Trustee in the event either of such ratings at any time falls below A. (m) The Local Agency Investment Fund of the State of California, created pursuant to Section 16429.1 of the California Government Code, to the extent the Trustee is authorized to register such investment in its name. (n) The California Asset Management Program. (o) Defeasance securities include (i) U.S. Treasury obligations and obligations guaranteed by the U.S. Government, including but not limited to: Treasury bills, bonds, notes, and STRIPS; Resolution Funding Corporation (“REFCORP”) Interest STRIPS; and United States Agency for International Development (“US AID”) guaranteed notes (including stripped securities) provided that any US AID security shall mature at least 5 business days prior to any cash flow or escrow requirement and (ii) non-callable senior debt obligations, participations, or other instruments issued or fully guaranteed by any U.S. Federal agency, instrumentality, corporation, or government- sponsored enterprise, including but not limited to: Fannie Mae, Freddie Mac, the Federal Home Loan Banks, the Federal Farm Credit System, Tennessee Valley Authority, and Resolution Funding Corporation. Interest and principal strips are eligible investments provided that the securities are stripped from non-callable senior debt obligations, participations, or other instruments as described above in this section (b). A-7 “Principal Account” means the account by that name established and held by the Trustee in the Bond Fund under Section 5.02. “Project” means the acquisition and construction of certain public safety improvements consisting generally of a new public safety center and two replacement fire stations. “Project Fund” means the fund by that name established and held by the Trustee under Section 3.04. “Record Date” means, with respect to any Interest Payment Date, the 15th calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day. “Redemption Fund” means the fund by that name established and held by the Trustee under Section 5.06. “Registration Books” means the records maintained by the Trustee under Section 2.05 for the registration and transfer of ownership of the Bonds. “Revenues” means: (a) all amounts received by the Authority or the Trustee under or with respect to the Lease, including, without limiting the generality of the foregoing, all of the Lease Payments (including both timely and delinquent payments, any late charges, and whether paid from any source), but excluding (i) any amounts described in Section 7.5(b)(v) of the Lease, and (ii) any Additional Rental Payments; and (b) all interest, profits or other income derived from the investment of amounts in any fund or account established under this Indenture. “Securities Depositories” means DTC; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other securities depositories as the Authority designates in written notice filed with the Trustee. “Site Lease” means the Site Lease dated as of March 1, 2018, between the City as lessor and the Authority as lessee, as amended from time to time in accordance with its terms. “Site Lease Payment” means the amount of $___________ which is payable by the Authority to the City on the Closing Date under Section 3 of the Site Lease. “S&P” means S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC business, its successors and assigns. “Supplemental Indenture” means any indenture hereafter duly authorized and entered into between the Authority and the Trustee, supplementing, modifying or amending this Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder. “Tax Code” means the Internal Revenue Code of 1986 as in effect on the Closing Date or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the Closing Date, together with applicable temporary and final A-8 regulations promulgated, and applicable official public guidance published, under said Code. “Term” means, with reference to the Lease, the time during which the Lease is in effect, as provided in Section 4.2 thereof. “Term Bonds” means the Bonds maturing on June 1, 20__. “Trustee” means MUFG Union Bank, N.A., a national banking association organized and existing under the laws of United States of America, or its successor or successors, as Trustee hereunder as provided in Article VIII. “Written Certificate,” “Written Request” and “Written Requisition” of the Authority or the City mean, respectively, a written certificate, request or requ isition signed in the name of the Authority or the City by its Authorized Representative. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. B-1 APPENDIX B BOND FORM NO. R- ***$ *** UNITED STATES OF AMERICA STATE OF CALIFORNIA SAN RAFAEL JOINT POWERS FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2018 (PUBLIC SAFETY FACILITIES PROJECT) INTEREST RATE: MATURITY DATE: ORIGINAL ISSUE DATE: CUSIP: ______% June 1, ____ March ___, 2018 _______ REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: *** *** The SAN RAFAEL JOINT POWERS FINANCING AUTHORITY, a public body corporate and politic duly organized and existing under the laws of the State of California (the “Authority”), for value received, hereby promises to pay to the Registered Owner specified above or registered assigns (the “Registered Owner”), on the Maturity Date specified above (subject to any right of prior redemption hereinafter provided for), the Principal Amount specified above, in lawful money of the United States of America, and to pay interest thereon in like lawful money from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication of this Bond unless (i) this Bond is authenticated on or before an Interest Payment Date and after the close of business on the 15th day of the month preceding such interest payment date, in which event it shall bear interest from such Interest Payment Date, or (ii) this Bond is authenticated on or before May 15, 2018, in which event it shall bear interest from the Original Issue Date specified above; provided, however, that if at the time of authentication of this Bond, interest is in default on this Bond, this Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment on this Bond, at the Interest Rate per annum specified above, payable semiannually on December 1 and June 1 in each year, commencing June 1, 2018 (the “Interest Payment Dates”), calculated on the basis of a 360-day year composed of twelve 30-day months. Principal hereof and premium, if any, upon early redemption hereof are payable upon presentation and surrender hereof at the designated corporate trust office of MUFG Union Bank, N.A. (the “Trust Office”), as trustee (the “Trustee”). Interest hereon is payable by check of the Trustee mailed to the Registered Owner hereof at the Registered Owner’s address as it appears on the registration books of the Trustee as of the close of business B-2 on the fifteenth day of the month preceding each Interest Payment Date (a “Record Date”), or, upon written request filed with the Trustee as of such Record Date by a registered owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer in immediately available funds to an account in the United States designated by such registered owner in such written request. This Bond is not a debt of the City of San Rafael (the “City”), the County of Marin, the State of California, or any of its political subdivisions, and neither the City, said County, said State, nor any of its political subdivisions, is liable hereon nor in any event shall this Bond be payable out of any funds or properties of the Authority other than the Revenues. This Bond is one of a duly authorized issue of bonds of the Authority designated as the “San Rafael Public Financing Authority Lease Revenue Bonds, Series 2018 (________________ Project)” (the “Bonds”), in an aggregate principal amount of $___________, all of like tenor and date (except for such variation, if any, as may be required to designate varying numbers, maturities, interest rates or redemption provisions) and all issued under the provisions of Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California, commencing with Section 6584 of said Code, and under an Indenture of Trust dated as of March 1, 2018, between the Authority and the Trustee (the “Indenture”) and a resolution of the Authority adopted on July 1, 2017, authorizing the issuance of the Bonds. Reference is hereby made to the Indenture (copies of which are on file at the office of the Authority) and all supplements thereto for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Revenues, and the rights thereunder of the owners of the Bonds and the rights, duties and immunities of the Trustee and the rights and obligations of the Authority thereunder, to all of the provisions of which the Registered Owner of this Bond, by acceptance hereof, assents and agrees. The Bonds have been issued by the Authority to refinance certain outstanding certificates of participation of the City. This Bond and the interest and premium, if any, hereon are special obligations of the Authority, payable from the Revenues, and secured by a charge and lien on the Revenues as defined in the Indenture, consisting principally of lease payments made by the City under a Lease Agreement dated as of March 1, 2018, between the Authority as lessor and the City as lessee (the “Lease”). As and to the extent set forth in the Indenture, all of the Revenues are exclusively and irrevocably pledged in accordance with the terms hereof and the provisions of the Indenture, to the payment of the principal of and interest and premium (if any) on the Bonds. The rights and obligations of the Authority and the owners of the Bonds may be modified or amended at any time in the manner, to the extent and upon the terms provided in the Indenture, but no such modification or amendment shall extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the owner of each Bond so affected. The Bonds maturing on or before June 1, 20__, are not subject to optional redemption prior to their stated maturity. The Bonds maturing on or after June 1, 20__, are subject to redemption, as a whole or in part at the election of the Authority among maturities on such basis as designated by the Authority and by lot within a maturity, at the option of the Authority, on June 1, 20__, and on any date thereafter, at a redemption price B-3 equal to 100% of the principal amount of Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. The Bonds are subject to redemption as a whole, or in part by lot, on any date, to the extent of any net proceeds of hazard or title insurance with respect to the property which has been leased under the Lease (the “Leased Property”) or any portion thereof which are not used to repair or replace the Leased Property pursuant to the Lease, or to the extent of any net proceeds arising from the disposition of the Leased Property or any portion thereof in eminent domain proceedings which the City elects to be used for such purpose pursuant to the Lease, at a redemption price equal to the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium. The Bonds maturing on June 1, 20__ (the “20__ Term Bonds”), are subject to mandatory sinking payment redemption in part on June 1, 20__, and on each June 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: 20__ Term Bonds Redemption Date (June 1) Sinking Payments 20__ (Maturity) As provided in the Indenture, notice of redemption will be mailed by the Trustee by first class mail not less than 30 nor more than 60 days prior to the redemption date to the respective owners of any Bonds designated for redemption at their addresses appearing on the registration books of the Trustee, but neither failure to receive such notice nor any defect in the notice so mailed shall affect the sufficiency of the proceedings for redemption or the cessation of accrual of interest thereon from and after the date fixed for redemption. Notice of any optional redemption of the Bonds may be rescinded under the circumstances set forth in the Indenture, upon notice to the owners of such Bonds. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, interest shall cease to accrue hereon from and after the date fixed for redemption. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Trust Office, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon registration of such transfer, a new Bond or Bonds, of authorized denomination or denominations, for the same aggregate principal amount and of the same maturity will be issued to the transferee in exchange herefor. This Bond may be exchanged at the Trust Office for Bonds of the same tenor, aggregate principal amount, interest rate and maturity, of other authorized denominations. The Authority and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary. B-4 Unless this Bond is presented by an authorized representative of The Depository Trust Company to the Authority or the Trustee for registration of transfer, exchange or payment, and any Bond 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. It is hereby certified by the Authority that all of the things, conditions and acts required to exist, to have happened or to have been performed precedent to and in the issuance of this Bond do exist, have happened or have been performed in due and regular time, form and manner as required by the Ordinance and the laws of the State of California and that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Ordinance or any laws of the State of California, and is not in excess of the amount of Bonds permitted to be issued under the Indenture. This Bond shall not be entitled to any benefit under the Indenture or become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been manually signed by the Trustee. B-5 IN WITNESS WHEREOF, the San Rafael Joint Powers Financing Authority has caused this Bond to be executed in its name and on its behalf with the facsimile signature of its Chair and attested to by the facsimile signature of its Secretary, all as of the Original Issue Date specified above. SAN RAFAEL JOINT POWERS FINANCING AUTHORITY By Chair Attest: Secretary CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the within-mentioned Indenture. Dated: MUFG UNION BANK, N.A., as Trustee By Authorized Signatory B-6 ASSIGNMENT For value received the undersigned hereby sells, assigns and transfers unto __________________________________ whose address and social security or other tax identifying number is ____________________, the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) ________________________________________ attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: Signature Guaranteed: Note: Signature(s) must be guaranteed by an eligible guarantor institution. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. B-1 APPENDIX C FORM OF PROJECT FUND DISBURSEMENT REQUEST SAN RAFAEL JOINT POWERS FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2018 (PUBLIC SAFETY FACILITIES PROJECT) DISBURSEMENT REQUEST NO.: _______ MUFG Union Bank, N.A. 350 California Street, 17th Floor San Francisco, California 94104 Attention: Corporate Trust Department Under Section 3.04 of the Indenture of Trust dated as of March 1, 2018, by and between MUFG Union Bank, N.A., and the San Rafael Joint Powers Financing Authority (the “Indenture”), you are hereby authorized and requested to make immediate disbursement of funds held by you in the Project Fund for costs of acquiring, construction and equipping the Project (as defined in the Indenture). You are hereby requested to pay from the Project Fund established by the Indenture, to the persons or entities designated on Schedule A attached hereto, in payment of all or a portion of the costs of constructing and equipping the Improvements, as described on Schedule A. The undersigned hereby certifies that (i) no part of the amount requested herein has been included in any other request previously filed with you; (ii) to the knowledge of the undersigned, there has not been filed with or served upon the City any notice of any lien or attachment upon or claim (except for any preliminary notice of lien as may be filed in accordance with law) affecting the right of the person, corporation or other entity stated below to receive payment of the amount stated below, which lien has not been released or will not be released simultaneously with the payment requested hereunder; and (iii) the labor, services and/or materials covered hereby have been performed upon or furnished to the Improvements and the payment requested herein is due and payable under a purchase order, contract or other authorization; Dated: __________, 20__. CITY OF SAN RAFAEL By Its B-2 SCHEDULE A Payee Description (include address) of Costs Amount 41390-03 SM:SRF:REL 1/18/2018 TO BE RECORDED AND WHEN RECORDED RETURN TO: Jones Hall, A Professional Law Corporation 475 Sansome Street, Suite 1700 San Francisco, California 94111 Attention: Scott R. Ferguson, Esq. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES UNDER SECTION 27383 OF THE CALIFORNIA GOVERNMENT CODE. ASSIGNMENT AGREEMENT This ASSIGNMENT AGREEMENT (this “Agreement”), dated for convenience as of March 1, 2018, is between the SAN RAFAEL JOINT POWERS FINANCING AUTHORITY, a joint powers authority duly organized and existing under the laws of the State of California (the “Authority”), and MUFG Union Bank, N.A., a national banking association organized and existing under the laws of the United States of America, as trustee (the “Trustee”). B A C K G R O U N D : 1. The City of San Rafael (the “City”) wishes to finance the acquisition and construction of certain public safety improvements consisting generally of a new public safety center and two replacement fire stations (collectively, the “Project”). 2. To that end, the City has proposed to lease to the Authority certain real property and improvements, initially consisting of the City’s new public safety facility, the City’s Fire Station 52, and the City’s Fire Station 57, including land and improvements thereon, as more particularly described in Appendix A attached hereto and by this reference incorporated herein (the “Leased Property”), under a Site Lease, dated the date hereof (the “Site Lease”), in consideration of the payment by the Authority of an upfront rental payment (the “Site Lease Payment”) sufficient to provide funds for the acquisition and construction of the Project. The Site Lease is being recorded concurrently herewith. 3. The Authority has authorized the issuance of its San Rafael Joint Powers Financing Authority Lease Revenue Bonds, Series 2018 (Public Safety Facilities Project) in the aggregate principal amount of $___________ (the “Bonds”) under an Indenture of Trust dated as of March 1, 2018 (the “Indenture”), between the Authority and the Trustee, for the purpose of providing the funds to enable the Authority to pay the Site Lease Payment to the City in accordance with the Site Lease. -2- 4. In order to provide revenues that are sufficient to enable the Authority to pay debt service on the Bonds, the Authority has agreed to lease the Leased Property back to the City under a Lease Agreement dated as of the date hereof (the “Lease Agreement”), a memorandum of which has been recorded concurrently herewith, under which the City has agreed to pay semiannual Lease Payments as the rental for the Leased Property thereunder. 5. The Authority has requested the Trustee to enter into this Agreement for the purpose of assigning certain of its rights under the Lease Agreement to the Trustee for the benefit of the Bond owners. A G R E E M E N T : In consideration of the material covenants contained in this Agreement, the parties hereto hereby formally covenant, agree and bind themselves as follows: SECTION 1. Defined Terms. All capitalized terms not otherwise defined herein have the respective meanings given those terms in the Indenture. SECTION 2. Assignment. The Authority hereby assigns to the Trustee, for the benefit of the Owners of all Bonds which are issued and Outstanding under the Indenture, all of the Authority’s rights under the Lease Agreement (excepting only the Authority’s rights under Sections 4.5, 5.10, 7.3 and 8.4 of the Lease Agreement and its rights to give consents and approvals under the Lease Agreement), including but not limited to: (a) the right to receive and collect all of the Lease Payments from the City under the Lease Agreement; (b) the right to receive and collect any proceeds of any insurance maintained thereunder with respect to the Leased Property, or any eminent domain award (or proceeds of sale under threat of eminent domain) paid with respect to the Leased Property; and (c) the right to exercise such rights and remedies conferred on the Authority under the Lease Agreement as may be necessary or convenient (i) to enforce payment of the Lease Payments and any amounts required to be deposited in the Insurance and Condemnation Fund established under Section 5.07 of the Indenture, or (ii) otherwise to protect the interests of the Bond Owners in the event of a default by the City under the Lease Agreement. The Trustee shall administer all of the rights assigned to it by the Authority under this Agreement in accordance with the provisions of the Indenture, for the benefit of the Owners of Bonds. The assignment made under this Section 2 is absolute and irrevocable, and without recourse to the Authority. SECTION 3. Acceptance. The Trustee hereby accepts the assignments made herein for the purpose of securing the payments due under the Lease Agreement and Indenture to, and the rights under the Lease Agreement and Indenture of, the Owners of the Bonds, all subject to the provisions of the Indenture. The recitals contained herein are -3- those of the Authority and not of the Trustee, and the Trustee assumes no responsibility for the correctness thereof. SECTION 4. Conditions. This Agreement confers no rights and imposes no duties upon the Trustee beyond those expressly provided in the Indenture. The assignment hereunder to the Trustee is solely in its capacity as Trustee under the Indenture, and the Trustee shall have the same rights, protections, immunities and indemnities hereunder as afforded to it under the Indenture. SECTION 5. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which is an original and all together constitute one and the same agreement. Separate counterparts of this Agreement may be separately executed by the Trustee and the Authority, both with the same force and effect as though the same counterpart had been executed by the Trustee and the Authority. SECTION 6. Binding Effect. This Agreement inures to the benefit of and binds the Authority and the Trustee, and their respective successors and assigns, subject, however, to the limitations contained herein. SECTION 7. Governing Law. This Agreement is governed by the Constitution and laws of the State of California. -4- IN WITNESS WHEREOF, the parties have executed this Agreement by their duly authorized officers as of the day and year first written above. SAN RAFAEL JOINT POWERS FINANCING AUTHORITY By Executive Director Attest: Secretary MUFG UNION BANK, N.A., as Trustee By Authorized Representative A-1 APPENDIX A DESCRIPTION OF THE LEASED PROPERTY The Leased Property consists of that certain real property situated in the City of San Rafael, County of Marin, which is more particularly described as follows: 41390-03 SM:SRF:REL 2/9/2018 PRELIMINARY OFFICIAL STATEMENT DATED ________, 2018 NEW ISSUE - FULL BOOK-ENTRY RATING: Standard & Poor’s: “___” See “RATING” herein. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to ce rtain qualifications described herein, under existing law, the interest on the 2018 Bonds is excluded from gross income for federal income tax purposes, and such interest is not an item of tax preference for purposes of the federal alternative minimum tax , although, in the case of tax years beginning prior to January 1, 2018, for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest earned by a corporation prior to the end of its tax year in 2018 is taken into account in determining certain income and earnings. In the further opinion of Bond Counsel, interest on the 2018 Bonds is exempt from California personal income taxes. See “TAX MATTERS.” $___________* SAN RAFAEL JOINT POWERS FINANCING AUTHORITY Lease Revenue Bonds, Series 2018 (Public Safety Facilities Project) (Green Bonds) Dated: Date of Delivery Due: June 1, as shown on inside cover Authority for Issuance. The bonds captioned above (the “2018 Bonds”) are being issued by the San Rafael Joint Powers Financing Authority (the “Authority”) under a resolution adopted by the Board of Directors of the Authority on _______, 2018, and an Indenture of Trust dated as of March 1, 2018 (the “Indenture”) by and between the Authority and MUFG Union Bank, N.A. as trustee (the “Trustee”). See “THE 2018 BONDS – Authority for Issuance.” Purpose. The 2018 Bonds are being issued primarily to finance the acquisition and construction of certain public safety improvements consisting generally of a new public safety center and two replacement fire stations (collectively, the “Project”). In addition, the proceeds of the 2018 Bonds will be used to (a) fund capitalized interest on the 2018 Bonds through September 2020, and (b) pay the costs of issuing the 2018 Bonds. See “FINANCING PLAN.” Security. Under the Indenture, the 2018 Bonds are payable from and secured by a first pledge of and lien on “Revenues” (as defined in this Official Statement) received by the Authority under the Lease Agreement, dated as of March 1, 2018, by and between the Authority, as lessor, and the City, as lessee (the “Lease”), consisting primarily of lease payments (the “Lease Payments”) made by the City under the Lease with respect to the lease of certain real property, as further described in this Official Statement. The 2018 Bonds are also secured by certain funds on deposit under the Indenture. Neither the Authority nor the City is establishing a reserve fund for the 2018 Bonds. See “SECURITY FOR THE 2018 BONDS.” Book-Entry Only. The 2018 Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”). The 2018 Bonds are issuable as fully registered securities in denominations of $5,000 or any integral multiple of $5,000. Purchasers of the 2018 Bonds (the “Beneficial Owners”) will not receive physical certificates representing their interest in the 2018 Bonds. See “THE 2018 BONDS” and “APPENDIX F - DTC AND THE BOOK-ENTRY ONLY SYSTEM.” Payments. Interest on the 2018 Bonds accrues from the date of delivery and is payable semiannually on June 1 and December 1 of each year, commencing June 1, 2018. Payments of principal and interest on the 2018 Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants, which will remit such payments to the Beneficial Owners of the 2018 Bonds. See “THE 2018 BONDS - General Provisions.” Redemption. The 2018 Bonds are subject to optional redemption, mandatory sinking fund payment redemption and special mandatory redemption from insurance or condemnation proceeds prior to maturity. See “THE 2018 BONDS – Redemption.” NEITHER THE 2018 BONDS, NOR THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL OF OR INTEREST THEREON, NOR THE OBLIGATION OF THE CITY TO MAKE THE LEASE PAYMENTS, CONSTITUTE A DEBT OR A LIABILITY OF THE AUTHORITY, THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL LIMITATION ON INDEBTEDNESS, OR A PLEDGE OF THE FULL FAITH AND CREDIT OF THE CITY. THE 2018 BONDS ARE SECURED SOLELY BY THE PLEDGE OF REVENUES AND CERTAIN FUNDS HELD UNDER THE INDENTURE. THE 2018 BONDS ARE NOT SECURED BY A PLEDGE OF THE TAXING POWER OF THE CITY. MATURITY SCHEDULE (see inside cover) Cover Page. This cover page contains certain information for general reference only. It is not a summary of all the provisions of the 2018 Bonds. Prospective investors must read the entire Official Statement to obtain information essential to making an informed investment decision. The 2018 Bonds are offered when, as and if issued and received by the Underwriter and 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 for the Authority and the City by Jones Hall, A Professional Law Corporation, as Disclosure Counsel. Quint & Thimmig LLP, Larkspur, California, is acting as Underwriter’s counsel. Certain legal matters will be passed upon for the City and the Authority by the City Attorney. It is anticipated that the 2018 Bonds will be delivered in book-entry form through the facilities of DTC on or about __________, 2018. The date of this Official Statement is: _________, 2018 * Preliminary; subject to change. This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances will this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy nor will there be any sale of these securities in any jurisdiction in which such offer solicitation or sale would be unlawful. SAN RAFAEL JOINT POWERS FINANCING AUTHORITY Lease Revenue Bonds, Series 2018 (Public Safety Facilities Project) MATURITY SCHEDULE* (Base CUSIP:† _______) $__________ Serial Bonds Maturity Date Principal Interest (June 1) Amount Rate Yield Price CUSIP† $__________ ___% Term Bond Due June 1, ____, Yield ___%, Price: ____, CUSIP: ________ * Preliminary; subject to change. † CUSIP Copyright 2017, CUSIP Global Services, and a registered trademark of American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, which is managed on behalf of American Bankers Association by S&P Capital IQ. Neither t he City nor the Underwriter takes any responsibility for the accuracy of the CUSIP data. SAN RAFAEL JOINT POWERS FINANCING AUTHORITY CITY OF SAN RAFAEL (MARIN COUNTY, CALIFORNIA) CITY COUNCIL Gary Phillips, Mayor John Gamblin, Vice Mayor Maribeth Bushey, Council Member Kate Colin, Council Member Andrew Cuyugan McCullough, Council Member CITY OFFICIALS AND STAFF Jim Schutz, City Manager Mark Moses, Finance Director Lindsay Lara, Interim City Clerk PROFESSIONAL SERVICES BOND AND DISCLOSURE COUNSEL Jones Hall, A Professional Law Corporation San Francisco, California MUNICIPAL ADVISOR PFM Financial Advisors LLC San Francisco, California Trustee MUFG Union Bank, N.A. San Francisco, California GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT Use of Official Statement. This Official Statement is submitted in connection with the sale of the 2018 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. Thi s Official Statement is not a contract between any bond owner and the Authority, the City or the Underwriter. No Offering Except by This Official Statement. No dealer, broker, salesperson or other person has been authorized by the Authority or the Underwriter to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such other information or representation must not be relied upon as having been authorized by the Authority, the City or the Underwriter. No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sale of the 2018 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Information in Official Statement. The information set forth in this Official Statement has been furnished by the Authority, the City and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness. Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the City or the Authority in any press release and in any oral statement made with the approval of an authorized officer of the City or the Authority or any other entity described or referenced herein, the words or phrases “will likely result,” “are expected to”, “will continue”, “is anticipated”, “estimate”, “project”, “forecast”, “expect”, “intend” and similar expressions identify “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. The information and expressions of opinion herein 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, the Authority or any other entity described or referenced herein since the date hereof. Involvement of Underwriter. The following statement has been included in this Official Statement on behalf of the Underwriter of the 2018 Bonds: 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. Stabilization of and Changes to Offering Prices. The Underwriter may overallot or take other steps that stabilize or maintain the market prices of the 2018 Bonds at levels above that which might otherwise prevail in the open market. If commenced, the Underwriter may discontinue such market stabilization at any time. The Underwriter may offer and sell the 2018 Bonds to certain securities dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and those public offering prices may be changed from time to time by the Underwriter. Document Summaries. All summaries of the Indenture, the Lease or other documents referred to in this Official Statement are made subject to the provisions of such documents and qualified in their entirety to reference to such documents, and do not purport to be complete statements of any or all of such provisions. No Securities Laws Registration. The 2018 Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon exceptions therein for the issuance and sale of municipal securities. The 2018 Bonds have not been registered or qualified under the securities laws of any state. Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the 2018 Bonds will, under any circumstances, give rise to any implication that there has been no change in the affairs of the City, the Authority, the other parties described in this Official Statement, or the condition of the property within the City since the date of this Official Statement. Website. The City maintains a website. However, the information presented on the website is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the 2018 Bonds. -i- TABLE OF CONTENTS INTRODUCTION ................................................ 1 FINANCING PLAN ............................................. 4 The Project ..................................................... 4 Estimated Sources and Uses of Funds .......... 5 Issuance as Green Bonds .............................. 7 Future Capital Projects ................................... 7 THE LEASED PROPERTY ................................ 8 Description and Location ................................ 8 Modification of Leased Property ..................... 8 Release of Leased Property ........................... 9 THE 2018 BONDS ........................................... 10 Authority for Issuance .................................. 10 General Provisions ....................................... 10 Redemption .................................................. 11 Book-Entry Only System .............................. 13 Transfer, Registration and Exchange .......... 13 DEBT SERVICE SCHEDULE .......................... 15 SECURITY FOR THE 2018 BONDS ............... 16 Revenues; Pledge of Revenues ................... 16 Allocation of Revenues by Trustee; Application of Funds................................. 17 Lease Payments; Covenant to Appropriate . 17 Limited Obligation......................................... 18 Abatement .................................................... 18 No Reserve Fund ......................................... 19 Property Insurance ....................................... 19 CITY FINANCIAL INFORMATION ................... 21 General ......................................................... 21 CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS ..................................... 45 Article XIIIA of the State Constitution ........... 45 Article XIIIB of the State Constitution ........... 46 Articles XIIIC and XIIID of the State Constitution .............................................. 46 Proposition 1A; Proposition 22 .................... 48 Possible Future Initiatives ............................ 48 BOND OWNERS’ RISKS ................................. 50 No Pledge of Taxes ..................................... 50 Limitations on Taxes and Fees .................... 50 Additional Obligations of the City ................. 50 Default .......................................................... 51 Abatement .................................................... 51 No Debt Service Reserve Fund ................... 52 Property Taxes ............................................. 52 Limitations on Remedies Available to Bond Owners ..................................................... 53 Loss of Tax-Exemption ................................ 54 Secondary Market for Bonds ....................... 55 TAX MATTERS ................................................ 58 CERTAIN LEGAL MATTERS .......................... 60 LITIGATION ..................................................... 60 RATING ........................................................... 61 CONTINUING DISCLOSURE .......................... 61 MUNICIPAL ADVISOR .................................... 62 UNDERWRITING ............................................. 62 PROFESSIONAL SERVICES .......................... 62 EXECUTION .................................................... 63 APPENDIX A - GENERAL INFORMATION ABOUT THE CITY OF SAN RAFAEL AND MARIN COUNTY APPENDIX B - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS APPENDIX C - FISCAL YEAR 2016-17 COMPREHENSIVE ANNUAL FINANCIAL REPORT APPENDIX D - PROPOSED FORM OF OPINION OF BOND COUNSEL APPENDIX E - FORM OF CONTINUING DISCLOSURE CERTIFICATE APPENDIX F - DTC AND THE BOOK-ENTRY ONLY SYSTEM APPENDIX G FORM OF GREEN BOND PROJECT REPORT -1- __________________________________ OFFICIAL STATEMENT __________________________________ $___________* SAN RAFAEL JOINT POWERS FINANCING AUTHORITY Lease Revenue Bonds, Series 2018 (Public Safety Facilities Project) (Green Bonds) The purpose of this Official Statement, which includes the cover page, inside cover page and attached appendices, is to set forth certain information concerning the sale and delivery of the bonds captioned above (the “2018 Bonds”) by the San Rafael Joint Powers Financing Authority (the “Authority”). All capitalized terms used in this Official Statement, unless noted otherwise, have the meanings set forth in the Indenture (as defined below). INTRODUCTION This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the 2018 Bonds to potential investors is made only by means of the entire Official Statement. Authority for Issuance. The Authority is issuing the 2018 Bonds under the following: (a) Article 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code, as amended, commencing with Section 6584 (the “Law”), (b) resolutions adopted by the Board of Directors (the “Board”) of the Authority on _______, 2018 (the “Authority Resolution”), and by the City Council (the “City Council”) of the City of San Rafael (the “City”) on _______, 2018 (the “City Resolution”), and (c) an Indenture of Trust (the “Indenture”) dated as of March 1, 2018, by and between the Authority and MUFG Union Bank, N.A., as trustee (the “Trustee”). The Authority. The Authority is a joint powers authority between the City and the California Municipal Finance Authority pursuant to an Amended and Restated Joint Exercise of Powers Agreement dated as of March 15, 2013, entered into under Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the California Government Code, as amended, for the purpose, among others, of having the Authority provide financing and refinancing for certain projects of the City by entering into, among other arrangements, lease/leasebacks with the City. * Preliminary; subject to change. -2- The City. The City is located 17 miles north of San Francisco in Marin County (the “County”) and is the County seat. The City was incorporated in 1874 and became a charter city in 1913. The City currently has a land area of approximately 17 square miles and an estimated January 1, 2017 population of approximately 60,842. The City’s budgeted General Fund expenditures for fiscal year 2017-18 are $72,885,270. For demographic and financial information regarding the City and County, see “APPENDIX A – GENERAL INFORMATION ABOUT THE CITY OF SAN RAFAEL AND MARIN COUNTY,” and “APPENDIX C – FISCAL YEAR 2016-17 COMPREHENSIVE ANNUAL FINANCIAL REPORT.” Purpose of the 2018 Bonds. The 2018 Bonds are being issued to finance the acquisition and construction of certain public safety improvements consisting generally of a new public safety center and two replacement fire stations (collectively, the “Project”), to fund capitalized interest on the 2018 Bonds through September 2020, and to pay the costs of issuing the 2018 Bonds. See “FINANCING PLAN.” Security for the 2018 Bonds and Pledge of Revenues. Under the Indenture, the 2018 Bonds are payable from and secured by a first pledge of and lien on “Revenues” (as defined in this Official Statement) received by the Authority under the Lease Agreement dated as of March 1, 2018, between the Authority, as lessor, and the City, as lessee (the “Lease”), consisting primarily of lease payments (the “Lease Payments”) made by the City under the Lease. The 2018 Bonds are also secured by certain funds on deposit under the Indenture, but no reserve fund will be established for the 2018 Bonds. See “SECURITY FOR THE 2018 BONDS.” The City and the Authority will enter into a Site Lease dated as of March 1, 2018 (the “Site Lease”). Under the Site Lease, the City will lease certain real property to the Authority, consisting of the site for the City’s proposed Public Safety Center and, when completed, the improvements thereon (as described herein, the “Leased Property”). Concurrently, the City and the Authority will enter into the Lease, under which the Authority will lease the Leased Property back to the City for the purpose of financing the Project. See “THE LEASED PROPERTY.” Form of Bonds; Book-Entry Only. The 2018 Bonds will be issued in fully registered form, registered in the name of The Depository Trust Company, New York, New York (“DTC”), or its nominee, which will act as securities depository for the 2018 Bonds. Purchasers of the 2018 Bonds will not receive certificates representing the 2018 Bonds that are purchased. See “THE 2018 BONDS - Book-Entry Only System” and “APPENDIX F – DTC AND THE BOOK-ENTRY ONLY SYSTEM.” Redemption. The 2018 Bonds are subject to optional redemption, mandatory redemption from sinking fund payments, and special mandatory redemption from the proceeds of insurance or condemnation proceeds prior to their stated maturity dates. See “THE 2018 BONDS – Redemption.” Abatement. The Lease Payments are subject to complete or partial abatement in the event and to the extent that there is substantial interference with the City’s use and possession of the Leased Property or any portion thereof. If the Lease Payments are abated under the Lease, the Bond Owners would receive less than the full amount of principal of and interest on the 2018 Bonds. To the extent proceeds of rental interruption insurance are available (as described below), Lease Payments (or a portion thereof) may be made from those proceeds during periods of -3- abatement. See “SECURITY FOR THE 2018 BONDS – Abatement” and “BOND OWNERS’ RISKS.” Legal Opinion. Upon delivery of the 2018 Bonds, Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel (“Bond Counsel”) will release its final approving legal opinion with respect to the 2018 Bonds, regarding the validity and tax-exempt status of the 2018 Bonds, in the form attached hereto as APPENDIX D. Risks of Investment. Debt service on the 2018 Bonds is payable only from Lease Payments and other amounts payable by the City to the Authority under the Lease. For a discussion of some of the risks associated with the purchase of the 2018 Bonds, see “BOND OWNERS’ RISKS.” NEITHER THE 2018 BONDS, THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL OF OR INTEREST THEREON, NOR THE OBLIGATION OF THE CITY TO MAKE THE LEASE PAYMENTS, CONSTITUTE A DEBT OR A LIABILITY OF THE AUTHORITY, THE CITY, THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL LIMITATION ON INDEBTEDNESS, OR A PLEDGE OF THE FULL FAITH AND CREDIT OF THE CITY. THE 2018 BONDS ARE SECURED SOLELY BY THE PLEDGE OF REVENUES AND CERTAIN FUNDS HELD UNDER THE INDENTURE. THE 2018 BONDS ARE NOT SECURED BY A PLEDGE OF THE TAXING POWER OF THE CITY. THE AUTHORITY HAS NO TAXING POWER. -4- FINANCING PLAN The 2018 Bonds are being issued to provide funds to finance the Project and pay the costs of issuing the 2018 Bonds. The Project The Project anticipated to be financed with proceeds of the 2018 Bonds includes certain public capital improvements of the City, consisting generally of a new public safety center and two replacement fire stations. Replacement Fire Stations. In April 2017, the City entered into a construction contract for $19,940,000 for the major construction and renovation of two fire stations, Fire Station 57 and Fire Station 52. The contract amount was reduced shortly thereafter to its current sum of $19,098,834. These two projects are further described below. Replacement of Fire Station 57, located at 3530 Civic Center Drive. The new 9,855-square foot, two-story fire station will remain located at 3530 Civic Center Drive in the City, and will house five on-duty fire fighters/paramedics. The new station is designed to accommodate six on-duty personnel should additional staffing be required to better serve the community. The core elements of the new station will include three drive-through apparatus bays, apparatus support spaces, public lobby, accessible restroom, office, kitchen, dining, dayroom, laundry room, private sleeping quarters, unisex restrooms, mechanical, electrical, communications rooms and staff parking. Other notable site or adjacent improvements will include access aprons and sidewalk replacement along Civic Center Drive, modification of median(s) in front of the station on Civic Center Drive to align with the new apparatus bay location, and striping of a “keep clear” zone in front of the apparatus bay apron on Civic Center Drive. Construction has commenced, and the City expects to complete this new station in or about January 2019. Replacement of Fire Station 52, located 210 3rd Street. The new 10,973 square foot, two-story fire station will remain located at 210 Third Street in the City, and will house five on-duty fire fighters in a 24-hour shift. The new station is designed to accommodate six on-duty personnel should additional staffing be required to better serve the community. The core elements of the new station will include three drive-through apparatus bays, apparatus support spaces, public lobby, accessible restroom, office, kitchen, dining, dayroom, laundry room, private sleeping quarters, unisex restrooms, mechanical, electrical, communications rooms and staff parking. Other notable site/adjacent improvements will include a second new structure that will be a four-story training tower. The new 3,322 square foot, 46’ high, pre-engineered building will be located at the south/east corner of the site and will provide a variety of training scenario opportunities, not only for the City’s Fire Department, but also for other neighboring fire departments. Finally, a third new building on the site will be a 1,297-square foot, 24-person, training classroom. The facility will serve as a training academy by day and will be utilized in the evening for certification training/meetings, CPR classes, and other fire prevention functions. -5- Construction has commenced, and the City expects to complete this new station in or about August 2018. Construction of Public Safety Center – 5th Avenue between C Street and D Street. The proposed project is a new, 43,500-square-foot facility, with three levels including a 17,000- square-foot basement to remain at 1375 5th Avenue, San Rafael, California. The facility will house four fire fighters and the Battalion Chief. It will provide fire department administrative division which includes the office of the Fire Chief, the fire prevention bureau and administrative staff. It will also provide services for the administration and the Office of the Chief, patrol operations, investigations, dispatch, evidence and property and professional standards. The core elements of the new facility include conference rooms, an emergency operations center /training room, break rooms, sleeping rooms, fitness room, lobby and public restrooms, men's and women's staff toilets, and all infrastructure support areas including computer rooms, electrical rooms, etc. The basement and subterranean garage will be for on-site parking for marked patrol vehicles and specialty Police Department (PD) units, the PD holding facility, evidence storage and processing functions and storage areas for the motorcycle and bicycle patrol units. The first level, which includes the main lobby, shared conference and support facilities and the apparatus bay, will be situated midway between the basement level and the first level. Lastly, the second level contains PD locker rooms, dispatch and other PD support areas to the north of the lob by. To the south of the lobby are the living quarters for Fire Station 51 Engine Company and the emergency operations center. This community asset will provide a productive and safe work environment for its employees while being open and available to the public to conduct Police and Fire Department business. The estimated construction cost of the new public safety center is approximately $47.6 million, and the estimated land value of the underlying site is approximately $_____ million. There is no deed of trust or mortgage securing the Bonds. See “BOND OWNERS’ RISKS - Limitations on Remedies Available to Bond Owners.” The notice to proceed for this project was issued in February 2018, and the City expects to take occupancy of the new facility in or about March 2020. Green Project Features. The new public safety center and the two new fire stations are each certified as LEED gold projects. Building elements for each project include natural daylighting and ventilation; robust building envelopes with insulated, low-e glazing; highly efficient mechanical systems with controls to moderate energy use; solar power to reduce electrical demand from the grid; exterior material color selection to reduce heat gain; high recycled content of building materials; and masonry, concrete and steel construction for building longevity. Site elements for each project include storage and filtration of rain water to reduce run-off; and native vegetation with drip irrigation or non-potable irrigation water where available. -6- [INSERT PROJECT PHOTOS] -7- Estimated Sources and Uses of Funds The estimated sources and uses of funds relating to the 2018 Bonds are as follows: Sources of Funds: Principal Amount of 2018 Bonds $ Plus: Net Original Issue Premium TOTAL SOURCES $ Uses of Funds: Deposit to Costs of Issuance Fund (1) $ Underwriter’s Discount Deposit to Interest Account (2) Deposit to Project Fund TOTAL USES $ (1) Represents funds to be used to pay Costs of Issuance, which include legal fees, printing costs, rating agency fees and other costs of issuing the 2018 Bonds. (2) Represents capitalized interest through September 2020. Issuance as Green Bonds The City is issuing the Bonds as ''Green Bonds" due to the intended use of the proceeds. The designation of the Bonds as Green Bonds is intended to allow investors the opportunity to invest directly in bonds that finance environmentally beneficial projects. The term ''Green Bonds" is not defined in the Indenture, and its use in this Official Statement is for identification purposes only and is not intended to provide or imply that the holders of the Bonds are entitled to any additional terms or security in addition to those provided in the Indenture. Use of the proceeds of the Bonds will be tracked by the City. The City will post updates regarding the use of proceeds of the Bonds with the Municipal Securities Rulemaking Board's Electronic Municipal Market Access (EMMA) system, currently located at www.emma.msrb.org (which website is not incorporated into this Official Statement by reference), annually, and will post a final list of projects funded once all proceeds of the Bonds have been spent. A form of this report is attached as APPENDIX G. The City currently expects the final component of the Project to be completed by the end of 2019. Once all proceeds of the Bonds have been spent, no further updates regarding the projects will be provided or filed. Future Capital Projects The City has adopted a strategic plan to fund certain proposed capital projects from proceeds of the 0.75% Measure E Transactions and Use Tax, including the Project. After completion of the Project, approximately $8.5 million in capital projects in the strategic plan will remain uncompleted (the “Future Projects”). The Future Projects may be funded from Measure E Tax revenues or other General Fund monies on a pay-go basis; from proceeds of the 2018 Bonds (if Project cost savings are achieved and 2018 Bond proceeds are available for such purpose); from proceeds of future indebtedness; or from some combination thereof. The City has not made any binding determinations as to the funding sources for the Future Projects. -8- THE LEASED PROPERTY Description and Location Lease Payments will be made by the City under the Lease for the use and occupancy of the Leased Property, which consists of the proposed public safety center described above under the heading “FINANCING PLAN - The Project.” Modification of Leased Property Under the Lease, the City has the right, at its own expense, to make additions, modifications and improvements to the Leased Property or any portion thereof. All additions, modifications and improvements to the Leased Property will thereafter comprise part of the Leased Property and become subject to the provisions of the Lease. Such additions, modifications and improvements may not in any way damage the Leased Property, or cause the Leased Property to be used for purposes other than those authorized under the provisions of state and federal law; and the Leased Property, upon completion of any additions, modifications and improvements made thereto under this provision of the Lease, must be of a value which is not substantially less than the value thereof immediately prior to the making of such additions, modifications and improvements. The City will not permit any mechanic’s or other lien to be established or remain against the Leased Property for labor or materials furnished in connection with any remodeling, additions, modifications, improvements, repairs, renewals or replacements made by the City under this provision of the Lease; except that if any such lien is established and the City first notifies or causes to be notified the Authority of the City’s intention to do so, the City may in good faith contest any lien filed or established against the Leased Property, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and will provide the Authority with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Authority. The Authority will cooperate fully in any such contest, upon the request and at the expense of the City. Substitution Under the Lease, the City has the option at any time and from time to time, to substitute other real property (the “Substitute Property”) for the Leased Property or any portion thereof (the “Former Property”), upon satisfaction of all of the requirements set forth in the Lease, which includes (among others) the following: • The City has filed with the Authority and the Trustee, and caused to be recorded in the office of the County Recorder, sufficient memorialization of an amendment of the Lease, the Site Lease and the Assignment Agreement that adds the legal description of the Substitute Property and deletes therefrom the legal description of the Former Property, and has filed and caused to be recorded corresponding amendments to the Site Lease and Assignment Agreement. • The City has obtained a CLTA policy of title insurance insuring the City’s leasehold estate under the Lease in the Substitute Property, subject only to Permitted -9- Encumbrances (as defined in the Lease), in an amount at least equal to the estimated value thereof. • The City has certified in writing to the Authority and the Trustee that the Substitute Property serves the municipal purposes of the City and constitutes property which the City is permitted to lease under the laws of the State of California, and has been determined to be essential to the proper, efficient and economic operation of the City and to serve an essential governmental function of the City. • The City has filed with the Authority and the Trustee a written certificate of the City or other written evidence stating that the useful life of the Substitute Property at least extends to the final maturity date of the 2018 Bonds, that the estimated value of the Leased Property, after substitution of the Substitute Property and release of the Former Property, is at least equal to the aggregate Outstanding principal amount of the 2018 Bonds, and the fair rental value of the Leased Property, after substitution of the Substitute Property and release of the Former Property, is at least equal to the Lease Payments thereafter coming due and payable under the Lease. See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” Upon the satisfaction of all such conditions precedent, the Term of the Lease will thereupon end as to the Former Property and commence as to the Substitute Property, and all references to the Former Property will apply with full force and effect to the Substitute Property. The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of any substitution of property under this provision of the Lease. Release of Leased Property Under the Lease, the City has the option at any time and from time to time to release any portion of the Leased Property from the Lease (the “Released Property”) provided that the City has satisfied all of the requirements under the Lease that are conditions precedent to such release, which include (among others) the following: • The City has filed with the Authority and the Trustee, and caused to be recorded in the office of the County Recorder sufficient memorialization of an amendment of the Lease, the Site Lease and the Assignment Agreement which removes the Released Property from the Lease, the Site Lease and the Assignment Agreement. • The City has certified in writing to the Authority and the Trustee that the value of the property which remains subject to the Lease following such release is at least equal to the aggregate Outstanding principal amount of the 2018 Bonds, and the fair rental value of the property which remains subject to the Lease following such release is at least equal to the Lease Payments thereafter coming due and payable thereunder. See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” -10- THE 2018 BONDS This section provides summaries of the 2018 Bonds and certain provisions of the Indenture. See APPENDIX B for a more complete summary of the Indenture. Capitalized terms used but not defined in this section have the meanings given in APPENDIX B. Authority for Issuance The 2018 Bonds are being issued under the Law, the Authority Resolution (which was adopted by the Board of the Authority on _______, 2018), the City Resolution (which was adopted by the City Council on _______, 2018), and the Indenture. Under the Authority Resolution and the City Resolution, the 2018 Bonds may be issued in a principal amount not to exceed $__________. General Provisions Bond Terms. The 2018 Bonds will be dated their date of delivery and issued in fully registered form without coupons in integral multiples of $5,000, so long as no Bond has more than one maturity date. Interest on the 2018 Bonds will be payable on June 1 and December 1 in each year, commencing June 1, 2018 (each an “Interest Payment Date”). The 2018 Bonds will mature in the amounts and on the dates, and bear interest at the annual rates, set forth on the inside cover page of this Official Statement. Calculation of Interest. Interest on the 2018 Bonds is payable from the Interest Payment Date next preceding the date of authentication thereof unless: (a) a 2018 Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it will bear interest from such Interest Payment Date, (b) a 2018 Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the Closing Date, or (c) interest on any 2018 Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Interest with respect to the 2018 Bonds will be computed on the basis of a 360-day year composed of 12 months of 30 days each. Record Date. Under the Indenture, “Record Date” means, with respect to any Interest Payment Date, the 15th calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day. Payments of Principal and Interest. Interest is payable on each Interest Payment Date to the persons in whose names the ownership of the 2018 Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided below. Interest on any 2018 Bond which is not punctually paid or duly provided for on any Interest Payment Date is payable to the person in whose name the ownership of such 2018 Bond is -11- registered on the Registration Books at the close of business on a special record date for the payment of such defaulted interest to be fixed by the Trustee, notice of which is given to such Owner by first-class mail not less than 10 days prior to such special record date. The Trustee will pay interest on the 2018 Bonds by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the 2018 Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. At the written request of the Owner of 2018 Bonds in an aggregate principal amount of at least $1,000,000, which written request is on file with the Trustee as of any Record Date, the Trustee will pay interest on such 2018 Bonds on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account of a financial institution within the United States of America as specified in such written request, which will remain in effect until rescinded in writing by the Owner. The Trustee will pay principal of the 2018 Bonds in lawful money of the United States of America by check of the Trustee upon presentation and surrender thereof at the Office of the Trustee. While the 2018 Bonds are subject to the book-entry system, the principal, interest and any redemption premium with respect to the 2018 Bonds will be paid by the Trustee to DTC for subsequent disbursement to beneficial owners of the 2018 Bonds. See “– Book-Entry Only System” below. Redemption* Optional Redemption. The 2018 Bonds maturing on or before June 1, 20___ are not subject to optional redemption prior to their stated maturity. The 2018 Bonds maturing on or after June 1, 20___ are subject to redemption, as a whole or in part at the election of the Authority among maturities on such basis as designated by the Authority and by lot within a maturity, at the option of the Authority, on June 1, 20___ and on any date thereafter, at a redemption price equal to 100% of the principal amount of 2018 Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. Special Mandatory Redemption From Insurance or Condemnation Proceeds. The 2018 Bonds are subject to redemption as a whole, or in part on a pro rata basis among maturities, on any date, from any Net Proceeds required to be used for such purpose as provided in the Indenture, at a redemption price equal to 100% of the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium. Mandatory Sinking Fund Redemption. The 2018 Bonds maturing on June 1, 20__ (the “20__ Term Bonds”), are subject to mandatory sinking payment redemption in part on June 1, 20__, and on each June 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows. * Preliminary; subject to change. -12- Mandatory Sinking Fund Redemption of Term Bonds Maturing June 1, 20__ Sinking Fund Redemption Date (June 1) Principal Amount To Be Redeemed Mandatory Sinking Fund Redemption of Term Bonds Maturing June 1, 20__ Sinking Fund Redemption Date (June 1) Principal Amount To Be Redeemed The amounts in the foregoing tables shall be reduced pro rata as a result of any prior partial option redemption or partial mandatory redemption from insurance or condemnation proceeds, as described above, as specified by the Authority to the Trustee. Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the 2018 Bonds of a single maturity, the Trustee will select the 2018 Bonds of that maturity to be redeemed from all 2018 Bonds of that maturity to be redeemed by lot in any manner which the Trustee in its sole discretion deems appropriate. For purposes of such selection, the Trustee shall treat each 2018 Bond as consisting of separate $5,000 portions and each such portion shall be subject to redemption as if such portion were a separate 2018 Bond. Notice of Redemption. The Trustee shall mail notice of redemption of the 2018 Bonds by first class mail, postage prepaid, not less than 30 nor more than 60 days before any redemption date, to the respective Owners of any 2018 Bonds designated for redemption at their addresses appearing on the Registration Books and to one or more Securities Depositories and shall file such notice electronically with the Municipal Securities Rulemaking Board. Neither the failure to receive any notice nor any defect therein will affect the sufficiency of the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date. Rescission of Redemption. Redemption notices may be conditional. The Authority has the right to rescind any notice of optional redemption of the 2018 Bonds by written notice to the Trustee on or prior to the date fixed for redemption. Any notice of redemption will be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the 2018 Bonds then called for redemption, and such cancellation will not constitute an Event of Default under the Indenture. -13- The Authority and the Trustee have no liability to the Bond Owners or any other party related to or arising from such rescission of redemption. The Trustee will mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under the Indenture. Effect of Redemption. If notice of redemption has been duly given as provided in the Indenture, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, including any applicable premium, the 2018 Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the 2018 Bonds (or portions thereof) so called for redemption will become due and payable, interest on the 2018 Bonds so called for redemption will cease to accrue, said 2018 Bonds (or portions thereof) will cease to be entitled to any benefit or security under the Indenture, and the Owners of said 2018 Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof. Book-Entry Only System The 2018 Bonds will be issued as fully registered bonds in book-entry only form, registered in the name of Cede & Co. as nominee of DTC, and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple of $5,000, under the book -entry system maintained by DTC. While the 2018 Bonds are subject to the book-entry system, the principal, interest and any redemption premium with respect to a 2018 Bond will be paid by the Trustee to DTC, which in turn is obligated to remit such payment to its DTC Participants for subsequent disbursement to Beneficial Owners of the 2018 Bonds. Purchasers of the 2018 Bonds will not receive certificates representing their interests therein, which will be held at DTC. See “APPENDIX F – DTC AND THE BOOK-ENTRY ONLY SYSTEM” for further information regarding DTC and the book-entry system. Transfer, Registration and Exchange The following provisions regarding the exchange and transfer of the 2018 Bonds apply only during any period in which the 2018 Bonds are not subject to DTC’s book-entry system. While the 2018 Bonds are subject to DTC’s book-entry system, their exchange and transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and requirements established by DTC. See “APPENDIX F – DTC AND THE BOOK-ENTRY ONLY SYSTEM.” Bond Register. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the 2018 Bonds, which shall upon reasonable notice as agreed to by the Trustee, be open to inspection during regular business hours by the Authority; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the 2018 Bonds as provided in the Indenture. Transfer of Bonds. Any 2018 Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by a duly authorized attorney of such person, upon surrender of such 2018 Bond to the Trustee at its Office for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee, duly executed. The Trustee will require the Owner requesting such transfer to pay -14- any tax or other governmental charge required to be paid with respect to such transfer. Whenever any 2018 Bond is or 2018 Bonds are surrendered for transfer, the Authority will execute and the Trustee will authenticate and deliver to the transferee a new 2018 Bond or 2018 Bonds of like series, interest rate, maturity and aggregate principal amount. The Authority will pay the cost of printing 2018 Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer of 2018 Bonds. Exchange of Bonds. The 2018 Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of 2018 Bonds of other authorized denominations and of the same series, interest rate and maturity. The Trustee will require the Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. The Authority will pay the cost of printing 2018 Bonds and any services rendered or expenses incurred by the Trustee in connection with any exchange of 2018 Bonds. Limitations on Transfer and Exchange. The Trustee may refuse to transfer or exchange, under these provisions of the Indenture, any 2018 Bonds selected by the Trustee for redemption under the Indenture, or any 2018 Bonds during the period established by the Trustee for the selection of 2018 Bonds for redemption. -15- DEBT SERVICE SCHEDULE The table below shows the semiannual and bond year debt service payments on the 2018 Bonds. Date Principal Interest Bond Year Debt Service June 1, 2018 $ $ December 1, 2018 $ June 1, 2019 December 1, 2019 June 1, 2020 December 1, 2020 June 1, 2021 December 1, 2021 June 1, 2022 December 1, 2022 June 1, 2023 December 1, 2023 June 1, 2024 December 1, 2024 June 1, 2025 December 1, 2025 June 1, 2026 December 1, 2026 June 1, 2027 December 1, 2027 June 1, 2028 December 1, 2028 June 1, 2029 December 1, 2029 June 1, 2030 December 1, 2030 June 1, 2031 December 1, 2031 June 1, 2032 December 1, 2032 June 1, 2033 September 1, 2033 June 1, 2034 Total: -16- SECURITY FOR THE 2018 BONDS The principal of and interest on the 2018 Bonds are not a debt of the Authority or the City, nor a legal or equitable pledge, charge, lien or encumbrance, upon any of their respective property, or upon any of their income, receipts, or revenues except the Revenues and other amounts pledged under the Indenture. This section provides summaries of the security for the 2018 Bonds and certain provisions of the Indenture, the Lease and the Site Lease. See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” for a more complete summary of the Indenture, the Lease and the Site Lease. Capitalized terms used but not defined in this section have the meanings given in APPENDIX B. Revenues; Pledge of Revenues Pledge of Revenues and Other Amounts. Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein, all of the Revenues and all amounts (including proceeds of the sale of the 2018 Bonds) held in any fund or account established under the Indenture are pledged to secure the payment of the principal of and interest and premium (if any) on the 2018 Bonds in accordance with their terms and the provisions of the Indenture. Said pledge constitutes a lien on and security interest in the Revenues and such amounts and will attach, be perfected and be valid and binding from and after the Closing Date, without the need for any physical delivery thereof or further act. Definition of Revenues. “Revenues” are defined in the Indenture as follows: (a) all amounts received by the Authority or the Trustee under or with respect to the Lease, including, without limiting the generality of the foregoing, all of the Lease Payments (including both timely and delinquent payments, any late charges, and whether paid from any source), but excluding (i) any amounts described in the provisions of the Lease relating to permitted amendments that provide for additional rental to be pledg ed or assigned for the payment of bonds issued to finance or refinance projects for which the City is authorized to expend its funds, and (ii) any Additional Rental Payments (consisting of certain administrative costs due to the Authority and the Trustee under the Lease), and (b) all interest, profits or other income derived from the investment of amounts in any fund or account established under the Indenture. Assignment to Trustee. Under the Assignment Agreement, the Authority has transferred to the Trustee all of the rights of the Authority in the Lease (other than the rights of the Authority under the provisions of the Lease regarding Additional Rental Payments, advances, release and indemnification covenants, and agreement to pay attorneys’ fees, and its rights to give approvals and consents thereunder). The Trustee is entitled to collect and receive all of the Revenues, and any Revenues collected or received by the Authority will be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and will forthwith be paid by the Authority to the Trustee. The Trustee is also entitled to and may, subject to the provisions of the Indenture regarding rights of the Trustee, take all steps, actions and proceedings which the Trustee determines to be -17- reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all of the obligations of the City under the Lease. Allocation of Revenues by Trustee; Application of Funds Deposit of Revenues in Bond Fund. All Revenues will be promptly deposited by the Trustee upon receipt thereof in a special fund designated as the “Bond Fund” which the Trustee will establish, maintain and hold in trust; except that all moneys received by the Trustee and required under the Indenture or under the Lease to be deposited in the Redemption Fund or the Insurance and Condemnation Fund will be promptly deposited in such funds. All Revenues deposited with the Trustee will be held, disbursed, allocated and applied by the Trustee only as provided in the Indenture. Any surplus remaining in the Bond Fund, after payment in full of the principal of and interest on the 2018 Bonds (or provision having been made therefor under the Indenture), and payment in full of any applicable fees and expenses owed to the Trustee, will be withdrawn by the Trustee and remitted to the City. Allocation of Revenues. On or before each Interest Payment Date, the Trustee will transfer from the Bond Fund and deposit into the following respective accounts (each of which the Trustee will establish and maintain within the Bond Fund), the following amounts in the following order of priority: (a) Deposit to Interest Account. The Trustee will deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to be at least equal to the amount of interest becoming due and payable on such Interest Payment Date on all 2018 Bonds then Outstanding. (b) Deposit to Principal Account. The Trustee will deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the 2018 Bonds coming due and payable on such Interest Payment Date, including principal of any Term Bonds payable as a result of mandatory sinking fund redemption, including the amount of the Term Bonds payable through mandatory sinking fund redemption on such Interest Payment Date. Lease Payments; Covenant to Appropriate Obligation to Pay. Under the Lease, subject to the provisions of Lease regarding abatement and prepayment, the City agrees to pay to the Authority, its successors and assigns, the Lease Payments in the respective amounts specified in the Lease, to be due and payable in immediately available funds on the Interest Payment Dates immediately following each of the respective Lease Payment Dates specified in the Lease, and to be deposited by the City with the Trustee on each of the Lease Payment Dates specified in the Lease. Each Lease Payment Date is one Business Day prior to the corresponding Interest Payment Date. Any amount held in the Bond Fund, the Interest Account and the Principal Account on any Lease Payment Date (other than amounts resulting from the prepayment of the Lease Payments in part but not in whole under the Lease, and amounts required for payment of past due principal or interest on any 2018 Bonds not presented for payment) will be credited towards the Lease Payment then required to be paid under the Lease. The City is not required to deposit any Lease Payment with the Trustee on any Lease Payment Date if the amounts then held in the Bond Fund, -18- the Interest Account and the Principal Account are at least equal to the Lease Payment then required to be deposited with the Trustee. The Lease Payments payable in any Rental Period are for the use of the Leased Property during that Rental Period. Fair Rental Value. The aggregate amount of the Lease Payments and Additional Rental Payments coming due and payable during each Rental Period constitute the total rental for the Leased Property for such Rental Period, and are payable by the City in each Rental Period for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of the Leased Property during each Rental Period. The City and the Authority have agreed and determined that the total Lease Payments do not exceed the fair rental value of the Leased Property. In making that determination, consideration has been given to the estimated value of the Leased Property, other obligations of the City and the Authority under this Lease, the uses and purposes which may be served by the Leased Property and the benefits therefrom which will accrue to the City and the general public. Source of Payments; Covenant to Budget and Appropriate. Under the Lease, the Lease Payments are payable from any source of available funds of the City, subject to the provisions of the Lease regarding abatement. See “ – Abatement” below. The City covenants in the Lease to take all actions required to include the Lease Payments in each of its budgets during the Term of the Lease and to make the necessary appropriations for all Lease Payments and Additional Rental Payments. This covenant of the City constitutes a duty imposed by law and each and every public official of the City is required to take all actions required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements agreed to be carried out and performed by the City under the Lease. Limited Obligation THE OBLIGATION OF THE CITY TO MAKE THE LEASE PAYMENTS DOES NOT CONSTITUTE A DEBT OF THE CITY, THE AUTHORITY OR THE STATE OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. Abatement Termination or Abatement Due to Eminent Domain. Under the Lease, if the Leased Property is taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the Term of the Lease thereupon ceases as of the day possession is taken. If less than all of the Leased Property is taken permanently, or if the Leased Property is taken temporarily, under the power of eminent domain, then: (a) the Lease will continue in full force and effect with respect thereto and does not terminate by virtue of such taking, and the parties waive the benefit of any law to the contrary; and -19- (b) the Lease Payments are subject to abatement in an amount determined by the City such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property. Abatement Due to Damage or Destruction. Under the Lease, the Lease Payments are subject to abatement during any period in which by reason of damage or destruction (other than by eminent domain as described above) there is substantial interference with the use and occupancy by the City of the Leased Property or any portion thereof. The Lease Payments are subject to abatement in an amount determined by the City such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property not damaged or destroyed. Such abatement will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, this Lease continues in full force and effect and the City waives any right to terminate this Lease by virtue of any such damage and destruction. No Reserve Fund No debt service reserve fund has been established with respect to the 2018 Bonds. See “BOND OWNERS’ RISKS – No Debt Service Reserve Fund.” Property Insurance Liability and Property Damage Insurance. Under the Lease, the City is required to maintain or cause to be maintained throughout the Term of the Lease, a standard commercial general liability insurance policy or policies in protection of the Authority, the City, and their respective members, officers, agents, employees and assigns. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Leased Property. Such policy or policies shall provide coverage in such liability limits and be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City, subject to the provisions of the Lease, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The proceeds of such liability insurance must be applied toward extinguishment or satisfaction of the liability with respect to which paid. Casualty Insurance. Under the Lease, the City is required to procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease, casualty insurance against loss or damage to all buildings situated on the Leased Property, in an amount at least equal to the lesser of (a) 100% of the replacement value of the insured buildings, or (b) 100% of the aggregate principal amount of the Outstanding 2018 Bonds. -20- Such insurance must, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance may, at the sole discretion of the City, include earthquake insurance if available at reasonable cost from reputable insurers in the judgment of the City. Such insurance may be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained by the City in the form of self-insurance. The Net Proceeds of such insurance must be applied as provided in the Lease and described below. Rental Interruption Insurance. Under the Lease, the City is required to procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any portion of the Leased Property constituting buildings or other improvements as a result of any of the hazards covered in the casualty insurance described above, in an amount at least equal to the maximum such Lease Payments coming due and payable during any consecutive two Fiscal Years. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained by the City in the form of self-insurance. The Net Proceeds of such insurance, if any, must be paid to the Trustee and deposited in the Bond Fund, to be applied as a credit towards the payment of the Lease Payments allocable to the insured improvements as the same become due and payable. Application of Net Proceeds. The Trustee, as assignee of the Authority under the Assignment Agreement, has the right to receive all Net Proceeds. As provided in the Indenture, the Trustee will deposit all Net Proceeds in the Insurance and Condemnation Fund to be applied to the redemption of 2018 Bonds as set forth in the Indenture. -21- CITY FINANCIAL INFORMATION General The City is located 17 miles north of San Francisco in the County. The City is the County seat and largest city within the County. The City currently has a land area of 22 square miles which includes 17 square miles of land and five of water and tidelands, and a population estimated at 60,842 as of January 1, 2017. Cultural, park and recreational resources are available within the City, and nearby attractions include Muir Woods, five State parks, the San Francisco area, Oakland and the wine country. The City provides municipal services required by statute or charter, namely: Fire, Police, Community Development (encompassing Building, Planning and Code Enforcement), Public Works, Community Services (both Recreational and Child Care Programs), Redevelopment, Library and General Administrative Services. For certain general and demographic information regarding the City, see “APPENDIX B - City of San Rafael General Information.” 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. 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 C. The City actively maintains a number of policies that support ongoing financial decision- making. At the City Council level, policies are maintained for General Fund Reserves, Investments, Debt (covering capital project financing and debt issuance considerations), Pension Funding, and Other Post-Employment Benefit (OPEB) Funding. See - “CITY FINANCIAL INFORMATION - General Fund Reserves” and “- Investment of City Funds - Investment Policy.” The City Manager and Finance Director report to the City Council annually on the status of Pension and OPEB funding as well as on the condition of City reserves. See - “CITY FINANCIAL INFORMATION - Retirement System - Funding Policy” and “- Other Post-Employment Benefits (“OPEB”) - Funding Policy.” 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 2016-17 was prepared by Maze & Associates Accountancy Corporation, Pleasant Hill, California. -22- The City’s financial statements comply with Governmental Accounting Standards Board (“GASB”) Statement No. 34. See “APPENDIX C – Audited Annual Statements of the City for the Fiscal Year Ended June 30, 2017 – Audited Financial Statement – Note 1” for a description of the significant accounting policies of the City. See “FINANCIAL STATEMENTS OF THE CITY” below. -23- 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 2013-14 through 2016-17. Table 1 CITY OF SAN RAFAEL General Fund - Audited Revenues, Expenditures and Fund Balances For Fiscal Years 2013-14 through 2016-17 Audited Fiscal Year 2013-14 Audited Fiscal Year 2014-15 Audited Fiscal Year 2015-16 Audited Fiscal Year 2016-17 Revenues: Taxes and special assessments $51,510,233 $56,541,604 $60,217,831 $64,242,440 Licenses and permits 1,934,755 2,456,820 2,588,411 2,559,841 Fines and forfeitures 669,553 505,029 435,829 400,283 Use of money and property 265,034 290,103 221,832 229,791 Intergovernmental 6,703,119 7,846,436 8,078,040 2,767,092 Charges for services 2,124,933 2,660,869 2,772,446 2,459,680 Other revenues 1,075,311 446,272 441,761 706,657 Total Revenues 64,282,938 70,747,133 74,756,150 73,365,784 Expenditures: Current operating: General government 8,546,690 9,530,931 10,501,341 10,190,580 Public safety 35,138,757 36,564,699 39,230,483 40,844,246 Public works and parks 9,793,235 10,392,192 10,468,421 11,201,655 Community development/redevelopment 3,296,375 3,416,859 3,670,108 3,659,564 Cultural and recreation 2,545,446 2,801,488 2,963,125 3,077,435 Capital Outlay 42,016 -- -- -- Capital improvement/special projects 17,288 30,676 12,389 -- Debt service: principal 39,642 75,172 75,172 175,172 Interest and fiscal charges 279,605 284,288 277,263 271,263 Total Expenditures 59,699,054 63,096,305 67,198,302 69,519,915 Excess (deficiency) of revenues over expenditures 4,583,884 7,650,828 7,557,848 3,845,869 Other financing sources (uses): Proceeds from PG&E Loans 568,481 -- -- -- Operating transfers in 1,225,080 1,039,150 1,110,809 1,382,303 Operating transfers out (2,498,336) (1,697,664) (2,491,249) (1,796,089) Capital transfers out Total other financing sources (uses) (1) - - (704,775) (2) - - (658,514) (1,849,406) (3,229,846) (5,417,454) (5,831,240) Net change in Fund Balance 3,879,109 6,992,314 4,382,002 (1,985,371) Fund balance, July 1 3,490,378 7,369,487 14,361,801 18,689,803 Fund balance, June 30 $7,369,487 $14,361,801 $18,689,803 $16,704,432 Source: City of San Rafael; Comprehensive Annual Financial Reports. -24- Table 2 CITY OF SAN RAFAEL General Fund Balance Sheet As of June 30 for Fiscal Years 2013-14 through 2016-17 Fiscal Year 2013-14 Fiscal Year 2014-15 Fiscal Year 2015-16 Fiscal Year 2016-17 ASSETS: Cash and investments for operations $4,422,768 $11,912,244 $11,761,730 $13,434,032 Restricted cash and investments -- -- -- -- Receivables: Accounts 2,014,927 1,212,870 1,280,029 1,257,061 Taxes 5,756,649 5,906,885 10,349,225 7,109,197 Grants -- 7,940 35,206 -- Interest 64,615 88,654 118,226 167,018 Loans 398,546 350,282 294,529 230,973 Long-term receivable from the Successor Agency 1,779,324 1,533,103 1286,882 761,773 Prepaid expenses 104,792 49,017 181,787 277,473 TOTAL ASSETS 14,541,621 21,060,995 25,307,614 23,237,538 LIABILITIES AND FUND BALANCE: Liabilities: Accounts payable 3,064,081 3,531,630 3,800,802 4,144,408 Deposits payable 62,710 86,477 65,457 79,411 Developer bonds payable 402,190 455,913 376,567 387,085 Due to other funds -- -- -- -- Deferred revenue -- -- -- -- Compensated absences -- -- -- 64,189 Unearned revenue -- -- -- -- TOTAL LIABILITIES 3,528,981 4,074,020 4,242,826 4,675,093 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - SB90 reimbursement receivable 1,863,829 1,092,071 1,088,103 1,096,240 Unavailable revenue - long-term receivable from Successor Agency 1,779,324 1,533,103 1,286,882 761,773 Fund Balance: Nonspendable 503,338 399,299 476,316 508,446 Restricted -- -- -- -- Committed -- -- -- -- Assigned 6,866,149 12,374,002 16,440,910 14,900,945 Unassigned -- 1,588,500 1,772,577 1,295,041 Total fund balance 7,369,487 14,361,801 18,689,803 16,704,432 Total liabilities and fund balance $14,541,621 $21,060,995 $25,307,614 $23,237,538 Source: City of San Rafael; Basic Financial Statements. -25- Recent Budgets Fiscal Year 2016-17. The City adopted a fiscal year 2016-17 budget on June 6, 2016. The total proposed fiscal year 2016-17 budget for the City was $106,673,115. This sum reflected all funds and operations for the City, inclusive of $4,807,372 in new appropriations for capital projects. These appropriations were supported by fiscal year 2016-17 revenue and other sources then projected at $105,031,599 as well as by funds retained from previous periods for capital projects. The General Fund portion of the City budget was balanced in that fiscal year 2016-17 expenditures and operating transfers out, totaling $72,321,799, were fully supported by fiscal year 2016-17 General Fund revenues and operating transfers in, then projected at $75,499,303. The 2016-17 budget also provided for capital transfers for major construction and improvements to public safety facilities known as the San Rafael Essential Facilities project. At the City Council’s direction, this project’s chief funding source was allocations from Measure E Transactions and Use Tax revenues (“Measure E”) (see “- Other Taxes” below) that had been set aside in previous years. Fiscal Year 2017-18. On June 5, 2017, the City Council adopted the City’s budget for fiscal year 2017-18. The total proposed fiscal year 2017-18 budget for the City is $111,578,822. The Capital Improvement Program has new planned expenditures of $9,302,302 for the year. Appropriations are supported by fiscal year 2017-18 revenue and other sources projected at $108,639,679 as well as funds retained from previous periods for capital projects. The General Fund portion of the City budget is balanced in that fiscal year 2017-18 expenditures and operating transfers out, totaling $75,235,270, are fully supported by fiscal year 2017-18 General Fund revenues and transfers in, projected at $78,489,437. The budget also provides for capital transfers of $4,025,000 for continued funding of the San Rafael Essential Facilities project. As was the case in the prior year, this project’s chief funding source is allocations from Measure E revenues (“Measure E”) (see “-Other Taxes” below). The General Fund operating-related appropriations for fiscal year 2017-18 also provide for an allocation of $210,000 to maintain the emergency and cashflow reserve at its target level, as well as authorization to use $1,271,000 of previously unallocated and unassigned funds for limited-term operating needs. -26- Comparison of Budget to Actual Performance For purposes of comparison, the following table summarizes the City’s adopted budgets for fiscal years 2015-16 and 2016-17 and sets forth audited revenues and expenditures for fiscal years 2015-16 and 2016-17; it also includes the City’s budgeted figures for fiscal year 2017-18. Table 3 CITY OF SAN RAFAEL General Fund - Comparison of Budgeted and Actual Revenues, Expenditures and Fund Balances For Fiscal Years 2015-16 through 2017-18 Budgeted Fiscal Year 2015-16 Audited Fiscal Year 2015-16 Budgeted Fiscal Year 2016-17 Audited Fiscal Year 2016-17 Budgeted Fiscal Year 2017-18 Revenues: Taxes and special assessments $59,537,000 $60,217,831 $64,563,000 $64,242,440 66,848,000 Licenses and permits 2,545,000 2,588,411 2,511,000 2,559,841 2,782,000 Fines and forfeitures 473,000 435,829 448,000 400,283 457,000 Use of money and property 278,100 221,832 288,000 229,791 238,200 Intergovernmental 7,533,767 8,078,040 3,042,000 2,767,092 3,323,000 Charges for services 2,739,287 2,772,446 2,869,000 2,459,680 2,980,450 Other revenues 457,000 411,761 396,000 706,657 504,443 Total Revenues 73,563,154 74,756,150 74,117,000 73,365,784 77,133,093 Expenditures: General government 10,093,917 10,501,341 10,941,401 10,190,580 9,633,850 Public safety 38,943,504 39,230,483 40,958,109 40,844,246 43,270,574 Public works and parks 10,999,225 10,468,421 10,943,588 11,201,655 11,512,560 Community development 3,914,771 3,670,108 4,154,885 3,759,564 4,570,439 Culture and recreation 3,005,021 2,963,125 3,076,042 3,077,435 3,255,722 Capital Outlay 145,457 -- -- -- 90,690 Capital improvement/ special projects 15,922 12,389 -- -- -- Debt service: principal 75,172 75,172 175,172 175,172 280,172 Interest and fiscal charges 276,513 277,263 276,513 271,263 271,263 Total Expenditures 67,469,572 67,198,302 70,525,710 69,519,915 72,885,270 Excess (Deficiency) of Revenues Over (under) Expenditures 6,093,582 7,557,848 3,591,290 3,845,869 4,247,823 Other financing sources (uses): Operating transfers in 1,110,810 1,110,809 1,382,303 1,382,303 1,356,344 Operating transfers out (2,491,249) (2,491,249) (1,796,089) (1,796,089) (2,350,000) Capital transfers out (1,849,406) (1,849,406) (5,417,454) (5,417,454) (4,025,000) Total other financing sources (uses) (3,229,845) (3,229,846) (5,831,240) (5,831,240) (5,018,656) Net change in Fund Balance $2,863,737 4,328,002 ($2,239,950) (1,985,371) (770,833) Fund balances, beginning of year 14,361,801 18,689,803 16,704,432 Fund balances, end of year $18,689,803 $16,704,432 15,933,599 Source: City of San Rafael. -27- General Fund Reserves The City Council has adopted a financial management policy requiring that emergency and cash flow reserves be maintained at 10% of General Fund expenditures. In fiscal year 2015- 16, the reserves were funded at 10.2%. During fiscal year 2016-17, reserves were funded at 10.4% of General Fund expenditures, and are projected to remain at that level through fiscal year 2017-18 reflecting the City’s commitment to maintain a minimum reserve of 10%. 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. Other Reserves - Internal Service Funds The City maintains internal services funds that are available to the General Fund. The funds include reserves for Employee Benefits, General Liability, Workers’ Compensation, and Equipment Replacement. In fiscal year 2015-16, these reserves represented 12.6% of General Fund expenditures, 13.3% in fiscal year 2016-17, and, in fiscal year 2017-18, these reserves are projected to remain at a comparable level. Tax Receipts Revenues received by the City include sales taxes, property taxes, transaction/use taxes (Measure E), business license taxes, property transfer taxes, occupancy taxes, franchise taxes, business license taxes and other miscellaneous taxes. The following table sets forth General Fund revenues received by the City for fiscal years 2013-14 through 2016-17, by source, as well as the percentage of total fiscal year 2016-17 revenues that each revenue source contributes. -28- Table 4 CITY OF SAN RAFAEL General Fund Revenues by Source For Fiscal Years 2013-14 through 2016-17 Source: 2013-14 2014-15 2015-16 2016-17 Percent of Total 2016-17 Revenues Taxes: Property(1) $18,439,619 $19,039,443 $19,998,567 $21,532,626 29.35% Sales: Sales and Use $19,283,904 $20,634,478 $22,342,619 $19,818,323 27.01% Measure E half-cents sales tax(2) 1,781,335 7,702,530 7,696,000 7,689,925 10.48 Measure E quarter-cents sales tax(2) 890,667 3,498,470 3,848,000 3,844,963 5.24 Measure S 5,444,446 12,433 28,144 28,878 0.04 Total, Sales Taxes $27,400,352 $31,847,911 $33,914,763 $31,382,089 42.77% Property Transfer Tax $1,708,976 $1,513,524 $1,707,694 $1,810,514 2.47% Transient occupancy 2,332,277 2,661,878 3,063,263 2,984,758 4.07 Franchise 3,260,958 3,272,390 3,418,277 3,610,824 4.92 Business license 2,588,728 2,670,071 2,824,664 2,774,803 3.78 Other Taxes(3) 211,828 199,282 210,607 216,922 0.30 Licenses and Permits 1,934,755 2,456,820 2,588,411 2,559,841 3.49 Fines and Forfeitures 669,553 505,030 435,829 400,283 0.55 Use of Money and Property 265,034 290,103 221,832 229,791 0.31 Intergovernmental 2,270,614 3,183,540 3,158,036 2,696,996 3.68 Charges for Services 2,124,933 2,660,869 2,772,446 2,459,680 3.35 Other revenue 1,075,311 446,272 441,761 706,657 0.96 Total $64,282,938 $70,747,133 $74,756,150 $73,365,784 100.00% (1) Property tax revenue includes secured, unsecured, supplemental, educational relief augmentation fund, homeowner’s exemption and VLF property tax backfill property tax revenue along with penalties and interest. (2) Measure “E” Transaction and Use Tax. See “Other Taxes” below. (3) Other taxes include Unitary tax. Source: City of San Rafael. Sales Taxes General. Sales tax represented the largest source of revenue to the City in fiscal year 2015-16 and is projected by an independent third-party consultant to be the largest source of revenue in fiscal years 2016-17 and 2017-18. This section describes the current system for levying, collecting and distributing sales and use tax revenues in the State. 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. The statewide sales tax rate is 7.25%, of which the City’s share is 1.00%. After peaking above 10% during fiscal year 2014-15, sales tax growth has plateaued during the past two years. Recurring sales tax revenues are estimated to increase by 3.0% to $21.1 million in fiscal year 2017-18. Sales taxes account for 28% of General Fund revenues. 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. An additional 0.75% is collected in Marin County for transportation purposes and 0.25% is collected for open space purposes. Transactional/Use Tax (Measure E). The City receives revenue from the 0.75% Measure E Transactions and Use Tax, approved by the City’s voters in November 2013. The Measure E -29- Transactions and Use Tax is effective through March 31, 2034, and supplanted a 0.50% transactions and use tax approved under Measure S by voters in 2005. The City currently plans, for budgeting purposes only, to allocate a portion of its Measure E tax revenues for public safety purposes, including to pay the Lease Payments supporting the 2018 Bonds. However, the City is not legally required to use any of its Measure E tax revenues for such purposes, and the City will not pledge or grant a security interest in the Measure E tax revenues to secure such Lease Payments. The Measure E tax is a general tax and the revenues from such tax are available for any purpose legally permitted. The following table presents the sales tax rates currently applicable to taxable transactions in San Rafael. The State collects, administers and distributes the tax. The portions dedicated to the City of San Rafael are highlighted in bold. Table 5 CITY OF SAN RAFAEL Sales Tax Rates State (General Fund) 5.00% Local General Fund (Bradley-Burns) 1.00 Countywide Transportation Fund 0.25 County Mental Health/Welfare Districts 0.50 Public Safety Augmentation Fund 0.50 Total State-wide Tax 7.25% Sonoma-Marin Train (SMART) 0.25% Transportation Authority of Marin 0.50 Marin Parks, Open space and Farmland Preservation 0.25 San Rafael Transactions and Use Tax (Measure E) 0.75 Local Tax Subtotal 1.75% Total Sales and Use Tax 9.00% Sales and use taxes are complementary taxes; when one applies, the other does not. In general, the statewide sales tax applies to gross receipts of retailers from the sale of tangible personal property in the State. The use tax is imposed on the purchase, for storage, use or other consumption in the State of tangible personal property from any retailer. The use tax generally applies to purchases of personal property from a retailer outside the State where the 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. -30- This is not an exhaustive list of exempt transactions. A comprehensive list can be found in the State Board of Equalization’s Publication No. 61 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/. The reference to this Internet website is provided for reference and convenience only. The information contained within the website may not be current, has not been reviewed by the City and is not incorporated in this Official Statement by reference. Sales Tax Collection Procedures. Collection of the sales and use tax is administered by the California Department of Tax and Fee Administration (CDTFA), which took over this function from the State Board of Equalization in July 2017. According to the CDTFA, 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 CDTFA 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 CDTFA 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 (the fourth, clean-up payment) 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 CDTFA under a contract with any city, city and county, redevelopment agency, or county are required to be transmitted by the CDTFA 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 CDTFA 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 CDTFA’s quarterly projection. During the last month of each quarter, the CDTFA adjusts the amount remitted to reflect the actual receipts of the sales and use tax for the previous quarter. The CDTFA 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. -31- History of Taxable Transactions. A summary of historic taxable sales within the City during the past five years for which data is available is shown in the following table. Total taxable sales during calendar year 2015 in the City were reported to be $1,777,942,000, a 1.50% increase over the total taxable sales of $1,751,753,000 reported during calendar year 2014. Table 6 CITY OF SAN RAFAEL Taxable Transactions by Type of Business For Calendar Years 2011 through 2015 (Dollars in thousands) Retail Stores Total All Outlets Number of Permits Taxable Transactions Number of Permits Taxable Transactions 2012 1,696 $1,234,514 2,805 $1,532,832 2013 1,793 1,336,922 2,920 1,660,492 2014 1,765 1,407,601 2,884 1,751,753 2015(1) 1,744 1,426,578 3,079 1,777,942 2016(2) 1,755 1,055,162 3,104 1,311,866 (1) Permit figures for calendar year 2015 are not comparable to that of prior years due to outlet counts in these reports including the number of outlets that were active during the reporting period. Retailers that operate part-time are now tabulated with store retailers. (2) Only three quarters available for 2016. Source: State Department of Tax and Fee Administration. Taxable Sales in California (Sales & Use Tax). Property Taxes Property taxes represented the second largest source of General Fund revenue in fiscal year 2015-16 and the largest source in fiscal year 2016-17, and is projected by an independent third-party consultant to be the second largest source of General Fund revenue for fiscal year 2017-18. This section describes property tax levy and collection procedures and certain information regarding historical assessed values and major property tax payers in the City. ERAF Shift Legislation. Certain property taxes have been shifted from local government agencies to schools by the State Legislature for deposit in the Education Revenue Augmentation Fund (“ERAF”), a shift that has resulted in diversion of City property taxes since fiscal year 1992- 93. There can be no assurance that the State will not undertake future ERAF shifts , but the State’s legal authority to do so is limited by Prop. 22. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS - Proposition 1A; Proposition 22.” Levy and Collection. Property taxes are levied for each fiscal year on taxable real and personal property as of the preceding January 1. For assessment and collection purposes, property is classified either as “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State- assessed public utilities property and real property the taxes on which are a lien sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the “unsecured roll.” Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year, and become delinquent on December 10 and April 10, respectively. -32- A penalty of 10% attaches immediately to all delinquent payments. Property on the secured roll with respect to which taxes are delinquent become tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of a penalty of 1% per month to the time of redemption, plus costs and a redemption fee. If taxes are unpaid for a period of five years or more, the property is deeded to the State of California and may be sold at public auction. Property taxes on the unsecured roll are due as of the January 1 lien dates and become delinquent on August 31. A 10% penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at 5:00 p.m. on October 31, an additional penalty of 1% attaches to them on the first day of each month until paid. The County has four ways of collecting delinquent unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a judgment in the office of the County Clerk specifying certain facts in order to obtain a 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. Teeter Plan Property taxes are recorded by the City as revenue when received in the fiscal year of levy because of the adoption of the “alternate method of property tax distribution,” known as the Teeter Plan, by the City and the County of Marin. The Teeter Plan authorized the auditor-controller of the County of Marin to allocate 100% of the secured property taxes billed, but not yet paid. The County of Marin remits property tax revenues to the City in three installments, as follows: (1) 55% remitted on December 15; (2) 40% remitted on April 15; and (3) 5% remitted on June 15. Under the provisions of the Teeter Plan, each county operating under the Teeter Plan establishes a delinquency reserve and assumes responsibility for all secured delinquencies, assuming that certain conditions are met. Because of this method of tax collection, participating local agencies located in counties operating under the Teeter Plan and participating in the Teeter Plan are assured of 100% collection of their secured tax levies if the conditions established under the applicable county’s Teeter Plan are met. However, such local agencies are no longer entitled to share in any penalties due on delinquent payments or in the interest which accrues on delinquent payments. The Teeter Plan is to remain in effect unless the Board of Supervisors of the County of Marin orders its discontinuance or unless, prior to the commencement of any fiscal year of the County (which commences on July 1), the Board of Supervisors has received a petition for its discontinuance joined in by resolutions adopted by two thirds of the participating local agencies in the County, in which event the Board of Supervisors is required to order discontinuance of the Teeter Plan effective at the commencement of the subsequent fiscal year. The Board of Supervisors may, by resolution adopted not later than July 15 of the fiscal year for which it is to apply after holding a public hearing on the matter, discontinue the procedures under the Teeter Plan with respect to any tax levying agency or assessment levying agency in the County if the rate of secured tax delinquency in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured rolls for that agency. In the event that the Teeter Plan was terminated, the amount of the levy of ad valorem taxes in the City would depend upon the collections of the ad valorem property taxes and delinquency rates experienced with respect to the parcels within the City. The City is not aware of any plans by the County to discontinue the Teeter Plan. -33- So long as the Teeter Plan remains in effect with respect to the City, the City's receipt of revenues with respect to the levy of ad valorem property taxes on secured property will not be dependent upon actual collections of the ad valorem property taxes by the County. Beginning in 1978-79, Proposition 13 and its implementing legislation shifted the function of property tax allocation to the counties, except for levies to support prior voted debt, and prescribed how levies on countywide property values are to be shared with local taxing entities within each county. Assessed Valuation Information. Set forth below is a listing of the City’s assessed valuations for the past five fiscal years. Table 7 CITY OF SAN RAFAEL Assessed Valuation For Fiscal Year 2013-14 through 2017-18 Local Secured Utility Unsecured Total % Change 2013-14 $9,939,469,670 $5,246,402 $402,261,887 $10,346,977,959 -- 2014-15 10,471,724,630 5,246,402 414,275,471 10,891,246,503 5.3% 2015-16 11,100,791,102 5,246,402 398,759,673 11,504,797,177 5.6 2016-17 11,790,357,580 26,867,933(1) 423,305,303 12,240,530,816 6.4 2017-18 12,432,691,490 26,867,933 416,634,339 12,876,193,762 5.2 (1) The increase in utility value from fiscal year 2015-16 to 2016-17 is attributable to improvements owned by Pacific Gas & Electric. Source: California Municipal Statistics, Inc. and Marin County Dept. of Finance. Proposition 13 and Proposition 8 Property Value Adjustments. Proposition 13, passed in 1978, established the base year value concept for property tax assessments. Un der Proposition 13, the 1975-76 fiscal year serves as the original base year used in determining the assessment for real property. Thereafter, annual increases to the base year value are limited to the inflation rate, as measured by the California Consumer Price Index, or 2%, whichever is less. A new base year value, however, is established whenever a property, or portion thereof, has had a change in ownership or has been newly constructed. Proposition 8, enacted in 1978, allows for a temporary reduction in assessed value when a property suffers a “decline-in-value.” As of the January 1st (lien date) each year, the Assessor must enroll either a property’s Proposition 13 value (adjusted annually for inflation by no more than 2%) or its current market value, whichever is less. When the current market value replaces the higher Proposition 13 value, the lower value is commonly referred to as a “Proposition 8 Value.” “Proposition 8 values” are temporary and, once enrolled, must be reviewed annually by the assessor until the Proposition 13 adjusted base year value is enrolled. -34- Historical Tax Rates. 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 8 CITY OF SAN RAFAEL Typical Tax Rate per $100 Assessed Value (TRA 8-000) Fiscal Years 2013-14 through 2017-18 2013-14 2014-15 2015-16 2016-17 2017-18 General Tax Rate $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 San Rafael School District 0.0551 0.0474 0.0463 0.0535 .0201 San Rafael High School District 0.0294 0.0273 0.0266 0.0710 .0706 Marin Community College District 0.0204 0.0180 0.0165 0.0142 .0365 Marin Healthcare District N/A N/A 0.0235 0.0093 .0338 Total Tax Rate $1.1049 $1.0927 $1.1128 $1.1480 $1.1610 Source: California Municipal Statistics, Inc. -35- Major Property Taxpayers. The following table lists the top 20 local secured taxpayers in the City of San Rafael for fiscal year 2017-18. Table 9 CITY OF SAN RAFAEL Top 10 Local Secured Taxpayers Fiscal Year 2017-18 2017-18 % of Property Owner Primary Land Use Assessed Valuation Total (1) 1. California Corporate Center Acquisition Commercial $ 261,000,911 2.10% 2. Northgate Mall Associates Commercial 140,729,805 1.13 3. BRE Properties Inc. Apartments 62,385,259 0.50 4. South Valley Apartments LLC Commercial 53,045,451 0.43 5. BRE Piper MF 33 North CA LLC Residential Development 46,565,701 0.37 6. Northbay Properties II Apartments 45,976,145 0.37 7. Bay Apartment Communities Inc. Apartments 43,612,049 0.35 8. Barbara Fasken 1995 Trust Commercial 43,324,046 0.35 9. Marin Sanitary Service Commercial 41,511,018 0.33 10. Target Corporation Commercial 37,656,772 0.30 11. San Rafael Manor Inc. Apartments 36,886,454 0.30 12. Mach II 4040 LLC Commercial 36,140,694 0.29 13. Marin Hotel Owner LLC Commercial 33,655,375 0.27 14. Sutter Health Commercial 33,150,000 0.27 15. SFF MEC LLC Commercial 32,743,437 0.26 16. Marin Newco LLC Apartments 30,462,414 0.25 17. Civic Center Marin LLC Commercial 28,574,064 0.23 18. Bel Albert Holdings LLC Apartments 28,471,437 0.23 19. Francisco Boulevard Investors LLC Commercial 27,670,669 0.22 20. Regency Center II Associates LP Commercial 26,864,000 0.22 $1,090,425,701 8.77% (1) 2017-18 Local Secured Assessed Valuation: $12,432,691,490. Source: California Municipal Statistics, Inc. Other Taxes Franchise Tax. The City’s Franchise Tax (which is expected to generate $3,720,000, or 4.8% of General Fund revenues in fiscal year 2017-18) is imposed on the distribution and sales of public utility services. City Charter Article XIV provides regulations concerning franchised agencies and businesses. Currently, the City charges PG&E a franchise fee of 1% for gas and 0.50% for electricity. The local cable provider, Comcast, pays a 5% franchise fee on a quarterly basis to Marin Telecommunications Authority (“MTA”). Under a formation agreement, MTA deducts its budget cost from the received franchise fees and remits the net to each agency based on relative cable TV subscribers. Marin Sanitary Service collects and remits a 10% refuse fee for the privilege of being the sole waste hauler for the City. Under Article XIIIC of the California Constitution, franchise fees can only be increased by a vote of the City residents. Business License Tax. The Business License Tax is expected to generate $2,859,000, approximately 3.7% to the City’s fiscal year 2017-18 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. -36- Transient Occupancy Tax. The City’s Transient Occupancy Tax is expected to contribute $3,122,000, approximately 4.1% to the City’s fiscal year 2017-18 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 is expected to generate 2.7% of General Fund revenues in fiscal year 2017-18) 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 property transfer tax rates would require voter approval pursuant to Proposition 218. State Budget and its Impact on the City General. Information about the fiscal year 2017-18 State budget and other State budgets is regularly available at various State-maintained websites. An impartial analysis of the budget is posted by the Legislative Analyst Office at www.lao.ca.gov. In addition, various State official statements, many of which contain a summary of the current and past State budgets, may be found at the website of the State Treasurer, www.treasurer.ca.gov. The information referred to in this paragraph is prepared by the respective State agency maintaining each website and not by the City or Underwriter, and the City and Underwriter take no responsibility for the continued accuracy of the Internet addresses or for the accuracy or timeliness of information posted there, and such information is not incorporated in this Official Statement by these references. See “RISK FACTORS – Impact of State Budget on City Revenues.” Proposition 30 and Proposition 55. Approved in 2012, Proposition 30 (“Proposition 30”) enacted temporary increases on high-income earners, raising income taxes by up to three percent on the wealthiest Californians for seven years and increased the state sales tax by $0.0025 for four years. The temporary personal income tax increases under Proposition 30 were scheduled to expire at the end of 2018; however, the voters approved Proposition 55 in the November 2016 statewide election, which extended these increases through 2030. The temporary increase in the state sales tax under Proposition 30 has expired. 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 s in such revenues may have an adverse impact on the City’s ability to pay the 2018 Bonds. Retirement System Marin County Employees’ Retirement Fund. The City’s defined benefit retirement plan is administered by the Marin County Employees’ Retirement Association (“MCERA”). MCERA operates as a cost-sharing multiple employer defined benefit plan for the City and eight other participating employers: County of Marin, Local Agency Formation Commission (LAFCO), Marin City Community Services District, Marin County Superior Court, Marin/Sonoma Mosquito and Vector Control District, Novato Fire Protection District, Southern Marin Fire Protection District, -37- and Tamalpais Community Services District. Separate actuarial valuations are performed for these other agencies and districts, and the responsibility for funding their plans rest with those entities. Post-retirement benefits are administered by MCERA to qualified retirees. MCERA’s service retirement benefits are based on the years of credited service, final average compensation, and age at retirement, according to the applicable statutory formula. Members who qualify for service retirement are entitled to receive monthly retirement benefits for life. Funding Policy. The funding policy of MCERA provides for actuarially determined periodic contributions by the City at rates such that sufficient assets will be available to pay plan benefits when due. The employer rates for normal cost are determined using the Entry Age Normal Actuarial Cost Method, which takes into account those benefits that are expected to be earned in the future as well as those already accrued. The City has its own funding policy, adopted on June 17, 2013 and revised on September 8, 2015. Under that policy, the City is to use the actuarially determined periodic contribution determined by MCERA as the basis for its pension contributions. If the City is unable to fund the full amount of the ADC in a given year with current resources (i.e. without borrowing or using reserves), the City Manager and the Finance Director of the City are to identify a reasonable period to return to full funding. The City Manager is to ensure that any recommended changes to the defined benefit pension plan are fully consistent with all applicable federal and state regulations. The City’s contribution rates for the year ended June 30, 2017 were as follows: Employer Contribution Rate Employee Contribution Rate Benefit Basis City of San Rafael Misc Tier 1 50.40% 0.00-16.82% 2.7% @ 55 Highest Year City of San Rafael Misc Tier 2 46.81 7.89-12.57% 2.0% @ 55 Average of Three Highest Years City of San Rafael Fire Tier 1 75.67 0.00-19.79% 3.0% @ 55 Highest Year City of San Rafael Fire Tier 2 72.59 11.34-17.69% 3.0% @ 55 Average Three Highest Years City of San Rafael Safety Police Tier 1 74.79 00.00-19.79% 3.0% @ 55 Highest Year City of San Rafael Safety Police Tier 2 75.53 11.34-17.69% 3.0% @ 55 Average Three Highest Years PEPRA1 Misc 42.11 9.18-10.18% 2.0% @ 62 Average Three Highest Years PEPRA Safety 64.88 14.53% 2.7% @ 57 Average Three Highest Years 1 Public Employees’ Pension Reform Act Source: Basic Financial Statements for the Year Ended June 30, 2017. These rates were determined by MCERA, based on the actuarial valuation dated June 30, 2015. The actual rate of return on investments during that year was 4.99% on a market value basis net of investment expenses, as compared to the 7.25% assumption. The City uses the actuarially determined percentages of payroll to calculate and pay contributions to MCERA. Contributions to the plan from the City were $20,003,002 for the year ended June 30, 2017, based on a total payroll of $41,553,242, of which $32,885,135 represented the basis for the plan contributions. Of the total payroll subject to plan contributions, $1,305,530 is attributable to the San Rafael Sanitation District (“SRSD”), a component unit of the City. -38- Effective with the June 30, 2013 valuation, the Unfunded Actuarial Liability (“UAL”) as of June 30, 2013 is being amortized over a closed 17-year period (15 years remaining as of June 30, 2015), except for the additional UAL attributable to the outstanding unfunded actuarial loss from 2009, which is being amortized over a separate closed period (currently 23 years). Under Governmental Accounting Standards Board Statement Number 68 “Accounting and Financial Reporting for Pensions,” the City’s funding progress is expressed as the ratio of net position (market value of assets) to total pension liability. Information for the past three years is shown in the following table. Table 10 City's Share of Net Pension Liability Defined Benefit Pension Plan (Fire, Police, Miscellaneous) (Dollars in thousands) 6/30/2015 6/30/2016 6/30/2017 Total Pension Liability $677,754 $907,195 $900,629 Fiduciary Net Pension Liability 603,500 764,872 733,574 Net Pension Liability $74,254 $142,323 $167,055 Plan fiduciary net position as a percentage of the total pension liability 89.04% 84.31% 81.45% Covered employee payroll $31,429 $31,106 $31,126 Net Pension liability as a percentage of covered employee payroll 236.26% 457.54% 519.99% Source: City Financial Statements for the Year Ended June 30, 2017. The fiscal year ended June 30, 2015 was the first year of implementation, therefore only three years are available. In November 2017, MCERA voted to lower the investment return assumption used to determine its pension funding contributions from 7.25% to 7.00%. The new investment return assumption will begin to impact contribution rates in the 2018-19 fiscal year. MCERA has advised the City that, based on MCERA’s estimates, the new investment return assumption will result in contribution rate increases of approximately 1% of covered payroll in fiscal year 2018-19. While the City does not maintain a pension stabilization trust fund, it currently maintains approximately $2 million in an internal service fund for employee benefits. See “CITY FINANCIAL INFORMATION - Other Reserves - Internal Service Funds.” 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 MCERA 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. -39- During the fiscal year 2016-17, the City and employees each contributed $98,186. The total covered payroll of employees participating in PARS for the year ended June 30, 2017, was $2,618,290. The total payroll for the year was $41,553,242. 401(a) Tax Qualified Plan. In addition, the City participates in a 401(a) tax qualified plan for eligible executive management and mid-management employees, and elected officials. Under this plan, which was terminated effective August 3, 2015, the percent amount of contribution ranged from 3% to 4.6% of base salary of participating employees. During fiscal year 2015 -16, and prior to the plan’s termination, the City contributed $3,770 on behalf of these employees. Other Post Employment Benefits (“OPEB”) Description of Postretirement Healthcare Benefits. The City provides certain health care benefits for retired employees and their spouses under a cost sharing defined benefit plan. Employees who meet the vesting criteria become eligible for these benefits if they receive a retirement benefit from the Marin County Employees’ Retirement Association within 120 days of retirement from City employment. At June 30, 2017, 684 retirees and surviving spouses received post-employment health care benefits. The City’s Comprehensive Annual Financial Report for the fiscal year ended June 30, 2017, and in particular Note 11 thereto, includes information about the City’s postemployment healthcare liabilities and funding. Actuarial Required Contribution and Assumptions. The City’s annual required contribution (“ARC”) with respect to the OPEB Plan was determined as part of a June 30, 2015 actuarial valuation, using the entry-age normal cost method. This is a projected benefit cost method, which takes into account those benefits that are expected to be earned in the future as well as those already accrued. The actuarial assumptions included (a) 4.50% investment rate of return and (b) 2.75% of general inflation increase, and (c) a healthcare trend of declining annual increases ranging from 6.70% in 2015 to 4.50% for the years starting 2021. In addition, the fixed dollar benefit amounts are assumed to be held flat in the future and the premium related benefits are assumed to increase with the healthcare trend rate. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and the plan members at that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets consistent with the long-term perspective of the calculations. Since 2013, the City has maintained an irrevocable trust under the California Employers’ Retiree Benefit Trust Fund (CERBT) for the purpose of funding post-retirement healthcare benefits. For the past five years, the City has fully funded its actuarially required contribution. As of June 30, 2017, the amount in the CERBT trust was $17,872,938. As of June 30, 2016, the amount in the CERBT trust was approximately $17,758,000. Funding Policy. On September 18, 2017, the City Council adopted a policy for funding the City’s OPEB obligations. Under that policy, the City’s stated goal is to fully fund the amount of the actuarially determined contribution (“ADC”) each year. (Under GASB 75, the term of art -40- has changed from “actuarially required contribution” to “actuarially determined contribution.”) In the event the City is unable to fund the full amount of the ADC in a given year without borrowing, the Finance Director and City Manager will identify a timeframe under which to return to full funding. Under the policy, a Pension-OPEB Subcommittee is to review the ADC each fiscal year, and recommend the level of funding to be considered by the City Council for adoption in the budget. Reporting of OPEB Liability and Funded Status. Effective with the fiscal year ended June 30, 2017, the City implemented Governmental Accounting Board Statement Number 75 – “Accounting and Financial Reporting for Postemployment Benefits Other than Pensions” (GASB 75). Under GASB 75, the City’s funding progress is expressed as the ratio of net position (market value of assets) to total OPEB liability. Because this was the first year of implementation, comparable historical information is unavailable. 6/30/20171 ($000) Total OPEB Liability $49,543 Fiduciary Net OPEB Position 15,758 Net OPEB Liability $33,785 Plan fiduciary net position as a percentage of the total OPEB liability 31.81% Covered employee payroll $31,106 Net OPEB Liability as a percentage of covered employee payroll 108.61% 1 Under GASB 75, the June 30, 2017 accounting information presented here represents a June 30, 2016 measurement date. Source: City Financial Statements for the Year Ended June 30, 2017. 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. 2010 Taxable Pension Obligation Bonds. On July 1, 2010, the City issued 2010 Taxable Pension Obligation Bonds in the amount of $4,490,000 bearing interest at rates from 6.00% to 6.25%. The bonds mature on July 1, 2025. As of June 30, 2017, the outstanding principal amount was $4,390,000. 2012 Authority Lease Revenue Refunding Bonds. On August 7, 2012, the San Rafael Joint Powers Financing Authority issued 2012 Authority Lease Revenue Refunding Bonds in the amount of $6,750,000 bearing interest at rates from 2.00% to 4.00%. The bonds mature on April 1, 2033. As of June 30, 2017, the outstanding principal amount was $5,445,000. 2013 Pacific Gas and Electric Note Payable. On September 30, 2013, the City executed a note payable agreement with Pacific Gas and Electric (“PG&E”) in the amount of $634,861, bearing no interest. Repayment of the loan commenced in December 2013, and is due monthly until paid in full in 2023. As of June 30, 2017, the outstanding principal amount was $303,323. -41- 2018 Pacific Gas and Electric Note Payable. On or about September 5, 2017, the City executed a note payable agreement with PG&E in the amount of $1,178,813, bearing interest at 1% annually. Disbursement of the loan is expected in July 2019. Repayment of the loan is expected to commence in December 2020, and is due semiannually until paid in full in December 2027. Jointly Governed Organizations The City is a member of a number of joint powers authorities with respect to which the City is obligated to make annual payments, including debt service payments. See Note 12 to the City’s June 30, 2017 audited financial statement, which is attached as Appendix C. 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. -42- Table 11 CITY OF SAN RAFAEL Statement of Direct and Overlapping Debt as of February 1, 2018 2017-18 Assessed Valuation: $12,876,193,762 OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 2/1/18 Marin Community College District 17.302% $ 53,647,446 San Rafael High School District 78.363 49,588,353 Tamalpais Union High School District 0.080 87,748 Dixie School District 66.114 10,922,568 Ross School District 1.528 281,137 Ross Valley School District 0.012 5,232 San Rafael School District 83.700 53,337,120 Marin Healthcare District 20.813 78,827,156 Marin Emergency Radio Authority Parcel Tax Obligations 17.277 5,701,410 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $252,398,170 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Marin County Certificates of Participation 17.277% $15,184,674 Marin County Pension Obligation Bonds 17.277 15,640,868 Marin County Transit District General Fund Obligations 17.277 15,708 Marin Municipal Water District General Fund Obligations 22.022 16,289 Marin Community College District Certificates of Participation 17.302 418,853 San Rafael School District Certificates of Participation 83.700 2,741,175 City of San Rafael General Fund Obligations 100.000 6,747,916(1)(2) City of San Rafael Pension Obligation Bonds 100.000 4,185,000 TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT $44,950,483 Less: City of San Rafael obligations supported by enterprise revenues 5,445,000 TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT $39,505,483 OVERLAPPING TAX INCREMENT DEBT (Successor Agency): 100.000 % $11,344,004 GROSS COMBINED TOTAL DEBT $308,692,657(3) NET COMBINED TOTAL DEBT $303,247,657 Ratios to 2017-18 Assessed Valuation: Total Overlapping Tax and Assessment Debt ........................ 1.96% Total Gross Direct Debt ($10,932,916) ............................... 0.08% Total Net Direct Debt ($5,487,916) ..................................... 0.04% Gross Combined Total Debt ................................................... 2.40% Net Combined Total Debt ....................................................... 2.36% Ratios to Redevelopment Successor Agency Incremental Valuation ($2,831,146,323): Total Overlapping Tax Increment Debt .................................. 0.40% (1) Excludes issue to be sold. (2) Includes city’s share of Marin Emergency Radio Authority refunding revenue bonds. (3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc. 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 August 7, 2017, 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 -43- 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 Council 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 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. 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). Recent Monthly Report. As of June 30, 2017, the City has invested funds as set forth in the table below. Table 12 CITY OF SAN RAFAEL Investment Portfolio as of June 30, 2017 Portfolio Assets Percentage Return LAIF $34,208,197 58.2% 0.91% Cash 34,392 0.1 0.00 Treasury Securities 4,146,098 7.1 1.08 Agency Securities 14,829,261 25.2 1.02 Corporate Notes 4,058,635 6.9 1.27 Municipal 1,520,800 2.6 5.25 Total $58,797,383 Weighted Average Yield 1.09% Source: City of San Rafael. -44- 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 Employees Contract Expiration Date Service Employees International Union (SEIU) 134 6/30/2018 San Rafael Police Association (SRPA) (Police) 89 6/30/2018 Police Mid-Management 6 6/30/2018 Firefighters’ Association 65 6/30/2018 Fire Chief Officers’ Association 4 6/30/2018 SEIU – Childcare 46 10/31/2019 Association of Professional Employees (WCE) 10 6/30/2018 Local One – Confidential 9 6/30/2018 -45- CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS The constitutional and statutory provisions discussed in this section have the potential to affect the ability of the City to levy taxes and spend tax proceeds for operating and other purposes. Article XIIIA of the State Constitution Basic Property Tax Levy. On June 6, 1978, California voters approved Proposition 13 ("Proposition 13"), which added Article XIIIA to the State Constitution ("Article XIIIA"). Article XIIIA limits the amount of any ad valorem tax on real property to 1% of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on (i) indebtedness approved by the voters prior to July 1, 1978, (ii) (as a result of an amendment to Article XIIIA approved by State voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-thirds of the voters on such indebtedness (which provided the authority for the issuance of the 2010 Note), and (iii) (as a result of an amendment to Article XIIIA approved by State voters on November 7, 2000) 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. Article XIIIA defines full cash value to mean "the county assessor’s valuation of real property as shown on the 1975-76 tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment". This full cash value may be increased at a rate not to exceed 2% per year to account for inflation. Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways. Legislation Implementing Article XIIIA. Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The 1% property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1979. Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the annual adjustment not to exceed 2% are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years. Inflationary Adjustment of Assessed Valuation. As described above, the assessed value of a property may be increased at a rate not to exceed 2% per year to account for inflation. On December 27, 2001, the Fresno County Superior Court, in County of Orange v. Fresno County Assessment Appeals Board No. 3, held that where a home’s taxable value did not increase for two years, due to a flat real estate market, the Fresno County assessor violated the 2% inflation adjustment provision of Article XIIIA, when the assessor tried to "recapture" the tax value of the property by increasing its assessed value by 4% in a single year. The assessors in most California counties, including the County, use a similar methodology in raising the taxable values of property -46- beyond 2% in a single year. The State Board of Equalization has approved this methodology for increasing assessed values. On appeal, the Appellate Court held that the trial court erred in ruling that assessments are always limited to no more than 2% of the previous year’s assessment. On May 10, 2004 a petition for review was filed with the California Supreme Court. The petition has been denied by the California Supreme Court. As a result of this litigation, the “recapture” provision described above may continue to be employed in determining the full cash value of property for property tax purposes. Article XIIIB of the State Constitution In addition to the limits Article XIIIA imposes on property taxes that m ay be collected by local governments, certain other revenues of the State and most local governments are subject to an annual “appropriations limit” imposed by Article XIIIB which effectively limits the amount of such revenues those entities are permitted to spend. Article XIIIB, approved by the voters in June 1979, was modified substantially by Proposition 111 in 1990. The appropriations limit of each government entity applies to “proceeds of taxes,” which consist of tax revenues, State subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed “the cost reasonably borne by such entity in providing the regulation, product or service.” “Proceeds of taxes” excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on the appropriation of funds which are not “proceeds of taxes,” such as reasonable user charges or fees, and certain other non-tax funds. Article XIIIB also does not limit appropriation of local revenues to pay debt service on Bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990, levels. The appropriations limit may also be exceeded in case of emer gency; however, the appropriations limit for the next three years following such emergency appropriation must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster declared by the Governor , and the expenditure is approved by two-thirds of the legislative body of the local government. The State and each local government entity has its own appropriations limit. Each year, the limit is adjusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or from another government entity of financial responsibility for providing services. Proposition 111 requires that each agency’s actual appropriations be tested against its limit every two years. If the aggregate “proceeds of taxes” for the preceding two-year period exceeds the aggregate limit, the excess must be returned to the agency’s taxpayers through tax rate or fee reductions over the following two years. The City has never exceeded its appropriations limit. Articles XIIIC and XIIID of the State Constitution General. On November 5, 1996, the voters of the State approved Proposition 218, known as the “Right to Vote on Taxes Act.” Proposition 218 adds Articles XIIIC and XIIID to the California Constitution and contains a number of interrelated provisions affecting the ability of the City to levy and collect both existing and future taxes, assessments, fees and charges. -47- 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. Property-Related Fees and Charges. 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. Reduction or Repeal of Taxes, Assessments, 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 2018 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. Judicial Interpretation of Proposition 218. The interpretation and application of Articles XIIIC and XIIID will ultimately be determined by the courts, and it is not possible at this time to predict with certainty the outcome of such determination. Impact on City’s General Fund. The City does not believe that any material source of General Fund revenue is subject to challenge under Proposition 218 or Proposition 26. 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. Proposition 62 Proposition 62 was adopted by the voters at the November 4, 1986, general election and (a) requires that any new or higher taxes for general governmental purposes imposed by local -48- governmental entities such as the City be approved by a two-thirds vote of the governmental entity’s legislative body and by a majority vote of the voters of the governmental entity voting in an election on the tax, (b) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two - thirds vote of the voters of the governmental entity voting in an election on the tax, (c) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (d) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIIIA, (e) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and (f) requires that any tax imposed by a local governmental entity on or after August 1, 1985, be ratified by a majority vote of the voters voting in an election on the tax within two years of the adoption of the initiative or be terminated by November 15, 1988. California appellate court cases have overturned the provisions of Proposition 62 pertaining to the imposition of taxes for general government purposes. However, the California Supreme Court upheld Proposition 62 in its decision on August 28, 1995, in Fresno County Transportation Authority v. Guardino. This decision reaffirmed the constitutionality of Proposition 62. Certain matters regarding Proposition 62 were not addressed in the Supreme Court’s decision, such as what remedies exist for taxpayers subject to a tax not in compliance with Proposition 62, and whether the decision applies to charter cities. The City has not experienced any substantive adverse financial impact as a result of the passage of this initiative. Proposition 1A; Proposition 22 Proposition 1A. Proposition 1A, proposed by the Legislature in connection with the State’s Fiscal Year 2004-05 Budget, approved by the voters in November 2004 and generally effective in Fiscal Year 2006-07, provided that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A generally prohibited the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any Fiscal Year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county had to be approved by two-thirds of both houses of the Legislature. Proposition 22. Proposition 22, entitled “The Local Taxpayer, Public Safety and Transportation Protection Act,” was approved by the voters of the State in November 2010. Proposition 22 eliminates or reduces the State’s authority to (i) temporarily shift property taxes from cities, counties and special districts to schools, (ii) use vehicle license fee revenues to reimburse local governments for State-mandated costs (the State will have to use other revenues to reimburse local governments), (iii) redirect property tax increment from redevelopment agencies to any other local government, (iv) use State fuel tax revenues to pay debt service on State transportation bonds, or (v) borrow or change the distribution of State fuel tax revenues. Possible Future Initiatives Articles XIIIA, XIIIB, XIIIC and XIIID and Propositions 62, 111, 218 and 1A were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the City or the City’s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the City. -49- -50- BOND OWNERS’ RISKS The following describes certain special considerations and risk factors affecting the payment of and security for the 2018 Bonds. The following discussion is not meant to be an exhaustive list of the risks associated with the purchase of any 2018 Bonds and does not necessarily reflect the relative importance of the various risks. Potential investors in the 2018 Bonds are advised to consider the following special factors along with all other information in this Official Statement in evaluating the 2018 Bonds. There can be no assurance that other considerations will not materialize in the future. No Pledge of Taxes General. The obligation of the City to pay the Lease Payments and Additional Rental does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to pay Lease Payments and Additional Rental does not constitute a debt or indebtedness of the Authority, the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. The City is currently liable on other obligations payable from general revenues, which are described above under “CITY FINANCIAL INFORMATION – Long-Term General Fund Obligations.” Limitations on Taxes and Fees Limitations on Taxes and Fees. Certain taxes, assessments, fees and charges presently imposed by the City could be subject to the voter approval requirements of Article XIIIC and Article XIIID of the State Constitution. Based upon the outcome of an election by the voters, such fees, charges, assessments and taxes might no longer be permitted to be imposed, or may be reduced or eliminated and new taxes, assessments fees and charges may not be approved. The City has assessed the potential impact on its financial condition of the provisions of Article XIIIC and Article XIIID of the State Constitution respecting the imposition and increase of taxes, fees, charges and assessments and does not believe that an election by the voters to reduce or eliminate the imposition of certain existing fees, charges, assessments and taxes would substantially affect its financial condition. However, the City believes that if the initiative power was exercised so that all local taxes, assessments, fees and charges that may be subject to Article XIIIC and Article XIIID of the State Constitution are eliminated or substantially reduced, the financial condition of the City, including its General Fund, could be materially adversely affected. Although the City does not currently anticipate that the provisions of Article XIIIC and Article XIIID of the State Constitution would adversely affect its ability to pay Lease Payments and its other obligations payable from the General Fund, no assurance can be given regarding the ultimate interpretation or effect of Article XIIIC and Article XIIID of the State Constitution on the City’s finances. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.” Additional Obligations of the City The City has existing obligations payable from its General Fund. See “CITY FINANCIAL INFORMATION – Long-Term General Fund Obligations.” The City is permitted to enter into other obligations which constitute additional charges against its revenues without the consent of -51- Owners of the 2018 Bonds. To the extent that additional obligations are incurred by the City, the funds available to pay Lease Payments may be decreased. The Lease Payments and other payments due under the Lease (including payment of costs of repair and maintenance of the Leased Property, taxes and other governmental charges levied against the Leased Property) are payable from funds lawfully available to the City. If the amounts that the City is obligated to pay in a fiscal year exceed the City’s revenues for such year, the City may choose to make some payments rather than making other payments, including Lease Payments and Additional Rental, based on the perceived needs of the City. The same result could occur if, because of California Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues or is required to expend available revenues to preserve the public health, safety and welfare. Default Whenever any event of default referred to in the Lease happens and continues, the Authority is authorized under the terms of the Lease to exercise any and all remedies available under law or granted under the Lease. See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” for a detailed description of available remedies in the case of a default under the Lease. If a default occurs, there is no remedy of acceleration of the total Lease Payments due over the term of the Lease. The Trustee is not empowered to sell the Leased Property and use the proceeds of such sale to prepay the 2018 Bonds or pay debt service on the 2018 Bonds. The City will be liable only for Lease Payments on an annual basis and, in the event of a default, the Trustee would be required to seek a separate judgment each year for that year’s defaulted Lease Payments. Any such suit for money damages would be subject to limitations on legal remedies against municipalities in the State, including a limitation on enforcement of judgments against funds of a fiscal year other than the fiscal year in which the Lease Payments were due and against funds needed to serve the public welfare and interest. Abatement Under certain circumstances related to damage, destruction, condemnation or title defects which cause a substantial interference with the use and possession of the Leased Property, the City’s obligation to make Lease Payments will be subject to full or partial abatement and could result in the Trustee having inadequate funds to pay the principal and interest on the 2018 Bonds as and when due. See “SECURITY FOR THE 2018 BONDS – Abatement” and “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” Although the City is required under the Lease to maintain property and liability insurance with respect to the Leased Property, the required insurance coverage is subject to certain conditions and restrictions. See “SECURITY FOR THE 2018 BONDS – Property Insurance.” In addition, the Authority is required to use the proceeds of rental interruption insurance maintained under the Lease to make debt service payments on the 2018 Bonds during any period of abatement. See “SECURITY FOR THE 2018 BONDS – Property Insurance.” However, there is no assurance that the Authority will receive proceeds of rental interruption insurance in time to make debt service payments on the 2018 Bonds when due. -52- No Debt Service Reserve Fund The Authority will not fund a debt service reserve fund for the 2018 Bonds. If Revenues are insufficient for the Authority to pay debt service on the 2018 Bonds when due, no debt service reserve will be available under the Indenture for the Authority to make such payments. Property Taxes Levy and Collection. The City does not have any independent power to levy and collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the City’s property tax revenues, and accordingly, could have an adverse impact on the ability of the City to make Lease Payments. Likewise, if the Teeter Plan were to be discontinued for the City, delinquencies in the payment of property taxes could have an adverse effect on the City’s ability to pay principal of and interest on the 2018 Bonds when due. Reduction in Inflationary Rate. Article XIIIA of the California Constitution provides that the full cash value base of real property used in determining assessed value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.” Such measure is computed on a calendar year basis. Because Article XIIIA limits inf lationary assessed value adjustments to the lesser of the actual inflationary rate or 2%, there have been years in which the assessed values were adjusted by actual inflationary rates, which were less than 2%. Since Article XIIIA was approved, the annual adjustment for inflation has fallen below the 2% limitation a limited number of times. The City is unable to predict if any adjustments to the full cash value base of real property within the City, whether an increase or a reduction, will be realized in the future. Appeals of Assessed Values. There are two types of appeals of assessed values that could adversely impact property tax revenues: Proposition 8 Appeals. Most of the appeals that might be filed in the City would be based on Section 51 of the Revenue and Taxation Code, which requires that for each lien date the value of real property must be the lesser of its base year value annually adjusted by the inflation factor pursuant to Article XIIIA of the State Constitution or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. Under California law, property owners may apply for a reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. In most cases, the appeal is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. These market-driven appeals are known as Proposition 8 appeals. Any reduction in the assessment ultimately granted as a Proposition 8 appeal applies to the year for which application is made and during which the written application was filed. These reductions are often temporary and are adjusted back to their original -53- values when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. Base Year Appeals. A second type of assessment appeal is called a base year appeal, where the property owners challenge the original (basis) value of their property. Appeals for reduction in the “base year” value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date. No assurance can be given that property tax appeals in the future will not significantly reduce the City’s property tax revenues. Sales Taxes With limited exceptions, the Measure E sales and use tax is imposed upon the same transactions and items subject to the sales tax levied statewide by the State. The State Legislature or the voters within the State, through the initiative process, could change or limit the transactions and items upon which the statewide sales tax and the Measure E sales and use tax are imposed. In particular, future legislation could limit the type of internet-based transactions subject to the Measure E sales and use tax. Any such change or limitation could have an adverse impact on the revenues collected pursuant to the Measure E sales and use tax. In addition, the State could change its collection procedures and therefore affect the City’s receipt of Measure E sales and use tax revenues. For a further description of the Measure E sales and use tax, see “CITY FINANIAL INFORMATION - Sales Taxes.” The Measure E sales and use tax is in addition to the sales or use tax levied statewide by the State. On November 6, 2012, State voters approved Proposition 30, which, among other things, increased the statewide tax rate by one quarter of one percent (increasing the statewide rate from 7.25% to 7.50%) for four years, effective January 1, 2013, through December 31, 2016; the tax increase was extended by 12 years on November 8, 2016, when State voter approved Proposition 55. Voters of the City or the County could also vote to increase sales tax rates. Future increases, if any, on sales tax rates could have an adverse effect on consumer spending decisions and consumption, resulting in a reduction of Measure E sales and use tax revenues. The increasing use of the Internet to conduct electronic commerce may affect the levels of Measure E sales and use tax receipts. Internet sales of physical products by businesses located in the State, and Internet sales of physical products delivered to the State by businesses located outside of the State are generally subject to the Measure E sales and use tax. It is possible, however, that some of these transactions may avoid taxation either through error or deliberate non-reporting, and this potentially reduces the amount of Measure E sales and use tax revenues. As a result, the more that Internet use increases, along with a failure to collect sales taxes on such Internet purchases, the more Measure E sales and use tax revenues may be reduced. Limitations on Remedies Available to Bond Owners The ability of the City to comply with its covenants under the Lease may be adversely affected by actions and events outside of the control of the City, and may be adversely affected -54- by actions taken (or not taken) by voters, property owners, taxpayers or payers of assessments, fees and charges. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS” above. Furthermore, any remedies available to the owners of the 2018 Bonds upon the occurrence of an event of default under the Lease or the Indenture are in many respects dependent upon judicial actions, which are often subject to discretion and delay and could prove both expensive and time consuming to obtain. In addition to the limitations on Bondowner remedies contained in the Lease and the Indenture, the rights and obligations under the 2018 Bonds, the Lease and the Indenture may be subject to the following: the United States Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect; equity principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power 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 2018 Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation or modification of their rights. The opinion to be delivered by Bond Counsel, concurrently with the issuance of the 2018 Bonds, will include a qualification that the rights of the owners of the 2018 Bonds and the enforceability of the 2018 Bonds and the Indenture, the Lease and the Site Lease may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in accordance with principles of equity or otherwise in appropriate cases. See “APPENDIX D — PROPOSED FORM OF OPINION OF BOND COUNSEL.” There is no deed of trust or mortgage securing the 2018 Bonds. Loss of Tax-Exemption As discussed under the caption “TAX MATTERS,” interest on the 2018 Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the 2018 Bonds were issued, as a result of future acts or omissions of the Authority or the City in violation of their respective covenants in the Lease and the Indenture. Should such an event of taxability occur, the 2018 Bonds are not subject to special redemption and will remain Outstanding until maturity or until redeemed under other provisions set forth in the Indenture. Tax Cuts and Jobs Act H.R. 1 of the 115th U.S. Congress, known as the “Tax Cuts and Jobs Act,” was enacted into law on December 22, 2017 (Pub. L. No. 115-97, 131 Stat. 2054 (2017)) (the “Tax Act”). The Tax Act makes significant changes to many aspects of the Code. For example, the Tax Act reduces the amount of mortgage interest expense and state and local income tax and property tax expense that individuals may deduct from their gross income for federal income tax purposes, -55- which could adversely affect the assessed values of residences in the City. However, the City cannot predict the effect that the Tax Act may have on its finances. Secondary Market for Bonds There can be no guarantee that there will be a secondary market for the 2018 Bonds or, if a secondary market exists, that any 2018 Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then-prevailing circumstances. Such prices could be substantially different from the original purchase price. Natural Calamities General. From time to time, the City has been and could be subject to natural calamities, including, but not limited to, earthquake, flood or wildfire, that may adversely affect economic activity in the City, and which could have a negative impact on City finances. There can be no assurance that the occurrence of any natural calamity would not cause substantial interference to the Leased Property, or that the City would have insurance or other resources available to make repairs to the Leased Property in order to make the Lease Payments under the Lease. See “- Abatement” above. Seismic. Like most regions in California, the City is in an area of significant seismic activity. There are numerous earthquake faults near the City, including particularly the San Andreas and Hayward faults. The San Andreas fault runs along the Marin and Sonoma Coast through the Santa Cruz Mountains. The Hayward fault covers the hills on the east side of the San Francisco Bay and into San Pablo Bay, directly north and east of the City. Both can cause damaging earthquakes. Numerous other faults are capable of producing damaging earthquakes similar in magnitude to the 1989 Loma Prieta earthquake. Soils in lowland areas away from major faults may also be unable to support buildings during major earthquakes. Landslides are likely on hillsides during major earthquakes. Coastal areas are also at risk of tsunamis, generated from earthquakes on local faults or across the Pacific. If there were to be an occurrence of severe seismic activity in the City, there could be substantial damage to and interference with the City’s right to use and occupy all or a portion of the Leased Property, which could result in Lease Payments being subject to abatement. See “- Abatement” above. Damage resulting from such an event could have a material adverse effect on the City’s financial condition as well, through unexpected recovery costs and reduced tax and other revenues. The City is not required to obtain earthquake insurance for the Facility. See “SECURITY FOR THE 2018 BONDS - Property Insurance” above. Also see “THE LEASED PROPERTY” for information about the construction of the Leased Property. Flood. Like most of California, the City is subject to unpredictable seasonal rainfall, with periods of intense and sustained precipitation occurring every few years. The extent of possible flooding in the City has been analyzed through Federal Emergency Management Agency (“FEMA”) flood insurance studies. These studies show that inundation due to a 100-year flood (a flood that has a one percent probability of being equaled or exceeded in any given year) can occur in [the Central San Rafael Basin (southern portions of Downtown San Rafael extending from the -56- San Rafael Canal/Creek westward to E Street, south including portions of Gerstle Park; Woodland Avenue area extending into portions of the Bret Harte neighborhood); Southeast San Rafael (the Canal neighborhood and greater East San Rafael residential and commercial areas including Spinnaker Point, Kerner Boulevard, Andersen Drive), San Pedro Peninsula (low-lying residential neighborhoods north of the San Rafael Canal including Summit Avenue/Marina Vista and Mooring Road, Loch Lomond Marina and low-lying areas of Peacock Gap); and the Gallinas Creek Basin (east of U.S. Highway 101).] [[The Leased Property is not located in the 100-year floodplain.]] There are numerous water storage tanks in or near the City the failure of which in an earthquake or other calamity could cause inundation of portions of the City. [Please confirm: no dams pose flood risk if they were to fail.] Sea Level Rise and Flooding With frontage on San Francisco Bay, parts of the City are also vulnerable to inundation as a result in a rise in sea levels. Inundation, and the threat thereof, could have material impacts on the financial condition of the City. For example, the capital expense to the City of preventing flooding or adapting to rising sea levels, and even the assessment and study of, and planning and preparation for, rising sea levels, could run into the many millions of dollars. Inundation due to rising sea levels could also have a negative impact on the economy of the City generally. The City could experience the loss of material amounts of property tax, sales tax, transient occupancy tax and other sources of revenues. The predictions for sea level rises vary. A report released by the San Francisco Bay Conservation Development Commission (“BCDC”) in 2011 predicts sea levels in the Bay to rise 16 inches by 2050 and 55 inches by 2100. The State of California’s Fourth Climate Change Assessment, released in 2017, estimates sea level rise or the year 2100 in the range of 14 inches to 94 inches (36 cm to 239 cm) with an additional very low probability, worst-case estimate that exceeds 108 inches (274 cm). As part of the National Flood Insurance Program (“NFIP”), a federal program that enables property owners, businesses, and residents in participating communities to purchase flood insurance backed by the federal government, FEMA has recently revised Flood Insurance Rate Maps (“FIRMs”) for San Francisco Bay Area communities. FIRMs identify areas that are subject to inundation during a flood having a 1% chance of occurrence in a given year (also known as a “base flood” or “100-year flood”). FEMA refers to an area that is at risk from a flood of this magnitude as a special flood hazard area (“SFHA”). FIRMs also identify areas that are subject to inundation during a flood having a 0.2% chance of occurrence in a given yea. FEMA refers to an area that is at risk from a flood of this magnitude as other areas of flood hazard (“OAFH”). The City participates in the NFIP. On March 24, 2014, FEMA issued a Preliminary FIRM for the City (the “Preliminary FIRM”). Portions of the City are identified as a SFHA, and other portions of the City as OAFH. The Preliminary FIRM is available through FEMA’s website at https://hazards.fema.gov/femaportal/prelimdownload/. FEMA maps coastal flood hazards based on existing shoreline characteristics, and wave and storm climatology at the time of the flood study. In accordance with current federal regulations, FEMA does not map flood hazards based on anticipated future sea levels or climate change. The portions of the City within the two FEMA flood zones are near or border waterways and are typically, low-lying, former diked baylands and marshlands. The larger, more significant flood prone areas include: the Central San Rafael Basin (southern portions of Downtown San -57- Rafael extending from the San Rafael Canal/Creek westward to E Street, south including portions of Gerstle Park; Woodland Avenue area extending into portions of the Bret Harte neighborhood); Southeast San Rafael (the Canal neighborhood and greater East San Rafael residential and commercial areas including Spinnaker Point, Kerner Boulevard, Andersen Drive), San Pedro Peninsula (low-lying residential neighborhoods north of the San Rafael Canal including Summit Avenue/Marina Vista and Mooring Road, Loch Lomond Marina and low-lying areas of Peacock Gap); and the Gallinas Creek Basin (east of U.S. Highway 101). In January 2014, the Department of Community Development of the City released an informational white paper entitled “Climate Adaptation - Sea Level Rise” (the “White Paper”), which identifies a number of challenges and proposes possible actions to address the threat to the City of rising sea levels. The challenges include: 1. Assessment and long-term strategy planning for sea level adaptation cannot be done in isolation or be “piecemeal” in its approach. Yet there are no jurisdictional boundaries to the impacts of or planning for sea level rise in the San Francisco Bay. 2. Assessment and planning requires the involvement of multiple agencies. Given the complexity of this issue assessing and planning requires the participation, coordination and resources of a number of agencies. Other participating agencies would include, among others, County of Marin, BCDC, the State Regional Water Quality Control Board, FEMA, and US Army Corps of Engineers. 3. The number of stakeholders involved and effected is substantial. In the Central San Rafael Basin alone, there are thousands of property owners and business owners that are impacted by projected sea level rise, as well as the cost and implications of potential adaptation solutions. Public outreach and participation is critical. 4. Information on sea level rise continues to evolve which could impact long -range planning. For example, in the short-term, the long-awaited update of the FEMA FIRM maps will present new flood zone mapping information that may have broader area impacts and will likely result in higher insurance costs to effected property owners. 5. San Rafael has diverse shoreline and levee conditions that vary by neighborhood and area. So, a “one-size-fits-all” approach to long-term adaptation strategies is impossible. While an area-wide assessment is critical, the assessment must carefully look at and consider localized conditions and solutions. 6. City resources and funding are limited. At this time, there are no Public Works Department staff resources, nor is there an earmarked City budget to initiate the preparation of a vulnerability assessment. 7. Long-term adaptation strategies will require trade-offs. Some of the adaptation strategies would have environmental implications that may be at -odds with current policies and priorities. For example, the retreat strategy that converts upland or seasonal marsh to tidal marsh could significantly impact private property rights, private view loss, and biological resources. Assessing the trade-offs will require the cooperation of and coordination with the appropriate stakeholders. 8. Long-term adaptation strategies will be costly. The cost of strategies such as “barriers” could be staggering. Even the raising of an earthen levee is extremely costly unless fill -58- material is locally available. Planning the appropriate strategy for an area will need to consider cost in addition to effectiveness. While federal, state and other agency sources may be available to partially fund these strategies, the formation of assessment districts or other taxing measure will likely be necessary. The White Paper suggests the following actions to consider and pursue: 1. Prioritize Preparation of a Vulnerability Assessment. The City may choose to investigate and determine Public Works Department staff resources needed to pursue next steps. 2. Investigate and Pursue Funding Sources for Staffing, Studies and Adaptation. The City may choose to monitor and pursue funding opportunities such as federal grants. 3. Engage in Countywide and Regional Efforts. The City may choose to identify County, State, and regional agencies with Bay and shoreline oversight; participate in coordinating a collective effort, partnership and/or assistance in preparation of a vulnerability assessment . 4. Identify Stakeholders and Initiate Outreach. 5. Continue to Monitor and Participate in Studies and Efforts Underway. These efforts include monitoring updates to FEMA FIRM Maps; participating in County of Marin Public Works Department Gallinas Creek Watershed Project; and monitoring and participating in BCDC Pilot Project for Priority Development Areas (PDA), among others. 6. Complete Tasks to Stay Current on Data and to be Eligible for Funding Opportunities. 7. Pursue Preparation of a Vulnerability Assessment. Assessment should include Identify long-term adaptation strategies, and identifying tools for planning and localized implementation including adoption of a Bayfront Corridor zoning overlay or land use designation, and continued Canal dredging. 8. Commit to Long-Term Implementation and Programming . The City should identify tools for funding strategy implementation (e.g., including assessment districts or other taxing measures) Despite the multiple studies, initiatives and construction described above, it remains possible that sea-level rise or other impacts of climate change or flooding from a major storm will affect the City. The City is unable to predict with certainty to what extent they will occur, when they may occur, and, if any such events occur, whether they will have a material adverse effect on the financial condition of the City. TAX MATTERS Federal Tax Status. 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 2018 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax, although, in the case of tax years beginning prior to January 1, 2018, for the purpose of computing the alternative minimum tax imposed on certain cor porations, such interest earned -59- by a corporation prior to the end of its tax year in 2018 is taken into account in determining certain income and earnings. The opinions set forth in the preceding paragraph are subject to the condition that the Authority and the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Tax Code”) relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the 2018 Bonds. The Authority and the City have made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the 2018 Bonds. Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public (excluding bond houses and brokers) at which a 2018 Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes “original issue discount” for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which a 2018 Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes “original issue premium” for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount and original issue premium are disregarded. Under the Tax 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 2018 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such 2018 Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2018 Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2018 Bonds who purchase the 2018 Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2018 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2018 Bonds 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 2018 Bonds under the federal individual alternative minimum tax. Under the Tax Code, original issue premium is amortized on an annual basis over the term of the 2018 Bond (said term being the shorter of the 2018 Bond’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 2018 Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a 2018 Bond is amortized each year over the term to maturity of the 2018 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized 2018 Bond premium is not deductible for federal income tax purposes. Owners of premium 2018 Bonds, 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 2018 Bonds. California Tax Status. In the further opinion of Bond Counsel, interest on the 2018 Bonds is exempt from California personal income taxes. -60- Other Tax Considerations. Current and future legislative proposals, if enacted into law, clarification of the Tax Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, such legislation would apply to bonds issued prior to enactment. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of such opinion, and Bond Counsel has expressed no opinion with respect to any proposed legislation or as to the tax treatment of interest on the Bonds, or as to the consequences of owning or receiving interest on the Bonds, as of any future date. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. Owners of the 2018 Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2018 Bonds may have federal or state tax consequences other than as described above. Other than as expressly described above, Bond Counsel expresses no opinion regarding other federal or state tax consequences arising with respect to the 2018 Bonds, the ownership or disposition of the 2018 Bonds, or the amount, accrual or receipt of interest on, the 2018 Bonds. CERTAIN LEGAL MATTERS Jones Hall, A Professional Law Corporation, Bond Counsel, will render an opinion with respect to the validity of the 2018 Bonds, the form of which is set forth in APPENDIX D.” Certain legal matters will also be passed upon for the City and the Authority by Jones Hall, as Disclosure Counsel. Certain legal matters will be passed upon for the City and the Authority by the City Attorney. LITIGATION -61- To the best knowledge of the City, there is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending and notice of which has been served on and received by the City or, to the knowledge of the City, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of the Lease, the Site Lease or the Indenture, or upon the financial condition, assets, properties or operations of the City, and the City is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially adversely affect the consummation of the transactions contemplated by the Lease, the Site Lease or the Indenture, or the financial conditions, assets, properties or operations of the City, including but not limited to the payment and performance of the City’s obligations under the Lease. RATING S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC (“S&P”), has assigned its municipal bond rating of “___” to the 2018 Bonds. This rating reflects only the views of S&P, and an explanation of the significance of this rating, and any outlook assigned to or associated with this rating, should be obtained from S&P. 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 agency (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. Any such downward revision or withdrawal of any rating on the 2018 Bonds may have an adverse effect on the market price or marketability of the 2018 Bonds. CONTINUING DISCLOSURE The City (on behalf of the Authority and itself) will covenant for the benefit of owners of the 2018 Bonds to provide certain financial information and operating data relating to the City (the “Annual Report”), by not later than nine months after the end of the City's fiscal year (presently June 30) and commencing April 1, 2018 with the report for the fiscal year ending June 30, 2017, and to provide notices of the occurrence of certain listed events. These covenants have been made in order to assist the purchaser of the 2018 Bonds in complying with Securities Exchange Commission Rule 15c2-12(b)(5), as amended (the “Rule”). The specific nature of the information to be contained in the Annual Report or the notices of listed events is set forth in “APPENDIX E — FORM OF CONTINUING DISCLOSURE CERTIFICATE.” The City and certain related entities, previously entered into certain disclosure undertakings under the Rule in connection with the issuance of long -term obligations. In connection with the preparation of this Official Statement, the City caused a review of filings -62- available on the EMMA internet site maintained by the Municipal Securities Rulemaking Board covering the prior five years to be performed. Based on such review, the City believes that neither it nor its related entities have failed to comply in any material respect during the past five years with their prior continuing disclosure undertakings under the Rule. Willdan Financial Services will serve as the initial dissemination agent with respect to the City’s undertaking pursuant to the Rule with respect to the 2018 Bonds. In addition, in connection with the designation of the Bonds as “Green Bonds,” the City has agreed to file periodic updates regarding the expenditure of Bond proceeds on capital projects with the EMMA system. See APPENDIX G. These filings may, but need not, be included in the City’s Annual Report. MUNICIPAL ADVISOR The City and the Authority have retained PFM Financial Advisors LLC, San Francisco, California, as municipal advisor (the “Municipal Advisor”) in connection with the offering of the 2018 Bonds and the preparation of this Official Statement. The Municipal Advisor assisted in the preparation and review of this Official Statement. All financial and other information presented in this Official Statement has been provided by the City and the Authority from their records, except for information expressly attributed to other sources. The Municipal Advisor takes no responsibility for the accuracy or completeness of the data provided by the City, the Authority or others and has not undertaken to make an independent verification or does not assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. UNDERWRITING Raymond James & Associates, Inc. (the “Underwriter”), has entered into a bond purchase agreement with the Authority and City under which the Underwriter will purchase the 2018 Bonds at a price of $_________ (equal to the par amount of the 2017 Bonds, plus/less a [net] original issue premium/discount of $___________, and less an Underwriter’s discount of $___________). The Underwriter will be obligated to take and pay for all of the 2018 Bonds if any are taken. The Underwriter intends to offer the 2018 Bonds to the public at the offering prices set forth on the inside cover page of this Official Statement. After the initial public offering, the public offering price may be varied from time to time by the Underwriter. PROFESSIONAL SERVICES In connection with the issuance of the 2018 Bonds, fees payable to the following professionals involved in the offering are contingent upon the issuance and delivery of the 2018 Bonds: Jones Hall, A Professional Law Corporation, as Bond Counsel and Disclosure Counsel; Quint & Thimmig LLP, Larkspur, California, as Underwriter’s counsel; PFM Financial Advisors LLC, as municipal advisor to the Authority and the City; and MUFG Union Bank, N.A., as Trustee. -63- EXECUTION The execution of this Official Statement and its delivery have been authorized by the Board of the Authority and the City Council of the City. SAN RAFAEL JOINT POWERS FINANCING AUTHORITY By: Executive Director CITY OF SAN RAFAEL By: City Manager A-1 APPENDIX A GENERAL INFORMATION ABOUT THE CITY OF SAN RAFAEL AND THE COUNTY OF MARIN The following information concerning the City of San Rafael (the “City”) and the County of Marin (the “County”) is included only for the purpose of supplying general information regarding the region. The 2018 Bonds are not a debt of the City, the County, the State of California (the “State”) or any of its political subdivisions (other than the Authority), and none of the City, the County, the State or any of its political subdivisions (other than the Authority) is liable therefor. General The City. The City is located 17 miles north of San Francisco in Marin County. Located 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 an 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 County. The 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, 2017, a population of approximately 263,604. Geographically, the County forms a large, southward-facing peninsula, with the Pacific Ocean to the west, San Pablo Bay and San Francisco Bay to the east and, across the Golden Gate, the city of San Francisco to the south. Marin County’s northern border is with Sonoma County. Most of the County’s population resides on the eastern side, with a string of communities running along the Bay, from Sausalito to Tiburon to San Rafael to Corte Madera. The interior contains large areas of agricultural and open space; West Marin, through which California State Route 1 runs alongside the California coast, contains many small unincorporated communities dependent on agriculture and tourism for their economies. A-2 Population The following table lists population estimates for the City and County for the last five calendar years, as of January 1. MARIN COUNTY Population Estimates Calendar Years 2013 through 2017 2013 2014 2015 2016 2017 Belvedere 2,120 2,141 2,157 2,173 2,172 Corte Madera 9,306 9,397 9,434 9,480 9,486 Fairfax 7,438 7,496 7,525 7,560 7,571 Larkspur 12,123 12,258 12,426 12,551 12,572 Mill Valley 14,474 14,677 14,796 14,887 14,910 Novato 53,341 54,037 54,365 54,466 54,522 Ross 2,480 2,508 2,526 2,541 2,543 San Anselmo 12,625 12,776 12,862 12,929 12,937 San Rafael 59,329 60,058 60,442 60,692 60,842 Sausalito 7,118 7,202 7,274 7,314 7,327 Tiburon 9,260 9,381 9,453 9,497 9,508 Balance of County 67,806 68,623 69,045 69,060 69,214 Marin County Total 257,420 260,554 262,305 263,150 263,604 Source: State of California, Department of Finance, Demographic Research. Employment The City’s major employers are set forth below: CITY OF SAN RAFAEL Major Employers (As of June 30, 2017) Employer Employees Kaiser Permanente 2,061 Autodesk Inc. 719 San Rafael City Schools 700 Dominican University of California 456 City of San Rafael 454 Wells Fargo Bank 310 Bradley Real Estate 280 Community Action Marin 255 Buckelew Programs 240 Total 5,475 Source: City of Ran Rafael Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2017. A-3 The County’s major employers are set forth below in alphabetized order. COUNTY OF MARIN Major Employers (As of January 2018) Employer Name Location Industry Autodesk Inc San Rafael Computer Programming Services Bio Marin Pharmaceutical San Rafael Laboratories-Research & Development Bradley Real Estate Belvedere Tibrn Real Estate Cagwin & Dorward Landscape Novato Landscape Contractors California Alpine Club Mill Valley Clubs College of Marin Kentfield Schools-Universities & Colleges Academic Community Action Marin San Rafael Non-Profit Organizations Corrections Dept San Quentin Government Offices-State Extreme Pizza San Rafael Restaurant Management Glassdoor Inc Mill Valley Website Hosting Kaiser Foundation Hospital Novato Hospitals Kaiser Permanente Sn Rafael MD San Rafael Hospitals Kreines & Kreines Inc Belvedere Tibrn Environmental & Ecological Services Macy's Corte Madera Department Stores Managed Health Network Inc San Rafael Mental Health Services Marin General Hospital Greenbrae Hospitals Marin Independent Journal San Rafael Newspapers (Publishers/Mfrs) Nordstrom Corte Madera Department Stores Nordstrom Restaurant Corte Madera Restaurants-Cyber Cafes Rh Corte Madera Furniture-Dealers-Retail San Rafael Human Resources San Rafael Government Offices-City, Village & Twp Sutter Care At Home Novato Hospices Township Building Svc Inc Novato Janitor Service University of Ca Co-Op Ext Novato Schools-Universities & Colleges Academic Westamerica Bancorporation San Rafael Holding Companies (Bank) Source: California Employment Development Department, extracted from The America’s Labor Market Information System (ALMIS) Employer Database, 2018 1st Edition. A-4 The unemployment rate in the County was 2.2% in November 2017, down from a revised 2.6% in October 2017, and below the year-ago estimate of 3.1%. This compares with an unadjusted unemployment rate of 4.0% for California and 3.9% for the nation during the same period. The following table shows civilian labor force data and wage and salary employment data for Marin County for the years 2012 through 2016. SAN RAFAEL METROPOLITAN DIVISION (Marin County) Annual Average Civilian Labor Force, Employment and Unemployment, Employment by Industry (March 2016 Benchmark) 2012 2013 2014 2015 2016 Civilian Labor Force (1) 136,900 138,400 139,100 139,500 141,100 Employment 128,300 131,200 133,100 134,600 136,500 Unemployment 8,600 7,100 5,900 4,900 4,600 Unemployment Rate 6.3% 5.2% 4.3% 3.5% 3.2% Wage and Salary Employment: (2) Agriculture 400 400 400 300 300 Mining and Logging 100 0 0 0 0 Construction 5,200 5,700 6,100 6,500 6,700 Manufacturing 2,400 2,900 3,500 4,000 4,500 Wholesale Trade 2,600 2,700 2,800 3,000 3,000 Retail Trade 13,600 13,900 14,300 14,200 14,400 Trans., Warehousing, Utilities 1,100 1,200 1,300 1,200 1,200 Information 2,800 2,800 2,600 2,600 2,600 Financial Activities 7,200 7,300 6,800 6,400 6,300 Professional and Business Services 18,600 18,700 18,200 18,300 18,500 Educational and Health Services 18,500 19,400 19,700 20,100 20,600 Leisure and Hospitality 13,200 14,400 15,100 15,400 16,000 Other Services 5,000 5,200 5,200 5,200 5,400 Federal Government 800 800 700 700 700 State Government 2,000 1,900 1,800 1,900 2,000 Local Government 12,700 12,700 12,900 12,800 12,900 Total All Industries (3) 106,200 110,000 111,300 112,600 115,100 (1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (3) Totals may not add due to rounding. Source: State of California Employment Development Department. A-5 Construction Activity Provided below are the building permits and valuations for the City and the County for calendar years 2012 through 2016. CITY OF SAN RAFAEL Total Building Permit Valuations Calendar Years 2012 through 2016 (dollars in thousands) 2012 2013 2014 2015 2016 Permit Valuation New Single-family $195.0 $2,640.7 $767.2 $20,904.6 $6,838.8 New Multi-family 0.0 0.0 3,612.8 0.0 5,890.7 Res. Alterations/Additions 12,469.7 23,587.5 34,216.4 30,875.9 26,167.0 Total Residential $12,664.7 $26,228.2 $38,596.4 $51,780.5 $38,896.5 New Commercial $25,264.0 $814.8 $53,946.5 $417.5 $2,120.7 New Industrial 0.0 0.0 0.0 0.0 0.0 New Other 0.0 152.4 81.7 366.0 15,891.0 Com. Alterations/Additions 11,762.2 32,361.1 39,257.1 51,772.4 19,382.7 Total Nonresidential $37,026.2 $33,328.3 $93,285.3 $52,555.9 $37,394.4 New Dwelling Units Single Family 2 4 1 38 9 Multiple Family 0 0 45 0 15 TOTAL 2 4 46 38 24 Source: Construction Industry Research Board, Building Permit Summary MARIN COUNTY Total Building Permit Valuations Calendar Years 2012 through 2016 (dollars in thousands) 2012 2013 2014 2015 2016 Permit Valuation New Single-family $36,152.7 $59,423.2 $71,460.1 $75,834.5 $62,804.2 New Multi-family 4,927.5 33,397.4 14,069.1 2,426.4 7,869.8 Res. Alterations/Additions 132,762.3 152,065.1 203,375.3 203,754.7 194,743.0 Total Residential $173,842.5 $244,885.7 $288,904.5 $282,015.6 $265,417.0 New Commercial $48,102.5 $26,262.6 $76,204.6 $10,439.6 $17,564.0 New Industrial 2,124.0 154.9 0.0 0.0 0.0 New Other 11,275.0 15,072.2 24,104.2 42,614.2 54,015.5 Com. Alterations/Additions 243,054.4 93,745.8 85,972.9 497,343.6 69,437.8 Total Nonresidential $304,555.9 $135,235.5 $186,281.7 $550,397.4 $141,017.3 New Dwelling Units Single Family 67 90 112 121 89 Multiple Family 50 212 76 20 17 TOTAL 117 302 188 141 106 Source: Construction Industry Research Board, Building Permit Summary A-6 Effective Buying Income “Effective Buying Income” is defined as personal income less personal tax and nontax payments, a number often referred to as “disposable” or “after-tax” income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as “disposable personal income.” The following table summarizes the total effective buying income for the City, the County, the State and the United States for the period 2012 through 2016: CITY OF SAN RAFAEL Effective Buying Income 2012 through 2016 Year Area Total Effective Buying Income (000’s Omitted) Median Household Effective Buying Income 2012 City of San Rafael $2,060,978 $57,110 Marin County 11,615,363 69,129 California 864,088,828 47,307 United States 6,737,867,730 41,358 2013 City of San Rafael $1,789,048 $48,994 Marin County 10,035,970 61,675 California 858,676,636 48,340 United States 6,982,757,379 43,715 2014 City of San Rafael $2,219,178 $63,367 Marin County 11,636,360 74,420 California 901,189,699 50,072 United States 7,357,153,421 45,448 2015 City of San Rafael $2,412,075 $67,267 Marin County 12,751,873 80,192 California 981,231,666 53,589 United States 7,757,960,399 46,738 2016 City of San Rafael $2,519,848 $67,355 Marin County 13,506,516 80,608 California 1,036,142,723 55,681 United States 8,132,748,136 48,043 Source: The Nielsen Company (US), Inc. A-7 Commercial Activity Summaries of historic taxable sales within the City and the County during the past five years in which data is available are shown in the following tables. Annual figures are not yet available for calendar year 2016. Total taxable sales during the first three quarters of calendar year 2016 in the City were reported to be $1.311 billion, a 0.22% decrease over the total taxable sales of $1.314 billion reported during the first three quarters of calendar year 2015. CITY OF SAN RAFAEL Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands) Retail Stores Total All Outlets Number of Permits Taxable Transactions Number of Permits Taxable Transactions 2011 1,584 $1,151,941 2,713 $1,431,727 2012 1,696 1,234,514 2,805 1,532,832 2013 1,793 1,336,922 2,920 1,660,492 2014 1,765 1,407,601 2,884 1,751,753 2015(1) 1,744 1,426,578 3,079 1,777,942 (1) Permit figures for calendar year 2015 are not comparable to that of prior years due to outlet counts in these reports including the number of outlets that were active during the reporting period. Retailers that operate part -time are now tabulated with store retailers. Source: California Department of Tax and Fee Administration, Taxable Sales in California (Sales & Use Tax). Total taxable sales reported during the first three quarters of calendar year 2016 in the County were $3.714 billion, a 0.85% increase over the total taxable sales of $3.683 billion reported during the first three quarters of calendar year 2015. COUNTY OF MARIN Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands) Retail Stores Total All Outlets Number of Permits Taxable Transactions Number of Permits Taxable Transactions 2011 5,993 $3,134,270 9,906 $4,049,869 2012 6,207 3,357,884 10,057 4,333,600 2013 6,550 3,605,108 10,414 4,664,920 2014 6,457 3,745,315 10,272 4,861,801 2015(1) 4,836 3,836,153 10,958 5,046,316 (1) Permit figures for calendar year 2015 are not comparable to that of prior years due to outlet counts in these reports including the number of outlets that were active during the reporting period. Retailers that operate part-time are now tabulated with store retailers. Source: California Department of Tax and Fee Administration, Taxable Sales in California (Sales & Use Tax). A-8 Transportation The County's transportation facilities are excellent, with U.S. Highway 101 and U.S. Interstate Highway 580 providing easy access to the rest of California. Buses provide commuter service to San Francisco and other Bay Area cities, and commuter ferries embark for San Francisco from the communities of Sausalito, Tiburon, and Larkspur. The San Francisco International Airport, located 30 miles from the City, provides air passenger service to points worldwide. Sonoma-Marin Area Transit (SMART), which is a new passenger rail service in Sonoma and Marin Counties, officially opened on August 25, 2017. B-1 APPENDIX B SUMMARY OF PRINCIPAL LEGAL DOCUMENTS C-1 APPENDIX C FISCAL YEAR 2016-17 COMPREHENSIVE ANNUAL FINANCIAL REPORT D-1 APPENDIX D PROPOSED FORM OF OPINION OF BOND COUNSEL E-1 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE $____________ SAN RAFAEL JOINT POWERS FINANCING AUTHORITY Lease Revenue Bonds, Series 2018 (Public Safety Facilities Project) (Green Bonds) This Continuing Disclosure Certificate (this “Disclosure Certificate”) is executed and delivered by the City of San Rafael (the “City”), on behalf of the San Rafael Joint Powers Financing Authority (the “Authority”) and itself, in connection with the issuance by the Authority of the bonds captioned above (the “Bonds”). The Bonds are being issued under an Indenture of Trust dated as of March 1, 2018 (the “Indenture”), by and between the Authority and MUFG Union Bank, N.A., as trustee (the “Trustee”). The City hereby covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City on behalf of itself and the Authority for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: “Annual Report” means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Annual Report Date” means nine months after the end of the City's fiscal year (currently April 1, based on the City’s fiscal year-end of June 30). “Dissemination Agent” means Willdan Financial Services, 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” means any of the events listed in Section 5(a) of this Disclosure Certificate. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. “Official Statement” means the final official statement dated _____________, 2018, executed by the City and the Authority in connection with the issuance of the Bonds. “Participating Underwriter” means Raymond James & Associates, Inc., the original purchaser of the Bonds required to comply with the Rule in connection with offering of the Bonds. “Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. E-2 Section 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing April 1, 2018, with the report for the 2016-17 Fiscal Year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City is in compliance wit h the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the City’s Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). The City shall provide a written certificate? with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the City hereunder. (b) If the City does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the City shall, in a timely manner as required by the Rule, provide (or cause the Dissemination Agent to provide) to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A. (c) With respect to each Annual Report, the Dissemination Agent shall: (i) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and (ii) if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided. Section 4. Content of Annual Reports. The City’s Annual Report shall contain or incorporate by reference the following: (a) Financial Statements. Audited financial statements of the City for the preceding fiscal year, prepared in accordance generally accepted accounting principles. If the City’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when the y become available. (b) Other Annual Information. To the extent not included in the audited final statements of the City, the Annual Report shall also include financial and operating data with respect to the City for preceding fiscal year, substantially similar to that provided in the corresponding tables and charts in the Official Statement, as follows: [FOR DISCUSSION] E-3 (i) General Fund revenue sources by type (over $1,000,000); (ii) assessed valuations and tax collection records; (iii) summary of investments, to the extent not summarized in the Audited Financial Statements, including types and amounts of investments; (iv) combined annual contribution (City’s share and employees’ share) to the Public Employees Retirement System; (v) adopted General Fund budget; and (vi) to the extent not summarize in the Audited Financial Statements, a schedule of General Fund long term debt, indicating type of issue, final maturity, interest rate range, original issue amount, outstanding principal amount, dollar amount maturing in the fiscal year to which the report relates and principal amount outstanding as of the end of the fiscal year to which the report relates. (c) Cross References. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public through the MSRB. The City shall clearly identify each such other document so included by reference. If the document included by reference is a final official statement, it must be available from the MSRB. Section 5. Reporting of Significant Events. (a) The City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds: (1) Principal and interest payment delinquencies. (2) Non-payment related defaults, if material. (3) Unscheduled draws on debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions, 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. E-4 (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 Indenture. (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” and that subparagraph (a)(6) also contains the qualifier “material” with respect to certain notices, determinations or other events affecting the tax status of the Bonds. 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 it determines the event’s occurrence is material for purposes of U.S. federal securities law. Whenever the City obtains knowledge of the occurrence of any of these Listed Events, the City will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the City will cause a notice to be filed as set forth in paragraph (b) above. (d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. E-5 Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The City’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. 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 will be Willdan Financial Services. Any Dissemination Agent may resign by providing 30 days’ written notice to the City. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or 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 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. E-6 A notice of any amendment made pursuant to this Section 9 shall be filed in the same manner as for a Listed Event under Section 5(c). Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to includ e any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, the Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, 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 12. Duties, Immunities and Liabilities of Dissemination Agent. (a) 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 Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Bond owners or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. (b) The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time, and shall be reimbursed for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. Section 13. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given as follows: To the Issuer: San Rafael Joint Powers Financing Authority c/o City of San Rafael 1400 Fifth Avenue San Rafael, CA 94901 Fax: (415 485-3109 Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. E-7 Section 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 15. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument. Date: ________________, 2018 CITY OF SAN RAFAEL By: City Manager E-8 EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: San Rafael Joint Powers Financing Authority (the “Authority”) Name of Bond Issue: San Rafael Joint Powers Financing Authority Lease Revenue Bonds, Series 2018 (Public Safety Facilities Project) (Green Bonds) Date of Issuance: _________________, 2018 NOTICE IS HEREBY GIVEN that the City of San Rafael, on behalf of itself and the Authority, has not provided an Annual Report with respect to the above-named Bonds as required by the Indenture of Trust dated as of March 1, 2018, between the Authority and MUFG Union Bank, N.A. The City anticipates that the Annual Report will be filed by _____________. Dated: CITY OF SAN RAFAEL By: Its: F-1 APPENDIX F 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 2018 Bonds, payment of principal, interest and other payments on the 2018 Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the 2018 Bonds 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 City (the “Issuer”) nor the Trustee (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 2018 Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the 2018 Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the 2018 Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC. 1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue. 2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC ’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding F-2 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 a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. The information contained on this Internet site is not incorporated herein by reference. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. 6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI 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 F-3 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. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to the Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to the Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC’s records and followed by a book - entry credit of tendered Securities to the Agent’s DTC account. 10. 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. 11. 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. 12. 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. G-1 APPENDIX G FORM OF GREEN BOND PROJECT REPORT SAN RAFAEL JOINT POWERS FINANCING AUTHORITY Lease Revenue Bonds, Series 2018 (Public Safety Facilities Project) (Green Bonds) Date of issuance: _____, 2018 CUSIP: ________ NOTICE IS HEREBY GIVEN, that the City of San Rafael has financed the following project with the above-referenced bonds (the “Bonds”): Amount Financed Project Description $ This notice is to provide interested parties with information regarding the use of proceeds of the Bonds. [ Once all proceeds of the Bonds have been spent, no further updates will be provided. ] [ All proceeds of the Bonds have been spent; no further updates on the projects or the use of the Bonds will be provided. ] Dated: __________________ Quint & Thimmig LLP 02/07/18 18030.07 $___________ SAN RAFAEL JOINT PUBLIC FINANCING AUTHORITY Lease Revenue Bonds, Series 2018 BOND PURCHASE AGREEMENT July 13, 2018 San Rafael Joint Public Financing Authority 1400 Fifth Avenue San Rafael, California 94905 City of San Rafael 1400 Fifth Avenue San Rafael, California 94905 Ladies and Gentlemen: Raymond James & Associates, Inc. (the “Underwriter”) hereby offers to enter into this bond purchase agreement (the “Bond Purchase Agreement”) with the San Rafael Joint Public Financing Authority (the “Authority”) and the City of San Rafael (the “City”). Upon the acceptance hereof by the Authority and the City, this offer will be binding upon the Authority, the City and the Underwriter. This offer is made subject to (a) the written acceptance hereof by the Authority and the City and (b) withdrawal by the Underwriter upon written notice (by telecopy or otherwise) delivered to the Authority and the City at any time prior to each of their acceptance hereof by the Authority and the City. 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase on the Closing Date (as defined herein), and the Authority and the City hereby agree to sell and deliver to the Underwriter on the Closing Date, $_________ aggregate principal amount of San Rafael Joint Public Financing Authority Lease Revenue Bonds, Series 2018 (the “Bonds). The Bonds are being issued pursuant to Article 4, Chapter 5, Division 7, Title 1 of the California Government Code (the “Marks-Roos Act”), a resolution of the Authority authorizing the issuance of the Bonds, adopted on March 5, 2018 (the “Authority Resolution”), and an Indenture of Trust, dated as of March 1, 2018 (the “Indenture”), by and between the Authority and MUFG Union Bank, N.A., as trustee (the “Trustee”). The City will lease certain real property and all buildings and other improvements installed thereon (collectively, the “Leased Property”) to the Authority pursuant to a Site Lease, dated as of March 1, 2018 (the “Site Lease”). The Leased Property will be leased by the Authority to the City pursuant to the Lease Agreement, dated as of March 1, 2018 (the “Lease Agreement”), by and between the Authority and the City. Pursuant to an Assignment Agreement, dated as of March 1, 2018 (the “Assignment Agreement”), by and between the Authority and the Trustee, the Authority will assign, for the benefit of the owners of the Bonds, its right to receive lease payments (the ”Lease -2- Payments”) made by the City under the Lease Agreement and its right to exercise rights and remedies of the Authority under the lease Agreement. All capitalized terms not defined herein shall have the respective meaning specified in Section 1.01 of the Indenture. Under the Lease Agreement, the City is required to make Lease Payments and Additional Rental Payments from legally available funds in amounts calculated to be sufficient to pay principal of and interest on the Bonds when due. All of the Authority’s right, title and interest in and to the Lease Agreement (except for the right to receive Additional Rental Payments to the extent payable to the Authority and certain rights to indemnification), including the right to receive Lease Payments under the Lease Agreement, are assigned to the Trustee for the benefit of the Owners of the Bonds. The Bonds are being issued to finance certain public capital improvements of the City, consisting generally of a new public safety center and two replacement fire stations, and (b) pay costs of issuance of the Bonds. The aggregate purchase price to be paid by the Underwriter for the Bonds is hereby agreed to be $___________, which amount represents the principal amount of the Bonds of $___________, less $________, representing the Underwriter’s discount, plus $_________, representing an original issue premium (such payment and delivery of the Bonds and the other actions contemplated hereby to take place at the time of such payment and delivery being herein sometimes called the “Closing”). The Authority and the City acknowledge and agree that (i) the purchase and sale of the Bonds pursuant to this Bond Purchase Agreement is an arm’s-length commercial transaction between the Authority and the City and the Underwriter; (ii) in connection with such transaction, the Underwriter is acting solely as a principal and not as an agent or a fiduciary of the Authority or the City; (iii) the Underwriter has not assumed a fiduciary responsibility in favor of the Authority or the City with respect to the offering of the Bonds or the process leading thereto (whether or not the Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the Authority or the City on other matters) nor has it assumed any other obligation to the Authority or the City except the obligations expressly set forth in this Bond Purchase Agreement, (iv) the Underwriter has financial and other interests that differ from those of the Authority and the City; and (v) the Authority and the City have consulted with their own legal and financial advisors to the extent they deemed appropriate in connection with the offering of the Bonds. The Authority and the City hereby acknowledge receipt from the Underwriter of disclosures required by the Municipal Securities Rulemaking Board (“MSRB”) Rule G-17 (as set forth in MSRB Notice 2012-25 (May 7, 2012), relating to disclosures concerning the Underwriter’s role in the transaction, disclosures concerning the Underwriter’s compensation, conflict disclosures, if any, and disclosures concerning complex municipal securities financing, if any. A Preliminary Official Statement of the City and the Authority, dated March 7, 2018 (together with the Appendices thereto, any documents incorporated therein by reference and any supplements or amendments thereto and as disseminated in its printed physical form or in electronic form in all respects materially consistent with such physical form, the “Preliminary Official Statement”), has been prepared for use in marketing the Bonds, and a final Official Statement of the Authority, to be dated the date hereof, as amended to conform to the terms of this Purchase Contract, and with such changes and amendments as are mutually agreed to by the Authority, the City and the Underwriter, including the cover page, inside cover page, the appendices and all information incorporated therein by reference, is herein collectively referred -3- to as the “Official Statement,” which shall be in substantially the form of the Preliminary Official Statement, with such changes and amendments thereto as may be mutually agreed upon by the Underwriter, the Authority and the City. The Bonds shall be dated their date of delivery, and shall have the maturities, bear interest at the rates, have reoffering yields, and be subject to mandatory sinking fund redemption as shown on Exhibit A hereto. It shall be a condition to the Authority’s obligation to sell and to deliver the Bonds to the Underwriter and to the obligation of the Underwriter to purchase, to accept delivery of and to pay for the Bonds that the entire $__________ aggregate principal amount of the Bonds as authorized by the Indenture shall be sold and delivered by the Authority and accepted and paid for by the Underwriter at the Closing. The Underwriter may change the offering prices (or yields) of the Bonds from time to time at any time. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. The obligation of the Authority to sell and deliver the Bonds to the Underwriter shall also be conditioned upon the delivery by Jones Hall, A Professional Law Corporation, Bond Counsel (“Bond Counsel”), of its approving legal opinion with respect to the Bonds. The Authority and the City hereby authorize the Underwriter to use and distribute the Site Lease, the Lease Agreement, the Assignment Agreement, the Indenture and the Preliminary Official Statement, and the information contained in such documents in connection with the public offering and sale of the Bonds. The Authority and the City have authorized the use of the Preliminary Official Statement in connection with the public offering of the Bonds by the Underwriter prior to the date hereof. The obligation of the City to make Lease Payments under the Lease Agreement does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Neither the Bonds nor the obligation of the City to make Lease Payments under the Lease Agreement constitutes a debt of the Authority, the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. The obligation of the City to make Lease Payments, as set forth in the Lease Agreement, shall be deemed to be and shall be construed to be a ministerial duty imposed by law and it shall be the ministerial duty of each and every public official of the City to take such actions and do such things as are required by law in the performance of such duty, subject to abatement in the event of damage or destruction to, or condemnation of, the Leased Property or a portion thereof. 2. Bona Fide Public Offering. The Underwriter agrees to make a bona fide public offering of all of the Bonds, at prices not in excess of the initial public offering yields or prices set forth on the cover page of the Official Statement (defined below). Subject to Section 3(c), the Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices; provided, however, that the Underwriter may offer a portion of the Bonds for sale to selected dealers who are members of the Financial Industry Regulatory Authority[, and the Underwriter reserves the right to change such offering prices or yields as the Underwriter shall deem necessary in connection with the marketing of the Bonds and to offer and sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) and others at prices lower than the initial offering prices or at yields higher than the initial yields set forth on Exhibit A attached hereto]. The Underwriter also reserves the right to over-allot or effect transactions that stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market and to discontinue such stabilizing, if commenced, at any time. None of such activities shall affect the principal amounts, maturity dates, interest -4- rates, redemption or other provision of the Bonds or the amount to be paid by the Underwriter to the Authority for the Bonds. 3. Establishment of Issue Price. (a) The Underwriter agrees to assist the Authority and the City in establishing the issue price of the Bonds and shall execute and deliver to the Authority and the City at Closing an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit B, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Authority, the City and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. All actions to be taken by the Authority and the City under this Section 3 to establish the issue price of the Bonds may be taken on behalf of the Authority and the City by the City’s municipal advisor identified herein and any notice or report to be provided to the Authority and the City may be provided to the City’s municipal advisor. (b) The Authority and the City will treat the first price at which 10% of each maturity of the Bonds (the “10% test”) is sold to the public as the issue price of that maturity (if different interest rates apply within a maturity, each separate CUSIP number within that maturity will be subject to the 10% test). At or promptly after the execution of this Bond Purchase Agreement, the Underwriter shall report to the Authority and the City the price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the Authority and the City the prices at which it sells the unsold Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied as to the Bonds of that maturity or until all Bonds of that maturity have been sold to the public. (c) The Underwriter confirms that any selling group agreement and any retail distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such retail distribution agreement, as applicable, to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allotted to it until it is notified by the Underwriter that either the 10% test has been satisfied as to the Bonds of that maturity or all Bonds of that maturity have been sold to the public and (B) comply with the hold-the-offering-price rule, if applicable, in each case if and for so long as directed by the Underwriter. The Authority and the City acknowledges that, in making the representation set forth in this subsection, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the hold-the-offering-price rule, if applicable, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a retail distribution agreement was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the hold-the-offering-price rule, if applicable, as set forth in the retail distribution agreement and the related pricing wires. The Authority and the City further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a retail distribution agreement, to comply with its corresponding agreement regarding the hold-the- offering-price rule as applicable to the Bonds. -5- (d) The Underwriter acknowledges that sales of any Bonds to any person that is a related party to the Underwriter shall not constitute sales to the public for purposes of this Section 3. Further, for purposes of this Section 3: (i) “public” means any person other than an underwriter or a related party, (ii) “underwriter” means (A) any person that agrees pursuant to a written contract with the Authority and the City (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the public), (iii) a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other), and (iv) “sale date” means the date of execution of this Bond Purchase Agreement by all parties. 4. The Bonds. The Bonds will be issued, executed and delivered pursuant to the Indenture. The City Council of the City has adopted a resolution on March 5, 2018, relating to the Bonds (the “City Resolution”). This Bond Purchase Agreement, the Site Lease, the Lease Agreement and the Continuing Disclosure Certificate (hereinafter defined) are collectively referred to as the “City Documents.” This Bond Purchase Agreement, the Site Lease, the Lease Agreement and the Assignment Agreement are collectively referred to as the “Authority Documents.” 5. Official Statement, Continuing Disclosure. (a) The Authority and the City represent that they have deemed the Preliminary Official Statement to be final as of its date, except for either revisions or additions to the offering price(s), interest rate(s), yield(s) to maturity, selling compensation, aggregate principal amount, principal amount per maturity, delivery date, rating(s) and other terms of the Bonds which depend upon the foregoing as provided in and pursuant to Rule 15c2-12 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Rule”). (b) The Underwriter agrees that, prior to the time the final Official Statement is available, the Underwriter will send to any potential purchaser of the Bonds, upon the request of such potential purchaser, a copy of the most recent Preliminary Official Statement. Such Preliminary Official Statement shall be sent by first class mail (or other equally prompt means) not later than the second business day following the date upon which each such request is received. (c) The Authority agrees to deliver to the Underwriter, at such addresses as the Underwriter shall specify, as many copies of the final Official Statement relating to the Bonds as -6- the Underwriter shall reasonably request as necessary to comply with paragraph (b)(4) of the Rule and with Rule G-32, Rule G-36 and all other applicable rules of the Municipal Securities Rulemaking Board. The Authority agrees to deliver such Official Statements within seven business days after the execution hereof. The Underwriter agrees to give notice to the Authority on the date after which the Underwriter shall no longer be obligated to deliver Official Statements pursuant to paragraph (b)(4) of the Rule, which date shall be no earlier than 25 days after the “end of the underwriting period,” as determined in accordance with Section 14 herein. (d) Prior to the earlier of (i) receipt of notice from the Underwriter that no participating underwriter, as such term is defined in the Rule, remains obligated to deliver Official Statements pursuant to paragraph (b)(4) of the Rule or (ii) 25 days after the date of the Closing (as defined below), the Authority and the City shall provide the Underwriter with such information regarding the Authority and the City, each of their current financial conditions and ongoing operations as the Underwriter may reasonably request. (e) The City hereby covenants and agrees that it will, on or prior to the Closing Date, enter into an agreement or contract for the benefit of the owners of the Bonds in which the City will undertake to provide financial information, operating data and notices of material events as required by paragraph (d)(2)(ii) of the Rule substantially in the form of Appendix D to the Official Statement (the “Continuing Disclosure Certificate”). 6. Representations, Warranties and Agreements of the City. The City represents, warrants and agrees as follows: (a) The City is a municipal corporation and chartered city duly organized and validly existing under the Constitution and laws of the State of California. (b) The City has full legal right, power and authority (i) to enter into, execute and deliver the City Documents; and (ii) to carry out and consummate the transactions on its part contemplated by the City Documents and the Official Statement. (c) By all necessary official action, the City has duly authorized and approved the City Documents, has duly authorized and approved the Preliminary Official Statement and the Official Statement and approved the distribution thereof (including in electronic form), has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations in connection with the execution and delivery of the Bonds on its part contained in the City Documents, and the consummation by it of all other transactions contemplated by the City Documents in connection with the execution and delivery of the Bonds, all pursuant to the City Resolution adopted at a meeting duly called and held in accordance with the requirements of all applicable laws and at which a quorum of the members of the City Council was continuously present. The City Resolution has not been modified, amended or rescinded since the date of its adoption. (d) The City is not in any material respect in breach of or default under any applicable constitutional provision, law or administrative regulation of the State of California or of the United States, or any agency or instrumentality of either, or any applicable judgment or decree, or any loan agreement, indenture, bond, note, resolution, agreement (including, without limitation, the City Documents) or other instrument to which the City is a party which breach or default has or may have an adverse effect on the ability of the City to perform its obligations under the City Documents, and no event has occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute such a default or event of default under any such instrument; and the execution and delivery of the Bonds and the City Documents, and compliance with the provisions on the City’s part contained therein, will not conflict in any -7- material way with or constitute a material breach of or a material default under any constitutional provision, law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the City or under the terms of any such law, regulation or instrument, except as provided by the Bonds and the City Documents. (e) All authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the City of its obligations in connection with the execution and delivery of the Bonds under the City Documents or the consummation by it of all other transactions contemplated by the City Documents have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any state in connection with the offering and sale of the Bonds; except as described in or contemplated by the Official Statement, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the City of its obligations under the City Documents have been duly obtained. (f) There is no action, suit, proceeding, inquiry or investigation, notice of which has been duly served on the City, at law or in equity before or by any court, government agency, public board or body, pending or to the best knowledge of the officer of the City executing this Bond Purchase Agreement, threatened against the City, affecting the existence of the City or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, execution or delivery of the Bonds pursuant to the Indenture, or contesting or affecting as to the City the validity or enforceability of the Bonds or the City Documents, or contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement, or contesting the powers of the City to cause the execution and delivery of the Bonds, or the execution and delivery or adoption by the City of the City Documents, or in any way contesting or challenging the consummation of the transactions contemplated hereby or thereby; nor, to the best knowledge of the City, is there any basis for any such action, suit, proceeding, inquiry or investigation, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity of the Bonds or the authorization, execution, delivery or performance by the City of the City Documents. (g) The City will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the City shall not be required to execute a general or special consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction, and the Underwriter shall bear all costs in connection with the foregoing. (h) As of the date thereof, the Preliminary Official Statement did not, except for the omission of certain information permitted to be omitted in accordance with the Rule, contain any untrue statement of a material fact or omit to state a material fact necessary to make the -8- statements therein, in the light of the circumstances under which they were made, not misleading. (i) At the time of the City’s acceptance hereof, and (unless an event occurs of the nature described in paragraph (k) of this Section 6) at all times subsequent thereto up to and including the Closing Date, the Official Statement (other than information therein provided by the Underwriter) did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (j) If the Official Statement is supplemented or amended pursuant to paragraph (k) of this Section 6, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto up to and including the Closing Date, the Official Statement (other than information therein provided by the Underwriter) as so supplemented or amended will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) If between the date of this Bond Purchase Agreement and that date which is 25 days after the end of the underwriting period (as determined in accordance with Section 14 hereof) any event of which the officer of the City executing this Bond Purchase Agreement has knowledge shall occur affecting the City which might adversely affect the marketability of the Bonds or the market prices thereof, or which might cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the City shall notify the Underwriter thereof, and if in the opinion of the Underwriter such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will at its expense prepare and furnish to the Underwriter a reasonable number of copies of such supplement to, or amendment of, the Official Statement in a form and in a manner approved by the Underwriter. (l) Any certificate signed by any officer of the City and delivered to the Underwriter pursuant to the City Documents or any document contemplated thereby or required for the valid execution and delivery of the Bonds shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein. (m) The City will cause the proceeds from the sale of the Bonds to be paid to the Trustee for the purposes specified in the Indenture and the Official Statement. So long as any of the Bonds are outstanding and except as may be authorized by the Indenture, the City will not issue or sell, or cause to be issued or sold, any Bonds or other obligations, other than the Bonds delivered thereunder, the interest on and premium, if any, or principal of which will be payable from Lease Payments. (n) The City shall honor all other covenants on its part contained in the Lease Agreement which are incorporated herein and made a part of this Bond Purchase Agreement. 7. Representations, Warranties and Agreements of the Authority. The Authority represents, warrants and agrees as follows: (a) The Authority is a joint exercise of powers entity duly organized and validly existing under the laws of the State of California pursuant to a Joint Exercise of Powers Agreement between the City and the California Municipal Finance Authority, dated March 15, 2013 (the “JPA Agreement”). -9- (b) The Authority has full legal right, power and authority (i) to enter into, execute and deliver the Authority Documents and to sell and deliver the Bonds to the Underwriter as provided herein; and (ii) to carry out and consummate the transactions on its part contemplated by the Authority Documents and the Official Statement. (c) By all necessary official action, the Authority has duly authorized and approved the issuance of the Bonds and the Authority Documents, has duly authorized and approved the Preliminary Official Statement and the Official Statement and approved the distribution thereof (including in electronic form), has duly authorized and approved the execution and delivery of, and the performance by the Authority of the obligations in connection with the execution and delivery of the Bonds on its part contained in the Bonds and the Authority Documents, and the consummation by it of all other transactions contemplated by the Authority Documents in connection with the execution and delivery of the Bonds, all pursuant to the Authority Resolution adopted at a meeting duly called and held in accordance with the requirements of all applicable laws and at which a quorum of the board members of the Authority was continuously present. The Authority Resolution has not been modified, amended or rescinded since the date of its adoption and each Authority Document is the valid and binding obligation of the Authority. (d) The Authority is not in any material respect in breach of or default under any applicable constitutional provision, law or administrative regulation of the State of California or of the United States, or any agency or instrumentality of either, or any applicable judgment or decree, or the JPA Agreement, or any loan agreement, indenture, bond, note, resolution, agreement (including, without limitation, the Authority Documents) or other instrument to which the Authority is a party which breach or default has or may have an adverse effect on the ability of the Authority to perform its obligations under the Bonds or the Authority Documents, and no event has occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute such a default or event of default under any such instrument; and the execution and delivery of the Bonds and the Authority Documents, and compliance with the provisions on the Authority’s part contained therein, will not conflict in any material way with or constitute a material breach of or a material default under any constitutional provision, law, administrative regulation, judgment, decree, loan agreement, indenture, Bond, note, resolution, agreement or other instrument to which the Authority is a party nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Authority or under the terms of any such law, regulation or instrument, except as provided by the Bonds and the Authority Documents. (e) All authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the Authority of its obligations in connection with the execution and delivery of the Bonds under the Authority Documents or the consummation by it of all other transactions contemplated by the Authority Documents, including all filings with the California Secretary of State, have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any state in connection with the offering and sale of the Bonds; except as described in or contemplated by the Official Statement, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of -10- which would materially adversely affect the due performance by, the Authority of its obligations under the Bonds and the Authority Documents have been duly obtained. (f) The Bonds, when executed, issued, authenticated and delivered in accordance with the Indenture, and sold to the Underwriter as provided herein, will be validly executed and outstanding obligations, entitled to the benefits of the Indenture, and upon such execution and delivery, the Indenture will provide, for the benefit of the Owners from time to time of the Bonds, the legally valid and binding security interest it purports to create. (g) There is no action, suit, proceeding, inquiry or investigation, notice of which has been duly served on the Authority, at law or in equity before or by any court, government agency, public board or body, pending or to the best knowledge of the officer of the Authority executing this Bond Purchase Agreement, threatened against the Authority, affecting the existence of the Authority or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance, execution or delivery of the Bonds pursuant to the Indenture, or contesting or affecting as to the Authority the validity or enforceability of the Bonds or the Authority Documents, or contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement, or contesting the powers of the Authority to cause the execution and delivery of the Bonds, or the execution and delivery or adoption by the Authority of the Authority Documents, or in any way contesting or challenging the consummation of the transactions contemplated hereby or thereby; nor, to the best knowledge of the Authority, is there any basis for any such action, suit, proceeding, inquiry or investigation, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity of the Bonds or the authorization, execution, delivery or performance by the Authority of the Bonds or the Authority Documents. (h) The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the Authority shall not be required to execute a general or special consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction, and the Underwriter shall bear all costs in connection with the foregoing. (i) As of the date thereof, the Preliminary Official Statement did not, except for the omission of certain information permitted to be omitted in accordance with the Rule, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (j) At the time of the Authority’s acceptance hereof, and (unless an event occurs of the nature described in paragraph (l) of this Section 5) at all times subsequent thereto up to and including the Closing Date, the Official Statement (other than information therein provided by the Underwriter) did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) If the Official Statement is supplemented or amended pursuant to paragraph (l) of this Section 5, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto -11- up to and including the Closing Date, the Official Statement (other than information therein provided by the Underwriter) as so supplemented or amended will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (l) If between the date of this Bond Purchase Agreement and that date which is 25 days after the end of the underwriting period (as determined in accordance with Section 14 hereof) any event of which the officer of the Authority executing this Bond Purchase Agreement has knowledge shall occur affecting the Authority which might adversely affect the marketability of the Bonds or the market prices thereof, or which might cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Authority shall notify the Underwriter thereof, and if in the opinion of the Underwriter such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Authority will at its expense prepare and furnish to the Underwriter a reasonable number of copies of such supplement to, or amendment of, the Official Statement in a form and in a manner approved by the Underwriter. (m) Any certificate signed by any officer of the Authority and delivered to the Underwriter pursuant to the Authority Documents or any document contemplated thereby or required for the valid execution and delivery of the Bonds shall be deemed a representation and warranty by the Authority to the Underwriter as to the statements made therein. (n) The Authority will cause the proceeds from the sale of the Bonds to be paid to the Trustee for the purposes specified in the Indenture and the Official Statement. So long as any of the Bonds are outstanding and except as may be authorized by the Indenture, the Authority will not issue or sell any Bonds or other obligations, other than the Bonds delivered thereunder, the interest on and premium, if any, or principal of which will be payable from the Revenues. (o) The Authority shall honor all other covenants on its part contained in the Indenture and the Lease Agreement which are incorporated herein and made a part of this Bond Purchase Agreement. 6. Closing. At 8:00 A.M., California time, on March 28, 2018, or on such other date time, as may be mutually agreed upon by the Authority, the City and the Underwriter (the “Closing Date”), the Authority will, subject to the terms and conditions hereof, deliver to the Underwriter, at the offices of The Depository Trust Company (“DTC”), or at such other place as the Authority, the City and the Underwriter may mutually agree, the Bonds in definitive, fully registered form (one Bond for each maturity), duly executed and registered in the name of Cede & Co. as nominee of DTC; and, subject to the terms and conditions hereof, the Underwriter shall wire to the Trustee Federal Reserve Bank Funds in the amount of the purchase price of the Bonds. 8. Closing Conditions. The Underwriter has entered into this Bond Purchase Agreement in reliance upon the representations and warranties of the Authority and the City contained herein, and in reliance upon the representations and warranties to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Authority and the City of its obligations hereunder, both as of the date hereof and as of the Closing Date. Accordingly, the Underwriter’s obligations under this Bond Purchase Agreement to purchase, to accept delivery of and to pay for the Bonds shall be conditioned upon the performance by the Authority and the City of their respective obligations to be performed hereunder and under such documents and instruments at or prior to the Closing Date, shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the -12- statements the officers and other officials of the Authority and of the City, as the Underwriter, authorized representatives of Bond Counsel, the Trustee, and the City Attorney made in any certification or other documents furnished pursuant to the provisions hereof, and shall also be subject to the following additional conditions: (a) The respective representations and warranties of the Authority and the City contained herein shall be true, complete and correct on the date hereof and on and as of the Closing Date, as if made on the Closing Date; (b) At the time of Closing, the City Documents and the Authority Documents shall be in full force and effect in accordance with their terms and shall not have been amended, modified or supplemented and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriter; (c) All necessary official action of the Authority, the City and of the other parties thereto relating to the City Documents and the Authority Documents shall have been taken and shall be in full force and effect and shall not have been amended, modified or supplemented in any material respect; (d) Subsequent to the date hereof, there shall not have occurred any change in or affecting particularly the Authority, the City or the Bonds, as the foregoing is described in the Official Statement, which in the reasonable opinion of the Underwriter materially impairs the investment quality of the Bonds; and (e) At or prior to the Closing Date, the Underwriter shall have received copies of each of the following documents: (i) The Official Statement and each supplement or amendment, if any, thereto, executed by authorized officers of the Authority and the City; (ii) A copy of the Indenture, executed by the parties thereto; (iii) A copy of the Lease Agreement, executed by the parties thereto; (iv) A copy of the Site Lease, executed by the parties thereto; (vi) A copy of the Continuing Disclosure Certificate, executed by the City; (vii) A certified copy of the JPA Agreement; (viii) A certificate or certificates of the City, dated the Closing Date, to the effect that: (A) the representations and warranties of the City contained herein are true and correct in all material respects on and as of the Closing Date as if made on the Closing Date and the City has complied with all of the terms and conditions of this Purchase Agreement required to be complied with by the City at or prior to the Closing Date; (B) none of the proceedings or authority for (i) the authorization, sale, execution and delivery of the Bonds, (ii) the adoption of the City Resolution, or (iii) the execution and delivery of the City Documents and performance of its -13- obligations thereunder, has been repealed, modified, amended, revoked or rescinded; (C) subsequent to June 30, 2015, and prior to Closing, there have been no material adverse changes in the financial position of the City; (D) no event affecting the City has occurred since the date of the Official Statement that should be disclosed in the Official Statement for the purposes for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any material respect; (E) to the best of its knowledge, the information and statements contained in the Official Statement (other than information relating to The Depository Trust Company and its book-entry system) do not contain an untrue statement of a material fact required to be stated therein or necessary to make such statements therein, in the light of the circumstances under which they were made, not misleading in any material respect; (F) to the best of its knowledge after reasonable investigation, the City is not in breach of or default under any applicable law or administrative regulation of the State of California or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement (including but not limited to the Lease Agreement) or other instrument to which the City is a party or is otherwise subject, which would have a material adverse impact on the City’s ability to perform its obligations under the City Documents, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument; and (G) No consent is required for the inclusion of the City’s 2014-15 audited financial statements in the Official Statement. (ix) A certificate or certificates of the Authority, dated the Closing Date, to the effect that: (A) the representations and warranties of the Authority contained herein are true and correct in all material respects on and as of the Closing Date as if made on the Closing Date and the Authority has complied with all of the terms and conditions of this Purchase Agreement required to be complied with by the Authority at or prior to Closing Date; (B) none of the proceedings or authority for (i) the authorization, sale, execution and delivery of the Bonds, (ii) the adoption of the Authority Resolution, or (iii) the execution and delivery of the Authority Documents, has been repealed, modified, amended, revoked or rescinded; (C) no event affecting the Authority has occurred since the date of the Official Statement that should be disclosed in the Official Statement for the purposes for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any material respect; and -14- (D) the information and statements contained in the Official Statement (other than information relating to the Underwriter and The Depository Trust Company and its book-entry system) do not contain an untrue statement of a material fact required to be stated therein or necessary to make such statements therein, in the light of the circumstances under which they were made, not misleading in any material respect; and (E) to the best of its knowledge after reasonable investigation, the Authority is not in breach of or default under any applicable law or administrative regulation of the State of California or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Authority is a party or is otherwise subject, which would have a material adverse impact on the Authority’s ability to perform its obligations under the Authority Documents, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument; (x) An opinion or opinions, dated the Closing Date and addressed to the Underwriter and the Trustee, of the San Rafael City Attorney, counsel for the City, to the effect that: (A) The City is a municipal corporation and chartered city duly organized and validly existing under the Constitution and laws of the State of California; (B) The City Documents have been duly approved by a resolution of the City adopted at a meeting duly called and held in accordance with the requirements of all applicable laws, with all public notice required by law, and at which a quorum of the members of the City Council was continuously present and such resolution has not been modified, amended or rescinded since the date of its adoption; (C) Except as described in the Official Statement, there is no litigation, inquiry, or investigation pending or to the best of such counsel’s knowledge after due inquiry, threatened, which: (1) challenges the right or title of any member or officer of the City to hold his or her office or exercise or perform the powers and duties pertaining thereto; (2) challenges the validity or enforceability of the Bonds or the City Documents; (3) seeks to restrain or enjoin the sale of the Bonds or the execution and delivery by the City of, or the performance by the City of its legal obligations under, the City Documents or in which a final adverse decision could materially adversely affect the operations of the City with respect to the Leased Property; or (4) contests in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement, nor, to the best of such counsel’s knowledge, is there any basis therefor; (D) The execution and delivery by the City of, and the performance by the City of its obligations under, the City Documents, do not conflict with, violate or constitute a default under any provision of any law, court order or decree or any contract, instrument or agreement to which the City is a party or by which it is bound and of which such counsel has knowledge; (E) As of the date hereof, the statements and information relating to the City contained in the Preliminary Official Statement and Official Statement did -15- not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances, under which they were made not misleading; and (F) The City Documents have been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery of the City Documents by the parties thereto other than the City, the City Documents constitute legal, valid and binding agreements of the City, enforceable against the City in accordance with their respective terms except as enforcement may be limited by bankruptcy, insolvency and other laws affecting the enforcement of creditors’ rights and remedies in general, or by the application of equitable principles if equitable remedies are sought. (G) Except as may be required under the “blue sky” or securities laws of the United States or any state, there is no authorization, approval, consent or other order of, or filing with, or certification by, the State or any other governmental authority or agency within the State having jurisdiction over the City required for the issuance of the Bonds or the consummation by the City of the other financial transactions contemplated by the Official Statement and the City Documents. (H) Based on the information made available to the City Attorney in its role as City Attorney to the City, and without having undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Official Statement, nothing has come to its attention which would lead it to believe that the Official Statement as of its date and as of the date of Closing (excluding therefrom the financial and statistical data and forecasts included therein, as to which no opinion is expressed and information relating to the Authority and the Depository Trust Company and its book entry system) contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (xi) An opinion or opinions, dated the Closing Date and addressed to the Underwriter and the Trustee, of the San Rafael City Attorney, counsel for the Authority, to the effect that: (A) The Authority is a joint exercise of powers authority duly organized and validly existing under the laws of the State of California pursuant to the JPA Agreement; (B) The Authority Documents have been duly approved by a resolution of the Authority adopted at a meeting duly called and held in accordance with the requirements of all applicable laws, with all public notice required by law, and at which a quorum of the members of the Board of the Authority was continuously present and such resolution has not been modified, amended or rescinded since the date of its adoption; (C) Except as described in the Official Statement, there is no litigation, inquiry, or investigation pending to the best of such counsel’s knowledge after due inquiry, or threatened, which: (1) challenges the right or title of any member or officer of the Authority to hold his or her office or exercise or perform the -16- powers and duties pertaining thereto; (2) challenges the validity or enforceability of the Bonds or the Authority Documents; (3) seeks to restrain or enjoin the sale of the Bonds or the execution and delivery by the Authority of, or the performance by the Authority of its legal obligations under, the Authority Documents or in which a final adverse decision could materially adversely affect the operations of the Authority with respect to the Leased Property; or (4) contests in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement, nor, to the best of such counsel’s knowledge, is there any basis therefor; (D) The execution and delivery by the Authority of, and the performance by the Authority of its obligations under, the Authority Documents, do not conflict with, violate or constitute a default under any provision of any law, court order or decree or any contract, instrument or agreement to which the Authority is a party or by which it is bound and of which such counsel has knowledge; and (E) The Authority Documents have been duly authorized, executed and delivered by the Authority and, assuming due authorization, execution and delivery of the Authority Documents by the parties thereto other than the Authority, the Authority Documents constitute legal, valid and binding agreements of the Authority, enforceable against the Authority in accordance with their respective terms except as enforcement may be limited by bankruptcy, insolvency and other laws affecting the enforcement of creditors’ rights and remedies in general, or by the application of equitable principles if equitable remedies are sought. (F) Except as may be required under the “blue sky” or securities laws of the United States or any state, there is no authorization, approval, consent or other order of, or filing with, or certification by, the State or any other governmental authority or agency having jurisdiction over the Authority required for the issuance of the Bonds or the consummation by the Authority of the other financial transactions contemplated by the Official Statement and the Authority Documents. (G) Based on the information made available to such City Attorney in its role as counsel to the Authority, and without having undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Official Statement under the captions entitled “THE AUTHORITY,” and “LITIGATION”, nothing has come to such City Attorney’s attention that would lead it to believe that the statements contained in the above-referenced captions as of the date of the Official Statement and as of the date of Closing (excluding therefrom the financial and statistical data and forecasts included therein, as to which no opinion is expressed) contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (xii) An opinion, dated the Closing Date and addressed to the Authority, of Bond Counsel, substantially in the form set forth in Appendix E to the Official Statement, together with a letters from such counsel, dated the Closing Date and addressed to the Underwriter and the Trustee, to the effect that the foregoing opinion may be relied upon by the Underwriter and the Trustee to the same extent as if such opinion was addressed to them; -17- (xiii) A supplemental opinion, dated the Closing Date and addressed to the Underwriter, of Bond Counsel, to the effect that: (A) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended; (B) the Bond Purchase Agreement has been duly executed and delivered by the Authority and the City and is a valid and binding agreement of the Authority and the City; and (C) the statements contained in the Official Statement under the captions “THE BONDS,” “SECURITY FOR THE BONDS” and “TAX MATTERS” and in APPENDIX A–”SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS,” insofar as such statements expressly summarize certain provisions of the Indenture, the Lease Agreement, the Site Lease and the final opinion of Bond Counsel concerning certain state income tax matters relating to the Bonds, are accurate in all material respects; (xiv) An opinion letter, dated the Closing Date and addressed to the Authority, the City and the Underwriter of Jones Hall, A Professional Law Corporation, California, as disclosure counsel (“Disclosure Counsel”), to the effect that based upon their participation in the preparation of the Official Statement as Disclosure Counsel, except to the extent set forth in their supplemental opinion without assuming any responsibility for the accuracy, completeness or fairness of any of the statements contained in the Official Statement nor making any representation regarding independent verification of the accuracy, completeness or fairness of any of the statements contained in the Official Statement, except to the extent set forth in their supplemental opinion such counsel advises that during the course of such representation of the Authority as disclosure counsel on this matter, no information came to the attention of the attorneys in such firm rendering legal services in connection with such representation which caused them to believe that the Official Statement as of its date (except for any financial, statistical or economic data or forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions or expressions of opinion (except opinions of Bond Counsel), Appendix B to the Official Statement, or any information about book-entry or DTC included therein, as to which no opinion or view is expressed) contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (xv) the opinion of Quint & Thimmig LLP, as counsel to the Underwriter, dated the Closing Date and addressed to the Underwriter, in form and substance acceptable to the Underwriter. (xvi) A certificate of an authorized officer of the Trustee satisfactory to the Underwriter, certifying substantially as follows: (A) The Trustee is a national banking association duly organized and in good standing under the laws of the United States of America and has all necessary power and authority to enter into the Indenture and to perform its duties under the Indenture; -18- (B) The Trustee is duly authorized to enter into the Indenture and to authenticate and deliver the Bonds to the Underwriter pursuant to the terms of the Indenture and, when executed by the other parties thereto, the Indenture will constitute a legal, valid and binding obligation of the Trustee enforceable in accordance with its terms; (C) The Bonds have been duly authenticated and delivered to the Underwriter pursuant to direction from the Authority; (D) The Trustee is not in breach of or default under any law or administrative rule or regulation of the State of California or of any department, division, agency or instrumentality thereof, of any applicable court or administrative decree or order, or any other material instrument to which the Trustee is a party or is otherwise subject or bound and which would materially impair the ability of the Trustee to perform its obligations under the Indenture; (E) To its knowledge, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, is pending or threatened in any way against the Trustee affecting the existence of the Trustee or the titles of its directors or officers to their respective offices, or seeking to restrain or enjoin the execution, sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Indenture, or in any way contesting or affecting the validity or enforceability of the Bonds or the Indenture; (F) The execution and delivery of the Indenture will not conflict with or constitute a breach of or default under the Trustee’s duties under such documents, or any law, administrative regulation, court decree, resolution, articles of association, bylaws or other material agreement to which the Trustee is subject or by which it is bound; and (G) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee that has not been obtained is or will be required for the authentication and delivery of the Bonds, the execution and delivery of the Indenture, the performance of the Trustee’s duties under the Indenture or the consummation by the Trustee of the other transactions contemplated by the Indenture, except as such may be required under the state securities or blue sky laws in connection with the distribution of the Bonds by the Underwriter. (xvii) An opinion of counsel to the Trustee in form and substance acceptable to the Underwriter; (xviii) Evidence, satisfactory to Bond Counsel and the Underwriter, of insurance, including a CLTA title insurance policy, in compliance with the Lease Agreement; (xix) 15c2-12 certificates of City and the Authority; (xx) Certified copies of the City Resolution and the Authority Resolution; (xxi) Evidence, satisfactory to the Underwriter, that the Bonds have been assigned the rating of “____” by S&P Global Ratings; -19- (xxii) Transcripts of all proceedings relating to the authorization, issuance, execution and delivery of the Bonds certified by the City and the Authority as applicable; and (xxiii) Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the date of the Closing, of the City’s representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the City and the Authority on or prior to the date of the Closing of all the agreements then to be performed and conditions then to be satisfied by each of them. All the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Bond Purchase Agreement shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to Bond Counsel, Disclosure Counsel and the Underwriter. If the City shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds contained in this Bond Purchase Agreement, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this Bond Purchase Agreement, this Bond Purchase Agreement shall terminate and none of the Underwriter, the Authority or the City shall be under any further obligation hereunder. 9. Termination. The Underwriter shall have the right to terminate the Underwriter’s obligations under this Bond Purchase Agreement to purchase, to accept delivery of and to pay for the Bonds by notifying the Authority and the City in writing or by telegram, of its election to do so, if, after the execution hereof and prior to the Closing: (a) the United States has become engaged in, or there has been an escalation of, hostilities which, in the reasonable opinion of the Underwriter, materially adversely affects the marketability or market price of the Bonds; (b) there shall have occurred the declaration of a general banking moratorium by any authority of the United States or the State of New York or the State of California; (c) an event shall have occurred, or been discovered as described in paragraph (k) of Section 6 or paragraph (l) of Section 7 hereof, which in the opinion of the Underwriter requires the preparation and publication of disclosure material or a supplement or amendment to the Official Statement; (d) any legislation, ordinance, rule or regulation shall be introduced in, or be enacted by any governmental body, department or agency in the State of California, or a decision by any court of competent jurisdiction within the State of California shall be rendered which, in the Underwriter’s reasonable opinion, materially adversely affects the market price of the Bonds; (e) there shall have occurred or any notice shall have been given of any intended downgrading, suspension, withdrawal or negative change in credit watch status by any national rating service to any of the Authority’s or the City’s obligations; (f) legislation shall be introduced, by amendment or otherwise, or be enacted by the House of Representatives or the Senate of the Congress of the United States, or a decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or official -20- statement by or on behalf of the Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter shall be made or proposed, to the effect that the execution, issuance, delivery, offering or sale of obligations of the general character of the Bonds, or the Bonds, as contemplated hereby or by the Official Statement, is or would be in violation of any provision of the Securities Act of 1933, as amended and as then in effect, or the Securities Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect, or with the purpose or effect of otherwise prohibiting the issuance, offering or sale of obligations of the general character of the Bonds or the Bonds, as contemplated hereby or by the Official Statement; (g) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange; (h) the New York Stock Exchange, or other national securities exchange or association or any governmental authority, shall impose as to the Bonds, or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by or the charge to the net capital requirements of broker-dealers; (i) trading in securities on the New York Stock Exchange or other national securities exchange or association shall have been suspended or limited or minimum prices have been established on either such exchange; (j) any action shall have been taken by any government in respect of its monetary affairs which, in the reasonable opinion of the Underwriter, has a material adverse effect on the United States securities market; or as of the date hereof that in the Underwriter’s reasonable opinion materially adversely affects the marketability or market price of the Bonds; or (k) the marketability of the Bonds or the market price thereof, in the opinion of the Underwriter, has been materially and adversely affected by disruptive events, occurrences or conditions in the securities or debt markets. If this Bond Purchase Agreement shall be terminated pursuant to Section 8 or this Section 9, or if the purchase provided for herein is not consummated because any condition to the Underwriter’s obligations hereunder is not satisfied or because of any refusal, inability or failure on the part of the City or the Authority to comply with any of the terms or to fulfill any of the conditions of this Bond Purchase Agreement, or if for any reason the City or the Authority shall be unable to perform all of its respective obligations under this Bond Purchase Agreement, neither the City nor the Authority shall be liable to the Underwriter for damages on account of loss of anticipated profits arising out of the transactions covered by this Bond Purchase Agreement. The Underwriter may, in its sole discretion, waive any of the conditions set forth in Section 78 or this Section 9. 10. Changes in Official Statement. After the Closing, neither the Authority nor the City will adopt any amendment of or supplement to the Official Statement to which the Underwriter shall reasonably object in writing. Within 25 days following the “end of the underwriting period” (as defined in Section 240 15c-12 in Chapter II of Title 17 of the Code of Federal Regulations (Rule 15c2-12), whichever occurs first, if any event relating to or affecting the Bonds, the City or the Authority shall occur as a result of which it is necessary, in the opinion of the Underwriter, to amend or supplement the Official Statement in order to make the Official Statement not misleading in any material respect in the light of the circumstances existing at the time it is delivered to a purchaser, the Authority will forthwith prepare and furnish to the -21- Underwriter an amendment or supplement that will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to purchaser, not misleading. The City and the Authority shall cooperate with the Underwriter in the filing by the Underwriter of such amendment or supplement to the Official Statement with a nationally recognized municipal securities repository. 11. Payment of Costs and Expenses. (a) All costs and expenses incident to the sale and delivery of the Bonds to the Underwriter shall be payable by the Authority from the proceeds of the Bonds, including, but not limited to: (i) the fees and expenses of the City, its counsel and consultants; (ii) the fees and expenses of the Authority, its counsel and consultants; (iii) the fees and expenses of Bond Counsel; (iv) the fees and expenses of Disclosure Counsel; (v) the fees and expenses of PFM Financial Advisors LLC, the City’s municipal advisor; (vi) all expenses in connection with the preparation and printing of the Bonds; (vii) all expenses in connection with the preparation, printing, distribution and delivery of the Preliminary Official Statement, the Official Statement and any amendment or supplement thereto; (viii) the initial fees and expenses of the Trustee, including the reasonable fees and expenses of its counsel; (ix) the fees and expenses of any rating agency rating the Bonds; and (x) any credit enhancement costs for the Bonds. (b) The Underwriter shall pay all expenses incurred by it in connection with the public offering and distribution of the Bonds including, but not limited to: (i) all advertising expenses in connection with the offering of the Bonds; (ii) the fees and disbursements of Underwriter’s counsel, if any, and (iii) all out-of-pocket disbursements and expenses incurred by the Underwriter in connection with the offering and distribution of the Bonds, including, air travel and hotel accommodations in connection with the pricing of the Bonds; investor meetings, rating agency trips and meetings; the Closing; meals and transportation for the City, the Underwriter and other working group personnel during rating agency, investor meetings; pricing and Closing trips; expenses related to attending working group meetings, such as parking, meals and transportation and any other miscellaneous costs associated with the Closing; (iv) all other expenses incurred by the Underwriter in connection with the public offering and distribution of Bonds, except as provided in (a) above or as otherwise agreed to by the Underwriter and the City, and (v) the fees of the California Debt and Investment Advisory Commission. -22- 12. Notices. Any notice or other communication to be given under this Bond Purchase Agreement may be given by delivering the same in writing: To the Authority: San Rafael Joint Public Financing Authority c/o City of San Rafael 1400 Fifth Avenue San Rafael, CA 94905 Attention: Finance Director To the City: City of San Rafael 1400 Fifth Avenue San Rafael, CA 94905 Attention: Finance Director To the Underwriter: Raymond James & Associates, Inc. One Embarcadero Center, Suite 650 San Francisco, CA 94111 Attention: Mr. Robert Larkins, Managing Director 13. Parties in Interest. This Bond Purchase Agreement is made solely for the benefit of the Authority, the City and the Underwriter (including the successors or assigns of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. All of the Authority’s and the City’s representations, warranties and agreements contained in this Bond Purchase Agreement shall remain operative and in full force and effect, regardless of: (a) any investigations made by or on behalf of the Underwriter; (b) delivery of and payment for the Bonds pursuant to this Bond Purchase Agreement; and (c) any termination of this Bond Purchase Agreement. 14. Determination of End of the Underwriting Period. For purposes of this Bond Purchase Agreement, the end of the underwriting period for the Bonds shall mean the earlier of (a) the Closing Date unless the City and the Authority have been notified in writing by the Underwriter, on or prior to the Closing Date, that the “end of the underwriting period” for the Bonds for all purposes of the Rule will not occur on the Closing Date, or (b) the date on which notice is given to the City and the Authority by the Underwriter in accordance with the following sentence. In the event that the Underwriter has given notice to the City and the Authority pursuant to clause (a) above that the “end of the underwriting period” for the Bonds will not occur on the Closing Date, the Underwriter agrees to notify the City and the Authority in writing as soon as practicable following the “end of the underwriting period” for the Bonds for all purposes of the Rule. The Underwriter agrees to file a copy of the Official Statement with each of the nationally recognized municipal securities information repositories. 15. No Assignment. This Bond Purchase Agreement is entered into between the City, the Authority and the Underwriter, and is solely for the benefit of the City, the Authority, the Underwriter and their respective successors or assigns, and no person other than the foregoing shall acquire or have any right under or by virtue of this Bond Purchase Agreement. All of the representations, warranties and agreements contained in this Bond Purchase Agreement shall survive the delivery of and payment for the Bonds and any termination thereof. 16. Effectiveness. This Bond Purchase Agreement shall become effective upon the execution of the acceptance by an authorized representative of the City and an authorized representative of the Authority and shall be valid and enforceable at the time of such acceptance. 17. Headings. The headings of the sections of this Bond Purchase Agreement are inserted for convenience only and shall not be deemed to be a part hereof. -23- 18. Governing Law. This Bond Purchase Agreement shall be interpreted, governed and enforced in accordance with the laws of the State of California. 19. Counterparts. This Bond Purchase Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. If the foregoing is in accordance with your understanding of this Bond Purchase Agreement please sign and return to us the enclosed duplicate copies hereof, whereupon it will become a binding agreement among the City, the Authority and the Underwriter in accordance with its terms. Very truly yours, RAYMOND JAMES & ASSOCIATES, INC., as Underwriter By Robert Larkins Managing Director SAN RAFAEL JOINT PUBLIC FINANCING AUTHORITY By Mark Moses Treasurer CITY OF SAN RAFAEL By Mark Moses Finance Director Time of Execution: Exhibit A Page 1 EXHIBIT A MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, PRICES AND YIELDS $_________ SAN RAFAEL JOINT PUBLIC FINANCING AUTHORITY Lease Revenue Bonds, Series 2018 Maturity Principal Interest (June 1) Amount Rate Yield Price Redemption Provisions Optional Redemption The Bonds maturing on or before June 1, ____, are not subject to optional redemption prior to their stated maturity. The Bonds maturing on or after June 1, ____, are subject to redemption, as a whole or in part at the election of the Authority among maturities on such basis as designated by the Authority and by lot within a maturity, at the option of the Authority, on June 1, ____, and on any date thereafter, at a redemption price equal to 100% of the principal amount of Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. Mandatory Sinking Payment Redemption The Bonds maturing on June 1, 20__ (the “Term Bonds”), are subject to mandatory sinking payment redemption in part on June 1, 20__, and on each June 1 thereafter to and including June 1, ____, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Sinking Fund Payment Date Principal (June 1) Amount †Maturity Exhibit A Page 2 Special Mandatory Redemption from Insurance or Condemnation Proceeds The Bonds are subject to redemption as a whole, or in part on a pro rata basis among maturities, on any date, from any net proceeds of casualty or title insurance or an eminent domain award with respect to the Leased Property which are not applied to repair, rebuild or replace the Leased Property as provided it the Indenture, at a redemption price equal to 100% of the principal amount to be redeemed plus interest accrued thereon to the date fixed for redemption, without premium. Exhibit B Page 1 EXHIBIT B ISSUE PRICE CERTIFICATE $_________ SAN RAFAEL JOINT PUBLIC FINANCING AUTHORITY Lease Revenue Bonds, Series 2018 The undersigned, on behalf of Raymond James & Associates, Inc. (“Raymond James”), based on the information available to it, hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Bonds”). I. General 1. Raymond James and the San Rafael Joint Public Financing Authority and City of San Rafael (collectively, the “Issuer”) have executed a bond purchase agreement in connection with the Bonds on the Sale Date. Raymond James has not modified the bond purchase agreement since its execution on the Sale Date. II. Price 1. As of the date of this certificate, for each Maturity of the Bonds, the first price at which at least 10% of such Maturity of the Bonds was sold to the Public is the respective price listed in Schedule A. III. Defined Terms 1. Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate maturities. 2. Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a Related Party to an Underwriter. 3. A person is a “Related Party” to an Underwriter if the Underwriter and the person are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other). 4. Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Bonds. The Sale Date of the Bonds is March 13, 2018. 5. Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with Raymond James to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public). All terms not defined herein shall have the same meanings as in the Arbitrage Certificate with respect to the Bonds, to which this Certificate is attached. The Issuer may rely on the statements made herein in connection with its efforts to comply with the conditions imposed by the Internal Revenue Code of 1986, as amended (the “Code”). Bond Counsel Exhibit B Page 2 may also rely on this Certificate for purposes of its opinion regarding the treatment of interest on the Bonds as excludable from gross income for federal income tax purposes. However, notwithstanding the foregoing, we remind you that the Underwriter is not an accountant or actuary, nor is the Underwriter engaged in the practice of law. Accordingly, while the Underwriter believes the calculations described above to be correct, it does not warrant their validity for purposes of Sections 103 and 141 through 150 of the Code or make any representation as to the legal sufficiency of the factual matters set forth herein. Except as expressly set forth above, the certifications set forth herein may not be relied upon or used by any third party or for any other purpose. Dated: _____, 2018 RAYMOND JAMES & ASSOCIATES, INC., as Underwriter By Managing Director Exhibit B Page 3 SCHEDULE A TO ISSUE PRICE CERTIFICATE $_________ SAN RAFAEL JOINT PUBLIC FINANCING AUTHORITY Lease Revenue Bonds, Series 2018 Maturity Principal Interest June 1 Amount Rate Price