HomeMy WebLinkAbout03 - Assessment District 101 - Sale of BondsCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. 3
September 9, 2008
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Administrative Services Department
Dennis C. Danner, Administrative Services Director
(949) 644 -3123 or ddanner(&citv.newport- beach.ca.us
Dan Matusiewicz, Finance Officer
(949) 644 -3126 or dmatusie(&-city.newport- beach.ca.us
SUBJECT: Sale of Bonds for Assessment District No. 101 —Area Generally Bounded
by Buena Vista Boulevard, Balboa Boulevard, Adams Street, and
Edgewater AvenuefEdgewater Place
Recommendation:
Adopt the resolution authorizing:
1. The sale of 1915 Act Assessment bonds not to exceed $2,481,399 million for
Assessment District 101;
2. The execution and delivery of one or more Indentures in substantially the form presented;
3. The execution and delivery of one or more Official Statements and Continuing Disclosure
Agreement in substantially the form presented;
4. The execution and delivery of one or more Bond Purchase Contracts in substantially the
form presented; and
5. Staff to take the necessary steps to provide for the sale and issuance of the bonds.
Discussion:
Assessment District 101 was formed by Public Hearing vote on July 22, 2008. Of the ballots
submitted, 61.97% were in favor of the district and 33.03% of the ballots were submitted in
opposition to the district. A Statement of Assessment and Notice of Recordation of
Assessment and Diagram was published in the Daily Pilot on July 28, 2008 and August 4,
2008. Letters were mailed July 23, 2008 to residents of Assessment District No. 101 with
instructions for assessment payment and the cash - payment deadline of August 22, 2008.
The total assessment levied for the District amounted to $4,749,060 which represents the cost
of the improvement project and financing costs. To date, the City has received $2,106,674 in
prepaid contributions from property owners that amounted to a total levy credit of $2,267,661,
which includes the exercised financing discount of $160,987. The remaining amount of unpaid
assessments amounts to $2,481,399, as depicted below.
Sale of Bonds for Assessment District No. 101
September 9, 2008
Page 2
Assessment levied — cost of improvement project and financing
$4,749,060
City received — prepaid contributions from property owners
$2,106,674
Exercised financing discount
$160,987
Remaining unpaid assessment amount
$2,481,399
The unpaid assessment amount will be sold as bonds to ML Stern, on a negotiated basis. ML
Stern is a qualified underwriter with extensive experience with 1915 Act assessment district
bonds. On the date of the bond sale, Fieldman Rolapp & Associates, the City's Financial
Advisor, will assist the City in pricing the bonds. The decision to sell the bonds, at the
negotiated price, will be delegated to the Administrative Services Director. The attached
resolution approves all formal terms, and a condition related to the sale of bonds through
approval of the Bond Indenture, and approves the Bond Purchase Contract, subject to
modifications as necessary with approval by the City Manager. The remaining financing
schedule is expected as follows:
September 10th, 2008 Print and electronically distribute Preliminary Official Statement
September 16th, 2008 Pre Pricing of Bonds
September 17th, 2008 Price Bonds
September 24th' 2008 Bond Closing (Proceeds Available)
Environmental Review:
This project qualifies for a Class 2 California Environmental Quality Act (CEQA) exemption
under Section 15302, item "d" of the Implementing Guidelines as follows: "Conversion of
overhead electric utility distribution system facilities to underground including connection to
existing overhead electric utility distribution lines where the surface is restored to the
condition existing prior to the undergrounding."
Funding Availability:
Funds will be available subject to the sale of bonds for this Assessment District.
Prepared by:
an Matusiewicz
Finance Officer
Submitted by:
Dennis C. Danner
Administrative Services Director
Attachments: District No. 101 Boundary Maps
Resolution — Sale of Bonds
Bond Indenture
Preliminary Official Statement
Bond Purchase Contract
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RESOLUTION NO. 2008
RESOLUTION AUTHORIZING ISSUANCE OF BONDS AND
APPROVING THE FORM OF CERTAIN BOND DOCUMENTS
FOR ASSESSMENT DISTRICT NO. 101
WHEREAS, this City Council previously adopted a Resolution of Intention
and initiated proceedings for the acquisition of certain public works of
improvement, namely, the conversion of certain overhead electrical and
communication facilities to underground locations, together with appurtenances
and appurtenant work, in a special assessment district designated as
Assessment District No. 101 (hereinafter referred to as the "Assessment District ")
pursuant to the terms and provisions of the "Municipal Improvement Act of 1913 ",
being Division 12 of the Streets and Highways Code of the State of California, as
adopted and modified by Ordinance No. 2000 -17 of the City of Newport Beach
(together, the 'Improvement Act ");
WHEREAS, this City Council, to finance the acquisition and construction
of such improvements, declared in its Resolution of Intention to issue bonds
against any unpaid assessments as certified by the Treasurer, such bonds to
issue pursuant to the terms and provisions of the 'Improvement Bond Act of
1915 ", being Division 10 of the Streets and Highways Code (the 'Bond Act');
WHEREAS, this City Council desires to set forth the general terms and
conditions relating to the authorization, sale, delivery, and administration of such
bonds;
WHEREAS, the bonds are to be sold by negotiated sale to M.L. Stem &
Co., LLC pursuant to the provisions of a bond purchase contract (the "Bond
Purchase Contract');
WHEREAS, the City of Newport Beach has caused to be prepared and
filed with the City Clerk drafts of the Bond Purchase Contract, a bond indenture
(the Bond Indenture "), a preliminary official statement describing the
Assessment District, the improvements, and the bonds (the "Preliminary Official
Statement'), and an agreement to provide continuing disclosure of certain
information contained in the Preliminary Official Statement (the "Continuing
Disclosure Agreement'), which drafts have been reviewed by this City Council;
NOW, THEREFORE, it is hereby Resolved, Determined, and Ordered as
follows:
SECTION 1. Recitals. The above recitals are true and correct.
SECTION 2. Bonds Authorized. Pursuant to the Bond Act, this Resolution
and the Bond Indenture, limited obligation improvement bonds of the City for the
benefit of the Assessment District and designated as "City of Newport Beach
Assessment District No. 101 Limited Obligation Improvement Bonds" (the
"Bonds ") are hereby approved and authorized to be issued, sold and delivered.
The Bonds shall be in an aggregate principal amount equal to the aggregate
unpaid assessments in the Assessment District as certified by the City Treasurer.
The date, manner of payment, interest rate or rates, interest payment dates,
denominations, form, registration privileges, manner of execution, place of
payment, terms of redemption and other terms, covenants and conditions of the
Bonds shall be as provided in the Bond Indenture and Bond Purchase Contract.
SECTION 3. Authorization and Conditions. The City Manager, Director of
Administrative Services, City Treasurer, Finance Officer and such other officials
of the City as may be designated by the City Council, or any of them (each an
"Authorized Officer "), are hereby authorized and directed to execute and deliver
the various documents and instruments described in this Resolution and the
Bond Purchase Contract with such additions and changes as the Authorized
Officer deems advisable, provided that no additions or changes shall authorize
an aggregate principal amount of Bonds in excess of the aggregate unpaid
assessments. The approval of such additions or changes shall be conclusively
evidenced by the execution and delivery of such documents or instruments by an
Authorized Officer, upon consultation with and review by the City Attorney and
bond counsel.
SECTION 4. Bond Indenture. The form of Bond Indenture with respect to
the Bonds as presented to this City Council and on file with the City Clerk is
hereby approved. The Authorized Officer is hereby authorized and directed to
cause the same to be completed and executed on behalf of the City.
SECTION 5. Official Statement and Continuing Disclosure Aareement.
This City Council hereby approves the forms of Preliminary Official Statement
and the Continuing Disclosure Agreement on file with the City Clerk. The
Authorized Officer is authorized to approve corrections and additions to the
Preliminary Official Statement and to certify on behalf of the City that the
approved Preliminary Official Statement is final as of its date except for the
omission of certain information as permitted by Section 240.15c2- 12(b)(1) of Title
17 of the Code of Federal Regulations. The Authorized Officer is further
authorized and directed to cause the completion of the Preliminary Official
Statement into the form of a final official statement (the "Final Official Statement ")
and to execute a statement that the facts contained in the Final Official
Statement, and any supplement or amendment thereto (which shall be deemed
an original part thereof for the purpose of such statement) were, at the time of
sale of the Bonds, true and correct in all material respects and that the Final
Official Statement did not, on the date of sale of the Bonds, and does not, as of
the date of delivery of the Bonds, contain any untrue statement of a material fact
2
or omit to state material facts required be stated where necessary to make any
statement made therein not misleading in the light of the circumstances under
which it was made. The Authorized Officer shall take such further action as the
Authorized Officer deems necessary or appropriate to verify the accuracy
thereof.
The form of Continuing Disclosure Agreement as presented to this City
Council and on file with the City Clerk is hereby approved. The Authorized Officer
is hereby authorized and directed to cause the same to be completed and
executed on behalf of the City.
SECTION 6. Sale of Bonds. This City Council hereby authorizes and
approves the sale of the Bonds by negotiated sale. The form of the Bond
Purchase Contract as presented to this City Council and on file with the City
Clerk is hereby approved and the Authorized Officer is hereby authorized and
directed to sell and deliver the Bonds subject to the following conditions: the
aggregate principal amount of the Bonds does not exceed the unpaid
assessments within the Assessment District, the underwriter's discount does not
exceed two percent (2 %), and the net interest rate on the bonds shall not exceed
seven percent (7 %) per annum.
SECTION 7. Bonds Prepared and Delivered. Upon the sale of the Bonds,
the Bonds shall be prepared, authenticated and delivered, all in accordance with
the applicable terms of the Bond Act and the Bond Indenture, and the Authorized
Officer and other responsible City officials are hereby authorized and directed to
take such actions as are required under the Bond Purchase Contract and the
Bond Indenture to complete all actions required to evidence the delivery of the
Bonds upon the receipt of the purchase price thereof from the purchaser.
SECTION 8. Annual Assessment Installments. A copy of the resolution
confirming the assessments, which assessments shall constitute the security for
the Bonds, shall be delivered to the City Treasurer, and the City Treasurer shall
keep or cause to be kept the record showing the several installments of principal
and interest on the assessments which are to be collected each year during the
term of the bonds. An annual portion of each assessment, together with annual
interest on the assessment, shall be payable in the same manner and at the
same time and in the same installment as the general property taxes of the
County of Orange and shall be payable and become delinquent at the same time
and in the same proportionate amount. Each year the annual installments shall
be submitted to the County Auditor for purposes of collection.
SECTION 9. Covenant to Initiate Foreclosure Proceedings. This
legislative body does further specifically covenant for the benefit of the
bondholders to commence and prosecute to completion foreclosure actions
regarding delinquent installments of the assessments in the manner, within the
3
time limits and pursuant to the terms and conditions as set forth in the Bond
Indenture as submitted and approved through the adoption of this Resolution.
SECTION 10. Actions. All actions heretofore taken by the officers and
agents of the City with respect to the establishment of the Assessment District
and the sale and delivery of the Bonds are hereby approved, confirmed and
ratified, and the proper officers of the City are hereby authorized and directed to
do any and all things and take any and all actions and execute any and all
certificates, agreements, contracts, and other documents, which they, or any of
them, may deem necessary or advisable in order to consummate the lawful
issuance, sale and delivery of the Bonds in accordance with Bond Act, this
Resolution, the Bond Indenture, the Bond Purchase Contract, the Continuing
Disclosure Agreement, and any certificate, agreement, contract, and other
document described in the documents herein approved.
SECTION 11. Effective Date. This resolution shall take effect from and
after its adoption.
PASSED, APPROVED AND ADOPTED at a regular meeting of the City
Council of the City of Newport Beach on the 9th day of September, 2008 by the
following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
City Clerk
4
Mayor
BONDINDENTURE
by and between
City of Newport Beach,
California
and
U.S. Bank National Association,
as Paying Agent
Dated as of September 1, 2008
$2,481,399*
City of Newport Beach
Assessment District No. 101
Limited Obligation Improvement Bonds
* Subject to change.
08!28!08 Draft
TABLE OF CONTENTS
08/28/08 Draft
Page
SECTION 1.
Authorization, Designation and Amount ................................. ...............................
1
SECTION 2.
Issuance, Unpaid Assessments ...................................................... ...............................
1
SECTION 3.
Alternative Procedure for Advance Payment ............................. ...............................
1
SECTION 4.
Registered Bonds; Denominations and Book -Entry Only ......... ...............................
1
SECTIONS.
Date of Bonds ................................................................................. ...............................
1
SECTION6.
Maturity ......................................................................................... ...............................
1
SECTION7.
Interest ............................................................................................ ...............................
1
SECTION 8.
Place of Payment ........................................................................... ...............................
2
SECTION9.
Redemption .................................................................................... ...............................
2
SECTION 10.
Transfer of Registered Bonds ....................................................... ...............................
4
SECTION 11.
Exchange of Bonds ........................................................................ ...............................
4
SECTION 12.
Books of Registration .................................................................... ...............................
5
SECTION 13.
Execution of Bonds ........................................................................ ...............................
5
SECTION14.
Authentication ............................................................................... ...............................
5
SECTION 15.
Ownership of Bonds ...................................................................... ...............................
5
SECTION 16.
Mutilated, Destroyed, Stolen or Lost Bonds ............................... ...............................
5
SECTION 17.
Cancellation of Bonds ................................................................... ...............................
6
SECTION 18.
Application of Bond Proceeds ...................................................... ...............................
6
SECTION 19.
Creation of Funds .......................................................................... ...............................
6
SECTION20.
Investments .................................................................................... ...............................
8
SECTION 21.
No City Liability ............................................................................ ...............................
8
SECTION 22.
Covenant for Superior Court Foreclosure .................................. ...............................
8
SECTION 23.
Covenant to Maintain Tax - Exempt Status .................................. ...............................
9
SECTION 24.
Order to Print and Authenticate Bonds ...................................... ...............................
9
SECTION25.
Paying Agent .................................................................................. ...............................
9
SECTION 26.
Liability of Paying Agent ............................................................ ...............................
10
SECTION 27.
Provisions Constitute Contract .................................................. ...............................
11
SECTION 28.
Unclaimed Funds ......................................................................... ...............................
11
SECTION 29.
Modification or Amendment to this Indenture ......................... ...............................
11
SECTION 30.
Notices to and Demands on City and Paying Agent ................. ...............................
12
SECTION 31.
Partial Invalidity ......................................................................... ...............................
12
SECTION 32.
Applicable Law ............................................................................ ...............................
12
SECTION 33.
Conflict with Act .......................................................................... ...............................
12
SECTION 34.
Payment on Business Day ........................................................... ...............................
13
SECTION 35.
Insurer Provisions ....................................................................... ...............................
14
SECTION36.
Defeasance .................................................................................... ...............................
18
SECTION37.
Counterparts ................................................................................ ...............................
19
Exhibit A Maturity Schedule
Exhibit B Book Entry Provisions
Exhibit C Form of Bond
Exhibit D Authorized Investments
9
08128108 Draft
BONDINDENTURE
This Bond Indenture (the "Indenture") dated as of September I, 2008, is entered into by and between the City
of Newport Beach, a California municipal corporation (the "City'), and U.S. Bank National Association, as
paying agent, registrar and transfer agent (the "Paying Agent "), to establish the terms and conditions pertaining
to the issuance of bonds in a special assessment district known and designated as Assessment District No. 101
(the "Assessment District ").
SECTION 1. Authorization, Designation and Amount. Pursuant to the provisions of the "Improvement
Bond Act of 1915" (the "Act"), being Division 10 of the Streets and Highways Code of the State of California,
the City does hereby authorize the issuance of a bond or bonds to represent the unpaid assessments within the
Assessment District in an aggregate principal amount of $2,481,399.00, and to be designated as the City of
Newport Beach Assessment District No. 101 Limited Obligation Improvement Bonds (the `Bonds').
SECTION 2. Issuance; Unpaid Assessments; No Parity Bonds. The City shall determine the assessments
that are unpaid and the aggregate amount thereof and issue, sell and deliver bonds therefor as authorized by the
Act. The Bonds shall be secured by, and the City does hereby pledge, (1) the unpaid assessments within the
Assessment District and (2) the amounts held in the Redemption Fund and the Reserve Fund maintained
pursuant to this Indenture and any earnings thereon (except to the extent earnings are to be transferred to the
Rebate Fund under this Indenture). Except for refunding bonds, if any, no additional bonds or other obligations
will be issued or incurred that will be secured by or payable from the assessments of the Assessment District.
SECTION 3. Alternative Procedure for Advance Payment. The provisions of Part 1 1.1 of the Act,
providing an alternative procedure for the advance payment of assessments and the calling of all or a portion of
the Bonds shall apply.
SECTION 4. Registered Bonds; Denominations and Book-Entry Only. The Bonds shall be issued only
as fully registered Bonds in the denomination of $5,000, or any integral multiple thereof, except for one Bond
(which Bond if a series of Bonds is issued shall be the Bond maturing in the first year of maturity) which shall
include the amount by which the total aggregate principal amount of the Bonds exceeds the maximum integral
multiple of $5,000. Notwithstanding any provisions herein to the contrary, the Bonds shall be initially issued in
book -entry form in accordance with the terns of Exhibit B attached hereto and incorporated herein by this
reference.
SECTION 5. Date of Bonds. All of the Bonds shall be dated as of the date of the delivery of the Bonds to
the initial purchase thereof (the "Date of Delivery"), and interest shall accrue from that date at the rates set
forth in Exhibit A attached hereto and incorporated herein by this reference.
SECTION 6. Maturity. The Bonds may be issued as serial bonds, term bonds, or both. The principal of
the Bond or Bonds shall be payable on September 2 of every year, commencing September 2, 2009, until the
whole is paid. The principal amount maturing or payable each year shall be the principal amounts maturing or
payable in the respective years as shown on Exhibit A hereto.
SECTION 7. Interest. Each serial Bond shall be of a single maturity and shall bear interest at the rate for
its maturity as set forth in Exhibit A attached hereto.
Interest on the Bonds shall be paid in lawful money of the United States of America on March 2 and
September 2 of each year (each, an "Interest Payment Date "), commencing March 2, 2009, by check of the
Paying Agent mailed by first -class mail, postage prepaid, on each Interest Payment Date to the registered
08/28/08 Draft
owners thereof at the owner's addresses as they appear on the Paying Agent's books of registration on the 15th
day of the month immediately preceding said Interest Payment Date regardless of whether such day is a
business day (the "Record Date') or by wire transfer to an account in the United States of America made on an
Interest Payment Date upon written instructions received by the Paying Agent on or before the Record Date
from an owner of $1,000,000 or more in aggregate principal amount of Bonds. Interest shall be calculated on
the basis of a 360 -day year composed of twelve 30 -day months.
Interest on any Bond shall be payable from the Interest Payment Date next preceding the date ofauthentication
of that Bond, unless (i) the date of authentication is an Interest Payment Date, in which event interest shall be
payable from such date of authentication, (ii) the date of authentication is after a Record Date but prior to the
immediately succeeding Interest Payment Date, in which event interest shall be payable from that Interest
Payment Date, or (iii) the date of authentication is prior to the close of business on the first Record Date, in
which event interest'shall be payable from the Date of Delivery, provided, however, that if at the time of
authentication of any Bond, interest is in default, interest on that Bond shall be payable from the last Interest
Payment Date to which the interest has been paid or made available for payment or from the Date of Delivery,
if no interest has been paid or made available for payment.
SECTION 8. Place of Payment. The principal of, and any premium due on the redemption of the Bonds,
shall be payable in lawful money of the United States of America upon surrender thereof at the corporate trust
office of the Paying Agent in St. Paul, Minnesota (the "Principal Office "), or at such other office as the Paying
Agent may designate, or at the corporate trust office of such other registrar, transfer agent, paying agent or
fiscal agent as appointed by Section 25 hereof.
SECTION 9. Redemption.
(a) Optional Redemption. Any Bond or any portion of a Bond may be redeemed, in whole or in part in
increments of $5,000, in advance of maturity on any Interest Payment Date, commencing March 2, 2009, from
any source of funds including, without limitation, the prepayment of assessments, at the redemption prices
(expressed as a percentage of the principal amount to be redeemed) set forth below, together with accrued
interest to the date of redemption:
Redemption Date
Redemption Price
March 2, 2009 through September 2, 2013 103%
March 2, 2014 and September 2, 2014 102%
March 2, 2015 and September 2, 2015 101%
March 2, 2016 and thereafter 100%
(b) Purchase of Bonds. In lieu of payment at maturity or redemption under this Section 9, monies in the
Redemption Fund (other than monies representing prepaid assessments) may be used and withdrawn by the
Paying Agent for purchase of outstanding Bonds which mature on the next principal payment date, upon the
filing with the Paying Agent prior to the selection of Bonds for redemption of a written request from the City
requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and
other charges) as such request may provide, but in no event may Bonds be purchased at a price in excess ofthe
principal amount thereof, the premium, if any, plus interest accrued to the date of maturity or redemption that
would otherwise be payable.
(c) Selection of Bonds for Redemption. If less than all of the outstanding Bonds or portions thereof are to
be redeemed, the Paying Agent shall select the Bonds to be redeemed in authorized denominations in such a
08/28/08 Drat
way that the ratio of outstanding Bonds to issued Bonds shall be approximately the same for each annual
maturity insofar as possible.
(d) Notice of Redemption. When the Paying Agent shall receive notice from the City of its election to
redeem Bonds at least sixty (60) days prior to the applicable redemption date, or when Bonds are otherwise to
be redeemed pursuant to this Section 9, the Paying Agent shall give notice, in the name and at the expense of
the City, of the redemption of such Bonds. Such notice of redemption shall (a) specify the numbers of the
Bonds selected for redemption, except that where all the Bonds are subject to redemption or all the Bonds of a
maturity date are subject to redemption, the numbers thereof need not be specified; (b) state the date fixed for
redemption; (c) state the redemption price; (d) state the place or places where the Bonds are to be redeemed; (e)
in the case of Bonds to be redeemed only in part, state the portion of the Bond which is to be redeemed; and (f)
the CUSIP numbers of the Bonds to be redeemed. Such notice shall further state that on the date fixed for
redemption there shall become due and payable on each Bond, or portion thereof called for redemption, the
principal thereof, together with any premium, and interest accrued to the redemption date, and that from and
after such date, interest thereon shall cease to accrue and be payable. At least 30 days but no more than 45
days prior to the redemption date, the Paying Agent shall mail by registered or certified mail, postage prepaid,
or deliver by personal service, a copy of such notice, to the respective owners of the Bonds to be redeemed at
their addresses appearing on the bond register. The actual receipt by the owner of any Bond of notice of such
redemption shall not be a condition precedent thereto, and failure to receive such notice shall not affect the
validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption
date. A certificate by the Paying Agent that notice of such redemption has been given as herein provided shall
be conclusive as against all parties, and it shall not be open to any Bond owner to show that he or she failed to
receive notice of such redemption.
In addition to the notice described in the foregoing paragraph, such redemption notice shall be given by the
Paying Agent (i) by first class mail, postage prepaid, or (ii) by facsimile transmission on the same day as the
date of the mailing required by the preceding paragraph, to M.L. Stern & Co., LLC and to The Depository
Trust Company.
In addition to the foregoing notices, on the same day as the date of the mailing required by the second
paragraph preceding this paragraph, such redemption notice shall be given by the Paying Agent by (i) first-
class mail, postage prepaid, or (ii) facsimile transmission, to at least one of the Nationally Recognized
Municipal Securities Information Repositories selected by the City.
Neither failure to give the notice described in the two immediately preceding paragraphs nor any defect therein
shall in any manner affect the redemption of the Bonds.
(e) Partial RedemRtion of Bonds. Upon surrender of any Bond to be redeemed in part only, the City shall
execute and the Paying Agent shall authenticate and deliver to the Bond owner, at the expense of the City, a
new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed
portion of the Bond surrendered, with the same interest rate and the same maturity.
(f) Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly
given, as provided in this Section 9, and the amount necessary for the redemption having been made available
for that purpose and being available therefor on the date fixed for such redemption:
(1) The Bonds, or portions thereof, designated for redemption shall, on the date fixed for
redemption, become due and payable at the redemption price thereof as provided in this Indenture, anything in
this Indenture or in the Bonds to the contrary notwithstanding;
08/28/08 Draft
(2) Upon presentation and surrender thereof at the Principal Office of the Paying Agent, such
Bonds shall be redeemed at the specified redemption price;
(3) From and after the redemption date, the Bonds or portions thereof so designated for
redemption shall be deemed to be no longer outstanding and such Bonds or portions thereof shall cease to bear
further interest;
(4) From and after the date fixed for redemption, no owner of any of the Bonds or portion thereof
so designated for redemption shall be entitled to any of the benefits of this Indenture, or to any other rights,
except with respect to payment of the redemption price and interest accrued to the redemption date from the
amounts so made available.
(g) Bonds Subject to Refunding. The Bonds shall be subject to refunding pursuant to Division 11.5 ofthe
Streets and Highways Code of the State of California.
(h) No Mandatory Call. There shall be no mandatory redemption of the Bonds upon an event or
determination of taxability or otherwise.
SECTION 10. Transfer of Registered Bonds. Any Bond may, in accordance with its terms, be transferred,
upon the books of registration required to be kept pursuant to the provisions of Section 12, by the owner in
whose name it is registered, or by his or her duly authorized attorney or legal representative, upon surrender of
such Bond for registration of such transfer, accompanied by delivery of a written instrument of transfer in a
form approved by the Paying Agent and duly executed by the owner of said Bonds.
The Paying Agent may require the payment by the Bond owner requesting such transfer of any tax or other
governmental charge required to be paid with respect to such transfer and such charges as provided for in the
system of registration for registered debt obligations.
The Paying Agent shall not be required to register the transfer of any Bonds during the fifteen (15) days
preceding the selection of any Bonds for redemption prior to the maturity thereof, nor with respect to any Bond
which has been selected for redemption prior to the maturity thereof.
Upon any registration of transfer, a new Bond or Bonds shall be authenticated and delivered by the Paying
Agent in exchange for such Bond, in the name of the transferee, in any denomination or denominations autho-
rized by this Indenture, and in an aggregate principal amount equal to the principal amount of such Bond or
principal amount of such Bond or Bonds so surrendered. In all cases in which Bonds shall be exchanged or
transferred, the Paying Agent shall authenticate Bonds in accordance with the provisions ofthis Indenture. All
Bonds surrendered in such exchange or registration transfer shall forthwith be canceled.
SECTION 11. Exchange of Bonds. Bonds may be exchanged at the principal corporate trust office of the
Paying Agent for a like aggregate principal amount of Bonds of the same series, interest rate and maturity,
subject to the payment of any tax or governmental charges, if any, upon surrender and cancellation of the
Bond. Upon such transfer and exchange, anew registered Bond or Bonds of any authorized denomination or
denominations of the same series and maturity for the same aggregate principal amount will be issued to the
transferee in exchange therefor.
The Paying Agent shall not be required to register the exchange of any Bonds during the fifteen (15) days
preceding the selection of any Bonds for redemption prior to the maturity thereof, nor with respect to any Bond
which has been selected for redemption prior to the maturity thereof.
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SECTION 12. Books of Registration. There shall be kept by the Paying Agent sufficient books for the
registration and transfer of the Bonds and, upon presentation for such purpose, the Paying Agent shall, under
such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on
said register, Bonds as hereinbefore provided.
SECTION 13. Execution of Bonds. The Bonds shall be executed manually or in facsimile by the Treasurer
and by the City Clerk of the City. The Bonds shall be delivered to the Paying Agent for authentication and
registration. In case an officer who shall have signed or attested to any of the Bonds by facsimile or otherwise
shall cease to be such officer before the authentication, delivery and issuance of the Bonds, such Bonds
nevertheless may be authenticated, delivered and issued, and upon such authentication, delivery and issue,
shall be as binding as though those who signed and attested the same had remained in office.
SECTION 14. Authentication. Only such of the Bonds as shall bear thereon a certificate of authentication
substantially in the form below, manually executed by the Paying Agent, shall be valid or obligatory for any
purpose or entitled to the benefits of this Indenture, and such certificate of the Paying Agent shall be
conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered
hereunder, and are entitled to the benefits of this Indenture.
FORM OF CERTIFICATE OF AUTHENTICATION
This Bond has been authenticated on: [Date] U.S. Bank National Association,
as Paying Agent, Transfer Agent and Registrar
By:
Authorized signatory
SECTION 15. Ownership of Bonds. The person in whose name any Bond shall be registered shall be
deemed and regarded by the Paying Agent and the City as the absolute owner thereof for all purposes and shall
not be affected by any notice to the contrary, and payment of or on account of the principal and redemption
premium, if any, of any such Bond, and the interest on any such Bond, shall be made only to or upon the order
of the registered owner thereof or his legal representative shown on the books of registration. All such
payments shall be valid and effectual to satisfy and discharge the liability upon such Bond, including the
redemption premium, if any, and interest thereon, to the extent of the sum or sums so paid.
SECTION 16. Mutilated, Destroyed, Stolen or Lost Bonds. In case any Bond secured hereby shall become
mutilated or be destroyed, stolen or lost, the City shall cause to be executed and authenticated a new Bond of
bike date and tenor and principal or maturity amount in exchange and substitution for and upon the cancellation
of such mutilated Bond or in lieu of and in substitution for such Bond mutilated, destroyed, stolen or lost, upon
the owner's paying the reasonable expenses and charges in connection therewith, and, in the case of a Bond
destroyed, stolen or lost, his filing with the Paying Agent and City of evidence satisfactory to them that such
Bond was destroyed, stolen or lost, and of his ownership thereof, and furnishing the Paying Agent and City
with indemnity satisfactory to them.
SECTION 17. Cancellation of Bonds. Any Bond paid or redeemed either at or before maturity shall be
canceled upon the payment or redemption of such Bond and shall be delivered to the Paying Agent when such
payment or redemption is made. All Bonds canceled under any of the provisions of this Indenture shall be
destroyed by the Paying Agent and the Paying Agent shall execute a certificate describing the Bonds so
destroyed and retain said executed certificate in its permanent files for the issue.
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SECTION 18. Application of Bond Proceeds. The proceeds of the sale of the Bonds in the aggregate
principal amount of$ .00 (beingthe par amount of the Bonds less the underwriter's discount in
the amount of $ .00), shall be received by the City and deposited or transferred as follows:
(1) $ .00 of the sale proceeds, which represents the initial Reserve Requirement (as
defined below), shall be deposited in the Reserve Fund established pursuant to Section 19 (b) hereof, and
(2) $ .00 of the sale proceeds, together with $ collected by the City as
prepaid assessments, shall be deposited into the Improvement Fund established pursuant to Section 19 (c) (1)
hereof.
SECTION 19. Creation of Funds. The Paying Agent and the City, as applicable, are hereby authorized and
directed to establish the following funds for purposes of collecting assessment installments, making payment
for the hereinafter designated costs and expenses and payment of principal and interest on the Bonds. The
funds to be created are designated and subject to the terms as follows:
(a) Redemption Fund: The Paying Agent is hereby authorized and directed to establish and maintain a
Redemption Fund (the "Redemption Fund') designated by the name of the Assessment District and to deposit
therein from time to time (i) the amount of the proceeds of the Bonds which represents accrued and capitalized
interest, if any, on the Bonds, (ii) all sums received from the City representing the collection ofthe assessments
(other than assessments for administrative costs) and the interest thereon, and (iii) any surplus in the
Improvement Fund to the extent as provided below.
There shall be established by the Paying Agent a prepayment subaccount within the Redemption Fund to be
known as the Prepayment Account ( "Prepayment Account "). The Paying Agent shall not be required to
establish the Prepayment Account until the time when deposits are required to be made therein. The City shall
transfer to the Paying Agent for deposit in the Prepayment Account all monies received by the City
representing the prepayment the principal of, and interest and redemption premium on, any Bonds. Such
monies shall be applied solely to the payment of the principal of, and interest and premium on, Bonds to be
redeemed prior to maturity pursuant to the provisions of Section 9 of this Indenture.
Except for money received with respect to assessment surcharges for administrative costs, the City shall
transfer or cause to be transferred to the Paying Agent at least five days prior to each Interest Payment Date all
sums received and not previously transferred from the collection of the assessments and any interest thereon
and all sums received for the partial or full prepayment of assessments as required by Streets and Highways
Code Section 8767. Any transfer representing the payment of delinquent assessment installments or the
proceeds of the redemption of or foreclosure on any property with respect to which any assessment installments
are delinquent shall be accompanied by written instructions as to the amount, if any, of such transfer which is
required to be transferred to the Reserve Fund. Any transfer representing the prepayment of assessments shall
be accompanied by written instructions as to the disposition of such sums to redeem Bonds prior to maturity or
to pay accrued interest on any Bonds to be redeemed.
Principal of and interest on the Bonds shall be paid by the Paying Agent to the registered owners out of the
Redemption Fund to the extent funds on deposit in said Redemption Fund are available therefor. In all
respects not recited herein, said Bonds shall be governed by this Indenture or such other direction ofthe City to
the Paying Agent in writing given in accordance with the provisions of the Act. The Paying Agent may
conclusively rely upon any statement or certification of the City that any such direction is given by the City in
accordance wit the Act. Under no circumstances shall the Bonds or interest thereon be paid out of any other
fund except as provided herein.
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(b) Reserve Fund: The City shall create and maintain a special reserve fund for the Bonds (the "Reserve
Fund ") to be designated by the name of the Assessment District. Pursuant to Section 18 of this Indenture, the
Reserve Fund shall be initially funded from a portion of the Bond proceeds in an amount equal to 6% of the
original principal amount of the Bonds. The City shall also deposit in the Reserve Fund funds which represent
the proceeds of (i) payments made to redeem delinquent assessment installments or (ii) thejudicial foreclosure
sale of parcels pursuant to Section 22 below, in each case if and to the extent that any advance was made from
the Reserve Fund to the Redemption Fund as a result of such delinquencies.
Monies in the Reserve Fund shall be applied as follows
(1) Amounts in the Reserve Fund shall be transferred to the Paying Agent for deposit in the
Redemption Fund if there are insufficient monies in said Redemption Fund to pay principal of and interest on
the Bonds when due. Amounts so transferred shall be repaid to the Reserve Fund from proceeds from the
redemption or foreclosure of property with respect to which an assessment is unpaid and from payments ofthe
delinquent assessments.
(2) Interest earned on the permitted investment of monies on deposit in the Reserve Fund shall
remain in the Reserve Fund to the extent required to maintain the Reserve Fund at the Reserve Requirement.
Not later than July 15 of each fiscal year the amount on deposit in the Reserve Fund in excess of the "Reserve
Requirement" shall be transferred from the Reserve Fund to the Redemption Fund and credited to the unpaid
assessment installments payable during such fiscal year. "Reserve Requirement" shall mean the least of the
maximum annual debt service on the outstanding Bonds, (ii) 125% of the average annual debt service on the
outstanding Bonds, or (iii) 6% of the original principal amount of Bonds (the "Reserve Requirement'). The
City Auditors record shall reflect the credits against each of the unpaid assessments in amounts equal to each
parcel's proportionate share of such transfer.
Notwithstanding the above, interest earnings on monies on deposit in the Reserve Fund in excess of
the "yield" on the Bonds, as that term is defined in the Internal Revenue Code of 1986 (the "Code'), shall be
subject to transfer and rebate to the United States Treasury.
(3) Whenever monies in the Reserve Fund, together with available funds in the Redemption Fund,
are sufficient to fully and timely pay and redeem all outstanding Bonds, plus accrued interest thereon, the
money shall be transferred to the Redemption Fund and collection of corresponding amount ofthe remaining
unpaid assessments shall cease.
(4) In the event an assessment is prepaid in cash, the City shall credit the prepaid assessment with
a proportionate share of the Reserve Fund and transfer an amount equal to such credit to the Redemption Fund
to be utilized for the advance retirement of Bonds.
(c) Improvement Fund
(1) General. The City shall create and maintain an improvement fund for the Bonds (the
"Improvement Fund ") to be designated by the name of the Assessment District.
(2) Project Costs. The monies in the Improvement Fund shall be used only for the payment of
Project Costs as that term is defined hereinafter. "Project Costs" shall mean the costs of the conversion of
certain overhead electrical and communication facilities to underground locations, together with appurtenances
and appurtenant work in connection therewith (the "Improvements ") as authorized in the assessment
proceedings and all incidental costs related thereto including the costs of issuing the Bonds, all as more
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particularly described in the Assessment Engineers Report for the Assessment District on file in the Office of
the City Clerk of the City, as the report may be amended from time to time pursuant to the Municipal
Improvement Act of 1913.
The Treasurer of the City shall be responsible for the safekeeping and investment ofthe monies held in
the Improvement Fund. Interest earned on the investment of the monies held in the Improvement Fund shall be
deemed at all times to be part of the Improvement Fund.
Upon completion of the acquisition and construction of the Improvements, the Superintendent of
Streets of the City shall file a certificate of completion with the Treasurer. Any surplus in the Improvement
Fund after completion of the Improvements but prior to September 30, 2010 shall remain in the Improvement
Fund until at least September 30, 2010 and thereafter shall be utilized or distributed in any manner authorized
by the Act.
(d) Rebate Fund: The City shall establish and maintain a Rebate Fund. Amounts, if any, on deposit in the
Rebate Fund shall be paid to the United States of America. Notwithstanding any other provisions of this
Indenture, all earnings on amounts on deposit in the Rebate Fund shall remain therein until all amounts payable
to the United States of America have been paid.
SECTION 20. Investments. Obligations purchased as investments of monies in any of the funds in which
investments are authorized shall be deemed at all times to be part of such funds. Subject to the restrictions set
forth herein, monies in said funds may from time to time be invested by the Paying Agent, as to money in the
Redemption Fund, at the written direction of the Treasurer of the City, which written direction shall contain a
certification to the Paying Agent that such investments are Authorized Investments as defined in Exhibit D
hereto. In the absence of written direction from the City, the Paying Agent shall invest the moneys deposited in
the Redemption Fund and any account of such fund in investments described in paragraph (vii) of Exhibit D.
Such monies shall be invested only in obligations which will by their terms mature on such dates so as to
ensure the payment of principal of and interest on the Bonds as the same become due; provided, investments of
money in the Reserve Fund shall mature not later than five years from the date of purchase except such money
may be invested in a repurchase agreement or an investment agreement without such five year limitation so
long as the repurchase agreement or investment agreement provides for withdrawals at par on or before any
Interest Payment Date.
The City and, if applicable, the Paying Agent shall sell at the best price reasonably obtainable or present for
redemption any obligations so purchased whenever it may be necessary to do so in order to provide monies to
meet any payment or transfer for such funds or from such funds. For the purpose of determining at any given
time the balance in any such funds, any such investments constituting a part of such funds shall be valued at
their market value. Notwithstanding anything herein to the contrary, the Paying Agent shall not be responsible
for any loss from any investments pursuant to this Indenture, except for its own negligence or willful
misconduct. The Paying Agent may act as principal or agent in the acquisition or disposition of investments.
The Paying Agent and the City may commingle the funds established hereunder for investment purposes, but
shall nonetheless account for each separately.
The Paying Agent 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 Paying Agent or for any third person or dealing as principal for its own account.
The City acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable
regulatory entity grant the City the right to receive brokerage confirmations of security transactions as they
occur, the City specifically waives receipt of such confirmations to the extent permitted by law.
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Notwithstanding the preceding sentence, the Paying Agent will deliver confirmations to the City upon the
written request of the City with respect to any specific transaction identified in the request. The Paying Agent
will furnish the City periodic cash transaction statements that include detail for all investment transactions
made by the Paying Agent hereunder.
SECTION 21. No City Liability. It is hereby further determined and declared that the City will not obligate
itself to advance any available funds from its treasury to cure any deficiency or delinquency which may occur
in the Redemption Fund by failure of property owners to pay annual special assessments. This determination
shall be clearly stated in the title of the Bonds to be issued as authorized and required by Section 8769 of the
Streets and Highways Code of the State of California.
SECTION 22. Covenant for Superior Court Foreclosure. The City will review the public records of the
County of Orange, California, in connection with the collection of the assessment installments not later than
August I of each year to determine the amount of assessment installments collected in the prior Paying Year. If
the City determines that any parcel or parcels are delinquent in the payment of assessment installments, then
the City will cause judicial foreclosure proceedings to be filed in the Superior Court not later than December I
of such year, and will prosecute diligently such foreclosure proceedings to judgment and judicial foreclosure
sale; provided, however, the commencement of any foreclosure action may be deferred in the sole discretion of
the City if, and only so long as, the amount in the Reserve Fund is not less than seventy percent (70 %) of the
Reserve Requirement.
Upon the redemption or sale of the real property responsible for any such delinquent assessment installment,
the City will apply the net proceeds thereof to: (a) deposit to the Reserve Fund the amount of any delinquency
advanced therefrom to the Redemption Fund for payment of interest on or principal of the Bonds, and (b) the
balance, if any, will be disbursed as set forth in the judgment of foreclosure or as required by law.
SECTION 23. Covenant to Maintain Tax - Exempt Status. The City covenants that it will not make any
use of the proceeds of the Bonds issued hereunder which would cause the Bonds to become "arbitrage bonds"
subject to federal income taxation pursuant to the provisions of Section 148(k) of the Internal Revenue Code of
1986, as amended (the "Code'), or to become "federally- guaranteed obligations" pursuant to the provisions of
Section 149(b) of the Code, or to become "private activity bonds" pursuant to the provisions of Section 141(a)
of the Code. To that end, the City will comply with all applicable requirements of the Code and all regulations
of the United States Department of Treasury issued thereunder to the extent such requirements are, at the time,
applicable and in effect. Additionally, the City agrees to implementand follow each and every recommendation
provided by bond counsel and deemed to be necessary to be undertaken by the City to ensure compliance with
all applicable provisions of the Code in order to preserve the exclusion of interest on the Bonds from gross
income for federal income tax purposes.
SECTION 24. Order to Print and Authenticate Bonds. The Treasurer is hereby instructed to cause Bonds,
in form substantially similar to Exhibit C attached hereto, to be printed, and to proceed to cause said Bonds to
be authenticated and delivered to an authorized representative of the purchaser, upon payment ofthe purchase
price as set forth in the accepted proposal for the sale of Bonds.
SECTION 25. Paying Agent. The City hereby appoints U.S. Bank National Association, and U.S. Bank
National Association, hereby accepts appointment as Paying Agent for the Bonds. The Paying Agent is hereby
authorized to and shall mail or wire transfer interest payments to the Bond owners, select Bonds for
redemption, give notice of redemption of Bonds, maintain the Bond register and maintain and administer the
Redemption Fund. The Paying Agent is hereby authorized to pay the principal of and premium, if any, on the
Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for
the registration of transfer and exchange of Bonds presented to it for such purposes, to provide for the
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cancellation of Bonds, all as provided in this Indenture, and to provide for the authentication of Bonds, and
shall perform all other duties assigned to or imposed on it as provided in this Indenture. The Paying Agent
shall keep accurate records of all funds administered by it and al l Bonds paid and discharged by it. The Paying
Agent initially appointed, and any successor thereto, may be removed by the City and a successor or successors
may be appointed. So long as any Bonds are outstanding and unpaid the Paying Agent and any successor or
successors thereto designated by the City shall continue to be Paying Agent of the City for all of said purposes
until the designation of a successor or successors as Paying Agent. The City shall compensate the Paying
Agent at its normal fee and charges pursuant to the schedule of fees and charges to be provided to the City for
the performance of its services hereunder.
The Paying Agent may rely and shall be protected in acting or refraining from acting upon any notice,
resolution, request, consent, order, certificate, report, warrant, Bond or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or proper parties. The Paying Agent
may consult with counsel, who may be counsel to the City, with regard to legal questions, and the opinion of
such counsel shall be full and complete authorization and protection in respect of any action taken or suffered
by it hereunder in good faith and in accordance therewith.
Whenever in the administration of its duties under this Indenture the Paying Agent shall deem it necessary or
desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or
willful misconduct on the part of the Paying Agent, be deemed to be conclusively proved and established by a
certificate of the City, and such certificate shall be full warrant to the Paying Agent for any action taken or
suffered under the provisions of this Indenture or any Supplemental Indenture upon the faith thereof, but in its
discretion the Paying Agent may, in lieu thereof, accept other evidence of such matter or may require such
additional evidence of such matter or may require such additional evidence as to it may seem reasonable.
The City shall pay to the Paying Agent from time to time reasonable compensation for all services rendered as
Paying Agent under this Indenture, and also all reasonable expenses, charges, counsel fees and other
disbursements, including those of its attorneys, agents and employees, incurred in and about the performance
of its powers and duties under this Indenture, and the Paying Agent shall have a lien therefor on any funds at
any time held by it under this Indenture. The City further agrees, to the extent permitted by applicable law, to
indemnify and save the Paying Agent, its officers, employees, and agents harmless against any liabilities which
it may incur in the exercise and performance of its powers and duties hereunder which are not due to its
negligence or willful misconduct.
The obligation of the City under this Section shall survive resignation or removal of the Paying Agent under
this Indenture and payment of the Bonds and discharge of this Indenture.
A Paying Agent appointed hereunder may resign at any time upon written notice to the City and after
appointment of a successor, provided the successor is either the Treasurer of the City or is a bank or trust
company having (or, if such bank or trust company is a member of a bank holding company, its bank holding
company has) combined capital (excluding borrowed capital) and surplus of at least $50,000,000 and is subject
to State or federal supervision. Any company into which the Paying Agent may be merged or converted or
with which it may be consolidated or any company resulting from any merger, conversion or consolidation to
which it shall be a party or any company to which the Paying Agent may sell or transfer all or substantially all
of its corporate trust business, provided such company shall be eligible under this Section 25, shall succeed to
the rights and obligations of such Paying Agent without the execution or filing of any paper or further act. If a
successor to the Paying Agent is not appointed by the City within sixty (60) calendar days after notice of
resignation by the Paying Agent, the Paying Agent may petition a court of competent jurisdiction to appoint a
successor.
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SECTION 26. Liability of Paying Agent. The recitals of fact and all promises, covenants and agreements
contained herein and in the Bonds shall be taken as statements, promises, covenants and agreements of the
City, and the Paying Agent assumes no responsibility for the correctness of the same and makes no
representations as to the validity or sufficiency of this Indenture or of the Bonds, and shall incur no
responsibility in respect thereof other than in connection with its duties or obligations herein, or in the Bonds
or in the certificate of authorization assigned to or imposed upon the Paying Agent. No implied duties or
obligations shall be read into this Indenture against the Paying Agent. The Paying Agent shall be under no
responsibility or duty with respect to the issuance ofthe Bonds for value. The Paying Agent shall not be liable
in connection with the performance of its duties hereunder, except for its own negligence or willful
misconduct. The Paying Agent shall be protected in acting on any notice, resolution, request, consent,
certificate or other document believed by it to be genuine and to have been signed or presented by the proper
per•
The Paying Agent assumes no responsibility or liability for any information, statement or recital in any offering
memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds.
The Paying Agent shall not be liable for any error of judgment made in good faith by a responsible officer of
the Paying Agent unless it shall be proved that the Paying Agent was negligent in ascertaining the pertinent
facts. No provision of this Indenture shall require the Paying Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of
any of its rights or powers. All indemnification and releases from liability granted herein to the Paying Agent
shall extend to the officers and employees of the Paying Agent.
The Paying Agent shall not be chargeable with taking any actions hereunder in accordance with the Act but
shall solely be charged with taking action in accordance with this Indenture and any other written direction
furnished by the City.
SECTION 27. Provisions Constitute Contract. The provisions of this Indenture and the Bonds shall
constitute a contract between the City and the Bond owners and the provisions hereof and thereof shall be
enforceable by any Bond owner for the equal benefit and protection of all Bond owners similarity situated by
mandamus, accounting, mandatory injunction or any other suit, action or proceeding at law or in equity that is
now or may hereafter be authorized under the laws of the State of California in any court of competent
jurisdiction. Said contract is made under and is to be construed in accordance with the laws of the State of
California.
After the issuance and delivery of the Bonds, this Indenture shall not be subject to rescission, but shall be
subject to modification to the extent and in the manner provided in this Indenture, but to no greater extent and
in no other manner.
SECTION 28. Unclaimed Funds. Notwithstanding any provisions of this Indenture, subject to applicable
state escheat laws, any monies held by the Paying Agent in trust forthe payment ofthe principal or premium, if
any, or interest on, any Bonds and remaining unclaimed for one year after the principal of all ofthe Bonds has
become due and payable (whether at maturity or upon call for redemption or by declaration as provided in this
Indenture), if such monies were held at such date, or one year after the date of deposit of such monies if
deposited after said date when all of the Bonds became due and payable, shall be repaid to the City free from
the lien created by this Indenture, and all liability of the Paying Agent with respect to such monies shall
thereupon cease and the Bond owners shall, upon such payment, look only to the City for payment; provided,
however, that before the repayment of such monies to the City as aforesaid, the Paying Agent shall (at the
written request and cost of the City) first publish at least once in a nationally recognized financial publication
published in New York, New York, and Los Angeles, California, a notice, in such form as may be deemed
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appropriate by the Paying Agent, with respect to the provisions relating to the repayment to the City of the
monies held for the payment thereof.
SECTION 29. Modification or Amendment to this Indenture
(a) This Indenture and the rights and obligations of the City and of the owners of the Bonds may be
modified or amended at any time by a supplemental indenture pursuant to the affirmative vote at a meeting of
the owners, or with the written consent without a meeting, of the owners of at least a majority in aggregate
principal amount of the Bonds then outstanding. No such modification or amendment shall (i) extend the
maturity of any Bond or the time for paying interest thereon, or otherwise alter or impair the obligation of the
City to pay the principal of, and the interest and any premium on, any Bond, withoutthe express consent of the
owner of such Bond, or (ii) permit the creation of any pledge of or lien upon the assessments superior to or on
a parity with the pledge and lien created for the benefit of the Bonds, (iii) reduce the percentage of Bonds
required for the amendment hereof, or (iv) reduce the principal amount of or redemption premium on any Bond
or reduce the interest rate thereon. Any such amendment may not modify any of the rights or obligations of the
Paying Agent without its written consent. The Paying Agent may obtain an opinion of counsel that any such
supplemental indenture entered into by the City and the Paying Agent complies with the provisions of this
Section 29 and the Paying Agent may conclusively rely on such opinion.
(b) This Indenture and the rights and obligations of the City and the owners may also be modified or
amended at any time by a supplemental indenture, without the consent of any owners, only to the extent
permitted by law and only for any one or more of the following purposes:
(1) to add to the covenants and agreements of the City contained in this Indenture, other covenants
and agreements thereafter to be observed, or to limit or surrender any right or power herein reserved to or
conferred upon the City;
(2) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or
supplementing any defective provisions of this Indenture, or in regard to questions arising under this Indenture,
as the City and the Paying Agent may deem necessary or desirable and not inconsistent with this Indenture, and
which shall not materially adversely affect the rights of the owners; or
(3) to make such additions, deletions or modifications as may be necessary or desirable to assure
compliance with Section 148 of the Code relating to required rebate of excess earnings to the United States of
America or otherwise as may be necessary to assure exclusion from gross income for federal income tax
purposes of interest on the Bonds or to conform with the federal tax regulations.
SECTION 30. Notices to and Demands on City and Paying Agent. Any notice or demand which by any
provision of this Indenture is required or permitted to be given to or served on the City or the Paying Agent
may be given or served by first class mail, postage prepaid, addressed (until another address is filed by the City
or the Paying Agent) as follows:
Paving Agent: U.S. Bank National Association
633 West Fifth Street, 24h Floor
Los Angeles, CA 90071
Attn: Corporate Trust Services
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08/28/08 Draft
CW City of Newport Beach
3300 Newport Boulevard
Newport Beach, CA 92658
Attn: Finance Officer
SECTION 31. Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of this Indenture
shall for any reason be held by a court of competent jurisdiction to be illegal or unenforceable, such holding
shall not affect the validity of the remaining portions of this Indenture. The City hereby declares that it would
have executed and delivered this Indenture and each and every other section, paragraph, sentence, clause or
phrase thereof and authorized the issue of the Bonds pursuant thereto irrespective of the fact that any one or
more sections, paragraphs, clauses or phrases of this Indenture may be held illegal, invalid or unenforceable.
SECTION 32. Applicable Law. This Indenture shall be governed by and enforced in accordance with the
laws of the State of California applicable to contracts made and performed in the State of California.
SECTION 33. Conflict with Act. In the event of a conflict between any provision ofthis Indenture with any
provision of the Act as in effect on the closing date, the provision of the Act as in effect on the closing date
shall prevail over the conflicting provision of this Indenture.
SECTION 34. Payment on Business Day. In any case where the date of the payment of principal of or
interest (and premium, if any) on the Bonds or the date fixed for redemption is other than a business day (i.e.,
any day other than a Saturday or Sunday or any day the Paying Agent is authorized or obligated by law or
executive order to be closed), the payment of interest or principal (and premium, if any) need not be made on
the scheduled date but may be made on the next succeeding date which is a business day with the same force
and effect as if made on the date required, and no interest shall accrue for the period from and after the
scheduled date
SECTION 35. Continuing Disclosure. The City hereby covenants and agrees that it will comply with and
carry out all of the provisions of that certain Disclosure Dissemination Agent Agreement dated as of September
1, 2008 by and between the City and the Digital Assurance Certification, L.L.C., acting as dissemination agent
(the "Disclosure Agreement'). Notwithstanding any other provision of this Indenture, failure of the City to
comply with the Disclosure Agreement shall not be considered an event of default; however, any Participating
Underwriter (as such term is defined in the Disclosure Agreement) or any Bond owner may take such actions
as may be necessary and appropriate, including seeking mandate or specific performance by court order, to
cause the City to comply with its obligations under this Section.
SECTION 36. Defeasance. If the City shall pay or cause to be paid, or there shall otherwise be paid, to the
Owner of an outstanding Bond the interest due thereon and the principal thereof, at the times and in the manner
stipulated in this Indenture, then other than as set forth below, all covenants, agreements and other obligations
of the City to the Owner of such Bond under the Bond Indenture shall thereupon cease, terminate and become
void and discharged and satisfied.
Any outstanding Bond shall be deemed to have been paid within the meaning expressed in the preceding
paragraph if such Bond is paid in any one or more of the following ways:
(1) by paying or causing to be paid the principal of, premium, if any, and interest on such Bond,
as and when the same shall become due and payable;
(2) by depositing with the Paying Agent, in trust, at or before maturity, money which, together
with the amounts then on deposit in the funds established pursuant to this Indenture (exclusive of the Rebate
13
08/28/08 Draft
Fund) and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on
such Bond, as and when the same shall become due and payable; or
(3) by depositing with an escrow bank appointed by the City, in trust, noncallable United States
Treasury Obligations, in such amount as a certified public accountant shall determine (as set forth in a
verification report from such accountant) will be sufficient, together with the interest to accrue thereon and
moneys then on deposit in the funds established under this Indenture (exclusive of the Rebate Fund) and
available for such purpose, together with the interest to accrue thereon, to pay and discharge the principal of,
premium, if any, and interest on such Bond, as and when the same shall become due and payable;
then, at the election of the City, and notwithstanding that any Outstanding Bonds shall not have been
surrendered for payment, all obligations of the City under this Indenture with respect to such Bond shall cease
and terminate, except for the obligation of the Paying Agent to pay or cause to be paid to the Owners of any
such Bond not so surrendered and paid, all sums due thereon and except for the covenants of the District to
preserve the exclusion of the interest on the Bonds from gross income for federal income tax purposes. Notice
of such election shall be filed with the Paying Agent not less than ten (10) days prior to the proposed
defeasance date, or such shorter period of time as may be acceptable to the Paying Agent. In connection with a
defeasance under (2) or (3) above, there shall be provided to the Paying Agent a certificate of a certified public
accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Paying Agent
or the escrow bank, together with the interest to accrue thereon and moneys then on deposit in the funds
established under this Indenture (exclusive of the Rebate Fund) and available for such purpose, together with
the interest to accrue thereon to pay and discharge the principal of, premium, if any, and interest on all such
Bonds to be defeased in accordance with this Indenture as and when the same shall become due and payable,
and an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the
effect that the Bonds being defeased have been legally defeased in accordance with this Indenture.
[Remainder of page intentionally blank.]
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08/28/08 Draft
SECTION 37. Counterparts. This Indenture may be executed in counterparts, each of which shall be
deemed an original.
IN WITNESS WHEREOF, the parties hereto have executed this Bond indenture effective the date first written
hereinabove.
City of Newport Beach
12
Dennis Danner
Director of Administrative Services
U.S. Bank National Association,
as Paying Agent, Transfer Agent, and Registrar
By:
Authorized Officer
15
08/28/08 Pratt
EXHIBIT A
MATURITY SCHEDULE
Year
Amount
Rate
2009
,000
00
2010
,000
00
2011
,000
00
2012
,000
00
2013
,000
00
2014
,000
00
2015
,000
00
2016
,000
00
2017
,000
00
2018
,000
00
2019
,000
00
2020
,000
00
2021
,000
00
2022
,000
00
2023
,000
00
Total 1000
A -1
08/28/08 Draft
EXHIBIT "B"
Book -Entry Provisions
The Bonds (other than the first maturity bonds) shall be initially issued in the form of a single, fully
registered Bond for each maturity (which may be typewritten). Upon initial issuance, the ownership of such
Bonds shall be registered in the name of the Nominee identified below as nominee of The Depository Trust
Company, New York, and its successors and assigns (the "Depository" or "DTC'). Except as hereinafter
provided, all of the Bonds shall be registered in the name of the nominee of the Depository, which may be the
Depository, as determined from time to time pursuant to this Section (the "Nominee ").
With respect to the Bonds registered in the name of the Nominee, neither the Issuer nor the Paying
Agent shall have any responsibility or obligation to any broker - dealers, banks and other financial institutions
from time to time for which the Depository holds Bonds as securities depository (the "Participant ") or to any
person on behalf of which such a Participant holds an interest in the Bonds. Without limiting the immediately
preceding sentence, neither the Issuer nor the Paying Agent shall have any responsibility or obligation (unless
the Issuer is at such time the Depository) with respect to (i) the accuracy of the records of the Depository, the
Nominee, or any Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any
Participant or any other person, her than an owner of a Bond as shown in the register, of any notice with
respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository and its
Participants of the beneficial interests in the Bonds to be redeemed in the event the Issuer redeems the Bonds in
part, or (iv) the payment to any Participant or any other person, other than an owner of Bond as shown in the
register, of any amount with respect to principal of or interest on the Bonds. The Issuer and the Paying Agent
may treat and consider the person in whose name each Bond is registered as the holder and absolute owner of
such Bond for the purpose of payment of principal and interest with respect to such Bond, for the purpose of
giving notices of prepayment if applicable, and other matters with respect to such Bond, for the purpose of
registering transfers with respect to such Bond, and for all other purposes whatsoever. The Paying Agent shall
pay all principal of and interest on the Bonds only to or upon the order of the respective owner of a Bond, as
shown in the register, or his respective attorney duly authorized in writing, and all such payments shall be valid
and effective to fully satisfy and discharge the Issuer's and the Paying Agent's obligations with respect to
payment of principal of and interest on the Bonds to the extent of the sum or sums so paid. No person other
than an owner of a Bond, as shown in the register, shall receive a Bond evidencing the obligation of the Issuer
to make payments of principal and interest pursuant to this Indenture. Upon delivery by the Depository to the
owners of the Bonds, and the Issuer of written notice to the effect that the Depository has determined to
substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record
Dates, the word Nominee in this Indenture shall refer to such nominee of the Depository.
In order to qualify the Bonds for the Depository's book -entry system, the Issuer is executing and
delivering to the Depository a Representations Letter. The execution and delivery ofthe Representations Letter
shall not in any other way limit the provisions of this Section or in any other way impose upon the Issuer any
obligation whatsoever with respect to persons having interests in the Bonds other than the owners of the
Bonds, as shown on the register. In addition to the execution and delivery of the Representations Letter, the
Issuer shall take such other actions, not inconsistent with this Indenture, as are reasonably necessary to qualify
the Bonds for the Depository's book -entry program.
In the event (i) the Depository determines not to continue to act as securities depository forthe Bonds,
or (ii) the Depository shall no longer so act and gives notice to the Issuer of such determination, then the Issuer
will discontinue the book -entry system with the Depository. If the Issuer determines to replace the Depository
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08/28/08 Draft
with another qualified securities depository, the Issuer shall prepare or direct the preparation of anew, single,
separate, fully registered Bond, per maturity, registered in the name of such successor or substitute qualified
securities depository or its nominee. If the Issuer fails to identify another qualified securities depository to
replace the Depository, then the Bonds shall no longer be restricted to being registered in the register in the
name of the Nominee, but shall be registered in whatever name or names owners of the Bonds transferring or
exchanging Bonds shall designate, in accordance with the provisions of this Indenture, and the Issuer shall
prepare and deliver Bonds to the owners thereof for such purpose.
In the event of a reduction in aggregate principal amount of Bonds or an advance refunding of part of
the Bonds, DTC, in its discretion, (a) may request the Issuer to prepare and issue a new. Bond or (b) may make
an appropriate notation on the Bond indicating the date and amounts of such reduction in principal, but in such
event the Issuer records maintained by the Paying Agent shall be conclusive as to what amounts are on the
Bond, except in the case of final maturity, in which case the Bond must be presented to the Paying Agent prior
to payment.
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 of principal and interest with respect to such Bond and all notices
with respect to such Bonds shall be made and given, respectively, as provided in the Representation Letter or
as otherwise instructed by the Depository and acceptable to the Issuer.
The initial Nominee shall be Cede & Co., as Nominee of DTC.
M
No. R -_
Interest Rate:
EXHIBIT "C"
FORM OF BOND
United States of America
State of California
City of Newport Beach
Assessment District No. 101
Limited Obligation Improvement Bond
Maturity Date: Bond Date:
September 2, 20_ , 2008
REGISTERED OWNER: Cede & Co.
PRINCIPAL SUM: Dollars
08/28/08 Draft
CUS1P:
Under and by virtue of the Improvement Bond Act of 1915, being Division 10 of the Streets and Highways
Code of the State of California (the "Act'), the City of Newport Beach, California (the "Issuer"), will, out of
the Redemption Fund for the payment of the Bonds issued upon the assessments in Assessment District No.
101 as more fully described in the Resolution of Intention for said Assessment District, being Resolution No.
2008 -_ adopted by the City Council of the Issuer on April 8, 2008, pay to the registered owner stated above,
on maturity date stated above, the principal sum stated above in lawful money of the United States ofAmerica
upon presentation at the corporate trust office or agency of U.S. Bank National Association (together with any
successor paying under the Bond Indenture, the "Paying Agent ") in St. Paul, Minnesota (or such other office
designated by the Paying Agent, herein called the "Principal Office" of the Paying Agent), with interest
thereon from the Interest Payment Date next preceding the date on which this Bond is authenticated, unless this
Bond is authenticated as of an Interest Payment Date, in which case it shall bear interest from said Interest
Payment Date, or unless this Bond is authenticated and registered prior to the fast Interest Payment Date, in
which case it shall bear interest from its date or unless interest is in default on this Bond on such date, in which
case it shall bear interest from the last date interest was paid in full or from its dated date if no interest has been
paid, until payment of such principal sum has been discharged, at the rate per annum stated above, all as is
hereinafter specified.
This Bond is one of a series of Bonds of like date, tenor and effect, but differing in amounts, interest rates and
maturities, issued by the Issuer under the Act for the purpose of providing means for paying for the work and
improvements described in said Resolution of Intention, is secured by the monies in said Redemption Fund and by
the unpaid assessments made for the payment of said work, and, including principal and interest, is payable
exclusively out of the Redemption Fund. Further terms and conditions of the Bonds are provided for by a Bond
Indenture by and between the Issuer and the Paying Agent, dated as ofSeptember 1, 2008 (the `Bond Indenture "),
and this reference incorporates the Bond Indenture herein and by acceptance hereofthe owner ofthis Bond assents
to the terms and conditions of the Bond Indenture. All capitalized terms used herein shall have the same meanings
given such terms in the Bond Indenture unless otherwise specified herein.
C -1
08/28108 Draft
The interest on this Bond is payable semiannually on March 2 and September 2 in each year, commencing March
2, 2009 (each an "Interest Payment Date "), to the registered owner hereofby check mailed by fast class mail to the
registered owner at the registered owner's address as it appears on the registration books of the Issuer kept by the
Paying Agent on the fifteenth day of the month immediately preceding said Interest Payment Date regardless of
whether such day is a business day (the "Record Date ") or by wire transfer to an account in the United States of
America made on an Interest Payment Date upon written instructions received by the Paying Agent on or before the
Record Date from an owner of $1,000,000 or more in aggregate principal amount of Bonds.
This Bond will continue to accrue interest after maturity at the rate above stated, provided it is presented at maturity
and payment thereof is refused upon the sole ground that there are not sufficient monies in the Redemption Fund
with which to pay same. If this Bond is not presented at maturity, interest hereon will cease to accrue at maturity.
The Bonds are issuable only as fully registered Bonds in denominations of $5,000.00 or any integral multiple
thereof, except for one Bond maturing in the first year of maturity which shall include the amount by which the
total aggregate principal amount of the Bonds exceeds the maximum integral multiple of $5,000. This Bond is
transferable by the registered owner hereof in person or by the registered owner's attorney duly authorized in
writing at the Principal Office of the Paying Agent, subject to the payment of any tax or governmental charges, if
any, upon surrender and cancellation of this Bond. Upon such transfer a new registered Bond or Bonds of any
authorized denomination or denominations ofthe same maturity, for the same aggregate principal amount, will be
issued to the transferee in exchange therefor.
The Bonds are limited obligations of the Issuer and are not a lien or charge upon the funds or property of
the Issuer, except to the extent of the funds in the Redemption Fund. The Bonds are not a debt of the Issuer
or the State of California or any subdivision thereof, and neither the Issuer nor the State of California or
any subdivision thereof is liable for the payment of the Bonds. THE ISSUER DETERMINED AND
DECLARED THAT THE ISSUER WILL NOT OBLIGATE ITSELF TO ADVANCE AVAILABLE FUNDS
FROM ITS TREASURY TO CURE ANY DEFICIENCY WHICH MAY OCCUR IN THE REDEMPTION FUND.
This Bond or any portion of thereof may be redeemed, in whole or in part in increments of $5,000, in advance of
maturity on any Interest Payment Date, from any source of funds including, without limitation, the voluntary
prepayment of assessments, at the redemption prices (expressed as a percentage of the principal amount to be
redeemed) set forth below, together with accrued interest to the date of redemption:
Redemption Date Redemption Price
March 2, 2009 through September 2, 2013 103%
March 2, 2014 and September 2, 2014 102%
March 2, 2015 and September 2, 2015 101%
March 2, 2016 and thereafter 100%
In lieu of payment at maturity or redemption as described above, monies in the Redemption Fund (other than
monies representing prepaid assessments) may be used and withdrawn by the Paying Agent upon the direction of
the Issuer for purchase of outstanding Bonds which mature on the next principal payment date, but in no event may
Bonds be purchased at a price in excess of the principal amount thereof, the premium, if any, plus interest accrued
to the date of maturity or redemption that would otherwise be payable.
Notice of redemption in advance of maturity shall be given in accordance with the provisions of the Bond
Indenture. If notice of redemption has been duly given and the amount necessary for the redemption has been made
available for that purpose on the date fixed for such redemption, then from and after the redemption date, the
Bonds or portions thereof so designated for redemption shall be deemed to be no longer outstanding and such
Bonds or portions thereof shall cease to accrue further interest and no owner of any ofthe Bonds or portion thereof
so designated for redemption shall be entitled to any of the benefits of the Bond Indenture, or to any other rights,
C -2
08/28/08 Draft
except with respect to payment of the redemption price and interest accrued to the redemption date from the
amounts so made available.
This Bond is subject to refunding pursuant to the Act.
The Bond Indenture and the rights and obligations of the Authority and of the owners of the Bonds and of the
Paying Agent may be modified or amended from time to time and at any time in the manner, to the extent, and
upon the terms provided in the Bond Indenture; provided that no such modification or amendment shall (i) extend
the maturity of any Bond or the time for paying interest thereon, or otherwise alter or impair the obligation of the
Issuer to pay the principal of, and the interest and any premium on, any Bond, without the express consent of the
owner of such Bond, or (ii) permit the creation of any pledge of or lien upon the assessments superior to or on a
parity with the pledge and lien created for the benefit of the Bonds, (iii) reduce the percentage of Bonds required
for the amendment, or (iv) reduce the principal amount of or redemption premium on any Bond or reduce the
interest rate thereon.
This Bond shall not be entitled to any benefit under the Act or the proceedings or become valid or obligatory for
any purpose until the Certificate of Authentication hereon endorsed shall have been dated and signed by the
designated transfer agent, registrar and fiscal agent.
IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed by the Treasurer of the Issuer and by the
City Clerk, as of September 24, 2008.
Treasurer
CERTIFICATE OF AUTHENTICATION
This Bond has been authenticated on September 24, 2008.
ASSIGNMENT
City Clerk
U.S. Bank National Association,
as Paying Agent, Transfer Agent, and
Registrar
La
Authorized Officer
For value received the undersigned do(es) hereby sell, assign and transfer unto
(Name, Address, and Tax Identification or Social Security Number of
the within - mentioned registered Bond and hereby irrevocably constitute(s) and
attorney, to
transfer the same on the books of the Paying Agent with full power of substitution in the premises.
Dated:
Guaranteed: Signature
NOTICE: Signature must be guaranteed by a qualified guarantor. NOTICE: The signature on this assignment must correspond
with the name as it appears on the face of the within Bond in
every particular, without alteration or enlargement or any
change whatsoever.
C -3
08128108 Draft
EXHIBIT D
AUTHORIZED INVESTMENTS
"Authorized Investments" is defined to mean the following types of investments:
(i) 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) and (b) obligations of any agency, department or instrumentality of the United
States of America the timely payment of principal of and interest on which are
unconditionally guaranteed by the full faith and credit of the United States of America.
(ii) any of the following obligations of federal agencies not guaranteed by the United States: (a)
debentures issued by the Federal Housing Administration; (b) participation certificates or
senior debt obligations of the Federal Home Loan Mortgage Corporation or Farm Credit
Banks (consisting of Federal Land Banks, Federal Intermediate Credit Bank or Banks for
Cooperatives); (c) bonds or debentures of the Federal Home Loan Bank Board established
under the Federal Home Loan Bank Act, bonds of any federal home loan bank esta(il7ished
under said act and stocks, bonds, debentures, participations or other obligations of or issued
by the Federal National Mortgage Association, the Student Loan Marketing Association, the
Government National Mortgage Association and the Federal Home Loan Mortgage
Corporation; and (d) bonds, notes or other obligations issued or assumed by the International
Bank for Reconstruction and Development;
(iii) interest- bearing demand or time deposits (including certificates of deposit) in federal or State
of California chartered savings and loan associations or banks (including the Trustee and its
affiliates), provided that (a) in the case of a savings and loan association, such demand or time
deposits shall be fully insured by the Federal Deposit Insurance Corporation, or the unsecured
obligations of such savings and loan association shall be rated in one ofthe two highest rating
categories by a nationally recognized rating service, and (b) in the case of a bank, such
demand or time deposits shall be fully insured by the Federal Deposit Insurance Corporation,
or the unsecured obligations of such bank (or the unsecured obligations of the parent bank
holding company of which such bank is the lead bank) shall be rated in one ofthe two highest
rating categories by a nationally recognized rating service;
(iv) repurchase agreements collateralized by Federal Securities with a registered broker /dealer
subject to Securities Investors Protection Corporation liquidation in the event of insolvency,
or any commercial bank provided that: (a) the unsecured obligations of such bank shall be
rated in one of the two highest rating categories by a nationally recognized rating service, or
such bank shall be the lead bank of a bank holding company whose unsecured obligations are
rated in one of the two highest rating categories by a nationally recognized rating service; (b)
the most recent reported combined capital, surplus and undivided profits of such bank shall be
not less than $100,000,000; and (c) the entity holding such repurchase agreement shall have a
perfected first security interest in the collateral securities for the benefit of the City under the
California Commercial Code or pursuant to the book entry procedures prescribed at 31 C.F.R.
306.1 et seq. or 31 C.F.R. 350.0 et seq.;
(v) bankers acceptances endorsed and guaranteed by banks described in clause (iv) above;
D-1
08/28/08 Draft
(vi) obligations, the interest on which is exempt from federal income taxation under Section 103
of the Code and which are rated in one of the two highest rating categories by a nationally
recognized rating service;
(vii) money market 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
Standard & Poor's of "AAAm -G," "AAA -m" or "AA -m" and, if rated by Moody's, rated
"Aaa," "Aal" or "Aa2" by Moody's;
(viii) units of a taxable government money market portfolio (including portfolios of the Trustee and
its affiliates) comprised solely of obligations listed in clause (i) or (ii) above;
(ix) investment agreements;
(x) commercial paper of "prime" quality of the highest ranking or of the highest letter and
numerical rating by Moody's or Standard & Poor's of issuing corporations that are organized
and operating within the United States and have total assets in excess of $500,000,000 and
have an "Aa," "AA" or higher rating for the issuer's debentures, other than commercial paper,
as provided by Moody's or Standard & Poor's, respectively, and provided that purchases of
eligible commercial paper may not exceed one - hundred eighty (180) days' maturity nor
represent more than ten (10) percent of the outstanding paper of an issuing corporation;
(xi) any general obligation of a bank or insurance company whose long -term debt obligations are
rated in one of the two highest rating categories of a nationally recognized rating service; and
(xii) the Local Agency Investment Fund in the State Treasury of the State of California as
permitted by the State Treasurer pursuant to Section 16429.1 of the California Government
Code;
(xiii) any other investment which at the time of investment is a legal investments under the laws of
the State of California for the moneys proposed to be invested therein. The Paying Agent shall
be entitled to rely upon any written investment direction from the City as a certification to the
Paying Agent that such investment constitutes a Authorized Investment.
D -2
E o PRELIMINARY OFFICIAL STATEMENT DATED , 2008
p ?� NEW ISSUE - BOOK ENTRY ONLY NOT RATED
�' y .$r' In the opinion of Robert E Hessell, Esq., San Diego, California, Bond Counsel, subject to certain qualifications described herein, under existing laws.
as .?, regulations, rulings andcourt decisions, interest on the Bands is excluded from gross Income far federal income im purposes and is not an item for purposes of the
C federal alternative minimum tax imposed on individuals and corporations, although far the purpose ofcomputing the alternative minimum tax imposed on certain
corporations, such interest is taken into account in determining certain income and earnings. In the further opinion of Bond Counsel, such interest is exempt from
co California personal income taxes. See "CONCLUDiNGINF'ORb ax fATION —T Matters "herein.
4 52,467,597'
° CITY OF NEWPORT BEACH
o ASSESSMENT DISTRICT NO. 101
LIMITED OBLIGATION IMPROVEMENT BONDS
c' Dated: September 1, 2008 Dan: September 2, as shown below
0 The City of Newport Beach Assessment District No. 101 Limited Obligation Improvement Bonds (the `Bonds") are limited obligations of the City of
„moo, 'f
o 'g Newport Beach, California (the "Cilv') secured by special assessments on real property located within the City's Assessment District No. 101 (the "District').
The installation and construction of District improvements and the levy of special assessments will be undertaken as provided by the Municipal
Improvement Act of 1913. The Bonds are issued pursuant to provisions of the Improvement Bond Act of 1915 and a Bond Indenture dated as of September 1, 2008
s. 7 (the `Indenture') by and between the City and U.S. Bank National Association as Paving Agent (the "Paying Agent').
0
C — The Bonds are being issued in book -entry form and, when issued. will be registered in the name of Cede & Co., as nominee of The Depositary Trawl
a %
;; Compare}', New York, New York. Purchasers of Bonds will not receive certificates representing their beneficial ownership thereof but will receive credit balances an
`o the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transfer to soother nominee of The Depository Trust Company
o or as otherwise described herein. Individual purchases may be made in principal smouns of $5,000 and integral multiples thereof, except for one Bond (which shall
T 0 0 be the Bond maturing in the first year of maturity) which shall include the amount by which the total aggregate principal amount of the Bonds exceeds the maximum
E m 0 integral multiple of $5,000.
v Interest on the Bands will be payable on March 2, 2009 and semiannually thereafter on each September 2 and March 2. Principal of and interest on the
6 Bonds will be paid by the Paying Agent to Cede & Co., and such payments are expected to be disbursed to the beneficial owners of the Bonds through their
nominees.
pThe Bonds are subject to redemption prior to maturity as described under "THE BONDS— Redemption of Bonds" herein.
Under the provisions of the Improvement Bond Am of 1915, installments of principal and interest sufficient to meet annual debt service on the Bonds will
. ';i 2 be billed by the County of Orange (the "County') to owners of property within the District against which there are unpaid assessments. Upon receipt by the Paying
rn `0 Agent from the City, these annual installments are to be paid into the Redemption Fund to be held by the Paying Agent and used to pay debt service on the Bonds as
it becomes due.
c3
Unpaid assessments constitute fixed liens on the lots and parcels assessed within the District and do not constitute a personal indebtedness of the
�, 4 respective owners of such loss and parcels. Accordingly, in the event of delinquency, proceedings may be had only against the real property securing the
0` as § delinquent esaessmem. Thus, the value of land within the District is a critical factor in determining the Investment quality of the Bands.
C - n
R.£ � The City will establish a Reserve Fund and deposit therein Bond proceeds in the amount of the Reserve Requirement to provide funds for
a3 payment of principal and interest on the Bonds in the event of any delinquent assessment installments. The City's obligation to advance funds to the
0 Redemption Fund as a result of delinquent installments is limited to the balance in the Reserve Fund. The City has covemosted to initiate judicial
o ' - y foreclosure in the event of a delinquency as described herein. See "SECURITY FOR THE BONDS --- Covenam for Superior Court Fomclosms."
y
Neither the faith and credit nor the taxing power of the City, the County, the Site of California or any political subdivision thereof is pledged to the
v 0 payment of the Bonds, and the payment thereof is not second by any encumbrance, mortgage or other pledge of property of the City except the pledge of the
E=, o assessments and moneys on deposit in the Redemption Fund and Reserve Fund The City has determined not to obligate itself W advance available funds from is
oqq treasury in the event of delinquencies in the payment of assessments.
This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors most read the entire 0ificial Statement,
v including, without limitation, "BONDOWAERS' RISKS, "to obtain it formation essential to the making of an informed investment decision.
c 6
g Ev
MATURITY SCHEDULE
$ `a z Base CAMP` No.
v
c Ffamrity Rirmcipd interest CUSP dlmuriry Principal /Mw'ear CUS /P
aQ September Amount Rate Tidd Price Not September Amount Rah Held Price No.r
- 0 3
c c
� c �
0 9 M
a T The Bonds are offered when, as and if issued subject to the approval of Robert L Hassell. Esq., San Diego, California. Bond Counsel. Certain matters
'8 v will be passed upon far the City by the City Attorney and by Stradling Yocca Carlson & Routh, a Professional Corporation, Newport Beach. California, as
Disclosure Counsel. It is anticipated that the Bomb will be available far delivery to The Depository Trust Company or its agent on or about _ 2008.
o Dated: , 2008
� � C
m c
v Preliminary, subject to change.
z t Copyright 2008, American Bankers Association CUSIP data herein is provided by Standard & Pan's, CUSIP Service Bureau, a division of TheMcGroww-Hill
w Companies, lnc. This data is not intended to create a database and does net serve in anyway as a substitute far the CUSIP Services.
0
m
E
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c « �
DOCSOCi 1294032v51022459 -0019
CITY OF NEWPORT BEACH
MAYOR AND CITY COUNCIL
Edward D. Selich, Mayor, District 5
Michael F. Henn, District l
Steven Rosansky, District 2
Don Webb, District 3
Leslie Daigle, District 4
Nancy Gardner, District 6
Keith D. Curry, District 7
CITY STAFF
Homer Bludau, City Manager
Robin Clausen, City Attorney
LaVonne M. Harkless, City Clerk
Dennis Danner, Director of Administrative Services
Dan Matusiewicz. Finance Officer
Stephen Badum, Public Works Director
David Webb, City Engineer
BOND COUNSEL
Robert E. Hessell, Esq.
San Diego, California
FINANCIAL ADVISOR
Fieldman, Rolapp & Associates
Irvine, California
ASSESSMENT ENGINEER
W illdan/MuniFinancial
Temecula, California
PAYING AGENT
U. S. Bank National Association
Los Angeles, California
DISCLOSURE COUNSEL
Stradling Yocca Carlson & Rauth, a Professional Corporation
Newport Beach, California
UNDERWRITER
M.L. Stem & Co., LLC
Beverly Hills, California
DISSEMINATION AGENT
Digital Assurance Certification, LLC
DOCSOC/ 12940320/022459 -0019
The issuance and sale of the Bonds have not been registered under the Securities Act of 1933 or the Securities Exchange Act
of 1934, both as amended, in reliance upon exemptions provided thereunder. This Official Statement does not constitute an offer to
sell or a solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.
All information for investors regarding the City, the District and the Bonds is contained in this Official Statement. While
the City maintains an intemet website for various purposes, none of the information on that websile is intended to assist investors in
making any investment decision or to provide any continuing information with respect to the Bonds or any other bonds or obligations
of the City.
No dealer, broker, salesperson or other person has been authorized by the City to provide any information or to make any
representations other than as contained herein and, if given or made, such other information or representation must not be relied upon
as having been authorized by the City. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy,
nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer,
solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of Bonds. Statements contained in this
Official Statement that involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended
solely as such and are not to be construed as a representation of facts.
The information set forth herein has been obtained from the City and certain other sources believed to be reliable. The
information and expressions of opinion herein are subject to change without notice, and neither delivery of this Official Statement nor
any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City
or of the owners sources of property within the District or any matters expressed herein since the date hereof.
C4 UTIONARY INFORMATION REGARDING FORWARD- LOOSING STATEMENTS IN
THIS OFFICIAL STATEMENT
Certain statements included or incorporated by reference in this Official Statement constitute "Forward- Looking
Statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United
States Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements
are generally identifiable by the terminology used, such as `plan," "expect," "estimate," "budget' and other similar words.
The achievement of certain results or other expectations contained in such forward - looking statements involves known and
unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be
materially different from any future results, performance or achievements expressed or implied by such forward - looking statements.
While the City has agreed to provide certain on -going financial and operating data for a limited period of time (see "CONCLUDING
INFORMATION —Continuing Disclosure" and Appendix F hereto), it does not plan to issue any updates or revisions to those
forward - looking statements if or when its expectations or events, conditions or circtumstances on which statements are based change.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER -ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONITNUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS
AND DEALER BANKS AND BANKS ACTING AS AGENTS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES
STATED ON THE COVER PAGE HEREOF, AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO
TIME BY THE UNDERWRITER.
THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
DOC SOC/ 1294032v5/022459 -0019
TABLE OF CONTENTS
CITY OF NEWPORT BEACH AND
VICINITY MAP .................. ...............................
i
SUMMARY STATEMENT .. ...............................
ii
INTRODUCTION .................. ...............................
I
THE FINANCING PLAN ...... ...............................
I
Purpose of the Bonds ....... ...............................
I
Sources and Uses of Funds .............................
2
THEBONDS ......................... ...............................
2
Authority for Issuance ..... ...............................
2
Description of the Bonds . ...............................
2
Redemption..................... ...............................
3
Improvement Fund .......... ...............................
4
Redemption Fund ............ ...............................
4
Reserve Fund ................... ...............................
5
RebateFund ..................... ...............................
6
Investments ...................... ...............................
6
Annual Debt Service ....... ...............................
7
SECURITY FOR THE BONDS ...........................
7
General............................ ...............................
7
Reserve Fund ................... ...............................
8
Covenant for Superior Court Foreclosure ......
8
Covenant to Maintain Tax - Exempt Status.:....
9
Bonds Create a Lien ...... ...............................
10
Limited City Obligation Upon
APPENDIX H
Delinquency .................................... :.........
10
THE DISTRICT ................... ...............................
10
Description .................... ...............................
10
The Improvement Project .t. ............................
10
Assessments .................. ...............................
10
Teeter Plan ..................... ...............................
I I
Estimated Direct and Overlapping
Indebtedness ............... ...............................
I I
Assessed Value -to -Lien Ratios .....................
13
Top Ten Property Owners ............................
14
BONDOWNERS' RISKS .... ...............................
14
General.......................... ...............................
14
Property Tax Delinquencies .........................
14
Delinquency Resulting in Ultimate or
Temporary Loss on Bonds ........................
15
Non -Cash Payments of Assessments............
15
LandValues ................... ...............................
15
Limited City Obligation Upon
Delinquency............... ...............................
16
Collection of the Assessments ......................
16
Availability of Funds to Pay Delinquent
Assessment Installments ...........................
16
Owner Not Obligated to Pay Assessments...
17
Parity Taxes and Special Assessments.........
17
Bankruptcy and Foreclosure .........................
17
FD1C/Fedeml Government Interests in
Parcels........................ ...............................
18
Natural Disasters ........... ...............................
18
Hazardous Substances ... ...............................
19
DOC SOC/ 1294032v5.i022459 -0019
Loss of Tax Exemption .... .............................19
THE NEWPORT BEACH
Limited Secondary Market ............................19
Ballot Initiatives ............... .............................19
B- I
Constitutional Amendment — Articles IIIC
SUMMARY OF BOND
andIIID ........................ .............................20
CONCLUDING INFORMATION ......................20
C-1
Continuing Disclosure ..... .............................20
FORM OF LEGAL
Legal Opinion .................. .............................21
Tax Matters ...................... .............................21
D -I
NoLitigation .................... .............................22
INFORMATION
Financial Interests ............ .............................22
Underwriting .................... .............................22
Financial Advisor ............. .............................22
DEPOSITORY TRUST
Miscellaneous .................. .............................22
APPENDIX A ASSESSMENT DIAGRAM ... A -1
APPENDIX B INFORMATION ABOUT
THE NEWPORT BEACH
AREA.....................................
B- I
APPENDIX C
SUMMARY OF BOND
INDENTURE .........................
C-1
APPENDIX D
FORM OF LEGAL
OPINION ...............................
D -I
APPENDIX E
INFORMATION
CONCERNING THE
DEPOSITORY TRUST
COMPANY ............................
E-1
APPENDIX F
DISCLOSURE
DISSEMINATION AGENT
AGREEMENT .......................
F -I
APPENDIX G
FINAL ENGINEER'S
REPORT . ...............................
G -1
APPENDIX H
LIST OF UNPAID
ASSESSMENTS AND MAP
OF THE DISTRICT ..............
H -1
CITY OF NEWPORT BEACH AND VICINITY MAP
DOC SOC/ 1294032v5/022459 -0019
SUMMARY STATEMENT
Purpose Proceeds of the $2,481,400" principal amount of the City of Newport Beach
Assessment District No. 101 Limited Obligation Improvement Bonds (the "Bonds "),
together with certain investment earnings, and certain other moneys will be used to
finance the costs of undergrounding overhead utility lines (including trenching,
installing new utility vaults needed to receive the conduits and transformers, laying
the conduit lines into the trenches, re- paving the street, switching service to the
underground system and removing the existing overhead poles and wires) (the
"Improvement Project'). See "THE DISTRICT —The Improvement Project" herein
Bond proceeds will also be used to establish a debt service reserve fund and to pay
the costs of issuance of the Bonds.
The District The City of Newport Beach Assessment District No. 101 ( "the District') is located in
Newport Beach, California (the "City "). The District generally includes the
properties east of Buena Vista, south of East Edgewater Avenue, west of Adams
Street, and north of Balboa Boulevard, excluding certain properties located on Island
Avenue that are included in Assessment District 74. The District is made up of 354
assessable parcels, of which 78 are condominiums, 2 are non - residential and 274 are
single or multi - family residential. The District was formed by the City on July 22,
2008. The amount of assessments levied in the District was $4,749,060 of which
$2,119,497 has been prepaid. Tyre are currently 184 parcels in the District with
unpaid assessments in the amount of $2,467,597.
Security for the Bonds The Bonds are issued upon and secured by a pledge of revenues received by the City
in each Fiscal Year from the collection of annual installments of unpaid assessments.
including penalties and interest and proceeds from the sale of property for delinquent
assessments, on parcels within the District, but excluding amounts collected by the
City for the payment of administration costs ( "Assessment Revenues "). See
"SECURITY FOR THE BONDS — Reserve Fund—No Additional Bonds" herein.
The unpaid assessments represent fixed liens on the assessed parcels. They do not
however, constitute a personal indebtedness of the owners of such parcels.
Pursuant to the Improvement Bond Act of 1915, installments of principal of
assessments and interest thereon sufficient to meet annual debt service on the Bonds
will be billed by the County of Orange (the "County") to owners of parcels within
the District against which there are unpaid assessments (the "Assessment
Installments.") Upon receipt by the Paying Agent from the City, these Assessment
Installments are to be deposited into the Redemption Fund, which will be held by the
Paying Agent and used to pay Bond principal and interest as they become due. The
Assessment Installments billed against each parcel each year represent pro rata
shares of the total principal and interest coming due that year, based on the
percentage which the unpaid assessment against that parcel bears to the total of
unpaid assessments levied to repay the Bonds.
The Paying Agent will deposit $ . from Bond proceeds into a Reserve
Fund (the "Reserve Fund "). The Reserve Fund will be a source of available funds to
advance to the Redemption Fund in the event of delinquent installments. The City's
obligation to advance funds to the Redemption Fund in the event of delinquent
Preliminary, subject to change.
DOC SOC/ 1294032v5/022459 -0019
installments is limited to the balance in the Reserve Fund. Pursuant to the
Indenture, the City has no obligation to replenish the Reserve Fund except to
the extent that delinquent assessments are paid or proceeds from foreclosure
sales are realized. See "SECURITY FOR THE BONDS— Reserve Fund."
The City covenants with and for the benefit of the Owners of the Bonds that it will
commence judicial foreclosure proceedings against properties with delinquent
Assessment Installments under certain circumstances. See "SECURITY FOR THE
BONDS — Covenant for Superior Court Foreclosure."
Redemption Arty Bond or any portion of a Bond may be redeemed in whole or in part in
increments of $5,000, in advance of maturity on any Interest Payment Date,
commencing March 2, 2009, from any source of funds including, without limitation,
the prepayment of assessments, together with accrued interest to the date of
redemption at the redemption prices shown on the table under "THE BONDS —
Redemption of Bonds — Redemption" herein.
Bondowners' Risks Unpaid assessments do not constitute a personal indebtedness of the owners of the
parcels within the District There is no assurance that such owners will be able to
pay the Assessment Installments or that they will pay such installments even though
financially able to do so.
Because the City has not obligated itself to advance funds to pay debt service on the
Bonds in the event of delinquent Assessment Installments, failure by owners of the
parcels to pay Assessment Installments when due, depletion of the Reserve Fund, or
the inability of the City to sell parcels which have been subject to foreclosure
proceedings for amounts sufficient to cover the delinquent Assessment Installments
levied against such parcels may result in the inability of the City to make full or
punctual payments of debt service on the Bonds, and owners of the Bonds would
therefore be adversely affected. See `BONDOWNERS' RISKS "
lll
IOC SOC/1294032 v5/022459 -0019
$2,467,597'
CITY OF NEWPORT BEACH
ASSESSMENT DISTRICT NO. 101
LIMITED OBLIGATION IMPROVEMENT BONDS
INTRODUCTION
The purpose of this Official Statement, which includes the cover page and the appendices hereto, is to
provide certain information concerning the City of Newport Beach Assessment District No. 101 Limited
Obligation Improvement Bonds (the `Bonds "). Assessment District No. 101 (the "District") was formed by
the City of Newport Beach (the "City") on July 22, 2008 to underground overhead utility lines.
The Bonds are being issued pursuant to the Improvement Bond Act of 1915 (the "1915 Act") and a
Bond Indenture dated as of September 1, 2008 (the "Indenture "), by and between the City and U.S. Bank
National Association, as paying agent (the "Paying Agent ").
Unpaid assessments represent liens on the parcels in the District on which they have been confirmed;
they do not, however, constitute a personal indebtedness of the owners of the parcels. Installments of principal
of assessments and interest thereon sufficient to meet annual debt service on the Bonds will be billed by the
County of Orange (the "County") to owners of parcels within the District against which there are unpaid
assessments (the "Assessment Installments "). Unpaid assessments and all moneys and securities from time to
time held by the City or by the Paying Agent in certain specified funds and accounts under the Indenture are
pledged to the payment of the principal of and interest on the Bonds.
The Bonds do not constitute a debt of the City, and the City will not be liable thereon except for
amounts pledged under the Indenture. The full faith and credit of the City is not pledged to the
payment of the Bonds; and the payment of the Bonds is not secured by any encumbrance, mortgage or
other pledge of property of the City except the pledge described under the beading "SECURITY FOR
THE BONDS."
There follow brief descriptions of the Bonds, the District, the Indenture, the Continuing Disclosure
Agreement, dated as of September 1, 2008, by and between the City and Digital Assurance Certification, LLC
( "DAC ") (the "Disclosure Agreement") and certain other matters. Such descriptions do not purport to be
comprehensive or definitive. All references herein to any of the aforesaid documents are qualified in their
entirety by reference to the forms thereof, which are available for inspection at the office of the Paying Agent
in Los Angeles, California and at the office of the City Clerk in Newport Beach, California. Capitalized terms
not defined herein shall have the respective meanings ascribed to them in the Indenture.
THE FINANCING PLAN
Purpose of the Bonds
Proceeds from the sale of the Bonds will be used to finance the cost of undergrounding utility lines
including trenching, installing new utility vaults needed to receive the conduits and transformers, laying the
conduit lines into the trenches, re- paving the street, switching service to the underground system and removing
the existing overhead poles and wires (the "Improvement Project ") to serve the property within the District, as
further described in the section herein entitled "THE DISTRICT —The Improvement Project." The estimated
costs of the Improvement Project, is $4,41 1,895 (excluding financing costs of $175,199). The total amount of
' Preliminary, subject to change.
DOC SOC/ 1294032 v 5 /022459 -0019
assessments levied in the District was $4,749,060. The total amount of assessments prepaid is $2,119,497 and
the total amount of unpaid assessments is $2,467,597.
Sources and Uses of Funds
The Paying Agent will receive the proceeds from the sale of the Bonds upon delivery of such Bonds to
the purchasers thereof. The proceeds of the Bonds will be applied as set forth in the following table:
Sources and Uses of Funds
SOURCES:
Par Amount of Bonds $
Less Underwriter's Discount
Plus Accrued Interest
Total Sources
USES:
Improvement Fund $
Reserve Fund
Costs of Issuance ct>
Total Uses $
Costs of issuance include legal fees, printing costs, Paying Agent Fees and other miscellaneous issuance costs.
See Table 2 under the caption "THE DISTRICT —The Improvement Project' for a more detailed
statement of all sources and uses of funds relating to the Project.
THE BONDS
Authority for Issuance
The proceedings for the District were conducted pursuant to the Municipal Improvement Act of 1913
(Division 12 of the California Streets and Highways Code) (the "1913 Act'). The Bonds, which represent the
unpaid assessments levied against the property in the District. are issued pursuant to the provisions of the
Improvement Bond Act of 1915 (the "1915 Act') and the Indenture. Pursuant to the 1913 Act and Proposition
218, which added Article XIIID to the California Constitution, the City held a hearing on July 22, 2008. The
City received a favorable response from the landowners casting assessment ballots upon the conclusion of the
public hearing.
Description of the Bonds
The $2,467,597* principal amount of Bonds are dated as of September 1, 2008 and will mature in the
amounts and on the dates set forth on the cover hereof. Interest will be paid at the rates set forth on the cover
commencing on March 2, 2009, and semiannually thereafter on March 2 and September 2 of each year (each
an "Interest Payment Date ") until maturity. The Bonds are issued only as fully registered bonds without
coupons in the denomination of $5,000 or any integral multiple thereof, except for one Bond (which shall be
the Bond maturing in the first year of maturity) which shall include the amount by which the total aggregate
principal amount of the Bonds exceeds the maximum integral multiple of $5,000. The Bonds will be executed
and delivered as fully registered Bonds in the name of CEDE & Co., nominee of The Depository Trust
Company, New York, New York ( "DTC "), as registered owner of all Bonds. The principal of and interest
with respect to the Bonds will be paid directly to CEDE & Co. by the Paying Agent as long as DTC or its
y Preliminam subject to change.
DOC SOU 1294032x5/022459 -0019
nominee, CEDE & Co., is the registered owner of the Bonds. For information relating to DTC and the DTC
book -entry system as it relates to the Bonds, see APPENDIX E— "INFORMATION CONCERNING THE
DEPOSITORY TRUST COMPANY." The information presented therein is based solely on information
provided by DTC and no representation is made by the City concerning the accuracy thereof.
Principal and redemption premium, if any, will be payable at the principal corporate trust office of the
Paying Agent on presentation of the Bonds. Interest will be calculated on the basis of a 360 -day year
composed of twelve 30 -day months. Each Bond will bear interest from the Interest Payment Date next
preceding the date of authentication thereof unless otherwise specified in the Indenture.
Redemption
Optional Redemption. Any Bond or any portion of a Bond may be redeemed. in whole or in part in
increments of $5,000, in advance of maturity on any Interest Payment Date, commencing March 2, 2009 from
any source of funds including, without limitation, the prepayment of assessments, at the following redemption
prices (expressed as percentages of the principal amount of the Bonds to be redeemed). together with accrued
interest to the date of redemption:
Redemption Date Redemption Price
March 2, 2009 through September 2, 2013 103%
March 2, 2014 and September 2, 2014 102
March 2, 2015 and September 2, 2015 101
March 2, 2016 and thereafter 100
Purchase of Bonds. In hen of payment at maturity or redemption, moneys in the Redemption Fund
(other than moneys representing prepaid assessments) may be used and withdrawn by the Paying Agent for
purchase of Outstanding Bonds which mature on the next principal payment date, upon the filing with the
Paying Agent prior to the selection of Bonds for redemption of a written request from the City requesting such
purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as
such request may provide, but in no event may Bonds be purchased at a price in excess of the principal amount
thereof, the premium, if any, plus interest accrued to the date of maturity or redemption that would otherwise
be payable.
Selection of Bonds for Redemption. If less than all of the outstanding Bonds or portions thereof are
to be redeemed, the Paying Agent shall select the Bonds to be redeemed in authorized denominations in such a
way that the ratio of outstanding Bonds to issued Bonds shall be approximately the same for each annual
maturity insofar as possible.
Notice of Redemption. When the Paying Agent receives notice from the City of its election to redeem
Bonds at least sixty (60) days prior to the applicable redemption date, or when Bonds are otherwise to be
redeemed pursuant to the Indenture, the Paying Agent shall give notice, in the name and at the expense of the
City, of the redemption of the Bonds. Such notice of redemption shall (a) specify the nwnbers of the Bonds
selected for redemption, except that where all the Bonds are subject to redemption or all the Bonds of a
maturity date are subject to redemption, the numbers thereof need not be specified; (b) state the date fixed for
redemption; (c) state the redemption price; (d) state the place or places where the Bonds are to be redeemed;
(e) in the case of Bonds to be redeemed only in part, state the portion of the Bond which is to be redeemed; and
(f) the CU SIP numbers of the Bonds to be redeemed. Such notice shall further state that on the date fixed for
redemption there shall become due and payable on each Bond, or portion thereof called for redemption, the
principal thereof, together with any premium, and interest accrued to the redemption date, and that from and
after such date, interest thereon shall cease to accrue and be payable. At least 30 days but no more than
45 days prior to the redemption date, the Paving Agent shall mail by registered or certified mail, postage
prepaid, or deliver by personal service, a copy of such notice, to the respective owners of the Bonds to be
redeemed at their addresses appearing on the bond register. The actual receipt by the owner of any Bond of
DOC SOCi 1294032v5/022459 -0019
notice of such redemption shall not be a condition precedent thereto, and failure to receive such notice shall not
affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the
redemption date. A certificate by the Paying Agent that notice of such redemption has been given as provided
in the Indenture shall be conclusive as against all parties, and it shall not be open to any Bondowner to show
that he or she failed to receive notice of such redemption.
Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the City
shall execute and the Paying Agent shall authenticate and deliver to the Bondowner, at the expense of the City.
a new Bond or Bonds of authorized denominations equal in aggregate amount to the unredeemed portion of the
Bond surrendered, with the same interest rate and the same maturity.
Effed of Notice and Availability of Redemption Money. Notice of redemption having been duly
given, as provided in the Indenture. and the amount necessary for the redemption having been made available
for that purpose and being available therefor on the date fixed for such redemption:
(l) The Bonds, or portions thereof, designated for redemption shall, on the date fixed for
redemption, become due and payable at the redemption price thereof as provided in the Indenture, anything in
the Indenture or in the Bonds to the contrary notwithstanding;
(2) Upon presentation and surrender thereof at the Principal Office of the Paying Agent, such
Bonds shall be redeemed at the specified redemption price;
(3) From and after the redemption date, the Bonds or portions thereof so designated for
redemption shall be deemed to be no longer outstanding and such Bonds or portions thereof shall cease to bear
further interest;
(4) From and after the date fixed for redemption, no owner of any of the Bonds or portion thereof
so designated for redemption shall be entitled to any of the benefits of the Indenture, or to any other rights,
except with respect to payment of the redemption price and interest accrued to the redemption date from the
amounts so made available.
Improvement Fund
Moneys in the Improvement Fund will be used only for the Improvement Project as authorized in the
assessment proceedings and all incidental costs related thereto including the costs of issuing the Bonds, all as
more particularly described in the Assessment Engineer's Report for the Assessment District on file in the
Office of the City Clerk of the City, as the report may be amended from time to time pursuant to the Municipal
Improvement Act of 1913. Upon completion of the Improvement Project, the Superintendent of Streets of the
City will file a certificate of completion with the Treasurer. Any surplus in the Improvement Fund after
completion of the Improvement Project but prior to September 30, 2010 will remain in the Improvement Fund
until at least September 30, 2010 and thereafter will be utilized or distributed in any manner authorized by the
Act.
Redemption Fund
The Paying Agent will establish and keep a Redemption Fund designated by the name of the
Assessment District and to deposit therein from time to time (i) the amount of the proceeds of the Bonds which
represents accrued and capitalized interest, if any, on the Bonds (ii) all sums received from the City
representing the collection of the assessments (other than assessments for administrative costs) and the interest
thereon and (iii) any surplus in the Improvement Fund to the extent provided in the Indenture.
Prepayment Account. There will be established by the Paying Agent a prepayment subaccount within
the Redemption Fund to be known as the Prepayment Account (the "Prepayment Account"). The Paying
4
DOC SOC/ 1294032v5/022459 -0019
Agent will not be required to establish the Prepayment Account until the time when deposits are required to be
made therein. The City will transfer to the Paying Agent for deposit in the Prepayment Account all moneys
received by the City representing the prepayment of the principal of, and interest and redemption premium on,
any Bonds. Such moneys will be applied solely to the payment of the principal of, and interest and premium
on, Bonds to be redeemed prior to maturity pursuant to the Indenture.
Except for money received with respect to assessment surcharges for administrative costs, the City
will transfer or cause to be transferred to the Paying Agent at least five days prior to each Interest Payment
Date all sums received and not previously transferred from the collection of the assessments and any interest
thereon and all sums received for the partial or full prepayment of assessments as required by Streets and
Highways Code Section 8767. Any transfer representing the payment of delinquent assessment installments or
the proceeds of the redemption of or foreclosure on any property with respect to which any assessment
installments are delinquent will be accompanied by written instructions as to the amount, if any, of such
transfer which is required to be transferred to the Reserve Fund. Any transfer representing the prepayment of
assessments will be accompanied by written instructions as to the disposition of such stuns to redeem Bonds
prior to maturity or to pay accrued interest on any Bonds to be redeemed.
Principal of and interest on the Bonds will be paid by the Paying Agent to the registered owners out of
the Redemption Fund to the extent funds on deposit in the Redemption Fund are available therefor.
Reserve Fund
The City will create and maintain the Reserve Fund to be designated by the name of the Assessment
District. The Reserve Fund will be initially funded from a portion of the Bonus proceeds in an amount equal to
6% of the original principal amount of the Bonds. The City will also deposit in the Reserve Fund funds which
represent the proceeds of (i) payments made to redeem delinquent assessment installments or (it) the judicial
foreclosure sale of parcels pursuant the Indenture, in each case if and to the extent that any advance was made
from the Reserve Fund to the Redemption Fund as a result of such delinquencies.
Moneys in the Reserve Fund will be applied as follows:
(1) Amounts in the Reserve Fund will be transferred to the Paying Agent for deposit in the
Redemption Fund if there are insufficient moneys in the Redemption Fund to pay principal of and interest on
the Bonds when due. Amounts so transferred will be repaid to the Reserve Fund from proceeds from the
redemption or foreclosure of property with respect to which an assessment is unpaid and from payments of
delinquent assessments.
(2) Interest earned on the permitted investment of moneys on deposit in the Reserve Fund will
remain in the Reserve Fund to the extent required to maintain the Reserve Fund at the "Reserve Requirement"
Not later than July 15 of each fiscal year the amount on deposit in the Reserve Fund in excess of the "Reserve
Requirement` will be transferred from the Reserve Fund to the Redemption Fund and credited to the unpaid
assessment installments payable during such fiscal year. "Reserve Requirement" means the least of (i) the
maximum annual debt service on the outstanding Bonds, (ii) 125% of the average annual debt service on the
outstanding Bonds, or (iii) 6% of the original principal amount of Bonds. The City Auditor's record will
reflect the credits against each of the unpaid assessments in amounts equal to each parcel's proportionate share
of such transfer.
Notwithstanding the above, interest earnings on moneys on deposit in the Reserve Fund in excess of
the "yield" on the Bonds, as that term is defined in the Internal Revenue Code of 1986 (the "Code "), will be
subject to transfer and rebate to the United States Treasury.
(3) When moneys in the Reserve Fund, together with available funds in the Redemption Fund,
are sufficient to fully and timely pay and redeem all outstanding Bonds, plus accrued interest thereon, the
DOCSOC/ 1294032v5/022459 -0019
money will be transferred to the Redemption Fund and collection of a corresponding amount of the remaining
unpaid assessments will cease.
(4) In the event an assessment is to be prepaid in cash, the City will credit the prepaid assessment
with a proportionate share of the Reserve Fund and cause the Paying Agent to transfer from the Reserve Fund
to the Redemption Fund an amount equal to such credit to be utilized for the advance retirement of Bonds.
Rebate Fund
The City will establish and maintain a Rebate Fund. Amounts, if any, on deposit in the Rebate Fund
will be paid to the United States of America. All earnings on amounts on deposit in the Rebate Fund will
remain therein until all amounts payable to the United States of America have been paid.
Investments
Obligations purchased as investments of moneys in any of the funds in which investments are
authorized will be deemed at all times to be part of such funds. Subject to the restrictions set forth in the
Indenture, monies in the Redemption Fund may from time to time be invested by the Paying Agent, as to
money in the Redemption Fund at the written direction of the Treasurer of the City, which written direction
will contain a certification to the Paying Agent that such investments are Authorized Investments as defined in
the Indenture. In the absence of written direction from the City, the Paying Agent will invest the moneys
deposited in the Redemption Fund and arty account of such funds in investments described in the Indenture.
Such moneys will be invested only in obligations which will by their terms mature on such dates so as to
ensure the payment of principal of and interest on the Bonds as the same become due; provided, investments of
money in the Reserve Fund will mature not later than five years from the date of purchase except such money
may be invested in a repurchase agreement or an investment agreement without such five year limitation so
long as the agreement provides for withdrawals at par on or before any Interest Payment Date.
The City, and if applicable, the Paying Agent, will sell at the best price reasonably obtainable or
present for redemption any obligations so purchased whenever it may be necessary to do so in order to provide
moneys to meet any payment or transfer for such funds or from such funds. For the purpose of determining at
any given time the balance in any such funds, any such im estments constituting a part of such funds will be
valued at their market value. Notwithstanding anything to the contrary, the Paying Agent will not be
responsible for any loss from any investments pursuant to the Indenture, except for its own negligence of
willful misconduct. The Paying Agent may act as principal or agent in the acquisition or disposition of
investments. The Paying Agent and the City may commingle the funds established under the Indenture for
investment purposes, but will nonetheless account for such separately.
6
DOC SOC/1294032v5r022459 -0019
Annual Debt Service
Table I below sets forth the annual debt service on the Bonds based on the maturity schedule and
interest rates set forth on the cover page of this Official Statement.
TABLE 1
CITY OF NEWPORT BEACH
ASSESSMENT DISTRICT NO. 101
LIMITED OBLIGATION IMPROVEMENT BONDS
ANNUAL DEBT SERVICE
Year Ending
September 2 Principal interest Total
Totals $
SECURITY FOR THE BONDS
General
The Bonds are issued upon and secured by a pledge of Assessment Revenues. All the Bonds are
secured by the moneys in the Redemption Fund and the Reserve Fund and any earnings thereon (except to the
extent earnings are to be transferred to the Rebate Fund under the Indenture) and by the unpaid assessments.
Principal of and interest on the Bonds are payable exclusively out of the Redemption Fund.
The payment of the amount of each Assessment Installment, interest and any penalties and collection
costs is secured by an assessment lien upon the applicable property in the District. Such lien is coequal with
the latest lien thereon to secure the payment of general ad valorem property taxes, is not subject to
extinguishment by the sale of any property on account of the non - payment of general property taxes, and is
prior and superior to all liens, claims, encumbrances and titles other than the liens of assessments, special taxes
and general property taxes. The Assessment Installments are pledged to secure the payment of the principal of,
premium, if any, and interest on the Bonds, and, as received by or otherwise credited to the City, will
immediately be subject to the lien of such pledge. Although the unpaid assessments constitute liens upon the
parcels assessed, they do not constitute a personal indebtedness of the owners of said parcels. There can be no
assurance as to the financial or legal ability, or the willingness, of such property owners to pay the unpaid
assessments.
DOCSOC /1294032v5 /022459 -0019
The failure of a property owner to pay an Assessment Installment will not result in an increase
in Assessment Installments applicable to other parcels within the District.
The unpaid assessments will be collected in semi - annual installments, together with interest on the
declining balances, on the County tax roll on which general taxes on real property are collected, and the unpaid
assessments are payable and become delinquent at the same time and in the same proportionate amounts and
bear the same proportionate penalties and interest after delinquency as do general taxes, and the assessment
parcels are subject to the same provisions for sale and redemption as are properties for nonpayment of general
tares. See also the section herein below entitled "Covenant for Superior Court Foreclosure."
Reserve Fund
The Reserve Fund will be a source of available funds to advance to the Redemption Fund in the event
of delinquent Assessment Installments. See "THE BONDS — Reserve Fund" herein. The City's obligation to
advance funds to the Redemption Fund in the event of delinquent Assessment Installments is limited to
the balance in the Reserve Fund. Pursuant to the Indenture, the City has no obligation to replenish the
Reserve Fund except to the extent that delinquent Assessment Installments are paid or proceeds from
foreclosure sales are realized. However, the determination by the City not to obligate itself to advance
available funds to cure delinquencies will not prevent the City from, in its sole discretion, advancing such
funds.
No Additional Bonds. No additional bonds or other obligations will be issued or incurred that will be
secured by or payable from the assessments of the Assessment District.
Covenant for Superior Court Foreclosure
The City has covenanted to institute judicial foreclosure in the event of a delinquency and thereafter to
prosecute diligently to completion, court foreclosure proceedings upon the hen of any and all delinquent
assessments and interest.
Pursuant to Part 14 of Division 10 of the California Streets and Highways Code, as amended, in the
event am Assessment Installment is not paid when due, the City may order the institution of a court action to
foreclose the hen of the delinquent unpaid Assessment Installments. In such an action, the property subject to
the unpaid Assessment Installments may be sold at judicial foreclosure sale. This foreclosure sale procedure is
not mandatory. However, the City will review the public records of the County of Orange, California, in
connection with the collection of the assessment installments not later than August I of each year to determine
the amount of assessment installments collected in the prior Paying Year. If the City determines that any
parcel or parcels are delinquent in the payment of assessment installments, then the City will cause judicial
foreclosure proceedings to be filed in the Superior Court not later than December I of each year, and will
prosecute diligently such foreclosure proceedings to judgment and judicial foreclosure sale; provided,
however, the commencement of arry foreclosure action may be deferred in the sole discretion of the City if,
and only so long as, the amount in the Reserve Fund is not less than seventy percent (701/6) of the Reserve
Requirement.
Judicial Foreclosure Proceedings. The Act provides that the court in a foreclosure proceeding has
the power to order property securing delinquent Assessment Installments to be sold for an amount not less than
all Assessment Installments, interest, penalties. costs, fees, and other charges that are delinquent at the time the
foreclosure action is ordered, and certain other fees and amounts as provided therein (the "Minimum Price ").
The court may also include subsequent delinquent Assessment Installments and all other delinquent amounts.
The City may, at its discretion, but is not required to, become the purchaser of any property sold in a
foreclosure proceeding. If the City becomes the purchaser, it shall pay into the Redemption Fund an amount
necessary to satisfy the judgment, less any advances by the City to cover delinquent Assessment Installments
3
DOC SOC/ 1294032x5/022459 -0019
plus simple interest on such net amount, at the interest rates bome by the Bonds, from the dates of
delinquency. Unless such property is subsequently resold, the City must transfer to the Redemption Fund any
future Assessment Installments pending redemption. The City may thereupon be reimbursed for any amount
advanced from the City to the Redemption Fund to cover such future Assessment Installments with respect to
the property so sold from the proceeds of such sale.
If the property is sold to a purchaser other than the City, the City shall deposit the proceeds from the
sale of the property into the Redemption Fund. From such amount, the City shall reimburse the Reserve Fund
the amount, if any, of funds advanced from the Reserve Fund to the Redemption Fund to cover the delinquent
Assessment Installments with respect to the property which is sold. After reimbursement of the Reserve Fund,
the City may be reimbursed for any other amounts advanced from it to the Redemption Fund to cover
delinquent Assessment Installments and interest with respect to the property sold in such proceedings. Any
funds in excess of the amount necessary to reimburse the City may be applied by the City to pay interest and
penalties, costs, fees and other charges, to the extent they were included in the sales proceeds.
If the property to be sold fails to sell for the Minimum Price, the City may petition the court to modify
the judgment so that the property may be sold at a lesser price or without a Minimum Price. Notice of the
hearing on such petition must be given to all Bondowners. In certain circumstances, the court may modify the
judgment after the hearing to permit the sale of the property at a price lower than the Minimum Price if the
court makes certain determinations, including determinations that the sale at less than the Minimum Price will
not result in an ultimate loss to Bondowners or that Bondowners of at least 75% of the principal amount of
Bonds outstanding have consented to the petition and certain other circumstances described in the statute exist.
Neither the property owner nor any holder of a security interest in the property nor any defendant in the
foreclosure action may purchase the property at the foreclosure sale for less than the Minimum Price.
A period of 140 days must elapse after the date notice of levy of the interest in real property is served
on the judgment debtor before the sale of such lot or parcel with not more than 4 dwelling units can be made.
However, pursuant to Streets and Highways Code Section 8832, the 140 day period may be shortened to
20 days for undeveloped property. If the judgment debtor fails to redeem, and if the purchaser at the sale is the
judgment creditor (e.g., the City), an action may be commenced by the delinquent property owner within
90 days after the date of sale to set aside such sale. The constitutionality of the repeal of the one year
redemption period has not been tested; and there can be no assurance that, if tested, such legislation will be
upheld.
In the event such Superior Court foreclosure or foreclosures are necessary, there may be a delay
in payments to Bondowners pending prosecution of the foreclosure proceedings and receipt by the City
of the proceeds of the foreclosure sale; it is also possible that no bid for the purchase of the applicable
property would be received at the foreclosure sale. See the section herein entitled "BONDOWNERS'
RISKS."
Covenant to Maintain Tax- Exempt Status
The City covenants that it will not make any use of the proceeds of the Bonds which would cause the
Bonds to become "arbitrage bonds" subject to federal income taxation pursuant to the provisions of
Section 148(k) of the Code, or to become "federally- guaranteed obligations" pursuant to the provisions of
Section 149(b) of the Code, or to become "private activity bonds" pursuant to the provisions of Section 14I(a)
of the Code. To that end, the City will comply with all applicable requirements of the Code and all regulations
of the United States Department of Treasury issued thereunder to the extent such requirements are, at the time,
applicable and in effect Additionally, the City agrees to implement and follow each and every
recommendation provided by bond counsel and deemed to be necessary to be undertaken by the City to ensure
compliance with all applicable provisions of the Code in order to preserve the exclusion of interest on the
Bonds from gross income for federal income tax purposes.
9
DOC SOC/ 1294032v5/022459 -0019
Bonds Create a Lien
The Assessment Installments and any interest and penalties thereon constitute a hen against the
parcels on which they were imposed until the same is paid. Such lien has priority over all private liens and
over all fixed special assessment liens which may thereafter be created against the property. Such lien is co-
equal to and independent of the lien for general and special taxes.
Limited City Obligation Upon Delinquency
The City's obligation to advance moneys to pay debt service on the Bonds in the event of delinquent
Assessment Installments is limited to the balance in the Reserve Fund.
Neither the faith and credit nor the taxing power of the City, the State of California or any
political subdivision thereof is pledged to the payment of the Bonds.
THE DISTRICT
Description
The District generally includes the properties east of Buena Vista Boulevard, south of East Edgewater
Avenue, west of Adams Street, and north of Balboa Blvd., excluding certain properties located on Island
Avenue that are included in Assessment District 74. The District is made up of 354 assessable parcels, of
which 78 are condominiums,, 2 are non - residential and 274 are single or multi- family residential. The District
was formed by the City on July 22, 2008. The amount of assessments levied in the District was $4,749,060.
There are currently 184 parcels in the District with unpaid assessments in the amount of $2,467,597.
The Improvement Project
The following is a summary of the District Improvement Project Cost Estimate as contained in the
Final Engineer's Report prepared by Willdan/MuniFinancial, Temecula, California, Assessment Engineers
attached hereto as APPENDIX G.
TABLE 2
CITY OF NEWPORT BEACH ASSESSMENT DISTRICT NO. 101
ENGINEER'S ESTIMATE OF COSTS AND EXPENSES
Construction Costs
Electrical Improvements $ 2,817,731
Telephone Improvements 1,309,527
Street Rehabilitation Contingency 19,000
Incidental Expenses(!) 265,638
Financing Costs (2) 175,199
Total $ 4,587,095
Includes costs for inspect ion, engineering, administration, printing, consultants and legal fees.
Includes Reserve Requi,e,nenl and Underwriter's discount.
Source: willdan/MuniFinancial.
Assessments
The City Council has taken proceedings under the 1913 Act for the formation of the District and has
confirmed an assessment, which assessment and a related diagram were recorded in the office of the City
Engineer, acting as the Superintendent of Streets, and with the County Recorder of the County of Orange. A
10
DOC SOC/ 1294032v5/022459 -0019
notice of assessment, as prescribed in Section 3114 of the Streets and Highways Code, has been recorded with
the County Recorder of the County of Orange, whereupon the assessment attached as a lien upon the property
assessed within the District as provided in Section 3115 of the Streets and Highways Code. On July 22, 2008,
the City Council conducted a duly noticed public hearing and election regarding the formation of the District
and the issuance of the Bogs. At the election, the property owners approved the levy of the assessments. At
the end of the 30 day cash collection period, a list of unpaid assessments will be filed with the City Treasurer
pursuant to Section 8620 of the 1915 Act. The amount of assessments prepaid during the 30 day cash
collection period was $2,119,497 and the Superintendent of Streets has listed all unpaid assessments in the
aggregate amount of $2,467,597.
The amounts to be assessed against the parcels of property to pay the costs and expenses of the work
and improvements have been based on the estimated benefits to be derived by the various properties within the
District.
Teeter Plan
A Teeter Plan is an alternative method for the distribution of secured property taxes to local agencies.
Teeter Plan provisions are set forth in Sections 4701 to 4717 of the California Revenue and Taxation Code. If
a Teeter Plan is adopted and implemented by a County Board of Supervisors, local agencies for which a county
acts as "bank" and certain other public agencies and taxing areas located in that county receive annually the
full amount of their share of property taxes on the secured rolls, including delinquent property taxes which
have vet to be collected.
No Teeter Plan applies to the District.
Estimated Direct and Overlapping Indebtedness
Within the District's boundaries are numerous overlapping local agencies providing public services.
Some of these local agencies have outstanding bonds which are secured by taxes and assessments on the
parcels within the District and others have authorized but unissued bonds which, if issued, will be secured by
taxes and assessments levied on parcels within the District. The approximate amount of the direct and
overlapping debt secured by such taxes and assessment on the parcels within the District for fiscal year
2007 -08 is shown in Table 3 below (the "Debt Report").
The Debt Report has been derived from data assembled and reported to the District by California
Municipal Statistics, Inc. Neither the District nor the City have independently verified the information in the
Debt Report and do not guarantee its completeness or accuracy.
DOCSOC/ 1294032v5/022459 -0019
TABLE 3
CITY OF NEWPORT BEACH
ASSESSMENT DISTRICT NO. 101
DIRECT AND OVERLAPPING DEBT
CITY OF NEWPORT BEACH ASSESSMENT DISTRICT NO. 101
(Includes Parcels with Preuaid Assessments)
2007 -08 Local Secured Assessed Valuation: $214,751,10011'
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:
% Aunlicable
Debt 8/1/08
Orange County Teeter Plan Obligations
0.058%
$ 71,761
Metropolitan Water District
0.168
549,721
Coast Community College District
0.229
782,422
Newport Mesa Unified School District
0.469
778,885
City of Newport Beach Assessment District No. 101
100.
- ('-)
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT
$2,182,789
OVERLAPPING GENERAL FUND DEBT
Orange County General Fund Obligations
0.058%
$281,048
Orange County Pension Obligations
0.058
41,850
Orange County Board of Education Certificates of Participation
0.058
11,362
Municipal Water District of Orange County Water Facilities Corporation
0.069
12,203
Newport Mesa Unified School District Certificates of Participation
0.483
4,927
City of Newport Beach Certificates of Participation
0.611
28,503
Orange County Sanitation District Certificates of Participation
0.166
149.367
TOTAL GROSS OVERLAPPING GENERAL FUND DEBT
$529,260
Less: MWDOC Water Facilities Corporation (100% self - supporting)
12.203
TOTAL NET OVERLAPPING GENERAL FUND DEBT
$517,057
GROSS COMBINED TOTAL DEBT $2,712,049 13)
NET COMBINED TOTAL DEBT $2,699,846
11I Includes the $1,064 value of APN 048 - 032 -14 which is a remainder parcel that will not be assessed by the District.
t2i Excludes 1915 Act bonds to be sold.
(3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non -bonded
capital lease obligations.
Ratios to 2007 -08 Assessed Valuation:
DirectDebt ............................................ ...............................
- %
Total Direct and Overlapping Tax and Assessment Debt ......
1.02%
Gross Combined Total Debt .................... ...............................
1.26%
Net Combined Total Debt ....................... ...............................
1.26%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30108: $0
source: California Municipal statistics.
12
DOC SOC/ 1294032v5/022459 -0019
Assessed Value -to -Lien Ratios
The assessed value of the parcels as of August 1, 2008 that did not prepay the assessments during the
cash collection period is $107,639,749. The total amount of unpaid assessments is $2,467,597'. The overall
value -to -lien ratio for parcels with unpaid assessments is 43.62 -to -l.
The numbers provided in the following Tables 4, 5, and 6 exclude parcels that prepaid all of the
assessment.
Table 4 provides information breaking down the overall value -to -lien ratio of groups of parcels with
unpaid assessments.
TABLE 4
CITY OF NEWPORT BEACH
ASSESSMENT DISTRICT NO. 101
ASSESSED VALUE TO LIEN RATIOS
Table 5 provides information breaking down the overall value -to -lien ratio of parcels by land use
within the District.
TABLE 5
CITY OF NEWPORT BEACH
ASSESSMENT DISTRICT NO. 101
ASSESSED VALUE TO LIEN RATIOS BY PERMITTED LAND USE
Number
Fiscal Year 2007 108Assessed Value
Fiscal Year 2007/08
Remaining
Of
Land
Assessed Value
Total
l
Assessment
Percent of
Value to Lien Ratio
Parcels
Land
Structure
Total
Lien
Lien
Greater than 100:1
18
$ 30,142,948
$ 4,418,540
$ 34,561,488
$ 220,287
8.93%
50:1 to 99.99:1
46
30,919,525
7,063,356
37,982,881
537,580
21.79
25:1 to 49.99:1
52
19,273,575
5,655,937
24,929,512
661,058
26.79
10:1 to 24.99:1
24
3,932,473
2,327,085
6,259,558
344,799
13.97
Less than 9.99:1
44
2,717350
1,188,560
3,906,310
703,873
28.52
Totals
184
$86,986,271
$ 20,653,478
$107,639,749
$ 2,467,597
100.00%
Source: Willdan/MuniFinancial Financial
Services.
Table 5 provides information breaking down the overall value -to -lien ratio of parcels by land use
within the District.
TABLE 5
CITY OF NEWPORT BEACH
ASSESSMENT DISTRICT NO. 101
ASSESSED VALUE TO LIEN RATIOS BY PERMITTED LAND USE
source: Willdan MuniFinancial Financial Services
Jamihninary. subject to change.
13
DOC SOC /I 294032v5/022459 -0019
Number
Fiscal Year 2007 108Assessed Value
of
Land
Structure
Total
l
Assessment
Value
Percent
Land Use Category
Parcels
Lien
to Lien
of Lien
Single - Family Residential
95
$ 54,428.246
$ 12,077,828
$ 66.506,074
$ 1,411,681
47.11:1
57.21%
Multi- Family Residential
54
22,439,791
4,208,132
26,647,923
847,861
31.43:1
34.36
Condominiums
35
10.118234
4367.518
14.485,752
208.056
69.62:1
8.43
Totals
184
$ 86,986.271
$ 20,653,478
$ 107,639,749
$ 2,467,597
43.62:1
100.00%
source: Willdan MuniFinancial Financial Services
Jamihninary. subject to change.
13
DOC SOC /I 294032v5/022459 -0019
Top Property Owners
The property owner within the District with the largest unpaid assessments was responsible for 1.21%
of the assessments in the District. The next eight largest property owners were responsible for between I and
0.65% of the lien.
Property Tax Delinquencies
As of August 26, 2008, $16,669 of the property taxes levied in Fiscal Year 2007 -08 within the
boundaries of the District was delinquent. Property taxes for Fiscal Year 2008 -09 have not yet been assessed.
The level of delinquency relating to property taxes in Fiscal Year 2007 -08 and prior years may or may not be
indicative of future delinquencies for the Assessment Installments.
Table 6 sets forth delinquencies for properties in the District for Fiscal Years 2004 -05 through
2007 -08.
ri FM,
048- 072 -15
932 -940 -01
936 - 520 -34
936 - 520-35
TABLE 6
CITY OF NEWPORT BEACH
ASSESSMENT DISTRICT NO. 101
PROPERTY TAX LEVIES AND COLLECTIONS
FISCAL YEARS 2004 -05 THROUGH 2007 -08
Delinquencies(')
Fiscal Year Fiscal Year Fiscal Year Fiscal Year
2004 -05 2005 -06 2006 -07 2007 -08
$ 1,326
$ $ 1,326
$ 1,211 $ 1,097
4,912 4,336
3,192 5,618
3.192 5.618
$ 12,507 $ 16,669
Aggregate Amount
Delinquent Plus
Penalty
$ 3,649
9,263
8,825
8,825
$ 30,5621'-1
ft As of August 2008.
In The aggregate remaining delinquent amount represents 1.43% of 1.00:0 of the Assessed Value of all properties within the District.
Source: Willdan�AluniFinancial Financial Se ieea.
BONDOWNERS' RISKS
General
In order to pay debt service on the Bonds, it is necessary that unpaid Assessment Installments on land
within the District are paid in a timely manner. The Reserve Fund will be used to pay delinquent Assessment
Installments should they occur. The assessments are a lien on the parcels of land and the City can institute
foreclosure proceedings to sell land with delinquent Assessment Installments for the amount of such
delinquent installments in order to obtain funds to pay debt service on the Bonds.
Failure by owners of the parcels to pay Assessment Installments when due, depletion of the Reserve
Fund or the inability of the City to sell parcels which have been subject to foreclosure proceedings for amounts
sufficient to cover the delinquent Assessment Installments for such parcels may result in the inability of the
City to make full or punctual payments of debt service on the Bonds, and Bondowners would therefore be
adversely affected.
Amendments to the 1915 Act enacted in 1988 and effective January 1, 1989 provide that under certain
circumstances property may be sold upon foreclosure at a lesser Minimum Price or without a Minimum Price.
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DOC SOC/1294032 v51022459 -0019
"Minimum Price" as used in the 1915 Act is the amount equal to the delinquent installments of principal or
interest of the assessment or assessment, together with all interest penalties, costs, fees, charges and other
amounts more fully detailed in the 1915 Act. The court may authorize a sale at less than the Minimum Price if
the court determines that sale at less than the Minimum Price will not result in an ultimate loss to the
Bondowners or, under certain circumstances, if owners of 75% or more of the outstanding Bonds consent to
such sale. There can be no assurance that foreclosure proceedings will occur in a timely manner so as to avoid
depletion of the Reserve Fund and a delay in payments of debt service on the Bonds. See "SECURITY FOR
THE BONDS — Covenant for Superior Court Foreclosure Judicial Foreclosure Proceedings."
Unpaid Assessment Installments do not constitute a personal indebtedness of the owners of the parcels
within the District. There is no assurance the owners will be able to pay the Assessment Installments or that
they will pay such installments even if financially able to do so.
Delinquency Resulting in Ultimate or Temporary Loss on Bonds
If a temporary deficiency occurs in the Redemption Fund with which to pay Bonds that have then
matured, past due interest or the principal and interest on Bonds coming due during the current year, but it does
not appear to the City Treasurer that there will be an ultimate loss to the Bondowners, the City Treasurer shall
cause the Paying Agent to pay the principal of Bonds which have matured as presented and make interest
payments on the Bonds when due, as long as there are available funds in the Redemption Fund, in the order of
priority and as required by the Indenture. If it appears to the City Treasurer that there is a danger of an
ultimate loss accruing to the Bondowners for any reason, he or she is required pursuant to the 1915 Act to
withhold payment on all matured Bonds and interest on all Bonds and report the facts to the City Council so
that the City Council may take proper action to equitably protect all Bondowners.
Non -Cash Payments of Assessments
The 1915 Act may permit the owner of a parcel that is subject to an unpaid Assessment Installment to
tender any bond secured by such assessment in payment or partial payment of any installment of the
assessment or interest or penalties thereon which may be due or payable. A bond so tendered is to be accepted
at the par amount thereof and credit is to be given for any interest thereon accrued to the date of the tender.
Thus, if Bonds can be purchased at a discount, it may be to the advantage of a property owner to pay amounts
due with respect to an assessment by tendering a Bond. Such a practice would decrease the cash flow
available to the City to make payments with respect to other Bonds then outstanding and could result in a
default in payment on the Bonds.
Land Values
The value of the property within the District is a critical factor in determining the investment quality
of the Bonds. if a property owner is delinquent inthe payment of Assessment Installments, the District's only
remedy is to commence foreclosure proceedings against the delinquent parcel in an attempt to obtain funds to
pay The delinquent Assessment Installments. Reductions in property values due to a downturn in the economy,
physical events such as earthquakes, foes or floods, stricter land use regulations, delays in development or
other events will adversely impact the security underlying the assessments. See "THE DISTRICT— Assessed
Value -to -Lien Ratios" herein
The assessed values of the property within the District contained herein do not represent market values
arrived at through an appraisal process and generally reflect only the sales price of a parcel when acquired by
its current owner, adjusted annually by an amount determined by the County Assessor, not to exceed an
increase or more than 2% per fiscal year. No assurance can be given that a parcel could actually be sold for its
assessed value. No assurance can be given that the values of the property within the District will not decline in
the future, if one or more events, such as natural disasters or adverse economic conditions. occur.
15
DOC SOC/ 1294032v5i022459 -0019
No assurance can be given that any bid will be received for a parcel with delinquent Assessment
Installments offered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all
delinquent Assessment Installments. See "SECURITY FOR THE BONDS — Covenant for Superior Court
Foreclosure."
Limited City Obligation Upon Delinquency
Pursuant to the 1915 Act, the City has elected not to be obligated to advance funds from the treasury
of the City for delinquent Assessment Installments. The only obligation of the City with respect to such
delinquencies and the consequent deficiencies in the Redemption Fund is to advance money to the Redemption
Fund from the Reserve Fund. The City has no obligation to replenish the Reserve Fund except to the extent
that delinquent Assessment Installments are paid or proceeds from foreclosure sales are realized. There is no
assurance that the balance in the Reserve Fund will always be adequate to pay all delinquent Assessment
Installments and if during the period of delinquency there are insufficient funds in the Reserve Fund, a delay
may occur in payments to the Bondowners.
Collection of the Assessments
The Assessment Installments are to be collected in the same manner as ordinary ad valorem real
property taxes are collected and, except as provided in the special covenant for foreclosure in the Indenture, are
to be subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is
provided for ad valorem real property taxes. Pursuant to these procedures, if taxes are unpaid for a period of
five years or more, the property may be deeded to the State and then is subject to sale by the County.
Pursuant to the Bond Law, in the event any delinquency in the payment of an Assessment Installment
occurs, the City may commence an action in superior court to foreclose the lien therefor within the specified
time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial
foreclosure sale. Such judicial foreclosure action is not mandatory. Amendments to the Bond Law enacted in
1988 and effective January I, 1989 provide that under certain circumstances property may be sold upon
foreclosure at a lesser Minimum Price or without a Minimum Price. "Minimum Price" as used in the Bond
Law is the amount equal to the delinquent installments of principal or interest of the assessment or
reassessment, together with all interest penalties, costs, fees, charges and other amounts more fully detailed in
the Bond Law. The court may authorize a sale at less than the Minimum Price if the court determines that sale
at less than Minimum Price will not result in an ultimate loss to the Bondowners or, under certain
circumstances, if owners of 75% or more of the outstanding Bonds consent to such sale. See "SECURITY
FOR THE BONDS — Covenant for Superior Court Foreclosure — Judicial Foreclosure Proceeding."
There can be no assurance that foreclosure proceedings will occur in a timely manner so as to avoid a
delay in payments of debt service on the Bonds. The City has covenanted that the City will commence
foreclosure upon the occurrence of a delinquency as provided in the Indenture, and thereafter diligently
prosecute, an action in the superior court to foreclose the lien of the delinquent Assessment Installments
against parcels of land in the District for which such installment has been billed but has not been paid, and will
diligently prosecute and pursue such foreclosure proceedings to judgment and sale, all as provided in the
Indenture. See `SECURITY FOR THE BONDS — Covenant for Superior Court Foreclosure." In the event
that sales or foreclosure of property are necessary, there could be a delay in payments on the Bonds pending
such sales or the prosecution of foreclosure proceedings and receipt by the City of the proceeds of sale.
Availability of Funds to Pay Delinquent Assessment Installments
Upon receipt of the proceeds from the sale of the Bonds, the City will initially establish the Reserve
Fund in an amount of the "Reserve Requirement." The moneys in the Reserve Fund constitute a trust fund for
the benefit of the Owners of the Bonds, will be held by the Paying Agent and administered by the Paying
Agent in accordance with and pursuant to the provisions of the Indenture. If a deficiency occurs in the
16
DOCSOC/ 1294032x5/022459 -0019
Redemption Fund for payment of interest on or principal of the Bonds, the Paying Agent will transfer into such
funds an amount out of the Reserve Fund needed to pay debt service on the Bonds. There is no assurance that
the balance in the Reserve Fund will always be adequate to pay the debt service on the Bonds in the event of
delinquent Assessment Installments.
If, during the period of delinquency. there are insufficient funds in the Reserve Fund to pay the
principal of and interest on the Bonds as it becomes due, a delay may occur in payments of principal and/or
interest to the owners of the Bonds.
Owner Not Obligated to Pay Assessments
Unpaid assessments do not constitute a personal indebtedness of the owner of parcels within the
District and the property owners have made no commitment to pay the principal of or interest on the Bonds or
to support payment of the Bonds in any manner. There is no assurance that the property owners have the
ability to pay the Assessment Installments or that even if they have the ability, they will choose to pay such
Assessment Installments. An owner may elect to not pay the assessments when due and cannot be legally
compelled to do so. If an owner decides it is not economically feasible to develop or to continue owning its
property encumbered by the lien of the assessment, or decides that for any other reason it does not want to
retain title to the property, such owner may choose not to pay assessments and to allow the property to be
foreclosed. Such a choice may be made due to a decrease in the market value of the property. A foreclosure
of the property will result in such owner's interest in the property being transferred to another party. Neither
the City nor any Bondholder will have the ability at any time to seek payment directly from any owner of
property within the District of any assessment or any principal or interest due on the Bonds, or the ability to
control who becomes a subsequent owner of any property within the District.
Parity Taxes and Special Assessments
The ability or willingness of a property owner in the District to pay the Assessment Installments could
be affected by the existence of other taxes and assessments imposed upon the property. The assessments and
any penalties thereon constitute a lien against the lots and parcels of land on which they have been levied until
they are paid. Such lien is on a parity with all special taxes and special assessments levied by other agencies
and is co -equal to and independent of the lien for general property taxes and other special assessments
regardless of when they are imposed upon the same property. The assessments have priority over all existing
and future private hens imposed on the property. In addition, other public agencies whose boundaries overlap
those of the District could, with or in some circumstances without the consent of the owners of the land in the
District, impose additional taxes or assessment liens on the property in the District in order to finance public
improvements to be located inside or outside of the District.
The City, however, has no control over the ability of other entities and districts to issue indebtedness
secured by special taxes or assessments payable from all or a portion of the property in the District In
addition, the City is not prohibited itself from establishing assessment districts, community facilities districts
or other districts which might impose assessments or taxes against property in the District. The imposition of
additional liens on a parity with the assessments could reduce the ability or willingness of the owners of
parcels in the District to pay the assessments and increases the possibility that foreclosure proceeds will not be
adequate to pay delinquent assessments or the principal of and interest on the Bonds when due. See "THE
DISTRICT— Estimated Direct and Overlapping Indebtedness."
Bankruptcy and Foreclosure
The payment of the assessments and the ability of the City to foreclose the lien of a delinquent unpaid
assessment, as discussed in "SECURITY FOR THE BONDS — Covenant to Commence Superior Court
Foreclosure," may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or
17
DOCSOC /1294032v 5.!022459 -0019
by the laws of the State of California relating to judicial foreclosure. In addition, the prosecution of a
foreclosure action could be delayed due to crowded local court calendars or delays in the legal process.
The various legal opinions to be delivered concurrently with the delivery of the Bonds (including
Bond Counsel's approving legal opinion) will be qualified as to the enforceability of the various legal
instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors'
rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases.
Although bankruptcy proceedings would not cause the assessments to became extinguished
bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings
and could result in delinquent assessment installments not being paid in full. Where property is encumbered
by liens securing mortgage loans, it is highly probable that bankruptcy of a property owner would delay
foreclosure for an extended period of time. Such a delay would increase the likelihood of a delay or default in
payment of the principal and interest on the Bonds.
FDIC /Federal Government Interests in Parcels
The ability of the City to collect interest and penalties specified by the 1915 Act and to foreclose the
lien of delinquent Assessment Installments may be limited in certain respects with regard to parcels in which
the Federal Deposit Insurance Corporation (the "FDIC ") has or obtains an interest. Specifically, in the event
that any financial institution making a loan which is secured by parcels is taken over by the FDIC and the
applicable Assessment Installment is not paid, the remedies available to the City may be constrained. The
FDIC's policy statement regarding the payment of state and local real property taxes (the "Policy Statement ")
provides that taxes other than ad valorem taxes which are secured by a valid lien in effect before the FDIC
acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is
appropriate. The Policy Statement provides that the FDIC generally will not pay installments of non-
ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize
the validity of any lien to secure payment except in certain cases where the Resolution Trust Corporation had
an interest in property on or prior to December 31, 1995. Moreover, the Policy Statement provides that with
respect to parcels on which the FDIC holds a mortgage lien, the FDIC will not permit its lien to be foreclosed
out by a taxing authority without its specific consent, nor will the FDIC pay or recognize liens for any
penalties, fines or similar claims imposed for the non - payment of taxes.
The City is unable to predict what effect the application of the Policy Statement would have in the
event of a delinquency with respect to a portion of the parcels in which the FDIC has or obtains an interest,
although prohibiting the lien of the FDIC to be foreclosed out at a judicial foreclosure sale would prevent or
delay the foreclosure sale.
The City's remedies may also be limited in the
respect to parcels in which other federal agencies (such
Enforcement Administration) have or obtain an interest.
Natural Disasters
case of delinquent Assessment Installments with
as the Internal Revenue Service and the Drug
Property within the District may be subject to unpredictable seismic activity, fires, flood, or other
natural disasters. Southern California is a seismically active area. Seismic activity represents a potential risk
for damage to buildings, roads and property within the District. In addition, land susceptible to seismic
activity may be subject to liquefaction during the occurrence of such event.
Homes within the District near the shore of the Pacific Ocean are susceptible to flooding as a result of
high tides from the Pacific Ocean. The City currently uses a "tidal valve" system to prevent flooding and to
protect the homes. No assurances can be given that such system will always protect homes in the District near
the shore of the Pacific Ocean from high tides and flooding. Should such homes be damaged or destroyed as a
18
DOC SOC/ 1294032v5/022459 -0019
result of flooding, owners of such homes may be unable or unwilling to pay the Assessment Installments when
due.
In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant
damage to both property and infrastructure in the District. As a result, a substantial portion of the property
owners may be unable or unwilling to pay the Assessment Installments when due. In addition, the value of
land in the District could be diminished in the aftermath of such a natural disaster, reducing the resulting
proceeds of foreclosure sales in the event of delinquencies in the payment of the Assessment Installments.
Hazardous Substances
While government taxes, assessments and charges are a common claim against the value of a parcel,
other less common claims may also be relevant. The value of a parcel may be reduced as a result of a claim
with regard to a hazardous substance. In general, the owners and operators of a parcel may be required by law
to remedy conditions relating to releases or threatened releases of hazardous substances. The federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as
"CERCLA" or the "Super Fund Act ", is the most well known and widely applicable of these laws, but
California laws with regard to hazardous substances are also stringent and similar in effect. Under many of
these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of a parcel whether
or not the owner (or operator) had anything to do with creating or handling the hazardous substance. The
effect, therefore, should any of the parcels within the District be affected by a hazardous substance, is to reduce
the marketability and value by the costs of remedying the condition because the prospective purchaser of such
a parcel will, upon becoming the owner of such parcel, become obligated to remedy the condition just as the
seller of such a parcel is.
Loss of Tax Exemption
As discussed under the heading "CONCLUDING INFORMATION —Tax Matters," interest on the
Bonds could cease to be excluded from gross income for purposes of federal income taxation, retroactive to the
date the Bonds were issued, as a result of future acts or omissions of the City. In addition, it is possible that
future changes in applicable federal tax laws could cause interest on the Bonds to be included in gross income
for federal income taxation or could otherwise reduce the equivalent taxable yield of such interest and thereby
reduce the value of the Bonds.
Limited Secondary Market
There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary
market exists, that such Bonds can be sold for any particular price. Although the City has committed to
provide certain statutorily- required financial and operating information, there can be no assurance that such
information will be available to Bondowners on a timely basis. The failure to provide the required annual
financial information does not give rise to monetary damages but merely an action for specific performance.
Occasionally, because of general market conditions, lack of current information, the absence of a credit rating
for the Bonds 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.
Ballot Initiatives
From time to time constitutional initiatives or other initiative measures may be adopted by California
voters. The adoption of any such initiative might place limitations on the ability of the State, the County or
local districts to increase revenues or to increase appropriations.
19
DOCSOC/ 1294032v5/022459-0019
Constitutional Amendment — Articles IIIC and IIID
An initiative measure commonly referred to as the "Right to Vote on Taxes Act' (the "Initiative ") was
approved by the voters of the State of California at the November 5, 1996 general election. The Initiative
added Article X111C ( "Article X111C ") and Article X111D ("Article XIIID") to the California Constitution.
According to the "Title and Summary" of the Initiative prepared by the California Attorney General, the
Initiative limits "the authority of local governments to impose taxes and property- related assessments, fees and
charges."
Article X1IID requires that, beginning July 1, 1997, the proceedings for the levy of any assessment by
the City under the Act (including, if applicable, any increase in such assessment or any supplemental
assessment under the Act) must be conducted in conformity with the provisions of Section 4 of Article XI11D.
The City completed its proceedings for the levy of assessments in the District on July 27, 2004, after
complying with the procedural requirements of Section 4 of Article X111D. Under Section 10400 of the Act,
any challenge to the proceedings or the Assessment must be brought within 30 days after the date the
assessment was levied.
Article X1IIC removes limitations on the initiative power in matters of local taxes, assessments, fees
and charges. Article X111C does not define the term "assessment ", and it is unclear whether this term is
intended to include assessments levied under the Act In the case of the unpaid assessments which are pledged
as security for payment of the Bonds, the 1915 Act provides a mandatory, statutory duty of the City and the
County Auditor to post Assessment Installments on account of the unpaid assessments to the property tax roll
of the County each year while any bonds are outstanding, commencing with property tax year 2004/05, in
amounts equal to the principal of and interest on the Bonds coming due in the succeeding calendar year plus
certain administrative costs. It is unlikely that the initiative power can be used to reduce or repeal the unpaid
assessments which are pledged as security for payment of the Bonds or to otherwise interfere with
performance of the mandatory, statutory duty of the City and the County Auditor with respect to the unpaid
assessments which are pledged as security for payment of the Bonds.
The interpretation and application of the Initiative will ultimately be determined by the courts with
respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty
the outcome of such determination.
CONCLUDING INFORMATION
Continuing Disclosure
The City has agreed to execute a Continuing Disclosure Agreement (the "Disclosure Agreement ")
prior to delivery of the Bonds for the benefit of the Undervriter, holders and beneficial owners of the Bonds to
provide certain financial information and operating data relating the District within 270 days after the end of
the City's fiscal year (the "Annual Report') and to provide notices of the occurrence of certain enumerated
events (the "Listed Events "). The Annual Reports will be filed on behalf of the City by the Dissemination
Agent with each Nationally Recognized Municipal Securities Information Repository and the State Repository,
if am' . Notices of Listed Events will be filed by the Dissemination Agent with the Municipal Securities
Rulemaking Board. The specific nature of the information to be included in the Annual Report and the notices
of Listed Events is set forth in APPENDIX F— "DISCLOSURE DISSEMINATION AGENT AGREEMENT."
The City has agreed to execute the Disclosure Agreement in order to assist the Underwriter in complying with
Securities and Exchange Commission Rule 15c2- 12(b)(5) (the "Rule "). See APPENDIX F— "DISCLOSURE
DISSEMINATION AGENT AGREEMENT."
It should be noted that the City is required to file certain financial statements with the Annual Report.
This requirement has been included in the Disclosure Agreement solely to satisfy the provisions of the Rule.
The inchusion of this information does not mean that the Bonds are secured by any resources or property of the
20
DOC SOC/1294032v5/022459 -0019
City other than as described hereinabove. See "BONDOWNERS' RISKS— Limited City Obligation Upon
Delinquency." It should also be noted that the list of significant events which the City has agreed to report
includes one item which has absolutely no application to the Bonds. These items have been included in the list
solely to satisfy the requirements of the Rule. Any implication from the inclusion of these items in the list to
the contrary notwithstanding, the Bonds have not been assigned a credit rating.
The City has never failed to comply in all material respects with any previous undertakings with
regard to the Rule to provide annual reports or notices of material events.
Legal Opinion
All proceedings in connection with the issuance of the Bonds are subject to the approval of Robert E.
Hessell, Esq., San Diego, California, Bond Counsel (`Bond Counsel "). The opinion of Bond Counsel attesting
to the validity of the Bonds will be delivered with each Bond. A form of the opinion to be delivered by Bond
Counsel is set forth in Appendix D hereto,
The descriptions of the Bonds and statements of law and legal conclusions set forth in this Official
Statement under the heading "THE BONDS," "SECURITY FOR THE BONDS," "CONCLUDING
INFORMATION —Tax Matters' and Appendices C and D herein have been reviewed by Bond Counsel.
Bond Counsel's engagement is limited to a review of the legal procedures required for the authorization of the
Bonds and the exemption of interest on the Bonds from income taxation See "CONCLUDING
INFORMATION —Tax Matters" herein. The opinion of Bond Counsel will not consider or extend to any
documents, agreements, representations, offering circulars or other material of any kind concerning the Bonds,
including the Official Statement, not mentioned in this paragraph.
Tax Matters
In the opinion of Robert E. Hessell, Esq., San Diego, California, Bond Counsel, under existing
statutes, regulations, rules and court decisions, interest on the Bonds is excluded from gross income for federal
income tax purposes and is exempt from personal income taxation imposed by the State of California.
Bond Counsel is further of the opinion that interest on the Bonds is not a speck preference item for
purposes of the alternative minimum tax provisions of the Irternal Revenue Code of 1986, as amended (the
"Code"), However, with respect to the Bonds owned by corporations (as defined for federal income tax
purposes), interest on the Bonds may be included in adjusted current earnings, a portion of which may increase
the alternative minimum taxable income of such corporations. In addition, although interest on the Bonds is
excluded from gross income for federal income tax purposes, the accrual or receipt of interest on the Bonds
and the ownership of the Bonds may otherwise affect the federal income tax liability of certain persons or
entities. Bond Counsel expresses no opinion regarding any such consequences.
The Code sets forth certain requirements which must be met subsequent to the issuance and delivery
of the Bonds for interest paid with respect thereto to be and remain exempt from federal income taxation
Noncompliance with such requirements might cause the interest paid on the Bonds to be subject to federal
income taxation retroactive to the date of issue and the Bonds. These requirements include, but are not limited
to, provisions which prescribe yield and other limits within which the proceeds of the Bonds and other
amounts are to be invested and require that certain investment earnings on the foregoing must be rebated on a
periodic basis to the Treasury Department of the United States. Pursuant to the Indenture, the City has
covenanted to comply with all such requirements.
In rendering such opinions, Bond Counsel is assuming that the City will comply with its covenants in
the Indenture to comply with the requirements of the Code. Noncompliance with the Code might cause the
interest on the Bonds to be subject to federal income taxation retroactive to the date of issuance and delivery of
the Bonds.
21
DOCSOC/ 1294032v5/022459 -0019
No Litigation
There is no action, slit, or proceeding known by the City to be pending at the present time restraining
or enjoining the delivery of the Bonds or in any way contesting or affecting the validity of the Bonds or any
proceedings of the City taken with respect to the execution or delivery thereof. A no litigation certificate
executed by the City will be required to be delivered to the Underwriter simultaneously with the delivery of the
Bonds.
Financial Interests
The fees being paid to the Financial Advisor, Disclosure Counsel and Bond Counsel are contingent
upon the issuance and delivery of the Bonds.
Underwriting
The Bonds were sold to ML Stem& Co. LLC (the "Underwriter") at a negotiated sale. The
Underwriter has agreed to purchase the Bonds at a price of $ ($ parvalue, less an
Underwriter's discount of $ ). The Underwriter is committed to purchase all of the Bonds if arty are
purchased.
The Underwriter may offer and sell Bonds to certain dealers and others at prices lower than the
offering prices stated on the cover page hereof. The offering prices may be changed from time to time by the
Underwriter.
Financial Advisor
Fieldman, Rolapp & Associates of Irvine, California, served as financial advisor to the City with
respect to the sale of the Bonds. Fieldman, Rolapp & Associates will receive compensation contingent upon
the sale and delivery of the Bonds.
Miscellaneous
All quotations from, and summaries and explanations of, the Indenture and other statutes and
documents contained herein do not purport to be complete, and reference is made to said documents, the
Indenture and statutes for full and complete statements of their provisions.
This Official Statement is submitted only in connection with the sale of the Bonds by the City. All
estimates, assumptions, statistical information and other statements contained herein, while taken from sources
considered reliable, are not guaranteed by the City. The information contained herein should not be construed
as representing all conditions affecting the City or the Bonds.
The execution and delivery of this Official Statement have been authorized by the City.
CITY OF NEWPORT BEACH
0
22
DOC SOC/ I294032v5/022459 -0019
Mayor
APPENDIX A
ASSESSMENT DIAGRAM
A -1
DOC SOC/ 1294032v5i022459 -0019
APPENDIX B
INFORMATION ABOUT THE NEWPORT BEACH AREA
This appendix sets forth general information about the Newport Beach area. This information is
included only for general background purposes. It is not intended to suggest that the Bonds are payable from
any source other than the assessments and certain funds and accounts created by the Indenture.
General Description
The City of Newport Beach (the "City") was incorporated September 1, 1906. The Council- Manager
form of government was established by Municipal Charter on January 7, 1955. The City is located in Orange
County, California, and is 75 miles north of San Diego, 15 miles south of Long Beach, and 50 miles south of
Los Angeles. The tourist population is high throughout the year. Its harbor, recreation and special attractions
draw many to the City.
Climate & Topography
The City's climate is moderate. Because the City is a beach city, temperatures are generally cooler in
the summer and warmer in the winter than other Southern California areas. While much of the City is just
above sea level, the City does rise inland. The total area of the City in square miles is: Land -25, Bay -2.5, and
Ocean - 23.00, for a total of 50.5 square miles.
Population
The table below shows the recent population of the City and County of Orange (the "County ").
POPULATION GROWTH, 2004 -08
City of Newport Beach and the County of Orange
County of Orange
3,021,568
3,050,403
3,071,924
3,089,707
3,121,251
Source: California State Department of Finance, E-4 Population Estimates for Cities, Counties and the State, 2001 -2009 with
2000 DRU Benchmark
B -1
DOC SOC /1294032x5/022459 -0019
City of
Year
Newport Beach
2004
82,344
2005
82,984
2006
83,503
2007
83,834
2008
84,554
County of Orange
3,021,568
3,050,403
3,071,924
3,089,707
3,121,251
Source: California State Department of Finance, E-4 Population Estimates for Cities, Counties and the State, 2001 -2009 with
2000 DRU Benchmark
B -1
DOC SOC /1294032x5/022459 -0019
Employment
The following table summarizes wage and salary employment in the County from 2003 to 2007. The
total wage and salary employment in the County increased by 5.7% between 2003 and 2007. Service
Providing is the largest employment sector in the County.
ANNUAL AVERAGE INDUSTRY EMPLOYMENV)
Orange County Primary PMSA
B -2
DOC SOC/ 1294032v5/022459 -0019
2003
2004
2005
2006
2007
Total Farm
7,200
6,700
5,600
5,300
5,000
Total Nonfarm
1,429,000
1,456,700
1,491,000
1,518,900
1,513,000
Total Private
1,274,800
1.303,300
1,335,600
1,362,200
1,353,700
Goods Producing
268,100
276,300
283,500
289,900
284.500
Natural Resources and Mitring
500
600
700
600
600
Construction
83,700
92,200
99,900
106,600
103,700
Manufacturing
183,900
183,500
182,900
182,700
180,300
Service Providing
1,160,900
1,180,500
1,207,400
1,229,000
1,228,400
Trade, Transportation and Utilities
265,000
264,900
269,800
272,800
276,500
Wholesale Trade
83,200
82,400
83,000
83,700
87,100
Retail Trade
152,800
153,200
158,100
160,800
160,700
Transportation, Warehousing and
Utilities
29,000
29,200
28,700
28,200
28,700
Information
35,200
33,800
32,800
31,900
31,300
Financial Activities
122,200
132,300
138,400
138,200
128,500
Professional and Business Services
252,600
254.900
264,300
274,500
272,300
Educational and Health Services
126,000
131,000
133,500
137,700
141,600
Government
154 -200
153.400
155300
156,700
159,200
Total, All Industries
1,436,200
1.463,400
1,496,500
1,524,300
1.518,000
Note: The "Total, All Industries" data is not directly comparable to the employment data found herein.
n) Employment is reported by place of work; it does
not include persons involved in
labor - management
disputes.
Figures are
rounded to the nearest hundred. Columns may not
add to totals due
to rounding.
Source: State of California, Employment Development Department, Orange PMSA Industry Employment & Labor Force by
AmualAverage, March 20071?mchmark.
B -2
DOC SOC/ 1294032v5/022459 -0019
The following table summarizes civilian labor force, employment, and unemployment in the City, the
County, the State of California (the "State ") and the United States of America from 2003 to 2007. ,
CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
City of Newport Beach, County of Orange, State of California and United States of America
Annual Averages, 2003 -07
Civilian Labor Civilian ChZan Civilian
Year and Area Force Employment°( Unemploymenta" Unenrloymenl Rated
2003
rr1 Includes persons involved in labor- management trade disputes.
r �1 Includes all persons withouljobs who are actively seeking work.
o3 The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures in this
table.
(4) Not strictly comparable with data for prior years.
Source: State of California, Employment Development Department, and U.S. Department of labor, Bureau of Labor Statistics.
B -3
DOC SOC/ 1294032v5/022459 -0019
Newport Beach
47,730
46,600
1,130
2.4%
Orange County
1,575,600
1,515,900
59,700
3.8
California
17,460,000
16,282,700
1,177,300
6.7
United States (4)
146,510,000
137,736,000
8,774,000
6.0
2004
Newport Beach ")
Orange County
1,589,300
1,521,300
68,000
4.3
California
17,655,000
16,576,000
1,080,000
6.2
United States(41
147,401,000
139,252,000
8,149,000
5.5
2005
Newport Beach("
Orange County
1,602,262
1,541,800
60,400
3.8
California
17,695,600
16,746,900
948,700
5A
United States (4)
149,320,000
141,730,000
7,591,000
5.1
2006
Newport Beach
45,900
44,900
1,000
2.1%
Orange County
1,623,700
1,568,300
55,400
3.4
California
17,907,200
17,029,900
877,300
4.9
United States (4)
151,428,000
144,427,000
7,001,000
4.6
2007
Newport Beach
46,000
44,900
1,100
2.4%
Orange County
1,633,100
1,568,800
64,300
3.9
California
18,188,100
17,208,900
979,200
5.4
United States(4)
153,124,000
146,047,000
7,078,000
4.6
rr1 Includes persons involved in labor- management trade disputes.
r �1 Includes all persons withouljobs who are actively seeking work.
o3 The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures in this
table.
(4) Not strictly comparable with data for prior years.
Source: State of California, Employment Development Department, and U.S. Department of labor, Bureau of Labor Statistics.
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DOC SOC/ 1294032v5/022459 -0019
Major Employers
The principal employers as of June 30, 2007 in the City are as follows:
PRINCIPAL EMPLOYERS(')
City of Newport Beach
W ?!}1;'
Hoag Memorial Hospital
Pacific Life Insurance
Downey Savings & Loan
City of Newport Beach
Jazz Semiconductor
Conexant Systems Inc.
The Island Hotel
Pacific Investment Management Co.
Newport Beach Marriott & Tennis Club
Mindspeed Technology
Figures reflect number of employees of each employer as of June 30, 2007 and do not reflect current number of employees
for each employer.
Source: Newport Beach Chamber of Commerce.
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DOC SOC/ 1294032v5/022459.0019
Number
Type of Business or Entity
Engrloyed
hospital and health care
4,390
life insurance, investment
2,788
banking
2,566
city government
814
semiconductor networking solutions
730
semiconductor networking solutions
650
hotel, resort
550
investment company
530
hotels, resorts
500
semiconductor networking solutions
390
Figures reflect number of employees of each employer as of June 30, 2007 and do not reflect current number of employees
for each employer.
Source: Newport Beach Chamber of Commerce.
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DOC SOC/ 1294032v5/022459.0019
Construction Activity
The following table shows building permit valuations and new housing units in Newport Beach for
years 2003 through 2007.
City of Newport Beach
Building Permit Valuation and New Housing Units
(Dollar Amounts Are Stated Fully)
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DOCSOC/ 1294032x5/022459 -0019
2003
2004
2005
2006
2007
Residential
Single Family
$ 64,150,467
$ 56,021.134
$ 73,381,227
5 82,967,310
$ 68,054,930
Multi- Family
7,987,086
31,833,538
7,658,741
7,450,000
11,283,560
Alteration /Additions
44.089A03
50.009A11
53.783,612
56.805.626
58.058.723
Total
$116,226,956
$137,864,083
$ 136.823.580
S 147,222.936
$137,397,213
Non - Residential
New Commercial
S 3,781,500
$ 7,746.165
$ 18,235,000
S 36,300,000
5 57,666,475
New Industry
0
0
0
0
2,000,000
Other(t)
19,089,752
18,442,820
34,025,725
37,093,731
29,236,976
Alteration /Additions
37.462.146
46.776,521
54.026.316
53.803.425
40A31.975
Total
S 60,333,398
$ 72,965,506
$106,287,041
$ 127,197,156
$ 129,335,426
T tat A1I Indust rvta)
$176 60 u
$210.829,f$9_
5243.1 10.621
$ 274A20.092
266
New Housing Units
Single Family Units
142
100
141
126
107
Multi - Family Units
40
231
34
34
40
Total
182
331
175
160
147
Includes churches and religious
building, hospitals and institutional buildings,
schools and educational buildings, residential
garages, public works and utilities buildings and non - residential alterations
and additions.
('l May not add due to rounding.
Source: Construction Industry Research Board.
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DOCSOC/ 1294032x5/022459 -0019
Taxable Sales
Taxable sales in the City are shown below. Taxable sales in the City increased by 43% between 2002
and 2006. The largest taxable sales sectors in the City are automotive,
other
retail stores and eating and
drinking places.
$227074,712,813
1,372,432,950
24,591,599,249
1,484,019,033
267677,681,287
TAXABLESALES
30,050,714,559
1,569,867,249
32,993,340,291
City of Newport Beach
2003 - 20070)
(In Thousands)
Taxable Sales
2003 2004
2005
2006
2007n)
Apparel
$ 116,461 $ 138.308
$ 159,346
$ 168,773
$ 43,740
General Merchandise
216.676 237,968
256,604
259,294
58,705
Food Stores
75.576 76,493
82,662
86,262
21,952
Eating and Drinking Places
309,219 344,205
381,592
392,918
103,600
Home Furnishings & Appliances
82,783 81,027
99,458
96,501
24,642
Building Materials and Farm Implements
21,369 25,548
29,130
30,566
7.087
Automotive
350,740 382,748
430,653
538,993
173,030
Service Station
61,231 74,715
89,411
105,462
32,887
Other Retail Stores
276.253 288,372
327.910
334.155
54.578
Total Retail Stores
$1,510,308 $1,649,348
$1,856,766
$2,012,924
$ 520.221
All Other Outlets
$ 402,738 $ 475,161
$ 501,875
$ 559,897
$ 159,909
Total All Outlets
$1,913,046 $2,124,545
$2,358,641
$2,572,821
S 680,130
(') Figures through second quarter 2007
Source: California Board of Equalization.
Assessed Valuation
Below is a table which indicates the secured, unsecured and total assessed valuations for the City for
the fiscal years 2002 -03 through 2006 -07:
Fiscal Year Secured Valuation
2002 -03 $20,9907583,190
2003 -04 23,202,634,794
2004 -05 25,193,608,944
2005 -06 28,136,554,256
2006 -07 31,423J73,042
Public Utility
$16,531,505(')
16,531,505('}
53,310
53,310
53,310
Unsecured
Total Assessed
Valuation
Value
$1,067,598,118
$227074,712,813
1,372,432,950
24,591,599,249
1,484,019,033
267677,681,287
1,914,106,993
30,050,714,559
1,569,867,249
32,993,340,291
�') Pacific Bell acquired property significantly affecting the Public Utility Value.
Source: County of Orange Auditor - Controller's Office.
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DOC SOC/ 1294032v5l022459 -0019
APPENDIX C
SUMMARY OF THE INDENTURE
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DOC SOC/ 1294032v5/022459 -0019
APPENDIX D
FORM OF LEGAL OPINION
[Closing Date]
City of Newport Beach
Newport Beach, California
CITY OF NEWPORT BEACH
ASSESSMENT DISTRICT NO. 101
LIMITED OBLIGATION IMPROVEMENT BONDS
Bond Opinion
Ladies and Gentlemen:
In my capacity as bond counsel to the City of Newport Beach, California (the "City'). I have
examined the record of the proceedings of the City Council of the City for the levy of special assessments, and
authorization and issuance of the above captioned Bonds in the aggregate principal amount of S upon
unpaid assessments, in what is designated as Assessment District No. 101. The proceedings were taken
pursuant to the provisions of the Municipal Improvement Act of 1913, being Division 12 of the Streets and
Highways Code of the State of California. with the Bonds issued pursuant to the provisions of the
Improvement Bond Act of 1915, being Division 10 of said Code. The Bonds are payable solely from the
special assessments as provided in the Bond Indenture, dated as of September 1, 2008 (the "Indenture"), by
and between the City and U.S. Bank National Association, as Paying Agent. Capitalized terms used herein not
otherwise defined herein shall have the meanings given to them in the Indenture.
As to questions of fact material to this opinion, I have relied upon the certified proceedings and other
certifications of public officials furnished to me without undertaking to verify the same by independent
investigation. I have also assumed the genuineness of the signatures appearing upon such records, proceedings,
certifications, documents and opinions.
Based upon my examination and subject to the foregoing, I am of the opinion, as of the date hereof,
that
1. The City is duly organized and validly existing and has duly and validly authorized all the
acts undertaken by it in connection with the authorization, execution and delivery of the Bonds.
2. The Bonds and the Indenture are legal, valid and binding obligations enforceable in
accordance with their terms and the owners of the Bonds are entitled to the benefits of the Indenture; it should
be noted, however, that the rights of the owners of the Bonds and the enforceability of the Bonds and the
Indenture may be subject to bankruptcy, insolvency, reorganization and other similar laws affecting creditors'
rights, to equitable principles relating to or limiting creditors' rights, and to limitations on remedies applicable
to governmental entities.
3. Under existing laws, regulations, rulings and judicial decisions, the interest on the Bonds is
excluded from gross income for federal income tax purposes, is exempt from personal income taxation by the
State of California, and is not an item of tax preference for purposes of the federal alternative minimum tax
imposed upon individuals and corporations; it should be noted, however, that for the purpose of computing the
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DOC SOC/ 1294032x5/022459 -0019
alternative minimum tar imposed on corporations (as defined for federal income tax purposes), such interest is
taken into account in determining adjusted current earnings. This opinion presumes that the City complies with
all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the
issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for
federal or state income tax purposes. The City has covenanted to comply with each such requirement. Failure
to comply with such requirements may cause the inclusion of interest on the Bonds in gross income for federal
income tax purposes retroactive to the date of issuance of the Bonds. I express no opinion regarding other
federal or state tax consequences pertaining to the Bonds.
Respectfully submitted,
Robert E. Hessell
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DOC SOC/ I294032v5/022459 -0019
APPENDIX E
INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY
The information in this section concerning DTC and DTC'S book -entry only system has been obtained
from sources that the District believes to be reliable, but the District takes no responsibility for the
completeness or accuracy thereof The following description of the procedures and record keeping with
respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value
and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial
ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants
and the Beneficial Owners is based solely on information provided by DTC.
The Depository Trust Company ( "DTC "), New York, NY, will act as securities depository for the
Bonds (the "Bonds "). The Bonds will be issued as fully - registered securities registered in the name of Cede &
Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of
DTC. One fully- registered Bond certificate will be issued for each maturity of the Bonds, in the aggregate
principal amount of such maturity, and will be deposited with DTC.
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 company for DTC, National Securities Clearing Corporation and Fixed
Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its
regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non -U.S.
securities brokers and dealers. banks, trust companies, and clearing corporations that clear through or maintain
a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants "). DTC
has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the
Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and
www.dtc.org. The information on such websites is not incorporated herein by reference.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will
receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each
Bond (`Beneficial Owner ") is in tam to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are,
however, expected to receive written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries
made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in Bonds, except in the event that
use of the book -entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered
in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an
authorized representative of DTC The deposit of Bonds with DTC and their registration in the name of
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DOC SOC/ 1294032 v5 /022459 -0019
Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The
Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners
will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be
in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the
transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders,
defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may
wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices
to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to
the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC If less than all of the Bonds within a maturity are being
redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such
maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds
unless authorized by a Direct Participant in accordance with DTC's procedures. Under its usual procedures,
DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are
credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal, redemption price and interest payments on the Bonds will be made to Cede & Co., or such
other nominee as may be requested by an authorized representative of DTC DTC's practice is to credit Direct
Participants' accounts upon DTC's receipt of funds and corresponding detail information from the District or
the Paying Agent, on payable date in accordance with their respective holdings shown on DTC's records.
Payments by Participants to Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the District,
subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of
principal, redemption price and interest payments to Cede & Co. (or such other nominee as may be requested
by an authorized representative of DTC) is the responsibility of the District or the Paying Agent disbursement
of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments
to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered, through its
Participant to the Trustee, and shall effect delivery of such Bond by causing the Direct Participant to transfer
the Participant's interest in the Bonds, on DTC's records, to the Trustee. The requirement for physical
delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied
when the ownership nights in the Bonds are transferred by Direct Participants on DTC's records and followed
by a book -entry credit of tendered Bonds to the Trustee's DTC account.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by
giving reasonable notice to the District or the Paying Agent. Under such circumstances, in the event that a
successor depository is not obtained, physical Bonds are required to be printed and delivered.
The District may decide to discontinue use of the system of book - entry-only transfers through DTC
(or a successor securities depository). In that event. Bond certificates will be printed and delivered to DTC.
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DOCSOC(1294032v5i022459 -0019
APPENDIX F
DISCLOSURE DISSEMINATION AGENT AGREEMENT
This Disclosure Dissemination Agent Agreement (the "Disclosure Agreement'), dated as of
September 1, 2008, is executed and delivered by the City of Newport Beach (the `Issuer") and Digital
Assurance Certification, L.L.C., as exclusive Disclosure Dissemination Agent (the "Disclosure Dissemination
Agent' or "DAC. ") for the benefit of the Holders (hereinafter defined) of the Bonds (hereinafter defined) and in
order to provide certain continuing disclosure with respect to the Bonds in accordance with Rule 15c2 -12 of
the United States Securities and Exchange Commission under the Securities Exchange Act of 1934, as the
same may be amended from time to time (the "Rule ").
SECTION 1. Definitions. Capitalized terms not otherwise defined in this Disclosure Agreement
shall have the meaning assigned in the Rule or, to the extent not in conflict with the Rule, in the Official
Statement (hereinafter defined). The capitalized terms shall have the following meanings:
"Annual Report" means an Annual Report described in and consistent with Section 3 of this
Disclosure Agreement.
"Annual Filing Date" means the date, set in Sections 2(a) and 2(f), by which the Annual Report is to
be filed with the Repositories.
"Annual Financial Information" means annual financial information as such term is used in paragraph
(b)(5)(i) of the Rule and specified in Section 3(a) of this Disclosure Agreement.
"Audited Financial Statements" means the financial statements (if any) of the Issuer for the prior fiscal
year, certified by an independent auditor as prepared in accordance with generally accepted accounting
principles or otherwise, as such term is used in paragraph (b)(5)(i) of the Rule and specified in Section 3(b) of
this Disclosure Agreement.
"Bonds" means the bonds as listed on the attached Exhibit A, with the 9 -digit CUSIP numbers relating
thereto
"Central Post Office" means the Disclosure USA website maintained by the Municipal Advisory
Council of Texas or any successor thereto, or any other organization or method approved by the staff or
members of the Securities and Exchange Commission as an intermediary through which issuers may, in
compliance with the Rule, make filings required by the Disclosure Agreement
"Certification" means a written certification of compliance signed by the Disclosure Representative
stating that the Annual Report, Audited Financial Statements, Voluntary Report or Notice Event notice
delivered to the Disclosure Dissemination Agent is the Annual Report, Audited Financial Statements,
Voluntary Report or Notice Event notice required to be submitted to the Repositories under this Disclosure
Agreement. A Certification shall accompany each such document submitted to the Disclosure Dissemination
Agent by the Issuer and include the full name of the Bonds and the 9 -digit CUSIP numbers for all Bonds to
which the document applies.
"Disclosure Representative" means the Finance Officer of the Issuer, or such other person as the
Issuer shall designate in writing to the Disclosure Dissemination Agent from time to time as the person
responsible for providing Information to the Disclosure Dissemination Agent.
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DOC SOC/ 1294032v5/022459 -0019
"Disclosure Dissemination Agent" means Digital Assurance Certification, L.L.C, acting in its capacity
as Disclosure Dissemination Agent hereunder, or any successor Disclosure Dissemination Agent designated in
writing by the Issuer pursuant to Section 9 hereof.
"Holder" means any person (a) having the power, directly or indirectly, to vote or consent with respect
to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories
or other intermediaries) or (b) treated as the owner of any Bonds for federal income lax purposes.
"Information" means the Annual Financial Information, the Audited Financial Statements (if any) the
Notice Event notices, and the Voluntary Reports.
"Notice Event" means an event fisted in Sections 4(a) of this Disclosure Agreement.
"MSRB" means the Municipal Securities Rulemaking Board established pursuant to Section
1513(b)(1) of the Securities Exchange Act of 1934.
"National Repository" means any Nationally Recognized Municipal Securities Information Repository
for purposes of the Rule.
"Official Statement" means that Official Statement prepared by the Issuer in connection with the
Bonds, as listed on Exhibit A.
issued.
"Paying Agent" means the institution identified as such in the document under which the Bonds were
"Repository" means the MSRB, each National Repository and the State Depository (if am).
"State Depository" means any public or private depository or entity designated by the State of
California as a state information depository (if any) for the purpose of the Rule. The list of state information
depositories maintained by the United States Securities and Exchange Commission shall be conclusive as to
the existence of a State Depository.
"Underwriter" shall mean any underwriter of the Bonds required to comply with the Rule in
connection with the offering of the Bonds.
"Voluntary Report" means the information provided to the Disclosure Dissemination Agent by the
Issuer pursuant to Section 7.
SECTION 2. Provision of Annual Reports.
(a) The Issuer shall provide, annually, an electronic copy of the Annual Report and Certification
to the Disclosure Dissemination Agent, together with a copy to the Paying Agent and the Underwriter, not later
than 30 days prior to the Annual Filing Date. Promptly upon receipt of an electronic copy of the Annual Report
and the Certification, the Disclosure Dissemination Agent shall provide an Annual Report to each National
Repository and the State Depository (if any) not later than 270 days after the end of each fiscal year of the
Issuer, commencing with the fiscal year ending June 30, 2005. Such date and each anniversary thereof is the
Annual Filing Date. The Annual Report may be submitted as a single document or as separate documents
comprising a package, and may cross reference other information as provided in Section 3 of this Disclosure
Agreement.
(b) If on the fifteenth (15th) day prior to the Annual Filing Date, the Disclosure Dissemination
Agent has not received a copy of due Annual Report and Certification, the Disclosure Dissemination Agent
shall contact the Disclosure Representative by telephone and in writing (which may be by e-mail) to remind
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DOCSOC/1294032v5/022459 -0019
the Issuer of its undertaking to provide the Annual Report pursuant to Section 2(a). Upon such reminder, the
Disclosure Representative shall either (i) provide the Disclosure Dissemination Agent with an electronic copy
of the Annual Report and the Certification) no later than two (2) business days prior to the Annual Filing Date,
or (ii) instruct the Disclosure Dissemination Agent in writing that the Issuer will not be able to file the Annual
Report within the time required under this Disclosure Agreement, state the date by which the Annual Report
for such year will be provided and instruct the Disclosure Dissemination Agent that a Notice Event as
described in Section 4(a)(12) has occurred and to immediately send a notice to each National Repository or the
MSRB and the State Depository (if any) in substantially the form attached as Exhibit B.
(c) If the Disclosure Dissemination Agent has not received an Annual Report and Certification
by 12:00 noon on the first business day following the Annual Filing Date for the Annual Report, a Notice
Event described in Section 4(a)(12) shall have occurred and the Issuer irrevocably directs the Disclosure
Dissemination Agent to immediately send a notice to each National Repository or the MSRB and the State
Depository (if any) in substantially the form attached as Exhibit B.
(d) If Audited Financial Statements of the Issuer are prepared but not available prior to the
Annual Filing Date, the Issuer shall, when the Audited Financial Statements are available, provide in a timely
manner an electronic copy to the Disclosure Dissemination Agent, accompanied by a Certificate, together with
a copy for the Paying Agent, for filing with each National Repository and the State Depository (if any).
(e) The Disclosure Dissemination Agent shall
(i) determine the name and address of each Repository each year prior to the Annual
Filing Date;
(ii) upon receipt promptly file each Annual Report received under Section 2(a) with
each National Repository, and the State Depository, (if any);
(iii) upon receipt, promptly file each Audited Financial Statement received under Section
2(d) with each National Repository, and the State Depository (if any);
(iv) upon receipt, promptly file the text of each disclosure to be made with each National
Repository and the State Depository (if any) together with a completed copy of the Event Notice
Cover Sheet in the form attached as Exhibit C, describing the event by checking the box indicated
below when filing pursuant to the Section of this Disclosure Agreement indicated:
1. "Principal and interest payment delinquencies," pursuant to Sections 4(c)
and 4(a)(1);
2. "Non- Payment related defaults," pursuant to Sections 4(c) and 4(a)(2);
3. "Unscheduled draws on debt service reserves reflecting financial
difficulties," pursuant to Sections 4(c) and 4(a)(3);
4. "Unscheduled draws on credit enhancements reflecting financial
difficulties," pursuant to Sections 4(c) and 4(a)(4);
5. "Substitution of credit or liquidity providers, or their failure to perform,"
pursuant to Sections 4(c) and 4(a)(5);
6. "Adverse tax opinions or events affecting the tax-exempt status of the
security," pursuant to Sections 4(c) and 4(a)(6);
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DOCSOC/ I 294032v5/0224 59-0019
7. "Modifications to rights of securities holders," pursuant to Sections 4(c) and
4(a)(7);
8. `Bond calls," pursuant to Sections 4(c) and 4(a)(8);
9. "Defeasances," pursuant to Sections 4(c) and 4(a)(9);
10. "Release, substitution, or sale of property securing repayment of the
securities," pursuant to Sections 4(c) and 4(a)(10);
11. "Ratings changes," pursuant to Sections 4(c) and 4(a)(11);
12. "Failure to provide annual financial information as required," pursuant to
Section 2(b)(ii) or Section 2(c), together with a completed copy of Exhibit B
to this Disclosure Agreement;
13. "Other material event notice (specify)," pursuant to Section 7 of this
Agreement, together with the summary description provided by the
Disclosure Representative.
(v) provide the Issuer evidence of the filings of each of the above when made, which
shall be by means of the DAC system, for so long as DAC is the Disclosure Dissemination Agent
under this Disclosure Agreement.
(f) The Issuer may adjust the Annual Filing Date upon change of its fiscal year by providing
written notice of such change and the new Annual Filing Date to the Disclosure Dissemination Agent, Paying
Agent (if any) and the Repositories, provided that the period between the existing Annual Filing Date and new
Annual Filing Date shall not exceed one year.
Notwithstanding any other provision of this Disclosure Agreement, any of the required filings
hereunder may be made through a Central Post Office in lieu of filing with the Repositories.
SECTION 3. Content of Annual Reports.
(a) Each Annual Report shall contain Annual Financial Information with respect to the Issuer,
including (1) the audited financial statements of the City; (2) the principal amount of Bonds outstanding,
(3) the status of the public improvements which have been financed by the City with proceeds of the Bonds;
(4) a table setting forth the percentage of delinquent Assessment Installments as of June 30 of each fiscal year
and a description of the status of any foreclosure actions being pursued by the City with respect to delinquent
Assessment Installments; (5) the Reserve Fund balance; and (6) the total assessed value of property within the
District.
(b) Audited Financial Statements prepared in accordance with GAAP as described in the Official
Statement will be included in the Annual Report. If audited financial statements are not available, then
unaudited financial statements, prepared in accordance with generally accepted accounting principles
( "GAAP ") will be included in the Annual Report. Audited Financial Statements (if any) will be provided
pursuant to Section 2(d).
Any or all of the items listed above may be included by specific reference from other documents.
including official statements of debt issues with respect to which the Issuer is an `obligated person' (as defined
by the Rule), which have been previously filed with each of the National Repositories or the Securities and
Exchange Commission. If the document incorporated by reference is a final official statement, it must be
available from the MSRB. The Issuer will clearly identify each such document so incorporated by reference.
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Any annual financial information containing modified operating data or financial information is
required to explain, in narrative form, the reasons for the modification and the impact of the change in the type
of operating data or financial information being provided.
SECTION 4. Reporting of Notice Events.
(a) The occurrence of any of the following events, with respect to the Bonds constitutes a Notice
Event:
I Principal and interest payment delinquencies;
2.
Non - payment related defaults;
3.
Unscheduled draws on debt service reserves reflecting financial difficulties;
4.
Unscheduled draws on credit enhancements relating to the Bonds reflecting financial
difficulties;
5.
Substitution of credit or liquidity providers, or their failure to perform;
6.
Adverse tax opinions or events affecting the tax-exempt status of the Bonds;
7.
Modifications to rights of Bond holders;
8.
Bond calls;
9.
Defeasances;
10.
Release, substitution, or sale of property securing repayment of the Bonds;
II.
Rating changes on the Bonds;
12.
Failure to provide annual financial information as required; and
The Issuer
shall promptly notify the Disclosure Dissemination Agent in writing upon the occurrence
of a Notice Event.
Such notice shall instruct the Disclosure Dissemination Agent to report the occurrence
pursuant to subsection (c). Such notice shall be accompanied with the text of the disclosure that the Issuer
desires to make, the written authorization of the Issuer for the Disclosure Dissemination Agent to disseminate
such information, and
the date the Issuer desires for the Disclosure Dissemination Agent to disseminate the
information.
(b) The Disclosure Dissemination Agent is under no obligation to notify the Issuer or the
Disclosure Representative of an event that may constitute a Notice Event. In the event the Disclosure
Dissemination Agent so notifies the Disclosure Representative, the Disclosure Representative will within five
business days of receipt of such notice, instruct the Disclosure Dissemination Agent that (i) a Notice Event has
not occurred and no filing is to be made or (ii) a Notice Event has occurred and the Disclosure Dissemination
Agent is to report the occurrence pursuant to subsection (c), together with the text of the disclosure that the
Issuer desires to make, the written authorization of the Issuer for the Disclosure Dissemination Agent to
disseminate such information, and the date the Issuer desires for the Disclosure Dissemination Agent to
disseminate the information.
(c) If the Disclosure Dissemination Agent has been instructed by the Issuer as prescribed in
subsection (a) or (b)(ii) of this Section 4 to report the occurrence of a Notice Event, the Disclosure
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DOCSOCi 1294032v5/022459 -0019
Dissemination Agent shall promptly file a notice of such occurrence with the State Depository (if any) and (i)
each National Repository, or (ii) the MSRI3 in accordance with Section 2 e (iv) hereof.
SECTION 5. CUSIP Numbers. Whenever providing information to the Disclosure Dissemination
Agent, including but not limited to Annual Reports, documents incorporated by reference to the Annual
Reports, Audited Financial Statements, notices of Notice Events, and Voluntary Reports filed pursuant to
Section 7(a), the Issuer shall indicate the full name of the Bonds and the 9 -digit CUSIP numbers for the Bonds
as to which the provided information relates.
SECTION 6. Additional Disclosure Obligations. The Issuer acknowledges and understands that
other state and federal laws, including but not limited to the Securities Act of 1933 and Rule IOb -5
promulgated under the Securities Exchange Act of 1934, may apply to the Issuer, and that the failure of the
Disclosure Dissemination Agent to so advise the Issuer shall not constitute a breach by the Disclosure
Dissemination Agent of any of its duties and responsibilities under this Disclosure Agreement. The Issuer
acknowledges and understands that the duties of the Disclosure Dissemination Agent relate exclusively to
execution of the mechanical tasks of disseminating information as described in this Disclosure Agreement.
SECTION 7. Voluntary Reports.
(a) The Issuer may instruct the Disclosure Dissemination Agent to file information with the
Repositories, from time to time pursuant to a Certification of the Disclosure Representative accompanying
such information (a "Voluntary Report").
(b) Nothing in this Disclosure Agreement shall be deemed to prevent the Issuer from
disseminating any other information through the Disclosure Dissemination Agent using the means of
dissemination set forth in this Disclosure Agreement or including any other information in any Annual Report,
Annual Financial Statement, Voluntary Report or Notice Event notice, in addition to that required by this
Disclosure Agreement. If the Issuer chooses to include any information in any Annual Report, Annual
Financial Statement, Voluntary Report or Notice Event notice in addition to that which is specifically required
by this Disclosure Agreement, the Issuer shall have no obligation under this Disclosure Agreement to update
such information or include it in arty future Annual Report, Annual Financial Statement, Voluntary Report or
Notice Event notice.
SECTION 8. Termination of Reporting Obligation The obligations of the Issuer and the
Disclosure Dissemination Agent under this Disclosure Agreement shall terminate with respect to the Bonds
upon the legal defeasance, prior redemption or payment in full of all of the Bonds when the Issuer is no longer
an obligated person with respect to the Bonds, or upon delivery by the Disclosure Representative to the
Disclosure Dissemination Agent of an opinion of nationally recognized bond counsel to the effect that
continuing disclosure is no longer required.
SECTION 9. Disclosure Dissemination Agent. The Issuer has appointed Digital Assurance
Certification, L.L.C. as exclusive Disclosure Dissemination Agent under this Disclosure Agreement, The
Issuer may, upon thirty days written notice to the Disclosure Dissemination Agent and the Paying Agent,
replace or appoint a successor Disclosure Dissemination Agent. Upon termination of DAC's services as
Disclosure Dissemination Agent, whether by notice of the Issuer or DAC. the Issuer agrees to appoint a
successor Disclosure Dissemination Agent or, alternately, agrees to assume all responsibilities of Disclosure
Dissemination Agent under this Disclosure Agreement for the benefit of the Holders of the Bonds.
Notwithstanding any replacement or appointment of a successor. the Issuer shall remain liable until payment in
full for arty and all sums owed and payable to the Disclosure Dissemination Agent. The Disclosure
Dissemination Agent may resign at any time by providing thirty days' prior written notice to the Issuer.
SECTION 10. Remedies in Event of Default. In the event of a failure of the Issuer or the Disclosure
Dissemination Agent to comply with any provision of this Disclosure Agreement, the Holders' rights to
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DOCSOC/ 1294032v5 /0224 59 -00 19
enforce the provisions of this Agreement shall be limited solely to a right, by action in mandamus or for
specific performance, to compel performance of the parties' obligation under this Disclosure Agreement. Any
failure by a party to perform in accordance with this Disclosure Agreement shall not constitute a default on the
Bonds or under any other document relating to the Bonds, and all rights and remedies shall be limited to those
expressly stated herein.
SECTION 11. Duties. Immunities and Liabilities of Disclosure Dissemination Agent.
(a) The Disclosure Dissemination Agent shall have only such duties as are specifically set forth
in this Disclosure Agreement. The Disclosure Dissemination Agent's obligation to deliver the information at
the times and with the contents described herein shall be limited to the extent the Issuer has provided such
information to the Disclosure Dissemination Agent as required by this Disclosure Agreement. The Disclosure
Dissemination Agent shall have no duty with respect to the content of any disclosures or notice made pursuant
to the terms hereof. The Disclosure Dissemination Agent shall have no duty or obligation to review or verify
anv Information or any other information, disclosures or notices provided to it by the Issuer and shall not be
deemed to be acting in any fiduciary capacity for the Issuer, the Holders of the Bonds or any other party. The
Disclosure Dissemination Agent shall have no responsibility for the Issuer's failure to report to the Disclosure
Dissemination Agent a Notice Event or a duty to determine the materiality thereof The Disclosure
Dissemination Agent shall have no duty to determine, or liability for failing to determine, whether the Issuer
has complied with this Disclosure Agreement. The Disclosure Dissemination Agent may conclusively rely
upon certifications of the Issuer at all times.
The obligations of the Issuer under this Section shall survive resignation or removal of the Disclosure
Dissemination Agent and defeasance, redemption or payment of the Bonds.
(b) The Disclosure Dissemination Agent may, from time to time, consult with legal counsel
(either in -house or external) of its own choosing in the event of any disagreement or controversy, or question
or doubt as to the construction of any of the provisions hereof or its respective duties hereunder, and shall not
incur any liability and shall be fully protected in acting in good faith upon the advice of such legal counsel.
The reasonable fees and expenses of such counsel shall be payable by the Issuer.
SECTION 12. Amendment Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the Issuer and the Disclosure Dissemination Agent may amend this Disclosure Agreement and any
provision of this Disclosure Agreement may be waived, if such amendment or waiver is supported by an
opinion of counsel exTert in federal securities laws acceptable to both the Issuer and the Disclosure
Dissemination Agent to the effect that such amendment or waiver does not materially impair the interests of
Holders of the Bonds and would not, in and of itself, cause the undertakings herein to violate the Rule if such
amendment or waiver had been effective on the date hereof but taking into account any subsequent change in
or official interpretation of the Rule; provided neither the Issuer or the Disclosure Dissemination Agent shall
be obligated to agree to any amendment modifying their respective duties or obligations without their consent
thereto.
Notwithstanding the preceding paragraph, the Disclosure Dissemination Agent shall have the right to
adopt amendments to this Disclosure Agreement necessary to comply with modifications to and interpretations
of the provisions of the Rule as announced by the Securities and Exchange Commission from time to time by
giving not less than 20 days written notice of the intent to do so together with a copy of the proposed
amendment to the Issuer, No such amendment shall become effective if the Issuer shall, within 10 days
following the giving of such notice, send a notice to the Disclosure Dissemination Agent in writing that it
objects to such amendment.
SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the
Issuer. the Paying Agent of the Bonds, the Disclosure Dissemination Agent, the underwriter. and the Holders
from time to time of the Bonds, and shall create no rights in any other person or entity.
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DOC SOC/ 1294032 v 5 /0224 59 -0019
SECTION 14. Governing Law. This Disclosure Agreement shall be governed by the laws of the
State of Florida (other than with respect to conflicts of laws).
SECTION 15. Counternarts. This Disclosure Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and the same instrument.
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DOCSOC/ 1294032v5/022459 -0019
The Disclosure Dissemination Agent and the Issuer have caused this Continuing Disclosure
Agreement to be executed, on the date first written above, by their respective officer; duly authorized.
DIGITAL ASSURANCE CERTIFICATION, L.L.C.,
as Disclosure Dissemination Agent
0
Title:
CITY OF NEWPORT BEACH,
as Issuer
0
Title:
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DOC SOC/ 1294032v5/022459 -0019
Name of Issuer
Obligated Person(s)
Name of Bond Issue:
EXHIBIT A
NAME AND CUSIP NUMBERS OF BONDS
City of Newport Beach
Date of Issuance:
Date of Official Statement
CUSIP Number:
CUSIP Number:
CUSIP Number:
CUSIP Number:
CUSIP Number:
CUSIP Number:
CUSIP Number:
CUSIP Number:
CUSIP Number:
CUSIP Number:
CUSIP Number:
CUSIP Number:
DOC SOC /I 294032v 5/022459 -0019
$ City of Newport Beach Assessment District No. 101
Limited Obligation Improvement Bonds
.2008
2008
F -10
EXHIBIT B
NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT
Issuer: City of Newport Beach
Obligor:
Name of Bond Issue: $ City of Newport Beach Assessment District No. 101 Limited
Obligation Improvement Bonds
Date of Issuance: 12009
NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with respect to the
above named Bonds as required by the Disclosure Agreement, dated as of September 1, 2008 between the
Issuer and Digital Assurance Certification, L.L.C., as Disclosure Dissemination Agent. The Issuer has notified
the Disclosure Dissemination Agent that it anticipates that the Annual Report will be filed by
Dated:
Digital Assurance Certification, L.L.C., as Disclosure
Dissemination Agent, on behalf of the Issuer
cc: Issuer
Obligated Person
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DOC SOC/1294032v5/022459 -0019
EXHIBIT C
EVENT NOTICE COVER SHEET
This cover sheet and material event notice will be sent to all Nationally Recognized Municipal Securities Information
Repositories, and any State Information Depository, if applicable, pursuant to Securities and Exchange Commission Rule 15c2-
12(b)(5)(i)(C) and (D).
Issuer's and/or Other Obligated Person's Name:
Issuer's Six -Digit CUSIP Number:
m Nine -Digit CUSIP Number(s) of the bonds to which this material event notice relates:
Number of pages of attached:._,_,. _„
_
Description of Material Event Notice (Check One):
1 —...Principal and interest payment delinquencies
2. -Non-Payment related defaults
3. Unscheduled draws on debt service reserves reflecting financial difficulties
4. _Unscheduled draws on credit enhancements reflecting financial difficulties
5. Substitution of credit or liquidity providers, or then failure to perform
6. _.—Adverse tax opinions or events affecting the tax - exempt status of the security
7. .Modifications to rights of securities holders
8. Bond calls
9. - .- ....Deloasances
10. _Release, substitution, or sale of property securing repayment of the securities
11. _Rating changes
12. _Other material event notice (specify):
Failure to provide annual financial information as required
I hereby represent that I am authorized by the issuer m its agent to distribute this information publicly:
Signature:
Name: Title:
Employer: Digital Assurance Certification, L.L.C.
Address:
City, State, Zip Code:
Voice Telephone Number:
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DOCSOC/ 1294032 v5 /022459 -0019
APPENDIX G
FINAL ENGINEER'S REPORT
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DOCSOCi 1294032v5/022459 -0019
APPENDIX H
LIST OF UNPAID ASSESSMENTS AND MAP OF THE DISTRICT
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DOC SOC/ 1294032x5/022459 -0019
$
CITY OF NEWPORT BEACH
ASSESSMENT DISTRICT NO. 101
LIMITED OBLIGATION IMPROVEMENT BONDS
BOND PURCHASE CONTRACT
12008
City of Newport Beach
3300 Newport Blvd.
Newport Beach, California 92663
Ladies and Gentlemen:
The undersigned (the "Underwriter"), acting not as fiduciary or agent for you, but on behalf
of itself, offers to enter into this Purchase Contract with the City of Newport Beach (the "City") in
connection with Assessment District No. 101 (the "Assessment District') which, upon acceptance,
will be binding upon the City and upon the Underwriter. This offer is made subject to acceptance of
it by the City on the date hereof, and, if not accepted, will be subject to withdrawal by the
Underwriter upon notice delivered to the City, at any time prior to the acceptance hereof by the City.
1. Purchase. Sale and Delivery of the Bonds.
(a) Subject to the terms and conditions and in reliance upon the representations,
warranties and agreements set forth herein, the Underwriter agrees to purchase from the City, and
the City agrees to sell to the Underwriter, all (but not less than all) of $ aggregate
principal amount of the City of Newport Beach, Assessment District No. 101 Limited Obligation
Improvement Bonds (the "Bonds "), bearing interest (payable semiannually on March 2 and
September 2 in each year, commencing March 2, 2009) at the rates per annum and maturing on the
dates and in the amounts set forth in Appendix A attached hereto and incorporated herein. The
purchase price for the Bonds shall be $ (representing a price of par less an Underwriter's
discount of$ ).
The Bonds shall be substantially in the form described in, shall be issued and secured
under the provisions of, and shall be payable and subject to redemption as provided in, a Bond
Indenture by and between the City and U.S. Bank National Association, as paying agent, dated as of
2008 (the "Indenture ") approved by a resolution (the "Resolution "), adopted by the
City Council of the City sitting as the legislative body of the Assessment District (the "City
Council ") on . 2008. The Bonds shall be substantially in the form described in, shall be
issued and secured under the provisions of, and shall be payable and be subject to redemption as
provided in, the Indenture.
(b) Pursuant to the authorization of the City, the Underwriter has distributed
copies of the Preliminary Official Statement, dated . 2008, relating to the Bonds, which,
DOC SOC/ I294386v3/022459 -0019
together with the cover page and all appendices thereto, is herein called the "Preliminary Official
Statement" and which, as amended with the prior approval of the Underwriter and executed by the
City, will be referred to herein as the "Official Statement ". The City hereby ratifies the use by the
Underwriter of the Preliminary Official Statement and the Official Statement and authorizes the
Underwriter to use and distribute the Indenture, the Official Statement, the Continuing Disclosure
Agreement dated as of 2008, by and between the City and Digital Assurance
Certification, L.L.C. ( "DAC "), as dissemination agent (the "Continuing Disclosure Agreement ") and
other documents or contracts to which the City is a party, including this Purchase Contract, and all
information contained therein, and all other documents, certificates and statements furnished by the
Citv to the Underwriter in connection with the transactions contemplated by this Purchase Contract,
in connection with the offer and sale of the Bonds by the Underwriter.
(c) The Underwriter agrees to make a bona fide public offering of the Bonds at
the initial offering price set forth in the Official Statement; however, the Underwriter reserves the
right to make concessions to dealers and to change such initial offering price as the Underwriter shall
deem necessary in connection with the marketing of the Bonds. The Underwriter agrees that, in
connection with the public offering and initial delivery of the Bonds to the purchasers thereof from
the Underwriter, the Underwriter will deliver or cause to be delivered to each purchaser a copy of the
Official Statement prepared in connection with the Bonds. The Underwriter also agrees to notify the
City by phone or in writing of the "end of the underwriting period" as defined in Rude 15c2 -12
promulgated under the Securities Exchange Act of 1934 ( "Rule 15c2 -12 "). Terns defined in the
Official Statement are used herein as so defined.
(d) The City shall deliver, or cause to be delivered, to the Underwriter two (2)
executed copies of the final Official Statement prepared in connection with the Bonds, in such form
as shall be approved by the City and the Underwriter and such additional conformed copies thereof
as the Underwriter may reasonably request. The City deems the Preliminary Official Statement (the
"Preliminary Official Statement ") to be "final" as of its date for purposes of Rule 15c2 -12. By
acceptance of this Purchase Contract, the City hereby authorizes the use of copies of the Official
Statement in connection with the public offering and sale of the Bonds, and ratifies and approves the
distribution by the Underwriter of the Preliminary Official Statement.
(e) At approximately 8:00 a.m., Pacific Time, on 2008, or at such
earlier or later time or date, as shall be agreed upon by the City and the Underwriter (such time and
date herein referred to as the "Closing Date "), the City shall deliver to (i) the Depository Trust
Company in New York, New York (all Bonds being book -entry form registered in the name of
Cede & Co. and having the CUSIP numbers assigned to them printed thereon) duly executed by the
officers of the City as provided in the Indenture and with facsimile seals printed thereon, and (ii) to
the Underwriter at the offices of Robert E. Hessell, Esq., the other documents herein mentioned, and
the Underwriter shall accept such delivery and pay the purchase price of the Bonds in same day funds
(such delivery and payment being herein referred to as the "Closing'). The Bonds, as so registered,
shall be made available to the Underwriter for inspection not later than the first business day before
the Closing Date.
2. Representations. Warranties and Agreements of the City. The City represents,
warrants and covenants to and agrees with the Underwriter that:
(a) The City is duly organized and validly existing as a municipal corporation
under the laws of the State; and has, and at the Closing Date will have, as the case may be, full legal
DOC SOC/ 1294386v3/022459 -0019
right, power and authority (i) to execute, deliver and perform its obligations under this Purchase
Contract, the Indenture, the Resolution and the Continuing Disclosure Agreement (collectively, the
"City Documents") and to carry out all transactions contemplated by each of the City Documents,
(ii) to adopt the Resolution approving the Indenture and enter into the other authorizing documents,
(iii) to issue, sell and deliver the Bonds to the Underwriter pursuant to the Indenture as provided
herein, and (iv) to carry out, give effect to and consummate the transactions contemplated by the
Official Statement and the City Documents;
(b) The City Council has duly and validly (i) taken or caused to be taken, all
proceedings necessary under the Constitution and the laws of the State of California in order to form
the Assessment District and to confirm assessments (the "Assessments ") on the parcels located
within the Assessment District in the respective amounts shown in the report of the Assessment
Engineer approved by the City Council on , 2008 (the "Engineer's Report"), to cause
each of the Assessments to be a valid lien upon the parcel upon which it was confirmed and to
authorize the sale and issuance of the Bonds, (ii) authorized and approved the execution and delivery
of the City Documents and the Bonds, (iii) authorized the preparation and delivery of the Official
Statement and (iv) approved the performance by the City of its obligations contained in, and the
taking of any and all action as may be necessary to carry out, give effect to and consummate the
transactions contemplated by each of the City Documents (including, without limitation, the
collection of the Assessments and the Assessment District has been validly formed, the Assessments
have been validly confirmed and constitute liens on the respective parcels within the Assessment
District, and (assuming due authorization, execution and delivery by other parties thereto, where
necessary) the City Documents and the Bonds will constitute the valid, legal and binding obligations
of the City and will be enforceable in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights
in general and to the application of equitable principles if equitable remedies are sought;
(c) The City is not in breach of or default under any applicable law or
administrative rule or regulation of the State, the United States of America, or of any department,
division, agency or instrumentality thereof, or under any applicable court or administrative decree or
order, or under any loan agreement, note, resolution, indenture, contract, agreement or other
instrument to which the City is a party or is otherwise subject or bound, a consequence of which
could be to materially and adversely affect the performance by the City of its obligations under the
Bonds or the City Documents, and compliance with the provisions of each thereof, will not conflict
with or constitute a breach of or default under any applicable law or administrative rule or regulation
of the State, the United States of America, or of any department, division, agency or instrumentality
thereof, or under any applicable court or administrative decree or order, or under any loan agreement,
note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is
otherwise subject or bound;
(d) Except as may be required under the "blue sky" or other securities laws of
any jurisdiction, all approvals, consents, authorizations, elections and orders of or filings or
registrations with any State governmental authority, board, agency or commission having jurisdiction
which would constitute a condition precedent to, or the absence of which would materially adversely
affect, the performance by the City of its obligations hereunder, or under the City Documents or the
Bonds have been obtained and are in full force and effect;
DOCSOC/ 1294396v31022459 -0019
(e) Except as disclosed in the Official Statement, there are, to the best knowledge
of the City, no outstanding assessment liens against any of the properties within the City which are
senior to or on a parity with the Assessments;
(f) Each of the Assessments has been duly and lawfully confirmed, may be
collected in installments under the laws of the State, and constitutes a valid and legally binding lien
on the property on which it has been confirmed;
(g) As of the date thereof, to the best knowledge of the City, the Preliminary
Official Statement did not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The information contained in the
Official Statement is, as of the date hereof and will be, as of the Closing Date and as of the date of
any supplement or amendment thereto pursuant to paragraph (i) below, true, correct and complete in
all material respects and does not, as of the date hereof and will not, as of the Closing Date or as of
the date of any supplement or amendment thereto pursuant to paragraph (i) below, contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they were made, not
misleading;
(h) Until the date which is twenty -five (25) days after the "end of the
underwriting period" (as hereinafter defined) if any event shall occur of which the City becomes
aware as a result of which it may be necessary to supplement the Official Statement in order to make
the statements therein, in light of the circumstances existing at such time, not misleading, the City
shall forthwith notify the Underwriter of any such event, and shall cooperate fully in furnishing any
information available to it for any supplement to the Official Statement necessary so that the
statements therein as so amended or supplemented will not be misleading in light of the
circumstances existing at such time; and the City shall promptly fumish to the Underwriter a
reasonable number of copies of such supplement (as used herein, the term "end of the underwriting
period" means the later of such time as (i) the City delivers the Bonds to the Underwriter, or (ii) the
Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance
of the Bonds for sale to the public);
(i) The Indenture creates a valid pledge of the Assessments and the moneys in
the Redemption Fund, the Improvement Fund and the Reserve Fund established pursuant to the
Indenture, including the investments thereof, subject in all cases to the provisions of the Indenture
permitting the application thereof for the purposes and on the terms and conditions set forth therein;
and said pledge constitutes a first lien on and security interest in all of the foregoing;
0) Except as disclosed in the Official Statement, 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, to the knowledge of the City, threatened against the City (1) which would
materially adversely affect the ability of the City to perform its obligations under the City Documents
or the Bonds, or (ii) seeking to restrain or to enjoin: (A) the development of any of the land within
the Assessment District, (B) the issuance, sale or delivery of the Bonds, (C) the application of the
proceeds thereof in accordance with the Indenture, or (D) the collection or application of the
Assessments, or the pledge thereof, or in any way contesting or affecting the validity or
enforceability of the Bonds, the City Documents, any tentative or fmal subdivision map or building
permits applicable to property within the Assessment District, any other instruments relating to the
DOC SOC/ 1294386v3/022459 -0019
development of any of the property within the Assessment District, or any action contemplated by
any of said documents, or (iii) in any way contesting the completeness or accuracy of the Preliminary
Official Statement, or the Official Statement or the powers or authority of the City with respect to the
Bonds, the City Documents, or any action of the City contemplated by any of said documents; nor is
there any action pending or, to the knowledge of the City, threatened against the City which alleges
that interest on the Bonds is not excludable from gross income for federal income tax purposes or is
not exempt from California personal income taxation;
(k) The City will famish such information, execute such instruments and take
such other action in cooperation with the Underwriter as the Underwriter may reasonably request in
order for the Underwriter 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; provided, however, the City shall not be required to register as a dealer
or a broker of securities or to consent to service of process in connection with any blue sky filing;
(1) Any certificate signed by any authorized official of the City authorized to do
so shall be deemed a representation and warranty to the Underwriter as to the statements made
therein;
(m) The City will apply the proceeds of the Bonds in accordance with the
Indenture and as described in the Official Statement;
(n) Based upon projections which the City believes are reasonable, the
Assessments supporting the Bonds when levied and collected by the City in accordance with the
terms of the Assessments formula, assuming normal and reasonable delinquency rates, will provide a
yearly cash flow at least sufficient to make timely payment of principal and interest on the Bonds;
(o) The City is not aware of any toxic waste conditions or adverse soils condition
which would impair development within the Assessment District;
(p) The City will undertake, pursuant to a continuing disclosure agreement dated
2008 (the "Continuing Disclosure Agreement "), by and among the City and DAC as
dissemination agent thereunder, to provide annual reports, the City Annual Report and notice of
certain events;
(q) The Official Statement (except the portions thereof entitled "CONCLUDING
INFORMATION — Legal Opinion" and "— Tax Matters," and "APPENDIX E — INFORMATION
CONCERNING THE DEPOSITORY TRUST COMPANY ", as to which no view need be expressed)
is, as of the date thereof, and will be, as of the Closing Date, true, correct and complete in all material
respects; and the Official Statement (except the portions thereof mentioned above, as to which no
view need be expressed), does not, as of the date thereof, and will not, as of the Closing Date, contain
any untrue statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading; and
(r) The Preliminary Official Statement heretofore delivered to the Underwriter
has been deemed final by the City as of its date, except for the omission of such information as is
permitted to be omitted in accordance with paragraph (b)(1) of Rule 15c2 12. The City hereby
covenants and agrees that, within seven (7) business days from the date hereof, or (upon reasonable
5
DOC SOC/ 1294386.3/022459 -0019
written notice from the Underwriter) within sufficient time to accompany any confirmation
requesting payment from any customers of the Underwriter, the City shall cause a final printed form
of the Official Statement to be delivered to the Underwriter in a quantity mutually agreed upon by the
Underwriter and the City so that the Underwriter may comply with paragraph (b)(4) of Rule 15c2 12
and Rules G 12, G 15, G 32 and G 36 of the Municipal Securities Rulemaking Board.
3. Conditions to -the Obligations of the Underwriter. The obligations of the Underwriter
to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the
Underwriter, to the accuracy in all material respects of the representations and agreements on the part
of the City contained herein, as of the date hereof and as of the Closing Date, to the accuracy in all
material respects of the statements of the officers and other officials of the City made in any
certificates or other documents furnished pursuant to the provisions hereof, to the performance by the
City of its obligations to be performed hereunder at or prior to the Closing Date and to the following
additional conditions:
(a) At the Closing Date, the City Documents, the Resolution of Formation and
any other applicable agreements shall be in full force and effect, and shall not have been amended,
modified or supplemented, except as may have been agreed to in writing by the Underwriter, and
there shall have been taken in connection therewith, with the issuance of the Bonds and with the
transactions contemplated thereby and by this Purchase Contract, all such actions as, in the opinion
of Robert E. Hessell, Esq., Bond Counsel for the City, shall be necessary and appropriate;
(b) Between the date hereof and the Closing Date, the market price or
marketability of the Bonds at the initial offering prices set forth in the Official Statement shall not
have been materially adversely affected, in the judgment of the Underwriter (evidenced by a written
notice to the City terminating the obligation of the Underwriter to accept delivery of and pay for the
Bonds), by reason of any of the following:
(1) legislation introduced in or enacted (or resolution passed) by the
Congress of the United States of America or recommended to the Congress by the President of the
United States, the Department of the Treasury, the Internal Revenue Service, or any member of
Congress, or favorably reported for passage to either House of Congress by any committee of such
House to which such legislation had been referred for consideration or a decision rendered by a court
established under Article III of the Constitution of the United States of America or by the Tax Court
of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press
release or other form of notice issued or made by or on behalf of the Treasury Department or the
Internal Revenue Service of the United States of America, with the purpose or effect, directly or
indirectly, of imposing federal income taxation upon the interest as would be received by the owners
of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof;
(2) legislation introduced in or enacted (or resolution passed) by the
Congress of the United States of America, or an order, decree or injunction issued by any court of
competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or
other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or
any other governmental agency having jurisdiction of the subject matter, to the effect that obligations
of the general character of the Bonds; or the Bonds, including any or all underlying arrangements, are
not exempt from registration under or other requirements of the Securities Act of 1933, as amended,
or that the Indenture is not exempt from qualification under or other requirements of the Trust
Indenture Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general
DOC SOCi 1294396v3/022459 -0019
character of the Bonds, or of the Bonds, including any or all underwriting arrangements, as
contemplated hereby or by the Official Statement or otherwise is or would be in violation of the
federal securities laws, rules or regulations as amended and then in effect;
(3) any amendment to the federal or State Constitution or action by any
federal or State court, legislative body, regulatory body or other authority materially adversely
affecting the tax status of the City, its property, income, securities (or interest thereon), the validity or
enforceability of the Assessments or the ability of the City to construct or acquire the improvements
as contemplated by the City Documents, the Resolution of Formation and the Official Statement; or
(4) any event occurring, or information becoming known, which, in the
judgment of the Underwriter, makes untrue in any material respect any statement or information
contained in the Official Statement, or results in the Official Statement containing any untrue
statement of a material fact or omitting to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading.
(c) On the Closing Date, the Underwriter shall have received counterpart
originals or certified copies of the following documents, in each case satisfactory in form and
substance to the Underwriter:
(1) The City Documents and the Resolution of Formation together with a
certificate dated as of the Closing Date of the City Clerk of the City, as applicable, to the effect that
each such document is a true, correct and complete copy of the one duly adopted by the City Council
and that it has not been amended, modified or rescinded since its adoption (except as may have been
agreed to by the Underwriter) and is in full force and effect as of the Closing Date;
(2) The Official Statement duly executed;
(3) An unqualified approving opinion, dated the Closing Date and
addressed to the City, of Robert E. Hessell, Esq., Bond Counsel for the City, in customary form for
such transactions, to the effect that the Bonds are legal, valid and binding obligations of the City, the
City has the full right, power and authority to levy and pledge the Assessments to the payment of the
Bonds, interest on the Bonds is excluded from gross income for federal income tax purposes, is not
an item of tax preference for purposes of the federal alternative minimum tax, and is exempt from
State personal income taxation, and an unqualified opinion of such counsel, dated the Closing Date
and addressed to the Underwriter, to the effect that such opinion addressed to the City may be relied
upon by the Underwriter to the same extent as if such opinion were addressed to it;
(4) A supplemental opinion, dated the Closing Date and addressed to the
Underwriter, of Robert E. Hessell, Esq., Bond Counsel for the City, to the effect that (i) the
Resolution of Formation has been duly adopted by the City Council and this Purchase Contract and
the Indenture have been duly authorized, executed and delivered by, and, assuming due
authorization, execution and delivery by the other parties thereto, constitute legal, valid and binding
agreements of the City enforceable in accordance with their terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the enforcement of creditors rights in general
and to the application of equitable principles if equitable remedies are sought; (ii) the Bonds are not
subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture
is exempt from qualification under the Trust Indenture Act of 1939, as amended; (iii) the information
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DOC SOC/ 1294386v3/022459 -0019
contained in the Official Statement under the headings "INTRODUCTION," "THE BONDS,"
"SECURITY FOR THE BONDS," "TILE DISTRICT," "CONCLUDING INFORMATION — Legal
Opinion," and "— Tax Matters," is accurate insofar as it purports to summarize certain provisions of
the Act, the Bonds, the Indenture, the Resolution and the statements contained under such captions in
the Preliminary Official Statement and the Official Statement, as of their respective dates, and in the
case of the Official Statement as of the Closing Date, contained no untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were,made, not misleading in any
material respect; (iv) the Bonds are secured by Assessments to be levied for the payment of principal
of, premium, if any, and interest on the Bonds; (v) principal of, premium, if any, and interest on, the
Bonds are payable out of the Redemption Fund; (vi) installments of Assessments are to be collected
on the tax roll on which general taxes on real property are collected; (vii) the Assessments have been
duly and validly authorized in accordance with the provisions of the Act and, when levied, the
Assessments will be valid and binding obligations of the affected property owners enforceable by the
City in accordance with the provisions of the Indenture and the Act; (viii) the legislative body of the
City has a valid and binding obligation to annually fix and levy that amount of Assessments required
for the payment of principal and interest on the Bonds for the ensuing year, including any necessary
replenishment of the Reserve Account; and (ix) based upon the information provided to such counsel
in the course of their participation in the preparation of the Official Statement and (except as
provided in (iii) above) without having undertaken to determine independently the accuracy or
completeness of the statements contained in the Official Statement, such counsel has no reason to
believe that the Official Statement (except for the financial and statistical data included therein and
assumptions with respect thereto, as to which no view need be expressed) as of the date of the
Official Statement omitted, or as of the Closing Date omits, to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(5) An opinion, dated the Closing Date and addressed to the City and the
Underwriter, of Stradling Yocca Carlson & Rauth, Disclosure Counsel, to the effect that, without
having undertaken to determine independently the accuracy or completeness of the statements
contained in the Official Statement, but on the basis of their participation in conferences with
representatives of the City, Bond Counsel, representatives of the Underwriter and others, and their
examination of certain documents, nothing has come to their attention which would lead them to
believe that the Official Statement as of its date and as of the Closing Date contained any untrue
statement of a material fact or omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading (except that no
opinion or belief need be expressed as to the Appendices of the Official Statement or any other
financial or statistical data, any forecasts, any assumptions or any expressions of opinion contained in
the Official Statement);
(6) A Certificate, dated the Closing Date and signed by an authorized
representative of the City, ratifying the use and distribution by the Underwriter of the Preliminary
Official Statement and the Official Statement in connection with the offering and sale of the Bonds;
and certifying that (i) the representations and warranties of the City contained in Section 2 hereof are
true and correct in all material respects on and as of the Closing Date with the same effect as if made
on the Closing Date; (ii) to the best of his or her knowledge, no event has occurred since the date of
the Official Statement affecting the matters contained therein which should be disclosed in the
Official Statement for the purposes for which it is to be used in order to make the statements and
information contained in the Official Statement not misleading in any material respect and the Bonds
DOC SOC.' 1294386v3./022459 -0019
and the City Documents conform as to form and tenor to the descriptions thereof contained in the
Official Statement and (iii) the City has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied under the City Documents and the Official
Statement at or prior to the Closing Date;
(7) An opinion, dated the Closing Date and addressed to the Underwriter,
of counsel to the City, to the effect that (i) to the best of his or her knowledge, except as described in
the Official Statement, 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
affecting the existence of the City or the titles of its officers to their respective offices, or seeking to
restrain or to enjoin the development of property within the City, the issuance, sale or delivery of the
Bonds or the exclusion from gross income for federal income tax purposes or State personal income
taxes of interest on the Bonds, or the application of the proceeds thereof in accordance with the
Indenture, or the collection or application of the Assessments to pay the principal of and interest on
the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the
Indenture, the Resolution of Formation, this Bond Purchase Contract or any action of the City or the
City contemplated by any of said documents; (ii) the City is duly organized and validly existing
under the laws of the State, with, as the case may be, full legal right, power and authority to issue the
Bonds and to perform all of their obligations under this Purchase Contract, the Bonds and the
Indenture; (iii) to the best of his or her knowledge after due inquiry, the City has obtained all
approvals, consents, authorizations, elections and orders of or filings or registrations with any State
governmental authority, board, agency or commission having jurisdiction which constitute a
condition precedent to the levy of the Assessments, the issuance of the Bonds or the performance by
the City of its obligations thereunder or under the Indenture, except that no opinion is expressed
regarding compliance with "blue sky" or other securities laws or regulations, whatsoever; (iv) the
City Council has duly and validly adopted the resolutions and the Resolution of Formation at
meetings of the City Council which were called and held pursuant to law and with all public notice
required by law, and the resolution and the Resolution of Formation are now in full force and effect
and have not been amended; and (v) the City has duly authorized, executed and delivered this
Purchase Contract, the Indenture, and the Bonds and has duly authorized the preparation and delivery
of the Official Statement, and this Purchase Contract, the Bonds, and the Indenture constitute legal,
valid and binding agreements of the City, enforceable in accordance with their respective terms,
subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
enforcement of creditors' rights in general and to the application of equitable principles if equitable
remedies are sought;
(8) One counterpart original or copy certified by the Clerk of the City of
a transcript of all proceedings relating to the authorization, issuance, sale and delivery of the Bonds;
(9) The Certificate of the Paying Agent, dated the Closing Date, to the
effect that (i) the Paying Agent is duly organized and existing as a state banking corporation under
the laws of the State having the full power and authority to perform its duties under the Indenture;
(ii) the Paying Agent is duly authorized to accept the obligations created by the Indenture and to
authenticate the Bonds pursuant to the terms of the Indenture; (iii) no consent, approval,
authorization or other action by any governmental or regulatory authority having jurisdiction over the
Paying Agent that has not been obtained is or will be required for the authentication of the Bonds or
the consummation by the Paving Agent of the other transactions contemplated to be performed by the
Paying Agent in connection with the authentication of the Bonds and the acceptance and
performance of the obligations created by the Indenture; and (iv) compliance with the terms of the
DOC SOC/ 1294386v3/022459 -0019
Indenture will not conflict with, or result in a violation or breach of, or constitute a default under, any
loan agreement, indenture, bond, note, resolution or any other agreement or instrument to which the
Paying Agent is a parry or by which it is bound, or any law or any rile, regulation, order or decree of
any court or governmental agency or body having jurisdiction over the Paying Agent or any of its
activities or properties; and
(10) An opinion, dated the Closing Date and addressed to the Underwriter
and the City, of counsel to the Paying Agent in form and substance acceptable to the Underwriter;
(11) The Continuing Disclosure Agreement;
(12) A certificate of MuniFinancial/Willdan dated the Closing Date, to the
effect that the statements contained in the Official Statement relating to the size and location of the
Assessment District, the amounts of the Assessments and the Engineer's Report and all other
information famished by it therein do not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
(13) A certificate of the City dated the Closing Date, in a form acceptable
to Bond Counsel, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the
Internal Revenue Code of 1986, as amended;
(14) Evidence satisfactory to the Underwriter that, other than as disclosed
in the Official Statement, there are no ad valorem taxes, special taxes or assessments applicable to
the property within the Assessment District that are delinquent; and
(15) 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 Closing Date, of the statements and information contained in the
Preliminary Official Statement and the Official Statement, of the City's representations and
warranties contained herein, and the due performance or satisfaction by the City at or prior to the
Closing of all agreements then to be performed and all conditions then to be satisfied by the City in
connection with the transactions contemplated hereby and by the Official Statement.
If the City shall be unable to satisfy the conditions to the obligations of the Underwriter to
purchase, accept delivery of and pay for the Bonds contained in this Purchase Contract, or if the
obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be
terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate
and neither the Underwriter nor the City shall be under any further obligation hereunder, except that
the respective obligations of the City and the Underwriter set forth in Section 4 and Section 5 hereof
shall continue in full force and effect.
4. Conditions of the City's Obligations. The City's obligations hereunder are subject to
the Underwriter' performance of their obligations hereunder, and are also subject to the following
conditions:
(a) As of the Closing Date, no litigation shall be pending or, to the knowledge of
the duly authorized officer of the City executing the certificate referred to in Section 3 hereof,
threatened, to restrain or enjoin the issuance or sale of the Bonds or in any way affecting any
10
DOC SOC/ 1294386v3/022459 -0019
authority for or the validity of the Bonds or the City Documents or the existence or powers of the
City; and
(b) As of the Closing Date, the City shall receive the approving opinions of Bond
Counsel and Underwriter's Counsel referred to in Section 3 hereof, dated as of the Closing Date.
Expenses.
Whether or not the Bonds are delivered to the Underwriter set forth herein:
(a) The Underwriter shall be under no obligation to pay, and the City shall pay or
cause to be paid (out of any legally available funds of the City) all expenses incident to the
performance of the City's obligations hereunder, including, but not limited to, the cost of printing
and delivering the Bonds to DTC, the cost of printing, distribution and delivery of the Indenture, the
Preliminary Official Statement, the Official Statement and all other agreements and documents
contemplated hereby (and drafts of any thereof) in such reasonable quantities as requested by the
Underwriter; the cost of the overlapping debt statement and the fees and disbursements of the Paying
Agent for the Bonds, Disclosure Counsel and the Bond Counsel and any accountants, engineers or
any other experts or consultants the City have retained in connection with the Bonds; and
(b) The City shall be under no obligation to pay, and the Underwriter shall pay,
CUSIP Bureau and CDIAC fees; the cost of preparation of any "blue sky" or legal investment
memoranda; expenses to qualify the Bonds for sale under any "blue sky" or other state securities
laws; and all other expenses incurred by the Underwriter in connection with its public offering and
distribution of the Bonds (except those specifically enumerated in paragraph (a) of this section),
including the fees and disbursements of its counsel any advertising expenses.
6. Notices. Any notice or other communication to be given to the City under this
Purchase Contract may be given by delivering the same in writing to the City of Newport Beach,
3300 Newport Blvd., Newport Beach, California 92663; any notice or other communication to be
given to the Underwriter under this Purchase Contract may be given by delivering the same in
writing to M.L. Stem & Co. LLC, 8350 Wilshire Blvd., Beverly Hills, California 90211, Attention:
Miles L. Benickes, Executive Vice President.
7. Parties in Interest. This Purchase Contract is made solely for the benefit of the City
and the Underwriter (including their successors or assigns), and no other person shall acquire or have
any right hereunder or by virtue hereof.
8. Survival of Representations, Warranties and Agreements. The representations,
warranties and agreements of the City set forth in or made pursuant to this Purchase Contract shall
not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing
or termination of this Purchase Contract and regardless of any investigations made by or on behalf of
the Underwriter (or statements as to the results of such investigations) concerning such
representations and statements of the City and regardless of delivery of and payment for the Bonds.
9. Effective, This Purchase Contract shall become effective and binding upon the
respective parties hereto upon the execution of the acceptance hereof by the City and shall be valid
and enforceable as of the time of such acceptance. This Purchase Contract may be signed in
counterparts by each party.
DOC SOC/ 12943 86x3/022459 -0019
10. No Prior AMements. This Purchase Contract supersedes and replaces all prior
negotiations, agreements and understandings between the parties hereto in relation to the sale of
Bonds for the City.
11. Govemine Law. This Purchase Contract shall be governed by the laws of the State of
California.
12. CounWERarts. This Purchase Contract may be executed simultaneously in several
counterparts, each of which shall be an original and all of which shall constitute one and the same
instrument.
Very truly yours,
M.L. STERN & Co.. LLC
By:
Executive Vice President
ACCEPTED.
CITY OF NEWPORT BEACH
City Manager of the City of Newport Beach
12
DOC SOC/ 1294396v3/022459 -0019
APPENDIX A
MATURITY SCHEDULE
CITY OF NEWPORT BEACH
ASSESSMENT DISTRICT NO. 101
LIMITED OBLIGATION IMPROVEMENT BONDS
Maturity Date
(September 2) Principal Interest Rate
A -1
DOC SOC/ 1294386c3 %022459 -0019
Yield Price