sr-112409-8b~® City Council
~~~YOf Public Financing Authority
Santa Monica
Report
City Council Meeting: November 24, 2009
Agenda Item: ~(3
To: Mayor and City Council
Public Financing Authority
From: Carol Swindell, Director of Finance
Subject: Issuance of Lease Revenue Refunding Bonds, Series 2009 (Public Safety
Facility Project)
Recommended Actions
Staff recommends that the City Council and Public Financing Authority: 1) adopt the
attached Resolutions approving related documents .authorizing the refunding of the
Santa Monica Public Financing Authority Lease Revenue Bonds, Series 1999 (Public
Safety Project) (the "Series 1999 Bonds"); and, 2) appropriate funds and adopt budget
changes set forth below.
Executive Summary
Issuance of lease revenue bonds to refund lease revenue bonds originally issued in
1999 will take advantage of a reduction in interest rates since the sale of the Series
1999 Bonds were issued and will result in savings estimated at a net present value of
$620,000 in lease payments. The Public Financing Authority Lease Revenue
Refunding Bonds, Series. 2009 (Public Safety Facility Project) will refund the Series
1999 Bonds.
Background
In September 1999 the Public Financing Authority issued the Series 1999 Bonds in the
amount of $13,200,000 to provide a portion of the funds necessary to finance
construction of the Public Safety Facility. At the present time $9,385,000 in Series 1999
Bonds remain outstanding with interest rates ranging from 5.00% to 5.50°/0. The final
maturity date of the 1999 bonds is July 1, 2021. The Series 1999 Bonds can be
redeemed by the Authority on any interest payment date.
The City has the opportunity to issue refunding bonds with lower interest rates to
refinance the Series 1999 Bonds and reduce future lease payments. The next date that
the Series 1999 Bonds can be redeemed is January 1, 2010. If redeemed on January
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1, 2010, the Authority must also pay a redemption premium of 1.0%. Issuance of the
Series 2009 Refunding Bonds in December 2009 will permit the Authority to redeem the
Series 1999 Bonds on January 1, 2010 and pay the redemption premium. This type of
refinancing is known as a current refunding because the new bonds are issued within
90 days of redemption of the old bonds
The yields on the new Series 2009 Refunding Bonds are expected to range from 0.50%
to 4.00% based on current tax-exempt interest rate levels. The final maturity date on
the Series 2009 Refunding Bonds will be July 1, 2021, the same final maturity date as
the Series 1999 Bonds. The reduction in interest cost is expected to save
approximately $80,000 in annual lease payments paid by the General Fund with a net
present value of approximately $620,000 or about 6.6% of the par amount of bonds to
be refunded. The actual savings achieved through the refunding will depend on interest
rates at the time the Series 2009 Refunding Bonds are sold.
The City has previously sold its bonds through a competitive bid process where the
bond offering is advertised and bids for the bonds are taken on a specific date and time
and awarded to the bidder offering the lowest cost. In order to provide the City with
greater flexibility in determining the date of sale of the Series 2009 Refunding Bonds,
staff is proposing to sell the Series 2009 Refunding Bonds through a negotiated sale
whereby the bond underwriter is predetermined and the interest cost of the bonds is set
through a process of negotiation. The City's financial advisor will assist staff in
determining that the interest cost on the bonds is a fair market value. The City's
financial advisor believes that at the present time, due to the relatively small size of the
Series 2009 Refunding Bond issue and the absence of a competitive bond insurance
industry, that a negotiated sale has the best chance of providing the lowest borrowing
cost to the City for the Series 2009 Refunding Bonds.
In order to select the underwriter, the City's financial advisor distributed a Request for
Qualifications to ten commercial and investment banking institutions active in the
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California tax-exempt bond market. Four firms responded to the RFQ. The
recommended firm bid the lowest compensation and has the most relevant experience
in similar financings of the firms responding to the RFQ.
Discussion
The attached Resolutions will allow the City and the Public Financing Authority ("PFA")
to proceed with all steps necessary for issuance of the Series 2009 Refunding Bonds.
The Resolutions authorize the issuance of a maximum principal amount of bonds of
$10.0 million with a final maturity date of July 1, 2021, and a maximum true interest cost
of 4.25%. The Resolutions also provide approvals of all steps necessary to complete
the financing, including the approval of all necessary documents and certificates and
related actions.
Attached to this staff report are copies of the following documents necessary to the
issuance of the Bonds:
• A Second Supplemental Indenture by and among the PFA,. the City and Bank of
New York/Mellon, as Trustee. The Indenture is the contract with the bondholders
and contains the terms of the Bonds, the duties of the Trustee and the covenants
and agreements of the PFA and City with respect to the Bonds. (Attachment A)
• A Second Amendment to Lease Agreement by and between the PFA, as lessor,
and the City, as lessee, whereby the PFA leases the site and the Project to the
City. (Attachment B)
• A Second Amendment to Assignment Agreement by and between the PFA and
the Trustee, whereby the rental payments are assigned to the Trustee for the
benefit of the bondholders. (Attachment C)
• A Continuing Disclosure Certificate, wherein the City agrees to provide certain
information annually to designated national bond information depositories.
(Attachment D)
• A Preliminary Official Statement to be used in connection with the offering and
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sale of the Bonds. (Attachment E)
• A Bond Purchase Agreement between the PFA and the bond underwriter
wherein the underwriter agrees to purchase the bonds from the PFA (Attachment
F)
The attached resolutions approve these documents and authorize their execution and
delivery by the specified agency's officials and employees. These resolutions also
approve the preparation, execution and delivery of a Final Official Statement, the
execution and delivery of any additional documents and the performance of such acts
and as may be necessary or desirable to effect the offering, sale and issuance of the
Series 2009 Refunding Bonds.
Financial Impacts & Budget Actions
The Public Financing Authority will issue up to $10 million in tax-exempt lease revenue
bonds. At current interest rates it is anticipated that the principal amount of the Bonds
will be approximately $9.6 million. The estimated annual debt service on the Bonds is
approximately $970,000 which will be paid from base rental payments received from the
City pursuant to the Lease Agreement. The City will make the annual base rental
payments from generally available revenues in the City's General Fund, or other
available revenues.
It is necessary to establish revenue budgets for the proceeds from the issuance of the
refunding bonds and expenditure budgets for the defeasance of the 1999 bonds and
payment of issuance costs. Revenue and appropriation budget actions necessary at
this time to record the sale of the Refunding Bonds and defeasance of the 1999 bonds
follow:
Other Financing Sources (proceeds from the sale of the Refunding bonds, net of
any original issue discount):
Account No. 01990.601001 $10,000,000
4
Other Financing Uses (redemption of 1999 Bonds):
Account No. 01990.601003
$10, 000, 000
Bond Issue Costs (costs of issuance, underwriter's discount and bond
insurance):
Account 01274.555980
$250,000
The estimated annual debt service on the Refunding Bonds will be paid from base
rental payments received from the City. Budgets will be reduced by $100,000 a year.
Prepared By: Carol Swindell, Director of Finance
Approved:
Director of Finance
Forwarded to Council:
Attachments:
A: Second Supplemental Indenture
B: Second Amendment to Lease Agreement
C: Second Amendment to Assignment Agreement
D: Continuing Disclosure Certificate
E: Preliminary Official Statement
F: Bond Purchase Agreement
G1: Resolution Authorizing Issuance of Refunding Bonds -Council Series
G2: Resolution Authorizing Issuance of Refunding Bonds - Public
Authority Series
H: Escrow Agreement
Financing
5
ATTACI-IMENT A
SECOND SUPPLEMENTAL
INDENTURE
by and among
SANTA MONICA
.PUBLIC FINANCING AUTHORITY
and
CITY OF SANTA MONICA
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
Dated as of December 1, 2009
Relating to
S[Bond Amount]
Santa Monica Public Financing Authority
Lease Revenue Refunding Bonds, Series 2009 A
(Public Safety Facility Project)
DOCSOC/1369325v3/200ll 9-0002
TABLE OF CONTENTS
Page
PART 1 PARTICULAR AMENDMENTS ......................................................................................:....2
Part 1.1
PART 2 ADDITION OF ARTICLE XIII
Part 2.1 .........
ARTICLE XIII
SERIES 2009
3
Section 13.01. Definitions ....................................................................................... .................3
Section 13.02. Certain References to Bonds ........................................................... .................3
Section 13.03. Issuance of Series 2009 Bonds ........................................................ .................3
Section 13.04. Terms of Series 2009 Bonds; Interest Computation ....................... .................4
Section 13.05. Form of Series 2009 Bonds ............................................................. .................5
Section 13.06. Deposit of Proceeds of Series 2009 Bonds ..................................... .................5
Section 13.07. Redemption of Series 2009 Bonds .................................................. .................5
Section 13.08. Section 12.08 ................................................................................... .................5
Section 13.09. Section 12.09 ................................................................................... .................6
Section 13.10. Section 12.10 ................................................................................... .................6
PART 3 MISCELLANEOUS
Part 3.1 ....................................................
Part 3.2 ...................................................•
Part 3.3 ....................................................
7
7
7
7
EXFIIBIT B FORM OF SERIES 2009 Bond .........................................................:...........................B-1
i
DOCSOC/1369325v3/ZOOll9-0002
SECOND SUPPLEMENTAL INDENTURE
THIS SECOND SUPPLEMENTAL INDENTURE (this "Second Supplemental
Indenture"), is made and entered into as of December 1, 2009, by and among the SANTA MONICA
PUBLIC FINANCING AUTHORITY, a joint exercise of powers entity organized and existing under
and by virtue of the laws of the State of California (the "Authority"), the CITY OF SANTA
MONICA, a municipal corporation and charter city duly organized and existing under and by virtue
of the Constitution and laws of the State of California and its Charter (the "City"), and THE BANK
OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association duly
organized and existing under and by virtue of the laws of the State of California (the "Trustee").
WITNESSETH:
WHEREAS, the City previously financed a portion of the costs of the acquisition,
construction and installation of certain capital improvements constituting a public safety facility and
related improvements, facilities and equipment (the "Project");
WHEREAS, in order to accomplish such financing, the City leased certain real property on
which the Project has been constructed (the "Site") to the Authority pursuant to a Ground Lease,
dated as of September 1, 1999, and the City subleased the Site and the Project (collectively, the
"Property") back from the Authority pursuant to a Lease Agreement, dated as of September 1, 1999
(the "Original Lease Agreement");
WHEREAS, the City and the Authority determined that it would be in the best interests of
the City and the Authority to provide the funds necessary to finance the acquisition, construction and
installation of the Project through the issuance by the Authority of bonds (the "Series 1999 Bonds")
payable from the base rental payments (the "Base Rental Payments") to be made by the City under
the Original Lease Agreement;
WHEREAS, all rights to receive such Base Rental Payments were assigned without recourse
by the Authority to the Trustee pursuant to an Assignment Agreement, dated as of September 1, 1999
(the "Original Assignment Agreement");
WHEREAS, in consideration of such assignment and the execution of the Indenture, dated
as of September 1, 1999 (the "Original Indenture"), by and among the Trustee, the Authority and the
City, the Authority issued the Series 1999 Bonds (capitalized undefined terms used in these recitals
shall have the meanings ascribed thereto in the Original Indenture, as defined hereto);
WHEREAS, the Original Indenture provides that, subject to the conditions set forth therein,
in addition to the Series 1999 Bonds, the City, the Authority and the Trustee may by execution of a
supplemental Indenture without the consent of the Owners, provide for the issuance of Additional
Bonds, payable from additional Base Rental Payments;
WHEREAS, the Original Lease Agreement provides that the Original Lease Agreement and
the rights and obligations of the Authority and the City thereunder may be amended or supplemented
at any time by an amendment thereof or supplement thereto which shall become binding upon
execution by the Authority and the City, without the written consents of any Owners, in order to
provide for the issuance of Additional Bonds in accordance with the provisions of the Original
Indenture;
DOCSOC/1369325v3/200119-0002
WHEREAS, in 2002 the Authority issued its Santa Monica Public Financing Authority
Lease Revenue Bonds, Series 2002 A (Public Safety Facility Project) (the "Series 2002A Bonds") to
finance an additional portion of the costs of the acquisition, construction and installation of the
Project;
WHEREAS, in order to accomplish such financing, the Authority and the City entered into a
First Amendment to Lease Agreement, dated as of January 1, 2002 (the "First Amendment"), in
order to amend the Original Lease Agreement so as to increase the amount of Base Rental Payments
payable thereunder and to make certain other modifications in order to provide for the execution and
delivery of Additional Bonds in accordance with the provisions of the Original Indenture;
WHEREAS, the City and the Authority have determined that it would be in the best interests
of the City and the Authority to provide the funds necessary to refinance the outstanding Series 1999
Bonds through the sale and delivery of Additional Bonds, designated "Santa Monica Public
Financing Authority Lease Revenue Refunding Bonds, Series 2009 A (Public Safety Facility
Project)" (the "Series 2009 Bonds") payable from additional Base Rental Payments to be payable
pursuant to a Second Amendment to Lease Agreement, dated as of December 1, 2009 (the "Second
Amendment") and to further amend the Original Lease Agreement to modify the amount of Base
Rental Payments thereunder and to make certain other modifications to provide for the execution and
delivery of the Series 2009 Bonds as Additional Bonds in accordance with the provisions of the
Original Indenture, the First Amendment and the Second Amendment (the Original Lease Agreement
as amended by the First Amendment and the Second Amendment is referred to as the "Lease
Agreement");
WHEREAS, the Authority and the Trustee are entering into a Second Amendment to
Assignment Agreement, dated as of the date hereof, in order to amend the Original Assignment
Agreement and the First Amendment to Assignment Agreement, dated as of January 1, 2002, so as to
expressly provide that all rights to receive the Base Rental Payments, including the increased
amounts thereof provided for in the Second Amendment to Lease Agreement, have been assigned
without recourse by the Authority to the Trustee;
WHEREAS, the Trustee, the Authority and the City are entering into this Second
Supplemental Indenture in order to provide for the execution and delivery of the Series 2009 Bonds;
and
WHEREAS, all acts, conditions and things required by law to exist, to have happened and to
have been performed precedent to and in connection with the execution and entering into of this
Second Supplemental Indenture do exist, have happened and have been performed in regular and due
time, form and manner as required by law, and the parties hereto are now duly authorized to execute
and enter into this Second Supplemental Indenture;
NOW, THEREFORE, in consideration of the premises and of the mutual agreements and
covenants contained herein and for other valuable consideration, the parties do hereby agree as
follows:
PART 1
PARTICULAR AMENDMENTS
Part 1.1. [Reserved]
2
DOC SOC/ 1369325x3/200119-0002
PART2
ADDITION OF ARTICLE XIII
Part 2.1. Addition of Article XIII. The Original Indenture is hereby amended and
supplemented by adding thereto an additional Article as follows:
ARTICLE XIII
SERIES 2009 BONDS
Section 13.01. Definitions. Unless the context otherwise requires, the terms defined in this
Section shall for all purposes hereof and of any amendment hereof or supplement hereto and of the
Bonds and of any Bond, opinion, request or other document mentioned herein or therein have the
meanings defined herein, the following definitions to be equally applicable to both the singular and
plural forms of any of the terms defined herein:
"Continuing Disclosure Certificate (Series 2009 Bonds)" means the Continuing Disclosure
Certificate, dated as of December 1, 2009, executed by the City, as originally executed and as it may
be amended from time to time in accordance with the terms thereof.
"Participating Underwriter (Series 2009 Bonds)" has the meaning ascribed thereto in the
Continuing Disclosure Certificate (Series 2009 Bonds).
"Refunded 1999 Bonds" means the portion of the Series 1999 Bonds refunded with the net
proceeds of the Series 2009 Bonds.
"Series 2009 Bonds" means the Bonds designated "Santa Monica Public Financing
Authority Lease Revenue Refunding Bonds, Series 2009 (Public Safety Facility Project)" issued
hereunder.
"Series 2009 Bonds Closing Date" means ,
"Series 2009 Escrow Agreement" means the Escrow Agreement dated as of December 1,
2009, by and between the Authority and the Trustee as Escrow Agent providing for the defeasance of
the Refunded 1999 Bonds.
hereof.
"Series 2009 Escrow Fund" means the fund of that name established under Section 13.06
"Tax Certificate (Series 2009 Bonds)" means the Tax Certificate executed by the Authority
and the City at the time of issuance of the Series 2009 Bonds relating to the requirements of
Section 148 of the Code, as originally executed and as it may from time to time be amended in
accordance with the provisions thereof.
Section 13.02. Certain References to Bonds. [Reserved]
Section 13.03. Issuance of Series 2009 Bonds. The Authority may, at any time, execute the
Series 2009 Bonds, in the aggregate principal amount of $[Bond Amount], for issuance hereunder
and deliver the same to the Trustee. The Trustee shall authenticate the Series 2009 Bonds and
DOCSOC/1369325 v3/200119-0002
deliver the Series 2009 Bonds to the original purchaser thereof upon receipt of a Written Request of
the Authority and upon receipt of the purchase price therefor.
Section 13.04. Terms of Series 2009 Bonds; Interest Computation. (a) The Series 2009
Bonds shall be designated the "Santa Monica Public Financing Authority Lease Revenue Refundmg
Bonds, Series 2009 (Public Safety Facility Project)."
(b) The Series 2009 Bonds shall be issued in fully registered form without coupons in
Authorized Denominations, so long as no Series 2009 Bond shall have more than one maturity date.
The Series 2009 Bonds shall be dated as of the Series 2009 Bonds Closing Date, shall be issued in
the aggregate principal amount of $[Bond Amount] shall mature on July 1 of each year and shall bear
interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) at the rates
per annum as follows:
Maturity Date Principal Interest
(July 1) Amount Rate
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
(c) Commencing July 1, 2010, interest on the Series 2009 Bonds shall be payable on
each Interest Payment Date, from the Interest Payment Date next preceding the date of authentication
thereof unless (i) a Series 2009 Bond is authenticated on or before an Interest Payment Date and after
the close of business on the preceding Record Date, in which event it shall bear interest from such
Interest Payment Date, (ii) a Series 2009 Bond is authenticated on or before the first Record Date of
June 15, 2009, in which event interest thereon shall be payable from the dated date thereof, or
(iii) interest on any Series 2009 Bond is in default as of the date of authenfication thereof, in which
event interest thereon shall be payable from the date to which interest has been paid in full, payable
on each Interest Payment Date. Interest shall be paid in lawful money of the United States on each
Interest Payment Date to the Persons in whose names the ownership of the Series 2009 Bonds is
registered on the Registration Books at the close of business on the immediately preceding Record
Date, except as provided below. Interest shall be paid by check of the Trustee mailed by first class
mail, postage prepaid, on each Interest Payment Date to the Series 2009 Bond Owners at their
respective addresses shown on the Registration Books as of the close of business on the preceding
Record Date.
(d) The principal and premium, if any, of the Series 2009 Bonds shall be payable in
lawful money of the United States of America upon presentation and surrender thereof upon maturity
or earlier redemption at the Office of the Trustee.
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DOCSOC/ 1369325v3/200119-0002
(e) The Series 2009 Bonds shall be subject to redemption as provided in Section 13.07.
Section 13.05. Form of Series 2009 Bonds. The Series 2009 Bonds shall be in substantially
the form set forth in Exhibit B hereto, with appropriate or necessary insertions, omissions and
variations as permitted or required hereby.
Section 13.06.. Deposit of Proceeds of Series 2009 Bonds. On the Series 2009 Bonds
Closing Date, the proceeds received from the sale of the Series 2009 Bonds shall be deposited by the
Trustee in the following respective funds, as directed by a Written Request of the City:
(1) The Trustee shall deposit in the Costs of Issuance Fund the amount of
(2) The Trustee shall deposit in the Series 2009 Escrow Fund the amount of
The Trustee shall establish and hold hereunder in trust for the benefit of the owners of
the Series 1999 Bonds and"the Series 2009 Bonds a fund to be named the Series 2009 Escrow
Fund. Upon receipt and deposit in the Series 2009 Escrow Fund of the moneys described in
this Section 13.06, the Trustee shall concurrently transfer all such moneys to the Escrow
Agent for application in accordance with the Escrow Agreement, at which time the Series
2009 Escrow Fund shall be closed and earnings therein, if any, shall be deposited in the
Interest Fund.
Section 13.07. Redemption of Series 2009 Bonds. The Series 2009 Bonds shall be subject
to redemption as follows:
(a) Extraordinary Redemption. The Series 2009 Bonds shall be subject to redemption, in
whole or in part, on any date, in Authorized Denominations, from and to the extent of any Net
Insurance Proceeds received with respect to all or a portion of the Property, deposited by the Trustee
in the Redemption Fund pursuant to Sections 5.03 and 5.04 hereof, at a Redemption Price equal to
the principal amount of the Series 2009 Bonds to be redeemed, plus accrued interest thereon to the
date of redemption, without premium.
(b) Optional Redemption. The Series 2009 Bonds maturing on or after July 1,
shall be subject to optional redemption, in whole or in part, on any date on or after July 1, , in
Authorized Denominations, from and to the extent of prepaid Base Rental Payments paid pursuant to
subsection (a) of Section 7.02 of the Lease Agreement, at a Redemption Price equal to the principal
amount of the Series 2009 Bonds to be redeemed plus accrued interest thereon to the date of
redemption, without premium.
Section 13.08. Tag Covenants. (a) Neither the Authority nor the City will take any action,
or fail to take any action, if such action or failure to take such action would adversely affect the
exclusion from gross income of interest on the Series 2009 Bonds under Section 103 of the Code.
Without limiting the generality of the foregoing, the Authority and the City will comply with the
requirements of the Tax Certificate (Series 2009 Bonds), which is incorporated herein as if fully set
forth herein. This covenant shall survive payment in full or defeasance of the Series 2009 Bonds.
DOCSOC/1369325v3/200119-0002
(b) In the event that at any time the Authority is of the opinion that for purposes of this
Section it is necessary or helpful to restrict or limit the yield on the investment of any moneys held
by the Trustee in any of the funds or accounts established hereunder, the Authority shall so instruct
the Trustee in writing, and the Trustee shall take such action as may be necessary in accordance with
such instructions.
(c) Notwithstanding any provisions of this Section, if the Authority shall provide to the
Trustee an Opinion of Counsel to the effect that any specified action required under this Section is no
longer required or that some further or different action is required to maintain the exclusion from
federal income tax of interest on the Series 2009 Bonds, the Trustee may conclusively rely on such
opinion in complying with the requirements of this Section and of the Tax Certificate (Series 2009
Bonds), and the covenants hereunder shall be deemed to be modified to that extent.
(d) The Authority hereby designates the Series 2009 Bonds as "bank qualified" under the
provisions of Section 265(6)(3) of the Code.
Section 13.09. Rebate Fund. (a) There shall be deposited in the Rebate Fund such amounts
as are required to be deposited therein pursuant to the Tax Certificate (Series 2009 Bonds). All
money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent
required to satisfy the Rebate Requirement (as defined in the Tax Certificate (Series 2009 Bonds)),
for payment to the United States of America. Notwithstanding defeasance of the Series 2009 Bonds
pursuant to Article X hereof or anything to the contrary contained herein, all amounts required to be
deposited into or on deposit in the Rebate Fund shall be governed exclusively by this Section and by
the Tax Certificate (Series 2009 Bonds) (which is incorporated herein by reference). The Trustee
shall be deemed conclusively to have complied with such provisions if it follows the written
directions of the Authority, and shall have no liability or responsibility to enforce compliance by the
Authority with the terms of the Tax Certificate (Series 2009 Bonds). The Trustee may conclusively
rely upon the Authority's determinations, calculations and certifications required by the Tax
Certificate (Series 2009 Bonds). The Trustee-shall have no responsibility to independently make any
calculation or determination or to review the Authority's calculations.
(b) Any funds remaining in the Rebate Fund with respect to the Series 2009 Bonds after
payment in full of all of the Series 2009 Bonds and after payment of any amounts described in this
Section shall be withdrawn by the Trustee and remitted to the Authority.
Section 13.10. Continuin¢ Disclosure. The City shall comply with and carry out all of the
provisions of the Continuing Disclosure Certificate (Series 2009 Bonds). Notwithstanding any other
provision of this Indenture, failure of the City to comply with the Continuing Disclosure Certificate
(Series 2009 Bonds) shall not constitute an event of default hereunder; provided, however, that the
Trustee may (and,. at the written direction of any Participating Underwriter (Series 2009 Bonds) or
the holders of at least 25% of the aggregate principal evidenced by Outstanding Series 2009 Bonds,
shall) or any holder or beneficial owner of the Series 2009 Bonds may take such actions as maybe
necessary and appropriate to compel performance, including seeking mandate or specific
performance by court order.
DOCSOC/ 1369325v3/200119-0002
PART 3
MISCELLANEOUS
Part 3.1. Effect of Second Supplemental Indenture. This Second Supplemental Indenture
and all of the terms and provisions herein contained shall form part of the Indenture as fully and with
the same effect as if all such terms and provisions had been set forth in the Indenture. The Indenture
is hereby ratified and confirmed and shall confinue in full force and effect in accordance with the
terms and provisions thereof, as heretofore amended and supplemented, and as amended and
supplemented hereby. If there shall be any conflict between the terms of this Second Supplemental
Indenture and the terms of the Indenture (as in effect on the day prior to the effective date of this
Second Supplemental Indenture), the terms of this Second Supplemental Indenture shall prevail.
Part 3.2. Execution in Counterparts. This Second Supplemental Indenture may be
executed in several counterparts, each of which shall be deemed an original, and all of which shall
constitute but one and the same instrument.
Part 3.3. Effective Date. This Second Supplemental Indenture shall become effective upon
Series 2009 Bonds Closing Date.
DOCSOC/] 369325v3/200119-0002
IN WITNESS WHEREOF, the parties hereto have executed this Second Supplemental
Indenture by their officers thereunto duly authorized as of the clay and year first written above.
THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as Trustee
By:
Authorized Officer
SANTA MONICA PUBLIC FINANCING
AUTHORITY
By:
Carol Swindell, Treasurer
ATTEST:
Maria M. Stewart, Secretary
APPROVED AS TO FORM:
Marsha Jones Moutrie, Authority Counsel
CITY OF SANTA MONICA
By:
P. Lamont Ewell, City Manager
ATTEST:
Maria M. Stewart, City Clerk
APPROVED AS TO FORM:
Marsha Jones Moutrie, City Attorney
DOCSOC/ 1369325x3/200119-0002
EXHIBIT B
FORM OF SERIES 2009 Bond
No.
SANTA MONICA PUBLIC FINANCING AUTHORITY
LEASE REVENUE BOND
SERIES 2002A
(PUBLIC SAFETY FACILITY PROJECT)
INTEREST RATE MATURITY DATE
July 1, 20
DATED DATE
CUSIP
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT:
DOLLARS
The Santa Monica Public Financing Authority (the "Authority"), for value received, hereby
promises to pay, solely from the Base Rental Payments (as hereinafter defined) or amounts in certain
funds and accounts held under the Indenture (as hereinafter defined), to the Registered Owner
identified above or registered assigns (the "Registered Owner"), on the Maturity Date identified
above or on any earlier redemption date, the Principal Amount identified above in lawful money of
the United States of America; and to pay interest thereon at the Rate of Interest identified above in
like lawful money from the date hereof payable semiannually on January 1 and July 1 in each year,
commencing July 1, 2010 (the "Interest Payment Dates"), until payment of such Principal Amount in
full. This Bond shall bear interest from the Interest Payment Date next preceding the date of
authentication of this Bond (unless this Bond is authenticated on or before an Interest Payment Date
and after the fifteenth calendar day of the month preceding such Interest Payment Date, whether or
not such day is a business day, in which event it shall bear interest from such Interest Payment Date,
or unless this Bond is authenticated on or prior to June 15, 2010, in which event it shall bear interest
from the Dated Date identified above; provided, however, that if, at the time of authentication of this
Bond, interest is in default on this Bond, this Bond shall bear interest from the Interest Payment Date
to which interest hereon has previously been paid or duly provided for). The Principal Amount
hereof is payable upon surrender hereof upon maturity or earlier redemption at the Office of the
Trustee (as hereinafter defined). Interest hereon is payable by check of The Bank of New York
Mellon Trust Company, N.A., as Trustee (the "Trustee"), mailed by first class mail on each Interest
Payment Date to the Registered Owner hereof at the address of the Registered Owner as it appears on
the Registration Books of the Trustee as of the close of business on the fifteenth calendar day of the
month preceding such Interest Payment Date. "Office of the Trustee" means the principal corporate
trust office of the Trustee in Los Angeles, California, or such other office as may be specified to the
Authority by the Trustee in writing.
This Bond is one of a series of a duly authorized issue of bonds issued for the purpose oI
financing the construction and acquisition of certain public facilities (the "Project"), and is one of the
series of bonds designated "Santa Monica Public Financing Authority Lease Revenue Refunding
B-1
DOCSOC/1369325v3/200 1 1 9-0002
Bonds, Series 2009 A (Public Safety Facility Project)" (the "Series 2009 Bonds") in the aggregate
principal amount of $[Bond Amount]. The Series 2009 Bonds are issued pursuant to the Indenture,
dated as of September 1, 1999, by and among the Authority, the City of Santa Monica (the "City")
and the Trustee, as amended and supplemented by the First Supplemental Indenture dated as of
January 1, 2002 by and among the Authority, the City and the Trustee, and the Second Supplemental
Indenture, dated as of December 1, 2009, by and among the Authority, the City and the Trustee
(collectively, the "Indenture"), and this reference incorporates the Indenture herein, and by
acceptance hereof the owner of this Bond assents to said terms and conditions- The Series 2009
Bonds are on a parity with the Santa Monica Public Financing Authority Lease Revenue Bonds,
Series 2002A, issued in-the aggregate original principal amount of $17,310,000 previously executed
pursuant to the terms of the Indenture. Pursuant to and as more particularly provided in the
Indenture, additional bonds ("Additional Bonds") may be issued by the Authority secured by a lien
on a parity with the lien securing the Series 2009 Bonds and the Series 2002A Bonds. The Series
2009 Bonds and the Series 2002A Bonds and any Additional Bonds are collectively referred to as the
"Bonds". The Indenture is entered into, and this Bond is issued under, the Marks-Roos Local Bond
Pooling Act of 1985 (the "Act") and the laws of the State of California.
Pursuant to the Indenture, the principal of and interest on the Bonds are payable solely from
certain base rental payments (the "Base Rental Payments") under and pursuant to that certain Lease
Agreement, dated as of September 1, 1999, by and between the City, as lessee, and the Authority, as
lessor, as amended and supplemented by the First Amendment to Lease Agreement, dated as of
January 1, 2002, by and between the City, as lessee, and the Authority, as lessor, and the Second
Amendment to Lease Agreement, dated as of December 1, 2009, by and between the same parties
(collectively, the "Lease Agreement"), all of which rights to receive such Base Rental Payments-have
been assigned without recourse by the Authority to the Trustee. Subject only to the provisions of the
Indenture permitting the application thereof for the purposes and on the terms and conditions set
forth therein, all of the Base Rental Payments and any other amounts (including proceeds of the sale
of the Bonds) held in the Base Rental Payment Fund, the Reserve Fund, the Interest Fund, the
Principal Fund and the Redemption Fund established under the Indenture are pledged to secure the
payment of the principal of, premium, if any, and interest on the Bonds in accordance with their
terms, the provisions of the Indenture and the Act. Said pledge constitutes a first lien on such assets.
The Series 2009 Bonds are authorized to be issued in the form of fully registered bonds in
denominations o£$5,000 or any integral multiple thereof ("Authorized Denominations").
The Series 2009 Bonds shall be subject to redemption, in whole or in part, on any date, in
Authorized Denominations, from the net proceeds of any insurance or condemnation award with
respect to the property leased under the Lease Agreement, or portions thereof, deposited by the
Trustee in the Redemption Fund established under the Indenture and not used to repair or replace
such property, or portions thereof, at a Redemption Price equal to the principal amount of the Series
2009 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without
premium.
The Series 2009 Bonds maturing on or after July 1, ,shall be subject to optional
redemption, in whole or in part, on any date on or after July 1, , in Authorized Denominations,
from and to the extent of prepaid Base Rental Payments paid pursuant to the Lease Agreement, at a
Redemption Price equal to the principal amount of the Series 2009 Bonds to be redeemed plus
accrued interest thereon to the date of redemption, without premium.
DO C S OC/ 1369325v3/200119-0002
B-2
The Trustee on behalf and at the expense of the Authority shall mail (by first class mail)
notice of any redemption to the respective owners of any Series 2009 Bonds designated for
redemption, at their respective addresses appearing on the Registration Books maintained by the
Trustee, at least 15 but not more than 60 days prior to the redemption date; provided, however, that
neither failure to receive any such notice so mailed nor any defect therein shall affect the validity of
the proceedings for the redemption of such Series 2009 Bonds or the cessation of the accrual of
interest thereon. The redemption price of the Series 2009 Bonds to be redeemed shall be paid only
upon presentation and surrender thereof at the Office of the Trustee. From and a8er the date fixed
for redemption of any Series 2009 Bonds, interest on such Series 2009 Bonds will cease to accrue.
Subject to the limitations and upon payment of the charges, if any, provided in the Indenture,
fully registered Series 2009. Bonds may be exchanged at the Office of the Trustee for a like aggregate
principal amount and maturity of fully registered Series 2009 Bonds of other authorized
denominations,
This Bond is transferable by the Registered Owner hereof, in person or by his or her attorney
duly authorized in writing, at the Office of the Trustee, but only in the manner, subject to the
limitations and upon payment of the charges provided in the Indenture, and upon surrender and
cancellation of this Bond. Upon such transfer a new fully registered Series 2009 Bond or Series
2009 Borids, in Authorized Denominations, for the same aggregate principal amount and of the same
maturity will be issued to the transferee in exchange herefor. The Authority, the City and the Trustee
may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and Authority,
the City and the Trustee shall not be affected by any notice to the contrary.
The Indenture and the rights and obligations of the Authority, the City, the owners of the
Bonds and the Trustee maybe modified or amended from time to time and at any time in the manner,
to the extent, and upon the terms provided in the Indenture; provided that no such modification or
amendment shall (a) extend the fixed maturity of any Bonds, or reduce the principal thereof or the
rate of interest home thereby, or extend the time of payment, without the consent of the owner of
such Bond, (b) reduce the percentage of Bonds the consent of the owners of which is required to
effect any such amendment or modification, or (c) permit the creation of any lien on the Base Rental
Payments and other assets pledged under the Indenture prior to or on a parity with the lien created by
the Indenture, or deprive the Bonds owners of the lien created under the Indenture on such the Base
Rental Payments and such other assets (except as expressly provided in the Indenture), without the
consent of the owners of all outstanding Bonds.
The Indenture contains provisions permitting the Authority to make provision for the
payment of interest on, and the principal and premium, if any, of any of the Bond so that such Bonds
shall no longer be deemed to be outstanding under the terms of the Indenture.
All obligations of the Authority under the Indenture shall be special obligations of the
Authority, payable solely from Base Rental Payments and the other assets pledged therefor under the
Indenture; provided, however, that all obligations of the Authority under the Bonds shall be special
obligations of the Authority, payable solely from Base Rental Payments and the other assets pledged
therefor under the Indenture. Neither the faith and credit nor the taxing power of the Authority, the
City or the State of California, or any political subdivision thereof, is pledged to the payment of the
Bonds.
DOCSOC/ 1369325 v3YL00119-0002
B-3
Unless this Bond is presented by an authorized representative of The Depository Trust
Company to the Trustee for registration of transfer, exchange or payment, and any Bond issued is
registered in the name of Cede & Co. or such other name as requested by an authorized
representative of The Depository Trust Company and any payment is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest
herein.
DOCSOC/1369325v3/200119-0002
B-4
IN WITNESS WHEREOF, the Authority has caused this Bond to be signed in its name and
on its behalf by the facsimile signatures of its Executive Director and Secretary, all as of the Dated
Date identified above.
SANTA MONICA PUBLIC FINANCING
AUTFIORITY
Executive Director of the Santa Monica
Public Financing Authority
Attest:
Secretary of the Santa Monica
Public Financing Authority
B-5
DOCSOC/ 1369325v3/200119-0002
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Series 2009 Bonds described in the within-mentioned Indenture and
registered on the Registration Books.
Date:
THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., AS TRUSTEE
Authorized Signatory
B-6
DOCSOC/13693tiv3YL00ll9-0002
ASSIGNMENT
For .value received the undersigned hereby sells, assigns and transfers unto
whose address and social security or other tax identifying
number is the within-mentioned Bond and hereby irrevocably
constitute(s) and appoint(s) attorney, to, transfer
the same on the registration books of the Trustee with full power of substitution in the premises
Dated:
Signature Guaranteed:
Note: Signature(s) must be guaranteed by an Note: The signature(s) on this Assignment must
eligible guarantor. correspond with the name(s) as written on the
face of the within Bond in every particular
without alteration or enlargement or any change
whatsoever.
B-7
DOCSOC/ 1369325v3/200 1 1 9-0002
TO BE RECORDED AND WHEN RECORDED ATTACHMENT B
RETURN TO:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Attention: E. Kurt Yeager
THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TAX
PURSUANT TO SECTION 11921 OF THE CALIFORNIA REVENUE AND TAXATION CODE.
THIS DOCUMENT IS EXEMPT FROM RECORDING FEES PURSUANT TO SECTION 27383
OF THE CALIFORNIA GOVERNMENT CODE.
SECOND AMENDMENT TO
LEASE AGREEMENT
by and between
CITY OF SANTA MONICA
and
SANTA MONICA
PUBLIC FINANCING AUTHORITY
Dated as of Decemberl, 2009
DOCSOC/1369322v3/200ll 9-0002
TABLE OF CONTENTS
PART 1
PARTICULAR AMENDMENTS
Part 1.1 Amendments to Section 1.01 ............................................................
Part 1.2 Amendment to Section 3.03 ..............................................................
Part 1.3 Amendment to Section 7.02(a) .........................................................
Part 1.4 Amendment to Section 7.02(b) ................,................:........:..............
Part 1.5 Amendment to Section 7.02(c) .........................................................
Part 1.6 Amendment to Section 7.02(e) .........................................................
Part 1.7 Amendment to Exhibit C ..................................................................
PART 2
MISCELLANEOUS
Paee
.:3
..3
..4
..4
Part 2.1 Effect of Second Amendment .......................................................................................4
Part 2.2 Execution in Counterparts .............................................................................................4
Part 2.3 Effective Date ................................................................................................................4
EXFIIBIT A DESCRIPTION OF THE SITE ..............:.................................................................A-1
EXFIIBIT B THE PROJECT ...:....................................................................................................B-1
EXI~BIT C BASE RENTAL PAYMENT SCHEDULE .............................................................. C-1
DOCSOC/1369322v3/200119-0002
SECOND AMENDMENT TO
LEASE AGREEMENT
THIS SECOND AMENDMENT TO LEASE AGREEMENT (this "Second Amendment")
executed and entered into as of Decemberl, 2009, is by and between the CITY OF SANTA
MONICA, a municipal corporation and charter city duly organized and existing under and by virtue
of the Constitution and laws of the State of California and its Charter (the "Cit}~'), and the SANTA
MONICA PUBLIC FINANCING AUTHORITY, a joint exercise of powers entity organized and
existing under and by virtue of the laws of the State of California (the "Authority").
RECITALS
WHEREAS, the City previously financed a portion of the costs of the acquisition,
construction and installation of certain capital improvements constituting a public safety facility and
related improvements, facilities and equipment, more particularly described in Exhibit B hereto (the
"Project");
WHEREAS, in order to accomplish such financing, the City leased certain real property on
which the Project has been constructed, more particularly described in Exhibit A hereto (the "Site"),
to the Authority pursuant to a Ground Lease, dated as of September 1, 1999, Los Angeles County
Recorder (the ``Recorder") Instrument No. 991931757, and the City subleased the Site and the
Project back from the Authority pursuant to a Lease Agreement, dated as of September 1, 1999 (the
"Original Lease Agreement"), with regard to which a Memorandum of Lease Agreement was
recorded, Recorder Instrument No. 991931758;
WHEREAS, the City and the Authority determined that it would be in the best interests of
the City and the Authority to provide the funds necessary to finance the acquisition, construction and
installation of the Project through the issuance by the Authority of bonds (the "Series 1999 Bonds")
payable from the base rental payments (the "Base Rental Payments") to be made by the City under
the Original Lease Agreement;
WHEREAS, all rights to receive such Base Rental Payments were assigned without recourse
by the Authority to The Bank of New York Mellon Trust Company, N.A., as Trustee (the "Trustee")
pursuant to an Assignment Agreement, dated as of September 1, 1999 (the "Original .Assignment
Agreement"), Recorder Instrument No. 991931759;
WHEREAS, in consideration of such assignment and the execution of the Indenture, dated
as of September 1, 1999 (the "Original Indenture"), by and among the Trustee, the Authority and the
City, the Authority issued the Series 1999 Bonds (capitalized undefined terms used in these recitals
shall have the meanings ascribed thereto in the Original Indenture);
WHEREAS, the Original Indenture provides that, subject to the conditions set forth therein,
in addition to the Series 1999 Bonds, the City, the Authority and the Trustee may by execution of a
supplemental Indenture without the consent of the Owners, provide for the issuance of Additional
Bonds, payable from additional Base Rental Payments;
WHEREAS, the Original Lease Agreement provides that the Original Lease Agreement and
the rights and obligations of the Authority and the City thereunder may be amended or supplemented
at any time by an amendment thereof or supplement thereto which shall become binding upon
1
DOCSOC/ 1369322x3/200119-0002
execution by the Authority and the City, without the written consents of any Owners, in order to
provide for the issuance of Additional Bonds in accordance with the provisions of the Original
Indenture;
WHEREAS, in 2002 the City elected to finance an additional portion of the costs of the
acquisition, construction and installation of the Project;
WHEREAS, in 2002 the Authority issued its Santa Monica Public Financing Authority
Lease Revenue Bonds, Series 2002A (Public Safety Facility Project) (the "Series 2002A Bonds");
WHEREAS, in order to accomplish such financing, the Authority and the City entered into a
First Amendment to Lease Agreement, Recorder Instrument No. 02-0218608, in order to amend the
Original Lease Agreement so as to increase the amount of Base Rental Payments payable thereunder
and to make certain other modifications in order to provide for the issuance of the Series 2002A
Bonds as Additional Bonds in accordance with the provisions of the Original Indenture;
WHEREAS, the City and the Authority have determined that it would be in the best interests
of the City and the Authority to provide the funds necessary to refinance the outstanding Series 1999
Bonds through the sale and delivery of Additional Bonds, designated "Santa Monica Public
Financing Authority Lease Revenue Refunding Bonds, Series 2009 (Public Safety Facility Project)"
(the "Series 2009 Bonds") payable from the additional Base Rental Payments to be payable pursuant
to a Second Amendment to Lease Agreement, dated as of December 1, 2009 (the "Second
Amendment") and to further amend the Original Lease Agreement to modify the amount of Base
Rental Payments thereunder and to make certain other modifications to provide for the execution and
delivery of the Series 2009 Bonds as Additional Bonds in accordance with the provisions of the
Original Indenture, the First Amendment and the Second Amendment (the Original Lease Agreement
as amended by the First Amendment and the Second Amendment is referred to as the "Lease
Agreement");
WHEREAS, the Authority and the Trustee are entering into a Second Amendment to
Assignment Agreement, dated as of the date hereof, in order to further amend the Original
Assignment Agreement and the First Amendment to Assignment Agreement, dated as of January 1,
2002, so as to expressly provide that all rights to receive the Base Rental Payments, including the
increased amounts thereof provided for in this Second Amendment, have been assigned without
recourse by the Authority to the Trustee;
WHEREAS, the Trustee, the Authority and the City are entering into a Second Supplemental
Indenture, dated as of the date hereof (the "Second Supplemental Indenture"), by and among the
Trustee, the Authority and the City, in order to provide for the issuance of the Series 2009 Bonds;
and
WHEREAS, all acts, conditions and things required by law to exist, to have happened and to
have been performed precedent to and in connection with the execution and entering into of this
Second Amendment do exist, have happened and have been performed in regular and due time, form
and manner as required by law, and the parties hereto are now duly authorized to execute and enter
into this Second Amendment;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the
parties hereto agree as follows:
2
DOC SOC/ 1369322x3/200119-0002
PART 1
PARTICULAR AMENDMENTS
Part 1.1 Amendments to Section 1.01. Section 1.01 of the Original Lease Agreement
is hereby amended by adding thereto the following definitions:
"Original Base Rental Payments" means the portion of the Base Rental Payments
set forth under the caption "Otiginal Base Rental Payments" on Exhibit C hereto.
"Second Additional Base Rental Payments" means the portion of the Base Rental
Payments set forth under the caption "Second Additional Base Rental Payments" on Exhibit
C hereto.
``Series 2009 Bonds" means the Santa Monica Public Financing Authority Lease
Revenue Refunding Bonds, Series 2009 (Public Safety Facility Project), issued under the
Indenture.
Part 1.2 Amendment to Section 3.03. The first sentence of Section 3.03 of the
Original Lease Agreement is hereby amended by the addition of the following text at the end thereof,
to read as follows:
and the parties hereto hereby affirm as of the date of issuance of the Series 2009
Bonds that they have agreed and determined that the annual fair rental value of the Property,
upon substantial completion of the Project, will be not less than $3,000,000.
.Part 1.3 Amendment to Section 7.02(a). Section 7.02(x) of the Original Lease
Agreement is hereby amended by adding thereto the following paragraph to the end thereof:
The City may prepay all or a portion of the Base Rental Payments attributable to the
Series 2009. Bonds which are payable on or after July 1, ,from any source of available
funds, on any date on or after July 1, , by paying all or a portion, as elected by the City,
of the principal components of such Base Rental Payments plus the accrued but unpaid
interest component of such Base Rental Payments to be prepaid to the date of such
prepayment, without premium.
Part 1.4 Amendment to Section 7.02(b). Section 7.02(b) of the Original Lease is
hereby amended by adding the following paragraph to the end thereof:
The City may prepay, from any source of available funds, all or any portion of the
Base Rental Payments attributable to the Series 2009 Bonds by depositing with the Trustee
moneys or securities as provided, and subject to the terms and conditions set forth, in Article
X of the Indenture sufficient to make such Base Rental Payments when due or to make such
Base Rental Payments through a specified date on which the City has a right to prepay such
Base Rental Payments pursuant to subsection (a) of this Section, and to prepay such Base
Rental Payments on such prepayment date, at a prepayment price determined in accordance
with subsection (a) of this Section.
Part 1.5 Amendment to Section 7.02(c). Section 7.02(c) of the Original Lease
Agreement is hereby amended by adding thereto the following paragraph to the end thereof:
DOCSOC/ 1369322v3/200119-0002
If less than all of the Base Rental Payments attributable to the Series 2009 Bonds are
prepaid pursuant to this Section then, as of the date of such prepayment pursuant to
subsection (a) of this Section, or the date of a deposit pursuant to subsection (b) of this
Section, the principal and interest components of such Base Rental Payments shall be
recalculated in order to take such prepayment into account. The City agrees that if, following
a partial prepayment of such Base Rental Payments, the Property is damaged or destroyed or
taken by eminent domain, or a defect in title to the Property is discovered, the City shall not
be entitled to, and by such prepayment waives the right of, abatement of such prepaid Base
Rental Payments and the City shall. not be entitled to any reimbursement of such Base Rental
Payments.
Part 1.6 Amendment to Section 7.02(e). Section 7.02(e) of the Original Lease
Agreement is hereby amended by adding thereto the following paragraph to the end thereof:
Prepayments of Base Rental Payments attributable to the Series 2009 Bonds made
pursuant to this Section shall be applied to the redemption of Series 2009 Bonds as provided
in Section 13.07 of the Indenture.
Part 1.7 Amendment to Exhibit C. Exhibit C to the Original Lease Agreement is
hereby amended to read in full as set forth in Exhibit C hereto to revise the Original Base Rental
Payments and to provide for Second Additional Base Rental Payments all in connection with the
issuance of the Series 2009 Bonds as Additional Bonds under the Indenture.
PART2
NIISCELLANEOUS
Part 2.1 Effect of Seeond Amendment. This Second Amendment and all of the
terms and provisions herein contained shall form part of the Original Lease Agreement as fully and
with the same effect as if all such terms and provisions had been set forth in the Original Lease
Agreement. The Original Lease Agreement is hereby ratified and confirmed and shall continue in
full force and effect in accordance with the terms and provisions thereof, as heretofore amended and
supplemented, and as amended and supplemented hereby. If there shall be any conflict between the
terms of this Second Amendment and the terms of the Original Lease Agreement (as in effect on the
day prior to the effective date of this Second Amendment), the terms of this Second Amendment
shall prevail.
Part 2.2 Execution in Counterparts. This Second Amendment may be executed in
several counterparts, each of which shall be deemed an original, and all of which shall constitute but
one and the same instrument.
Part 2.3 Effective Date. This Second Amendment shall become effective upon the
Series 2009 Bonds Closing Date (as defined in the Second Supplemental Indenture).
4
DOCSOC/ 1369322v3/200119-0002
IN WITNESS WHEREOF, the Authority and the. City have caused this Second
Amendment to be executed by their respective officers thereunto duly authorized, all as of the day
and year first above written.
ATTEST:
Maria M. Stewart, Secretary
APPROVED AS TO FORM:
Marsha Jones Moutrie, Authority Counsel
ATTEST:
Maria M. Stewart, Secretary
APPROVED AS TO FORM:
Marsha Jones Moutrie, Authority Counsel
SANTA MONICA PUBLIC FINANCING
AUTHORITY
By:.
Carol Swindell, Treasurer
CITY OF SANTA MONICA
By;
P. Lamont Ewell, City Manager
5
DOCSOC/ 1369322v3/200119-0002
STATE OF CALIFORNIA )
ss.
COUNTY OF )
On ,before me, ,Notary Public,
(Print Name of Notary Public)
personally appeared
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERNRY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature of Notary Public
OPTIONAL
Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent
fraudulent reattachment of this form.
CAPACITY CLAIl~D BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
^ Individual
^ Corporate Officer
Tine(s) Tille Or Type Of Document
^ Partner(s) ^ Limited
^ General
^ Attorney-In-Fact
^ Tmstee(s)
^ Guardian/Conservator Number of Pages
^ Other:
Signer is representing:
Name Of Person(s) Or Entity(ies)
Date Of Documents
Simmer(s) Other Than Named Above
DOCSOC/ 1369322v3/200119-0002
EXHIBIT A
DESCRIPTION OF THE SITE
All that real property situated in the County of Los Angeles, State of California, described as
follows, and any improvements thereto:
A-1
DOCSOC/1369322v3/200 1 1 9-0002
EXFHBTT B
THE PROJECT
The Project consists of a 118,000 square foot
houses the City's police and fire department central
operations center and 100 spaces of subterranean parking.
four-story specialized office building that
operation, municipal jail and emergency
B-1
DOCSOC/1369322v3/2 00 1 1 9-0 0 02
EXHIBIT C
BASE RENTAL PAYMENT SCHEDULE
Date Principal Component Interest Component Total Base Rental
07/01/2010
01/01/2011
07/01/2011
01/01/2012
07/01/2012
01/01/2013
07/01/2013
01/01/2014
07/01/2014
01/01/2015
07/01/2015
01/01/2016
07/01/2016
01/01/2017
07/01/2017
01/01/2018
07/01/2018
01/01/2019
07/01/2019
01/01/2020 .
07/01/2020
01/01/2021
07/01/2021
C-1
DOCSOC/1369322v3/200ll 9-0002
ORIGINAL BASE RENTAL SCHEDULE
Date Principal Component Interest Component Total Base Rental
07/01/2002
01/01/2003
07/01/2003
01/01/2004
07/01/2004
01/01/2005
07/01/2005
01/01/2006
07/01/2006
01/01/2007
07/01/2007
01/01/2008.
07/01/2008
01/01/2009
07/01/2009
01/01/2010
07/01/2010
01/01/2011
07/01/2011
01/01/2012
07/01/2012
01/01/2013
07/01/2013
01/01/2014
07/01/2014
01/01/2015
07/01/2015
01/01/2016
07/01/2016
01/01/2017
07/01/2017
01/01/2018
07/01/2018
01/01/2019
07/01/2019
01/01/2020
07/01/2020
01/01/2021
07/01/2021
C-2
DOCSOC/ 1369322v3/200119-0002
FIRST ADDITIONAL BASE RENTAL PAYMENT SCHEDULE
Date Principal Component Interest Component Total Base Rental
07/01/2002 $351,358.13 351,358.13
01/01/2003 $351,358.13 351,358.13
07/01/2003 $ 650,000 351,358.13 1,001,358.13
01/01/2004 344,858.13 344,858.13
07/01/2004 665,000 344,858.13 1,009,858.13
01/01/2005 334,883.13 334,883.13
07/01/2005 685,000 334,883.13 1,019,883.13
01/01/2006 324,608.13 324,608.13
07/01/2006 705,000 324,608.13 1,029,608.13
01/01/2007 314,033.13 314,033.13
07/01/2007 725,000 314,033.13 1,039,033.13
01/01/2008 301,345.63 301,345.63
07/01/2008 755,000 301,345.63 1,056,345.63
01/01/2009 287,189.38 287,189.38.
07/01/2009 780,000 287,189.38 1,067,189.38
01/01/2010 271,589.38 271,589.38
07/01/2010 810,000 271,58938 1,081,589.38
01/01/2011 255,389.38 255,389.38
07/01/2011 845,000 255,389.38 1,100,389.38
01/01/2012 238,489.38 238,489.38
07/01/2012 875,000 238,489.38 1,113,48938
01/01/2013 220,989.38 220,989.38
07/01/2013 915,000 220,989.38 1,135,989.38
01/01/2014 202,231.88 202,231.88
07/01/2014 950,000 202,231.88 1,152,231.88
01/01/2015 182,281.88 182,281.88
07/01/2015 995,000 182,281.88 1,177,281.88
01/01/2016 160,889.38 160,889.38
07/01/2016 1,035,000 160,889.38 1,195,889.38
01/01/2017 138,248.75. 138,248.75
07/01/2017 1,080,000 138,248.75 1,218,248.75
01/01/2018 113,948.75- 113,948.75
07/01/2018 1,130,000 113,948.75 1,243,948.75
01/01/2019 87,817.50 87,817.50
07/01/2019 1,180,000 87,817.50 1,267,817.50
01/01/2020 60,087.50 60,087.50
07/01/2020 1,235,000 60,087.50 1,295,087.50
01/01/2021 30,756.25. 30,756.25
07/01/2021 1,295,000 30,756.25 1,325,756.25
C-3
DOCSOC/ 1369322v3/200119-0002
SECOND ADDITIONAL BASE RENTAL PAYMENT SCHEDULE
Date Principal Component Interest Component Total Base Rental
01/01/2010
07/01/2010
01/01/2011
07/01/2011
01/01/2012
07/01/2012
01/01/2013
07/01/2013
01/01/2014
07/01/2014
01/01/2015
07/01/2015
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DOCSOC/1369322v3/200119-0002
TO BE RECORDED AND WHEN RECORDED ATTACHMENT C
RETURN TO:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Attention: E. Kurt Yeager
THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TAX
PURSUANT TO SECTION 11921 OF THE CALIFORNIA REVENUE AND TAXATION CODE.
THIS DOCUMENT IS EXEMPT FROM RECORDING FEES PURSUANT TO SECTION 27383
OF THE CALIFORNIA GOVERNMENT CODE.
SECOND AMENDMENT TO
ASSIGNMENT AGREEMENT
by and between
SANTA MONICA
PUBLIC FINANCING AUTHORITY
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A,
as Trustee
Dated as of December 1, 2009
DOC SOC/1369324v3/200119-0002
SECOND AMENDMENT TO
ASSIGNMENT AGREEMENT
THIS SECOND AMENDMENT TO ASSIGNMENT AGREEMENT (this "Second
Amendment"), executed and entered into as of December 1, 2009, is by and between the SANTA
MONICA PUBLIC FINANCING AUTHORITY, a joint exercise of powers entity organized and
existing under and by virtue of the laws of the State of California (the "Authority"), and THE BANK
OF NEW YORK MELLON TRUST COMPANY, N.A., a banking corporation duly organized. and
existing under and by virtue of the laws of the State of California, as trustee (the "Trustee").
WITNESSETH:
WHEREAS, the City of Santa Monica (the "City") previously financed a portion of the costs
of the acquisition, construction and installation of certain capital improvements constituting a public
safety facility and related improvements, facilities and equipment (the "Project");
WHEREAS, in order to accomplish such financing, the City leased certain real property on
which the Project has been constructed, more particularly described in Exhibit A hereto (the "Site"),
to the Authority pursuant to a Ground Lease, dated as of September 1, 1999, Los Angeles County
Recorder (the "Recorder") Instrument No. 991931757, and the City subleased the Site and the
Project back from the Authority pursuant to a Lease Agreement, dated as of September 1, 1999 (the
"Original Lease Agreement"), with regard to which a Memorandum of Lease Agreement was
recorded, Recorder Instrument No. 991931758;
WHEREAS, the City and the Authority determined that it would be in the best interests of
the City and the Authority to provide the funds necessary to finance the acquisition, construction and
installation of the Project through the issuance by the Authority of bonds (the "Series 1999 Bonds")
payable from the base rental payments (the "Base Rental Payments") to be made by the City under
the Original Lease Agreement;
WHEREAS, all rights to receive such Base Rental Payments were assigned without recourse
by the Authority to Trustee pursuant to an Assignment Agreement, dated as of September 1, 1999
(the "Original Assignment Agreement"), Recorder Instrument No. 991931759;
WHEREAS, in consideration of such assignment and the execution of the Indenture, dated
as of September 1, 1999 (the "Original Indenture"), by and among the Trustee, the Authority and the
City, the Authority issued the Series 1999 Bonds (capitalized undefined terms used in these recitals
shall have the meanings ascribed thereto in the Original Indenture);
WHEREAS, the Original Indenture provides that, subject to the conditions set forth therein,
in addition to the Series 1999 Bonds, the City, the Authority and the Trustee may by execution of a
supplemental Indenture without the consent of the Owners, provide for the issuance of Additional
Bonds, payable from additional Base Rental Payments;
WHEREAS, the Original Lease Agreement provides that the Original Lease Agreement and
the rights and obligations of the Authority and the City thereunder may be amended or supplemented
at any time by an amendment thereof or supplement thereto which shall become binding upon
execution by the Authority and the City, without the written consents of any Owners, in order to
DOCSOC/ 1369324v3/200119-0002
provide for the issuance of Additional Bonds in accordance with the provisions of the Original
Indenture;
WHEREAS, in 2002 the Authority issued its Santa Monica Public Financing Authority
Lease Revenue Bonds, Series 2002A (Public Safety Facility Project) (the "Series 2002A Bonds") to
finance an additional portion of the costs of the acquisition, construction and installation of the
Project;
WHEREAS, in order to accomplish such financing, the Authority and the City entered into a
First Amendment to Lease Agreement, dated as of January 1, 2002 (the "First Amendment to Lease
Agreement"), Recorder Instrument No. 02-0218608, in order to amend the Original Lease Agreement
so as to increase the amount of Base Rental Payments payable thereunder and to make certain other
modifications in order to provide for the issuance of the Series 2002A Bonds as Additional Bonds in
accordance with the provisions of the Original Indenture;
WHEREAS, the City and the Authority have determined that it would be in the best interests
of the City and the Authority to provide the funds necessary to refmance the outstanding Series 1999
Bonds through the sale and delivery of Additional Bonds, designated "Santa Monica Public
Financing Authority Lease Revenue Refunding Bonds, Series 2004 A (Public Safety Facility
Project)" (the "Series 2009 Bonds") payable from additional Base Rental Payments to be payable
pursuant to a Second Amendment to Lease Agreement, dated as of December 1, 2009 (the "Second
Amendment") and to further amend the Original Lease Agreement to modify the amount of Base
Rental Payments thereunder and to make certain other modifications to provide for the execution and
delivery of the Series 2009 Bonds as Additional Bonds in accordance with the provisions of the
Original Indenture, the First Amendment and the Second Amendment (the Original Lease Agreement
as amended by the First Amendment and the Second Amendment is referred to as the "Lease
Agreement");
WHEREAS, the Trustee, the Authority and the City have entered into a Second
Supplemental Indenture, dated as of the date hereof, in order to provide for the issuance of the Series
2009 Bonds;
WHEREAS, the Authority and the Trustee desire to enter into this Second Amendment in
order to further amend the Original Assignment Agreement and the First Amendment to Assignment
Agreement, dated as of January 1, 2002, so as to expressly provide that all rights to receive the Base
Rental Payments, including the modified amounts thereof provided for in the Second Amendment to
Lease Agreement, have been assigned without recourse by the Authority to the Trustee; and
WHEREAS, all acts, conditions and things required by law. to exist, to have happened and to
have been performed precedent to and in connection with the execution and entering into of this
Second Amendment do exist, have happened and have been performed in regular and due time, form
and manner as required by law, and the parties hereto are now duly authorized to execute and enter
into this Second Amendment;
NOW, THEREFORE, in consideration of the premises and of the mutual agreements and
covenants contained herein and for other valuable consideration, the parties hereto do hereby agree as
follows:
DOCSOC/ 1369324v3/200119-0002
Part 1. Amendment to Original Assignment Agreement. From and after ,
2009 (the "Series 2009 Bonds Closing Date"), all references in the Original Assignment Agreement
to the Lease Agreement shall be deemed to be references to the Lease Agreement, dated as of
September 1, 1999, by and between the City and the Authority, as amended and supplemented by the
First Amendment to Lease Agreement, dated as of January 1, 2002 by and between the City and the
Authority, and the Second Amendment to Lease Agreement, dated as of December 1, 2009, by and
between the City and the Authority, and as the same may be further amended or supplemented
pursuant to the provisions thereof. From and after the Series 2009 Bonds Closing Date, all
references in the Original Assignment Agreement to the Indenture shall be deemed to be references
to the Indenture, dated as of September 1, 1999, by and among the Trustee, the Authority and the
City, as amended and supplemented by the First Supplemental Indenture, dated as of January 1,
2002, by and among the Trustee, the Authority and the City and the Second Supplemental Indenture,
dated as of December 1, 2009, by and among the same parties, and as the same may be further
amended or supplemented pursuant to the provisions thereof.
Part 2. Effect of Second Amendment. This Second Amendment and all of the terms and
provisions herein contained shall form part of the Original Assignment Agreement as amended by
the First Amendment to Assignment Agreement as fully and with the same effect as if all such terms
and provisions had been set forth in the Original Assignment Agreement. The Original Assignment
Agreement is hereby ratified and confirmed and shall continue in full force and effect in accordance
with the terms and provisions thereof, as heretofore amended and supplemented, and as amended and
supplemented hereby. If there shall be any conflict between the terms of this Second Amendment
and the terms of the Assignment Agreement (as in effect on the day prior to the effective date of this
Second Amendment), the terms of this Second Amendment shall prevail.
Part 3. Execution in Counterparts. This Second Amendment may be executed in several
counterparts, each of which shall be deemed an original, and all of which shall constitute but one and
the, same instmment.
Part 4. Effective Date. This Second Amendment shall become effective upon Series 2009
Bonds Closing Date.
DOCSOC/1369324v3/200ll9-0002
3
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment by
their officers thereunto duly authorized as of the day and year first written above:
SANTA MONICA PUBLIC FINANCING
AUTHORITY
Carol Swindell, Treasurer
ATTEST:
Maria M. Stewart, Secretary
APPROVED AS TO FORM:
Marsha Jones Moutrie, Authority Counsel
THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as Trustee
Authorized Officer
DOCSOC/ 1369324v3/200119-0002
E~aasaT A
DESCRIPTION OF TFIE SITE
All that real property situated in the County of Los Angeles, State of California, described as
follows, and any improvements thereto:
A-1
DOCSOC/1369324v3/200119-0002
STATE OF CALIFORNIA
COUNTY OF
ss.
On before me, ,Notary Public,
personally appeared ,who proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
DOCSOC/ 1369324x3/200119-0002
CONTINUING DISCLOSURE CERTIFICATE ATTACHMENT D
This Continuing Disclosure Certificate, dated as of December 1, 2009 (the "Disclosure Certificate") is
executed and delivered by the City of Santa Monica (the "City") in connection with the execution and delivery
of the Santa Monica Public Financing Authority's (the "Authority") $ Lease Revenue Refunding
Bonds, Series 2009 (Public Safety Facility Project) (the "Bonds").
WHEREAS, the Bonds are being issued pursuant to an Indenture, dated as of September 1, 1999 (the
"Original Indenture"), as amended by a First Supplemental Indenture; dated as of January 1, 2002, and by a
Second Supplemental Indenture, dated as of December 1, 2009 (as so amended, the "Indenture"), by and
among the Authority, the City and the Bank of New York Mellon Trust Company, N.A., as trustee (the
"Trustee").
WHEREAS, the Bonds are payable from the base rental payments to be made by the City under the
Lease Agreement, dated as of September 1, 1999 (the "Original Lease Agreement"), as amended by a First
Amendment to Lease Agreement, dated as of January 1, 2002, and by a Second Amendment to Lease
Agreement, dated as of December 1, 2009 (as so amended, the "Lease Agreement"), between the City, as
lessee, and the Authority, as lessor; and
WHEREAS, this Disclosure Certificate is being executed and delivered by the City for the benefit of
the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in
complying with the Rule (defined below).
NOW, THEREFORE, the City covenants as follows:
SECTION 1. Definitions. In addition to the definitions set forth in the Indenture, which apply to any
capitalized term used in this Disclosure Certificate unless otherwise defined in Yhis Section, the following
capitalized terms shall have the following meanings:
"Annual Report" shall mean any Comprehensive Annual Financial Report provided by the City
pursuant to, and as described in, Sections 2 and 3 of this Disclosure Agreement.
"Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to vote or
consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through
nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income
tax purposes.
"Disclosure Representative" shall mean the City Manager of the City, the Finance Director of the City
or their designee, or such other officer or employee as the City shall designate in writing from time to time.
"Dissemination Agent" shall mean the City, or any successor Dissemination Agent designated in
writing by the City and which has filed with the City a written acceptance of such designation.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.
"Official Statement" shall mean the Official Statement relating to the Bonds, dated , 2009.
"Participating Underwriter" shall mean the original underwriter of the Bonds required to comply with
the Rule in connection with the offering of the Bonds.
"Repository" shall mean the -Municipal Securities Rulemaldng Board, which can be found at
http://emma.msrb. org.
DOC SOC/ 1373102v 1 /200119-0002
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as the same maybe amended from time to time.
"State" shall mean the State of California.
SECTION 2. Provision of Annual Renorts.
(a) The City shall, or, upon delivery of the Annual Report to the Dissemination Agent, shall
cause the Dissemination Agent to, not later than each April I of each yeaz commencing April 1, 2010, provide
to the Repository an Annual Report which is consistent with the requirements of Section 3 of this Disclosure
Agreement. 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;
provided that the audited financial statements of the City may be submitted separately from the balance of the
Annual Report and later than the date required above for the filing of the Annual Report if they are not
available by that date. If the City's fiscal year changes, it shall give notice of such change in the same manner
as for a Listed Event under Section 4(c).
(b) Not later than fifteen (15) business days prior to said date; the City shall provide the Annual
Report to the Dissemination Agent (if other than the City). If the City is unable to provide to the Repository an
Annual Report by the date required in subsection (a), the City shall send a notice to-the Repository in
substantially the form attached as Exhibit A.
(c) The Dissemination Agent shall:
(i) confum the electronic filing requirements of the Municipal Securities
Rulemaking Board for the Annual Report the name and address of each Repository; and
(ii) (if the Dissemination Agent is other than the City), file a repoXt with the City
certifying that the Annual Report has been provided pursuant to this Disclosure Agreement and stating
the date it was provided.
SECTION 3. Content of Annual Reports. The City's Annual Report shall contain or include by
reference the following:
(a) The City's audited financial statements, prepared in accordance with generally accepted
auditing standards for municipalities in the State of California. If the City's audited financial statements aze
not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report
shall contain unaudited financial statements in a format similar to the financial statements contained in the
final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual
Report when they become available.
(b) To the extent not contained in the audited financial statements filed pursuant to the preceding
subsection (a) by the date required by Section 4 hereof, updates of Tables _ through ~ _ and _ set forth
in the Official Statement. [DISCUSS]
Any or all of the items listed above may be included by specific reference to other documents,
including official statements of debt issues of the City or related public entities, which have been submitted to
each of the Repositories or the Securities and Exchange Commission. If the document included by reference is
a final official statement, it must be available from the Municipal Securities Rulemaking Boazd. The City shall
clearly identify each such other document so included by reference.
DOCSOC/1373102v 1/200119-0002
SECTION 4. Reportine of Sienificant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give; or cause to be given, notice of
the occurrence of any of the following events with respect to the Bonds, if material:
(i) Principal and interest payment delinquencies.
(ii) Non-payment related defaults.
(iii) Modifications to rights of Bond holders.
(iv) Optional, contingent or unscheduled bond calls.
(v) Defeasances.
(vi) Rating changes.
(vii) Adverse tax opinions or events affecting the tax-exempt status of the Bonds.
(viii) Unscheduled draws on the debt service reserves reflecting financial difficulties.
(ix) Unscheduled draws on the credit enhancements reflecting financial difficulties.
(x) Substitution of the credit or liquidity providers or their failure to perform.
(xi) Release, substitution or sale of property securing repayment of the Bonds.
(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall as
soon as possible determine if such event would be material under applicable federal securities laws.
(c) If the City determines that knowledge of the occurrence of a Listed Event would be material
under applicable federal securities laws, the City shall promptly file a notice of such occurrence with the
Repositories. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(iv) and (v)
need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to
Holders of affected Bonds pursuant to the Indenture.
SECTION 5. Termination of Reportine Obligation. The City's obligations under this Disclosure
Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds.
If such termination occurs prior to the fmal maturity of the Bonds, the City shall give notice of such
termination in the same manner as for a Listed Event under Section 4(c).
SECTION 6. Dissemination Aeent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The
Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by
the City pursuant to this Disclosure Agreement. The Dissemination Agent may resign by providing thirty days
written notice to the CiTy and the Trustee. The Dissemination Agent shall not be responsible for the content of
any report or notice prepared by the CiTy and shall have no duty to review any information provided to it by the
City. The Disseminafion Agent shall have no duty to prepare any information report nor shall the
Dissemination Agent be responsible for filing any report not provided to it by the City in a timely manner and
in a form suitable for filing.
DOCSOC/ 1373102v 1/200119-0002
SECTION 7. Amendment Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement
may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or
waiver is permitted by the Rule; provided, the Dissemination Agent shall have fast consented to any
amendment that modifies or increases its duties or obligations hereunder. In the event of any amendment or
waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next
Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or
waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of
financial information or operating data being presented by the City. In addition, if the amendment relates to the
accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given
in the same manner as for a Listed Event under Section 4(c), and (ii) the Annual Report for the yeaz in which
the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form)
between the financial statements as prepared on the basis of the new accounting principles and those prepared
on the basis of the former accounting principles.
SECTION 8. Additional Information. Nothing in this Disclosure Agreement shall be deemed to
prevent the City from disseminating any other information, using the means of dissemination set forth in this
Disclosure Agreement or any other means of communication, or including any other information in any
Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this
Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of
occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement,
the City shall have no obligation under this Bond to update such information or include it in any future Annual
Report or notice of occurrence of a Listed Event.
SECTION 9. Default. ht the event of a failure of the City to comply with any provision of this
Disclosure Agreement, any Holder or Beneficial Owner of the Bonds may take such actions as may be
necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City
to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement
shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure
Ageement in the event of any failure of the City to comply with this Disclosure Agreement shall be an action
to compel performance.
No Bond holder or Beneficial Owner may institute such action, suit or proceeding to compel
performance unless they shall have first delivered to the City satisfactory written evidence of their status as
such, and a written notice of and request to cure such failure, and the City shall have refused to comply
therewith within a reasonable time.
SECTION 10. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent
shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees, to the
extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and
agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or
performance of its powers and duties hereunder, including the costs and expenses (including attorney's fees) of
defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence
or willful misconduct. The Dissemination Agent shall be paid compensation by the City for its services
provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses,
legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties
hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be acting in
any fiduciary capacity for the City, the Bond holders, or any other party. The obligations of the City under this
Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
DOCSOC/1373102v 1/200119-0002
SECTION 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City,
the Dissemination Agent, if any, the Participating Underwriter and Holders and Beneficial Owners from time
to time of the Bonds, and shall create no rights in any other person or entity.
CTTY OF SANTA MONICA
P. Lamont Ewell, City Manager
ATTEST:
Maria M. Stewart, City Clerk
APPROVED AS TO FORM:
Marsha Jones Moutrie, City Attorney
DOCSOC/1373102v 1/200119-0002
EXHII3TT A
NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD
OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: Santa Monica Public Financing Authority
Name of Issue: Santa Monica Public Financing Authority Lease Revenue Refunding Bonds,
Series 2009 (Public Safety Facility Project)
Date of Issuance: , 2009
NOTICE IS HEREBY GIVEN that the City of Santa Monica (the "City") has not provided an
Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate,
dated as of December 1, 2009, executed by the City. [The City anticipates that the Annual Report will be filed
by .]
Dated:
CITY OF SANTA MONICA
By:
DOCSOC/1373102v 1/200119-0002
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ATTACHA~NT E
PRELIMINARY OFFICIAL STATEMENT DATED , 2009
Stradling Yocca Carlson & Routh
Draft of I I/17/09
Ratings:
Fitch: "_
Moody's: "
Standard & Poor's: "_
See "RATINGS" herein
NEW ISSUE -BOOK-ENTRY ONLY
In the opinion of Stradling Yocca Carlson & Routh, a Professional Corporation, Bond Counsel, under existing statutes, regulations, ralings and
judicial decisions and assuming certain representations and compliance with certain covenants and requirements described in this Offcia7 Statement,
interest on the Series 2009 Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference far purposes of
calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the
Series 2009 Bonds is exempt from State of California personal income tax. The Authority has designated the 2009A Bonds as "bank qual~ed" under
the provisions of Section 265(6)(3) of the Internal Revenue Code of 1986, as amended See "BANK QUALIFIED OBLIGATIONS"and "TAX MATTERS "
SANTA MONICA PUBLIC FINANCING AUTHORITY
LEASE REVENUE REFUNDING BONDS, SERIES 2009
(Public Safety Facility Project)
(Bank Qualffied)
Dated: _, 2009
Due: duly 1, as shown below
The Santa Monica Public Financing Authority Lease Revenue Refunding Bonds, Series 2009 (Public Safety Facility Project) (the "Series 2009 Bonds") aze
payable from base rental payments (the "Base Rental Payments") to be made by the CiTy of Santa Monica (the "CiTy") for the right to the use of certain real
property (the "Site")on which the Project (de£ned below) is located (the Site and the Project together, the "Property") pursuant to a Lease Agreement, dated as of
September 1, 1999, as amended by a First Amendment to Lease Agreement, dated as of January 1,2002, and as further amended by a Second Amendment to
Lease Agreement, dated as of December 1, 2009 (as so amended, the "Lease Agreement"), by and between the CiTy, as lessee, and the Santa Monica Public
Financing AuthoriTy (the "Authority"), as lessor. See "SECURITY FOR THE SERIES 2009 BONDS" The Series 2009 Bonds aze being issued to provide
funds to (i) refinance the Authority's outstanding Lease Revenue Bonds, Series 1999 (Public Safety Facility Project) (the "Refunded Bonds' and (ii) pay the
costs incurred in connection with the issuance of the Series 2009 Bonds. See "THE REFUNDING PLAN." The CiTy has covenanted under the Lease Agreement
to make all Base Rental Payments provided for therein, to include all such payments as a separate line item in iu annual budgets, and to make all the necessary
annual appropriations for such Base Rental Payments. The CiTy's obligation to make Base Rental Payments is subject to abatement during any period in which,
by reason of material damage to, or destruction or condemnation of, the Property, or any defects in title to the Property, there is substantial interference with the
City's right to use and occupy any portion of the Property. See "RISK FACTORS-Abatement"
The Series 2009 Bonds are being issued in fully registered bookcntry only form, initially registered in the name of Cede & Co., as nominee of The
Depository Trust Company, New York, New York ("DTC"). Interest on the Series 2009 Bonds is payable semiannually on January 1 and July 1 of each year,
commencing July 1, 2010. Purchasers will not receive certificates representing their interest in the Series 2009 Bonds. Individual purchases will be in principal
amounts of $5,000 or integral multiples thereof. Principal of and interest and premium, if any, on the Series 2009 Bonds will be paid by The Bank of New York
Mellon Trust Company, N.A, as trustee (the "Tmstee") to DTC for subsequent disbursement to DTC Participants who are obligated to remit such payments to
the beneficial owners of the Series 2009 Bonds. See "THE SERIES 2009 BONDS-Book-Entry Only System" herein.
The Series 2009 Bonds will be issued on a parity with the Authority's Series 2002A Bonds (defined herein), originally issued in January, 2002 pursuant [o
the Indenture, dated as of September I, 1999, asamended by a First Amendment to Lease Agreement, by and between the AuthoriTy and the Trustee, in the
original aggregate principal amount of $17,310,000 and cuaendy outstanding in the aggegate principal amount of $12,345,000 and any additional bonds
("Additional Bonds") issued pursuant to the Indenture. The Series 2002A Bonds, the Series 2009 Bonds and any such Additional Bonds azc collectively refeaed
to as the "Bands."
The Series 2009 Bonds are subject to redemption prior to maturity as described herein. See "THE SERIES 2009 BONDSRedemption" herein.
The Series 2009 Bonds are special obligations of the Authority, payable solety from Base Rental Payments avd the other assets pledged therefor
under the Indenture. Neither the faith avd credit nor the taxing power of the Authority, the City or the State of California, or any political subdivision
thereof, is pledged to the payment of the Series 2009 Bonds. The Authority has no taxing power.
The obligation of the City to make the Base Rental Payments does not constitute a debt of the City or the State of California or of any political
subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction, and does not constitute an obligation far which the
City or the State of California is obligated to levy or pledge any Form of taxation or for which the City or the State of California has levied or pledged
any form of taxation.
Maturity Date Principal
(Tu[y I) Amount
2010 $
2011
2012
2013
2014
2015
Interest
Rate Aice~eld
MATURITY SCHEDULE
Maturity Date
CUSIPt (July I)
2016
2017
2018
2019
2020
2021
.Principal Interest
Amount Rote Yie[d
CUSIPt
THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE.
INVESTORS MUST READ THE ENTII2E OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED
INVESTMENT DECISION-
[STONE & YOUNGBERG LOGO]
The Series 2009 Bonds will be offered when, as and if issued oral received by the Underwriter, subject to the approval as to their validity by Stradling
Yocca Carlson & Routh, a Professional Corparahon, Newport Beach, California, Bond Counsel Stradling Yocca Carlson and Routh, a Professional
Corporation is also-acting as Disclosure Counsel to the City. Certain legal matters will be passed upon for the Ciry by its City Attorney. Public Resources
Preliminary, subject fo change.
t Copyright 2009, American Bankers Associauon. CUSIPs' data herein in provided by Standard & Poor's, CUSIPx Service Bureau, a division of The McGraw-
Hi[7 Companies, Inc. The City, Authority and the Underwriter take no responsibility far the accuracy of such data.
DOCSOC/1369366v7/200119-0002
Advisory Group has served as financial advisor to the City in connecfion with the issuance of the Series 2009 Bonds. It is anticipated that the Series 2009 Bonds
in def~nitfve farm wf17 be available for delivery to DTC in New Yor/~ New York on or about December L6, 2009.
Dated: December , 2009
DOCSOC/ 1369366v7/200119-0002
No dealer, broker, salesperson or other person has been authorized by the CiTy or the Authority to give any information
or to make any representations in connection with the offer or sale of the Series 2009 Bonds other than those contained herein
and, if given or made, such other information or representations must not be relied upon as having been authorized by the City of
the Authority. 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 Series 2009 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 or owners of the Series 2009 Bonds.
Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly
so described herein, aze intended solely as such and are not to be constmed as representations of fact.
The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has
reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the
federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guazantee the
accuracy or completeness of such information.
This Official Statement and the information contained herein aze subject to completion or amendment 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 the Authority or any other parties described herein since the
date hereof. These securities may-not be sold nor may an offer to buy be accepted prior to the time the Official Statement is
delivered in final form. Thi5Official Statement is being submitted in connection with the sale of the Series 2009 Bonds referred
to herein and may not be reproduced or used, in whole or in pazt, for any other purpose, unless authorized in writing by the City.
All summazies of documents and laws aze made subject to the provisions thereof and do not purport tobe complete statements of
any or all such provisions.
Certain statements included or incorporated by reference in this Official Statement constimte "forwazd-looking
statements" within the-meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United
States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended.
Such statements aze generally identifiable by the terminology usedsuch as "plan," "expect," "estimate," "project," "budget,"
"intend" or similaz words. Such forwazd-looking statements include, but aze not limited to, certain statements contained in the
information under the caption "CITY OF SANTA MONICA FINANCES: '
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAIlVED IN SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS
DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE CITY DOES
NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET
FORTH IN THIS OFFICLIL STATEMENT. IN EVALUATING SUCH STATEMENTS, POTENTLIL INVESTORS
SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR
RESULTS TO DIFFER MATERIALLY FROM THOSE EVDICATED BY SUCH FORWARD-LOOKING
STATEMENTS.
IN CONNECTION WITH THE OFFERING OF THE SERIES 2009 BONDS, THE UNDERWRITER MAY
OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SERIES 2009 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAII. IN THE OPEN
MARKET. SUCH STABA.IZING, IF COMMENCED, MAY BE DISCONTIIVUED AT ANY TIME. THE
UNDERWRITER MAY OFFER AND SELL THE SERIES 2009 BONDS TO CERTAIN DEALERS AND DEALER
BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER TARN THE PUBLIC OFFERING
PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED
FROM TIME TO TIME BY THE UNDERWRTTER
THE SERIES 2009 BONDS HAVE NO.T BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT AND HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
The City maintains a website; however, information presented there is not a part of this Official Statement and should
not be relied upon in making an investment decision with respect to the Series 2009 Bonds.
DOCSOC/1369366v7/200119-0002
CITY OF SANTA MONICA
(County of Los Angeles, California)
City Couucil
Ken Genser, Mayor
Pam O'Connor, Mayor Pro Tempore
Richard Bloom
Gleam Davis
Santa Monica Public Financing Authority
Ken Genser, Chairperson
Pam O'Connor, Chairperson Pro Tempore
Richard Bloom
Gleam Davis
City Manager/Authority Execufive Director
P. Lamont Ewell
City Attorney/Authority Attorney
Marsha Jones Moutde
City C[erk/Authority Secretary
Maria M. Stewart
Director of Finance/AuthoritpTreasurer/City Treasurer
Carol Swindell
PROFESSIONAL SERVICES
Financial Advisor
Public Resources Advisory Group
Los Angeles, California
Bond Counsel and Disclosure Counsel
Stradling Yocca Cazlson & Routh, a Professional Corporation
Newport Beach, Califomia
Trustee
The Bank of New York Mellon Trust Company, N.A.
Los Angeles, California
Robert T. Holbrook
Kevin McKeown
Bobby Shriver
Robert T. Holbrook
Kevin McKeown
Bobby Shriver
DOCSOC/ 1369366v7/200119-0002
TABLE OF CONTENTS
Page
INTRODUCTION .............................................................................................................. ........................:......... 1
THE SERIES 2009 BONDS .............................................................................................. .................................. 3
General ........................................................................................................................... .................................. 3
Registration, Transfers and Exchanges .................................................:........................ .................................. 3
Redemption .................................................................................................................... .................................. 4
Book-Entry Only System .............................................................................:................. .................................. 5
Transfer and Exchange of Bonds ................................................................................... .................................. 5
SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2009 BONDS .......... .................................. 6
Pledge of Revenues ........................................................................................................ .................................. 6
Abatement ...................................................................................................................... .................................. 6
Substitution and Removal of Property ........................................................................... ...........................:...... 7
Action on Default ........................................................................................................... .................................. 8
Reserve Fund .................................................................................................................. .................................. 8
Base Rental Payments .................................................................................................... .....................:............ 9
Additional Rental Payments .........................................................:................................. .......................:.......... 9
Insurance ........................................................................................................................ ................................ 10
SOURCES AND USES OF FUNDS ................................................................................. ................................ 11
BASE RENTAL PAYMENT SCHEDULE~ ....:................................................................. ................................ 11
THE REFUNDING PLAN .................................................................................................. ............................... 12
THE PROPERTY ..........................................:....................................................................: ............................... 12
THE AUTHORITY ............................................................................................................. ............................... 13
CITY OF SANTA MONICA .............................................................................................. ............................... 13
General ............................................................................................................:............... ............................... 13
Government and Administration ................................:.................................................... ............................... 14
Population ........................................................................................................................ ............................... 14
City Enterprise Operations .............................................................................................. ............................... 14
Retirement System ....::.................................................................................................... ............................... 15
Pension Funding Information ...........................................................:.............................. ............................... 16
Other Post Employment Benefits .................................................................................... ............................... 17
Labor Relations ............................................................................................................... ............................... 17
Industry and Employment ......................................................................:........................ ............................... 17
Effective Buying Income ................................................................................................. ........:...................... 21
Education ......................................................................................................................... ............................... 21
Culture and Recreation .................................................................................................... ............................... 22
Taxable Transactions ...................................:................................................................... ............................... 22
Building Permit Activity .............................::...............................................:.................. ............:.................. 24
Principal Property Taxpayers .......................................................................................... ............................... 25
Utilities ............................................................................................................................ ............................... 25
CITY OF SANTA MONICA FINANCES ...................:............................:......................... ............................... 25
Accounting Policies and Financial Reporting .......................:......................................... ............................... 25
Budgetary Process ..................................................:......................................................... .............................. 26
Assessed Valuations ......................................................................................................... .............................. 26
Ad Valorem Property Taxes; Proposition lA ................................................................... .............................. 29
Tax Receipts ..................................................................................................................... .............................. 30
Vehicle License Fee Reduction .....:.................................................................................. .............................. 31
Long-Term Debt ............................................................................................................... .............................. 32
General Fund Financial Summary .................................................................................... .............................. 35
Investment of City Funds ................................................................................................. .............................. 38
RISK FACTORS .................................................................................................................. .............................. 39
i
DOCSOC/1369366v7/200ll 9-0002
General Considerations -Security for the Series 2009 Bonds .......................:................................:... ......... 39
Abatement ............................................................................................................................................. ......... 39
Seismic Activity and Natural Disasters ................................................................................................. ......... 40
Other Financial Matters ......................................................................................................................... ......... 41
State Budget .......................................................................................................................................... ......... 41
Substitution, Addition and Removal of Property; Additional Bonds ..................................................... ........ 43
Limited Recourse on Default; No Acceleration of Base Rental ............................................................. ........ 43
Possible Insufficiency of Insurance Proceeds ........................................................................................ ........ 44
Limitations on Remedies ................................................................................:.......:................:.............. ........ 44
Loss of Tax Exemption .................................................................................................................:........ ........ 45
No Liability of Authority to the Owners ................................................................................................ ........ 45
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.... ........ 45
Article XIIIA of the California Constitution .......................................................................................... ........ 45
Article XIIIB of the California Constitution .......................................................................................... ........ 46
Proposition 62 ...................................::........................:.......................................................................... ........ 46
Proposition 218 ...................................................................................................................................... ........ 47
Unitary Property ..................................................................................................................................... ........ 48
Future Initiatives ..............................................................................................................:...................... ........ 48
TAX MATTERS .......:...................................................................................................................:............ ........ 48
BANK QUALIFIED OBLIGATIONS ....................................................................................................... ........ 49
CERTAIN LEGAL MATTERS ................................................................................................................. ........ 50
ABSENCE OF LITIGATION ..:...............................................:................::............................................... ........ 50
UNDERWRITING ..................................................................................................................................... ........ 5 0
RATINGS .....................................................................................................................:............................. ........ 50
FINANCIAL ADVISOR ............................................................................................................................ ........ 50
CONTINUING DISCLOSURE .......:......................................................................................................... ........ 51
FINANCIAL STATEMENTS OF THE CITY ..................:....................................................................... ........ 51
MISCELLANEOUS ................................................................................................................................... ........ 51
APPENDIX A SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS .................................... ...... A-I
APPENDIX B AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE YEAR
ENDED JUNE 30, 2008 .............................................................................................. .......B-1
APPENDIX C PROPOSED FORM OF BOND COUNSEL OPINION .............................................. .......C-1
APPENDIX D FORM OF CONTINUING DISCLOSURE CERTIFICATE ...................................... ...... D-1
APPENDIX E BOOK-ENTRY ONLY SYSTEM ...................:.......................................................... .......E-1
ii
DOCSOC/1369366v7/200119-0002
OFFICIAL STATEMENT
SANTA MONICA PUBLIC FINANCING AUTHORITY
LEASE REVENUE REFUNDING BONDS, SERIES 2009
(Public Safety Facility Project)(Bank Qualified)
INTRODUCTION
This Official Statement (which includes the cover page and Appendices hereto) (the "Official
Statement"), provides certain information concerning the sale and delivery of $ `aggregate
principal amount of Santa Monica Public Financing Authority Lease Revenue Refunding Bonds, Series 2009
(Public Safety Facility Project) (the "Series 2009 Bonds").
The Series 2009 Bonds are being issued in fully registered book-entry only form, initially registered in
the name of Cede & Co.; as nominee of The Depository Trust Company, New York, New York ("DTC").
Interest on the Series 2009 Bonds is payable semiannually on January 1 and July 1 of each year, commencing
July 1, 2010. Purchasers will not receive certificates representing their interest in the Series 2009 Bands.
Individual purchases will be in principal amounts of $5,000 or integral multiples thereof. Principal of and
interest on the Series 2009 Bonds will be paid by The Bank of New York Mellon Trust Company, N.A., as
trustee (the "Trustee") to DTC for subsequent disbursement to DTC Participants who are obligated to remit
such payments to the beneficial owners of the Series 2009 Bonds. See "THE SERIES 2009 BONDS-Book-
Entry Only System" herein. The Series 2009 Bonds are subject to redemption prior to maturity as described
herein. See "THE SERIES 2009 BONDS-Redemption."
The net proceeds of the sale of the Series 2009 Bonds will be used to (i) refmance the Authority's
outstanding Lease Revenue Bonds, Series 1999 (Public Safety Facility Project) (the "Refunded Bonds") and
(ii) pay the costs incurred in connection with the issuance of the Series 2009 Bonds.
The Authority issued the Refunded Bonds in 1999 pursuant to an Indenture, dated as of September 1,
1999 (the "Original Indenture") to (i) finance a portion of the costs of the acquisition, constmcfion and
installation of a public safety facility and related improvements, facilities and equipment (the "Project"),
(ii) fund a reserve fund for the Series 2002A Bonds, and (iii), pay the costs of issuance of the Refunded Bonds.
In 2002, the Authority issued its Lease Revenue Bonds, Series 2002A (Public Safety Facility Project), pursuant
to the Original Indenture (defined below), as amended by a First Supplemental Indenture, dated as of
January 1, 2002, in the original aggregate principal amount of $17,310,000 and currently outstanding in the
aggregate principal amount of $12,345,000 (the "Series 2002A Bonds") to finance additional costs of the
Project (including capitalized interest), fund an additonal contribution to the Reserve Fund for the Bonds, and
pay certain costs of issuance.
The Series 2009 Bonds are payable from base rental payments (the "Base Rental Payments") to be
made by the City for the right to the use of certain real property on which the Project is located (the "Site") and
the Project (together, the Site and the Project comprise the "Property") pursuant to a Lease Agreement, dated
as of September 1, 1999 (the "Original Lease Ageement"); as amended by a First Amendment to Lease
Agreement, dated as of January 1, 2002, as further amended by a Second Amendment to Lease Agreement,
dated as of December 1, 2009 (as so amended, the "Lease Agreement"), between the City, as lessee, and the
Santa Monica Public Financing Authority. (the "Authority"), as lessor.
The Series 2009 Bonds will be issued pursuant to an Indenture, dated as of September 1, 1999 (the
"Original Indenture"), as amended by a First Supplemental Indenture, dated as of January 1, 2002, (the "First
Preliminary, subject to change..
DOCSOC/ 1369366v7/200119-0002
Supplemental Indenture") and as further amended by a Second Supplemental Indenture, dated as of
December 1, 2009 (as so amended, the "Indenture"), by and among the Authority, the City and the Trustee.
The Series 2009 Bonds will be issued on a panty with the Series 2002A Bonds. Pursuant to the
Indenture, the Authority may issue additional bonds (the "Additional Bonds") payable from the Base Rental
Payments on a parity with the Series 2002A Bonds and the Series 2009 Bonds (the Series 2002A Bonds, the
Series 2009 Bonds and any such Additional Bonds being collectively referred to as the "Bonds").
Pursuant to a Ground Lease, dated as of September 1, 1999 (the "Ground Lease"), the City has leased
the real property on which the Project is located (the "Site") to the Authority. The Authority has subleased the
Site and the Project (together, the "Property") to the City under the Lease Agreement. The Lease Agreement
obligates the City to make Base Rental Payments.
The Trustee and the Authority have entered into an Assignment Agreement, dated as of September 1,
1999, as amended by a First Amendment to Assigmnent Agreement, dated as of January 1, 2002 and by a
Second Amendment to Assignment Agreement, dated as of December 1, 2009, pursuant to which the
Authority has assigned to the Trustee for the benefit of the Bond Owners substantially all of the Authority's
right, title and interest in and to the Ground Lease and the Lease Agreement, including its right to receive the
Base Rental Payments due under the Lease Agreement.
The City covenants under the Lease Agreement to take such action as may be necessary to include all
Rental Payments, which are comprised of Base Rental Payments and Additional Rental Payments (which
include taxes and assessments affecting the Property, administrative costs of the Authority relating to the
Property, fees and expenses of the Trustee and other amounts payable under the Lease Agreement), due under
the Lease Agreement as a sepazate line item in its annual budgets and to. make the necessazy annual
appropriations therefor, subject to abatement as described herein.
Base Rental Payments aze subject to complete or partial abatement in the event and to the extent that
there is substantial interference with the City's right to use and occupy the Property or any portion thereof.
See "RISK FACTORS-Abatement " Abatement of Base Rental Payments under the Lease Agreement, to the
extent payment is not made from alternative sources as set forth below, would result in all Bond Owners
receiving less than the full amount of principal of and interest on the Bonds. To the extent proceeds of
insurance aze available or there aze moneys in the Reserve Fund established under the Indenture, Base Rental
Payments (or a portion thereof) maybe made during periods of abatement.
THE SERIES 2009 BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY, PAYABLE
SOLELY FROM BASE RENTAL PAYMENTS AND THE OTHER ASSETS PLEDGED THEREFOR
UNDER THE INDENTURE. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE
AUTHORITY, THE CITY OR THE STATE OF CALIFORNIA (THE "STATE"), OR ANY POLITICAL
SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE SERIES 2009 BONDS: THE
AUTHORITY HAS NO TAXING POWER.
THE OBLIGATION OF THE CITY TO MAKE THE BASE RENTAL PAYMENTS DOES NOT
CONSTITUTE A DEBT OF THE CITY OR THE STATE OR OF ANY POLITICAL SUBDNISION
THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR
RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY OR THE
STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE
CITY OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.
The City has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking
Board for purposes of Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission certain annual
financial information and operating data and, in a timely manner, notice of certain material events. These
covenants have been made in order to assist the Underwriter in complying with SEC Rule 15c2-12(b)(5). See
DOCSOC/1369366v7/200119-0002
"CONTINUING DISCLOSURE" herein for a description of the specific nature of the annual report and
notices of material events and a summary description of the terms of the disclosure agreement pursuant to
which such reports aze to be made.
The summazies or references to the Indenture, Lease Agreement, the Ground Lease, the Assignment
Agreement and other documents, agreements and statutes referred to herein, and the description of the
Series 2009 Bonds included in this Official Statement, do not purport to be comprehensive or definitive, and
such summaries, references and descriptions aze qualified in their entireties by reference to each such
document or statute. All capitalized terms used in this Official Statement (unless otherwise defined herein)
which are defined in the Indenture or the Lease Agreement shall have the meanings set forth therein, some of
which are summarized in APPENDIX A-"SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS."
THE SERIES 2009 BONDS
General
The Series 2009 Bonds shall be issued in fully registered form without coupons in denominations of
$5,000 or any integral multiple thereof, so long as no Series 2009 Bond shall have more than one maturity
date. The Series 2009 Bonds will be dated as of and beaz interest (calculated on the basis of a 360-day year
comprised of twelve 30-day months) from the dated date thereof at the rates set forth on the cover page hereof.
Interest on the Series 2009 Bonds will be paid semiannually on January 1 and July 1 (each, an "Interest
Payment Date") of each yeaz, commencing July 1, 2010.
Interest on the Series 2009 Bonds will be payable from the Interest Payment Date next preceding the
date of authentication thereof unless (i) a Series 2009 Bond is authenticated on or before an Interest Payment.
Date and after the close of business on the preceding Record Date, in which event it will beaz interest from
such Interest Payment Date, (ii) a Series 2009 Bond is authenticated on or before the first Record Date, in
which event interest thereon will be payable from the dated date thereof, or (iii) interest on any Series 2009
Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from
the date to which interest has been paid in full, payable on each Interest Payment Date. Interest will be paid in
lawful money of the United States on each Interest Payment Date to the Persons in whose names the ownership
of the Series 2009 Bands is registered on the Registration Books at the close of business on the immediately
preceding Record Date, except as provided below. Interest will be paid by check of the Trustee mailed by first
class mail, postage prepaid, on each Interest Payment Date to the Series 2009 Bond Owners at their respective
addresses shown on the Registration Books as of the close of business on the preceding Record Date.
The principal and premium, if any, of the Series 2009 Bonds will be payable in lawful money of the
United States of America upon presentation and surrender thereof upon maturity or earlier redemption at the
Office of the Trustee. The Series 2009 Bonds will be subject to extraordinary [and optional redemption] as set
forth herein.
Registration, Transfers and Exchanges
The Series 2009 Bonds will be issued as fully registered bonds, registered in the name of Cede & Co.
as nominee of DTC, and will be available to actual purchasers of the Series 2009 Bonds (the "Beneficial
Owners") in the denominations set forth above, under the book-entry system maintained by DTC, only through
brokers and dealers who are or act through DTC Participants (as defined herein) as described herein.
Beneficial Owners will not be entitled to receive physical delivery of the Series 2009 Bonds. See "THE
SERIES 2009 BONDS-Book-Entry Only System."
DOCSOC/ 1369366x7/200119-0002
Redemption
Extraordinary Redemption from Condemnation Award or Insurance Proceeds. The Series 2009
Bonds are subject to redempfion, in whole or in part, on any date, in denominations of $5,000 or any integral
multiple thereof, from and to the extent of any insurance proceeds or condemnation award received with
respect to all or a portion of the Property, deposited by the Trustee in the Redemption Fund pursuant to the
Indenture, at a Redemption Price equal to the principal amount of the Series 2009 Bonds to be redeemed, plus
accrued interest thereon to the date of redemption, without premium.
Optional Redemption. The Series 2009 Bonds maturing on or after July 1, 20_, are subject to
optional redemption, in whole or in part, on any date on or after July 1, 20_, in denominations of $5,000 or
any integral multiple thereof, from and to the extent of prepaid Base Rental Payments paid pursuant to the
Lease Agreement, at a Redemption Price equal to the principal amount of the Series 2009 Bonds to be
redeemed plus accrued interest thereon to the date of redemption, withouf premium.
Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redempfion
of less than all of the Bonds, the Trustee shall select the Bonds to be redeemed from all Bonds not previously
called for redemption (a) with respect to any optional redemption of Bonds of a Series, among maturities of
Bonds of such Series as duetted in a Written Request of the Authority, (b) with respect to any redemption
from and to the extent of any insurance proceeds or condemnation award received with respect to all or a
portion of the Property and the corresponding provision of any Supplemental Indenture pursuant to which
Additional Bonds are issued, among maturities of all Series of Bonds on a pro rata basis as neazly as
practicable, and (c) with respect to any other redemption of Additional Bonds, among maturities as provided in
the Supplemental Indenture pursuant to which such Additional Bonds are issued, and by lot among Bonds of
the same Series with the same maturity in any manner which the Trustee in its sole discretion shall deem
appropriate and fair. For purposes of such selection, all Bonds shall be deemed to be comprised of sepazate
$5,000 denominations and such separate denominations shall be treated as sepazate Bonds which may be
separately redeemed.
Notice ofRedempfron. So long as the Bonds are held in book-entry form, notices of redemption will
be mailed by the Trustee only to DTC and not to any Beneficial Owners. The Trustee on behalf and at the
expense of the Authority shall mail (by fast class mail) notice of any redemption to the respective Owners of
any Bonds designated for redemption at their respective addresses appearing on the Registration Books, to the
Securities Depositories and to one or more Information Services, at least 15 but not more than 60 days prior to
the date fixed for redemption. Such notice shall state the date of the notice, the redemption date, the
redemption place and the Redemption Price and shall designate the CUSIP numbers, the Bond numbers and
the maturity or maturities (except in the event of redemption of all of the Bonds of such maturity or maturities
in whole) of the Bonds to be redeemed, and shall require that such Bonds be then surrendered at the principal
corporate trust office of the Trustee for redemption at the Redemption Price, giving notice also that further
interest on such Bonds will not accrue from and after the date fixed for redempfion. Neither the failure to
receive any notice so mailed, nor any defect in such notice, shall affect the validity of the proceedings for the
redemption of the Bonds or the cessation of accrual of interest thereon from and after the date fixed for
redemption.
The City has the right under the Indenture to rescind any optional redemption by written notice to the
Trustee on or prior to the date fixed for redemption. Any notice of optional redemption will be cancelled and
annulled if for any reason funds will not be or are not available on the date fixed for redemption for the
payment in full of the Bonds then called for redemption, and a cancellation will not constitute an Event of
Default under the Indenture. The City and the Trustee have no liability to the Owners or any other party
related to or arising from a rescinded redemption. The Trustee will mail notice of a rescission of redemption in
the same manner as the original notice of redemption was sent.
DOCSOC/1369366v7/200119-0002
Partial Redemption of Bonds. Upon surrender of any Bonds redeemed in part only, the Authority
shall execute and the Tmstee shall authenticate and deliver to the Owner thereof, at the expense of the
Authority, a new Bond or Bonds of the same Series in authorized denominations equal in aggregate principal
amount representing the unredeemed portion of the Bonds surrendered.
Effect of Notice of Redemption. Notice having been mailed as aforesaid, and moneys for the
Redemption Price, and the interest to the applicable date fixed for redemption, having been set aside in the
Redemption Fund, the Bonds shall become due and payable on said date, and, upon presentation and surrender
thereof at the principal corporate trust office of the Trustee, said Bonds shall be paid at the Redemption Price
thereof, together with interest accrued and unpaid to said date.
If; on said date fixed for redemption, moneys for the Redemption Price of all the Bonds to be
redeemed, together with interest to said date, shall be held by the Trustee so as to be available therefor on such
date, and, if notice of redemption thereof shall have been mailed as aforesaid and not canceled, then, from and
after said date, interest on said Bonds shall cease to accrue and become payable. All moneys held by or on
behalf of the Trustee for the redemption of Bonds shall be held in trust for the account of the Owners of the
Bonds so to be redeemed without liability to such Owners for interest thereon.
Book-Entry Only System
General. DTC will act as securities depository for the Series 2009 Bonds. The Series 2009 Bonds
will be issued asfully-registered bonds registered in the name of Cede & Co. (OTC's partnership nominee).
One fully-registered Series 2009 Bond will be issued for each maturity of the Series 2009 Bonds, each in the
initial aggregate principal amount of such maturity, and will be deposited with DTC. See APPENDIX E-
"Book-Entry Only System."
Transfer and Exchange of Bands
The following provisions regarding the exchange and transfer of the Series 2009 Bonds apply only
during any period in which the Series 2009 Bonds are not subject to OTC's book- entry system. While the
Series 2009 Bonds are subject OTC's book-entry system, their exchange and transfer will be effected through
DTC and the Participants and will be subject to the procedures, rules and requirements established by OTC.
Any Bond may, in accordance with its terms, be transferred upon the books required to be kept by the
Tmstee pursuant to the provisions of the Indenture by the Person in whose name it is registered, in person or
by his or her duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery
of a written instrument of transfer, duly executed in a form acceptable to the Trustee. Whenever any Bond or
Bonds shall be surrendered for transfer, the Authority shall execute and the Tmstee shall authenticate and shall
deliver a new Bond or Bonds of the same Series in a like aggregate principal amount, in any Authorized
Denomination. The Trustee shall require the Bond Owner requesting such transfer to pay any tax or other
governmental charge required to be paid with respect to such transfer.
The Bonds may be exchanged at the principal corporate trust office of the Trustee for a like aggregate
principal amount of Bonds of the same Series of other authorized denominations. The Tmstee shall require the
payment by the Bond Owner requesting such exchange ofany tax or other governmental charge required to be.
paid with respect to such exchange.
The Trustee shall not be obligated to make any transfer or exchange of Bonds of a Series during the
period established by the Trustee for the selection of Bonds of such Series for redemption, or with respect to
any Bonds of such Series selected for redemption.
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DOCSOG1369366v7/20 0 1 1 9-00 02
SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2009 BONDS
Pledge of Revenues
The Series 2009 Bonds are payable from and secured by Base Rental Payments and Additional Rental
Payments and certain amounts on deposit in the funds and accounts established under the Indenture. Base
Rental Payments shall be paid by the City from any and all legally available funds. The City has covenanted
in the Lease Agreement to take such action as may be necessary to include all Base Rental Payments and
Additional Rental Payments due under the Lease Agreement as a sepazate line item in its annual budgets and to
make the necessary annual appropriations therefor.
The Authority, pursuant to the Assignment Agreement, will assign to the Trustee for the benefit of the
Series 2009 Bond Owners all of the Authority's right, title and interest in and to the Ground Lease and the
Lease Agreement, including, without limitation, its right to receive Base Rental Payments to be paid by the
City under and pursuant to the Lease Agreement; provided that, the Authority will retain the rights to
indemnification and to payment of reimbursement of its reasonable costs and expenses under the Lease
Agreement. The City will pay Base Rental Payments directly to the Trustee, as assignee of the Authority. See
`-Base Rental Payments" below.
The Series 2009 Bonds will be .issued on a parity with the Series 2002A Bands, originally issued in
January 2002 pursuant to the Original Indenture, as amended by the First Supplemental Indenture, in the
original aggregate principal amount of $17,310,000 and currently outstanding in the aggregate principal
amount of $12,345,000. The Series 2002A Bonds are payable from and secured by Base Rental Payments and
Additional Rental Payments and certain amounts on deposit in the funds and accounts established under the
Indenture on a parity with the Series 2009 Bonds and any Additional Bonds issued pursuant to the Indenture.
Pursuant to the Indenture, the Authority may issue Additional Bonds payable from the Base Rental Payments
on a parity with the Series 2002A Bonds and the Series 2009 Bonds. See APPENDIX A-"SUMMARY OF
TIfE PRINCIPAL LEGAL DOCUMENTS-The Indenture-Additional Bonds."
Subject only to the provisions of the Indenture permitting the application thereof for the purposes and
on the terms and conditions set forth in the Indenture, all of the Base Rental Payments and any other amounts
(including proceeds of the sale of the Bonds) held in the Base Rental Payment Fund, the Reserve Fund, the
Interest Fund, the Principal Fund and the Redemption Fund aze pledged by the Authority pursuant to the
Indenture to secure the payment of the principal of, premium, if any, and interest on the Bands in accordance
with their terms, the provisions of the Indenture and the Act. Said pledge constitutes a first lien on such assets.
The Series 2009 Bonds are special obligations of the Authority, payable solely from Base Rental
Payments and the other assets pledged therefor under the Indenture. Neither the faith and credit nor the taxing
power of the Authority, the City or the State, or any political subdivision thereof, is pledged to the payment of
the Series 2009 Bonds. The Authority has no taxing power.
Abatement
Base Rental Payments and Addifional Rental Payments aze paid by the City in each Rental Period for
and in consideration of the right to use and occupy the Property and in consideration of the continued right to
the quiet use and enjoyment thereof during each such period. Except as otherwise specifically provided in the
Lease Agreement, during any period in which, by reason of material damage to, or destruction or
condemnation of, the Property, or any defect in title to the Property, there is substantial interference with the
City's right to use and occupy any portion of the Property, Rental Payments shall be abated proportionately,
and the City waives the benefits of Civil Code Sections 1932(1), 1932(2) and 1933(4) and any and all other
rights to terminate the Lease Agreement by virtue of any such interference, and the Lease Agreement shall
continue in full force and effect. The amount of such abatement shall be ageed upon by the City and the
Authority; provided, however, that the Rental Payments due for any Rental Period shall not exceed the annual
DOCSOC/1369366d7/200119-0002
fair recital value of that portion of the Property available for use and occupancy by the CiTy during such Rental
Period. Such abatement shall continue for the period commencing with the date of interference resulting from
such damage, destruction, condemnation or title defect and, with respect to damage to or destruction of the
Property, ending with the substantial completion of the work of repair or replacement of the Property, or the
portion thereof so damaged or destroyed; and the term of the Lease Agreement shall be extended as provided
in the Lease Agreement, except that the term shall in no event be extended ten yeazs beyond the stated
termination date of the Lease Agreement. The Trustee cannot terminate the Lease Agreement in the event of
such substantial interference. Abatement of Base Rental Payments and Additional Rental Payments is not an
event of default under the Lease Agreement and does not permit the Trustee to take any action or avail itself of
any remedy against the CiTy. See APPENDIX A-"SiJNIIvIARY OF THE PRINCIPAL LEGAL
DOCUMENTS-The Lease Agreement Rental Abatement."
Notwithstanding the foregoing, to the extent that moneys are available for the payment of Rental
Payments due under the Lease Agreement in any of the funds and accounts established under the Indenture,
such Rental Payments will not be abated as provided above but, rather, will be payable by the CiTy as a special
obligation payable solely from said funds and accounts.
Substitution and Removal of Property
The Authority and the CiTy may amend the Lease Agreement to substitute alternate real property for
any portion of the Property or to release a portion of the Property from the Lease Agreement, upon compliance
with all of the conditions set forth in the Lease Agreement and described below. After a substitution or
release, the portion of the Property for which the substitution or release has been effected shall be released
from the leasehold encumbrance of the Lease Agreement.
The Lease Agreement provides that there shall be no reduction in or abatement of the Base Rental
Payments due from the City thereunder as a result of such substitution or release. Any such substitution or
release shall be subject to the following specific conditions precedent to such substitution or release:
(a) an independent certified real estate appraiser selected by the CiTy shall have found (and shall
have delivered a certificate to the City and the Trustee setting forth its findings) that the Property, as
constituted after such substitution or release, (i) has an annual fair rental value Beater than or equal to 105% of
the maximum Base Rental Payments payable by the City in any Rental Period, and (ii) has a useful life equal
to or greater than the useful life of the Property, as constituted prior to such substitufion or release;
(b) the City shall have obtained or caused to be obtained a CLTA title insurance policy or
policies with respect to any substituted property in the amount of the fair mazket value of such substituted
property (which fair market value shall have been determined by an independent certified real estate
appraiser), of the type and with the endorsements described in the Lease Agreement;
(c) the City shall have provided the Trustee with an opinion of counsel to the effect that such
substitution or release will not, in and of itself, cause the interest on the Bonds to be included in gross income
for federal income tax purposes;
(d) the City shall have given, or shall have made arrangements to be given, any notice of the
occurrence of such substitution or release required to be given pursuant to the Continuing Disclosure
Certificate;
(e) the City, the AuthoriTy and the Trustee shall have executed, and the City shall have caused to
be recorded with the Los Angeles CoanTy Recorder, any document necessary to reconvey to the CiTy the
portion of the Property being substituted or released and to include any substituted real property in the
description of the Property contained in the Lease Agreement and in the Ground Lease; and
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DOCSOC/ 1369366v7/20 0 1 1 9-00 02
(~ the City shall .have certified to the Trustee that the substituted real properly is of
approximately the same degree of essentially to the City as the portion of the Property for which it is being
subsfituted.
See APPENDIX A-"Si JMMARY OF THE PRINCIPAL LEGAL DOCi.JMENTS-The Lease Agreement-
Substitution or Release of the Property"
Acfion on Default
Should the City default under the Lease Agreement, the Trustee, as assignee of the Authority under
the Lease Agreement, may terminate the Lease Agreement and.recover certain damages from the City, or may
retain the Lease Agreement and hold the City liable for all Base Rental Payments thereunder on an annual
basis, and will have the right to re-enter and re-let the Property. In the event such re-letting occurs, the City
would be liable for any resulting deficiency in Base Rental Payments. Base Rental Payments may not be
accelerated upon a default under the Lease Ageement. See "RISK FACTORS-Limited Recourse on Default;
No Acceleration of Base Rental."
For a description of the events of default and permitted remedies of the Trustee (as assignee of the
Authority) contained in the Lease Ageement and the Indenture, see APPENDIX A-"SUMMARY OF THE
PRINCIPAL LEGAL DOCi.JMENTS-The Lease Agreement-Default" and "-The Indenture-Events of
Default," "-Other Remedies of the Trustee," and "Limitation on Suits: '
Reserve Fuud
A reserve fund (the "Reserve Fund") has been established by the Indenture for the Bonds and was
funded initially from proceeds of the Series 1999 Bonds and the Series 2002A Bonds, respecfively, in the
amount equal to the least of (a) "10% of the proceeds of the issue" within the meaning of Section 148 of the
Code, (b) the maximum amount of debt service on the Bonds payable in any one yeaz, and (c) 125% of the
average amount of debt service on the Bonds payable in each year (the "Reserve Requirement"). As of the
date of issuance of the Series 2009 Bands, the amount of the Reserve Requirement (calculated with respect to
the Series 2002A Bonds and the Series 2009 Bonds) will equal the amount described in (a) above, namely
The Authority may substitute a Credit Facility for all or part of the moneys on deposit in the Reserve
Fund by depositing such Credit Facility with the Trustee so long as, at the time of such substitution, the
amount on deposit in the Reserve Fund, together with the amount available under all Credit Facilities, shall be
at least equal to the Reserve Requirement.
If, oh any Interest Payment Date, the amount on deposit in the Interest Fund is insufficient to pay the
interest on the Bonds payable on such Interest Payment Date, the Trustee shall transfer from the Reserve Fund
and deposit in the Interest Fund an amount sufficient to make up such deficiency. If, on any July 1, the amount
on deposit in the Principal Fund is insufficient to pay the principal amount of the Bonds due on such July 1,
[either] as a result of the maturity thereof [or mandatory sinking fund redemption], the Trustee shall transfer
from the Reserve Fund and deposit in the Principal Fund an amount sufficient to make up such deficiency.
Moneys, if any, on deposit in the Reserve Fund shall be withdrawn and applied by the Trustee for the
final"payment of principal of and interest on the Bonds.
If the sum of the amount on deposit in the Reserve Fund, plus the amount available under all available
Credit Facilities, is less than the Reserve Requirement, the first of Base Rental Payments thereafter received
from the City under the Lease Agreement and not needed to pay the principal, if any, of and interest on the
Bonds scheduled to be paid on the following Interest Payment Date shall be used to increase the amount on
DOCSOC/1369366v7/200119-0002
deposiYin the Reserve Fund to an amount which, when added to the amount available under all available
Credit Facilities, shall equal the Reserve Requirement
Base Rental Payments
Rental Payments, including Base Rental Payments, shall be paid by the City to the Authority for and
in consideration of the right to use and occupy the Property and in consideration of the continued right to the
quiet use and enjoyment thereof during each Rental Period for which such Rental Payments are to be paid.
Each Base Rental Payment shall be deposited with the Trustee no later than the 15th day of the month next
preceding each Interest Payment Date (the "Base Rental Deposit Date") on which such Base Rental Payment is
due. All Base Rental Payments will be paid directly by the City to the Trustee, and if received by the
Authority at any time will be transferred by the Authority with the Trustee within one Business Day after the
receipt thereof. All Base Rental Payments received by the Trustee will be deposited by the Trustee in the Base
Rental Payment Fund.
Pursuant to the Indenture, on the Business Day immediately preceding each Interest Payment Date and
on the Business Day immediately preceding each Principal Payment Date, the Trustee will transfer amounts in
the Base Rental Payment Fund as are necessary to the Interest Fund and the Principal Fund to provide for the
payment of the interest on and principal of the Series 2009 Bonds.
Scheduled Base Rental Payments relating to the Series 2002A Bonds and the Series 2009 Bonds are
set forth below under the heading "BASE RENTAL PAYMENT SCHEDULE."
THE OBLIGATION OF THE CITY TO MAKE THE BASE RENTAL PAYMENTS DOES NOT
CONSTITUTE A DEBT OF THE CITY OR THE STATE OR OF ANY POLITICAL SUBDIVISION
THEREOF WITHIN THE MEANING OF-ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR
RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY OR THE
STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE
CITY OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.
Additional Rental Payments
For the right to use and occupy the Properly, the Lease Ageement requires the City to pay, as
Additional Rental payments thereunder, in addition to the Base Rental Payments, such amounts as shall be
required for the payment of the following:
(i) All taxes and assessments of any type or nature charged to the Authority or the City
or affecting the Property or the respective interests or estates of the Authority or the City therein.
(ii) All reasonable administrative costs of the Authority relating to the Property
includmg, but without limiting the generality of the foregoing, salaries, wages, fees and expenses,
compensation and indemnification of the Tmstee payable by the Authority under the Indenture, fees of
auditors, accountants, attorneys or engineers, and all other necessary and reasonable administrative costs of the
Authority or charges required to be paid by it in order to maintain its existence or to comply with the terms of
the Indenture or the Lease Ageement or to defend the Authority and its members, officers, agents and
employees.
(iii) Insurance premiums for all insurance required pursuant to the Lease Agreement.
(iv) Any amounts with 4espect to the Lease Agreement or the Bonds required to be
rebated to the federal government in accordance with section 148(f) of the Internal Revenue Code of 1986.
DOCSOC/ 1369366v7/200119-0002
(v) All other payments required to be paid by the City under the provisions of the Lease
Agreement or the Indenture.
Amounts constituting Additional Rental Payments payable under the Lease Agreement will be paid by
the City duectly to the person or persons to whom such amounts shall be payable. The City will pay all such
amounts when due or at such later time as such amounts may be paid without penalty or, in any other case,
within 60 days after notice in writing from the Trustee to the City stating the amount of Additional Rental
Payments then due and payable and the purpose thereof.
Insurance
The Lease Agreement requires the City to maintain or cause to be maintained fire, lightning and
special extended coverage insurance (which shall include coverage for vandalism and malicious mischief, but
need not include coverage for earthquake damage) on all improvements constituting any part of the Property in
an amount equal to the greater of 100% of the replacement cost of such improvements or 100% of the
outstanding principal amount of 4he Bonds. Each such policy of insurance shall contain a standazd
replacement cost endorsement providing for no deduction for depreciation and a stipulated amount
endorsement. All insurance required to be maintained pursuant to the Lease Agreement may be subject to a
deductible in amount not to exceed $500,000. The City's obligation to maintain the insurance described above
may be satisfied by self-insurance, provided such self-insurance complies with the requirements of the Lease
Agreement. See APPENDIX A-"SUMMARY OF THE PRINCIPAL LEGAL DOCT JMENTS-The Lease
Agreement-Insurance."
The Lease Ageement requires the City to maintain rental interruption insurance to cover the
Authority's loss, total or partial, of Base Rental Payments resulting from the loss, total or partial, of the use of
any part of the Property as a result of any of the hazards covered by the casualty insurance described in the
preceding pazagraph, in an amount sufficient at all times to pay an amount not less than the product of two
times the maximum amount of Base Rental Payments scheduled to be paid during any Rental Period. The City
is not permitted to self-insure its obligation to maintain rental interruption insurance.
The City is also required to maintain or cause to be maintained, throughout the term of the Lease
Agreement, a standard commercial general liability insurance policy or policies in protection of the City, the
Authority and their respective members, officers, agents and employees, and worker's compensation insurance
as described in APPENDIX A-"SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS-The Lease
Agreement-Insurance."
The City is required under the Lease Agreement to provide, at its own expense, one or more CLTA
title insurance policies far the Property, in the aggregate amount of not less than the initial aggregate principal
amount of the [Series 2009] Bonds, insuring the fee interest of the City in the Property, the Authority's
leasehold estate in the Property under the Ground Lease, and the City's subleasehold estate in the Property
under the Lease Agreement, subject only to Permitted Encumbrances, and providing that all proceeds
thereunder are payable to the Trustee for the benefit of the Owners.
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DOCSOC/1369366v7/200 1 1 9-0002
SOURCES AND USES OF FUNDS
The sources and uses of funds with respect to the Series 2009 Bonds aze shown below.
Sources
Principal Amount of Series 2009 Bonds $
[Plus: Available Series 1999 Bond Amounts]I'I
Less: [Net Original Issue DiscounUPremium]
Total Sources $
Uses
Escrow Fund $
Cast of Issuance FundIZl
Underwriter's Discount
Total Uses $
"~ Includes excess Reserve Fund amounts and other available amounts.
«~ Includes legal, financial advisory, rating agency, printing fees and other miscellaneous costs of issuance.
BASE RENTAL PAYMENT SCFIEDULE~
Following is the annual schedule of Base Rental Payments due with respect to the Series 2009 Bonds
and the Series 2002A Bonds:
Period Ending Series 2009 Series 2009 Series 2002A Tota[
(Tuly 1) Principal Interest Bonds Payments
2010 $ 850,000.00 $ 185,723.61 $ 1,353,178.76 $ 2,388,902.37
2011 675,000.00 319,875.00 1,355,778.76 2,350,653.76
2012 695,000.00 303,000.00 1,351,978.76 2,349,978.76
2013 710,000.00 282,150.00 1,356,978.76 2,349,128.76
2014 735,000.00 260,850.00 1,354,463.76 2,350,313.76
2015 755,000.00 238,800.00 1,359,563.76 2,353,363.76
2016 785,000.00 208,600.00 1,356,778.76 2,350,378.76
2017 820,000.00 177,200.00 1,356,497.50 2,353,697.50
2018 850,000.00 144,400.00. 1,357,897.50 2,352,297.50
2019 885,000.00 110,400.00 1,355,635.00 2,351,035.00
2020 920,000.00 75,000.00 1,355,175.00 2,350,175.00
2021 955,000.00 38,200.00 1,356,512.50 2 349 712.50
Total $ 9.635.000.00 $ 2.344.198.61 $ 16.270.438.82 $ 28.249.637.43
Preliminary, subject to change.
I1
DOCSOC/1369366v7/200119-0002
THE REFUNDING PLAN
The Series 2009 Bonds are being issued to provide a portion of the moneys, together with certain
funds on deposit with The Bank of New York Mellon Trust Company, N.A., acting as escrow agent (the
"Escrow Agent"), to redeem the Authority's outstanding Series 1999 Bonds in the aggregate principal amount
of $[9,385,000] at a redempfion price equal to the principal amount thereof plus accrued interest and premium
of 1.00% on January 4, 2010. The Refunded Bonds are currently outstanding in the aggegate principal
amount of $9,385,000 as follows:
Maturity Date
(July 1) PrincipalAmount
2010 $ 585,000
2011 610,000
2012 645,000
2013 675,000
2014 710,000
2015 745,000
2016 785,000
2017 830,000
2018 875,000
2019 925,000
2020 975,000
2021 1,025,000
Total $ 9.385.000
Pursuant to the Original Indenture, the Authority will deliver a portion of the proceeds of the
Series 2009 Bonds to the Trustee to transfer to the Escrow Agent for deposit in an escrow fund (the "Escrow
Fund") established under the Escrow Agreement, dated as of December 1, 2009, by and between the Authority
and the Escrow Agent (the "Escrow Agreement"). Proceeds of the Series 2009 Bonds and other moneys held
in the Escrow Fund to redeem the Refunded Bonds will be held in cash or invested in duect general
obligations of the United States of America (collectively, the "Defeasance Obligations"). The Defeasance
Obligations will be scheduled to mature in such amounts and at such times and beaz interest at such rates as to
provide amounts sufficient to pay on January 4, 2010 the redemption price of the Refunded Bonds, together
with accrued interest and premium through the date of redempfion. All Defeasance Obligations will be
irrevocably pledged to secure, when due, the payment pf the principal of, interest and premium due with
respect to the Refunded Bonds.
As a result of the deposit and investment of funds under the Escrow Agreement, all of the Authority's
obligations with respect to the Refunded Bonds, including the pledge and lien on the Base Rental Payments
which secure the Authoriys's obligations with respect to the Refunded Bonds, will be fully dischazged upon the
issuance ofthe Series 2009 Bonds.
THE PROPERTY
The Property is comprised of the Site and the Project. The Site is an approximately one acre pazcel of
real property located adjacent to City Hall.
The City leases the Site to the Authority pursuant to the Ground Lease. The Authority subleases the
Site and the Project (i.e., the Property) to the City pursuant to the Lease Agreement.
The Project, a $66 million 118,000 square foot four-story specialized office building housing the
City's police and fire department central operations, municipal jail, emergency operations center and 100
12
DOCSOC/ 1369366v7YL00119-0002
spaces of subterranean parking, was dedicated in August 2003. Considered a part of the City's new Civic
Center area, the Project is located at 333 Olympic Drive immediately east of City Hall, between the Santa
Monica Freeway, Olympic Drive and 4~ Streets.
The Authority's Series 1999 Bonds were issued in 1999 and generated Project funds in the amount of
$11,772,000. These funds, in conjunction with $30,383,000 of City funds were to be used to fmance the
Project initially. Due to construction bids that. were substantially above construction cost estimates, the
Authority issued the Series 2002A Bonds to finance $15,000,000. of the estimated cost increase. The City also
provided $3,045,000 of City funds and interest earnings to fmance a portion of the cost increase. Final project
casts included $2.6 million for construction of an Olympic Drive Extension that runs between Fourth Street
and Main Street and $3.3 million for facility equipment.
County Covenant. A Courthouse facility currently owned by the County of Los Angeles is located
adjacent to the Site. In 1962, the City entered into and recorded against a portion of the Site a Covenant and
Affidavit regarding Maintenance of Yards for Buildings and Limitations (the "Covenant") whereby the City
agreed to maintain a portion of the Site unobstructed from ground to sky. The Covenant remains as long as the
Courthouse building exists or the Covenant is terminated by the County Engineer. The Project encroaches on
the area covered by the Covenant. The City and the County recorded an Amendment to the Covenant
suspending this obligation of the City during the period of time that the Site is used for purposes substantially
similar to the Project or if bonds related to the Site are outstanding (the "Suspension Period"). If during the
Suspension Period the use of the Site is substantially changed from the current projected use of the Site, the
City and the County, or its successor, are required to meet and agree on the change in use in order to maintain
the suspension of the Covenant. Pursuant to Chapter 1082 of the Statutes of 2002, the State accepted transfer
of court facilities, including the Courthouse facility on or about November 18, 2018. See "RISK FACTORS-
Limited Recourse on Default; No Acceleration on Base Rental."
THE AUTHORITY
The Santa Monica Public Financing Authority was organized pursuant to the provisions of Article I of
Chapter 15 of Division 7 of Title 1 of the State Government Code and a Joint Exercise of Powers Agreement,
dated as of July 25, 1995, by and between the City and the Redevelopment Agency of the City of Santa
Monica. The Authority was organized for the purpose of financing and assisting local agencies in financing
capital improvements, working capital, liability or other insurance needs or projects. The Authority has no
financial liability to the Owners of the Series 2009 .Bonds with respect to the payment of Base Rental
Payments by the City or with respect to the performance by the City of the other agreements and covenants it
is required to perform.
CTTY OF SANTA MONICA
General
The City of Santa Monica is situated on the western side of Los Angeles County, bordered by the City
of Los Angeles on three sides and by the Pacific Ocean to the west. The City encompasses an azea slightly
greater than eight squaze miles and, as of January 1, 2009, has an estimated population of 92,494 persons.
The Santa Monica Freeway passes through the approximate center of the CiTy on an east-west course
and provides direct connection with downtown Los Angeles, approximately 16 miles to the east. About six
miles southeast of the City is Los Angeles International Airport, which is easily accessible via the San Diego
Freeway, about one mile beyond the eastern border of Santa Monica on a north-south course.
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DOCSOC/ 1369366x7/200119-0002
Government and Administration
The City of Santa Monica was incorporated in 1886 and adopted its City Charter in 1945. In 1947 a
council-manager form of government was established following a vote of the City's residents and approval by
the California Legislature. The City Council consists of seven members with overlapping terms of four yeazs.
Elections aze held every two years, at which time three Council members or four Council members are elected.
.After each election, Council members select one of their group to act as Mayor, who then presides over
Council meetings.
The City Council appoints a City Manager, City Attorney and City Clerk. The City Manager is
responsible for supervising day-to-day operations of the City and for carrying out policies set by the Council.
Population
The following table sets forth population data for the City of Santa Monica.
City of Santa Monica
Population
(January 1)
Year Population
1970 88,289
1980 88,314
1990 86,905
2000 84,084
2001 85,576
2002 87,994
2003 89,339
2004 90,410
2005 90,678
2006 90,750
2007 91,124
2008 91,439
2009 92,494
Source: 1970-2000 data from US Census Bureau; 2001-2009 data from State of California Department of Finance.
City Enterprise Operations
Santa Monica operates an airport, bus line, cemetery, pier and civic auditorium. The City also
provides water, refuse collection, recycling, wastewater and stonnwater services. A portion of the revenues
from these enterprises is annually paid to the City's General Fund for various administrative support services
provided to the enterprises.
The Santa Monica Airport is a 227-acre general aviation airport, located at the southeastern edge of
the City. The Airport has the capacity to park a minimum of 550 based aircraft and 40 transient aircraft. The
City rents an average of 205 of its own aircraft pazking tie-down spaces, and also receives commercial lease
revenues and commissions on fuel sold at the airport.
In 2008-09, the City's 200 regular buses carried more than 20 million revenue passengers, while
traveling approximately 6 million miles. The system provides coverage at low cost (a bus route operates
within aquarter-mile of almost every resident; regular fazes aze $0.75 for local service and $1.75 for express
service; discount fares are available for the elderly, handicapped and students through the purchase of tokens
14
DOCSOC/ 1369366v7/200119-0002
or pre-paid card). The City's Big Blue Bus also manages pazatransit services, carrying 24,000 revenue
passengers in 2008-09. hi addition, Big Blue Bus provides charter and excursion programs.
Woodlawn Cemetery was purchased by the City in 1897 and the mausoleum was purchased in 1972.
It is operated as an enterprise competitive with comparable private facilities. It is located in the south-central
portion of the City.
The Santa Monica Pier is a local historical landmazk built in 1909 and just celebrated its centennial. It
currently contains an amusement pazk, carousel; games, restaurants, entertainment venues, and retail. Santa
Monica Amusements, aprivately-owned enterprise, operates Pacific Park, with its Ferris wheel, roller coaster,
famous vintage wooden carousel, games and a food court. The Santa Monica Pier Aquarium has been
operated by Heal the Bay since June 2003.
The Water Division of Santa Monica is operated as aself-supporting enterprise. About 15% of the
City's water is supplied by its own wells, stored in over 16 acres of well fields and reservoir grounds on City-
owned property inside and outside the city limits.. The remaining 85% of the water is purchased from the
Metropolitan Water District of Southern California. The City's modern, automated system delivers over 12
million gallons per day to approximately 17,000 water accounts. The City's water chemists supervise over
9,500 separate water quality and safety tests per yeaz in State-licensed laboratories, to ensure that the highest
standazds are met before delivering the water to the customer's tap.
During the State's drought years, the City implemented several conservation programs. One of the
City's water/wastewater conservation programs is a program of retrofitting bathrooms in the City with ultra
low flow toilets and low flow showerheads. This program, which currently results in a wastewater reduction
of approximately 1.4 million gallons per day, significantly reduces the City's wastewater treatment and
disposal costs by eliminating the need for the City to acquire additional capacity in the local Hyperion Sewage
Treatment Plant.
Santa Monica's Urban Runoff Recycling Facility, otherwise known as the "SMURRF," treats dry
weather runoff water (from excessive irrigation, spills, construction sites, pool draining, car washing, the
washing down of paved areas, and some wet weather runoff) to produce 200,000 gallons a day of recycled
water that is safe for all landscape irrigation and dual-plumbed systems (buildings plumbed to accept. recycled
water for the flushing of toilets).
Retirement System
.The City contributes to the State of California Public Employees' Retirement System (PERS), an
agent multiple-employer public employee retirement system that acts as a common investment and
administrative agent for cities in the State. The City's payroll for employees covered by PERS for the yeaz
ended June 30, 2009 was $136,441,000. Total payroll far the City for the yeaz ended June 30, 2009 was
$174,093,000.
All full-time City employees and part-time City employees who have worked over 1,000 hours during
a fiscal yeaz are eligible to participate in PERS, with benefits vesting after 5 years of service. Employees aze
designated as safety (police officers, firefighters and others designated as safety by law) or miscellaneous (all
others).
Safety employees who retire at or after age 50 with 5 years of credited service are entitled to an annual
retirement benefit, payable monthly for life, in an amount equal to a benefit factor mulfiplied by their final
compensation which is the average monthly pay rate for the last consecutive 12 months of employment (or any
12-month period in which pay was higher). Far fire safety employees, the benefit factor is an amount equal to
between 2.4% and 3.0% mulfiplied by the number of years of credited employment. The percentage amount is
based upon the age of the employee at retirement, increasing from age 50 to age 55. For police safety
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DOCSOC/ 1369366v7/200 1 1 9-0002
employees the benefit factor is 3.0% multiplied by the number of yeazs of service. This percentage starts at
age 50 and does not increase.
Miscellaneous members who retire at age 50 with 5 years of credited service aze entitled to an annual
retirement benefit, payable monthly for life, in an amount equal to a benefit factor mulfiplied by their fmal
compensation: Final compensation for miscellaneous members is the average monthly pay rate for the last
consecutive 12 months (or any 12-month period in which pay was higher) of employment, The benefit factor
is an amount equal to between 2.0% and 2.7% multiplied by the number of yeazs of credited employment.
The percentage amount is based upon the age of the employee at retirement, increasing from age 50 to age 55.
PERS also provides death and disability benefits. These benefit provisions and all other requirements
are established by state statute and City ordinance.
PERS requires that miscellaneous employees contribute 8% and safety employees contribute 9% of
their annual salary to PERS. However, this benefit, like all others, is subject to collective bazgaining.
Currently all of the City's bargaining units have negotiated for the City to contribute this portion on behalf of
the employee. The City is required to contribute the remaining amounts necessary to fund the benefits for its
members using the actuarial basis recommended by the PERS actuaries and actuarial consultants and adopted
by the PERS Boazd of Administration. The miscellaneous members reimburse the City for the cost of an
enhanced benefit at a rate of 6.7%.
For Fiscal Year 2008-09, employer contribution rates were as follows:
Annual Rate Miscellaneous Safety Category
Components Category Fire Police
A. Normal cost rate 9.583% 13.431% 17.674%
B. Unfunded liability rate 5.875 8.216 15.741
C. Total Required 15.458% 21.647% 33.415%
The contribution to PERS for Fiscal Year 2008-09 of $40,645,943 was made in accordance with
actuarially determined requirements computed through an actuarial valuation performed as of June 30, 2007.
The City contributed $26,944,672 (18% of current covered payroll); employees contributed $13,701,271 (8.8%
of current covered payroll), $13,497,001, of which was paid by the City and $204,270 was paid by employees.
Three-Yeaz Trend hiformation for the Annual Pension Cost Fundine for the Plan (Unaudited)
Fiscal year ended
June 30
2009
2008
2007
Annual pension cost
(APC)
$26,944,672
24,767,790
20,719,971
Pension Funding Information
PercentageofAPC Netpension
contributed obligation
100%
100 -
100 -
As of June 30, 2008, the date of the latest actuarial valuation, the City's underfunded liability was
$150,156,936 This under funded liabiliTy was primarily the result of a decline in the value of the plan assets,
less than anticipated investment returns by PERS and an increase in benefits for Public Safety employees. The
City has addressed the under funded liability through additional contributions, as determined by PERS, in
excess of the amount required to fund the current normal cast liability. Maintaining this funding schedule
PERS has estimated that the under funded balance will be amortized over 15 years. The City cannot predict
the level of future contributions to PERS which may be required by PERS but such amounts may increase
significantly over current levels.
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DOCSOG 1369366x7/200119-0002
Other Post Employment Benefits
In addition to providing pension benefits through PERS, the City, in accordance with agreements with
various bazgaining units and groups, provides medical insurance benefits that aze considered other
postemployment benefits ("OPEB") to certain retired employees. Employees of the Supervisory Team
Associates bazgaining unit become eligible for a medical insurance benefit if they were hired prior to June 30,
1990, fulfill length of service requirements and have more than 75 unused sick leave days upon retirement.
Employees of the Executive Pay Plan group and management employees of the Rent Control Board aze
eligible for a city paid medical insurance benefit if their combined retirement age and years of public service
equals or exceeds 70. Although not delineated in any written ageement, all retirees aze allowed to continue
participating in one of the City's health plans at the same rate as active employees. The City also maintains
minimum benefits for public safety employees provided by the City's contract with its healthcare provider. hi
Fiscal Yeaz 2009, the City paid $549,000 for retiree health benefits. The City pays for OPEB on a pay-as-you-
go basis.
The Govemmental Accounting Standards Board recently published Statement No. 45, requiring
governmental agencies that fund post-employment benefits on apay-as-you-go basis, such as the City, to
account for and report the outstanding obligations and commitments related to such post-employment benefits
in essentially the same manner as for pensions. The City retained AON Consulting (the "Actuarial
Consultant") to calculate the City's post employment benefits funding status. In a report dated October 20,
2009 (the "Report"), the Actuarial Consultant concluded that, as of July 1, 2008,. the City's unfunded actuarial
accrued liability for post employment benefits based upon a 5% discount rate was $17,721,000. The Report
also concluded that the annual required contribution ("ARC") for the year beginning July 1, 2009 is
$1,722,000. The ARC is the annual amount that would be necessary to fund the OPEB in accordance with the
Governmental Accounting Standards Board's Statements No. 45. The City cannot predict the level of future
contributions to PERS which may be required but such amounts may increase significantly over current levels.
Labor Relafions
in accordance with the Meyers-Milian-Brown Act, the City has adopted an Ordinance, which
establishes the procedures for the administration of employer-employee relations. This includes the procedure
by which the City meets and confers with representatives of recognized employee organizations (i.e. unions
and associations) regarding matters within the scope of representation, including wages, hours and other terms
and conditions of employment within the appropriate unit.
Of the approximately 2,018 budgeted permanent City employees, most aze represented by nine unions
or associations, including 908 by the Municipal Employees Association, 202 by the Santa Monica Police
Officers Association, 106 by Local 1109 of the Firefighters Association, 281 by the United Transportation
Union, 40 by the Management Team Associates, 89 by the Supervisory Team Associates, 241 by the
Administrative Team Associates, 23 by the Public Attorneys Union, and 16 by the Public Attorneys Legal
Support Staff: All City employees are covered by existing multiple- or single-yeaz contracts. An Executive
Pay Plan covers 20 employees.
Industry and Employment
The Santa Monica business community is comprised of a diverse collection of businesses ranging
from traditional retailers to hi-tech post-production and Internet firms. Tourism, health industries, and retail
augment the large business service sector. Mainstay firms like Saint John's and UCLA-Santa Monica
Hospitals, Loews and Marriott Hotels, and new car dealerships occupy a more traditional niche as large
institutional property owners, sales tax producers, and employers. Major entertainment and mul6media-
software industry fums like Universal Music Group, Apple, Google, Yahoo and MTV aze among over 200 hi-
tech, multimedia, and related entertainment firms of all sizes. These companies relocate to Santa Monica and
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DOCSOC/1369366v7/200119-0002
West Los Angeles because they appreciate the quality of life here and because the hi-tech and entertainment
clusters provide a critical mass of support firms and other similar firms in the azea.
The CiTy invests significant governmental resources in its pedestrian-oriented commercial districts,
including such nationally-recognized venues as the Third Street Promenade, Santa Monica Place Mall, the
Santa Monica Pier, Main Street, and Montana Avenue. The City provides support for the Santa Monica
Convention & Visitor's Bureau, and a variety of other services, including parking in the downtown. The CiTy
completed a $7.5 million streetscape improvement project along Pico Boulevard in 1999. Recent completed
City projects include the Annenberg CommuniTy Beach House, a public facility that received a $27.5 million
grant from the Annenberg Foundation, the award-winning Main Library that expanded the Library's ability to
offer programs and services to library patrons, infrastructure improvements to the Pier including new public
restrooms and the Virginia Avenue Park in the Pico Neighborhood. Also in the planning process are several
circulation improvements to the waterfront area including the California Incline and the Pier Bridge projects.
This investment has paid off in a healthy retail and restaurant sector and an active tourism industry
which provides significant sales tax revenues to the City, and will continue to do so even through the recent
economic turndown. The three largest business types producing taxable goods in the City are; New Motor
Vehicle Dealers, 21% of the City's sales tax revenue; Restaurants with Liquor, 10.5% of the City's sales tax
revenue, and Specialty Stores, 3.7% of the City's sales tax revenue. When grouped into major business
goups, General Consumer Goods provide 30.7% of the CiTy's sales tax revenue, Autos and Transportation
provide 25.0% of the City's sales tax revenue, and Restaurants and Hotels provide 21.0% of City's sales tax
revenue.
The CiTy's economic condition has been affected by the current economic recession. Taxable sales for
the fiscal yeaz ending June 30, 2009, were 10.2% lower than for the fiscal year ending June 30, 2008. Office
vacancy rates were 4.9% higher than for fiscal year ending June 30, 2008.
The City's tourism industry and occupancy rates benefit from its proximity to Southern Califomia
points of interest, including the beach, Pacific Pazk on the Santa Monica Pier, the Third St. Promenade, and the
Getty Center in nearby Brentwood. According to the Santa Monica Convention & Visitor's Bureau, tourism
spending totaled $788 million in 2000, when 3.8 million visitors came to the City. Hotel occupancy rates
currently stand at 77.3% for 2009, down 8.6% for the year-to-date over 2008 totals, with over 3,500 hotel
rooms available daily.
As of December 31, 2008, an estimated 79,376 people were employed by approximately 6,570 firrns
in the CiTy with a total of almost $1.45 billion in payroll. This figure does not include a substantial number of
self-employed persons or contract workers. Unemployment in the CiTy (as compared to the County) is lower
in the City at 10.5%.
The City's focus on "quality of life" issues has created a positive environment on the Westside in
which to live, work, and visit. The resulting environment has attracted a stable, dynamic business base and a
strong local economy.
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DOCSOC/ 1369366v7/200119-0002
The following table summarizes employment and payroll information within the City as of
December 31.2008.
City of Santa Monica
2008 Employment and Payroll
By Major Industry Division
As of December 31, 2008
Average
ojTota[ Annual % ojTOtal Annual % ojTotal
Major Division Industry Firms Firms Employment Employment Payroll Payroll
Professional, Scientific, & Technical
Services 1,185 18.0% 11,784 14.8% $ 297,739,975 20.5%
Health Caze & Social Assistance 834 12.7 8,537 10.8 111,412,050 7.7
Retail Trade 634 9.6 9,709 12.2 108,787,722 7.5
Information 599 9.1 8,033 10.1 272,275,051. 18.7
Arts, Entertainment, & Recreation 558 8.5 1,809 2.3 79,691,974 5.5
Real Estate & Rental & Leasing 380 5.8 3,169 4.0 77,167,950 5.3
Accommodation & Food Services 371 5.6 11,606. 14.6 78,917,524 5.4
Other Services 350 5.3 3,194 4.0 27,709,321 1.9
Finance & Insurance 252 3.8 2,857 3.6 125,750,857 8.7
Admin & Support & Waste Mgmt &
Remediation 223 3.4 2,629 3.3 35,705,875 2.5
Wholesale Trade 227 3.5 2,511 3.2 47,182,010 3.2
Construction 224 3.4 2,021 ZS 30,018,682 2.1
Manufacturing 98 1.5 975 1.2 13,523,229 0.9
Educational Services 84 1.3 2,590 3.3 25,590,350 1.8
Local Govt 49 0.7 6,170 7.8 88,203,766 6.1
Transportation & Wazehousing 31 0.5 349 0.4 3,864,843 0.3
Management Of Companies And
Enterprises 23 0.4 486 0.6 13,462,360 0.9
Non-Classified 430 6.5 416 0.5 8,519,925 0.6
Utilities 6 0.1 250 0.3 5,167,975 0.4
Federal Gov[ 6 0.1 265 0.3 3,703,691 0.3
Agriculture, Forestry, Fishing &
Hunting 4 «** *** *** *:* ***
State Gov[. 1 *** 13 *** - 116,196 0.01
Mining 1 *** *** *** *** ***
Total 66 i70 7 376 $1 454 564.528
Source: City of Santa Monica (from data by Major NAICS Sectors)
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DOCSOC/1369366v7/200119-0002
The major employers within the City boundaries and the number of persons employed bq each
organization are shown below:
City of Santa Monica Major Employers
As of June 30, 2009
Company Number ofEmployees
Santa Monica College 2,143
City of Santa Monica 1,949
Santa Monica-UCLA Hospital 1,767
Saint John's Hospital Medical Center 1,682
Santa Monica-Malibu Unified School District 1,643
The Rand Corporation 898
MTV Networks 878
Activision Blizzard lnc. 781
ET Whitehall Santa Monica Partners LP 654
Universal Music Group 518
Rubin Postaer and Associates 430
Loews Hotels 428
Total jobs provided by principal employers 13,771
Total jobs in Santa Monica 79,376
Principal Employers As Percent Of Total Jobs 17.3%
Source: Voluntary reporting of employment levels to the City of Santa Monica by individual organizations. Total jobs in Santa
Monica as provided by the Labor Mazket Information Division, State of California Employment Development
Department as of August 31, 2009.
The following chart provides a comparison, for the years indicated, of the average annual
unemployment rates in the City of Santa Monica, the City of Los Angeles, the County of Los Angeles, the
State of California and the United States. The City's 2008 unemployment rate of 6.2% was below the City of
Los Angeles rate of 8.3%, the County rate of 7.5% and the State rate of 7.2%, but was higher than the national
rate of 5.8%. The City's September 2009 unemployment rate was 10.5%, reflecting the ongoing current
difficult economic environment.
Annual Average
Unemployment Rates
For Calendar Years 2003 through 2009
City of Santa City ofLos County ofLos State of
Year Monica Angeles Angeles California United States
2003 5.7% 7.7% 7.0% 6.8% 6.0%
2004 5.3 7.2 6.5 6.2 5.5
2005 4.4 5.9 5.3 5.4 5.1
2006 3.9 5.3 4.8 4.9 4.6
2007 4.1 5.7 5.1 5.4 4.6
2008 6.2 8.3 7.5 7.2 5.8
2009'1 10.5 14.0 12.7 12.2 9.5
c'1 As of September 2009.
Source: State of California, Employment Development Department, Labor Market Information Division, based on Mazch 2008
benchmazk and U.S. Department of Labor, Bureau of Labor Statistics.
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DOCSOC/1369366v7/200119-0002
Effective Buying Income
For 2009, the City's median household effective buying income was greater than the median
household effective buying income for the Los Angeles-Long Beach-Santa Ana Statistical Area, the State of
California and the United States. The following table summarizes the total effective buying income for the
City, the Los Angeles-Long Beach Statistical Area, the State and the United States for calendar yeaz 2008
through the third quarter of 2009.
City of Santa Monica
Effective Buying Income
For Calendar Years 2008 Through 2009
Year and Area
2008
City of Santa Monica
Los Angeles-Long Beach MSA
California
United States
2009tt1
City of Santa Monica
Los Angeles-Long Beach MSA
Califomia
United States
Totat Effective Buying Income
(OOOs omitted)
$3,985,397,500
280,261,545,000
814,894,437,500
6,300,794,040,000
$4,011,022,500
280,261,545,000
814,894,437,500
6,443,994,426,250
~'~ As of September 3Q, 2009.
Source: Survey of Buying Power and Media Mazket.
Education
$51,448
46,933
48,203
41,792
$52,152
46,933
48,203
42,303
Public instruction in the City is provided by the Santa Monica-Malibu Unified School District with 10
elementary schools (three of which are in the City of Malibu), three middle schools, two high schools (one of
which is in the City of Malibu), one continuation high school, one alternative school, an adult education
program and child care and development centers. Total enrollment for the last five school years was as
follows:
City of Santa Monica
Public School Enrollment
For2004-OSthrough 2008-09
Year
2004-OS
2005-06
2006-07
2007-08
2008-09
"~ Estimated
Source: Santa Monica-Malibu Unified School District
Enrollment
12,545
12,191
ll,911
11,688
11,580t'1
Median Household Effective
Buying Zucome
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DOCSOC/ 1369366v7/200119-0002
The Santa Monica-Malibu Unified School District also provides additional programs, such as
bilingual education, computer literacy, the Gifted and Talented program, the Regional Occupation Program
(vocational skills), and pre-school and school age child care programs.
There are nine private nursery/kindergarten schools and 16 private/parochial schools in Santa Monica.
The City also has one community college, Santa Monica College, which includes technical and vocational
schools, including the Academy of Entertainment and Technology.
Culture and Recreation
Each year, Southern California's natural and commercial attractions bring millions of visitors to the
region. Good weather, miles of Pacific coastline, and picturesque mountain ranges combine with world class
destinations such as the Getty Center, Disneyland, the Los Angeles Music Center, the Rose Bowl, Knott's
Berry Farm, Universal Studios Hollywood, and the Long Beach Aquarium to make the Los Angeles basin one
of the most traveled to places in the world.
Santa Monica's strong recreational identity is historically tied to the beachside community's
extraordinary natural setting and mild climate. Residents walk, bike, skate, participate in cultural events,
experience nature, and engage in a wide range of active sports throughout the year. in the most fundamental
sense, recreation within a town like Santa Monica has to do with establishing ties between people and building
a sense of community by creating opportunities for physical, social and cultural interacfion. Santa Monica
residents and visitors see the entire. City as their park system-where users enjoy the community's renowned
public gathering places including the Third Street Promenade and Santa Monica Piei, green streets, 245 acres
of sandy beach and 24 pazks to pursue their recreational activities of choice.
The City continues to have a profound effect on the development of art and culture in this country.
More visual and performing artists, arts presenters, designers, architects, and film and music producers per
capita can be found in Santa Monica than in any other city in the State. Santa Monica has over 70 galleries,
three major museums (including the Santa Monica Museum of Art, the California Heritage Museum, and the
Museum of Flying), over a dozen theaters and performance spaces presenting a wide range ofmusic, dance
and performance art, bookstores, photography, video, film, and award-winning architecture -all thriving in its
many walkable and attractive neighborhoods.
The exceptional physical, recreational, and cultural environment in Santa Monica provides residents
with a wide range of arts and leisure opportunities.
Taxable Transactions
Taxable transactions for the City in 2008 showed a 6.3% decrease below the 2007 level. The future
rate of growth of taxable transacfions may be adversely affected by the growth of electronic commerce to the
extent that Federal and/or State laws, policies and sales tax collection procedures aze not altered to include
taxable transactions via electronic commerce.
The following table indicates the level of taxable transactions in the City by type of business from
calendaz years 2004 through 2008.
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DOCSOC/1369366v7/200119-0002
City of Santa Monica
Taxable Transactions by T ype of Business
for Calendar Years 2 004 - 2008
(i n Thousands of Dollars)
Business 2004 2005 2006
Apparel Stores $ 302,756 $ 329,556 $ 336,010
General Merchandise 84,334 75,618 68,565
Food Stores 67,825 75,971 81,477
Eating & drinking places 374,767 409,645 435,807
Building materials & farm 101,540 103,851 119,648
implements
Auto dealers & auto 691,828 710,000 716,162
suppliers
Service stations 89,261 101,214 132,437
Other retail stores 613,781 634,605 649,123
Retail stores total 2,326,092 2,440,460 2,539,229
All other outlets 598 595 676,497 724,944
Total all outlets $ 2.924.687 $ 3 116 957 $ 3.264.173
Source: Hinderleiter, de Llamas and Associates
2007 2008
$ 333,651 $ 311,386
62,818 51,547
85,452 87,586
452,246 449,260
125,718 110,439
715,633 648,404
137,283 145,869
689,179 626,490
2,601,980 2,430,981
658,730 625.884
$ 3.260.710 $ 3.056.865
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DOCSOC/1369366v7/200119-0002
The table below compares 2009 second calendar quarter sales taxes with 2008 second calendar quarter
sales taxes as indicated taxable sales. Across the boazd sales taxes are down versus 2008 second calendar
quarter figures, which is consistent with statewide trends.
City of Santa Monica
Second Quarter Sales Taxes by Major Business Group
(unadjusted)
Business
New Motor Vehicle
Dealers
Restaurants Liquor
Auto Lease
Electronics/Appliance
Sales
Family Appazel
Restaurants No Alcohol
Service Stations
Women's Apparel
Specialty Stores
Home Furnishings
Hotels -.Liquor
Restaurants Beer & Wine
Grocery Stores Liquor
Sporting Goods/Bike
Stores
All Others
Subtotal
County/State Pools
Total
2009 2008 Difference
$863,061 $1,061,202 (18.7)%
619,358 630,591 (1.8)
408,352 544,565 (25.0)
324,101 418,006 (22.5)
317,316 418,396 (24.2)
287,587 281,930 (2.0)
278,271 429,455 (35.2)
226,185 301,310 (24.9)
221,462 306,791 (27.8)
209,828 258,589 (18.9)
161,260 197,822 (18.5)
160,958 190,378 (15.5)
] 35,535 139,737 (3.0)
113,608 128,334 (11.5)
1,580,384 2,003,881 21.1
$5,907,266 $7,310,987 (19.2)%
668,247 761,502 1( 2.21
$6,575,513 $8,072,489 (18.5)%
Source: City of Santa Monica Finance Department.
Building Permit Activity
The following table shows the number and value of building permits issued in the City.
City of Santa Monica
Building Construction
For Fiscal Years 2004-OS through 2008-09
Fiscal Year Ended Residential Residential Nonresidential
June 30 Number of Units Construction Yalue Construction Yalue
2005 426 $109,876,149 $96,421,910
2006 238 96,693,536 66,449,275
2007 633 128,120,760 174,264,297
2008 187 87,863,887 171,541,504
2009 82 53,935,976 50,190,611
Source: Construction Industry Research Boazd.
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DOCSOC/ 1369366v7/200119-0002
Principal Property Taxpayers
The ten principal property taxpayers in the City based on reported gross assessed values for Fiscal
Yeaz 2009-10, are listed below.
CITY OF SANTA MONICA
Principal Property Taxpayers
For Fiscal Year 2009-10
(Based on Taxes Levied)tt)
Net Assessed
Paluation
(IncL Secured & % of
Property Taxpayer/Type ojBusiness Unsecured) Total
1) California Colorado Center LLC $ 470,425,014 1.95%
2) Water Garden Realty Holding 456,900,932 1.90
3) Douglas Emmett LLC 307,106,724 1.27
4) SC Enterprises SMBP LLC 304,000,000 1.26
5) CREP 2700 Holdings 226,807,200 0.94
6) Ocean Avenue LLC 145,571,407 0.60
7) Equity Office Properties Trust 138,508,958 0.57
8) New Santa Monica Beach Hotel LLC 138,119,347 0.57
9) Maguire Properties Lantana North LLC 136,458,496 0.57
10) RAND Corporation 132,635,402 0_55
Top Ten Total $ 2.456.533.480 10.19%
"' Does not reflect the impact of pending appeals of assessed valuation.
Source: City of Santa Monica Finance Department (from data from Los Ange]es County Assessor)
Utilities
Southern California Gas Company and Southern California Edison Company ("SCE") provide gas and
electricity service within the City, respectively. The City purchases for its own use a lazge portion of
renewable energy from Commonwealth Energy Corporation. Commonwealth provides this energy in
conjunction with SCE services. Verizon California supplies local telephone service. The City provides water
and wastewater service.
CITY OF SANTA MONICA FINANCES
The following selected fmancial information provides a brief overview of the City's fmances. This
fmancial information has been extracted from the City's audited fmancial statements and, in some cases, from
unaudited information provided by the City's Finance Department. The most recent audited financial
statements of the City with an unqualified auditor's opinion is included as Appendix B hereto. See
"FINANCIAL STATEMENTS" and APPENDIX B-"AUDITED FINANCIAL STATEMENTS OF THE
CITY FOR THE YEAR ENDED NNE 30, 2008." The audited fmancial statements of the City for fiscal yeaz
ended 2008-09 are expected to be released during December, 2009. The City does not believe that the 2008-09
audited financial statements will show a material difference in the City's fmancial condition from the
unaudited fiscal year 2008-09 financial information provided herein.
Accounting Policies and Financial Reporting
The City's accounting records are organized and operated on a "fund" basis, which is the basic fiscal
and accounting entity in governmental accounting. The three broad fund categories include governmental,
proprietary and fiduciary funds. The operations of the different funds are accounted for with separate sets of
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DOCSOC/ 1369366v7/200 L19-0002
self-balancing accounts with assets, liabilities, fund balance or equity, and revenues and expenses. The basis
of accounting for all funds is more fully explained in the Notes to the City of Santa Monica Combined
Financial Statements contained in Appendix B.
The Government Finance Officers Association has awarded its Certificate of Achievement for
Excellence in Financial Reporting to the City for the past 25 years.
Budgetary Process
During May of each yeaz, the City Manager submits to the CiTy Council a proposed operating and
capital improvements budget for the fiscal yeaz commencing the following July 1. The operating and capital
improvements budget includes proposed expenditures and expenses and the means of financing them. Public
hearings'aze conducted by the City Council to obtain citizen comments, and prior to June 30, the budget is
adopted through passage of appropriate resolutions. See "~,eneral Fund Financial Summary" for a summary
of the City's general fund budget for Fiscal Yeaz 2009-10.
The budgetary process is guided by CiTy Council's priorities, with input from residents, neighborhood
groups, Boazds, Commissions, and businesses following fall neighborhood meetings and various year-round
opportunities for suggestions and comments. In May. of each yeaz, the City Manager submits a proposed
operating and capital budget to the City Council for the fiscal yeaz commencing on July 1. Study sessions and
public hearings are conducted by the City Council to obtain staff and citizen comments to the proposed budget,
and prior to June 30, the budget is adopted through passage of appropriate resolutions. See "general Fund
Financial Summazy" for a summary of the City's general fund budget for Fiscal Year 2009-10.
In response to a downturn in the economy beginning in Fiscal Year 2008-2009 and the resulting
impact on key revenue sources for the City, the adopted budget for Fiscal Yeaz 2009-10 and the budget plan
for Fiscal Year 2010-2011 reflects a combination of measures to close a structural deficit in an organized and
orderly manner. The City Council set aside an economic uncertainty reserve of $8.2 million using monies
.previously reserved for potential utility users tax losses. Departments were asked in January 2009 to plan for
expenditures savings of at least 3% for Fiscal Year 2008-09 and to develop their Fiscal Yeaz 2009-2010
budgets with an additional 5% reduction. In addition, employees agreed to forego performance bonuses.
These expenditure reductions, along with limited enhancements, fee adjustments and the use of planned one-
fime funding sources allowed the CiTy to close a structural gap in Fiscal Yeaz 2009-2010 and will provide time
for further assessment as a permanent strategy for closing the structural deficit is developed. Despite
indications that the recession is ending, sales tax, utility users tax, and transient occupancy tax remain weak,
and the state's ability to divert City funds remains a threat. While the State did divert property taxes, the CiTy
has been able to participate in a securitization which will mitigate the effects of this state diversion of
Proposition lA funds. See "RISK FACTORS-State Budget-CiTy Impact" below. In Fiscal Yeaz 2010-11,
the CiTy will again respond to fiscal challenges with savings from a continuing hiring freeze, the use of funds
designated for use in times of economic hardship, and a strategic reduction in City services. In accordance
with fiscal policy, the budget for Fiscal Year 2009-10 and the budget plan for Fiscal Yeaz 2010-11 provide for
a general fund reserve of 10% for emergencies or an unanticipated financial reversal; however the total fund
balance as of June 30, 2009, is significantly larger than this reserve amount, providing flexibility to respond to
the uncertain economy.
Assessed Valuations
The City uses the facilities and services of the County of Los Angeles (the "County") for the
assessment and collection of taxes. City taxes aze collected at the same time and on the same tax rolls as are
the CounTy, City and special district taxes. Assessed valuations aze the same for both City and County taxing
purposes.
DOC SOC/1369366v7/200119-0002
26
The valuation of property in the City is established by the Los Angeles County Assessor, except for
public utility property which is assessed by the State Board of Equalization. Assessed valuations aze reported
at 100% of the full value of the property, as defined in Article XIIIA of the California Constitution. See
"CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS."
The California State Legislature adopted two types of State-reimbursed exemptions beginning in the
tax yeaz 1969-70. The first currently exempts 100% of the full value of business inventories from taxation.
The second exemption currently provides a credit of $7,000 of the full value of an owner- occupied dwelling
for which application has been made to the Los Angeles County Assessor. Revenue estimated to be lost to
local taxing agencies due to the above exemptions has in the past been reimbursed from State sources.
Reimbursement is based upon total taxes due upon such exemption values and therefore is not reduced by any
estimated amount of actual delinquencies. The breakdown of assessed value of taxable property within the
City for fiscal years ending 2005-06 through 2009-10 is set forth in the table below.
DOCSOC/ 1369366v7/20 0 1 1 9-0 0 02
27
City of Santa Monica
Assessed Value of Taxable Property
For Fiscal Years 2005-06 through 2009-10
Fiscal
Year
Ended Persoual Public Less
June 30 Real Property Property Utilities Secured Grass Exemptionstl~
2006 $17,818,362,618 $36,240,768 $742,865 $17,856,346,251 $ 535,704,727
2007 19,407,566,948 231,255,829 742,865 19,639,565,642 810,600,441
2008 20,861,475,912. 230,361,744 .742,365 21,092,580,021 847,012,250
2009 23,100,511,228 228,270,851 742,365 23,329,524,444 904,660,628
2010 23,951,442,065 234,194,136 742,345 24,186,378,566 1,134,966,580
(t) Includes Homeowner Exe mption. City is rei mbursed by Stat e For takes lost because of these exemptions.
Source: Los Angeles County Audiror-Controller
Secured Net
$17,320,641,524
18,828,965,201
20,245,567,771
22,424,863,816
23,051,411,986
Tota[ Assessed
Net Unsecured Valuations
$777,908,774 $18,098,550,298
876,645,078 19,705;610,279
877,156,158 21,122,723,929
987,848,754 23,412,712,750
969,009,242 24,020,421,228
28
DOCSOC/1369366v7/200119-0002
Ad Valorem Property Taxes; Proposition lA
Taxes aze levied for each fiscal year on taxable real and personal property which is situated in the
County as of the preceding January I. However, upon a change in ownership of real property or completion of
new construction, State law permits an accelerated recognition and taxation of increases in real property
assessed valuation (known as a "floating lien date"). -For assessment and collection purposes, property is
classified either as "secured" or "unsecured" and is listed accordingly on separate parts of the assessment roll.
The "secured roll" is that part of the assessment roll containing State and County assessed property secured by
alien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Other property is
assessed on the "unsecured roll." See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON
TAXES AND APPROPRIATIONS."
The County levies a one percent property tax on behalf of all taxing agencies in the County. The taxes
collected are allocated on the basis of a formula established by State law enacted in 1979. Under this formula,
the County and all other taxing entities receive a base year allocation plus an allocation on the basis of "situs"
growth in assessed value (new construction, change of ownership, inflation) prorated among the jurisdictions
which serve the tax rate azeas within which the gowth occurs. Tax rate areas are .specifically defined
geographic areas which were developed to permit the levying of taxes for less than county-wide or less than
city-wide special districts and school districts. In addition, the County levies and collects additional approved
property taxes and assessments on behalf of any taxing agency within the County.
Property taxes on the secured roll aze due in two installments, on November 1 and February 1. If
unpaid, such taxes become delinquent after December 10 and April 10, respectively, and a ten percent penalty
attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are
delinquent is declared tax-defaulted on or about June 30. Such property may thereafter be redeemed by
payment of the delinquent taxes and the delinquency penalty, plus costs and redemption penalty of one and
one-half percent per month to the time of redemption. If taxes aze unpaid for a period of five years or more,
the tax-defaulted property is subject to sale by the Treasurer and Tax Collector of the County of Los Angeles.
Property taxes on the unsecured roll aze assessed as of the January 1 lien date and become delinquent,
if unpaid, on August 31. A ten percent penalty attaches to delinquent taxes on property on the unsecured roll
and an additional penalty of one and one-half percent per month begins to accrue on November 1. The taxing
authority has four ways of collecting delinquent unsecured personal property taxes: (1) a civil action against
the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain
a judgment lien on certain property of the taxpayer, (3) filing a certificate of delinquency for recordation in the
County Recorder's office in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale
of personal property, improvements or possessory interests belonging or assessed to the taxpayer. City taxes
are collected on the same bill as County taxes.
For a number of years, the State Legislature has shifted property taxes from cities, counties and
special districts to the Educafional Revenue Augmentation Fund. The term "ERAF" is often used as a
shorthand reference for this shift of property taxes. In 1992-93 and 1993-94, in response to serious budgetary
shortfalls, the State Legislature and administration permanently redirected over $3 billion of property taxes
from cities, counties, and special districts to schools and community college districts. The 2004-OS California
State Budget included an additional $1.3 billion shift of property taxes from certain local agencies, including
the City, to occur in Fiscal Years 2004-OS and 2005-06. The City's portion of such property tax shift for each
of these two Fiscal Yeazs was $2,716,305.
On November 2, 2004, California voters approved Proposition lA, which amended the State
Constitution to significantly reduce the State's authority over major local government revenue sources. Under
Proposition lA, the State may not (i) reduce local sales tax rates or alter the method of allocating the revenue
generated by such taxes, (ii) shift property taxes from local governments to schools or community colleges,
(iii) change how property tax revenues are shared among local governments without two-third approval of both
29
DOC SOC/1369366v7/200119-0002
houses of the State Legislature, or (iv) decrease Vehicle License Fees revenues without providing local
governments with equal replacement funding. Under Proposition lA, the State may shift to schools and
community colleges a limited amount of local government property tax revenue if certain conditions are met,
including (a) a proclamation by the Governor that the shift is needed due to a severe financial hardship of the
State, and (b) approval of the shift by the State Legislature with atwo-thirds vote of both houses. Under such
a shifr, the State must repay local governments for their property tax losses, with interest, within three yeazs.
Proposifion IA does allow the State to approve voluntary exchanges of local sales tax and property tax
revenues among local governments within a county. See "RISK FACTORS-State Budget" for information
related to the Proposition IA shift approved by the State for Fiscal Year 2009-10 and its impact on the City's
General Fund.
See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONSArticle XIIIA of the California Constitution".
The City's receipt of property taxes is affected by property tax delinquencies, appeals, refunds and
collection of delinquent amounts. ht the past five yeazs, the County reports countywide delinquency rates
ranging from a low of 1.4%, to 2.1 % and 3.0% in Fiscal Years 2007-08 and 2008-09, respectively.
Taa Receipts
Taxes received by the CiTy include Utlity User's Taxes, Sales Taxes, Property Taxes, Business
License Taxes, Transient Occupancy Taxes, Franchise Taxes, Parking Facility Taxes and other miscellaneous
taxes. Of such taxes, Utility User's Taxes, Sales Taxes and Transient Occupancy Taxes constitute the major
sources of revenues. A brief discussion of Utility User's Taxes, Sales Taxes and Transient Occupancy Taxes
follows:
Utility User's Tax. The Urility User's Tax is imposed on all users of natural gas, electricity, water,
wastewater, cable television and telephone services within the City's limits. The tax rate is 10.0% of all utility
chazges. This tax rate has been in effect since July 1993, and the Utility User's Tax has been in effect since
July 1969. On November 4, 2008, City residents voted to update and modernize the, City's Utility User's Tax
ordinance to include new technologies.
An exemption from the Utility User's Tax is available to senior citizens over the age of 62 and to
permanently disabled individuals, provided that the combined adjusted gross income of all household members
is below $29,788, or $25,995 for persons living alone (as of July 1, 2009). As provided by the California
Constitution, insurance companies are exempt from the Utility User's Tax. hi addition, county, state, federal
and foreign governments within the City aze not subject to this tax, as the City has no authority to impose a tax
on these entities. Exemptions account for a minor amount of the total UtIlity User's Tax base.
All utility companies, including the City's water and wastewater operafions, collect and transmit the
Utility User's Tax monthly to the City's Finance Department which then deposits. the tax revenues into the
General Fund.
Sales Tax. A sales tax is imposed on retail sales or consumption of personal property. The statewide
sales tax rate is established by the State Legislature. In Los Angeles County the sales tax rate is 9.75%. 8.25%
is collected and administered by the State on taxes collected within the City as follows:
State General Fund .......................................................................... .............................................6.00%
Proposition 172 (public safety use) ..........:...................................... .............................................0.50%
Proposition 57 (State financing bond) ............................................. .............................................0.25%
County Health/Welfaze .................................................................... .............................................0.50%
County Transportation ...............................................................:..... .............................................0.25%
City ............................................................................:..................... ............................................. 0.75%
30
DOCSOC/ 1369366v7/200119-0002
The 0.75% sales tax revenue collected by the State is deposited monthly into the City's General Fund.
The remaining 1.5% Los Angeles sales tax is authorized locally under Proposifions A, C and R for
transportation including bus, rail and some streets and road projects. These funds are collected by the State but
administered by the Los Angeles County Metropolitan Transportation Authority. A portion of the Proposition
A and C funds are returned to cities for use on approved projects.
Transient Occupancy Tax. A transient occupancy tax ("TOT") is imposed on persons staying 30 days
or less in a hotel, motel, inn, hostelry, tourist home, rooming house or other lodging place within the City. The
TOT has been in effect since November 1963. The current tax rate is 14%. Exemptions aze granted to federal,
State of California and City of Santa Monica officials or employees on official business. Exemptions account
for a very minor amount of the total TOT base. Payments aze made to the City on a monthly or quarterly basis
and are then deposited to the City's General Fund.
The following table sets forth tax revenues received by the City, by source:
City of Santa Monica
Tax Revenues by Sourcetrl
For Fiscal Years 2004-OS through 2008-09
($'s in thousands)
Fiscal Year Ended June 30
Source 2005 2006 2007 2008 2009141
Utility User's Tax $ 29,315 $ 30,444 $ 31,243 $ 31,622 $ 31,5579
Sales Taxes 27,580 31,872 33,267 32,357 28,297
Property TaxeslZl 25,651 28,032 32,586 36,068 36,855
Transient Occupancy Tax 23,419 29,209 .31,892 34,969 31,265
Business License Taxes 18,970 20,274 22,637 24,654 27,216
Pazking Facility Taxes 6,241 6,832 7,400 7,826 7,980
Vehicle License Fees 975 2,062 608 390 263
Real Property Transfer Tax 7,180 5,573 6,409 4,739 2,653
Franchise Taxes131 909 -- -- -- --
Condominium Taxes 24 24 39 50 35
Total ~ 140 264 153 922 166 081 172 5 166 143
~`~ Does not include Highway Users' Taxes which are recorded in the Gas Tax Fund, Unit Dwelling Taxes, which aze recorded
in the Pazks and Recreation Facilities Fund, or TORCA Conversion Taxes, which aze recorded in the TORCA Fund.
(z> Includes ad valorem property taxes for purposes of paying debt service on general obligation bonds, vehicle license fee
backfil] payments, redevelopment agency statutory pass through payments and certain local public safety fund amounts. See
`-Vehicle License Fee Reduction."
(3) Beginning in fiscal yeaz 2005-06, franchise fees are classified as "Licenses and Permits."
(a) Unaudited actuals.
Source: City of Santa Monica Finance Department
Vehicle License Fee Reduction
The State imposes a vehicle license fee ("VLF"), which is the portion of the fees paid in lieu of
personal property taxes on a vehicle. The vehicle license fee is based on vehicle value and declines as the
vehicle ages. Prior to the adoption of the Fiscal Yeaz 2004-OS State Budget, the fee was 2 percent of the value
of a vehicle. Through legislation in prior fiscal years, the State enacted vehicle license fee reductions under
which the State was required to "backfill" local governments for their revenue losses resulting from the
lowered fee. The Fiscal Yeaz 2004-OS State Budget permanently reduced the vehicle license fee from
2 percent to 0.65 percent and deleted the requirement for backfill payments, providing, instead, that the amount
31
DOCSOC/1369366v7/200119-0002
of the backfill requirement will be met by an increase in the property tax allocation to cities and counfies, and
such backfill amounts are reflected under "Property Taxes" above. See "RISK FACTORS-State Budget "
For the Fiscal Year ended June 30, 2009, the City received $263,000 (down from $390,000 in 2007- - --
08) in total vehicle license fees.
Long-Term Debt
The City may issue general obligation bonds for the acquisition and improvement of real property;
subject to the approval of two-thirds of the voters voting on the bond proposition. A tax on all real property
within the City to pay principal of and interest on general obligation bonds is levied by the City and collected
by the County on the secured and unsecured property tax bills. As of September 30, 2009, the City had
$16,745,000 in general obligation bonds outstanding. The City Charter of the City limits general obligation
bonded indebtedness to 10.0% of the total assessed valuation of property within the City, exclusive of any
indebtedness that has been or may be incurred for the purpose of acquiring and establishing a system of
waterworks for the supplying of water, or for the purpose of constructing sewers or drains in the City, for
which purposes a further indebtedness may be incurred by the issuance of bonds, subject only to the provisions
of the California Constitution and of the City Charter.
The City may enter into certain long-term lease obligations without first obtaining voter approval.
The City has entered into various lease arrangements under which the City is obligated to make annual
payments. Securifles have been issued which certificate or are payable from these lease arrangements. As of
September 1, 2009, there were $134,960,000 in non-voter approved bonded or certificated City lease
obligations outstanding. The City may enter into such arrangement in the future to fund City projects or
initiatives, payable from moneys in the General Fund, and such obligations may be material. The City's 2009-
10 budget does not indicate any such new borrowing.
Contained within the City are overlapping local agencies providing public services which have issued
general obligation bonds and other types of indebtedness. A table setting forth the. direct and overlapping debt
of the City as of June 30, 2009 is provided below:
32
DOC SOC/1369366v7/200119-0002
City of Santa Monica
Statement of Overlapping Debt
As of June 3Q 2009
2008-09 Assessed Valuation: $23,488,853,129
Redevelopment Incremental Valuation: 7.047.378.449
Adjusted Assessed Valuation: $16,441,474,680
Total Debt City's Shaze of
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: - 6/30/09 %Apylicable cn Debt 6/30/09
Los Angeles County Flood Control District _. $ 84,705,000 1.793 % $ 1,518,761
Metropolitan Water District ___ __. 293,425,000 0.892 2,617,351
Los Angeles Community College District 2,408,605,000 0.009 216,774
Santa Monica Community College District 241,365,685 58.287 140,684,817
Los Angeles Unified School District 8,046,220,000 0.0002 16,092
Santa Monica-Malibu Unified School District 126,280,034 58358. 73,694,502
City of Santa Monica 15,455,000 100. 18,455,000
Los Angeles County Regional Pazk and Open Space Assessment District 246,875,000 1.761 _ 4347.469
TOTAL DIItECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $241,550,766
DD2ECT AND OVERLAPPING GENERAL FUND DEBT:
Los Angeles County General Fund Obligations - $928,941,195 1.761 % $ 16,358,654
Los Angeles County Pension Obligations 235,690,861 1.761 4,150,516
Los Angeles County Superintendent of Schools Certificates of Participa tion 15,904,264 1.761 280,074
Santa Monica Community College District Certificates of Participation 26,710,000 58287 15,568,458
Los Angeles Unified School District Certificates of Participation. 440,351,710 0.0002 881
Santa Monica-Malibu Unified School District Certificates of Paricipaton 16,776,501 58.358 9,790,430
City of Santa Monica General Fund Obligations 67,880,000 100. 67 880 000
TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $114,029,013
GROSS COMBIlVED TOTAL DEBT $355,57$779«
Ratios to 2008-09 Assessed Valuation:
Direct Debt ($18,455,000) .................................................................... 0.08%
Total Direct and Overlapping Tax and Assessment Debt ....................... 1.03%
Ratios to Adiusted Assessed Valuation:
Combined Direct Debt ($86,335,000) ................................................. 0.53%
Combined Total Debt ............................................................................. 2.16%
STATE SCHOOL BUII,DING AID REPAYABLE AS OF 6/30/09: $0
t'~ Percentage of overlapping agency'sassessed valuation located within boundazies of the City.
(e) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded
capital lease obligations.
Source: California Municipal Statistics, Inc.
33
DOCSOC/1369366v7/200119-0002
A table setting forth the pro-forma statement of net debt of the City outstanding as of June 30, 2009 is
provided below:
City of Santa Monica
Net Debt
(As of June 30, 2009)
Type of Issue
General Obligation Bonds
Main Library Improvements 1998
Main Library Improvements 2002.
Subtotal
Outstanding
Principal Amount
$955,000
17,500,000
18,455,000
Final Maturity
Lease Obligations
Lease Revenue Bonds (Public Safety Facilities) 19991tI 9,940,000
Lease Revenue Bonds (Public Safety Facilities) 2002 13,125,000
Parking Authority Lease Revenue Bonds 2002 7,520,000
Lease Revenue Bonds (Civic Center Parking Project) 2004 37,295,000
Subtotal 67,880,000
Revenue Bonds
Wastewater Enterprise Revenue Bonds 1993 9,670,000
Wastewater Enterprise Refunding Revenue Bonds 2005 16,090,000
Subtotal 25,760,000
Gross Direct Debt 112,095,000
Less: Revenue Bonds (25,760,000)
Net Direct Debt 86,335,000
Plus: Tax Allocation Debtlzl 72,900,000
Plus: Overlapping Debt13l 269,244,779
Total Net Debt $428,479,779
2010
2022
2021
2021
2016
2034
2022
2018
~'~ To be refunded by the Series 2009 Bonds.
Iz) Debt of the Santa Monica Redevelopment Agency.
t'~ City of Santa Monica Finance Department (from data from California Municipal statistics, Inc.) as of June 3Q, 2009.
Source: City of Santa Monica Finance Department
34
DOCSOC/1369366v7/200119-0002
The following table sets forth assessed value within-the City, the applicable debt limit, the ratio of net
bonded debt to assessed value and the net bonded debt per capita.
City of Santa Monica
Assessed Value, Debt Limit and Ratio of Bonded Debt
to Assessed Value and Per Capita
For Fiscal Years 2005-06 through 2008-09
Ratio of
Fiscal Legal Bonded Net
Year Total Debt Total Net Debt to Bonded
Ended Estimated Assessed Limit Bonded Assessed Debt Per
June 30 Popadation Valae (OOOJs (000)s Debt Yalue Captta
2005 90,678 $16,546,884 $1,655 $103,060 0.62 $1,137
2006 90,750 18,098,550 1,810 104,750 0.58 1,154
2007 91,124 19,705,610 1,971 99,915 0.51 1,096
2008 91,439 21,122,724 2,112 95,710 0.45 1,047
2009'1 92,494 23,412,713 2,341 91,355 0.39 988
"' Unaudited
Source: City of Santa Monica Comprehensive Annual Financial Report for Fiscal Years 2004-OS through 2007-08; City of
Santa Monica Finance Department for Fiscal Yeaz 2008-09.
General Fund Financial Summary
The information contained in the following tables of revenues, expenditures and changes in fund
balances, and assets, liabilities and fund equity has been derived from the City's audited financial statements
for the four Fiscal Years 2004-OS through 2007-08, the unaudited financial statements for Fiscal Year 2008-09
and the City's adopted Budget for Fiscal Year 2009-10.
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DOCSOC/1369366v7/200119-0002
A copy of the City's audited financial statements for the fiscal yeaz ended June 30, 2008 is attached as
Appendix B hereto. Audited financial statements for prior yeazs are available upon request from the Finance
Department of the City.
City of Santa Monica -
General Fund Balance Sh eet
For Fiscal Years 2004-OS through 2008-09
Fiscal Year Ended June 30
2005 2006 2007 2008 2009rr~
Assets
Cash and investments $ 130,925,620 $ 119,059,275 $ 138,392,952 $ 124,459,829 $ 173,012,780«
Receivables (net, where applicable, of
allowance for uncollectibles
Accounts 6,273,654 6,112,872 8,306,186 7,301,931 6,804,986
Notes 1,736,229 2,996229 2,956,229 2,916,229 2,876,229
Property taxes 839,499 1,660,512 487,428 1,038,841 1,197,298
Interest ~ 891,704 1,069,920 1,046,361 1,456,881 1,033,694
Other Governments 90,551 122,434 - -- --
Due from other funds 222,877 - 3,402,840 1,376,555
Inventory 769,733 799,614 909;796 938,999 1,381,714
Prepaids 168,092 181,313 189,741 855,343 300,046
Cash with fiscal agent 28,327,648 16,314,299 3,998,825 2,725,992 1,355,138
Advances to other funds 32.543.229 38,547 810 34,269.608 35.105.966
TOTAL ASSETS $ 202,788,836 $ 181,864,278 $ 185,557,126 $ 180,202,851 $ 225,748,103
Liabilities and Fund Balance
Liabilities
Accounts payable and accrued liabilities $ 18,279,905 $ 14,009,795 $ 11,747,860 $ 12,293,534 $ 11,156,793
Contracts payable (retained percentage) - 1,027,242 538238 236,491 473,755 515,899
Due to other governments 1,313,747 - -- 438,629 --
Deferted revenue 12,831,615 13,485,321 16,977,041 17,44Q,343 996,991
Deposits-payable from restricted assets 781 508 862.692 926 130 754,711 15.727.952
TOTAL LIABILFfIES $ 34,052,017 $ 28,896,046 $ 29,887,522 $ 31,400,972 $ 28,793,873
Fund Balance:
Total Reserved Fund Balance 116,386,390 97,044,588 91,843,183 81,056,800 41,032273
Total Unreserved Fund Balance -
Designated 31,610,855 27,540,221 54,416,418 62,572,543 147,861,3911~H'~
Total Unreserved Fund Balance -
Undesignated 20.739.574 28383.423 9.410.003 5.172 536 8.060.566
TOTAL FUND BALANCE 168.736.819 152.968.232 ] 55.669.604 148,801.879 196.954.230
TOTAL LIABILITIES & FUND BALANCE $ 202 788.836 % 181 864278 $ 185 557.126 $ 180 202 R51 $ 225.748 103
"' Unaudited Acmals.
m Includes $56.4 million of funds received by the City m 2004 and 2006 in conjunction with a legal settlement related to contamination
of the City's water and held in a special revenue fund until all restrictions on expenditures of funds were lifted.
~'~ Reflects a change in the presentation of amounts needed to fund the remaining full cast of uncompleted projects. Prior to Fiscal Year
2009, this balance was reported as Reserved Fund Balance; starting with Fiscal Year 2009, the balance is reported as Umeserved Fund
Balance -Designated. Designation for Specific Continuing Capital Projects at June 30, 2009 is $30.3 million.
Source: City of Santa Monica Comprehensive Annual Financial Report for Fiscal Years 2004-OS through 2007-08;. City of Santa Monica
Finance Department.
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DOCSOC/1369366v7/200119-0002
City of Santa Monica
- - -- General Fund _
Summary of Revenues and Expenditures
For Fiscal Years 2004-OS through 2008-09
Fiscal Year Ended Ja»e 30
2005 2006 2007 ~ --- 2008. 2009Q1
Revenues
Property taxes $ 25,650,975 $ 28,031,618 $ 32,586,134 $ 36,067,632 $ 36,763,026
Sales taxes 27,179,776 31,871,593 33,267,253 32,356,941 - . 28,296,696
Other taxes 68,062,807 94,065,034 100,228,061 104,250,391 100,991,562
Licenses and permits 39,114,188 18,276,305 19,093,485 20,109;435 2Q,3li,341
lntergovemmental 769,170 498,490 1,101,941 446,800 652,174
Charges for services 12,292,054 19,728,267 25,578,687 25,778,223 28,122,186
Fines and forfeitures 13,332,411 13,101,713 14,191,722 14,567,262 14,113,906
Investment income 4,109,730 4,192,437 7,979,847 5,799,315 5,411,464
Rental income 7,209,164 5,165,179 5,873,728 5,696,255 5,388,721
Other 1.426.645 6.263,572 3.980.180 5.117.139 7 510 002
Total revenue $ 199,546,920 $ 221,194,208 $ 243,881,038 $ 250,189,393 $ 247,565,078
Expenditures
General government $ 28,895,001 $ 32,754,548 $ 35,328,010 $ 40,722,122 $ 44,733,450
Public safeTy 79,226,865 81,621,114 86,716,041 88,308,262 93;282,777
General services 23,081,361 34,613,325 32,679,323 36,943,004 45,437,347
Cultural and recreation services 52,003,224 39,405,674 42,987,556 32,316,853 33,498,492
Library 30,092,186 18,662,989 9,218,047 10,219,930 10,024,203
Housing and community
development 24,436,192 26,750,282 29,684,528 31,538,299 29,377,311
O[her 1.087.085 2.189224 609225
Total expenditures $ 238,821,914 $ 235,997,156 $ 237,222,730 $ 240,048,470 $.256,353,580
Excesa of revenues over expenditures $ (39,274,994) $ (14,802,948) $ (6,658,308) $ 10,140,923 $ (8,788;502)
Other financing sources (uses)
Proceeds from issuance of lone
term debt $ 38,93Q,000 - -- -- --
Tmnsfersin 10,984,330 11,406,631 9,811,028 11,408,818 72,076,SSOUt
Transfers out (17,031,729) (12,372,270) (13,767,964) (28,417,466) (15,135,727)
Premium on debt issued ~ 163.064
Total other financing sources $ 33,045,665 $ (965,639) $ 3,956,936 $ (17,008,648) $ 56,94Q,853
Excess of revenues and other sources
over expenditures and other uses $ (6,229,329) $ (15,768,587) $ 2,701,372 $ (6,867,725) $ 48,152,351
Fund balance az beginning of year $ 174,996 148 _$ 168.736.819 $ 152.968.232 $ 155.669,604 $ 148.801,879
Fund balance at end of yeaz $ 168.736.819 $ 152.968232 S 155.669.604 $ 148.R01,$2q $ 196 954 230
"~ Unaudited actuals.
a~ Includes $56.4 million in funds received by the City in 2004 and 2006 in conjunction with a legal settlement related to the
contaminazion of the CiTy's water and held in a special revenue fund until all restrictions on expenditures of funds were lifted.
Source: CiTy of Santa Monica Comprehensive Annual Financial Report for Fiscal Years 2004-OS through 2007-08; CiTy of Santa Monica
Finance Department.
The following table sets forth the budgetary information for Fiscal Year 2008-09 as of the June 30,
2009 revised budget and for Fiscal Year 2009-10 as adopted June 23, 2009.
City of Santa Mouica
General Fund
Revenues and Expenditures-Appropriations
Fiscal Year 2008-09 Revised Budget and Fiscal Year 2009-10 Adopted Budget
[To Come]
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Investment of City Funds -
The City may invest moneys not immediately required for operations in a manner consistent with the
City's Investment Policy (the "Investment Policy") and State law.
The Investment Policy. An Investment Committee, consisting of the City Manager, Assistant City
Manager, Deputy City Manager, Director of Finance/City Treaswer, and the Principal Budget Analyst-
Investments, provides general oversight and acts in an advisory capacity regarding City investments. hl
addition, the Committee will include orie other department head serving one-year terms on a rotating basis.
The Committee meets at least once each calendar quarter to review and evaluate previous investment activity,
to review the current status of all fiords held by the City, to discuss anticipated cash requirements and
investment acfivity for the next quarter, and to discuss investment strategy with the Director of Finance/City
Treasurer. The policy was recently certified by the Association of Public Treasurers, United States and
Canada.
The Investment Policy establishes three objectives for City investment
(1) Safety of prlnCl~: The overall value of City funds shall not be diminished in the process of
secwing and investing those funds or over the dwation of the investments.
(2) Liquidity of funds: Funds shall be made available to meet all anticipated City obligations and
a prudent. reserve shall be kept to meet unanticipated cash requirements.
(3) Retum on investment: Eam a market rate of interest from City funds commenswate with the
objectives of safety and availability of the principal invested.
Specific Investment Restrictions. The Investment Policy mandates "prudent" investment in those
instruments specifically authorized by State law and establishes additional diversification guidelines with
respect to instruments, maturity, and deposit institutions. It is the City Treaswer's policy to hold investments
to maturity and she does not anticipate any event in the futwe that would require selling investments prior to
maturity. The Investment Policy restricts the average weighted maturity of all pooled City investments to a
maximum of three yeazs. The City's practice is not to permit investment of the City's non-pool securities
either in derivatives or reverse repwchase agreements, nor does it permit leveraging of the City's investment
portfolio.
The Investment Policy is annually submitted to the City Council for approval. There is no asswance
that State law and/or the Investment Policy will not be amended in the firtwe to allow for investments that are
currently prohibited.
The Monthly Report. Secrion 711 of the City Charter delegates investment authority to the City
Treaswer. The Investment Policy requires the City Treaswer to (i) keep a record of all investment
transactions, and make monthly reports to the City Council and the City Manager detailing and summarizing
all transactions and stating the present status of City investments (the "Monthly Report"). The Monthly Report
dated as of September 30, 2009, indicates that 70.2% of the City's investment portfolio ($430.1 million) was
invested in Federal Agency securfies, 11.9% ($73.1 million, all of which is 100% guaranteed by the Federal
Deposit Inswance Corporation through its Temporary Liquidity Guarantee Program) was invested in corporate
medium term notes, 12.3% ($75 million) was invested in the Local Agency Investment Fund of the State
(LATE) and 5.3% ($32.6 million) was invested in money market funds. The mazket value of the City's
investment portfolio was 100.2% of its book value. As of September 30, 2009, the City Treaswer reports an
average annual yield to maturity of the City's investment portfolio of 1.92% and an average weighted maturity
of 630 days.
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RISK FACTORS
The following factors, along with the other information in this Official Statement, should be
considered by potential investors in evaluating purchase of the Series 2009 Bonds. However, they do not
purport to be an exhaustive listing of risks and other considerations which may be relevant to an investment in
the Series 2009 Bonds. in addition, the order in which the following factors are presented is not intended to
reflect the relative importance of any such risks.
General Considerations -Security for the Series 2009 Bonds
The Series 2009 Bonds aze special obligations of the Authority; payable solely from Base Rental
Payments and the other assets pledged under the Indenture. Neither the faith and credit nor the taxing power
of the Authority, the City or the State, or any political subdivision thereof, is pledged to the payment of the
Series 2009 Bonds. The Authority has no taxing power.
The obligation of the City to make the Base Rental Payments does not constitute a debt of the City or
the State or of any political subdivision thereof within the meaning of any constitutional or statutory debt limit
or restriction, and does not constitute an obligafion for which the City or the State is obligated to levy or
pledge any form of taxation or for which the City or the State has levied or pledged any form of taxation.
Although the Lease Agreement does not create a pledge, lien or encumbrance upon the funds of the
City, the City is obligated under the Lease Agreement to pay the Base Rental Payments and Additional Rental
Payments from any source of legally available funds and the City has covenanted in the Lease Agreement that
it will take such action as may be necessary to include all Base Rental Payments and Additional Rental
Payments due under the Lease Agreement as a separate line item in its annual budgets and to make necessary
annual appropriafions for all such Rental Payments. The City is currently liable and may become liable on
other obligations payable from general revenues, some of which may have a priority over the Base Rental
Payments.
The City has the capacity to enter into other obligations which may constitute additional charges
against its revenues. To the extent that additional obligafions aze incurred by the City, the funds available to
make Base Rental Payments may be decreased. ht the event the City's revenue sources are less than its total
obligations, the City could choose to fund other activities before making Base Rental Payments and other
payments due under the Lease Agreement. The same result could occur if, because of California
Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available
revenues. However, the City's appropriations have never exceeded the limitation on appropriations under
Article XIIIB of the Califomia Constitution. See "CONSTITUTIONAL AND STATUTORY LIMITATIONS
ON TAXES AND APPROPRIATIONS-Article XIIIB of the California Constitution."
Abatement
In the event of substantial interference with the City's right to use and occupy any portion of the
Property by reason of damage to, or destruction or condemnation of the Property, or any defects in title to the
Property, Base Rental Payments will be subject to abatement. See "SECURffY AND SOURCES OF
PAYMENT FOR THE SERIES 2009 BONDS-Abatement." In the event that such portion of the Property, if
damaged or destroyed by an insured casualty, could not be replaced during the period of time in which
proceeds of the City's rental interruption insurance will be available in lieu of Base Rental Payments, plus the
period-for which funds aze available from the Reserve Fund or other funds and accounts established under the
Indenture, or in the event that casualty insurance proceeds aze insufficient to provide for complete repair or
replacement of such portion of the Property or redemption of the Series 2009 Bonds, there could be
insufficient funds to make payments to Owners in full..
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DOCSOC/1369366v7/2 00 1 1 9-0 002
It is not possible to predict the circumstances under which such an abatement of rental may occur. In
addition, there is no statute, case or other law specifying how such an abatement of rental should be measured.
For example, it is not clear whether fair rental value is established as of commencement of the lease or at the
time of the abatement. If the latter, it may be that the value of the Property is substantially higher or lower
than its value at the time of the execution and delivery of the Series 2009 Bonds. Abatement, therefore, could
have an uncertain and material adverse effect on the security for and payment of the Series 2009 Bonds.
If damage, destruction, title defect or eminent domain proceedings with respect to the Property results
in abatement of the Base Rental Payments related to such Property and if such abated Base Rental Payments, if
any, together with moneys from rental interruption or use and occupancy insurance (in the event of any insured
loss due to damage or destruction), eminent domain proceeds, if any, and moneys available in-the Reserve-
Fund, are insufficient to make all payments of principal and interest with respect to the Series 2009 Bonds
during the period that the Property is being replaced, repaired or reconstructed, then all or a portion of such
payments of principal. and interest may not be made. Under the Lease Agreement and the Indenture, no
remedy is available to the Series 2009 Bond Owners for nonpayment under such circumstances.
Seismic Activity and Natural Disasters
The City, like all southern California communities, may be subject to unpredictable seismic activity,
fires or floods. The City, like most regions that border the Pacific Ocean, is an azea of significant seismic
activiTy and, therefore, is subject to potentially destructive earthquakes. The San Andreas fault is the major
active fault in the State, and is approximately 40 miles from the Property. Several active or potentially active
faults are located closer to the Property, including the Santa Monica fault, the Malibu Coast fault and the
Newport-Inglewood fault. According to the City of Santa Monica Final Master Environmental Assessment
(dated April 1996), the CiTy is subject to sometimes violent shaking from periodic earthquakes.
On January 17, 1994, a 6.8 magnitude earthquake occurred in Northridge, California which resulted in
450 injuries and 3 fatalities in the City. The City sustained damage to 530 buildings, including 2300 housing
units and the temporary shutdown of St. John's Hospital.
The Safety Element of the CiTy of Santa Monica General Plan (dated January 1995) identifies the area
of the City where the Project is located as one that is considered to be at a very low level of susceptibility to
liquefaction in the event of an earthquake. The State of California Seismic Hazard Evaluation of the Beverly
Hills Quadrangle (1999) indicates that the site is not in a liquefaction hazard azea in the event of seismic
activity. The Final Environmental Impact Report prepared for the Project (February 2003) states that given the
dominant silt and clay native soils at the site and the anticipated depth to groundwater of approximately 50 feet
below grade, the potential for liquefaction occurring at the existing ground surface is considered low.
The California Department of Mines and Geology has modeled the Site as having a 10 percent
probability of experiencing 0.4 - 0.5 g ground acceleration over the next 50 years. The Project was designed in
accordance with the then applicable industry standards for structural design in order to minimize the potential
for structural failure due to seismic activiTy.
The City is also susceptible to tsunami and seiche hazards. A tsunami is a sea wave generated by a
submarine earthquake, landslide or volcanic eruption. A seiche is another form of earthquake- or landslide-
induced wave or oscillation that can be generated in an enclosed body of water such as a lagoon or harbor.
Depending on their magnitude, tsunamis and seiches may cause damage along Santa Monica Bay. According
to the City, the Project does not appeaz to be located in an area that is susceptible to tsunami run up and seiche
hazards.
hi the event of a severe earthquake, fire, flood or other natural disaster, there may be significant
damage to both property and infrastructure in the City, which could impact the ability of the City to make Base
Rental Payments when due and, accordingly, could have an adverse effect on the Authority's ability to make
DOC SOC/1369366v7/200119-0002
40
timely payments of principal and interest with respect to the Series 2009 Bonds. The City is not required
under the Lease Agreement to maintain earthquake or flood insurance on the Property. See "SECURITY AND
SOURCES OF PAYMENT FOR THE SERIES 2009 BONDS-Insurance."
Other Financial Matters
Due to recent economic changes in the State and the United States, it is possible that the general
revenues of the. City will decline, particularly those based on tourism. Such a reduction in revenues may
include, but may not be limited to, a decline in TOT and sales tax revenues, and the lass of vehicle license fee
revenue. Such financial matters may have a detrimental impact on the City's General Fund; and, accordingly,
may reduce the City's ability to make Base Rental Payments. See "CITY OF SANTA MONICA FINANCES
Tax Receipts-Transient Occupancy Tax" for information on TOT revenues of the City; see "CITY OF
SANTA MONICA FINANCES-Vehicle License Fee Reduction" for information on the loss of vehicle
license fee revenue by the City.
State Budget
The following information concerning the State's budgets has been obtained from publicly available
information which the City believes to be reliable; however, the City does not guaranty the accuracy or
completeness of this information and has not independently verified such information. Furthermore, it should
not be inferred from the inclusion of this information in this Official Statement that the principal of or interest
on the Series 2009 Bonds is payable by or the responsibility of the State of California.
The State of California is experiencing significant financial and budgetary stress. State budgets aze
affected by national and state economic conditions and other factors over which the City has no control. The
State's financial condition and budget policies affect communities and local public agencies throughout
California. To the extent that the State budget process results in reduced revenues to the City, the City will be
requued to make adjustments to its budget. Each State budget, and notably the State's 2009-10 budget,
contains a number of measures which impact the City's finances.
The State Budget Act for Fiscal Year 2008-09 was signed by the Governor on September 23, 2008-
the latest in State history. Thereafter, on-going weak economic conditions resulted in significant revenue
shortfalls and the Governor declazed a fiscal emergency and called special sessions of the Legislature to
consider budget actions to address the problems. The Governor's proposed budget for Fiscal Year 2009-10,
released December 31, 2008, estimated there would be a budget gap of more than $40 billion for the 18-month
period ending June 30, 2010. Following lengthy budget negotiations, on February 19, 2009, the State
Legislature passed revisions to the State Budget Act for the remainder of Fiscal Year 2008-09, as well as the
State Budget Act for Fiscal Year 2009-10 and related legislafion, which the Governor signed on February 20,
2009 after making additional line-item vetoes. On July 28, 2009, the Governor signed into law a series of
amendments to the 2009-10 State Budget (the "2009-10 Budget Amendments").
The State's financial difficulties may affect the amount and timing of payments to or for the benefit
of cities of funds provided by the State. From time to time, some of the State's budget solutions may increase
the financial stress of cities and other local governments because they (1) decrease local revenues (particulazly
the property tax, road improvement funding, public safety or other categorical funded initiatives) or (2) directly
or indirectly increase demand for local programs (such as public safety or indigent health programs). There
can be no assurances that the State's financial difficulties will not materially adversely affect the financial
condition of the City.
The 2009-10 Budget Amendments were designed to address the State's budget deficit. The 2009-10
Budget Amendments project $89.5 billion of General Fund revenues and authorize $84.6 billion of
expenditures. Since many of the actions taken to balance the State's Fiscal Year 2009-10 Budget were either
one-time actions, or involve loans which have to be repaid, or are based on temporary revenue increases or the
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DOC SOC/ 1369366v7/200119-0002
limited receipt of federal stimulus fonds, budget gaps of several billions of dollazs a year are expected to recur
in 2010-11 and subsequent yeazs. The State Department of Finance has projected that, using expenditure
obligations under existing law and various assumpfions concerning revenues in future years, the State would,
in the absence of taking additional steps to balance its budget, face an "operating deficit" (expenditures
exceeding revenues in the same fiscal year) of $7.4 billion in fiscal yeaz 2010-11, $15.5 billion in 2011-12 and
$15.1 billion in 2012-13. These projections in turn aze based on a number of assumptions.
The financial condition of the State is subject to a number of other risks in the future, including
particulazly potential significant increases in required state contributions to the Public Employees' Retirement
System, increased financial obligations related to Other Post-Employment Benefits, and increased debt service.
The 2009-10 Budget Amendments included two especially significant revenue provisions affecting the
City. The State's 2009-10 Budget includes an approximately $2 billion borrowing of property tax funds from
local government under the provisions of Proposition lA of 2004. The City's shaze of the borrowing, which
would have resulted in reduced revenues to the City's General Fund, was $3,149,130. However, by reason of
the City's participation in the State-sponsored securitization of the City's Proposition lA receivable (i.,e, the
$3,149,130), the City does not expect to suffer any reduction in General Fund 7evenues as a result of the
State's Proposition lA property tax borrowing.. See "CITY OF SANTA MONICA Ad Valorem Property
Taxes; Proposition 1 A" for a discussion of Proposition lA and the securitization of the State's obligation.
Second, the 2009-10 Budget Amendments include a total of $2.05 billion to be taken from local
redevelopment agencies through a seizure of $1.7 billion in Fiscal Yeaz 2009-10, and then an additional $350
million in Fiscal Year 2010-11. These funds aze to be deposited in county "Supplemental" Educational
Revenue Augmentation Funds ("SERAF") to be distributed to meet the State's consfitutional minimum
funding obligation to schools. The SERAF shift is similar to prior educational augmentation fund shifts which
most recently have been invalidated by a local California Superior Court. While the legislative formulation of
the SERAF shift is different from prior shifts in certain respects, the California Redevelopment Association
believes the shift represents an unconsfitutional diversion of redevelopment funds which are dedicated to
redevelopment, and has filed suit to invalidate the provisions. The California Redevelopment Association
estimates the shaze of this diversion assessed against the City's redevelopment agency is $20,863,376 for
Fiscal Year 2009-10 and $4,295,401 for Fiscal Yeaz 2010-11. The 2009-10 Budget Amendments allow these
funds to be paid by a redevelopment agency through the use of any available funds, and does not require the
City to make the payments. However, significant penalties aze imposed upon redevelopment agencies which
do not make the payments. The City cannot predict the outcome of the currently pending or any future
challenge to the SERAF shift or other legislative changes which may affect the City's redevelopment agency,
or the impact of such changes on the City's General Fund.
Ciry Impact. As a result of the Proposition lA borrowing, the State will withhold approximately
$3,149,130 of properly tax revenues in Fiscal Yeaz 2010, which the City would ordinarily expect the State to
repay within 3 years. See "CITY OF SANTA MONICA FINANCES Ad Valorem Properly Taxes;
Proposition lA" for a description of Proposition lA. However, the City and other local governments have
elected to participate in a securitizafion financing offered by a joint powers authority in which they will
receive, up front, property tax revenues being borrowed by the State. California Communities, the joint
powers authority, has issued bonds securitizing the future payments by the State and will remit the proceeds of
the bonds to the local governments, including the City, which opted to participate in the securitization. The
State will then repay the bondholders, to pay off the outstanding bonds including interest costs. As a
participant in the financing, the City will receive the full amount of its property tax reduction. Payments to all
participating agencies are scheduled to occur in two equal installments on or about January 15, 2010 and May
3, 2010.
The SERAF shift of redevelopment property tax increment funds is significant and, if upheld by the
courts and repeated in future fiscal years by the Legislature, could affect the finances of the City's
redevelopment agency for years to come. Nevertheless, the City expects that, if ultimately required to be paid,
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the City's redevelopment agency will fund its SERAF payment for Fiscal Year 2009-10 and 2010-11 from its
own property tax increment and without direct impact on the City's General Fund.
The Authority and the City cannot predict what actions will be taken in the future by the State
Legislature and the Governor to address the State's current and future budget deficits. Future State budgets
could be affected by national economic conditions and other factors over which the City will have no control.
To the extent that the State's annual budget process results in reduced revenues or increased expenses to the
City, the City will be required to make adjustments to its budget.
Substitufion, Addifion and Removal of Property; Additional Bonds
The Authority and the City may amend the Lease Agreement to substitute alternate real property for
any portion of or add additional real property to the.Property or to release a portion of the Property from the
Lease Agreement, upon compliance with all of the conditions set forth in the Lease Ageement and
summarized below. After a substitution or release, the portion of the Property for which the substitution or
release has been effected shall be released from the leasehold encumbrance of the Lease Agreement. See
"SECURITY FOR AND SOURCES OF PAYMENT FOR THE SERIES 2009 BONDS-Substitution,
Addition and Removal of Property." Moreover, the Authority may issue Additional Bonds secured by Base
Rental Payments which are increased from current levels.
Although the Lease Agreement requires, among other things, that the Property, as constituted after
such substitution or release, has an aanual fair rental value greater than or equal to 105% of the maximum Base
Rental Payments payable by the City in any Rental Period, it does not require that such Property have an
annual fair rental value equal to the annual fair rental value of the Property at the time of subsfitution or
release. Thus, a portion of the Property could be replaced with less valuable real property, or could be released
altogether. Such a replacement or release could have an adverse impact on the security for the Series 2009
Bonds, particularly if an event requiring abatement of Base Rental Payments were to occur subsequent to such
substitution or release. See APPENDIX A-"SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS-
The Lease Agreement-Subsfitution or Release of the Property."
The Indenture requires, among other things, that upon the issuance of Additional Bonds, the- Ground
Lease and the Lease Ageement shall have been amended, to the extent necessary, so as to increase the Base
Rental Payments payable by the City thereunder by an aggregate amount equal to the principal of and interest
on such Additional Bonds; provided, however, that no such amendment shall be made such that the sum of
Base Rental Payments, including any increase in the Base Rental Payments as a result of such amendment,
plus Additional Rental Payments, in any Rental Period shall be in excess of the annual fair rental value of the
Property after taking into account the use of the proceeds of any Additional Bonds issued in connecfion
therewith. Such issuance of Additional Bonds could result in the Property, as consfituted after such issuance
of Additional Bonds, having less than 105% of the maximum Base Rental Payments payable by the City in any
Rental Period.
Limited Recourse on Default; No Acceleration of Base Rental
Failure by the City to make Base Rental Payments or other payments required to be made under the
Lease Agreement, or failure to observe and perform any other terms, covenants or conditions contained in the
Lease Agreement or in the Indenture for a period of 30 days after written notice of such failure and request that
it be remedied has been given to the City by the Authority or the Trustee, constitute events of default under the
Lease Agreement and permit the Trustee or the Authority to pursue any and all remedies available. In the
event of a default, notwithstanding anything in the Lease Agreement or in the Indenture to the contrary, there
shall be no right under any circumstances to accelerate the Base Rental Payments or otherwise declare any
Base Rental Payments not then in default to be immediately due and payable, nor shall the Authority or the
Trustee have any right to re-enter or re-let the Property except as described in the Lease Agreement.
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The enforcement of any remedies provided in the Lease Agreement and the Indenture could prove
both expensive and time consuming. If the City defaults on its obligation to make Base Rental Payments with
respect to the Property, the Trustee, as assignee of the Authority, may retain the Lease Agreement and hold the
City liable for all Base Rental Payments thereunder om an annual basis and enforce any other terms or
provisions of the Lease Agreement to be kept or performed by the City.
Alternatively, the Authority or the Trustee may terminate the Lease Agreement, retake possession of
the Property and proceed against the City to recover damages. pursuant to the Lease Agreement. Due to the
specialized nature of the Property or any property substituted therefor pursuant to the Lease Agreement and the
restrictions on its use, no assurance can be given that the Trustee will be able to re-let the Property so as to
provide rental income sufficient to make all payments of principal of, interest and premium, if any, on the
Series 2009 Bonds when due, and the Trustee is not empowered to sell the Property for the benefit of the
Owners of the Series 2009 Bonds. Any suit for money damages would be subject to limitafions on legal
remedies against cities in California, including a limitation on enforcement of judgments against funds needed
to serve the public welfare and interest. See "SECURITY AND SOURCES OF PAYMENT FOR THE
SERIES 2009 BONDS" and APPENDIX A-"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS The
Lease Agreement-Default" See also "THE PROPERTY" for a description of the County Covenant and a use
restriction applicable to the Property.
Possible Insufficiency of Insurance Proceeds
The Lease Agreement obligates the City to keep in force various forms of insurance, subject to
deductibles, for repair or replacement of the Property in the event of damage, destruction or title defects,
subject to certain exceptions. The Authority and the City make no representation as to the ability of any
insurer to fulfill its obligations under any insurance policy obtained pursuant to the Lease Agreement and no
assurance can be given as to the adequacy of any such insurance to fund necessary repair or replacement or to
pay principal of and interest on the Series 2009 Bonds when due. In addition, certain risks, such as
earthquakes and floods, are not covered by the insurance required under the Lease Agreement. See
"SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2009 BONDS-Insurance: '
Limitations on Remedies
The rights of the Owners of the Series 2009 Bonds are subject to the limitations on legal remedies
against cities in the State, including a limitation on enforcement of judgments against funds needed to serve the
public welfare and interest. Additionally, enforceability of the rights and remedies of the Owners of the
Series 2009 Bonds, and the obligations incurred by the City, may become subject to the federal bankruptcy
code (Title I1, United States Code) (the "Bankruptcy Code") and applicable banlo-uptcy, insolvency,
reorganizafion, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights
generally, now or hereafter in effect, equity principles which may limit the specific enforcement under State
law of certain remedies, the exercise by the United States of America of the powers delegated to it by the U.S.
Constitution, the reasoriable and necessary exercise, in certain exceptional situations, of the police powers
inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and
legitimate public purpose and the limitations on remedies against cities in the State. Bankruptcy proceedings,
or the exercise of powers by the Federal or State government, if inifiated, could subject the Owners of the
Series 2009 Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and
consequently may entail risks of delay, limitation, or modification of their rights. Under Chapter 9 of the
Bankruptcy Code, which governs the bankruptcy proceedings for public agencies such as the City, there aze no
involuntary petitions in bankruptcy. If the City were to file a petition under Chapter 9 of the Bankruptcy Code,
the Owners of the Series 2009 Bonds, the Trustee and the Authority could be prohibited from taking any steps
to enforce their rights under the Lease Agreement, and from taking any steps to collect amounts due from the
City under the Lease Agreement
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Loss of Tax Exemption
As discussed under the heading "TAX MATTERS," the interest on the Series 2009 Bonds could
become includable in gross income for purposes of federal income taxation retroactive to the date of delivery
of the Series 2009 Bonds, as a result of acts or omissions of the Authority or the City in violation of its
covenants in the Indenture and the Lease Agreement. Should such an event of taxability occur, the Series 2009
Bonds would not be subject to a special redemption and would remain Outstanding until maturity or until
redeemed under the redemption provisions contained in the Indenture.
No Liability of Authority to the Owners
Except as expressly provided in the Indenture, the Authority will not have any obligation or liability to
the Owners of the Series 2009 Bonds with respect to the payment when due of the Base Rental Payments by
the City, or with respect to the performance by the City of other agreements and covenants required to be
performed by it contained in the Lease Agreement or the Indenture, or with respect to the performance by the
Trustee of any right or obligation required to be performed by it contained in the Indenture.
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS
There are a number of provisions in the State Constitution that limit the ability of the City to raise and
expend tax revenues.
Article XIIIA of the California Constitufion
On June 6, 1978, California voters approved an amendment (commonly known as both Proposition 13
and the Jarvis-Gann Initiative) to the California Constitution. This amendment, which added Article XIIIA to
the California Constitution, among other things affects the valuation of real property for the purpose of
taxation in that it defines the full cash property value to mean "the county assessor's valuation of real property
as shown on the 1975/76 tax bill under `full cash value', or thereafter, the appraised value of real property
newly constructed, or when a change in ownership has occurred after the 1975 assessment." The full cash
value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or a reducfion in the
consumer price index or compazable local data at a rate not to exceed 2% per year, or reduced, in the event of
declining property value caused by damage, destruction or other factors including a general economic
downturn. The amendment further limits the amount of any ad valorem tax on real property to one percent of
the full cash value except that additional taxes may be levied to pay debt service on indebtedness approved by
the voters prior to July 1, 1978, and bonded indebtedness for the acquisition or improvement of real property
approved on or after July 1, 1978 by two-thirds of the votes cast by the voters voting on the proposition (55%
in the case of certain school facilities). Property taxes subject to Proposition 13 are a significant source of
revenues to the City's General Fund. See "CITY OF SANTA MONICA FINANCES."
Legislation enacted by the California Legislature to implement Article XIIIA provides that all taxable
property is shown at full assessed value as described above. Tax rates for voter approved bonded indebtedness
and pension liability are also applied to 100% of assessed value. Redevelopment agencies may capture a
significant portion of taxes attributable to the assessed value of real property located within redevelopment
project areas of such agencies, and this is the case in the City.
Future assessed valuation growth allowed under Article XIIIA (new construction, change of
ownership, 2% annual value growth) is allocated on the basis of "situs" among the jurisdictions that serve the
tax rate azea within which the growth occurs. Local agencies and school districts share the growth of "base"
revenue from the tax rate area. Each year's growth allocation becomes part of each agency's allocation the
following yeaz. Article XIIIA effectively prohibits the levying of any other ad valorem property tax above the
1 % limit except for taxes to support indebtedness approved by the voters as described above.
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DOCSOC/1369366v7/200119-0002
Article XIIlA has subsequently been amended to permit reduction of the "full cash value" base in the
event of declining property values caused by damage, destrucfion or other factors, and to provide that there
would be no increase in the "full cash value" base in the event of reconstruction of property damaged or
destroyed in a disaster and in certain other limited circumstances. -
Article XIRB of the California Constitufion
At the statewide special election ott November 6, 1979, the voters approved an initiative enfitled
"Limitation on Government Appropriafions" which added Article XIIIB to the California Constitution. Under
Article XIIIB, state and local government entities have an annual "appropriations limit" which limits the
ability to spend certain moneys which are called "appropriations subject to limitation" (consisting of tax
revenues and certain state subventions together called "proceeds of taxes" and certain other funds) in an
amount higher than the "appropriations limit " Article XIIIB does not affect the appropriation of monies
which are excluded from the defmition of "appropriations limit" including debt service on indebtedness
existing or authorized as of October 1, 1979, or bonded indebtedness subsequently approved by the voters. In
general teens, the "appropriations limit" is to be based on certain 1978-79 expenditures, and is to be adjusted
annually to reflect changes in the consumer price index, population and services provided by these entities.
Among other provisions of Article XIIIB, if those entties' revenues in any yeaz exceed the amounts permitted
to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two
yeazs.
The City's appropriations have never exceeded the limitation on appropriations under Article XIIIB of
the California Constitution.
Proposition 62
Proposition 62, which was adopted by the voters at the November 4, 1986 general election,
(a) requires that any new or higher taxes for general governmental purposes imposed by local governmental
entities such as the City be approved by atwo-thirds vote of the governmental entity's legislative body and by
a majority vote of the voters of the governmental enfity voting in an election on the tax, (b) requires that any
special tax (defined as taxes levied for other than general governmental purposes) imposed by a local
government entity be approved by atwo-thirds vote of the voters of the governmental entity voting in an
election on the tax, (c) restricts the use of revenues from a special tax to the purposes or for the service for
which the special tax was imposed, (d) prohibits the imposition of ad valorem taxes on real property by local
governmental entities except as permitted by Article XIII A of the California Constitution, (e) prohibits the
imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and
(f) requires that any tax imposed by a local governmental entity on or after August 1, 1985, be ratified by a
majority vote of the voters voting in an election on the tax within two yeazs of the adoption of the initiatve or
be terminated by November 15, 1988.
On September 28, 1995, the California Supreme Court, in the case of Santa Clara County Local
Transportation Authority v. Guardino, upheld the constitutionality of Proposition 62. In this case, the court
held that acounty-wide sales tax of one-half of one percent was a special tax that, under Section 53722 of the
Government Code, was invalid without the required two-thirds voter approval. The decision did not address
the question of whether or not it should be applied retroactively.
Following the Guardino decision upholding Proposition 62, several acfions were filed challenging
taxes imposed by public agencies since the adoption of Proposifion 62. On June 4, 2001, the California
Supreme Court released its decision in one of these cases, Howard Tarvis Taxpayers Association v. City of La
Habra, et al. hi this case, the court held that a public agency's continued imposition and collection of a tax is
an ongoing violation upon which the statute of limitations period begins anew with each collection. The court
also held that, unless another statute or constitutional mle provided differently, the statute of limitations for
challenges to taxes subject to Proposition 62 is three yeazs. Accordingly, a challenge to a tax subject to
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DOCSOC/ 1369366v7/200119-0002
Proposition 62 may only be made for those taxes received within three years of the date the action is brought.
The City believes that it has complied with the requirements of Proposition 62 with respect to its utility tax.
Proposifion 218 _ ;- - .-
On November 5, 1996,. Califomia voters approved Proposition 218-Voter Approval for Local
Government Taxes-Limitation on Fees, Assessments, and Charges-hutiative Constitutional Amendment.
Proposifion 218 added Articles XIIIC and. XIIID to the California :Constitution, imposing- certain vote
requirements and other limitations on the imposition of new or increased taxes, assessments. and property-
related fees and chazges. Proposition 218 states that all taxes imposed by local governments aze deemed to be
either general taxes or special taxes. Special purpose districts, including school districts, have no power to
levy general taxes. No local govemment may impose, extend or increase any general tax unless and until such
tax is submitted to the electorate and approved by a majority vote. No local government may impose, extend
or increase any special tax unless and until such tax is submitted to the electorate and approved by atwo-thirds
vote.
Proposition 218 also provides that no tax, assessment, fee or charge may be assessed by any agency
upon any parcel of property or upon any person as an incident of property ownership except: (i) the ad
valorem property tax .imposed pursuant to Article XIII and Article XIIlA of the California Constitution,
(ii) any special tax receiving atwo-thirds vote pursuant to the California Constitution, and (iii) assessments,
fees and chazges for property related services as provided in Proposition 218. Proposifion 218 then goes on to
add voter requirements for assessments and fees and charges imposed as an incident of property ownership,
other than fees and chazges for sewer, water, and refuse collection services. In addition, all assessments and
fees and charges imposed as an incident of property ownership, including sewer, water, and refuse collection
services, are subjected to vazious additional procedures, such as hearings and stricter and more individualized
benefit requirements and findings. The effect of such new provisions will presumably be to increase the
difficulty a local agency will have in imposing, increasing or extending such assessments, fees and chazges.
Proposition 218 also extended the initiative power to reducing or repealing any local taxes,
assessments, fees and charges. This extension of the initiative power is not limited to taxes imposed on or
after November 6, 1996, the effective date of Proposition 218, and could result in retroactive repeal or
reduction in any existing taxes, assessments, fees and charges, subject to overriding federal constitutional
principles relating to the impairments of contracts. Legislation implementing Proposition 218 provides that the
initiative power provided for in Proposition 218 "shall not be construed to mean that any owner or beneficial
owner of a municipal security, purchased before or after (the effective date of Proposition 218) assumes the
risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of
contractual rights" protected by the United States Constitution. However; no assurance can be given that the
voters of the City will not, in the future, approve an initiative which reduces or repeals local taxes,
assessments, fees or charges that currently are deposited into the CiTy's General Fund.
Although a portion of the City's General Fund revenues are derived from general taxes purported to
be governed by Proposition 218, all of such taxes were either imposed, extended or increased prior to the
effecfive date of Proposition 218 or in accordance with the requirements of Proposifion 218. No assurance can
be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or
repeal local taxes, assessments, fees or chazges, such as the transient occupancy tax and the utility tax which
support the City's General Fund. In Fiscal Yeaz 2010, the City has budgeted to receive approximately $30.6
million in General Fund revenues (which constitute approximately 12.4% of General Fund revenues) from the
transient occupancy tax and approximately $33.2 million in General Fund revenues (which constitutes
approximately 13.4% of General Fund revenues) from the utility tax. Both of these taxes, and other local
taxes, assessments, fees and charges could be subject to reduction or repeal by initiative under Proposition 218.
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Unitary Property
Some amount of property tax revenue of the City is derived from utility property which is considered
part of a utility system with components located in many taxing jurisdictions ("unitary property"). Under the
State Constitution, such property is assessed by the State Board of Equalization ("SBE") as part of a "going
concern" rather than as individual pieces of real or personal property. State-assessed unitary and certain other
property is allocated to the counties by SBE, taxed at special county-wide rates, and the tax revenues
distributed to taxing jurisdictions (including the City) according to statutory formula generally based on the
distribution of taxes in the prior year.
Future Iniflatives -
Article XIIIA, Article XIIIB and Propositions 62 and 218 were each adopted as measures that
qualified for the ballot pursuant to the State's initiative process. From time to time other initiative measures
could be adopted, further affecting the City's current revenues or its ability to raise and expend revenues.
TAX MATTERS
In the opinion of Stradling Yocca Cazlson & Rauth, a Professional Corporation, Newport Beach,
California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, interest on the
Series 2009 Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax
preference for purposes of calculating the federal alternafive minimum tax imposed on individuals and
corporations. hi the further opinion of Bond Counsel, interest on Series 2009 Bonds is exempt from State of
Califomia personal income tax. Bond Couhsel notes that, with respect to corporations, interest on the
Series 2009 Bonds is not included as an adjustment in the calculation of alternative minimum taxable income.
The difference between the issue price of a Series 2009 Bond (the first price at which a substantial
amount of the Bonds of the same series and maturity is to be sold to the public) and the stated redemption price
at maturity with respect to such Series 2009 Bond constitutes original issue discount. Original issue discount
accrues under a constant yield method, and original issue discount will accrue to the owner of the Series 2009
Bond before receipt of cash attributable to such excludable income (with respect to the Series 2009 Bonds).
The amount of original issue discount deemed received by the owner of a Series 2009 Bond will increase the
owner's basis in the Series 2009 Bond. In the opinion of Bond Counsel original issue discount that accrues to
the owner of a Series 2009 Bond is excluded from the gross income of such owner for federal income tax
purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on
individuals and corporations, and is exempt from State of California personal income tax.
Bond Counsel's opinion as to the exclusion from gross income for federal income tax purposes of
constituting interest (and original issue discount) on the Series 2009 Bonds is based upon certain
representations of fact and certifications made by the City and others and is subject to the condition that the
City and the Corporation comply with all requirements of the Internal Revenue Code of 1986; as amended (the
"Code"), that must be satisfied subsequenfto the execution and delivery of the Series 2009 Bonds to assure
that the portion of each Base Rental Payment constituting interest (and original issue discount) will not become
includable in gross income for federal income tax purposes. Failure to comply with such requirements of the
Code might cause interest (and original issue discount) on the Series 2009 Bonds to be included in Boss
income for federal income tax purposes retroactive to the date of execution and delivery of the Series 2009
Bonds. The City and the Corporafion have covenanted to comply with all such requirements applicable to
each, respectively.
The amount by which a Series 2009 Bond Owner's original basis for determining loss on sale or
exchange in the applicable Series 2009 Bond (generally, the purchase price) exceeds the amount payable on
maturity (or on an eazlier call date) constitutes amortizable Series 2009 Bond premium, which must be
amortized under Section 171 of the Code; such amortizable Series 2009 Bond premium reduces the
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Series 2009 Bond Owner's basis in the applicable Series 2009 Bond (and the amount of tax-exempt interest
received with respect to the Series 2009 Bonds), and is not deductible for federal income tax purposes. The
basis reduction as a result of the amortization of Series 2009 Bond premium may result in a Series 2009 Bond
Owner realizing a taxable gain when a Series 2009 Bond is sold by the Owner for an amount equal to or less
(under certain circumstances) than the original cost of the Series 2009 Bond to the Owner. Purchasers of the
Series 2009 Bonds should consult their own tax advisors as to the treatment, computation and collateral
consequences of amortizable Series 2009 Bond premium.
An owner who acquires a Series 2009 Bond for an amount that is Beater than the sum of all amounts
payable on the Series 2009 Bond after the purchase date other than payments of qualified stated interest will be
considered to have purchased such Series 2009 Bond at a premium. An owner of a Series 2009 Bond
generally may elect to amortize such premium using a constant yield method over the remaining term of the
Series 2009 Bond. Any such election shall apply to all debt instruments (other than debt instruments the
interest on which is excludable from gross income) held at the beginning of the fast taxable year to which the
election applies or thereafter acquired, and is irrevocable without consent of the IRS. Special rules may apply
if a Series 2009 Bond is subject to call prior to maturity at a price in excess of its redemption price at maturity.
Bond Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not
occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person,
whether any such actions or events aze taken or do occur. The Indenture, the Lease Agreement, and the Tax
Certificate permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is
provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from Boss
income for federal income tax purposes of interest (and original issue discount) due with respect to any
Certificate if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca
Cazlson & Rauth, a Professional Corporation.
The Intemal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax-
exempt bond issues, including both random and targeted audits. It is possible that the Series 2009 Bonds will
be selected for audit by the IRS. It is also possible that the market value of the Series 2009 Bonds might be
affected as a result of such an audit of the Series 2009 Bonds (or by an audit of similaz securities).
Although Bond Counsel has rendered an opinion that the interest (and original issue discount) on the
Series 2009 Bonds is excluded from gross income for federal income tax purposes provided that the City and
the Corporation continue to comply with certain requirements of the Code, the ownership of the Series 2009
Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Series 2009 Bonds
may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any
such tax consequences. Accordingly, before purchasing any of the Series 2009 Bonds, all potential purchasers
should consult their tax advisors with respect to collateral tax consequences with respect to the Series 2009
Bonds.
.The form of Bond Counsel's proposed opinion with respect to the Series 2009 Bonds is attached
hereto in Appendix E.
BANK QUALIFIED OBLIGATIONS
The Authority has designated the Series 2009 Bonds as "qualified tax-exempt obligations," thereby
allowing certain financial institutions that aze holders of such qualified tax-exempt obligations to deduct a
portion of such institution's interest expense allocable to such qualified tax-exempt obligations, all as
determined in accordance with Section 265(b)(3) of the Internal Revenue Code of 1986, as amended.
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DOC SOC/1369366v7/200119-0002
CERTAIN LEGAL MATTERS
The validity of the Series 2009 Bonds and certain other legal matters are subject to the approving
- opinion of Stradling-Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel. Stradling Yocca
Cazlson & Rauth, a Professional Corporation, is also acting as Disclosure Counsel for the City. A complete
copy of the proposed form of Bond Counsel opinion is contained in Appendix C hereto. Bond Counsel
undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Bond
Counsel will receive compensation from the City contingent upon the sale and delivery of the Series 2009
Bonds. [From time to time, Bond Counsel represents the Underwriter on matters unrelated to the Series 2009
Bonds.]
ABSENCE OF LTTIGATION
To the best knowledge of the City, the Authority and the CiTy Attorney, there is no action, suit or
proceeding pending or threatened either restraining or enjoining the execution or delivery of the Series 2009
Bonds, the Lease Agreement or the Indenture, or in any way contesting or affecfing the validity of the
foregoing or any proceedings of the Authority or the City taken with respect to any of the foregoing. There. aze
a number of lawsuits and claims pending against the City. In the opinion of the City and the CiTy Attorney,
and taking into account likely insurance coverage and litigation reserves, there are no lawsuits or claims
pending against the City which will materially affect the City's fmances so as to impair its ability to pay Base
Rental Payments when due.
UNDERWRITING
The Series 2009 Bonds are being purchased by Stone & Youngberg LLC, as Underwriter. The
Underwriter has purchased the Series 2009 Bonds from the Authority at a competifive sale at an aggregate
purchase price representing the principal amount of the Series 2009 Bonds, less $ of original issue
discount and less $ of Underwriter's discount
The Series 2009 Bonds are offered for sale at the initial prices stated on the cover page of this Official
Statement, which may be changed from time to time by the Underwriter. The Series 2009 Bonds may be
offered and sold to certain dealers at prices lower than the public offering prices.
RATINGS
Fitch Ratings, Moody's Investors Service, Inc. and Standard & Poor's Ratings Services, have given
the Series 2009 Bonds the ratings set forth on the cover page hereof. Such ratings reflect only the views of
such rating agencies, and an explanation of the significance of the ratings may be obtained by contacting them
at: Fitch, Inc., One State Street Plaza, New York, New York 10004, Moody's Investors Service, 7 World
Trade Center at 250 Greenwich Street, New York, New York 10007, and Standard & Poor's Ratings Services,
55 Water Street, New York, New York 10041. Such ratings are not a recommendation to buy, sell or hold the
Series 2009 Bonds. There is no assurance that such ratings will continue for any given period of time or that
such ratings will not be revised downwazd or withdrawn entirely by such organizafions, if in their judgment
circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse
effect on the market price of the Series 2009 Bonds.
FINANCIAL ADVISOR
Public Resources Advisory Group, Los Angeles, California, served as financial advisor to the
Authority and the City with respect to the sale of the Series 2009 Bonds. Public Resources Advisory Group
will receive compensation contingent upon the sale and delivery of the Series 2009 Bonds
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DOC SOC/ 1 3 6 93 6647/2 00 1 1 9-00 02
CONTINUING DISCLOSURE
The City has covenanted for the benefit of the Owners of the Series 2009 Bonds to provide annually
certain fmancial information and operating data relating to the Series 2009 Bonds and the City (the "Annual
Report"), and to provide notices of the occurrence of certain enumerated events, if material. For a complete
listing of items of information which will be provided in each Annual Report, see APPENDIX E-"FORM OF
CONTINUING DISCLOSURE CERTIFICATE." Such information is to be provided by the City not later
than eight (8) months after the end of the City's fiscal year (which currently would be Mazch 1), commencing -
with the report for the 1998-1999 Fiscal Yeaz. The Annual Report will be filed by the City with each
Nationally Recognized Municipal Securities Information Repository and with each State Repository, if any.
These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange
Commission Rule 15c2-12(b)(5). The City has never failed to comply in all material respects with any
previous undertakings with regard to said Rule to provide annual reports or notices of material events.
FINANCIAL STATEMENTS OF TAE CITY
Included herein as Appendix B aze the audited financial statements of the City as of and for the yeaz
ended June 30, 2008, together with the report thereon dated December 15, 2008 of Mayer Hoffman McCann
P.C., Certified Public Accountants (the "Auditor"). Such audited financial statements have been included
herein in reliance upon the report of the Auditor. The Auditor has not undertaken to update the audited
financial statements of the City or its report or to take any action intended or likely to elicit information
concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no
opinion is expressed by the Auditor with respect to any event subsequent to its report dated December 15,
2008.
The City is currently in the process of preparing unaudited, preliminary fmancial information for the
fiscal yeaz which ended June 30, 2009 for submission to the Auditor in connection with the Auditor's
preparation of the fiscal year 2008-09 audited fmancial statements of the City. The audited financial
statements of the City for fiscal year ended 2008-09 are expected to be released during December, 2009. The
City does not believe that the 2008-09 audited fmancial statements will show a material difference in the City's
financial condition from the unaudited fiscal year 2008-09 financial information provided herein.. See "CITY
OF SANTA MONICA FINANCES."
MISCELLANEOUS
References aze made herein to certain documents and reports which aze brief summaries thereof which
do not purport to be complete or defmitive and reference is made to such documents and reports for full and
complete statements of the contents thereof. Copies of the Indenture, the Lease Agreement, the Ground Lease
and other documents aze available, upon request, and upon payment to the City of a charge for copying,
mailing and handling, from the City Clerk at the City of Santa Monica, 1685 Main Street, Santa Monica,
California 90401.
Any statements in this Official Statement involving matters of opinion, whether or not expressly so
stated, aze intended as such and not as representations of fact. This Official Statement is not to be construed as
a contract or agreement between the Authority or the City and the purchasers or Owners of any of the
Series 2009 Bonds.
51
DOCSOG1369366vU200119-0002
The execution and delivery of this Official Statement have been duly authorized by the Authority and
the City.
__
SANTA MONICA PUBLIC FINANCING
AUTI30RITY
Treasurer
CITY OF SANTA MONICA
sy:.
City Manager
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DOCSOC/1369366v9/200119-0002
APPENDIX A
SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS
[TO COME]
A-1
DOCSOC/1369366v9/200119-0002-
APPENDIX B
AUDITED FINANCIAL STATEMENTS OF THE CTTY
FOR THE YEAR ENDED diJNE 30, 2008
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DOCSOC/ 1369366v7/200119-0002
APPENDIX C
PROPOSED FORM OF BOND COUNSEL OPBVION
- ___
[Date of Delivery]
Santa Monica Public Financing AuthoriTy
1685 Main Street
Santa Monica, California 90401
Santa Monica Public Financing Authority
Lease Revenue Refunding Bonds, Series 2009
(Public Safe Facility Project)
Ladies and Gentlemen:
We have acted as bond counsel in connection with the issuance by the Santa Monica Public Financing
Authority (the "Authority") of the Santa Monica Public Financing Authority Lease Revenue Bonds, Series
2002A (Public Safety Facility Project) (the "Bonds") in the aggregate principal amount of $
In such connection, we have reviewed the Indenture, dated as of September 1, 1999, by and among The Bank
of New York Mellon Tmst Company, N.A., as Trustee (the "Trustee"), the Authority and the City of Santa
Monica (the "City"), as amended and supplemented by the First Supplemental Indenture, dated as of January 1,
2002, as further amended by the Second Supplemental Indenture, dated as of December 1, 2009, by and among
the Trustee, the Authority and the City (as so amended and supplemented, the "Indenture"), the Lease
Agreement, dated as of September 1, 1999, by and between the City and the Authority, as amended and
supplemented by the First Amendment to Lease Agreement, dated as of January 1, 2002, as further
supplemented by the Second Amendment to Lease Agreement dated as of December 1, 2009, by and between
the City and the Authority (as so amended and supplemented, the "Lease Agreement"), the Ground Lease,
dated as of September 1, 1999, by and between the City and the Authority (the "Ground Lease"), the
Assignment Agreement, dated as of September 1, 1999, by and between the Authority and the Trustee, as
amended and supplemented by the First Amendment to Assignment Agreement, dated as of January 1, 2002,
as further amended by the Second Amendment to Assignment Agreement dated as of December 1, 2009, by
and between the Authority and the Trustee (as so amended and supplemented, the "Assignment Agreement"),
the Tax Certificate of the Authority and the City, dated as of the date hereof (the "Tax Certificate"), opinions
of counsel to the Authority, the City and the Trustee, certificates of the Authority, the City and the Trustee and
others and such other documents, opinions and matters to the extent we deemed necessary to render the
opinions set forth herein. Capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Indenture.
Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we
deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that:
(1) The obligation of the City to pay Base Rental Payments in accordance with the terms of the
Lease Agreement is a valid and binding obligation payable from the funds of the City lawfully available
therefore, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights, by
equitable principles, by the exercise of judicial discretion in appropriate cases and by the limitations on legal
remedies against municipalities in the State of California. The obligation of the City to make Base Rental
Payments under the Lease does not constitute a debt of the City, the State of California or any political
subdivision thereof within the meaning of any statutory or constitutional debt limitation or restriction and does
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DOCSOC/1369366v7/200119-0002
not constitute a pledge of the faith- and credit or taxing power of the City, the State of California or any
political subdivision thereof.
(2) The Lease Agreement and the Indenture have been duly authorized, executed and delivered
by the City and the Authority and constitute valid and legally binding ageements of the City and the Authority
enforceable against the City and the Authority in accordance with their terms, except as the same may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other laws relating to
or affecting generally the enforcement of creditors' rights, by equitable principles, by the exercise of judicial
discretion in appropriate cases and by the limitations on legal remedies against municipalities in the State of
California, except that we express no opinion as to any provisions in the Lease Agreement or the Indenture
with respect to indemnification, penalty, contribution, choice of law, choice of forum or waiver.
(3) Under existing statutes, regulations, rulings and judicial decisions, interest (and original issue
discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of
tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and
corporations and with respect to corporations will not be included as an adjustment in the calculation of
alternate minimum taxable income.
(4) Interest (and original issue discount) on the Bonds is exempt from personal income taxes
imposed in the State of California.
(5) The difference between the issue price of a Bond (the first price at which a substantial amount
of the Bonds of a maturity are to be sold to the public) and the stated redemption price at maturity with respect
to such Bonds constitutes original issue discount. Original issue discount accrues under a constant yield
method, and original issue discount will accme to a Bond owner before receipt of cash attributable to such
excludable income. The amount of original issue discount deemed received by a Bond owner will increase the
Bond owner's basis in the applicable Bond. Original issue discount that accrues to a Bond owner is excluded
from the gross income of such owner for federal income tax purposes, is not an item of tax preference for
purposes of calculating the federal alternative minimum tax imposed on individuals or corporations (as
described in paragraph 3 above) and is exempt from State of California personal income tax.
(6) The amount by which a Bond owner's original basis for determining loss on sale or exchange
in a Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an eazlier call date)
constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such
amortizable Bond premium reduces the Bond owner's basis in the applicable Bond (and the amount of tax-
exempt interest received), and is not deductible for federal income tax purposes.. The basis reduction as a
result of the amortization of Bond premium may result in a Bond owner realizing a taxable gain when a Bond
is sold by the owner for an amount equal to or less (under certain circumstances) than the original cost of the
Bond to the owner.
The opinions expressed in paragraphs (3) and (5) aze subject to the condition that the City and the
Authority comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that
must be satisfied subsequent to the delivery of the Bonds to assure that such interest (and original issue
discount) will not become includable in gross income for federal income tax purposes. Failure to comply with
such requirements of the Code might cause interest (and original issue discount) with respect to the Bonds to
be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds.
The City and the Authority have covenanted Yo comply with all such requirements.
Except as expressly set forth in paragraphs (3), (4), (5) and (6) we express no opinion regarding any
tax consequences with respect to the Bonds.
Certain ageements, requirements and procedures contained or referred to in the Indenture, the Tax
Certificate executed by the City and the Authority and other documents related to the Bonds may be changed
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DOCSOC/ 1369366v7/200119-0002
and certain actions may be taken or omitted, under the circumstances and subject to the terms and- conditions
set forth in such documents, upon the advice or with the approving opinion of counsel nationally recognized in
the azea of tax-exempt obligations. We express no opinion as to the effect on the tax consequences on and
after the date on which any such change occurs or action is taken or omitted upon advice or approval of
counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation.
We have not made or undertaken to make an investigation of the state of title to any of the real
property described in the Lease Agreement, the Ground Lease and the Assignment Agreement or of the
accuracy or sufficiency of the description of such property contained therein, and we express no opinion with
respect to such matters.
We are admitted to the practice of law only in the State of California and our opinion is limited to
matters governed by the laws of the State of California and federal law. We assume no responsibility with
respect to the applicability or the effect of the laws of any other jurisdiction.
The opinions expressed herein aze based upon our analysis and interpretation of existing statutes,
regulations, rulings and judicial decisions and cover certain matters not duectly addressed by such authorities.
The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not
occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any
such actions or events aze taken or do occur. Our engagement with respect to the Bonds terminates orrthe date
of their execution and delivery.
We express no opinion herein as to the accuracy, completeness or sufficiency of the Official
Statement or other offering material relating to the Bonds and expressly disclaim any duty to advise the owners
of the Bonds with respect to matters contained in the Offtcial Statement.
Respectfully submitted,
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APPENDIX D
FORM OF CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate, dated as of December 1, 2009 (the "Disclosure Certificate") is
executed and delivered by the City of Santa Monica (the "City") in connection with the execution and delivery
of the Santa Monica Public Financing Authority's (the "AuthoriTy") $ Lease Revenue Refunding
Bonds, Series 2009 (Public Safety Facility Project) (the "Bonds").
WI~REAS, the Bonds are being issued pursuant to an Indenture, dated as of September 1, 1999 (the
"Original Indenture"), as amended by a First Supplemental Indenture, dated as of January 1, 2002, and by a
Second Supplemental Indenture, dated as of December 1, 2009 (as so amended, the "Indenture"), by and
among the Authority, the City and the Bank of New York Mellon Trust Company, N.A., as trustee (the
"Trustee").
WfIEREAS, the Bonds are payable from the base rental payments to be made by the City under the
Lease Ageement, dated as of September 1, 1999 (the "Original Lease Agreement"), as amended by a First
Amendment to Lease Agreement, dated as of January 1, 2002, and by a Second Amendment to Lease
Agreement, dated as of December 1, 2009 (as so amended, the "Lease Agreement"), between the City, as
lessee, and the Authority, as lessor; and
WHEREAS, this Disclosure Certificate is being executed and delivered by the City for the benefit of
the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in
complying with the Rule (defined below).
NOW, THEREFORE, the City covenants as follows:
SECTION 1. Definitions. In addition to the definitions set forth in the Indenture, which apply to any
capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following
capitalized teens shall have the following meanings:
"Annual Report" shall mean any Comprehensive Annual Financial Report provided by the City
pursuant to, and as described in, Sections 2 and 3 of this Disclosure Agreement.
"Beneficial Owner" shall mean any person which (a) has the power, duectly 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 intermediazies), or (b) is treated as the owner of any Bonds for federal income
tax purposes.
"Disclosure Representative" shall mean the City Manager of the City, the Finance Director of the City
or their designee, or such other officer or employee as the City shall designate in writing from time to fime.
"Dissemination Agent" shall mean the City, or any successor Dissemination Agent designated in
writing by the City and which has filed with the City a written acceptance of such designation.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.
"Official Statement" shall mean the Official Statement relating to the Bonds, dated , 2009.
"Participating Underwriter" shall mean the original underwriter of the Bonds required to comply with
the Rule in connecfion with the offering of the Bonds.
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DOCSOC/1369366v7/200119-0002
"Repository" shall mean the Municipal Securities Rulemaking Board, which can be found at
http://emma.msrb.org.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as the same maybe amended from time to time.
"State" shall mean the State of California.
SECTION 2. Provision of Annual Reports.
(a) The City shall, or, upon delivery of the Annual Report to the Dissemination Agent, shall
cause the Dissemination Agent to, not later than each April 1 of each year commencing April 1, 2010, provide
to the Repository an Annual Report which is consistent with the requirements of Section 3 of this Disclosure
Agreement. 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;
provided that the audited financial statements of the City may be submitted separately from the balance of the
Annual Report and later than the date required above for the filing of the Annual Report if they are not
available by that date. If the City's fiscal year changes, it shall give notice of such change in the same manner
as for a Listed Event under Section 4(c).
(b) Not later than fifteen (15) business days prior to said date, the City shall provide the Annual
Report to the Dissemination Agent (if other than the City). If the City is unable to provide to the Repository an
Annual Report by the date required in subsection (a), the City shall send a notice to the Repository in
substantially the form attached as Exhibit A.
(c) The Dissemination Agent shall:
(i) confirm the electronic filing requirements of the Municipal Securities
Rulemaking Boazd for the Annual Report the name and address of each Repository; and
(ii) (if the Dissemination Agent is other than the City), file a report with the City
certifying that the Annual Report has been provided pursuant to this Disclosure Agreement and stating
the date it was provided.
SECTION 3. Content of Aanual Reports. The City's Annual Report shall contain or include by
reference the following:
(a) The City's audited fmancial statements, prepared in accordance with generally accepted
auditing standazds for municipalities in the State of California. If the CiTy's audited fmancial statements aze
not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report
shall contain unaudited financial statements in a format similar to the financial statements contained in the
final Official Statement, and the audited fmancial statements shall be filed in the same manner as the Annual
Report when they become available.
(b) To the extent not contained in the audited fmancial statements filed pursuant to the preceding
subsection (a) by the date required by Section 4 hereof, updates of Tables _ through ~ _ and _ set forth
in the Official Statement:
Any or all of the items listed above may be included by specific reference to other documents,
including official statements of debt issues of the City or related public entities, which have been submitted to
each of the Repositories or the Securities and Exchange Commission. If the document included by reference is
a final official statement, it must be available from the Municipal Securities Rulemaking Boazd. The City shall
clearly identify each such other document so included by reference.
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DOCSOC/1369366v7/200119-0002
SECTION 4. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of
the occurrence of any of the following events with respect to the Bonds, if material:
(i) Principal and interest payment delinquencies.
(ii) Non-payment related defaults.
(iii) Modifications to rights of Bond holders.
(iv) Optional, contingent or unscheduled bond calls.
(v) Defeasances.
(vi) Rating changes.
(vii) Adverse tax opinions or events affecting the tax-exempt status of the Bonds.
(viii) Unscheduled draws on the debt service reserves reflecting financial difficulties.
(ix) Unscheduled draws on the credit enhancements reflecting financial difficulties.
(x) Substitution of the credit or liquidity providers or their failure to perform.
(xi) Release, substitution or sale of property securing repayment of the Bonds.
(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall as
soon as possible determine if such event would be material under applicable federal securities laws.
(c) If the City determines that knowledge of the occurrence of a Listed Event would be material
under applicable federal securities laws, the City shall promptly file a notice of such occurrence with the
Repositories. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(iv) and (v)
need not be given under this subsection any eazlier than the notice (if any) of the underlying event is given to
Holders of affected Bonds pursuant to the Indenture.
SECTION 5. Termination of Reporting Obligafion. The City's obligations under this Disclosure
Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds.
If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such
termination in the same manner as for a Listed Event under Section 4(c).
SECTION 6. Dissemination Agent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may
dischazge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The
Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by
the City pursuant to this Disclosure Agreement. The Dissemination Agent may resign by providing thirty days
written notice to the City and the Trustee. The Dissemination Agent shall not be responsible for the content of
any report or notice prepazed by the City and shall have no duty to review any information provided to it by the
City. The Dissemination Agent shall have no duty to prepaze any information report nor shall the
Dissemination Agent be responsible for filing any report not provided to it by the City in a timely manner and
in a form suitable for filing.
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SECTION 7. Amendment; Waiver. Notwithstanding any other provision of this Discloswe
Agreement, the CiTy may amend this Discloswe Agreement, and any provision of this Disclosure Agreement
may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or
waiver is permitted by-the -Rule; provided; the Dissemination Agent shall have first consented to any
amendment that modifies or increases its duties or obligations hereunder. In the event of any amendment or
waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next
Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or
waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of
financial information or operating data being presented by the City. In addition, if the amendment relates to the
accounting principles to be followed in prepazing financial statements, (i) notice of such change shall be given
in the same manner as for a Listed Event under Section 4(c), and (ii) the Annual Report for the yeaz in which
the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form)
between the fmancial statements as prepazed on the basis of the new accounting principles and those prepared
on the basis of the former accounting principles.
SECTION 8. Additional Information. Nothing in this Disclosure Agreement shall be deemed to
prevent the City from disseminating any other information, using the means of dissemination set forth in this
Discloswe Agreement or any other means of communication, or including any other information in any
Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this
Disclosure Agreement. If the CiTy chooses to include any information in any Annual Report or notice of
occurrence of a Listed Event in addition to that which is specifically required by this Discloswe Agreement,
the City shall have no obligation under this Bond to update such information or include it in any future Annual
Report or notice of occurrence of a Listed Event.
SECTION 9. Default. 1n the event of a failure of the CiTy to comply with any provision of this
Discloswe Agreement, any Holder or Beneficial Owner of the Bonds may take such actions as may be
necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City
to comply with its obligations under this Discloswe Agreement. A default under this Discloswe Agreement
shall not be deemed an Event of Default under the Indentwe, and the sole remedy under this Discloswe
Agreement in the event of any failwe of the City to comply with this Discloswe Agreement shall be an action
to compel performance.
No Bond holder or Beneficial Owner may institute such action, suit or proceeding to compel
performance unless they shall have first delivered to the City satisfactory written evidence of their status as
such, and a written notice of and request to cure such failure, and the City shall have refused to comply
therewith within a reasonable time.
SECTION 10. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent
shall have only such duties as aze specifically set forth in this Discloswe Certificate, and the CiTy agrees, to the
extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and
agents, harmless against any loss, expense and liabilities which it may incw arising out of or in the exercise or
performance of its powers and duties hereunder, including the costs and expenses (including attorney's fees) of
defending against any claim of liabiliTy, but excluding liabilities due to the Dissemination Agent's negligence
or willful misconduct. The Dissemination Agent shall be paid compensation by the City for its services
provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses,
legal fees. and advances made or incurred by the Dissemination Agent in the performance of its duties
hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be acting in
any fiduciary capacity for the City, the Bond holders, or any other party. The obligations of the CiTy under this
Section shall survive resignafion or removal of the Dissemination Agent and payment of the Bonds.
DOCSOC/ 1369366v7/200 1 1 9-0002
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SECTION 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City,
the Dissemination Agent, if any, the Participating Underwriter and Holders and Beneficial Owners from time
to time of the Bonds, and shall create no rights in any other person or entity. -
_ _._ _ _
CTTY OF SANTA MONICA
ATTEST:
Mazia M. Stewart, City Clerk
APPROVED AS TO FORM:
Marsha Jones Moutrie, City Attorney
By.
P. Lamont Ewell, City Manager
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DOCSOC/ 1369366x9/20 0 1 1 9-00 02
EXFIIBIT A
NOTICE TO MUNICIPAL SECURTTIES RULEMAKING BOARD
OF FAH.URE TO FILE ANNUAL REPORT
Name of Issuer: Santa Monica Public Financing Authority
Name of Issue: Santa Monica Public Financing Authority Lease Revenue Refunding Bonds,
Series 2009 (Public Safety Facility Project)
Date of Issuance: _, 2009
NOTICE IS HEREBY GIVEN that the City of Santa Monica (the "City") has not provided an
Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate,
dated as of December 1, 2009, executed by the City. [The City anficipates that the Annual Report will be filed
by .]
Dated:
CTTY OF SANTA MONICA
By:
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APPENDIX E
BOOK-ENTRY ONLY SYSTEM
The information in this section concerning DTC and DTC's book-entry only system has been obtained
from sources that the Authority believes to be reliable, but the Authority 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 Series 2009 Bonds, payment of principal, premium, if any,
accreted value and interest on the Series 2009 Bonds to DTC Participants or Beneficial Owners, confirmation
and transfers of beneficial ownership interests in the Series 2009 Bonds and other related transactions by and
between DTC, the DTC Partcipants and the Beneficial Owners is based solely on informafron provided by
DTC.
1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for
the Series 2009 Bonds (the "Securities"). The Securities will be issued asfully-registered securities registered
in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered Security certificate will be issued for each maturity of
the Securities in the aggregate principal amount of such maturity, and will be deposited with DTC. If,
however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with
respect to each $500 million of principal amount, and an additional certificate will be issued with respect to
any remaining principal amount of such issue.
2. DTC, the world's lazgest securities depository, is alimited-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. Duect 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 cleazing corporations that clear through or
maintain a custodial relationship with a Direct Participant, either duectly or indirectly ("Indirect Pazticipants").
DTC has Standazd & Poor's highest rating: AAA. The DTC Rules applicable to its Participants aze on file
with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com
and www.dtc.org.
3. Purchases of Securities under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each
actual purchaser of each SecuriTy ("Beneficial Owner") is in turn to be recorded on the Direct and Induect
Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase.
Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the
Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities aze to be
accomplished by entries made on the books of Direct and Induect Participants acting on behalf of Beneficial
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DOCSOC/1369366v7/2 0 0 1 1 9-0002
Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities,
except in the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC
are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as maybe requested
by an authorized representafive of DTC. The deposit of Securities with DTC and their registration in the name -
of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identiTy of the
Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial
Owners. The Direct and Indrect Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners
will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be
in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the
transmission to them of notices of significant events with respect to the Securities, such as redempfions,
tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of
Securities may wish to ascertain that the nominee holding the Securities for their benefit has ageed to obtain
and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their
names and addresses to the registraz and request that copies of notices be provided directly to them.
6. Redemption notices shall be sent to DTC. If less than all of the Securities within 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.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect
to Securities unless authorized by a Duect Participant in accordance with DTC's MMI Procedures. Under its
usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible a8er the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Principal, redemption price and interest payments on the Securifies 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 Authority 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 instrucfions and
customary practices, as is the case with securities held for the accounts of customers in beazer form or
registered in "street name," and will be the responsibility of such Participant and not of DTC, the Paying
Agent, or the Authority, 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 byan authorized representative of DTC) is the responsibility of the Authority 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 Duect and Induect
Participants.
9. If applicable, a Beneficial Owner shall give notice to elect to have its Securities purchased or
tendered, through its Participant, to tender/remarketing agent, and shall effect delivery of such Securities by
causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to
tender/remazketing gent. The requirement for physical delivery of Securities in connection with an optional
tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are
transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Securities
to tender/remazketing agent's DTC account.
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DOCSOC/1369366v7/200119-0002 - - -
10. DTC may discontinue providing its services as depository with respect to the Securities at any
fime by giving reasonable nonce to the Authority or the Paying Agent. Under such circumstances, in the event
that a successor depository is not obtained, Security certificates are required to be printed and delivered.
11. The Authority may decide to discontinue use of the system ofbook-entry-only transfers through DTC
(or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
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DOCSOC/1369366v7/200119-0002
$ ATTACHMENTF
SANTA MONICA PUBLIC FINANCING AUTHORITY
LEASE REVENUE REFUNDING BONDS
SERIES 2009 (PUBLIC SAFETY FACILITY PROJECT)
BOND PURCHASE AGREEMENT
2009
Santa Monica Public Financing Authority
1685 Main Street,
Santa Monica, California 90401
City of Santa Monica
1685 Main Street,
Santa Monica, California 90401
Ladies and Gentlemen
The undersigned Stone & Youngberg LLC (the "Underwriter"), offers to enter into this Bond
Purchase Agreement (which, together with Exhibit A, is referred to as the "Purchase Contract") with
the Santa Monica Public Financing Authority (the "Authority") and the City of Santa Monica,
California (the "City"), which, upon the acceptance of the Authority and the City, will be binding
upon the Authority, the City and the Underwriter. This offer is made subject to acceptance by the
Authority and by the City by the execution of this Purchase Contract and delivery of the same to the
Underwriter prior to 9:00 A.M, California time, on the date hereof, and, if not so accepted, will be
subject to withdrawal by the Underwriter upon notice delivered to the Authority and the City at any
time prior to the acceptance hereof by the Authority and the City. Capitalized terms used herein and
not otherwise defined shall have the meanings set forth in the Indenture, defined below.
Section 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the
representations, warranties and agreements herein set forth, the Underwriter hereby agrees to
purchase from the Authority and the City, and the Authority and the City hereby agree to issue, sell
and deliver to the Underwriter all (but not less than all) of the Santa Monica Public Financing
Authority Lease Revenue Refunding Bonds, Series 2009 in the aggregate principal amount of
$ .00 (the "Bonds"). The Bonds will be dated as of their date of delivery. Interest on the
Bonds shall be payable semiannually on January 1 and July 1 in each year (each an "Interest Payment
Date") commencing July 1, 2010 and will bear interest at the rates and on the dates as set forth in
Exhibit A hereto. The purchase price for the Bonds shall be $ (which includes an
Underwriter's discount of $ [and an original issue premium in the amount of
$ ,] [less an original issue discount of $ )].
Section 2. The Bonds. The Bonds shall be secured by revenues consisting primarily of
base rental payments ("Base Rental") to be paid by the City pursuant to a certain Lease Agreement,
dated as of September 1, 1999, by and between the City and the Authority as modified by the First
Amendment to Lease Agreement, dated as of January 1, 2002, and as amended by Second
Amendment to Lease dated as of December 1, 2009 (collectively, the ``Lease Agreement"). The
DOCSOC/1373527v2/200119-0002
Authority's right to receive the Base Rental due under the Lease Agreement and to exercise remedies
upon default under such Lease Agreement shall be assigned to the Trustee for the benefit of the
owners of the Bonds pursuant to an Assignment Agreement, dated as of September 1, 1999, by and
between the Authority and BNY Western Trust Company, as prior trustee, as amended by the First
Amendment to Assignment Agreement (collectively, the "Assignment Agreement"), dated as of
January 1, 2002, and the Second Amendment to Assignment Agreement (collectively, the
"Assignment Agreement"), dated as of December 1, 2009 by and between the Authority and The
Bank of New York Mellon Trust Company, N.A., as successor trustee (the "Trustee").
The Bonds shall be as described in, and shall be secured under and pursuant to an Indenture,
dated as of September 1, 1999, by and between the Authority and BNY Western Trust Company, as
prior trustee, as amended and supplemented including by the First Supplemental Indenture, dated as
of January 1, 2002, and the Second Supplemental Indenture, dated as of December 1, 2009, by and
between the Authority and the Trustee (collectively, the "Indenture") substantially in the form
previously submitted to the Underwriter with only such changes therein as shall be mutually agreed
upon by the Authority, the City and the Underwriter.
The proceeds of the Bonds shall be used to (i) provide for the current refunding and
defeasance of the Santa Monica Public Financing Authority Lease Revenue Refunding Bonds, Series
1999 (Public Safety Facility Project) (the "1999 Bonds") in an aggregate principal amount of
$9,385,000 (the "Refunded Bonds"), and related City base rental payment obligations, (ii) fund the
Reserve Account established under the Indenture, and (iii) pay for the costs of issuance of the Bonds.
Section 3. Public Offering. The Underwriter agrees to make an initial public offering
of all the Bonds atthe public offering prices (or yields) set forth on Exhibit A attached hereto and
incorporated herein by reference. Subsequent to the initial public offering, the Underwriter reserves
the right to change the public offering prices (or yields) as they deem necessary in connection with
the marketing of the Bonds, provided that the Underwriter shall not change the interest rates set forth
on Exhibit A. The Bonds may be offered and sold to certain dealers at prices lower than such initial
public offering prices. The City and the Authority acknowledge and agree that (a) purchase and sale
of the Bonds pursuant to this Agreement is an arm's-length, commercial transaction, with the
Underwriter acting solely as a principal and (b) the underwriter has not assumed a fiduciary role.
Section 4. The Official Statement. By its acceptance of this proposal, the Authority
and the City ratify, confirm and approve of the use and distribution by the Underwriter prior to the
date hereof of the preliminary official statement relating to the Bonds dated 2009
(including the cover page, all appendices and all information incorporated therein and any
supplements or amendments thereto and as disseminated in its printed physical form or in electronic
form in all respects materially consistent with such physical form, the "Preliminary Official
Statement") that authorized officers of the City deemed "final" as of its date, for purposes of Rule
15c2-12 promulgated under the Securities Exchange Act of 1934 ("Rule 15c2-12") except for certain
omissions permitted to be omitted therefrom by Rule 15c2-12. The Authority and the City hereby
agree to deliver or cause to be delivered to the Underwriter, within seven business days of the date
hereof, copies of the final official statement, dated the date hereof, relating to the Bonds (including
all information previously permitted to have been omitted by Rule 15c2-12) the cover page, all
appendices, all information incorporated therein and any amendments or supplements as have been
approved by the Authority, the City and the Underwriter (the "Official Statement") in such quantity
as the Underwriter shall reasonably request to comply with Securities and Exchange Commission
Rule 15c2-12(b)(4) and the rules of the Municipal Securities Rulemaking Board (the "MSRB").
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2
The Underwriter hereby agrees that it will not request that payment be made by any
purchaser of the Bonds prior to delivery by the Underwriter to the purchaser of a copy of the Official
Statement. The Underwriter agrees to (i) provide the Authority and the City with final pricing
information on the Bonds on a timely basis and (ii) promptly file a copy of the final Official
Statement, including any supplements prepared by the Authority or the City with the Municipal
Securities Rulemaking Board, which can be found at http://emma.msrb.org. The Authority and the
City hereby approve of the use and distribution by the Underwriter of the Official Statement in
connection with the offer and sale of the Bonds: The Authority and the City will cooperate with the
Underwriter in the filing by the Underwriter of the Official Statement with the Municipal Securities
Rulemaking Board.
Section 5. Closing. At 8:00 a.m., California time, on , 2009, or at such
other time or date as the Authority and the Underwriter agree upon, the Authority. shall deliver or
cause to be delivered to the Trustee, and the Trustee shall deliver or cause to be delivered to The
Depository Trust Company, New York New York ("DTC"), the Bonds in definitive form, duly
executed and authenticated. Concurrently with the delivery of the Bonds, the Authority and the City
will deliver the documents hereinafter mentioned at the offices of Stradling Yocca Carlson & Rauth,
Newport Beach, California or another place to be mutually agreed upon by the Authority, the City
and the Underwriter. The Underwriter will accept such delivery and pay the purchase price of the
Bonds as set forth in Section 1 hereof by wire transfer in immediately available funds. This payment
for and delivery of the Bonds, together with the delivery of the aforementioned documents, is herein
called the "Closing."
The Bonds shall be registered in the name of Cede & Co., as nominee of DTC in
denominations of five thousand dollars ($5,000) or any integral multiple thereof, at least three
business days prior to the Closing and shall be made available to the Underwriter at least one
(1) business day before the Closing for purposes of inspection and packaging. The Authority and the
City acknowledge that the services of DTC will be used initially by the Underwriter in order to
permit the issuance of the Bonds in book-entry form, and agree to cooperate .fully with the
Underwriter in employing such services.
The Underwriter hereby agrees to make a bona fide public offering of all Bonds at prices not
in excess of the initial public offering prices (or yields) set forth on the cover page of the Official
Statement, reserving, however, the right to change such yields or prices after the initial public
offering as the Underwriter shall deem necessary in connection with the offering of the Bonds upon
reasonable notice to, and with the consent of the Authority and the City. The Underwriter shall
provide to the Authority and the City on the Closing Date a certificate setting forth the offering prices
to the public of each maturity of the Bonds at which a substantial amount of such maturities were
sold, such certificate to be in a form acceptable to Bond Counsel.
Section 6. Representations, Warranties and Covenants of the Authority. The
Authority represents, warrants and covenants to the Underwriter and the City that:
(a) The Authority is and will be at the date of Closing a public body, corporate
and politic, duly organized and existing pursuant to and under the Constitution and laws of the State
of California and has all necessary power and authority to enter into and perform its duties under the
Indenture, the Ground Lease Agreement, dated as of September 1, 1999 by and between the City and
the Authority (the "Ground Lease"), the Lease Agreement, the Assignment Agreement, the Escrow
Agreement dated as of December 1, 2009 (the "Escrow Agreement"), by and among the City, the
DOCSOC/ 1373527v2/200119-0002
3
Authority and the Trustee, as Escrow Bank, and this Purchase Contract (collectively, the "Authority
Documents").
(b) By official action of the Authority prior to or concurrently with the
acceptance hereof, the Authority has duly approved the distribution of the Preliminary Official
Statement and the distribution of the Official Statement (including in electronic form), and has duly
authorized and approved the execution and delivery of, and the performance by the Authority of the
.obligations on its part contained, in the Authority Documents. When executed and delivered, each
Authority Document will constitute the legal, valid and .binding obligation of the Authority
enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting
creditors' rights generally.
(c) Prior to the date hereof, the Authority has provided to the Underwriter for its
review the Preliminary Official Statement that an authorized officer of the City has deemed final for
purposes of Rule 15c2-12, has approved the distribution of the Preliminary Official Statement and
the Official Statement and has duly authorized the execution and delivery of the Official Statement
(including in electronic form). The Preliminary Official Statement, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any material fact necessary to make
the statements therein (other than the information relating to The Depository Trust Company and its
book-entry system, as to which no view is expressed), in the light of the circumstances under which
they were made, not misleading. At the date hereof and on the Closing, the Final Official Statement
did not and will not contain any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein (other than the information relating to The Depository Trust
Company and its book-entry system, as to which no view is expressed), in the light of the
circumstances under which they were made, not misleading. The Authority hereby covenants and
agrees that, within seven business days from the date hereof, the Authority shall cause a final printed
form of the Official Statement to be delivered to the Underwriter in sufficient quantity to comply
with paragraph (b)(4) of Rule 15c2-12 and Rules of the Municipal Securities Rulemaking Board but
in no event less than one business day prior to the Closing.
(d) To the best knowledge of the undersigned officer of the Authority, the
execution and delivery by the Authority of the Authority Documents and the approval and execution
by the Authority of the Official Statement and compliance with the provisions on the Authority's part
contained in the Authority Documents, will- not conflict with or constitute a breach of or default
under any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note,
resolution; agreement or other instrument to which the Authority is a party or is otherwise subject to,
which conflict, breach or default has or may have a material adverse effect on the ability of the
Authority to carry out its obligations under the Authority Documents, nor will any such execution,
delivery, adoption or compliance result in the creation or imposition of any material lien, charge or
othersecurity interest or encumbrance of any nature whatsoever upon any of the properties or assets
of the Authority under the terms of any such law, administrative regulation, judgment, decree, loan
agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by
the Authority Documents.
(e) The Authority will advise the Underwriter promptly of any proposal to amend
or supplement the Official Statement and will not effect or consent to any such amendment or
supplement without the consent of the Underwriter, which consent will not be unreasonably
withheld. The Authority will advise the Underwriter promptly of the institution of any proceedings
DOCSOC/ 1373527v2/200119-0002
4
known to it by any governmental Authority prohibiting or otherwise affecting the use of the Official
Statement in connection with the offering, sale or distribution of the Bonds.
(f) To the best knowledge of the undersigned officer of the Authority, after
reasonable inquiry, the Authority is not in breach of or default under any applicable law or
administrative regulation of the State of California or the United States or any applicable judgment or
decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to
which the Authority is a party or is otherwise subject, and no event has occurred and is continuing
which, with the passage of time or the giving of notice, or both, would constitute a default or an
event of default under any such instrument, in each case which breach or default has or may have a
material adverse effect on the ability of the Authority to perform its obligations under the Authority
Documents.
(g) As of the time of acceptance hereof and as of the date of Closing, no action,
suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government
Authority; public board or body, is pending or, to the best knowledge of the officers of the Authority,
threatened (i) in any way questioning the corporate existence of the Authority or the titles of the
officers of the Authority to their respective offices, (ii) affecting, contesting or seeking to prohibit,
restrain or enjoin the execution or delivery of any of the Bonds, or in any way contesting or affecting
the validity of the Bonds or the Authority Documents or the consummation of the transactions
contemplated thereby, or contesting the exclusion of the interest on the Bonds from gross income for
federal income tax purposes or contesting the powers of the Authority to enter into the Authority
Documents or (iii) contesting the completeness or accuracy of the Preliminary Official Statement or
the Official Statement or any supplement or amendment thereto or asserting that the Preliminary
Official Statement or the Official Statement contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading, and there is no
basis for any action, suit, proceeding, inquiry or investigation of the nature described in clause (i)
through (iii) of this sentence.
(h) Any certificate signed by any officer of the Authority authorized to execute
such certificate in connection with the execution, sale and delivery of the Bonds and delivered to the
Underwriter shall be deemed a representation and warranty of the Authority to the Underwriter and
the City as to the statements made therein but not of the person signing such certificate.
Section 7. Representations, Warranties and Covenants of the City. The City
represents, warrants and covenants to the Underwriter and the Authority that:
(a) The City is and will be at the date of Closing a charter city and a municipal
corporation duly organized and existing pursuant to and under the Constitution and laws of the State
of California and has all necessary power and authority to enter into and perform its duties under the
Continuing Disclosure Certificate relating to the Bonds (the "Continuing Disclosure Certificate"), the
Ground Lease, the Lease Agreement, the Indenture, the Escrow Agreement and this Purchase
Contract (collectively, the "City Documents," and together with the Authority Documents, the "Legal
Documents") and has by official action duly authorized and approved the execution and delivery'of,
and the performance by the City of the obligations on its part contained in the City Documents.
(b) By official action. of the City prior to or concurrently with the acceptance
hereof, the City has duly approved the distribution of the Preliminary Official Statement and the
DOCSOC/ 1373527v2/200119-0002
distribution of the Official Statement (including in electronic form), and has duly authorized and
approved the execution and delivery of, and the performance by the City of the obligations on its part
contained, in the City Documents. When executed and delivered, each City Document will-constitute
the legally valid and binding obligation of the City enforceable in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws or equitable principles relating to or affecting creditors' rights generally.
(c) The Preliminary Official Statement heretofore delivered to the Underwriter is
hereby deemed final by the City as of its date and as of the date hereof, except for the omission of
such information as is permitted to be omitted in accordance with paragraph (b)(i) of Rule 15c2-12.
The Preliminary Official Statement, at the date thereof, did not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the statements therein (other than
the information relating to The Depository Trust Company and its book-entry system, as to which no
view is expressed), in the light of the circumstances under which they were made, not misleading. At
the date hereof and on the Closing, the Final Official Statement did not and will not contain any
untrue statement of a material fact or omit to state any material fact necessary to make the statements
therein (other than the information relating to The Depository Trust Company and its book-entry
system, as to which no view is expressed), in the light of the circumstances under which they were
made, not misleading. The City hereby covenants and agrees that, within seven business days from
the date hereof,. the City shall cause a final printed form of the Official Statement to be delivered to
the Underwriter in sufficient quantity to comply with paragraph (b)(4) of Rule 15c2-12 and Rules of
the Municipal Securities Rulemaking Board but in no event less than one business day prior to the
Closing.
(d) To the best knowledge of the undersigned officer of the City, the execution
and delivery by the City of the City Documents and the approval by the City of the Official
Statement and compliance with the provisions on the City's part contained in the City Documents,
will not conflict with or constitute a breach of or default under any law, administrative regulation,
judgment, decree, loan agreement, indenture, bond, note, resolution, agreement orpther instrument to
which the City is a parry or is otherwise subject to, which conflict, breach or default has or may have
a material adverse effect on the ability of the City to carry out its obligations under the City
Documents, nor will any such execution, delivery, adoption or compliance result in the creation or
imposition of any material lien, charge or other security interest or encumbrance of any nature
whatsoever upon any of the properties or assets of City under the terms of any such law,
administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution,
agreement or other instrument; except as provided by the City Documents.
(e) The City will advise the Underwriter promptly of any proposal to amend or
supplement the Official Statement and will not effect or consent to any such amendment or
supplement without the consent of the Underwriter, which consent will not be unreasonably
withheld. The City will advise the Underwriter promptly of the institution of any proceedings known
to it by any governmental Authority prohibiting or otherwise affecting the use of the Official
Statement in connection with the offering, sale or distribution of the Bonds.
(f) To the best knowledge of the undersigned officer of the City, after reasonable
inquiry, the City is not in breach of or default under any applicable law or administrative regulation
of the State of California or the United States or any applicable judgment or decree or any loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a
parry or is otherwise subject, and no event has occurred and is continuing which, with the passage of
DOCSOC/1373527v2/200119-0002
6
time or the giving of notice, or both, would constitute a default or an event of default under any such
instrument, in each case which breach or default has or may have a material adverse effect on the
ability of the City to perform its obligations under the City Documents.
(g) The financial statements relating to the receipts, expenditures and cash
balances of the City as of June 30, 2008 attached as Appendix B to the Official Statement fairly
represent the receipts, expenditures and cash balances of the General Fund. Except as disclosed in
the Official Statement or otherwise disclosed in writing to the Underwriter, there has not been any
materially adverse change in the financial condition of the General Fund or in its operations since
June 30, 2008 and there has been no occurrence, circumstance or combination thereof which is
reasonably expected to result in any such materially adverse change.
(h) As of the time of acceptance hereof and as of the date of Closing, no action,
suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government
Authority, public board or body, is pending or, to the best knowledge of the officers of the City,
threatened (i) in any way questioning the corporate existence of the City or the titles of the officers of
the City to their respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin
the execution or delivery of any of the Bonds, or in any way contesting or affecting the validity of the
Bonds or the City Documents or the consummation of the transactions contemplated thereby, or
contesting the exclusion of the interest on the Bonds from gross income for federal income tax
purposes or contesting the power of the City to enter into the City Documents; (iii) which may result
in any material adverse change to the financial condition of the City or to its ability to pay the Base
Rental when due; or (iv) contesting the completeness or accuracy of the Preliminary Official
Statement or the Official Statement or any supplement or amendment thereto or asserting that the
Preliminary Official Statement or the Official Statement contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading,
and there is no basis for any action, suit, proceeding, inquiry or investigation of the nature .described
in clause (i) through (iv) of this sentence.
(i) To the extent required by law, the City will undertake, pursuant to the Lease
Agreement and the Continuing Disclosure Certificate, to provide annual reports and notices of
certain events, if material. A description of this undertaking is set forth in Appendix D to the
Preliminary Official Statement and will also be set forth in the final Official Statement.
(j) Any certificate signed by any officer of the City authorized to execute such
certificate in connection with the execution, sale and delivery of the Bonds and delivered to the
Underwriter shall be deemed a representation and warranty of the City to the Underwriter and the
Authority as to the statements made therein but not of the person signing such certificate.
(k) The City has never failed to comply in all material respects with any previous
undertakings with regard to Rule 15c2-12 to provide annual financial and operating data or notices of
material events.
Section 8. Conditions to the Obligations of the Underwriter. The Underwriter has
entered into this Purchase Contract in reliance upon the representations and warranties of the
Authority and the City contained herein. The obligations of the Underwriter to accept delivery of
and pay for the Bonds on the date of the Closing shall be subject, at the option of the Underwriter, to
the accuracy in all material respects of the statements of the officers and other officials of the
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DOCSOC/ 1373527v2/200119-0002
Authority and of the City, as well as authorized representatives of Bond Counsel, the Trustee,
Disclosure Counsel and the Financial Advisor made in any Bonds or other documents famished
pursuant to the provisions hereof; to the performance by the Authority and the City of their
obligations to be performed hereunder at or prior to the date of the Closing; and to the following
additional conditions:
(a) The representations, warranties and covenants of the City and the Authority
contained herein shall be true, complete and correct at the date hereof and at the time of the Closing,
as if made on the date of the Closing.
(b) At the time of Closing, the Legal Documents shall be in full force and effect
as valid and binding agreements between or among the various parties thereto, and the Legal
Documents and the Official Statement shall not have been amended, modified or supplemented
except as may have been agreed to in writing by the Underwriter, and all such reasonable actions as,
in the opinion of Bond Counsel, shall reasonably deem necessary in connection with the transactions
contemplated hereby;
(c) At the time of the Closing, no default shall have occurred or be existing under
the Authority Documents, the City Documents, or any other agreement or document pursuant to
which any of the City's financial obligations were executed and delivered, and the City shall not be
in default in the payment of principal or interest with respect to any of its Financial obligations, which
default would adversely impact the ability of the City to make the Base Rental.
(d) In recognition of the desire of the Authority, the City and the Underwriter to
effect a successful public offering of the Bonds, and in view of the potential adverse impact of any of
the following events on such a public offering, this Agreement shall be subject to termination in the
absolute discretion of the Underwriter by notification, in writing, to the Authority and the City prior
to delivery of and payment for the Bonds, if at any time prior to such time, regardless. of whether any
of the following statements of fact were in existence or known of on the date of this Purchase
Contract:
(i) any event shall occur which makes untrue any statement or results in
an omission to state a'material fact necessary to make the statements in the Official
Statement, in the light of the circumstances under which they were made, not
misleading, which event, in the reasonable opinion of the Underwriter would
materially or adversely affect the ability of the Underwriter to market the Bonds; or
(ii) the marketability of the Bonds or the market price thereof, in the
opinion of the Underwriter, has been materially adversely affected by an amendment
to the Constitution of the United States or by any legislation in or by the Congress of
the United States or by the State of California, or the amendment of legislation
pending as of the date of this Purchase Contract in the Congress of the United States,
or the recommendation to Congress or endorsement for passage (by press release,
other form of notice or otherwise) of legislation by the President of the United States,
the Treasury Department of the United States, the Internal Revenue Service or the
Chairman or ranking minority member of the Committee on Finance of the United
States Senate or the Committee on Ways and Means of the United States House of
Representatives, or the proposal for consideration of legislation by either such
Committee or by any member thereof, or the presentment of legislation for
8
DOCSOC/ 1373527v2/200119-0002
consideration as an option by either such Committee, or by the staff of the Joint
Committee on Taxation of the Congress of the United States, or the favorable
reporting for passage of legislation to either House of the Congress of the United
States by a Committee of such House to which such legislation has been referred for
consideration, or any decision of any federal or state court or any ruling or regulation
(final, temporary or proposed) or official statement on behalf of the United States
Treasury Department, the Internal Revenue Service or other federal or State authority
affecting the federal or State tax status of the Authority or the City, or the interest on
or with respect to bonds or notes (including the Bonds); or
(iii) any legislation, ordinance, rule or regulation shall be introduced in, or
be enacted by any governmental body, department or Authority of the State, or a
decision by any court of competent jurisdiction within the State shall be rendered
which materially adversely affects the market price of the Bonds; or
(iv) an order, decree or injunction issued by any court of competent
jurisdiction, or order, ruling, regulation (final, temporary or proposed), official
statement or other form of notice or communication issued or made by or on behalf of
the Securities and Exchange Commission, or any other governmental Authority
having jurisdiction of the subject matter, to the effect that: (i) obligations of the
general character of the Bonds, or the Bonds, including any or all underlying
an•angements, are not exempt from registration under the Securities Act of 1933, as
amended, or that the Indenture is not exempt from qualification under the Trust
Indenture Act of 1939, as amended; or (ii) the issuance, offering or sale of obligations
of the general character of the Bonds, or the issuance, offering or sale of the Bonds,
including any or all underlying obligations, as contemplated hereby or by the Official
Statement, is or would be in violation of the federal securities laws as amended and
then in effect; or
(v) legislation shall be enacted by the Congress of the United States, or a
decision by a court of the United States shall be rendered, to the effect that
obligations of the general character of the Bonds, or the Bonds are not exempt from
registration under or other requirements of the Securities Act of 1933, as amended
and as then in effect, or the Securities Exchange Act of 1934, as amended and as then
in effect, or that the Indenture is not exempt from qualification under or other
requirements of the Trust Indenture Act of 1939, as amended and as then in effect; or
(vi) additional material restrictions not in force as of the date hereof shall
have been imposed upon trading in securities generally by any domestic
governmental authority or by any domestic national securities exchange, which are
material to the marketability of the Bonds; or
(vii) a general banking moratorium shall have been declared by federal,
State or New York authorities, or the general suspension of trading on any national
securities exchange; or
(viii) there shall have occurred any outbreak or escalation of hostilities,
declaration by the United States of a national emergency or war or other calamity or
crisis the effect of which on financial markets is materially adverse such as to make
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DOCSOC/1373527v2/200119-0002
it, in the sole judgment of the Underwriter, impractical or inadvisable to proceed with
the purchase or delivery of the Bonds as contemplated by the Final Official Statement
(exclusive of any amendment or supplement thereto); or
(ix) any rating of the Bonds or the rating of any obligations of the City
secured by the City's general fund shall have been downgraded or withdrawn by a
national rating service, which, in the opinion of the Underwriter, materially adversely
affects the market price of the Bonds; or
(x) the commencement of any action, suit or proceeding described in
Section 6(g) or Section 7(h);
(e) at or prior to the Closing, the Underwriter shall receive the following
documents, in each case to the reasonable satisfaction in form and substance of the Underwriter:
(i) all resolutions relating to the Bonds adopted by the Authority and
certified by an authorized official of the Authority authorizing the execution and
delivery of the Bonds, the Authority Documents and the Official Statement;
(ii) all resolutions relating to the Bonds adopted by the City and certified
by an authorized official of the City authorizing the execution and delivery of the
City Documents and the delivery of the Bonds and the Official Statement;
(iii) the Legal Documents duly executed and delivered by the respective
parties thereto, with only such amendments, modifications or supplements as may
have been agreed to in writing by the Underwriter;
(iv) the approving opinion of Stradling Yocca Carlson & Rauth, Bond
Counsel, dated the date of Closing and addressed to the Authority and the City, in
substantially the form attached as Appendix D to the Official Statement, and a
reliance letter thereon addressed to the Underwriter;
(v) a supplemental opinion of Bond Counsel dated the date of Closing
and addressed to the Underwriter, to the effect that:
(A) the statements on the cover of the Official Statement and in
the Official Statement under the captions "INTRODUCTION," "THE
SERIES 2009 BONDS," "SECURITY AND SOURCES OF PAYMENT
FOR THE 2009 BONDS", "THE REFUNDING PLAN," "TAX MATTERS,"
and "CONTINi7ING DISCLOSURE," and in "APPENDIX A -SUMMARY
OF THE PRINCIPAL LEGAL DOCUMENTS" and "APPENDD~ C -
PROPOSED FORM OF BOND COUNSEL OPINION," excluding any
material that may be treated as included under such captions and appendices
by any cross-reference, insofar as such statements expressly summarize
provisions of the Bonds, the Ground Lease, the Lease Agreement, the
Assignment Agreement, the Indenture, the Escrow Agreement and Bond
Counsel's final opinion concerning certain federal tax matters relating to the
Bonds, are accurate in all material respects as of the date of Closing, provided
that Bond Counsel need not express any opinion with respect to any financial
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DOCSOC/ 1373527v2/200119-0002
or statistical data contained therein or with respect to the book-entry system
in which the Bonds are initially delivered;
(B) The Purchase Contract and the Escrow Agreement have been
duly authorized, executed and delivered by the City and the Authority and are
the valid, legal and binding agreements of the City and the Authority
enforceable in accordance with their terms, except that the rights and
obligations under the Purchase Contract and the Escrow Agreement are
subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws affecting creditors' rights, to the
application of equitable principles if equitable remedies are sought, to the
exercise of judicial discretion in appropriate cases and to limitations on legal
remedies against public agencies in the State, and provided that no opinion is
expressed with respect to any indemnification or contribution provisions
contained therein.
(C) 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 Aet of 1939, as amended.
(vi) a defeasance opinion of Bond Counsel dated the date of Closing and
addressed to the Underwriter to the effect that, as a result of the deposit and
application of a portion of the proceeds of the Bonds with the trustee for the
Refunded Bonds on the Closing and compliance with certain provisions of the
Indenture, [and relying on the report of the Verification Agent as to the sufficiency of
the amount so deposited for such purposes], the Refunded Bonds have ceased to be
entitled to the lien of the Indenture and such lien and all covenants, agreements and
other obligations of the Authority under the Indenture have ceased thereunder and
become void as to such Refundable Bond.
(vii) the Official Statement, executed on behalf of the City;
(viii) evidence that the Bonds have been rated "_" by Moody's Investors
Service, " " by Standard &Poor's Ratings Services, and "" by Fitch Ratings, as
applicable;
(ix) a certificate, dated the date of Closing, signed by a duly authorized
officer of the Authority satisfactory in form and substance to the Underwriter to the
effect that: (i) the representations, warranties and covenants of the Authority
contained in this Purchase Contract are true and correct in all material respects on and
as of the date of Closing with the same effect as if made on the date of the Closing by
the Authority, and the Authority has complied with all of the terms and conditions of
this Purchase Contract required to be complied with by the Authority at or prior to the
date of Closing; (ii) to the best of such officer's knowledge, no event affecting the
Authority has occurred since the date of the Official Statement which should be
disclosed in the Official Statement for the purposes for which it is to be used or
which is necessary to disclose therein in order to make the statements and
information therein not misleading in any material respect; (iii) the information and
statements contained in the Official Statement (other than information relating to The
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DOCSOC/1373527v2/200ll9-0002
Depository Trust Company and its book-entry system) did not as of its date and do
not as of the Closing contain an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleadmg in any material respect;
and (iv) to the best of its knowledge after reasonable investigation, the Authority is
not in breach of or default under any applicable law or administrative regulation of
the State of Califomia or the United States or any applicable judgment or decree or
any loan agreement, indenture, bond, note, resolution, agreement or other instrument
to which the Authority is a party or is otherwise subject, which would have a material
adverse impact on the Authority's ability to perform its obligations under the
Authority Documents, and no event has occurred and is continuing which, with the
passage of time or the giving of notice, or both, would constitute a default or an event
of default under any such instrument;
(x) a certificate, dated the date of Closing, signed by a duly authorized
officer of the City satisfactory in form and substance to the Underwriter to the effect
that: (i)the representations, warranties and covenants of the City contained in this
Purchase Contract are true and correct in all material respects on and as of the date of
Closing with the same effect as if made on the date of the Closing by the City, and
the City has complied with all of the terms and conditions of the Purchase Contract
required to be complied with by the City at or prior to the date of Closing, (ii) to the
best of such officer's knowledge, no event affecting the City has occurred since the
date of the Official Statement which should be disclosed in the Official Statement for
the purposes for which it is to be used or which is necessary to disclose therein in
order to make the statements and information therein not misleading in any material
respect; (iii) the information and statements contained in the Official Statement (other
than information relating to The Depository Trust Company and its book-entry
system) did not as of its date and do not as of the Closing contain an untrue statement
of a material fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading
in any material respect; and (iv) to the best of its knowledge after reasonable
investigation, the City is not in breach of or default under any applicable law or
administrative regulation of the State of California or the United States or any
applicable judgment or decree or any loan agreement, indenture, bond, note,
resolution, agreement (including but not limited to the Lease Agreement) or other
instrument to which the City is a party or is otherwise subject, which would have a
material adverse impact on the City's ability to perform its obligations under the
Legal Documents, and no event has occurred and is continuing which, with the
passage of time or the giving of notice, or both, would constitute a default or an event
of default under any such instrument;
(xi) an opinion dated the date of Closing and addressed to the Underwriter
and Bond Counsel, of the Office of the City Attorney of the City of Santa Monica, as
Counsel to the Authority, to the effect that:
(A) the Authority is a public body, corporate and politic duly
organized and validly existing under the Constitution and laws of the State of
California;
12
DOCSOC/ 1373527v2/200119-0002
(B) the resolution of the Authority approving and authorizing the
execution and delivery of the Authority Documents, the Bonds and the
Official Statement and other actions of the Authority was duly adopted at a
meeting of the governing body of the Authority which was called and held
pursuant to law and with all public notice required by law and at which a
quorum was present and acting throughout, and the resolution is now. in full
force and effect;
(C) the Authority Documents are valid, legal and binding
agreements of the Authority (assuming due authorization, execution and
delivery by and validity against the other parties thereto);
(D) to the best knowledge of such counsel there is no action, suit,
proceeding, inquiry or investigation at law or in equity before or by any court
or public body pending with respect to which the Authority has been served
or, to the best of such counsel's knowledge, threatened against or affecting
the Authority, except as may be disclosed in the Official Statement, which
would materially adversely impact the Authority's ability to complete the
transactions contemplated by the Authority Documents, the Official
Statement or any other document or certificate related to such transactions,
restrain or enjoin the collection of Base Rental with respect to the Lease
Agreement, or in any way contesting or affecting the validity of the Bonds,
the Official Statement, the Authority Documents or the transactions described
in and contemplated thereby wherein an unfavorable decision, ruling or
finding would materially adversely affect the validity and enforceability of
the Bonds or the Authority Documents or in which a final adverse decision
could materially adversely affect the operations of the Authority;
(E) the execution and delivery of the Authority Documents and
the issuance of the Bonds and compliance with the provisions thereof, do not
and will not in any material respect conflict with or constitute on the part of
the Authority a breach of or default under any agreement or other instrument
to which the Authority is a party or by which it is bound or any existing law,
regulation, court order or consent decree to which the Authority is subject,
which breach or default has or may have a material adverse effect on the
ability of the Authority to perform its obligations under the Authority
Documents;
(F) no authorization, approval, consent, or other order of the State
of California or any other governmental body within the State of California is
required for the valid authorization, execution and delivery of the Authority
Documents or the Official Statement by the Authority or the consummation
by the Authority of the transactions on its part contemplated therein, except
such as have been obtained and except such as may be required under state
securities or blue sky laws in connection with the purchase and distribution of
the Bonds by the Underwriter; and
(G) based on the information made available to such counsel in its
role as counsel to the Authority, and without having undertaken to determine
DOCSOC/ 1373527v2/20 0 1 1 9-0002
13
independently or assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Official Statement under the
caption entitled "THE AUTHORITY," nothing has come to its attention
which would lead it to believe that the statements contained in the above-
referenced caption as of the date of the Official Statement and as of the date
of Closing (excluding therefrom the financial and statistical data and forecasts
included therein, as to which no opinion is expressed) contained or contains
any untrue statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(xii) an opinion dated the date of Closing and addressed to the Underwriter
and the Bond Counsel, of the Office of the City Attorney of the City of Santa
Monica, to the effect that:
(A) the City is a charter city and a municipal corporation duly
organized. and validly existing under the Constitution and laws of the State of
California;
(B) the resolution of the City approving and authorizing the
execution and delivery of the City Documents. and approving and authorizing
the issuance of the Bonds and the delivery of the Official Statement and other
actions of the City was duly adopted at a meeting of the governing body of
the City which was called and held pursuant to law and with all public notice
required by law and at which a quorum was present and acting throughout,
and the resolution is now in full force and effect;
(C) the City Documents are valid, legal and binding agreements
of the City (assuming due authorization, execution and delivery by and
validity against the other parties thereto);
(D) to the best knowledge of the City Attorney there is no action,
suit, proceeding, inquiry or investigation at law or in equity before or by any
court or public body pending with respect to which the City has been served
or, to the best of such City Attorney's knowledge, threatened against or
affecting the City, except as may be disclosed in the Official Statement,
which would materially adversely impact the City's ability to complete the
transactions contemplated by the City Documents, the Official Statement or
any other document or certificate related to such transactions, restrain or
enjoin the collection of Base Rental with respect to the Lease Agreement, or
in any way contesting or affecting the validity of the Bonds, the Official
Statement or the City Documents;
(E) the execution and delivery of the City Documents and.
compliance with the provisions thereof, do not and will not in any material
respect conflict with or constitute on the part of the City a breach of or default
under any agreement or other instrument to which the City is a party or by
which it is bound or any existing law, regulation, court order or consent
decree to which the City is subject, which breach or default has or may have a
14
DOCSOC/ 1373527v2/200119-0002
material adverse effect on the ability of the City to perform its obligations
under the City Documents;
(F) no authorization, approval, consent, or other order of the State
of California or any other governmental body within the State of California is
required for the valid authorization, execution and delivery of the City
Documents or the consummation by the City of the transactions on its part
contemplated therein, except such as have been obtained and except such as
may be required under state securities or blue sky laws in connection with the
purchase and distribution of the Bonds by the Underwriter; and
(G) based on the information made available to City Attorney, and
without having undertaken to determine independently or assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Official Statement, nothing has come to its attention which
would lead it to believe that the Official Statement as of its date and as of the
date of Closing (excluding therefrom the financial and statistical data and
forecasts included therein, as to which no opinion is expressed and
information relating to the Authority and The Depository Trust Company and
its book entry system) contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(xiii) an opinion of Stradling Yocca Carlson & Rauth, Disclosure Counselto
the Authority and the City dated the date of Closing and addressed to the Underwriter
inform and substance satisfactory to the Underwriter may require;
(xiv) an opinion of counsel to the Trustee, addressed to the Underwriter and
the Authority, dated the date of the Closing, to the effect that:
(A) the Trustee is a banking corporation duly organized and
validly existing under the laws of the State of California, having full
corporate power to undertake the trust created under the Indenture;
(B) the Indenture and the Assignment Agreement (collectively,
the "Trustee Documents") have each been duly authorized, executed and
delivered by the Trustee and, assuming due authorization, execution and
delivery by the other parties thereto, the Trustee Documents constitute the
valid, legal and binding obligations of the Trustee enforceable in accordance
with its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency or other laws affecting the enforcement of creditors' rights
generally and by the application of equitable principles, if equitable remedies
are sought;
(C) the Trustee has duly authenticated the Bonds upon the order
of Authority;
15
DOCSOC/ 1373527v2/20 0 1 1 9--0 002
(D) the Trustee's actions in executing and delivering the Trustee
Documents are in full compliance with, and do not conflict with any
applicable law or governmental regulation and, to the best of such counsel's
knowledge, after reasonable inquiry with respect thereto, do not conflict with
or violate any contract to which the Trustee is a party or any administrative or
judicial decision by which the Trustee is bound; and
(E) no consent, approval, authorization or other action by any
governmental or regulatory authority having jurisdiction over the banking or
trust powers of the Trustee that has not been obtained is or will be required
for the execution and delivery of the Bonds or the consummation by the
Trustee of its obligations under the Trustee Documents.
(xv) a certificate, dated the date of Closing, signed by a duly authorized
official of the Trustee and Escrow Agent satisfactory in form and substance to the
Underwriter, to the effect that:
(A) the Trustee is duly organized and existing as a banking
corporation under the laws of the State of California, having the full corporate
power and authority to enter into and perform its duties under the Trustee
Documents and, in its capacity as Escrow Agent, the Escrow Agreement;
(B) the Trustee is duly authorized to enter into the Trustee
Documents and, in its capacity as Escrow Agent, the Escrow Agreement and
has duly executed and delivered the Trustee Documents and the Escrow
Agreement, and assuming due authorization and execution by the other
parties thereto, the Trustee Documents and the Escrow Agreement are legal,
valid and binding upon the Trustee or Escrow Agent, as applicable, and
enforceable against such party in accordance with its terms,
(C) the Trustee has duly authenticated the Bonds under the
Indenture and delivered the Bonds to or upon the order of the Underwriter;
and
(D) no consent, approval, authorization or other action by any
governmental or regulatory authority having jurisdiction over the banking or
trust powers of the Trustee that has not been obtained is or will be required
for the execution and delivery of the Bonds or the consummation by the
Trustee of its obligations under the Trustee Documents and, in its capacity as
Escrow Agent, the Escrow Agreement.
(xvi) the preliminary and final Statement of Sale required to be delivered to
the California Debt and Investment Advisory Commission pursuant to Section 53583
of the Government Code and Section 8855(g) of the Government Code;
(xvii) a copy of the executed Blanket Issuer Letter of Representations by
and between the City and DTC relating to the book-entry system, and a Copy of the
Operational Arrangements Letter of Representations executed by the Trustee.
16
DOCSOC/1373527v2/200119-0002
(xviii) the tax and nonarbitrage certificate by the City in form and substance
to the reasonable satisfaction of Bond Counsel-and the Underwriter;
(xix) a certificate, dated the date of the Preliminary Official Statement, of
the City, as required under Rule 15c2-12;
(xx) a certificate, dated the date of the Preliminary Official Statement, of
the Authority, as required under Rule 15c2-12;
(xxi) a certificate of the Auditor acknowledging the use of its report for
Fiscal Year 2007-08 in the Official Statement and Preliminary Official Statement;
and
(xxii) such additional legal opinions, Bonds, proceedings, instruments or
other documents as Bond Counsel or Underwriter's Counsel may reasonably request:
Section 9. Changes in Official Statement. After the Closing, neither the Authority nor
the City. will adopt any amendment of or supplement to the Official Statement to which the
Underwriter shall reasonably object in writing. Within 90 days after the Closing or within 25 days
following the "end of the underwriting period" (as defined in Section 240 15c-12 in Chapter II of
Title 17 of the Code of Federal Regulations (Rule "15c2-12"), whichever occurs first, if any event
relating to or affecting the Bonds, the Trustee, the City or the Authority shall occur as a result of
which it is necessary, in the opinion of the Underwriter, to amend or supplement the Official
Statement in order to make the Official Statement not misleading in any material respect in the light
of the circumstances existing at the time it is delivered to a purchaser, the Authority will forthwith
prepare and furnish to the Underwriter. an amendment or supplement that will amend or supplement
the Official Statement so that it will not contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the light of the circumstances
existing at the time the Official Statement is delivered to purchaser, not misleading. The City and the
Authority shall cooperate with the Underwriter in the filing by the Underwriter of such amendment
or supplement to the Official Statement with a nationally recognized municipal securities repository.
The Underwriter acknowledges that the "end of the underwritingperiod" will be the date of Closing.
Section 10. Expenses. Whether or not the transactions contemplated by this Purchase
Contract are consummated, the Underwriter shall be under no obligation to pay, and the Authority
shall pay only from the proceeds of the Bonds, but only as the Authority and such other party
providing such services may agree, all expenses and costs of the Authority and the City incident to
the performance of their obligations in connection with the authorization, execution, sale and
delivery of the Bonds to the Underwriter, including, without limitation, printing costs, rating agency
fees and charges, initial fees of the Trustee and Escrow Agent, including fees and disbursements of
its counsel, if any, fees and disbursements of Bond Counsel and other professional advisors
employed by the Authority or the City, costs of preparation, printing, signing, transportation, delivery
and safekeeping of the Bonds and for expenses (included in the expense component of the spread)
incurred by the Underwriter on behalf of City's employees which are incidental to implementing this
agreement, including, but not limited to, meals, transportation, lodging, and entertainment of those
employees. The Underwriter shall pay all out-of-pocket expenses of the Underwriter, including,
without limitation, the fees and expenses of its counsel, advertising expenses, the California Debt and
Investment Advisory Commission fee, CUSIP Services Bureau charges, regulatory fees imposed on
17
DOCSOC/1373527v2/200] 19-0002
new securities issuers and any and all other expenses incurred by the Underwriter in connection with
the public offering and distribution of the Bonds.
Section 11. Notices. 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 Stone & Youngberg
LLC, 515 S. Figueroa Street, Suite 1800, Los Angeles, CA 90071, Attention: Managing Director.
All notices or communications hereunder by any party shall be given and served upon each other
party. Any notice or communication to be given the Authority under this Purchase Contract may be
given by delivering the same in writing to the Santa Monica Public Financing Authority, 1685 Main
Street„ Santa Monica, California 90401, Attention: Executive Director. Any notice or
communication to be given the City under this Purchase Contract may be given by delivering the
same in writing to the City of Santa Monica, 1685 Main Street„ Santa Monica, California 90401,
Attention: Finance Director.
Section 12. Parties in Interest. This Purchase Contract is made solely for the benefit of
the Authority, the City and the Underwriter (including the successors or assigns thereof) and no other
person shall acquire or have any right hereunder or by virtue hereof. All representations, warranties
and agreements of the Authority and the City in this Purchase Contract shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of the Underwriter and shall
survive the delivery of and payment for the Bonds.
Section 13. Counterparts. This Purchase Contract maybe executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be an original; but all
such counterparts shall together constitute but one and the same instrument.
18
DOCSOC/1373527v2/200119-0002
Section 14. Governing Law. This Purchase Contract shall be governed by the laws of
the State of California.
STONE & YOUNGBERG LLC
By:
Title: Managing Director
Accepted:
SANTA MONICA PUBLIC FINANCING AUTHORITY APPROVED AS TO FORM
By:
Title: Executive Director
Accepted:
CITY OF SANTA MONICA
Title: City Manager
ATTEST:
MARIA M. STEWART
CLERK OF THE COUNCIL
MARSHA. JONES MOUTRIE
CITY ATTORNEY
19
DOCSOC/ 1373527v2/200119-0002
EXHIBIT A
LEASE REVENUE REFUNDING BONDS
SERIES 2009 (PUBLIC SAFETY FACILITY PROJECT)
MATURITY SCHEDULE
Maturity
Date Principal
(July I) Amount Interest Rate Pield
Total $
A-1
DOCSOC/1373527v2/200119-0002
Table of Contents ATTACHMENT H
Page
Section 1. Federal Securities .................................................................................................. ........2
Section 2. Appointment of Escrow Bank ............................................................................... ........2
Section 3. Establishment of 1999 Bonds Escrow Fund ......................................................... ........2
Section 4. Deposit of Funds ................................................................................................... ........2
Section 5. Application of Deposit .......................................................................................... ........2
Section 6. Instructions as to Application of Deposit; Call and Redemption of 1999 Bonds . ........2
Section 7. Application of Certain Terms of 1999 Bonds Indenture ....................................... ........3
Section 8. Substitution of Federal Securities ................:........................................................ ........3
Section 9. Compensation to Escrow Bank ............................................................................. ........3
Section 10. Liabilities-and Obligations of Escrow Bank ......................................................... ........4
Section 11. Amendment ............................................................:.............................................. ........5
Section 12. Partial Invalidity .................................................................................................... ........5
Section 13. Execution in Counterparts .........................................:........................:.................. ........5
Section 14. Governing Law ...................................................................................................... ........5
Section 15. Notices ................................................................................................................... ........5
DOCSOC/ 1370744v3/200119-0002
1999 BONDS
ESCROW DEPOSIT AND TRUST AGREEMENT
by and between the
SANTA MONICA PUBLIC FINANCING AUTHORITY
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
as Escrow Bank
Dated as of December 1, 2009
Relating to:
$13,200,000
Santa Monica Public Financing Authority
Lease Revenue Bonds
Series 1999 (Public Safety Facility Project)
DOC SOC/1370744v3/200119-0002
1999 BONDS ESCROW DEPOSIT AND TRUST AGREEMENT
This 1999 BONDS ESCROW DEPOSIT AND TRUST AGREEMENT dated as of the 1st
day of December 2009 (this "Agreement"), by and between the SANTA MONICA PUBLIC
FINANCING AUTHORITY, a joint exercise of powers entity duly organized and existing under and
by virtue of the laws of the State of California (the "Authority"), and THE BANK OF NEW YORK
MELLON TRUST COMPANY, N.A. , a national banking association organized and existing under
the laws of the United States of America, as escrow holder hereunder (the "Escrow Bank") and as
successor trustee with respect to the 1999 Bonds (the Escrow Bank being hereinafter referred to in
such respect as the "Trustee"):
WITNESSETH:
WHEREAS, the Authority has previously issued its Santa Monica Public Financing
Authority Lease Revenue Bonds Series 1999 (Public Safety Facilities Project) 1999 Refunding Series
(the "1999 Bonds") pursuant to an Indenture, dated as of September 1, 1999, as supplemented by a
First Supplemental Indenture, dated as of January 1, 2002, both by and among the Authority, the City
of Santa Monica (the "City"), and Trustee (as supplemented, the "1999 Bonds Indenture");
WHEREAS, the Escrow Bank is the trustee under the 1999 Bonds Indenture (the "Trustee");
WHEREAS, the City has determined to issue its Santa Monica Public Financing Authority
Lease Revenue Refunding Bonds Series 2009 (Public Safety Facilities Project) (the "2009 Bonds")
pursuant to the 1999 Bonds Indenture, as supplemented by a Second Supplemental Indenture, dated
as of December 1, 2009, by and between the City and the Trustee, for the purpose of providing funds,
together with other available moneys, to refund and defense and discharge the 1999 Bonds (the
"Refixnded Portion of the 1999 Bonds");
WHEREAS, the 1999 Bonds Indenture contains provisions relating to the defeasance of the
Refunded Portion of the 1999 Bonds upon the deposit with the Escrow Bank, as 1999 Bonds Trustee,
of cash and Federal Securities sufficient to pay when due the principal and interest due and to
become due on the Refunded Portion of the 1999 Bonds on and prior to the maturity date or earlier
redemption thereof, and the City wishes to make such a deposit with the Escrow Bank and to enter
into this Agreement for the purpose of providing the terms and conditions for the deposit and
application of amounts so deposited; and
WHEREAS, the Escrow Bank has full powers to act with respect to the irrevocable escrow
and trust created herein and to perform the duties and obligations to be undertaken pursuant to this
Agreement;
NOW, THEREFORE, in consideration of the above premises and of the mutual promises
and covenants herein contained and for other valuable consideration, the parties hereto do hereby
agree as follows:
DOCSOC/ 1370744v3/200ll 9-0002
Section 1. Federal Securities. Federal Securities (as defined in Section 5 hereof) means
provisions of this Agreement, which Federal Securities are within the meaning of such term in
Section 1O.O1(d) of the 1999 Bonds Indenture.
Secfion 2. Appointment of Escrow Bank. The Authority hereby appoints the Escrow
Bank, as escrow holder for all purposes of this Agreement and in accordance with the terms and
provisions of this Agreement, and the Escrow Bank hereby accepts such appointment.
Section 3. Establishment of 1999 Bonds Escrow Fund. The Escrow Bank agrees to
establish and maintain a special trust account designated the "1999 Bonds Escrow Fund," which shall
be held by the Escrow Bank, as a segregated fund separate and distinct from all other funds and
accounts held by the Escrow Bank, in trust as security for the payment of the principal of and interest
on the Refunded Portion of the 1999 Bonds.
Section 4. Deposit of Funds. Concurrently with the issuance and delivery of the .Series
2OO9A Bonds, the Authority shall cause the. Trustee to transfer from the proceeds of the Series
2OO9A Bonds to the Escrow Bank for deposit into the 1999 Bonds Escrow Fund in immediately
available funds the amount of $ . In addition, concurrently with the issuance and
delivery of the Series 2OO9A Bonds, the Authority shall transfer to the Escrow Bank for deposit into
the 1999 Bonds Escrow Fund in immediately available funds the amount of $
Section 5. Application of Deposit. The total amount of $ deposited in
the 1999 Bonds Escrow Fund pursuant to Section 4 hereof, shall be invested in the federal securities
described in Exhibit A, attached hereto and hereby made a part hereof (the "Federal Securities"),
except that $ -shall be held uninvested as cash and the Authority warrants that the amount
deposited in the 1999 Bonds Escrow Fund shall be sufficient for such purposes. The Authority
hereby directs the Escrow Bank to acquire the Federal Securities for deposit in the 1999 Bonds
Escrow Fund.
After the Escrow Bank shall have paid or have made provision for payment of all principal of
and interest on the Refunded Portion of the 1999 Bonds as provided in Section 6 hereof, the Escrow
Bank shall promptly transfer to the Trustee any surplus amounts remaining in the 1999 Bonds
Escrow Fund to be used by the Trustee solely to pay debt service on the 2009 Bonds.
Section 6. Instructions as to Application of Deposit; Call and Redempfion of 1999
Bonds. The total amount of Federal Securities and cash held in the 1999 Bonds Escrow Fund
pursuant to Section 5 hereof shall be deemed to be and shall constitute the deposit permitted to be
made by the Authority to pay in full the Refunded Portion of the 1999 Bonds pursuant to Section
10.02 of the 1999 Bonds Indenture. In accordance with said Section 10.02, the Authority hereby
irrevocably directs and instructs the Escrow Bank to apply the maturing amounts of the Federal
Securities and cash to pay all interest due and payable on the Refunded Portion of the 1999 Bonds to
and including July 1, 2010, and to pay all principal, premium and interest due and payable upon call
and redemption of the Refunded Portion of the 1999 Bonds prior to maturity on July 1, 2010, the date
of early redemption of the Refunded Portion of the 1999 Bonds, all as more particularly set forth in
Exhibit B, attached hereto and hereby made a part hereof. For such purpose of call and redemption
prior to maturity, the Authority hereby instructs the Escrow Bank, as the Trustee, and the Escrow
Bank, as the Trustee, hereby agrees to give notice of redemption of the Refunded Portion of the 1999
Bonds, such notice of redemption to be given timely for redemption of the Refunded Portion of the
1999 Bonds on July 1, 2010, in accordance with the further applicable provisions of the 1999 Bonds
2
DOC SOC/1370744v3/200119-0002
Indenture. In addition, the Escrow Bank, as 1999 Bonds Trustee, shall also give notice of such
redemption to [insurer] , as required by Section
Further, in accordance with said Section 10.02 of the 1999 Bonds Indenture, this Agreement
shall constitute the election of the Authority to pay and defease the refunded portion of the 1999
Bonds.
[ ,certified public accountants, has confirmed, in its report to the Authority
and certain other parties to the proceedings, dated October 13, 2005, that the deposit in the 1999
Bonds Escrow Fund of such Federal Securities, together with interest to accrue thereon, will be fully
sufficient to pay all interest due and payable on the Refunded Portion of the 1999 Bonds to and
including July 1, 2010, and to pay all principal; premium and interest due and payable upon call and
redemption of the Refunded Portion of the 1999 Bonds prior to maturity on July 1, 2010, the date of
early redemption of the Refunded Portion of the 1999 Bonds.]
Section 7. A_nnlication of Certain Terms of 1999 Bonds Indenture. All of the terms of
the 1999 Bonds Indenture relating to the call and prepayment of the Refunded Portion of the 1999
Bonds prior to maturity and to the making of payments of principal and interest on the Refunded
Portion of the 1999 Bonds, as applicable, are incorporated in this Agreement as if set forth in full
herein. The provisions of the 1999 Bonds Indenture relating to the resignation and removal of the
Trustee are also incorporated in this Agreement as if set forth in full herein and shall be the
procedure to be followed with respect to any resignation or removal of the Escrow Bank hereunder.
Section 8. Substitution of Federal Securities. The Authority may, at any time direct the
Escrow Bank, in writing, to substitute Federal Securities for any or all of the Federal Securities then
deposited in the 1999 Bonds Escrow Fund, provided that any such written direction and substitution
shall be accompanied with a certification of an independent certified public accountant or firm of
certified public accountants of favorable national reputation experienced in the refunding of
obligations of political subdivisions that the Federal Securities then to be so deposited in the 1999
Bonds Escrow Fund, together with interest to be derived therefrom, shall be in an amount at all times
at least sufficient without reinvestment to make the payments specified in Section 6 and, further, to
be accompanied with an opinion of nationally recognized bond counsel that the substitution will not
affect, for Federal income tax purposes, the exclusion from gross income for purposes of federal
income taxation of the interest on the 1999 Bonds and the Series 2009 Bonds. In the event that,
following any such substitution of Federal Securities pursuant to this Section 8, there is an amount of
moneys or Federal Securities in excess of an amount sufficient to make the payments required by
Section 6, such excess shall be transferred to the Trustee upon the Authority's written direction to be
used by the Trustee solely to pay debt service on the 2009 Bonds.
Section 9. Compensation to Escrow Bank. The Authority shall pay or cause the
Authority to pay the Escrow Bank full compensation for its duties under this Agreement, including
out-of-pocket costs such as publication costs, redemption costs and expenses, legal fees and
expenses, which fees and expenses shall include the allocated costs and disbursements of in-house
counsel (to the extent such counsel's services are not redundant of services provided by external
counsel to Escrow Bank) and other costs and expenses relating hereto and, in addition, fees, costs and
expenses relating to the purchase of any Federal Securities after the date hereof, pursuant to separate
agreement between the Authority and the Escrow Bank. Such compensation shall not affect the right
of Escrow Bank, as Trustee for the Refunded Portion of the 1999 Bonds, to compensation for its
duties (including but not limited to, exchanges and transfers of Refunded Portion of the 1999 Bonds),
DOC SOC/1370744v3/200119-0002
under the 1999 Bonds Indenture. Under no circumstances shall amounts deposited in the 1999 Bonds
Escrow Fund be deemed to be available for said purposes prior to the payment in full of all of the
principal of and interest on the Refunded Portion of the 1999 Bonds in accordance with Section 6
hereof.
Section 10. Liabilities and Oblieations of Escrow Bank. The Escrow Bank shall have no
obligation to make any payment or disbursement of any type or incur any financial liability in the
performance of its duties under this Agreement unless the Authority shall have deposited sufficient
funds with the Escrow Bank. The Escrow Bank may rely and shall be protected in acting upon the
written instructions of the Authority or its agents relating to any matter or action as Escrow Bank
under this Agreement. The Escrow Bank shall not be required to act upon any oral instructions, but
may request that such instruction be given in writing.
The Authority covenants to indemnify and hold harmless the Escrow Bank against any loss,
liability or expense, including legal fees and expenses, which fees and expenses shall include the
allocated costs and disbursements of in-house counsel (to the extent such counsel's services are not
redundant of services provided by external counsel to Escrow Bank) in connection with the
performance of any of its duties hereunder, except the Escrow Bank shall not be indemnified against
any loss, liability or expense resulting from its negligence or willful misconduct. Such
indemnification shall survive the termination and discharge of this Agreement or the removal or
resignation of the Escrow Bank.
The Escrow Bank undertakes only such duties as are expressly and specifically set forth in
this Agreement and no implied duties or obligations shall be read into this Agreement against the
Escrow Bank. The Escrow Bank shall not be responsible for any of the recitals or representations
made herein other than that the Escrow Bank is qualified to accept and administer the trusts created
hereunder. The Escrow Bank shall not be liable for the accuracy of any calculations provided as to
the sufficiency of the moneys deposited with it to pay the principal of and interest on the Refunded
Portion of the 1999 Bonds. The Escrow Bank shall not have any liability hereunder except to the
extent of its own negligence or willful misconduct. The Escrow Bank may consult with counsel of its
own choice and the opinion of such counsel shall be full and complete authorization to take or suffer
any action in accordance with such opinion of counsel.
Except as otherwise provided in this Agreement, whenever in the administration of this
Agreement the Escrow Bank 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 Escrow Bank, be deemed to be conclusively proved and established by
a certificate of any authorized representative of the Authority, and such certificate shall, in the
absence of negligence or willful misconduct on the part of the Escrow Bank, be full warrant to the
Escrow Bank for any action taken or suffered by it under the provisions of this Agreement upon the
faith thereof. The Escrow Bank may conclusively rely, as to the truth and accuracy of the statements
and correctness of the opinions and the calculations provided, and shall be protected and
indemnified, in acting or refraining from acting, upon any written notice, instruction, request,
certificate, document or opinion furnished to the Escrow Bank signed or presented by the proper
parry, and it need not investigate any fact or matter stated in such notice, instruction, request,
certificate or opinion.
4
DOCSOC/1370744v3/200119-0002
Section 11. Amendment. This Agreement may be amended by the parties hereto if such
amendment shall be for the purpose of curing or correcting any ambiguous or defective provision
hereof, but only, in either case, if there first shall have been filed with the Escrow Bank a written
opinion of bond counsel stating that such amendment will not cause interest on the 1999 Bonds or the
Series 2009 Bonds to become includable in gross income for federal tax purposes.
Section 12. Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of this
Agreement shall for any reason be held illegal, invalid or unenforceable, such holding shall not affect
the validity of the remaining portions of this Agreement. The Authority and the Escrow Bank hereby
declare that they would have entered into this Agreement and each and every other Section,
paragraph, sentence, clause or phrase hereof would have been authorized irrespective of the fact that
any one or more Sections, paragraphs, sentences, clauses, or phrases of this Agreement may be held
illegal, invalid or unenforceable.
Section 13. Execution in Counterparts. This 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.
Section 14. Governing Law. This Escrow Agreement shall be governed by and construed
in accordance with the laws of the State of California.
Section 15. Notices. All notices, instructions, accounting and other communications
under this Agreement shall be in writing and shall be deemed duly given to the parties hereto if sent
by facsimile transmission (telecopy) or sent by U.S. Postal Service mail, 48 hours after deposit
thereto, postage prepaid and addressed as follows:
Authority: Santa Monica Public Financing Authority
City Hall
1685 Main Street
Santa Monica, California 90407
Attention: Treasurer
Escrow Bank: The Bank ofNew York Mellon Trust Company, N.A.
700 S. Flower Street, Suite 500
Los Angeles, CA 90017
Attention:
DOC SOC/ 1370744v3/200119-0002
IN WITNESS WHEREOF, the City and the Escrow Bank have each caused this Agreement
to be executed by their duly authorized officers all as of the date first above written.
SANTA MONICA PUBLIC FINANCING
AUTHORITY
By:
City Manager
(Seal)
ATTEST:
City Clerk
APPROVED AS TO FORM
By:
City Attorney
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A. ,
as Escrow Bank
Authorized Officer
DOCSOC/1370744v3/200119-0002
EXiIIBIT A
SCHEDULE OF FEDERAL
Type of Security
Maturity Date First Interest
Payment Date
Par Amount
___ __
Rate
~
A-1
DOCSOC/ 1370744v3/200 1 1 9-0002
EYIIIBIT B
SCHEDULE OF REFUNDED PORTION OF 1999 BONDS DEBT SERVICE
B-1
DOCSOC/1370744v3/200119-0002
Reference Resolution Nos.
10444 (CCS) and 5 (PAS).