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sr-052411-8aity u cil, a evel® n ~~tYO, ency and u lic Finance Santa Monica urity ep® City Council Meeting: May 24, 2011 Agenda Item: ~~ To: Mayor and City Council Chairperson and Redevelopment Agency Chairperson and Public Finance Authority From: Andy Agle, Director of Housing and Economic Development Carol Swindell, Director of Finance Subject: Redevelopment Agency Immediate Funding Opportunities Recommended Action Staff recommends that the City Council (Council) and Redevelopment Agency (Agency): 1. Consider immediate redevelopment funding opportunities and direct staff to prepare necessary contracts to take advantage of such opportunities as recommended below; Staff recommends that the Council: 1. Authorize the City Manager to negotiate and execute a memorandum of understanding (MOU) between the City, Agency and Santa Monica Malibu Unified School District (School District) to provide a stream of tax increment funding to the School District for implementation of Phase I of the Civic Center Joint Use Project (CCJUP); 2. Authorize the City Manager to negotiate and execute a funding agreement between the City, Agency and Exposition Metro Line Construction Authority (Expo) and/or Los Angeles County Metropolitan Transportation Authority (Metro) to provide a stream of tax increment funding to Expo and/or Metro for basic elements of the Downtown, Memorial Park, and Bergamot light rail stations; 3. Approve the payment of issuance costs associated with the 2011 Bonds and approve the modification of agreement with Stradling, Yocca, Carlson,. and Rauth (SCYR) to increase total to not exceed $400,000. 1 4. Adopt the attached Resolution approving the issuance of Earthquake Recovery Redevelopment Project Area, Series 2011 Tax Allocation Bonds (2011 Bonds) by the Santa Monica Public Financing Authority, and making certain determinations relating thereto; and, 5. Appropriate funds and adopt budget changes as outlined in the Financial Impacts and Budget Actions section of this report. Staff recommends that the Agency: 1. Authorize the Agency Executive Director to negotiate and execute a memorandum of understanding (MOU) between the City, Agency and Santa Monica Malibu Unified School District (School District) to provide a stream of tax increment funding to the School District for implementation of Phase I of the Civic Center Joint Use Project (CCJUP); 2. Authorize the Agency Executive Director to negotiate and execute a funding agreement between the City, Agency and Exposition Metro Line Construction Authority (Expo) and/or Los Angeles County Metropolitan Transportation Authority (Metro) to provide a stream of tax increment funding to Expo and/or Metro for basic elements of the Downtown, Memorial Park, and Bergamot light rail stations; and, 3. Adopt the attached Resolution authorizing the issuance of Earthquake Recovery Redevelopment Project Area Series 2011 Tax Allocation Bonds (2011 Bonds) by the Santa Monica Public Financing Authority, and approving and authorizing other official action and matters related thereto. Staff recommends that the Public Financing Authority: 1. Adopt the attached Resolution authorizing the purchase and sale- of Earthquake Recovery Redevelopment Project Area Series 2011 Tax Allocation Bonds (2011 Bonds), and approving and authorizing related documents and actions. Executive Summary In 2009, the Agency, in accordance with California Redevelopment Law, adopted its Five-Year Implementation Plan for FY 2009-10 through FY 2013-14 (the Implementation Plan) to delineate the goals, objectives, programs, and estimated expenditures for its four redevelopment project areas. In preparing the Implementation Plan, the Agency prioritized certain capital improvement projects for redevelopment funding based on projections of available tax increment and debt financing structures. Given pending legislative proposals to dissolve redevelopment agencies in California, staff recommends that the City move forward immediately to establish funding or construction obligations for those redevelopment priority projects that are sufficiently developed to enter into contractual obligations. While this staff report focuses on 2 immediate actions, staff will continue to move forward on all of the remaining redevelopment priority projects, with the expectation that redevelopment will continue in its current form. Staff recommends authorizing funding agreements for the Civic Center Joint Use Project and Exposition Light Rail Stations Project, and pursuing contractual obligations in the near-term for the development of Affordable Housing, Palisades Garden Walk-and Town Square /Freeway Capping (PGW), Pico Neighborhood Branch Library, Civic Auditorium Renovation, Colorado Esplanade, Pier Infrastructure, and Fire Station 1, when appropriate. Additionally, staff recommends the Council and Agency approve the attached Resolutions to proceed with issuance of tax-exempt bonds to help finance the projects. Background On November 17. 2009, the Agency adopted its Five-Year Implementation Plan for the period of FY 2009-10 through FY 2013-14, with established goals to support affordable housing, disaster prevention and mitigation, community revitalization, commercial revitalization, and institutional revitalization. The Agency established redevelopment funding priorities to implement the programs and activities (the Projects) associated with each goal. Priority allocations totaled $283 million and were based on a variety of assumptions regarding growth in tax increment, borrowing costs, timing of borrowing, State grabs of local funds, leveraging opportunities and State law. The Agency's funding allocations for the priority Projects are summarized in the following table. 11/2009 Council RDA Priority Projects Priorities (in millions) Affordable Housing 43.6 Civic Center Planning and Design 2.5 Palisades Garden Walk and Town Square 25.0 Civic Auditorium Renovation 25.0 Civic Auditorium District Projects 21.0 Early Childhood Education Center 4.4 Expo Green Streets and Pathways 20.g Exposition Light Rail Station Enhancements 10.0 Civic Center Joint Use (Phase 1) 57.0 Civic Center District Shared Parking 25.0 Memorial Park Expansion 2.3 Pico Neighborhood Branch. Library 12.g Traffic Signal Master Plan 4.4 Freeway Capping & Bridging (Colorado/Ocean Sidewalk Widening) 2.0 Property Acquisition 27,0 Total $282.9 3 On August 10. 2010, to ensure the timely implementation and completion of the Projects, the City ahd Agency entered into Cooperation Agreement No. 9267 (CCS/RAS) for the City to carry out the Projects on behalf of the Agency, and, on January 17, 2011, following analysis of the Agency's financial obligations for the Projects, the City and Agency entered into Implementing Agreement No. 9318 (CCS/RAS) to set forth the schedule of payments to reimburse the City for costs associated with the Projects' implementation. On March 8. 2011, the Agency and Council approved an agreement with Wells Fargo Bank for a loan with net proceeds of $60 million for the purposes of financing redevelopment priority capital projects. The City also has a net balance of approximately $50 million of Agency funds that were transferred to the City in order to meet the Agency's obligations under Cooperation Agreement No. 9267. As a result, the City has approximately $110 million available for projects that are ready to move forward in the coming weeks. In addition, staff issued a request for, and identified, an underwriter for Tax Allocation Bonds that would utilize the Agency's remaining tax allocation bonding authority. If the bond offering is ultimately successful, it would provide approximately $36.5 million of additional funds for projects, bringing the total amount available within the next two months to an estimated $146.5 million. In January 2011, California Governor Jerry Brown announced his intention to eliminate all redevelopment agencies in California as part of his proposed FY 2011-2012 budget. State legislation regarding the fate of redevelopment is pending, with several proposals and bills having received varying levels of support from legislators. As of May 13, no decisive action has been taken. In light of the State challenges, it is prudent for the City and Agency to continue to pursue appropriate measures to ensure that as many projects as possible are completed according to community expectations. Discussion In the two years since adoption of the Implementation Plan, several priority redevelopment projects have achieved critical path milestones in design development, 4 community input, environmental analysis and development of construction cost estimates. A comprehensive summary of each Project's description, status and refined project costs is provided in Attachment A. There are four projects that are ready or will soon be ready to move forward with design-build contracts, two projects for which funding agreements can be established, and three projects requiring new contract authority as part of their ongoing work. Design-Build Contracts PGW is completing design development and the Pico Branch Library is completing schematic design this month. CEQA review has been completed, and both projects are ready to enter into design-build contracts. The Civic Auditorium Renovation and Colorado Esplanade's scopes of work have been sufficiently developed to enable design-build RFBs to be issued. The Civic Auditorium's RFB for adesign-build team was posted on April 29, 2011. Project Estimated Full Development Cost Palisades Garden Walk /Town Square /Freeway Capping` $ 46.1 million Pico Neighborhood Library $ 10.4 million Civic Auditorium Renovation $ 46.8 million Colorado Esplanade $ 12.4 million TOTAL DESIGN-BUILD CONTRACTS $115.7 million `NOTE: Full project cost is $49.3 million; however, $3.2 million has already been awarded for design. The proposed amounts noted above reflect the latest full development cost estimates of the four projects. These cost estimates are less. than the original full development cost estimates presented to Council in 2009, though in the case of PGW and the Civic Auditorium, the current estimated costs are greater than the RDA funding allocations made in 2009, which were initially estimated at $54 million and $55 million, respectively. For PGW, the City applied for a State Prop 1-C Infill Infrastructure grant of over $15 million, with all indications that the application would be successful based on the awards made in the first round of Prop 1-C grants. This grant program was designed to 5 provide funding for open space improvements that would serve affordable housing projects and, although the City's grant application emphasized the strong linkage that would be provided between PGW and the adjacent Village housing project, the grant application was not successful, leaving PGW underfunded. For the Civic Auditorium renovation, through its due diligence and negotiations with Nederlander, the Gity has learned that performing arts and concert venues operate with slim margins and cannot produce revenues that can fund significant capital improvements. Council directed staff to work with the Civic's financial consultant to determine if there are viable private financing strategies that could generate significant additional revenue toward the renovation. To date, strategies that have been analyzed would either yield limited funds, add to the operating deficit, require an expensive and speculative fund-raising. campaign, or require major land use changes to the Civic Center area to allow for adjacent private development to support the project. An information item transmitting this report to Council was provided on May 13. 2011. Staff struggled with the large anticipated cost associated with renovation of the Civic Auditorium and ultimately decided to recommend that the City move forward immediately with renovation of the Civic due to its priority as a community objective, its importance in providing long-term fiscal stability for the City, and the ideal timing to make the investment. More information on the considerations regarding funding the Civic Auditorium is provided in Attachment B. The current cost estimate for the Pico Library is lower than the 2009 RDA allocation because the original cost estimates anticipated subterranean parking, which is not a part of the proposed project. The Colorado Esplanade project is recommended for adesign-build contract of $12.4 million as the first priority project under the Expo Green Streets and Pathways Project, and includes the required match for the awarded Metro Call for Projects Grant of $3.3 million. In addition, the scope for this project has been increased to address providing improved pedestrian access to PGW. 6 Staff recommends that all four projects be fully funded at this time to ensure that they can move forward immediately Funding Agreements Two of the redevelopment priority projects are proposed to be completed by other entities and staff recommends that the City and Agency immediately enter into funding agreements to enable the projects to continue moving forward. The projects and the proposed structure of the funding agreements are described below. Civic Center Joint Use Project Under the Implementation Plan, $57 million of Agency funding capacity was prioritized for the CCJUP. The City's adopted Capital Improvement Project budget for FY 2010-11 included approximately $1.1 million in general funds for planning and design for the CCJUP. In January 2011, the City and School District entered into an MOU to provide for the City's reimbursement to the School District for additional planning, design; project definition work, and initiation of environmental review up to approximately $1.1 million. On April 6, 2011, the School District Board adopted the project description for the CCJUP shown in Attachment A. Staff supports the proposed description and recommends that the City and Agency authorize the negotiation and execution of an MOU with the School District for further development of Phase 1 of the CCJUP. The MOU would provide the terms and conditions for additional planning, completion of environmental review, design, entitlements, and project development and management work, and provide that upon the School District's compliance with CEQA, construction of the CCJUP may proceed. Funding would be disbursed in a stream of payments for the completion of the CCJUP. The agreement would also ensure that the District is kept whole with respect to tax increment pass-through payments. The MOU is a funding mechanism for environmental review and construction of future facilities to be identified and approved for construction after compliance with CEQA, and 7 is therefore exempt from CEQA pursuant to CEQA Guideline 15378(b)(4). The first year payment to the District under the MOU is projected to be $5.9 million. Exposition Light Rail Stations Under the Implementation Plan, $10 million of Agency funding capacity was prioritized for Exposition Light Rail Station Enhancements to fund station area enhancements such as additional platforms, crossings and station entrances. Metro is requiring each jurisdiction within the County that will receive light rail to make a three percent contribution toward the construction costs withih its jurisdiction. For Santa Monica, the estimated contribution cost is not to exceed $16.5 million. As the light rail line has been further defined, and as the City has prepared station area analyses as part of the LUCE and subsequent planning studies, the .estimated cost for stations and station area access improvements is approximately $49 million, including the City's $16.5 million contribution toward basic light rail station development in Santa Monica. Staff recommends that the Agency and City enter into an agreement with Expo and/or Metro to provide for a stream of payments over a period of no less than four years to be applied toward the basic construction of light rail stations in Santa Monica. The first payment would be drawn from tax increment revenues in 2012 and thereby would not affect the Agency's current available cash. The funding agreement would ensure that if the final construction costs for the Exposition Light Rail Line are less than currently budgeted, the City would receive a proportionate reduction in its contribution. Funding for enhancements to the basic light rail stations will be considered at a future point. Additional Obligations Afifordable Housing Under the Implementation Plan, the goal of affordable housing is to continue to facilitate the acquisition, rehabilitation and construction of residential buildings to increase, improve, and preserve the supply of affordable housing. The Agency's $50 million line of credit for affordable housing has enabled the City to invest in the production and preservation of approximately 370 affordable residences in 13 developments. In addition, the Council allocated $43.6 million from the Earthquake Project Area's non- 8 housing funds to support affordable housing. In line with this effort, staff has identified $21.2 million in acquisition, design, and construction projects and is ready to commit funds for these projects at this time. Staff is working on due diligence for the projects utilizing the remaining $22.4 million allocation and will commit the funds as each project becomes ready. Combined, the $43.6 million funding will produce approximately 126 affordable residences. Early Childhood Education Center Under the Implementation Plan, $4.4 million of Agency funding capacity was prioritized for the Early Childhood Education Center (ECEC) to supplement existing redevelopment funds of $1.163 million allocated in FY 2006-07. The ECEC is to be developed and operated by Santa Monica College (SMC) in cooperation with the City. To ensure that the project moves forward expeditiously and that the pass-through payments for SMC are sustained, staff has identified General Funds to cover the $5.63 million needed for the project; these funds will be highlighted in the proposed Capital Improvement Project FY 2011-12 budget. Pier Improvements Under the Implementation Plan, the goal of disaster prevention and mitigation supports efforts to repair, replace, upgrade or reconstruct buildings, public facilities and utilities. The Agency has supported activities such as the seismic retrofit of parking structures 1, 2, 4, 5, 7 and 8 in the downtown, the seismic retrofit and repair of Palisades Bluff, and, more recently, the seismic retrofit and renovation of the Civic Auditorium. Staff recommends the $5.63 million (previously allocated to support the construction of the ECEC) be utilized to fund the seismic and infrastructure improvements necessary to retrofit and repair the Pier. Specifically, the $5.63 million allocation would fund the following Pier Infrastructure projects: ® Pier Infrastructure Phase IV: $674,200. This project involves the reconstruction of the Municipal Pier from the upgraded timber area at Bent 41 at the high-tide line to the existing concrete-pile supported area at Bent 59, using a concrete sub- structure and timber superstructure designed to accommodate a 20 ton emergency vehicle. This section of the pier currently has limited capacity to 9 support emergency vehicles and the existing timber substructures have limited life and higher maintenance costs. • Carousel Floor and Infrastructure Repair: $841,000. This project involves replacement of the oak floor of the Carousel Building and substructure repair which include repair and/or replacement of stringers, piles and caps, relocation of utilities and relocation and reassembly of the carousel during the project. The Carousel floor is currently buckling and sinking in certain areas, potentially creating unsafe conditions for visitors. • Newcomb Deck Infrastructure: $4.1 million. This project involves constructing the recommended structural upgrades to the Newcomb's parking deck and walkway areas to support loads of 30,000 pounds for vehicles and future buildings. The Pier Infrastructure Upgrade Study, submitted to Council on May 19. 2009, examined the existing conditions on the pier and prioritized the phasing of the upgrades based on urgency of repairs, the Newcomb Deck repairs were identified as a high priority. Fire Station 7 As noted above, the Implementation Plan includes the goal of disaster prevention and mitigation to support efforts to repair, replace, upgrade or reconstruct buildings, public facilities and .utilities. Fire Station 1 (FS 1), located at 1444 7th Street, services a significant portion of the Agency's Earthquake Recovery Redevelopment Project Area. Based on a recent study of the seismic integrity of FS 1, this nearly 57-year-old facility needs to be replaced in order to comply with current ADA accessibility guidelines as well as seismic and building and safety standards, and to meet the current needs of the Fire Department. Staff recommends an allocation of $3 million to fund the development of plans and specifications for an approximately- 25,000-square foot replacement fire station featuring basic improvements such as apparatus bays, dormitories, training room, locker room, kitchen and dining facilities, storage and mechanical areas, and parking. Financing Program The financing plan for the priority projects anticipated the use of various debt instruments to maximize funding. As noted in earlier reports, City staff and consultants would analyze the projects to be financed in order to determine the financing structure 10 that best meets the Agency's needs in maintaining flexibility and reducing the overall costs of borrowing. Based on study by the Agency's financial advisor and bond counsel, it is recommended that the Agency proceed with the issuance of tax-exempt tax allocation bonds (TABs) to help fund the projects. The Agency has the opportunity to issue tax allocation bonds with expected net proceeds of $36.5 million. The Agency 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 costs. In order to provide the Agency with greater flexibility in determining the date of sale of the Series 2011 Bonds, staff is proposing to sell the Series 2011 Bonds through a negotiated sale whereby the bond underwriter is predetermined and the interest rates for the bonds are set through a process of negotiation. The Agency's financial advisor believes that a negotiated sale has the best chance of providing the lowest borrowing cost to the Agency given the relatively small size of the Series 2011 Bond issue, the absence of a competitive sale market at this time for redevelopment agency credits and the added uncertainty surrounding redevelopment due to the Governor's budget proposals. In order to provide for a negotiated sale under State law, the Series 2011 Bonds will be sold initially to the Santa Monica Public Financing Authority, who will in turn immediately sell the Series 2011 Bonds to the bond underwriters. The attached. Resolutions authorize the Agency to proceed with the issuance of the Series 2011 Bonds, with a maximum principal amount of $41.05 million, a final maturity date of June 2042, and a maximum true interest cost of 7.75 percent. After depositing $4 million in the debt service reserve and deducting $0.6 million in issuance costs, net proceeds will be approximately $36.5 million. The actual amount of proceeds will depend on the final bond interest rates, based on market conditions. The Resolutions also provide authority to execute related documents, certificates and actions necessary to complete the financing. The Public Financing Authority resolution will authorize the Public Financing Authority to purchase the Series 2011 .Bonds and to 11 immediately sell such Series 2011 Bonds to E. J. De La Rosa & Co. Inc. as representative of itself and Wells -Fargo Securities pursuant to a Bond Purchase Agreement to be entered into between the Underwriters, the Agency and the Public Financing Authority. The issue costs associated with these bonds will include bond and disclosure counsel fees, financial advisory fees, fiscal consultant and other costs not to exceed $340,000 and the underwriter's discount cost not to exceed $235,000, for a total of $575,000. The current contract with SYCR, bond and disclosure council limits compensation to an amount not to exceed $220,000. For the fees associated with this bond issuance and others anticipated in the near term, staff recommends that this contract amount be increased to $400,000. Available Current Funds and Recommended Commitments Available Funds Wells Fargo Bank Loan Net Proceeds $ 60.0 million Available Cash Assets $ 50.0 million Total $110.0 million Estimated Prospective TAB Net Proceeds'' $ 36.5 million Potential Capacity $146.5 million `NOTE: Amount is net of closing costs and funding of the debt service reserve. Recommended Commitments PGW Design-Build Contract $ 46.1 million Civic Auditorium Renovation Design-Build Contract $ 46.8 million Pico Neighborhood Library Design-Build Contract $ 10.4 million Colorado Esplanade $ 12.4 million CCJUP MOU with District (2011 payment) $ 5.9 million Light rail station agreement with Expo (payments begin in 2012) $ 0 million Pier Improvement (2011 payment) $ .7 million Affordable Housing (2011 payment) $ 21.2 million Fire Station 1 (2011 payment) $ 3.0 million Total $146.5 million 12 Alternatives Should the Council wish to fund projects other than those recommended, the alternative projects would need to be ready to establish construction contracts, design-build contracts or other contractual obligations within the coming weeks in order to take advantage of available cash and loan and bond proceeds. Other projects that could be ready to take advantage of the timing window include: ® Affordable Housing: With additional funding, the City could quickly establish loan agreements with affordable housing providers to purchase .existing apartment buildings for rehabilitation or to acquire property for new' construction. One additional affordable residence could be created through acquisition and rehabilitation or new construction for every $300,000 to $350,000 invested in affordable housing. ® Parking Structure 6: Funding could be used for the reconstruction of Parking Structure 6. The estimated cost of Parking Structure 6 ranges from $40 to $43 million, depending on the additional features that may be included, such as rear facade improvements and occupancy sensors. Staff expects to return to Council with adesign-build guaranteed maximum price for the project on June 28, 2011. Funding Parking Structure 6 with redevelopment funds could allow the parking funds that have been designated for Parking Structure 6 to be used to help pay for the some of the public parking ultimately planned for the site at 4th Street and Arizona Avenue. Additional funding for .public parking could reduce the pressures to create development value on the site to subsidize the cost of public parking. The parking funds that would have otherwise gone to Parking Structure 6 could also be used for other parking needs in Downtown Santa Monica. ® Exposition Light Rail Enhancements: On July 13, 2010, City Council supported staff's recommendations for design improvements to the Light Rail stations that would address safety and functionality. City staff could work quickly with Expo staff to identify costs for the desired betterments to the planned rail stations in Santa Monica. The City and Expo could then expeditiously enter into an agreement to fund Expo's construction of the desired betterments. Preliminary cost estimates for potential station betterments range from $20 million to $33 million. ® Traffic Signal Master Plan Phase IV: Phase IV of the traffic signal master plan covers the intersections in the Mid-City area and Arizona in the downtown. Staff anticipates that a contract of $4.4 million for the work could be awarded early next fiscal year. 13 Next Steps With Council approval, and market support for the Agency's issuance of tax allocation bonds, staff will move forward with the projects recommended in this report. In addition, staff will continue to further define and plan all of the Agency-funded priority projects. Once there is more clarity on exactly which legislative measures, if any, will be adopted by the State with respect to redevelopment agencies, staff will return to Council with an updated funding capacity analysis. While some of the recommended project commitments are greater than the original Council earmarks, it is likely that there will be sufficient funding capacity for all of the priority project allocations if redevelopment continues in its current form. A primary reason is that the original debt capacity analysis completed in 2009 anticipated that the State of California would take over $4 million per year of Agency funds. With the passage of Proposition 22 in November 2010, the State's ability to take local redevelopment funds has been curtailed. However, given the Governor's proposal to completely eliminate redevelopment, as well as the variety of alterative redevelopment proposals in Sacramento, any long-term projections of the Agency's funding capacity would be unreliable. Financial Impacts & Budget Actions It will be necessary to establish revenue budgets for the proceeds from the issuance of the Series 2011 Bonds and payment of issuance costs. Revenue and expenditure appropriation actions necessary at this time to record the sale of the Series 2011 Bonds follow: Account Name Other Financing Sources Bond Issuance Costs Underwriter's Discount Amount Account Number $41, 050, 000 17990.601003 $ 340, 000 17274.555980 $235,000 17274.555980 The following budget appropriations are necessary to fully fund the projects that will be entering design-build contracts or funding .agreements in FY 2010-11. A number of these projects have already received previous budget appropriations. 14 Account Name Amount Account Number Palisades Garden Walk & Town $ 46,098,276 0172071.589000 Square/Freeway Capping Civic Auditorium Renovation $43,749,800 0174053.589000 Colorado Esplanade $ 12,002,049 0177040.589000 Pier Infrastructure Improvements $ 674,200 New account Fire Station 1 $ 3,000,000 New account Low/Moderate Income Housing $ 13,078,475 017005010.589000 Low/Moderate Income Housing $ 3,000,000 015004911.589000 Any approved funding commitments beyond FY 2010-11 will be appropriated in subsequent fiscal years. Prepared by: Nia Tang, Senior Development Analyst Approved: Andy Agle, Director Housing and Economic Development Forwarded to Council: ~ ~~h Rod Gould City Manager ~~ Carol Swindell Finance Director Attachments Attachment A: RDA Priority Projects -Updated Costs and Status Attachment B: Civic Auditorium Funding Considerations Attachment C: Resolution of Issuance of Tax Allocation Bonds (Agency) Attachment D: Resolution Approving Issuance of Agency Bonds (City) Attachment E: Resolution Approving Purchase and Sale of Bonds Financing Authority) Attachment F: Second Supplement to Indenture of Trust Attachment G: Continuing Disclosure Certificate Attachment H: Preliminary Official Statement Attachment I: Bond Purchase Agreement 15 (Public ATTACHMENT A RDA PRIORITY PROJECTS -UPDATED COSTS AND STATUS -MAY 2011 ~~~ ~ r RDA Pnoniy P"rojects ' r J ~~ PrgecLDescr[pgon " ~~' r ~ Project Status `~ ~ Nov'2009 ~ ~ Revised PfojecL: .; ~,,,q :. e. ... ..: .~ ,~ v..oc. ~.~ ..~ ~ ~ a; ... ... ~ Allocabon . . :'.Costs. ~:. ...r:. ~. Palisades Garden The Palisades Garden Walk and Town Square will Following a competdive bidding process the City Council 25,000,000 47,048,276 Walk (antl Town create seven acres of park space bountled by contracted with James Corner Field Operations totlesign Square) Inlerstatel0 and Olympic Drive; City Hall and Ocean the parks. An extensive wmmunity engagement process Avenue. A central component of the Civic Center incultling several community workshops was also Specifc Plan (CCSP), these parks will provitle a undertaken. Staff anticipates going to Couricil in June critical link between the Civic Center, Palisades Park, 2071 for approval of design development plans antl the Pier and Downtown. awartl of a tlesign-build contract. It is Anticipatetl that atltlitional funding, above the $26 million in RDA funtls prioritized, will be neetletl to fully realize this project. This project is on-schetlule: Anticipated Conslmilion Start: early summer 2012. Anticipated Completion: fa112013. :Freeway Capping & A key recommendation of the Civic Center Spec'dc In January 2010, the City contracted wdh AECOM to 2,000,000 2,260,000 Budging (Ocean Plan was to explore options for capping anumber of complete afeasibilily stutlyof freeway capping options,. Sidewalk - different segments of Interstate 70. Cappstl areas including cost estimates. Based on the results, the Witlening) '. would create new lantl for open space, parks, and immediate priority is the consWCtion of a limitetl freeway pedestrian connections between Downtown and the capping and the widening of the sidewalk ai Ocean - Civic Center Avenue to provide better access to the new Palisades Gartlen Walk. Contract awartl is anticipated in June 2011, final design anticipated in mid 2012. Anticipatetl ConsWCtion Start: late 2072. Anticipated Completion: 2073-2074. May 24 Staff Report Recommends Footling the Palisades Gartlen Walk & Town Square, antl the Ocean Avenue Freeway Capping Component in the near-term. Civic Auditorium This project involves the design antl renovation of the Following a Request for Qualifications from non-pro&t 25,000,000 46,749,800 Renovabon historic Civic Autlitonum. Funds will support seismic and/or for-proft entities interested in participating in a and accessibility upgrades to the lantlmark huilding as public/private partnership for the use antl programming of well as some upgrades to equipment (lighting, sound, the Civic Auditorium, the City Council authorized the City stage) antl builtling systems (i e, HVAC, acoustical; Manager to negotiate an agreement unth the Nededander electrical). Organization in September 2009. On March 2011, Council approvetl terms of the Nederlander agreement 'Staff issued a request for bitls for constmcgon, antl plans to go to Council in June 2011 to awaN aconsWCtion wnUact. Anticipated Constmction Stau: falNrvinler 2012. Anticipated Completion: summer 2014. May 245ta9Report Recommends Funding forme Civic Auditorium Renovation in fhe near-term. Pico Neighborhootl An 8,300 square fool neighbomootl library will be built After issuing a Request for Proposals for the design, the 72,800,000 t0,400,ODD. Branch Library in the Pico neighborhood at Virginia Avenue Park, on City executed a contrail wdh Koning E¢enberg the wmer Clovefield antl Pico Boulevards The ' Architecture in June 2010. An uptlated sde survey antl an ' library willerihance existing park amenities, including geotechniwl report were completed in 2010, and four the weekly Fanners Market, Commundy Center; Teen communty workshops were held to gather input on the .Center; antl Park Center euiltling. new branch library. A schematic design is expected to be complete by me end of FY 2010.2071. Anticipate going to Council idJune 2011-for awartl ofaconsWction contract. Anticipatetl Construction Start: 2012. Anticipatetl Completion 2013. May 24 Staff Report Recommends Fundi ng forme Pica Neighborhood Branch LI62ry in the near-term. Affordable Housing _ Fgntls for affordable housing activdies (primarily Projects have been itlent~ed. Pepping tlue tliligenge. 43,600,000 63,934,950 through acquisftion and predevelopmen[donstruction or rehabilitiation loans orgrants tonon-profiC developers. Will fund an estimatetl 126 affordable .housing units. Addiliorially, as notetl in the' Implementation Plan,lhe Agency tletlicatstl all of the Downtown Project Area's tax increment net of the 'housing set aside;debt and atlministretive costs to increasing, improvingand preserving the supply of affordable housing inane City. However; given the requirement to repay the Generel FUntl for the$20.3 million debt associated wdh Downtown Project Area promissory notes, starling in FY 2010-77, the available tax increment from the Downtown Project Area to support affordable housing will be insumcient. To maintain the commitment of the Downtown Project Area, tt is recommentletl that funds of $2D.3 million from the Earthquake Project Area be sllocatetl to supportthe Implementation Plan's affordable housing : 'goals. This 520.3 million is Anticipatetl to preserve of . builtl 68 residences antl will be included in the Ciys capital improvement project butlget in future years. May 24 StaSReport Recommends Footling of $21.2m forAUordable Housing in the near-term. ATTACHMENT A RDA PRIORITY PROJECTS -UPDATED COSTS AND STATUS -MAY 2011 'r'~ RDA Pnonty Projects " ~ Profectbescn tron ~ ~ ~ ~ Pr ect Status ~ Nov 2009"~~~ Revised Pro7eck` p • r ~ . ~.. ; ~ g . ., ..: .~ AllocaLOri. ~~; ~ ':Costs:. ...~ ~ Civic Center Joint The CCJUP. seeks to connen the School Disinct's ~ In June 2070, Council allocated $t 084 million in General 57,000,000 57000,000 Use Project long-range plan to improve the Santa Monica High Fund revenue to the CCJUP, which reduced total Agency School campus with revitalization efforts underway in funding to $55.976 million, stnicWred as a stream of the civic center. The CCJUP will expand recreational annual payments. In October 2070, Council authorized and cultural facildies that the public can access when staff to negotiate a Memorandum of Understanding with not needed by the high school. The improved joint use the School DisMC[ to spend the initial funding on facilHies will include a full gymnasium that will include planning, design; and preliminary environmental review basketball and volleyball courts; muNipurpose rooms on the project. Currently, the School District is moving far dance or yoga classes, restrooms, showers, forwaM with technical studies for environmental review dressing areas, and spectator acwmotlations. The and design, and has finalized a project description that project will also resurtace the existing football feltl has been approved by the School District Board. City staff wdh synthetic turt and may replace eMerior courts, or has worked with District staff to develop the terms of an improve lM1e pool orfleltl spectator accomodalions. agreement far the remaining $55.9 million allocation. This Atltlitionally, the CCJUP will expand cultural anivities May 24 staff report recommends authorizing stag to by adding restrooms, dressing rooms, storage areas negotiate and execute that agreement and begin for props and equipment, stage IighlinginfrasGuclure, disbursing the stream of payments. and backstage enhancements for the Greek theater. May 24 Staff Report Recommends ExecuGh9 the MOU with the School District and allocating $5.em for the firs! years payment. Exposition Light Through discussions wHh the Ezposflion Rail Staff is exploring funding such as joint development 10,000,000 49,288,577 Rail Station Authordy, City staff now haveabetter untlerslantling opportunities, transit fees, and grant funding where Enhancements of required costs, which are higher than anticipated. possible. Final design is anticipated in late 2011 Improvements to facilitate the incorporation of the Constriction anticipated in 2012-2015, depending on Expo Slabons Downtown, on 17th Street, and al Expo schedule. The following enhancements for each Bergamont; transit plazas, second entrances, bike statioh; reviewed by Council on July 73, 2010 Aprilg2, station faciliffes; side plaffonns, and plaza 2011, have been identified as priordies for safety and improvements, where applicable. Station "function: enhancements for the Downtown Slalien inlcutle Downtown access for transit and bike ped: necessary site circulation improvements, an expanded • Downtown Station Access - Fealign arid improve the 4th plaza and a second entrance to the station on 4th Street off-remp to enable circulation around the Street. Enhancements at the 17th Street Station Downtown Slalion and provide access to TOD sites include converting Expo's planned surtace parking lot • Gateway Plaza into a Transit Hub and Plaza Shuffle; and Bus Stop,' Bergamot Station access to Bergamot Arts Center: and adding a Bike Center, sewntl entrance, rail • Second pedestrian crossing crossing, and a roadway reconfiguration: • Side platforms Ehhancements at the Bergamot Statiodinclude side Memorial Panc{access for bus, bike and ped: platforms with a second entrance, atltlilional rail • Transit Transfer Plaza"- crossings for improved access, aBike Center, and • Second Entrance at west end of stations improvements to the Station Plaza wffhin the The revised total project costs includes a required Qty Bergamot Arts Complex. match of $76.5m. May 24 StaHRepoR Recommends Executing an agreement vAth Expo to coverthe City's required $76.5m contribution. Payments would not start un6720tt. Expo Green Streets ConsWCtion of the Exposition Light Rail Transtt (LRT) Staff issued a Request for Quaycations (RFO) and then 20,900,000 58,667,809 and Pathways is scheduled to begin in Santa Monica in 2074. As the a Request for Proposals (RFP) for a consultant team to Expo LRT project is more fully designed and as the '. develop criteria far integrating the Expo LRT; and design City has conducted thorough analysis, it has become: '.a downtown station plaza antlan "Esplanade" along clearer what atltlitional station design and wnsWCtioh ' Colorado Avenue. In Febniary 2010, ffie Council awarded projects will be needed for optimal integration The a contract to Cityworks Design. Planning concepts and project has been refined and tlescibed as four sub- project ident~cation are complete, and were reviewed by projects Council on April 12, 2011: There are four sub- . components to the overall project, described below. Colo2do Avenue After cimula8'on and linkages analysis, stafrexpanded Stafris prepadnga revised RequestforProposais based 72,402,046 Esplanande the Esplanade Project to include the intersections of on the expanded scope. The five films that have already Colorado with Main St. and Second St.; Main St. been selected (or the Short list will receive the RFP and Bodge sidewalk improvements; enhancements to the bids for construction will be recieved shortly vies! side of Ocean Ave. from the Pier to Moomaf Ahiko to provide pedeSMan access fmm the Pierand Palfsades Padc to Palisades Garden Walk; and adjacent iMUence areas including the north side of CO/o2do Avenue between 4th antl5th Street, 4th Street between Colorado and the 4th Street bridge, and linkages fo Ocean Ave. north of Colorado and to The Pier May 24 Staff Report Recommends allocating $72.4m to spend on the Colorado Esplanade in the near fens. Ofher components will occurin the futur e. Colorado Avenue Catenary system betterments; Three crossings on Final design anticipated in late 2073; COn5tNCtion 9,378,352 Integre6on Coloredo; Ped lights, curt extensions and trees; anticipated in 2075. Landscaping, safety LED and reflectors; artist fencing; Silva cells fornamow sidewalk tee installation; Sa/ety enhanced paving treatment for parking lane. I Bike Nefwork These funds ale needed to make necessary $1.2m forbike lanes and wayfintling can be committed in 5,237,420 Improvements circulation improvements fo minimize conflicts with FY 2077-2012. bikes, petlestnans and buses at the future Expo Downtown Station. ATTACHMENT A RDA PRIORITY PROJECTS -UPDATED COSTS AND STATUS -MAY 2011 ~` ~ ` k6A Pnonty Projects j r ~ ~ protect descnQfion ~ ~ ;" r~~ ProJeck Status Novi2009 ~. ~~ Revised PrajecE ` ~cu r ~.,. cm. k ti .:..: ..~ ..... ~ ., r; :: ~: ~ s, .:..~ ~ ..:~.; .. ~ Allocation°> : .. ~ FPets > .... Downtown Ekpo 4th St. brdge wldeningend pedesMan rmprovements; Adtlrhonal Nnding forthls project is requested fo cover 31,655,988 Circulation 4th St. off-ramp, 7th Street bridge bike antl pedestrian the Pierbike bridge, schemaL'c desing and engineering Enhancements improvements; antl Pierbike bridge. tlesing/tlocumentaticn for the 4th street etldge Improvements and 4th Street pff 2mp. Pier Improvements The Pier is in need of several repairs antl upgmdes that are consistent wAh thetlisaster prevention and mitigation goals of the Earthquake Recovery Retlevelopment Project Area. The three subprbjeclslisted below describe the necessary improvements. Pierlnf25tructure As part of the PieYS phased infrdstruclure While a recentinspechon indicated that none of the ofr 0 674,200 improvements program, the next phase to complete is shore piles on the Municipal Piershowed damages Phase IV- the reconst2cbon of the Municipal Pier requiring immediate attention, emergency vehicles from the upgreded timber area at Bent 41 at the high- exceeding 20 tons cannot be supported in this area tide line to the existing concrete-pile supported area without the femporery intervenG'on of steel plates. Wodc at Bent 59 using a concrete sub-structure and timber will also include utility relocation, design, fabdcation and superstructure designed to accommotlate a 20 tan installation of new udlity supports. emergency vehicle. May 24 Staff Report Recommends allocating $700k to spentl on the Pier Infrastructure Improvements in the neat-teml. Othercomponents will occur in the future. Carousel Floor and Carousel Floor Replacement and substructure repair The Carousel flooris buckling and sinking in areas, 0 84 f,000 SubsWCfure will involve replacement of the oak floor of the potentially creaG'ng unsafe conditions for visitors. In Carousel euiltling antl substructure repair addition, a preliminary review of the substructure untler the floorshows evidence ofdeterioration. It mayinvolve the repair and/orreplacement ofsMngers, repair and/or replacement of piles and caps, relocation of utilities, and relocation and reassembly of the carousel tludng the project. Newcomb Dect The Newcomb Deck involves the structure/ upgrades The Pier/n(restructure Upgrade Study, submitted to 0 4,048,446 Infrastructure ofthe Newcomb's deck and walkway area. Council on May 19, 2009, ezaminetl conditions on the Newcomb Pier and recommended structure/ upgrades to the Newcomb's parking deck and walkway areas that would accept loads of 30,000 pounds either Nrvehicles or for future buildings. This study prioritized the phasing by year o/the upg2tles based on urgency of repair. Fire Station 7 Design and builtl a fre station in Downtown.. In preliminary planning phase. (Preliminary cost 0 53,000,000 (Preliminary cest estimate). estimate). However, due to seimic problems with the existing fre station, this project is a high priority and will be expetlRed to the extent possible. May 24 Staff Report Recommends allocating $3m in the neaFtenn. ~,~ r r ~r Pfofed~NOtAd~res~ed by AaLOps.irlthe May grf Staff Report . .: .. .. .a^ ......, :~ .. :..?:. .... .... ,.... .g. Traffic Signal Amufti-phased upgrade of the City's traffic signal < Cunently finishing the design if Phase IV; construction 4,400 000 4,400,000 Master Plan technology wi0allow forcentralized management of contract anticipatetl in FY 2011-2012 the Cfly's 1fi0 signals in teal time to handle incidents, special events and unique timing needs: Previous phases were completetlih poor years: This funtling is. for Phase lV which includes the Mid City area. Civic Center The Civic Center Specific Plan (CCSP) resultetl in Funtls have been spent on staffing, planning and design 2,500,000 2,500,000 Planning & Design plans, concept designs; antl studies tot various project work for Civic Center area projects, inclutling feasibility . wmpondnts of the Civic Center, especially public analyses, circulation studies, freeway capping antl open spaces cultural faciliLes antl renovation antl bridging analysis, and initial staffing costs. upgrades to the Qvic Center AutlROrium: These Euntls are tletlicatetl to refning the CCSP goals by funtling plans, concept designs, and studies for various project components of the Civic Center ' Early Childhood 'The Civic Center Specifc Plan (CCSP)calls forthe After delays tlue to uncertainty of siting plans fora 4,400,000: 0 Education Center orealion of art early dhildfiootl education center museumlcultural facility, staff has resumetl negotiations (ECEC) ld provide a teaming environment for Santa on an MOU with SMC. The Center will likely be located in Monica College (SMC) students and a childcare facility the area tlesignaletl in the CCSP (leaving an opportunity for the civic center: These funds will cover site fora cultural facility in place while allowing the ECEC improvements(only) to allow SMC to construct the project to progress). The ECEC will likely be designed ECEC at the Civic Center antl built by SMC. Note: Tnis project will now be coveretl by the general fund Civic Auditorium These open space and culture) facility projects will After opportunities for an EIi Broad museum fell through, 21,000,000 21,000,000 District Projects) `occupy the block bounded by 4th, Main, Pico, antl staff issued a notice of opportunity to other potential Civic Center Drive. The projects include a new 5.6 museum founders antl is actively exploring possibiltties. acre park and a potential cultural facility with Design and donstucion of open space improvements on slreetscapes and pedestrian linkages designed to the Civic Auditorium Campus are sequenced to occur complement the Civic Auditorium Renovation antl the following the use of portions of the site for constnrcion ECEC.(tlescribed below). staging for the Civic Autldodum Renpvatiogfor the Early Childhood Education Center, and for interim parking use during the cansWction of downtown improvements. ATTACHMENTA RDA PRIORITY PROlECiS -UPDATED COSTS AND STATUS -MAY 2011 ~,~ a ~ ~ ' ~. ~ Nov 2004 ~.~ t;. sect P{ojec vi R,qA Pnonty pro/ cts , Pro/eat Descnption ~ Project Status ~ ~ ' ° ,~~ ~ ~ ~ .; . , ~ . a .... .., :. AIIoc ation .. Cosfr ,? . . . ,.:... .. ..,.~::U ..... .. ...~: .. .. .... ;, .. ...~ .. ; .,. ... ."... .~.. .. :?; .. ~Sharetl Parking Efforts le capitalize on sharedparking opportunities This project ispn hold. The interim parking plan requires 25,000,000 25,000,000 ' -'are a priorRy as Civic Center projects proceetl with full use of the cunent surtace parking area until 2016. planning antl tlesign. A traffic circulation stutlywas This project is also gentling further assessment of completed to consitler optimal circulation based on downtowri circulation parking neetls when Expo and the the Civic Center Speck Plan build ou[ and phasing, repurposetl auditorium are operating while planning for effective Civic Center circulation in relation to the Downtovm as well. This would fund a maximum of of 7,350 subtertaneanparking spaces at one or more locations in the Civic Center, 'rf they are needed Memorial Park This project invovles a Master Plan for Memorial Park, The inHiatien of the park master plan process is pending 2,300,000 2,300,000 Expansion :Including ident~cation of replacement sde for the Exposition Rail Authority decisions regarding the new light Communky Maintenance activities occupying the 2.9 rail ahgnmenl, which includes a station next to Memorial acre former Fisher Lumber stte; environmental review, Park on Colorado. It is likely that the Fxpo project will '.and design of Phase I park improvements. need tc "lake' of one to two of the buildings on this site and eliminate street parking on one side ofCOlorado Given the significant impacts this property"take°would ' have on the Colorado Yards, public parking; options fof park expansion antl the importance of properly linking the park to the station, the planning for the Memorial Park Expansion is on holtl until a resolution is reached Civic Center-Cafe This Civic Center outtloor cafe for Palisades Garden Through the planning and design stages to tlate for the 0 3,916,250. for Palisades Walk (PGW) is called for in the CCSP. Apark- PGW, community members antl Council have reiterated Garden Walk Park adjacent restaurant was indptletl for this location as the need and desire for a park grientetl cafe. An outdoor part of the CCSP cafe will be locatetl near ariexisting restaurant (Chez Jay),currently untlera monthly lease agreement wdh the City; that will integrate into and serve the park. An analysis is uhtlertvay to determine the market need antl - '. physmal parameters of a successful cafe. The City will need to solicit a padner/operator forthe cafe and there is astrong likelihootl that the City will need to contribute to 'the design antl constmction of a restaurant kitchen and cafe slmdure. Property Continuation of the Downtown Parking Strategic Plao- Aomplete. In November 2010, the Agency purchased a 27,000,000 27,000,000 ACgwsmon ' through opportunities for acquisdion of appropriate '. key property at 4th Street and Anzona The parcel properties. facilttates land assemblage on a key Downtown city black. The property is being paid forthropgh an established stream of payments, not included in totals here. `~TQ7AL Cj15H€LOW NEEDS ar ~~r~ ~ r ~ r ~ ~ ~r ~ `292900000 ~ 48R 019308 , ~ -r ~ ;, Attachment B Santa Monica Civic Auditorium Renovation History The Santa Monica Civic Auditorium, designed by renowned Los Angeles architect Welton Becket, opened in 1959. The facility was designated a City Landmark on November 12, 2001. That decision was upheld by the City Council at its April 9. 2002 meeting. Over the course of its history the Civic has been the subject of a number of studies as the City grappled with its future such as the June 2004 Urban Land Institute report. Community Vision The Santa Monica Civic Auditorium has also been an important component of a number of recent community planning initiatives. Each of these processes confirmed the community's desire to see the venue brought to life as a focal point for large musical and cultural performances. They include: ® Civic Center Specific Plan (CCSP), June 2005, defines the "Civic Auditorium District" with the Civic Auditorium as its cornerstone, to be bordered by open space as well as an early childhood education center and additional cultural facilities. The CCSP identifies the need to make improvements to the Civic Auditorium as a venue for large musical and cultural performances as well as exhibitions and community gatherings. ® Creative Capital, approved by City Council on Februarv, 27, 2007 committed the-City to a cultural use of the Civic Auditorium in line with the community's vision for the facility. That vision includes the need for significant upgrades to the building and its technical equipment in order to support its repurposing from primarily an exhibition hall to primarily a cultural venue or performing arts center, highlighting concerts, theatrical shows and other special events. ® The Santa Monica Redevelopment Agency's five year implementation plan, adopted November 17. 2009, includes an allocation for Civic Auditorium. During the extensive community process that the City undertook to develop that plan, investing in the renovation of the Civic Auditorium emerged as the key cultural priority. Renovation Once renovated, the Civic Auditorium would become a state of the art facility while retaining notable characteristics such as the facade and the hydraulic floor. Anticipated improvements include a flexible seating system, enhanced technical capacity (sound, lighting, .projection, etc.) and improved public spaces such as the lobby and concession areas. The renovated facility would be able to host a full range of events from concerts to award shows, including corporate events and consumer shows. Timin The confluence of the economic downturn's impact on construction costs and the option of RDA funding create a unique opportunity for the renovation of Civic Auditorium. The City 1 Attachment B recently issued an RFB for adesign-build team for the renovation and close to two hundred interested parties attended the recent job walk. Interest in the project is extremely high and will undoubtedly ensure a highly competitive and responsive process. If the City were to undertake the renovation in the future it would likely come at a much higher cost, with fewer responses from highly qualified teams. Return on Investment ® City-wide Economic Impact: The City can anticipate a substantial increase in economic activity, primarily in the hospitality sector, as a result of repurposing the Civic Auditorium due to spending by an increased number of attendees at an expanded range of Civic Auditorium events. Strategic Advisory Group, the City's consultants for this project, did an analysis of the projected economic impact of a repurposed Civic Auditorium which shows an anticipated increase of approximately 95,000 attendees in year seven. of this proposed agreement over 2010, with an estimated increase of almost $18M in combined direct spending and indirect spending. A renovated Civic would also support the planned development in the area by providing confidence in its long-term vitality and sustainability and by attracting tens of thousands of visitors, many of whom will stay overnight. ® Enhanced Asset: Renovation of the Civic Auditorium would result in the enhancement of a significant asset for the City and the creation of an outstanding facility for the community. If there were a dramatic change in the concert and performing art industries, such-that the proposed business model failed, the City would still own a first rate facility that could serve other community needs, such as supporting the visitor industry through expanded convention and consumer shows. Were the Gity to choose to return to programming the facility at that point, with a mix of events and consumer shows, it is likely that the upgraded facility would be more .competitive and attract events with larger audiences and a higher return. Partnership Option The proposed Exclusive Presenter/Joint Venture model invests Nederlander, a top industry promoter, in the success of the venue and ensures that the City shares in that success. Nederlander, established almost 100 years ago, is one of America's premier entertainment companies with the ability to secure top headline entertainment based on long-term industry relationships. Nederlander is one of the primary theatrical producers and theater operators on Broadway, whose production list includes shows such as Lion King, Wicked, Rent, Avenue Q, Stomp, Riverdance, Evita and Chicago, among many others. Nederlander also has a major concert programming division that works with a broad array of talent across all musical genres, including such superstars as Sting, Bruce Springsteen, and Bob Dylan, as well as Erykah Badhu and Kristin Chenoweth. Further they have extensive experience working with municipalities and other government entities as well as with landmark facilities. In California, they have agreements to operate or program the Greek Theater in Los Angeles, the Santa Barbara Bowl, the Grove in Anaheim, the San Diego Civic Theater, and 2 Attachment B the Civic Auditorium and Center for the Performing Arts in San Jose. Nederlander's standing in the industry and status as an international promoter are critical to repositioning the Santa Monica Civic Auditorium as a destination venue for music and theatrical productions; it is not likely the City can achieve this on its own. Proposed Business Model • Event Mix: Under the proposed model, once renovated, the Civic Auditorium would host a mix of concerts, theatrical performances, film screenings, Broadway shows and special events, which would include a broad range of activities from award shows and movie premieres, to select corporate events. It would also continue to host Stairway and the Santa Monica Symphony, along with a limited number of other popular Santa Monica charitable and community events. • Conservative Baseline Scenario: The various financial scenarios developed to analyze the proposed business model included both pessimistic and optimistic options, along with the baseline. Given the volatile nature of the entertainment business, in developing the number of events a renovated Civic Auditorium might host under a baseline scenario, all parties agreed to take a conservative approach. This was confirmed by a range of consultants that reviewed the baseline. • City Subsidy Comparison: Although in all scenarios modeled the venue would still require an annual subsidy ranging from $0.6M to $1.7M, the projected cumulative subsidy over the same time frame under a "status quo" scenario, where the Civic Auditorium would continue to operate as it currently does, is over $32.9M. Repurposing the Civic under the proposed business model is projected to result in a significant subsidy reduction of $18M to $24M over the ten year term. (Additional information on the business models and scenarios is available in the March 8. 2011 staff report on the proposed agreement with the Nederlander Organization.) Summary of Projected pity Subsidy over 10 Years Status Quo ~.% v.,~:a. ~.'~„-~^'.'"'.~..;,~.mr5 $32,903,166 '°~E t~=~~~"'®"'®7 $14,702,111 Very Pessimistic ,.~.-U~~r.;:~„~u:;,,»~~-, $13,998,931 Pessimistic - ~~~-~~~=='3: $12,196,255 Base '-'~~~-~~%-~^~_"' $8,891,074 Optimistic E,,. ~ y.-,~,;,:~_.:-.,, $8,697,458 Very optimistic 3 Attachment B Alternatives ® Status Quo: The City Council could choose to continue to operate the Civic Auditorium as is, presenting primarily consumer shows. However the projected deficit would continue to mount, reaching $32.9M over the next ten years. The facility would also still require major infrastructure improvements to address ADA accessibility and retrofits for earthquake safety at an estimated cost of $15M to $20M. ® Mothballing the Facility: The Gity Council could choose to simply close the Civic Auditorium until such time as an alternative funding source for the necessary improvements is identified. Annual costs associated with .shuttering the facility are estimated at $1.7M if the core staff identified in the proposed business model were retained and assigned other responsibilities. Or $0.25M for such items as insurance, security, and utilities, if the City were to lay-off all Civic Auditorium staff and close the building. ® Development of Adjacent City Land: Another possible measure to fund the renovation of the Civic is for the City Council to capitalize the development value of the Civic parking lot. Currently, the Civic Center Specific Plan designates the Civic parking lot for a new park, cultural uses and the Civic Center Early Childhood Education Center. Rather than using the properly for park and cultural uses, the City could make the parking lot available for development in order to help fund the renovation of the Civic. If the City kept a portion of the lot for the Early Childhood Education Center, up to five additional acres could be made available for development. Depending on how much of the lot was made available, the timing with respect to market conditions, and the requirements imposed on the development, the City could generate significant income to support the Civic renovations. For example, if only one acre of the lot was made available for development, market timing was poor and many requirements were placed on the development, the City might generate as little as $6M. If the full five acres were made available, the real estate market had regained its full strength, and requirements placed on the development were modest, the land could generate as much as $80M. 4 ATTACHMENT F SECOND SUPPLEMENT TO INDENTURE OF TRUST Dated as of June 1, 2011 by and between the REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA and Union Bank, N.A. , as Trustee Relating to $[Bond Amount] Redevelopment Agency of the City of Santa Monica Earthquake Recovery Redevelopment Project 2011 Tax Allocation Bonds DOCSOC/t 481488x4/200120-0004 TABLE OF CONTENTS SECTION I. Supplement to Bond Indenture ............. SECTION 2. Attachment of Exhibit C ...................... SECTION 3. Partial Invalidity ................................... SECTION 4. Execution in Counterparts .................... SECTION 5. Governing Law ..................................... Appendix A Exhibit C to Indenture -Form of Bond i DOCSOC/ 1481488v4/200120-0004 SECOND SUPPLEMENT TO INDENTURE OF TRUST This SECOND SUPPLEMENT TO INDENTURE OF TRUST (this "Second Supplement"), dated as of June 1, 2011, is by and between the REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA, a public body corporate and politic duly organized and existing under the laws of the State of California (the "Agency"), and Union Bank, N.A. (formerly known as Union Bank of California, N.A.), a national banking association organized and existing under the laws of the United States of America, as trustee under the hereinafter defined Bond Indenture (the "Trustee"); WITNESSETH. WHEREAS, the Agency is a public body, corporate and politic, duly established and authorized to transact business and exercise powers under and pursuant to the provisions of the Community Redevelopment Law of the State of California, constituting Part 1 of Division 24 of the Health and Safety Code of the State of California (the "Redevelopment Law"), including the power to issue bonds for any of its corporate purposes; and WHEREAS, a redevelopment plan for the Santa Monica Earthquake Recovery Redevelopment Project (the "Redevelopment Project") has been adopted by the Agency pursuant to all applicable requirements of the Redevelopment Law; and WHEREAS, the Agency has .previously issued its Earthquake Recovery Redevelopment Project 2006 Tax Allocation Refunding Bonds, Series A and its Earthquake Recovery Redevelopment Project 2006 Taxable Tax Allocation Refunding Bonds, Series B (collectively, the "2006 Bonds") pursuant to an Indenture of Trust and First Supplement to Indenture of Trust, each dated as of April 1, 2006 (collectively, the "Existing Indenture") between the Agency and Union Bank of California, N.A. (now known as Union Bank, N.A.), as trustee (the "Trustee"); and WHEREAS, in order to finance redevelopment activities of the Agency in or of benefit to the Project Area the Agency has determined to issue hereunder its Redevelopment Agency of the City of Santa Monica Earthquake Recovery Redevelopment Project 2011 Tax Allocation Bonds, in the principal amount of $[Bond Amount] (the "2011 Bonds") on a parity with the 2006 Bonds pursuant to the Existing Indenture and this Second Supplement, all as provided herein; and WHEREAS, the 2011 Bonds will be payable from Tax Revenues (as herein defined) on a parity with the 2006 Bonds; and WHEREAS, the Agency has certified that all acts and proceedings required by law necessary to make the 2011 Bonds, when executed by the Agency, authenticated and delivered by the Trustee, and duly issued, the valid, binding and legal special obligations of the Agency, and to constitute this Second Supplement a valid and binding. agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of the Second Supplement have been in all respects duly authorized. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto do hereby agree as follows: SECTION L Supplement to Bond Indenture. In accordance with the provisions of Section 7.01(c) of the Bond Indenture, the Bond Indenture is hereby amended by adding a DOCSOC/1481488v4/200120-0004 supplement thereto consisting of a new article to be designated as Article XL Such Article XI shall read in its entirety as follows: ARTICLE XI 2011 Bonds Section 11.01. Definitions. Unless the context otherwise requires, the terms defined in this Section 11.01 shall, for all purposes of this Article but not for any other purposes of this Indenture, have the respective meanings specified in this Section 11.01. All terms defined in Section 1.01 and not otherwise defined in this Section 11.01 shall, when used in this Article XI, have the respective meanings given to such terms in Section 1.01. "Article XI" means this Article XI which has been incorporated in and made a part of this Indenture pursuant to the Second Supplement, together with all amendments of and supplements to this Article XI entered into pursuant to the provisions of Section 7.01. "Bond Year" means the one-year period beginning on July 2 in any year and ending on the next succeeding July 1, both dates inclusive, except that the first Bond Year shall begin on the Closing Date and end on July 1, 2012. "Closing Date" means the date on which the 2011 Bonds are delivered to the Original Purchaser. "Continuine Disclosure Certificate" means that certain Continuing Disclosure Certificate relating to the 2011 Bonds executed by the Agency and dated the date of issuance and delivery of the 2011 Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. "Costs of Issuance" means all items of expense directly or indirectly payable by or reimbursable to the Agency relating to the authorization, issuance, sale and delivery of the 2011 Bonds, including but not limited to printing expenses, rating agency fees, municipal bond insurance and surety bond premiums, filing and recording fees, initial fees, expenses and charges of the Trustee, and its counsel, including the Trustee's first annual administrative fee, fees, charges and disbursements of attorneys, financial advisors, accounting firms, consultants and other professionals, fees and charges for preparation, execution and safekeeping of the 2011 Bonds and any other cost, charge or fee in connection with the original issuance of the 2011 Bonds. "Second Supplement" means the Second Supplement to Indenture of Trust, dated as of June 1, 2011, by and between the Agency and the Trustee, as the same may be amended from time to time in accordance with the terms of the Bond Indenture. "Interest Payment Date" means January 1, 2012, and each July 1 and June 1 thereafter so long as any of the Bonds remain unpaid. "Ordinal Purchaser" means collectively E.J. De La Rosa & Co., Inc., and on behalf of itself and Wells Fargo Bank National Association, as the initial underwriters of the 2011 Bonds. "Participating Underwriter" has the meaning ascribed thereto in the Continuing Disclosure Certificate. DOC SOC/ 1481488v4/200120-0004 "Bond Indenture" means the Indenture of Trust, dated as of April 1, 2006, by and between the Agency and the Trustee as amended to date and, as the same may be amended from time to time in accordance with the terms thereof, including, without limitation, as amended and supplemented by the Second Supplement. "2011 Bonds" means the Bonds which are authorized and issued under Section 11.02. "2011 Bonds Costs of Issuance Fund" means the fund by that name established and held by the Trustee pursuant to Section 11.07. "2011 Bonds Redevelopment Account" means the account by that name established and held by the Trustee in the Redevelopment Fund pursuant to Section 11.07. "2011 Bonds Reserve Account Subaccount" means the subaccount, by that name established and held by the Trustee pursuant to Secfion 11.14. Section 11.02. Authorization of 2011 Bonds. The 2011 Bonds are issued as Parity Debt in the aggregate principal amount of Dollars ($[Bond Amount]) under and subject to the terms of this Indenture and the Redevelopment Law, for the purpose of providing fiords to finance redevelopment activities with respect to the Redevelopment Projects. This Indenture constitutes a continuing agreement with the Owners of all of the 2011 Bonds issued hereunder and at any time Outstanding to secure the full and final payment of principal of and premium, if any, and interest on all 2011 Bonds which may from time to time be executed and delivered hereunder, subject to the covenants, agreements, provisions and conditions herein contained. The 2011 Bonds shall be designated the "Redevelopment Agency of the City of Santa Monica Earthquake Recovery Redevelopment Project 2011 Tax Allocation Bonds". Upon the execution and delivery of the Second Supplement, the Agency shall execute and deliver 2011 Bonds in the aggregate principal amount of $[Bond Amount] to the Trustee and the Trustee shall authenticate and deliver the 2011 Bonds to the Original Purchaser upon receipt of a Request of the Agency therefor. Section 11.03. Terms of 2011 Bonds. The 2011 Bonds shall be dated as of the Closing Date, and shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof and shall be subject to the book entry system provisions of Section 2.11. The 2011 Bonds shall mature on July 1 in each of the years and in the respective principal amounts, and shall bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) which is payable on each Interest Payment Date in the respective amounts, as set forth in the following table: 3 DOC SOC/ 1481488v4/200120-0004 Maturity Principal Interest (July 1) Amount Rate Interest on the 2011 Bonds shall be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) a 2011 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 2011 Bond is authenticated on or before the first Record Date with respect to the 2011 Bonds, in which event interest thereon shall be payable from the Closing Date, or (iii) interest on any 2011 Bond is in default as of the date of authentication 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 on each Interest Payment Date to the persons in whose names the ownership of the 2011 Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date. Interest on any 2011 Bond which is not punctually paid or duly provided for on any Interest Payment Date shall be payable to the person in whose name the ownership of such 2011 Bond is registered on the Registration Books at the close of business on a special record date for the payment of such defaulted interest to be fixed by the Trustee, notice of which shall be given to such Owner not less than ten (10) days prior to such special record date. Interest on the 2011 Bonds shall be paid by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the 2011 Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date; provided, however, that at the written request of the Owner of 2011 Bonds in an aggregate principal amount of at least $1,000,000, which written request is on file with the Trustee prior to any Record Date, interest on such 2011 Bonds shall be paid on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account at a financial institution within the United States of America as shall be specified in such written request. The principal of the 2011 Bonds and any redemption premium shall be payable in lawful money of the United States of America by check of the Trustee upon presentation and surrender thereof to the Trustee. Section 11.04. Redemption. The 2011 Bonds are subject to optional redemption or mandatory sinking account redemption by the Agency's set forth below: (i) Optional Redemption. The 2011 Bonds maturing on or before July 1, 20_, shall not be subject to optional redemption prior to maturity. The 2011 Bonds maturing on or after July 1, 20_, shall be subject to redemption in whole, or in part among such maturities as shall be determined by the Agency, and in any case by lot within a maturity, at the option of the Agency, on any date on or after July 1, 20 ,from any available source of funds, at a redemption price equal to the principal amount DOCSOC/ 1481488v4/200120-0004 of the 2011 Bonds to be redeemed, plus accrued interest thereon to the redemption date, without premium. The Agency shall be required to give the Trustee written notice of its intention to redeem 2011 Bonds and of the annual maturities determined to be redeemed under this subsection (a) at least forty-five (45) days prior to the date fixed for such redemption (or such lesser number of days as the Trustee may accept). (ii) Sinking AccountRedemptiora. (A) The 2011 Bonds maturing July 1 in each of the years ,and shall be subject to mandatory sinking fund redemption in part by lot on July 1 and July 1, ,respectively and on July 1 in each year thereafter, from Sinking Account payments made by the Agency pursuant to this Section 11.04(b), at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium, or in lieu thereof shall be purchased pursuant to paragraph (ii) of this subsection (b), in the aggregate respective principal amounts and on the dates as set forth in the following table (provided, however, that if some but not all of such 2011 Bonds have been redeemed, the total amount of all future Sinking Account payments attributable to such 2011 Bonds shall be reduced by the aggregate principal amount of such 2011 Bonds so redeemed, to be allocated among such Sinking Account payments on a pro rata basis, or on such other basis, in integral multiples of $5,000 as determined by the Agency (written notice of which determination shall be given by the Agency to the Trustee)): Term Bond Maturing on July i, 20_ Sinking Account Redemption Date Principal Amount To Be Jul 1 Redeemed or Purchased 20 $ 20 Maturity. Term Bond Maturing on July 1, 20_ Sinking Account Redemption Date Principal Amount To Be Jul 1 Redeemed or Purchased 20 $ 20 ' Maturity. Maturity. (B) In lieu of redemption of any 2011 Bonds pursuant to the preceding paragraph (i) of this subsection (b), amounts on deposit in the Special Fund may also be used and withdrawn by the Agency at any time for the purchase of such 2011 Bonds at public or private sale as DOCS OC/ 1481488v4/200120-0004 and when and at such prices (including brokerage and other charges and including accrued interest) as the Agency may in its discretion determine. The par amount of any of the 2011 Bonds so purchased by the Agency in any twelve-month period ending on January 1 in any year shall be credited towards and shall reduce the par amount of such 2011 Bonds required to be redeemed pursuant to this subsection (b) on July 1 in such year. (iii) Notice of Redemption. The Trustee on behalf and at the expense of the Agency shall mail (by first class mail) notice of any redemption to the respective Owners of any 2011 Bonds designated for redemption at their respective addresses appearing on the Registration Books, at least thirty (30) but not more than sixty (60) days prior to the date fixed for redemption; 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 2011 Bonds or the cessation of the accrual of interest thereon. 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 individual number of each 2011 Bond to be redeemed or state that a112011 Bonds between two stated numbers (both inclusive) have been called unless all 2011 Bonds within a maturity have been called, or will state that all of the 2011 Bonds Outstanding of one or more maturities and Series are to be redeemed, and shall require that such 2011 Bonds be then surrendered at the office of the Trustee for redemption at the redemption price, giving notice also that further interest on such 2011 Bonds will not accrue from and after the redemption date. Additionally, on the date on which the notice of redemption is mailed to the Owners of the 2011 Bonds pursuant to the provisions above, such notice of redemption shall be given by (i) first class mail, postage prepaid, (ii) confirmed facsimile transmission, or (iii) overnight delivery service to the Agency, to each of the Securities Depositories and to one or more of the Information Services as shall be designated in writing by the Agency to the Trustee. (iv) Manner of Redemption. Whenever provision is made in this Section 11.4 for the redemption of less than all of the 2011 Bonds of any maturity, the Trustee shall select the 2011 Bonds of such maturity to be redeemed by lot in any manner which the Trustee in its sole discretion shall deem appropriate. For purposes of such selection, all 2011 Bonds shall be deemed to be comprised of separate $5,000 denominations and such separate denominations shall be treated as separate 2011 Bonds which may be separately redeemed. (v) Partial Redemption of 2011 Bonds. In the event only a portion of any 2011 Bond is called for redemption, then upon surrender of such 2011 Bond the Agency shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Agency, a new 2011 Bond or 2011 Bonds of the same maturity date, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the 2011 Bond to be redeemed. (vi) Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of and interest (and premium, if any) on the 2011 Bonds so called for redemption shall have been duly provided, such 2011 Bonds so called shall cease to be entitled to any benefit under this Indenture other than the right to receive payment of the redemption price, and no interest shall accrue thereon from and after the redemption date specified in such notice. A112011 Bonds redeemed pursuant to this Section 10.4 shall be canceled and destroyed. (vii) Rescission. The Agency shall have the right to rescind any optional redemption by written notice to the Trustee on or prior to the dated fixed for redemption. Any notice DOCSOC/ 1481488v4/200120-0004 6 of optional redemption shall be cancelled and annulled if for any reason funds will not or are not available on the date fixed for redemption for the payment in full of the 2011 Bonds then called for redemption, and such cancellation shall not constitute an Event of Default under the Indenture. The Agency and the Trustee shall have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent. Section 11.05. Form and Execution of 2011 Bonds. CUSIP Numbers. The 2011 Bonds, the form of Trustee's Certificate of Authentication, and the form of Assignment to appear thereon, shall be substantially in the respective forms set forth in Exhibit C attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Indenture. The 2011 Bonds shall be executed on behalf of the Agency by the signature of its Chair and the signature of its Secretary who are in office on the date of execution and delivery of the Second Supplement or at any time thereafter, and the seal of the Agency shall be impressed, imprinted or reproduced by facsimile signature thereon. Either or both of such signatures may be made manually or may be affixed by facsimile thereof. If any officer whose signature appears on any 2011 Bond ceases to be such officer before delivery of the 2011 Bonds to the purchaser, such signature shall nevertheless be as effective as if the officer had remained in office until the delivery of the 2011 Bonds to the purchaser. Any 2011 Bond may be signed and attested on behalf of the Agency by such persons as at the actual date of the execution of such 2011 Bond shall be the proper officers of the Agency although on the date of such 2011 Bond any such person shall not have been such officer of the Agency. Only such of the 2011 Bonds as shall bear thereon a Certificate of Authentication in the form set forth in Exhibit C, executed and dated by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such Certificate of the Trustee shall be conclusive evidence that such 2011 Bonds have been duly authenticated and delivered hereunder and are entitled to the benefits of this Indenture. The Trustee and the Agency shall not be liable for any omission, defect or inaccuracy in the CUSIP number that appears on any 2011 Bond or in any redemption notice. The Trustee may, in its discretion, include in any redemption notice a statement to the effect that the CUSIP numbers on the 2011 Bonds have been assigned by an independent service and are included in such notice solely for the convenience of the Owners and that neither the Trustee nor the Agency shall be liable for any inaccuracies in such numbers. Section 11.06. Application of Proceeds of Sale of 2011 Bonds. Upon the receipt of payment of the purchase price for the 2011 Bonds ($ ) on the Closing Date (representing $ principal amount issue premium of $ and less original issue discount of $ ), the proceeds thereof shall be paid to the Trustee and deposited in a temporary. fund (if required by the Trustee to make the following transfers and deposits, which temporary fund shall be closed after such transfers and deposits have been made), all of the amounts on deposit in which shall be transferred on the Closing Date as follows: DOCSOC/ 1481488v4/200120-0004 (a) The Trustee shall deposit to the 2011 Bonds Costs of Issuance Fund the amount of (b) The Trustee shall transfer to the Agency for deposit in the 2011 Bonds Redevelopment Account of the Redevelopment Fund created pursuant to Section 3.04(a) of the Indenture the amount of $ for application in accordance with Section 3.04(a) and Section 11.07(b). (c) The Trustee. shall deposit to the 2011 Bonds Subaccount of the Reserve Account the amount of $ which shall, together with the credit of the Reserve Account Surety Bond to the 2006 Series A Bonds Reserve Account Subaccount with respect to the 2006 Series A Bonds and the 2006 Series B Bonds Reserve Account Subaccount with respect to the 2006 Series B Bonds, represents the full amount of the Reserve Requirement upon delivery of the 2011 Bonds. Section 11.07. 2011 Bonds Costs of Issuance Fund and 2011 Bonds Redevelopment Account. (a) There is hereby established a separate fund to be known as the "2011 Bonds Costs of Issuance Fund", which shall be held by the Trustee in trust. The moneys in the 2011 Bonds Costs of Issuance Fund shall be used and withdrawn by the Trustee from time to time to pay the Costs of Issuance upon submission of a Written Request of the Agency stating (a) the person to whom payment is to be made, (b) the amount to be paid, (c) the purpose for which the obligation was incurred, (d) that such payment is a proper charge against the 2011 Bonds Costs of Issuance Fund, and (e) that such amounts have not been the subject of a prior Written Request of the Agency; in each case together with a statement or invoice for each amount requested thereunder. On the earlier of (i) [November) 1, 2011, or (ii) the date of receipt by the Trustee of a Request of the Agency therefor, all amounts (if any) remaining in the 2011 Bonds Costs of Issuance Fund shall be withdrawn therefrom by the Trustee and deposited in the Interest Account. (b). There is hereby established a separate account in the Redevelopment Fund to be known as the "2011 Bonds Redevelopment Account", which shall be held by the Agency. The moneys in the 2011 Bonds Redevelopment Account shall be used and withdrawn by the Agency from time to time to pay authorized costs upon submission (and retention in the records of the Agency) of a Written Request of the Agency stating (a) the person to whom payment is to be made, (b) the amount to be paid, (c) the purpose for which the obligation was incurred, (d) that such payment is a proper charge against the 2011 Bonds Redevelopment Account and the Redevelopment Fund, and (e) that such amounts have not been the subject of a prior Written Request of the Agency; in each case together with a statement or invoice for each amount requested thereunder. On the the date of the Agency's certification (and retention in the records of the Agency) that it has completed the expenditure of all amounts to be expended from the 2011 Bonds Redevelopment Account, all amounts (if any) remaining in the 2011 Bonds Redevelopment Account shall be withdrawn therefrom and transferred to the Trustee for deposit in the Interest Account. Section 11.08 Security for 2011 Bonds. The 2011 Bonds shall be Parity Debt within the meaning of such term in Section 1.02 and shall be secured in the manner and to the extent set forth in Article IV. As provided in Section 4.01, the 2011 Bonds shall be secured on a parity with all other Bonds issued under this Indenture, including the 2006 Bonds, by a first pledge of and lien on all of the Tax Revenues in the Special Fund and the moneys in the Reserve Account. [Without limiting any other provision of this Indenture, the Agency hereby covenants and agrees to pay all amounts due under the Indenture with respect to the 2011 Bonds maturing July 1, 2042 on or before the last DOC SOC/1481488v4/200120-0004 day for the Agency to repay indebtedness pursuant to the Redevelopment Plan and the Redevelopment Law.] Section 11.09 Continuinu Disclosure. The Agency hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of this Indenture, failure of the Agency to comply with the Continuing Disclosure Certificate shall not be considered an Event of Default; however, any Participating Underwriter or any holder or beneficial owner of the 2011. Bonds may take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause the Agency to comply with its obligations under this Section 11.09. Section 11.10 Benefits Limited to Parties. Nothing in this Article XI, expressed or implied, is intended to give to any person other than the Agency, the Trustee, and the Owners of the 2011 Bonds, any right, remedy, claim under or by reason of this Article XI. Any covenants, stipulations, promises or agreements in this Article XI contained by and on behalf of the Agency shall be for the sole and exclusive benefit of the Trustee, and the Owners of the 2011 Bonds. Section 11.11. Federal Tax Covenants. The provisions of Section 5.11 and the further provisions of this Indenture relating to the Tax Code shall apply to the 2011 Bonds as if restated in full herein. Section 11.12. 2011 Bonds Reserve Subaccount. The 2011 Bonds Reserve Subaccount is hereby created as a Subaccount of the Reserve Account. The portion of the Reserve Requirement allocable to the 2011 Bonds shall be satisfied initially by the deposit of a portion of the proceeds of the 2011 Bonds to the 2011 Bonds Reserve Subaccount pursuant to Section 11. 06 hereof. [Notwithstanding any other provision of this Indenture to the contrary, amounts on deposit therein shall be applied exclusively to the payment of 2011 Bonds [as further set forth below]. Section 11.13. Effect of this Article XI. Except as in this Article XI expressly provided or except to the extent inconsistent with any provision of this Article XI, the 2011 Bonds shall be deemed to be Bonds under and within the meaning of Section 1.02, and every term and condition contained in the other provisions of this Indenture shall apply to the 2011 Bonds with full force and effect, with such omissions, variations and modifications thereof as may be appropriate to make the same conform to this Article XL In addition, Section 9.03(b) relating to the 2006 Insurer shall apply to the defeasance of the 2011 Bonds. Section 11.14. [Reserved Section 11:15. Further Assurances. The Agency will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture, and for the better assuring and confirming unto the Owners of the 2011 Bonds and the rights and benefits provided in this Indenture. SECTION 2. Attachment of Exhibit C. The Bond Indenture is also hereby further amended by attaching thereto and incorporating therein an Exhibit C setting forth the form of the 2011 Bonds, which shall read substantially as set forth in Appendix A which is attached hereto and by this reference incorporated herein. DOCS OC/1481488v4/200120-0004 SECTION 3. Amendment of Existin¢ Indenture. (a) Section 1.01 is hereby amended to restate in full the definition of Reserve Requirement as follows: Reserve Requirement means, as of the date of any calculation, [(a) with respect to the Series 2006A Bonds and the Series 2006B Bonds], the lesser of (1) Maximum Annual Debt Service [with respect to the Series 2006A Bonds and the Series 2006B Bonds], or (2) the maximum amount permitted to be deposited in the Reserve Account under the Tax Code [from the proceeds of the Series 2006A Bonds and the Series 2006B Bonds], as certified to the Trustee by the Agency; [(b) with respect to the Series 2011 Bonds], the lesser of (1) Maximum Annual Debt Service [with respect to the Series 2011 Bonds], or (2) the maximum amount permitted to be deposited in the Reserve Account under the Tax Code without yield restriction [from the proceeds of the Series 2011 Bonds], as certified to the Trustee by the Agency and [(c) with respect to any other Parity Debt authorized pursuant to a Parity Debt Instrument, the lesser of (a) Maximum Annual Debt Service [with respect to the Parity Debt authorized pursuant to such Parity Debt Instrument], or (b) the maximum amount permitted to be deposited in the Reserve Account under the Tax Code without yield restriction [from the proceeds of such Parity Debt], as certified to the Trustee by the Agency, in each case computed and maintained separately for each issue or series of Parity Debt. (b) Section 4.02(d) of the Bond Indenture is hereby amended to read in full as follows: (d) Reserve Account. In addition to the Reserve Account, the Trustee shall establish within the Reserve Account the 2006 Series A Bonds Reserve Account Subaccount. In the event that the Trustee has actual knowledge that the amount on deposit in the Reserve Account at any time becomes less than the Reserve Requirement, the Trustee shall promptly notify the Agency of such fact. Promptly upon receipt of such notice, the Agency shall transfer to the Trustee for deposit in the applicable subaccount to which the deficiency relates (pro rata in the event a deficiency exists in more than one Subaccount and Tax Revenues are insufficient to fund the entire deficiency) an amount of available Tax Revenues sufficient to maintain the Reserve Requirement on deposit in the Reserve Account. Amounts in the Reserve Account shall be used and withdrawn by the Trustee solely for the purpose of making transfers pursuant to any applicable Parity Debt Instrument in the applicable order of priority and to the Interest account, the Principal Account and the Sinking Account, in such order of priority, on any date which the principal of or interest on the Bonds becomes due and payable hereunder, in the event of any deficiency at any time in any of the applicable accounts. In the event there shall be insufficient amounts in the Reserve Account to make all of the transfers required by this Section 4.02(d) and any applicable Parity Debt Instrument, then such transfers shall be made from the applicable Subaccount for the benefit of the Bonds to which the applicable Subaccount relates. So long as no Event of Default shall have occurred and be continuing, any amount in the Reserve Account in excess of the Reserve Requirement on the fourth (4"') Business Day preceding each Interest Payment Date shall be withdrawn from the Reserve Account by the Trustee and deposited in the Interest Account and the Interest Account established by any Parity Debt Instrument, for deposit to the applicable Bonds and/or Parity Debt to which the Subaccount relates. The Agency shall have the right at any time to direct the Trustee to release funds from the Reserve Account, in whole or in part, by tendering to the Trustee: (i) a Qualified Reserve Account Credit Instrument, and (ii) an opinion of Bond Counsel stating that neither the release of such funds not the acceptance of such Qualified Reserve Account Credit Instrument will cause interest on the Bonds to become includable in gross income for purposes of federal income taxation. Upon tender of such items to the Trustee, and upon delivery by the Agency to the Trustee of written calculation of the amount permitted to be released from the Reserve Account (upon which 10 DOCSOC/ 1481488v4/200120-0004 calculation the Trustee may conclusively rely),the Trustee shall transfer such funds from the Reserve Account and deposit such funds in the Redevelopment Fund to be used solely as provided in Section 3.04(a). The Trustee shall comply with all documentation relating to a Qualified Reserve Account Credit Instrument as shall reasonably be required to maintain such Qualified Reserve Account Credit Instrument in full force and effect and as shall reasonably be required to receive payments thereunder in the event and to the extent required to make any payment when and as required under this subsection (d). Upon the expiration or any default with respect to any Qualified Reserve Account Credit Instrument, the Agency shall be obligated either (i) to replace such Qualified Reserve Account Cr3edit Instrument, or (ii) to deposit or cause to be deposited with the Trustee an amount of funds equal to the Reserve Requirement, to be derived from the first available Tax Revenues. The Reserve Account shall be maintained in the form of one or more separate subaccounts which are established at the direction of the Agency for the purpose of holding the proceeds of separate issues of the bonds inconformity with applicable provisions of the Tax Code. The portion of the Reserve. Requirement allocable to the 2006 Series A Bonds shall be satisfied initially by the credit to the 2006 Series A Bonds Reserve Account subaccount of the Bond Reserve Fund Policy. As long as the Bond Reserve Fund Policy shall be in full force and effect, the Trustee and the agency, if applicable, agree to comply with the provisions of Section 4.08 relating to the Bond Reserve Fund Policy Agreement. Amounts in the subaccount of the Reserve Account shall be available only for the payment of the Bonds, including any Parity Debt to which the subaccount relates, except as may be otherwise set forth in any Parity Debt Instrument, as to amounts in the subaccount created thereunder. (c) Section 8.08 of the Existing Indenture is hereby amended as follows: All references to the Bonds in Section 8.08 shall mean and refer to the 2006 Series A Bonds and the 2006 Series B Bonds, and no others. SECTION 3. Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of this Second Supplement shall for any reason be held illegal, invalid or unenforceable, such holding shall not affect the validity of the remaining portions of this Second Supplement. The Agency hereby declares that it would have entered into this Second Supplement and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issue of the 2011 Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses, or phrases of this Second Supplement may be held illegal, invalid or unenforceable. SECTION 4. Execution in Counterparts. This Second Supplement 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 5. Governing Law. This Second Supplement shall be construed and governed in accordance with the laws of the State of California. 11 DOC SOC/1481488v4/200120-0004 IN WITNESS WHEREOF, the REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA has caused this Second Supplement to be signed in its name by its Executive Director and attested by its Secretary, and Union Bank, N.A. , in token of its acceptance of the trusts created hereunder, has caused this Second Supplement to be signed in its corporate name by its officers thereinto duly authorized, all as of the day and year first above written. REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA Executive Director (SEAL) ATTEST: Secretary APPROVED AS TO FORM By; Agency General Counsel Union Bank, N.A. , as Trustee By:. Authorized Officer 12 DOCSOC/ 1481488v4/200120-0004 APPENDIX A EXHIBIT C TO INDENTURE (FORM OF 2011 BOND) No. UNITED STATES OF AMERICA STATE OF CALIFORNIA REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT 201 I TAX ALLOCATION BOND INTEREST RATE: MATURITY DATE: DATED DATE: CUSIP: July 1, [Closing Date) REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: The Redevelopment Agency of the City of Santa Monica, a public body, corporate and politic, duly organized and existing under the laws of the State of California (the "Agency"), for value received, hereby promises to pay (but only out of the Tax Revenues and other moneys and securities hereinafter referred to) to the Registered Owner specified above or registered assigns (the "Registered Owner"), on the Maturity Date specified above (subject to any right of prior redemption hereinafter provided for), the Principal Amount specified above in lawful money of the United States of America, and to pay interest thereon at the Interest Rate specified above in like lawful money from the Interest Payment Date (as hereinafter defined) 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 (15th) calendar day of the month preceding such Interest Payment Date (a "Record Date"), in which event it shall bear interest from such Interest Payment Date, or unless this Bond is authenticated on or prior to [December 15, 2011], in which event it shall bear interest from the Dated Date specified above; provided, however, that if, at the time of authentication of this Bond, interest is in default on this Bond, this Bond shall bear interest from the Interest Payment Date to which interest hereon has previously been paid or made available for payment), payable semiannually on January 1 and July 1 in each year, commencing [January 1, 2012] (the "Interest Payment Dates"), until payment of such Principal Amount in full. The Principal Amount hereof is payable upon presentation hereof at the. principal corporate trust office of Union Bank, N.A. in Los Angeles, (the "Trustee"), or such other office of the Trustee as the Trustee may designate (the "Principal Corporate Trust Office"). Interest hereon is payable by check of the Trustee mailed by first class mail on each Interest Payment Date to the Registered Owner hereof at the address of such Registered Owner as it appears on the registration books of the Trustee as of the preceding Record Date; provided that at the written request of the owner of at least $1,000,000 aggregate principal amount of Bonds, which written request is on file with the Trustee prior to the Record Date immediately preceding the applicable Interest Payment A-1 DOCSOC/1481488v4/200120-0004 Date, interest on such Bonds shall be paid on such Interest Payment Date by wire transfer to such account within the United States of America as shall be specified in such written request. This Bond is one of a duly authorized issue of bonds of the Agency designated as the "Redevelopment Agency of the City of Santa Monica Earthquake Recovery Redevelopment Project 2011 Tax Allocation Bonds" (the "Bonds") of an aggregate principal amount of Dollars ($[Bond Amount]), all of like tenor and date (except for such variation, if any, as maybe required to designate varying numbers, maturities or interest rates) and all issued pursuant to the provisions of the Community Redevelopment Law of the State of California, constituting Part 1 of Division 24 of the Health and Safety Code of the State of California (the "Redevelopment Law"), and pursuant to an Indenture of Trust, dated as of April 1, 2006, by and between the Agency and the Trustee as supplemented and amended by a First Supplement to Indenture of Trust, dated as of April 1, 2006 and a Second Supplement to Indenture of Trust, dated as of June 1, 2011, in each case by and between the Agency and the Trustee (as so amended and supplemented, the "Indenture"). The Bonds have been issued on a parity with the Redevelopment Agency of the City of Santa Monica Earthquake Recovery Redevelopment Project 2006 Tax Allocation Refunding Bonds, Series A, issued in the original principal amount of $49,945,000 (the "2006 Series A Bonds") and the Redevelopment Agency of the City of Santa Monica Earthquake Recovery Redevelopment Project 2006 Taxable Tax Allocation Refunding Bonds, Series B"), issued in the original principal amount of $14,775,000 (the "2006 Series. B Bonds" and, together with the 2006 Series A Bonds, the "2006 Bonds"). The Agency may issue or incur additional obligations on a parity with the 2006 Bonds and the Bonds, but only subject to the terms of the Indenture. Reference is hereby made to the Indenture (copies of which are on file at the office of the Agency) and all supplements thereto and to the Redevelopment Law for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Tax Revenues, as that term is defined in the Indenture, and the rights thereunder of the owners of the Bonds and the rights, duties and immunities of the Trustee and the rights and obligations of the Agency thereunder, to all of the provisions of which the Registered Owner of this Bond, by acceptance hereof, assents and agrees. The Bonds have been issued by the Agency for the purpose of providing funds to finance redevelopment activities with respect to its Earthquake Recovery Redevelopment Project (the "Project Area"). In accordance with the Indenture, this Bond and the interest hereon, together with all other Bonds, a112006 Bonds and all other Parity Debt (as defined in the Indenture) and the interest thereon (to the extent set forth in the Indenture), are payable from, and are secured by a pledge of and lien on the Tax Revenues derived by the Agency from the Project Area. As and to the extent set forth in the Indenture, all of the Tax Revenues are exclusively and irrevocably pledged in accordance with the terms and provisions of the Indenture and the Redevelopment Law, to the payment of the principal of and interest on the Bonds, the 2006 Bonds and any additional Parity Debt. Notwithstanding the foregoing, certain Tax Revenues maybe applied for other purposes as provided in the Indenture. This Bond is not a debt, liability or obligation of the City of Santa Monica, the State of California, or any of its political subdivisions, and neither said City, said State, nor any of its political subdivisions is liable hereon, nor in any event shall this Bond be payable out of any funds or properties other than the Tax Revenues. A-2 DOC SOC/ 1481488v4/200120-0004 The rights and obligations of the Agency and the owners of the Bonds may be modified or amended at any time in the manner, to the extent and upon the terms provided in the Indenture, but no such modification or amendment shall permit a change in the terms of maturity of the principal of any outstanding Bond or of any installment of interest thereon or a reduction in the rate of interest thereon without the consent of the owner of such Bond, or shall reduce the percentages of the owners required to effect any such modification or amendment. The 2011 Bonds maturing on or before July 1, 20 ,are not subject to redemption prior to their respective stated maturities.. The 2011 Bonds maturing on or after July 1, 20_, are subject to redemption in whole, or in part among such maturities as shall be determined by the Agency and by lot within a maturity, at the option of the Agency, on any date on or after July 1, 20_ from any available source of funds, at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium. The 2011 Bonds maturing on July 1 in each of the years, 20 and 20 ,are subject to redemption from sinking account payments made by the Agency, in part by lot, on July 1, 20_ and 20_ respectively, and on July T in each year thereafter, at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium, as set forth in the following table (provided, however, that if some but not. all of such 2011 Bonds have been redeemed, the total amount of all future Sinking Account payments attributable to such 2011 Bonds shall be reduced by the aggregate principal amount of such 2011 Bonds so redeemed, to be allocated among such Sinking Account payments on a pro rata basis in integral multiples of $5,000 as determined by the Agency (written notice of which determination shall be given by the Agency to the Trustee)): 2011 Bonds Maturing on July 1, 20_ Sinking Account Redemption Date Principal Amount To Be Jul 1 Redeemed or Purchased 20 $ 20 ' Matuity. 2011 Bonds Maturing on July 1, 20_ Sinking Account Redemption Date Principal Amount To Be Ju( 111 Redeemed or Purchased 20 $ 20 ' Maturity. A-3 DOCSOC/ 1481488v4/200120-0004 As provided in the Indenture and subject to rescission to the extent provided in the Indenture, notice of redemption shall be mailed by first class mail, postage prepaid, not less than thirty (30) nor more than sixty (60) days prior to the redemption date to the respective owners of any 2011 Bonds designated for redemption at their addresses appearing on the 2011 Bond registration books of the Trustee, but neither failure to receive such notice nor any defect in the notice so mailed shall effect the sufficiency of the proceedings for redemption.. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, interest shall cease to accrue hereon from and after the date fixed for redemption. If an Event of Default, as defined in the Indenture, shall occur, the Trustee may, and if requested by a majority in aggregate principal amount of the Bonds then outstanding shall, exercise any remedies available to the Trustee in law or in equity. This Bond is transferable by the Registered Owner hereof, in person or by an attorney duly authorized in writing by such person, at said Principal Corporate Trust 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 registration of such transfer a new Bond or Bonds, of authorized denomination or denominations, for the same aggregate principal amount and of the. same maturity will be issued to the transferee in exchange herefor. Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York Corporation ("DTC"), to the Trustee for registration of transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. The Agency and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the Agency and the Trustee shall not be affected by any notice to the contrary. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all of the things, conditions and acts required to exist, to have happened or to have been performed precedent to and in the issuance of this Bond do exist, have happened or have been performed in due and regular time, form and manner as required by the Redevelopment Law and the laws of the State of California and that the amount of this Bond, together with all other indebtedness of the Agency, does not exceed any limit prescribed by the Redevelopment Law or any laws of the State of California, and is not in excess of the amount of Bonds permitted to be issued under the Indenture. This Bond shall not be entitled to any benefit under the Indenture or become valid or obligatory for any purpose until the Certificate of Authentication hereon endorsed shall have been manually signed by the Trustee. DOC SOC/ 1481488v4/200120-0004 A-4 IN WITNESS WHEREOF, THE REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA has caused this Bond to be executed in its name and on its behalf with the facsimile signature of its Chair and its seal to be reproduced hereon and attested to by the facsimile signahire of its Secretary, all as of the Dated Date set forth above. REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA Chair (SEAL) ATTEST: By: Secretary A-5 DOCSOC/ 1481488v4/200120-0004 CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the within-mentioned Indenture. Dated: Union Bank, N.A. as Trustee By: Authorized Signatory A-6 DOCSOC/ 1481488v4/200120-0004 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) most be guaranteed by an eligible guarantor institution. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlazgement or any change whatsoever. A-~ DOC SOC/ 1481488v4/200 ] 20-0004 ATTACHMENT G CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure. Certificate") is executed and delivered by the Redevelopment Agency of the City of Santa Monica (the "Agency") in connection with the issuance by the Agency of its $ aggregate principal amount of Redevelopment Agency of the City of Santa Monica Earthquake Recovery Redevelopment Project, 2011 Tax Allocation Bonds (the "Bonds"). The Bonds are being issued pursuant to Resolution No. of the Agency, adopted on , 201 I, and an Indenture of Trust and First Supplement to Indenture of Trust, each dated as of April 1, 2006, and a Second Supplement to Indenture of Trust dated as of June 1, 2011 (collectively, the "Indenture"), in each case between the Agency and Union Bank, N.A., as trustee (the "Trustee"). The Bonds are payable from and secured by certain Tax Revenues of the Agency. The Agency covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Agency for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriters in complying with S.E.C. Rule ISc2- 12(b)(5). Section 2. Defmitions. In addition to the definitions set forth in the Indenture described in the Official Statement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" means any Annual Report provided by the Agency pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Annual Report Date" means the date that is eight (8) months after the end of the Agency's fiscal year (currently March 1 based on the City's fiscal year end of June 30). "Dissemination Agent" means the Agency, or any successor Dissemination Agent designated in writing by the Agency and which has filed with the Agency and the Trustee a written acceptance of such designation. "Listed Events" means any of the events listed in Sections 5(a) and (b) of this Disclosure Certificate. "MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. Bonds. "Official Statement" means the Official Statement dated , 2011, related to the "Participating Underwriter" means E.J. De La Rosa & Co., Inc., on behalf of itself and Wells Fargo Bank, National Association, the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Rule" means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Section 3. Provision of Annual Reports. (a) The Agency shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing March 1, 2012, with the report for the 2010-11 fiscal year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate, with a copy to the Trustee. Not later than fifteen (15) Business Days prior to the Annual Report Date, the Agency shall provide the Annual Report to the Dissemination Agent, if other than the Agency. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate. If the Agency's fiscal year changes, the Agency, upon becoming aware of such change, shall give notice of such change in the same manner as for a Listed Event under Section 5(c). The Agency shall provide a written certificafion with each Annual Report fiirnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certiftcation of the Agency and shall have no duty or obligation to review such Annual Report. (b) If by fifteen (15) Business Days prior to the Annual Report Date, the Dissemination Agent (if other than the Agency) has not received a copy of the Annual Report, the Dissemination Agent shall notify the Agency of such non-receipt. (c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the MSRB by the Annual Report Date, the Dissemination Agent shall provide to the MSRB (with a copy to the Trustee and the Participating Underwriter) a notice, in substantially the form attached as Exhibit A. (d) Unless the Agency has done so pursuant to Section 3(a) above, the Dissemination Agent (if other than the Agency) shall: (i) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and (ii) if the Dissemination Agent is other than the Agency, file a certificate with the Agency to the effect that The Annual Report has been provided pursuant to this Disclosure Certificate, stating, to the extent it can confirm such filing of the Annual Report, the date it was provided. Section 4. Content of Annual Reports. The Agency's Annual Report shall contain or incorporate by reference the following: (a) Audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board, and as further modified according to applicable State law. If the Agency's audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements in a format similar to the usual format utilized by the Agency, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) The following additional items: 1. Assessed valuations and Tax Revenues for the fiscal year to which the Annual Report pertains, by means of an update to the "Historical Project Area Assessed Values Values" table for the Project Area shown in the Official Statement for the Bonds (Table ~; 2. Description of any Parity Debt (date, amount, term, rating, insurance) issued by the Agency in 4he fiscal year to which the Annual Report pertains and amount of all Agency debt outstanding payable with tax increment revenue from the Project Areas as of the end of the fiscal year to which the Annual Report pertains; 3. Estimated annual debt service coverage for obligations of the Agency by means of an update to the "Projected Tax Revenues" table for the Project Area shown in the Official Statement for the Bonds (Table 8); 4. Top ten property tax assessees in the Project Area for the fiscal year to which the Annual Report pertains, taxable value and percentage of total taxable value for the Project Area. Any or all of the items above may be included by specific reference to other documents, including official statements of debt issues of the Agency or related public entities, which are available to the public on the MSRB's Internet web site or filed with the Securities and Exchange Commission. The Agency shall clearly identify each such other document so included by reference. -The Trustee shall have no responsibility for the content of the Annual Report, or any part thereof. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the Agency shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten (10) days after the event, if material 1. Principal and interest payment delinquencies; 2. Unscheduled draws on debt service reserves reflecting financial difficulties; 3. Unscheduled draws on credit enhancements reflecting financial difficulties; 4. Substitution of credit or liquidity providers, or their failure to perform; 5. Issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposal Issue (IRS Form 5701-TEB); 6. Tender Offers; 7. Defeasances; 8. Rating changes; and 9. Bankruptcy, insolvency, receivership or similar proceedings.. Note: For the purposes of the event identifted in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, ftscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Pursuant to the provisions of this Section 5, the Agency shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the 2011 Bonds, if material in a timely manner not more than ten (10) days after occurrence: 1, tmless described in Section 5(a)(5), adverse tax opinions or other material notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds. 2. modifications to the rights of Bondholders; optional, unscheduled or contingent Bond calls; 4. release, substitution or sale of property securing repayment of the Bonds; 5. non-payment related defaults; 6. the consummation of a merger, consolidation, or acquisition involving the Agency or the Authority or the sale of all or substantially all of the assets of the Agency or the Authority, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; and name of a trustee. appointment of a successor or additional trustee or the change of the (c) If the Agency determines that knowledge of the occurrence of a Listed Event under subsection (b) would be material under applicable federal securities laws, and if the Dissemination Agent is other than the Agency, the Agency shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to file a notice of such occurrence with the MSRB in an electronic format as prescribed by the MSRB in a timely manner not more than ten (10) Business Days after the event. (d) If the Agency determines that the Listed Event under subsection (b) would not be material under applicable federal securities laws and if the Dissemination Agent is other than the Agency, the Agency shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent nat to report the occurrence. (e) The Agency hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the Agency and, if the Dissemination Agent is other than the Agency, the Dissemination Agent shall not be responsible for determining whether the Agency's instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. Section 6. Identi ing_Information for Filings with the MSRB. All documents provided to the MSRB under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obli ap lion. The obligations of the Agency, the Trustee and the Dissemination Agent under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Agency shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. From time to time, the Agency may appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. If at any time there is not any other designated Dissemination Agent, the Agency shall be The Dissemination Agent. The Dissemination Agent may resign by providing .sixty days prior written notice to the Agency. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Agency may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Section 3(a), 4 or 5(a), it may be made only in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, in the opinion of nationally recognized bond counsel, would have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) in the opinion of nationally recognized bond counsel, does not materially impair the interests of the holders or beneficial owners of the Bonds. Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Agency from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to-that which is required by this Disclosure Certificate. If the Agency 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 Certificate, the Agency shall have no obligation under this Disclosuee Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the Agency to comply with any provision of this Disclosure Certificate, the Trustee may (and, at the request of any Participating Underwriter or the holders of at least 25% aggregate principal amount of Outstanding Bonds, shall), after receiving indemnification satisfactory to the Trustee, or any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by coiut order, to cause the Agency to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the Agency to comply with this Disclosure Certificate shall be an action to compel performance. Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent and the Trustee shall be entitled to the protections and limitations from liability afforded to the Trustee in Article 6 of the Indenture. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Agency. agrees tc> indemnify and hold .harmless the Dissemination Agent, its officers, directors, employees and agents, against any loss, expense and liabilities which the Dissemination Agent may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding ]iabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the Agency under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. The Trustee shall not be required to consent to any amendment which would impose any greater duties or risk of liability on the Trustee. No person shall have any right to commence any action against the Trustee seeking any remedy other than to compel specific performance of this Agreement. The Trustee shall not be liable under any circumstances for monetary damages to any person for any breach of this Disclosure Certificate. Section 13. Notices. Any notice or communications to be given under this Disclosure Certificate maybe given as follows: To the Agency: Redevelopment Agency of the City of Santa Monica Sata Monica, CA Fax ~) Attention: To the participating Underwriters: Fax: (~ Attention: Public Finance To the Trustee: Union Bank of California, N.A. Los Angeles, CA Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. Section 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Agency, the Trustee, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Date: 2011 REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA By: EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Obligor: Redevelopment Agency of the City of Santa Monica Name of Issue: City of Santa Monica Earthquake Recovery Redevelopment Project, 2011 Tax Allocation Bonds Date of Issuance: , 2011 NOTICE IS HEREBY GIVEN that the Redevelopment Agency of the City of Santa Monica (the "Agency") has not provided an Annual Report with respect to the above-named Bonds as required by Section _ of the Indenture of Trust, dated as of April 1, 2006, as amended, by and between the Redevelopment Agency of the City of Santa and Union Bank of California, N.A., as trustee. The Agency anticipates that the Annual Report will be filed by Dated: cc: Trustee and Participating Underwriter REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA By:_ A-1 DOCSOC/ 1485103 v3/200120-0004 o ~ o .. ~ a~ b a. V ~p ~ o p „ ti ~ o >, ~ 3• -9 O 0 0 w ,~ o .~ ~ o ~ Y o ~ o -d o y ~ o ~ „ w C ~" 0 cs H U O "~~, m ~ r ~. ~~ C o b ~ `' O ° o ~ ~ ~. o o.~p y ro 40.. ~ N O o :c 3 m o ~ y U y er o .~ ., ~ E .° L .`~. ~ ~ o ~. V ~ O er ~ o c ~ ,. cd 'O U -C~ ~ V ~ U u 3 e ~ c 4~ o ^ .~' U ~ b b y ., 9 a> -~Oi >. >, ~ ro ~ .~ b ~ ,~ ~ 2 m m ~ U ~ ~ O ~ N U ~ ~w ~ O '= .~ v o _~ i ti v a. E c ~-~ m Y p Stradling Yacea Carlson & Routh Draft of 5/I3/ll PRELIMINARY OFFICIAL STATEMENT DATED _, 2011 Ratings: Standard & Poor's: "" Fitch: " New Issue-Book Entry Only (See "OTHER MATTERS -Ratings") In the opinion of Stradling Yocca Carlson & ~Rauth, a Professional Corporation, Newport Beach, Calijornia, Bond Counsel, under existing Jaws, regulations, rulings and judicial decisions, and assuming certain representaaons and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the 2011 Bands is exclaeded from grass income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federn[ alternative minimum tax imposed on individuals and corporations. Zn the further opinion of Bond Counsel, snterest (and originad issue discount) on the 2011 Bonds is exempt from State of Calijornia personal income taxes. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds ofa maturity is to be sold to the public) and the stated redemption price ad maturity with respect to the Bond constitutes originad issue discount. See "OTZIER iLlATTERS-Tax Matters"herein. $41,050,000* REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA EarthquaKe Recovery Redevelopment Project 2011 Tax Allocation Bonds Dated: Date of Delivery Due: July 1, as shown on inside cover The Redevelopment Agency of the City of Santa Monica (the "Agency") is issuing the bonds captioned above (the "201 I Bonds") pursuant to a Second Supplement to Indenture of Trust dated as of May 1, 2011, supplementing an Indenture of Trust and Fast Supplement to Indenture of Trust, respectively, eaoh dated as of April 1, 2006, and each by and between the Agenoy and Union Bank of California, N.A., as trustee (collectively, the "Indenture"). See "THE 2011 BONDS Authority for Issuance" Proceeds of the 2011 Bonds will be used to (i) fund certain costs of the Agency's Santa Monica Earthquake Recovery Redevelopment Project (the "Project Area"), (ii) provide for a debt service reserve for the 2011 Bonds, and (iii) pay the costs of issuing the 2011 Bonds. See "PLAN OF FINANCE." The 2011 Bonds will be delivered as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ("DTC"), and will be available to ultimate purchasers ("Beneficial Owners"), under the book-entry system maintained by DTC. Beneficial Owners will not be entitled to receive delivery of certificates representing their ownership interest in the 2011 Bonds. The principal of, premium if any, and semiannual interest on the 2011 Bonds will be payable by the Trustee to DTC for subsequent disbursement to DTC Participants, so long as DTC or its nominee remains the registered owner of the 2011 Bonds. See APPENDIX F - "Book Entry-Only System." Interest on the 2011 Bonds is due January 1 and July 1 of each year, commencing July 1, 2011. The 2011 Bonds will be issued in denominations of $5,000 or any integral multiple of $5,000. See "THE 2011 BONDS-Description." The 2011 Bonds are subject to redemption prior to maturity as described herein. See "THE 2011 BONDS -Redemption." The 2011 Bonds are secured by and payable from "Tax Revenues" from the Agency's Earthquake Recovery Redevelopment Project Area (the "Project Area") and amounts on deposit in certain funds and accounts established pursuant to the Indenture on a parity the Agency's 2006A Bonds and 2006B Bonds currently outstanding in the respective principal amounts of $49,945,000 and $4,005,000. Tax Revenues generally consist of tax increment revenues to be derived from the Agency's Project Area, less unsubordinated pass-through obligations and certain amounts treated as Housing Set-Aside, except to the limited extent described herein. See "SECURTTY FOR THE 2011 BONDS." The receipt of Tax Revenues is subject to certain risks and limitations. See "RISK FACTORS" and "LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS." The Indenture authorizes the Agency to incur additional debt secured by Tax Revenues on a parity with the 2006A Bonds, the 2006B Bonds and the 201 I Bonds. See "SECURITY FOR THE 2011 BONDS Parity Debt" THE 2011 BONDS ARE NOT A DEBT OF THE CITY OF SANTA MONICA (THE "CITY"), THE STATE OF CALIFORNIA, OR ANY OF THEIR POLITICAL SUBDIVISIONS OTHER THAN THE AGENCY, AND NEITHER THE CITY, TAE STATE NOR ANY OF T1iEIR POLITICAL SUBDIVISIONS, OTHER THAN THE AGENCY, IS LIABLE THEREFOR. THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE 2011 BONDS ARE PAYABLE SOLELY FROM TAX REVENUES ALLOCATED TO THE AGENCY FROM THE PROJECT AREA AND AbIOUNTS IN CERTAIN FUNDS AND ACCOUNTS HELD UNDER THE LNDENTURE. NEITFIER THE OFFICERS OF THE AGENCY OR TAE CITY, NOR ANY PERSONS EXECUTING THE 2011 BONDS, ARE LIABLE PERSONALLY ON THE 2011 BONDS BY REASON OF THEIR ISSUANCE. An investment in the 201 I Bonds involves risk. Potential investors in the Bonds should review the entire Official Statement to evaluate an investment in the Bonds. See "RISK FACTORS" for a discussion of factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Bonds. This cover page contains certain information for quick reference only. It is not intended to be a summary of all factors relating to an investment in the 2011 Bonds. MATURITY SCHEDULE (See inside front cover) The 2011 Bonds are offered when, as and if issued and accepted by the Underwriters, subject to approval as to legality by Stradling Yocca Cazlson & Routh, a Professional Corporation, Newport Beach, California, Bond Counsel, and subject to certain other conditions. Stradling Yocca Cazlson & Routh is also serving as Disclosure Counsel for the Agency. Certain legal matters will be passed on for the Agency by Kane, Ballmer & Berkman, Los Angeles, California, and for the Underwriters by Jones Hall, A Professional Law Corporation, San Francisco, California. It is anticipated that the 201 I Bonds, in book-entry form, will be available for delivery to DTC in New York, New York on or about June ~ 2011. Dated: 7une~ 2011 De La Rosa & Co. Wells Fargo Securities " Preliminary, subject to change. DOCSOC/ 148179 t v5/200120-0004 $41,050,000 REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA Earthquake Recovery Redevelopment Project 2011 Tag Allocation Bonds MATURITY SCHEDULE (Base CUSIP: ) $ % Term Bonds due July 1, 20_, Yield %CUSIP' No. $ % Term Bonds due July 1, 20~ Yield %CUSIPI No. $ % Term Bonds due July 1, 20~ Yie]d %CUSIPI No. Preliminary, subject to change. t Copyright 2011, American Bankers Association. CUSIP data herein is provided by Standard and Poo/s CUSIP Service Bureau, a division of The eNcGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute far the CUSIP Service. CUSIP numbers are provided for conveniettce of reference only. Neither the Agency or the Underwriters takes any responsibiliryfor the accuracy of such numbers. The CUSIP number for a specific makrriry is subject m being changed after the iss¢mnce of the 2071 Bonds as a result of various subsequent actions, Including but ttot 7rmited to a refunding in whole or in part ar as a result of the praamement of secandmy market portfolio insurance or other similar enhancement by investors that is applicable to all ar a portion of certain maturifies of the 20//Bonds. DOCSOG 1481791 v5/200120-0004 REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA AGENCY/CITY COUNCIL MEMBERS Richard Bloom, Agency Chair, Mayor Gleam Davis, Agency Vice Chair, Mayor Pro-Tempore Robert Holbrook, Agency Member,. Council Member Kevin McKeown, Agency Member, Coamcil Member Pam O'Connor, Agency Member, Council Member Terry O'Day, Agency Member, Council Member Bobby Shriver, Agency Member, Council Member ADMINISTRATIVE OFFICIALS Rod Gould, Agency Executive Director/City Manager Carol Swindell, Agency Treasurer/Director of Finance Andy Agle, Director of Housing and Economic Development Marsha Jones Moutrie, Agency General Counsel/City Attorney SPECIAL SERVICES Agency Counsel Kane, Ballmer & Berkman Los Angeles, California Financial Advisor Public Resources Advisory Group Los Angeles, California Bond Counsel and Disclosure Counsel Stradling Yocca Carlson & Routh a Professional Corporation Newport Beach, California Fiscal Consultant HdL Coren & Cone Diamond Bar, Califomia Trustee Union Bank of California, N.A. Los Angeles, California DOCSOC/ 1481791 v5/200120-0004 No dealer, broker, salesperson or other person has been authorized by the Agency to give any information or to make any representations with respect to the 2011 Bonds other than as contained in this Official Statement, and, if given or made, such other information or representation must not be relied upon as having been given or authorized by the Agency or the Underwriters. This Official Statement is submitted in connection with the sale of the 2011 Bonds described herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement does not constitute a contract between any Bond owner and the Agency or the Underwriters. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the 2011 Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the Agency, the other parties described in this Official Statement, since the date of this Official Statement. The Underwriters have provided the following sentence for inclusion in this Official Statement: The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, the responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. When used in this Official Statement and in any continuing disclosure made by the Agency, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "forecast," "expect," "intend" and similar expressions identify "forward looking statements" within the meaning of the Private Securities Litigafion Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. All summaries of the Indenture or other documents contained in this Official Statement are made subject to the provisions of such documents and do not purport to be complete statements of any or all such provisions. All references in this Official Statement to the Indenture and such other documents are qualified in their entirety by reference to such documents, which are on file with the Agency. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. The issuance and sale of the 2011 Bonds have not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon exemptions provided thereunder by Sections 3(a)(2) and 3(a)(12), respectively, for the issuance and sale ofmunicipal securities. The Underwriters may offer and sell the 201 I Bonds to certain dealers and dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and the Underwriters may change those public offering prices from time to time. The Agency and the City maintain a website. However, the information presented therein is not a part of this Official Statement and must not be relied upon in making an investment decision with respect to the Bonds. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR AFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAII, IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAYBE DISCONTINUED AT ANY TIME. DOCSOC/1481791v5/200t 20-0004 Insert Map DOC SOC/ 1481791 v~/200120-0004 TABLE OF CONTENTS Page INTRODUCTION ........................................ ......... I PLAN OF FINANCE ................................... .........3 Plan of Finance ......................................... .........3 Estimated Sources and Uses of Funds ...... .........3 THE 2011 BONDS ....................................... .........3 Authority for Issuance .............................. .........3 Description ............:................................... .........4 Redemption ............................................... .........4 Transfer and Exchange ............................. .........6 Debt Service Schedule .............................. .........7 SECURITY FOR THE 2011 BONDS :......... .........7 Tax Allocation Financing ......................... .........7 Tax Revenues ........................................... .........8 Pledge of TaxRevenues ........................... ...:.....9 Reserve Account ....................................... .........9 Parity Debt ................................................ .......10 THE AGENCY ............................................. .......11 Agency Existence and Personnel .............: ....... l l Agency Powers and Duties ....................... ....... l l Agency Financial Statements ................... .......12 Outstanding Agency Debt ......................... .......12 THE EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT .................. .......15 General ..................................................... .......15 Land Use ................................................... .......15 Redevelopment Plan Limitations .............. .......16 Major Taxable Properly Owners .............. .......17 Recent Transfers ........................................ ......17 Statutory Pass-Through Requirements ...... ......17 Tax Sharing Agreements ........................... ......18 Low and Moderate Income Housing ......... ......19 TAX REVENUES .......................:................. ...:..19 Historical Assessed Value and Tax Revenues .................................................... ......19 Appeals of Assessed Values ...................... ......21 Projected Tax Revenues ............................ ......22 Estimated Debt Service Coverage ............. ......25 RISK FACTORS ........................................... ......27 Reduction in Taxable Value and Tax Revenues .................................................... ...... 28 Concentration of Tax Base .:...................... ......28 Estimates of Tax Revenues ........................ ......28 Reduction in Inflationary Rate ................... ......28 Levy and Collection ................................... ......29 Risks Associated With Parity Debt ............ ......29 Bankruptcy Risks ....................................... ......29 State Budget and SERAF ........................... ......29 Governor's Proposal to Eliminate Paee Redevelopment ............................................. ... 31 Seismic Factors ............................................ ... 37 Hazardous Substances .................................. ... 38 Investment Funds ......................................... ... 38 Bankruptcy and Foreclosrve ......................... ... 38 Changes in the Law ...................................... ... 38 Bonds Are Limited Obligations ................... ... 38 Limited Recourse on Default ....................... ... 39 Secondary Market ........................................ ... 39 Loss of Tax Exemption ................................ ... 39 LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS........ ...39 Property Tax Limitations -Article XIIIA .... ... 39 Challenges to Article XIIIA ......................... ... 40 Implementing Legislation ...................:........ ... 40 Properly Tax Collection Procedures ............. ... 40 Unitary Property ........................................... :.. 41 Appropriations Limitations -Article XIIIB . ... 42 Statement of Indebtedness ............................ ... 42 Proposition 218 ............................................ ... 43 Future Initiatives ........................................... .. 43 OTHER MATTERS .......................................... .. 43 Litigation ........................:.............................. .. 43 Ratings .......................................................... .. 44 Tax Matters ................................................... .. 44 Continuing Disclosure ................................... .. 45 Underwriting ................................................. .. 46 Financial Statements .........................:........... .. 46 Financial Advisor .:........................................ .. 46 Professionals Involved in the Offering.......... .. 46 EXECUTION .................................................... .. 46 APPENDIX A - Summary of Certain Provisions of the Indenture APPENDIX B - Santa Monica General Information APPENDIX C - Audited Financial Statements of the Agency for Fiscal Year Ended June 30, 2010 APPENDIX D - Form of Bond Counsel Opinion APPENDIX E - Form of Continuing Disclosure Certificate APPENDIX F - Book Entry-Only System APPENDIX G - Fiscal Consultant Report DOCSOC/ 1481791 v5/200120-0004 $41,050,000' REDEVELOPMENT AGENCY OF TAE CITY OF SANTA MONICA Earthquake Recovery Redevelopment Project 2011 Tax Allocation Bonds INTRODUCTION This Official Statement, including the cover page, inside cover page, and appendices, is provided to furnish information in connection with the sale by the Redevelopment Agency of the City of Santa Monica (the "Agency") of the bonds captioned above (the "2011 Bonds"). This Introduction contains a brief summary of certain information contained in this Official Statement. It is not intended to be complete and is qualified by the more detailed information contained elsewhere in this Official Statement. Definitions of certain terms used in this Official Statement are set forth in APPENDIX A - "Summary of Certain Provisions of the Indenture." The City The City of Santa Monica, California (the "City"), is located in the western portion of Los Angeles County (the "County"), bordered by the City of Los Angeles on three sides and by the Pacific Ocean to the west. The City encompasses an area slightly greater than eight square miles and has an estimated population of 92,703 persons as of January 1, 2010. The City was incorporated as a general law city in 1886 and became a charter city in 1945. For certain information regarding the City, see APPENDIX B - "Santa. Monica Genera] Information." The Agency The Agency is a redevelopment agency existing under the Community Redevelopment Law of the State of California (the "State"), constituting Part 1 of Division 24 (commencing with Section 33000) of the California Health and Safety Code, as amended (the "Redevelopment Law"). The Agency was activated on August 13, 1957 by an ordinance of the City Council, at which time the City Cormcil declared itself to be the governing board of the Agency. See "THE AGENCY." The Project Area The Santa Monica Earthquake Recovery Redevelopment Project (the "Project Area") encompasses approximately 2.89 square miles or 34.8% of the City's total land area. The Project Area is almost entirely developed, with use (based on fiscal year 2010-I1 assessed value inclusive of unsecured values) primarily characterized as commercial (48.47%), residential (39.61%) and industrial (2.64%). The Project Area was formed after the 1994 Northridge Earthquake to assist in the maintenance, repair, restoration, demolition or replacement of property in the City as a result of the earthquake pursuant to the Redevelopment Law, as then constituted, the Community Redevelopment Financial Assistance and Disaster Project Law, as then constituted (Health & Safety Code Sections 34000 et seq., the "Disaster Project Law"), the California Constitution, and all applicable local codes and ordinances. See "THE EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT" for additional information on land use and property ownership within the Project Area. Preliminary, subject fo change. DOCSOC/1481791 v5/200120-0004 Authority fop Issuance The 2011 Bonds are being issued under the Redevelopment Law and pursuant to an Indenture of Trust as supplemented by a First Supplement to Indenture of Trust, each dated as of April 1, 2006, and a Second Supplement to Indenture of Trust dated as of May 1, 2011 (collectively, the "Indenture"), each by and between the Agency and Union Bank of California, N.A., Los Angeles, California, as trustee (the "Trustee"). See "THE 2011 BONDS -Authority for Issuance." Financing Purpose Proceeds of the 2011 Bands will be used for the following purposes: (i) to pay Agency costs of redevelopment activities in or of benefit to the Agency's Earthquake Recovery Redevelopment Project; (ii) to provide for a debt service reserve for the 2011 Bonds; and (iii) to pay the costs of issuing the 2011 Bonds. See "PLAN OF FINANCE." Pledge of Tax Revenues The 2011 Bonds are payable from and secured by Tax Revenues (as defined below), generally consisting of a portion of the tax increment eligible for allocation to the Agency pursuant to the Redevelopment Law from the Project Area. The pledge of Tax Revenues securing the 2011 Bonds is on a parity with the pledge of Tax Revenues securing the 2006 Bonds (defined below). Tax increment that the Agency is obligated to deposit into its Low and Moderate Income Housing Fund (the "Housing Set-Aside") is included in the definition of Tax Revenues for the purpose of paying up to 20% of the debt service on the 2006 Bonds (see "THE EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT -Low and Moderate Income Housing") and a portion of the debt service on any Parity Debt to the extent proceeds of such parity Debt are applied far eligible Housing Set-Aside purposes. Tax Revenues does not include amounts that the Agency is obligated to pay to other taxing agencies pursuant to statutory pass- through obligations established by the Redevelopment Law. See "THE EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT -Statutory Pass Through Requirements". Outstanding Parity Debt The 2011 Bonds are issued on a parity with the Agency's Earthquake Recovery Redevelopment Project, 2006 Tax Allocation Refunding Bonds, Series A (the "2006A Bonds") originally issued in the principal amount of $49,945,000 and the Agency's Earthquake Redevelopment Project, 2006 Taxable Tax Allocation Refunding Bonds, Series B (the " 2006B Bonds" and collectively with the 2006A Bonds, the "2006 Bonds") originally issued in the aggregate principal amount of $14,775,000. The 2006 Series A Bonds are currently outstanding in the principal amount of $49,945,000 and the 2006 Series B Bonds are currently outstanding in the principal amount of $4,005,000. Additional Parity Debt The Indenture permits the Agency to issue additional bonds payable from Tax Revenues on a parity basis to the 2006 Bonds and the 2011 Bonds. See "SECURITY FOR THE 2011 BONDS -Parity Debt." The 2006 Bonds, the 2011 Bonds and future "Parity Debt" (defined below) issued under the terms of the Indenture are collectively referred to in this Official Statement as the `Bonds." Possible Risk Factors Any future decrease in the taxable valuation in the Project Area or in the applicable tax rates could reduce the Tax Revenues allocated to the Agency and correspondingly could have an adverse impact on the DOCSOC/1481791 v5/200120-0004 ability of the Agency to pay debt service on the 2011 Bonds. Currently pending legislation would eliminate redevelopment agencies and alter the mechanism by which tax revenues would be made available to pay debt service on the 2011 Bonds. See "RISK FACTORS: ' PLAN OF FINANCE The 2011 Bonds are being issued primarily to pay the cost of redevelopment activities of the Agency in or of benefit to the. Project Area. Proceeds of the 2011 Bonds will also be used to provide for a debt service reserve account for the 2011 Bonds and pay the costs of issuing the 2011 Bonds. Plan of Finance Proceeds .from the sale of the 2011 Bonds will be used by the Agency to finance redevelopment activities within or benefiting the Project Area, including but not limited to a payment to the City to satisfy a portion of the Agency's obligations pursuant to the Master Cooperation Agreement dated as of September I, 2010 by and between the Agency and the City. See "THE AGENCY-Outstanding Agency Debt-City Obligation" herein. The Agency (or the City pursuant to the Master Cooperation Agreement) plans on applying 2011 Bond proceeds to fund the following: [Describe use of proceeds for Projects] Estimated Sources and Uses of Funds The anticipated sources and uses of funds relating to the 2011 Bonds are as follows: SOURCES OF FUNDS Principal Amount $ Plzrs/Less: Net Premium/(Discount) Less: Underwriters' Discount Total Sources of Funds $ USES OF FUNDS Costs of Issuance Fund P) $ Redevelopment Fund 1~1 2011 Reserve Account Total Uses of Funds $ ~'~ Represents the costs of issuing the 2011 Bonds, Trustee fees, Bond Counsel and Disclosure Counsel fees and expenses, Agency Counsel fees; Financial Advisor fees and expenses, fiscal consultant fees and expenses, printing costs, rating agency fees and other related costs. «1 To be transferred to the Agency for deposit in the Redevelopment Fund. THE 2011 BONDS Authority for Issuance The 2011 Bonds are being issued pursuant to the Redevelopment Law, the Indenhve, a resolution of the Agency adopted on May 24, 2011, and a resolution of the City adopted on May 24, 2011. The 2011 Bonds will initially be sold to Santa Monica Public Financing Authority, which will immediately sell the 201 I Bonds to the Underwriters. DOCSOC/ 1481791 v5/200120-0004 Description The 2011 Bonds will be dated their date of delivery (the "Closing Date"), will be issued as filly registered bonds in denominations of $5,000 or any integral multiple of $5,000, and will mature in the amounts and on the dates as set forth on the inside cover of this Official Statement. Interest on the 2011 Bonds will be payable semiannually on January 1 and July I of each year (each, an "Interest Payment Date"), commencing July 1, 2011. Interest due on the 2011 Bonds will be calculated on the basis of a 360-day year comprised of twelve 30-day months at the respective rates per annum, as set forth on the inside cover page of this Official Statement. Interest on the 2011 Bonds will be payable. from the Interest Payment Date next preceding the date of authentication thereof unless (i) a 2011 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 2011 Bond is authenticated on or before the first Record Date, in which event interest thereon shall be payable from the Closing Date, or (iii) interest on any 2011 Bond is in default as of the date of authentication 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. A "Record Date" means, with respect to any Interest Payment Date, the 15th calendar day of the month immediately preceding such Interest Payment Date, whether or not such day is a Business Day. Payment of interest on the 2011 Bonds is payable in lawful money of the United States of America on each appropriate Interest Payment Date to the registered owner thereof according to the registration books of the Trustee (the "Owner") as of the close of business on the Record Date. DTC will act as securities depository for the 2011 Bonds. The 2011 Bonds will be executed and delivered as fully-registered securities registered initially in the name of Cede & Co. (OTC's partnership nominee). So long as Cede & Co. is the registered owner of the 2011 Bonds, as nominee of DTC, references in this Official Statement to the "Owners" will mean Cede & Co., and will not mean the Beneficial Owners of the 2011 Bonds. See APPENDIX F - "Book Entry-Only System." Principal of and, premium, if any, and interest on the 2011 Bonds are payable directly to DTC by the Trustee in lawful money of the United States of America. Upon receipt of payments of principal, premium or interest, DTC is to remit such principal, premium or interest to the "DTC Participants" (as defined in Appendix F) for subsequent disbursement to the Beneficial Owners of the 2011 Bonds. See APPENDIX F - "Book Entry-Only System." Redemption Optional Redemption. The 2011 Bonds maturing on or before July 1, 20~ are not subject to optional redemption prior to maturity. The 2011 Bonds maturing on and after July 1, 20, are subject to redemption in whole, or in part among maturities on such basis as shall be designated in a Request of the Agency filed with the Trustee, and in any case by lot within a maturity, on any date on or after July 1, 20~ at the option of the Agency from any available source of funds, at a redemption price equal to the principal amount of the ZOI1 Bonds to be redeemed plus accrued interest thereon to the redemption date, without premium. Mandatory Sinking Fund Redemption. The 2011 Bonds maturing July 1 in each of the years and shall be subject to mandatory sinking fund redemption in part by lot on July 1, July 1, and July 1, ,respectively, and on July 1 in each year thereafter, from Sinking Account payments made by the Agency, at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium, or in ]ieu thereof shall be DOCSOG 1481791 v5/200120-0004 4 purchased by the Agency as described below, in the aggregate respective principal amounts and on the dates as set forth in the following table (provided, however, that if some but not all of such 2011 Bonds have been redeemed, the total amount of all future Sinking Account payments attributable to such 2011 Bonds shall be reduced by the aggregate principal amount of such 2011 Bonds so redeemed, to be allocated among such Sinking Account payments on a pro rata basis, or on such other basis, in integral multiples of $5,000 as determined by the Agency (written notice of which determination shall be given by the Agency to the Trustee)): Term Bond Maturing on July 1, 20_ Sinking Account Redemption Date (July 1) 20 20 t Principal Amount To Be Redeemed or Purchased j Maturity. Term Bond Maturing on July 1, 20_ Sinking Account Redemption Date Principal Amount (July I) To Be Redeemed or Purchased 20 $ 20 j Maturity. Term Bond Maturing on July 1, 20_ Sinking Account Redemption Date (July 1) 20 20 ~ Principal Amount To Be Redeemed or Purchased j Maturity. In lieu of mandatory sinking fund redemption of any 2011 Bonds, amounts on deposit in the Special Fund may also be used and withdrawn by the Agency at any time for the purchase of such 2011 Bonds at public or private sale as and when and at such prices (including brokerage and other charges and including accrued interest) as the Agency may in its discretion determine. The par amount of any of the 2011 Bonds so purchased by the Agency in any twelve-month period ending on January 1 in any year shall be credited towards and shall reduce the par amount of such 2011 Bonds required to be redeemed on July 1 in such year. Notice of Redemption. The Trustee will mail notice of redemption (by first class mail, postage prepaid) at least 30 days prior to the redemption date to the respective registered Owners of the 2011 Bonds designated for redemption. Rescission of Notice of Redemption. The Agency has the right to rescind any optional redemption by written notice to the Trustee on or prior to the date fixed for redemption. A notice of optional redemption will be canceled and annulled if for any reason funds will not be or are not available on the proposed redemption date, and a cancellation will not constitute an Event of Default under the Indenture. The Agency and the Trustee will have no liability to the Owners or any other party related to or arising from a rescission of DOC SOC/1481791 v5/200120-0004 redemption. The Trustee will mail notice of a rescission of redemption in the same manner as the original notice of redemption was sent. Selection of Bonds for Redemption. Whenever any 2011 Bonds or portions thereof are to be selected for redemption by lot, the Trustee will make such selection, in such manner as the Trustee shall deem fair and appropriate. For purposes of such selection, all 2011 Bonds shall be deemed to be comprised of separate $5,000 denominations and such separate denominations shall be treated as separate Bonds which may be separately redeemed. Transfer and Exchange The 2011 Bonds will be initially delivered only in book-entry form. So long as the book-entry system is in effect with respect to the 2011 Bonds, transfer and exchange of 2011 Bonds will be made in accordance with book-entry procedures. See APPENDIX F - "Book Entry-Only System" below. The Trustee shalTmaintain at its principal corporate trust office books for the registration, exchange and transfer of the 2011 Bonds. In the event of discontinuance of the Book-Entry System, any 2011 Bond may, in accordance with its terms, be transferred, upon said registration books, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer in a form approved by the Trustee, duly executed and meeting the other requirements of the Indenture. DOCSOC/t 481791v5/200120-0004 Debt Service Schedule Scheduled debt service on the 2011 Bonds and the 2006 Bonds, without regard to any optional redemption, is shown in the following table: TABLE 1 Debt Service Schedules Year Ending 2006 Bonds Jaly 1 Principa/'t 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 Bonds 2006 Bonds 2006 Bonds 2017 Bonds 2011 Bonds 2017 Bonds Aggregate Interesf`~ Totalt't Principal Interest Tota! Total ~~~ The principal and interest on the 2006B Bonds maturing on July I, 2011 was defeased by the Agency on 2011. SECURITY FOR THE 2011 BONDS Tax Allocation Financing The Redevelopment Law provides a means for financing redevelopment projects based upon an allocation of taxes collected within a redevelopment project area. The taxable valuation of a redevelopment project area last equalized prior to adoption of the redevelopment plan, or base roll, is established and, except for any period during which the taxable valuation drops below the base year level, the taxing agencies thereafter receive the taxes produced by the levy of the then-current tax rate upon the base roll. Taxes collected upon any increase in taxable valuation over the base roll are allocated to a redevelopment agency and may be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing or refmancing a redevelopment project. Redevelopment agencies themselves have no authority to levy property taxes and must look specifically to the allocation of taxes produced as indicated above. DOC SOC/1481791 v5/200120-0004 See APPENDIX G - "Fiscal Consultant Report" for more information about applicable tax rates in the Project Area. Tax Revenues General. As provided. in the redevelopment plan for the Project Area (the "Redevelopment Plan"), and pursuant to Article 6 of Chapter 6 of the Redevelopment Law (commencing with Section 33670 of the California Health and Safety Code) and Section 16 of Article XVI of the Constitution of the State of California, taxes levied upon taxable property in a redevelopment project area each year by or for the benefit of the State of California and any city, county, city and county, district or other public corporation (collectively referred to as "taxing agencies") for each fiscal year beginning after the effective dates of the ordinance approving the original redevelopment plan for the redevelopment project area, are divided as follows: 1. To other taxing a eq ncies: That portion of the taxes which would be produced by the rate upon which the tax is levied each year by or for each of the taxing agencies upon the total sum of the assessed value of the taxable property in the redevelopment project area as shown upon the assessment roll used in connection with the taxation of such property by such taxing agency last equalized prior to the establishment of the redevelopment project area (the "Base Year Amount") will be allocated to and when collected will be paid into the funds of the respective taxing agencies in the same manner as taxes by or for the taxing agencies on all other property are paid; and 2. To the Agency: Except for tares which are attributable to a tax rate levied by a taxing agency for the purpose of producing revenues to repay bonded indebtedness approved by the voters of the taxing agency on or after January 1, 1989, which will be allocated to and when collected will be paid to the respective taxing agency, and except for statutory pass-through payments, that portion of the levied taxes each year in excess of the Base Year Amount will be paid into a special fund of the Agency to pay the principal of and interest on bonds, loans, moneys advanced to, or indebtedness (whether funded, refunded, assumed, or otherwise) incurred by the Agency to finance or refinance, in whole or in part, the redevelopment project area. When all bonds, loans, advances, and indebtedness, if any, and interest thereon, have been paid, all moneys thereafter received from taxes upon the taxable property in the redevelopment project area is paid into the funds of the respective taxing agencies as taxes on all other property are paid. Definition. The term "Tax Revenues" is defined in the Indenture to mean all taxes annually allocated to the Agency with respect to the Project Area following the Closing Date, pursuant to Article 6 of Chapter 6 (commencing with Section 33670) of the Redevelopment Law and Section 16 of Article XVI of the Constitution of the State and as provided in the Redevelopment Plan, including all other payments, subventions and reimbursements (if any) to the Agency specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations (but excluding payments to the Agency with respect to personal property within the Project Area pursuant to Section 16110, et seq., of the Government Code of the State of California); provided, however, that Tax Revenues shall not include (a) all amounts of such taxes required to be deposited into the Low and Moderate Income Housing Fund of the Agency in any Fiscal Year pursuant to Section 33334.3 of the Redevelopment Law, except to the extent permitted under the Redevelopment Law to be applied to the payment of the principal of and interest and premium (if any) on the 2006 Bonds, the 2011 Bonds or any Parity Debt and (b) amounts payable by the Agency pursuant to the Pass- Through Agreements and Sections 33607.5 and 33607.7 of the Redevelopment Law, to the extent not subordinated to the payment of principal of and interest and prepayment premium (if any) on the 2011 Bonds or any Parity Debt. See "THE EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT -Low and Moderate Income Housing" herein: The Agency is subject to a number of statutory pass-through obligations that are payable from tax increment revenue prior to the calculation of Tax Revenues and are accordingly paid from tax increment prior DOC SOC/ 1481791 v5/200120-0004 to the payment of debt service on the Bonds. See "THE EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT -Statutory Pass-Through Requirements". The Agency's ability to collect tax increment and pay debt service is constrained by limitations set forth in the Redevelopment Plan. See "THE EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT -Redevelopment Plan Limitations." See "RISK FACTORS" and "LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS" below for information about various factors that could. impact the availability of Tax Revenues. Pledge of Tax Revenues The 2011 Bonds and any additional obligations payable from Tax Revenues on a parity with the 2011 Bonds, including the 2006 Bonds ("Parity Debt") are secured by a first pledge of, security interest in and lien on the Tax Revenues. A special fund known as the "Special Fund," which is held by the Agency, was previously established for the Bonds under the Indenture. The Agency will deposit all of the Tax Revenues from the Project Area received in any Bond Year in the Special Fimd promptly upon receipt by the Agency. Amounts in the Special Fund will be used to first pay the amounts due with respect to the 2006 Bonds, the 2011 Bonds and any additional Parity Debt. Amounts in the Special Fund are also to be used to replenish the Reserve Account (described below). Tax Revenues received during a Bond Year in excess of the amounts required to be paid for such purposes are released from the pledge and lien of the Indenture and may be used for any lawful purpose of the Agency. Reserve Account A special account known as the "Reserve Account", which is held in trust by the Trustee, was previously established for the Bonds together with subaccounts for each series of 2006 Bonds, the 201 I Bonds and any Parity Debt. The amounts on deposit in subaccounts of the Reserve Account related to the 2006 .Bonds secure only the 2006 Bonds and do not secure any other Bonds. The amounts on deposit in the subaccount established for the 2011 Bonds will secure only the 2011 Bonds and not any other Bonds. The amount on deposit in the Reserve Account shall be maintained at the Reserve Requirement in accordance with the terms of the Indenture. The term "Reserve Requirement" is defined in the Indenture to mean, as of the date of any calculation, the lesser of (a) Maximum Annual Debt Service or (b) the maximum amount permitted to be deposited in the Reserve Account under the Internal Revenue Code of 1986, as certified to the Trustee by the Agency. The term "Maximum Annual Debt Service" is defined in the Indenture to mean, as of the date of calculation, the largest aggregate amount of scheduled debt service for the current or any future Bond Year payable on the 2006 Bonds, the 2011 Bonds and any additional Parity Debt in such Bond Year. For purposes of such calculation, there are excluded (i) interest on any Parity Debt which is to be paid from amounts constituting capitalized interest and (ii) payments with respect to any Parity Debt to the extent that the proceeds of such Parity Debt are deposited in an escrow fund from which amounts may not be released to the Agency unless the Tax Revenues for the current Fiscal Year (as evidenced in the written records of the County) are at least equal to one hundred twenty five percent (125%) of the amount of Maximum Annual Debt Service. Currently, the 2006 Bonds are secured by a Municipal Bond Debt Service Reserve Fund Policy (the "2006 Reserve Fund Policy") issued by Financial Guaranty Insurance Corporation ("FGIC") in the maximum amount of $4,453,693.76. At closing, $ will be deposited into the 201 I subaccount of the Reserve Account for the 2011 Bonds, which, together with the 2006 Reserve Policy, will equal the Reserve Requirement. The Agency has the right at any time to direct the Tmstee to release funds from the Reserve Account, in whole or in part, by tendering a Qualified Reserve Account Credit Instmment to the Trustee. See DO C S O C/ 1481791 v5/200120-0004 APPENDIX A - "Summary of Certain Provisions of the Indenture: ' The 2006 Reserve Fund Policy has been reinsured by National Public Finance Guarantee Corp., formerly MBIA Insurance -Corp. of Illinois ("NPFGC"). According to a posting on the FGIC website dated August 4, 2010, FGIC Corporation, the parent company of FGIC, has filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. Such posting also states that none of its subsidiaries or affiliates, including FGIC, is part of the Chapter 11 filing. According to a posting on The FGIC website dated December 2, 2010, investors holding securities guaranteed by FGIC have formed a policyholder group to negotiate a proposed restructuring plan with FGIC. Information set forth on either of such websites is not incorporated herein by reference. In the event that the 2006 Reserve Fund Policy were to be terminated or discharged in a bankruptcy proceeding, the Agency would be required to deposit available Tax Revenues to the 2006 Bonds subaccount of the Reserve Account in an amount that would bring the funds on deposit in the Reserve Account up to the Reserve Requirement. Parity Debt The 2011 Bonds have been issued as Parity Debt under the Indenture. The Indenhue provides that, in addition to the 2006 Bonds and the 2011 Bonds, the Agency may issue or incur additional Parity Debt in such principal amount as determined by the Agency. The Agency may issue or incur such Parity Debt subject to specific conditions precedent, including the following: (a) The Tax Revenues estimated to be received for the then current Bond Year, based on the assessed value of property within the Project Area as set forth in the written records of the County, plus (at the option of the Agency) the Additional Revenues, shall be at least equal to 125% of Maximum Annual Debt Service on all Bonds which will be Outstanding immediately following the issuance of such Parity Debt. For purposes of computing the amount of Tax Revenues, the following requirements will be observed: (i) Tax Revenues will be calculated on the basis of a tax rate of $1.00 per $100 of assessed value and will not include the amounts of any State tax subventions; (ii) the amount of Tax Revenues will be the amount received in the most recent Fiscal Year (which may be the then-current Fiscal Year) for which records are available from the County establishing the assessed valuations of property in the Project Area; (iii) The Indenture defines "Additional Revenues" to mean, as of the date of calculation, the amount of Tax Revenues which, as shown in the Report of an Independent Fiscal Consultant, are estimated to be receivable by the Agency within the Fiscal Year following the Fiscal Year in which such calculation is made as a result of increases in the assessed valuation of taxable property in the Project Area due to the completion of construction which is not then reflected on the tax rolls, or due to transfer of ownership or any other interest in real property which has been recorded but which is not then reflected on the tax rolls. (b) The Parity Debt Instrument providing for the issuance of such Parity Debt will provide for the deposit into the Reserve Account of an amount required to cause The balance Thereinto equal the full amount of the Reserve Requirement, which deposit will be made concunent with the issuance of such Parity Debt and may be in who]e or in part in the form of a Qualified Reserve Account Credit Instrument. (c) The proceeds of such Parity Debt may be deposited into an escrow fund from which amounts may not be released to the Agency unless and until the Tax Revenues (as evidenced in the written records of the County) at least equal 125% of the amount of Maximum Annual Debt Service. See APPENDIX A - "Simunary of Certain Provisions of the Indenture." 10 Doc soa t as t ~9 t vsizoo l zo-oooa The Project Area currently has a limit on bonded indebtedness that can be Outstanding at any one time of $95,000,000. As of the date of issuance of the 2011 Bonds, $95,000,000# in Bonds will be Outstanding. See "THE EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT - Redevelopment Plan Limitations" herein. THE AGENCY Agency Existence and Personnel The Agency was established by the Santa Monica City Council on August 13, 1957 pursuant to the Redevelopment Law. With the approval of the Council, the Mayor appointed the original five members of the Agency simultaneously with its creation. Appointive members continued to serve until May 1972 when the Cotmcil, pursuant to Section 33200 of the Redevelopment Law, declared itself to be the Agency and assumed all the rights, powers, duties, privileges and immunities vested in the Agency. The purpose of the Agency is to eliminate blight and to promote economic revitalization within designated project areas of the City. The Agency has three project areas other than the Project .Area: the Downtown Redevelopment Project Area, Ocean Park Redevelopment Project Area lA and Ocean Park Redevelopment Project Area IB. The members of the City Council of the City serve as the governing body of the Agency and exercise all rights, powers, duties and privileges of the Agency. Members of the Agency and their terms of office are shown below: Member .Term Expires Richard Bloom, Agency Chair November 2012 Gleam Davis, Agency Vice Chair November 2012 Robert Holbrook, Member November 2014 Kevin McKeown, Member November 2014 Pam O'Connor, Member November 2014 Terry O'Day, Member November 2012 Bobby Shriver, Member November 2012 The Agency has entered into various agreements with the City for financial assistance and services, facilities and personnel support. The Agency reimburses the City for all such services performed on its behalf in amounts equal to the gross salary and employee fringe benefits for all City employees used by the Agency, plus an allocation of overhead costs. Agency Powers and Duties Redevelopment in the State of California is carried out pursuant to the Redevelopment Law. Section 33020 of the Redevelopment Law defines redevelopment as the planning, development, replanning, redesign, clearance, reconstruction or rehabilitation, or any combination of these, of all or part of a survey area and the provision of such residential, commercial, industrial, public or other structures or spaces as may be appropriate or necessary in the interest of the general welfare, including recreational and other facilities incidental or appurtenant to them. All powers of the Agency are vested in its seven members. The Agency exercises governmental functions in carrying out projects and has authority to acquire, develop, administer and sell or lease property, including the right to acquire property, to issue bonds and expend their proceeds. Preliminary, subject to change. ll DOCSOG1481791v5YZ00120-0004 The Agency is authorized to clear buildings and other improvements, develop as a building site any real property owned or acquired, and in connection with such development, cause streets, highways, and sidewalks to be constructed or reconstructed and public utilities to be installed. The Agency may, out of the funds available to it for such purposes, pay for all or part of the value of the land and the cost of buildings, facilities, structures or other improvements to be publicly owned and operated to the extent that such improvements are of benefit to the project area and no other reasonable means of financing is available. The Agency must sell or lease remaining properly within a project for redevelopment by others in strict conformity with the redevelopment plan, and may specify a period within which such redevelopment must begin and be completed. Agency Financial Statements The Redevelopment Law requires redevelopment agencies to have an independent financial audit conducted each year. The financial audit is also required to include an opinion of the Agency's compliance with laws, regulations and administrative requirements governing activities of the Agency. The firm of Mayer Hoffman McCann P.C., independent accountants, prepared a financial statement for the Agency for the fiscal year ended June 30, 2010. The firm's examination was made in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Audit Standards, issued by the Comptroller General of the United States. The Agency follows fund accounting principles reflecting the modified accrual basis of accounting in which revenues are recognized when they become measurable and available and expenditures are generally recognized when incurred except for principal and interest on general long-term debt, which is recognized when due. The audited financial statements of the Agency, including Mayer Hoffman McCann P.C.'s auditor's report and report on compliance and on internal control over financial reporting, are attached as APPENDIX C - "Audited Financial Statements of the Agency for Fiscal Year Ended June 30, 2010." Mayer Hoffman McCann P.C. has not performed any post-audit review of the financial condition or operations of the Agency. Outstanding Agency Debt Other than the 2006 Bonds, the Agency has no outstanding indebtedness secured by a pledge of Tax Revenues on a parity with the 2011 Bonds. The Agency does, however, have various indebtedness and obligations payable from tax increment generated in the Project Area. See APPENDIX C - "Audited Financial Statements of the Agency for Fiscal Year Ended June 30, 2010." The Agency has entered into a number of obligations which are either secured by a pledge of all or a portion of Tax Revenues on a basis that is subordinate to the pledge and lien on Tax Revenues for repayment of the 2006 Bonds and the 2011 Bonds Lmder the Indenture or which are not secured by a pledge of any part of Tax Revenues. Principal Agency obligations secured by a pledge of Tax Revenues on a basis subordinate to the Bonds are set forth below. City Obligation. On September 1, 2010 the Agency entered into a Master Cooperation Agreement and two separate implementing agreements with the City of Santa Monica to commit $5.7 billion to the construction of various projects in support of the Agency's Five Year Implementation Plan goals of affordable housing, disaster prevention and mitigation, community revitalization and other purposes, all in accordance with Section 33445 of the Law. The Agency's obligations to the City under the Master Cooperation Agreement are secured by a pledge of tax increment revenues on a basis subordinate to the pledge of Tax Revenues to the Bonds. Lastly, the Agency is indebted to the City's Parking Authority pursuant to a certain Purchase/Sales Agreement for the purchase/sale of six downtown parking structures with related land for an initial principal amount of $60 million. The related promissory notes, sectved by a deed of trust, call for annual principal 12 DOCSOC/ 1481791 v~/200120-0004 payments on a fully amortizing basis for a total term of 30 years. The Agency's payment obligation is not secured by a pledge of gross tax increment of the Agency and is expressly subordinate to the Bonds, as confirmed by resolution of the City adopted May 24, 2011. Bank Loans. On May 1, 2008, the Agency entered into a Line of Credit Agreement with Bank of America, N.A. (the "Bank of America Loan Agreement"). The Agreement calls for an initial line of credit of up to $50 million which may be increased at the Bank's option to $75 million at the request of the Agency. The line is secured by future property tax increment revenues of the Agency for the Project Area attributable to the Housing Set-Aside. The Agency has drawn all of the initial $50 million available to be drawn under the line of credit [and has transferred such amounts which remain Lmexpended to the City for application pursuant to the Master Cooperation Agreement]. The Agency's obligation lender the Bank of America Loan Agreement is subordinate to the Bonds. The Agency makes annual payments at a variable interest rate in amounts which are expected to be fully amortized by June 1, 2031. On March 11, 2011, the Agency entered into a Loan Agreement with Wells Fargo Bank, National Association (the "Wells Fargo Bank Loan Agreement" and, together with the Bank of America Loan Agreement, the "Bank Loans"). Pursuant to the Wells Fargo Loan Agreement, the Agency has borrowed $60 million to fund projects identified in the Agency's Five Year Implementation Plan and further identified in the Wells Fargo Loan Agreement and the Master Cooperation Agreement. [The Agency has transferred the proceeds of the Wells Fargo Bank Roan to the City for implementation and application pursuant to the Master Cooperation Agreement.] The Agency's obligations under the Wells Fargo Bank Loan Agreement are secured by a pledge of Tax Revenues of the Agency, exclusive of Housing Set-Aside, on a basis subordinate to the Agency's pledge of Tax Revenues under the Indenture for the 2006 Bonds and the 2011 Bonds. The Bank Loans were entered into pursuant to the Agency's authority to receive bank loans and do not constitute bonded indebtedness of the Agency for purposes of the Agency's bonded indebtedness limit. Future Subordinate Obligations. The Agency enters into other agreements from time to time which may be material to the Agency's ftnances and which are permitted under the Indenture as Subordinate Debt. See APPENDIX A - "Summary of Certain Provisions of the Indenture-Issuance of Subordinate Debt." DOCSOC/ 1481791 v5/200120-0004 13 [Insert Map] DOC SOC/ 1481791 v5/200120-0004 14 THE EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT General On January 17, 1994, the Northridge Earthquake occurred with serious consequences in the. City. The President declared the earthquake to be a major disaster under federal law. . On June 21, 1994, pursuant to the Redevelopment Law, the Disaster Project Law, the California Constitution, and all applicable local codes and ordinances, the City adopted the Redevelopment Plan for the Project and established the Project Area. Redevelopment of the Project Area pursuant to the Redevelopment Plan is expected to attain the purposes of the Redevelopment Law and the Disaster Project Law by: (1) planning, design and/or redevelopment of areas which are in need of maintenance, repair, restoration, demolition or replacement as a result of the Northridge Earthquake; (2) protecting and promoting sound development and redevelopment ofearthquake-stricken areas and injurious conditions through the employment of appropriate means; (3) installation of new or repairing or replacing existing public improvements, facilities and utilities in areas which are currently inadequately served with regard to such improvements, facilities and utilities; and (4) other means as determined appropriate by the Agency. The Project Area encompasses approximately 2.89 square miles or 34.8% of the City's total land area of 8.3 square miles. As set forth on the map of the Project Area above, the Project Area is generally bounded by Pico Boulevard on the south, 26th Street on the east, Montana Avenue on the north and Pacific Coast Highway/Ocean Front Walk to the west. Slightly less than one-half of the City's population of 92,703 (as of January I, 2010) resides in the Project Area. Selection of the Project Area boundaries was guided by inclusion of the most severely damaged properties in need of public assistance for repair and recovery; approximately 90% of all red-tagged and approximately 80% of all yellow-tagged buildings in the City at the time of formation were included in the Project Area. Land Use The table below summarizes Project Area land uses and assessed values in the Project Area. TABLE2 Earthquake Recovery Redevelopment Project Summary of Land Uses Percent of No. of Total Assessed Category Parcels 2010-II Value~'~ Value Residential 6,340 $ 4,131,177,046 39.61% Commercial 1,037 5,055,785,610 48.47 Industrial 180 275,720,622 2.64 Institutional 102 128,958,666 1.24 Dry Farm 1 703,142 0.01 Recreational 17 25,150,467 0.24 Vacant Land 77 64,819,474 0.62 Government/Exempt 195 0 0.00 Total Parcels: 7,949 $ 9,682,315,027 92.83 Possessory Interest $ 217,893,457 2.09 Unsecured 530.191,136 5.08 Total Value: 10.430.399.620 ioo.nn% Source: HdL Coren & Cone. 15 DOCSOC/148179Iv5/200120-0004 Redevelopment Plan Limitations The Agency has covenanted in the Indenture to undertake financing of redevelopment of the Project Area in conformance with the Redevelopment Plan and the Redevelopment Law. The Redevelopment Plan was adopted by the City Council on June 21, 1994 pursuant to Ordinance No. 1747. Pursuant to Senate Bill 1045 ("SB 1045") in connection with adoption of statutes requiring an ERAF shift for fiscal year 2003-04, and pursuant to Senate Bill 1096 ("SB 1096"} in connection with the adoption of statutes requiring an ERAF shift for fiscal years 2004-OS and 2005-06, the State Legislature authorized amendments of redevelopment plans to extend by one year the time limit of the effectiveness of the plan and the time limit to repay indebtedness and receive tax increment. Accordingly, the City Council has extended the time limits of the Project Area as permitted by SB 1045 pursuant to Ordinance No. 2108 (CCS) adopted on January 13, 2004. The Agency further extended the time limits as permitted by SB 1096 pursuant to Ordinance No. 2197 (CCS) adopted on July 11, 2006. The following table summarizes the various limitations established by the Redevelopment Plan with respect to tax increment and bonded indebtedness. Description LimilatioH Plan Life: June 21, 2027 Final Date to Incur Debt <0: June 21, 2014 Pinal Date to Collect Tax Increment and Repay Debt: June 21, 2042121 Limit on Tax Increment allocated to the Agency: None Limit on Outstanding Bonded Indebtedness 131: $95,000,000 Outstanding Bonded Indebtedness141: $95,000,000' "' This limit does not prevent the Agency from incurring debt to be paid from the Agency's Low and Moderate Income Housing Fund or establishing more debt in order to fu1511 the Agency's housing obligations under Section 33413 of the Redevelopment Law. Housing Set-Aside is pledged to payment of up to 20% of the debt service on the 2006 Bonds. (~) The Agency has covenanted in the Indenture to pay the debt service due on the 2011 Bonds maturing on 7uly 1, 2042 on or prior to June 21, 2042. 131 This limitation does not limit non-bonded indebtedness, including loans, advances or reimbursement agreements. Limit is on Bonds Outstanding at any one time. (a) Includes the 2011 Bonds. Source: The Agency. Preliminary, subject to change. 16 DOCSOC/1481791 v5/200120-0004 Major Taxable Property Owners Major Owners List. The following table identifies the top 10 property owners, describes their land use within the Project Area, and identifies each owner's share of the 2010-11 Project Area assessed value. TABLE3 Earthquake Recovery Redevelopment Project Top Ten Taxable Property Owners Fiscal Year2010-11 (t) Owner 1 California Colorado Center LLC 11 2 Water Garden Realty Holding LLC 3 Ocean Avenue LLC 1i> 4 New Santa Monica Beach Hotel 11 5 RAND Corporation 6 Douglas Emmett Realty Fund 199811 7 Sisters of Charity Leavemvorth Health 1'1 8 CLPF-Arboretum 9 1299 Ocean LLC (~1 0 Equity Office Properties (0 Totals Total and Incremental Values of Tatal ofTotal 7nerementaZ Description Assessed 1~alue Assessed Vnlue hulue $ 469,587,234 4.50% 7.14% 456,965,588 4.38% - 6.9~% 146,613,466 1.41% 2.23% 136,423,289 1.31% 2.07% 131,690,037 1.26% 2.00% 118,217,078 1.13% 1.80% 114,185,821 1.09% 1.74% 104,863,751 1.01% 1.59% 96,600,000 0.93% 1.47% 75.990.000 0_73% 1_16% $ 1,851,136,264 17.75% 28.15% 510,430,399,620 $6,575,102,284 1O Property owners with pending assessment appeals. See "TAX REVENUESAppeals of Assessed Values." Source: HdL Coren & Cone Recent Transfers The projection of Tax Revenues (see "TAX REVENUES -Projected Tax Revenues") identifies 289 transfers of ownership that occurred after the January 1, 2010 lien date for fiscal year 2010-I 1. These transfers are expected to add $86;271,428 in new value to the fiscal year 2011-12 County tax roll (for transfers from January 1, 2010 through December 31, 2010) and $7,779,962 in new value to the fiscal year 2012-13 tax roll (for transfers from Januazy 1, 2011 through February 28, 2011) for the Project Area. See APPENDIX G "Fiscal Consultant Report." The projections also identify potential reduction in value from parcels in foreclosure of $10,016,000 for fiscal year 2012-13. Statutory Pass-Through Requirements General. Under the Redevelopment Law (Health & Safety Code Section 33607.5), "statutory pass-through" payments are made to all jurisdictions receiving a portion of the basic one percent levy. The pass-through payments are made as follows during three statutorily-defined periods (except for the City which receives its portion only as to the first allocation below): First vear the Agency receives tax increment (Fiscal Year 1995-961 through the life of the Proiect Area: The Agency must pay 25 percent of gross tax increment revenue (net of Housing Set-Aside). 17 DOCS OC/1481791 v5/200120-0004 Year 11~F'iscal Year 2005-06) after the Agency first receives tax increment through the life of the Project Area: The Agency must pay 21 percent of the tax increment revenue (net of Housing Set-Aside) derived from growth in assessed value in excess of the assessed value of the Project Area in Year 10. Year 31 (Fiscal Year 2025-26) after the Agency first receives tax increment throe the life of the Project Area: The Agency must pay 14 percent of the tax increment revenue (net of Housing Set-Aside) derived from growth in assessed value in excess of the assessed value of the Project Area in the 30th year. The Agency pays statutory pass-through payments to various County- and school-related entities. Santa Monica Community College District Cooperation Agreement. The Agency is a party to a Cooperation Agreement (Contract No. 8216 (RAS)) (The "SMCCD Cooperation Agreement") with the Santa Monica Community College District ("SMCCD") dated July 15, 2005 pursuant to which the Agency agreed to reimburse SMCCD for up to $10,206,823 of the costs of building a new liberal arts building. The Agency made its first reimbursement payment in Fiscal Year 2005-06. The SMCCD Cooperation Agreement provides that, pursuant to Section 33607.5(a)(2) of the Redevelopment Law, the portion of the Agency's statutory pass- through payments to SMCCD that would be available to SMCCD for use for educational facilities (52.5%) will be reduced as a result of its payments under the SMCCD Cooperation Agreement by the amount paid to SMCCD under the SMCCD Cooperation Agreement. As a result, the statutory pass-through payment to SMCCD is reduced until this amount is paid in full, which is projected to occur in Fiscal Year 2027-28. Santa Monica-Malibu Unified School DistrzM Memorandum of Understanding. The Agency is considering entering into an agreement with the Santa Monica-Malibu Unified School District (the "School District") to advance an approximately $57 million portion of the capital component of the statutory pass- through requirements in order to assist in financing the Civic Center Joint Use Project. If made, the advance would function similarly to the SMCCD Cooperation Agreement and would reduce future statutory pass- throughs. The Agency makes no assurance as to if or when such an agreement might be entered into or if and when such an advance will be made. Section 33676. For redevelopment project areas established prior to January 1, 1994, Section 33676 of the Redevelopment -Law allows taxing entities to receive additional property taxes in a redevelopment project area above the base year revenue amount. Such payments are based on annual increases in the real property portion of the base year value up to the inflation limit of 2 percent. Because the Project Area was established after January 1, 1994, there are no entities receiving Section 33676 payments in the Project Area. Priority ofPass-Through Obligation. Under the Redevelopment Law, the Agency may subordinate the payment of statutory pass-through payments to the repayment of indebtedness. However, the Agency has not sought approval of subordination from the pass-through entities and, accordingly, the Tax Revenues projection set forth in this Official Statement assumes that the amount of Tax Revenues available to pay debt service on the 2011 Bonds reflects the prior payment of the pass-through payments from tax increment generated in the Project Area. Tax Sharing Agreements The Agency has not entered into any Owner Participation Agreements or any other obligations that constitute a pledge of Tax Revenues or that would in any way have a lien on Tax Revenues that would be superior to the lien established for payment of debt service on the 2011 Bonds. 18 DOCSOC/ 1481791 v5/200120-0004 Low and Moderate Income Housing Chapter 1337, Statutes of 1976, added Sections 33334.2 and 33334.3 to the Redevelopment Law requiring redevelopment agencies to seY aside 20% of all tax increment revenues allocated to redevelopment agencies from project areas adopted after December 31, 1976, in a low- and moderate-income housing fund to be expended for authorized low- and moderate-income housing purposes ("Housing Set-Aside"). Amounts on deposit in the low-and moderate-income housing fund may also be applied to pay debt service on bonds, loans or advances of redevelopment agencies to provide financing for such low- and moderate-income housing purposes. Housing Set-Aside segregated by the Agency pursuant to this requirement is included in the definition of Tax Revenues for the purpose of paying up to 20% of debt service on the 2006 Bonds and a portion of the debt service on any Parity Debt to the extent proceeds of such Parity Debt are applied for eligible Housing Set- Aside purposes. Housing Set-Aside is not available to pay debt service on the 2011 Bonds. TAX REVENUES Historical Assessed Value and Tax Revenues Historical Assessed Yalue. Between fiscal years 2001-02 and 2010-11, the taxable value within the Project Area increased by $4,492,969,020 (75%). Annual growth during this period ranged from a low of (-0.87%) in 2010-11 to a high of 26.48% in 2002-03. Secured value has risen in each fiscal year except 2010- 11; however, unsecured values experienced minor reductions for 2002-03 (-5.37%), 2004-OS (-9.75%), 2009- 10 (-3.06%) and 2010-11 (-5.89%). This fluctuation is not uncommon for unsecured values. The Project Area's taxable assessed values for fiscal year 2010-11 exceed the base year value by $6,597,598,116. Set forth in the table below is a summary of the historical assessed values and Tax Revenues (as defined in the Indenture) in the Project Area for fiscal years 2006-07 through 2010-11. Table 4 Earthquake Recovery Redevelopment Project Historical Project Area Assessed Values (OOOs) Revised Base Year 7993-1994r~~ 2006-07 2007-08 2008-09 2009-10 2010-11 Secured t'~ Land $1,785,03Q,900 $ 4,245,949,423 $4,586,382,701 $5,053,499,402 $ 5,213,744,866 $ 5,206,882,615 Improvements 2,060,082,620 4,405,316,658 4,655,434,825 5,265,379,497 5,403,136,820 5,427,019,971 Personal Prop 43,156,789 38,649,772 37,534,501 37,221,821 43,146,023 38,606,136 Exemptions (249.410203] (469 250.0611 (502,6422921 (531.811995) (735 193 6401~t 1749 804.4061 TOTAL SECURED 3.638 860.106 8.220.665.792 8 776 709.735 9,824,288.925 9.924,834 069 9,922704 316 Unsecured Land 0 0 0 0 0 0 Improvements 9Q,742,357 198,439,841 221,583,565 234,680,010 235,862,530 242,838,016 Personal Prop 394,721,559 471,811,501 514,679,581 520,354,844 583,112,050 543,971,121 Exemptions (269,026,6861 (161.636 3281 (172923.820) (173.8852001 (255.630 3001 (256 618,0011 TOTAL UNSECURED 216.437230 508.615014 563.339326 581,149.654 563344280 530.191136 GRAND TOTAI.t'~ .855. 9783 S R.729.2RO.R06 59 340A49.061 810 405 4 R 579 R10.4RR.17R349 510.452.895.452 m Secured values include state assessed non-unitary utility property. ¢t Base Yeaz Valne reflects an adjustment for the transfer of railroad properties val ues to the Unitary Roll. ~> Increase in exemptions reflects completion of substantial improvements to Sis ters of Charity Hospita l], Base Year Value was decreased most recently in 2009-10. ~'t Fiscal Yeazs 2007-OS and 2009-10 have been subsequently adjusted to refl ect successful appeals and exemption adjust ments. See APPENDIX G-"FISCAL CONSULTANT REPORT." Source: County of Los Angeles Lien Date Rolls. Compiled by HdL Goren & Cone. 19 DOCSOC/1481791 v5/200120-0004 Historical Tax Collection. The County has not elected to follow the procedures of Sections 4707 et seq. of the California Revenue and Taxation Code, known as the "Teeter Plan" as to general taxes entered and collected on the secured tax roll. Therefore, property tax revenues in the Project Area reflect actual collections. The following table shows, for each of the most recent five fiscal years: (i) total tax levy, (ii) receipts of tax increment and (iii) collection rates. TABLE 5 Earthquake Recovery Redevelopment Project Historical Tax Receipts Current Year Total Total Collections Prior Year Collections Collections Fiscal Year Tax Levy Percentage Collections/'1 Apportioned Percentage 2005-06 $44,828,269 98.91% $6,269,325 $50,607,576 112.89% 2006-07 50,986,726 97.67% 4,194,394 53,995,445 105.90% 2007-08 56,700,771 97.90% 4,758,374 60,267,687 106.29% 2008-09 65,702,562 96.73% 2,699,474 66,251,106 100.83% 2009-10 68,845,280 97.11% 1,414,210 68,268,572 99.16% ~'~ Prior Year Collections include Supplemental Revenue, reductions for taxpayer refunds and revenue from prior yeazs. Source: Los Angeles County Auditor/Controller Office; Disbursement Tax Division "CRA Remittance Advice." Based on the table above, the average rate of collections for fiscal years 2005-06 through 2009-10 was approximately 97.66% and when redemptions for prior years' delinquencies (including acceptable penalties) are included, the average rate of collections was approximately 105.02%. A collection rate of over 100% reflects the fact that roll changes occurred after the lien date that increased assessed values and resulted in a greater amount of revenue. This greater amount of revenue, when compared to the lien date tax roll, produces a collection rate of greater than 100%. For purposes of the projection of future Tax Revenues, the Agency has assumed a 100% collection rate. Historical Supplemental Assessments. The following table shows the tax revenue from Supplemental Assessments for previous years within the Project Area received by the Agency for Fiscal Years 2005-06 through 2009-10. These amounts are exclusive of refunds and other deductions withheld by the County. The projection of Tax Revenues assumes no revenue from Supplemental Assessments. TABLE 6 Supplemental Revenue Fiscal Year 2005-06 through 2009-10 Fiscal Year Amount 2005-06 $5,955,107 2006-07 3,527,499 2007-08 4,964,632 2008-09 2,072,035 2009-10 1,298,933 Source: Los Angeles County Auditor/Controller Office; compiled by lidL Coren & Cone 20 DOC SOC/ 1481791 v5/200120-0004 Appeals of Assessed Values Genera[. Pursuant to California law, property owners may apply for a reduction of their property tax assessment by filing a'written appeal. After the applicant and the assessor have presented their arguments, the applicable local appeals board makes a final decision on the proper assessed value. The appeals board may rule in the assessor's favor, rule in the applicant's favor, or set its own opinion of the proper assessed value, which may be more or less than either the assessor's opinion or the applicant's opinion. Any reduction in the assessment ultimately granted applies to the year for which the application is made and may also affect the values in subsequent years.. Refunds for taxpayer overpayment of property taxes may include refunds for overpayment of taxes in years after that which was appealed. Current year values may also be adjusted as a result of a successful appeal of prior year values. Any taxpayer payment of property taxes that is based on a value that is subsequently adjusted downward will require a refund for overpayment. Appeals for reduction in the "base year" value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date. Abase year assessment appeal has significant future revenue impacts because a reduced base year assessment will then reduce the compounded value of the property prospectively. Except for the 2% inflation factor, the value of the property cannot be increased until a change of ownership occurs or additional improvements are added. Section 51 of the Revenue and Taxation Code permits a reduction in the assessed value if the full cash value of the property has been reduced by damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. Reductions made under this code section may be initiated by the County Assessor or requested by the property owner. After a roll reduction is granted under this section,-the property is reviewed on an annual basis to determine its full cash value and the valuation is adjusted accordingly. This may result in further reductions or in value increases. Such increases must be in accordance with the full cash value of the property and it may exceed the maximum annual inflationary growth rate allowed on other properties under Article XIIIA of the State Constitution. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. See "LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS -Property Tax Limitations-Article XIIIA" below. The taxable value of unitary property may be contested by utility companies and railroads to the State Board of Equalization. Generally, The impact of utility appeals is on the statewide value of a utility determined by the State Board of Equalization. As a result, the successful appeal of a utility may not impact the taxable value of a project area but could impact a project area's allocation of uuutary property tax revenues. Historical Appeals. Since fiscal year 2005-06, 911 assessment appeals have been filed on properties within the Project Area. Many of the appeals filed in the Project Area are based on Section 51 of the Revenue and Taxation Code (described above). Of the 91 l appeals filed, 188 have been allowed by the County with a reduction in value and 100 were denied or withdrawn. There are 623 appeals currently pending on 439 properties within the Project Area. For purposes of projecting future Tax Revenues, the Fiscal Consultant report estimates, based on the historical averages, that 287 of the currently pending appeals will be allowed and that these successful appeals will result in a reduction of the fiscal year 2011-12 assessed value of $246,407,427. The projection does not reflect any reductions in tax increment revenue for refunds resulting from successful appea]s. DOCSOC/1481791 v5/200120-0004 21 The following table summarizes the estimated potential losses that are incorporated into the projections. Actual appeals, reductions and refunds may vary from historical averages. Total No. of No. of No. of Resolved Sueeessfid Appeals Appeals Appeals 911 288 188 Estimated Reduction of FY2010-11 FY2010-11 AV Esfrmated AVfor Rerluetion Average No. of Value of No. of Pending for AV Appeals Appeals Appeals Appeals Resolved Reduction Pendtngf~ Pending Allowed Allowed Appeals 12.02% 439 $3,141,43],924 .287 $246,407,427 $22,495,832 "' Number of pending appeals do not include 184 appeals that aze pending on the same parcels for multiple years. «) The pending appeals included in the projection of value loss do not include appeals on the same parcel in multiple yeazs. Reduction in value in such cases is not cumulative. The following table shows the top ten property taxpayers with pending appeals. There are appeals on the same parcels for multiple years. Reduction in value in such cases is not cumulative. TABLE 7 Earthquake Recovery Redevelopment Project Largest Taxpayers With Pending Appeals As of , 2011 Owner California Colorado Center LLC Ocean Avenue LLC New Santa Monica Beach Hotel Rand Corporation Douglas Emmett Realty Fund 1998 Sisters of Chazity Leavenworth Health 1299 Ocean LLC Equity Office Properties Trust Na. Of Value Unrler Owners Opinion Max Potential Fiscal Year Parcels Appeal of Value Value Loss 2010-11 2 $~ 469,310,104 $ 330,000,000 $ 139,310,104 2006-07 3 128,470,000 85,587,314 42,882,686 2008-09 1 9,126,369 3,000,000 6,126,369 2009-10 3 145,571,407 39,988,000 105,583,407 2010-11 3 146,613,466 39,360,000 107,253,466 2010-11 1 131,505,096 60,000,000 71,505,096 2008-09 1 116,799,652 86,799,652 30,000,000 2010-11 2 118,212,31 l 0 118,212,3 t 1 2010-! 1 1 2,511,801 1,255,901 1,255,900 2007-08 1 62,000,000 0 62,000,000 2008-09 2 107,100,000 68,000,000 39,100,000 2010-11 2 96,600,000 90,000,000 6,600,000 2009-10 1 84,000,000 66,000,000 18,000,000 2010-] 1 1 75,990,000 40,000,000 35,990,000 Source: Los Angeles County Clerk of the Board as compiled by HdL Coren & Cone. Projected Tax Revenues The tax increment revenue projections for the Project Area, as prepazed by HdL Coren & Cone, are summarized in the table below. These projections are based upon the following assumptions. The Agency believes these assumptions to be reasonable, but to the extent that assessed valuations, the tax rates or the percentage of taxes collected are less than the Agency's assumptions, the Tax Revenues available to pay debt service on the 2011 Bonds could be less than those projected. No assurance can be given that the level of projected Tax Revenues will be achieved. See Appendix G for the entire Fiscal Consultant Report. Tax Rate: The Project Area contains two Tax Rate Areas ("TRAs"). Within the two Project Area TRAs there is one tax rate. The debt service override rates for indebtedness approved by The voters after January 1, 1989 is not included in the tax rate for purposes of calculating Tax Revenues and the projection 22 DOCSOC/ 1481791 v5/200120-0004 reflects the fact that certain existing override rates will terminate in the next few fiscal years. See "LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS -Exclusion of Tax Revenues for General Obligation Bonds Debt Service". The. projection uses a tax rate of $1.0037 per $100 of secured assessed value through Fiscal Year 2034-35 and $1.00 per $100 of secured assessed value thereafter. Inflation Rate: In California, real property values (land and improvements) are subject to an annual inflationary increase, as allowed under Proposition 13. The projection table assumes, with respect to secured and unsecured property, a 0.753% inflation factor in fiscal year 2011-12 and 2.0% thereafter. See "RISK FACTORS -Reduction in Inflationary Rate." Supplemental Assessments: The projections assume no revenues will be realized from supplemental assessments. See "Historical Assessed Value and Tax Revenues" above for historic supplemental revenues. Transfers and Foreclosures: The projection assumes recent transfers of ownership will add $86,271,428 in new value to the fiscal year 2011-12 tax roll (transfers occurring from January 1, 2010 through December 31, 2010) and $7,779,692 in new value to the 2012-13 tax roll for the Project Area (transfers occurring from January 1, 2011 through. February 28, 2011) offset, however, by an assumed reduction in assessed value of $10,016,600 as a result of foreclosures. The projections assume no additional Tax Revenues from transfers or reductions from foreclosures after Fiscal Year 2012-13. Collections: The projections assume 100% of the amount levied will be collected on an annual basis. See "Historical Assessed Value and Tax Revenues" above for historic collection rates. Appeals: The projections assume assessed values are reduced in fiscal year 2011-12 as a result of the resolution of pending appeals. The projections do not, however, reflect a reduction in revenues for refunds associated with pending appeals. See "Appeals of Assessed Values" above. County Collection Charges: For fiscal year 2010-11, the County charged the Agency a collection fee of $1,063,124 (1.60% of estimated ftscal year 2010-11 gross tax increment revenue). The projection assumes the County will continue to charge the Agency for property tax administration at a rate equal to 1.60% of gross tax increment. Unitary Taxes: For fiscal year 2010-11, the Agency expects to receive $70,340 in unitary revenue for the Project Area. The projection assumes the same amount of uti]ity tax revenue will be remitted to the Agency in future years. See "LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS -Unitary Property" below. Housine Set-Aside: The projection of Tax Revenues assumes Housing Set-Aside will be available to pay 20% of debt service on the 2006 Bonds, but no portion of the debt service on the 2011 Bonds. Statutory Pass-Through Oblieations: The projection of Tax Revenues assumes none of the Agency's statutory pass-through obligations will be subordinated to debt service on the 2011 Bonds. However, statutory pass-through obligations are net of Housing Set-Aside, which is available to pay up to 20% of debt service on the 2006 Bonds. SMCCD Agreement. The projection assumes repayment by SMCCD of the Agency advance through fiscal year 2027-28, at which point the statutory pass-through obligation to SMCCD will increase to its full amount. See "THE EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT -Statutory Pass-Through Requirements." 23 DOCSOC/1481791v5/200120-0004 O ~~ O N N O~ N O O Q~ O O N O N N W O w I~ Vl V r O M P b 0 001 b N M N ~- P p ~ N N Gl V Gi l~ h y B Gl' q N N V1 01 I~ n `~ v O ,-r M ~p u .V (V rt ~n ~p " N O eJ N N~ ^ ~ ~ eRi y 3 ~ ~. O 6 G 3 C m `3 >~> ,Ni W _ y M P M V I N O N y'~j ~ ~ O O W N 9 'O ~ y O Q r~ O. m VOJ~ O ~ ti NO O vMi M O M ~1 ai pj O e) J t1 c0 T S O N rip P P r v ~. ~ .^ ~ P e N G ~ O M M eT ~. ,Q ~ .^ .a O P1 ^' P N ~G eJ N o ~ ^ O O R O N d' G\M V' v~OV O ~ V O O V M ... m= O d 3 O cb V ~ o r 1~ r ~ ~ M P V > at Po (,i G\ V G\ P v~ O ~n V 4> A Y~ m h N M~ N ~ r ~ ti `. N ti M 9 LO C R ~ b O v°. O ~ ° .... ~ ° 'o 0 00 ° w E c o x ~ E" w a ~ v o N ^ A ~ n N ^ O ~D p in N P b G\ .ti O b O r O O 'b O W .~.. ^ ~ ~° O 00 t~ N c1 y N r M O .-r h O hMQ• [n O r W W l~ H NO' O~ ~ ^~ .-r l~ N O O V ~ O V b C •^ ~ N> J b o0 N O Vl h P " Vl OO ` C. .~ Ol O\ O ~ .. N ~ ~ N OO O {~ O~ ~ X R O 4 w O ~ 9 V ~: o PPCO POI C~ ~ bmP W V~I~ ~~ r O r V O -`I V r W N v R v .`y"~ O L ^yi M MPV ~ ~O lip v M ~ C .M.~ M ~ O tp Y ~ >" `U >, ~ a. r a NO ~ V L 4 3Ty'Ci O ~' +J v t^C m ~ v m ~ .Yd>" o~c E °~i •y 4 N a~ Y . GL O G A oPP N ~o~ o '-' v o n ~ P ~ m m o`a ~ U p ~ l~ v) N .M+ f~I N l~ d' Ni V M V W '~ y 'D Y ~ ~ ~)f u Y ~ ~ ~ O N Gil C b V ~ ~ ~ @ ~' M ~ 3 V O ~ •O• •L-' ~p h .r M ~ V (~ 'O ~ !. W TJ k ~r O O O V'~ y E O y. ~p N iy ~Y/ CQ C N 9M ri3i V3 O cJ N a ~X ~® ~ y G~ C 6 W y N ~ N W p N y N A O O Cp ~ L F a G o P y~ ,. ~ of b oo '~ m o N v, ~ "~ ~° o= ~" E O O v v o ~n ~ N a m iv m d' M = ss a .^ o V ~ ~ O P O r b h O 01 n y' M C,. V ~ R ~ O R W n ti_ A M N C V V v v ~ M u N .O ~ N ~p W U Gd y NO` ~ V W ~ o ~~ ~ Ra x `~~ ~(~i~ v f3 m a W Gl l~ O MOM b M W O P N M M ~' O °~ O~ V `~ ~ M ~n a. a O~ ~~ ~o o ~n of ~ v~ o a ~ o bn.a Q: c r+ M ~n P{ v N V lr o ~n c v v~ ~ ~ '~ '3 0 i~ N h y .--i AO [V N N M b N M R ~' ~ o~ ~•• ~ - 3 6S l~ N O R V V ~ ~ M ~ i' ~ ti eCi N l~ M f+ N v CJ ° E W O G1 O V' C '3 ~U E ~p > N 9 ... k O ~^ V t~ ip M(y0/ } i N ~yOy d W :n '6 ~~ u~ O y b_0 y O~ U 3N ^ A4+ NCJ P M ~ o N 6 N ~ o e N v ~'~ ~~ `°~~ ~° o ~o ~~o ~ o ~o ~ ~ ~ m ~ ~ ~ ^> ~ > c ° m ow v 00 N y a ^a vN ~ Qo~O o P o N ~o o v M ~ y O o e ~n P a.5.N m~ o v~ o ~.~ -° V ~n O O O l~ h ~D V N O ~p y y O> y 'S c~Ai V ~ v call v, 0 0 o cu o v ry, N ~ o G :.~ E' m o 0 o N° ~ e ~ ~ ti ~ a ,M. M .a ~ Q' F3 ~ v3 E' m °. E o 0 'Y .. M V V~ ~ T'O ~ O ,"v+ y T U C O ~°yo o ~: 'd ~~=3.N.9 aEi eE i« ¢.5a o X~ C T N. A. d O 'O F. U Vl .~ 3 L n ~ " b0A ~ ~ F .^ R O C n C '3 O .Y 3 ~ ~ ^ 9 c]S ~- -, ~> m c ~ ~ o d ~ mdN, a.o~O c> ~,8 ¢~ ~ ~ ai c ~ a aoi ~ a. "+ ~ ~ rt U ~, :o h i ~ ~°\v o c; ~ ` ~ bn ~«' bn «° ~ °J a ~ ~ v ~ S ~ a~i o c~ ~ ~ v 6' m ai ° ° o e m ~ ~ m ~ m ° m 00 ,~ ~ > p, c. °J,> y~? .Yd ~ ¢ L F F H o ~ u ~m ~ m ~ a'yi rv .°~ .e°i 3 ¢ E' ciEi a ? ~~ 3 ~ U 0 ac: cc: a h ~~~'~ ~'^ F~ .NNON'm m i, L,' °- c'x~ ~~~~ac:w ~¢ ~ oivz 'r, ~ O % R ~ R K d p ~ .^ O VJ N f~ Lj (~ .- 6 X ~ ~ C U. F6:ar Ha1U L: ']U .:I~ iCaFQ'r. ~;-: rn Ni F ~c,'zF ~ _ ... ,. .. ... ,. ~ q Estimated Debt Service Coverage The two succeeding tables show the following: Table 9A: projected debt service coverage ratios based on (i) estimated non-Housing Set-Aside Tax Revenues available to pay debt service on the 2011 Bonds and (ii) 80% of debt service on the 2006 Series A Bonds. Table 9B: projected debt service. coverage ratios based on (i) estimated Housing Set-Aside available to pay debt service on up to 20% of the debt service on the 2006 Bonds. 25 DOCSOG1481791 v5/200120-0004 TABLE 9A Earthquake Recovery Redevelopment Project Estimated Debt Service Coverage Provided by Non-Housing Tax Revenues ($OOOs) Non-Housing 80%of2OO6 TotalNon- Set Aside Tax Bands Debt 2011 Bonds Housing Bond Projected Year tZJ Revenues (zl Service 131 Debt Service Debt Service Coverage td) 2012 $ 34,640 $ 3,562 $ 2,547 $ 6,109 5.67x 2013 35,486 3,562 2,547 6,109 5.81x 2014 36,358 3,558 2,547 6,106 5.95x 2015 37,248 3,563 2,547 6,110 6.lOx 2016 37,665 3,560 2,547 6,107 6.17x 2017 38,551 3,562 2,547 6,109 6.31x 2018 39,475 3,561 2,547 6,109 6.46x 2019 40,416 3,556 2,547 6,103 6.62x 2020 41,377 3,562. 2,547 6,110 6.77x 2021 42,357 3,558 2,547 6,106 6.94x 2022 43,357 3,561 2,547 6,109 7.1Ox 2023 44,376 3,558 2,547 6,105 7.27x 2024 45,416 3,557 2,547 6,104 7.44x 2025 46,477 3,559 2,547 6,106 7.61x 2026 47,559 3,559 2,547 6,106 7.79x 2027 48,365 3,558 2,547 6,105 7.92x 2028 49,188 3,559 2,547 6,107 8.OSx 2029 50,027 3,557 2,547 6,105 8.19x 2030 50,883 - 4,697 4,697 10.83x 2031 51,755 - 4,701 4,701 11.OIx 2032 52,646 - 4,702 4,702 11.20x 2033 53,554 - 4,699 4,699 11.40x 2034 54,480 - 4,697 4,697 11.60x. 2035 55,425 - 4,701 4,701 11.79x 2036 56,189 - 4,700 4,700 11.96x 2037 57,161 - 4,698 4,698 12.17x 2038 58,160 - 4,699 4,699 12.38x 2039 59,179 - 4,697 4,697 12.60x 2040 60,218 - 4,702 4,702 12.81x 2041 61,278 - 4,697 4,697 13.OSx 2042 62,360 - 4,702 4,702 13.26x ~`~ Tax Revenues aze shown on a fiscal year basis (July 1 through June 30) and debt service is shown on a Bond Year basis (Jury 2 through July 1). (~) See table entitled "Projection of Tax Revenues". (3) Fiscal year 2011-12 debt service includes the July 1, 2011 debt service payment on the 2011 Bonds. ta> In the event Housing Set-Aside was unavailable to pay up to 20% of debt service on the 2011 Bonds but non-Housing Set-Aside Tax Revenues were available for that purpose, the Agency would be obligated to use the non-Housing Set-Aside Tax Revenues to pay the debt service on the 2011 Bonds otherwise payable from Housing Set-Aside (the converse is not true; if non-Housing Set-Aside Tax Revenues were unavailable, Housing Set-Aside could still only be used to pay 20% of debt service). Because Housing Set-Aside is 20% of total tax increment generated in the Project Area, the Agency believes it is unlikely that non-Housing Set-Aside Tax Revenues would be available but Housing Set-Aside would not. Source: Redevelopment Agency of the City of Santa Monica. 26 DOCSOC/1481791v5/200120-0004 TABLE 9B Earthquake Recovery Redevelopment Project Estimated Debt Service Coverage Provided by Housing Set-Aside ($OOOs) Year !11 Housing Set Aside 121 20% ofTota12006 Bonds Debt Service Projected Coverage 2012 $ 13,040 2013 13,438 2014 13,848 2015 14,267 2016 14,694 2017 15,129 2018 15,573 2019 16,026 2020 16,488 2021 16,959 2022 17,439 2023 17,930 2024 18,430 2025 18,940 2026 19,460 2027 19,990 2028 20,532 2029 21,084 2030 21,647 2031 22,221 2032 22,807 2033 23,404 2034 24,014 2035 24,636 2036 25,180 2037 25,821. 2038 26,478 2039 27,149 2040 27,833 2041 28,530 2042 29,242 $ 891 890 890 891 890 890 890 889 891 890 890 889 889 890 890 889 890 889 14.64x 15.09x 15.57x 16.02x 16.S1x 16.99x 17.49x 18.03x 18.S1x 19.06x 19.59x 20.16x 20.73x 21.29x 21.87x 22.48x 23.07x 23.71x "~ Tax Revenues are shown on a fiscal yeaz basis (July 1 through June 30) and debt service is shown on a Bond Yeaz basis (July 2 through July 1). «~ See table entitled "Projection of Tax Revenues." Source: Redevelopment Agency of the City of Santa Monica. RISK FACTORS The following information should be considered by prospective investors in evaluating the 2011 Bonds. However, the following does not purport to be an exhaustive Zisting of risks and other considerarions which may be relevant to investing in the 2011 Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. 27 DOCS OC/1481791 v5/200! 20-0004 Reduction in Taxable Value and Tax Revenues Tax Revenues allocated to the Agency are determined by the amount of incremental taxable value in the Project Area allocable to the Project Area and the current rate or rates at which property in the Project Area is taxed. The reduction of taxable values of properly caused by economic factors beyond the Agency's control, such as a relocation out of the Project Area by one or more major property owners, or the transfer, pursuant to California Revenue and Taxation Code Section 68, of a lower assessed valuation to property within the Project Area by a person displaced by eminent domain or similar proceedings, or the discovery of hazardous substances on a property within the Project Area (see "Hazardous Substances" below) or the complete or partial destruction of such property caused by, among other eventualities, an earthquake (see "Seismic Factors" below), flood or other natural disaster, could cause a reduction in the Tax Revenues securing the 2011 Bonds. Property owners may also appeal to the County Assessor for a reduction of their assessed valuations or the County Assessor could order a blanket reduction in assessed valuations based on then current economic conditions. See "TAX REVENUES -Appeals of Assessed Values." Any reduction of assessed valuations and the resulting decline in Tax Revenues or the resulting property tax refunds could have an adverse effect on the Agency's ability to make timely payments of principal of and interest on the 2011 Bonds. Concentration of Tax Base In the Project Area, a significant portion of the assessed value and resulting Tax Revenues is attributable to relatively few assessees. For Fiscal Year 2010-11 the top ten taxable property owners account for 17.75% of the total Project Area value and 28.15% of the total Project Area incremental value. The failure or financial difficulty of one or more of these properties could have significant detrimental impact on the assessed values of such properties and consequently on the amount of Tax Revenues available for payment of the 2011 Bonds. See "THE EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT -Major Taxable Property Owners." Estimates of Tax Revenues In estimating the total Tax Revenues to be received by the Agency and available to pay debt service on the 2011 Bonds, the Agency has relied on actual historical Tax Revenues and made certain assumptions with regard to future assessed valuation in the Project Area, future tax rates and the percentage of taxes collected. See "TAX REVENUES -Estimated Debt Service Coverage." The Agency be]ieves these assumptions to be reasonable, but there is no assurance these assumptions will be realized and to the extent that the assessed valuation and/or the tax rates are less than expected, the total Tax Revenues available to pay debt service on the 2011 Bonds will be reduced. Such reduced Tax Revenues may be insufficient to provide for the payment of debt service on the 201 I Bonds. Reduction in Inflationary Rate As described in greater detail below, Article XIIIA of the California Constihrtion provides that the full cash value base of real property used in determining taxable va]ue may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or maybe reduced to reflect a reduction in the consumer price index or comparable local data. Such measure is computed on a calendar year basis. Because Article XIIIA limits inflationary assessed value adjustments to the lesser of the actual inflationary rate or 2 percent, there have been years in which the assessed values were adjusted by actual inflationary rates, which were less than 2%. Since Article XIIIA was approved, the annual adjustment for inflation has fallen below the 2% limitation six times: in fiscal year 1983-84, 1%; in fiscal year 1995-96, 1.19%; in fiscal year 1996-97, 1.11%; in fiscal year 1999-00, 1.85%; in fiscal year 2004-05, 1.867% and in fiscal year 2009-10, 0.99763%. 28 DOCS OC/ 1481791 v5/200120-0004 The State mandated a 0.99763% inflation adjustment for fiscal year 2010-11, and the projections of Tax Revenues assume a 0.753% inflation factor will be applied in fiscal year 2011-12 and a 2% inflation factor will be applied in fiscal years commencing with fiscal year 2011-12. The Agency is unable to predict if any adjustments to the full cash value base of real property within the Project Area, whether an increase or a reduction, will be realized in the future. Levy and Collection The Agency does not have any independent power to levy and collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the Tax Revenues, and accordingly, could have an adverse impact on the ability of the Agency to repay the 2011 Bonds. Likewise, delinquencies in the payment of property taxes could have an adverse effect on the Agency's ability to make timely debt service payments. Because the County has not adopted the Teeter Plan, the Agency's tax increment revenues reflect actual collections rather than the amount levied. See "TAX REVENUES -Historical Assessed Value and Tax Revenues." Further, collection and property taxes by the County, and the ability of the County to timely reduce the lien and delinquent unpaid property taxes, may be limited or delayed by bankruptcy, insolvency or other laws affecting creditors' rights, or by state laws relating to judicial foreclosure. Risks Associated With Parity Debt As described in "SECURITY FOR THE 2011 BONDS Parity Debt," the Agency may issue or incur obligations payable from Tax Revenues on a parity with its pledge of Tax Revenues to payment of debt service on the 2011 Bonds. The potential for such additional obligations increases the risks associated with the Agency's payment of debt service on the 2011 Bonds in the event of a decrease in the Agency's collection of Tax Revenues. Bankruptcy Risks The enforceability of the rights and remedies of the owners of the 2011 Bonds and the obligations of the Agency may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equitable principles which may limit the specific enforcement under state law of certain remedies: the exercise by the United States of America of the powers delegated to it by the federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations of the police power inherent in the sovereignty of the State of California and its governmental bodies in the interest of servicing a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the owners of the 2011 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. State Budget and SERAF In connection with its approval of the budget for the 1992-93, 1993-94, 1994-95, 2002-03, 2003- 04, reallocated funds from redevelopment agencies to school districts by shifting a portion of each agency's tax increment, net of amounts due to other taxing agencies, to school districts-for such fiscal years for deposit in the Education Revenue Augmentation Fund ("ERAF"). The amount required to be paid by a redevelopment agency under such legislation was apportioned among all of its redevelopment project areas on a collective basis, and was not allocated separately to individual redevelopment project areas. In 2008, the State Legislature adopted, and the Governor of the State signed, legislation, Chapter 751, Statutes 2008 (AB 1389) ("AB 1389"), that among other things required redevelopment agencies to pay into ERAF in Fiscal Year 2008-09 prior to May 10, 2009, an aggregate amount of $350 million, of which the 29 DOCSOC/1481791 v5/200120-0004 Agency was to pay approximately $4.3 million. Such payment obligations were to be subordinate to payments on bonds secured by tax increment revenues. However, on April 30, 2009, a California superior court in California Redevelopment Association v. Genest (County of Sacramento) (Case No. 34-2008-00028334) held that such required payment into ERAF violated the California constitution and invalidated and enjoined the operation of the section in AB 1389 requiring such payment. On September 23, 2009, the State filed an Abandonment of Appeal, abandoning its appeal of the decision of the superior court. In connection with various legislation related to the State's Fiscal Year 2009-10 budget, in late July 2009, the State legislature adopted, and the Governor of the State signed, Chapter 21, Statutes of 2009-10 Fourth Extraordinary Session (AB 26). Such legislation was subsequently amended in November 2009 by Chapter 652, Statutes of 2009 (SB 68) (as amended, the "2009 SERAF Legislation"). The 2009 SERAF Legislation mandates that redevelopment agencies in the State make deposits to the Supplemental Educational Revenue Augmentation Fund ("SERAF") that is established in each cotmty treasury throughout the State the aggregate amounts of $1.7 billion for Fiscal Year 2009-10, which were due prior to May 10, 2010, and $350 million for Fiscal Year 2010-11, which are due prior to May 10, 201.1. On May 10, 2010, the Agency deposited into SERAF the amount of $20,883,384 as its SERAF payment for Fiscal Year 2009-10 (the "Agency 2009-10 SERAF Amount"). On May 10, 2011, the Agency deposited into SERAF the amount of $4,299,520 as its SERAF payment for Fiscal Year 2010-11 (the "Agency 2010-11 SERAF Amount'). Pursuant to the 2009 SERAF Legislation, redevelopment agencies may use any funds that are legally available and not legally obligated for other uses, including reserve funds, proceeds of land sales, proceeds of bonds or other indebtedness, lease revenues, interest and other earned income. Such legislation also provides that redevelopment agencies may borrow from the amounts required to be allocated to their Low and Moderate Income Housing Funds and that to make payments of their required Fiscal Year 2009-10 SERAF payments only (not 2010-11 SERAF payments), redevelopment agencies also may borrow from their Low and Moderate Income Housing Funds. The Agency paid the Agency 2009-10 SERAF Amount and the 2010-11 SERAF Amount from available funds without borrowing funds from the Agency's Low and Moderate Income Housing Fund. On May 4, 2010, a State superior court, in California Redevelopment Association v. Michael C. Genest (County of Sacramento) (Case No. 34-2009-80000359), a class action case filed on behalf of all California redevelopment agencies, upheld the 2009 SERAF Legislation to constitutional challenge (The "2009 SERAF Litigation"). The challengers to the 2009 SERAF Legislation have appealed the superior court's decision. The Agency cannot predict the outcome of the 2009 SERAF Litigation. The 2009 SERAF Legislation also added a provision to the Redevelopment Law to provide that when a redevelopment agency is required pursuant to the 2009 SERAF Legislation to make a payment to the county auditor for deposit in the county SERAF and such agency has allocated the full amount of the payment, the legislative body may amend a redevelopment plan to extend by one year the time limits on the effectiveness of the plan and the repayment of indebtedness (the "SERAF Extension"). Under the Redevelopment Law, the SERAF Extension also has the effect of extending by one year the time limit to receive property taxes. On November 2, 2010, the voters of the State approved a ballot initiative known as Proposition 22, pursuant to which the State is prohibited from shifting, taking, borrowing or restricting the use of tax revenues dedicated by law to, among other things, funding redevelopment agencies and other local government services. Although the passage of Proposition 22 will have no impact upon the Agency's obligation to pay the Agency 2011 SERAF Amotmt, the State Legislative Analyst's Office (the "LAO") has stated that the measure prohibits the State from enacting new laws that require redevelopment agencies to shift funds to schools or other agencies. No assurance can be provided that Proposition 22 will be implemented as contemplated by the LAO. DOCSOC/ 1481791 v5/200120-0004 30 In addition, Proposition 22 is subject to interpretation by the courts and there can be no assurance that the measure will not be challenged by the State or other parties or repealed by the voters of the State in the fiiture. Governor's Proposal to Eliminate Redevelopment On December 6, 2010, Governor Schwarzenegger called an emergency session of the Legislature to address the $6.1 billion projected deficit for fiscal year 2010-11. During budget briefings held in December 2010, then Governor elect Jerry Brown announced that the deficit between now and June 30, 2012 had likely grown from the $25.1 billion reported in the Fiscal Outlook Report to approximately $28 billion. On January 3, 2011, Jeny Brown was sworn in as Governor. On January 10, 2011, the Governor released his proposed budget for fiscal year 2011-12 ("Proposed Budget"). The Proposed Budget is designed to address an estimated budget shortfall of $25.4 billion in the fiscal year 2011-12 California State Budget. The budget shortfall consists of an $8.2 billion projected deficit for fiscal year 2010-11 and a $17.2 billion gap between projected revenues and spending in fiscal year 2011-12. The Governor's proposal includes approximately $12.5 billion in budget cuts, $12 billion in tax extensions and changes, and $1.9 billion in other solutions. The Governor is calling for a statewide special election in June to extend for five more years tax measLiies currently set to expire. The Proposed Budget proposes elimination of the current funding mechanism for redevelopment agencies (the "RDA Provisions"), although only limited details are provided for such afar-reaching proposal. The RDA Provisions, if adopted, would prohibit existing agencies from creating new contracts or obligations effective upon enactment of urgency legislation. By July 1, existing agencies would be disestablished and successor local agencies would be required to use the tax increment revenues that redevelopment agencies would otherwise have received to retire redevelopment agency debts and certain contractual obligations "in accordance with existing payment schedules." The RDA Provisions would divert an estimated $1.7 billion in fiscal year 2011-12 to offset State General Fund costs for Medi-Cal and trial courts. An additional estimated $210 million would be distributed on a one-time basis to cities, counties, and special districts proportionate to their current share of the countywide property tax. The RDA Provisions propose that, after fiscal year 2011-12, the money available after payment of the redevelopment agency debt and contractual obligations would be distributed to schools, counties, cities, and non-enterprise special districts for general uses. As to Low and Moderate Income Housing Fund balances, the Proposed Budget provides that amounts in the redevelopment agency's balances reserved for low-moderate income housing would be shifted to local housing authorities for low and moderate income housing. In lieu of redevelopment, the Proposed Budget proposes a new financing mechanism for economic development. Specifically, the Proposed Budget proposes that the Constitution be amended to provide for 55% voter approval for limited tax increases and bonding against local revenues for developmentprojects such as are currently done by redevelopment agencies. Voters in each affected jurisdiction would be required to approve use of their tax revenues for these purposes. In a statement accompanying release of the Proposed Budget, State Finance Director Ana Matosantos indicated that the new financing mechanism may be included in a proposal following approval of the Proposed Budget, possibly in 2012. Implementation of the Proposed Budget, including the RDA Provisions, will require implementing legislation by the Legislature and perhaps voter approval as to certain material elements and may include terms which are not yet proposed which are material to the Agency and the Bonds. The Agency cannot predict the ultimate form of such legislation, if any is adopted. Elements of the RDA Provisions, including the economic development program authorization, contemplate voter approval through the initiative process. It is possible that Proposition 22, which amended the State Constitution to prohibit state diversion of redevelopment agency DOC SOC/1481791 v5/200120-0004 31 revenues generally, will affect the State's ability to implement the RDA Provisions. It is possible that the Governor and the Legislature may seek voter approval of changes to the terms of Proposition 22 that are in conflict with the Proposed Budget, including the RDA Provisions. The Agency cannot predict the timing, terms or ultimate implementation of any such final legislation or voter initiative measures, or the impact on the Agency or the Bonds of any proposed, interim or final legislative and constitutional changes which may be adopted arising out of the Proposed Budget. The LAO released its Overview of the Governor's Budget ("LAO Overview") on January 12, 2011. As it relates to the RDA Provisions, the LAO Overview suggests the proposal has merit "but faces considerable implementation issues." The LAO Overview notes that "the administration's plan will require considerable work by the Legislature to sort through many legal, financial and policy issues. Several voter- approved constitutional measures, for example, constrain the State's authority to redirect redevelopment funds, use property tax revenues to pay for State programs, or impose increased costs on local agencies. hi addition, the administration's plan does not address many related issues, such as clarifying the firture financial responsibility for low- and moderate- income housing (currently, a redevelopment progam)." The LAO suggests that the Proposed Budget may understate the debt of redevelopment agencies and therefore the availability of additional revenues to assist with the State budget issues. Finally, the LAO Overview recommends that the Legislature pass urgency legislation as soon as possible prohibiting redevelopment agencies, during the period of legislative review, from taking actions that increase their debt in light of the considerable work that will be required of the Legislature to develop the statutory measures to implement the RDA Provisions. Draft legislation implementing this proposal was released by the Department of Finance of the State on February 23, 2011 (the "Proposed Legislation"). On March 3, 2011, after making certain revisions to the Proposed Budget, the Joint Budget Committee of the California Legislature voted six to four in favor of the Proposed Budget (as revised), which includes the Proposed Legislation. The Proposed Legislation has been introduced and is currently embodied in Assembly Bill 101 and Senate Bill 77, as amended on March 15, 2011. The Agency expects it may be taken up by the Legislature soon. No asstirance can be given whether or not the Proposed Legislation will be enacted in its present form, or at all. The Proposed Legislation is styled as a bill providing for appropriations related to the budget bill, and states that it would become effective immediately upon passage and signature of the Governor. It is possible that, if the Proposed Legislation as a part of a budget package passed by the Legislature, could be passed with majority vote approval in each house of the State Legislature rather than with two-thirds approval and become effective immediately. The Proposed Legislation makes it clear that it would not be effective until the date of enactment and would not be retroactive. The Proposed Legislation, if enacted in its present form, would prohibit redevelopment agencies from, among other things: • incurring new or expanding existing monetary or legal obligations unless specifically provided for in the Proposed Legislation. These prohibitions include the issuance of bonds and other obligations, and refinancing or restructuring existing indebtedness (except in limited circumstances); • entering into new contracts for redevelopment activities; • modifying terms and conditions bf existing agreements, obligations or commitments; and • disposing of assets. The Proposed Legislation would establish successor agencies (in the case of the Commission, the successor agency would be the City under the current farm of the Proposed Legislation) to administer each redevelopment agency's existing "enforceable obligations" and would establish a series of special funds to 32 DOCSOG 1481791 v5/200120-0004 effectuate the payments of such obligations and administer the transfer of property taxes to other local entities and the disposition of an agency's other assets such as real property and cash. As defined in the Proposed Legislation, "enforceable obligations" include bonds, debt service on bonds, reserve set-asides and other payments required under the indenture governing the issuance of the bonds. Under the Proposed Legislation, the county or city that authorized the creation of a redevelopment agency may elect to retain the housing assets and functions previously performed by the redevelopment agency or may designate its local housing authority to perform such functions. If a county or city elects to retain the responsibility for performing housing functions previously performed by a redevelopment agency, all rights, powers, assets, liabilities, duties, and obligations associated with the housing activities of the agency, along with any amounts in the Low and Moderate Income Housing Fund shall be transferred to such city, or county, or city and county. Under the Proposed Legislation, future functions of the Agency or the successor agency with respect to the affairs of the Agency are subject to oversight by an oversight committee (described below). The Proposed Legislation changes the mechanism by which property tax revenue from a redevelopment project area is allocated and accounted for, putting the responsibility for paying debt service on obligations, including the Bonds, in the hands of the county auditor-controller rather than the redevelopment agency or a successor agency. The Proposed Legislation does protect the rights of the owners of bonds to the pledged tax increment revenues, stating that it is the intent of the Proposed Legislation to not affect either the pledge, the legal existence of the pledge, or "the stream of equivalent revenues available to make good on that pledge;" however, the county auditor-controller, and the successor agency established to take over the redevelopment agency's powers and obligations, will be the entity responsible for making sure those rights are protected and that lien is honored. Notwithstanding the foregoing, the Proposed Legislation sets forth a priority and timing for allocation of moneys from a "Redevelopment Property Tax Trust Fund" in Fiscal Year 2011- 12; which provides for a county auditor-controller to allocate moneys in a specified priority, as follows: First, to each local agency and school entity in an amount equal to what would have been received pursuant to certain specified state law provisions orpass-through agreements that would be in force in 2011-12 but for operation of the Proposed Legislation, if the redevelopment agency were in existence without reference to such payments being made after needs for "enforceable obligations" are taken into account (such payments to be made no later than January 16, 2012, and June 1, 2012; Second, to the Public Health and Safety Fund in an amount not to exceed one billion, seven hundred million dollars ($1,700,000,000) on a statewide basis specified by the Director of the Department of Finance from the amounts deposited in the Redevelopment Property Tax Trust Fund comprised of the revenues that would otherwise have been allocated to each redevelopment agency, but for the operation of the Proposed Legislation after needs for enforceable obligations and pass through amounts are taken into account (such transfers to occur on January 16, 2012 and June 1, 2012, or any later date specified by Director of Finance); and Third, on January 16, 2012 and June 1, 2012, to each successor agencies for payments listed in its recognized obligation payment schedule for the six-month fiscal period beginning January 1 or July 1, 2012, in the following priority order: (A) debt service payments scheduled to be made for tax allocation bonds, (B) payments scheduled to be made on revemie bonds, but only to the extent the revenues pledged for them are insufficient to make the payments and only where the agency's tax increment revenues were also pledged for the repayment of such bonds, and (C) payments scheduled for other debts and obligations listed in the recognized obligation payment schedule that are required to be paid from former tax increment revemie; Fourth, on January 16, 2012 and June 1,2012, to each successor agency for administrative costs set forth in an approved administrative budget for those payments required to be paid from former tax increment revenues; and 33 DOCSOC/1481791v5/200120-0004 Fifth, on January 16, 2012, and June 1, 2012, any moneys remaining in the Redevelopment Tax Trust Fund after the payments and transfers authorized by paragraphs (1) through (4), inclusive, shall be distributed to certain local agencies and school entities. If a successor agency is other than the agency that formed a redevelopment agency, the share that would have been allocated to that agency shall instead be allocated to the agency that is the successor agency. If a local agency other than the county auditor-controller has accepted responsibility for administering the Public Health and Safety Fund in a county, the county share shall be allocated to that local agency. If the successor agency reports, no later than December 1, 2011 and May 1, 2012, to the county auditor-controller that the total amount available to the successor agency from the Redevelopment Property Tax Trust Fund allocation to that successor agency's Redevelopment Obligation Retirement Fund, from other funds transferred from the each redevelopment agency, and from funds that have or will become available through asset sales and all redevelopment operations are insufficient to fund the payments required in the next six month fiscal period, the county auditor-controller shall notify the State Controller and the Department of Finance no later than December 10, 2011 and May 10, 2012. The county auditor shall verify whether the successor agency will have sufficient funds from which to service debts according to the schedule and shall report the findings to the state Controller. If the State Controller concurs that there are insufficient funds to pay required debt service, the amount of such deficiency shall be deducted first from the amount remaining to be distributed to taxing entities pursuant to Fifth above, and if that amount is exhausted, from amounts available for distribution for administrative costs in Fourth and Third above from amounts available for allocation to the Public Health and Safety Fund. If an agency made pass through payment obligations subordinate to debt service payments required for enforceable obligations, funds for servicing bond debt may be deducted from the amounts for pass-through payments under First above, if the amounts remaining to be distributed to taxing entities pursuant to Ffth above the amounts available for distribution for administrative costs in Fourth above and the amounts available for allocation td the Public Health and Safety Fund have all been exhausted. The Proposed Legislation provides that the successor agency shall make payments for enforceable obligations using tax increment funds only when no other funding source is available or when payment from current property tax revenues is required by an enforceable obligation. Successor agencies are required to prepare draft recognized obligation payment schedules for the enforceable obligations of the former redevelopment agency and such recognized obligation payment schedules must be certified by an external auditor, approved by the oversight committee, and submitted to the county auditor-controller, the State Controller's Offtce and the Department of Finance. The specific effects of the Proposed Legislation, if enacted in its present form, on the overall administration of the Bonds and the related documents, including the Indentures and the 2011 Loan Agreements and any continuing disclosure certificate, cannot be determined at this time. The Proposed Legislation also proposes the establishment of a seven member oversight committee to monitor and approve the activities of each successor agency. As currently drafted in the case of the Agency, the oversight committee board may have one member appointed by the City, and the remaining members are to be selected by the applicable county board of supervisors, the county superintendent of education, the community college district, school district and the largest non-enterprise special district in the territory of the former redevelopment agency (or by the Governor if positions are not otherwise filled). The result of this make up of the oversight committee is that its actions may not be in the best interest of, and may be adverse to, the Agency or the City and the owners of the Bonds. The Proposed Legislation lengthens the statute of limitations to challenge various actions by the Agency taken after January 1, 2011, including the issuance of the Bonds, from 90 days to two years and requires audits of each redevelopment agency. While the Agency does not believe there is any defect in the proceedings for the issuance of the Bonds that could give rise to a successful challenge, and Bond Counsel is 34 DOCSOC/ 1481791 v5/200120-0004 providing its opinions with respect to the Bonds as set forth in APPENDIX E - "Form of Bond Counsel Final Opinion," due to the heightened scrutiny that may occur with respect to redevelopment agency activities, there could be an increased risk of a legal challenge relating to or affecting the proceedings for the Bonds and any such challenge could affect the market price of the Bonds. Interpretation of the wording and effect of the Proposed Legislation is subject to varying opinions. [t appears that if enacted as drafted in its present form and if found to be legal and enforceable by the courts in the event of a cow~t challenge, the legislation will include provisions having the effect of barring redevelopment agencies from entering into certain contracts and, in some circumstances, expending funds after the effective date of the legislation. These provisions, as well as possibly other provisions, may limit the Agency's fixture ability to spend the proceeds of the Bonds. The existence and/or extent of such limitations cannot be determined at this time. The Agency has covenanted in the Indenture to comply with the requirements of the Internal Revenue Code of 1986, as amended (the "Code"), in order to maintain the exclusion from gross income for federal income tax purposes of the interest on the 2011 Bonds. The Proposed Legislation implements its intended purposes through a complex series of provisions, and appears to contain several inconsistencies and drafting problems which will likely require revision, including, but not limited to, the priority of payments from the Redevelopment Property Tax Trust Fund. The Agency cannot predict what changes may be made to the Proposed Legislation or whether the Proposed Legislation in any form will be enacted. The full text of the Proposed Legislation may be obtained from the State of California Department of Finance at the following web link: http://www.dof. ca. gov/budgeting/trailer_bill_language/financial_research_and_local~ovemment/documents/5 02%20RDA%20Legislation%202-23p.pdf The link to the Proposed Legislation is provided for convenience and is not a part of nor incorporated by reference into this Official Statement. It is possible that Proposition 22, which amended the State Constitution to prohibit state diversion of redevelopment agency revenues generally, will affect the State's ability to implement the RDA Provisions. It is possible that the Governor and the Legis]ature may seek voter approval of changes to the terms of Proposition 22 that are in conflict with the Proposed Budget, including the RDA Provisions and/or the Proposed Legislation: The Agency cannot predict the timing, terms or ultimate implementation of any such final legislation or voter initiative measures, or the impact on the Agency or the Bonds of any proposed, interim or final legislative and constitutional changes which may be adopted arising out of the Proposed Budget. There are a variety of ways in which the Proposed Budget, the RDA Provisions and/or the Proposed Legislation, if adopted, could impact the Agency and the Bonds, although the Agency is not able to predict the full variety or extent of these impacts, and the impacts will vary greatly depending on the final terms of laws adopted to implement the Proposed Budget and the RDA Provisions: (i) The Proposed Legislation, if adopted, could impact the Agency's activities and programs generally and could reduce or eliminate its fund balances and staffing. (ii) The Proposed Legislation, if adopted, could affect the Agency's compliance with and performance under existing contracts and obligations. (iii) Subject to certain "contract clause" protections described below; the Proposed Legislation could affect the Agency's compliance with and performance under the terms of the 2011 DOCSOC/ 1481791 v5/200120-0004 35 Indentures, the 2011 Loan Agreements and the Bonds. These impacts could relate to the amount or availability of property tax revenue, tax increment revenues or Tax Revenues for the Bonds and other uses, the manner of application of Tax Revenues to debt service, flow of funds, use of Bond proceeds to fund new projects, compliance with 2011 Indentures and 2011 Loan Agreements covenants, continuing disclosure and other matters. (iv) Pending final adoption of laws to implement the RDA Provisions, interim proposals could affect the activities of the Agency and-the value of the Bonds. (v) The Proposed Legislation if adopted and implemented, most significantly the e]imination of redevelopment agencies and the redeployment of tax increment revenues affecting redevelopment agencies, would almost certainly raise legal and practical issues, some of which may be subject to litigation and ultimate resolution in the courts, or subsequent legislative action. These issues could affect the Agency and its compliance with the terms of the 2011 Indentures and the Bonds, and resolution of these issues could involve expense and delay or modification of certain of the rights of Bondholders in ways that the Agency cannot predict. The Agency believes that constitutional protections against the impairment of contracts will prevent the proposed actions in the RDA Provisions and the Proposed Legislation from adversely affecting the validity of the Bonds or the Agency's pledge of Tax Revenues to secure the payment of the Bonds and, in this vein, the RDA Provisions and the Proposed Legislation purport to provide for the payments by successor entities of existing redevelopment agencies' debts and contractual obligations such as the Bonds. Article I, section 10 of the United States Constitution provides that "No state shall ... pass any ... law impairing the obligation of contracts." Article I, section 9 of the State Constitution provides that a "law impairing the obligation of contracts may not be passed." Each of these provisions is generally referred to as a "contracts clause:' Federal courts have applied afact-based three-part test to determine whether a state law violates the federal contracts clause. In general, the test compares any impairment against the significant and legitimate public purpose behind the state ]aw; there is no absolute prohibition against impairment. The Agency cannot predict the applicable scope of "contract clause" protections to the Bonds and the RDA Provisions as they may ultimately be implemented. Protection of the rights of Bondholders and enforcement of the terms of the Indenture, if necessary, could involve expense and delay including with respect to the determination of the applicable scope of the "contract clause" provisions. Should legislation be introduced adversely impacting the Agency's receipt of tax increment revenues or the Agency's ability to issue the Bonds or impose additional limitations or burdens on the Agency or the City by reason of the issuance of the Bonds, the Agency and the Underwriters have the right under the bond purchase agreements to not proceed in issuing or purchasing the Bonds. After execution by the Agency, the Authority and the Underwriters of the bond purchase agreement relating to the Bonds, the Agency and the Underwriters have the right under the bond purchase agreements to not proceed in issuing or purchasing the Bonds if the Agency determines that legislation has been introduced or proposals made by the Governor of the State or if legislation is enacted which would impose additional materially adverse limitations or burdens on the Agency or the City by reason of the issuance of the Bonds or which purport to prohibit the issuance of the Bonds. The Agency cannot predict what actions will be taken in the future by the voters of the State, the State Legislature and the Governor to deal with changing State revenues and expenditures and the repercussions they may have on the current fiscal year State Budget, the Proposed Budget and future State budgets, or their impact on the Agency. These developments at the State level, whether related to the Proposed Budget or not, may, in tum, affect local governments and agencies, including the Agency. Even if the proposals affecting the Agency in the Proposed Budget are not adopted, the State Legislah~re may adopt other legislation from time to time requiring redevelopment agencies to make other payments to ERAF or SERAF or to make other DOCSOG 148 1791 v5/200120-0004 36 payments. The impact that current and future State fiscal shortfalls will have on the Agency is unknown at this time. In prior years, the State has experienced budgetary difficulties and as in the Proposed Budget, balanced its budget by requiring local polifical subdivisions, such as the County, the City and the Agency, to fund certain costs previously borne by the State. Information about the State budget and State spending is available at various State-maintained websites. Text of the budget may be found at the website of the Department of Finance, www.dofca.gov, under the heading "California Budget." An impartial analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. In addition, various State of Califomia official statements for its various debt obligations, many of which contain a summary of the current and past State budgets, may be found at the website of the State Treasurer, www.treasurer.ca.gov. All of such websites are provided for general informational purposes only and the material on such sites is in no way incorporated into this Official Statement. Seismic Factors The City, like most regions that border the Pacific Ocean, is an area 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 City. Several active or potentially active faults are located closer to the City, inchiding the Santa Monica, the San Jacinto, the Malibu Coast, and the Newport-Inglewood faults. According to the City of Santa Monica Local Hazard Mitigation Plan (2006), seismologists believe that a 6.0 earthquake on the Newport-Inglewood fault would cause more damage than a larger quake on the San Andreas fault. 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 2,300 housing units and the temporary shutdown of St. John's Hospital. The 1994 Northridge Earthquake was the precipitating factor to formation of the Project Area. Over the last two decades, significant earthquake mapping and mitigation measures have been completed and public awareness has improved: City officials implemented measures to expedite recovery efforts, including streamlined permitting and fee waivers, which allowed most damaged buildings to be repaired within five years of the earthquake. Federal funds ($93.4 million) were used to complete necessary repairs and retrofit buildings to reduce effects of future earthquakes. hi the Earthquake Recovery Redevelopment Project Area, formed following the Northridge earthquake, the following key improvements have been made: seismic retrofitting was completed on public parking structures 2, 4, 7, and 8; Santa Monica College's Liberal Arts Building was reconstructed with Redevelopment Agency assistance; portions of St. Johns Health Center are being reconstructed in phases to be able to remain operational during high magnitude earthquakes; and the Santa Monica UCLA Hospital Medical Center, which also suffered damage in the earthquake, has tmdergone improvements. The City is susceptible to tsunami and seiche hazards. A tsunami is a sea wave generated by a submarine earthquake, landslide or volcanic eruption. According to the Santa Monica Local Hazard Mitigation Plan (2006), Santa Monica's tsunami threat is considered low to moderate. 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. Tsunamis and seiches have both caused damage in the Santa Monica area. The occurrence of severe seismic activity in the City could result. in substantial damage to property located in the Project Area, and could lead to successful appeals for reduction of assessed values of such property. Such a reduction of assessed valuations could result in a reduction of the Tax Revenues that secure the 2011 Bonds. 37 DOCSOC/ 1481791 v5/200120-0004 Hazardous Substances An additional environmental condition that may result in the reduction in the assessed value of property would be the discovery of a hazardous substance that would limit the beneficial use of taxable property within the Project Area. In general, the owners and operators of a property may be required by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The owner or operator may be required to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the property within the Project Area be affected by a hazardous substance, could be to reduce the marketability and value of the property by the costs of remedying the condition. Investment Funds All funds held by the Trustee under the Indenture and all funds held by the Agency under the Indenture [including the Special Fund, into which all Tax Revenues are initially deposited, are required to be invested in Permitted Investments] as provided in the Indenture. All investments, including the Permitted Investments and those authorized by law from time to time for investments by municipalities, contain a certain degree of risk. Such risks include, but are not limited to, a lower rate of return than expected and loss or delayed receipt of principal. The occurrence of these events with respect to amounts held under the Indenture or the Special FLmd could have a material adverse effect on the security for the Bonds. Bankruptcy and Foreclosure The rights of the Owners of the Bonds and the enforceability of the obligation to make payments on the Bonds may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights under currently existing law or laws enacted in the future and may also be subject to the exercise of judicial discretion under certain circumstances. The opinion of Bond Counsel as to the enforceability of the obligation to make payments on the Bonds will be qualified as to bankruptcy and such other legal events. See APPENDIX E - "Form of Bond Counsel Final Opinion: ' Further, the payment of the tax increment revenues and the ability of the County to timely foreclose the lien of a delinquent unpaid tax may be limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. Any delay in prosecuting superior court foreclosure proceedings would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds and the possibility of delinquent tax installments not being paid in full. These risks may be greater where, as here, the Project Area has a high concentration of major taxpayers. Changes in the Law In addition to the other limitations on tax revenues described herein under "LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS," the California electorate or Legislature could adopt a constitutional or legislative change that decreases property taxes or the amount thereof allocable to the Agency with the effect of reducing Tax Revenues payable to the Agency. There is no assurance that the California electorate or Legislature will not at some future time approve additional limitations that could reduce such Tax Revenues and adversely affect the security for the Bonds. Bonds Are Limited Obligations The Bonds are special, limited obligations of the Agency and are payable solely from and secured by Tax Revenues of the Agency under.the Indenture and as such are not debt of the City, the State or any of their political subdivisions other than the Agency, and none of the City, the State or any of their political subdivisions other than the Agency is liable for the payment thereof. The principal of, and premium, if any, and interest on, the Bonds are payable solely from Tax Revenues allocated to the Agency from the Project 38 DOCSOG1481791v5/200120-0004 Area and certain other funds pledged therefor under the Indenh~re. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. See "SECURITY FOR THE BONDS:' No Owner of the Bonds may compel exercise of the taxing power of the State, the City or any of their political subdivisions to pay the principal of, or premium, if any, or interest due on, the Bonds. Limited Recourse on Default If the Agency defaults on its obligations to make payments with respect to the Bonds, the Trustee has the right to accelerate the total unpaid principal amount of the Bonds. However, in the event of a default and such acceleration, there can be no assurance that the Trustee will have sufficient moneys available for payment of the Bonds. Secondary Market There can be no guarantee that there will be a secondary market for the 2011 Bonds, or, if a secondary market exists, that the 2011 Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon the then prevailing circumstances. Such prices could be substantially different from the original purchase price. Loss of Tax Exemption A5 discussed under the caption "OTHER MATTERS -Tax Matters," interest on the 2011 Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the 2011 Bonds were issued as a result of future acts or omissions of the Agency in violation of its covenants contained in the Indenture. Should such an event of taxability occur, the 2011 Bonds are not subject to special redemption or any increase in interest rate and may remain outstanding until maturity. LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS Property Tax Limitations -Article XIIIA Califomia voters, on June 6, 1978, approved an amendment (commonly known as both Proposition 13 and the Jarvis-Gann Initiative) to the California Constitufion. This amendment, which added Article XIIIA to the Califomia Constitution, among other things, affects the valuation of real property for the purpose of taxation in that it defines the fiill cash value of property to mean "the county assessor's valuation of real property as shown on the 1975/76 tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership 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 any reduction in the consumer price index or wmparable local data, or any reduction in the event of declining property value caused by damage, destruction or other factors. The amendment further limits the amount of any ad valorem tax on real property to 1 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. In addition, an amendment to Article XIII was adopted in June 1986 by initiative which exempts any bonded indebtedness approved by two-thirds of the votes cast by voters for the acquisition or improvement of real property from the 1 percent limitation. In the general election held November 4, 1986, voters of the State of Califomia approved two measures, Propositions 58 and 60, which further amend Article XIIIA. Proposition 58 amends Article XIIIA to provide that the terms "purchased" and "change of ownership," for purposes of determining full cash value 39 DOCSOC/ 1481791 v5/20 01 20-0 0 04 of property under Artic]e XIIIA, do not include the purchase or transfer of (1) real property between spouses -and (2) the principal residence and the first $1,000,000 of other property between parents and children. Proposition 60 amends Article XIIIA to permit the Legislature to allow persons over age 55 who sell their residence to buy or build another of equal or lesser value within two years in the same county, to transfer the old residence's assessed value to the new residence. Pursuant to Proposition 60, the Legislature has enacted legislation permitting counties to implement the provisions of Proposition 60. Challenges to Article XIIIA There have been many challenges to Article XIIIA of the California Constitution. Recently, the United States Supreme Couu heard the appeal in Nordlinger v. Hahn, a challenge relating to residential property. Based upon the facts presented in Nordlinger, the United States Supreme Court held that the method of property tax assessment under Article XIIIA did not violate the federal Constitution. The Agency cannot predict whether there will be any future challenges to California's present system of property tax assessment and cannot evaluate the ultimate effect on the Agency's receipt of tax increment revenues should a future decision hold unconstitutional the method of assessing property. Implementing Legislation Legislation enacted by The Califomia Legislature to implement Article XIIIA (Statutes of 1978, Chapter 292, as amended) provides that, notwithstanding any other law, local agencies may not levy any property tax, except to pay debt service on indebtedness approved by the voters prior to July 1, 1978, and that each county will levy the maximum tax permitted by Article XIIIA. The apportionment of property taxes in fiscal years after 1978/79 has been revised pursuant to Statutes of 1979, Chapter 282 which provides relief funds from State moneys beginning in fiscal year 1978/79 and is designed to provide a permanent system for sharing State taxes and budget surplus funds with local agencies. Under Chapter 282, cities and counties .receive about one-third more of the remaining property tax revenues collected under Proposition 13 instead of direct State aid. School districts receive a correspondingly reduced amount of property taxes, but receive compensation directly from the State and are given additional relief. Future assessed valuation growth allowed under Article XIIIA (new construction, change of ownership, 2% annual value growth) will be allocated on the basis of"sites" among thejurisdictions that serve the tax rate area within which the growth occurs except for certain utility property assessed by the State Board of Equalization which is allocated by a different method discussed herein. Property Tax Collection Procedures Class cations. In California, property which is subject to ad valorem taxes is classified as "secured" or "unsecured." Secured and unsecured property are entered on separate parts of the assessment roll maintained by the county assessor. The secured classification includes property on which any property tax levied by the County becomes a lien on that property sufficient, in the opinion of the county assessor, to secure payment of the taxes. Every tax which becomes a lien on secured property has priority over all other liens on the secured property, regardless of the time of the creation of other liens. A tax levied on unsecured property does not become a lien against unsecured property, but may become a lien on certain other property owned by the taxpayer. Collections. The method of collecting delinquent taxes is substantially different for the two classificafions of property. The taxing authority has four ways of collecting unsecured property taxes in the absence of timely payment by the taxpayer: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the county recorder's office, in order to obtain a DOCSOC/ 1481791 v5/200120-0004 40 lien on certain property of the taxpayer; and (4) seizure and sale of the personal property, improvements or possessory interests belonging or assessed to the assessee. The exclusive means of enforcing the payment of delinquent taxes with respect to property on the secured roll is the sale of property securing the taxes to the State for the amount of taxes which are delinquent. Penalties. A 10 percent penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, property on the secLUed roll on which taxes are delinquent is declared in default on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1.5 percent per month to the time of redemption and a $ I S Redemption Fee. If taxes are unpaid for a period of five years or more, the property is recorded in a "Power to Sell" status and is subject to sale by the county tax collector. A 10 percent penalty also applies to the delinquent taxes on property on the unsecured roll, and further, an additional penalty of 1- 1/2 percent per month accrues with respect to such taxes beginning the first day of the third month following the de]ihquency date. Delinquencies. The valuation of property is determined as of January 1 each year and equal installments of taxes levied upon secured property become delinquent on the following December 10 and April 10. Tales on unsecured property are due January 1. Unsecured taxes enrolled by July 31, if unpaid, are delinquent August 31 at 5:00 p.m. and are subject to penalty; unsecured taxes added to roll after July 31, if unpaid, are delinquent on the last day of the month succeeding the month of enrollment. Disbursement to the Agency. The County disburses tax increment revenue to all redevelopment agencies from November. through August with approximately 35% of secured revenues apportioned by the end of December and a total of 75% of the secured revenues by the end of the following April. Unsecured revenues are disbursed in November, March and August of each fiscal year. The Agency receives the final distributions of secured revenues in July and August. The November payment consists of an 80% advance on the total unsecured levy. SupplementaZAssessmenis. A bill enacted in 1983, SB 813 (Statutes of 1983, Chapter 498), provides for the supplemental assessment and taxation of property as of the occurrence of a change in ownership or completion of new construction. The statute may provide increased revenue to redevelopment agencies to the extent that supplemental assessments as a result of new construction or changes of ownership occur within the boundaries of redevelopment projects subsequent to the lien date. To the extent such supplemental assessments occur within the Project Area, Tax Revenues may increase. The projection of Tax Revenues assumes no revenue from supplemental assessments in future years. See "TAX REVENUES -Projected Tax Revenues". Tax Collection Fees. SB 2557 (Chapter 466, Statutes of 1990) permits county auditors to withhold a portion of annual tax revenues for the recovery of county charges related to property tax administration services to cities in an amount equal to their property tax administration costs proportionately attributable to cities. Subsequent legislation specifically includes redevelopment agencies among the entities which are subject to a property tax administration charge. The projection of Tax Revenues assumes the County will continue to charge the Agency an annual collection fee of [1.60]% of gross tax increment revenue. See "TAX REVENUES -Projected Tax Revenues". Unitary Property AB 2890 (Statutes of 1986, Chapter 1457) provides that, commencing with the fiscal year 1988-89, assessed value derived from State-assessed unitary property (consisting mostly of operational property owned by utility companies and herein defined as "Unitary Property") is to be allocated county-wide as follows: (i) each tax rate area will receive the same amount from each assessed utility received in the previous fiscal year unless the applicable county-wide values are insufficient to do so, in which case values will be allocated 41 DOCSOC/ 1481791 v5/200120-0004 to each tax rate area on a pro-rata basis; and (ii) if values to be allocated are greater than in the previous fiscal year, each tax rate area will receive apro-rata share of the increase from each assessed utility according to a specified formula. Additionally, the lien date on State-assessed property has been changed to January 1. Railroad property will continue to be assessed and revenues allocated to all tax rate areas where the railroad property is sited. To administer the allocation of unitary tax revenues to redevelopment agencies, the County no longer includes the taxable value of utilities as part of the reported taxable values of the project area. For fiscal year 2010-11, the County is expected to remit $[70,340] unitary revenue to the Agency for the Project Area. The projection of Tax Revenues assumes the County will remit a like amount of utility tax revenue to the Agency in future years. See "TAX REVENUES -Projected Tax Revenues". Appropriations Limitations -Article XIIIB On November 6, 1979, California voters approved Proposition 4, the so-called Gann Initiative, which added Article XIIIB to the California Constitution. The principal effect of Article XIIIB is to limit the annual appropriations of the State and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the government entity. Effective November 30, 1980, the California Legislature added Section 33678 to the Redevelopment Law which provided that the allocation of taxes to a redevelopment agency for the purpose of paying principal of, or interest on, loans, advances, or indebtedness will not be deemed the receipt by such agency of proceeds of taxes levied by or on behalf of the agency within the meaning of Article XIIIB, nor will such portion of taxes be deemed receipt of taxes by, or an appropriation subject to the limitation of, any other public body within the meaning or for the purpose of the Constitution and laws of the SYaYe, including Section 33678 of the Redevelopment Law. Statement of Indebtedness Under the Law, the Agency must file with the County Auditor a statement of indebtedness for the Project Area by October 1 each year. As described below, the statement of indebtedness controls the amount of tax increment revenue that will be paid to the Agency in each fiscal year. Each statement of indebtedness is filed on a form prescribed by the State Controller and specifies, among other things: (a) the total amount of principal and interest payable on all loans, advances or indebtedness (including the 2011 Bonds and any Parity Debt) (the "Debt"), both over the life of the Debt and for the current fiscal year, and (b) the amount of "available revenue" as of the end of the previous fiscal year. "Available revenue" is calculated by subtracting the total payments on Debt during the previous fiscal year from the total revenues (both tax increment revenue and other revenues) received during the previous fiscal year, plus any carry-forward from the prior fiscal year. Available revenue includes amounts held by the Agency and irrevocably pledged to the payment of Debt, but does not include Housing Set-Aside. The County Auditor may only pay tax increment revenue to the Agency in any fiscal year to the extent that the total remaining principal and interest on all Debt exceeds the amount of available revenues as shown on the statement of indebtedness. The statement of indebtedness constitutes prima facie evidence of the debt of the Agency; however, the County Auditor may dispute the statement of indebtedness in certain cases. Section 33675 provides for certain time limits controlling any dispute of the statement of indebtedness, and allows for Superior Court determination of such dispute in the event it cannot be resolved by the Agency and the County Auditor. Any such action may only challenge the amount of the Debt as shown on the statement, and not the validity of any Debt or related contract or the expenditures related thereto. No challenge can be made to payments to a trustee DOCSOC/ 1481791 v5/200120-0004 42 in connection with a bond issue or payments to a public agency in connection with payments by that public agency with respect to a lease or bond issue. The Agency's October 1, 2010 Statement of Indebtedness included outstanding obligations sufficient to collect all ofthe tax increment currently generated in the Project Area for Fiscal Year 2010-11. The Agency expects that its future Statement of Indebtedness will also include outstanding obligations sufficient to collect all of the tax increment generated in the Project Area during the applicable fiscal year. Proposition 218 On November 5, 7996, California voters approved Proposition 218 -Voter Approval for Local Government Taxes -Limitation on Fees, Assessments, and Charges -Initiative Constitutional Amendment. Proposition 218 added Articles XIIIC and XIIID to the Ca]ifornia Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property- related fees and charges. Tax Revenues securing the 2011 Bonds are derived from property taxes which are outside the scope of taxes, assessments and property-related fees and charges which were limited by Proposition 218. Future Initiatives Article XIIIA, Article XIIIB and certain other propositions affecting property tax levies were each adopted as measures which qualified for the ballot pursuant to California's initiative process. From time to time other initiative measures could be adopted, further affecting Agency revenues or the Agency's ability to expend revenues. OTHER MATTERS Litigafion The Agency will represent on the Closing Date that no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, is pending for which the Agency has been served, or, to the best of its knowledge after due inquiry, threatened- (i) in any way questioning the corporate existence of the Agency or the titles of the officers of the Agency to their respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin the issuance or delivery of any of the 2011 Bonds, or the payment or collection of any amounts pledged or to be pledged to pay the principal of and interest on the 2011 Bonds, or in any way contesting or affecting the validity of the 2011 Bonds or the related legal documents or the consummation of the transactions contemplated thereby or hereby, or contesting. the exclusion of the interest on the 2011 Bonds from taxation or contesting the powers of the Agency or its authority to issue the 2011 Bonds; (iii) which may result in any material adverse change relating to the Agency; 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 circtunstances under which they were made, not misleading, and (v) there is no basis for any action, suit, proceeding, inquiry or investigation of the nature described in clauses (i) through (iv) above. 43 Docsoat 4s I ~9 t ~sizoo t zo-ooo4 Ratings Standard & Poor's has assigned its municipal bond rating of "_" to the 2011 Bonds. Fitch Ratings Group has assigned its municipal bond rating of " " to the 201 t Bonds. The ratings issued reflect only the view of the applicable rating agency, and any explanation of the significance of such ratings should be obtained from the applicable rating agency. There is no assurance that such ratings will be retained for any given period of time or that they will not be revised downward or withdrawn entirely by the applicable rating agency if, in the judgment of the applicable rating agency, circumstances so warrant. Any such downward revision or withdrawal of any ratings obtained may have an adverse effect on the market price of the 2011 Bonds. Tax Matters In the opinion of Stradling Yocca Carlson & Routh, a Professional Corporation, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) on the 2011 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; however, Bond Counsel notes that, with respect to corporations, interest (and original issue discount) on the 2011 Bonds may be included as an adjustment in the calculation of alternative minimum taxable income which may affect such corporation's alternative minimtun tax liability. In the further opinion of Bond Counsel, interest (and original issue discount) on the 2011 Bonds is exempt from California personal income tax. In the opinion of Bond Counsel, the difference between the issue price of a 2011 Bond (the first price at which a substantial amount of the 2011 Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity of such 2011 Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a 2011 Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a 2011 Bond Owner will increase the 2011 Bond Owner's basis in the applicable 2011 Bond. The amount of original issue discount that accrues to the Owner of the 2011 Bonds 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 California personal income tax. Bond Counsel's opinion, as to the exclusion from gross income of interest (and original issue discount) on the 2011 Bonds, is based upon certain representations made by the Agency and others, and is subject to the condition that the Agency comply with certain covenants and the requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the 2011 Bonds to assure that interest (and original issue discount) on the 2011 Bonds will remain excludable from gross income for federal income tax proposes. Failure to comply with such requirements possibly could-cause interest (and original issue discount) on the 2011 Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the 2011 Bonds. The Agency has covenanted to comply with all such requirements. The amount by which a 2011 Bond Owner's original basis for determining loss on sale or exchange of the applicable 2011 Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable 2011 Bond premium, which must be amortized under Section 171 of the Code; such amortizable 201 I Bond premium reduces the 2011 Bond Owner's basis in the applicable 2011 Bond (and the amount oftax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of amortization of 2011 Bond premium may result in a 2011 Bond Owner realizing a taxable gain when a 201 I Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the ZOl 1 Bond to the Owner. Purchasers of the 2011 Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable 2011 Bond premium. 44 DOCSOC/1481791 v5/200120-0004 The Internal 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 2011 Bonds will be selected for audit by the IRS. It is also possible that the market value of the 2011 Bonds might be affected as a result of such an audit of the 2011 Bonds (or by an audit of similar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof] subsequent to the issuance of the 2011 Bonds to the extent that it adversely affects the exclusion from gross income of interest on the 2011 Bonds or their market vahie. It is possible that subsequent to the issuance of the 2011 Bonds there might be federal, state, or local statutory changes (or judicial or regulatory interpretations of federal, state, or local law) that affect the federal, state, or local tax treatment of the 2011 Bonds or the market value of the 2011 Bonds. No assurance can be given that subsequent to the issuance of the 2011 Bonds such changes or interpretations will not occty. Bond Counsel's opinion is based on an analysis of existing statutes, regulations, rrdings and judicial decisions. Such opinions maybe 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 are taken or do occur. The Resolution and the Tax Certificate relating to the 2011 Bonds permit certain actions to be taken or to be omitted if a favorable opinion is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the 2011 Bonds for federal income tax purposes with respect to any 2011 Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth. Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the 2011 Bonds is excluded from gross income for federal income tax purposes, as provided above, the ownership of the 2011 Bonds and the accrual or receipt of interest on the 2011 Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, all potential purchasers of the 2011 Bonds should consult their tax advisors before purchasing any of the 2011 Bonds with respect to collateral tax consequences relating to the 2011 Bonds. Should the interest (and original issue discount) on the 2011 Bonds become includable in gross income for federal income tax purposes, the 2011 Bonds are not subject to early redemption as a result of such occurrence and will remain outstanding until maturity or until otherwise redeemed in accordance with the Resolution. A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix D. General. Owners of the 2011 Bonds should be aware that_the ownership or disposition of, or the accrual or receipt of interest on, the 2011 Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the 2011 Bonds other than as expressly described above. Continuing Disclosure The Agency has undertaken for the benefit of holders and beneficial owners of the 2011 Bonds to provide certain financial information and operating data relating to the Agency by not later than eight months following the end of the Agency's fiscal year (currently by March 1 each year based upon the June 30 end of the Agency's fiscal year), commencing March 1, 2012 with the report for the 2010-11 Fiscal Year (the "Annual Report"), and to provide notices of the occurrence of certain listed events. The Anmial Report and notices of certain listed events will be filed by the Agency with Municipal Securities Rulemaking Board. The specific nature of the information to be contained in the Annual Report or the notices of material events is set forth in APPENDIX E -'`Form of Continuing Disclosure Certificate." These covenants have been made in order to assist the Underwriters in complying with SEC Rule 15c2-12(b)(5) (the "Rule"). 45 DOCSOC/ 1481791 v5/200120-0004 [The Agency has not failed to comply in any material respects with previous undertakings to provide annual reports and notices of material events under the Rule in the past five years.] Underwriting The 2011 Bonds were sold to the Santa Monica Public Financing Authority for concurrent resale to E. J. De La Rosa & Co., Inc., as representative of itself and We]Is Fargo Bank, National Association (collectively, the "Underwriters"), pursuant to a bond purchase agreement dated 2011. The Underwriters have agreed to purchase the 2011 Bonds at a purchase price of $ (being the principal amount of the 2011 Bonds ($ .00) less an original issue discount of $ and less an Underwriters' discount of $ ). The Underwriters may change the initial public offering prices of the 201 I Bonds from time to time. The Underwriters will purchase all of the 2011 Bonds if any are purchased. Financial Statements The audited financial statements of the Agency for the Fiscal Year ended June 30, 2010, are included as part of APPENDIX C - "AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR THE YEAR ENDED JUNE 30, 2010." Such financial statements have been audited by Mayer Hoffman McCann P.C. (the "Auditor"), independent certified public accountants, whose report also appeus in Appendix C. The Auditor was not requested to consent to the inclusion of its report in Appendix C, nor has the Auditor undertaken to update 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 the date of its report. Financial Advisor Public Resources Advisory Group served as financial advisor to the Agency in connection with the issuance of the 2011 Bonds. Public Resources Advisory Group will receive compensation contingent upon the sale and delivery of the 2011 Bonds. Professionals Involved in the Offering The following professionals are participating in this financing: Stradling Yocca Carlson & Rauth, a Professional Corporation, as Bond Counsel and Disclosure Counsel; Kane, Balhner & Berkman, as Agency counsel; HdL Coren & Cone, as Fiscal Consuhant; Public Resources Advisory Group, as Financial Advisor to the Agency; Union Bank of California, N.A., as Trustee; and Jones Hall, A Professional Law Corporation, as counsel to the Underwriters. The fees of Bond Counsel and Disclosure Counsel, the Underwriters and the Financial Advisor are contingent on the issuance of the 2011 Bonds. EXECUTION The execution and delivery of this Official Statement has been duly authorized by The Agency. REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA By: Executive Director 46 DOCSOC/ 1481791 v5/200120-0004 47 DOCSOC/1481791 v5/200120-0004 APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE The following is a brief summary of certain provisions of the Indenture of Trust, dated as of April I, 2006, by and between the Agency and Union Bank of California, N.A., as trustee (the "Trustee"), as amended and supplemented by a First Supplement to Indenhite of Trust, dated as of April 1, 2006, and a Second Supplement to Indenture of Trust dated as of June 1, 2011by and between the Agency and the Trustee (as so amended and supplemented, the "Indenture") providing for the issuance of the Redevelopment Agency of the City of Santa Monica Earthquake Recovery Redevelopment Project 2011 Tax Allocation Bonds (the "2011 Bonds"), the Redevelopment Agency of the City of Santa Monica Earthquake Recovery Redevelopment Project 2006 Tax Allocation Refunding Bonds, Series A (the "2006 Series A Bonds")and the Redevelopment Agency of the City of Santa Monica Earthquake Recovery Redevelopment Project 2006 Taxable Tax Allocation Refunding Bonds, Series B (the "2006 Series B Bonds" and together with the 2006 Series A Bonds, the "2006 Bonds"). The 2006 Series A Bonds were issued pursuant to the Indenture of Trust, the 2006 Series B Bonds were issued pursuant to the First Supplement to Indenture of Trust and the 2011 Bonds are being issued pursuant to the Second Supplement to Indenture of Trust. Except as noted herein, the provisions of the Indenture described in this summary apply to both the 2011 Bonds and the 2006 Bonds. Accordingly, references in this summary to "Bonds" is with respect to the 2011 Bonds and/or the 2006 Bonds, as applicable. The principal difference between the application of the provisions of the Indenture results from the fact that interest paid on the 2011 Bonds and the 2006 Series A Bonds is exempt from federal income taxes and the interest paid on the Series B Bonds is intended by the Agency to be subject to federal income taxes. This is a summary of the provisions of the Indenture not otherwise described in the text of this Official Statement. Such summary is not intended to be definitive, and reference is made to-the actual document (copies of which may be obtained from the Trustee) for the complete terms thereof. Definitions "Additional Revenues" means, as of the date of calculation, the amount of Tax Revenues which, as shown in the Report of an Independent Fiscal Consultant, are estimated to be receivable by the Agency within the Fiscal Year following the Fiscal Year in which such calculation is made, as a result of increases in the assessed valuation of taxable property in the Project Area due to the completion of construction which is not then reflected on the tax rolls, or due to transfer of ownership or any other interest in real property which has been recorded but which is not then reflected on the tax rolls. "Aeency" means the Redevelopment Agency of the City of Santa Monica, a public body corporate and politic duly organized and existing under the Law. "Bond Counsel" means (a) Stradling Yocca Carlson & Rauth, a Professional Corporation, or (b) any other attorney or firm of attorneys appointed by or acceptable to the Agency of nationally-recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Tax Code. "Bond Year" means any twelve-month period beginning on July 2 in any year and extending to the next succeeding July 1, both dates inclusive; except that the first Bond Year shall begin on the Closing Date and end on July I, 2011. "Bonds" means, collectively, the 2011 Bonds, the 2006 Bonds and any Parity Debt. "Business Dav" means a day of the year (other than a Saturday or Sunday) on which banks in the State are not required or permitted to be closed, and on which the New York Stock Exchange is open. A-1 DOCSOC/ 148 ] 791v5/200120-0004 "C~" means the City of Santa Monica, a municipal corporation and chartered city organized and existing under the Constitution and laws of the State. "Closing Date" means the date on which the Bonds are delivered by the Agency to the purchaser of the Bonds. "Continuine Disclosure Certificate" means that certain Continuing Disclosure Certificate executed by the Agency dated as of the Closing Date, as originally executed and as it maybe amended from time to time in accordance with the terms thereof. "Costs of Issuance" means all items of expense directly or indirectly payable by or reimbursable to the Agency relating to the authorization, issuance, sale and delivery of the Bonds, including but not limited to: printing expenses; rating agency fees; bond insurance and surety bond premiums; filing and recording fees; initial fees, expenses and charges of the Trustee and its counsel, including the Trustee's first annual administrative fee; fees, charges and disbursements of attorneys, financial advisors, accounting firms, consultants and other professionals; fees and charges for preparation, execution and safekeeping of the Bonds; and any other cost, charge or fee in connection with the original issuance of the Bonds and the refunding and defeasance of the 1999 Bonds. "Costs of Issuance Fund" means the fund by that name established and held by the Trustee pursuant to the Indenture. "Coun "means the County of Los Angeles, a county duly organized and existing under the Constitution and laws of the State. "Debt Service Fund" means the fund by that name established and held by the Trustee pursuant to the Indenture. "Defeasance Obli atga ions" means cash, direct non-callable obligations of the United States of America and securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the United States of America, to which direct obligation or guarantee the full faith and credit of the United States of America has been pledged, Refcorp interest strips, CATS, TIGRS, STRPS, or defeased municipal bonds rated AM by S&P or Aaa by Moody's (or any combination of the foregoing). "Event of Default" means any of the events described into the Indenture. "Fair Market Value" means, with respect to any investment, the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of Section 1273 of the Tax Code) and, otherwise, the term "Fair Market Value" means the acquisition price in a bona fide arm's length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, (iii) the investment is a United States Treasury Security--State and Local Godemment Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) any commingled investment fund in which the City and related parties do not own more than a ten percent (10%) beneficial interest therein if the return paid by the fund is without regard to the source of the investment. "Federal Securities" means, with respect to the Bonds, United States treasury notes, bonds, bills or certificates of indebtedness, or obligations for which the full faith and credit of the United States of America are pledged for the payment of principal and interest (including obligations issued or held in book-entry form A-2 DOCSOC/1481791v5/200t20-0004 and securities which represent an undivided interest in such direct obligations), and also any securities now or hereafter authorized, both the principal of and interest on which is guaranteed directly by the full faith and credit of the United States of America. "Fiscal Year" means any twelve-month period beginning on July I in any year and extending to the next succeeding June 30, both dates inclusive, or any othertwelve-month period selected and designated by the Agency as its official fiscal year period pursuant to a Certificate of the Agency filed with the Trustee. "Indenture" means collectively, the Indenture of Trust ,the First Supplemental Indenture of Trust and the Second Supplemental Indenture of Trust, each by and between the Agency and the Trustee, as amended or supplemented from time to time pursuant to any Supplemental Indenture entered into pursuant to the provisions of such Indenture. "Independent Accountant" means any accountant or firm of such accountants duly licensed or registered or entitled to practice and practicing as such under the laws of the State, appointed by or acceptable to the Agency, and who, or each of whom: (a) is in fact independent and not under domination of the Agency; (b) does not have any substantial interest, direct or indirect, with the Agency; and (c) is not connected with the Agency as an officer or employee of the Agency, but who may be regularly retained to make reports to the Agency. "Independent Fiscal Consultant" means any consultant or firm of such consultants appointed by or acceptable to the Agency and who, or each of whom: (a) is judged by the Agency to have experience in matters relating to the financing of redevelopment projects; (b) is in fact independent and not under domination of the Agency; and (c) is not connected with the Agency as an officer or employee of the Agency, but who may be regularly retained to make reports to the Agency. "Interest Account" means the account by that name established and held by the Trustee pursuant to the Indenture. "Interest Payment Date" means July 1, 2011, and each January 1 and July 1 thereafter so long as any ofthe Bonds remain unpaid. "Law" means the Community Redevelopment Law of the State, constituting Part 1 of Division 24 of the Health and Safety Code of the State, and the acts amendatory thereof and supplemental thereto. "Low and Moderate Income Housing Fund" means the fund of the Agency by that name established pursuant to Section 33334.3 of the Law. "Low and Moderate Income Housin¢ Account" means the account by that name established by the Indenture and held by the Trustee. "Maximmn Annual Debt Service" means, as of the date of calculation, the largest aggregate amount of Annual Debt Service on all Outstanding Bonds, including the Bonds and all other Parity Debt, for the current or any fuhu~e Bond Year. For purposes of such calculation, there shall be excluded (i) interest on any Parity Debt which is to be paid from amounts constituting capitalized interest and (ii) a pro rata portion of each installment of principal of any Parity Debt, together with the interest to accrue thereon, in the event and to the extent that the proceeds of such Parity Debt are deposited in an escrow fund from which amounts may not be released to the Agency unless the Tax Revenues for the crrrent Fiscal Year (as evidenced in the written records of the County) at least equal to one hundred twenty five percent (125%) of the amount of Maximum Annual Debt Service. "Moodv's" means Moody's Investors Service, Inc., its successors and assigns. A-3 DOCSOC/1481791 v5/200120-0004 "Outstandine", when used as of any particular time with reference to Bonds, means (subject to the provisions of the Indenture) all Bonds except: (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds paid or deemed to have been paid within the meaning of the Indenture; and (c) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the Agency pursuant to the Indenture. "Owner" means, with respect to any Bond, the person in whose name the ownership of such Bond shall be registered on the Registration Books. "Parity Debt" means any loans, bonds, notes, advances or indebtedness payable from Tax Revenues on a parity with the 2006-Bonds and the 2011 Bonds made to finance or refinance the Redevelopment Project and issued or incurred pursuant to and in accordance with the provisions of the Indenture. "Parity Debt Instrument" means the [2011 Bonds Indenture] or the [Series B Bonds Indenture], as applicable, and any resolution, indenture of trust, trust agreement or other instrument authorizing the issuance of any Parity Debt and which otherwise complies with all of the terms and conditions of the Indenture. "Permitted Investments" means any of the following which at the rime of investment are legal investments under the laws bf the State of California for the moneys proposed to be invested therein, but only to the extent that the same are acquired at Fair Market Value: (a) cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with obligations described in paragraph (b) below); (b) Federal Securities; (c) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America, including: (i) Export- Import Bank; (ii) Farmers Home Administration; (iii) General Services Administration; (iv) U.S. Maritime Administration; (v) Small Business Administration; (vi) Government National Mortgage Association (GNMA); (vii) U.S. Department of Housing & Urban Development (DNA's); and (viii) Federal Housing Administration; (d) senior debt obligations rated "AAA" by S&P and "Aaa" by Moody's issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation with remaining maturities not exceeding three years; (e) U.S. dollaz denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of "A-1" or "A-1+" by S&P and "P-1" by Moody's and maturing no more than 360 days after the date of purchase (ratings on holding companies are not considered as the rating of the bank); (f) commercial paper which is rated at the time of purchase in the single highest classification, "A-1 +" by S&P and "P-1" by Moody's and which matures not more than 270 days after the date of purchase; (g) investments in a money market fund rated "AAAm" or "AAAm-G" or better by S&P; (h) pre-refunded municipal obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (i) which are rated, based on an irrevocable escrow account or fund (the "escrow"), in the highest rating category of S&P and Moody's; or A-4 DOCSOC/1481791v5/200120-0004 (ii) (A) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (a) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (B) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate; (i) investment agreements approved in writing by the Insurer, supported by appropriate opinions of counsel, with notice to S&P; (j) the Local Agency Investment Fund of the State of Califomia, created pursuant to Section 16429.1 of the Califomia Government Code, to the extent the Trustee is authorized to register such investment in its name; and (k) other forms of investments approved in writing by Insurer with notice to S&P. "Plan Limitation" means the ]imitations contained or incorporated in the Redevelopment Plan on the aggregate principal amount of bonded indebtedness payable from Tax Revenues which may be outstanding at any time. "Principal Account" means the account by that name established and held by the Trustee pursuant to the Indenture. "Proiect Area" means the project area described in the Redevelopment Plan. "Qualified Reserve Account Credit Instrument" means an irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank or insurance company and deposited with the Trustee pursuant to the Indenture, provided that all of the following requirements are met by the Agency at the time of delivery thereof to the Trnstee: (a) the long-term credit rating of such bank or insurance company is Aa or better from Moody's and AA or better from S&P; (b) such letter of credit or surety bond has a term of at least twelve (12) months; (c) such letter of credit or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released pursuant to the Indenture; and (d) the Tmstee is authorized pursuant to the terms of such letter of credit or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the Interest Account, the Principal Account for the Sinking Account or the purpose of making payments required pursuant to the Indenture. "Record Date" means, with respect to any Interest Payment Date, the close of business on the fifteenth (15th) calendar day of the month preceding such Interest Payment Date, whether or not such fifteenth (15th) calendar day is a Business Day. "Redemption Account" means the account by that name established and held by the Trustee pursuant to the Indenture. "Redevelopment Fund" means the fimd by that name established and held by the Trustee pursuant to the Indenture. "Redevelopment Plan" means the Redevelopment Plan for the project designated as the "Santa Monica Earthquake Recovery Redevelopment Project", approved by Ordinance No. 1747 of the City Council of the City; adopted on June 21, 1994, together with any amendments thereof heretofore or hereafter duly enacted pursuant to the Redevelopment Law. A-5 DOCSOC/ 148179 (v5/200120-0004 "Redevelopment Project" means the undertaking of the Agency to redevelop the Project Area in accordance with the Redevelopment Plan. "Reeistration Books" means the records maintained by the Trustee pursuant to the Indenhite for the registration and transfer of ownership of the Bonds. "Request of the Agency" means a request in writing signed by the Chairman, Executive Director, Treasurer or Secretary of the Agency, or any other officer of the Agency duly authorized by the Agency for that purpose. "Reserve Account" means the account by that name established and held by the Trustee pursuant to the Indenture. "Reserve Requirement" means; as of the date of any calculation, the lesser of (a) Maximum Annual Debt Service or (b) the maximum amount permitted to be deposited in the Reserve Account under the Tax Code, as certified to the Trustee by the Agency. "S&P" means Standard & Poor's Ratings Services, A Division of the McGraw-Hill Companies, Inc., its successors and assigns. "Sinking Account" means the account by that name established and held by the Trustee pursuant to the Indenture. "Special Fund" means the fund by that name established and held by the Trustee pursuant to the Indenture. "State" means the State of California. "Subordinate Debt' means any bonds, notes, loans, advances or other indebtedness issued or incurred by the Agency in accordance with the requirements of the Indenture, which are either: (a) payable from, but not secLited by a p]edge of or lien upon, the Tax Revenues; or (b) secured by a pledge of or lien upon the Tax Revenues which is subordinate to the pledge of and lien upon the Tax Revenues under the Indenture for the security of the Bonds. "Supplemental Indenture" means any indenture, agreement or other instrument which amends, supplements or modifies the Indenture and which has been duly entered into by and between the Agency and the Trustee; but only if and to the extent that such Supplemental Indenture is specifically authorized under the Indenture. "2006 Reserve Account Subaccount" means the 2006 Series A Bonds Reserve Account Subaccount, the 2006 Series B Bonds Reserve Account Subaccount, or the 201 I Bonds Reserve Account Subaccount, as applicable, by such names established and held by the Trustee pursuant to the Indenture. "Tax Code" means the Internal Revenue Code of 1986 as in effect on the Closing Date or (except as otherwise referenced in the .Indenture) as it may be amended to apply to obligations issued on the Closing Date, together with applicable proposed, temporary and. final regulations promulgated, and applicable official public guidance published, under said Code. "Tax Revenues" means all taxes annually allocated to the Agency with respect to the Project Area following the Closing Date, pursuant to Article 6 of Chapter 6 (commencing with section 33670) of the Redevelopment Law and Section 16 of Article XVI of the Constitution of the State and as provided in the Redevelopment Plan, including all other payments, subventions and reimbursements (if any) to the Agency specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations (but A-6 Docsoata t79tvsizootzo-oooa excluding payments to the Agency with respect to personal property within a Project Area pursuant to Section 16110, et seq., of the Government Code of the State of California; provided, however, that Tax Revenues shall not include (a) all amounts of such taxes required to be deposited into the Low and Moderate Income Housing Fund of the Agency in any Fiscal Year pursuant to section 33334.3 of the Redevelopment Law, except to the extent permitted under the Redevelopment Law to be applied to the payment of the principal of and interest and premium (if any) on the Bonds or any Parity Debt and (b) amounts payable by the Agency pursuant to Sections 33607.5 and 33607.7 of the Redevelopment Law, to the extent not subordinated to the payment of principal of and interest and prepayment premium (if any) on the Bonds or any Parity Debt. "Term Bonds" means any maturity of Parity Debt which is subject to mandatory Sinking Account redemption pursuant to the Supplemental Indenture authorizing the issuance thereof. "Trustee" means Union Bank of California, N.A., as Trustee under the Indenture, or any successor thereto appointed as Trustee under the Indenture in accordance with the provisions of the Indenture. Costs of Issuance Fund The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee from time to time to pay the Costs of Issuance upon submission of a Request of the Agency stating (a) the person to whom payment is to be made, (b) the amount to be paid, (c) the purpose for which the obligation was incurred, (d) that such payment is a proper charge against the Costs of Issuance Fund, and (e) that such amounts have not been the subject of a prior Request of the Agency; in each case together with a statement or invoice for each amount requested thereunder. On the earlier of (i) ~ or (ii) the date of receipt by the Trustee of a Request of the Agency therefor,-all amounts (if any) remaining in the Costs of Issuance Fund shall be withdrawn therefrom by the Trustee and transferred to the Agency for deposit in the Redevelopment Fund. Redevelopment Fund The Redevelopment Fund shall be established and held by the Agency. The moneys in the Redevelopment Fund shall be used in the manner provided by the Law solely for the purpose of aiding in financing redevelopment activities with respect to the Redevelopment Project, including payment of any remaining unpaid Costs of Issuance. The Agency covenants in the Indenture that no funds on deposit in the Redevelopment Fund shall be applied for any purpose not authorized by the Law. Low and Moderate Income Housing Account The Low and Moderate Income Housing Account shall be established and held by the Agency. The Agency shall cause to be deposited in the Low and Moderate Income Housing Account the amount of the proceeds of Parity Debt specified in any Supplemental Indenture. The Agency covenants that rnoneys in the Low and Moderate Income Housing Account shall be used in the manner provided by Section 33334.2 of the Redevelopment Law solely for the purpose of aiding in financing low and moderate income housing within or of benefit to the Project Area and the Agency warrants that no funds in the Low and Moderate Income Housing Account shall be applied for any purpose not authorized by Section 33334.2 of the Redevelopment Law for the expenditure of moneys in the Low and Moderate Income Housing FLmd and the Indenture. Issuance of Parity Debt In addition to the 2006 Bonds and the 2011 Bonds, the Agency may issue or incur additional Parity Debt in such principal amount as shall be determined by the Agency. The Agency may issue or incur such Parity Debt subject to the following specific conditions precedent: (a) The Agency shall be in compliance with all covenants set forth in the Indenture and all Parity Debt Instnunents. A-7 DOCS OC/1481791 v5/200120-0004 (b) The Tax Revenues estimated to be received for the then current Bond Year, based on the assessed value of property within the Project Area as set forth in the written records of the County, plus (at the option of the Agency) the Additional Revenues, shall be at least equal to one hundred twenty-five percent (125%) of Maximum Annual Debt Service on all Bonds which will be Outstanding immediately following the issuance of such Parity Debt. For purposes of computing the amount of TaxRevenues, the following requirements shall be observed: (i) Tax Revenues shall be calculated on the basis of a tax rate of $1.00 per $100 of assessed value and shall not include the amounts of any State tax subventions; and (ii) the amount of Tax Revenues shall be the amotmt received in the most recent Fiscal Year (which may be the current Fiscal Year) for which records are available from the County establishing the assessed valuations of property in the Project Area. (c) The Parity Debt Instrument providing for the issuance of such Parity Debt shall provide that interest thereon shall not be payable on any dates other than January 1 and July I, and principal thereof shall be payable on July 1 in any year in which principal is payable. (d) The Parity Debt Instrument providing for the issuance of such Parity Debt shall provide for the deposit into the Reserve Account of an amount required to cause the balance therein to equal the full amount of the Reserve Requirement, which deposit shall be made concurrent with the issuance of such Parity Debt and may be in whole or in part in the form of a Qualified Reserve Account Credit Inshument. (e) The proceeds of such Parity Debt may be deposited into an escrow fund from which amounts may not be released to the Agency unless and until the Tax Revenues (as evidenced in the written records of the County) at least equal one hundred twenty-five percent (125%) of the amount of Maximum Annual Debt Service. (f) The issuance of such Parity Debt shall not cause the Agency to exceed the Plan Limitation. (g) The Trustee shall be trustee for such Parity Debt. (h) The Agency shall deliver to the Trustee a Certificate of the Agency certifying that the conditions precedent to the issuance of such Parity Debt set forth in the foregoing provisions have been satisfied. Issuance of Subordinate Debt The Agency may from time to time issue or incur Subordinate Debt in such principal amount as shall be determined by the Agency, provided that the issuance of such Subordinate Debt shall not cause the Agency to exceed the Plan Limitation. Security for the Bonds; Equal Security The 2011 Bonds, the 2006 Bonds and any other Parity Debt shall be secriied by a first pledge of, security interest in and lien on all of the Tax Revenues and all of the moneys on deposit in the Special Fund. hi addition, the Bonds shall be secured by a first and exclusive pledge of, security interest in and lien upon all of the moneys in the Debt Service Fund, the Interest Account, the Principal Account, the Sinking Account, Reserve Account and the Redemption Account. Such pledge, security interest in and lien shall be for the equal security of the Outstanding Bonds without preference or priority for series, issue, number, dated date, sale date, date of execution or date of delivery. Except for the Tax Revenues and such moneys, no funds of the Agency A-8 DOCSOC/ 1481791 v5/200120-0004 are pledged to, or otherwise liable for, the payment of principal of or interest or redemption premium (if any) on the Bonds. In consideration of the acceptance of the Bonds by those who shall hold the same from time to time, the Indenture shall be deemed to be and shall constitute a contract beriveen the Agency and the Owners from time to time of the Bonds, and the covenants and agreements set forth in the Indenture to be performed on behalf of the Agency shall be for the equal and proportionate benefit, security and protection of all Owners of the Bonds without preference, priority or distinction as to security or otherwise of any of the Bonds over any of the others by reason of the number or date thereof or the time of sale, execution and delivery thereof, or otherwise for any cause whatsoever, except as expressly provided therein. Special Fund; Deposit of Tax Revenues There has been established pursuant to the Indenture a special fund known as the "Special Fund", which is held by the Agency, The Agency shall deposit all of the Tax Revenues received in any Bond Year in the Special Fund promptly upon receipt thereof by the Agency, until such time (if any) during such Bond Year as the amounts on deposit in the Special Fund equal the aggregate amounts required to be transferred to the Trustee (i) pursuant to the Indenture, and (ii) pursuant to the applicab]e provisions of any Parity Debt Instrument; and (except as may be otherwise provided in any Parity Debt Instrument) any Tax Revenues received during such Bond Year in excess of such amounts shall be released from the pledge and lien of the Indenture and may be used for any lawful purpose of the Agency. Prior to the payment in full of the principal of and interest and prepayment premium (if any) on the Bonds and all Parity Debt and the payment in full of all other amounts payable hereunder and under any Parity Debt Instrument, the Agency shall not have any beneficial right or interest in the moneys on deposit in the Special Fund, except only as provided in the Indenture and in any Parity Debt Instrument. Deposit of Amounts by Trustee The Indenture establishes a special trust fund known as the "Debt Service Fund", which is held by the Trustee. Moneys in the Special Fund shall be transferred by the Agency no later than the following times to the Trustee for deposit in the Debt Service Fund, for transfer to the following respective special accounts within the Debt Service Fund, which accounts are established with the Trustee to pay debt service on the Bonds and any Parity Debt not otherwise provided for in a Parity Debt Instrument, in the following order of priority: (a) Interest Account. On or before the fourth Business Day preceding each date on which interest on the Bonds becomes due and payable, the Agency shall withdraw from the Special Fund and transfer to the Trustee for deposit in the Interest Account an amount which, when added to the amount then on deposit in the Interest Account, will be equal to the aggregate amount of the interest becoming due and payable on the Outstanding Bonds on such date. All moneys in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity pursuant to the Indenture). (b) Principal Account. On or before the fourth Business Day preceding each date on which principal of the Bonds becomes due and payable at maturity, the Agency shall withdraw from the Special Fund and transfer to the Trustee for deposit in the Principal Account an amount which, when added to the amount then on deposit in the Principal Account, will be equal to the amount of principal coming due and payable on such date on the Outstanding Bonds. All moneys in the Principal Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds upon the maturity thereof. A-9 Docsoatast~9lvsrzoolso-oooa (c) Sinking Account. On or before the fourth Business Day preceding each date on which any Outstanding Term Bonds become subject to mandatory Sinking Account redemption, the Agency shall withdraw from the Special Fund and transfer to the Trustee for deposit in the Sinking Account an amount which, when added to the amount then contained in the Sinking Account, will be equal to the aggregate principal amount of the Term Bonds required subject to mandatory Sinking Account redemption on such date. All moneys on deposit in the Sinking Account shall be used and withdrawn by the Trustee for the sole purpose of paying the principal of the Term Bonds as it shall become due and payable upon the mandatory Sinking Account redemption thereof. (d) Reserve Account. In addition to the Reserve Account, the Trustee shall establish within the Reserve Account the 2006 Series A Bonds Reserve Account Subaccount. In the event that the Trustee has actual knowledge that the amount on deposit in the Reserve Account at any time becomes less than the Reserve Requirement, the Trustee shall promptly notify the Agency of such fact. Promptly upon receipt of such notice, the Agency shall transfer to the Trustee for deposit in the applicable Subaccount to which the deficiency relates (pro rata in the event a deficiency exists in more than one Subaccount and Tax Revenues are insufftcient to fund the entire deficiency) an amount of available Tax Revenues sufftcient to maintain the Reserve Requirement on deposit in the Reserve Account. Amounts in the Reserve Account shall be used and withdrawn by the Trustee solely for the purpose of making transfers pursuant to any applicable Parity Debt Instrument in the applicable order of priority and to the Interest account, the Principal Account and the Sinking Account, in such order of priority, on any date which the principal of or interest on the Bonds becomes due and payable hereunder, in the event of any deficiency at any time in any of the applicable accounts. In the event there shall be insufficient amounts in the Reserve Account to make all of the transfers required by this Section and any applicable Parity Debt Instrument, then such transfers shall be made from the applicable Subaccount for the benefit of the Bonds to which the applicable Subaccount relates. So long as no Event of Default shall have occurred and be continuing, any amount in the Reserve Account in excess of the Reserve Requirement on the fourth (4th) Business Day preceding each Interest Payment Date shall be withdrawn from the Reserve Account by the Trustee and deposited in the Interest Account and the Interest Account established by any Parity Debt Instrument, for deposit to the applicable Bonds and/or Parity Debt to which the subaccount relates. The Agency shall have the right at any time to direct the Trustee to release funds from the Reserve Account, in whole or in part, by tendering to the Trustee: (i) a Qualified Reserve Account Credit Instrument, and (ii) an opinion of Bond Counsel stating that neither the release of such funds not the acceptance of such Qualified Reserve Account Credit Instrument will cause interest on the Bonds to become includable in gross income for purposes of federal income taxation. Upon tender of such items to the Trustee, and upon delivery by the Agency to the Trustee of written calculation of the amount permitted to be released from the Reserve Account (upon which calculation the Trustee may conclusively rely), the Trustee shall transfer such funds from the Reserve Account and deposit such funds in the Redevelopment Fund to be used solely as provided in the Indenture. The Trustee shall comply with all documentation relating to a Qualified Reserve Account Credit Instrument as shall reasonably be required to maintain such Qualified Reserve Account Credit Instnument in full force and effect and as shall teasonably be required to receive payments thereunder in the event and to the extent required to make any payment when and as required under this subsection (d). Upon the expiration or any default with respect to any Qualified Reserve Account Credit Instrument, the Agency shall be obligated either (i) to replace such Qualified Reserve Account Cr3edit Instrument, or (ii) to deposit or cause to be deposited with the Trustee an amount of funds equal to the Reserve Requirement, to be derived from the first available Tax Revenues. The Reserve Account shall be maintained in the form of one or more separate subaccounts which arA established at the direction of the Agency for the purpose of holding the proceeds of separate issues of the bonds inconformity with applicable provisions of the Tax Code. D OC S O C/ 1481791 v5l200120-0004 A-10 The portion of the Reserve Requirement allocable to the 2006 Series A Bonds shall be satisfied initially by the credit to the 2006 Series A Bonds Reserve Account subaccount of the Bond Reserve Fund Policy. As long as the Bond Reserve Fund Policy shall be in full force and effect, the Trustee and the agency, if applicable, agree to comply with the provisions of the Indenture relating to the Bond Reserve Fund Policy Agreement. Amounts in the subaccount of the Reserve Account shall be available only for the payment of the Bonds, including any Parity Debt to which the subaccount relates, except as may be otherwise set forth in any Parity Debt Instrument, as to amounts in the subaccount created thereunder. (e) Redemption Account. On or before the Business Day preceding any date on which Bonds are subject to redemption, other than mandatory Sinking Account redemption of Term Bonds, the Agency shall withdraw from the Special Fund and transfer to the Trustee for deposit in the Redemption Account an amount required to pay the principal of and premium, if any, on the Bonds to be so redeemed on such date. All moneys in the Redemption Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of and premium, if any, on the Bonds upon. the redemption thereof, on the date set for such redemption, other than mandatory Sinking Account redemption of Term Bonds. Rights of Insurer; Consent or Approval of the Insurer (a) With respect to the Insurer and its Insurance Policy insuring debt service on the Bonds, the following provisions shall govern, notwithstanding anything to the contrary set forth in the Indenture. The rights granted to the Insurer under the Indenture to request, consent to or direct any action are rights granted to the Insurer in consideration of its issuance of the Insurance Policy. In this regard, the Insurer is a third party beneficiary of the Indenture. Any exercise by the Insurer of such rights is merely an exercise of the Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit or on behalf of the Owners of the Bonds. With respect to Events of Default under the Indenture, the consent of the owners of the Bonds shall not be required in addition to consent of the Insurer where the Insurer was granted such right of consent. (b) The Insurer shall be deemed to be the sole owner of the Bonds insured by it for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the owners of the Bonds insured by it are entitled to take pursuant to the Indenture. Except as otherwise provided in the Indenture, no contract shall be entered into or action taken by which the rights of the Insurer or the security or sources of payment for the Bonds may be impaired or prejudiced, except upon obtaining the prior written consent of the Insurer. (c) The rights of the Insurer to direct or consent to Agency, Trustee or Bondowner actions under the Indenture shall be suspended during any period in which the Insurer is in default in its payment obligations under the Insurance Policy (except to the extent of amounts previously paid by the Insurer and due and owing to the Insurer) and shall be of no force or effect in the event the Insurance Policy is no longer in effect or the Insurer asserts that the Insurance Policy is not in effect or the Insurer shall have provided written notice that it waives such rights. (d) The Insurer shall be deemed to be the Owner of all Bonds insured under the Insurance Policy for the following purposes and provided that the Insurer is not on default under the terms of the Insurance Policy, during the following tunes under the Indenture: (a) at all times for the purpose of the execution and delivery of a Supplemental Indenture relating to any amendment, change or modification of the Indenture where the consent of the Bondowners is required; (b) at all times with respect to the initiation by the Bondowners of any action to be taken under the Indenture by the Trustee at the request of such Bondowners, which under the Indenture requires the written approval or consent of or permits initiation by the owners of a specified principal amount of Bonds then Outstanding; and (c) following the occurrence of an Event of Default for all other purposes. A-I 1 DOCSOC/1481791v5/200120-0004 (e) The Agency shall, to the extent permitted by law, pay or reimburse the Insurer for any and all charges, fees, costs and expenses which the Insurer may reasonably pay or incur in connection with the pursuit of any remedies under the Indenture or the enforcement of the Indenture or otherwise afforded by law or equity other than resulting from the failure of the Insurer to honor its obligations under the Insurance Policy. The Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Indenture. (f) Payments required to be made to the Insurer shall be payable solely from Tax Revenues and other amounts pledged under the Indenture and shall be paid (i) prior to an Event of Default after required deposits to the Revenue Fund and (ii) on and after an Event of Default; with respect to amounts other than principal and interest on the Bonds, on a priority immediately following payments to the Trustee for expenses (g) The Insurer shall be deemed to be a party in interest under the Indenture and as a party entitled. to (i) notify the Agency, the Trustee or any applicable receiver of the occurrence of an Event of Default and (ii) request the Trustee or receiver to intervene in judicial proceedings that could affect the Bonds or the security therefor. The Trustee or receiver shall be required to accept notice of default from the Insurer. (h) The Insurer shall be provided with the following information: (i) Notice of any drawing upon or deficiency due to market fluctuation in the amount, if any, on deposit in the Reserve Account; (ii) Notice of the redemption, other than pursuant to mandatory sinking fixed redemption, of any of the Bonds, or the advance refunding of the Bonds, including the principal amount, maturities and CUSIP numbers thereof; (iii) Notice of any material events pursuant to Rule 15c2-12 under the Securities Exchange Act of 1934; and (iv) Such additional information as the Insurer may reasonable request from time to, time. Covenants of the Agency Punctual Payment. The Agency shall punctually pay or cause to be paid the principal, premium (if any) and interest to become due in respect of all the Bonds in strict conformity with the terms of the Bonds and of the Indenture. The Agency shall faithfully observe and perform all of the conditions, covenants and requirements of the Indenture and all Supplemental Indentures. Nothing contained in the Indenture shall prevent the Agency from making advances of its own moneys howsoever derived to any of the uses or purposes referred to in the Indenture. Limitation on Additional Indebtedness. The Agency covenants that, so long as the Bonds are Outstanding, the Agency shall not issue any bonds, notes or other obligations, enter into any agreement or otherwise incur any indebtedness, for which all or any part of the Tax Revenues are pledged as security for payment, excepting only the Bonds, any Parity Debt and any Subordinate Debt. The Agency will not otherwise encumber, pledge or place any charge or lien upon any of the Tax Revenues or other amounts pledged to the Bonds superior to the pledge and lien created in the Indenture for the benefit of the Bonds. Extension of Payment. The Agency will not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default under the Indenture, to the benefits of the Indenture, except subject to the prior payment in full of the principal of all of the Outstanding Bonds and of all claims for interest thereon which shall not have been so A-12 DOCSOC/1481791v>/200120-0004 extended. Nothing in this paragraph shall be deemed, to limit the right of the Agency to issue bonds for the purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an extension of maturity of the Bonds. Payment of Claims. The Agency shall pay and discharge, or cause to be paid and discharged, any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the properties owned by the Agency or upon the Tax Revenues or any part thereof, or upon any funds held by the Trustee pursuant to the Indenture, or which might impair the security of the Bonds. Nothing contained in the Indenture shall require the Agency to make any such payment so long as the Agency ingood faith shall contest the validity of said claims. Books and Accounts: Financial Statements. The Agency shall keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Agency and the City, in which complete and correct entries shall be made of all transactions relating to the Redevelopment Project, the Tax Revenues and the Special Fund. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Owners of not less than ten percent in aggregate principal amotmt of the Bonds then Outstanding, or their representatives authorized in writing. The Agency will cause to be prepared and delivered to the Trustee annually, within 180 days after the close of each Fiscal Year so long as any of the Bonds are Outstanding, complete audited financial statements with respect to such Fiscal Year showing the Tax Revenues, all disbursements from the Special Fund and the financial condition of the Redevelopment Project, including the balances in all funds and accounts relating to the Redevelopment Project, as of the end of such Fiscal Year. In accordance with the Indenture, the Trustee shall not be responsible for reviewing such financial statements. The Agency shall furnish a copy of such statements to any Owner upon reasonable request and at the expense of such Owner. Protection of Security and Ris hts of Owners. The Agency will preserve and protect the security of the Bonds and the rights of the Owners. From and after the date of issuance of any Bonds, such Bonds shall be incontestable by the Agency. Payments of Taxes and Other Charges. The Agency will pay and discharge, or cause to be paid and discharged, all. taxes, service charges, assessments and other governmental charges which may hereafter be lawfully imposed upon the Agency or the properties then owned by the Agency in the Project Area, when the same shall become due. Nothing in the Indenture shall require the Agency to make any such payment so long as the Agency in good faith shall contest the validity of said taxes, assessments or charges. The Agency will duly observe and conform with all valid requirements of any governmental authority relative to the Redevelopment Project or any part thereof. Disposition of Property. The Agency will not participate in the disposition of any land or real property in the Project Area to anyone which will result in such property becoming exempt from taxation because of public ownership or use or otherwise (except property dedicated for public right-of--way and except property planned for public ownership or use by the Redevelopment Plan in effect on the date of the Indenture) so that such disposition shall, when taken together with other such dispositions, aggregate more than ten percent of the land area in the Project Area unless such disposition is permitted as hereinafter provided in the Indenture. If the Agency proposes to participate in such a disposition, it shall thereupon appoint an Independent Fiscal Consultant to report on the effect of said proposed disposition. If the report of the Independent Fiscal Consultant concludes that the security of the Bonds or the rights of the Owners will not be materially adversely impaired by said proposed disposition, the Agency may thereafter make such disposition. If such report concludes that such security will be materially-adversely impaired by the proposed disposition, the Agency shall not approve the proposed disposition. Maintenance of Tax Revenues. The Agency shall comply with all requirements of the Law to insure the allocation and payment to it of the Tax Revenues, including without limitation the timely filing of any A-13 Docsoat asi ~9ivsizootzo-oooa necessary statements of indebtedness with appropriate officials of the County and the State. The Agency shall not enter into any amendment of the Pass-Through Agreements, or any other agreement with the County or any other governmental unit, unless the Agency shall first obtain a written opinion of an Independent Fiscal Consultant that such amendment or agreement will not adversely impair the Agency's ability to pay the 2006 2011 Bonds and all Parity Debt. Nothing herein is intended or shall be construed in any way to prohibit or impose any limitations on the entering into by the Agency of any such amendment or agreement which by its term is subordinate to the payment of the Bonds and all Parity Debt. Tax Covenants Relating to 2011 Bonds. The following tax covenants relate solely to the 2011 Bonds and the 2006 Series A Bonds. These covenants do not apply to the 2006 Series B Bonds because interest on the Series B Bonds is included in the gross income of the recipient. (a) Private Activity Bond Limitation. The Agency shall assure that the proceeds of the 2011 Bonds are not so used as to cause the 2011 Bonds to satisfy the private business tests of Section 141(b) of the Tax Code or the private loan fmancing test of Section 141(c) of the Tax Code. (b) Federal Guarantee Prohibition. The Agency shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause any of the 2011 Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Tax Code. (c) No Arbitrage. The Agency shall not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the 2011 Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date would have caused the 2011 Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Tax Code. (d) Maintenance of Tax-Exemption. The Agency shall take all actions necessary to assure the exclusion of interest on the 2011 Bonds from the gross income of the Owners of the 2011 Bonds to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the Closing Date. This covenant shall remain in full force and effect following defeasance of the 2011 Bonds. (e) Rebate. Requirement. The Agency shall take any and all actions necessary to assure compliance with Section 148(f) of the Tax Code, re]ating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the 2011 Bonds. Continuing Disclosure. The Agency covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of the Indenture, failure of the Agency to comply with the Continuing Disclosure Certificate shall not be an Event of Default under the Indenture. However, any Participating Underwriters or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause the Agency to comply with its obligations under to the Indenture. Deposit and Investment of Moneys in Funds Moneys in the Special Fund, the Debt Service Fund, the Interest Account, the Principal Account, the Sinking Account, She Reserve Account, the Redemption Account, the Redevelopment fund, the Low and Moderate Income Housing Account and the Costs of Issuance Fund shall be invested by the Trustee in Permitted Investments specified in the Request of the Agency (which Request shall be deemed to include a certification that the specified investment is a Permitted Investment) delivered to the Trustee at least two (2) Business Days in advance of the making of such investments In the absence of any such direction from the Agency, the Trustee shall invest any such moneys solely in Permitted Investments described in clause (d) of the definition thereof. A-14 DOCSOC/1481791v5/200120-0004 Obligations purchased as an investment of moneys in any fund or account shall be deemed to be part of such fund or account. Whenever in the Indenture any moneys are required to be transferred by the Agency to the Trustee, such transfer may be accomplished by transferring a like amount of Permitted Investments. All interest or gain derived from the investment of amounts in any of the fiords or accounts held by the Trustee under the Indenture shall be retained in the respective fund or account from which such investment was made, provided that all interest or gain from the investment of amounts in the Reserve Account shall be deposited by the Trustee in the Interest Account to the extent not required to cause the balance in the Reserve Account to equal the Reserve Requirement. No Permitted Investment of moneys in the Reserve Account shall have a maturity in excess of five years following the date of its acquisition. For purposes of acquiring any investments, the Trustee may commingle funds held by it under the Indenture upon receipt by the Trustee of the Request of the Agency. The Trustee may act as principal or agent in the acquisition or disposition of any investment, may utilize the investment departments of its affdiates to complete each transaction and may impose its customary charges therefor. The Trustee shall incur no liability for losses arising from any investments made pursuant to the Indenture. The Agency acknowledges that to the extent that regulations of the Comptroller of the Currency or other applicable regulatory agency grant the Agency the right to receive brokerage confirmations of security transactions as they occur, the Agency specifically waives receipt of such confirmations to the extent permitted by law. The Trustee shall furnish to the Agency periodic statements which include detail of all investment transactions made by the Trustee. Amendment Without Consent of Owners The Indenture and the rights and obligations of the Agency and of the Owners may be modified or amended at any time by a Supplemental Indenture which shall become binding upon adoption, with the consent of the Insurer (except with respect to an amendment pursuant to Sections (c) or (d) below), but without the consent of any Owners, to the extent permitted by law and only for any one or more of the following purposes- (a) to add to the covenants and agreements of the Agency contained in the Indenture, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power reserved in the Indenture to or conferred upon the Agency provided such addition; limit, or surrender shall not materially adversely affecfthe interest of the Owners as determined by the Agency and certified to the Trustee; or (b) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in the Indenture, or in any other respect whatsoever as the Agency may deem necessary or desirable, provided under any circumstances that such modifications or amendments shall not materially adversely affect the interests of the Owners,. or (c) to provide for the issuance of Parity Debt pursuant to the Indenture, and to provide the terms and conditions under which such Parity Debt may be issued, including but not limited to the establishment of special funds and accounts relating thereto and any other provisions relating solely thereto, subject to and in accordance with the provisions of the Indenture; or (d) to amend any provision of the Indenture to assure the exclusion from gross income of interest on the Bonds for federal income tax purposes, in the opinion of Bond Counsel filed with. the Agency and the Trustee; or (e) to comply with the requirements of the provider of a Qualified Reserve Account Credit Instrument. Amendment With Consent of Owners Except as set forth in the preceding paragraph, the Indenture and the rights and obligations of the Agency and of the Owners may be modified or amended at any time by a Supplemental Indenture which shall DOCSOC/ 1481791 v5/200120-0004 A-15 become binding when the written consent of the Insurer and the written consents of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding are delivered to the Trustee. No such modification or amendment shall (a) extend the maturity of or reduce the interest rate on any Bond or otherwise alter or impair the obligation of the Agency to pay the principal, interest or redemption premium (if any) at the time and place and at the rate and in the currency provided therein of any Bond without the express written consent of the Owner of such Bond, (b) reduce the percentage of Bonds required for the written consent to any such amendment or modiftcation, or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee. Effect of Supplemental Indenture From and after the time any Supplemental Indenture becomes effective, the Indenture shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations of the parties under the Indenture or thereto and all Owners, as the case may be, shall thereafter be determined, exercised and enforced under the Indenture subject in all respects to such modification and amendment, and all the terms and conditions of any Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture for any and all purposes. Events of Default and Acceleration of Maturities Each of the following events shall constitute an Event of Default under the Indenture (a) Failure to pay any installment of the principal of any Bonds when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise. (b) Failure to pay any installment of interest on any Bonds when and as the same shall become due and payable. (c) Failure by the Agency to observe and perform any of the other covenants, agreements or conditions on its part in the Indenture or in the Bonds contained, if such failure shall have continued for a period of thirty days after written notice thereof, specifying such failure and requiring the same to be remedied, shall have been given to the Agency by the Trustee or the Insurer; provided, however, if in the reasonable opinion of the Agency the failure stated in the notice can be corrected, but not within such thirty day period, such failure shall not constitute an Event of Default if corrective action is instituted by the Agency within such thirty day period and the Agency shall thereafter diligently and in good faith cure such failure in a reasonable period of time. (d) The Agency shall commence a voluntary case under Title 11 of the United States Code or any substitute or successor statute. If an Event of Default has occurred and is continuing, the Trustee may, and if requested in writing by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding the Trustee shall, (a) declare the principal of the Bonds, together with the accrued interest thereon, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable, anything in the Indenture or in the Bonds to the contrary notwithstanding, and (b) upon receipt of indemnity satisfactory to it from any liability or expense, including payment of the fees and expenses of its counsel and agents, exercise any other remedies available to the Trustee and the Owners in law or at equity. Promptly upon becoming aware of the occurrence of an Event of Default, the Trustee shall give notice of such Event of Default to the Agency by telephone confirmed in writing. Such notice shall also state whether the principal of the Bonds shall have been declared to be or have immediately become due and payable. With respect to any Event of Default described in clauses (a) or (b) above the Trustee shall, and with A-16 DOCSOC/1481791v5/200120-0004 respect to any Event of Default described in clause (c) above the Trustee in its sole discretion may, also give such notice to the Owners in the same manner as provided in the Indenture for notices of redemption of the Bonds, which shall include the statement that interest on the Bonds shall cease to accrue from and after the date, if any, on which the Trustee shall have declared the Bonds to become due and payable pursuant to the preceding paragraph (but only to the extent that principal and any accrued, but unpaid, interest on the Bonds is actually paid on such date). This provision, however, is subject to the condition that if, at any time after the principal of the Bonds shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Agency shall deposit with the Trustee a sum sufficient to pay all principal on the Bonds matured prior to such declaration and all mahired installments of interest (if any) upon all the Bonds, with interest on such overdue installments of principal and interest (to the extent permitted by law) at the weighted average interest rate then borne by the Outstanding Bonds, and the fees and expenses of the Trustee, including any fees and expenses of its attorneys, and any and all other defaults known to the Trustee (other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been made therefor, then, and in every such case, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, by written notice to the Agency and to the Trustee, may, on behalf of the Owners of all of the Bonds, rescind and annul such declaration and its consequences. However, no such rescission and annulment shall extend to or shall affect any subsequent default, or shall impair or exhaust any right or power consequent thereon. Application of Funds ITpon Acceleration All of the Tax Revenues and all sums in the funds and accounts established and held by the Trustee under the Indenhve upon the date of the declaration of acceleration as provided in the Indenture (excluding moneys in the Redevelopment Fund and the Low and Moderate Income Housing Account), and all sums thereafter received by the Trustee under the Indenture, shall be applied by the Trustee as follows and in the following order: (a) To the payment of any fees, costs and expenses incurred by the Trustee to protect the interests of the Owners of the Bonds; payment of the fees, costs and expenses of the Trustee (including Fees and expenses of its counsel, including any allocated costs of internal counsel) incurred in and about the performance of its powers and duties under the Indenture and the payment of all fees, costs and expenses owing to the Trustee pursuant to the Indenture, together with interest on all such amounts advanced by the Trustee at the maximum rate permitted by law; (b) To the payment of the whole amount then owing and unpaid upon the Bonds for interest and principal with interest on such overdue amounts at the respective rates of interest borne by the Outstanding Bonds, and in case such moneys shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then to the payment of such interest, principal and interest on overdue amounts without preference or priority among such interest, principal and interest on overdue amounts ratably to the aggregate of such interest, principal and interest on overdue amounts. Power of Trustee to Control Proceedings hi the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties under the Indenture, whether upon its own discretion or upon the request of the Owners of a majority in principal amount of the Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds, with respect to the continuance, discontim~ance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, A-17 DOCSOC/ 148179 t v5/200120-0004 if at the time there has been filed with it a written request signed by the Owners of a majority in principal amount of the Outstanding Bonds opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation accompanied, if requested by the Trustee, by indemnity or confirmation of indemnity as described in the Indenture. Limitation on Owner's Right to Sue No Owner of any Bond issued under the Indenture shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon the Indenture, unless (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers thereinbefore granted or to institute such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are declared in the Indenture, in every case, to be conditions precedent to the exercise by any Owner of any remedy under the Indenture; it being understood and intended that no one or more Owners shall have any right in any manner whatever by his or their action to enforce any right under the Indenture, except in the manner provided, and that all proceedings at law or in equity to enforce any provision of the Indenture shall be instituted, had and maintained in the manner provided and for the equal benefit of all Owners of the Outstanding Bonds. The right of any Owner of any Bond to receive payment of the principal of and premium, if any, and interest on such Bond as provided in the Indenture, shall not be impaired or affected without the written consent of such Owner, notwithstanding the foregoing provisions of the Indenture or any other provision of the Indenture. Remedies Not Exclusive No remedy in the Indenture conferred upon or reserved to the Trustee or Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given in the Indenture or now or hereafter existing, at law or in equity or by statute or otherwise, acid may be exercised without exhausting and without regard to any other remedy conferred by the Law or any other law. Rights of Insurer Anything in the Indenture to the contrary notwithstanding, upon the occurrence and continuation of an Event of Default, the Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted thereunder to the Bond Owners, or to the Trustee for the benefit of the Bond Owners, including but not limited to the right to approve all waivers of any Events of Default. The rights granted to the Insurer under the Indenture shall be deemed terminated and shall not be exercisable by the Insurer during any period during which the Insurer shall be in default under the Insurance Policy. Discharge of Indenture If the Agency shall pay and discharge the entire indebtedness on all Bonds or any portion thereof in any one or more of the following ways: (i) by paying or causing to be paid the principal of and interest on such Bonds, as and when the same become due and payable; A-18 DOCSOC/1481791 v5/200120-0004 (ii) by irrevocably depositing with the Tmstee or another fiduciary, in trust, at or before maturity, an amount of cash which, together with the available amounts then on deposit in the funds and accounts established pursuant to the Indenture, in the opinion or report of an Independent Accountant is fully sufficient to pay such Bonds, including all principal, interest and redemption premium, if any; (iii) by irrevocably depositing with the Trustee or another fiduciary, in trust, Defeasance Obligations in such amount as an Independent Accountant shall determine will, together with the interest to accrue thereon and available moneys then on deposit in any of the funds and accounts established pursuant to the Indenhue, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premium, if any) at or before maturity; or (iv) by purchasing such Bonds prior to maturity and tendering such Bonds to the Trustee for cancellation; and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been duly given or provision satisfactory to the Trustee shall have been made for the giving of such notice, then, at the election of the Agency, and notwithstanding that any such Bonds shall not have been surrendered for payment, the pledge of the Tax Revenues and other funds provided for in the Indenture and all other obligations of the Trustee and the Agency under the Indenture with respect to such Bonds shall cease and terminate, except only (A)the obligations of the Agency regarding tax and rebate requirements of the Indenture, (B) the obligation of the Trustee to transfer and exchange Bonds under the Indenture, (C) the obligation of the Agency to pay or cause to be paid to the Owners of such Bonds, from the amounts so deposited with the Trustee, all sums due thereon, and (D) the obligations of the Agency to compensate and indemnify the Trustee pursuant to the Indenture. Notice of such election shall be filed with the Trustee. In the event the Agency shall, pursuant to the foregoing provisions, pay and discharge any portion or all of the Bonds then Outstanding, the Trustee shall be authorized to take such actions and execute and deliver to the Agency all such instruments as may be necessary or desirable to evidence such discharge, including without limitation, selection by lot of Bonds of any maturity of the Bonds that the Agency has determined to pay and discharge in part. Any funds thereafter held by the Trustee, which are not required for said purpose, shall be paid over to the Agency. A-19 DOC SOC/1481791 v5/200120-0004 APPENDIX B SANTA MONICA GENERAL INFORMATION General Santa Monica (the "City") is situated on the western portion of Los Angeles County (the "County"), bordered by the City of Los Angeles on three sides and by the Pacific Ocean to the west. The City encompasses an area slightly greater than eight square miles and has an estimated population of [92,703]. 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 the City. Population Population figures for the City, the County and the State for 1970, 1980 1990, 2000 and the last five years are shown in the following table. The City has been substantially built out since the 1970x. CITY OF SANTA MONICA Population Estimates C6ty of County of State of Year Sm2taMonica Las Angeles Cakfornia 1970 88,289 7,041,980 19,971,069 1980 88,314 7,477,421 23,668,562 1990 86,905 8,832,500 29,558,000 2000 84,084 9,519,330 33,873,086 2006 90,750. 10,202,094 37,087,005 2007 91,124 10,231,000 37,463,609 2008 91,439 10,285,296 37,871,509 2009 92,494 10,355,053 38,255,508 2010 92,703 10,441,080 38,648,090 Source: State Department of Finance estimates (as of January 1 except 1970 through 1980, which are as of April 1). Government and Administration The City was incorporated in 1886 and became a charter city in 1945. In 1947 acouncil-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 years. Elections are held every two years, at which time either three or four Council members are elected. The City Council appoints a city manager, city attorney and city clerk. The city manager is responsible for supervising the day-to-day operations of the City and for carrying out policies set by the Council. Largest Employers The table below lists the larger employers in the Los Angeles County area as of January 1, 2011. Major private employers in the Los Angeles area include those in health care, electronics, retail and package delivery services. Major public sector employers include the State of California and the County. B-1 DOCSOC/ 1481791 v5/200120-0004 LOS ANGELES COUNTY Major Employers EmplayerName Location Industry American Honda Motor Co Inc. Torrance Automobile & Truck Brokers California Institute Of Technology Pasadena Schools-Universities & Colleges California State-Northridge Northridge Crisis Intervention Service Cedars Sinai Medical Center West Hollywood Physicians & Surgeons Century Plaza Towers Los Angeles Office Buildings & Parks Contractor State License Center Burbank Schools-Business & Vocational Fire Command Control Los Angeles Fire Departments Gold Coast Tire Co Inc. -Los Angeles Batteries-Storage-Retail Kaiser Foundation Hospital Los Angeles Hospitals Kaiser Permanente Los Angeles Physicians & Surgeons LAC & USC Medical Center Los Angeles Hospitals Long Beach City Hall Long Beach City Government-Executive Offices Long Beach Financial Management Long Beach City Govemment-Finance & Taxation Long Beach Memorial Medical Long Beach Hospitals Los Angeles County Sheriff Monterey Park Sheriff Los Angeles Police Department Los Angeles Police Departments Nestle USA Glendale Food Products & Manufacturers Raytheon Space & Airborne Systems El Segundo Business Services Santa Monica College Santa Monica Schools-Universities & Colleges Six Flags Magic Mountain Inc. Valencia Amusement & Theme Parks Sony Pictures Entertainment Culver City Motion Picture Film-Distributors Synxis Pasadena Hotels & Motels UCLA Los Angeles Schools-Universities & Colleges UCLA Health System Los Angeles Schools-Universities & Colleges Walt Disney Co. Burbank Motion Picture Producers & Studios Sonrce: State of California Employment Development Department B-2 DOC SOC/1481791 v5/200120-0004 The table below lists the largest employees in the City as of June 30, 2010. CITY OF SANTA MONICA, CALIFORNIA PRINCIPAL EMPLOYERS June 3Q 2010 Total Number of Total Number of Employees in the Employer Employees in the Cy ProjectArea Santa Monica College 2,187 2,187 City of Santa Monica 2,177 2,177 Saint John's Hospital Medical Center 1,813 1,813 Santa Monica-UCLA Hospital 1,786 1,786 Santa Monica-Malibu Unified School District 1,553 1,553 RAND Corporation 894 894 Activision 663 0 MTV Networks 648 648 Universal Music Group 620' 620 ET Whitehall (Shutters and Casa del Mar) 546 546 Total Jobs Provided by Principal Employers 12$7 12 224 Average total jobs in Santa Monica 74,237 74,237 Principal Employers as Percent of Total Jobs 17.36% 16.47% Source: City of Santa Monica Economic Development Division, Resource Management Department Employment The City is included in the Los Angeles-Long Beach Metropolitan Statistical Area. The distribution of employment in the Los Angeles/Long Beach area is presented in the following table for the calendar years 2005 through 2009. These figures are multi county-wide statistics and may not necessarily accurately reflect employment trends in the City. B-3 DOCSOC/148179 (v5/200120-0004 Los Angeles Metropolitan Statistical Area (Los Angeles County) Civilian Labor Force, Employment and Unemployment (Annual Averages) Industry Goods Producing: Natural Resources and Mining Construction Manufacturing: Durable Goods Nondurable Goods Service Providing: Wholesale Trade Retail Trade Transp., Warehousing & Utilities Information Financial Activities Professional & Business Services Education & Health Services Leisure & Hospita]ity Other Services Government Total Nonfarm Total Farm Total (all industries) 2005 2006 2007 2008 2009 623,200 611,200 584,000 510,600 482,700 4,000 4,400 4,400 4,100 4,200 157,500 157,600 145,200 l 17, 300 104,300 461,700 449,200 434,500 389,200 374,200 257,300 250,900 243,200 217,500 207,200 204,400 198,3 00 191,200 171,600 166,900 3,469,300 3,510,900 3,486,700 3,313,500 3,286,300 225,700 227,000 223,700 204,500 202,900 423,300 426,000 416,500 387,000 385,200 165,200 165,600 163,100 151,200 150,300 205,600 209,800 210,300 191,200 192,400 246,700 243,800 233,300 216,000 209,200 598,900 605,400 582,600 529,800 526,100 480,800 492,700 505,800 514,600 522,700 388,600 397,900 401,600 385,600 384,600 145,200 147,100 146,100 137,900 136,300 589,400 595,700 603,700 595,800 576,600 4,092,500 4,122,100 4,070,700 3,824,100 3,769,000 7,600 7,500 6,900 6,200 6,400 4,100,100 4,129,600 4,077,600 3,830,300 3,775,300 Source: State of California Employment Development Department. Commercial Activity A summary of historic taxable sales within the City during the past five years for which data is available is shown in the following table. Figures for 2010 are not yet available. B-4 DOCSOC/ 1481791 v5/200120-0004 CITY OF SANTA MONICA Taxable Transactions (figures in thousands) 2005 2006 2007 2008 2009 Apparel Stores $337,230 $336,229 $327,768 $325,835 $272,133 General Merchandise 72,935 65,731 60,131 48,371 26,308 Food Stores 76,460 81,546 85,551 87,818 85,034 Eating & Drinking Places 407,701 426,220 459,782 452,371 425,412 Building Materials 109,936 125,567 132,959 119,383 90,123 Auto Dealers & Auto Suppliers 706,009 714,543 724,018 678,604 607,195 Service Stations 101,255 13],785 137,758 146,172 109,105 Other Retail Stores 648,473 656,917 682,816 640,299 527,997 Retail Stores Total 2,459,999 2,538,538 2,610,783 2,498,853 2,143,307 All Other Outlets 342,139 430,207 331,111 320,235 283,257 TOTAL ALL OUTLETS 2,802,138 2,968,745 2,941,894 2,819,088 2,426,564 Apparel Stores $337,230 $336,229 $327,768 $325,835 $272,133 General Merchandise 72,935 65,731. 60,131 48,371 26,308 Source: City of Santa Monica CAFR 2009-]0 Construction Activity Building activity in the City between fiscal years 2005-06 and 2009-10 is shown in the following table. CITY OF SANTA MONICA Total Building Permit Valuations Fiscal CornmercialNumber Construction Residential Construction TotnZAssessed Year of Units «/ Value Number of Dnits «~ Value Valuations 2005-06 $66,449,275 238 $96,693,536 $18,098,550,298 2006-07 174,264,297 633 128,120,760 19,705,610,279 2007-08 171,541,504 187 87,863,887 21,122,723,929 2008-09 50,190,611 82 53,935,976 23,412,712,570 2009-10 3 33,395,839 501 87,108,378 24,020,421,228 "' Represents the number of new commercial buildings. (a) Represents the number of new dwelling units. Source: City of Santa Monica Education Public education is provided to City residents of school age through the Santa Monica-Malibu Unified School District, which operates nine elementary schools, three middle schools, two high schools, one adult school and an altematiye school. 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 19 private and five 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, and an Emeritus College. B-5 DOC SOC/1481791 v5/200120-0004 APPENDIX C AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR FISCAL YEAR ENDED JUNE 30, 2010 C-1 DOC SOC/ 1481791 v5/200120-0004 APPENDIX D FORM OF BOND COUNSEL OPINION D-1 DOCSOC/1481791 v5/200120-0004 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE E-1 DOCSOC/1481791 v5/200120-0004 APPENDIX F BOOK ENTRY-ONLY SYSTEM F-1 DOCSOC/1481791 v5/200120-0004 APPENDIX G FISCAL CONSULTANT REPORT G-1 DOCSOC/ 1481791v5/200120-0004 14038 JH:SM:SRF:AJB $[Bond Amount] REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT 2011 TAX ALLOCATION BONDS BOND PURCHASE AGREEMENT ,2011 Santa Monica Public Financing Authority c/o Redevelopment Agency of the City of Santa Monica 1901 Main Street, Suite E Santa Monica, California 90405 Redevelopmeht Agency of the City of Santa Monica 1901 Main Street, Suite E Santa Monica, California 90405 Ladies and Gentlemen: 5/05/2011 The undersigned, E. J. De La Rosa & Co., Inc., on behalf of itself and Wells Fargo Securities (collectively, the "Underwriter"), offers to enter into this Bond Purchase Agreement (this "Bond Purchase Agreement") with the Santa Monica Public Financing Authority (the "Authority") and the Redevelopment Agency of the City of Santa Monica (the "Agency") which will be binding upon the Authority, the Agency and the Underwriter upon the acceptance hereof by the Authority and the Agency. This offer is made subject to its acceptance by the Authority and the Agency by execution of this Bond Purchase Agreement and its delivery to the Underwriters on or before 5:00 p.m., California time, on the date hereof. All terms used herein and not otherwise defined will have the respective meanings given to such terms in the Indenture (as hereinafter defined). 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements hereinafter set forth, the Underwriter hereby agrees to purchase from the Authority for offering to the public, and the Authority hereby agrees to sell to the Underwriter for such purpose, all (but not less than all) of the (a) $[Bond Amount] aggregate principal amount of the Agency's Earthquake Recovery Redevelopment Project, 2011 Tax Allocation Bonds (the "Bonds"), at a purchase price equal to $ (being the aggregate principal amount thereof, less an Underwriter's discount of $ and less a net original issue discount of $ The Bonds are to be purchased by the Authority from the Agency pursuant hereto for resale and delivery to the Underwriter concurrently with the purchase of the Bonds by the Underwriter from the Authority; provided that the obligation of the Authority to purchase the Bonds from the Agency will be solely with moneys provided by the Underwriter. Such payment and delivery and the other actions contemplated hereby to take place at the time of such payment and delivery are herein sometimes called the "Closing." 2. The Bonds and Related Documents. The Bonds will be issued pursuant to an Indenture of Trust as supplemented by a First Supplement to Indenture of Trust, each dated as of April 1, 2006, and a Second Supplement to Indenture of Trust dated as of June 1, 2011 (collectively, the "Indenture'), each by and between the Agency and Union Bank of California, N.A., Los Angeles, California, as trustee (the "Trustee") and pursuant to the California Community Redevelopment Law, constituting Part 1, Division 24 commencing with Section 33000) of the California Health and Safety Code (the "Redevelopment Law") and a resolution of the Agency adopted 2011: (the "Agency Resolution'). The Bonds will be as described in the Indenture and the Official Statement dated the date hereof relating to the Bonds (which, together with all exhibits and appendices included therein or attached thereto and such amendments or supplements thereto which will be approved by the Underwriter, is hereinafter called the "Official Statement"). The net proceeds of the Bonds will be used to finance redevelopment activities of the Agency with respect to the Agency's Earthquake Recovery Redevelopment Project (the "Project"). The Authority was created as a joint exercise of powers authority pursuant to Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Act"). The Agency will undertake pursuant to the provisions of a Continuing Disclosure Certificate, to be dated the date of the Closing (the "Disclosure Certificate"), and executed by the Agency, to provide certain annual information and notices of the occurrence of certain events, if material. A description of the undertaking is set forth in the Preliminary Official Statement (as defined below) and will also be set forth in the Official Statement. The Indenture, the Continuing Disclosure Certificate and this Bond Purchase Agreement are sometimes collectively referred to herein as the "Agency Legal Documents." The resolution of the Authority adopted , 2011, approving the purchase and sale of the Bonds and related matters is herein referred to as the "Authority Resolution." The resolution of the City adapted , 2011, approving the issuance of the Bonds by the Agency is herein referred to as the "City Resolution." 3. Offering. It will be a condition to the Agency's obligations to sell and to deliver the Bonds to the Authority and the Underwriter and to the Underwriter's obligations to purchase, to accept delivery of and to pay for the Bonds that the entire $[Bond Amount] aggregate principal amount of the Bonds will be issued, sold and delivered by the Agency and the Authority and purchased, accepted and paid for by the Underwriter at the Closing. The Underwriter agrees to make a bona fide public offering of all of the Bonds at the initial public offering prices or yields- set forth in Exhibit A hereto and on the cover page of the Official Statement, plus interest accrued thereon from the date.of the Bonds, and will provide a certificate in a form approved by Bond Counsel to such effect. The Underwriter reserves the right to change, subsequent to the initial public offering, such initial offering prices as it will deem necessary in connection with the marketing of the Bonds. -2- 4. Use and Preparation of Documents. The Agency has caused to be prepared and delivered to the Underwriter prior to the execution of this Purchase Agreement copies of the Preliminary Official Statement dated 2011, relating to the -Bonds (the "Preliminary Official Statement"). The Agency ratifies, confirms and approves the use by the Underwriter prior to the date hereof of the Preliminary Official Statement. The Agency has previously deemed the Preliminary Official Statement to be final as of its date for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 ("Rule 15c2-12"), except for information permitted to be omitted therefrom by Rule 15c2-12. The Agency will have executed and delivered to the Underwriter a certification to such effect in the form attached hereto as Exhibit B. The Agency hereby agrees to deliver or cause to be delivered to the Underwriter, within seven business days of the date hereof, a sufficient number of copies of the final Official Statement relating to the Bonds, dated the date hereof, which includes all information permitted to be omitted by Rule 15c2-12 and any amendments or supplements to such Official Statement as have been approved by the Agency, the Agency and the Underwriter to enable the Underwriter to distribute a single copy of each Official Statement to any potential customer of the Underwriter requesting an Official Statement during the time period beginning when the Official Statement becomes available and ending on the End of the Underwriting Period (defined below). The Underwriter agrees that it will not confirm the sale of any Bonds unless the confirmation of sale is accompanied or preceded by the delivery of a copy of the Official Statement. The Agency and the Authority hereby approve of the use and distribution (including the electronic distribution) by the Underwriter of the Preliminary Official Statement and the Official Statement in connection with the offer and sale of the Bonds. 5. Representations. Warranties and Agreements of the Agencv. The Agency hereby represents, warrants and agrees as follows: (a) The Agency is a public body, corporate and politic, organized and existing under the Constitution and laws of the State of California, including the Redevelopment Law. (b) The Agency has full legal right, power and authority to enter into the Agency Legal Documents and carry out and consummate the transactions contemplated by the Agency Legal Documents. (c) By all necessary official action of the Agency prior to or concurrently with the acceptance hereof, the Agency has duly authorized and approved the preparation and use of the Preliminary Official Statement and the Official Statement, the execution and delivery of the Official Statement and the Agency Legal Documents, and the performance by the Agency of all transactions contemplated by the Agency Legal Documents; and the Agency Legal Documents will constitute legal, valid and binding obligations of the Agency, enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally. (d) The Agency is not in any material respect in breach of or default under any applicable constitutional provision, law or administrative regulation to which it is subject or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement (including, without limitation, the Indenture) or other instrument to which the Agency -3- is a party or to which the Agency or any of its property or assets 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 such a default or event of default under any such instrument; and the execution and delivery of the Agency Legal Documents, and compliance with the provisions on the Agency's part contained therein, will not conflict with or constitute a material breach of or a material default under any constitutional provision, law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Agency is a party or to which the Agency or any of its property or assets is otherwise subject, nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Agency or under the terms of any such constitutional provision, law, regulation or instrument, except as provided by the Indenture. (e) Except as described in or contemplated by the Official Statement, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the Agency of its obligations under the Agency Legal Documents have been duly obtained. (f) Between the date of-this Bond Purchase Agreement and the date of the Closing, the Agency will not, without the prior written consent of the Underwriter, offer or issue any bonds, notes or other obligations for borrowed money, or incur any material liabilities, direct or contingent, payable from Tax Revenues (as defined in the Indenture), nor will there by any adverse change of a material nature in the financial position, results of operations or condition, financial or otherwise, of the Agency. (g) To the best knowledge of the officer of the Agency executing this Bond Purchase Agreement, after due inquiry, as of the date hereof, there is no action, suit, proceeding, inquiry or investigation, at law or in equity before or by any court, government agency, public board or body, pending or threatened against the Agency, affecting the existence of the Agency or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the execution and delivery of the Indenture or the collection of the Tax Revenues or contesting or affecting, as to the Agency, the validity or enforceability of the Agency Legal Documents or contesting the exclusion from gross income of interest on the Bonds for federal income tax purposes, or contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement, or contesting the powers of the Agency, or in any way contesting or challenging the consummation of the transactions contemplated hereby, or which might result in a material adverse change in the financial condition of the Agency or which might materially adversely affect the Tax Revenues of the Agency; nor, to the best knowledge of the Agency, is there any known basis for any such action, suit, proceeding, inquiry or investigation, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity of the authorization, execution, delivery or performance by the Agency of the Agency Legal Documents. (h) As of the time of acceptance hereof and as of the date of the. Closing, the Agency does not and will not have outstanding any indebtedness which indebtedness is secured by a lien on the Tax Revenues of the Agency superior to or on a parity with the lien provided for in the Indenture on the Tax Revenues, other than as disclosed in the Official Statement. As of the time of acceptance hereof and as of the date of the Closing, the Agency -4- does not and will not have outstanding any indebtedness which indebtedness is payable prior to the Bonds from Tax Revenues. (i) As of the time of acceptance hereof and as of the date of the Closing, the Agency has complied with the filing requirements of Article 6 of Chapter 1 of the Redevelopment Law. Q) As of the date thereof, the Preliminary Official Statement did not, except as revised by the Official Statement, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein in light of the circumstances under which they were made, not misleading in any material respect. (k) As of the date thereof and at all times subsequent thereto to and including the date which is 25 days following the End of the Underwriting Period (as such term is hereinafter defined) for the Bonds, the Official Statement did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made not misleading. (I) If between the date hereof and the date which is 25 days after the End of the .Underwriting Period for the Bonds, an event occurs which would cause the information contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make such information therein, in the Tight of the circumstances under which it was presented, not misleading, the Agency will notify the Underwriter, and, if in the opinion of the Underwriter or the Agency, or respective counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Agency will cooperate in the preparation of an amendment or supplement to the Official Statement in a form and manner approved by the Underwriter, and will pay all expenses thereby incurred. For the purposes of this subsection, between the date hereof and the date which is 25 days of the End of the Underwriting Period for the Bonds, the Agency will furnish such information with respect to itself as the Underwriter may from time to time reasonably request. (m) If the information contained in the Official Statement is amended or supplemented pursuant to paragraph (I) hereof, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date which is 25 days after the End of the Underwriting Period for the Bonds, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein) will not contain any untrue statement of a material fact required to be stated therein or necessary to make such information therein in the light of the circumstances under which it was presented, not misleading. (n) After the Closing, the Agency will not participate in the issuance of any amendment of or supplement to the Official Statement to which, after being furnished with a copy, the Underwriter will reasonably object in writing or which will be disapproved by counsel for the Underwriter. (o) Any certificate signed by any officer of the Agency and delivered to the Underwriter will be deemed a representation by the Agency to the Underwriter as to the statements made therein. -5- (p) The Agency will apply the proceeds from the sale of the Bonds for the purposes specified in the Official Statement. (q) The Agency's Low and Moderate Income Housing Fund established pursuant to Section 33334.3 of the Redevelopment Law does not on the date hereof, and will not on the date of the Closing, contain an "excess surplus" (within the meaning of Section 33334.12 of the Redevelopment Law) that would cause the Agency to be or to become subject to the sanctions contained in Section 33334.12(e)(1) of the Redevelopment Law. (r) The Agency does not on the date hereof, and will not as of the date of Closing, have "major audit violations" (within the meaning of Section 33080.8(1) of the Redevelopment Law) so as to be subject to a court order prohibiting the activities set forth in Section 33080.8(e)(3) of the Redevelopment Law. (s) The Agency timely paid its payment obligation under Section 33690(a) of the Redevelopment Law (SERAF payment). 6. Representations, Warranties and Agreements of the Authority. The Authority hereby represents, warrants and agrees as follows: (a) The Authority has been duly and validly created as a joint exercise of powers authority pursuant to the Act and the Joint Powers Agreement, and is a duly and validly existing public entity under the laws of the State of California. (b) The Authority has full legal right, power and authority to (i) enter into this Bond Purchase Agreement, (ii) sell, issue and deliver the Bonds to the Underwriter under the Act, as provided herein; and (iii) carry out and consummate the transactions contemplated by this Bond Purchase Agreement. (c) To the best knowledge of the officer of the Authority executing this Bond Purchase Agreement, after due inquiry, as of the date hereof, there is no action, suit, proceeding, inquiry or investigation, at law or in equity before or by any court, government agency, public board or body, pending or threatened against the Authority, affecting the existence of the Authority or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale or delivery of the Bonds or contesting or affecting, as to the Authority, the validity or enforceability of the Act, the Bonds or this Bond Purchase Agreement; or in any way contesting or challenging the consummatiorrof the transactions contemplated hereby. (d) The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate, and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the Authority will not be required to qualify to do business in connection with any such qualification or determination in any jurisdiction or take any other action which is inconsistent with or violates the Joint Powers Agreement. -6- (e) Any certificate signed by any officer of the Authority and delivered to the Underwriter will be deemed a representation by the Authority to the Underwriter as to the statements made therein. 7. Closin At 8:00 A.M., California time, on , 2011, or on such other date as may be mutually agreed upon by the Agency, the Authority and the Underwriter, the Agency and the Authority will, subject to the terms and conditions hereof, sell and deliver the Bonds to the Underwriter, duly executed and authenticated, together with the other documents hereinafter mentioned, and, subject to the terms and conditions hereof, the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in Section 1 hereof in federal funds. Sale, delivery and payment as aforesaid will be made at the offices of Stradling Yocca Carlson & Routh, a Professional Corporation ("Bond Counsel"), Newport Beach, California, or such other place as may be mutually agreed upon by the Agency, the Authority and the Underwriter, except that the Bonds (with one certificate for each maturity and otherwise in a form suitable for the book-entry system) will be delivered to the Underwriter in New York, New York, through the book-entry system of The Depository Trust Company ("DTC"). Unless the DTC Fast Automated Securities Transfer ("FAST") is utilized, the Bonds will be made available for inspection by DTC at least one business day prior to the Closing. 8. Closing Conditions. The Underwriter has entered into this Bond Purchase Agreement in reliance upon the representations and warranties of the Agency and the Authority contained herein, and in reliance upon the representations and warranties to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Agency and the Authority of their respective obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriter's obligations under this Bond Purchase Agreement to purchase, to accept delivery of and to pay for the Bonds will be conditioned upon the performance by the Agency and the Authority of their respective obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and will also be subject to the following additional conditions: (a) The Underwriter will receive, within seven business days after the date hereof, copies of the Official Statement (including all information previously permitted to have been omitted from the Preliminary Official Statement by Rule 15c2-12 and any amendments or supplements as have been approved by the Underwriter), in such reasonable quantity as the Underwriter may request. (b) The representations and warranties of the Agency and the Authority contained herein will be true, complete and correct on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing and the statements of the officers and other officials of the Agency, the Authority and the Trustee made in any certificate or other document furnished pursuant to the provisions hereof are accurate. (c) At the time of the Closing, the Agency Legal Documents will have been duly authorized, executed and delivered by the respective parties thereto, and the Official Statement will have been duly authorized, executed and delivered by the Agency, all in substantially the forms heretofore submitted to the Underwriter, with only such changes as will have been agreed to in writing by the Underwriter, and will be in full force and effect; and there will be in full force and effect such resolution or resolutions of the governing bodies of the Agency and the Authority as, in the opinion of Bond Counsel will be necessary or appropriate in connection with the transactions contemplated hereby. -7- (d) At the time of the Closing, all necessary official action of the Agency and the Authority relating to the Official Statement and the Agency Legal Documents will have been taken and will be in full force and effect and will not have been amended, modified or supplemented in any material respect. (e) At or prior to the Closing, the Underwriter will have received copies of each of the following documents: (1) Bond Counsel Opinion. The approving opinion of Bond Counsel to the Agency, dated the date of the Closing and substantially in the form included as Appendix D to the Official Statement. (2) Supplemental Opinion of Bond Counsel. A supplemental opinion or opinions of Bond Counsel addressed to the Underwriter, in form and substance acceptable to the Underwriter, and dated the date of the Closing, stating that the Underwriter may rely on the opinion of Bond Counsel described in paragraph (1) above as if such opinion was addressed to the Underwriter and to the following effect: (i) the Bond Purchase Agreement has been duly executed and delivered by the Agency and the Authority and (assuming due authorization, execution and delivery by and validity against the Underwriter) constitutes the valid and binding agreement of the Agency and the Authority, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting enforcement of creditors' rights and by 'the application of equitable principles; (ii) the statements contained in the Official Statement under the captions "INTRODUCTION," "THE 2011 BONDS," "SECURITY FOR THE 2011 BONDS," "OTHER MATTERS -Tax Matters" and in Appendices A and D insofar as such statements expressly summarize certain provisions of the Indenture, the Bonds or the opinion of Bond Counsel, are accurate in all material respects; and (iii) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended. (3) .Financial Advisor Certificate. A certificate, dated the date of Closing, signed by a duly authorized official of the Financial Advisor addressed to the Underwriter and the Agency to the effect, that, in connection with the preparation of the Official Statement, nothing has come to the attention of the Financial Advisor that would lead it to believe that the statements and information contained in the Official Statement as of the date thereof and the date of the Closing, contains an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. (4) Agency Counsel Opinion. An opinion of Counsel to the Agency, dated the date of the Closing and addressed to the Underwriter, in form and substance acceptable to the Underwriter to the following effect: -$- (i) the Agency is a public body, corporate and politic, duly organized and existing under the Constitution and laws of the State, including the Redevelopment Law, with full right, power and authority to execute, deliver and perform its obligations under the Agency Legal Documents; (ii) the Agency Resolution was duly adopted at a meeting of the Agency, called and held pursuant to law, with all public notice required by law and at which a quorum was present and acting throughout; and the Agency Resolution is in full force and effect and has not been modified amended or rescinded since their respective adoption date; and (iii) the Agency Legal Documents have been duly authorized, executed and delivered by the Agency and, assuming due authorization, execution and delivery by the other parties thereto, constitute the valid, legal and binding obligations of the Agency enforceable in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting enforcement of creditors rights and by the application of equitable principles if equitable remedies are sought; (iv) the execution and delivery of the Agency Legal Documents and the Official Statement and compliance with the provisions of the Agency Legal Documents, under the circumstances contemplated thereby, (1) do not and will not in any material respect conflict with or constitute on the part of the Agency a breach of or default under any agreement or other instrument to which the Agency is a party or by which it is bound, and (2) do not and will not in any material respect constitute on the part of the Agency a violation, breach of or default under any existing law, regulation, court order or consent decree to which the Agency is subject; (v) to the best of such counsel's knowledge, except as otherwise disclosed in the Official Statement, there is no litigation or proceeding, pending and served, or threatened, challenging the creation, organization or existence of the Agency, or the validity of the Bonds or the Agency Legal Documents or seeking to restrain or enjoin any of the transactions referred to therein or contemplated thereby, or under which a determination adverse to the Agency would have a material adverse effect upon the financial condition or the revenues of the Agency, or which, in any manner, questions the right of the Agency to issue, sell and deliver the Bonds, to enter into the Indenture or to use the Tax Revenues for repayment of the Bonds or affects in any manner the right or ability of the Agency to collect or pledge the Tax Revenues; and (vi) the information in the Official Statement relating to the Agency, the Tax Revenues and the Project Area (excluding any financial or statistical data with respect thereto, as to which no opinion is expressed) is true and correct in all material respects, and the Official Statement contains no misstatement of any material fact and does not omit any statement necessary to make the statements contained therein with respect to, in the light of the circumstances in which such statements were made, not misleading. -9- (5) Authority Counsel Opinion. An opinion of counsel to the Authority,. dated the date of Closing and in form and substance satisfactory to the Underwriter, to the effect that: (i) the Authority is a joint exercise of powers authority, duly organized and validly existing under the Act and the Joint Powers Agreement; (ii) the Authority Resolution was duly adopted at a meeting of the Authority, called and held pursuant to law, with all public notice required by law and at which a quorum was present and acting throughout; and the Authority Resolution is in full force and effect and has not been modified amended or rescinded since its adoption date; and (iii) the Bond Purchase Agreement has been duly authorized, executed and delivered by the Authority and constitutes the valid, legal and binding obligation of the Authority enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting enforcement of creditors rights and by the application of equitable principles if equitable remedies are sought. (6) Trustee Counsel Opinion. The opinion of counsel to the Trustee, dated the date of the Closing, addressed to the Underwriter, to the effect that: (i) the Trustee is a national banking association, duly organized and validly existing under the laws of the United States of America, having full power to enter into, accept and administer the trusts created under the Indenture; (ii) the Indenture has been duly authorized, executed and delivered by the Trustee and the Indenture and the Indenture constitute the legal, valid and binding obligation 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; and (iii) except as may be required under Blue Sky or other securities laws of any state, no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee that has not been obtained is or will be required for the execution and delivery of the Indenture, or the consummation of the transactions contemplated therein. (7) Agency Certificate. A certificate of the Agency, dated the date of the Closing, signed on behalf of the Agency by a duly authorized officer of the Agency, to the effect that: (i) the representations and warranties of the Agency contained herein are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing; (ii) no event affecting the Agency has occurred since the date of the Official Statement which has not been disclosed therein or in any supplement or amendment thereto which event should be disclosed in the Official Statement in -10- order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (iii) no further consent is required to be obtained for the inclusion of the Agency's audited financial statements, including the accompanying accountant's letter, for fiscal year ended June 30, 2010, in the Official Statement. (8) Authority Certificate. A certificate of the Authority, dated the date of the Closing, signed on behalf of the Authority by a duly authorized officer of the Authority, to the effect that: (i) the representations and warranties of the Authority contained herein are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing; and (ii) no event affecting the Authority has occurred since the date of the Official Statement which has not been disclosed therein or in ariy supplement or amendment thereto which event should be disclosed in the Official Statement in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (g) Trustee's Certificate. A Certificate, dated the date of Closing, to the effect that: (i) the Trustee is a national banking association duly organized and validly existing under the laws of the United States of America; (ii) the Trustee has full power, authority and legal right to comply with the terms of the Indenture and to perform its obligations stated therein; and (iii) the Indenture has been duly authorized, executed and delivered by the Trustee and (assuming due authorization, execution and delivery by the Agency) constitutes a legal, valid and binding obligations of the Trustee in accordance with there respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally. (10) Leaal Documents.. Executed copies of this Bond Purchase Agreement, the other Agency Legal Documents and a tax certificate in form acceptable to Bond Counsel (11) Ratina Letters. Letters from Standard & Poor's Rating Group, a division of The McGraw-Hill Companies, Inc. ("S&P") and Fitch Ratings ("Fitch") to the effect that the Bonds have been assigned the respective ratings shown in the Official Statement. (12) Disclosure Counsel Letter. A letter of Stradling Yocca Carlson & Rauth, a Professional Corporation ("Disclosure Counsel"), dated the date of the Closing, addressed to the Underwriter, to the effect that, based upon its participation in the preparation of the Official Statement and without having undertaken to determine independently the fairness, accuracy or completeness -11- of the statements contained in the Official Statement, such counsel has no reason to believe that, as of the date of the Closing, the Official Statement (excluding therefrom the reports, financial and statistical data and forecasts therein, Appehdices A, C, D and F, and information relating to DTC, as to which no advice need be expressed) contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (13) Fiscal Consultant Certificate. An executed certificate of the Fiscal Consultant to the effect that (i) other than any modifications of debt service requirements after final sale of the Bonds reflected in the Official Statement, nothing has come to the attention of the Fiscal Consultant since the date of the Fiscal Consultant's Report set forth as Appendix A to the Official Statement which would cause it to believe that the Report was materially incorrect in any respect, (ii) the Report sets forth the best estimates of the Fiscal Consultant with respect to the projections contained therein and (iii) the Fiscal Consultant has consented to the reproduction of the Report as Appendix G to the Official Statement. (14) Additional Documents. Such additional certificates, instruments and other documents as Bond Counsel, the Agency or the Underwriter may reasonably deem necessary. All the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Bond Purchase Agreement will be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to the Underwriter. If the Agency, the Authority or the Trustee will be unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds contained in this Bond Purchase Agreement, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds will be terminated for any reason permitted by this Bond Purchase Agreement, this Bond Purchase Agreement will terminate and neither the Underwriter nor the Authority will be under any further obligation hereunder. 9. Termination. The Underwriter will have the right to terminate its obligations under this Bond Purchase Agreement to purchase, to accept delivery of and to pay for the Bonds by notifying the Authority of their election to do so if, after the execution hereof and prior to the Closing: (a) any event occurs that causes any statement contained in the Official Statement to be materially misleading or results in a failure of the Official Statement 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; or -12- (b) 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, or the amendment of legislation pending as of the date of this Bond Purchase Agreement 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 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 materially adversely affecting the federal or State tax status of the Agency, or the interest on bonds or notes or obligations of the general character of the Bonds; or (c) any legislation, ordinance, rule or regulation is introduced in, or enacted by any governmental body, department or agency of the State, or a decision by any court of competent jurisdiction within the State or any court of the United States is rendered which, in the reasonable opinion of the Underwriter, materially adversely affectsthe market price of the Bonds; or (d) legislation is enacted by the Congress of the United States, or a decision by a court of the United States is rendered, or a stop order, ruling, regulation or official statement by, or on behalf of, the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter is issued or made, to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the issuance, offering or sale of the Bonds, including all underlying obligations, as contemplated hereby or by the Official Statement, is in violation or would be in violation of, or that obligations of the general character of the Bonds, or the Bonds, are not exempt from registration under, any provision of the federal securities laws, including the Securities Act of 1933, as amended and as then in effect, or that the Indenture needs to be qualified under the Trust Indenture Act of 1939, as amended and as then in effect; or (e) additional material restrictions not in force as of the date hereof are imposed. upon trading in securities generally by any governmental authority or by any national securities exchange which restrictions materially adversely affect the Underwriter's ability to trade the Bonds; or (f) a general banking moratorium is established by federal or State authorities; or (g) the United States becomes engaged in hostilities which result in a declaration of war or a national emergency, or there occurs any other outbreak of hostilities or a national or international calamity or crisis, or there occurs any escalation -13- of existing hostilities, calamity or crisis, financial or otherwise, the effect of which on the financial markets of the United States being such as, in the reasonable opinion of the Underwriter, would affect materially and adversely the ability of the Underwriter to market the Bonds; or (h) any rating of the Bonds is downgraded, suspended or withdrawn by a national rating service, which, in the Underwriter's reasonable opinion, materially adversely affects the marketability or market price of the Bonds; or (i) the commencement of any action, suit or proceeding described in Section 5(g) hereof which, in the judgment of the Underwriter, materially adversely affects the market price of the Bonds; or Q) there is in force a general suspension of trading on the New York Stack Exchange. 10. Expenses. (a) The Underwriter will be under no obligation to pay, and the Agency will pay, any expenses incident to the performance of the Agency's obligations hereunder including, but not limited to: (i) the cost of preparation, printing and distribution of the Indenture and the Indenture and word processing, reproduction, printing and distribution costs relating to the Preliminary Official Statement, the Official Statement and any supplements or amendments thereto (incurred by Disclosure Counsel or an independent printer); (ii) the cost of preparation of the Bonds; (iii) the fees and disbursements of Bond Counsel and Disclosure Counsel, the fees and expenses of counsel to the Agency, the Authority and the City and the fees of counsel to the Underwriter; (iv) the fees and disbursements of the Financial Advisor and the Fiscal Consultant and any other experts, consultants or advisors retained by the Agency, the Authority or the City; (v) the fees of the rating agencies; (vi) the cost of preparation of the Blue Sky Memoranda and all Blue Sky filing fees in connection with the public offering of the Bonds; and (vii) the bond insurance premium and surety bond premium; and (viii) any out-of-pocket disbursements of the Agency, the Authority and of the Underwriter incurred in connection with the public offering and distribution of the Bonds, including any expenses (included in the expense component of the spread) incurred on behalf of the Authority's or the Agency's employees which are incidental to implementing this Bond Purchase Agreement including, but not limited to, meals, transportation, lodging and entertainment of those employees. (b) The Underwriter will pay: (i) fees, if any, payable to the California Debt and Investment Advisory Commission in connection with the issuance of the Bonds; and (ii) all other expenses incurred by the Underwriter in connection with the public offering of the Bonds. 11. Notices. Any notice or other communication to be given to the Agency under this Bond Purchase Agreement may be given by delivering the same in writing at the Agency's address set forth above, to the attention of its Executive Director. Any notice or other communication to be given to the Underwriter under this Bond Purchase Agreement may be given by delivering the same in writing to: De la Rosa & Co. 10866 Wilshire Boulevard, Suite 1650 Los Angeles, California 94608 Attention: John Kim -14- 12. Parties in Interest. This Bond Purchase Agreement is made solely for the benefit of the Authority, the Agency and the Underwriter and no other person will acquire or have any right hereunder or by virtue hereof. All of the representations, warranties and agreements of the Agency and the Authority contained in this Bond Purchase Agreement will remain operative and in full force and effect, regardless of: (i) any investigations made by or on behalf of the Underwriter; (ii) delivery of and payment for the Bonds pursuant to this Bond Purchase Agreement; and (iii) any termination of this Bond Purchase Agreement. 13. Effectiveness; Counterpart Signatures. This Bond Purchase Agreement will become effective upon the execution of the acceptance by an authorized officer of the Agency and approval by an authorized officer of the Authority and will be valid and enforceable at the time of such acceptance and approval. This Bond Purchase Agreement may be executed by the parties hereto by facsimile transmission and in separate counterparts, each of which when so executed and delivered (including delivery by facsimile transmission) will be an original, but all such counterparts will together constitute but one and the same instrument. 14. Headings. The headings of the sections of this Bond Purchase Agreement are inserted for convenience only and will not be deemed to be a part hereof.- 15. No Fiduciary Relationship. The Agency acknowledges and agrees that (i) the purchase and sale of the Bonds under this Bond Purchase Agreement is an arm's-length commercial transaction among the Agency, the Authority and the Underwriter; (ii) in connection therewith, the Underwriter is acting solely as a principal and not as an agent or a fiduciary of the Agency or the Authority; (iii) the Underwriter has not assumed a fiduciary responsibility in favor of the Agency or the Authority with respect to: (a) the offering of the Bonds or the process leading thereto (whether or not any Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the Agency or the Authority on other matters); or (b) any other obligation to the Agency or the Authority except the obligations expressly set forth in this Purchase Contract; and (iv) the Agency has consulted with its own legal and financial advisors in connection with the offering of the Bonds, including, but not limited to, matters relating to the timing of the sale of the Bonds, the size of the Bonds, the potential impacts of the sale of the Bonds on the Agency's financial condition and the potential financial and legal consequences on the Agency for selling the Bonds in light of the 2011 12 budget proposal made by the Governor of California. -15- 16. Governino Law. This Bond Purchase Agreement will be construed in accordance with the laws of the State of California. Very truly yours, E. J. DE LA ROSA & CO.. INC. Authorized Representative Accepted: REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA By: Executive Director SANTA MONICA PUBLIC FINANCING AUTHORITY By: Treasurer -16- EXHIBIT A REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT 2011 TAX ALLOCATION BONDS MATURITY SCHEDULE $ Serial Bonds Maturity Principal Interest (July 1) Amount Rate Yield Term Bonds Maturity Principal Interest (July 1) Amount Rate Yield Price Price A-1 EXHIBIT B REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA EARTHQUAKE RECOVERY REDEVELOPMENT PROJECT 2011 TAX ALLOCATION BONDS RULE 15c2-12 CERTIFICATE The undersigned hereby certifies and represents to E. J. De La Rosa & Co., Inc., on behalf of itself and Wells Fargo Securities (collectively, the "Underwriter"), that he or she is a duly appointed and acting officer of the Redevelopment Agency of the City of Santa Monica, and as such is authorized to execute and deliver this Certificate and further hereby certify and reconfirm on behalf of the Agency to the Underwriter as follows: (1) This Certificate is delivered to enable the Underwriter to comply with Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act. of 1934 (the "Rule") in connection with the offering and sale of the tax allocation bonds captioned above (the "Bonds"). (2) In connection with the offering and sale of the Bonds, there has been prepared a Preliminary Official Statement, dated as of 2011, setting forth information concerning the Bonds and the Agency (the "Preliminary Official Statement"). (3) As used herein, "Permitted Omissions" will mean the offering price(s), interest rate(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Bonds depending on such matters and the identity of the underwriter(s), all with respect to the Bonds. (4) The Preliminary Official Statement is, except for the Permitted Omissions deemed final within the meaning of the Rule and has been, and the information therein is accurate and complete in all material respects except for the Permitted Omissions. (5) If, at any time prior to the execution of the final contract of purchase, any event occurs as a result of which the Preliminary Official Statement might include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Authority or the Agency will promptly notify the Underwriter thereof. Dated: ,2011 REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA By Authorized Officer B-1 - ~ ~ ,- ®~j y~ ~(ay ~ << 9; ~a Reference Contract Nos. 9374 (CCS), 9375 (CCS), Amended Contract No. 9146 (CCS), Resolution Nos. 10576 (CCS), 531 (RAS), and 7 (PEAS)