HomeMy WebLinkAboutAgenda Bill 4D 10/19/2009
CITY OF PETALUMA, CALIFORNIA `~^
AGENDA II,I, ~ ®c~ober 19, 2009
Agenda `Title: A Resolution Approving The Form .Of And Authorizing The Meeting Date:
Execution And Delivery Of A Purchase And Sale Agreement And Related October 19, 2009
Documents With. Respect. To The Sale Of The City's Proposition l a
Receivable From: The State; And Directing And Authorizing Certain Other Meeting Time: 7:00 PM
Actions In Connection. Therewith.
Cate~orv ^ Presentation ^ Appointments ^ Consent ^ Public Hearing ^ Unfinished Business ^ New Business
Department: Director: Contact Person: Phone Number:
.Finance Tamera Haas Tamera Haas 707-778-4352
Total Cost of Proposal' or Proiect: Name of-Fund: General Fund-1100
Only staff time to prepare report. Account Number: Affects Property Tax, Sales
Amount Budgeted; Tax & MVLF In Lieu Revenues
No appropriation budgeted or needed. Current Fund Balance: Estimated $900 thousand
as of 7/1/09
.Recommendation: 'It is recommended that'the City .Council fake~fhe following action: It is recommended
that the City Council adopt the attached resolution which will enable the City to participate in the Proposition lA
Seeuritization Program.
1. ^ First reading.of Ordinance approved unanimously, or with unanimou§ vote to allow posting prior to second reading
2. ^ F,irstxeading of Ordinance approved without unanimous vote: Ordinance has'been published/posted prior to second
reading; see Attachment
3. ^'Other action requiring special notice: Notice has been given, see Attachment
Summary Statement: As part of the .State budget adoption for 2009-10 -year, the State plans to borrow 8% of
the amount of property tax apportioned to cities, counties, and, special districts. The State will be required to
repay those obligations by June 30, 2013.
The reduction in property tax revenue for the City of Petaluma is estimated to be $1,109,572.51. The County will
finalize the 8% reduction amount after December 10, 2009. The Prop 1 A loan or receivable will be sold to
California Statewide Communities Development Authority, (CSCDA, a joint powers authority) for 100% of the
.face value. The sale constitutes an "absolute. sale" with no recourse back to the. City. CSCDA will sell bonds to
.investors. solely secured by State repayment of the Prop 1 A loan. All transaction costs of issuance and interest
associated with sale will be paid by the .State: To provide immediate cash relief, cash proceeds equal to 100% of
the property tax.reductign`will be ,provided to the City of Petaluma in two equal installments, on January 15,
2010 and May 3, .2010 to~ coincide with the dates that the .State will be shifting property tax from the City.
The existing legislation for :fhis program prescribes a November 6' deadline for the City to adopt the Resolution
and to then.. sign the Purchase -and Sale ..Agreement, complete and sign the .related documents and then submit the
required doeument.package~to CSCDA, and failure to meet that deadline would result in being excluded from the
program.
In order for the program.to go forward,. CSCDA has confirmed that the legislature must enact and the Governor
must sign.. SB 67, which failedin the legislature on September 11-12. The fate of SB 67 may not be resolved by
the November 6 submission deadline: If for any reason S'B 67 does .not become law on a timely basis, the
program cannot •proceed; and the documents which will have been completed, signed and submitted by the City
in the meantime will be of no.force or effect and will be destroyed,
Summary .Statement. (con't).
The adopted State budget includes AB 15 that. provides a hardship mechanism for agencies. Agencies that believe
they would qualify for a hardship exemption can file for the determination as required by AB15. This is strictly a
backup option, if SB67 does not pass to allow the securitization program to go forward. As a safeguard, staff
will have- sought a hardship exemption by the State's October 15, 2009 deadline for such exemptions.
Attachments to A~enda'Packet Item:
1. .Resolution approving participation in the Proposition lA Receivable Financing Program
2. Purchase and Sale Agreement
3, FAQ's from California C'omtnunities
Reviewed by Finance Director: "Reviewed by City Attorney.: A rove b C'i anager:
~~.
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Date: ~ %D• (.,~ .D~l Date: Date: /6 -%~ -D~
Rev: # 1 DateLast.Revised: 10/13/09 File: s:/agenda/2 009-10-19 Pro lA
CITE OF PE'TALLTMA, CALIFORNIA
OCTOBER 19, 2009
AGENDA REPORT FOR
A RESOLUTION APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION AND
DELIVERY OF A PURCHASE AND SALE AGREEMENT AND RELATED DOCUMENTS WITH
RESPECT TO THE SALE OF THE SELLER'S PROPOSITION lA RECEIVABLE FROM THE STATE;
AND DIRECTING AND AUTHORIZING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH
RECOMMENDATION: It is recommended that the City Council adopt the attached
resolution wlii'ch will enable the City to participate in the Proposition l A Securitization
Program.
2. BACKGROUND:
Proposition 1 A Sus ep nsion: Proposition 1 A was passed by California voters in 2004 to
ensure local property tax and sales tax revenues remain with local government thereby
safeguarding funding. for public safety, health, libraries,. parks, and other local services.
Provisions can only be suspended if the Governor declares a fiscal necessity and two-
thirds of the Legislature concurs.
The emergency suspension of Proposition lA was passed by the Legislature and signed
by the Governor as ABX4 14 and ABX4 15 as part of the 2009-10 budget package on
July 28, 2009. Under the provision, the State will borrow 8% of the amount of property
tax revenue apportioned to cities, counties and special districts. The state will be required
to repay those obligations plus interest by June 30, 2013.
The. legislature.is currently reviewing aclean-up bill, SB67 which would provide for a
few critical changes to~ the, enacted legislation, including but not limited to providing for:
financing to occur in November; county. auditor certification of amount of Prop 1 A
receivable; tax_exempt structure; California Communities as the only issuer; more
flexibility on bond structure (interest payments, state payment date and redemption
features); sales among local agencies; and revision.to the hardship mechanism. While SB
67 has notyet been passed and signed into law, California,Communities expects that to
occur prior to funding the Program. If for any reason :SB 67 is not enacted and the bonds
cannot be sold by December 31, 2009, all .approved documents placed in escrow with
Transaction counsel will be of no force and effect and will be destroyed.
.Proposition lA Securitization Program: Authorized under ABX4 14 and ABX4 15, the
Proposition lA Securitization Program was instituted by California Communities to
enable Local Agencies to sell their respective Proposition lA Receivables to California
Communities. Currently, SB67 is being considered to clarify specific aspects of ABX4
14 and ABX4 15. Under the Securitization Program, California Communities will
simultaneously purchase the Proposition lA Receivables, issue bonds ("Prop lA Bonds")
and provide each local agency with the cash proceeds 'in two equal installments, on
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January 15, 2010 and May 3, 2010 (to coincide with the dates that the State will be
shifting property tax from local. agencies). The purchase price paid to the local agencies
will equal 100% of the amount of the .property tax reduction. All transaction costs of
issuance and interest will be paid by the State of California. Participating local agencies
will have no obligation on the bonds and no credit exposure to the State.
If the City sells it's .Proposition 1 A Receivable under the Proposition 1 A Securitization
Program, ~Cal~ifornia ~Communiti'es -will pledge the City's Proposition lA Receivable to
secure the repayment of a:corresponding amount of the Prop lA Bonds. The City's sale
of its Proposition lA Receivable will be irrevocable. Bondholders will have no recourse
to the City if the State does not make the Proposition. lA Repayment.
Proposition '1 A Pro r~ponsor: California Statewide Communities.Development
Authority ("California Communities") is a joint powers authority sponsored by the
California State Association of Counties and the League of California Cities. The
member agencies of :California Cornrnunities include. approximately 230 cities and 54
counties throughout California.
DISCUSSION:
Benefits of Participation in the Proposition lA Securitization. Program: The benefits to
the City ofparticipation in the Proposition lA Securitization Program includes:
Immediate cash .relief -the sale of the City's Proposition 1 A Receivable will ,provide
the City with 100% of its Proposition 1 A Receivable in two equal installments, on
January 15; 2010 and May 3, 2010.
1Vlit atg_ es impact of 8% property tax, withholding. in January and May -Per ABX4 14
and ABX4 15 and the proposed clean-up .legislation SB 67, the State will withhold 8%
of property tax receivables due to Cities, Counties,. and Special Districts under
Proposition 1 A. The financing outlines bond proceeds to be distributed to coincide
with the dates that the State will be shifting .property tax from local agencies.
®' ~ All costs .of financing borne by the State of California. The City will not have to pay
any interest cost or costs of issuance in connection with its participation.:
® No obligation, on Bonds. The City has no obligation with. respect to, the payment of'the
bonds, -nor ,any reporting, disclosure or other compliance obligations associated with
the bonds. ~
Proceeds of the Sale of the City's Proposition lA Reccivablec Upon delivery of the
Proposition 1 A Bonds,.. Cal_iforna Communities. will make available to the City its fixed
purchase price, which will equal 100% of the local agency's Proposition l A Receivable.
These funds- may be used.. forany lawful purpose. of the City and. are not restricted by the
program.
a
Proposed Proposition 1 A Receivables :Sale Resolution; The proposed Proposition 1A
Receivables Sale Resolution:
(1) Authorizes the sale of the City's Proposition lA Receivable to California
Communities for 100% of its receivable;.
(2) Approves the form; .and directs the execution and delivery, of the Purchase and
Sale. Agreement. with California Communities and related documents;
(3) Authorizes ,and directs any Authorized Officer to send, or to cause to be sent, an
irrevocable written instruction required by statute to the'State Controller notifying
the State of the sale of the Proposition l A Receivable and instructing the
disbursement of the Proposition lA Receivable to ;the Proposition lA Bond
Trustee;
(4) Appoints certain City officers and officials as Authorized Officers for purposes of
signing documents; and
(5) Authorizes miscellaneous related actions and makes certain ratifications, findings
and determinations required by law.
Proposed Purchase- and Sale Agreement: The proposed Purchase and Sale Agreement:
(1) Provides, for the sale of the Proposition 1 A Receivable to California
Communities;
(2) Contains representations and warranties of the City to assure California
Communities that the Proposition 1 A Receivable has not been previously. sold, is
not encumbered, that no litigation or other actions. is pending or threatened to
disrupt the transaction and that this is an arm's length "true sale" of the
.Proposition lA Receivable.
(3) Provides mechanics for payment of the .Purchase Price.
(4) . Contains other miscellaneous. provisions.
Proposed Purchase and Sale Agreement Exhibits: 'The proposed Proposition 1 A Purchase
and Sale. Agreement Exhibits:
(B 1) Opinion.. of Counsel: This is an opinion of the. counsel to the local .agency
covering basic approval of the documents, litigation; and enforceability of the
document against the Seller. It will be dated:as of the Pricing date of the bonds
(currently expected to be November 10,:2009.).
(B2) Bring down Opinion: This simply "brings down" the opinions to the closing date
(currently expected to be November 1'9,'2009)..
(C 1) Certificate of the Clerk of the Local Agency: A certificate of the Clerk
confirming that the resolution was duly adopted and is in full force and effect.
{C2) Seller Certificate: A cerEification of the .Seller dated as of the Pricing. Date
confirming that the representations and warranties of the. Seller are true as of the
Pricing, Date, confirming.. authority to sign, confirming due. approval of the
resolution and providing payment instructions.
(C3) Bill of Sale and Bring down Certificate: Certificate that brings: the certifications
of C2 down to the.Closing. Date and confirms the sale of the Proposition lA
Receivable as of the Closing. Date.
(D) Irievocable Instructions~~ to~ he Controller: ~R~equired in order to let, the State
Con"troller know that the Proposition 1A Receivable has been sold and directing
the State. to make payment of the receivable to the Trustee on behalf of the
Purchaser.
(E) Escrow Instruction Letter: Instructs Trarisaetion Counsel (Orrick) to holdall
documents in, escrow until closing, and if clo "sing .does not occur by December 31,
2009 -for any reason, to destroy all documents.
4. ~ FrnaNCr~aL I1v~raC'rs The reduction in.property tax revenue for the City of Petaluma is
estimated to be $1,1.09,572.51. The County will. finalize the 8% reduction amount after
December .1.0., 2009. The Prop 1A;loan or receivable will be sold to California Statewide
Communities Development Authority, (CSCDA, a joint powers authority) for 100% of
the face value... They sale constitutes an "absolute sale." with no recourse back to the City.
CSCDA will sell bonds to investors oiely secured by State repayment of the Prop 1A
loan. All transaction costs of~ssuance and interest associated with sale will be paid by
the State: ' To provide immediate cash relief, cash proceeds equal to 100% of the property
tax reduction will be p"ro~ided to-the City'of.Petaluma in two equal. installments, on
January 15, 201,0 and May 3, 20i 0 to coincide with the dates that the State will be
shifting property tax from the City.
RESOLUTION NO.
CITY COUNCIL
OF THE
CITY OF PETALUMA
A RESOLUTION APPROVING THE FORM OF AND AUTHORIZING THE
EXECUTIONAND DELIVERYOF A PURCHASE AND SALE AGREEMENT
.AND RELATED DOCUMENTS WITH RESPECT TO THE SALE OF THE
SELLER'S PROPOSITION IA RECEIVABLE FROM THE STATE; AND
DIRECTING AND AUTHORIZING. CERTAIN. ~ OTHER ACTIONS IN
CONNECTION THEREWITH
WHEREAS, ,pursuant to 'Sect~ioii 25.5 of Article XIII; .of the Califonnia Constitution and
Chapter 14XXXX of the California Statutes of 2009 (Assembly B~~ill No. 15), as amended (the
"Act"), certain local agencies wi:t_h~in the State of California (tlie "State") are entitled to receive
certain payments to be made by the. State on or before Jime 30, 2013, as reimbursement for
reductions in the percentage of tlae~ total amount of ad valorem property tax revenues allocated to
such local agencies. during the State's 2009-10 fiscal year (the "Reimbursement Payments"),
which reductions have been authorized pursuant to Section's 1-00.05' aild 100:06 of the California
Revenue and Taxation Code;
WHEREAS; the City of Petaluma, a local agency within the meaning, of Section 6585(f)
of the Califonlia Government Code (the "Seller"), is entitled to and. has determined to sell all
right; title and interest of the Seller -in and to its "Proposition lA receivable", as defined in
Section 6585(g) of the California Government Code. (the "Ptopostion lA Receivable"), namely,
the right to payment of moneys..due or to become due to, the Seller pursuant to Section
25.5(a)(1)(B)(iii) of Article XIII of the California Constitution sand Section 100.06 of the
California Revenue and Taxation Code, in order to obtain money to fiind public capital
improvements or working capital;
WHEREAS, the Seller is authorized to sell or otlserwise dispose of its property as the
interests of its residents require;
WHEREAS.,. theCalifornia Statewide Communities Development Authority, a joint
exercise of powers authority organized and .existing under the laws of the State (tle
"Purchaser"), has been authorized pursuant to Section 6588(x) of the California Government
.Code to pureh'ase the Proposition A Receivable;
WHEREAS; the Purchaser desires to purchase the Proposition lA Receivable .and the
Seller desires; to sell the Proposition 1 A Receivable pursuant to a purchase. and sale agreement. by
and between,~the Seller and the Purchaser in the foi-~n presented to this City Council (the "Sale
Agreement") for the ;purpose"s set forth herein;
WHEREAS, in order to finance the purchase, price of the Proposition l A Receivable from
the S-tiller and, the purchase price'~o~f other Proposition 1 A Receivables from other Local agencies,
the Purchaser will issue its bonds (the `Bonds") pursuant to Seetign 6590 of the California
Government Code; and an; Indenture {the "Indenture"), by and between the Purchaser and Wells
Fargo~Baiik, National Association, as trustee (the "Trustee"), which_Bonds will be payable solely
7
from: the proceeds of the Seller's Proposition LA. Recevable and other Proposition lA
Receivables sold to fhe~ Purchaser by focal agencies ~in connection with. the issuance of the
Bonds;
WHEREAS, the Sel er acknowledges that (i) any transfer of its Proposition lA
Receivable to: the Purchaser pursuant to the Sale Agreement shall be treated as an absolute sale
and transfer of the property so tra~lsferred and not as a pledge 'or grant of a security interest by
City of Petaluma to secure a borrowing; (ii):any such sale of~its Proposition lA Receivable to the
Purchaser shall automatically be~, perfected without the need for physical delivery, recordation,
filing or further act, (iii) the provisions of Division 9 (commencing, with Section 91.01) of the
California Commercial Code and. Sections 954.5 to 955.1 of'the~ California; Civil Code, inclusive,
shall not apply to the sale ~of its Proposition :IA Receivable,, and (~iu~) after such. transfer-, the. S~el ler
shall have no right,. title, or 'interes't -in or to the Proposition 1 A Receivable. sold to the Purchaser
and the Proposition lA Receivable will thereafter be owned; received, held and disbursed only
by the Purchaser or a trustee. or agent appointed by the Purchaser;
WHE~REA~S, the' ;Seller acknowledges that the 'Purchaser will .grant a security interest in
the Proposition 1A Receivable to the Trus"tee and any credit enhancer to secure payment of the
Bonds;
W1=IEREAS, a ~portori of the proceeds of the Bonds will be used by the Purchaser to,
among other things, pay the purchase price of the Proposition 1 A Receivable;
WHEREAS, the ,Seller will use the proceeds receiyed from the sale of the Proposition lA.
Receivable for any lawful purpose as permitted under the appl~i`ca~~ble laws of the State;
NOW THEREFORE, the City Council of the City of Petahmia hereby resolves as
.follows:
Section 1. All .of .the "recitals set forth above -are true and correct, and this Cif-y
Council .hereby so finds and. deternries:
Section 2. The Seller hereby authorizes the a_'le of the Proposition lA Receivable
to the Purchaser for a price egtilal 'to the amount certified as the Initial A~mount~ (as defined in the
Sale: Agreement) by the County ;auditor pursuant to the Act. The, form of Sale Agreement
.presented to the City Council is :hereby approved.:. Ata Authorized Officer (as set' forth in
Apperid~ix~ A o~f th~`s Resolution, attached hereto and by this reference incorporated.:herein), 's
hereby,' authorized :and directed~to~ execute and deliver the :Sale Agreement on behalf- of~fhe Seller,
which shall.be in the form presented at this meeting.
Section 3._ Any Authorized Officer is hereby :authorized and directed to send, or
to cause fo be sent;, an irrevocable written instruction. to the State Controller (the "Irrevocable
Written. Instruction") notifying the State of the sale of the Pro"position 1 A Receivable ,and
.instructing; the disbursement pursuant to Section 6588.6(c) of California Government Code of the
Proposition a.A Receivable to the Trustee, oil behalf of the Purchaser, which Irrevocable Written
Instruction shall be~.in the form presented at this meeting.
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~Seefion 4:. The Authorized Off cers and uch' ~otler Sellerofficers, as appropriate,
are hereby 'authorized and drected;,jointly and-severally, to,do.any-and all things and to execute
acid deliver any and all documents; including but .not limited.. to, if reeuired, appropriate escrow
instructi°ons :relating to the delivery into escrow. of executed documents prior to the closing of the
Bonds, and such other documents mentioned in the Sale Agreement or the Indenture, which any
of them niay deem necessary or' desirable, 'in order to in~plertrent. the Sale Agreement and
otherwise to carry out; give, effect to and comply with t11e terms and intent of this Resolution; and
all such actions heretofo"re taken by such officers are hereby ratified; confiilned and approved.
Section ~5. A11 consents, approvals, ,notices; orders, requests and otlier actions
permitted or required by any of the documents authorized by this Resolution, whether before or
after the, sale of the Propos~ti~on lA Receivable or-the, issuance ~of~~~the Bonds, ncluding without
limitation any of the foregoing; that may be necessary or desirable in connection with any default
under or amendment of such documents, may be .given or~ taken by an Authorized Officer
without further authorization by this~~ 'City Council; and each Authorized. Officer is hereby
authorized and directed to :give any such consent, approval, notice, order or request, to execute
any necessary or appropriate documents or'anaendnients, and to take. any such action-that such
Authorized Off cer may d`e'em necessary ~or desirable to furtlaer~tlie purposes. of this Resolution.
Section 6. The City Council acknowledges that, upon execution and delivery of
the Sale Agreement, the Seller is contractually obligated to sell the Propositiori LA Receivable to
the~.PUrcfiaser pilrsuant to the S"a]e ,Agreerr~ent and the..Seller shall _not; have any option to revoke
its approval of the Sale Agreement or to determine not to perform its obligations thereunder.
Section 7. This Resolution shall Make effect from and after its adoption and
approval.
PASSED AND ADOPTED by the City. Council of the City of Petaluma, State of
California, Phis day of , 2009, by the following vote:
AYES:
NOES:
ABSENT:
Mayor
Attest:
City Clerk
Approved as to form
SELLER'S COUNSEL
By
Dated:
4 '
~0
APPENDIX A
CITY OF PETALUNIA
Authorized Officers: Taniera Haas, Interim Finance Director
Kate Lloyd, Finance iVlanager
Sue Simmons, Commercial Services, Manager
any designee of any of them; as appointed in a written certificate of
such Authorized Officer delivered to the Trustee.
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CITY OF PETALUMA, CALIFORNIA,
as Seller
and
CALIRORNIA STATEWIDE COMMUNITIES
DEVCLOPMENT AUTHORITY,
as Purchaser
PURCHASE AND SALE AGREEMENT
Dated as of November 1; X009
E-1
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1'A>I3LIL O:IF C'ON'Q'Ih N'TS
Page
L. DEFINITIONS AND INTERPRETATION ..........:...............................:...........................2
2. AGREEMENT TO SELL AND PURCHASE; CONDITIONS PRECEDENT .......... ......2
.3. PURCHASE PRICE, CONVEYANCE OF PROPOSITION lA RECEIVABLE
AND PAYMENT OF PURCHASE PRICE ....................:........................................... ...... 3
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER .................... ......4
5. REPRESENTATIONS AND WARRANTIES OF THE SELLE:R ....................:........ ...:.. 5
6. COVENANTS OF THE SELLER .....:......................................................................... .:.... 7
7. THE PURCHASER'S ACKNOWLE.DGMENT ......................................................... ......9
8. NOTICES OF BREACH ............................................................................................. ...... 9
9. LIABILITY OF SELLER; INDEMNIFICATION ............................. .................. .....,9
LO. LIMITATION ON LIABILITY ...:.............................................................................. .... 10
11. TH:E SELLER'S ACKNOWLEDGIvIENT .................................................................. .... IO
12. NOTICES ..................................................................................................................... ....IO
13. AM.ENDMENTS ......................................................................................................... ....10
14. SUCCESSORS AND ASSIGNS ................................................................................. .... 10
15. THIRD PARTY RLGHTS .........................................:.................................................. ..:.1 1
lt. PARTIAL INVALIDITY ...........:......................................................:......................... .... 1 l
17. COUNTERPARTS ......:............................................................................................... .... 1 I
18. ENTIRE AGREEMENT .:...::....................................................................................... :... ll
l9. GOVERNING LAW ....:............................................................................................... .... 12
EXH IBIT A -DEFINITIONS ................................................................................................. .. A-1
EXH IBIT BL -OPINION OF SELLER'S COUNSEL ..............:..........:....:............................ B1-]
"EXH IBIT B2 -'BRINGDOWN OPINION OF SELLER"S COUN'SEL ................................. B?-I.
EXH IBIT CI -CLERK'S CERTfFICATE ................................:............................................ Cl-1
EXH IBIT C2-SELLER CERTfF:ICATE ............................................................................... C2-1
EXH IBIT C3 -'B1LL OF SALE AN`D BRfNGDOWN CERTIFICATE ................................ C3-1
EXH IBIT D - IRREVOCABLE INSTRUCTIONS TO CONTROLLER .............................. .. D-1
EXH IBIT E - ESCROV/ INSTRUCTION LETTER .............................................................. .. E-I
~2
PIJY2G>E-11AS>F ANA) SALE AG><2'EII/1V><ENT
~~ THIS PURCH.t1SE AND SALE AGRE'EMENT', dated. as of November 1, 2009
(this "A~reement"), is entered-.into Uy and between:
(;1) CITY: OF PETALUMA, a local agency of the State of California within
th'e meaning of Section 6585(f) of the California Government Code (the "Seller"); and
'' (2) CALIFORNIA STATEWIDE COM:MUN:IT1ES DEVELOPMENT
S UTHORITY, a joint exercise ~of powers authority organized :.arid existing under the laws of the
gate of California (the "Purchaser"). .
Rt+,(''~TA'~,~
A. Pursuant to Section. 25._5 of Article XIII of the California Constitution and
Section 100.06 of the California Revenrreand Taxation Code, local agencies within the meaning.
of Section 6585(f) of the .California,Government Code are entitled to receive certain payments to
be made by the State of California (the."`State") on or before June 3'0, 201.3, as reimbursement for
reductions in the percentage ~of tlie~ total amount of ad v.aloren~ property tax revenues allocated to
such local agencies during the ;State's 2009-10 fscal year, which reductions have been
authorized pursuant to Sections 100.05 and 100.06 of the California Revenue and Taxation Code.
B. The Seller is the .owner of the Proposition lA Receivable (as defined
below) and is entitled to and has determined to sell all right, title :and interest in and to the
Proposition lA receivable, namely, the righYto payment of.moneys due or to become dire to the
Seller pursuant to Section 25 3(a)(I)(B)(iii) of Article XI11 oaf th'e California~~Constihrtion and
Section 100..06 of the California' Revenue and Taxation Code; in order to obtain money to fund
any lawl:ul purpose as permitted under the applicable laws of the State.
C. The.. ;S'cller is authorized to sell.. or otherwise. dispose of .its property as the
interests of its residents require.
D. T'he Purchaser',. a joint. exercise of powers authority organized and existing
under the laws of the State, has been authorized pursuant to Section 65880) of the California.
Government Code to purchase the Proposition l f1 Receivable..
E. .The Seller is willing to sel ,and the Purchaser is willing o purchase, the
Propos"tiorl lA Re~ei~able'upon tfie terms specified in this Agreement.
F„ ,Pursuant to its Propos ion lA Rece;iuable Finar~cing~ Program (the
"Program"), .the Purchaser will issue its bonds (tlie "Bonds") pursuant ~to an Indenture (the
".Indenture")', between the 'Purchaser and. Wells .Fargo Bank, Na Tonal Association; as trustee (the
"Trustee''), and will, use a portion of the proceeds thereof to purchase the Proposition IA
Reccivable fi•orrr the Sel cr.
G.. The Purchaser will grant a security interest .in such Proposition 1A
Receivable to the Trustee and each Credit'E:nhancer to secure the Bonds.
`7`
A~IItEEl'V1<IH~N'I'
NOW, THEREFORE; in :consideration. of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby'agree as followsi
I. Definitions and Interpretation.
(a) For all purposes of this, Agreement, except as otherwise expressly provided
herein or unless the context otherwise :requires, capitalized .terms not otherwise defined herein
shall have the meanings ascribed to such teens in Exhibit A attached hereto. and which is
incorporated by reference herein.
(b) The words. "hereof," "herein," "heretnder" and words of similar import when
used in this Agreement shall refei° to this Agreement as a .,Whole and not to any paJ•ticular
provision. of this Agreement;. section, and exhibits. references contained in this Agreement are
references to sections and. exhibits in or to this Agreement unless otherwise specified; and the
term ``including" shall mean ``including without limitation."
(c) Any .agreement, 'instrument or statute defined ~or referred. to herein or in any
instrument or certificate delivered. in connection herewith means .such agreement, instrument or
statute as from time to time inay lie amended, modified or supplemented and includes (in the
case of agreertients or instruments) references to all attachments and eahi~its thereto and
instruments incorporated therein;, and any references to a Person are also to its permitted
successors and assigns.
2. A~reementto Sell and Purchase• Conditions Precedent.
(a) The Seller agrees to sell, and the Purchaser agrees to p~u•chase, on the Closing
Date, for an amount equa .to the Purchase Price, all right, title :and. interest of the Seller in and to
-the "Proposition 1A receivable" as defined in Section 6585(.`g)~ cif the California Goven~nnetlt
Code (the "Proposition '1 A Receivable"), namely, the right- to payment of moneys due or to
become due to the Seller pursuant'to Section 25.5(x)(1){B)(iii) of Article XI]I of.the California
Constitution ..and Section 100.06. of the California. Revenue and. Taxation Code. The Purchase
Price shall. be paid by the Pt~n~chaser to the Seller in two equal cash installnae~nt payments, without
interest (each, an "Installment Payment" and, collectively, the "Instal meet Payments''), on
Janua~y_ f 5, 20 l0; and May. 3, 2010 (each a "Payment Date" and, collectively, the "Payrne_nt
Dates"). T1;~e .Purchaser shall pay the Purchase Price _by wire transferpursuant to wire
instructions provided' by the Seller to the Trustee by e-.mail to john.deleray cL:wellsfargo.com or
by facsimile to 213-b'14-~i55, A tendon: John Deleray. If wire instructions are not provided to
the rhrusfee (or if such. wire instructions are invalid) payment will be made by check mailed to
the Sefier's Principal :Place of Business.
(b) The performance by the Purchaser of its obligations hereunder shall be
conditioned upon:
(i) Transaction Counsel receiving on or before the. date the Bonds are sold
(the." Pricing; Date"), to be held in escrow t-ntil the Closing Date and then
delivered fo the Purchaser on the Closing :Date, the following documents
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duly executed by the Seller or its counsel,;;as applicable: (1) an opinion of
counsel to the Seller dated the Pricing Date in .substantially the form
attached hereto as Exhibit B;l, (2) certificates dated the :Pricing Date in
substantially the :forms attached hereto. as Exhibit Cl and .Exhibit C2,
(3) irrevocable instructions to the Controller dated as of the Closing Date
in substantially the form attached hereto as Exhibit D, (4) this Agreement,
(5) a certified copy of the resolution of the Seller's City Council approving
this Agreement, the transactions contemplated hereby and the documents
attached hereto as exhibits, and (6) an escrow instruction letter in
substantially the form attached hereto as~ExhibitE;
(ii) Transaction. Counsel receiving on or before the Pricing Date, (1) a
bringdown opinion of cou»sel to the Seller dated as of the Closing Date in
substantially the form attached hereto as Exhibit B2, and (2).a bill of sale.
and bringdown certificate of the Seller (the `Bi`ll of Sale") in substantially
the form attached hereto as ,Exhibit C~;, provided that the Purchaser may
waive,~in-its~sole~ discretion, the requirements of Section 2(b)(ii)(1);
(iii) the Purchaser-issuing Bonds in an amount which will be sufficient to pay
the Purchase Price; and
(iv) the receipt by the Purchaser of a certification of the County Auditor
confirming: the, I:n'itial A-nount of the Proposition lA Receivable pursuant
to the Act.
(c) The performance by the Seller of its obligations hereunder shall be
conditioned solely upon the Purchaser's issuance of the Bonds its execution. and delivery of this
Agree~rtent, pursuant to which: it iS legally obligated to pay the. I`hstal merit Payments to the Seller
on the.Payment Dates as set forth in this Agreement, and no ether act or omission on the part of
the .Purchaser or any other party shall excuse the Seller from performing its obligations
hereunder_ Seller specifcalJy disclaims. any right to rescind this Agreement, or to assert that title
to the. Proposition l A Receivable has not passed to the,Purchaser, should Purchaser fail to make.
Installment Payments in the requisite amounts on the Payment `Dates.
Purchase :Price; Conveyance of ProRostion 1'A Receivable and Payment of
Pi~rcfiase Price.
(a)~. U-pon pricing of the Bonds by the Purchaser, the Purchaser will inform the
Se er that it w;i~ll pay the Ptu•chase Price in Installment Payrtlents on the Payment Dates.
(b) In consideration of the Purchaser's agreement to pay and de fiver to the Seller
the Installment Payments on the Payment Dates, the Seller agrees to (i) transfer, grant, ba~rga~in,
sell, assign, convey, set ouer and deliver to the Purchaser, absolutely and not as~collateral
security,, without recourse except as expressly .provided herein, and the Purchaser agrees to
purchase, accept and ~receive;'the Proposition 'I A Receivable, and (ii) assig» to the Purchaser, to
the extent permitted by law, allpresent or firture rights, ~if any, of the: Seller to enforce or cause
the enforcement of. payment. of the Proposition 1 A Receivable pursuant to the Act and other
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applicable law. Such transfer, grant; bargain, sale, :assignment, conveyance, set over and
delivery is hereby expressly stated to be a sale and', pursuant to Section 6588.6(1) of 'the
California Government Code, shall be treated as an absolute sale and transfer of the Proposition
l A Receivable, and not. as a grant of. a security interest by the Sealer to secure a borrowing. This
is the statement referred ~fo in Seetions~"6588.6(b) and (c) ~f the C'atifornia Government Code.
4. Representations and Warranties of the.. Purchaser. 'The Purchaser represents
and warrants to 'the Seller, as of the: date' hereof, as follows;
(a) The Purchaser'is duly organized, valid y existing and in good standing under
the laws of the State of California.
(b) The Purchaser has' fiill power and authority to enter into this Agreement and to
perform its obligations. hereunder and :has duly. authorized such purchase and assignment of the
Proposition 1 A Receivable by the Purchaser by al.l necessary'acton.
(c) Neither the execution and delivery by the: Purchaser of this Agreement, nor
the performance by the Purchaser of'its obligations here~inder; shall conflict with or result in a
breach or default under any of~its organizational documents, any law, rule,~regulation, judgment,
order or decree to which it is subject or any agreement or instrument fo which it is a party.
(d) To the best of t11e .knowledge of the Purchaser; no action, suit, proceeding,
inquiry or investigation; at law or in equity, before or by any court, public board or body, is
pending or threatened in any way against the Purchaser affecting the existence of the Purchaser
or the titles of its commissioners or officers, or reeling to restrain or to enjoin the purchase of
the Proposition lA Receivable: or to direct the application of the proceeds of the purchase
thereof, or in any way contesting or affecting., the validity or .enforceability of any of the
Transaction Documents or any other applicable agreements or any action of the Purchaser
contemplated by any of said documents; or in any way contesting. the powers of the Purchaser or
its authority with. respect to the Transaction Documents to which it is a party or any other
applicable agreement, or any action on the part of the Purchaser contemplated by the Transaction
Documents, or in any way seeking to. enjoin or restrain .the Piu'chascr from purchasing the
:Proposition lA Receivable or which if determined adverse y to Elie Purchaser would have an
adverse effect upon the Pureh,aser's ability to purchase the Proposition 1 A Receivable, nor to the
knowledge of the Purchaser is there any basis therefor.
(e) This Agr_.eement; and its execution, delivery and performance, hereof. have
been duly authorized by it, and this Agreement has been duly executed and delivered by ~it and'
constitutes i s valid and bliding obligation eirf~rceable: agaiiast it in accordance with the terms
hereof, Subject., to the effeef of banlo•~iptcy; insolvency; reorganization, moratorium, fraudulent
conveyance and other simi ar laws relating to or affecting creditors' rights generally or the
application of equitable principles in any proceeding, whether at law or in equity:.
(f) The Purchaser is a separate legal entity, acting solely through its authorized
representatives, .from the Seller, maintaining separate records, books of account, :assets, bank
accounts and funds, which are not and have not been commingled with those ofthe Seller.
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(g) All approvals, consents, authorizations; elections and orders of or filings or
registrations with any governmental authority, board, agency or commission having jurisdiction
which would. constitute a condition precedent to, or the absence of which would adversely affect,
the purchase by the Purchaser of the Proposition lA :Receivable or the performance by the
Purchaser of its obligations under the Transaction Documents to which it is a party and any other
applicable agreements, have .been obtained and are in ful I force and effect.
(h) Insofar as it would materially adversely affect the Purchaser's ability to enter
into, carry out and perform its obligations under any or all of the Transaction Documents to
which it is a party, or consummate the transactions contemplated by the same, the Purchaser is
not in breach. of or default under any applicable constitutional 'provision, law or administrative
regulation of the State of California or the United States. or any applicable judgment or decree or
any loan. agreement, indenture, bond, note, resolution, agreement or other instrument to which it
is a party or to which it or any of its property or assets is otherwise subject, and, to the best of the
knowledge of the Purchaser, no event has occurred and is continuing which with the passage of
time or the giving of notice, or both, would constitute a default or an event of default under any
such instrument, and the. execution and ..delivery by the Purchaser of the transaction Documents
to which it is a party, and compliance by the Purchaser with the provisions thereof, under the
circumstances contemplated thereby, do not and will not canflictwith or constit~rte on the part of
the Purchaser a breach of or default under any agreement or other instrument to which the
Purchaser is a party or by which it is bound or any existing .law, regulation, court order or
consent decree to which the Purchaser is subject.
5. Representations and Warranties of the Seller. The Seller hereby represents
and warrants to the Purchaser, as of the date hereof, as follows:
(a) The Seller his a local agency within the. meaning' of Section 6585(f) of the
California Government Code, with frill power and authority to execute and deliver this
Agreement and to carry out its terms.
(b) The Seller has full power, authority -and legal right to sell and assigm the
Proposition lA Receivable to the Purchaset• and has duly authorized such sale and assignment to
the Purchaser by all necessary action; and the execution, delivery and performance by the Seller
of this Agreement has been duly authorized by the Seller by all necessary action.
(c) This Agreement has been, a~iad as of the Closing Date the Bill of Sale will have
been, daily executed and delivered by the Seller and,. assuming the due authorization., execution
and delivery ,of thisAgreeinent by the }'urchaser, each of this Agreement and the Bill of Sale
constitutes a legal, valid and `binding obligation of the Seller enforceablc.in accordance with its
terms, subject to the effect. of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or affecti-rg creditors' rights generally or the
application ofequitable peinciples in any proceeding, whether at law or in equity.
(d) Ala. approvals, consents, authorizations, elections and orders of or filings or
registrations with any governmental authority, board, agency or commission having jurisdiction
which would constitute a condition precedent to, or the absence ofi which, would adversely affect,
the sale by the Seller of the ;Proposition lA Receivable or the performance by the Seller of its
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obligations under .the Resolution and the ~hransaction Docur~rents to which it is a party and any
other applicable agreements, have been obtained .and: are in firtl force and effect.
(e) Insofar as it would materially adversely affect the Seller's ability to enter into;
carry out and perform its obligations under any or all of the Transaction Documents to which it is
a party; or consummate the transactions contemplated by the san--e, the Seller is not in breach of
or default under any applicable constitutional provision, law or administrative regulation. of the
State of California or the United States or any applicable judgment or decree or any loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which it is a party
or to which it or any of its property or assets is otherwise subject,. and, to the best of the
knowledge of the Seller, no event has occurred and is continuing, which with the passage of time
or the giving of notice, or both, would constitute a default or an event of default under any such
instrument, and the adoption of the Resolution and the execution and delivery by the Seller of the
Transaction Documents to whie}i it is a party; and compliance by the Seller with the provisions
thereof, under the circumstances contemplated thereby, do not and will not conflict with or
constitute on the part of the Seller a breach of or default under any agreement or other instrument
to which the Seller is a party or by which it is bound or any existing law, regulation, court order
or consent decree to which ~tlie Seller is subject.
(f) To the best ofthe knowledge of the Seller,, »o action, suit, proceeding, inqui-y
or investigation, at law or in equity; Uefore or by any court,. public board or body, is pending or
threatened in any way against the Seller affecting the existence of the Seller or the titles of its
City Council members or offcers~to their respective offices, orseeki~ig to restrain onto enjoin
the sale. of the Proposition lA Receivable or to direct the application of the proceeds ofthe sale
thereof, or in any way contesting or affecting the validity or enforceability of any of the
Transaction Documents or any other applicable agreements or any action of the Seller
contemplated ~y any of said documents, or in any way contesting. the powers of the Seller or its
aufhority with respect to the Resolution or the Transaction Documents to which it is a party or
any other applicable agreement, or any action on the part of the Seller contemplated by the
Transaction Documents, or in any way seeking to enjoin or restrain the Seller from selling the
Proposition lA Receivable or which if determined adversely to the Seller would have an adverse
effect upon the Seller's ability to sell the Proposition 1 A Receivable, nor to the knowledge of the
Seller is there any basis therefor.
(g) Prier to the sale of the Proposition lA Receivable to the Purchaser,, the Seller
was the sale owner of the Proposition 1 A -Receivable,~and has, such .right, title and interest.to the
Proposition lA Receivable as provided in the Act.. h'ro~n and after the coiweyance of the
Proposition 1A Receivable by the Seller to Purchaser on the Closing Date; the Seller shawl have
no right, title 'or interest in or to the Proposition IA Receivable. E?~cept.as provided in this
Agreement,. the: Seller has not sold, transferred, assigned, set-over o-° otherwise conveyed any
right, fide or interest of any kind whatsoever in all or any portion of the Proposition. lA
Receivable; nor has the. Seller created, or to the best knowledge of the .Seller permitted the
creation of; any lien, pledge, security interest or any other encumbrance (a "Lien") thereon.
Prior to the sale of the Proposition. 1A Receivable to the Purchaser,.. the Seller-held title to the
Proposition aA Receivable free and clear of any Liens. As of the Closing Date, this Agreement,
together with. -the Bill of Sale; constitutes a valid and absolute sale to the F3uyer of all of the
Seller's right, title and interest in and to the Proposition l A Receivable.
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(h) The Seller actssolely through its aut}iorized~ officers or agents.
(i) The Seller tnantains° records and books of account separate from those of the
Purchaser.
(j) The Seller mairitaiiis its respective assets separately froth the assets of the
Purchaser (including through the ta~ai~tenance of separate bank.-accounts); the Seller's funds and
assets, and records relating thereto, have not been and are not commingled with those of the
Purchaser.
(k) The Seller' principal place of business and chief executive office is located at
I 1 English Street, Petaluma, CA 94952.
('l) The aggregate ~amolmt of~the lnstallment~;Paytnents is reasonably equivalent
value for the Proposition 1 A.Receivable. The Seller acknowledges that the amount payable to or
on behalf of the Purchaser by thee. State with respect to the Proposition. lit Receivable will. be in
excess of the Purchase Price: and the Initial Amount of the Proposition lA Receivable and
confirms that it has no claim to any such excess amount whatsoever:
(m) The Seller. dges not act as ~an agent of the Purchaser in any capacity, but.
instead presents itself to the ~pu>;hc as an entity separate from the Purchaser,
(n) The Seller has: not guaranteed and shall not guarantee the obligafions of the
Purchaser, nor shall it hold itself out or permit itself to be held oert as having agreed. to pay or as
being liable for the debts of the Purchaser; and the Seller has, not received not- shall the Seller
accept any credit or financing from~any Person who is relying upotl the availability of the assets
of the Purchaser in extending such credit or financing. The Seller has,not purchased and shall
not purchase any of the Bonds or any interest therein.
(o) All transactions between or among the ,Seller, on the one hand, and the
Purchaser on the other hand (including, without limitation, transactions governed by contracts for
services and facilities; such. as payroll., purchasing, accounting, legal and personnel services and
office space), wheihea• existing on the date hereof:or entered info after the date hereof, shall be on
terms and .conditions (inc''luding, without limitation, terms relating ,to amounts to be paid
thereu-Zder) which are believed by each such. party thereto to 'be :both fair anal reasonable and
comparab}eto those available on~an arms-length basis froth Persons tivho are not affiliates.
(p) Tlae~ Seller .has not, under the provisions of Section 100.06.(b)~ cif the. California
Revenue and Ta~atioi~ Code, received. a reduction for hardship or~otherwise, nor has it requested,
made arrangements. fir, or' completed a reallocation or exchange with any other local agency, of
the total amount of the ad valorem .property tax revenue reduction allocated to the Seller pursuant
to Si;ction 100.06(a)-cif the~CaliforniaRe~enue and Taxation Code.
6: Covei~a~lts,of the Seller.
(a) Th:e Seller shall not take any action or omit to take any action which adversely
affects 'the interests ~of thePurchaser ~in the Proposition. 1 A Receivable and in the proceeds
thereof. The Seller shall not take any action or omit to take any action that shall adversely affect
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the ability of the Purchaser, -and any assignee of the Purchaser; to receive payments of the
Proposition A `Receivable.
(b) The Seller shall .not take any action or omit., to take any action that would.
impair the validity or effectiveness. of the Act, nor, without. the prior written consent of the
Purchaser or its assignees, agree to any .amendment, modification, termination, waiver or
surrender 9f the terms of the Act, or waive timely. performance- or observance under the Act.
Nothing in this .agreement shall impose a duty on the Seller to seek to enforce the Act or to seek
enforcement thereof by others, or to prevent others from modifying, terminating, discharging or
impairing the validity or.effectiveness of the Act.
(c) Upon request of the Purchaser or its assignee; (i) the .Seller shall execute and
deliver such further instruments and do such further acts. (including being named as a plaintiff in
an appropriate proceeding) as may be reasonably necessary or proper to carry out more
effectively the purposes and intent of this Agreement and the Act, and (ii) the Seller shall take all
actions necessary to preserve, maintain and protect the title of the Purchaser to the Proposition
lA Receivable.
(d) On or before the Closing Date, the Seller shall send (or cause to be sent) an -
irrevocable instruction to the Controller pursuant to Section 6588.6(c) of California Government
Code to cause the Controller to disburse all payments of the Proposition lA Receivable to the
Trustee, together with .notice of the. sale of .the Proposition 1 A Receivable to the Purchaser and
the assignment of all or a portion .of such assets by the Purchaser to the Trustee. Such notice and
instructions shall be in the form of Exhibit D hereto. The Seller shall not take any action to
revoke or which would have the: effect of revoking, in whole or in part, such instructions to,the
Controller. Upon. sending such irrevocable instruction, the Seller shall have relinquished and
waived any control over the Proposition lA Receivable, any authority to collect the Proposition
1 A Receivable, .and any :power to revoke or amend the instructions to the Controller
contemplated by this paragraph: Except as provided in Section 2(c) of this Agreement, the Seller
shall not rescind, amend or modify the instruction described in -the first sentence of this
paragraph. The Seller shall cooperate with the -Purchaser or its assignee in giving .instructions to
the Controller if the Purchaser or its assignee transfers the Proposition. lA Receivable. In the
event that the Seller receives any pi`oceeds of the Proposition : A Receivable, the Seller shall.
hold the same in trust for he benefit.. oPthe Purchaser and the; Trustee and each Credit .Enhancer,
as assignees of the'Purchaser, and shall promptly remit the same to'the Trustee.
(e) Tlie Seller hereby covenants and agrees that. it will not at ally time. institute
against the Purchaser;. or join in instituting against the .Purchaser, any bankruptcy; reorganization,
arrangement, insolvency,. liquidation, ~or similar proceeding under any United States or state
bankruptcy or imilar law.
(`f) The financial statements and books and records of the Seller prepared after the
Closing Date shall reflect the separate existence of the Purchaser and the sale to the Purchaser of
the .Proposition. 1 A Receivable.
(g) The=Seller shall treat the. sale of the Proposition 1 A Receivable as a sale for
regulatory and, a~ceou-iting purposes.
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(li} From and after the date of this Agreement,, the Seller shall not sell, transfer,
assign, set over or otherwise convey any right, title or .interest of -.any kind whatsoever in all or
any portion ofthe Proposition IA Receivable, nor shall the Seller create, or to the knowledge of
the Seller permit the creation of, any Lien thereon.
7. The Purchaser's Acknowledgment. The Purchaser acknowledges that the
Proposition lA Receivable is not a debt or liability of the .Seller, and that the Proposition lA
Receivable is payable solely by the State from the funds of the State provided. therefor.
Consequently, neither the taxing power of the, Seller, nor the Ii-11 faith. and. credit thereof is
pledged to the payment of the Proposition. lA Receivable. No representation is made by the
Seller concerning the obligation or abi ity of the State to make any payment of the Proposition
lA Receivable pursuant to Section 1.00.06 of the Revenue and Taxation Code and. Section 25.5
of Article XIII of the Caaiforriia Constitution, nor is any representation .made with respect to the
ability of the State to enact any change in the law applicable to "the Transaction Documents
(including. without limitation Section 100.06 of the Revenue and Taxation Code or Section
6588.6 of the Government Code), The P~u•chaser acknowledges that the Seller has no obligation
with respect to any offering document or disclosure related to the Bonds.
8. Notices of Breach.
(a) Upon. discovery by the Seller or the Purchaser that the Seller or Purchaser has
breached any of its covenants or tfiat any of the representations or warranties of the Seller or the
Purchaser are materially false or misleading, in a manner that materially and adversely affects
the value of the Proposition lA Receivable or the Purchase Price thereof, the discovering party
shall :give prompt written. notice thereof to the other party and to the Trustee, as assignee of the
Purchaser, who shall, pursuant to the Indenture, promptly thereafter notify each Credit Enhancer
and the Rating Agencies.
(b) The Seller shall .not 'be liable to the Purchaser, the Trustee, the holders of the
Bonds, or any Credit Enhancer l:or any loss, cost or expense resulting from the failure of the
Trustee, `any Credit Enhancer or the Purchaser to promptly notify the Seller upon the discovery
by an authorized officer of the Trustee, any Credit Enhancer or the Purchaser of a breach of any
covenantor any materially false or misleading representation or tiyarranty contained herein.
9. Liability of Seller; .Indemnification. The Sellershall be liable in accordance
herewith only to the extent of the obligations specifically undertaken by the. Seller under this.
Agreement. ~['he Sel,ler shal~~l.'indemnify, .defend a.nd hold harmless the Purchaser, the Trustee and
each Credit Enhancer, as assignees of the Purchaser, and their respective. officers, directors,
employees and agents from.. and against any and all costs, expenses, losses, claims, damages and
liabilities to the extent: that such cost, expense, loss, claim, damage or liahlity. arose out of, or
was imposed upon any such Person by the Seller's breach of any of 'its covenants contained
herein or any materially false or misleading representation or warranty of the Seller contained
herein., Notwithstanding anything to the contrary herein, the Seller shall have no liability for the
payine~nt ofthe principal of or interest on the Bonds issued by the Purchaser.
Z. ~--
10.. Limitation. on Liability.
(a) The Seller and:any officer or employee or agent of the Seller may rely in good
faith on the advice. o#: counsel or on anydocument of~any kind, prima facie properly executed and
submitted by 'any Person respecting any matters arising hereunder. The Seller shall not be under
any obligation to appear in, prosecute or defend any legal action regarding the Act that is
unrelated to its specific obligations under this Agreement.
(b) No officer or employee of the Seller .shall have any . liability for the
representations, warranties, covenants,. agreements or other obligations ofthe Seller hereunder or
in any of the certificates, notices or agreements delivered. pursuant hereto, as to all of which
recourse shall be had solely to the assets of the Seller.
1.1. The .Seller's Acknowled ment. The Seller'.here~y agrees and .acknowledges
that the Purchaser intends to' assign and grant a security interest. in all or a ~portion_of (a) its rights
hereunder and (b) the Proposition lA Receivable, to the Trustee and each Credit Enhancer
pursuant to the Indenture.. `The. Seller further agrees and acknowlledges that the Trustee, the
holders of the Bonds, and each Credit ,Enhancer have relied .and shawl continue to rely upon each
of the foregoing representations, warranties and covenants, and further agrees that such Persons
are entitled so to rely thereon. Each ofthe above .representations,, warranties and covenants shall
survive any assignment and grant of a security interest in all or~~a portion of this Agreement or the
Proposition lA Receivable to the Trustee and each Credit Enhanserand shaYl continue in fiill
force and effect, notwithstanding any subsequent termination .of this Agreement and the other
Transaction Documents. The above representations, warranties and covenants shall inure to the
benefit of the Trustee and. each. Credit. Enhancer.
12. Notices. All demands upon or, :notices and.comnatmicatons to, the Seller, the
Purchaser,. the Trustee or the .Ratii~rg Agencies under this ..Agreement shall be in writing,
personally delivered or mailed by ceitif ed mail, return receipt..requested, to such party at the
appropriate notice address, and shall be deemed to have been dily:given upon receipt.
I3. Amendments. This .Agreement may be amended by the Seller and the
Purchaser, wi h (a) the consent of the Trustee, (b) the consent of each. Credit. Enhancer, and (c) a
Rating. Agency Confirmation, 'but without the consent of any of thehplders of the Bonds, for the.
purpose .of adding any provisions to or changing in. any manner or eliminating: any of. the
provisions of this Agreement:
Promptly after the execution of any such amendment, the Purchaser shall furnish
written °nofification of the substance of such amendment to the Trustee and to the Rating
Agencies.
1-4.; Successors and .Assigns. This Agreement shall be binding upon and inure to
the benefit of the Seller, the Purchaser and their respective successors -and permitted assigns.
The Seller play not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent ofthe Purchaser. Except as specified herein, the. Purchaser may
not assign or. ti~aiister ariy of its rights or obligations under this' Agreement without the prior
written consent of the Seller.
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1S. Third Party Ri~.,hts. The Trustee and each Credit F,nhancer are express and.
intended third party beneficiaries under this, Agreement. Nothing expressed in or to be implied
from this Agreement is intended to give; or shall be construed to give, a»y Person, other than-the
parties hereto, the Trustee, and each Credit Enhancer, and their permitted successors and assigns
hereunder, any benefit or legal or equitable right, remedy or claim under or by virtue of this
Agreement or under or by virtue of any provision herein.
16. Partial nvalidity. If at any time any provision of this Agreement is or
becomes illegal, invalid or~uneiiforceable in any respect~under the law ofany jurisdiction, neither
the legality, validity or enforceability of the remaining provisions of this Agreement nor the
legality, validity or enforceability of such provision. under the law of any other jurisdiction. shall
in any way be affected or impaired thereby.
17. Counterparts. This ;Agreement may be executed in any number of identical
counterparts, any set of which signed' by all the parties hereto shall be deemed to constitute a
complete, executed original for all purposes.
18. Entire Agreement. This Agreement sets forth the entire understanding and
agreement of the parties with respect to the subject matter hereof and supersedes any and all oral
or written agreements or understandings between the parties as to the subject matter hereof.
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l9. ~Governint Law, This Agreement shah. be ggverned by and construed in
accordance with the laws of the State of California.
IN WITN;GSS WHEREOF, the Seller and the Purchaser have. caused this
Agreement to be duly executed as of the .date first written above.
C]TY OF PETALUNIA, as Seller
By:
Authorized Officer
CALIFORNIA STATEWIDE COMIVIUNITICS
DEVELOPMENT'AUTH:ORITY, as Purchaser
By:
Authorized Signatory
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EXIII~IT A
~E>F][NITI®NS
.For all purposes of this Agreement, except as otherwise expressly provided herein
or unless the context otherwise .requires, capitalized terms not otherwise defined herein shall
have the meanings set forth below.
"Act" means Chapter 14XXXX of the California Statutes of 2009 (Assembly Bill.
No. 15), as amended.
"Bill of Sale" has the meaning given to that term in~Seetion 2(b)(ii) hereof.
"Closing Date" means the date on which the. Bonds are issued. The Closing Date
is expected to be November 19; 2009, but the Purchaser may change the Closing Date by
providing e-mail notification to thaas~ci.petaluma.ca.us not later than. one day prior to the
Closing~Date.
"Controller" means they Controller of the State.
"County Auditor" ti~eans the auditor or auditor-controller of the county within
which the Seller is located..
"Credit Enhancer" means any mtmicipal bond insurance company, bank or other
~,, . ~ financial institution or organization which is performing ii~° all material respects its obligations
under any Credit Support- Instrument for some or all of the Bonds:
"Credit Support Instrument" means a policy of insurance, a letter of credit, a
stand-by purchase .agreeme~~t, a revolving credit agreement or other credit arrangement pursuant
to which a Credit.Enhancer provides credit or liquidity support with respect to the payment of
interest, principal or purchase price of the Bonds.
".initial Amount" means,. with respect to the. Proposition lA Receivable, the
amount of property tax revenue reallocated away from the Seller pursuant to the provisions of
Section 100.06 of the Revenue .and Taxation Code, as certified by ,the County Auditor pursuant
to the Act.
"installment Payments" have the meaning set forth in Section 2(a);:
"Paynient`Dates"have themeaning set forth in Section 2{a).
"Pricing Date" means the date on which the Bonds arse sold,,, The I'r•icing :Date is
expected o be Ngvemb'er 1'0,,2009, but the Purchaser ,may change the Pricing Date by providing
e-mail.notif cation to ~thaas c~,ci.pe~taluma.ea.us nc~t laterthan one• day prior to the Pricing Date,
"Principal Place of Business" means, with respect to the Seller, the location of the
Seller's principal place of business and chief executive office located at 1~1 Etaglish Street,
Petaluirra, CA Q~1952.
A-1
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"Proposition l A Receivable" has the meaning set forth in Section 2(a).
"Purchase Price" means an amount equal to the Initial Amount.
"Rating Agency" means any nationally recognized rating agency then providing
or maintaining a rating on the :Bonds at the request of the Purchaser.
``Rating Agency Confirmation" means written confirmation. from each Rating
Agency that any proposed action will not, in and of itself, cause the Rating Agency to lower,
suspend or withdraw the rating then assigned by such Rating Agency to any Bonds.
"Resolution" means the resolution adopted by the City Council approving the sale
of the Proposition. lA Receivable.
"State" means the State of California..
"Transaction Counsel" means Orrick, Herrington & .Sutcliffe LLP.
"Transaction Documents" mean this Agreement, the Bill of Sale, the Indenture,
the Bonds and the Irrevocable Instructions For Disbursement of Proposition lA Receivable of
City of Petaluma, dated as of the Closing. Date.
A-2
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EX1[~IBI'1[' B1
>~®
Dated: Pricing Date
California Statewide Communities Development Authority
Sacramento, California.
Wells Fargo Bank, Nationaa Association
Los Angeles, California
Re: Sale of Proposition l A Receivable
Ladies & Gentlemen:
[I ;have/This Office has] acted as counsel for the City of Petaluma (the "Seller") in
connection with. the. adoption of that certain resolution (the "Resolution") of the City Council. of
the Seller (the `'Governing Body") pursuant to which the .Seller authorized the sale to the
California Statewide Coinmunities Development Authority (ihe "Purchaser") of the Seller's
"Proposition lA Receivable", as defined in and pursuant to the Purchase and Sale Agreement
dated as of November 1, 20p9 (the "Sale Agreement") between the Seller and the Purchaser. In
connection with these transactions, the Seller has issued certain Irrevocable .Instructions .For
Disbursement of the Seller's Proposition 1 A Receivable to the Controller of the State of
California (the "Disbursement [nst-•uctions") and a. Bill of Sale and Bringdown Certificate of the
Seller (the ":Bill of Sale" and, c~llectively_ with the Sale Agreement and the Disbursement
lnstructions, the "Seller Documents").
Unless the contest otherwise requires,. capitalized Germs used but not otherwise
defined herein shall have the meanings given to such terms in the Sale Agreement. [I/We] have
examitred and are fam'iliah `with the Seller Documents and with those documents ~~elating to the
existence; organization, and operation of the Seller, the adoption of the 13.esolution, and the
execution of-the Seller .Documents, and have satisfied ourselves as to such other matters as [I/we]
deem necessary in girder to render the following opinions. As to paragraphs nu~i~bered 3 and_~1
below, '[l/we] have relied as to factual matters on the representations and warranties of the Seller
contained in the Sale Agreement.
Based upon the foregoing, and subject to the limi ations and qualifications set
forth hereiai,.[I/we] are of the opinion. that:
BI-I
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1. The Seller is a local agency, with~in~ the lneaiiing of~ Section 6585(f) of the
California Governtne.nt Code. The Governing Body is the~governng body of the Seller.
2. The Resolution was duly- adopted at. a meeting. of'the Governing Body,
which was called and heldpursuant to. law and with all pull~ic notice required by law, and at
which a quorum. was present' and acting throughout, and the Resolution. is in full force and effect
and has not been modified, amended or rescinded since the date of its adoption.
~. ~ To the best of ~[rny/our] knowledge, no action, suit, proceeding, inquiry or
investigation, at law or in equity, .before or by any court, ,public board- or body, is pending or
threatened in any way against the .Seller (i) affecting the existence of the ~Setler or the titles of its
Governing Body members or. officers to their respective offices.~(ii) seeking to restrain or to
enjoin the sale of the Proposition. A ..Receivable or to direct the application of the proceeds of
the sale thereof, or materially adversely affecting the sale of the Proposition 1 A Receivable; (iii)
in any way contesting or affecting fhe validity or enforceability of the Resolution, Seller
Documents or any other applicable agreements or any action of the Seller contemplated by any
of said documents; or (iv) in any way contesting the powers of the Seller or its authority with
respect to the Resolution or the Seller Documents or any other applicable agreement, or any
action on the part of the Seller contemplated by any of said documents.
~}. To the; liest of [my/oiir] .knowledge, prior t~ the sale of the Proposition 'I A
Receivable to the'Purchaser, t}ie Seller had not sold, transferred, assigned, set over or otherwise
conveyed any right, title or interest of any kind whatsoever in .all or any portion of the :Seller's
Proposition lA Receivable, nor had the Seller created, or permitted the creation of, any Lien
thereon.
S. ~ The Seller has duly authorized and. executed the Seller Documents and,
assuming'the dice authorization execution and delivery of the-Sale Agreement by the Purchaser,
each. Seller Document will be legal, valid aid bii~ding~ against the Seller and enforceable against
the Seller in accordance with its, terms, except as enforcement may be .limited. by bankruptcy;
insolvency, reorganization, fraudulent conveyance; moratorium qr laws relating to or affecting
creditors' rights, and the application of equitable principles and'the:exercise of judicial discretion
in appropriate areas. '
No opinicm is expressed concerning the obligation or' abili y of the State of
Calif~rria to make .any payment o{'the Prt~position ] A Receivable pursuant to Section 100.06 of
the Revenue and Taxation Code and' Section 25.5 of Arfiele XIIt of the California Constitution,
nor is airy opinion e:~pressed with. respect to the ability of the State to enact any change in the
law applicable to :the; Seller Documents {including, without limitation, Section. 1.00.06 of the
Revenue and Taxation Code or Section 6588.6 of the Govermnent Code). liurtl-ermore, [I/we]
express no .opinion as to the- value of the Proposition 1 A Receivable ;or as to any legal or
equitable remedies that may be .available to any person should the Proposition lA R.eceivable
have little or no value. No opinion is expressed with respect to the sale of Bonds by the
Purchaser.
B 1-?
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The legal opinion set forth herein is intended for the information solely of the
addressees hereof and for the purposes contemplated by the Sale Agreement. The addressees
may not rely on it ~in connection with any transactions other than those described herein, and it is
not to be relied upon by any other person or entity, or for any other purpose, or quoted as a whole
or in part, or otherwise referred to, in any document, or to be filed with any governmental or
administrative agency other than the Purchaser or with any other person or entity for any purpose
without [my/our] prior written consent. In addition to the addressees hereof, each Credit
Enhancer and the underwriters of the Bonds .may rely upon this legal opinion as if it were
addressed to them. [I/We] do not undertake to advise you. of~n.atters that may come to [my/our]
attention subsequent to the date hereof that may affect the opinions expressed. herein.
Very truly yours,
By:
Seller's Counsel
Bl-~
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EX1H1{BI')<' B2
>~®
C,I~Y ®F ~E'~1~L~Tl~A
Dated: Closing Date
California. Statewide Communities. Development Authority
Sacramento, California
Wells Faigo Bank, National Association
Los Angeles, California
Re: . Sale of Proposition l A ;Receivable (Brin~dowrr OpinionL
Ladies R ,Gentlemen:
Pursuant to that certain Purchase and Sale Agreement- dated as of November 1,
2009 (the "Sale Agreement") between the City of Petaluma. '(the "Seller") and the California
Statewide Communities Development Authority (the "Purchaser"), this Office delivered an
opinion (the ``Opinion") dated the. Pricing Date as counsel for the Seller in connection with the
sale of the Seller's. Proposition 1 A Receivable (as defined in the Sale Agreement), the execution
of documents related thereto and certain other related matters.
Capitalized ,teens used but not defined herein shall :have the meanings given to
such terms in the Sale Agreement.
I confirm that yoti may continue to rely upon the Opinion as if it were dated as of
the date hereof. Each Credit Enhancer and the underwriters of the Bonds may rely upo-1 this
1e~al opinion as if it were add~re~ssed to them. Phis letter is delivered to you pursuant~to Section
2(b)(ii)(l.) of the Sale Agreement.
Very truly yours,
Bv:
E32-1
Seller's Counsel
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EXIFIIBIT C1
CI,>E;R1K'S CE RT><F><aCA'1['E
CERT1FlCATE OF TI-IE
CITY CLERK OF
C1TY OF PETALUMA, CALIFORNIA
Dated: Pricing Date
The undersigned City Clerk of the City of Petaluma (the ".Seher"), a local agency of the
State of California within the meaning of Section 6585(f) of the California. Government Code,
does hereby certify that the foregoing is a firll, true and: correct` copy of Resolution No.
duly adopted at a„regular meeting of the City .Council of said Seller duly and
legally held at the regular meeting place thereof on the day of ,
2009, of which meeting all of the members of said City Council had due notice and at which a
quorum was present and acting throughout, and. that at said meeting said. resolution was adopted
by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
I do hereby further ..certify that_I have carefully compared the same with the original
minutes of said meeting on file:-and of record in my office and that said resolution is a full, true
and correct copy of the original resolution adopted at .said aneeti'ng: and entered in said minutes
and that. said. resolution. has not been amended,. modified or rescinded since the date of its
adoption and the same is now'in full force and effect.
do :hereby further certify that an agenda of'sad meeting was posted at least. 72 hours
before said meeting,at a location in the.. City of.Petaluma, California freely accessible to members
of the public, and a brief genera description of said.. resolution~appeared on said agenda.
Capitalized, ;teems L,sed but. not. defined herein sha l have the meanings given to such
terms'in the Purchase and Sa e Agreement, dated as of November 1, 2009; between the Seller
and the California Statewide Communities Development Auth~r•ity.
W11`NESS by my hand as of the P"rising Date.
B v'
City C erk.ofthe City of 'etalurna,
California.
Cl-l
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EX~IIBIT~ C2
SELLER CERTIF><CA'1<'E
SELLER CERT>(F><CA')i'E
Dated: Pricing :Date
We, the undersigned officers oft}ie City of Petaluma. (the "Seller"), a local agency
of the State of California within the meaning of Section 65:85(f) of the California Government
Code, holding the respective offices herein below set,opposite our signatures, do hereby certify
that on the date hereof the following documents {the "Seller Transaction Documents") were
officially executed and delivered by the Authorized Officer or Officers whose names appear on
the executed copies thereof,, to wit:
Document
i . Purchase and Sale Agreement; dated as of November 1', 200 (the
"Sale Agreement"), between the Seller and the California:
Statewide Communities Development Authority (thee"Purchaser").
In•evocable Instructions. For Disbursement of Seder's Proposition.
1 A Receivable to the Controller of the State of California,. dated
the Closing Date.
3. Bill of Sale, dated the Closing Date.
Capitalized terms used herein and not defied herein shall .have the meaning given
such terms in the Sale Agreement.
We further certify as follows:
1. At the `time of signing .the: Seller Transaction. Documents and the other documents and
opi~iions related whereto, we held said offices, respectively; and we now hold the same.
The representafigns and. warranties of the Seller contained in the Seller Transaction
Documents,are true: and correct as of the date hereof in all material respects.
3. The City Council duly adopted its resolution (the "Resolution") approving the sale: of the
Seller's Proposition 1 A :Receivable at a meeting of the City Council which was duly called
a~~~d held pursuant to 'law with all public notice required by law and a~t whi¢~h a quorum was
,present. and. acting when the Resolution was adopted, and such Resolution is in full force and
effect and has not been amended, modified, supplemented or rescinded.
C2-1
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Name Official Title Signature
Tames Haas, Interim Finance Director
Kate Lloyd, Finance Manager
Sue Simmons, Commercial Services Manager
I HEREBY CERTIFY that the signatures of the officers named above are
genuine.
Dated: Pricing Date
By:
C2-2
City Clerk. of the City of Petaluma,
California.
l`'
_ EXIIII~IT C3
SILL OF SALE.AND B12ING>DOW1~T CEItT1(I+'ICATIE
BILL OF SALE AND BRINGDOWN CERTIFICATE
Pursuant to terms and conditions of the Purchase anal Sale Agreement (the "Sale
Agreement"), dated as of November 1, 2009, between the t-ndersigned (the "Seller") and the
California Statewide Communities Development Authority , (the ``Purchaser"), and in
consideration of the obligation of fhe Purchaser to pay and deliver to the Seller the Purchase
Price ,(as defined in the Sale Agreement), in two equal installment payments to be made on
January 15, 20.10; and May. ~, 201:0 (collectively, the "Payment Dates"), the Seller does hereby
(a) transfer, grant, bargain, sell,. assign,. convey, set over and deliver to the Purchaser, absolutely
and not as .collateral security, without recourse except as expressly provided in the .Sale
Agreement, the Proposition lA Receivable as defined in the Sale Agreement (the "Proposition
1A Receivable"), and (b) assign to the, Purchaser, to the extent'permfted by law (as to which no
representation is made), ail present-or future rights, if any, of the Sel er to enforce or cause the
enforcement of payment of the Proposition lA Receivable pursuant to the Act and other
applicable law. Such. transfer,, grant, bargain, sale, assignment, conveyance,, set over and
delivery is hereby expressly stated, to be a sale and, pursuant to Section. 6588.6(b) of the
California. Government Code, shall be treated as an absolute "sale and transfer of the Proposition
lA Receivable, and not as a .grant. of'a security interest by the Seller to secure a borrowing.
Seller specifical y disclaims any right. to rescind the Agreement;,. or to assert that title to the
Proposition 7 A Receivable has not- passed to the Purchaser, 'should Purchaser fail to make. the
installment payments in the reduisite amounts on the Payment.Dates.
The Seller hereby certifies that the representations and warranties of the Seller set
forth in-the Certificate of theCity Clerk dated the Pricing Date, fhe Seller Certif cate dated dated
the Pricing .Date and in the Transaction Documents to which the Seller is.a party.are true and
correct. in all material respects as of the date hereof (eseept for such representations and
warranties made as of a specified. date, which are."true and correct as of such date). Capita ized
terms used. but not defined herein shall have the meanings given to such terms in the Sale
Agreement.
Dated: Closing; Date
CITY OF PE"1'ALUMA
B}~:.
Authorized Officer
C3- l
~S
IEXIFIII3>(T D
IR12I/VOCAI3I.>E INSTR><JC~'IONS T® C®N'I'RDLL1rJI2.
[RREVOCABLE INSTRUCTIONS rOR DISBURSEMENT
OF PROPOSITION lA REC`EIVABLE OF
CITY OF PETALUMA
Dated: Closing Date
Office of the Cor1h•oller
State of California
P.O. Box 942850
Sacramento, California 942.50-5872
Re: Notice of Sale ofPr-oposition lA Receivable by the City of Petaluma and
Wiring Instructions Infot7nation Form
Dear Sir or Madam:
Pursuant to Section. 6588.6(c) of the -California Government Code,. City of
Petaluma (the "Seller'') hereb~~ notifies .you of the sale by Seller,, effective as of the date of these
instructions written above, of .all right; title and interest of the' Seller in and to the ``Proposition
lA Receivable" as defned in Secfi~n 6~8~(g) of the- California Government Code (the
"Proposi ion 7 A Receivable"), namely, the right to payment of moneys .due or to become due to
the Sellerpursuant to Section 25.5'(.a)(T)(B)(iii) of Article XIIIof~the~California Constit~rtion and
Section 100.06 of the California Revenge and Taxation Code.
By resolution, the Seller's City Council authorized. the sale of the .Proposition. l A
Receivable to the California Statewide Communities Development Authority (the "Purchaser")
pursuant to a I'urehase and 'Sale Agreement, dated as of November 1, 2009 (the "Purchase and
Sale Agreement") and a Bill of Sale; dated the Closing Date (as defied in the Purchase and Sale
Agreement). The Proposition lA Receivable has been pledged. and :assigned by the Purchaser
pursuant to an Indenture, dated as of November 1, 2009 (the "Indenture") between the Purchaser
and We11s Fargo $anl, National Association, as "Trustee (the "Truustee").
The Seller .hereby irrevocably requests and directs that, commencing as of the
date: of~these~ iitstrtiictions written above, all paymea~~ts of the Proposition IA Receivable (and
documentation related: thereto) be made directly to Wells Fargo Ba ik, National_flssocation, as
'i~rustee; ire accordance with the wire instructions and bank. routing information set forth below.
Please: note. tliut the sale of the Proposition: lt4 Receivrrhle by tfie Seller is
irrevocable antif tlint: ;(i) .the seller leas tto power to .revoke. or nnnennd these inrstrirctdvnts at crn~y
tune; (i~) the Purchaser si~r~~ll have ?lte pox~~er fo revoke or rrmerul tli.ese intstructionrs only if
tfrere tree no n°totes~..of ~tlte Purchaser orttstartdirr~ untnler tla~ Lttlenitirre rxrtd the Intdentftrre hers
heerr clisclthrl;ed; tzrrtl,(iii) so Irin~r as theLtdenture bets snot heerr clisclrarl;ed, these inrstructionts
cantnrot he revciketl ter ant~ntleil bj~ the Purchaser rvitlrout the contsenrt of the Ti•trstee. Should
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tlce Pccrchuser; ;ho»~ever, deliver a -vrittecc notice to the Offce of the Cotztrvller stating that:
(u) the Seller failed Co meet tlce reguirentents set forth in tlce Pccrchase: and Sale Agreencertt;
(h) the Burcllaser Itas not wai+1ed such regreirerrrents; and (c) the Purchaser /arcs not purchased
tke Proposition IA Receivable as a result of the circumstances described in (a) and (b) above,
t/cen these instructions shall he automatically rescinded and flee Seller shall again be entitled
to receive all payment ~f mo~reys due car to become due to the Seller pursuant to Section
25.5(a)(I)(B)(iii) of Article XIII of tfce California Constitution and Section 100.06 ~f the
California Revenue rmd Tcrx:ation Code.
Bank Name: Wells Fargo Bank, N.A.
Bank ABA Routing #: ~ 12100024$
Bank Account #: 0001038377
Bank Account Name: Corporate.Trust Clearing
Further Credit To: CSCDA Proposition lA Bonds
Bank flddress: .707 Wilshire Blvd., 17th Floor
MAC E2818-176
Los Angeles, CA 90017
Bank Telephone #: (2:13) 614-3353
Bank Contact Person: Robert Schneider
Please do not hesitate to call the undersigned ifyou have any questions regarding
this transaction. Thankyou for your assistance in this matter.
Very truly yours,
ey:
CITY OF PCTALUMA
Authorized Officer
D-2
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EXIII>gI'><' E
>ES'CI2~W INS`I'ItTTCTI®N IJ1ET'><'EI~
.ESCROW INSTRUCTION LETTER
2009
California Statewide Communities Development Authority
1100 K Street
Sacramento, CA 95$14
Re: Proposition 1~A .Receivable Financin
Dear Sia• or Madam:
The City of Petaluma (the "Seller") hereby notifies you of its agreement to
participate in the Ci~lifornia Statetivide Communities Development Authority Proposition lA
Receivable Financing..By adoption of:a resohrtion (the "Resol,ution") authorizing the sale of its
Proposition lA Receivable, the. Seller's City Council has agreed to sell to the California
Statewide Communities `Development Authority (the "Purchaser"), for a purchase price that
meets the conditions set forth in the Resolution, all of its right, title and interest in the
Proposition 1 A Receivable..
Enclosed Herewith are. the following documents which have been duly approved
and executed by the Seller and wh;ieh are to be held in escrow by Orrick, I-lerrington &
Sutcliffe LLP, as transaction counsel (`--`Transaction Counsel"), a's instructed below:
1. certf ed ccipy ~of the Resolution, together wifh a certificate of the City Clerk,
dated the :Pricing Date;
2. the Seller Certificate, dated the Pricing. Date;
3. the Opinion bf Seller's Counsel, dated the Pricing I~nte;
4. the Opinion of Seller's Counsel (hringdown opinion), dateel the Closing Date;
5. thePui-chase and Sale.Agreement, dated as of November 1, 2009;
6. the:Bill ~of~Sale and Bringdown Certi£cate, dated the Closing lDa~te; and
7. the-Irrevocable lnstructions to Controller,. dated the ClosingDate.
The. foregoing documents are to be held in escroav by Transaction Counsel and
shall be delivered on the Closing Date (as defined in the Purchase and Sale Agreement),
provided that such Closing Date occurs on or before December 31, 2009.
E-l
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Should (i) the Closing Date not occur on or berfore December 3 , 2009, or (ii)
Transaction Counsel receive prior to the Closing Date written notification from. Seller or Seller's
Counsel stating, respectively and in good faith, that the representations made in the Seller's
Certificate are not true'and accurate, or the opinions set forth in the Opinion of Seller's Counsel
are not valid, in each case as of the Closing Date and provided that the :Purchaser may, in its sole
discretion, choose to waive receipt of such representations or opinions, then this, agreement shall
terminate and Transaction Counsel shall destroy all of the enclosed documents.
Very truly yours,
CITY ®1F PETAI.;iJ1VIA
By:
Pnclosures
cc: Orrick, Herrington & Sutcliffe LLP
E-2
Authorized Off cer
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L PROPOSITION 1A SECURITIZATION FAQ
IL OPTIONS FOR OPTING AUT OF T-HE PROPOSITION 1A SECURITIZATION FAQ..
.III. PROPOSITION 1A GENERAL FAQ .
I
PI~O.POSIT'IOIV 1A S.ECUR~ITIZA`I'ION
FIZEQLIENTLY 1~SI~E'D QUES1'I`®NS
Q: What is Proposi ion 1A securitization?
A: On July 28, 2009; the California legislature and Governor Arnold Schwarzenegger
passed the state budget and approved a provision allowing the state to borrow 8
percent of the amount of'property tax revenue apportioned.tq cities, counties and
special•districts. Under the provision, the state will. be required to repay those
obligations by June 30, 2013.
The provision alsp created.an option for California local public~agencies to relieve.the
burden of loaning th'estate~property taxrevenues. Tle provision, called Proposition 1A
securitization, authorizes the Galifor.nia Statewide Corninunties Development
Authority ("California Communities") to purchase the receivable due to local.. agencies
from the State.
Q: Who is the. Calfor..nia Statewide. Communities Development Authority?
A: T.he Californa:Statewide Communities; Development Authority is.a joint'powers
authority ("JPA"] sponsored by the Califor-nia State Association of Counties (''CSAC")
and the League of California Cities ("League"). California Communities was created by
CSAC and the:~League in 1988 to enable local goyernrnent and eligible private entities
aecess~to low-cost, financing through a variety of pooled and stand-alone. finance
programs.
Q: How does the P'rop:osition lA securitization work?
1
1
5
7
'7 v
A: The legislation for'the: Proposition 1A securitization authorizes cities, counties, and
special districts to sell-their state repayment.obligations to California Communities. In
a simultaneous transaction, California Communiteswill issue bonds and remitthe cash
proceeds to the participatinglocal public agencies. Bondholders will receive their
repayment from the state at a later date. The Legislation provides that local agencies
participating in th'e securitization program will receive 100% of their respective
Proposition 1A receivables.
Q: ,Do I need to become a member of California Communities to participate in the
program?
A: No: All public agencies that are,subject to the property tax;dversion under Proposition
1A are eligible to participate in the program without having to join the, California
Communities JPA.
Q: Is securitization voluntary? What if our local agency chooses°not to securitize?
A: Yes, this is a voluntary program. Public agencies that,do not participate in the
Proposition 1A securitization Program can expect to receive repayment plus interest
from the state for its obligations by June 30, ZO.13. The interest rate to be paid by the
state to those local public agencies that do not securitize has-been setby the Director of
Finance at 2.0%.
Q: How much-will it cost our local;agency to participate in the Proposition 1A
securitization Program?
A: All costs of issuance and interest expense will bepaid by the state. This allows agencies
to receive 100%` of their receivables. Some agencies. may-incur legal costs if they use an
outside attorneyfor normal egal services.
Q: `If our local agency securities, will we still get the repayment interest from the
state?
A: No. In the case of securitization; the state will pay thernterest due to bondholders and
issuance costs associated with the transaction. Onlyagencies that do not securitize will
recei~e'interest from the state in 2013.
Q: If my local:agency participates in the securitization program, when can my
agency expect to receive payment?
Ac Depending upon timing of°enactment of cleanup legislation in the California legislature,
Gali.fornia Communities is targeting completion ofthe. securitizationtransactiomto
occur in November~or early December, 200.9, which would.resultin 50% ofthe payment
to participating,local public agencies on January 15, 201Q and 50% on May 3, 2,010.
Should the 1eegislature not pass the anticipated egislative amendments,: California
Communities' next,opportunity to securitize will likely be March, 2.010.
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Q: Will our local agency incur any liability by participating in the program?
A: No. The bonds issued by California Communities are notobligations of any of the local
agencies that participate in the securitization program. The California Communities
joint powers agreement expresslyprovides that California Communities is an entity
separate;and apart from the pal-tieipating public agencies, and "its debts, liabilities.and
obligations do not constitute debts, liabilities or obligations of any party to the joint
powers.agreement.'' .Participating public agencies are;not responsible for any
repayment of debt, :nor. are they named in any of the bond documents. Participating
public agencies also will`not have any obligations related to compliance with tax or
disclosure obligations on the bonds.
Q: Are. there any°resfrictions to joining?
A: No. California Communities is required to accept any local entity affected by the
.suspension, regardless of the amount of property tax revenue lost.
Q: Can redevelopment agencies participate?
A. No. The diversion of tax`incr..ement revenues:from:redevelopmentagencies that was a
part offihe State budget is nova "loan" and was not done under Proposition 1A and
therefore redevelopment agencies cannot participate.
Q: Has California.. Communities conducted a program.like this before?
Ac Yes. In 20;0:5, California Communities conducted a similar bond securitization program
for local agencies when the state borrowed Vehicle License Fee ("VLF") revenues from
cities and counties.. California Communities securitized $455 million in VLF payments
due: from the state to provide advance repayment to 146 participating cities and
counties.
Q: How isthe Proposition 1A securitization differentfrom the VLF "gap loan"
securitization?
A: Under the~VLF financing program in 2005, local agencies:in California were "required to
cover th"e costs of issuance and pay the interest cost. As a result, local. agencies; only
received on.:average about 93 cents on the dollar from their'loans to the state. Under
the proposed Proposition 1A securitization Program, the state will pay for the
borrowing interest'incurred and the costs of issuance required for each agency to
participate, allovvi`ng local agencies the ability to receive .100% of their receivables.
Q: Who is the:financng team for the Proposition lA securitization Program?
A: Bond Counsel: Orrick, Herrington & Sutcliffe, LLP
Underwriters: Goldman Sachs,
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JP Morgan,
Morgan Stanley,
De La Rosa,
and Stone & Youngberg
Program Consultant:. Greencoast Capital Partners LLC
Trustee: Wells Fargo Bank, NA
Q: What is required' from our local agency to participate?
A: Participating agencies must enroll in the program by going to the online Enrollment
.Form hosted on the California Communities"website www.cacommunities.org/proplA.
Enrolled agencies°will received the required documentation from transaction counsel
(Orrick, Herrington & Sutcliffe) including a resolution that must be adopted by their
governing board. The resolution authorizes the sale of the Proposition 1A receivables
to California Communities:. This resolution together with other signature documents
and local agency legal opinions must be submitted no later than November 6, 2009.
Q: What is th'e deadline to participate in the Proposition 1A Securitization Program?
A: Completed applications including resolutions passed by the board/council, participant
documents signed by the authorized parties and legal opinions. must be submitted by
November 6, 2009.
Qc When should I begin the application process?
A: It is best to begin fhe application process as soon as possible. Each local agency is not
committed tb the program until all executed documentation is returned to bond counsel
prior to November 6, 20:09. So it is best to begin the'proce"ss early and have all the.
relevant documentation prepared.
Q: -.What if I-start the process and decide I don'twant to participate? Can I pull out of
the process half:--way through?
A; Each local agency is not committed until they return executed documents to bond
counsel on or priorto November 6, 2009. Signed documents will be held in escrow by
bond' counsel,,and can be withdrawn priorto November 6, 2009. After November 6,
.2009, agencies that have submitted the required signed documentation are committed
to the .transaction.
Q Will_ our local agency have to go through a credit rating process? How will'the
credit::rating for these bonds be assessed?
A: No. The`bonds are secured by the State of California's constitutional and statutory
oblgation;to repaythe loan within the three-year time period.. The ratings on the
bonds will be determined by the rating agencies based upon their assessment of the
credit worthiness ofthe transaction and the state's ability to pay.
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Q: Are there-other ways'to securi ize.aside from the California Communities
program?
A: California Communities offers the only pooled Proposition 1A securitization program
and is the only statutorily=authorized. option "that allows local. agencies to securitize and
have. bond issuance. acid interest costs paid by the state.
Q: Where can I get more information?
A: For more information on the Proposition 1A securitization :program, go to
www.cacomrnunities:org/proplA.
Q: How can I sign up for the Program?
A: To enroll. in the program; submit'the online Enrollment Form hosted on the California
Communities website,www.cacommunities:orgfproplA. There is no obligation on
behalf of an enrolled local agency to actually participate. Each enrolled local agency
must submita complete set of signed documents with legal opinions by November 6,
2009 in order to be committed to the securitization program.
Q: There are several special: districts in our Countywith.board members that are the
same as the County Board of Supervisors. Does each;special district needto
enroll in the program,;adopt the Sale Resolution and sign documentation?
A: Yes. Each local agency must adopt the Sate Resolution, sign. the Purchase and Sale
Agreement and provide ,the required signature documents and legal opinions to
participate in the Program.
Q: Can the.Resolution approving the form of Purchase and Sale Agreement be placed
on the consent calendar or does it need to 6e a~separate item on the board's
agenda?
A: The Resolution may be approved on the consent calendar.
II
OPTI®NS`'I'0 TIE PI20POSITI01~ 1t~ SECIJIaI'I'IZ1~'I'I®1i1
~~~Qu~~~L~ ~s~~~ ~u~s~IONS
Q: What are my local agency's options other than participafing in the.. Prop lA loan
securitization program?
A: There are a few options to securitization.
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1. If a local: agency can absorb the loss in property tax.:revenue this year, it can decide
to wait for the State. to, repay the obligation.by June 30, 2013.
2. •Tw9 or more local agencies are able to;reallocate or sell the obligation to another
ocal agency..
3. `Local agencies can apply for a hardship exemption. If cleanup legislation is enacted,
local. agencies must first enroll. in and fulfill the requirements of the securitization
program in order to qualify for a hardship exemption.
Q: What is a hardship exemption?
A: For those local agencies experiencing extreme fiscal Hardship, upon written request, the
Director of Finance may decrease the reduction. amount. Extreme fiscal hardship may
include a local agency.that:
® is in bankruptcy proceedings;
® may be required to seek bankruptcy protection as a resultof the reduction in
property tax revenue;
o does not have sufficient reserves to continue to provide a basic level of core
services.
If the Director of Finance decreases a local agency's reduction as:a result of hardship,
the amount of the decrease will be allocated. proportionately among other local
agencies within the county;.not to exceed more than 10 percent of.the total reduction
amounts for all local. agencies within the. county.
Q: How does my local agency apply for a hardship exemption?
A: The final hardship application. procedures have notbeen established and are not
,expected to be established until' after the cleanup legislation is enacted by the
legislature. While current'language is expected to change,, current language states that
a written request must be received by the Director of Finance bq October 15, 2009. The
Director of Finance must approve or reject the requests for a hardship exemption by
November 15;2009. The Director of Finance may not grant decreases in the suspension
amount that totals more than 1'0 percent of the combined.total shift of property tax per
county. I:oeahagencies Ghat believe they would qualify for a hardship exemption
should p"repave to file a request with the State Director of Finance by October 15,
2009: If the cleanup legislation passes, this deadline maybe extended, but;under
current law October 15 is the deadline.
Q: What can I expect to happen if my local agency does not participate in the
California Communities Proposition 1A Securitization Program?
A; If your loaal_agency cansustain an 8 percent,property tax shift this year, and your local
.agency chooses not to participate in California Communiti'es' loan seeuritization
program, then theaocal agency can expect to be repaid direcfly fr-orn the `state by June
30, 2013, with interest.
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Q: What is the interest rate for those entities Ghat choose not to participate in the
Prop 1A loan securitizaton program?
A: The interestrate has been- determined by the State,Director of Finance to be 2.0%.
Q: Are there other options?
A: If the cleanup legislation passes, a local. agency°may be able to sell the receivable to
another local agency..
Q. How would a Tocal agency sell.its Prop 1A Receivable to another local agency?
A: The cleanup legislation is expected to provide procedures for-local agencies to sell
Proposition 1A receivables to another local agency. The cleanup legislation is currently
pending approval by the State Senate.
ILI
P'I~O:POSITION 11~ SUSPENSION
FIZEQLIEN'I'LY ASKED QUESTI®NS
Q When will we see the reduction in our property tax;revenues?
A: You will see a reduction in .your property-tax revenues when you receive your property
taxes as dispersed. by the county auditor. The county auditor is required to shift the 8
percentkproperty tax°re~enue:in two installments, once before January 15, 2010, and
again after the first'transfer but no later than May 3, 2010.
Q: When s'the state required to repay the "loan"?
A: ABX415 indicates the`state' deadline to repay"the loan is June 30, 2013.
Q: And at'wFiaf interest rate on the "loan"?
A: The interest rate for- those agencies thatdo not sell the receivable to the jointpowers
authority has; been set by the .Director of Finance at 2:0%.
Q: Are there any'guarantees thatthe state will repay, us?
A: The'State: Constitution requires that thestate provide repaymentwithn a,thre.e-year
period. ABX4.15 ets'the repayment deadline at June 30, 2013_
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The repayment is, also continuously appropriated in the. General Fund and authorizes
the State Controller fo make the repayment. The repayment is a priority payment
behind General Fund obligations to schools and.general obligation bonds. If the state
has not fully repaid local agencies by June 30, 2013, local agencies or the bond issuer
may seek a writ of mandamus to compel the :Controller to fully pay the amounts the
state is obligated to pay. The petition for writ of mandamus has priority and preference
insetting and review and maybe filed in the California Supreme Court.
Q: Will next year'sp"roperty taxes (Z010-11) be affected bythis year's Prop 1A
suspension?
A: It is highly unlikely that the Prop 1A protection of 201;0-11 propertytaxes -could be
suspended. 'The State Constitution indicates that the property tax ,protection provisions
of Proposition. 1A cannot,be suspended more than twice in a i0-year period. (the first
year begins with'. the first. suspension).
Further, the state cannot suspend Proposition 1A until' all previous.loans are paid in full.
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