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HomeMy WebLinkAboutAgenda Packet - November 21, 2011 - CC OF.' U AGENDA REGULAR MEETING OF THE CITY COUNCIL, THE REDEVELOPMENT AGENCY, AND THE AZUSA PUBLIC FINANCING AUTHORITY I AZUSA AUDITORIUM MONDAY, NOVEMBER 21, 2011 213 EAST FOOTHILL BOULEVARD 6:30 P.M. Closed Session 7:30 P.M. Regular Meeting AZUSA CITY COUNCIL JOSEPH R. ROCHA MAYOR KEITH HANKS ANGEL CARRILLO MAYOR PRO-TEM COUNCILMEMBER I - URIEL E.IMACIAS ROBERT GONZALES COUNCILMEMBER COUNCILMEMBER 6:30 P.M. , CLOSED SESSION NOTICE TO THE PUBLIC FOR CLOSED SESSION Prior to going into closed session the City Council will convene in the Auditorium serving as council chambers to take public comment on the closed session items only. General public comment will be provided for during the regular I portion of the meeting beginning at 7:30 P.M. CITY CLOSED SESSION 1. Gov. Code See. 54957.6 —CONFERENCE WITH LABOR NEGOTIATOR City Negotiators: Administrative Services Director-Chief Financial Officer Kreimeier and City Manager Delach Organizations: ACEA (Azusa City Employees Association), AMMA (Azusa Middle Management Association), CAPP (Civilian Association Police Personnel), SEIU (Service Employees International Union). 11/21/11 1 - 2. Gov. Code See. 54956.8 - REAL PROPERTY NEGOTIATIONS k Agency: City of Azusa City Negotiators: Manager Delach and Assistant City Manager Makshanoff Negotiating With: Richard Valenzuela, in partnership with Leonel Prats Under Negotiation: Price and Terms of Sale. Address: 101 E. Arrow Hwy, Azusa, CA 91702 Any person wishing to comment on any of the Closed Session items listed above may do so now. NOTICE TO THE PUBLIC FOR REGULAR MEETING Copies of staff reports or other written documentation relating to each item of business referred to on the Agenda are on file in the Office of the City Clerk and are available for public inspection at the City Library and Police Department Lobby. Persons who wish to speak during the Public Participation portion of the Agenda or on a Public Hearing item, shall fill out a card requesting to speak and shall submit it to the City Clerkprior to the start of the City Council meeting. Cards submitted after 7:30P.M will not be accepted. 7:30 P.M. - REGULAR MEETING OF THE CITY COUNCIL AND AGENCY BOARD 1. Call to Order 2. Pledge to the Flag—Ms. Yvonne Mendez 3. Invocation—Pastor Eddie Velasquez of Jesus Is Lord Church A. CEREMONIAL MATTERS AND PRESENTATIONS None. B. PUBLIC PARTICIPATION This time has been set aside for persons in the audience to make public comments on items within the subject matter jurisdiction of the council/agency board that are not listed on this aeenda or are listed as an item other than a Public hearing item. Members of the audience will have the opportunity to address the city council/agency board about public hearing items at the time the public hearing is held. Under the provisions of the Brown Act, the council/agency board is prohibited from taking action on oral requests, but may refer the matter to staff or to a subsequent meeting. The council/agency board will respond after public comment has been received. Each person or representative of a group shall be allowed to speak without interruption for up to five (5) continuous minutes, subject to compliance with applicable meeting rules. Questions to the speaker or responses to the speaker's questions or comments shall be handled after the speaker has completed his/her comments. Public Participation will be limited to sixty (60) minutes. C. REPORTS, UPDATES, AND ANNOUNCEMENTS FROM STAFF/COUNCIL 11/21/11 - 2 - I D. SCHEDULED ITEMS I 1. PUBLIC HEARING - EXPENDITURE PLAN —STATE AWARDED GRANT FUNDS RECOMMENDED ACTION: Op In the Public Hearing; receive testimony, close the Hearing. Approve the proposed expenditure plan, purchases and appropriations of funds to be received from the State Citizens' Option for Public Safety (COPS) Program. The anticipated funding from this program is $100,000. The proposed expenditure plan is detailed below and also includes $103,750 in carryover funds from F/Y 10/11. 2. PUBLIC HEARING - ON PROCEEDINGS FOR THE APPROVAL OF CERTAIN CHANGES TOi THE RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX FOR COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE). RECOMMENDED ACTION: Opin the Public Hearing, receive testimony, close the Hearing. Waive further reading and adopt Resolution No. 11-C80 as follows: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA APPROVING CERTAIN CHANGES TO THE RATE AND METHOD OF APPORTIONMENT AND CALLING A SPECIAL ELECTION FOR SUBMITTING TO THE VOTERS OF IMPROVEMENT AREA NO. 2 OF CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) THE QUESTION OF WHETHER THE RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX FOR SAID ,'IMPROVEMENT AREA SHOULD BE AMENDED AND RESTATED a City Clerk conducts Special Election and announces results of canvass of votes cast. Waive further reading and adopt Resolution No. I I-C81 as follows: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA DECLARING THE RESULTS OF THE SPECIAL ELECTION FOR IMPROVEMENT AREA NO. 2 OF CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) ON THE QUESTION OF WHETHER THE RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX FOR SAID IMPROVEMENT AREA SHOULD BE AMENDED AND RESTATED 3. APPROVAL OF RESOLUTION APPROVING AN INSTALLMENT SALE AGREEMENT RELATING TO THE DEFEASEANCE AND REFUNDING OF THE CITY'S OUTSTANDING 1994 CERTIFICATES OF PARTICIPATION (1994 SEWER SYSTEM REFUNDING PROJECT) AND AUTHORIZING THE FINANCING OF ADDITIONAL IMPROVEMENTS TO,THE CITY'S SEWER SYSTEM. RECOMMENDED ACTION: W I've further reading and adopt Resolution No. 11-C82, approving and authorizing staff to take the necessary steps to complete the refinancing of the 1994 Certificates of Participation, as well as new money necessary to complete improvements through private placement of an Installment Sale Agreement. Staff and the City's financial advisor recommend approval of the attached legal documents and the use of Capital One for this financing. 11/21/11 - 3 - V a 4. CONSIDERATION OF THE SALE OF CERTAIN REAL PROPERTY OWNED BY THE CITY AND LOCATED AT 880 S. AZUSA AVENUE (APNs 8621-024-903 AND 904) AND AUTHORIZE THE CITY MANAGER TO EXECUTE ALL DOCUMENTS AND TAKE ANY ACTIONS NECESSARY TO CONVEY THE LAND TO THE CHARVAT FAMILY TRUST CONSISTENT WITH THE TERMS AND INTENT OF THE DISPOSITION AND DEVELOPMENT AGREEMENT AND STAFF REPORT FROM JUNE 2011 RECOMMENDED ACTION: Waive further reading and adopt Resolution No. 11-C83•, approving the sale of real property located at 880 S. Azusa Avenue (APN's 8621-024-903, 904) and authorize the City Manager to execute all documents and take any actions necessary to convey the land to Charvat consistent with the terms and intent of the DDA and City Council staff report from June 2011, E. CONSENT CALENDAR The Consent Calendar adopting the printed recommended actions will be enacted with one vote. If Councilmembers or Staff wish to address any item on the Consent Calendar individually, it will be considered under SPECIAL CALL ITEMS. 1. APPROVAL OF THE MINUTES OF THE REGULAR MEETING OF NOVEMBER 7 2011. RECOMMENDED ACTION: Approve Minutes as written. 2. HUMAN RESOURCES-ACTION ITEMS. RECOMMENDED ACTION: Approve Personnel Action Requests in accordance with the City of Azusa Civil Service Rules and applicable Memorandum of Understanding(s). 3. INVESTMENT POLICY FOR THE CITY OF AZUSA. RECOMMENDED ACTION: Adopt Resolution No. I 1-C84, approving and re-adopting the Investment Policy for the City of Azusa. 4. PURCHASE OF A RADAR SPEED DISPLAY TRAILER RECOMMENDED ACTION: Approve the issuance of a purchase order in an amount not to exceed $14,339 to RU2 Systems, Inc. of Mesa AZ, for the purchase of a RU2 Fast-3350 VMS Radar Speed Display Trailer, under the provisions of A.M.C. Section 2-518 (b), "purchases of supplies and equipment of between $10,000 and $24,999, shall except as otherwise provided in this article," be awarded by the City Council pursuant to the Azusa Informal or Alternative Purchasing Procedure. 11/21/11 - 4 - i T. 5. DISPOSITION OF SURPLUS VEHICLES I RECOMMENDED ACTION: I In accordance with Section 2-525(b) of the Azusa Municipal Code, approve the disposal of three (3) surplus Ford Crown Victoria Police vehicles, one (1) surplus Chevrolet 5-10 Pick-up Truck, one (1) surplus Toyota Prius, and other miscellaneous items. 6. WARRANTS. RESOLUTION AUTHORIZING PAYMENT OF WARRANTS BY THE CITY. RECOMMENDED ACTION: I Adopt Resolution No. 11-C85. I CONVENE AS THE REDEVELOPMENT AGENCY I F. AGENCY CONSENT CALENDAR The, Consent Calendar adopting the printed recommended actions will be enacted with one vote. If Board Members or Staff wish to address any item on the Consent Calendar individually, it will be considered under SPECIAL CALL ITEMS. 1. APPROVAL OF THE MINUTES OF THE REGULAR MEETING OF NOVEMBER 7, 2011. RECOMMENDED ACTION: Approve Minutes as written. 2. IN ESTMENT POLICY FOR THE REDEVELOPMENT AGENCY OF THE CITY OF AZUSA. RECOMMENDED ACTION: I Adopt Resolution No. 11-R43, approving and re-adopting the Investment Policy for the Redevelopment Agency of the City of Azusa. 3. WARRANTS. RESOLUTION AUTHORIZING PAYMENT OF WARRANTS BY THE AGENCY. i I RECOMMENDED ACTION: Adopt Resolution No. 11-R44. G. AZUSA PUBLIC FINANCING AUTHORITY The Consent Calendar adopting the printed recommended actions will be enacted with one vote. If Directors or Staff wish to address any item on the Consent Calendar individually, it will be considered under SPECIAL CALL ITEMS. 11/21/11 - 5 - r 1. APPROVAL OF MINUTES OF THE REGULAR MEETING OF NOVEMBER 7 2011. RECOMMENDED ACTION: Approve Minutes as written. 2. INVESTMENT POLICY FOR THE AZUSA PUBLIC FINANCING AUTHORITY. RECOMMENDED ACTION: Adopt Resolution No.I l-P2, approving and re-adopting the Investment Policy for the Azusa Public Financing Authority. H. ORDINANCES/SPECIAL RESOLUTIONS. 1. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF AZUSA AMENDING CHAPTER 46-239(A) OF THE AZUSA MUNICIPAL CODE RELATING TO GRAFFITI REWARD PROGRAM. RECOMMENDED ACTION: Waive further reading and adopt Ordinance No. 11-018. I. ADJOURNMENT 1. Adjourn in memory of Trinidad Delgado. UPCOMING MEETINGS: November 28, 2011, Utility Board Meeting— 6:30 p.m. Azusa Light and Water Conference Room December 5, 2011, City Council Meeting—6:30 p.m. Azusa Auditorium December 19, 2011, City Council Meeting— 6:30 p.m. Azusa Auditorium In compliance with Government Code Section 54957.5, agenda materials are available for inspection by members of the public at the following locations: Azusa City Clerk's Office - 213 E. Foothill Boulevard, Azusa City Library - 729 N. Dalton Avenue, and Azusa Police Department Lobby - 725 N. Alameda, Azusa, California. In compliance with the Americans with Disabilities Act, if you need special assistance to participate in a city meeting, please contact the City Clerk at 626-812-5229. Notification three (3) working days prior to the meeting when special services are needed will assist staff in assuring that reasonable arrangements can be made to provide access to the meeting. 11/21/11 - 6 - i� r„ PUBLIC HEARING TO`:! HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: ROBERT B. GARCIA, CHIEF OF POLICE VIA: F.M. DELACH, CITY MANAGER DATE: NOVEMBER 21, 2011 SUBJECT:JEXPENDITURE PLAN— STATE AWARDED GRANT FUNDS RECOMMENDATION It is recommended that the City Council hold a Public Hearing to include appropfiations of funds to be received from the State Citizens' Option for Public Safety (COPS) Program and approve the proposed expenditure plan and purchases in one City Council action. The anticipated funding from this program is $100,000. The proposed expenditure plan is detailed below and also includes $103,750 in carryover funds from F/Y 10/11. BACKGROUND { Thellfollowing expenditures are recommended: State COPS Total Awarded F/Y 11/12: $100,000 $37,500 Helicopter service—City of El Monte $22,000 Evidence room security $17,000 Rifle conversion (e.g. retrofit cars, slings, magazines & ammo) $ 9,500 Evidence room furniture/work station $ 7,000 Hirsch identification card printer $ 1,500 First aid supplies for patrol cars $ 1,500 Homicide (CHIA) conference $ 1,500 SWAT (NTOA) conference $ 1,750 Booking room flooring $ 250 Helicopter supplies I I $ 500 Overhead expense $100,000 Total K Helicopter Services The City has agreed to continue its participation in the regional helicopter program. This participation will cost $37,500 for helicopter services from the City of El Monte, and an additional $250 for supplies. Evidence Room Security The Department needs to upgrade the existing alarm and access control systems in the evidence room. This upgrade will provide for local monitoring and eliminate the need for an outside vendor to monitor the system. Moreover, the overall security of the evidence room will be enhanced. Police Rifle Conversion (Phase II and III) The Department's Firearms staff has recommended and the Chief has approved conversion to a U.S. made rifle for patrol purposes. This is a three phase project and the $17,000 listed above is to implement phase two and three; phase two, retrofit police cars with appropriate gun locking system and phase three, purchase slings, magazines and ammunition for training. Phase I will be accomplished using carry-over funds (see below). Evidence Room Furniture The Department's evidence room has been streamlined with an electronic management system and a new property, evidence and crime scene technician has been hired. The procurement of new furniture will provide for a work station to be installed in the evidence room proper. Hirsch Identification Card (I.D.)Printer The Police Department's I.D. printer that is compatible with our Hirsch access door control system is inoperable and in need of replacement. First Aid Supplies for Patrol Cars The first aid products in patrol cars are in regular need of replacement or rotation. Homicide Conference Two detectives will be selected to attend an annual California Homicide Investigator's Association (CHIA) conference to learn the latest homicide trends and investigative techniques. 2 SWAT Conference A SWAT team commander or supervisor will be selected to attend the annual National Tactical Officer's Association (NTOA) conference to remain current with the law, training and trends as they pertain to tactical teams. e ,� Booking Room Flooring and Chair Theljail's booking room floor is in poor condition and needs to be replaced. A professional flooring company will be selected to install appropriate flooring for the required use. Also, a second work station chair is needed for the booking room. Ov rhead Expenses I Thel COPS Grant stipulates that overhead (administrative) expenses are allowable in the amount of.5% ($500). i I ` Carryover from F/Y 10/11: $103,750 $27,000 Security camera system $25,250 Unmarked gang unit and conversion $20,000 Mobile digital computers (MDCs) in police vehicles $12,950 Enterprise vehicle Lease $ 9,950 Police rifle conversion Colt M4 rifles $ 8.600 Lexipol policy manual updates & daily training bulletins $103,750 Total Sec iritv Camera System 'I The Police Department will procure and install a new security camera and panic alarm system to replace the leased camera and panic alarm system currently in place. The Police Department is under a "rolling" annual contract with a local vendor to lease a security camera, burglar and panic alarm system. The annual cost for this service is $16,380 and does not include digital storage or internet viewing; however, the new system will provide for both and will eliminate the need for a costly annual service contract. Unmarked Gane Unit and Conversion The Gang Specialist Unit (GSU) has been very successful in their gang and tagging enforcement efforts. They are provided two unmarked cars for patrol use, but one is an older converted marked police car, which is in need of replacement. A new vehicle will provide for increased safety and longevity compared to using converted high mile marked police cars. I 3 Mobile Digital Computers (MDCs) The Police Department identified replacing the aged MDCs as a top priority and adopted a three phase plan. Phase two is nearing completion and 20 new MDCs have been deployed in the field. These funds will be used in conjunction with JAG 2011 funds to complete Phase III, which will provide MDCs for the remaining four vehicles and three spares. Enterprise Vehicle Lease The Department will continue to lease three vehicles for the patrol lieutenants through Enterprise Fleet Services. Police Rifle Conversion (Phase I) As stated above, the Police Department is going to convert to a U.S. made rifle for patrol use and will trade in the existing inventory of German made rifles to accomplish Phase I; that is, trade in 20 H&K G36 rifles and purchase 19 Colt M4 rifles. The former rifle is no longer manufactured and it has become extremely difficult to purchase replacement parts and spare magazines. Lexipol Policy Manual Updates & Daily Training Bulletins The Azusa Police Department continues to use the Lexipol police policy manual. The Lexipol product corresponds with the Department's vision for a more professional, accountable and well trained police agency. The costs associated with continued modifications, revisions and training from Lexipol LLC is outlined above. The exact amounts in each category are subject to change due to fluctuations in pricing. All funds shall be expended for supplemental front line law enforcement services only, as provided by law and mandated by grant guidelines. FISCAL IMPACT The items contained in this report have been preliminarily approved in the 2011-2012 budget and the proposed expenditures will not utilize any general funds. Prepared by: Cynthia Haebe, Crime Analyst Sam Gonzalez, Captain 4 n e PUBLIC HEARING TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: ALAN KREIMEIER, DIRECTOR OF ADMINISTRATIVE SERVICES/CFO VIA I: F.M. DELACH, CITY MANAGER/ { W DATE: NOVEMBER 21, 2011 SUBJECT: PROCEEDINGS FOR THE APPROVAL OF CERTAIN CHANGES TO THE RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX FOR COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) RECOMMENDATION It is recommended that the City Council approve the changes to the Rate and Method of Apportionment for the Special Tax for Community Facilities District No. 2005-1 and authorize staff to take the necessary steps to complete the process I BACKGROUND i At its October 17, 2011, meeting, the City Council adopted a resolution of consideration to amend and restate the special taxes to be levied in Improvement Area No. 2 of Community Facilities District No. 2005-1 (Rosedale). At the November 21, 2011, meeting the City Council will conduct a public hearing to implement, among other things, changes to the rate of special tax to be levied on parcels of property in Improvement Area No. 2. The proposed changes were requested by Rosedale Land Partners II, LLC, and William Lyon Homes, Inc., the developers of the land within Improvement Area No. 2 of the community facilities district. At the conclusion of the public hearing the Council will consider the adoption of a Resolution Calling a Special Election on the proposition of whether the Rate and Method of Apportionment should be amended and restated as provided in Exhibit B to Resolution No. 11-C80, presented for your consideration. The form of the ballot for this election is attached as Exhibit A to the Resolution Calling the Special Election. Therl are no registered voters within the boundaries of Improvement Area No. 2 of Community Facilities District No. 2005-1 (Rosedale), and therefore the voters in the special election will be the iwners of the land in Improvement Area No. 2. Each owner will have one vote per acre of its property. The special election will beheld immediately following adoption of the Resolution Calling a Special Election on Monday, November 21, 2011, after which the City Clerk, as the election official, will tally the ballots received. The Council will subsequently declare the results of the election and consider adoption of Resolution No. 11-C81, the Resolution Declaring the Results of the Election. After the proceedings have been completed, our office will work with the City's staff to record an amended notice of special tax lien on the taxable property in Improvement Area No. 2. FISCAL IMPACT There are no financial impacts to the City. ATTACHMENTS 1. Final CFD Report for Improvement Area No. 2 of CFD No. 2005-1 2. Resolution Approving Certain Changes to the Rate and Method of Apportionment and Calling a Special Election (Resolution No. 11-C80) 3. Exhibit "B" Amended and Restated Rate and Method of Apportionment for Improvement Area No. 2 of CFD No. 2005-1 (Rosedale). 4. Resolution Declaring the Results of the Special Election (Resolution No. 11-C81) lh��I fly r'II , A1 �1 ��1 '411 �YAw1(P" ll 7 *TAT�5SIG SUPPLEMENTAL CFD REPORT IMPROVEMENT AREA NO. 2 OF CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) November 15, 2011 pw b Y o ,w w w - �y „wvwaw Fresno Riverside San Francisco Chicano Dallas i i * SUPPLEMENTAL CFD REPORT IMPROVEMENT AREA.No. 2 OF CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) Prepared for Prepared by CITY OF AzuSA DAVID TAUSSIG &ASSOCIATES,INC. 213 East Foothill Boulevard 5000 Birch Street, Suite 6000 Azusa, California 91702 Newport Beach, California 92660 (949) 955-1500 TABLE OF CONTENTS Section Page I. INTRODUCTION....................................................................................................................1 Ii. PROJECT DESCRIPTION .......................................................................................................2 III. AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT OF THE SPECIAL TAX ......................................................................................................................................3 A. Explanation for Special Tax Apportionment...........................................................3 B. Maximum Special Tax Rates...................................................................................3 C. Backup Special Tax A ............................................................................................4 D. One-Time Special Tax.............................................................................................4 E. Accuracy of Information..........................................................................................4 EXHIBITS Exhibit A Amended and Restated Rate and Method of Apportionment for Improvement Area No. 2 I I I. INTRODUCTION This report is a supplement to the original community facilities district report(the"Original CFD Report") prepared at the time of formation of Community Facilities District No. 2005-1 ("CFD No. 2005-1"). The purpose of this report is to provide information related to changes made to the Rate and Method of Apportionment for Improvement Area No. 2 ("IA No. 2") of CFD No. 2005-1. The information presented herein is intended to supplement that Original CFD Report. City of Azusa November 15,2011 IA No.1 of CFD No.1005-1 (Rosedale) page I i 11. PROJECT DESCRIPTION i IA No. 2 encompasses approximately 36 gross acres of land in the City of Azusa and is comprised of two Zones. Zone 1 contains approximately 6.4 net acres that are expected to be dveloped-into uses subject to a special tax levy. Zone 2 contains approximately 1.6 net acres that are expected to be developed into uses subject to a special tax levy. At buildout, the property within IA No. 2 will consist of approximately 429 single-family residential units, with 323 units in Zone 1 and 106 units in Zone 2, as well as 0.26 acres of non-residential property in Zone 2. in addition, planning areas within each Zone have been designated as defined in the Amended and Restated Rate and Method of Apportionment for IA No. 2. There are four planning areas in Zone 1 and one planning area in Zone 2. C(ty of Azusa November 75,1011 lA No.2 of CFD No.2005-1 (Rosedale) Page 2 III. AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT OF THE SPECIAL TAX All of the taxable property located within IA No. 2, unless exempted by law or by the Amended and Restated Rate and Method of Apportionment for IA No. 2, shall be taxed for the purpose of providing facilities and services authorized to be financed by CFD No. 2005-1. Pursuant to Section 53325.3 of the Act, the tax imposed "is a special tax and not a special assessment, and there is no requirement that the tax be apportioned on the basis of benefit to any property." The Special Tax "may be based on benefit received by parcels of real property, the cost of making facilities or authorized services available to each parcel, or other reasonable basis as determined by the legislative body," although the Special Tax may not be apportioned on an ad valorem basis pursuant to Article XIIIA of the California Constitution. As shown in Exhibit A, the Amended and Restated Rate and Method of Apportionment for IA No. 2 provides information sufficient to allow each property owner within IA No. 2 to estimate the maximum annual Special Tax he or she will be required to pay. Sections A through E, below, provide additional information on the Amended and Restated Rate and Method of Apportionment for IA No. 2. A. Explanation for Special Tax Apportionment Two separate Special Tax rates have been established for IA No. 2. The Special Tax A shall be levied on Taxable Property within IA No. 2 each fiscal year to finance the Special Tax Requirement for Facilities. Additionally, the Special Tax B shall be levied on Developed and Undeveloped Property within IA No. 2 each fiscal year to finance the Special Tax Requirement for Services. Six Land Use Classes have been established for Zone 1 of IA No. 2. Residential Property in Zone 1 of IA No. 2 will be assigned to Land Use Classes 1 through 5 based on the size of the home. Non-Residential Property in Zone 1 of IA No. 2 will be assigned to Land Use Class 6 and the special tax will be determined based on the acreage of the Assessor's Parcel. Four Land Use Classes have been established for Zone 2 of IA No. 2. Residential Property in Zone 2 of IA No. 2 will be assigned to Land Use Classes 1 through 3 based on the size of the home. Non-Residential Property in Zone 2 of IA No. 2 will be assigned to Land Use Class 4 and the special tax will be determined based on the acreage of the Assessor's Parcel. B. Maximum Special Tax Rates The Maximum Special Tax A that may be levied against Developed Property within each zone of IA No. 2 is described in Section C of the Amended and Restated Rate and Method of Apportionment for IA No. 2. City of Azusa November 15,2011 lA No.2 of CFD No. 2005-1 (Rosedale) Page 3 i . Each year, commencing in fiscal year 2012-2013, the Special Tax A and Special Tax B shall be levied subject to the methodology and Maximum Special Taxes set forth in the Amended and Restated Rate and Method of Apportionment, in an amount sufficient to meet the Special Tax Requirement for Facilities and the Special Tax Requirement for Services, respectively. Prior to fiscal year 2012-2013, the Special Tax A and Special Tax 1 B were levied subject to the methodology and Maximum Special Taxes set forth in the original Rate And Method of Apportionment for IA No. 2. I Ci. Backup Special Tax A All of the requirements of Section D of the Amended and Restated Rate and Method of Apportionment, which describes the need for a Backup Special Tax A payment resulting from a change in development, shall only apply after the issuance of the first series of Bonds. Prior to the issuance of the first series of Bonds, no Backup Special Tax A calculation shall be necessary and no Backup Special Tax A payment shall be required. Prior to the issuance of a Post-Bond Certificate of Occupancy for an Assessor's Parcel of Developed Property, the CFD Administrator shall make a determination of whether or not a Backup Special Tax A payment is required for the Planning Area in which such property is located. The CFD Administrator shall charge a fee for providing this determination and shall follow the steps as described in Section D of the Amended and Restated Rate and Method of Apportionment. D. One-Time Special Tax Prior to the issuance of a Certificate of Occupancy for a residential dwelling unit, the CFD Administrator shall make a one-time determination of whether or not a One-Time Special Tax payment is required for such dwelling unit. The CFD Administrator shall charge a fee for providing this determination. A One-Time Special Tax payment shall be paid by the builder of a residential dwelling unit if the Total Tax and Assessment Obligation is expected to be greater than two percent (2.0%) of the Value of such residential dwelling unit. The amount of the One-Time Special Tax for such residential dwelling unit shall be an amount sufficient to reduce the Total Tax and Assessment Obligation to two percent (2.0%) of the Value of such residential dwelling unit. If the Total Tax and Assessment Obligation for a residential dwelling unit is expected to be less than or equal to two percent (2.0%) of the Value of such residential dwelling unit, no One-Time Special Tax will be required. E. Accuracy of Information In order to establish the Special Taxes for IA No. 2 as set forth in the Amended and Restated Rate and Method of Apportionment, David Taussig and Associates, Inc. has relied City of Azusa November 15,2011 JAI No.2 of CFD No.2005-1 (Rosedale) Page 4 on information including, but not limited to absorption, land-use types, building square footage, and net taxable acreage which were provided to David Taussig and Associates, Inc. by others. David Taussig and Associates, Inc. has not independently verified such data and disclaims responsibility for the impact of inaccurate data provided by others, if any, on the Amended and Restated Rate and Method of Apportionment for IA No. 2, including the inability to meet the financial obligations of IA No. 2. a K:\CLIENTS2\Azusa.ctyWello\cfd2005-1\Updated CFD Report\CFD_RPT_06.doc City of Azusa November 15,2011 IA No.2 of CFD No.1005-1 (Rosedale) page 5 { RESOLUTION NO. 11-C80 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA APPROVING CERTAIN CHANGES TO THE RATE AND METHOD OF APPORTIONMENT AND CALLING A SPECIAL ELECTION FOR SUBMITTING TO THE VOTERS OF IMPROVEMENT AREA NO. 2 OF CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 20054 (ROSEDALE) THE QUESTION OF WHETHER THE RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX ` FOR SAID IMPROVEMENT AREA SHOULD BE lAMENDED AND RESTATED i WHEREAS, on October 17, 2011, the City Council (the "City Council") of the City of Azusa (the "City") adopted Resolution No. 11-C73, a resolution of lonsideration pursuant to Section 53334 of the California Government Code, commencing proceedings to amend and restate the Rate and Method of Apportionment for Improvement Area No. 2 of the City of Azusa Community Facilities District No. 2005-1 (Rosedale) (the jOriginal RMA") to implement, among other things, changes to the rates of special tax to be levied on parcels of property in Improvement Area No. 2 (the "Improvement Area") of City of Azusa Community Facilities District No. 2005-1 (Rosedale) (the "District) to pay debt service on the bonds of the District that may be issued to finance the design, construction and acquisition of public facilities authorized to be financed by the District, or to pay the costs of the provision, construction and acquisition of such public facilities I and/or to accumulate funds therefor, as set forth in the Amended and Restated Rate and Method of Apportionment of Special Tax for the Improvement Area (the "Amended and Restated RMA") that is attached to this Resolution as Exhibit"B"; and WHEREAS, Resolution No. 11-C73 scheduled a public hearing for 7:30 p.m. on November 21, 2011, on the proposed Amended and Restated RMA; and WHEREAS, at the public hearing, certain changes to the language of the Amended and Restated RMA that was attached as Exhibit "A" to Resolution No. I1-C73 were presented which did not result in any alteration in the amount of the special taxes to .be levied by the Amended and Restated RMA, and the final form of the Amended and Restated RMA is attached hereto as Exhibit "B'; and WHEREAS, on November 21, 2011, the City Council conducted said public hearing and no written protests were filed; and WHEREAS, pursuant to Section 53338 of the California Government Code, the City Council is therefore authorized to submit to the qualified electors of the Improvement Area the question regarding the proposed amendment and restatement of the Original RMA to change the rates of the special tax to be levied on parcels of taxable property in the Improvement Area to pay debt service on the bonds of the District that may be issued to finance the design, construction and acquisition of the public facilities authorized to be financed by the District, or to pay the costs of the provision, construction and acquisition of such public facilities and/or to accumulate funds therefor, as provided in the Amended and Restated RMA. NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED BY THE CITY COUNCIL OF THE CITY OF AZUSA, AS FOLLOWS: Section 1. Findines. The City Council finds as follows: (a) The foregoing recitals are true and correct; (b) The public hearing held by the City Council pursuant to Resolution No. 11-C73 has been properly conducted, and notice thereof was duly given, in compliance with all applicable requirements of Article 3 (commencing with Section 53330) of Chapter 45635.08001\6987238.1 2 I l 2.5 of Part 1 of Division 2 of Title 5 of the California Government Code; (c) No written protests were filed with the City Clerk prior to the conclusion of said public hearing and the City Council is therefore authorized, pursuant to Section 53338 of said Code, to submit to the qualified electors of the Improvement Area I tihe question regarding the proposed changes to numerous provisions of the Original RMA, iincluding, but not limited to, changes in the rates of the special tax to be levied on parcels of taxable property in the Improvement Area to pay debt service on the bonds of the I District that may be issued to finance the design, construction and acquisition of public facilities authorized to be financed by the District, or to pay the costs of the provision, construction and acquisition of such public facilities and/or to accumulate funds therefor, as provided in the Amended and Restated RMA that is attached as Exhibit "B" to this resolution. (d) There are no registered voters within the Improvement Area and pursuant to Section 53326 of the California Government Code, the vote in said election ill, therefore, be by the owners of the taxable property within the Improvement Area `hose property would be subject to such special taxes if they were levied at the time of laid election, with each owner having one vote for each acre or portion of an acre of land I that he or she owns within the Improvement Area; (e) Rosedale Land Partners II, LLC, a Delaware limited liability company, Ind William Lyon Homes, Inc., a California corporation, the owners of all of the taxable plroperty within the Improvement Area, have by written consent (i) waived the time limit Set forth in Section 53326 of the California Government Code for holding the election Called by this resolution, (ii) consented to the holding of said election on any date prior to I 45635.08001\6987238.1 3 I December 31, 2011, including the date of the adoption of this resolution, (iii) waived notice and mailed notice of the time and date of said election, (iv) waived an impartial analysis by the City Attorney of the ballot propositions pursuant to Section 9280 of the California Elections Code and arguments and rebuttals pursuant to Sections 9281 to 9287, inclusive, and 9295 of that Code, and mailing of a statement pursuant to Section 9401 of that Code, and (v) consented to such election being called and conducted on November 21, 2011, at the conclusion of the public hearing; and (f) The City Clerk has consented to the holding of said election on November 21, 2011, at the conclusion of the public hearing. Section 2. Revision of Rate and Method of Apportionment. It is necessary that the Original RMA be revised in the form of the Amended and Restated RMA that is attached as Exhibit `B" hereto and by this reference herein incorporated, to implement, among other things, changes to the rates of special tax to be levied on parcels of taxable property in the Improvement Area to pay debt service on the bonds of the District that may be issued to finance the design, construction and acquisition of public facilities authorized to be financed by the District, or to pay the costs of the provision, construction and acquisition of such public facilities and/or to accumulate funds therefor. Section 3. Election. The City Council hereby calls and schedules a special election for the Improvement Area to be held on November 21, 2011, immediately following the adoption of this resolution, on the proposition of whether to amend and restate the Original RMA to implement, among other things, changes to the rates of special tax to be levied on parcels of taxable property in the Improvement Area to pay debt service on the bonds of the District that may be issued to finance the design, construction and 45635.08001\6987238.1 4 acquisition of public facilities authorized to be financed by the District, or to pay the costs f the provision, construction and acquisition of such public facilities and/or to accumulate funds therefore, as provided in the Amended and Restated RMA for Improvement Area No. 2. ` Section 4. Proposition. The question or proposition to be submitted to the voters of the Improvement Area at such special election shall be as follows: PROPOSITION A: Shall the Rate and Method of Apportionment of Special Tax for IImprovement Area No. 2 of City of Azusa Community Facilities District No. 2005-1 I (Rosedale) be amended and restated to implement, among other things, changes in the rates f special tax to be levied on parcels of taxable property in the Improvement Area to pay debt service on the bonds that may be issued to finance the design, construction and acquisition of public facilities authorized to be financed by the District, or to pay the costs f the provision, construction and acquisition of such public facilities and/or to accumulate funds therefor, as provided in the Amended and Restated Rate and Method of Apportionment of Special Tax for Improvement Area No. 2 of the City of Azusa Community Facilities District No 2005-1 (Rosedale) which is attached as Exhibit `B" to Resolution No. 1 I-C80 adopted by the City Council of the City of Azusa on November 21, 2011? Section 5. Conduct of Election: Voters. Except as otherwise provided in Section 6 hereof, said special election shall be conducted by the City Clerk who shall act as Rection official, pursuant to the applicable provisions of the California Elections Code governing elections of cities, and specifically Division 4 (commencing with Section 4000) i i 45635.08001A6987238.1 5 of the California Elections Code with respect to elections conducted by mail. The ballot for said election shall be in the form attached hereto as Exhibit"A" to this Resolution. Section 6. Election Procedures. The procedures to be followed in conducting the special election on the proposition specified in Section 4 Jiereof shall be as follows: (a) Pursuant to Section 53326 of the California Government Code, ballots for the special election shall be distributed to the qualified electors by the City Clerk by mail with return postage prepaid, or by personal service. (b) Pursuant to applicable sections of the California Elections Code governing the conduct of mail ballot elections of cities, and specifically Division 4 (commencing with Section 4000) of the California Elections Code with respect to elections conducted by mail, the City Clerk shall mail or deliver to each qualified elector an official ballot in the form attached hereto as Exhibit "A," and shall also mail or deliver to all such qualified electors a ballot pamphlet and instructions to voter, including a sample ballot identical in form to the official ballot but identified as a sample ballot, and a copy of Resolution No. 11-C73. (c) The official ballot to be mailed or delivered by the City Clerk to each landowner-voter shall have printed or typed thereon the name of the landowner-voter and the number of votes to be voted by the landowner-voter and shall have appended to it a certification to be signed by the person voting the official ballot which shall certify that the person signing the certification is the person who voted the official ballot, and if the landowner-voter is other than a natural person, that he or she is an officer of or other person affiliated with the landowner-voter entitled to vote such official ballot, that he or 45635.08001\6987238.1 6 she has been authorized to vote such official ballot on behalf of the landowner-voter, that i�n voting such official ballot it was his or her intent, as well as the intent of the landowner- voter, to vote all votes to which the landowner-voter is entitled based on its land ownership i on the proposition set forth in the official ballot as marked thereon in the voting square opposite such proposition, and further certifying as to the acreage of the landowner-voter's I I land ownership within the Improvement Area. (d) The return identification envelope delivered by the City Clerk to each landowner-voter shall have printed or typed thereon the following: (i) the name of the landowner, (ii) the address of the landowner, (iii) a declaration under penalty of perjury stating that the voter is the landowner or the authorized representative of the landowner entitled to vote the enclosed ballot and is the person whose name appears on the ildentification envelope, (iv) the printed name and the signature of the voter, (v) the address of the voter, (vi) the date of signing and place of execution of said declaration, and (vii) a notice that the envelope contains an official ballot and is to be opened only by the City Clerk. (e) The instruction to voter form to be mailed or delivered by the City Clerk to the landowner-voters shall inform them that the official ballots shall be returned to the City Clerk properly voted as provided thereon and with the certification appended tILeto properly completed and signed in the sealed return identification envelope with the Ithereon completed and signed and all other information to be inserted thereon properly inserted prior to 7:30 p.m. on November 21, 2011; provided that if all qualified lectors have voted, the election shall be closed with the concurrence of the City Clerk. (f) Upon receipt of the return identification envelopes which are returned 45635.0800116987238.1 7 prior to such hour, the City Clerk shall canvass the votes cast in the special election, and shall file a statement with the City Council as to the results of such special election. ADOPTED by the City Council this 21st day of November, 2011. Mayor of the City of Azusa ATTEST: City Clerk of the City of Azusa 45635.0800116987238.1 8 i I I CERTIFICATION I, Vera Mendoza, City Clerk of the City of Azusa, certify that the foregoing resolution was adopted by the City Council at a regular meeting held on 21st day of November, 2011, by the following vote: AYES: I NOES: ABSENT: ABSTAIN: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of Azusa this_day of November, 2011. VERA MENDOZA City Clerk of the City of Azusa ' I I i 45635.0800116987238.1 9 EXHIBIT"A" OFFICIAL BALLOT SPECIAL ELECTION FOR IMPROVEMENT AREA NO. 2 OF CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) COUNTY OF LOS ANGELES STATE OF CALIFORNIA November 21, 2011 To vote, mark a cross (+) in the voting square after the word "YES" or after the word "NO". All marks otherwise made are forbidden. If you wrongly mark, tear, or deface this ballot, return it to the City Clerk of the City of Azusa and obtain another. PROPOSITION A: Shall the Rate and Method of Apportionment of Special Tax for Improvement Area No. 2 of City of Azusa Community Facilities District No. 2005-1 (Rosedale) be amended and restated to implement, among other things, changes in the rates of special tax to be levied on parcels of taxable property in the Improvement Area to pay debt service on the bonds that may be issued to finance the design, construction and acquisition of public facilities authorized to be financed by the District, or to pay the costs of the provision, construction and acquisition of such public facilities and/or to accumulate funds therefor, as provided in the Amended and Restated Rate and Method of Apportionment of Special Tax for Improvement Area No. 2 of City of Azusa YES Community Facilities District No 2005-I (Rosedale) which is attached as Exhibit "B" to NO Resolution No. 11-C80 adopted by the City Council of the City of Azusa on November 21, 2011? 17286.0002016949704.2 A-1 I I I EXHIBIT "B" AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT FOR IMPROVEMENT AREA NO. 2 OF CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) i B-1 AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT FOR IMPROVEMENT AREA NO. 2 OF CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) Special Taxes as hereinafter defined shall be levied on all Assessor's Parcels in Improvement Area No. 2 ("IA No. 2")of the City of Azusa Community Facilities District No.2005-1 (Rosedale)("CFD No. 2005-1") and collected each Fiscal Year commencing in Fiscal Year 2012-2013, in an amount determined by the Council through the application of the appropriate Special Tax for "Developed Property," "Other Taxable Property," and "Undeveloped Property" as described below. All of the property in IA No. 2, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS This Amended and Restated Rate and Method of Apportionment employs terms defined below and terms defined in the Rate and Method of Apportionment for Improvement Area No. 1. When necessary,terms defined in the latter shall be distinguished from terms defined in the former by including the words "IA No. I" prior to the defined term. The terms hereinafter set forth have the following meanings: "Acre" or "Acreage" means the area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the area is not shown on an Assessor's Parcel Map, the area shown on the applicable final map,parcel map, condominium plan, or other recorded County parcel map. "Act" means the Mello-Roos Community Facilities Act of 1982,as amended,being Chapter 2.5, Division 2 of Title 5 of the Government Code of the State of California. "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of IA No. 2 and each Zone therein: the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the County or otherwise);the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee(including its legal counsel)in the discharge of the duties required of it under the Indenture; the costs to the City, IA No. 2 or any designee thereof of complying with arbitrage rebate requirements;the costs to the City,IA No. 2 or any designee thereof of complying with City,IA No.2 or obligated persons disclosure requirements associated with applicable federal and state securities laws and of the Act;the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes or the Bonds; the costs of the City, IA No. 2 or any designee thereof related to an appeal of the Special Tax; the costs associated with the release of funds from an escrow account;that portion of the City's overhead and staff time related to the administration of IA No. 2; and the City's third party expenses. Administrative Expenses shall also include City of Azusa October 24,2011 IA No. 2 of CFD No. 2005-1 (Rosedale) Page 1 amounts estimated or advanced by the City or IA No. 2 for any other administrative purposes of IA No.2,including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. "Assessor's Parcel" means a lot or parcel shown on an Assessor's Parcel Map with an assigned Assessor's Parcel number. I "Assessor's Parcel Map" means an official map of the Assessor of the County designating parcels by Assessor's Parcel number. "Backup Special Tax A" means a special tax payable by a property owner that may be required to be paid subsequent to the issuance of the first series of Bonds as a result of changes in development, as determined in accordance with Section D below. "Bonds" means any bonds or other debt(as defined in Section 53317(d)of the Act),whether in one or more series, issued by IA No. 2 under the Act. "Builder" means an entity which owns a residential dwelling unit immediately prior to the issuance of a Certificate of Occupancy, and then enters into a contract to sell that dwelling unit for its Value to an Original Homeowner. "Certificate of Occupancy"means a document issued by the City which permits the initial habitation of one or more newly constructed residential dwelling units or non-residential space. "CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement for Facilities and the Special Tax Requirement for Services, and providing for the levy and collection of the Special Taxes. "CFD No. 2005-1" means City of Azusa Community Facilities District No. 2005-1 (Rosedale). "City" means the City of Azusa. "Council" means the City Council of the City, acting as the legislative body of CFD No. 2005-1. "County" means the County of Los Angeles. "Developed Property" means, for each Fiscal Year, all Taxable Property, exclusive of Taxable Property Owner Association Property or Taxable Public Property, for which a building permit for new construction was issued after January 1,2006 and as of May I of the previous Fiscal Year. "Fiscal Year" means the period starting July 1 and ending on the following June 30. I 20�0 Azusa October 24, 2011 . IA No. 2 of CFD No. 2005-1 (Rosedale) Page 2 "Improvement Area No. 1" or "IA No. 1" means Improvement Area No. 1 of CFD No. 2005-1, as identified on the boundary map for CFD No. 2005-1, and includes each zone therein. "Improvement Area No. 2" or "IA No. 2" means Improvement Area No. 2 of CFD No. 2005-1, as identified on the boundary map for CFD No. 2005-1, and includes each Zone therein. "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds are issued,as modified,amended and/or supplemented from time to time. "Land Use Class" means any of the classes listed in Table 1, Table 2, or Table 4. "Maximum Special Tax" means the Maximum Special Tax A and/or Maximum Special Tax B, as applicable. "Maximum Special Tax A" means the Maximum Special Tax A,determined in accordance with Section C.I below,that can be levied in any Fiscal Year on an Assessor's Parcel within IA No. 2. "Maximum Special Tax B" means the Maximum Special Tax B,determined in accordance with Section C.2 below,that can be levied in any Fiscal Year on an Assessor's Parcel within IA No. 2. "Non-Residential Property"means all Assessor's Parcels of Developed Property for which a building permit(s) was issued for a non-residential use. "One-Time Special Tax" means a one-time special tax payable by a Builder prior to ' issuance of a Certificate of Occupancy for a residential dwelling unit in order to reduce the Maximum Special Tax A on such dwelling unit, so that the Total Tax and Assessment Obligation for the Fiscal Year in which a Certificate of Occupancy for such residential dwelling unit is expected to be issued will not exceed two percent (2.00%) of the Value of such residential dwelling unit. "Original Homeowner"means the first homeowner expected to purchase and close escrow on a residential dwelling unit from a Builder after the issuance of a Certificate of Occupancy. "Other Taxable Property" means Taxable Property Owner Association Property and Taxable Public Property. "Outstanding Bonds" means all Bonds which are deemed to be outstanding under the Indenture. "Planning Area" means a geographic area within IA No. 2 which has been designated as a Planning Area as identified in Exhibit A herein. City of Azusa October 24,2011 1A No. 2 of CFD No. 2005-1 (Rosedale) Page 3 i "Post-Bond Certificate of Occupancy" means a Certificate of Occupancy that is issued after the issuance of the first series of Bonds. "Property Owner Association Property" means, for each Fiscal Year, any Assessor's Parcel within the boundaries of IA No. 2 that was owned by or irrevocably offered for dedication to a property owner association, including any master or sub-association, as of January 1 of the previous Fiscal Year. h "Proportionately" means for Developed Property that the ratio of the actual Special Tax A levy to the Maximum Special Tax A is equal for all Assessor's Parcels of Developed Property and that the ratio of the actual Special Tax B levy to the Maximum Special Tax B is equal for all Assessor's Parcels of Developed Property, except to the extent that the Special iTax levy on Residential Property is limited as described in Section G below. For Undeveloped Property and Other Taxable Property, 'Proportionately"means that the ratio of the actual Special Tax A levy per Acre to the Maximum Special Tax A per Acre is equal for all Assessor's Parcels of Undeveloped Property or Other Taxable Property and that the ratio of the actual Special Tax B levy to the Maximum Special Tax B is equal for all Assessor's Parcels of Undeveloped Property or Other Taxable Property. "Public Property" means,for each Fiscal Year,(i)any property within the boundaries of IA No. 2 that was owned by or irrevocably offered for dedication to the federal government,the State, the City or any other public agency as of January 1 of the previous' Fiscal Year; provided however that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified in accordance with its use; or(ii) any property within the boundaries of CFD No. 2005-1 that was encumbered, as of January 1 of the previous Fiscal Year, by an unmanned utility easement making impractical its utilization for other than the purpose set forth in the easement. "Residential Floor Area" for any Residential Property means all of the square footage of living area within the perimeter of a residential structure,not including any carport,walkway, garage, overhang, patio, enclosed patio, or similar area. The CFD Administrator shall determine the Residential Floor Area of each dwelling unit based on the building permit, condominium plan, or other available information. "Residential Property" means all Assessor's Parcels of Developed Property for which a building permit has been issued for purposes of constructing one or more residential dwelling units. "RMA" means this Amended and Restated Rate and Method of Apportionment. "Special Tax" means the Special Tax A, Special Tax B,Backup Special Tax A,and/or One- Time Special Tax, as applicable. "Special Tax A" means the special tax to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property to fund the Special Tax Requirement for Facilities. I City!of Azusa October 24,2011 /A No . 2 of CFD No. 2005-1 (Rosedale) Page 4 "Special Tax B" means the annual special tax to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property to fund the Special Tax Requirement for Services. "Special Tax Requirement for Facilities" means that amount required in any Fiscal Year for IA No. 2 to: (i) pay debt service on all Outstanding Bonds; (ii)pay periodic costs on the Bonds, including but not limited to, credit enhancement and rebate payments on the Bonds; (iii) pay all or a portion of Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) pay directly for acquisition or construction of facilities eligible under the Act and authorized to be financed in IA No. 2 to the extent that inclusion of such amount does not increase the Special Tax A levy on Undeveloped Property; and (vi) pay for reasonably anticipated Special Tax A delinquencies based on the delinquency rate for Special Taxes levied in the previous Fiscal Year; less (vii) a credit for funds available to reduce the annual Special Tax A levy, as determined by the CFD Administrator pursuant to the Indenture. "Special Tax Requirement for Services" means that amount required in any Fiscal Year for CFD No. 2005-1 to: (i)pay directly for all public services eligible under the Act; (ii)pay Administrative Expenses not funded through the Special Tax Requirement for Facilities as determined by the CFD Administrator and IA No. 1 Administrative Expenses not funded through the IA No. 1 Special Tax Requirement for Facilities; less (iii) a credit for funds available to reduce the annual Special Tax B levy and the IA No. 1 Special Tax B levy, as determined by the CFD Administrator. The Special Tax Requirement for Services represents the total amount to be levied in any Fiscal Year within IA No. 1 and IA No. 2. "State" means the State of California. "Taxable Property" means all of the Assessor's Parcels within the boundaries of IA No. 2 which are not exempt from the Special Tax pursuant to law or Section H below. "Taxable Property Owner Association Property"means all Assessor's Parcels of Property Owner Association Property that are not exempt from the Special Tax pursuant to Section H below. "Taxable Public Property" means all Assessor's Parcels of Public Property that are not exempt from the Special Tax pursuant to Section H below. "Total Tax and Assessment Obligation" means for any residential dwelling unit,the sum of the projected ad valorem taxes and any other charges,special assessments,or taxes which are expected to be included on the annual property tax bill for the Fiscal Year in which the calculation is being performed assuming such residential dwelling unit had been completed, sold, and subject to such levies and impositions in such Fiscal Year. For purposes of this calculation, the CFD Administrator shall include the Maximum Special Tax A and Maximum Special Tax B for CFD No. 2005-1 plus estimated amounts for all other items expected to appear on the property tax bill. "Trustee" means the trustee or fiscal agent under the Indenture. City of Azusa October 24,2011 1A No. 2 of CFD No. 2005-1 (Rosedale) Page 5 i "Undeveloped Property" means,for each Fiscal Year,all Taxable Property not classified as Developed Property or Other Taxable Property. i _ "Value" means the full sales price of a residential dwelling unit as determined prior to the close of escrow by the Builder and the Original Homeowner, as listed on the preliminary escrow closing statement prepared by the title company for such sale, or if such preliminary escrow closing statement is unavailable,as reasonably determined by the CFD Administrator. "Zone" means Zone 1 and/or Zone 2, as applicable. "Zone 1" means the property identified as Zone I (Great Park and Transit 1)of IA No. 2,as identified on the boundary map for CFD No. 2005-1. I "Zone 2" means the property identified as Zone 2 (Transit 2) of IA No. 2, as identified on the boundary map for CFD No. 2005-1. B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, all Taxable Property within IA No. 2 shall be assigned to Zone 1 or Zone 2 and classified as Developed Property, Other Taxable Property,or Undeveloped Property,and shall be subject to Special Taxes in accordance with this RMA. Developed Property shall be classified as Residential Property and Non-Residential Property. C. MAXIMUM SPECIAL TAX RATE 1. Special Tax A a. Developed Property Residential Property in Zone 1 shall be assigned to Land Use Classes 1 through 5 in Table 1, and Non-Residential Property in Zone 1 shall be assigned to Land Use Class 6 in Table 1. Residential Property in Zone 2 shall be assigned to Land Use Classes 1 through 3 in Table 2, and Non-Residential Property in Zone 2 shall be assigned to Land Use Class 4 in Table 2. The Maximum Special Tax A for Residential Property shall be based on the number of residential dwelling units and the Residential Floor Area of such residential dwelling units located on the Assessor's Parcel. The Maximum Special Tax A for Non-Residential Property shall be based on the Acreage of the Assessor's Parcel. The Maximum Special Tax A as set forth in Sections C.L(a)(i)and C.L(a)(ii) below may be reduced in accordance with, and subject to the conditions set forth in, Section F below. City;of Azusa - October 24, 2011 1A No. 2 of CFD No. 2005-1 (Rosedale) Page 6 (i) Maximum Special Tax A—Zone I The Fiscal Year 2012-2013 Maximum Special Tax A for each Land Use Class within Zone 1 is shown below in Table 1. TABLE 1 Maximum Special Tax A for Developed Property Fiscal"Year 2012-2013 Zone 1 Land Use 'Zone 1. Class Description Residential Floor= i (Great Park and Transit 1.) Area. . Maximum.Special Tax A 1 Residential Property > 1,950 SF $2,948 per dwelling unit 2 Residential Property 1,751 — 1,950 SF $2,719 per dwelling unit 3 Residential Property 1,551 — 1,750 SF $2,420 per dwelling unit 4 Residential Property 1,401 — 1,550 SF $2,178 per dwelling unit 5 Residential Property < 1,401 SF $1,986 per dwelling unit 6 Non-Residential Property NA $15,000 per Acre On each July 1,commencing July 1,2013,the Maximum Special Tax A for each Land Use Class shall be increased by an amount equal to two percent(2%)of the amount in effect for the previous Fiscal Year. (ii) Maximum Special Tax A—Zone 2 The Fiscal Year 2012-2013 Maximum Special Tax A for each Land Use Class within Zone 2 is shown below in Table 2. City of Azusa October 24,2011 IA No. 2 of CFD No. 1005-1 (Rosedale) Page 7 TABLE 2 j Maximum Special Tax A for Developed Property Fiscal Year 2012-2013 � Zone 2 I Zone 2 Land Use Class Description Residential Floor (Transit 2) Area Maximum Special Tax A 1 Residential Property > 1,300 SF $2,179 per dwelling unit 2 Residential Property 1,201 — 1,300 SF $2,069 per dwelling unit 1 3 Residential Property < 1,201 SF $1,886 per dwelling unit 4 Non-Residential Property NA $15,000 per Acre On each July 1, commencing July 1, 2013, the Maximum Special Tax A for each Land Use Class shall be increased by an amount equal to two.percent (2%) of the amount in effect for the previous Fiscal Year. I b. Undeveloped Property and Other Taxable Property The Fiscal Year 2012-.2013 Maximum Special Tax A for Undeveloped Property and Other Taxable Property within each Zone is shown below in Table 3. 1 TABLE 3 Maximum Special Tax A for iUndeveloped Property and Other Taxable Property Fiscal Year 2012-2013 Zone 1 and Zone 2 FY 2012-2013 i Zone Maximum Special Tax A 1 $127,870 per Acre 2 $146,625 per Acre On each July 1, commencing July 1, 2013, the Maximum Special Tax A for Undeveloped Property and Other Taxable Property in Zone 1 and Zone 2 shall be increased by an amount equal to two percent(2%) of the amount in effect for the previous Fiscal Year. (iv) Multiple Land Use Classes { I City'of Azusa October 24,2011 IA No. 2 of CFD No. 2005-1 (Rosedale) Page 8 I� 4 In some instances an Assessor's Parcel of Developed Property may contain more than one Land Use Class. The Maximum Special Tax A that can be levied on an Assessor's Parcel shall be the sum of the Maximum Special Tax A that can be levied for all Land Use Classes located on that Assessor's Parcel. For an Assessor's Parcel that contains both Residential Property and Non-Residential Property,the Acreage of such Assessor's Parcel shall be allocated to each type of property based on the amount of Acreage designated for each land use as determined by reference to the site plan approved for such Assessor's Parcel. The CFD Administrator's allocation to each type of property shall be final. 2. Special Tax B a. Developed Property (i) Maximum Special Tax B The Fiscal Year 2012-2013 Maximum Special Tax B for each Assessor's Parcel classified as Developed Property in Zone 1 and Zone 2 shall be the amount shown below in Table 4. TABLE 4 Maximum Special Tax B for Developed Property Fiscal Year 2012-2013 Zone 1 and Zone 2 Zone 1'= Zone 2 Land Use FY 2012-2013 - FY 2012-2013 . Descnption r Class 'Maximum Special Maximum Special Tax B . Tax B 1 Residential Property $345.35 per dwelling unit $326.17 per dwelling unit 2 Non-Residential Property $4,907.78 per Acre $4,887.67 per Acre On each July 1,commencing July 1, 2013,the Maximum Special Tax B for Developed Property in Zone I and Zone 2 shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. (ii) Multiple Land Use Classes In some instances an Assessor's Parcel of Developed Property may contain more than one Land Use Class. The Maximum Special Tax B levied on an Assessor's Parcel shall be the sum of.the Maximum Special Tax B for all Land Use Classes located on that Assessor's City of Azusa October 24,2011 IA No. 2 of CFD No. 2005-1 (Rosedale) Page 9 i Parcel. For Assessor's Parcel that contains both Residential f Property and Non-Residential Property, the Acreage of such Assessor's Parcel shall be allocated to each type of property based on the amount of Acreage designated for each land use as determined by i reference to the site plan approved for such Assessor's Parcel. The CFD Administrator's allocation to each type of property shall be final. o b. Undeveloped Property The Fiscal Year 2012-2013 Maximum Special Tax B for Undeveloped Property within each Zone is shown below in Table 5. I TABLE 5 Maximum Special Tax B for Undeveloped Property Fiscal Year 2012-2013 Zone 1 and Zone 2 FY 2012-2013 Zone Maximum.Special Tax B 1 $1,997.20 per Acre 2 $1,997.20 per Acre On each July 1,commencing July 1,2013 the Maximum Special Tax B for Undeveloped Property in Zone 1 and Zone 2 shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. C. Property Owner Association Property and Public Property There shall be no Special Tax B levied on Property Owner Association Property and Public Property. D. BACKUP SPECIAL TAX A All of the requirements of this Section D,which describes the need for a Backup Special Tax A payment resulting from a change in development,shall only apply after the issuance of the first series of Bonds. Prior to the issuance of the first series of Bonds, no Backup Special Tax A calculation shall be necessary and no Backup Special Tax A payment shall be required. I Prior to the issuance of a Post-Bond Certificate of Occupancy for an Assessor's Parcel of Developed Property (the "Subject Property"), the CFD Administrator shall make a determination of whether or not a Backup Special Tax A payment is required for the City of Azusa October 24,2011 1A No. 2 of CFD No. 2005-1 (Rosedale) Page 10 Planning Area in which the Subject Property is located. The CFD Administrator shall charge a fee for providing this determination and shall follow the steps listed below. Step No.: 1. Required Special Tax A Revenues As of the date of the issuance of any series of Bonds, the Required Special Tax A Revenues for IA No. 2 shall be esiablished to equal (i) 1.1 times the discounted maximum annual gross debt service for all Outstanding Bonds (including those Bonds currently being issued, if any), which shall be computed by determining the Fiscal Year in which occurs the maximum aggregate annual gross debt service for all Bonds and discounting that amount from such Fiscal Year to the current Fiscal Year using a discount rate reflecting the actual rate of increase(if any)of the debt service on the Bonds, plus (ii) anticipated Administrative Expenses in the next Fiscal Year. The CFD Administrator shall allocate such Required Special Tax A Revenues to each Planning Area based on the current Expected Special Tax A Revenues and identify such allocation in the records of IA No. 2. Such allocation shall remain valid except as adjusted under 1.(a) or L(b) below: (a) On each July 1, the Required Special Tax A Revenues for each Planning Area shall be increased by an amount equal to the annual percentage increase in the debt service on the Bonds. (b) The CFD Administrator shall reduce the Required Special Tax A Revenues for any Planning Area as necessary to reflect reduced revenues required as a result of a Backup Special Tax A payment, One-Time Special Tax payment, or prepayment made with respect to an Assessor's Parcel in such Planning Area. 2. Expected Special Tax A Revenues Prior to the issuance of a Post-Bond Certificate of Occupancy for the Subject Property,the CFD Administrator shall estimate the Expected Special Tax A Revenues that will be generated at buildout of the Planning Area in which the Subject Property is located based on the Maximum Special Tax A rates then in effect and the current development plan for such Planning Area based on building permits issued to date,expected building permits to be issued in the future, and all other relevant development information available to the CFD Administrator. 3. Determination of Need for Backup Special Tax If the CFD Administrator determines that the Expected Special Tax A City ojAzusa October 24, 2011 1A No. 2 of CFD No. 2005-1 (Rosedale) Page 11 I Revenues that will be generated at buildout in the Planning Area in which the Subject Property is located are less than such Planning Area's Required Special Tax A Revenues (as adjusted to the date of calculation), then a Backup Special Tax A payment will be required for such Planning Area. However, if it is determined that the Expected Special Tax A Revenues are greater than or equal to the Planning Area's Required Special Tax A Revenues(as adjusted to the date of calculation),then no Backup Special Tax _ A payment will be required. I 4. Calculation of Backup Special Tax If a Backup Special Tax A payment is required pursuant to step 3 above,such payment shall equal that Prepayment Amount calculated pursuant to Section I K.3. 5. Payment The Backup Special Tax A computed under this section shall be paid by the owner of the Subject Property prior to the issuance of the Certificate of Occupancy for the Subject Property. E. ONE-TIME SPECIAL TAX Prior to the issuance of a Certificate of Occupancy for a residential dwelling unit, the CFD Administrator shall make a one-time determination of whether or not a One-Time Special Tax payment is required for such dwelling unit. The CFD Administrator shall charge a fee for providing this determination. A One-Time Special Tax payment shall be paid by the Builder for a residential dwelling unit if the Total Tax and Assessment Obligation is expected to be greater than two percent (2.00%) of the Value for such residential dwelling unit. The amount of the One-Time Special Tax,for such residential dwelling unit shall equal that Partial Prepayment Amount calculated pursuant to Section K.2 which shall be sufficient to reduce the Total Tax and Assessment Obligation to two percent (2.00%) of the Value for such residential dwelling unit. If the Total Tax and Assessment Obligation for a residential dwelling unit is expected to be less than or equal to two percent (2.00%) of the Value of such residential dwelling unit, no One-Time Special Tax will be required. F. SPECIAL TAX REDUCTION Any Special Tax Reduction determined pursuant to this section will not apply to dwelling units for which One-Time Special Tax calculations were prepared prior to the date of the Price Point Study, whether or not such calculations resulted in a One-Time Special Tax payment. City of Azusa October 24,2011 /A No. 2 of CFD No. 2005-1 (Rosedale) Page 12 The following definitions apply to this Section F: "Independent Price Point Consultant" means any consultant or firm of such consultants selected by CFD No. 2005-1 that (a) has substantial experience in performing price point studies for residential units within community facilities districts or otherwise estimating or confirming pricing for residential units in community facilities districts,(b) is well versed in analyzing economic and real estate data that relates to the pricing of residential units in community facilities districts, (c)is in fact independent and not under the control of CFD No. 2005-1 or the City, (d)does not have any substantial interest,direct or indirect,with or in(i) CFD No. 2005-1, (ii)the City, (iii)any owner of real property in CFD No.2005-1,or(iv)any real property in CFD No. 2005-1, and(e)is not connected with CFD No. 2005-1 or the City as an officer or employee thereof,but who may be regularly retained to make reports to CFD No. 2005-1 or the City. "Plan Type" means a discrete residential plan type (generally consisting of residential dwelling units that share a common product type (e.g., single family, multi-family, senior) and that have nearly identical amounts of living area) that is constructed or expected to be constructed within a Planning Area of IA No. 2 as identified in the Price Point Study. "Price Point" means,with respect to the residential dwelling units in each Plan Type, as of any date, the minimum base price of such residential dwelling units, estimated as of such date, including any incentives and concessions, but excluding potential appreciation or premiums, options or upgrades, based upon their actual or expected characteristics, such as living area and lot size. "Price Point Study" means a price point study or a letter updating a previous price point study, which(a) has been prepared by an Independent Price Point Consultant, (b) sets forth the Plan Types constructed or expected to be constructed within IA No. 2, (c) sets forth the estimated number of constructed and expected residential dwelling units for each Plan Type, (d) sets forth such Independent Price Point Consultant's estimate of the Price Point for each Plan Type, and (e) uses a date for establishing such Price Points that is no earlier than 60 days prior to the date the Price Point Study is delivered to the CFD Administrator. Dwelling units for which One-Time Special Tax calculations have been prepared previously will not be included in the Price Point Study. Prior to the issuance of the first series of Bonds, the following steps shall be taken: Step No.: 1. At least 30 days prior to the expected issuance date of the first series of Bonds, IA No. 2 shall cause a Price Point Study to be delivered to the CFD Administrator. 2. As soon as practicable after receipt of the Price Point Study, the CFD Administrator shall calculate the Total Tax and Assessment Obligation for each Plan Type included in the Price Point Study. City of Azusa October 24,2011 JA No. 2 of CFD No. 2005-1 (Rosedale) Page 13 3. The CFD Administrator shall determine the Expected Special Tax A Revenues for each Planning Area by taking the sum of the Maximum Special Tax A revenues expected to be generated at buildout based on building permits issued to date, expected future development identified in the Price Point Study, and all other relevant development information available to the CFD Administrator 4. Separately, for each Land Use Class,the CFD Administrator shall determine whether or not the Total Tax and Assessment Obligation for all Plan Types in a Land Use Class is less than or equal to 2.00% of the Price Point for such Plan Type. a. If the Total Tax and Assessment Obligation for all Plan Types in a Land Use Class is less than or equal to 2.00% of the Price Point for such Plan Type, then there shall be no change in the Maximum Special Tax A for such Land Use Class. b. If the Total Tax and Assessment Obligation for any Plan Type in a Land Use f Class is greater than 2.00% of the Price Point for such Plan Type, the CFD Administrator shall calculate a revised Maximum Special Tax A for such Land Use Class, which revised Maximum Special Tax A shall be the highest amount (rounded to the nearest whole dollar) that will not cause the Total Tax and Assessment Obligation for any Plan Type in such Land Use Class to exceed 2.00% of the Price Point for such Plan Type. The amount of the change in the Maximum Special Tax A for a particular Land Use Class is not required to be proportional to changes in the Maximum Special Tax A made for other Land Use Classes. 5. If the Maximum Special Tax A for any Land Use Class is revised pursuant to step 4.b. above, the CFD Administrator shall prepare and execute a Certificate of Reduction in Special Taxes substantially in the form of Exhibit B hereto and shall deliver such Certificate of Reduction in Special Taxes to CFD No. 2005-1. The Certificate of Reduction in Special Taxes shall be completed for all Land Use Classes and shall set forth,as applicable,either(i)the reduced Maximum Special Tax A for a Land Use Class as calculated pursuant to step 4.b.,or(ii)the Maximum Special Tax A as identified in Table 1 or Table 2 in Section C.L(a)for a Land Use Class that was not revised as determined pursuant to step 4.a. I 6. If the first series of Bonds is issued within 90 days of the date of receipt of the Price Point Study by the CFD Administrator, CFD No. 2005-1 shall execute the acknowledgement on such Certificate of Reduction in Special Taxes,dated as of the date of such issuance, and, upon the issuance of such first series of Bonds, the i Maximum Special Tax A for each Land Use Class shall, ipso facto, be, for all purposes, as set forth in such Certificate of Reduction in Special Taxes (except for ` Assessor's Parcels excluded from the reduction as identified in Attachment B to the Certificate of Reduction in Special Taxes). If the first series of Bonds is not issued within 90 days of the date of receipt of the Price Point Study by the CFD Administrator, such Certificate of Reduction in Special Taxes shall not be acknowledged by CFD No. 2005-1 and shall, as of such date, be void and of no 06 of Azusa October 24, 1077 IA No. 2 of CFD No. 2005-1 (Rosedale) Page 14 I. further force and effect. In such case, if subsequently, a first series of Bonds is expected to be issued,at least 30 days prior to the expected issuance date of such first series of Bonds, the CFD Administrator shall cause a new Price Point Study to be delivered to the CFD Administrator and, following such delivery, steps 2 through 5 of this section shall be performed based on such new Price Point Study. 7. As soon as practicable after the execution by CFD No. 2005-1 of the acknowledgement on the Certificate of Reduction in Special Taxes,CFD No. 2005-1 shall cause to be recorded in the records of the County Recorder an Amended Notice of Special Tax Lien for IA No. 2 reflecting the Maximum Special Tax A for all Land Use Classes set forth in such Certificate of Reduction in Special Taxes only for those Assessor's Parcels listed in Exhibit A to such notice(Assessor's Parcels for which a One-Time Special Tax was not previously calculated). 8. If the Maximum Special Tax A is not required to be changed for each Land Use Class based on the calculations performed above, there shall be no reduction in the Maximum Special Tax A, and no Certificate of Reduction in Special Taxes shall be required. However the CFD Administrator shall prepare and deliver to CFD No. 2005-1 a Certificate of No Reduction in Special Taxes substantially in the form of Exhibit C hereto dated as of the date of the issuance of the first series of Bonds that states that the calculations required pursuant to this Section F have been made and that no changes to the Maximum Special Tax A are necessary. 9. CFD No. 2005-1 and the CFD Administrator shall take no further actions under this Section F upon the earlier to occur of the following: (i) the execution of the acknowledgement by CFD No. 2005-1 on a Certificate of Reduction in Special Taxes pursuant to step 6 above; or (ii) the delivery by the CFD Administrator of a Certificate of No Reduction in Special Taxes pursuant to step 8 above. G. METHOD OF APPORTIONMENT OF THE SPECIAL TAX 1. Special Tax A Commencing with Fiscal Year 2012-2013 and for each following Fiscal Year, the Council shall levy the Special Tax A until the amount of Special Tax A equals the Special Tax Requirement for Facilities. The Special Tax A shall be levied each Fiscal Year as follows: First: The Special Tax A shall be levied Proportionately on each Assessor's Parcel of Developed Property in Zone 1 and Zone 2 at up to 100%of the applicable Maximum Special Tax A as needed to satisfy the Special Tax Requirement for Facilities; Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Tax A shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property in Zone 1 and Zone 2 at up to 100% of the Maximum Special Tax A for Undeveloped Property; City of Azusa October 24,2011 1A No. 2 of CFD No. 2005-1 (Rosedale) Page 15 f' j Third: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed,then the Special Tax A shall be levied Proportionately on each Assessor's Parcel of Other Taxable Property in Zone 1 and Zone 2 at up to the Maximum Special Tax A for Other Taxable Property, 2. Special Tax B Commencing with Fiscal Year 2012-2013 and for each following Fiscal Year, the Council shall determine the Special Tax Requirement for Services and levy the Special Tax B,taking into consideration the levy of the IA No. 1 Special Tax B,until the amount of Special Tax B and IA No. 1 Special Tax B equals the Special Tax Requirement for Services. The Special Tax B shall be levied each Fiscal Year as follows: First: The Special Tax B shall be levied Proportionately on each Assessor's Parcel of Developed Property in Zone I and Zone 2 at up to 100%of the applicable Maximum Special Tax B as needed to satisfy the Special Tax Requirement for Services; and the Council shall be notified that under the terms of the IA No. 1 RMA, the IA No. 1 Special Tax B shall be levied on each Assessor's Parcel of IA No. 1 Developed Property in Zone I and Zone 2 at up to 100% of the applicable IA No. 1 Maximum Special Tax B as needed to satisfy the Special Tax Requirement for Services; Second: If additional monies are needed to satisfy the Special Tax Requirement for Services after the first step has been completed, the Special Tax B shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property in Zone 1 and Zone 2 at up to 100%of the Maximum Special Tax B for Undeveloped Property;the Council shall be notified that under the terms of the IA No. 1 RMA, the IA No. 1 Special Tax B shall be levied Proportionately on each Assessor's Parcel of IA No. I Undeveloped Property in Zone I and Zone 2 at up to 100% of the IA No. 1 Maximum Special Tax B for Undeveloped Property. I 3. Backup Special Tax A The Backup Special Tax A payment may be levied on any Assessor's Parcel as required in Section D. ' 4. One-Time Special Tax The One-Time.Special Tax may be levied on any Assessor's Parcel as required in Section E. Notwithstanding the above,under no circumstances will the Special Tax A or Special Tax B levied in any Fiscal Year against any Assessor's Parcel of Residential Property be increased as a consequence of delinquency or default by the owner or owners of any other Assessor's Parcel(s)within IA No. 2 by more than 10%above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. To the extent that the levy of the Special Tax A or Special Tax B on Residential Property is limited by the City of Azusa October 24, 1011 IA No. 2 of CFD No. 2005-1 (Rosedale) Page 16 provision in the previous sentence, the levy of the Special Tax A or Special Tax B on each Assessor's Parcel of Non-Residential Property shall continue in equal percentages at up to 100% of the Maximum Special Tax. H. EXEMPTIONS 1. Special Tax A No Special Tax A shall be levied on up to 20.36 Acres of Property Owner Association Property and Public Property in Zone 1 and up to 7.35 Acres of Property Owner Association Property and Public Property in Zone 2. Tax-exempt status will be assigned by the CFD Administrator in the chronological order in which property becomes Property Owner Association Property or Public Property. However,should an Assessor's Parcel no longer be classified as Property Owner Association Property or Public Property its tax-exempt status will be revoked. Property Owner Association Property or Public Property that is not exempt from Special Tax A under this section shall be subject to the levy of the Special Tax A and shall be taxed Proportionately as part of the third step in Section G.1 above, at up to 100% of the applicable Maximum Special Tax A for Other Taxable Property. 2. Special Tax B No Special Tax B shall be levied on Property Owner Association Property and Public Property. I. APPEALS AND INTERPRETATIONS Any landowner or resident may file a written appeal of the Special Tax on his/her property with the CFD Administrator, provided that the appellant is current in his/her payments of Special Taxes. During the pendency of an appeal, all Special Taxes previously levied must be paid on or before the payment date established when the levy was made. The appeal must specify the reasons why the appellant claims the Special Tax is in error. The CFD Administrator shall review the appeal, meet with the appellant if the CFD Administrator deems necessary, and advise the appellant of its determination. If the CFD Administrator agrees with the appellant, the CFD Administrator shall eliminate or reduce the Special Tax on the appellant's property and/or provide a refund to the appellant. If the CFD Administrator disagrees with the appellant and the appellant is dissatisfied with the determination, the appellant then has 30 days in which to appeal to the Council by filing a written notice of appeal with the City Clerk,provided that the appellant is current in his/her payments of Special Taxes. The second appeal must specify the reasons for its disagreement with the CFD Administrator's determination. Interpretations may be made by the Council by ordinance or resolution for purposes of clarifying any vagueness or ambiguity in this Amended and Restated Rate and Method of Apportionment. City of Azusa October 24,2011 1A No. 2 of CFD No. 2005-1 (Rosedale) page 17 i J. MANNER OF COLLECTION I i {I The Special Tax A and Special Tax B shall be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however,that IA No. 2 may directly bill the Special Tax, may collect Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Parcels as permitted by the Act. The Backup Special Tax A and One-Time Special Tax shall be paid directly to the City by, or on behalf of, the Builder or property owner. K. I PREPAYMENT OF SPECIAL TAX The following definitions apply to this Section K: I "CFD Public Facilities" means either$11.5 million in 2012 dollars,which shall increase by the Construction Inflation Index on July 1,2013, and on each July 1 thereafter,or such lower number as (i) shall be determined by the CFD Administrator as sufficient to provide the public facilities to be provided by IA No. 2 under the authorized bonding program for IA No. 2, or (ii) shall be determined by the Council concurrently with a covenant that it will not issue any more Bonds to be supported by Special Taxes levied under this Amended and Restated Rate and Method of Apportionment. "Construction Inflation Index" means the annual percentage change in the Engineering News-Record Building Cost Index for the City of Los Angeles,measured as of the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the CFD Administrator that is reasonably comparable to the Engineering News-Record Building Cost Index for the City of Los Angeles. "Future Facilities Costs" means the CFD Public Facilities minus (i) public facility costs previously paid from the Improvement Fund, (ii) moneys currently on deposit in the Improvement Fund,and(iii)moneys currently on deposit in an escrow fund that are expected to be available to finance public facilities costs. "Improvement Fund" means an account specifically identified in the Indenture to hold funds which are currently available for expenditure to acquire or construct facilities eligible under the Act. "Outstanding Bonds" means all Previously Issued Bonds which are deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year. "Previously Issued Bonds" means all Bonds that have been issued by IA No. 2 prior to the date of prepayment. 1. Prepayment in Full I Clry of Azusa October 14, 2011 IA No. 2 of CFD No. 2005-1 (Rosedale) Page 18 The obligation of an Assessor's Parcel to pay the Special Tax A may be prepaid and permanently satisfied as described herein;provided that a prepayment may be made only for Assessor's Parcels of Developed Property or Undeveloped Property for which a building permit has been issued, and only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax A obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice,the CFD Administrator shall notify such owner of the prepayment amount of such Assessor's Parcel. The CFD Administrator may charge a reasonable fee for providing this service. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of Bonds from the proceeds of such prepayment may be given to the Trustee pursuant to the Indenture. The Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Amount plus Administrative Fees and Expenses less Reserve Fund Credit less Capitalized Interest Credit Total: equals Prepayment Amount As of the proposed date of prepayment, the Prepayment Amount(defined below)shall be calculated as follows: Paragraph No.: 1. Confirm that no Special Tax delinquencies apply to such Assessor's Parcel. 2. For Assessor's Parcels of Developed Property, compute the Maximum Special Tax A. For Assessor's Parcels of Undeveloped Property for which a building permit has been issued, compute the Maximum Special Tax A for that Assessor's Parcel as though it was already designated as Developed Property, based upon the building permit which has already been issued for that Assessor's Parcel. 3. Divide the Maximum Special Tax A computed pursuant to paragraph 2 by the total estimated Maximum Special Tax A for the entire IA No. 2 based on the Developed Property Special Tax A which could be charged in the current Fiscal Year on all expected development through buildout of IA No. 2, excluding any Assessor's Parcels which have been prepaid. City of Azusa - October 14, 2011 IA No. 2 of CFD No. 1005-1 (Rosedale) Page 19 4. Multiply the quotient computed pursuant to paragraph 3 by the Outstanding Bonds to compute the amount of Outstanding Bonds to be retired and prepaid (the 'Bond Redemption Amount"). 5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed (the "Redemption Premium"). y 6. Compute the current Future Facilities Costs. 7. Multiply the quotient computed pursuant to paragraph 3 by the amount determined pursuant to paragraph 6 to compute the amount of Future Facilities Costs to be prepaid (the "Future Facilities Amount"). 8. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds. I 9. Determine the Special Tax A levied on the Assessor's Parcel in the current Fiscal Year which has not yet been paid. I t 10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Prepayment Amount less the Future Facilities Amount and the Administrative Fees and Expenses from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the prepayment. 11. Add the amounts computed pursuant to paragraphs 8 and 9 and subtract the amount computed pursuant to paragraph 10 (the 'Defeasance Amount"). I 12. Verify the administrative fees and expenses of IA No. 2, including the costs of computation of the prepayment,the costs to invest the prepayment proceeds,the costs j of redeeming Bonds, and the costs of recording any notices to evidence the I prepayment and the redemption (the "Administrative Fees and Expenses"). I I 13. The reserve fund credit ("Reserve Fund Credit") shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associate with the redemption of Outstanding Bonds as a result of the prepayment,or (b)the amount derived by subtracting the new reserve requirement(as defined in the iIndenture) in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero. 14. If any capitalized interest for the Outstanding Bonds will not have been expended at the time of the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the quotient fcomputed pursuant to paragraph 3 by the expected balance in the capitalized interest r City' of Azusa October 24,2011 1A No. 2 of CFD No. 1005-1 (Rosedale) Page 20 fund after such first interest and/or principal payment (the "Capitalized Interest Credit"). 15. The Special Tax A prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the "Prepayment Amount"). 16. From the Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 11, 13 and 14 shall be deposited into the appropriate fund as established under the Indenture and be used to retire Outstanding Bonds or make debt service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Improvement Fund. The amount computed pursuant to paragraph 12 shall be retained by IA No. 2. The Special Tax A Prepayment Amount may be sufficient to redeem other than a$5,000 increment of Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next prepayment of bonds or to make debt service payments. As a result of the payment of the current Fiscal Year's Special Tax A levy as determined under paragraph 9(above),the CFD Administrator shall remove the current Fiscal Year's Special Tax A levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid, the Council shall cause a suitable notice to be recorded in compliance with the Act,to indicate the prepayment of Special Tax A and the release of the Special Tax A lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax A shall cease. Notwithstanding the foregoing, no prepayment will be allowed unless the amount of Maximum Special Tax A that may be levied on Taxable Property (based on expected development at build out) after the proposed prepayment,less expected Administrative Expenses,shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all Outstanding Bonds (excluding Bonds to be redeemed by such prepayment and all prior prepayments) in each future Fiscal Year and such prepayment will not impair the security of all Outstanding Bonds, as reasonably determined by the CFD Administrator. The Special Tax B may not be prepaid. 2. Prepayment in Part The Special Tax A on an Assessor's Parcel of Developed Property or an Assessor's Parcel of Undeveloped Property for.which a building permit has been issued may be partially prepaid. The Partial Prepayment Amount shall be calculated as in Section K.1; except that a partial prepayment shall be calculated according to the following formula: PP = [(PE-AE) x F] + AE City of Azusa October 24,2011 IA No. 2 of CFD No. 2005-1 (Rosedale) page 21 These terms have the following meaning: AE — the Administrative Fees and Expenses PP the partial prepayment PE the Prepayment Amount calculated according to Section K.1 F the percentage by which the owner of the Assessors Parcel is partially prepaying the Special Tax A. The owner of any Assessor's Parcel who desires such prepayment shall notify the CFD Administrator of such owner's intent to partially prepay the Special Tax A and the percentage by which the Special Tax A shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax A for an Assessor's Parcel within thirty(30)days of the request and may charge a reasonable'fee for providing this service. With respect to any Assessor's Parcel that is partially prepaid, the City shall (i) distribute the funds remitted to it according to Section K.1, and (ii) indicate in the records of IA No. 2 that there has been a partial prepayment of the Special Tax A and that a portion of the Special Tax A with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 -F) of the remaining Maximum Special Tax A, shall continue to be levied on such Assessor's Parcel pursuant to Section G. Notwithstanding the foregoing,no partial prepayment will be allowed unless the amount of Maximum Special Tax A that may be levied on Taxable Property(based on expected development at build out) after the proposed prepayment, less expected Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all Outstanding Bonds (excluding Bonds to be redeemed by such prepayment and all prior prepayments) in each future Fiscal Year and such partial prepayment will not impair the security of all Outstanding Bonds, as reasonably determined by the CFD Administrator. 3. Bond Call based on Backup Special Tax A The Prepayment Amount for a Backup Special Tax A payment shall equal the amount necessary to call Bonds based on steps 4, 5, 12, 13, and 14 of Section K.1. above such that the total Special Tax A revenues available in any Fiscal Year (i.e., the Expected Special Tax A Revenues from step 2 of Section D above for the Planning Area for which the Backup Special Tax A payment is being made plus the Required Special Tax A Revenues from all other Planning Areas as adjusted to the date of calculation and both escalated by 2%per Fiscal Year) less anticipated annual Administrative Expenses as of the date of calculation will be approximately equal to (but not less than) 110%of the debt service on the Outstanding Bonds during the current Fiscal Year and all future years. From the Backup Special Tax A payment,the amounts computed pursuant to paragraphs 4, 5, 13, and 14 shall be used to retire Outstanding Bonds. The amount computed pursuant to paragraph 12 shall be retained by IA No. 2. The Maximum Special Tax A shall not be reduced as a result of a Backup Special Tax A payment. City,of Azusa October 24, 2011 1A No. 2 of CFD No. 2005-1 (Rosedale) Page 22 L. TERM OF SPECIAL TAX The Special Tax A, Backup Special Tax A, and One-Time Special Tax shall be levied for a period not to exceed fifty years commencing with Fiscal Year 2012-2013. The Special Tax B shall be levied as long as necessary to meet the Special Tax Requirement for Services. K:\CLIENTS2\Azusa.cty\Mello\cfd2005-I\RMA\lA 2 Amended RMA\IA2 RMA 09.doc 4 City of Azusa October 24,2011 IA No. 2 of CFD No. 2005-I (Rosedale) page 23 EXHIBIT A PLANNING AREAS Planning Area , Description Planning Area 1 (GPI) Lots 1, 2, 3, 4, 5, and 6 of j Zone 1 Tract No. 66141 I i Planning Area 2 (GP2) Lots 9, 10, 11, and 12 of Zone 1 Tract No. 66141 �e Planning Area 3 (GP3) Lots 7 and 8 of Zone I Tract No. 66141 Planning Area 4 (Tl) Lots 13, 14, 15, 16, 17, 18, and 19 of Zone 1 Tract No. 66141 Planning Area 5 (Transit 2) Assessor's Parcels 8625-005-040 Zone 2 and 8625-005-041 [Insert Planning Area Map here] EXHIBIT B i CERTIFICATE OF REDUCTION IN SPECIAL TAXES City of Azusa IA No. 2 of CFD No. 2005-1 i I 1. 'Pursuant to Section F of the Amended and Restated Rate and Method of Apportionment, the !Maximum Special Tax A for Developed Property for[certain or all] Land Use Classes within 1A No. 2 has been reduced. 2. IThe calculations made pursuant to Section F were based upon a Price Point Study that was received by the CFD Administrator on 3. Tables 1 and 2 below shows the Maximum Special Tax A for each Land Use Class after such reduction. Table 1 Maximum Special Tax for Developed Property Zone 1 Land Use Ctlass. Description Residential Floor Area; ` Maximum Special Tax A , . 1 Residential Property > 1,950 SF [$____j per dwelling unit 2 Residential Property 1,751 — 1,950 SF per dwelling unit 3 Residential Property 1,551 — 1,750 SF per dwe ling unit 4 Residential Property 1,401 — 1,550 SF per dwelling unit 5 Residential Property < 1,401 SF per dwelling unit 6 Non-Residential PropeNA 2er Acre Table 2 Maximum Special Tax for Developed Property Zone 2 Land Use Class Description.. Residential Floor Area, Maximum Special Tax A 1 Residential Property > 1,300 SF [$_� per dwelling unit 2 Residential Property 1.201 — 1,300 SF $ per dwelling unit 3 Residential Property < 1.201 SF $ per dwelling unit 4 Non-Residential Property NA 2er Acre I Certificate of Reduction in Special Taxes Page 2 4. Upon execution of this certificate by CFD No. 2005-1, CFD No. 2005-1 shall cause an amended notice of Special Tax lien for IA No. 2 to be recorded reflecting the Maximum Special Tax A set forth herein for the Assessor's Parcels listed in Attachment A. No amended notice of Special Tax Lien shall be recorded for Assessor's Parcels listed in Attachment B (One-Time Special Tax previously calculated). Submitted CFD ADMINISTRATOR By. Date: By execution hereof, the undersigned acknowledges, on behalf of CFD No. 2005-1, receipt of this certificate and modification of the Amended and Restated Rate and Method of Apportionment for the Assessor's Parcels listed in Attachment A as set forth in this certificate. CITY OF AZUSA CFD NO. 2005-1 By: Date as of: [date of issuance of Bonds] EXHIBIT C CERTIFICATE OF NO REDUCTION IN SPECIAL TAXES City of Azusa IA No. 2 of CFD No. 2005-1 I 1. All calculations required pursuant to Section F of the Amended and Restated Rate and Method of Apportionment have been made based upon a Price Point Study that was received by the CFD Administrator on 2. The Total Tax and Assessment Obligation for all Plan Types in a Land Use Class is less than or equal to 2.00% of the Price Point for such Plan Type. i 13. The Maximum Special Tax A for Developed Property within IA No. 2 set forth in Section C.L(a) of the Amended and Restated Rate and Method of Apportionment shall remain in effect and not be reduced. I Submitted CITY OF AZUSA CFD NO. 2005-1 Byi Date as of. [date of issuance of Bonds] RESOLUTION NO. 11-C81 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA DECLARING THE RESULTS OF THE SPECIAL ELECTION FOR IMPROVEMENT AREA NO. 2 OF CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) ON THE QUESTION OF WHETHER THE RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX FOR SAID IMPROVEMENT AREA SHOULD BE AMENDED AND RESTATED WHEREAS, on November 21, 2011, the City Council (the "City Council") of the City of Azusa (the "City") adopted a resolution (the "Election Resolution") calling a special election within and for Improvement Area No. 2 (the "Improvement Area") of City of Azusa Community Facilities District No. 2005-1 (Rosedale) (the "District') on the question of whether to amend and restate the Rate and Method of Apportionment of Special Tax for Improvement Area No. 2 of the District (the "Original RMA") to implement, among other things, changes to the rates of special tax to be levied on parcels of taxable property within the Improvement Area to pay debt service on the bonds of the District that may be issued to finance the design, construction and acquisition of public facilities authorized to be financed by the District, or to pay the costs of the provision, construction and acquisition of such public facilities and/or to accumulate funds therefor, as provided in the Amended and Restated Rate and Method of Apportionment of Special Tax for the Improvement Area (the "Amended and Restated RMA") which is attached as Exhibit "B" to Resolution No. 11-C80 of the City Council of the City of Azusa on November 21, 2011; and WHEREAS, the City Council has received a statement from the City Clerk (the "City Clerk"), who pursuant to the Election Resolution was authorized to conduct the special election within and for the Improvement Area and act as the election official for such election, ' I i - I with respect to the canvass of the ballots returned and the results of the special election, certifying that more than two-thirds of the votes cast upon the question submitted to the voters in the special election were cast in favor of such question. I NOW, THEREFORE, BE. IT RESOLVED, DETERMINED AND ` ORDERED BY THE CITY COUNCIL OF THE CITY OF AZUSA AS FOLLOWS: I Section 1. Findings. The City Council finds that: (i) there were no persons registered to vote within the boundaries of the Improvement Area at the time of the close of the public hearing on November 21, 2011, and pursuant to Section 53326 of the California Government Code ("Section 53326") the vote in the special election was, therefore, to be by thl landowners owning land within the Improvement Area, with each landowner having one vote for each acre or portion of an acre of land that he or she owned within the Improvement Area that would have been subject to the special tax if levied at the time of the special election; (ii) pursuant to_Section 53326 and the Election Resolution, the City Clerk caused to be mailed to Rosedale Land Partners, II, LLC, a Delaware limited liability company; and i William Lyon Homes, Inc., a California corporation, the owners of all of the taxable property within the Improvement Area (the "Owners"), ballots for the special election; (iii) the Owners wl ived the time limits for holding the special election and the election dates specified in Section 53326, and consented to the calling and holding of the special election on November 21, 2011; (iv) the special election has been properly conducted in accordance with all s tutory requirements and the provisions of the Election Resolution; (v) pursuant to Section 53326, the Owners, which collectively owned approximately 26.857 acres of taxable property inI the Improvement Area, were entitled to 28 votes in the special election; (vi) ballots for the special election within and for the Improvement Area were returned by the Owners to the City 45635.08001\6996525.1 2 I Clerk prior to the hour on the date of the election specified by the City Council for the return of voted ballots; (vii) the ballots returned to the City Clerk by the Owners voted all votes to which they were entitled in favor of the proposition set forth therein; (viii) more than two- thirds of the votes cast in the special election on said proposition were cast in favor thereof, and pursuant to Sections 53328 and 53338(b) of the California Government Code, the proposition carried; (ix) the City Council, as the legislative body for the District, is authorized to levy special taxes on taxable property in the Improvement Area to pay debt service on the bonds that may be issued to finance the design, construction and acquisition of public facilities authorized to be financed by the District, or to pay the costs of the provision, construction and acquisition of such public facilities and/or to accumulate funds therefor at the special tax rates and pursuant to methodology for determining and apportioning such special taxes that are set forth in the Amended and Restated RMA for the Improvement Area that is attached as Exhibit `B" to Resolution No. 11-C80 adopted by the City Council on November 21, 2011. Section 2. Declaration of Results. All votes voted in the special election within and for the Improvement Area on the question with respect to the revision of the Original RMA for the Improvement Area to implement, among other things, changes to the rates of special tax to be levied on parcels of taxable property in the Improvement Area to pay debt service on the bonds that may be issued to finance the design, construction and acquisition of public facilities authorized to be financed by the District, or to pay the costs of the provision, construction and acquisition of such public facilities and/or to accumulate funds therefor, as provided in the Amended and Restated RMA for the Improvement Area which is 45635.08001\6996525.1 3 i attached as Exhibit `B" to Resolution No. I1-C80 adopted by the City Council on November 211, 2011, were voted in favor thereof, and the proposition carried. I Section 3. Effect of Election. The effect of the results of the special election within and for the Improvement Area, as specified in Section 2 hereof, is`that the City Council, as the legislative body of the District, is authorized to levy special taxes on taxable property within the Improvement Area in an amount sufficient to pay debt service on the bonds of the District that may be issued to finance the design, construction and acquisition of piblic facilities authorized to be financed by the District for the Improvement Area, or to pay the costs of the provision, construction and acquisition of such public facilities and/or to accumulate funds therefor, as provided in the Amended and Restated RMA for the Improvement Area which is attached as Exhibit `B" to Resolution No. 11-C80 adopted by the City Council of the City of Azusa on November 21, 2011. Pursuant to Section 53338(b) of the California Government Code, the City Council finds that the matters described in the preceding sentence have been lawfully authorized. {� Section 4. Amendment to Notice of Special Tax Lien. The City Clerk shall record an amendment to the notice of special tax lien for the District pursuant to Section f 531338(c) of the California Government Code and Section 3117.5 of the California Streets and I Highways Code. ADOPTED by the City Council this 21st day of November, 2011. Mayor of the City of Azusa Attest: City Clerk of the City of Azusa 45635.0800116996525.1 4 CERTIFICATION I, Vera Mendoza, City Clerk of the City of Azusa, certify that the foregoing regolution was adopted by the City Council at a regular meeting held on the 21st day of November, 2011 by the following vote: AYES: NOES: ABSENT: ABSTAIN: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of Azusa this_day of November, 2011. VERA MENDOZA City Clerk of the City of Azusa 45635.08001\6996525.1 5 i i j e SCHEDULED ITEM TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL (/ FROM: ALAN KREIMEIER, DIRECTOR OF ADMINISTRATIVE SERVICES/ CFO VIA: F.M. DELACH, CITY MANAGER` I DATE: NOVEMBER 21, 2011 i SUBJECT: APPROVAL OF RESOLUTION No. 2011-XX, APPROVING AN INSTALLMENT SALE AGREEMENT RELATING TO THE DEFEASEANCE AND REFUNDING OF THE CITY'S OUTSTANDING 1994 CERTIFICATES OF PARTICIPATION (1994 SEWER SYSTEM REFUNDING PROJECT) AND AUTHORIZING THE FINANCING OF ADDITIONAL IMPROVEMENTS TO THE CITY'S SEWER SYSTEM RECOMMENDATION It is recommended that the City Council approve,the and authorize staff to take the necessary steps to complete the refinancing of the 1994 Certificates of Participation, as well as new money necessary to complete improvements through private placement of an Installment Sale Agreement. Staff and the City's financial advisor recommend approval of the attached legal documents and the use of Capital One for this financing. BACKGROUND At the October 17, 2011 City Council meeting the Council authorized the staff to move forward with refunding of the City's 1994 Certificates of Participation and the financing of improvements to the City's wastewater system through a private placement structure with Capital One. The action will provide Fiscal Year 2012 savings of $76,000 and total net present value savings of $127,000 resulting from refunding the 1994 Certificates of Participation as well as new money ($4.1 million) necessary to construct sewer system improvements that will be raised by the Installment Sale Agreement. On June 20, 2011, the City Council conducted a public hearing, received public comments, and adopted an ordinance establishing sewer rate increases of 5% over the next 10 years. This action was necessary to meet the financing needs of the City's Sewer Master Plan, which calls for the repair of existing lines and pipes, as well as improvements to the hydraulic capacity of the system. I I The City's Sewer Master Plan (SMP) consultant estimated the total cost of improvements to be upwards of$8 million over tb'c next 10 years, taking into account a 3% inflationary factor. To finance the improvements to the sewer system, City staff, in conjunction with the City's financial advisor, evaluated the following three options: 1) Option I: Finance the improvements to the system at a cost of over $8 million with Pay- Go Capital over a 10 year period. The cost of inflation for this scenario is currently estimated to be about $1.4 million. 2) Option 2: Finance the improvements to the system through the issuance of bonds which would refund the City's outstanding 1994 Certificates of Participation and provide new money to finance the improvements. The bond would have a 20 year maturity, with total interest cost for the refunding and new money portions equaling approximately $6 million over the life of the bonds. Average annual debt service would be approximately $680,000. 3) Option 3: Finance the improvements to the system through a combination of Pay-Go Capital, cash on-hand, and the issuance of two private placements which would provide funds to: refund the outstanding 1994 bonds for savings, and provide the additional capital necessary to finance the improvements to the sewer system. Based on an analysis of each option, Option 3 was determined to be the most cost effective strategy. Attached to this staff report is a summary of the projected debt service payments under Option 3. The City received a bid from the Underwriting firm EJ De La Rosa & Co. for the issuance of traditional tax-exempt bonds. Additionally, staff directed the City's financial advisor to solicit bids from interested financial institutions for a private placement. Bids were requested from Brandis Tallman, Bank of America, and Capital One Public Funding (Capital One). Brandis Tallman did not ultimately bid and Bank of America declined to bid due to poor debt service coverage in prior years. Capital One provided a competitive bid and performed preliminary credit analysis for the transaction. The financing structure recommended by staff and the financial advisor includes a private placement of an Installment Sale Agreement with the following components: 1) Refinancing the 1994 COPS at a fixed rate of 2.9% without modifying the term or structure of the existing bonds, which provided savings of$127,000 through 2020. 2) Financing new money in the amount of$4.1 million at a fixed interest rate of 3.6% and final maturity of 2025. 3) Funding the remaining portion of the projects with existing cash on hand. Funding most of the projects up-front (in lieu of a pure Pay-Go strategy over a 10 year period), shortens the construction period by as much as 40%-50% and reduces the effect of inflation on construction costs. Additionally, private placements generally have a lower cost of issuance than traditional bond financing. FISCAL IMPACT I The proposed Installment Sale Agreement will be a limited obligation of the City's sewer enterprise, payable solely from net revenues derived from the system. The Installment payments arel allocated among the refinancing of the 1994 COPS and the new money. So that the City can take advantage of a lower fixed rate for the shorter-term refinancing of the 1994 COPS. The new money financing will be "wrapped" around the refunding portion, resulting in level annual debt payments equal to approximately$524,000 through 2025. One of the benefits of utilizing a private placement over a traditional bond financing is the lower cost of issuance. To issue bonds, the up-front cost to the City of Azusa would be approximately $120,000. In contrast, the cost of the private placement will be $75,000. This amount includes thelfollowing services: Financial Advisor- Urban Futures, Inc.; Bond Counsel & City Attorney- Best, Best & Krieger; Lender's Counsel- Kronick, Moskovitz,- Tiedemann & Girard; and Trustee- Wells Fargo Bank. The Lender, Capital One Public Funding, LLC, will not receive any loan fees for this transaction. ]n choosing to move forward with a private placement, the City of Azusa will realize up-front, direct savings of$45,000 in the difference between fees. In addition, private placements do not require annual continuing disclosure reports or trustee services. As a result, the City will save an additional $25,000 through the life of the financing, bringing the total cost savings to $70,000. It should be noted that private placement deals are only available for smaller financings typically under$5 million. In Iummary the City will: 1. Save $127,000 from the payoff of the existing COP'S. 2. Receive $4.1 million in new money to expedite construction of Master Planned sewer improvements. 3. Save $70,000 by utilizing a private placement sale through Capital One I DOICUMENTS TO BE APPROVED Authorizing Resolution: The Resolution approves the Installment Sale Agreement, Irrevocable Prepayment Instructions, authorizes the defeasance of the 1994 Certificates of Participation, and the lfinancing of additional facilities to improve the City's wastewater system. Installment Sale Agreement: This document outlines the responsibilities of the City and Capital One and provides the formal agreement and terms of the transaction between the two parties including the obligation of the City to pay installment payments. Irr(vocable Prepayment Instructions: This document provides instructions regarding prepayment of the installment payments to the City's Trustee, Wells Fargo, for the 1994 Certificates of Participation on Februaryl, 2012. Acquisition Agreement: This document establishes the "City of Azusa Project Fund" to be held in trust by the City's Custodian, Wells Fargo. Funds held by the Custodian will be disbursed at the City's request to pay for new wastewater facilities funded from Installment Sale Agreement proceeds. ATTACHMENTS Resolution Installment Sale Agreement Irrevocable Prepayment Instructions Acquisition Agreement (11/16/2011) Alan Kreimeier-Azusa 2011 Wastewater Financing - City Council Page 1 I RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA APPROVING AN INSTALLMENT SALE AGREEMENT AND IRREVOCABLE PREPAYMENT INSTRUCTIONS AND AUTHORIZING THE DEFEASANCE AND REFUNDING OF THE CERTIFICATES OF PARTICIPATION (1994 SEWER SYSTEM REFINANCING PROJECT) AND AUTHORIZING THE FINANCING OF ADDITIONAL FACILITIES TO IMPROVE THE CITY'S WASTEWATER SYSTEM WHEREAS, the City of Azusa (the "City") previously entered into an Installment Sale Agreement, dated as of March 1, 1994 (the "1994 Installment Sale Agreement"), whereby the City (i) refinanced certain improvements to the City's water system (the "1994 Project") and obligated itself to make installment payments in the amounts and on the dates specified in the 1994 Installment Sale Agreement (the"1994 Installment Payment Obligation"); and WHEREAS, in order to finance the 1994 Project, the City authorized the preparation, execution and delivery of certificates of participation in the aggregate principal amount of $3,100,000 (the "1994 Certificates") pursuant to a Trust Agreement, dated as of March 1, 1994, by and among the City, the Azusa Public Financing Authority, and Wells Fargo Bank, National Associaton (the "Trustee"), as successor trustee (the "1994 Trust Agreement"); and/ WHEREAS, the City Council (the "City Council") has determined that it is in the best interests of the City that the 1994 Installment Payment Obligation be reduced by refinancing the, 1994 Project at interest rates which are lower than those with regard to the 1994 Certificates; and I WHEREAS, in order to accomplish such refinancing it is necessary and desirable forl the City to secure payment of the 1994 Installment Payment Obligation, thereby defeasing they 1994 Certificates, as permitted and provided in the 1994 Installment Sale Agreement and the 1994 Trust Agreement; and I WHEREAS, in order to secure the payment of the 1994 Installment Payment Obligation, it is necessary and desirable to sell and transfer the Project to Capital One Public Funding, LLC (the "Corporation") and to immediately reacquire the 1994 Project by purchasing the/ 1994 Project from the Corporation pursuant to the Installment Sale Agreement, hereinafter moire particularly described; and WHEREAS, the City desires to raise additional funds for repair, replacement and expansion of its wastewater transmission system (the "Project"); and I WHEREAS, the Corporation will provide the funds necessary to secure payment of the 1994 Installment Payment Obligation and defease the 1994 Certificates and to finance the I 45635.01425\7009754.3 1 . (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing - City Council page 2 Project by acquiring an Installment Sale Agreement between the Corporation and the City (the "Installment Sale Agreement'), under which it will receive Installment Payments; and WHEREAS, the rates of interest reflected in the interest components of the Installment Payments will be lower than the interest rates with regard to the 1994 Certificates and the amount of the interest components of the Installment Payments relating to the 1994 Installment Payments will therefore be lower than the amounts of the interest components of the 1994 Installment Payment Obligation; and WHEREAS, the funds necessary to secure payment of the 1994 Installment Payment Obligation and defease the 1994 Certificates will be deposited for such purpose in an escrow fund created pursuant to Irrevocable Prepayment Instructions, hereinafter more particularly described; and WHEREAS, the funds necessary to finance the Project will be deposited in a Project Fund held in a custodial or disbursement account pursuant to an Acquisition Agreement; and WHEREAS, the City Council has determined that it is in the best interests of the City and desirable that the Installment Sale Agreement, the Irrevocable Prepayment Instructions and the Acquisition Agreement be approved as hereinafter provided and that the aggregate principal amount represented by the Installment Payments not exceed $6,000,000 for the purposes provided above; NOW, THEREFORE, the City Council of the City of Azusa resolves as follows: Section 1. Refinancing of 1994 Certificates and Financinjz of Project. The City hereby approves the refinancing of the 1994 Certificates and the financing of the Project with the installment payment arrangement as described herein; provided, however, the aggregate principal amount of the installment payment arrangement shall not exceed $6,000,000 and the interest rate associated therewith shall not exceed 2.90% with respect to installment payments relating to the prepayment of the 1994 Installments and 3.60% with respect to Installment Payments relative to financing the Project. Section 2. Approval of Installment Sale Agreement. The agreement entitled "Installment Sale Agreement" to be entered into by and between the City and the Corporation which provide generally for (i) the sale by the City to the Corporation of the Project, (ii) the purchase by the City from the Corporation of the 1994 Project and the Project, and (iii) the payment by the City to the Corporation from the Net Revenues of the Wastewater System (as such terms are defined in the Installment Sale Agreement) of Installment Payments are approved, and the Mayor, the City Manager, and the Chief Financial Officer/Administrative Services .Director are, and each of them is, authorized to execute, acknowledge and deliver said agreements on behalf of the City. Section 3. Approval of Irrevocable Prepayment Instructions. Wherein the City directs the Trustee to create an escrow fund and to take all necessary action to defease and refund the 1994 Certificates is approved, and the Mayor, the City Manager, and the Chief 45635.01425%7009754.3 - 2 (11/16/2011) in Kreimeier Azusa 2011 Wastewater Financing - City Council Page 3 it - - -- -�- Financial Officer/Administrative Services Director are, and each of them is, authorized to execute, acknowledge and deliver the Irrevocable Prepayment Instructions on behalf of the City. { Section 4. Acquisition Agreement. The City hereby approves the Acquisition Agreement among the City, the Corporation, and Wells Fargo Bank, National Association, as Custodian or Disbursement Agent. The Mayor, the City Manager and the Chief Financial Officer/Administrative Services Director are, and each of them is, authorized to execute, acknowledge and delivery the Acquisition Agreement on behalf of the City. Section 5. Modifications. The approval of said agreements given by this resolution shall apply to any modification or amendment of any said agreements which is agreed upon and approved by Special Counsel to the City, and the City Manager or the Chief Financial Officer/Administrative Services Director, as being necessary to carry out the provisions thereof and the authorizations and direction provided in this resolution. Section 6. Further Action. The Mayor, the City Manager, the Chief Financial Officer/Administrative Services Director and the City Clerk, or their written designees, are authorized to take any and all action which is directed by Special Counsel to the City with respect to the execution, acknowledgment and delivery of the aforementioned agreements which in the opinion of said Special Counsel is necessary in order for the authorizations and direction proivided in this resolution to be carred out. PASSED, APPROVED and adopted by the City Council of the City Council of thea City of Azusa at a regular meeting thereof held November 21, 2011, and approved by the foll owing vote: r Mayor ATTEST: City Clerk I HEREBY CERTIFY that the foregoing Resolution No. was duly adopted at a regular meeting of said City Council on the 21st day of November, 2011, by the fAIowing vote of the Council: AYES: NOES: ABSENT: 45635.0!425\7009754.3 3 (1 1/9 61201 1) Alan Kreimeier-Azusa 2011 Wastewater Financing Installment _ �� Page 1 INSTALLMENT SALE AGREEMENT THIS INSTALLMENT SALE AGREEMENT, (this "Installment Sale Agreement'), dated for convenience as of November 1, 2011, is by and between Capital One Public Funding, LLC, a limited liability company organized and existing under the laws of the State of New York ("COPF"), and-the City of Azusa, a municipal corporation duly organized and existing under the Constitution and laws of the State of California (the "City"); WITNESSETH: WHEREAS, the City presently owns and operates certain facilities and property for the transmission and disposal of wastewater for residents within the service area of the City (the "Enterprise"), and WHEREAS, the City has previously financed the acquisition and construction of the improvements and facilities more particularly described in Exhibit B attached hereto (the "1994 Project") with the proceeds of the City of Azusa Certificates of Participation (1994 Sewer System Refinancing Project) (the "1994 Certificates") that represented interests of the owners thereof in installment payments to be made by the City under an Installment Sale Agreement by and between the City and the Azusa Public Financing Authority dated as of March 1, 1994 (the "1994 Installment Sale Agreement'), and I WHEREAS, the City desires to refinance its obligations incurred under the 1994 Installment Sale Agreement by selling the 1994 Project to COPF and immediately purchasing the 1994 Project from COPF thereby obligating itself to make installment payments all as more particularly set forth herein; and WHEREAS, the City desires to raise additional funds for the repair, replacement and expansion of its existing wastewater transmission system (the "Project") and COPF will sell the Project to the City pursuant to this Installment Sale Agreement, the proceeds of such sale being held in a custodial arrangement under an Acquisition Agreement, dated as of November 1, 2011, between the City, COPF, and Wells Fargo Bank, National Association; and WHEREAS, COPF has agreed to assist the City in refinancing the 1994 Project and financing the Project as set forth herein; NOW, THEREFORE, in consideration of the above premises and of the mutual covienants hereinafter contained and for other good and valuable consideration, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND EXHIBITS SECTION 1.1. Definitions. All capitalized terms used in this Section 1.1 shall for all purposes of this Installment Sale Agreement have the meanings herein specified or as hereinafter defined. 45635.01425\7008845.3 1 (11!16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing Installment Page 2 "Acquisition Agreement" means the Acquisition Agreement dated as of November 1, 2011, among COPF, the Custodian, and the City. "Assignee" means any entity to whom the rights of COPF hereunder shall be assigned. "Bond Counsel" means any attorney or firm of attorneys of nationally recognized expertise with respect to legal matters relating:to obligations the interest on which is excludable from gross income under Section 103 of the Tax Code. "City" means the City of Azusa, a municipal corporation duly organized and existing under the Constitution and laws of the State of California. "Closing Date" means the date COPF pays, transfers, or deposits the Installment Sale proceeds as provided in Section 3.2. "COPF" means Capital One Public Funding, LLC, a limited liability company duly organized and existing under the laws of the State of New York. Whenever in this Installment Sale Agreement any reference is made to COPF and such reference concerns rights that have been assigned to an Assignee, such reference shall be deemed to refer to the Assignee. "Custodian" means Wells Fargo Bank, National Association, a national banking association, as custodian under the Acquisition Agreement. "Enterprise" means the existing facilities and property owned by the City in connection with the wastewater transmission services of the City, together with all extensions thereof and improvements thereto hereafter acquired, constructed or installed by the City. "Escrow Bank" means Wells Fargo N.A., a national banking association duly organized and existing under the laws of the United States of America and any successor thereto. "Escrow Fund" means the Escrow Fund to be established by the Escrow Bank pursuant to the irrevocable prepayment instructions of the City dated November_, 2011. "Event of Default"means any of the events of default as defined in Section 5.1. "Federal Securities" means any direct general non-callable obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), or obligations the timely payment of principal of and interest on which are directly guaranteed by the United States of America. "Fiscal Year" means each twelve-month period during the Term of this Installment Sale Agreement commencing on July 1 in any calendar year and ending on June 30 in the next succeeding calendar year, or any other twelve-month period selected by the City as its fiscal year period. "Gross Revenues" means all gross charges received for, and all other gross income and receipts derived by the City from, the ownership and operation of the Enterprise or otherwise arising from the Enterprise, including but not limited to connection charges (to the extent legally available to pay any of the amounts described in Section 4.5(a) and earnings on the investment of 45635.01425\7008845.3 2 (11/t6/2011) Alan Kreimeier -Azusa 2011 Wastewater Financing - Installment Page 3 any funds held by the City in the Revenue Fund; but excluding (a) the proceeds of any ad valorem property taxes levied for the purpose of paying bonded indebtedness of the City and (b) the proceeds of any special assessments or special taxes levied upon real property within any improvement district served by the City for the purpose of paying special assessment bonds or special tax obligations of the City. "Installment Sale Agreement" means this Installment Sale Agreement, dated as of November 1, 2011, between COPF and the City. "Installment Payment Date" means the dates on which each Installment Payment is due and'payable as set forth on Exhibit A attached hereto. "Installment Payments" means all payments required to be paid by the City on any date pursuant to Section 3.4, including any prepayment thereof pursuant to Section 6.2 or 6.3. "Irrevocable Prepayment Instructions" means the instructions dated November 2011, are given by the City to Wells Fargo Bank, National Association, acting as trustee for the 1994 Certificates. "1994 Certificates" means the $3,100,000 initial aggregate principal amount City of .Azusa Certificates of Participation (1994 Sewer System Refinancing Project). "1994 Installment Sale Agreement" means the Installment Purchase Contract dated as of March 1, 1994, by and between the City and the Azusa Public Financing Authority. e "1994 Project" means project funded with proceeds of the 1994 Certificates and designated as such in Exhibit B attached hereto. I "1994 Trust Agreement" means the Trust Agreement dated as of March 1, 1994, by and among the City, the Azusa Public Financing Authority and Wells Fargo N.A., as successor trustee. "Maximum Annual Debt Service" means, as of the date of any calculation, the maximum sum obtained for the current or any future Fiscal Year during the Term of this Installment Sale Agreement by totaling the aggregate amount of(i) the Installment Payments coming due in such Fiscal Year, and (ii) the principal and interest coming due and payable in such Fiscal Year on any, Parity Debt, including the principal amount coming due and payable by operation of mandatory sinking fund redemption. There shall be excluded from such calculation any principal of and interest on the Installment Payments for the payment of which a security deposit has been deposited in accordance with Section 6.1 and any Parity Debt that has been defeased or discharged. In determining the debt service on Parity Debt for which interest is calculated at a variable interest rate, such Parity Debt shall be assumed to bear interest at a fixed interest rate equal to the highest variable rate borne over the preceding 24 months by outstanding variable rate debt of the City, or, if no such variable rate debt is at the time outstanding, by variable rate debt for which the interest rate is computed by reference to an index comparable to that to be utilized in determining the interest rate for the Parity Debt proposed to be issued. With respect to any Parity Debt that is a tax incentive bond (such as a Build America Bond), such interest 45635.01425\7008845.3 3 (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing Installment Page 4 shall be equal to the net interest paid by the City after taking into account any anticipated payments to be received by or on behalf of the City from the United States of America. "Net Revenues" means, for any period, an amount equal to all of the Gross Revenues received during such period, minus the amount required to pay all Operation and Maintenance Expenses becoming payable during such period. "Operation and Maintenance Expenses" means the reasonable and necessary costs and expenses paid by the City for maintaining and operating the Enterprise, including but not limited to the reasonable expenses of management and repair and other costs and expenses necessary to maintain and preserve the Enterprise in good repair and working order, and including but not limited to administrative costs of the City attributable to the Enterprise and the financing thereof, but in all cases excluding depreciation, replacement and obsolescence charges or reserves therefor and excluding amortization of intangibles or other bookkeeping entries of a similar nature. "Parity Debt" means any bonds, notes or other obligations of the City payable from and secured by a pledge of and lien upon any of the Net Revenues on a parity with the Installment Payments. "Permitted Investments" means any investments permitted under Section 53601 of the California Government Code and in conformity with the City's current investment policy. "Project" means all of the facilities and improvements acquired with the proceeds hereof as more particularly described in Exhibit B attached hereto and by this reference incorporated herein. "Reserve Fund" means the fund by that name established by the City and referenced in Section 3.9 hereof. "Reserve Requirement" means an amount equal to one-half of the maximum amount of the Installment Payments coming due in the current or any future Fiscal Year during the Term of this Installment Sale Agreement. "Revenue Fund" means the fund by that name established by the City and referenced in Section 3.8(b). "Tax Code" means the Internal Revenue Code of 1986. Any reference herein to a provision of the Tax Code shall include all applicable temporary and permanent regulations promulgated under the Tax Code. "Term of this Installment Sale Agreement" or "Term" means the time during which this Installment Sale Agreement is in effect, as provided in Section 3.3. SECTION 1.2. Exhibits. The following Exhibits are attached to, and by reference made a part of this Installment Sale Agreement: Exhibit A: Schedule of Installment Payments to be paid by the City hereunder, showing the date and amount of each such Installment Payment. 45635.0142517008845.3 4 (11/ 612011) Alan Kreimeier-Azusa 2011 Wastewater Financing .Installment _ Page 5 I Exhibit B: The original description of the Project and the 1994 Project. Exhibit C: Form of Acknowledgment of Assignment. Exhibit D: Certificate of the purchaser under this Installment Sale Agreement. ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES CitySECTION 2.1. Representations, Covenants and Warranties of the City. The represents, covenants and warrants to COPF as follows: (a) Due Organization and Existence. The City is a municipal corporation duly organized and existing under the Constitution and laws of the State of California. I (b) Authorization. The laws of the State of California authorize the City to enter into this Installment Sale Agreement, the Acquisition Agreement and the Irrevocable Prepayment Instructions and to enter into the transactions contemplated hereby and thereby, and to carry out its I obligations under this Installment Sale Agreement and the Irrevocable Prepayment Instructions and the City Council has duly authorized the execution and delivery of this Installment Sale Agreement, the Acquisition Agreement and the Irrevocable Prepayment Instructions. i (c) No Violations. Neither the execution' and delivery of this Installment Sale Agreement and the Irrevocable Prepayment Instructions nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which the City is now a party or by which the City is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrances whatsoever upon any of the property or assets of the City, other than as set forth herein. (d) No Prior Indebtedness. Except as disclosed to COPF, the City has not issued or incurred any obligations which are currently outstanding having any priority in payment out of thel Gross Revenues or the Net Revenues over the payment of the Installment Payments as prof ided herein. for I (e) Role of COPF. The City acknowledges that: (a) COPF is acting hereunder solely its own account and not as a fiduciary for the City or in the capacity of broker, dealer, municipal icipal securities underwriter or municipal advisor; (b) COPF has not provided, and will not pro I vide, financial, legal, tax, accounting or other advice to or on behalf of the City with respect to any of the transactions contemplated by this Installment Sale Agreement; and (c) the City has sought and obtained financial, legal, tax, accounting and other advice (including as it relates to structure, timing, terms and similar matters) with respect to this Installment Sale Agreement from its financial, legal and other advisors (and not COPF) to the extent that the City desired to obtain such advice. 45635.01425\7008845.3 5 (11!16/2011)Alan Kreimeier-Azusa 2011 1Nastewater Financing - Installment Page 6 (f) Facilitation of Assignments. The City hereby agrees that, upon the request of COPF or the Assignee, the City shall answer questions from and furnish all documents and information requested by a potential Assignee concerning the City, the Enterprise, this Installment Sale Agreement, and the security for the City's obligations hereunder, and the transactions and documents related to or contemplated by the foregoing and all matters related thereto. SECTION 2.2. Representations, Covenants and Warranties of COPF. COPF represents, covenants and warrants to the City as follows: (a) Due Organization and Existence. COPF is a limited liability company duly organized and existing under the laws of the State of New York. (b) Authorization. The laws of the State of New York authorize COPF to enter into this Installment Sale Agreement and the Acquisition Agreement and to enter into the transactions contemplated hereby and thereby, and to carry out its obligations under this Installment Sale Agreement and the Acquisition Agreement and COPF has duly authorized the execution and delivery of this Installment Sale Agreement by its officers. (c) No Violations. Neither the execution and delivery of this Installment Sale Agreement or the Acquisition Agreement nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which COPF is now a party or by which COPF is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of COPF. (d) Certificate of COPF. COPF will deliver to the City a certificate in the form set forth in Exhibit D hereto. ARTICLE III TERMS OF INSTALLMENT SALE SECTION 3.1. Sale and Purchase. Sale. Based upon the consideration of COPF entering into this Installment Sale Agreement enabling the City to finance the Project and to refinance its obligations with respect to the 1994 Installment Sale Agreement, the City hereby sells the 1994 Project to COPF and COPF hereby purchases the 1994 Project from the City. Purchase. COPF hereby sells the Project and the 1994 Project to the City, and the City hereby purchases the Project and the 1994 Project from COPF, upon the terms and conditions set forth in this Installment Sale Agreement. As consideration for this Installment Sale Agreement, COPF shall pay, deposit, or transfer as described in 3.2 the total amount of$ in immediately available funds on the Closing Date, which funds will be used to (i) fund the construction and acquisition of the Project pursuant to the Acquisition Agreement; (ii) prepay the 45635.01425\7008845.3 6 (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing - Installment Page 7 I City's obligations under the 1994 Installment Sale Agreement; (iii) to fund the Reserve Fund; and (iv) pay costs of issuance relating to this Installment Sale Agreement. ISECTION 3.2. Deposit to Escrow Fund and Costs of Issuance. On the Closing Date, COPF shall (1) transfer the sum of $ at the direction of the City to the Escrow Bank for deposit in the Escrow Fund established pursuant to the Irrevocable Prepayment Instructions, (2) transfer the sum of$ to the Custodian for the payment of the costs of issuance incurred by the City in connection with this Installment Sale Agreement, (3) transfer the Isum of$ to the Custodian for deposit in the Project Fund established under the Acquisition Agreement, and (4) transfer the sum of$ to the City for deposit in the Reserve Fund. The City hereby represents that the deposit referenced in (1) above will discharge the'City's obligations under the 1994 Installment Purchase Contract thereby defeasing the 1994 Certificates as set forth in the 1994 Trust Agreement. SECTION 3.3. Term. The Term of this Installment Sale Agreement shall commence on the Closing Date, and shall end on the date on which the City shall have paid all of the iInstallment Payments and all other amounts due and payable hereunder or provision for such payiment shall be made as provided herein. SECTION 3.4. Title. Title to the Project and the 1994 Project, and each component thereof, shall be deemed conveyed to and vested in the City upon the acquisition thereof. COPF shall, execute deliver and cause to be recorded and any all documents reasonably requested by the City to consummate such transfer of title. SECTION 3.5. Disclaimer of Warranties. COPF MAKES NO WARRANTY ORI REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE OF THE PROJECT OR ANY PART THEREOF, OR AS TO THE FITNESS FOR ANY PARTICULAR USE OF THE PROJECT OR 1994 PROJECT OR ANY PART THEREOF OR AS TO THE FITNESS OF THE PROJECT OR 1994 PROJECT FOR THE USE CONTEMPLATED BY CITY OR ANY PART THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT THERETO. THE CITY ACKNOWLEDGES THAT COPF IS NOT A CONTRACTOR OF THE PROJECT OR 1994 PROJECT, THAT THE CITY PURCHASES THE PROJECT "AS-IS", IT BEING AGREED THAT ALL OF THE AFOREMENTIONED RISKS ARE TO BE BORNE BY THE CITY. IN NO EVENT SHALL CORPORATION BE LIABLE FOR AN INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGE IN I CONNECTION WITH OR ARISING OUT OF THIS INSTALLMENT SALE AGREEMENT OR THE ACQUISITION, CONSTRUCTION, EXISTENCE, FURNISHING, FUNCTIONING OR CITY'S USE OF ANY ITEM OR PRODUCTS OR SERVICES PROVIDED FOR IN THIS INSTALLMENT SALE AGREEMENT. CITY ACKNOWLEDGES THAT IT IS SOLELY RESPONSIBLE FOR DETERMINING THE SUITABILITY OF THE PROJECT FOR ITS INTENDED USE. SECTION 3.6. Installment Payments. (a) Obligation to Pay. The City hereby agrees to pay to COPF, as the purchase price of the Project and 1994 Project hereunder, the aggregate principal amount of $ together with interest (calculated on the basis of a 360-day year of twelve 30-day months at the 4563(5.014257008845.3 (11116/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing- Installment Page 8 rates set forth below) on the unpaid principal balance thereof, payable in Installment Payments in the respective amounts and on the respective Installment Payment Dates specified in Exhibit A attached hereto. The Installment Payments are designated as Series A Installment Payments, which relate to the proceeds of this Installment Sale Agreement allocable to prepaying the 1994 Installment Sale Agreement, and Series B Installment Payments, which relate to the proceeds of this Installment Sale Agreement allocable to financing the Project. The Series A Installment Payments shall represent an annual rate of interest of 2.90%, and Series B Installment Payments shall represent an annual rate of interest of 3.60%, and each schedule is set forth in Exhibit A attached hereto. (b) Effect of Prepayment. In the event that the City prepays the Installment Payments pursuant to Article VI, the City's obligations under this Installment Sale Agreement with respect to Installment Payments so prepaid shall thereupon cease and terminate, including but not limited to the City's obligation to pay such Installment Payments under this Section 3.6; subject however, to the provisions of Section 6.1 in the case of prepayment by application of a security deposit. In the event that the City prepays the Installment Payments in part but not in whole pursuant to Section 6.3, the principal components of the remaining Installment Payments shall be reduced on a pro rata basis so as to produce equal Installment Payments over the remaining Term of this Installment Sale Agreement. (c) Rate on Overdue Payments. In the event the City should fail to make any of the payments required in this Section 3.6, the payment in default shall continue as an obligation of the City until the amount in default shall have been fully paid, and the City agrees to pay the same with interest thereon, to the extent permitted by law, from the date of default to the date of payment at the rate of eight percent (8%) per annum. SECTION 3.7. Nature of City's Obligations. (a) Special Obligation. The City's obligation to pay the Installment Payments is a special obligation of the City limited solely to the Net Revenues and amounts on deposit in the Revenue Fund. Under no circumstances is the City required to advance moneys derived from any source of income other than the Net Revenues and other sources specifically identified herein for the payment of the Installment Payments, and no other funds or property of the City are liable for the payment of the Installment Payments. Notwithstanding the foregoing provisions of this Section, however, nothing herein prohibits the City voluntarily from making any payment hereunder from any source of available funds of the City. (b) Obligations Absolute. The obligations of the City to pay the Installment Payments from the Net Revenues and other sources specifically identified herein and to perform and observe the other agreements contained herein are absolute and unconditional and are not subject to any defense or any right of setoff, counterclaim or recoupment arising out of any breach of the City or COPF of any obligation to the City or otherwise with respect to the Enterprise, whether hereunder or otherwise, or out of indebtedness or liability at any time owing to the City by COPF. Until such time as all of the Installment Payments have been fully paid or prepaid, the City: (i) will not suspend or discontinue payment of any Installment Payments, 45635.01425\7008845.3 8 (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing�lnstallment Page 9 i (ii) will perform and observe all other agreements contained in this Ins Itallment Sale Agreement, and (iii) will not terminate this Installment Sale Agreement for any cause, including, without limiting the generality of the foregoing, the occurrence of any acts or circumstances that may constitute failure of consideration, eviction or constructive eviction, destruction of or damage to the Enterprise, sale of the Enterprise, the taking by eminent domain of title to or temporary use of any component of the Enterprise, commercial frustration of purpose, any change in the tax or other laws of the United States of America or the State of California or any political subdivision of either thereof or any failure of COPF to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with this Installment Sale Agreement. (c) Protection of Rights. If COPF fails to perform any such agreements on its part, the City may institute such action against COPF as the City deems necessary to compel performance so long as such action does not abrogate the obligations of the City contained in the preceding subsection (b). The City may, however, at the City's own cost and expense and in the Cit1y's own name or in the name of COPF prosecute or defend any action or proceeding or take any other action involving third persons which the City deems reasonably necessary in order to secure or protect the City's rights hereunder, and in such event COPF will cooperate fully with the' City and take such action necessary to effect the substitution of the City for COPF in such action or proceeding if the City shall so request. SECTION 3.8. Pledge and Application of Net Revenues. (a) Pledge. All of the Net Revenues and amounts on deposit in the Revenue Fund are hereby irrevocably pledged to the punctual payment of the Installment Payments and any Parity Debt. The Net Revenues and such other funds may not be used for any other purpose so long as any of the Installment Payments and any Parity Debt remain unpaid; except that out of the Net Revenues there may be apportioned such sums, for such purposes, as are expressly permitted by this Section 3.8. Such pledge constitutes a first and exclusive lien on the Net Revenues and such other moneys for the payment of the Installment Payments and any Parity Debt in accordance with the terms hereof and the terms of the instruments authorizing the issuance of any Parity Debt. (b) Deposit of Gross Revenues; Transfers to Make Installment Payments. The City has heretofore established the Revenue Fund, which the City agrees to continue to hold and maintain for the purposes and uses set forth herein. The City shall deposit all Gross Revenues in the Revenue Fund promptly upon the receipt thereof. All Net Revenues will be held by the City in the Revenue Fund in trust for the benefit of COPF and for the benefit of the owners of any Parity Debt. The City shall withdraw from such fund or funds and transfer to COPF an amount of Net Revenues equal to the aggregate amount of each Installment Payment when and as the same becomes due and payable. In addition, the City sha11 withdraw from such fund or funds such amounts of Net Revenues at such times as required to pay the principal of and interest on any Parity Debt and otherwise comply with the provisions of ib e instruments authorizing the issuance of any Parity Debt. 4563'5.01425\7008845.3 9 (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing Installment Page 10' (c) Other Uses Permitted. The City shall manage, conserve and apply the Net Revenues in such a manner that all deposits required to be made under the preceding paragraph will be made at the times and in the amounts so required. Subject to the foregoing sentence, so long as no Event of Default has occurred and is continuing hereunder, the City may at any time and from time to time use and apply Net Revenues for (i) the acquisition and construction of improvements to the Enterprise; (ii) the prepayment of this Installment Sale Agreement and any Parity Debt, or (iii) any other lawful purpose of the City. (d) Budget and Appropriation of Installment Payments. During the Term of this Installment Sale Agreement, the City shall adopt all necessary budgets and make all necessary appropriations of the Installment Payments from the Net Revenues. In the event any Installment Payment requires the adoption by the City of any supplemental budget or appropriation, the City shall promptly adopt the same. The covenants on the part of the City contained in this subsection (d) shall be deemed to be and shall be construed to be duties imposed by law, and it shall be the duty of each and every public official of the City to take such actions and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out the perform the covenants and agreements in this subsection (d). SECTION 3.9. Establishment of Reserve Fund. (a) The City shall establish a special fund designated the "Reserve Fund" and shall keep such fund separate and apart from all other funds and moneys held by the City. All moneys at any time on deposit in the Reserve Fund shall be held by the City in trust for the benefit of COPF, and applied solely as provided herein. (b) There shall be deposited in the Reserve Fund the amount of $ which amount is the Reserve Requirement. (c) If on any Installment Payment Date the moneys on hand in the Revenue Fund do not equal the amount of the Installment Payments due and payable, the City shall immediately notify COPF of the amount of such deficiency and the City shall transfer from the moneys on hand in the Reserve Fund an amount sufficient, together with amounts on deposit in the Revenue Fund, to make the Installment Payments then due and payable and, if such amounts are insufficient, amounts transferred from the Reserve Fund shall, together with all other moneys on hand in the Revenue Fund, be applied first, to the payment of interest with respect to the Installment Payments, pro rata if necessary, and second, to the payment of the unpaid principal balance with respect to the Installment Payments which is then past due, pro rata if necessary. (d) If on any Installment Payment Date the moneys on hand in the Reserve Fund and the Revenue Fund are sufficient to pay all Installment Payments, including all principal, interest and redemption premiums (if any), the City shall deposit such funds in the Revenue Fund to be applied to the payment or prepayment of the Installment Payments. (e) If, on any date of computation, amounts on hand in the Reserve Fund are less than the Reserve Requirement because of a transfer or a market valuation discloses a deficiency therein, the City shall, within one (1) year from the date of such deficiency if caused by a drawing and within six months from the date of such deficiency if determined on a valuation thereof, from Net Revenues, an amount necessary to bring the amounts on deposit in the Reserve Fund to the Reserve Requirement. 45635.01425\7008845.3 10 (11/16/2011)AlanKreimeier-Azusa 2011 Wastewater Financing Installment Page 11 I ARTICLE IV COVENANTS OF THE CITY SECTION 4.1. Release and Indemnification Covenants. The City shall indemnify COPF and its officers, agents, successors and assigns and hold them harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of the following: (a) the use, maintenance, condition or management of, or from any work or thing done on or about the Enterprise by the City, (b) any breach or default on the part of the City in the performance of any of its obligations under this Installment Sale Agreement, I (c) any intentional misconduct or negligence of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Enterprise, and (d) any intentional misconduct or negligence of any lessee of the City with respect to the/,Enterprise. Aglf No indemnification is made under this Section 4.1 or elsewhere in this Installment Sale eement for willful misconduct, negligence, or breach of duty under this Installment Sale Agreement by COPF, its officers, agents, employees, successors or assigns. j SECTION 4.2. Disposition or Condemnation of Enterprise. Except as provided herein, the City covenants that the Enterprise will not be encumbered, sold, leased, pledged, any charge placed thereon, or otherwise disposed of, as a whole or substantially as a whole if such encumbrance, sale, lease, pledge, charge or other disposition would materially impair the ability of the City to pay the Installment Payments or the principal of or interest on any Parity Debt, or would materially adversely affect its ability to comply with the terms of this Installment Sale Agreement or the instruments authorizing the issuance of any Parity Debt. The City shall not enter into any agreement which impairs the operation of the Enterprise or any part of it necessary to secure adequate Net Revenues to pay the Installment Payments and any Parity Debt, or which othlerwise would impair the rights of COPF with respect to the Net Revenues. If any substantial part of the Enterprise is sold, the payment therefor must either (a) be used for the acquisition or construction of improvements and extensions or replacement facilities or (b) be applied to prepay or redeem the Installment Sale Agreement and any Parity Debt, on a pro rata basis, in the manner provided herein and in the instruments authorizing such Parity Debt. Any amounts received as awards as a result of the taking of all or any part of the Enterprise by the lawful exercise of eminent domain, if and to the extent that such right can be exercised against such property of the City, shall either (a) be used for the acquisition or construction of improvements and extension or replacement facilities of the Enterprise, or (b) be applied to prepay the Installment Payments and redeem any Parity Debt, on a pro rata basis, in thejmanner provided herein and in the instruments authorizing such Parity Debt. I 45 6315.01425%7008845.3 11 (1 111 6/2 0 1 1) Alan Kreimeier-Azusa 2011 Wastewater Finaricing - Installment Page 12 SECTION 4.3. Insurance. The City shall at all times maintain with responsible insurers all such insurance on the Enterprise as is customarily maintained with respect to works and properties of like character against accident to, loss of or damage to the Enterprise. If any useful part of the Enterprise is damaged or destroyed, such part shall be restored to usable condition. All amounts collected from insurance against accident to or destruction of any portion of the Enterprise shall be used to repair or rebuild such damaged or destroyed portion of the Enterprise or if determined not to repair or rebuild such portion and in any event to the extent not so applied, must either (a) be used for the acquisition or construction or improvements and extensions or replacement facilities or (b) be applied on a pro rata basis to prepay Installment Payments and redeem any Parity Debt in the manner provided in this Installment Sale Agreement and in the instruments authorizing such Parity Debt. The City shall also maintain, with responsible insurers, worker's compensation insurance and insurance against public liability and property damage to the extent reasonably necessary to protect the City, COPF and the Assignee. Any insurance required to be maintained hereunder may be maintained under and in accordance with a joint exercise of powers agreement, and may be maintained by the City in the form of self. insurance (but only with COPF's prior written consent) or in the form of participation by the City in a program of pooled insurance. SECTION 4.4. Records and Accounts. The City shall keep proper books of records and accounts of the Enterprise, separate from all other records and accounts, in which complete and correct entries shall be made of all transactions relating to the Enterprise. Said books shall, upon prior request, be subject to the reasonable inspection of COPE The City shall cause the books and accounts of the Enterprise to be audited annually by an independent certified public accountant or firm of certified public accountants, not more than 180 days after the close of each Fiscal Year, and shall furnish a copy of such report to COPF or the Assignee. The audit of the accounts of the Enterprise may be included as part of a general City -wide audit. The City shall cause to be published annually, not more than 180 days after the close of each Fiscal Year, a summary statement showing the amount of Gross Revenues and the disbursements from Gross Revenues and from other funds of the City in reasonable detail. The City shall furnish a copy of the statement to COPF or the Assignee. SECTION 4.5. Rates and Charges. (a) Covenant Regarding Gross Revenues. The City shall fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the Enterprise during each Fiscal Year that are sufficient to yield Gross Revenues that (together with existing unencumbered cash and cash-equivalent balances in the Revenue Fund at the beginning of the Fiscal Year that are lawfully available to the City for payment of any of the following amounts during such Fiscal Year) are at least sufficient, after making allowances for contingencies and error in the estimates, to pay the following amounts: (i) All Operation and Maintenance Expenses estimated by the City to become due and payable with respect to such Fiscal Year; 45635.01425\7008845.3 12 (111.1612011) Alan Kreimeier-Azusa 2011 Wastewater Financing - Installment Page 13 I i I (ii) The Installment Payments and all principal of and interest and premium (if any) on any Parity Debt as they become due and payable with respect to such Fiscal Year, without preference or priority; (iii) All payments coming due and payable with respect to such Fiscal Year and required for compliance with this Installment Sale Agreement and the instruments authorizing any Parity Debt; and (iv) All payments required to meet any other obligations of the City which are charges, liens, encumbrances upon or payable from the Gross Revenues with respect to such Fiscal Year. I (b) Covenant Regarding Net Revenues. In addition to the covenant set forth in the preceding clause (a) of this Section, the City shall fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the Enterprise during each Fiscal Year that are sufficient to yield Net Revenues that, together with existing unencumbered cash and cash- equivalent balances in the Revenue Fund at the beginning of the Fiscal Year that are lawfully available to the City for the payment of any of the amounts described in the preceding clause (a) of ithis Section with respect to such Fiscal Year, are at least equal to 125% of the aggregate amount of Installment Payments and principal of and interest on any Parity Debt coming due and payable with respect to such Fiscal Year. If the amount of such existing unencumbered cash and cash-equivalent balances, excluding Net Revenues, falls below the amount of Maximum Annual Debt Service with respect to such Fiscal Year, the City shall thereupon fix, prescribe, revise and collect rates, fees and charges for the services, and facilities furnished by the Enterprise with respect to such Fiscal Year which are sufficient to yield Net Revenues with respect to such Fiscal Year (excluding connection charges) at least equal to 100% of the aggregate amount of Installment Payments and principal of and interest on any Parity Debt coming due and payable with respect to such Fiscal Year. lSECTION 4.6. No Priority for Additional Obligations. The City may not issue or incur any bonds or other obligations having any priority in payment of principal or interest out of the Net Revenues over the Installment Payments. SECTION 4.7. Issuance of Parity Debt. The City further covenants that, except for obligations issued or incurred to prepay the Installment Payments in full pursuant to Section 6.2 hereof, the City shall not issue or incur any Parity Debt unless: (a) The City is not in default under the terms of this Installment Sale Agreement; (b) Net Revenues, calculated on sound accounting principles, as shown by the books of the City for the latest Fiscal Year or any more recent twelve (12) month period selected by the City ending not more than sixty (60) days prior to the adoption of the resolution approving the instrument pursuant to which such Parity Debt is issued or incurred, as shown by the books of the, City, plus, at the option of the City, the additional allowance described below, shall have amounted to at least 125% of the sum of the maximum Installment Payments coming due and payable in any future Fiscal Year and the maximum annual debt service on all Parity Debt outstanding immediately subsequent to the incurring of such additional obligations. 45635.01425\7008845.3 13 . I (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing -Installment Page 14 Either or both of the following items may be added to such Net Revenues for the purpose of applying the restriction contained in this subsection 4.7(b): (i) An allowance for revenues from any additions to or improvements or extensions of the Enterprise to be constructed with the proceeds of such additional obligations, and also for net revenues from any such'additions, improvements or extensions which have been from moneys from any source but which, during all or any part of such Fiscal Year, were not in service, all in an amount equal to 70% of the estimated additional average annual Net Revenues to be derived from such additions, improvements and extensions for the first 36-month period following closing of the proposed Parity Debt, all as shown by the certificate or opinion of a qualified independent consultant employed by the City, may be added to such Net Revenues for the purpose of applying the restriction contained in this subsection 4.7(b). (ii) An allowance for earnings arising from any increase in the charges made for service from the Enterprise which has become effective prior to the incurring of such additional obligations but which, during all or any part of such Fiscal Year, was not in effect, in an amount equal to 100% of the amount by which the Net Revenues would have been increased if.such increase in charges had been in effect during the whole of such Fiscal Year and any period prior to the incurring of such additional obligations, as shown by the certificate or opinion of a qualified independent engineer employed by the City. (c) A reserve fund shall be funded for such Parity Debt, with cash or Permitted Investments, which is at least equal to one-half of the maximum amount of principal and interest coming due and payable on such Parity Debt, including the principal amount coming due and payable by operation of mandatory sinking fund redemption, in the current or any future Fiscal Year during the Term of this Installment Sale Agreement._ (d) Subordinate Debt. The City further covenants that the City shall not issue or incur any Subordinate Debt unless Net Revenues, calculated on sound accounting principles, as shown by the books of the City for the latest Fiscal Year or any more recent twelve (12) month period selected by the City ending not more than sixty (60) days prior to the adoption of the resolution approving the instrument pursuant to which such Subordinate Debt is issued or incurred, as shown by the books of the City shall, after deducting all amounts required for the payment of Installment Payments and any Parity Debt, have amounted to at least 1.00 times the sum of the maximum annual debt service on all Subordinate Debt outstanding immediately subsequent to the incurring of such additional obligations. An allowance for earnings arising from any increase in the charges made for service from the Enterprise which has become effective prior to the incurring of such additional obligations but which, during all or any part of such Fiscal Year, was not in effect, may be added in an amount equal to 100% of the amount by which the Net Revenues would have been increased if such increase in charges had been in effect during the whole of such Fiscal Year and any period prior to the incurring of such additional obligations, as shown by the certificate or opinion of a qualified independent engineer employed by the City. (e) Calculating Debt Service on Variable Rate Debt. In determining the debt service on Parity Debt or Subordinate Debt for which interest is calculated at a variable interest rate, such Parity Debt or Subordinate Debt shall be assumed to bear interest at a fixed interest rate equal to the highest variable rate borne over the preceding 24 months by outstanding variable 45635.01425\7008845.3 14 (11/t6/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing - Installment Page 15 j — — - rate debt of the City or, if no such variable rate debt is at the time outstanding, by variable rate debt for which the interest rate is computed by reference to an index comparable to that to be utilized in determining the interest rate for the Parity Debt or Subordinate Debt the proposed to be issued. SECTION 4.8. Additional Payments. In addition to the Installment Payments, thelCity shall pay, from Net Revenues, when due all costs and expenses incurred by COPF to comply with the provisions of this Installment Sale Agreement, including, without limitation all costs of issuance (to the extent not paid from amounts on deposit in the Costs of Issuance Fund held by the Custodian under the Acquisition Agreement), and all costs and expenses of attomeys, auditors, engineers and accountants. SECTION 4.9. Payments to Reserve Fund. In addition to the Installment Payments, the City shall transfer from Net Revenues; such amounts as shall be required to replenish the Reserve Fund in the event of a draw therefrom or if a valuation determines that a deficiency exists therein. SECTION 4.10. Assignment. The rights of COPF and any Assignee under this Installment Sale Agreement, including the right to receive and enforce payment of the Installment Payments to be made by the City under this Installment Sale Agreement, may be assigned to an Assignee. No such assignment will be effective as against the City unless and until COPF or the Assignee files with the City a copy of such assignment or written notice thereof' Prior to the effective date of any assignment permitted pursuant to this Installment Sale Agreement, the Assignee shall execute and deliver a certificate in the form set forth in Exhibit D hereto to the City. Upon such assignment, then, whenever in this Installment Sale Agreement any reference is made to COPF and such reference concerns rights which COPF has assigned to the Assignee, such reference shall be deemed to refer to the Assignee. The City shall pay all Installment Payments hereunder under the written direction of COPF or the Assignee named in the most recent assignment or notice of assignment filed with the City. During the Term of this Installment Sale Agreement, the City shall keep a complete and accurate record of all such assignments or notices of assignment. Regardless of the number of Assignees, the City shall not be 'required to pay more than a single payee. SECTION 4.11. Assignment by the City. This Installment Sale Agreement may not be assigned by the City, other than to a public agency which shall succeed to the interests of thel City in and to the Enterprise and which (by operation of law, by contract or otherwise) becomes legally bound to all of the terms and provisions hereof. SECTION 4.12. Amendment of this Installment Sale Agreement. This Installment Sale Agreement may be amended by the City, but only with the prior written consent of COPF (which consent may not be unreasonably withheld). SECTION 4.13. Tax Covenants. (a) Generally. The City shall not take any action or permit to be taken any action within its control which would cause or which, with the passage of time if not cured would 45631'5.01425\7005845.3 15 (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing - Installment Page 16—. cause, the interest components of the Installment Payments to become includable in gross income for federal income tax purposes. (b) Private Activity Bond Limitation. The City shall assure that the proceeds of the Installment Sale are not so used as to cause the Installment Sale to satisfy the private business tests of section 141(b) of the Tax Code or the private loan financing test of section 141(c) of the Tax Code. ` (c) Federal Guarantee Prohibition. The City shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Installment Payments to be "federally guaranteed" within the meaning of Section 149(b) of the Tax Code. (d) No Arbitrage. The City shall not take, or permit or suffer to be taken, any action with respect to the proceeds of the Installment Payments which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date would have caused the Installment Payments to be "arbitrage bonds" within the meaning of Section 148(a) of the Tax Code. (e) Small Issuer Exemption from Bank Nondeductibility Restriction. The City hereby designates this Installment Sale Agreement for purposes of paragraph (3) of Section 265(b) of the Tax Code and represents that not more than $10,000,000 aggregate principal amount of obligations the interest on which is excludable (under Section 103(a) of the Tax Code) from gross income for federal income tax purposes (excluding (i) private activity bonds, as defined in Section 141 of the Tax Code, except qualified 501(c)(3) bonds as defined in Section 145 of the Tax Code and (ii) current refunding obligations to the extent the amount of the refunding obligation does not exceed the outstanding amount of the refunded obligation), including this Installment Sale Agreement, has been or will be issued by the City, including all subordinate entities of the City, during the calendar year 2011. (f) Arbitrage Rebate. The City shall take any and all actions necessary to assure compliance with section 148(f) of the Tax Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the Installment Sale. (g) Acquisition. Disposition and Valuation of Investments. Except as otherwise provided in the following sentence, the City covenants that all investments of amounts deposited in any fund or account created by or pursuant to this Installment Sale Agreement, or otherwise containing gross proceeds of the Installment Sale (within the meaning of section 148 of the Tax Code) shall be acquired, disposed of, and valued (as of the date that valuation is required by this Installment Sale Agreement or the Tax Code) at Fair Market Value. Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Tax Code shall be valued at their present value (within the meaning of section 148 of the Tax Code). For purposes of this subsection (g), the term "Fair Market Value" means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase .or sell the investment becomes binding) if the investment is traded on an established securities market (within the 45 63 5.0142517008 845.3 16 L011/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing - Installment Page 17 meaning of section 1273 of the Tax Code) and, otherwise, the term "Fair Market Value" means they acquisition price in a bona fide arm's length transaction (as referenced above) if (i) the mvlestment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or 'reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, (iii) the investment is a United States Treasury Security — State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) any commingled investment fund in which the City and related parties do not own more than a 10% beneficial interest therein if the return paid by the fund is without regard to the source of the investment. ARTICLE V EVENTS OF DEFAULT AND REMEDIES SECTION 5.1. Events of Default Defined. The following shall be Events of DeI ault under this Installment Sale Agreement. (a) Failure by the City to pay any Installment Payment on the Installment Payment Date on which it is due. (b) failure to pay other amounts required to be paid hereunder within fifteen (15) days of the time specified herein, and such failure is not cured within ten (10) days after written notice thereof by COPF. (c) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed hereunder other than as referred to in the preceding clauses (a) and (b) of this Section, for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the City by COPF provided, however, if in the reasonable opinion of the City the failure stated in the notice can be corrected, but not within such thirty (30) day period, COPF shall not unreasonably withhold its consent to an extension of such time if corrective action is instituted by the City within such thirty (30) day period and diligently pursued until the default is corrected. (d) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment, or adjudication of the City as a barI pt, or assignment by the City for the benefit of creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the Federal Bankruptcy Code, as amended, or under any similar acts which may her be enacted. (e) An event of default as defined under any contracts or agreements relating to any Parity Debt. 45635.01425\7008845.3 17 (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing- Installment Page 18 SECTION 5.2. Remedies on Default. Whenever any Event of Default shall have happened and be continuing, COPF shall have the rights, at its option and without any further demand or notice to: (a) declare all principal components of the unpaid Installment Payments, together with accrued interest thereon at the rate of interest per annum represented by the Installment Sale from the immediately preceding,Installment Payment Date on which payment was made, to be immediately due and payable, whereupon the same shall immediately become due and payable; and, (b) take whatever action at law or in equity may appear necessary or desirable to collect the Installment Payments then due or thereafter to become due during the Term of this Installment Sale Agreement, or enforce performance and observance of any obligation, agreement or covenant of the City under this Installment Sale Agreement. The provisions of the preceding clause (a) are subject to the condition that if, at any time after the principal components of the unpaid Installment Payments shall have been so declared due and payable pursuant to the preceding clause (a), and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the City shall deposit with COPF a sum sufficient to pay all principal components of the Installment Payments coming due prior to such declaration and all matured interest components (if any) of the Installment Payments, with interest on such overdue principal and interest components calculated at the rate set forth in Section 3.6(c) and the reasonable expenses of COPF (including any fees and expenses of its attorneys), and any and all other defaults known to COPF (other than in the payment of the principal and interest components of the Installment Payments due and payable solely by reason.of such declaration) shall have been made good, then, and in every such case, COPF may, by written notice to the City rescind and annul such declaration and its consequences. However, no such rescission and annulment shall extend to or shall affect any subsequent default, or shall impair or exhaust any right or power consequent thereon. SECTION 5.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to COPF is intended to be exclusive and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Installment Sale Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle COPF to exercise any remedy reserved to it in this Article V it shall not be necessary to give any notice, other than such notice as may be required in this Article V or by law. SECTION 5.4. Agreement to Pay Attorneys' Fees and Expenses. In the event either party of this Installment Sale Agreement should default under any of the provisions hereof and the nondefaulting party should employ attorneys (including in-house counsel) or incur other expenses for the collection of moneys or the enforcement of performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it will on demand therefor pay to the nondefaulting party the reasonable fees of such attorneys (including the allocable cost of in-house counsel) and such other expenses so incurred by the nondefaulting party. 45635.01425\7008845.3 18 (11/l6/2011)Alan Kreimeier Azusa 2011 Wastewater Financing - Installment Page 19 SECTION 5.5. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Installment Sale Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. ARTICLE VI PREPAYMENT OF INSTALLMENT PAYMENTS 1 SECTION 6.1. Security Deposit. Notwithstanding any other provision of this Installment Sale Agreement, the City may on any date secure the payment of Installment Payments, in whole, by irrevocably depositing with a fiduciary an amount of cash which, together with other available amounts, is either (a) sufficient to pay all such Installment Payments, including the principal and interest components thereof, when due pursuant to Section 3.4(a), or (b) invested in whole or in part in Federal Securities in such amount as will, in the opinion of an independent certified public accountant, together with interest to accrue thereon and together with any cash which is so deposited, be fully sufficient to pay all such Installment Payments when due pursuant to Section 3.4(a) or when due on any optional prepayment date pursuant to Section 6.2, as the City shall instruct at the time of said deposit. In the event of a security deposit pursuant to this Section for the payment of all remaining Installment Payments, all i obligations of the City under this Installment Sale Agreement, and the pledge of Net Revenues and all other security provided by this Installment Sale Agreement for said obligations, shall cease and terminate, excepting only the obligation of the City to make, or cause to be made, all of Installment Payments from such security deposit. Said-security deposit shall be deemed to be j and shall constitute a special fund for the payment of such Installment Payments in ace ordance with the provisions of this Installment Sale Agreement. SECTION 6.2. Optional Prepayment. (a) Series A Installment Payments. The City shall have the option to prepay the principal component of the Series A Installment Payments in whole, on any date, commencing August 1, 2017, by paying the Series A Installment Payments required to be paid on such date plus accrued interest to the date set for prepayment, with no prepayment premium. The City shall give COPF written notice of its intention to exercise its option not less than thirty (30) days in advance of the date of exercise. (b) Series B Installment Payments. The City shall have the option to prepay the principal component of the Series B Installments in whole, on any date, commencing August 1, 2022, by paying the Series B Installment Payments required to be paid on such date plus accrued interest to the date set for prepayment, with no prepayment premium. The City shall give COPF written notice of its intention to exercise its option not less than thirty (30) days in advance of the date of such prepayment. i I I 45631.()1 425\7008845.3 19 (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financir g Installment Page 20 SECTION 6.3. Mandatory Prepayment From Net Proceeds of Insurance or Eminent Domain. The City shall prepay the unpaid principal component of the Installment Payments in whole on any date or in part, on any Installment Payment Date, from and to the extent the City determines to apply any Net Proceeds of insurance award or condemnation award with respect to the Enterprise for such purpose pursuant to Sections 4.2 or 4.3 at a price equal to the principal amount to be prepaid plus accrued interest to the date set for such prepayment. The City and COPF hereby agree that such proceeds, to the extent remaining after payment of any delinquent Installment Payments, shall be credited towards the City's obligations under this Section 6.3. ARTICLE VII MISCELLANEOUS SECTION 7.1. Notices. All written notices to be given under this Installment Sale Agreement shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, or by telecopier or other form of telecommunication, at its number set forth below. Notice shall be effective either (a) upon transmission by telecopier or other form of telecommunication, (b) 48 hours after deposit in the United States of America first class mail, postage prepaid, or (c) in the case of personal delivery to any person, upon actual receipt. COPF, the City or the Assignee may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder. If to the City: City of Azusa 213 E. Foothill Boulevard Azusa, CA 91702-1395 Attention: Director of Administrative Services If to COPF: Capital One Public Funding, LLC 275 Broadhollow Road Melville,NY 11747 Attention: SECTION 7.2. Binding Effect. This Installment Sale Agreement shall inure to the benefit of and shall be binding upon COPF and the City and their respective .successors and assigns. SECTION 7.3. Severability. In the event any provision of this Installment Sale Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. SECTION 7.4. Net-net-net Contract. This Installment Sale Agreement shall be deemed and construed to be a "net-net-net" contract, and the City hereby agrees that the Installment Payments shall be an absolute net return to COPF, free and clear of any expenses, charges or set-offs whatsoever. 45635.01425\7008845.3 20 (11/:16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing - Installment Page 21 SECTION 7.5. Further Assurances and Corrective Instruments. COPF and the City agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for carrying out the expressed intention of this Installment Sale Agreement. r SECTION 7.6. Execution in Counterparts. This Installment Sale Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 7.7. Applicable Law. This Installment Sale Agreement shall be governed by and construed in accordance with the laws of the State of California. SECTION 7.8. Captions. The captions or headings in this Installment Sale Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Section of this Installment Sale Agreement. I IN WITNESS WHEREOF, COPF has caused this Installment Sale Agreement to be executed in its corporate name by its duly authorized officer, and the City has caused this Installment Sale Agreement to be executed in its name by its duly authorized officer, as of the date first above written. CITY OF AZUSA j By City Manager Attest: City Clerk CAPITAL ONE PUBLIC FUNDING, LLC By Senior Vice President 45635.01425\7008845.3 21 (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing - Installment Page 22 EXHIBIT A SCHEDULE OF INSTALLMENT PAYMENTS A. Aggregate Installment Payments Payment Date Principal Compound c Interest Compound Total Installment_ Payment B. Series A Installment Payments (Interest Rate 2.90%) C. Series B Installment Payments (Interest Rate 3.60%) 45635.01425\7008845.3 A-1 (1 1/1 61201 1)Alan Kreimeier -Azusa 2011 Wastewater Financing - Installment Page 23 I EXHIBIT B DESCRIPTION OF THE 1994 PROJECT AND PROJECT A. 1994 Project I Various improvements to City's sewer enterprise, including upsizing of sewer lines, extending sewer lines and reconstruction of sewer lines. B. Project f I 45635.01425\7008845.3 B-1 (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing - Installment Page 24 I EXHIBIT C ACKNOWLEDGEMENT OF ASSIGNMENT The undersigned hereby acknowledges the assignment by CAPITAL ONE PUBLIC FUNDING, LLC over to (the "Assignee") of that certain Installment Sale Agreement dated as of November 1, 2011 (the "Installment Sale Agrgement"), entered into between CAPITAL ONE PUBLIC FUNDING, LLC, as seller and the undersigned as purchaser. With respect to the Installment Sale Agreement, the undersigned agrees to pay, commencing with the Installment Payment, scheduled for [date] all Installment Payments and moneys due or to become due under the Installment Sale Agreement to the Assignee and further agrees it shall have no counterclaim or offset against Installment Payments due thereunder as to the Assignee and expressly further agrees that the Assignee shall not (except for the obligations specifically set forth in the assignment agreement between COPF and the Assignee) be liable for any of the obligations or burdens of COPF under the Installment Sale Agreement. IN WITNESS WHEREOF, the City has caused this Acknowledgment of Assignment to be executed by its authorized agent on the date specified below. CITY OF AZUSA By Title Date 45635.0]425\7008845.3 C-1 (11/j6/2011) Alan Kreimeier-Azusa 2011 Wastewater Financing - Installment Page 25 INCUMBENCY AND SIGNATURE CERTIFICATE I do hereby certify that I am the duly appointed and acting City Clerk of the City of Azusa, a municipal corporation validly existing under the Constitution and laws of the State of California (the "City"), and that, as of the date hereof, the individual named below is the duly appointed officer of the City holding the office set forth opposite his/her respective name. I furlther certify that (i) the signature set forth opposite his/her respective name and title is true and authentic and (ii) such officer has the authority on behalf of the City to enter into that certain Installment Sale Agreement dated November 1, 2011, by and between the City and Capital One Public Funding, LLC and all documents related thereto. Name Title Si anature City IN WITNESS WHEREOF, I have duly executed this certificate this day of November, 2011. i City Clerk I 45635.01425\7008845.3 C-2 (11/16/2011) Alan Kreimeier-Azusa 2011 Wastewater Financing Installment Page 26 EXHIBIT D FORM OF CERTIFICATE OF PURCHASER To: City Of Azusa 213 E. Foothill Boulevard Azusa, CA 91702-.1395 Attention: Director of Administrative Services Re: Installment Sale Agreement dated as of November 1, 2011 (the "Installment Sale Agreement') by and between Capital One Public Funding, LLC and the City of Azusa (the"City") Capitalized terms used herein not otherwise defined have the meanings ascribed to such terms in the Installment Sale Agreement. The undersigned (the "Purchaser") hereby certifies to the City: 1. The Purchaser has requested from the City all legal and financial information with respect to the City as it deems necessary to make its decision to purchase the interest in the Installment Sale Agreement; and the City has provided all such requested information. The Purchaser acknowledges that it has read and understands the matters and terms stated in the documents and materials or other information as provided by the City. 2. The Purchaser (MARK OR INDICATE APPROPRIATELY): [_] is a "qualified institutional buyer" (a "Qualified Institutional Buyer") within the meaning of Rule 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act'), [ ] is an "accredited investor" (an "Accredited Investor") as described in Section 501(a) of Regulation D promulgated under the Securities Act. 3. The Purchaser has sufficient knowledge and experience in financial and business matters to understand and evaluate the merits and risks of purchasing and holding the interest in the Installment Sale Agreement. 4. The Purchaser is acquiring the interest in the Installment Sale Agreement purchased by it for its account or for one or more accounts (each of which is a Qualified Institutional Buyer or an Accredited Investor). The Purchaser is purchasing the interest in the Installment Sale Agreement not in the capacity of an underwriter, nor with a view to the public distribution thereof. 5. The Purchaser has made an independent investigation and evaluation of the financial condition and prospects of, and the risks associated with, the interest in the Installment Sale Agreement, the City, and the Enterprise, or has caused such investigation and evaluation to be made by persons it deems competent to do so, and it has not relied upon the City in making its decision to purchase the interest in the Installment Sale Agreement. 45035.014257008845.3 D-1 (11/ 6/2011) Alan Kreimeier -Azusa 2011 Wastewater Financing - Installment Page 27 I 6. The Purchaser understands that neither the members of the City Council, the officers or the agents of the City, nor any person executing the Installment Sale Agreement, shall be(subject to any personal liability or accountability by reason of or in connection with the Ins ltallment Sale Agreement. 7. The Purchaser understands and agrees that the sale of the interests in the Installment Sale Agreement is exempt from Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the "Rule") and that the City is not obligated, except as set forth in the Installment Sale Agreement, to provide other or further information to the Purchaser after the date hereof, provided, however, that the City shall have a duty to correct (i) any untrue statement of a material fact or (ii) any omission of a material fact necessary to make a statement made therein not misleading in light of the circumstances under which it was made, in the Installment Sale Agreement or in any financial statements of the City provided to the Purchaser, or in any of the other information provided to the Purchaser by or on behi alf of the City. IN WITNESS WHERE, the Purchaser has caused this Certificate to be executed by its authorized representative as of Firm Name: By: Name: Title: I I 45635.0 142 5700 8 84 5.3 D-2 (11/16%2011)Alan Kreimeier-Azusa 2011 Wastewater Finanang-Irrevocable Page 1 IRREVOCABLE PREPAYMENT INSTRUCTIONS These Irrevocable Prepayment Instructions (these "Instructions"), are dated November 2011, and are given by the CITY OF AZUSA, a municipal corporation duly organized and existing under the Constitution and laws of the State of California (the "City"), to WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, acting as trustee for the hereinafter described 1994 Certificates of Participation (the "1994 Trustee"). BACKGROUND : 1. In order to finance improvements to its Wastewater System, the City has previously issued its Certificates of Participation (1994 Sewer System Refinancing Project) in the initial aggregate principal amount of $3,100,000 (the "1994 Certificates"), under a Trust Agreement dated as of March 1, 1994 (the "1994 Trust Agreement"), among the City, the Azusa Public Financing Authority (the "Authority") and the 1994 Trustee, as successor trustee to Bank of America National Trust and Savings Association. 2. The 1994 Certificates are secured by a pledge of certain revenues consisting primarily of installment payments (the "Installment Payments") which are payable by the City under an Installment Sale Agreement dated as of March 1, 1994 (the "1994 Installment Sale Agreement"), between the City and the Authority. 3. The City has the right to prepay the Installment Payments on February 1, 2012, at a prepayment price equal to 100% of the principal amount thereof, and the 1994 Installment Sale Agreement provides that amounts so prepaid by the City shall be applied to pay the prepayment price of the 1994 Certificates on such date at a prepayment price equal to 100% of the principal amount of the 1994 Certificates to be prepaid. 4. In order to raise funds to pay and prepay the Installment Payments, Capital One Public Funding, LLC (the "Corporation") has entered into an installment sale agreement financing arrangement with the City the amount of$ (the "Financing"), a portion of which amount will be applied to prepay the City's obligations under the 1994 Installment Sale Agreement and to defease the 1994 Trust Agreement. 5. The City gives these Instructions to the 1994 Trustee for the purpose of establishing an irrevocable Escrow Fund to be funded, invested, held and administered for the purpose of providing for the payment and prepayment in full of the Installment Payments and corresponding payment and prepayment in full of the outstanding 1994 Certificates. INS TR UC TIONS: In order to provide for the payment and prepayment of the Installment Payments and the corresponding payment and prepayment of the 1994 Certificates, the City hereby irrevocably direct the 1994 Trustee as follows: SECTION 1. Establishment of Escrow Fund. The 1994 Trustee is directed to establish an escrow fund (the "Escrow Fund") to be held by the 1994 Trustee in trust as an irrevocable 45635.01425\7010135.2 1 ( ) en Kreimeier-Azusa 2011 Wastewater Financing -Irrevocable Page 2 11/ 6/2011 AIL— �-�>._ ,� _ «, :__ �. �. . escrow securing the payment and prepayment of the Installment Payments. All cash and securities, if any, in the Escrow Fund are hereby irrevocably pledged as a special fund for the payment of the Installment Payments in accordance with the provisions of Sections 10.02 and 10 05 of the 1994 Installment Sale Agreement, and the corresponding payment and prepayment of the 1994 Certificates in accordance with Section 4.01(c) of the 1994 Trust Agreement. If at any time the 1994 Trustee receives actual knowledge that the cash and securities in the; Escrow Fund will not be sufficient to make any payment required by Section 3, the 1994 Trustee shall notify the Cityof such fact and the City shall immediately cure such deficiency from any source of legally available funds. The 1994 Trustee has no liability for any such insufficiency. I SECTION 2. Deposit into Escrow Fund. On the date hereof, the City shall cause to be transferred to the 1994 Trustee for deposit into the Escrow Fund the amount of$ in 'immediately available funds, to be derived from the following sources in the following amounts: (a) from amounts provided by the Corporation in the amount of$ (b) from amounts held in the Installment Payment Fund established and held by the 1994 Trustee under Section 5.02 of the 1994 Trust Agreement in the amount of $ , which amount the 1994 Trustee is hereby directed to transfer to the Escrow Fund on the date hereof; and (c) from amounts held in the Reserve Fund established and held by the 1994 Trustee under Section 6.01 of the 1994 Trust Agreement in the amount of$ , which amount the 1994 Trustee is hereby directed to transfer to the Escrow Fund on the date hereof. jThe 1994 Trustee shall hold all amounts in the Escrow Fund in cash uninvested until February 1, 2012 (the "Prepayment Date"). SECTION 3. Application ofAmounts. The 1994 Trustee shall apply all cash held in the Escrow Fund to pay and prepay the Installment Payments, and thereby pay and prepay the 1994 Certificates, on the Prepayment Date, in the following amounts: Payment Interest Principal to be Prepayment Total Date Prepaid Premium Payment (February 1, 2012 $ $ $ $ Following payment and prepayment in full of all of the 1994 Certificates on the Prepayment Date, the 1994 Trustee shall withdraw all amounts remaining on deposit in the Escrow Fund and transfer those amounts to the City. SECTION 4. Proceedings for Prepayment of Installment Payments. The City hereby elects and irrevocably signifies its election to prepay the Installment Payments in full on the Prepayment Date under Section 10.02 of the 1994 Installment Sale Agreement, and the City hereby elects and irrevocably signifies its election to prepay the 1994 Certificates in full on the 45635.01425\7010135.2 2 (11/1612011)Alan Kreimeier Azusa 2011 Wastewater Financing-Irrevocable Page 3. Prepayment Date under Section 4.01(c) of the 1994 Trust Agreement. The 1994 Trustee shall give notice of the prepayment of the 1994 Certificates in accordance with Section 4.03 of the 1994 Trust Agreement at the expense of the City. SECTION 5. Transfer of Funds. The 1994 Trustee shall make the transfers into the Escrow Fund from the Installment Payment Fund and the Reserve Fund established under the 1994 Trust Agreement as set forth herein, such transfers to be made on the Closing Date. All other amounts held by the 1994 Trustee in any of the funds and accounts established under the 1994 Trust Agreement shall be withdrawn therefrom and transferred to the City as its property free and clear of the lien of the 1994 Trust Agreement and the 1994 Installment Sale Agreement. SECTION 6. Application of Certain Terms. All of the terms of the 1994 Trust Agreement relating to the payment and prepayment of the 1994 Certificates, are incorporated in these Instructions as if set forth in full herein. SECTION 7. Compensation to 1994 Trustee. The City shall pay the 1994 Trustee full compensation for its services under these Instructions, including out-of-pocket costs such as publication costs, prepayment expenses, legal fees and other costs and expenses relating hereto and, in addition, all fee, costs and expenses relating to the purchase, substitution or withdrawal of any securities after the date hereof. Under no circumstances shall amounts deposited in or credited to the Escrow Fund be deemed to be available for said purposes. The 1994 Trustee has no lien upon or right of set off against the cash and securities at any time on deposit in the Escrow Fund. SECTION 8. Rights and Liabilities of 1994 Trustee. All of the rights, indemnities, protections, immunities and limitations from liability afforded the 1994 Trustee as trustee for the 1994 Certificates (including such rights, indemnities, protections, immunities and limitations from liability set forth in the 1994 Trust Agreement and the 1994 Installment Sale Agreement) are incorporated in these Instructions as if set forth in full herein. These Instructions set forth all matters pertinent to the escrow contemplated hereunder, and no additional obligations of the 1994 Trustee shall be inferred from the terms of these Instructions or any other agreement. None of the provisions of this Agreement shall require the 1994 Trustee to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties hereunder. The 1994 Trustee agrees to accept and act upon instructions or directions pursuant to this Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods, provided, however, that, the 1994 Trustee shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to added or deleted from the listing. If the City elects to give the 1994 Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the 1994 Trustee in its discretion elects to act upon such instructions, the 1994 Trustee's understanding of such instructions shall be deemed controlling. The 1994. Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the 1994 Trustee's reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The City agrees to assume all 45635.0142517010135.2 3 ( � ) an Kreimeier- Azusa 2011 Wastewater Financing_Irrevocable l _Page 4 • I risks arising out of the use of such electronic methods to submit instructions and directions to the 1994 Trustee, including without limitation the risk of the 1994 Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties. SECTION 9. Effect of These Instructions. As a result of the deposit and application of funds in accordance with these Instructions, the obligations of the City under the 1994 Installment Sale Agreement shall be discharged under and with the effect set forth in Section 10.05 of the 1994 Installment Sale Agreement. I SECTION 10. Governing Law. These instructions shall be governed by the laws of the State of California. Date: November_, 2011 CITY OF AZUSA I I j By: I' I ACCEPTED: io WELLS FARGO BANK, NATIONAL ASSOCIATION, as 1994 Trustee By.l Authorized Officer 45635101425\7010135.2 4 (11/1612011)Alen Kreimeier-Azusa 2011 Wastewater Financing -Acquisition Pege 1 ACQUISITION AGREEMENT This Acquisition Agreement (this "Agreement"), dated as of November 1, 2011, is among Capital One Public Funding, LLC, a California corporation ("COPF"), Wells Fargo Bank, National Association, a national banking association, as custodian (the "Custodian"), and the City of Azusa, a municipal corporation duly organized and existing under the laws of the State of California (the "City"). Reference is made to that certain Installment Sale Agreement dated as of-November 1, 2011 between COPF and City (the "Installment Sale Agreement'), covering the financing of a certain project described therein (the "Project'). It is a requirement of the Installment Sale Agreement that the funds for the acquisition and construction of the Project be deposited with the Custodian hereunder for the purpose of providing a mechanism for the application of such amounts to the payment of Project costs. Capitalized terns used in this Agreement and not otherwise defined shall have the respective meanings given such terns in the Installment Sale Agreement. The parties agree as follows: 1. Creation of Costs of Issuance Fund. (a) There is hereby created a special trust fund to be known as the "City of Azusa Costs of Issuance Fund" (the "Costs of Issuance Fund") to be held in trust by the Custodian for the purposes stated herein, for the benefit of COPF and City, to be held, disbursed and returned in accordance with the terms hereof. On the Closing Date, COPF has caused the amount of $ to be transferred to the Custodian for deposit into the Costs of Issuance Fund on behalf of the City. (b) Moneys in the Costs of Issuance Fund shall be held by the Custodian and disbursed upon a written request of the City, stating the name of the payee, the purpose and the amount to be disbursed. Moneys deposited in the Costs of Issuance Fund shall be invested as directed by the City in Qualified Investments, defined below. (c) On April 29, 2012, any moneys remaining on deposit in the Costs of Issuance Fund shall be transferred to the City and the Costs of Issuance Fund shall be closed. 2. Creation of Project Fund. (a) There is hereby created a special trust fund to be known as the "City of Azusa Project Fund" (the "Project Fund") to be held in trust by the Custodian for the purposes stated herein, for the benefit of COPF and City, to be held, disbursed and returned in accordance with the terms hereof. On the Closing Date, COPF has caused the amount of $ to be transferred to the Custodian for deposit into the Project Fund on behalf of the City. (b) The Custodian shall invest and reinvest moneys on deposit in the Project Fund in Qualified Investments in accordance with written instructions received from City. City shall be solely responsible for ascertaining that all proposed investments and reinvestments are Qualified Investments and that they comply with federal, state and local laws, regulations and ordinances governing investment of such funds and for providing appropriate notice to the Custodian for the reinvestment of any maturing investment. Accordingly, neither the Custodian nor COPF shall be responsible for any liability, cost, expense, loss or claim of any kind, directly or indirectly arising out of or related to the investment or reinvestment of all or any portion of the moneys on deposit 45635.01425\7010348. 3 1 (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing - Acquisition Page 2 ' I in the Project Fund, and City agrees to and does hereby release the Custodian and COPF from any such liability, cost, expenses, loss or claim. Interest on the Project Fund shall become part of the Project Fund, and gains and losses on the investment of the moneys on deposit in the Project Fund shall be home by the Project Fund. For purposes of this agreement, "Qualified Investments" means any investments which meet the requirements of Section 53601 of the California Government Code. IN THE ABSENCE OF WRITTEN INSTRUCTIONS FROM THE CITY, THE CUSTODIAN IS HEREBY AUTHORIZED AND DIRECTED TO INVEST AND RE- VEST ALL FUNDS ON HAND IN [TO COME]. (c) Unless the Project Fund is earlier terminated in accordance with the provisions of paragraph (d) below, amounts in the Project Fund shall be disbursed by the Custodian in payment J f amounts described in Section 2 hereof upon receipt of written authorization(s) from COPF, as is more fully described in Section 2 hereof. If the amounts in the Project Fund are insufficient to pay such amounts, City shall be solely responsible for the balance of the funds needed to complete the acquisition and construction of the Project. Any moneys remaining in the Project Fund after November 1, 2014 (the "Acquisition and Construction Period") shall be applied as provided in Section 4 hereof. The initial Acquisition and Construction Period may be extended as set forth in Section 4. amounts in (d) The Project Fund shall be terminated at the earliest of(i) the final distribution of the Project Fund or (ii) written notice given by COPF of the occurrence of a default or termination of the Installment Sale Agreement. i (e) The Custodian may act in reliance upon any writing or instrument or signature Which it, in good faith, believes to be genuine and may assume the validity and accuracy of any statement or assertion contained in such a writing or instrument.'The Custodian shall not be liable in any manner for the sufficiency or correctness as to form, manner of execution, or validity of any instrument nor as to the identity, authority, or right of any person executing the same; and its duties hereunder shall be limited to the receipt of such moneys, instruments or other documents received by it as the Custodian, and for the disposition of the same in accordance herewith. (f) Unless the Custodian is guilty of gross negligence or willful misconduct with regard to its duties hereunder, City agrees to and does hereby release and indemnify the Custodian and hold it harmless from any and all claims, liabilities, losses, actions, suits or proceedings at law or in equity, or any other expense, fees or charges of any character or nature, which it may incur or I ith which it may be threatened by reason of its acting as Custodian under this agreement; and in connection therewith, does to the extent permitted by law indemnify the Custodian against any aid all expenses; including reasonable attorneys' fees and the cost of defending any action, suit or proceeding or resisting any claim. (g) If City and COPF shall be in disagreement about the interpretation of the Installment Sale Agreement, or about the rights and obligations, or the propriety of any action contemplated by the Custodian hereunder, the Custodian may, but shall not be required to, file an appropriate civil action to resolve the disagreement. The Custodian shall be reimbursed by City for all costs, including reasonable attorneys' fees, in connection with such civil action, and shall be fully protected in suspending all or part of its activities under the Installment Sale Agreement until a final judgment in such action is received. (h) The Custodian may consult with counsel of its own choice and shall have full and cl mplete authorization and protection with the opinion of such counsel. The Custodian shall 45635.0142517010348. 3 2 (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing -Acquisition Page 3 otherwise not be liable for any mistakes of fact or errors of judgment, or for any acts or omissions of any kind unless caused by its willful misconduct. (i) City shall reimburse the Custodian for all reasonable costs and expenses, including those of the Custodian's attorneys, agents and employees incurred for extraordinary administration of the Project Fund and the performance of the Custodian's powers and duties hereunder in connection with any Event of Default under the Installment Sale Agreement, or in connection with any dispute between COPF and City concerning the Project Fund. 3. Acquisition and Construction of Project. (a) Acquisition and Construction Contracts. City will arrange for, supervise and provide for, or cause to be supervised and provided for, the acquisition and construction of the Project, with moneys available in the Project Fund and from other City sources of funds. City represents the estimated costs of the Project are within the funds estimated to be available therefor, and COPF makes no warranty or representation with respect thereto. COPF shall have no liability under any of the acquisition or construction contracts. City shall obtain all necessary permits and approvals, if any, for the acquisition, construction, equipping and installation of the Project, and the operation and maintenance thereof. (b) Authorized Project Fund Disbursements. Disbursements from the Project Fund shall be made for the purpose of paying (including the reimbursement to City for advances from its own funds to accomplish the purposes hereinafter described) the cost of acquiring and constructing the Project. (c) Requisition Procedure. No disbursement from the Project Fund shall be made unless and until COPF has approved such requisition. Prior to disbursement from the Project Fund there shall be filed with the Custodian a requisition for such payment in the form of Disbursement Request attached hereto as Schedule 1, stating each amount to be paid and the name of the person, firm or corporation to whom payment thereof is due. Each such requisition shall be signed by an authorized representative of City (an "Authorized Representative") and by COPF. City shall provide to COPF a Certificate of Completion with the final Disbursement Request. 4. Deposit to Project Fund. Upon satisfaction of the conditions specified in the Installment Sale Agreement, COPF will cause the Installment Sale Agreement Proceeds to be deposited in the Project Fund. City agrees to pay any costs with respect to the Project in excess of amounts available therefor in the Project Fund. 5. Excessive Moneys in the Project Fund. Following the final disbursement from the Project Fund at the end of the Acquisition and Construction Period, or termination of the Project Fund as otherwise provided herein, the Custodian shall transfer any remainder from the Project Fund to COPF (or to City at COPF's written direction) for application to amounts owed under the Installment Sale Agreement in accordance with Section 3.8 of the Installment Sale Agreement; provided, however, that the City may upon written notice to the Custodian and COPF extend the Acquisition and Construction Period i£ (i) the Project is not complete and the City reasonably believes that the Project can and will be completed without significant delay from moneys in the Project Fund together with other available moneys therefor, (ii) moneys are still held in the Project Fund and are available to complete the Project, and (iii) all moneys held in the Project Fund are invested at a yield that does not exceed the yield on the interest portion of the City's obligation to make lease payments under the Installment Sale Agreement. 45635.0142517010348. 3 3 (11/ 6/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing -Acquisition Page 4 , - - 6. Security Interest. The Custodian and City acknowledge and agree that the Project Fund and all;proceeds thereof are being held by Custodian for disbursement or return as set forth herein. City herebyjgrants to COPF a first priority perfected security interest in the Project Fund, and all proceeds thereof; and all investments made with any amounts in the Project Fund. If the Project Fund, or any part thereof; is converted to investments as set forth in this agreement, such investments shall be made in the name of Custodian and the Custodian hereby agrees to hold such investments as bailee for COPF so that COPF 1is deemed to have possession of such investments for the purpose of perfecting its security interest. 17. Control of Project Fund. In order to perfect COPF's security interest by means of control in (i) the Project Fund established hereunder, (ii) all securities entitlements, investment property and other financial assets now or hereafter credited to the Project Fund, (iii) all of City's rights in respect of the Project,Fund, such securities entitlements, investment property and other financial assets, and (iv) all products, proceeds and revenues of and from any of the foregoing in the Project Fund (collectively, the "Collatl al"), COPF, City and Custodian further agree as follows: (a) All terns used in this Section 7 which are defined in the Commercial Code of the State of California (the "Commercial Code") but are not otherwise defined herein shall have the meanings assigned to such terms in the Commercial Code, as in effect on the date of this greement. (b) Custodian will comply with all entitlement orders originated by COPF with respect to the Collateral, or any portion of the Collateral, without further consent by City. (c) Custodian hereby represents and warrants (a) that the records of Custodian show that City is the sole owner of the Collateral, (b) that Custodian has not been served with any notice of levy or received any notice of any security interest in or other claim to the Collateral, or any portion of the Collateral, other than COPF's claim pursuant to this Agreement, and (c) that Custodian is not presently obligated to accept any entitlement order from any person with respect to the Collateral, except for entitlement orders that Custodian is obligated to accept from COPF under this Agreement and entitlement orders that Custodian, subject to the provisions of paragraph (e) below, is obligated to accept from City. (d) Without the prior written consent of COPF, Custodian will not enter into any agreement by which Custodian agrees to comply with any entitlement order of any person other than COPF or, subject to the provisions of paragraph (e) below, City, with respect to any portion I all of the Collateral. Custodian shall promptly notify COPF if any person requests Custodian to enter into any such agreement or otherwise asserts or seeks to assert a lien, encumbrance or I dverse claim against any portion or all of the Collateral. (e) Except as otherwise provided in this paragraph (e) and subject to Section 1(b) hereof, Custodian may allow City to effect sales, trades, transfers and exchanges of Collateral within the Project Fund, but will not, without the prior written consent of COPF, allow City to withdraw any Collateral from the Project Fund. Custodian acknowledges that COPF reserves the right, by delivery of written notice to Custodian, to prohibit City from effecting any withdrawals (including withdrawals of ordinary cash dividends and interest income), sales, trades, transfers or exchanges of any Collateral held in the Project Fund. Further, Custodian hereby agrees to comply I ith any and all written instructions delivered by COPF to Custodian (once it has had a reasonable I pportunity to comply therewith) and has no obligation to, and will not, investigate the reason for any action taken by COPF, the amount of any obligations of City to COPF, the validity of any of 45635.01425\7010348. 3 4 (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing Acquisition - - Page 5 COPF's claims against or agreements with City, the existence of any defaults under such agreements, or any other matter. (f) City hereby irrevocably authorizes Custodian to comply with all instructions and entitlement orders delivered by COPF to Custodian. (g) Custodian will not attempt to assert control, and does not claim and will not accept any security or other interest in, any part of the Collateral, and Custodian will not exercise, enforce or attempt to enforce any right of setoff against the Collateral, or otherwise charge or deduct from the Collateral any amount whatsoever. (h) Custodian and City hereby agree that any property held in the Project Fund shall be treated as a financial asset under such section of the Commercial Code as corresponds with Section 8-102 of the Uniform Commercial Code, notwithstanding any contrary provision of any other agreement to which Custodian may be a party. (i) Custodian is hereby authorized and instructed, and hereby agrees, to send to COPF at its address set forth in Section 8 below, concurrently with the sending thereof to City, duplicate copies of any and all monthly Project Fund statements or reports issued or sent to City with respect to the Project Fund. 8. Miscellaneous. This Agreement may not be amended except in writing signed by all parties hereto. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original instrument and each shall have the force and effect of an original and all of which together constitute, and shall be deemed to constitute, one and the same instrument. Notices hereunder shall be made in writing and shall be deemed to have been duly given when personally delivered or when deposited in the mail, first class postage prepaid, or delivered to an express carrier, charges prepaid, or sent by facsimile with electronic confirmation, addressed to each party at its address below: If to Custodian: Wells Fargo Bank, National Association 707 Wilshire Blvd., 17th Floor Los Angeles, CA 90017 Attention: Corporate Trust Services Phone: (213) 614-3353 Fax: (213) 614-3355 If to COPF: Capital One Public Funding, LLC 275 Broadhollow Road Melville, NY 11747 Attention: If to City: City of Azusa 213 E. Foothill Boulevard Azusa, CA 91702-1395 Attention: Director of Administrative Services Phone: (626) 812-5200 Fax: (626) 334-3136 45635.014257010348. 3 5 - I L=11/16/2011)Alan Kreimeier -Azusa 2011 Wastewater Financing -Acquisition Page 6. In Witness Whereof, the parties have executed this Project Fund Agreement as of the date first above written. e CAPITAL ONE PUBLIC FUNDING, LLC CITY OF AZUSA By. By. City Manager WELLS FARGO BANK, NATIONAL ASSOCIATION I By. Authorized Signatory I a I I I I( I I I 45635.01425\7010348. 3 6 (11/16/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing - Acquisition Page 7 SCHEDULEI FORM OF DISBURSEMENT REQUEST Re: Installment Sale Agreement dated as of November 1, 2011 by and between Capital One Public Funding, LLC and City of Azusa (the "Installment Sale Agreement") In accordance with the terms of the Acquisition Agreement, dated as of November 1, 20)1 (the "Acquisition Agreement") by and among Capital One Public Funding, LLC ("COPF"), Wells Fargo Bank, National Association (the "Custodian") and the City of Azusa (the "City"), the undersigned hereby requests the Custodian pay the following persons the following amounts from the Project Fund created under the Acquisition Agreement (the "Project Fund") for the following purposes. Payee's Name and Address Invoice Number Dollar Amount Purpose The undersigned hereby certifies as follows: (i) An obligation in the stated amount has been incurred by City, and the same is-a proper charge against the Project Fund for costs relating to the Project identified in the Installment Sale Agreement, and has not been paid. Attached hereto is the original invoice with respect to such obligation. (ii) The undersigned, as Authorized Representative, has no notice of any vendor's, mechanic's or other liens or rights to liens, chattel mortgages, conditional sales contracts or security interest which should be satisfied or discharged before such payment is made. (iii) This requisition contains no item representing payment on account, or any retained percentages which City is, at the date hereof, entitled to retain. (iv) The Project is insured in accordance with the Installment Sale Agreement. (v) No Event of Default, and no event which with notice or lapse of time, or both, would become an Event of Default, under the Installment Sale Agreement has occurred and is continuing at the date hereof. (vi) The disbursement shall occur during the Acquisition and Construction Period set forth in this Agreement. (vii) No material adverse change in City's financial condition shall have occurred since the date of the Installment Sale Agreement. Dated: 45635.01425\7010348. 3 7 (11/J 6/2011)Alan Kreimeier-Azusa 2011 Wastewater Financing -Acquisition Page 8 _ . . 4 ..__ I CITY OF AZUSA By: Authorized Representative Disbursement of funds from the Project Fund in accordance with the foregoing Disbursement Request hereby is authorized CAPIT IL ONE PUBLIC FUNDING, LLC By: Title: , I E I 45635.014257010348. 3 8 1 t i AGENDA ITEM TO: I HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: KURT E. CHRISTIANSEN ECONOMIC AND COMMUNITY DEVELOPMENT iDIRECTOR VIA: F.M. DELACH, CITY MANAGERAIV DATE: NOVEMBER 21, 2011 I SUBJECT: CONSIDERATION OF THE SALE OF CERTAIN REAL PROPERTY OWNED BY THE CITY AND LOCATED AT 880 S. AZUSA AVENUE (APNs 8621-024- 903 AND 904) AND AUTHORIZE THE CITY MANAGER TO EXECUTE ALL DOCUMENTS AND TAKE ANY ACTIONS NECESSARY TO CONVEY THE j LAND TO THE CHARVAT FAMILY TRUST CONSISTENT WITH THE TERMS AND INTENT OF THE DISPOPSITION AND DEVELOPMENT AGREEMENT AND STAFF REPORT FROM JUNE 2011 RECOMMENDATION It is recommended that the City Council adopt a resolution approving the sale of real property located at 880 S. Azusa Avenue (APN's 8621-024-903, 904) and authorize the City Manager to execute all documents and take any actions necessary to convey the land to Charvat consistent with the to i s and intent of the DDA and City Council staff report from June 2011. BACKGROUND The City currently owns two parcels of land totaling f 145,055 square feet (3.3 acres) located at 880 S. Azusa Avenue (APN's 8621-024-903, 904) ("City Property"). The City Property was previously acquired by the Redevelopment Agency of the City of Azusa from Clark and William Allen in August 2008 for $5,210,000 for the development of a future commercial/retail project. At the time of acquisition, the address of the City Property was 17525 E. Arrow Highway. The address has since been changed to 880 S. Azusa Avenue. On March 7, 2011, the Agency approved the transfer of the I I City Property to the City of Azusa as repayment for various loans that were made over the years to the Agency from the City's General Fund and Water and Electric Utility. In March 2011, the Agency acquired the adjacent parcel totaling 9,856 square feet (0.23 acre) located at 101 E. Arrow Hwy (formerly 17511 E. Arrow Highway) (APN 8621-024-905) ("Agency Propert ) for$1.450,000 from Roy and Joyce Fowler as a result of a condemnation action. 45636:I Ol\7033398. 3 I`I f _ On June 6, 2011 the City Council and the Agency Board approved a Disposition and Development Agreement ("DDA") with The Charvat Family LLC ("Developer") to develop a retail store on the City Property. The DDA with the Charvat Family LLC provides that the Agency will reacquire title to the the City Property and convey that to the Developer for the construction of a 40,000 to 60,000 square foot retail store ("Project") and allows for a five-year Option to Purchase the Agency Property. Pursuant to the DDA, an escrow has been opened for the sale of the City Property to the Developer in the amount of$3.3 Million, which is based on an appraisal conducted on behalf of the Agency on March 29, 2011, which determined that the fair market value of the City Property and Agency Property is $22.98 per square foot. In August 2011, the Agency was prohibited from taking certain actions as a result of the stay in the litigation surrounding the constitutionality of AB 1X 26 and AB IX 27. Consequently, at this time, staff is seeking authorization from the Council for the City Manager to execute all documents and take any actions necessary to convey the land to Charvat consistent with the terms and intent of the DDA and City Council staff report from June 2011. Staff is working with the escrow to facilitate the transfer. This transfer is for the fair market value of the property based upon an appraisal, will benefit the community through the creation of jobs, generation of tax revenues and the redevelopment of an underutilized property. This transaction was analyzed at the time the DDA was approved; at which time City staff determined that the Project constitutes a "project" under the California Environmental Quality Act, Public Resources Code Sections 21000, et seq. ("CEQA"), and further determined that the Project is exempt from environmental review under CEQA pursuant to Public Resources Code Section 21084 and Title 14 California Code of Regulations Section 15332 because it is in-fill development: (1) consistent with the applicable general plan designation and all applicable general plan policies as well as with the applicable zoning designation and regulations; (2) occurring within city limits on a project site of no more than five acres substantially surrounded by urban uses; (3) the Property has no value as habitat for endangered, rare or threatened species; (4) approval of the Project would not result in any significant effects relating to traffic, noise, air quality, or water quality; and (5) the Property can be adequately served by all required utilities and public services. Staff recommends that the City Council adopt a resolution approving the sale of the City Property and authorize the City Manager to execute all documents and take any actions necessary to convey the land to Charvat consistent with the terms and intent of the DDA and City Council staff report from June. FISCAL IMPACT The sale of the City Property will be pursuant to the City's police powers and at the fair market value of$3.3 Million. Attachments: 1. Resolution of the City Council of the City of Azusa, California, Authorizing the Sale of Certain City-Owned Real Property Located at 880 S. Azusa Avenue 45636.06001\7033398. 3 i RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA, CALIFORNIA, AUTHORIZING THE SALE OF CERTAIN CITY OWNED REAL PROPERTY LOCATED AT 880 S. AZUSA AVENUE AND AUTHORIZE THE CITY MANAGER TO EXECUTE ALL DOCUMENTS AND TAKE ANY ACTIONS NECESSARY TO CONVEY THE LAND TO THE CHARVAT FAMILY TRUST CONSISTENT WITH THE TERMS AND INTENT OF THE DISPOPSITION AND DEVELOPMENT AGREEMENT AND STAFF REPORT FROM JUNE 2011 I WHEREAS, the City of Azusa ("City") owns that certain real property located at 880 S. Azusa Avenue (APNs 8621-024-903 and 8621-024-904) and further described in Exhibit A attached to this Resolution (the "Property"); and WHEREAS, on June 6, 2011, the City Council approved a the disposition of land pursuant to the Disposition and Development Agreement ("DDA") by and between the City, the Redevelopment Agency of the City of Azusa ("Agency") and The Charvat Family LLC ("Developer") for the development of a 40,000 to 60,000 square foot retail store on the Property ("Project"); and WHEREAS, pursuant to the DDA, the City supports and the Agency desires to sell the Property to facilitate the development of the Project consistent with the City General Plan and the'DDA; and WHEREAS, Section 37351 of the California Government Code authorizes the City to sell real property under terms and conditions that are determined to be for the benefit of the City; and WHEREAS,the Property has been appraised at a fair market value of$3.3 Million; and WHEREAS, the Planning Commission of the City of Azusa, at its meeting on November 16,12011, adopted a resolution finding that the sale of the Property is consistent with the City Ge eral Plan, as required by Government Code Section 65402(a); and WHEREAS. City staff has determined that the Project constitutes a "project" under the California Environmental Quality Act, Public Resources Code Sections 21000, et seq. ("CEQA"), and has further determined that the Project is exempt from environmental review under CEQA pursuant to Public Resources Code Section 21084 and Title 14 California Code of Regulations Section 15332 because it is in-fill development: (1) consistent with the applicable general plan designation and all applicable general plan policies as well as with the applicable zoning designation and regulations; (2) occurring within city limits on a project site of no more than five acres substantially surrounded by urban uses; (3) the project site has no value as habitat for endangered, rare or threatened species; (4) approval of the project would not result in any significant effects relating to traffic, noise, air quality, or water quality; and (5) the site can be adequately served by all required utilities and public services. I 6.0600IM33778.2 033778.2 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Azusa, California, as follows: 1. The City Council finds that the sale of the Property for its appraised fair market value of$3.3 Million, and upon terms and conditions that protect the City's interests, is for the benefit of the City and its residents, as sale of the Property will allow it to be used for purposes consistent with the DDA, the Azusa General Plan and applicable zoning and land use controls. 2. The City's Planning Commission has determined that the sale of the Property is in conformity with the City's General Plan, pursuant to California Government Code Section 65402. 3. The City Manager is authorized to take such other actions and make, enter into or sign such other documents on behalf of the City as may be reasonably necessary to accomplish the sale and conveyance of the Property in accordance with this Resolution, the DDA and the intent expressed at the time the DDA was approved. 4. The City, acting as lead agency, hereby finds and determines that the Project constitutes a "project" under CEQA, and further finds and determines that the Project is exempt from environmental review under CEQA pursuant to Public Resources Code Section 21084 and Title 14 California Code of Regulations Section 15332 because it is in-fill development (1) consistent with the applicable general plan designation and all applicable general plan policies as well as with the applicable zoning designation and regulations; (2) occurring within city limits on a project site of no more than five acres substantially surrounded by urbag uses; (3) the project site has no value as habitat for endangered, rare or threatened species; (4) approval of the project would not result in any significant effects relating to traffic, noise, air quality, or water quality; and (5) the site can be adequately served by all required utilities and public services. The City authorizes and directs the City Clerk to file all appropriate notices under CEQA with the County of Los Angeles, California, regarding the CEQA compliance actions of the City contained in this Resolution, within five (5) days following the date of adoption of this Resolution. 5. The Mayor is directed to sign this Resolution and the City Clerk is directed to certify to the adoption of this Resolution. 45636.06001\70337782 6. This Resolution shall take effect immediately upon its adoption. PASSED, APPROVED AND ADOPTED this 21 st day of November, 2011. Mayor 1 A(TEST: I City Clerk I I I I i I i I I 45636.06001V033778.2 - CERTIFICATION h City Clerk of the City of Azusa, do hereby certify that the foregoing Resolution No. _was duly and regularly adopted by the City Council of the City of Azusa at its regular meeting on the 21 st day of November, 2011, and that the same was passed and adopted by the following vote, to wit: AYES: NOES: ABSENT: ABSTAINED: City Clerk 45636.06001\70337782 EXHIBIT A TO RESOLUTION NO. Property Legal Description [Attached behind this cover page] i I I EXHIBIT A 45636.0600 1\70337 78.2 i U � CITY OF AZUSA MINUTE9OF THE CITY COUNCIL REGULAR MEETING , I .MONDAY,NOVEMBER 7,2011—6:32 P.M. 1 The City Council of the City of Azusa met in regular session at the above date and time in the Azusa A1 uditorium located at 213 E.Foothill Boulevard,Azusa,CA 91702. CLOSED SESSION Closed Session City Attorney Carvalho stated that at the last meeting there were comments on the legality of the way the City Attorney agendas are being posted with regard to Closed Session items. She stated that she has followed up with staff Comments and that agendas are being posted legally and do comply with the Brown Act. I i The City Council recessed to Closed Session at 6:34 p.m.to discuss the following: I I! CONFERENCE WITH LABOR NEGOTIATOR(Gov.Code See.54957.6) Conf w/Labor Agency Negotiators: Administrative Services Director-Chief Financial Officer Kreimeier and City Negotiators Manager Detach Organizations: ACEA (Azusa City Employees Association), AMMA (Azusa Middle Management Association), CAPP (Civilian Association Police Personnel), SEIU(Service Employees International Union). Cncl rcvnd The City Council reconvened at 7:30 p.m.There was no reportable action taken in Closed Session. No Rpts Call to Order Call to Order Plledge to the Flag was led by Richie Lugo,Daniel Lugo and Joet Gonzalez,sons of Peter"Bubbles"Lugo. Flag Salute [I nvocation was given by Pastor Rick McDonald of Azusa House of Prayer Invocation ROLL CALL Roll Call PRESENT: COUNCILMEMBERS: GONZALES,CARRILLO,MACIAS,HANKS,ROCHA ABSENT: COUNCILMEMBERS: NONE LSO PRESENT: Also Present City Attorney Carvalho, City Manager Detach, Assistant City Manager Makshanoff, Police Chief Garcia, Director of Economic and Community Development Christiansen, Director of Utilities Morrow, Public Information Officer Quiroz, Administrative Services Director-Chief Financial Officer Kreimeier, Assistant Director of Economic and Community Development McNamara, Library Director Johnson, City Engineer Hassel, Senior Management Analyst Del Toro, Director of Public Works/Assistant City Manager Haes, City Ilerk Mendoza,Deputy City Clerk Toscana. Mayor Rocha announced that the meeting will be adjourned in memory of Peter`Bubbles" Lugo, Jesus F. Mayor Rocha Pedroza, Elena"Helen'Ceniceros, Ruth Anne Griffin,Jeannette K. Partridge,Fred Granados,and Josephine Comments Duna Gonzales. CEREMONIAL MATTERS AND PRESENTATIONS Presentation Ms. Helen Jaramillo of Victor Hodge School expressed appreciation to Azusa Police Officers for H.Jaramillo P, articipating and supporting International Walk to School Day and Red Ribbon Week. She read two essays Walk to School from second grade students noting the impact it had on them, presented Certificates of Appreciation to the Day&Red Officers and showed video about the Safe Routes to School Program. Ribbon Week PUBLIC PARTICIPATION - - Pub Part Ms. Barbara Dickerson addressed Council and provided an update on student enrollment, students who have B.Dickerson achieved honors,athletic achievements,fundraising events and artistic projects. Comments Mr. Mike Lee addressed Council noting apologies if he offended anyone from comments he has made in the M.Lee past. He announced election for the Azusa Unified School Board, noting his choice for the positions, Comments commented on political issues,and voiced his opinion regarding candidates. Rebecca Garcia,Eric Knoles,Jorge Rosales,Bruce Knoles,Peggy Martinez,Joe Guarrem,Jeri Vogel,Meme Speakers angst Sudan, and Audrey Lohr expressed their,opposition, offered comments and asked questions regarding a Pkg structure proposed parking and ride structure on Alameda in Azusa. Mr. Steven Castro addressed Council requesting that they consider writing a,formal letter asking Caltrans to S.Castro open Highway 2. Comments Ms. Madelyn Payne, Mr. Fernando Ayala, Ms. Diana Veloz and Mr. Tom Sanchez addressed Council and Payne, Ayala, audience expressing their choice for the upcoming School Board Election. _ Veloz,Sanchez Mr.Charles Crossland owner of the proposed.fimess center that may be placed at the old Big Lots building at C.Crossland the Azusa Promenade, addressed Council stating that he would like the agreement with Azusa Pacific Comments University and the City to be amended with regard to the In-Lieu Sales Tax Agreement. City Manager Delach advised that he would return with response to questions after he reviews comments to City Mgr previous answers. He and City Attorney Carvalho advised that an item regarding CalTrans and the request to Comments - - open up Highway 39 to Route 2 could be brought back to the next meeting for consideration. REPORTS.UPDATES COUNCIL BUSINESS AND ANNOUNCEMENTS-STAFF Rpts,Updates Library Director Nancy Johnson presented information regarding Public Service Hours at the Azusa City N.Johnson Library detailing Service Hours, Statistical Data, and Senior Use, cost for additional hours of service and Lib Pub Svs -recommended that the Library hours remain the same. Hours Mayor Pro-Tem Hanks reported progress on the Gold Line regarding the challenge to the supplement EIR has Hanks not been viable,MTA raised the cap on spending for the Gold Line,a notice to proceed can be issued to the Comments Design Builders and officially the Gold Line is moving forward,and that there is a need to discuss a place for a parking lot. He announced the Canyon Christian Fellowship 4'Annual Hearts for Hungry event to be held November 19, 2011 from 11:30 a.m. to 3:30 p.m. for more information and/or to volunteer call Maria Aramburo at(626) 922-3076. He stated that Southern California Association of Governments (SCAG) will be discussing the Regional Transportation Plan Truck Transit Lans and the unfunded status of the project. Councilmember Gonzales announced that the Celebrity Softball Game will be held at the West Covina Big Gonzales League Dreams on Sunday,December 11,2011,gates will open at 3 p.m.,celebrities will be from the cast of Comments Sons of Anarchy, CSI Miami and CSI New York and others. He noted that players will consist of members of Council of the District.He provided information regarding the event and stated the cost will be$3. Councilmember Macias reminisced about persons who he remembered while delivering newspapers as a. Macias young boy and expressed his condolences to the family in the passing of Jeanette Partridge and Ruth Ann Comments Griffin,as they made an impact on his life with their kindness. Councilmember Carrillo thanked the Recreation and Family Services Department for the great Trunk or Treat Carrillo event for Halloween. - Comments Mayor Rocha advised that the meeting would be adjourned in memory of Peter"Bubbles" Lugo, Jesus F. Rocha Pedroza,Elena"Helen"Ceniceros,Ruth Anne Griffin,Jeannette K. Partridge,Fred Granados, and Josephine Comments Luna Gonzales. He announced the following events: Friday, November Ila at I I a.m. Veteran's Day Ceremony at City Hall Flag pole, Saturday, November 12'n at 8 a.m. spreading mulch at the Bike Trail, Saturday, November 12'n Be a Walker 9:30 a.m., Can Food Drive for local food banks, pick up dates are December 2"a 9'n and 10 at local schools,Library and City Hall. He announced a Sub-Committee for new City Manager recruitment as Councilmember Carrillo and Councilmember Macias to work together with Dr. Mathis. SCHEDULED ITEMS Sched Items PROPOSED FITNESS AND EXERCISE GYM AND QUICK SERVE RESTAURANT WITH A DRIVE Promenade THRU AT THE PROMENADE COMMERCIAL RETAIL CENTER (RANCH CENTER Commercial REDEVELOPMENT PROJECT AREA) OWNED BY AZUSA PACIFIC UNIVERSITY (APU), Retail Center LOCATED ON THE SOUTHEAST CORNER OF ALOSTA AVENUE. 11!07111 PAGE TWO 1 Director of Economic and Community Development Christiansen addressed the issue stating that they are K.Christiansen looking for guidance on applications and proposals received regarding the Promenade Center. The first item Comments islregarding a proposed fitness gym at the former Big Lots unit. Under the current zoning a center of seven acres or more is not allowed to have more than 15%of non-sales tax generating uses and the center exceeds the 15%already and it not be allowed in the zoning category,in this case an in lieu tax agreement has been proposed. The second site is the former Sizzler Restaurant which has an owner participation agreement. APU has proposed a quick serve drive through restaurant not a full service restaurant as required under the OPA. After discussions with legal staff it is proposed that in order to keep the full service restaurant, it would be located somewhere else on the site. They would be able to keep the quick serve restaurant and APU would pay liquidated damages on an annual basis. He explained AB X26 and AB X27 prohibiting the o making amendments to the OPA. Lengthy discussion was held between Council, Staff and Mark Dickerson of Azusa Pacific University, Discussion rggarding the Owner Participation Agreement, the,beer and wine license, a full service restaurant, the debt owed on the center and return on investment, Swipe Card Program, Chick-Fil-A Restaurant, Land Use Oi dinance,and the proposed fitness center and sales tax generation. Moved by Mayor Pro-Tem Hanks, seconded by Councilmember Macias and unanimously carried to allow Fitness& fitness and exercise gym at the former Big Lots unit, notwithstanding the City's current zoning regulations Exercise Gym that prohibit more than 15%of the shopping center's use for non-sales tax generating uses because APU and Promenade thie tenant have proposed an In-Lieu Sales Tax Agreement. Moved by Councilmember Carrillo, seconded by Councilmember Gonzales to allow a quick serve restaurant Motion with a drive thru at the former Sizzler restaurant site, notwithstanding the Agency's Owner Participation Drive thru Agreement that specifies a full service restaurant, if APU locates a full service restaurant,with a minimum of Chick—Fil-A a beer and wine license with the center. The City Manager would be authorized to negotiate an agreement Promenade with APU authorizing a quick serve restaurant with a requirement of$10,000 per year liquidated damages for thle remainder of the OPA if APU fails to have a full service restaurant on site. A substitute motion was made as follows: Moved by Mayor Pro-Tem Hanks, seconded by Mayor Rocha to Substitute approve a quick serve restaurant without the requirement of a beer and wine license sales, and that the Motion or agreement to come back for consideration, motion failed Councilmembers Gonzales, Carrillo and w/o beer& Macias voting no. wine failed 01 iginal motion stood as follows: Moved by Councilmember Carrillo, seconded by Councilmember Original Gonzales and carried to allow a quick serve restaurant with a drive thru at the former Sizzler restaurant site, motion notwithstanding the Agency's Owner Participation Agreement that specifies a full service restaurant, if APU Approved locates a full service restaurant, with a minimum of a beer and wine license with the center. The City Manager was authorized to negotiate an agreement with APU authorizing a quick serve restaurant with a requirement of$10,000 per year liquidated damages for the remainder of the OPA if APU fails to have a full selrvice restaurant on site. Mayor Rocha dissenting. AMENDMENT TO AZUSA MUNICIPAL CODE AND ADOPTION OF RESOLUTION-- GRAFFITI Amend AMC REWARD PROGRAM. Graffiti Prgm S mor Management Analyst Del Toro addressed the issue stating that this is a proposed new Graffiti Reward Del Toro Program which would allow for the reward of$100 leading to the arrest of a graffiti vandal. He detailed the Comments process and responded to questions posed by Councilmembers. Co uncilmember Gonzales offered an Ordinance entitled: I AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF AZUSA, AMENDING CHAPTER 46- 1"Rdg Ord 239(A)OF THE AZUSA MUNICIPAL CODE. Graffiti Prgm Moved by Councilmember Gonzales, seconded by Councilmember Carrillo and unanimously carried to Approved wlaive further reading and introduce the proposed ordinance which would amend Section 46-239 (a) of the Azusa Municipal Code and allow the City Council to authorize reward payment for information leading to thie arrest of any person found in violation of California Penal Code Section 594 or 640.5. Mayor Pro-Tem Hanks offered a Resolution entitled: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA AUTHORIZING A GRAFFITI Res. I1-C75 REWARDS PROGRAM AND AUTHORIZING STAFF TO UNDERTAKE APPROPRIATE ACTIONS Graffiti Reward CI NSISTENT THEREWITH. Program Moved by Mayor Pro-Tem Hanks, seconded by Councilmember Gonzales to waive further reading and rulopt. Resolution passed and adopted by the following vote of the Council: AYES: COUNCILMEMBERS: GONZALES,CARRILLO.MACIAS,HANKS,ROCHA NOES: COUNCILMEMBERS: NONE ABSENT: COUNCILMEMBERS: NONE 11/07/11 PAGE THREE Moved by Councilmember Carrillo, seconded by Mayor Pro-Tem Hanks and unanimously carried to Funds for appropriate approximately$5,000 annually from the General Fund Reserves for the Graffiti Reward Program. Graffiti Prgm ADOPTION OF A RESOLUTION OF INTENTION AND APPROVAL OF THE ORDINANCE TO Amendment AMEND THE PUBLIC EMPLOYEE'S RETIREMENT CONTRACT TO INCLUDE A 3% AT 55 PERS Contract SECOND TIER PLAN FOR NEWLY HIRED PUBLIC SAFETY MEMBERS. Pub Safety Administrative Services Director-Chief Financial Officer Kreimeier addressed the issue stating that included Kreimeier with the MOU's with Azusa Police Management Association and Azusa Police Officers Association was the Comments implementation of a second tier of 3%at 55 PERS formula for new hires. In order to make the change to the contract the proposed resolution needs to be adopted as well as the first reading of the proposed ordinance which will have second reading at the meeting of December 5, 2011. He announced that the proposed percentage savings will be 2.935%. Mayor Pro-Tem Hanks offered a Resolution entitled: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA ESTABLISHING NOTICE OF Res. I 1-C76, INTENTION TO APPROVE AN AMENDMENT TO CONTRACT BETWEEN THE BOARD OF establishing ADMINISTRATION CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM AND THE CITY Notice of COUNCIL OF THE CITY OF AZUSA. Intention Amend Moved by Mayor Pro-Tem Hanks, seconded by Councilmember Gonzales to waive further reading and Contract PERS adopt. Resolution passed and adopted by the following vote of the Council . AYES: COUNCILMEMBERS: GONZALES,CARRILLO,MACIAS,HANKS,ROCHA NOES: COUNCILMEMBERS: NONE ABSENT: COUNCILMEMBERS: NONE Mayor Pro-Tem Hanks offered an Ordinance entitled: AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF AZUSA AUTHORIZING AN 1"Rdg Ord AMENDMENT TO THE CONTRACT BETWEEN THE CITY COUNCIL OF THE CITY OF AZUSA Amend PERS AND THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES' Contract RETIREMENT SYSTEM. Moved by Mayor Pro-tem Hanks, seconded by Councilmember Gonzales and unanimously carried to waive Ord Introduced further reading and introduce the proposed ordinance. The CONSENT CALENDAR consisting of Items D-I through D-10 were approved by motion of Consent Cal Councilmember Carrillo, seconded by Councilmember Gonzales and unanimously carried with the exception Spec Call D6, of items D-6,D-7,and D-9,which were considered under the Special Call portion of the Agenda. 7&9 1. The minutes of the regular meeting of October 17,2011,were approved as written. Min appvd 2. HUMAN RESOURCES ACTION ITEMS. HR Action Merit Increase and/or Regular Appointment:D.Eldridge,Police Sergeant. Items New Appointment: B.Gallardo,Office Specialist II. 3. The City Treasurer's Report as of September 30,2011 was received and filed. 4. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA RE-APPOINTING Res. II-C77 LALISA MORGAN-DAVIS TO THE HUMAN RELATIONS COMMISSION. Morgan HRC A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA APPOINTING Res. 11-C78 HELEN JARAMILLO TO THE HUMAN RELATIONS COMMISSION. Jaramillo HRC 5. Janitorial Service specifications were approved and staff was authorized to solicit bids for city-wide Janitorial Svs Janitorial services Specs 6. SPECIAL CALL ITEM. Spec Call 7. SPECIAL CALL ITEM. Spec Call 8. The Plans and Specifications were approved for CIP Project 4601403-11 — Concrete ADA Plans&Specs Improvements and staff was authorized to solicit a notice of inviting bids. Concrete Imp 9. SPECIAL CALL ITEM. Spec Call 10. The following resolution was adopted and entitled: 11/07/11 PAGE FOUR A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA ALLOWING CERTAIN Res. 11-C79 CLAIMS AND DEMANDS AND SPECIFYING THE FUNDS OUT OF WHICH THE SAME ARE Warrants - TO BE PAID. Special Call SPECIAL CALL ITEMS Creative Bus 6: AWARD OF CONTRACT—PURCHASE OF(2)TRANSIT BUSES Purchase buses i Councilmember Carrillo addressed the item thanking Director of Public Warks/Assistant City Manager Haes Carrillo for a previous attempt at a potential savings of over $500,000 to the City by considering studying and Comments reviewing what revenues would be saved the City should they choose to contract out these types of services. He stated the study at the time would not have diminished the service to the community but save over $500,000 to the City's Fund,and now there is a need to purchase two new buses. -loved by Mayor Pro-Tm Hanks, seconded by Councilmember Gonzales and unanimously carried to award Pur of buses contract to Creative Bus Sales in an amount of$133,032 for the purchase of(2) 2011 Ford E450 Transit Approved Buses. I 71 ACCEPTANCE OF RELINQUISHMENT AGREEMENT FROM CALTRANS FOR AZUSA AVENUE Relinquishment (STATE ROUTE 39)FROM ARROW HIGHWAY TO 330 FEET NORTH OF ARROW HIGHWAY AND Agmt Caltrans THE MAINTENANCE OF SIGNALS AT THE INTERSECTIONS ON AZUSA AVENUE AT FIRST Arrow STREET, PARAMOUNT STREET GLADSTONE STREET AND ARROW HIGHWAY. Highway Mayor Rocha addressed the proposed Agreement and expressed concern regarding verbiage that states funds Rocha I ay not be available at the time. Director of Public Works/Assistant City Manager Hoes and City Attorney Comments Carvalho advised that this is standard language in CalTrans agreements. City Engineer Hassel referred to agreement Section I item 4 states the funds will be paid by 2013. I Moved by Mayor Pro-Tem Hanks, seconded by Councilmember Gonzales and unanimously carried to Agreement approve the Relinquishment Agreement from Caltrans for Azusa Avenue (State Route 39) from Arrow Approved Highway to 330 Feet North of Arrow Highway and the Maintenance of Signals at the Intersections on Azusa Ivenue at First Street,Paramount Street,Gladstone Street and Arrow Highway. 9. APPROVAL OF COST SHARING AND MAINTENANCE AGREEMENT BETWEEN THE CITY OF Cost Sharing AZUSA AND THE CITY OF GLENDORA FOR THE EXTENSION OF CITRUS AVENUE AND Agmt Azusa IMPROVEMENTS RELATED TO THE ROSEDALE DEVELOPMENT. Glendora i Mayor Rocha addressed the proposed Agreement stating that although the majority of the right of way of Rocha Citrus is within the City of Glendora,Azusa is to pay 100%of the maintenance cost of the street and related Comments facilities;he asked if Glendora will be helping with the payment. Director of Public Works/Assistant City Manager Hoes responded no, that none of their development will Hacs exit on to Citrus Avenue and that only Azusa portion will exit on to Citrus and Glendora does not feel the Comments need to pay for maintenance of that roadway and it's required for Azusa's portion of Rosedale to have that extension.Discussion was held regarding the pros and cons of the agreement. I Moved by Mayor Pro-Tem Hanks, seconded by Councilmember Gonzales and unanimously carried to Agreement approve the Cost Sharing and Maintenance Agreement between the City of Azusa and City of Glendora for Approved t Ic extension of Citrus Avenue and improvements related to the Rosedale Development and the Mayor was authorized to execute the agreement. THE CITY COUNCIL RECESSED AND THE REDEVELOPMENT AGENCY CONVENED AT 9:57 CRA &APFA P.M.THE REDEVELOPMENT AGENCY ADJOURNED AND THE AZUSA PUBLIC FINANCING Cncl Rcnvnd AUTHORITY CONVENED AT 9:58 P.M.THE CITY COUNCIL RECONVENED AT 9:59 P.M. It was consensus of Councilmembers to adjourn in memory of Peter"Bubbles"Lugo,Jesus F.Pedroza,Elena Adjourn in "Helen"Ceniceros,Ruth Anne Griffin,Jeannette K.Partridge,Fred Granados,and Josephine Luna Memory of Gonzales. P.Lugo,J. Pedroza,E. TIME OF ADJOURNMENT: 9:59 P.M. Ceniceros,R. Griffin,J. Partridge,F. CITY CLERK Granados& J.Luna NEXT RESOLUTION NO.2011-C80 - NEXT ORDINANCE NO.2011-018. I I 11/07/11 PAGE FIVE - � U � a amp i CONSENT CALENDAR TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: KERMIT FRANCIS, INTERIM DIRECTOR OF HUMAN RESOURCES/PERSONNEL OFFICER VIA: F.M. DELACH, CITY MANAGER DATE: i NOVEMBER 21, 2011 i SUBJECT HUMAN RESOURCES ACTION ITEMS I RECOMMENDATION i It is recommended that the City Council approve the following Personnel Action Requests in accordance with the City of Azusa Civil Service Rules and applicable Memorandum of Understanding(s). i .D. NEW APPOINTMENT: The following appointments have been requested by department heads ursuant to the Rules of The Civil Service System. DEPARTMENT NAME CLASSIFICATION EFFECTIVE _ iRANGE/STEP DATE BASE MO. SALARY PD Samantha Police Officer Trainee TBD/Pending 6184/1 Sutcliffe Background $4,486.64 PD i Nathan Police Officer Trainee TBD/Pending 6184/1 Houston Background $4,486.44 UTL Alicia Administrative Analyst 11/22/2011 4192/1 Howard $4.815.17 FISCAL IMPACT There is no 'fiscal impact, as positions listed are funded in approved department budgets. l � N G �'94 1POAt1�P. I CONSENT ITEM e TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: MARCENE HAMILTON, CITY TREASURER DATE: November 21, 2011 SUBJECT: INVESTMENT POLICY FOR THE CITY OF AZUSA I I RECOMMENDATION J The City Treasurer recommends that the City Council approve the attached resolution re-adopting the Investment Policy for the City of Azusa. FISCAL IMPACT None I BACKGROUND I California Government Code Section 53646(a)(2)requires the City to adopt an Investment Policy every year. The City is also charged with changing the policy as necessary. The policy must be adopted or changed at a public meeting of the Council. The Council Members last adopted the Investment Policy on October 18, 2010. DISCUSSION In addition to the annual review of the City's Investment Policy, Government Code Section 53607 requires the City to reconfirm annually the delegation of investment authority to the City Treasurer. TheT reasurer and the City Council are "fiduciaries" subject to the prudent investor standard. The eInvestment Policy is the outline from which the Treasurer operates to ensure that investments are safe,� liquid and achieving returns. I . x RESOLUTION NO RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA ADOPTING THE INVESTMENT POLICY WHEREAS, the City of Azusa receives taxes and other revenues from a variety of sources and uses the funds to pay its bills on a regular basis; and WHEREAS, the City Treasurer is charged with the duties of handling and maintaining the cash that is taken in or otherwise received by the City; and WHEREAS, the balance of these funds fluctuates between $3,000,000 and $40,000,000 or more; and WHEREAS, per Government Code Sections 53607 and 53600.5 the City Treasurer is charged with investing idle public funds on the basis of protecting the safety of the funds, ensuring the liquidity of the investments, and maximizing earnings in that order of importance and based on the "Prudent Investor Standards"; and WHEREAS, the State of California requires each City annually to adopt an investment policy per Government Code Section 53646; and WHEREAS, the City Council, with the aid of its staff has reviewed the Statement of Investment Policy and wishes to approve the same; .NOW THEREFORE BE IT RESOLVED that the City Council of the City of Azusa does hereby adopt its Investment Policy attached hereto marked Exhibit A and instructs the City Treasurer to be guided by it in carrying out the duties of his office for the benefit of the City of Azusa. ADOPTED AND APPROVED this day of November 201 1. JOSEPH R. ROCHA,MAYOR I HEREBY CERTIFY that the foregoing resolution was duly adopted by the City Council of the City of Azusa at a regular meeting thereof on the day of November 201 1 by the following vote of Council: AYES: CITY COUNCIL MEMBERS: NOES: CITY COUNCIL MEMBERS ABSTAIN: CITY COUNCIL MEMBERS ABSENT: CITY COUNCIL MEMBERS VERA MENDOZA, CITY CLERK City of Azusa, California INVESTMENT POLICY 1. POLICY STATEMENT All funds of the City of Azusa ("City") shall be invested in accordance with principles of sound treasury management and in accordance with the provisions of California Government Code Section 53600, et seq., and guidelines established by the California Municipal Treasurer's Association, the California Society of Municipal Finance Officers, and this Investment Policy ("Policy"). These funds are defined and detailed in the City's Comprehensive Annual Financial Report ("CAFR").and include any new funds created unless specifically excluded by the City Council. Specifically excluded funds are: Funds deposited with the State Public Employees' Retirement System; and i Bond proceeds that are subject to covenants and restrictions as defined in the Bond's indenture are administered under the direct control of the Bond Trustee. e 2. I INVESTMENT POLICY OBJECTIVES G A. Overall Risk Profile I Pursuant to California Government Code Section 53600.5 the three(3)objectives of the City's Policy are, in order of priority: 1. Safeguard the principal of the funds; 2. Meet the liquidity needs of the City; and 3. Achieve a return on the funds. To achieve these objectives, the City shall consider the following when making an investment: 1. Safeguard the Principal of the Funds The City shall mitigate the risk to the principal of invested funds by limiting credit and interest rate risks. Credit risk is the risk of loss due to the failure of the security issuer or backer. Interest rate risk is the risk that the market 1 IIIY4TSMINROIIfYLRY OFKLLaoI I.GM value of the City's portfolio will fall due to an increase in general interest rates. a) Credit risk will be mitigated by. (i) Limiting investments to the safest types of securities; (ii) By pre-qualifying the financial institutions with which it will do business; and (iii) By diversifying the investment portfolio so that the potential failure of any one issue or backer will not place an undue financial burden on the City. b) Interest rate risk will be mitigated by: (i) Structuring the City's portfolio so that securities mature to meet the City's cash requirements for ongoing obligations, thereby avoiding the possible need to sell securities on the open market at a loss prior to their maturity to meet those requirements; and (ii) Investing primarily in shorter-term securities. 2. Meet the Liquidity Needs of the City The City's investment portfolio shall be structured in a manner that ensures securities mature at the same time as cash is needed to meet anticipated demands (Static Liquidity). Additionally, since all possible cash demands cannot be anticipated, the portfolio should consist of securities with active secondary markets (Dynamic Liquidity). The maximum percentage of different investment instruments and maturities is detailed within Section II of this Policy. 3. Achieve a Return on the Funds Yield on the City's investment portfolio is of secondary importance compared to the safety and liquidity objectives described above. Investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. While it may occasionally be necessary or strategically prudent for the City to sell a security prior to maturity to either meet unanticipated cash needs or to restructure the portfolio, this Policy LLW'vF9AIXI UCV6GMOFW Ah Dl 1.T specifically prohibits trading securities for the sole purpose of speculating on the future direction of interest rates. B. Basic Investment Strategy I The City's investment portfolio shall be structured to provide sufficient funds from investments to meet the City's monthly anticipated cash needs. Subject to the objectives stated above,the choice in investment instruments and maturities shall be based upon an analysis of future anticipated cash needs, existing and anticipated revenues, interest rate trends and specific market opportunities. No investment may have a maturity of more than five (5) years from its date of purchase without receiving prior City Council approval. After approval by City Council,reserve funds associated with bond issues may have a maturity of more than five(5)years,up to the earliest date the bonds may be redeemed or mature. I 3. INVESTMENTS j This section of the Policy identifies the types of investments in which the City will invest its idle or surplus funds. A. Standard of Prudence lThe City operates its investment portfolio under the Prudent Investor Standard (California Government Code Section 53600.3) which states, in essence, "when investing,reinvesting,purchasing,acquiring,exchanging,selling or managing public funds, a trustee shall act with care, skill, prudence and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated need of the City, that a prudent person in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims,to safeguard the principal and maintain the liquidity needs of the City." This standard shall be applied in the context of managing the overall portfolio. Investment officers, acting in accordance with written procedures and this investment policy and exercising the above standard of diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. i I B. Eligible Securities The City is provided a broad spectrum of eligible investments under California Government Code Section 53600, et seq. The City may choose to restrict its permitted investments to a smaller list of securities that more closely fits the City's cash flow needs and requirements for liquidity. If a type of investment is added to California Governmelit Code Section 53600 et seg., the new investment option will not be added to the City's Authorized Investment List until this Policy is amended and approved by the City Council. If a type of investment permitted by the City should be removed from California Government Code 53600 et seq., the investment will be deemed concurrently removed from the City's Authorized Investment List. The City's Authorized Investment List • Insured Certificates of Deposit (CD's) of California banks and/or savings and loan associations, and/or savings banks that mature in five (5) years or less, provided that the City's investments shall not exceed Two Hundred and Fifty Thousand Dollars ($250,000) per institution. If the investment exceeds the insured Two Hundred and Fifty Thousand Dollars ($250,000),the funds are to be collateralized at one hundred and ten percent (110%) of the deposit in government securities or one hundred and fifty percent (150%) in mortgages. • Local Agency Investment Fund (LAIF) Demand Deposits. • Securities of the U.S. Government, and securities of which the principal and interest is guaranteed by the full faith and credit of the U. S. Government. • Securities issued by agencies and instrumentalities of the U. S. Government or issued by a government-sponsored enterprise. • Commercial Paper(limited to 30%of the portfolio)rated A 1/P I or the equivalent by two nationally recognized rating agencies with maturities not to exceed one hundred and eighty-one (18 1) days. • Medium-Term Corporate Notes (limited to 20% of the portfolio) that are rated "AA" or better by two (2) nationally recognized rating agencies. • Passbook Savings or Money Market Demand Deposits, subject to the restrictions and limitations set forth in California Government Code Section 53638. • Repurchase Agreements (limited to 30% of the portfolio) with approved banks and broker-dealers who have completed and signed a Master Repurchase Agreement with the City. 4 c • Money Market Mutual Funds(with a stated objective of maintaining a$1.00 net asset value) that has been rated AAAm by Moody's or any two nationally recognized rating agencies. Please see Exhibit A for a more detailed description of the authorized investments listed above. A thorough investigation of any pool or fund is required prior to investing and on'a continual basis. The investigation will, at a minimum, obtain the following information: • A description of eligible investment securities, and a written statement of investment policies and objectives; and • A description of interest calculations and how it is distributed,and how gains and losses are distributed; and • A description of how securities are safeguarded (including the settlement process) and how often the securities are marked to market and how often an audit is conducted; and • A description of who may invest in the program, how often, what size deposits and withdrawals are permitted; and • A schedule for receiving statements and portfolio listings; and • A determination as to whether the pool/fund maintain a reserve or retain earnings or is all income after expenses distributed to participants; and • A fee schedule that also discloses when and how fees are assessed; and • A determination as to whether the pool or fund is eligible for bond proceeds i and/or will accept such proceeds. P The purpose of this investigation is to determine the suitability of a pool or fund and evaluate the risk of placing funds with that pool or fund. I One of the purposes of this Policy is to define what investments are permitted. If a type of security is not specifically authorized by this Policy, it is not a permitted investment. I C. Qualification of Brokers, Dealers and Financial Institutions The City Treasurer or designees will establish and maintain a list of the financial institutions and broker/dealers authorized to provide investment and depository services to the City, will perform an annual review of the financial condition and registrations of the qualified bidders, and require annual audited financial statements to be on file for each approved company. The City shall annually send a copy of their current Policy to all financial institutions and broker/dealers approved to do business with the City. Receipt of the Policy and Enabling Resolution, including confirmation 5 that it has been received and reviewed by the person(s) handling the City's account, shall be acknowledged in writing within thirty (30) days. All broker-dealers and financial institutions that desire to become qualified bidders for investment transactions must submit a"Broker-Dealer Application" and related documents relative to eligibility. This includes a current audited financial statement, proof of state registration, proof of NASD registration and a certification they have received and reviewed the City's Policy and agree to comply with the provisions outlined in the Investment Policy. The City Treasurer or designees may establish any additional criteria they deem appropriate to evaluate and approve any financial services provider. The selection process for broker-dealers shall be open to both "primary dealers"and"secondary/regional dealers"that qualify under Securities and Exchange Commission Rule 15c3-1 (Uniform Net Capital Rule). Theprovidermust have an office in California and the provider's representative must be experienced in institutional trading practices and familiar with the California Government Code as it relates to investments by a City. D. Collateralization Requirements Uninsured Time Deposits with banks and savings and loans shall be collateralized in the manner prescribed by state law for depositories accepting municipal investment funds. Re-purchase Agreements shall be collateralized in accordance with terms specified in the Master Repurchase Agreement. The valuation of collateral securing a Re- purchase Agreement will be verified weekly to ensure a minimum of one hundred and two percent (102%) of the value of the transaction is held by the City's depository agent. E. Diversification The City will diversify its investments by security type and investment. With the exception of bond reserve funds, bond escrow funds, and any other specific funds approved by the Treasury Committee or the City Council, the City Treasurer or designee, and the City's Investment Committee will adopt a strategy that combines current market conditions with the City's cash needs to maintain the maximum degree of safety of principal and liquidity throughout market and budgetary cycles. This strategy will include diversification by investment type and maturity allocations and will be included in the regular quarterly reports to the City Council. This strategy will be reviewed quarterly and can be changed accordingly. 6 r F. Confirmations Receipts for confirmation of purchase of authorized securities should include at a minimum the following information: trade date, settlement date, description of the security,par value, interest rate,price,yield to maturity, agency's name, net amount due, and third party custodial information. G. GASB 3 I The Governmental Accounting Standards Board("GASB")issued GASB#3 in April 1986, and the local entity's investments must be categorized into three(3) levels of credit risk as follows: 1) Securities that are insured or registered,or for which the securities are held by public units or its agent in the units; 2) Securities that are uninsured and unregistered and are held by the broker's or dealer's trust department or agent in the unit's name; 3) Securities that are uninsured and unregistered and are held by the broker or idealer, or by its trust department or agent, but not in the unit's name. { The carrying amount and market value of all types of investments must be disclosed in total and for each type of investment. GASB 43 exempts mutual funds and LAIF investments from the mandatory risk categorization. 4. SAFEKEEPING OF SECURITIES A. Safekeeping Agreement The City shall contract with a bank or banks for the safekeeping of securities that are owned by the City as a part of its investment portfolio or transferred to the City under the terns of a Re-purchase Agreement. All securities owned by the City shall be held in safekeeping by a third party bank trust department acting as agent for the City under the terms of a custody agreement executed by the bank and the City. All securities will be received and delivered using standard delivery versus payment(DVP) procedures. The third party bank trustee agreement must comply with California Government Code Section 53608. No outside broker/dealer or advisor may have access to City funds, accounts or investments, and any transfer of funds must be approved by the City Treasurer. I I B. Security Transfers The authorization to release City's securities or funds will be telephoned to the appropriate bank representative by a finance department member other than the person who initiated the transaction. A written confirmation outlining details for the transaction and confirming the telephoned instructions will be sent to the bank within ` five (5) working days. C. Verification of Security Securities transferred to the City as collateral securing time deposits or repurchase agreements that are being held in safekeeping for the City will be verified in writing and examined on a random basis during the year by the City's independent auditors as part of the City's annual independent audit. 5. STRUCTURE AND RESPONSIBILITY This section of the Policy defines the overall structure and areas of responsibility within the investment management program. A. Responsibilities of the City Treasurer The City Treasurer is charged with responsibility for maintaining custody of all public funds and securities belonging to or under the control of the City, and for the deposit and investment of those funds in accordance with principles of sound treasury management applicable laws,ordinances,and this Policy. This includes establishing written procedures for the operation of the investment program consistent with this Policy. The procedures should include reference to safekeeping, master repurchase agreements, wire transfer agreements, banking services contracts and depository agreements. Such procedures shall also include explicit delegation of authority to persons responsible for investment transactions. No person may engage in any investment transaction except as provided under the terms of this Policy and the procedures established by the Treasurer and approved by the Investment Committee. Investment decisions that involve borrowing in the amount of One Hundred Thousand Dollars($100,000)or more must be included as a separate discussion item on the City Council's agenda. Such items can no longer be included on the City Council's consent calendar. (California Government Code Section 53635.7) B. Responsibilities of the Director of Finance The Director of Finance is responsible for keeping the City Council fully advised as to the financial condition of the City. C. Responsibilities of the ON Council The City Council shall consider and adopt a written Investment Policy. As provided in that policy, the Council shall receive, review and accept monthly investment reports. D. Responsibilities of the Investment Committee There shall be an Investment Committee consisting of the Director of Finance, the City Manager, and City Treasurer and their designees. The Committee shall meet quarterly to discuss cash flow requirements, the monthly investment reports, investment strategies, investment and banking procedures and significant investment related work projects being undertaken in each department that will affect the cash flow management of the City Treasurer. This will require timely reports from the department heads to the City Treasurer concerning significant future cash flow requirements. The Committee's meetings will be summarized in minutes that are distributed to the City Council. The Investment Committee,with the approval of the City Council,may retain an external investment manager on behalf of the City. The investment manager will be required to act in accordance with this investment policy. E. Ethics and Conflicts of Interest All City officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution of the investment program, or that could impair their ability to make impartial investment decisions. Those employees and investment officials shall disclose to the appropriate City executive(City Manager, City Attorney,or the Director of Finance)any material financial interest in financial institutions that conduct business within the City, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the City's investments. 6. REPORTING The City Treasurer shall prepare a monthly investment report, including a succinct management summary that provides a clear picture of the status of the current investment portfolio and transactions made over the past month. This management summary shall be prepared in a manner that will allow the Director of Finance and the City Council to ascertain whether investment activities during the reporting period have deviated from the City's Investment Policy. The monthly report shall include all of the information required by California Government Section 53646, including the following: 9 uwscruwrroucv<morvarswuii.oac • A list of individual securities held at the end of the reporting month; and • Unrealized gain or loss resulting from amortization or accretion of principal versus market value changes by listing the cost and market value of securities owned by the City; and • A description of the current investment strategy and the assumptions upon which it is based; and • Dollar weighted yield to maturity of the City's investments; and • Maturity schedule by type of each of the City's investments; and • Statement as to compliance of the City's Investment Policy with Government Code Section 53601 et seq.; and • Statement as to ability to meet expenditure requirements for next six months; and • Market value, book value, par value and cost basis of all investments; and. • Investments"under the management of contracted parties,including lending programs"(i.e., investments held by deferred compensation administrators). 7. PERFORMANCE STANDARDS The investment portfolio will be managed in accordance with the standards established within this Policy and should obtain a market rate of return throughout budgetary and economic cycles. The Investment Committee will establish and periodically review the City's portfolio benchmarks and performance. A benchmark will be selected that compares with the portfolio composition, structure and investment strategy at that time. S. REVIEW OF INVESTMENT POLICY A. Policy Review This Policy shall be reviewed annually by the City Council in accordance with State law to ensure its consistency with respect to the overall objectives of safety,liquidity and yield. Proposed amendments to the Policy shall be prepared by the Treasurer and reviewed by the Investment Committee and City Attorney and then be forwarded to the City Council for consideration. The Investment Committee shall annually review the Policy and any proposed amendments and forward to the City Council for its consideration and adoption at a public meeting. 10E .<mo.w ,o . B. Internal Control and Review The external auditors shall annually review the investments and general activities associated with the investment program to ensure compliance with this Policy. This review will provide internal control by assuring compliance with policies and procedures for the activities that are selected for testing. I 9. ADOPTION OF POLICY This Policy was duly adopted by the City Council of the City of Azusa on November 21, 2011. I EXHIBIT A EXHIBIT A DESCRIPTION OF INVESTMENTS The City of Azusa's ("City") investments may be placed in those securities as outlined below; the allocation between the various investment instruments may change in order to give the City the best combination of safety, liquidity and higher yield. Surplus funds of local agencies may only be invested in certain eligible securities. The City limits its investments to allowable securities under the State of California statutes (Government Code Section 53601, et. seq., Section 53356, et. seg., and Section 53595, et. seq.) and is further limited to those listed below. Certificates of Deposit Certificates of deposit allow the City to select the exact amount and day of maturity as well as the exact depository. Certificates of deposit are issued in any amount for periods of time as short as fourteen(14)days and as long as several years. At any given time,the City may have certificates of deposit innumerousfinancial institutions in the future. The City Treasurer may at his/her discretion waive security for that portion of a deposit, which is insured pursuant to federal law. Currently, the first Two Hundred and Fifty Thousand Dollars ($250,000)of a deposit is federally insured by FSLIC or FDIC. It may be to the City's advantage to waive this collateral requirement for the first Two Hundred and Fifty Thousand Dollars($250,000) because the City may receive a higher interest rate. If funds are to be collateralized, the collateral will be one hundred and ten percent(110%)of the deposit in government securities or mortgages of one hundred and fifty percent (150%). At purchase, institutions must not show an operating loss. Banks must have an equity-to-asset ratio of at least six percent(6%). Savings and loan associations and savings banks must have an equity-to-asset ratio of a least three percent (3%). Local Agency Investment Fund The Local Agency Investment Fund("LAIF")of the State of California offers high liquidity because deposits can be wired to the City checking account within twenty-four (24) hours. Interest is computed on a daily basis. This is a special fund in the State Treasury, which local agencies may use to deposit funds for investment. There is no minimum investment period and the minimum transaction is Five Thousand Dollars ($5,000) in multiples of One Thousand Dollars ($1,000) above that, with a maximum of Fifty Million Dollars ($50,000,000) for any city. It offers high liquidity because deposits can be converted to cash within twenty-four(24)hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly by adding it to the principal. v The State charges participants a small fee to cover reasonable costs associated with operating the investment pool, not to exceed one quarter of one percent (.25%) of the earnings. The interest rates received are fairly stable because of the pooling of the State's surplus cash with the surplus cash deposited by local governments. This creates a well-diversified multi-billion dollar money pool. U.S. Treasury Securities U.SI Treasury securities are highly liquid and considered the safest of all in because they are backed by the full faith and credit of the United States Government. I U.S.Treasury Bills are direct obligations of the United States Government. They are issued weekly with maturity dates up to six (6)months. They are issued and traded on a discount basis and the interest is figured on a three hundred and sixty(360)day basis using the actual number of days to maturity. They are issued in the minimum amount of Ten Thousand Dollars ($10,000) and in multiples of Five Thousand ($5,000) thereafter. U.S. Treasury Notes are direct obligations of the United States Government. They are issued throughout the year with maturities from two up to thirty(30)years. Notes are coupon securities paying a fixed amount every six (6) months. The City will not invest in notes having maturities longer than five (5) years. Federal Agency Securities I Federal Agency securities are highly liquid and considered to be virtually without credit risk. Federal Agency issues are guaranteed indirectly by the United States Government. All Agency obligations that are fixed-rate and meet the maturity restrictions of the State Code and this Policy qualify as legal investments and are acceptable as security for public deposits. They usually provide higher yields than regular Treasury issues with all of the same advantages. Examples are: FNMA's (Federal National Mortgage Association) are used to assist the home mortgage market by purchasing mortgages insured by the Federal Housing Administration and the Farmers Home Administration,as well as those guaranteed by the Veterans Administration. FHLB's (Federal Home Loan Bank Notes and Bonds) are issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations,mutual savings banks, cooperative banks, insurance companies and mortgage-lending institutions. Other Federal Agency issues are Federal Home Loan Mortgage Corporation i ("FHLMC"), Federal Farm Credit Bank ("FFCB"), Small Business Administration 13 I= - Notes("SBA's"),Government National Mortgage Association("GNMA's"),Tennessee Valley Authority("TVA's")and the Student Loan Marketing Association("SLMA's") Negotiable Certificate of Deposit Negotiable certificates of deposit are high-gr4de instruments, paying a higher interest rate than regular certificates of deposit. They are liquid because they can be traded in the secondary market. Negotiable Certificates of Deposit ("WD's") are unsecured obligations of the issuing financial institution, bank or savings and loan, bought at face value with a promise to pay face value plus accrued interest at maturity. The primary market issuance is in multiples of One Million Dollars ($1,000,000). The secondary market usually trades in denominations of Five Hundred Thousand Dollars($500,000), although smaller denominations are occasionally available. Local agencies may not invest more than thirty percent(30%)of their surplus money in negotiable certificates of deposit. NCD's will only be placed with the largest and most financially sound institutions. Commercial Paper Commercial paper allows the investment of large amounts of money on a short-term basis at rates higher than passbook savings accounts. Commercial paper is a short-term unsecured promissory note issued by a corporation to raise working capital. These negotiable instruments are purchased at a discount to par value. As an example, corporations such as American Express, International Business Machines (IBM) and General Electric issue commercial paper. Local agencies are permitted by state law to invest in commercial paper of"prime" quality of the highest ranking or of the highest letter and numerical rating as provided by Moody's Investor's Service, Inc. or Standard and Poor's Corporation (Allpl or a1+/p]). Purchases of eligible commercial paper may not exceed one hundred and eighty (180) days maturity nor exceed thirty percent (30%) of the City's surplus funds. Medium-Term Corporate Notes A city may invest in medium term corporate notes with a maximum maturity of five years issued by a corporation organized and operating within the United States, a depository institution licensed by the United States Government or any state government and operating within the United States. California Government Code Section 53601 et seq. permits cities to invest in corporations with a rating category of"A" or better, but the City will limit its investments in corporate medium term notes to those issued by corporations that have been rated "AA" or its equivalent by two (2) nationally recognized ratings agencies. Passbook Savings or Money Market Account 14 �Ha min "OF. SSW I Passbook savings account allows us to transfer money from checking to savings and earn interest on smaller amounts of money, which are not available for a longer-term investment. The passbook savings account is similar to a CD except not for a fixed term. The interest rate is much lower than CD's but the savings account provides daily liquidity and funds can be deposited and withdrawn according to our daily needs. Mutual Funds I Mutual Funds allow the City to maintain liquidity and receive money market rates. Mutual Funds are Ireferred to in the Government Code, Section 53601(1),as"shares of beneficial interests issued by diversified management companies". The Mutual Fund must be restricted by its prospectus to be a "Money Market" mutual fund and be limited to the same approved investments as LAIF. These investments include U.S. Treasury and Agency issues, Bankers Acceptances, Commercial Paper, Repurchase Agreements,Certificates of Deposit,and Negotiable Certificates of Deposit. The quality rating and percentage restrictions in each investment category applicable to LAIF also apply to any Mutual Fund. One of the stated objectives of the Mutual Fund must be to attempt to maintain a One Dollar($1.00) Net!Asset Value(NAV). A further restriction is that the purchase price of shares of any mutual fund shall not include any sales commission. Investments in mutual funds shall not exceed fifteen percent (15%) of the City's surplus money. Repurchase A¢reements Re purchase Agreements are purchases of securities by the City under an agreement with a term of one�(1)year or less whereby the seller will"repurchase"the same securities on or before a specified date' or on demand of either party and for a specified amount. The underlying securities must be delivered to the City's custodial account by book entry,physical delivery or a third-party custodial agreement. I I I 15 I_ U I •nu -CONSENT CALENDAR TOI HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL i FROM: ALAN KREIMEIER, DIRECTOR OF ADMINISTRATIVE SERVICES/CFO i VIA: F. M. DELACH, CITY MANAGER* I DATE: NOVENBER 21, 2011 SUBJECT: PURCHASE OF RADAR SPEED DISPLAY TRAILER I RECOMMENDATION It is recommended that the City Council approve the issuance of a purchase order in an amount not to exceed $14,339 to RU2 Systems, Inc. of Mesa AZ, for the purchase of a RU2 Fast-3350 VMS Radar Speed Display Trailer, under the provisions of A.M.C. Section 2-518 (b), "purchases of supplies and equipment of between $10,000 and $24,999, shall except as otherwise provided in this article, be awarded by the City Council pursuant to the Azusa Informal or Alternative Puri hasing Procedure. BACKGROUND At the June 6, 2011 Council meeting, City Council authorized staff, through the budget process for fiscal year 2011/12, to purchase a new radar trailer that can be towed around town. Cpl. Dean Brewer of Azusa P.D. conducted a comprehensive search of Radar trailers that would meet our requirements, which include a full graphic medium density LED display that is capable of up top 3 lines of text, including full graphic characters and complex animation. The display panel must also fold down for ease of transport, and storage. Three quotes were received, and are listed below in terms of total cost to the City of Azusa, including sales tax and delivery charges to Azusa. Com i any Name Equipment Description Company Location Total cost RU2 Systems, Inc. RU2 Fast-3350 VMS Mesa, AZ $14,388.69 Radar Speed Display Trailer Optics For You Decatur Onsite 400 Radar IL $16,311.41 Speed Display Trailer National Sign, Inc. Sunray 290 Solar Powered Fullerton, CA $16,965 Full Matrix Message Sign Cpl. Brewer will travel to Mesa, AZ to receive comprehensive training in the operation of the equipment, and take delivery,at that time, and tow it to its new home at AZPD, at an additional cost of not more than $240, making the total cost not more than $14,629. FISCAL IMPACT Funding for this equipment has been budgeted as part of the 2011/12 Police Department Operating Budget under Account number 10-55-651-000-7140 Prepared by:T.Garcia,Buyer i ?'r§ IN J� W SIR +(rrt�aS�P I I CONSENT CALENDAR j TO� % HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: ALAN KREIMEIER, DIRECTOR OF ADMINISTRATIVE SERVICES/CFO VIA: F. M. DELACH, CITY MANAGER,& DATE: NOVEMBER 21, 2011 SUBJECT: DISPOSITION OF SURPLUS VEHICLES RECOMMENDATION It is recommended that in accordance with Section 2-525(b) of the Azusa Municipal Code, City Council approve the disposal of three (3) surplus Ford Crown Victoria Police vehicles, one (1) surplus Chevrolet S-10 Pick-up Truck, one (1) surplus Toyota Prius, and other miscellaneous items. BACKGROUND The!above mentioned vehicles and miscellaneous items have been declared as surplus by their respective departments, due to age, high mileage, and the need for costly repairs to keep them in safeioperating condition, and have been turned over to the Purchasing Division for disposal. The vehicles are no longer needed or used by their respective departments, and are not suitable for use by any other city department for any reason. The subject vehicles and miscellaneous equipment are listed on page two of this report. i 1 I Year Make/Model V.I.N. Number& Department Est. Value Mileage 2006 Ford Crown Victoria 2FAHP71 W66X115681 Police $3,000-$4,000 63,697 miles 2007 Ford Crown Victoria 2FAHP71W47X138538 Police $3,000-$4,000 72,920 miles 2007 Ford Crown Victoria 2FAHP71 W87X138543 Police $3,000-$4,000 75,675 miles 2001 Toyota Prins JT2BK12U520042300 Administration $3,000 47,000 miles (approximately) 1991 Chevrolet S-10 Pickup 1GCCS19Z4M8306799 Public Works $500 81,404 Miles Miscellaneous items include: two pallets of miscellaneous computers, monitors, and keyboards. FISCAL IMPACT It is estimated that the sale of these surplus vehicles and miscellaneous items could add as much as $15,500 to the general fund. Prepared by:T.Garcia,Buyer 2 �'t OF q2G U N' CITY OF AZUSA MINUTES OF THE REDEVELOPMENT AGENCY REGULAR MEETING MONDAY,NOVEMBER 7,2011—9:57 P.M. i The Board of Directors of the Redevelopment Agency of the City of Azusa met in regular session at the above date and time in the Azusa Auditorium,213 E.Foothill Blvd.,Azusa CA. lChairman Rocha called the meeting to order. Call to Order ROLL CALL Roll Call PRESENT: DIRECTORS: GONZALES,CARRILLO,HANKS,MACIAS,ROCHA ABSENT: DIRECTORS: NONE ALSO PRESENT: Also Present General Counsel Carvalho, Executive Director Delach, Assistant Executive Director Makshanoff, Department Heads,Secretary Mendoza,Deputy Secretary Toscana. i The CONSENT CALENDAR consisting of items F-1 through F-3 was approved by motion of Director Consent Cal. Gonzales,seconded by Director Carrillo and unanimously carried. Approved 1. Minutes of the regular meeting of October 17,2011,were approved as written. Min appvd 2. The Agency Treasurer's Report as of September 30,2011,was received and filed. Treas Rpt 3. Resolution authorizing payment of warrants by the Agency was adopted and entitled: A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF AZUSA Res. 11-R42 ALLOWING CERTAIN CLAIMS AND DEMANDS TO BE PAID OUT OF REDEVELOPMENT Warrants AGENCY FUNDS. It was consensus of the Redevelopment Agency Board Members to adjourn. Adjourn TIME OF ADJOURNMENT:9:58 P.M. SECRETARY NEXT RESOLUTION NO. 11-1143 i i ` *ME A*21 All -- 3 ,- --. --_ - + OM Cg41FOAr�P CONSENT ITEM TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: MARCENE HAMILTON, CITY TREASURER DATE: November 21 , 2011 SUBJECT: INVESTMENT POLICY FOR THE REDEVELOPMENT AGENCY OF THE CITY OF AZUSA I RECOMMENDATION I The City Treasurer recommends that the City Council approve the attached resolution re-adopting the Investment Policy for the Redevelopment Agency of the City of Azusa. FISCAL IMPACT None i, BACKGROUND California Government Code Section 53646(a)(2) requires the Agency to adopt an Investment Policy every year. The Agency is also charged with changing the policy as necessary. The policy must, be adopted or changed at a public meeting of the Council. The Council Members last adopted the Investment Policy on October 18, 2010. DISCUSSION In addition to the annual review of the Agency's Investment Policy, Government Code Section 53647 requires the Agency to reconfirm annually the delegation of investment authority to the City Treasurer. The Treasurer and the City Council are "fiduciaries" subject to the prudent investor standard. The Investment Policy is the outline from which the Treasurer operates to ensure that investments are safe, liquid and achieving returns. i I I II • s RESOLUTION NO RESOLUTION OF THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF THE CITY OF AZUSA ADOPTING THE INVESTMENT POLICY WHEREAS, the Redevelopment Agency of the City of Azusa receives taxes and other revenues from a variety of sources and uses the funds to pay its bills on a regular basis; and WHEREAS, the Agency Treasurer is charged with the duties of handling and maintaining the cash that is taken in or otherwise received by the Agency; and WHEREAS, the balance of these funds fluctuates between $3,000,000and $20,000,000or more; and WHEREAS, per Government code Sections 53607 and 53600.5 the Agency Treasurer is charged with investing idle public funds on the basis of protecting the safety of the funds, ensuring the liquidity of the investments, and maximizing earnings in that order of importance and based on the "Prudent Investor Standards"; and WHEREAS, the State of California requires each City entity annually, including the Redevelopment Agency, to adopt an investment policy per Government Code Section 53646; and WHEREAS, the Board of Directors, with the aid of its staff has reviewed the Statement of Investment Policy and wishes to approve the same; NOW THEREFORE BE IT RESOLVED that the Board of Directors of the Redevelopment Agency of the City of Azusa does hereby adopt its Investment Policy attached hereto marked Exhibit A and instructs the Agency Treasurer to be guided by it in carrying out the duties of his office for the benefit of the Redevelopment Agency. ADOPTED AND APPROVED this day of November 2011. JOSEPH R. ROCHA, MAYOR 1 HEREBY CERTIFY that the foregoing resolution was duly adopted by the City Council of the City of Azusa at a regular meeting thereof on the day of November 2011 by the following vote of Council: AYES: CITY COUNCIL MEMBERS: NOES: CITY COUNCIL MEMBERS ABSTAIN: CITY COUNCIL MEMBERS ABSENT: CITY COUNCIL MEMBERS VERA MENDOZA, CITY CLERK Redevelopment Agency, City of Azusa INVESTMENT POLICY j 1. I POLICY STATEMENT j All funds of the City of Azusa Redevelopment Agency ("Agency") shall be invested in accordance with principles of sound treasury management and in accordance with the provisions of California Government Code Section 53600 et seq., and guidelines established by the California Municipal Treasurer's Association, the California Society of Municipal Finance Officers,and this Investment Policy("Policy").These funds are defined and detailed in the City's Comprehensive Annual Financial Report("CAFR")and include any new funds created unless specifically excluded by the City Council. Specifically excluded funds are: Funds deposited with the State Public Employees' Retirement System; and Bond proceeds that are subject to covenants and restrictions as defined in the Bond's indenture are administered under the direct control of the Bond Trustee. 2. INVESTMENT POLICY OBJECTIVES A. Overall Risk Profile Pursuant to California Government Code Section 53600.5 the three(3)objectives of the RDA's Policy are, in order of priority: 1. Safeguard the principal of the funds; 2. Meet the liquidity needs of the City; and 3. Achieve a return of the funds. To achieve these objectives,the Agency shall consider the following when making an investment: 1. Safeguard the Principal of the Funds The Agency shall mitigate the risk to the principal of invested funds by limiting credit and interest rate risks. Credit risk is the risk of loss due to the failure of the security issuer or backer. Interest rate risk is the risk that the c.�u TS"D srrMGszus. Rln ��m+wurnnw-nrnmrioixr-rracVunvw TAO. n.m11.HNu. ' 1 market value of the Agency's portfolio will fall due to an increase in general interest rates. a) Credit risk will be mitigated by: (i) Limiting investments to the safest types of securities; (ii) By pre-qualifying the financial institutions with NVhich it will do business; and (iii) By diversifying the investment portfolio so that the potential failure of any one issue or backer will not place an undue financial burden on the Agency. b) Interest rate risk will be mitigated by: (i) Structuring the Agency's portfolio so that securities mature to meet the Agency's cash requirements for ongoing obligations, thereby avoiding the possible need to sell securities on the open market at a loss prior to their maturity to meet those requirements; and (ii) Investing primarily in shorter-term securities. 2. Meet the Liquidity Needs of the City The Agency's investment portfolio shall be structured in a manner that ensures securities mature at the same time as cash is needed to meet anticipated demands (Static Liquidity). Additionally, since all possible cash demands cannot be anticipated,the portfolio should consist of securities with active secondary markets(Dynamic Liquidity). The maximum percentage of different investment instruments and maturities is detailed within Section E of this Policy. 3. Achieve a Return on the Funds Yield on the Agency's investment portfolio is of secondary importance compared to the safety and liquidity objectives described above. Investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. While it may occasionally be necessary or strategically prudent for the Agency to sell a security prior to maturity to either meet unanticipated cash needs or to restructure the c portfolio, this Policy specifically prohibits trading securities for the sole purpose of speculating on the future direction of interest rates. B. Basic Investment Strateey The Agency's investment portfolio shall be structured to provide sufficient funds from investments to meet the Agency's monthly anticipated cash needs. Subject to the objectives stated above,the choice in investment instruments and maturities shall be based upon an analysis of future anticipated cash needs, existing and anticipated revenues, interest rate trends and specific market opportunities. No investment may have a maturity of more than five (5) years from its date of purchase without receiving prior Council approval. After approval by the Council, reserve funds associated with bond issues may have a maturity of more than five(5)years,up to the earliest date the bonds may be redeemed or mature. 3. INVESTMENTS This section of the Policy identifies the types of investments in which the Agency will invest its idle or surplus funds. A. Standard of Prudence The Agency operates its investment portfolio under the Prudent Investor Standard (California Government Code Section 53600.3) which states, in essence, "when investing,reinvesting,purchasing,acquiring, exchanging,selling or managing public funds, a trustee shall act with care, skill, prudence and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated need of the Agency, that a prudent person in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims,to safeguard the principal and maintain the liquidity needs of the Agency." This standard shall be applied in the context of managing the overall portfolio. Investment officers,acting in accordance with written procedures and this investment policy and exercising the above standard of diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. C?WC1MLYf5.Wpspl�INj�.MNS.WslAIWV IgPINRISINVFSTMIXI WIICWNVFSlAS.1W1lCy.pFD[VIIDPMFM MFNCV E011-iW�1.ppC 9 B. Eligible Securities The Agency is provided a broad spectrum of eligible investments under California Government Code Section 53600, et seq. The Agency may choose to restrict its permitted investments to a smaller list of securities that more closely fits the Agency's cash flow needs and requirements for liquidity. If a type of investment is added to California Government Code 53600 et seq., the new investment option will not be added to the Agency's Authorized Investment List until this Policy is amended and approved by the Council. If a type of investment permitted by the Agency should be removed from California Government Code 53600 et seq., the investment will be deemed concurrently removed from the Agency's Authorized Investment List. The Agency's Authorized Investment List • Insured Certificates of Deposit("CD's") of California banks and/or savings and loan associations, and/or savings banks that mature in five (5) years or less, provided that the Agency's investments shall not exceed Two Hundred and Fifty Thousand Dollars ($250,000) per institution. If the investment exceeds the insured Two Hundred and Fifty Thousand Dollars($250,000),the funds are to be collateralized at one hundred and ten percent (110%) of the deposit in government securities or one hundred and fifty percent (150%) in mortgages. • Local Agency Investment Fund (LAIF) Demand Deposits. • Securities of the U.S. Government, and securities of which the principal and interest is guaranteed by the full faith and credit of the U. S. Government. • Securities issued by agencies and instrumentalities of the U. S. Government or issued by a government sponsored enterprise. • Commercial Paper(limited to 30%of the portfolio)rated Al/P 1 or the equivalent by two nationally recognized rating agencies with maturities not to exceed one hundred and eighty-one (18 1) days. • Medium-Term Corporate Notes (limited to 20% of the portfolio) that are rated "AA" or better by two (2) nationally recognized rating agencies. • Passbook Savings or Money Market Demand Deposits,subject to the restrictions and limitations set forth in California Government Code Section 53638. c�mcvbFrrrsauosmrpvzusnusrxiun wcv.�.mmma�wa�wucrvx.¢rmerv.wuw.unevuwv.r�avay.oi.mu.uoc • Repurchase Agreements (limited to 30% of the portfolio) with approved banks and broker-dealers who have completed and signed a Master Repurchase Agreement with the Agency. • Money Market Mutual Funds(with a stated objective of maintaining a$1.00 net asset value) that has been rated AAAm by Moody's or any two (2) nationally recognized rating agencies. Please see Exhibit A for a more detailed description of the authorized investments listed above. A thorough investigation of any pool or fund is required prior to investing and on a continual basis. The investigation will, at a minimum, obtain the following information: • A description of eligible investment securities, and a written statement of investment policies and objectives; and • A description of interest calculations and how it is distributed,and how gains and losses are distributed; and • A description of how securities are safeguarded (including the settlement process) and how often the securities are marked to market and how often an audit is conducted; and • A description of who may invest in the program, how often, what size deposits j and withdrawals are permitted; and • A schedule for receiving statements and portfolio listings; and • A determination as to whether the pool/fund maintain a reserve or retain earnings or is all income after expenses distributed to participants; and • A fee schedule which also discloses when and how fees are assessed; and • A determination as to whether the pool or fund is eligible for bond proceeds and/or will accept such proceeds. The purpose of this investigation is to determine the suitability of a pool or fund and evaluate the risk of placing funds with that pool or fund. One of the purposes of this Policy is to define what investments are permitted. If a type of security is not specifically authorized by this Policy, it is not a permitted investment. C. Oualification of Brokers. Dealers and Financial Institutions The Agency Treasurer or designees will establish and maintain a list of the financial i institutions and broker/dealers authorized to provide investment and depository I I i i a services to the Agency,will perform an annual review of the financial condition and registrations of the qualified bidders, and require annual audited financial statements to be on file for each approved company. The Agency shall annually send a copy of their current Policy to all financial institutions and broker/dealers approved to do business with the Agency. Receipt of.the Policy and Enabling Resolution, including confirmation that it has been received and reviewed by the person(s) handling the Agency's account, shall be acknowledged in writing within thirty(30) days. All broker-dealers and financial institutions that desire to become qualified bidders for investment transactions must submit a"Broker-Dealer Application" and related documents relative to eligibility. This includes a current audited financial statement, proof of state registration, proof of NASD registration and a certification they have received and reviewed the Agency's Policy and agree to comply with the provisions outlined in the Investment Policy. The Agency Treasurer or designees may establish any additional criteria they deem appropriate to evaluate and approve any financial services provider. The selection process for broker-dealers shall be open to both "primary dealers"and"secondary/regional dealers"that qualify under Securities and Exchange Commission Rule 15c3-1 (Uniform Net Capital Rule). The provider must have an office in California and the provider's representative must be experienced in institutional trading practices and familiar with the California Government Code as it relates to investments by an Agency. D. Collateralization Requirements Uninsured Time Deposits with banks and savings and loans shall be collateralized in the manner prescribed by state law for depositories accepting municipal investment funds. Re-purchase Agreements shall be collateralized in accordance with terms specified in the Master Re-purchase Agreement. The valuation of collateral securing a Repurchase Agreement will be verified weekly to ensure a minimum of one hundred and two percent, (102%) of the value of the transaction is held by the Agency's depository agent. E. Diversification The Agency will diversify its investments by security type and investment. With the exception of bond reserve funds, bond escrow funds, and any other specific funds approved by the Treasury Committee or the City Council, the Agency Treasurer or designee, and the Agency's Investment Committee will adopt a strategy that combines current market conditions with the Agency's cash needs to maintain the maximum degree of safety of principal and liquidity throughout market and budgetary cycles. This strategy will include diversification by investment type and maturity allocations and will be included in the regular quarterly reports to the Council. This strategy will be reviewed quarterly and can be changed accordingly. F. Confirmations Receipts for-confirmation of purchase of authorized securities should include at a minimum the following information: trade date, settlement date, description of the security,par value,interest rate,price,yield to maturity,Agency's name,net amount due, and third party custodial information. G. GASB 3 The Governmental Accounting Standards Board("GASB")issued GASB#3 in April 1986, and the local entity's investments must be categorized into three (3) levels of credit risk as follows: 1) Securities that are insured or registered,or for which the securities are held by public units or its agent in the units; 2) Securities that are uninsured and unregistered and are held by the broker's or dealer's trust department or agent in the unit's name; 3) Securities that are uninsured and unregistered and are held by the broker or dealer, or by its trust department or agent, but not in the unit's name. The carrying amount and market value of all types of investments must be disclosed in total and for each type of investment. GASB#3 exempts mutual funds and LAIF investments from the mandatory risk categorization. 4. SAFEKEEPING OF SECURITIES i A. Safekeeping Agreement The Agency shall contract with a bank or banks for the safekeeping of securities that are owned by the Agency as a part of its investment portfolio or transferred to the Agency under the terms of a Re-purchase Agreement. All securities owned by the Agency shall be held in safekeeping by a third party bank trust department acting as agent for the Agency under the terms of a custody agreement executed by the bank and the Agency. All securities will be received and delivered using standard delivery versus payment(DVP)procedures. The third party bank trustee agreement must complywith California Government Code Section I I I 53608. No outside broker/dealer or advisor may have access to Agency funds, accounts or investments, and any transfer of funds must be approved by the Agency Treasurer. B. Security Transfers The authorization to release Agency's securities or funds will be telephoned to the appropriate bank representative by a finance department member other than the' person who initiated the transaction. A written confirmation outlining details for the transaction and confirming the telephoned instructions will be sent to the bank within five (5) working days. C. Verification of Security Securities transferred to the Agency as collateral securing time deposits or repurchase agreements that are being held in safekeeping for the Agency will be verified in writing and examined on a random basis during the year by the Agency's independent auditors as part of the Agency's annual independent audit. 5. STRUCTURE AND RESPONSIBILITY This section of the Policy defines the overall structure and areas of responsibility within the ' investment management program. A. Responsibilities of the Agency Treasurer The Agency Treasurer is charged with responsibility for maintaining custody of all public funds and securities belonging to or under the control of the Agency, and for the deposit and investment of those funds in accordance with principles of sound treasury management applicable laws, ordinances, and this Policy. Tbis includes establishing written procedures for the operation of the investment program consistent with this Policy. The procedures should include reference to safekeeping, master repurchase agreements,wire transfer agreements,banking services contracts and depository agreements. Such procedures shall also include explicit delegation of authority to persons responsible for investment transactions. No person may engage in any investment transaction except as provided under the terms of this Policy and the procedures established by the Treasurer and approved by the Investment Committee. Investment decisions that involve borrowing in the amount of One Hundred Thousand Dollars ($100,000) or more must be included as a separate discussion item on the Council's agenda. Such items can no longer be included on the Council's consent calendar. (California Government Code Section 53635.7) ewacun>arts.vmserixhswnrssi. rnvzuvmmrszvvrszau+r rournnvssr�nwucr.xrneM1vnvemr�c�cr.zeu.m.,uooc B. Responsibilities of the Director of Finance jThe Director of Finance is responsible for keeping the Council fully advised as to the financial condition of the Agency. I C. Responsibilities of the Board of Directors The City Council shall consider and adopt a written Investment Policy. As provided in that policy, the Council shall receive, review and accept monthly investment reports. D. Responsibilities of the Investment Committee I There shall be an Investment Committee consisting of the Director of Finance, the . City Manager, and Agency Treasurer and their designees. The Committee shall meet quarterly to discuss cash flow requirements, the monthly investment reports, investment strategies,investment and banking procedures and significant investment related work projects being undertaken in each department that will affect the cash flow management of the Agency Treasurer. This will require timely reports from the department heads to the Agency Treasurer concerning significant future cash flow requirements. The Committee's meetings will be summarized in minutes that are distributed to the City Council. The Investment Committee,with the approval of the Council, may retain an external investment manager on behalf of the Agency. The investment manager will be required to act in accordance with this investment policy. t E. Ethics and Conflicts of Interest All Agency officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution of the investment program, or that could impair their ability to make impartial investment decisions. Those employees and investment officials shall disclose to the appropriate City executive(City Manager, City Attorney,or the Director of Finance)any material financial interest in financial institutions that conduct business within the City, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the Agency's investments. 6. ` REPORTING The Agency Treasurer shall prepare a monthly investment report, including a succinct management summary that provides a clear picture of the status of the current investment portfolio and transactions made over the past month. This management summary shall be prepared in a manner that will allow the Director of Finance and the Council to ascertain whether investment activities during the reporting period have deviated from the Agency's Investment Policy. C��S n �. . moo« M ��.w�n.� �� AGINn .mow I C �I V The monthly report shall include all the information required by California Government Section 53646, including the following: • A list of individual securities held at the end of the reporting month; and • Unrealized gain or loss resulting from amortization or accretion of principal versus market value changes by listing the cost and market value of securities owned by the Agency; and • A description of the current investment strategy and the assumptions upon which it is based; and • Dollar weighted yield to maturity of the Agency's investments; and • Maturity schedule by type of each of the Agency's investments; and • Statement as to compliance of the Agency's Investment Policy with Government Code Section 53601 et seq.; and • Statement as to ability to meet expenditure requirements for next six (6) months; and • Market value, book value, par value and cost basis of all investments; and • Investments"under the management of contracted parties,including lending programs"(i.e. investments held by deferred compensation administrators). 7. PERFORMANCE STANDARDS The investment portfolio will be managed in accordance with the standards established within this Policy and should obtain a market rate of return throughout budgetary and economic cycles. The Investment Committee will establish and periodically review the Agency's portfolio benchmarks and performance. A benchmark will be selected that compares with the portfolio composition, structure and investment strategy at that time. 8. REVIEW OF INVESTMENT POLICY A. Policy Review This Policy shall be reviewed annually by the City Council in accordance with State law to ensure its consistency with respect to the overall objectives of safety,liquidity and yield. Proposed amendments to the Policy shall be prepared by the Treasurer and reviewed by the Investment Committee and City Attorney and then be forwarded to the Council for consideration. The Investment Committee shall annually review the cmcuumrs ruosEmpopaz�sn�uixrc mvwwrsvxvesr�urvr rournrvvvsrmFmrou�v.nrnevunwv.T�otcr.sei.nwrooc I t l I Policy and any proposed amendments and forward to the Council for its consideration and adoption at a public meeting. I B. Internal Control and Review The external auditors shall annually review the investments and general activities associated with the investment program to ensure compliance with this Policy. This review will provide internal control by assuring compliance with policies and procedures for the activities that are selected for testing. 9. ADOPTION OF POLICY i This Policy was duly adopted by the City Council of the City of Azusa on November 21, 2011. I I I i e i, i i i i I i I I i I I a EXHIBIT A EXHIBIT A DESCRIPTION OF INVESTMENTS The Redevelopment Agency's("Agency")investments maybe placed in those securities as outlined below; the allocation between the various investment instruments may change in order to give the Agency the best combination of safety, liquidity and higher yield. Surplus funds of local agencies may only be invested in certain eligible securities. The Agency limits its investments to allowable securities under the State of California statutes (Government Code Section 53601, et. seq., Section 53356, et. seq., and Section 53595, et. seq.) and is further limited to those listed below. Certificates of Deposit Certificates of deposit allow the Agency to select the exact amount and day of maturity as well as the exact depository. Certificates of deposit are issued in any amount for periods of time as short as fourteen(14)days and as long as several years. At any given time,the Agency may have certificates of deposit in numerous financial institutions in the future. The Treasurer may at his/her discretion waive security for that portion of a deposit,which is insured pursuant to federal law. Currently,the first Two Hundred and Fifty Thousand Dollars($250,000)of a deposit is federally insured by FSLIC or FDIC. It may be to the Agency's advantage to waive this collateral requirement for the first Two Hundred and Fifty Thousand Dollars($250,000)because the Agency may receive a higher interest rate. If funds are to be collateralized,the collateral will be one hundred and ten percent(11,0%)of the deposit in government securities or mortgages of one hundred and fifty percent (150%). At purchase, institutions must not show an operating loss. Banks must have an equity-to-asset ratio of at least six (6%). Savings and loan associations and savings banks must have an equity-to-asset ratio of a least three percent (3%). Local A2ency Investment Fund The Local Agency Investment Fund("LAIF")of the State of California offers high liquidity because deposits can be wired to the Agency checking account within twenty-four (24) hours. Interest is computed on a daily basis. This is a special fund in the State Treasury, which local agencies may use to deposit funds for investment. There is no minimum investment period and the minimum transaction is Five Thousand Dollars ($5,000) in multiples of One Thousand Dollars ($1,000) above that, with a maximum of Fifty Million Dollars ($50,000,000) for any agency. It offers high liquidity because deposits can be converted to cash within twenty-four(24)hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly by adding it to the principal. The State charges participants a small fee to cover reasonable costs associated with operating the investment pool, not to exceed one quarter of one percent (.25%) of the earnings. The interest rates received are fairly stable because of the pooling of the State's surplus cash with the surplus cash deposited by local governments. This creates a well-diversified multi-billion dollar mon y pool. U.S.iTreasury Securities U.S. (Treasury securities are highly liquid and considered the safest of all investments because they are backed by the full faith and credit of the United States Government. i f U.S.Treasury Bills are direct obligations of the United States Government. They are issued weekly with maturity dates up to six (6) months. They are issued and traded on a discount basis and the interest is figured on a three hundred and sixty(360)day basis using the actual number of days to maturity. They are issued in the minimum amount of Ten Thousand Dollars ($10,000) and in multiples of Five Thousand Dollars ($5,000) thereafter. U.S. Treasury Notes are direct obligations of the United States Government. They are issued throughout the year with maturities from two up to thirty(30)years. Notes are coupon securities paying a fixed amount everyesix (6)months. The Agency will not invest in notes having maturities longer than five (5) years. Federal Agency Securities i Federal Agency securities are highly liquid and considered to be virtually without credit risk. Federal Agency issues are guaranteed indirectly by the United States Government. All Agency obligations that are fixed-rate and meet the maturity restrictions of the State Code and this Policy qualify as legal investments and are acceptable as security for public deposits. They usually provide higher yields than regular Treasury issues with all of the same advantages. Examples are: i FNMA's (Federal National Mortgage Association) are used to assist the home mortgage market by purchasing mortgages insured by the Federal Housing Administration and the Farmers Home Administration, as well as those guaranteed by the Veterans Administration. FHLB's (Federal Home Loan Bank Notes and Bonds) are issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations,mutual savings banks, cooperative banks, insurance companies and mortgage-lending institutions. cmcv�Ma SE..ycrA. Ik xenev�xnc -2011.m�w 0 Other Federal Agency issues are Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Farm Credit Bank ("FFCB"), Small Business Administration Notes("SBA's"),Government National Mortgage Association("GNMA's"),Tennessee Valley Authority ("TVA's") and the Student Loan Marketing Association("SLMAW ). NeEotiable Certificate of Deposit Negotiable certificates of deposit are high-grade instruments, paying a higher interest rate than regular certificates of deposit. They are liquid because they can be traded in the secondary market. Negotiable Certificates of Deposit ("NCD's") are unsecured obligations of the issuing financial institution, bank or savings and loan, bought at face value with a promise to pay face value plus accrued interest at maturity. The primary market issuance is in multiples of One Million Dollars ($1,000,000). The secondary market usually trades in denominations of Five Hundred Thousand Dollars($500,000),although smaller denominations are occasionally available. Local agencies may not invest more than thirty percent(30%)of their surplus money in negotiable certificates of deposit. NCD's will only be placed with the largest and most financially sound institutions. Commercial Paper Commercial paper allows the investment of large amounts of money on a short-term basis at rates higher than passbook savings accounts. Commercial paper is a short-term unsecured promissory note issued by a corporation to raise working capital. These negotiable instruments are purchased at a discount to par value. As an example, corporations such as American Express, International Business Machines ("IBM") and General Electric issue commercial paper. Local agencies are permitted by state law to invest in commercial paper of"prime" quality of the highest ranking or of the highest letter and numerical rating as provided by Moody's Investor's Service, Inc. or Standard and Poor's Corporation (Al/p] or al+/pl). Purchases of eligible commercial paper may not exceed one hundred and eighty(180) days maturity nor exceed 30%of the Agency's surplus funds. Medium-Term Corporate Notes An agency may invest in medium term corporate notes with a maximum maturity of five years (5) issued by a corporation organized and operating within the United States, a depository institution licensed by the United States Government or any state government and operating within the United States. California Government Code Section 53601 et seq., permits cities to invest in corporations with a rating category of "A" or better, but the Agency will limit its investments in corporate medium term notes to those issued by corporations that have been rated "AA" or its equivalent by two (2) nationally recognized ratings agencies. �I Pass book Savings or Money Market Account Passbook savings account allows us to transfer money from checking to savings and earn interest on smaller amounts of money, which are not available for a longer-term investment. I The(passbook savings account is similar to a CD except not for a fixed term. The interest rate is much lower than CD's but the savings account provides daily liquidity and funds can be deposited and withdrawn according to our daily needs. 1 Mutual Funds I Mutual Funds allow the Agency to maintain liquidity and receive money market rates. Mutual Funds are referred to in the Government Code, Section 53601(1),as"shares of beneficial interests issued by diversified management companies". The Mutual Fund must be restricted by its prospectus to be a "Money Market" mutual fund and be limited to the same approved investments as LAIF. These investments include U.S. Treasury and Agency issues, Bankers Acceptances, Commercial Paper, Repurchase Agreements,Certificates of Deposit,and Negotiable Certificates of Deposit. The quality rating and percentage restrictions in each investment category applicable to LAIF also apply to any Mutual Fund. One of the stated objectives of the Mutual Fund must be to attempt to maintain a One Dollar($1.00) Net Asset Value(NAV). A further restriction is that the purchase price of shares of any mutual fund shall not include any sales commission. Investments in mutual funds shall not exceed fifteen percent (15%I) of the Agency's surplus money. Repurchase Agreements RelnJrchase Agreements are purchases of securities by the Agency under an agreement with a term of one(1)year or less whereby the seller will"repurchase"the same securities on or before a specified date or on demand of either party and for a specified amount. The underlying securities must be delivered to the Agency's custodial account by book entry, physical delivery or a third-party custodial agreement. I� I Caw.Sµ�==,M­���MUM JN�M� unE+rvum Ti CY,�11. WARRANT REGISTER NO. 24 WARRANTS RDATED 10/01/11 THROUGH 10/15/11 F AFL82 - FOR REDEVELOPMENT AGENCY MEETING OF 11/21/11 RESOLUTION NO. A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF AZUSA ALLOWING CERTAIN CLAIMS AND DEMANDS TO BE PAID OUT OF REDEVELOPMENT AGENCY FUNDS I THE REDEVELOPMENT AGENCY OF THE CITY OF AZUSA DOES RESOLVE AS FOLLOWS: SECTION 1. That the following claims and demands.have been audited as required bylaw and that the same are hereby allowed in the amounts and ordered paid out of the Redevelopment Agency Funds as hereinafter set forth: i I 80-110-REDEVELOPMENT ADMINISTRATION FUND $ 6,162,27 80-125-CBD CAPITAL PROJECTS FUND 9.912.35 80-135-WED CAPITAL PROJECTS FUND 80-185-RANCH CAPITAL PROJECTS FUND 80-165-624-2008A TAX ALLOCATION BONDS 81-155-TAX INCREMENT SET-ASIDE FUND 1.490.76 81-165-LM MRG TAB08B HS 82-125-CBD DEBT SERVICE FUND 60,015.69 82-135-WED DEBT SERVICE FUND _ 82.943.87 I 82-165-MERGED PROJECT TAX ALLOCATION BONDS 82-185-RANCH CENTER DEBT SERVICE FUND TOTAL ALL FUNDS: $ 160.524 94 SECTION 2. That the Secretary shall certify to the adoption of this resolution and shall deliver a certified copy thereof to the Agency Treasurer and shall retain a certified copy thereof in his own records. ADOPTED AND APPROVED THIS DAY OF 2011. Chairman I HEREBY CERTIFY that the foregoing resolution was duly adopted by the Redevelopment Agency of the City Iof Azusa at a regular meeting there of, held on the day of 2011. AYES: AGENCY MEMBERS: NOES: AGENCY MEMBERS: ABSTAIN: AGENCY MEMBERS: ABSENT: AGENCY MEMBERS: Secretary 0 City of Azu--a BP 4M,R J 16, 2011, 4:32 EM _11/16/11 O P E N H O L D D B L I S T I N G By /Entity Nim Page 1 rEq: RCIDY-------1e3: Q JL---10c: BI-TFI�T---Job: 854851 W3485--- 00 <1.34> rpt id: CiTUIR02 SE= FLUID Codes: 80-82 ; Check Issue Dates: 100111-101511 PE ID PE Nam AO= NUvEEP / JCB NCNBER Irwoioe- Uxrber De=ption St Disc. Art. Dist. Art. V00434 A.A.J. IW. 8010125000-7080 431673847 RFITJRN BID ESD/ FD 0.00 1,215.00 PEIDd: . 0.00 Paid: 1,215.00 Total: 1,215.00 V01545 ACEA 8000000000-3020 2615/1101020 PY420/11 PD 0.00 3.60 PFSi��d: 0.00 Paid: 3.60 Total: 3.60 V11440 ALIJANTM CIUP, 8000000000-2724 67861 FLEX M4EN FEES FD 0.00 3.30 PEID upald: 0.00 Paid: 3.30 Total: 3.30 V01305 AZ[ISA CITY FMPM 8000000000-3035 100511 PR20/11 FD 0.00 350.00 PEID Upaid: 0.00 Paid: 350.00 Total: 350.00 V10604 AGFA ME= WN 8000000000-3020 2618/1101020 PY#20/11 PD 00.00 35.00 PESPaid: 35. 00 Total: 35.00 V00286 AGFA IDTIFTFD SC 8210135000-7040 100411 ACCT818.03/818.0 PD 0.00 54,761.77 V00286 AZUSA LNIFTFD SC 8210125000-7040 100411 A=18.03/818.0 ED 0.00 41,820.04 PEID Unpaid: 0.00 PPaa�.d: 96,581.81 Total: 96,581.81 V06783 CTTTSI= 8000000000-3010 2315/1101020 PY 20/11 PD 0.00 306.90 1101020 V06783 CTAT SIREF'SIREEr 8000000000-3010 1310/1101020 20/11 P11 FD 0.00 0.00 267.00 PEID Upaid: 0.00 City of 16, 01190040 32 11/16/11 O P E N H O L D D B LISTING By P�Fhtity Narte PPa�qe 2 meq: R[IBY-------leg: CL JL---loc: BI-=---job: 854851 #J3485--- _ _-_ > rpt id: CHN�fII202 pgn: 00 <1.34 —aESP—FUD---ODcles:-80=82-;-Check-Issae-Ikltes-100111=101511 ---- PE l-)>N ID PE Ike AQ7JiITI WEER / JM NCMEERR Invoice Nurber Des=pticn St Disc. Ant. Dist. Ant. Paid: 1,160.73 Tbtal: 1,160.73 V02687 CTIRJS CCMEIIY 8210135000-7040 100411 =91.04/791.2 PD 0.00 6,808.15 V02687 CTIR[1; CCvn= 8210125000-7040 100411 ALC.T791.04/791.2 PD 0.00 5,324.90 PEID ihVd: 0.00 Paid: 12,133.05 Total: 12,133.05 V06175 CGLNIY OF LOS AN 8210125000-7040 100411 ACCI30.10/30.7-# PD 0.00 1,277.55 PEIDd: 0.00 Paid: 1,277.55 Tbtal: 1,277.55 V11556 EEUA EENIAL OF 8000000000-3052 EED00198351 PFO PREM OCI2011 PD 0.00 353.24 PEID Uuaid: 0.00 Paid: 353.24 Total: 353.24 V11555 MUM= USA 8000000000-3052 4317713 HAD PREM ClCI2011 PD 0.00 31.70 PEID LYTV: 0.00 Paid: 31.70 Total: 31.70 V11396 EXAM UNIFIED S 8210135000-7040 100411 ACM55.03/855.0 PD 0.00 4.26 PEID UUaid: 0.00 Paid: 4.26 Total: 4.26 V00331 FFIEFRAT ESS 8010125000-6625 763185331 117052788/E.TMI FD 0.00 20.73 PEM 11- id: 0.00 raid: 20.73 V05574 Total: 20.73 II�IV MAIN RE 8010110000-6493 EEE2854EEE2861 EEE2854-EEE2861 FD 0.00 142.87 f Amisa HP WFD oo�7 20119 4 :32 EM _ 0011/16/11 O P E N H O L D D B LISTING By Entity Nane p� 3 req: RL]BY-------leg: C3 JL --lcc: BI-TD�i---job: 854851 #J3485---pgn: 00 <1.34> zpt id: ti1R02 SEIFJri' FUID Axles: 80-82 ; Check Issue Dates: 100111-101511 PE ID PE Nane ALJDW NUVEER / JOB NUEER Irnoice NuTber Descriptia7 St Disc. Part. Dist. Ant. PEID U d: 0.00 Paid: 142.87 Tbtal: 142.87 V96319 LALPAIN & ASSXI 8010125000-6325 8673 APPRAISAL;975 W. FD 0.00 2,200.00 PEID [19d: 0.00 Paid: 2,200.00 ,Ibtal: 2,200.00 V09587 LOS ANSECES C N 8210135000-7040 100411 ACCT7.3/7.31 -#1 ED 0.00 1,934.94 V09587 LC6 MaIES OJ[N 8210125000-7040 , 100411 ACCP7.3/7.31 -#1 PD 0.00 21016.74 PEID u d: 0.00 Paid: 3,951.68 Total: 3,951.68 V03219 LOS MMES C13LN 8210135000-7040 100411 A=400.15/400.2 PD 0.00 1,128.26 V03219 LCS ANS = 8210125000-7040 100411 ALCT400.15/400.2 FD 0.00 882.46 PEIDd: 0.00 Paid: 2,010.72 Total: 2,010.72 V08628 ICS ANELES = 8210125000-7040 100411 A=6.65/66.85 FD 0.00 3,085.86 V08628 LOS AN-MliS OUN 8210135000-7040 100411 ACM6.65/66.85 FD 0.00 4,534.28 PEID d: 0.00 d: 7,620.14 Total: 71620.14 V10322 M & T HnAIIC 8000000000-3010 101011 I@P: 457 DEEERRE M 0.00 822.81 PEID ihrza�id: 0.00 Paid: 822.81 Total: 822.81 V02362 ME'MMUMN WAT 8210125000-7040 100411 ACCT337.05 #112. PD 0.00 315.85 PEIDd: 0.00 Paid: 315.85 Tbtal: 315.85 City oN37f Awsa2H 190040 32 11/16/11 O P E N H O L D D B LISTING By Ehtit, � Paqe 4 i� req: 1�Y-------leg: GL JLr--loc: BI-'IRE---jcb: 854851 #03485---pgn: Q�400 <1.34> rPt id: CHMIR02 ---SE=--FUID--C-,des:-80-82-;Check Issae-Dates-100111=101511 PE ID PE Nave A03MTf NU4ER / JCB N 4MR Invoice Nater De~Scsi icn _ 1rt St Disc. Ant.. Dist. A-rt. V09445 PARAMS, SUSAN 8010110000-6235 100311 REINB PARKIM3 PD 0.00 7.00 V09445 PARACAS, REAN 8010110000-6240 V09445 PAP-AMS, SLW 8010110000-6240 082511 Mile Reins-irs FD 0.00 63.85 V09445 PARAMS, SUSW 8010110000-6235 100311 MKIM P Revrlatrs FD 0.00 24.61 082511 REII�B PARKIN FD 0.00 10.00 FEIDd: 0.00 Paid: 105.46 Tbtal: 105.46 V02185 SAN G [, VALL 8210125000-7040 100411 AOM37.05/367.0 PD 0.00 5,135.56 V02185 SAN GURIM VALL 8210135000-7040 100411 ACCM67.05/367.0 PD 0.00 13,772.21 PEID UT9dd: 0.00 Pai : 18,907.77 'Ibtal: 18,907.77 V08056 SIA EAM INSURAN 8000000000-3044 091711 DISAB PREM =0 PD al: 229.54 V08056 SPAAIIARD INSURAN 8000000000-2725 091711E LIFE PREM CC7201 PIJ 0.00 76.38 PEID d: 0.00 305.92 Total: 305.92 V10053 SIPNaSD SAN 8000000000-3044 1221/1101020 PY420/11 PD 0.00 72.35 PEID d: 0.00 Paid: 72.35 Total: 72.35 V08237 THRFE VALLEYS NdJ 8210125000-7040 100411 A=30.10 #112. PD 0.00 106.87 FEID Ll . 0.00 106.87 Total: 106.87 V12065 U\ICN BANK OF CA 8000000000-2727 101011 PARS-EXCESS BENE rD 0.00 524.78 PETDd: 0.00 Paid: 524.78 Ibtal: 524.78 EP City of Azusa 0119004:32 gy _11/16/11 O P E N H O L D D B LISTING By /altity Nam Page 5 RUBY-------1e3: GL JL --lcc: BI-TRP 854851 #J3485--- 00 <1.34> rpt id: CHFLTR02 WEESE[FX-T FLkU C}x3Ps: 80-82 ; Check Issue Dates: 100111-101511 PE ID PE NMre AO= NIVEER / JOB NUVEER Invoice Nurser Deipticn St Disc. Ant. Dist. Airt. V94521 UPPER SAN GMFJE 8210125000-7040 100411 A=68.05 #112. FD 0.00 49.86 PEID 0.00 d: 49.86 Total: 49.86 V11824 URBAN FUIU ES IN 8010110000-6345 0811002 MMLY REIAINER• FD 0.00 2,114.93 V11824 U;BW FUMUS IN 8110155000-6345/505320-6345 0811002 YNIH Y RETAINN ; PD 0.00 1,490.76 V11824 URBAN FUIUIIES IN 8010110000-6345/650201-6345 0811002 NNII-ILY REIAIMM; PD 0.00 117.69 V11824 URBnN FUIUZES IN 8010125000-6345/505900-6345 0811002 nM-ILY REM=; PD 0.00 6,476.62 PML�r d: 0.00 Paid: 10,200.00 Tbtal: 10,200.00 V04678 VEZI71IDF7Il2E[ESS 8010110000-6915 1015868256 INV# 1015868256 PD 0.00 17.89 PM U ppaid: 0.00 Paid: 17.89 Total: 17.89 GRAND TOTALd: 0.00 UM 160,524.94 Tbtal: 160,524.94 I I - i `..0 q2N CITY OF AZUSA MINUTES OF THE AZUSA PUBLIC FINANCING AUTHORITY TUESDAY,SEPTEMBER 6,2011 —10:02 P.M. The Board Members of the Azusa Public Financing Authority of the City of Azusa met in regular session at the above date and time in the Azusa Auditorium located at 213 East Foothill Boulevard,Azusa. Chairman Rocha called the meeting to order. Call to Order ROLL CALL - Roll Call PRESENT: BOARDMEMBERS: GONZALES,CARRILLO,MACIAS,HANKS,ROCHA ABSENT: BOARDMEMBERS: NONE ALSO PRESENT: Also Present General Counsel Carvalho, Executive Director Delach, Assistant Executive Director Makshanoff, Department Heads,Secretary Mendoza,Deputy Secretary Toscana. The CONSENT CALENDAR consisting of item G-1 and G-2 was approved by motion of Board Member Consent Cal Carrillo,seconded by Board Member Hanks and unanimously carried. Approved 1. Minutes of the regular meeting June 6,2011,were approved as written. Min appvd 2. The Azusa Public Financing Authority Treasurer's Report as of lune 30,2011 was received and filed. Treas Rpt It was consensus of the Board Members to adjourn. Adjourn I I TIME ADJOURNMENT: 10:03 P.M. SECRETARY - -- NEXT RESOLUTION NO. 11-P2. I no F. � N U - c9t,Fonr`P CONSENT ITEM I i, , TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL Q� FROM: MARCENE HAMILTON, CITY TREASURER �,� I I DATE: November 21 , 2011 SUBJECT: INVESTMENT POLICY FOR THE AZUSA PUBLIC FINANCING AUTHORITY RECOMMENDATION i i The City Treasurer recommends that the City Council approve the attached resolution re-adopting the Investment Policy for the Azusa Public Financing Authority. FISCAL IMPACT None BACKGROUND California Government Code Section 53646(a)(2)requires the Public Financing Authority to adopt an Investment Policy every year. The Authority is also charged with changing the policy as necessary. The policy must be adopted or changed at a public meeting of the Council. The CounI cil Members last adopted the Investment Policy on October 18, 2010. DISCUSSION In addition to the annual review of the Pubic Financing Authority's Investment Policy, Government Code Section 53607 requires the Authority to reconfirm annually the delegation of investment authority to the City Treasurer. The Treasurer and the City Council are "fiduciaries" subject to the prudent investor standard. The Investment Policy is the outline from which the Treasurer operates to ensure that investments are safe, liquid And achieving returns. 1 RESOLUTION NO RESOLUTION OF THE BOARD OF DIRECTORS OF THE AZUSA PUBLIC FINANCING AUTHORITY OF THE CITY OF AZUSA ADOPTING THE INVESTMENT POLICY WHEREAS, the Public Financing Authority of the City of Azusa receives taxes and other revenues from a variety of sources and uses the funds to pay its bills on a regular basis; and WHEREAS, the APFA Treasurer is charged with the duties of handling and maintaining the cash that is taken in or otherwise received by the Authority; and WHEREAS, the balance of these funds Fluctuates between $3,000,000 and $20,000,000 or more; and WHEREAS, per Government Code Sections 53607 and 53600.5 the APFA Treasurer is charged with investing idle public funds on the basis of protecting the safety of the funds, ensuring the liquidity of the investments, and maximizing earnings in that order of importance and based on the "Prudent Investor Standards"; and WHEREAS, the State of California requires each City entity annually to adopt an investment policy per Government Code Section 53646; and WHEREAS, the Board of Directors, with the aid of its staff has reviewed the Statement of Investment Policy and wishes to approve the same; NOW THEREFORE BE IT RESOLVED that the Board of Directors of the Azusa Public Financing Authority of the City of Azusa does hereby adopt its Investment Policy attached hereto marked Exhibit A and instructs the Authority Treasurer to be guided by it in carrying out the duties of his office for the benefit of the Azusa Public Financing Authority. ADOPTED AND APPROVED this day of November 2011. JOSEPH R. ROCHA,CHAIRMAN 1 HEREBY CERTIFY that the foregoing resolution was duly adopted by the Board of Directors of the Azusa Public Financing Authority at a regular meeting thereof on the day of November 2011 by the following vote of Directors: AYES: BOARD OF DIRECTORS: NOES: BOARD OF DIRECTORS: ABSTAIN: BOARD OF DIRECTORS: ABSENT: BOARD OF DIRECTORS: VERA MENDOZA, SECRETARY r Azusa Public Financing Authority (APFA) INVESTMENT POLICY 1. POLICY STATEMENT All funds of the APFA shall be invested in accordance with principles of sound treasury management and in accordance with the provisions of California Government Code Section 53600, et seg., and guidelines established by the California Municipal Treasurer's Association, the California Society of Municipal Finance Officers,and this Investment Policy ("Policy"). These funds are defined and detailed in the City's Comprehensive Annual Financial Report("CAFR")and include any new funds created unless specifically excluded by the City Council. Specifically excluded funds are: Funds deposited with the State Public Employees' Retirement System; and Bond proceeds that are subject to covenants and restrictions as defined in the Bond's indenture are administered under the direct control of the Bond Trustee. 2. INVESTMENT POLICY OBJECTIVES A. Overall Risk Profile Pursuant to California Government Code Section 53600.5 the three(3)objectives of the APFA's Policy are, in order of priority: 1. Safeguard the principal of the funds; 2. Meet the liquidity needs of the City; and ` 3. Achieve a return on the funds. To achieve these objectives,the APFA shall consider the following when making an investment: 1. Safeeuard the Principal of the Funds The APFA shall mitigate the risk to the principal of invested funds by limiting credit and interest rate risks. Credit risk is the risk of loss due to the failure of the security issuer or backer. Interest rate risk is the risk that the market value of the APFA's portfolio will fall due to an increase in general interest rates. a) Credit risk will be mitigated by: (i) Limiting investments to the safest types of securities; (ii) By pre-qualifying the financial institutions with which it will do business; and (iii) By diversifying the investment portfolio so that the potential failure of any one issue or backer will not place an undue financial burden on the APFA. b) Interest rate risk will be mitigated by: (i) Structuring the APFA's portfolio so that securities mature to meet the APFA's cash requirements for ongoing obligations, thereby avoiding the possible need to sell securities on the open market at a loss prior to their maturity to meet those requirements; and (ii) Investing primarily in shorter-term securities. 2. Meet the Liquidity Needs of the City The APFA's investment portfolio shall be structured in a manner that ensures securities mature at the same time as cash is needed to meet anticipated demands (Static Liquidity). Additionally, since all possible cash demands cannot be anticipated, the portfolio should consist of securities with active secondary markets (Dynamic Liquidity). The maximum percentage of different investment instruments and maturities is detailed within this Policy. 3. Achieve a Return on the Funds Yield on the APFA's investment portfolio is of secondary importance compared to the safety and liquidity objectives described above. Investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. While it may occasionally be necessary or strategically prudent for the APFA to sell a security prior to maturity to either meet unanticipated cash needs or to restructure the portfolio, this Policy specifically prohibits trading securities for the sole purpose of speculating on the future direction of interest rates. cmcumwrsauv xnnxcs.nu.vq�rvn wart.o-arrrvwsmrn�wucwxvemntvrroucv..v�s weucux,wnxc.vmomrv.:oi.mu.mc B. Basic Investment StrateLyv The APFA's investment portfolio shall be structured to provide sufficient funds from investments to meet the APFA's monthly anticipated cash needs. Subject to the objectives stated above,the choice in investment instruments and maturities shall be based upon an analysis of future anticipated cash needs, existing and anticipated revenues, interest rate trends and specific market opportunities. No investment may have a maturity of more than five (5) years from its date of purchase without receiving prior Board approval. After approval by the Board, reserve funds associated with bond issues may have a maturity of more than five(5)years,up to the earliest date the bonds may be redeemed or mature. 3. j INVESTMENTS This section of the Policy identifies the types of investments in which the APFA will invest its idle or surplus funds. A. Standard of Prudence I ! The APFA operates its investment portfolio under the Prudent Investor Standard (California Government Code Section 53600.3) which states, in essence, "when investing,reinvesting,purchasing,acquiring,exchanging,selling or managing public funds, a trustee shall act with care, skill, prudence and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated"need of the APFA, that a prudent person in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims,to safeguard the principal and maintain the liquidity needs of the APFA." This standard shall be applied in the context of managing the overall portfolio. Investment officers,acting in accordance with written procedures and this investment policy and exercising the above standard of diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. B. Eligible Securities The APFA is provided a broad spectrum of eligible investments under California Government Code Section 53600, 'et seq. The APFA many choose to restrict its permitted investments to a smaller list of securities that more closely fits the APFA's cash flow needs and requirements for liquidity. If a type of investment is added to I y California Government Code 53600 et seq., the new investment option will not be added to the APFA's Authorized Investment List until this Policy is amended and approved by the Board. If a type of investment permitted by the APFA should be removed from California Government Code 53600 et seq., the investment will be deemed concurrently removed from the APFA's Authorized Investment List. The APFA's Authorized Investment List Insured Certificates of Deposit (CD's) of California banks and/or savings and loan associations, and/or savings banks that mature in five (5) years or less, provided that the City's investments shall not exceed Two Hundred and Fifty Thousand Dollars ($250,000) per institution. If the investment exceeds the insured Two Hundred and Fifty Thousand Dollars($250,000),the funds are to be collateralized at one hundred and ten percent (110%) of the deposit in government securities or one hundred and fifty percent (150%) in mortgages. • Insured Certificates of Deposit ("CD's") of California banks and/or savings and loan associations, and/or savings banks which mature in five (5) years or less, provided that the APFA's investments shall not exceed One Hundred Thousand Dollars ($100,000) per institution. If the investment exceeds the insured One Hundred Thousand($100,000),the funds are to be collateralized at one hundred and ten percent (110%) of the deposit in government securities or one hundred and fifty percent (150%) in mortgages. • Local Agency Investment Fund ("LAIF") Demand Deposits. • Securities of the U.S. Government, and securities of which the principal and interest is guaranteed by the full faith and credit of the U. S. Government. • Securities issued by agencies and instrumentalities of the U. S. Government or issued by a government-sponsored enterprise. • Commercial Paper(limited to 30%of the portfolio)rated AI/Pl or the equivalent by two nationally recognized rating agencies with maturities not to exceed one hundred and eighty-one (18 1) days. • Medium-Term Corporate Notes (limited to 20% of the portfolio) that are rated "AA" or better by two nationally recognized rating agencies. • Passbook Savings or Money Market Demand Deposits, subject to the restrictions and limitations set forth in California Government Code Section 53638. I • Repurchase Agreements (limited to 30% of the portfolio) with approved banks and broker-dealers who have completed and signed a Master Repurchase Agreement with the AgQncy. • Money Market Mutual Funds (with a stated objective of maintaining a$1.00 net asset value) that has been rated AAAm by Moody's or any two (2) nationally recognized rating agencies. Please see Exhibit A for a more detailed description of the authorized investments listed above. A thorough investigation of any pool or fund is required prior to investing and on a continual basis. The investigation will, at a minimum, obtain the following information: • A description of eligible investment securities, and a written statement of investment policies and objectives; and • A description of interest calculations and how it is distributed,and bow gains and losses are distributed; and • A description of how securities are safeguarded (including the settlement process) and how often the securities are marked to market and how often an audit is conducted; and • A description of who may invest in the program, how often, what size deposits and withdrawals are permitted; and • A schedule for receiving statements and portfolio listings; and • A determination as to whether the pool/fund maintain a reserve or retain earnings or is all income after expenses distributed to participants; and • A fee schedule which also discloses when and how fees are assessed; and • A determination as to whether the pool or fund eligible for bond proceeds and/or will accept such proceeds. The purpose of this investigation is to determine the suitability of a pool or fund and evaluate the risk of placing funds with that pool or fund. One of the purposes of this Policy is to define what investments are permitted. If a type of security is not specifically authorized by this Policy, it is not a permitted investment. I I C [—TI-0MfP'OSw$uCMISp(Nry LONMG'i5WVFS�v.Erc1'WIICWWF. MpiPMny..,Z116.,fu0t1CFL''wN[IGGwNilOP1LY.1011-4II:.U.NC 1 C. Qualification of Brokers, Dealers and Financial Institutions The Authority Treasurer or designees will establish and maintain a list of the financial institutions and broker/dealers authorized to provide investment and depository services to the APFA, will perform an annual review of the financial condition and registrations of the qualified bidders, and require annual audited financial statements to be on file for each approved company. The APFA shall annually send a copy of their current Policy to all financial institutions and broker/dealers approved to do business with the APFA. Receipt of the Policy and Enabling Resolution, including confirmation that it has been received and reviewed by the person(s) handling the APFA's account, shall be acknowledged in writing within thirty(30) days. All broker-dealers and financial institutions that desire to become qualified bidders for investment transactions must submit a"Broker-Dealer Application" and related documents relative to eligibility. This includes a current audited financial statement, proof of state registration, proof of NASD registration and a certification they have received and reviewed the APFA's Policy and agree to comply with the provisions outlined in the Investment Policy. The Authority Treasurer or designees may establish any additional criteria they deem appropriate to evaluate and approve any financial services provider. The selection process for broker-dealers shall be open to both"primary dealers"and"secondary/regional dealers"that qualify under Securities and Exchange Commission Rule 15c3-1 (Uniform Net Capital Rule). The provider must have an office in California and the provider's representative must be experienced in institutional trading practices and familiar with the California Government Code as it relates to investments by an Agency. D. Collateralization Requirements Uninsured Time Deposits with banks and savings and loans shall be collateralized in the manner prescribed by state law for depositories accepting municipal investment funds. Re-purchase Agreements shall be collateralized in accordance with terms specified in the Master Repurchase Agreement. The valuation of collateral securing a Re- purchase Agreement will be verified weekly to ensure a minimum of one hundred and two percent (102%) of the value of the transaction is held by the APFA's depository agent. cwanmccsuosmrvcsnxn�xrvrc uonmicx.srvrsrw�rromvxwsrum�wucv.wnnweuc nnu+ancnvmoax-mu.nxti.00c -r r E. Diversification The APFA will'diversify its investments by security type and investment. With the exception of bond reserve funds, bond escrow funds, and any other specific funds approved by the Treasury Committee or the Board of Directors,the APFA Treasurer or designee and the APFA's Investment Committee will adopt a strategy that combines current market conditions with the APFA's cash needs to maintain the maximum degree of safety of principal and liquidity throughout market and budgetary cycles. This strategy will include diversification by investment type and maturity allocations and will be included in the regular quarterly reports to the Board. This strategy will be reviewed quarterly and can be changed accordingly. F. Confirmations Receipts for confirmation of purchase of authorized securities should include at a minimum the following information: trade date, settlement date, description of the security,par value, interest rate,price,yield to maturity, agency's name, net amount due, and third party custodial information. G. GASB 3 The Governmental Accounting Standards Board("GASB")issued GASB#3 in April 1986, and the local entity's investments must be categorized into three (3) levels of credit risk as follows: i 1) Securities that are insured or registered,or for which the securities are held by public units or its agent in the units; 2) Securities that are uninsured and unregistered and are held by the broker's or dealer's trust department or agent in the unit's name; 3) Securities that are uninsured and unregistered and are held by the broker or dealer, or by its trust department or agent, but not in the unit's name. f The carrying amount and market value of all types of investments must be disclosed in total and for each type of investment. GASB #3 exempts mutual funds and LAIF investments from the mandatory risk categorization. I 4. SAFEKEEPING OF SECURITIES A. Safekeeping Agreement The APFA shall contract with a bank or banks for the safekeeping of securities that are owned by the APFA as a part of its investment portfolio or transferred to the APFA under the terms of a Re-purchase Agreement. All securities owned by the APFA shall be held in safekeeping by a third party bank trust department acting as agent for the APFA under the terms of a custody agreement executed by the bank and the APFA. All securities will be received and delivered using standard delivery versus payment ("DVP") procedures. The third party bank trustee agreement must comply with California Government Code Section 53608. No outside broker/dealer or advisor may have access to APFA funds, accounts or investments, and any transfer of funds must be approved by the Authority Treasurer. B. Security Transfers The authorization to release APFA's securities or funds will be telephoned to the appropriate bank representative by a finance department member other than the person who initiated the transaction. A written confirmation outlining details for the transaction and confirming the telephoned instructions will be sent to the bank within five (5) working days. C. Verification of Securitv Securities transferred to the APFA as collateral securing time deposits or repurchase agreements that are being held in safekeeping for the APFA will be verified in writing and examined on a random basis during the year by the APFA's independent auditors as part of the APFA's annual independent audit. 5. STRUCTURE AND RESPONSIBILITY This section of the Policy defines the overall structure and areas of responsibility within the investment management program. A. Responsibilities of the Authoritv Treasurer The Authority Treasurer is charged with responsibility for maintaining custody of all public funds and securities belonging to or under the control of the APFA,and for the deposit and investment of those funds in accordance with principles of sound treasury management applicable laws,ordinances,and this Policy. This includes establishing f written procedures for the operation of the investment program consistent with this Policy. The procedures should include reference to safekeeping,master repurchase agreements, wire transfer agreements, banking services contracts and depository agreements. Such procedures shall also include explicit delegation of authority to persons responsible for investment transactions. No person may engage in any investment transaction except as provided under the terms of this Policy and the procedures established by the Treasurer and approved by the Investment Commiftee. Investment decisions that involve borrowing in the amount of One Hundred Thousand Dollars($100,000)or more must be included as a separate discussion item on the Board's agenda. Such items can no longer be included on the Board's consent calendar. (California Government Code Section 53635.7) B. Responsibilities of the Director of Finance The Director of Finance is responsible for keeping the Board of Directors fully advised as to the financial condition of the APFA. i C. Responsibilities of the Board of Directors The Board of Directors shall consider and adopt a written Investment Policy. As provided in that policy, the Board shall receive, review and accept monthly investment reports. DP Responsibilities of the Investment Committee There shall be an Investment Committee consisting of the Director of Finance, the City Manager, and APFA Treasurer and their designees. The Committee shall meet quarterly to discuss cash flow requirements, the monthly investment reports, investment strategies,investment and banking procedures and significant investment related work projects being undertaken in each department that will affect the cash flow management of the APFA Treasurer. This will require timely reports from the department heads to the APFA Treasurer concerning significant future cash flow requirements. The Committee's meetings will be summarized in minutes that are distributed to the Board of Directors. The Investment Committee,with the approval of the Board, may retain an external investment manager on behalf of the APFA. The investment manager will be required to act in accordance with this investment policy. E. Ethics and Conflicts of Interest I 4 � [•p'JL'MFMSµpStlTNG5N2{GM�tWy[IXl]pIENS, T.¢VI WIICVNrvERMfNiPoIJCYKVSNrtRYf,WM'[INO.W'HOYT'.]oIIiA'.LLDpC I All APFA officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution of the investment program, or that could impair their ability to make impartial investment decisions. Those employees and investment officials shall disclose to the appropriate City executive(City Manager,City Attorney,or the Director of Finance)any material financial interest in financial institutions that conduct business within the City, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the APFA's investments. 6. REPORTING The Authority Treasurer shall prepare a monthly investment report, including a succinct management summary that provides a clear picture of the status of the current investment portfolio and transactions made over the past month. This management summary shall be prepared in a manner that will allow the Director of Finance and the Board to ascertain whether investment activities during the reporting period have deviated from the APFA's Investment Policy. The monthly report shall include all of the information required by California Government Section 53646, including the following: • A list of individual securities held at the end of the reporting month; and • Unrealized gain or loss resulting from amortization or accretion of principal versus market value changes by listing the cost and market value of securities owned by the APFA; and • A description of the current investment strategy and the assumptions upon which it is based; and • Dollar weighted yield to maturity of the APFA's investments; and • Maturity schedule by type of each of the APFA's investments; and • Statement as to compliance of the APFA's Investment Policy with Government Code Section 53601 et seg.; and • Statement as to ability to meet expenditure requirements for next six months; and • Market value, book value, par value and cost basis of all investments; and cmcvwriaaw sernxwvnu��wroocuue*+smvrsrrnwr wurnx.Esrn�vrwuc.nziunwexrv+ucwc wmowrv.oii.mu.mc • Investments "under the management of contracted parties,including lending programs" (i.e., investments held by deferred compensation administrators). 7. PERFORMANCE STANDARDS ` The investment portfolio will be managed in accordance with the standards established within this Policy and should obtain a market rate of return throughout budgetary and economic cycles. The Investment Committee will establish and periodically review the APFA's portfolio benchmarks and performance. A benchmark will be selected that compares with the portfolio composition, structure and investment strategy at that time. I 8. REVIEW OF INVESTMENT POLICY A. Poliev Review This Policy shall be reviewed annually by the Board of Directors in accordance with State law to ensure its consistency with respect to the overall objectives of safety, liquidity and yield. Proposed amendments to the Policy shall be prepared by the Treasurer and reviewed by the Investment Committee and City Attorney and then be forwarded to the Board for consideration. The Investment Committee shall annually review the Policy and any proposed amendments and forward to the Board for its consideration and adoption at a public meeting. I I B. Internal Control and Review The external auditors shall annually review the investments and general activities associated with the investment program to ensure compliance with this Policy. This review will provide internal control by assuring compliance with policies and . procedures for the activities that are selected for testing. I i 9. Ij ADOPTION OF POLICY This Policy was duly adopted by the Board of Directors of the Azusa Public Financing Authority on November 21, 2011. I c.moumwrs,wvsmiwszusn�e}wv mivxen.swux.,rnx wu�+cnmmmxxwwcy.,,iusn rtauc un,w�wnxrxowrv.xou.nxwmc EXHIBIT A EXHIBIT A DESCRIPTION OF INVESTMENTS The APFA's investments maybe placed in those securities as outlined below;the allocation between the various investment instruments may change in order to give the APFA the best combination of safety, liquidity and higher yield. Surplus funds of local agencies may only be invested in certain eligible securities. The APFA limits its investments to allowable securities under the State of California statutes (Government Code Section 53601, et. seq., Section 53356, et. seg., and Section 53595, et. seq.) and is further limited to those listed below. Certificates of Deposit Certificates of deposit allow the APFA to select the exact amount and day of maturity as well as the exact depository. Certificates of deposit are issued in any amount for periods of time as short as fourteen(14) days and as long as several years. At any given time,the APFA may have certificates of deposit in numerous financial institutions in the future. The Treasurer may at his/her discretion waive security for that portion of a deposit,which is insured pursuant to federal law. Currently,the first Two Hundred and Fifty Thousand Dollars($250,000)of a deposit is federally insured by FSLIC or FDIC. It may be to the APFA's advantage to waive this collateral requirement for the first Two Hundred Fifty and Thousand Dollars($250,000)because the APFA may receive a higher interest rate. If funds are to be collateralized,the collateral will be one hundred and ten percent(110%)of the deposit in government securities or mortgages of one hundred and fifty percent (150%). At purchase, institutions must not show an operating loss. Banks must have an equity-to-asset ratio of at least six percent(6%). Savings and loan associations and savings banks must have an equity-to-asset ratio of a least three percent (3%). Local Agency Investment Fund The Local Agency Investment Fund("LAIF")of the State of California offers high liquidity because deposits can be wired to the APFA checking account within twenty-four (24) hours. Interest is computed on a daily basis. This is a special fund in the State Treasury which local agencies may use to deposit funds for investment. There is no minimum investment period and the minimum transaction is Five Thousand Dollars ($5,000) in multiples of One Thousand Dollars ($1,000) above that, with a maximum of Fifty Million Dollars($50,000,000) for any agency. It offers high liquidity because deposits can be converted to cash within twenty-four(24)hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly by adding it to the principal. The (State charges participants a small fee to cover reasonable costs associated with operating the investment pool, not to exceed one quarter of one percent (.25%) of the earnings. The interest rates received are fairly stable because of the pooling of the State's surplus cash with the surplus cash deposited by local governments. This creates a well-diversified multi-billion dollar money pool. U.S. Treasury Securities i U.S.(Treasury securities are highly liquid and considered the safest of all investments because they are bI acked by the full faith and credit of the United States Government. U.S.Treasury.Bills are direct obligations of the United States Government. They are issued weekly with maturity dates up to six (6) months. They are issued and traded on a discount basis and the interest is figured on a three hundred and sixty(360) day basis using the actual number of days to maturity. They are issued in the minimum amount of Ten Thousand Dollars ($10,000) and in multiples of Five Thousand ($5,000) thereafter. U.S. Treasury Notes are direct obligations of the United States Government. They are issued throughout the year with maturities from two up to thirty 30 years. Notes are coupon securities paying a fixed amount every six (6) months. The APFA will not invest in notes having maturities longer than five (5) years. Federal A2eney Securities I Federal Agency securities are highly liquid and considered to be virtually without credit risk. Federal Agency issues are guaranteed indirectly by the United States Government. All Agency obligations that are fixed-rate and meet the maturity restrictions of the State Code and this Policy qualify as legal investments and are acceptable as security for public deposits. They usually provide highei yields than regular Treasury issues with all of the same advantages. Examples are: j FNMA's (Federal National Mortgage Association) are used to assist the home mortgage market by purchasing mortgages insured by the Federal Housing Administration and the Fanners Home Administration,as well as those guaranteed by the Veterans Administration. FHLB's (Federal Home Loan Bank Notes and Bonds) are issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations,mutual savings banks, cooperative banks, insurance companies and mortgage-lending institutions. Other Federal Agency issues are Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Farm Credit Bank ("FFCB"), Small Business Administration Notes (SBA's), Government National Mortgage Association ("GNMA's"), Tennessee Valley Authority("TVA's")and the Student Loan Marketing Association("SLMA's") Negotiable Certificate of Deposit , Negotiable certificates of deposit are high-grade instruments, paying a higher interest rate than regular certificates of deposit. They are liquid because they can be traded in the secondary market. Negotiable Certificates of Deposit ("NCD's") are unsecured obligations of the issuing financial institution, bank or savings and loan, bought at face value with a promise to pay face value plus accrued interest at maturity. The primary market issuance is in multiples of One Million Dollars ($1,000,000). The secondary market usually trades in denominations of Five Hundred Thousand Dollars($500,000),although smaller denominations are occasionally available. Local agencies may not invest more than thirty percent(30%)of their surplus money in negotiable certificates of deposit. NCD's will only be placed with the largest and most financially sound institutions. Commercial Paper Commercial paper allows the investment of large amounts of money on a short-term basis at rates higher than passbook savings accounts. Commercial paper is a short-term unsecured promissory note issued by a corporation to raise working capital. These negotiable instruments are purchased at a discount to par value. As an example, corporations such as American Express, International Business Machines (IBM) and General Electric issue commercial paper. Local agencies are permitted by state law to invest in commercial paper of"prime" quality of the highest ranking or of the highest letter and numerical raring as provided by Moody's Investor's Service, Inc. or Standard and Poor's Corporation (Allpl or al+/pl). Purchases of eligible commercial paper may not exceed one hundred and eighty (180) days maturity nor exceed thirty percent (30%) of the APFA's surplus funds. Medium-Term Corporate Notes An agency may invest in medium term corporate notes with a maximum maturity of five years issued by a corporation organized and operating within the United States, a depository institution licensed by the United States Government or any state government and operating within the United States. California Government Code Section 53601 et seg. permits cities to invest in corporations with a rating category of"A" or better,but the APFA will limit its investments in corporate medium term notes to those issued by corporations that have been rated "AA" or its equivalent by two (2) nationally recognized ratings agencies. cuwcauNnau�sertmasuusa,�.ywrc ooaMrz+zsvwo-rmwrwuivvr+.o�uerzwucr.nzwnnmuc nxuucmowmazzzv.zoi.muu.uoc f T Passbook Savings or Money Market Account Passbook savings account allows us to transfer money from checking to savings and earn interest on smaller amounts of money, which are not available for a longer-term investment. The passbook savings account is similar to a CD except not for a fixed term. The interest rate is much lower than CD's but the savings account provides daily liquidity and funds can be deposited and wI ithdrawn according to our daily needs. Mutual Funds I Mutual Funds allow the APFA to maintain liquidity and receive money market rates. Mutual Funds are referred to in the Government Code, Section 53601(1),as"shares of beneficial interests issued by diver Isified management companies". The Mutual Fund must be restricted by its prospectus to be a "Money Market" mutual fund and be limited to the same approved investments as LAIF. These investments include U.S. Treasury and Agency issues, Bankers Acceptances, Commercial Paper, Repurchase Agreements,Certificates of Deposit,and Negotiable Certificates of Deposit. The quality rating and percentage restrictions in each investment category applicable to LAIF also apply to any Mutual Fund. One of the stated objectives of the Mutual Fund must be to attempt to maintain a One Dollar($1.00) Net Asset Value(NAV). A further restriction is that the purchase price of shares of any mutual fund shall not include any sales commission. Investments in mutual funds shall not exceed fifteen percent (15%) of the APFA's surplus money. I Repurchase Agreements Repurchase Agreements are purchases of securities by the APFA under an agreement with a term of one(1) year or less whereby the seller will"repurchase"the same securities on or before a specified date or on demand of either party and for a specified amount. The underlying securities must be delivered to the APFA's custodial account by book entry,physical delivery or a third-party custodial agreement. I _ i I ORDINANCE NO. 2011- r i AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF AZUSA, AMENDING CHAPTER 46-239(a) OF THE AZUSA MUNICIPAL CODE WHEREAS, the City of Azusa ("City") is empowered by California Constitution Article XI, Section 7 to make and enforce within its limits all local,-police, sanitary, and other ordnances and regulations not in conflict with general laws; and I WHEREAS, graffiti abatement and prevention is one of the Police Department's top three priorities; and WHEREAS, the Police Department wants to increase its ability to arrest graffiti criminals; and I WHEREAS, the Police Department believes a reward program will encourage witnesses to report graffiti acts while in progress. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF AZUSA DOES ORDAIN AS FOLLOWS: f I SECTION 1. Section 46-239(a) of the Azusa Municipal Code is hereby amended to read as follows: (a) The City may pay a reward in an amount established by separate resolution of the City Council for information leading to the arrest or conviction or plea of guilty of any person for violation of California Penal Code Section 594 or 640.5, or this chapter. SECTION 2. SEVERABILITY. If any section, subsection, sentence, clause, phrase, or portion of this Ordinance is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have adopted this Ordinance, and each section, one or more sections, subsections, subdivisions, sentences, clauses, phrases or Portions might subsequently be declared invalid or unconstitutional. SECTION 3. CEQA. The City Council finds that this Ordinance is not subject to the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the erivironment, directly, or indirectly. SECTION 4. EFFECTIVE DATE. This Ordinance shall become effective thirty (30) days after its adoption. SECTION 5. PUBLICATION. The City Clerk shall certify the adoption of this Ordinance and shall cause the same to be posted as required by law. PASSED, APPROVED, AND ADOPTED this_ day of 2011.