Loading...
HomeMy WebLinkAboutAgenda Packet - April 23, 2012 - UB AZUSA AGENDA REGULAR MEETING OF AZUSA UTILITY BOARD AZUSA LIGHT & WATER APRIL 23, 2012 729 N.AZUSA AVENUE 6:30 P.M. AZUSA, CA 91702 AZUSA UTILITY BOARD ANGEL CARRILLO CHAIRPERSON URIEL E. MACIAS JOSEPH R. ROCHA VICE CHAIRPERSON BOARD MEMBER KEITH HANKS ROBERT GONZALES BOARD MEMBER BOARD MEMBER 6:30 P.M. Convene to Regular Meeting of the Azusa Utility Board • Call to Order • Pledge to the Flag • Roll Call A. PUBLIC PARTICIPATION 1. (Person/Group shall be allowed to speak without interruption up to five(S) minutes maximum time, 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 time.) 1 001 B. UTILITIES DIRECTOR COMMENTS C. UTILITY BOARD MEMBER COMMENTS D. CONSENT CALENDAR The Consent Calendar adopting the printed recommended action will be enacted with one vote. If Staff or Councilmembers wish to address any item on the Consent Calendar individually, it will be considered under SPECIAL CALL ITEMS. 1. Minutes. Recommendation: Approve minutes of regular meeting on March 26,2012 as written. March UB Min.pdf 2. Award Purchase of John Deere 326D Skid Steer Loader to Coastline Equipment Under California Multiple Award Schedule (CMAS). Recommendation: Waive formal scaled bids in accordance with the Municipal Code Section 2-522, sub-section C; and award the purchase of a John Deere 326d Skid Steer Loader to Coastline Equipment Under California Multiple Award Schedule(CMAS Contract No. 4- 08-23-0023A) in the amount of $69,719.91, including tax, delivery, discount, and State administrative fees. Wader Purchase.pdf Exhibit-Quote.pdf 3. Approval to Seek Bids for W-265, Water Main Replacement Project. Recommendation: Approve the advertisement for, and solicitation of bids for Project W-265, Water Main Replacement in Bellbrook, Street, Lark Ellen Avenue, Brookport Street, Benwood Street, Benbow Street, Vogue Avenue, and Cypress Street in Los Angeles County near West Covina. �I W-265 Bid Advertise.pdf 4. Approval to Continue Transaction Services with the City of Riverside Recommendation: Approve continuation of the Transaction Services Agreement between Azusa and Riverside; and authorize the Director of Utilities to execute the extension agreement and designate the Director to administer/execute subsequent agreement renewals/amendments provided that cumulative annual cost increases do not exceed d$$1+0,000. y Riverside Agrmt.pdf Exhibit-Agnnt.pdf 2 00' 5. Authorization to Execute the "Officer Certification Form" Document as Required by FERC and the CAISO. Recommendation: Authorize the Director of Utilities to execute the "Officer Certification Form" as required by the Federal Energy Regulatory Commission (FERC) and the California Independent System Operator (CAISO). ISO Cert Officer Cert Authority.pdf Formpdf 6. Approval of Proposal by Standard & Poors for Credit Rating Services for Electric Utility. Recommendation: 1) Approve the selection of Standard & Poors for Credit Rating Services in amount not-to-exceed $18,000 plus reasonable out-of-pocket expenses; and 2) authorize the Director of Utilities to execute agreement subject to City Attorney's review and approval. 9 oil Standard and Exhibit-Savings.pdf Exhibit- - Poors.pdf Proposal.pdf E. SCHEDULED ITEMS 1. Resolution Approving Documents and Actions to Refinance Certain Lone Term Debt Issued by Water and Electric Utilities. Recommendation: (1)Approve the following resolution entitled: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA AUTHORIZING AND APPROVING DOCUMENTS AND OFFICIAL ACTIONS RELATING TO REFINANCING OF CERTAIN WATER SYSTEM IMPROVEMENTS AND ELECTRIC SYSTEM IMPROVEMENTS AND THE ISSUANCE AND SALE OF WATER SYSTEM REVENUE REFUNDING BONDS AND ELECTRIC SYSTEM REVENUE REFUNDING BONDS AND AUTHORIZING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH. (2) Authorize use of$2.325 million from water fund balance to defease long-tem debt associated with the Series A Certificates of Participation issued in 2003 that cannot be advance refunded. KIM )LI Rpt-Refunding Ref!Reso.pdf Draft POS.pdf Water Electric Water LTD.pdf Indenture-Clean.pdf Indenture-Clean.pdf CDA-Clean.pdf glt_`i1 ± Electric Water Electric Bond Purch Agrmt- Bond Purch Agrmt- CDA-Clean.pdf Escrow-Clean.pdf Escrow-Clean.pdf Electric.pdf Water.pdf 3 003 G 2. Approval of License Agreement with ECOtality for Furnishing and Installing Electric Vehicle Public Charging Stations on City Owned Property and Resection of All Other Proposals. Recommendation: (1) Approve the ECOtality License Agreement for furnishing and installing electric vehicle public charging stations on City owned property and authorize the Director of Utilities to sign the license agreement, and any necessary line extension construction agreement subject to legal review; and (2) reject the three formal proposals received from the December 2011 RFP for EV charging stations. �1 I Eootality.pdf ExhbitUcAgnt.pdf , F. STAFF REPORTS/COMMUNICATIONS 1. UpdateonCalifornia Renewable Portfolio Standards (RPS) Bill and Azusa 2011 Compliance RPS Update.pdf 2. Next Utility Board Meeting Date—Tuesday, May 29 (due to Memorial Day on Monday, May 28) G. ADJOURNMENT 1. Adjournment. "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 or time when special services are needed will assist staff in assuring that reasonable arrangements can be made to provide access to the meeting." "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- 729N. Dalton Avenue, and Azusa Light& Water-729N. Azusa Avenue,Azusa CA." 4 .0^4 UfflKy Board Meeting Automated Trash Service for Azusa Scrrido Automatizado de Basura m*e'�N Mom Information Ilere! A;E;R�. M iY April 23, 2012 Chair Angel Carrillo AZUSA LI G M i b W AT E R Utilities Director Comments Automated Trash Collection Workshops — 3 to date, 2 more k 5 Lodi Energy Center — complete 91 . 5% — August 10 Dedication s ° CEC SB1368 Rulemaking 2 AZUSA L t G H ) & WATER ConsentAgenda i ° March 26, 2012 Minutes %, o Purchase of Skid Steer Loader ($69,719.91 ) 3 ° Approval to Seek Bids on Water Main Replacement Project (W-265) ° Continue Transactions Service Arrangement with Riverside ($20, 175) ° Execution of CAISO "Officer Certification Form" ° Standard & Poors Credit Rating Services ($18,000) �� ►� Me 3 kr(� AZUSA L I G H T d W A i E R 2012 Water & Electric Bond Refinancing f , a , ri Azusa Utility Board April 23, 2011 4 AZUSA L 1 G R i & W A T E R [�ackgr®und In January 2012, the Utility Board authorized Staff to move forward toward refinancing the utility's Water 2003 Series A and Electric 2003 Series B Certificates of Participation With UB approval , a financing team was assembled : — Financial Advisor — Urban Futures — Underwriter — De La Rosa & Company — Bond/Disclosure Counsel — Hawkins, Delafield & Wood „4 .w 5 AZUSA LIGHT & WATEA Aster series A Refunding Limitation 20% of issue had been previously refinanced/refunded . Tax Code allows tax-exempt debt to be refunded only once. Options: 1 . Refund only 80% portion ($1 ,056,700 savings) 2. Refund the 20% portion with taxable debt ($1 ,517,900 savings) ' 3. Use water system reserves to defease the 20% portion ($1 ,800,000 savings) 6 AZUSA LIGHT 6 WATER Water Seder A Reffundrog Recommen ation Option 3 (defease 20% portion with cash on hand ) is recommended : — Sufficient cash on hand ($20+ million) — Cash reserves earn only minimal interest — Would improve debt service coverage — Improves refinancing cash flow �A 7 AZUSA LIGHT & WATER Water Bonds [Projected Cash Row u( vl Series A Installment Comparison 04 FY Yr Existing Pymnt New Payment Savings 2012 $ 53,774 $ 36,681 $ 17,093 2013 1,553,883 1,032,500 521,383 2014 1,555,138 1,033,800 521,338 2015 1,553,275 1,027,800 525,475 2016 1,553,175 1,029,200 523,975 2017 1,555,025 1,029,400 525,625 2018 1,553,505 1,028,400 525,105 2019 1,552,930 1,031,200 521,730 2020 1,554,743 1,032,600 522,143 2021 1,548,063 1,02200 525,463 2022 1,5 52,738 1,026,600 526,138 2023 1,554,000 1,029 000 525,000 Total $ 17,1409246 $ 11,3599781 $ 557809466 ^A ON ,'tio '� a $ AZUSA LIGHT & WATER Mectroc Bonds [ rg eccted Cash Mow Series B Installment Comparison FY Yr Existing Pymnt New Payment t,,Savj gs' 2012 $ 21,953 $ 23,428 $ (1,475) 2013 263,438 221,950 41,488 2014 263,438 221,950 41,488 2015 263,438 221,950 41,488 2016 263,438 221,950 41,488 12017 828,438 781,950 46,488 2018 962,448 919,550 42,898 2019 963,373 920,750 42,623 2020 962,273 915,750 46,523 2021 964,113 919,750 44,363 2022 963,406 917,350 46,056 2023 960,750 918,750 42,000 Total $ 7,680,502 $ 7,205,078 $ 475,424 AZUSA LIGHT & WATER Projected ted SaAngs • Water — Reduced cash flow of ~$520K per year through 2023 ( NPV of ~$ 1 . 6M ) • Electric — Reduced cash flow of ~$41 -46K per year through 2023 (NPV of ~$454K) iim AZUSA LIGHT L WATER Loond Documents Authorizing Resolution f Indentures Bond Purchase Agreements Preliminary Official Statement Escrow Instructions Continuing Disclosure Agreements Note: Documents are in substantially final form subject to minor changes ,N 11 yrM AZUSA LIGHT 6 WATER R"I acam men datoan o That the Utility Board approve the Authorizing Resolution attached to Staff Report — This resolution approves the bond refunding documents and authorizes actions in connection with Water Series 2003A and Electric Series 2003B COPs . ,� - - C) - � 12 AZUSA LIGHT 6 WATER ECOtaflty Agreement for- Local EV 1ntallations Q Azusa Utility Board April 23, 2012 LcDackground Per Utility Board authorization , Staff issued an RFP for acquisition of EV charging stations Proposals received for basic Level II EV dual charging units were as follows : — AeroVironment ($6,244 per unit) — General Electric ($7,497 per unit) — ChargePoint/Coulomb ($4,765 per unit) mwo 14 i;m AZUSA LIGHT G WATER ECOWKy pr® p®sa � ° Subsequent to the RFP process, the City became aware of an opportunity to participate in a national "EV Project" o The EV Project, funded in part by federal ARRA grant, will deploy several thousand EV chargers in major metropolitan areas in six states, including California The contractor for this research project is ECOtality, Inc. . " 15 ��vv AZUSA E; G H T G WATER Summary ®f ECOtaMy Arrangement • Level II "Blink" EV chargers provided by ECOtality at no cost to Azusa (Level III possibility) • Up to two "Blink" charging units per location for 2 to 7 locations in City of Azusa • Installation subsidy of $2,250 per charging unit ($4,500 per site) • AL&W to "contribute" electricity and service line extensions for the chargers • Payment to AL&W of 50% charging revenue from charging user fees and advertising • Automated billing services using RFID cards obtained via internet • Complete the charger installation no later than 30 June 2012 • Demonstration project through 30 April 2013 under a License Agreement 16 hr� AZUSA LIGHT d WATER Rscd impact Value of seven dual Level II charging units with installation subsidy is about $73,500 Azusa responsible for electric line extension costs in excess of subsidy (will seek to minimize, as appropriate) Azusa to receive 50% of revenues from sale of electricity "tM4 17 AZUSA L 1 G H 1 b W Al E F omcommendafoon ° Approve finalization/execution of ECOtality License Agreement and any necessary line extension construction agreements ° Reject the three formal proposals received in response to earlier RFP W.A _ J 18 AZUSA LIGHT 6 WATER Update o C l RenewaWe Portfolio Standards X o i Azusa Utility Board April LcDackground ° SBX 1 -2 was signed into law in April 2011 o Law requires California electric utilities to reach 33% RPS in three compliance periods — 2011 to 2013 (average of 20%) — 2014 to 2016 (25% at end of period ) — 2017 to 2020 (33% at end of period ) 20 A USA LIGHT b WA'IEP. RPS RegWadoons ° The California Energy Commission is charged with establishing compliance rules for SBX 1 -2 for publicly-owned utilities • Rules to be finalized by mid-2012 • Key issues for Azusa is treatment of Hoover and "grandfathering" of renewable resources • Azusa closely monitoring and providing input into the RPS rule development 21 AZUSA L i G H i & WATER ActuM 2011 RPS ° For calendar 2011 , Azusa's RPS totals were as follows : - 18 . 8% without Hoover — 20 . 5% counting Hoover ° When RPS rules are finalized , Staff will provide a further report to the Utility Board 4 _ - 22 AZUSA L I G H T L W F 7 E H Hext MeeU n g Tuesday, May 29 due to Memorial Day 23 ��ra AZUSA LIGHT 6 WATER • r t CITY OF AZUSA MINUTES OF THE REGULAR MEETING OF THE AZUSA UTILITY BOARD/CITY COUNCIL MONDAY, MARCH 26,2012—6:30 P.M. The Utility Board/City Council of the City of Azusa met in regular session,at the above date and time,at the Azusa Light and Water Conference Room, located at 729 N. Azusa Avenue, Azusa,California. Chairman Hanks called the meeting to order. Call to Order Chief of Police Sam Gonzalez led in the Flag Salute. Flag Salute ROLL CALL Roll Call PRESENT: BOARD MEMBERS: GONZALES, CARRILLO, MACIAS, HANKS, ROCHA ABSENT: BOARD MEMBERS: NONE ALSO PRESENT: Also Present City Attorney Carvalho,City Manager Makshanoff,Director of Utilities Morrow,Assistant to the Director of Utilities Kalscheuer,Assistant Director Water Operations Anderson,Assistant Director of Customer Service and Care Vanca, Assistant Director of Resource Management Lehr, Public Works Director/Assistant City Manager Haes, Assistant Director of Electric Operations Langit, Director of Economic.and Community Development Christiansen, Chief Financial Officer Kreimeier, Library Director Johnson, Director of Recreation and Family Services Jacobs, Public Information Officer Quiroz, Finance Controller Paragas, Director of Information Services Graf,Assistant Library Director Strege,Chief of Police Gonzalez,City Clerk Mendoza, Deputy City Clerk Toscano. PUBLIC PARTICIPATION Pub Part Mr.Jorge Rosales addressed the Board Members and questioned why the item regarding Feasibility Study for J. Rosales sludge handling facilities did not go out to bid,why the item regarding Athens Services Refuse rate adjustment Comments commercial rates were increased and there was a reduction in cubic area,which was opposite residential rates. Staff advised that this item is only to schedule a Public Hearing for June 18, 2012 to consider a refuse adjustment and questions may be addressed at that Public Hearing.With regard to item Contract for Electronic Commerce Services,he questioned getting a late fee notice in the mail the next day after payments are due;he receives one every month and is concerned about the cost of mailing. Staff responded to the questions posed. OG5 UTILITIES DIRECTOR COMMENTS Dir Comment Director of Utilities Morrow provided an update on the water supply stating that there is a 45% increase in Water Update snow pack. He stated that there will be notices posted to use water wisely. UTILITY BOARD MEMBER COMMENTS Brd Mbr Com Election of Officers: Election Moved by Board Member Gonzales,seconded by Board Member Rocha and unanimously carried to appoint Carrillo—Chair Board Member Carrillo as Chairman of the Utility Board. Moved by Board Member Gonzales,seconded by Board Member Rocha and unanimously carried to appoint Macias—Vice Board Member Macias as Vice Chairman of the Utility Board. Chair The CONSENT CALENDAR consisting of Items D-1 through D-4, were approved by motion of Board Consent Cal Member Hanks, seconded by Board Member Gonzales and unanimously carried. Appvd 1. The minutes of the regular meeting of February 27, 2012,were approved as written. Minutes appvd 2. Approval was given to award a Professional Services Agreement to Civiltec Engineering Inc. to PSA Civiltec provide engineering services for the preparation of a feasibility study of various sludge handling Engr Sludge facility options for the Hsu-Canyon Membrane Water Filtration. Handling 3. Approval was given to schedule public hearing for regular City Council Meeting on June 18,2012 to Pub Hrg consider refuse rate adjustment for Athens Services, and authorize staff to prepare and mail public Refuse Rate notice of said hearing. June 18, 2012 4. Approval was given for Amendment No.2 to Long-Tenn Power Purchase Agreement(Wind Power) Pur Agmt between Iberdrola Renewables,Inc.and City of Azusa,and the Director of Utilities was authorized to Iberdrola execute the agreement. Renewables SPECIAL CALL ITEM Spec Call Item None. None SCHEDULED ITEMS Sched Items Local Resource Adequacy Capacity Purchase for 2013 from Caloine/Shell Pur Capacity Moved by Board Member Hanks,seconded by Board Member Macias and unanimously carried to approve a Pur Local Res Local Resource Adequacy Capacity purchase of 31 MW for calendar year 2013 from Calpine (transacted Adequacy through a"confirm" with Shell acting on Calpine's behalf), and the Director of Utilities was authorized to Capacity execute the associated Confirmation Agreement. Calpine/Shell "No Cost"Letter of Intent with SAIC to Identify the Cost and Benefits of Installing a Local Smart Grid Letter of Intent SAIC Local Lengthy discussion was held regarding the matter, it was then moved by Board Member Hanks,seconded by Smart Grid Board Member Macias and unanimously carried to authorize the Director of Utilities to finalize and execute a "no cost"Letter of Intent with an engineering consultant,SAIC,to identify the cost and benefits of a potential smart grid service procurement by Azusa Light&Water. 03/26/12 PAGE TWO �' 000 �r Award of Contract for Electronic Commerce Services to Wells Fargo. Electronic Commerce Discussion was held regarding subject matter; it was then moved by Board Member Macias, seconded by Service Board Member Gonzales and unanimously carried to authorize the Director of Utilities to execute a three year Wells Fargo contract with Wells Fargo for electronic commerce services to improve utility customer service. STAFF REPORTS/COMMUNICATIONS Staff Reports Director of Utilities Morrow detailed the information on Electronic Vehicle Public Charging Stations-EV Electronic Connect and responded to questions posed. He stated that the next steps would be to finalize the agreement Vehicle and return it to Board Members for consideration. Azusa Light and Water will work with ECOtality agent Charging called EV Connect to identify suitable installation sites,and Site hosts will need to sign ECOtality permission Stations agreement. Director of Utilities Morrow detailed the information regarding Automated Residential Trash Collection Automated stating that workshops are being scheduled on April 5'h at Memorial Park Easter Egg Hunt, April 14'h at Residential Edgewood Center Parking Lot,April 21"at Jr. Olympic Meet at APU,and on April 24"at the Azusa Senior Trash Center. Workshops The Board Members recessed at 7:28 p.m. The Board Members reconvened at 8:25 p.m and recessed into Recess— Closed Session to discuss the following: Reconvene CLOSED SESSION Closed Session . CONFERENCE WITH REAL PROPERTY NEGOTIATORS Pursuant to Government Code Section 54956.8 Property: Water rights regarding Main San Gabriel Basin Agency Negotiator: George Morrow, Utilities Director Negotiating Parties: Reiner Kruger, Monrovia Nursery Under negotiation: Price and terms of payment. The Board Members reconvened at 8:58 p.m. There was no reportable action taken in Closed Session. Reconvene No Reports It was consensus of the Board Members to adjourn. Adjourn TIME OF ADJOURNMENT 8:59 P.M. SECRETARY NEXT RESOLUTION NO. 12-C21. 03/26/12 PAGE THREE 007 t CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZ A UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES DATE: APRIL 23, 2012 SUBJECT: WAIVE FORMAL BIDDING PROCEDURES AND AWARD PURCHASE OF JOHN DEERE 326D SKID STEER LOADER TO COASTLINE EQUIPMENT UNDER CALIFORNIA MULTIPLE AWARD SCHEDULE (CMAS) RECOMMENDATION It is recommended that the Utility Board waive formal sealed bids in accordance with the Municipal Code Section 2-522, sub-section C, and award the purchase of a John Deere 326d Skid Steer Loader to Coastline Equipment under California Multiple Award Schedule (CMAS Contract No. 4-08-23-0023A) in the amount of $69,719.91, including tax, delivery, discount, and State administrative fees. BACKGROUND The Water Division Distribution crew does a great deal of small excavations to repair leaks which do not require the use of the large end loaders that the crew currently uses on such work. The proposed John Deere skid steer loader can be transported to work site and put to work moving excavated material, breaking sections of pavement for excavation and brushing and cleaning the worksite at the end of the repairs. The small loader will also be able to operate in small and tight spaces where the other end loaders had trouble operating. FISCAL IMPACT Fiscal impact will be $69,719.91 including applicable tax, delivery, and State administrative fees. Funds are available in the Water Division's Capital Outlay Budget 32-40-723-761-7135; $90,720 was budgeted. Prepared by: Chet F. Anderson P.E., Assistant Director -Water Operations ��8 A _Coastline Equipment ® JOHN DEERE P G.Eo:!22732,Long t3eacn; CA 50801-5732 _ I GIBS Palamuent 61vo.. Lor.g Beach,CA 90805 • (562) 272-7400 • (71•4) u73.9220 FAX(562)272-I<4 .venv.cossd:neegm pmen;.com A CALII'ORNIA MULTIPLE AWARD SCHEDULE PROPOSAL (CMAS) AZUSA LIGHT A\D WAT EER 729 VN. AZUSA .AVE. AZUSA, CA 91702 AT'TN: ken C:odhev o-NE NE.w JOHN DEERI': 3261) SKID STEER LOADER 81811'1 326D Skid Steel- 537,431.1111 0800 Standard Contiguratioo 00.00 0975 li-ll .foystiil: Controls PCH1017 lance Packace 3.154.00 Q50 I wo-Speed 'lransmission . ?29.00 2310 12X16.5 101T SKS I::\II;r\ +'all Tires 00.00 301!1: 110) Irlor: »111ydraulic Scll=Lceclinc '.120!)0 40011 3'" Seat Bell w/Shoulcler l larncss 337.00 5001 Power Quick-'Patch 742.00 5204 120PSI1'011S Cab w/I]u:ucr& AC 4.100.00 01001 Vinyl Suspension Seat 433.00 6501 Revcrsine Pan Drive 738.00 6800 1 Zorn 123.00 6900 i_.naine Air Preeleaner 287.00 50=10 Backup Alarm 92.00 8075 Dual Flashers 75.00 8.100 Rear Coinnenr'ai­hl ;li).00 9046 76 in. HD Construction Bucket(18.5 cu. 1't.) with Edge 1,235.1111 0410,1Worksile Pru fill-60 Iltidraulic Ilarnmer 8,241.00 1002 1-11-160 Skid Sleer Bracket 959.00 75(101 Workske Pro 13H I Backhoe 12,152.00 1i)u6 M(AlIllint Kit lite H115 Backhoe 540.00 3000 Mcchanical Quick Coupler 144.00 9504 12 In. H.D. Bucket tis 1311 Quick Coupler 562.00 Al ;1655 13 18 In. I I.D. Huckct for 1311 Quick Coupler isg,00 I3\'I 195":6 Rubber Sheet Pads l it 122.00 1:+211'1• Worksite Pro BR72 RJgid Pick-up Broom 4,314.00 A 1 ,495O9 73 In. Broom Spray Bar.' 0123.00 A 137:485 30 I'll. Wmerl'ank Kit 1.251.00 1570 F Worksite Pru HD NMI Forks 1,4112.00 KV265'-8 Moununlp Frame for Forks 685.00 !ICN>Ci-.fE .CCOF NI cF5 ISj:I ir :G :.J-.'a ill t3RE!i':Ic.-:: a'i:I S<::C.:;:-a:a . ._r.. .. . n-•i .: �>'JI]:..S5f.SCJ 009 _Coastline _ -- Equipment ®JOHN DEERE —� '.O.Box 22732, Long Beach, CA 90801-5732 Itre - ,��__ 1 618,8 Paramovnl Biva.. Lome Beech. CA 90205 • f562) 272-74CO • (71::) ?739220 • FAX (562)272741.4 - ..::rcaeas=Gncequip^-e ntcoT List Price 85.149.00 Less 26.0% CHAS Discount <7 .l 3ti.74> Subtotal $63.010.26 'I he follmairt iS a Non Sl)ceificd Price 1NSP.) ilem and nm51 he Shown as a sepnralc line i!cn, kill 1110 Purchase Order: Bits 1.101)M SnNOtal o4-1 10.26 S.75% Sales'I'ax 5.609.65 TOTA T. S69,719.91 b:O.13. Ansa. CA DI•;I,IV1:N1' AppioXimatcly60da.;s :\.IZ.O. CNIAS Cuntruct4-08-13-002_A Contractor C:oasdinc l:quipn,cnt C,11) 6nE�os-6-:,n-1., (•nnlacl ( human !rebs - 01lice :`.' 562-272-7400 Email NOTE: Please bc-advised Oita all Smtu.of California charges for Mministrirtive ices Will be paid by Coastline Equipment. Complete inSlructionon 111C ollt purchasinc aerncv s re ponsibililies under a C\4AS -ontract ntay be Ibund at C 3HrcrAF_:1LaG12u AITCH', J::f.OFM3I L%n:4p .:AN IAW,FM lr.1 r. aT.CAg:HR 5as'F ars ,\'1.tar ,562;:77.140* 010 -3 • AZI JSA tIGHT R WATER CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD fir' FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES fetriGt" DATE: APRIL 23, 2012 SUBJECT: APPROVAL TO SEEK BIDS FOR THE INSTALLATION OF PROJECT W-265 WATER MAIN REPLACEMENT IN BELLBROOK STREET, LARK ELLEN AVENUE, BROOKPORT STREET, BENWOOD STREET, BENBOW STREET, VOGUE AVENUE, AND CYPRESS STREET IN LOS ANGELES COUNTY NEAR WEST COVINA. RECOMMENDATION It is recommended that the Utility Board approve the advertisement for, and solicitation of bids for Project W-265, Water Main Replacement in Bellbrook Street, Lark Ellen Avenue, Brookport Street, Benwood Street, Benbow Street, Vogue Avenue, and Cypress Street in Los Angeles County near West Covina. • BACKGROUND The Water Division has a program of replacing water mains that have a history of leaks and/or may be experiencing flow and pressure problems. The mains to be replaced in this project have both leak problems requiring constant repair and deliver less flow than is optimal for current residential area standards. In all, this project will install, as pipeline replacement, approximately 890 linear feet of 18-inch ductile iron pipe water main; 400 linear feet of 12-inch ductile iron pipe water main; 4,250 linear feet of 8-inch ductile iron pipe water main; 630 linear feet of 18- inch steel water main; and two 18-inch steel water main bridge crossings in Lark Ellen Avenue at Big Dalton Wash and at San Dimas Wash. The documents that make up the bid specifications are available for public review at the Library at 729 N. Dalton, and at the Azusa Light& Water Office at 729 N. Azusa Avenue. FISCAL IMPACT There is no immediate fiscal impact to the bidding of this project. This item will be funded from Capital Improvement Program Budget No. 32-80-000-721-72112B. Prepared by: Chet F Anderson P.E., Assistant Director- Water Operations . 0I 1 ~.0 ",".0 "."0 AZUSA LIGHT & WATER AZUSA, CALIFORNIA CONTRACT DOCUMENTS AND SPECIFICATIONS FOR THE WATER MAIN REPLACEMENT PROJECTS PROJECT NO. W- 265 April 2012 PREPARED BY: AZUSA LIGHT & WATER TABLE OF CONTENTS PAGE NOTICE INVITING BIDS NIB - 1 RECEIPT OF PROPOSALS NIB - 1 DESCRIPTION OF WORK NIB - 1 COMPLETION OF WORK NIB - 1 MANDATORY PRE-BID JOB WALK NIB - 1 DRAWINGS AND SPECIFICATIONS NIB - 1 GUARANTEE NIB - 1 PREVAILING WAGE RATES NIB - 1 PAYMENT NIB - 2 SUBSTITUTION OF SECURITIES NIB - 2 OPENING OF PROPOSALS NIB - 2 CITY'S RIGHTS RESERVED NIB - 2 REQUIREMENT FOR CONTRACTOR'S LICENSING NIB - 2 INSTRUCTION TO BIDDERS NIB - 3 PROPOSAL NIB - 3 DISCREPANCIES IN PROPOSALS NIB - 3 PROPOSAL GUARANTEE NIB - 3 BIDDER'S EXAMINATION OF SITE NIB - 3 COMPETENCY OF BIDDERS NIB -4 DISQUALIFICATION OF BIDDERS NIB - 4 RETURN OF PROPOSAL GUARANTEE NIB - 4 AWARD OF CONTRACT NIB - 4 EXECUTION OF CONTRACT NIB - 4 NON-DISCRIMINATION IN EMPLOYMENT NIB -4 PROPOSAL P- 1 BIDDING SCHEDULE P- 2 LIST OF MATERIAL AND EQUIPMENT MANUFACTURERS P- 13 LIST OF SUBCONTRACTORS P- 14 CONTRACTOR'S EQUIPMENT P- 15 MANDATORY FORM - BID BOND P- 16 CONTRACTOR'S LICENSE DECLARATION P- 18 NON-COLLUSION AFFIDAVIT P- 19 AGREEMENT A - 1 FAITHFUL PERFORMANCE BOND A - 3 LABOR AND MATERIAL BOND A - 4 ESCROW AGREEMENT A - 6 TOC-i I TABLE OF CONTENTS GENERAL CONDITIONS GC - 1 SECTION 1 - DEFINITIONS AND ABBREVIATIONS GC - 1 1.01 DEFINITIONS GC - 1 1.02 ABBREVIATIONS GC - 2 SECTION 2 - SPECIFICATIONS AND DRAWINGS GC - 3 2.01 INTERPRETATION OF SPECIFICATIONS AND DRAWINGS GC - 3 2.02 CONFLICTS BETWEEN SPECIFICATIONS AND DRAWINGS GC - 3 2.03 STANDARD SPECIFICATIONS GC - 3 2.04 SHOP DRAWINGS GC - 3 2.05 REFERENCE TO STANDARDS, PUBLICATIONS OR STANDARD SPECIFICATIONS GC -4 2.06 REFERENCE TO PROPRIETARY PRODUCTS GC - 5 2.07 SPECIFICATIONS AND DRAWINGS FURNISHED TO CONTRACTOR GC - 5 2.08 AS-BUILT DRAWINGS GC - 5 SECTION 3 - CITY-ENGINEER-CONTRACTOR RELATIONS GC - 6 3.01 AUTHORITY OF CITY GC - 6 3.02 AUTHORITY OF THE ENGINEER GC - 6 3.03 INSPECTION AND TESTING GC - 6 3.04 CHANGE ORDERS GC - 7 3.05 CONTRACTOR'S PLANT AND EQUIPMENT GC - 9 3.06 ASSIGNMENT OF CONTRACT GC - 9 3.07 SUBCONTRACTS GC - 9 3.08 CONTRACTOR'S EMPLOYEES AND SUBCONTRACTORS GC-10 3.09 ATTENTION TO WORK GC-10 3.10 SERVICE OF NOTICES GC-10 3.11 DEVIATION FROM CONTRACT GC-11 3.12 SUSPENSION OF WORK GC-11 3.13 TERMINATION OF CONTRACT BY CITY (CONTRACTOR NOT AT FAULT) GC-11 3.14 TERMINATION OF CONTRACT BY CITY (CONTRACTOR AT FAULT) GC-11 3.15 TERMINATION OF CONTRACT BY CONTRACTOR GC-12 3.16 FAILURE TO COMPLY GC-12 3.17 PROTESTS GC-12 3.18 RIGHTS-OF-WAY GC-13 3.19 CONSTRUCTION INTERFERENCE GC-13 3.20 LINES AND GRADES GC-15 3.21 SUPERVISION AND INSPECTION GC-15 3.22 OBSERVING LAWS AND ORDINANCES GC-16 3.23 COORDINATION WITH COMMUNITY AGENCIES GC-17 3.24 FIRE HYDRANTS GC-17 3.25 LOSS AND DAMAGE GC-17 TOC- ii TABLE OF CONTENTS 3.26 USE OF IMPROVEMENT DURING PROGRESS OF CONSTRUCTION GC-18 3.27 ALTERNATIVE METHODS OF CONSTRUCTION GC-18 3.28 EXAMINATION OF WORK GC-18 SECTION 4 - MATERIAL, EQUIPMENT AND WORKMANSHIP GC-19 4.01 QUALITY QC-19 4.02 SAMPLES AND TESTS OF MATERIAL GC-19 4.03 PROOF OF COMPLIANCE WITH CONTRACT GC-20 4.04 SAFEGUARDING OF EQUIPMENT, MATERIAL AND WORK GC-20 4.05 DEFECTIVE MATERIAL, EQUIPMENT AND WORKMANSHIP GC-20 4.06 CHARACTER OF WORKMEN GC-20 4.07 RUBBISH AND DUST CONTROL GC-21 4.08 CLEANING UP GC-21 4.09 GUARANTEE GC-21 SECTION 5 - PROGRESS AND PAYMENT GC-23 5.01 CONTRACT TIME GC-23 5.02 CONTRACT PRICE GC-23 5.03 CONSTRUCTION SCHEDULE GC-23 5.04 OVERTIME WORK GC-23 5.05 EXTENSION OF TIME GC-24 5.06 FAILURE TO COMPLETE ON TIME GC-24 5.07 MONTHLY ESTIMATES AND PAYMENTS GC-24 5.08 UNPAID CLAIMS GC-26 5.09 FULFILLMENT OF CONTRACT GC-26 5.10 FINAL ESTIMATE OF PAYMENT GC-26 5.11 FINAL PAYMENT TERMINATES LIABILITY OF CITY GC-27 5.12 NOTICE OF COMPLETION GC-27 5.13 CHANGES IN THE WORK GC-27 SECTION 6 - LEGAL RESPONSIBILITY, SAFETY, BONDS AND INSURANCE GC-30 6.01 RESPONSIBILITY OF CONTRACTOR GC-30 6.02 LIABILITY OF CONTRACTOR GC-30 6.03 LAWS, REGULATIONS AND PERMITS GC-30 6.04 PATENTS AND COPYRIGHTS GC-31 6.05 PERMITS AND LICENSES GC-31 6.06 SALES AND USE TAXES GC-31 6.07 LABOR DISCRIMINATION GC-31 6.08 WAGE DETERMINATIONS GC-31 6.09 APPRENTICES ON PUBLIC WORKS PROJECTS GC-32 6.10 WORKING HOURS GC-32 6.11 PUBLIC SAFETY AND CONVENIENCE GC-32 6.12 TRENCH EXCAVATION GC-33 6.13 CONCRETE FORMS, FALSE WORK AND SHORING GC-33 TOC- iii TABLE OF CONTENTS 6.14 SANITARY PROVISIONS GC-33 6.15 SAFETY AND HEALTH REGULATIONS GC-33 6.16 LABOR, MATERIAL AND PERFORMANCE BONDS GC-33 6.17 CONTRACTOR NOT RESPONSIBLE FOR DAMAGE RESULTING FROM CERTAIN ACTS OF GOD GC-34 6.18 INSURANCE GC-34 6.19 LIABILITY OF CITY AND ENGINEER GC-37 SPECIAL PROVISIONS SP - 1 7.01 THE REQUIREMENTS SP - 1 7.02 CITY DESIGNATED ENGINEER SP - 1 7.03 BEGINNING AND COMPLETION OF WORK AND WORK HOURS SP 1 7.04 LIQUIDATED DAMAGES SP - 1 7.05 STANDARD SPECIFICATIONS SP - 2 7.06 WATER AND POWER SP - 2 7.07 TRENCH EXCAVATION SP - 2 7.08 PERMITS AND LICENSES SP - 2 7.09 LINES, GRADES AND MEASUREMENTS SP - 3 7.10 GUARANTEE SP - 3 7.11 RESTORATION OF EXISTING FACILITIES SP - 3 7.12 CONTRACT DRAWINGS SP -4 7.13 SHOP DRAWINGS SP - 4 7.14 INSPECTION SP -4 7.15 WATERING SP - 4 7.16 PUBLIC CONVENIENCE, SAFETY AND TRAFFIC CONTROL SP - 4 7.17 CONSTRUCTION INTERFERENCES SP - 6 7.18 SCHEDULING OF WORK SP - 7 7.19 RIGHT-OF-WAY SP - 7 7.20 COORDINATION OF CONSTRUCTION SP - 7 7.21 COMPLIANCE WITH NATIONAL CLEAN WATER ACT SP - 7 7.22 INSURANCE SP - 9 TECHNICAL SPECIFICATIONS TS - 1 EARTHWORK AND GRADING TS - 1 8.01 GENERAL TS - 1 8.02 PRESERVATION OF PROPERTY TS - 1 8.03 CLEARING AND GRUBBING TS - 1 8.04 REMOVAL AND DISPOSAL OF MATERIAL TS - 1 8.05 ROADWAY EXCAVATION TS -2 8.06 EMBANKMENT TS - 2 8.07 SUBGRADE PREPARATION TS -2 8.08 FINISHING SLOPES AND SURFACES TS - 3 8.09 SUBGRADE AND EMBANKMENT PROTECTION TS - 3 8.10 WATERING TS - 3 8.11 PAYMENT TS - 3 TOC- iv TABLE OF CONTENTS AGGREGATE BASE TS -4 9.01 GENERAL TS - 4 9.02 SUBGRADE TS - 4 9.03 UNTREATED BASE MATERIALS TS -4 9.04 PLACING UNTREATED BASE TS -4 9.05 COMPACTING UNTREATED BASE TS - 4 9.06 PAYMENT TS - 4 CONCRETE CURBS, WALKS, GUTTERS, CROSS GUTTERS, ALLEY INTERSECTIONS, ACCESS RAMPS AND DRIVEWAYS TS - 5 10.01 GENERAL TS - 5 10.02 SUBGRADE TS - 5 10.03 MATERIAL TS - 5 10.04 MIXING, PLACING AND CURING TS - 5 10.05 FORMS TS - 5 10.06 JOINTS TS - 6 10.07 FINISHING TS - 6 10.08 CURING TS - 6 10.09 REMOVALS TS - 6 10.10 REPAIRS AND REPLACEMENTS TS - 6 10.11 CURB MACHINES TS - 7 10.12 PAYMENT TS - 7 CONCRETE STRUCTURES TS - 8 11.01 GENERAL TS - 8 11.02 STRUCTURES TS - 8 11.03 REINFORCING TS - 8 11.04 MISCELLANEOUS METAL ITEMS TS - 8 11.05 PAYMENT TS - 8 WATER DISTRIBUTION PIPELINES TS - 9 12.01 GENERAL - PIPING TS - 9 12.02 STEEL PIPE TS - 9 12.03 DUCTILE IRON PIPE TS-12 12.04 SLEEVE-TYPE COUPLINGS AND FLANGE ADAPTERS TS-12 12.05 FLANGE GASKETS AND BOLTS TS-12 12.06 EXCAVATION AND BACKFILL TS-12 12.07 CUTTING AND RESTORING EXISTING PAVEMENT TS-13 12.08 INSTALLATION OF PIPE TS-14 12.09 INSULATING BUSHINGS AND UNIONS TS-15 12.10 SERVICE LATERALS TS-15 12.11 VALVES - GENERAL TS-16 12.12 RESILIENT SEAT GATE VALVES TS-16 12.13 BUTTERFLY VALVES TS-16 12.14 MISCELLANEOUS SMALL VALVES TS-17 TOC- v TABLE OF CONTENTS 12.15 VALVE BOXES TS-17 12.16 CORPORATION STOPS TS-17 12.17 INSTALLATION OF VALVES TS-17 12.18 EPDXY COATINGS TS-18 12.19 SHOP APPLIED EPDXY COATINGS TS-18 12.20 BURIED MISCELLANEOUS FERROUS SURFACES TS-19 12.21 TESTING AND DISINFECTING - GENERAL TS-20 12.22 TESTING PIPELINES TS-20 12.23 DISINFECTING THE PIPELINES TS-20 12.24 COMPACTION TESTS TS-21 12.25 SEPARATION OF WATER MAINS AND SANITARY SEWERS TS-23 12.26 PAYMENT TS-23 MISCELLANEOUS METALWORK TS-24 13.01 GENERAL TS-24 13.02 BOLTS TS-24 13.03 GALVANIZING TS-24 13.04 PAYMENT .TS-23 PAINTING AND PROTECTIVE COATINGS TS-25 14.01 GENERAL TS-25 14.02 FERROUS SURFACES NOT BURIED TS-25 14.03 BURIED MISCELLANEOUS FERROUS SURFACES TS-26 ASPHALT CONCRETE PAVEMENT TS-27 15.01 GENERAL TS-27 15.02 PRIME AND SEAL COATS TS-27 15.03 ASPHALT BINDER TS-27 15.04 WEED KILLER TS-27 15.05 ASPHALT CONCRETE TS-27 15.06 PLACING ASPHALT CONCRETE PAVEMENT TS-28 15.07 ROLLING TS-28 15.08 PAYMENT TS-28 ER 1110-1-1807 DRILLING PROCEDURES TS-29 WATER STANDARD DRAWINGS WS-1 TOC- vi AZUSA LIGHT AND WATER NOTICE INVITING BIDS NOTICE INVITING BIDS-WATER MAIN REPLACEMENT PROJECT NO.W-265 RECEIPT OF PROPOSALS. Notice is hereby given that sealed proposals will be received at the office of City Clerk, City Hall, 213 East Foothill Boulevard, Azusa, California, 91702, until 1:30 PM, on Thursday, June 7, 2012, for the Construction of the WATER MAIN REPLACEMENT PROJECT NO. W-265. DESCRIPTION OF WORK. The work consists of the construction of approximately 1,020 linear feet of 18-inch ductile iron pipe water main; 630 linear feet of 18-inch mortar lined and coated steel pipe water main (1/4-inch wall thickness); one water crossing over San Dimas Wash and one water crossing over Big Dalton Wash; 600 linear feet of 12-inch ductile iron pipe water main; 4,550 linear feet of 8-inch ductile iron pipe water main; all in LA County including valves, fire hydrants, services, connections, abandonments, appurtenances, pavement replacement, traffic control and all supplies, equipment, services and transportation necessary to construct and complete the project entitled: WATER MAIN REPLACEMENT PROJECT NO. W-265 COMPLETION OF WORK. All work shall be completed within 150 calendar days after date set forth in the Notice to Proceed. MANDATORY PRE-BID JOB WALK, There will be a mandatory pre-bid meeting held on Wednesday, May 30, 2012 at 1:30 PM beginning at the first floor conference room of Azusa Light and Water Department, 729 N. Azusa Avenue, Azusa, California. DRAWINGS AND SPECIFICATIONS. Copies of the Drawings and Specifications may be examined without charge at the office of the Azusa Light and Water Department, 729 N. Azusa Avenue, Azusa, CA 91702. Complete sets may be obtained from the front desk at the Light and Water Department at a charge of$75.00 (non-refundable) for each set. An additional charge of$20.00 (non-refundable) will be made for mailing each set. GUARANTEE. Each bid shall be made on the proposal form furnished by the City herewith and shall be in accordance with the Drawings, Specifications and other Contract Documents and shall be accompanied by a certified check, cashier's check or bidders' bond, payable to the City in a sum not less than ten percent (10%) of the amount of the bid, as a guarantee that the bidder will enter into the Contract for the work,the full amount of such guarantee to be forfeited to the City should said bidder fail to enter into said Contract. The successful bidder will be required to furnish a Faithful Performance Bond in the amount of not less than one hundred percent (100%) of the Contract price, and a Labor and Material Bond in an amount of not less than one hundred percent (100%) of the Contract price, said bonds to be secured from a surety company authorized to do business in the State of California, and to be subject to the approval of the City Attorney. PREVAILING WAGE RATES. Bidders are hereby notified that pursuant to Section 1773 et seq. of the Labor Code of the State of California, the City Council of the City of Azusa incorporates herein by reference the general prevailing rate of per diem wages as determined by the Director of Industrial Relations of the State of California. Copies of the prevailing rate of per diem wages are on file in the office of the City Clerk and will be made available to any interested party upon request. In accordance with the Labor Code, no workman employed upon work under contract to the City shall be paid less than the above referenced prevailing wage rate. A copy of said rates shall be posted at each job site during the course of construction. NIP - AZUSA LIGHT AND WATER NOTICE INVITING BIDS Any classification omitted therein shall be paid not less than the prevailing wage scale as established for similar work in the particular area and all overtime shall be paid at the prevailing rates as established for the particular area. Sunday and holiday time shall be paid at the wage rates determined by the Director of Industrial Relations. PAYMENT. Payment will be made to the Contractor in accordance with the Specifications. SUBSTITUTION OF SECURITIES. Contractor may, at his sole cost and expense, substitute securities equivalent to any monies withheld by the City to ensure performance under the Contract. Such securities shall be deposited with the City or with a state or federally chartered bank as escrow agent who shall pay such monies upon satisfactory completion of the contract. The Contractor shall be the beneficial owner of any securities substituted for monies withheld and shall receive any interest thereon. Securities eligible for substitution shall include those listed in Public Contract Code Section 22300. OPENING OF PROPOSALS. The proposals will be publicly opened and read at the time and date stated above, in the office of the City Clerk of the Azusa City Hall, and the results will thereafter be referred to the City Council Utility Board for consideration at their next regular meeting. CITY'S RIGHTS RESERVED. The City reserves the right to reject any or all bids, to waive any informality in a bid, and to make awards in the interest of the City. No bidder may withdraw his bid for a period of 60 days after the bid opening. REQUIREMENT FOR CONTRACTOR'S LICENSING. The City of Azusa requires that all contractors be licensed with the State of California in their particular area of expertise. The City has determined that a Class A or a Class C-34 license is necessary to bid this project. If the bidder is a specialty contractor, the bidder is alerted to the requirements of Business and Professions Code section 7059. Per Section 7028.15(e)of the Business and Professions Code, a licensed contractor shall not submit a bid to a public agency unless his or her contractor's license appears clearly on the bid, the license expiration date is stated and the bid contains a statement that the representations therein are made under penalty of perjury. Any bid not containing this information, or a bid containing information which is subsequently proven false, shall be considered non responsive and shall be rejected by the City of Azusa. All bidders are required to completely fill out the "Contractor's License Declaration" contained in the bid documents. CITY OF AZUSA Dated: Signature on File City Clerk Dates Published: NIB-2 AZUSA LIGHT AND WATER INSTRUCTION TO BIDDERS INSTRUCTION TO BIDDERS - PROPOSAL The proposal shall be made on the forms furnished herewith. The completed Proposal shall be enclosed in a sealed envelope bearing the name of the bidder and name of the project. The proposal shall be delivered by the time and to the place stipulated in the Notice Inviting Bids. It is the bidder's responsibility to see that his proposal is received in proper time. Any proposal received after the scheduled closing time for receipt of proposals will be returned to the bidder unopened. The proposal may be withdrawn by the bidder by means of a written request, signed by the bidder or his properly authorized representative. Such written request must be delivered to the place stipulated in the Notice Inviting Bids for receipt of proposals prior to the scheduled closing time for receipt of proposals. The proposals will be publicly opened and read at the time and place stipulated in the Notice Inviting Bids. Unauthorized conditions, limitations, or provisions attached to a proposal will render it informal and may cause its rejection. The completed proposal forms shall be without interlineations, alterations, or erasures. Oral, telegraphic, fax or telephonic proposals or modifications will not be considered. DISCREPANCIES IN PROPOSALS The bidder shall furnish a price for all bid items in the proposal and failure to do so will render the proposal invalid and will cause its rejection. In the event the total indicated for the schedule does not agree with the sum of the prices bid on the individual items the prices bid on the individual item shall govern and the total for the schedule will be corrected accordingly. PROPOSAL GUARANTEE Each proposal shall be accompanied by a certified or cashier's check or bid bond in the amount of not less than ten (10%) percent of the total amount named in the bidder's proposal. Said check or bond shall be made payable to the City of Azusa and shall be given as a guarantee that the bidder, if awarded the work, will enter into a contract within ten (10) calendar days after date of written notice of award and will furnish satisfactory Faithful Performance Bond and Labor and Material Bond, each of said bonds to be in the amount stated in the Notice Inviting Bids. In case of refusal or failure to enter into said contract, each check or bond, as the case may be, shall be forfeited to the City. If the bidder elects to furnish a Bid Bond as his proposal guarantee, he shall use the Bid Bond form herein, or one conforming substantially to it in form. BIDDER'S EXAMINATION OF SITE Before submitting a proposal, the bidder shall carefully examine the Drawings, Specifications, and other Contract Documents, and shall visit the site of the work. It will be assumed that the bidder is familiar with existing site conditions and that he has a clear understanding of the requirements of the Contract regarding the furnishing of materials and performance of work. It is further assumed that the Bidder agrees that the Contract Documents are sufficient in scope and detail to convey an understanding of the conditions for Contractor performance on the job and for furnishing all work in an acceptable manner. NIB -3 AZUSA LIGHT AND WATER INSTRUCTION TO BIDDERS COMPETENCY OF BIDDERS In selecting the lowest responsible bidder, consideration will be given not only to the financial standing but also to the general competency of the bidder for the performance of the work covered by the proposal. To this end, each proposal shall be supported by a statement of the bidder's experience as to recent date on the form entitled "INFORMATION REQUIRED OF BIDDER" bound herein. No proposal for work will be accepted from a contractor who is not licensed in accordance with applicable state law. DISQUALIFICATION OF BIDDERS More than one proposal form from an individual, firm, partnership, corporation, or association under the same or different names will not be considered. Reasonable grounds for believing that any bidder is interested in more than one proposal for the work contemplated will cause the rejection of all proposals in which such bidder is interested. If there is reason for believing that collusion exists among the bidders, all bids will be rejected and none of the participants in such collusion will be considered for future proposals. RETURN OF PROPOSAL GUARANTEE Within ten (10) days after award of the Contract, the City will return all proposal guarantees, except bonds, to their respective bidder except those accompanying proposals submitted by the three lowest responsible bidders. Those three will be held until the Contract has been finally executed after which they will be returned to the respective bidders whose proposal they accompany. AWARD OF CONTRACT Award of a contract, if it is to be awarded, will be made to the lowest responsible bidder whose proposal complies with all the requirements prescribed. The City reserves the right to reject any or all bids, to waive any informality in a bid, and to make awards in the interest of the City. The award, if made, will be made within 10 days of the date for receipt of proposals. The City reserves the right to eliminate portions of the bid if deemed necessary by the City. EXECUTION OF CONTRACT The bidder to whom award is made shall execute a written contract with the City on the form of agreement provided, and shall secure all insurance and bonds required by the Specifications within ten (10) calendar days after the Notice of Award. Failure or refusal to enter into a contract as herein provided or to conform to any of the stipulated requirements in connection therewith shall be just cause for annulment of the award and the forfeiture of the proposal guarantee. If the successful bidder refuses or fails to execute the Contract, the City may award the Contract to the second lowest responsible bidder. If the second lowest responsible bidder refuses or fails to execute the Contract, the City may award the Contract to the third lowest responsible bidder. On the failure or refusal to such second or third lowest bidders to execute the Contract, such bidders' guarantee likewise shall be forfeited to the City. The work may then be re-advertised for bids. NON-DISCRIMINATION IN EMPLOYMENT Contracts for work under this proposal will obligate the Contractors and Subcontractors not to discriminate against any person on account of race, color, religion, sex or national origin. NIB -4 AZUSA LIGHT AND WATER PROPOSAL PROPOSAL - TO THE CITY COUNCIL PROJECT NO. W-265 CITY OF AZUSA AZUSA, CALIFORNIA The undersigned bidder hereby proposes to furnish all labor, material, equipment, tools and services necessary to perform all work required under the City's Specifications entitled: CONTRACT DOCUMENTS AND SPECIFICATIONS FOR CONSTRUCTION OF THE WATER MAIN REPLACEMENT PROJECT NO.W-265 in accordance with the intent of said Specifications, Drawings and all Addenda issued by said City prior to opening of the proposals. Said bidder agrees that, within 10 calendar days after date of written Notice of Award of the Contract by said City, he will execute a contract in the required form, of which the Notice Inviting Bids, Instructions to Bidders, Proposal, Specifications, Drawings and all Addenda issued by said City prior to the opening of proposals, are part, and will secure the required insurance and bonds; and that upon failure to do so within said time, then the proposal guarantee furnished by said bidder shall be forfeited to said City as liquidated damages for such failure; provided, that if said bidder shall execute the Contract and secure the required insurance and bonds within said time, his check, if furnished shall be returned to him within 5 days thereafter, and the Bid Bond, if furnished, shall become void. Said bidder further agrees to complete all work required under the Contract within the time stipulated in said Specifications, and to accept in full payment therefore the price named in the Bidding Schedule. I am aware of the provisions of Section 3700 of the Labor Code which requires every employer to be insured against liability for Workmen's Compensation or to undertake self-insurance in accordance with such provisions before commencing the performance of the work of this Contract. Dated: Bidder Signature Title P- I AZUSA LIGHT AND WATER PROPOSAL WATER MAIN REPLACEMENT PROJECT NO. W-265 ITEM EST. UNIT DESCRIPTION UNIT TOTAL PRICE NO. QTY. PRICE 1 1 LS Furnish all labor, material and equipment to mobilize, demobilize, and provide cleanup of construction site; provide all bonds, insurances, and obtain all permits, (60% due at mobilization, 40% due at demobilization), complete for the Lump Sum Price of: (Words) $ $ 2 1 LS Furnish all labor, material, and equipment as required to provide public convenience, safety and traffic control, including electronic message boards, warning signs, high level warning devices, delineators, regulatory signs, barricades, and trench plate bridging, complete for the Lump Sum Price of: (Words) $ $ 3 1 LS Furnish all labor, material, and equipment as required to provide SWPPP, BMPs, erosion control, and excavation safety measures including sheeting, shoring, and bracing, or equivalent method for the protection of life and limb in trenches and open excavation in conformance with applicable safety orders, complete for the Lump Sum Price of: $ $ (Words) P-2 AZUSA LIGHT AND WATER PROPOSAL WATER MAIN REPLACEMENT PROJECT NO. W-265 ITEM EST. UNIT DESCRIPTION UNIT TOTAL PRICE NO. QTY. PRICE 4 630 LF Furnish all labor, material and equipment to construct 18-inch ML&C Steel Water Pipe, 1/4- inch wall thickness including: pipe materials, trench excavation, disposal of excess materials, control of ground and surface water, bedding, backfill, compaction, installation of pipe, fittings, couplings, thrust blocks, pipe inverts, connections to existing facilities, removal, abandonment or protection of interfering portions of existing utilities or improvements, temporary and permanent support of utilities, disposal of excess excavation materials, install temporary and permanent asphalt pavement and all other appurtenances & incidentals necessary to install the pipe complete in place for the Unit Price of: (Words) $ $ 5 890 LF Furnish all labor, material and equipment to construct 18-inch Ductile Iron Pipe (Pressure Class 350) including: pipe materials, trench excavation, disposal of excess materials, control of ground and surface water, bedding, backfill, compaction, installation of pipe, polyethylene wrap, fittings, couplings, thrust blocks, pipe inverts, connections to existing facilities, removal, abandonment or protection of interfering portions of existing utilities or improvements, temporary and permanent support of utilities, disposal of excess excavation materials, install temporary and permanent asphalt pavement and all other appurtenances & incidentals necessary to install the pipe complete in place for the Unit Price of: (Words) $ $ P-3 AZUSA LIGHT AND WATER PROPOSAL WATER MAIN REPLACEMENT PROJECT NO. W-265 ITEM EST. UNIT DESCRIPTION UNIT TOTAL PRICE NO. QTY. PRICE 6 400 LF Furnish all labor, material and equipment to construct 12-inch Ductile Iron Pipe (Pressure Class 350) including: pipe materials, trench excavation, disposal of excess materials, control of ground and surface water, bedding, backfill, compaction, installation of pipe, polyethylene wrap, fittings, couplings, thrust blocks, pipe inverts, connections to existing facilities, removal, abandonment or protection of interfering portions of existing utilities or improvements, temporary and permanent support of utilities, disposal of excess excavation materials, install temporary and permanent asphalt pavement and all other appurtenances & incidentals necessary to install the pipe complete in place for the Unit Price of: (Words) $ $ 7 4,250 LF Furnish all labor, material and equipment to construct 8-inch Ductile Iron Pipe (Pressure Class 350) including: pipe materials, trench excavation, disposal of excess materials, control of ground and surface water, bedding, backfill, compaction, installation of pipe, polyethylene wrap, fittings, couplings, thrust blocks, pipe inverts, connections to existing facilities, removal, abandonment or protection of interfering portions of existing utilities or improvements, temporary and permanent support of utilities, disposal of excess excavation materials, install temporary and permanent asphalt pavement and all other appurtenances & incidentals necessary to install the pipe complete in place for the Unit Price of: (Words) $ $ P-4 AZUSA LIGHT AND WATER PROPOSAL WATER MAIN REPLACEMENT PROJECT NO. W-265 ITEM EST. UNIT DESCRIPTION UNIT TOTAL PRICE NO. QTY. PRICE 8 16 EA Furnish all labor, material and equipment to install 6-inch Fire Hydrant Assembly, standard drawing W-11, (JONES MODEL 3700 or Approved Equal) including: valve can, valve cover, materials, valve, trench excavation, control of ground and surface water, bedding, backfill, compaction, installation of pipe, fittings, valves, couplings, thrust blocks, removal, abandonment or protection of interfering portions of existing utilities or improvements, temporary and permanent support of utilities, disposal of excess excavation materials, and all other appurtenances necessary to install the Fire Hydrant Assembly complete in place as shown in the standard drawings for the Unit Price of: $ $ (Words) 9 6 EA Furnish all labor, material and equipment to install 18-inch Butterfly Valves, including: materials, trench excavation, disposal of excess materials, control of ground and surface water, bedding, backfill, compaction, polyethylene wrap, fittings, couplings, anchor blocks, pipe inverts, connections to and all other appurtenances complete in place as shown in the standard drawings for the Unit Price of: $ $ (Words) P- 5 AZUSA LIGHT AND WATER PROPOSAL WATER MAIN REPLACEMENT PROJECT NO.W-265 ITEM EST. UNIT DESCRIPTION UNIT TOTAL PRICE NO. QTY. PRICE 10 2 EA Furnish all labor, material and equipment to install 12-inch Resilient Wedge Gate Valves, including: valve assembly, box, cover identification, valve stem extension, materials, trench excavation, backfill, compaction, polyethylene wrap, fittings, couplings, anchor blocks, pipe inverts, connections to and all other appurtenances complete in place for the Unit Price of: $ $ (Words) 11 20 EA Furnish all labor, material and equipment to install 8-inch Resilient Wedge Gate Valves, including: valve assembly, box, cover identification, valve stem extension, materials, trench excavation, backfill, compaction, polyethylene wrap, fittings, couplings, anchor blocks, pipe inverts, connections to and all other appurtenances complete in place for the Unit Price of: $ $ (Words) P-6 AZUSA LIGHT AND WATER PROPOSAL WATER MAIN REPLACEMENT PROJECT NO. W-265 ITEM EST. UNIT DESCRIPTION UNIT TOTAL PRICE NO. QTY. PRICE 12 130 EA Furnish all labor, material and equipment to install 1-inch Water Service per Standard Drawing W-1, including: materials, potholing, of all existing facilities and utilities in advance of pipe excavation operations, trench excavation, disposal of excess excavation materials, control of ground and surface water, bedding, backfill, compaction, installation of pipe, fittings, valves, couplings, thrust blocks, pipe inverts, connections to existing facilities, removal, abandonment or protection of interfering portions of existing utilities or improvements, temporary and permanent support of utilities, and all other appurtenances necessary to install the Water Service complete in place as shown in the standard drawings for the Unit Price of: $ $ (Words) 13 10 EA Furnish all labor, material and equipment to install 2-inch Blow-off Assembly, including: concrete meter box, shield, materials, trench excavation, disposal of excess materials, control of ground and surface water, bedding, backfill, compaction, installation of pipe, fittings, valves, couplings, protection of interfering portions of existing utilities or improvements, temporary and permanent support of utilities, disposal of excess excavation materials, and all other appurtenances necessary to install the Blow-off Assembly complete in place as shown in the Standard Drawing W-13 for the Unit Price of: $ $ (Words) P-7 AZUSA LIGHT AND WATER PROPOSAL WATER MAIN REPLACEMENT PROJECT NO. W-265 ITEM EST. UNIT DESCRIPTION UNIT TOTAL PRICE NO. QTY. PRICE 14 3 EA Furnish all labor, material and equipment to install 4-inch Blow-off Assembly, including: concrete meter box, shield, materials, trench excavation, disposal of excess materials, control of ground and surface water, bedding, backfill, compaction, installation of pipe, fittings, valves, couplings, protection of interfering portions of existing utilities or improvements, temporary and permanent support of utilities, disposal of excess excavation materials, and all other appurtenances necessary to install the Blow-off Assembly complete in place as shown in the standard drawings for the Unit Price of: $ $ (Words) 15 3 EA Furnish all labor, material and equipment to install 2-inch Combination Air Release-Air Vacuum Valve Assembly, including: trench excavation, disposal of excess materials, control of ground and surface water, bedding, backfill, compaction, installation of pipe, fittings, valves, valve can, concrete, concrete pedestal, shield, couplings, protection of interfering portions of existing utilities or improvements, temporary and permanent support of utilities, disposal of excess excavation materials, and all other appurtenances necessary to install the Combination Air Release-Air-Vacuum Valve Assembly complete in place as shown in the standard drawings for the Unit Price of: $ $ (Words) P-8 AZUSA LIGHT AND WATER PROPOSAL WATER MAIN REPLACEMENT PROJECT NO. W-265 ITEM EST. UNIT DESCRIPTION UNIT TOTAL PRICE NO. QTY. PRICE 16 1 LS Furnish all labor, material and equipment to construct 18-inch ML&C Steel Water Pipe, 1/4- inch wall thickness over the Big Dalton Wash from STA 45+00 to STA 46+50 including: acquiring and complying with all necessary permits, materials, trench excavation, pipe supports, piles, disposal of excess materials, control of ground and surface water, bedding, backfill, compaction, installation of pipe, fittings, couplings, thrust blocks, pipe inverts, connections to existing facilities, removal, abandonment or protection of interfering portions of existing utilities or improvements, temporary and permanent support of utilities, disposal of excess excavation materials, install temporary and permanent asphalt pavement and all other appurtenances and incidentals necessary to install the pipe complete and in place for the Lump Sum Price of: $ $ (Words) P-9 AZUSA LIGHT AND WATER PROPOSAL WATER MAIN REPLACEMENT PROJECT NO. W-265 ITEM EST. UNIT DESCRIPTION UNIT TOTAL PRICE NO. QTY. PRICE 17 1 LS Furnish all labor, material and equipment to construct 18-inch ML&C Steel Water Pipe, 1/4- inch wall thickness over the San Dimas Wash from STA 41+50 to STA 43+00 including: acquiring and complying with all necessary permits, materials, trench excavation, pipe supports, piles, disposal of excess materials, control of ground and surface water, bedding, backfill, compaction, installation of pipe, fittings, couplings, thrust blocks, pipe inverts, connections to existing facilities, removal, abandonment or protection of interfering portions of existing utilities or improvements, temporary and permanent support of utilities, disposal of excess excavation materials, install temporary and permanent asphalt pavement and all other appurtenances and incidentals necessary to install the pipe complete and in place for the Lump Sum Price of: $ $ (Words) P- 10 AZUSA LIGHT AND WATER PROPOSAL WATER MAIN REPLACEMENT PROJECT NO. W-265 ITEM EST. UNIT DESCRIPTION UNIT TOTAL PRICE NO. QTY. PRICE 18 3,055 LF Furnish and install 6-inch asphalt concrete over 12-inch crushed aggregate base per Trench Detail, Los Angeles County, including all required work for the Unit Price of: $ $ (Words) 19 2,000 LF Furnish and install 4-inch asphalt concrete over 8-inch crushed aggregate base per Trench Detail, Los Angeles County, including all required work for the Unit Price of: $ $ (Words) 20 1 LS Furnish all labor, material, and equipment to pressure test and disinfection, flushing and testing complete, for the Lump Sum Price of: $ $ (Words) P- 11 AZUSA LIGHT AND WATER PROPOSAL WATER MAIN REPLACEMENT PROJECT NO. W-265 TOTAL BID ITEMS 1 THRU 20 - W-265 WATER MAIN REPLACEMENT PROJECT CONTINGENCY 10% OF TOTAL BID. (THE BIDDER SHALL PROVIDE A 10% CONTINGENCY TOTAL ON THE BID FOR POTENTIAL $ CHANGE ORDERS ON THE PROJECT. THE CITY RESERVES THE RIGHT TO IMPLEMENT THE USE OF THIS ITEM OR DELETE IT ENTIRELY.) TOTAL BID PLUS CONTINGENCY The City reserves the right to delete any bid item and increase or decrease the estimated quantities that will serve the City's best interest. It is understood that the foregoing quantities are approximate only and are solely for the purpose of facilitating the comparison of bids, and that the Contractor's compensation will be computed upon the basis of the actual quantities in the complete work, whether they be more of less than those shown. Bidder hereby acknowledges receipt of Addenda No.'s COMPANY TELEPHONE # BIDDER'S SIGNATURE P- 12 LIST OF MATERIAL AND EQUIPMENT MANUFACTURERS The undersigned bidder understands and agrees that the City may consider this Bid incomplete unless the Bidder names a manufacturer/supplier for each item of equipment in the following list. The City may at its discretion reject any bid whose list is incomplete or improperly compiled. Not more than one manufacturer/supplier shall be named for each item of equipment. The undersigned Bidder hereby agrees that, after submission of this Bid, a change will not be made in the following listing of manufacturers/suppliers and will not award a contract or agreement of any kind to a manufacturer not listed below for the listed items of equipment unless such change, award, or agreement is first approved in writing by the City according to the provisions of the Contract Documents pertaining to substitutions and equals. The manufacturers/suppliers named below produce the listed items of equipment which comply with the requirements of the Contract Documents, and the undersigned Bidder will furnish and install the complying equipment of the manufacturers/suppliers named in the following list SCHEDULE OF MANUFACTURERS Item Description Manufacturer P- 13 LIST OF SUBCONTRACTORS The Bidder is required to furnish the following information ( in accordance with the provisions of Sections 4100 to 4114, inclusive of the Public Contract Code of the State of California and any amendments thereto) for each Subcontractor performing more than 0.5% of the Total Base Bid. Do not list alternative subcontractors for the same work. Name under Which Address & Telephone Specific Subcontractor License Number of Office, Work Description to be Licensed Number Mill or Shop Performed by Subcontractor P- 14 CONTRACTOR'S EQUIPMENT The undersigned Bidder is licensed in accordance with the laws of the State of California: License Number , Class The following is a list of all major items of construction equipment and vehicles available to the Bidder which the Bidder believes to be necessary or essential to the completion of the project: Date/Year Item Lease/Owned of Manufacturers Condition Bidder's Initials P- 15 BID BOND FORM SEE ATTACHED KNOW ALL MEN BY THESE PRESENTS, That as Principal, and as Surety, are held and firmly bound unto the City of Azusa hereinafter called "City" in the sum of: dollars, (not less than 10 percent of the total amount of the bid) for the payment of which sum, well and truly to be made, we bind ourselves our heirs, executors, administrators, successors, and assigns,jointly and severally, firmly by these presents. WHEREAS, said Principal has submitted a bid to said City to perform all work required under the City's Specifications entitled: CONTRACT DOCUMENTS AND SPECIFICATIONS FOR CONSTRUCTION OF THE WATER MAIN REPLACEMENT PROJECT NO. W-265 NOW THEREFORE, if said Principal is awarded a contract by said City, and, within the time and in the manner required under the heading "Instructions to Bidders" bound with said Specifications, enters into a written contract on the form of Agreement bound with said Specifications and furnished the required insurance and required bonds, one to guarantee faithful performance and the other to guarantee payment of labor and materials, then this obligation shall be null and void, otherwise it shall remain in full force and effect. In the event suit is brought upon this bond by said City and judgment is recovered, said Surety shall pay all costs incurred by said City in such suit, including a reasonable attorney's fee to be fixed by the court. Principal Surety By By Its Its_ By By Its Its Surety signatures on this bond must be acknowledged before notary publics, and a legally sufficient power of attorney must be attached to the bond to verify the authority of any party signing on behalf of a surety. Bidder's Initials P- 16 The bidder is required to supply the following information. Additional sheets may be attached if necessary. If requested by the City, the bidder shall furnish a notarized financial statement, references, and other information, sufficiently comprehensive to permit an appraisal of his current financial condition. 1. Address 2. Telephone 3. Type of Firm: Individual () Partnership() Corporation( ) 4. Corporation organized under the laws of the State of 5. Contractor's License: State License No. 6. Contractor's License: Expiration Date 7. Names and Titles of all officers of the firm: 8. Number of years of experience in projects of this type 9. Three projects of this type recently completed: Contract Type of Date Name and Telephone Amount Project Completed Number of Owner A. $ B. $ C. $ 10. Person who inspected site of work for your firm: Date Inspected Bidder's Initials P- 17 CONTRACTOR'S LICENSE DECLARATION (Business and Professions Code Section 7028.15) The undersigned declares that he or she is (Title) of (Bidder), (Company Name) 1. Contractor's License Number: State 2. Contractor's License Classification: 3. Expiration date of Contractor's License: _ 4. Bidder acknowledges that Section 7028.15(e) of the Business and Professions Code provides as follows: "A licensed contractor shall not submit a bid to a public agency unless his or her contractor's license appears clearly on the bid, the license expiration date is stated and the bid contains a statement that the representations therein are made under penalty of perjury. Any bid not containing this information, or a bid containing information which is subsequently proven false, shall be considered nonresponsive and shall be rejected by the public agency." The undersigned declares under penalty of perjury that the forgoing is true and correct. Executed on ,2012, at . (insert city and state where signed) Name of Company Typed Name Signature Title Bidder's Initials P- 18 NON-COLLUSION AFFIDAVIT STATE OF CALIFORNIA ) )SS COUNTY OF ) , being first duly sworn, [NAME] deposes and says that he/she is of [SOLE OWNER, A PARTNER, PRESIDENT, SECRETARY, ETC.] , the party submitting a bid for a [IDENTITY OF CONTRACTOR] contract covering [DESCRIBE NATURE OF CONTRACT] that such bid is not made in the interest of or on behalf of any undisclosed person, partnership, company association, organization, or corporation; that such bid is genuine and not collusive or sham; that said bidder has not directly or indirectly induced or solicited any other bidder to put in a false or sham bid, and has not directly or indirectly colluded, conspired, connived, or agreed with any bidder or anyone else to put in a sham bid, not that anyone shall refrain from bidding; that said bidder has not in any manner, directly or indirectly, sought by agreement, communications or conference with anyone to fix the bid price of said bidder or any other bidder, nor to fix any overhead, profit, or cost element of such bid price, nor of that of any other bidder, nor to secure any advantage against the public body awarding the contract or anyone interested in the proposed contract; that all statements contained in such bid are true; and, further, that said bidder has not, directly or indirectly, submitted his or her bid price or any breakdown thereof, nor the contents thereof, nor divulged information or date relative thereto, nor paid and will not pay any fee in connection therewith to any corporation, partnership, company, association, organization, bid depository, nor to any member or agent thereof, nor to any other individual except to such person or persons as have a partnership or other financial interest with said bidder in his or her general business. Dated: Signed: [TITLE] Subscribed and sworn to before me this day of , 2012. SEAL Notary Public Bidder=s Initials P- 19 CITY OF AZUSA AGREEMENT THIS AGREEMENT, made and entered into as of this day of 2012 ,by and between the CITY OF AZUSA, hereinafter called "City" and hereinafter called "Contractor". WITNESSETH: That the parties hereto do mutually agree as follows: ARTICLE I: For and in consideration of the payments and agreement hereinafter mentioned to be made and performed by said City, said Contractor agrees with said City to perform and complete in a workmanlike manner all work required under the City's Specifications entitled: CONTRACT DOCUMENTS AND SPECIFICATIONS FOR CONSTRUCTION OF THE WATER MAIN REPLACEMENT PROJECT NO. W-265 in accordance with the Specifications and Drawings thereof, to furnish at his own expense all labor, materials, equipment, tools, supplies, transportation, utilities, bonds and insurance, permits and services necessary therefore, except such materials, equipment, and services as may be stipulated in said Specifications to be furnished by said City, and to do everything required by this Agreement and the said Specifications and Drawings. ARTICLE II. For furnishing all said labor, materials, equipment, tools, and services, furnishing and removing all plant, temporary structures, tools, and equipment, and doing everything required by this Agreement and the said Specifications and Drawings; also for all loss and damage arising out of the nature of the work aforesaid, or from the action of the elements, or from any seen unforeseen difficulties which may arise during the prosecution of the work until its acceptance by said City, and for all risks of every description connected with the work; also for all expenses resulting from the suspension or discontinuance of work, except as in the said Specifications are expressly stipulated to be borne by said City; and for completing the work in accordance with the requirements of said Specifications and Drawings as directed by the Engineer, said City will pay and said Contractor shall receive, in full compensation therefore, the price(s) named in the Proposal. ARTICLE III. The City hereby employs said Contractor to perform the work according to the terms of this Agreement for price(s) named in the Proposal, and agrees to pay the same at the time, in the manner, and upon the conditions as stipulated in the said Specifications; and the said parties for themselves, their heirs, executors, administrators, successors, and assigns, do hereby agree to the full performance of the covenants contained. A- 1 - t ARTICLE IV. The Notice Inviting Bids, Instruction to Bidders, Proposal, Information Required of Bidder, the Faithful Performance Bond, the Labor and Material Bond, the General Conditions, Special Provisions and Technical Specifications, Drawings, and all Addenda issued by the City with respect to the foregoing prior to the opening of bids, are hereby incorporated in and made part of this Agreement. ARTICLE V. All time limits stated in the Contract Documents are of the essence of this Agreement. No work, services, materials or equipment shall be performed or furnished under this Agreement unless and until a Notice to Proceed has been given to the Contractor by the City. City shall, with no liability to Contractor whatsoever, have an absolute right to withhold delivery of a Notice to Proceed until the expiration of statute of limitations for challenging the City's environmental review of this project. City shall, also with no liability whatsoever to Contractor, have an absolute right to cancel this Agreement in the event that litigation is filed against the City challenging the City's environmental review process. Notwithstanding the foregoing, the City's said right to cancellation must be exercised not later than 45 days following the bid opening date, and before delivery of a Notice to Proceed to Contractor. IN WITNESS WHEREOF, the parties hereto have caused this Contract to be executed as of the day and year first above written. CITY OF AZUSA (Seal) By Title MAYOR ATTEST: Signature CITY CLERK CONTRACTOR. (Seal) By: Title: CONTRACTOR'S SIGNATURES MUST BE NOTARIZED AND THE NOTARY ACKNOWLEDGMENT MUST SPECIFY THAT THE SIGNER OF THE AGREEMENT IS AUTHORIZED TO EXECUTE THE AGREEMENT. THE CITY'S ATTORNEY SHALL DETERMINE THE SUFFICIENCY OF CONTRACTOR'S SIGNATURES, AND MAY REQUIRE NOTARIZED SIGNATURES FROM TWO OFFICERS IN THE EVENT THAT CONTRACTOR IS A CORPORATION. A-2- FAITHFUL PERFORMANCE BOND KNOW ALL MEN BY THESE PRESENTS, That as Contractor, and as Surety, are held and firmly bound unto the City of Azusa, hereinafter called "City" in the sum of: and no/100 ($ dollars, lawful money of the United States, said sum being not less than 100 percent of the total Contract amount, for the payment of which sum, well and truly to be made, we bind ourselves, our heirs, executors, and administrators, successors, and assigns, jointly and severally, firmly by these presents. WHEREAS, said Contractor has been awarded and is about to enter into the annexed agreement with said City to perform all work required under the City's Specifications entitled: CONTRACT DOCUMENTS AND SPECIFICATIONS FOR THE CONSTRUCTION OF THE WATER MAIN REPLACEMENT PROJECT NO. W-265 NOW, THEREFORE, if said Contractor shall perform all the requirements of said agreement required to be performed on his part, at the times and in the manner specified herein and shall indemnify and save harmless the said City, its officers, employees and agents, as therein stipulated, then this obligation shall be null and void, otherwise it shall remain in full force and effect. PROVIDED,that any alterations in the work to be done or the materials to be furnished, which may be made pursuant to the terms of said Contract, shall not in any way release said Contractor or said Surety thereunder, nor shall any extensions of time granted under the provisions of said Contract release either said Contractor or said Surety, and notice of such alterations or extensions of the Contract is hereby waived by said Surety. In the event suit is brought upon this Bond by said City and judgment is recovered, (or settlement made which is favorable to City), said Surety shall pay all costs incurred by said City in such suit, including a reasonable attorney's fee to be fixed by the court. SIGNED AND SEALED, this day of CONTRACTOR SURETY By By Its Its By By Its Its Surety's Phone Address A-3 - ALL SIGNATURES ON THIS BOND MUST BE ACKNOWLEDGED BEFORE NOTARY PUBLICS,AND A LEGALLY SUFFICIENT POWER OF ATTORNEY MUST BE ATTACHED TO THE BOND TO VERIFY THE AUTHORITY OF ANY PARTY SIGNING ON BEHALF OF A SURETY. LABOR AND MATERIAL BOND KNOW ALL MEN BY THESE PRESENTS, That as Contractor,and as Surety, are held and firmly bound unto the City of Azusa, hereinafter called "City" in the sum of: and no/100 ($ dollars, lawful money of the United States, said sum being not less than 100 percent of the total Agreement/Contract amount, for the payment of which sum, well and truly to be made, we bind ourselves, our heirs, executors, administrators, successors, and assigns, jointly and severally, firmly by these presents. WHEREAS, said Contractor has been awarded and is about to enter into the annexed contract with said City to perform all work required under the City's Specifications entitled: CONTRACT DOCUMENTS AND SPECIFICATIONS FOR THE CONSTRUCTION OF THE WATER MAIN REPLACEMENT PROJECT NO. W-265 THE CONDITION OF THE OBLIGATION IS SUCH THAT, if said Contractor or any of his Sub-contractors, fails to pay for any materials, equipment, or other supplies, or for rental of same used in connection with the performance of work contracted to be done or for work or labor thereon of any kind, or fails to pay any of the persons named in Section 3181, California Civil Code or amounts due under the Unemployment Insurance Code with respect to work or labor performed by any such claimant or for any amounts required to be deducted, withheld and paid to the Employment Developmental Department or its successor(s) from the work of employees of the Contractor and his Sub-contractors pursuant to Section 13020 of the Unemployment Insurance Code with respect to such work and labor and all other applicable laws of the State of California and rules and regulations of its agencies, then said Surety will pay for the same in an amount not exceeding the sum specified above. This bond shall inure to the benefit of any persons named in Section 3181 of said California Civil Code, so as to give a right of action to them or their assigns in any suit brought upon this bond. This bond shall be subject to and include all of the consistent provisions of the Civil Code of the State of California relating to Payment Bonds for Public Works, including but not limited to Civil Code, Sections 3225-3226 and Section 3247-3252. A-4- LABOR AND MATERIAL BOND PROVIDED, that any alterations in the work to be done or the materials to be furnished, which may be made pursuant to the terms of said Contract, shall not in any way release either said Contractor or said Surety thereunder, nor shall any extensions of time granted under the provisions of said Contract release either said Contractor or said Surety, and notice of such alterations or extensions of the Contract is hereby waived by said Surety. In the event suit is brought upon this bond by said City and judgment is recovered, (or settlement made which if favorable to City), said Surety shall pay all costs incurred by said City in such suit, including a reasonable attorney's fee to be fixed by the court. SIGNED AND SEALED, this day of Principal Surety By By Its Its By By Its Its Surety's Phone: Address: ALL SIGNATURES ON THIS BOND MUST BE ACKNOWLEDGED BEFORE NOTARY PUBLICS, AND A LEGALLY SUFFICIENT POWER OF ATTORNEY MUST BE ATTACHED TO THE BOND TO VERIFY THE AUTHORITY OF ANY PARTY SIGNING ON BEHALF OF A SURETY. A5 ESCROW AGREEMENT FOR SECURITY DEPOSITS IN LIEU OF RETENTION This Escrow Agreement is made and entered into this day of , 2012, by and between the CITY OF AZUSA, whose address is 729 N. Azusa Avenue, Azusa, California, 91702 (hereinafter called "City"); ., whose address is , (hereinafter called "Contractor"); and , whose address is , (hereinafter called "Escrow Agent"). For the consideration hereinafter set forth, the City, Contractor and Escrow Agent agree as follows: 1. Pursuant to Section 22300 of the Public Contract Code of the State of California, the Contractor has the option to deposit securities with the Escrow Agent as a substitute for retention earnings required to be withheld by the City pursuant to the Contract Agreement entered into between the City and Contractor for the construction of , in the amount of$ dated (hereinafter referred to as the "Contract"). Alternatively, on written request of the Contractor, the City shall make payments of the retention earnings directly to the Escrow Agent. When the Contractor deposits the securities as a substitute for Contract earnings, the Escrow Agent shall notify the City within ten (10) days of the deposit. The market value of the securities at the time of the substitution shall be at least equal to the cash amount then required to be withheld as retention under the terms of the Contract between the City and Contractor. Securities shall be held in the name of the City of Azusa, and shall designate the Contractor as the Beneficial Owner. 2. The City shall make progress payments to the Contractor for those funds which otherwise would be withheld from progress payments pursuant to the Contract provisions, provided that the Escrow Agent holds securities in the form and amount specified above. 3. When the City makes payment of retentions earned directly to the Escrow Agent, the Escrow Agent shall hold them for the benefit of the Contractor until such time as the escrow created under this Contract is terminated. The Contractor may direct the investment of the payments into securities. All terms and conditions of this Agreement and the rights and responsibilities of the parties shall be equally applicable and binding when the City pays the Escrow Agent directly. 4. The Contractor shall be responsible for paying all fees for the expenses incurred by the Escrow Agent in administering the escrow account. These expenses and payment terms shall be determined by the Contractor and Escrow Agent. A6 ESCROW AGREEMENT FOR SECURITY DEPOSITS IN LIEU OF RETENTION 5. The interest earned on the securities or the money market accounts held in escrow and all interest earned on that interest shall be for the sole account of Contractor and shall be subject to withdrawal by the Contractor at any time and from time to time without notice to the City. 6. The Contractor shall have the right to withdraw all or any part of the principal in the Escrow Account by written authorization from the City to the Escrow Agent that the City consents to the withdrawal of the amount sought to be withdrawn by the Contractor. 7. The City shall have a right to draw upon the securities in the event of default by the Contractor. Upon seven (7) days written notice to the Escrow Agent from the City of the default, the Escrow Agent shall immediately convert the securities to cash and shall distribute the cash as instructed by the City. 8. Upon receipt of written notification from the City certifying that the Contract is final and complete, and that the Contractor has complied with all requirements and procedures applicable to the Contract, the Escrow Agent shall release to the Contractor all securities and interest on deposit less escrow fees and charges of the Escrow Account. The escrow shall be closed immediately upon disbursement of all moneys and securities on deposit and payments of fees and charges. 9. The Escrow Agent shall rely upon the written notification from the City and the Contractor pursuant to Sections (1) to (8), inclusive, of this Agreement and the City and Contractor shall hold the Escrow Agent harmless from the Escrow Agent's release, conversion, and disbursement of the securities and interest as set forth above. 10. The names of the persons who are authorized to give written notice or to receive written notice on behalf of the City and on behalf of the Contractor in connection with the foregoing, and exemplars of their respective signatures are as follows: A7 ESCROW AGREEMENT FOR SECURITY DEPOSITS IN LIEU OF RETENTION On behalf of the City: On behalf of Contractor: City Manager . Title Name Signature Signature 729 N. Azusa Avenue Azusa, CA 91702 Address On behalf of Escrow Agent: Title Name Signature Address At the time the Escrow Account is opened, the City and the Contractor shall deliver to the Escrow Agent a fully executed counterpart of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement by their proper officers on the date first set forth above. City: Contractor: City Manager Title Signature Signature A8 THE CITY OF AZUSA GENERAL CONDITIONS SECTION 1 - DEFINITIONS AND ABBREVIATIONS 1.01 DEFINITIONS Wherever the words defined in this Section, or pronouns used in their stead, occur in these Specifications or in any of the other Contract Documents, the intent and meaning shall be as follows: (a) CITY. The City of Azusa, County of Los Angeles, State of California. (b) CITY COUNCIL. The duly elected Council of the City of Azusa. (c) CITY ENGINEER and ENGINEER. The City Engineer of the City of local jurisdiction, or an authorized deputy, agent, representative or inspector. The designated Engineer for Azusa Light &Water for this Contract is listed in the Special Provisions. (d) CONTRACTOR. Contractor shall mean the party entering into contract with the City for performance of the work called for in these Specifications and shown on the Drawings, including the Contractor's authorized agents. (e) SUBCONTRACTOR. Subcontractor shall mean any person, firm, or corporation entering into agreement with the Contractor for performance of any part of the Contractor's obligation under the Contract. (f) CONTRACT. Contract shall mean the Contract Documents and shall include the written agreement entered into by the City and the Contractor for the performance of work described in the Specifications and shown on the Drawings, together with the Notice Inviting Bids, the Instructions To Bidders, the Proposal, the Information Required of Bidders, the Specifications, the Drawings, all Addenda issued by the City with respect to the foregoing prior to the opening of bids, and all Change Orders issued by the City and signed by the Contractor pertaining to the Contract after the Contract is awarded. (g) SPECIFICATIONS. Specifications shall mean the General Conditions, the Special Provisions and the Technical Specifications of the Contract, together with all Addenda and Change Orders issued with respect thereto. All worked performed shall be in accordance with the Standard Specifications for Public Works Construction (SSPWC), current edition, except as modified herein. (h) DRAWINGS. Drawings or Contract Drawings shall mean those drawings accompanying the Specifications which show the location, nature, extent and form of the work, together with applicable details. (i) SHOP DRAWINGS. Drawings, diagrams, illustrations, schedules, performance charts, brochures and other data prepared by the Contractor or any Subcontractor, manufacturer, supplier or distributor, which illustrates how specific portions of the work shall be fabricated and/or installed. Shop Drawings are not considered to be part of the Contract Documents. GC - 1 THE CITY OF AZUSA GENERAL CONDITIONS 1.02 ABBREVIATIONS Wherever the following abbreviations are used they shall have the meanings listed: AASHTO American Association of State Highway and Transportation Officials ACI American Concrete Institute AGA American Gas Association Al The Asphalt Institute AIA American Institute of Architects AIEE American Institute of Electrical Engineers AISC American Institute of Steel Construction AISI American Iron and Steel Institute ANSI American National Standards Institute API American Petroleum Institute ASCE American Society of Civil Engineers ASHRAE American Society of Heating, Refrigeration and Air Conditioning Engineers ASME American Society of Mechanical Engineers ASTM American Society of Testing Materials AWPA American Wood Preservers Association AWS American Welding Society AWWA American Water Works Association, Inc. CRSI Concrete Reinforcement Steel Institute NEMA National Electrical Manufacturer's Association NIC Not in Contract NTS Not to Scale OAE Or Approved Equal OSHA Occupational Safety and Health Act PCA Portland Cement Association SSPC Steel Structures Painting Council SSPWC Standard Specifications for Public Works Construction UBC Uniform Building Code UPC Uniform Plumbing Code USACE United States Army Corps of Engineers U/L Underwriters Laboratories, Inc. *** END OF SECTION 1 *** GC - 2 THE CITY OF AZUSA GENERAL CONDITIONS SECTION 2 - SPECIFICATIONS AND DRAWINGS 2.01 INTERPRETATION OF SPECIFICATIONS AND DRAWINGS The Specifications and the Drawings are intended to be explanatory of each other. Any work indicated in the Drawings and not in the Specifications, or vice versa, shall be executed as if indicated in both. As the figured dimensions shown on the Drawings and in the Specifications of the Contract may not in every case agree with scale dimensions, the figured dimensions shall be followed in preference to the scaled dimensions, and drawings to a large scale shall be followed in preference to the Drawings to a small scale. Should it appear that the work to be done or any of the matters relative thereto are not sufficiently detailed or explained in the Contract Documents, the Contractor shall apply to the Engineer for such further explanations as may be necessary, and shall conform thereto as part of the Contract. In the event of any doubt or question arising respecting the meaning of the Specifications or Drawings, reference shall be made to the Engineer and the Engineer's decision therein shall be final. 2.02 CONFLICTS BETWEEN SPECIFICATIONS AND DRAWINGS In case of conflict between the Specifications and the Drawings, the Specifications shall govern over the Drawings. In cases of conflict between the General Conditions and Special Provisions of the Specifications, the Special Provisions shall govern over the General Conditions. 2.03 STANDARD SPECIFICATIONS A reference to the Standard Specifications shall mean "Standard Specifications for Public Works Construction" (SSPWC), the current edition and amendments. All work performed shall conform to the SSPWC. 2.04 SHOP DRAWINGS (a) Wherever called for in these Specifications or on the Drawings, or where required by the Engineer, the Contractor shall furnish to the Engineer for review six (6) prints of each Shop Drawing. The Shop Drawings shall be approved by the Contractor prior to submittal to the Engineer. Unless otherwise required, said drawings shall be submitted at a time sufficiently early to allow review of same by the Engineer, and to accommodate the rate of construction progress required under the Contract. (b) The Contractor shall stamp all six copies of the Shop Drawings stating his approval of the submittal and that the Contractor has determined and verified all field measurements and quantities, field construction criteria, materials, catalog numbers and similar data, and that the Contractor has reviewed and coordinated the information in the Shop Drawings with the requirements of the work and the Contract Documents. Any Shop Drawings submitted without complying with this Section will not be reviewed by the Engineer. GC - 3 THE CITY OF AZUSA GENERAL CONDITIONS (c) Except as may be otherwise provided in the Special Provisions, the Engineer will return two prints of each Shop Drawing to the Contractor, with comments noted thereon, within 15 calendar days following their receipt at the Engineer's office. The Contractor shall make a complete and acceptable submittal to the Engineer by the second submission of drawings. The City reserves the right to withhold moneys due the Contractor to cover additional costs of the Engineer's review beyond the second submittal. (d) If the Shop Drawings are returned to the Contractor marked APPROVED AS SUBMITTED, formal revision and re-submittal of said drawing will not be required. (e) if the Shop Drawings are returned to the Contractor marked APPROVED AS NOTED, formal revision and re-submittal of said drawing will not be required, but the noted correction will be adhered to by the Contractor. (f) If one print of the Shop Drawing is returned to the Contractor marked REVISE AND RESUBMIT the Contractor shall revise said drawing and shall resubmit six (6) copies of said revised drawing to the Engineer. (g) If one print of the Shop Drawing is returned to the Contractor marked NOT APPROVED, Contractor shall resubmit six (6) copies of a material or installation process specified in the Contract Documents and/or acceptable to the Engineer. (h) Fabrication of an item shall not be commenced before the Engineer has reviewed the pertinent Shop Drawings and returned copies to the Contractor marked either APPROVED AS SUBMITTED or APPROVED AS NOTED. Revisions indicated on Shop Drawings shall be considered as changes necessary to meet the requirements of the Contract Drawings and Specifications and shall not be taken as the basis of claims for extra work. The Contractor shall have no claim for damages or extension of time due to any delay resulting from the Contractor's having to make the required revisions to Shop Drawings (unless review by the Engineer of said drawings is delayed beyond a reasonable period of time and unless the Contractor can establish that the Engineer's delay in review actually resulted in a delay in the Contractor's construction schedule). The review of said drawings by the Engineer will be limited to checking for general agreement with the Specifications and Drawings and shall in no way relieve the Contractor of responsibility for errors or omissions contained therein, nor shall such review operate to waive or modify any provision contained in the Specifications or Contract Drawings. Fabricating dimensions, quantities of material, applicable code requirements and other Contract requirements shall be the Contractor's responsibility. 2.05 REFERENCE TO STANDARDS, PUBLICATIONS OR STANDARD SPECIFICATIONS Any reference made in the Specifications or Drawings to any specification, standard, or publication of any organization shall, in the absence of a specific designation to the contrary, be GC - 4 THE CITY OF AZUSA GENERAL CONDITIONS understood to refer to the latest edition of the specification, standard or publication in effect as of the date of advertising the work. 2.06 REFERENCE TO PROPRIETARY PRODUCTS Where references to proprietary products appear in the Specifications or Drawings, whether or not followed by the words "or approved equal", it is for the purpose of establishing an acceptable standard of quality or design. Unless a substitute is expressly prohibited, the Contractor may request approval of a substitute for any such proprietary product. Such approval normally will not be given by the Engineer prior to award of a Contract. A request for substitution must be in writing and must include descriptive literature, specifications, test reports or samples, as appropriate, to enable the Engineer to determine the acceptability of the product proposed for substitution. If substitution is requested as part of a Shop Drawing submittal, the item(s) proposed for substitution shall be clearly indicated. No substitute product shall be used on the work until written approval has been received from the Engineer. Any revisions to structures, piping, mechanical, electrical, instrumentation, or any other work made necessary by such substitution must be approved by the Engineer and the entire cost of these revisions shall be borne by the Contractor. 2.07 SPECIFICATIONS AND DRAWINGS FURNISHED TO CONTRACTOR The City will furnish to the Contractor five sets of Specifications together with Drawings. Additional quantities of Specifications and Drawings will be furnished at reproduction cost. 2.08 AS-BUILT DRAWINGS The Contractor shall maintain, on the job site, a set of full-size blueline or blackline prints of the Contract Drawings. On these the Contractor shall mark all as-built conditions, locations, configurations, and other details which may vary from the details represented on the original drawings. This master record of as-built conditions, including all revisions made necessary by addenda, change orders and field conditions shall be maintained up-to-date during the progress of the work. In the case of those drawings which depict the detailed requirement for equipment to be assembled and wired in the factory, such as motor control centers and instrumentation, the as- built drawings shall be updated by indicating those portions which are superseded by final Shop Drawings, and by including a reference note describing the Shop Drawings by manufacturer, drawing and revision number and date. Upon completion of the work but prior to final acceptance, the as- built drawings maintained by the Contractor shall be delivered to the City or Engineer. *** END OF SECTION 2 *** GC - 5 THE CITY OF AZUSA GENERAL CONDITIONS SECTION 3 - CITY-ENGINEER-CONTRACTOR RELATIONS 3.01 AUTHORITY OF CITY (a) The work and the manner of performing the same shall be done to the satisfaction and approval of the City. (b) The Contract Documents do not purport to control the method of performing the work but only the requirements as to the nature of the completed work. The Contractor shall assume the entire responsibility for methods of performing the work. 3.02 AUTHORITY OF THE ENGINEER (a) The Engineer is the agent of the City and is employed to act as advisor and consultant to the City in engineering matters relating to the Contract. The City has delegated its authority under this Contract to the Engineer to determine the amount, quality, acceptability and fitness of the several kinds of work, material and equipment which are to be paid for under the Contract; to decide for the City all questions relative to the construction, meaning and intent of the Contract Documents; to decide all questions relative to the classification, measurements of quantities, materials and the fulfillment of this Contract, and to reject or condemn all work or material which does not conform t6 the terms of this Contract to recommend, for consideration and action of the City, progress payments and change orders. The Engineer's decision in all matters is the decision of the City and can only be changed in writing by the City Manager of the City. (b) It is expressly agreed and understood that the Engineer will have no liability whatsoever resulting from the obligations entered into under the Contract; that the City must look solely to the Contractor for the furnishing of the work; that the Contractor and City must look solely to each other for the enforcement of any claims or liabilities arising under or by reason of the Contract. If the Contractor files any suit arising under the Contract and names the Engineer as a party and if no recovery is had against the Engineer, then the Engineer shall recover damages from the Contractor for reasonable attorney's fees for time spent by the attorney for the Engineer in the defense of the suit and the Engineer shall recover from the Contractor and be paid by the Contractor at the rate of$1,000.00 per day for the time of the Engineer required in connection with the preparation and defense of the suit. This provision is specifically intended as a Contract between the Contractor and the City for the benefit of the Engineer. 3.03 INSPECTION AND TESTING (a) All materials furnished and all work performed under the Contract shall be subject to inspection by the Engineer. Such inspection may include mill, plant, shop or field inspection as required. The Engineer shall be permitted access to all parts of the work, including plants where material or equipment are manufactured or fabricated, and the Engineer shall be furnished with GC - 6 THE CITY OF AZUSA GENERAL CONDITIONS such materials, information and assistance by the Contractor and Subcontractors and suppliers as is required to make a complete and detailed inspection. (b) Work done in the absence of prescribed inspection may be required to be removed and replaced under proper inspection, and the entire cost of removal and replacement, including the cost of all materials which may be furnished by the City and used in the work thus removed, shall be borne by the Contractor, regardless of whether the work removed is found to be defective or not. Work shall not be covered up without the authority of the Engineer. If so covered without authority, the work, upon order of the Engineer, shall be uncovered to the extent required, and the Contractor similarly shall bear the entire cost of performing all the work and furnishing all the material necessary for the removal of the covering and its subsequent replacement, as directed and approved by the Engineer. (c) Except as otherwise provided herein, cost for ordinary City inspection fees will be paid by the City. All inspection fees and costs imposed by agencies other than the City and extraordinary inspection by the City shall be paid by the Contractor. (d) The Engineer will make, or have made, such tests as he deems necessary to insure that the work is being accomplished in accordance with the requirements of the Contract. Unless otherwise specified in the Special Provisions, the cost of such testing will be borne by the City. In the event such tests reveal non-compliance with the requirements of the Contract, the Contractor shall bear the cost of such corrective measures deemed necessary by the Engineer, as well as the cost of subsequent re-testing. (e) The City will provide inspection for an 8-hour day and 40-hour work week for Monday through Friday. Overtime inspection shall be paid for by Contractor. No work shall be performed on weekends unless approved in writing by the City. Any shutdown of any portion of the City's water system will take place on Monday, Tuesday, Wednesday, or Thursday only; other times by agreement between the Contractor and City. The Contractor shall reimburse the City at rates established by the City for inspection in excess of the foregoing including legal holidays. 3.04 CHANGE ORDERS (a) The City, or its duly authorized representative, may order changes in the work through additions, deletions or modifications. Such changes will be effected through written change orders delivered to the Contractor describing the change required in the work, together with any adjustment in Contract price or time in completion as hereinafter provided. No such change shall constitute the basis of claims for damage or anticipated profits; however, the Engineer will make reasonable allowance for the value of any work, materials or equipment furnished and subsequently rendered useless because of such changes. Any adjustment in Contract price resulting from a change order will be considered in computing subsequent monthly payments due the Contractor. Any work performed in accordance with a change order shall be subject to GC - 7 THE CITY OF AZUSA GENERAL CONDITIONS all provisions of the original Contract, and the Contractor's sureties shall be bound thereby to the same degree as under the original Contract. Change order requests by the Contractor shall be made to the City in writing in a timely manner. Unless specified otherwise herein, Contractor change order request shall be submitted within 5 calendar days of the occurrence of the precipitating Contractor action. Until the Change Order requested is approved by the City in writing, Contractor proceeds at his own risk. (b) Any adjustment in Contract price shall be based on unit price bid items or additive and deductive bid items submitted by the Contractor in the original bid on the work where such bid items are applicable. (c) If the original bid prices are not applicable, the adjustment in Contract price shall be based on a lump sum or unit price agreed upon by the City and the Contractor prior to executing the change order. (d) If the original bid prices are not applicable and the City and Contractor are unable to agree upon a lump sum or unit price prior to executing the change order, the adjustment in Contract price shall be made on a cost-plus basis. In such an event, the following items will be included as the direct costs: • Materials and supplies • Labor (including foremen's wages) • Workmen's compensation insurance • Unemployment insurance contributions paid to the State • Social Security taxes paid to the Federal Government • Labor union health and welfare, pension, vacation-holiday and apprenticeship fund contribution • Value for use of equipment for actual time of use according to Cal-trans "Labor Surcharge and Equipment Rental Rates" for the current year In addition to the direct costs enumerated above, the City will pay to the Contractor for said extra work a percentage of said direct costs to compensate for the following profit and overhead items: • Profit • General expenses • All insurance except workmen's compensation insurance • Excise taxes • Property taxes • License and inspection fees • Bond premiums • All other items of expense not specifically enumerated above GC - 8 THE CITY OF AZUSA GENERAL CONDITIONS Said percentage will be 15 percent of said direct costs provided the Contractor actually performs said extra work. In the event said extra work is performed by a Subcontractor, the percentage paid to the Contractor will be 20 percent of said Subcontractor's direct costs. Said 20 percent will include allowance for profit and overhead costs for both the Contractor and Subcontractor. In the event said extra work is performed through more than one Subcontractor in succession, said percentage will not exceed 25 percent. (e) When work is being performed on a cost-plus basis, the Contractor shall submit written reports as directed by the Engineer, showing all items of direct cost which enter into the work. If required by the Engineer, the Contractor shall furnish books, time sheets, vouchers, invoices and other records to substantiate the direct cost items listed in said reports. 3.05 CONTRACTOR'S PLANT AND EQUIPMENT The Contractor shall at all times be responsible for the adequacy, efficiency and sufficiency of the Contractor's plant and equipment and any Subcontractor's plant and equipment. 3.06 ASSIGNMENT OF CONTRACT (a) The Contractor shall not assign, sublet, sell, transfer or otherwise dispose of the Contract or any portion thereof, or his right, title or interest therein, or his obligations thereunder, without the prior written consent of the City. The City shall have no obligation whatsoever to provide such written consent. (b) If the Contractor violates the provisions of this section, the Contract may be terminated at the option of the City and the City shall be relieved of all liability and obligations to the Contractor, and to his assignee or transferee, growing out of such termination. 3.07 SUBCONTRACTS (a) All proposed Subcontractor's shall be listed by the Contractor at the time of bid opening and shall be contained in the Information Required of Bidders. The Contractor may request a replacement of a previously approved Subcontractor only through the specific procedures contained in Public Contract Code, Section 4107. Any such request is subject to approval by the City. (b) The Contractor shall perform not less than 50 percent of the work with his own forces (i.e., without subcontracting). This requirement shall be understood to refer to work, the value of which totals not less than 50 percent of the Contract price. Refer to Section 2-3 of the SSPWC for clarification. (c) In the City's discretion, subject to the requirements of Section 3.07(a), subcontracts may be permitted to such extent as shall be shown to be necessary or advantageous to the Contractor in the prosecution of the work and without injury to the City's interests. The re-subletting of work GC - 9 THE CITY OF AZUSA GENERAL CONDITIONS Contractor's last known place of business. If mailed it shall be deemed to have been given to and received by the Contractor two days after the day of mailing in any post office in the vicinity of the work. 3.11 DEVIATION FROM CONTRACT The Contractor shall not make any alteration or variation in or addition to or deviation or omission from the Contract without the advance written consent of the City. 3.12 SUSPENSION OF WORK The Engineer acting on behalf of the City may, by written notice to the Contractor, suspend the work, in whole or in part, for such period or periods as he may deem necessary due to unsuitable weather, delay in delivery of City furnished equipment or materials, or such other conditions as are considered unfavorable for prosecution of the work, or failure on the part of the Contractor to carry out the provisions of the Contract or to provide material or workmanship meeting the requirements of the Specifications. Suspended work shall be resumed by the Contractor within a reasonable time, as designated by the Engineer, after receipt from the Engineer of written notice to proceed. Contractor shall not be entitled to receive extra or additional compensation, except as may otherwise be provided for explicitly in the Contract Documents, on account of suspension of work pursuant hereto. 3.13 TERMINATION OF CONTRACT BY CITY (CONTRACTOR NOT AT FAULT) The City may terminate the Contract upon ten calendar days written notice to the Contractor, if it is found that reasons beyond the control of either the City or Contractor make it impossible or against the City's interests to complete the work. In such a case, the Contractor shall have no claims against the City except (1) for the value of work performed up to the date the Contract is terminated, and (2) for the cost of materials and equipment on hand, in transit, or on definite commitment as of the date the Contract is terminated, which would be needed in the work and which meet the requirements of the Specifications. The value of work performed and the cost of materials and equipment delivered to the site, as mentioned above, shall be determined by the Engineer in accordance with the procedure prescribed for the making of the final estimate and payment and shall be paid in accordance with the same procedure. 3.14 TERMINATION OF CONTRACT BY CITY (CONTRACTOR AT FAULT) (a) The City may terminate the Contract upon ten calendar days written notice to the Contractor in the event of any default by the Contractor. Without limitation, it shall be considered a Contract default whenever the Contractor shall: (1) declare bankruptcy, become insolvent or assign assets for the benefit of creditors, (2) disregard or violate important provisions of the Contract Documents or Engineer's instruction or fail to prosecute the work according to the approved progress schedule, or (3) fail to provide a qualified superintendent, competent GC - 11 THE CITY OF AZUSA GENERAL CONDITIONS workmen or Subcontractors, or materials or equipment meeting the requirements of the Specifications and Drawings. (b) In the event the Contract is terminated, the City may take possession of the work and of all materials, which have been provided in connection with the work and may complete the work by whatever method or means is selected. The cost of completing the work shall be deducted from the balance which would have been due the Contractor had the Contract not been terminated and the work completed in accordance with the Specifications and Drawings. If such cost exceeds the balance which would have been due, the Contractor shall pay the excess amount to the City. If such cost is less than the balance which would have been due, the Contractor shall have no claim to the difference except to such extent as may be necessary, in the opinion of the Engineer, to reimburse the Contractor or the Contractor's sureties for any expense properly incurred for materials, tools, equipment, property and labor devoted to the execution of the work, of which the City shall have received the benefit. In computing such expense, as it relates to equipment and property, the salvage value at completion of the work shall be deducted from the depreciated value at the time the Contract was terminated and the difference shall be considered as an expense. 3.15 TERMINATION OF CONTRACT BY CONTRACTOR The Contractor may terminate the Contract upon ten calendar days written notice to the City whenever: (1) the entire work has been suspended in accordance with Section 3.12, for 60 consecutive calendar days through no fault or negligence of the Contractor and notice to resume work or to terminate the Contract has not been received from the City within this time period, or (2) the City shall fail to pay the Contractor any substantial sums due in accordance with the terms of the Contract and within the time limits prescribed. In the event of such termination, the Contractor shall have no claims against the City except for those claims specifically enumerated in Section 3.13 and determined in accordance with that section. 3.16 FAILURE TO COMPLY If the Contractor should refuse or neglect to comply with the provisions of the Contract or the orders of the Engineer, the City may have such provisions or orders carried out by others at the expense of the Contractor. 3.17 PROTESTS If the Contractor considers any work demanded of him to be outside the requirements of the Contract, or if he considers any order or ruling of the Engineer, or of any inspector to be unfair, he shall, immediately upon such work being demanded or such order or ruling being made, ask for written instructions or decision, whereupon he shall proceed without delay to perform the work or to conform to the order or ruling; but unless the Contractor finds such instructions or decisions satisfactory, he shall, within five (5) days after receipt of same, file a written protest with the Engineer, stating clearly and in detail any objections and the reasons therefore. The GC - 12 THE CITY OF AZUSA GENERAL CONDITIONS Engineer shall, as soon as practicable after receipt of such written protest from the Contractor, forward said protest through appropriate channels to the City including any written comments on the issue or issues involved. The decision of the City on all such matters shall be considered final and binding upon all parties concerned. Except for such grounds for protests or objections as are made of record in the manner specified and within the time stated herein, the Contractor hereby waives all grounds for protests or objections to the orders, rulings, instructions or decisions of the Engineer and hereby agrees that, as to all matters not included in such protest, the orders, instructions and decisions of the Engineer shall be final and conclusive. 3.18 RIGHTS-OF-WAY (a) Lands or rights-of-way for the work to be constructed under the Contract will be provided by the City as shown on the Drawings. Nothing contained in the Specifications or Drawings shall be interpreted as giving the Contractor exclusive occupancy of the lands or rights-of-way provided. Any additional lands or rights-of-way required for construction operations shall be provided by the Contractor at the Contractor's own expense. (b) Except as may otherwise be provided, the Contractor shall secure from the agencies having jurisdiction the necessary permits to create obstructions, to make excavations if required under the Contract and to otherwise encroach upon rights-of-way and shall present evidence to the Engineer that such permission has been granted before work is commenced. Regulations and requirements of all agencies concerned shall be strictly adhered to in the performance of this Contract, including the furnishing of insurance and bonds if required by such agencies. The enforcement of such requirements under this Contract shall not be made the basis for claims for additional compensation. (c) The Contractor shall not do any work that would affect any oil, gas, sewer, storm drain, or water pipeline, any telephone, telegraph, or electric transmission line, fence, or any other structure, nor enter upon the rights-of-way involved until notified by the Engineer that the City has secured authority therefore from the proper party. After authority has been obtained, the Contractor shall give said party due notice of any intention to begin work and shall give said party convenient access and every facility for removing, shoring, supporting, or otherwise protecting such pipeline, transmission line, ditch, fence or structure and for replacing same. The Contractor shall not be entitled to any extension of time or extra compensation on account of any postponement, interference, or delay caused by any such pipeline, transmission line, fence or structure being on the line of the work except as provided herein. 3.19 CONSTRUCTION INTERFERENCE (a) As used in this section, the word "utility" shall be understood to include tracks, overhead or underground wires, cables, pipelines, conduits, ducts, sewers or storm drains. The term "service connection" shall be understood to mean all or any portion of a pipeline (including sewer house laterals), conduit, wire, cable or duct, including meter, between a utility distribution line and an individual customer or customers when served by a single service connection. The term GC - 13 THE CITY OF AZUSA GENERAL CONDITIONS "construction interference" shall be understood to include any utility or service connection within the limits of excavation or over excavation required for the work under the Contract as shown, or ordered by the Engineer, or any utility, or service connection located in the space which will be required by any of the work under the Contract. (b) In the event any utility or service connection is required to be disturbed or removed to permit construction of a pipeline or other structure under the Contract, such disturbance or removal shall be done only with the approval of the Engineer and following notification to the owner of the interfering utility or service connection. Any such utility or service connection removed or otherwise disturbed shall be reconstructed as promptly as possible in its original or other authorized location in a condition at least as good as prior to such removal or disturbance, subject to the inspection of the owner of same. The Contractor's responsibility under this section to remove or replace shall apply even in the event such damage or destruction occurs after backfilling or is not discovered until after completion of backfilling. The owner of the utility or service connection shall be notified immediately after damage or destruction occurs or is discovered. (c) During the performance of the work under this Contract, the owner of any utility affected by the work shall have the right to enter when necessary upon any portion of the work for the purpose of maintaining service and to make repairs to said utility. (d) The Drawings show the approximate positions of known utilities in the immediate vicinity of the work but the City does not guarantee that all existing utilities are shown. Service connections normally are not shown on the Drawings. The Contractor, before commencing any excavation, shall ascertain from records or otherwise, the existence, horizontal and vertical position and ownership of all existing utilities and service connections. If the Contractor discovers any utility in the line of the work which is not shown on the Drawings, he shall immediately notify the Engineer of the existence of same. The City will not be liable for any consequences arising as a result of a service connection being incorrectly located in the field by the agency having jurisdiction over said service connection. (e) All costs involved in removing, relocating, protecting, supporting, repairing, maintaining or replacing a main or trunkline utility which actually constitutes a construction interference when said utility is not shown with reasonable accuracy as an interference or is omitted from the Drawings, will be paid for by the City as extra work. In such case, the City also will compensate the Contractor for equipment on the project necessarily idled during and by reason of such work. The City's obligation to repair damage to such a facility and to compensate the Contractor for idled equipment shall not extend to damage resulting from the failure of the Contractor to use reasonable care. (0 All costs involved in removing, relocating, protecting, supporting, repairing, maintaining or replacing any utility or service connection other than those described in Subsection (e) herein shall be borne by the Contractor. GC - 14 THE CITY OF AZUSA GENERAL CONDITIONS (g) The Contractor shall not be assessed liquidated damages for failure to complete the work on time to the extent that such delay was caused by failure of the City or of the agency having jurisdiction over the utility or service connection to authorize or otherwise provide for its removal, relocation, protection, support, repair, maintenance or replacement. (h) The City reserves the right, upon determination of the actual position of existing utilities and service connections, to order changes in alignment or grade of the City's pipelines when, by so doing, the necessity for relocation of existing utilities or service connections will be avoided. Such changes will be ordered in writing by the Engineer. Where applicable, adjustment in the Contract price will be on the basis of the unit prices stated in the proposal. Where unit prices in the proposal are not applicable, adjustment in Contract price will be in accordance with Section 3.04. 3.20 LINES AND GRADES (a) All surveying necessary and adequate for construction purposes will be done by the Engineer or as modified in the Special Provisions. (b) The Contractor shall give two (2) working days notice, in writing, when the surveying services of the Engineer will be required for laying out any portion of the work, and he shall dig all holes necessary for line and grade stakes. The Contractor shall preserve all stakes set for the lines, grades or measurements of the work in their proper places until authorized to remove them by the Engineer. Any expenses incurred in replacing said stakes that the Contractor may have failed to preserve shall be borne by the Contractor. (c) Grades for all work will be set on the surface of the ground and the Contractor shall transfer them to the construction as necessary. At no time shall less than three (3) consecutive grade points be used in common so that any variation from a straight grade can be detected. Any such variation shall be reported to the Engineer and in the absence of such report, the Contractor shall be responsible for any error in the grade of the finished work. (d) The Contractor shall preserve all bench marks, stakes and other survey marks, and in case of their removal or destruction by the Contractor's employees or by a Subcontractor's employees, he shall be liable for the cost of their replacement. 3.21 SUPERVISION AND INSPECTION (a) The Engineer shall decide within the provisions of the Specifications all questions which may arise concerning the quality or acceptance of materials furnished and work performed and all questions concerning the acceptable fulfillment of the Contract by the Contractor. (b) All work shall be done in a thorough and workmanlike manner under the direction and to the satisfaction of the Engineer, and the materials used shall comply with these Specifications. GC - 15 THE CITY OF AZUSA GENERAL CONDITIONS Work shall be started and continued at such time and at such points as may be designated by the Engineer and shall be carried on diligently and without unnecessary delay. (c) Each day the Contractor shall furnish the Engineer a duplicate copy of all delivery and shipment tags or slips for all materials delivered on the work. Tags or slips shall show the actual quantity of material received on the work. No materials shall be used on the work until such tags or slips have been furnished to the Engineer. (d) All tests of materials shall be made under the direction of the Engineer. The costs of tests for materials shall be borne by the Contractor and shall be included in the unit prices for appropriate items of work. At the Contractor's own expense the materials for testing shall be delivered at the time and to the place designated by the Engineer. Should the materials fail, the retesting cost shall be borne by the Contractor. (e) The Contractor shall prosecute work only in the presence of the Engineer or his designated representative, and any work done in the absence of said Engineer or his designated representative shall be subject to rejection for that reason. The Contractor shall give written notice to the Engineer at least 24 hours before beginning any work and shall furnish said Engineer all reasonable facilities for obtaining full information respecting the progress and manner of work. (f) Any day shall be considered as a normal work day except Saturdays, Sundays or legal holidays or days on which the Contractor is specifically required by the Specifications, by labor contract, or by law to suspend construction operations, or is prevented from working at the beginning of the work day for cause defined in Section 6 of the SSPWC or conditions resulting therefrom, or is prevented from preceding with at least 75 percent of the normal labor and equipment force for at least five (5) hours toward completion of the current controlling operation shall be considered as a normal work day. 3.22 OBSERVING LAWS AND ORDINANCES (a) The Contractor shall keep himself fully informed of all Federal, State and local laws, ordinances and regulations which may affect the conduct of the work, those engaged or employed by the Contractor, the materials used, and all orders and decrees of bodies or tribunals having any jurisdiction or authority over the work. The Contractor shall observe and comply therewith, and shall protect and indemnify the City against any claim or liability arising from or based on the violation thereof. (b) The Contractor shall secure and pay for all necessary permits, licenses and make all necessary deposits before starting work. GC - 16 THE CITY OF AZUSA GENERAL CONDITIONS 3.23 COORDINATION WITH COMMUNITY AGENCIES (a) The Contractor shall notify the local Police Department, Fire Department and refuse contractor of any construction causing street closure forty-eight (48) hours prior to start of such closure. (b) The Contractor also shall be responsible for notifying, in writing, affected businesses and residents forty-eight (48) hours prior to start of construction or street closures. 3.24 FIRE HYDRANTS (a) Free access shall be provided to all ALW fire hydrants at all times. The Contractor shall not draw any water from a fire hydrant for use on the work, other than for extinguishing fire, without first obtaining permission, and a hydrant meter, from the City of Azusa. (b) Whenever required by the City of Azusa, the Contractor shall obtain a fire hydrant meter to record water usage. A deposit as established by the City of Azusa shall be paid by Contractor and refunded upon return of said hydrant meter. The water usage fees shall be paid as defined in the Special Provisions. 3.25 LOSS AND DAMAGE (a) All loss or damage to the City or to third persons, occurring during the progress of the work being performed under this Contract, which loss or damage occurs before acceptance of the work by the City and which results from: (1) the negligence of the Contractor, or Contractor's agents or employees, or (2) any act or omission on the part of the Contractor or Contractor's agent or employees which is not authorized by these Specifications shall be sustained and borne by the Contractor. (b) Excavation shall be braced in accordance with CAL OSHA Standards so that they will be safe and the ground alongside the excavations will not slide or settle, and all existing improvements of any kind, either on public or private property, shall be fully protected from damage. If any damage does result, the necessary repairs as directed by the City Engineer, shall be made by and at the expense of the Contractor. (c) Performance under this Contract by the Contractor shall not be excused by any unforeseen obstruction or difficulties which may be encountered, including damage to or destruction of the project under construction by action of the elements or otherwise. GC - 17 THE CITY OF AZUSA GENERAL CONDITIONS 3.26 USE OF IMPROVEMENT WIRING PROGRESS OF CONSTRUCTION At any time during the progress of work, ALW may, upon written notice to the Contractor, take over and utilize the whole or any part of the improvement or appurtenance thereto which has been completed, giving if desired, permits to utilize same. Such uses by ALW shall constitute a limited acceptance of that part of the improvement so taken over and utilized which shall relieve the Contractor and Contractor's sureties from responsibility for any damage to or defect in that part of the improvement not inherent in the construction which may be caused by the use of such part by ALW or by property owners. 3.27 ALTERNATIVE METHODS OF CONSTRUCTION Whenever the Drawings and Specifications provide that more than one specified method of construction or more than one specified type of construction equipment may be used to perform portions of the work and leave the selection of the method of construction or the type of equipment to be used up to the Contractor, it is understood that the City does not guarantee that every such method of construction or type of equipment can be successfully used throughout all or any part of any project. It shall be the Contractor's responsibility to select and use the alternative(s) which will satisfactorily perform the work under the conditions encountered. In the event some of the alternatives are not feasible or it is necessary to use more than one of the alternatives on the project, full compensation for any additional cost involved shall be considered as included in the Contract price paid for the item of work involved and no additional compensation will be allowed therefore. 3.28 EXAMINATION OF WORK (a) Contractor must examine the location, physical conditions and surroundings of the proposed work and judge for themselves the nature of the excavation to be made and the work to be done. (b) The Drawings for the work show conditions as they are supposed or believed to exist by the Engineer, but it is not intended or to be inferred that the conditions as shown thereon constitute a representation or warranty, express or implied,by the City or its officers, that such conditions are actually existent, nor shall the Contractor be relieved of the liability under this Contract, nor the City or any of its officers be liable for any loss sustained by the Contractor as a result of any variance between conditions as shown on the Drawings and the actual conditions revealed during the progress of the work or otherwise. (c) Execution of the Contract shall be conclusive evidence that the Contractor has satisfied himself through his own investigation as to the conditions to be encountered; the character, quality and quantity of work to be performed; materials and equipment to be furnished; and all requirements of the Drawings and Specifications. *** END OF SECTION 3 *** GC - 18 THE CITY OF AZUSA GENERAL CONDITIONS SECTION 4 - MATERIAL, EQUIPMENT AND WORKMANSHIP 4.01 QUALITY (a) Material and equipment shall be new and of the quality specified. All work shall be executed in conformity with the best accepted standard practice of the trade so as to contribute to maximum efficiency of operation, accessibility and appearance, and minimum cost of maintenance and construction of future alterations and additions. (b) Whenever the Contractor shall furnish materials or manufactured articles or shall do work for which no detailed Specifications are set forth, the materials or manufactured articles shall be of the best grade in quality and workmanship obtainable in the market from firms of established good reputation or, if not ordinarily carried in stock, shall conform to the usual standards for first-class materials or articles of the kind required with due consideration of the use to which they are to be put. In general, the work performed shall be in full conformity and harmony with the intent to secure the best standard of construction and equipment of the work as a whole or in part. 4.02 SAMPLES AND TESTS OF MATERIAL (a) Samples of materials to be supplied by the Contractor shall be prepared and submitted for checking, if required by the Specifications or the Engineer. The samples or test specimens shall be prepared and furnished with information as to their source in such quantities and sizes as may be required, with all freight and charges prepaid. (b) All samples shall be submitted before shipment of the material to the site of the work and in ample time to permit the making of proper tests, analyses, examinations, rejections and resubmissions before the time at which it is desired to incorporate the material into the work. All tests of materials furnished by the Contractor will be made by the Engineer in accordance with recognized standard practice. No such materials shall be used in the work unless or until they have been accepted in writing by the Engineer and samples of materials will be retained by the Engineer for reference and comparison purposes. (c) The cost of material inspection and testing in the vicinity of the work unless specified otherwise herein, will be borne by the City. If the inspection and testing of material in the vicinity of the work is not practicable, the Contractor may request such inspection and testing take place at the point of manufacture. In such an event, the additional cost to the City of remote inspection and testing shall be paid for by the Contractor. Such additional costs will consist of reimbursement for travel time and expense to and from the remote point. GC - 19 THE CITY OF AZUSA GENERAL CONDITIONS 4.03 PROOF OF COMPLIANCE WITH CONTRACT In order that the Engineer may determine whether the Contractor has complied with the requirements of the Contract Documents not readily determinable through inspection and tests of plant, equipment, work or materials, the Contractor shall, at any time when requested, submit to the Engineer properly authenticated documents or other satisfactory proof as to compliance with such requirements. 4.04 SAFEGUARDING OF EQUIPMENT, MATERIAL AND WORK The Contractor shall properly safeguard all equipment, material and work against loss, damage, malicious mischief or tampering by unauthorized persons until acceptance of the work by the City. Locked and covered storage or continuous surveillance by a watch- man shall be provided if required to accomplish this purpose. 4.05 DEFECTIVE MATERIAL, EQUIPMENT AND WORKMANSHIP (a) Inspection of the work shall not relieve the Contractor of any of his obligations under the Contract. Even though equipment, material or work required to be provided under the Contract have been inspected, accepted and estimated for payment, the Contractor shall, at the Contractor's own expense, replace or repair any such equipment, material or work found to be defective or otherwise not to comply with the requirements of the Contract up to the end of the maintenance and guarantee period. (b) Any equipment or material brought upon the job site by the Contractor and subsequently rejected by the Engineer as not complying with the requirements of the Contract shall be removed immediately by the Contractor. (c) If the Contractor shall fail to repair or replace unsatisfactory equipment, material or work or to remove unsatisfactory equipment or material from the job site within 10 calendar days after being ordered to do so by the Engineer, the Engineer, acting on behalf of the City, may make the ordered repairs or remove the condemned equipment or material and the City will deduct the cost thereof from any moneys due or to become due the Contractor. 4.06 CHARACTER OF WORKMEN Skilled workmen shall be employed on work requiring special qualifications. When required in writing by the Engineer, the Contractor or any Subcontractor shall discharge any person who is, in the opinion of the Engineer, incompetent, unfaithful, disorderly or otherwise unsatisfactory and shall not again employ such discharged person on the work except with the consent of the Engineer. Such discharge shall not be the basis of any claim for compensation or damages against the City or any of its officers. GC - 20 THE CITY OF AZUSA GENERAL CONDITIONS The Contractor shall provide, at all times, a superintendent on the job site who shall be able to speak, read and write the English language per Section 7-6 of the SSPWC. 4.07 RUBBISH AND DUST CONTROL (a) During the progress of the work, the Contractor shall keep the site of the work and other areas utilized by the Contractor in a neat and clean condition and free from any accumulation of rubbish. (b) The Contractor shall at all times conduct work so as to avoid unnecessary dust. The Contractor shall provide adequate equipment, water and implement procedures to comply with the South Coast Air Quality Management District rules to prevent dust emissions. 4.08 CLEANING UP The Contractor shall promptly remove from the vicinity of the completed work, all rubbish, unused material, concrete forms, equipment and temporary structures used during construction. Additional clean-up work, if provided in the Special Provisions, shall be performed by the Contractor. 4.09 GUARANTEE (a) Besides guarantees required elsewhere in this Contract Document, the Contractor shall and hereby does guarantee all work for a period of one (1) year after the date of acceptance of the work by the City and shall repair and replace any and all such work, together with any other work which may be displaced, that may prove defective in workmanship and/or materials within the one (1) year period from the date of acceptance, without expense whatsoever to the City. Ordinary wear and tear and usual abuse or neglect is excepted. In the event of failure to comply with the above mentioned conditions within seven (7) days after being notified in writing, or in the event of an emergency, the City is hereby authorized to proceed to have the defects repaired and make good at the expense of the Contractor, who hereby agrees to pay the cost and charges therefore immediately on demand. (b) The Contractor hereby guarantees that the entire work constructed under this Contract will meet fully all requirements thereof as to quality of workmanship and of materials furnished by the Contractor. The Contractor hereby agrees to make any repairs or replacements made necessary by defects in materials or workmanship supplied by the Contractor that becomes evident within the guarantee period, and to restore to full compliance with the requirements of these Specifications, including the test requirements set forth herein for any part of the work constructed hereunder, which during said period is found to be deficient with respect to any provision of the Specifications. The Contractor also agrees to hold the City harmless from claims of any kind arising from damage due to said defects. The Contractor shall make all repairs and replacements promptly upon receipt of written orders for same from the Engineer. If GC - 21 THE CITY OF AZUSA GENERAL CONDITIONS the Contractor fails to make the repairs and replacements promptly, the City may do the work and the Contractor and the Contractor's surety shall be liable to the City for the cost of such work. (c) Upon acceptance of the work by the City, any and all manufacturer's guarantees held by the Contractor shall be delivered to the City. (d) The guarantees and agreements set forth hereinbefore shall be secured by a surety bond which shall be delivered by the Contractor to the City before the notice of completion shall be filed by the Engineer. Said bond shall be in an approved form and executed by a surety company or companies satisfactory to the City, in the amount of ten percent of the Contract price. Said bond shall remain in force for the period specified herein. Instead of providing a surety bond, the Contractor may, at his option, provide for the Faithful Performance Bond furnished under the Contract to remain in force for said amount until the expiration of the required period. *** END OF SECTION 4 *** f � GC -22 THE CITY OF AZUSA GENERAL CONDITIONS SECTION 5 - PROGRESS AND PAYMENT 5.01 CONTRACT TIME (a) Time is of the essence of the Contract. The Contractor shall commence work promptly under the Contract and all portions of the work shall be prosecuted so that the entire work shall be completed and ready for use within the time stipulated. (b) A bidder may contact the Engineer prior to bid opening with concerns regarding Contract time allowed for completion of the work to initiate a re-evaluation. Any adjustments to time allowed will be made prior to bid opening and all decisions are final. All other time extension will be per Section 5.05 of these General Conditions. 5.02 CONTRACT PRICE Prior to commencement of the work, the Contractor shall submit a detailed price breakdown of any of the bid items for the work contained in lump sum items. Such price breakdown shall include quantities, unit prices, and any other information required in sufficient detail to enable it to be used in preparing monthly progress estimates. 5.03 CONSTRUCTION SCHEDULE The Contractor shall submit a construction schedule showing the order in which the Contractor proposes to carry on the work and the dates when the various parts are to be begun and completed. The timing associated with submitting the schedule will be determined by the Engineer. The schedule shall be subject to the approval of the Engineer and if in the Engineer's opinion a schedule submitted is inadequate to secure the completion of the work in the time agreed upon, or is otherwise not in accordance with the Specifications, the Engineer may require the Contractor to submit a new schedule which will insure timely completion of the work. It is mandatory that an up-to-date construction schedule be submitted with each request for progress payment. 5.04 OVERTIME WORK Except as otherwise provided in this section, the Contractor shall receive no additional compensation for overtime work even though such overtime work may be required under emergency conditions and may be ordered by the Engineer in writing. Additional compensation will be paid the Contractor for overtime work only in the event extra work is ordered by the Engineer and the change order specifically authorizes the use of overtime work, and then only to such extent as overtime wages are regularly being paid by the Contractor for overtime work of a similar nature in the same locality. GC - 23 THE CITY OF AZUSA GENERAL CONDITIONS 5.05 EXTENSION OF TIME (a) The Contractor may be entitled to an extension of Contract time: (1) if the work has been suspended by the City, in whole or in part; or (2) where weather or other circumstances occur which delay progress and which are clearly beyond the control of the Contractor; provided that, in either case, the Contractor is not at fault and is not negligent under the terms of the Contract. The extension of time allowed shall be as determined by the Engineer. (b) To receive consideration, a request for extension of time must be made in writing to the Engineer stating the reason for said request, and such request must be received by the Engineer within ten days following the end of the delay-causing condition and approved or denied by the Engineer in writing. 5.06 FAILURE TO COMPLETE ON TIME (a) The Contractor shall pay liquidated damages to the City in the amount specified in the Special Provisions if the Contractor fails to complete the work within the time agreed upon. The period for which said damages shall be paid shall be the number of calendar days from the agreed date of completion as contained in the Contract, or from the date of termination of any extension of time approved by the Engineer, to the date the Engineer certifies completion of work to the City. The City may deduct the amount of said damages from any moneys due or to become due the Contractor. (b) The said amount is fixed and agreed upon by and between the Contractor and the City because of the impracticability and extreme difficulty of fixing and ascertaining the actual damages the City would sustain. Said amount is agreed to be the amount of damages which the City would sustain. 5.07 MONTHLY ESTIMATES AND PAYMENTS (a) On or about the 25th of each month, the Contractor will prepare, certify, and submit to ALW, an estimate of the cumulative amount and value of work performed by the Contractor up to that date. All payments will be paid on or before the 15th day of the following month. Except as may otherwise be provided in the Special Provisions, said amount will include 80 percent of the value of all acceptable materials and equipment delivered to the site of the work. Said value will be based on certified copies of paid invoices delivered by the Contractor to the Engineer. To this figure will be added all amounts due or paid the Contractor for performance of extra work in accordance with change orders. From the total computed above, in conformance with Public Contract Code Section 7201, a deduction of 5 percent will be made from each monthly pay estimate for the term of the Contract unless the Director of the Light & Water Department has made a finding prior to the bid that the project is substantially complex and therefore requires a higher retention amount than 5 percent. Further deductions will be made for: (1) amounts due the City for equipment or materials GC - 24 THE CITY OF AZUSA GENERAL CONDITIONS furnished or services rendered; (2) amounts due the City under the terms of the Contract; (3) amounts of any claims of lien filed with the City in accordance with Section 6.02(b), and (4) amounts required to be deducted by federal, state or local governmental authority. From the balance thus determined will be deducted the amount of all previous payments and the remainder shall constitute the monthly payment due the Contractor. (b) Pursuant to the provisions of Public Contract Code Section 22300, the Contractor is permitted to substitute securities for any moneys withheld to ensure performance of this Contract. At the request and expense of the Contractor, securities equivalent to the amount withheld shall be deposited with the State Treasurer or a state or federally chartered bank in California as the escrow agent, who shall then pay the moneys to the Contractor. Upon satisfactory completion of the Contract, the securities shall be returned to the Contractor. Alternatively, the Contractor may request and the City shall make payment of retentions earned directly to the escrow agent. The Contractor may direct the investment of the payments into securities and the Contractor shall receive the interest earned on the investments upon the same terms provided for in this section for securities deposited by the Contractor. Upon satisfactory completion of the Contract, the Contractor shall receive from the escrow agent all securities, interest, and payments received by the escrow agent from the City pursuant to the terms of this section. Securities eligible for investment under this section shall include those listed in Section 16430 of the Government Code, bank or savings and loan certificates of deposit, interest-bearing demand deposit accounts, standby letters of credit, or any other security mutually agreed to by the Contractor and the City. The Contractor shall be beneficial owner of any securities substituted for moneys withheld and shall receive any interest thereon. The escrow agreement used pursuant to this section shall be null, void and unenforceable unless it is substantially similar to the form enclosed. (c) The Engineer's estimate of the monthly payment due the Contractor will not be required to be made by strict measurement, an approximation will suffice. The monthly payments may be withheld or reduced if, in the Engineer's opinion, the Contractor is not diligently or efficiently endeavoring to comply with the intent of the Contract or if the Contractor fails to pay labor and material bills as they become due. (d) The Contractor shall furnish the Engineer promptly, upon request, all information and records necessary to determine the cost of the work for purposes of estimating monthly payments, including an itemized statement, in a form satisfactory to the Engineer, of the actual cost of all acceptable materials delivered by the Contractor to the site. GC - 25 THE CITY OF AZUSA GENERAL CONDITIONS (e) No monthly,payment shall be construed as an acceptance of the work or of any portion of the work, nor shall the making of such payment preclude the City from demanding and recovering from the Contractor such damages as it may sustain by reason of the Contractor's failure to comply with the requirements of the Contract. • (f) In the event the Contract is terminated, any funds due the Contractor and retained by the City shall become the property of the City to the extent necessary to repay to the City any excess in the Contract price above the cost of the work completed at the time of termination. After issuance of notice to discontinue work, no further payment will be made to the Contractor for the work covered by the notice until completion of the work and final settlement has been made. 5.08 UNPAID CLAIMS If, upon or before completion of the work,or at any time prior to expiration of the period within which claims of lien or stop notices may be filed for record, any person claiming to have performed any labor or to have furnished any materials, supplies or services toward the performance of this Contract, or to have agreed to do so, shall file with the City a verified statement of such claim stating in general terms the kind of labor and-materials, the value of same and the name of the person to or from whom the same was furnished, together with a statement that the same has not been paid; or if any person shall bring against the City or any of its agents any action to enforce such claim or stop notice, the City will, until the action is settled, withhold from moneys due to the Contractor an amount sufficient to satisfy the decision of the court together with costs. 5.09 FULFILLMENT OF CONTRACT The Contractor shall protect and care for all work until the Contract has been fulfilled to the satisfaction of the Engineer, and subsequent acceptance of the work by the City Council. The Contractor shall remove all rubbish, excess earth and rock, leaving the site in a neat, orderly and presentable condition before the Engineer makes final inspection of the work to determine the fulfillment of the Contract. 5.10 FINAL ESTIMATE OF PAYMENT (a) When the Engineer is of the opinion that the Contractor has completely performed all work required under the Contract, the Engineer shall certify to the City that the work is complete, and, using data provided by Contractor, shall submit to the Contractor a draft of the final estimate. The Contractor shall submit a written approval of said final estimate within five calendar days after receipt, or, in the event the Contractor disagrees with said final estimate, the Contractor shall, within said five day period, file a written statement of all claims to be presented. If the Contractor delays more than five calendar days in approving said final estimate or in presenting claims, the time for final payment shall be extended by the period of such delay. GC - 26 THE CITY OF AZUSA GENERAL CONDITIONS (b) After timely acceptance of the work by the Utility Board/City Council and 35 calendar days after recording of the Notice of Completion, the City will pay to the Contractor the amount remaining after deducting all prior payments and all amounts to be kept or retained under the provisions of the Contract. In the event acceptance of the work is delayed more than 30 calendar days beyond the date of the last partial payment under the Contract, the City will make a further partial payment in accordance with Section 5.07. (c) If the Contractor disagrees with the Engineer's final estimate and files a timely (within 15 calendar days) written statement of his claims, the Engineer will issue, as a semi-final estimate, the proposed estimate submitted to the Contractor, and the City will make payment to the Contractor in accordance with the provisions of Subsection 5.10(b). The Engineer then will investigate the Contractor's claims, make any revisions to said semi-final estimate as the Contractor deems appropriate and certify in writing to the City the amount and value of the work performed by the Contractor. The City then will make final payment to the Contractor in accordance with the provisions of Subsection 5.10(b). 5.11 FINAL PAYMENT TERMINATES LIABILITY OF CITY The acceptance by the Contractor of the final payment shall be a release of the City and its agents from all claims of and liability to the Contractor for anything done or furnished for, or relating to, the work or for any act or neglect of the City or of any person relating to or affecting the work. 5.12 NOTICE OF COMPLETION As required by the California Code of Civil Procedure, and within ten calendar days after date of acceptance of the work by the Utility Board/City Council, the City will file, in the county recorder's office, a notice of completion of the work. 5.13 CHANGES IN THE WORK (a) GENERAL. The City reserves and shall have the right to revise the details of the contemplated work or to delete work or add work of a different character or function and have the Contractor perform such revised, decreased or added work as a Contract "change order". "Extra work" is defined as added work of a different character or function and for which no basis for payment is prescribed; or that involving revisions of the details of the work in such a manner as to render inequitable payment under items upon which the Contractor bid; or that work to be done under the stipulated prices given in the bidding schedule. The signing of the Contract by the Contractor will be deemed to be an agreement on the part of the Contractor to perform extra work, as and when ordered by the City. GC - 27 THE CITY OF AZUSA GENERAL CONDITIONS If required extra work results in delay to the work, the Contractor will be given an equivalent extension of time. (b) PROCEDURE. Upon decision of the City to have extra work performed, or to delete or modify work, the City's representative will so inform the Contractor, acquainting the Contractor with the essential details. The Contractor shall thereupon prepare an estimate of cost and submit said price and estimate to the City's representative who will secure the City's approval in writing before work is started. The City reserves the right to reject any claims as a result of extending the work under the bid prices, which has not been approved by the City in the same manner herein provided. Adjustment in the compensation due the Contractor shall be determined by one or more of the following methods in the order of precedence listed below: 1. Mutually agreeable lump-sum or unit prices, based upon current prevailing fair prices for materials, labor, overhead, and profit. If requested by the City's representative, the Contractor shall furnish an itemized breakdown of the quantities and prices used in computing proposed lump-sum and unit prices. 2. Force account whereby the Contractor is compensated for furnishing labor, materials, tools, and equipment as follows: a) Cost of labor plus 15 percent for workers directly engaged at the jobsite in the performance of the work. Cost of labor shall include actual wages paid including employer payments to or on behalf of the workers for health and welfare, pension, vacation, and similar purposes plus payments imposed on payroll amounts by State and Federal laws plus subsistence and travel allowance payments to workers. b) Cost of material plus 15 percent. Cost of material shall include sales tax, freight, and delivery charges. The City reserves the right to furnish such materials as it deems advisable and the Contractor shall not be paid the 15 percent markup on such materials. c) For tools and equipment actually engaged in the performance of the work, rental rates plus 15 percent. The rental rates shall be those prevailing in the area where the work is performed. No rental charge shall be made for use of tools or equipment having a replacement value of$500 or less. d) Subcontractor invoices to the Contractor plus five percent. Subcontractor invoices shall be based upon the above described cost of labor plus 15 percent, cost of material plus 15 percent, and tool and equipment rental rates plus 15 percent. GC - 28 TI> F IT 44EPAZ4 e) The Contractor shall submit to the City's representative for his verification, on SECTIOItlai ,l . C��I n§MFiUniMl Milf6i4r Gaterials, tools and equipment used in performing the work. No payment will be made for 6.01 RESPONapiIf'Veg'egiI-}TsWresentative. (a) The work S Jl p'sy},ll rsiclvtfilgtvfdiew4iis Rite AftdAtikrett>ovIe4eiCalellikVokrvitiWit bear all loss anfincintw LtifitH 'sqpk*en,tbfibilitradf114414sttNOVVetkOnaiomiwkitliottpdr exclusively by tjpg.nfagLts(tris ofgc9t 9.>i§dtitif'i grtl#t'itnOgrQt dvluk during the fulfillment of the Contract. If any loss or damage occurs, the Contractor shall immediately make good any such l'4 2ro f318fdaelilaltthg n etkiifia otth f irtga@toltegi et OltSosball the City may itIsafofifebN tircgra-uthlyntexrt640qprim titkileicmitmt role Ooshittitteu yr,,ndss and damage and theiffifitrfflEleefifefftWtile*tilIg@ilAkt ghalgtsi tAtbilccedniiMPIPto include the work described in the change order. (b) The Contractor alone shall at all times be responsible for the safety of employees and any Subcontractor's employees and for plant and equipment and any Subcontractor's plant and equipment and the method of pros tiENAKY cgECTION 5 *** 6.02 LIABILITY OF CONTRACTOR (a) The Contractor shall be liable for all damages and injury which shall be caused to City of property on or in the vicinity of the work or which shall occur to any person or persons or property whatsoever arising out of the performance of this Contract, whether or not such damage or injury be caused by the negligence of the Contractor and whether or not such damage or injury be caused by the inherent nature of the work as specified except the willful or negligent acts of the City, its officers or agents. (b) In case any suit or legal proceedings shall be brought against the City or the Engineer or any of their officers, agents or employees on account of loss or damage sustained by any person or property as a result of the performance of the work covered by this Contract, whether or not such injuries or damage be due to the negligence of the Contractor and whether or not such injuries or damage be caused by the inherent nature of the work as specified, the Contractor agrees to assume the defense thereof and to pay all expenses connected therewith including reasonable attorneys' fees and any judgment that may be obtained against the City or the Engineer or any of their officers, agents or employees in such suits, and in the event that any lien is placed upon the property of the City or the Engineer or any of their officers, agents or employees, as a result of such suits, the Contractor agrees to at once cause the same to be dissolved and discharges by giving bond or otherwise. 6.03 LAWS, REGULATIONS AND PERMITS Q I?3g9 THE CITY OF AZUSA GENERAL CONDITIONS SECTION 6 - LEGAL RESPONSIBILITY, SAFETY, BONDS AND INSURANCE 6.01 RESPONSIBILITY OF CONTRACTOR (a) The work shall be under the Contractor's responsible care and charge. The Contractor shall bear all loss and damage whatsoever and from whatever cause, except that caused solely and exclusively by the fault or negligence of the City which may occur on or to the work during the fulfillment of the Contract. If any loss or damage occurs, the Contractor shall immediately make good any such loss or damage and in the event of the Contractor refusing or neglecting so to do, the City may itself or by the employment of some other person make good any such loss or damage and the cost and expense of so doing shall be charged to the Contractor. (b) The Contractor alone shall at all times be responsible for the safety of employees and any Subcontractor's employees and for plant and equipment and any Subcontractor's plant and equipment and the method of prosecuting the work. 6.02 LIABILITY OF CONTRACTOR (a) The Contractor shall be liable for all damages and injury which shall be caused to City of property on or in the vicinity of the work or which shall occur to any person or persons or property whatsoever arising out of the performance of this Contract, whether or not such damage or injury be caused by the negligence of the Contractor and whether or not such damage or injury be caused by the inherent nature of the work as specified except the willful or negligent acts of the City, its officers or agents. (b) In case any suit or legal proceedings shall be brought against the City or the Engineer or any of their officers, agents or employees on account of loss or damage sustained by any person or property as a result of the performance of the work covered by this Contract, whether or not such injuries or damage be due to the negligence of the Contractor and whether or not such injuries or damage be caused by the inherent nature of the work as specified, the Contractor agrees to assume the defense thereof and to pay all expenses connected therewith including reasonable attorneys' fees and any judgment that may be obtained against the City or the Engineer or any of their officers, agents or employees in such suits, and in the event that any lien is placed upon the property of the City or the Engineer or any of their officers, agents or employees, as a result of such suits, the Contractor agrees to at once cause the same to be dissolved and discharges by giving bond or otherwise. 6.03 LAWS, REGULATIONS AND PERMITS GC - 30 THE CITY OF AZUSA GENERAL CONDITIONS (a) The Contractor shall give all notices required by law and comply with all laws, ordinances, rules and regulations pertaining to the conduct of the work. The Contractor shall be liable for all violations of the law in connection with work furnished by the Contractor. If the Contractor observes that the Drawings or Specifications are at variance with any law, ordinance, rule or regulation, the Contractor shall promptly notify the Engineer in writing and any necessary changes shall be made by instruction or change order. If the Contractor performs any work knowing it to be contrary to such laws, ordinances, rules and regulations and without giving such notice to the Engineer, the Contractor shall bear all cost arising therefrom. (b) Unless otherwise specified herein, permits and licenses which are necessary only for and during the prosecution of the work and the subsequent guaranty period thereafter shall be secured and paid for by the Contractor while those permits and licenses of regulatory agencies which are necessary to be maintained after the completion of the guaranty period of the Contract will be secured and paid for by the City. 6.04 PATENTS AND COPYRIGHTS The Contractor shall hold harmless, indemnify and defend the City and Engineer, their officers, agents and employees against all claims of liability arising from the use of any patented or copyrighted design, device, material or process, furnished, or used by the Contractor or any Subcontractors in the performance of the work. 6.05 PERMITS AND LICENSES Unless otherwise provided in the Special Provisions, the Contractor shall obtain at the Contractor's own expense all permits and licenses required for prosecution of the work and shall pay all fees and taxes properly assessed against equipment or property used in connection with the work. 6.06 SALES AND USE TAXES The Contractor shall pay all sales and use taxes assessed by federal, state or local authorities on materials furnished by the Contractor in the performance of the work. 6.07 LABOR DISCRIMINATION No discrimination shall be made in the employment of persons on the work by the Contractor or by any Subcontractor because of race, color or religion of such persons. 6.08 WAGE DETERMINATIONS (a) As required by the California Labor Code, the Contractor shall pay not less than the prevailing rate of per diem wages as determined by the Director, Department of Industrial Relations, State of California. Copies of such prevailing rate of per diem wages are on file at the GC - 31 THE CITY OF AZUSA GENERAL CONDITIONS City Clerk's office, which copies will be made available to any interested party upon request. The Contractor shall post a copy of such determination at each job site. (b) The Contractor shall, as penalty to the City, forfeit $50.00 for each calendar-day, or portion thereof, for each worker paid less than the specified prevailing rates for such work or craft in which such worker is employed, whether paid by the Contractor or by any Subcontractor. (c) In accordance with the provisions of the California Labor Code, the Contractor shall secure the payment of compensation to employees. 6.09 APPRENTICES ON PUBLIC WORKS PROJECTS The Contractor shall comply with all applicable provisions of the California Labor Code relating to employment of apprentices on public works projects. 6.10 WORKING HOURS The Contractor shall comply with all applicable provisions of the California Labor Code relating to working hours. The Contractor shall, as a penalty to the City, forfeit $25.00 for each worker employed in the execution of the Contract by the Contractor or by any Subcontractor, for each calendar day during which such worker is required or permitted to work more than 8 hours in any one calendar day and 40 hours in any one calendar week, unless such worker receives compensation for all hours worked in excess of 8 hours at not less than 1 1/2 times the basic rate of pay. 6.11 PUBLIC SAFETY AND CONVENIENCE (a) The Contractor shall at all times conduct work so as to assure the least possible obstruction to traffic and inconvenience to the general public and adequate protection of persons and property in the vicinity of the work. No street shall be closed to the public without first obtaining permission of the Engineer and proper governmental authority. Where excavation is being performed in primary streets or highways, one lane in each direction shall be kept open to traffic at all times unless otherwise provided or shown. Toe boards shall be provided to retain excavated material. Fire hydrants on or adjacent to the work shall be kept accessible to fire- fighting equipment at all times. Temporary provisions shall be made by the Contractor to assure the use of sidewalks and the proper functioning of all gutters, storm drain inlets and other drainage facilities. (b) The Contractor shall provide adequate barricades, signs, warning lights, watchmen and flagmen as required, as directed by the Engineer and agency having jurisdiction, to protect the work and the safety of the public. Warning lights using inflammable liquids will not be permitted. Only electrically-operated warning lights will be approved for use. Warning lights shall operate from sunset to sunrise. Barricades shall be painted to increase their visibility at night. GC - 32 THE CITY OF AZUSA GENERAL CONDITIONS (c) "NO PARKING" signs with specific time frames shall be supplied and posted by the Contractor 48 hours prior to start of work. The Contractor shall notify the local Police Department of such restrictions and obtain approval for the posting. 6.12 TRENCH EXCAVATION Prior to excavating any trench five feet or more in depth the Contractor shall submit to the Engineer a detailed plan showing the design of shoring, bracing, sloping or other provisions to be made for worker protection from the hazard of caving ground. If such plan varies from the shoring system standards established by the Construction Safety Orders of the California Division of Industrial Safety, the plans shall be prepared by a civil engineer registered in California. In no case will the Contractor be permitted to use a shoring, sloping or other protection system less effective than that required by said Orders. Nothing contained herein shall be construed to impose a tort liability upon the City, Engineer or any of their officers, agents or employees. 6.13 CONCRETE FORMS, FALSE WORK AND SHORING The Contractor shall comply with the requirements of CAL OSHA, Construction Safety Orders, regarding the design of concrete forms, false work and shoring and the inspection of same prior to placement of concrete. The Contractor shall employ a civil engineer registered in California to prepare design calculations and working drawings of the false work or shoring system, to inspect such system prior to placement of concrete and to certify in writing to the Engineer 24 hours prior to placing concrete that the false work or shoring system complies with the design and that the materials and workmanship are satisfactory for the purpose intended. 6.14 SANITARY PROVISIONS The Contractor shall provide and maintain sanitary facilities for the use of employees and Subcontractors necessary to comply with the requirements of state and local health departments. 6.15 SAFETY AND HEALTH REGULATIONS All work shall be performed in accordance with requirements of the California Division of Industrial Safety, the California Occupational Safety and Health Act and the William Steiger Occupational Safety and Health Act of 1970. The job safety conditions will be the responsibility of the Contractor. 6.16 LABOR, MATERIAL AND PERFORMANCE BONDS The Contractor shall furnish two bonds each in the amount shown in the Notice Inviting Bids, one as security for the faithful performance of the work and the other as security for the faithful payment and satisfaction of all persons furnishing materials and performing labor on the work. GC - 33 THE CITY OF AZUSA GENERAL CONDITIONS The bonds shall be issued-by a corporation duly and legally licensed to transact surety business in the State of California. Such bonds shall remain in force throughout the period required to complete the work. The bond must fie executed by a duly licensed surety company approved by the City. 6.17 CONTRACTOR NOT RESPONSIBLE FOR DAMAGE RESULTING FROM CERTAIN ACTS OF GOD As provided in Section 7105 of the Public Contract Act, the Contractor shall not be responsible for the cost of repairing or restoring damaged portions of the work determined to have been caused by an act of God, in excess of five percent of the Contract amount, provided, that the work damaged was constructed in accordance with accepted and applicable building standards and the Specifications and Drawings. The Contractor shall obtain insurance to indemnify the City for any damage to the work caused by an act of God if the premium of said insurance coverage is called for as a separate bid item in the proposal for the work. The term "Act of God" shall include only the following occurrences or conditions and effects: (1) earthquakes and (2) Tsunami. 6.18 INSURANCE (a) GENERAL. The Contractor shall procure and maintain for the duration of the Contract, insurance against claims for injuries to persons or damages to property which may arise from or in connection with the performance of the work hereunder by the Contractor, Contractor's agents, representatives, employees or Subcontractors. The cost of said insurance shall be included in the Contractor's bid. The Contractor shall not commence work under this Contract until ALL insurances required herein are obtained and until such insurance has been approved by the City. The Contractor shall not allow any Subcontractor to commence work on any subcontract until the insurance required of the Subcontractor has been so obtained and approved. The insurance required herein shall be maintained continuously during the life of the Contract up to the date of acceptance of the work by the City Council, however, the Contractor's liabilities under this Contract shall not be limited in anyway to the insurance coverage required. Each insurance policy required herein shall be endorsed to state that coverage shall not be suspended, voided, canceled, reduced in coverage or in limits except after thirty (30) days prior written notice by certified mail, return receipt requested, has been given to the City. Insurance is to be placed with insurer's having a Best's rating of no less than A and a Financial Class VII or higher. (b) GENERAL LIABILITY AND AUTOMOBILE LIABILITY COVERAGES. The policies are to contain, or be endorsed to contain the following provisions: 1. The City, its Council Members, officials, employees, designated agents and volunteers, and the Engineer, his directors, employees, contract employees and agents are to be covered as insures with the following: liability arising out of activities performed by or on behalf of the Contractor; products and completed operations of the Contractor; GC - 34 THE CITY OF AZUSA GENERAL CONDITIONS premises owned, leased or used by the Contractor; or automobiles owned, leased or used by the Contractor. The coverage shall contain no special limitations on the scope of protection afforded to the City, its Council Members, officials, employees, designated agents or volunteers, and the Engineer, his directors, employees, contract employees and agents. 2. The Contractor's insurance coverage shall be primary insurance with respect to the City, its Council Members, officials, employees, designated agents and volunteers, and the Engineer, his directors, employees, contract employees and agents. Any insurance or self-insurance maintained by the City, its Council Members, officials, employees, designated agents or volunteers, and the Engineer, his directors, employees, contract employees and agents shall be excess of the Contractor's insurance and shall not contribute with it. 3. Any failure to comply with reporting provisions of the policies shall not affect coverage provided to the City, its Council Members, officials, employees, designated agents or volunteers, and the Engineer, his directors, employees, contract employees and agents. 4. Coverage shall state that the Contractor's insurance shall apply separately to each insured against whom claim is made or suit is brought except with respect to the limits of the insurer's liability. (c) WORKERS' COMPENSATION INSURANCE. The Contractor shall procure and maintain workers' compensation insurance as required by applicable state law for all employees to be engaged in work at the site of the project under this Contract and, in case of any such work sublet, the Contractor shall require the Subcontractor to provide workers' compensation insurance for all of the latter's employees to be engaged in such work unless such employees are covered by the protection afforded by the Contractor's workers' compensation insurance. The Subcontractor's insurance coverage shall be subject to all of the same requirements stated herein for the Contractor's insurance coverage. In case any class of employees engaged in hazardous work under this Contract is not protected under the workers' compensation statute, the Contractor shall provide and shall cause each Subcontractor to provide adequate employers' liability insurance for the protection of such employees that are not otherwise protected. (d) CONTRACTOR'S PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE AND VEHICLE LIABILITY INSURANCE. The Contractor shall procure and maintain contractor's public liability insurance, contractor's property damage insurance and vehicle liability insurance in the amounts listed in the Special Provisions. (e) SUBCONTRACTOR'S PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE AND VEHICLE LIABILITY INSURANCE. The Contractor shall either: (1) require each Subcontractor to procure and to maintain subcontractor's public liability and property damage GC - 35 THE CITY OF AZUSA GENERAL CONDITIONS insurance and vehicle liability insurance of the type and in amounts specified, or(2) insure the activities of Subcontractors in the Contractor's own policy, in like amount. (f) BUILDER'S RISK INSURANCE (ALL RISK COVERAGE). The Contractor shall procure and maintain builder's risk insurance (all risk coverage) on a 100 percent completed value basis for the benefit of the City, the Contractor and Subcontractors as their interest may appear. (g) MINIMUM SCOPE OF INSURANCE. Coverage shall be at least as broad as: 1. Insurance Services Office form number GL 0002 (Ed. 1/73) covering Comprehensive General Liability and Insurance Services Office form number GL 0404 covering Broad Form Comprehensive General Liability; or Insurance Services Office Commercial General Liability coverage ("occurrence" From CG 0001). 2. Insurance Services Office form number CA 0001 (Ed. 1/78) covering Automobile Liability, code 1 "any auto" and endorsement CDA 0025. 3. Workers' Compensation insurance as required by the State of California and Employers Liability insurance. (h) MINIMUM LIMITS OF INSURANCE. Contractor shall maintain limits no less than the following unless modified in the Special Provisions: 1. Comprehensive General Liability: $1,000.000 per occurrence for bodily injury, personal injury and property damage. If Commercial General Liability Insurance or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to this project/location or the general aggregate limit shall be twice the required occurrence limit. 2. Automobile Liability: $1,000,000 per accident for bodily injury and property damage. 3. Workers' Compensation: Limits as required by the State of California and Employers Liability limits of$1,000,000 per accident. (i) DEDUCTIBLES AND SELF INSURED RETENTIONS. Any deductibles or self-insured retentions must be declared to and approved by the City. At the option of the City, either the insurer shall reduce or eliminate such deductibles or self-insured retentions with respect to the City, its directors, officials, employees, designated agents and volunteers, and the Engineer, his directors, employees, contract employees and agents; or the Contractor shall procure a bond guaranteeing payment of losses and related investigations, claim administration and defense expenses. (j) VERIFICATION OF COVERAGE. The Contractor shall furnish the City with certificates of insurance and with original endorsements affecting coverage required by this section. The GC - 36 THE CITY OF AZUSA GENERAL CONDITIONS certificates and endorsements for each insurance policy are to be signed by a person authorized by that insurer to bind coverage on its behalf. The certificates and endorsements are to be on forms provided by the City and are to be received and approved by the City before work commences. (k) The certificates of insurance shall name as additionally insured the City agents listed in the Special Provisions. 6.19 LIABILITY OF CITY AND ENGINEER To the fullest extent permitted by law, the Contractor shall defend, indemnify and hold harmless the City, Engineer and their officers, agents and employees against and from all claims, suits or actions arising under or by reason of the work agreed to be undertaken in the Contract or any performance of the work from the sole negligence of the Contractor or employees or agents or negligence which could be jointly attributed to City employees or the Contractor, but not from the sole negligence or willful misconduct of the City or the Engineer. *** END OF SECTION 6 *** GC - 37 THE CITY OF AZUSA SPECIAL PROVISIONS SECTION 7—SPECIAL PROVISIONS 7.01 THE REQUIREMENTS (a) It is required that there be furnished in accordance with these specifications and accompanying drawings all plant, labor, equipment, shoring, bracing, sheeting, cribbing, false work, pumping, drainage and materials of every description as required or necessary to excavate, backfill, grade, construct, lay, erect, install, test, disinfect, clean-up and leave in an operable and acceptable condition all of the work. (b) The work consists of the construction of approximately 1,020 linear feet of 18-inch ductile iron pipe water main; 630 linear feet of 18-inch mortar lined and coated steel pipe water main (1/4-inch wall thickness); one water crossing over San Dimas Wash and one water crossing over Big Dalton Wash; 600 linear feet of 12-inch ductile iron pipe water main; 4,550 linear feet of 8- inch ductile iron pipe water main; all in LA County including valves, fire hydrants, services, connections, abandonments, appurtenances, pavement replacement, traffic control and all supplies, equipment, services and transportation necessary to construct and complete the project entitled: WATER MAIN REPLACEMENT PROJECT NO.W-265 7.02 CITY DESIGNATED ENGINEER The City has designated Melissa Barbosa, P.E. as the Engineer for this Contract Tel: (626)-812- 5173, Fax: (626) 334-3163, e-mail: mbarbosa@ci.azusa.ca.us. The project manager is Chet Anderson, P.E., Tel: (626) 812-5209, Fax: (626) 334-3163, email: canderson@ci.azusa.ca.us. 7.03 BEGINNING AND COMPLETION OF WORK AND WORK HOURS The work shall be commenced within 10 working days after the date set forth in the "Notice to Proceed" to begin work. All work shall be completed within 150 calendar days after said date. All the work under this contract shall be performed between 7 a.m. and 5 p.m., Monday through Friday. 7.04 LIQUIDATED DAMAGES The City and Contractor agree that it would be impracticable or extremely difficult to fix actual damages in case of the Contractor's delay in completion of work beyond the time agreed upon, • therefore, the City and Contractor agree that the Contractor shall pay to the City as fixed, agreed and liquidated damages the amount of$750 for each calendar day's delay in completion of the work beyond the time agreed upon, and agrees that said liquidated damages is a reasonable estimate of the damages to be sustained by the City. SP-1 THE CITY OF AZUSA SPECIAL PROVISIONS 7.05 STANDARD SPECIFICATIONS AND HIERARCHY The work shall be in accordance with these Specifications and the "Standard Specifications for Public Works Construction", latest Edition, published by Building News, Inc., 990 Park Center Drive, Suite E, Vista, CA 92801 (760-734-113), and are referred to elsewhere in these Specifications as SSPWC. Copies of the "SSPWC" are on file in the office of the Engineer and are open to public inspection during regular business hours. When the Specifications and SSPWC conflict, the Specifications shall supersede the SSPWC. Where the Plans conflict with the requirements of the Specifications and SSPWC, the Specifications and SSPWC shall prevail. 7.06 WATER AND POWER (a) The City will supply the Contractor with all water required during the construction. However, the Contractor, at his own expense, shall pay all fees for such water including water for pressure testing and disinfection. Upon the Contractor making a deposit for each meter, the Water Utility Manager will cause a meter to be installed on a fire hydrant as near as possible to the site of the work. The Contractor at his own expense shall provide facilities for conveying the water from the meter to the point of use. (b) The Contractor shall provide temporary electric power as required for his construction operations under the contract. He shall pay for the meter installation and for all power used. 7.07 TRENCH EXCAVATION The Contractor, prior to excavating any trench five feet or more in depth shall submit to the Engineer a detailed plan showing the design of shoring,bracing, sloping or other provisions to be made for worker protection from the hazard of caving ground. If such plan varies from the shoring system standards established by the CAL OSHA, the plans shall be prepared by a registered civil or structural engineer. 7.08 PERMITS AND LICENSES A City of Azusa business license is required for Contractors and Subcontractors for work in the City of Azusa. Business licenses may be required by other jurisdictions in which the project is located. The Contractor is responsible to obtain a business license at his own expense. The Contractor is responsible for obtaining all required permits for this project. SP-2 THE CITY OF AZUSA SPECIAL PROVISIONS 7.09 LINES, GRADES AND MEASUREMENTS (a) All lines and grades required for proper execution of the work shall be furnished by the Contractor who will be held responsible for constructing the work to the lines and grades shown on the Drawings. (b) The Contractor shall preserve all bench marks, monuments, survey marks and stakes and, in case of their removal or destruction, he shall be liable for the cost of their replacement. 7.10 GUARANTEE The Contractor hereby guarantees for a one-year period, following acceptance by the Utility Board/City Council, that the entire work constructed by him under this Contract will meet fully all requirements thereof as to quality of workmanship and of materials furnished by him. 7.11 RESTORATION OF EXISTING FACILITIES (a) ROADS AND STREETS. All roads and streets in which the surface is removed, broken or damaged, or in which the ground has caved or settled due to work under this Contract, shall be completely resurfaced and brought to the original grade and crown section unless otherwise indicated. Before resurfacing material is placed, edges of pavements shall be trimmed back far enough to provide clean, solid, vertical faces, and shall be free of any loose material. Paving shall be one-inch thicker than adjoining pavement and shall conform to the requirements of these Specifications. Roadways used by the Contractor for hauling materials, equipment, supplies, etc., shall be cleaned and repaired if the condition of the roadway is damaged or otherwise affected due to the Contractor's operation. (b) CULTIVATED AREAS AND OTHER SURFACE IMPROVEMENTS. All cultivated areas, either agricultural or landscaping, and other surface improvements which are damaged by actions of the Contractor shall be restored as nearly as possible to their original condition. (c) EXISTING STAKES AND MARKS. All section, section subdivisions, plat, U.S.E.D., U.S.C. & G.S., U.S.G.S., and any other official monuments or bench marks shall be carefully preserved or replaced. In the event any such monument or marker is disturbed as a result of the Contractor's operation, the Contractor shall replace or reset such monument or marker in a manner satisfactory to the Engineer. Replaced or reset monuments shall be of acceptable type and quality and shall be located so as to clear existing utilities or any other interference. They shall be placed in a manner consistent with good and recognized engineering and surveying practice. SP-3 THE CITY OF AZUSA SPECIAL PROVISIONS (d) SIDEWALK RECONSTRUCTION. Where sidewalk, curbs, or gutters are to be repaired, the repairs shall be made by removing and replacing the entire section back to the nearest score lines and not by refinishing the damaged portion. 7.12 CONTRACT DRAWINGS The Contract Drawings applicable to the work to be performed under this Contract are bound herein or attached hereto. 7.13 SHOP DRAWINGS The Contractor shall furnish Shop Drawings to the Engineer for review in accordance with Section 2.04 of the General Conditions. 7.14 INSPECTION The City shall provide inspection for an 8-hour day and 40-hour work week from Monday through Friday. No work shall be performed on weekends, unless approved in writing by the Water Utility Manager. The Contractor shall reimburse the City at rates established by the City for inspection in excess of the foregoing, including legal holidays. 7.15 WATERING (a) Water for compacting original ground, fill material, subgrades, and water required for laying dust caused by grading operations and the passage of traffic through the work shall be applied as directed by the Engineer. (b) Full compensation for furnishing water for any of the construction operations shall be considered as included in the prices paid for the various contract items of work and no additional allowance shall be made therefore. 7.16 PUBLIC CONVENIENCE, SAFETY AND TRAFFIC CONTROL (a) Traffic and access shall comply with Section 7-10 of the "Standard Specifications for Public Works Construction" and the requirements set forth herein. The Contractor shall be responsible for all traffic control during construction, and any other activity or condition that may alter existing traffic control and place in jeopardy the safety of the public or those in the employ of the Contractor. He shall be responsible for placing at an absolute minimum the chance of harm or injury to the public or to those in the employ of the Contractor through the use of accepted construction traffic control standards and techniques. An SP-4 THE CITY OF AZUSA SPECIAL PROVISIONS engineered traffic control plan shall be prepared and submitted by Contractor when required by the applicable jurisdiction. The Contractor shall be in strict conformance with the "Work Area Traffic Control Handbook" (WATCH). Any situation not addressed by the WATCH Manual shall conform to the detour/lane reduction plan provided by the Contractor or the direction of the Engineer. The Contractor shall immediately correct any deficiencies in existing traffic control as directed by the Engineer. Arrowboards shall be installed at both ends of a work area where traffic lanes are reduced or diverted. (b) No street or access closure to through traffic will be allowed without the express approval of the local jurisdiction, Public Works Department, or appropriate City Engineer.. (c) All existing stop signs, street name signs and regulatory signs shall be maintained in visible locations during construction and permanently relocated or removed as directed by the plan and the Engineer. (d) The Contractor shall provide access through the site for the use of emergency vehicles and local traffic to residences and businesses. (e) Temporary no parking is authorized along the streets in the project areas. Contractor shall post "Temporary No Parking" signs after notifying and receiving approval from the local jurisdiction. Type of sign and method and location of posting shall also be subject to the Engineer's approval. The Contractor shall notify all affected residences and business establishments at least seven (7) days prior to the posting of signs. The "No Parking' signs shall be posted at least 48 hours prior to work. (f) All warning signs, lights, and devices to be used by the Contractor shall conform to the standards of the "Manual of Traffic Controls - Warning Signs, Lights, and Devices for Use in Performance of Work Upon Highways" Issued by the Department of Transportation, State of California, latest edition. (g) Payment for traffic control will be included in related payment items and no additional compensation will be allowed therefore. (h) Contractor shall maintain access to driveways wherever possible and no driveway or drive approach shall remain closed for more than (2) two consecutive days. All driveways and drive approaches which are not poured the same day in which the existing area was excavated and graded shall be ramped with aggregate base material to the satisfaction of the Engineer. All approaches to other proposed concrete improvements normally used as an access way for traffic (i.e. cross-gutters, spandrels, etc.) shall be treated in a similar fashion. While working on any driveway where vehicular passage will be temporarily interrupted, he shall notify the property SP-5 THE CITY OF AZUSA SPECIAL PROVISIONS owner 24 hours before commencing work so that the owner may park his/her vehicles off his property. (I) In addition, if the Contractor fails or refuses to place adequate warning lights, and or barricades necessary for the public's convenience and safety, the City will place warning lights or barricades to protect or warn the public of any dangerous condition connected with Contractor's operations. Contractor shall become liable to the City at the rate of five hundred dollars ($500)per night. At least 5 working days in advance of closing or partially closing any street or alley, Contractor shall submit a plan for detouring of traffic to the Engineer for his approval. Full compensation for providing for the public convenience as set forth in this Section shall be considered as included in the prices paid for the various contract items of work and no additional allowance will be made therefore. 7.17 CONSTRUCTION INTERFERENCES (a) Insofar as practicable, during the progress of the work, the Contractor shall not disturb, but shall support and protect against injury and maintain in good operating condition at his own expense, all subsurface, surface and overhead utilities, fences, structures and other facilities whether or not they are shown on the Drawings. (b) All facilities removed shall be reconstructed as promptly as is reasonably possible in their original or other authorized locations and in a condition at least as good as when removed and subject to the inspection of the City, or the governing body having jurisdiction. (c) During the performance of the work under these Specifications, the City or agencies in control of any of the facilities affected by the work shall have the right to enter when necessary upon the pipeline right-of-way, or upon any portion of the work thereof, for the purpose of maintaining service and of making changes in or repairs to said facilities. (d) The Contractor shall be responsible for and shall make good all damage due to utilities, structures or other facilities as shown on the Drawings due to his operations, and the provisions of this section shall not be abated even in the event such damage occurs after backfilling or is not discovered until after completion of backfilling. (e) The Drawings show the approximate position of known subsurface, surface and overhead utilities, fences, structures, and other facilities as they are supposed to exist in the immediate vicinity of the work, but the City does not guarantee that all existing facilities are shown on the Contract Drawings. The Contractor will not be assessed for liquidated damages due to delay in removal or relocation of utility facilities. SP-6 THE CITY OF AZUSA SPECIAL PROVISIONS 7.18 SCHEDULING OF WORK The Contractor shall submit a detailed schedule of work to the Engineer for his approval prior to commencing construction of any portion of the project. The Engineer shall have the right to revise or alter the Contractor's work schedule. The Contractor shall not commence work until he has received Notice to Proceed from the City. 7.19 RIGHT-OF-WAY (a) The Contractor shall not do any work that would affect any oil, gas, storm drain or water pipelines, any telephone, telegraph or electric transmission lines, fences or any other structure, nor enter upon the rights-of-way or other lands appurtenant thereto until notified by the Engineer that the City has secured authority therefore from the proper companies or parties. Authority to enter onto land for the Contractor's convenience shall be obtained by the Contractor. (b) After authority has been obtained, the Contractor shall give said companies or parties due notice of his intention to begin work and he shall give them convenient access and every facility for removing, shoring, supporting or otherwise protecting such pipelines, transmission lines, ditches, fences or structures and for replacing same. 7.20 COORDINATION OF CONSTRUCTION The Contractor shall coordinate construction as required by the Engineer with other adjacent utility and building projects, and provide adequate access to adjoining properties at all times. The Contractor shall provide for this in his bid and therefore shall have no claims for damages or extra compensation in the event his work is delayed by the work performed by others 7.21 COMPLIANCE WITH NATIONAL CLEAN WATER ACT The Contractor is required to comply with the National Clean Water Act as follows: (a) General Practices: Develop and implement erosion/sediment control plans for embankments, if any. Schedule excavation and grading work for dry weather. Check for and repair leaking equipment. Perform major equipment repairs in designated areas, away from the construction site. SP-7 THE CITY OF AZUSA SPECIAL PROVISIONS Designated a location away from storm drains for refueling and vehicle/equipment maintenance. Do not use diesel oil to lubricate equipment or parts. Recycle used oil, concrete,broken asphalt, etc. whenever possible. Use good materials storage, spill prevention and other "housekeeping" practices to prevent runoff contamination by toxic chemicals such as paints, solvents, pesticides, fuels or metals from building materials. (b) Asphalt/Concrete Removal: After breaking old pavement,be sure to remove all chunks and pieces. Make sure broken pavement does not come in contact with rainfall or runoff. Shovel or vacuum saw-cut slurry and remove from the site. Cover or barricade storm drain during saw-cutting if necessary. (c) During Construction: Cover and seal catch basins and maintenance holes when applying seal coat, slurry seal, fog seal, etc. Use check dams ditches or berms to divert runoff around excavations. Never wash excess materials from exposed aggregate concrete or similar treatments into a street or storm drain. Collect and recycle or dispose to dirt. Cover stockpiles (asphalt, sand etc.) and other materials with plastic sheets and berms. Catch drips from paver with drip pans or absorbent material (cloth, rags, etc.) placed under machine when not in use. Clean up all spills and leaks using "dry" methods (with absorbent materials and/or rags), or dig up and remove contaminated soil. SP-8 THE CITY OF AZUSA SPECIAL PROVISIONS Collect and recycle excess abrasive gravel or sand. Call the Integrated Solid Waste • Management Office to order Construction and Demolition Waste Recycling Guide, - (213) 237-1444. Avoid over application by water trucks for dust control. 7.22 INSURANCE The Contractor shall maintain insurance in the amounts shown in Section 6.18 of the General Conditions. Certificates of Insurance shall be submitted to the City with the following as additionally insured: (a) The City of Azusa, its Council Members, officials, employees, designated agents or volunteers. *** END OF SECTION 7 *** SP-9 CITY OF AZUSA TECHNICAL SPECIFICATIONS EARTHWORK AND GRADING 8.01 GENERAL The Contractor shall furnish all labor, materials, tools, equipment, transportation, watering, compacting and all incidental work and services required for satisfactory completion of earthwork and grading. Earthwork and grading shall conform to Section 300 of the Standard Specifications for Public Works Construction (SSPWC), except as modified herein. The work shall consist of performing all operations necessary to excavate roadways, slopes, benches, ditches, channels or other items shown on the Drawings and to backfill depressions or ditches caused by removal of obstructions, construct embankments at the locations and to the elevations and form shown on the Drawings and to shape and compact all subgrade all in accordance with these Specifications. Unless otherwise provided in the Proposal as separate pay items, general site preparation, clearing and grubbing, removal of excess grass and weeds and grading of roadway shall be included in this item. 8.02 PRESERVATION OF PROPERTY Existing improvements or facilities and trees and shrubs that are not to be removed, shall be protected from injury or damage resulting from operations of the Contractor, and the Contractor shall be responsible for such damage. Only trees and shrubs specifically designated or marked for removal by the Engineer shall be removed. The Contractor shall provide such dust control equipment and methods as may be required to protect adjacent property from annoyance or damage from dust caused by his operations. Failure to control such dust shall be cause for the Engineer to stop the work until said dust is controlled, and the Contractor shall have no recourse to collect from the City for any loss of time or expense sustained by him due to such suspension of work. 8.03 CLEARING AND GRUBBING Except as otherwise specified, all trees, stumps, large roots, buried logs, decayed vegetable matter, buried junk piles, heavy growth of grass and weeds and all other objectionable material shall be removed from the site of the work. None of the above materials shall be permitted to remain in or under embankment and fill areas. 8.04 REMOVAL AND DISPOSAL OF MATERIAL Material removed during clearing and grubbing, including any excess excavation, shall be removed from the site of the work and disposed of at a location acceptable to the Engineer. Burning of materials on the site will not be permitted. • TS - 1 CITY OF AZUSA TECHNICAL SPECIFICATIONS 8.05 ROADWAY EXCAVATION Excavation shall conform to the lines, grades and cross-sections shown on-the Drawings and no payment will be made for quantities in excess of those shown or hereinafter specified. When solid rock, scale, hardpan or like materials are encountered in the excavation, it shall be excavated to not less than 6-inches below subgrade and replaced with select material approved by the Engineer. Said select material shall be compacted to not less than 90 percent maximum density. Whenever reference is made to maximum density, it refers to the maximum density as determined by ASTM. All soft or unsuitable material that will not readily compact to the density specified shall be removed to the depths shown on the Drawings or ordered by the Engineer and disposed of as directed by the Engineer. Excavation in areas not shown on the Drawings or authorized by the Engineer will not be paid for and the Contractor shall, at his own expense, backfill and compact unauthorized excavation areas to the original ground elevation and to the density specified. All rocks or lumps larger than 2-1/2 inches in size in the upper 6-inches of the subgrade which will not break up under the operation of grading equipment shall be removed and the resulting space refilled and compacted with selected material approved by the Engineer. 8.06 EMBANKMENT The area where an embankment is to be constructed shall be cleared of all vegetation, roots and foreign material. The surface shall be moistened, scarified to a depth of six inches and rolled or mechanically compacted to 95 percent of maximum density. Embankment shall be placed in horizontal layers not to exceed eight inches in thickness measured prior to compaction, where compaction is by sheepsfoot rollers. The thickness shall be limited to six inches if compaction is by means of power driven tampers. Each layer shall be moistened or dried as required and thoroughly compacted to the following densities: 1. The density of each layer placed within 2.5 feet of the finished surface shall be not less than 95 percent of maximum density if under asphaltic concrete with no base material and 90 percent if under asphaltic concrete on base material. 2. The density of layers greater than 2.5 feet below finished surface shall be not less than 90 percent of maximum density. 8.07 SUBGRADE PREPARATION Subgrade preparation shall consist of(1) preparing basement soil or original ground to receive embankment, aggregate base or pavement; (2) preparing basement soil in roadway excavation areas to receive aggregate base or pavement; or (3) of preparing embankment to receive aggregate base or pavement. TS - 2 CITY OF AZUSA TECHNICAL SPECIFICATIONS The roadbed shall be graded to the approximate elevation and cross- section shown. All rocks and lumps of earth over 2-1/2 inches in size and other unsuitable material shall be removed and disposed of from the upper 6-inches of the roadbed. The subgrade then shall be watered, shaped to the required grade and cross-section and thoroughly compacted. The surface of the finished subgrade shall be true and uniform and shall not vary more than 0.1 foot below and not more than 0.05 foot above the theoretical cross-section at any point thereon. Any subgrade that does not conform to these requirements immediately prior to placing subsequent material thereon, shall be reworked, watered and recompacted. 8.08 FINISHING SLOPES AND SURFACES The surface of all areas of earth and other materials shall be finished to a reasonably smooth and compact surface substantially in accordance with the surface lines and cross-sections shown and to the elevations indicated on the Drawings or as directed. The degree of finish for graded slopes shall be that ordinarily obtainable from either blade-grader, scraper or hand shovel operations. 8.09 SUBGRADE AND EMBANKMENT PROTECTION During construction and until final acceptance of the work, excavations, embankments and subgrades shall be kept shaped and effectively drained at all times. Where ruts develop in the subgrade, the subgrade shall be brought to grade, reshaped if required, and recompacted prior to the placing of any paving material. Storage or stockpiling of materials on the subgrade will not be permitted. No base course shall be placed until the subgrade has been approved by the Engineer. Base material shall not be placed on muddy or otherwise unsuitable subgrade. 8.10 WATERING All water used for compacting original ground, embankments, structure and trench backfill, subgrade, base and for laying dust caused by grading or traffic shall be included in the price bid for such items and separate payment will not be allowed for watering. 8.11 PAYMENT Earthwork and grading will be paid for at the unit or lump sum price listed in the Proposal or, if no separate item is included, in the other items of work to which it relates. ***END OF SECTION 8*** TS - 3 CITY OF AZUSA TECHNICAL SPECIFICATIONS AGGREGATE BASE 9.01 GENERAL The Contractor shall furnish all plant, labor, materials, tools, equipment, transportation and all incidental work and services required to construct aggregate base in accordance with these Specifications, applicable drawings and Section 200 and 301 of the SSPWC, as modified herein and as approved by the applicable jurisdiction. 9.02 SUBGRADE The subgrade shall be prepared as specified in Section 301-1 of the SSPWC. 9.03 UNTREATED BASE MATERIALS The aggregate for untreated base shall conform to the requirements of Section 200-2 of the SSPWC. 9.04 PLACING UNTREATED BASE Untreated base material shall be spread on the prepared subgrade in uniform layers in accordance with Section 301-2 of the SSPWC. 9.05 COMPACTING UNTREATED BASE Untreated base shall be compacted in accordance with Section 301-2.3 of the SSPWC. The finished base, where not controlled by adjacent structures, shall be not more than 0.02 foot above, and not more than 0.02 foot below the theoretical cross-section. 9.06 PAYMENT Aggregate base will be paid for at the unit or lump sum price listed in the Proposal. ***END OF SECTION 9*** TS - 4 CITY OF AZUSA TECHNICAL SPECIFICATIONS CONCRETE CURBS,WALKS, GUTTERS, CROSS GUTTERS, ALLEY INTERSECTIONS, ACCESS RAMPS AND DRIVEWAYS 10.01 GENERAL The Contractor shall furnish all plant, labor, materials, tools, equipment transportation and all incidental work and services required to construct concrete curbs, walks, gutters, cross gutters, alley intersections, access ramps and driveways shown on the Drawings or specified, in accordance with these Specifications and Sections 201 and 303-5 of the SSPWC, except as modified herein and as approved by the applicable jurisdiction. 10.02 SUBGRADE Subgrade shall be prepared in accordance with Section 301.1 of the SSPWC. The completed subgrade shall be tested for grade and cross-section by means of a template extending the full depth of the section and supported between the side forms. The subgrade and forms shall be thoroughly watered in advance of placing concrete. 10.03 MATERIAL Unless otherwise specified all curbs, gutters sidewalks and driveways shall be constructed with Class 520-C-2500 concrete. Concrete aggregate shall be No. 3 grade unless specified otherwise by the Engineer. All concrete shall comply with Section 201 of the SSPWC. 10.04 MIXING, PLACING AND CURING The mixing, placing and curing of concrete shall comply with Section 303-5 of the SSPWC. 10.05 FORMS All forms shall be set to the true lines and grades as shown on the Drawings and typical cross- sections. The depth of forms for curbs and gutters shall be equal to the full depth of the structure. The depth of forms for 4-inch sidewalk may be 3-5/8 inches. Timber forms, if used, shall be surfaced on the side next to the concrete and on the upper edge and shall be of the required size and strength to maintain their rigidity when the concrete is placed. Timber forms on all straight work shall not be less than 1-5/8-inch in thickness after being surfaced. The forms on the front of curbs shall be removed not less than 2 hours or more than 6 hours after the concrete has been placed. All other forms shall remain in place until the concrete is thoroughly set. Forms shall be cleaned thoroughly each time they are used and coated with light oil as often as necessary to prevent the concrete form adhering to them. Warped or rough forms will be rejected. TS - 5 CITY OF AZUSA TECHNICAL SPECIFICATIONS Curb forms shall be held rigidly in place by the use of pairs of iron stakes placed at intervals not to exceed 4 feet. Clamps, spreaders and braces shall be used where required to insure rigidity in the forms. 10.06 JOINTS Expansion joints shall be installed at each driveway top of"X". Transverse expansion joints in curbs, gutters and sidewalks shall be installed at all returns and shall be spaced at intervals not to exceed 60 feet between joints. An effort shall be made to space all joints in such a manner so as to create an appearance of uniformity. Expansion joints shall be filled with joint filler strips 1/2- inch thick and shall extend the full width and depth of curb, gutter and sidewalk. The joint filler strips shall be in one piece, pre-cut to true cross-section and installed true to line and grade and at true angles to the curb and gutter line. Edges of expansion joints shall be rounded with an approved edging tool having a radius not to exceed 1/4-inch and all excess concrete shall be removed from around the joint. Weakened plane joints shall be installed at regular intervals not exceeding 10 feet for walks and 20 feet for curb and gutters. Weakened plane joints shall be constructed in accordance with Section 303-5.4.3 of the SSPWC. 10.07 FINISHING Finishing of concrete curbs, walks, gutters, cross gutters, alley intersections, access ramps and driveways shall conform to Section 303-5.5 of the SSPWC. A mortar finish will not be allowed under any circumstances. 10.08 CURING Exposed concrete surfaces shall be cured in accordance with Section 303-5.6 of the SSPWC. 10.09 REMOVALS When Drawings provide for reconstruction of existing sidewalks, curbs and driveways limits of the removal are to be saw cut to a depth of 1-1/2-inches. Limits are to fall on the nearest full section of walk or curb at the next weakened plane or expansion joint. 10.10 REPAIRS AND REPLACEMENTS Any new work found to be defective or damaged prior to its acceptance shall be repaired or replaced by the Contractor at no expense to the City in accordance with Section 300-1.3 of the SSPWC. TS - 6 CITY OF AZUSA TECHNICAL SPECIFICATIONS CONCRETE STRUCTURES 11.01 GENERAL The Contractor shall furnish all plant, labor, materials, tools, equipment, excavation, backfill and all incidental work and services required to construct concrete structures such as, culverts, headwalls, endwalls, drop inlets, catch basins, retaining walls, piles, reinforced and non- reinforced, complete in place in accordance with these Specifications, the Drawings, applicable standard drawings and Sections 201, 205, 303 and 305 of the SSPWC. 11.02 STRUCTURES Portland cement concrete structures shall conform to the applicable Sections of the SSPWC. 11.03 REINFORCING Reinforcing steel shall conform to Section 201-2 of the SSPWC and applicable ASTM Standards. 11.04 MISCELLANEOUS METAL ITEMS Miscellaneous metal items shall conform to Section 206 of the SSPWC and applicable ASTM Standards. 11.05 PAYMENT Concrete structures that are identified on the Drawings or in the Special Provisions shall be paid for at the unit price bid either by lump sum or as listed in the Proposal. ***END OF SECTION 11*** TS - 8 CITY OF AZUSA TECHNICAL SPECIFICATIONS 10.11 CURB MACHINES The use of curb machines will require approval by the appropriate Director of Public Works or City Engineer prior to its use. 10.12 PAYMENT Payment for concrete curbs, walks, gutters, cross gutters, alley intersections, access ramps and driveways will be made at the unit or lump sum price listed in the Proposal. ***END OF SECTION 10*** TS - 7 1 CITY OF AZUSA TECHNICAL SPECIFICATIONS CONCRETE STRUCTURES 11.01 GENERAL The Contractor shall furnish all plant, labor, materials, tools, equipment, excavation, backfill and all incidental work and services required to construct concrete structures such as, culverts, headwalls, endwalls, drop inlets, catch basins, retaining walls, piles, reinforced and non- reinforced, complete in place in accordance with these Specifications, the Drawings, applicable standard drawings and Sections 201, 205, 303 and 305 of the SSPWC. 11.02 STRUCTURES Portland cement concrete structures shall conform to the applicable Sections of the SSPWC. 11.03 REINFORCING Reinforcing steel shall conform to Section 201-2 of the SSPWC and applicable ASTM Standards. 11.04 MISCELLANEOUS METAL ITEMS Miscellaneous metal items shall conform to Section 206 of the SSPWC and applicable ASTM Standards. 11.05 PAYMENT Concrete structures that are identified on the Drawings or in the Special Provisions shall be paid for at the unit price bid either by lump sum or as listed in the Proposal. ***END OF SECTION 11*** TS - 8 CITY OF AZUSA TECHNICAL SPECIFICATIONS WATER DISTRIBUTION PIPELINES 12.01 GENERAL - PIPING The Contractor shall furnish and install all pipe, fittings, valves, supports, bolts, nuts, gaskets, jointing, materials and appurtenances as shown on the Drawings and as specified herein, and shall furnish and install all auxiliary piping and connection to equipment, all as required for a complete and workable piping system. 12.02 STEEL PIPE (a) General: Fabricated steel pipe and fittings, 6-inches in diameter and larger, shall conform to the requirements of the "Steel Water Pipe 6-Inches and Larger", (AWWA C200). Steel pipe, 4- inches in diameter and smaller shall conform to the "Specifications for Black and Hot-Dipped Zinc Coated (Galvanized) Welded and Seamless Steel Pipe for Ordinary Uses" (ASTM A120) and shall be standard weight. Galvanized steel pipe shall not be cement mortar lined unless otherwise shown. Buried galvanized pipe shall be wrapped with polyvinyl chloride tape with a total thickness of 30 mils. The tape shall be Plicoflex No. 340 or approved equal. The pipe first shall be primed following which the tape shall be applied strictly in accordance with the manufacturer's instructions. (b) Pipe: Pipe 8-inch diameter and larger shall be fabricated from 1/4-inch wall thickness steel sheet or plate, and pipe smaller than 8-inch diameter shall be fabricated from 10 gage steel sheet or plate. The pipe shall be manufactured in sections having nominal lengths of 30 to 48 feet except where special sections are required. The pipe shall be furnished with rubber gaskets, butt straps, and closure pieces where shown or required. (c) Interior Lining: Pipe and fittings, as indicated on the Drawings, shall be cement mortar lined in conformance with the "Standard for Cement Mortar Protective Lining and Coating for Steel Water Pipe - 4-inch and Larger-Shop Applied", (AWWA C205). (d) Exterior Coating: Steel pipe and fittings exposed to the atmosphere, inside structures and above ground shall be thoroughly cleaned and given a shop coat of rust-inhibitive red lead primer and two coats of enamel. All buried, 12-inch and larger steel pipe and fittings shall be cement mortar coated in conformance with the above referenced AWWA C205. All buried, 10- inch and smaller steel pipe and fittings shall be coated with a tape coating system per AWWA C214. TS - 9 CITY OF AZUSA TECHNICAL SPECIFICATIONS (e) Hand holes: The pipe fabricator shall provide 5-inch diameter minimum hand holes at identified locations that require field application of cement mortar lining. For pipes 24-inch in diameter and smaller, mortaring the inside of joints may be accomplished by inserting a tight fitting swab or ball in the joint end of the installed pipe, when ready to insert the spigot end of the pipe to be joined, coat the face of the cement mortar lining at the bell end with sufficient stiff cement, sand, and water mortar to fill the space between adjacent mortar linings of the two pipes to be joined, and immediately after joining the pipes, draw the swab or ball through the pipe to remove all excess mortar and expel it from the open pipe end. (f) Trench Bearing: Steel pipe 4 inches or larger in diameter shall be installed in trenches in such a manner that the pipe shall have uniform bearing along the bottom of the trench, except at bell holes for flanges and field-welded joints. (g) Jointing: The pipe shall have welded or flanged joints. Where practicable, sections of pipe between flanges and/or couplings shall be shop-welded where indicated or required. Welding shall be as specified hereinafter. (h) Lining and Coating: After welding jointing, the lining and coating of the pipe shall be made continuous by pointing the joint with mortar of one part portland cement, one part sand, and water. (i) Pipe Welding: Circumferential joints in steel pipe shall be welded by use of electric arc in such a manner as to insure a connection equally or surpassing the strength of adjacent pipe. Care shall be taken to prevent spilling of the mortar lining and coating. All field welding shall be done in accordance with the applicable requirements of AWWA Standard C206, entitled "Field Welding of Steel Water Pipe Joints." All shop and field welding, whether manual or by machine, shall be as specified herein. Welds to fabricate pipe shall be made in accordance with the requirements of the applicable reference specifications under which the pipe is fabricated as amended herein. Welds specified herein, or shown on the Drawings, shall conform to the contours shown on these Drawings or indicated by standard welding symbols on such drawings. Welds, when tested, shall develop a tensile strength equal to that of adjoining parent metal. Finished weld bead shall be centered in the seam, and the finished joints shall be reasonably smooth and free from depressions, cut edges, burrs, irregularities, and valleys. Each deposited layer of welded material shall be thoroughly wire brushed, and all slag, scale, and other loose material shall be removed before any additional weld metal is applied. Fillet welds shall have the full penetration into the corner of the fillet and shall be obtained with a minimum cutting back of the edge of the outside sheet. Fillet welds shall be of the size specified herein or shown TS - 10 CITY OF AZUSA TECHNICAL SPECIFICATIONS on the drawings, and in any case, shall have a thickness of not less than that of the thinnest member to be joined. Welds considered by the City to be deficient in quality, or made contrary to any mandatory provisions of these Specifications, shall be removed by chipping or cutting and re-made. Weld metals shall be removed throughout its depth to expose clean base metal, but in no case shall the chipping or cutting extend into the base metal beyond the depth of weld penetration. Caulking of welds will not be permitted. Tack welds shall be removed if required by the City. Weld test specimens taken from materials fabricated for the work of these Specifications shall be taken in accordance with the respective reference specifications under which the particular item is being fabricated. Said specimens shall be furnished to the City Inspector to enable the City to ascertain that welds of the proper quality are being made. The furnishing of specimens in insufficient time so as to cause delay in the fabrication of materials shall not be cause for a time extension nor extra cost item to the contract. The City shall have the right to request and witness the making of weld test specimens by a welder when, in the opinion of the City, a satisfactory weld is not being made. Specimens shall be furnished by the Contractor and a weld of the type in question shall be made. The weld specimen shall then be submitted to a test laboratory approved by the owner and subject to the appropriate test to determine the character of the quality in question. The expense of said test shall not be borne by the Contractor. If more than one test is to be performed, additional specimens shall be furnished by the Contractor as required. The requirements of this provision shall not be cause for a time extension nor extra cost item to the Contract. (j) Qualifications for Welding Operators: Manual welders shall be qualified in accordance with the latest revision of Section IX of the ASME Boiler Construction Code entitled, "Welding Qualifications" or under the Standard Qualification Procedure of the American Welding Society. All welding operators shall be qualified under paragraph U-69 of ASME Code for Unfired Pressure Vessels, or Paragraph W.451 of API-ASME Code for Standard Qualification Procedure of the American Welding Society. (k) Welding Filler Material: Electrodes for manual welding shall conform to the American Welding Society Standards. All welding electrodes shall be subject to the approval of the City. (1) Welding Equipment: Contractor's equipment for welding and flame cutting shall be so designed and manufactured to permit qualified welding operators to follow the procedures and obtain the results described in these Specifications. TS - 11 CITY OF AZUSA TECHNICAL SPECIFICATIONS 12.03 DUCTILE IRON PIPE (a) Ductile iron pipe and fittings shall be cement mortar lined in conformance with ANSI A21.4 and shall be Pressure Class Designation 350. Pipe shall be furnished in approximately 18 foot lengths with bell and spigot ends and shall conform to ANSI A21.51 in all respects except details of the joint. (b) Ductile iron pipe joints shall be of the push-on rubber gasket type conforming ANSI A21.11. Mechanical,restrained and flanged joints shall be provided where shown on the Drawings. (c) Ductile iron fittings for joining ductile iron pipe shall be restrained joints, the joint shall be mechanical joint with set screws on the retainer gland. The set screws shall be square head, double heat tested steel screws designed to bite into the pipe surface to prevent joint separation. 12.04 SLEEVE-TYPE COUPLINGS AND FLANGE ADAPTERS Sleeve-type couplings and flange adapters shall be furnished where shown and shall be Romac or approved equal. Couplings shall be of steel with stainless steel bolts, without pipe stop, and shall be sized to fit the pipe and fittings shown. The middle ring shall not be less than 1/4-inch in thickness and shall be 12 inches long. 12.05 FLANGE GASKETS AND BOLTS Flange gaskets shall be ring face type, with bolt holes pre-punched, Johns-Manville, Style 605, Cranite or approved equal. Gasket thickness shall be 1/16-inch for pipe 10 inches and smaller and 1/8-inch for 12-inch and larger pipe. Flanged assembly bolts shall be standard hex-head machine bolts with heavy, hot pressed, hexagon nuts. Threads shall conform to ANSI B1.1, coarse thread series, Class 2 fit. Bolts length shall be such that after joints are made up, the bolts shall protrude through the nut but not more than 1/2-inch. All bolts for use in installations shall be stainless steel Type 304. 12.06 EXCAVATION AND BACKFILL (a) EXCAVATION. The Contractor shall make all necessary excavation to construct the work as shown on the Drawings and shall remove all pipes, trees, stones, debris and other obstructions that may be encountered in making the excavation. The trench at the end of each day shall not be excavated more than one hundred (100) feet in advance of the pipe laying, nor left unfilled for more than one hundred (100) feet where the pipe has been laid. TS - 12 CITY OF AZUSA TECHNICAL SPECIFICATIONS The trench shall be excavated to a depth of six-inches below the bells and re-filled to invert grade with sand and thoroughly compacted into place at the Contractor's expense for all labor and material. If any trench bottom, through neglect of the Contractor, be excavated below the grade as required by the Drawings and these specifications, it shall be re-filled to grade with sand thoroughly compacted into place at the Contractor's expense for all labor and material. Excavation shall be supported in a safe manner meeting the requirements of CAL OSHA. Existing improvements of any kind, either on public or private property, shall be fully protected from damage. If any damage does result to such improvements, the Contractor shall make the necessary repairs or reconstruction at his own expense and as directed by the Engineer. Sheet piling or other timbers shall be removed in such a manner as to prevent caving of the walls of the excavation. The minimum width of excavation shall be 12-inches (6-inches on each side) more than the exterior diameter of the pipe exclusive of joints and tees. (b) BACKFILL. All pipe trenches shall be backfilled to twelve inches over the top of the pipe with sand conforming to Section 200-1.5 of the SSPWC. The material shall be placed simultaneously on both sides of the pipe and shall be completely worked by tamping around the pipe. Such backfilling must be witnessed by the Engineer. It shall be compacted to not less than 90 percent of maximum density. Prior to placing the remaining backfill, all material that has inadvertently fallen into the excavation, shall be removed to twelve inches above the pipe before commencing trench backfilling. This requirement is mandatory. The remaining backfill shall be select material obtained from the excavation, shall not contain stones or boulders larger than 3- inches maximum dimension, and shall be placed in layers not exceeding 12-inches in thickness. Each layer shall be compacted to not less than 90 percent of maximum density. 12.07 CUTTING AND RESTORING EXISTING PAVEMENT Street destroyed in connection with performing the work required under the Contract shall be replaced with the same kind or better by the Contractor. If a strip of existing pavement less than five (5) feet is left between a trench and a gutter or edge of pavement, it shall be removed and new pavement placed in its stead. In cutting or breaking up street surfacing, the Contractor shall not use equipment which will damage the adjacent pavement. All concrete pavement surfaces shall be scored with concrete sawing equipment; provided, that any portland cement concrete base under an asphalt mix surface will not be required to be scored by sawing. Asphaltic- concrete pavement shall be removed to clean straight lines. TS - 13 CITY OF AZUSA TECHNICAL SPECIFICATIONS Concrete sidewalks, curbs and gutter required to be removed in connection with performing the work under the contract shall be cut to the nearest score mark and shall be replaced with the same kind or better by the Contractor. Immediately after completing the backfilling of any section of pipeline in a paved area, temporary resurfacing at least 1-1/2 inches in thickness, shall be placed over the backfilled trench and maintained by the Contractor at his own expense. Upon completion of substantial parts of the project,but not before the pipeline is tested the temporary resurfacing shall be placed with permanent resurfacing. All work shall match the appearance of the existing improvements as nearly as practical. Lampblack or other pigments may be added to the concrete to attain the necessary result. In all cases the repaving and repairing shall be done in accordance with the requirements of the local authorities having jurisdiction in the area of the work. 12.08 INSTALLATION OF PIPE (a) The Contractor shall install pipe closure sections, fittings, valves and appurtenances shown, including bolts, nuts, gaskets,jointing materials and thrust blocks. (b) At all times when the work of installing pipe is not in progress, all openings into the pipe and the ends of the pipe in the trenches or structure shall be kept tightly closed to prevent entrance of animals and foreign materials. The Contractor shall take all necessary precautions to prevent the pipe from floating due to water entering the trench from any source, shall assume full responsibility for any damage due to this cause and shall at his own expense restore and replace the pipe to its specified condition and grade if it is displaced due to floating. The Contractor shall maintain the inside of the pipe free from foreign materials and in a clean and sanitary condition until its acceptance by the City. (c) Where closure sections are required by the Contractor's laying operation, the sections shall be installed in accordance with the applicable section of these Specifications. (d) The pipe sections shall be laid in the trench to true alignment and grade in accordance with the Drawings. Exceptional care shall be taken in placing the pipe and making the field joint. Bumping of the pipe in the trench will not be permitted. Steel pipe shall be welded, unless otherwise shown on the Drawings. Concrete thrust blocks shall be provided at the locations and of the sizes as shown on the Drawings. (e) Special care shall be taken during unloading and placing the pipe in trenches. Fabric or other approved slings shall be used for steel pipe. Sandbags shall be used to support all stockpiled TS - 14 CITY OF AZUSA TECHNICAL SPECIFICATIONS pipe. Bell holes shall be dug under each bell to permit even bearing of the pipe along the entire length. (f) Pipe ends shall be reamed to the full bore of the pipe. Threads shall conform to ANSI B2.1. In making up threaded joints, an accepted thread lubricant shall be applied to the male threads only. (g) Flanged joints shall be made up square with even pressure upon the gaskets and shall be perfectly watertight. (h) Bell and spigot joints shall be made up concentrically with the rubber gasket completely retained by the bell or spigot groove. A feeler gage shall be used to determine if each joint has been properly assembled. (I) When steel pipe is not to be welded, concrete thrust blocks shall be constructed at all changes in direction. Thrust blocks shall be constructed against undisturbed earth. Each thrust block shall be placed so that valves and fittings are accessible for repair. Size of thrust blocks shall be as shown or as directed by the Engineer. 12.09 INSULATING BUSHINGS AND UNIONS Pipe and fittings made of non-ferrous metals shall be isolated from ferrous metals by nylon insulating pipe bushings or unions as manufactured by Smith Blair, Corrosion Control Products, Co., or approved equal. 12.10 SERVICE LATERALS (a) New service laterals are to be installed of the size and at the location shown on the Drawings. All services shall utilize a brass double strap service saddle for tap to main. (b) Service lateral material shall be Type K soft copper. (c) Service laterals are to be installed, chlorinated, pressure tested and flushed before connection is made to meters. (d) No joints shall be made in service lateral runs without the City inspector's permission. (e) All new services shall be installed before new mains are pressurized and chlorinated. TS - 15 CITY OF AZUSA TECHNICAL SPECIFICATIONS 12.11 VALVES - GENERAL (a) All valves and gates shall be of new manufacture. The flanges may be either raised or plain faced and shall be faced and drilled to 150-pound American Standard dimensions, unless otherwise shown on the Drawings. Each valve body shall be tested to a pressure equal to twice its design water working pressure, except that gate valves shall be tested in accordance with "Standard for Gate Valves for Ordinary Water Works Service" (AWWA C500). (b) All interior parts of valves manufactured of bronze or brass except valve stems, shall conform to the requirements of ASTM B62. Gate valve stems shall be of bronze, containing aluminum and having a minimum tensile strength of 60,000 psi, a yield strength of 40,000 psi and elongation of at least 100 percent in two inches, as determined from a test coupon poured from the same ladle from which the valve stems to be furnished are poured. (c) Except as otherwise provided, all ferrous surfaces (excluding non-corrosive surfaces) in the water passages of all valves, 4-inch and larger, shall be coated with an epoxy coating meeting the requirements of Section 12.19. All buried valves shall be provided with an exterior protective coating in accordance with Section 12.20. 12.12 RESILIENT SEAT GATE VALVES (a) Gate valves shall conform to the above referenced AWWA C500. Gate valves shall be designed for a water working pressure of 175 psi and shall be iron-bodied, bottom-wedging, double-disc with parallel seats and shall have 2-inch square operating nut or handwheel, as shown, opening to the left. In addition, non-rising stem gate valves shall be equipped with "0" ring seals. Unless otherwise shown, gate valves shall have non-rising stems and shall be furnished with flanged ends. Gate valve shall be new and of current manufacture and shall be as manufactured by Mueller Co., or approved equal. (b) All interior parts of gate valves shall be constructed of bronze conforming to the requirements of Section 12.11. (c) Ferrous surfaces in the water passages of valves 4-inches in diameter and larger shall be epoxy coated in accordance with Section 12.19. The coating shall not be applied to stainless steel,brass or bronze surfaces. (d) Resilient seat gate valves shall be used for installations up to 12-inches in size exclusively. 12.13 BUTTERFLY VALVES TS - 16 CITY OF AZUSA TECHNICAL SPECIFICATIONS (a) BUTTERFLY VALVES. Butterfly valves shall conform to the "Standard for Rubber-Seated Butterfly Valves" (AWWA C504), except that butterfly valves, 24-inch and smaller, may be of the shorter laying length and the seat may be bonded into a groove in the valve body. The valves shall be of the class indicated on the Drawings. Valve bodies shall be cast iron conforming to the "Specification for Gray Cast Iron Casting for Valves, Flanges and Pipe Fittings" (ASTM A126), Class B. Valve shafts shall be of Type 304 stainless steel, running in "oilite", or approved equal, sleeve-type bearings and fitted at the outer end for connection to operating gearing. Ferrous surfaces in the water passages of all valves (excluding those surfaces manufactured of non-corrosive materials) shall be coated in accordance with Section 12.19. Butterfly valves shall be Pratt Groundhog or approved equal. (b) MANUAL OPERATORS. The type of manual operator to be provided with each butterfly valve shall be as shown. Manual operation shall be through totally-enclosed, permanently- lubricated gear reducers. Gear reducers shall have a self-locking worm or spur and rack-type gearing and shall be equipped with handwheel or with a 2-inch square operating nut on the input shaft as noted on the drawings. Open and close stops shall be provided to limit valve disc travel. Handwheel operators shall be equipped with position indicators. The operators for buried butterfly valves shall be totally-enclosed, have fully-gasketed, sealed and grease-packed operator cases suitable for and expressly designed for installation and operation in a buried location. The minimum torque rating for a buried service operator shall be 8,000 inch-pounds. (c) Butterfly valves shall be used for installations of 14-inch and larger only and at the direction of the Engineer. 12.14 MISCELLANEOUS SMALL VALVES Miscellaneous small valves shall be as shown. Where not specifically labeled, valves smaller than 4-inch shall be lever-operated, rubber-faced, eccentric plug valves as manufactured by De Zurik or approved equal. 12.15 VALVE BOXES Valve boxes shall be as shown on Standard Drawing W-10. 12.16 CORPORATION STOPS Corporation stops shall be James Jones No. J-3403 or Ford No. FB- 1100 for 1-inch and J-1943 or FB-1100 for 2-inch. 12.17 INSTALLATION OF VALVES TS - 17 CITY OF AZUSA TECHNICAL SPECIFICATIONS All buried valves shall have the operating nuts in a vertical position except as otherwise noted. Valve boxes, where called for, shall be centered over the operating nuts and shall be set plumb. Butterfly valves with handwheel operators shall be installed with the handwheels in the position shown. 12.18 EPDXY COATINGS (a) SURFACE PREPARATION. All oil and grease shall be removed from the metal, using an oil-free solvent (methyl ethyl ketone or trichloroethylene) and clean dry rags. The surface shall be sand- blasted to white metal. In order to obtain maximum adhesion of epoxy coating, the grit used for blasting shall be coarse enough to impart a tooth in the metal equal to 25 percent of the thickness of the coating to be applied. The metal shall be cleansed after sandblasting with clean, dry compressed air. (b) PRIME COATING. The prime coat shall be a Devoe product or approved equal applied to the prepared surface. (c) FINISH COATING. One or more finish coats of a Devoe product or approved equal shall be applied to the primed surface. (d) THICKNESS OF COATING. The minimum dry coating thickness shall be 10 mils, provided, however, that the thickness of coating in the grooves of valves or fitting designed to receive a rubber gasket shall be approximately 5 mils. 12.19 SHOP APPLIED EPDXY COATINGS (a) SURFACE PREPARATION. All oil and grease shall be removed from the metal, using an oil-free solvent (methyl-ethyl-ketone or trichloroethylene) and clean dry rags. The surface shall be sand- blasted to white metal. In order to obtain maximum adhesion of epoxy coating, the grit used for blasting shall be coarse enough to impart a tooth in the metal equal to 25 percent of the thickness of the coating to be applied. The metal shall be cleaned after sandblasting with clean, dry compressed air. (b) POWDER EPDXY. The epoxy shall be one hundred percent epoxy material and shall be 3M Company's Scotchcoat No. 134 or approved equal. (c) PREHEATING. Areas that are not to be coated shall be masked using 500-degree masking tape, similar to 3M Company's Permacel. The part to be coated shall be placed in an oven and preheated to the temperature specified by the epoxy manufacturer. An accurate temperature measuring device such as pyrometer shall be used to determine the substrate temperature. TS - 18 CITY OF AZUSA TECHNICAL SPECIFICATIONS (d) APPLICATION. The epoxy shall be applied as a powder to the heated metal by one of the following methods: (1) ELECTROSTATIC METHOD. The powder shall be applied to the heated, grounded metal part which has been electro-statically charged by means of a current of approximately 1-1/2 amperes at approximately 400 volts. After application of the epoxy, the part shall be reheated as specified by the manufacturer to fuse the epoxy. Equipment for applying the epoxy powder shall be the Sames Electrostatic Powder Spray, or approved equal. Particular care shall be given to protection of non-ferrous masked parts. The finished product shall be carefully examined for epoxy interference on working parts. (2) HEAT FUSION METHOD. The part shall be prepared as outlined above and heated for a sufficient period to drive out all moisture from the metal. Epoxy powder shall be applied using as air spray device designed to exclude moisture from the spray air. The part must be preheated to maintain a surface temperature high enough to cause instant epoxy fusion during the entire application process. After coating, the part shall be reheated as specified by the manufacturer. Particular care shall be taken to protect non- ferrous masked parts. The finished product shall be carefully examined for epoxy interferences on working parts. (e) THICKNESS OF COATING. The minimum dry coating thickness shall be 8 mils, provided, however, that the thickness of coating in the grooves of valves or fittings designed to receive a rubber gasket shall be approximately 5 mils. (f) INSPECTION. Coating thickness shall be checked with a nondestructive magnetic type thickness gage. Coating integrity shall be tested with an 87-volt Tinker Rasor holiday tester or a spark testing unit operating at approximately 2,000 volts. (g) FIELD REPAIRS. If small local repairs are necessary, they shall be made using 3M Company's Scotchclad 134 field repair kit, or approved equal. The surface must first be cleaned with an oil-free solvent (methyl-ethyl-ketone or trichloroethylene) and clean dry rags. 12.20 BURIED MISCELLANEOUS FERROUS SURFACES Buried valves and flanged joints, sleeve-type and victaulic coupling and other buried miscellaneous ferrous piping and metal surfaces (excluding any cast iron pipe) shall be thoroughly cleaned and field-coated with a 1/8-inch thick coating of Scotch-Clad No. 244 as manufactured by 3M or approved equal. The coating shall be applied in strict accordance with the manufacturer's recommendations. Valves may be polyethylene bagged at the discretion of the Engineer. The Contractor will need to request this alternative in writing to the Engineer. TS - 19 CITY OF AZUSA TECHNICAL SPECIFICATIONS 12.21 TESTING AND DISINFECTING - GENERAL The Contractor shall furnish all equipment, labor and materials required for testing and disinfecting the piping. Disinfection shall be accomplished by chlorination. Chlorine dosages will be computed by a chlorination consultant hired by the Contractor, who will furnish the Contractor with detailed instructions for proper application of the chlorine per AWWWA 651-05 "Disinfecting Water Mains." All chlorinating and testing operations shall be done in the presence of ALW staff. Prior to testing and disinfecting, the pipeline shall be thoroughly flushed in accordance with Specification Section 12.23 below. 12.22 TESTING PIPELINES The Contractor shall test the piping after backfilling operations are completed. The test shall be made by placing a temporary bulkhead in the pipe and filling the lines slowly with water. At no time during pipeline construction will heavily chlorinated water be pressure tested against a valve connected to a City water main. Care shall be used to see that air is permitted to escape during filling. After the line has been completely filled, it shall be allowed to stand under slight pressure for a sufficient length of time to allow the mortar lining to absorb what water it will and to allow the escape of air from any air pockets, but for not less than 24 hours. During this period, bulkheads and connections shall be examined for leaks. If any are found, these shall be stopped or in case of leakage through bulkheads, provision shall be made for measuring such leakage during the test. The test shall consist of holding the test pressure on each section of the line for a period of 4 hours. The test pressure at the highest point in the line shall be 150 psi. The water necessary to maintain this pressure shall be measured through a meter or by other means satisfactory to the Engineer. The leakage shall be considered the amount of the water entering the pipeline during the test, less the measured leakage through bulkheads. The leakage shall not exceed 25 gallons per inch of diameter per mile per 24 hours. Any noticeable leaks shall be replaced with new pipe or equipment until the leakage is reduced to permissible limits. 12.23 DISINFECTING AND FLUSHING THE PIPELINES (a) Chlorination shall be accomplished by means of a chlorine-water mixture applied using a solution-feed chlorination device or other methods as approved by AWWA Standard C651-05. The chlorine dosage entering the pipeline shall be at least 50 mg/L. Chlorine concentrations in excess of 50 mg/L or other extraordinary disinfection methods must be approved by ALW in writing, including additional conditions as ALW may require, prior to disinfecting the pipeline. Chlorinated water shall be retained in the pipeline a sufficient length of time to destroy all non- spore forming bacteria, a minimum of 24 hours. All valves shall be operated while the lines are filled with the heavily chlorinated water. All water used for disinfection and flushing shall be metered and paid for by the contractor. TS - 20 CITY OF AZUSA TECHNICAL SPECIFICATIONS (b) Following the required retention period, the heavily chlorinated water shall be flushed from the pipeline until the chlorine concentration in the water leaving the pipeline is no higher than that generally prevailing in the system. A chlorine residual determination shall be made to affirm that the heavily chlorinated water has been removed from the pipeline. Once flushing is complete, the system water will remain in the pipeline for a period of 24 hours; other than minimal amounts to maintain a minimum positive pressure in the pipeline, no additional water is to be introduced into the pipeline. No additional flushing will be allowed once bacteria testing has commenced. All discharged water shall be de-chlorinated per NPDES requirements. (c) 24 hours following completion of flushing, a set of bacteriological samples shall be taken. 24 hours later a second set of bacteriological samples shall be taken. For each set of samples, a coliform bacteria test (Bac-T) and a heterotrophic plate count (HPC) test will be performed. The Contractor shall be responsible for the cost of all water analysis sampling and testing. (d) At the Contractor's expense, ALW will collect water samples for analysis prior to placing the new facilities in service. Contractor shall provide sampling points a minimum of 500 L.F. apart along the pipeline. In any round of sampling, should any sample fail to meet the requirements of AWWA C651-05 for coliform bacteria (i.e. positive) and/or an HPC of 500 CFU/ml or greater, in accordance with Section 5.2 "Redisinfection," the chlorination, flushing and testing procedures shall be repeated. If, after a third round of testing, either the Bac-T or the HPC fail, subsequent rounds of Redisinfection and testing will include an additional set of Bac-T and HPC testing 7 days after the second 24 hour set of testing was performed. (e) If fourth, fifth or sixth sets of testing are required, sampling and testing for Bac-T and HPC will be required at 24-hour, 48-hour, and 7-day intervals. All tests must pass both the Bac-T and HPC test result requirements. If, at the end of the sixth round of testing, the pipeline does not pass both the Bac-T and HPC requirements, further testing of the pipeline will be terminated and the contractor shall remove the pipeline from the ground and re-lay a new pipeline using new pipe and material. Testing of the replacement pipeline will then begin anew at 24-hour Test 1. (f) Existing water pipelines that have been shut down and cut into for connections or installation of tees and valves shall be sterilized to the satisfaction of the Engineer or his duly authorized representatives. The water pipeline and all existing services shall be flushed out until the chlorine residual is not greater than the prevailing water system residual prior to placing back in service. All discharged water shall be de-chlorinated per NPDES requirements. 12.24 COMPACTION TESTS Tests to determine compaction shall be made by a technician hired by the Contractor. Said expense to be included in the Contractor's price bid for the work. Maximum density shall be TS - 21 CITY OF AZUSA TECHNICAL SPECIFICATIONS determined in accordance with ASTM D1557 method, modified to use three layers. Field density tests shall be performed in accordance with the test procedure specified in ASTM D1556. TS - 22 CITY OF AZUSA TECHNICAL SPECIFICATIONS 12.25 SEPARATION OF WATER MAINS AND SANITARY SEWERS The criteria for the separation of water mains and sanitary sewers shall be as specified by the State of California Department of Health Services. A copy of the criteria is on file in the office of the Department of Public Works. 12.26 PAYMENT Pipe shall be paid for at the contract price per linear foot. All other water distribution items shall be paid for at the unit or lump sum price indicated in the bidding schedule. If no bid item is indicated, then the item shall be considered in the contract price per linear foot for pipe. ***END OF SECTION 12*** TS - 23 CITY OF AZUSA TECHNICAL SPECIFICATIONS MISCELLANEOUS METALWORK 13.01 GENERAL The Contractor shall furnish, fabricate, and install all miscellaneous metalwork required by these Specifications and the accompanying Drawings. Miscellaneous metalwork, as used herein, is defined as all items required to be fabricated from structural steel shapes, plates, bars and their products. Except for miscellaneous metalwork items manufactured of stainless steel, all structural steel shapes, plates, bars and their products shall conform to the "Specifications for Structural Steel" (ASTM A36) or the "Specifications for Low and Intermediate Tensile Strength Carbon Steel Plates of Structural Quality" (ASTM A283), (Grade B or C). All miscellaneous items shall be galvanized after fabrication. Shop drawings of all miscellaneous metalwork shall be furnished. Fabrication shall not be commenced prior to approval of shop drawings. 13.02 BOLTS The Contractor shall furnish and set all bolts and anchor bolts. All bolts and anchor bolts shall be low-carbon steel, galvanized after fabrication or they shall be stainless steel. Steel for bolts shall meet the requirements of the "Specifications for Carbon Steel Externally and Internally Threaded Standard Fasteners", Grade B (ASTM A307). Steel for anchor bolts shall meet the requirements of "Specifications for Steel Structural Rivets", (ASTM A502) with the following exceptions and additions: (1) the nut material shall be free cutting steel and (2) the nuts shall be capable of developing the full strength of the anchor bolts. Threads shall be Coarse Thread Series conforming to the requirements of the American Standard for Screw Threads. All bolts shall have hexagon heads and nuts shall be Heavy Hexagon Series. 13.03 GALVANIZING All structural steel plates, shapes, bars and fabricated assemblies required to be galvanized shall, after the steel has been thoroughly cleaned of rust and scale, be galvanized in accordance with the "Specifications for Zinc (Hot-Galvanized) Coatings on Products Fabricated from Rolled, Pressed and Forged Steel Shapes, Plates, Bars and Strips" (ASTM A123). Any galvanized part that becomes warped during the galvanizing operation shall be straightened. Bolts, anchor bolts, and similar threaded fasteners, after being properly cleaned shall be galvanized in accordance with the "Specifications for Zinc Coating (Hot Dip) on Iron and Steel Hardware" (ASTM A153). 13.04 PAYMENT Miscellaneous metal work that is identified on the Drawings or in the Special Provisions shall be paid for at the unit price bid either by lump sum or as listed in the Proposal. *** END OF SECTION 13 *** TS - 24 CITY OF AZUSA TECHNICAL SPECIFICATIONS PAINTING AND PROTECTIVE COATINGS 14.01 GENERAL (a) The Contractor shall furnish all labor, material and equipment necessary to complete the painting as specified or required. Equipment shall include brushes, spray guns, drop cloths, scraping and sanding equipment, masking material, ladders and any scaffolding that may be required. (b) Spray painting shall be conducted under controlled conditions and the Contractor shall be fully responsible for any damage occurring from spray painting. (c) Each coat of paint shall be of the proper consistency and shall be well brushed, rolled or sprayed to obtain a uniform and evenly applied finish. Work shall be free from "runs", "bridges", "shiners" or other imperfections due to faulty intervals. Paint shall not be applied in extreme heat nor in dust or smoke-laden air nor in damp or humid weather. Unless otherwise specified, each coat shall have a minimum drying time of 48 hours before the next coat is applied. (d) Only good clean brushes and equipment shall be used. 14.02 FERROUS SURFACES NOT BURIED (a) SURFACE PREPARATION. Deposits of dirt, grease, tar and oil shall be removed and all sharp edges and weld splatter shall be ground smooth. The surface to be painted shall be prepared in accordance with SSPC-SP-3 (Power Tool Cleaning) or SSPC-SP-2 (Hand Tool Cleaning) to remove all rust, mill scale, paint or other foreign matter. All dust shall be removed from the surface by brush or industrial vacuum. Galvanized metal surfaces shall be cleaned of all foreign matter and treated with an Engard barrier primer or approved equal then coated in accordance with this Section. (b) PRIME COATING. The prime coating shall be applied immediately after the surface has been prepared. The surface shall receive one coat of Kop-Coat 340 (2 mils) or approved equal. The primer shall dry for a minimum time of 24 hours in dry weather before the finish coating is applied. (c) FINISH COATING. The primed surface shall receive two finish coats of Kop-Coat 200 (5 mils each) or approved equal. The color of the finish coat shall be selected by the Engineer. TS - 25 CITY OF AZUSA TECHNICAL SPECIFICATIONS 14.03 BURIED MISCELLANEOUS FERROUS SURFACES Buried valves and flanged joints, sleeve-type and victaulic couplings and other buried miscellaneous ferrous piping and metal surfaces (excluding any cast iron pipe) shall be thoroughly cleaned and field-coated with two 10 mil coatings of 300-M as manufactured by Kop-Coat, or approved equal. The coating shall be applied in strict accordance with the manufacturer's recommendations. **END OF SECTION 14** TS - 26 CITY OF AZUSA TECHNICAL SPECIFICATIONS ASPHALT CONCRETE PAVEMENT 15.01 GENERAL The Contractor shall furnish all plant, labor, materials, tools, equipment, transportation and all incidental work and services required to construct asphalt concrete pavement and asphalt concrete resurfacing in accordance with these Specifications, applicable drawings and Section 203 and 302 of the SSPWC, except as modified herein and as approved by the applicable jurisdiction . 15.02 PRIME AND SEAL COATS A prime coat or a seal coat will not be required unless specified in the Special Provisions. When specified, the prime and seal coats shall conform to Section 203 of the SSPWC. 15.03 ASPHALT BINDER A tack coat shall be applied to all concrete curb or gutter surfaces that will be in contact with the asphalt surfacing. When the surface to be paved is an existing portland cement, brick, or dry asphalt pavement, a tack coat shall be applied to said surface at the rate of from 0.05 gallon to 0.10 gallon per square yard of surface covered. The exact rate of application will be determined by the Engineer. The tack coat shall be applied only so far in advance of paving or surfacing as ordered by the Engineer. The surface to be covered shall be thoroughly cleaned of all dirt and loose materials prior to application of the asphalt binder. The tack coat shall consist of an emulsified asphalt, Grade SS-lh or Grade AR1000 paving asphalt. It shall be furnished and applied in accordance with the requirements of Section 203-3 and 302-5 of the SSPWC. 15.04 WEED KILLER Polybor chlorate, a weed killer, shall be applied to all ground surfaces where pavement is to be placed. It shall be mixed at the rate of two pounds of chemical to one gallon of water and shall be applied at a coverage rate of one gallon per 50 square foot. 15.05 ASPHALT CONCRETE TS - 27 CITY OF AZUSA TECHNICAL SPECIFICATIONS Asphalt concrete shall be the product of mixing mineral and/or crushed slag aggregate with asphalt binder at a central mixing plant. The combined mineral aggregate shall be as follows: Pavement Thickness Maximum Size Class Aggregate 3" AC or greater 3/4-inch C-1 2" AC 3/4-inch C-2 1-1/2" AC Resurfacing 1/2-inch D-1 The asphalt binder shall be paving asphalt. The viscosity grade shall be as specified by the Engineer and shall conform to the requirements of Section 203.6 of the SSPWC. The temperature of the paving asphalt and the mineral aggregate at the time of mixing shall conform to Section 203-1 of the SSPWC. 15.06 PLACING ASPHALT CONCRETE PAVEMENT Prime coat or plant mixed surfacing shall be placed on the base course or subgrade only after said base has been approved by the Engineer. All work shall conform to Section 302-5 of the SSPWC except as modified herein. The application temperature of asphalt shall conform to Section 203-1.4 of the SSPWC. Distribution and spreading shall conform to Section 302-5.4 The Contractor shall furnish to the Engineer certified weight tickets for all asphalt concrete incorporated in the work. 15.07 ROLLING Asphalt concrete shall be thoroughly compacted by rolling in accordance with Section 302-5.5 of the SSPWC. All valve cans and lids shall be adjusted to pavement grade prior to rolling. Manholes and other structures shall be adjusted to grade per Section 302-5.7 of the SSPWC. 15.08 PAYMENT Asphalt concrete will be paid for at the unit or lump sum price listed in the proposal or if no separate item is included, in the other items of work to which it relates. ***END OF SECTION 15*** TS - 28 CITY OF AZUSA TECHNICAL SPECIFICATIONS ER 1110-1-1807 PROCEDURES FOR DRILLING IN EARTH EMBANKMENTS 16.01 GENERAL All work shall conform to ER 1110-1-1807 of the United States Army Corps of Engineers for work near Big Dalton Wash and San Dimas Wash. Official Publications for USACE may be found at: http://publications.usace.army.mil/publications/ The Engineering Regulations are located at: http://publications.usace.army.mil/publications/eng-regs/ TS - 29 DEPARTMENT OF THE ARMY ER 1110-1-1807 U.S.Army Corps of Engineers CECW-CE Washington,DC 20314-1000 Regulation No. 1110-1-1807 1 March 2006 Engineering and Design PROCEDURES FOR DRILLING IN EARTH EMBANKMENTS 1. Purpose. This regulation establishes policy and requirements and provides guidance for drilling in dam and levee earth embankments and/or their earth foundations. 2. Applicability. This regulation applies to all major subordinate commands(MSC), district commands, laboratories and field operating activities having Civil Works and/or Military Program responsibilities. It applies to in-house and contracted efforts. 3. References. a. EM 1110-1-1804 Geotechnical Investigations. b. EM 1110-1-1906 Soil Sampling. c. EM 1110-2-3506 Grouting Technology. d. UFGS-02210 (August 2004) Subsurface Drilling, Sampling, and Testing. e. ASTM D1452-80(2000) Standard Practice for Soil Investigation and Sampling by Auger Borings. f. ASTM D1586-99 Standard Test Method for Penetration Test and Split-Barrel Sampling of Soils. g. ASTM D1587-00 Standard Practice for Thin-Walled Tube Sampling of Soils for Geotechnical Purposes. 4. Distribution. This regulation is approved for public release; distribution is unlimited. 5. Background. In the past, compressed air and various drilling fluids have been used as circulating media while drilling through earth embankments and their foundations. Although these methods have been used successfully in accomplishing the intended purposes,there have been many incidents of damage to embankments and foundations. While using air(including air with foam),there have been reports of loss of circulation with pneumatic fracturing of the embankment as evidenced by connections to other borings and blowouts on embankment slopes. While using water as the circulating This regulation supersedes ER 1110-2-1807, 30 September 1997 ER 1110-1-1807 1 Mar 06 medium,there have been similar reports of erosion and/or hydraulic fracturing of the embankment or foundation materials. 6. Policy. a. This regulation provides guidance for drilling in earth embankments and their soil and soft rock foundations. It identifies acceptable and prohibits unacceptable techniques and circulating media and prescribes personnel requirements and approved drilling methods. b. Personnel involved in drilling into or through dam and levee earth embankments shall be senior,well qualified, and experienced in the processes and procedures outlined within this regulation. Designs shall be prepared and approved by geotechnical engineers and/or engineering geologists. Drillers and mud engineers shall be industry specialists and experts in their fields. c. Drilling in embankments or their foundations using compressed air(including air with foam)or any other gas or water as the circulating medium is prohibited. This prohibition shall apply whether drilling is done with hired labor or with contract drilling. Further, it will apply regardless of the purpose of drilling, whether for investigations, grouting, instrumentation installation, or any other reason. d. Auger drilling is an acceptable method for advancing a hole through an earthen embankment. If auger tools are used, either bucket, continuous flight, or hollow stem augers shall be used, and under no circumstances shall drill fluid circulation be used. Hollow stem augers may be used with Standard Penetration Test equipment. e. Cable tool(churn) drilling and rotary drilling may also be used when auger drilling is impracticable. If the cable tool method is used, drilling tools shall be restricted to hollow sampling(drive)barrels in earth embankment and overburden materials. If rotary drilling is used, an engineered drilling fluid(or mud) shall be used. If rotary drilling with fluid is selected as the drilling method,procedures detailed in Appendix A shall be used. f. ResonantSonicsM drilling is an acceptable method for advancing a hole through an earthen embankment. If ResonantSonics drilling is selected as the drilling method, procedures detailed in Appendix B shall be used. g. Exemptions to or deviations from these prohibitions and requirements may be made only in special circumstances and when all other acceptable alternatives have been exhausted. Drilling through pervious rockfill or gravel sections of an embankment or foundation could be considered an appropriate instance for exemption. Granting of an exemption should not be taken lightly since inappropriate drilling has caused serious dam safety consequences. It is the responsibility of the District Dam Safety Officer(DSO)to assure compliance with the restrictions and procedures outlined in this regulation. 2 ER 1110-1-1807 1 Mar 06 h. Written requests for waivers to this regulation must be submitted for approval to the DSO before beginning the work. This request shall include details of the design, drilling personnel, equipment and procedures to be used, as well as detailed descriptions and cross sections of the embankment and the foundation materials to be penetrated. The DSO shall assure that documentation for each waiver request receives an independent technical review prior to his decision to grant or reject the request. Finally, the DSO shall notify CECW-CE prior to granting any exemption or deviation from these requirements. FOR THE COMMANDER: 2 Appendices 4,01-IN R. McMAHON APP A-Rotary Drilling Procedures Colonel, Corps of Engineers for Earth Embankments Chief of Staff APP B -ResonantSonicsM Drilling Procedures For Earth Embankments 3 ER 1110-1-1807 1 Mar 06 APPENDIX A ROTARY DRILLING PROCEDURES FOR EARTH EMBANKMENTS A-1. Purpose. This appendix prescribes materials and procedures to be followed when using rotary drilling equipment and methods for sampling and/or advancing a drill hole through an embankment to set casing. A-2. Procedure. a. Holes into or through an embankment shall be drilled with a noncoring type roller (preferred), fishtail or other suitable bit as necessary to drill a minimum 5-1/2 inch diameter hole in the embankment and overburden. Where practicable, openings or nozzles directing flow of the circulation fluid should be upward or side discharge. A commercial drilling mud shall be used as the drilling fluid. The mud shall have sufficient consistency and weight to prevent caving and minimize intrusion of the drilling mud into the embankment and overburden. Thorough washing out and removal of all cuttings during drilling is essential. b. Upon reaching foundation rock, an NW size, 3-1/2 inch O.D. x 3 inch I.D., flush joint casing shall be inserted in the hole and firmly seated in rock. After seating the casing, drilling mud shall be flushed from inside the casing. However,mud shall be maintained outside the casing until it is removed from the hole after backfilling. Every effort shall be made to avoid loss of circulation and embankment damage. This shall include careful control of the following: (1) Excess drill penetration rate or down pressure may cause embankment damage. What constitutes"normal" and"excessive" drilling parameters can be expected to vary considerably from embankment to embankment and from hole to hole. Normal drilling parameters should be established during initial drilling of an embankment in a relatively clean hole. (2) A drilling rate of not more than 5 ft penetration in five minutes should be maintained when drilling in clay. To prevent damage from clay buildup on the drill rods or balling of the bit and overloading(clogging)the annulus of the hole,the drill stem should be slowly raised and cleaned if clay buildup occurs. (3) Surges in pumping rate or pressure should be avoided. Pump pressure and drill down-pressure readings must be continually monitored. If the pump pressure increases by 50 percent during the drilling of any 5 ft increment, the bit should be picked up slowly and the hole allowed to clean. (4) Attempt to drill through any tight sections. Do not advance the hole by rapid raising and lowering of the drill tools. Raise or lower drill tools slowly to prevent pressure changes that cause caving. A-1 ER 1110-1-1807 1 Mar 06 (5) Run the pump for 15 seconds with the bit on the bottom of the hole before adding a joint of drill rod. (6) Operate the pump at the lowest rate that will assure adequate cooling and cleaning of the bit and removal of cuttings. A-3. Drilling Fluid Mix. The initial drilling fluid mix shall be as follows,using materials similar or equal to the Baroid industrial drilling products listed: a. To 100 gallons of water add: 20 lbs. (one-half sack)HY-SEAL® 25 lbs. (one-half sack)MICATEX 10 lbs. (one-fifth sack)QUIK-GEL® 5 lbs. (one-fifth sack)JELFLAKE® 1 pint CON DET® b. If severe loss of drilling fluid occurs, double the amounts of HY-SEAL®,MICATEX, and JELFLAKE®. MICA(MICATEX) is available from GEO Drilling Fluids,Inc. A mixing tub or holding tank large enough to hold an adequate quantity (at least 1.5 times the hole volume) of drilling fluid mix should be maintained on site. This will insure that the hole is filled with drilling fluid and kept open at all times. c. The maximum allowable mud weight is 72 lbs/ft3. Drilling mud viscosity also should be monitored continually using a Marsh funnel and should be maintained within 60 to 70 seconds. Drilling mud should be weighed every 15 minutes, adding water or new mix while drilling to maintain minimum weight(hydrostatic head and solids content), viscosity (pressure in the annulus while circulating) and filtration (filter cake restriction of the annulus). When drilling mud weight reaches 72 lbs/ft3, stop drilling and pumping and mix a new batch of drilling mud. d. Adjustments should be made to this initial mix during the drilling operation if problems or unfavorable results occur such as clay buildup. If significant loss of drilling fluid or other problems continue, the use of rotary drilling shall be discontinued and a new tactic developed in consultation with the DSO and CECW-CE. A-4. Backfilling Holes. a. After the rock section of the hole has been grouted to refusal,the casing should be pulled to approximately 3 ft above top of rock. The grout injection pipe should then be pulled to near top of rock. Backfilling of holes in overburden and/or an earthen embankment shall be accomplished by injection of grout through a tremie pipe or hose inserted to a depth below top of rock. The backfill or grout mix should be changed to an appropriate mix that approximates the properties of the undisturbed embankment. The hole should then be backfilled(grouted)to a level not to exceed approximately 50 ft above the casing bottom. The estimated quantity for backfill grout shall always be calculated A-2 ER 1110-1-1807 1 Mar 06 before starting backfilling operations, and injection quantities shall be monitored continuously. If the estimated quantity per linear foot of hole is exceeded by a meaningful amount at any time, operations shall be halted. The casing should then be pulled to the top of the grout and the backfill allowed to set. Prescribed backfilling operations can then resume. The casing should then be slowly pulled a maximum of 15 ft above top of rock,the injection pipe pulled approximately 5 ft above top of rock, and the hole again grouted to a level not to exceed 50 ft above casing bottom. b. The injection pipe and casing should then be withdrawn in increments not to exceed approximately 50 ft, keeping the hole filled with the backfill mix to a level not to exceed approximately 50 ft above casing bottom at all times. After the casing has been removed,the hole should be periodically checked for a period of 24 hours and kept full of backfill mix until the material has set. c. Backfilling of holes in an embankment in which an instrument has been installed will be in accordance with prescribed procedures for that instrument, but will follow techniques and requirements as described above when practicable. A-3 ER 1110-1-1807 1 Mar 06 APPENDIX B RESONANTSONICsM DRILLING PROCEDURES FOR EARTH EMBANKMENTS B-1. Purpose. This appendix describes materials and procedures to be followed when using ResonantSonicsM drilling(also known as rotary sonic drilling and sonic drilling) equipment and methods for sampling and/or advancing a drill hole through an embankment to set casing. B-2. Procedure. a. A ResonantSonicsM drill uses high frequency mechanical oscillations, developed in the special drill head,to transmit resonant vibrations and rotary power through the specially designed drill tooling to the drill bit allowing it to achieve drilling penetration without the need for drilling fluids or air. Frequencies in the range of 50 Hz to more than 180 Hz are generated. The driller adjusts the frequency to match the natural frequency of the drill tooling, causing no dampening of the vibratory wavelength to the bit. Drill pipe acceleration rates exceeding 500g's and forces up to 200,000 lbs are efficiently transmitted to the drill bit face to create an effective cutting action. The sonic vibratory action fluidizes the soil particles, destroying the shear strength and pushing the particles away from the tip of the drill bit and along the sides of the drill string. This localized liquefaction process allows for penetration of overburden formations. The drill bit can be designed to either push all the soils into the borehole wall or modified to allow a continuous core to enter the steel pipe of the drill. Core samples can be continuously retrieved of both unconsolidated and consolidated formations with significant detail and accuracy. The core samples can be analyzed to provide a precise and detailed stratigraphic profile of any overburden condition including dry or wet saturated sands and gravels, cobbles and boulders, clays, silts and hard tills. Recovery of a sample is as consistently close to 100%as any other boring methodology. The ResonantSonicsM rig utilizes a dual line of drill pipe. The inner string of drill rods has the core barrel(s) attached. All overburden core sampling is done ahead of the outer string of drill casing with no fluid or air added to insure accurate, representative,undiluted samples. After the core barrel has been advanced,the outer drill casing is advanced to the same depth. This can best be accomplished with water;however, dry casing advancement methods can also be employed. With the outer casing left in place to hold the hole open, the core barrel is then removed from the borehole. The core sample can then be extracted into plastic sleeves, stainless steel sample trays,wooden core boxes or virtually any container. The outer drill casing ensures there is no sample contamination from uphole material by sealing it off prior to each sample run. Various sample diameters can be acquired with this method;however, for drilling in embankments a minimum sample diameter of 4 inches is recommended. b. The outer casing also serves to hold the borehole open for installation of monitoring wells,piezometers,vents, observation wells, instrumentation or other downhole equipment. The outer drill casing has nominal diameters of 6 inches B-1 ER 1110-1-1807 1 Mar 06 and 8 inches, allowing ample space to install 2 inch and 4 inch wells with a 1 inch or 1- 1/4 inch tremie pipe to place sand packs, seals, slurries and grouts into the annular space between the well screen/riser and the outer casing and borehole annulus. The drill bits used on the outer drill casing are open and are 5-7/8 inches through 8-1/2 inches in diameter, depending on borehole size requirements. Most practitioners are also capable of performing conventional sampling(ASTM D1586 and ASTM D1587)through the ResonantSonicsM drill string. B-3. Ease and Appropriateness of Use. An experienced operator is required for this method. Equipment maintenance, downtime, and mobilization costs are typically higher with ResonantSonicsM drilling than with other drilling techniques; however, for deep holes in well-compacted soil, this method will usually out perform the alternatives from the standpoint of production rate, sample quality, and overall cost per foot. B-4. Use of Drilling Fluids. Circulation of drilling fluid is not required with ResonantSonicsM drilling. Water may be used for two main reasons, to facilitate penetration in very tough soil materials when the in-situ moisture content is not high enough to facilitate the shearing of the material, and to control heave in the bottom of the hole. Using water for ResonantSonicsM drilling in embankments should be avoided and should only be used as a last resort to facilitate the penetration in very tough, dry material. The amount of water used for any purpose should be gravity fed to the collar of the hole. The volume of water introduced should be closely monitored and held to no more than would raise the water level in the hole to 15 feet above the phreatic water level. B-5. Limitations. When a drill bit is used, ResonantSonicsM drilling forces most of the soil cuttings into the borehole wall,which may create problems for subsequent logging, in-situ permeability testing, and monitoring well performance. Based upon moderate field experience, some bottom heave and sample growth problems have been reported. The typical set-up requires two large trucks positioned end-to-end, so site access and space issues must be considered. Although smaller,modular(trailer or skid mounted) ResonantSonicsM drills are available with limited capabilities. B-6. Backfilling Holes. The backfilling procedures described in paragraph A-4 Backfilling Holes shall also apply to holes drilled with the ResonantSonic M technique. B-2 CITY OF AZUSA WATER STANDARD DRAWINGS WATER STANDARD DRAWINGS WS - 1 I • STANDARD DESCRIPTION DATE ISSUED W-1 3/4" x 1" OR 1" SERVICE ASSEMBLY JULY 10, 2006 W-2 2" WATER SERVICE ASSEMBLY JULY 10, 2006 W-3.1 3" & 4" METERS WITH 2" BY—PASS MAY 09, 2006 W-3.2 3" & 4" METERS WITH 2" BY—PASS MAY 09, 2006 W-4.1 6" Sc 8" METERS WITH BY—PASS MARCH 22, 2005 W-4.2 6" & 8" METERS WITH BY—PASS MAY 09, 2006 W-5.1 MAIN TESTING AND DISINFECTING JAN 12, 2011 W-5.2 MAIN TESTING AND DISINFECTING JAN 12. 2011 W-6 TYPICAL TRENCH DETAIL MAY 09, 2006 W-7.1 THRUST BLOCKS MARCH 22, 2005 W-7.2 THRUST BLOCKS MARCH 22, 2005 W-8 PIPE SUPPORT MARCH 22, 2005 W-9 PIPE CONCRETE ENCASEMENT MARCH 22, 2005 W-10 VALVE ASSEMBLY, BOX, COVER MAY 09, 2006 IDENTIFICATION AND VALVE STEM EXTENSION W-11.1 FIRE HYDRANT ASSEMBLY MAY 09, 2006 W-11.2 LOCATION OF ABOVE GROUND UTILITIES MARCH 22, 2005 W-12 FIXED POST BARRIER MARCH 22, 2005 W-13 2" BLOW—OFF ASSEMBLY MARCH 22, 2005 CLASS 200 W-14 AIR & VACUUM ASSEMBLY (1" & 2") MAY 09. 2006 W-15.1 BACKFLOW PREVENTION ASSEMBLY MARCH 22, 2005 DOUBLE CHECK VALVE W-15.2 BACKFLOW PREVENTION ASSEMBLY MARCH 22, 2005 REDUCED PRESSURE PRINCIPLE W-15.3 BACKFLOW PREVENTION ASSEMBLY MARCH 22, 2005 GENERAL INSTALLATION W-16.1 WATER AND SEWER SEPARATION MARCH 22, 2005 W-16.2 WATER AND SEWER SEPARATION MARCH 22, 2005 WATER STAN EZ:10.40316.11FE KM) • DRAWNi NGUYEN Bill DWG.NO. by WATER WORKS CONSTRUCTION LIST DATEI w�+�R._', W - 0 AZUSA. ( SHEET SCALEI AS sHC •!N tYrBr'YtD:` ��1 yS`>"O 3 0 O i/12/I I 7 OF '11 LIGHT $ WATER ` .:;:'�i;7�;.•pl C?Cft-LITERO"EVATI,,.No RCE NO. 0/�.TE ` / I 1 TOP OF METER BOX ..VARI�S SLOPE PKWY , 0 O TOP OF CURB -1 _ 1/4" /FT' _-_-"" L- •iiriisiiriiirvrriiiirvii FACE OF CURB ; z ---- ry 4' 0 •t .1!4 Q r... - --t-1-_ COPPER SERVICE SHALL NOT` Z lJ 0 O OF EXTE ADE OVER " ABOVE TOP \ Z in BY OTHERS at. C.I., DUCTILE IRON, STL, of FOR MULTIPLE INSTALLATION OR C.M.L. do C. PIPE A::_,,_ 0 -mss 0 - = 12" MIN. _ BEND TUBING TO PROVIDE SLACK, ,�`�'' IF BEND CAN NOT BE MADE, USE `, Var' COMPRESSION 90' FORD MODEL ,, - --aims L44-77 WHEN P.V.C. PIPE IS USED, A BRASS SADDLE WITH DOUBLE STAINLESS STEEL STRAPS SHALL BE USED. WHEN DUCTILE IRON OR CAST IRON PIPE IS USED, A DOUBLE STRAP BRASS SADDLE SHALL BE USED. WHEN STEEL PIPE IS USED, A FULL CIRCLE MAXIMUM WORKING PRESSURE 150 P.S.L, STAINLESS STEEL SADDLE SHALL BE USED. 0 CORPORATION STOP,FORD F 1100-4, JONES J-3403X1, A.Y. McDONALD 4704-22X1, MUELLER P-15028X1 TAPPING THREAD ON DUCTILE IRON. COMPRESSION JOINT OR STAB JOINT (NOT FLARED) * INLET MALE IRON PIPE THREAD 0 1" COPPER SERVICE TUBING, TYPE "K" - SOFT 03 1" BALL VALVE, JAMES JONES NO. J-1949 COMPRESSION CONNECTION OR EQUAL 0 ANGLE METER STOP WITH LOCKWING (1" x 1"), FORD KV43-444W, JONES NO. J-4201X1, A.Y. McDONALD 4602-22, MUELLER P-14258X1 COMPRESSION (NOT FLARED). 0 METER ADAPTER, FORD A-34 (3/4" METER ONLY), JONES NO. J-128H (1 1/4" X 1") © METER (3/4" x 1" OR 1" x 1") (BY CITY), 0 3/4" OR 1" BALL VALVE WITH LEVER HANDLE, SWIVEL NUT AND I.P.T. TAPPED END, FORD MOD. B-13-444W-HB-34S, JONES NO. J-1908, MUELLER H-14345, A.Y. McDONALD 6101MW. 0 437 (3/4" METER) OR 438 (1" METER) METER BOX AND COVER ARMORCAST 0 C.I. COVER REQUIRED WHERE SUBJECT TO HIGH EXTERNAL LOADS DRAWNt NGUYEN 13: - I ovia•NO. 3/4" x 1" OR 1" SERVICE ASS.ammx DATE: 04-05-2001 WY .. 1 AZUSA SHEET tiCALE�AS SH°WN MPROVEO: 4 0 3 3 0 07/10/06 1 OF 1 LIGHT 6 WATER) ` , ` ASS ANT Daum ATEROPBL4TIaS RCE NO. GATE ` I r AP IW 0 TOP OF METER BOX _VAR'FS SLOP K, O TOP OF CURB �_ FACE OF CURB :: a A__ vpizlpoz, ,. ildbi MI z_ 2 © 0 3 ;o BY OTHERS I 'l C.L, DUCTILE IRON, STL, ©R MULTIPLE OR C.M.L & C. PIPE INSTALLATION elr_ 0 0 - a. 12" MIN. BEND TUBING TO PROVIDE SLACK, I IF BEND CAN NOT BE MADE, USE " ---------- COMPRESSION 90' FORD MODEL ----I---- 11=4=1 L44-77 I WHEN P.V.C. PIPE IS USED, A BRASS SADDLE WITH \ DOUBLE STAINLESS STEEL STRAPS SHALL BE USED. WHEN DUCTILE IRON. OR CAST IRON PIPE IS USED, A DOUBLE STRAP BRASS SADDLE SHALL BE USED. WHEN STEEL PIPE IS USED, A FULL CIRCLE MAXIMUM WORKING PRESSURE 150 P.S.I. STAINLESS STEEL SADDLE SHALL BE USED. O 2" CORPORATION STOP, FORD FB 1100-7, JONES NO. J-1935X2, A.Y. McDONALD 47048-22X2 MUELLER P-25028X2 COMPRESSION JOINT. *INLET MALE IRON PIPE THREAD 0 2" COPPER SERVICE TUBING, TYPE "K" - SOFT O 2" BALL VALVE, JAMES JONES NO. J-1949 COMPRESSION CONNECTION OR EQUAL 0 ANGLE METER STOP WITH LOCKWING (2" x 2"), FORD KV43-444W, JONES NO. J-4201 X2, A.Y. McDONALD 4602-22,MUELLER P-14258X2 COMPRESSION (NOT FLARED) O METER (1 1/2" x 2" OR 2" x 2") © 1 1/2" OR 2" BALL VALVE WITH LEVER HANDLE, SWIVEL NUT AND I.P.T. TAPPED END, FORD BF13-777W-HS-4, JONES NO. J-1913W, A.Y. McDONALD 6101MW OR APPROVED EQUAL O 666 METER BOX AND COVER ARMORCAST (17x30) 0 C.I. COVER REQUIRED WHERE SUBJECT TO HIGH EXTERNAL LOADS NOTE: USE JONES NO. J-2102 TAPPING ADAPTER FOR MUELLER MACHINE D-4. DRAWN!NGUYEN 9UI DWG.NO. 1 1/2" x 2" OR 2" SERVICE ASSEMBLY DAIS' 04-05-2001 w — 2 SKEET AZUSA ....., AS SHOWN APPROVED:` r..0!F —4 0 3 3 0 07,10/06 1 OF 11 LIGHT 8. WATER / ` ASSISLWrDIRECTOR WATER OPERATIONS RCE NO. DATE J 4 '4 'y.• '' •! • . :... 1'-6" . 1'-3"_ a :' e e MIN, •;, 15 6" ID ® VAULT • i, --__ _- '^0 —FLOW-----=° ---- T❑ CUSTOMER'S �N; •—•-><--=I= a CCa : ---- 411 ---------� TO WATER BF DEVICE +d I �) MAIN :.•• 6f 4 12 .'.. ?f 5 © :.• .IN, „O�O� O icy :MIN :rc METER ZER .a. •.. •": ':. • .;•• = < 3' 1'-7' 4' 1'-11' CONSTRUCTION NOTES; 0 3" METER, BADGER METER COMPOUND SERIES 4" METER, BADGER METER COMPOUND SERIES METERS SHALL BE SUPPUED WITH STRAINER 0 FLANGED ADAPTER, ROMAC, FCA 501, CL 150, OAE ® FLANGED SPOOL, D.I. PIPE CLASS 350 ® FLANGE x PLAIN END SPOOL, D.I. PIPE CLASS 350 QS GATE VALVE, CL. 150 w/ VALVE BOX ASSEMBLY AS PER WATER STANDARD DRAWINGS. ® GATE VALVE, CL. 150 w/ HANDWHEEL O PIPE SUPPORT AS PER WATER STANDARD DRAWINGS. ® 2" DOUBLE STRAP SERVICE SADDLE, NIPPLE, BALL VALVE AND JAMES JONES EXTENSION ON NIPPLE J-341 WITH J-669 CAP AND CHAIN ® PRECAST VAULT — 3" & 4" METER — 4'x5' QUIKSET SERIES 3100 10 2" BALL VALVE, COMPRESSIONxF.I.P. w/ LOCK WINGS FORD B41—777WG, JONES NO. J-1921WSG, A.Y. McDONALD 6102WT. 11 DOUBLE STRAP SERVICE SADDLE w/ 2" OUTLET © 2" 90', COMPRESSION ® 2" VALVE, COMPRESSIONxM.I.P. 0) 2" M.I.P.xN.F.T. ADAPTER © 2" COMPRESSIONxN.F.T. ADAPTER ® 2" TYPE "K" COPPER r - DRAWNI NGUYEN BUI DWG.pp, 3" & 4" METERS WITH 2` BY-PASS DAM 04-05-2001 W •• 3 �Z`-'S iCALE� AS sriowN / O oven. F..,Ak 41' SHEET4 0 3 3 0 0,/09/061 y F T LIGHT & WATER ` OFECTE1It Wei tlPBiATJfWS RCE NO. BATE s. 1 UNLESS OTHERWISE SPECIFIED ON PLANS OR CALLED FOR IN THE SPECIFICATIONS; 1. ANY CHANGES TO STANDARD MUST BE APPROVED BY WATER DIVISION INSPECTOR. 2. PLACE AN APPROVED FLEXIBLE PACKING AROUND PIPE PENETRATIONS. 3. ALL VAULTS SHALL BE EQUIPPED WITH A PRECAST CONCRETE FLOOR, SUMP WITH GRATE AND 1 C.Y. OF 3/4" GRAVEL BELOW SUMP. 4. THE COVER SHALL HAVE AT LEAST 2 PLATES WITH HANDLES AND BOLT DOWN FEATURES AND SHALL BE "E" STYLE AS MANUFACTURED BY QUIKSET. THE COVER SHALL BE DESIGNED FOR TRAFFIC LOADING IF LOCATED IN AN AREA WITH TRAFFIC ACCESS. SUPPORT BEAMS SHALL BE REMOVABLE. METER READING LIDS SHALL BE PROVIDED CENTERED OVER THE METER REGISTER. EACH READING LID SHALL.BE FLUSH MOUNT, Hl D, RECTANGULAR IN SHAPE AND SHALL POSE NO SAFETY HAZARD. 5. ALL BOLTS SHALL BE TYPE 304 STAINLESS STEEL. 6. GATE VALVES 2" IN SIZE AND LARGER SHALL BE RESILIENT WEDGE GATE VALVES PER AWWA C509. ALL VALVES WHICH ARE LOCATED INSIDE THE VAULT SHALL BE EQUIPPED WITH A HANDWHEEL. 7. METER VAULTS SHALL BE CONSTRUCTED ON A 6" BASE OF COMPACTED SAND OR PEA GRAVEL. 4igaz ..ljr ORAWNI NGUYEN BUI - 3" 4" VIII TERS WITH 2" BYPASS SS owo.NO. DATE: 04-05-2001 W - 3 1A.LJ V S A.. SNOW i Ag SHOWN A OVI Z � - .�j�4.. 4 0 3 3 0 05/09/06or 2 LIGHT & WATER k�SI$TA�lt0 OR Wkril -OPERk710NS RCE N.O. DAX (10 4 : 0 , 7 ------------------------------- `� ='.'• .:..:..: , 0 -- 0 i ,. . . _ .. . i 1.::-.... •.:-, !...,: : 4- ''' • .:.".....• :"....I 0 I 1'-6" 1'-3" 1'-6" 0 1 I 6" Mlle. I N, I MIN. , 0 0 ••,'MN O MN� a'. © ' 0 " i - FLOW 0 :, -.L-- <-- -- - p L —L— TO WATER —_ �._. .� � --�---- � � � MAIN • 0 -,4 ' . 3 4 • © O d TO CUSTOMER'S ,,� RP DEVICE W CL OF VAULT CONSTRUCTION NOTES., 10 6" - 8" BADGER FIRE SERVICE METER MODEL FSAA-01 DETECTOR CHECK VALVE & BY-PASS METER OR NEPTUNE PROTECTUS III. FOR DOMESTIC, BADGER COMPOUND METER SERIES OR NEPTUNE TRU/FLO COMPOUND METER. 20 FLANGED ADAPTER, ROMAC, FCA 501, CL. 150, OAE (TYP. OF 2) 03 FLANGED SPOOL, D.I. PIPE CLASS 350 ® FLANGE x PLAIN END SPOOL, D.I. PIPE CLASS 350 ® GATE VALVE, CL. 150 (TYP. OF 4) ® FLANGED TEE w/ REDUCED OUTLET (TYP. OF 2) 07 90' L.R. FLANGED ELBOW (TYP. OF 2) ® PIPE SUPPORT AS PER WATER STANDARD DRAWINGS. 09 2" DOUBLE STRAP SERVICE SADDLE, NIPPLE, BALL VALVE AND JAMES JONES EXTENSION ON NIPPLE J-341 WITH J-669 CAP AND CHAIN ® PRECAST VAULT (QUIKSET) 10 THRUST BLOCK AS PER WATER STANDARD DRAWINGS. e .41L WAT E- - ST N A 0 ' lr . DRAWN:NGUYEN BU pyo,,,gyp, 6" & 8" METERS WITH BY-PASS DATE: o2-12-loos W — 4 AZUSACASHEET SLE; AS SHOWN arPRovED. A.,- , 0 3 3 0 03/22/05 y OF 2 ` LIGHT & WATER ` , ` ASSISTANT DIRECTOR-WATER OPERATIONS RCE NO. 04..TE / ` i • 0 UNLESS OTHERWISE SPECIFIED ON PLANS OR CALLED FOR IN THE SPECIFICATIONS; 1. ANY CHANGES TO STANDARD MUST BE APPROVED BY WATER DIVISION INSPECTOR. 2. PLACE AN APPROVED FLEXIBLE PACKING AROUND PIPE PENETRATIONS. 3. ALL VAULTS SHALL BE EQUIPPED WITH A PRECAST CONCRETE FLOOR, SUMP WITH GRATE AND 1 C.Y. OF 3/4" GRAVEL BELOW SUMP. 4. THE COVER SHALL HAVE AT LEAST 2 PLATES WITH HANDLES AND BOLT DOWN FEATURES AND SHALL BE "E" STYLE AS MANUFACTURED BY QUIKSET. THE COVER SHALL BE DESIGNED FOR TRAFFIC LOADING IF LOCATED IN AN AREA WITH TRAFFIC ACCESS. SUPPORT BEAMS SHALL BE REMOVABLE. METER READING LIDS SHALL BE PROVIDED CENTERED OVER THE METER REGISTER. EACH READING LID SHALL BE FLUSH MOUNT, RECTANGULAR IN SHAPE AND HINGED. 5. ALL BOLTS SHALL BE TYPE 304 STAINLESS STEEL. 6. GATE VALVES 2" IN SIZE AND LARGER SHALL BE RESILIENT WEDGE GATE VALVES PER AWWA C509. 7. EACH SIZE METER SHALL HAVE THE FOLLOWING BY-PASS PIPING SIZE: 6" METER = 4" BY-PASS 8" METER = 6" BY-PASS 8. METER VAULTS SHALL BE CONSTRUCTED ON A 6" BASE OF COMPACTED SAND OR PEA GRAVEL. 9. MECHANICAL JOINTS MAY BE USED INSTEAD OF FLANGED JOINTS. 1 -400$11070 .�� MINIM NGUYEN BUI 6" & 8" METERS WITH BYPASS DWG.NO. ilmws 04-05-2001 W r � AZUSAC 4 0 3 3 0 05/09/06 $ LIGHT & WATER, `fes` AS sHowN, ` OF �~,-� DIRECTOR WATER OPERATIONS RCE NO. OATS, > t TESTING AND DISINFECTING 1. GENERAL The Contractor shall furnish all equipment, labor and materials required for testing and disinfecting the piping. Disinfection shall be accomplished by chlorination. Chlorine dosages will be computed by a chlorination consultant hired by the Contractor, who will furnish the Contractor with detailed instructions for proper application of the chlorine per AWWWA C651-05 "Disinfecting Water Mains." All chlorinating and testing operations shall be done in the presence of ALW staff. Prior to testing and disinfecting, the pipeline shall be thoroughly flushed in accordance with Specification Section 3 below. 2. TESTING PIPELINES The Contractor shall test the piping after backfilling operations are completed. The test shall be made by placing a temporary bulkhead in the pipe and filling the lines slowly with water. At no time during pipeline construction will heavily chlorinated water be pressure tested against a valve connected to a City water main. Care shall be used to see that air is permitted to escape during filling. After the line has been completely filled, it shall be allowed to stand under slight pressure for a sufficient length of time to allow the mortar lining to absorb what water it will and to allow the escape of air from any air pockets, but for not less than 24 hours. During this period, bulkheads and connections shall be examined for leaks. if any are found, these shall be stopped or in case of leakage through bulkheads, provision shall be made for measuring such leakage during the test. The test shall consist of holding the test pressure on each section of the line for a period of 4 hours. The test pressure at the lowest point in the line shall be 150 psi. The water necessary to maintain this pressure shall be measured through a meter or by other means satisfactory to the Engineer. The leakage shall be considered the amount of the water entering the pipeline during the test, less the measured leakage through bulkheads. The leakage shall not exceed 25 gallons per inch of diameter per mile per 24 hours. Any noticeable leaks shall be replaced with new pipe or equipment until the leakage is reduced to permissible limits. 3. DISINFECTING, FLUSHING, AND BACTERIOLOIGICAL TESTING OF PIPELINES (a) Chlorination shall be accomplished by means of a chlorine-water mixture applied using a solution-feed chlorination device or other methods as approved by AWWA Standard C651-05. The chlorine dosage entering the pipeline shall be at least 50 mg/L. Chlorine concentrations in excess of 50 mg/L or other extraordinary disinfection methods must be approved by ALW in writing, including additional conditions as ALW may require, prior to disinfecting the pipeline. Chlorinated water shall be retained in the pipeline a sufficient length of time to destroy all non-spore forming bacteria, a minimum of 24 hours. All valves shall be operated while the lines are filled with the heavily chlorinated water. All water used for disinfection and flushing shall be metered and paid for by the contractor. r WATE R —i— . a 1101►AE=t DRAWN:v,U'EUBVI STANDARD MAIN TESTING DWG.NO. 1 DATES 2_'101 AND DISINFECTING w - s A Z U S A SHEET SCALE: • A'.,SHOWN ._rri c c;. ' �l�y+l�^� '3 3 0 01/12/1 1 or 2 Li G'iT a WATER ! ` !i i.V"C<_C.?-ri4TFRff .1="s6 RCE NO. f]L�TE i • TESTING AND DISINFECTING-(Continue) (b) Following the required retention period, the heavily chlorinated water shall be flushed from the pipeline until the chlorine concentration in the water leaving the pipeline is no higher than that generally prevailing in the system. A chlorine residual determination shall be made to affirm that the heavily chlorinated water has been removed from the pipeline. Once flushing is complete, the system water will remain in the pipeline for a period of 24 hours; other than minimal amounts to maintain a minimum positive pressure in the pipeline, no additional water is to be introduced into the pipeline. No additional flushing will be allowed once bacteria testing has commenced. All discharged water shall be de-chlorinated per NPDES requirements. (c) 24 hours following completion of flushing, a set of bacteriological samples shall be taken. 24 hours later a second set of bacteriological samples shall be taken. For each sets of samples, a coliform bacteria test(Bac-T) and a heterotrophic plate count(HPC)test will be done. The Contractor shall be responsible for the cost of all water analysis sampling and testing. (d) At the Contractor's expense, ALW will collect water samples for analysis prior to placing the new facilities in service. Contractor shall provide sampling points a minimum of 500 L.F. apart along the pipeline. In any round of sampling, should any sample fail to meet the requirements of AWWA C651-05 for coliform bacteria(i.e. positive) and/or have an HPC of 500 CFU/m1 or greater, in accordance with Section 5.2 "Re-disinfection," the chlorination, flushing and testing procedures shall be repeated. If, after a third round of testing, either the Bac-T or the HPC fail, subsequent rounds of testing will include an additional set of Bac-T and HPC testing 7 days after the second 24 hour set of testing was performed. (e) If fourth, fifth or sixth sets of testing are required, sampling and testing for Bac-T and HPC will be required at 24-hour, 48-hour, and 7-day intervals. All tests must pass both the Bac-T and HPC test result requirements. If, at the end of the sixth round of testing, the pipeline does not pass both the Bac-T and HPC requirements, further testing of the pipeline will be terminated and the contractor shall remove the pipeline from the ground and re-lay a new pipeline using new pipe and material. Testing of the replacement pipeline will then begin at 24-hour Test 1. (I) Existing water pipelines that have been shut down and cut into for connections or installation of tees and valves shall be sterilized to the satisfaction of the Project Manager or his duly authorized representatives. The water pipeline and all existing services shall be flushed out until the chlorine residual is not greater than the prevailing water system residual prior to placing back in service. All discharged water shall be de-chlorinated per NPDES requirements. WATE R STAN NFU NZI DRAWN:"J(UF'4FMi' STANDARD MAIN TESTING DWG.NO. DATE: Iz_ o I AND DISINFECTING W - v�'4}0 3 3 0 01/12/11 sNEET �'�L U S r� Ste,A,,,,o,� �:�.F_,:� ,� LIGHT & WATER r, "A?LRFCI'=?-PIAT;^ie'r'i.:'•i,^.N;. RCE NO. OF 2 / ` �G1TE ` I • CONSTRUCT A.C. 1" MIN. THICKER SAWCUT EDGE – OF TRENCH THAN EXISTING A.C. RESTORATION OF ASPHALT AS PER LOCAL JURISDICTION'S PUBLIC WORKS STANDARDS. EXIST. A.C. OVER C.A.B.— (THICKNESS VARIES) 95% COMPACTED AGGREGATE BASE NO AGGREGATE OVER 3/4" IN DIAMETER. IMPORT MATERIAL ONLY _ -__ COMPACTED TO 90% OF .,r � = z THE RELATIVE DENSITY 12" 1'`.' `0 5 (SEE SPECIFICATIONS) `//\ : ��� * BEDDING & BACKFILL SHALL BE FREE �,; : • •: . ,/ x DRAINING GRANULAR MATERIAL HAVING W A SAND EQUIVALENT OF NOT LESS THAN ;; •' ;o 0 30 AND SHALL BE COMPACTED TO 90% • i%;..;_2,';.t:,•••.-:•.: ;. A. RELATIVE DENSITY BY WATER '� • �° N m DENSIFICATION METHODS -.:.; : ; °:•:i•••,�� NO FLOODING ALLOWED. i, ..;,...::::.-•, :;: '. i, 411.:„.,: r,� = •� It a D.I.P. CL. 350 �4./V/maw���,/<•<�t,�<� � IM TRENCH WIDTH SEE CHART BELOW PIPE SIZE 4" 6" 8" 10" 12" 16" 20" 24" 30" MAXIMUM ALLOWED TRENCH WIDTH 20" 20" 20" 22" 24" 28" 32" 36" 42" * NOTE: DEPTH OF COVER SHALL BE 36" ON RESIDENTIAL STREETS. DEPTH OF COVER SHALL BE 42" ON ARTERIAL STREETS. Vir ter;: -:. , r _.�+ - ,_ , : . _ [ . ._,- �t�'. ,, 1:..'.,.. .. -./ , 1 DNAWNI NGUYEN WI DWG.NO. TYPICAL TRENCH DETAIL DATE. a-os-iOOI W - 0 /� �fTTc [� r sir I- .zV sL-1 C� 5�1 4 0 3 3 0 05/09-06` 1 OF '� CALEI AS SHOWN APPROYEO: LIGHT WATER , DIRECTOR-WATERdP(RATICNS RCt,NO. C)QTE J 4 CONSTRUCT THRUST SYMMETRICAL THRUST BEARING AROUND PIPE BEARING AREA Yy: AREA /\jam Y.-A. \' • : _a. __ !I I ` ) II. il� Rim, �r ►s R ...15'.-,../ 12" MIN. 8" MIN. BEND TEE OR PLUG THRUST REDUCER BEARING PLAN PLAN PLAN AREA 0 #4 BARS THRUST CONCRETE BEARING _ gitIWV"4. THRUST (nP -(( �® �I�j BLOCK - ries , HOOK,ENDS ��� • '440...h. Ali)/ n.L-Militi". 6" MIN. .\ SIMi i In VERTICAL BEND /ti's Fay 1 ... 0. ,` ! / CROSS WITH VALVE 2 - #4 REBAR PLAN . • • . . • ••• :- ` , • CONCRETE TBLOCKHRUST SECTION 0 114917/0116.-111-11E F --11-41316.IN CODA NPR to e • DRAWNI NGUYEN BUI DWG.NO. THRUST BLOCKS DATE! O4-05-2001 W - 7 * e AZUSA SNEET tCALEe AS SHOWN ��eo.\�..�J�-'��\` 0 3 3 0 03/22/05 '� OP 2 LIGHT & WATER ASSISTANT DIRECTOR-WATER OPERATIONS RCE NO. pA'TH , 0 THRUST BEARING AREA (SQUARE FEET) 2 - 16 BARS ©k AROUND VALVE PIPE SIZE e` 8" 10" 12" TEST PRESSURE (PSI) 150 150 150 150 1 90' 4.0 7.1 11.1 16Airi .0 c 45' 2.2 3.8 6.0 8.7 ,�I11111') m 225' 2.0 2.0 3.1 4.4 lia���il�t 11.25' 2.0 2.0 2.0 2.2 • �'. PLUG! LUG 5.7 10.1 15.7 22.6 l X` ° ..;•r-r..," TEE/VALVE 2.8 5.0 7.9 11.3 I� a'•' "' . • CROSS * 2.8 5.0 7.9 11.3 `; � %• REDUCER 2.0 4.0 7.0 10.0 * WITHAVALVE L THRUST BEARING TABLE(S) BASED ON SOIL BEARING VALUE AREA VALVE OF 1500 lb. PER SQUARE FOOT. CALCULATIONS MUST BE SUBMITTED FOR �. OTHER SOIL BEARING VALUES OR OTHER TEST PRESSURE IN WATER MAIN. �°` .:.� =. RESIUENT WEDGE . i , ��• GATE VALVE �� r1 VERTICAL ANCHOR (CUBIC FEET OF P.C.C.) 1s:• PIPE SIZE 6' 8" 10" 12" f' lie A '. 1 r. •y•%. ILSI PRESSURE (PSI) 150 150 150 150 •... 1.:' 90' 62 111 173 249 ••Vo`*;-.." yc 45' 44 78 122 176 W #6 REINFORCING m 22.5' 24 42 66 95 BAR 1125 12 22 34 49 SECTION ® NOTES: 1. THRUST BLOCKS MUST BEAR ON UNDISTURBED SOIL 2. CONCRETE FOR THRUST & ANCHOR BLOCKS SHALL VALVE AND (L) (W) CO BE OF CLASS 480-C-2000 IN ACCORDANCE WITH S.S.P.W.C. IT SHALL BE POURED (12" THICK MIN.) PIPE SIZE LENGTH WIDTH THICKNESS AGAINST UNDISTURBED SOIL P.C.C. SHALL BE KEPT 6" 2' 2'-0" 12" CLEAR OF PIPE & BELL OF THE FITTINGS. 8" 3' 2'-2" 14" 3. WHEN MECHANICAL JOINTS ARE UTIUZED, SET FORMS 10" 3' 2'-4" 14" TO SEPARATE BOLTS FROM P.C.C. TO ASSURE ACCESS 12" 4' 2'-6" 15" TO BOLTS & JOINTS. '\A/A7`E IIRKS TA N ii304.011..R * e S. I 1 DRAWN:NGUYEN BUI DWG.NO. THRUST BLOCKS DATE! 04-05-2001 W - AZUSA SHEET SCALE:AS SHOWN �'��00 0 3 3 0 03/22/05 2 SOF 2 LIGHT & WATER ! ` , ` ASSISTANTDINECTOR-WATEROPERATIONS RCE NO. DATE t N - , • NOTE: PIPE SUPPORTS TO BE LOCATED IN PLAN AT POINTS MARKED THUS: X OR AS SHOWN. SET ROD COUPLERS PLUMB AND FLUSH WITH CONCRETE. . OD' pkirONp /4 6' -- eP ' \`: -- -- ,QF ' 90' ` n \ _I i r''i > PI 4-3/4' GALV. P/L AO STUD BOLTS IYPn RAD . 1-1/2" •4' I I W/NUTS ) [f'' CONCRETE 4.! }_ �t :j tl PIER c 6" I • •1: 1 14" CHAM' ' 1 • ---1---1- 4-3[4' ROD / i YP.) COUPPLERS C. I•.' I ANCHOR A ( :—..,''......I BOLTS B I 1 E -.. ! ill DIMENSIONS IN INCHES NOMINAL SUPPORTING SUPPORTING SIZE PIPE PIPE OR FLANGE PIPE FLANGE C D E A B A B 6 2 4 12 10 16 10 16 , 8 & 10 2 4 12 10 16 14 , 20 12 & 14 2 4 12 12 18 16 22 16 & 18 2 4 12 14 20 20 26 20 & 22 3 5 12 16 22 22 28 24 3 5 12 18 24 24 __ 30 GALVANIZE AFTER FABRICATION NOTE: WHEN SUPPORTING ON THE SAME LINE ALTERNATIVELY PIPE AND FLANGE, CONCRETE PIERS FOR PIPE SUPPORTS SHALL ALL HAVE THE SAME DIMENSION B (FOR FLANGE SUPPORT). . IWIWAIrlielir IIE N STAN 111310.016.lift IC& DRAWNt NGUYEN BUI DWG.NO, P■PE SVPlPORT C DATE: 06-05-2001 W - 8 AZUSA a SHEET LIGHT & WATER SCALE: AS SHOWN APPROVED: 0 3 3 0 03/22/05 .' OF .i t • t ASSISTANTDIRECTOR-WATBtOPERATIWS RCE NO. DATE 1 • MIN.—PIPE O.D.+12" MAX.— PIPE O.D.+20" CONSTRUCT A.C. & EXIST. A.C. TRENCH WIDTH C.A.B. PER PLANS o BACKFILL 0 •° •° 0 0 (SEE SPEC'S) • ° .• • #5 CONTINUOUS 6" \ a \//\ AS SHOWN >/ • • j •,/ ••�.' / PIPE TO BE ENCASED •= ,y — �- #4 TIES ® 24 /, 3,000 PSI CONCRETE \� S,. //, i//,/ 6, (MIN.) NOTES: 1, THE LENGTH OF THE ENCASEMENT SHALL BE AS SHOWN ON THE CONTRACT DRAWINGS, 2. PERPENDICULAR CROSSINGS OF WATER AND SEWER PIPELINES SHALL BE PER CALIFORNIA DEPT. OF HEALTH SERVICES, "CRITERIA FOR THE SEPARATION OF WATER MAINS AND SANITARY SEWERS 3. VCP SEWER PIPE SHALL BE WRAPPED WITH POLYETHYLENE MATERIAL PRIOR TO BEING ENCASED IN CONCRETE. • • WA'TE S77INV NMA,R DRAWN:NGUYEN stn DWG.NO. W PIPE CONCRETE ENCASEMENT A DATE: 04-05-2001 - `� AZUSA i' iCALEs AS SHOWN APPROVED:(�` 3 0 03/22/05 '� OF �I LIGHT & WATER ASSISTANT DI CTOR-WATER OPERATIONS RCE NO. DATE 0' ALHAMBRA FOUNDRY - re - 1 I P .N CAST IN PLACE CONCRETE CAST IRON VALVE BOX COVER RING 20" DIAM. PAINTED LIGHT BLUE STREET OR FINISHED SURFACE M M `' i GALVANIZED SLIP CAN .N x 7 3f1"x t/4 SOLID DISK, N 'i bi inx TACK WELD TO • 2" SQ. OPERATING NUT, z va SHAFT EXTENSION o z z .\'''''.-\ hi• ��o PLAN \ � VALVE STEM EXTENSION, w 9,9 0 -rte -' 14 " STEEL ROD o 0 8" PVC. CL 900 �\ C NTER AND PLUMB i,. oo ��� ' OVER OPERATING NUT a ADAPT TO OPERATING NUT ; ON VALVE. FASTEN W/PIN ."' : 1./7...........„...„ _ N \ 2"x6"x12" REDWOOD BLOCKS t 1 `% WHERE SLOPE OF WATER MAIN VALVE C EXCEEDS 1%, INSTALL FLANGES a) 1 ( % THRUST BLOCK AS PER WITH HALF CIRCLE IN VERTICAL % WATER STANDARD DRAWINGS. POSITION AS SHOWN. %� Al • l it ..,,,,*.\,....„,-. , ii +.1 % ec,.... ., AI MAINLINE STL. PIPE TEE CONNECTION t ELEVATION TO EXISTING PIPE 1 i i *With NGUYEN DUI .VAl �. Y, C owa.No. �., 4TRi 04-05-2001 77ii=;r' u)11411714 rtrA171". W. L ZUSAGb1T. & WATER ` . An�ove4033 0 05/09/06� ,,....�_ ...�r t�A� ('YIAT6F it..l b 1:4:51oteE N0 -ATF, ,,,:,..,,,,:•:: . . ,. , '#i'�%lrt�efiVx:':;C+4.;.•.x ; .fir.. ..a:�tio..< d�a�S�i�'� ;�r ..4'�,T1:.so�f:�t..,-5,r -�r;r.::;4m x^t,c..:-., 4 0-30'-^x-30' • 4"4B WATER MAIN q HYDRANT f C VARIES 28" (TYP.) I 0 .1 6' FIXED POST BARRIER. SEE STANDARDS m 3 ;}, cra GUARD POSTS DETAIL o o lb BREAK—OFF BOLTS ao ia_W ASPHALT PAVING THRUST BLOCK PER 4' MAX, WATER STANDARDS. 0 1 3 1/2' MIN. • 0 i 0 p * - '**: ik.-..:1 ____Iik 1 \ •.... Iv 1----tf-- K\ 0 di . . . THRUST BLOCK PER WATER STANDARDS. ® 6" SCUD BRONZE HEAD 2-1/2" AND 4" OUTLET, JONES NO. J-3700 (EASTBAY TYPE) OR EQUAL - IN COMMERCIAL & INDUSTRIAL AREA USE JONES NO. J-3765. PAINT THE EXTERIOR w/ (2) COATS OF RED PRIMER, RUST-OLEUM NO. 769 AND FINISH w/ ONE COAT OF YELLOW, RUST-OLEUM NO. 659. 0 6" FLANGE X M.J. BURY ELBOW, 6H. O 6" DUCTILE IRON PIPE, CLASS 350. ® 6" GATE VALVE - FLANGE X M.J., MUELLER A-2360-16 AFC 500, OAE. MINIMUM 10' SEPARATION TO FIRE HYDRANT ti:.) STEEL PIPE AND SLIP JOINT BOX ASSEMBLY AS PER WATER STANDARDS. © 6" FLANGED OUTLET ON TEE. O TAPPING SLEEVE FOR D.I.: ROMAC SST WITH D.I. FLANGE, OAE. TAPPING SLEEVE FOR STEEL: FULL CIRCLE STAINLESS STEEL TAPPING SLEEVE. NOTES: 1. FIRE HYDRANTS INSTALLED ALONG STREETS OR ROADS WITHOUT CURBS SHALL BE PROTECTED WITH GUARD POSTS PER DETAIL. 2. EACH FIRE HYDRANT SHALL HAVE BLUE PAVEMENT MARKER NEXT TO THE STREET CENTER LINE, ON THE SAME SIDE AS FIRE HYDRANT. 3. MAXIMUM 150 psi WATER WORKING PRESSURE DRAWN,NGUYEN BUI DWG,NO, FIRE HYDRANT ASSEMBLY DAM 08-25-2001 W - 11 ` `ZU'""' SCAMAS SHOWN ' APPROVED, 1k•�) 4 0 3 3 0 05/09/061SHEET LIGHT a WATER '%. i., TDIRECTOR•WATER OPERATIONS RCE NO. r)ATE '� OF 2 / LOCATION OF ABOVE-GROUND UTILITIES WHEN SIDEWALKS ARE CONSTRUCTED ADJACENT TO THE CURB, ABOVE GROUND UTILITIES, INCLUDING AIR AND VACUUM VALVES, FIRE HYDRANTS, BLOW-OFFS, METER BOXES, ETC. SHALL BE LOCATED AS FOLLOWS: 6' 5' 124 WHEN 5FT. SIDEWALKS ARE ADJACENT TO CURB, HYD- RANTS SHALL BE CENTERED 6FT. FROM FACE OF CURB. METER BOXES TO BE FLUSH WITH BACK OF SIDEWALK. I I t ;i;.••: %///!//////////1///////:.._,,':` _ 6' OR GREATER _ 28'j TYP. WHEN SIDEWALKS ARE CONSTRUCTED WITH WIDTHS ) GREATER THAN 6FT. FROM CURB FACE TO OUTSIDE EDGE OF SIDEWALK, HYDRANTS SHALL BE PLACED IN THE NORMAL LOCATION 28 IN. FROM THE CURB FACE. �, -.�• inaitgaltanga • 4' OR GREATER 28„ • WHEN SIDEWALKS ARE CONSTRUCTED BACK FROM ') CURB, 4' OR GREATER HYDRANT SHALL BE PLACED IN THE NORMAL LOCATION 28 IN. FROM CURB FACE. 1 I -- ////////ll/// :.._ ..�. 28" WHEN INVERTED SHOULDER SECTION IS PERMITTED AND CURB, GUTTER AND SIDEWALK ARE WAIVED, THE HYDRANTS SHALL BE CENTERED 28 IN: BEHIND THE EDGE OF THE PAVEMENT. I I///////1/////////////lAO� v'V V�I+ �{ • WA W EIFIR S-111-4.111.1111\111 i R • N DRAWN:NGUYEN BUI DWO.HO. LOCATION OF ABOVE GROUND UTILITIES DATE: 04-05-2001 W - 7 7 AZUSA ` y. � ' SHEET APPROVEGc 4 0 3 3 0 03/22/05 OF LIGHT 8. WATER KALE:as Sr+owN 2 OF 2 ASSISTANT DETECTOR-WATER OPERATIONS RCE NO. DATE ! � � • _ d 4" GALV. STEEL PIPE, 1/4"WALL (MIN.) FILLED w/ NON—SHRINK GROUT CROWN CONCRETE BASE AT THE TOP TO SHED WATER FINISHED GRADE • io • co • �a ti ,• ;• , M \\ • 16"0 PCC FOOTING io i•4.; NOTES: 1. PAINT THE PIPE BARRIERS YELLOW. POSITION POSTS 2' IN FRONT OF AND 2.5' EACH SIDE OF UTILITY. 2. A MINIMUM OF TWO BARRIERS SHALL BE INSTALLED IN FRONT OF ABOVE GRADE WATER FACILITIES IF NO CURB EXISTS. FOUR BARRIERS SHALL BE USED IF TRAFFIC CAN ACCESS FACILITIES FROM ALL SIDES. 111FIK am NM A,IRE IMO • DRAWN:NGUYEN BUI DWG.NO. F'UXED POST BARRIER DATE: 04-05-2001 W - 12 AL1 USA swu,E, A5 s"owN APPRovED: MEET 0 3 3 0 03/22/05 y OF LIGHT 8, WATER N.. ASSISTANTDIRECTOR-WATEROPERATIONS RCE NO. DATE J ` CURB FACE---.., 0 �PLUG 24"0 x 6" THICK CONC. RING ` 2 1 1 1 �, 4 3' --� MIN. Te:14. um L—J U Vag. REDWOOD BLOCKS 3" SAND % 0 `CURB BOX C.L, DUCTILE IRON, STL, /OR C.M.L & C. PIPE _ R 12" MIN. ::),...._________ - ------ II -- idbfi ------------ -_ lip WHEN P.V.C. PIPE IS USED, A BRASS SADDLE WITH DOUBLE STAINLESS Situ STRAPS SHALL BE USED. ,� WHEN DUCTILE IRON OR CAST IRON PIPE IS USED, . Ai -i E- A DOUBLE STRAP BRASS SADDLE SHALL BE USED. ,...___ ,' FULL CIRCLE STAINLESS STEEL TAPPING NOTE; SLEEVE ON STEEL MAINS. MAXIMUM WORKING PRESSURE 150 P.S.I. 12" DIA. PIPE AND SMALLER O 12" C.I. VALVE BOX COVER, ALHAMBRA FOUNDRY NO. A-29612 (12") 0 VALVE BOX SBF 1246W (SOUTH BAY FOUNDARY) 0 2" COPPER ADAPTER. 2" COPPER TUBING, TYPE "K" - SOFT. 5 2" FORD BALL VALVE MODEL B44-777 OR EQUAL AT MINIMUM ONE FOOT FROM GUTTER WITH VALVE CAN, SLIP CAN AND LID. © 2" CORPORATION STOP, FORD FB 1100-7G, JONES NO. J-1935, OR APPROVED EQUAL. • e DRAWN:NGUYEN KM 2" El La I DATES 04-16-2003 W-ORF ASSEMBLY DWG.Na CLASS 200 W - 13 .AZUSA ( c SHUT SCALE] as SHOWN APPROVED:Q - 4 0 3 3 0 03/22/05 y OF 1 LIGHT & WATER • ` ` ANT()RECTOR•WATE20PEiOW RCE NO. DATE ! t 2-STANLEY HEAVY DUTY PO N 3/16" STEEL PLATE (6)-1"0 SPACED HINGES 3'x3" (WELD) NOS.gp do® GALVANIZE AND:PAINT, WELD TO CYLINDER AS SHOWN AND GRIND SMOOTH 2 13� I - 0' �r� WELD SUPPORT , �` � ` %' 6"x1"x STL STRIP I 1/41 t. IV, ilko o ‘ iik. STREET LEVEL-) 3'-"-1 I FMIN. IX LIMITS OF '" ' CONC. PAD '' :. ;:7,,;::...- . WHEN P.V.C. PIPE IS USED, A BRASS SADDLE WITH 1r.--1 O ^' 3/16"V 10 DOUBLE STAINLESS STEEL STRAPS SHALL BE USED. 1 4 WHEN DUCTILE IRON OR CAST IRON PIPE IS USED, 1 I •.._ me C"x C. PAD A DOUBLE STRAP BRASS SADDLE SHALL BE USED. , 0 CONC. PAD WHEN STEEL PIPE IS USED, A FULL CIRCLE -- i " i--"- STAINLESS STEEL SADDLE SHALL BE USED. � 0 — SLOPE UP 2% MIN. IP 0 0 USE MIN. RADIUS BEND H„� (MIN. COVER 2 FT.) i L \ FORDBALLVALVE �Ir// 1 MIL 844-777 . C.I. P E OR . ASSEM. INSTALLED AT EASEMENTS, D.I. I IPE i PIKE ROADS AND STREETS WITHOUT CURBS + SHALL BE PROTECTED w/ GUARD POSTS PER WATER STANDARDS. 0 20" DIAMETER STEEL PIPE, GALVANIZE AND PAINT PER SPEC.'S. ( 2 - 90' GALVANIZED STREET ELLS. 0 COMBINATION AIR RELEASE & AIR VACUUM VALVE, CLA-VAL SERIES 36 OR APPROVED EQUAL Q 2 - BRASS NIPPLES, I.P. THREADED. © BALL VALVE, PER STANDARD SPEC.'S. O COPPER FEMALE ADAPTER. O COPPER TUBING, TYPE "K" - SOFT. O CORPORATION STOP, 1" FORD F1100-4, JONES J-3403X1, A.Y. McDONALD 4704-22X1, MUELLER P-15028X1, 2" FORD FB1100-7, JONES J-1936X2, A.Y.McDONALD 47048-22X2 MUELLER P-25028X2 COMPRESSION JOINT. *INLET MALE IRON PIPE THREAD O TEST DRAIN VALVE - 1/2" I.P.T. X 3/4" H.T., UTILITY MFG. CO. el 3 - 3" X 3" X 1/4" GALV. ANGLES 2" WIDE w/ 1/2"0 HOLE, WELD TO PIPE ON RIGID SIDE. r R �. . DRAWNI NGUYEN BUI • A &VACUUM ASSEMBLY (1" & 2"j DWG.Na DATES 04-05-20OI W - 14 A.ZI SA �I AS SHOWN ' r:. •f;✓ MILT 4 0 3 3 0 05/09/06, 1 APPROVED LIGHT & WATER ;� i ` ASSISTANTDRECTO WATER OPERATIONS RCE NO. DATE , II thin. 1--.--12' li AlWI* 1l)I, -1 ('-I+ y.♦ t 1.,II 0 •T• i 1t►AQ!Ili'.pi � I r-V-%'- • r-V--.11-• o 1 r3 1 ild. (11616.: ...... irodi •„por..' ,!: v,/,4411' — 14-4 lir 12' MIN, 36' MAX. NAN CAINE tiriAi i 1.ti ,.: i � vvvI � v V � .• L�J�ri • • • USE FEBCO MODEL 876/876V DCDA OR APPROVED EQUAL FOR CLASS 1 & 2 FIRE SERVICES. USE FEBCO MODEL 826YD RPDA OR APPROVED EQUAL FOR OTHER THAN CLASS 1 & 2 FIRE SERVICES. NOTE: PIPING & VALVES SHALL RECEIVE ONE COAT OF RED LEAD PRIMER AND TWO FINISHING COATS OF ENAMEL PAINT (COLOR SHALL BE DETERMINED BY THE CITY). WALT NE I S' / ..MINI QA NM 1E310 e , ,. • °RAWN:"� "B1� BACKFLOW PREVENTION ASSEMBLY owo.No. DATE; 04-05-2001 DOUBLE CHECK VALVE • W 15 AZUSAe 1 =�E� SCALE: AS SHOWN APPROVED: 4 0 3 3 0 03/22/05 3 LIGHT & WATER t I ` ASSISTANT DIRECTOR-WATER OPERATIONS RCE N0. DATE ! • 1 i r i i i,0lhli 1I!Ili!EI ,_ viz sumo: 4 I : ' NIOiiiUNION-` '. Ptov 12' MIN. HIGH WATER LEVEL 36' MAX, 11 TiT " II METER BOX " --'..: .I... ...i......, I,, -PROPERTY LINE, EASEMENT LINE, OR R/W LINE FORD BALL VALVE 1' MAX. I - SECTIONAL VIEW R.P. DEVICE 2" OR LESS REDUCED PRESSURE BACKFLOW PREVENTER ASSEMBLY Tii lir N.N. ` , GRINNELL PIPE SUPPORT HIGH WATER LEVEL 01ii ,II Iliiiiik FIG. 264 (ORE.) I ,) —� 6"MIN. (BOTH ENDS) VALVE BOX do COVER ` PER WATER STANDARDS.mg 12" MIN. 4' P.C.C. W/6X6 / I I 36" MAX `10X10 WIRE MESH M. • ti;iI I2 i r r•-• 0.1. PIPE CLASS 350 ( .i V _J ` O L. .o • • ,,: —THRUST BLOC ' • •••• ., liar ...• .• •-... -;PER WATER SUWDARD•';•..'.:•a:•` D R.W.G.V., i _ FLG.xM.J. I PROPERTY UNE, EASEMENT r---TNSTALLED BY CITY UNE, OR R/W UNE (mkt) SECTIONAL VIEW NOTE R.P. DEVICE LARGE THAN 2" ALL ASSEMBLIES MUST BE APPROVED BY U.S.C. FOUNDATION FOR CROSS CONNECTION CONTROL & HYDRAUUC RESEARCH. . 11110W-.419r 111M R STA N .412I•R D DRAWN:NGUYEN BUI BACKFLOW PREVENTION ASSEMBLY DWG.NO. REDUCED PRESSURE PRINCIPLE W _ y S DATE: 04-16-2003 AZUSA SHEET ANO APPROVED:C 4 0 3 3 0 03/22/05 2 of 3 LIGHT & WATER1/4 / ` ASSISTANT DIRECTOR•WATER OPERATIONS RCE NO. DATE / ♦ J Hi 1 BACKFLOW DEVICE (RP, DC OR SVB) , 4 , , I ,..______ 5' MAX. ,- v-__. luo o VALVE BOX ASSEMBLY (_ (�'r '_``-L_ 1 - PER WATER STANDARDS. I i ' 12' MIN. 1=I-- 36' MAX. r HIGH WATER LEVEL _ el..1,I. �I • A I - D.I. PIPE CLASS 350 (FLANGED) MIN MI �� .q., °—THRUSTWER BSIOCK °: _>�(� ••,."7:---7t.. ., . .. .PER WATER STANDARD' R.W.G.V., I f • FLG.xM.J. • 1.0"---` PROPERTY UNE, EASEMENT �---INSTALLED BY CITY UNE, OR R/W UNE ( .) SECTIONAL VIEW FLM.J. TEE ANGED yi./ CLEARANCE AREA r� 12' MIN. + 1 12' MIN [ -r12' MIN. 11111110111=1--.{-1E-7 61:101146). lira iii--11 t-----------+ 1 12' MIN. L___I J WATERMAIN PLAN VIEW NOTE PIPING & VALVES SHALL RECEIVE ONE COAT OF RED PRIMER AND TWO FINISHING COATS OF' ENAMEL PAINT (COLOR SHALL BE DETERMINED BY THE CITY). i 1 11/NATER STAN 111:310A IOU • DRAWN:NGUYEN 201 BACKFLOW PREVENTION ASSEMBLY DWG.NO. GENERAL INSTALLATION W _ i 5 DATES 04-05-2001 AZUSA ��-'Cl'�'1 �' SHEET sCALEO AS SHOWN APPROVED: 4 0 3 3 0 03/22/05 $or 3 LIGHT & WATERd ` , ` ASSISTANT DIRECTOR-WATER OPERATIONS RCE NO. DATE= > S. • I ♦ / a .' 'a M'ON 30LI SNOIMEI.10OM-2013..OINN ♦ 4' 1 Z" SO/ZZ/£0 0 £ £ 0 7 , , , :a3noaddv NMOHS SV :Matt 2l31`VM '8'8 1H01111 JAMS N. / VS1 1Z 91. ' M loot-so-70 2111/0 MN,moo NOI1VHVd3S 1:13111\38 CINV 1:113111/111 Ine N3An9N'NMVBO %, / ♦ / =II adv WM Niar.JL. 111=111 MILIILAgirillelk SONISSOd3 SNI IS 10Cb4\ \ ,��� .Q, 3Naz� � i a I. .d1 3N2% / �/// „t, 1-.0--,-p-r.J m , ,01 j 7\\\\...t.\\\I" 314E1Z1 )\>\\;>137.d\\\\\\\ I 3 S 'I Io d IF A. 3NOZ / 33d321f1S HSINI3 NOLL3neLISNO3 131 Ibd .£ _ :/ ////, < .t Z/ .8. iNOZ fil " / , I 441 I , .V. 3NOZ ri / f 33VJWS HSINI3 lb PARALLEL CONSTRUCTION Zone P Prohibited. Zone A Sewer lines parallel to water mains shall not be permitted in this zone without approval from the responsible health agency and water supplier. Zone B A sewer line placed parallel to a water line shall be constructed of Cast or ductile iron pipe with compression joints. CROSSING CONSTRUCTION Zone P Prohibited. Zone C A sewer line crossing a water main shall be constructed of Ductile Iron pipe with hot dip bituminous coating and mechanical joints. Zone D A sewer line crossing a water main shall be constructed of a continuous section of ductile iron pipe with hot dip bituminous coating. • Lateral sewer: The above special constructions apply to the house laterals that cross above a { pressure water main but not to those that cross below pressure water main. Sewer force main: Shall not be installed in all zone A,B,C,D,P and all portions of the sewer within ten feet of the water main shall be enclosed in a continuous sleeve. When special conditions exist, an approval from the responsible health agency and water supplier is required. A/AT E R S ' '� N Cis • DRAWN!NGUYEN BU DWG.HO. WATER AND SEWER SEPARATION DATE; 04-05-2001 W - 16 AZUSA APPROVED: SHEET 3 3 0 03/22/05 2 of 2 LIGHT & WATER SCALE LIGHT ASSISTANT DIRECTOR-WATER OPERATIONS RCE NO. DATE ` r • AZUSA CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF TH SA UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES DATE: APRIL 23, 2012 SUBJECT: APPROVAL TO CONTINUE TRANSACTION SERVICES AGREEMENT WITH THE CITY OF RIVERSIDE RECOMMENDATION It is recommended that the Utility Board approve continuation of the Transaction Services Agreement (Agreement) between Azusa and Riverside, authorize the Director of Utilities to execute the extension agreement and designate the Director to administer/execute subsequent Agreement renewals/amendments provided that cumulative annual cost increases do not exceed $10,000. BACKGROUND The Utility Board originally approved a Transaction Services Agreement in July 2007 with the City of Riverside. Under the terms of the Agreement, Riverside provides various real time power scheduling services to Azusa as well as access to, and use.of, power settlement software. This basic arrangement has been extended on an annual or biannual basis through FY 2011/2012. As noted above, Riverside has provided Azusa with real time scheduling services, including handling Azusa's intermittent renewable resources under the ISO's participating intermittent resource program (PIRP). Additionally, Riverside has been providing Azusa the use of third party ISO settlement software. Azusa is interested in continuing the transaction services arrangement with Riverside for FY 2012/2013. Riverside proposes to renew the real time services component of the Agreement without any increase from last year's $17,600/month rate. Further, Riverside proposes to pass through a $75/month fee increase in the Riverside contracted third party ISO settlement software contract resulting in a new monthly rate to Azusa of$2,575. Staff has reviewed the Riverside offered Agreement continuation proposal and recommends its approval. 012 Azusa/Riverside Transactions Agreement April 23, 2012 Page 2 FISCAL IMPACT The total monthly cost in FY 2012/2013 will be $20,175 per month (the current monthly rate in FY 2011/2012 is $20,100). The Agreement can be terminated with a 180-day written notice by either party or by mutual agreement. Funds will be budgeted to pay for this service. Prepared by: Richard Torres, Power Resources Coordinator Yarek Lehr, Assistant Director of Resource Management RVSD_RENEWAL_DO CS.pdf 013 Public Utilities Department Resources Division iN April 5,2012 Mr.George Morrow Director of Utilities City of Azusa 729 North Azusa Avenue Azusa,CA 91702 Subject: Azusa-Riverside Transaction Services Agreement 2012-2013 Monthly Rate i Dear Mr. Morrow: Section 7 of the Transaction Services Agreement (Agreement) provides that monthly fees and charges assessed to Azusa by Riverside shall be as set forth in the related Operating Instructions and Task Assignments. Attachment A to the Agreement is entitled Operating Instruction for Transaction Scheduling Services and requires that the Authorized Representatives annually recalculate and reestablish Riverside's monthly charges to Azusa for services rendered thereunder. Based on review of Riverside's anticipated costs related to the services specified in the Operating Instruction for Transaction Scheduling Services Riverside proposes to hold the cost consistent with the 2011-12 rate as noted in Attachment B"Cost Summary"the 2012-13 monthly rate to remain at$17,600. Azusa has requested and Riverside has agreed to continue the additional services as they relate to Power Settlements SettleCore software as outlined in the Azusa-Riverside Utility Services Task Assignment 2012-13 Fee Schedule. If the proposed rate is acceptable to Azusa, please so indicate by signing both copies of this letter and returning one to me for Riverside's files. If you have any questions regarding this matter, please contact Reiko Kerr, Utilities Interim Assistant General Manager,Resources,at(951) 826-5914. I ! Sinc ely, I i David H. Wright Public Utilities General Manager j AGREED AND ACCEPTED: a i 3 George Morrow,City of Azusa j Date: 3435 14th Street • Riverside,CA 92501 • 951.715.3551 - fox 951.715.3563 • vww.rivers idepu6licutilities.com OWN& C) PRINTED ON RECYCLED PAPER WITH 30%POST-CONSUMER WASTE P U 8 L I r U T 1 L 1014 Public Utilities Deportment Resources Division April 5, 2012 Mr. George Morrow Director of Utilities City of Azusa 729 North Azusa Avenue Azusa, CA 91702 t � Subject: Azusa-Riverside Utility Services Agreement SettleCore Task Assignment 2012-2013 Fee Schedule Dear Mr. Morrow: The Utility Services Agreement provides that Azusa may request additional task-specific services from Riverside and allows for the Authorized Representatives to negotiate and establish the fees associated therewith,as specified in a written Task Assignment. In 2011-12 Riverside and Azusa agreed and entered into the Azusa-Riverside Utility Services Agreement SettleCore Task Assignment dated May 24, 2011. In discussions with Azusa the services associated with the Task Assignment are still being requested by Azusa. Therefore, provided that Azusa continues to pay its existing Annual Support/Maintenance Fees to Power Settlements,Riverside will continue to facilitate the use of the Power Settlements SettleCore application, as follows: 1. SettleCore Settlements Analyzer, 2. SettleCore ISO Downloader, 3. SettleCore Shadow Settlements, 14. Power Settlements will provide remote support of the SettleCore application to Azusa, including performing the"SettleCore Daily Processing Service",and 5. The fees charged to Riverside by Power Settlements for items I through 4 above shall be paid by Riverside; provided that such fees do not exceed the costs reimbursed by Azusa as provided below. The services noted in items 1-4 are for a fixed term of twelve months effective July 1, 2012 thru June 30, 2013. at a currently anticipated monthly fee of $2,575. The fixed term, and Azusa's reimbursement 1 obligations hereunder, shall survive termination of any other services provided by Riverside under the Azusa-Riverside Transaction Services Agreement, or early termination of the Azusa-Riverside Transaction Services Agreement itself. Riverside's ability to provide the SettleCore services described herein, and Azusa's obligation to make payments to Riverside as provided herein, are both subject to Riverside entering into a definitive agreement with Power Settlements to provide Azusa the SettleCore functionality described E in this Task Assignment. 3435 14th Street• Riverside,CA 92501 • 951.715.3551 • fax 951.715.3563 • wwwriversidepublicurilities.com ? tJ PRINTED ON RECYCLED PAPER WITH 30%POST-CONSUMER WASTE P U B L I C U 71�1�1 E 5 Mr. George Morrow April 5,2012 Page 2 If these proposed arrangements are acceptable to Azusa, please so indicate by signing both copies of this letter and returning one to me for Riverside's files. If you have any questions regarding this matter, please contact Reiko Kerr,Utilities Interim Assistant General Manager, Resources,at(951) 826-5914. The signatories hereto represent that they are authorized to execute this Task Assignment on behalf of the party for who they sign. CITY OF RIVERSIDE AUTHORIZED REPRESENTATIVE j� By: iX4, David H. Wright Public Utilities General Manager Date: —12— CITY 2CITY OF AZUSA AUTHORIZED REPRESENTATIVE By: George Morrow Director of Utilities Date: 016 LV • AZUSA uoxr rxw CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF T USA UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES DATE: APRIL 23, 2012 SUBJECT: AUTHORIZATION FOR THE DIRECTOR OF UTILITIES TO EXECUTE THE "OFFICER CERTIFICATION FORM" DOCUMENT REQUIRED BY FERC AND THE CAISO RECOMMENDATION It is recommended that the Utility Board authorize the Director of Utilities to execute the attached "Officer Certification Form", as required by FERC and the CAISO. BACKGROUND As a result of deregulation of the California electric utility sector, Azusa Light & Water has been operating within the California Independent System Operator (CAISO or ISO) footprint since 1998. In addition to operating a Balancing Area, the ISO operates centralized markets for energy, Ancillary Services and transmission optimization and hedging. One should note that whether one formally"participates"in the ISO there are no provisions for exemption or exclusion from the ISO operated centralized market mechanisms. In October 2010, the Federal Energy Regulatory Commission (FERC) issued Order 741 wherein FERC introduced a number of reforms of wholesale electric markets. Throughout 2011 the ISO worked on the FERC Order compliance plans which resulted in FERC's order accepting the ISO's compliance filing on March 15, 2012. Key elements of the ISO compliance filing include increased security posting for Congestion Revenue Right (CRR) auction participants and requirements that market participants holding CRRs have adequate understanding of the CRR concept and associated market risks. CRRs are financial instruments used for hedging transmission congestion with the ISO. Just as with any load serving entity within the ISO, Azusa routinely receives the ISO allocated CRRs and also, if needed, purchases CRRs from the ISO conducted CRR auctions. 017 CAISO Certification Form April 23, 2012 Page 2 Accordingly, as part of their FERC accepted compliance filing, the ISO requires that officers of any and all entities that receive, hold, transact or use CRRs attest that their organizations have good understanding of the CRR concept, are aware of risks associated thereof, and have internal processes to track, assess and if needed mitigate the associated financial risks if any. FISCAL IMPACT At this time there is no immediate, expected or envisioned fiscal impact. Prepared by: Yarek Lehr, Assistant Director of Resource Management ®L ISOFormOfficerCer f ication.doc 018 California ISO SMptng a R�,n.red Furore OFFICER CERTIFICATION FORM Market Participant Name: ("Market Participant") I, an officer of a prospective or existing Market Participant, understanding that California Independent System Operator Corporation ("CAISO") is relying on this certification as evidence that Market Participant meets the minimum participation requirements set forth in the CAISO Tariff and the Business Practice Manual ("BPM") for Credit Management, hereby certify that I have full authority to represent on behalf of Market Participant and further represent as follows, as evidenced by my initialing each representation in the space provided below: 1. All employees or agents entering into CAISO market transactions on behalf of the Market Participant have received appropriate' training and are authorized to transact on behalf of Market Participant. Furthermore, these same employees or agents have satisfied all applicable CAISO training requirements as specified in CAISO Tariff Sections 4.5.1.1.10.1 and 36.5.2. 2. Market Participant has and maintains written risk management policies, procedures, and controls, approved by Market Participant's independent risk management function and applicable to transactions in the CAISO markets in which it participates and for which employees or agents entering into CAISO market transactions provided pursuant to the CAISO Tariff or applicable CAISO Operating Agreement have been trained, that provide an appropriate, comprehensive risk management framework that,-at a minimum, clearly identifies and documents the range of risks to which Market Participant is exposed through its participation in an organized wholesale electric market. These risks may include but are not limited to credit risk, liquidity risk and market risk, and related transaction controls. The CAISO at any time may request information and documents from Market Participants regarding their risk management policies, procedures, and controls, including, but not limited to, information and documents relating to the liquidity of their financial resources and their settlement procedures. If requested, Market Participant shall make information and documents available to the CAISO within five (5) Business Days. 'As used in this representation, the term "appropriate' as used with respect to training means training that is commensurate and proportional in sophistication, scope and frequency to the volume of transactions and the nature and extent of the risk taken by the Market Participant. Z As used in this representation, a Market Participant's "independent risk management function" can include appropriate corporate persons or bodies that are independent of the Market Participant's trading functions, such as a risk management committee, a risk officer, a Market Participant's board or board committee, or a board or committee of the Market Participant's parent company. 019 3. A Market Participant that is also a Congestion Revenue Rights ("CRR") Entity must additionally attest and answer the relevant sections below unless such attestation and answers have been previously provided and there are no material changes to the responses. If there are no material changes from the attestations and answers previously provided to the CAISO, acknowledge by initialing here and skip to section 4. Otherwise, narrative responses should be submitted in a separate document citing the appropriate references in Market Participant's current governing risk management policies, procedures, and controls. a. Please attest and answer the following: i) Market Participant, or the company Market Participant may outsource certain risk management functions to, has the ability to periodically value its Congestion Revenue Rights. positions using analytically based methodologies, predicated on the use of industry recognized valuation methodologies which is consistent with the level of risk the Market Participant engages in within the ISO Markets. (a) Describe the valuation and risk assessment methodologies used. (b) Discuss the highest risks to your CRR trading strategy and the methods used to assess your CRR holdings and activities relevant to such risks. ii) Such valuation and risk assessment functions are validated either by persons within Market Participant's organization independent from those trading in the CAISO's CRR markets or by an outside firm qualified and with expertise in this area of risk management. (a) Describe your processes ensuring the independence of your valuation and risk assessment functions. (b) Describe the processes that are in place to ensure risks are adequately reported throughout the organization. iii) Having valued its CRR positions and analyzed the potential risks, Market Participant applies procedures and controls, in accordance with written policies, to limit its risks using industry recognized practices, such as value-at-risk limitations, concentration limits, or other controls designed to prevent Market Participant from purposefully or unintentionally taking on risk that is not commensurate or proportional to Market Participant's financial capability to manage such risk. (a) Discuss the relevant methods used to limit exposure in the CRR markets: (b) Describe the sources of liquidity your firm has access to in order to minimize the risk of default at various levels of risk events (sections of publically available SEC filings may be referenced): (c) Briefly describe how Delegation of Authority or other policy, procedures and controls is used to restrict traders in the types of transactions they may enter into and their corresponding trade limits. iv) Exceptions to Market Participant's written risk policies, procedures and controls applicable to Market Participant's CRR positions are documented and explain a reasoned basis for the granting of any exception. b. A Market Participant that answers"Yes"to either of the following questions need only submit a copy of its current governing risk management policies, procedures and controls, and any associated documentation, if requested by the CAISO. The CAISO retains the right to request these documents at any time and for any reason under Section 2 of this certification form. 020 i. Market Participant only receives CRRs from the CAISO's allocation process and does not participate, nor foresees participating in the coming year, in the CRR auctions or purchasing CRRs through any other means except for the limited purpose of unwinding allocated CRR positions. Yes: No: ii. Market Participant transacts in the CRR Market with the intent to hedge the congestion risk related to the Market Participant's physical transactions as a load serving entity or generation provider and monitors all of the Market Participant's CRR market activity to endeavor to ensure that its CRR positions are either generally proportionate to or generally do not exceed the Market Participant's physical transactions as a load serving entity or generation provider, and are generally appropriate to fulfill the Market Participant's intention to hedge its physical transactions. Yes: No: c. If you responded "No" to questions 3bi and 3bii, based on calculations and results provided by the CAISO, Market Participants whose CRR credit holding requirement, at any time during the past 12 months, was greater than zero are required to provide to the CAISO, in accordance with the CAISO Tariff, a copy of its current governing risk management policies, procedures and controls applicable to its CRR trading activities unless such risk management policies, procedures and controls applicable to its CRR trading activities have been previously provided and there are no material changes to these documents. If there have been no material changes to the risk management policies, procedures and controls previously provided to the CAISO, acknowledge by initialing here 4) Market Participant has appropriate personnel resources, operating procedures and technical abilities to promptly and effectively respond to all CAISO communications and directions, including, but not limited to, the CAISO's issuance of invoices and collateral requests to the Market Participant. 5) Market Participant has demonstrated compliance with the minimum capitalization requirements as specified in Tariff Section 12.1. and is not aware of any material change in financial condition having occurred (or being imminent) since the release of Market Participant's, or its guarantor's, most recent financial statements that would invalidate such compliance. 6) I acknowledge that I understand the relevant provisions of Section 12 of the CAISO Tariff and the Business Practice Manual for Credit Management applicable to Market Participant's business in the CAISO markets, including those provisions describing CAISO's minimum participation requirements and the enforcement actions available to CAISO if a Market Participant does not satisfy those requirements. I acknowledge that the information provided herein is true and accurate to the best of my belief and knowledge after due investigation. In addition, by signing this certification, I acknowledge the potential consequences of making incomplete or false statements in this certification. Date: (Signature) Print Name: Title: Subscribed and sworn before me a notary public of the State of in and for the County of this day of 20_ (Notary Public Signature) 021 My commission expires:_/_/_ The fully executed Officer Certification Form and associated risk management policies, procedures and controls documentation, as required, should be sent to: Kevin King at kking(cDcaiso.com Mailing address: California Independent System Operator Corporation Kevin King —Manager, Credit & Corporate Insurance 250 Outcropping Way Folsom, CA 95630 If you should have any questions related to this form, please contact Kevin King at(916) 608-1247. 022 AZUSA IIONI . SA Ar CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE A UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES DATE: APRIL 23, 2012 SUBJECT: APPROVAL OF PROPOSAL BY STANDARD & POORS FOR CREDIT RATING SERVICES FOR ELECTRIC UTILITY RECOMMENDATION It is recommended that the Utility Board: (1) approve the selection of Standard & Poors for Credit Rating Services in amount not-to-exceed $18,500 plus reasonable out-of-pocket expenses; and (2) authorize the Director of Utilities to execute attached agreement subject to City Attorney's review and approval. BACKGROUND In order to reduce interest expense associated with long term debt issued by the Utilities Department in 2003, Utilities staff has been working with a finance team to refund eligible debt by preparing documents to issue tax exempt revenue bonds. As part of the refunding process, it is important to have a credit rating agency provide the water and electric utilities with a third party credit rating. A credit rating is important since it can affect the cost of borrowing, and in this case, must be performed before our bonds are priced by the underwriter. Since staff is only refunding existing debt, and since the refunding amount ($5.5 million for electric utility) is relatively small, our financial advisors have told us that only one credit rating is necessary. Standard & Poor's (S&P) is one of the top rating agencies in the United States, and has provided the attached proposal to Azusa to review financial information for the Electric Utility and to provide a credit rating. Due to previous engagements, S&P has said that there will be no charge for rating the water utility. S&P previously gave Azusa Light & Water fairly good ratings to both the water and electric utilities, AA+ and A, respectively, and so staff is hopeful that existing ratings can be affirmed through the rating process. 023 Standard & Poor's Proposal April 23, 2012 Page 2 FISCAL IMPACT. The rating fee is $13,500 based on par value of$5.5 million, plus reimbursements for reasonable out-of-pocket expenses. An annual surveillance fee of$5,000 is also proposed and recommended for approval for one year. Following approval of this item, staff will administratively process a budget amendment in the electric budget to fund contract. It is estimated that refunding the electric utility 2003 Series B debt will save-about $475,000 over 10 years. Prepared by: Cary Kalscheuer, Assistant to the Director of Utilities Attachments: 1. Proposal by Standard & Poors 2. Installment schedule comparison 024 r STANDARD Mama Manageerr Fee Administration & P O 0 R'S 55 Water Street,38th Floor New York,NY 10041-0003 RATINGS SERVICES tel 2124386808 moma_lebron®standardandpoors.com issue no.:1213094 April 10, 2012 City of Azusa Azusa Light& Water 213 East Foothilll Blvd Azusa, CA 91702 Attention: Mr. Cary Kalscheuer, Assistant to the Director of Utilities Re:USS5,500,000 Azusa, California,Electric Refunding Revenue Bonds, Series 2012B Dear Mr. Kalscheuer: Thank you for your request for a public Standard & Poor's rating for the above-referenced obligations. In accepting a Standard & Poor's rating, you agree to accept and comply with this letter and the enclosed Terms and Conditions. Please return this executed engagement as soon as possible as no significant analytical work will commence until it is received. Return directly to Pub]icFinanceEneagementLtrsnasandp.com We will make every effort to provide you with the high level of analytical performance and knowledgeable service for which we've become known worldwide. You will be contacted directly by your assigned analytic team. In consideration of our analytic review and issuance of the rating, you agree to pay us the following fees: Rating Fee of$13,500. Standard & Poor's reserves the right to adjust the rating fee if the proposed par amount changes. Payment of the fee is not conditioned on Standard & Poor's issuance of any particular rating. Annual surveillance fee of$5,000 will be charged for so long as we maintain the rating. The annual surveillance fees will commence twelve months after the initial rating date. S&P reserves the right to change fees from time to time, and will provide written notice of any fee increases. Derivatives Products analysis fee. Standard & Poor's charges a separate fee for our review of derivative products. This separate fee is applicable for derivative products secured by any of the issuer/obligor's revenues. Derivative products include, but are not limited to, interest rate swaps, caps, collars, floors, and swaptions. Derivative products analysis fees will be determined on a case- by-case basis based on the number and complexity of the derivative products. Other fees and expenses. You will reimburse Standard& Poor's for reasonable travel and legal expenses if such expenses are not included in the fee. Should the rating not be issued, you agree to 025 Page 12 compensate us based on our time, effort, and charges incurred through the date upon which it is determined that the rating will not be issued. Note Regarding Private and Confidential Ratings: If you request a confidential rating under this Agreement, you agree that the rating will be exclusively for your internal use, and not to disclose it to any third party other than your professional advisors who are bound by appropriate confidentiality obligations or as otherwise required by law or regulation or for regulatory purposes. If you request a private rating under this Agreement, Standard & Poor's will make such rating and related report available by email or through a password-protected website or third-party private document exchange to a limited number of third parties you identify, and you agree not to disclose such rating to any third party other than (A) to your professional advisors who are bound by appropriate confidentiality obligations, (B) as required by law or regulation or for regulatory purposes, or (C) for the purpose of preparing required periodic reports relating to the assets owned by a special purpose vehicle that has purchased the rated obligation, provided that the preparer(s) of the reports must agree to keep the information confidential and the private rating shall not be referred to or listed in the reports under the heading "credit rating," "rating" or "S&P rating", and shall be identified only as a "Standard & Poor's implied rating" or similar term. If a third-party private document exchange is used, you agree to pay a one time administrative fee of$10,000 in addition to the fees outlined in this Agreement. You also agree to maintain the list of third-parties authorized to access the private rating current and to notify Standard & Poor's in writing of any changes to that list. Standard & Poor's may make access to the private rating subject to certain terms and conditions, and disclose on its public website the fact that the rated entity or obligations (as applicable) has been assigned a private rating. Please sign below to indicate your acceptance of this letter and the enclosed terms and conditions and return the signed original of this letter to me as soon as possible. Please feel free to call me if you have any questions or suggestions about our fee policies. In addition, please visit our web site at www.standardandpoors.com for our ratings definitions and criteria, research highlights, and related information. We appreciate your business and look forward to working with you. 026 Page 13 Sincerely yours,/ Standard & Poor's Ratings Services a Standard & Poor's Financial Services LLC business By: Morna Lebron Manager Fee Administration by cc: Mr. Michael Mejia, Financial Analyst E.J. De La Rosa & Co. CONFIRMED, AGREED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN City of Azusa Azusa Light& Water By: Name: Title: 027 STANDARD & P00R'S RATINGS SERVICES Standard & Poor's Ratings Services Terms and Conditions Applicable To Public Finance Ratings You understand and agree that: General. The ratings and other views of Standard & Poor's Ratings Services ("Ratings Services") are statements of opinion and not statements of fact. A rating is not a recommendation to purchase, hold, or sell any securities nor does it comment on market price, marketability, investor preference or suitability of any security. While Ratings Services bases its ratings and other views on information provided by issuers and their agents and advisors, and other information from sources it believes to be reliable, Ratings Services does not perform an audit, and undertakes no duty of due diligence or independent verification, of any information it receives. Such information and Ratings Services' opinions should not be relied upon in making any investment decision. Ratings Services does not act as a "fiduciary" or an investment advisor. Ratings Services neither recommends nor will recommend how an issuer can or should achieve a particular rating outcome nor provides or will provide consulting, advisory, financial or structuring advice. All Rating Actions in Ratings Services' Sole Discretion. Ratings Services may assign,raise, lower,suspend,place on CreditWatch, or withdraw a rating, and assign or revise an Outlook, at any time, in Ratings Services' sole discretion. Ratings Services may take any of the foregoing actions notwithstanding any request for a confidential or private rating or a withdrawal of a rating, or termination of this Agreement. Ratings Services will not convert a public rating to a confidential or private rating,or a private rating to a confidential rating. Publication. Ratings Services reserves the right to use, publish, disseminate, or license others to use, publish or disseminate the rating provided hereunder and any analytical reports, including the rationale for the rating, unless you specifically request in connection with the initial rating that the rating be assigned and maintained on a confidential or private basis. If, however, a confidential or private rating or the existence of a confidential or private rating subsequently becomes public through disclosure other than by an act of Ratings Services or its affiliates, Ratings Services reserves the right to treat the rating as a public rating, including, without limitation, publishing the rating and any related analytical reports. Any analytical reports published by Ratings Services are not issued by or on behalf of you or at your request. Notwithstanding anything to the contrary herein, Ratings Services reserves the right to use, publish,disseminate or license others to use,publish or disseminate analytical reports with respect to public ratings that have been withdrawn, regardless of the reason for such withdrawal. Ratings Services may publish explanations of Ratings Services' ratings criteria from time to time and nothing in this Agreement shall be construed as limiting Ratings Services' ability to modify or refine its ratings criteria at any time as Ratings Services deems appropriate. Information to be Provided by You. For so long as this Agreement is in effect, in connection with the rating provided hereunder, you warrant that you will provide, or cause to be provided, as promptly as practicable, to Ratings Services all information requested by Ratings Services in accordance with its applicable published ratings criteria. The rating, and the maintenance of the rating, may be affected by Ratings Services' opinion of the information received from you or your agents or advisors. You further warrant that all information provided to Ratings Services by you or your agents or advisors regarding the rating or, if applicable, surveillance of the rating,as of the date such information is provided, (i) is true, accurate and complete in all material respects and, in light of the circumstances in which it was provided, not misleading and (ii) does not infringe or violate the intellectual property rights of a third party. A material breach of the warranties in this paragraph shall constitute a material breach of this Agreement. Confidential Information. For purposes of this Agreement, "Confidential Information" shall mean verbal or written information that you or your agents or advisors have provided to Ratings Services and, in a specific and particularized manner, have marked or otherwise indicated in writing (either prior to or promptly following such PF Ratings U.S. (05/17/11) 028 disclosure)that such information is"Confidential". Notwithstanding the foregoing, information disclosed by you or your agents or advisors to Ratings Services shall not be deemed to be Confidential Information, and Ratings Services shall have no obligation to treat such information as Confidential Information, if such information (i) was known by Ratings Services or its affiliates at the time of such disclosure and was not known by Ratings Services to be subject to a prohibition on disclosure, (ii) was known to the public at the time of such disclosure, (iii) becomes known to the public (other than by an act of Ratings Services or its affiliates) subsequent to such disclosure, (iv) is disclosed to Ratings Services or its affiliates by a third parry subsequent to such disclosure and Ratings Services reasonably believes that such third party's disclosure to Ratings Services or its affiliates was not prohibited, (v) is developed independently by Ratings Services or its affiliates without reference to the Confidential Information, (vi) is approved in writing by you for public disclosure, or (vii) is required by law or regulation to be disclosed by Ratings Services or its affiliates. Ratings Services is aware that U.S. and state securities laws may impose restrictions on trading in securities when in possession of material, non-public information and has adopted securities trading and communication policies to that effect. Ratings Services' Use of Information. Except as otherwise provided herein, Ratings Services shall not disclose Confidential Information to third parties. Ratings Services may(i)use Confidential Information to assign,raise, lower, suspend, place on CreditWatch, or withdraw a rating, and assign or revise an Outlook, and (ii) share Confidential Information with its affiliates engaged in the ratings business who are bound by appropriate confidentiality obligations; in each case, subject to the restrictions contained herein, Ratings Services and such affiliates may publish information derived from Confidential Information. Ratings Services may also use, and share Confidential Information with any of its affiliates or agents engaged in the ratings or other financial services businesses who are bound by appropriate confidentiality obligations ("Relevant Affiliates and Agents"), for modelling, benchmarking and research purposes; in each case, subject to the restrictions contained herein, Ratings Services and such affiliates may publish information derived from Confidential Information. With respect to structured finance ratings not maintained on a confidential or private basis, Ratings Services may publish data aggregated from Confidential Information, excluding data that is specific to and identifies individual debtors ("Relevant Data"), and share such Confidential Information with any of its Relevant Affiliates and Agents for general market dissemination of Relevant Data;you confirm that,to the best of your knowledge, such publication would not breach any confidentiality obligations you may have toward third parties. Ratings Services will comply with all applicable U.S. and state laws, rules and regulations protecting personally- identifiable information and the privacy rights of individuals. Ratings Services acknowledges that you may be entitled to seek specific performance and injunctive or other equitable relief as a remedy for Ratings Services' disclosure of Confidential Information in violation of this Agreement. Ratings Services and its affiliates reserve the right to use, publish, disseminate, or license others to use, publish or disseminate any non-Confidential Information provided by you,your agents or advisors. Ratings Services Not an ExpertUnderwriter or Seller under Securities Laws. Ratings Services has not consented to and will not consent to being named an "expert" or any similar designation under any applicable securities laws or other regulatory guidance, rules or recommendations, including without limitation, Section 7 of the U.S. Securities Act of 1933. Ratings Services is not an "underwriter" or "seller" as those terms are defined under applicable securities laws or other regulatory guidance, rules or recommendations, including without limitation Sections I I and 12(a)(2) of the U.S. Securities Act of 1933. Rating Services has not performed the role or tasks associated with an "underwriter" or "seller" under the United States federal securities laws or other regulatory guidance, rules or recommendations in connection with this engagement. Office of Foreign Assets Control. As of the date of this Agreement, (a)neither you nor the issuer(if you are not the issuer)or any of your or the issuer's subsidiaries,or any director or corporate officer of any of the foregoing entities, is the subject of any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury("OFAC Sanctions"),(b)neither you nor the issuer(if you are not the issuer) is 50%or more owned or controlled, directly or indirectly,by any person or entity("parent")that is the subject of OFAC Sanctions, and(c)to the best of your knowledge, no entity 50%or more owned or controlled by a direct or indirect parent of you or the issuer(if you are not the issuer) is the subject of OFAC sanctions. For so long as this Agreement is in effect, you will promptly notify Ratings Services if any of these circumstances change. PF Ratings U.S. (05/17/11) 029 Ratings Services' Use of Confidential and Private Ratings. Ratings Services may use confidential and private ratings in its analysis of the debt issued by collateralized debt obligation (CDO) and other investment vehicles. Ratings Services may disclose a confidential or private rating as a confidential credit estimate or assessment to the managers of CDO and similar investment vehicles. Ratings Services may permit CDO managers to use and disseminate credit estimates or assessments on a limited basis and subject to various restrictions; however, Ratings Services cannot control any such use or dissemination. Entire Agreement. Nothing in this Agreement shall prevent you, the issuer (if you are not the issuer) or Ratings Services from acting in accordance with applicable laws and regulations. Subject to the prior sentence, this Agreement, including any amendment made in accordance with the provisions hereof, constitutes the complete and entire agreement between the parties on all matters regarding the rating provided hereunder. The terms of this Agreement supersede any other terms and conditions relating to information provided to Ratings Services by you or your agents and advisors hereunder, including without limitation, terms and conditions found on, or applicable to, websites or other means through which you or your agents and advisors make such information available to Ratings Services, regardless if such terms and conditions are entered into before or after the date of this Agreement. Such terms and conditions shall be null and void as to Ratings Services. Limitation on Damages. Ratings Services does not and cannot guarantee the accuracy, completeness, or timeliness of the information relied on in connection with a rating or the results obtained from the use of such information. RATINGS SERVICES GIVES NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. Ratings Services, its affiliates or third party providers, or any of their officers, directors, shareholders, employees or agents shall not be liable to you, your affiliates or any person asserting claims on your behalf, directly or indirectly, for any inaccuracies,errors,or omissions, in each case regardless of cause, actions, damages(consequential, special, indirect, incidental, punitive, compensatory, exemplary or otherwise), claims, liabilities, costs, expenses, legal fees or losses(including, without limitation, lost income or lost profits and opportunity costs) in any way arising out of or relating to the rating provided hereunder or the related analytic services even if advised of the possibility of such damages or other amounts except to the extent such damages or other amounts are finally determined by a court of competent jurisdiction in a proceeding in which you and Ratings Services are parties to result from gross negligence, intentional wrongdoing, or willful misconduct of Ratings Services. In furtherance and not in limitation of the foregoing, Ratings Services will not be liable to you, your affiliates or any person asserting claims on your behalf in respect of any decisions alleged to be made by any person based on anything that may be perceived as advice or recommendations. In the event that Ratings Services is nevertheless held liable to you,your affiliates, or any person asserting claims on your behalf for monetary damages under this Agreement, in no event shall Ratings Services be liable in an aggregate amount in excess of US$5,000,000 except to the extent such monetary damages directly result from Ratings Services' intentional wrongdoing or willful misconduct. The provisions of this paragraph shall apply regardless of the form of action, damage, claim, liability, cost, expense, or loss, whether in contract, statute, tort(including,without limitation,negligence),or otherwise. Neither parry waives any protections, privileges,or defenses it may have under law, including but not limited to, the First Amendment of the Constitution of the United States of America. Termination of Agreement This Agreement may be terminated by either party at any time upon written notice to the other parry. Except where expressly limited to the term of this Agreement, these Terms and Conditions shall survive the termination of this Agreement. No Third—Party Beneficiaries. Nothing in this Agreement, or the rating when issued, is intended or should be construed as creating any rights on behalf of any third parties, including, without limitation, any recipient of the rating. No person is intended as a third party beneficiary of this Agreement or of the rating when issued. Binding Effect. This Agreement shall be binding on,and inure to the benefit of,the parties hereto and their successors and assigns. PF Ratings U.S. (05/17/11) 030 f Severability. In the event that any term or provision of this Agreement shall be held to be invalid, void, or unenforceable, then the remainder of this Agreement shall not be affected, impaired, or invalidated, and each such term and provision shall be valid and enforceable to the fullest extent permitted by law. Amendments. This Agreement may not be amended or superseded except by a writing that specifically refers to this Agreement and is executed manually or electronically by authorized representatives of both parties. Reservation of Rights. The parties to this Agreement do not waive, and reserve the right to contest, any issues regarding sovereign immunity, the applicable governing law and the appropriate forum for resolving any disputes arising out of or relating to this Agreement. PF Ratings U.S. 105/17/11) 031 City of Aausa-Series 2012 B Refunding Breakdown 2012 S - $ 131,719 S 131,719 $ 109,766 S 21.953 S - S 23,428 $ 23,428- S (1,475) 2013 - 263,438 263,438 - 263,438 - 221,950 221,950 41,488 2014 - 263,438 263,438 - 263,438 - 221,950 221,950 41,488 2015 - 263,438 263,438 - 263,438 - 221,950 221,950 41,488 2016 - 263,438 263,438 - 263,438 - 221,950 221,950 41,488 2017 565000 263,438 828,438 - 828,438 560,000 221,950 781,950 46,488 2018 725,000 237,448 962,448 - 962,448 720,000 199,550 919,550 42,898 2019 760,000 203,373 963,373 - 963,373 750,000 170,750 920,750 42,623 2020 795,000 167,273 962,273 - 962,273 775,000 140,750 915,750 46,523 2021 835,000 129,113 964,113 - 964,113 810,OOD 109,750 919,750 44,363 2022 875000 88,406 963,406 - 963,406 840,000 77,350 917,350 46,056 2023 915,000 45,750 960,750 960,750 875,000 43,750 918,750 42,000 ToMl S 5,470,000 S 2,320,268 S 7,790,268 S 109,766 S 7,680,502 $ 5,330,000 S 1,875,078 S 7,205,078 S 475,424 'Assumes the City has 5 months of accrued overeat in interest account at the Nosing of the refunding bonds. ® De Ln Ream&Co. 032 rr' dwi AZUSA 114ME W/lE SCHEDULEDITEM TO: HONORABLE CHAIRMAN /MAYOR AND MEMBERS OF THE UTILITY BOARD/ CITY COUNCIL FROM: GEORGE MORROW, DIRECTOR OF UTILITIES DATE: APRIL 23, 2012 SUBJECT: RESOLUTION APPROVING DOCUMENTS AND ACTIONS TO REFINANCE CERTAIN LONG TERM DEBT OF THE WATER AND ELECTRIC UTILITIES RECOMMENDATION It is recommended that the Utility Board/ City Council: (1) Approve the attached resolution entitled: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA AUTHORIZING AND APPROVING DOCUMENTS AND OFFICIAL ACTIONS RELATING TO THE REFINANCING OF CERTAIN WATER SYSTEM IMPROVEMENTS AND ELECTRIC SYSTEM IMPROVEMENTS AND THE ISSUANCE AND SALE OF WATER SYSTEM REVENUE REFUNDING BONDS AND ELECTRIC SYSTEM REVENUE REFUNDING BONDS AND AUTHORIZING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH (2) Authorize use of$2.325 million from water fund balance to defease long-term debt associated with the Financing Authority for Resource Efficiency of California ("FARECal") Certificates of Participation, 2003 Series A (Water System Capital Improvements Program) (Series A COPs) executed and delivered in 2003 for those portions that cannot be advance refunded on a tax-exempt basis. (3) Authorize staff to schedule a public hearing for May 7, 2012, to amend water utility budget by $2.325 million for the purpose of effecting the proposed refunding. 033 Refunding Plan for Utility LT Debt t� April 23, 2012 Page 2 i BACKGROUND To reduce interest expense associated with certain long term debt incurred by Azusa Light & Water in 2003, Utilities staff initiated efforts to assemble a finance team to take advantage of the current historically low interest rate environment, and the Utility.Board approved of the selection of a Financial Advisor-- Urban Futures, Inc., Underwriter-- De La Rosa& Co, and Bond/Disclosure Counsel -- Hawkins Delafield & Wood LLP (the "Financing Team"). As you are aware, the Financing Team focused on refunding two Series of Certificates of Participation (COPS) executed and delivered in 2003: (1) Series A CON were executed and delivered in the original principal amount of $20.37 million to finance certain water infrastructure and refund certain outstanding debt associated with the purchase of the Azusa Valley Water Company in 1993; and (2) FARECal COPS, 2003 Series B (Electric System Capital Improvements Program) (Series B COPs) were executed and delivered in the original principal amount of $5.47 million to help fund a portion of the Kirkwall substation and related infrastructure. Both of these series are tax exempt issues. One limitation on refunding the Series A COPS was that about 20% of the outstanding debt had been previously advance refunded. Since public agencies are not allowed to advance refund long term tax-exempt debt more than once, 20% of the Series A COPS was ineligible for advance refunding with tax-exempt revenue bonds. Without refunding the 20%, the prior COP documents would have required the City to continue to maintain a large reserve fund with the Trustee, and this would have reduced the benefit of refinancing. To address the non-refundable 20%portion, the Finance Team considered various Options: 1. Effect a partial refunding by issuing tax-exempt debt for the 80% eligible portion of the Series A COPS and get partial release of the reserve funds, which would be used to make future payments of debt service under the Series A COPS documents. This was estimated to result in savings of about $1,056,700. 2. Effect a full refunding by issuing a combination of tax-exempt debt (for the 80% eligible portion of the Series A COPS) and taxable debt (for the 20% ineligible portion of the Series A COPS), and get full release of the reserve fund. This option was believed to save about $1,517,900. 3. Allocate water fund cash reserve to defease the 20% ineligible portion of the Series A COPS as an alternative to the issuance of taxable bonds. In this case, the total reserve is released and City would be required to contribute $2.325 million of its own money. The savings of this option is about$1.8 million. Option 3 noted above was favored by staff for the following reasons: A. The cash reserves of the water utility were about $21.4 million according to the audited financial report for fiscal year ended June 30, 2011. Hence, cash 034 z Refunding Plan for Utility LT Debt April 23, 2012 Page 3 is on hand to maximize our savings potential. B. Rates earned on cash investments are very low right now, below I%, and so if we can use our own cash to reduce the cost of borrowing, the net effect would be akin to getting a higher rate of return on our cash. If the City earned more than 1.5% on cash investments, it would have been more advantageous for the City to use Option 2, although there would be additional work associated with issuing taxable debt and additional administrative costs associated with debt service. C. For second quarter ended December 31, 2011, the Quarterly Budget Report showed that the water fund is nearing a 1.30 debt coverage ratio. The minimum is 1.25. Exercising Option 3 will allow the City to reduce its interest expense on installment payments significantly on an annual basis and thereby improve our debt coverage ratio without having to rely on a retail water rate increase. Notably, consumption (i.e., "sales") are still down due to conservation and the current economic conditions, and staff is sensitive to the idea of proposing a rate increase if Option 3 can be used to meet debt- coverage requirements. D. The added positive cash flow as shown below in the "Savings" column can be used for other purposes, such as funding capital improvement projects or replenishing cash reserves: Series A Installment Comparison FY Yr Existing Pymnt 11:22H:16060 t Savings 2012 $ 53,774 81 $ 17,093 2013 1,553,88300 521,383 2014 1,555,13800 521,338 2015 1,553,27500 525,475 2016 1,553,17500 523,975 2017 1,555,02500 525,625 2018 1,553,50500 525,105 2019 1,552,930 1,031,200 521,730 2020 1,554,743 1,032,600 522,143 2021 1,548,063 1,022,600 525,463 2022 1,552,738 1,026,600 526,138 2023 1,554 000 1,029,000 525 000 Total S 17,140,246 $ 11,359,781 $ 5,780,466 Staff believes that for all of the above reasons, it is compelling to use our water fund cash to benefit ratepayers, provide additional operating revenue for ongoing system maintenance, or for the purpose of replenishing cash reserves. 035 Refunding Plan for Utility LT Debt r April 23, 2012 Page 4 In regard to the Electric Fund Series B COPS, a full refunding is proposed by the Financing Team using tax exempt revenue bonds. The annual cash flow savings forecast by the Underwriter is set forth below: Series B Installment Comparison rYrExistingPymnt New Payment Savings 1,953 $ 23,428 $ (1,475) 3,438 221,950 41,488 3,438 221,950 41,488 3,438 221,950 41,488 3,438 221,950 41,488 2017 828,438 781,950 46,488 2018 962,448 919,550 42,898 2019 963,373 920,750 42,623 2020 962,273 915,750 46,523 2021 964,113 919,750 44,363 2022 963,406 917,350 46,056 2023 960,750918,750 42,000 Total $ 7,680,502 $ 7,205,078 $ 475,424 The savings forecasts included in both of the above tables is subject to final pricing of the bonds to be issued; however, it is important to move forward to take advantage of the currently low bond market rates. To summarize the proposed financing, the Financing Team has structured the following plan of refunding the aforementioned Series A COPS and Series B COPS to provide savings to both the water and electric utilities: 1. Advance refund the legally permissible 80% share of outstanding Series A COPS in the approximate amount of $10 million on a tax-exempt basis through the issuance of certain 2012 Series A Water System Refunding Revenue Bonds (Water Bonds) in the principal amount not-to-exceed $11 million. 2. Contribute $2.325 million in cash to refund the portion of the Series A COPS that is not eligible for refunding on a tax-exempt basis. 3. Advance refund all of the Series B COPS outstanding in the approximate amount of$5.5 million through the issuance of certain 2012 Series B Electric System Refunding Revenue Bonds (Electric Bonds) in the principal amount not-to-exceed $6.5 million. To fully effect the above refunding plan, staff and the City's Financing Team recommend approval of the attached legal documents, which include the following: Authorizing Resolution: The Resolution approves the Indentures, Bond Purchase Agreements, Preliminary Official Statement, Escrow Instructions, and Continuing Disclosure Agreements for the Water Bonds and the Electric Bonds, and authorizes actions in 036 Refunding Plan for Utility LT Debt April 23, 2012 Page 5 connection with the refinancing of the Series A COPS and Series B COPS. Indentures: The Indentures, each between the City and Wells Fargo Bank, National Association (Trustee), set forth the terms of the Water Bonds and the Electric Bonds and the conditions, rights, and responsibilities of both the City and the Trustee with respect to the Water Bonds and the Electric Bonds. Bond Purchase Agreements: The Bond Purchase Agreements, each between the City and the Underwriter, sets forth the terms, conditions, rights and responsibilities of the parties thereto with respect to the sale and purchase of the Water Bonds and the Electric Bonds. Preliminary Official Statement The Preliminary Official Statement serves as a marketing tool for the Underwriter to sell the bonds, and is required as a means to disclose all material information of the Water and Electric Utilities to potential investors in the Water Bonds and Electric Bonds. The document contains background information on the City, the electric system and the water system, as well as historic, current, and projected financial information such as utility rates, system operating results, and debt service coverage. Escrow Instructions: The Escrow Instructions, each between the City and Wells Fargo Bank, National Association, sets forth the terms and conditions of the escrows that will be established to defease and repay the balance of the installment agreements related to the existing Series A COPS and Series B COPs. Continuing_Disclosure Agreements: The Continuing Disclosure Agreements, each between the City and Wells Fargo Bank, National Association, sets forth the City's obligations to provide timely, ongoing annual financial information for the benefit of investors in the Water Bonds and the Electric Bonds. This document is required pursuant to Rule 15c2-12 established by the Securities and Exchange Commission. It is understood that the above referenced documents are in substantially final form and have been reviewed and commented on by both City Staff and the City Attorney's office. Continued minor changes are likely to occur in the coming days, however, the documents are ready for the Utility Board's/City Council approval at this time. FISCAL IMPACT The above financing plan requires a cash contribution from the water fund in amount of $2.325 million. Since the municipal code requires budget amendments in excess of $1 million to be approved at a public hearing, staff is recommending that a public hearing be scheduled for May 7, 2012. Staff estimates that the Water fund had approximately $22.7 million in cash as of December 31, 2011, and so this cash contribution will lower the water fund cash, however, adequate funds are on hand to effect this refunding and various members of the Financing Team do not believe this use of funds will adversely affect the water utility's credit rating. 037 Refunding Plan for Utility LT Debt April 23, 2012 Page 6 Below includes some forecasted savings of this refunding in discounted net present value terms for both utilities. Water System Savings Without extending the final maturity for the Series A CON, the water system will save an average of$520,000 in annual cash flow through 2023, and approximately $1.58 million in discounted net present value savings through the life of the bonds (under current market conditions). The savings to the water system is expected to exceed the City's target of 5% minimum present value savings over current debt repayment. Electric System Savings Without extending the final maturity for the Series B COPS, the electric system will save up to $46,000 in annual cash flow through 2023, and approximately $454,000 in discounted net present value savings through the life of the bonds. The savings to the water system is expected to exceed the City's target of 5% minimum present value savings over current debt repayment. Prepared by Cary Kalscheuer, Assistant to the Director of Utilities HARDCOPY ATTACHMENTS DISTRIBUTED WITH REPORT Resolution Preliminary Official Statement OTHER ATTACHMENTS Due to the number and size of the remaining documents, hardcopies are available for public review at the Library at 729 N. Dalton and at the Azusa Light & Water Office at 729 N. Azusa Avenue. These documents include the following: Indenture (Water) Indenture (Electric) Continuing Disclosure Agreement (Water) Continuing Disclosure Agreement (Electric) Escrow Instructions (Water) Escrow Instructions (Electric) Bond Purchase Agreement (Water) Bond Purchase Agreement (Electric) 038 RESOLUTION NO. 12- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA AUTHORIZING AND APPROVING DOCUMENTS AND OFFICIAL ACTIONS RELATING TO THE REFINANCING OF CERTAIN WATER SYSTEM IMPROVEMENTS AND ELECTRIC SYSTEM IMPROVEMENTS AND THE ISSUANCE AND SALE OF WATER SYSTEM REVENUE REFUNDING BONDS AND ELECTRIC SYSTEM REVENUE REFUNDING BONDS AND AUTHORIZING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH WHEREAS, the City of Azusa (the "City") is a general law city existing under the law of the State of California; and WHEREAS, the City owns and operates that certain water system (the "Water System"); and WHEREAS, the City previously executed and delivered a Series A Installment Sale Agreement, dated as of August 1, 2003 (the "2003A Installment Sale Agreement"), by and between the Financing Authority for Resource Efficiency of California ("FARECal") and the City, for the purpose of financing the refunding of all of the Azusa Public Financing Authority Revenue Bonds, Series 1993 A (City of Azusa Water System Acquisition Project) (the "2003A Project"); and WHEREAS, pursuant to the 2003A Installment Sale Agreement, the City agreed to pay certain installment payments (the "2003A Installment Payments") and FARECal caused to be executed and delivered the Financing Authority for Resource Efficiency of California Certificates of Participation, 2003 Series A (Water System Capital Improvements Program) (the "2003A Certificates") pursuant to a Trust Agreement, dated as of August 1, 2003, by and between FARECal and Wells Fargo Bank,National Association, as trustee thereunder; and WHEREAS, the City desires to refinance all of the 2003A Project and prepay all of the 2003A Installment Payments and all of the related 2003A Certificates through the issuance of Water System Refunding Revenue Bonds, Series 2012A (the "Water Bonds") pursuant to an Indenture (the "Water Indenture") by and between the City and Wells Fargo Bank, National Association, as trustee thereunder(the "Water Trustee"), and the contribution of certain available moneys of the Water System; and WHEREAS, the City owns and operates that certain electric system (the "Electric System"); and WHEREAS, the City previously executed and delivered a Series B Installment Sale Agreement, dated as of August 1, 2003 (the "2003B Installment Sale Agreement"), by and between FARECal and the City, for the purpose of financing the acquisition, construction and installation of a substation, including associated equipment and facilities, and certain upgrades to the distribution lines and equipment of the City's Electric System that are adjacent to such substation (the "2003B Project"); and 039 WHEREAS, pursuant to the 2003B Installment Sale Agreement, the City agreed to pay certain installment payments (the "2003B Installment Payments") and FARECal caused to be executed and delivered the Financing Authority for Resource Efficiency of California Certificates of Participation, 2003 Series B (Electric System Capital Improvements Program) (the "2003B Certificates") pursuant to a Trust Agreement, dated as of August 1, 2003, by and between FARECal and Wells Fargo Bank, National Association, as trustee thereunder; and WHEREAS, the City desires to refinance all of the 2003B Project and prepay all of the 2003B Installment Payments and all of the related 2003B Certificates through the issuance of Electric System Refunding Revenue Bonds, Series 2012B (the "Electric Bonds" and, together with the Water Bonds, the "Bonds") pursuant to an Indenture (the "Electric Indenture" and, together with the Water Indenture, the "Indentures") by and between the City and Wells Fargo Bank,National Association, as trustee thereunder (the "Electric Trustee"); and WHEREAS, the funds to refund all of the 2003A Certificates will be applied pursuant to Escrow Instructions (the "2003A Escrow Instructions"), by and among the City, FARECal and Wells Fargo Bank, National Association, as escrow agent thereunder; and WHEREAS, the funds to refund all of the 2003B Certificates will be applied pursuant to Escrow Instructions (the "2003B Escrow Instructions" and, together with the 2003A Escrow Instructions, the "Escrow Instructions"), by and among the City, FARECal and Wells Fargo Bank, National Association, as escrow agent thereunder; and WHEREAS, E. J. De La Rosa & Co., Inc. has submitted to the City a proposed form of an agreement to purchase the Water Bonds in the form of a Purchase Agreement (the "Water Bonds Purchase Agreement') and a proposed form of an agreement to purchase the Electric Bonds in the form of a Purchase Agreement ("the Electric Bonds Purchase Agreement' and, together with the Water Bonds Purchase Agreement, the "Purchase Agreements"); and WHEREAS, Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 ("Rule 15c2-12") requires that, in order to be able to purchase or sell the Bonds, the underwriter thereof must have reasonably determined that the City has undertaken in a written agreement or contract for the benefit of the holders of the Bonds to provide disclosure of certain financial information and operating data and certain enumerated events on an ongoing basis; and WHEREAS, in order to cause such requirement to be satisfied, the City desires to execute a Continuing Disclosure Agreement with respect to the Water Bonds and a Continuing Disclosure Agreement with respect to the Electric Bonds (collectively, the "Continuing Disclosure Agreements"); and WHEREAS, a form of the Preliminary Official Statement (the "Preliminary Official Statement') to be distributed in connection with the public offering of the Bonds has been prepared; and WHEREAS, the Council of the City (the "City Council") has been presented with the form of each document referred to herein relating to the actions contemplated hereby; and 2 040 WHEREAS, all acts, conditions and things required by the Constitution and laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the actions authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the City is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such actions for the purpose, in the manner and upon the terms herein provided; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF AZUSA DOES HEREBY FIND, DETERMINE AND RESOLVE AS FOLLOWS: Section 1. The City Council hereby finds that all of the above recitals are true and correct. Section 2. The City Council hereby approves the refinancings described in the recitals of this Resolution and the execution and delivery of the Water Bonds in the not-to- exceed aggregate principal amount of $11,000,000 and the Electric Bonds in the not-to-exceed aggregate principal amount of$6,500,000; provided any refunding to be accomplished with the proceeds from the sale of the Water Bonds will result in a minimum average net present value savings of 5%, expressed as a percentage of the principal amount of the 2003A Certificates being prepaid and any refunding to be accomplished with the proceeds from the sale of the Electric Bonds will result in a minimum average net present value savings of 5%, expressed as a percentage of the principal amount of the 2003B Certificates being prepaid. Section 3. The forms of the Indentures attached hereto are hereby approved, and the Mayor, the City Manager, or the Director of Administrative Services/CFO, their designee, or any member of the City Council (each, an "Authorized Representative"), are each hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver, and the City Clerk is hereby authorized and directed to attest to, the Indentures in substantially said forms, with such changes therein as the Authorized Representative executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the true interest cost applicable to the interest on the Water Bonds shall not exceed 3.00% per annum and the true interest cost applicable to the interest on the Electric Bonds shall not exceed 3.50%per annum. Section 4. The forms of the Purchase Agreements attached hereto are hereby approved, and the Authorized Representatives are each hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Purchase Agreements in substantially said forms, with such changes therein as the Authorized Representative executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the underwriter's total fees for the sale of the Water Bonds shall not exceed 0.423% of the aggregate principal amount of such Water Bonds and the underwriter's total fees for the sale of the Electric Bonds shall not exceed 0.4236/o of the aggregate principal amount of such Electric Bonds. . Section 5. The form of the Preliminary Official Statement attached hereto, with such changes therein as may be approved by an Authorized Representative, is hereby approved, and the use of the Preliminary Official Statement by the Underwriter in connection 3 041. with the offering and sale of the Bonds is hereby authorized and approved. The Authorized a Representatives are each hereby authorized to certify on behalf of the City that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 (except for the omission of certain final pricing, rating and related information as permitted by Rule 15c2- 12). Section 6. The preparation and delivery of an Official Statement, and its use by the Underwriter in connection with the offering and sale of the Bonds, is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement with such changes, insertions and omissions as may be approved by an Authorized Representative, such approval to be conclusively evidenced by the delivery thereof. The Authorized Representatives are each hereby authorized and directed, for and in the name of and on behalf of the City, to deliver the final Official Staiement and any amendment or supplement thereto to the Underwriter. Section 7. The forms of the Escrow Instructions attached hereto are hereby approved, and the Authorized Representatives are each hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Escrow Instructions in substantially said forms, with such changes therein as the Authorized Representative executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 8. The forms of the Continuing Disclosure Agreements attached hereto are hereby approved, and the Authorized Representatives are each hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Continuing Disclosure Agreements in substantially said forms, with such changes therein as the Authorized Representative executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 9. If an Authorized Representative determines that it will be advantageous to the City to purchase municipal bond insurance, reserve fund surety or other credit enhancement or liquidity with respect to some or all of the Bonds, any Authorized Representative is hereby authorized to purchase such insurance, surety or other credit enhancement or liquidity as may be necessary to improve the marketability of the.Bonds. Section 10. All actions heretofore taken by any officers, employees or agents of the City with respect to the execution, delivery or sale of the Bonds, or in connection with or related to any of the agreements or documents referred to herein, are hereby approved, confirmed and ratified. Section 11. Any Responsible Officer is hereby authorized and directed to execute and deliver any and all documents and to do and cause to be done any and all acts and things necessary or advisable for carrying out the transactions contemplated by this Resolution, including obtaining a municipal bond insurance policy for all or a portion of the Bonds. 4 042 Section 12. The City Clerk shall certify to the adoption of this Resolution, and thenceforth and thereafter the same shall be in full force and effect. Notwithstanding the foregoing, such certification and any of the other duties and responsibilities assigned to the City Clerk pursuant to this Resolution may be performed by a Deputy City Clerk with the same force and effect as if performed by the City Clerk hereunder. ADOPTED AND APPROVED THIS TH DAY OF APRIL, 2012. Mayor ATTEST: City Clerk I HEREBY CERTIFY that the foregoing Resolution No. 12- was duly adopted by the City Council of the City of Azusa at a regular meeting thereof on the day of April, 2012. AYES: NOES: ABSENT: City Clerk 5 043 3 CERTIFICATE OF THE CITY CLERK OF THE CITY OF AZUSA a WITH RESPECT TO RESOLUTION NO. 12- I, Vera Mendoza, the City Clerk of the City of Azusa (the "City"), DO HEREBY CERTIFY as follows: Attached hereto as Exhibit A is a true, correct and complete copy of Resolution No. 12- (the "Resolution"), duly adopted on April _, 2012 by the City Council of the City at a meeting of the City Council that was called and held pursuant to law and with all notice required by law and at which a quorum was present and acting throughout, and that the aforesaid Resolution has not been modified, amended, rescinded, revoked or repealed and is in full force and effect as of the date hereof. IN WITNESS WHEREOF, I have hereunto set my and this day of 2012. By: City Clerk 044 o HDW-4-17-12 Draft PRELIMINARY OFFICIAL STATEMENT DATED MAY 4,2012 oNEW ISSUE-BOOK-ENTRY ONLY SYSTEM o S&P: Water Bonds-" " E o Electric Bonds-" " E See"RATINGS"herein. q'm In the opinion of Hawkins Delafield& Wood LLP,Bond Counsel to the City, under existing statutes and court decisions and assuming b continuing compliance with certain tax covenants described herein, (i) interest on the Water Bonds (as defined below) and the Electric ° Bonds (as defined below) is excluded from gross income for federal income tax purposes pursuant to Section 103 the Internal Revenue Code of 1986, as amended(the "Code'), and(ii)interest on the Water Bonds and the Electric Bonds is not treated as a preference item in _ calculating the alternative minimum tax imposed on individuals and corporations under the Code,'such interest, however, is included in 'F ..°. the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In addition, in the opinion of Special Counsel, under existing statutes, interest on the Bonds is exempt from personal income a taxes imposed by the State of California.See ' TAX MATTERS"herein. ll of City of Azusa U * * [Water Preliminary Par Amount] [Electric Preliminary Par Amount] o °'tooa Water System Refunding Revenue Bonds, Electric System Refunding Revenue Bonds, Series 2012A Series 2012B U Dated:Date of Delivery Due:July 1,as shown below on the inside cover hereof n The$[Water Preliminary Par Amount]City of Azusa Water System Refunding Revenue Bonds, Series 2012A (the"Water Bonds") are being issued by the City of Azusa (the "City") pursuant to the Indenture, dated as of lune I, 2012 (the "Water Indenture"), by and d ° between the City and Wells Fargo Bank,National Association, as trustee thereunder(the"Water Trustee"), California Government Code 'o ZSections 53570 et seq. (as amended, the "Refunding Law") and a resolution of the City authorizing the issuance of the Water Bonds. = Proceeds of the Water Bonds, together with certain available moneys, will be used to advance refund all of the City's obligations in o 2 connection with the Financing Authority for Resource Efficiency of California Certificates of Participation, 2003 Series A(Water System z 3 Capital Improvements Program) and pay costs of issuance incurred in connection with the issuance of the Water Bonds. The$[Electric 3 5 Preliminary Par Amount]*City of Azusa Electric System Refunding Revenue Bonds,Series 2012B (the"Electric Bonds")are being issued cc by the City pursuant to the Indenture,dated as of June 1,2012(the"Electric Indenture"),by and between the City and Wells Fargo Bank, National Association, as trustee thereunder (the "Electric Trustee"), the Refunding Law and a resolution of the City authorizing the o issuance of the Electric Bonds. Proceeds of the Electric Bonds,together with certain available moneys,will be used to advance refund all m of the City's obligations in connection with the Financing Authority for Resource Efficiency of California Certificates of Participation, $ � 2003 Series B (Electric System Capital Improvements Program), fund a reserve account for the Electric Bands and pay costs of issuance c A incurred in connection with the issuance of the Electric Bonds. o = Interest on the Water Bonds and the Electric Bonds will be payable on January I and July 1, commencing on [First Interest Payment E Date].The Water Bonds and the Electric Bonds will be issued as fully-registered bonds,will mature in the principal amounts in each year, subject to prior redemption, and will bear interest at the respective rates per annum as set forth on the inside cover of this Official g 8 Statement. The Water Bonds and the Electric Bonds will be registered in the name of Cede& Co., as nominee of The Depository Trust y Company ("DTC'). DTC will act as securities depository for the Water Bonds and the Electric Bonds. Ownership interests in the Bonds 5 may be purchased in book-entry form only. So long as DTC or its nominee is the Owner of the Water Bonds and the Electric Bonds, payments of the principal of, redemption premium, if any, and interest on the Water Bonds and the Electric Bonds will be made as described in Appendix E—"Book-Entry Only System"attached hereto. To secure the payment of the Water Bonds,the City pledges to the Owners of the Water Bonds and grants the Owners a lien upon the A Water Net Revenues in the Water Fund held by the City and any other amounts held by the Trustee in any fund Or account established o ° under the Water Indenture;provided,however,that out of the Water Net Revenues and other moneys there may be applied such sums for ,c n such purposes as are permitted under the Water Indenture. The pledge of Water Net Revenues constitutes a first pledge of and charge and c s lien upon the Water Net Revenues for the payment of the interest on and principal of the Water Bonds in accordance with the terms of the $ = Water Indenture on parity with the pledge of Water Net Revenues for the City's heretofore and hereinafter issued Water Parity Obligations. H Payment of principal of and interest on the Water Bonds and all other payments with respect to other Water Parity Obligations shall be equally secured by Water Net Revenues without priority for number or date of issuance or incurrence of such Water Bonds or Water Parity € c Obligations. See"SECURITY FOR THE WATER BONDS AND THE ELECTRIC BONDS-Sources of Payment,""-Outstanding Parity Obligations"and"-Additional Indebtedness"herein. s o o To secure the payment of the Electric Bonds,the City pledges to the Owners of the Electric Bonds and grants the Owners a lien upon the Electric Net Revenues in the Electric Fund held by the City and any other amounts held by the Trustee in any fund or account A o a established under the Electric Indenture;provided,however,that out of the Electric Net Revenues and other moneys there may be applied R such sums for such purposes as are permitted under the Electric Indenture. The pledge of Electric Net Revenues constitutes a first pledge F .o = of and charge and lien upon the Electric Net Revenues for the payment of the interest on and principal of the Electric Bonds in accordance c y with the terms of the Electric Indenture on parity with the pledge of Electric Net Revenues for the City's heretofore and hereinafter issued o Electric Parity.Obligations. Payment of principal of and interest on the Electric Bonds and all other payments with respect to other Electric A = Parity Obligations shall be equally secured by Electric Net Revenues without priority for number or date of issuance or incurrence of such h Electric Bonds or Electric Parity Obligations. See "SECURITY FOR THE ELECTRIC BONDS AND THE ELECTRIC BONDS - O „ Sources of Payment,""-Outstanding Parity Obligations"and"-Additional Indebtedness"herein. The Water Bonds and the Electric Bonds are subject to optional redemption prior to maturity as more fully described herein. _E 8 See"DESCRIPTION OF THE WATER BONDS AND THE ELECTRIC BONDS-Redemption"herein. o The Water Bonds and the Electric Bonds are limited obligations of the City and are payable solely from the Water Net Revenues and Electric Net Revenues, respectively,and the City is not obligated to pay them except from the applicable Water Net r Revenues or Electric Net Revenues. All the Water Bonds are equally secured by a pledge of and charge and lien upon the Water Net Revenues and all the Electric Bonds are equally secured by a pledge of and charge and lien upon the Electric Net Revenues. Preliminary,subject to change. 043175097.8 036227 OS The Water Bonds and the Electric Bonds are not a debt of the State of California(the"State")or any of its political subdivisions, and neither the State nor any of its political subdivisions is liable thereon, nor in any event shall the Water Bonds or the Electric Bonds be payable out of any funds or properties other than those of the City as described herein. The pledge under the Water Indenture and the Electric Indenture do not constitute a pledge of general revenues,funds or moneys of the City or an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form z of taxation. The full faith and credit of the City is not pledged for the payment of the principal of or interest on the Water Bonds or the Electric Bonds and no tax or other source of funds other than the Water Net Revenues and Electric Net Revenues are pledged to pay the principal of or interest on the Water Bonds and the Electric Bonds,respectively. This cover page contains information for general reference only. Potential purchasers are advised to read the entire Official Statement to obtain information essential to making an informed investment decision. The Water Bonds and the Electric Bonds are offered when,as and if issued and accepted by the Underwriter subject to the approval, as to their validity,of Hawkins Delafield&Wood LLP,Los Angeles,California,Bond Counsel,and certain other conditions.Certain legal matters will be passed upon for the City by Best Best& Krieger LLP, Riverside, California, as City Attorney, for the City by Hawkins Delafield&Wood LLP, Los Angeles,California,Disclosure Counsel, and for the Underwriter by its counsel, Stradling Yocca Carlson& Rauth,a Professional Corporation,Newport Beach,California. It is expected that the Water Bonds and the Electric Bonds will be available for delivery in book-entry form on or about ,2012. De La Rosa & Co. Dated May_,2012 175097.8 036227 OS MATURITY SCHEDULES" $[Water Preliminary Par Amount] Water System Refunding Revenue Bonds, Series 2012A Year Principal Interest CUSIPt (July 1) Amount Rate Yield (Base: $ % % $[Electric Preliminary Par Amount] Electric System Refunding Revenue Bonds, Series 2012B Year Principal Interest CUSIP (July 1) Amount Rate Yield (Base: ) Preliminary,subject to change. Copyright 2012,American Bankers Association. CUSIP®is a registered trademark of the American Bankers Association. CUSIP data herein is provided by the CUSIP Service Bureau,managed on behalf of the American Bankers Association by Standard & Poor's. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers have been assigned by an independent company not affiliated with the City and are included solely for the convenience of the registered owners of the applicable Water Bonds and the Electric Bonds. Neither the City nor the Underwriter are responsible for the selection Or uses of these CUSIP numbers,and no representation is made as to their correctness on the applicable Water Bonds and the Electric Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Water Bonds and the Electric Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance and other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Water Bonds and the Electric Bonds. 175097.8 036227 OS CITY OF AZUSA, CALIFORNIA Azusa City Council and Other Elected Officials Joseph R.Rocha,Mayor Angel A. Carrillo,Mayor Pro-Tem Keith Hanks, Councilmember Robert Gonzales, Councilmember Uriel E. Macias, Councilmember Vera Mendoza, City Clerk Marcene Hamilton, City Treasurer City Officials James Makshanoff,City Manager Alan Kreimeier, Director of Administrative Services/CFO Best Best&Krieger, City Attorney Azusa Light & Water Utility Board Angel A. Carrillo,Chairperson Uriel E. Macias, Vice Chairperson Joseph R. Rocha,Board Member Robert Gonzales, Board Member Keith Hanks, Board Member Azusa Light&Water Staff George Morrow,Director of Utilities Yarek Lehr, Federico Langit Assistant Director of Resource Management Assistant Director of Electric Operations Chet Anderson, Assistant Director Karen Vanca,Assistant Director of Water Operations of Customer Care& Solutions Cary Kalscheuer, Assistant to the Director of Utilities Bond and Disclosure Counsel Financial Advisor Hawkins Delafield &Wood LLP Urban Futures Incorporated Los Angeles,California Orange, California Trustee Verification Agent Wells Fargo Bank, National Association [Grant Thornton LLP] Los Angeles, California Minneapolis,Minnesota 175097.8 036227 OS No dealer, broker, salesperson or other person has been authorized by the City to give any information or to make any representations other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the City. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Water Bonds and the Electric Bonds by a person in any jurisdiction in which it is unlawful for such person to make an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Water Bonds and the Electric Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. The information set forth in this Official Statement has been obtained from the City and other sources which are believed by the City to be reliable. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any implication that there has been no change in the affairs of the City since the date hereof. All summaries of the Water Bonds and the Electric Bonds, the Resolutions (as defined herein) and other documents summarized herein, are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. This Official Statement is submitted in connection with the issuance of the Water Bonds and the Electric Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE WATER BONDS AND THE ELECTRIC BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE WATER BONDS AND THE ELECTRIC BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. The City maintains a website at www.ci.azusa.ca.us. The information presented therein is not a part of this Official Statement, is not incorporated by reference herein, and should not be relied upon in making an investment decision with respect to the Water Bonds and the Electric Bonds. 175097.8 036227 OS TABLE OF CONTENTS , Page INTRODUCTION.........................................................................................................................................I WaterBonds..............................................................................................................................................1 ElectricBonds...........................................................................................................................................2 LimitedObligations...................................................................................................................................3 No Cross Collateralization Between Water Bonds and Electric Bonds....................................................3 The City, the Water System and Electric System......................................................................................4 Forward-Looking Statements....................................................................................................................4 Miscellaneous............................................................................................................................................4 PLANOF FINANCE....................................................................................................................................5 WaterBonds..............................................................................................................................................5 ElectricBonds...........................................................................................................................................6 ESTIMATED SOURCES AND USES OF FUNDS.....................................................................................7 DESCRIPTION OF THE WATER BONDS AND THE ELECTRIC BONDS ...........................................7 General ......................................................................................................................................................7 Book-Entry Only System ..........................................................................................................................8 Redemption...............................................................................................................................................8 Noticeof Redemption................................................................................................................................8 PartialRedemption....................................................................................................................................9 Effectof Redemption ................................................................................................................................9 SECURITY FOR THE WATER BONDS AND THE ELECTRIC BONDS.............................................10 General....................................................................................................................................................10 Sourcesof Payment.................................................................................................................................10 No Cross Collateralization Between Water Bonds and Electric Bonds..................................................12 Applicationof Gross Revenues...............................................................................................................12 OutstandingParity Obligations...............................................................................................................15 AdditionalIndebtedness..........................................................................................................................16 Ratesand Charges...................................................................................................................................19 ReserveAccount......................................................................................................................................19 AdditionalCovenants..............................................................................................................................21 No Acceleration Upon an Event of Default.............................................................................................23 AZUSA LIGHT AND WATER DEPARTMENT......................................................................................23 GeneralDescription.................................................................................................................................23 Azusa Light and Water Utility Board......................................................................................................23 Managementof the Department..............................................................................................................24 Insurance .................................................................................................................................................25 PensionBenefits.....................................................................................................................................26 Other Post Employment Benefits..........................................................................................................30 THEWATER SYSTEM.............................................................................................................................31 General....................................................................................................................................................31 ExistingService Territory.......................................................................................................................31 MajorFacilities and Equipment ..............................................................................................................33 Sourcesof Water.....................................................................................................................................33 WaterRights............................................................................................................................................33 ReplacementWater.................................................................................................................................35 175097.8 036227 OS TABLE OF CONTENTS Page Water Production and Average Cost.......................................................................................................35 Customers................................................................................................................................................37 Ratesand Charges...................................................................................................................................38 Operation and Maintenance of the Water System...................................................................................40 WaterSystem Employees........................................................................................................................40 Water Treatment and Quality Control.....................................................................................................40 WaterSystem Master Plan......................................................................................................................42 UrbanWater Management Plan..............................................................................................................42 CapitalRequirements..............................................................................................................................42 Transfers to the General Fund of the City...............................................................................................43 Historical Coverage of Water System Obligations Debt Service............................................................44 DebtService Requirements.....................................................................................................................45 Projected Coverage of Water Systems Obligations Debt Service...........................................................46 Litigation.................................................................................................................................................46 THEELECTRIC SYSTEM ........................................................................................................................47 General....................................................................................................................................................47 PowerSupply Resources.........................................................................................................................47 Short-Term Wholesale Transactions.......................................................................................................48 Joint Powers Agency Resources/Remote Ownership Interests...............................................................49 SanJuan Hedging Program.....................................................................................................................53 RenewableEnergy Agreements ..............................................................................................................54 FuturePower Resources..........................................................................................................................54 Existing Transmission Resources............................................................................................................54 Participationin the CAISO......................................................................................................................55 DistributionFacilities..............................................................................................................................55 Electric Rates and Charges......................................................................................................................55 CapitalRequirements..............................................................................................................................58 Indebtedness............................................................................................................................................58 HistoricalOperating Results....................................................................................................................60 Debt Service Requirements.....................................................................................................................61 Transfers to the General Fund of the City...............................................................................................61 ElectricSystem Employees.....................................................................................................................62 ElectricSystem Initiatives.......................................................................................................................62 CashReserves..........................................................................................................................................63 CustomerRelations............:....................................................................................................................63 Conservation and Renewable Energy Programs .....................................................................................64 ElectricSystem Litigation.......................................................................................................................64 DEVELOPMENTS IN THE CALIFORNIA ENERGY MARKETS.........................................................65 Background; Electric Market Deregulation.............................................................................................65 Market Redesign and Technology Upgrade.......................4_000P.........6...........44b..44.o............... Resource Adequacy Requirement..............:............................................................................................67 CAISO Credit Reform Initiative.............................................................................................................67 CAISOConvergence Bidding.................................................................................................................67 State Climate Change Policy Developments...........................................................................................68 FutureRegulation....................................................................................................................................71 Impact of Developments on the City.. .........4......................444............4.............. ........4.....71 ii 175097.8 036227 OS TABLE OF CONTENTS Page OTHER FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY...........................................72 FederalEnergy Legislation......................................................................................................................72 EnvironmentalIssues...............................................................................................................................74 CertainOther Factors ..............................................................................................................................75 RateRegulation.......................................................................................................................................76 RISKFACTORS.........................................................................................................................................76 LimitedObligations.................................................................................................................................77 System Water Net Revenues and Electric Net Revenues and Expenditures...........................................77 Water System and Electric System Demand...........................................................................................77 Rate-Setting and Initiative Processes Under Proposition 218.................................................................77 Statutory and Regulatory Compliance.....................................................................................................78 Earthquakes and Other Natural Disasters; Casualty Risk........................................................................78 Risks Relating to the Water Supply.........................................................................................................79 Electric System Expenses and Collections..............................................................................................79 Impact of Current Economic Conditions on Water Net Revenues and Electric Net Revenues..............80 No Acceleration; Limitations on Remedies.............................................................................................80 CONSTITUTIONAL LIMITATIONS ON TAXES, WATER RATES AND CHARGES........................81 Proposition218........................................................................................................................................81 Proposition26..........................................................................................................................................83 FutureInitiatives......................................................................................................................................84 CONTINUINGDISCLOSURE..................................................................................................................84 LEGALOPINION......................................................................................................................................84 TAXMATTERS.........................................................................................................................................85 Opinionof Bond Counsel........................................................................................................................85 Certain Ongoing Federal Tax Requirements and Covenants ..................................................................85 Certain Collateral Federal Tax Consequences.........................................................................................85 OriginalIssue Discount...........................................................................................................................86 BondPremium.........................................................................................................................................86 Information Reporting and Backup Withholding....................................................................................87 Proposed Legislation and Other Matters.................................................................................................87 VERIFICATION OF MATHEMATICAL COMPUTATIONS.................................................................87 RATINGS....................................................................................................................................................88 FINANCIALSTATEMENTS ....................................................................................................................88 FINANCIALADVISOR.............................................................................................................................88 UNDERWRITING......................................................................................................................................88 MISCELLANEOUS....................................................................................................................................89 APPENDIX A THE CITY OF AZUSA ............................................................................................A-1 APPENDIX B SUMMARY OF THE INDENTURES ......................................................................B-1 APPENDIX C AUDITED FINANCIAL STATEMENTS OF THE CITY AS OF.TUNE 30, 201 I..C-I APPENDIX D PROPOSED FORMS OF BOND COUNSEL OPINIONS........................................D-1 APPENDIX E BOOK-ENTRY ONLY SYSTEM.............................................................................E-1 APPENDIX F FORMS OF CONTINUING DISCLOSURE AGREEMENTS.................................F-1 iii 175097.8 036227 OS OFFICIAL STATEMENT City of Azusa City of Azusa [Water Preliminary Par Amount]' [Electric Preliminary Par Amount] Water System Refunding Revenue Bonds, Electric System Refunding Revenue Bonds, Series 2012A Series 2012B INTRODUCTION This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Oficial Statement, including the cover page and appendices hereto, and the documents described herein. All statements contained in this introduction are qualified in their entirety by reference to the entire Official Statement. References to, and summaries of, provisions of the Constitution and laws of the State of California (the "State') and any documents referred to herein do not purport to be complete and such references are qualified in their entirety by reference to the complete provisions. All capitalized terms used in this Official Statement and not otherwise defined herein have the meanings set forth in the Water Trust Indenture or the Electric Trust Indenture, as applicable. Water Bonds Authorization and Description of the Water Bonds. The $[Water Preliminary Par Amount]*City of Azusa Water System Refunding Revenue Bonds, Series 2012A (the "Water Bonds') are being issued by the City of Azusa (the "City") pursuant to the Indenture, dated as of June 1, 2012 (the "Water Indenture"), by and between the City and Wells Fargo Bank, National Association, as trustee thereunder (the "Water Trustee"), California Government Code Sections 53570 et seq. (as amended, the "Refunding Law") and a resolution of the City authorizing the issuance of the Water Bonds. Proceeds of the Water Bonds, together with certain available moneys, will be used to advance refund all of the City's obligations in connection with the Financing Authority for Resource Efficiency of California Certificates of Participation, 2003 Series A (Water System Capital Improvements Program) (the "2003A Water Certificates")and pay costs of issuance incurred in connection with the issuance of the Water Bonds. Security and Sources of Payment for the Water Bonds. The Water Bonds are revenue bonds secured by and payable from certain limited revenues of the City received from the ownership and/or operation of the water system (the "Water System"). The Water Bonds are special limited obligations of the City payable solely from net revenues of the Water Fund held by the City(the"Water Net Revenues") and any other amounts held by the Water Trustee in any fund or account established under the Water Indenture. The pledge of Water Net Revenues constitutes a pledge of and charge and lien upon the Water Net Revenues for the payment of the interest on and principal of the Water Bonds in accordance with the terms of the Water Indenture on parity with the pledge of Water Net Revenues for the City's heretofore and hereinafter issued Water Parity Obligations (herein defined). Payment of principal of and interest on the Water Bonds and all other payments with respect to other Water Parity Obligations shall be equally secured by Net Revenues without priority for number or date of issuance or incurrence of such Water Bonds or Water Parity Obligations. "SECURITY FOR THE WATER BONDS AND THE ELECTRIC BONDS -Sources of Payment"herein. Preliminary,subject to change. 175097.8 036227 OS Water Parity Obligations. To finance and refinance the costs of certain improvements to its Water System, the City has executed and delivered certain installment sale agreements (collectively, the "Prior Water Installment Agreements") with the Azusa Public Financing Authority(the "Authority") and the Financing Authority for Resource Efficiency of California("FARECal"). The Prior Water Installment Agreement with the Authority secures the Authority's Parity Revenue Bonds (Water System Capital Improvements Program) Series 2006 (the "2006 Water Bonds"), which are outstanding the in the principal amount of $53,965,000 as of April 1, 2012. The Prior Water Installment Agreement with FARECal secures FARECal's Certificates of Participation, 2003 Series A (Water System Capital Improvements Program) (the "2003A Certificates"), which are outstanding the in the principal amount of $13,965,000 as of April 1, 2012, prior to the refunding described herein. Subsequent to the issuance of the Water Bonds and the refunding described herein, none of the 2003A Certificates will be outstanding. See "PLAN OF FINANCE" and "SECURITY FOR THE WATER BONDS AND THE ELECTRIC BONDS -Outstanding Parity Obligations"herein. In addition, subject to satisfaction of the conditions set forth in the Prior Water Installment Agreements and the Water Indenture, the City may enter into additional installment agreements to finance and refinance improvements to the Water System and/or issue additional refunding revenue bonds. Such additional installment agreements and refunding revenue bonds will be secured by a lien on Water Net Revenues and payable on a parity with the City's Water Bonds and Prior Water Installment Agreements. All Prior Water Installment Agreements and additional obligations relating to the Water System secured by a lien on Water Net Revenues and payable on a parity therefrom are collectively referred to herein as "Water Parity Obligations". See "SECURITY FOR THE WATER BONDS AND THE ELECTRIC BONDS - Additional Indebtedness" herein and Appendix B "SUMMARY OF THE INDENTURES - Water Indenture - Conditions for the Issuance of Additional Bonds" and "- Procedure for the Issuance of Additional Bonds"attached hereto. Electric Bonds Authorization and Description of the Electric Bonds. The $[Electric Preliminary Par Amount]` City of Azusa Electric System Refunding Revenue Bonds, Series 2012B (the "Electric Bonds") are being issued by the City pursuant to the Indenture, dated as of June 1, 2012 (the "Electric Indenture'; each of the Water Indenture and the Electric Indenture is referred to herein as an"Indenture"),by and between the City and Wells Fargo Bank, National Association, as trustee thereunder (the "Electric Trustee'; each of the Electric Trustee and the Water Trustee is referred to herein as a"Trustee"), the Refunding Law and a resolution of the City authorizing the issuance of the Electric Bonds. Proceeds of the Electric Bonds, together with certain available moneys, will be used to advance refund all of the City's obligations in connection with the Financing Authority for Resource Efficiency of California Certificates of Participation, 2003 Series B (Electric System Capital Improvements Program) (the "2003B Electric Certificates"), fund a reserve account for the Electric Bonds and pay costs of issuance incurred in connection with the issuance of the Electric Bonds. Security and Sources of Payment for the Electric Bonds. The Electric Bonds are revenue bonds secured by and payable from certain limited revenues of the City received from the ownership and/or operation of the electric system (the "Electric System"). The Electric Bonds are special limited obligations of the City payable solely from net revenues of the Electric Fund held by the City (the "Electric Net Revenues") and any other amounts held by the Electric Trustee in any fund or account established under the Electric Indenture. The pledge of Electric Net Revenues constitutes a first pledge of and charge and lien upon the Electric Net Revenues for the payment of the interest on and principal of the Electric Bonds in accordance with the terms of the Electric Indenture on parity with the pledge of Electric Net Revenues for the City's heretofore and hereinafter issued Electric Parity Obligations (herein defined). Payment of principal of and interest on the Electric Bonds and all other payments with respect to other 2 175097.8 036227 OS Electric Parity Obligations shall be equally secured by Net Revenues without priority for number or date of issuance or incurrence of such Electric Bonds or Electric Parity Obligations. "SECURITY FOR THE WATER BONDS AND THE ELECTRIC BONDS - Sources of Payment"herein. Electric Parity Obligations. To finance the costs of certain improvements to its Electric System, the City has executed and delivered certain installment sale agreements (collectively, the "Prior Electric Installment Agreements") with FARECal that secure FARECal's Certificates of Participation, 2003 Series B (Electric System Capital Improvements Program) (the "2003B Certificates") and Certificates of Participation, 2003 Series C (Electric System Capital Improvements Program) (the "2003C Certificates"). The 2003B Certificates are outstanding the in the principal amount of $5,470,000 as of April 1, 2012, prior to the refunding described herein. Subsequent to the issuance of the Electric Bonds and the refunding described herein, none of the 2003B Certificates will be outstanding. The 2003C Certificates are outstanding the in the principal amount of $3,070,000 as of April 1, 2012. See "PLAN OF FINANCE" and "SECURITY FOR THE WATER BONDS AND THE ELECTRIC BONDS - Outstanding Parity Obligations"herein. In addition, subject to satisfaction of the conditions set forth in the Prior Electric Installment Agreements and the Electric Indenture, the City may enter into additional installment agreements to finance and refinance improvements to the Electric System and/or issue additional refunding revenue bonds. Such additional installment agreements and refunding revenue bonds will be secured by a lien on Electric Net Revenues and payable on a parity with the City's Electric Bonds and Prior Electric Installment Agreements. All Prior Electric Installment Agreements and additional obligations relating to the Electric System secured by a lien on Electric Net Revenues and payable on a parity therefrom are collectively referred to herein as "Electric Parity Obligations". See "SECURITY FOR THE WATER BONDS AND THE ELECTRIC BONDS - Additional Indebtedness" herein and Appendix B "SUMMARY OF THE INDENTURES - Electric Indenture - Conditions for the Issuance of Additional Bonds"and"-Procedure for the Issuance of Additional Bonds"attached hereto. Limited Obligations The Water Bonds and the Electric Bonds are limited obligations of the City and are payable solely from the Water Net Revenues and Electric Net Revenues, respectively, and the City is not obligated to pay them except from the applicable Water Net Revenues or Electric Net Revenues. All the Water Bonds are equally secured by a pledge of and charge and lien upon the Water Net Revenues and all the Electric Bonds are equally secured by a pledge of and charge and lien upon the Electric Net Revenues. The Water Bonds and the Electric Bonds are not a debt of the State of California (the "State") or any of its political subdivisions, and neither the State nor any of its political subdivisions is liable thereon, nor in any event shall the Water Bonds or the Electric Bonds be payable out of any funds or properties other than those of the City as described herein. The pledge under the Water Indenture and the Electric Indenture do not constitute a pledge of general revenues, funds or moneys of the City or an obligation of the City for,which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The full faith and credit of the City is not pledged for the payment of the principal of or interest on the Water Bonds or the Electric Bonds and no tax or other source of funds other than the Water Net Revenues and Electric Net Revenues are pledged to pay the principal of or interest on the Water Bonds and the Electric Bonds,respectively. No Cross Collateralization Between Water Bonds and Electric Bonds The payments to be made by the City from Water Net Revenues, together with any other amounts held by the Water Trustee in any fund or account established under the Water Indenture, are the only source of payment for the Water Bonds. Revenues of the Electric System will not be used to make 3 175097.8 036227 OS payments with respect to the Water Bonds. The payments to be made by the City from Electric Net Revenues, together with any other amounts held by the Electric Trustee in any fund or account established under the Electric Indenture, are the only source of payment for the Electric Bonds. Revenues of the Water System will not be used to make payments with respect to the Electric Bonds. Amounts in the reserve account for the Electric Bonds are solely for the benefit of the Electric Bonds. See "SECURITY AND SOURCES OF PAYMENT FOR THE WATER BONDS AND THE ELECTRIC BONDS"herein. The City,the Water System and Electric System The City was founded in 1887 and incorporated as a general law city on December 29, 1898. The City is located in the County of Los Angeles (the"County") and situated 27 miles northeast of the City of Los Angeles. The City encompasses 9.13 square miles and has a population of approximately 46,000. The economy of the City includes residential development and industrial, commercial and agricultural activities. See Appendix A-"THE CITY OF AZUSA"attached hereto. The City owns and operates the Water System, whose service territory includes the City and adjoining portions of surrounding cities and unincorporated areas of the County. The Water System serves approximately 22,900 accounts with an estimated population of 108,000 persons. See "THE WATER SYSTEM"herein. The City also owns and operates the Electric System, which provides electric service to an estimated population of 46,400 persons, serving nearly all of the electric customers within the City limits. The Electric System has approximately 14,000 residential customers, 1,600 commercial and industrial customers and 130 governmental customers. See"THE ELECTRIC SYSTEM"herein. Forward-Looking Statements Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements." Such statements are generally identifiable by the terminology used such as "plan," "expect," "estimate," "budget," "projected" or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Although the City believes that such expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The City is not obligated to issue any updates or revisions to the forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur. Miscellaneous The summaries of and references to documents, statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive, and each such summary and reference is qualified in its entirety by reference to each document, statute, report or instrument. The capitalization of any word not conventionally capitalized or otherwise defined herein, indicates that such word is defined in a particular agreement or other document and, as used herein, has the meaning given it in such agreement or document. See Appendix B — "SUMMARY OF THE INDENTURES" for summaries of certain of such definitions. 4 175097.8 036227 OS PLAN OF FINANCE Water Bonds Proceeds of the Water Bonds, together with a $2.3 million cash contribution from the Water System and certain other available moneys, will be used to advance refund and defease all of the City's obligations in connection with the 2003A Water Certificates ("Refunded 2003A Water Certificates") and pay costs of issuance incurred in connection with the issuance of the Water Bonds. The 2003A Water Certificates were issued on August 19, 2003 to refund all of the Azusa Public Financing Authority Revenue Bonds, Series 1993 A (City of Azusa Water System Acquisition Project) (the "1993 Water Bonds"). The 1993 Water Bonds were issued to finance certain improvements to the Water System and advance refund a portion of the Authority's 1990 Local Agency Revenue Bonds Series A, which were in tum issued to advance refund certain outstanding obligations of the City and finance certain improvements to the City's Water System. The 2003A Water Certificates being advance refunded and defeased are as follows: Maturity Date Principal Prepayment Prepayment . CUSIP Jul 1 Amount Date Price* No! 2012 $ 910,000 N/Atte N/A 130570BG8 2013 945,000 N/A") N/A 130570BH6 2014 985,000 July 1, 2013 100% 130570BJ2 2015 1,025,000 July 1, 2013 100 130570BK9 2016 1,070,000 July 1,2013 100 130570BL7 2017 1,120,000 July 1, 2013 100 130570BM5 2018 1,170,000 July 1, 2013 100 130570BN3 2019 1,225,000 July 1, 2013 100 130570BP8 2020 1,285,000 July 1, 2013 100 130570BQ6 2021 1,340,000 July 1, 2013 100 130570BR4 2022 1,410,000 July 1, 2013 100 130570BS2 2023 1,480,000 July 1,2013 100 13057OBTO Total $13,965,000 * Expressed as a percentage of the principal amount. ' Copyright 2003,American Bankers Association. CUSIP®is a registered trademark of the American Bankers Association. CUSIP data herein is provided by the CUSIP Service Bureau,managed on behalf of the American Bankers Association by Standard & Poor's. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers have been assigned by an independent company not affiliated with the City and are included solely for the convenience of the registered owners of the referenced bonds. Neither the City nor the Underwriter are responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the applicable bonds or as included herein. (0 Amounts in the Water Escrow Fund(as described below) will be used to pay the principal of and interest on the Refunded Certificates maturing on July 1,2012 and July 1,2013 as they become due and payable. To provide for the defeasance and/or prepayment of the Refunded 2003A Water Certificates, the City intends to deposit into an escrow account (the "Water Escrow Account") to be held by Wells Fargo Bank, National Association (the "Water Escrow Agent"), proceeds of the Water Bonds and certain available moneys which, when invested in certain defeasance securities, will be sufficient to pay (i) the principal of and interest on the Refunded 2003A Water Certificates maturing on July 1, 2012 and July 1, 2013 as they become due and payable, (ii) the interest due on the Refunded 2003A Water Certificates maturing after July 1, 2013 on each interest payment date thereof to July 1, 2013 (the "Water Prepayment Date") and (iii) the prepayment price of such Refunded 2003A Water Certificates equal to 100% of the 5 175097.8 036227 OS principal amount thereof on the Water Prepayment Date, without premium. The City intends to purchase or direct the Water Escrow Agent to purchase certain defeasance securities that will be held by the Water Escrow Agent in the Water Escrow Account to be established thereby under an escrow agreement (the "Water Escrow Agreement") by and among the City, FARECAI and the Water Escrow Agent. Such defeasance securities will be available only for the payment of the Refunded 2003A Water Certificates for which the Water Escrow Account is created. After the deposit of the defeasance securities into the Water Escrow Account as described above, the City will be discharged from all obligations with respect to the Refunded 2003A Water Certificates. Grant Thornton, a firm of independent certified public accountants, will verify the arithmetical computations used to determine the sufficiency of the escrow deposit. See "Verification of Mathematical Computations"herein. Electric Bonds Proceeds of the Electric Bonds, together with certain available moneys, will be used to advance refund all of the City's obligations in connection with the 2003B Electric Certificates (the "Refunded 2003B Electric Certificates"), fund a reserve account for the Electric Bonds and pay costs of issuance incurred in connection with the issuance of the Electric Bonds. The 2003B Electric Certificates were issued on August 19, 2003 to finance the acquisition, construction and installation of a new substation, including associated equipment and facilities, and certain upgrades to the distribution lines and equipment of the City's Electric System that are adjacent to the such substation. The 2003B Electric Certificates being advance refunded and defeased are as follows: Maturity Principal Prepayment Prepayment (July 1) Amount Date Price CUSIP, 2017 $ 565,000 July 1, 2013 100% 130570BU7 2018 725,000 July 1, 2013 100 130570BV5 2019 760,000 July 1, 2013 100 130570BW3 2020 795,000 July 1,2013 100 130570BXI 2021 835,000 July 1,2013 100 130570BY9 2022 875,000 July 1, 2013 100 130570BZ6 2023 915,000 July 1,2013 100 130570CAO Total $5,470,000 * Expressed as a percentage of the principal amount. f Copyright 2003,American Bankers Association. CUSIP®is a registered trademark of the American Bankers Association. CUSIP data herein is provided by the CUSIP Service Bureau,managed on behalf of the American Bankers Association by Standard & Poor's. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers have been assigned by an independent company not affiliated with the City and are included solely for the convenience of the registered owners of the referenced bonds. Neither the City nor the Underwriter are responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the applicable bonds or as included herein. To provide for the defeasance and prepayment of the Refunded 2003B Electric Certificates, the City intends to deposit into an escrow account(the `Electric Escrow Account")to be held by Wells Fargo Bank, National Association (the "Electric Escrow Agent"), proceeds of the Electric Bonds and certain available moneys which, when invested in certain defeasance securities, will be sufficient to pay all interest with respect to the Refunded 2003B Electric Certificates when due through and including July 1, 2013 (the "Electric Prepayment Date") and provide for the refunding of the Refunded 2003B Electric Certificates on the Electric Prepayment Date at a prepayment price equal to the principal amount of the Refunded 2003B Electric Certificates to be prepaid plus accrued interest thereon to the date of 6 175097.8 036227 OS prepayment, without premium. The City intends to purchase or direct the Electric Escrow Agent to purchase certain defeasance securities that will be held by the Electric Escrow Agent in the Electric Escrow Account to be established thereby under an escrow agreement(the"Electric Escrow Agreement') by and among the City, FARECal and the Electric Escrow Agent. Such defeasance securities will be available only for the payment of the Refunded 2003B Electric Certificates for which the Electric Escrow Account is created. After the deposit of the defeasance securities into the Electric Escrow Account as described above, the City will be discharged from all obligations with respect to the Refunded 2003B Electric Certificates. Grant Thornton, a firm of independent certified public accountants, will verify the arithmetical computations used to determine the sufficiency of the escrow deposit. See "Verification of Mathematical Computations"herein. ESTIMATED SOURCES AND USES OF FUNDS The following sets forth the estimated sources and uses of funds related to the issuance of the Bonds. Water Bonds Electric Bonds Sources of Funds: Principal Amount Net Issue Premium/Discount Release from funds/accounts for the Refunded 2003A Water Certificates and the Refunded 2003B Electric Certificates City Contribution Total Sources of Funds Uses of Funds: Refund Refunded 2003A Water Certificates Refund Refunded 2003B Electric Certificates Deposit to Reserve Account Deposit to Expense Fund') Total Uses of Funds Includes fees and expenses of the financial advisor, bond counsel and disclosure counsel, verification agent, underwriting fees, fees of the Trustee, printing and other miscellaneous costs associated with the issuance of the Water Bonds and the Electric Bonds. DESCRIPTION OF THE WATER BONDS AND THE ELECTRIC BONDS General The Water Bonds and the Electric Bonds will be dated their date of delivery and will bear interest at the rates set forth on the inside cover page of this Official Statement, payable on January 1 and July 1 of each year, commencing [First Interest Payment Date] (each, an"Interest Payment Date") until maturity or earlier redemption. Subject to the redemption provisions set forth herein, the Water Bonds and the Electric Bonds will mature on the dates and in the amounts set forth on the inside cover page hereof. Each Water Bond and Electric shall bear interest from the Interest Payment Date next preceding the date of authentication thereof, in which event such Water Bond or Electric Bond shall bear interest from such date, or unless such date of authentication is prior to the Record Date (as hereinafter defined) for the first Interest Payment Date, in which event such Water Bond or Electric Bond shall bear interest from its date of delivery. 7 175097.8 036227 OS Principal of any Water Bond or Electric Bond and any premium upon redemption shall be paid by check of the respective Trustee upon presentation and surrender thereof at the office of the respective Trustee. Principal of and interest and premium (if any) on the Water Bonds and the Electric Bonds shall be payable in lawful money of the United States of America. So long as Cede & Co. is the registered owner of the Water Bonds and the Electric Bonds, payments of principal and interest on the Water Bonds and the Electric Bonds will be paid to DTC as registered owner of the Water Bonds and the Electric Bonds. Book-Entry Only System The Water Bonds and the Electric Bonds are being issued as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ("DTC") and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple thereof, under the book-entry only system maintained by DTC. While the Water Bonds and the Electric Bonds are subject to the book-entry only system, the principal, interest and any redemption premium with respect to a Water Bond or an Electric Bond will be paid by the respective Trustee to DTC, which in turn is obligated to remit such payment to its DTC Participants for subsequent disbursement to Beneficial Owners of the Water Bonds and the Electric Bonds as described herein. See Appendix E - "Book-Entry Only System"below. Redemption Optional Redemption.* The Water Bonds maturing on or before July 1, 20_ are not subject to Optional redemption prior to their maturities. The Water Bonds maturing on or after July 1, 20 shall be subject to redemption prior to their respective maturities at the option of the City from any source of funds on or after July 1, 20_, as a whole or in part (in such maturities as are designated to the Water Trustee by the City or, if the City fails to designate such maturities, on a proportional basis among maturities) on any date, in integral multiples of$5,000 at a redemption price equal to the principal amount of the Water Bonds to be redeemed, together with interest accrued thereon to the date fixed for redemption,without premium. The Electric Bonds maturing on or before July 1, 20_ are not subject to optional redemption prior to their maturities. The Electric Bonds maturing on or after July 1, 20_ shall be subject to redemption prior to their respective maturities at the option of the City from any source of funds on or after July 1, 20_, as a whole or in part (in such maturities as are designated to the Electric Trustee by the City or, if the City fails to designate such maturities, on a proportional basis among maturities) on any date, in integral multiples of $5,000 at a redemption price equal to the principal amount of the Electric Bonds to be redeemed, together with interest accrued thereon to the date fixed for redemption, without premium. Notice of Redemption Notice of Redemption. In the event of an optional redemption, the Water Trustee or Electric Trustee, as applicable, will mail by first-class mail, not less than thirty(30)nor more than sixty(60) days prior to the redemption date to the respective Owners of the Water Bonds or the Electric Bonds, as applicable, designated for redemption at their addresses appearing on the registration books of the respective Trustee. Each notice of redemption will state (1) the date of such notice, (2) the date of redemption, (3) the redemption price, if any, (including the name and appropriate address of the respective Trustee), (4) the place or places where the redemption will be made, including the name and Preliminary,subject to change. 8 175097.8 036227 OS address of any paying agent, (5) the CUSIP number(if any) of the maturity or maturities, (6) if less than all of any such maturity is to be redeemed, the distinctive certificate numbers of the Water Bonds or the Electric Bonds of such maturity to be redeemed and (7) in the case of Water Bonds or Electric Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice will also state that on said redemption date there will become due and payable on each of said Water Bonds or Electric Bonds the redemption price thereof(including redemption premium, if any) and in the case of a Water Bond or Electric Bond to be redeemed in part only, the specified portion of the principal amount thereof to be redeemed, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon will cease to accrue, and will require that such Water Bonds or Electric Bonds be then surrendered at the address of the respective Trustee specified in the redemption notice. Failure to receive such notice will not invalidate any of the proceedings taken in connection with such redemption. With respect to any notice of any optional redemption of Water Bonds or Electric Bonds, unless at the time such notice is given the Water Bonds or Electric Bonds to be redeemed will be deemed to have been defeased pursuant to the respective Indenture, such notice will state that such redemption is conditional upon receipt by the respective Trustee, on or prior to the date fixed for such redemption, of moneys that, together with other available amounts held by the respective Trustee, are sufficient to pay the redemption price of, and accrued interest on, the Water Bonds or Electric Bonds to be redeemed, and that if such moneys will not have been so received said notice will be of no force and effect and such Water Bonds or Electric Bonds will not be required to be redeemed. In the event a notice of redemption of Water Bonds or Electric Bonds contains such a condition and such moneys are not so received, the redemption of Water Bonds or Electric Bonds as described in the conditional notice of redemption will not be made and the respective Trustee will, within a reasonable time after the date on which such redemption was to occur, give notice to the persons and in the manner in which the notice of redemption was given, that such moneys were not so received and that there will be no redemption of Water Bonds or Electric Bonds pursuant to such notice of redemption. Neither the failure to receive any notice of redemption so mailed nor any defect therein will affect the validity of the proceedings for the redemption of the Water Bonds or Electric Bonds to be redeemed or the cessation of the accrual of interest with respect to such redemption. Partial Redemption In the event only a portion of any Water Bond or Electric Bond is called for redemption, then upon surrender of such Water Bond or Electric Bond to the respective Trustee, the City will execute and the respective Trustee will authenticate and deliver to the Owner thereof a new Water Bond or Electric Bond of the same series, maturity date and interest rate in an aggregate principal amount equal to the non- redeemed portion of the Water Bond or Electric Bond to be redeemed; provided, however, so long as there is a securities depository for the Water Bonds or Electric Bonds, there will be only one registered owner and neither the City nor the respective Trustee will have responsibility for prorating partial redemption payments among beneficial owners of the Water Bonds or Electric Bonds. Effect of Redemption If notice of redemption has been duly given as aforesaid and money for the payment of the redemption price of the Water Bonds or Electric Bonds called for redemption is held by the respective Trustee, then on the redemption date designated in such notice Water Bonds or Electric Bonds so called for redemption will become due and payable, and from and after the date so designated interest on such Water Bonds or Electric Bonds will cease to accrue, and the Owners of such Water Bonds or Electric Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof. 9 175097.8 036227 OS All Water Bonds and Electric Bonds redeemed as described herein will be cancelled and destroyed by the respective Trustee and will not be reissued. SECURITY FOR THE WATER BONDS AND THE ELECTRIC BONDS General The Water Bonds and the Electric Bonds are limited obligations of the City and are payable solely from the Water Net Revenues and Electric Net Revenues, respectively, and the City is not obligated to pay them except from the applicable Water Net Revenues or Electric Net Revenues. All the Water Bonds are equally secured by a pledge of and charge and lien upon the Water Net Revenues and all the Electric Bonds are equally secured by a pledge of and charge and lien upon the Electric Net Revenues. The Water Bonds and the Electric Bonds are not a debt of the State of California (the "State") or any of its political subdivisions, and neither the State nor any of its political subdivisions is liable thereon, nor in any event shall the Water Bonds or the Electric Bonds be payable out of any funds or properties other than those of the City as described herein. The pledge under the Water Indenture and the Electric Indenture do not constitute a pledge of general revenues, funds or moneys of the City or an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The full faith and credit of the City is not pledged for the payment of the principal of or interest on the Water Bonds or the Electric Bonds and no tax or other source of funds other than the Water Net Revenues and Electric Net Revenues are pledged to pay the principal of or interest on the Water Bonds and the Electric Bonds,respectively. Sources of Payment Net Water Revenues. .Pursuant to the Water Indenture, to secure the payment of the Water Bonds, the City pledges to the Owners of the Water Bonds and grants the Owners a lien upon the Water Net Revenues in the Water Fund held by the City and any other amounts held by the Trustee in any fund or account established under the Water Indenture; provided, however,that out of the Water Net Revenues and other moneys there may be applied such sums for such purposes as are permitted under the Water Indenture. The pledge of Water Net Revenues constitutes a first pledge of and charge and lien upon the Water Net Revenues for the payment of the interest on and principal of the Water Bonds in accordance with the terms of the Water Indenture on parity with the pledge of Water Net Revenues for the City's heretofore and hereinafter issued Water Parity Obligations. Payment of principal of and interest on the Water Bonds and all other payments with respect to other Water Parity Obligations shall be equally secured by Water Net Revenues without priority for number or date of issuance or incurrence of such Water Bonds or Water Parity Obligations. "Water Net Revenues" means Water Gross Revenues less Water Operation and Maintenance Expenses. "Water Gross Revenues"means all revenues, charges, income and receipts derived by the City from the operation of the Water System or arising from the Water System (including all revenues, charges, income and receipts received by the City from the services, facilities and distribution of water by the City), including, but not limited to income from investments, but excepting therefrom all refundable charges and deposits to secure service. "Water Operation and Maintenance Expenses"means the amount required to pay the reasonable expenses of management, repair and other costs of the nature of costs which have historically and customarily been accounted for as such, necessary to operate, maintain and preserve the Water System in good repair and working order, including but not limited to, the cost of supply and transmission of water under long-term contracts or otherwise and the expenses of conducting the activities of the water division of the City, but excluding depreciation. "Water Operation and Maintenance Expenses" does not include any payments to the City for special franchise fees or any transfers to the City's general fund. 10 175097.8 036227 OS Net Electric Revenues. Pursuant to the Electric Indenture, to secure the payment of the Electric Bonds, the City pledges to the Owners of the Electric Bonds and grants the Owners a lien upon the Electric Net Revenues in the Electric Fund held by the City and any other amounts held by the Trustee in any fund or account established under the Electric Indenture; provided, however, that out of the Electric Net Revenues and other moneys there may be applied such sums for such purposes as are permitted under the Electric Indenture. The pledge of Electric Net Revenues constitutes a first pledge of and charge and lien upon the Electric Net Revenues for the payment of the interest on and principal of the Electric Bonds in accordance with the terms of the Electric Indenture on parity with the pledge of Electric Net Revenues for the City's heretofore and hereinafter issued Electric Parity Obligations. Payment of principal of and interest on the Electric Bonds and all other payments with respect to other Electric Parity Obligations shall be equally secured by Electric Net Revenues without priority for number or date of issuance or incurrence of such Electric Bonds or Electric Parity Obligations. "Electric Net Revenues"means Electric Gross Revenues less Electric Operation and Maintenance Expenses. "Electric Gross Revenues" means all revenues, charges, income and receipts derived by the City from the operation of the Electric System or arising from the Electric System (including all revenues, charges, income and receipts received by the City from the services, facilities and distribution of electric energy by the City), including, but not limited to (i) income from investments and (ii) only for the purposes of determining compliance with the City's covenant with respect to rates and charges (see "SECURITY FOR THE WATER BONDS AND THE ELECTRIC BONDS -Rates and Charges" herein), the amounts on deposit in a Rate Stabilization Fund or any other unrestricted funds of the Electric System and available for the purpose of paying Electric Operation and Maintenance Expenses and/or Electric Parity Obligations or Priority Obligations then outstanding, but excepting therefrom (a) all refundable charges and deposits to secure service and (b) any charges collected by any Person which the City has dedicated solely to the payment of obligations other than Electric Parity Obligations or Priority Obligations then outstanding. "Electric Operation and Maintenance Expenses" means the amount required to pay the reasonable expenses of management, repair and other costs of the nature of costs which have historically and customarily been accounted for as such, necessary to operate, maintain and preserve the Electric System in good repair and working order, including but not limited to, the cost of supply and transmission of electric energy under long-term contracts or otherwise, hedging agreements regarding power resources, and/or power supply agreements, termination payments regarding power purchase agreements and/or transmission agreements and the expenses of conducting the activities of the power division of the City, but excluding depreciation. "Electric Operation and Maintenance Expenses" shall (i) include all amounts required to be paid by the City with respect to Priority Obligations and (ii) for the purpose of determining compliance with the City's covenant with respect to additional indebtedness (see "SECURITY FOR THE WATER BONDS AND THE ELECTRIC BONDS - Additional Indebtedness" herein), exclude during any Fiscal Year Electric Operation and Maintenance Expenses paid during such Fiscal Year (or expected to be paid during such Fiscal Year) from a Rate Stabilization Fund or any other fund or account that is not a fund or account established pursuant to this Indenture and that is not pledged to or dedicated solely for the payment of Electric Parity Obligations (which fund or account shall include, but not be limited to, any project stabilization accounts established for the City by the Southern California Public Power Authority, including, but not limited to, its Board Resolution No. 1996-7). "Electric Operation and Maintenance Expenses" shall not include any payments to the City for utility-in-lieu taxes, special franchise fees or any transfers to the City's general fund. "Rate Stabilization Fund"means any fund or account established by or for the benefit of the City, from time to time, that is not a fund or account established pursuant to the Electric Indenture, the moneys in which may be used from time to time, as determined by the City, to pay or prepay any lawful charges, expenses or costs attributable to, associated with or arising from the Electric System, including but not limited to Electric Operation and Maintenance Expenses, Electric Parity Obligations and Priority Obligations. 11 175097.8 036227 OS "Priority Obligations" means any contract heretofore or hereafter entered into between the City and a joint powers agency or similar entity, including but not limited to Southern California Public Power Authority, for the purchase or acquisition of electric capacity,energy,transmission capability or any other commodities or services related thereto, which contract includes debt service on related revenue bonds, revenue notes or other evidences of indebtedness heretofore or hereafter issued or incurred by such joint powers agency or other entity, and requires payments by the City made thereunder to be treated as Electric Operation and Maintenance Expenses. No Cross Collateralization Between Water Bonds and Electric Bonds The payments to be made by the City from Water Net Revenues, together with any other amounts held by the Water Trustee in any fund or account established under the Water Indenture, are the only source of payment for the Water Bonds. Revenues of the Electric System will not be used to make payments with respect to the Water Bonds. The payments to be made by the City from Electric Net Revenues, together with any other amounts held by the Electric Trustee in any fund or account established under the Electric Indenture, are the only source of payment for the Electric Bonds. Revenues of the Water System will not be used to make payments with respect to the Electric Bonds. Amounts in the reserve account for the Electric Bonds are solely for the benefit of the Electric Bonds. Application of Gross Revenues Water Gross Revenues. Pursuant to the Water Indenture, the City agrees and covenants that all Water Gross Revenues received by it will be deposited when and as received in the existing Water Fund established and held by the City with respect to the Water System (the "Water Fund"), and all money on deposit in the Water Fund will be applied and used only as provided in the Water Indenture and each other instrument authorizing the other Water Parity Obligations. The City will pay all Water Operation and Maintenance Expenses (including amounts reasonably required to be set aside in contingency reserves for Water Operation and Maintenance Expenses the payment of which is not then immediately required) from the Water Fund as they become due and payable, and remaining Water Net Revenues on deposit in the Water Fund will be transferred or expended by the City at the following times in the following order of priority: (a) Water Parity Obligation Service; Transfers. On or before the third Business Day before each date on which "Water Parity Obligation Service" (which means, with respect to any period, the amount of principal and interest or other payments accrued or to accrue in such period with respect to all outstanding Water Parity Obligations(excluding the amount of proceeds of Water Parity Obligations held in any fund or account for the payment of Water Parity Obligation Service accrued or to accrue during such period); provided that or purposes of accrual under this definition, all payments with respect to Water Parity Obligations due in a calendar month shall be deemed due on the fust day of such calendar month; provided further "Water Parity Obligation Service" includes the principal and interest payments with respect to the Water Bonds issued under the Water Indenture)becomes due and payable (whether at maturity or prior redemption or otherwise) the City shall, from the Water Net Revenues in the Water Fund, transfer to the Water Trustee for deposit in the Payment Fund under the Water Indenture (the "Water Payment Fund") and to the trustee or trustees for any corresponding funds or accounts relating to any other Water Parity Obligations, sums equal to the amount of principal of and interest on the Water Bonds and other Water Parity Obligation Service, respectively, becoming due and payable on such due date, except that no such deposit need be made if the Water Trustee or such other trustees, as the case may be, then holds monies in the Water Payment Fund or any corresponding funds or accounts, respectively, at least equal to the amount of principal of and interest on the Water Bonds or other Water Parity 12 175097.8 036227 OS Obligation Service (including mandatory sinking account payments) becoming due and payable on the next succeeding date on which Water Parity Obligation Service becomes due and payable; provided, however,that if Water Net Revenues are not sufficient to make such transfers, then such transfers shall be made on a pro rata basis based upon the amounts due on each such series of Water Parity Obligations. The City shall pay to the Water Trustee for deposit in the Water Payment Fund not less than three Business Days prior to January 1 and July 1 of each year the amount of the principal and/or interest payments due on such January 1 or July 1,respectively. Each payment under the Water Indenture shall be paid by the City in funds available on the due date thereof in lawful money of the United States of America to the Water Trustee at its Corporate Trust Office, and the City agrees that such amounts shall be held,invested,disbursed and applied as provided in this Indenture. (b) Water Reserve Account; Transfers. On or before the third Business Day before each date on which Water Parity Obligation Service becomes due and payable, the City shall, from the remaining Water Net Revenues on deposit in the Water Fund after transfers pursuant to paragraph(a)above,transfer to the Trustee for deposit in the Water Reserve Account (if any) and to the trustee or trustees for any corresponding funds or accounts relating to any other Water Parity Obligations the respective amounts, if any, required to be so transferred to satisfy the Water Reserve Account Requirement (if any) pursuant to the Water Indenture and the reserve requirements of each other instrument authorizing the other Water Parity Obligations; provided, however, that if Water Net Revenues are not sufficient to make such transfers, then such transfers shall be made on a pro rata basis based upon the amount of the deficiency in each fund or account (including the accounts in the Water Payment Fund) to which transfers are to be made. (c) Rebate Payments. The City shall, from the remaining Water Net Revenues on deposit in the Water Fund after transfers pursuant to paragraphs (a) and (b) above, make when due any payments required to be made to the United States in accordance with the Indenture and any tax certificate relating to the Water System. (d) Water Administrative Fee and Tax Payments. The City shall, from the remaining Water Net Revenues on deposit in the Water Fund after transfers pursuant to paragraphs (a), (b) and (c) above, transfer to the Trustee amounts in payment of administrative fee and tax payments relating to the Water Bonds and transfer to any other trustee for deposit into any corresponding administrative fee and tax payments funds or accounts relating to any other Water Parity Obligations the amount necessary to pay when due all administrative fee and tax payments as provided herein and other payments required to be made from any other corresponding funds or accounts. (e) Remaining Water Net Revenues. All Water Net Revenues remaining on deposit in the Water Fund after transfers pursuant to paragraphs (a), (b), (c) and(d)above shall be held free and clear of the Water Indenture by the City, and the City may use and apply such remaining amount for any lawful purpose of the City, including, but not limited to, replenishing any deficiencies under the Water Indenture or any other instrument authorizing Water Parity Obligations, payment of any repairs, replacements, improvements or renewals of or to the Water System, payment of any cost or funding of any reserve or fund, the redemption,prepayment or payment of Water Bonds or other Water Parity Obligations upon the terms and conditions set forth in the Water Indenture or the instrument authorizing such other Water Parity Obligations, the purchase of Water Bonds or other Water Parity Obligations as and when and at such prices as the City may determine, the payment of any subordinate obligations in accordance with the instruments authorizing such subordinate obligations, and transfers to the City's general fund, including but not limited to special franchise fees or other similar fees or taxes. 13 175097.8 036227 OS Electric Gross Revenues. Pursuant to the Electric Indenture, the City agrees and covenants that all Electric Gross Revenues received by it will be deposited when and as received in the existing Electric Fund established and held by the City with respect to the Electric System (the "Electric Fund"), and all money on deposit in the Electric Fund will be applied and used only as provided in the Electric Indenture and each other instrument authorizing the other Electric Parity Obligations. The City will pay all Electric Operation and Maintenance Expenses (including amounts reasonably required to be set aside in contingency reserves for Electric Operation and Maintenance Expenses the payment of which is not then immediately required) from the Electric Fund as they become due and payable, and remaining Electric Net Revenues on deposit in the Electric Fund will be transferred or expended by the City at the following times in the following order of priority: (a) Electric Parity Obligation Service; Transfers. On or before the third Business Day before each date on which Electric Parity Obligation Service (which means, with respect to any period, the amount of principal and interest, installment payments or other payments accrued or to accrue in such period with respect to all outstanding Electric Parity Obligations (excluding the amount of proceeds of Electric Parity Obligations held in any fund or account for the payment of Electric Parity Obligation Service accrued or to accrue during such period); provided that for purposes of accrual under this definition, all payments with respect to Electric Parity Obligations due in a calendar month shall be deemed due on the first day of such calendar month; provided further that "Electric Parity Obligation Service" includes the principal and interest payments with respect to the Electric Bonds issued under the Electric Indenture) becomes due and payable (whether at maturity or prior redemption or otherwise) the City will, from the Electric Net Revenues in the Electric Fund, transfer to the Electric Trustee for deposit in the Electric Payment Fund under the Electric Indenture and to the trustee or trustees for any corresponding funds or accounts relating to any other Electric Parity Obligations, sums equal to the amount of principal of and interest on the Electric Bonds and other Electric Parity Obligation Service, respectively,becoming due and payable on such due date, except that no such deposit need be made if the Electric Trustee or such other trustee or trustees, as the case may be, then holds monies in the Electric Payment Fund under the Electric Indenture or any corresponding funds or accounts, respectively, at least equal to the amount of principal of and interest on the Electric Bonds or other Electric Parity Obligation Service (including mandatory sinking account payments) becoming due and payable on the next succeeding date on which Electric Parity Obligation Service becomes due and payable; provided, however, that if Electric Net Revenues are not sufficient to make such transfers, then such transfers will be made on a pro rata basis based upon the amounts due on each such series of Electric Parity Obligations. With respect to the Electric Bonds, the City will pay to the Electric Trustee for deposit in the Electric Payment Fund under the Electric Indenture not less than three Business Days prior to January 1 and July 1 of each year the amount of the principal and/or interest payments due on such January I or July 1, respectively. Each payment under the Electric Indenture shall be paid by the City in funds available on the due date thereof in lawful money of the United States of America to the Electric Trustee at its Corporate Trust Office, and the City agrees that such amounts will be held, invested, disbursed and applied as provided in the Electric Indenture. (b) Electric Reserve Account Transfers. On or before the third Business Day before each date on which Electric Parity Obligation Service becomes due and payable, the City will, from the remaining Electric Net Revenues on deposit in the Electric Fund after transfers pursuant to paragraph (1) above, transfer to the Electric Trustee for deposit in the Electric Reserve Account and to the trustee or trustees for any corresponding funds or accounts relating to any other Electric Parity Obligations the respective amounts, if any, required to be so transferred to satisfy the Electric Reserve Account Requirement pursuant to the Electric Indenture and the reserve requirements of each other instrument authorizing the other Electric Parity Obligations; provided,however, that if Electric Net Revenues are not 14 175097.8 036227 OS sufficient to make such transfers, then such transfers will be made on a pro rata basis based upon the amount of the deficiency in each fund or account (including the accounts in the Electric Payment Fund) to which transfers are to be made. (c) Rebate Payments. The City will, from the remaining Electric Net Revenues on deposit in the Electric Fund after transfers pursuant to paragraphs (1) and (2) above, make when due any payments required to be made to the United States in accordance with the Electric Indenture and any tax certificate relating to the Electric System. (d) Electric Administrative Fee and Tax Payments. The City shall, from the remaining Electric Net Revenues on deposit in the Electric Fund after transfers pursuant to paragraphs (1), (2) and (3) above, transfer to the Trustee amounts in payment of administrative fee and tax payments relating to the Electric Bonds and transfer to any other trustee for deposit into any corresponding administrative fee and tax payments funds or accounts relating to any other Electric Parity Obligations the amount necessary to pay when due all administrative fee and tax payments as provided herein and other payments required to be made from any other corresponding funds or accounts. (e) Remaining Electric Net Revenues. All Electric Net Revenues remaining on deposit in the Electric Fund after transfers pursuant to paragraphs (1), (2), (3) and (4) above will be held free and clear of the Electric Indenture by the City, and the City may use and apply such remaining amount for any lawful purpose of the City, including, but not limited to, replenishing any deficiencies under the Electric Indenture or any other instrument authorizing Electric Parity Obligations, payment of any repairs, replacements, improvements or renewals of or to the Electric System, payment of any cost or funding of any reserve or fund(including but not limited to the Rate Stabilization Fund),the redemption,prepayment or payment of Priority Obligations, Electric Bonds or other Electric Parity Obligations upon the terms and conditions set forth in the instrument authorizing such Priority Obligations, the Electric Indenture or the instrument authorizing such other Electric Parity Obligations, the purchase of Priority Obligations, Electric Bonds or other Electric Parity Obligations as and when and at such prices as the City may determine, the payment of any subordinate obligations in accordance with the instruments authorizing such subordinate obligations, and transfers to the City's general fund, including but not limited to special franchise fees or other similar fees or taxes. Outstanding Parity Obligations Outstanding Water Parity Obligations. To finance and refinance the costs of certain improvements to its Water System, the City has executed and delivered the Prior Water Installment Agreements with the Authority and FARECal. The Prior Water Installment Agreement with the Authority secures the 2006 Water Bonds, which are outstanding the in the principal amount of $53,965,000 as of April 1, 2012. The Prior Water Installment Agreement with FARECal secures FARECal's 2003A Certificates, which are outstanding the in the principal amount of$13,965,000 as of April 1, 2012, prior to the refunding described herein. Subsequent to the issuance of the Water Bonds and the refunding described herein, none of the 2003A Certificates will be outstanding. Outstanding Electric Parity Obligations. To finance the costs of certain improvements to its Electric System, the City has executed and delivered Prior Electric Installment Agreements with FARECal that secure the 2003B Certificates and the 2003C Certificates. The 2003B Certificates are outstanding the in the principal amount of$5,470,000 as of April 1, 2012,prior to the refunding described herein. Subsequent to the issuance of the Electric Bonds and the refunding described herein, none of the 2003B Certificates will be outstanding. The 2003C Certificates are outstanding the in the principal amount of$3,070,000 as of April 1, 2012. 15 175097.8 036227 OS Additional Indebtedness Additional Water Parity Obligations. Pursuant to the Water Indenture, the City covenants that it shall not issue or incur any "Water Revenue Water Bonds" (defined as any revenue bond, revenue note, warrant or other evidence of indebtedness issued, incurred or delivered for the financing or refinancing or extensions of, additions to, repairs and replacements to, renewals of, and improvements of, the Water System, designated by the City at the initial delivery thereof as payable from Water Net Revenues to be transferred to the Water Trustee for deposit in the Water Payment Fund under Water Indenture and any other corresponding fund or account relating to any other Water Parity Obligations, to the extent the payments under such revenue bond, revenue note, warrant or other evidence of indebtedness are payable from such Water Net Revenues), indebtedness or obligations(excluding obligations for payment of Water Operation and Maintenance Expenses) that would be payable out of Water Net Revenues prior to Water Parity Obligations. Except for Water Revenue Water Bonds or other indebtedness issued to refund revenue bonds under the Water Indenture or other Water Parity Obligations payable from Water Net Revenues in accordance with the Water Indenture or otherwise, which may be issued at any time without meeting the test set forth below, no additional indebtedness of the City payable out of Water Net Revenues on a parity with the Water Bonds and other Water Parity Obligations shall be created or incurred unless: (i) the Water Net Revenues during any twelve (12) consecutive calendar months out of the immediately preceding eighteen (18) calendar month period, plus, at the option of the City, any or all of the items hereinafter described in (a) and (b) in this subsection, shall have amounted to at least one hundred twenty-five percent (125%)of the greatest amount of Water Annual Parity Obligation Service(as defined in the Water Indenture) immediately subsequent to the incurring of such additional Water Parity Obligations,as certified by the City; or (ii) the projected Water Net Revenues during the first complete Fiscal Year following issuance of such Water Parity Obligations when the improvements to the Water System financed with the proceeds of the Water Parity Obligations shall be in operation,plus, at the option of the City, any or all of the items hereinafter described in (a) and (b) in this subsection, shall amount to at least one hundred twenty-five percent (125%) of the greatest amount of Annual Parity Obligation Service immediately subsequent to the incurring of such additional Water Parity Obligations, as certified by the City. The items any or all of which may be added to such Water Net Revenues for the purpose of meeting either of the requirements set forth in clause(i) or(ii)above are the following: (a) An allowance for any increase in Water Net Revenues (including, without limitation, a reduction in Water Operation and Maintenance Expenses) which may arise from any additions to or extensions or improvements of the Water System to be made or acquired with the proceeds of such additional Water Parity Obligations or with the proceeds of indebtedness previously issued, and also for Water Net Revenues from any such additions, extensions or improvements which have been made or acquired with moneys from any source but which, during all or any part of such Fiscal Year or such twelve (12) consecutive calendar month period out of the immediately preceding eighteen (18) calendar month period, were not in service, all in an amount equal to the estimated additional average annual Water Net Revenues (or estimated average annual reduction' in Water Operation and Maintenance Expenses) to be derived from such additions, extensions or improvements for the first thirty-six (36) month period in which each addition, extension orimprovement is to be in operation, all as certified by the City. (b) An allowance for earnings arising from any increase in the charges made for the use of the Water System which has become effective prior to the incurring of such additional Water Parity 16 175097.8 036227 OS Obligations but which, during all or any part of such Fiscal Year or such twelve (12) consecutive calendar month period out of the immediately preceding eighteen (18) calendar month period, was not in effect, in an amount equal to the amount by which the Water Net Revenues would have been increased if such increase in charges had been in effect during the whole of such Fiscal Year or such twelve (12) consecutive calendar month period out of the immediately preceding eighteen (18)calendar month period, as certified by the City. Nothing in the Water Indenture shall limit the ability of the City to issue or incur obligations that are junior and subordinate to the payment of the principal, premium, interest and reserve fund requirements for the Water Bonds and all other Water Parity Obligations and which subordinate obligations are payable as to principal, premium, interest and reserve fund requirements, if any, only out of Water Net Revenues after the prior payment of(i) all amounts then due and required to be paid or set aside under the Water Indenture from Water Net Revenues for principal, premium, if any, interest and reserve fund requirements for the Water Bonds and other Water Parity Obligations, as the same become due and payable and at the times and in the manner as required in the Water Indenture or any documents providing for the issuance or incurrence of other Water Parity Obligations and (ii) any rebate amount to the United States pursuant to the Water Indenture. Additional Water Refunding Water Bands. Pursuant to the Water Indenture, subject to satisfaction of the conditions set forth in the Water Indenture, the City may at any time issue additional water refunding bonds payable from the Water Net Revenues secured by a pledge of the Water Net Revenues on a parity with the pledge securing the Outstanding Water Bonds theretofore issued under the Water Indenture. See Appendix B "SUMMARY OF THE INDENTURES -Water Indenture-Conditions for the Issuance of Additional Water Bonds" and "- Procedure for the Issuance of Additional Water Bonds"attached hereto. Additional Electric Parity Obligations. Pursuant to the Electric Indenture,the City will not issue or incur any "Electric Revenue Bonds" (defined as any revenue bond, revenue note, warrant or other evidence of indebtedness issued, incurred or delivered for the financing or refinancing or extensions of, additions to, repairs and replacements to, renewals of, and improvements of, the Electric System, designated by the City at the initial delivery thereof as payable from Net Revenues to be transferred to the Trustee for deposit in the Payment Fund and any other corresponding fund or account relating to any other Electric Parity Obligations, to the extent the payments under such revenue bond, revenue note, warrant or other evidence of indebtedness are payable from such Net Revenues; provided that Electric Revenue Bonds shall not include any Priority Obligations), indebtedness or obligations (excluding obligations for payment of Electric Operation and Maintenance Expenses (which include Priority Obligations)) that would be payable out of Electric Net Revenues prior to Electric Parity Obligations. Except for Electric Revenue'Bonds or other indebtedness issued to refund Electric Bonds or other Electric Parity Obligations payable from Electric Net Revenues in accordance with the Electric Indenture or otherwise, which may be issued at any time without meeting the test set forth below, no additional indebtedness of the City payable out of Electric Net Revenues on a parity with the Electric Bonds and other Electric Parity Obligations shall be created or incurred unless: (i) the Electric Net Revenues during any twelve (12) consecutive calendar months out of the immediately preceding eighteen (18) calendar month period, plus, at the option.of the City, any or all of the items hereinafter described in (a) and (b) in this subsection, shall have amounted to at least one hundred ten percent (110%) of the greatest amount of Electric Annual Panty Obligation Service (as defined in the Electric Indenture) immediately subsequent to the incurring of such additional Electric Parity Obligations, as certified by the City; or 17 175097.8 036227 OS (ii) the projected Electric Net Revenues during the first complete Fiscal Year following issuance of such Electric Parity Obligations when the improvements to the Electric System financed with the proceeds of the Electric Parity Obligations shall be in operation,plus, at the option of the City, any or all of the items hereinafter described in (a) and(b) in this subsection, shall amount to at least one hundred ten percent (110%) of the greatest amount of Annual Parity Obligation Service immediately subsequent to the incurring of such additional Electric Parity Obligations, as certified by the City. The items any or all of which may be added to such Electric Net Revenues for the purpose of meeting either of the requirements set forth in clause(i)or(ii)of this subsection are the following: (a) An allowance for any increase in Electric Net Revenues (including, without limitation, a reduction in Electric Operation and Maintenance Expenses) which may arise from any additions to or extensions or improvements of the Electric System to be made or acquired with the proceeds of such additional Electric Parity Obligations or with the proceeds of indebtedness previously issued, and also for Electric Net Revenues from any such additions, extensions or improvements which have been made or acquired with moneys from any source but which, during all or any part of such Fiscal Year or such twelve (12) consecutive calendar month period out of the immediately preceding eighteen (18) calendar month period, were not in service, all in an amount equal to the estimated additional average annual Electric Net Revenues (or estimated average annual reduction in Electric Operation and Maintenance Expenses) to be derived from such additions, extensions or improvements for the first thirty- six (36) month period in which each addition, extension or improvement is to be in operation, all as certified by the City. (b) An allowance for earnings arising from any increase in the charges made for the use of the Electric System which has become effective prior to the incurring of such additional Electric Parity Obligations but which, during all or any part of such Fiscal Year or such twelve(12) consecutive calendar month period out of the immediately preceding eighteen (18) calendar month period, was not in effect, in an amount equal to the amount by which the Electric Net Revenues would have been increased if such increase in charges had been in effect during the whole of such Fiscal Year or such twelve (12) consecutive calendar month period out of the immediately preceding eighteen (18)calendar month period, as certified by the City. Nothing in this Indenture shall limit the ability of the City to issue or incur obligations that are junior and subordinate to the payment of the principal, premium, interest and reserve fund requirements for the Electric Bonds and all other Electric Parity Obligations and which subordinate obligations are payable as to principal, premium, interest and reserve fund requirements, if any, only out of Electric Net Revenues after the prior payment of(i) all amounts then due and required to be paid or set aside under the Electric Indenture from Electric Net Revenues for principal, premium, if any, interest and reserve fund requirements for the Electric Bonds and other Electric Parity Obligations, as the same become due and payable and at the times and in the manner as required in this Indenture or any documents providing for the issuance or incurrence of other Electric Parity Obligations and (ii) any rebate amount to the United States pursuant to the Electric Indenture. Additional Electric Refunding Electric Bonds. Pursuant to the Electric Indenture, subject to satisfaction of the conditions set forth in the Electric Indenture, the City may at any time issue additional water refunding bonds payable from the Electric Net Revenues secured by a pledge of the Electric Net Revenues on a parity with the pledge securing the Outstanding Electric Bonds theretofore issued under the Electric Indenture. See Appendix B "SUMMARY OF THE INDENTURES - Electric Indenture - Conditions for the Issuance of Additional Electric Bonds"and"-Procedure for the Issuance of Additional Electric Bonds"attached hereto. 18 175097.8 036227 OS Rates and Charges Water System. Pursuant to the Water Indenture, the rates to be charged for services furnished by the Water System will be fixed so as to provide Gross Revenues for each Fiscal Year at least sufficient to pay, as the same become due, all Water Operation and Maintenance Expenses for such Fiscal Year and so as to provide Water Net Revenues for each Fiscal Year at least 1.25 times the amount necessary to pay, as the same become due, all Parity Obligation Service (including mandatory sinking account payments) on the Water Bonds and any other Water Parity Obligations for such Fiscal Year and to pay all other obligations and indebtedness payable under the Water Indenture or similar agreement for any other Water Parity Obligation for such Fiscal Year (including the payment of any amounts owing to any provider of any surety bond, insurance policy or letter of credit with respect to the Water Bonds and any other Water Parity Obligations, which amounts are payable under the Water Indenture or other applicable instrument). The City will have in effect at all times rules and regulations requiring each consumer or customer located on any premises connected with the Water System to pay the rates and charges applicable to the Water System provided to such premises and providing for the billing thereof and for a due date and a delinquency date for each bill. The City will not permit any part of the Water System or any facility thereof to be used or taken advantage of free of charge by any corporation, firm or Person, or by any public agency (including the United States of America, the State and any city, county, district, political subdivision,public corporation or agency of any thereof). Electric System. Pursuant to the Electric Indenture,the rates to be charged for services furnished by the Electric System will be fixed so as to provide Gross Revenues for each Fiscal Year at least sufficient to pay, as the same become due, all Electric Operation and Maintenance Expenses for such Fiscal Year and so as to provide Electric Net Revenues for each Fiscal Year at least 1.10 times the amount necessary to pay, as the same become due, all Electric Parity Obligation Service (including mandatory sinking account payments)on the Electric Bonds and any other Electric Parity Obligations for such Fiscal Year and to pay all other obligations and indebtedness payable under the Electric Indenture or similar agreement for any other Electric Parity Obligation for such Fiscal Year (including the payment of any amounts owing to any provider of any surety bond, insurance policy or letter of credit with respect to the Electric Bonds and any other Electric Parity Obligations, which amounts are payable under the Electric Indenture or other applicable instrument). The City will have in effect at all times rules and regulations requiring each consumer or customer located on any premises connected with the Electric System to pay the rates and charges applicable to the Electric System provided to such premises and providing for the billing thereof and for a due date and a delinquency date for each bill. The City will not permit any part of the Electric System or any facility thereof to be used or taken advantage of free of charge by any corporation, firm or Person, or by any public agency (including the United States of America, the State and any city, county, district, political subdivision, public corporation or agency of any thereof). Nothing herein will prevent the City, in its sole and exclusive discretion, from permitting other parties to sell electricity to retail customers within the service area of the Electric System; provided, however, that permitting such sales will not relieve the City of its obligations under the Indenture. Reserve Account No Reserve Account for the Water Bonds. There is no reserve fund for the Water Bonds. Moneys held in the Reserve Account for the Electric Bonds may not be used to pay the principal of, premium, if any, and interest on the Water Bonds. 19 175097.8 036227 OS Reserve Account for the Electric Bonds. Pursuant to the Electric Indenture, there will be established and maintained with the Electric Trustee a reserve account (the "Electric Reserve Account") for the Electric Bonds, which will be funded in an amount equal to, as of any date of calculation, with respect to the Electric Bonds, an amount equal to the least of. (i) 100% of the Maximum Annual Debt Service for the Electric Bonds for the then current or every subsequent Bond Year; (ii) 125% of average Annual Debt Service for the Electric Bonds then current and every subsequent Bond Year, and (iii) ten percent (10%) of the issue price for the Electric Bonds (as defined pursuant to section 148 of the Code) (the "Electric Reserve Account Requirement"). Under the Electric Indenture, "Maximum Annual Debt Service"means, as of any date of calculation, with respect to the Electric Bonds, the largest Annual Debt Service for the current or any future Bond Year following the anticipated issuance of the Electric Bonds. "Annual Debt Service" means, for each Bond Year, with respect the Electric Bonds, the sum of(1) the interest falling due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Serial Bonds are retired as scheduled and that the Outstanding Term Bonds (if any) are redeemed from Mandatory Sinking Account Payments(if any) or at maturity as scheduled, (2) the principal amount of the Outstanding Serial Bonds payable by their terms in such Bond Year, and (3) the principal amount of the Outstanding Term Bonds (if any) scheduled to be paid or redeemed from Mandatory Sinking Account Payments (if any) in such Bond Year. Upon the issuance of the Electric Bonds, $ from the proceeds of the Electric Bonds will be deposited in the Electric Reserve Account in satisfaction of the Electric Reserve Account Requirement. The Electric Indenture provides that, on or before the last day of each month, so long as any Electric Bonds are Outstanding, beginning in May, 2012, the Electric Trustee will set aside from the Electric Payment Fund and deposit in the Electric Reserve Account the amount of money that shall be required either (i) to maintain the Electric Reserve Account in the full amount of the Electric Reserve Account Requirement or (ii) to repay any and all obligations due and payable under the terms and conditions of any credit facility provided for therefor(as permitted by the Electric Indenture). No deposit need be made in the Electric Reserve Account so long as there shall be on deposit therein a sum equal to at least the amount required by this Section 3.03(c)to be on deposit therein. All money in the Electric Reserve Account (including all amounts which may be obtained from letters of credit, insurance policies and surety Electric Bonds on deposit in the Electric Reserve Account) shall be used and withdrawn by the Electric Trustee solely for the purpose of replenishing the Interest Account or the Principal Account for the Electric Bonds, in that order, in the event of any deficiency at any time in either of such accounts, but solely for the purpose of paying the interest or principal of or redemption premiums, if any, on the Electric Bonds; provided, however, that so long as the City is not in default under the Electric Indenture, if the amount on deposit in the Electric Reserve Account as of June 15 or December 15 is in excess of the Electric Reserve Account Requirement, the Trustee shall transfer all of such excess to the Interest Account or the Principal Account for the Electric Bonds; provided, further, that so long as the City is not in default hereunder, to effect a redemption or partial defeasance of the Electric Bonds, any amounts on deposit in the Electric Reserve Account which will exceed the amount of the Electric Reserve Account Requirement following such redemption or partial defeasance may be applied to effect such redemption or partial defeasance. Whenever the amount on deposit in the Electric Reserve Account falls below the Electric Reserve Account Requirement, the Electric Trustee will send a notice to the City in writing stating the amount of the deficiency resulting from (i) delinquencies in payments under the Electric Indenture and (ii) a decline in the value of investments in the Electric Reserve Account. The City shall deposit with the Electric Trustee the requisite amount to replenish the Electric Reserve Account. In the event that any part of the deficiency in the Electric Reserve Account is due to a decline in the value of investments in the Electric. Reserve Account, such replenishment shall be made from the Electric Payment Fund in proportion to the 20 175097.8 036227 OS a principal amount of Bonds remaining Outstanding under the Electric Indenture, and the written notice from the Electric Trustee shall specify such amount. No Cross Collateralization. The Electric Reserve Account under the Electric Trust Agreement secure only the Electric Bonds. Amounts held in the Electric Reserve Account are not available and may not be used to make up any deficiency in the Water Payment Fund. Additional Covenants Additional covenants contained in the Water Indenture and the Electric Indenture include, but are not limited to,the following: No Encumbrances- Water System. The City will not create any pledge, lien or charge upon any of the Water Net Revenues having priority over the lien of the Water Bonds and the other Water Parity Obligations with respect to Water Net Revenues. The City covenants that in order to fully preserve and protect the priority and security of the Water Bonds, the City will pay from the Water Fund and discharge all lawful claims for labor, materials and supplies furnished for or in connection with the Water System which, if unpaid, may become a lien or charge upon the revenues prior or superior to the lien of the Water Bonds and impair the security of the Water Bonds. Except as expressly otherwise provided in the Water Indenture, the City will also pay from the Water Fund all taxes and assessments or other governmental charges lawfully levied or assessed upon or in respect of the Water System or upon any part thereof or upon any of the revenues therefrom. No Encumbrances -Electric System. The City shall not create any pledge, lien or charge upon any of the Electric Net Revenues having priority over the lien of the Electric Bonds and the other Electric Parity Obligations with respect to Electric Net Revenues. The City covenants that in order to fully preserve and protect the priority and security of the Electric Bonds, the City shall pay from the Electric.Fund and discharge all lawful claims for labor, materials and supplies furnished for or in connection with the Electric System which, if unpaid, may become a lien or charge upon the revenues prior or superior to the lien of the Electric Bonds and impair the security of the Electric Bonds. Except as expressly otherwise provided in the Electric Indenture, the City shall also pay from the Electric Fund all taxes and assessments or other governmental charges lawfully levied or assessed upon or in respect of the Electric System or upon any part thereof or upon any of the revenues therefrom. Sale of Water System. The Water System shall not be sold or leased or otherwise disposed of as a whole, or substantially as a whole,unless such sale, lease or other disposition be so arranged as to provide for a continuance of payments into the Water Fund sufficient in amount to permit payment therefrom of the principal of and interest on, and premiums, if any, due upon the maturity or redemption of, all Water Bonds and other Water Parity Obligations payable out of Water Net Revenues, or to provide for such payments into some other fund charged with such payments. None of the works, plant, properties, facilities or other part of the Water System or any real or personal property comprising a part of the Water System shall be sold, leased or otherwise disposed of if such sale, lease or disposition would cause the City to be unable to satisfy the requirements of the Water Indenture. Sale of Electric System. The Electric System shall not be sold or leased or otherwise disposed of as a whole, or substantially as a whole, unless such sale, lease or other disposition be so arranged as to provide for a continuance of payments into the Electric Fund sufficient in amount to permit payment therefrom of the principal of and interest on, and premiums, if any, due upon the maturity or redemption 21 175097.8 036227 OS of, all Electric Bonds and other Electric Parity Obligations payable out of Electric Net Revenues, or to a provide for such payments into some other fund charged with such payments. None of the works, plant, properties, facilities or other part of the Electric System or any real or personal property comprising a part of the Electric System shall be sold, leased or otherwise disposed of if such sale, lease or disposition would cause the City to be unable to satisfy the requirements of the Electric Indenture. Maintenance and Operation of the Water System. The City covenants and agrees that it will operate and maintain the Water System in an efficient and economic manner and to operate, maintain and preserve the Water System in good repair and working order. Maintenance and Operation of the Electric System. The City covenants and agrees that it will operate and maintain the Electric System in an efficient and economic manner and to operate, maintain and preserve the Electric System in good repair and working order. Insurance on the Water System. The City covenants that it shall at all times maintain with responsible insurers, to the extent available from such insurers at reasonable rates as determined by the City, all such insurance on the Water System as is customarily maintained with respect to works and properties of like character against accident, loss of or damage to such works or properties [and against loss of revenues]. If any useful part of the Water System shall be damaged or destroyed such part shall be restored to use unless the City provides a Written Certificate to the Water Trustee to the effect that in the opinion of the City such restoration would not be prudent. The money collected from insurance against accident, loss or damage shall be used for repairing or rebuilding the loss, damaged or destroyed works and properties, and to the extent not so applied, shall be applied to the retirement of outstanding Parity Obligations of the City and for such purpose paid into the appropriate funds or accounts. The City shall also maintain with responsible insurers to the extent available from such insurers at reasonable rates worker's compensation insurance and insurance against public liability and property damage to the extent reasonably necessary and obtainable. Notwithstanding the foregoing, the City may provide any insurance required by this covenant through a self-insurance program or it may provide such insurance as part of any blanket coverages maintained by the City. Insurance on the Electric System. The City covenants that it shall at all times maintain with responsible insurers, to the extent available from such insurers at reasonable rates as determined by the City, all such insurance on the Electric System as is customarily maintained with respect to works and properties of like character against accident, loss of or damage to such works or properties [and against loss of revenues]. If any useful part of the Electric System shall be damaged or destroyed such part shall be restored to use unless the City provides a Written Certificate to the Electric Trustee to the effect that in the opinion of the City such restoration would not be prudent. The money collected from insurance against accident, loss or damage shall be used for repairing or rebuilding the loss, damaged or destroyed works and properties, and to the extent not so applied, shall be applied to the retirement of outstanding Panty Obligations of the City and for such purpose paid into the appropriate funds or accounts. The City shall also maintain with responsible insurers to the extent available from such insurers at reasonable rates worker's compensation insurance and insurance against public liability and property damage to the extent reasonably necessary and obtainable. Notwithstanding the foregoing, the City may provide any insurance required by this covenant through a self-insurance program or it may provide such insurance as part of any blanket coverages maintained by the City. 22 175097.8 036227 OS No Acceleration Upon an Event of Default Pursuant to the Water Indenture and the Electric Indenture, upon the occurrence and continuance of an event of default thereunder, the Trustee may, and at the written direction of the Owners of a majority in aggregate principal amount of the Water Bonds or the Electric Bonds, as applicable, at the time Outstanding shall,upon notice in writing to the City, pursue any available remedy at law or in equity to remedy such event of default and to enforce any applicable rights of the Trustee under or with respect to the Water Indenture or Electric Indenture, as applicable; provided, that, such remedies shall not include any remedy of acceleration with respect to the payment of the principal of and interest on the Water Bonds or the Electric Bonds. See "RISK FACTORS — No Acceleration Upon an Event of Default; Limitations on Remedies" herein APPENDIX B — "SUMMARY OF THE INDENTURES - Water Indenture - Events of Default and Remedies of Owner" and "- Electric Indenture - Events of Default and Remedies of Owner"attached hereto. AZUSA LIGHT AND WATER DEPARTMENT General Description The Light and Water Department (the "Department") of the City is responsible for construction, maintenance and operation of electric and water utilities owned or operated by the City pursuant to Chapter 78 of the City Municipal Code. The Department's Director administers the Department under the authority of the City Manager and is charged with the operation of both the City's Water System and Electric System. The Water System and the Electric System provide water and electricity to nearly all of the residential, commercial and industrial customers within the City limits. The Water System also serves portions of the Cities of Covina, Glendora, Irwindale, West Covina, and unincorporated areas of Los Angeles County. The funds and accounts of the Water System and the Electric System are held in the Water Fund and the Electric Fund, respectively, and the funds and accounts of one system are not pledged or available to pay the other system's obligations. Azusa Light and Water Utility Board The City Council established the Azusa Light and Water Utility Board (the "Utility Board"). The Utility Board is empowered to carry out the following duties: (1) establish rates for the Electric System and Water System and such other fees and charges as may be appropriate in the provision of utility services, (2) establish rules and regulations governing the conduct of the Utility Board and its members and the employees of the Department, (3) control and order the expenditures of all money received from the sale or use of water and electric power for defraying of expenses, maintenance, repairs, construction, extension and operation of the Water System and Electric System and for any expenses for additions to same, (4) supply customers of the Electric System and the Water System with electric power and water, respectively, for any and all purposes and adopt all necessary rules and regulations for the provisions of service, (5) enter into contracts with any public or private agency for the exchange of water or electric power, (6) hold, lease, acquire and purchase property in the name of the City, and (7) dispose of property surplus to the needs of the Water System or Electric System. The Utility Board consists of five members, none of whom may hold any paid office in City government or be a City employee. The members of the Utility Board are currently the five City Council members. The current members of the Utility Board are: 23 175097.8 036227 OS ANGEL A. CARRILLO, Chairperson URIEL E. MACIAS , Vice Chairperson ROBERT GONZALES, Board Member KEITH HANKS, Board Member JOSEPH R. ROCHA,Board Member Management of the Department GEORGE MORROW,Director of Utilities -Mr. Morrow has served as the Director of the utility since September 2009. Mr. Morrow has 34 years of experience in the electric and water sector, including 10 years with a private "for profit" electric utility and 24 years serving the"not-for-profit" water/electric sector of the industry. He has a Bachelor of Science degree in Electrical Engineering and a Master of Business Administration from the University of Texas at El Paso. Mr. Morrow began his career as a planning engineer with El Paso Electric Company, a private utility serving approximately 10,000 square miles in west Texas and southern New Mexico. He later served as Assistant General Manager of Pasadena Water and Power and as Electric Utility Director for the City of Lodi—both California community-owned electric utilities. He also served 11 years as the Director of Independence Power & Light in Missouri -- the second largest of 89 municipal utilities in that state. Mr. Morrow's professional experience includes service on the Board of Directors of the American Public Power Association, the Southem California Public Power Authority, the Northern California Power Agency, the Transmission Agency of Northern California and the Financing Authority for Resource Efficiency of Califomia. He has also served as President of the Consumers Electric Power Association, President of the Missouri Association of Municipal Utilities and Chairman of the Missouri Municipal Electric Utility Commission. YAREK LEHR,Assistant Director of Resource Management-Mr. Lehr joined the Department in May 2010. His responsibilities include management of power and transmission resources, state and federal regulatory matters, wholesale contract administration, financial planning, and retail rate setting. Mr. Lehr spent over 25 years in the electric utility business in various resource planning, operating and contract/regulatory functions as well as in private consulting functions. Mr. Lehr's experience includes managing Los Angeles Department of Water and Power's wholesale energy trading group, serving as market operations specialist and manager of electric contracts at the CAISO (herein defined), serving as Western Electricity Coordinating Council ("WECC")/North American Electric Reliability Corporation (NERC") Reliability Coordinator; managing resources (including a power plant) and engineering groups at the City of Corona's Department of Water and Power; and consulting on NERC Reliability Standards and renewable resources. Mr. Lehr holds a Bachelor of Science degree in Electrical Engineering from the California State University, Northridge, and a Master of Business Administration from the University of Redlands. Mr. Lehr is a licensed professional engineer in California (electrical) and certified WECC and NERC system operator(inactive). FEDERICO LANGIT, JR., Assistant Director of Electric Operations - Mr. Langit has served as the Assistant Director of Electrical Operations since May 2010. Mr. Langit manages the engineering, construction, maintenance and operations of the electric distribution system. Mr. Langit served in various positions at Azusa Light & Water for the past 20 years, starting as Electrical Engineer, Senior Engineer and Project Manager of Azusa's second electrical substation - Kirkwall Substation. Prior to joining Azusa, Mr. Langit served for 5 years as Associate Engineer, designing and constructing high voltage 24 175097.8 036227 OS underground electric distribution systems for Glendale Water& Power, a medium-sized municipal utility in Southern California. Mr. Langit holds a Bachelor of Arts degree in Business and a Master in Business Administration from Webster University. Mr. Langit is also a Registered Professional Electrical Engineer in the State of California. CHET ANDERSON, Assistant Director - Water Operations - Mr. Anderson has served Azusa Light & Water since September of 2000. Mr. Anderson oversees the operation of the Water System. He has provided civil engineering services for approximately 32 years. Mr. Anderson previously worked as a design engineer, project manager and supervising engineer in Illinois, Colorado, and California for various consultants, special districts, and Southern California Water Company. Mr. Anderson holds a Bachelor of Science Degree in Civil Engineering from Bradley University and a Bachelor of Arts Degree from Southern Illinois University. He is a registered Professional Engineer in Civil Engineering in California and is also a Registered Professional Engineer(inactive) in the State of Colorado. KAREN VANCA, Assistant Director of Customer Care & Solutions - Ms. Vanca joined the Department in April 2001. Her responsibilities include management of customer service and public benefit funds. She has a Bachelors Degree in Business Administration from California State Polytechnic University at Pomona and is a Certified Internal Auditor and Certified Fraud Examiner. Prior to joining the Department, Ms. Vanca worked for the City of Glendale for 4-1/2 years where she managed customer services and marketing operations. Previously she worked for Southern California Edison Company for 18 years. During that time she was a manager in the Internal Audits Department, Budgets & Administration Manager in the Health Care & Employee Services Department, and Customer Service Manager. CARY KALSCHEUER, Assistant to the Director of Utilities -Mr. Kalscheuer has been with the Department since January 2000 and assists the Director of Utilities with administration of Azusa Light & Water. Mr. Kalscheuer has 23 years municipal management experience, including 10 years with the City of Covina. Mr. Kalscheuer's principal duties with Azusa include Utility Board agenda preparation, budgeting, financial management, cost of service studies and rate setting for the water and electric utilities, preparation of financial disclosure reports, and solid waste contract administration and rate setting. Mr. Kalscheuer has participated in various debt financings for the Department, which includes a lead role in issuing $54.85 million in revenue bonds to finance construction of various water system improvements in 2006, including construction of the Joseph F. Hsu Water Filtration Plant. Mr. Kalscheuer holds a Bachelor of Arts Degree and Master of Public Administration Degree with a concentration in Public Finance from California State University, Fullerton. Insurance The City is self-insured for workers' compensation and general liability claims arising in the ordinary course of City operations. The City is a member of the Independent Cities Risk Management Authority for general liability insurance coverage in excess of$500,000 up to a maximum of$2,000,000 per claim and for coverage of workers' compensation claims in excess of$350,000 up to a maximum of $5,000,000 per claim. In addition the City also purchased excess liability insurance of $18,000,000 in excess of the $2,000,000 and excess worker's compensation insurance of $95,000,000 in excess of $5,000,000. For the past three years, no settlements or claims payments have exceeded the amount of the applicable insurance coverage. Additional losses may result from matters pending before the City. However, the resolution of such matters is not expected to have a material adverse effect on the financial condition of the Water System or the Electric System. See Note 10 to the Audited Financial Statements of the City as of June 30, 2011 attached hereto as Appendix C. 25 175097.8 036227 OS Pension Benefits California Public Employees' Retirement System. The City contracts with, and contributes to, the California Public Employees' Retirement System ("PERS"), an agent multiple- employer public employee defined benefit pension plan, for certain defined pension benefits. PERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Copies of PERS' annual financial report may be obtained from their executive office: 400 P Street, Sacramento, CA 95814. Such information is not incorporated herein by reference. See Note 7 to the Audited Financial Statements of the City as of June 30,2011 attached hereto as Appendix C. City safety employees and City non-safety employees participating in PERS are required to contribute 9% and 7%, respectively, of their annual covered salary. The City has historically made the entire contribution required of City employees on their behalf and for their account. Changes to the City's contribution practices have resulted in non-management safety employees hired after'January 1, 2011 and all Executive Contract employees effective March 2012 contributing 3% and 4%, respectively, of their annual covered salary. Benefit provisions and all other requirements are established by State statutes and City contracts with employee bargaining groups. The City's contributions to the PERS plan include the employer-paid member contribution described above and the actuarially determined annual required contribution ("ARC"), which fluctuates each year based on an annual actuarial plan valuation. The ARC is calculated using the entry age actuarial cost method and consists of two components: the "normal cost", which represents the portion of the actuarial present value of the benefits that the City and its employees will be expected to fund that are attributable to a current year's employment, and the amortized amount of the unfunded actuarial accrued liability ("UAAL"). The amortization of the UAAL represents the current year's portion of the unfunded accrued costs (i.e., the UAAL) attributable to past years' employment. The UAAL is an estimate based on a series of assumptions that operate on economic and demographic data of the PERS plan membership and may increase or decrease as result of changes in actuarial assumptions (such as the current assumed investment rate of return of 7.75°/x, net of administrative expenses, which assumed investment rate will be adjusted to 7.50%, implemented over two fiscal years, pursuant to PERS action effective March 2012), benefit improvements and other experience that differ from that anticipated by the actuarial assumptions. This process is used to determine, as of the date of the calculation, how sufficient the assets in the PERS plan are to fund, as of the date of calculation, the accrued costs attributable to PERS plan participants. The funding sufficiency is typically expressed as the ratio of the valuation assets to the actuarial accrued liabilities. If the actuarially calculated funding level of a plan is less than 100%, the plan has a UAAL. For a summary of principal assumptions and methods used to determine the ARC for the City's PERS plan for safety and non-safety employees, see Note 7 to the Audited Financial Statements of the City as of June 30, 2011 attached hereto as Appendix C. When measuring assets for determining the UAAL, many pension plans, including the City's PERS plan, "smooth" gains and losses to reduce volatility. The City has a 15-year smoothed market asset valuation method. Initial unfunded liabilities are amortized over a closed period that depends on the plan's date of entry into PERS. Subsequent plan amendments are amortized as a level percent of pay over a closed 20-year period. Pursuant to the Employer Rate Stability Policy (herein defined) adopted by PERS and the "fresh start" implemented in connection therewith, gains and losses that occur in the operation of the plan are amortized over a 30-year rolling period. If the plan's accrued liability exceeds the actuarial value of plan assets, then the amortization payment on the total unfunded liability may not be lower than the payment calculated over a 30-year amortization period. 26 175097.8 036227 OS Using a rolling 30-year amortization period for measuring the actuarial accrued liability could result in the UAAL continuing to rise indefinitely even if the City were to contribute the full ARC in each year. Under certain circumstances,the City may be unable to effectively amortize the plan's UAAL. Beginning with the June 30, 2009 valuation, PERS implemented a 3-year phase-in of the 24% investment losses experienced in Fiscal Year 2008-09. The phased-in approach entailed temporarily increasing the corridor limits for establishing the actuarial value of assets from 80-120% of market value of assets to 60-140% of market value on June 30, 2009 (which impacts the Fiscal Year 2011-12 contribution rate), changing the corridor limits to 70-130% of market value on June 30, 2010 (which impacts the 2012-13 contribution rate) and returning to the 80-120% of market value corridor limits for the actuarial value of assets on June 30, 2011 (which impacts contribution rates for Fiscal Year 2013-14 and thereafter). According to PERS, the Fiscal Year 2008-09 asset loss, isolated outside of the 80-120% corridor, will be amortized using a fixed 30-year schedule. Temporary expansion of the corridor limits for the actuarial value of assets is expected to result in lower City pension contributions in the short-term and a higher UAAL in the long-term. The amortization periods and assumptions used by PERS are subject to change from time to time. The City cannot predict the nature or effect of such changes on the City's pension costs. There is a lag between the point in time at which the actuary completes the actuarial valuation and the date that the contribution rates calculated in the valuation go into effect. This lag is typically two years. The actuarial valuation of the plan as of June 30, 2010, the most recent actuarial valuation provided by PERS, sets forth the employer contribution rates for Fiscal Year 2011-12, which are 12.655% for non-safety employees(non-risk pooled) and 28.183%for safety employees (risk pooled) of annual covered payroll. The employer contribution rates for Fiscal Year 2010-11 were 11.714% for non-safety employees (non-risk pooled) and 22.343% for safety employees of annual covered payroll (risk pooled). The City has included its ARC in the Fiscal Year 2011-12 Adopted Budget. Under GASB 27, an employer reports an annual pension cost ("APC'') equal to the ARC plus an adjustment for the cumulative difference between the APC and the employer's actual plan contributions for the year. The cumulative difference is called the net pension obligation ("NPO"). The City has made contributions to the plan equaling at least 100% of the ARC. Because the City pays the entire ARC each year, by definition, its NPO at the end of each year is $0 or negative (where a net pension asset exists). For more information on the City's pension plan and funding levels, see Note 7 to the financial statements attached to this Official Statement as Appendix C. Water System Share of PERS Costs. The Water System's share of the PERS costs fluctuates from year to year, depending on the number of Water System employees included in PERS. The Water System's full-time employees are covered by PERS. Pension costs are funded by monthly contributions to PERS by the City, with a portion thereof allocated to the Water System. For Fiscal Year 2010-11, the Water System's proportionate share to fully fund the City's contribution to PERS was $335,000, and for Fiscal Year 2011-12 such share is projected to be$337,000. Electric System Share'of PERS Costs. The Electric System's share of the PERS costs fluctuates from year to year, depending on the number of Electric System employees included in PERS. The Electric System's full-time employees are covered by PERS. Pension costs are funded by monthly contributions to PERS by the City, with a portion thereof allocated to the Electric System. For Fiscal Year 2010-11, the Electric System's proportionate share to fully fund the City's contribution to PERS was$373,000, and for Fiscal Year 2011-12 such share is projected to be$385,000. 27 175097.8 036227 OS The table below sets forth the APC, percentage of APC contributed and NPO for Fiscal Years 2006-07 through 2009-10 and the estimated amounts for Fiscal Year 2010-11. PERS ANNUAL PENSION COSTS Miscellaneous Plan Fiscal Years 2006-07 through 2010-11 ($in thousands) % of Annual Annual Water System Electric System Pension Net Pension Fiscal Year Pension Cost", Portion Portion Cost Contributed Obligation 2007-08 $2,416 $293 $345 100% $0 2008-09 2,617 326 374 100 0 2009-10 2,655 339 346 100 0 2010-11 2,725 335 373 100 0 2011-12(21 N/A131 337 385 100 N/A131 Source: City of Azusa, California Comprehensive Annual Financial Report for Fiscal Years 2009-10 through 2010- 11; City approved Budget for Fiscal Years 2009-10 and 2010-11. See Appendix C — "Audited Financial Statements of the City as of June 30,201 P'attached to this Official Statement. t�] Includes City contribution and employer paid member contributions. (2) Projected. 131 To be determined by PERS actuary. The table below sets forth the PERS schedule of funding progress for Fiscal Years 2005-06 through 2009-10. PERS SCHEDULE OF FUNDING PROGRESS Miscellaneous Plan Fiscal Years 2006-07 through 2009-10 ($in thousands) Funded Status Entry Age Unfunded Valuation Normal Actuarial Market Liability Actuarial Market Annual UAAL as a Date Accrued Value of Value of (Excess Value of Value of Covered Percentage (June 30) Liability AssetsM Assets Assets) Assets['] Assets Payroll of Payroll 2006 $69,289 $63,329 - $67,115 $ 5,960 91.4% 96.9% $12,295 48.5% 2007 75,027 68,944 79,837 6,083 91.9 106.4 13,474 45.6 2008 80,194 73,953 75,339 6,241 92.2 93.9 14,621 42.7 2009") 87,949 78,137 56,988 9,813 88.8 64.8 15,596 63.0 2010 93,158 82,653 64,819 10,505 88.7 69.6 16,192 64.9 tt] Decrease in market value for Fiscal Year 2008-09 is attributable to the PERS investment loss of 24.0% in Fiscal Year 2008-09. Source: California Public Employee's Retirement System Actuarial Reports for the respective Fiscal Years for market value of assets and Fiscal Year 2008-09 data;City of Azusa Comprehensive Annual Financial Report for Fiscal Years 2005-06 through 2008-09 for all other data for Fiscal Years 2004-05 through 2007-08. The City's pension costs are expected to increase due to, among other things, the PERS investment losses of 24.0% in Fiscal Year 2008-09, the increase in unfunded liability as a result of such losses, the greater longevity of plan members and lower than expected actual rates of return on investments. The City is exploring various options to address the projected cost increases, including the 28 175097.8 036227 OS potential for negotiating additional employee contributions and the creation of a new tier of reduced pension benefits of new employees. If the City is unsuccessful in attaining such cost reductions, the City may make additional operations reductions,which may include furloughs and layoffs. Public Agency Retirement System, Defined Contribution Pension Plan. The City contributes to the Public Agency Retirement System ("PARS"), a defined contribution pension plan provided and administered by the Public Agency Retirement System Alternate Retirement System Plan (the "PARS Plan"). The PARS Plan was established by City ordinance and benefits thereunder depend solely on amounts contributed to the PARS Plan plus investment earnings. Federal legislation requires contribution of at least 7.5% to a retirement plan, 3.75% of which is contributed by each of the City and the applicable employee pursuant to a 1992 agreement. Under the PARS Plan, normal retirement age is 60 years of age. PARS Plan assets are primarily investe�dinmoneyymmarkeett funds. [The City's contributions for each employee and the interest thereon are fully vsted�immediatelyThereis no actuarial accrued liability attributable to past years -- employment.�Confinn:] For the year ended June 30, 2011, total payroll for the City was $22,465,772, the covered payroll for employees in the PARS Plan was $458,986 and the employer and the employees each contributed an amount equal to$17,212. For the year ended June 30,2010,total payroll for the City was$29,697,387, the covered payroll for employees in the PARS Plan was $579,280 and the employer and the employees each contributed an amount equal to $21,723. For the year ended June 30, 2009, total payroll for the City was $28,312,830,the covered payroll for employees in the PARS Plan was $600,803 and the employer and the employees each contributed an amount equal to$22,530. Retirement Enhancement Plan. The City also contributes to the PARS Retirement Enhancement Plan (the "PARS Enhancement Plan"). The PARS Enhancement Plan provides pension benefits to approximately 116 eligible covered positions in the International Brotherhood of Electric Workers Mgt!"" zusa Middle Management Association ("AMMA") and Executive Management (Contract) he City's 2011 GAFR a�sites Service Employ' ee�s Int��tional1Umon Local 721. Should e included and incorporated into,the table below?�+fir_ tllereT E�thF,System employees EIU ]•The plan is administered by Phase II Systems,PARS Trust Administration. d the affected employees are required to contribute the following percentage of annual covered ordance with certain agreements approved in 2007,as set forth below: Covered Positions Employer Contribution Employee Contribution IBEW 2.26% 2.00% AMMA 2.50 7.38 Executive Management 4.00 7.00 Water System Share of PARS Plan and Retirement Enhancement Plan. The Water System's share of the PARS Plan and Retirement Enhancement Plan costs depends on the number.of Water System employees included in the Retirement Enhancement Plan. For Fiscal Year 2010-11, the Water System's proportionate share to of Retirement Enhancement Plan costs was $41,576, and for Fiscal Year 2011-12 such share is estimated to be$46,440. Electric System Share of PARS Plan and Retirement Enhancement Plan. The Electric System's share of PARS Plan and Retirement Enhancement Plan costs depends on the number of Electric System employees included in the Retirement Enhancement Plan. For Fiscal Year 2010-11, the Electric 29 175097.8 036227 OS System's proportionate share to of Retirement Enhancement Plan costs was $27,995, and for Fiscal Year 2011-12 such share is estimated to be$29,250. Other Post Employment Benefits Pursuant to contracts between the City and its employee associations, the City provides other postemployment benefits ("OPEB") through a single-employer defined benefit healthcare plan (the "Healthcare Plan") by contributing approximately one-half of all premiums charged under the health benefit plan for all eligible employees and qualified family members. A separate financial report is not available for the plan. See Note 9 to the financial statements attached to this Official Statement as Appendix C. As of June 30, 2011, there were 352 active employees in the Healthcare Plan. The City currently funds the Healthcare Plan on a pay-as-you-go basis. The City contributed $439,152 during Fiscal Year 2010-11 and expects to contribute$519,979 for Fiscal Year 2011-12. In connection with GASB 45 compliance, the City has calculated its net OPEB obligation ("NOPEBO") as of June 30, 2011 to be approximately $6.2 million. The NOPEBO is the cumulative difference between the City's annual OPEB cost and the City's contributions to OPEB in a particular year, including the OPEB liability or asset at transition, if any. Annual OPEB cost is equal to (i) the ARC for OPEB (determined to be $2.5 million for Fiscal Year 2010-11), (b) one year's interest on the NOPEBO from prior years ($157,000 for purposes of the June 30, 2011 calculation), and (c) an adjustment to the ARC for OPEB to offset the effect of actuarial amortization of past under- or over- contributions (-$229,000 for purposes of the June 30, 2011 calculation). The most recent actuarial valuation of the City's Healthcare Plan was prepared as of June 30, 2006 (the "2006 OPEB Valuation") for the purpose of determining the City's annual cost in accordance with GASB 45. The valuation reflected a projected unit credit method and included an assumed investment rate of return of 3.50%, which is a blended rate of the expected long-term investment return on plan assets and on the City's own investments calculated based on the funded level of the plan at the valuation date. The valuation also assumed an annual healthcare cost trend rate of 11% beginning July 1, 2006, reduced to an ultimate rate of 5% after six years. The UAAL for OPEB is amortized as a level percentage of payroll on an open basis. Water System Share of OPEB Costs. The Water System's share of the OPEB costs fluctuates from year to year, depending on the number of Water System employees included in OPEB. The Water System's full-time employees are covered by OPEB. For Fiscal Year 2010-11, the Water System's proportionate share to fully fund the City's contribution to OPEB was $11,049, and for Fiscal Year 2011- 12 such share is projected to be$13,557. Electric System Share of OPEB Costs. The Electric System's share of the OPEB costs fluctuates from year to year, depending on the number of Electric System employees included in OPEB. The Electric System's full-time employees are covered by OPEB. For Fiscal Year 2010-11, the Electric System's proportionate share to fully fund the City's contribution to OPEB was $4,138, and for Fiscal Year 2011-12 such share is projected to be$4,052. 30 175097.8 036227 OS - THE WATER SYSTEM General The Water System began operation in 1899, the year after the incorporation of the City. That same year the City issued water bonds to finance construction of the facilities of the Water System. Deep ground water wells were drilled and their initial use was primarily for agricultural consumption. In the latter half of the 194Os, the wells were redeveloped for domestic production. In 1993, the City acquired the outstanding shares and retired the outstanding debt of the Azusa Valley Water Company ("AVWC"), substantially increasing the Water System service territory, customer base and facilities. The Water System, being the combined and integrated water systems of the City and the AVWC, comprises the largest municipal water utility in the San Gabriel Valley. Existing Service Territory The Water System service territory includes the City and adjoining portions of surrounding cities and unincorporated areas of Los Angeles County. The Water System serves approximately 22,290 active service connections with an estimated population of 108,000. Approximately 40% of the Water System's customers are located in the City, with the remainder in the Cities of Covina, Glendora, Irwindale, West Covina, and unincorporated areas of the County. A majority of customers served outside the City are located in the Cities of Covina and West Covina. 31 175097.8 036227 OS Y 1 I l'� _♦' City of CovinaNOM 175097.8 036227 Major Facilities and Equipment The major facilities and equipment of the Water System consist of 11 wells, 9 booster pump stations, 13 reservoirs and 1 filtration plant. The City's filtration plant, the Joseph F. Hsu Water Filtration Plant (the"Hsu Water Filtration Plant"), filters 12 million gallons of water per day. Completed in 2009 at a cost of$36 million, the technology at the Hsu Water Filtration Plant pumps water through membranes in an outside-in pattern such that any particle larger than 0.04 microns is retained on the fiber surface.The Hsu Water Filtration Plant has been designed to exceed current water quality requirements, thereby enabling the City to treat San Gabriel River water, imported water from the Colorado River and water from the State Water Project. In addition, the Water System includes 251 miles of transmission and distribution mains. The distribution system is divided into four pressure zones based on the hydraulic gradient throughout the service area. The Water System also maintains fire hydrants throughout the service area. The Department maintains a program that monitors the condition of all major facilities and equipment of the Water System. Facilities and equipment are rehabilitated or replaced on a timely basis to ensure reliable service. Sources of Water The Water System relies on several sources of water supply. These are: (i) underground water, which is pumped from 11 deep wells currently in operation within the Main San Gabriel Basin, Intermediate San Gabriel Basin, and Upper San Gabriel (Canyon) Basin; (ii) surface water from the San Gabriel River, which is filtered and treated at the Hsu Water Filtration Plant, located in north Azusa; (iii) treated water purchased from the Upper San Gabriel Valley Municipal Water District ("Upper San Gabriel Valley MWD"); and (iv) untreated State Water Project water purchased from the San Gabriel Valley Municipal Water District. The Water System has interconnections with other water purveyors and is able to receive or supply water to other systems on an emergency basis. Water Rights Pursuant to the judgment and decree in the California Superior Court case titled Upper San Gabriel Valley Municipal Water District v City of Alhambra et al., California Superior Court No. 924128, Dec. 29, 1972, as amended (the "Judgment"), all of the rights of the Water System to pump ground water and to divert surface water are under the jurisdiction of the Main San Gabriel Basin Watermaster("Watermaster"). Watermaster, a 9-member board composed of six representatives of water producers and three public water agency representatives, determines the annual amount of water that can safely be produced from the Watershed (the "Operating Safe Yield"). Parties which produce in excess of their share of the Operating Safe Yield are subject to assessment by Watermaster for the purpose of purchasing replacement water to recharge the ground water basin. The Water System pays a replacement water charge that varies depending on the geographic location of the overdraft. By agreement among the City, Watermaster, and the San Gabriel Valley MWD, 40% of the City's total annual water production is considered produced within the San Gabriel Valley MWD service boundaries, and is subject to a water replacement cost of $130 per acre foot for water produced in excess of the City's water rights, which are dedicated for use within the San Gabriel Valley MWD's service boundaries. The remaining 60% of the City's total annual water production is considered produced within the service boundaries of the Upper San Gabriel Valley Municipal Water District, and is subject to a water replacement cost in Fiscal Year 2010-2011 of$512.00 per acre foot for water produced in excess of the combined water rights of AVWC and the Azusa Agricultural Water Company ("AAWC"), which are dedicated for use within the Upper San Gabriel Valley Municipal Water District service boundaries. 33 175097.8 036227 OS z Rights to divert surface water are fixed and do not vary with changes in the Operating Safe Yield. Pumping rights of a producer are expressed as the percentage share of the annual Operating Safe Yield which that producer is entitled to take without being subject to assessment for purchase of replacement water. A producer which produces less than its share of the Operating Safe Yield is able to carryover its unproduced share. In a year in which the producer produces in excess of its share of the Operating Safe Yield, it may produce additional water in an amount equal to its carryover water rights without incurring an assessment for replacement water. In years in which the Watermaster declares a reduced Operating Safe Yield, the amount of water each pumper is entitled to take without assessment is reduced proportionately. The Operating Safe Yield was established at 170,000 acre-feet ("AF", being the amount of water needed to cover one acre with water one foot deep or 325,829 gallons) for Fiscal Year ended June 30, 2011 and 210,000 for Fiscal Year ending June, 30 2012. See the table entitled "Adjudicated Water Rights"below for the diversion rights of the City, AAWC and AVWC as set forth in the Judgment and such entities' corresponding pumping rights, based on the Operating Safe Yield for Fiscal Year ending June 30, 2012. See also the table entitled "Water Production" set forth under "Water Production and Average Cost"below for the City's overdraft and carryover amounts in the last five fiscal years. A producer which has both diversion and pumping rights is treated as an "Integrated Producer." An Integrated Producer is a.producer that may, at its sole option, produce its entire aggregate production right by any combination of pumping and diversion. The Water System is one of sixteen Integrated Producers designated by the Judgment. The City has designated "Diversion Rights" to a constant amount of water available which does not change with the variations in the Watermaster annual Operating Safe Yield determination. Of the City's water rights, 3,785 acre-feet are"Diversion Rights." The following table sets forth the Operating Safe Yields since 2003. San Gabriel Basin Operating Safe Yield 2002-2012 Fiscal Year Operating Safe Yield (ending June 30) (Acre Feet) 2012 210,000 2011 170,000 2010 170,000 2009 180,000 2008 210,000 2007 240,000 2006 240,000 2005 170,000 2004 170,000 2003 190,000 The Water System holds the City's water rights, the water rights of the AVWC (which the City purchased, as described under the Section entitled "THE WATER SYSTEM - General" herein), and the water rights for the AAWC. The Water System derives its rights to AAWC water through the City's ownership of approximately 99%.of the shares of AAWC, which is a tax-exempt, nonprofit mutual water company under the management f the City. The AAWC is obligated to provide water to its stockholders at cost. The AAWC's only assets are the surface diversion and pumping rights established under the Judgment. The estimated value of these water rights is $4.82 million using an estimate of$10,000 per AF of water right. The City has used and will continue to use its 99% share of AAWC's water rights for the benefit of the Water System. 34 175097.8 036227 OS c The following table sets forth the diversion rights of the City, AAWC and AVWC, as set forth in the Judgment, and the pumping rights of the respective entities, based on the Operating Safe Yield of 210,000 AF in effect through Fiscal Year ending June 30, 2012: Adjudicated Water Rights (Acre Feet Per Year) Azusa AAWC AVWC Total Diversion(') 363.0 170.0 3,252.0 3,785.0 Pumping(2) 3,884.7 312.9 10,319.4 14,517.0 Total(') 4,247.7 482.9 13,571.4 18,302.0 Fixed diversion rights established pursuant to the Judgment. (a1 Based on the respective entity's percentage share of the Operating Safe Yield, which was established by Watermaster as 210,000 AF through Fiscal Year ending June 30,2012. tri See the table entitled"Water Production"under"Replacement Water"herein for the City's rights to carryover water. The City has secured sufficient sources of water to meet the projected needs of the Water System's customers for the foreseeable future. Replacement Water Since 1953, surface and ground water have been taken from the groundwater resources utilized by the Water System and other water purveyors in the San Gabriel Valley (the "Watershed") at a rate greater than that at which natural precipitation and runoff can replenish them. To maintain the productivity of wells in spite of this overdraft condition, the Watershed is recharged by importing water from outside sources and spreading it in basins located above the waterbearing strata of the Watershed. This "replacement water" or"spreading water" currently is provided by three local water districts: (i) the Upper San Gabriel Valley Municipal Water District, a member public agency of The Metropolitan Water District of Southern California, a metropolitan water district that supplies supplemental water at wholesale rates to its 26 member public agencies ("MWD"); (ii) the Three Valleys Municipal Water District, formerly Pomona Valley Municipal Water District, also a member public agency of MWD; and (iii) the San Gabriel Valley Municipal Water District (the "San Gabriel Valley MWD"), which has a direct contract with the California Department of Water Resources for State Water Project water. San Gabriel Valley MWD was organized in 1958 by the Cities of Azusa, Alhambra, Monterey Park, and Sierra Madre and has an annual entitlement of State Water Project water of 28,800 AF. The San Gabriel Valley MWD has not requested more than 15,700 AF of State Water Project water annually in the past five years, and the requests have always been fulfilled. The City expects that San Gabriel Valley MWD will have its orders filled in the future up to the limitations on supply that are imposed by the Department of Water Resources annual allocation of State Water Project supply. The San Gabriel Valley MWD has a one-mile extension of the State Project Ground Water Recharge Service Connection that connects to the Azusa Canyon Spreading Grounds. This extension provides the Water System with an additional source of ground water replenishment. Water Production and Average Cost The following table sets forth the sources and amount of total water production of the Water System for Fiscal Years 2007 through 2011. 35 175097.8 036227 OS Water Production _ (Acre Feet) Fiscal Year Ended June 30 2007 2008 2009 2010 2011 Percent Percent Percent Percent Percent AF of Total AF of Total AF of Total AF of Total AF of Total Wells 21,504 79.3% 15,994 71.3% 16,668 75.3% 14,783 71.0% 12,796 66% Surface Water 5,627 20.7 6,449 28.7 5,454 24.7 6,036 29.0 6,547 34 Purchased from MWD 0 OA -190 N/A 0 N/A 0 N/A 0 N/A Total 2M.13d ]00%s 22,443100% 2 100% 20.819 100% A343 100% Adjudicated Water Rights 20376 20 613 19371 20419 18 103 Carryover(Overdraft)") 870 82 2,654 12) 278 Lz�e Sources:Main San Gabriel Basin Water Master Reports and City of Azusa. n) These are the production rights to be carried over to the next fiscal year and include beneficial water purchases. If the number is positive for year in which the carryover is realized, the amount carries forward for 2 years unless used. If the amount is negative, the overdraft amount must be paid by the City for the year in which the overdraft occurred. Payment amounts are used to purchase replenishment water. Replenishment costs are determined through the Watemnaster and are passed on to customers in the form of a Replacement Water Cost Adjustment. Total includes consideration of water rights transferred from MillerCoors LLC ("MillerCoors")to the City. See description of the City's water supply agreement with MillerCoors under"Customers"herein. 12) Reflects amount set forth in the Watermasters Annual Report for the indicated year,which serves as the basis for carryover rights or overdraft obligations for the following year. Total water production for fiscal year ending June 30, 2011 was 19,343 AF, a decrease of 1,498 AF from the amount produced in the prior year. Lower production during this period was due to continued water conservation, a downturn in the economy, and MillerCoors, the Water System's largest customer, supplying a portion of its water needs from its own wells. See description of the City's water supply agreement with MillerCoors under "Customers" herein. Of the total produced, 66%, or 12,796 AF, was produced from the deep wells, and 34%, or 6,547 AF, was produced at the Joseph F. Hsu Water Filtration Plant from surface water supplied by the San Gabriel River. No treated water was purchased from Upper San Gabriel Valley MWD for fiscal year ending June 30, 2011. Water production from each source has varied from year to year. Total annual production for the past five years, from 2007 through 2011, has varied from 19,343 AF to 27,131 AF. The lowest cost water source is from the San Gabriel River, which has varied from 20.7% to 34% of total production over the period from 2007 to 2011. The most expensive source of supply is imported treated water purchased from Upper San Gabriel Valley MWD, but over the period from 2006 to 2011 purchases from this source have only been necessary during Fiscal Year 2007-08. From 2007 through 2011, ground water supplies vaned from 66.0% to as much as 79.3%of total water produced. During the fiscal year ending June 30, 2011, the Water System distributed an average of 17.3 MGD. Total water production for the fiscal year ending June 30, 2011 was 6,302.83 MG. 36 175097.8 036227 OS Customers During 2011,the Water System delivered approximately 5,523 MG of water to 22,000 customers. Approximately 54% of such water was used for residential purposes, approximately 36% for commercial, industrial and municipal purposes, and approximately 10% for miscellaneous purposes. The City does not have wholesale customers. However, from time to time, the City leases for one fiscal year its excess water rights (being the portion of the City's adjudicated water rights in excess of the needs of the Water System) to other regulated entities, as permitted pursuant to Watermaster rule changes in 2010. Revenues derived from such leasing constitutes"wholesale" revenues. The following table sets forth the volume of Water System sales by customer class and the corresponding revenues for Fiscal Years 2006-07 through 2010-11. Sale of Water(1) Fiscal Year Ended June 30 2007 200e' 2009141 20101st 2011 Accounts........................................ Residential................................ 19,758 19,739 19,827 19,784 19,834 Commercial,Industrial 2,387 2,965 3,226 3,032 3.052 and Municipal................. Other121..................................... 2 2 2 2 2 Total.............................. 22.147 ZZ-10 Za= 2ZM ZZ$Ji$ Volume(MG) ............................... MG MG MG MG MG Residential................................ 3,562 3,901 3,228 3,057 2,%6 Commercial,Industrial and Municipal................. 2,420 2,698 2,172 2,010 1,978 Other(21..................................... 815 859 833 808 579 Total.............................. 61M 2A58 _VX 3 LU5 5.5n Revenues($000s)............:............. Residential................................ $8,006 $8,571 $7,520 $8,689 $9,626 Commercial,Industrial and Municipal................. 5,031 5,554 4,534 4,755 5,686 Other Retail and Wholesale(2)... 1 274 1 340 1 502 6 207 "05 Total.............................. 4 1 $JS 4 $13,556 29151 $ Source: Azusa Light&Water Billing Report. f11 Million Gallons(MG)= 1,336.898 hundred cubic feet or ccf 1 acre foot=325,829 gallons. 1a) Includes contract water customer,MillerCoors. See description of the City's water supply agreement with MillerCoors under"Customers"herein. Total includes$3.3 million in wholesale water right lease revenue. 131 Drought prompted an aggressive water conservation program. Conservation reduced new revenues added from the 2007 water rate adjustment. However, the Replacement Water Cost Adjustment Factor ("RWCAF") was used to recover $1.8 million during this fiscal year. The RWCAF revenue is identified separately in this table. See"Water Conservation"herein. 141 In addition to continued conservation,a submeter charge was eliminated from the rate schedule which reduced revenue by approximately$800,000. (s> Retail revenues reflect an 18%rate adjustment that went into effect July 1,2009. For Fiscal Year 2009-10,"Other Retail" revenue totaled$1,859,000 and"Wholesale"revenues derived from leasing of nonrecurring water rights were$4,448,228. The leasing of nonrecurring water rights was made possible due to Watermaster rule changes. 37 175097.8 036227 OS The following table sets forth the ten largest customers of the Water System in terms of total water sales and total billings for the Fiscal Year ended June 30, 2011. Ten Largest Customers Fiscal Year Ended June 30, 2011 Business Usage Percentage Total Percentage Customer Type cc of System Charges of System MillerCoors LLC") Food 693,147 9.4% $1,179,307 7.1% Ready Pac Food 261,493 3.5% 508,908 3.1% Azusa Western Mining 180,437 2.4% 257,893 1.6% Azusa Unified School District Education 170,286 2.3% 304,201 1.8% City of Azusa Government 96,477 1.3% 204,200 1.2% Azusa Pacific University Education 88,814 1.2% 158,720 1.0% Azusa Greens Country Club(') Golf 82,752 1.1% 123,513 0.7% S& S Foods, LLC Food 61,606 0.8% 117,826 0.7% Covina Valley Unified School District Education 58,594 0.8% 114,450 0.7% Cal Mat Mining 49,494 0.7% 57,686 0.3% Total 1,743,100 23.6% $3,026,704 18.2% Source: Azusa Light&Water billing system.Reflects minor methodological differences from amounts set forth in the Statistical Section of the City's Comprehensive Annual Financial Report for the Fiscal Year ended June 30,2011. l0 Customer is subject to separate contract rate tariff. The City has entered into a Water Supply Agreement (the "MillerCoors Agreement") with MillerCoors, as successor in interest to Miller Brewing Company, which provides, among other things, for the City's delivery of water to Miller from the Canyon Basin at certain rates and the use by the City of Miller's water rights. The MillerCoors Agreement is effective through May 31, 2013, and provides Miller with the option to extend the agreement three times for successive five-year terms. Pursuant to the MillerCoors Agreement, supplied water is derived from MillerCoor's prescriptive pumping rights which are leased to the City and the City charges Miller for the supplied water. The City also has an obligation to maintain the pipeline to Miller's Irwindale facility. Miller is required to comply with water curtailment conditions in event of emergencies and droughts. Rates and Charges Water rates are developed by the Water System and approved by the City Council after a notice and public hearing process in accordance with the provisions of Proposition 218. See "CONSTITUTIONAL LIMITATIONS ON TAXES, WATER RATES AND CHARGES - Proposition 218" herein. The water rates of the Water System are composed of a service charge component designed to cover a portion of the fixed costs and a commodity charge designed to cover the remaining fixed costs and all of the variable costs. The following table sets forth the rate increases for the Water System since January 1, 1999. 38 175097.8 036227 OS Schedule of Approved Rate Increases January 1, 1999 to July 1,2010 Service Commodity Charge Charge Approximate Effective (Percent (Percent Revenue Date Increase) Increase) Increase July 1, 1999 5.00% 5.70% $ 790,000 April 4,2001 3.40 3.40 551,000 July 21,2003 4.35 4.35 658,000 November 1,2005 3.00 3.00 476,000 July 1,2007 6.00 6.00 872,000 July 1,2009 18.00 18.00 2,242,000 July 1,2010 15.60 15.60 2,293,000 Effective October 1992, the City Council approved a surcharge which added a cost adjustment factor called the Replacement Water Cost Adjustment Factor (the "RWCAF"). The RWCAF was designed to address water cost fluctuations caused by variation in Operating Safe Yield and the costs of replacement water. The RWCAF is adjusted annually at the beginning of each fiscal year. The following table shows RWCAF adjustments from July 1, 1999 to July 1, 2011. Schedule of RWCAF Charges July 1, 1999 to July 1,2011 Effective or Adopted RWCAF Approximate Date Cost Per ccf Revenue July 1, 1999 $0.06036 $512,991 July 1,2000 $0.06036 $519,335 July 1,2001 $0.06036 $510,150 July 1,2002 $0.16000 $1,055,501 November 1,2003 $0.09000 $593,720 July 26,2004 $0.13000 $1,175,741 June 27,2005 $0.00000 $0 July I,2006 $0.05000 $454,331 July 1,2007t'1 $0.13060 $1,186,713 October 1,2007 $0.24380 $196,0001=1 December 1,2007 $0.28960 $222,80011 [February 1,2007] $0.52360 $440,68011 April 1,2008 $0.32790 $255,617121 June 1,2008 $0.13060 $109,950 July 1,2008 $0.05900 $491,000 July 1,2009 $0.05180 $431,000 July 1,2010 $0.00000 $0 July 1,2011 $0.00000 $0 1�1 Stayed in effect for Fiscal Year 2007-08. 1l Imposed to manage purchased water costs in severe drought. Amount represents incremental increase in excess of revenue generated from$0.1306 per ccf charge that stayed in effect for Fiscal Year 2007-08. Residential, commercial and industrial customers within the City are billed monthly; residential, commercial and industrial customers outside of the City are billed bi-monthly. Bills are due and payable on presentation and become delinquent after 20 days unpaid. After a water bill is delinquent, following appropriate procedures, the Water System may disconnect the water service. Before service is reinstated, 39 175097.8 036227 OS the customer must bring the entire bill current and pay a reconnection charge. As of June 30, 2011, the delinquency rate was 9.5%,the disconnection rate was 1.9%and the recovery rate was 8.5%. Operation and Maintenance of the Water System Water System sales and expenses are monitored on a continuing basis. Projections of future revenues, customers, and water consumption are made annually and are revised when appropriate. Rates are reviewed annually and are recommended for adjustment as needed to meet budgetary, capital addition requirements, debt service obligations, and the Utility Board's reserve policy goals, which is currently $25 million. The following table sets forth the operating expenses of the Water System (excluding depreciation, amortization, interest expense and transfers to the City General Fund) during Fiscal Years 2006-07 through 2010-11. Operating Expenses(i) Fiscal Year Ended June 30th 2007 2008 2009 2010 2011 Cost of Purchased Water' $2,852,596 $4,124,072 $2,629,400 $2,711,899 $2,835,895 Operations and Maintenance... $9,082,944 $8,901,402 $9,315,939 $9,647,670 $9,577,301 Total................................. $11,935,540 $13,418,331 $11,945,339 $12,359,569 $12,413,196 Source: City of Azusa, Light & Water Department; City of Azusa California Comprehensive Annual Financial Report for Fiscal Year 2010-11. u) Excludes depreciation,amortization,interest expense and transfers to Azusa General Fund. How much-is transerfeimed t'o the Eeneial Fund each y ,ear?;'How is the`=mount R) Cost of purchased water includes outside assessments,cost of purchased water,and water right lease payment to the City. Water System Employees A staff of 26.5 fulltime equivalent employees is currently employed by the City to operate and maintain the Water System. Additional employees perform utility billing, customer services and central administrative service functions. The cost of these additional employees is shared with the Electric System. No significant changes to staffing levels are anticipated for fiscal year 2012-2013. All Water System employees are represented by one of the following employee associations: IBEW, AMMA and Azusa City Employees Association ("ACEA"). The employee associations represent the employees in all matters pertaining to wages, benefits and working conditions. The current arrangements with IBEW, which is in the form of a memorandum of understanding, will continue in effect until July 31, 2012. The City is currently in negotiations with AMMA and ACEA. The employees represented by AMMA and ACEA will continue to operate under the terms of their existing memoranda of understanding until new agreements are executed. Water Treatment and Quality Control The United States Environmental Protection Agency ("EPA") and the California Department of Public Health("State Department of Public Health")prescribe regulations that limit the amount of certain contaminants in water provided by public water systems. The regulations of the State Department of Public Health also establish limits for contaminants in bottled water that must provide the same protection for public health. Water supplied by the Water System meets or exceeds all existing chemical and 40 175097.8 036227 OS �'i bacteriological quality standards relating to domestic water supply as established by State and Federal water quality regulations. A water quality review conducted by the City in connection with its 2010 Consumer Confidence Report (the "2010 Confidence Report") indicated that current groundwater sources of the Water System are free of contaminants and of good water quality. However, certain contaminants have been found in two of the City's wells and in a portion of the Main San Gabriel Basin downstream from the City's location, as described below. Volatile Organic Compounds. In 1979, studies revealed that portions of the Main San Gabriel Basin had been contaminated by volatile organic compounds ("VOCs"), principal among which are trichloroethylene("TCE") and perchloroethylene ("PCE"). In 1984, the EPA placed the Main San Gabriel Basin on its National Priorities List. Contamination by VOCs has necessitated the closure of numerous wells and the blending or treatment of water from other wells in order to meet State and Federal drinking water requirements. Because the VOC contamination is located in the Main San Gabriel Basin, downstream from the wells of the Water System, the VOC contamination poses no threat to the Water System wells. The Upper and Intermediate San Gabriel Basins remain free of VOC contamination. VOC contamination is still considered a significant issue in the Main San Gabriel Basin. However, it is not a significant issue for the Water System due, in part, to the City's location upstream of the ground water gradient. Well No. 9. Well No. 9 is currently inactive due to high nitrate levels and the presence of PCE above maximum contaminant levels. Well No. 9 will remain in inactive status until planning for a potential multi-agency water treatment plant is finalized. Well No. 10. The 2010 Confidence Report reflected the continued presence of nitrate, perchlorate and PCE in Well No. 10, which produces 4.2 MGD and is the third largest producer of groundwater supplies of the I 1 wells of the Water System. The level of nitrate contamination at Well No. 10 has been measured at up to 40 parts per million ("ppm"). The State Department of Health ("DOHS") maximum contaminant level for nitrates is 45 ppm, and the Water System monitors the nitrate level regularly. A sampling from Well No. 10 conducted in connection with the 2010 Confidence Report showed a reading of 8.3 parts per billion ("ppb") for perchlorate. The DOHS maximum contaminant level for perchlorate is 40 ppb. Water from Well No. 10 is blended with other sources, reducing perchlorates to lower levels before being piped to customers. The City notifies DOHS of compliance with its guidelines for monitoring and review. Well No. 10 is currently an approved source of drinking water, DOHS has not required that operation at Well No. 10 be limited. As of March 1, 2012, the nitrate level in Well No. 10 is 53 ppm and the PCE level is 1.0 ppb. Raw Surface Water Supply. The Water System obtains its raw surface water supply from a diversion at the San Gabriel Dam Reservoir. This water is filtered and disinfected at the Hsu Water Filtration Plant. Pursuant to a memorandum of understanding, protection of the surface water from unauthorized human contact is the responsibility of the Los Angeles County Department of Public Works (the "DPW"), which operates the impoundments of the San Gabriel River. In addition, the Los Angeles County Sheriff patrols access points to the surface supply. The Water System is obligated under the Surface Water Treatment Rule to perform a watershed assessment every 5 years with regard to potential contamination due to unauthorized human contact. The most recent Watershed Sanitary Survey, completed in 2010, indicated (Any material levels,oficontamination due to a_uthor_i_zed human contact. An material'findin s fromm th , __�] L _Y� g._ e201Qsuerla] 41 175097.8 036227 OS s Water System Master Plan In 1994, the City developed a Water System Master Plan to design an integration process along with the needed system improvements or modifications necessary to integrate the Water System with that of AVWC's water system. Integration was completed in 1998, and in 2000 and 2005 the City updated its Water System Master Plan to guide Water System maintenance and capital improvements for the ensuing years. Projects undertaken the past several years have resulted from studies conducted on various facilities and equipment. Such projects have included the construction of the Hsu Water Filtration Plant, replacement of various water mains (including to increase the size of water mains) and completion of the 1,250 unit Rosedale Development(which includes a water infrastructure system of reservoirs, main lines and pump stations installed in accordance with the 2005 Water Master Plan) described in Appendix A hereof. Anticipated capital improvements for the next five years include replacement of aging and undersized water mains and related facilities. Urban Water Management Plan Pursuant to the Urban Water Management Planning Act (Act), the City develops water management plans to achieve conservation and efficient use of water (the "Urban Water Management Plan") every five years. The latest version of the Urban Water Management Plan was completed in 2011. As part of the City's past and current sustainability goals, the City is implementing improvements and programs to achieve 20%conservation by 2020. As population increases, the City seeks to continue its independence from imported water by focusing its efforts on its existing water supply infrastructure in order to maximize its local supply capacity. Additionally, the City will explore the possibility of receiving imported water through the San Gabriel Valley MWD, and by working with the Upper San Gabriel Valley MWD towards the advancement of recycled water infrastructure. The City will continue to work with other regional agencies and Watermaster to ensure that groundwater supplies are maximized when natural replenishment is limited during dry climate conditions. The City will also continue to implement conservation measures to offset demand and provide additional reliability. Based on the current capacity of the Water System's supply infrastructure, the City expects to meet the needs of its customers through 2035 with an annual supply of approximately 4,000 AF of imported water, 24,350 AF of groundwater and 10,100 AF of surface water. In addition, the City's supply reliability in the near future is expected to increase through continued upgrades to its groundwater facilities, expansion of the Hsu Filtration Plant from 12 to 16 MGD, continued access to imported water and the future potential use of recycled water. Capital Requirements The City expects capital requirements for the Water System for the next five years to aggregate approximately $_ million. It is expected that these costs will be funded primarily from Water Net Revenues. Use of Water System revenues to pay for capital improvements is permitted only after paying Water Operation and Maintenance Expenses and Water Parity Obligation Service, which includes Water Payments for the Water Bonds. 42 175097.8 036227 OS The following table lists the expected yearly capital requirements of the Water System over the next five Fiscal Years. Projected Capital Requirements Fiscal Year Amounts 2012 $ 1,500,000 2013 2,025,000 2014 2,500,000 2015 2,500,000 2016 2.500,000 Total $11,025,000 Source:City of Azusa. Transfers to the General Fund of the City The Water System currently contributes a portion of its retail sales revenue to the City's General Fund in the form of Franchise Fees. The Water System also transfers the interest earned on the Water Fund cash reserves to the General Fund if the Water Fund meets a net income test for the fiscal year. For the fiscal year ending June 30, 2011, the Electric System transferred $341,033 as Franchise Fees. Under the Prior Water Installment Sale Agreements and the Water Indenture, such transfers may be made only from Water Net Revenues which exist following payment of Water Operation and Maintenance Expenses and Water Parity Obligation Service, which includes principal of and interest on the Water Bonds. See "DESCRIPTION OF THE WATER BONDS AND THE ELECTRIC BONDS" herein. In addition, for Fiscal Year 2010-11, $513,030 interest income was transferred to the General Fund for Fiscal Year 2010-11. See "ELECTRIC SYSTEM - Transfers to the General Fund of the City" and "CONSTITUTIONAL LIMITATIONS ON TAXES, WATER RATES AND CHARGES" herein for a description of certain limitations on fees for service or regulatory activity. 43 175097.8 036227 OS Historical Coverage of Water System Obligations Debt Service The following table shows the Water System obligations debt service coverage by the Water Net Revenues for the five Fiscal Years shown. Historical Coverage of Water System Obligations Debt Service Fiscal Year Ended June 30 2007 2008 2009(') 20101" 2011'41 Gross Revenues ........... $19,291,943 $19,586,794 $16,273,690 $20,638,036 $18,326,599 Operating Expenses"'.. $11,935,540 $13.418,331 $11,945.339 $12,359,569 $12,413,196 Net Revenue................. $4,328,351 8 2 46 55.913.403 Debt Service'"... $2,980,113 $4,328,256 $4,247,295 $4,518,170 $4,518,170 Coverage............ 2.47 1.52 1.02 1.83 1.31 Excludes des interest expense,depreciation,amortization and transfers to the Azusa General Fund. (2) Represents debt service on 2003A Water Certificates which commenced Fiscal Year 2004-2005,and debt service on 2006 Water Bonds which commenced during Fiscal Year 2006-2007. Revenues were significantly impacted by elimination of submeter charge in Fiscal Year 2008-09 and continued water conservation. Based on forecast that debt-coverage ratio requirement would not be met in Fiscal Year 2008-09, the City Council approved two rate increases,an 18%increase effective July 1,2009,and a 15.6%increase effective July 1,2010. 14� Reflects Water Gross Revenues, Water Operating Expenses and Water Net Revenues as defined in the Prior Water Installment Agreements. Alternate Historieal I perating Resuks�Table] Revenues 2007 2008 2009 2010 2011 Sales and service charges $17,254,963 $16,501,434 $14,805,241 $20,592,358 $17,625,477 Interdepartmental charges 2,036,980 438,400 389,040 43,603 39,267 Miscellaneous - 7,291 43,928 2,075 - Interest Revenue 1,937,657 2775498 1,035,481 576,697 661,855_ Total Revenues $21,229,600 $19,722,623 $16,273,690 $21,214,733 $18,326,599 Expenses Cost of sales and service $ 3,305,033 $ 4,594,188 $ 2,967,427 $ 3,091,155 $ 3,060,276 Source of supply 756,309 843,051 946,236 1,005,148 925,390 Pumping 43,872 13,221 26,762 43,946 32,726 Transmission/collection 1,301,383 1,237,599 1,423,016 1,560,995 1,593,543 Treatment 393,826 282,377 310,167 456,608 465,855 Admin and general 6,131,117 6 152630 6,271,731 6,201,717 6,335,406 Total Expenses $11,931,540 $13,123,066 $11,945,339 $12,359,569 $12,413,196 Net Revenues $ 9 298 060 $ 6,599,557 $ 4,328,351 $ 8,855,164 $ 5,913,403 Debt Service $ 2,980,113 $ 4,245,995 $ 4,527,295 $ 4,527,570 $ 4,529,270 Coverage 3.12 1.55 0.96 1.96 1.31 General Fund Transfer $ 322,540 $ 283,993 $ 316,101 $ 341,033 Funds Available after Debt $ 6,317,947 $ 2,031,022 [,(482,937)] $ 4,011,493 $ 1,043,100 44 175097.8 036227 OS Debt Service Requirements The following table sets forth the annual debt service schedule for the Water Bonds through 2039 and outstanding Water Parity Obligations, which are payable from Water Net Revenues on a parity with the Water Bonds, assuming no redemption other than mandatory sinking account redemptions. Outstanding Water Parity Obligations(') Water Bonds Bond Year Ending July 1 Principal Interest Principal Interest Total 2012 $ 1,230,000 $ 3,302,071 $ 4,532,071 2013 1,275,000 3,252,871 4,527,871 2014 2,030,000 3,200,926 5,230,926 2015 2,115,000 3,106,813 5,221,813 2016 2,215,000 3,016,113 5,231,113 2017 2,320,000 2,910,713 5,230,713 2018 2,435,000 2,799,193 5,234,193 2019 2,555,000 2,680,368 5,235,368 2020 2,680,000 2,555,681 5,235,681 2021 2,810,000 2,424,251 5,234,251 2022 2,955,000 2,285,425 5,240,425 2023 3,105,000 2,139,438 5,244,438 2024 1,700,000 1,984,188 3,684,188 2025 1,775,000 1,911,938 3,686,938 2026 1,855,000 1,836,500 3,691,500 2027 1,950,000 1,743,750 3,693,750 2028 2,055,000 1,646,250 3,701,250 2029 2,160,000 1,543,500 3,703,500 2030 2,270,000 1,435,500 3,705,500 2031 2,385,000 1,322,000 3,707,000 2032 2,505,000 1,202,750 3,707,750 2033 2,635,000 1,077,500 3,712,500 2034 2,770,000 945,750 3,715,750 2035 2,915,000 807,250 3,722,250 2036 3,065,000 661,500 3,726,500 2037 3,220,000 508,250 3,728,250 2038 3,385,000 347,250 3,732,250 2039 3,560,000 178,000 3,738,000 Total $67,930,000 $52,825,730 $120,755,730 Preliminary, subject to change. Includes installment payments relating to the Refunded 2003A Water Certificates and the 2006 Water Bonds;does not include the issuance of the Water Bonds or the refunding described herein. 45 175097.8 036227 OS Projected Coverage of Water Systems Obligations Debt Service The following table is a summary of the projected operating results of the Water System for the five Fiscal Years shown. The financial forecast represents the City's estimate of projected financial results based upon its judgment of the most probable occurrence of certain important future events. Actual operating results achieved during the projection period may vary from those presented in the forecast and such variations may be material. Fiscal Year Ended June 30111 2012 2013 2014 2015 2016 Gross Revenues(Z)................ $21,424,555 $20,076,820 $20,864,472 $21,152,408 $21,451,509 Operating Expenses............. 13,564,289 12,813,190 12,904,536 12,997,325 13,091,581 Net Revenue Available for Debt Service.................. 7,860,266 7,263,630 7,959,936 8,155,083 8,359,928 Debt Service(3)........... 4,528,271 4,527,871 5,230,926 5,221,813 5,231,113 Coverage14)........I........ 1.74 1.60 1.52 1.56 1. 60 Source: City of Azusa,Light&Water Department. (() Preliminary, subject to change. Includes installment payments relating to the Refunded 2003A Water Certificates and the 2006 Water Bonds;does not include the issuance of the Water Bonds or the refunding described herein. (2) Assumes residential growth of 1.26%annually for 4 years, a 3%retail rate increase in Fiscal Year 2013-14 and a 6% increase in annual wholesale water right leasing revenue due to increased replacement water costs. tt) Includes principal and interest on existing 2003A Water Certificates and 2006 Water Bonds. The issuance of the Water Bonds and the refunding of the 2003A Water Certificates with proceeds thereof will improve the debt service coverage set forth above. (u) Excludes interest expense,depreciation,amortization and transfers to the Azusa General Fund. Litigation There is no controversy of any nature now pending against the City or, to the knowledge of its respective officers, threatened, seeking to restrain or enjoin the issuance, sale, execution or delivery of the Water Bonds, or in any way contesting or affecting the validity of the Water Bonds, or the authorizations or any proceedings of the City taken with respect to the issuance or sale thereof, or the pledge or application of any moneys or security provided for the payment of the Water Bonds, or the use of the proceeds of the Water Bonds. There are no pending lawsuits that in the opinion of the City Attorney challenge the validity of the above issues, the corporate existence of the City, or the title of the officers to their respective offices. In this review, attention has been given to not only litigation pending against the City,but also against the City's Light and Water Department. The Office of the City Attorney has prepared the following summary, as of April 30, 2012, of certain claims and lawsuits (with any potential material loss) pending against the Water Fund for construction claims and certain other alleged liabilities arising during the ordinary course of operations of the Water System. • [ lease provide (either verbally or in writing)]a[chee oclaims anawsu dulf d lits with potentia al m �l loss and descriptions thf -ereoTo come.from City Attorney,] Pending lawsuits and other claims against the City with respect to the Water System are incidental to the ordinary course of operations of the Water System and are largely covered by the City's self-insurance program. In the opinion of the Water System's management and the City Attorney, the City has sufficient defenses against such claims and lawsuits and in no event should these claims and lawsuits result in judgments or settlements which, in the aggregate, would have a material adverse effect on the financial position of the Water Fund. 46 175097.8 036227 OS THE ELECTRIC SYSTEM General The Electric System was established in 1902. Prior to 1984, the Electric System purchased all of its electric energy from Edison. From 1984 through 1998, the Electric System and Edison operated under the Integrated Operations Agreement ("IOA")whereby the Electric System procured power resources and provided such resources to Edison for economic dispatch for the benefit of Edison's control area. In exchange, the Electric System received both electric capacity and energy credits for such resource contribution, and also received in-kind control area services from Edison. In connection with the deregulation of the California electric energy market, the Electric System and Edison entered into a Restructuring Agreement in 1997 whereby the IOA was terminated and the Electric System received certain transitional arrangements with Edison to facilitate the Electric System's entry in the deregulated California energy market. The City has been a certified Scheduling Coordinator in the California Independent System Operator (the "CAISO") market since January 1, 1999. As of January 1, 2003, the City has transferred certain transmission scheduling rights to the CAISO and, has been a participating transmission owner in the CAISO, receives all transmission service from the CAISO. See"Participation in the CAISO"herein. The Electric System provides service to virtually all of the electric customers within the City limits. For Fiscal Year ended June 30, 2011, the customer base of the Electric System comprised approximately 13,346 residential customers, 1,456 commercial and industrial customers, and 239 governmental and other customers. The Electric System's current resource mix includes long-term purchase contracts from a variety of remote sources including hydroelectric; coal, nuclear and wind generating units. Although these resources are sufficient to meet the Electric System's current loads on an annual basis, a portion of the Electric System's energy supply is purchased on the wholesale hourly, daily and month-ahead open markets to match the Electric System's load profile, diversify the sources of power serving the Electric System and reduce the costs of power whenever economically feasible. See"San Juan Hedging Program"and "Short-Term Wholesale Transactions"herein. The following table sets forth the valuation of the Electric System facilities for the last five Fiscal Years. City of Azusa Electric Facilities (Audited) Fiscal Year ended June 30, 2007 2008 2009 2010 2011 Electric Plant: Net Utility Plant................... $31,297,359 $30,146,119 $31,986,453 $31,893,800 $30,957,313 Miles of Distribution Lines(') 120 125 130 130 130 Source: City of Azusa Comprehensive Annual Financial Report for the respective Fiscal Years. (') Approximate. Power Supply Resources The following table sets forth the peak demand and the total power resources of the Electric System for the last five Fiscal Years. 47 175097.8 036227 OS e City of Azusa Peak Demand and Total Power Resources Fiscal Year Ended June 30, 2007 2008 2009 2010 2011 Peak(MW)................................ 64.5 65.8 59.8 61.5 67.5 Power Resources(MWh): PVNGS................................... 16,678 15,968 18,277 18,057 18,678 Hoover.................................... 4,414 4,324 4,157 3,836 4,233 San Juan Unit 3....................... 216,217 187,806 203,018 198,885 202,764 Renewable Energy Contractst" 16,320 15,455 19,988 36,070 45,577 Spot or Short Term................. 126,313 138.426 116,644 129,042 127,456 Total Resources......................... 379,942 361,979 362,084 385,890 398,708 Less Transmission Losses ...... 16,882 16,897 16,596 16,376 14.978 Net Resources......................... 363,060 345,082 345,488 369,514 383,730 Less Net Power Requirement"'. 264.485 264,957 260,013 256,566 249,626 Excess Energy(for Resale)'" .... 98,575 80,125 85,475 112,948 134,104 Source: City of Azusa. ttl Reporting of renewable energy purchases for all years commenced with Fiscal Year 2010-11 report. (l) Modified or added for all years due to change in reporting methodology. Short-Term Wholesale Transactions In recent years, significant changes occurred within California's electric power industry, and management of power resources on a day-to-day basis became critical to the financial stability of an electric utility. The Electric System's wholesale transactions have primarily served as a hedging tool to mitigate transmission congestion risks and secondarily to sell excess power in the spot market. With the launch of the CAISO's Market Redesign and Technology Upgrade ("MRTU") in 2009, load serving entities such as the City were required to participate in the day-ahead and real-time markets and procure demand at their specific load point within the major Southern California Edison utility service territory. This resulted in all demand requirements being procured in the day-ahead and real-time market from the CAISO solely. A major portion of the City's wholesale transactions are arranged to best position the City's long term external resources at locations where the City can import and offer these resources to the CAISO and offset part or most of the demand costs depending on season. These imported resources primarily use transmission rights, hedging the City's congestion risks. The remaining resources not participating in the CAISO markets are sold in the spot markets 48 175097.8 036227 OS t The Electric System volume of short-term wholesale transactions has varied over the years. The following table sets forth the wholesale revenue during the past five fiscal years: Short-Term Wholesale Transaction History as of Fiscal Year Ended June 30,2011 Wholesale Fiscal Year Power Sales 2006-07 $5,400,000 2007-08 5,201,000 2008-09 3,463,000 2009-10 4,389,000 2010-11 5,919,864 Source: City of Azusa In response to the changes in Califomia electric power industry, the City adopted and implemented a Risk Management Policy (the "Risk Management Policy") in 1999 that established procedures for the administration of risk management activities with respect to the Electric System. The Risk Management Policy defines, among other things, the credit requirements and counter-party risk limits for the Electric System's wholesale transactions, including risk parameters relating to hedging activities. The Electric System's goal continues to be to minimize its risk of loss associated with wholesale transactions consistent with the Risk Management Policy, which is periodically updated to address changes in the electric industry and electric commodity trading markets. Joint Powers Agency Resources/Remote Ownership Interests The City and certain other public agencies in Southern California are members of the Southern California Public Power Authority("SCPPA"), a joint powers agency that was created under authority of the Joint Exercise of Powers Act of the State of California as a separate public entity for the purpose of planning, financing, developing, acquiring, constructing, operating and maintaining projects for the generation or transmission of electric energy for participation by some or all of its members. With respect to electric generation, the City is a participant in the SCPPA portion of the Palo Verde Nuclear Generating Station, Units 1, 2 and 3 and the associated switchyard ("PVNGS") and San Juan Unit 3. The City also acquired entitlements to the output of hydroelectric generating units at the Hoover Dam. Palo Verde Nuclear Generating Station Interest Through its membership in SCPPA, the City has purchased a 1.00% entitlement share in SCPPA's interests in the PVNGS. SCPPA's interest in the PVNGS consists of (i) a 5.91% undivided ownership interest in the Palo Verde Nuclear Generating Station Units 1, 2 and 3 (the "Generating Station"), including certain associated facilities and contractual rights relating thereto, and (ii)a 5.44% undivided ownership interest in the Arizona Nuclear Power Project ("ANPP") High Voltage Switchyard (the "Switchyard") and contractual rights relating thereto. SCPPA's interest in the PVNGS also includes a 6.55% share of the right to use certain portions of the transmission rights of the ANPP Valley Transmission System(the"ANPP Transmission System"). Located approximately 50 miles west of Phoenix, Arizona, PVNGS consists of three nearly identical, nuclear electric generating units. Arizona Public Service Company ("APS") is the operating agent for PVNGS Units 1, 2 and 3, which began commercial operation 'on January 27, 1986, September 18, 1986, and January 19, 1988, respectively. Each PVNGS unit is designed for a 40-year life and has a nominal rating of 1,270 MW. Any capital improvements to the PNVGS that increase 49 175097.8 036227 OS e generating capacity are distributed proportionately to its owners. Following the replacement of the steam i generators for Unit 2 in 2003, Unit 1 in 2005 and Unit 3 in 2007, design electrical rating was increased to 1,333 MW, 1,336 MW and 1,334 MW, respectively. In 2009, additional capital improvements were completed. Units 1, 2 and 3 were originally licensed to operate under a 40-year Full-Power Operating License from the Nuclear Regulatory Commission ("NRC") expiring in 2025, 2026 and 2027, respectively. NRC approved license renewals on April 12, 2011; this allows the units to operate an additional 20 years until 2045 for Unit 1, 2046 for Unit 2 and 2047 for Unit 3. APS has also negotiated on behalf of the co-owners an extension of the Effluent Supply Agreement with the City of Phoenix and its nearby cities that allows continued water supply to the station for plant cooling purpose until the year of 2050. For calendar year 2011, PVNGS operated at a plant capacity factor of 91% and provided 18,678 MWhs of electric energy to the City. The City's cost of PVNGS power was $0.043 per kilowatt hours ("kWh")in Fiscal Year 2010-11, excluding transmission costs. SCPPA has sold the entire capability of the PVNGS and related interests pursuant to power sales contracts with certain SCPPA members, including the City. The City's payment obligation under the Palo Verde power sales contract constitutes Operation and Maintenance Expenses of the Electric System, payable solely from Revenues of the Electric System. Pursuant to power sales contracts, each participant is obligated to purchase a percentage of the capacity and energy in the PVNGS and related interests equal to the participant's share. The participants are required to purchase such capacity on a "take or pay" basis; that is whether or not the PVNGS and related interests or any part thereof is operating or operable, or its service is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and such payments are shall not subject to reduction whether by offset or otherwise and are not conditioned upon the performance or nonperformance by any party of any agreement for any cause whatsoever. If a participant defaults on its payment obligations under its power sales contract, SCPPA may institute legal action to enforce the obligation. If the default continues, SCPPA may discontinue providing capacity and energy of the PVNGS and related interests to the defaulting participant and may transfer the defaulting participant's rights under the power sales contract to nondefaulting participants or other transferees. To the extent that SCPPA receives payment for the capacity and energy so transferred, the defaulting participant's obligation is to be deemed satisfied without, however, reducing the obligation of the defaulting participant to make payments under its power sales contract. The schedule for the development of facilities for the permanent storage and disposal of spent fuel by the Department of Energy is uncertain. SCPPA has incurred substantial additional costs as the result of the construction of onsite storage facilities and other related costs. SCPPA has issued various revenue bonds and refunding revenue bonds to finance and refinance improvements to the PVNGS and related facilities. See the table entitled "Outstanding Take-or-Pay Obligations as of June 30, 2011" herein. Hoover Uprating Project Interest Modern insulation technology made it possible to "uprate"the nameplate capacity of the original generators at Hoover. The Hoover Uprating Project consisted principally of uprating the capacity of the 17 existing generating units at the hydroelectric power plant of the Hoover Dam ("Hoover"), located approximately 25 miles from Las Vegas, Nevada. Hoover is owned and operated by the United States Bureau of Reclamation, and power from the project is marketed by the Western Area Power Administration. The lower Colorado River ("LCR") has been included in a Critical Habitat Designated Area ("Habitat"), which required the Bureau of Reclamation(the "Bureau")to prepare and file with the United States Fish and Wildlife Service (the "Service") a Biological Assessment of the effect of its operations of the LCR on endangered species within the Habitat. Subsequent to the inclusion of the LCR in the Habitat, 50 175097.8 036227 OS • the Service issued a Biological Opinion regarding the Bureau's operations outlining remedial actions to be taken to correct any adverse effects to endangered species. The Hoover customers, together with certain other parties, created a Multi-Species Conservation Plan ("MSCP") in cooperation with the Bureau and the Service to mitigate operational scenarios which would adversely affect the Hoover customers and the other parties. The MSCP for the main stem of the LCR covers 27 species and habitats for a term of 50 years. This plan was approved by the participating agencies in April 2005. Implementation of the MSCP continues to progress, with approximately 300 acres (of the proposed 8,132 acres) developed to augment the existing fish populations in the LCR. Concerns regarding the Quagga Mussel, a species residing in the Habitat, have prompted a separate series of studies by the Bureau to analyze the impact of the Hoover, Davis, and Parker dams on the LCR. The results of consultant findings and subsequent resolutions to this problem will be taken into consideration by the MSCP. In December 2011, new federal legislation extended the current Hoover contract beyond its current September 2017 termination date for an additional fifty-year term. Under the pending legislation, the current Hoover customers' power allocations would be reduced by five percent (5%) to provide allocations to potential new Hoover contractors. The City's current entitlement totals approximately 4 MW of capacity from the Hoover Uprating Project. In 1987, to reflect this entitlement, the City entered into a contract with the United States Bureau of Reclamation (the "Bureau") providing for the advancement of funds for the uprating and contract with Western Area Power Administration for the purchase of power from the Hoover Uprating Project. Subsequently, the City entered into an assignment agreement to assign its entitlement to SCPPA in return for SCPPA's agreement to provide funds to the Bureau to pay for the City's share of the Hoover Uprating Project debt service and operating costs. Under current hydrologic conditions, the City receives approximately.0_0 MWh of annual energy deliveries from the Hoover Uprating Project. In the Fiscal Year ended June 30, 2011, the Hoover Project provided 4,233 MWh of energy to the City at an average cost for delivered power of$32.19 per MWh. San Juan Unit 3 Interest Through its membership in SCPPA, the City purchased 14.7% (approximately 30 MW) entitlement share in SCPPA's interest in the San Juan Generating Station Unit 3 and related facilities (the "San Juan Project") in New Mexico. SCPPA's interest in the San Juan Project consists of(i)a 41.8%undivided ownership interest (providing approximately 204 MW of power) in San Juan Unit 3, (ii)a 20.9% undivided ownership interest in facilities common to Units 3 and 4, and (iii)a 12.71% undivided interest in facilities common to all four units of the San Juan Project (the"SCPPA San Juan Interest"). Unit 3 is a coal-fired steam electric generating unit with a net generating capability of 497 MW, which was constructed and is operated by Public Service Company of New Mexico ("PNM"). Unit 3 began operating on December 31, 1979. In the Fiscal Year ended June 30, 2011, San Juan Unit 3 provided 202,764 MWh of energy to the City which equates to a capacity factor of 77%. SCPPA has sold the entire capability of the SCPPA San Juan Interest pursuant to power sales contracts with certain SCPPA members, including the City. The City's payment obligation under the San Juan power sales contract constitutes Operation and Maintenance Expenses of the Electric System, payable solely from Revenues of the Electric System, and is on a "take or pay"basis as described above. SCPPA has issued various revenue bonds to finance improvements to the San Juan Project. See the table entitled"Outstanding Take-or-Pay Obligations as of June 30, 2011" herein. Several environmental upgrades have been made to the San Juan Generating Station to mitigate a number of environmental consequences which might otherwise occur in the operation of the plant. The additional costs associated with these environmental upgrades were shared by the San Juan Generation 51 175097.8 036227 OS Station participants. SCPPA began budgeting and collecting funds from participants in advance in an effort to create level annual costs. The environmental upgrades affecting Unit 3 and the SCPPA San Juan participants have been completed and paid in full. The total cost borne by the SCPPA San Juan Generating Station participants totaled $34.5 million,with the City's share thereof being 14.7%. On April 8, 2010, the Sierra Club filed suit in the U.S. District Court for the District of New Mexico against PNM,PNM Resources ("PNMR"),the parent company of PNM, San Juan Coal Company ("SJCC") and BHP Billiton Limited, SJCC's parent company ("BHI'"). In the suit, the Sierra Club alleges that activities at the San Juan Generating Station and the San Juan Mine are causing imminent and substantial harm to the environment, including ground and surface waters in the region, and the placement of coal combustion byproducts ("CCBs") at the San Juan Mine constitute "Open Dumping" in violation of Resources Conservation and Recovery Act ("RCRA"). The claims under RCRA were asserted with respect to PNM, PNMR, SJCC and BHP. The suit also includes claims under the Surface Mine Control and Reclamation Act ("SMCRA"), which are directed only against SJCC and BHP. The claims were settled pursuant to an agreement executed by all parties in March 2012 at a total projected cost to the defendants of approximately$12 million. The United States Environmental Protection Agency(the"EPA")has established rules addressing regional haze (i.e., visibility impairment caused by cumulative air pollutant emissions from numerous sources over a wide geographic area). The rules call for all states to establish goals and emission reduction strategies for improving visibility in national parks and wilderness areas. The rules require Best Available Retrofit Technology(`BART") to be considered as a control measure on specific categories of certain major stationary sources of haze-producing pollutants in existence prior to the enactment in 1977 of the Clean Air Act amendments addressing regional haze. If a source is found to be BART-eligible, a determination of the source's contribution to visibility impairment and the resulting emission reductions from the application of BART is conducted. In June 2010, the New Mexico Environment Department ("NMED") filed a proposed regional haze State Implementation Plan ("SIP") with the New Mexico Environmental Improvement Board (the "EIB"), which included a finding by the NMED that BART for nitrogen oxide ("Nox") at the San Juan Generating Station is a technology known as "selective catalytic reduction" ("SCR") plus "sorbent injection." PNM disagreed with this BART determination. Environmental retrofit technologies were recently installed at the San Juan Generating Station to reduce plant emissions of nitrogen oxides, sulfur dioxide, particulate matter and mercury. A study by a respected international engineering firm (Black& Veatch) found the upgrades meet the federal requirement for BART. LAMED subsequently withdrew its petition for adoption of the regional haze SIP on December 17, 2010. The EPA was subject to a consent decree that required it to issue a proposed Federal Implementation Plan ("FTP") for certain states, including New Mexico, for regional haze mitigation if no proposed SIP had been submitted by December 22, 2010. A SIP was adopted by the New Mexico Environmental Improvement Board in February 2011 which endorsed the use of Selective Non-Catalytic Reduction("SNCR")techniques to meet regional haze reduction goals. The estimated cost of SNCR for all four units at San Juan is $77 million Notwithstanding the SIP adopted in New Mexico, the EPA issued a final FII' on August 5, 2011 requiring the installation of SCR technology on all four units of the San Juan Generating Station within a five year timeframe. Although PNM is challenging the EPA's decision, the five-year compliance deadline requires PNM to take immediate steps to commence the installation of SCRs, which is a large construction project requiring extensive advance planning. PNM has issued an RFP to prospective bidders for the installation of SCRs. In connection with this process, PNM has, with the assistance of a leading engineering firm, further refined the conceptual design and cost estimates for the installation of SCRs at the San Juan Generating Station. The current estimate for such construction is in the range of approximately $749 million to $897 million, exclusive of Allowance for Funds Used During Construction, which at the lower range would be approximately$38 million and at the upper range would be approximately$45 million for 52 175097.8 036227 OS - SCPPA. SCPPA and the City would be responsible for their proportional share of these costs. The San Juan project manager and the State of New Mexico have filed a number of requests for stay of the FIP and challenging the specific NOx reduction technology endorsed by the FIR The City cannot predict the outcome of any of the challenges to the final FIP at this time. Additionally, the City's requirement to pay its share to install BART at San Juan Generating Station may be questioned if the CEC (as defined herein) takes a greater role in reviewing POU board decisions about the nature of costs required to maintain non Emission Performance Standard compliant generating units. See "DEVELOPMENTS IN THE CALIFORNIA ENERGY MARKETS - State Climate Change Policy Developments - Greenhouse Gas Emission" herein. The City cannot predict how other SCAPPA owners in the San Juan Generating Station facilities or the CEC will review the costs of installing SCR technology under the requirements of SB 1368. In September 2011, a mine providing coal to the San Juan Generating facility experienced a fire. The fire resulted in a loss of a significant amount of coal supply loss for the facility pending reopening of the mine and reestablishment of"long wall" mining operations. The City has been drawing down the original seven month stockpile of coal reserves and actively monitoring use of its share of the coal reserves. The City has also purchased back-up power for the third quarter of 2012 to ensure adequate power supply if opening of the coal mine is delayed. The mine is scheduled to resume normal operations in May 2012. However, there can be no assurance that the mine will resume normal operations as scheduled. SCPPA is involved in a number of other electric energy projects. The City does not participate in, and has no obligation with respect to any other such project (other than the projects described herein). San Juan Hedging Program Energy from the City's rights in San Juan Unit 3 represents the Electric System's single largest resource,providing up to 75%of the energy required to serve Electric System load. Relying upon a single resource to provide the majority of the energy required by the Electric System exposes the City to certain risks,including but not limited to: (i) During unscheduled outages or reduced operating capacity of San Juan or the associated transmission paths to deliver San Juan power to the Electric System, the City may need to purchase substantial amounts of replacement energy from high-priced spot markets. (ii) The City could incur high transmission congestion costs if the transmission paths for San Juan energy are heavily utilized. (iii) The City may be unable to cost-effectively dispose of San Juan energy during off-peak periods or during periods of transmission outages, derates, or congestion. The City has devised hedging strategies to reduce certain of the risks associated with San Juan by: (i) purchasing short-term standard firm energy products at fixed prices ahead of the delivery times at diverse delivery locations when the City determines that the market fundamentals warrant such purchases (e.g., because of anticipated spot market price volatility, higher price levels, and/or scarce transmission service); (ii) selling San Juan energy output on a unit-contingent/transmission-contingent basis to third parties; and (iii)undertaking such purchases and sales activities pursuant to the Risk Management Policy developed by the City. The primary goal of the hedging strategy is to reduce the amount of energy the City might need to purchase from a volatile spot market in the event San Juan energy is unavailable. As a consequence of the City's hedging strategy of selling San Juan energy and purchasing similar amounts of 53 175097.8 036227 OS a short-term, fixed-price energy from the open market,the City has a higher volume of wholesale purchases and sales when compared to a similar-sized utility with a more diversified generation portfolio The City is also seeking to reduce its interest in San Juan on a long-tern basis, including through execution of a memorandum of understanding with a large joint action public power entity in a neighboring state outlining preliminary terms to sell all, or a significant portion, of its San Juan interest. There can be no assurance that a sale will be effected. Renewable Energy Agreements The City has several multiyear arrangements for purchase of energy and associated renewable attributes: • High Winds—6.0 MW; 14,825 MWH delivered in Fiscal Year 2010-11 at $53.5/MWH; • Garnet Wind — 6.5 MW; 20,526 MWH delivered in Fiscal Year 2010-11; price is variable/formula based and in Fiscal Year 2010-11 was approximately$75/MWH; • San Dimas small hydro— 1.05 MW; 2,822 MWH delivered in Fiscal Year 2010-11; price is variable/formula based and in Fiscal Year 2011 was approximately$55/MWH; and MWD small hydro — 3.74 MW; 7,404 MWH delivered in Fiscal Year 2010-11; $93.5/MWH. K'577eetemmthese cotEctsaraemhais herlto „ term of Ehe contract and when dtd the contract commence.. Future Power Resources As part of its San Juan diversification strategy and its goal of reducing GHG emissions, the City is participating in a new baseload, gas-fired electric generating facility under construction in Lodi, California. The City's 2.7857% interest in the 280 MW Lodi Energy Center equates to approximately 7.8 MW.The projected in-service date is August, 2012. The project is being built, funded and operated by the Northern California Power Agency ("NCPA"), a joint powers agency headquartered in Roseville, California. The City's interest and proportional cost responsibility is defined in a power sales agreement between the City and NCPA. The City also plans to acquire additional renewable resources or credits to meet its goals under the State's SBXI-2 law mandating that electric utilities in California meet a renewable portfolio standard which increases over time reaching a maximum of 33%by 2020. Existing Transmission Resources Transmission resources are an integral component of the Electric System's plan to provide economical and reliable electric service to its customers. The Electric System currently has several firm capacity transmission agreements.intended for delivery of remote generation to the City and to provide access to major hubs of the western wholesale power market. This network of transmission resources has allowed the Electric System to obtain energy supplies and facilitated bulk sales and exchanges of energy during low-load periods. 1. Mead-Phoenix Transmission Project. This project includes a 500 kV alternating current transmission line extending between the Westwing and Mead Substations. SCPPA owns 352 MW of this portion of the Project's 1,923 MW rated capability. With regard to this component, the City is entitled to firm bi-directional service equaling 1.2605%of the SCPPA portion, or 4MW. 54 175097.8 036227 OS c 2. A 500 kV alternating current transmission line extending between the Mead and Marketplace Substations. SCPPA owns 582 MW of this portion of the Project's 2,600 MW rated capability. The City is entitled to firm bi-directional service equaling 0.7229% of the SCPPA portion,or 4 MW. 3. Mead-Adelanto Transmission Project. The Mead-Adelanto Transmission Project ("Mead-Adelanto") consists of a 500 kV alternating current transmission line extending between the Marketplace Substation and the Adelanto Switching Station. SCPPA owns 877 MW of the Project's 1,291 MW rated capability, and the City is entitled to firm bi-directional service equaling 2.2086% of the SCPPA portion, or 19 MW. DWP operates and maintains the line. 4. Los Angeles Department of Water and Power Transmission Contract Azusa has one transmission contract with Los Angeles Department of Water and Power ("LADWP") for a 19 MW Entitlement to firm transmission service between the Adelanto Switching Station and Marketplace to the midpoint of the Victorville-Lugo 500 kV transmission line ("Adelanto- Victorville"), which is a point of interconnection between LADWP's system and the CAISO- Controlled Grid. 5. Firm Transmission Service Contracts with Edison. The City has four (4) firm transmission service contracts with Edison totaling 30 MW. Participation in the CAISO As of January I, 2003, the City became a participating transmission owner ("PTO") in the CAISO market and turned over the scheduling rights with respect to all of the City's transmission entitlements to the CAISO (the "CAISO-Transferred Entitlements") pursuant to a Transmission Control Agreement between the City and the CAISO. See "Existing Transmission Resources'herein. In return for turning over all scheduling rights with respect to the ISO-Transferred Entitlements, the City is entitled to receive payments from the CAISO based upon the City's transmission revenue requirements for the ISO- Transferred Entitlements. Since January 1, 2003, the City has obtained transmission service through the CAISO's day- ahead and hour-ahead markets for power to be delivered to the City's distribution system. Effective October 2007, the City of Riverside has served as the City's scheduling agent pursuant to a Utility Service Agreement (the "Utility Service Agreement"). The Utility Service Agreement also provides for the City to share the estimated business systems costs attributable to the specific services provided under the Utility Service Agreement. The City staff performs all mid-term and short-term transactions and optimization as well as the day-ahead scheduling with the CAISO. Distribution Facilities The City owns facilities for the distribution of electric power. The principal facilities include two 69/12kV substations and approximately 130 circuit miles of l2kV distribution lines. Electric Rates and Charges The City is obligated by its Municipal Code and its agreements with SCPPA to establish rates and collect charges in an amount sufficient to meet its expenses of operation and maintenance and debt service requirements (with specific requirements as to priority and coverage). Electric rates for the Electric System may be established by either the Utility Board or the City Council, each such legislative body consisting of the same five elected officials. Electric rates are not subject to regulation by the CPUC 55 175097.8 036227 OS or by any other state agency. See "CONSTITUTIONAL LIMITATIONS ON TAXES, WATER RATES x AND CHARGES - Proposition 218" herein. The Municipal Code requires that electric rates be based upon the cost of service to the various customer classes. California Assembly Bill 1890 ("AB 1890") requires that the City establish a non-bypassable, usage-based charge on local distribution service to fund public benefits programs. This charge is equivalent to 2.85% of the City's power sales revenues. On January 1, 2012, AB 1890 was sunset by lawmakers for privately owned utilities but the obligation continues for publicly-owned utilities like the Electric System. Detailed review of the City's energy efficiency program and its effectiveness is periodically performed by the City and by the California Energy Commission. The following table sets forth the average rates for the indicated customer classes for Fiscal Years 2006-07 through 2010-11, inclusive of energy cost adjustment charge. Five Year History of Rates (Average Rate—Dollars per Kilowatt Hour) Fiscal Year Ended June 30, Customer Class 2007 2008 2009 2010 2011°l Residential $0.1163 $0.1200 $0.1200 $0.1272 $0.1418 Commercial 0.1205 0.1252 0.1252 0.1336 0.1495 Industrial 0.0988 0.1041 0.1041 0.1112 0.1260 Lighting 0.1912 0.1983 0.1983 0.2122 0.2342 Includes effective Power Cost Adjustment described below. See "ELECTRIC SYSTEM - Electric System Initiatives" herein. Customers,Energy Sales,Revenues and Demand Electric System peak demand has varied in the last five Fiscal Years, ranging from a low of 59.8 MW to a high of 67.5 MW. Over the same period, retail sales decreased from 255,586 MWh to 238,936 MWh primarily due to the effects of a declining economy.. During the Fiscal Year ended June 30, 2011, the Electric System generated and purchased (including wholesale sales to other utilities) a total of 398,708 MWh of electricity.Net wholesale sales to other utilities for the Fiscal Year ended June 30, 2011 were 134,104 MWh. 56 175097.8 036227 OS The average number of customers, MWh sales'and revenues derived from sales, by classification of service,and demand during the Fiscal Years 2006-07 through 2010-11, are listed below. Customers,Sales,Revenues and Demand Fiscal Year Ended June 30 2007 2008 2009 2010 2011( Customer Counts:` Residential...................................... 13,843 13,960 13,730 13,823 13,846 Commercial .................................... 1,420 1,421 1,401 1,408 1,420 Industrial......................................... 31 33 36 36 36 Other............................................... 237 236 236 234 239 Total Customers.............................. 15,531 15,650 15,403 15,501 15,541 Megawatt-Hour Sales Vit) Residential.................................... 79,129 80,558 80,849 77,828 74,535 Commercial.................................. 78,838 77,326 77,028 71,596 69,491 Industrial...................................... 84,810 81,450 84,836 84,604 84,663 Public Street and Highway Lighting 12,809 11.927 10.600 12.860 10,247 Total Retail Energy Sales.......... 255,586 251,261 253,313 246,888 238,936 Wholesale Sales to Other Utilities(2) 98,575 80,125 85,475 112,948 134,104 Total Energy Sales..................... 354,161 331,386 338,788 359,836 373,040 Revenues from Sale of Energy(S): (1)[3) Residential.................................... 9,202,227 9,808,691 10,367,157 9,898,773 10,566,123 Commercial.................................. 9,476,838 9,905,873 10,243,141 9,562,523 10,388,219 Industrial...................................... 8,379,482 8,741,441 9,546,292 9,405,369 10,666,692 Wholesale Sales to Other Utilities(2) 5,371,196 5,201,029 3,463,315 4,389,141 5,919,864 Public Street&Highway Lighting& Other............................................ 3,140,840 1,230,386 1.146,253 1,134,071 1,238,439 Total Sales Revenue.................. 38,424,409 34,887,420 34,766,158 34,389,877 38,779,337 Source: City of Azusa. m Based on City's Customer Information System Billing Reports. (1) All years revised with FY 2010-11 report due to use of different methodology.Annual variances were due to changing market demand,market restructuring,and price volatility. t'1 Fiscal Year 2010-11 Retail Revenues include Power Cost Adjustment billing amounts. For the Fiscal Year ended June 30, 2011, approximately 28% of the Electric System's sales revenues were derived from sales to industrial customers, while residential and commercial customers represented approximately 27% and 27% of sales revenues, respectively. In addition, approximately 15% of revenues were generated from sales to governmental agencies as well as from wholesale sales to other utilities. Within the City, large "commercial/industrial" customers represent a diverse mixture of industries, such as light manufacturing, education institutions, and warehouse sales. No single large commercial/industrial customer accounted for more than 6.6% of total electric sales revenues during the Fiscal Year ended June 30, 2011. Monthly electric bills are due and payable on presentation and become delinquent after 20 days. After an electric bill is delinquent, following appropriate procedures, the Electric System may disconnect the electric service. Before service is reinstated, the customer must pay the delinquent portion of the bill 57 175097.8 036227 OS and,pay a reconnection charge that varies depending on time of day or whether the person is a residential a or commercial customer. The following table sets forth the ten largest power customers of the Electric System, in terms of kWh sales, for the fiscal year ended June 30, 2011. The ten largest power customers accounted for approximately 31% of the Electric System's total energy sales for the fiscal year ended June 30,2011. Ten Largest Power Customers Fiscal Year Ended June 30,2011 % of Total Name Type of Business MWh MWh 1. Azusa Pacific University Education Institution/Housing 14,417 6.6% 2. S&S Foods Frozen Food Processor 13,001 5.4 3. City of Azusa Municipal Government 10,354 4.3 4. TH Molding Manufacture Metal Stamping 6,422 2.7 5. Azusa Unified School District Public School 6,205 2.6 6. City of Glendora Municipal Government 5,803 2.4 7. Verizon Wireless Telecommunications 5,735 2.4 8. Costco Warehouse Sales 5,380 2.3 9. Northrop Grumman Systems Aerospace Manufacturing 4,836 2.0 10. Artisan Screen Process Printing 2,590 1.1 Source: City of Azusa. Capital Requirements The City expects capital requirements for the Electric System for the next five years to aggregate approximately $1.35 million. It is expected that these costs will be funded primarily from Electric Net Revenues. Use of Electric System revenues to pay for capital improvements is permitted only after paying Electric Operation and Maintenance Expenses and Electric Parity Obligation Service, which includes Electric Payments for the Electric Bonds. The following table lists the expected yearly capital requirements of the Electric System over the next five Fiscal Years. Projected Capital Requirements Fiscal Year Amounts 2012 $ 550,000 2013 200,000 2014 200,000 2015 200,000 2016 200.000 Total $1.350.000 Source:City of Azusa. Indebtedness To finance the costs of certain improvements to its Electric System, the City has executed and delivered Prior Electric Installment Agreements with FARECal that secure the 2003B Certificates and the 58 175097.8 036227 OS 2003C Certificates. The 2003B Certificates are outstanding the in the principal amount of$5,470,000 as of April 1, 2012, prior to the refunding described herein. Subsequent to the issuance of the Electric Bonds and the refunding described herein, none of the 2003B Certificates will be outstanding. The 2003C Certificates are outstanding the in the principal amount of$3,070,000 as of April 1, 2012. See "PLAN OF FINANCE" and "SECURITY FOR THE WATER BONDS AND THE ELECTRIC BONDS -Outstanding Parity Obligations"herein. As previously described, the City is a participant in the following SCPPA projects: PVNGS, the Hoover Uprating Project, the Mead- Phoenix Transmission Project, the Mead-Adelanto Transmission Project, and San Juan Unit 3. To the extent the City participates in projects developed by SCPPA,the City is obligated, on a take-or-pay basis, to pay (using Electric Gross Revenues in the Electric Fund) for its proportionate share of the cost of the particular project. Such payments are considered Electric Operation and Maintenance Expenses (as a cost of purchased power) and, therefore, are paid prior to Electric Installment Payments with respect to the Electric Bonds. The SCPPA take-or-pay contracts provide for increased payments by all non-defaulting SCPPA project participants in the event a SCPPA project participant defaults under its project contract. In addition, all of these agreements contain "step-up" provisions obligating the City to pay a share of the obligations of a defaulting participant. The City's participation and share of principal obligation(without giving effect to any"step-up"provisions) for each of the joint powers agency projects in which it participates are shown in the following table. Outstanding Take-or-Pay Obligations as of June 30,2011 City Outstanding City Share of SCPPA Debt al Participation Outstanding Debt PVNGS $65,578,000 1.0% $655,780 Hoover Uprating Project 11,406,000 4.2 479,052 Mead-Phoenix Transmission Project 46,902,000 1.0 469,020 Mead-Adelanto Transmission Project 151,897,000 2.2 3,341,734 San Juan Unit 3 114,174,000 14.7 $16,555,230 Total $389.957.000 $21.500.81 Source of Information: SCPPA audited financial statements For the fiscal year ending June 30, 2012,the City's obligations for annual debt service on its joint powers agency obligations with SCPPA will aggregate to approximately $3.55 million. Debt service on joint powers agency obligations with SCPPA is expected to increase to a high of approximately $5.5 million in Fiscal Year 2014. Debt service for SCPPA related project during Fiscal Years 2017 through 2021 is expected to average approximately $2.1 million per year. Various projects are included in these aggregate annual figures. The Palo Verde Project debt consists of subordinate refunding series bonds with variable interest rates and final maturities in 2017. The San Juan Project debt consists of refunding series bonds with fixed interest rates between 5.0% and 5.5% and final maturities during 2020. The Hoover Uprating Project debt consists of refunding series bonds with fixed interest rates between 4.0% and 5.25% and final maturity occurring in 2017. The Mead Phoenix/Mead Adelanto Project debt consists of revenue and refunding series bonds with variable interest and fixed interest rates. Fixed interest rates o a range from 3.921% to 5.15/o with final maturities occurring in 2020. These projections are based on SCPPA's Audited Financial Reportfor fiscal years ended June 30, 2010 and 2011, and the Annual Report for 2011. The City's joint power authority debt service obligations with NCPA will be approximately 59 175097.8 036227 OS $626,700 for fiscal year ending June 30, 2012 for the Lodi Energy Center project. Azusa's portion of debt service on the Lodi Energy Center project will continue through 2040 and will range from approximately$766,000 to$835,700 for each fiscal year. Historical Operating Results The following table sets forth the historical net income for the Electric System for Fiscal Years ended June 30,2007 through June 30, 2011. Historical Operating Results ($in thousands) Fiscal Year Ended June 30 2007 2008 2009 2010 2011") Operating Revenues $35,571 $37,239 $35,284 $36,472 $39,422 Other Revenues f I 2,111 2,026 1,388 1,091 910 Operating Expenses(2) 30,045 34.105131 32,061 34,961 35,017 Net Revenues $7,637 $5,160 $4,611 $2,602 $5,315 Notes: nt Other revenues available for debt service include interest income. 1a) Operating expenses exclude depreciation,transfers to the City's general fund,government franchise and in-lieu fees and capital expenditures. tit San Juan Unit 3 required major maintenance and was retrofitted to reduce carbon emissions in Fiscal Year 2007-08. Because of limited availability of this facility,the City had to buy replacement power which increased costs during this fiscal yearby approximately$5 million. These costs were onetime in nature and do not affect ongoing operating costs. t0� Revenues increased due to adoption of Power Cost Adjustment factor to address real purchase power cost fluctuations. Reflects application of term as set_forth ice. n thePTr water Installment Agreements. Alternate Hi_s_toncal O_peratin_g Results;Table] Revenues 2007 2008 2009 2010 2011 Sales and service charges $34,932,840 $35,998,389 $34,496,805 $35,192,941 $39,107,089 Interdepartmental charges 199,787 189,864 584,713 1,221,423 182,952 Miscellaneous 437,956 1,050,894 202,835 57,903 132,187 Interest revenue 2,111,049 1884 123 1,388,342 1,090,532 9092840 Total Revenues $37,681,632 $39,123,270 $36,672,695 $37,562,799 $40,332,068 EVenses Cost of sales and service $ 153,686 $ 76,725 $ 105,320 $ 151,766 $ 84,031 Source of supply 21,900,531 25,829,427 23,106,698 26,042,269 25,169,035 Transmission/collection 2,657,738 2,844,077 2,962,657 2,938,419 3,285,863 Admin and general 5,333,162 5,354,711 5,886,261 5,828,529 6,478,078 Total Expenses $30,045,117 $34,104,940 $32,060,936 $34,960,983 $35,017,007 Net Revenues $ 7,636,515 $ 5,0182330 $ 4,611,759 $ 2,601,816 $ 5,315,061 Debt Service $ 961,347 $ 956,727 $ 959,545 $ 961,021 $ 961,205 Coverage 7.94 5.25 4.81 2.71 5.53 General Fund Transfer $ 2,979,370 $ 3,030,084 $ 3,183,707 $ 3,064,635 $ 3,339,256 Funds Available after Debt $ 3,695,798 $ 1,031,519 $ 468,508 [(1,4 ] $ 1,014,600 60 175097.8 036227 OS Debt Service Requirements The following is the annual debt service schedule for the Electric Bonds and outstanding Electric Parity Obligations, which are payable from Electric Net Revenues on a parity with the Electric Bonds, assuming no redemption other than mandatory sinking account redemptions. Outstanding Electric Parity Obligations(l) Electric Bonds Bond Year Ending July 1 Principal Interest Principal Interest Total 2012 $ 530,000 $ 430,095 $ 960,095 2013 555,000 402,696 957,696 2014 585,000 374,002 959,002 2015 620,000 341,418 961,418 2016 650,000 306,884 956,884 2017 695,000 270,679 965,679 2018 725,000 237,448 962,448 2019 760,000 203,373 963,373 2020 795,000 167,273 962,273 2021 835,000 129,113 964,113 2022 875,000 88,406 963,406 2023 915.000 45.750 960.750 Total $2,997,137 $��537.137 n> Includes installment payments relating to the Refunded 2003B Electric Certificates and the 2003C Electric Certificates;does not include the refunding described herein. Transfers to the General Fuad of the City The Electric System currently contributes 10% of its retail sales revenue to the City's General Fund in the form of Franchise Fees and In-Lieu Fees. The Electric System also transfers the interest earned on the Electric Fund cash reserves to the General Fund if the Electric Fund meets a net income test for the fiscal year. For the fiscal year ending June 30, 2011, the Electric System transferred approximately $3.3 million (equal to 10% of gross retail revenues) as Franchise Fees and In-Lieu Fees. Under the Prior Electric Installment Sale Agreements and the Electric Indenture, such transfers may be made only from Electric Net Revenues which exist following payment of Electric Operation and Maintenance Expenses and Electric Parity Obligation Service, which includes principal of and interest on the Electric Bonds. See "DESCRIPTION OF THE WATER BONDS AND THE ELECTRIC BONDS" herein. In addition, for Fiscal Year 2010-11, $191,267 interest income was transferred to the General Fund for Fiscal Year 2010- 11. In general, California law (Government Code § 50076) provides that any fee that exceeds the reasonable cost of providing the service or regulatory activity for which the fee is charged and which is levied for general revenue purposes is a special tax. To the City's knowledge, no California appellate court has considered whether payments by an electric utility like the transfers to the General Fund are a cost of providing the related service. As of the date of this Official Statement, no claim has been filed with the City regarding the legality of including the General Fund transfer as a cost of providing the related services and no litigation has been threatened. 61 175097.8 036227 OS The statute of limitations for filing a claim is one year from the date that the City collected the electric revenues that were used to make the General Fund transfer. Further, under the court's holding in Ardon v City of Los Angeles, 174 Cal.AppAth 369 (2009) (petition for review granted by the California Supreme Court), class claims are not permitted in local tax refund cases. The Court recognized the need for fiscal predictability and strict legislative control over refund claims at the local as well as State level and held that constitutional protections apply to general as well as specific claiming statutes,including the Government Tort Claims Act,thus protecting tax refund claims asserted against local agencies. If a court were to conclude that the General Fund transfer is not a cost of providing the service of the Electric System, then the Electric System might be required to revise its rates and charges to eliminate the revenues needed to pay the General Fund transfer, and the Electric System could be required to rebate to its customers the amount of any rates and charges in excess of the cost of service. In such an event, the Electric System most likely would require the City to return the challenged General Fund transfer and the Electric System would be prohibited from making any future General Fund transfers. The City is unaware of any applicable case law precedent regarding this issue. See "CONSTITUTIONAL LIMITATIONS ON TAXES, WATER RATES AND CHARGES -Proposition 26"herein. Although the City believes that the Electric System rates and charges are not taxes for purposes of Proposition 26, a court could conclude that, to the extent the City transfers surplus funds to the General Fund, the Electric System rates and charges constitute"taxes" for purposes of Proposition 26. This would mean that, so long as the City continued to make General Fund transfers of surplus funds, the City could not increase the rates and charges without a two-thirds vote of the City's voters. The City is unaware of any pending lawsuits regarding this issue. Electric System Employees For Fiscal Year 2010-11, the City has budgeted for approximately 20 full-time employees for the Electric System. The Department's budget also includes 26 full-time employees budgeted in Utilities Administration and Customer Services division. No significant changes to staffing levels are anticipated for fiscal year 2012-2013. This division provides meter reading, utility billing and other customer services to the electric utility. All Electric System employees are represented by one of the following employee associations: IBEW, AMMA or ACEA. The employee associations represent the employees in all matters pertaining to wages, benefits and working conditions. The current arrangements with IBEW, which is in the form of a memorandum of understanding, will continue in effect until July 31, 2012. The City is currently in negotiations with AMMA and ACEA. The employees represented by AMMA and ACEA will continue to operate under the terms of their existing memoranda of understanding until new agreements are executed. Electric System Initiatives Strategic Planning. In Fiscal Year 2009-10,the City conducted a review of escalating purchased power costs and analyzed various retail rate options to recover costs associated with fluctuations in purchased power costs that exceeded retail base rate revenue. In June 2010, the Utility Board adopted a Power Cost Adjustment ("PCA") rate mechanism. The PCA authorizes the Director of Utilities to administratively set a per kWh fee based on forecasted purchased power costs that are expected to exceed base rate revenue. The PCA is then adjusted every six (6) months on January 1 and July 1, based on actual purchased power costs. If forecasted costs are less than actual costs, the PCA is increased to make up for the revenue shortfall; if forecasted costs are more than actual costs, then the PCA is adjusted downward to rebate customers for excess of revenues collected. In this way, the PCA helped mitigate risks associated with purchased power costs fluctuations. Since base rates are well below real purchased power costs, the PCA has been a net revenue generator since it was instituted, generating $1.7 million in 62 175097.8 036227 OS Fiscal Year 2010-11, and$3.7 million from July 1, through March 31, 2012. See below table showing the per kWh history of PCA rates. Power Cost Adjustment History Effective Date $Per kWh PC 7/1/2010 $0.00960 1/1/2011 0.00958 7/1/2011 0.02659 1/1/2012 0.02053 Source: City of Azusa Electric Rates. Historically, electric rates for the Electric System's customers have been lower than rates for Southern California Edison ("Edison") customers. Based on the Department of Energy's Form EIA 861 published in November 2011, the Electric System's 2010 residential rates were approximately 20% lower than Edison's rates, and Electric System's 2010 rates for small to medium commercial customers were approximately 15% lower than Edison's rates. While Electric System's rates for large time-of-use customers were slightly higher than Edison's rates in 2010, Electric System's overall rates were approximately 14% below Edison's system rates. While the adoption of the PCA in 2010 has increased the Electric System's rates, they remain approximately 7%below Edison's rates in 2011. Cash Reserves The minimum reserve policy as set by the Utility Board in September 2010 for Fiscal Year 2010- 11 was $12.6 million with maximum target of$20.27 million. The basis for the minimum policy amount as recommended by a third party consultant is: 90 days of operating cash, 3% of historical asset values, 100% of annual debt service, and 15% of current year capital improvement program budget, plus 15%of 5 year capital improvement program budget. As of June 30, 2011, the Electric Fund contained unrestricted cash and investments of $2.5 million, restricted cash and investments of $2.7 million and cash held for rate stabilization of $9.3 million, for an aggregate of$14.4 million that may be used to satisfy for the reserve policy requirement. In addition, the Electric Fund has loaned $12.7 million to the Azusa Redevelopment Agency, which was dissolved effective October 1, 2011 pursuant to Assembly Bill ABXI 26 ("ABX1 26"). ABX 126 requires that successor agencies take over from the former redevelopment agencies and perform certain functions, including continue making payments on existing legal obligations of the former redevelopment agencies and not incur any additional debt. The Electric System cannot predict the timing of the loan repayment. Customer Relations Customers and community relations continue to be an important focus for the Electric System, The Electric System is committed to maintaining high customer service and reliability, while maintaining reasonable costs of providing electric service. In March 2011, the Electric System was one of 82 utilities in the nation granted a "Reliable Public Power Provider" or "RPT" designation by the American Public Power Association, which review the documented practices of an electric utility that can demonstrate proficiency in the key areas of reliability, safety, workforce development and system improvement projects and recognizes public power utilities for providing consumers with the highest degree of reliable and safe electric service. In the past two years, the City has also implemented a new customer 63 175097.8 036227 OS information billing system, and has provided customers with multiple payment opportunities, including online bill pay and offsite payment centers. The City is also investigating the feasibility of deploying smart meters at no cost to the consumers, in order to move the utility into the 21 st century and provide enhanced services and real time information to customers. Conservation and Renewable Energy Programs The Electric System has a strong commitment to the development and implementation of energy conservation and renewable energy programs. The Electric System's energy conservation programs provide free energy audits, rebates and other incentives for customers to implement energy saving programs to help reduce their energy hills, in conjunction with reducing demands on the Electric System. These programs are available to all customer classes, including businesses, residential and government/schools. The Electric System has undertaken an aggressive campaign to increase energy conservation by its customers. Due in part to its conservation campaign and other factors affecting retail sales as described herein, there was an overall reduction of approximately 5.7% in energy consumption of the Electric System as measured in retail kWhs sold in Fiscal Year 2010 compared to Fiscal Year 2011. The Electric System is currently pursuing joint procurement of renewable energy sources with other SCPPA members. The Electric System has entered into long term renewable energy contracts to initially provide up to 20% of Electric System's annual electric energy requirement. The Electric System is continuously evaluating external sources for other renewable energy types, such as wind and geothermal power for inclusion in its power resource portfolio to meet the SBX 1 2 mandated 25% and 33%goals by 2016 and 2020,respectively. Electric System Litigation General. There is no controversy of any nature now pending against the City or, to the knowledge of its respective officers, threatened, seeking to restrain or enjoin the issuance, sale, execution or delivery of the Electric Bonds, or in any way contesting or affecting the validity of the Electric Bonds, or the authorizations or any proceedings of the City taken with respect to the issuance or sale thereof, or the pledge or application of any moneys or security provided for the payment of the Electric Bonds, or the use of the proceeds of the Electric Bonds. There are no pending lawsuits that in the opinion of the City Attorney challenge the validity of the above issues, the corporate existence of the City, or the title of the officers to their respective offices. In this review, attention has been given to not only litigation pending against the City, but also against the City's Light and Water Department. In addition, as of April 30, 2012, there are no claims or lawsuits with any potential material loss pending against the Electric Fund for construction claims or other alleged liabilities arising during the ordinary course of operations of the Electric System. See "Joint Powers Agency Resources/Remote Ownership Interests - San Juan Unit 3 Interest" herein for a description of litigation relating to San Juan Unit 3, in which the City has an interest through its membership in SCPPA. From time to time, there are lawsuits and other claims against the City with respect to the Electric System incidental to the ordinary course of operations of the Electric System. Such lawsuits and claims are largely covered by the City's self-insurance program and are not expected to result in judgments or settlements which, in the aggregate, would have a material adverse effect on the financial position of the Electric Fund. California Energy Crisis Litigation. The City has been a party to several state and federal investigations and proceedings concerning the 2000-2001 California energy crisis. The Federal Energy Regulatory Commission ("FERC") found that there was no evidence that the City engaged in any gaming 64 175097.8 036227 OS practices as defined by FERC. However, the FERC ruled that the City and other municipal utilities were subject to the FERC's refund authority for sales made into the centralized California markets during the energy crisis at prices that exceeded "Mitigated Market Clearing Prices" ("MMCPs") as determined by the FERC. Subsequently, the United States Court of Appeals for the Ninth Circuit overruled the FERC, determining that the FERC does not have jurisdiction under the Federal Power Act to require municipal electric systems, such as the City, to make refunds for power sales. The United States Supreme Court denied a petition for certiorari of the Ninth Circuit's decision, making that decision final. Subsequent to the Ninth Circuit's decision, the California Electricity Oversight Board, the California Attorney General, Pacific Gas and Electric Company("PG&E"), SCE, and San Diego Gas&Electric Company(collectively referred to as the "California Parties") filed suit against the City and other publicly-owned utilities in federal and California state courts asserting breach of contract and unjust enrichment claims related to transactions made during the energy crisis. On February 29, 2008, the City and the California Parties (as well as the California Energy Resources Scheduling division of the California Department of Water Resources) filed a settlement agreement with the FERC resolving all litigation related to claims against the City arising from its sales during the energy crisis. The FERC approved the settlement agreement on June 4, 2008. Under the agreement, the City received its unpaid receivables with interest and paid $ 905,000 in refunds. Under the settlement, the City has received and may continue to receive additional distributions of refunds from other sellers. The City also may be responsible for paying its allocated portion (as determined by the FERC) of payments due to other sellers for any Emissions Offsets, Fuel Cost Allowances, or Cost Offsets associated with sales by such other sellers during the energy crisis, subject to a cap of$150,000 on such potential payments to other sellers. It is not possible at this time to estimate the net effect of the overall distributions to or payments by the City. Impact of the California Energy Crisis. During the 2000 and 2001 energy crisis, California experienced extreme fluctuations in the prices and supplies of natural gas and electricity in much of the State. While there has been progress in addressing such concerns since that time, including a restructuring of the market rules and tariff provisions of CAISO, known as the CAISO's Market Redesign and Technology Upgrade, there are ongoing risks and uncertainties that could lead to price volatility and reliability concerns in the future. As a result of the foregoing and other factors, no assurance can be given that measures undertaken during the last several years, together with measures to be taken in the future, will prevent the recurrence of shortages, price volatility or other energy problems that have adversely affected the Electric System and other California electric utilities in the past. DEVELOPMENTS IN THE CALIFORNIA ENERGY MARKETS The following factors affecting the Electric System and the electric utility industry should be considered when evaluating the Electric System and considering an investment in the Electric Bonds. The City cannot predict what effects these risks and other factors will have on the business operations and financial condition of the Electric System, but the effects could be significant. The following is a brief description of certain of these factors. This description does not purport to be comprehensive or defmitive, and these matters are subject to change subsequent to the date hereof. See "THE ELECTRIC SYSTEM," "FINANCIAL RESULTS OF THE ELECTRIC SYSTEM" and Appendix C — "AUDITED FINANCIAL STATEMENTS OF THE CITY AS OF JUNE 30, 2011" for additional information relating to the Electric System. Background; Electric Market Deregulation California began the process of restructuring electricity service in the early 1990s by introducing competition into the generation of electricity, with the ultimate goal being lower prices for utility customers. The deregulation legislation was ultimately enacted in 1996 ("AB 1890") and an independent system operator of the transmission system,the CAISO, was established,as well as an independent power 65 175097.8 036227 OS exchange, the Cal PX. The Cal PX was originally established to permit power generators to sell power on a competitive spot-market basis. As a consequence of deregulation,the IOUs sold a large portion of their generation resources. As a result, three major IOUs in California, PG&E, SDG&E and SCE were net buyers of electricity. Following the deregulation of the California energy markets, the IOUs were purchasing electricity at fluctuating short-term and spot wholesale prices through the Cal PX and the CAISO while the retail prices that they would charge their residential and small business customers were capped at specified levels. By the summer of 2000, wholesale power sellers were not making sufficient power supplies available in the wholesale spot market, and spot market prices began to rise, swiftly and dramatically. By December 2000, PG&E and SCE had incurred several billion dollars of losses, adversely affecting their creditworthiness and ultimately causing defaults in payments for power purchases in the CAISO markets and from other suppliers. Certain other marketers, power suppliers and power plant developers experienced downgrades of their credit ratings. PG&E emerged from bankruptcy on April 12, 2004. The credit ratings of SCE and PG&E have improved since the dislocations of the California energy markets in 2000 and 2001. In early 2001, the Cal PX ceased all operations and filed for bankruptcy protection. See "THE ELECTRIC SYSTEM - Electric System Litigation - California Energy Crisis Litigation" for a description of the City's settlement of claims related to the Cal PX bankruptcy and the CAISO FERC refund case. Market Redesign and Technology Upgrade In response to the electricity market manipulation that occurred during the 2000-01 energy crisis and the underlying need for improved congestion management,the CAISO, as directed by the FERC, has undertaken an initiative called Market Redesign and Technology Upgrade ("MRTU"), to implement a new day-ahead wholesale electricity market and to improve electricity grid management reliability, operational efficiencies and related technology infrastructure. After several delays, the CAISO launched the MRTU on April 1, 2009. The City participated extensively in the testing and market simulations of MRTU system functionalities prior to MRTU's launch. The redesigned California energy market under MRTU includes the following new features among others (i) an integrated forward market for energy, ancillary services and congestion management that operates on a day-ahead basis; (ii) a congestion management process that represents all network transmission constraints to determine electric transmission congestion costs and credits between two locations and charged to the market participants; (iii)congestion revenue rights to allow market participants to hedge the financial risks of CAISO-imposed transmission congestion costs in the MRTU day-ahead market; (iv) locational marginal energy prices by price nodes (approximately 3,000 in total), also known as locational marginal pricing; and(v) new market rules and penalties to prevent gaming and illegal manipulation of the market as well as.modifications to certain existing market power and mitigation rules and procedures. The CAISO implementation of MRTU to restructure California's wholesale electric market presents both opportunities and risks to the City. The MRTU is expected to affect the costs of operating the City's Electric System due to reasons such as: (i) significant cost to implement MRTU in its Electric System; (ii) costs associated with congestion revenue rights in the event that City acquired congestion revenue rights are not sufficient to hedge the financial risks associated with the City's CAISO-imposed congestion costs under MRTU; (iii) the new market mechanisms created by MRTU result in any price/market flaws that are not promptly and effectively corrected by the market mechanisms, the CAISO or the FERC; (iv) either the CAISO's or the City's MRTU-related systems and software do not perform as intended; (v) the City is unable to timely identify and implement new operating procedures necessary under MRTU or to achieve operating and capital cost budgets based on current expectations; (vi) opportunities to sell excess generating capacity into the CAISO markets as ancillary services for 66 175097.8 036227 OS additional revenues and (vii) economically bid City's resources into the CAISO markets to minimize dispatch costs and/or generate additional revenues from excess energy sales. MRTU is expected to add significant market complexity. The City monitors the market outcomes in the MRTU environment and participates in the new market initiatives, and will continue to implement changes to the appropriate systems, software and market strategies in the MRTU. The City has been operating in the MRTU environment since April 2009 with no significant issues or problems. Resource Adequacy Requirement In September 2005, the Governor signed into law AB 380, which requires the CPUC to establish resource adequacy requirements for all Load Serving Entities("LSEs") within the CPUC's jurisdiction. In addition, Assembly Bill 380 requires publicly-owned utilities to procure adequate resources to meet their peak demands and reserves. In October 2005, the CPUC issued a decision stating that LSEs under its jurisdiction would be required to demonstrate that they have acquired capacity sufficient to serve their forecast retail customer load plus a 15-17%reserve margin. The City has established its qualifying criteria and requirements at a 15%reserve margin. In addition, the CAISO requires that a portion of the resource adequacy capacity be sourced from the Los Angeles Basin area interconnected resources. The City procures the portion of this requirement not covered by the City contracted local resources. CAISO Credit Reform Initiative Pursuant to the FERC's Order issued on October 21, 2010 on credit reforms in the organized electric power market, the CAISO has initiated a credit reform initiative in its markets. Under the Order, the CAISO is directed to (a) calculate the CAISO market participants' credit requirements on gross purchases in the CAISO markets; (b) require credit requirements to participate in the CAISO CRR allocation and auction processes; (c) shorten the invoicing and settlement period from 15 days to 7 days for transactions in the CAISO markets and (d) establish credit risk management criteria applicable to CAISO market participants. The imposition of aforementioned credit requirements could result in additional financial credit requirements and costs to the City in order to participate in the CAISO markets. The City has been operating in the CAISO-enforced credit requirement environment since October 2011 with no significant problems or issues. CAISO Convergence Bidding On February 1, 2011 the CAISO introduced convergence bidding in its energy markets. Convergence (or virtual) bidding is a mechanism whereby market participants can make financial sales (or purchases) of energy in the day-ahead market, with the explicit requirement to buy back (or sell back) that energy in the real time market. Virtual bids pressure day0ahead and real time prices to move closer together,thus reducing the incentive for buyers and sellers to forgo bidding physical schedules in the day- ahead market in expectation of better prices in the real time market. The rationale of the convergence bidding is to promote market efficiency by converging energy prices across CAISO energy markets. Although convergence bids do not relate to the actual generation or consumption of energy, they could impact the physical generation dispatch pattern of resources and the transmission congestion pattern of the CAISO transmission grid, and therefore could influence the locational market prices in the CAISO markets. Safeguards have been provided in the CAISO Tariff and protocols to prevent market manipulation to the detriment of market efficiency. The ultimate impact of the convergence bidding to the City cannot be assessed at this time due to the market infancy. Due to the relative immaturity of CAISO's convergence bidding program and 67 175097.8 036227 OS associated inherent market risk that cannot be easily mitigated, the City has not been submitting convergence bids. State Climate Change Policy Developments Greenhouse Gas Emissions. Assembly Bill 32, the Global Warming Solutions Act of 2006 (the "GWSA") became effective as law on January 1, 2007. The GWSA prescribed a statewide cap on global warming pollution with a goal of reaching 1990 greenhouse gas emission levels by 2020. In addition,the GWSA establishes a mandatory reporting program for all IOUs, local, POUs and other load-serving entities (electric utilities providing energy to end-use customers) to inventory and report greenhouse gas emissions to the California Air Resources Board ("CARB"), requires CARB to adopt regulations for significant greenhouse gas emission sources (allowing CARB to design a "cap-and-trade" system) and gives CARB the authority to enforce such regulations beginning in 2012. On December 11, 2008, CARB adopted a "scoping plan' to reduce greenhouse gas emissions. The scoping plan set out a mixed approach of market structures, regulation, fees and voluntary measures. The scoping plan included a cap-and-trade system covering approximately 85% of all greenhouse gas emissions in California. In August 2011, CARB revised the scoping plan in response to litigation. The revised scoping plan continues to include a cap-and-trade system. On October 20, 2011, CARB adopted a regulation implementing a cap-and-trade system. The California Office of Administrative Law approved the regulation on December 13, 2011, and it became effective on January 1, 2012. The cap-and-trade program covers sources accounting for 85% of California's greenhouse gas emissions, the largest program of its type in the United States. It provides for emission compliance obligations to begin on January 1,2013. The cap-and-trade program will be implemented in phases. The first phase of the program (January 1, 2013 to December 31, 2014) will introduce a hard emissions cap that covers emissions from electricity generators and large industrial sources emitting more than 25,000 metric tons of carbon dioxide-equivalent greenhouse gases ("CO2e") per year. In 2015, the program will be expanded to cover emissions from transportation fuels,natural gas,propane and other fossil fuels. The cap will decline each year. The cap-and-trade program will include the distribution of carbon allowances. Each allowance will be equal to one metric ton of COze. As part of a transition process, initially, most of the carbon allowances will be distributed for free. The remaining allowances will be auctioned quarterly, beginning in the second half of 2012. IOUs, as well as POUs located within the CAISO will be required to auction their allowances. They will then need to purchase allowances to meet their compliance obligations, and use any remaining proceeds from the sale of their allocated allowances for the benefit of their ratepayers. The California Public Utilities Commission is currently conducting a rulemaking proceeding to determine how funds from IOU allowance auctions may be utilized by the IOUS. POUs that are not located within the CAISO have three options (which are not mutually exclusive) once their allocated allowances are distributed to them. They can (i) place allowances in their compliance accounts to meet compliance obligations for plants they operate directly, (ii)place allowances in the compliance account of a joint powers agency or public power utility that generates power on their behalf, and/or (iii) auction the allowances and use the proceeds to benefit their ratepayers. The POUs are not bound by the requirements that will be established for IOU use of allowance auction revenues. The cap-and-trade program will also allow covered entities to use offset credits for compliance purposes (not exceeding 8% of a covered entity's compliance obligation). Offsets can be generated by certified projects in sectors that are not regulated under the cap-and-trade program. These include urban 68 175097.8036227 OS forest projects, reforestation projects, destruction of ozone-depleting substances, and methane management projects. CARB is considering additional offset protocols, including conversion of pneumatic controllers and N20 reductions from changes in fertilizer management. These protocols may be approved in 2012. There are a number of issues remaining to be addressed prior to the start of emission compliance obligations in 2013, including reviewing provisions relating to electricity imports, developing rules to minimize emissions leakage through"resource shuffling," linking the California cap-and-trade program to the equivalent program in Quebec, Canada, and developing and testing a trading and tracking computer system. CARB will work on these issues throughout 2012. Linking California's program to additional Canadian cap-and-trade programs may occur in 2013, as part of the Western Climate Initiative. The Western Climate Initiative is a regional effort consisting of California and four Canadian provinces (Quebec, British Columbia, Ontario and Manitoba), which is in the process of establishing a greenhouse gas reduction trading framework. The City is unable to predict at this time the full impact of the cap-and-trade program on the operations and finances of the Electric System or the electric utility industry generally or whether any changes to the adopted program will be made. However, the City could be adversely affected if the carbon emissions of its resource portfolio is in excess of the allowances administratively allocated to it and it is required to purchase allowances on the market to cover its emissions. Although the City expects the cost impacts of the cap and trade program to be modest and manageable, there can be no assurance that such expectations will prove to be correct. In addition to the GWSA, Senate Bill 1368 also became effective as law on January 1, 2007 and provides for an emission performance standard,restricting new investments in baseload fossil fuel electric generating resources that exceed the rate of emissions for greenhouse gases for existing combined-cycle natural gas baseload generation and seeks to allow the CEC to establish a regulatory framework necessary to enforce the greenhouse gas emission performance standard for POUs, such as the City. The CPUC has a similar responsibility for the IOUs. The regulations promulgated by the CEC were approved by the Office of Administrative Law on October 16, 2007. The CEC regulations prohibit any investment in baseload generation that does not meet the emission performance standard of 1,100 pounds of CO2 per MWh of electricity, with limited exceptions for routine maintenance, requirements of pre-existing contractual commitments, or threat of significant financial harm. In December 2011, the CEC decided to undertake a review of these regulations to ensure there is adequate review of investments in facilities that do not meet the emission performance standard. Changes to these regulations may affect the City. Additionally, California Assembly Bill 1925, signed by then Governor Schwarzenegger on September 26, 2006, requires the CEC to develop a cost effective strategy for the geologic sequestration and management of industrial carbon dioxide. Energy Procurement and Efficiency Reporting. Senate Bill 1037 ("SB 1037") was signed by then Governor Schwarzenegger on September 29, 2005. It requires that each POU, including the City, prior to procuring new energy generation resources, first acquire all available energy efficiency, demand reduction, and renewable resources that are cost effective, reliable and feasible. SB 1037 also requires each POU to report annually to its customers and to the CEC its investment in energy efficiency and demand reduction programs. Further, Assembly Bill 2021 ("AB 2021"), signed by then Governor Schwarzenegger on September 29, 2006, requires that the POUs establish, report, and explain the basis of the annual energy efficiency and demand reduction targets by June 1, 2007 and every three years thereafter for a ten-year horizon. Future reporting requirements under AB 2021 include: (i)the identification of sources of 69 175097.8 036227 OS funding for the investment in energy efficiency and demand reduction programs; (ii)the methodologies and input assumptions used to determine cost-effectiveness; and (iii) the results of an independent evaluation to measure and verify energy efficiency savings and demand reduction program impacts. The information obtained from the POUs is being used by the CEC to present the progress made by the POUs towards the State's goal of reducing electrical consumption by 10% within ten years and the greenhouse gas targets presented in Executive Order S-3-05. h> addition, the CEC will provide recommendations for improvement to assist each POU in achieving cost-effective, reliable, and feasible savings in conjunction with the established targets for reduction. The City is in compliance with all applicable state mandated regulatory reporting requirements. Renewable Portfolio Standards. In September 2002, the California Legislature enacted and then Governor Gray Davis signed into law Senate Bill 1078 ("SB 1078"). SB 1078 requires that the IOUs adopt a Renewable Portfolio Standard ("RPS") to meet a minimum increase of 1% of retail energy sales needs each year from renewable resources and to meet a goal of 20% of their retail energy needs from renewable energy resources by the year 2017. SB 1078 also directed the State's POUs to implement and enforce an RPS that recognizes the intent of the Legislature to encourage development of renewable resources, taking into consideration the impact on a utility's standard on rates, reliability, financial resources, and the goal of environmental improvement. In response to SB 1078 the City has adopted its first renewable program wherein a renewable target was established at 20%by 2017, subject to feasibility of renewable energy delivery and rate impacts. On September 26, 2006, then Governor Schwarzenegger signed Senate Bill 107 ("SB 10711) into law, which requires IOUs to have 20% of their electricity produced by renewable sources by 2010 and prescribes that POUs meet the intent of the legislation. On November 17, 2008, then Governor Schwarzenegger signed Executive Order S-14-08. Among other things, Executive Order S-14-08 provides that the RPS target established for California shall require retail electricity sellers to serve 33% of their loads with eligible renewable energy resources by 2020. Pursuant to SB 107,the City revised its RPS program to reflect the RPS targets of 20%by 2010 and 33%by 2020, also subject to feasibility of renewable energy delivery and rate impacts. Since the implementation of SB 1078, the CPUC and the CEC have taken a number of actions designed to assist utilities in achieving the renewable energy goals set by the legislation. In order to help utilities overcome the challenges associated with meeting accelerated RPS goals, the CPUC and the CEC supported the implementation of a renewable energy certificate ("REC") trading system. In parallel, pursuant to SB 1078, the CEC, collaboratively with the Western Governors' Association and WECC, established the Western Renewable Energy Generation Information System ("WREGIS"), to ensure the integrity of RECs and prevent the double counting of the certificates. The electronic tracking system became operational in 2007. All renewable generation contracted by the City is reported via WREGIS. Senate Bill Xl 2("SBX 12"),the"California Renewable Energy Resources Act,"was signed into law on April 12, 2011. SBXI 2 codifies the RPS target for retail electricity sellers to serve 33% of their loads with eligible renewable energy resources by 2020 as provided in Executive Order S-14-08. As enacted, SBXI 2 makes the requirements of the RPS program applicable to POUs (rather than just prescribing that POUs meet the intent of the legislation as under previous statutes). However, the governing boards of POUs are responsible for implementing the requirements, rather than the CPUC, as is the case for the IOUs. In addition, certain enforcement authority with respect to POUs is given to the CEC and CARB, including authority to impose penalties. SBXI 2 requires each POU to adopt and implement a renewable energy resource procurement plan and enforcement program. The plan must require the utility to procure a minimum quantity of electricity products from eligible renewable energy resources, which may include RECs, as a specified percentage of total kilowatt hours sold to the utility's retail end- use customers to achieve the following targets: (i)an average of 20% for the period January 1, 2011 to December 31, 2013, inclusive; (ii) 25%by December 31, 2016; and (iii) 33%by December 31, 2020 and for all subsequent years. SBX1 2 grandfathers any facility approved by the governing board of a POU 70 175097.8 036227 OS . prior to June 1, 2010 for procurement to satisfy renewable energy procurement obligations adopted under prior law if the facility is a "renewable electrical generation facility" as defined in the bill (subject to certain restrictions). Renewable electrical generation facilities include certain out-of-state renewable energy generation facilities if the facility: (i)will not cause or contribute to any violation of a California environmental quality standard or requirement, (ii)participates in the accounting system to verify compliance with the RPS program requirements, and (iii)either (a)commenced initial commercial operation after January 1, 2005 or (b) either (x)the electricity is from incremental generation resulting from expansion or repowering of the facility or(y)electricity generated by the facility was procured by a retail seller or POU as of January 1, 2010. The percentage of a POU's RPS requirements that may be met with unbundled RECs from generating facilities outside California declines over time, beginning at 25% through 2013 and declining to a level of 10% in 2017 and beyond. The CEC is in the process of developing detailed rules to implement SBXl 2. The City adopted an RPS enforcement program in December 2011 to comply with the requirements of SBX1 2. Following finalization of the CEC regulation development,the City will establish a SBX 1 2 mandated procurement plan. In 2011, the first compliance year of the state mandated SBX 1 2, City procured 20.5% of its retail served energy from renewable resources. Approximately 18.5% was sourced from the CEC certified renewable resources and approximately 1.7% from the Hoover repowering project, the formal renewable status of which is pending final outcome of the RPS regulations being drafted by the CEC. Solar Power. On August 21, 2006, Senate Bill 1 (also known as the"California Solar Initiative") was signed into law. This legislation requires POUs, including the City, to establish a program supporting the stated goal of the legislation to install 3,000 MW of photovoltaic energy in California. POUs are also required to establish eligibility criteria in collaboration with the CEC for the funding of solar energy systems receiving ratepayer funded incentives. The legislation gives a POU the choice of selecting an incentive based on the installed capacity, starting at $2.80 per watt, or based on the energy produced by the solar energy system, measured in kilowatt-hours. Incentives would be required to decrease at a minimum average rate of 7% per year. POUs also have to meet certain reporting requirements regarding the installed capacity, number of installed systems, number of applicants, amount of awarded incentives and the contribution toward the program's goals. The City complies with this program by providing rebates to customers that install solar systems and by purchasing any net energy generated by such installations. The program has experienced modest interest from consumers in the City due to relatively low rates and rate design. Future Regulation The electric industry is subject to continuing legislative and administrative reform. States routinely consider changes to the way in which they regulate the electric industry. Recently, both further deregulation and forms of additional regulation have been proposed for the industry, which has been highly regulated throughout its history. The City is unable to predict at this time the impact any such proposals will have on the operations and finances of the Electric System or the electric utility industry generally. Impact of Developments on the City The effect of the developments in the California energy markets described above on the City cannot be fully ascertained at this time. Also, volatility in energy prices in California may return due to a variety of factors that affect both the supply and demand for electric energy in the western United States. These factors include, but are not limited to, the adequacy of generation resources to meet peak demands, the availability and cost of renewable energy, the impact of greenhouse gas emission legislation and regulations, fuel costs and availability, weather effects on customer demand, transmission congestion, the 71 175097.8 036227 OS strength of the economy in California and surrounding states and levels of hydroelectric generation within the region (including the Pacific Northwest). See also "OTHER FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY"herein.This price volatility may contribute to greater volatility in the Electric System's revenues from the sale(and purchase) of electric energy and,therefore, could materially affect the financial condition of the Electric System. OTHER FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY Federal Energy Legislation EPACT 1992. The Energy Policy Act of 1992 (the "EPACT 1992") made fundamental changes in the federal regulation of the electric utility industry, particularly in the area of transmission access under Sections 211, 212 and 213 of the Federal Power Act. The purpose of these changes, in part, was to bring about increased competition in the electric utility industry. As amended by EPACT 1992, Sections 211, 212 and 213 of the Federal Power Act provide FERC authority, upon application by any electric utility, federal power marketing agency or other person or entity generating electric energy for sale or resale, to require a transmitting utility to provide transmission services (including any enlargement of transmission capacity necessary to provide such services) to the applicant at rates, charges, terms and conditions set by FERC based on standards and provisions in the Federal Power Act. Under EPACT 1992, electric utilities owned by municipalities and other public agencies which own or operate electric power transmission facilities which are used for the sale of electric energy at wholesale are `transmitting utilities' subject to the requirements of Sections 211, 212 and 213. FERC also encouraged the voluntary formation of regional transmission organizations ("RTOs") that are independent from owners of generation and other market participants and that will provide transmission access on a non discriminatory basis to buyers and sellers of power. IOUs and publicly- owned utilities are encouraged to participate in the formation and operation of RTOs, but are not, at this time, being ordered by FERC to participate. EPACT 2005. In August 2005, President Bush signed the Energy Policy Act of 2005 ("EPACT 2005"). EPACT 2005 addresses a wide array of energy matters that could affect the entire electric utility industry, including the City's Electric System. It expands FERC's jurisdiction to require open access transmission of municipal utilities that sell more than four million megawatt hours of energy and to order refunds under certain circumstances for municipal utilities that sell more than eight million megawatt hours of energy. EPACT 2005 requires that FERC conclude its investigation into the allegations of overcharges during the California energy crisis in 2000 and 2001 and submit a report to Congress. See "THE ELECTRIC SYSTEM - Electric System Litigation - California Energy Crisis Litigation" for additional information related to the City's settlement of FERC related litigation. In response to numerous regional electric reliability crises, EPACT 2005 required the FERC to enforce mandatory national electric reliability standards for all utilities. The North American Electric Reliability Corporation, was designated by FERC as the national Electric Reliability Organization to develop reliability standards to be approved and enforced by FERC. On March 16, 2007,FERC approved the first set of 83 reliability standards, and the standards became effective June 18, 2007. The City is subject to the resource planning and purchasing-selling entity standards. The City deems itself in compliance with all applicable standards, however, the City has not yet been audited by WECC/NERC. EPACT 2005 also provides for criminal penalties for manipulative energy trading practices and the repeal of the Public Utility Holding Company Act of 1935, which prohibited certain mergers and consolidations involving electric utilities. 72 175097.8 036227 OS Y ' Under EPACT 2005, IOUs must offer and the municipal utilities need to consider offering each of its customer classes a time-based rate schedule to enable customers to manage energy use through advanced metering and communications technology. It authorizes FERC to exercise eminent domain powers to construct and operate transmission lines if FERC determines a state has unreasonably withheld approval. EPACT 2005 contains provisions designed to increase imports of liquefied natural gas and incentives to support renewable energy technologies, including a new two-year program for tax credit bonds for local governments to finance certain renewable energy facilities. EPACT 2005 also extends for 20 years the Price-Anderson Act, which concerns nuclear power liability protection, and provides incentives for the construction of new nuclear plants. The City expects the impact on the City's utility to be manageable. However, there can be no assurance as to the future impact that EPACT 2005 will have on the operations and finances of its Electric System or the electric utility industry generally. Independence and Security Act of 1007 (H.R. 6). In December 2007, then President Bush signed the Energy Independence and Security Act of 2007. While this law focused primarily on increasing energy efficiency and promoting biofuels for the transportation sector, Sec. 529 of the law required the FERC to assess demand response potential and develop a demand response action plan. This plan, currently under development by FERC, is intended to reduce the demand for electricity during "peak" demand periods. Title XIII of the Act promotes the development of"smart grid"technologies in a variety of ways. FERC is also tasked to identify and eliminate barriers to smart grid deployments. Energy Improvement and Extension Act of 2008 (H.R. 7424). In October 2008, then President Bush signed the Emergency Economic Stabilization Act designed to address the U.S. financial crisis. It contains very significant federal policy enhancements for the solar industry, including (1) extending for 8 years the 30-percent tax credit for both residential and commercial solar installations; (2) eliminating the $2,000 monetary cap for residential solar electric installations, creating a true 30-percent credit; (3) eliminating the prohibition on utilities from benefiting from the credit; (4) allowing Alternative Minimum Tax filers, both businesses and families, to take the credit; and authorizing $800 million for clean energy bonds for renewable energy generating facilities, including solar. The City actively pursues and reviews renewable new energy offers, both through SCPPA and independently. The City has observed a decline in the PV prices during the past few years. Other Legislation. Congress has considered and is considering numerous bills addressing United States energy policies and various environmental matters, including bills relating to energy supplies (such as a federal clean energy portfolio standard), global warning and water quality. Many of these bills, if enacted into law, could have a material impact on the Electric System and the electric utility industry generally. The impact that federal clean energy portfolio standard legislation will have on the electric utility industry and business generally, and on the City, in particular, depends largely on the specific provisions of the legislation that ultimately become law. Some of the important factors to be addressed in any federal clean energy legislation include the clean energy targets and timelines, the list of fuel types accepted as "clean energy", and whether or not existing clean energy sources can be used to meet the targets. The timeline and impact of any such legislation cannot be accurately assessed at this time, but it is expected that any such federal action will have a significant impact on fossil-fueled generation facilities. In light of the variety of issues affecting the utility sector, federal energy legislation in other areas such as reliability, transmission planning and cost allocation, operation of markets, environmental requirements and cybersecurity is also possible. However, the City is unable to predict the outcome or potential impacts of any possible legislation at this time. 73 175097.8 036227 OS Q Environmental Issues General. Electric utilities are subject to continuing environmental regulation. Federal, state and local standards and procedures which regulate the environmental impact of electric utilities are subject to change. These changes may arise from continuing legislative, regulatory and judicial action regarding such standards and procedures. Consequently, there is no assurance that any utility facility or project will remain subject to the laws and regulations currently in effect, will always be in compliance with future laws and regulations or will always be able to obtain all required operating permits. An inability to comply with environmental standards could result in additional capital expenditures, reduced operating levels or the shutdown of individual units not in compliance. In addition, increased environmental laws and regulations may create certain barriers to new facility development, may require modification of existing facilities and may result in additional costs for affected resources. The City cannot predict at this time whether any additional legislation or rules will be enacted which will affect the City's operations, and if such laws or rules are enacted, what the costs to the City might be in the future because of such action. Greenhouse Gas Regulations Under the Clean Air Act The EPA has taken steps to regulate greenhouse gas emissions under existing law. In 2009,the EPA issued a final "endangerment finding," in which it declared that the weight of scientific evidence requires a finding that six identified greenhouse gases, namely, carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbon, and sulfur hexafluoride, cause global warming, and that global warming endangers public health and welfare. The final rule for the "endangerment finding" was published in the Federal Register on December 15, 2009. As a result of this finding, the EPA is authorized to issue regulations limiting carbon dioxide emissions from, among other things, stationary sources such as electric generating facilities,under the federal Clean Air Act. The "Tailoring Rule" states that greenhouse gas emissions will be regulated from large stationary sources, including electric generating facilities, if the sources emit more than the specified threshold levels of tons per year of COze. Large sources with the potential to emit in excess of the applicable threshold will be subject to the major source permitting requirements under the Clean Air Act. Permits would be required in order to construct, modify and operate facilities exceeding the emissions threshold. Examples of such permitting requirements include, but are not limited to, the application of Best Available Control Technology (known as "BACT") for greenhouse gas emissions, and monitoring, reporting, and recordkeeping for greenhouse gases. On September 22, 2009, the EPA issued the final rule for mandatory monitoring and annual reporting of greenhouse gas emissions from various categories of facilities including fossil fuel suppliers, industrial gas suppliers,direct greenhouse gas emitters(such as electric generating facilities and industrial processes), and manufacturers of heavy-duty and off-road vehicles and engines. This rule does not require controls or limits on emissions, but required data collection to begin on January 1, 2010, and initially provided that the first annual reports would be due March 31, 2011. However, the EPA extended the initial reporting deadline until September 30, 2011, in order to finalize development of software to be utilized for such reporting. The two facilities with which the City has contractual relationship—San Juan Unit 3 and the Lodi Energy Center are subject to greenhouse gas monitoring and reporting requirements. Operators of said facilities, PNM and NCPA, respectively, are responsible for all compliance and reporting. Such data collection and reporting lays the foundation for controlling and reducing greenhouse gas emissions in the future, whether by way of the EPA regulations under existing Clean Air Act authority or under a new climate change federal law. On December 23, 2010, the EPA announced two settlements with a number of states and environmental groups. The settlements (as amended on June 13, 2011) commit the EPA to issuing final regulations by May 26, 2012, setting performance standards for greenhouse gas emissions from new, 74 175097.8 036227 OS modified, and existing power plants. These standards are to be based on the best demonstrated control technology. The EPA is expected to issue proposed performance standard regulations for public comment in the first quarter of 2012. On May 20, 2011, the State of Texas filed, on behalf of itself, certain other state petitioners and supporting intervenors, a petition for review of the EPA's endangerment finding in the United States Court of Appeals for the District of Columbia in a proceeding consolidating several similar challenges to the endangerment finding and subsequent EPA rulemaking. On September 28, 2011, the EPA's Office of Inspector General issued a report concluding that the EPA should have followed a more rigorous peer review process in relation to the endangerment finding. The EPA disagreed with this conclusion. In addition, legislation has been introduced in the United States Congress that would repeal the EPA's endangerment finding or otherwise prevent the EPA from regulating greenhouse gases as air pollutants. The City is unable to predict the outcome of these legal and legislative challenges to the EPA's endangerment finding and subsequent rulemaking or the effect that any final rules promulgated by the EPA regulating greenhouse gas emissions from electric generating units and other stationary sources would have on the City's projects or its Electric System. Air Quality — National Ambient Air Quality Standards. The Clean Air Act requires that the EPA establish National Ambient Air Quality Standards ("NAAQS") for certain air pollutants. When a NAAQS has been established, each state must identify areas in its state that do not meet the EPA standard (known as "non-attainment areas") and develop regulatory measures in its state implementation plan to reduce or control the emissions of that air pollutant in order to meet the applicable standard and become an "attainment area." The EPA has recently increased the stringency of the NAAQS for three pollutants, nitrogen dioxide, sulfur dioxide and particulate matter. A proposed rule for the secondary NAAQS for nitrogen dioxide and sulfur dioxide was published in the Federal Register on August 1, 2011. On September 2, 2011, President Obama directed the EPA to withdraw its proposal to lower the NAAQS for ozone. As a result of this withdrawal, the EPA will now resume the process of issuing non-attainment designations for the ozone NAAQS. Even without lower standards, non-attainment areas for ozone are likely to be designated. This may result in stringent permitting processes for new sources of emissions and additional state restrictions on existing sources of emissions. Mercury and Air Toxics Standards. On December 16, 2011, the EPA signed a rule establishing new standards to reduce air pollution from coal- and oil-fired power plants under sections 111 (new source performance standards, or"NSPS") and 112 (toxics program) of the Clean Air Act. Under section 111, the NSPS revises the standards that new coal- and oil-fired power plants must meet for particulate matter, sulfur dioxide, and nitrogen oxides. Under section 112, the new toxics standards set limits on emissions of heavy metals, including mercury, arsenic, chromium, and nickel; and acid gases, including hydrochloric acid and hydrofluoric acid, from existing and new power plants larger than 25 megawatts that burn coal or oil. Power plants have up to four years to meet these standards. While many plants already meet some or all of these new standards, some plants will be required to install new equipment to meet the standards. The environment improvements made at the San Juan power plant during the past five years are expected to enable San Juan to be in compliance with much of the new standards. Certain Other Factors The electric utility industry in general has been, or in the future may be, affected by a number of other factors which could impact the financial condition and competitiveness of many electric utilities and the level of utilization of generating and transmission facilities. In addition to the factors discussed above, such factors include, among others: (a) effects of compliance with rapidly changing environmental, safety, licensing, regulatory and legislative requirements other than those described above, (b) changes 75 175097.8 036227 OS resulting from conservation and demand-side management programs on the timing and use of electric energy, (c) effects of reliability of the power supply with the increased usage of renewable resources, (d) changes resulting from a national energy policy, (e) effects of competition from other electric utilities (including increased competition resulting from mergers, acquisitions, and "strategic alliances". of competing electric and natural gas utilities and from competitors transmitting less expensive electricity from much greater distances over an interconnected system) and new methods of, and new facilities for, producing low-cost electricity, (f) the repeal of certain federal statutes that would have the effect of increasing the competitiveness of many IOUs, (g) increased competition from independent power producers and marketers, brokers and federal power marketing agencies, (h) "self-generation" or "distributed generation" (such as microturbines and fuel cells) by industrial and commercial customers and others, (i) issues relating to the ability to issue tax-exempt obligations, including severe restrictions on the ability to sell to nongovernmental entities electricity from generation projects and transmission service from transmission line projects financed with outstanding tax-exempt obligations, 0) effects of inflation on the operating and maintenance costs of an electric utility and its facilities, (k) changes from projected future load requirements, (1) increases in costs and uncertain availability of capital, (m) shifts in the availability and relative costs of different fuels (including the cost of natural gas), (n) sudden and dramatic increases in the price of energy purchased on the open market that may occur in times of high peak demand in an area of the country experiencing such high peak demand, such as has occurred in California, (o) inadequate risk management procedures and practices with respect to, among other things, the purchase and sale of energy and transmission capacity, (p) other legislative changes, voter initiatives, referenda and statewide propositions, (q) effects of the changes in the economy, (r) effects of possible manipulation of the electric markets, (s)the effects of current economic conditions on the availability and creditworthiness of counterparties and the resulting effects on liquidity in the power and fuel markets, (t) governmental, statutory, regulatory, or administrative changes or initiatives affecting the electricity industry, (u) environmental laws and regulations—both state and federal—or changes in the application of those laws that could impact the cost and manner of doing business, and (v) natural disasters or other physical calamities, including,but not limited to,earthquakes. Any of these factors (as well as other factors) could have an adverse effect on the financial condition of any given electric utility and likely will affect individual utilities in different ways. The City is unable to predict what impact such factors will have on its business operations and financial condition, but the impact could be significant. This Official Statement includes a brief description of certain of these factors. This description does not purport to be comprehensive or definitive, and these matters are subject to change subsequent to the date hereof. Extensive information on the electric utility industry is available from the legislative and regulatory bodies and other sources in the public domain, and potential purchasers of the Electric Bonds should obtain and review such information. Rate Regulation The City sets rates, fees and charges for electric service. The authority of the City to impose and collect rates and charges for electric power and energy sold and delivered is not subject to the general regulatory jurisdiction of the CPUC and presently neither the CPUC nor any other regulatory authority of the State nor the FERC approves such rates and charges. It is possible that future legislative and/or regulatory changes could subject the rates and/or service area of the City to the jurisdiction of the CPUC or to other limitations or requirements. RISK FACTORS The ability of the City to pay principal of and interest on the Water Bonds and the Electric Bonds depends primarily upon the receipt by the City of Water Net Revenues and Electric Net Revenues, respectively. Some of the events which could prevent the City from receiving a sufficient amount of 76 175097.8 036227 OS Water Net Revenues and Electric Net Revenues to enable it to pay the principal of and interest on the Water Bonds and the Electric Bonds are summarized below. The following description of risks is not intended to be an exhaustive list of the risks associated with the purchase of the Water Bonds and the Electric Bonds and the order of the risks set forth below does not necessarily reflect the relative importance of the various risks. Limited Obligations The obligation of the City to pay debt service on the Water Bonds and the Electric Bonds is a limited obligation of the City and is not secured by a legal or equitable pledge or charge or lien upon any property of the City or any of its income or receipts, except the Water Net Revenues and Electric Net Revenues, respectively. The obligation of the City to pay debt service on the Water Bonds and the Electric Bonds does not constitute an obligation of the City to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The City is obligated under the Water Indenture and the Electric Indenture to pay debt service on the Water Bonds and the Electric Bonds solely from Water Net Revenues and Electric Net Revenues, respectively. Factors that can adversely affect the availability of Water Net Revenues and Electric Net Revenues include, among other matters, insufficient supply of water and/or electricity, general and local economic conditions, and changes in law and government regulations (including initiatives and moratoriums on growth). The realization of future Water Net Revenues and Electric Net Revenues is also subject to, among other things, the capabilities of management of the City, the ability of the City to provide water and electric service to its customers and the ability of the City to establish, maintain and collect rates and charges sufficient to pay debt service on the Water Bonds and the Electric Bonds. System Water Net Revenues and Electric Net Revenues and Expenditures Actual operation and maintenance expenses of the Water System and the Electric System may be greater or less than currently projected. Factors such as changes in technology, regulatory standards, increased costs of material, energy, labor and administration can substantially affect Water System and the Electric System expenses. Although the City has covenanted to fix rates and charges in amounts sufficient to pay debt service on the Water Bonds and the Electric Bonds, there can be no assurance that such amounts will be collected. Increases in water and electric rates could result in a decrease in demand for Water System and the Electric System usage. Water System and Electric System Demand There can be no assurance that the demand for water and electric services will occur as described in this Official Statement. Reduction in levels of demand could require an increase in rates or charges in order to comply with the covenants to fix rates and charges so as to produce Net Water Revenues and Net Electric Revenues equal to the debt service coverage set forth in the Water Indenture and the Electric Indenture, respectively. Rate-Setting and Initiative Processes Under Proposition 218 Proposition 218 affects the City's ability to impose future water rate increases and no assurance can be given that future water rate increases will not encounter majority protest opposition. In the event that future proposed water rate increases cannot be imposed as a result of majority protest, the City might thereafter be unable to generate Water Net Revenues in the amounts required to pay debt service on the Water Bonds. 77 175097.8 036227 OS In addition, Proposition 218, as incorporated in the California Constitution under Article XIIIC, also provides that the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge and that the power of initiative to affect local taxes, assessments, fees and charges shall be applicable to all local governments. No assurance can be given that the voters of the City will not, in the future, approve initiatives which seek to repeal, reduce or prohibit the future imposition or increase of the City's water rates or electric rates, which could adversely affect the Water Net Revenues and Electric Net Revenues pledged to the payment of debt service on Series 2012 Bonds. See also "CONSTITUTIONAL LIMITATIONS ON TAXES, WATER RATES AND CHARGES"herein. Statutory and Regulatory Compliance Changes in the scope and standards for public agency water systems and electric systems, such as the Water System and the Electric System, may lead to increasingly stringent operating requirements and the imposition of administrative orders issued by Federal or State regulators. Future compliance with such requirements and orders can impose substantial additional costs on the Water Fund and the Electric Fund, respectively. In addition, claims against the Water System and the Electric System for failure to comply with applicable laws and regulations could be significant. Such claims are payable from assets of the Water System and the Electric System or from other legally available sources. No assurance can be given that the cost of compliance with such existing or future laws, regulations and orders would not adversely affect the ability of the Water System and the Electric System to generate Water Net Revenues and Electric Net Revenues sufficient to pay debt service on the Water Bonds and the Electric Bonds, respectively. Earthquakes and Other Natural Disasters; Casualty Risk The Water System and the Electric System are located above or near a number of geological faults capable of generating significant earthquakes. The area is characterized by a number of geotechnical conditions which represent potential safety hazards, including expansive soils and areas of potential liquefaction and landslide. In anticipation of such potential disasters, the City designs and constructs system facilities to the seismic codes in effect at the time of design of the project. In January 1994, an earthquake of magnitude 6.8 on the Richter Scale occurred in the northwest San Fernando Valley on a previously unmapped fault. It caused widespread damage to commercial and residential structures. No significant damage occurred to the Water System and the Electric System and sewer service was not interrupted. Although the City has implemented disaster preparedness plans, there can be no assurance that these or any additional measures will be adequate in the event that a natural disaster occurs, nor that costs of preparedness measures will be as currently anticipated. Further, damage to components of the Water System and the Electric System could cause a material increase in costs for repairs or a corresponding material adverse impact on Water Net Revenues and Electric Net Revenues,respectively. The City is not obligated under the Water Indenture or the Electric Indenture to maintain earthquake insurance on the Water System and the Electric System, and the City does not now and does not plan to maintain, earthquake insurance on the Water System and the Electric System. Further, any natural disaster or other physical calamity, including earthquake, may have the effect of reducing Water Net Revenues and Electric Net Revenues through damage to the Water System and the Electric System or adversely affecting the economy of the surrounding area. The City maintains such 78 175097.8 036227 OS insurance as is customarily maintained by similar utilities systems with respect to works and properties of like character against accident to, loss of or damage to such works or properties, but there can be no assurance that losses in excess of the insured amount will not occur. Risks Relating to the Water Supply Drought Risks. The Los Angeles region and its primary sources of water supply can be subject to drought conditions. The region is situated in an and and semi-desert environment. While suppliers of water to the City have planned and managed reserve supplies to account for normal occurrences of drought conditions, decreased runoff, environmental issues in California and a severe drought in the Colorado River Basin are restricting the ability to transport water supplies to Southern California. These conditions may result in reduced Water Net Revenues. Security of the Water System. Military conflicts and terrorist activities may adversely impact the operations and finances of the Water System. The City continually plans and prepares for emergency situations and immediately responds to ensure the quality and service of water is maintained. However, there can be no assurance that any existing or additional safety and security measures will prove adequate in the event that terrorist activities are directed against the Water System or that costs of security measures will not be greater than presently anticipated. Further, damage to certain components of the Water System could require the City to significantly increase expenditures for repairs to the Water System,which could adversely impact the City's ability to pay debt service on the Water Bonds. Utility Costs. Power outages may cause difficulties in receiving an adequate water supply and thus increase the cost of water. No assurance can be given that any future significant reduction or loss of power would not materially adversely affect the operations of the Water System. Also, the City cannot guarantee that prices for electricity or gas will not increase, which could adversely affect the Water System's financial condition. The City also cannot guarantee that additional increases in water rates charged by the City's wholesale providers or other charges imposed by the City's water sources will not be proposed. Electric System Expenses and Collections The City's Electric System, timely payment of debt service on the Electric Bonds and the financial condition of the City's Electric System are dependent, in part, upon the payment by customers of the amounts billed to such customers for the energy they receive. In addition to the factors set forth herein, multiple factors may potentially have an adverse effect on collections. Many of these factors are not under the influence or control of the City or are factors over which the City has only limited influence or control. These factors include,but are not limited to,the following factors: Energy Market-Driven Increases in Wholesale Power Costs. Wholesale power costs are affected by a number of factors, including, but not limited to, weather, fuel supplies and transmission, transmission systems operations and capacity (including import capability), and generation capacity. Natural gas pipeline transmission interruptions (due to seismic or other environmental events,accidents or intentional acts) could result in higher natural gas prices in California and substantial increases in gas- fired electric generating facility operating costs. Due to the City's ownership interest or participation in joint generation projects, and long-term power contracts, it has nominal exposure to volatile natural gas and spot market pricing impacts. Market Manipulation. The CAISO, with the approval from FERC, adopted tariffs, protocols and regulations governing the conduct of energy suppliers and other entities whose activities affect the transmission system. CAISO tariffs, protocols and regulations are intended, among other things, to 79 175097.8036227 OS 2 prevent manipulation of the CAISO's transmission system. The CAISO monitors the activities of transmission system participants, but manipulative behavior could occur, possibly resulting in higher or substantially higher costs. This risk is somewhat mitigated by the City's acquisition of additional generating capacity and the City's risk management activities. Impact of These Factors. The factors discussed above (and other factors described herein) might result in increased rates while the Electric Bonds remain outstanding. If a combination of one of more such factors lead to increased retail rates for electric energy, such increase could lead to increased delinquencies and non-payments by customers. There can be no assurance that the City's expenses for the.Electric System will remain at the levels described in this Official Statement. Increases in fuel and energy costs, new environmental regulations, CAISO's MRTU or other expenses could reduce the City's Electric Net Revenues and could require substantial increases in rates or charges. Such rate increases could increase the likelihood of nonpayment, and could also decrease demand. Although the City has covenanted to fix rates and charges for the Electric System at certain levels, there can be no assurance that such amounts will be collected in the amounts and at the times necessary to make timely payments with respect to the Electric Bonds. Impact of Current Economic Conditions on Water Net Revenues and Electric Net Revenues The major economic disruptions and recession of the past few years have adversely affected economic activity of the region in general, in particular resulting in decreased economic activity, increased unemployment and a reduction in residential and commercial construction. The City cannot predict the extent of the fiscal problems that will be encountered in this or in any future economic downturn. Reduction in Water System and Electric System users' ability to pay rates and charges, and reduction in the rate at which new customers are added to the Water System and the Electric System, can adversely impact System Water Net Revenues and Electric Net Revenues. No Acceleration; Limitations on Remedies Pursuant to the Water Indenture and the Electric Indenture, upon the occurrence and continuance of an event of default thereunder, the Trustee may, and at the written direction of the Owners of a majority in aggregate principal amount of the Water Bonds or the Electric Bonds, as applicable, at the time Outstanding shall, upon notice in writing to the City, pursue any available remedy at law or in equity to remedy such event of default and to enforce any applicable rights of the Trustee under or with respect to the Water Indenture or Electric Indenture, as applicable; provided, that, such remedies shall not include any remedy of acceleration with respect to the payment of the principal of and interest on the Water Bonds or the Electric Bonds. Upon the occurrence and continuance of an event of default, the Trustee would be required to seek a separate judgment each year for that year's defaulted payments of principal and interest on the Water Bonds and Electric Bonds. Any such suit for money damages would be subject to limitations on legal remedies against counties in the State, including a limitation on enforcement of judgments against funds of a fiscal year other than the fiscal year in which the applicable payments of principal and interest were due and against funds needed to serve the public welfare and interest. In addition, enforceability of the rights and remedies of the Owners of the Water Bonds and the Electric Bonds may become subject to (i) the Federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditor's rights generally, (ii) equity principles which may limit the specific enforcement of certain remedies, (iii) the exercise by the United States of America of the powers delegated to it by the Constitution, and(iv) the exercise of the state police powers. 80 175097.8 036227 OS CONSTITUTIONAL LIMITATIONS ON TAXES,WATER RATES AND CHARGES Proposition 218 On November 5, 1996, California voters approved an initiative known as the Right to Vote on Taxes Act ("Proposition 218") that added Articles XIIIC and XIIID to the California Constitution. Proposition 218 limits the application of property-related fees and charges and requires them to be submitted to property owners for approval or rejection, after notice and public hearing. Proposition 218 also extended the initiative power to reducing or repealing local property-related fees and charges, regardless of the date such fees and charges were imposed. Fees and charges for water service are excepted from the voter approval provisions of Proposition 218 pursuant to Article XIIID, but are subject to the limitations of Proposition 26 described below. Fees for the electric service are exempted from the provisions of Proposition 218, but are subject to the limitations of Proposition 26 described below. See "- Proposition 26"herein. Section 1 of Article XIIIC requires majority voter approval for the imposition, extension or increase of general taxes and Section 2 thereof requires two thirds voter approval for the imposition, extension or increase of special taxes. Section 3 of Article XIIIC expressly extends the initiative power to give voters the power to reduce or repeal local taxes, assessments, fees and charges, regardless of the date such taxes, assessments, fees or charges were imposed. Section 3 expands the initiative power to include reducing or repealing assessments, fees and charges,which had previously been considered administrative rather than legislative matters and therefore beyond the initiative power. This extension of the initiative power is not limited by the terms of Article XIIIC to fees imposed after November 6, 1996, the effective date of Proposition 218, and absent other legal authority could result in the reduction in any existing taxes, assessments or fees and charges imposed prior to November 6, 1996. "Fees"and"charges"are not expressly defined in Article XIIIC or in SB 919, the Proposition 218 Omnibus Implementation Act enacted in 1997 to prescribe specific procedures and parameters for local jurisdictions in complying with Article XIIIC and Article XIIID ("SB 919"). However, on July 24, 2006, the California Supreme Court ruled in Bighorn-Desert View Water Agency v. Virjil(Kelley) (the "Bighorn Decision") that charges for ongoing water delivery are property-related fees and charges within the meaning of Article XIIID and are also fees or charges within the meaning of Section 3 of Article XIIIC. The California Supreme Court held that such water service charges may,therefore,be reduced or repealed through a local voter initiative pursuant to Section 3 of Article XIIIC. In the Bighorn Decision, the California Supreme Court did state that nothing in Section 3 of Article XIIIC authorizes initiative measures that impose voter-approval requirements for future increases in fees or charges for water delivery. The California Supreme Court stated that water providers may 'determine rates and charges upon proper action of the governing body and that the governing body may increase a charge which was not affected by a prior initiative or impose an entirely new charge. The Supreme Court further stated in the Bighorn Decision that it was not holding that the initiative power is free of all limitations and was not determining whether the initiative power is subject to the statutory provision requiring that water service charges be set at a level that will pay debt service on bonded debt and operating expenses. Such initiative power could be subject to the limitations imposed on the impairment of contracts under the contract clause of the United States Constitution. Additionally, SB 919 provides that the initiative power provided for in Proposition 218 "shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after [the effective date of Proposition 218] assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights"protected by the United States Constitution. No assurance can be given that the voters of the City will not, in the future, approve initiatives which repeal, reduce or prohibit the future imposition or increase of assessments, fees or charges, including the City's water rates, 81 175097.8036227 OS which are a significant source of Water Net Revenues pledged to the payment of debt service on Water Bonds, or the City's electric rates, which are a significant source of Electric Net Revenues pledged to the payment of debt service on Electric Bonds. Whether and the extent to which the initiative power may be used to reduce water rates and electric rates is unclear. However, the City believes that even if the water rates and electric rates of the City are subject to the initiative power, under Article XIIIC or otherwise, the electorate of the City would be precluded from reducing electric rates and charges in a manner adversely affecting the payment of the Water Bonds and the Electric Bonds by virtue of the "impairment of contracts clause" of the United States and California Constitutions. Article XIIID defines a "fee" or"charge" as any levy other than an ad valorem tax, special tax,or assessment imposed upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property-related service. A "property-related service" is defined as "a public service having a direct relationship to a property ownership." In the Bighorn Decision, the California Supreme Court held that a public water agency's charges for ongoing water delivery are fees and charges within the meaning of Article XIIID. Article XIIID requires that any agency imposing or increasing any property-related fee or charge must provide written notice thereof to the record owner of each identified parcel upon which such fee or charge is to be imposed and must conduct a public hearing with respect thereto. Also, the proposed fee or charge may not be imposed or increased if a majority of owners of the identified parcels file written protests against it. As a result, the local government's ability to increase such fee or charge may be limited by a majority protest. The imposition or increase of any fee or charge by the City for its water service will be subject to majority protest. If such a majority protest occurs, the ability of the City to generate Water Net Revenues sufficient to comply with the covenants of the Water Indenture and Prior Water Installment Agreements may be adversely affected. In addition, Article XIIID includes a number of limitations applicable to existing fees and charges, including provisions to the effect that (i) revenues derived from the fee or charge shall not exceed the funds required to provide the property-related service; (ii) such revenues shall not be used for any purpose other than that for which the fee or charge was imposed; (iii) the amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel; and (iv) no such fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Property-related fees or charges based on potential or future use of a service are not permitted. See"THE ELECTRIC SYSTEM - Electric Rates and Charges" herein for a description of the City's energy efficiency program pursuant to AB 1890,a detail review of.which is periodically performed. The City believes that current water fees and charges that are subject to Proposition 218 comply with the provisions thereof and that the City will continue to comply with the rate covenant set forth in the Water Indenture and Prior Water Installment Agreements in conformity with the provisions of Article XIIID of the California State Constitution. Should it become necessary to increase the water fees and charges above current levels, the City would be required to comply with the requirements of Article XIIID in connection with such proposed increase. No assurance can be given that the voters of the City will not, in the future, approve initiatives which repeal, reduce or prohibit the future imposition or increase of assessments,.fees or charges. Implementing legislation pertaining to Proposition 218 may be introduced in the State legislature from time to time. Moreover, Proposition 218 was adopted as a measure that qualified for the ballot pursuant to California's initiative process. From time to time other initiative measures could be adopted to modify Proposition 21 S. No assurance may be given as to the terms of such legislation or initiatives or 82 175097.8 036227 OS their potential impact on the various fees and charges that constitute Revenues of the System, however, there could be a material negative impact on the City's ability to collect such Revenues. The City does not believe that its fees and charges related to its Electric System are subject to the provisions of Proposition 218. Proposition 26 On November 2, 2010, the voters approved Proposition 26 and approved revising provisions of Articles XIIIA and XIIIC of the California Constitution. Proposition 26 re-categorizes many State and local fees as taxes and specifies approval requirements for those taxes. In its "Findings and Declarations of Purpose" section,Proposition 26 states: "Fees couched as `regulatory' but which exceed the reasonable costs of actual regulation or are simply imposed to raise revenue for a new program and are not part of any licensing or permitting programs are actually taxes and should be subject to the limitations applicable to the imposition of taxes." For State "taxes," a two-thirds vote of both houses of the Legislature is required for a higher tax. The State bears the burden of proving that a levy, charge or other exaction is not a tax subject to Proposition 26. Any State-imposed "tax' adopted after January 1, 2010, but prior to the effective date of Proposition 26 that was not adopted in compliance with Proposition 26's approval requirements is void 12 months after the effective date of Proposition 26. Among the regulatory fees that could be subject to Proposition 26 approval threshold include State laws enacted in 2010 that allow tax breaks for new alternative energy plants and the cap-and-trade program for greenhouse gases adopted by CARB that will result in auctioning pollution permits to entities. Opponents of Proposition 26 have taken the position that such auctioning of pollution permits is a tax that will require a two-thirds vote of the Legislature. The ultimate resolution as to the scope of Proposition 26 will likely be determined through litigation.It is not certain how the courts will interpret the provisions of Proposition 26 as applicable to AB32 or other regulatory fees. With respect to local government "taxes," Proposition 26 expressly excludes a variety of levies, charges and exactions from the definition of "tax", including a "charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege," and "a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product." The City believes that the water and electric rates and charges are not taxes for purposes of Proposition 26. However, a court could conclude that, to the extent the City transfers surplus funds to the General Fund, the Water System and Electric System rates and charges constitute "taxes" for purposes of Proposition 26. This could mean that, so long as the City continued to make General Fund transfers of surplus funds, the City could not increase the existing rates and charges without a two-thirds vote of the City's voters. The City is unaware of any applicable case law precedent regarding this issue. However, there is litigation challenging a similar transfer by the City of Redding. While a final judgment has not been reached, the ruling by the trial court issued after a hearing on the merits found that adoption of the payment in lieu of taxes at issue in the Redding case predated the effectiveness of Proposition 26; there was no determination on whether the payment in lieu of taxes constitutes a tax. Proposition 26 amended Article XIIIC to provide that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the 83 175097.8 036227 OS manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor's burdens on,or benefits received from, the governmental activity. Future Initiatives Proposition and Proposition 26 were each adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time, other initiative measures could be adopted, further affecting revenues of the City or the City's ability to expend revenues. The nature and impact of these measures cannot be predicted by the City. CONTINUING DISCLOSURE The City has executed separate Continuing Disclosure Agreements (each a "Disclosure Agreement") for the benefit of the respective Owners of the Water Bonds and the Electric Bonds, respectively. The forms of Disclosure Agreements are attached hereto as Appendix F. Under the Disclosure Agreement,the City will covenant for the benefit of respective Owners and Beneficial Owners of the Water Bonds and the Electric Bonds to provide certain annual financial information and operating data, including its audited financial statements, relating to the City by not later than eight months after the end of the City's Fiscal Year, commencing with its report for Fiscal Year 2011-12, or if the fiscal year- end changes from June 30,not later than eight months after the end of the City's Fiscal Year(the"Annual Reports"), and to provide notices of the occurrence of certain enumerated events (the "Listed Events"). The Annual Reports and notices of Listed Events will be filed with the Electronic Municipal Market Access ("EMMA") database maintained by the Securities and Exchange Commission, pursuant to the Rule. These covenants will be made in order to assist the Underwriter of the Water Bonds and the Electric Bonds in complying with the Rule. The City has existing disclosure undertakings that have been made pursuant to the Rule in connection with the issuance and execution and delivery of certain of the City's outstanding debt obligations. See Note 5 to the City's audited financial statements attached hereto as Appendix C. The Annual Reports and audited financial statements for Fiscal Years [ _ and _-I were not timely filed and [notices of late filings were not made]. 1 id the City'tiinely fileevent notices regarding changes,to,the,underlying rat'� ngnddown'�ade'"s oaf bond,insurance companies that insuredits bods?] The Annual Reports, audited financial statements and notices of the rating changes have been submitted. Accordingly,the City is presently in compliance with its existing continuing disclosure undertakings. LEGAL OPINION The validity of the Water Bonds and the Electric Bonds and certain other matters are subject to the approval of legality by Hawkins Delafield & Wood LLP, Los Angeles, California, Bond Counsel. A complete copy of the proposed forms of opinions of Bond Counsel are contained in Appendix F-1 and Appendix F-2 attached hereto. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the City by Best Best & Krieger LLP, Riverside, California, as City Attorney, for the City by Hawkins Delafield &Wood LLP, Los Angeles, California, Disclosure Counsel, and for the Underwriter by its counsel, Stradling Yocca Carlson&Rauth,a Professional Corporation,Newport Beach, California. 84 175097.8 036227 OS TAX MATTERS Opinion of Bond Counsel In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel to the City, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, (i) interest on the Water Bonds and the Electric Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), and (ii) interest on the Water Bonds and the Electric Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In rendering its opinion, Bond Counsel has relied on certain representations, certifications of fact, and statements of reasonable expectations made by the City in connection with the Bonds, and Bond Counsel has assumed compliance by the City with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Water Bonds and the Electric Bonds from gross income under Section 103 of the Code. In addition, in the opinion of Bond Counsel to the City, under existing statutes, interest on the Certificates is exempt from personal income taxes imposed by the State of California. . Bond Counsel expresses no opinion regarding any other Federal or state tax consequences with respect to the Certificates. Bond Counsel renders its opinion under existing statutes and court decisions as of the issue date, and assumes no obligation to update, revise or supplement its opinion to reflect any action hereafter taken or not taken, or any facts or circumstances that may hereafter come to its attention, or changes in law or in interpretations thereof that may hereafter occur, or for any other reason. Bond Counsel expresses no opinion on the effect of any action hereafter taken or not taken in reliance upon an opinion of other counsel on the exclusion from gross income for Federal income tax purposes of interest on the Water Bonds and/or the Electric Bonds, or under state and local tax law. Certain Ongoing Federal Tax Requirements and Covenants The Code establishes certain ongoing requirements that must be met subsequent to the issuance of the Water Bonds and the Electric Bonds in order that interest on the Water Bonds and the Electric Bonds be and remain excluded from gross income under Section 103 of the Code. These requirements include, but are not limited to, requirements relating to use and expenditure of gross proceeds of the Water Bonds and the Electric Bonds, yield and other restrictions on investments of gross proceeds, and the arbitrage rebate requirement that certain excess earnings on gross proceeds be rebated to the Federal government. Noncompliance with such requirements may cause interest on the Water Bonds and/or the Electric Bonds to become included in gross income for Federal income tax purposes retroactive to their issue date, irrespective of the date on which such noncompliance occurs or is discovered. The City has covenanted to comply with certain applicable requirements of the Code to assure the exclusion of interest on the Water Bonds and the Electric Bonds from gross income under Section 103 of the Code. Certain Collateral Federal Tax Consequences The following is a brief discussion of certain collateral Federal income tax matters with respect to the Water Bonds and the Electric Bonds. It does not purport to address all aspects of Federal taxation that may be relevant to a particular owner of Water Bonds and/or Electric Bonds. Prospective investors, particularly those who may be subject to special rules, are advised to consult their own tax advisors 85 175097.8 036227 OS regarding the Federal tax consequences of owning and disposing of the Water Bonds and/or the Electric Bonds. Prospective owners of the Water Bonds and/or the Electric Bonds should be aware that the ownership of such obligations may result in collateral Federal income tax consequences to various categories of persons, such as corporations (including S corporations and foreign corporations), financial institutions, property and casualty and life insurance companies, individual recipients of Social Security and railroad retirement benefits, individuals otherwise eligible for the earned income tax credit, and taxpayers deemed to have incurred or continued indebtedness to purchase or carry obligations the interest evidenced thereby is excluded from gross income for Federal income tax purposes. Interest on the Water Bonds and the Electric Bonds may be taken into account in determining the tax liability of foreign corporations subject to the branch profits tax imposed by Section 884 of the Code. Original Issue Discount "Original issue discount" ("OID") on a tax-exempt bond is the excess of the sum of all amounts payable at the stated maturity of a Water Bond or an Electric Bond (excluding certain "qualified stated interest" that is unconditionally payable at least annually at prescribed rates) over the issue price of that maturity. In general, the"issue price" of a maturity means the first price at which a substantial amount of the Water Bonds or the Electric Bonds, as applicable, of that maturity was sold (excluding sales to bond houses, brokers, or similar persons acting in the capacity as underwriters, placement agents, or wholesalers). In general, the issue price for each maturity of Water Bonds or Electric Bonds is expected to be the initial public offering price set forth on the cover page of the Official Statement. Bond Counsel further is of the opinion that, for any Water Bonds and Electric Bonds having OID (a "Discount Bond"), OID that has accrued and is properly allocable to the owners of the Discount Bonds under Section 1288 of the Code is excludable from gross income for Federal income tax purposes to the same extent as other interest on the Water Bonds and the Electric Bonds. In general, under Section 1288 of the Code, OID on a Discount Bond accrues under a constant yield method, based on periodic compounding of interest over prescribed accrual periods using a compounding rate determined by reference to the yield on that Discount Bond. An owner's adjusted basis in a Discount Bond is increased by accrued OID for purposes of determining gain or loss on sale, exchange, or other disposition of such Water Bonds and Electric Bond. Accrued OID may be taken into account as an increase in the amount of tax-exempt income received or deemed to have been received for purposes of determining various other tax consequences of owning a Discount Bond even though there will not be a corresponding cash payment. Owners of Discount Bonds should consult their own tax advisors with respect to the treatment of original issue discount for Federal income tax purposes, including various special rules relating thereto, and the state and local tax consequences of acquiring, holding, and disposing of Discount Bonds. Bond Premium In general, if an owner acquires a Water Bond or an Electric Bond for a purchase price(excluding accrued interest) or otherwise at a tax basis that reflects a premium over the sum of all amounts evidenced by the Water Bond or Electric Bond after the acquisition date (excluding certain "qualified stated interest" that is unconditionally payable at least annually at prescribed rates), that premium constitutes "bond premium" on that Water Bond or Electric Bond (a "Premium Bond"). In general, under Section 171 of the Code, an owner of a Premium Bond must amortize the bond premium over the remaining term of the Premium Bond, based on the owner's yield over the remaining tern of the Premium Bond determined based on constant yield principles (in certain cases involving a Premium Bond callable prior to its stated 86 175097.8 036227 OS maturity date, the amortization period and yield may,be required to be determined on the basis of an earlier call date that results in the lowest yield on such bond). An owner of a Premium Bond must amortize the bond premium by offsetting the qualified stated interest allocable to each interest accrual period under the owners regular method of accounting against the bond premium allocable to that period. In the case of a Premium Bond, if the bond premium allocable to an accrual period exceeds the qualified stated interest allocable to that accrual period, the excess is a nondeductible loss. Under certain circumstances,the owner of a Premium Bond may realize a taxable gain upon disposition of the Premium Bond even though it is sold or redeemed for an amount less than or equal to the owner's original acquisition cost. Owners of any Premium Bonds should consult their own tax advisors regarding the treatment of bond premium for Federal income tax purposes, including various special rules relating thereto, and state and local tax consequences, in connection with the acquisition, ownership, amortization of bond premium on, sale, exchange,or other disposition of Premium Bonds. Information Reporting and Backup Withholding Information reporting requirements apply to interest paid on tax-exempt obligations, including the Water Bonds and the Electric Bonds. In general, such requirements are satisfied if the interest recipient completes, and provides the payor with, a Foran W-9, "Request for Taxpayer Identification Number and Certification," or if the recipient is one of a limited class of exempt recipients. A recipient not otherwise exempt from information reporting who fails to satisfy the information reporting requirements will be subject to "backup withholding," which means that the payor is required to deduct and withhold a tax from the interest payment, calculated in the manner set forth in the Code. For the foregoing purpose, a "payor" generally refers to the person or entity from whom a recipient receives its payments of interest or who collects such payments on behalf of the recipient. If an owner purchasing a Water Bond or an Electric Bond through a brokerage account has executed a Form W-9 in connection with the establishment of such account, as generally can be expected, no backup withholding should occur. In any event, backup withholding does not affect the excludability of the interest on the Water Bonds or the Electric Bonds from gross income for Federal income tax purposes. Any amounts withheld pursuant to backup withholding would be allowed as a refund or a credit against the owner's Federal income tax once the required information is furnished to the Internal Revenue Service. Proposed Legislation and Other Matters Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the Federal or stats level, may adversely affect the tax-exempt status of interest on the Water Bonds and the Electric Bonds under Federal or state law or otherwise prevent beneficial owners of the Water Bonds and the Electric Bonds from realizing the full current benefit of the tax status of such interest. In addition, such legislation or actions (whether currently proposed, proposed in the future, or enacted) and such decisions could affect the market price or marketability of tax-exempt obligations, such as the Water Bonds and the Electric Bonds. Prospective purchasers of the Water Bonds and the Electric Bonds should consult their own tax advisors regarding the foregoing matters. VERIFICATION OF MATHEMATICAL COMPUTATIONS Upon delivery of the Water Bonds and the Electric Bonds, [Grant Thornton LLP], independent certified public accountants, will deliver a report stating that the firm has verified the mathematical accuracy of certain computations relating to the adequacy of the related defeasance securities and the 87 175097.8 036227 OS interest thereon to pay the principal of, and premium, if any, and interest with respect to the Refunded 2003A Water Certificates and the Refunded 2003B Electric Certificates on their respective payment and prepayment dates. RATINGS The City anticipates that Standard & Poor's, a Division of The McGraw-Hill Companies ("S&P"), will assign its underlying rating of"_"to the Water Bonds. The City also anticipates that S&P will assign its underlying rating of"_" to the Electric Bonds. Such ratings reflect only the views of such organizations and any desired explanation of the significance of such ratings should be obtained from the rating agency furnishing the same, at the following address: Standard & Poor's Ratings Services, 55 Water Street, New York,New York 10041. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely by the rating agencies, if in the judgment of such rating agencies, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market prices of the Water Bonds and the Electric Bonds. FINANCIAL STATEMENTS The audited financial statements of the City for the Fiscal Year ended June 30, 2011 are included as Appendix C. The financial statements of the City for the Fiscal Year ended June 30, 2011 have been audited by Lance, Soil & Lunghard, LLP, certified public accountants, as stated in their report. Lance, Soil & Lunghard, LLP has not consented to the inclusion of its report as Appendix C and has not undertaken to update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is expressed by Lance, Soil& Lunghard,LLP with respect to any event subsequent to the date of the audited financial statements. FINANCIAL ADVISOR Urban Futures Incorporated has served as Financial Advisor to the City in connection with the issuance of the Water Bonds and Electric Bonds. The Financial Advisor has assisted the City in matters relating to the planning, structuring, issuance of the Water Bonds and Electric Bonds. The Financial Advisor has not audited, authenticated or otherwise independently verified the information set forth in the Official Statement, or any other related information available to the City, with respect to accuracy and completeness of disclosure of such information. The Financial Advisor makes no guaranty, warranty or other representation respecting accuracy and completeness of the Official Statement. UNDERWRITING The Water Bonds are being purchased by the Underwriter at a price of$ (which amount represents the principal amount of the Water Bonds, plus/minus a net original issue premium/discount of $ , and less an Underwriter' discount of $ ). The Electric Bonds are being purchased by the Underwriter at a price of $ (which amount represents the principal amount of the Electric Bonds, plus/minus a net original issue premium/discount of$ , and less an Underwriter' discount of$ ). The Underwriter may offer and sell the Series 2012 Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter. 88 175097.8 036227 OS The following two sentences have been provided by De La Rosa & Co., the Underwriter for the Water Bonds and the Electric Bonds: De La Rosa & Co., the Underwriter of the Water Bonds and the Electric Bonds,has entered into separate agreements with Credit Suisse Securities USA LLC, UnionBanc Investment Services LLC and City National Securities, Inc. for retail distribution of certain municipal securities offerings, at the original issue prices. Pursuant to said agreement, if applicable to the Water Bonds and the Electric Bonds, De La Rosa & Co. will share a portion of its underwriting compensation with respect to the Water Bonds and the Electric Bonds, with Credit Suisse Securities USA LLC, UnionBanc Investment Services LLC or City National Securities, Inc. MISCELLANEOUS This Official Statement has been duly approved, executed and delivered by the City. There are appended to this Official Statement a summary of certain provisions of the Water Indenture and the Electric Indenture, audited financial statements of the City, the proposed forms of opinions of Bond Counsel, a general description of the City and a description of the Book-Entry Only System. The Appendices are integral parts of this Official Statement and must be read together with all other parts of this Official Statement. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or Owners of any of the Water Bonds or the Electric Bonds. Any statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as an opinion and not as representations of fact. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. CITY OF AZUSA By: City Manager 89 175097.8 036227 OS [THIS PAGE INTENTIONALLY LEFT BLANK] 175097.8 036227 OS APPENDIX A THE CITY OF AZUSA The Bonds will not be secured by any pledge of ad valorem taxes or General Fund revenues but will be payable solely front the Net Revenues of the City's Water System, as more fully described in the body of this Oficial Statement. The description of the financial and economic position of the City set forth below and on the following pages is included in this Official Statement for informational purposes only. General The City of Azusa (the "City") is a municipal corporation existing under the laws of the State of California (the "State"). Located in the County of Los Angeles (the "County"), the City owns and operates an electric public utility for its citizens, which provides electric service to virtually all of the electric customers within the City limits, encompassing approximately 9 square miles. The City also owns and operates a water system. Its service territory includes the City and adjoining portions of surrounding cities and unincorporated areas of Los Angeles County. The City is located in the greater metropolitan Los Angeles area, approximately 24 miles east of downtown Los Angeles. The economy represents a diverse blend of industrial, commercial, agricultural and residential development. The City was incorporated as a general law city in 1898, and is administered by a Council- Administrator form of government. The four City Council members are elected at large for four-year terms. Elections are staggered at two-year intervals. The office of Mayor is elected at-large for a two- year term. The election coincides with those of the Council members. History and Development of Community The Azusa area grew after 1854 when gold was discovered in the San Gabriel Canyon. By 1860 the town had over 2,000 inhabitants and the United States government bought much of the land from founder Henry Dalton for homesteading. The advent of the railroad spurred more growth in the area and agriculture emerged as the dominant industry. After acquiring the orchard community of Azusa Rancho from Dalton in 1880, Jonathan D. Slauson, a Los Angeles banker, laid out the City in 1887. The City of Azusa was then incorporated on December 29, 1898. During the 1900s, Azusa, like many surrounding cities,urbanized from a largely rural agricultural community to a city with a downtown surrounded by tract housing. Agriculture continued to have a presence in the City through the Monrovia wholesale nursery and food processing facilities. Mining also continued as one of Azusa's industries in the form of inert materials mining for cement, rock and road base. Other more sophisticated industries emerged, such as defense and higher education, and Azusa became host to Aerojet,now Northrop, manufacturer of satellites, and Azusa Pacific University. Currently, Azusa has a diverse economy of retail, commercial, industrial businesses, and an equally diverse population of about 46,399 residents. The industries and demographics in Azusa continue to diversify, and in 2004 the City approved a development agreement with Azusa Land Partners for the Rosedale Development, a 1,200 home, master planned community,under construction on about 280 acres of land. A-1 175097.8 036227 OS Population The following table sets forth population data for the City,the County and the State since 2002. TABLE A-1 POPULATION CITY OF AZUSA, COUNTY OF LOS ANGELES AND STATE OF CALIFORNIA Calendar City of County of State of Year Azusafl LosAngelesttl Californiattl 2002 45,455 9,679,212 34,725,516 2003 46,152 9,756,914 35,163,609 2004 46,808 9,806,944 35,570,847 2005 46,642 9,816,153 35,869,173 2006 46,279 9,798,609 36,116,202 2007 46,133 9,780,808 36,399,676 2008 46,117 9,785,474 36,704,375 2009 46,227 9,801,096 36,966,713 2010 46,382 9,822,121 37,223,900 2011 46,399 9,858,989 37,510,766 Source: State of California, Department of Finance, E-4 Population Estimates for Cities, Counties and the State, 2001-2010, with 2000 and 2010 Census Counts.Newport Beach,California,August 2011;E-1 Population Estimates for Cities,Counties and the State with Annual Percent Change-January 1,2010 and 2011.Newport Beach,California,May 2011. of As of January 1 of the indicated year. A-2 175097.8 036227 OS Income The following table sets forth the total personal income for the County, State and United States for the calendar years 2006 through 2010. TABLE A-2 PERSONAL INCOME COUNTY OF LOS ANGELES, STATE OF CALIFORNIA AND UNITED STATES Calendar Years 2006 through 2010 Total Personal Income Average Per Capita Year and Area (S in Thousands) Personal Income 2006 County 385,724,212 39,365 State 1,495,533,388 41,518 United States 11,268,100,000 37,709 2007 County 400,366,343 40,934 State 1,566,400,134 43,211 United States 11,912,300,000 39,4842 2008 County 412,638,667 42,168 State 1,610,319,388 43,993 United States 12,460,200,000 40,914 2009 County 402,459,119 41,063 State 1,528,457,253 41,353 United States 11,930,200,000 38,830 2010 County NW" N/A") State 1,590,279,298 42,578 United States 12,373,500,000 39,944 Source: Information from U.S.Department of Commerce-Bureau of Economic Analysis. All state and local area dollar estimates are in current dollars(not adjusted for inflation). Inst updated:April 21,2011 -new estimates for 2009;revised estimates for 2001-2008 Ol Expected to be released by May 2012. A-3 175097.8 036227 OS Industry The following table sets forth the annual average employment in the County for the years 2006 through 2010. TABLE A-3 COUNTY OF LOS ANGELES ANNUAL AVERAGE EMPLOYMENT (In Thousands) Industry 2006 2007 2008 2009 2010 Agriculture 7,600 7,500 6,900 6,200 6,200 Construction,Natural Resources and 161,500 162,000 149,600 121,400 108,600 Mining Manufacturing: 461,700 449,200 434,500 389,200 373,200 Durables 257,300 250,900 243,200 217,500 207,000 Nondurables 204,400 198,300 191,200 171,600 166,200 Trade,Transportation and Utilities: 814,100 818,500 803,300 742,700 739,800 Wholesale Trade 225,700 227,000 223,700 204,500 203,300 Retail Trade 423,300 426,000 416,500 387,000 386,000 Transportation,Warehousing and 165,200 165,600 163,100 151,200 150,600 Utilities Information 205,600 209,800 210,300 191,200 191,500 Financial Activities 246,700 243,800 233,300 216,000 209,500 Professional and Business Services 598,900 605,400 582,600 529,800 527,500 Educational and Health Services 480,800 492,700 505,800 514,600 522,000 Leisure and Hospitality 388,600 397,900 401,600 385,600 384,800 Other Services 145,200 147,100 146,100 137,900 136,700 Government 589,400 595,700 603,700 595,800 579,600 TOTAL ALL INDUSTRIES 4,100,100 4,129,600 4,077,600 3,830,300 3,779,300 Source: State Employment Development Department,Labor Market Information Division. A-4 175097.8 036227 OS Employment The following table sets forth the labor force, employment and unemployment figures, to the extent available, for the years 2007 through 2011 in the City, the County,the State and the United States. TABLE A-4 County of LOS ANGELES, State of California and United States Labor Force,Employment and Unemployment Annual averagettl(2) Civilian Civilian Civilian Civilian Unemployment Year and Area(l) Labor Force Employment Unemployment Rate 2007 City of Azusa N/A N/A N/A N/A County of Los Angeles 4,872,517 4,625,633 246,892 5.1 California 17,928,700 16,970,200 958,500 5.3 United States 153,124,000 146,047,000 7,078,000 4.6 2008 City of Azusa N/A N/A N/A N/A County of Los Angeles 4,934,750 4,565,467 369,283 7.5 California 18,191,000 16,883,400 1,307,600 7.2 United States 154,287,000 145,362,000 8,924,000 5.8 2009 City of Azusa N/A N/A N/A N/A County of Los Angeles 4,904,250 4,335,217 569,042 11.6 California 18,204,200 16,141,500 2,062,700 11.3 United States 154,142,000 139,877,000 14,265,000 9.3 2010 City of Azusa 21,500 18,600 2,900 13.7 County of Los Angeles 4,910,525 4,291,400 619,150 12.6 California 18,176,200 15,916,300 2,259,900 12.4 United States 153,885,000 139,070,000 14,815,000 9.6 2011 City of Azusa 21,500 18,700 2,900 13.3 County of Los Angeles 4,924,400 4,318,900 605,500 12.3 California 18,384,900 16,226,600 2,158,300 11.7 United States 153,616,000 139,873,000 13,743,000 9.0 Source: California Employment Development Department; U.S. Dept.of labor;Bureau of Labor Statistics. - OJ The State Employment Development Department has reported anunemploymentrate (not seasonally adjusted) within Los Angeles County of 12.1%for January 2012. (2) Data not seasonally adjusted. Data reflects March 2009 Benchmark. The State of California Employment Development Department, Labor Market Information Division (the "EDD"), preliminarily estimates that, on a seasonally unadjusted basis, the civilian labor force in the City in February 2012 was 21,500, of which approximately 2,800 persons were unemployed. A-5 175097.8 036227 OS Based on preliminary estimates of the EDD as of March 23, 2012, the County's unemployment rate in February 2012 of 12.1%, on a seasonally unadjusted basis,was below that of the City at 13.1%. The following table sets forth the principal employers in the City for fiscal year ended June 30, 2010. TABLE A-5 CITY OF AZUSA PRINCIPAL EMPLOYERS Fiscal Year 2010 [IUpdated Information to come_from_the Cityjs Business License Administration.] Percentage of City Employer Number of Employees Employment Northrop Grumman 1,300 8.21 Azusa Unified School District 1,064 6.72 Azusa Pacific University 1,200 7.58 Monrovia Nursery 671 4.24 City of Azusa 409 2.58 Costco 265 1.67 Cee-Jay Research and Sales 250 1.58 ABCO Insulation 200 1.26 Alliance Environmental Group 200 1.26 Magparts 175 1.11 Physician's Formula 167 1.06 Gale Banks Engineering 160 1.01 California Amforge 150 0.95 Stanley Steemer Carpet Cleaner 150 0.95 Buena Vista Food Products 122 0.77 Source: City of Azusa,California Comprehensive Annual Financial Report for Fiscal Year 2009-10. A-6 175097.8 036227 OS Building Permit Activity The following table sets forth building permit activity issued in the City from calendar year 2006 through 2010. TABLE A-6 CITY OF AZUSA BUILDING PERMIT ACTIVITY Calendar Years 2006 through 2010 (Dollars in Thousands) 2006 2007 2008 2009 2010 PERMIT VALUATION New Single-family $6,781.3 $43,584.9 $992.7 $907.4 $11,824.8 New Multi-family 3,538.6 1,587.4 0.0 0.0 0.0 Res. Alterations/Additions 751.0 720.0 1,261.8 1,414.0 803.3 Total Residential $11,070.9 $45,892.3 $2,254.5 $2,321.4 $12,628.1 New Commercial $0.0 $0.0 $834.8 $0.0 $872.4 New Industrial 0.0 0.0 0.0 0.0 0.0 New Other" 231.0 294.0 1,507.0 279.4 278.3 Com. Alterations/Additions 188.0 212.0 4,523.9 873.2 1,937.1 Total Nonresidential $419.0 $506.0 $6,865.7 $1,152.6 $3,087.8 NEW DWELLING UNITS Single Family 27 159 4 3 35 Multiple Family 26 11 0 0 0 TOTAL 53 170 4 3 35 Source: Construction Industry Research Board tit Includes churches and religious buildings, hospitals and institutional buildings, schools and educational buildings, residential garages,public works and utilities buildings and non-residential alterations and additions. A-7 175097.8 036227 OS Taxable Sales s The following table sets forth taxable sales transactions in the City for the calendar years 2004 through 2008. TABLE A-7 CITY OF AZUSA TAXABLE TRANSACTIONS BY TYPE OF BUSINESS Calendar Years 2004 through 2008 ($in Thousands) Type of Business 2004 2005 2006 2007") 20081'1 Apparel Stores 4,159 4,384 5,037 4,424 7,231 General Merchandise Specialty Stores(2) Food Stores 14,954 14,886 18,591 19,861 17,412 Eating and Drinking Establishments 35,095 36,705 37,021 36,706 39,022 Home Furnishings/Appliances 4,006 4,330 5,500 5,975 3,967 Building Materials 22,358 24,085 30,322 13,988 7,494 Automotive(3) 17,454 19,739 11,364 12,403 12,905 Service Station(') 44,970 54,554 53,917 68,501 73,638 Other Retail Stores(z) 154,125 160,880 179,027 184,096 168,443 Retail Stores Totals 297,121 319,562 340,779 345,954 330,111 All Other Outlets 102,317 96,385 103,458 97,128 98,936 TOTAL ALL OUTLETS 399,438 415,947 444,237 443,082 429,047 Source:California State Board of Equalization,Taxable Sales in California. t0 In early 2007,the California State Board of Equalization began a process of converting business codes of sales and use tax permit Owners to North American Industry Classification System codes. As a result of the coding change process, industry data for 2007 and 2008 are not comparable with data from prior years. tat In 2007 and 2008,industry data for Specialty Stores were included in Other Retail Stores. 131 Prior to 2007, industry data for Service Stations were included in Automotive. The aggregate amount of taxable sales transactions for Service Stations was approximately $1.9 billion in 2004, approximately $2.3 billion in 2005 and approximately$2.6 billion in 2006. A-8 175097.8 036227 OS TABLE A-8 CITY OF AZUSA TAXABLE TRANSACTIONS BY TYPE OF BUSINESS Calendar Years 2009 through 2010 ($in Thousands) Type of Business 2009 2010 Motor Vehicle and Parts Dealers 10,731 11,323 Home Furnishings and Appliance Stores 3,453 3,714 Building Material and Garden Equip. and Supplies 1,904 1,857 Food and Beverage Stores 16,625 17,037 Gasoline Stations 55,000 62,470 Clothing and Clothing Accessories Stores 11,165 11,826 General Merchandise Stores Food Services and Drinking Places 38,975 39,400 Other Retail Group 135,364 144,202 All Other Outlets 74,917 78,453 TOTAL ALL OUTLETS 348,134 370,283 Source:California State Board of Equalization,Taxable Sales in California. Direct and Overlapping Debt Report Set forth below is a direct and overlapping debt report (the"Debt Report")prepared by California Municipal Statistics Inc. The Debt Report is included for general information purposes only. The City makes no representations as to its completeness or accuracy. The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long-term obligations generally are not payable from revenues of the City (except as indicated) nor are they necessarily obligations secured by property within the City. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. A-9 175097.8 036227 OS TABLE A-9 CITY OF AZUSA DIRECT AND OVERLAPPING DEBT (as of April 1,2012) 2011-12 Assessed Valuation: $3,198,476,153 Redevelopment Incremental Valuation: 740.823.503 Adjusted Assessed Valuation: $2,457,652,650 OVERLAPPING TAX AND ASSESSMENT DEBT: %Applicable Debt 4/1/12 Los Angeles County Flood Control District 0.282% $ 104,890 Metropolitan Water District 0.052 102,203 Citrus Community College District 14.941 12,088,808 Mount San Antonio Community College District 0.035 78,918 Azusa Unified School District 71.529 56,797,417 Covina Valley Unified School District 0.327 315,025 Duarte Unified School District 0.983 530,199 City of Azusa Community Facilities District No.2002-1 100. 7,880,000 City of Azusa Community Facilities District No.2005-1 I.A.No. 1 100. 50,370,000 Los Angeles County Regional Park and Open Space Assessment District 0.265 452,421 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $128,719,881 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Los Angeles County General Fund Obligations 0.265% $ 3,942,691 Los Angeles County Superintendent of Schools Certificates of Participation 0.265 29,865 Los Angeles County Sanitation District No.22 Authority 10.979 1,748,105 Azusa Unified School District Certificates of Participation 71.529 5,836,766 Covina Valley Unified School District Certificates of Participation 0.327 16,350 City of Azusa General Fund Obligations 100. 3,025,000 al City of Azusa Pension Obligation Bonds 100. 5,555,000 TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT $20,153,777 Less: Los Angeles County obligations supported by landfill revenues 47.184 TOTAL NET DIRECT AND OVER GENERAL FUND DEBT $20,106,593 GROSS COMBINED TOTAL DEBT $148,873,658 tZ] NET COMBINED TOTAL DEBT $148,826,474 (iJ Excludes issue to be sold. (zl Excludes tax and revenue anticipation notes,enterprise revenue,mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to 2011-12 Assessed Valuation: Total Overlapping Tax and Assessment Debt..........................4.02% Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($8,580,000).....................................0.35% Gross Combined Total Debt.....................................................6.06% Net Combined Total Debt........................................................6.06% - STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/11: $0 Source:California Municipal Statistics Inc. A-10 175097.8 036227 OS Assessed Valuation and Tax Collections Property taxes attach as an enforceable lien on property as of March 1, each year. Taxes are levied on July 1, and are payable in two installments no later than December 10, and April 10, respectively, of each year. The County of Los Angeles bills and collects the property taxes and remits them to the City in installments during the year. City property tax revenues are recognized when received in cash except at year-end when they are accrued pursuant to the modified accrual basis of accounting. The following table sets forth the assessed property valuations within the City for fiscal years 2007 through 2011. Assessed valuations include homeowners and business inventory exemption, the taxes on which have been paid by the State. Figures in the final column below consist of total assessed valuations less redevelopment project area incremental assessed valuations, the taxes on which are payable to the Azusa Redevelopment Agency, which was dissolved effective October 1, 2011 pursuant to ABX1 26. ABX1 26 requires that successor agencies take over from the former redevelopment agencies and perform certain functions, including (i) continue making payments on existing legal obligations of the former redevelopment agencies and not incur any additional debt and (ii) wind down the affairs of the former redevelopment agencies and return the funds of liquidated assets to the county auditor-controller, who will in tum distribute these funds to all taxing entities. Any tax increment remaining after the payment of enforceable legal obligations, pass-through payments and limited administrative costs of the former redevelopment agencies will be distributed as property tax revenue to the appropriate taxing entities, including the City general fund. The actual amount of property tax revenue to be received by the City will be based on an audit of the legal obligations of the Azusa Redevelopment Agency. Until the legal obligations of the Azusa Redevelopment Agency are evaluated by the oversight boards established by ABX1 26 and the Auditor-Controller of the County, the City is unable to quantify the amount of additional property tax revenues to be received. TABLE A-10 CITY OF AZUSA ASSESSED PROPERTY VALUATIONS Fiscal Years 2007 through 2011 Fiscal Total Year Secured Unsecured Valuations 2007 $2,307,392,525 $68,162,253 $2,375,554,778 2008 2,514,920,977 74,038,048 2,588,959,025 2009 2,474,468,333 74,013,744 2,548,482,077 2010 2,226,506,719 66,363,721 2,292,870,440 2011 2,184,060,386 68,627,065 2,252,687,451 Source:County of Los Angeles Auditor-Controller A-11 175097.8 036227 OS The following table shows the ten largest taxpayers in the City based on the Fiscal Year 2011-12 s tax roll. TABLE A-11 PRINCIPAL PROPERTY TAXPAYERS Fiscal Year 2011-12 2011-2012 Percentage Secured Assessed of Assessed Property Owner Valuation Land Use Value"' 1,Northrop Grumman Systems $111,346,020 Industrial 13.77% 2. PPF Industrial 823 985 8th Street LP 30,727,500 Industrial 3.80 3. Citrus Crossing Prop Fee LLC 21,675,726 Commercial 2.68 4. Costco Wholesale Corp 19,303,996 Commercial 2.39 5. Walton CWCA Foothill 40 LLC 18,112,653 Industrial 2.24 6. Azusa Holdings LLC 15,378,674 Commercial 1.90 7. Vogel Ontario 11,393,193 Industrial 1.41 8. California Amforge Corp 10,480,614 Industrial 1.30 9. Cityview Citrus Crossing 102 LP 10,447,242 Commercial 1.29 10. Kae Soon Choe 10,407,983 Multi-Family Residential 1.29 Total $259,273,601 32.07% Source: Urban Futures,Inc. Based on Fiscal Year 2011-12 secured assessed valuation of$808,553,190. The following table shows the City's property tax collections and adjustments for the fiscal years indicated. TABLE A-12 PROPERTY TAX COLLECTIONS Fiscal Years 2007 through 2011 Amount Collections Collected in Total Percent of Taxes within Percent of Subsequent Collections Levy to Fiscal Year Levied Fiscal Year Levy Years to Date Date 2007 $3,236,313 $2,944,985 91.0% $(7,502) $2,937,483 90.8% 2008 3,569,732 3,200,875 89.7 (20,189) 3,180,685 89.1 2009 3,841,664 3,519,967 91.6 (3,643) 3,516,324 91.5 2010 3,815,354 3,622,701 95.0 (29,760) 3,592,941 94.2 2011 3,492,186 3,261,283 93.4 (3,421) 3,257,862 93.3 Source:County of Los Angeles Auditor-Controller;City of Azusa Administrative Services Finance Department. Education There is one unified(K-12) school district in Azusa. Approximately 10,086 students attend Azusa Unified schools which include eleven elementary, three middle and three high schools, as well as an Alternative Education Center A-12 175097.8 036227 OS Public school enrollment for the school years 2006-07 through 2010-11 is set forth in the following table. TABLE A-11 City of azusa Public School Enrollment Grade Level 2006-07 2007-08 2008-09 2009-10 2010-11 K-8 7827 7584 7538 7345 7064 9-12 3273 3354 3382 3246 3147 Total 11100 10938 10920 10591 10211 Source: California Department of Education,Educational Demographics Unit. Total enrollment numbers include ungraded elementary and secondary students. Azusa is also home to Azusa Pacific University. Azusa Pacific University was founded in 1899, and today the institution offers accredited undergraduate and graduate level education to its more than 9,200 current students. Transportation Azusa is connected to neighboring cities via major freeways and highways. The Foothill Freeway (State Route 210) extends West through Pasadena and East to San Bernardino County. The Orange Freeway (State Route 57) connects Azusa to Orange County, Interstate 10 connects Azusa to downtown Los Angeles via the San Gabriel River freeway(State Route 605). The City of Azusa operates a shuttle service to and from the Covina Metrolink station. The service is offered Monday through Friday. The commuter rail service connects Azusa to San Bernardino County. The Foothill Transit Bus System, Dial-A-Ride and Rideshare programs offer non-driving commuters transportation throughout the city. A-13 175097.8 036227 OS APPENDIX B SUMMARY OF THE INDENTURES B-1 175097.8 036227 OS APPENDIX C AUDITED FINANCIAL STATEMENTS OF THE CITY AS OF JUNE 30,2011 C-1 175097.8 036227 OS APPENDIX D PROPOSED FORMS OF BOND COUNSEL OPINIONS Upon delivery of the Water Bonds, Hawkins Delafield& Wood LLP, Bond Counsel to the City, proposes to issue an approving opinion in substantially the followingform: [Closing Date] City of Azusa Azusa, California Ladies and Gentlemen: We have acted as Bond Counsel to the City of Azusa (the "City") in connection with its issuance of$ aggregate principal amount of Water System Refunding Revenue Bonds, Series 2012A (the "Bonds"), pursuant to the Indenture, dated as of June 1, 2012 (the "Indenture"), by and between the City and Wells Fargo Bank, National Association, as trustee thereunder (the "Trustee"), California Government Code Sections 53570 et seq. (as amended, the "Refunding Law")and a resolution of the City authorizing the issuance of the Bonds (the "Resolution'). The Bonds are payable from Net Revenues from the Water Fund held by the City and any other amounts (including proceeds of the sale of the Bonds) held by the Trustee in any fund or account established under the Indenture, as specified therein. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Indenture. In such connection, we have reviewed the Indenture, the Tax Certificate, dated the date hereof (the "Tax Certificate), executed by the City, certificates of the City, the Trustee and others, opinions of the City Attorney and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. Certain agreements, requirements and procedures contained or referred to in the Indenture, the Tax Certificate and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. No opinion is expressed herein as to any Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than ourselves. 175097.8 036227 OS a We are of the opinion that: 1. The Bonds constitute the valid and binding limited obligations of the City, enforceable in accordance with their terms and the terms of the Indenture. 2. The Indenture has been duly executed and delivered by, and constitutes the valid and binding obligation of, the City. The Indenture creates a valid pledge, to secure the payment of the principal of and interest on the Bonds,of the Net Revenues from the Water Fund held by the City and any other amounts (including proceeds of the sale of the Bonds) held by the Trustee in any fund or account established pursuant to the Indenture, except the Rebate Fund, subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein. 3. Under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described below, (i) interest on the Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the"Code")and (ii) interest on the Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In rendering our opinion, we have relied on certain representations, certifications of fact, and statements of reasonable expectations made by the City and others in connection with the Bonds, and we have assumed compliance by the City with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code. The Code establishes certain requirements that must be met subsequent to the issuance and delivery of the Bonds in order that, for Federal income tax purposes, interest on the Bonds be excluded from gross income pursuant to Section 103 of the Code. These requirements include, but are not limited to, requirements relating to the use and expenditure of Bond proceeds, restrictions on the investment of Bond proceeds prior to expenditure and the requirement that certain earnings be rebated to the Federal government. Noncompliance with such requirements may cause interest on the Bonds to become subject to Federal income taxation retroactive to their date of issue, . irrespective of the date on which such noncompliance occurs or is ascertained. On the date of delivery of the Bonds, the City will execute the Tax Certificate containing provisions and procedures pursuant to which such requirements can be satisfied. In executing the Tax Certificate and Agreement, the City covenants that it will comply with the provisions and procedures set forth therein and that it will do and perform all acts and things necessary or desirable to assure that interest paid on the Bonds will, for Federal income tax purposes, be excluded from gross income. In rendering the opinion in this paragraph 3, we have relied upon and assumed (i) the material accuracy of the representations, statements of intention and reasonable expectation, and certifications of fact contained in the Tax Certificate with respect to matters affecting the status of interest paid on the Bonds, and (ii) compliance by the City with the procedures and covenants set forth in the Tax Certificate as to such tax matters. 4. Under existing statutes, interest on the Bonds is exempt from present State of California personal income taxes. Except as stated in paragraphs (3) and (4) above, we express no opinion as to any other Federal, state or local tax consequences arising with respect to the Bonds or the ownership or disposition thereof. Furthermore, we express no opinion as the effect of any action hereafter taken or not taken in reliance upon an opinion of other counsel on the exclusion from gross income for Federal income tax purposes of interest on the Bonds,or under state and local tax law. The foregoing opinions are qualified to the extent that the enforceability of the Bonds and the Indenture may be limited by bankruptcy, moratorium, insolvency or other laws affecting creditor's rights 3 175097.8 036227 OS V I or remedies and is subject to general principles of equity (regardless of whether such enforceability is considered in equity or at law), to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against governmental entities in the State of California. We render our opinion under existing statutes and court decisions as of the date hereof, and we assume no obligation to update, revise or supplement this opinion after the issue date to reflect any action hereafter taken or not taken, or any facts or circumstances, or any change in law or in interpretations thereof, or otherwise,that may hereafter arise or occur, or for any other reason. Very truly yours, 4 175097.8 036227 OS Upon delivery of the Electric Bonds,Hawkins Delafield& Wood LLP, Bond Counsel to the City, proposes to issue an approving opinion in substantially thefollowingform: [Closing Date] City of Azusa Azusa, California Ladies and Gentlemen: We have acted as Bond Counsel to the City of Azusa (the "City") in connection with its issuance of$ aggregate principal amount of Electric System Refunding Revenue Bonds, Series 2012B (the "Bonds"), pursuant to the Indenture, dated as of June 1, 2012 (the "Indenture"), by and between the City and Wells Fargo Bank, National Association, as trustee thereunder (the "Trustee"), California Government Code Sections 53570 et seq. (as amended,the "Refunding Law")and a resolution of the City authorizing the issuance of the Bonds (the "Resolution"). The Bonds are payable from Net Revenues from the Electric Fund held by the City and any other amounts (including proceeds of the sale of the Bonds) held by the Trustee in any fund or account established under the Indenture, as specified therein. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Indenture. In such connection, we have reviewed the Indenture, the Tax Certificate, dated the date hereof (the "Tax Certificate), executed by the City, certificates of the City, the Trustee and others, opinions of the City Attorney and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. Certain agreements, requirements and procedures contained or referred to in the Indenture, the Tax Certificate and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terns and conditions set forth in such documents. No opinion is expressed herein as to any Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than ourselves. We are of the opinion that: 1. The Bonds constitute the valid and binding limited obligations of the City, enforceable in accordance with their terms and the terms of the Indenture. 2. The Indenture has been duly executed and delivered by, and constitutes the valid and binding obligation of, the City. The Indenture creates a valid pledge, to secure the payment of the principal of and interest on the Bonds, of the Net Revenues from the Electric Fund held by the City and D-1 175097.8 036227 OS f any other amounts (including proceeds of the sale of the Bonds) held by the Trustee in any fund or account established pursuant to the Indenture, except the Rebate Fund, subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein. 3. Under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described below, (i) interest on the Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the"Code") and (ii) interest on the Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In rendering our opinion, we have relied on certain representations, certifications of fact, and statements of reasonable expectations made by the City and others in connection with the Bonds, and we have assumed compliance by the City with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code. The Code establishes certain requirements that must be met subsequent to the issuance and delivery of the Bonds in order that, for Federal income tax purposes, interest on the Bonds be excluded from gross income pursuant to Section 103 of the Code. These requirements include, but are not limited to, requirements relating to the use and expenditure of Bond proceeds, restrictions on the investment of Bond proceeds prior to expenditure and the requirement that certain earnings be rebated to the Federal government. Noncompliance with such requirements may cause interest on the Bonds to become subject to Federal income taxation retroactive to their date of issue, irrespective of the date on which such noncompliance occurs or is ascertained. On the date of delivery of the Bonds, the City will execute the Tax Certificate containing provisions and procedures pursuant to which such requirements can be satisfied. In executing the Tax Certificate and Agreement, the City covenants that it will comply with the provisions and procedures set forth therein and that it will do and perform all acts and things necessary or desirable to assure that interest paid on the Bonds will, for Federal income tax purposes, be excluded from gross income. In rendering the opinion in this paragraph 3, we have relied upon and assumed (i) the material accuracy of the representations, statements of intention and reasonable expectation, and certifications of fact contained in the Tax Certificate with respect to matters affecting the status of interest paid on the Bonds, and (ii) compliance by the City with the procedures and covenants set forth in the Tax Certificate as to such tax matters. 4. Under existing statutes, interest on the Bonds is exempt from present State of California personal income taxes. Except as stated in paragraphs (3) and (4) above, we express no opinion as to any other Federal, state or local tax consequences arising with respect to the Bonds or the ownership or disposition thereof. Furthermore, we express no opinion as the effect of any action hereafter taken or not taken in reliance upon an opinion of other counsel on the exclusion from gross income for Federal income tax purposes of interest on the Bonds,or under state and local tax law. The foregoing opinions are qualified to the extent that the enforceability of the Bonds and the Indenture may be limited by bankruptcy, moratorium, insolvency or other laws affecting creditor's rights or remedies and is subject to general principles of equity (regardless of whether such enforceability is considered in equity or at law), to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against governmental entities in the State of California. We render our opinion under existing statutes and court decisions as of the date hereof, and we assume no obligation to update, revise or supplement this opinion after the issue date to reflect any action D-2 175097.8 036227 OS hereafter taken or not taken, or any facts or circumstances, or any change in law or in interpretations thereof, or otherwise,that may hereafter arise or occur, or for any other reason. Very truly yours, D-3 175097.8 036227 OS APPENDIX E BOOK-ENTRY ONLY SYSTEM The information in this Appendix E concerning The Depository Trust Company ("DTC'), New York, New York, and DTC's book entry system has been obtained from DTC, and the City and the Underwriter take no responsibility for the completeness or accuracy thereof. The City and the Underwriter cannot and do not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Water Bonds and Electric Bonds (collectively, the "Bonds'), (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or(c) redemption or other notices sent to DTC or Cede& Co., its nominee, as the registered owner of the Bonds, or that they will do so on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Oficial Statement. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. 1. The Depository Trust Company, New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity of such issue,and will be deposited with DTC. 2. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries)that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC,National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. 3. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Security("Beneficial Owner") is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the E-1 175097.8 036227 OS Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. 4. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede& Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. 6. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede &Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and other payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the City or its agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and other payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City, disbursement of such payments to Direct Participants will be the responsibility of DTC, and.disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. If applicable, a Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the City's designated agent, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's interest in the Bonds, on DTC's records, to E-2 175097.8 036227 OS the City's designated agent. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Bonds to the DTC account of the City's designated agent. 10. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the City. Under such circumstances, in the event that a successor depository is not obtained, security certificates are required to be printed and delivered. 11. The City may decide to discontinue use of the Water System of book-entry-only transfers through DTC (or a successor securities depository). In that event,certificates will be printed and delivered to DTC and the requirements of the applicable Indenture with respect to certificated Bonds will apply. 12. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. NONE OF THE CITY, THE UNDERWRITER OR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS WITH RESPECT TO THE PAYMENTS OR THE PROVIDING OF NOTICE TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS OR THE SELECTION OF BONDS FOR REDEMPTION. E-3 1750928 036227 OS Y APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT (Water Bonds) This Continuing Disclosure Agreement (this "Disclosure Agreement"), dated as of June 1, 2012, is executed and delivered by the City of Azusa (the"City") and Wells Fargo Bank, National Association, as dissemination agent hereunder (the "Dissemination Agent") in connection with the execution and delivery of the City of Azusa Water System Refunding Revenue Bonds, Series 2012A (the "Water Bonds"). The Water Bonds are being issued pursuant to the Indenture, dated as of June 1, 2012 (the "Water Indenture"), by and between the City and Wells Fargo Bank, National Association, as trustee thereunder(the"Trustee"). The City hereby covenants and agrees as follows: Section 1. Purpose of Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the City for the benefit of the Owners and Beneficial Owners of the Water Bonds and in order to assist the Participating Underwriter in complying with the Rule(herein defined). Section 2. Definitions. In addition to the definitions set forth in the Water Indenture, which apply to any capitalized term used in this Disclosure Agreement, unless otherwise defined in this Section, the following capitalized terms have the following meanings: "Annual Report" means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" means any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Certificates (including persons holding Certificates through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Certificates for federal income tax purposes. "Commission"means the Securities and Exchange Commission. "Dissemination Agent" means Wells Fargo Bank, National Association, and any person subsequently appointed in writing by the City to act as the City's agent in complying with the filing requirements of the Rule. "EMMA System" shall mean the MSRB's Electronic Municipal Market Access system. "Listed Event"means any of the events listed in Section 5(a)of this Disclosure Agreement. "MSRB" means the Municipal Securities Rulemaking Board established pursuant to Section 1513(b)(1) of the Securities Exchange Act of 1934, or any successor thereto or to the functions of the MSRB contemplated by this Disclosure Agreement. "Participating Underwriter" means any of the original purchasers of the Water Bonds required to comply with the Rule in connection with the offer and sale of the Water Bonds. "Rule" means Rule 15c2-12 adopted by the Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time, including any official interpretations thereof issued either before or after the effective date of this Disclosure Agreement which are applicable hereto. F-1 175097.8 036227 OS A. Section 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the City's fiscal year, commencing with the report for the City's fiscal year ended June 30, 2012, provide to the MSRB copies of an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the City's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under subsection 5(b). (b) Not later than 15 Business Days prior to the date specified in subsection (a) above for providing an Annual Report to the MSRB, the City shall provide such Annual Report to the Dissemination Agent (if one has been appointed). If the City is unable to provide to the MSRB an Annual Report by the date specified in subsection (a) above, the City shall send a notice of this event to the MSRB. (c) The Dissemination Agent (if one has been appointed) shall, if the Annual Report has been famished to the Dissemination Agent, file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Agreement,and stating the date it was provided. Section 4. Content of Annual Reports. The City's Annual Report shall contain or include by reference the following: (a) The audited financial statements of the City for the fiscal year most recently ended, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board and reporting standards as set forth by the State Controller in "State of California Accounting Standards and Procedures for Counties." if the City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to subsection 3(a) of this Disclosure Agreement, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, dated , 2012, relating to the Water Bonds, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) To the extent not included in the financial statements, the following types of information will be provided in one or more reports: (i) the Water System portion of the table entitled "PERS Annual Pension Costs" as it appears in the Official Statement; (ii) updated information comparable to the information contained under "AZUSA LIGHT AND WATER DEPARTMENT - Public Agency Retirement System - Water System Share of PARS Plan and Retirement Enhancement Plan" as it appears in the Official Statement; (iii) updated information comparable to the information contained under "AZUSA LIGHT AND WATER DEPARTMENT-Other Post Employment Benefits -Water System Share of OPEB Costs" as it appears in the Official Statement; (iv) the table entitled "San Gabriel Basin Operating Safe Yield" as it appears in the Official Statement; F-2 175097.8 036227 OS (v) the table entitled "Adjudicated Water Rights" and the paragraph immediately preceding such table as it appears in the Official Statement; (vi) the table entitled "Water Production"as it appears in the Official Statement; (vii) the table entitled"Sale of Water"as it appears in the Official Statement; (viii) the table entitled "Ten Largest Customers" as it appears in the Official Statement; (ix) the table entitled "Schedule of Rate Increases" as it appears in the Official Statement; (x) the table entitled "Schedule of RWCAF Charges" as it appears in the Official Statement; (xi) the table entitled "Operating Expenses"as it appears in the Official Statement; (xii) the table entitled "Historical Coverage of Water System Obligations" as it appears in the Official Statement; (xiii) updated information comparable to the information contained in the second paragraph and the third paragraph in the section entitled "THE WATER SYSTEM - Sources of Water"as such information appears in the Official Statement; and (xiv) updated information comparable to the information contained in the third paragraph in the section entitled "THE WATER SYSTEM - Replacement Water" as such information appears in the Official Statement (which third paragraph sets forth information previously included in the seventh paragraph in the section entitled "THE WATER SYSTEM - Sources of Water" of the Official Statement for the Azusa Public Financing Authority Parity Revenue Bonds (Water System Capital Improvements Program) Series 2006). Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been submitted to the MSRB through its EMMA System. The contents, presentation and format of the Annual Reports may be modified from time to time as determined in the judgment of the City to conform to changes in accounting or disclosure principles or practices and legal requirements followed by or applicable to the City or to reflect changes in the business, structure, operations, legal form of the City or any mergers, consolidations, acquisitions or dispositions made by or affecting the City; provided that any such modifications shall comply with the requirements of the Rule. Section 5. Reporting of Listed Events. (a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Water Bonds: (i) principal and interest payment delinquencies; (ii) non-payment related defaults, if.material; F-3 175097.8 036227 OS i (iii) unscheduled draws on debt service reserves reflecting financial difficulties of the City; (iv) unscheduled draws on any credit enhancements reflecting financial difficulties of the City; (v) substitution of any credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices of determinations with respect to the tax status of the Water Bonds, or other material events affecting the tax status of the Water Bonds; (vii) modifications to the rights of Owners of the Water Bonds, if material; (viii) bond calls other than scheduled sinking fund redemptions, if material, and tender offers; (ix) defeasances; (x) release, substitution, or sale of property, if any, securing repayment of the Water Bonds, if material; (xi) rating changes; (xii) bankruptcy, insolvency, receivership or similar event of the City; provided that for the purposes of the event identified in this clause (xii), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the City in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or government authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City; (xiii) the consummation of a merger, consolidation,or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms,if material; and (xiv) appointment of a successor or additional trustee or the change of name of a trustee, if material. Certain of the foregoing events may not be applicable to the Water Bonds. (b) Whenever the City obtains knowledge of the occurrence of a Listed Event,the City shall file a notice of such occurrence not later than ten(10)business days after such occurrence with the MSRB through its EMMA System. F-4 175097.8 036227 OS i v Section 6. Termination of Reporting Obligation. The City's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior prepayment or payment in full of all of the Water Bonds. If such termination occurs prior to the final maturity of the Water Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under subsection 5(b). Section 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing sixty days written notice to the City. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Agreement.The initial Dissemination Agent is the City. Section 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of subsection 3(a), Section 4, or subsection 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Water Bonds, or the type of business conducted; (b) The undertakings, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel,have complied with the requirements of the Rule at the time of the original execution and delivery of the Water Bonds, after taking into account any amendments or interpretations of the Rule,as well as any change in circumstances; and (c) The amendment or waiver either(i) is approved by the Owners of the Water Bonds in the same manner as provided in the Water Indenture for amendments to the Water Indenture with the consent of Owners of the Water Bonds, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Owners or Beneficial Owners of the Water Bonds. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i)notice of such change shall be given in the same manner as for a Listed Event under subsection 5(b), and (ii) the Annual Report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City from disseminating any other information, including the information then contained in Appendix B to the City's official statements relating to debt issuances, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the City shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. F-5 175097.8 036227 OS Section 10. Default. In the event of a failure of the City to comply with any provision of this ` Disclosure Agreement, any Owner or Beneficial Owner of the Water Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Agreement; provided that any such action may be instituted only in the Superior Court of the State of California in and for the City of Azusa or in a U.S. District Court in or nearest to Los Angeles County. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Water Indenture with respect to the Water Bonds, and the sole remedy under this Disclosure Agreement in the event of any failure of the City to comply with this Disclosure Agreement shall be an action to compel performance, and no person or entity shall be entitled to recover monetary damages under this Disclosure Agreement. Section 11. Duties Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the City agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including reasonable attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Water Bonds. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter, the Owners and Beneficial Owners from time to time of the Water Bonds, and shall create no rights in any other person or entity. Section 13. Governing Law. This Disclosure Agreement shall be governed by the laws of the State of California and the federal securities laws. Section 14. Transmission of Notices Documents and Information. All notices, documents and information provided to the MSRB shall be provided in an electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB. Section 15. Effective Date. This Disclosure Agreement shall be effective upon the issuance of the Water Bonds. IN WITNESS WHEREOF, the City of Azusa has executed this Continuing Disclosure Agreement as of the date first set forth above. CITY OF AZUSA By: Name: Title: F-6 175097.8 036227 OS i c FORM OF CONTINUING DISCLOSURE AGREEMENT (Electric Bonds) This Continuing Disclosure Agreement (this "Disclosure Agreement"), dated as of June 1, 2012, is executed and delivered by the City of Azusa (the"City") and Wells Fargo Bank, National Association, as dissemination agent hereunder (the "Dissemination Agent") in connection with the execution and delivery of the City of Azusa Electric System Refunding Revenue Bonds, Series 2012B (the "Electric Bonds"). The Electric Bonds are being issued pursuant to the Indenture, dated as of June 1, 2012 (the "Electric Indenture"), by and between the City and Wells Fargo Bank, National Association, as trustee thereunder(the"Trustee"). The City hereby covenants and agrees as follows: Section 1. Pumose of Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the City for the benefit of the Owners and Beneficial Owners of the Electric Bonds and in order to assist the Participating Underwriter in complying with the Rule(herein defined). Section 2. Definitions. In addition to the definitions set forth in the Electric Indenture, which apply to any capitalized term used in this Disclosure Agreement, unless otherwise defined in this Section,the following capitalized terns have the following meanings: "Annual Report"means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" means any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Certificates (including persons holding Certificates through nominees, depositories or other intermediaries), or(b) is treated as the owner of any Certificates for federal income tax purposes. "Commission"means the Securities and Exchange Commission. "Dissemination Agent" means Wells Fargo Bank, National Association, and any person subsequently appointed in writing by the City to act as the City's agent in complying with the filing requirements of the Rule. "EMMA System" shall mean the MSRB's Electronic Municipal Market Access system. "Listed Event"means any of the events listed in Section 5(a) of this Disclosure Agreement. "MSRB" means the Municipal Securities Rulemaking Board established pursuant to Section 1513(b)(1) of the Securities Exchange Act of 1934, or any successor thereto or to the functions of the MSRB contemplated by this Disclosure Agreement. "Participating Underwriter" means any of the original purchasers of the Electric Bonds required to comply with the Rule in connection with the offer and sale of the Electric Bonds. "Rule" means Rule 15c2-12 adopted by the Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time, including any official interpretations thereof issued either before or after the effective date of this Disclosure Agreement which are applicable hereto. F-7 175097.8 036227 OS Section 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to,not later than nine months after the end of the City's fiscal year, commencing with the report for the City's fiscal year ended June 30, 2012, provide to the MSRB copies of an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the City's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under subsection 5(b). (b) Not later than 15 Business Days prior to the date specified in subsection (a) above for providing an Annual "Report to the MSRB, the City shall provide such Annual Report to the Dissemination Agent (if one has been appointed). If the City is unable to provide to the MSRB an Annual Report by the date specified in subsection (a) above, the City shall send a notice of this event to the MSRB. (c) The Dissemination Agent (if one has been appointed) shall, if the Annual Report has been furnished to the Dissemination Agent, file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Agreement,and stating the date it was provided. Section 4. Content of Annual Reports. The City's Annual Report shall contain or include by reference the following: (a) The audited financial statements of the City for the fiscal year most recently ended, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board and reporting standards as set forth by the State Controller in"State of California Accounting Standards and Procedures for Counties." If the City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to subsection 3(a) of this Disclosure Agreement, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, dated , 2012, relating to the Electric Bonds, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) To the extent not included in the financial statements,the following types of information will be provided in one or more reports: (i) the Electric System portion of the table entitled "PERS Annual Pension Costs"as it appears in the Official Statement; (ii) updated information comparable to the information contained under "AZUSA LIGHT AND WATER DEPARTMENT - Public Agency Retirement System - Electric System Share of PARS Plan and Retirement Enhancement Plan"as it appears in the Official Statement; (iii) updated information comparable to the information contained under "AZUSA LIGHT AND WATER DEPARTMENT - Other Post Employment Benefits - Electric System Share of OPEB Costs"as it appears in the Official Statement; (iv) the table entitled "Electric System Facilities" as it appears in the Official Statement; F-8 175097.8 036227 OS (v) the table entitled "Electric System Power Supply" as it appears in the Official Statement; (vi) the table entitled "Five Year History of Rates" as it appears in the Official Statement; (vi) the table entitled "Customers, Sales, Revenues and Demand" as it appears in the Official Statement; (viii) the table entitled "Ten Largest Power Customers" as it appears in the Official Statement; (ix) the table entitled "Outstanding Take-or-Pay Obligations" as it appears in the Official Statement; (x) the table entitled "Historical Operating Results" as it appears in the Official Statement; (xi) updated information comparable to the information in the section entitled "THE ELECTRIC SYSTEM - Short-Term Wholesale Transactions" as such information appears in the Official Statement; (xii) updated information comparable to the information in the section entitled "THE ELECTRIC SYSTEM -Transfers to the General Fund of the City"as such information appears in the Official Statement; and (xiii) updated information comparable to the information in the section entitled "THE ELECTRIC SYSTEM -Cash Reserves"as such information appears in the Official Statement. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been submitted to the MSRB through its EMMA System. The contents, presentation and format of the Annual Reports may be modified from time to time as determined in the judgment of the City to conform to changes in accounting or disclosure principles or practices and legal requirements followed by or applicable to the City or to reflect changes in the business, structure, operations, legal form of the City or any mergers, consolidations, acquisitions or dispositions made by or affecting the City; provided that any such modifications shall comply with the requirements of the Rule. Section 5. Reporting of Listed Events. (a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Electric Bonds: (i) principal and interest payment delinquencies; (ii) non-payment related defaults,if material; (iii) unscheduled draws on debt service reserves reflecting financial difficulties of the City; F-9 175097.8 036227 OS (iv) unscheduled draws on any credit enhancements reflecting financial difficulties of the City; (v) substitution of any credit or liquidity providers,or their failure to perform; (vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices of determinations with respect to the tax status of the Electric Bonds, or other material events affecting the tax status of the Electric Bonds; (vii) modifications to the rights of Owners of the Electric Bonds, if material; (viii) bond calls other than scheduled sinking fund redemptions, if material, and tender offers; (ix) defeasances; (x) release, substitution, or sale of property, if any, securing repayment of the Electric Bonds,if material; (xi) rating changes; (xii) bankruptcy, insolvency, receivership or similar event of the City; provided that for the purposes of the event identified in this clause (xii), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the City in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or government authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City; (xiii) the consummation of a merger,consolidation,or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions,other than pursuant to its terms, if material; and (xiv) appointment of a successor or additional trustee or the change of name of a trustee, if material. Certain of the foregoing events may not be applicable to the Electric Bonds. (b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall file a notice of such occurrence not later than ten(10)business days after such occurrence with the MSRB through its EMMA System. Section 6. Termination of Reporting Obligation. The City's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior prepayment or payment in full of all of the Electric Bonds. If such termination occurs prior to the final maturity of the Electric Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under subsection 5(b). F-10 175097.8 036227 OS Section 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing sixty days written notice to the City. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Agreement. The initial Dissemination Agent is the City. Section 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of subsection 3(a), Section 4, or subsection 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Electric Bonds, or the type of business conducted; (b) The undertakings, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original execution and delivery of the Electric Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) The amendment or waiver either (i) is approved by the Owners of the Electric Bonds in the same manner as provided in the Electric Indenture for amendments to the Electric Indenture with the consent of Owners of the Electric Bonds, or (ii) does not, in the opinion of nationally recognized bond counsel,materially impair the interests of the Owners or Beneficial Owners of the Electric Bonds. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i)notice of such change shall be given in the same manner as for a Listed Event under subsection 5(b), and (ii) the Annual Report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City from disseminating any other information, including the information then contained in Appendix B to the City's official statements relating to debt issuances, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the City shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the City to comply with any provision of this Disclosure Agreement, any Owner or Beneficial Owner of the Electric Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Agreement; provided that any such F-11 175097.8 036227 OS r action may be instituted only in the Superior Court of the State of California in and for the City of Azusa c or in a U.S. District Court in or nearest to Los Angeles County. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Electric Indenture with respect to the Electric Bonds, and the sole remedy under this Disclosure Agreement in the event of any failure of the City to comply with this Disclosure Agreement shall be an action to compel performance, and no person or entity shall be entitled to recover monetary damages under this Disclosure Agreement. Section 11. Duties Immunities and Liabilities of Dissemination Aeent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the City agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including reasonable attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Electric Bonds. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter, the Owners and Beneficial Owners from time to time of the Electric Bonds, and shall create no rights in any other person or entity. Section 13. Governing Law. This Disclosure Agreement shall be governed by the laws of the State of California and the federal securities laws. Section 14. Transmission of Notices Documents and Information. All notices, documents and information provided to the MSRB shall be provided in an electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB. Section 15. Effective Date. This Disclosure Agreement shall be effective upon the issuance of the Electric Bonds. IN WITNESS WHEREOF, the City of Azusa has executed this Continuing Disclosure Agreement as of the date first set forth above. CITY OF AZUSA By: Name: Title: F-12 175097.8 036227 OS • MIAMI A.ZUSA CNY i WUU AGENDA ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF TH ASA UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES DATE: APRIL 23, 2012 SUBJECT: APPROVAL OF LICENSE AGREEMENT WITH ECOTALITY FOR FURNISHING & INSTALLING ELECTRIC VEHICLE PUBLIC CHARGING STATIONS ON CITY OWNED PROPERTY AND REJECTION OF ALL OTHER PROPOSALS RECOMMENDATION It is recommended that the Azusa Utility Board: 1) Approve the ECOtality License Agreement for furnishing and installing electric vehicle public charging stations on City owned property and authorize the Director of Utilities to sign the license agreement, and any necessary line extension construction agreement, subject to legal review; and 2) Reject the three formal proposals received from the December 2011 RFP for EV Charging stations. BACKGROUND Pursuant to Utility Board's authorization, Staff solicited and received proposals from companies who are engaged in the manufacture and installation of electric vehicle public charging stations. Three cost proposals were received last December 2011 and are listed below. COMPANY EV CHARGER UNIT COST AeroVironment (AV) Dual Port Pedestal EVSE $6,244 General Electric (GE) DuraStation Double Pedestal RFID $7,497 ChargePoint/Coulomb (CT) CT 2100 Family Product <$4,765> Q46 ECOtality License Agreement April 23, 2012 Page 2 A fourth proposal from ECOtality Inc. was submitted early this year after receipt of the initial three cost proposals. In reviewing all proposals, the ECOtality Inc. arrangement was attractive to Azusa Light & Water due to its connection with the "EV Project" which is funded in part under a Federal ARRA grant by the U.S. Department of Energy. The "EV Project" will deploy several thousand chargers in major cities and metropolitan areas in six states which includes California. Under ECOtality's proposal, Azusa Light & Water will enter into a "License Agreement" which contains the terms and conditions for furnishing/installing up to 3 EV charging stations on City- owned sites and up to 4 additional privately owned local sites. The owners/representatives of the privately-owned sites will also be required to execute separate site agreements with ECOtality. Staff previously reported last month to the Utility Board the main features of ECOtality's proposal which includes, amongst other features, the following: • Level 1I `Blink" EV chargers provided by ECOtality at no cost to Azusa • Two `Blink" charging units per location for 2 to 7 locations in City of Azusa • Installation subsidy of$2,250 per charging unit($4,500 per site) • AL&W to "contribute" electricity and service line extensions for the chargers • Payment to AL&W of 50% charging revenue from charging user fees and advertising • Automated billing services using RFID cards obtained via intemet • Complete the charger installation no later than 30 June 2012 • Demonstration project through 30 April 2013 under a License Agreement Staff is recommending that the Utility Board accept ECOtality's proposal for furnishing and installing Level II Blink electric vehicle public charging stations on City owned property using ECOtality's preferred installation service provider that will be retained under City's customary Short Form Construction Contract. Moreover, Staff is recommending the approval of the ECOtality License Agreement in its substantially final form which has been reviewed by legal counsel. Lastly, Staff recommends that the Utility Board reject the other three proposals received earlier. FISCAL IMPACT Azusa Light & Water may be required to contribute "matching" funds, in excess of the $4,500 installation subsidy per location, towards constructing the electric line extensions to the charger locations. The utility will strive to minimize the level of matching funds. These funds are available in the Underground Line Extensions CIP Project No. 73012B. The estimated value of ECOtality's proposal upon completing installation at the proposed seven (7) locations is about $73,500 plus AL&W's share of any revenue proceeds. Prepared by: F. Langit Jr. —Assistant Director of Electric Operations 047 a LICENSE AGREEMENT DRATI THIS LICENSE AGREEMENT (this "Agreement") is made effective as of 20—, between the City of Azusa a California municipal corporation (the "Licensor'), and Electric Transportation Engineering Corporation, dba ECOtality North America, an Arizona corporation, and its successors and assigns ("Licensee") (collectively the "Parties"). RECITALS: A. The Licensor is the fee owner of certain real properties more particularly described on the attachedExhibit A (collectively "Licensor's Properties"). specific portions of which will be licensed to Licensee pursuant to this Agreement which licensed portions are described and depicted on the attached Exhibit B (collectively the"Licensed Premises"). B. Licensee is the owner of the EVSE and Software (collectively the "EVSE"). C. The United States Department of Energy ("DOE") has provided funding through the American Recovery and Reinvestment Act ("ARRA") to accelerate the development and production of electric vehicles ("EVs") in order to reduce petroleum consumption in the United States. D. For the use of EVs to expand, drivers of EVs will require access to sufficient publicly available Electric Vehicle Supply Equipment ("EVSE") stations in order to provide for convenient re- charging of EVs in locations remote from the drivers' homes. E. To encourage the development and use of EVs the DOE is supporting the development of a large publicly available EV charging infrastructure in several cities in the United States, through a program known as the "EV Project," which will provide EVSE units at publicly available locations in the United States. F. Pursuant to the EV Project, and separate from this Agreement, Licensee has received a grant from DOE (the "DOE Grant") to install EVSEs and to collect data relating to public use of the EVSEs. The data collected from publicly available EVSE and EV Project participants will be analyzed to determine vehicle use and charging patterns in a variety of topographies and climate conditions, to evaluate the effectiveness of the charge infrastructure deployed under the EV Project, and to support the future deployment of EV infrastructure in other regions. G. Licensor has a long-standing commitment to resource conservation and has been an active participant in energy conservation, energy efficiency and environmental preservation and is committed to protecting the environment and providing a sustainable future for its residents. H. Licensor is interested in the outcome of the studies and other efforts being undertaken by Licensee as part of the DOE Grant, including the extent to which EVSEs on the Licensed Premises would affect energy use by Licensor and the use of EVs by members of the public. I. Licensee desires to obtain from Licensor certain rights over, under and across Licensor's Property for the purpose of installing, maintaining, operating and removing the EVSE to facilitate Licensee's implementation of the DOE Grant. Municipal License Agreement Page I of 12 Rev'd Date:3.12.12 O 4 8 NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which DUF.Tged, the Parties agree as follows: 1. The License. Licensor hereby grants to Licensee a revocable license to use and occupy the Licensed Premises (the "License"), on the terms and conditions stated in this Agreement, to install, maintain, and operate the EVSE for the purpose of implementing the DOE Grant. 1.1. Limited, Nonexclusive Rights. This License is a revocable, nonexclusive, and non- possessory authorization for Licensee to enter upon and use the Licensed Premises solely for the purposes described in § 1.3 on the terms and conditions stated herein. Licensee may not use the Licensed Premises for any other purpose or in any other manner without Licensor's prior written consent. This License in no way restricts Licensor's use or conveyance of the Licensed Premises, any interest therein, or any improvements thereon, or Licensor's use of the Licensed Premises in any manner not inconsistent with the License. This License is not intended to create or convey to Licensee an interest in real property, and may not be recorded without Licensor's prior written permission, which consent may be granted or denied in Licensor's sole discretion.. 1.2. Rights of Others. Nothing in this License may be construed as Licensor's representation, warranty, approval, or consent regarding rights in the Licensed Premises held by other parties, and Licensee is responsible for ascertaining the rights of all third parties in the Licensed Premises and obtaining their consent to the activities described in this License as necessary or appropriate. Licensee agrees to obtain, at its sole expense, such other licenses, permits, consents and agreements as may be required to address the rights of others by other appropriate agreements, easements, privileges or other rights, whether recorded or unrecorded, and shall make its own arrangements with holders of such prior rights. 1.3. Scope of License; Permitted Uses. During the term of this Agreement, Licensee shall have reasonable access to the Licensed Premises for the limited purpose of installing, maintaining, using, operating, repairing, and removing the EVSE. Licensee may not use the EVSE located on the Licensed Premises for any purpose other than to provide for EV charging, for both privately owned cars and car share fleet vehicles of Licensor, and to collect data relating to the use of the EVSE. 1.4. Condition of Premises. Licensee agrees to accept the Licensed Premises "As Is," without warranty of any kind, express or implied. Licensee acknowledges that Licensor is not obligated to construct or install any improvements or facilities of any kind on the Licensed Premises. Licensee must use commercially reasonable efforts to maintain the Licensed Premises and any EVSE installed on the Licensed Premises in a condition satisfactory to the Licensor, including the removal from the EVSE and from any areas that are inaccessible to Licensor of graffiti and other unsightly, dangerous or offensive conditions and must not cause or permit any generation of hazardous waste. During the term of this Agreement Licensor will cooperate with Licensee to implement appropriate, mutually agreed upon procedures to assure that the Licensed Premises are maintained in a condition that is satisfactory to both Licensor and Licensee. 1.5. Condition of Licensee's EVSE. During the term of this Agreement Licensee must maintain the EVSE in a reasonable, safe and operable condition at all times when the EVSE is installed on Licensor's Property. Licensor will have no right or responsibility to repair, maintain, or operate the EVSE. Licensor will cooperate with Licensee to implement appropriate, mutually agreed upon measures to assure that the EVSE is maintained in operable condition and that if the EVSE is damaged or becomes inoperable that Licensee is promptly notified. Licensee will repair or replace, at Licensee's option and at Licensee's sole expense, the EVSE or parts or components thereof as Licensee deems necessary and appropriate. Licensee will not be responsible for the condition of the EVSE after the expiration or termination of this Agreement if ownership of said EVSE is conveyed to Licensor pursuant to the terms of this Agreement. Municipal License Agreement Page 2 of 12 Rev'd Dale:3.12.12 h A h A 9 1.6. EnvironmentalPW�Hazards. Licensees agrees not to use fii be u used stored, on the Licensed Premises, gasoline or petroleum products, hazardous or toxic substances or inflammable materials, herbicides, pesticides, fungicides, algaecides. Licensee may not engage in the production, location, transportation, storage, treatment, discharge, disposal, or release upon or under the Licensed Premises of any substance regulated under any local, state or federal environmental protection law or regulation. 1.7. Waste, Nuisance. Licensee shall not commit or suffer to be committed any waste or impairment of the Licensed Premises and covenants that it shall not do, nor permit to be done, on or about the Licensor's Properties any acts which may be a nuisance. 1.8. Compliance with Laws. In the exercise of any privilege granted by this License, Licensee must comply with all applicable State, municipal and local laws, and the rules, orders, regulations and other legal requirements, including laws and regulations relating to occupational safety and health and environmental protection, and all orders, writs, judgments, injunctions, decrees or awards of any court or governmental authority with jurisdiction over Licensee or the Licensed Premises. Licensee must obtain promptly and maintain in effect throughout the term of the License all licenses, permits, authorizations, registrations, rights and franchises necessary to conduct the actions required or permitted by the License. Furthermore, Licensee will not encourage or permit any use in or upon the Licensed Premises, or any part thereof, in violation of any applicable laws, statutes, rules or regulations of any federal, state or local authority. 1.9. Compliance with Licensor Requirements. Any use made of the Licensed Premises pursuant to this License, and any construction, maintenance, repair, or other work performed thereon by the Licensee, including the installation and removal of any article or thing, shall be accomplished in a manner satisfactory to the Licensor. 1.10. Structures. Licensee may not place or construct upon, over or under the Licensed Premises any installation or structure of any kind or character, except such as are specifically authorized herein or in writing signed by Licensor. 1.11. Alterations; Damage; Restoration. No alterations may be made by Licensee to the Licensed Premises without first obtaining the prior written consent of Licensor and, if applicable, any other person or entity having an interest in or right to use or occupy the Licensed Premises. Licensee will bear the costs and expenses, up to a maximum of $2,250 per charging unit for a maximum of $4,500 per site. Two (2) EVSE charging units shall be installed per location for two (2) to seven (7) locations as further described in Exhibit B. Such costs and expenses are associated with performing any such alterations, including, without limitation, costs of construction and any increased operating costs resulting from such alterations. Except as may be otherwise provided in this Agreement, Licensee may not alter, destroy, displace or damage any of Licensed Premises or any neighboring property in the exercise of the privileges granted by this Agreement without the prior written consent of Licensor and any other affected landowner, and the express agreement of Licensee promptly to replace, return, repair and restore any such property to a condition satisfactory to Licensor and any other affected landowner upon demand, and at Licensee's sole cost and expense. The installations as set forth herein shall be completed by Licensee on or before June 30, 2012. 1.12. Operation and use of EVSE. Licensee must confine activities on the Licensed Premises strictly to those necessary for the enjoyment of the privilege hereby licensed, and must refrain from marring or impairing the appearance of the Licensed Premises, obstructing access thereto, interfering with the transaction of Licensor's business and the convenience of the public, or jeopardizing the safety of persons or property, or causing justifiable public criticism. 1.13. EquipmentlAccess Revenue. Licensor acknowledges that Licensee is providing the initial EVSE to the site as part of a no-cost pilot program and Licensee intends to collect revenues from the EVSE. As Municipal License Agreement Page 3 of 12 Rev'd Date:3.12.12 - - 050 part of the consideration for this Agreement. Licensee shall surrPI11� Icer in an amount equal to fifty percent (50%)of such revenues fro a earned or collected during the term of this Agreement. Said payment shall be submitted to Licensor on or before the date which is thirty (30)days from the date of collection. 1.14. Expense. Except as provided in § 1.11, any cost, expense or liability connected with or in any manner incident to the granting, exercise, enjoyment, or relinquishment of this License will be assumed and paid or discharged by the Licensee. Such costs shall include, but shall not be limited to, costs to install or remove the EVSE, costs to install electricity or other power supplies to serve and operate the EVSE, and costs to keep the EVSE free of graffiti and debris. 1.15. Assignment. Licensee may not assign this License nor sub-license all or any portion of the Licensee's right to use and occupy the Licensed Premises, and any purported assignment or sub-license by Licensee is void. This License does not confer on or convey to Licensee any possessory interest in the Licensed Premises, any right to exclusive possession or occupancy of the Licensed Premises, or any right of quiet enjoyment. The privileges granted to Licensee by this Agreement are personal to Licensee and may not be assigned or transferred to any other person, firm, corporation, or other entity without the prior, express and written consent of Licensor. 1.16. Responsibility for Others. Licensee will be responsible for the conduct and discipline of its employees, contractors, subcontractors, invitees, licensees, and other persons entering upon or using the Licensed Premises pursuant to this Agreement. 1.17. Subordination. This Agreement and the License granted herein is subject and subordinate to the terms of all ground leases, superior leases, mortgages, deeds of trust, other security instruments, and any other prior rights and matters of record now or hereafter affecting Licensor's interest in Licensed Premises. 2. Term of License. The License and rights granted by this Agreement will become effective as of , 2012 (the"Commencement Date") and unless otherwise agreed in a writing signed by both Parties, will automatically expire and terminate as of April 30, 2013 ("Expiration Date"). 3. Consideration for License. As consideration for the License and the use of electricity used for the charging of EVs using EVSEs located on the Licensed Premises, Licensee agrees to pay the sum of $1.00 upon execution of this Agreement. In addition, Licensee will provide Licensor reports and other information relating to the License and the use of the EVSEs, including data collected from or relating to the use of EVSE's on the Licensed Premises, provided, however, that Licensee will not be required to and will not provide to Licensor any information that is proprietary or confidential. As further consideration, Licensee will provide to Licensor at no cost Level II "Blink" EV chargers on or before execution of this Agreement. In addition, Licensee I iaenser shall be responsible for the electric line extension, metering, internet connection or wireless communication to the EVSEs. Licensee L-ieenser shall be responsible for the cost of said installations in addition to the amounts to be contributed by Licensee under Section 1.11 of this Agreement. 4. Surrender, Removal of the EVSE. On the expiration or any earlier termination of this Agreement, Licensee shall vacate the Licensed Premises and surrender possession of the Licensed Properties to Licensor. 1.1. Licensor's Option to Retain the EVSE upon Expiration of the Term. Upon the expiration of the Term, Licensor, in its sole and absolute discretion, may elect to retain the EVSE. Licensor shall notify Licensee in writing delivered to Licensee not less than thirty (30) days prior to the expiration of this Agreement, whether Licensor desires to retain the EVSE on some or all of the Licensed Premises. If Licensor fails to deliver such written notice within such thirty (30) day period. Licensor will be deemed to have elected to retain the EVSE at the Licensed Premises. If Licensor elects to retain the EVSE installed at some or all of the Licensed Premises, Licensor shall become entitled to acquire from Licensee all rights, title, and interest in and to such EVSE at no additional Municipal License Agreement Page 4 of 12 Rev'd Date:3.12.12 Ins i cost, and Licensee agrees to execute and deliver to Licensor such documents as Licensor may reasonably request to evidence the transfer of title. 4.2. Removal of the EVSE by Licensee upon Expiration of the Term. If Licensor elects not to retain the EVSE at the Properties, Licensee shall remove (at Licensee's sole cost and expense) any or all of the EVSE, and must restore the Licensed Premises to a safe and reasonable condition, as more specifically described in § 4.4 hereof. Should the Licensor elect to continue ECOtality Blink Network and EVSE support, following the Term or earlier termination thereof, such additional services shall be subject to a new written agreement to be entered into between the Parties. 4.3. Removal of the EVSE by Licensor. If Licensor timely notifies Licensee of Licensor's election to have Licensee remove the EVSE from the Licensed Premises, Licensee will promptly remove the EVSE and restore the condition of Licensed Premises as provided in § 4.4. 4.4. Restoration. Upon expiration or termination of the License and removal of the EVSE Licensee will, at Licensee's sole expense and to Licensor's satisfaction, restore the affected portions of the Licensed Premises (surface and subsurface) to a safe condition, with the electricity to the Charger installation locations capped, the breakers turned off, and the Charger anchor/mounting bolts cut flush/removed. 2. Termination. 2.1. Without Cause. This Agreement may be terminated by Licensee in writing to the Licensor, without cause, at any time and for any reason, including the termination of the EV Project or a reduction in EV Project funding, whereupon the Parties shall be fully released from their respective duties, rights, obligations and liabilities under this Agreement except as provided below. del:this Agpeepnent.eXGApt as provided below, 2.2. With Cause. This Agreement may be terminated in writing by either party for cause if either party violates any term of this Agreement and fails to cure the same within ten (10) days of receiving written notice of such default. Upon such termination of this Agreement for cause, as its sole and exclusive remedy, Licensee shall have the right, but not the obligation, to disable or remove (at its sole cost and expense) any or all of the EVSE installed at the Location and terminate services to Licensor's. In the event that Licensee does not elect to remove the EVSE within thirty (30) days following such termination, the EVSE shall be deemed abandoned by Licensee and Licensor shall possess all rights, title and interest in and to the same. 3. Use of the EVSE by Licensor. 3.1. Software License. During the term of this Agreement, Licensee grants to the Licensor a non-exclusive and non-transferable license, to use Licensee's software in the form in which it is embedded in the EVSE on the delivery date for use in conjunction with other parts of the EVSE on the condition that the EVSE shall be used for its intended purpose only. Nothing contained in this Section shall be construed as an assignment or transfer of any copyright, design right or other intellectual property rights in such software, all of which rights are owned by the Licensee. 3.2. Limitation of Licensee's Liability. Licensee makes no warranty or representation, expressed, implied, oral or statutory, to the Licensor or any third party, with respect to the Software or the EVSE, including, without limitation, any warranty, condition or representation: (a) of merchantability, fitness for a particular purpose, satisfactory quality, or arising from a course of dealing, usage, or trade practice; (b) that the products will be free from infringement or violation of any rights, including intellectual property rights of third parties; or (c) that the operation of any software supplied will be uninterrupted or error free. Municipal License Agreement Page 5 of 12 Rev'd Dale:3.12.12 X15 2 D � ��gs■■pp - defend save and hold harmless thland9ts 4. Indemnification. Licensee shall indemnify,. officers, officials, agents, and employees from and against any and all claims, actions, liabilities, damages, losses, or expenses (including court costs, attorneys' fees, and costs of claim processing, investigation and litigation) (hereinafter referred to as "Claims") for bodily injury or personal injury (including death), or loss or damage to tangible or intangible property caused, or alleged to be caused, in whole or in part, by the negligent or willful acts or omissions of Licensee or any of its owners, officers, directors, agents, employees or contractors, arising out of or related to Licensee's occupancy and use of the Licensed Premises. It is the specific intention of the Parties that the Licensor shall, in all instances, except for Claims arising solely from the negligent or willful acts or omissions of the Licensor, be indemnified by Licensee from and against any and all claims. It is agreed that Licensee will be responsible for primary loss investigation, defense and judgment costs where this indemnification is applicable. In consideration for the use and occupancy of the Licensed Premises, the Licensee agrees to waive all rights of subrogation against the Licensor, its officers, officials, agents and employees for losses arising from the use, occupancy or condition of the Licensed Premises. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, ANY CLAIMS FOR DAMAGES BY EITHER PARTY ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT SHALL BE LIMITED TO ACTUAL RECOVERIES UNDER SUCH PARTY'S INSURANCE POLICIES. 5. Insurance Requirements. Licensee shall procure and maintain for the duration of the License, insurance against claims for injury to persons or damage to property which may arise from or in connection with the License. The insurance requirements herein are minimum requirements for the License and in no way limit the indemnity covenants contained in this Agreement. Licensee in no way warrants that the minimum limits contained herein are sufficient to protect the Licensor from liabilities that might arise out of the License. Licensor is free to purchase such additional insurance as Licensee determines necessary. 5.1. Minimum Scope and Limits of Insurance: Licensee shall provide coverage with limits of liability not less than those stated below. An excess liability policy or umbrella liability policy may be used,to meet the minimum liability requirements provided that the coverage is written on a"following form" basis. 5.1.1. Commercial General Liability— Occurrence Form Policy shall include bodily injury, property damage and broad form contractual liability coverage • General Aggregate $2,000,000 • Products—Completed Operations Aggregate $1,000,000 • Personal and Advertising Injury $1,000,000 • Each Occurrence $1,000,000 Fire Damage (Damage to Rented Premises) " $100,000 The policy shall be endorsed to include the following additional insured language: "The Licensor shall be named as an additional insured with respect to liability arising out of the use and/or occupancy of the property subject to this License." 5.1.2. Additional Insurance Requirements. The policies shall include, or be endorsed to include, the following provisions: a. On insurance policies where the Licensor is named as an additional insured, the Licensor shall be an additional insured to the full limits of liability purchased by the Licensee even if those limits of liability are in excess of those required by this Agreement. b. The Licensee's insurance coverage shall be primary insurance and non- contributory with respect to all other available sources. 5.1.3. Notice of Cancellation. For each insurance policy required by the insurance provisions of this Agreement, the Licensee must provide to the Licensor, within 2 business days of receipt, a notice if a policy is suspended, voided or cancelled for any reason. Municipal License Agreement Page 6 of 12 Rev'd Date:3.12.12 053 5.1.4. Acceptability of Insurers. Insurance is to be placedw RAFT, or authorized to do business in the state and with an "A.M. Best" rating less than B+ VI. The Licensor in no way warrants that the above-required minimum insurer rating is sufficient to protect the Licensee from potential insurer insolvency. 5.1.5. Verification of Coverage. Licensee shall furnish the Licensor with certificates of insurance (ACORD form or equivalent approved by the Licensor) as required by this Agreement. The certificates for each insurance policy are to be signed by a person authorized by that insurer to bind coverage on its behalf. All certificates and any required endorsements are to be received and approved by the Licensor before the License commences. Each insurance policy required by this Lease must be in effect at or prior to commencement of this License and remain in effect for the duration of the License. Failure to maintain the insurance policies as required by this License or to provide evidence of renewal is a material breach of contract. [COMMENT — PLEASE BE SURE TO CHECK THESE INSURANCE PROVISIONS AND LIMITS WITH THE CITY'S INSURANCE PROVIDER.] 6. Notices. All notices or other communications required or permitted to be provided pursuant to this License must be in writing and may be hand delivered, sent by United States Mail, postage prepaid, or delivered by a nationally recognized courier service. Any notice will be deemed to have been given when delivered if hand delivered, when received if sent by courier, or forty-eight (48) hours following deposit in the United States Mail. Notices shall be addressed as follows: To Licensee: Company: Attn: Title: Address: City, State, Zip: Fax Number: To Licensor: Electric Transportation Engineering Corporation dba ECOtality North America Attn: Legal Department Address 430S. 2 nd Avenue City, State, Zip: Phoenix, AZ 85003-2418 Fax Number: 602-443-9007 7. Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. . 8. Entire Agreement. This Agreement and the exhibits and schedules referenced or attached hereto constitute the entire agreement between the Parties with respect to the subject matter hereof Municipal License Agreement Page 7 of 12 Rev'd Date:3.12.12 054 and shall supersede all prior agreements, understandings and nwr n and oral between the Parties with respect to the subject matter heWThis2tsmlis not intended to confer upon any Person other than the Parties hereto any rights or remedies hereunder. 9. Severability. If any terms or other provision of this Agreement or the schedules or exhibits hereto shall be determined by a court, administrative agency or arbitrator to be invalid, illegal or unenforceable; such invalidity or unenforceability shall not render the entire Agreement invalid. Rather, this Agreement shall be construed as if not containing the particular invalid, illegal or unenforceable provision, and all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either Party. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent permitted under applicable law. 10. Information. Subject to applicable law and privileges, each Party hereto covenants with and agrees to provide to the other Party all information regarding itself and transactions under this Agreement that the other Party reasonably believes is required to comply with all applicable federal, state, county and local laws, ordinances, regulations and codes. 11. Further Agreements. The Parties shall execute or cause their applicable affiliates to execute such additional agreements between the Parties and/or their respective affiliates as may be reasonably necessary to effectuate the intent of this Agreement. 12. Binding Effect. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective legal representatives and successors, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. This Agreement may be amended at any time by mutual consent of Licensor and Licensee, evidenced by an instrument in writing signed on behalf of each of the Parties. 13. Amendment and Modification. This Agreement may be amended, modified or supplemented only by a written agreement signed by all of the Parties hereto. 14. Failure or Indulgence Not Waiver, Remedies Cumulative. No failure or delay on the part of either Party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. 15. Authority. Each of the Parties represent to the other Party that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement, (b)the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate or other actions, (c) it has duly and validly executed and delivered this Agreement and (d)this Agreement is its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equity principles. 16. Third Party Beneficiaries. None of the provisions of this Agreement shall be for the benefit of or enforceable by any third party, including any creditor of any Person. No such third party shall obtain any right under any provision of this Agreement or shall by reasons of any such provision make any claim in respect of any liability (or otherwise) against either Party hereto. Notwithstanding the foregoing, it is understood that the Licensee's rights hereunder shall inure to the benefit of Licensee's affiliates and their officers, directors and employees. 17. Default; Remedies. The actual or prospective failure of either parry to satisfy any material obligation under this Agreement, and the breach of any material representation or warranty stated in this agreement, will be an event of default. If a party's default continues without cure Municipal License Agreement Page 8 of 12 Rev'd Date:3.12.12 055 for thirty (30) days after delivery of a written notice of default int dlSection 9 the other party will be entitled to terminate this Agreement for cause, and to all other remedies available at law or in equity, including damages and specific performance. The rights and remedies set forth in this agreement are not intended to be exhaustive and the exercise by either party of any right or remedy does not preclude the exercise of any other rights or remedies that may now or subsequently exist in law or equity or by statute or otherwise. Failure or delay by the Licensor to exercise any right, power or privilege will not be deemed a waiver thereof. 18. Attorney's Fees. If a suit, action, arbitration or other proceeding of any nature whatsoever is instituted in connection with any controversy arising out of this Agreement or to interpret or enforce any rights under this Agreement, the prevailing party shall be awarded its reasonable attorney fees, and costs and expenses incurred. 19. Confidentiality and Data Security. Personal identifying information, financial account information, or restricted Licensor information, whether electronic format or hard copy, must be secured and protected at all times to avoid unauthorized access. At a minimum, Licensee must encrypt and/or password-protect electronic files. This includes data saved to laptop computers, computerized devices or removable storage devices. When personal identifying information, financial account information, or restricted Licensor information, regardless of its format, is no longer necessary, the information must be redacted or destroyed through appropriate and secure methods that ensure the information cannot be viewed, accessed, or reconstructed. In the event that data collected or obtained by the Licensee in connection with this Agreement is believed to have been compromised, Licensee shall notify the Licensor immediately. Licensee agrees to reimburse the Licensor for any costs incurred by the Licensor to investigate potential breaches of this data and, where applicable, the cost of notifying individuals who may be impacted by the breach. Licensee agrees that the requirements of this Section shall be incorporated into all subcontractor/subconsultant agreements entered into by the Licensee. It is further agreed that a violation of this Section shall be deemed to cause irreparable harm that justifies injunctive relief in court. A violation of this Section may result in immediate termination of this Agreement without notice. The obligations of Licensee under this Section shall survive the termination of this Agreement. 20. Data Collection for DOE Grant Purposes. During the Term of this Agreement Licensor will allow Licensee reasonable access to the EVSE, the Licensed Premises, and existing sources of electrical energy as reasonably necessary to enable Licensee to collect and transmit data regarding public use of the EVSE as may be required by the DOE Grant. 21. Miscellaneous. Time is of the essence with respect to the performance of every provision of this Agreement in which time of performance is a factor. Except as expressly provided herein to the contrary, when a Party is required to do something by this Agreement, it shall do so at its sole cost and expense without right of reimbursement from the other Party. Whenever one Party's consent or approval is required to be given as a condition to the other Party's right to take any action pursuant to this Agreement, unless another standard is expressly set forth, such consent or approval shall not be unreasonably withheld, conditioned or delayed. 22. Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same agreement. IN AGREEMENT, each of the Parties hereto has caused this Agreement to be duly executed as of the day and year first set forth above. LICENSOR: LICENSEE: Municipal License Agreement Page 9 of 12 Rev'd Date:3.12.12 056 a corporation municipal oration Electric Transportation En Ai'if P P Corporation dba ECOtality North America By: By: Name: Name: Title: Title: Date: Date: Municipal License Agreement Page 10 of 12 Rev'd Date:3.12.12 057 57 F EXHIBIT A: Description of Licensor's PropertiesD R Ar,�F0, NOTE: This Exhibit A may be amended from time to time to add or delete properties Location No. Property Address Assessor's Parcel No Municipal License Agreement Page 1 I of 12 Rev'd Date:3.12.12 X58 r .It EXHIBIT B: Description and/or Depiction of Licensed Premises Location No. 1 [Insert metes and bounds or other narrative description, size, etc.] See diagram attached as Exhibit B-1 Location No. 2 [Insert metes and bounds or other narrative description, size, etc.] See diagram attached as Exhibit B-1 Municipal License Agreement Page 12 of 12 Rev'd Date:3.12.12 (� f) �-..� AZUSA Orr IIGMI R W1tR INFORMATION ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OFA UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIE DATE: APRIL 23, 2012 SUBJECT: UPDATE ON THE CALIFORNIA RENEWABLE PORTFOLIO STANDARDS (RPS) BILL AND AZUSA 2011 COMPLIANCE On April 12, 2011, California Governor Jerry Brown signed into law California Senate Bill SBXI 2, the RPS Bill. SBXI-2 requires all California's electric utilities to reach the 33% RPS in three compliance periods. Between January 1, 2011 and December 31, 2013, the utilities must procure renewable energy products equal to 20% of retail sales. By December 31, 2016, utilities must procure renewable energy products equal to 25% of retail sales, and by December 31, 2020, utilities must procure renewable energy products equal to 33% of retail sales and maintain that percentage in following years. Detailed regulations for the RPS law (SBXI 2) are currently being developed by the California Energy Commission ("CEC") and are expected to be finalized in mid 2012. The CEC RPS regulations drafting process involves a number of deliberations on topics such as POU-designated but not CEC certified renewable resources (such as Azusa's Hoover Uprating project) as well as potential regulatory, operational and financial compliance "off-ramps". Another important topic of deliberation involves "grandfathering" options — i.e. whether the pre June 1, 2010 projects can be grandfathered into specific CEC designated "bucket" categories or used only to satisfy a portion of RPS requirement ("count in full"). Azusa supports the "bucket" grandfathering option as this option would enable us to procure relatively inexpensive Tradable Renewable Energy Credits (TRECs) to satisfy any needed balance of RPS compliance until approximately year 2016. Azusa is actively engaged in the regulation writing process, along with SCPPA and CMUA. Irrespective of the status of the regulation writing process, the SBXI 2 requires that authorities governing publicly-owned electric utilities approve an RPS "Enforcement 060 Update on California RPS Bill and 2011 compliance April 23, 2012 Page 2 Program" by January 1, 2012. Azusa complied with this requirement and adopted such an Enforcement Program in December 2011. Since calendar year 2011 was the first year of the first RPS compliance period (2011- 2013), staff would like to update the Board on our 2011 performance. Accordingly, measured as a percentage of our 2011 retail sales we achieved 20.5% of renewable energy delivery of which 18.8% was derived from the CEC certified renewable resources and the remaining 1.7% portion from Hoover Uprating project. As soon as the RPS regulations are finalized, staff shall report to the Board on the final and binding version of the regulations and how such might affect Azusa and its electric utility business. Prepared by: Yarek Lehr, Assistant Director of Resource Management X6 .8.