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06/24/15 CC AGENDA PACKET SPECIAL
Council Chambers, City Hall, 1501 Truxtun Avenue Special Meeting 3:30 PM SPECIAL MEETING - 3:30 PM 1. ROLL CALL 2. PUBLIC STATEMENTS 3. NEW BUSINESS a. Wastewater Revenue Refunding Bonds Series 2015A: 1. Resolution authorizing the issuance and sale of not to exceed $170,000,000 in aggregate principal amount of City of Bakersfield, California Wastewater Revenue Refunding Bonds Series 2015A, approving a Fourth Supplemental Trust Indenture, an Official Statement, a Bond Purchase Contract, an Escrow Agreement, a Continuing Disclosure Certificate and authorizing and directing additinal actions in connection with the issuance of the Revenue Refunding Bonds. Staff recommends adoption of resolution. 4. CLOSED SESSION a. Conference with Legal Counsel - Potential Litigation; Closed Session pursuant to Government Code Section 54956.9(d)(2),(e)(1) (one matter). 5. CLOSED SESSION ACTION 6. ADJOURNMENT 6124115 CC A EN A PACKET PAGE 1 enaif MEETING DATE: 6/24/2015 New Business 3. a. TO: Honorable Mayor and City Council FROM: Nelson K. Smith, Finance Director DATE: 6/8/2015 VI %1 N 13 SUBJECT: Wastewater Revenue Refunding Bonds Series 2015A: Resolution authorizing the issuance and sale of not to exceed $170,000,000 in aggregate principal amount of City of Bakersfield, California Wastewater Revenue Refunding Bonds Series 2015A, approving a Fourth Supplemental Trust Indenture, an Official Statement, a Bond Purchase Contract, an Escrow Agreement, a Continuing Disclosure Certificate and authorizing and directing additinal actions in connection with the issuance of the Revenue Refunding Bonds. STAFF RECOMMENDATION: Staff recommends adoption of resolution. BACKGROUND: On March 5, 2015 staff presented two potential cost savings opportunities involving the refinancing of existing debt service to take advantage of historically low interest rates. One of those opportunities involved the refinancing of the 2007 A fixed rate Wastewater Revenue Bonds. The proposed refinancing is expected to lower the annual debt service payment of the Wastewater Enterprise by $700,000 to $800,000 per year for the next 18 years, which is the remaining term of the existing debt. The Resolution for your consideration implements the following: - Approves a Fourth Supplemental Trust Indenture; - Approves a Preliminary Official Statement; - Approves a Bond Purchase Contract; - Approves an Escrow Agreement; - Approves a Continuing Disclosure Certificate (Exhibit F in the POS); and 6124115 CC AGENDA PACKET PAGE 2 Authorizes designated City staff to take such actions necessary to complete the refunding transaction. Upon the approval of the Resolution, the Preliminary Official Statement (POS) will be updated to include rating agency information and then the updated POS will be distributed to potential investors to solicit their interest in purchasing the bonds. This pre -sale activity by the underwriter usually runs for about two weeks, at which time the bond underwriter will propose a final rate structure to the City based on current market conditions. The City will, with assistance from our Financial Advisor, review the proposal and assuming market conditions on that date are still supportive of generating anticipated savings to the Enterprise, then the pricing of the bonds will be finalized by execution of the Bond Purchase Contract. We anticipate the pricing activity to take place in mid -July with final closing of the transaction in September 2015. The timing of this transaction is important to get into the municipal bond market as soon as possible to minimize the risk of rate escalation. City staff as well as the bond underwriter and other bond specialists will be in attendance to answer any questions about the transaction. ATTACHMENTS: Description Blue Memo Resolution authorizing issuance Fourth Supplemental Trust Indenture Preliminary Official Statement (POS) Bond Purchase Contract Escrow Agreement Type C oveir I eirno 1:: ces oIklfi lrl C:3aCIl Ua p 11MaCcwrl4 l C:3aCIl Ua p 11MaCcwrl4 l Agreement Agreement 6124115 CC A EN A PACKET PAGE 3 TO' Ho�norable Mayor and City Council FROM: Nelson K. Smith, IFinance Director Al�� SUBJECT* Agenda Item #,3.a, (3:30 meefing) New Business - Wastewater Revenue Refunding Bonds 2015A Due to a typographical: error there is a discrepancy in dollar amounts between the agenda/cldr-ninistrative report and the Resolution, document for this item. The Resolution docurnent correctly reflects the "not to exceed" transaction amount of $177 million in aggregate principal amount of the proposed refunding. Both the agenda: and the administrative report incorrectly show a figure of "not to exceed $170 million"'. The "not to exceed" dollar figure in the Resolution for adoption was established to slightly exceed the actual outstanding principal balance of the 2007A fixed rate bonds, which is currently $174,255,000. The Resolution figure is purposely set higher than the existing principal balance to allow for potential marketing flexibility of selling the refunding bonds at either a premium or a discount. As a practical matter, since we do not intend to refinance the 2007A bonds which mature in 2015, 2016 or 2017 (which total $17,505,01010) the principal amount of the 2015A refunding bonds will be much lower than the "not to exceed" figure established in the Resolution. My apoliogies for any confusion this clerical error may have caused. Alan Tandy - City Manager Virginia ennaro - City Attorney Roberta iGaffiord - City Clerk File nanm nks-.1p-Imerno-agenda item 3 a supplemental information June .4 doa c 6124115 CC AGENDA PACKET PAGE 4 Student, First, Student, Last Phonetic School Site Ulysis H. : Baal :: " Wiseez Ball Bakersfield. Alexandra J. Vaughan Bakersfield Timothy P. : _ _ Andersen ;. -... ..: - Centennial. Juliette N. Pascual Centennial Rachael'A. ; Sheeter East.Bakersfield Matthew Barrera Foothill Irma.B. Fernandez Martinez foothill Maria, D. Lira Macias Foothill . ChUmpidtas Laviyay Maria G. Chumpitaz Lavalle Frontier Joseph Cruz.::.' . - . ; :Frontier Annie L. Murrell Highland LeCheng :; .. Tong :- .:... ° . :Independence . Brenden Alvarez Liberty EvanJt e Amason , ` ,, . ry Y� Lrbe Nadine A. Annan Libert Liberty JunGyo Kim ]un go Bianca R. Medina :: ,Liberty .... Alexandria V. Pyle Liberty Zachary Q Pyle Liberty Johanna T. Coronado Mira Monte Breanna. Ramos. ,Ridgeview. .. Arturo- Castellanos South I�u.d.it D!` Buch .�.. IWWoO�CI't'BuitC Stock5 da;le� RESOLUTION NO. A RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF NOT TO EXCEED $177,000,000 IN AGGREGATE PRINCIPAL AMOUNT OF CITY OF BAKERSFIELD, CALIFORNIA WASTEWATER REVENUE REFUNDING BONDS SERIES 2015A, APPROVING A FOURTH SUPPLEMENTAL TRUST INDENTURE, AN OFFICIAL STATEMENT, A BOND PURCHASE CONTRACT, AN ESCROW AGREEMENT, AND A CONTINUING DISCLOSURE CERTIFICATE AND AUTHORIZING AND DIRECTING ADDITIONAL ACTIONS IN CONNECTION WITH THE ISSUANCE OF THE REVENUE REFUNDING BONDS. (Wastewater Revenue Refunding Bonds Series 2015A) WHEREAS, the City of Bakersfield (the "City ") is a charter city organized and existing under the laws of the State of California (the "State "); and WHEREAS, the City now owns and operates a municipal sewer system (the "Enterprise "); and WHEREAS, the City Council (the "Council ") of the City, acting under and pursuant to the powers reserved to the City under Sections 3, 5 and 7 of Article XI of the Constitution of the State of California and Section 33.3 of the Charter of the City, has enacted the City of Bakersfield Enterprise Revenue Bond Law (the "Law "), being Chapter 3.55 of the Municipal Code of the City, which incorporates, to the extent made applicable by the Law, the Revenue Bond Law of 1941, being Chapter 6 of Division 2 of Title 5 of the California Government Code, as enacted and as thereafter amended; and WHEREAS, the Law authorizes the City to issue enterprise revenue bonds for the purposes set forth therein; and WHEREAS, the City has determined that it is necessary and advisable to issue, from time to time, one or more series of Bonds (as defined in the Master Trust Indenture, dated as of August 1, 2007 (the "Master Trust Indenture "), by and between the City and U.S. Bank National Association (the "Trustee ")) for the purposes set forth in the Law and the Master Trust Indenture, and that such Bonds be payable from and secured by Net Revenues (as defined in the Master Trust Indenture); and WHEREAS, the City previously issued its City of Bakersfield, California Wastewater Revenue Bonds Series 2007A (the "Series 2007A Bonds ") in the initial aggregate principal amount of $190,695,000; and WHEREAS, the City has determined that it is in its best interest to issue one or more series of Bonds in an aggregate principal amount not to exceed $177,000,000 for the purpose of refunding all or a portion of the outstanding Series 2007A Bonds (the "Series 2007A Refunded Bonds "), which the City expects will result in debt service savings to the City; and 4827 - 2060 - 6241.4 6124115 CC AGENDA PACKET PAGE 5 WHEREAS, the City has determined that the bonds issued to refund the Series 2007A Refunded Bonds shall be designated as City of Bakersfield, California Wastewater Revenue Refunding Bonds, Series 2015A (the "Series 2015A Bonds "); and WHEREAS, the City has previously entered into the State Revolving Fund Loan Program Contract No. 7- 806 - 550 -0, dated as of September 3, 1997 (the "State Loan "), by and between the City, and the State, acting through the State Water Resources Control Board (the "State Water Board ") whereby the City borrowed $14,954,054 from the State Revolving Fund Loan Program to pay a portion of the costs and expenses of an upgrade and expansion to the Enterprise's Wastewater Treatment Plant 2; and WHEREAS, pursuant to the State Loan, the City has granted to the State a first lien (but not necessarily an exclusive lien) on and pledge of the Net Revenues; and WHEREAS, under the terms of the State Loan, the City may create a charge or lien on the Net Revenues on a parity with or subordinated to the charge or lien of the State Loan; and WHEREAS, the City previously issued, pursuant to the terms of the Master Indenture, and a third supplement thereto, its City of Bakersfield, California Wastewater Revenue Bonds Series 2012A (the "Series 2012A Bonds ") in the initial aggregate principal amount of $25,000,000 and such Series 2012A Bonds are secured by a pledge of Net Revenues; and WHEREAS, the Series 2015A Bonds will be issued on a parity with the State Loan, the Series 2007A Bonds (that remain outstanding after the issuance of the Series 2015A Bonds) and the Series 2012A Bonds; and WHEREAS, the Series 2015A Bonds will be issued pursuant to the Law, certain other provisions of the laws of the State (including Section 53580 et seq. of the California Government Code), the Master Trust Indenture and the Fourth Supplemental Indenture (as hereinafter defined); and WHEREAS, the Series 2015A Bonds will be issued so that the interest paid on the Series 2015A Bonds will be excluded from the gross income of the recipients thereof under the varying provisions of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder or related thereto (collectively, the "Code "); and WHEREAS, City staff has recommended the selection of U.S. Bank National Association to act as escrow agent (the "Escrow Agent ") under the Escrow Agreement (as hereinafter defined); and WHEREAS, City staff has recommended the selection of Citigroup Global Markets Inc. (senior book runner), Merrill Lynch, Pierce, Fenner & Smith Incorporated (co- manager) and Morgan Stanley & Co. LLC (co- manager) to act as underwriters of the Series 2015A Bonds (the "Underwriters "); and WHEREAS, there have been prepared and submitted to the City Clerk for consideration of this Council forms of the following documents: 2 4827 - 2060 - 6241.4 6124115 CC AGENDA PACKET PAGE 6 (a) a form of the Fourth Supplemental Trust Indenture (the "Fourth Supplemental Indenture ") by and between the City and the Trustee; (b) a form of the final Official Statement (the "Official Statement ") relating to the issuance of the Series 2015A Bonds; (c) a form of the Bond Purchase Contract (the "Bond Purchase Contract ") by and among the Underwriters and the City with respect to the purchase and sale of the Series 2015A Bonds; (d) a form of the Escrow Agreement (the "Escrow Agreement "), by and between the City and U.S. Bank National Association, as Trustee and Escrow Agent, to be entered into with respect to the Series 2007A Bonds; and (g) a form of a Continuing Disclosure Certificate (the "Continuing Disclosure Certificate ") by the City; and WHEREAS, said documents will be modified and amended to reflect the various details applicable to the Series 2015A Bonds and said documents are subject to completion to reflect the results of the sale of the Series 2015A Bonds; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Bakersfield as follows: Section 1. Issuance of Series 2015A Bonds; Terms of Series 2015A Bonds. For the purposes set forth in the foregoing recitals, the City hereby authorizes the issuance of its Series 2015A Bonds in an aggregate principal amount not to exceed $177,000,000, plus the amount of any original issue premium (subject to the limitations set forth in this Resolution) at which the Series 2007A Bonds may be sold. The proceeds from such Series 2015A Bonds, and any other moneys made available in connection with the advance refunding of the Series 2007A Refunded Bonds, may be used to pay the costs of issuance and fund an escrow fund to pay the principal and interest on the Series 2007A Bonds on the applicable redemption date. In addition to the above use of the Series 2015A Bonds proceeds, the proceeds from such Series 2015A bond proceeds may be used to fund a reserve fund for the Series 2015A Bonds and /or purchase a reserve fund surety policy, and pay for a municipal bond insurance policy relating to the Series 2015A Bonds, if it is determined by the Finance Director of the City that bond insurance results in savings to the City. The Series 2015A Bonds shall be in fully registered form and may be issued as Book Entry Bonds as provided for in the Master Trust Indenture and the Fourth Supplemental Indenture. Payment of principal of and interest on the Series 2015A Bonds shall be made at the place or places and in the manner provided in the Master Trust Indenture and the Fourth Supplemental Indenture. The Series 2015A Bonds shall be issued as current interest bonds and shall be initially available in denominations of $5,000 and integral multiples thereof. The Series 2015A Bonds shall, when issued, be in the aggregate principal amounts and shall be dated as shall be provided in the final form of the Fourth Supplemental Indenture. The Series 2015A Bonds may be issued 3 4827 - 2060 - 6241.4 6124115 CC AGENDA PACKET PAGE 7 as serial bonds and /or term bonds or as both serial and term bonds, all as set forth in the Master Trust Indenture and the Fourth Supplemental Indenture. Except as otherwise permitted under this Resolution, each maturity of the Series 2015A Bonds shall bear interest at a rate not in excess of 5.5% per annum. Interest on the Series 2015A Bonds shall be paid on the dates set forth in the Master Trust Indenture and the Fourth Supplemental Indenture. The Series 2015A Bonds shall mature no later than September 15, 2033. The Series 2015A Bonds shall be sold in a manner by which the interest thereon is excludable from gross income under the Code. The Series 2015A Bonds shall be subject to redemption at the option of the City on such terms and conditions as shall be set forth in the Master Trust Indenture and the Fourth Supplemental Indenture. The Series 2015A Bonds which are term bonds shall also be subject to mandatory sinking fund redemption as shall be set forth in the Master Trust Indenture and the Fourth Supplemental Indenture. Section 2. Pledge to Secure the Series 2015A Bonds. The pledge to secure the Series 2015A Bonds as set forth in the Master Trust Indenture and the Fourth Supplemental Indenture is hereby approved. Net Revenues are hereby irrevocably pledged in accordance with the terms of the Master Trust Indenture and the Fourth Supplemental Indenture and the pledge to secure the Series 2015A Bonds as set forth in the Master Trust Indenture and the Fourth Supplemental Indenture is hereby approved. Section 3. Special Obligations. The Series 2015A Bonds shall be special obligations of the City, secured by, and payable from, Net Revenues and from the funds and accounts held by the Trustee and the City under the Master Trust Indenture and the Fourth Supplemental Indenture, as and to the extent therein described. The Series 2015A Bonds shall also be secured by and be paid from such other sources as the City may hereafter provide. Section 4. Forms of Series 2015A Bonds. The Series 2015A Bonds and the Trustee's Certificate of Authentication to appear thereon shall be in substantially the form set forth in Exhibit A to the Fourth Supplemental Indenture with necessary or appropriate variations, omissions and insertions as permitted or required by the Master Trust Indenture or the Fourth Supplemental Indenture or as appropriate to adequately reflect the terms of the Series 2015A Bonds and the obligation represented thereby. Section 5. Execution of the Series 2015A Bonds. Each of the Series 2015A Bonds shall be executed by the Mayor or the City Manager of the City (each a "Designated Officer ") and attested by the Finance Director or Clerk of the City. Any such signatures may be by manual or facsimile signature and the seal of the City may be impressed or printed on the Series 2015A Bonds. Additionally, each of the Series 2015A Bonds shall be authenticated by the signature of the Trustee or an agent of the Trustee as required and permitted by the Master Trust Indenture and the Fourth Supplemental Indenture. Any facsimile signature of such Designated Officer of the City shall be of the same force and effect as if such signature were manually placed on such Series 2015A Bonds. Section 6. Approval of Documents; Authorization for Execution. The form, terms and provisions of the Fourth Supplemental Indenture, the Escrow Agreement and the Continuing Disclosure Certificate (collectively, the "Documents ") are in all respects approved and the Mayor of the City, the City Manager, the Finance Director of the City, the City Attorney I 4827 - 2060 - 6241.4 6124115 CC AGENDA PACKET FACE and such other officers as are specified by each of the respective Documents (together with any designee in writing of any such officer; all references hereinafter in this resolution to any officer of the City shall be deemed to include any designee in writing of such officer) are hereby authorized, empowered and directed to execute, acknowledge and deliver each of the Documents including counterparts thereof, in the name and on behalf of the City. The Documents, as executed and delivered, shall be in substantially the forms now before this meeting and hereby approved, or with such changes therein (including any changes required by a municipal bond insurer or insurers in order to obtain a municipal bond insurance policy or policies with respect to the Series 2015A Bonds or a reserve fund surety policy or policies) as shall be approved by the officer or officers of the City executing the same; the execution thereof shall constitute conclusive evidence of the City's approval of any and all changes or revisions therein from the forms of the Documents now before this meeting; and from and after the execution and delivery of the Documents, the officers, agents and employees of the City are hereby authorized, empowered and directed to do all such acts and things and to execute all such documents as may be necessary to carry out and comply with the provisions of the Documents. Section 7. Sale of the Series 2015A Bonds. The sale of the Series 2015A Bonds is hereby approved through a private, negotiated sale to the Underwriters. The Mayor of the City, the City Attorney, the City Manager and the Finance Director of the City, or any one of them, are hereby authorized to approve the final terms of the sale of the Series 2015A Bonds subject to the terms, conditions and restrictions set forth in this Resolution. The Series 2015A Bonds shall be sold with an underwriters' discount and /or underwriting fee as set forth in the Bond Purchase Contract, in an amount not to exceed 0.2% of the aggregate principal amount of the Series 2015A Bonds, and subject to the terms and conditions set forth in the Bond Purchase Contract. Additionally, the Series 2015A Bonds may be sold to the Underwriters at a discount or a premium. The form, terms and provisions of the Bond Purchase Contract now before this meeting are in all respects hereby approved and the Mayor of the City, the City Attorney, the City Manager and the Finance Director of the City are hereby authorized and empowered, either alone or in combination, to execute and deliver the Bond Purchase Contract, including counterparts thereof, in the name and on behalf of the City. The Bond Purchase Contract, as executed and delivered, shall be in substantially the form now before this meeting and hereby approved, or with such changes therein as shall be approved by the officer(s) executing the same; the execution thereof shall constitute conclusive evidence of the City's approval of any and all changes or revisions therein from the form of the Bond Purchase Contract now before this meeting; and from and after the execution and delivery of the Bond Purchase Contract, the officers, agents and employees of the City are hereby authorized, empowered and directed to do all such acts and things and to execute all such documents as may be necessary to carry out and comply with the provisions of the Bond Purchase Contract. Section 8. Official Statement. The form of the Official Statement now before this meeting is in all respects hereby approved to be used in connection with the sale of the Series 2015A Bonds to the public. The Official Statement shall be in substantially the form now before this meeting and hereby approved, or with such changes therein as shall be approved by the Mayor of the City, the City Manager and the Finance Director of the City, or any one of Wi 4827 - 2060 - 6241.4 6124115 CC AGENDA PACKET PAGE 9 them. The Mayor of the City, the City Manager, the Finance Director of the City, or any one of them, are hereby authorized and directed to execute the Official Statement in the name and on behalf of the City. The execution thereof shall constitute conclusive evidence of the City's approval of any and all changes or revisions therein from the form of the Official Statement now before this meeting. The Official Statement shall be circulated (via printed format and /or electronic means) for use in selling the Series 2015A Bonds at such time or times as the Mayor of the City, the City Manager, the Finance Director of the City, or any one of them, (after consultation with the City's bond counsel and disclosure counsel and such other advisors the City believes to be useful) shall determine that each Official Statement is a "final official statement" within the meaning of Rule 15c2 -12 promulgated under the Securities Exchange Act of 1934, as amended ( "Rule 15c2 -12 "), and any such action previously taken is hereby confirmed, ratified and approved. The Underwriter is hereby authorized to distribute (via printed format and /or electronic means) the Official Statement, in connection with the sale of the Series 2015A Bonds to the public. Section 11. Paying Agent and Registrar. The City hereby appoints U.S. Bank National Association as paying agent (the "Paying Agent ") and as registrar (the "Registrar ") for the Series 2015A Bonds. Such appointments shall be effective upon the issuance of the Series 2015A Bonds, respectively, and shall remain in effect until the City shall, by supplemental agreement or by resolution, name a substitute or successor thereto. Section 12. Escrow Agent. The City hereby appoints U.S. Bank National Association, as the Escrow Agent, in connection with the advanced refunding and defeasance of the Series 2007A Refunded Bonds. Such appointment shall be effective upon the execution and delivery of the Escrow Agreement and shall remain in effect until the City shall, by resolution, name a substitute or successor thereto. Section 13. Authorization for Provision for Reserve Funds. A portion of the proceeds of the Series 2015A Bonds may be used to fund a reserve fund for the Series 2015A Bonds, or to pay costs of a surety bond or any other surety device for the reserve fund as may be set forth in the Fourth Supplemental Indenture. Section 14. Additional Authorization. The Mayor of the City, the City Manager, the Finance Director of the City, the City Attorney and all officers, agents and employees of the City, for and on behalf of the City, be and they hereby are authorized and directed to do any and all things necessary to effect the execution and delivery of the Series 2015A Bonds, the Documents, the Official Statement and the Bond Purchase Contract and to carry out the terms thereof. The Mayor of the City, the City Manager, the Finance Director of the City, the City Attorney and all other officers, agents and other employees of the City are further authorized and directed, for and on behalf of the City, to execute all papers, documents, certificates and other instruments that may be required in order to carry out the authority conferred by this Resolution and by the Series 2015A Bonds, the Documents, the Official Statement and the Bond Purchase Contract or to evidence the same authority and its exercise. The foregoing authorization includes, but is in no way limited to, authorizing City staff to pay costs of issuance of the Series 2015A Bonds and the underwriting fees; authorizing the Finance Director of the City to direct the investment of the proceeds of the Series 2015A Bonds in one or more of the permitted investments provided for under the Master Trust Indenture and the Fourth Supplemental rol 4827 - 2060 - 6241.4 6124115 CC AGENDA PACKET PAGE 10 Indenture (including, but not limited to, investment agreements) and to execute any documents relating to such investments; and authorizing the execution by the Mayor of the City, the City Manager, the Finance Director of the City, or any of them, of a tax compliance certificate as required by the Master Trust Indenture and the Fourth Supplemental Indenture for the purpose of complying with the arbitrage and rebate requirements of the Code, any documents required by The Depository Trust Company in connection with the Book -Entry Bonds (as defined in the Fourth Supplemental Indenture) and any notices of the advance refunding and defeasance of the Series 2007A Refunded Bonds required pursuant to the Master Trust Indenture and the First Supplemental Indenture. Section 15. Costs of Issuance. The City authorizes funds of the City, together with the proceeds of the Series 2015A, to be used to pay costs of issuance of the Series 2015A Bonds, including, but not limited to, costs and expenses of attorneys, accountants and financial advisors, underwriting fees, costs associated with rating agencies, the Trustee, the Escrow Agent, bond issuance and surety bonds, printing, publications and mailing expenses; and any related filing fees thereof. Section 16. Severability. The provisions of this Resolution are hereby declared to be severable and, if any section, phrase or provisions shall for any reason be declared to be invalid, such declaration shall not affect the validity of the remainder of the sections, phrases and provisions hereof. Section 17. Governing Law. This resolution shall be construed and governed in accordance with the laws of the State of California. Section 18. Repeal of Inconsistent Resolutions. All other resolutions of the City, or parts of resolutions, inconsistent with this Resolution, are hereby repealed to the extent of such inconsistency. Section 19. Effective Date of Resolution. This Resolution shall take effect immediately upon its passage. 7 4827 - 2060 - 6241.4 6124115 CC AGENDA PACKET FACE 11 HEREBY CERTIFY that the foregoing Resolution was passed and adopted by the City Council of the City of Bakersfield at a regular meeting thereof held on June 24, 2015, by the following vote: RIVERA, MAXWELL, WEIR, SMITH, HANSON, SULLIVAN, PARLIER AYES: COUNCILMEMBER NOES: COUNCILMEMBER ABSTAIN: COUNCILMEMBER ABSENT: COUNCILMEMBER City Clerk and Ex Officio Clerk of the Council of the City of Bakersfield APPROVED this 24h day of June, 2015. HARVEY L. HALL Mayor of the City of Bakersfield APPROVED AS TO FORM: VIRGINIA GENNARO City Attorney By: VIRGINIA GENNARO City Attorney 4827 - 2060 - 6241.4 6124115 CC AGENDA PACKET PAGE 12 4845- 7481 - 6545.5 FOURTH SUPPLEMENTAL TRUST INDENTURE by and between CITY OF BAKERSFIELD and U.S. BANK NATIONAL ASSOCIATION, as Trustee relating to $ [PAR] City of Bakersfield, California Wastewater Revenue Refunding Bonds Series 2015A Dated as of September 1, 2015 6124115 CC AGENDA PACKET FACE 13 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; INTERPRETATIONS Section1.01. Definitions ......................................................................... ............................... 1 Section 1.02. Incorporation of Definitions Contained in the Master Indenture ..................... 4 Section 1.03. Article and Section References ......................................... ............................... 4 ARTICLE II THE SERIES 2015A BONDS Section 2.01. Designation of the Series 2015A Bonds; Principal Amount ........................... 4 Section 2.02. Series 2015A Bonds Under the Master Indenture; Security; Parity ................ 4 Section 2.03. General Terms of the Series 2015A Bonds ....................... ............................... 4 Section 2.04. Exchange of Series 2015A Bonds ..................................... ............................... 6 Section 2.05. Book -Entry Bonds ............................................................ ............................... 6 ARTICLE III REDEMPTION Section 3.01. Notices to Bondholders ..................................................... ............................... 8 Section 3.02. Redemption Dates ............................................................. ............................... 9 Section 3.03. Optional Redemption of the Series 2015A Bonds ............ ............................... 9 Section 3.04. Mandatory Sinking Fund Redemption of the Series 2015A Bonds ................. 9 Section 3.05. Payment of Series 2015A Bonds Called for Redemption .............................. 11 Section 3.06. Selection of Series 2015A Bonds for Redemption; Series 2015A Bonds Redeemedin Part ............................................................ ............................... 11 Section 3.07. Effect of Redemption Call .............................................. ............................... 11 ARTICLE IV ESTABLISHMENT OF FUNDS AND APPLICATION THEREOF Section 4.01. Establishment of Funds and Accounts ............................ ............................... 11 Section 4.02. Application of Series 2015A Bond Proceeds .................. ............................... 12 Section 4.03. Series 2015A Debt Service Fund .................................... ............................... 12 Section 4.04. Series 2015A Costs of Issuance Fund ............................. ............................... 13 Section 4.05. Sources of Payment of Series 2015A Bonds .................. ............................... 13 ARTICLE V TAX COVENANTS Section 5.01. Series 2015A Rebate Fund .............................................. ............................... 13 Section 5.02. Preservation of Tax Exemption ...................................... ............................... 14 ARTICLE VI MISCELLANEOUS Section6.01. Notices ............................................................................ ............................... 15 Section 6.02. Compliance with Article 9 of the UCC ........................... ............................... 15 Section 6.03. Modification of Master Indenture and Fourth Supplemental Indenture ........ 15 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 1 Section 6.04. Continuing Disclosure ....................... ............................... Section 6.05. Parties Interested Herein .................... ............................... Section 6.06. Severability ........................................ ............................... Section 6.07. Payments or Actions Occurring on Non - Business Days.. Section 6.08. Governing Law .................................. ............................... Section6.09. Captions ............................................. ............................... Section6.10. Counterparts ....................................... ............................... EXHIBIT A FORM OF SERIES 2015A BOND EXHIBIT B DEBT SERVICE SCHEDULE EXHIBIT C REFUNDED SERIES 2007A BONDS ii 4845- 7481 - 6545.5 ........................ 15 ........................ 16 ........................ 16 ........................ 16 ........................ 16 ........................ 16 ........................ 16 6124115 CC A EN A PACKET PAGE 15 FOURTH SUPPLEMENTAL TRUST INDENTURE THIS FOURTH SUPPLEMENTAL TRUST INDENTURE (this "Fourth Supplemental Indenture ") dated as of September 1, 2015 is made by and between the CITY OF BAKERSFIELD, CALIFORNIA, a charter city and municipal corporation organized and existing under the Constitution of the State of California (the "City "), and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as trustee (the "Trustee "), and supplements that certain Master Trust Indenture, dated as of August 1, 2007, which is also by and between the City and the Trustee (the "Master Indenture "). WHEREAS, the Master Indenture provides, in Sections 2.09, 2.10 and 2.11 thereof, for the issuance of Refunding Bonds and, in Section 10.02 thereof, for the execution and delivery of Supplemental Indentures setting forth the terms of such Refunding Bonds; and WHEREAS, the City now, for the purpose of advance refunding a portion of its City of Bakersfield, California Wastewater Revenue Bonds Series 2007A, by execution and delivery of this Fourth Supplemental Indenture and in compliance with the provisions of the Master Indenture, sets forth the terms of its $[PAR] City of Bakersfield, California Wastewater Revenue Refunding Bonds, Series 2015A (the "Series 2015A Bonds "), provides for the deposit and use of the proceeds of the Series 2015A Bonds and makes other provisions relating to the Series 2015A Bonds; and WHEREAS, the Series 2015A Bonds are being issued as Refunding Bonds as provided for in Sections 2.10 and 2.11 of the Master Indenture. GRANTING CLAUSE In order to secure the payment of the Series 2015A Bonds, the City hereby pledges, assigns and grants to the Trustee with respect to the Series 2015A Bonds all of the liens, rights, interests and privileges set forth in the Granting Clause of, and elsewhere in, the Master Indenture. ARTICLE I DEFINITIONS; INTERPRETATIONS Section 1.01. Definitions. The following definitions shall apply to terms used in this Fourth Supplemental Indenture unless the context clearly requires otherwise: thereof "Authorized Denominations" means $5,000 principal amount and integral multiples "Bond Year" means a "Bond Year" as defined in the Tax Certificate. "Book -Entry Bonds" shall mean the Series 2015A Bonds held by DTC (or its nominee) as the registered owner thereof pursuant to the terms and provisions of Section 2.05 hereof. 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 1 "Cede & Co." shall mean Cede & Co., the nominee of DTC, and any successor nominee of DTC with respect to the Series 2015A Bonds. "Costs of Issuance" means all costs and expenses incurred by the City in connection with the issuance of the Series 2015A Bonds, including, but not limited to, as applicable, costs and expenses of printing and copying documents, the preliminary and final official statements, the Series 2015A Bonds, bond insurance premium (if any), reserve fund surety policy premium (if any), underwriters' compensation, and the fees, costs and expenses of rating agencies, the Trustee, counsel, accountants, financial advisors, feasibility consultants, verification agents and other consultants. "DTC" shall mean The Depository Trust Company, a limited - purpose trust company organized under the laws of the State of New York, and its successors and assigns. "Escrow Agreement" means the Escrow Agreement, dated September 1, 2015, by and between the City and the Trustee, as trustee and escrow agent, and under which a portion of the proceeds of the Series 2015A Bonds are to be deposited and used to pay the principal of and interest on the Refunded Series 2007A Bonds. "First Supplemental Indenture" means the First Supplemental Indenture, dated as of August 1, 2007, by and between the City and the Trustee. "Fourth Supplemental Indenture" means this Fourth Supplemental Trust Indenture, dated as of September 1, 2015, by and between the City and the Trustee and which sets forth the terms of the Series 2015A Bonds. "Holder" or "Bondholder" shall mean the registered owner of any Series 2015A Bond including DTC or its nominee as the sole registered owner of Book -Entry Bonds. "Interest Payinent Date" means each March 15 and September 15, commencing March 15, 2016, the dates upon which interest on the Series 2015A Bonds become due and payable. "Master Indenture" means the Master Trust Indenture, dated as of August 1, 2007, by and between the City and the Trustee, under which the Series 2015A Bonds are authorized and secured. "Participants" means the participants of DTC which include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. "Paying Agent" means, for purposes of this Fourth Supplemental Indenture, the Trustee, or any other institution appointed by the City. " Permitted Investments" means, with respect to this Fourth Supplemental Indenture, those investments designated as Permitted Investments under the Master Indenture. "Person" means a corporation, association, partnership, limited liability company, joint venture, trust, organization, business, individual or government or any government agency or political subdivision thereof. 2 4845- 7481 - 6545.5 6124115 CC AGENDA PACKET FACE 17 "Record Date" means for a March 15 Interest Payment Date the preceding March 1 and for a September 15 Interest Payment Date the preceding September 1. "Refunded Series 2007A Bonds" means the Series 2007A Bonds being advance refunded and defeased with a portion of the proceeds of the Series 2015A Bonds, as set forth in Exhibit C attached hereto. "Registrar" for purposes of this Fourth Supplemental Indenture, means the Trustee. "Registered Owner" means a Person in whose name a Series 2015A Bond is registered in the registration books of the Registrar. "Representation Letter" means the Blanket Issuer Letter of Representations dated July 28, 1998 from the City to DTC. "Series 2007A Bonds" means $190,695,000 aggregate principal amount of the City of Bakersfield, California Wastewater Revenue Bonds Series 2007A, a portion of the outstanding principal amount of which is being advance refunded with the Series 2015A Bonds. "Series 2012A Bonds" means $25,000,000 aggregate original principal amount of the City of Bakersfield, California Wastewater Revenue Refunding Bonds Series 2012A. "Series 2015A Bonds" means the $[PAR] aggregate principal amount of Bonds issued under the Master Indenture and this Fourth Supplemental Indenture and designated "City of Bakersfield, California Wastewater Revenue Refunding Bonds, Series 2015A." "Series 2015A Costs of Issuance Fund" means the Costs of Issuance Fund of such designation created in Section 4.01 of this Fourth Supplemental Indenture and into which money is to be deposited to pay Costs of Issuance of the Series 2015A Bonds. "Series 2015A Debt Service Fund" means the Debt Service Fund of such designation created in Section 4.04 of this Fourth Supplemental Indenture and into which money is to be deposited to pay debt service on the Series 2015A Bonds. "Series 2007A Escrow Fund" means the "City of Bakersfield, California Wastewater Revenue Bonds Series 2007A Escrow Fund" established and maintained by the Trustee, as trustee and escrow agent, under the terms of the Escrow Agreement and held for the purpose of paying the principal of and interest on the Refunded Series 2007A Bonds. "Series 2015A Rebate Fund" means the fund of such designation created in Section 4.01 of this Fourth Supplemental Indenture. "Tax Certificate" means that Tax Compliance Certificate dated the date of issuance of the Series 2015A Bonds, as amended from time to time, entered into by the City and executed with respect to the Series 2015A Bonds. "Underwriters" shall mean Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC, as the initial purchasers of the Bonds. 3 4845- 7481 - 6545.5 6124115 CC ACEN A PACKET FACE 18 Section 1.02. Incorporation of Definitions Contained in the Master Indenture. Except as otherwise provided in Section 1.01 of this Fourth Supplemental Indenture, all words, terms and phrases defined in the Master Indenture shall have the same meanings herein as in the Master Indenture. Section 1.03. Article and Section References. Except as otherwise indicated, references to Articles and Sections are to Articles and Sections of this Fourth Supplemental Indenture. ARTICLE II THE SERIES 2015A BONDS Section 2.01. Designation of the Series 2015A Bonds; Principal Amount. The Series 2015A Bonds authorized to be issued under the Master Indenture and this Fourth Supplemental Indenture shall be designated as "City of Bakersfield, California Wastewater Revenue Refunding Bonds, Series 2015A," which shall be issued in the original principal amount of $[PAR]. Section 2.02. Series 2015A Bonds Under the Master Indenture; Security; Parity. The Series 2015A Bonds are issued as Refunding Bonds under and subject to the terms of the Master Indenture and are secured by and payable from the Net Revenues and other security provided in the Granting Clause of the Master Indenture and in accordance with the terms of the Master Indenture. The payment of the principal of and interest on the Series 2015A Bonds are on a parity with the State Loan, the Series 2007A Bonds that are not refunded with the proceeds of the Series 2015A Bonds, and the Series 2012A Bonds. Section 2.03. General Terms of the Series 2015A Bonds. The Series 2015A Bonds shall, upon initial issuance, be dated September [], 2015. Each Series 2015A Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless such date of authentication is an Interest Payment Date, in which event such Series 2015A Bond shall bear interest from such date of authentication, or unless such date of authentication is after a Record Date and before the next succeeding Interest Payment Date, in which event such Series 2015A Bond shall bear interest from such succeeding Interest Payment Date, or unless such date of authentication is prior to [ ], 2015 in which event such Series 2015A Bond shall bear interest from [ ], 2015. If interest on the Series 2015A Bonds shall be in default, Series 2015A Bonds issued in exchange for Series 2015A Bonds surrendered for transfer or exchange shall bear interest from the Interest Payment Date to which interest has been paid in full on the Series 2015A Bonds surrendered. The Series 2015A Bonds shall be issued in denominations of $5,000 original principal amount or integral multiples thereof. Interest on the Series 2015A Bonds shall be paid on March 15, 2016 and semiannually thereafter on September 15 and March 15. Principal of the Series 2015A Bonds shall be paid annually on September 15 of each year beginning on September 15, 2018. Interest on the Series 2015A Bonds shall be calculated on the basis of a year of 360 days and twelve 30 -day months. I 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 19 At least fifteen (15) Business Days prior to each date on which principal or interest on any Series 2015A Bond shall be due and payable, the Trustee shall notify the City of such payment, the date such payment is due and the amount of such payment and the Series of Bonds to which such payment relates. Such notice shall be given by telephone or facsimile transmission and promptly confirmed in writing. The Series 2015A Bonds shall be issued in the original principal amount of $[PAR] and shall mature in the years and in the amounts and bear interest at the annual rates set forth in the following schedule: September 15 of the Year Principal Amount Interest Rate Payment of principal of the Series 2015A Bonds shall be made upon surrender of the Series 2015A Bonds to the Trustee or its agent; provided that with respect to Series 2015A Bonds which are Book -Entry Bonds, the Trustee may make other arrangements for payment of principal as provided in the Representation Letter. Payment of interest on Series 2015A Bonds which are not Book -Entry Bonds shall be made by check or draft of the Trustee mailed on the applicable Interest Payment Date by first -class mail to the person who is the registered Owner thereof on the Record Date, and such payment shall be mailed to such Owner at his address as it appears on the registration books of the Registrar. The payment of interest on Book -Entry Bonds shall be made as provided in Section 2.05 hereof. With respect to all Series 2015A Bonds, interest due and payable on any Interest Payment Date shall be paid to the person who is the registered owner as of the Record Date. The Series 2015A Bonds shall be substantially in the form of Exhibit A, which is part of this Fourth Supplemental Indenture. If the principal of a Series 2015A Bond becomes due and payable, but shall not have been paid as a result of a default hereunder, and no provision is made for its payment, then such Series 2015A Bond shall bear interest at the same rate after such default as on the day before the default occurred. Principal and interest will be paid in lawful money of the United States that at R 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 2 the time of payment is legal tender for payment of public and private debts or by checks or wire transfer payable in such money. Section 2.04. Exchange of Series 2015A Bonds. Series 2015A Bonds which are delivered to the Registrar for exchange may be exchanged for an equal total principal amount of the same Series of such Series 2015A Bonds with the same interest rate and maturity date. The cost of printing Series 2015A Bonds and any services rendered or expenses incurred by the Trustee or the Registrar in connection with any transfer or exchange shall be paid by the City. The Trustee or the Registrar may require the payment by the Bondholders requesting such transfer or exchange of any tax or other governmental charge required to be paid with respect to such transfer. The Registrar will not, however, be required to transfer or exchange any such Series 2015A Bond during the period established by the Registrar for selection of Series 2015A Bonds for redemption or any Series 2015A Bond which has been selected for redemption. Section 2.05. Book -Entry Bonds. (a) Except as provided in subparagraph (c) of this Section 2.05, the Registered Owner of all of the Series 2015A Bonds shall be DTC and the Series 2015A Bonds shall be registered in the name of Cede & Co., as nominee for DTC. Payment of principal of or interest on any Series 2015A Bond registered in the name of Cede & Co. shall be made by wire transfer of New York clearing house or equivalent next day funds or by wire transfer of same day funds to the account of Cede & Co. at the address indicated on the Record Date or special record date for Cede & Co. in the registration books of the Registrar. (b) The Series 2015A Bonds shall be initially issued in the form of separate single authenticated fully registered Series 2015A Bonds for each separate stated maturity of the Series 2015A Bonds. Upon initial issuance, the ownership of such Series 2015A Bonds shall be registered in the registration books of the Registrar in the name of Cede & Co., as nominee of DTC. The Trustee, the Registrar and the City may treat DTC (or its nominee) as the sole and exclusive owner of the Series 2015A Bonds registered in its name for the purposes of payment of the principal of or interest on the Series 2015A Bonds, giving any notice permitted or required to be given to Bondholders under the Master Indenture or this Fourth Supplemental Indenture, registering the transfer of Series 2015A Bonds, obtaining any consent or other action to be taken by Bondholders and for all other purposes whatsoever, and none of the Trustee, the Registrar or the City shall be affected by any notice to the contrary. None of the Trustee, the Registrar or the City shall have any responsibility or obligation to any Participant, any person claiming a beneficial ownership interest in the Series 2015A Bonds under or through DTC or any Participant, or any other person which is not shown on the registration books as being a Bondholder, with respect to the accuracy of any records maintained by DTC or any Participant; the payment by DTC or any Participant of any amount in respect of the principal of or interest on the Series 2015A Bonds; any notice which is permitted or required to be given to Bondholders under the Master Indenture and this Fourth Supplemental Indenture; any consent given or other action taken by DTC as Bondholder; or any other purpose. The rol 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 21 Trustee shall pay all principal of and interest on the Series 2015A Bonds to DTC, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to the principal of and interest on the Series 2015A Bonds to the extent of the sum or sums so paid. No person other than DTC shall receive an authenticated Series 2015A Bond evidencing the obligation of the City to make payments of principal and interest pursuant to the Master Indenture and this Fourth Supplemental Indenture. Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions herein with respect to Record Dates, the words "Cede & Co." in this Fourth Supplemental Indenture shall refer to such new nominee of DTC. (c) In the event the City determines that it is in the best interest of the beneficial owners that they be able to obtain bond certificates, and notifies DTC, the Trustee and the Registrar of such determination, then DTC will notify the Participants of the availability through DTC of bond certificates. In such event, the Trustee shall authenticate and the Registrar shall transfer and exchange bond certificates as requested by DTC and any other Bondholders in appropriate amounts. DTC may determine to discontinue providing its services with respect to the Series 2015A Bonds at any time by giving notice to the City and the Trustee and discharging its responsibilities with respect thereto under applicable law. Under such circumstances (if there is no successor securities depository), the City and the Trustee shall be obligated to deliver bond certificates as described in this Fourth Supplemental Indenture. In the event bond certificates are issued, the provisions of the Master Indenture and this Fourth Supplemental Indenture shall apply to, among other things, the transfer and exchange of such certificates and the method of payment of principal of and interest on such certificates. Whenever DTC requests the City and the Trustee to do so, the Trustee and the City will cooperate with DTC in taking appropriate action after reasonable notice (i) to make available one or more separate certificates evidencing the Series 2015A Bonds to any DTC Participant having Series 2015A Bonds credited to its DTC account or (ii) to arrange for another securities depository to maintain custody of certificates evidencing the Series 2015A Bonds. (d) Notwithstanding any other provision of the Master Indenture and this Fourth Supplemental Indenture to the contrary, so long as any Series 2015A Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to the principal of and interest on such Series 2015A Bond and all notices with respect to such Series 2015A Bond shall be made and given, respectively, to DTC as provided in the Representation Letter. (e) In connection with any notice or other communication to be provided to Bondholders pursuant to the Master Indenture and this Fourth Supplemental Indenture by the City or the Trustee with respect to any consent or other action to be taken by Bondholders, the City or the Trustee, as the case may be, shall establish a record date for such consent or other action and give DTC notice of such record date not less than fifteen (15) calendar days in advance of such record date to the extent possible. Notice to DTC shall be given only when DTC is the sole Bondholder. 7 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 22 (f) NEITHER THE CITY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO PARTICIPANTS OR BENEFICIAL OWNERS WITH RESPECT TO: THE PAYMENT BY DTC OR ANY PARTICIPANT OF THE PRINCIPAL OF OR INTEREST ON THE SERIES 2015A BONDS; THE PROVIDING OF NOTICE TO PARTICIPANTS OR BENEFICIAL OWNERS; THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, ANY PARTICIPANT; OR ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS OWNER OF THE SERIES 2015A BONDS. ARTICLE III REDEMPTION Section 3.01. Notices to Bondholders. If the City wishes that any Series 2015A Bonds be redeemed pursuant to any optional redemption provision in this Fourth Supplemental Indenture, the City will notify the Trustee of the applicable provision, the Series 2015A Bonds being redeemed, the redemption date, the maturity date, the interest rate, the CUSIP number and the principal amount of the Series 2015A Bonds to be redeemed and other necessary particulars. The City will give notice to the Trustee at least thirty -five (35) days before the redemption date, provided that the Trustee may, at its option, waive such notice or accept notice at a later date. The Trustee shall give notice of redemption, in the name of the City, to Bondholders affected by redemption at least thirty (30) days but not more than sixty (60) days before each redemption date, send such notice of redemption by first -class mail (or with respect to Series 2015A Bonds held by DTC by an express delivery service for delivery on the next following Business Day) to each owner of a Series 2015A Bond to be redeemed; each such notice shall be sent to the owner's registered address. Each notice of redemption shall specify the Series 2015A Bonds to be redeemed, the date of issue and the maturity date thereof, if less than all Series 2015A Bonds of a maturity are called for redemption the numbers of the Series 2015A Bonds and the CUSIP number assigned to the Series 2015A Bonds to be redeemed, the principal amount to be redeemed and the interest rate applicable to the Series 2015A Bonds to be redeemed, the date fixed for redemption, the redemption price, the place or places of payment, the Trustee's name, that payment will be made upon presentation and surrender of the Series 2015A Bonds to be redeemed, that interest, if any, accrued to the date fixed for redemption and not paid will be paid as specified in said notice, and that on and after said date interest thereon will cease to accrue. The City may provide that, if at the time of mailing of notice of an optional redemption there shall not have been deposited with the Trustee moneys sufficient to redeem all the Series 2015A Bonds called for redemption, such notice may state that it is conditional, that is, subject to the deposit of the redemption moneys with the Trustee not later than the opening of business three Business Days prior to the scheduled redemption date, and such notice shall be of no effect unless such moneys are so deposited. In the event sufficient moneys are not on deposit on the required date, then the redemption shall be canceled and on such cancellation date notice shall be mailed to the holders of such Series 2015A Bonds, to be redeemed in the manner provided in this Section 3.01. 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 23 Failure to give any required notice of redemption as to any particular Series 2015A Bonds will not affect the validity of the call for redemption of any Series 2015A Bonds in respect of which no failure occurs. Any notice sent as provided herein will be conclusively presumed to have been given whether or not actually received by the addressee. When notice of redemption is given, Series 2015A Bonds called for redemption become due and payable on the redemption date at the applicable redemption price. In the event that funds are deposited with the Trustee sufficient for redemption, interest on the Series 2015A Bonds to be redeemed will cease to accrue as of the redemption date. If any Series 2015A Bonds, at the time of redemption, are not Book -Entry Bonds, then at the time of mailing required by the first paragraph of this Section, such redemption notice shall be given by (i) registered or certified mail, postage prepaid; (ii) telephonically confirmed facsimile transmission; or (iii) overnight delivery service, to: The Depository Trust Company 55 Water Street, 50th Floor New York, NY 10041 -0099 Attention: Call Notification Facsimile: (212) 855 -7232 Failure to give the notice described in the immediately preceding paragraph or any defect therein shall not in any manner affect the redemption of any Series 2015A Bond. Section 3.02. Redemption Dates. The redemption date of Series 2015A Bonds to be redeemed pursuant to any optional redemption provision with respect to the Series 2015A Bonds and the following Section 3.03 will be a date permitted by the City in the notice delivered pursuant to Section 3.01. [The redemption date for mandatory redemptions of the Series 2015A Bonds will be as set forth in Section 3.04.] Section 3.03. Optional Redemption of the Series 2015A Bonds. At the option of the City, the Series 2015A Bonds maturing on or after September 15, 20[] (other than the Series 2015A Bonds maturing on September 15, 20[], September 15, 20[], September 15, 20[] and September 15, 20[]) may be called for redemption and payment prior to maturity, on or after September 15, 20[], in whole or in part, at any time, from any moneys that may be provided for such purpose at a redemption price equal to [100] % of the principal amount thereof, plus accrued interest thereon to the redemption date. At the option of the City, the Series 2015A Bonds maturing on September 15, 20[], September 15, 20[], September 15, 20[] and September 15, 20[] may be called for redemption and payment prior to maturity, on or after September 15, 20[20], in whole or in part, at any time, from any moneys that may be provided for such purpose at a redemption price equal to [_]% of the principal amount thereof, plus interest thereon to the redemption date. Section 3.04. Mandatory Sinking Fund Redemption of the Series 2015A Bonds. (a) The Series 2015A Bonds with a stated maturity date of September 15, 20[] are subject to mandatory sinking fund redemption at a redemption price equal to z 4845- 7481 - 6545.5 6124115 CC AGENDA PACKET FACE 2 the principal amount thereof plus accrued interest thereon to the redemption date, without premium, on September 15 of the following years and in the following principal amounts: September 15 of the Principal Amount Year *Final Maturity Date (b) The Series 2015A Bonds with a stated maturity date of September 15, 20[] are subject to mandatory sinking fund redemption at a redemption price equal to the principal amount thereof plus accrued interest thereon to the redemption date, without premium, on September 15 of the following years and in the following principal amounts: September 15 of the Principal Amount Year *Final Maturity Date (c) On or before the forty -fifth day prior to any mandatory sinking fund redemption date, the Trustee shall proceed to select for redemption (by lot in such manner as the Trustee may determine), from all Series 2015A Bonds subject to such redemption, an aggregate principal amount of such Series 2015A Bonds equal to the amount for such year as set forth in the appropriate table above and shall call such Series 2015A Bonds or portions thereof (in Authorized Denominations) for redemption and give notice of such call. (d) At the option of the City, to be exercised by delivery of a written certificate to the Trustee on or before the sixtieth (60'') day next preceding any mandatory sinking fund redemption date, it may (a) deliver to the Trustee for cancellation Series 2015A Bonds or portions thereof (in Authorized Denominations) of the stated maturity subject to such redemption purchased in the open market or otherwise acquired by the City or (b) specify a principal amount of such Series 2015A Bonds or portions thereof (in Authorized Denominations) which prior to said date have been purchased or redeemed (otherwise than under the provisions of this Section 3.04) and previously cancelled by the Trustee at the request of the City and not theretofore applied as a credit against any mandatory sinking fund redemption requirement. Each such Series 2015A Bond or portion thereof so delivered or previously redeemed shall be credited by the Trustee at 100% of the principal amount thereof against the obligation of the City on such mandatory sinking fund redemption date. 10 4845- 7481 - 6545.5 6124115 CC AGENDA PACKET FACE 25 Section 3.05. Payment of Series 2015A Bonds Called for Redemption. Upon surrender to the Trustee or the Trustee's agent, Series 2015A Bonds called for redemption shall be paid at the redemption price stated in the notice, plus, when applicable, interest accrued to the redemption date. Section 3.06. Selection of Series 2015A Bonds for Redemption; Series 2015A Bonds Redeemed in Part. Series 2015A Bonds are subject to redemption in such order of maturity [(except Series 2015A Bonds redeemed under Section 3.04)] as the City shall direct and by lot, selected in such manner as the Trustee shall deem appropriate, within a maturity. Upon surrender of a Series 2015A Bond to be redeemed, in part only, the Trustee will authenticate for the holder a new Series 2015A Bond or Series 2015A Bonds of the same maturity and Series equal in principal amount to the unredeemed portion of the Series 2015A Bond surrendered. Section 3.07. Effect of Redemption Call. On the date so designated for redemption, notice having been given in the manner and under the conditions provided herein and moneys for payment of the redemption price being held in trust to pay the redemption price, the Series 2015A Bonds so called for redemption shall become and be due and payable on the redemption date, interest on such Series 2015A Bonds shall cease to accrue from and after such redemption date, such Series 2015A Bonds shall cease to be entitled to any lien, benefit or security under the Master Indenture and this Fourth Supplemental Indenture and the owners of such Series 2015A Bonds shall have no rights in respect thereof except to receive payment of the redemption price. Series 2015A Bonds which have been duly called for redemption under the provisions of this Article III and for the payment of the redemption price of which moneys shall be held in trust for the holders of the Series 2015A Bonds to be redeemed, all as provided in this Fourth Supplemental Indenture, shall not be deemed to be Outstanding under the provisions of the Master Indenture and this Fourth Supplemental Indenture. ARTICLE IV ESTABLISHMENT OF FUNDS AND APPLICATION THEREOF Section 4.01. Establishment of Funds and Accounts. The following funds and accounts are hereby established with the Trustee: (a) City of Bakersfield, California Wastewater Revenue Refunding Bonds, Series 2015A Debt Service Fund (the "Series 2015A Debt Service Fund ") and therein an Interest Account, a Principal Account and a Redemption Account; and (b) City of Bakersfield, California Wastewater Revenue Refunding Bonds, Series 2015A Rebate Fund (the "Series 2015A Rebate Fund ") and therein an Earnings Account. 11 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 26 Section 4.02. Application of Series 2015A Bond Proceeds. The proceeds of the sale of the Series 2015A Bonds, being the amount of $[ ] (which sum represents the par amount of the Series 2015A Bonds of $[PAR].00, plus a [net] original issue [premium/discount] in the amount of $[ ], less an underwriter's discount in the amount of $[ ]), received by the Trustee shall be deposited or paid by the Trustee as follows: (a) the sum of $[ ] shall be transferred to the Escrow Agent, for deposit by the Escrow Agent in the Series 2007A Escrow Fund, to be used to refund and defease the Refunded Series 2007A Bonds; and (b) the sum of $[ ] shall be transferred to the Finance Director and deposited into the Series 2015A Costs of Issuance Fund. Section 4.03. Series 2015A Debt Service Fund. The Trustee shall make deposits into the Series 2015A Debt Service Fund as follows: (a) Interest Account. The Trustee shall deposit into the Interest Account (i) the amounts received from the City pursuant to Section 4.03 of the Master Indenture to be used to pay interest on the Series 2015A Bonds and, if the City enters into an interest rate swap agreement with respect to all or a portion of the Series 2015A Bonds, to pay amounts due and payable to the provider of such agreement at such times as are provided in such interest rate swap agreement and (ii) if the City enters into an interest rate swap agreement with respect to all or a portion of the Series 2015A Bonds, any amounts received by the City from the provider of such agreement. The Trustee shall also deposit into the Interest Account any other amounts deposited with the Trustee for deposit in the Interest Account or transferred from other funds and accounts for deposit therein. All amounts held at any time in the Interest Account shall be held on a priority basis for the ratable security and payment of interest due on the Series 2015A Bonds in accordance with their terms and amounts due and payable by the City under any interest rate swap agreement entered into by the City with respect to all or a portion of the Series 2015A Bonds (other than any swap termination payments and any other amounts payable thereunder which are payable and secured by a lien on Net Revenues ranking junior and subordinate to the lien of the Bonds) at any time in proportion to the amounts due or accrued with respect to each of them. Earnings on the Interest Account shall be retained in such account. (b) Principal Account. The Trustee shall deposit into the Principal Account amounts received from the City pursuant to Section 4.03 of the Master Indenture to be used to pay principal of the Series 2015A Bonds at maturity. The Trustee shall also deposit into the Principal Account any other amounts deposited with the Trustee for deposit into the Principal Account or transferred from other funds and accounts for deposit therein. On or about July 15 of each Fiscal Year, earnings on the Principal Account shall be withdrawn by the Trustee and paid to the City for deposit into the Wastewater Treatment Fund unless an Event of Default exists under the Master Indenture, in which event the earnings shall be retained in such account. 12 4845- 7481 - 6545.5 6124115 CC AGENDA PACKET FACE 27 (c) Redemption Account. The Trustee shall deposit into the Redemption Account amounts received from the City or from other sources to be used to pay the principal of, interest and premium, if any, on Series 2015A Bonds that are to be redeemed in advance of their maturity [(except redemptions occurring as a result of the operation of the mandatory sinking fund under Section 3.04 hereof, which amounts shall be deposited into the Principal Account)]. Earnings on amounts from time to time deposited into the Redemption Account shall be retained in such account or paid to the City for deposit into the Wastewater Treatment Fund in accordance with instructions given to the Trustee by an Authorized City Representative at the time of such deposit. The Series 2015A Debt Service Fund shall be invested and reinvested as directed by the City in Permitted Investments. Section 4.04. Series 2015A Costs of Issuance Fund. (a) The Finance Director shall establish, maintain and hold in trust a separate fund designated as the "City of Bakersfield, California Wastewater Revenue Refunding Bonds, Series 2015A Costs of Issuance Fund" (the "Series 2015A Costs of Issuance Fund "). (b) There shall be deposited into the Series 2015A Costs of Issuance Fund the amounts as provided in Section 4.02(b) above. (c) The City shall make payments or disbursements from the Series 2015A Costs of Issuance Fund to pay costs of issuance relating to the Series 2015A Bonds in accordance with the City's budget, record keeping and invoicing procedures. (d) Moneys held in the Series 2015A Costs of Issuance Fund shall be invested and reinvested in Permitted Investments. (e) Earnings on the Series 2015A Costs of Issuance Fund shall be transferred by the Finance Director and deposited with the Trustee into the Interest Account of the Series 2015A Debt Service Fund. Any amounts remaining in the Series 2015A Costs of Issuance Fund on June [], 2016 shall be transferred by the Finance Director and deposited with the Trustee in the Interest Account of the Series 2015A Debt Service Fund and the Series 2015A Costs of Issuance Fund shall be closed. Section 4.05. Sources of Payment of Series 2015A Bonds. The Series 2015A Bonds shall be secured by and payable from the Net Revenues as provided in the Master Indenture. The City may, but is not obligated to, provide for payment of principal and interest on the Series 2015A Bonds from any other source or from any other funds of the City. ARTICLE V TAX COVENANTS Section 5.01. Series 2015A Rebate Fund. The City hereby agrees that it will enter into the Tax Certificate and will, pursuant to this Fourth Supplemental Indenture, create the Series 13 4845- 7481 - 6545.5 6124115 CC AGENDA PACKET FACE 28 2015A Rebate Fund, which fund will be funded if so required under the Tax Certificate and amounts in such Series 2015A Rebate Fund shall be held and disbursed in accordance with the Tax Certificate. Section 5.02. Preservation of Tax Exemption. (a) The City shall comply with those covenants and agreements set forth in the Tax Certificate. (b) The City shall not use or permit the use of any proceeds of the Series 2015A Bonds or any other funds of the City held by the Trustee under this Fourth Supplemental Indenture, allocable to the Series 2015A Bonds, directly or indirectly, to acquire any securities or obligations, and shall not use or permit the use of any amounts received by the City or the Trustee with respect to the Series 2015A Bonds in any manner, and shall not take or permit to be taken any other action or actions, which would cause any Series 2015A Bond to be "federally guaranteed" within the meaning of Section 149(b) of the Code or an "arbitrage bond" within the meaning of Section 148 of the Code and applicable regulations promulgated from time to time thereunder and under Section 103(c) of the Code. The City shall observe and not violate the requirements of Section 148 of the Code and any such applicable regulations. In the event the City is of the opinion that it is necessary to restrict or limit the yield on the investment of money held by the Trustee or to use such money in certain manners, in order to avoid the Series 2015A Bonds from being considered "arbitrage bonds" within the meaning of Section 148 of the Code and the regulations thereunder as such may be applicable to the Series 2015A Bonds at such time, the City shall issue to the Trustee a certificate to such effect together with appropriate instructions, in which event the Trustee shall take such action as it is directed to take to use such money in accordance with such certificate and instructions, irrespective of whether the Trustee shares such opinion. (c) The City shall at all times do and perform all acts and things permitted by law and this Fourth Supplemental Indenture which are necessary or desirable in order to assure that interest paid on the Series 2015A Bonds will not be included in gross income for federal income tax purposes and shall take no action that would result in such interest being included in gross income for federal income tax purposes. 14 4845- 7481 - 6545.5 6124115 CC AGENDA PACKET FACE 29 ARTICLE VI MISCELLANEOUS Section 6.01. Notices. (a) Any notice, request, direction, designation, consent, acknowledgment, certification, appointment, waiver or other communication required or permitted by this Fourth Supplemental Indenture or the Series 2015A Bonds must be in writing except as expressly provided otherwise in this Fourth Supplemental Indenture or the Series 2015A Bonds. (b) Any notice or other communication, unless otherwise specified, shall be sufficiently given and deemed given when mailed by first -class mail, postage prepaid, addressed to the City or the Trustee at the addresses provided in the Master Indenture or when delivered by hand and received by the City or the Trustee at the addresses provided in the Master Indenture. Any addressee may designate additional or different addresses for purposes of this Section. Section 6.02. Compliance with Article 9 of the UCC. The security interests granted to the Bondholders of the Series 2015A Bonds under the Master Indenture and this Fourth Supplemental Indenture are not, as of the date of the original issuance of the Series 2015A Bonds, subject to the provisions of Article 9 of the Uniform Commercial Code (as such Article has been adopted by the State of California). In the event, subsequent to the date of original issuance of the Series 2015A Bonds, the security interests granted to the Bondholders of the Series 2015A Bonds under the Master Indenture and this Fourth Supplemental Indenture become subject to the provisions of Article 9 of the Uniform Commercial Code (as such Article may be adopted by the State of California), (a) the City shall take all necessary steps to preserve the continuing security interest granted to the Bondholders of the Series 2015A Bonds (including, if applicable, the filing of all necessary financing statements); and (b) an opinion of Bond Counsel will be delivered to the City and the Trustee, to the effect that the Series 2015A Bonds' first lien on the Net Revenues is perfected and all financing statements necessary to evidence such first lien have been filed. Section 6.03. Modification of Master Indenture and Fourth Supplemental Indenture. The City may, from time to time and at any time, execute and deliver Supplemental Indentures supplementing and /or amending the Master Indenture and this Fourth Supplemental Indenture in the manner set forth in Article X of the Master Indenture. Section 6.04. Continuing Disclosure. The City hereby covenants to annually provide certain financial information and operating data of the City with respect to the Enterprise and to provide notices of certain events, pursuant to Rule 15c2- 12(b)(5) of the Securities and Exchange Commission, and to execute and deliver a Continuing Disclosure Certificate for the benefit of the holders and the Beneficial Owners of the Series 2015A Bonds in a form acceptable to the Underwriter of the Series 2015A Bonds. Notwithstanding any other provision of this Fourth Supplemental Indenture, failure of the City to comply with the Continuing Disclosure Certificate shall not constitute an Event of Default hereunder; provided, however, that the Underwriter or 15 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 3 any Beneficial Owner of the Series 2015A Bonds may take such actions as may be necessary and appropriate to compel performance by the City of its obligations under this Section 6.04, including seeking mandate or specific performance by court order. Section 6.05. Parties Interested Herein. Nothing in this Fourth Supplemental Indenture expressed or implied is intended or shall be construed to confer upon, or to give or grant to, any person or entity, other than the City, the Trustee and the Registered Owners of the Series 2015A Bonds, any right, remedy or claim under or by reason of this Fourth Supplemental Indenture or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Fourth Supplemental Indenture contained by and on behalf of the City shall be for the sole and exclusive benefit of the City, the Trustee and the Registered Owners of the Series 2015A Bonds. Section 6.06. Severability. If any provision of this Fourth Supplemental Indenture shall be determined to be unenforceable, that shall not affect any other provision of this Fourth Supplemental Indenture. Section 6.07. Payments or Actions Occurring on Non - Business Days. If a payment date is not a Business Day at the place of payment or if any action required hereunder is required on a date that is not a Business Day, then payment may be made at that place on the next Business Day or such action may be taken on the next Business Day with the same effect as if payment were made on the action taken on the stated date, and no interest shall accrue for the intervening period. Section 6.08. Governing Law. This Fourth Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of California. Section 6.09. Captions. The captions in this Fourth Supplemental Indenture are for convenience only and do not define or limit the scope or intent of any provisions or Sections of this Fourth Supplemental Indenture. Section 6.10. Counterparts. This Fourth Supplemental Indenture may be signed in several counterparts. Each will be an original, but all of them together constitute the same instrument. [End of Fourth Supplemental Trust Indenture] 16 4845- 7481 - 6545.5 6124115 CC AGENDA PACKET FACE 31 IN WITNESS WHEREOF, the parties hereto have caused this Fourth Supplemental Indenture to be duly executed, all as of the date first above written. CITY OF BAKERSFIELD, CALIFORNIA Harvey Hall, Mayor APPROVED AS TO FORM: ma Virginia Gennaro, City Attorney APPROVED AS TO CONTENT AND COUNTERSIGNED: ma U.S. BANK NATIONAL ASSOCIATION, as Trustee Authorized Officer Nelson K. Smith, Finance Director [Signature page to Fourth Supplemental Trust Indenture] 17 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 32 EXHIBIT A FORM OF SERIES 2015A BOND UNITED STATES OF AMERICA No. R -[ ] $ CITY OF BAKERSFIELD, CALIFORNIA WASTEWATER REVENUE REFUNDING BOND, SERIES 2015A UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AS DEFINED IN THE HEREINAFTER DEFINED FOURTH SUPPLEMENTAL INDENTURE) TO THE TRUSTEE (AS HEREINAFTER DEFINED) FOR REGISTRATION OF, TRANSFER, EXCHANGE, OR PAYMENT, AND ANY SERIES 2015A BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. Interest Rate Maturity Date Original Issue Date CUSIP % September 15, 20[] [ ], 2015 [ ] REGISTERED HOLDER: * *CEDE & CO. ** PRINCIPAL AMOUNT: ** DOLLARS THIS BOND IS A SPECIAL, LIMITED OBLIGATION OF THE CITY, PAYABLE SOLELY FROM AND SECURED BY A PLEDGE OF NET REVENUES (AS HEREINAFTER DEFINED) DERIVED BY THE CITY FROM THE OPERATIONS OF THE ENTERPRISE (AS HEREINAFTER DEFINED) AND CERTAIN FUNDS AND ACCOUNTS HELD UNDER THE MASTER INDENTURE. NONE OF THE PROPERTIES OF THE ENTERPRISE ARE SUBJECT TO ANY MORTGAGE OR OTHER LIEN FOR THE BENEFIT OF THE OWNERS OF THIS BOND, AND NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, KERN COUNTY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION OR AGENCY OF THE STATE IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THIS BOND. PROVISIONS OF THE FOURTH SUPPLEMENTAL INDENTURE WILL CONTROL TO THE EXTENT INCONSISTENT WITH THE PROVISIONS OF THIS BOND. 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 33 The City of Bakersfield, California (the "City "), acting pursuant to Constitution of the State of California, Section 33.3 of the City Charter, the City of Bakersfield Enterprise Revenue Bond Law (the "Bond Law ") and certain provisions of the laws of the State of California (including Section 53580 et seq. of the California Government Code) (the "Refunding Law ") and with exclusive management and control of the Enterprise, promises to pay, from the Net Revenues, as hereinafter defined in this Bond, to , or registered assigns, the principal sum of Dollars on the Maturity Date set forth above and to pay interest as provided in this Bond. Additional provisions of this Bond are set forth on the following pages of this Bond. All acts, conditions and other matters required to exist, to happen and to be performed, precedent to and in the issuance of this Bond, do exist, have happened and have been performed in due time, form and manner as required by law, the Bond Law and the Refunding Law. Date of Authentication: September [_], 2015 U.S. BANK NATIONAL ASSOCIATION., CITY OF BAKERSFIELD, CALIFORNIA as Trustee certifies that this is one of the Bonds referred to in the Master Indenture and Fourth Supplemental Indenture By By Authorized Signatory Mayor Attest: Clerk of the City 1. Master Indenture; Fourth Supplemental Indenture. The City has entered into a Master Trust Indenture, dated as of August 1, 2007 (the "Master Indenture "), with U.S. Bank National Association, as trustee (the "Trustee "). Such Master Indenture provides that the City may issue bonds and incur other indebtedness under the terms and conditions set forth in the Master Indenture and Supplemental Indentures. All bonds and other indebtedness issued thereunder and secured thereby are collectively referred to herein as "Bonds." All capitalized terms not defined herein shall have the meanings set forth in the Master Indenture and the hereinafter defined Fourth Supplemental Indenture. This Bond is part of a series of Bonds of the City issued under the Master Indenture and the Fourth Supplemental Trust Indenture, dated as of September 1, 2015 (the "Fourth Supplemental Indenture "), by and between the City and the Trustee and authorized by Resolution No. [ ] adopted by the City Council of the City on June 24, 2015. The series of Bonds of which this Bond is a part is being issued in the original principal amount of $[PAR] and FEW 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 34 designated as City of Bakersfield, California Wastewater Revenue Refunding Bonds, Series 2015A (the "Series 2015A Bonds "). The City has previously issued and there are currently outstanding two series of Bonds, including City of Bakersfield, California Wastewater Revenue Bonds, Series 2007A in the original principal amount of $190,695,000 (the "Series 2007A Bonds ") and City of Bakersfield, California Wastewater Revenue Refunding Bonds, Series 2012A in the original principal amount of $25,000,000 (the "Series 2012A Bonds "). The 2015A Bonds are being issued to refund a portion of the outstanding Series 2007A Bonds. After the issuance of the 2015A Bonds, $[17,505,000] in principal amount of the Series 2007A Bonds and $10,000,000 in principal amount of the Series 2012A Bonds will remain outstanding. The Master Indenture also provides for the incurrence of additional debt, including the issuance of additional Bonds, to be secured under the Master Indenture equally and ratably with Series 2015A Bonds. On September 3, 1997, the City entered into the State Revolving Fund Loan Program Contract No. 7- 806 -550 -0 (the "State Loan "), by and between the City, and the State, acting through the State Water Resources Control Board (the "State Water Board ") whereby the State Water Board agreed to loan to the City $14,954,054 from the State Revolving Fund Loan Program to pay a portion of the costs and expenses of an upgrade and expansion to the Enterprise. Pursuant to the State Loan, the City has granted to the State a first lien on and pledge of the Net Revenues. Payment of principal of and interest on this Bond are on a parity with the State Loan repayment obligations. As of the date of this Bond, the amount of all principal and imputed interest remaining on the State Loan is $[5,415,330]. This Bond is being issued with a pledge of and lien on Net Revenues on a parity with any additional Bonds issued on a parity with the State Loan, the Series 2007A Bonds (to the extent not refunded and defeased by the Series 2015A Bonds) and Series 2012A Bonds under the terms and provisions of the Master Indenture. The terms of the Series 2015A Bonds include the terms set forth in the Master Indenture and the Fourth Supplemental Indenture. Bondholders are referred to the Master Indenture, as amended and supplemented from time to time, and the Fourth Supplemental Indenture, as amended and supplemented from time to time, for a statement of those terms and for the meanings of any defined terms not defined herein. 2. Source of Payments. The Series 2015A Bonds are, as provided in the Master Indenture and the Fourth Supplemental Indenture, together with all other Bonds, secured by and payable from, the Net Revenues, as described below and as defined in the Master Indenture. The Master Indenture pledges the Net Revenues to secure payment of all Bonds issued under the Master Indenture. The term "Net Revenues" is defined in the Master Indenture to mean, for any Fiscal Year, the Revenues for such Fiscal Year, less the Operation and Maintenance Costs for such Fiscal Year. FEW 4845- 7481 - 6545.5 6124115 CC AGENDA PACKET FACE 35 Net Revenues also includes such additional sources of revenue, if any, subsequently pledged by the City to pay the Bonds. The City is not required to provide for the payment of the Bonds from any other source. 3. Interest Rate. This Bond shall bear interest until the Maturity Date at the rate shown on the first page of this Bond. Interest on overdue principal and, to the extent lawful, on overdue interest will be payable at the rate on this Bond on the day before the default occurred. Interest on this Bond shall be calculated on the basis of a year of 360 days and twelve 30 -day months. 4. Interest Payment and Record Dates. Interest hereon will be due and payable on March 15, 2016 and each September 15 and March 15 thereafter and will be paid to the party who is the owner hereof on the Record Date for such payment. The Record Date for a March 15 payment is the preceding March 1, and the Record Date for a September 15 payment is the preceding September 1. If this Bond is not a Book -Entry Bond, as defined in the Fourth Supplemental Indenture, interest hereon will be paid by check mailed to the holder's registered address, and, if this Bond is a Book -Entry Bond, as defined in the Fourth Supplemental Indenture, interest will be paid as provided in Section 2.03 of the Fourth Supplemental Indenture. Interest will be paid in lawful money of the United States that at the time of payment is legal tender for payment of public and private debts or by checks or wire transfer payable in such money. 5. Payment of Principal. Payment of principal of Series 2015A Bonds will be paid at maturity upon surrender of such Bonds to the Trustee or its agent except that with respect to Series 2015A Bonds which are Book -Entry Bonds, the Trustee may make other agreements for payment of principal. Principal will be paid in lawful money of the United States that at the time of payment is legal tender for payment of public and private debts or by checks or wire transfer payable in such money. If any payment on the Series 2015A Bonds is due on a non - Business Day, it will be made on the next Business Day, and no interest will accrue as a result. 6. Redemptions. All redemptions will be made at a redemption price of [100]% of the principal amount of the Series 2015A Bonds being redeemed plus interest accrued since the most recent interest payment date. Optional Redemption. At the option of the City, the Series 2015A Bonds maturing on or after September 15, 20[] (other than the Series 2015A Bonds maturing on September 15, 20[], September 15, 20[], September 15, 20[] and September 15, 20[]) may be called for redemption and payment prior to maturity, on or after September 15, 20[], in whole or in part, at any time, from any moneys that may be provided for such purpose at a redemption price equal to [100]% of the principal amount thereof, plus accrued interest thereon to the redemption date. At the option of the City, the Series 2015A Bonds maturing on September 15, 20[], September 15, 20[], September 15, 20[] and September 15, 20[] may be called for redemption and payment prior to maturity, on or after September 15, 20[20], in whole or in part, at any time, from any moneys that may be provided for such purpose at 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 36 a redemption price equal to [100]% of the principal amount thereof, plus interest thereon to the redemption date. [Mandatory Redemption. The Series 2015A Bonds with a stated Maturity Date of September 15, 20[] will be subject to mandatory sinking fund redemption on September 15, 20[] and each September 15 thereafter, to and including September 15, 20[] in accordance with the terms of a mandatory sinking fund redemption schedule set forth in the Fourth Supplemental Indenture.] Notice of Redemption. At least thirty (30) days but not more than sixty (60) days before each redemption, the Trustee will give notice sent as provided in the Fourth Supplemental Indenture to each owner of a Series 2015A Bond to be redeemed. Failure to give any required notice of redemption will not affect the validity of the call for redemption of any Series 2015A Bond in respect of which no failure occurs. Any notice sent as provided in the Fourth Supplemental Indenture will be conclusively presumed to have been given whether or not actually received by the addressee. Effect of Notice of Redemption. When notice of redemption is given, Series 2015A Bonds called for redemption become due and payable on the redemption date at the applicable redemption price; in such case when funds are deposited with the Trustee or an agent of the Trustee sufficient for redemption, interest on the Series 2015A Bonds to be redeemed ceases to accrue as of the redemption date. 7. Denominations; Transfer; Exchange. The Series 2015A Bonds are available in denominations of $5,000 of original principal amount and integral multiples thereof. A holder may transfer or exchange Series 2015A Bonds in accordance with the Master Indenture and the Fourth Supplemental Indenture. The Trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Master Indenture. 8. Persons Deemed Owners. The registered owner of this Bond shall be treated as the owner of it for all purposes. 9. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee will pay the money to or for the account of the City. After that, holders entitled to the money must look only to the City and not to the Trustee for payment. 10. Discharge Before Maturity. If the City at any time deposits with the Trustee money, Government Obligations or obligations described in item (b) of the definition of Permitted Investments as described in the Master Indenture sufficient to pay at maturity principal of and interest on the outstanding Series 2015A Bonds, and if the City also pays all other sums then payable by the City under the Master Indenture, the Master Indenture will be discharged. After discharge, Bondholders must look only to the deposited money and securities for payment. If the City at any time deposits with the Trustee money, Government Obligations or obligations described in item (b) of the definition of Permitted Investments as described in the Master Indenture sufficient to pay at maturity, principal of and interest on all or any portion of the outstanding Series 2015A Bonds, such Series 2015A Bonds, with respect to which the deposit FEW 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 37 was made, shall no longer be deemed to be outstanding and shall no longer be secured by the Master Indenture except to the extent of the funds set aside therefor. 11. Amendment, Supplement, Waiver. The Master Indenture, the Fourth Supplemental Indenture and the Series 2015A Bonds may be amended or supplemented, and any past default or compliance with any provision may be waived, as provided in the Master Indenture. Any consent given by the owner of this Bond shall bind any subsequent owner of this Bond or any Bond delivered in substitution for this Bond. 12. Defaults and Remedies. The Master Indenture provides that the occurrences of certain events constitute Events of Default. If an Event of Default occurs and is continuing, the Trustee may exercise the remedies set forth in the Master Indenture. Under no circumstances does an Event of Default grant any right to accelerate payment of this Bond. An Event of Default and its consequences may be waived as provided in the Master Indenture and the Fourth Supplemental Indenture. Bondholders may not enforce the Master Indenture or this Bond except as provided in the Master Indenture and the Fourth Supplemental Indenture. The Trustee may refuse to enforce the Master Indenture or this Bond unless it receives indemnity satisfactory to it. Subject to certain limitations, holders of a majority of the principal amount of the Series 2015A Bonds (determined in accordance with the terms of the Master Indenture and the Fourth Supplemental Indenture) may direct the Trustee in its exercise of any trust or power. 13. No Recourse Against Others. No member, director, officer or employee of the City shall have any personal liability for any obligations of the City under this Bond, the Master Indenture or the Fourth Supplemental Indenture or for any claim based on such obligations or their creation or be subject to any personal liability or accountability by reason of the issuance thereof. Each Bondholder, by accepting this Bond, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Bond. 14. Authentication. This Bond shall not be valid until the Trustee or an authenticating agent signs the certificate of authentication on the second page of this Bond. 15. Abbreviations. Customary abbreviations may be used in the name of a Bondholder or an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), U /G /M /A (= Uniform Gifts to Minors Act) and U /T /M /A (= Uniform Transfers to Minors Act). 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 38 [FORM OF ASSIGNMENT] I or we assign and transfer to Insert social security or other identifying number of assignee (Print or type name, address and zip code of assignee) this Bond and irrevocably appoint agent to transfer this Bond on the books of the City. The agent may substitute another to act for him. Dated: Signed (Sign exactly as name appears on the face of this Bond) Signature guaranteed: (NOTE: Signature(s) guarantee should be made by a guarantor institution participating in the Securities Transfer Agents Medallion Program or such other guarantee program acceptable to the Trustee.) FEW 4845- 7481 - 6545.5 6124115 CC AGENDA PACKET FACE 39 EXHIBIT B DEBT SERVICE SCHEDULE $ [PAR] City of Bakersfield, California Wastewater Revenue Refunding Bonds Series 2015A Bonds Date Principal Interest Total 4845- 7481 - 6545.5 6124115 CC ACEN A PACKET FACE EXHIBIT C REFUNDED SERIES 2007A BONDS City of Bakersfield, California Wastewater Revenue Bonds Series 2007A Bonds 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 41 Principal to be Redemption Redemption CUSIP Maturity Date Redeemed Price Date Number September 15, 2018 $6,025,000 100.00% September 15, 2017 05753P AK8 September 15, 2019 6,480,000 100.00 September 15, 2017 05753P AL6 September 15, 2020 3,695,000 100.00 September 15, 2017 05753P BF8 September 15, 2020 4,100,000 100.00 September 15, 2017 05753P AM4 September 15, 2021 8,240,000 100.00 September 15, 2017 05753P AN2 September 15, 2022 8,595,000 100.00 September 15, 2017 05753P AP7 September 15, 2023 9,080,000 100.00 September 15, 2017 05753P AQ5 September 15, 2024 9,585,000 100.00 September 15, 2017 05753P AR3 September 15, 2025 10,065,000 100.00 September 15, 2017 05753P AS1 September 15, 2026 10,620,000 100.00 September 15, 2017 05753P AT9 September 15, 2027 11,175,000 100.00 September 15, 2017 05753P AU6 September 15, 2028 11,840,000 100.00 September 15, 2017 05753P AV4 September 15, 2032 53,765,000 100.00 September 15, 2017 05753P BG6 September 15, 2033 3,485,000 100.00 September 15, 2017 05753P AW2 4845- 7481 - 6545.5 6124115 CC A EN A PACKET PAGE 41 � ar 0 0 c ro oY — Q , ro ro X00 a.0-ro c n E ro � C 0 cn � cn au ro :E �0ar c � � rocrro E U c ro � � � c n 2 all C (0 0 ro E � E E ro en 8 ro `oY E ' — ro 80 ro 2 ro � a E ° E a -o U 0. U i7 cn ss cn a 2 a5 E 0 c U 0 ro 0 0 c c � 0ar� c 2 D io . -sr E C C C > — au '� c E ro 65 E � U U U �FE ro W 0 EO 0 ar � ar !E E PRELIMINARY OFFICIAL STATEMENT DATED , 2015 NEW ISSUE — BOOK -ENTRY ONLY RATING: Moody's : S &P: (See "RATINGS. ") In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions and assuming the accuracy of certain representations and continuing compliance with certain covenants, interest on the Series 2015A Bonds is excluded from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. Bond Counsel is further of the opinion that interest on the Series 2015A Bonds is exempt from present State of California personal income taxes. For a more complete description, see "TAX MATTERS." Dated: Date of Delivery CITY OF BAKERSFIELD, CALIFORNIA WASTEWATER REVENUE REFUNDING BONDS SERIES 2015A Due: September 15, as shown on the inside cover THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. The City of Bakersfield, California, Wastewater Revenue Refunding Bonds, Series 2015A (the "Series 2015A Bonds "), are being issued by the City of Bakersfield, California (the "City"), in the aggregate principal amount of $ `, pursuant to (i) the charter of the City, (ii) the City of Bakersfield Enterprise Revenue Bond Law, being Chapter 3.55 of the City's Municipal Code (the `Bond Law "), which incorporates, to the extent made applicable by the Bond Law, the Revenue Bond Law of 1941, being Chapter 6 of Division 2 of Title 5 of the California Government Code, as amended, (iii) certain provisions of the laws of the State of California (the "State ") (including Section 53580 et seq. of the California Government Code (the "Refunding Law "), (iv) a resolution adopted by the City Council of the City on June 24, 2015 (the "Resolution "), and (v) a Master Trust Indenture, dated as of August 1, 2007 (the "Master Indenture "), by and between the City and U.S. Bank National Association, a national banking association, as trustee (the "Trustee "), as supplemented by a Fourth Supplemental Trust Indenture, dated as of September 1, 2015 (the "Fourth Supplemental Indenture," and collectively with the Master Indenture, the "Indenture "), by and between the City and the Trustee. See "THE SERIES 2015A BONDS." Capitalized terms used on this cover page and not otherwise defined have the meanings ascribed to them elsewhere in this Official Statement. See in particular "APPENDIX A — Summary of Certain Provisions of the Principal Legal Documents — Selected Definitions." The proceeds from the sale of the Series 2015A Bonds will be used to (i) redeem a portion of the City's outstanding Wastewater Revenue Bonds, Series 2007A (the "Series 2007A Bonds "), the proceeds of which were used to finance a portion of the cost of certain capital improvements to the City's wastewater and sewage collection, treatment, and disposal system (the "Enterprise "), and (ii) pay costs of issuance of the Series 2015A Bonds, as more fully described herein. See "THE REFUNDING PLAN," "ESTIMATED SOURCES AND USES OF FUNDS," "THE SERIES 2015A BONDS," and "THE ENTERPRISE." The Series 2015A Bonds will be delivered as fully registered bonds without coupons and, when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( "DTC "). DTC will act as securities depository for the Series 2015A Bonds. Individual purchases of Series 2015A Bonds may be made in book -entry form only in the principal amount of $5,000 or integral multiples thereof for each maturity. Purchasers will not receive certificates representing their interest in the Series 2015A Bonds purchased. See "APPENDIX E— Book -Entry System." The Series 2015A Bonds are special, limited obligations of the City, payable solely from and secured by (i) a pledge of certain Net Revenues (as defined herein) derived from the Enterprise and (ii) certain limited funds and accounts held by the Trustee under the Indenture. See "SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2015A BONDS — Pledge of Net Revenues." The pledge of Net Revenues that secures the payment of principal and interest with respect to the Series 2015A Bonds is on a parity with a pledge of such Net Revenues to pay certain other outstanding obligations of the City, including the Series 2007A Bonds not refunded by the Series 2015A Bonds, the Series 2012A Bonds, and the State Loan, as such terms are defined herein. See "SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2015A BONDS — Pledge of Net Revenues," "— Series 2007A Unrefunded Bonds," "— Series 2012A Bonds," and "- State Loan." Additionally, future parity obligations may be issued by the City as described herein. See "SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2015A BONDS — Issuance of Additional Bonds." Payments of interest on the Series 2015A Bonds will be made by the Trustee to DTC, which will in turn remit such interest to its participants for subsequent disbursal to beneficial owners of the Series 2015A Bonds as described herein. Interest on the Series 2015A Bonds is payable semiannually on each March 15 and September 15, commencing March 15, 2016, until the maturity or the earlier redemption thereof. Principal and any redemption premiums with respect to each Series 2015A Bond will be paid upon surrender of such Series 2015A Bond at the principal corporate office of the Trustee upon maturity or the earlier redemption thereof. See "THE SERIES 2015A BONDS — Payment of the Series 2015A Bonds." The Series 2015A Bonds are subject to optional and mandatory sinking fund redemption prior to their stated maturities, as described herein. See "THE SERIES 2015A BONDS — Redemption of Series 2015A Bonds." THE SERIES 2015A BONDS REPRESENT A SPECIAL, LIMITED OBLIGATION OF THE CITY PAYABLE SOLELY FROM AND SECURED BY A PLEDGE OF NET REVENUES AND CERTAIN FUNDS AND ACCOUNTS HELD UNDER THE INDENTURE. NONE OF THE PROPERTIES OF THE ENTERPRISE ARE SUBJECT TO ANY MORTGAGE OR OTHER LIEN FOR THE BENEFIT OF THE OWNERS OF THE SERIES 2015A BONDS, AND NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, KERN COUNTY (THE "COUNTY "), THE STATE, OR ANY OTHER POLITICAL SUBDIVISION OR AGENCY OF THE STATE IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2015A BONDS. THE ISSUANCE OF THE SERIES 2015A BONDS DOES NOT DIRECTLY OR INDIRECTLY OBLIGATE THE CITY, THE COUNTY, THE STATE, OR ANY OTHER POLITICAL SUBDIVISION OR AGENCY OF THE STATE TO LEVY OR PLEDGE ANY FORM OF TAXATION WHATSOEVER OR TO MAKE ANY APPROPRIATION FOR PAYMENT OF THE SERIES 2015A BONDS. SEE MATURITY SCHEDULE ON INSIDE COVER The Series 2015A Bonds are offered when, as, and if delivered to and received by the Underwriters, subject to the approval of legality by Kutak Rock LLP, Denver, Colorado, Bond Counsel. Certain legal matters will be passed upon for the City by the City Attorney and by Disclosure Counsel, Goodwin Procter LLP, Los Angeles, California, and for the Underwriters by Stradling Yocca Carlson & Routh, Sacramento, California. It is anticipated that the Series 2015A Bonds in book -enhy form will be available for delivery through the facilities ofDTC on or about 2015. BofA MERRILL LYNCH Dated: , 2015. " Preliminary; subject to change. CITIGROUP MORGAN STANLEY 6124115 CC AGENDA PACKET PAGE 42 MATURITY SCHEDULE Maturity Principal Interest (September 15) Amount Rate Yield % Term Series 2015A Bonds due September 15, 20 Yield: % Term Series 2015A Bonds due September 15, 2033 Yield: Price CUSIP(I) No. %; Price: CUSIPL �1 No. %; Price: CUSIPL �1 No. (1) CUSIP® is a registered trademark of the American Bankers Association. Copyright© 1999 -2015 American Bankers Association. All rights reserved. CUSIP® data are provided by CUSIP Global Services, managed by Standard & Poor's Financial Services LLC on behalf of the American Bankers Association. These data are not intended to create a database and do not serve in any way as a substitute for CUSIP Global Services. CUSIP® numbers are provided for convenience of reference only. The City takes no responsibility for the accuracy of such numbers. 6124115 CC AGENDA PACKET PAGE 43 No dealer, broker, salesperson, or other person has been authorized by the City or the Underwriters to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy the Series 2015A Bonds, nor shall there be any sale of the Series 2015A Bonds, by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation, or sale. This Official Statement is not to be construed to be a contract with the purchasers of the Series 2015A Bonds. Statements contained in this Official Statement that involve estimates, forecasts, or matters of opinion, whether or not expressly described as such herein, are intended solely as such and are not to be construed as representations of fact. The information set forth herein has been obtained from the City and other sources that are believed to be reliable, but it is not guaranteed as to accuracy or completeness and it is not to be construed as a representation by the City. 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 will, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. The Underwriters have provided the following sentence for inclusion in this Official Statement. Each of the Underwriters has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. This Official Statement is submitted in connection with the sale of the Series 2015A Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. The initial public offering prices stated on the inside front cover of this Official Statement may be changed from time to time by the Underwriters. The Underwriters may offer and sell the Series 2015 Bonds to certain dealers (including dealers depositing Series 2015 Bonds into investment trusts), dealer banks, banks acting as agents, and others at prices lower than said public offering prices. THE SERIES 2015A BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE SERIES 2015A BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2015A BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 6124115 CC A EN A PACKET PAGE Oregon Sacramento San Franci Pacific Ocean w The City of Bakersfield, California, the county seat of the County of Kern, is located at the southern end of California's San Joaquin Valley. Bakersfield is approximately 110 miles north of Los Angeles and 290 miles south of San Francisco. Nevada KERN COUNTY Bakersfield Los Angeles Diego Mexico 6124115 CC A EN A PACKET PAGE 45 CITY OF BAKERSFIELD Mayor and City Council Harvey L. Hall, Mayor Willie Rivera, Councilmember First Ward Terry Maxwell, Councilmember Second Ward Ken Weir, Councilmember Third Ward Bob Smith, Councilmember Fourth Ward Harold Hanson, Vice Mayor, Councilmember Fifth Ward Jacquie Sullivan, Councilmember Sixth Ward Chris Parlier, Councilmember Seventh Ward City Staff Alan Tandy, City Manager Virginia Gennaro, City Attorney Roberta Gafford, City Clerk Nelson K. Smith, Finance Director Nick Fidler, Public Works Director Ted Wright, Assistant Public Works Director Ralph Braboy, Wastewater Manager BOND COUNSEL Kutak Rock LLP Denver, Colorado DISCLOSURE COUNSEL Goodwin Procter LLP Los Angeles, California TRUSTEE U.S. Bank National Association Los Angeles, California FINANCIAL ADVISOR Fieldman, Rolapp & Associates Irvine, California VERIFICATION AGENT Grant Thornton LLP Minneapolis, Minnesota 6124115 CC AGENDA PACKET PAGE 46 TABLE OF CONTENTS Page INTRODUCTION........................................................................................................................... ..............................1 General.............................................................................................................................. ..............................1 TheCity ............................................................................................................................ ............................... l Authorityfor Issuance ....................................................................................................... ..............................1 Purposeof Issuance .......................................................................................................... ............................... 2 General Terms of Series 2015A Bonds ............................................................................. ..............................2 Redemption of Series 2015A Bonds ................................................................................. ..............................2 Security for the Series 2015A Bonds ................................................................................ ..............................3 ContinuingDisclosure ....................................................................................................... ..............................4 No Acceleration of Series 2015A Bonds ........................................................................... ..............................4 LimitedObligations ........................................................................................................... ..............................4 Forward- Looking Statements ........................................................................................... ............................... 5 ReferencesQualified ........................................................................................................ ............................... 5 AdditionalInformation ..................................................................................................... ............................... 5 THEREFUNDING PLAN ............................................................................................................. ............................... 6 ESTIMATED SOURCES AND USES OF FUNDS ....................................................................... ..............................7 THESERIES 2015A BONDS ......................................................................................................... ..............................7 Authorityfor Issuance ...................................................................................................... ............................... 7 Deliveryin Book -Entry Form .......................................................................................... ............................... 7 Payment of the Series 2015A Bonds ................................................................................. ..............................8 Redemption of Series 2015A Bonds ................................................................................. ..............................8 SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2015A BONDS ...................... .............................10 LimitedObligations .......................................................................................................... .............................10 Pledgeof Net Revenues ................................................................................................... .............................11 Series 2007A Unrefunded Bonds ..................................................................................... .............................12 Series2012A Bonds ......................................................................................................... .............................12 StateLoan ......................................................................................................................... .............................12 No Reserve Fund for Series 2015A Bonds ....................................................................... .............................13 Wastewater Treatment Fund; Flow of Funds ................................................................... .............................13 Series2015A Debt Service Fund ..................................................................................... .............................14 Issuanceof Additional Bonds ........................................................................................... .............................15 Issuance of Subordinate Obligations ................................................................................ .............................17 RateCovenant .................................................................................................................. .............................17 Certain Other Covenants of the City ................................................................................ .............................18 Estimated Debt Service on Outstanding Bonds and State Loan ....................................... .............................22 THECITY .................................................................................................................................... ............................... 24 THEENTERPRISE ........................................................................................................................ .............................24 WastewaterTreatment Plant No. 2 ................................................................................... .............................24 WastewaterTreatment Plant No. 3 ................................................................................... .............................25 SewerVideo Inspection Program ..................................................................................... .............................25 Wastewater Treatment Process ......................................................................................... .............................25 Insuranceof Enterprise ..................................................................................................... .............................28 Managementand Organization ......................................................................................... .............................28 WastewaterTreatment Fund ............................................................................................ .............................28 Planned Capital Improvements to Enterprise ................................................................. ............................... 31 History of Revenues, Expenditures, and Debt Service Coverage ..................................... .............................31 Projection of Revenues, Expenditures, and Debt Service Coverage ................................ .............................32 RISKFACTORS .......................................................................................................................... ............................... 35 Series 2015A Bonds are Limited Obligations ................................................................ ............................... 35 SystemDemand ................................................................................................................ .............................35 IncreasedRegulations ....................................................................................................... .............................35 IncreasedSystem Expenses .............................................................................................. .............................35 SeismicActivity ............................................................................................................... .............................36 i 6124115 CC A GENDA PACKET PA GE 4 7 Self- Insurance ................................................................................................................. ............................... 36 Limitations on Available Remedies and the City's Ability to Generate Net Revenues ... .............................36 No Reserve Fund for Series 2015A Bonds ..................................................................... ............................... 37 No Acceleration of Series 2015A Bonds .......................................................................... .............................37 Absence of Market for Series 2015A Bonds .................................................................... .............................37 Potential Limitation of Tax Exemption of Interest on Series 2015A Bonds .................... .............................37 Economic, Political, Social, and Environmental Conditions ............................................ .............................37 Constitutional Provisions Affecting Enterprise Revenues and Expenditures ................... .............................38 FutureInitiatives .............................................................................................................. .............................40 TAXMATTERS ............................................................................................................................ .............................40 General........................................................................................................................... ............................... 40 Special Considerations With Respect to the Series 2015A Bonds ................................. ............................... 41 BackupWithholding ........................................................................................................ .............................41 Changes in Federal and State Tax Law .......................................................................... ............................... 41 Tax Treatment of Original Issue Premium ....................................................................... .............................42 Tax Treatment of Original Issue Discount ....................................................................... .............................42 LEGALMATTERS ....................................................................................................................... .............................43 LITIGATION................................................................................................................................. .............................43 VERIFICATION.......................................................................................................................... ............................... 43 RATINGS..................................................................................................................................... ............................... 43 UNDERWRITING....................................................................................................................... ............................... 44 FINANCIALADVISOR ................................................................................................................ .............................44 CONTINUINGDISCLOSURE ...................................................................................................... .............................45 MISCELLANEOUS..................................................................................................................... ............................... 45 APPENDIX A Summary of Certain Provisions of the Principal Legal Documents ............... ............................A -1 APPENDIX B City of Bakersfield Economic, Financial, and Demographic Information .. ............................... B -1 APPENDIX C City of Bakersfield Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014 ................................................................ ............................... C -1 APPENDIX D Form of Bond Counsel Opinion ..................................................................... ............................D -1 APPENDIX E Book -Entry System ..................................................................................... ............................... E -1 APPENDIX F Form of Continuing Disclosure Certificate ................................................. ............................... F -1 in 6124115 CC A EN A PACKET PAGE OFFICIAL STATEMENT CITY OF BAKERSFIELD, CALIFORNIA WASTEWATER REVENUE REFUNDING BONDS SERIES 2015A INTRODUCTION THIS INTRODUCTION IS SUBJECT IN ALL RESPECTS TO THE MORE COMPLETE INFORMATION IN THIS OFFICIAL STATEMENT, INCLUDING THE COVER PAGE AND APPENDICES HERETO, AND THE OFFERING OF THE SERIES 2015A BONDS TO POTENTIAL INVESTORS IS MADE ONLY BY MEANS OF THE ENTIRE OFFICIAL STATEMENT. General This Official Statement, which includes the cover page, Table of Contents, and Appendices (this "Official Statement "), provides certain information concerning the issuance, sale, and delivery by the City of Bakersfield, California (the "City "), of $ * in aggregate principal amount of its City of Bakersfield, California, Wastewater Revenue Refunding Bonds, Series 2015A (the "Series 2015A Bonds "). Descriptions and summaries of various documents contained in this Official Statement do not purport to be comprehensive or definitive, and reference is made to each such document for complete details of all terms and conditions therein. All statements in this Official Statement are qualified in their entirety by reference to the applicable documents. Capitalized terms used in this Official Statement and not otherwise defined have the meanings ascribed to them in "APPENDIX A — Summary of Certain Provisions of the Principal Legal Documents — Selected Definitions." The City The City is located at the southern end of the San Joaquin Valley in Kern County, California (the "County "), approximately 110 miles north of the City of Los Angeles and approximately 290 miles south of the City and County of San Francisco. The City covers over 150 square miles of land and an additional 162 square miles of land area is located within the City's sphere of influence. For more information regarding the City, see "THE CITY" and "APPENDIX B — City of Bakersfield Economic, Financial, and Demographic Information." Authority for Issuance The Series 2015A Bonds are being issued by the City pursuant to (i) the charter of the City, (ii) the City of Bakersfield Enterprise Revenue Bond Law, being Chapter 3.55 of the City's Municipal Code (the "Bond Law "), which incorporates, to the extent made applicable by the Bond Law, the Revenue Bond Law of 1941, being Chapter 6 of Division 2 of Title 5 of the California Government Code, as amended, (iii) certain provisions of the laws of the State of California (the "State ") (including Section 53580 et seq. of the California Government Code (the "Refunding Law "), (iv) Resolution No. adopted by the City Council of the City (the "City Council ") on June 24, 2015 (the "Resolution "), and (v) a Master Trust Indenture, dated as of August 1, 2007 (the "Master Indenture "), by and between the City and U.S. Bank National Association, a national banking association, as trustee (the "Trustee "), as supplemented by a Fourth Supplemental Trust Indenture, dated as of September 1, 2015 (the "Fourth " Preliminary; subject to change. 6124115 CC AGENDA PACKET PAGE 49 Supplemental Indenture," and collectively with the Master Indenture, the "Indenture "), by and between the City and the Trustee. Purpose of Issuance The proceeds from the sale of the Series 2015A Bonds will be used to (1) redeem a portion of the City's outstanding Wastewater Revenue Bonds, Series 2007A (the "Series 2007A Refunded Bonds "), originally issued in the aggregate principal amount of $190,695,000, and outstanding, as of the date of this Official Statement, in the aggregate principal amount of $174,225,000, and (ii) pay costs of issuance of the Series 2015A Bonds. The proceeds of the Series 2007A Refunded Bonds were used to finance a portion of the cost of certain capital improvements to the City's wastewater and sewage collection, treatment, and disposal system (the "Enterprise "), as more fully described herein. See "THE REFUNDING PLAN," "ESTIMATED SOURCES AND USES OF FUNDS," "THE SERIES 2015A BONDS," and "THE ENTERPRISE." General Terms of Series 2015A Bonds The Series 2015A Bonds will be delivered in fully registered form only and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( "DTC "). DTC will act as securities depository for the Series 2015A Bonds. Ownership interests in the Series 2015A Bonds may be purchased in denominations of $5,000 and integral multiples thereof ( "Authorized Denominations ") in book -entry form only. So long as Cede & Co. is the registered owner of the Series 2015A Bonds, principal of and interest on the Series 2015A Bonds are payable by wire transfer by the Trustee to Cede & Co., as nominee for DTC. Upon receipt of payments of principal and interest with respect to the Series 2015A Bonds, DTC will in turn remit such principal and interest to the participants in DTC for subsequent disbursement to the beneficial owners of the Series 2015A Bonds. See "THE SERIES 2015A BONDS — Delivery in Book -Entry Form" and "APPENDIX E — Book -Entry System." The Series 2015A Bonds will be dated the date of their initial delivery and will mature on September 15 on the respective dates and in the respective amounts, and the interest payable thereon will be computed at the respective rates, all as set forth on the inside cover page of this Official Statement. Interest on the Series 2015A Bonds will be calculated on the basis of a year of 360 days and twelve 30- day months and is payable semiannually on each March 15 and September 15, commencing March 15, 2016 (each, an "Interest Payment Date "), until the maturity or the earlier redemption thereof Interest on the Series 2015A Bonds (other than the Series 2015A Bonds held by DTC or its nominee) will be paid by check or draft, mailed by first class mail to the registered owners thereof (each, an "Owner ") as of the Record Date preceding the applicable Interest Payment Date. "Record Date" means for a March 15 Interest Payment Date the preceding March 1 and for a September 15 Interest Payment Date the preceding September 1. Principal of and any redemption premium with respect to each Series 2015A Bond will be payable upon surrender of such Series 2015A Bond at the principal corporate trust office of the Trustee in Los Angeles, California (the "Corporate Trust Office "), upon the maturity or earlier redemption thereof, provided that with respect to Series 2015A Bonds that are held by DTC or its nominee, the Trustee will make other arrangements for the payment of such principal as provided in the Indenture. See "THE SERIES 2015A BONDS — Payment of Series 2015A Bonds." Redemption of Series 2015A Bonds Optional Redemption of Series 2015A Bonds. At the option of the City, the Series 2015A Bonds maturing on or after September 15, 20 (other than the Series 2015A Bonds maturing on September 15, 20, September 15, 20, September 15, 20, and September 15, 20) may be called for redemption 6124115 CC AGENDA PACKET PAGE 50 and payment prior to maturity, on or after September 15, 20 , in whole or in part, at any time, from any moneys that may be provided for such purpose at a redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon to the redemption date. At the option of the City, the Series 2015A Bonds maturing on September 15, 20 , September 15, 20, September 15, 20 , and September 15, 20 , may be called for redemption and payment prior to maturity, on or after September 15, 20 , in whole or in part, at any time, from any moneys that may be provided for such purpose at a redemption price equal to % of the principal amount thereof, plus interest thereon to the redemption date. See "THE SERIES 2015A BONDS — Redemption of Series 2015A Bonds — Optional Redemption of Series 2015A Bonds." Mandatory Sinking Fund Redemption of Series 2015A Bonds. The Series 2015A Bonds maturing on September 15, 20 , and September 15, 2033, are subject to redemption prior to their stated maturities, in part, from mandatory sinking fund payments as set forth herein. See "THE SERIES 2015A BONDS — Redemption of Series 2015A Bonds — Mandatory Sinking Fund Redemption of Series 2015A Bonds." Security for the Series 2015A Bonds Pledge of Net Revenues. The Series 2015A Bonds are special, limited obligations of the City and are payable solely from Net Revenues generated by the Enterprise and received by the Trustee pursuant to the Indenture and from certain funds and accounts held under the Indenture. The term "Net Revenues," for any fiscal year of the City (each, a "Fiscal Year "), means Revenues (as defined herein) for such Fiscal Year, less the Operation and Maintenance Costs (as defined herein) for such Fiscal Year. Pursuant to the Indenture, the City has pledged and assigned to the Trustee and granted the Trustee a lien on and security interest in the Net Revenues and certain funds and accounts held by the Trustee. See "SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2015A BONDS — Pledge of Net Revenues." Rate Covenant. Pursuant to the Indenture, the City covenants in the Master Indenture to fix, prescribe, revise, and collect rates, fees, and charges for services and facilities furnished by the Enterprise during each Fiscal Year (subject to City Council approval with respect to rates) that are at least sufficient to pay, among other things, all payments of principal and interest with respect to certain specified obligations, including the Series 2015A Bonds, the Series 2007A Unrefunded Bonds (as defined herein), the Series 2012A Bonds (as defined herein), and the State Loan (as defined herein), payable from and secured by Net Revenues. See "SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2015A BONDS — Rate Covenant." Additional Bonds; Series 2007A Unrefunded Bonds; Series 2012A Bonds. Pursuant to the Indenture, the City may issue additional bonds that are payable and secured by Net Revenues on a parity with the Series 2015A Bonds. The City previously issued its City of Bakersfield, California, Wastewater Revenue Refunding Bonds, Series 2012A, in the aggregate principal amount of $25,000,000 (the "Series 2012A Bonds "), which are payable and secured by Net Revenues on a parity with the Series 2015A Bonds. As of date of this Official Statement, $10,000,000 in principal amount of Series 2012A Bonds are outstanding. In addition, a portion of the City's Wastewater Revenue Bonds, Series 2007A, in the aggregate principal amount of $17,505,000* (the "Series 2007A Unrefunded Bonds ") are not being refunded with proceeds of the Series 2015A Bonds and will remain outstanding upon the issuance of the Series 2015A Bonds. The Series 2007A Unrefunded Bonds, the Series 2012A Bonds, Series 2015A Bonds, and any additional bonds issued pursuant to the Indenture that are payable and secured by Net Revenues on a parity therewith, are collectively referred to herein as the "Bonds." See "SECURITY AND " Preliminary; subject to change. 6124115 CC AGENDA PACKET FACE 51 SOURCE OF PAYMENT FOR THE SERIES 2015A BONDS — Issuance of Additional Bonds," — Series 2007A Unrefunded Bonds," and "— Series 2012A Bonds." State Loan. The Series 2015A Bonds, when issued, the Series 2007A Unrefunded Bonds, and the Series 2012A Bonds are on a parity with the amount currently outstanding under the loan made by the State, acting through the State Water Resources Control Board, to the City in September 1997 in connection with the State Revolving Fund Loan Program (the "State Loan "). The State Loan was originally made to the City in the aggregate amount of $14,954,054. The terms of the State Loan require that the loan proceeds be used to finance not more than 83.33% of certain State - approved capital improvements and that the City pay for the remaining 16.67% of such costs as imputed interest. The State Loan is payable from Net Revenues over a 20 -year term in equal annual installments of $902,555, with the final installment due in Fiscal Year 2020 -21. As of the date of this Official Statement, the remaining amount of the State Loan payable by the City, including all principal and imputed interest, is $5,415,330. See "SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2015A BONDS — State Loan." No Reserve Fund for Series 2015A Bonds. The Master Indenture provides that the City may establish a debt service reserve fund for a given series of Bonds. While the City has previously elected to establish such a debt service reserve fund for the Series 2007A Bonds, no such debt service reserve fund was established for the Series 2012A Bonds and no such reserve fund will be established for the Series 2015A Bonds. Continuing Disclosure In connection with the issuance of the Series 2015A Bonds, the City will covenant in a continuing disclosure certificate (the "Continuing Disclosure Certificate "), executed for the benefit of Owners of the Series 2015A Bonds, to provide certain financial information and operating data relating to the Enterprise and the City and notices of certain events as specified therein. See "CONTINUING DISCLOSURE" and "APPENDIX F — Foam of Continuing Disclosure Certificate." No Acceleration of Series 2015A Bonds In no event, upon the occurrence or continuation of an event of default under the Indenture, shall the Owners of the Series 2015A Bonds, the Trustee, or any other party have the right to accelerate the payment of principal of or interest on the outstanding Series 2015A Bonds. Limited Obligations The Series 2015A Bonds represent a special, limited obligation of the City payable solely from and secured by a pledge of Net Revenues derived by the City from the operations of the Enterprise and certain funds and accounts held under the Indenture. None of the properties of the Enterprise are subject to any mortgage or other lien for the benefit of the Owners of the Series 2015A Bonds, and neither the full faith and credit nor the taxing power of the City, the County, the State, or any other political subdivision or agency of the State is pledged to the payment of the principal of or interest on the Series 2015A Bonds. The issuance of the Series 2015A Bonds does not directly or indirectly obligate the City, the County, the State, or any other political subdivision or agency of the State to levy or pledge any form of taxation whatsoever or to make any appropriation for payment of the Series 2015A Bonds. For certain financial information with respect to the City and the Enterprise, see "THE CITY" and "THE ENTERPRISE" 6124115 CC A EN A PACKET PAGE 52 Forward - Looking Statements Certain statements included or incorporated by reference in this Official Statement constitute "forward - looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 2 1 E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as "plan," "intend," "expect," "propose," "estimate," "project," "budget," "anticipate," or other similar words. The achievement of certain results or other expectations contained in such forward- looking statements involves known and unknown risks, uncertainties, and other factors that may cause the 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. No updates or revisions to these forward - looking statements are expected to be issued if or when the expectations, events, conditions, or circumstances on which such statements are based change. The forward - looking statements in this Official Statement are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by such forward - looking statements. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD- LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. References Qualified The summaries of and references to all documents, statutes, reports, and other instruments referred to in this Official Statement do not purport to be complete, comprehensive, or definitive, and each such summary and reference is qualified in its entirety by reference to each such document, statute, report, or instrument. Additional Information Additional information regarding this Official Statement, as well as copies of the Indenture and other documents described herein, may be obtained from the City. The City's address for such purpose is: City of Bakersfield, 1600 Truxtun Avenue, Bakersfield, California 93301, Attention: Finance Director. The Finance Director's telephone number is (661) 326 -3740. [Remainder of Page Intentionally Left Blank] 6124115 CC AGENDA PACKET FACE 53 THE REFUNDING PLAN A portion of the proceeds from the sale of the Series 2015A Bonds will be used to redeem the outstanding Series 2007A Refunded Bonds, as more particularly described in the following table: Maturity Date Series 2007A Refunded Bonds Principal Redemption Redemption Redeemed Price Date CUSIP Number (r) September 15, 2018 $6,025,000 100.00% September 15, 2017 05753P AK8 September 15, 2019 6,480,000 100.00 September 15, 2017 05753P AL6 September 15, 2020 4,100,000 100.00 September 15, 2017 05753P AM4 September 15, 2020 3,695,000 100.00 September 15, 2017 05753P BF8 September 15, 2021 8,240,000 100.00 September 15, 2017 05753P AN2 September 15, 2022 8,595,000 100.00 September 15, 2017 05753P AP7 September 15, 2023 9,080,000 100.00 September 15, 2017 05753P AQ5 September 15, 2024 9,585,000 100.00 September 15, 2017 05753P AR3 September 15, 2025 10,065,000 100.00 September 15, 2017 05753P AS1 September 15, 2026 10,620,000 100.00 September 15, 2017 05753P AT9 September 15, 2027 11,175,000 100.00 September 15, 2017 05753P AU6 September 15, 2028 11,840,000 100.00 September 15, 2017 05753P AW September 15, 2032 53,765,000 100.00 September 15, 2017 05753P BG6 September 15, 2033 3.485.000 100.00 September 15, 2017 05753P AW2 Total $156,750,000 (1) CUSIP® is a registered trademark of the American Bankers Association. Copyright0 1999 -2015 American Bankers Association. All rights reserved. CUSIP® data are provided by CUSIP Global Services, managed by Standard & Poor's Financial Services LLC on behalf of the American Bankers Association. These data are not intended to create a database and do not serve in any way as a substitute for CUSIP Global Services. CUSIP® numbers are provided for convenience of reference only. The City takes no responsibility for the accuracy of such numbers. The Series 2007A Refunded Bonds were issued pursuant to, and will be refunded in accordance with, the terms of the Master Indenture and a First Supplemental Trust Indenture, dated as of August 1, 2007, by and between the City and U.S. Bank National Association, a national banking association, as trustee (the "2007 Trustee "). On the date of issuance of the Series 2015A Bonds, a portion of the proceeds from the sale of the Series 2015A Bonds (the "Escrow Proceeds "), will be delivered to the 2007 Trustee, acting as escrow agent (the "Escrow Agent ") under that certain Escrow Agreement, dated September _, 2015 (the "Escrow Agreement "), by and between the City and the Escrow Agent. The Escrow Agent will deposit the Escrow Proceeds in accordance with the Escrow Agreement in an irrevocable escrow fund (the "Escrow Fund ") for the benefit of the owners of the Series 2007A Refunded Bonds, to be invested in direct, noncallable, general obligations of the United States of America ( "Refunding Securities "), plus an amount held in cash, if any. The Refunding Securities, together with earnings thereon, will be used to redeem the outstanding Series 2007A Refunded Bonds on September 15, 2017 (the "Redemption Date "), at the redemption price of 100% of the principal amount of the Series 2007A Refunded Bonds, together with interest accrued thereon to the redemption date. Grant Thornton LLP (the "Verification Agent ") will verify that the Refunding Securities, together with the earnings thereon and any uninvested cash held by the Escrow Agent in the Escrow Fund, will be sufficient to pay all of the principal, interest, and redemption premium, if any, coming due with respect to the Series 2007A Refunded Bonds on the Redemption Date. See "VERIFICATION." The Series 2007A Unrefunded Bonds, which will remain outstanding following the issuance of the Series 2015A Bonds, are described in the table below. " Preliminary; subject to change. 6124115 CC AGENDA PACKET PAGE 54 Series 2007A Unrefunded Bonds* Principal Maturity Date Outstanding CUSIP Interest Rate Number September 15, 2015 $ 1,925,000 4.250% 05753P AG7 September 15, 2015 3,550,000 5.000 05753P BC5 September 15, 2016 550,000 4.250 05753P AH5 September 15, 2016 5,505,000 5.000 05753P BD3 September 15, 2017 2,650,000 4.250 05753P AJI September 15, 2017 3,325,000 5.000 05753P BE1 Total $17,505,000 (1) CUSIP® is a registered trademark of the American Bankers Association. Copyright0 1999 -2015 American Bankers Association. All rights reserved. CUSIP® data are provided by CUSIP Global Services, managed by Standard & Poor's Financial Services LLC on behalf of the American Bankers Association. These data are not intended to create a database and do not serve in any way as a substitute for CUSIP Global Services. CUSIP® numbers are provided for convenience of reference only. The City takes no responsibility for the accuracy of such numbers. ESTIMATED SOURCES AND USES OF FUNDS The following table details the estimated sources and uses of the proceeds from the sale of the Series 2015A Bonds: SOURCES: Principal Amount of the Series 2015A Bonds [Plus /Less]: Net Original Issue [Premium/Discount] Total: USES: Underwriters' Discount Deposit to Series 2015A Costs of Issuance Fund (i) Deposit to Escrow Fund (2) Total: (1) Moneys in the Series 2015A Costs of Issuance Fund will be used to pay the fees and expenses of Bond Counsel, Disclosure Counsel, the Financial Advisor, the Trustee, the Escrow Agent, and the Verification Agent, as well as rating fees, printing fees, and other miscellaneous costs related to the issuance of the Series 2015A Bonds. The Series 2015A Costs of Issuance Fund will be held and administered by the City. (2) Moneys in the Escrow Fund established for the Series 2007A Refunded Bonds, which Escrow Fund will be funded with Series 2015A Bond proceeds, will be used to call and redeem all of the outstanding Series 2007A Refunded Bonds on September 15, 2017. The Escrow Fund will be held and administered by the Escrow Agent. See "THE REFUNDING PLAN." THE SERIES 2015A BONDS Authority for Issuance The Series 2015A Bonds are being issued by the City pursuant to (i) the Charter of the City, (ii) the Bond Law, (iii) the Refunding Law, (iv) the Resolution, and (v) the Indenture. Delivery in Book -Entry Form The Series 2015A Bonds will be delivered in fully registered form only and, when issued, will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository for the " Preliminary; subject to change. 6124115 CC AGENDA PACKET PAGE 55 Series 2015A Bonds. Ownership interests in the Series 2015A Bonds may be purchased in Authorized Denominations, in book -entry form only. So long as Cede & Co. is the registered owner of the Series 2015A Bonds, principal of and interest on the Series 2015A Bonds are payable by wire transfer by the Trustee to Cede & Co., as nominee for DTC. Upon receipt of payments of principal and interest with respect to the Series 2015A Bonds, DTC will in turn remit such principal and interest to the participants in DTC for subsequent disbursement to the beneficial owners of the Series 2015A Bonds. See "APPENDIX E — Book -Entry System." Payment of the Series 2015A Bonds The Series 2015A Bonds will be dated the date of their initial delivery and will mature on September 15 on the respective dates and in the respective amounts, and the interest payable thereon will be computed at the respective rates, all as set forth on the inside cover page of this Official Statement. Interest on the Series 2015A Bonds will be calculated on the basis of a year of 360 days and twelve 30- day months and is payable semiannually on each Interest Payment Date until the maturity or the earlier redemption thereof Interest on the Series 2015A Bonds (other than the Series 2015A Bonds held by DTC or its nominee) will be paid by check or draft, mailed by first class mail to the Owners as of the close of business on the Record Date preceding the applicable Interest Payment Date. Principal of and any redemption premium with respect to each Series 2015A Bond will be payable upon surrender of such Series 2015A Bond at the Corporate Trust Office of the Trustee in Los Angeles, California, upon the maturity or earlier redemption thereof, provided that with respect to Series 2015A Bonds that are held by DTC or its nominee, the Trustee will make other arrangements for the payment of such principal as provided in the Indenture. Redemption of Series 2015A Bonds Optional Redemption of Series 2015A Bonds. The Series 2015A Bonds maturing on or before September 15, 20 , are not subject to optional redemption prior to their respective stated maturities. At the option of the City, the Series 2015A Bonds maturing on or after September 15, 20 (other than the Series 2015A Bonds maturing on September 15, 20 , September 15, 20 , September 15, 20, and September 15, 20) may be called for redemption and payment prior to maturity, on or after September 15, 20 , in whole or in part, at any time, from any moneys that may be provided for such purpose at a redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon to the redemption date. At the option of the City, the Series 2015A Bonds maturing on September 15, 20 , September 15, 20, September 15, 20 , and September 15, 20 , may be called for redemption and payment prior to maturity, on or after September 15, 20 , in whole or in part, at any time, from any moneys that may be provided for such purpose at a redemption price equal to % of the principal amount thereof, plus interest thereon to the redemption date. Mandatory Sinking Fund Redemption of Series 2015A Bonds. The Series 2015A Bonds maturing on September 15, 20, are subject to mandatory sinking fund redemption prior to their stated maturity, at a redemption price equal to the principal amount thereof plus accrued interest thereon to the redemption date, without premium. The Series 2015A Bonds maturing on September 15, 20, shall be redeemed on the following dates and in the following amounts: 8 6124115 CC AGENDA PACKET FACE 56 Redemption Date Principal (Scutcmbcr 15) Amount (maturity) The Series 2015A Bonds maturing on September 15, 20, are subject to mandatory sinking fund redemption prior to their stated maturity, at a redemption price equal to the principal amount thereof plus accrued interest thereon to the redemption date, without premium. The Series 2015A Bonds maturing on September 15, 20, shall be redeemed on the following dates and in the following amounts: Redemption Date Principal (Scutcmbcr 15) Amount (maturity) On or before the 45th day prior to any mandatory sinking fund redemption date, the Trustee shall proceed to select for redemption (by lot in such manner as the Trustee may determine), from all Series 2015A Bonds subject to such redemption, an aggregate principal amount of such Series 2015A Bonds equal to the amount for such year as set forth in the appropriate table above and shall call such Series 2015A Bonds or portions thereof (in Authorized Denominations) for redemption and give notice of such call. At the option of the City, to be exercised by delivery of a written certificate to the Trustee on or before the 60th day next preceding any mandatory sinking fund redemption date, it may (a) deliver to the Trustee for cancellation Series 2015A Bonds or portions thereof (in Authorized Denominations) of the stated maturity subject to such redemption purchased in the open market or otherwise acquired by the City or (b) specify a principal amount of such Series 2015A Bonds or portions thereof (in Authorized Denominations) that, prior to said date, have been purchased or redeemed (otherwise than by mandatory sinking fund redemption as described above) and previously cancelled by the Trustee at the request of the City and not theretofore applied as a credit against any mandatory sinking fund redemption requirement. Each such Series 2015A Bond or portion thereof so delivered or previously redeemed shall be credited by the Trustee at 100% of the principal amount thereof against the obligation of the City on such mandatory sinking fund redemption date. Selection for Redemption. Series 2015A Bonds are subject to redemption in such order of maturity (except Series 2015A Bonds redeemed by mandatory sinking fund redemption as described above) as the City shall direct and by lot, selected in such manner as the Trustee shall deem appropriate, within a maturity. Upon surrender of a Series 2015A Bond to be redeemed, in part only, the Trustee will authenticate for the holder a new Series 2015A Bond or Series 2015A Bonds of the same maturity and series equal in principal amount to the unredeemed portion of the Series 2015A Bond surrendered. 6124115 CC AGENDA PACKET FACE 57 Notice of Redemption. If the City wishes that any Series 2015A Bonds be redeemed pursuant to any optional redemption provisions described above, the City will notify the Trustee of the applicable provision, the Series 2015A Bonds being redeemed, the redemption date, the maturity date, the interest rate, the CUSIP number, and the principal amount of the Series 2015A Bonds to be redeemed, and other necessary particulars. The City will give notice to the Trustee at least 35 days before the redemption date, provided that the Trustee may, at its option, waive such notice or accept notice at a later date. The Trustee shall give notice of redemption, in the name of the City, to Bondholders affected by redemption at least 30 days but not more than 60 days before each redemption date and send such notice of redemption by first class mail (or with respect to Series 2015A Bonds held by DTC by an express delivery service for delivery on the next following Business Day) to each owner of a Series 2015A Bond to be redeemed; each such notice shall be sent to the owner's registered address. The City may provide that, if at the time of mailing of notice of an optional redemption there shall not have been deposited with the Trustee moneys sufficient to redeem all the Series 2015A Bonds called for redemption, such notice may state that it is conditional, that is, subject to the deposit of the redemption moneys with the Trustee not later than the opening of business three Business Days prior to the scheduled redemption date, and such notice shall be of no effect unless such moneys are so deposited. In the event sufficient moneys are not on deposit on the required date, then the redemption shall be canceled and on such cancellation date notice shall be mailed to the holders of such Series 2015A Bonds, to be redeemed in the manner provided in the Indenture. Effect of Redemption. From and after the date fixed for redemption, if notice shall have been given in the manner and under the conditions provided in the Indenture (as described above) and if moneys for the payment of the applicable redemption price shall have been duly provided, the Series 2015A Bonds called for redemption will become and be due and payable on the redemption date, interest on such Series 2015A Bonds will cease to accrue from and after such redemption date, such Series 2015A Bonds will cease to be entitled to any lien, benefit, or security under the Indenture, and Owners of such Series 2015A Bonds will have no rights with respect thereto, except the right to receive payment of the redemption price. SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2015A BONDS Limited Obligations THE SERIES 2015A BONDS REPRESENT A SPECIAL, LIMITED OBLIGATION OF THE CITY PAYABLE SOLELY FROM AND SECURED BY A PLEDGE OF THE NET REVENUES DERIVED BY THE CITY FROM THE OPERATIONS OF THE ENTERPRISE AND CERTAIN FUNDS AND ACCOUNTS HELD UNDER THE INDENTURE. NONE OF THE PROPERTIES OF THE ENTERPRISE ARE SUBJECT TO ANY MORTGAGE OR OTHER LIEN FOR THE BENEFIT OF THE OWNERS OF THE SERIES 2015A BONDS, AND NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY, THE STATE, OR ANY OTHER POLITICAL SUBDIVISION OR AGENCY OF THE STATE IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE SERIES 2015A BONDS. THE ISSUANCE OF THE SERIES 2015A BONDS DOES NOT DIRECTLY OR INDIRECTLY OBLIGATE THE CITY, THE COUNTY, THE STATE, OR ANY OTHER POLITICAL SUBDIVISION OR AGENCY OF THE STATE TO LEVY OR PLEDGE ANY FORM OF TAXATION WHATSOEVER OR TO MAKE ANY APPROPRIATION FOR PAYMENT OF THE SERIES 2015A BONDS. 10 6124115 CC A EN A PACKET PAGE 58 Pledge of Net Revenues The Series 2015A Bonds are secured by and payable from Net Revenues. Net Revenues for any Fiscal Year are derived from the Revenues for such Fiscal Year, less the Operation and Maintenance Costs for such Fiscal Year. The term "Revenues" is defined in the Master Indenture as all charges received for, and all other income and receipts directly or indirectly derived by the City from the operation and use of the Enterprise, or arising from the Enterprise, or any part of the Enterprise, and includes, without limitation, all revenues received by the City, or any municipal corporation or agency succeeding to the rights of the City, from the Enterprise, and from the sale and use of wastewater, wastewater services or facilities, or any other service, commodity, or facility, or any combination thereof furnished to the inhabitants of the Service Area for the Enterprise, including (a) except as provided in (v) below, investment earnings allocated to the Wastewater Treatment Fund by the City from amounts in the Construction Fund or Debt Service Fund, the Debt Service Reserve Funds, the Rate Stabilization Fund, and from surplus Net Revenues, all in accordance with the Master Indenture, (b) all income derived from the investment of any money in the Wastewater Treatment Fund, (c) money released from the Rate Stabilization Fund, to the extent that the amount released is not considered Revenues and is used to pay Operation and Maintenance Costs or debt service requirements on Bonds or the State Loan in the year released, (d) money released from the Rebate Fund to the City and allocated by the City to the Wastewater Treatment Fund in accordance with a Supplemental Indenture, (e) property insurance proceeds which are not necessary to restore or replace the property lost or damaged and the proceeds of the sale or other disposition of any part of the Enterprise, (f) that portion of expansion charges and /or impact fees established specifically to pay debt service on debt obligations, (g) any rental income derived from the leasing of real property, (h) Connection Fees, and (1) any money released from the Rate Stabilization Fund, to the extent necessary to meet the rate covenant set forth in the Master Indenture for the then current Fiscal Year; provided, however, that Revenues do not include (1) any money received as (A) grants or gifts from the United States of America, the State, or other sources, and limited to a specific purpose inconsistent with the payment of principal of and interest on the Bonds, (B) the proceeds of any charge or tax intended as a replacement therefore or other capital contributions from any source which are restricted as to a use inconsistent with the payment of principal of and interest on the Bonds, or (C) the proceeds of any charges required by State or federal regulations to be levied and collected from users and held, distributed, or used for a specific designated or limited purpose, (ii) taxes and /or fees collected by the City and remitted to other governmental agencies, (iii) condemnation proceeds or the proceeds of any insurance policy, except any insurance proceeds derived in respect of loss of use or business interruption, (iv) proceeds from the sale of real property owned or used by the Enterprise, (v) any arbitrage earnings that are required to be paid to the U.S. Government pursuant to Section 148 of the Code (as defined herein), (vi) any current year Revenues transferred into the Rate Stabilization Fund, or (vii) Capitalized Interest. The term "Operation and Maintenance Costs" is defined in the Master Indenture as, for any given period, the total reasonable and necessary costs and expenses paid or incurred by the City for maintaining and operating the Enterprise, as determined in accordance with generally accepted accounting principles as in effect from time to time, including all reasonable expenses of management, repair, and other expenses necessary to maintain and preserve the Enterprise in good repair and working order, and including all administrative costs of the City that are properly charged directly or apportioned to the operation of the Enterprise, such as salaries and wages of employees, overhead, taxes (if any), and insurance premiums, and including all other reasonable and necessary costs and expenses of the City or charges required to be paid by the City to comply with the terms of the Indenture, such as compensation, reimbursement, and indemnification of the Trustee, the Credit Provider, and the Liquidity Provider, and fees and expenses of Consultants; provided, however, that Operation and Maintenance Costs do not include Annual Debt Service, depreciation, replacement, and obsolescence charges or reserves therefor, 11 6124115 CC A EN A PACKET PAGE 59 amortization of intangibles, and operation and maintenance expenses of the Enterprise payable from moneys other than Revenues. Pursuant to the Indenture, the City has pledged and assigned to the Trustee and granted the Trustee a lien on and security interest in the Net Revenues and certain funds and accounts held by the Trustee, as described above. See "APPENDIX A — Summary of Certain Provisions of the Principal Legal Documents." Series 2007A Unrefunded Bonds The Series 2007A Unrefunded Bonds, in the aggregate principal amount of $17,505,000 *, are not being refunded with proceeds of the Series 2015A Bonds and will remain outstanding upon the issuance of the Series 2015A Bonds. The Series 2007A Unrefunded Bonds are payable and secured by Net Revenues on a parity with the Series 2012A Bonds and, when issued, the Series 2015A Bonds. See "- Estimated Debt Service on Outstanding Bonds and State Loan" below. Series 2012A Bonds Pursuant to the Master Indenture and a Third Supplemental Trust Indenture, dated as of January 1, 2012 (the "Third Supplemental Indenture "), by and between the City and the Trustee, the City has previously issued the Series 2012A Bonds in the initial principal amount of $25,000,000, of which $10,000,000 remains outstanding as of the date of this Official Statement. The Series 2012A Bonds are special, limited obligations of the City payable solely from and secured by (a) a pledge of Net Revenues and (b) certain limited funds and accounts held by the Trustee under the Master Indenture, as supplemented by the Third Supplemental Indenture. Proceeds from the sale of the Series 2012A Bonds were used to refund all of the City's then - outstanding Wastewater Revenue Bonds, Series 2007B, the proceeds of which were used to finance a portion of the cost of certain capital improvements to the Enterprise. See "— Estimated Debt Service on Outstanding Bonds and State Loan" below and "THE ENTERPRISE." State Loan The Federal Clean Water Act (33 United States Code, Section 1251 et seq.) was amended in 1937 to create the State Revolving Fund Loan Program, which provides loan funding and other types of assistance for construction of publicly -owned wastewater treatment and water reclamation facilities, development and implementation of programs to control pollution from nonpoint sources and storm water drainage, and implementation of estuary cleanup programs. The State Revolving Fund Loan Program is capitalized by a combination of State and federal funds. In order to receive federal moneys, the Federal Clean Water Act requires each state to provide a match equal to 20% of the federal capitalization grant. The California Water Code allows the State Water Resources Control Board to enter into agreements with, and to accept State matching funds from, local public agencies in return for no- interest State Revolving Fund loans. The City has previously entered into a loan agreement with the State, dated as of September 3, 1997 (the "State Loan "), pursuant to which the State loaned the City an aggregate amount equal to $14,954,054. The proceeds of the State Loan were used to pay for a portion of the expansion of Wastewater Treatment Plant No. 2 of the Enterprise. The terms of the State Loan require that the loan proceeds be used to finance not more than 83.33% of certain State - approved capital improvements and that the City pay for the remaining 16.67% of such costs as imputed interest. The State Loan is payable " Preliminary; subject to change. 12 6124115 CC AGENDA PACKET FACE 6 from Net Revenues over a 20 -year term in equal annual installments of $902,555, with the final installment due in Fiscal Year 2020 -21. As of the date of this Official Statement, the remaining amount of the State Loan payable by the City, including all principal and imputed interest, is $5,415,330. The State Loan is payable from Net Revenues on a parity with the Series 2015A Bonds, the Series 2007A Unrefunded Bonds, and the Series 2012A Bonds. See "— Estimated Debt Service on Outstanding Bonds and State Loan" below. No Reserve Fund for Series 2015A Bonds The Master Indenture provides that the City may establish a debt service reserve fund for a given series of Bonds. While such a debt service reserve fund was previously established for the Series 2007A Refunded Bonds, no such debt service reserve fund was established for the Series 2012A Bonds and no such reserve fund will be established for the Series 2015A Bonds. Wastewater Treatment Fund; Flow of Funds Pursuant to the Master Indenture, so long as there are any Outstanding Bonds, all Revenues are required to be deposited in the City of Bakersfield Wastewater Treatment Fund (the "Wastewater Treatment Fund "), established and held by the City, and such Revenues must be set aside for the payment of the following amounts or deposited or transferred to the following funds and subaccounts in the order listed: Operation and Maintenance Subaccount. A sufficient amount of Revenues, from time to time, as set forth in the budget of the City for such Fiscal Year as finally approved by the City shall be deposited in the Operation and Maintenance Subaccount. In the event that the balance in the Operation and Maintenance Subaccount at any time is insufficient to make any required payments therefrom, additional amounts at least sufficient to make such payments must immediately be deposited in the Operation and Maintenance Subaccount from the Wastewater Treatment Fund. Debt Service Funds and Payment of State Loan. A sufficient amount of Revenues will be transferred by the City from, without priority and on an equal basis, except as to timing of payment, to the Trustee and the State in the amounts, at the times, and in the manner provided in the Master Indenture and the State Loan to provide for the payment of the principal of and interest to become due on the Outstanding Bonds and the State Loan. Debt Service Reserve Funds. A sufficient amount of Revenues will be transferred by the City, without priority and on an equal basis, except as to timing of payment to the Debt Service Reserve Funds, if any, at the times and in such amounts as specified in a Supplemental Indenture to be used in the manner provided in the Master Indenture. Subordinate Obligation Debt Service. A sufficient amount of Revenues will be transferred by the City from time to time as shall be necessary to make all payments and deposits required to be made on all Subordinate Obligations, but only to the extent (except as otherwise provided in the Master Indenture) a specific pledge of Net Revenues has been made in writing to the payment of debt service on such indebtedness. Subordinate Obligation Debt Service Reserve Funds. Upon any deficiency in any debt service reserve fund established by or for the benefit of the City in connection with any Subordinate Obligations, the City will deposit in such debt service reserve fund at such times and in such amounts as are sufficient to replenish withdrawals from such debt service reserve fund; and the full amount of any deficiency in such debt service reserve fund due to any required 13 6124115 CC AGENDA PACKET FACE 61 valuations of the investments in such debt service reserve fund until the balance in such debt service reserve fund is at least equal to the debt service reserve requirement with respect to such Subordinate Obligations, but only to the extent a specific pledge of Net Revenues has been made in writing to the payment of any such debt service reserve requirement on such indebtedness. Wastewater Capital Reserve Fund A sufficient amount of Revenues will be deposited, from time to time, to the Wastewater Capital Reserve Fund, such that the balance in the Wastewater Capital Reserve Fund equals the Wastewater Capital Reserve Fund Requirement. Rate Stabilization Fund At the option of the City, Net Revenues may be transferred to the Rate Stabilization Fund to be used for the purposes stated in the Master Indenture. In the event that during a Fiscal Year there is on deposit in the Wastewater Treatment Fund amounts not needed to satisfy the funding requirements described above, the City may withdraw such amounts as its sole property to be used for any lawful purpose of the Enterprise. Series 2015A Debt Service Fund Pursuant to the Fourth Supplemental Indenture, the Trustee is required to make deposits into the Series 2015A Debt Service Fund as follows: Interest Account. The Trustee will deposit into the Interest Account established within the Series 2015A Debt Service Fund (the "Interest Account ") (1) those amounts received from the City pursuant to the Indenture to be used to pay interest on the Series 2015A Bonds and, if the City enters into an interest rate swap agreement with respect to all or a portion of the Series 2015A Bonds, to pay amounts due and payable to the provider of such agreement at such times as are provided in such interest rate swap agreement, and (ii) if the City enters into an interest rate swap agreement with respect to all or a portion of the Series 2015A Bonds, any amounts received by the City from the provider of such agreement. The Trustee will also deposit into the Interest Account any other amounts deposited with the Trustee for deposit in the Interest Account or transferred from other funds and accounts for deposit therein. All amounts held at any time in the Interest Account will be held on a priority basis for the ratable security and payment of interest due on the Series 2015A Bonds in accordance with their terms and amounts due and payable by the City under any interest rate swap agreement entered into by the City with respect to all or a portion of the Series 2015A Bonds (other than any swap termination payments and any other amounts payable thereunder which are payable and secured by a lien on Net Revenues ranking junior and subordinate to the lien of the Bonds) at any time in proportion to the amounts due or accrued with respect to each of them. Earnings on the Interest Account will be retained in such account. Principal Account. The Trustee will deposit into the Principal Account established within the Series 2015A Debt Service Fund (the "Principal Account ") amounts received from the City pursuant to the Indenture to be used to pay principal of the Series 2015A Bonds at maturity. The Trustee will also deposit into the Principal Account any other amounts deposited with the Trustee for deposit into the Principal Account or transferred from other funds and accounts for deposit therein. On or about July 15 of each Fiscal Year, earnings on the Principal Account will be withdrawn by the Trustee and paid to the City for deposit into the Wastewater Treatment Fund unless an Event of Default exists under (and as defined in) the Master Indenture, in which event the earnings will be retained in the Principal Account. Redemption Account. The Trustee will deposit into the Redemption Account established within the Series 2015A Debt Service Fund (the "Redemption Account ") amounts received from the City or from other sources to be used to pay the principal of, and interest and premium, if any, on Series 2015A Bonds that are to be redeemed in advance of their maturity (except redemptions occurring as a result of 14 6124115 CC AGENDA PACKET FACE 62 the operation of the mandatory sinking fund under the Fourth Supplemental Indenture, which amounts will be deposited into the Principal Account). Earnings on amounts from time to time deposited into the Redemption Account will be retained in such account or paid to the City for deposit into the Wastewater Treatment Fund in accordance with instructions given to the Trustee by the City at the time of such deposit. See "THE SERIES 2015A BONDS — Redemption of Series 2015A Bonds." The Series 2015A Debt Service Fund will be invested and reinvested as directed by the City in Permitted Investments. See "APPENDIX A — Summary of Certain Provisions of the Principal Legal Documents — Selected Definitions — Permitted Investments." Issuance of Additional Bonds Pursuant to the Master Indenture, the City may issue or incur additional series of Bonds (each, a "Series of Bonds ") payable from Net Revenues on a parity with the Series 2015A Bonds, the Series 2007A Unrefunded Bonds, the Series 2012A Bonds, and the State Loan; provided that, as a condition to the issuance of any such additional Series of Bonds, there shall first be delivered to the Trustee either: (a) a certificate of the City, dated as of a date between the date of pricing of the Series of Bonds being issued and the date of delivery of such Series of Bonds (both dates inclusive), showing the Net Revenues for any 12 consecutive months out of the most recent 18 consecutive months immediately preceding the date of issuance of the proposed Bonds or preceding the first issuance of the proposed Series of Bonds or preceding the first issuance of the proposed Program Bonds were at least equal to 125% of Maximum Aggregate Annual Debt Service with respect to all Outstanding Bonds, the State Loan, Unissued Program Bonds, and the proposed Series of Bonds, calculated as if the proposed Series of Bonds and the full Authorized Amount of such proposed Program Bonds (as applicable) were then Outstanding; or (b) a certificate of an independent consultant approved by the City (the "Consultant "), dated as of a date between the date of pricing of the Series of Bonds being issued and the date of delivery of such Series of Bonds (both dates inclusive), showing that: (1) the Net Revenues for the last audited Fiscal Year or for any 12 consecutive months out of the most recent 18 consecutive months immediately preceding the date of issuance of the proposed Series of Bonds or the establishment of a Program, were at least equal to 125% of the sum of the Aggregate Annual Debt Service due and payable with respect to all Outstanding Bonds and the State Loan for such applicable period; (ii) for the period, if any, from and including the fast full Fiscal Year following the issuance of such proposed Series of Bonds through and including the last Fiscal Year during any part of which interest on such Series of Bonds is expected to be paid from the proceeds thereof, the Consultant estimates that the City will be in compliance with the Master Indenture; and (iii) for the period from and including the first full Fiscal Year following the issuance of such proposed Series of Bonds during which no interest on such Series of Bonds is expected to be paid from the proceeds thereof through and including the later of: (A) the fifth full Fiscal Year following the issuance of such Series of Bonds, or (B) the third full Fiscal Year during which no interest on such Series of Bonds is expected to be paid from the proceeds thereof, the estimated Net Revenues for each such Fiscal Year, will be at least equal to 125% of the Aggregate Annual Debt Service for each such Fiscal Year with respect to all Outstanding Bonds, the State Loan, and Unissued Program Bonds, and calculated as if the proposed Series of Bonds and the full Authorized Amount of such proposed Program Bonds (as applicable) were then Outstanding. 15 6124115 CC AGENDA PACKET FACE 63 For purposes of subsections (b)(ii) and (iii) above, in estimating Net Revenues, the Consultant may take into account (1) Revenues from Projects or Enterprise operations reasonably expected to become available during the period for which the estimates are provided, (2) any increase in fees, rates, charges, rentals, or other sources of Revenues which have been approved by the City and will be in effect during the period for which the estimates are provided, (3) any other increases in Revenues which the Consultant believes to be a reasonable assumption for such period. With respect to Operation and Maintenance Costs, the Consultant shall use such assumptions as the Consultant believes to be reasonable, taking into account: (i) historical Operation and Maintenance Costs, (ii) Operation and Maintenance Costs associated with any Projects and any other new Enterprise facilities, and (iii) such other factors, including inflation and changing operations or policies of the City, as the Consultant believes to be appropriate. The Consultant shall include in the certificate or in a separate accompanying report a description of the assumptions used and the calculations made in determining the estimated Net Revenues and shall also set forth the calculations of Aggregate Annual Debt Service, which calculations may be based upon information provided by another Consultant. For purposes of preparing the certificate or certificates described above, the City or the applicable Consultant may rely upon financial statements prepared by the City which have not been subject to audit by an independent certified public accountant if audited financial statements for the Fiscal Year or period are not available; provided, however, that the City must certify as to their accuracy and that such financial statements were prepared substantially in accordance with generally accepted accounting principles, subject to year -end adjustments. Neither of the certificates described above shall be required: (a) if the Series of Bonds being issued are for the purpose of refunding then Outstanding Bonds and /or the State Loan and there is delivered to the Trustee, instead, a certificate of the City showing that Aggregate Annual Debt Service on all Outstanding Bonds, the State Loan, and Unissued Program Bonds after the issuance of such Refunding Bonds will not exceed the Aggregate Annual Debt Service on all Outstanding Bonds, the State Loan, and Unissued Program Bonds prior to the issuance of such Refunding Bonds, for each Fiscal Year; (b) if the Series of Bonds being issued constitute Notes and there is delivered to the Trustee, instead, a certificate prepared by the City showing that the principal amount of the proposed Notes being issued, together with the principal amount of any Notes then Outstanding, does not exceed 10% of the Net Revenues for any 12 consecutive months out of the most recent 24 months immediately preceding the issuance of the proposed Notes and there is delivered to the Trustee a certificate of the City setting forth calculations showing that for each of the Fiscal Years during which the Notes will be Outstanding, and taking into account the debt service becoming due on such Notes, the City will be in compliance with the Indenture; or (c) if the Series of Bonds being issued are to pay costs of completing a Project for which Bonds have previously been issued and the principal amount of such Series of Bonds being issued for completion purposes does not exceed an amount equal to 15% of the principal amount of the Series of Bonds originally issued for such Project and reasonably allocable to the Project to be completed as shown in a written certificate of the City and there is delivered to the Trustee (1) a Consultant's certificate stating that the nature and purpose of such Project has not materially changed and (2) a certificate of the City to the effect that (y) all of the proceeds (including investment earnings on amounts in the Construction Fund allocable to such Project) of the original Bonds issued to finance such Project have been or will be used to pay Costs of the Project and (z) the then estimated Costs of the Project exceed the sum of the Costs of the Project already paid plus moneys available in the Construction Fund established for the Project (including unspent proceeds of Bonds previously issued for such purpose). 16 6124115 CC AGENDA PACKET FACE 6 Issuance of Subordinate Obligations Pursuant to the Master Indenture, the City may, from time to time, incur indebtedness that is subordinate to the lien of the Bonds ( "Subordinate Obligations "). Such indebtedness may be incurred at such times and upon such terms as the City shall determine; provided that: (a) any Supplemental Indenture authorizing the issuance of any Subordinate Obligations must specifically state that such lien on or security interest granted in the Net Revenues is junior and subordinate to the lien on and security interest in such Net Revenues and other assets granted to secure the Bonds; (b) payment of principal of and interest on such Subordinate Obligations shall be permitted; provided that all deposits required to be made pursuant to the Master Indenture to and from the Wastewater Treatment Fund, if any, are then current in accordance with the Master Indenture; and (c) such obligations, if a default in payment, may not be accelerated if any Bonds are outstanding. Rate Covenant The City covenants in the Master Indenture as follows (referred to herein as the "Rate Covenant "): (a) The City shall, while any of the Bonds remain Outstanding (but subject to all existing contracts and legal obligations of the City as of the date of execution of the Master Indenture setting forth restrictions relating thereto), fix, prescribe, revise, and collect rates, fees, and charges for the services and facilities furnished by the Enterprise during each Fiscal Year, with the approval of the City Council with respect to rates, which are at least sufficient, after making allowances for contingencies and error in the estimates, to yield Net Revenues sufficient to pay the following amounts in the following order of priority: (1) the Aggregate Annual Debt Service on any Outstanding Bonds and the payments due under the State Loan required to be funded by the City in such Fiscal Year as required by the Master Indenture or any Supplemental Indenture with respect to the Outstanding Bonds and the State Loan; (ii) the required deposits to any Debt Service Reserve Fund which may be established by a Supplemental Indenture; (iii) the reimbursement owed to any Credit Provider or Liquidity Provider as required by a Supplemental Indenture and the related Credit Facility and Liquidity Facility, and any Debt Service Reserve Fund Surety Policy; (iv) the interest on and principal of any indebtedness required to be funded during such Fiscal Year other than for Outstanding Bonds, but including Subordinate Obligations; (v) payments of any reserve requirement for debt service for any indebtedness other than Outstanding Bonds, but including Subordinate Obligations; and (vi) all payments required to meet any other obligations of the City which are charges, liens, encumbrances upon, or which are otherwise payable from, the Revenues during such Fiscal Year. 17 6124115 CC AGENDA PACKET FACE 65 (b) The City further agrees that it will establish, fix, prescribe, revise, and collect rates, fees, and charges for the services and facilities furnished by the Enterprise, so that during each Fiscal Year the Net Revenues, together with any amounts released from the Rate Stabilization Fund and permitted to be used, will be equal to at least 125% of Aggregate Annual Debt Service on the Outstanding Bonds and the State Loan. For purposes of the foregoing, the amount of moneys on deposit in the Rate Stabilization Fund taken into account and considered Net Revenues for purposes of the calculation described above shall not exceed 25% of the Aggregate Annual Debt Service on all Outstanding Bonds and the State Loan in such Fiscal Year. (c) The City also covenants that if Net Revenues in any Fiscal Year are less than the amount specified in paragraph (a) or (b) above, the City will retain and direct a Consultant to make recommendations as to the revision of the City's wastewater business operations and its schedule of rates, fees, and charges for the services and facilities furnished by the Enterprise, and after receiving such recommendations or giving reasonable opportunity for such recommendations to be made, the City shall take all lawful measures to revise the schedule of rates, fees, and charges for the services and facilities furnished by the Enterprise as may be necessary to produce Net Revenues, after taking into account any permitted amounts on deposit in the Rate Stabilization Fund in accordance with the Master Indenture, in the amount specified in such paragraphs (a) and (b), as applicable, in the next succeeding Fiscal Year. (d) In the event that Net Revenues for any Fiscal Year are less than the amount specified in paragraph (a) or (b) above, but the City promptly has taken prior to or during the next succeeding Fiscal Year all lawful measures to revise the schedule of rates, fees, and charges for the services and facilities furnished by the Enterprise as required in paragraph (c) above, such deficiency in Net Revenues shall not constitute an Event of Default under the Master Indenture. Nevertheless, if after taking the measures required in paragraph (c) above to revise the schedule of rates, fees, and charges for the services and facilities furnished by the Enterprise, Net Revenues in the second succeeding Fiscal Year (as evidenced by the audited financial statements of the City for such Fiscal Year) are less than the amount specified in paragraphs (a) and (b) above, such deficiency in Net Revenues shall constitute an Event of Default under the provisions of the Master Indenture. Certain Other Covenants of the City In addition to the Rate Covenant described above, the City has made several other covenants in the Master Indenture and the Fourth Supplemental Indenture, including, but not limited to, the following: Punctual Payment of Principal and Interest. The City covenants in the Master Indenture that it will duly and punctually pay or cause to be paid from the Net Revenues and to the extent thereof the principal of, premium, if any, and interest on every Bond at the place and on the dates and in the manner set forth in the Master Indenture and any Supplemental Indentures, and as specified in the Bonds, according to the true intent and meaning thereof, and that it will faithfully do and perform all covenants and agreements contained therein; provided that the City's obligation to make payment of the principal of, premium, if any, and interest on the Bonds shall be limited to payment from the Net Revenues, the funds and accounts pledged therefor in the Master Indenture, and any other source that the City may specifically provide for such purpose and no Owner shall have any right to enforce payment from any other funds of the City. Nothing contained in the Master Indenture shall prevent the City from making advances of its own moneys howsoever derived to any of the uses or purposes referred to therein. Senior Lien Obligations Prohibited The City covenants in the Master Indenture that so long as the State Loan is in effect or any Bonds are Outstanding under the Master Indenture, the City will not issue any additional bonds or other obligations with a lien on or security interest granted in Net Revenues that is senior to the Bonds and the State Loan. 18 6124115 CC AGENDA PACKET FACE Maintenance of Powers. The City covenants in the Master Indenture that it will at all times use its best efforts to maintain the powers, functions, duties, and obligations now reposed in it pursuant to the Bond Law and all other laws and that it will not at any time voluntarily do, suffer, or permit any act or thing the effect of which would be to delay either the payment of the indebtedness evidenced by any of the Bonds or the performance or observance of any of the covenants contained in the Master Indenture. Operation and Maintenance of the Enterprise. The City covenants in the Master Indenture that the Enterprise shall at all times be operated and maintained in good working order and condition and that all lawful orders of any governmental agency or authority having jurisdiction in the premises shall be complied with (provided the City shall not be required to comply with any such orders so long as the validity or application thereof shall be contested in good faith), and that all licenses and permits necessary to construct or operate any part of the Enterprise shall be obtained and maintained and that all necessary repairs, improvements, and replacements of the Enterprise shall be made, subject to sound business judgment. The City will maintain the Enterprise in efficient operating condition and make such improvements, extension, enlargements, repairs, and betterments to the Enterprise as may be necessary or advisable for its economical and efficient operation at all times and to supply reasonable public and private demands for Enterprise services within the Service Area of the Enterprise. The City shall employ experienced and competent personnel to manage the Enterprise. The City shall, from time to time, duly pay and discharge, or cause to be paid and discharged, except to the extent the imposition or payment thereof is being contested in good faith by the City, all taxes (if any), assessments, or other governmental charges lawfully imposed upon the Enterprise or upon any part thereof, or upon the Revenues or Net Revenues, when the same shall become due, as well as any lawful claim for labor, materials, or supplies or other charges that, if unpaid, might by law become a lien or charge upon the Revenues or Net Revenues or the Enterprise or any part thereof constituting part of the Enterprise. Accounts. The City covenants in the Master Indenture that it will keep and provide accurate books and records of account showing all Revenues received and all expenditures of the City and that it will keep or cause to be kept accurate books and records of account showing all moneys, Revenues, accounts, and funds (including the Wastewater Treatment Fund and all funds and accounts provided for in the Master Indenture) that are or shall be in the control or custody of the City; and that all such books and records pertaining to the Enterprise shall be open upon reasonable notice during business hours to the Trustee, the Credit Provider, and the Liquidity Provider, and to the Owners of not less than 10% of the Principal Amount of Bonds then Outstanding, or their representatives duly authorized in writing. Within 270 days after the close of each Fiscal Year, so long as any of the Bonds remain Outstanding, the City will prepare audited financial statements including a statement of the income and expenses for such Fiscal Year and a balance sheet prepared as of the close of such Fiscal Year for the City all accompanied by a certificate or opinion in writing of an independent certified public accountant of recognized standing, selected by the City, which opinion shall include a statement that said financial statements present fairly in all material respects the financial position of the City and are prepared in accordance with generally accepted accounting principles. Insurance; Application of Insurance Proceeds. The City covenants in the Master Indenture that, subject, in each case, to the condition that insurance is obtainable at reasonable rates and upon reasonable terms and conditions: (a) the City shall procure and maintain or cause to be procured and maintained commercial insurance or provide Qualified Self - Insurance (as defined below) with respect to the facilities constituting the Enterprise and public liability insurance in the form of commercial insurance or Qualified Self - Insurance and, in each case, in such amounts and against such risks as are, in the judgment of the City, prudent and reasonable taking into account, but not being controlled by, the amounts and types of insurance or self - insured programs provided by similar municipal wastewater systems; and 19 6124115 CC AGENDA PACKET FACE 67 (b) the City shall send written notice to the Trustee, annually within 120 days after the close of each Fiscal Year of any change in its insurance policies and self - insured programs then in effect with respect to the Enterprise and the operations of the City. "Qualified Self- Insurance" is defined in the Master Indenture as insurance maintained through a program of self - insurance or insurance maintained with a fund, company, or association in which the City may have a material interest and of which the City may have control, either singly or with others. Each plan of Qualified Self- Insurance shall be established in accordance with law, shall provide that reserves be established or insurance acquired in amounts adequate to provide coverage which the City determines to be reasonable to protect against risks assumed under the Qualified Self- Insurance plan, including any potential retained liability in the event of the termination of such plan of Qualified Self- Insurance, and such self - insurance program shall be reviewed at least once every 12 months by a Consultant who shall deliver to the City a report on the adequacy of the reserves established thereunder. If the Consultant determines that such reserves are inadequate, it shall make a recommendation as to the amount of reserves that should be established and maintained, and the City shall comply with such recommendation unless it can establish to the satisfaction of and receive a certification from a Consultant that a lower amount is reasonable to provide adequate protection to the City. If, as a result of any event, any part of the Enterprise is destroyed or severely damaged, the City shall create within the Wastewater Treatment Fund a special account and shall credit the net proceeds received as a result of such event of damage or destruction to such account and such net proceeds shall, within a reasonable period of time taking into account any terms under which insurance proceeds are paid and any insurance restrictions upon the use or timing of the use of insurance proceeds, be used to: (1) repair or replace the Enterprise, or portion thereof, which was damaged or destroyed, (ii) provide additional revenue - producing projects of the Enterprise, (iii) redeem Bonds, or (iv) create an escrow fund pledged to pay specified Bonds and thereby cause such Bonds to be deemed to be paid as provided in the Master Indenture; provided, however, that the City shall first deliver to the Trustee a certificate of a Consultant showing that, after taking into account the use of the net proceeds for the redemption of such specified Bonds, the test described in paragraphs (a) and (b) under the caption "Rate Covenant" above would, nevertheless, be met. Protection of Security and Rights of Owners. The City covenants in the Master Indenture that it will preserve and protect the security of the Bonds and the rights of the Owners of any Bonds. From and after the sale and delivery of any Bonds by the City, the Bonds shall be incontestable by the City. Limitation on Use of Proceeds. The City covenants in the Master Indenture to make no use of the proceeds of the Bonds which would cause the Bonds to be "private activity bonds" that are not "qualified private activity bonds" under and within the meaning of Section 141(d) of the Code. Without limiting the generality of the foregoing, the City shall not enter into any arrangement or agree to enter into any arrangement the effect of which would be to cause more than five percent of the proceeds of the Bonds to be used directly or indirectly to make or finance loans to persons other than governmental units. Arbitrage Covenant. The City covenants in the Master Indenture with the Owners of all Bonds at any time Outstanding issued as Bond the interest on which is excluded from gross income for federal income tax purposes that it will make no use of the proceeds of the Bonds which if made at the time of issuance of the Bonds, would have caused any of the Bonds to be "arbitrage bonds" subject to federal income taxation by reason of Section 148 of the Code. Competing Enterprise. The City covenants in the Master Indenture that, unless contrary to any provision of, or required by applicable law, as long as Bonds are outstanding, the City will not grant any franchise or license to a competing utility system, or permit any person, association, firm, or corporation 20 6124115 CC AGENDA PACKET FACE 68 to sell similar wastewater treatment services or facilities to any consumer, public or private, within the Service Area of the Enterprise; provided, however, that nothing shall prevent the City from annexing land into its boundaries solely due to the fact that there is a competing utility system or person, association, firm, or corporation selling similar utility services or facilities within or for the land to be annexed. Notwithstanding the foregoing, permits granted to individual homeowners shall not violate this covenant if the City is in compliance with the Rate Covenant as described herein. Alienating Enterprise. The City covenants in the Master Indenture that, while Bonds are Outstanding, the City shall not, except as permitted below, transfer, sell or otherwise dispose of the Enterprise or assets of the Enterprise financed with the proceeds of Bonds or any Subordinate Obligation. For purposes of this covenant, any transfer of an asset over which the City retains or regains substantial control shall not, for so long as the City has such control, be deemed a disposition of the Enterprise. The City may transfer, sell or otherwise dispose of the Enterprise or assets of the Enterprise only if such transfer, sale or disposition complies with one or more of the following provisions: (a) the property being disposed of is, in the City's sole discretion, surplus, unnecessary, inadequate, obsolete or worn out; or (b) the property proposed to be disposed of and all other property of the Enterprise disposed of during the 12 -month period ending on the day of such transfer (but excluding property disposed of under clause (a) above), will not, in the aggregate, constitute a Significant Portion of the Enterprise determined as described below and the proceeds are deposited into the Wastewater Treatment Fund to be used as described below; or (c) the City receives fair market value for the property, the proceeds are deposited into the Wastewater Treatment Fund to be used as described below and, prior to the disposition of such property, there is delivered to the Trustee a certificate of a Consultant to the effect that notwithstanding such disposition, but taking into account the use of such proceeds in accordance with the expectations of the City as evidenced by a certificate of the City, the Consultant estimates that the City will be in compliance with the Rate Covenant during each of the five Fiscal Years immediately following such disposition. The "Significant Portion" is defined in the Master Indenture as property of the Enterprise which, if such property had been disposed of by the City at the beginning of the Fiscal Year which includes the month of commencement of the 12 -month period referred to in clause (b) above would have resulted in a reduction in Net Revenues for such Fiscal Year of more than 4% when the actual Net Revenues for such Fiscal Year are decreased by the revenues directly attributable to such property of the Enterprise and increased by the Operation and Maintenance Costs of the City directly attributable to such property of the Enterprise. Proceeds of the disposition of assets under clause (a) above shall be deposited in any manner the City determines to be in the best interests of the City. Proceeds of the disposition of assets under clause (b) or (c) above shall be deposited into the Wastewater Treatment Fund and used, within a reasonable period of time, not to exceed five years, to (1) provide additional revenue - producing properties to the Enterprise or pay for Operation and Maintenance Costs, (ii) redeem Bonds, or (iii) create an escrow fund pledged to pay specified Bonds and thereby cause such Bonds to be deemed to be paid as provided in the Master Indenture. Properties of the Enterprise that were financed with the proceeds of obligations the interest on which is then excluded from gross income for federal income tax purposes shall not be disposed of, except under the terms of clause (a) above, unless the City has first received a written opinion of Bond 21 6124115 CC AGENDA PACKET FACE 69 Counsel to the effect that such disposition will not cause the interest on such obligations to become includable in gross income for federal income tax purposes. No such disposition shall be permitted which would cause the City to be in default of any other covenant contained in the Indenture. Estimated Debt Service on Outstanding Bonds and State Loan The following table details the principal and estimated interest due with respect to the Series 2015A Bonds and the Series 2012A Bonds, and the payments due under the State Loan. [Remainder of Page Intentionally Left Blank] 22 6124115 CC AGENDA PACKET FACE 7 E O O CIO 'o. tn 1=0 cl) O tn E 0. cl) O E O cl) E cl) CIO oc U cd rq m cl) �wt� m... 0000000000000000000 ^o 0, rq r cl) rA m -,t 'D r— oc 0, cs 000 rq 0000 rA rq rq rA rq cq rA rq m m m 0 := := 000 := C, t I 7- J2 GL 6124115 CC AGENDA PACKET PAGE 71 THE CITY The City is located at the southern end of the San Joaquin Valley in the County, approximately 110 miles north of the City of Los Angeles and 290 miles south of the City and County of San Francisco. The City covers over 150 square miles of land and an additional 162 square miles of land area is located within the City's sphere of influence. The City is a regional center for industry, government, transportation, retail trade, medical services, and oil field operations. Major manufacturing activities include iron and steel fabrication, plastic foam products, food products, petroleum refining, and textiles. Bakersfield is one of the leading convention centers of the state and is the commercial hub of the County. As the County seat, it is the location of many county, state, and federal offices. The metropolitan area has expanded considerably beyond the City limits. As of January 1, 2015, the estimated population of the County was 874,264 and the estimated population of the City was 369,505, according to the California Department of Finance. The Bakersfield Standard Metropolitan Statistical Area includes the entire County, as defined by the State Employment Development Department. See "APPENDIX B — City of Bakersfield Economic, Financial, and Demographic Information." The City's general fund is not pledged to secure payment of, and the taxing power of the City is not pledged for, the principal of and interest on the Series 2015A Bonds. The City has included its City of Bakersfield Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014 (the "City's Audited Financial Statements "), as Appendix C to this Official Statement. The City has not requested, and the City's auditor has not given, such auditor's consent to the inclusion in Appendix C of its report contained in the City's Audited Financial Statements. The City has not requested that such auditor undertake any review or investigation concerning subsequent events with respect to such City's Audited Financial Statements. THE ENTERPRISE The City provides sewage collection, treatment, and disposal services throughout its Service Area. Its Service Area encompasses approximately 124 square miles of the incorporated City and approximately 10 square miles of the unincorporated area within the County. The City currently operates two wastewater treatment plants (the "Plants ") with a combined treatment capacity of 57 million gallons per day ( "mgd "). The Plants, along with the other facilities comprising the City's sewer system, constitute the Enterprise. The Wastewater Division of the City's Department of Public Works administers the operation of the Enterprise. Wastewater Treatment Plant No. 2 Wastewater Treatment Plant No. 2 serves the central and eastern portions of the City, as well as surrounding unincorporated areas, including areas within the jurisdiction of the Kern Sanitation Authority (formerly the Union Avenue County Sanitation District) and the East Niles Community Services District. Included in the Service Area of Wastewater Treatment Plant No. 2 are areas previously served by the City's Wastewater Treatment Plant No. 1, which was decommissioned in 1980. Wastewater Treatment Plant No. 2 was originally completed and placed into service in 1952 with a design capacity of 16.0 mgd maximum monthly flow. Wastewater Treatment Plant No. 2 was upgraded in 1978 to a secondary treatment plant, and again in 2000 to its present design capacity of 25.0 mgd maximum daily flow, as 24 6124115 CC AGENDA PACKET FACE 72 permitted by waste discharge requirements special order no. R5 2009 -0122 issued by Central Valley Regional Water Control Board. Wastewater Treatment Plant No. 3 Wastewater Treatment Plant No. 3 is located west of State Route 99 in the southern portion of the City, west of Ashe Road between McCutchen Road and Taft Highway. The plant currently serves incorporated and unincorporated areas of northwest, west, and southwest portions of the City. Wastewater Treatment Plant No. 3 was originally constructed in 1972 as a water pollution control facility with a 4 mgd capacity. In 1984, the City expanded the treatment capacity of Wastewater Treatment Plant No. 3 to 8 mgd. In 1988, the City expanded the capacity of Wastewater Treatment Plant No. 3 to 12 mgd. In 1997, the City expanded the capacity of Wastewater Treatment Plant No. 3 to 16 mgd. The City also upgraded Wastewater Treatment Plant No. 3's cogeneration facility in 1998 and the headworks facility in 2002. The City expanded the capacity of Wastewater Treatment Plant No. 3 to 32 mgd, using primarily proceeds of the Series 2007A Refunded Bonds and the previously outstanding City of Bakersfield, California, Wastewater Revenue Bonds, Series 2007B. Wastewater Treatment No. 3 is currently permitted for its total daily discharge flow capacity of 32 mgd based on Waste Discharge Requirements Special Order No. R5- 2009 -0087 issued by the Central Valley Regional Water Control Board. Sewer Video Inspection Program In 1997, the City started a program of sewer video inspections and evaluation of City sewer lines. This program entails a small video camera being inserted into a sewer line. This program enables City staff to video a newly constructed sewer line and detect potential problems prior to the notice of completion being filed for any project for acceptance by the City and to inspect existing sewer lines. Wastewater Treatment Process A description of the wastewater treatment system employed by each plant, by major process units, is presented below. Wastewater Treatment Plant No 2 Wastewater Treatment Process: Preliminary Treatment. The preliminary treatment includes a headworks structure, wastewater pumping station, and an aerated grit chamber. Wastewater enters the headworks and passes through two mechanical bar screens that remove large debris, rags, sticks, and other objects that may damage equipment used in the treatment process, after which it flows to an influent wet well, where pumps lift the wastewater to a higher elevation so that it may flow through the plant by gravity. The wastewater then passes through one of two aerated grit chambers that continuously remove inorganic grit and sand particles, which are conveyed to a bin for disposal. The wastewater then flows by gravity to one of three primary clarifier tanks. Primary Treatment. Primary treatment consists of three primary clarifier tanks, where settleable and floatable organic and inorganic solids are removed. The solids removed are pumped to the sludge handling facilities. The remaining liquid portion is pumped to the trickling filter for secondary treatment. Secondary Treatment. The trickling filters distribute the wastewater over the honeycomb -like plastic filter media that is covered with a thin bacterial growth. Microorganisms grow on the media and absorb much of the organic content found in the wastewater. When the growth becomes too large, it breaks off and is passed to the next phase of treatment. 25 6124115 CC AGENDA PACKET FACE 73 Final Treatment. The secondary clarifiers provide a quiescent condition that promotes settling of the bacterial growth from the trickling filters and also any solids or scum not removed during primary sedimentation. The collected sludge and scum are pumped back to the headworks to repeat the treatment process. Effluent Disposal Facilities. After secondary treatment, the final effluent is stored in storage reservoirs for irrigation use at regulated rates on City -owned farmland. Sludge Handling Facilities. Sludge that settled in the primary clarifier tanks is pumped to three digester tanks. The sludge in the digester tanks is heated and mixed as part of the treatment process. The treated sludge is discharged to sludge drying beds. The dried sludge is disposed of as a soil conditioner on the City -owned farmland. Methane gas produced is used to power the plant's engine- generators. Standby Power. One 400 - kilowatt engine generator and one 640 - kilowatt engine- generator are available to provide either emergency standby power or cogenerated power to Wastewater Treatment Plant No. 2. Both are designed to utilize methane gas fuel. Heat recovery from these engines provides digester sludge heating. Odor Control. Raw wastewater produces hazardous and odorous gases. Such gases are collected and processed through one biofilter. The biofilter cleans the gas, preventing it from becoming a nuisance to the general public in the area. Septage and Grease Receiving Station. Restaurant grease traps and septic tanks are serviced by septage and grease haulers. Such haulers discharge their waste at the septage and grease receiving station, where the grease and septage waste undergo treatment by the plant processes. Wastewater Treatment Plant No 3 Wastewater Treatment Process: Preliminary Treatment. Raw wastewater entering the plant passes through a junction box to the headworks. Wastewater first passes through a mechanical bar screen, where large objects are removed, after which it flows to an influent wet well, where pumps lift the wastewater to a higher elevation so that it may flow through the plant by gravity. The wastewater then passes through one of two grit vortex chambers that continuously remove inorganic grit and sand particles, which are conveyed to a bin for disposal. The wastewater then flows by gravity to one of eight primary clarifier tanks. Primary Treatment. The wastewater, after screening and grit removal, is distributed to eight primary clarifiers. The purpose of the primary clarification is to separate settleable solids from the wastewater by gravity as solids heavier than the liquid settle down (primary sludge) and are collected at the bottom of the clarifiers. Also, the materials lighter than the liquid will float on the surface (scum) and will be skimmed off The effluent from these clarifiers is collected into a flow junction box and delivered to the plant's secondary process. The sludge scraped from the clarifier floor is conveyed to a sludge hopper located at the center of each clarifier. The primary sludge is pumped to anaerobic digesters for further treatment. Secondary Treatment. Activated Sludge Process (Aeration Basins): The effluent from the primary clarifiers is conveyed to the flow junction box and from there to the aeration basins. The purpose of the aeration basins is to support biological activities responsible for removing biochemical oxygen demand (`BOD ") and nitrogen contents of the wastewater and also producing flows that settle well within the secondary clarifiers, thus removing suspended solids and BOD. 26 6124115 CC A EN A PACKET PAGE 7 Secondary Clarifiers: The purpose of the secondary clarifiers is to separate the solids from the liquid by gravity as the solids heavier than the liquid settle down (sludge) and are collected at the bottom of the clarifiers. Also, the materials lighter than the liquid will float on the surface (scum) and will be skimmed off Thus, clear water leaves the secondary clarifiers. Secondary clarifiers operate in a similar manner to primary clarifiers, the major difference being the lower density of the secondary sludge compared to that of the primary sludge. Secondary sludge is either recycled or treated by dissolved air flotation thickeners prior to anaerobic digestion. Effluent Disposal Facilities. After secondary treatment, the effluent is disposed of in one of three ways. First, the effluent can be sent to percolation ponds that are located on -site. Second, the effluent can be sent to a farm for irrigation; the farm is located near the I -5 Highway and Taft Highway. Third, the effluent and can undergo tertiary treatment. Tertiary Treatment. Filtration is a tertiary treatment process typically adopted to remove organic and inorganic colloidal and suspended solids. The filtered wastewater is disinfected through a chlorination system to reduce the concentration of the total coliform bacteria in the effluent. Filtered wastewater is sent to a mixing chamber where sodium hypochlorite solution is injected and then conveyed to two storage tanks. Disinfected water flows out of the chlorine contact tanks into the wet well of the recycled water pump station. The current capacity of the tertiary treatment process is two mgd. Sludge Handling Facilities. All sludge from the plant is eventually processed by one of six anaerobic digesters. There are two additional digesters that act as storage tanks prior to dewatering. The digested sludge from the digesters is transferred to centrifuges in the dewatering building by the centrifuge feed pumps. The centrifuges separate the digested sludge solids (cake) from the liquid (centrate). Sludge cake is discharged to a system of collection screw conveyers for transfer to sludge hauling trucks. The sludge cake is then hauled away for off -site disposal. The centrate is pumped back to the head works intake for processing through the plant. Digester Gas Treatment & Power (Cogeneration). The cogeneration system is used to recover the energy available from the digester gas for plant use. Recovery of the energy from the digester gas is accomplished by feeding the gas to two engine- generators for electrical power production and generation of hot water for digester heating through recovery of a portion of the waste heat from the power generation equipment. Solar Panels. A solar panel energy field, generating one megawatt of power, and two cogeneration engines, each generating 848 kilowatts of power, support the plant through peak electrical demand and help reduce the plant's utility bill. Standby Power. Five Caterpillar diesel engines provide emergency power to Plant 3 in the event of a power outage. The sizes of the engines are: 800 M, 1000 M, 1500 M, and two engines at 2000 M Odor Control. Raw wastewater produces hazardous and odorous gases. Such gases are collected and processed through one of two biofilters. The biofilters clean the gas, preventing it from becoming a nuisance to the general public in the area. Septage and Grease Receiving Station. Restaurant grease traps and septic tanks are serviced by septage and grease haulers. Such haulers discharge their waste at the septage and grease receiving station, where the grease and septage waste undergo treatment by the plant processes. 27 6124115 CC A EN A PACKET PAGE 75 Insurance of Enterprise The City self - insures, utilizing an internally established Self Insurance Fund to account for and finance its uninsured risks of loss related to torts, theft of, damage to, and destruction of assets, errors and omissions, injuries to employees, and natural disasters. See "APPENDIX B — City of Bakersfield Economic, Financial, and Demographic Information — Insurance." Management and Organization The City's Public Works Department (the "Public Works Department "), with 423 full time employees, is made up of eight divisions. The functions of the Public Works Department are to provide for infrastructure design, construction, and inspection services; to design, install, and maintain traffic control systems; to provide maintenance of street surfaces, publicly owned facilities, and street lighting; to monitor, operate, and maintain Wastewater Treatment Plant No. 2 and Wastewater Treatment Plant No. 3, sanitary sewer and storm drain systems, and the recycling center; and to ensure an adequate inventory of safe and efficient motorized fleet, equipment, and telecommunications systems. The Wastewater Division of the Public Works Department is responsible for the day -to -day management, operation, and maintenance of the Enterprise. The Wastewater Division's goals are to provide for the operation and maintenance of wastewater facilities for the purpose of treating, reclaiming, and utilizing wastewater and its byproducts in accordance with federal, state, and local requirements; to provide a healthy and nuisance -free environment; to plan for future wastewater treatment needs to meet the anticipated growth of the City; to monitor and regulate industrial waste discharges; and to establish sewer user fees for properties receiving City sewer service. The Wastewater Division currently has 40 full time employees, of which 32 are directly involved in the operation and maintenance of the Plants. The Wastewater Manager and the Wastewater Superintendent are the two management positions in the Wastewater Division that are responsible for the day -to -day operations of the Plants. The other eight administrative positions are a combination of engineers, inspectors, and clerical staff. All blue and white collar (non - supervisory) employees within the Wastewater Division are represented by the City of Bakersfield and the Kern County Employees Association, Inc., Local 700 of the Service Employees International Union, AFL /CIO. The current Memorandum of Understanding expired on December 31, 2014. The City and the union are currently negotiating a new agreement. Wastewater Treatment Fund Rates and Charges. The City has the power to establish rates and charges for sewer service as needed, without the overview of any other governmental agency. Sewer service charges are collected in conjunction with property taxes by the County Auditor /Controller's Office, except large capacity users that are billed by the City. Delinquent sewer service charges become a lien against property until paid. The City establishes its sewer service charge as it adopts its annual budget, and advises the County Auditor each July of the amount of service charges to be added to the property tax bills. In the recent Bighorn decision (as defined herein), the California Supreme Court determined that any increases in a city's sewer service charge are subject to the public hearing requirements of Proposition 218, the "Right to Vote on Taxes Act," approved by the voters of the State on November 5, 1996. The City believes that it is in compliance with these requirements. See "RISK FACTORS — Constitutional Provisions Affecting Enterprise Revenues and Expenditures." 28 6124115 CC AGENDA PACKET FACE 76 The County currently adds $0.20 to each wastewater service bill for billing and collection services. The City has the power to bill and collect charges directly rather than through the County, should it choose to do so. The Revenues collected and received by the Enterprise consist primarily of the following: sewer service charges, connection fees and developer contributions (which are collectively shown on the City's financial statements "financing reimbursement "), rental income, septage discharge fees, and interest earnings. See "— Financial Statements" below. Sewer service charges are expressed in terms of single - family dwelling equivalent ( "SFDE ") service units. An SFDE service unit is a measurement of demand on the sewerage system equivalent in flow and strength to the average sewage flow from a single - family dwelling. A single - family dwelling, regardless of size, is charged as one SFDE service unit. Other property uses are assigned a number or a fraction of SFDE service units based on their relative demand on the sewerage facilities. The table below shows the approximate number of SFDE service units, as projected in December of the preceding Fiscal Year, which the City has served each year since Fiscal Year 2001 -02. The Enterprise serves the majority of the total metropolitan population. The remaining population is currently served by septic tanks and other sanitation districts. Sewer users in the City are primarily residential users, but also include commercial and industrial users. SFDE service units have grown at an average annual rate of approximately 2,303 SFDE service units per year since Fiscal Year 2003 -04. The table below also indicates the City's annual service charges from Fiscal Years 2003 -04 through 2013 -14. The sewer service charge is $205 per equivalent service unit for Fiscal Year 2014 -15. On June 3, 2015, the City Council approved a rate increase for sewer service charges of 2.4 %, raising the SFDE rate from $205 to $210 for fiscal year 2015 -16. The City also establishes and maintains a schedule of sewer connection fees and fees for other services. The City's sewer connection fee for Fiscal Year 2014 -15 is $4,000 per dwelling unit. Sewer service charges are collected annually on the special assessment portion of the ad valorem property tax statement. Delinquent amounts against a property result in a default status to that property. These delinquent amounts are ultimately recovered when the property changes ownership. The following table provides information with respect to SFDE service units and charges for fiscal years 2003 -04 through 2013 -14: Sewerage SFDE Service Units and Charges Fiscal Years 2003 -04 through 2013 -14 29 6124115 CC AGENDA PACKET FACE 77 Annual Service Fiscal Year SFDE Service Units �r� Charge 2003 -04 91,771 $117 2004 -05 94,557 120 2005 -06 98,035 125 2006 -07 102,641 135 2007 -08 107,160 155 2008 -09 107,895 178 2009 -10 113,711 195 2010 -11 113,986 200 2011 -12 114,857 205 2012 -13 115,897 205 2013 -14 117,104 205 (1) Data reflects actual SFDE Service Units as of the beginning of the applicable fiscal year. Source: City 29 6124115 CC AGENDA PACKET FACE 77 As of June 30, 2014, there were approximately 94,285 accounts (parcels) in the Enterprise Service Area that are within the City limits. Some of these accounts have multiple connections, and as a result, there are more connections than accounts. The connections are converted to SFDE service units by an equivalency factor. The SFDE service units are then used to determine the annual service charge. Based upon charges for Fiscal Year 2013 -14, as of June 30, 2014, the distribution of accounts versus connections and SFDE service units is as follows: City of Bakersfield Types of Sewer Users As of June 30, 2014 (1) Totals for schools do not include public schools, which are billed directly by the City Source: City. The table below sets forth the 10 largest Revenue contributors for Fiscal Year 2013 -14. City of Bakersfield 10 Largest Revenue Contributors Fiscal Year 2013 -14 Percentage of 2013 -14 Sewer Total SFDE Service Type of Business Accounts Connections Equivalency Factor Single Family Dwellings 80,668 80,669 1.0 80,669 Multiple Dwellings/Mobile Home 9,350 35,261 0.75 26,446 Schools (based on Average Daily Attendance) (1) 21 2,970 0.04 119 Hotels (based on number of rooms) 72 6,206 0.3 1,862 Hospital (based on number of beds) 7 1,092 0.6 655 Retirement Homes 41 41 1.5 62 Small Commercial 1,742 3,470 1.0 3,470 Large Commercial 2,384 2,548 1.5 3,822 TOTAL 94,285 132,257 117,104 (1) Totals for schools do not include public schools, which are billed directly by the City Source: City. The table below sets forth the 10 largest Revenue contributors for Fiscal Year 2013 -14. City of Bakersfield 10 Largest Revenue Contributors Fiscal Year 2013 -14 Percentage of Source: City 30 6124115 CC A EN A PACKET PAGE 78 2013 -14 Sewer Total Ratepayer Type of Business User Charges Revenue Dreyer's Grand Ice Cream Food Processing S 569,556 1.9% Knights Pumping Septage Hauler 380,529 1.3 Kern High School District Education 205,404 0.7 Bakersfield City School District Education 192,216 0.6 Valley Pumping Septage Hauler 164,498 0.5 Panama -Buena Vista Union School District Education 130,236 0.4 Kern Oil & Refining Co. Industry 82,610 0.3 United Site Services Septage Hauler 76,908 0.3 California State University, Bakersfield Education 63,260 0.2 Elite Site Services Septage Hauler 60,180 0_2 Total revenue from the 10 largest ratepayers S 1,925,397 6.4% Total revenue from the other ratepayers 26,185,126 93.6 Total sewer user charges (Fiscal Year 2013 -14) 530,110,523 100.0% Source: City 30 6124115 CC A EN A PACKET PAGE 78 Planned Capital Improvements to Enterprise The following table summarizes the capital improvements of the Enterprise planned to be constructed during fiscal year 2015 -16, and the estimated costs of such improvements, as contained in the City's most recent annual budget. In addition, the City has budgeted approximately $13,300,000 in its annual budget for capital improvements to the Enterprise to be completed in future fiscal years. City of Bakersfield Wastewater Enterprise Planned Capital Improvements to Enterprise Fiscal Year 2015 -16 Planned Imurovement Sewer Lift Stations Sewer Line Rehabilitation Sewer Plant Facilities Storm Drains Total source: uicy. Estimated Cost $1,000,000 40,000 1,600,000 2,600,000 $5,240,000 As of the date of this Official Statement, the City expects to pay the costs of all such capital improvements with available case, and does not anticipate the need to incur additional debt for such costs. History of Revenues, Expenditures, and Debt Service Coverage The City establishes its sewer service charge as it adopts its annual budget, and advises the County Auditor each July of the amount of service charges to be added to the property tax bills. The County currently adds $0.20 to each wastewater service bill for billing and collection services. The City has the power to bill and collect charges directly rather than through the County, should it choose to do so. See "APPENDIX B — City of Bakersfield Economic, Financial, and Demographic Information — Tax Levies and Delinquencies; Assessed Valuation of Taxable Property." The following table presents a description of the historical revenues and expenses attributable to the Enterprise and the related debt service coverage ratios for fiscal years 2009 -10 through 2013 -14. See also "APPENDIX C — City of Bakersfield Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014." [Remainder of Page Intentionally Left Blank] 31 6124115 CC AGENDA PACKET FACE 79 City of Bakersfield Wastewater Enterprise Historical Revenues, Expenditures, and Debt Service Coverage For Fiscal Years 2009 -10 through 2013 -14 The following table presents a summary of the projected operating results of the Enterprise, together with debt service and debt service coverage related to the Series 2015A Bonds. The projections are based on the following assumptions: Assumption Regarding Projected Revenues. The projections assume a 1.5% growth in the customer base and a 2.4% rate increase in fiscal years 2015 -16 and 2017 -18. Assumption Regarding Projected Expenses. The projections assume annual Operation and Maintenance Costs will increase 2.5% annually, primarily as a result of inflation, and increased costs for operations and maintenance of the Enterprise with customer growth assumptions. Assumption Regarding Interest Earnings on Wastewater Treatment Fund Moneys. The projections assume annual interest earnings on the moneys held in the Wastewater Treatment Fund will continue to be the same as in fiscal year 2014 -15. Assumption Regarding Series 2012A Bonds. The projections assume that portions of the variable rate Series 2012A Bonds will be called in $5 million increments in fiscal years 2015 -16 and 2016 -17. No Parity Obligations. The projections assume that, other than the Series 2015A Bonds, the City will not issue any obligations payable from Net Revenues on a parity with the Series 2015A Bonds, the Series 2007A Unrefunded Bonds, the Series 2012A Bonds, and the State Loan. Projections are Forward Looking Statements. The projections constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward - looking statements are subject to risks and uncertainties, which could cause actual results to differ 32 6124115 CC AGENDA PACKET FACE FY 2009 -10 FY 2010 -11 FY 2011 -12 FY 2012 -13 FY 2013 -14 Operating Revenues: Charges for Service $27,825,714 $28,972,884 $29,956,258 $29,732,128 $30,110,525 Other Revenues 1,791,772 1,779,631 787,582 1,093,256 1,037,802 Total Operating Revenues 29,617,486 30,752,515 30,743,840 30,825,384 31,148,327 Less Operating Expenses 11,928,571 14,144,051 12,913,038 13,156,437 14,265,421 Net Operating Revenues 17,688,915 16,608,464 17,830,802 17,668,947 16,882,906 Non - Operating Revenues: Connection Fees 6,837,321 3,992,663 4,761,305 6,243,441 7,137,560 Interest earnings / other 4,575,208 1,737,700 1,264,713 832,766 1,324,967 Total Non - Operating Revenues 11,412,529 5,730,363 6,026,018 7,076,207 8,462,527 Net Revenues Available for Debt Service $29,101,444 $22,338,827 $23,856,820 $24,745,154 $25,345,433 Debt Service: State Loan $ 902,555 $ 902,555 $902,555 $ 902,555 $ 902,555 Series 2007A Bonds (Fixed Rate) 10,484,291 11,245,834 12,108,122 11,559,306 11,824,069 Series 2012A Bonds (fonnerly Series 2007B Bonds) (Variable Rate) 335,514 269,280 972,921 187,905 130,134 Annual Debt Service $11,722,360 $12,417,669 $13,983,598 $12,649,766 $12,856,758 Debt Service Coverage Ratio 2.48% 1.80% 1.71% 1.96% 1.97% Source: City. Projection of Revenues, Expenditures, and Debt Service Coverage The following table presents a summary of the projected operating results of the Enterprise, together with debt service and debt service coverage related to the Series 2015A Bonds. The projections are based on the following assumptions: Assumption Regarding Projected Revenues. The projections assume a 1.5% growth in the customer base and a 2.4% rate increase in fiscal years 2015 -16 and 2017 -18. Assumption Regarding Projected Expenses. The projections assume annual Operation and Maintenance Costs will increase 2.5% annually, primarily as a result of inflation, and increased costs for operations and maintenance of the Enterprise with customer growth assumptions. Assumption Regarding Interest Earnings on Wastewater Treatment Fund Moneys. The projections assume annual interest earnings on the moneys held in the Wastewater Treatment Fund will continue to be the same as in fiscal year 2014 -15. Assumption Regarding Series 2012A Bonds. The projections assume that portions of the variable rate Series 2012A Bonds will be called in $5 million increments in fiscal years 2015 -16 and 2016 -17. No Parity Obligations. The projections assume that, other than the Series 2015A Bonds, the City will not issue any obligations payable from Net Revenues on a parity with the Series 2015A Bonds, the Series 2007A Unrefunded Bonds, the Series 2012A Bonds, and the State Loan. Projections are Forward Looking Statements. The projections constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward - looking statements are subject to risks and uncertainties, which could cause actual results to differ 32 6124115 CC AGENDA PACKET FACE materially from those anticipated. Factors that may cause actual results to differ from projected results might include, but are not limited to: • Adverse changes in the demand for or the price of the services provided by the Enterprise; • Adverse changes in wastewater, water, or other utility law, policies, and regulation, including market structures and transmission planning; • Any inability of the City or the Enterprise to obtain adequate and timely rate relief and regulatory approvals from federal and state regulators; • Changes in federal and state environmental or utility regulations and enforcement that could increase the costs or limit the operations of the Enterprise; • Actions or activities at one or more of our Enterprise facilities that might adversely affect our ability to continue to operate such facility or to provide required Enterprise services; • Any inability to manage our Enterprise obligations and risks; • Adverse outcomes of any legal, regulatory, or other proceeding, settlement, investigation, or claim applicable to the Enterprise, the City, or the utility industry; • Any deterioration in the credit quality of the City or its obligations; • Availability of capital and credit at commercially reasonable terms and conditions and the ability of the City to meet cash or financing needs related to the Enterprise; • Changes in the cost of, or interruption in the supply of, fuel and other commodities necessary to the operation of the Enterprise facilities; • Delays in receipt of necessary permits and approvals for the construction, development, or operational activities related to the Enterprise; • Unforeseen cost escalations related to the construction, development, or operation of the Enterprise; • Any inability to achieve, or continue to sustain, expected levels of operating performance of the Enterprise; • Any equipment failures, accidents, severe weather events, or other incidents that impact the ability of the Enterprise to provide services to customers, and any inability to obtain sufficient insurance coverage or recover proceeds of insurance with respect to such events; • Acts of terrorism, cybersecurity attacks, or intrusions that could adversely impact the Enterprise; • Increases in competition in the utility markets; • Any inability to realize anticipated tax benefits or retain tax credits related to the Enterprise, if any; 33 6124115 CC AGENDA PACKET FACE 81 • Challenges associated with recruitment and /or retention of a qualified workforce for the Enterprise; and • Changes in customer behaviors, including increases or decreases in demand or usage of Enterprise services. All of the projections made in the following table are qualified by these cautionary statements and the City makes no assurance that any of such projections will be realized. Investors are cautioned not to rely on these projections in making any investment decision. City of Bakersfield Wastewater Enterprise Estimated Revenues, Expenditures, and Debt Service Coverage (1)(2) For Fiscal Years 2014 -15 through 2018 -19 Operating Revenues: Charges for Service (3) Other Revenues (4) Total Operating Revenues Less Operating Expenses (5) Net Operating Revenues Non - Operating Revenues: Connection Fees (6) Interest earnings / Other (4) Total Non - Operating Revenues Net Revenues Available for Debt Service Debt Service: State Loan Series 2007A Bonds (Fixed Rate) Series 2012A Bonds (formerly Series 2007B Bonds ) (Variable Rate) (7) Series 2015A Fixed Rate Bonds Annual Debt Service Debt Service Coverage Ratio Amended Proposed Budget Budget FY 2014 -15 FY 2015 -16 $30,278,436 $30,629,320 785,310 470,000 31,063,746 31,099,320 14,697,845 14,995,974 16, 365,901 16,103,346 $31,828,968 470,000 32,298,968 15,370,873 16,928,095 Forecast Estimates Fv ')ni'7_iu Fv ')niR_io $33,057,715 470,000 33,527,715 15,755,145 17,772,569 $33,553,580 470,000 34,023,580 16,149,024 17,874,556 5,145,000 5,148,000 5,000,000 5,000,000 5,000,000 570,000 320,000 320,000 320,000 320,000 5,715,000 5,468,000 5,320,000 5,320,000 5,320,000 $22,080,901 $21,571,346 $22,248,095 $23,092,569 $23,194,556 $ 902,555 $ 902,555 13,133,306 6,182,156 100,000 75,000 3,803,736 $14,135,861 $10,963,447 1.56% 1.97% $ 902,555 6,483,188 7,322,700 $14,708,443 1.51% $ 902,555 6,144,438 7,322,700 $14,369,693 1.61% $ 902,555 12,864,600 $13,767,155 1.68% (1) Preliminary; subject to change. (2) All data in this table subject to assumptions described above. (3) Assumes 1.5% growth of customer base annually and rate increases of 2.4% in fiscal year 2015 -16, 2.4% in fiscal year 2016 -17, and 2.3% in fiscal year 2017 -18. (4) Projected to remain at fiscal year 2015 -16 budgeted amount. (5) Excludes depreciation and assumes a2.5% annual increase in Operating Expenses. (6) Assumes 1.5% growth of customer base annually resulting in consistent demand for service connections each fiscal year. (7) City intends to call portions of the variable rate Series 2012A Bonds in $5 million increments in fiscal years 2015 -16 and 2016 -17; the Series 2012A Bonds are expected to be completely paid and no longer outstanding by fiscal year 2016 -17. Source: City. 34 6124115 CC AGENDA PACKET FACE 82 RISK FACTORS Investment in the Series 2015A Bonds involves risks that may not be appropriate for certain investors. The following is a discussion of certain risk factors that should be considered, in addition to other matters set forth herein, in evaluating the Series 2015A Bonds for investment. The information set forth below does not purport to be an exhaustive listing of the risks and other considerations that may be relevant to an investment in the Series 2015A Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. Series 2015A Bonds are Limited Obligations The Series 2015A Bonds are payable solely from Net Revenues and amounts held in certain funds and accounts established under the Indenture. Consequently, the payment of principal of and interest on the Series 2015A Bonds will be dependent upon the availability and sufficiency of such Net Revenues. The Series 2015A Bonds do not constitute an obligation of the City for which the City must levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The Series 2015A Bonds do not constitute a debt or indebtedness of the City, the County, the State, or any political subdivision of the State, within the meaning of any constitutional or statutory debt limitation or restriction. System Demand There can be no assurance that the local demand for the services provided by the Enterprise will be maintained at levels described in this Official Statement. Because of changes in demographics within the boundaries of the City, it is possible for the demand for wastewater services to decline over the term of the Series 2015A Bonds. A significant decline in demand might create a situation in which the City could not increase rates sufficiently to offset the decrease in subscribers or usage. This would reduce the City's ability to make payments of the principal or interest due with respect to the Series 2015A Bonds. Increased Regulations The adoption by federal or State agencies of more regulations could reduce the amount of Revenues, which could in turn require substantial increases in rates or charges in order to comply with the Rate Covenant. A significant change in effluent standards for wastewater treatment imposed by law or regulation might cause the City to incur greater expenses of operation, thus creating a temporary or permanent inability to generate sufficient Net Revenues to pay the principal and interest with respect to the Series 2015A Bonds when due. It is not possible to predict the timing or nature of more stringent operating standards that may be imposed upon the City over the term of the Series 2015A Bonds. Increased System Expenses Changes in technology, increases in the cost of energy, chemicals, or other expenses could reduce Revenues, which could in turn require substantial increases in rates or charges in order to comply with the Rate Covenant. The City's ability to make its debt service payments with respect to the Series 2015A Bonds may be adversely affected until such time as the City is able to increase rates and charges to pay for such increased costs. 35 6124115 CC AGENDA PACKET FACE 83 Seismic Activity The Indenture does not require the City to maintain earthquake insurance on the Enterprise. However, the area in and around the City, along with much of the State, shares a history of seismic activity and is thus listed as a "Zone 4" earthquake area in the Uniform Building Code. A Zone 4 designation has the most restrictive design requirements for new construction. The City standards for development have been designed to reduce the risk to the public and adequately mitigate seismic hazards. There are no known major faults within the City; however, there are several faults, including the San Andreas Fault and the White Wolf Fault, that are considered active faults, and are located approximately 40 miles from the City. Activity along these faults could potentially result in damage to the buildings, roads, bridges, and property within the City in the event of a major earthquake. The Kern County earthquake of 1952, which occurred on the White Wolf Fault, caused considerable and widespread damage within the City and the surrounding areas. No structural damage occurred in the City, however, as a result of the 1989 Loma Prieta earthquake, the Landers and Big Bear earthquakes of June 1992, or the Northridge earthquakes of January 1994. If a major earthquake were to occur, it may substantially damage or destroy the Enterprise or portions of it. In such a case, under certain circumstances, the Revenues of the Enterprise could possibly be reduced or eliminated if the City was unable to provide wastewater services to its customers, or if the City was required to apply large amounts of Revenues to make extensive repairs to the Enterprise. Such a reduction or elimination of Revenues could impair the ability of the City to make payments of principal or interest with respect to the Series 2015A Bonds when due. The chance that the occurrence of severe seismic activity in the area of the Enterprise could result in substantial damage and interference with the City's right to use all or a portion of the Enterprise, and result in a reduction or elimination of Net Revenues, is mitigated by the above - discussed development standards. Self- Insurance The City self - insures, utilizing an internally established Self Insurance Fund to account for and finance its uninsured risks of loss related to torts, theft of, damage to, and destruction of assets, errors and omissions, injuries to employees, and natural disasters. However, no assurance can be given that such self - insurance at the time of any casualty or loss will be adequate to cover any claims that might arise. See "APPENDIX B — City of Bakersfield Economic, Financial, and Demographic Information — Insurance." Limitations on Available Remedies and the City's Ability to Generate Net Revenues The ability of the City to comply with its covenants under the Indenture and to generate Net Revenues sufficient to pay principal of and interest on the Series 2015A Bonds may be adversely affected by actions and events outside of the control of the City and may be adversely affected by actions taken (or not taken) by voters, property owners, taxpayers, or payers of assessments, fees, and charges. See "- Constitutional Provisions Affecting Enterprise Revenues and Expenditures" below. Furthermore, any remedies available to the Owners of the Series 2015A Bonds upon the occurrence of an event of default under the Indenture are in many respects dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time consuming to obtain. In addition to the limitations on remedies contained in the Indenture, the rights and obligations under the Series 2015A Bonds and the Indenture may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium, and other laws relating to or affecting 36 6124115 CC AGENDA PACKET FACE creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to limitations on legal remedies against charter cities in the State. The opinion to be delivered by Kutak Rock LLP, bond counsel, concurrently with the issuance of the Series 2015A Bonds, that the Series 2015A Bonds constitute valid and binding obligations of the City and the Indenture constitutes a valid and binding obligation of the City will be subject to such limitations, and the various other legal opinions to be delivered concurrently with the issuance of the Series 2015A Bonds will be similarly qualified. A complete copy of the proposed form of opinion of bond counsel is set forth in Appendix D hereto. In the event the City fails to comply with its covenants under the Indenture or to pay principal of or interest on the Series 2015A Bonds, there can be no assurance that available remedies will be adequate to fully protect the interests of the Owners of the Series 2015A Bonds. No Reserve Fund for Series 2015A Bonds The Master Indenture provides that the city may establish a debt serve reserve fund for a given series of Bonds. While such a debt service reserve fund was established for the Series 2007A Bonds, no such debt service reserve fund was established for the Series 2012A Bonds and no such debt service reserve fund will be established for the Series 2015A Bonds. No Acceleration of Series 2015A Bonds In no event, upon the occurrence or continuation of an event of default under the Indenture, shall the Owners of the Series 2015A Bonds, the Trustee, or any other party have the right to accelerate the payment of principal of or interest on the outstanding Series 2015A Bonds. Absence of Market for Series 2015A Bonds There can be no assurance that there will ever be a secondary market for purchase or sale of the Series 2015A Bonds, and from time to time there may be no market for them, depending upon prevailing market conditions and the financial condition or market position of firms who may make the secondary market. Potential Limitation of Tax Exemption of Interest on Series 2015A Bonds From time to time, the President of the United States, the United States Congress and /or state legislatures have proposed and could propose in the future, legislation that, if enacted, could cause interest on the Series 2015A Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. Clarifications of the Internal Revenue Code of 1986, as amended, or court decisions may also cause interest on the Series 2015A Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation. The introduction or enactment of any such legislative proposals or any clarification of the Internal Revenue Code of 1986, as amended, or court decisions may also affect the market price for, or marketability of, the Series 2015A Bonds. Prospective purchasers of the Series 2015A Bonds should consult their own tax advisors regarding any such pending or proposed federal or state tax legislation, regulations, or litigation, as to which Bond Counsel expresses no opinion. See "TAX MATTERS — Changes in Federal and State Tax Law." Economic, Political, Social, and Environmental Conditions Prospective investors are encouraged to evaluate current and prospective economic, political, social, and environmental conditions as part of an informed investment decision. Changes in economic, 37 6124115 CC AGENDA PACKET FACE 85 political, social, or environmental conditions on a local, state, federal, and /or international level may adversely affect investment risk generally. Such conditional changes may include (but are not limited to) fluctuations in business production, consumer prices, or financial markets, unemployment rates, technological advancements, shortages or surpluses in natural resources or energy supplies, changes in law, social unrest, fluctuations in the crime rate, political conflict, acts of war or terrorism, environmental damage, and natural disasters. Constitutional Provisions Affecting Enterprise Revenues and Expenditures California Constitution Article XIIIB Limitations. Article XIIIB of the California Constitution limits the annual appropriations of the State and of any city, county, school district, authority, or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living, population, and services rendered by the government entity. The "base year" for establishing this appropriations limit is the 1978 -79 fiscal year, and the limit is adjusted annually to reflect changes is population, consumer prices, and increases or decreases in the cost of services provided by these public agencies. Appropriations of an entity of local government subject to Article XIIIB include generally authorizations to expend during a fiscal year the proceeds of taxes levied by or for the entity and the proceeds of State subventions, exclusive of certain State subventions, refunds of taxes, and benefit payments from retirement, unemployment insurance, and disability insurance funds. "Proceeds of taxes" include, but are not limited to, all tax revenues, most State subventions, and the proceeds to the local governmental entity from (1) regulatory licenses, user charges, and user fees (to the extent that such proceeds exceed the cost reasonably borne by such entity), and (2) the investment of tax revenues. Article XIIIB provides that if a governmental entity's revenues in any year exceed the amounts permitted to be spent, the excess must be returned by revising tax rates or fee schedules over the subsequent two years. Certain expenditures are excluded from the appropriations limit, including payments of indebtedness existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by the voters and payments required to comply with court or federal mandates that without discretion require an expenditure for additional services or that unavoidably make the providing of existing services more costly. The City believes that its charges for sewer service and wastewater treatment do not exceed the costs it reasonably bears in providing such services and, therefore, are not subject to the limitations of Article XIIIB. The City has covenanted in the Master Indenture that it will, in each year, prescribe rates and charges sufficient to provide for payments of the Series 2015A Bonds each year. California Constitution Article XUIC and Article XIIID Limitations. On November 5, 1996, the voters of the State approved Proposition 218, the "Right to Vote on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which contain a number of provisions affecting the ability of the City to levy and collect both existing and future taxes, assessments, fees, and charges. These provisions could adversely affect the financial condition of the City, its ability to comply with its covenants under the Indenture, or the City's ability to pay principal of or interest on the Series 2015A Bonds. In such event, there can be no assurance that remedies will be available to fully protect the interests of the Owners of the Series 2015A Bonds. See "RISK FACTORS — Limitations on Available Remedies and the City's Ability to Generate Net Revenues" above. Article XIIID contains several provisions affecting the ability of local governments to impose or increase "fees" and "charges," defined for purposes of Article XIIID to mean "any levy other than an ad valorem tax, a special tax, or an assessment, imposed by ... [a local government] upon a parcel or upon a 38 6124115 CC A EN A PACKET PAGE 86 person as an incident of property ownership, including a user fee or charge for a property related service "; provided, however, that Article XIIID specifically provides that it shall not be construed to "affect existing laws relating to the imposition of fees or charges as a condition of property development." The City believes that its connection fee charges related to the Enterprise represent a fee or charge as a condition of property development within the meaning of Article XIIID, although no assurance can be given that a court would not determine otherwise. "Property related service" means a public service having a direct relationship to property ownership (which term may include tenancies). All new and existing property related fees and charges must conform to requirements prohibiting, among other things, fees and charges that (1) generate revenues exceeding the funds required to provide the property related service, (ii) are used for any purpose other than those for which the fees and charges are imposed, (iii) with respect to any parcel or person exceed the proportional cost of the service attributable to the parcel, (iv) are for a service not actually used by, or immediately available to, the owner of the property in question, or (v) are used for general governmental services, including police, fire, ambulance, or library services, where the service is available to the public at large in substantially the same manner as it is to property owners. Pursuant to the Bighorn decision, discussed below, the California Supreme Court has held that charges for water service, which charges are similar to the City's sewer service charges, are property related fees or charges within the meaning of Article XIIID. The City believes, however, that its sewer service charges, if also determined to be such property related fees or charges, would satisfy all of these requirements. However, in any legal action contesting the validity of a fee or charge, the City will have the burden of proving exemption from or compliance with Article XIIID and no assurance can be given that a court would not determine otherwise. Before any property related fee or charge may be imposed or increased, written notice must be given to the record owner of each parcel of land affected by such fee or charge. The City must then hold a hearing upon the proposed imposition or increase, and if written protests against the proposal are presented by a majority of the owners of the identified parcels, the City may not impose or increase the fee or charge. The City is unable to predict whether the imposition or increase of any fee and charge, including any increase in its sewer service charge, will be prevented by such a majority protest. Moreover, Article XIIID also provides that, beginning July 1, 1997, except for fees or charges for sewer, water, and refuse collection services (or fees for electrical and gas service, which are not treated as property related for purposes of Article XIIID), no property related fee or charge may be imposed or increased without majority approval by the property owners subject to the fee or charge or, at the option of the local agency, two thirds voter approval by the electorate residing in the affected area. The City believes that its sewer service charges are charges for sewer service within the meaning of Article XIIID, although no assurance can be given that a court would not determine otherwise. The City does not plan to conduct any new hearings, elections, or other proceedings with respect to any of its existing sewer related fees or charges. In addition to the provisions described above, Article XIIIC removes limitations on the initiative power in matters of local taxes, assessments, fees and charges. In the case Bighorn - Desert View Water Agency v. Beringson (`Bighorn "), decided by the California Supreme Court on July 24, 2006, the petitioner sought to establish his right to reduce a local water agency's water rates and fees and charges through the use of the initiative power. In holding for the petitioner on this issue, the Court stated that the absence of a restrictive definition of "fee" or "charge" in Article XIIIC suggests that those terms include all levies that are ordinarily understood to be fees or charges, including all of the property- related fees and charges subject to Article XIIID. (See the discussion of Article XIIID above.) Though the Court did not arrive at an exact definition of such terms, it did determine that fees and charges that are fees and charges within the meaning of Article XIIID are necessarily fees and charges within the meaning of Article XIIIC. The Court held that Article XIIIC authorizes the use of the initiative process to reduce water rates and other delivery charges, but that it does not authorize use of the initiative power to impose a voter- approval 39 6124115 CC AGENDA PACKET FACE 87 requirement on future increases or new water delivery charges. The Court declined to determine whether the initiative power is limited by other statutory provisions requiring that water service charges be set at a level that will pay system expenses and debt service since that issue was not before the Court. In light of the Bighorn decision, the voters of the City could, by future initiative, seek to repeal or reduce any local tax, assessment, fee, or charge, including the City's sewer service fees and charges, which are the primary source of Net Revenues pledged to the payment of debt service on the Series 2015A Bonds. Though the use of the initiative power is arguably limited in the case of levies directly pledged to bonded indebtedness, such as the fees and charges imposed by the Enterprise and securing the Series 2015A Bonds, there can be no assurance that the voters of the City will not seek to approve an initiative that attempts to reduce the fees and charges imposed by the Enterprise securing the Series 2015A Bonds. In addition to the foregoing, the City's general financial condition may be affected by other provisions of Article XIIIC and Article XIIID, including (A) provisions of Article XIIIC (1) requiring taxes for general governmental purposes to be approved by a majority vote and taxes for specific purposes, even if deposited into general fund, to be approved by a two thirds vote, (ii) subjecting all taxes, assessments, fees, and charges to reduction or repeal at any time through the initiative process (as mentioned above), and (iii) provisions of Article XIIID that could reduce the ability of the City to fund certain services or programs that it may be required or choose to fund from its general fund, such as provisions (1) adding requirements making it generally more difficult to levy and maintain "assessments," defined to mean a levy or charge upon real property for a particular and distinct benefit to the property over and above general benefits conveyed to property located in the district or to the public at large, (2) requiring any imposition or increase of property related fees or charges other than for sewer, water and refuse collection services or fees for electrical or gas service (which are not treated as property related for purposes of Article XIIID) to be approved by "majority of the property owners" subject to the fee or charge or, at the option of the local government, two thirds vote of the electorate residing in the affected area. The interpretation and application of Proposition 218 will continue to be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such future determinations. Future Initiatives Articles XIIIB, XIIIC, and XIIID of the Constitution were each adopted as measures that qualified for the ballot pursuant to California's initiative process. From time to time other initiative measures could be adopted, further affecting the generation of Revenues or the City's ability to expend such Revenues. TAX MATTERS General In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Series 2015A Bonds is excluded from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. The opinions described in the preceding sentence assume the accuracy of certain representations and compliance by the City with covenants designed to satisfy the requirements of the Code that must be met subsequent to the issuance of the Series 2015A Bonds. Failure to comply with such requirements could 40 6124115 CC AGENDA PACKET FACE 88 cause interest on the Series 2015A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2015A Bonds. The City will covenant to comply with such requirements. Bond Counsel has expressed no opinion regarding other federal tax consequences arising with respect to the Series 2015A Bonds. Notwithstanding Bond Counsel's opinion that interest on the Series 2015A Bonds is not a specific preference item for purposes of the federal alternative minimum tax, such interest will be included in adjusted current earnings of certain corporations, and such corporations are required to include in the calculation of federal alternative minimum taxable income 75% of the excess of such corporations' adjusted current earnings over their federal alternative minimum taxable income (determined without regard to such adjustment and prior to reduction for certain net operating losses). Bond Counsel is further of the opinion that interest on the Series 2015A Bonds is exempt from present State of California personal income taxes. Special Considerations With Respect to the Series 2015A Bonds The accrual or receipt of interest on the Series 2015A Bonds may otherwise affect the federal income tax liability of the owners of the Series 2015A Bonds. The extent of these other tax consequences will depend upon such owner's particular tax status and other items of income or deduction. Bond Counsel has expressed no opinion regarding any such consequences. Purchasers of the Series 2015A Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrifts or other financial institutions, certain recipients of social security or railroad retirement benefits, taxpayers entitled to claim the earned income credit, taxpayers entitled to claim the refundable credit in Section 36B of the Code for coverage under a qualified health plan or taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax- exempt obligations, should consult their tax advisors as to the tax consequences of purchasing or owning the Series 2015A Bonds. Backup Withholding As a result of the enactment of the Tax Increase Prevention and Reconciliation Act of 2005, interest on tax - exempt obligations such as the Series 2015A Bonds is subject to information reporting in a manner similar to interest paid on taxable obligations. Backup withholding may be imposed on payments made to any bondholder who fails to provide certain required information including an accurate taxpayer identification number to any person required to collect such information pursuant to Section 6049 of the Code. The reporting requirement does not in and of itself affect or alter the excludability of interest on the Series 2015A Bonds from gross income for federal income tax purposes or any other federal tax consequence of purchasing, holding or selling tax - exempt obligations. Changes in Federal and State Tax Law From time to time, there are legislative proposals in the Congress and in the various state legislatures that, if enacted, could alter or amend federal and state tax matters referred to above or adversely affect the market value of the Series 2015A Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Series 2015A Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Series 2015A Bonds or the market value thereof would be impacted thereby. Purchasers of the Series 41 6124115 CC A EN A PACKET PAGE 89 2015A Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Series 2015A Bonds and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation. Tax Treatment of Original Issue Premium The Series 2015A Bonds maturing on September 15, 20 through, and including, September 15, 20 (collectively, the "Premium Bonds ") are being sold at a premium. An amount equal to the excess of the issue price of a Premium Bond over its stated redemption price at maturity constitutes premium on such Premium Bond. A purchaser of a Premium Bond must amortize any premium over such Premium Bond's term using constant yield principles, based on the purchaser's yield to maturity (or, in the case of Premium Bonds callable prior to their maturity, generally by amortizing the premium to the call date, based on the purchaser's yield to the call date and giving effect to the call premium). As premium is amortized, the amount of the amortization offsets a corresponding amount of interest for the period, and the purchaser's basis in such Premium Bond is reduced by a corresponding amount resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Premium Bond prior to its maturity. Even though the purchaser's basis may be reduced, no federal income tax deduction is allowed. Purchasers of the Premium Bonds should consult with their tax advisors with respect to the determination and treatment of premium for federal income tax purposes and with respect to the state and local tax consequences of owning a Premium Bond. Tax Treatment of Original Issue Discount The Series 2015A Bonds maturing on September 15, 20 through, and including, September 15, 20 (collectively, the "Discount Bonds ") are being sold at an original issue discount. The difference between the initial public offering prices of such Discount Bonds and their stated amounts to be paid at maturity constitutes original issue discount treated in the same manner for federal income tax purposes as interest, as described under "— General" above. The amount of original issue discount which is treated as having accrued with respect to such Discount Bond is added to the cost basis of the owner in determining, for federal income tax purposes, gain or loss upon disposition of such Discount Bond (including its sale, redemption or payment at maturity). Amounts received upon disposition of such Discount Bond that are attributable to accrued original issue discount will be treated as tax - exempt interest, rather than as taxable gain, for federal income tax purposes. Original issue discount is treated as compounding semiannually, at a rate determined by reference to the yield to maturity of each individual Discount Bond, on days that are determined by reference to the maturity date of such Discount Bond. The amount treated as original issue discount on such Discount Bond for a particular semiannual accrual period is equal to (a) the product of (1) the yield to maturity for such Discount Bond (determined by compounding at the close of each accrual period) and (ii) the amount that would have been the tax basis of such Discount Bond at the beginning of the particular accrual period if held by the original purchaser, (b) less the amount of any interest payable for such Discount Bond during the accrual period. The tax basis is determined by adding to the initial public offering price on such Discount Bond the sum of the amounts that have been treated as original issue discount for such purposes during all prior periods. If such Discount Bond is sold between semiannual compounding dates, original issue discount that would have been accrued for that semiannual compounding period for federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period. 42 6124115 CC A EN A PACKET PAGE 9 Owners of Discount Bonds should consult their tax advisors with respect to the determination and treatment of original issue discount accrued as of any date and with respect to the state and local tax consequences of owning a Discount Bond. Subsequent purchasers of Discount Bonds that purchase such bonds for a price that is higher or lower than the "adjusted issue price" of the bonds at the time of purchase should consult their tax advisors as to the effect on the accrual of original issue discount. LEGAL MATTERS Kutak Rock LLP, Denver, Colorado, Bond Counsel, will render an opinion with respect to the validity and enforceability of the Indenture and as to the validity of the Series 2015A Bonds. Copies of such opinion will be available at the time of delivery of the Series 2015A Bonds. A copy of the opinion will accompany each Series 2015A Bond. Certain legal matters will be passed upon for the City by the City Attorney, and by Goodwin Procter LLP, Los Angeles, California, as the City's Disclosure Counsel, and for the Underwriters by Stradling Yocca Carlson & Rauth, Sacramento, California. The proposed form of the opinion of Bond Counsel is included as Appendix D hereto. The fees of Bond Counsel, Disclosure Counsel, and Underwriter's Counsel are contingent on the successful issuance of the Series 2015A Bonds. Bond Counsel's employment is limited to a review of the legal proceedings required for the authorization of the Series 2015A Bonds and to rendering the opinion referred to herein. Such opinion will not consider or extend to this Official Statement, or any sections, documents, agreements, representations, offering circulars, or other material of any kind concerning the Series 2015A Bonds. Bond Counsel takes no responsibility for the accuracy, completeness, or fairness of this Official Statement. LITIGATION No litigation is pending concerning the validity of the Series 2015A Bonds or the Indenture. The City is not aware of any litigation pending or threatened questioning the political existence of the City or contesting the City's ability to make payments on the Series 2015A Bonds. There are a number of lawsuits and claims pending against the City. In the opinion of the City Attorney, the aggregate amount of liability that the City might incur as a result of adverse decisions in such cases would be covered under the City's insurance policies or self - insurance program. VERIFICATION The Verification Agent, Grant Thornton LLP, will verify the accuracy of the mathematical computations of the adequacy of the funds held by the Escrow Agent to provide for the refunding and defeasance of the Series 2007A Refunded Bonds. RATINGS Moody's Investors Service, Inc., has assigned its municipal bond rating of " " to the Series 2015A Bonds and Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business, has assigned its municipal bond rating of " " to the Series 2015A Bonds. There is no assurance that such ratings will be in effect for any given period of time or that such ratings will not be revised downward or withdrawn entirely by such rating agency if, in the judgment of such rating agency, 43 6124115 CC A EN A PACKET PAGE 91 circumstances so warrant. Any such downward revision or withdrawal may have an adverse effect on the market price of the Series 2015A Bonds. Such ratings reflect only the views of the rating agency and an explanation of the significance of the rating may be obtained only from the rating agency furnishing the same. UNDERWRITING The Series 2015A Bonds are being purchased by Citigroup Global Markets Inc., as Senior Manager, and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC, as Co- Managers (collectively, the "Underwriters "). The Underwriters have agreed to purchase the Series 2015A Bonds at a purchase price of $ (comprised of the principal amount of the Series 2015A Bonds, [less /plus] a net original issue [discount/premium] of $ , and less an Underwriters' discount of $ ). The Underwriters will purchase all of the Series 2015A Bonds if any are purchased. The obligation of the Underwriters to make such purchase is subject to certain terms and conditions set forth in the bond purchase contract relating to the Series 2015A Bonds. Citigroup Global Markets Inc., an underwriter and the Senior Manager of the Series 2015A Bonds, has entered into a retail distribution agreement with each of TMC Bonds L.L.C. ( "TMC ") and UBS Financial Services Inc. ( "UBSFS "). Under these distribution agreements, Citigroup Global Markets Inc. may distribute municipal securities to retail investors through the financial advisor network of UBSFS and the electronic primary offering platform of TMC. As part of this arrangement, Citigroup Global Markets Inc. may compensate TMC (and TMC may compensate its electronic platform member firms) and UBSFS for their selling efforts with respect to the Series 2015 Bonds. Morgan Stanley, parent company of Morgan Stanley & Co. LLC, an underwriter of the Series 2015A Bonds, has entered into a retail distribution arrangement with its affiliate Morgan Stanley Smith Barney LLC. As part of the distribution arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Series 2015A Bonds. The Underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial, and investment banking, financial advisory, investment management, principal investment, hedging, financing, and brokerage activities. The Underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various investment banking services for the City for which they received or will receive customary fees and expenses. In addition, certain affiliates of the Underwriters are lenders, and in some cases agents or managers for the lenders, under credit and liquidity facilities. In the ordinary course of their various business activities, the Underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and /or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the City. FINANCIAL ADVISOR Fieldman, Rolapp & Associates has acted as Financial Advisor to the City in conjunction with the issuance of the Bonds. The Financial Advisor has assisted the City in matters related to the planning, 44 6124115 CC A EN A PACKET PAGE 92 structuring, execution, and delivery of the Bonds. The Financial Advisor will receive compensation contingent upon the sale and delivery of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. The Financial Advisor is an independent registered municipal advisory firm and is not engaged in the business of underwriting, trading, or distributing municipal or other public securities. CONTINUING DISCLOSURE The City will covenant in a Continuing Disclosure Certificate for the benefit of Owners of the Series 2015A Bonds to provide an annual report containing certain financial information and operating data relating to the City and to provide notices of the occurrence of certain enumerated events as specified therein. The specific nature of the information to be contained in each annual report, or each notice of listed events, and the applicable deadlines, are set forth in the Continuing Disclosure Certificate, the form of which is attached hereto as Appendix F. These covenants will be made in order to assist the Underwriters in complying with Securities and Exchange Commission Rule 15c2- 12(b)(5), as amended (the "Rule "). MISCELLANEOUS The purpose of this Official Statement is to supply information to prospective buyers of the Series 2015A Bonds. Quotations and summaries and explanations of the Series 2015A Bonds and of statutes and documents contained in this Official Statement do not purport to be complete, and reference is made to such documents and statutes for full and complete statements of their provisions. Copies of the Indenture may be obtained upon written request to the City at City of Bakersfield, 1600 Truxtun Avenue, Bakersfield, California 93301, Attention: Finance Director, or to the Trustee at U.S. Bank National Association, 633 West Fifth Street, 24`h Floor, Los Angeles, California 90071, Attention: Corporate Trust Department. The preparation and distribution of this Official Statement have been authorized by the City. CITY OF BAKERSFIELD 0 45 Finance Director 6124115 CC AGENDA PACKET FACE 93 APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS DEFINITIONS The following are definitions of certain terms used in this Official Statement including the summaries of the Master Indenture and the Fourth Supplemental Indenture. "Account" means any account established pursuant to the Indenture or any Supplemental Indenture. "Accreted Value" means (a) with respect to any Capital Appreciation Bonds, as of any date of calculation, the sum of the amount set forth in a Supplemental Indenture as the amount representing the initial principal amount of such Capital Appreciation Bond plus the interest accumulated, compounded and unpaid thereon as of the most recent compounding date, or (b) with respect to Original Issue Discount Bonds, as of the date of calculation, the amount representing the initial public offering price of such Original Issue Discount Bonds plus the amount of the discounted principal which has accreted since the date of issue; in each case the Accreted Value will be determined in accordance with the provisions of the Supplemental Indenture authorizing the issuance of such Capital Appreciation Bond or Original Issue Discount Bond. All references in the Indenture to "principal" will also include Accreted Value, as applicable. "Act" means the Bond Law and Section 33.3 of the Charter. "Aggregate Annual Debt Service" means for any Fiscal Year the aggregate amount of Annual Debt Service on all Outstanding Bonds and Unissued Program Bonds. For purposes of calculating Aggregate Annual Debt Service, the following components of debt service will be computed as follows: (a) in determining the amount of principal to be funded in each year, payment will (unless a different subsection of this definition applies for purposes of determining principal maturities or amortization) be assumed to be made on Outstanding Bonds and Unissued Program Bonds in accordance with any amortization schedule established by the governing documents setting forth the terms of such Bonds, including, as a principal payment, the Accreted Value of any Capital Appreciation Bonds or Original Issue Discount Bonds maturing or scheduled for redemption in such year; in determining the amount of interest to be funded in each year, interest payable at a fixed rate will (except to the extent subsection (b), (c) or (d) of this definition applies) be assumed to be made at such fixed rate and on the required funding dates; provided, however, that interest payable on the Bonds will be excluded to the extent such payments are to be paid from Capitalized Interest for such Fiscal Year; (b) if all or any portion or portions of an Outstanding Series of Bonds or Unissued Program Bonds constitute Balloon Indebtedness (excluding Program Bonds or Unissued Program Bonds to which subsection (f) applies), then, for purposes of determining Aggregate Annual Debt Service, each maturity which constitutes Balloon Indebtedness will, unless otherwise provided in the Supplemental Indenture pursuant to which such Balloon Indebtedness is issued or unless provision (c) of this definition then applies to such maturity, be treated as if it were to be amortized over a term of not more than 30 years and with substantially level annual debt service funding payments commencing not later than the year following the year in which such Balloon Indebtedness was issued, and extending not later than 30 years from the date such Balloon Indebtedness was originally issued; the interest rate used for such computation will be that rate A -1 6124115 CC AGENDA PACKET FACE 9 quoted in The Bond Buyer 25 Revenue Bond Index, or such successor or replacement index, for the last week of the month preceding the date of calculation as published by The Bond Buyer, or if that index is no longer published, another similar index selected by the City, or if the City fails to select a replacement index, that rate determined by a Consultant to be a reasonable market rate for fixed -rate Bonds of a corresponding term issued under the Indenture on the date of such calculation, with no credit enhancement and taking into consideration whether such Bonds bear interest which is or is not excluded from gross income for federal income tax purposes; with respect to any Series of Bonds, Unissued Program Bonds or Program Bonds, only a portion of which constitutes Balloon Indebtedness, the remaining portion will be treated as described in (a) above or such other provision of this definition as will be applicable and, with respect to any Series, Unissued Program Bonds or Program Bonds, or that portion of a Series thereof which constitutes Balloon Indebtedness, all funding requirements of principal and interest becoming due prior to the year of the stated maturity of the Balloon Indebtedness will be treated as described in (a) above or such other provision of this definition as will be applicable; (c) any maturity of Bonds which constitutes Balloon Indebtedness as described in provision (b) of this definition and for which the stated maturity date occurs within 12 months from the date such calculation of Aggregate Annual Debt Service is made, will be assumed to become due and payable on the stated maturity date and provision (b) above will not apply thereto unless there is delivered to the entity making the calculation of Aggregate Annual Debt Service a certificate of an Authorized City Representative stating that the City intends to refinance such maturity and stating the probable terms of such refinancing and that the debt capacity of the City is sufficient to successfully complete such refinancing; upon the receipt of such certificate, such Balloon Indebtedness will be assumed to be refinanced in accordance with the probable terms set out in such certificate and such terms will be used for purposes of calculating Aggregate Annual Debt Service, provided that such assumption will not result in an interest rate lower than that which would be assumed under provision (b) above and will be amortized over a term of not more than 30 years from the date of refinancing; (d) if any Outstanding Bonds (including Program Bonds) or any Bonds which are then proposed to be issued constitute Tender Indebtedness (but excluding Program Bonds or Bonds as to which a Qualified Swap is in effect and to which subsection (g) or (h) applies), then, for purposes of determining Aggregate Annual Debt Service, Tender Indebtedness will be treated as if the principal amount of such Bonds were to be amortized over a term of not more than 30 years commencing in the year in which such Series is first subject to tender and with substantially level Annual Debt Service payments and extending not later than 30 years from the date such Tender Indebtedness was originally issued; the interest rate used for such computation will be that rate quoted in The Bond Buyer 25 Revenue Bond Index, or such successor or replacement index, for the last week of the month preceding the date of calculation as published by The Bond Buyer, or if that index is no longer published, another similar index selected by the City, or if the City fails to select a replacement index, that rate determined by a Consultant to be a reasonable market rate for fixed -rate Bonds of a corresponding term issued under the Indenture on the date of such calculation, with no credit enhancement and taking into consideration whether such Bonds bear interest which is or is not excluded from gross income for federal income tax purposes; and with respect to all funding requirements of principal and interest payments becoming due prior to the year in which such Tender Indebtedness is first subject to tender, such payments will be treated as described in (a) above unless the interest during that period is subject to fluctuation, in which case the interest becoming due prior to such first tender date will be determined as provided in (e) or (f) below, as appropriate; A -2 6124115 CC A EN A PACKET PAGE 95 (e) if any Outstanding Bonds constitute Variable Rate Indebtedness, including obligations described in subsection (h)(ii) to the extent it applies (except to the extent subsection (b) or (c) relating to Balloon Indebtedness or (d) relating to Tender Indebtedness or subsection (h)(i) relating to Synthetic Fixed Rate Debt applies), the interest rate on such Bonds will be that rate quoted in The Bond Buyer 25 Revenue Bond Index, or such successor or replacement index, for the last week of the month preceding the date of calculation as published by The Bond Buyer, or if that index is no longer published, another similar index selected by the City, or if the City fails to select a replacement index, that rate determined by a Consultant to be a reasonable market rate for variable rate Bonds of a corresponding term issued under the Indenture on the date of such calculation, with no credit enhancement and taking into consideration whether such Bonds bear interest which is or is not excluded from gross income for federal income tax purposes; (f) with respect to any Program Bonds or Unissued Program Bonds (other than a Commercial Paper Program) (1) debt service on Program Bonds then Outstanding will be determined in accordance with such of the foregoing provisions of this definition as will be applicable, and (ii) with respect to Unissued Program Bonds, it will be assumed that the full principal amount of such Unissued Program Bonds will be amortized over a term certified by an Authorized City Representative at the time the initial Program Bonds of such Program are issued to be the expected duration of such Program or, if such expectations have changed, over a term certified by an Authorized City Representative to be the expected duration of such Program at the time of such calculation, but not to exceed 30 years from the date the initial Program Bonds of such Program are issued and it will be assumed that debt service will be paid in substantially level Annual Debt Service payments over such assumed term; the interest rate used for such computation will be that rate quoted in The Bond Buyer 25 Revenue Bond Index, or such successor or replacement index, for the last week of the month preceding the date of calculation as published by The Bond Buyer, or if that index is no longer published, another similar index selected by the City, or if the City fails to select a replacement index, that rate determined by a Consultant to be a reasonable market rate for fixed -rate Bonds of a corresponding term issued under the Indenture on the date of such calculation, with no credit enhancement and taking into consideration whether such Bonds bear interest which is or is not excluded from gross income for federal income tax purposes; (g) debt service on Repayment Obligations, to the extent such obligations constitute Bonds under the Indenture, will be calculated as provided therein; (h) (1) for purposes of computing the Aggregate Annual Debt Service of Bonds which constitute Synthetic Fixed Rate Debt, the interest payable thereon will, if the City elects, be that rate as provided for by the terms of the Swap or the net interest rate payable pursuant to offsetting indices, as applicable, or if the City fails to elect such rate, then it will be deemed to be the fixed interest rate quoted in The Bond Buyer 25 Revenue Bond Index, or such successor or replacement index, for the last week of the month preceding the date of calculation as published by The Bond Buyer, or if that index is no longer published, another similar index selected by the City; (ii) for purposes of computing the Aggregate Annual Debt Service of Bonds with respect to which a Swap has been entered into whereby the City has agreed to pay the floating variable rate thereunder, no fixed interest rate amounts payable on the Bonds to which such Swap pertains will be included in the calculation of Aggregate Annual Debt Service, and the interest rate with respect to such Bonds will, if the City elects, be the sum of that rate as determined in accordance with subsection (e) relating to Variable A -3 6124115 CC AGENDA PACKET FACE 9 Rate Indebtedness plus the difference between the interest rate on the Designated Debt and the rate received from the Swap Provider; (1) with respect to any Commercial Paper Program which has been Implemented and not then terminated or with respect to any Commercial Paper Program then proposed to be Implemented, the principal and interest thereon will be calculated as if the entire Authorized Amount of such Commercial Paper Program were to be amortized over a term of 35 years commencing in the year in which such Commercial Paper Program is Implemented and with substantially level Annual Debt Service payments; the interest rate used for such computation will be that rate quoted in The Bond Buyer 25 Revenue Bond Index, or such successor or replacement index, for the last week of the month preceding the date of calculation as published by The Bond Buyer, or if that index is no longer published, another similar index selected by the City, or if the City fails to select a replacement index, that rate determined by a Consultant to be a reasonable market rate for fixed -rate Bonds of a corresponding term issued under the Indenture on the date of such calculation, with no credit enhancement and taking into consideration whether such Bonds bear interest which is or is not excluded from gross income for federal income tax purposes; (j) if moneys or Permitted Investments have been irrevocably deposited with and are held by the Trustee or another fiduciary or Capitalized Interest has been set aside exclusively to be used to pay principal and /or interest on specified Bonds, then the principal and /or interest to be paid from such moneys, Permitted Investments, or Capitalized Interest or from the earnings thereon will be disregarded and not included in calculating Annual Debt Service; (k) if state and /or federal grants or other moneys have been irrevocably committed or are held by the Trustee or another fiduciary and are to be set aside exclusively to be used to pay principal and /or interest on specified Bonds, then the principal and /or interest to be paid from such and /or federal grants or other moneys or from earnings thereon will be disregarded (unless such state and /or federal grants or other moneys are included in the definition of Revenues) and not included in calculating Aggregate Annual Debt Service; and (1) for purposes of computing Aggregate Annual Debt Service on the State Loan, the preceding subsections of this definition will apply, except the term "Bonds" will be read to mean the State Loan. "Aggregate Annual Debt Service For Reserve Requirement" means the computation of Aggregate Annual Debt Service for a Debt Service Reserve Fund with respect to all Outstanding Bonds participating in an identified Debt Service Reserve Fund in the then current or any future Fiscal Year, with such modifications in the assumptions thereof as is described in this definition. For purposes of determining the Aggregate Annual Debt Service For Reserve Requirement for the respective Debt Service Reserve Fund, if any, for a Series of Bonds, the annual debt service with respect to any Variable Rate Indebtedness will, upon the issuance of such Series participating in a Debt Service Reserve Fund, be calculated on the basis of the assumptions set forth in subsection (e) of the definition of Aggregate Annual Debt Service, and the amount so determined will not require adjustment thereafter except as appropriate to reflect reductions in the outstanding principal amount of such Series. For purposes of the Aggregate Annual Debt Service For Reserve Requirement, the annual debt service requirements assumed at the time of issuance of a Series of Bonds containing Balloon Indebtedness or Tender Indebtedness will not, with respect to such Series, require subsequent increases. "Annual Debt Service" means, with respect to any Bond, the aggregate amount of principal and interest becoming due and payable during the Fiscal Year, and if a Qualified Swap is in effect for any A -4 6124115 CC AGENDA PACKET FACE 97 Bond, plus the amount payable by the City (or the Trustee) under the Qualified Swap in accordance with the terms thereof, less any amount to be received by the City from the Qualified Swap Provider pursuant to the Qualified Swap, calculated using the principles and assumptions set forth in the definition of Aggregate Annual Debt Service. "Authorized Amount" means, when used with respect to Bonds, including Bonds issued pursuant to a Program, the maximum Principal Amount of Bonds which is then authorized by a resolution adopted by the Council or a Supplemental Indenture entered into pursuant to the Indenture to be Outstanding at any one time under the terms of such Program or Supplemental Indenture. If the maximum Principal Amount of Bonds or Program Bonds authorized by a preliminary resolution or form of Supplemental Indenture approved by the City pursuant to the Indenture exceeds the maximum Principal Amount of Bonds set forth in the final resolution adopted by the Council or in the definitive Supplemental Indenture executed and delivered by the City pursuant to which such Bonds are issued or such Program is established, the Principal Amount of such Bonds or Program Bonds as is set forth in said definitive Supplemental Indenture as executed and delivered by the City and a resolution adopted by the Council will be deemed to be the "Authorized Amount." "Authorized City Representative" means the City Manager or such other officer, official or employee of the City or other person, as determined by the City Manager, which other officer, official, employee or person, has been designated by the City Manager as an Authorized City Representative by written notice delivered by the City Manager to the Trustee or other fiduciary. "Balloon Indebtedness" means, with respect to any Series of Bonds 50% or more of the principal of which matures on the same date or within a Fiscal Year, that portion of such Series which matures on such date or within such Fiscal Year; provided, however, that to constitute Balloon Indebtedness the amount of Bonds of a Series maturing on a single date or within a Fiscal Year must equal or exceed 150% of the amount of such Series which matures during any Fiscal Year. For purposes of this definition, the principal amount maturing on any date will be reduced by the amount of such Bonds, scheduled to be amortized by prepayment or redemption prior to their stated maturity date. A Commercial Paper Program and the Commercial Paper constituting part of such Program will not be Balloon Indebtedness. "Bond" or `Bonds" means any debt obligation of the City issued as a taxable or tax - exempt obligation under and in accordance with the provisions of the Indenture, including, but not limited to, bonds, notes, bond anticipation notes, commercial paper notes and other instruments creating an indebtedness of the City, and obligations incurred through lease or installment purchase agreements or other agreements or certificates of participation therein and Repayment Obligations to the extent provided in the Indenture. The term "Bond" or "Bonds" herein does not include any Subordinate Obligation; provided, however, that the City may provide in a Supplemental Indenture that Subordinate Obligations may be thereafter issued pursuant to the Indenture having the terms applicable to the Bonds, except that such Subordinate Obligations will be junior and subordinate in payment to the Bonds from Net Revenues. The term "Bond" and "Bonds" includes Program Bonds. "Bond Counsel" means a firm or firms of attorneys which are nationally recognized as experts in the area of municipal finance and which are familiar with the transactions contemplated under the Indenture and which are acceptable to the City. "Bond Law" means the City of Bakersfield Enterprise Revenue Bond Law, being Chapter 3.55 of the City's Municipal Code, which incorporates, to the extent made applicable by the Bond Law, the Revenue Bond Law of 1941, being Chapter 6 of Division 2 of Title 5 of the California Government Code, as enacted and thereafter amended. A -5 6124115 CC A EN A PACKET PAGE 98 "Bondholder," "holder," "Owner," "owner" or "registered owner" means the person in whose name any Bond or Bonds are registered on the books maintained by the Registrar and will include any Credit Provider or Liquidity Provider to which a Repayment Obligation is then owed, to the extent that such Repayment Obligation is deemed to be a Bond under the provisions of the Indenture. "Business Day" means a day on which banks located in New York, New York, in Los Angeles, California, in any office of a Credit Provider where draws under a Credit Facility are presented, and in the city in which the principal corporate trust office of the Trustee is located are open, provided that such term may have a different meaning for any specified Series of Bonds if so provided by Supplemental Indenture. "Capital Appreciation Bonds" means Bonds all or a portion of the interest on which is compounded and accumulated at the rates and on the dates set forth in a Supplemental Indenture and is payable only upon redemption or on the maturity date of such Bonds. Bonds which are issued as Capital Appreciation Bonds, but later convert to Bonds on which interest is paid periodically will be Capital Appreciation Bonds until the conversion date and from and after such conversion date will no longer be Capital Appreciation Bonds, but will be treated as having a principal amount equal to their Accreted Value on the conversion date. "Capitalized Interest" means the amount of interest on Bonds, if any, funded from the proceeds of the Bonds or other moneys that are deposited with the Trustee in the Debt Service Fund as will be described in a Supplemental Indenture upon issuance of Bonds to be used to pay interest on the Bonds. "Charter" means the Charter of the City, as may be in effect from time to time. "City" means the City of Bakersfield, California, a charter city duly organized and existing under the Constitution and laws of the State, and any successor thereto. "City Attorney" means the City Attorney or his or her designee. "City Manager" means the person at a given time who is the City Manager of the City as provided for in the Charter assigned to such position and the officer of officers succeeding to such position. "Council" means the Council of the City. "Code" means the Internal Revenue Code of 1986, as amended, and the United States Treasury Regulations applicable with respect thereto. "Commercial Paper" means notes of the City with a maturity of not more than 270 days from the date of issuance and which are issued and reissued from time to time pursuant to a Program adopted by the City. "Commercial Paper Program" means a Program authorized by the Council pursuant to which Commercial Paper will be issued and reissued from time to time, up to the Authorized Amount of such Program. "Connection Fees" means any fee or charge imposed upon any person or entity payable as a condition to establishing a physical connection to the Enterprise through which sewage effluent will be discharged into the Enterprise. A -6 6124115 CC AGENDA PACKET FACE 99 "Construction Fund" means any of the Construction Funds authorized to be created as provided in the Indenture. "Consultant" means any Independent consultant, consulting firm, engineer, architect, engineering firm, architectural firm, accountant or accounting firm, financial advisory or investment banking firm or other expert recognized to be well- qualified for work of the character required and retained by the City to perform acts and carry out the duties provided for such consultant in the Indenture. "Costs" or "Costs of a Project" means all costs of planning, developing, financing, constructing, installing, equipping, furnishing, improving, acquiring, enlarging and /or renovating a Project and placing the same in service and will include, but not be limited to the following: (a) costs of real or personal property, rights, franchises, easements and other interests in property, real or personal, and the cost of demolishing or removing structures and site preparation, infrastructure development, and landscaping and acquisition of land to which structures may be removed; (b) the costs of materials and supplies, machinery, equipment, vehicles, rolling stock, furnishings, improvements and enhancements; (c) labor and related costs and the costs of services provided, including costs of consultants, advisors, architects, engineers, accountants, planners, attorneys, financial and feasibility consultants, in each case, whether an employee of the City or a Consultant; (d) costs of the City properly allocated to a Project and with respect to costs of its employees or other labor costs, including the cost of medical, pension, retirement and other benefits as well as salary and wages and the allocable costs of administrative, supervisory and managerial personnel and the properly allocable cost of benefits provided for such personnel; (e) financing expenses, including costs related to issuance of and securing of Bonds, costs of Credit Facilities, Liquidity Facilities, Capitalized Interest, a Debt Service Reserve Fund, if any, Trustee's fees and expenses; (f) any Swap Termination Payments due in connection with a Series of Bonds or the failure to issue such Series of Bonds; and (g) such other costs and expenses that can be capitalized under generally accepted accounting principles in effect at the time the cost is incurred by the City. "Costs of Issuance" means all costs and expenses incurred by the City in connection with the issuance of the Series 2015A Bonds, including, but not limited to, as applicable, costs and expenses of printing and copying documents, the preliminary and final official statements, the Series 2015A Bonds, underwriter's compensation, and the fees, costs and expenses of rating agencies, the Trustee, the Escrow Agent, counsel, accountants, financial advisors, feasibility consultants, and other consultants. "Credit Facility" means a policy of municipal bond insurance, a letter of credit, surety bond, line of credit, guarantee, standby bond purchase agreement, Debt Service Reserve Fund Surety Policy or other financial instrument which obligates a third party to make payment of or provide funds to the Trustee for the payment of the principal or Accreted Value of and /or interest on Bonds whether such obligation is to pay in the first instance and seek reimbursement or to pay only if the City fails to do so. "Credit Provider" means the party obligated to make payment of principal of and interest on the Bonds under a Credit Facility. "Debt Service Fund" or "Debt Service Funds" means a Debt Service Fund or any of the Debt Service Funds required to be created as provided by the Indenture. "Debt Service Reserve Fund" means any Debt Service Reserve Fund created by the City or by the Trustee pursuant to a Supplemental Indenture in connection with the issuance of any Series of Bonds and that is required to be funded for the purpose of providing additional security for such Series of Bonds and under certain circumstances to provide additional security for such other designated Series of Bonds issued pursuant to the terms of the Indenture and as specified in any Supplemental Indenture. A -7 6124115 CC AGENDA PACKET FACE 1 "Debt Service Reserve Fund Surety Policy" means an insurance policy or surety bond, or a letter of credit, deposited with the Trustee for the credit of the Debt Service Reserve Fund created for one or more series of Outstanding Bonds in lieu of or partial substitution for cash or securities on deposit therein. The entity providing such Debt Service Reserve Fund Surety Policy will be rated in one of the two highest long -term Rating Categories by one or more of the Rating Agencies. "Designated Debt" means a specific indebtedness designated by the City in which such debt will be offset with a Swap, such specific indebtedness to include all or any part of a Series of Bonds. "Enterprise" means the entire municipal wastewater and sewage collection, treatment and disposal services provided by the City throughout the Service Area, including, but not limited to, all wastewater treatment plants, facilities, properties and improvements at any time owned, controlled or operated by the City for the collection, treatment and disposal of wastewater and sewage for residents of the Service Area, and any necessary lands, rights, entitlements and other property useful in connection therewith, together with all extensions thereof and improvements thereto at any time acquired, constructed or installed by the City. The term "Enterprise" does not include any facilities, properties or improvements constituting any portion of the public water supply system in the City. "Escrow Agent" means U.S. Bank National Association, and its successors and assigns, acting as escrow agent under the Escrow Agreement. "Escrow Agreement" means the Escrow Agreement, dated September 1, 2015, by and between the City and the Trustee, as trustee and escrow agent, and under which a portion of the proceeds of the Series 2015A Bonds are to be deposited and used to pay the principal of and interest on the Refunded Series 2007A Bonds. "Escrow Fund" means the fund by that name established and held pursuant to the Escrow Agreement. "Event of Default" means any occurrence or event specified in the Indenture. "Favorable Opinion of Bond Counsel" means, with respect to any action relating to the Series 2015A Bonds, the occurrence of which requires such an opinion, an unqualified written legal opinion of Bond Counsel to the effect that such action is permitted under the Fourth Supplemental Indenture and the Master Indenture and will not impair the exclusion of interest on the Series 2015A Bonds from gross income for purposes of federal income taxation (subject to the inclusion of any exception contained in the opinion delivered upon the original issuance of Series 2015A Bonds). "Finance Director" means the person at a given time who is the Finance Director of the City assigned to such position and the officer or officers succeeding to such position. "First Supplemental Indenture" means the First Supplemental Indenture dated as of August 1, 2007, by and between the City and the Trustee. "Fiscal Year" means the period of time beginning on July 1 of each given year and ending on June 30 of the immediately subsequent year, or such other similar period as the City designates as its fiscal year. "Fitch" means Fitch Ratings, a corporation organized and existing under the laws of the State of Delaware, its successors and its assigns, and, if such corporation will for any reason no longer perform the A -8 6124115 CC AGENDA PACKET FACE 101 functions of a securities rating agency, "Fitch" will be deemed to refer to any nationally recognized rating agency designated by the City. "Fourth Supplemental Indenture" means the Fourth Supplemental Trust Indenture dated as of September 1, 2015, by and between the City and the Trustee. "Government Obligations" means (a) United States Obligations (including obligations issued or held in book -entry form), (b) prerefunded municipal obligations meeting the following conditions: (1) the municipal obligations are not subject to redemption prior to maturity, or the trustee has been given irrevocable instructions concerning their calling and redemption and the issuer has covenanted not to redeem such obligations other than as set forth in such instructions; (ii) the municipal obligations are secured by cash and /or United States Obligations, which United States Obligations may be applied only to interest, principal and premium payments of such municipal obligations; (iii) the principal of and interest on the United States Obligations (plus any cash in the escrow fund) are sufficient to meet the liabilities of the municipal obligations; (iv) the United States Obligations serving as security for the municipal obligations are held by an escrow agent or trustee; (v) the United States Obligations are not available to satisfy any other claims, including those against the trustee or escrow agent; and (vi) the municipal obligations are rated in their highest rating category by one or more of the Rating Agencies, but only if such Rating Agencies have been requested by the City to maintain a rating on the Bonds and such Rating Agencies are then maintaining a rating on any of the Bonds; and (c) any other type of security or obligation which the Rating Agencies then maintaining ratings on the Bonds to be defeased have determined to be permitted defeasance securities. "Implemented" means, when used with respect to a Program, a Program which has been authorized and the terms thereof approved by a resolution adopted by the Council and, with respect to which Program, various items described in the Indenture have been filed with the Trustee. "Indenture" means the Master Trust Indenture, dated as of August 1, 2007, by and between the City and the Trustee, together with all Supplemental Indentures. "Independent' ' means, when used with respect to any specified firm or individual, such a firm or individual who (a) does not have any direct financial interest or any material indirect financial interest in the operations of the City, other than the payment to be received under a contract for services to be performed, and (b) is not connected with the City as an official, officer or employee. Initial Bonds " means those Bonds issued pursuant to the Indenture. "Investment Agreement" means an investment agreement or guaranteed investment contract (a) with or guaranteed by a national or state chartered bank or savings and loan, an insurance company or other financial institution whose unsecured debt is rated in the highest short-term rating category (if the term of the Investment Agreement is less than three years) or in either of the two highest long -term Rating Categories (if the term of the Investment Agreement is three years or longer) by one or more of the Rating Agencies, or (b) which investment agreement or guaranteed investment contract is fully secured by obligations described in items (a) or (b) of the definition of Permitted Investments which are (1) valued not less frequently than monthly and have a fair market value, exclusive of accrued interest, at all times at least equal to 103% of the principal amount of the investment, together with the interest accrued and unpaid thereon, (ii) held by the Trustee (who will not be the provider of the collateral) or by any Federal Reserve Bank or a depository acceptable to the Trustee, (iii) subject to a perfected first lien on behalf of the Trustee, and (iv) free and clear from all third -party liens. A -9 6124115 CC AGENDA PACKET FACE 102 "Liquidity Facility" means a letter of credit, line of credit, standby purchase agreement or other financial instrument, including a Credit Facility, which is available to provide funds with which to purchase Bonds that have been tendered for purchase but not remarketed. "Liquidity Provider" means the entity, including a Credit Provider, which is obligated to provide funds to purchase Bonds under the terms of a Liquidity Facility. "Liquidity Provider" means the entity, including a Credit Provider, which is obligated to provide funds to purchase Bonds under the terms of a Liquidity Facility. "Mail" means by first -class United States mail, postage prepaid. "Master Indenture" means the Master Trust Indenture, dated as of August 1, 2007, by and between the City and the Trustee, under which the Series 2015A Bonds are authorized and secured. "Maximum Aggregate Annual Debt Service" means the maximum amount of Aggregate Annual Debt Service with respect to all Bonds, Unissued Program Bonds and the Authorized Amount of all Bonds then proposed to be issued in the then current or any future Fiscal Year. " Moody's" means Moody's Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and its assigns, and, if such corporation will for any reason no longer perform the functions of a securities rating agency, " Moody's" will be deemed to refer to any other nationally recognized rating agency designated by the City. "Maximum Aggregate Annual Debt Service For Reserve Requirement" means the computation of Maximum Aggregate Annual Debt Service for a Debt Service Reserve Fund with respect to all Outstanding Bonds participating in an identified Debt Service Reserve Fund in the then current or any future Fiscal Year, with such modifications in the assumptions thereof as is described in this definition. For purposes of determining the Maximum Aggregate Annual Debt Service For Reserve Requirement for the respective Debt Service Reserve Fund, if any, for a Series of Bonds the annual debt service with respect to any Variable Rate Indebtedness will, upon the issuance of such Series participating in an identified Debt Service Reserve Fund, be calculated on the basis of the assumptions set forth in subsection (e) of the definition of Aggregate Annual Debt Service, and the amount so determined will not require adjustment thereafter except as appropriate to reflect reductions in the outstanding principal amount of such Series. For purposes of the Maximum Aggregate Annual Debt Service For Reserve Requirement, the annual debt service requirements assumed at the time of issuance of a Series of Bonds containing Balloon Indebtedness or Tender Indebtedness will not, with respect to such Series, require subsequent increases. "Net Revenues" means, for any Fiscal Year, the Revenues for such Fiscal Year, less the Operation and Maintenance Costs for such Fiscal Year. "Non- Qualified Swap" means any Swap which is not a Qualified Swap. "Notes" means Bonds issued under the provisions of the Indenture which have a maturity of one year or less from their date of original issuance and which are not part of a Commercial Paper Program. "Operation and Maintenance Costs" means, for any given period, the total reasonable and necessary costs and expenses paid or incurred by the City for maintaining and operating the Enterprise, as determined in accordance with generally accepted accounting principles as in effect from time to time, including all reasonable expenses of management, repair and other expenses necessary to maintain and A -10 6124115 CC AGENDA PACKET FACE 103 preserve the Enterprise in good repair and working order, and including all administrative costs of the City that are properly charged directly or apportioned to the operation of the Enterprise, such as salaries and wages of employees, overhead, taxes (if any) and insurance premiums, and including all other reasonable and necessary costs and expenses of the City or charges required to be paid by the City to comply with the terms of the Indenture, such as compensation, reimbursement and indemnification of the Trustee, the Credit Provider, the Liquidity Provider and fees and expenses of Consultants; but excluding in all cases Annual Debt Service, depreciation, replacement and obsolescence charges or reserves therefor, amortization of intangibles and operation and maintenance expenses of the Enterprise payable from moneys other than Revenues. "Operation and Maintenance Subaccount" means the "Operation and Maintenance Subaccount" created by the City within the Wastewater Treatment Fund pursuant to the Indenture. "Original Issue Discount Bonds" means Bonds which are sold at an initial public offering price of less than face value and which are specifically designated as Original Issue Discount Bonds by the Supplemental Indenture under which such Bonds are issued. "Outstanding" when used with respect to Bonds means all Bonds which have been authenticated and delivered under the Indenture, except: (a) Bonds cancelled or purchased by the Trustee for cancellation or delivered to or acquired by the Trustee for cancellation and, in all cases, with the intent to extinguish the debt represented thereby; (b) Bonds deemed to be paid in accordance with the Indenture; (c) Bonds in lieu of which other Bonds have been authenticated under the Indenture; (d) Bonds that have become due (at maturity or on redemption, acceleration or otherwise) and for the payment of which sufficient moneys, including interest accrued to the due date, are held by the Trustee or a Paying Agent; (e) Bonds which, under the terms of the Supplemental Indenture pursuant to which they were issued, are deemed to be no longer Outstanding; (f) Repayment Obligations deemed to be Bonds under the Indenture to the extent such Repayment Obligation arose under the terms of a Liquidity Facility and are secured by a pledge of Outstanding Bonds acquired by the Liquidity Provider; and (g) for purposes of any consent or other action to be taken by the holders of a specified percentage of Bonds under the Indenture, Bonds held by or for the account of the City or by any person controlling, controlled by or under common control with the City, unless such Bonds are pledged to secure a debt to an unrelated party. "Paying Agent" or "Paying Agents" means, with respect to the Bonds or any Series of Bonds, the banks, trust companies or other financial institutions or other entities designated in a Supplemental Indenture or a resolution of the City as the place where such Bonds will be payable. "Payment Date" means, with respect to any Bonds, each date on which interest is due and payable thereon and each date on which principal is due and payable thereon whether by maturity or redemption thereof. A -11 6124115 CC AGENDA PACKET FACE 1 "Permitted Investments" means any of the following, but only to the extent permitted by the laws of the State and the City's investment policy: (a) United States Obligations; (b) Obligations, debentures, notes or other evidences of indebtedness issued or guaranteed by any of the following instrumentalities or agencies of the United States of America: Federal Home Loan Bank System; Export-Import Bank of the United States; Federal Financing Bank; Government National Mortgage Association; Federal National Mortgage Association; Student Loan Marketing Association; Federal Farm Credit Bureau; Farmers Home Administration; Federal Home Loan Mortgage Corporation; and Federal Housing Administration; (c) Direct and general long -term obligations of any state, which obligations are rated in one of the two highest Rating Categories by one or more of the Rating Agencies; (d) Direct and general short -term obligations of any state which obligations are rated in the highest Rating Category by one or more of the Rating Agencies; (e) Interest- bearing demand or time deposits (including certificates of deposit) or interests in money market portfolios issued by state banks or trust companies or national banking associations that are members of the Federal Deposit Insurance Corporation ( "FDIC ") or by savings and loan associations that are members of the FDIC, which deposits or interests must either be (1) continuously and fully insured by FDIC and with banks that are rated at least in the highest short-term Rating Category by one or more of the Rating Agencies or is rated in one of the two highest long -term Rating Categories by one or more of the Rating Agencies; or (ii) fully secured by obligations described in item (a) or (b) of this definition of Permitted Investments (A) which are valued not less frequently than monthly and have a fair market value, exclusive of accrued interest, at all times at least equal to the principal amount of the investment, (B) held by the Trustee (who will not be the provider of the collateral) or by any Federal Reserve Bank or a depository acceptable to the Trustee, (C) subject to a perfected first lien in favor of the Trustee, and (D) free and clear from all third -party liens; (f) Long -term or medium -term corporate debt guaranteed by any corporation that is rated in one of the two highest Rating Categories by one or more of the Rating Agencies; (g) Repurchase agreements which are (A) entered into with banks or trust companies organized under state law, national banking associations, insurance companies or government bond dealers reporting to, trading with, and recognized as a primary dealer by, the Federal Reserve Bank of New York and which either are members of the Security Investors Protection Corporation or with a dealer or parent holding company that has an investment grade rating from one or more of the Rating Agencies and (B) fully secured by obligations specified in items (a) or (b) of this definition of Permitted Investments (1) which are valued not less frequently than monthly and have a fair market value, exclusive of accrued interest, at least equal to the amount invested in the repurchase agreements, (2) held by the Trustee (who will not be the provider of the collateral) or by any Federal Reserve Bank or a depository acceptable to the Trustee, (3) subject to a perfected first lien in favor of the Trustee and (4) free and clear from all third -party liens; (h) Prime commercial paper of a United States corporation, finance company or banking institution rated in the highest short-term Rating Category of one or more of the Rating Agencies; A -12 6124115 CC A EN A PACKET PAGE 105 (1) Shares of a diversified open -end management investment company (as defined in the Investment Company Act of 1940, as amended) or shares in a regulated investment company (as defined in Section 851(a) of the Code) that is (A) a money market fund that has been rated in one of the two highest Rating Categories by one or more of the Rating Agencies or (B) a money market fund or account of the Trustee or its affiliates or any state or federal bank that is rated at least in the highest short-term Rating Category by one or more of the Rating Agencies or is rated in one of the two highest long -term Rating Categories by one or more of the Rating Agencies, or whose own bank holding company parent is rated at least in the highest short-term Rating Category by one or more of the Rating Agencies or is rated in one of the two highest long -term Rating Categories by one or more of the Rating Agencies, or that has a combined capital and surplus of not less than $50,000,000 (all investments included in this clause (1) may include funds which the Trustee or its affiliates provide investment advisory or other management services); (j) Interest bearing notes issued by a banking institution having a combined capital and surplus of at least $500,000,000 and whose senior debt is in the highest Rating Category by one or more of the Rating Agencies; (k) Public housing bonds issued by public agencies which are either unconditionally guaranteed as to principal and interest by the United States of America, or rated in the highest Rating Category by one or more of the Rating Agencies; (1) Obligations issued or guaranteed by Private Export Funding Corporation, Resolution Funding Corporation and any other instrumentality or agency of the United States of America; (m) Investment Agreements; (n) Any other type of investment consistent with City policy in which the City directs the Trustee to invest provided that there is delivered to the Trustee a certificate of an Authorized City Representative stating that each of the Rating Agencies then maintaining a rating on the Bonds has been informed of the proposal to invest in such investment and each of such Rating Agencies has confirmed that such investment will not adversely affect the rating then assigned by such rating agency to any of the Bonds; (o) Any state administered pool investment fund in which the City is statutorily permitted or required to invest (including but not limited to the State of California Local Agency Fund ( "LAIF ") established pursuant to Section 16429.1 et seq. of the Government Code of the State); (p) Any investment specifically authorized by a Credit Provider for a Series of Bonds, as set forth in a Supplemental Indenture; and (q) any other investment which is a permitted investment of the City in accordance with the laws of the State. "Principal Amount" or "principal amount" means, as of any date of calculation, (a) with respect to any Capital Appreciation Bond, the Accreted Value thereof (the difference between the stated amount to be paid at maturity and the Accreted Value being deemed unearned interest), (b) with respect to any Original Issue Discount Bond, the Accreted Value thereof, unless the Supplemental Indenture under which such Bond was issued will specify a different amount, in which case, the terms of the Supplemental A -13 6124115 CC AGENDA PACKET PAGE 106 Indenture will control, and (c) with respect to any other Bonds, the principal amount of such Bond payable at maturity. "Program" means a financing program identified in a Supplemental Indenture, including but not limited to a Commercial Paper Program, (a) which is authorized and the terms thereof approved by a resolution adopted by the City and various items described in the Indenture have been filed with the Trustee, (b) wherein the City has authorized the issuance, from time to time, of notes, commercial paper or other indebtedness in an Authorized Amount, and (c) the Authorized Amount of which has met the additional bonds test set forth in the Indenture and the Outstanding amount of which may vary from time to time, but not exceed the Authorized Amount. "Program Bonds" means Bonds issued and Outstanding pursuant to a Program, other than Unissued Program Bonds. "Project" means any and all facilities, improvements and other expenditures related to the Enterprise financed in whole or in part with proceeds of a Series of Bonds. "Qualified Swap" means any Swap (a) whose Designated Debt is all or part of a particular Series of Bonds; (b) whose Swap Provider is a Qualified Swap Provider or has been a Qualified Swap Provider within the 60 day period preceding the date on which the calculation of Annual Debt Service or Aggregate Annual Debt Service is being made; (c) which has a term not greater than the term of the Designated Debt or to a specified mandatory tender or redemption of such Designated Debt; and (d) which has been designated in writing to the Trustee by the City as a Qualified Swap with respect to such Bonds. "Qualified Swap Provider" means a financial institution whose senior long -term debt obligations, or whose obligations under any Qualified Swap are (a) guaranteed by a financial institution, or subsidiary of a financial institution, whose senior long -term debt obligations, are rated at least "Al," in the case of Moody's and "A +," in the case of S &P, or the equivalent thereto in the case of any successor thereto, or (b) fully secured by obligations described in items (a) or (b) of the definition of Permitted Investments which are (1) valued not less frequently than monthly and have a fair market value, exclusive of accrued interest, at all times at least equal to 105% of the principal amount of the investment, together with the interest accrued and unpaid thereon, (ii) held by the Trustee (who will not be the provider of the collateral) or by any Federal Reserve Bank or a depository acceptable to the Trustee, (iii) subject to a perfected first lien on behalf of the Trustee, and (iv) free and clear from all third -party liens. "Rate Stabilization Fund" means the "Rate Stabilization Fund" created by the City pursuant to the Indenture. "Rating Agency" and "Rating Agencies" means Fitch, Moody's or S &P, or any other nationally recognized rating agency of municipal obligations, but only if such Rating Agencies have been requested by the City to maintain a rating on the Bonds and such Rating Agencies are then maintaining a rating on any of the Bonds. "Rating Category" and "Rating Categories" means (a) with respect to any long -term rating category, all ratings designated by a particular letter or combination of letters, without regard to any numerical modifier, plus or minus sign or other modifier, and (b) with respect to any short -term or commercial paper rating category, all ratings designated by a particular letter or combination of letters and taking into account any numerical modifier, but not any plus or minus sign or other modifier. A -14 6124115 CC AGENDA PACKET FACE 107 "Rebate Fund" means any fund created by the City pursuant to a Supplemental Indenture in connection with the issuance of the Bonds or any Series of Bonds for the purpose of complying with the Code and providing for the collection and holding for and payment of amounts to the United States of America. "Record Date" means, with respect to any Series of Bonds, the record date as specified in the Supplemental Indenture which provides for the issuance of such Series. "Refunded Series 2007A Bonds" means the portion of the Series 2007A Bonds being advance refunded and defeased with a portion of the proceeds of the Series 2015A Bonds, as set forth in the Fourth Supplemental Indenture. "Refunding Bonds" means any Bonds issued pursuant to the Indenture to refund or defease all or a portion of any series of Outstanding Bonds or the State Loan. "Registrar" means, with respect to the Bonds or any Series of Bonds, the bank, trust company or other entity designated in a Supplemental Indenture or a resolution of the City to perform the function of Registrar under the Indenture or any Supplemental Indenture, and which bank, trust company or other entity has accepted the position in accordance with the Indenture. "Regularly Scheduled Swap Payments" means the regularly scheduled payments under the terms of a Swap which are due absent any termination, default or dispute in connection with such Swap. "Repayment Obligation" means an obligation arising under a written agreement of the City and a Credit Provider pursuant to which the City agrees to reimburse the Credit Provider for amounts paid through a Credit Facility to be used to pay debt service on any Bonds or an obligation arising under a written agreement between the City and a Liquidity Provider pursuant to which the City agrees to reimburse the Liquidity Provider for amounts paid through a Liquidity Facility to be used to purchase Bonds that have been tendered for purchase but not remarketed. "Reserve Requirement" means, except as otherwise set forth in a Supplemental Indenture, an amount equal to the least of (a) Maximum Aggregate Annual Debt Service For Reserve Requirement for all Series of Bonds participating in the Debt Service Reserve Fund, (b) 10% of the principal amount of the Series of Bonds that have been issued and are participating in the Debt Service Reserve Fund, less the amount of original issue discount with respect to such Series of Bonds if such original issue discount exceeded 2% on such Series of Bonds at the time of their original sale and (c) 125% of the average Aggregate Annual Debt Service For Reserve Requirement for all Series of Bonds participating in the Debt Service Reserve Fund. "Responsible Officer" means an officer or assistant officer of the Trustee assigned by the Trustee to administer the Indenture. "Revenues" means all charges received for, and all other income and receipts directly or indirectly derived by the City relating to the operation and use of the Enterprise, or arising from the Enterprise, or any part of the Enterprise, and includes, without limitation, all revenues received by the City, or any municipal corporation or agency succeeding to the rights of the City, from the Enterprise, and from the sale and use of wastewater, wastewater services or facilities, or any other service, commodity or facility or any combination thereof within or beyond the Service Area relating to the Enterprise. Such term also includes: A -15 6124115 CC AGENDA PACKET FACE 1 (a) except as provided in (v) below, investment earnings allocated to the Wastewater Treatment Fund by the City from amounts in the Construction Fund, the Rate Stabilization Fund, the Debt Service Fund, the Debt Service Reserve Funds and from surplus Net Revenues in accordance with the Indenture; (b) all income derived from the investment of any money in the Wastewater Treatment Fund; (c) money released from the Rate Stabilization Fund, to the extent that the amount released is not considered Revenues and is used to pay Operation and Maintenance Costs or debt service requirements on the Bonds or the State Loan in the year released; (d) money released from the Rebate Fund to the City and allocated by the City to the Wastewater Treatment Fund in accordance with a Supplemental Indenture; (e) property insurance proceeds which are not necessary to restore or replace the property lost or damaged and the proceeds of the sale or other disposition of any part of the Enterprise; (f) that portion of expansion charges and /or impact fees established specifically to pay debt service on debt obligations; (g) any rental income derived from the leasing of real property; (h) Connection Fees; and (1) any money released from the Rate Stabilization Fund to the extent necessary to meet the rate covenant under the Master Indenture. Revenues do not include: (1) any money received as (A) grants or gifts from the United States of America, the State or other sources, and limited to a specific purpose inconsistent with the payment of principal of and interest on the Bonds, (B) the proceeds of any charge or tax intended as a replacement therefore or other capital contributions from any source which are restricted as to a use inconsistent with the payment of principal of and interest on the Bonds, or (C) the proceeds of any charges required by State or federal regulations to be levied and collected from users and held, distributed or used for a specific designated or limited purpose; (ii) taxes and /or fees collected by the City and remitted to other governmental agencies; (iii) condemnation proceeds or the proceeds of any insurance policy, except any insurance proceeds derived in respect of loss of use or business interruption; (iv) proceeds from the sale of real property owned or used by the Enterprise; (v) any arbitrage earnings which are required to be paid to the U.S. Government pursuant to Section 148 of the Code; (vi) any current year Revenues transferred into the Rate Stabilization Fund; or A -16 6124115 CC A EN A PACKET PAGE 109 (vii) Capitalized Interest. "Securities Depository" means DTC or any successor securities depository appointed by the City pursuant to the Fourth Supplemental Indenture. "Securities Exchange Act" means the federal Securities Exchange Act of 1934, as amended, and any successor thereto. "Serial Bonds" means Bonds for which no sinking installment payments are provided. "Series" means Bonds designated as a separate Series by a Supplemental Indenture and, with respect to Program Bonds or a Commercial Paper Program, means the full Authorized Amount of such program, regardless of when or whether issued, unless portions thereof are, by Supplemental Indenture, designated as a separate Series. "Series 2007A Bonds" means the $190,695,000 aggregate principal amount of Bonds issued under the Master Indenture and the First Supplemental Indenture and designated "City of Bakersfield, California Wastewater Revenue Bonds, Series 2007A." "Series 2015A Bonds" means the $ aggregate principal amount of Bonds issued under the Master Indenture and the Fourth Supplemental Indenture and designated "City of Bakersfield, California Wastewater Revenue Refunding Bonds, Series 2015A." "Series 2015A Costs of Issuance Fund' means the Costs of Issuance Fund of such designation created in the Fourth Supplemental Indenture and into which money is to be deposited to pay Costs of Issuance of the Series 2015A Bonds. "Series 2015A Debt Service Fund" means the fund of such designation created in the Fourth Supplemental Indenture. "Service Area" means 124 square miles of the incorporated City and approximately 10 square miles area within Kern County, and such additional area as may be added to or serviced by the Enterprise. "S &P" means Standard & Poor's Ratings Services, a division of The McGraw -Hill Companies, Inc. a corporation organized and existing under the laws of the State of New York, its successors and their assigns, and if such corporation will for any reason no longer perform the functions of a securities rating agency, "S &P" will be deemed to refer to any other nationally recognized securities rating agency designated by the City. "State" means the State of California. "State Loan" means the obligation of the City to repay a loan from the State made pursuant to State Revolving Fund Loan Program Contract No. 7- 806 - 550 -0, dated as of September 3, 1997, by and between the City, and the State, acting through the State Water Board, whereby the State Water Board loaned the City $14,954,054 from the State Revolving Fund Loan Program to pay a portion of the costs and expenses of an upgrade and expansion to the Enterprise's Wastewater Treatment Plant 2. Pursuant to the State Loan, the City owes an aggregate repayment amount of $17,944,937. Such repayment obligation is secured by Net Revenues and is on a parity with the Bonds. "State Water Board' means the State Water Resources Control Board. A -17 6124115 CC A EN A PACKET PAGE 11 "Subordinate Obligation" means any bond, note or other debt instrument issued or otherwise entered into by the City which ranks junior and subordinate to the Bonds and the State Loan and which may be paid from moneys constituting Net Revenues only if all amounts of principal and interest which have become due and payable on the Bonds and State Loan whether by maturity, redemption or acceleration have been paid in full and the City is current on all payments, if any, required to be made to replenish all Debt Service Reserve Funds. "Subordinate Obligations" are not Bonds for purposes of the Indenture; provided, however, that the City may by Supplemental Indenture elect to have the provisions of the Indenture applicable to the Bonds apply to the Subordinate Obligations issued thereunder, except that such Subordinate Obligations will be secured on a junior and subordinate basis to the Bonds and the State Loan from the Net Revenues. No bond, note or other instrument of indebtedness will be deemed to be a "Subordinate Obligation" for purposes of the Indenture and payable on a subordinate basis from Net Revenues unless specifically designated by the City as a "Subordinate Obligation" in a Supplemental Indenture or other written instrument. In connection with any Subordinate Obligation with respect to which a Swap is in effect or proposes to be in effect, the term "Subordinate Obligation" includes, collectively, both such Subordinate Obligation and either such Swap or the obligations of the City under each such Swap, as the context requires. The term "Subordinate Obligations" also includes a Swap or the obligations of the City under such Swap which has been entered into in connection with a Subordinate Obligation, as the context requires, although none of the Subordinate Obligations with respect to which such Swap was entered into remain outstanding. In connection with any Bonds with respect to which a Qualified Swap is in effect or proposed to be in effect, the term "Subordinate Obligation" includes any Swap Termination Payment if designated as a Subordinate Obligation in a Supplemental Indenture. "Subordinate Obligation Trustee" means the entity named and serving as the trustee under a Subordinate Obligation Trust Indenture, until a successor replaces it and, thereafter, will mean such successor. "Subordinate Obligation Trust Indenture" means a separate trust indenture entered into by the City with a Subordinate Obligation Trustee which provides for the issuance of Subordinate Obligations. "Supplemental Indenture" means any document supplementing or amending the Indenture or providing for the issuance of Bonds and entered into as provided in the Indenture. "Swap" means any financial arrangement between the City and a Swap Provider which provides that (a) each of the parties will pay to the other an amount or amounts calculated as if such amount were interest accruing during the term of the arrangement at a specified rate (whether fixed or a variable rate or measured against some other rate) on a Designated Debt, and payable from time to time or at a designated time or times (whether before, during or after the term of the arrangement); (b) if such amount is to be paid before it is deemed to have accrued, the amount paid will reflect the present value of such future amount (i.e., an upfront premium), while an amount to be paid after it is deemed to have accrued will reflect the time value of such funds; and (c) payment dates and calculated accrual rates need not be the same for each payor, but to the extent payment dates coincide, the arrangement may (but need not) provide that one will pay to the other any net amount due under such arrangement. "Swap Provider" means a party to a Swap with the City. "Swap Termination Payment" means an amount payable by the City or a Qualified Swap Provider, in accordance with a Qualified Swap, to compensate the other party to the Qualified Swap for any losses and costs that such other party may incur as a result of an event of default or the early termination of the obligations, in whole or in part, of the parties under such Qualified Swap. A -18 6124115 CC AGENDA PACKET FACE 111 "Synthetic Fixed Rate Debt" means indebtedness issued by the City which: (a) is combined, as Designated Debt, with a Qualified Swap and creates, in the opinion of a Consultant, a substantially fixed- rate maturity or maturities for a term not exceeding such maturity or maturities, or (b) consisting of an arrangement in which two inversely related variable -rate securities are issued in equal principal amounts with interest based on off - setting indices resulting in a combined payment which is economically equivalent to a fixed rate. "Tax Compliance Certificate" means the certificate of the City prepared by Bond Counsel and delivered by the City at the time of issuance and delivery of any Series of Bonds, the interest on which is excluded from gross income for federal income tax purposes pursuant to a favorable opinion of such Bond Counsel, making certifications and representations of the City as to the status of such Bonds under the Code. "Tender Indebtedness" means any Bonds or portions of Bonds a feature of which is an obligation on the part of the Bondholders, under the terms of such Bonds, to tender all or a portion of such Bonds to the City, the Trustee, the Paying Agent or other fiduciary or agent or Credit Provider or Liquidity Provider for payment or purchase and requiring that such Bonds or portions of Bonds be purchased if properly presented. "Term Bonds" means Bonds of a Series which are payable on or before their specified maturity dates from sinking installment payments established pursuant to the Supplemental Indenture for such Series for that purpose and calculated to retire the Bonds on or before their specified maturity dates. "Trustee" means the entity named as such in the heading of the Indenture until a successor replaces it and, thereafter, means such successor. "Unissued Program Bonds" means the bonds, notes or other indebtedness authorized to be issued pursuant to a Program and payable from Net Revenues, issuable in an amount up to the Authorized Amount relating to such Program, which have been approved for issuance by the City pursuant to a resolution adopted by the Council and with respect to which Program various items described in the Indenture have been filed with the Trustee but which have not yet been authenticated and delivered pursuant to the Program documents. "United States Bankruptcy Code" means Title 11 U.S.C., Section 101 et seq., as amended or supplemented from time to time, or any successor federal act. "United States Obligations" means direct and general obligations of the United States of America, or obligations that are unconditionally guaranteed as to principal and interest by the United States of America, including, with respect only to direct and general obligations and not to guaranteed obligations, evidences of ownership of proportionate interests in future interest and /or principal payments of such obligations, provided that investments in such proportionate interests must be limited to circumstances wherein: (a) a bank or trust company acts as custodian and holds the underlying United States Obligations; (b) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying United States Obligations; and (c) the underlying United States Obligations are held in a special account separate from the custodian's general assets and are not available to satisfy any claim of the custodian, any person claiming through the custodian or any person to whom the custodian may be obligated. "United States Obligations" will include any stripped interest or principal portion of United States Treasury securities and any stripped interest portion of Resolution Funding Corporation securities. A -19 6124115 CC A EN A PACKET PAGE 112 "Wastewater Capital Reserve Fund' means the "Wastewater Capital Reserve Fund" created by the City within the Wastewater Treatment Fund pursuant to the Indenture. "Wastewater Capital Reserve Fund Requirement" means, as of any date of calculation, such minimum amount as will be established by the "Policy For Implementing The State Revolving Loan Fund For Construction Of Wastewater Treatment Facilities" pursuant to the State Loan. "Wastewater Treatment Fund' means the "City of Bakersfield Wastewater Treatment Fund" established by the City and held and maintained by the City for the purpose of depositing all Revenues from the operation and use of the Enterprise, including any other moneys and funds not included in Revenues. THE MASTER TRUST INDENTURE In addition to certain information contained under the captions "THE SERIES 2015A BONDS," and "SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2015A BONDS" above, the following is a summary of certain provisions of the Master Indenture. Such summary is only a brief description of limited provisions of such document and is qualified in its entirety by reference to the full text of the Master Indenture. Grant to Secure Payment; Pledge of Net Revenues To secure the payment of the principal and Accreted Value (as hereinafter defined) of, premium, if any, and interest on the Bonds and the performance and observance by the City of all the covenants, agreements and conditions expressed or implied herein or contained in the Bonds, the City pledges and assigns to the Trustee and grants to the Trustee a lien on and security interest in all right, title and interest of the City in and to all of the following and provides that such lien and security interest will be prior in right to any other pledge, lien or security interest created by the City (except as otherwise provided herein) in the following: (a) the Net Revenues, (b) all moneys and securities (excluding moneys and securities on deposit in any Rebate Fund) held from time to time by the Trustee under the Indenture, and to the extent provided in any Supplemental Indenture moneys and securities held in any Construction Fund whether or not held by the Trustee, (c) earnings on amounts included in provisions (a) and (b) of the Granting Clause (except to the extent excluded from the definition of "Revenues" by the Indenture), and (d) any and all other funds, assets, rights, property or interests therein, of every kind or description which may from time to time hereafter, by delivery or by writing of any kind, be sold, transferred, conveyed, assigned, pledged, mortgaged, granted or delivered to or deposited with the Trustee as additional security hereunder, for the equal and proportionate benefit and security of all Bonds, all of which, regardless of the time or times of their authentication and delivery or maturity, will, with respect to the security provided by the Granting Clause, be of equal rank without preference, priority or distinction as to any Bond over any other Bond or Bonds, except as to the timing of payment of the Bonds. Any Debt Service Reserve Fund and any Debt Service Reserve Fund Surety Policy, as hereinafter defined, provided at any time in satisfaction of all or a portion of the Reserve Requirement and any other security, Liquidity Facility or Credit Facility provided for specific Bonds, a specific Series of Bonds or one or more Series of Bonds may, as provided by a Supplemental Indenture, secure only such specific Bonds, Series of Bonds or one or more Series of Bonds and, therefore, will not be included as security for all Bonds under the Indenture unless otherwise provided by a Supplemental Indenture and moneys and securities held in trust as provided in the Indenture exclusively for Bonds which have become due and payable and moneys and securities which are held exclusively to pay Bonds which are deemed to have been paid under the Indenture will be held solely for the payment of such specific Bonds. Any amounts held in funds and A -20 6124115 CC A EN A PACKET PAGE 113 accounts created pursuant to the State Loan will not be included as security for any Bonds under the Indenture. Issuance of Series of Bonds; Supplemental Indenture; Application of Bond Proceeds Bonds may be issued, at one time or in a Series from time to time, subject to the conditions of this Section. Each Series of Bonds will be dated, will mature, will bear interest, will be subject to redemption and will be amortized and, within a Program, will be issued and reissued from time to time, all as provided in the Supplemental Indenture relating to such Series of Bonds. In addition, each such Supplemental Indenture may provide for the appointment of a Registrar or Registrars and a Paying Agent or Paying Agents and such other agents as the City will determine to be necessary in addition to or in place of the Trustee. Each Series of the Bonds, upon execution by the City, will be deposited with the Trustee or an agent for authentication and delivery, but prior to or simultaneously with the original delivery of such Series of Bonds or delivery of the first Bonds of a Program, there will be filed with the Trustee the following: (a) an original executed counterpart or a copy of the Indenture, together with all Supplemental Indentures; (b) an original executed counterpart or a copy of the Supplemental Indenture or Supplemental Indentures providing for the issuance of such Series of Bonds or creating a Program and setting forth the terms of such Series of Bonds or Program; (c) except with respect to the issuance of the Initial Bonds or any Refunding Bonds, a certificate of an Authorized City Representative listing those Projects or undertakings which the City expects to finance with proceeds of the sale of such Series of Bonds or Program or from which the City expects to select those Projects which will be financed with proceeds of the sale of such Series of Bonds or Program and such certificate will, with respect to each item on the list include an estimated cost of such facility or undertaking; (d) the certificate of the Authorized City Representative or the Consultant or Consultants, as the case may be, if required by "— Test for Issuance of Bonds" below; (e) a certificate of the Authorized City Representative stating that none of the Events of Default set forth below under "— Defaults and Remedies – Events of Default," subsections (a), (b), (c), (e) and (f) of the Indenture have occurred and remain uncured and that the City is in full compliance with the terms of the Indenture and that the City is not in default of its payment obligations under the State Loan; (f) an opinion of Bond Counsel to the effect that the issuance of such Bonds has been duly authorized, that all legal conditions precedent to the delivery of such Bonds have been fulfilled, that the Bonds are valid and binding obligations of the City in accordance with their terms; (g) written instructions from the City to authenticate the Bonds and, upon receipt of the purchase price, to deliver the Bonds to or upon the order of the purchasers named in such instructions; and A -21 6124115 CC AGENDA PACKET FACE 11 (h) a copy of the resolution of the Council approving the issuance of Bonds of such Series, certified by the City Clerk. When the documents mentioned in subsections (a) through (h) above have been filed with the Trustee and when such Bonds have been executed and authenticated, the Trustee or authenticating agent will deliver such Bonds to or upon the order of the purchasers thereof, but only upon payment by the purchasers of the purchase price of such Bonds. Test for Issuance of Bonds Subject to the provisions under subsection (A), (B) or (C) of the last paragraph of this Section and excepting the Initial Bonds, as a condition to the issuance of any Series of Bonds, there will first be delivered to the Trustee either: (a) a certificate, dated as of a date between the date of pricing of the Bonds being issued and the date of delivery of such Bonds (both dates inclusive), prepared by an Authorized City Representative showing the Net Revenues for any 12 consecutive months out of the most recent 18 consecutive months immediately preceding the date of issuance of the proposed Series of Bonds or preceding the first issuance of the proposed Program Bonds were at least equal to 125% of Maximum Aggregate Annual Debt Service with respect to all Outstanding Bonds, the State Loan, Unissued Program Bonds and the proposed Series of Bonds, calculated as if the proposed Series of Bonds and the full Authorized Amount of such proposed Program Bonds (as applicable) were then Outstanding; or (b) a certificate, dated as of a date between the date of pricing of the Bonds being issued and the date of delivery of such Bonds (both dates inclusive), prepared by a Consultant showing that: (1) the Net Revenues for the last audited Fiscal Year or for any 12 consecutive months out of the most recent 18 consecutive months immediately preceding the date of issuance of the proposed Series of Bonds or the establishment of a Program, were at least equal to 125% of the sum of the Aggregate Annual Debt Service due and payable with respect to all Outstanding Bonds and the State Loan for such applicable period; (ii) for the period, if any, from and including the first full Fiscal Year following the issuance of such proposed Series of Bonds through and including the last Fiscal Year during any part of which interest on such Series of Bonds is expected to be paid from the proceeds thereof, the Consultant estimates that the City will be in compliance with subsections (a) and (b) under "— Revenues and Funds — Rate Covenant" below; and (iii) for the period from and including the first full Fiscal Year following the issuance of such proposed Series of Bonds during which no interest on such Series of Bonds is expected to be paid from the proceeds thereof through and including the later of: (A) the fifth full Fiscal Year following the issuance of such Series of Bonds, or (B) the third full Fiscal Year during which no interest on such Series of Bonds is expected to be paid from the proceeds thereof, the estimated Net Revenues for each such Fiscal Year, will be at least equal to 125% of the Aggregate Annual Debt Service for each such Fiscal Year with respect to all Outstanding Bonds, the State Loan and Unissued Program Bonds A -22 6124115 CC AGENDA PACKET FACE 11.E and calculated as if the proposed Series of Bonds and the full Authorized Amount of such proposed Program Bonds (as applicable) were then Outstanding. For purposes of subsections (b)(ii) and (iii) above, in estimating Net Revenues, the Consultant may take into account (1) Revenues from Projects or Enterprise operations reasonably expected to become available during the period for which the estimates are provided, (2) any increase in fees, rates, charges, rentals or other sources of Revenues which have been approved by the City and will be in effect during the period for which the estimates are provided, (3) any other increases in Revenues which the Consultant believes to be a reasonable assumption for such period. With respect to Operation and Maintenance Costs, the Consultant will use such assumptions as the Consultant believes to be reasonable, taking into account: (i) historical Operation and Maintenance Costs, (ii) Operation and Maintenance Costs associated with the Projects and any other new Enterprise facilities, and (iii) such other factors, including inflation and changing operations or policies of the City, as the Consultant believes to be appropriate. The Consultant will include in the certificate or in a separate accompanying report a description of the assumptions used and the calculations made in determining the estimated Net Revenues and will also set forth the calculations of Aggregate Annual Debt Service, which calculations may be based upon information provided by another Consultant. For purposes of preparing the certificate or certificates described above, the Consultant or Consultants or the Authorized City Representative may rely upon financial statements prepared by the City which have not been subject to audit by an independent certified public accountant if audited financial statements for the Fiscal Year or period are not available; provided, however, that an Authorized City Representative will certify as to their accuracy and that such financial statements were prepared substantially in accordance with generally accepted accounting principles, subject to year -end adjustments. Neither of the certificates described above under subsection (a) or (b) will be required: (A) if the Bonds being issued are for the purpose of refunding then Outstanding Bonds and /or the State Loan and there is delivered to the Trustee, instead, a certificate of the Authorized City Representative showing that Aggregate Annual Debt Service on all Outstanding Bonds, the State Loan and Unissued Program Bonds after the issuance of such Refunding Bonds will not exceed the Aggregate Annual Debt Service prior to the issuance of such Refunding Bonds, for each Fiscal Year; (B) if the Bonds being issued constitute Notes and there is delivered to the Trustee, instead, a certificate prepared by an Authorized City Representative showing that the principal amount of the proposed Notes being issued, together with the principal amount of any Notes then Outstanding, does not exceed 10% of the Net Revenues for any 12 consecutive months out of the most recent 24 months immediately preceding the issuance of the proposed Notes and there is delivered to the Trustee a certificate of an Authorized City Representative setting forth calculations showing that for each of the Fiscal Years during which the Notes will be Outstanding, and taking into account the debt service becoming due on such Notes, the City will be in compliance with subsections (a) and (b) under "— Revenues and Funds – Rate Covenant" below; or (C) if the Bonds being issued are to pay costs of completing a Project for which Bonds have previously been issued and the principal amount of such Bonds being issued for completion purposes does not exceed an amount equal to 15% of the principal amount of the Bonds originally issued for such Project and reasonably allocable to the Project to be completed as shown in a written certificate of an Authorized City Representative and there is delivered to A -23 6124115 CC AGENDA PACKET FACE 116 the Trustee (1) a Consultant's certificate stating that the nature and purpose of such Project has not materially changed and (2) a certificate of an Authorized City Representative to the effect that (y) all of the proceeds (including investment earnings on amounts in the Construction Fund allocable to such Project) of the original Bonds issued to finance such Project have been or will be used to pay Costs of the Project and (z) the then estimated Costs of the Project exceed the sum of the Costs of the Project already paid plus moneys available in the Construction Fund established for the Project (including unspent proceeds of Bonds previously issued for such purpose). Repayment Obligations Afforded Status of Bonds If a Credit Provider or Liquidity Provider makes a payment of principal of and /or interest on a Bond or advances funds to purchase or provides for the purchase of Bonds and is entitled to reimbursement thereof, pursuant to a separate written agreement with the City or pursuant to the terms of a Supplemental Indenture, but is not reimbursed, the City's Repayment Obligation under such written agreement or Supplemental Indenture provisions may, if so provided in the written agreement or Supplemental Indenture provisions, be afforded the status of a Bond issued under the Indenture, and, if afforded such status, the Credit Provider or Liquidity Provider will be the Bondholder of such Bond, and such Bond will be deemed to have been issued at the time of the original Bond for which the Credit Facility or Liquidity Facility was provided and will not be subject to the provisions of "— Issuance of Series of Bonds; Supplemental Indenture; Application of Bond Proceeds" and " — Test for Issuance of Bonds" above, provided, however, notwithstanding the stated terms of the Repayment Obligation, the payment terms of the Bond held by the Credit Provider or Liquidity Provider under the Indenture will be as follows (unless otherwise provided in the written agreement with the City or a Supplemental Indenture pursuant to which the Bonds are issued): (a) interest will be due and payable semiannually and (b) principal will be due and payable not less frequently than annually and in such annual amounts as to amortize the principal amount thereof in (1) 30 years or, if shorter, (ii)(A) a term extending to the maturity date of the enhanced Bonds or (B) if longer, the final maturity of the Repayment Obligation under the written agreement, and providing substantially level Annual Debt Service payments, using the rate of interest set forth in the written repayment agreement which would apply to the Repayment Obligation as of the date such amortization schedule is fixed. The principal amortized as described in the prior sentence will bear interest in accordance with the terms of the Repayment Obligation. This provision will not defeat or alter the rights of subrogation which any Credit Provider may have under law or under the terms of any Supplemental Indenture. The Trustee may conclusively rely on a written certification by the Credit Provider or Liquidity Provider of the amount of such non - reimbursement and that such Repayment Obligation is to be afforded the status of a Bond under the Indenture. Obligations Under Qualified Swap; Non - Qualified Swap (a) The obligation of the City to make Regularly Scheduled Swap Payments under a Qualified Swap with respect to a Series of Bonds may be on a parity with the obligation of the City to make payments with respect to such Series of Bonds and other Bonds under the Indenture, except as otherwise provided therein or in a Supplemental Indenture. The City may provide in any Supplemental Indenture that Regularly Scheduled Swap Payments under a Qualified Swap will be secured by a pledge of or lien on the Net Revenues on a parity with the Bonds of such Series and all other Bonds, regardless of the principal amount, if any, of the Bonds of such Series remaining Outstanding. The Trustee will take all action consistent with the other provisions hereof as will be requested in writing by the Qualified Swap Provider necessary to preserve and protect such pledge, lien and assignment and to enforce the obligations of the City with respect thereto. In the event the action requested to be taken pursuant to the preceding sentence will require the Trustee either to exercise the remedies granted in the Indenture or to institute any A -24 6124115 CC AGENDA PACKET FACE 117 action, suit or proceeding in its own name, the Qualified Swap Provider will provide to the Trustee reasonable security and indemnity against the costs, expenses and liabilities to be incurred in connection therewith. (b) In the event that a Swap Termination Payment or any other amounts other than as described in clause (a) above are due and payable by the City under a Qualified Swap, such Swap Termination Payment and any such other amounts will constitute a Subordinate Obligation hereunder. (c) Obligations of the City to make payments, including termination payments, under a Non - Qualified Swap will, unless otherwise provided in a Supplemental Indenture, constitute obligations which are payable on a basis subordinate to the Bonds. Revenues and Funds Creation and Funding of Debt Service Funds. At the time of issuance of each Series of Bonds, the City will create or cause to be created, a Debt Service Fund for such Series, which Debt Service Fund will be held by the Trustee or any agent of the Trustee, and amounts to be used to pay principal of and interest on such Series, as received by the Trustee or its agent, will be deposited therein and used for such purpose. Accounts and subaccounts will be created in the various Debt Service Funds and will be held by the Trustee or such agents as will be provided by Supplemental Indenture. The moneys in the Debt Service Fund will be held in trust and applied as provided in the Supplemental Indenture with regard to each such fund, and pending such application on the arrival of the Payment Date for such amounts will be subject to a lien on and security interest in favor of the holders of the Bonds issued and Outstanding under the Indenture. The Trustee will, at least fifteen (15) Business Days prior to each Payment Date on any Bond, give the City notice by telephone, promptly confirmed in writing, of the amount, after taking into account Capitalized Interest, if any, on deposit in the Debt Service Fund, required to be deposited with the Trustee to make each required payment of principal and /or interest due on such Payment Date. With respect to any Series of Bonds, the Supplemental Indenture under which such Bonds are issued may provide for different times and methods of notifying the City of Payment Dates and amounts to accommodate the specific provisions of such Series and, in such event, the terms of such Supplemental Indenture will control. The City, at least five (5) Business Days prior to each Payment Date, will withdraw from the Wastewater Treatment Fund and pay to the Trustee the full amount required to make the interest and /or principal payments due on such Payment Date. With respect to any Series of Bonds, the Supplemental Indenture under which such Bonds are issued may provide for different times and methods of paying the interest and /or principal payments due on a Payment Date, and, in such event, the terms of such Supplemental Indenture will control. On any day on which the Trustee receives funds from the City to be used to pay principal of or interest on the Bonds, the Trustee will, if the amount received is fully sufficient to pay all amounts of principal and interest then due or becoming due on the next Payment Date, deposit such amounts into the respective Debt Service Funds for the Series of Bonds for which such payments were made and any excess will be applied to pay all amounts of principal and interest becoming due on any subsequent Payment Dates. If, on any Payment Date, the Trustee does not have sufficient amounts in the Debt Service Funds (without regard to any amounts which may be available from Debt Service Reserve Funds) to pay in full all amounts of principal and /or interest due on such date, the Trustee will allocate the total A -25 6124115 CC ACEN A PACKET FACE 118 amount which is available to make payment on such day (without regard to any amounts in the various Debt Service Reserve Funds) as follows: first to the payment of interest then due on the Bonds and, if the amount available will not be sufficient to pay in full all interest on the Bonds then due, then pro rata among the Series according to the amount of interest then due, and second to the payment of the principal of the Bonds then due and, if the amount available will not be sufficient to pay in full all principal of the Bonds then due, then pro rata among the Series according to the Principal Amount then due on the Bonds. If a Debt Service Reserve Fund or Debt Service Reserve Funds (or a Credit Facility provided in lieu thereof) have been used to make payments on the Bonds secured thereby, then the City may be required by Supplemental Indenture to replenish such Debt Service Reserve Fund or Debt Service Reserve Funds or reimburse the Credit Provider from Net Revenues provided that (a) no amount from Net Revenues may be used for such purpose until all payments of principal of and interest on all Bonds which have become due and payable will have been paid in full, (b) the required payments to replenish any such Debt Service Reserve Fund or Debt Service Reserve Funds or reimburse the Credit Provider will be due over a 12 month period following any such withdrawal and (c) if the aggregate amount of payments due on any date to replenish the Debt Service Reserve Fund or Debt Service Reserve Funds or reimburse the Credit Provider exceeds the amount available for such purpose, the payments made to the Trustee for such purpose will be allocated among the various Debt Service Reserve Funds and any applicable Credit Provider pro rata on the basis of the Outstanding Principal Amount of Bonds secured thereby. Notwithstanding the foregoing, the City may, in the Supplemental Indenture authorizing such Series of Bonds, provide for different provisions and timing of deposits with the Trustee and different methods of paying principal of or interest on such Bonds depending upon the terms of such Bonds and may provide for payment through a Credit Facility with reimbursement to the Credit Provider from the respective Debt Service Fund created for the Series of Bonds for which such Credit Facility is provided. If the Net Revenues are at any time insufficient to make the deposits required to make payments on the Bonds, the City may, at its election, pay to the Trustee funds from any available sources with the direction that such funds be deposited into the Debt Service Funds or into a specified account or accounts or subaccount or subaccounts therein. Additional Security. The pledge of Net Revenues and the other security provided in the Granting Clauses of the Indenture secure all Bonds issued under the terms of the Indenture, including Repayment Obligations constituting Bonds, on an equal and ratable basis, except as to the timing of such payments. The City may, however, in its discretion, provide additional security or credit enhancement for specified Bonds or Series of Bonds with no obligation to provide such additional security or credit enhancement to other Bonds. Receipt, Deposit and Use of Revenues — Wastewater Treatment Fund (a) The City covenants and agrees to continue to maintain the Wastewater Treatment Fund. The City further covenants and agrees that all Revenues, when and as received, will be deposited by the City in the Wastewater Treatment Fund. (b) As long as there are any Outstanding Bonds, all Revenues will be deposited in the Wastewater Treatment Fund and will be set aside for the payment of the following amounts or deposited or transferred to the following funds and subaccounts in the order listed: (1) Operation and Maintenance Subaccount. A sufficient amount of Revenues, from time to time, as set forth in the budget of the City for such Fiscal Year as finally approved by the City will be deposited in the Operation and Maintenance A -26 6124115 CC A EN A PACKET PAGE 119 Subaccount. In the event that the balance in the Operation and Maintenance Subaccount at any time is insufficient to make any required payments therefrom, additional amounts at least sufficient to make such payments will immediately be deposited in the Operation and Maintenance Subaccount from the Wastewater Treatment Fund. (ii) Debt Service Funds and Payment of State Loan. A sufficient amount of Revenues will be transferred by the City, without priority and on an equal basis, except as to timing of payment, to the Trustee and the State in the amounts, at the times and in the manner provided in the Indenture and the State Loan to provide for the payment of the principal of and interest to become due on the Outstanding Bonds and the State Loan. (iii) Debt Service Reserve Funds. A sufficient amount of Revenues will be transferred by the City, without priority and on an equal basis, except as to timing of payment to the Debt Service Reserve Funds, if any, at the times and in such amounts as specified in a Supplemental Indenture to be used in the manner provided in the Indenture. (iv) Subordinate Obligation Debt Service. A sufficient amount of Revenues will be transferred by the City from time to time, as will be necessary to make all payments and deposits required to be made on all Subordinate Obligations, but only to the extent (except as otherwise provided in the Indenture) a specific pledge of Net Revenues has been made in writing to the payment of debt service on such indebtedness. (v) Subordinate Obligation Debt Service Reserve Funds. Upon any deficiency in any debt service reserve fund established by or for the benefit of the City in connection with any Subordinate Obligations, the City will deposit in such debt service reserve fund, at such times and in such amounts as are sufficient to replenish withdrawals from such debt service reserve fund; and the full amount of any deficiency in such debt service reserve fund due to any required valuations of the investments in such debt service reserve fund until the balance in such debt service reserve fund is at least equal to the debt service reserve requirement with respect to such Subordinate Obligations, but only to the extent a specific pledge of Net Revenues has been made in writing to the payment of any such debt service reserve requirement on such indebtedness. (vi) Wastewater Capital Reserve Fund. A sufficient amount of Revenues will be deposited, from time to time, to the Wastewater Capital Reserve Fund, such that the balance in the Wastewater Capital Reserve Fund equals the Wastewater Capital Reserve Fund Requirement. (vii) Rate Stabilization Fund. At the option of the City, Net Revenues may be transferred to the Rate Stabilization Fund to be used for the purposes stated in the Indenture. (c) In the event that during a Fiscal Year there is on deposit in the Wastewater Treatment Fund amounts not needed to satisfy the funding requirements set forth in subsection (b) above, the City may withdraw such amounts as its sole property to be used for any lawful purpose of the Enterprise. Creation, Use and Application of Rate Stabilization Fund The City may create and maintain a separate fund within the Wastewater Treatment Fund to be designated as the "Rate Stabilization Fund." Moneys on deposit in the Rate Stabilization Fund may be withdrawn at any time and used for any purpose for which Revenues may be used. Amounts on deposit in the Rate Stabilization Fund, which do not A -27 6124115 CC AGENDA PACKET FACE 120 constitute current year Revenues, may be included in the computations required pursuant to subsection (b) of "— Revenues and Funds — Rate Covenant" below. Payment of Principal and Interest. The City covenants and agrees that it will duly and punctually pay or cause to be paid from the Net Revenues and to the extent thereof the principal of, premium, if any, and interest on every Bond at the place and on the dates and in the manner specified in the Indenture, the Supplemental Indentures and in the Bonds, according to the true intent and meaning thereof, and that it will faithfully do and perform all covenants and agreements contained in the Indenture and in the Bonds, provided that the City's obligation to make payment of the principal of, premium, if any, and interest on the Bonds will be limited to payment from the Net Revenues, the funds and accounts pledged therefor in the Granting Clauses of the Indenture and any other source which the City may specifically provide for such purpose and no Bondholder will have any right to enforce payment from any other funds of the City. Rate Covenant. The City covenants to fulfill the following requirements: (a) The City will, while any of the Bonds remain Outstanding (but subject to all existing contracts and legal obligations of the City as of the date of execution of the Indenture setting forth restrictions relating thereto), fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the Enterprise during each Fiscal Year, with the approval of the Council with respect to rates, which are at least sufficient, after making allowances for contingencies and errors in the estimates, to yield Net Revenues sufficient to pay the following amounts in the following order of priority: (1) the Aggregate Annual Debt Service on any Outstanding Bonds and the payments due under the State Loan required to be funded by the City in such Fiscal Year as required by the Indenture or any Supplemental Indenture with respect to the Outstanding Bonds, and the State Loan; (ii) the required deposits to any Debt Service Reserve Fund which may be established by a Supplemental Indenture (iii) the reimbursement owed to any Credit Provider or Liquidity Provider as required by a Supplemental Indenture and the related Credit Facility and /or Liquidity Facility, and any Debt Service Reserve Fund Surety Policy; (iv) the interest on and principal of any indebtedness required to be funded during such Fiscal Year other than for Outstanding Bonds, but including Subordinate Obligations; (v) payments of any reserve requirement for debt service for any indebtedness other than Outstanding Bonds, but including Subordinate Obligations; and (vi) all payments required to meet any other obligations of the City which are charges, liens, encumbrances upon, or which are otherwise payable from, the Revenues during such Fiscal Year. (b) The City further agrees that it will establish, fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the Enterprise, so that during each Fiscal Year the Net Revenues, together with any amounts released from the Rate Stabilization Fund, will be equal to at least 125% of Aggregate Annual Debt Service on the A -28 6124115 CC A EN A PACKET PAGE 121 Outstanding Bonds and the State Loan. For purposes of this subsection (b), the amount of moneys on deposit in the Rate Stabilization Fund taken into account and considered Net Revenues for purposes of the calculation set forth in the Indenture will not exceed 25% of the Aggregate Annual Debt Service on the Outstanding Bonds and the State Loan in such Fiscal Year. (c) The City covenants that if Net Revenues in any Fiscal Year are less than the amount specified in paragraph (a) or (b) above, the City will retain and direct a Consultant to make recommendations as to the revision of the City's wastewater business operations and its schedule of rates, fees and charges for the services and facilities furnished by the Enterprise, and after receiving such recommendations or giving reasonable opportunity for such recommendations to be made, the City will take all lawful measures to revise the schedule of rates, fees and charges for the services and facilities furnished by the Enterprise as may be necessary to produce Net Revenues, after taking into account any permitted amounts on deposit in the Rate Stabilization Fund in accordance with paragraph (b) above, in the amount specified in paragraphs (a) and (b) above in the next succeeding Fiscal Year. (d) In the event that Net Revenues for any Fiscal Year are less than the amount specified in paragraph (a) or (b) above, but the City promptly has taken prior to or during the next succeeding Fiscal Year all lawful measures to revise the schedule of rates, fees and charges for the services and facilities furnished by the Enterprise as required by paragraph (c) above, such deficiency in Net Revenues will not constitute an Event of Default under the provisions of paragraph (d) under "— Defaults and Remedies — Events of Default" below. Nevertheless, if after taking the measures required by paragraph (c) above to revise the schedule of rates, fees and charges for the services and facilities furnished by the Enterprise, Net Revenues in the second succeeding Fiscal Year (as evidenced by the audited financial statements of the City for such Fiscal Year) are less than the amount specified in paragraphs (a) and (b) above, such deficiency in Net Revenues will constitute an Event of Default. Subordinate Obligations. The City may, from time to time, incur indebtedness which is subordinate to the lien of the Bonds, and which indebtedness is, in the Indenture, referred to as Subordinate Obligations. Such indebtedness will be incurred at such times and upon such terms as the City will determine; provided that: (a) any Supplemental Indenture authorizing the issuance of any Subordinate Obligations will specifically state that such lien on or security interest granted in the Net Revenues is junior and subordinate to the lien on and security interest in such Net Revenues and other assets granted to secure the Bonds; (b) payment of principal of and interest on such Subordinate Obligations will be permitted; provided that all deposits required to be made pursuant to the Indenture are then current in accordance therewith; and (c) such obligations, if a default in payment, may not be accelerated if any Bonds are outstanding. Operation and Maintenance of the Enterprise. The City covenants that the Enterprise will at all times be operated and maintained in good working order and condition and that all lawful orders of any governmental agency or authority having jurisdiction in the premises will be complied with (provided the City will not be required to comply with any such orders so long as the validity or application thereof will be contested in good faith), and that all licenses and permits necessary to construct or operate any part of A -29 6124115 CC AGENDA PACKET FACE 122 the Enterprise will be obtained and maintained and that all necessary repairs, improvements and replacements of the Enterprise will be made, subject to sound business judgment. The City will maintain the Enterprise in efficient operating condition and make such improvements, extension, enlargements, repairs and betterments to the Enterprise as may be necessary or advisable for its economical and efficient operation at all times and to supply reasonable public and private demands for Enterprise services within the Service Area. The City will employ experienced and competent personnel to manage the Enterprise. The City will, from time to time, duly pay and discharge, or cause to be paid and discharged, except to the extent the imposition or payment thereof is being contested in good faith by the City, all taxes (if any), assessments or other governmental charges lawfully imposed upon the Enterprise or upon any part thereof, or upon the Revenues or Net Revenues, when the same will become due, as well as any lawful claim for labor, materials or supplies or other charges which, if unpaid, might by law become a lien or charge upon the Revenues or Net Revenues or the Enterprise or any part thereof constituting part of the Enterprise. Accounts. The City covenants that it will keep and provide accurate books and records of account showing all Revenues received and all expenditures of the City and that it will keep or cause to be kept accurate books and records of account showing all moneys, Revenues, accounts and funds (including the Wastewater Treatment Fund and all funds and accounts provided for in the Indenture) which are or will be in the control or custody of the City; and that all such books and records pertaining to the Enterprise will be open upon reasonable notice during business hours to the Trustee, the Credit Provider, the Liquidity Provider and to the Owners of not less than 10% of the Principal Amount of Bonds then Outstanding, or their representatives duly authorized in writing. Within 270 days after the close of each Fiscal Year, so long as any of the Bonds remain Outstanding, the City will prepare audited financial statements including a statement of the income and expenses for such Fiscal Year and a balance sheet prepared as of the close of such Fiscal Year for the City all accompanied by a certificate or opinion in writing of an independent certified public accountant of recognized standing, selected by the City, which opinion will include a statement that said financial statements present fairly in all material respects the financial position of the City and are prepared in accordance with generally accepted accounting principles. Insurance; Application of Insurance Proceeds (a) Subject, in each case, to the condition that insurance is obtainable at reasonable rates and upon reasonable terms and conditions: (1) the City will procure and maintain or cause to be procured and maintained commercial insurance or provide Qualified Self- Insurance with respect to the facilities constituting the Enterprise and public liability insurance in the form of commercial insurance or Qualified Self- Insurance and, in each case, in such amounts and against such risks as are, in the judgment of the City, prudent and reasonable taking into account, but not being controlled by, the amounts and types of insurance or self - insured programs provided by similar municipal wastewater systems; and (ii) the City will send written notice to the Trustee, annually within 120 days after the close of each Fiscal Year, of any change in its insurance policies and self - insured programs then in effect with respect to the Enterprise and the operations of the City. (b) "Qualified Self- Insurance" will mean insurance maintained through a program of self - insurance or insurance maintained with a fund, company or association in which the City may have a material interest and of which the City may have control, either singly or with others. A -30 6124115 CC AGENDA PACKET FACE 123 Each plan of Qualified Self- Insurance will be established in accordance with law, will provide that reserves be established or insurance acquired in amounts adequate to provide coverage which the City determines to be reasonable to protect against risks assumed under the Qualified Self - Insurance plan, including any potential retained liability in the event of the termination of such plan of Qualified Self - Insurance, and such self - insurance program will be reviewed at least once every 12 months by a Consultant who will deliver to the City a report on the adequacy of the reserves established thereunder. If the Consultant determines that such reserves are inadequate, it will make a recommendation as to the amount of reserves that should be established and maintained, and the City will comply with such recommendation unless it can establish to the satisfaction of and receive a certification from a Consultant that a lower amount is reasonable to provide adequate protection to the City. If, as a result of any event, any part of the Enterprise is destroyed or severely damaged, the City will create within the Wastewater Treatment Fund a special account and will credit the net proceeds received as a result of such event of damage or destruction to such account and such net proceeds will, within a reasonable period of time taking into account any terms under which insurance proceeds are paid and any insurance restrictions upon the use or timing of the use of insurance proceeds, be used to: (1) repair or replace the Enterprise, or portion thereof, which was damaged or destroyed, (ii) provide additional revenue - producing projects of the Enterprise, (iii) redeem Bonds, or (iv) create an escrow fund pledged to pay specified Bonds and thereby cause such Bonds to be deemed to be paid as provided in the Indenture; provided, however, that the City will first deliver to the Trustee a certificate of a Consultant showing that, after taking into account the use of the net proceeds for the redemption of such specified Bonds, the test set forth in subsection (a) of "— Revenues and Funds – Rate Covenant" above would, nevertheless, be met. Investments Moneys held by the City and /or the Trustee in the funds and accounts created and /or maintained in the Indenture and under any Supplemental Indenture will be invested and reinvested as directed by the City, in Permitted Investments subject to the restrictions set forth in the Indenture and such Supplemental Indenture and subject to the investment restrictions imposed upon the City by the laws of the State and the City's investment policy. The City will direct such investments by written certificate (which certificate will include a certification that such directions comply with the City's investment policy and upon which the Trustee may conclusively rely) of an Authorized City Representative or by telephone instruction followed by prompt written confirmation by an Authorized City Representative; in the absence of any such instructions, the Trustee will, to the extent practicable, invest in Permitted Investments specified in item (1) of the definition thereof, which includes a money market fund comprised of United States Obligations, or in a money market fund or account of the Trustee, provided it meets the requirements specified in (i) of the definition of Permitted Investments, which are Permitted Investments under State law. The Trustee will not be liable for any loss resulting from following the written directions of the City or as a result of liquidating investments to provide funds for any required payment, transfer, withdrawal or disbursement from any fund or account in which such Permitted Investment is held. The Trustee may buy or sell any Permitted Investment through its own (or any of its affiliates) investment department. The City acknowledges that to the extent regulations of the Comptroller of the Currency or such other applicable regulatory entity grants the City the right to receive brokerage confirmations of security transactions as they occur, the City specifically waives receipt of such confirmations to the extent A -31 6124115 CC AGENDA PACKET FACE 124 permitted by law. The Trustee will furnish the City periodic cash transaction statements which include detail for all investment transactions made by the Trustee under the Indenture. Defeasance Bonds or portions thereof (such portions to be in integral multiples of the authorized denomination) which have been paid in full or which are deemed to have been paid in full will no longer be secured by or entitled to the benefits of the Indenture except for the purposes of payment from moneys, Government Obligations or obligations described in item (b) of the definition of Permitted Investments held by the Trustee or a Paying Agent for such purpose. When all Bonds which have been issued under the Indenture and all Repayment Obligations have been paid in full or are deemed to have been paid in full, and all other sums payable thereunder by the City, including all necessary and proper fees, compensation and expenses of the Trustee, the Registrar, the Paying Agent, each Credit Provider and each Liquidity Provider, have been paid or are duly provided for, then the right, title and interest of the Trustee in and to the pledge of Net Revenues and the other assets pledged to secure the Bonds under the Indenture will thereupon cease, terminate and become void, and thereupon the Trustee will cancel, discharge and release the Indenture, will execute, acknowledge and deliver to the City such instruments as will be requisite to evidence such cancellation, discharge and release and will assign and deliver to the City any property and revenues at the time subject to the Indenture which may then be in the Trustee's possession, except funds or securities in which such funds are invested and are held by the Trustee or the Paying Agent for the payment of the principal of, premium, if any, and interest on the Bonds. A Bond will be deemed to be paid under this Section and for all purposes of the Indenture when payment of the principal, interest and premium, if any, either (a) will have been made or caused to be made in accordance with the terms of the Bonds and the Indenture or (b) will have been provided for, as certified to the Trustee by a nationally recognized accounting firm, by irrevocably depositing with the Trustee in trust and setting aside exclusively for such payment, (1) moneys sufficient to make such payment and /or (ii) noncallable Government Obligations or obligations described in item (b) of the definition of Permitted Investments, maturing as to principal and interest in such amounts and at such times as will insure the availability of sufficient moneys to make such payment. At such times as Bonds will be deemed to be paid under the Indenture, such Bonds will no longer be secured by or entitled to the benefits of the Indenture, except for the purposes of payment from such moneys, Government Obligations or obligations described in item (b) of the definition of Permitted Investments. Any deposit under clause (b) of the foregoing paragraph will be deemed a payment of such Bonds. Once such deposit will have been made, the Trustee will notify all holders of the affected Bonds that the deposit required by (b) above has been made with the Trustee and that such Bonds are deemed to have been paid in accordance with this Section. Notice of redemption will be required at the time of such defeasance or prior to such date as may be required by the Supplemental Indenture under which such Bonds were issued. The City may at any time, prior to issuing such notice of redemption as may be required by the Supplemental Indenture under which such Bonds were issued, modify or otherwise change the scheduled date for the redemption or payment of any Bond deemed to be paid under the terms of the foregoing paragraph in accordance with the terms of the Bonds or the Indenture subject to (A) receipt of an approving opinion of nationally recognized Bond Counsel that such action will not adversely affect the tax - exemption of any Bond or Bonds then Outstanding and (B) receipt of an approving opinion of a nationally recognized accounting firm that there are sufficient moneys and /or Government Obligations and /or obligations described in item (b) of the definition of Permitted Investments to provide for the payment of such Bonds. Notwithstanding anything in this Section to the contrary, moneys from the trust or escrow established for the defeasance of Bonds may be withdrawn and delivered to the City so long as the requirements of subparagraphs (A) and (B) above are met prior to or concurrently with any such withdrawal. A -32 6124115 CC A EN A PACKET PAGE 12.E In connection with the redemption or defeasance, or partial redemption or defeasance of Bonds, the City may permit, or cause to be assigned to Bonds of a single maturity, multiple CUSIP numbers. Defaults and Remedies Events of Default. Each of the following events will constitute and is referred to in the Indenture as an "Event of Default ": (a) a failure to pay the principal of or premium, if any, on any of the Bonds when the same will become due and payable at maturity or upon redemption; (b) a failure to pay any installment of interest on any of the Bonds when such interest will become due and payable; (c) a failure to pay the purchase price of any Bond when such purchase price will be due and payable upon an optional or mandatory tender date as provided in a Supplemental Indenture; (d) a failure by the City to observe and perform any covenant, condition, agreement or provision (other than as specified in paragraphs (a), (b) and (c) above that are to be observed or performed by the City and which are contained in the Indenture or a Supplemental Indenture, which failure, except for a violation under "— Revenues and Funds — Rate Covenant" above which will be controlled by the provisions set forth therein, will continue for a period of 60 days after written notice, specifying such failure and requesting that it be remedied, will have been given to the City by the Trustee, which notice may be given at the discretion of the Trustee and will be given at the written request of holders of 25% or more of the Principal Amount of the Bonds then Outstanding, unless the Trustee, or the Trustee and the holders of Bonds in a Principal Amount not less than the Principal Amount of Bonds the holders of which requested such notice, will agree in writing to an extension of such period prior to its expiration; provided, however, that the Trustee or the Trustee and the holders of such principal amount of Bonds will be deemed to have agreed to an extension of such period if corrective action is initiated by the City within such period and is being diligently pursued until such failure is corrected; (e) bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, including without limitation proceedings under Chapter 9 of the United States Bankruptcy Code, or other proceedings for relief under any federal or state bankruptcy law or similar law for the relief of debtors are instituted by or against the City and, if instituted against the City, said proceedings are consented to or are not dismissed within 60 days after such institution; or (f) a default in the payment of the State Loan. If, on any date on which payment of principal of or interest on the Bonds is due and sufficient moneys are not on deposit with the Trustee or Paying Agent to make such payment, the Trustee will give telephone notice of such insufficiency to the City. Remedies. (a) Upon the occurrence and continuance of any Event of Default, the Trustee in its discretion may, and upon the written direction of the holders of 25% or more of the Principal Amount of the Bonds then Outstanding and receipt of indemnity to its satisfaction, will, in its own name and as the trustee of an express trust: A-33 6124115 CC AGENDA PACKET FACE 126 (1) by mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Bondholders, and require the City to carry out any agreements with or for the benefit of the Bondholders and to perform its or their duties under the Act or any other law to which it is subject and the Indenture; (ii) bring suit upon the Bonds; (iii) commence an action or suit in equity to require the City to account as if it were the trustee of an express trust for the Bondholders; or (iv) by action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Bondholders. (b) The Trustee will be under no obligation to take any action with respect to any Event of Default unless the Trustee has actual knowledge of the occurrence of such Event of Default. (c) Except as otherwise provided in a Supplemental Indenture or such other agreement between the City and a Credit Provider or Liquidity Provider, in no event, upon the occurrence and continuation of an Event of Default described in Section 8.01 of the Master Indenture, will the Trustee, the Bondholders, a Credit Provider, a Liquidity Provider or any other party have the right to accelerate the payment of principal of and interest on the Bonds Outstanding. Bondholders' Right To Direct Proceedings. Anything in the Indenture to the contrary notwithstanding, holders of a majority in Principal Amount of the Bonds then Outstanding will have the right, at any time, by an instrument in writing executed and delivered to the Trustee, to direct the time, method and place of conducting all remedial proceedings available to the Trustee under the Indenture to be taken in connection with the enforcement of the terms of the Indenture or exercising any trust or power conferred on the Trustee by the Indenture; provided that such direction will not be otherwise than in accordance with the provisions of the law and the Indenture and that there will have been provided to the Trustee security and indemnity satisfactory to the Trustee against the costs, expenses and liabilities to be incurred as a result thereof by the Trustee. Limitation on Right To Institute Proceedings. No Bondholder will have any right to institute any suit, action or proceeding in equity or at law for the execution of any trust or power under the Indenture, or any other remedy thereunder or on such Bonds, unless such Bondholder or Bondholders previously will have given to the Trustee written notice of an Event of Default as described above provided and unless also holders of 25% or more of the Principal Amount of the Bonds then Outstanding will have made written request of the Trustee to do so, after the right to institute such suit, action or proceeding under "— Defaults and Remedies — Remedies" above will have accrued, and will have afforded the Trustee a reasonable opportunity to proceed to institute the same in either its or their name, and unless there also will have been offered to the Trustee security and indemnity satisfactory to it against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee will not have complied with such request within a reasonable time; and such notification, request and offer of indemnity are declared in every such case, at the option of the Trustee, to be conditions precedent to the institution of such suit, action or proceeding; it being understood and intended that no one or more of the Bondholders will have any right in any manner whatever by their action to affect, disturb or prejudice the security of the Indenture, or to enforce any right thereunder or under the Bonds, except in the manner provided in the Indenture, and that all suits, actions and proceedings at law or in equity will be instituted, had and maintained in the manner provided for in the Indenture and for the equal benefit of all Bondholders. A -34 6124115 CC AGENDA PACKET FACE 127 Application of Moneys. If an Event of Default will occur and be continuing, all amounts then held or any moneys received by the Trustee, by any receiver or by any Bondholder pursuant to any right given or action taken under the provisions of the Indenture (which will not include moneys provided through a Credit Facility or a remarketing of the Bonds, which moneys will be restricted to the specific use for which such moneys were provided), after payment of the costs and expenses of the proceedings resulting in the collection of such moneys by the Trustee or by any receiver and of the expenses, liabilities and advances incurred or made by the Trustee in connection with its performance of its powers and duties under the Indenture and any Supplemental Indenture (including attorneys' fees and disbursements), will be applied as follows: (a) first, to the payment to the persons entitled thereto of all installments of interest then due on the Bonds, with interest on overdue installments, if lawful, at the rate per annum as provided in any Supplemental Indenture, as the case may be, in the order of maturity of the installments of such interest and, if the amount available will not be sufficient to pay in full any particular installment of interest, then to the payment ratably, according to the amounts due on such installment, and (b) second, to the payment to the persons entitled thereto of the unpaid principal amount of any of the Bonds which will have become due with interest on such Bonds at such rate as provided in a Supplemental Indenture from the respective dates upon which they became due and, if the amount available will not be sufficient to pay in full Bonds on any particular date determined to be the payment date, together with such interest, then to the payment ratably, according to the amount of principal and interest due on such date, in each case to the persons entitled thereto, without any discrimination or privilege. Whenever moneys are to be applied pursuant to the provisions of this Section, such moneys will be applied at such times, and from time to time, as the Trustee will determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee will apply such funds, it will fix the date (which will be an interest Payment Date unless it will deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal and interest to be paid on such date will cease to accrue. The Trustee will give notice of the deposit with it of any such moneys and of the fixing of any such date by Mail to all Bondholders and will not be required to make payment to any Bondholder until such Bonds will be presented to the Trustee for appropriate endorsement or for cancellation if fully paid. Trustee, Paying Agent and Co- Paying Agents; Registrar Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee will exercise its rights and powers and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) The Trustee will perform the duties set forth in the Indenture and no implied duties or obligations will be read into the Indenture against the Trustee. (c) Except during the continuance of an Event of Default, in the absence of any negligence on its part or any knowledge to the contrary, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed, upon certificates or opinions furnished to the Trustee and conforming to the requirements of the Indenture. However, the Trustee will examine the certificates and opinions to determine whether they conform to the requirements of the Indenture. (d) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: A-35 6124115 CC AGENDA PACKET FACE 128 (1) the Trustee will not be liable for any error of judgment made in good faith by a Responsible Officer unless the Trustee was negligent in ascertaining the pertinent facts; and (ii) the Trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it from Bondholders or the City in the manner provided in the Indenture. (e) The Trustee will not, by any provision of the Indenture be required, other than for drawings under the Liquidity Facility making payments to Bondholders from available funds, effecting any mandatory tenders, redemption or accelerations, to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under the Indenture if repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. The Trustee will be under no obligation to exercise any of the rights or powers vested in it by the Indenture at the request or direction of any of the holders of the Bonds or any Credit Provider or Liquidity Provider, unless such holders, Credit Providers and Liquidity Providers, as applicable, will have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. (f) Every provision of the Indenture that in any way relates to the Trustee is subject to all the paragraphs of this Section. Rights of Trustee. Subject to the above Section, the Trustee will be protected and will incur no liability in acting or proceeding in good faith upon any resolution, notice, telegram, facsimile, request, consent, waiver, certificate, direction, statement, affidavit, voucher, bond, requisition or other paper or document which it will in good faith believe to be genuine and to have been passed or signed by the proper authority or person or to have been prepared and furnished pursuant to any of the provisions of the Indenture, and the Trustee will be under no duty to make investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements. The Trustee may rely upon the calculations provided by the entity preparing the calculation of Aggregate Annual Debt Service in connection with its responsibility to ensure there exists in the Debt Service Reserve Funds the required amounts. The Trustee may consult with counsel with regard to legal questions, and the opinion of such counsel will be full and complete authorization and protection in respect of any action taken or suffered by the Trustee under the Indenture in good faith in accordance therewith. Whenever in the administration of the trusts or duties imposed upon it by the Indenture the Trustee will deem it necessary that a matter be proved or established prior to taking or not taking any action thereunder, such matter may be deemed to be conclusively proved and established by a certificate of the City, and such certificate will be full warrant to the Trustee for any action taken or not taken by it in good faith under the provisions of the Indenture in reliance on such certificate. The Trustee makes no representation as to the sufficiency or validity of the Indenture or of any Bonds, or in respect of the security afforded by the Indenture. The Trustee will not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it under the Indenture, except for its own negligence or willful misconduct. A-36 6124115 CC AGENDA PACKET FACE 129 In the performance of its duties under the Indenture, the Trustee may employ attorneys, agents and receivers and will not be liable for any actions of such attorneys, agents and receivers to the extent selected by it with reasonable care. The Trustee will have no responsibility with respect to any information, statement or recital whatsoever in any official statement, offering memorandum or other disclosure material prepared or distributed with respect to the Bonds. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Bonds and may otherwise deal with the City with the same rights it would have if it were not Trustee. Any Paying Agent or other agent may do the same with like rights. Notice of Defaults. If (a) an Event of Default has occurred or (b) an event has occurred which with the giving of notice and /or the lapse of time would be an Event of Default and, with respect to such events for which notice to the City is required before such events will become Events of Default, such notice has been given, then the Trustee will promptly, after obtaining actual notice of such Event of Default or event described in (b) above, give notice thereof to each Bondholder. Except in the case of a default in payment or purchase on any Bonds, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Bondholders. Eligibility of Trustee. The Indenture will always have a Trustee that is a trust company, banking association or a bank having the powers of a trust company and is organized and doing business under the laws of the United States or any state or the District of Columbia, is authorized to conduct trust business under the laws of the State, is subject to supervision or examination by United States, state or District of Columbia authority and has (together with its corporate parent) a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. Replacement of Trustee. The Trustee may resign by notifying the City in writing prior to the proposed effective date of the resignation. The holders of a majority in Principal Amount of the Bonds may remove the Trustee by notifying the removed Trustee and may appoint a successor Trustee with the City's consent. The City may remove the Trustee, by notice in writing delivered to the Trustee at least 60 days prior to the proposed removal date; provided, however, that the City will have no right to remove the Trustee during any time when an Event of Default has occurred and is continuing or when an event has occurred and is continuing or condition exists which with the giving of notice or the passage of time or both would be an Event of Default. No resignation or removal of the Trustee under this Section will be effective until a new Trustee has taken office and delivered a written acceptance of its appointment to the retiring Trustee and to the City. Immediately thereafter, the retiring Trustee will transfer all property held by it as Trustee to the successor Trustee, the resignation or removal of the retiring Trustee will then (but only then) become effective and the successor Trustee will have all the rights, powers and duties of the Trustee under the Indenture. If the Trustee resigns or is removed or for any reason is unable or unwilling to perform its duties under the Indenture, the City will promptly appoint a successor Trustee. If a Trustee is not performing its duties under the Indenture and a successor Trustee does not take office within 60 days after the retiring Trustee delivers notice of resignation or the City delivers notice of removal, the retiring Trustee, the City or the holders of a majority in Principal Amount of the Bonds may petition any court of competent jurisdiction for the appointment of a successor Trustee. A-37 6124115 CC AGENDA PACKET FACE 130 Modification of the Indenture Supplemental Indentures Not Requiring Consent of Bondholders. The City may, from time to time and at any time, without the consent of or notice to the Bondholders, execute and deliver Supplemental Indentures supplementing and /or amending the Indenture or any Supplemental Indenture as follows: (a) to provide for the issuance of a Series or multiple Series of Bonds under the provisions of " — Issuance of Series of Bonds; Supplemental Indenture; Application of Bond Proceeds" above of the Indenture and to set forth the terms of such Bonds and the special provisions which will apply to such Bonds; (b) to cure any formal defect, omission, inconsistency or ambiguity in, or answer any questions arising under, the Indenture or any Supplemental Trust Indenture, provided such supplement or amendment is not materially adverse to the Bondholders; (c) to add to the covenants and agreements of the City in the Indenture or any Supplemental Indenture other covenants and agreements, or to surrender any right or power reserved or conferred upon the City, provided such supplement or amendment will not adversely affect the interests of the Bondholders; (d) to confirm, as further assurance, any interest of the Trustee in and to the pledge of Net Revenues or in and to the funds and accounts held by the Trustee or in and to any other moneys, securities or funds of the City provided pursuant to the Indenture or to otherwise add additional security for the Bondholders; (e) to evidence any change made in the terms of any Series of Bonds if such changes are authorized by the Supplemental Indenture at the time the Series of Bonds is issued and such change is made in accordance with the terms of such Supplemental Indenture; (f) to comply with the requirements of the Trust Indenture Act of 1939, as amended from time to time; (g) to modify, alter, amend or supplement the Indenture or any Supplemental Indenture in any other respect which is not materially adverse to the Bondholders; (h) to provide for uncertificated Bonds or for the issuance of coupons and bearer Bonds or Bonds registered only as to principal; (1) to qualify the Bonds or a Series of Bonds for a rating or ratings from a Rating Agency; (j) to accommodate the technical, operational and structural features of Bonds which are issued or are proposed to be issued or of a Program which has been authorized or is proposed to be authorized, including, but not limited to, changes needed to accommodate commercial paper, auction bonds, swaps, variable rate or adjustable rate bonds, discounted or compound interest bonds or other forms of indebtedness which the City from time to time deems appropriate to incur; (k) to accommodate the use of a Credit Facility or Liquidity Facility for specific Bonds or a specific Series of Bonds; and A-38 6124115 CC AGENDA PACKET FACE 131 (1) to comply with the requirements of the Code as are necessary, in the opinion of Bond Counsel, to prevent the federal income taxation of the interest on the Bonds, including, without limitation, the segregation of Revenues into different funds. Before the City will, pursuant to this Section, execute any Supplemental Indenture, there will have been delivered to the City and Trustee an opinion of Bond Counsel to the effect that such Supplemental Indenture: (y) is authorized or permitted by the Indenture, the Act and other applicable law, complies with their respective terms, will, upon the execution and delivery thereof, be valid and binding upon the City in accordance with its terms and (z) will not cause interest on any of the Bonds which is then excluded from gross income of the recipient thereof for federal income tax purposes to be included in gross income for federal income tax purposes. The opinion of Bond Counsel required pursuant to clause (z) in the preceding sentence will not be required for a Supplemental Indenture executed and delivered in accordance with the Indenture. Supplemental Indenture Requiring Consent of Bondholders. (a) Except for any Supplemental Indenture entered into pursuant to the Indenture, the holders of not less than a majority in aggregate Principal Amount of the Bonds then Outstanding will have the right from time to time to consent to and approve the execution by the City of any Supplemental Indenture deemed necessary or desirable by the City for the purposes of modifying, altering, amending, supplementing or rescinding, in any particular, any of the terms or provisions contained in the Indenture or in a Supplemental Indenture; provided, however, that, unless approved in writing by the holders of all the Bonds then Outstanding or unless such change affects less than all Series of Bonds and the following subsection (b) is applicable, nothing contained in the Indenture will permit, or be construed as permitting, (1) a change in the scheduled times, amounts or currency of payment of the principal of, interest on or Accreted Value of any Outstanding Bonds or (ii a reduction in the principal amount or redemption price of any Outstanding Bonds or the rate of interest thereon; and provided that nothing contained in the Indenture, including the provisions of paragraph (b) below, will, unless approved in writing by the holders of all the Bonds then Outstanding, permit or be construed as permitting (iii) the creation of a lien (except as expressly permitted by the Indenture) upon or pledge of the Net Revenues created by the Indenture, ranking prior to or on a parity with the claim created by the Indenture, (iv) except with respect to additional security which may be provided for a particular Series of Bonds, a preference or priority of any Bond or Bonds over any other Bond or Bonds with respect to the security granted therefor under the Granting Clauses of the Indenture, or (v) a reduction in the aggregate Principal Amount of Bonds the consent of the Bondholders of which is required for any such Supplemental Indenture. (b) The City may, from time to time and at any time, execute a Supplemental Indenture which amends the provisions of an earlier Supplemental Indenture under which a Series or multiple Series of Bonds were issued. If such Supplemental Indenture is executed for one of the purposes set forth in the Indenture, no notice to or consent of the Bondholders will be required. If such Supplemental Indenture contains provisions which affect the rights and interests of less than all Series of Bonds Outstanding, is not applicable, then this subsection (b) rather than subsection (a) above will control and, subject to the terms and provisions contained in this subsection (b), the holders of not less than 51% in aggregate Principal Amount of the Bonds of all Series which are affected by such changes will have the right from time to time to consent to any Supplemental Indenture deemed necessary or desirable by the City for the purposes of modifying, altering, amending, supplementing or rescinding, in any particular, any of the terms or provisions contained in such Supplemental Indenture and affecting only the Bonds of such Series; provided, however, that, unless approved in writing by the holders of all the Bonds of all the affected Series A-39 6124115 CC A EN A PACKET PAGE 132 then Outstanding, in the Indenture will permit, or be construed as permitting, (1) a change in the scheduled times, amounts or currency of payment of the principal of, interest on or Accreted Value of any Outstanding Bonds of such Series or (ii) a reduction in the principal amount or redemption price of any Outstanding Bonds of such Series or the rate of interest thereon. Nothing in the Indenture will be construed as making necessary the approval by Bondholders of the adoption of any Supplemental Indenture for the benefit of particular Series of Bonds, security in addition to the pledge of the Net Revenues. (c) If at any time the City will desire to enter into any Supplemental Indenture for any of the purposes of this Section, the City will cause notice of the proposed execution of the Supplemental Indenture to be given by Mail to all Bondholders or, under paragraph (b) above, all Bondholders of the affected Series. Such notice will briefly set forth the nature of the proposed Supplemental Indenture and will state that a copy thereof is on file at the office of the City for inspection by all Bondholders and it will not be required that the Bondholders approve the final form of such Supplemental Indenture but it will be sufficient if such Bondholders approve the substance thereof (d) The City may execute and deliver such Supplemental Indenture in substantially the form described in such notice, but only if there will have first been delivered to the City (1) the required consents, in writing, of Bondholders and (ii) the opinion of Bond Counsel required under the Indenture. (e) If Bondholders of not less than the percentage of Bonds required by this Section will have consented to and approved the execution and delivery thereof as provided in the Indenture, no Bondholders will have any right to object to the adoption of such Supplemental Indenture, or to object to any of the terms and provisions contained therein or the operation thereof, or in any manner to question the propriety of the execution and delivery thereof, or to enjoin or restrain the City from executing the same or from taking any action pursuant to the provisions thereof (f) Notwithstanding subsections (c) through (e) above, the City may, at its discretion, execute and deliver such Supplemental Indenture which contains such modifications, alterations, amendments or supplements prior to receipt of the required consents in writing, of the Bondholders; provided, that such Supplemental Indenture or the applicable provisions of such Supplemental Indenture subject to the consents of the Bondholders will not become effective until such time as there has been delivered to the City (1) the required consents, in writing, of Bondholders and (ii) the opinion of Bond Counsel. In the event the City decides to execute and deliver a Supplemental Indenture in accordance with this subsection (f), the notice required in subsection (c) will make reference to a final and executed Supplemental Indenture as opposed to a proposed Supplemental Indenture. Credit Providers If a Credit Facility is provided for a Series of Bonds or for specific Bonds, the City may in the Supplemental Indenture under which such Bonds are issued, provide any or all of the following rights to the Credit Provider as the City will deem to be appropriate: (a) the right to make requests of, direct or consent to the actions of the Trustee or to otherwise direct proceedings all as provided in the Indenture to the same extent and in place of the Owners of the Bonds which are secured by the Credit Facility and for such purposes the Credit Provider will be deemed to be the holder of such Bonds; A -40 6124115 CC AGENDA PACKET FACE 133 (b) the right to act in place of the Owners of the Bonds which are secured by the Credit Facility for purposes of removing a Trustee or appointing a Trustee under the Indenture; and (c) the right to consent to Supplemental Indentures to the same extent and in place of the holders of the Bonds, which require the consent of the holders of not less than 51% of the aggregate Principal Amount of the Bonds, entered into pursuant to "— Modification of the Indenture — Supplemental Indenture Requiring Consent Bondholders," except with respect to any amendments described in subsections (a)(i) through (v) in "— Modification of the Indenture — Supplemental Indenture Requiring Consent Bondholders," and subsections (b)(i) or (ii) in "- Modification of the Indenture — Supplemental Indenture Requiring Consent Bondholders," which consent of the actual Bondholders will still be required, of the Indenture to the same extent and in place of the holders of the Bonds which are secured by the Credit Facility and for such purposes the Credit Provider will be deemed to be the holder of such Bonds. The rights granted to any such Credit Provider, with respect to the provisions of the Indenture will be disregarded and be of no effect if the Credit Provider is in default of its payment obligations under its Credit Facility FOURTH SUPPLEMENTAL TRUST INDENTURE In addition to certain information contained under the captions "THE SERIES 2015A BONDS" and "SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2015A BONDS," the following is a summary of certain provisions of the Fourth Supplemental Indenture. Such summary is only a brief description of limited provisions of such document and is qualified in its entirety by reference to the full text of the Fourth Supplemental Indenture. Terms of the Series 2015A Bonds The Fourth Supplemental Indenture sets forth the terms of the Series 2015A Bonds, most of which terms are described earlier in this Official Statement under "THE SERIES 2015A BONDS." Establishment of Funds The Fourth Supplemental Indenture establishes the following funds and accounts: the Series 2015A Debt Service Fund (the "Series 2015A Debt Service Fund ") and therein an Interest Account, a Principal Account and a Redemption Account; the Series 2015A Rebate Fund (the "Series 2015A Rebate Fund ") and therein an Earnings Account; and, the Series 2015A Costs of Issuance Fund. The 2015A Costs of Issuance Fund will be funded by the proceeds of the sale of the Series 2015A Bonds as described earlier in the Official Statement under "ESTIMATED SOURCES AND USES OF FUNDS." Series 2015A Debt Service Fund. The Trustee will deposit into the Interest Account amounts received from the City pursuant to the Master Indenture to be used to pay interest on the Series 2015A Bonds. The Trustee will also deposit into the Interest Account any other amounts deposited with the Trustee for deposit in the Interest Account or transferred from other funds and accounts for deposit therein. All amounts held at any time in the Interest Account will be held on a priority basis for the ratable security and payment of interest due on the Series 2015A Bonds in accordance with their terms and amounts due and payable by the City under any interest rate swap agreement entered into by the City A -41 6124115 CC AGENDA PACKET FACE 134 with respect to all or a portion of the Series 2015A Bonds (other than any swap termination payments and any other amounts payable thereunder which are payable and secured by a lien on Net Revenues ranking junior and subordinate to the lien of the Bonds) at any time in proportion to the amounts due or accrued with respect to each of them. Earnings on the Interest Account will be retained in such account. The Trustee will deposit into the Principal Account amounts received from the City pursuant to the Master Indenture to be used to pay principal of the Series 2015A Bonds at maturity. The Trustee will also deposit into the Principal Account any other amounts deposited with the Trustee for deposit into the Principal Account or transferred from other funds and accounts for deposit therein. On or about July 15 of each Fiscal Year, earnings on the Principal Account will be withdrawn by the Trustee and paid to the City for deposit into the Wastewater Treatment Fund unless an Event of Default exists under the Master Indenture, in which event the earnings will be retained in such account. The Trustee will deposit into the Redemption Account amounts received from the City or from other sources to be used to pay the principal of, interest and premium, if any, on Series 2015A Bonds that are to be redeemed in advance of their maturity (except redemptions occurring as a result of the operation of the mandatory sinking fund under the Fourth Supplemental Indenture, which amounts will be deposited into the Principal Account). Earnings on amounts from time to time deposited into the Redemption Account will be retained in such account or paid to the City for deposit into the Wastewater Treatment Fund in accordance with instructions given to the Trustee by an Authorized City Representative at the time of such deposit. The Series 2015A Debt Service Fund will be invested and reinvested as directed by the City in Permitted Investments. Tax Covenants Series 2015A Rebate Fund. The City hereby agrees that it will enter into the Tax Certificate and will, pursuant to this Fourth Supplemental Indenture, create the Series 2015A Rebate Fund, which fund will be funded if so required under the Tax Certificate and amounts in such Series 2015A Rebate Fund will be held and disbursed in accordance with the Tax Certificate. Preservation of Tax Exemption. (a) The City will comply with those covenants and agreements set forth in the Tax Certificate. (b) The City will not use or permit the use of any proceeds of Series 2015A Bonds or any other funds of the City held by the Trustee under the Fourth Supplemental Indenture, allocable to the Series 2015A Bonds, directly or indirectly, to acquire any securities or obligations, and will not use or permit the use of any amounts received by the City or the Trustee with respect to the Series 2015A Bonds in any manner, and will not take or permit to be taken any other action or actions, which would cause any Series 2015A Bond to be "federally guaranteed" within the meaning of Section 149(b) of the Code or an "arbitrage bond" within the meaning of Section 148 of the Code and applicable regulations promulgated from time to time thereunder and under Section 103(c) of the Code. The City will observe and not violate the requirements of Section 148 of the Code and any such applicable regulations. In the event the City is of the opinion that it is necessary to restrict or limit the yield on the investment of money held by the Trustee or to use such money in certain manners, in order to avoid the Series 2015A Bonds from being considered "arbitrage bonds" within the meaning of Section 148 of the Code and the regulations thereunder as such may be applicable to the Series 2015A Bonds at such time, the City will issue to the Trustee a certificate to such effect together with appropriate instructions, in which event the Trustee will A -42 6124115 CC AGENDA PACKET FACE 13.E take such action as it is directed to take to use such money in accordance with such certificate and instructions, irrespective of whether the Trustee shares such opinion. (c) The City will at all times do and perform all acts and things permitted by law and the Fourth Supplemental Indenture which are necessary or desirable in order to assure that interest paid on the Series 2015A Bonds will not be included in gross income for federal income tax purposes and will take no action that would result in such interest being included in gross income for federal income tax purposes. A -43 6124115 CC AGENDA PACKET FACE 136 APPENDIX B CITY OF BAKERSFIELD ECONOMIC, FINANCIAL, AND DEMOGRAPHIC INFORMATION General The City of Bakersfield (the "City ") is located in Kern County, California (the "County "), at the southern end of the San Joaquin Valley, approximately 110 miles north of Los Angeles and 290 miles south of San Francisco. The City includes over 150 square miles of land and an additional 162 square miles of land area is located within the City's sphere of influence. The City is a regional center for industry, government, transportation, retail trade, medical services, and oil field operations. Major manufacturing activities include iron and steel fabrication, plastic foam products, food products, petroleum refining, and textiles. Bakersfield is one of the leading convention centers in the state and is the commercial hub of the County. As the County seat, it is the location of many county, state, and federal offices. The metropolitan area has expanded considerably beyond the City limits. As of January 1, 2015, the estimated population of the County was 874,264 and the estimated population of the City was 369,505, according to the California Department of Finance. City Government The City was incorporated on January 11, 1898, under the general laws of the State. The City is a charter city with a council/manager form of government. The City Council is comprised of seven council members, elected by ward on a staggered basis for a term of four years. The mayor is directly elected for a four -year term. The council appoints the City Attorney and the City Manager. There are approximately 1,541 approved City employee positions, including 211 general government employees, 324 public works employees, 177 firefighters, 22 civilians who work in fire protection, 403 police officers, 147 civilians who work with the police department, 107 employees who work in refuse collection, and 150 employees who work with community services. Revenues, Expenditures, and Fund Balances The accounting records of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. Funds are grouped into governmental funds, proprietary funds, and fiduciary funds. The governmental funds include (a) the General Fund of the City, (b) special revenue funds, which are used to account for the proceeds of specific revenue sources or to finance specified activities as required by law or administrative regulation, (c) debt service funds, which are used to account for the accumulation of resources for, and the payment of, general long -term debt principal, interest, and related costs, and (d) capital projects funds, which are used to account for financial resources to be used for the acquisition or construction of major capital facilities other than those financed primarily through user charges. The proprietary funds include (1) enterprise funds, which are used to account for operations that provide goods or services to the general public on a continuing basis and are financed primarily through user charges, and (ii) internal service funds, which are used to account for the financing of goods or services provided by one department of the City to other departments on a cost reimbursement basis. The fiduciary funds include trust and agency funds, which are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governmental I� 6124115 CC A EN A PACKET PAGE 137 units or other funds. They include the pension trust fund and agency funds. Account groups record fixed assets used in governmental type operations and long -term liabilities expected to be financed from governmental funds. All governmental fund types and agency funds are accounted for using the modified - accrual basis of accounting. Under the modified - accrual basis, revenues are recognized when they become measurable and expenditures are recognized when materials and services are received. Taxpayer- assessed income, gross receipts, and sales taxes are considered "measurable" when in the hands of intermediary collecting governments and are therefore recognized as revenue at that time. Property taxes are recognized as revenue in the fiscal year during which they are levied, adjusted for amounts considered to be collectible more than 60 days beyond the fiscal year -end or ultimately uncollectible. Those revenues susceptible to accrual are property taxes, franchise taxes, special assessments, licenses, interest revenue, and charges for services. Sales taxes collected and held by the State at year end on behalf of the government also are recognized as revenue. Fines and permits are not susceptible to accrual because generally they are not measurable until received in cash. Expenditures are generally recognized under the modified - accrual basis of accounting when the related fund liability is incurred. An exception is interest on general long -term debt, which is not accrued but is expensed when due. Proceeds from issuance of long -term debt are recognized as other financing sources when received and repayments are recognized as expenditures when due. All proprietary fund types and pension trust funds are accounted for using the accrual basis of accounting. The revenues of these funds are recognized when they are earned, and their expenses are recognized when they are incurred. Unbilled service revenues, which are not significant, are not recognized as revenues. The City Charter requires an annual audit of the books of account, financial records, and transactions of the City by an independent certified public accountant selected by the City Council. See also "APPENDIX C — City of Bakersfield Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014." Budgetary Process The fiscal year of the City begins on the first day of July of each year and ends on the 30th day of June of the following year (each, a "Fiscal Year "). At such date as the City Manager determines, each department head must furnish to the City Manager an estimate of revenues and expenditures for such department for the ensuing Fiscal Year, detailed in such manner as may be prescribed by the City Manager. In preparing the proposed budget, the City Manager reviews the estimates, holds conferences thereon with the respective department heads, and revises the estimates as he deems advisable. At least 30 days prior to the beginning of each Fiscal Year, the City Manager submits to the City Council the proposed operating budget for the Fiscal Year. The operating budget includes proposed expenditures and the means of financing them. After reviewing and making such revisions as it deems advisable, the City Council, upon recommendation by the City Manager, sets the time for the holding of a public hearing thereon, and the City Manager causes to be published a notice thereof not less than 10 days prior to the hearing date. Copies of the proposed budget are available for inspection by the public in the office of the City Clerk at least 10 days prior to the hearing. At the conclusion of the public hearing, the City Council further considers the proposed budget and makes any revision thereof that it deems advisable. On or before June 30, the City Council adopts the 6124115 CC AGENDA PACKET FACE 138 budget with revisions, if any, through the passage of a resolution. Budgets are adopted for all governmental fund types and are prepared on a basis consistent with generally accepted accounting principles. From the effective date of the budget, the several amounts stated as proposed expenditures become appropriated to the several departments, offices and agencies for the objects and purposes named, provided that the City Manager may transfer budgeted amounts between departments within any fund and approve reductions of budgeted amounts. All appropriations lapse at the end of the Fiscal Year to the extent that they have not been expended or lawfully encumbered. Encumbered amounts are reappropriated in the following Fiscal Year budget. At any City Council meeting after the adoption of the budget, the City Council may amend or supplement the budget by the affirmative vote of the City Council. The City Council employs, at the beginning of each Fiscal Year, an independent certified public accountant who, at such time or times as specified by the City Council, at least annually, and at such other times as he shall determine, examines the books, records, inventories and reports of all officers and employees who receive, control, handle, or disburse public funds and of all such other officers, employees, or departments as the City Council may direct. As soon as practicable after the end of the Fiscal Year, a final audit and report is submitted by such accountant to the City Council and certain City officers and made available for public inspection, and a copy of the financial statements as of the close of the Fiscal Year is published. Budgetary Controls The City employs budgetary controls to ensure compliance with legal provisions applicable to the annual appropriated budget approved by the City Council. Project length financial plans are adopted for the capital projects funds. The level of budgetary control is established at the fund level. The City also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Unencumbered amounts lapse at year -end. However, encumbrances and certain capital projects are re- appropriated as part of the following year's budget. The City's Fiscal Year 2014 -15 appropriations limit established as required by State statute is $328,495,244. For a discussion of the City's budgetary controls, see "APPENDIX C — City of Bakersfield Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014." Investment Policy of the City The City Council annually adopts and approves a policy with respect to the investment activities of the City and its related entities. Idle cash in all funds is pooled for investment purposes except tax - exempt bond proceeds, which are separated for arbitrage record keeping as required by federal tax law, and the Fireman's Relief and Pension Fund, which is administered separately by the City. The investment policy is intended to provide guidelines for the prudent investment of the City's temporary idle cash, and outline the policies for maximizing the efficiency of the City's cash management system. The ultimate goal is to enhance the economic status of the City while protecting the safety of its financial assets. The City's present investment policy (the "Investment Policy "), which was adopted by the City Council on December 10, 2014, is summarized below: Introduction. The Investment Policy is intended to provide guidelines for the prudent investment of the City's temporary idle cash, and outline the policies for maximizing the efficiency of the City's cash management system. It is the policy of the City to invest public funds in a manner which will provide I� 6124115 CC AGENDA PACKET FACE 139 safety of principal and at least a market rate of return while meeting the daily cash flow demands of the City. Investments will conform to all statutes governing the investment of public funds. The primary goals of the Investment Policy are: To assure compliance with all federal, State and local laws governing the investment of public funds under the control of the City Treasurer. To maintain the principal value of financial assets and ensure ample liquidity to meet operating expenditures. • Within the constraints of safety and liquidity, and within the parameters of the Investment Policy, generate a market rate of return. The ultimate goal is to enhance the economic status of the City while protecting the safety of its financial assets. Scope. The Investment Policy applies to the investment activities of the City and related entities. Idle cash in all funds is pooled for investment purposes except tax exempt bond proceeds, which are separated for arbitrage record keeping as required by federal tax law, and the Firemen's Disability and Retirement Fund, which is administered separately under the City of Bakersfield Municipal Code Section 2.92. Other Post - Employment Benefits (OPEB) are administered by a separate investment policy per Resolution 008 -07. Investments made on a pooled basis include moneys of the City, the Agency, and the Authority. The pooled funds are accounted for in the City's Comprehensive Annual Financial Report ( "CAFR ") and include: OXX General Funds IXX Special Revenue Funds 2XX Debt Service Funds 3XX Capital Project Funds 4XX Enterprise Funds 5XX Internal Service Funds 6XX Fiduciary- Agency Funds Any new fund created, unless specifically exempted. All debt issue proceeds will be invested in accordance with the associated trust indenture, and in such a manner that facilitates arbitrage rebate calculations. Prudence. Investments shall be made in the context of the "prudent person" standard: Investments shall be made with judgment and care, under circumstance then prevailing which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. The prudent investment diversification for the City's temporary idle cash vs. the Firemen's Disability and Retirement Fund ( "FDRF ") is different. Up to 40% of the retirement fund may be invested in securities of a single agency of the four double -A rated United States Government Agencies authorized in the Investment Policy. This exception to investment diversification among the highest I: 6124115 CC A GENDA PACKET PA GE 140 quality securities is deemed prudent and necessary in order to increase the available options for keeping retirement funds fully invested at or above the four percent actuarial rate of return. Objective. Criteria for selecting investments and the order of priority are: • Safety - Safety of principal is the foremost objective of the investment program. The City only operates in those investments that are considered very safe. The City shall seek to preserve principal by mitigating the two types of risk, credit risk and market risk. • Credit Risk - Potential loss due to the failure of an issuer of a security. Market Risk - Potential decrease in the value of securities due to changes in the general level of interest rates. • Liquidity - Liquidity refers to the "ability to easily sell" at any moment in time with a minimal risk of losing some portion of principal and interest. Liquidity is an important investment quality should the need for cash occur unexpectedly. • Yield -Yield is the potential dollar earnings an investment can provide and is sometimes described as the rate of return. Delegation of Authority. In accordance with the City's Charter, Municipal Code, and subsequent resolutions, the City Treasurer is authorized to invest the City's funds in accordance with California Government Code Section 53600 et seq. The City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. Ethics and Conflicts of Interest. All officials involved with the City's investment program shall exercise their fiduciary responsibly as custodians of the public trust. The City Treasurer, or when appropriate the Treasury Supervisor, shall avoid any transactions that might impair public confidence in the City's ability to manage the investment of public funds in an effective manner. The City Treasurer, Treasury Supervisor, or any other official charged with the responsibility of making investment decisions, shall have no vested interest in any investment being made involving public funds of the City, and shall gain no financial benefit from such investment decisions. Authorized Broker - Dealers and Banks. All financial institutions that desire to do business with the City shall be evaluated by the City Treasurer to determine if they are adequately capitalized, meet California Government Code requirements, and agree to abide by the conditions set forth in the Investment Policy. Whenever reasonable and in keeping with Government Code, investments are placed locally. Broker - dealers are investigated to determine if there is pending legal action against the firm or the individual broker who would be the City's contact and that the firm offers securities appropriate to the City's needs. All broker- dealers, which may include "primary" dealers or regional dealers that qualify under Securities & Exchange Commission Rule 15c3 -1 (Uniform Net Capital Rule), who desire to become authorized bidders for City investment transactions must supply the City Treasurer with the following: I� 6124115 CC A EN A PACKET PAGE 141 • Current audited financial statements • Account authorization forms • Proof of National Association of Securities Dealers certification • Completed broker /dealer questionnaire • Certification of having read and agreement to abide by the Investment Policy All banks that desire to become authorized bidders for time certificates of deposit ( "TCD ") must be a qualified public depository as established by State law and supply the City Treasurer with the following: • Current audited financial statements • Depository contracts • A copy of the latest Federal Deposit Insurance Corporation ( "FDIC ") call report • Certification of having read and agreement to abide by the Investment Policy Broker- dealer account authorizations and depository contracts will be executed by the City's Finance Director as required by City Charter. The City Treasurer will maintain a list of authorized broker - dealers and banks that are approved to do business with the City. An annual review of the financial condition of authorized financial institutions will be conducted by the City Treasurer. Authorized and Suitable Investments. The City's investment program is governed by California Government Code Sections 53600 et seq. Within the context of these limitations, the following investments are authorized, as further limited herein (Single Asterisk * denotes term or percentage imposed by State statute; Double Asterisk ** denotes term or percentage utilized by the City, which is more restrictive than statute): United States Treasury Bills, Notes, and Bonds United State Treasury Bills, Notes, and Bonds are securities which have the full faith and credit of the United States pledged for payment of principal and interest. Although there is no percentage limitation of the dollar amount that can be invested in these categories, the "prudent person" standard shall apply. Maturities are limited to five* years from settlement date. Treasury Bills ( "T- Bills ") are short -term debt obligations of the United States Government, issued weekly with maturities up to one year. T -Bills are considered to have virtually no credit risk and to be the most liquid short-term fixed income instrument. Prices on T -Bills are quoted on a discount basis. The difference between the discount price and the full face value paid at maturity equals the total return. Treasury Note ( "T- Notes") are initially issued by the auction process with two, five and ten year maturities. T -Notes like Bills have virtually no credit risk and have liquidity through an active secondary market. T -Notes are issued at Par ($1,000) with a coupon or fixed rate of interest. The price or market value will fluctuate above or below par depending on the coupon rate and whether interest rates are rising or falling. T -Notes mature at par. Treasury Bonds ( "T -Bonds ") are initially issued by the auction process with 30 year maturities and have characteristics similar to T- Notes. 6124115 CC A EN A PACKET PAGE 142 United States Government Agencies United States Government agencies include the Federal Farm Credit Bank System ( "FFCB "), the Federal Home Loan Bank ( "FHLB "), the Federal Home Loan Mortgage Corporation ( "FHLMC "), and the Federal National Mortgage Association ( "FNMA "). Government agencies issue debt in the form of discount notes, much like T- Bills, and notes and bonds similar to T -Notes and T- Bonds. While agency debt is not a direct obligation of the U.S. government, it is rated AA. At the time of purchase no more than 20 % ** of the portfolio may be invested in any single agency name. Maturities are limited to five* years from settlement date. Bankers Acceptance Bankers Acceptance (BA ") is a time draft or bill of exchange, issued from a letter of credit, and is normally used to finance international trade. When the accepting bank stamps "accepted" on the draft the bank guarantees payment of the draft at a specified future date and thereby creates an acceptance. BA's are considered extremely safe in that there has never been a default on a BA. BA's trade on a discount basis and may not exceed 180* days to maturity. No more than 10 % ** of the portfolio may be invested in BA's issued by any one bank. No more than 40 %* of the portfolio may be invested in this - category. Eligible BA's are those issued by banks with a short term rating of the highest letter and number rating provided for by a nationally recognized statistical- rating organization. Commercial Paper Commercial Paper ( "CP ") is a short-term promissory note. CP is sold on a discount basis. The maximum maturity is 270 days with most issued in the 30 -50 day maturity range. Eligible CP is "prime" quality of the highest letter and number rating provided for by a nationally recognized statistical- rating organization. CP is issued by domestic corporations having assets in excess of $500 million and having an A or higher rating on its debt, other than CP, as provided by Standard & Poor's Ratings Services ( "S &P ") or Moody's Investors Service, Inc. Purchases of eligible CP may not exceed 270* days to maturity. No more than 10 %* of the portfolio may be invested in CP issued by any one corporation. No more than 25 %* of the portfolio may be invested in this category. Repurchase Agreements Repurchase Agreements, commonly called " Repos," consist of two simultaneous transactions. One is the purchase of securities by an investor (City) from a bank or dealer. The other is the commitment by the bank or dealer to repurchase the securities at the same price plus interest at some mutually agreed future date. Normally the securities are U.S. Treasury notes or bonds and are held by a Federal Reserve Bank. Repos can be done with banks or dealers with which the City has entered into a master repurchase contract that specifies terms and conditions of repurchase agreements. The maturity of Repos shall not exceed 90 ** days. No more than 30 % ** of the portfolio may be invested in this category. Local Agency Investment Fund Local Agency Investment Fund ( "LAIF ") is a State - managed investment pool for local agencies within the State. Investments may be up to the maximum permitted by State law or 40 % ** of the portfolio, whichever is less. Due diligence will be exercised in monitoring the performance of LAIF on a continual basis. ICI 6124115 CC A EN A PACKET PAGE 143 Time Certificates of Deposit Time Certificates of Deposit ( "TCD's ") are similar to a savings certificate that anyone can purchase at a bank where there is a fixed rate of interest and a specified maturity date. In the public funds area, TCD's are collateralized in accordance with California Government Code and are non - negotiable. At the time of purchase no more than 10 % ** of the portfolio may be in TCD's of any one institution. Maturity is limited to five* years. No more than 40 % ** of the portfolio may be invested in this category. Section 53652 of the California Government Code also specifies that the City will have a deposit contract with each depository. Public Agency Savings Account - Demand Deposits Public Agency Savings Account - Demand Deposits are similar to a savings account that anyone can open at a bank. The interest rate is specified at the time of deposit, but is subject to change. All funds can be withdrawn on demand. Like public TCD's, public agency savings accounts are collateralized in accordance with California Government Code requirements. No more than 30 % ** of the portfolio may be invested in this category. Mntnal Frnnrls Mutual Funds are money market funds meeting criteria prescribed in California Government Code Section 53601 and related legislation. Investment in this category is limited to funds that invest in United States Government Securities and maintain a net asset value of one (daily liquidity). The purchase price of shares shall not include any commission that these companies may charge. No more than 10 %* of the portfolio may be invested in the shares of any one mutual fund. No more than 20 %* of the portfolio may be invested in this category. Mutual funds are used for the investment of bond proceeds subject to arbitrage reporting. Due diligence will be exercised in the selection and performance monitoring of mutual funds on a continual basis. City of Bakersfield Summary of Maximum Percent and Term Limitations By Investment Type: (1) Short -tern debt rating of the highest letter and number rating provided for by a nationally recognized statistical- rating organization. (2) No more than 10% of the portfolio may be invested in any one entity from these categories. (3) Highest letter and number rating provided for by a nationally recognized statistical- rating organization. Should any investment percentage and portfolio limitation be exceeded due to the unexpected fluctuation in portfolio size, the affected securities may be held to avoid losses. When market values are such that no loss is indicated, the City Treasurer shall consider restructuring the portfolio basing the decision in part on the expected length of time the portfolio will be imbalanced. I� 6124115 CC A EN A PACKET PAGE 1 Percent Term U.S. Treasury Bills, Notes and Bonds 0 to 100% 5 Years U.S. Government Agency Obligations 20% per agency 5 Years Bankers Acceptances 40% 180 Days Commercial Paper 25% 270 Days Repurchase Agreements 30% 90 Days Local Agency Investment Fund 40% N/A Time Certificates of Deposit 40% 5 Years Public Agency Demand Accounts 30% N/A Mutual Funds 20% N/A (1) Short -tern debt rating of the highest letter and number rating provided for by a nationally recognized statistical- rating organization. (2) No more than 10% of the portfolio may be invested in any one entity from these categories. (3) Highest letter and number rating provided for by a nationally recognized statistical- rating organization. Should any investment percentage and portfolio limitation be exceeded due to the unexpected fluctuation in portfolio size, the affected securities may be held to avoid losses. When market values are such that no loss is indicated, the City Treasurer shall consider restructuring the portfolio basing the decision in part on the expected length of time the portfolio will be imbalanced. I� 6124115 CC A EN A PACKET PAGE 1 Any State legislative action that further restricts allowable maturities, investment type, or percentage allocations, will be incorporated into the Investment Policy and supersede any and all previous applicable language. Unauthorized Investments. Ineligible investments are those that are not described in the Investment Policy, including but not limited to, negotiable time certificates of deposit, non - government agency medium term corporate notes, and reverse repurchase agreements. Collateralization. Collateralization will be required on two types of investments, time certificates of deposit and repurchase agreements. Investment in time certificates of deposit shall be insured up to $250,000 by the FDIC. Investments in time certificates of deposit in excess of $250,000 shall be properly collateralized. When a depository pledges government securities as collateral, section 53652 of the California Government Code requires the securities to have a market value of at least 10% in excess of the City's deposit or 50% in excess of the City's deposit when mortgages are pledged as collateral. Repo collateralization will be at least 102% of market value of principal and accrued interest. Safekeeping and Custody. All security transactions entered into by the City shall be conducted on a delivery- versus- payment ( "DVP ") basis. Securities shall be delivered to the City by book entry, physical delivery or by third party custodial agreement. Diversification. To reduce credit and market risk in the overall portfolio, the City will diversify its investments by security type, maturity date and issuer. With the exception of U.S. Treasury securities, diversification is also achieved by the portfolio percentages and maturity limitations indicated in the "Authorized and Suitable Investments" section of the Investment Policy. Maximum Maturities. To the extent possible, and within the five year maximum maturity required by California Government Code, the City will attempt to match investment maturities with anticipated cash flow requirements. As required by California Government Code Section 53601, any investment term longer than five years requires express authority by the City Council to make that investment. This authority must be granted no less than three months prior to making the investment. Investments with terms longer than five years will be limited to the least of $10 million or 10% of the portfolio at the time the investment is made. Internal Control. Investment transactions are reviewed by the City's external auditor as part of the annual audit. This review verifies compliance with the Investment Policy and the California Government Code. Performance Standards. The cash management system is designed to accurately monitor and forecast expenditures and revenues, thus ensuring the investment of moneys to the fullest extent possible, including the estimated float for the Active Account and the Payroll Account. The City attempts to obtain the highest interest yields possible as long as investments meet the criteria required for safety and liquidity, do not exceed a term of five years (unless otherwise authorized by the City Council) and are within portfolio percentage limitations. The City strives to maintain the level of investment of all funds as near 100% as possible through daily and projected cash flow determinations. The basic premise underlying the Investment Policy is, and will continue to be, to ensure that the money is always safe and available when needed. Because the investment portfolio is designed to operate on a "hold -to- maturity" premise (or passive investment style) and because of the safety, liquidity, and yield priorities, the benchmark that will 6124115 CC A EN A PACKET PAGE 145 be used by the City Treasurer to determine whether market yields are being achieved shall be the yield on the U.S. Treasury Bill or Note maturing closest to the weighted average maturity of the City's overall portfolio. Reporting. The City Treasurer shall provide the City Council monthly investment reports which provide a clear picture of the status of the current investment portfolio. The monthly investment report shall include the following: • A listing of individual securities held at the end of the reporting period by authorized investment category • Final maturity of all investments listed • Coupon, discount, or earnings rate • Par value and market value • Transactions completed during the month • Percentage of the portfolio represented by each investment category Investment Policy Adoption. The Investment Policy shall be reviewed annually by City staff and adopted by resolution of the City Council. Indemnification of Investment Officials. The standard of care to be used by investment officials shall be the "prudent person" standard and shall be applied in the context of managing the overall portfolio. The City Treasurer and his designees acting in accordance with established procedures and the Investment Policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. Pension Plans The City's Retirement Plans. The City participates in the Miscellaneous Plan of the City of Bakersfield (the "Miscellaneous Plan "), the Safety Fire Plan of the City of Bakersfield (the "Safety Fire Plan "), and the Safety Police Plan of the City of Bakersfield (the "Safety Police Plan "), which are included in the Public Agency portion of the California Public Employees Retirement System ("CalPERS"). The City also participates in the Fireman's Relief and Pension Fund ( "FRPF "), which is administered by the City. Combined, the Miscellaneous Plan, the Safety Fire Plan, the Safety Police Plan, and the FRPF cover all permanent and certain part -time employees of the City. Prior to June 26, 1972, all City employees of the City's Fire Department were covered by FRPF. Effective June 26, 1972, all existing and new employees of the City's Fire Department became members of CalPERS. The Miscellaneous Plan, the Safety Fire Plan, and the Safety Police Plan (the "CalPERS Plans ") provide retirement and disability benefits, annual cost -of- living adjustments, and death benefits to plan members and beneficiaries. Each of the CalPERS Plans is part of the Public Agency portion of CalPERS, an agent multiple - employer plan administered by CalPERS, which acts as a common investment and administrative agent for participating public employers within the State. A menu of benefit provisions, as well as other requirements, is established by State statutes within the Public Employee's Retirement Law. The City selects optional benefit provisions for each of the CalPERS Plans from the benefit menu by contract with CalPERS and adopts those benefits through local ordinance. CalPERS issues a separate comprehensive annual financial report. Copies of the CalPERS annual financial report may be obtained from their Executive Office at 400 P Street, Sacramento, California 95814. B -10 6124115 CC ACEN A PACKET FACE 146 The Miscellaneous Plan. Active plan members in the Miscellaneous Plan are required to contribute 8% of their annual covered salary. The City is required to contribute the actuarially determined remaining amounts necessary to fund the benefits for its members. The actuarial methods and assumptions used are those adopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal year 2014 -15 is 18.012 %. The contribution requirements of the plan members are established by State statute and the employer contribution rate is established and may be amended by CalPERS. For the year ended June 30, 2014, the City's annual pension cost of $9,110,586 for CalPERS was equal to the City's required and actual contributions. The required contribution for fiscal year ended June 30, 2014 was determined as part of the June 30, 2011 actuarial valuation using the entry age normal actuarial cost method with the contributions determined as a percent of pay. The actuarial assumptions included (a) 7.5% investment rate of return (net of administrative expenses), (b) projected annual salary increases that vary by duration of service ranging from 3.3% to 14.2 %, and (c) 3% per year cost -of- living adjustments. Both (a) and (b) include an inflation component of 2.75 %. The actuarial valuation of the Miscellaneous Plan's assets is based on a 15 year smoothed market methodology that dampens the effects of short -term market value fluctuations on employer contributions. The Miscellaneous Plan's unfunded actuarial accrued liability is being amortized as a level percentage of projected payrolls on a closed basis. Based on the most recently completed actuarial valuation, the remaining amortization period at June 30, 2013 was twenty -one years. The Safety Fire Plan. Active Safety Fire Plan members are required to contribute 9% of their annual covered salary towards payment of the annual pension cost. The City is required to contribute the actuarially determined remaining amounts necessary to fund the benefits for its members. The actuarial methods and assumptions used are those adopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal year 2014 -15 is 29.004 %. The contribution requirements of the plan members are established by State statute and the employer contribution rate is established and may be amended by CalPERS. For the year ended June 30, 2014, the City's annual pension cost of $4,252,156 for CalPERS was equal to the City's required and actual contributions. The required contribution for fiscal year ended June 30, 2014 was determined as part of the June 30, 2011 actuarial valuation using the entry age normal actuarial cost method with the contributions determined as a percent of pay. The actuarial assumptions included (a) 7.5% investment rate of return (net of administrative expenses), (b) projected annual salary increases that vary by duration of service ranging from 3.3% to 14.2 %, and (c) 3% per year cost -of- living adjustments. Both (a) and (b) include an inflation component of 2.75 %. The actuarial value of the Safety Fire Plan's assets is based on a 15 year smoothed market methodology that dampens the effects of short - term market value fluctuations on employer contributions. The Safety Fire Plan's unfunded actuarial accrued liability is being amortized as a level percentage of projected payrolls on a closed basis. Based on the most recently completed actuarial valuation, the remaining amortization period at June 30, 2013, was twenty -four years. The Safety Police Plan. Active plan members in the Safety Police Plan are required to contribute 9% of their annual covered salary. The City is required to contribute the actuarially determined remaining amounts necessary to fund the benefits for its members, the actuarial methods and assumptions used are those adopted by the CalPERS Board of administration. The required employer contribution rate for fiscal year 2014 -15 is 37.536 %. The contribution requirements of the plan members are established and may be amended by CalPERS. For the year ended June 30, 2014, the City's annual pension cost of $10,789,992 for CalPERS was equal to the City's required and actual contributions. The required contribution for fiscal year ended B -11 6124115 CC ACEN A PACKET FACE 147 June 30, 2014 was determined as part of the June 30, 2011 actuarial valuation using the entry age normal actuarial cost method with the contributions determined as a percent of pay. The actuarial assumptions included (a) 7.5% investment rate of return (net of administrative expenses), (b) projected annual salary increases that vary by duration of service ranging from 3.3% to 14.2 %, and (c) 3% per year cost -of- living adjustments. Both (a) and (b) include an inflation component of 2.75 %. The actuarial value of the Safety Police Plan's assets is based on a 15 year smoothed market methodology that dampens the effects of short-term market value fluctuations on employer contributions. The Safety Police Plan's unfunded actuarial accrued liability is being amortized as a level percentage of projected payrolls on a closed basis. Based on the most recently completed actuarial valuation, the remaining amortization period at June 30, 2013, was twenty -six years. The Fireman's Relief and Pension Fund The FRPF, a single - employer defined benefit pension plan, is used to account for the accumulation of resources to be used for retirement, disability and death benefits as well as annual cost -of- living adjustments for Fire Department personnel who retired prior to June 26, 1972. At that time, eligible participants of the FRPF became members of Ca1PERS, and the FRPF was closed to new entrants. As of June 30, 2014, the most recent actuarial valuation date, there were 6 participants, retired and 100% vested. There is not a separate, audited GAAP -basis pension report available for the FRPF defined benefit pension plan. There were no employer or employee contributions made to this plan subsequent to June 26, 1972; the only activity in this plan is the receipt of income on invested assets and the payment of vested benefits. Benefit provisions may be amended by action of the City Council. Through June 30, 1996, an actuarial valuation was performed every three years using the unit - credit method to calculate the costs of the FRPF for pension benefits. Since June 30, 1998, valuations have occurred every two years. The June 30, 2014 valuation used the unprojected unit credit method to calculate the costs for pension benefits. Unfunded Liability and Contribution Rates. The unfunded actuarial accrued liability for valuation date June 30, 2013 (the most recent information available from Ca1PERS), was $114,137,655 for the Miscellaneous Plan (221.6% of payroll), $56,365,103 for the Safety Fire Plan (373.3% of payroll), and $127,454,224 for the Safety Police Plan (430.5% of payroll). The total unfunded liabilities for the City (all three plans combined) have been estimated by Ca1PERS to be $297,956,982 as of June 30, 2013. As part of its June 30, 2013, actuarial report, Ca1PERS provided the City with the following unfunded liability rates, stated as a percentage of the City's payroll, for the Fiscal Year 2015 -16 budget year: 221.6% for Miscellaneous Plan employees (average remaining period of 30 years); 373.3% for Safety Fire Plan employees (average remaining period of 30 years); and 430.5% for Safety Police Plan employees (average remaining period of 30 years). Other Post - Employment Benefits The City provides other post - employment benefits ( "OPEB ") to former employees in the form of a medical premium subsidy. The level of such medical premium subsidy for each former employee is dependent upon such former employee's date of hire and years of service with the City. The City's medical premium subsidy program is more fully described in "Note 17 — Other Post - Employment Benefits" in the Notes to the Financial Statements section of the City's CAFR for Fiscal Year 2013 -14, a copy of which is attached to this Official Statement as Appendix C. In December 2006, the City contracted with Phase II Systems, doing business as Public Agency Retirement Services, for trust administration services and established an irrevocable trust for its post - retirement medical benefit plan. In accordance with Governmental Accounting Standards Board (GASB) B -12 6124115 CC A EN A PACKET PAGE 1 Statements No. 43 and No. 45, the City has an actuarial study performed every two years. The most recent actuarial study was performed by The Segal Company with a valuation date of July 1, 2013. Insurance The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City established a Self - Insurance Fund (an internal service fund) to account for and finance its uninsured risks of loss. Under this program, the Self- Insurance Fund provides coverage for up to $500,000 for each worker's compensation claim and $1,000,000 for each liability claim. The City participates in a joint powers authority for worker's compensation claims in excess of coverage provided by the Self - Insurance Fund up to statutory limits and participates in a joint powers authority for any excess liability claims. All funds of the City participate in the program and are charged for their share of claim expenditures. The claims liability of $33,193,165 at June 30, 2014, is based on the requirements of Governmental Accounting Standards Board No. 10 (GASB 10), which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. An estimate of incurred but not reported claims has been included in the liability based on the various percentages of loss reserves. Tax Levies and Delinquencies; Assessed Valuation of Taxable Property The County Tax Collector collects ad valorem property tax levies representing taxes levied for each Fiscal Year on taxable real and personal property that is situated in the County as of the preceding March 1. Unsecured taxes are assessed and payable on March 1 and become delinquent August 31, in the next Fiscal Year. Accordingly, unsecured taxes are levied at the rate applicable to the Fiscal Year preceding the one in which they are paid. One half of the secured tax levy is due November 1 and becomes delinquent December 10; the second installment is due February 1 and becomes delinquent April 10. A 10% penalty is added to any late installment. Property owners may redeem property upon payment of delinquent taxes and penalties. Tax - delinquent properties are subject to a redemption penalty of 1.5% of the delinquent amount every month commencing on July 1 following the date on which the property became tax delinquent. Properties may be redeemed under an installment plan by paying current taxes, plus 20% of delinquent taxes each year for five years, with interest accruing at 1.5% per month on the unpaid balance. If no payments have been made on delinquent taxes at the end of five Fiscal Years, the property is deeded to the State. Such property may thereafter be conveyed to the County Tax Collector as provided by law. B -13 6124115 CC AGENDA PACKET PAGE 149 The table below summarizes the City's property tax levies and total collections for Fiscal Years 2009 -10 through 2013 -14. City of Bakersfield Property Tax Levies and Collections (Fiscal Years 2009 -10 through 2013 -14) Fiscal Total Total Tax Percent of Levy Year Tax Lew Collections Collected 2009 -10 $37,878,353 $36,683,727 96.8% 2010 -11 38,752,737 38,136,143 98.4 2011 -12 37,333,785 36,574,775 98.0 2012 -13 38,448,465 37,544,318 97.6 2013 -14 39,887,750 39,344,783 98.6 (1) Excludes redevelopment tax increment. Source: City of Bakersfield Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014. The table below summarizes the assessed value of taxable property in the City for Fiscal Years 2009 -10 through 2013 -14. City of Bakersfield Assessed Value of Taxable Property (Fiscal Years 2009 -10 through 2013 -14) (000s) Total Less Tax- Taxable Fiscal Residential - Commercial - Other - Exempt Real Assessed Year Secured Secured Secured Unsecured Propertv Value 2009 -10 $15,577,372 $4,030,198 $3,311,171 $878,216 $1,080,957 $22,716,000 2010 -11 14,950,744 4,053,184 3,134,829 834,158 1,063,302 21,909,613 2011 -12 14,521,636 3,832,880 3,245,619 850,899 1,104,081 21,346,953 2012 -13 14,698,137 3,904,832 3,268,227 912,300 1,097,928 21,685,568 2013 -14 15,592,995 4,010,392 3,575,805 791,531 1,186,061 22,784,662 Source: City of Bakersfield Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014. The table below shows the assessed valuations of the principal taxpayers in the City as of June 30, 2014. City of Bakersfield Assessed Valuation of Principal Taxpayers (June 30, 2014) 2013 -14 Assessed Percentage of Total Taxpaver (r) Valuation Assessed Valuation Chevron USA Inc. $ 201,845,664 0.89% Nestle Holdings Inc. 196,422,345 0.86 Valley Plaza Mall LP (formerly Bakersfield Mall LLC) 125,013,540 0.55 WalMart Real Estate BSNS Trust 90,072,683 0.40 California Water Service Company 83,735,182 0.37 Castle & Cook CA Inc. 76,768,870 0.34 Lserf2 Tractor Reo LLC 70,087,573 0.31 GSF Edgewater Investors LP 67,967,343 0.30 Donahue Schriber Realty Group LLP 63,594,316 0.28 Bright House Networks LLC 51.434.680 0.23 Total taxable assessed value of 10 largest taxpayers $ 1,026,942,196 4.53% Total taxable assessed value of other taxpayers 21.757.719.634 95.47 Total taxable assessed value of all taxpayers $22,784,661,830 100.00% (1) Related or affiliated parties are grouped together. Source: City of Bakersfield Comprehensive Annual Financial Report Fiscal Year ended June 30, 2014. B -14 6124115 CC A EN A PACKET PAGE 15 Demographic Statistics The following table sets forth various demographic data regarding the City, including population, estimated median household income, elementary school enrollment, and estimated unemployment rate, from Fiscal Year 2009 -10 through 2013 -14. City of Bakersfield Demographic Statistics (Fiscal Years 2009 -10 through 2013 -14) Source: City of Bakersfield Comprehensive Annual Financial Report Fiscal Year ended June 30, 2014 Employment The following table sets forth information regarding the size of the labor force, employment rates, and unemployment rates for the City, the County, and the State for calendar years 2010 through 2014. Employment Averages City of Bakersfield, Kern County, and State of California (Calendar Years 2010 — 2014) 2010 2011 Percentage of Estimated 2014 City of Bakersfield Per Capita Population Having Unemployment Fiscal Year Population Personal Income Formal Schooling Rate 2009 -10 333,847 $21,071 78.1% 15.8% 2010 -11 338,952 20,675 77.8 15.3 2011 -12 354,480 21,553 78.1 10.5 2012 -13 359,221 21,887 77.8 8.4 2013 -14 367,315 21,980 78.2 7.9 Source: City of Bakersfield Comprehensive Annual Financial Report Fiscal Year ended June 30, 2014 Employment The following table sets forth information regarding the size of the labor force, employment rates, and unemployment rates for the City, the County, and the State for calendar years 2010 through 2014. Employment Averages City of Bakersfield, Kern County, and State of California (Calendar Years 2010 — 2014) Source: California Employment Development Department B -15 6124115 CC AGENDA PACKET FACE 151 2010 2011 2012 2013 2014 City of Bakersfield Labor Force 166,800 171,900 176,900 177,700 178,000 Employment 143,400 149,100 156,000 159,000 161,400 Unemployment Rate 14.1% 13.3% 11.8% 10.5% 9.3% Kern County Labor Force 371,800 382,900 393,100 394,200 394,400 Employment 313,700 326,300 341,400 348,000 348,000 Unemployment Rate 15.5% 14.8% 13.2% 11.7% 11.7% State of California Labor Force (000s) 18,336.3 18,419.5 18,554.8 18,671.6 18,811.4 Employment (000s) 16,091.9 16,260.1 16,630.1 17,002.9 17,391.1 Unemployment Rate 12.2% 11.7% 10.4% 8.9% 7.5% Source: California Employment Development Department B -15 6124115 CC AGENDA PACKET FACE 151 The following table sets forth the top 10 employers in the City as of June 30, 2014. City of Bakersfield Principal Employers (As of June 30, 2014) Firm Employees County of Kern 7,811 Kern High School District 3,888 Bakersfield City School District 3,203 San Joaquin Community Hospital 2,039 Panama -Buena Vista Union School District 2,038 Wm. Bolthouse Farms 1,937 Chevron Corp. 1,873 Nabors Completion & Production Services 1,700 Bakersfield Memorial Hospital 1,650 City of Bakersfield 1,455 Others 138.506 Total 166 100 Source: City of Bakersfield Comprehensive Annual Financial Report Fiscal Year ended June 30, 2014. Building Activity The following table summarizes the City's total annual building permit valuations for fiscal years 2009 -10 through 2013 -14. City of Bakersfield Property Value, Construction, and Bank Deposits (Fiscal Years 2009 -10 through 2013 -14) (1) Property values and bank deposits reported in thousands. (2) Federal Deposit Insurance Corporation. (3) Constriction units and values are based on a 12 -month calendar year. June 30, 2014 data reflects the 2013 calendar year Source: City of Bakersfield Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014. B -16 6124115 CC AGENDA PACKET PAGE 152 Commercial Residential Other Total Construction Construction Construction Construction Fiscal Number Number Number Bank Year (3) of Units Value of Units Value Value of Units Value Deposits (2) 2009 -10 83 $62,088 1,097 $232,275 786,668 1,180 $381,031 $4,728,745 2010 -11 40 13,425 848 197,380 98,057 888 308,862 5,172,880 2011 -12 40 41,482 422 92,313 81,984 462 215,779 5,280,515 2012 -13 49 20,807 1,122 259,851 108,877 1,171 389,535 5,626,755 2013 -14 69 15,710 1,336 312,569 157,024 1,405 485,303 6,069,764 (1) Property values and bank deposits reported in thousands. (2) Federal Deposit Insurance Corporation. (3) Constriction units and values are based on a 12 -month calendar year. June 30, 2014 data reflects the 2013 calendar year Source: City of Bakersfield Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014. B -16 6124115 CC AGENDA PACKET PAGE 152 Commercial Activity Consumer spending in calendar year 2013 resulted in approximately $6,046,533,000 in taxable sales in the City, which is approximately 1.5% more than in calendar year 2012. The following tables set forth information regarding taxable sales in the City for calendar year 2013. City of Bakersfield Taxable Retail Sales Calendar Years 2009 through 2013 (000s) Source: California State Board of Equalization There are three major shopping centers in the City. Major department stores with local outlets include Macy's, J.C. Penney, Sears, and Kohl's. The retail base includes three Wal -Marts, three Targets, three Home Depots, two Lowe's Home Improvement Stores, two Costcos, and a Sam's Club. The number of sales permits issued and the valuation of taxable transactions for the years 2009 through 2013 is presented in the following table. City of Bakersfield Number of Permits and Valuation of Taxable Transactions Calendar Years 2009 through 2013 (000s) 2009 2010 2011 2012 2013 Motor Vehicles and Parts Dealers $ 631,773 $ 694,631 $ 862,869 $1,067,814 $1,131,743 Home Furnishings and Appliance Stores 170,486 116,364 188,226 203,522 203,213 Bldg. Materials and Garden Equip. and Supplies 268,924 261,174 290,507 310,438 317,048 Food and Beverage Stores 212,056 204,016 211,361 222,062 225,480 Gasoline Stations 396,688 447,576 564,575 549,632 528,471 Clothing and Clothing Accessories Stores 218,590 236,335 269,360 294,763 306,086 General Merchandise Stores 774,005 823,053 864,978 904,090 909,123 Food Service and Drinking Places 472,545 472,078 517,877 568,883 596,891 Other Retail Group 346,582 339,647 354,232 371,044 387,459 Total Retail and Food Services $3,491,649 $3,644,874 $4,123,995 $4,492,248 $4,605,514 All Other Outlets 930,474 1,022,871 1,326,385 1,462,546 1,441,019 Total All Outlets $4,422,123 $4,667,745 $5,450,380 $5,954,794 $6,046,533 Source: California State Board of Equalization There are three major shopping centers in the City. Major department stores with local outlets include Macy's, J.C. Penney, Sears, and Kohl's. The retail base includes three Wal -Marts, three Targets, three Home Depots, two Lowe's Home Improvement Stores, two Costcos, and a Sam's Club. The number of sales permits issued and the valuation of taxable transactions for the years 2009 through 2013 is presented in the following table. City of Bakersfield Number of Permits and Valuation of Taxable Transactions Calendar Years 2009 through 2013 (000s) Source: California State Board of Equalization B -17 Total All Outlets No. of Permits Taxable Transactions 6,929 Retail Stores Year No. of Permits Taxable Transactions 2009 4,771 $3,491,649 2010 5,061 3,644,874 2011 5,254 4,123,995 2012 5,416 4,492,248 2013 5,712 4,605,514 Source: California State Board of Equalization B -17 Total All Outlets No. of Permits Taxable Transactions 6,929 $4,422,123 7,189 4,667,745 7,334 5,450,380 7,520 5,954,794 7,700 6,046,533 6124115 CC AGENDA PACKET FACE 153 Transportation Well- developed surface and air transportation facilities are available to City residents and business firms. Main lines of both the Union Pacific and the Burlington Northern Santa Fe railroads traverse the area. Amtrak service is available. State Highway 99, the main north -south artery serving the most populous communities along the east side of the Central Valley, runs through the center of the City. State Highway 58 provides east -west linkage between Interstate 5, 20 miles west, and Interstate 15 at Barstow, to the east, Highway 178, heading northeast, is the major route along the Kern River Valley. Highway 65, to the north, provides access to communities east of Highway 99 and to Sequoia National Park. Interurban motor transportation is made available by Orange Belt Stages, Greyhound, and Trailways. Golden Empire Transit provides local bus transportation. The Meadows Field Airport adjoins the City to the north. Regularly scheduled passenger and air cargo service is available, as well as charter service and general aviation services. The Meadows Field Airport includes the William M. Thomas Terminal, a 64,800 square foot, state -of -the -art terminal facility completed in November 2005 that is currently equipped with three jet- boarding bridges, but that may be expanded to accommodate up to nine gates. The Director of Airports is appointed by the County Board of Supervisors. The County Board of Supervisors meets at 1115 Truxtun Avenue in Bakersfield, California, on Monday and Tuesday of each week. Department of Airports agenda items are usually heard on Tuesday at 9:00 a.m. Utilities Electricity throughout the City is supplied by Pacific Gas and Electric Company. This company, along with Southern California Gas Company, also supplies natural gas. Telephone service is by AT &T. Fifteen private water companies serve the City. The City provides sewer and water services. Education Public education in the City through the secondary grades is provided by a number of elementary school districts, including the Bakersfield City School District and Kern High School District. There are also a number of private schools, nursery schools, and pre - schools within the City. The City lies within Kern Community College District, which administers Bakersfield College. This two year institution is located on a 150 -acre site in northeast Bakersfield. Vocational and technical courses are offered as well as academic courses designed to equip the student for transfer to a four -year college or university in the third year. Bakersfield College attracts about half the local high school graduating class each year. California State University, Bakersfield, opened in 1970 and received its university status in 1988. It is located on a 375 -acre site located in the western portion of the City. Majors offered include anthropology, art, earth sciences, philosophy, mathematics, political science, business, and teaching. A graduate program offers a master's degree in a number of fields. The newest campus in the University of California system, UC Merced, opened in 2005. UC Merced serves the entire San Joaquin Valley, with the main campus located in the City of Merced and satellite centers located in the City and the Cities of Fresno and Modesto. B -18 6124115 CC A EN A PACKET PAGE 15 Financial Services Statewide banking systems serving the City include Bank of America, Chase Bank, Union Bank, Rabobank, and Wells Fargo Bank. Their services are supplemented by local and regional banks and various savings and loan associations. Community Facilities The City has six general hospitals with a total bed capacity of 1,075. The City is a primary medical center of a region larger than some states. Mercy Hospital and Greater Bakersfield Memorial Hospital are among the largest employers in the City. Kern Medical Center, administered by the County, is affiliated with UCLA Medical Center of Los Angeles. The daily `Bakersfield Californian" and two weekly newspapers provide regional news coverage. Bakersfield has 20 radio stations, four television stations, two cable TV companies, and two satellite TV companies. The City has 59 public parks, covering a total of 623 acres. The Bakersfield Rabobank Arena, Theater, and Convention Center contains a 3,250 -seat concert hall, an 11,000 -seat arena, and 14 meeting rooms. Memorial Stadium hosts more National AAU track meets than any other city in the country. County -owned golf courses and five private courses offer year - round golf, and tennis is played throughout the year at six private tennis clubs. Cultural advantages of the City include community theater, the Bakersfield Symphony orchestra, a community concert group, and the Cunningham Art Gallery. Bakersfield College and California State University, Bakersfield, sponsor plays, concerts, lectures, and special events throughout the year. B -19 6124115 CC A EN A PACKET PAGE 155 APPENDIX C CITY OF BAKERSFIELD COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2014 C -1 6124115 CC AGENDA PACKET PAGE 156 APPENDIX D FORM OF BOND COUNSEL OPINION [Closing Date] City of Bakersfield 1600 Truxtun Avenue Bakersfield, CA 93301 City of Bakersfield, California Wastewater Revenue Refunding Bonds Series 2015A Ladies and Gentlemen: We have acted as Bond Counsel to the City of Bakersfield, California (the "City ") in connection with the issuance and sale by the City of $ aggregate principal amount of its Wastewater Revenue Refunding Bonds, Series 2015A (the "Series 2015A Bonds "). The Series 2015A Bonds are being used to (1) advance refund and defease $ aggregate principal amount of the City's outstanding City of Bakersfield, California Wastewater Revenue Bonds, Series 2007A (the "Refunded Bonds "); and (ii) pay costs of issuance of the Series 2015A Bonds. The Series 2015A Bonds are being issued pursuant to Section 33.3 of the Charter of the City (the "Charter "), Chapter 3.55 of the City's Municipal Code (the "Municipal Code "), which incorporates certain provisions of the Revenue Bond Law of 1941, Section 54300, et seq., of the California Government Code (the "Revenue Bond Law "), certain provisions of the laws of the State of California (the "State ") (including Section 53580 et seq. of the California Government Code) (the "Refunding Law "), Resolution No. adopted by the City Council on June 24, 2015 (the "Resolution "), the Master Trust Indenture, dated as of August 1, 2007 (the "Master Indenture "), by and between the City and U.S. Bank National Association, as trustee (the "Trustee "), and a Fourth Supplemental Trust Indenture, dated as of September 1, 2015 (the "Fourth Supplemental Indenture" and together with the Master Indenture, the "Indenture "), by and between the City and the Trustee. The Series 2015A Bonds are special, limited obligations of the City payable solely from and secured by the Net Revenues (as defined in the Master Indenture) derived by the City from the operations of the Enterprise (as defined in the Master Indenture) and certain funds and accounts held under the Indenture. None of the properties of the Enterprise are subject to any mortgage or other lien for the benefit of the owners of the Series 2015A Bonds, and neither the full faith and credit nor the taxing power of the City, Kern County, the State of California (the "State "), or any other political subdivision or agency of the State is pledged to the payment of the principal of, premium, if any, or interest on the Series 2015A Bonds. Law; In connection with the issuance of the Series 2015A Bonds, we have examined the following: (a) a copy of the Charter, the Municipal Code, the Revenue Bond Law and the Refunding (b) a certified copy of the Resolution; D -1 6124115 CC A EN A PACKET PAGE 157 (c) an executed counterpart of the Master Indenture; (d) an executed counterpart of the Fourth Supplemental Indenture; (e) certifications of the City and others; (f) an executed counterpart of a Tax Compliance Certificate dated this date relating to the Series 2015A Bonds (the "Tax Certificate "); (g) an opinion of the City Attorney with respect to the City; (h) an executed counterpart of the Escrow Agreement, dated September , 2015, by and between the City and U.S. Bank National Association, as Trustee and escrow agent, with respect to the Refunded Bonds; (1) an executed counterpart of the Verification Report, dated September _, 2015, by Grant Thornton LLP; and (j) such other documents as we deemed relevant and necessary in rendering this opinion. From such examination, we are of the opinion that: 1. The City is duly organized and existing as a Charter City under and by virtue of the Constitution and the laws of the State, with the power to enter into and perform its obligations under the Master Indenture and the Fourth Supplemental Indenture and to issue the Series 2015A Bonds. 2. The Master Indenture and the Fourth Supplemental Indenture have been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the Trustee, represent valid and binding agreements of the City enforceable in accordance with their terms. 3. The Series 2015A Bonds have been validly authorized, executed and issued in accordance with the Charter, the Municipal Code, the Refunding Law, the Resolution, the Master Indenture and the Fourth Supplemental Indenture. The Series 2015A Bonds represent valid and binding limited obligations of the City payable solely from and secured by an assignment and pledge by the City to the Trustee of the Net Revenues and certain funds and accounts created under the Master Indenture and the Fourth Supplemental Indenture, and not out of any other fund or money of the City or the State. 4. Under existing laws, regulations, rulings and judicial decisions, interest on the Series 2015A Bonds is excluded from gross income for federal income tax purposes. Interest on the Series 2015A Bonds is not a specific preference item for purposes of the federal alternative minimum tax; however, such interest is included in the adjusted current earnings of certain corporations, and such corporations are required to include in the calculation of the federal alternative minimum taxable income 75% of the excess of such corporations' adjusted current earnings over their federal alternative minimum taxable income (determined without regard to such adjustment and prior to reduction for certain net operating losses). 5. Under existing laws, regulations, rulings and judicial decisions, interest on the Series 2015A Bonds is exempt from all present State personal income taxes. The opinions set forth in paragraph 4 regarding the exclusion of interest on the Series 2015A Bonds from the gross income of the recipients thereof for federal income tax purposes is subject to the D -2 6124115 CC A EN A PACKET PAGE 158 accuracy of certain representations and the continuing compliance by the City with covenants regarding federal tax law contained in the Master Indenture, the Fourth Supplemental Indenture and the Tax Certificate. Failure to comply with such covenants could cause interest on the Series 2015A Bonds to be included in gross income retroactive to the date of issuance of the Series 2015A Bonds. Although we are of the opinion that interest on the Series 2015A Bonds is excluded from gross income for federal tax purposes, the accrual or receipt of interest on the Series 2015A Bonds may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient's particular tax status or other items of income or deduction. We express no opinion regarding any such consequences. The obligations of the City and the security provided therefor, as contained in the Series 2015A Bonds, the Master Indenture and the Fourth Supplemental Indenture may be subject to general principles of equity which permit the exercise of judicial discretion and are subject to the provisions of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect. As Bond Counsel to the City, we have not undertaken any responsibility for the accuracy, completeness or fairness of the Official Statement, dated , 2015, or any other offering material relating to the Series 2015A Bonds and express no opinion relating thereto. Our engagement with respect to the Series 2015A Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. D -3 Very truly yours, 6124115 CC AGENDA PACKET FACE 159 APPENDIX E BOOK -ENTRY ONLY SYSTEM The following description of DTC and its book -entry system has been provided by DTC and has not been verified for accuracy or completeness by the City, and City does not take any responsibility or have any liability with respect thereto. The City shall have no responsibility or liability for any aspects of the records maintained by DTC relating to, or payments made on account of, beneficial ownership, or for maintaining, supervising, or reviewing any records maintained by DTC relating to beneficial ownership, of interests in the Series 2015A Bonds. The Depository Trust Company ( "DTC "), New York, NY, will act as securities depository for the Series 2015A Bonds. The Series 2015A 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 Series 2015A Bond certificate will be issued for each maturity of the Series 2015A Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest securities depository, 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. The foregoing internet address is included for reference only and the information on the internet site is not apart of this Official Statement or incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information included in such internet site. Purchases of the Series 2015A Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2015A Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2015A Bond (`Beneficial Owner ") is in turn 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 Series 2015A Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners E -1 6124115 CC AGENDA PACKET FACE 160 will not receive certificates representing their ownership interests in the Series 2015A Bonds, except in the event that use of the book -entry system for the Series 2015A Bonds is discontinued. To facilitate subsequent transfers, all Series 2015A 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 Series 2015A 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 Series 2015A Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2015A 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. 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 the Series 2015A Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2015A Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Series 2015A Bond documents. For example, Beneficial Owners of Series 2015A Bonds may wish to ascertain that the nominee holding the Series 2015A 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. Redemption notices shall be sent to DTC. If less than all of the Series 2015A Bonds are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such Series 2015A Bonds to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Series 2015A 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 the Series 2015A Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, principal payments, and interest payments with respect to the Series 2015A 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 or the Trustee, 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 Trustee, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, principal, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Trustee, 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. DTC may discontinue providing its services as securities depository with respect to the Series 2015A Bonds at any time by giving reasonable notice to the City or the Trustee. Under such E -2 6124115 CC AGENDA PACKET FACE 161 circumstances, in the event that a successor securities depository is not obtained, Series 2015A Bond certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book - entry -only transfers through DTC (or a successor securities depository). In that event, Series 2015A Bond certificates will be printed and delivered to DTC. 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. E -3 6124115 CC AGENDA PACKET FACE 162 APPENDIX F FORM OF CONTINUING DISCLOSURE CERTIFICATE CITY OF BAKERSFIELD, CALIFORNIA WASTEWATER REVENUE REFUNDING BONDS, SERIES 2015A This Continuing Disclosure Certificate (the "Disclosure Certificate ") is executed and delivered by the City of Bakersfield (the "City ") in connection with the issuance and delivery of $ City of Bakersfield, California, Wastewater Revenue Refunding Bonds, Series 2015A (the "Series 2015A Bonds "). The Series 2015A Bonds are being issued pursuant to (1) the charter of the City, (ii) the City of Bakersfield Enterprise Revenue Bond Law, being Chapter 3.55 of the City's Municipal Code (the "Bond Law "), which incorporates, to the extent made applicable by the Bond Law, the Revenue Bond Law of 1941, being Chapter 6 of Division 2 of Title 5 of the California Government Code, as amended, (iii) certain provisions of the laws of the State of California (including Section 53580 et seq. of the California Government Code, (iv) Resolution No. adopted by the City Council of the City on June 24, 2015 (the "Resolution "), and (v) a Master Trust Indenture, dated as of August 1, 2007 (the "Master Indenture "), by and between the City and U.S. Bank National Association, a national association, as trustee (the "Trustee "), as supplemented by a Fourth Supplemental Trust Indenture, dated as of September 1, 2015 (the "Fourth Supplemental Indenture," and collectively with the Master Indenture, the "Indenture "), by and between the City and the Trustee. The City covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Series 2015A Bonds and in order to assist the Participating Underwriters in complying with the Rule. Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, which apply to any capitalized term used in this Disclosure Certificate, unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Beneficial Owner" shall mean any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2015A Bonds (including persons holding Series 2015A Bonds through nominees, depositories, or other intermediaries). "Dissemination Agent" shall mean the City or any successor Dissemination Agent designated in writing by the City and that has filed with the City a written acceptance of such designation. "Fiscal Year" shall mean the 12 -month period beginning on July 1 and ending on the next following June 30, unless and until changed by the City. "Holder" shall mean either the registered owner of any Series 2015A Bond, or, if the Series 2015A Bonds are registered in the name of DTC or another recognized depository, any Beneficial Owner or applicable participant in its depository system. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. "MSRB" shall mean the Municipal Securities Rulemaking Board. F -1 6124115 CC A EN A PACKET PAGE 163 "Official Statement" shall mean the final Official Statement dated 2015, relating to the Series 2015A Bonds. "Participating Underwriters" shall mean, collectively, Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner, & Smith Incorporated, and Morgan Stanley & Co. LLC, and any other original underwriters of the Series 2015A Bonds required to comply with the Rule in connection with offering of the Series 2015A Bonds. "Rule" shall mean Rule 15c2- 12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Section 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than nine (9) months after the end of the City's Fiscal Year (i.e., currently, not later than April I of each year), commencing with the report for the 2014 -15 Fiscal Year, provide to MSRB an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than fifteen (15) calendar days prior to each such Annual Report Date, the City shall provide its Annual Report to the Dissemination Agent, if such Dissemination Agent is a different entity than the City. The Annual Report must be submitted in an electronic format as prescribed by MSRB, accompanied by such identifying information as is prescribed by MSRB, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; 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 such audited financial statements are not available by such date. If the City's Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished hereunder. The Dissemination Agent may conclusively rely upon such certification of the City and shall have no duty or obligation to review such Annual Report. (b) Not later than 15 Business Days prior to the date required in subsection (a), the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If the City is unable to provide to MSRB an Annual Report by the date required in subsection (a), the City shall send to MSRB a notice in substantially the form attached hereto as Exhibit A. Such notice must be submitted in an electronic format as prescribed by MSRB, accompanied by such identifying information as prescribed by MSRB. (c) The Dissemination Agent shall: (1) provide any Annual Report received by it to the MSRB by the date required in subsection (a); (ii) if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been provided to MSRB pursuant to this Disclosure Certificate, and stating the date the Annual Report was so provided; and (iii) if the Dissemination Agent is other than the City, take any other actions mutually agreed upon between the Dissemination Agent and the City. F -2 6124115 CC A EN A PACKET PAGE 164 Section 4. Content of Annual Reports. The City's Annual Report shall contain or incorporate by reference the following: (a) The audited financial statements of the City for the prior Fiscal Year. If the City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements of the City in a format similar to the audited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Audited financial statements shall be prepared in accordance with generally accepted accounting principles as prescribed for governmental units by the Governmental Accounting Standards Board; provided, however, that the City may from time to time, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. In the event that the City shall modify the basis upon which its financial statements are prepared, the City shall provide a notice of such modification to MSRB, including a reference to the specific federal or state law or regulation specifically describing the legal requirements for the change in accounting basis. (b) The following information with respect to the City for the Fiscal Year to which the Annual Report relates, which information may be provided by its inclusion in the audited financial statements of the City for the prior Fiscal Year described in subsection (a) above: (1) The principal amount of Series 2015A Bonds outstanding, including principal amounts and years of maturity of Series 2015A Bonds, if any, called for redemption in advance of maturity. (ii) Information with respect to any material changes to the wastewater treatment plants or the other facilities comprising the Enterprise, or the operation thereof, as described in the Official Statement under the heading "THE ENTERPRISE - Wastewater Treatment Plant No. 2" "— Wastewater Treatment Plant No. 3," "— Sewer Video Inspection Program," and "- Wastewater Treatment Process." (iii) Updated information with respect to single - family dwelling equivalent ( "SFDE ") service units, annual service charges, types of sewer users and principal Revenue contributors, substantially in the form presented in the tables set forth in the Official Statement under the heading "THE ENTERPRISE - Wastewater Treatment Fund - Rates and Charges." (iv) Financial information concerning the City's Wastewater Treatment Fund for the prior Fiscal Year only, which information for such Fiscal Year shall be presented substantially in the form set forth in the tables set forth in the Official Statement under the heading "THE ENTERPRISE - Wastewater Treatment Fund - Financial Statements." (v) Information concerning material changes in the City's insurance program, as discussed in Appendix B to the Official Statement. (c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the City shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. 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, that are available to the F -3 6124115 CC A EN A PACKET PAGE 16.E public on MSRB's Internet web site or filed with the Securities and Exchange Commission. The City shall clearly identify each such other document so included by reference. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2015A Bonds: (1) principal and interest payment delinquencies; (ii) non - payment related defaults, if material; (iii) unscheduled draws on any reserve fund for the Series 2015A Bonds reflecting financial difficulties; (iv) unscheduled draws on any credit enhancements securing the Series 2015A Bonds reflecting financial difficulties; (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 or determinations with respect to the tax status of the Series 2015A Bonds, or other material events affecting the tax status of the Series 2015A Bonds; Bonds; (vii) modifications to the rights of Owners of the Series 2015A Bonds, if material; (viii) Series 2015A Bond calls, if material, and tender offers for the Series 2015A (ix) defeasances; (x) any release, substitution, or sale of property securing repayment of the Series 2015A Bonds, if material; (xi) rating changes; (xii) any bankruptcy, insolvency, receivership, or similar event of the City [this Listed 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 governmental 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 F -4 6124115 CC AGENDA PACKET FACE 166 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. (b) Upon and after the occurrence of a Listed Event listed under subsection (a)(ii), (a)(vii), (a)(viii), (a)(x), ( a)(xiii), or (a)(xiv) above, the City shall as soon as possible determine if such event would be material under applicable federal securities laws. If the City determines that knowledge of the occurrence of such Listed Event would be material under applicable federal securities laws, the City shall promptly notify the Dissemination Agent, if different from the City, in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (d) below. (c) Upon and after the occurrence of any Listed Event (other than a Listed Event listed under subsection (a)(ii), (a)(vii), (a)(viii), (a)(x), ( a)(xiii), or (a)(xiv) above), the City shall promptly notify the Dissemination Agent, if different from the City, in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (d) below. (d) The City or the Dissemination Agent, if the Dissemination Agent has been instructed by the City to report the occurrence of a Listed Event, shall file a notice of such occurrence with MSRB, not in excess of ten (10) business days after the occurrence of such Listed Event. Such notice must be submitted in an electronic format as prescribed by MSRB, accompanied by such identifying information as prescribed by MSRB. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(viii) and (ix) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Series 2015A Bonds pursuant to the Indenture. (e) The City hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the City and that the Dissemination Agent shall not be responsible for determining whether the City's instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. Section 6. Termination of Reporting ate. The obligations of the City and the Dissemination Agent under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption, or payment in full of all of the Series 2015A Bonds. If such termination occurs prior to the final maturity of the Series 2015A Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). 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 Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing thirty days written notice to the City. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the City. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the City in a timely manner and in a form suitable for filing. The City shall initially act as its own Dissemination Agent. Section 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: F -5 6124115 CC AGENDA PACKET FACE 167 (a) if the amendment or waiver relates to the provisions of Section 3(a), 4, or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal (including a change in law (including rules or regulations) or in interpretations thereof), or a change in the identity, nature, or status of the City or the type of business conducted thereby; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Series 2015A Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (1) is approved by Holders of the Series 2015A Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of Holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Series 2015A Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall describe such amendment or waiver 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. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to MSRB. Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the 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 Certificate, the City shall have no obligation under this Disclosure Certificate 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 Certificate, any Holder or Beneficial Owner of the Series 2015A Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance. F -6 6124115 CC AGENDA PACKET FACE 168 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 Certificate and the City agrees to indemnify and save the Dissemination Agent, and its officers, directors, employees, and agents, harmless against any losses, expenses, and liabilities that it may incur arising out of or in the exercise or performance of its duties hereunder, including the costs and expenses (including 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 Series 2015A Bonds. The Dissemination Agent shall not be responsible in any manner for the format or content of any notice or Annual Report prepared by the City pursuant to this Disclosure Agreement. The City shall pay the reasonable fees and expenses of the Dissemination Agent for its duties hereunder. Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriters, and Holders and Beneficial Owners from time to time of the Series 2015A Bonds, and shall create no rights in any other person or entity. Date: [Closing Date] F -7 CITY OF BAKERSFIELD Finance Director 6124115 CC AGENDA PACKET FACE 169 EXHIBIT A NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City of Bakersfield, California Name of Bond Issue: City of Bakersfield, California, Wastewater Revenue Refunding Bonds, Series 2015A Date of Issuance: [Closing Date] NOTICE IS HEREBY GIVEN that the City of Bakersfield, California (the "City "), has not provided an Annual Report with respect to the above -named Series 2015A Bonds as required by Section 3 of the Continuing Disclosure Certificate executed by the City on [Closing Date]. The City anticipates that the Annual Report will be filed by Dated: F -8 CITY OF BAKERSFIELD Finance Director 6124115 CC A EN A PACKET PAGE 17 Stradling Yocca Carlson & Rauth Draft of 6112115 CITY OF BAKERSFIELD, CALIFORNIA WASTEWATER REVENUE REFUNDING BONDS, SERIES 2015A BOND PURCHASE CONTRACT City of Bakersfield 1600 Truxtun Avenue Bakersfield, California 93301 Ladies and Gentlemen: July , 2015 Citigroup Global Markets Inc. (the "Representative "), acting on behalf of itself and as representative of the underwriters listed on Schedule 1 attached hereto (hereinafter collectively referred to as the "Underwriter ") and not as an agent or representative of you, offers to enter into this Bond Purchase Contract (the "Purchase Contract ") with the City of Bakersfield (the "City ") which, upon acceptance of this offer by the City will be binding upon the City and the Underwriter. This offer is made subject to acceptance of this Purchase Contract by the City on or before 11:59 p.m. San Francisco time on the date hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter upon written notice delivered by the Representative to the City at any time prior to such acceptance. Capitalized terms used in this Purchase Contract and not otherwise defined herein shall have the meanings given to such terms as set forth in the Indenture (defined below). Section 1. Upon the terms and conditions and upon the basis of the representations set forth in this Purchase Contract, the Underwriter agrees to purchase from the City and the City agrees to sell to the Underwriter, all (but not less than all) of the $ principal amount of City of Bakersfield, California Wastewater Revenue Refunding Bonds, Series 2015A (the "Bonds "). The Bonds will be dated the date of delivery thereof, and shall have the maturities and bear interest at the rates per annum as set forth on Schedule 2 attached hereto. The aggregate purchase price of the Bonds shall be $ (consisting of the $ aggregate principal amount of the Bonds, plus [net] original issue premium in the amount of $ less an Underwriter's discount of $). The Bonds are being issued (i) to refund certain obligations described in the Official Statement described below, and (ii) to pay certain costs of issuing the Bonds. Section 2. The City previously delivered to the Underwriter a Preliminary Official Statement dated June , 2015 (the "Preliminary Official Statement ") and will deliver to the Representative a final Official Statement dated the date hereof as provided in Section 5 of this Purchase Contract (as amended and supplemented from time to time pursuant to Section 6 of this 6124115 GG AGENDA PACKET PAGE 171 Purchase Contract, the "Official Statement "). The City has previously delivered to the Representative a certificate relating to the Preliminary Official Statement, in substantially the form attached hereto as Exhibit A. Section 3. The Bonds are being issued pursuant to Section 33.3 of the Charter of the City, the terms of Chapter 3.55 of the Municipal Code of the City which incorporated certain provisions of the Revenue Bond Law of 1941 (section 54300 et seq of the California Government Code) and certain provisions of the laws of the State of California (the "State ") (including Section 53580 et seq. of the Government Code of the State), Resolution No. -15, adopted by the City Council of the City on June [24], 2015 (the "City Resolution ") and a Master Trust Indenture, dated as of August 1, 2007 (the "Master Indenture ") by and between the City and U.S. Bank National Association, as trustee (the "Trustee ") and as supplemented by a Fourth Supplemental Trust Indenture (the "Fourth Supplemental Indenture ") dated as of September 1, 2015 (the Master Indenture, as supplemented by the Fourth Supplemental Indenture being collectively referred to as the "Indenture "). The Bonds are payable and subject to redemption as provided in the Indenture and as set forth in the Official Statement. The Bonds are special, limited obligations of the City payable solely from and secured by the Net Revenues generated by the Enterprise, which constitute Revenues less Operation and Maintenance costs (as such terms are defined in the Indenture). Section 4. It shall be a condition to the obligation of the Underwriter to purchase, accept delivery of, and pay for the Bonds that the entire $ principal amount of the Bonds to be outstanding under the Indenture shall be delivered by the City to the Underwriter on the date of the Closing. The Underwriter agrees to make an initial bona fide public offering of all of the Bonds, at not in excess of the initial public offering yields or prices set forth on Schedule I attached hereto, however, the Bonds may be offered and sold to certain dealers (including dealers depositing the Bonds into investment trusts) at prices lower than such initial public offering prices or yields. Following the initial public offering of the Bonds, the offering prices may be changed from time to time by the Underwriter. Section 5. The City hereby authorizes the use of the Official Statement by the Underwriter in connection with the sale of the Bonds. The City consents to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement in connection with the sale of the Bonds. The Preliminary Official Statement dated June , 2015, was deemed "final" by the City as of its date for purposes of Securities and Exchange Commission Rule 15c2- 12(b)(1) (the "Rule "), except for the omission of certain information permitted to be omitted by such Rule. The City will supply or cause to be supplied to the Representative, not later than (i) seven business days from the date of this Purchase Contract, (ii) two business days before the Closing, and (iii) the date required by the rules and regulations of the Municipal Securities Rulemaking Board (the "MSRB ") and in time to accompany any confirmation that requests payment from any customer, the Official Statement in sufficient quantity as requested by the Representative to comply with Securities and Exchange Commission Rule 15c2- 12(b)(4) and the rules of the MSRB such Official Statement to be complete as of its date of delivery (as amended and supplemented from time to time pursuant to Section 6(h) of this Purchase Contract, the "Official Statement "). The Underwriter hereby agrees that it will not send any confirmation requesting payment for the purchase of any Bonds unless the confirmation is accompanied by or preceded by the delivery of a copy of the Official Statement. The Representative agrees to: (1) provide the City with final pricing information on the Bonds on a timely basis prior to the date of the Closing, (2) promptly file a copy of the Official Statement, including any supplements prepared by the City with a nationally recognized municipal securities information repository, (3) take any and all other actions necessary to comply with applicable 2 6124115 GG AGENDA PACKET PAGE 172 Securities and Exchange Commission rules and MSRB rules governing the sale of the Bonds and (4) promptly notify the City of the end of the underwriting period (as such term is defined in Rule 15c2- 12). Section 6. The City represents and warrants to the Underwriter that: (a) The City Council of the City has taken official action by the adoption of the City Resolution by a majority of its members at a meeting duly called, noticed and conducted, at which a quorum was present and acting throughout, on June [24], 2015, authorizing all action necessary to be taken by it for (1) the execution and delivery of the Fourth Supplemental Indenture, the Tax Certificate, the Continuing Disclosure Certificate, dated the date of issuance of the Bonds, the Escrow Agreement, dated September , 2015, by and between the City and U.S. Bank National Association, as escrow agent (the "Escrow Agreement "), and this Purchase Contract (collectively, the "City Agreements "), (2) the due performance of the City Agreements, and (3) the taking of any and all such action as may be required on the part of the City to carry out, give effect to and consummate the transactions contemplated hereby; (b) The City is a charter city duly organized and existing under the Constitution and laws of the State and has all necessary power and authority to adopt the City Resolution, to enter into and perform its duties under the City Agreements and, when the City Agreements are executed and delivered by the respective parties thereto, the City Agreements will each constitute legal, valid and binding obligation of the City enforceable in accordance with its respective terms; (c) By official action of the City prior to or concurrently with the acceptance hereof, the City has duly approved the City Agreements, has duly authorized and approved the Preliminary Official Statement and the Official Statement, has duly authorized and approved the execution and delivery of the City Agreements, and the performance by the City of the obligations contained in, the City Agreements and the consummation by it of all other transactions contemplated by the Official Statement; (d) No approval, consent or authorization of any governmental or public agency, authority or person is required for the execution and delivery by the City of any of the City Agreements or the performance by the City of its obligations thereunder or for the issuance or sale of the Bonds. (e) The execution and delivery of each of the City Agreements have been duly authorized by the City; the Purchase Contract has been duly executed and delivered by the City; and the Purchase Contract constitutes, and the other City Agreements and the Bonds will constitute, legal, valid and binding obligations of the City enforceable in accordance with their terms; and the execution and delivery of the City Agreements, and compliance with the provisions of each thereof will not conflict with or constitute a breach of or a default under any instrument relating to the organization, existence or operation of the City, or any commitment, agreement or other instrument to which the City is a party or by which it is or its property is bound or affected, or any ruling, regulation, ordinance, judgment, order or decree to which the City (or any of its officers in their respective capacities as such) is subject or any provision of the laws of the State of California relating to the City and its affairs; (f) Promptly after the Official Statement is available in final form, the City shall deliver or cause to be delivered to the Representative copies of the Official Statement signed by a duly 6124115 CC A EN A PACKET PAGE 173 authorized officer of the City and, within the time period required under Section 5 hereof, a sufficient number of copies of the printed final Official Statement as the Representative shall request (not to exceed 150); (g) At the time of the City's acceptance hereof and at all times subsequent thereto up to and including the time of the Closing, the Official Statement does not and will not contain any untrue statement of a material fact concerning the City or omit to state a material fact concerning the City required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (h) There is no action, suit, proceeding or investigation before or by any court, public board or body pending or, to the best knowledge of the City as of the date hereof, threatened, wherein an unfavorable decision, ruling or finding would: (i) affect the creation, organization, existence or powers of the City, or the titles of its members or officers, (ii) enjoin or restrain the issuance or sale of the Bonds, the collection of the rates and charges for the wastewater system or the use of any other monies or properties pledged under the Indenture for the payment of the Bonds or the Indenture for the payment of the Bonds, (iii) in any way question or affect any of the rights, powers, duties or obligations of the City with respect to the monies pledged or to be pledged to pay the principal of, premium, if any, or interest on the Bonds, (iv) in any way question or affect any authority for the issuance or sale of the Bonds, or the validity or enforceability of the Bonds or the City Agreements or (v) in any way question or affect the Purchase Contract or the other City Agreements or the transactions contemplated by the Purchase Contract, the other City Agreements, the documents referred to in the Official Statement, or any other agreement or instrument to which the City is a party relating to the Bonds; (i) For not more than 25 days from the end of the "underwriting period" (as defined in Securities and Exchange Commission Rule 15c2- 12(e)(2)), if, in the reasonable opinion of Disclosure Counsel and the City Attorney of the City, any event shall occur as a result of which it is necessary to amend or supplement the Official Statement in order to make the statements therein not misleading in light of the circumstances existing at the time it is delivered to a purchaser, the City will prepare and furnish to the Representative a reasonable number of copies of any amendment of or supplement to the Official Statement (in form and substance satisfactory to Disclosure Counsel and the City Attorney of the City) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances existing at the time the Official Statement is delivered to a purchaser, not misleading. For the purposes of this subsection (h), the City will furnish to the Representative such information as it may from time to time request. The City may assume that the "end of the underwriting period" for purposes of Securities and Exchange Commission 15c2 -12 will occur on the date of Closing unless otherwise notified, in writing, by the Representative on or prior to the date of Closing. If the Official Statement is supplemented or amended pursuant to this subsection (h), at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto up to and including the date of the Closing, the Official Statement as so supplemented or amended will not contain, to the best of the City's knowledge, any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 9 6124115 CC A EN A PACKET PAGE 17 (j) The City will furnish such information, execute such instruments and take such other action in cooperation with the Representative as the Representative may reasonably request, to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Representative may designate, and will assist, if necessary therefor, in the continuation of such qualifications in effect as long as required for the distribution of the Bonds; provided, however, that the City shall not be required to qualify as a foreign corporation or to file any general consents to service of process under the laws of any state; (k) Except as may be required under Blue Sky or other securities laws of any state, there is no consent, approval, authorization or other order of, or filing or registration with, or certification by, any regulatory authority having jurisdiction over the City required for the execution and delivery of the Purchase Contract or the issuance or sale of the Bonds or the consummation by the City of the other transactions contemplated by the Official Statement or the City Agreements; (1) Any certificate signed by any official of the City authorized to do so shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein; (m) The City is not in default, and at no time has defaulted in any material respect, on any bond, note or other obligation for borrowed money or any agreement under which any such obligation is or was outstanding; (n) There has not been any materially adverse change in the financial condition of the Wastewater Treatment Fund since June 30, 2014 and there has been no occurrence, circumstance or combination thereof which is reasonably expected to result in any such materially adverse change; (o) The City will undertake, pursuant to the Continuing Disclosure Certificate, to provide certain annual financial information and notices of the occurrence of certain events. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the final Official Statement; and (p) Except as disclosed in the Official Statement, the City has not within the five year period preceding the date of the Preliminary Official Statement and the date of the Official Statement failed to comply, in any material respect, with any of its previous continuing disclosure undertakings to provide annual reports or notices of certain enumerated events. Section 7. At 8:00 A.M., San Francisco time, on September , 2015 (the "Closing "), or on such later date as may be agreed upon by the Representative and the City, the Bonds, duly executed, will be delivered to the Underwriter through the Trustee, as FAST agent on behalf of DTC, and at the offices of Kutak Rock LLP ( "Bond Counsel ") in Los Angeles, California, or such other place as shall have been mutually agreed upon by the Representative and the City, the other documents described herein, and the Underwriter shall pay the purchase price of the Bonds as set forth in Section 1 of this Purchase Contract in immediately available funds to the order of the Trustee. The Bonds will be issued in fully registered form. It is anticipated that CUSIP identification numbers will be inserted on the Bonds, but neither the failure to provide such numbers nor any error with respect thereto shall constitute a cause for failure or refusal by the Underwriter to accept delivery of the Bonds in accordance with the terms of this Purchase Contract. 6124115 CC AGENDA PACKET PAGE 175 Section 8. The Underwriter has entered into this Purchase Contract in reliance upon the representations, warranties and agreements of the City contained herein and to be contained in the documents and instruments to be delivered at the Closing, and upon the performance by the City of its obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriter's obligations under this Purchase Contract to purchase, to accept delivery of and to pay for the Bonds shall be subject to the performance by the City of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following conditions: (a) The representations and warranties of the City contained herein shall be true, complete and correct on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing; (b) At the time of the Closing, the Indenture and the Tax Certificate shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to by the City and Representative, and (ii) the City shall perform or have performed all of its obligations required under or specified in the City Agreements performed at or prior to the date of the Closing; (c) As of the date of the Closing, all necessary official action of the City relating to the City Agreements, shall have been taken and shall be in full force and effect and shall not have been amended, modified or supplemented in any material respect; (d) The Representative shall have the right to terminate the Underwriter's obligations under this Purchase Contract to purchase, to accept delivery of and to pay for the Bonds by notifying the City of its election to do so if, after the execution hereof and prior to the Closing: (i) legislation shall be introduced in, enacted by, reported out of committee, or recommended for passage by the State of California, either House of the Congress, or recommended to the Congress or otherwise endorsed for passage (by press release, other form of notice or otherwise) by the President of the United States, the Treasury Department of the United States, the Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives, or legislation is proposed for consideration by either such committee by any member thereof or presented as an option for consideration by either such committee by the staff or such committee or by the staff of the Joint Committee on Taxation of the Congress of the United States, or a bill to amend the Code (which, if enacted, would be effective as of a date prior to the Closing) shall be filed in either House, or a decision by a court of competent jurisdiction shall be rendered, or a regulation or filing shall be issued or proposed by or on behalf of the Department of the Treasury or the Internal Revenue Service of the United States, or other agency of the federal government, or a release or official statement shall be issued by the Department of the Treasury or the Internal Revenue Service of the United States, in any such case with respect to or affecting (directly or indirectly) the taxation of interest received on obligations of the general character of the Bonds which, in the reasonable opinion of the Representative, materially adversely affects the market for the Bonds or the sale, at the contemplated offering prices (or yields), by the Underwriter of the Bonds; or (ii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national or international emergency or war or other calamity or crisis the 0 6124115 CC A EN A PACKET PAGE 176 effect of which on financial markets is such as to make it, in the reasonable judgment of the Representative, impractical or inadvisable to proceed with the offering of the Bonds as contemplated in the Official Statement; or (iii) (1) legislation introduced in or enacted (or resolution passed) by the Congress or an order, decree, or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary, or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended (the "Securities Act "), or that the Indenture is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended, or that the issuance, offering, or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise, is or would be in violation of the federal securities law as amended and then in effect, or (2) a stop order, ruling, regulation, proposed regulation or statement by or on behalf of the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall be issued or made to the effect that the issuance, offering, sale or distribution of obligations of the general character of the Bonds is in violation or would be in violation of any provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended or the Trust Indenture Act of 1939, as amended; or (iv) in the reasonable judgment of the Representative, the market price of the Bonds, or the market price generally of obligations of the general character of the Bonds, are materially and adversely affected because additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange; or (v) there shall have occurred a general suspension of trading, minimum or maximum prices for trading shall have been fixed and be in force or maximum ranges or prices for securities shall have been required on the New York Stock Exchange or other national stock exchange whether by virtue of a determination by that exchange or by order of the Securities and Exchange Commission or any other governmental agency having jurisdiction or the Comptroller of the Currency, The New York Stock Exchange, or other national securities exchange, or any governmental authority, shall impose, as to the Bonds or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, or financial responsibility requirements of the Underwriter; or (vi) a general banking moratorium shall have been declared by federal or New York or California state authorities or a major financial crisis or a material disruption in commercial banking or securities settlement or clearances services shall have occurred such as to make it, in the judgment of the Representative, impractical or inadvisable to proceed with the offering of the Bonds as contemplated in the Official Statement; or (vii) (1) a downgrading or suspension of any rating (without regard to credit enhancement) by Moody's Investors Service, Inc. ( "Moody's ") or Standard & Poor's ( "S &P ") of any debt securities issued by the City secured by or payable from Revenues or Net Revenues or payable from a contractual or other obligation of the City which is secured by or payable from Revenues or 7 6124115 CC A EN A PACKET PAGE 177 Net Revenues, or (2) there shall have been any official statement as to a possible downgrading (such as being placed on "credit watch" or "negative outlook" or any similar qualification) of any rating without regard to credit enhancement by Moody's or S &P of any debt securities described in clause (1) above, including the Bonds; or (viii) any legislation, ordinance, rule or regulation shall be introduced in or be enacted by any governmental body, department or agency in the State or a decision of a court of competent jurisdiction within the State shall be rendered, which, in the reasonable opinion of the Representative, after consultation with the City, materially adversely affects the market price of the Bonds; or (ix) an event shall occur which makes untrue or incorrect in any material respect, as of the time of such event, any statement or information contained in the Official Statement or which is not reflected in the Official Statement but should be reflected therein in order to make the statements contained therein not misleading in any material respect and requires an amendment of or supplement to the Official Statement and the effect of which, in the reasonable judgment of the Representative, would materially adversely affect the market for the Bonds or the sale, at the contemplated offering prices (or yields), by the Underwriter of the Bonds. (e) At or prior to the Closing, the Representative shall have received each of the following documents on behalf of the Underwriter: (i) A certified copy of the City Resolution and executed originals of the City Agreements; (ii) The Preliminary Official Statement and the Official Statement, with the Official Statement executed on behalf of the City by a duly authorized officer of the City; (iii) The Continuing Disclosure Certificate, executed on behalf of the City by a duly authorized officer of the City; (iv) An approving opinion of Bond Counsel, dated the date of Closing, substantially in the form attached as Appendix D to the Official Statement, and a reliance letter with respect thereto addressed to the Underwriter; (v) A supplemental opinion of Bond Counsel, dated the date of Closing and addressed to the Underwriter, in substantially the form of Exhibit C; (vi) An opinion of Goodwin Proctor LLP, Disclosure Counsel, dated the date of closing and addressed to the Underwriter, in substantially the form of Exhibit D; (vii) A certificate dated the date of Closing from a duly authorized official of the City to the effect that: (A) The representations and warranties of the City contained in Section 6 hereof are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing; (B) To the best of their knowledge, no event effecting the City has occurred since the date of the Official Statement which should be disclosed in the Official Statement 6124115 GG AGENDA PACKET PAGE 178 in order to make the statements therein in light of the circumstances in which they were made not misleading in any material respect; and (C) No litigation is pending or threatened (a) to restrain or enjoin the issuance or sale of the Bonds or the validity of the Indenture, (b) in any way contesting or affecting the validity of the City Agreements or the Bonds, or (c) in any way contesting the existence or powers of the City; (viii) An opinion of the City Attorney dated the date of Closing and addressed to the City and the Underwriter in substantially the form of Exhibit B; (ix) An opinion of Counsel to the Trustee and Escrow Agent dated the date of Closing, addressed to the City, the Trustee, and the Underwriter, to the effect that: (A) the Trustee is a national banking association duly organized and validly existing and in good standing under the laws of the United States of America and has full power and authority to execute and deliver the Fourth Supplemental Indenture and the Escrow Agreement and to perform its obligations under the Indenture; and (B) the Fourth Supplemental Indenture has been duly authorized, executed and delivered by the Trustee and the Indenture and the Escrow Agreement constitute valid and binding obligations of the Trustee enforceable against the Trustee in accordance with their terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws or equitable principles relating to or limiting creditors' rights generally; (x) A certificate of the Trustee, dated the date of the Closing, to the effect that (A) The Trustee is a national banking association duly existing under the laws of the United States of America, and has full power and is qualified to accept and comply with the terms of the Indenture and the Escrow Agreement, and to perform its obligations stated therein; (B) The Trustee has accepted the duties and obligations imposed on it by the Indenture and the Escrow Agreement; (C) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee that has not been obtained is or will be required for the consummation by the Trustee of the transactions contemplated by the Indenture and the Escrow Agreement to be undertaken by the Trustee; (D) Compliance with the terms of the Indenture will not conflict with, or result in a violation or breach of, or constitute a default under, any loan agreement, indenture, bond, note, resolution or any other agreement or instrument to which the Trustee is a party or by which it is bound, or, to the best knowledge of the Trustee, after reasonable investigation, any law, rule, regulation, order or decree of any court or governmental agency or body having jurisdiction over the Trustee or any of its activities or properties (except that no representation, warranty or agreement is made by the Trustee with respect to any Federal or state securities or Blue Sky laws or regulations); and (E) To the best knowledge of the Trustee, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court or governmental 0 6124115 CC A EN A PACKET PAGE 179 agency, public board or body served on or threatened against or affecting the existence of the Trustee, or in any way contesting or affecting the validity or enforceability of the Bonds, the Indenture or the Escrow Agreement, or contesting the powers of the Trustee or its authority to enter into and perform its obligations under the Fourth Supplemental Indenture, the Escrow Agreement or the Bonds, wherein an unfavorable decision, ruling or finding would adversely affect the validity of the Bonds, the Indenture or the Escrow Agreement; (xi) An opinion of Stradling Yocca Carlson & Rauth, A Professional Corporation ( "Underwriter's Counsel ") in form and substance satisfactory to the Representative; NO A Tax Certificate, executed on behalf of the City by a duly authorized officer; (xiii) Evidence that a federal tax information form 8038 -G has been prepared for filing with respect to the Bonds; (xiv) Evidence of required filings with the California Debt and Investment Advisory Commission ( "CDIAC "); (xv) A copy of the executed Blanket Letter of Representations by and between the City and The Depository Trust Company, New York, New York, relating to the book -entry system for the Bonds; (xvi) A letter from S &P indicating that the Bonds have been rated " "; and a letter from Moody's indicating that the Bonds have been rated " "; (xvii) A defeasance opinion of Bond Counsel, dated the date of Closing, with respect to the Refunded Series 2007A Bonds; (xviii) A verification report of Grant Thorton LLP, certified public accountants as described in the Official Statement; (xix) A certified resolution of the Trustee evidencing the authority of the Trustee to undertake its duties under the Indenture and the Escrow Agreement and the authority of the officer executing the Indenture and the Escrow Agreement to bind the Trustee in accordance therewith; and (xx) Such additional legal opinions, certificates, instruments and documents as the Representative may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the date of the Closing, of the City's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the City on or prior to the date of the Closing of all agreements then to be performed and all conditions then to be satisfied by the City. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Purchase Contract shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to the Representative and Underwriter's Counsel. Receipt of, and payment for, the Bonds shall constitute evidence of the satisfactory nature of such as to the Representative. The performance of any and all obligations of the City hereunder and the performance of any and all conditions contained herein for the benefit of the Underwriter may be waived by the Representative in its sole discretion. 10 6124115 GG AGEN A PACKET PAGE 18 If the City shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Contract, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate, and neither the Underwriter nor the City shall be under further obligation hereunder, except that the respective obligations of the City and the Underwriter set forth in Section 10 hereof shall continue in full force and effect. Section 9. (a) The Underwriter shall be under no obligation to pay, and the City shall pay the following expenses incident to the performance of the City's obligation hereunder: (i) the fees and disbursements of Bond Counsel and Disclosure Counsel; (ii) the cost of printing and delivering the Bonds, the Preliminary Official Statement and the Official Statement (and any amendment or supplement prepared pursuant to Section 6(h) of this Purchase Contract); (iii) the fees and disbursements of Fieldman, Rolapp & Associates, as Financial Advisor to the City, accountants, advisers and of any other experts or consultants retained by the City; (iv) expenses (included in the expense component of the Underwriter's spread) incurred on behalf of the City's officers, employees or representatives which are incidental to implementing this Purchase Contract, including, but not limited to, meals, transportation and lodging of those officers, employees or representatives; and (v) any other expenses and costs of the City incident to the performance of its obligations in connection with the issuance and sale of the Bonds (which may be paid through the expense component of the underwriters' discount), including out of pocket expenses and regulatory expenses, and any other expenses agreed to by the parties and expenses incurred on behalf of the City employees and representatives which are incidental to implementing this Purchase Contract, including but not limited to meals, transportation and lodging of such employees or representatives. (b) The Underwriter shall pay all expenses incurred by them in connection with the public offering and distribution of the Bonds including, but not limited to (i) all out -of- pocket disbursements and expenses incurred by the Underwriter in connection with the offering and distribution of the Bonds, (ii) the fees and expenses of Underwriters' Counsel, the fees and expenses of Digital Assurance Certification LLC for a continuing disclosure compliance review and amounts owed by the Underwriter to CDIAC in connection with the issuance of the Bonds (which will be reimbursed to the Underwriter through the expense component of the underwriters' discount) but excluding these expenses provided in (a)(iv) above or as otherwise agreed to by the Representative and the City. Section 10. Any notice or other communication to be given to the City under this Purchase Contract may be given by delivering the same in writing at the City's address set forth above, and any notice or other communication to be given to the Representative or the Underwriter under this Purchase Contract may be given by delivering the same in writing to Citigroup Global Markets Inc., 1850 Maple Glen Road, Sacramento, California 95864; Attention: David G. Houston. Section 11. This Purchase Contract is made solely for the benefit of the City and the Underwriter (including their successors and assigns), and no other person shall acquire or have any right hereunder or by virtue hereof All of the City's representations, warranties and agreements contained in this Purchase Contract shall remain operative and in full force and effect regardless of (a) any investigations made by or on behalf of the Underwriter; or (b) delivery of and payment for the Bonds pursuant to this Purchase Contract. The agreements contained in this Section and in Section 10 shall survive any termination of this Purchase Contract. 11 6124115 GG AGEN A PACKET PAGE 181 Section 12. In the event that any provision of this Purchase Contract shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision of this Purchase Contract. Section 13. This Purchase Contract shall be governed by and interpreted under the laws of the State of California. Section 14. This Purchase Contract may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute the Purchase Contract by signing any such counterpart. Section 15. The City and the Underwriter acknowledge and agree that (i) the purchase and sale of the Bonds pursuant to this Purchase Contract is an arm's - length commercial transaction between the City and the Underwriter, (ii) in connection therewith and with the discussions, undertakings and procedures leading up to the consummation of such transaction, the Underwriter is and has been acting solely as a principal and is not acting as the agent, advisor or fiduciary of the City, (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the City with respect to the purchase and sale contemplated hereby or the discussions, undertakings and procedures leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the City on other matters) and the Underwriter has no contractual obligation to the City with respect to the purchase and sale contemplated hereby except the contractual obligations expressly set forth in this Purchase Contract, (iv) the Underwriter is not acting as municipal advisor (as defined in Section 15B of the Securities Exchange Act of 1934, as amended), (v) the Underwriter has financial and other interests that differ from those of the City, and (vi) the City and the Underwriter have consulted their own legal, financial and other advisors to the extent they deemed appropriate in connection with the purchase and sale of the Bonds. Nothing in the foregoing paragraph is intended to limit the Underwriter's obligation of fair dealing to the City under MSRB Rules G -17 and G -30. Section 16. This Purchase Contract shall become effective upon the execution of the acceptance hereof by an authorized officer of the City and shall be valid and enforceable as of the time of such acceptance. 12 6124115 GG AGENDA PACKET PAGE 182 Accepted as of the date first stated above: CITY OF BAKERSFIELD Nelson Smith, Finance Director APPROVED AS TO FORM: Virginia Gennaro, City Attorney Very truly yours, CITIGROUP GLOBAL MARKETS INC. 13 David G. Houston, Managing Director 6124115 GG AGENDA PACKET PAGE 183 SCHEDULE 1 ADDITIONAL UNDERWRITERS 1.) Citigroup Global Markets Inc. 2.) Merrill Lynch, Pierce, Fenner & Smith Incorporated 3.) Morgan Stanley & Co. LLC 6124115 GG AGENDA PACKET PAGE 184 SCHEDULE 2 MATURITIES, AMOUNTS, RATES AND PRICES Maturity Principal Interest (September 15) Amount Rate Yield Priced to first optional redemption date of 15, 20 at par. Price 6124115 CC AGENDA PACKET PAGE 185 EXHIBIT A CITY OF BAKERSFIELD, CALIFORNIA WASTEWATER REVENUE REFUNDING BONDS, SERIES 2015A FORM OF THE CERTIFICATE OF THE CITY REGARDING PRELIMINARY OFFICIAL STATEMENT The undersigned hereby states and certifies: 1. That he is the duly appointed, qualified and acting Finance Director of the City of Bakersfield (the "City ") and as such, is familiar with the facts herein certified and is authorized and qualified to certify the same; 2. That there has been delivered to Citigroup Global Markets Inc., as representative of the underwriters (collectively, the "Underwriter ") of the captioned Bonds, a Preliminary Official Statement, dated June , 2015, including the cover page and all appendices thereto, in electronic form (the "Preliminary Official Statement "), which the City deemed final as of its date for purposes of Rule 15c2 -12 promulgated under the Securities Exchange Act of 1934, as amended ( "Rule 15c2- 12"), except for information permitted to be omitted therefrom by Rule 15c2 -12 and except for information concerning the Depository Trust Company and the book entry system as to which no representation is made; and 3. The City hereby approves the use and distribution by the Underwriter of the Preliminary Official Statement. Dated: June , 2015 CITY OF BAKERSFIELD A -1 Nelson Smith Finance Director 6124115 GG AGENDA PACKET PAGE 186 I9K4IIIH181] FORM OF OPINION OF CITY ATTORNEY [Letterhead of City Attorney] September , 2015 To the Addressees set forth on Schedule I attached hereto CITY OF BAKERSFIELD, CALIFORNIA WASTEWATER REVENUE REFUNDING BONDS, SERIES 2015A (Opinion of City Attorney) Ladies and Gentlemen: I am City Attorney to the City of Bakersfield, California (the "City "), a charter city organized and existing under the laws of the State of California (the "State ") and have served as such in connection with the issuance, sale and delivery of $ aggregate principal amount of its City of Bakersfield, California Wastewater Revenue Refunding Bonds, Series 2015A (the "Series 2015A Bonds "). In that connection, I have examined certain records reflecting the actions taken by the City pertaining to the authorization, execution and delivery of the following agreements (sometimes collectively referred to herein as the "City Documents "): the Master Trust Indenture, dated as of August 1, 2007, by and between the City and U.S. Bank National Association, as trustee (the "Trustee "), the Fourth Supplemental Trust Indenture, dated as of September 1, 2015 by and between the City and the Trustee, the Bond Purchase Contract, dated July , 2015 (the "Bond Purchase Contract "), by and between the City and Citigroup Global Markets Inc., as representative of the underwriters listed therein, the Escrow Agreement, dated September , 2015, by and between the City and U.S. Bank National Association, as trustee and escrow agent, and the Continuing Disclosure Certificate, dated as of September , 2015, of the City. I have reviewed the City Documents, the Official Statement, dated July , 2015 (the "Official Statement ") relating to the above captioned Series 2015A Bonds, Resolution No. -15, approving and authorizing the execution of the City Documents to which the City is a party and approving the Official Statement, adopted by the City Council of the City on June [24], 2015 (the "Resolution "), and such additional documents as I have deemed necessary to render this opinion. For purposes of this opinion, capitalized terms used herein and not defined have the meanings assigned to them in the Bond Purchase Contract. Based upon the foregoing, I am of the opinion that: 1. The City is a charter city, duly organized and validly existing under the Constitution and the laws of the State. IC 6124115 GG AGENDA PACKET PAGE 187 2. The City has full legal power and lawful authority to enter into the City Documents. 3. The City Documents have been duly authorized, executed and delivered by the City and constitute the valid and binding agreements of the City enforceable against the City in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditor's rights generally. 4. The Resolution of the City approving and authorizing the execution and delivery of the City Documents and approving and authorizing the execution and delivery of the Official Statement, was duly adopted at a meeting of the governing body of the City, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and the Resolution is in full force and effect and has not been modified, amended or rescinded. 5. Except as otherwise disclosed in the Official Statement, there is no litigation, proceeding, action, suit or investigation at law or in equity before or by any court, governmental agency or body, pending and for which the City has been served or, to the best knowledge of such counsel, threatened against the City or the Enterprise, challenging the creation, organization or existence of the City or the Enterprise, or the validity of the City Documents or seeking to restrain or enjoin the Net Revenues or in any way contesting or affecting the validity of the City Documents or any of the transactions referred to therein or contemplated thereby or contesting the authority of the City to enter into or perform its obligations under any of the City Documents, or under which a determination adverse to the City would have a material adverse effect upon the financial condition or the revenues of the Enterprise, or which, in any manner, questions or affects the right or ability of the City to enter into the City Documents or affects in any manner the right or ability of the City to make debt service payments on the Series 2015A Bonds or otherwise perform its obligations under the City Documents. 6. Nothing has come to my attention which would lead me to believe that the Official Statement (excluding therefrom the financial and statistical data and forecasts included therein and information about The Depository Trust Company and its book -entry system as to which no opinion is expressed) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Very truly yours, Virginia Gennaro City Attorney, City of Bakersfield IC 6124115 GG AGEN A PACKET PAGE 188 EXHIBIT C FORM OF SUPPLEMENTAL OPINION OF BOND COUNSEL September , 2015 City of Bakersfield Bakersfield, California Citigroup Global Markets Inc. as Representative Sacramento, California CITY OF BAKERSFIELD, CALIFORNIA WASTEWATER REVENUE REFUNDING BONDS, SERIES 2015A Ladies and Gentlemen: We have acted as Bond Counsel in connection with the issuance and sale by the City of Bakersfield, California (the "City ") of $ aggregate principal amount of its City of Bakersfield, California Wastewater Revenue Refunding Bonds, Series 2015A (the "Series 2015A Bonds "). We are delivering this letter pursuant to Section 8(e)(v) of the Bond Purchase Contract, dated July , 2015 (the "Bond Purchase Contract "), by and between Citigroup Global Markets Inc., on its own behalf and as representative of Morgan Stanley & Co. LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, and the City. All capitalized terms used herein and not defined shall have the meanings as set forth in the Bond Purchase Contract. In connection with the issuance of the Series 2015A Bonds and the opinions set forth below, we have examined the Master Trust Indenture, dated as of August 1, 2007, (the "Master Trust Indenture "), by and between the City and U.S. Bank National Association, as trustee (the "Trustee "); the Fourth Supplemental Trust Indenture, dated as of September 1, 2015 (the "Fourth Supplemental Indenture "), by and between the City and the Trustee; the Bond Purchase Contract; the Escrow Agreement, dated September , 2015, by and between the City and the Trustee, as trustee and escrow agent; the Continuing Disclosure Certificate; the Tax Compliance Certificate, dated September , 2015, by the City; the Resolution; the Official Statement; and such other documents, instruments and materials as we deemed necessary to provide the opinions and conclusions set forth herein. The opinions and conclusions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions or conclusions may be affected by actions taken or omitted or events occurring after the date hereof We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. C -1 6124115 GG AGENDA PACKET PAGE 189 We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the City. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents referred to in the second paragraph hereof We have further assumed compliance with all covenants and agreements contained in such documents. In addition, we call attention to the fact that the rights and obligations under the Series 2015A Bonds, the Master Trust Indenture, the Fourth Supplemental Indenture, the Bond Purchase Contract, the Escrow Agreement, the Continuing Disclosure Certificate, the Tax Compliance Certificate and the Resolution and their enforceability may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors' rights, to the application of equitable principles, and to the exercise of judicial discretion in appropriate cases. We express no opinion with respect to any indemnification, contribution, penalty, choice of law, choice of forum or waiver provisions contained in the foregoing documents. From such examination we are of the opinion that: (a) The Bond Purchase Contract, the Continuing Disclosure Certificate and the Escrow Agreement have each been duly authorized, executed and delivered by the City and, assuming the due authorization, execution and delivery by the other party thereto, as applicable, each constitute a binding and enforceable obligation of the City. (b) The Series 2015A Bonds are exempt from registration under Section (3)(a)(2) of the Securities Act of 1933, as amended, and the Master Trust Indenture and the Fourth Supplemental Indenture are exempt from qualification under the Trust Indenture Act of 1939, as amended. (c) The information in the Official Statement under the headings "INTRODUCTION," "THE SERIES 2015A BONDS," "SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2015A BONDS" and "TAX MATTERS," in "APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS" and in "APPENDIX D —FORM OF BOND COUNSEL OPINION," insofar as such statements expressly summarize certain provisions of the Series 2015A Bonds and the Master Trust Indenture, the Fourth Supplemental Indenture and Bond Counsel's opinion concerning certain federal tax matters relating to the Series 2015A Bonds, are accurate in all material respects. Additionally we consent to the form of our Bond Counsel opinion being included as Appendix D to the Official Statement. This letter is furnished by us as Bond Counsel. No attorney- client relationship has existed or exists between our firm and Citigroup Global Markets Inc., Morgan Stanley & Co. LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, in connection with the Series 2015A Bonds or by virtue of this letter. This opinion is issued to and for the sole benefit of the Addressees set forth above and is issued for the sole purpose of the transaction specifically referred to herein. No person other than the Addressees set forth above may rely upon this opinion without our express prior written consent. This opinion may not be utilized by you for any other purpose whatsoever and may not be quoted by you without our express prior written consent. Our engagement with respect to the Series 2015A Bonds has concluded with their issuance. We assume no obligation to review or supplement this C -2 6124115 GG AGENDA PACKET PAGE 190 opinion subsequent to its date, whether by reason of a change in the current laws, by legislative or regulatory action, by judicial decision or for any other reason. Very truly yours, C -3 6124115 CC A EN A PACKET PAGE 191 19K4II11]1811 FORM OF OPINION OF DISCLOSURE COUNSEL September , 2015 City of Bakersfield Citigroup Global Markets, Inc. 1600 Truxtun Avenue 1850 Maple Glen Road Bakersfield, California 93301 Sacramento, California 95864 Merrill Lynch, Pierce, Fenner & Smith Incorporated 333 S. Hope Street Los Angeles, California 90071 Ladies and Gentlemen: Morgan Stanley & Co. LLC 1999 Avenue of the Stars Los Angeles, California 90067 We have acted as disclosure counsel to the City of Bakersfield, California (the "City ") in connection with the purchase by Citigroup Global Markets Inc., as Senior Manager, and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC, as Co- Managers (collectively, the "Underwriters "), from the City of its "City of Bakersfield, California, Wastewater Revenue Refunding Bonds, Series 2015" in the aggregate principal amount of $ (the "Bonds "), pursuant to a Bond Purchase Contract, dated July , 2015 (the "Bond Purchase Contract "), by and between the Underwriters and the City. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Bond Purchase Contract. The Bonds are being issued pursuant to Section 33.3 of the Charter of the City, Chapter 3.55 of the City's Municipal Code, which incorporates certain provisions of the Revenue Bond Law of 1941, Section 54300, et seq., of the California Government Code, certain provisions of the laws of the State of California (including Section 53580 et seq. of the California Government Code), Resolution No. , adopted by the City Council of City on June , 2015, the Master Trust Indenture, dated as of August 1, 2007 (the "Master Indenture "), by and between the City and U.S. Bank National Association, as trustee (the "Trustee "), and a Fourth Supplemental Trust Indenture, dated as of September 1, 2015 (the "Fourth Supplemental Indenture "), by and between the City and the Trustee. In connection with the foregoing, we have reviewed the Master Indenture, the Fourth Supplemental Indenture, a printed copy of the Official Statement of the City, dated July , 2015, with respect to the Bonds (the "Official Statement "), the Bond Purchase Contract, the opinions referred to in Section 8(e) of the Bond Purchase Contract, certifications of the City, the Trustee, and others as to certain factual matters, and such other records, documents, certificates, instruments, and opinions, and we have made such investigations of law, as we have deemed appropriate as a basis for the conclusions hereinafter expressed. In arriving at the conclusions hereinafter expressed, we are not expressing any belief or view on, and, with the permission of the Underwriters and the City, are assuming and relying on, the D -1 6124115 GG AGENDA PACKET PAGE 192 validity, accuracy, and sufficiency of the records, documents, certificates, instruments, and opinions referred to above (including the accuracy of all factual matters represented and legal conclusions contained therein, including, without limitation, representations and legal conclusions regarding the due authorization, issuance, delivery, validity, and enforceability of the Bonds and the exclusion of interest on the Bonds from gross income for federal income tax purposes). We have assumed that all records, documents, certificates, instruments, and opinions that we have reviewed, and the signatures thereto, are genuine. We have reviewed only the printed version of the Official Statement and we assume that any electronic version of the Official Statement is identical in all respects to such printed version. Our statements herein with respect to the Official Statement do not pertain to any electronic version of the Official Statement that is not identical in all respects to the printed version thereof. We are not passing upon and do not assume any responsibility for the accuracy, completeness, or fairness of any of the statements contained in the Official Statement and make no representation that we have independently verified the accuracy, completeness, or fairness of any such statements. However, in our capacity as disclosure counsel, we met in conferences and participated in telephone conferences with representatives of the Underwriters, the City, the Trustee, Kutak Rock LLP, as bond counsel, and others, during which conferences the contents of the Official Statement and related matters were discussed. Based on our participation in the above - mentioned conferences, and in reliance thereon and on the records, documents, certificates, instruments, and opinions herein mentioned (as set forth above), we advise you that, during the course of our serving as disclosure counsel on this matter, no information came to the attention of the lawyers in our firm rendering disclosure counsel services in connection with such representation that caused us to believe that the Official Statement as of its date and as of the date of this letter (excluding any financial statements and other financial, statistical, economic, demographic, or engineering data or forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions, or expressions of opinion, any information about valuation, appraisals, absorption, archaeological, or environmental matters, and any information about debt service requirements, The Depository Trust Company or the book- entry- only system, or the tax exemption of interest on the Bonds included therein, and the Appendices thereto, as to all of which we express no belief or view), contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. For purposes of this paragraph, "attention" refers to the conscious awareness of each of the lawyers in our firm who actively participated in rendering such disclosure counsel services, and "believe" refers to the actual, subjective, good faith belief of each of those lawyers. Please be advised that only Lewis G. Feldman has rendered such disclosure counsel services in connection with such representation. We are furnishing this letter to you pursuant to Section 8(e)(vi) of the Bond Purchase Contract. This letter is intended for the information solely of the addressees hereof and solely for the purposes of the transactions contemplated by the Official Statement and may not be relied upon by any other person or entity, or for any other purpose, or quoted in whole or in part, or otherwise referred to, in any document, or be filed with any governmental or other administrative agency or other person or entity for any purpose, without the prior written consent of this firm. No attorney - client relationship has existed or exists between our firm and the Underwriters in connection with the Bonds or by virtue of this letter. This letter is not intended to, and may not, be relied upon by any owners of the Bonds. Our engagement with respect to this matter has terminated as of the date hereof, and we do not undertake to advise you of any matters that may come to our attention subsequent to the date hereof that may affect the statements set forth herein. D -2 6124115 GG AGENDA PACKET PAGE 193 This letter is limited to the matters expressly set forth herein, and no belief or assurance is implied or may be inferred beyond the matters expressly stated herein. Respectfully submitted, D -3 6124115 CC A EN A PACKET PAGE 194 4836- 2455- 4018.3 ESCROW AGREEMENT by and between CITY OF BAKERSFIELD, CALIFORNIA and U.S. BANK NATIONAL ASSOCIATION, as Trustee and Escrow Agent relating to: $190,695,000 City of Bakersfield, California Wastewater Revenue Bonds Series 2007A Dated September [], 2015 6124115 CC AGENDA PACKET FACE 19.E ESCROW AGREEMENT THIS ESCROW AGREEMENT, dated September [], 2015 (this "Escrow Agreement "), is made by and between the CITY OF BAKERSFIELD, CALIFORNIA, a charter city and municipal corporation organized and existing under the Constitution of the State of California (the "City "), and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as trustee under the hereinafter defined Master Indenture and First Supplemental Indenture, and as escrow agent (the "Trustee/Escrow Agent "). WITNESSETH: WHEREAS, the City has previously issued its City of Bakersfield, California Wastewater Revenue Bonds Series 2007A (the "Series 2007A Bonds "), pursuant to the Master Trust Indenture, dated as of August 1, 2007 (the "Master Indenture "), by and between the City and the Trustee /Escrow Agent, as trustee, and the First Supplemental Trust Indenture, dated as of August 1, 2007 (the "First Supplemental Indenture "), by and between the City and the Trustee /Escrow Agent, as trustee; WHEREAS, the City is, simultaneously with the execution of this Escrow Agreement, issuing $[ ] aggregate principal amount of its City of Bakersfield, California Wastewater Revenue Refunding Bonds, Series 2015A (the "Series 2015A Bonds ") under the terms of the Master Indenture and a Fourth Supplemental Trust Indenture, dated as of September 1, 2015 (the "Fourth Supplemental Indenture "), by and between the City and the Trustee /Escrow Agent, as trustee; WHEREAS, the Series 2015A Bonds are being issued to advance refund and defease the Series 2007A Bonds set forth in Exhibit A attached hereto (the "Refunded Bonds "); and NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth, the parties hereto agree as follows: Section 1. Creation of Escrow Fund. There is hereby created and established with the Trustee /Escrow Agent a special and irrevocable escrow fund designated "City of Bakersfield, California Wastewater Revenue Bonds Series 2007A Escrow Fund" (herein referred to as the "Escrow Fund") to be held in the custody of the Trustee /Escrow Agent in trust under this Escrow Agreement for the benefit of the owners of the Refunded Bonds. Except as otherwise provided in Section 5 hereof, the City shall have no interest in the funds or investments held in the Escrow Fund. 4836- 2455- 4018.3 6124115 CC AGENDA PACKET FACE 196 Section 2. Deposit to the Escrow Fund (a) Concurrently with the execution and delivery of this Escrow Agreement, the City hereby directs the Trustee /Escrow Agent to, and the Trustee /Escrow Agent shall, deposit the sum of $[ ] to be derived from the proceeds of the sale of the Series 2015A Bonds (which the City shall transfer or cause to be transferred to the Trustee /Escrow Agent on [ ], 2015). (b) The Trustee /Escrow Agent hereby acknowledges receipt of $[ ], as described in paragraph (a) above, and that such amount was deposited in the Escrow Fund. (c) The City hereby directs the Trustee /Escrow Agent to, and the Trustee /Escrow Agent shall, on [ ], 2015, use $[ ] on deposit in the Escrow Fund to purchase the securities described in Schedule I attached hereto (the "Initial Government Securities "), and shall retain $[ ] in the Escrow Fund as a beginning cash balance. Section 3. Investment of Escrow Fund. The Trustee /Escrow Agent shall purchase the Initial Government Securities as provided in Section 2 hereof and shall hold such Initial Government Securities, the beginning cash balances and any earnings received thereon and any reinvestment thereof created by this Escrow Agreement and disburse such amounts as provided herein. The Trustee /Escrow Agent shall collect amounts due and shall sell or otherwise liquidate investments in the Escrow Fund as needed to make the payments and transfers required by this Escrow Agreement and may substitute different Government Securities, as defined and subject to the terms and limitations of Section 7 hereof, for the Initial Government Securities but otherwise shall have no power or duty to sell, transfer, request the redemption of or otherwise dispose of the Initial Government Securities. Section 4. Creation of Lien on Escrow Fund. The deposit of the moneys, the Initial Government Securities and any other Government Securities in the Escrow Fund shall constitute an irrevocable deposit in trust for the benefit of the holders of the Refunded Bonds. The holders of the Refunded Bonds are hereby granted an express lien on the Escrow Fund and all moneys and investments from time to time held therein for the payment of amounts described in Section 5 hereof. Section 5. Use of Escrow Fund. The Trustee /Escrow Agent shall withdraw the amounts described in Schedule 11 attached hereto on the dates set forth in such Schedule 11 from the Escrow Fund and use such amounts in its capacity as Trustee for the Refunded Bonds to pay the principal of and interest on the Refunded Bonds as directed pursuant to the First Supplemental Indenture. The Trustee /Escrow Agent shall retain all unclaimed moneys, together with interest thereon, in the Escrow Fund and shall invest such unclaimed moneys as directed in writing by an Authorized City Representative (as defined in the Master Indenture). At such time as the City delivers to the Trustee /Escrow Agent written notice that no additional amounts from the Escrow Fund will be needed to redeem the Refunded Bonds, or on September 16, 2017, whichever 4836- 2455- 4018.3 2 6124115 CC A EN A PACKET PAGE 197 occurs first, the Trustee /Escrow Agent shall transfer all amounts then remaining in the Escrow Fund to the Interest Account of the Series 2015A Debt Service Fund, established under the Master Indenture and the Fourth Supplemental Indenture to be used to pay interest on the Series 2015A Bonds, and thereafter the holders of the Refunded Bonds shall look only to the City for payment and the Trustee /Escrow Agent shall have no responsibility or liability whatsoever with respect to any of such moneys. At such time as no amounts remain in the Escrow Fund, such fund shall be closed. Section 6. Notice of Redemption of Refunded Bonds. By the execution of this Escrow Agreement and delivery hereof to the Trustee /Escrow Agent, the City hereby delivers notice to the Trustee /Escrow Agent pursuant to the First Supplemental Indenture and the Master Indenture that the City wishes to redeem the Refunded Bonds on September 15, 2017. The Trustee /Escrow Agent hereby waives any right to receive any other notices that it may be entitled to from the City under the Master Indenture and the First Supplemental Indenture with respect to the redemption of the Refunded Bonds, as described herein. The Trustee /Escrow Agent agrees to give or cause to be given notice of such redemption at such times and in such manner as provided in the Master Indenture and the First Supplemental Indenture to the owners of the Refunded Bonds, including, (a) notice of defeasance of the Refunded Bonds (a form of which is attached hereto as Exhibit B), to be immediately mailed to the Depository Trust Company, as required pursuant to Article VII of the Master Indenture; and (b) at least 30 but no more than 60 days prior to September 15, 2017, notice of redemption of the Refunded Bonds (a form of which is attached hereto as Exhibit C) as required pursuant to Section 3.01 of the First Supplemental Indenture. Section 7. Reinvestment; Substitution of Government Securities. EXCEPT AS SPECIFICALLY PROVIDED BELOW, THE TRUSTEE /ESCROW AGENT MAY NOT SELL, TRANSFER, REQUEST THE REDEMPTION OF OR OTHERWISE DISPOSE OF THE INITIAL GOVERNMENT SECURITIES. Interest income and other amounts received by the Trustee /Escrow Agent as payments on the Initial Government Securities held in the Escrow Fund shall be held as part of the Escrow Fund to be used for the purposes set forth in Section 5 hereof and may be invested by the Trustee /Escrow Agent at the written direction of the Department; provided that (a) such amounts may only be invested in Government Securities as defined in this Section 7; and (b) such investments shall have maturities which do not extend beyond the date on which the moneys so invested will be needed to make payments required by Section 5 hereof. Upon the fulfillment of the conditions set forth in this Section 7, the Trustee /Escrow Agent at the written direction of the City may sell, liquidate or otherwise dispose of some or all of the Initial Government Securities then held as an investment of the Escrow Fund and reinvest the proceeds thereof, together with other moneys held in the Escrow Fund in different Government Securities; provided that no such substitution shall occur unless the Department shall first deliver to the Trustee /Escrow Agent (a) an opinion by an independent certified public accountant that, after such reinvestment or substitution, the principal amount of the Government Securities then held in such Escrow Fund, together with the interest thereon and other available moneys therein, will be sufficient to pay the principal of and interest on the Refunded Bonds secured by the Escrow Fund on the dates and in the amounts as required pursuant to this Escrow 4836- 2455- 4018.3 3 6124115 CC A EN A PACKET PAGE 198 Agreement and the First Supplemental Indenture; and (b) an opinion of nationally recognized bond counsel to the effect that such sale, liquidation or other disposition and substitution of different Government Securities is permitted under this Escrow Agreement, the First Supplemental Indenture and the Master Indenture, and will not have any adverse effect with respect to the exemption of the interest on the Series 2015A Bonds or the Refunded Bonds from income taxation under the Internal Revenue Code of 1986, as amended; provided further that no opinions shall be required pursuant to this Section 7 with respect to the reinvestment of any moneys derived from Government Securities held in the Escrow Fund hereunder which have matured so long as such moneys are reinvested in Government Securities maturing not later than the dates such funds are required to pay the principal of and interest on the Refunded Bonds and the yield on such Government Securities does not exceed the yield on the Series 2015A Bonds. "Government Securities," as used in this Escrow Agreement, means only noncallable direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by the full faith and credit of, the United States of America, and which are limited to: (i) U.S. Treasury Certificates, Notes and Bonds (including State and Local Government Series "SLGS" and any stripped interest on the principal portion of such U.S. Treasury Certificates, Notes and Bonds); and (ii) Resolution Funding Corp. (REFCORP), only the interest component of REFCORP strips which have been stripped by request to the Federal Reserve Bank of New York in book -entry form are acceptable. Section 8. Liability of Trustee /Escrow Agent. (a) The Trustee /Escrow Agent shall not under any circumstance be liable for any loss resulting from any investment made pursuant to this Escrow Agreement in compliance with the provisions hereof. The Trustee /Escrow Agent shall have no lien whatsoever on the Escrow Fund or moneys on deposit in the Escrow Fund for the payment of fees and expenses for services rendered by the Trustee /Escrow Agent under this Escrow Agreement or otherwise. (b) The Trustee /Escrow Agent shall not be liable for the accuracy of the calculations as to the sufficiency of any moneys deposited into the Escrow Fund or the Initial Government Securities or any Government Securities purchased at the direction of the City to pay the principal of and interest on the Refunded Bonds. (c) The City agrees that if for any reason the investments and moneys and other funds available to pay principal of and interest on the Refunded Bonds are insufficient therefor, the City shall continue to be liable for payment therefor in accordance with the terms of the Master Indenture and the First Supplemental Indenture. (d) No provision of this Escrow Agreement shall require the Trustee /Escrow Agent to expend or risk its own funds. (e) The Trustee /Escrow Agent may consult with bond counsel to the City or with such other counsel of its own choice subject to reasonable approval by the City 4836- 2455- 4018.3 rd 6124115 CC AGENDA PACKET PAGE 199 (which may but need not be counsel to the City) and the opinion of such counsel shall be full and complete authorization to take or suffer in good faith any action in accordance with such opinion of counsel. (f) Whenever in the administration of this Escrow Agreement the Trustee /Escrow Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or not taking any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or misconduct on the part of the Trustee /Escrow Agent, be deemed to be conclusively proved and established by a certificate of an Authorized City Representative, and such certificate shall, in the absence of negligence or misconduct on the part of the Trustee /Escrow Agent, be full warrant to the Trustee /Escrow Agent for any action taken or not taken by it under the provisions of this Escrow Agreement in reliance thereon. Except with respect to any future reinvestment or substitution of Government Securities as may be directed by the City as set forth in Section 7 hereof, the Trustee /Escrow Agent hereby represents that, as of the date hereof, it does not need any further certificate or direction from any other party in order to carry out the terms of this Escrow Agreement. (g) The Trustee /Escrow Agent may conclusively rely, as to the truth and accuracy of the statements and correctness of the opinions and the calculations provided, and shall be protected and indemnified as set forth in Section 12 hereof, in acting, or refraining from acting, upon any written notice, instruction, request, certificate, document or opinion furnished to the Trustee /Escrow Agent signed or presented by the proper party, and it need not investigate any fact or matter stated in such notice, instruction, request, certificate or opinion. (h) The Trustee /Escrow Agent shall not have any liability hereunder except to the extent of its own negligence or willful misconduct. In no event shall the Trustee /Escrow Agent be liable for any special, indirect or consequential damages. (i) The Trustee /Escrow Agent shall not be responsible for any of the recitals or representations contained herein. 0) The Trustee /Escrow Agent undertakes to perform only such duties as are expressly and specifically set forth in this Escrow Agreement and no implied duties or obligations shall be read into this Escrow Agreement against the Trustee /Escrow Agent. Section 9. Successor Trustee /Escrow Agent. Any corporation into which the Trustee /Escrow Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion, consolidation or tax -free reorganization to which the Trustee /Escrow Agent shall be a party or any corporation succeeding to the corporate trust business of the Trustee /Escrow Agent, shall be the successor Trustee /Escrow Agent under this Escrow Agreement without the execution or filing of any paper or any other act on the part of the parties hereto, anything herein to the contrary notwithstanding. 4836- 2455- 4018.3 9 6124115 CC AGENDA PACKET PAGE 200 Section 10. Termination. This Escrow Agreement shall terminate when all transfers and payments required to be made by the Trustee /Escrow Agent under the provisions hereof shall have been made. Any deficiency in the amounts required to be paid hereunder shall be paid by the City. The City hereby directs the Trustee /Escrow Agent to, and the Trustee /Escrow Agent shall, distribute any moneys remaining in the Escrow Fund at the time of such termination to the Interest Account of the Series 2015A Debt Service Fund, as required pursuant to Section 5 hereof. Section 11. Tax - Exempt Nature of Interest on the Refunded Bonds. The City covenants and agrees for the benefit of the holders of the Refunded Bonds that it will not direct or permit any thing or act to be done in such manner as would cause interest on the Refunded Bonds to be included in the gross income of the recipients thereof for federal income tax purposes under the Code, nor will it use any of the proceeds received from the sale of the Series 2015A Bonds, directly or indirectly, in any manner which would result in the Series 2015A Bonds being classified as "arbitrage bonds" within the meaning of the Code. Section 12. Compensation and Indemnity of Trustee /Escrow Agent. For acting under this Escrow Agreement, the Trustee /Escrow Agent shall be entitled to payment of fees, acceptable to the City, for its services, including, without limitation, reasonable compensation for all services rendered in the execution, exercise and performance of any of the duties of the Trustee /Escrow Agent to be exercised or performed pursuant to the provisions of this Escrow Agreement, and all reasonable expenses, disbursements and advances incurred in accordance with any provisions of this Escrow Agreement (including the reasonable compensation and expenses and disbursements of independent counsel, agents and attorneys -at -law or other experts employed by it in the exercise and performance of its powers and duties hereunder and out -of- pocket expenses including, but not limited to, postage, insurance, wires, stationery, costs of printing forms and letters and publication of notices of redemption); however, such amount shall never be payable from or become a lien upon the Escrow Fund, which fund shall be held solely for the purposes and subject to the liens set forth in Sections 4 and 5, respectively, hereof. To the extent permitted by law, the City agrees to indemnify and hold the Trustee /Escrow Agent, and its officers, agents and directors, harmless from and against all claims, suits and actions brought against it, or to which it is made a party, and from all costs, expenses (including reasonable attorneys' fees of counsel reasonably acceptable to the City), losses and damages suffered by it as a result thereof, including the costs and expenses of defending against any such claims, suits or actions, where and to the extent such claim, suit or action arises out of the performance by the Trustee /Escrow Agent of its duties under this Escrow Agreement; provided, however, that such indemnification shall not extend to claims, suits and actions brought against the Trustee /Escrow Agent which result in a judgment being entered, settlement being reached or other disposition made based upon the Trustee /Escrow Agent's negligence or willful misconduct. The indemnification provided for in this Escrow Agreement shall never be payable from or become a lien upon the Escrow Fund, which Escrow Fund shall be held solely for the purpose and subject to the liens set forth in Sections 4 and 5, respectively, hereof. The obligations of the City under this Section 12 shall remain in effect and continue notwithstanding the termination of this Escrow Agreement and the resignation or the removal of the Trustee /Escrow Agent. Section 13. Replacement and Resignation of Trustee /Escrow Agent. The Department may remove the Trustee /Escrow Agent and /or the Trustee /Escrow Agent may resign pursuant to 4836- 2455- 4018.3 6 6124115 CC AGENDA PACKET FACE 201 the provisions of Section 9.09 of the Master Indenture and the applicable provisions of the First Supplemental Indenture. Section 14. Third -Party Beneficiaries and Amendments. The owners of the Refunded Bonds are hereby recognized as third -party beneficiaries of this Escrow Agreement to the extent of their interests in the Escrow Fund as set forth in Sections 4 and 5 hereof. Section 15. Severability. If any one or more of the provisions of this Escrow Agreement should be determined by a court of competent jurisdiction to be contrary to law, such provision shall be deemed and construed to be severable from the remaining provisions herein contained and shall in no way affect the validity of the remaining provisions of this Escrow Agreement. Section 16. Successors and Assigns. All of the covenants and agreements in this Escrow Agreement contained by or on behalf of the City or the Trustee /Escrow Agent shall bind and inure to the benefit of their respective successors and assigns, whether so expressed or not. Section 17. Governing Law. This Escrow Agreement shall be governed by and construed in accordance with the laws of the State of California. Section 18. Headings. Any headings preceding the text of the several Sections hereof, and any table of content appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this Escrow Agreement, nor shall they affect its meaning, construction or effect. Section 19. Amendments. The City and the Trustee /Escrow Agent shall not modify this Escrow Agreement without the consent of all of the owners of the Refunded Bonds affected by such modification which have not been paid in full. Section 20. Counterparts. This Escrow Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as one original and shall constitute and be but one and the same instrument. 4836- 2455- 4018.3 [Signature page follows] 7 6124115 CC AGENDA PACKET FACE 202 IN WITNESS WHEREOF, the parties hereto have each caused this Escrow Agreement to be executed by their duly authorized officers as of the date first above written. CITY OF BAKERSFIELD, CALIFORNIA itz Harvey Hall, Mayor APPROVED AS TO FORM: ME Virginia Gennaro, City Attorney APPROVED AS TO CONTENT AND COUNTERSIGNED: ME U.S. BANK NATIONAL ASSOCIATION, as Trustee /Escrow Agent Authorized Officer Nelson K. Smith, Finance Director [Signature page to Escrow Agreement] S -1 4836- 2455- 4018.3 6124115 CC A EN A PACKET PAGE 203 EXHIBIT A REFUNDED BONDS City of Bakersfield, California Wastewater Revenue Bonds 2007A 4836- 2455- 4018.3 6124115 CC AGENDA PACKET FACE 204 Principal Redemption Redemption CUSIP Maturity Date Redeemed Price Date Number September 15, 2018 $6,025,000 100.00% September 15, 2017 05753P AK8 September 15, 2019 6,480,000 100.00 September 15, 2017 05753P AL6 September 15, 2020 3,695,000 100.00 September 15, 2017 05753P BF8 September 15, 2020 4,100,000 100.00 September 15, 2017 05753P AM4 September 15, 2021 8,240,000 100.00 September 15, 2017 05753P AN2 September 15, 2022 8,595,000 100.00 September 15, 2017 05753P AP7 September 15, 2023 9,080,000 100.00 September 15, 2017 05753P AQ5 September 15, 2024 9,585,000 100.00 September 15, 2017 05753P AR3 September 15, 2025 10,065,000 100.00 September 15, 2017 05753P AS1 September 15, 2026 10,620,000 100.00 September 15, 2017 05753P AT9 September 15, 2027 11,175,000 100.00 September 15, 2017 05753P AU6 September 15, 2028 11,840,000 100.00 September 15, 2017 05753P AV4 September 15, 2032 53,765,000 100.00 September 15, 2017 05753P BG6 September 15, 2033 3,485,000 100.00 September 15, 2017 05753P AW2 4836- 2455- 4018.3 6124115 CC AGENDA PACKET FACE 204 EXHIBIT B FORM OF NOTICE OF DEFEASANCE City of Bakersfield, California Wastewater Revenue Bonds Series 2007A Notice is hereby given to the holders of the below listed City of Bakersfield, California Wastewater Revenue Bonds, Series 2007A (the "Bonds ") that (1) there has been deposited with U.S. Bank National Association, as Trustee and Escrow Agent, moneys and investment securities as permitted by the Master Trust Indenture, dated as of August 1, 2007 (the "Master Indenture "), by and between the City of Bakersfield, California (the "City ") and U.S. Bank National Association, as trustee (the "Trustee "), as supplemented by the First Supplemental Trust Indenture, dated as of August 1, 2007 (the "First Supplemental Indenture," and together with the Master Indenture, the "Indenture "), by and between the City and the Trustee, the principal of and interest on which when due will provide moneys which, will be sufficient and available on (a) each September 15 and March 15 occurring between the date of this notice and March 15, 2017 to pay the interest on the Bonds, and (b) September 15, 2017 to redeem the Bonds at a redemption price of par and to pay the interest then due on the Bonds, and (ii) the Bonds are deemed paid for purposes of the Indenture. The Bonds consist of the following: CUSIP Maturity Date Principal Interest Number (September 15) Amount Rate 05753P AK8 2018 $ 6,025,000 5.000% 05753P AL6 2019 6,480,000 5.000 05753P BF8 2020 3,695,000 5.000 05753PAM4 2020 4,100,000 4.750 05753P AN2 2021 8,240,000 5.000 05753P AP7 2022 8,595,000 5.000 05753P AQ5 2023 9,080,000 5.000 05753P AR3 2024 9,585,000 5.000 05753P AS1 2025 10,065,000 5.000 05753P AT9 2026 10,620,000 5.000 05753PAU6 2027 11,175,000 5.000 05753P AV4 2028 11,840,000 5.000 05753P BG6 2032 53,765,000 5.000 05753P AW2 2033 3,485,000 5.000 Neither the Department nor the Trustee /Escrow Agent shall be responsible for the selection or use of the CUSIP Numbers, nor is any representation made as to their correctness indicated in this Notice of Defeasance. They are included solely for the convenience of the Bondholders. At least 30 days, but not more than 60 days, prior to September 15, 2017, in accordance with the terms of the Indenture, the Trustee will mail a redemption notice with respect to the Bonds to the Bondholders. Dated this [9th] day of September, 2015. [Also provide notice to EMMA within 10 days of closing per Rule l5c2 -14 4836- 2455- 4018.3 City of Bakersfield, California 6124115 CC A EN A PACKET PAGE 205 U.S. Bank National Association, as Trustee 4836- 2455- 4018.3 6124115 CC A EN A PACKET PAGE 206 EXHIBIT C FORM OF NOTICE OF REDEMPTION City of Bakersfield, California Wastewater Revenue Bonds Series 2007A Issue Date: August 9, 2007 Redemption Date: September 15, 2017 NOTICE IS HEREBY GIVEN that, pursuant to the provisions of the First Supplemental Trust Indenture, dated as of August 1, 2007 (the "First Supplemental Indenture "), between the City of Bakersfield, California (the "City") and U.S. Bank National Association, a national banking association, as trustee (the "Trustee ") the City has determined that $[156,750,000] aggregate principal amount of its outstanding City of Bakersfield, California Wastewater Revenue Bonds, Series 2007A (the "Bonds ") shall be redeemed on September 15, 2017 (the "Redemption Date ") at the redemption price of 100% of the principal amount thereof plus accrued interest thereon (the "Redemption Price "). The Bonds include the following: CUSIP' Maturity Date Rate Principal Amount 05753P AK8 September 15, 2018 5.000% $ 6,025,000 05753P AL6 September 15, 2019 5.000 6,480,000 05753P BF8 September 15, 2020 5.000 3,695,000 05753P AM4 September 15, 2020 4.750 4,100,000 05753P AN2 September 15, 2021 5.000 8,240,000 05753P AP7 September 15, 2022 5.000 8,595,000 05753P AQ5 September 15, 2023 5.000 9,080,000 05753P AR3 September 15, 2024 5.000 9,585,000 05753P AS1 September 15, 2025 5.000 10,065,000 05753P AT9 September 15, 2026 5.000 10,620,000 05753P AU6 September 15, 2027 5.000 11,175,000 05753P AV4 September 15, 2028 5.000 11,840,000 05753P BG6 September 15, 2032 5.000 53,765,000 05753P AW2 September 15, 2033 5.000 3,485,000 * The CUSIP Number provided in this notice is included solely for convenience of the Bondholder. Neither the City nor the Trustee shall be responsible for the selection or use of the CUSIP Number, nor is representation made as to the correctness of the CUISP Number on the Bonds or appearing in this notice of redemption. Payment of the Redemption Price of and the interest accrued on the Bonds will be made on the Redemption Date upon presentation and surrender in the following manner: If by Mail: U.S. Bank National Association Corporate Trust Services P.O. Box 64111 St. Paul, MN 55164 -0111 If by Hand or Overniuht Mail: U.S. Bank National Association Corporate Trust Services 111 Fillmore Ave. E St. Paul, MN 55107 Interest on the Bonds shall cease to accrue on and after the Redemption Date. IMPORTANT NOTICE 4836- 2455- 4018.3 6124115 CC A EN A PACKET PAGE 207 Under the provisions of the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the "Act'), the Trustee may be obligated to withhold 28% of the redemption price from any Bondholder who has failed to furnish that Trustee with a valid taxpayer identification number and a certification that such Bondholder is not subject to backup withholding under the Act. Bondholders who wish to avoid the application of these provisions should submit a completed Form W -9 when presenting their Bonds. C -2 4836- 2455- 4018.3 By U.S. Bank National Association, as Trustee 6124115 CC AGENDA PACKET FACE 208 4836- 2455- 4018.3 SCHEDULEI INITIAL GOVERNMENT SECURITIES 6124115 CC A EN A PACKET PAGE 209 SCHEDULE II PAYMENT REQUIREMENTS FOR REFUNDED BONDS Payment Date Principal Interest Total September 15, 2015 $ 0.00 March 15, 2016 0.00 September 15, 2016 0.00 March 15, 2017 0.00 September 15, 2017 $[156,760,000] 4836- 2455- 4018.3 6124115 CC A EN A PACKET PAGE 21 enaif MEETING DATE: 6/24/2015 Closed Session 4. a. TO: Honorable Mayor and City Council FROM: Virginia Gennaro, City Attorney DATE: 6/12/2015 1TI %1 N 13 SUBJECT: Conference with Legal Counsel - Potential Litigation; Closed Session pursuant to Government Code Section 54956.9(d)(2),(e)(1) (one matter). STAFF RECOMMENDATION: BACKGROUND: 6124115 CC AGENDA PACKET PAGE 211