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HomeMy WebLinkAboutRES NO 81-87RESOLUTION NO. 81-87 A RESOLUTION OF THE COUNCIL OF THE CITY OF BAKERSFIELD, CALIFORNIA, ORDERING SALE OF BONDS IN THE MATTER OF CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 86-5 adopted not to WHEREAS, the Council by Resolution No. 80-87 , May 6 , 1987, authorized the issuance of exceed $889,944.00 principal amount of bonds to be known as "IMPROVEMENT BONDS, CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 86-5", all dated the date of delivery, which is expected to be May 13, 1987, and further authorized the sale of such bonds by negotiation; and WHEREAS, sale of such bonds has been duly negotiated in the manner prescribed by Resolution No. 80-87 ; and WHEREAS, a Purchase Agreement has been submitted by Kelling, Northcross & Nobriga Incorporated and Drexel Burnham Lambert Incorporated on file with the City Clerk of the City of Bakersfield and incorporated herein by reference. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF BAKERSFIELD, CALIFORNIA, as follows: 1. The offer of Kelling, Northcross & Nobriga Incor- porated and Drexel Burnham Lambert Incorporated (the "Under- writers") as contained in the Purchase Agreement for $889,944.00 principal amount of Improvement Bonds, City of Bakersfield Assess- ment District No. 86-5 is hereby approved and accepted and the Finance Director is authorized to execute said Purchase Agreement. The Official Statement is hereby authorized for distribution in accor- dance with said Purchase Agreement. 2. Further, this Council directs the sale and delivery to the Underwriters in accordance with the terms and conditions stated in the Purchase Agreement. 3. This Resol!ution shall take effect upon adoption. .......... o0o .......... -2- I HEREBY CERTIFY that the adopted by the Council of meeting thereof held on ing roll foregoing Resolution was the City of Bakersfield at a May 6, 1987 , by the call vote: AYES: COUNCILN1EMBERS CHILDS, CHRISTENSEN, SMITH, .I~ATTY, MOORE, DICKERSON, SALVAGGIO NOES: COUNC,LMEMS~RS: r]~.~ ASSENT: COUNCILMEMSEP~S: ~..~ ABSTAINING: CO%,NCILM~ MF.,ERs ~-~')-~J passed and regular follow- CITY CLERK and Ex Officio Clerk of the Council oi' the City of Bakersfield APPROVED May 6, 1987 MAYOR of the City of Bakersfield O'ITY AT~'ORNEY oI' the City of Bal(ersfield 4ressig 3 PURCHASE CONTRACT $ 889,944 CITY OF BAKERSFIELD IMPROVEMENT BONDS ASSESSMENT DISTRICT NO. 86-5 May 6, 1987 Honorable Mayor and City Council City of Bakersfield 1501 Truxton Avenue Bakersfield, California 93301 Dear Mayor and City Council: Kelling, Northcross & Nobriga Incorporated and Drexel Burnham Lambert Incorporated (collectively, the "Underwriter,,), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Purchase Contract with the City of Bakersfield (the "City"), which upon acceptance will be binding upon the City and upon the Underwriter. This offer is made subject to the City's acceptance by the execution of this Purchase Contract and its delivery to the Underwriter at or before 11:59 p.m., local time, on the date set forth hereinabove, and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the City at any time prior to the acceptance hereof by the City. 1. Purchase, Sale and Delivery of the Bonds. (a) Subject to the terms and conditions and in reliance upon the representations, warranties and agreements herein set forth, the Underwriter hereby agrees to purchase from the City, and the City hereby agrees to sell to the Underwriter, all (but not less than all) of the City of Bakersfield Improvement Bonds, Assessment District No. 86-5 (the "Bonds"), in the aggregate principal amount of $889,944, dated May 19, 1987, bearing interest from said date (payable on March 2 and September 2 in each year commencing on March 2, 1988) at the rates per annum and maturing on the dates and in the amounts set forth in Exhibit A hereto. The purchase price for the Bonds shall be 98% of the principal amount thereof plus accrued interest (if any). The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable and subject to redemption as provided in Resolution No. adopted by the City on May 6, 1987 (the "Resolution") and the Improvement - 1 - Bond Act of 1915, constituting Division 10 of the Streets and Highways Code of the State of California (the "Bond Act"); provided that= (i) a reserve fund in the amount of four percent (4%) of the principal amount of the Bonds shall be established from the proceeds of the sale of the Bonds; and (ii) all investment earnings on moneys on deposit in said reserve fund shall be credited to and deposited in said reserve fund until the balance in such fund equals the maximum annual debt service to be paid on the Bonds then outstanding or the maximum amount that may be set aside as a reserve fund without limitation on yield as provided in Section 148(d)(1) of the Internal Revenue Code of 1986, whichever is less. Investment earnings on monies in the reserve fund which would cause the size of such fund to exceed this limitation shall be transferred by the City to the Redemption Fund for the Bonds and credited against the next assessment installment or installments due from owners of property within Assessment District No. 86-5 (the "District"). However, in no event shall interest earnings on the reserve fund cause the Bonds to become arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code. (b) The Underwriter has prepared and distributed an offering statement in connection with the offer and sale of the Bonds. Such offering statement consists of the preliminary offering statement together with such changes as may be required to be added subsequent to such offer and sale (the "Offering Statement"), The City hereby authorizes the distribution of the Offering Statement. (c) Except as the City and the Underwriter may otherwise agree, the City will deliver to the Underwriter, at its City Hall or at such other location as may be designated by the Underwriter, the documents hereinafter mentioned and the Bonds, duly executed by the City in the manner provided for in the Resolution and the Bond Act, at 10:00 a.m. local time, on May 19, 1987 (the "Closing Date"), and the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in paragraph (a) of this section in Federal Funds (such delivery and payment being herein referred to as the "Closing"). The Bonds shall be made available to the Underwriter not later than 24 hours prior to the Closing Date for the purposes of inspection and packaging. The Bonds shall be in fully registered form and shall be registered in accordance with instructions to be supplied to the City by the Underwriter. The City may close by issuing one bond in temporary form to be replaced by definitive bonds at the expense of the City within thirty (30) days following the Closing Date. 2. Offering of the Bonds. The Underwriter agrees to make a bona fide offering of all the Bonds at the initial offering price or yield to be set forth on the cover page of the Offering Statement. Subsequent to such initial offering, the Underwriter reserves the right to change such initial offering price or yield - 2 - as it deems necessary in connection with the marketing of the Bonds. 3. Representation, Warranties and Agreements of the City. The City represents and warrants to and agrees with the Underwriter that: (a) The City is duly organized and validly existing as a municipal corporation under the Constitution and laws of the State of California and has, and at the Closing Date will have, full legal right, power and authority (i) to enter into this Purchase Contract, (ii) to issue, sell and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out, give effect to and consummate the transactions contemplated by this Purchase Contract, the Resolution, the Offering Statement and any agreements referred to therein. (b) The City has complied with, and will at the Closing Date be in compliance in all respects with the Resolution, the Bond Act, and all other applicable laws and agreements. (c) The City has, or prior to the Closing Date, will have, duly and validly: (i) adopted the Resolution and approved and authorized the execution and delivery of the Bonds, this Purchase Contract and any other applicable agreements and authorized the distribution of the Offering Statement; (ii) authorized and approved the performance by the City of its obligations contained in, and the taking of any and all action as may be necessary to carry out, give effect to and cons~mmate the transactions contemplated by, each of said documents, and at the Closing Date of the Bonds, the Resolution, this Purchase Contract, and any other applicable agreements will constitute the valid, legal and binding obligations of the City and (assuming due authorization, execution and delivery by such other parties thereto, where necessary) of the other parties thereto, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency and other laws affecting the enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought. (d) To the best of its knowledge, the City is not, and as of the Closing Date will not be, in breach of or default under any law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or any applicable court or administrative decree or order or any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is party or is otherwise subject or bound; and the adoption of the Resolution, and the execution and delivery of the Bonds, this Purchase Contract, the contract or contracts for the construction of the public improvements which will be financed with the proceeds from the sale of the Bonds, any other applicable agreements and the other instruments contemplated by any of such documents to which the - 3 - City is a party, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or any applicable court or administrative decree or order or any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party of is otherwise subject or bound. (e) All approvals, consents, authorizations, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having Jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the performance by the City of its obligations hereunder and under the Resolution, the Bonds, and any other applicable agreements have been obtained and are in full force and effect. (f) The Bonds, when delivered to and paid for by the Underwriter on the Closing Date as provided herein, will be validly issued and outstanding and entitled to all the benefits and security of the Resolution. (g) The special assessment constituting the security for the Bonds has been duly and lawfully levied under and pursuant to the Municipal Improvement Act of 1913 and such assessment constitutes a valid and legally binding lien on the land in the District. (h) There are the land in the District referred to in paragraph no outstanding assessment liens against which are senior to the assessment lien (g) hereof. (i) The City has created a valid pledge of, lien upon and security interest in the unpaid assessment installments in the District and the interest thereon and the moneys in all funds and accounts established pursuant to the Resolution, including the investments thereof, subject in all cases to the provisions of the Resolution permitting the application thereof for the purposes and on the terms and conditions set forth therein. (J) No action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, or public board or body is pending, or to the knowledge of the City, threatened, in any way affecting the existence of the City or the titles of its officers to their respective offices or seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Resolution, or the collection or application of assessments pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the Bonds, the Resolution, any other applicable - 4 - agreements, this Purchase Contract, or any action of the City contemplated by any of said documents, or in any way contesting the completeness or accuracy of the Offering Statement or the powers of the City or its authority with respect to the Bonds, the Resolution, any applicable agreements, this Purchase Contract or any action of the City contemplated by any of said documents, or in any way seeking to enjoin or restrain the City from approving the further development of the property within the District, or which would adversely affect the exemption of interest paid on the Bonds from federal income taxation or California personal income taxation nor to the knowledge of the City, is there any basis therefor. (k) The City will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter 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 Underwriter may designate. (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 will apply the proceeds of the Bonds in accordance with the Resolution and all other applicable documents. 4. Conditions to the Obligations of the Underwriter. The obligations of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the City contained herein as of the date hereof and as of the Closing Date, to the accuracy in all material respects of the statements of the officers and other officials of the City, as well as of the other individuals referred to herein, made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the City of its obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions: (a) At the Closing Date, the Resolution and any other applicable agreements shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter and there shall have been taken in connection therewith, with the issuance of the Bonds and with the transactions contemplated thereby and by this Purchase Contract, all such actions as, in the opinion of Richard H. Hatgrove, Bond Counsel for the City, shall be necessary and appropriate; - 5 - (b) At the Closing Date, the Offering Statement shall be in form and substance satisfactory to the Underwriter~ (c) Between the date hereof and the Closing Date, the market price or marketability of the Bonds shall not have been materially adversely affected, in the Judgment of the Underwriter (evidenced by a written notice to the City terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following= (i) legislation introduced in or enacted by the Congress or recommended to the Congress by the President of the United States, the Department of the Treasury, the Internal Revenue Service, or any member of Congress, or favorably reported for passage to either House of Congress by any committee of such House to which such legislation has been referred for consideration, or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, 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 Treasury Department of the United States of America or the Internal Revenue Service, with the purpose or effect, directly or indirectly, of imposing federal income taxation upon such interest as would be received by any holders of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof; (ii) 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, or 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, or that the Resolution is not exempt from gualification 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, or of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Offering Statement or otherwise is or would be in violation of the Federal securities laws as amended and then in effect; (iii) a general suspension of trading in securities on the New York Stock Exchange, or a general banking moratorium declared by federal, State of New York or State of California officials authorized to do so, or a war or other national calamity; - 6 - (iv) any amendment to the federal or California Constitution or action by any federal or California court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the City, its property, income, eecurities (or interest thereon), the validity or enforceability of the assessment or the ability of the City to acquire and construct the Improvement Project as contemplated by the Resolution and the Offering Statement~ or (v) any event occurring, or information becoming known which, in the Judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Offering Statement, or has the effect that the Offering Statement contains any untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading~ or (d) At or prior to the Closing Date, the Underwriter shall have received two counterpart originals or certified copies of the following documents, in each case satisfactory in form and substance to the Underwriter= (i) The Resolution, as adopted on May 6, 1987, together with a certificate of the City Clerk dated as of the Closing Date, to the effect that the Resolution is a true, correct and complete copy of the one duly adopted by the City and that it has not been further amended, modified or rescinded (except as may have been agreed to by the Underwriter) and is in full force and effect as of the Closing Date; (ii) An unqualified approving opinion, dated the Closing Date and addressed to the City, of Richard H. Hatgrove, Bond Counsel for the City, in customary form for such transactions, approving the validity of the Bonds, the levy of the assessments and the exemption of interest on the Bonds from federal income taxes and from personal income taxes of the State of California, and an unqualified opinion of such counsel, dated the Closing Date and addressed to the City that it may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it; (iii) A certificate, dated the Closing Date and signed by the Mayor, City Manager, .Finance Director or such other officer of the City as the Underwriter may select, to the effect that (1) the representations and warranties of the City contained herein are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (2) to the best knowledge of said officer, the information contained in Appendix B is true and correct and not misleading in any material respect; and (3) the City has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under this Purchase Contract, and the Resolution at and prior to the Closing Date; - 7 - (iv) An opinion, dated the Closing Date and addressed to the Underwriter, of the City Attorney, to the effect that (1) no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, is pending or, to his knowledge, threatened in any way affecting the existence of the City or the titles of its officers to their respective offices, or seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Resolution, or the collection or application of the assessments and the interest thereon to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the Resolution, this Purchase Contract, or any other applicable agreements or any action of the City contemplated by any of said documents, or in any way contesting the the powers of the City or its authority with respect to the Bonds, the Resolution, this Purchase Contract, or any other applicable agreement, or any action on the part of the City contemplated by any of said documents, or in any way seeking to enjoin or restrain the City from approving the further development of the property within the District, or which challenges the exemption of interest paid on the Bonds from federal income taxation, nor California personal income taxation nor to his knowledge is there any basis therefor~ (2) the City is duly organized and validly existing as a municipal corporation under the Constitution and laws of the State of California, with full legal right, power and authority to issue the Bonds and to perform all of its obligations under this Purchase Contract, the Bonds, and all other applicable agreements~ (3) the City has duly and validly adopted the Resolution, and it is in full force and effect~ and (4) the City has duly authorized, executed and delivered this Purchase Contract and has authorized the distribution of the Offering Statement~ (vi) A transcript of all proceedings relating to the authorization, issuance, sale and delivery of the Bonds~ (vii) Such certificates, proceedings, Underwriter or Richard H. request. additional legal opinions, instruments and other documents as the Hatgrove, Bond Counsel, may reasonably All the opinions, letters, certificates, instruments and other documents mentioned in this section or elsewhere in this Purchase Contract shall be deemed to be in compliance with the terms hereof if, and only if, they are in form and substance satisfactory to the Underwriter. If any of the conditions to the obligations of the Underwriter contained in this section or elsewhere in this Purchase Contract shall not have been satisfied when and as required herein, or if the obligations of the Underwriter to accept delivery and to pay for the Bonds shall be terminated for - 8 - any reason permitted by this Purchase Contract, all obligations of the Underwriter and the City hereunder terminate at, or at any time prior to, the Closing Date and neither the Underwriter nor the City shall be under any further obligation hereunder, except that the respective obligations of the Underwriter and the City set forth in Section 4 hereof shall continue in full force and effect. 5. Expenses. (a) The City shall pay or cause to be paid all expenses incident to the performance of the Cityts obligations hereunder, including but not limited to: the cost of printing, engraving and delivering the Bonds to the Underwriter~ the cost of preparation, printing (and/or word processing and reproduction), distribution and delivery of the Resolution, the Offering Statement and all other agreements and documents contemplated thereby (and drafts of any thereof) in such reasonable quantities as requested by the Underwriter~ and the fees and disbursements of the paying agent and registrar for the Bonds and the Bond Counsel, financial consultant and any accountants, engineers or other experts or consultants the City has retained in connection with the Bonds~ (b) Whether or not the Bonds are delivered to the Underwriter as set forth herein, 'the City shall be under no obligation to pay, and the Underwriter shall pay the cost or preparation of any "blue sky" or legal investment memoranda and this Purchase Contract~ expenses to qualify the Bonds for sale under any "blue sky" or other state securities laws~ and all other expenses incurred by the Underwriter in connection with its public offering and distribution of the Bonds (except those specifically enumerated in paragraph (a) of this section), including the fees and disbursements of their counsel and any advertising expenses. 6. Notices. 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, Attention: Finance Director~ and any notice or other communication to be given to the Underwriter may be given by delivering the same in writing to Kelling, Northcross & Nobriga Incorporated, 4 Embarcadero Center, Suite 1610, San Francisco, California 94111, Attention: President and to Drexel Burnham Lambert Incorporated, Pacific Financial Center, 444 South Flower Street, 27th Floor, Los Angeles, California 90017, Attention: Vice President and Manager. 7. Parties in Interest. This Purchase Contract is made solely for the benefit of the City and the Underwriter (including successors or assignees of any Underwriter) and no other person, including but not limited to any owner of land within the District, shall acquire or have any right hereunder or by virtue hereof. 8. Survival of Representations and Warranties. The representations and warranties of the City, set forth in or made pursuant to this Purchase Contract, shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing or termination of this Purchase Contract and regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the City and regardless of delivery of and the payment for the Bonds. 9. Execution in Counterparts. This Contract of Purchase may be executed in several counterparts each of which shall be regarded as an original and all of which shall constitute one and the same document. 10. Applicable Law. This Contract of Purchase shall be interpreted, governed and enforced in accordance with the laws of the State of California. Very truly yours, KELLING, NORTHCROSS & NOBRIGA INCORPORATED By DREXEL BURNHAM LAMBERT INCORPORATED By Accepted: CITY OF BAKERSFIELD By Finance Director - 10 - EXHIBIT A $889,944 CITY OF BAKERSFIELD IMPROVEMENT BONDS ASSESSMENT DISTRICT NO. 86-5 Year 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Principal Amount $ 34,944 55,000 60,000 65,000 65,000 70,000 75,000 80,000 85,000 95,000 100,000 105,000 Interest Rate 5.5O% 6.00 6.25 6.50 6.75 7.00 7.20 7.40 7.50 7.60 7.70 7.80 PRELIMINARY OFFERING STATEMENT DATED APKIL 29, 1987 In the opinion of Bond Counsel. under existing laws, reg~dations, rulings, and judicial decisions, and assuming compliance with the provisions of the Bond Resolution designed to meet the re. quire,~ents of Section 148~9 of the Internal Revenue Code of 1986, as amended, and regulations thereunder (the 'Code ), the interest on the bonds is exempt from income taxation by the United States of ,4merles and from personal income taxation by the State of California. provided, however, that in the case of corporations subject to the alternative minimum tax described in Section $$ of the Code and to the environmental tax described in Section $9,4 of the Code. said interest will be included in adjusted net book income and adjusted current earnings for the purpose of determining alternative minimum taxable income under Sections $6~I~ and 56(g). respectively, of the Code and for the purpose of dete, rmining modified alternative minimum taxable income under Section 59/1(b} of the Code. See "T.4X EXEMPTION herein. $889,944* CITY OF BAKERSFIELD (Kern County, California) ASSESSMENT DISTRICT NO. 86-5 Dated: May 19, 1987 Due: September 2 as shown below The Bonds are issued pursuant to the Improvement Bond Act of 1915 (Division 10 of the California Streets and Highways Code) (the "Bond Act") and are secured by the unpaid assessments levied in proceedings conducted by the City of Bakersfield, California pursuant to the Chatter and Municipa Code of the Cty of Bakersfield and the Mun c pa Improvement Act of 1913 (Division 12 of the California Streets and Highways Code). Thc Bonds are issued only as fully registered bonds in denominations of S5 000 each or any integral multiple thereof, except for one Bond in an odd amount due n 1988. Principal of and premium, if any, on the Bonds are payable at the principal corporate trust oltice of Bank of America National Trust and Savings Association, Los Angeles, California, Paying Agent, Registrar and Transfer Agent. Interest (other than the final payment of interest) is payable commencing March 2. 1988. The Bonds will mature on September 2 of each of the years and in the amounts and will bear interest at the rates shown in thc maturity schedule set forth below. The Bonds are subject to redemption on any March 2 or September 2 in advance of maturity by the City if there ate sufficient surplus funds available for the purposn in the Redemption Fund upon giving 60 days prior notice and upon payment of the principal and interest accrued thereon to the date of redemption or earlier surrender, plus a redemption premium of three percent (3%) of the principal amount of the Bonds to be redeemed. Under the provisions of the Bond Act, installments of principal and interest sufficient to meet annual Bond debt service are included on the regular County of Kern tax hills sent to owners of property against which there are unpaid If a delinquency occurs in the payment of any assessment installment, the City has a duty to transfer into the Redemption Fund the amount of the delinquency out of available funds of the City. Available funds consist of the balance in the Reserve Fund together with any surplus funds of the City not required for lawful municipal obligations. This duty of thc City is continuing during the period of delinquency, until reinstatement, redemption or sale of the delinquent property. THERE IS NO ASSURANCE THAT FUNDS WILL BE AVAILABLE FOR THIS PUR- POSE AND IF. DURING THE PERIOD OF DELINQUENCY. THERE ARE INSUFFICIENT AVAILABLE FUNDS, A DELAY MAY OCCUR IN PAYMENTS TO THE OWNERS OF THE BONDS. THE BONDS ARE NOT GENERAL OBLIGATIONS OF THE CITY, OF THE STATE OF CALIFORNIA OR OF ANY OTHER POLITICAL SUBDIVISION OF THE STATE AND NEITHER THE CITY NOR THE STATE NOR ANY POLITICAL $UBD[VISION OF THE STATE HAS PLEDGED ITS FULL FAITH AND CREDIT FOR THE PAYMENT THEREOF. To provide funds for payment of the Bonds and thc interest thereon as a result of any delinquent installments thc City will establish a Reserve Fund and deposit therein Bond proceeds in the original amount of four percent (4%) of the aggregate principal amount of the Bonds. Additiona[ly, the City has convenanted to initiate judicial foreclosure in the event of a delinquency and to commence the procedure within 150 days following such delinquency. The information set forth in this Official Statement, including information under the heading "RISK FACTORS" should be rend in its entirety. Due Principa| Interne Due Pr~ipal ~ptem~r 2 Amount* . Rate PHce ~ptem~r 2 Amo~t* 1988 $34,944 % 1994 $ 75,0~ 1989 55,000 1995 80.000 1990 60,000 1996 85.000 1992 65,000 1998 100,000 1993 70,000 1999 105,000 Rate Price The Bonds are offered when. as and if issued and delivered to the Underwriters subject to the approval of Richard H. Hargrove, Fresno. California. Bond Counsel and certain other conditions. It is expected that the ~onds in definitive form will be available for delivery in New York. New York on or about May 19, 1987. KELLING, NORTHCROSS & NOBRIGA INCORPORATED DREXEL BURNHAM LAMBERT INCORPORATED Dated: May . 198'/ *Preliminary. subject to change. TO WHOM IT MAY CONCERN: The purpose of this Offering Statement, which includes the cover page, table of contents and appendices, is to provide information concerning the sale and issuance of $889,944* principal amount of City of Bakersfield Improvement Bonds, Assessment District No. 86-5 ("the Bonds") proposed to be issued by the City of Bakersfield ("the City,,) pursuant to the Charter and Municipal Code of the City of Bakersfield and the Improvement Bond Act of 1915 (the "Bond Act"). C'~ The. i~formati~n.set forth herein has been furnished by the l=y an~ from cer=aln other sources which are believed to be accurate and reliable but is not guaranteed as to accuracy or completeness, and is not to be construed as a representa~ion ?f such by the City or the Underwriters. Statements contained in this Offering Statement which involve estimates, forecasts, other matters of opinion, or whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. Further, the information and expressions of opinion contained herein are subject to completion or amendment without notice. No dealer, broker, salesman 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 the City or the Underwriters. This Offering Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The delivery of this Offering Statement shall not, under any circumstances, create any implication that there has been no change in the affairs of the City, the Improvement Project or the District since the date hereof. The summaries and references to the Bond Act, the Bond Resolution and to other statutes and documents referred to herein do not purport to be comprehensive or definitive, and are qualified in their entireties by reference to each such statute and document. This Offering Statement does not constitute a contract between any bondowner and the City or the Underwriters. *Preliminary, subject to change CITY OF Thomas A. Payne Mayor NAYORAND CITY COUNCIL J. M. Christensen Patricia M. Smith Ronald K. Ratty James Henry Childs Vice Mayor Rollie Moore Mark G. Dickerson Mark C. Salvaggio CITY STAFF Gregory Klimko Finance Director George A. Caravalho City Manager Richard J. Oberholzer City Attorney Mary L. Strenn Deputy City Manager J. Dale Hawley Superintendent of Streets Carol Williams City Clerk Kenneth R. Pulskamp Assistant City Manager BOND COUNSEL Richard H. Hargrove Fresno, California ASSESSMENT ENGINEER Willdan Associates Anaheim, California PAYING AGENT, I~EGIS~ARAND TRANSFER AGENT Bank of America National Trust & Savings Association Los Angeles, California TABLE OF CONTENTS INTRODUCTION THE BONDS . . Authority for issuance Description of the Bonds Optional Redemption and Prepayment of Bonds Security for the Bonds Obligation of the City Upon Reserve Fund Covenant to Con;n e'S&p;rio &o&r& o e &sur, Priority of Lien Annual Debt Servic~ . SOURCES AND USES OF FUNDS THE IMPROVEMENT PROJECT Scope Method of Spread THE DISTRICT General Unpaid Assessments Assessed Valuation Property Tax Status RISK FACTORS General Bankruptcy . Availability of 6i~y Funds Articles XIII A and B of State Constitution LEGAL OPINION TAX EXEMPTION NO LITIGATION NORATING UNDERWRITING ADDITIONAL INFORMATION . APPENDIX A EXCERPT FROM ASSESSMENT DIAGRAM APPENDIX B CITY GENERAL AND FINANCIAL INFORMATION APPENDIX C ECONOMIC PROFILE 1 2 2 3 4 4 5 5 6 7 8 8 9 9 9 10 10 10 11 11 11 11 12 12 13 14 14 16 16 16 16 .A-1 .B-1 .C-1 IN CONNECTION WITH THIS OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITERS MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITERS. OFFERING STATEMENT $ 889,944* CITY OF BAKERSFIELD (Kern County, California) IMPROVEMENT BONDS ASSESSMENT DISTRICT NO. 86-5 IBTKODUCTION The purpose of this Offering Statement, which includes the cover page, table of contents and appendices, is to provide information concerning the sale and issuance of $889,944* principal amount of City of Bakersfield Improvement Bonds, Assessment District No. 86-5..(the "Bonds"). The Bonds are being issued by the City of Bakersfield (the "City") to finance the construction of sanitary sewer improvements as more fully described herein under the heading "THE IMPROVEMENT PROJECT" (the "Improvement Project"). Assessment District No. 86-5 (the "District") contains four fully developed residential areas recently annexed by the City. There are 447 parcels in the District with unpaid assessments which have a combined 1986/87 assessed valuation of $4,396,994 for land only and $23,839,200 for land and improvements. See "THE DISTRICT" for a more complete discussion of the District. The Bonds are issued upon and secured by the unpaid assessments together with interest thereon, and said unpaid assessments together with interest thereon constitute a trust fund for the redemption and payment of the principal of the Bonds and the interest thereon. All the Bonds are additionally secured by the monies in a redemption fund (the "Redemption Fund") created pursuant to the assessment proceedings. The unpaid assessments represent fixed liens on the lots and parcels assessed. They do not, however, constitute a personal indebtedness of the owner or owners of said lots and parcels. under the provisions of the Improvement Bond Act of 1915, installments of principal and interest sufficient to meet annual debt service on the Bonds are to be included on the regular county tax bills sent to owners of property against which there are unpaid assessments. These annual installments are to be paid into *Preliminary, subject to change 1 a Redemption Fund, which will be held by the City and used to pay Bond principal and interest as it becomes due, and are subject to the same provisions for recovery as are applicable for nonpayment of general taxes. The installments billed against each property each year represent a pro rata share of the total principal and interest coming due that year, based on the percentage which the unpaid assessment against that property bears to the total of unpaid assessments. If a delinquency occurs in the payment of any assessment installment, the City has e duty to transfer into the Redemption Fund the amount of the delinquency out of available funds of the City. Available funds consist of the balance in the Reserve Fund together with any funds of the City not required for lawful municipal obligations. This duty of the City is continuing during the period of delinquency, until reinstatement, redemption or sale of the delinquent property. There is no assurance that funds will be available for this purpose and if, during the tax sale process, there are insufficient funds a delay may occur in payments to the owners of the Bonds or there may be insufficient funds to make such payments. A reserve fund (the "Reserve Fund") for the Bonds will be established. The Reserve Fund shall initially be funded in an amount equal to four percent (4%) of the total principal amount of Bonds issued. The Reserve Fund will be a source of available funds to advance to the Redemption Fund in the event of delinquent installments. Additionally, the City has covenanted to institute judicial foreclosure proceedings within 150 days following the date of a delinquency, and thereafter diligently prosecute to completion, such foreclosure proceedings upon the lien of any and all delinquent unpaid assessments and interest. In such foreclosure proceedings the City may sell property for the amount of the delinquent installment only. The Bonds are not general obligations of the City, of the State of California or of any political subdivisions of the State, and neither the City nor the State nor any political subdivision of the State has pledged its full faith and credit for the payment thereof. Authority for Issuance The improvement proceedings for the District are being conducted pursuant to the Charter and Municipal Code of the City of Bakersfield and the Municipal Improvement Act of 1913 ("the Improvement Act") and Resolution of Intention No. 1019, as amended, adopted by the City Council on February 4, 1987. The Bonds, which represent the unpaid assessments levied against property in the District are issued pursuant to the provisions of the Charter and Municipal Code of the City of Bakersfield and the 2 Improvement Bond Act of 1915 ("the Determining Unpaid Assessments and Bonds, adopted by the City on May Resolution"). Bond Act") and A Resolution Providing for Issuance of , 1987 (the "Bond Description of the Bonds The Bonds are dated May 19, 1987 and mature serially in various amounts on each September 2 commencing September 2, 1988 and ending September 2, 1999. Interest is payable commencing on March 2, 1988, and semiannually thereafter on March 2 and September 2 of each year until maturity or prior redemption. The Bonds are issued only as fully registered Bonds in denominations of $5,000 each or any integral multiple thereof, except for one bond in an odd amount due in 1988. Principal of, interest at maturity or upon prior redemption, as applicable, and premium, if any, on the Bonds are payable at the principal corporate trust office of Bank of America National Trust and Savings Association, Los Angeles, California, Paying Agent, Registrar and Transfer Agent ("the Paying Agent"). Interest (other than at maturity or upon prior redemption) shall be paid by check or draft of the Paying Agent mailed to the registered owners (as shown on the registration books kept by the Paying Agent) as of the date 15 days prior to each March 2 or September 2, as applicable. The Bonds mature in the amounts and on the dates as shown in the following maturity schedule. Due Principal September 2 Amount * 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 34 944 55 000 60 000 65 000 65 000 70 000 75 000 80 000 85 000 95 000 100 000 105 000 *Preliminary, subject to change Optional Redemption and Prepayment of Bonds Any Bond may be called for redemption prior to maturity on any March 2 or September 2 upon payment of one hundred three percent (103%) of par value, plus accrued interest to the date of surrender or the date of redemption, whichever is earlier. No interest will accrue on a Bond beyond the March 2 or September 2 on which said Bond is called for redemption. Notice of redemption must be given to the registered owner of the Bond by personal service or registered mail at least 60 days prior to the redemption date. The determination as to which Bond or Bonds are to be called will be made by the City in accordance with the Bond Act. Any prepayment of all or part of any assessment would, and the issuance of refunding bonds may, result in redemption of all or a portion of the Bonds prior to their stated maturities. A transfer or transfers of property ownership and other similar circumstances could result in prepayment of all or part of any assessment. Pursuant to the Refunding Act of 1984 for 1915 Improvement Act Bonds, Division 11.5 of the Streets and Highways Code of the State of California, the City may issue refunding bonds for the purpose of redeeming the Bonds. Security for the Bonds The Bonds are issued upon and secured by the unpaid assessments against the property in the District together with interest thereon, and said unpaid assessments together with interest thereon constitutes a trust fund for the redemption and payment of the principal of the Bonds and the interest thereon. All the Bonds are secured by the monies in the Redemption Fund and the Reserve Fund created pursuant to the proceedings and by the unpaid assessments levied to provide for payment of said acquisition and construction of improvements. Principal of and interest on the Bonds are payable exclusively out of the Redemption Fund. Each assessment and each installment thereof and any interest and penalties thereon constitute a lien against the single parcel of land on which it is levied until the same is paid. Such lien is subordinate to all fixed special assessment liens previously imposed upon the same property, but has priority over all existing and future private liens and over all fixed special assessment liens which may thereafter be created against the property. Such lien is co-equal to and independent of the lien for general property taxes and any community facilities district special taxes. There are no prior special assessment liens against the parcels in the District and the land within the District does not presently lie within the boundaries of any community facilities district. 4 The Bonds are not secured by the general taxing power of the City, or the State or any political subdivision of the State, and neither the City nor the Stete nor any political subdivision of the Stete has pledged its ftu11 faith and credit for the payment thereo f. Although the unpaid assessments constitute a fixed lien on the parcels assessed, they do not constitute a personal indebtedness of the respective owners of said parcels. Furthermore, there can be no assurance as to the ability or the willingness of such owners to pay the unpaid assessments. The unpaid assessments will be collected in annual installments, together with interest on the declining balance, on the County of Kern tax roll on which general taxes on real property are collected and are payable and become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do said general taxes, and the property upon which the assessments were levied are subject to the same provisions for sale and redemption as are properties for nonpayment of general taxes. These annual assessment installments are to be paid into the Redemption Fund which will be held by the City and used to pay the principal of and interest on the Bonds as they become due. Obligation of the City Upon Delinquency If a delinquency occurs in the payment of any assessment installment, the City will have the duty to transfer into the Redemption Fund the amount of such delinquent installment out of available funds of the City. Available funds consist of the balance in the Reserve Fund together with any funds of the City. This duty of the City is continuing during the period of delinquency, until reinstatement, redemption or sale of the delinquent property. There is no assurance that funds will be available for this purpose and if, during the period of delinquency, there are insufficient funds, a delay may occur in payments to the owners of the Bonds. For information on City finances, see APPENDIX B herein. See also "Reserve Fund" below, and the section entitled "RISK FACTORS." Reserve Fund Out of the proceeds of the sale of the Bonds, the City will set aside a Reserve Fund in the amount of four percent (4%) of the principal amount of the Bonds. The Reserve Fund will constitute a trust fund for the benefit of the holders of the Bonds. The Reserve Fund will be maintained, used, transferred, reimbursed and liquidated as follows: (a) Whenever there are insufficient funds in the Redemption Fund to pay the next maturing installment of principal of or 5 interest on the Bonds, an amount necessary to make up such deficiency will be transferred from the Reserve Fund, to the extent of available funds, to the Redemption Fund. The amounts so advanced will be reimbursed from the proceeds of redemption or sale of the parcel for which payment of delinquent installments of the assessments and interest thereon has been made from the Reserve Fund. (b) If any assessment or any portion thereof is prepaid prior to the final maturity of the Bonds, the amount of principal of the assessment to be prepaid will be reduced by an amount which will be determined by multiplying the then current balance of the Reserve Fund by the percentage which the original unpaid amount of the prepaid assessment is to the total amount of the original unpaid assessment on the land in the District. The reduction in the amount of principal prepaid shall be compensated for by a transfer of like amount from the Reserve Fund to the Redemption Fund. (c) Investment income from the Reserve Fund will remain in the Reserve Fund until the balance therein is equal to the lesser of the maximum annual debt service to be paid on the Bonds then outstanding or the maximum amount that may be set aside as a reserve fund without limitation on yield as provided by the Internal Revenue Code of 1986. If at any time the amount in the Reserve Fund exceeds this limitation, such excess shall be credited against the next payment of assessment installments due. (d) When the balance in the Reserve Fund is sufficient to retire all Bonds then outstanding (whether by advance retirement or otherwise), the amount of the Reserve Fund will be transferred to the Redemption Fund, and the remaining installments of principal and interest not yet due from the assessed property owner will be cancelled without payment, and the Reserve Fund will be liquidated upon the retirement of the Bonds. Covenant to Commence Superior Court Foreclosure The Bond Act provides that in the event any assessment or installment thereof or any interest thereon is not paid when due, the City may order the institution of a court action to foreclose the lien of the unpaid assessment. In such an action, the real property subject to the unpaid assessment may be sold at Judicial foreclosure sale. This foreclosure sale procedure is not mandatory. However, in the Bond Resolution, the City has covenanted with the Bondowners that, in the event any assessment or installment thereof, including any interest thereon, is not paid when due, it will order, and cause to be commenced within 150 days following the date of delinquency, and thereafter diligently prosecute to completion, court foreclosure proceedings upon the lien of any and all delinquent unpaid assessments and interest. In the event such Superior Court foreclosure or foreclosures are necessary, there may be a delay in payments to Bondowners pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale~ it is also possible that no bid for the purchase of the applicable property would be received at the foreclosure sale. See also the section herein entitled "RISK FACTORS." Prior to July 1, 1983, the right of redemption from foreclosure sales was limited to a period of one year from the date of sale. Under legislation effective July 1, 1983, the statutory right of redemption from such foreclosure sales has been repealed. However, a period of 150 days must elapse after a court adjudges and decrees a lien against the lot or parcel of land covered by an assessment before the sale of such parcel can be given. Furthermore, if the purchaser at the sale is the Judgment creditor, i.e., the City, an action may be commenced by the delinquent property owner within 6 months after the date of sale to set aside such sale. The constitutionality of the aforementioned legislation which repeals the one year redemption period has not been tested and there can be no assurance that, if tested, such legislation will be upheld. Priority of Lien Each assessment (and any reassessment) and each installment thereof, and any interest and penalties thereon, constitute a lien against the parcel of land on which it was imposed until the same is paid. Such a lien is subordinate to all fixed special assessment liens previously imposed upon the same property, but has priority over all private liens and over all fixed special assessment liens which may thereafter be created against the property. Such a lien is co-equal to and independent of the lien for general taxes and any community facilities district special taxes. There are no prior special assessment liens against the parcels in the District and the land within the District does not presently lie within the boundaries of any community facilities district. 7 Annual Debt Service (1) Due September 2 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Principal* Interest** Total $ 34,944 $ 80,902(1) $ 115,846 55,000 61,070 116,070 60,000 57,908 117,908 65,000 54,158 119,158 65,000 49,932 114,932 70,000 45,545 115,545 75,000 40,645 115,645 80,000 35,283 115,283 85,000 29,442 114,442 95,000 23,110 118,110 100,000 15,890 115,890 105,000 8t190 113,190 $ 889,944 Represents interest from May 19, $ 502,075 $ 1,392,019 1987 to September 2, 1988. SOURCES AND USES OF FUNDS The proceeds of the Bonds (other than accrued interest) together with certain other funds will be applied as follows: SOURCES Bonds (par value) City Contribution Cash Payments 889,944 250,317 127,347 TOTAL SOURCES $ 1,267,608 USES Construction Reserve Fund Cost of Issuance Discount $ 1,149,460 35,597 64,752 17,799 TOTAL USES $ 1,267,608 *Preliminary, subject to change **Estimate, subject to change 8 Scope Most properties in the District currently are not connected to the public sewage system and are served by onsite septic tank facilities. In order to avoid potential sewage overflows, a majority of the property owners within the District petitioned the City to institute assessment proceedings to finance the construction of sewer improvements. More specifically, the Improvement Project consists of the construction of a sanitary sewer system together with house laterals, manholes, cleanouts, fittings, asphalt patching of all streets and appurtenances thereto within the boundary of the District, including, but not limited to, all those works, appliances and appurtenant facilities necessary to operate the facilities. The City will engineer and supervise the construction of the Improvement Project. Work on the Improvement Project is expected to commence in May 1987 and is expected to be completed by October 1987. Upon completion, the City will own, operate and maintain the Improvement Project. Method of Spread Assessments levied pursuant to the provisions of the Improvement Act must be based on the benefit that the subject properties receive from the works of improvement. The statute does not specify the method or formula that should be used in any particular special assessment district proceeding. That responsibility rests with the Assessment Engineer, who is retained by the City for the purpose of making an analysis of the facts and determining the correct apportionment of the assessment obligation. For these proceedings, the City has retained the services of Willdan Associates, Anaheim, California as Engineer (the "Assessment Engineer"). Pursuant to the Improvement Act, the Assessment Engineer makes his recommendations as to the cost and method of apportionment of the special assessments at the public hearing on the District, and final authority and action with respect to the levy of the assessments rests with the City Council after hearing all testimony and evidence presented at the public hearing. Upon the conclusion of the public hearing, the City Council must take final action in determining whether or not the assessment apportionment has been made in direct proportion to the benefits received by the properties assessed. Most of the properties in the District are zoned for single- family residential use and contribute similar sewage discharge. The location and size of the sewer facilities will provide to each 9 property the availability of a public sewer. Thus, the benefit of the sewer improvements are aesessed on a per-parcel basis. In a few cases where multiple dwelling units exist or can be developed upon a single parcel, these parcels have been assessed on an equivalent dwelling unit basis (i.e., a single parcel containing two duplexes with two residential units in each duplex is assessed at the rate of two single-family detached residential units). The single commercial facility within the boundaries of the District is assessed at the rate of one single-family detached unit. At several locations there are sewers which have been constructed by private developments or other public assessment districts outside the boundaries of the District. Since these sewers were not financed by the properties which they abut, such properties are included within the District but are given adjusted assessments as a result of the partial availability of such sewers. All properties have been assessed the Sewer Treatment Plan capacity charge imposed by the City. This charge is also applied to those properties abutting existing sewers where such properties have not previously paid the charge or contributed to the cost of the sewer. Sewer laterals have been assessed equally to all properties irrespective of their location, with one exception. City contributions will be made to cover approximately all of the incidental costs of the program, together with certain construction items, such as paving the streets over the sewer mains to be constructed. DISTRICT General The District consists of four separate areas recently annexed by the City located in the southwestern portion of the City adjacent to State Highway 99. The District is fully developed and contains mostly single-family residences. APPENDIX A contains an index map of the District. The full assessment diagram is on file with the City Clerk and with the Kern County Recorder. Unpaid Assessments There are 447 parcels in the District with unpaid assessments. These unpaid assessments range from $969.70 to $4,453.16, however, over 90% of the parcels with unpaid assessments have an unpaid assessment of $2,049.08 each. A complete list of all unpaid assessments is on file with the City Clerk. 10 Assessed Valuation The total assessed valuation of land only for the parcels in the District with unpaid assessments is equal to $4,396,994 or 4.9 times the amount of the unpaid assessments in the District. The total assessed valuation of land and improvements for the parcels in the District with unpaid assessments is equal to $23,839,200 or 26 times the amount of unpaid assessments. Individually, assessed valuations range from $4,637 to $58,605 for land only, and from $20,675 to $156,061 for land and improvements. The lowest land value to lien ratio for any one parcel is 2.26:1 and the lowest land and improvement value to lien ratio for any one parcel is 10:1. Since the passage of Proposition 13 in 1978, California assessed valuations are not necessarily equal or proportionate to current market value. Property valuation for tax purposes in California is based on "full cash value" which is defined by State law to mean "the county assessor's valuation of real property as shown on the 1975/76 tax roll under 'full cash value', or thereafter, the appraised value of real property when purchased, newly constructed or a change in ownership has occurred after the 1975 assessment period", subject to exemptions in certain circumstances of property transfer or reconstruction. The "full cash value" is subject to annual adjustment to reflect increases, not to exceed 2% per year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors. Property Tax Status A review of the Kern County tax rolls, as of March 15, 1987 showed that 34 parcels with unpaid assessments were delinquent in the payment of the first installment of 1986/87 property taxes. The delinquent taxes amounted to $22,061.42, of which $14,018.52 are delinquencies from prior years. All other assessment parcels have been paid current through March 15, 1987. The second installment of taxes for 1986/87 become delinquent, if not paid, on April 10, 1987. No assurances can be made that all of the assessment parcels will not be delinquent on the second installment. RISK FACTOldS General In order to pay debt service on the Bonds, it is necessary that unpaid installments of the assessments on property within the District are paid in a timely manner. Should the installments not be paid on time, the City has established a Reserve Fund in the amount of four percent (4%) of the principal amount of the Bond 11 issue to cover delinquencies, and, pursuant to the Bond Resolution, will use available surplus funds of the City to pay such delinquent installments. In the event of a default in the payment of an assessment installment, the City must institute foreclosure proceedings within 150 days to sell the parcel with delinquent installments for the amount of such delinquent installments in order to obtain funds to pay debt service on the Bonds. Failure by owners of the assessed parcels to pay installments of the assessments when due, depletion of the Reserve Fund or the inability of the City to sell the property if it is subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of the assessment levied against such property may result in the inability of the City to make full or punctual payments of debt service on the Bonds and Bondowners would therefore be adversely affected. The unpaid assessments do not constitute a personal indebtedness of the owners of the parcels within the District. There is no assurance that the owners will be able to pay the assessment installments or that they will pay such installments even though they may be financially able to do so. The payment of the owners' assessment installments and the ability of the City to foreclose the lien of a delinquent unpaid assessment installment, as discussed in the section herein entitled "THE BONDS--Security for the Bonds", may be limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State relating to Judicial foreclosure. Although bankruptcy proceedings would not cause the assessment lien to become extinguished, bankruptcy of any of the owners could result in a delay in the City prosecuting Superior Court foreclosure proceedings. Such delay may increase the likelihood of a delay or a default in payment of the principal of and interest on the Bonds. Moreover, amounts received upon foreclosure sales may not be sufficient to fully repay outstanding Bonds. Bond Counsel's approving legal opinion will be qualified as to the enforceability of the various legal instruments, by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Availability of City Funds As discussed herein under "THE BONDS--Obligation of the City Upon Delinquency," if a delinquency occurs in the payment of any reassessment installment, the City has a duty to transfer into the Redemption Fund the amount of the delinquency out of available 12 funds of the City. Available funds consist of the balance in the Reserve Fund together with any surplus funds of the City not required for lawful municipal obligations. This duty of the City is continuing during the period of delinquency, until reinstatement, redemption or sale of the delinquent property. There is no assurance that funds will be available for this purpose and if, during the period of delinquency, there are insufficient available funds, a delay may occur in payments to the owners of the Bonds. In order to provide a source of surplus funds for such purpose, the City will establish a Reserve Fund out of Bond proceeds in the amount of four percent (4%) of the principal amount of the Bond issue. If the Reserve Fund were ever depleted as a result of a major or prolonged delinquency in the payment of reassessment installments, the City would be obligated to advance available funds to the Redemption Fund in order to pay principal and/or interest on the Bonds. Articles XIII A and B of State Constitution On June 6, 1978, California voters approved an amendment to the California Constitution commonly known as Proposition 13, the Jarvis/Gann Amendment, which added Article XIIIA to the California Constitution. On November 6, 1979, California voters approved a further amendment commonly known as Proposition 4, the Gann Initiative, which added Article XIIIB to the California Constitution. On July 2, 1979, the Fifth District Court of Appeal (94 Cal. App. 3d 974) rendered a 3-0 decision in the case of County of Fresno vs Maimstrom that determined that special assessments are not subject to the limitations of Article XIIIA (Proposition 13). The Court held the one percent tax limitation imposed by California Constitution Article XIIIA on ad valorem taxes does not apply to special assessments levied pursuant to Streets and Highways Code, Section 5000 et seq. and 10000 et seq., the Improvement Act of 1911 and the Municipal Improvement Act of 1913. The Court further held that because special assessments pursuant to such acts are not within the definition of "special taxes" in Article XIIIA, the Constitution does not require the levy of assessments and the issuance of bonds to be approved by a two- thirds vote of the qualified electors of the District. On September 12, 1979, the California Supreme Court refused to hear an appeal of the lower court~s decision. On December 17, 1980, the Third District Court of Appeal (113 Cal. App. 3d 443) rendered a 3-0 decision in the case of County of Placer v. Corin that determined that special assessments are not subject to the limitation of Article XIIIB (Proposition 4). The Court held that the definition of "proceeds of taxes" imposed by California constitution Article XIIIB does not apply to special assessments and improvement bonds issued pursuant to Streets and Highways Code, Sections 8500 et seq., and 1000 et seq., the 13 Improvement Bond Act of 1915 and the Municipal Improvement Act of 1913. The decision of the Court was not appealed. LEGAL OPINION The legal opinion of Richard H. Hatgrove, Fresno, California, Bond Counsel for the City of Bakersfield, approving the validity of the Bonds will be printed on each Bond. The statements of law and legal conclusions set forth in this Offering Statement under the heading "THE BONDS" have been reviewed by Bond Counsel. Bond Counsel~s employment is limited to a review of legal procedures required for the issuance of the Bonds and to rendering an opinion as to the validity of the Bonds and the exemption of interest on the Bonds. The opinion of Bond Counsel will not consider or extend to any documents which Bond Counsel did not prepare, or to any agreement, representations, official statement, offering circulars, or other material of any kind concerning the Bonds not mentioned in this paragraph. Bond Counsel will receive compensation contingent on sale and delivery of the Bonds. TAX EXEMPTION On October 22, 1986, the Tax Reform Act of 1986 (the "Act") was enacted. The Act amends section 103 of the Internal Revenue Code of 1954 in whole and imposes restrictions upon the tax- exemption of interest on obligations of states and local government units. Generally, the Act characterizes such obligations as either "governmental" obligations or "private activity" obligations. The Bonds constitute governmental obligations for the purposes of this characterization. Under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), the interest on governmental obligations is excludable from gross income for federal income tax purposes if the obligations satisfy restrictions relating to (1) limitations upon the use of proceeds for a private business use or to make a private loan, (2) reserve fund funding requirements, investment yield limitations and rebate requirements, (3) federal guarantee prohibitions, (4) registration requirements, (5) information reporting requirements. The Code imposes an alternative minimum tax upon certain individuals and corporations and includes interest on certain private activity obligations as a preference item for such purpose. The bonds are not private activity obligations for purposes of such alternative minimum tax preference. In the case of certain corporations which are subject to the alternative minimum tax upon corporations, the interest on the Bonds received by such corporations for taxable years beginning in 14 1987, 1988 and 1989 would be included in adjusted net book income for the purpose of provisions stating that alternative minimum taxable income shall be increased by 50 percent of the amount by which the adjusted net book income of such corporations exceeds the alternative minimum taxable income of such corporations, and for taxable years beginning after 1989, said interest would be included in adjusted current earnings for the purpose of provisions stating that the alternative minimum taxable income shall be increased by 75 percent of the amount by which the adjusted current earnings of such corporations exceed the alternative minimum taxable income of such corporations. On October 17, 1986, the Superfund Amendments and Reauthorization Act of 1986 ("SA~A") was enacted. SARA establishes a program for clearing hazardous waste sites and imposes an environmental tax to fund such program. The environmental tax is imposed upon modified alternative minimum taxable income, which income includes interest on the bonds in the same manner as the computation of alternative minimum taxable income referenced above. The environmental tax is effective for taxable years beginning after December 31, 1986 and, generally, before January 1, 1989. In the opinion of Richard H. Hatgrove, Fresno, California, Bond Counsel, under existing laws, regulations, rulings, and Judicial decisions, and assuming compliance with the provisions of the resolution designed to meet the requirements of Section 148(f) of the Code and regulations thereunder, which section relates to the rebate requirements imposed upon the City with respect to certain interest earnings on certain gross proceeds of the bonds, the interest on the bonds is exempt from income taxation by the United States of America and from personal income taxation by the State of California, provided, however, that in the case of corporations subject to the alternative minimum tax described in Section 55 of the Code and to the environmental tax described in Section 59A of the Code, said interest will be included in adjusted net book income and adjusted current earnings for the purpose of determining alternative minimum taxable income under Sections 56(f) and 56(g), respectively, of the Code for the purpose of determining modified alternative minimum taxable income under Section 59A(b) of the Code. In addition, the Tax Reform Act of 1986, as amended, disallows interest for taxable years ending after December 31, 1986, on debt incurred by financial institutions to purchase or carry tax-exempt obligations for obligations acquired after August 7, 1986. The bonds would be included as tax-exempt obligations for the purpose of this provision, with the result that interest on debt incurred by financial institutions to acquire the bonds would not be deductible to such institutions. 15 NO LITIGATION There is no action, suit, or proceeding known by the City to be pending at the present time restraining or enJoining the delivery of the Bonds or in any way contesting or affecting the validity of the Bonds or any proceedings of the City taken with respect to the execution or delivery thereof. A no litigation certificate executed by the City Attorney will be delivered to the Underwriters simultaneously with the delivery of the Bonds. NO~ATING The City has not, and does not contemplate making, application to any rating agency for the assignment of a rating to the Bonds. UNDERWRITING Kelling, Northcross & Nobriga Incorporated and Drexel Burnham Lambert Incorporated, the Underwriters, have purchased the Bonds from the City at an aggregate discount of $ from the total par value of Bonds as set forth on the cover page of this Offering Statement. The public offering prices may be changed from time to time by the Underwriters. The Underwriters may offer and sell Bonds to certain dealers and others at a price lower than the offering price stated on the cover page hereof. ADDITIONAL INFORMATION Any statements made in this Offering Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. This Offering Statement is not to be construed as a contract or agreement between the City and the purchasers, holders or owners of any of the Bonds. The distribution of this Offering Statement has been duly authorized by the City pursuant to a Resolution adopted by the City Council on May , 1987. 16 APPENDIX A EXc~,ttPT FROM ASSESSMENT DIAGRAM SHEET ¶ OF i7 SHEETS ASSESSMENT DIAGRAM * ASSESSMENT DISTRICT NO. 86 - 5 (REAL - AKERS - HARRIS - FAIRVIEW) CITY OF BAKERSFIELD · . COUNTY OF KERN STATE OF CALIFORNIA INDEX MAP *The complete assessment diagram is on file with the City Clerk and the Kern County Recorder. APPENDIX B CITY GENERAL AND FINANCIAL INFORMATION The following information is presented as general background information. The Bonds are payable solely from the proceeds of payments upon the unpaid assessment and the Reserve Fund as described herein. The taxing power of the City of Bakersfield, the State of California or any political subdivision thereof is not pledged to the payment of the Bonds. See the section herein entitled "THE BONDS". Location The City of Bakersfield is located at the southern end of the San Joaquin Valley, about 110 miles northeast of Los Angeles and 100 miles south of Fresno and is the county seat of Kern County. Municipal Government The City of Bakersfield was incorporated on January 11, 1898 and is a charter city. The City has a council-manager form of government. The City is governed by a mayor elected at large and a seven member City Council elected from districts for staggered four-year terms. The City Manager is appointed by the Council and is the administrative head of the City. Financial Statements The City's 1985/86 General Fund Balance Sheet and Statement of Revenues, Expenditure and Changes in Fund Balance prepared by the City Finance Department are reflected on the following two tables: B-1 CITY OF BAKERSFIELD GENERAL FUND BALANCE SHEET JUNE 30, 1986 ASSETS Cash and short-term investments Receivables Due from other funds Due from other governments Inventory, at cost Total assets LIABILITIES AND FUND EQUITY Accounts payable Payrolls payable Employer contributions payable Deferred revenue Compensated absences Total liabilities Fund balances Reserved for encumbrances Reserved for petty cash and inventory Reserved for cash basis Unreserved - undesignated Total fund equity Total liabilities and fund equity 7,896,754 236,240 1,213,113 1,408,761 10,157 $10,765,025 $ 2,737,327 938,988 320,170 35,497 243,400 4,275,382 400,409 18,707 2,900,000 3,170,527 6,489,643 $10,765,025 Source: Prepared by City of Bakersfield Finance Dept. B-2 CITY OF B;tKERSFIELD STATEMENT OF GENERAL FUND REVENUES, EXPENDITURES & CHANGES IN FUND BALANCE Year ended June 30, 1986 Revenues Taxes Licenses and permits Intergovernmental revenue Charges for services Fines and forfeitsnments Miscellaneous revenue Total revenues Expenditures Current General government Public safety Public works Development and conservation Total expenditures Excess of revenues over (under) expenditures Other financing sources (uses) Operating transfers in Operating transfers (out) Total other financing sources (uses) Excess of revenues and other sources over (under) expenditures and other uses Fund balance - beginning of year Fund balance - end of year $ 35,766,898 1,436,525 5,220,139 2,194,833 353,080 779,126 45,750,601 3,280,786 24,825,061 12,378,773 1,947,580 42,432,200 3,318,401 1,050,000 (3,876,700) (2,826,700) 491,701 5,997,942 $ 6,489,643 Source: Prepared by City of Bakersfield Finance Dept. B-3 APPENDIX C ECONOMIC PROFILE General Description The City is located in central Kern County (the "County"), the third largest county in California. The County is known for its agriculture, mining and recreational activities and is the leading oil and mineral producing county in the State and the nation. According to the State Department of Finance, Bakersfield is the fastest-growing large city in California. Population The following table shows the City's and the County's population for 1960, 1970 and 1980 and the annual estimates for 1985 and 1986. CITY OF BAKERSFIELD AND KERN COUNTY POPULATION Year City of Bakersfield Kern County 1960 56,848 291,984 1970 69,515 330,234 1980 105,611 403,089 1985 138,800 472,100 1986 148,200 486,800 Source: Statistics for 1985 and 1986 are State Department of Finance estimates as of January 1. The 1960, 1970 and 1980 totals are U.S. Census figures. C-1 Employment The largest below: employers for the City of Bakersfield are listed CITY OF BAKERSFIELD LARGEST EMPLOYERS (1) Company Tenneco West Bakersfield City School District Texaco Refining & Marketing Co. Kern High School District Giumarra Vineyards Corp. Shell California Production, Inc. Superior Farming Co. Kern Medical Center Chevron U.S.A., Inc. Mercy Hospital Pacific Bell Greater Bakersfield Memorial Hospital San Joaquin Hospital Product/Service Agricultural Processing/ Farming Education Oil, Petroleum, Refining & Marketing Education Agricultural Production Oil & Gas Production Farming County Hospital Petroleum Refining, Products and Pipeline Hospital Communications/Utility Hospital Hospital Employees 2,280 2,254 1,700 1,700 2,200 * 100 1,590 1,000 1,250 1,200 1,300 523 880 825 (1) Does not include County of Kern employees * Seasonal Source: Bakersfield Chamber of Commerce, 1987 C-2 The table shown below represents, as of January, 1986, the County~s labor patterns for 1984 and 1985 and the forecast for the County for 1986 and 1987. KERN COUNTY CIVILIAN LABOR FORCE, EMPLOIq4ENT AND UNEMPLOYMENT ANNUAL AVERAGES (Amounts in Thousands) Civilian Labor Force(1) Employment Unemployment Unemployment Rate Wage & Salary Employmt(2) Agricultural Non Agricultural Mining/Construction Nondurable Manufacturing Durable Manufacturing Transportation & Public Utilities Wholesale Trade Retail Trade Finance, Insurance & Real Estate Services Government ACTUAL FORECAST 1984 1985 1986 1987 215,900 216,100 218,300 222,700 189,500 191,000 192,000 196,200 26,400 25,100 26,300 26,500 12.2% 11.6% 12.0% 11.9% 177,300 179,800 178,900 181,400 29,200 26,500 26,000 26,000 148,100 153,300 152,900 155,400 23w800 25,400 21,600 21,700 5,000 4,800 5,000 5,100 5,300 5,600 5,700 5,900 7,600 8,300 8w200 8,300 7,700 7,600 7,500 7,600 30,900 31,000 31,600 32,100 5,600 5,800 5,900 6,000 27,800 28,900 29.900 30,500 34,400 36,000 37,500 38,200 (1) Based on place of residence (2) Based on place of work Source: California Employment Development Department Commercial Activity The following table shows total the City over the last five years. taxable transactions within CITY OF BAKERSFIELD TAXABLE TRANSACTIONS (In thousands of dollars) Year Permits 1981 3,482 1982 3,889 1983 3,997 1984 4,195 1985 4,430 Taxable Transactions $ 1,403,662 1,374,727 1,398,464 1,576,598 1,676,836 Source: State Board of Equalization Construction Activity The following table shows the valuation of building issued in the City for the last five years. permits CITY OF BAKERSFIELD BUILDING PERMITS AND VALUATIONS 1981-1985 (In thousands of dollars) Residential Year Permits Residential Non-Residential 1981 1,299 $ 70,524 $ 43,365 1982 2,716 127,837 87,175 1983 3,347 146,481 60,152 1984 3,765 162,762 70,452 1985 2,312 118,140 122,957 Source: "California Construction Trends," Security Pacific National Bank C-4 ~ncome The following table reflects income for the last five years: the median household buying CITY OF BAKERSFIELD MEDIAN HOUSEHOLD BUYING INCOME Year Amount 1981 $ 21,710 1982 24,894 1983 26,249 1984 28,595 1985 (1) 26,923 (1) 1985 methodology differs from methodology of previous years. Source: "Survey of Buying Power," Sales and Marketing Management Magazine C-5