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07/22/2004 FILLCOPY' ,,' 0 GREHD TE7ZZ CE ! July 22,'2004 " i 22795 Barton Road Grand Terrace California.92313-5295 , Civic Center (909)824-6621 Fax(909)783-7629 =Fait(909)783-2600 r` ITV F' GJ _A_` ND -m'" T C E oerman'Hilkey .. Mayor _ CRA/CITY_COUNCI-L Maryetta Ferr6 T N C' Mayor ProTem _ 'REGULARMEETIl\GS Lee Ann Garcia - DonLarkih 2ND AND 4TH T.hurs:.day;=�6:30 'p,.M'' ` -Bea Cortes, _ •. - _ � , • 'CouricilMembers• Thomas J.'Schwab " City Manager - � - - . ; - -, � --, , • ,"Council-Chambers " • ,' - : , - ' ��- = Grarid Terrace CivicCenter_ 22795 Barton Road A Grand Terrace, CA 92313-5295 " _ 1 - CITY OF GRAND TERRACE COUNCIL MEETING AGENDA CITY COUNCIL CHAMBERS JULY 22, 2004 GRAND TERRACE CIVIC_ CENTER 6:30 PM 22M Barton Road II]ECITYOFGRANDTERtRACECQMPLIESWITHTHEAMERICANSWITHDISABILITIESACTOF,-9 0,IFYOU REQUIRE°,SPECIAL ASSISTANCE.TO I'ARTICR'ATE,IN;THIS MEETING;:.PLEASE CALL THE;.GITY CLERK'S. OFFICE AT(009)824=6621;AT LEAST'48 HOURS PRIOR TO°THE-MEETING; IE YOU DESIRE4TO'.ADI)RESS THE�_CIfT�COUNCIL:DURI,NG;THE MEETING,PLEASE COMPLETE A REQi"EST, TO SPEAK FORM AVAILABLE.AT THE ENTRANTCE,AND PRESENT IT TO;TIIE:CITY CLERK. SPEAKERS WILL BE;CAL:LED-UP. N.BY-THE<MAYOR;AT"THE APPROPRIATE TIME,. * Call to Order- Invocation- * Pledge of Allegiance- * Roll Call- STAFF COUNCIL AGENDA ITEMS RECOMMENDATION ACTION 3 ' CONVENE COMMUNITY REDEVELOPMENT AGENCY I. Approval of 07-08-2004 Minutes Approve 2. Special Services Agreement Corporation For Better Housing Approve 3. Resolution approving the Community Redevelopment Agency of Adopt' the City of Grand Terrace Community Redevelopment Project Area Refunding Tax Allocation Bonds Series 2004 "A", Series 2004`B"and Series 2004"C 4. Closed Session-Real Estate Negotiations(22278 Van Buren) ADJOURN COMMUNITY REDEVELOPMENT AGENCY i CONVENE PUBLIC FINANCE AUTHORITY 1. Resolution approving the Community Redevelopment Agency of Adopt the City of Grand Terrace Community Redevelopment Project Area Refunding Tax Allocation Bonds Series 2004"A", Series 2004"B"and Series 2004"C" ADJOURN PUBLIC FINANCE AUTHORITY CONVENE CITY COUNCIL MEETING 1. Items to Delete 2. SPECIAL PRESENTATIONS-None COUNCIL AGENDA 07-22-2004 PAGE 2 OF 3 AGENDA ITEMS' STAFF COUNCIL .RECOMMENDATIONS ACTION 3. CONSENT CALENDAR The following Consent Calendar items are expected to be routine and noncontroversial. They will be acted upon by the Council at one time without discussion. Any Council Member,Staff Member,or Citizen may request removal of an item from the Consent Calendar for discussion. A. Approve Check Registers Dated July 22,2004 Approve B. Ratify 07-22-2004 CRA Action C. Waive Full Reading of Ordinances on Agenda D. Approval of 07-08-2004 Minutes Approve E. Resolution to Direct Collection of Delinquent Sewer User Approve Fees on San Bernardino County Tax Roll 2004-2005 4. PUBLIC COMMENT 5. ORAL REPORTS A. Committee Reports 1. Emergency Operations Committee a. Minutes of 06-01-2004 Accept 2. Crime Prevention Committee a. Minutes of 06-14-2004 Accept B. Council Reports 6. PUBLIC HEARINGS A. Second Reading of an Ordinance of the City Council of the Approve City of Grand Terrace Eliminating the Time Limit on Establishment of Loans,Advances and Indebtedness, Extending the Time Limit of the Effectiveness of the Redevelopment Plan,Extending the Time Limit for Payment of Indebtedness and Receipt of Taxes Under Authority of the Redevelopment Plan for the Grand Terrace Community Redevelopment Project. 7. UNFINISHED BUSINESS A. Second Reading of an Ordinance of the City Council of the Approve City of Grand Terrace Authorizing an Amendment to the Contract Between the City Council and the Board of Administration of the California Public Employees' Retirement System COUNCIL AGENDA 07-22-2004 PAGE 3 OF 3 AGENDA ITEMS STAFF COUNCIL RECOMMENDATIONS ACTION 8. NEW BUSINESS A. Resolution-Community Redevelopment Agency of the Adopt City of Grand Terrace Community Redevelopment Project Area Refunding Tax Allocation Bonds Series 2004"A", Series 2004"B"and Series 2004"C" B. Schedule Outdoor Adventure Center Specific Plan Public Schedule Hearing 9. CLOSED SESSION-None ADJOURN THE NEXT CRA/CITY COUNCIL MEETING WILL BE HELD ON THURSDAY,AUGUST 12,2004 AT 6.30 P.M: A GENDA ITEM REQUESTS FOR THE 08-12-2004 MEETING MUST BE SUBMITTED IN WRITING TO THE CITY CLERK'S OFFICE BY NOON 08-05-2004. PENDIM0 0 R A APU-17RCI AL CITY OF GRAND TERRACE COMMUNITY REDEVELOPMENT AGENCY MINUTES REGULAR MEETING-JULY 8, 2004 A regular meeting of the Community Redevelopment Agency, City of Grand Terrace, was held in the Council Chambers,Grand Terrace.Civic Center,22795 Barton Road,Grand Terrace,California, on July 8, 2004 at 6:30 p.m. PRESENT: Herman Hilkey, Chairman Maryetta Ferr6, Vice-Chairman Lee Ann Garcia, Agency Member Bea Cortes,Agency Member Tom Schwab, Executive Director Brenda Stanfill, City Clerk Larry Ronnow,Finance Director Jerry Glander,Building& Safety Director Lt. Hector Guerra, Sheriff's Department John Harper,'City Attorney ABSENT: Don Larkin,Agency Member Steve Berry, Assistant City Manager Gary Koontz, Community Development Director APPROVAL OF 06-24-2004 MINUTES CRA-2004-20 MOTION BY VICE-CHAIRMAN FERRE; SECOND BY AGENCY MEMBER CORTES,CARRIED 4-0-1-0(AGENCY MEMBER LARKIN WAS ABSENT),to approve the June 24,2004 Community Redevelopment Agency Minutes. Chairman Hilkey adj ourned the Community Redevelopment Agency Meeting at 6:40 p.m., until the next CRA/City Council Meeting scheduled to be held on Thursday, July 22, 2004, at 6:30 p.m. SECRETARY of the Community Redevelopment Agency of the City of Grand Terrace CHAIRMAN of the Community Redevelopment Agency of the City of Grand Terrace 1 L1Ty ' 0 STAFF REPORT �MNDTEZR cE City Manager's Office CRA ITEM ( X ) COUNCIL ITEM ( ) MEETING DATE;JULY 22, 2004 SUBJECT: SPECIAL SERVICES AGREEMENT CORPORATION FOR BETTER HOUSING. FUNDING REQUIRED (X ) NO FUNDING REQUIRED ( ) As the agency members are aware the Redevelopment Agency recently purchased the parcel adjacent to the Senior Center for the purpose of developing a senior housing project. The demolition of the existing structure on the site is currently underway.In order to develop a senior housing project we need to do some preliminary work that will determine what the potential market is for such a project. Also,to conduct a survey of our senior population to identify what features,and activities would be of interest to those that would likely reside in a housing project at that location.In addition we would ;,prepare a space and use program to determine the number, the type of unit, and other features that would be included in the project to best suit the needs of Grand Terrace Seniors. Corporation for Better Housing is a non-profit 501c3 Corporation that has completed over 2,000 housing units of this type with over 300 currently under construction.We have toured several of their projects including the closest which is the Goldware Senior Housing Project in the City of Riverside, which is a 162 unit project completed in the,year 2002, All,the projects that we toured were very weW managed and would be a project that we'd be proud to have to serve the citizens of Grand Terrace. On page#2 of the agreement an outline-of the work schedule would provide a market study,a senior citizens survey, a space and use program, and a project proforma.The completed studies would be - brought back to the agency to further define what type of project would be appropriate for our site. It is estimated that the total cost of these activities would be $39;000 and would be paid for out of the Redevelopment Agency housing fund. STAFF RECOMMENDATION: STAFF RECOMMENDS COUNCIL ENTER INTO AN AGREEMENT WITH CORPORATION FOR BETTER HOUSING TO PROVIDE THE PRELIMINARY DEVELOPMENT WORK FOR THE DEVELOPMENT OF A SENIOR HOUSING PROJECT IN THE CITY OF GRAND TERRACE. Professional Services Agreement This agreement made this day of July,2004, between THE CITY OF GRAND TERRACE COMMUNITY REDEVELOPMENT AGENCY,having a principal place of business at 22795 Barton Road, Grand Terrace, CA 92313 (hereinafter the"Agency"), and Corporation for Better Housing, a qualified 501(c)(3)not-for-profit Consultant,having a principal place of business at 15490 Ventura Boulevard, Suite 210, Sherman Oaks, CA, 91403 (hereinafter the "Consultant")provides the following: 1. PURPOSE The Community Redevelopment Agency ("Agency") wishes to retain the services of the Corporation for Better Housing ("Consultant") for preliminary development work necessary for the development of a low to moderate income senior housing project adjacent to Petta Park in Grand.Terrace, California. This agreement("Agreement')will serve as a contract between the Agency and Consultant to undertake the following activities: 1A. Market Study. The Consultant will retain such professional and other counsel necessary to prepare a market study for the construction of a low-to moderate income senior housing project in Grand Terrace, California. This study will be prepared and produced in accordance with methodologies and practices customarily associated with such work products, and will provide data that will allow the Consultant and Agency to better understand the competitive environment for such projects in the Inland Empire. 1B. Senior Citizen Survey. The Consultant will retain such professional or other counsel necessary to conduct in-person interviews with Grand Terrance residents who would qualify, or will qualify in the near term,to live in an age- and income-restricted senior housing project. The purpose of these interviews will be to identify features, amenities, and activities that would be of interest to those most likely to reside in a senior housing project in Grand Terrace. The results of the survey will be presented in a written form. Following the completion of the market study and the senior citizen survey,the Consultant will present the findings to the Agency and its redevelopment consultant, and discuss the implications for the space and use program and amenities for the proposed senior housing project. The Consultant shall not proceed to the next task until this meeting has taken place and the Agency has released the Consultant to begin work on Task 1 C. 1C. Space &Use Program. Following the review and approval of the market study and the senior citizen survey,the Consultant will proceed to prepare a proposed space and use program for a Grand Terrace senior housing project. This program should address the number, size, and kind of residential units; the size and features of the amenities; and the size and features of all auxiliary uses. The space and use program should be prepared and delivered in a format customary to such documents, and be suitable for transmission to an architect for the preparation of a conceptual design for the project. 11). Project Proforma. In cooperation with the Agency's redevelopment consultant, Empire Development Solutions,the Consultant will prepare a project proforma itemizing the likely costs to plan, design, construct and operate a project consistent with the recommendations from the Space &Use Program. 1E. Budget and Time Schedule. The tasks lA-1D shall be completed under the following budget and time schedule. Work Item Timeline By Budget 1A. Market Study. Weeks 1-4 Eliant, Inc. $ 9,000 1 B. Senior Citizen Survey. Weeks 1-8 GHS Consultants 15,000 CBH 5,000 1 C. Space and Use Program Weeks 8-12 CBH 5,000 1 D. Project Proforma Weeks 9-12 CBH 5,000 $39,000 Contact Information Eliant, Inc. Annie Gerard, CRE Vice President 18 Technology Drive, Suite 200 Irvine, CA 92618 (949) 753-1077 x15 GHS Consultants Mary Watson Gerontologist P.O. Box 6065 Irvine,CA 92616 (949) 697-4278 Professional Services Agreement—Page 2 CBH Dave Ferguson Senior Vice President 15490 Ventura Blvd. Suite 210 Sherman Oaks, CA 91403 (818) 905-2430 x15 2. TERM OF CONTRACT This agreement will become effective when signed by both parties and shall continue to be in effect for 120 days thereafter or until work is complete, whichever event comes first. If at 120 days from the start of'the contract, the work is not complete, at such point the contract can be renewed for an additional 60 days if agreed upon by both parties. 3. INITIATION OF WORK All work to be completed as outlined in items lA-lD will be initiated upon the signing of this Agreement by both parties. 4. RESPONSIBILITIES OF PARTIES --AGENCY Agency is responsible for: A. Providing on-going guidance and information necessary for the work of the Consultant B. Reviewing and approving the Consultant's work product in a timely fashion C. Paying Consultant outstanding invoices in an expeditious fashion. 5.RESPONSIBILITIES OF PARTIES -- CONSULTANT Consultant is responsible for: A. Acting upon the initiation of work and meeting the schedule and budget set by Agency B. Briefing and scheduling all sub-contractors and ensuring that the information gathered and work performed is adequate for, and appropriate to,the conceived project C. Reporting to and co-coordinating through the Agency redevelopment consultant,Empire Development Solutions (EDS). 6. COMPENSATION A budget and maximum fee for each task is outlined in the Budget and Time Schedule(1E) that includes the work of any subcontractors, all materials and services,travel, and the compensation of the Consultant corresponding with the delineated work. Any additional work which would cause the Budget and Time Schedule(M)to exceed the agreed upon budget must first be approved in writing by the Agency. All work by the Consultant's subcontractors shall be billed at cost;the Consultant will bill the Agency for its time at the rate of$200.00 per hour. Professional Services Agreement—Page 3 7. TERMINATION OF CONTRACT A. Termination The contract may be terminated by either parry upon written notice to the other party in the event of a substantial failure of performance by such other parry; or if Agency should decide to abandon or postpone the project indefinitely. The terminating party shall give a minimum five (5) day notice of termination. B. Payment upon Termination In the event of such termination,Agency.shall determine and pay to Consultant, as full payment for all Agency-approved work performed and all expense incurred under the contract; the amount which bears the same ratio to the total fee which would have been paid for the full performance of the contract as the ratio which the work actually rendered bears to the services which would have been necessary for the full performance of the contract,plus any sums due Consultant for extra services or reimbursements. In ascertaining the work actually rendered prior to the date of termination of the contract, consideration shall be given to both completed work and work in progress and to all drawings and other documents, whether completed or incomplete,provided that they are delivered to Agency. C. Recommencement If,upon payment of the amount required to be paid under this Article following the termination of the contract,Agency thereafter should determine to complete the original Project or substantially the same Project,Agency shall have the right to utilize any of the documents prepared under the contract by Consultant without additional compensation to Consultant, provided that prior to such utilization all reference to Consultant is removed from said documents, and no liability attaches to Consultant irrespective of any negligence in the drawings or documents since Consultant may have corrected any defects. 8. ACCOUNTING RECORDS OF CONSULTANT Records of Consultant's direct personnel and reimbursable expenses pertaining to any extra services rendered under the contract and records of accounts between Agency and Consultant shall be made and kept by Consultant on a generally recognized accounting basis and shall be made available by Consultant to Agency or its authorized representatives at all reasonable times for inspection and copying. 9.WORKERS' COMPENSATION By executing this Agreement, Consultant hereby certifies as follows: "I am aware of the provisions of Section 3700 of the Labor Code which require every employer to be insured against liability for workers' compensation or to undertake self- insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of the work of this contract." Professional Services Agreement.—Page 4 10. INSURANCE Prior to Agency's execution of this Agreement, Consultant shall obtain, and shall thereafter maintain during the term of this Agreement, such general liability insurance as required to insure Consultant against damages for personal injury, including accidental death, as well as from claims for property damage which may arise from or which may concern operations under.this Agreement,whether such operations be by Consultant or by anyone directly or indirectly employed by, connected with, or acting for or on behalf of Consultant. All liability insurance shall be issued by insurance companies authorized to transact liability insurance business in the State of California, satisfactory to Consultant, and shall cover comprehensive general and automobile liability for both bodily injury, (including death) and' property damage, including but.not limited to aggregate operations, aggregate protective and aggregate contractual with the following minimum limits: Bodily Injury $250,000 each person (Including death) $500,000 each occurrence $500,OOO.aggregate products and completed operations Property Damage 100,000 each occurrence $250,000.each aggregate A combined single limit policy with aggregate limits in the amount of$1,000,000 will be considered equivalent to the required minimum limits. Insurance.policies or certificates and additional insured endorsements evidencing the coverage required by this Agreement shall be'filed with Agency. Said policies shall be in the usual form of public liability insurance. The policies shall not be canceled unless thirty(30) days prior written notification of intended cancellation has been given to Agency by registered'mail. All major technical subconsultants (i.e. civil, geotechnical, and architectural) shall purchase and maintain, at its own cost and expense, and not`as a reimbursable cost,Professional Liability Insurance in the amount of not less than one million dollars ($1,000,000)per occurrence,per site,to protect it against all claims that may arise'out of, or in any manner be related to, error and/or omissions in Consultant's work under this Agreement. Technical subconsultants shall have this insurance cover a period of at least two years subsequent to the completion and acceptance by Agency of all work under this agreement. 11. ERRORS AND OMISSIONS In the event of errors and omissions that are due to the negligence of Consultant that result in expense to the Agency greater than would have resulted if there were no negligence in the work accomplished by Consultant or subconsultants, additional design, construction and/or restoration expenses shall be borne by Consultant and/or subconsultants. Professional Services Agreement-Page 5 12. REPRODUCTION OF DOCUMENTS A. Review Documents Consultant shall provide Agency, in the number reasonably required by Agency, all of Consultant's project documents for review and approval. B. Final Documents Consultant shall furnish the Agency the number of reproductions of the final approved project documents necessary for use by Agency. U 13. OWNERSHIP OF DOCUMENTS Consultant shall secure ownership.of all drawings and project,documents normal and customary in a private development and all rights to drawings and project documents shall be transferable from the Consultant to the Agency. 14. REUSE OF DOCUMENTS If at any time Agency desires to construct all or part of another project or projects which would be essentially identical to the Project, Consultant agrees that Agency shall have the right to reuse all or any portion of the documents at no additional compensation to Consultant,provided all reference to Consultant is removed from the documents prior to such reuse and Agency holds Consultant harmless from any liability which may arise from such reuse. :However, any such reuse may require fees to be paid to other parties. 15. SUCCESSORS AND ASSIGNS This Agreement shall be binding upon Agency and its successors and upon Consultant and Consultant's successors and assigns. Neither this Agreement,nor any part hereof,nor any monies due or to become due hereunder may be assigned by Consultant without the prior consent of Agency,which consent shall not be unreasonably withheld. 16.NONDISCRIMINATION• During Consultant's performance of the contract, Consultant and its subconsultants, shall not discriminate on the grounds of race,religious creed, color,national origin, ancestry,physical handicap,medical condition including the medical condition of Acquired Immune Deficiency Syndrome (AIDS) or any condition related thereto,marital status, age, sex or,sexual orientation in the selection and retention of employees and subconsultants and the procurement of materials and equipment, except as provided in Section 12940 of the California Government Code. ` Pursuant to the Americans with Disabilities Act and specif cally 42 USC 12132, Consultant acknowledges and agrees that in the performance of the Contract,no qualified individual shall, by reason of a disability,be excluded from participation in or be denied the benefits of the services,programs or activities of the Agency or Consultant or be subjected to discrimination by the Agency or Consultant. Professional Services Agreement-Page 6 17. INDEMT]IFICATION Consultant shall indemnify and hold Agency and Agency's officers and employees harmless from all damages, costs and expenses, including attorneys' fees, in law or equity, that may at any time arise or be set up because of damages to property or personal injury, including death, suffered by reason of, or in the course of performing, Consultant's services hereunder and caused or contributed to by any willful or negligent act or omission committed by Consultant or any of Consultant's employees, subconsultants or agents. The Agency likewise hereby indemnifies Consultant for any damage caused by or contributed to by the Agency, its agents, employees or like parties. 18. CONSULTANT STATUS In the performance of the contract, Consultant and Consultant's agents and employees shall act in an independent capacity and not as officers, employees or agents of Agency. Consultant's employees and agents shall under no circumstances be considered or held to be employees or agents of Agency, and Agency shall have no obligation to pay or withhold state or federal taxes or provide workers' compensation of unemployment insurance for or on behalf of them or Consultant. 19. BUSINESS TAX Consultant understands that its performance of the services will constitute doing business in the City of Grand Terrace, and it shall, therefore,register for and pay any required business taxes pursuant to the Grand Terrace Municipal Code. This expense is not reimbursable. 20. FULL COMPENSATION ;The consideration payable to Consultant as provided herein shall be compensation in full for all of Consultant's services and expenses incurred in the performance of the contract, including travel and per diem,unless otherwise expressly provided. 21.NOTICES Service of any notices,bills, invoices or other documents required or permitted by the contract shall be sufficient if sent by one party to the other by United States mail,postage prepaid and addressed as follows: A enc Consultant Community Redevelopment Agency Corporation for Better Housing of Grand Terrace, California Attn: Tom Schwab Attn: Dave Ferguson 22795 Barton Road 15490 Ventura Boulevard, Suite 210 Grand Terrace, CA 92313-5295 Sherman Oaks, CA 91403 22.MODIFICATIONS No alteration or variation of the terms of the contract shall be valid except as follows: Professional Services Agreement—Page 7 A. Changes relating to time, money or scope of work shall be made by formal written amendment to this Agreement executed by both parties. B. Minor alterations of terms or covenants may be formalized by letter from the Agency. 23. GOVERNING LAW AND VENUE This Agreement has been negotiated and executed in the State of California and shall be governed by and construed under the laws of the State of California. In the event of any legal action to enforce or interpret this Agreement,the sole and exclusive venue shall be a court of competent jurisdiction in San Bernardino County, California and the parties hereto agree and do hereby submit to the jurisdiction of that court,notwithstanding Code of Civil Procedure Section 394. The parties specifically agree that by soliciting and entering into and performing services under this Agreement, Consultant shall be deemed to constitute doing business within San Bernardino County, California from time of solicitation of work, through the period when all work under this Agreement is completed, and continuing until the expiration of any applicable limitations period. Furthermore,the parties have specifically agreed, as part of the consideration given and received for entering into this Agreement,to waive any and all rights to request that an action be transferred for trial to another county under Code of Civil Procedure Section 394. 24. SEVERABILITY Should any provision of this Agreement be held unenforceable or invalid for any reason, the remaining provisions shall be unaffected by such holding. 25. LITIGATION EXPENSES The parties agree that, in the case of any dispute arising over the terms of this Agreement,the prevailing party shall be entitled to receive as a component of its recovery all of its costs and expenses of litigation(including,without limitation, costs of investigation, attorneys' fees and expenses, and court costs). 26. CAPTIONS The captions or headings of paragraphs in this Agreement are for convenience only and are not to be interpreted as controlling, or affecting the subject matter contained hereunder. 27. ENTIRE AGREEMENT This instrument contains the entire agreement of the parties relating to the rights granted and obligations assumed in this instrument and supersedes any and all other agreements, contracts or understandings between the parties. Any oral representations or modifications concerning this instrument shall be of no force or effect unless contained in a subsequent written modification signed by the party to be charged. Professional Services Agreement--Page 8 IN WITNESS WHEREOF,the parties have executed this Agreement-as of the day and year first above written. COMMUNITY REDEVELOPMENT CORPORATION FOR BETTER HOUSING AGENCY OF GRAND TERRACE Thomas Schwab David erguson Executive Director of the Agency Senior Vice President l Z/O4 Date Date Professional Services Agreement—Page 9 LAW OFFICES OF HARPER& BURNS LLP A LIMITED LIABILITY PARTNERSHIP INCLUDING A PROFESSIONAL CORPORATION 453 S.GLASSELL STREET ALAN R BURNS ORANGE,CALIFORNIA 92866 RIVERSIDE/SAN BERNARDINO CO (909)674-0698 JOHN R.HARPER* COLIN R.BURNS (714)771-7728 FAX(714)744-3350 OF COUNSEL JUDI A.CURTIN• MICHAEL MONTGOMERY* -A PROFESSIONAL CORPORATION STAFF REPORT TO: Members of the Community Redevelopment Agency of the City of Grand Terrace Board of Directors FROM: John R. Harper, City Attorney DATE: July 22, 2004 RE: Community Redevelopment Agency of the City of Grand Terrace Community Redevelopment Project Area Refunding Tax Allocation Bonds Series 2004 "A", Series 2004 `B" and Series 2004 "C" As you are aware,the Redevelopment Agency has previously issued Tax Allocation Bonds, Series 1993 "A" and Series 1993 `B", as well as entering into a loan agreement with Zion Bank. Additionally,the City has available housing funds and receives tax increment which must be dedicated to the low and moderate income housing fund. Based upon a financial analysis by Urban Futures, Inc., and Wedbush Morgan Securities, Inc., it is in the Agency's best economic interest to refund the outstanding bonds and to issue housing bonds. The refunding of the existing bonds will not only reduce the cost to the Redevelopment Agency(and City taxpayers) (not unlike refinancing a home during this time of low interest rates),but also the refunding will allow the Agency to reduce the term of the debt to seven(7) years. This refunding will have no immediate economic impact on the Agency, but will allow the Agency to eliminate its debt more quickly and return tax increment funds to the City General Fund, should the Agency choose to do so. Recommendation: It is recommended that the Redevelopment Agency Board adopt the accompanying resolution approving the financing and the associated financing documents. Fiscal Impact: None CRA AGENDA ITEM NO. CRA RESOLUTION NO.,2004- A RESOLUTION OF THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY GRAND TERRACE, APPROVING THE FORMS OF AND AUTHORIZING THE EXECUTION OF AN INDENTURE OF TRUST, A BOND PURCHASE CONTRACT, CONTINUING DISCLOSURE AGREEMENT AND AN OFFICIAL STATEMENT RELATING TO THE ISSUANCE OF' THE AGENCY'S TAX ALLOCATION BONDS AND APPROVING. CERTAIN ACTIONS IN CONNECTION THEREWITH WHEREAS, the Agency is a redevelopment agency (a public body, corporate and politic) duly created, established and authorized to transact business and exercise its powers, all under and pursuant to the Community Redevelopment Law (Part 1 of Division 24 (commencing with Section 33000) of the, Health. and Safety Code of the State of California), and the powers of the Agency include the power to issue bonds or notes for any of its corporate purposes; and WHEREAS, the Redevelopment Plan for a redevelopment project known. and designated as the "Community Redevelopment Agency of the City of Grand Terrace Redevelopment Project", has been adopted and approved by Ordinance No. 17 of the City of Grand Terrace on -April 19, 1979 and has been amended by Ordinance No. 52 adopted and approved on July 15, 1981 and Ordinance No. 202 adopted on September 12; 2002, and all requirements of law for and precedent to the adoption and approval of the Redevelopment Plan, as amended, have been duly complied with; and WHEREAS, for the corporate purposes of the Agency, the_ Agency deems it necessary to issue at this time tax allocation bonds in a principal amount Not to Exceed Sixteen Million Dollars ($16,000,000) of the Community Redevelopment Agency of the City of Grand Terrace Refunding Tax Allocation Bonds, Series 2004A, 2004B and 2004C (the "Bonds"), and to use the proceeds of such Bonds to refund outstanding bonds, defease an existing Loan Agreement and to fund low and moderate income housing projects, certain redevelopment projects to pay costs in connection with the issuance of the Bonds and,to make certain other deposits as required by the Indenture; and WHEREAS, the purposes stated above will be accomplished by issuing at this time such tax allocation bonds pursuant to the Indenture and this resolution of the Agency. WHEREAS, there have been prepared and submitted to this meeting forms of: (1) a draft of the Indenture of Trust; and (2) a draft of the Preliminary Official Statement to be used in connection with the sale of the Bonds (such Preliminary Official Statement in the form presented at this meeting with such changes, insertions and omissions as are made pursuant to this Resolution, '.being referred to, herein as "Preliminary Official Statement"); and (3) a draft of the proposed Bond Purchase Contract among the Agency, the Underwriter and theAuthority. (4) a draft of the proposed Continuing-Disclosure Agreement. WHEREAS, the Agency now desires to authorize the execution of such documents and the performance of such acts as may be necessary or desirable to effect the issuance and sale of the Bonds. NOW, THEREFORE, BE IT RESOLVED by the Community Redevelopment Agency of the City of Grand Terrace at a regular meeting held on , 2004. Section 1. Subject to the provision's of Section 2 hereof, the issuance of the Bonds in the aggregate--principal amount Not to Exceed Sixteen Million ($16,000,000)- on the terms and conditions set forth in, and subject to the limitations specified in, the Indenture, is-hereby authorized and approved. The Bonds will be dated, will bear interest at the rates,' will mature on the dates, will be issued in the form, will have such sinking fund,. installments, will be subject .to redemption; and will be .as otherwise provided in the Indenture, as the same will be completed as provided in this Resolution. The proceeds of the sale of the Bonds shall be applied as provided in the Indenture of Trust. The Agency hereby designates the Series 2004A and 2004B as a qualified, tax exempt obligation, pursuant to Section 265 (b)(3)(B) of,the Code. The Series 2004C Bonds shall be subject to State of California and Federal Taxation. Section 2. The Indenture of Trust," in. substantially the form, submitted at this meeting and made a part hereof as,though set forth in full herein, be and'the same is hereby approved. The Chairman and the Secretary of the Agency are hereby authorized and directed to execute and deliver the Indenture of Trust in the form presented at this meeting with such changes insertions and omissions as may be requested by Bond Counsel and approved by the Chairman, said execution being conclusive evidence of such approval. Section 3. The Bond Purchase Contract among the Agency, the Underwriter and the Grand Terrace Financing Authority, in substantially the form submitted at this meeting and made a part hereof as though set forth in full. herein, be and the same is hereby approved. The Executive Director of the Agency is hereby authorized and directed to execute the Bond Purchase Contract in the form presented at this meeting with such changes, insertions and omissions as may be approved by the Executive Director, said execution being conclusive evidence of such approval. Section 4. The Preliminary Official Statement in substantially, the form presented at this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved and the use of the Preliminary Official Statement in connection with the offering and sale of the Bonds is hereby authorized and approved. Section 5. The preparation and delivery of an Official Statement, and its use by the Authority and.Wedbush Morgan Securities (the "Underwriter"), in connection with the offering and sale of the- Bonds, be and the same is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement with-such changes, insertions and-omissions as may be requested by Bond Counsel or the Underwriter and approved by the Chairman of the Agency, such approval to. be conclusively evidenced ,by the execution and delivery thereof. The Chairman is hereby authorized and directed to execute the .final Official Statement and any amendment or supplement thereto, in the name of and on behalf of the Agency, and thereupon to cause the final Official Statement and any such amendment or supplement to be delivered to the Underwriter. Section 6. The Continuing Disclosure Agreement, in substantially the form submitted at this meeting and made a part hereof as-though set forth in full herein, is hereby approved. The Executive Director' of the Agency is hereby authorized and directed to execute and deliver the Continuing Disclosure Agreement in the form presented with such changes, insertions or deletions.as may be requested by Bond Counsel- and approved by the Executive Director, said executive being conclusive evidence of such approval., Section 7. The Chairman of the Agency, the Treasurer, the Secretary of,the Agency, and any other'proper officer of the Agency, acting singly, be and each of them hereby is authorized and directed to execute and deliver any and all documents and -instruments, including .any agreements with the Authority relating to the Bonds, and to do and cause to be done any and all acts and things necessary or proper for carrying out the transactions contemplated by the Indenture, the Purchase Agreements-, the 'Official Statement, this Resolution and any such agreements. Section 8. This Resolution shall take effect immediately upon its adoption. PASSED AND APPROVED by the Community Redevelopment Agency of the City of Grand Terrace, at a regular meeting held on , 2004. Chairman. Community Redevelopment Agency of the City of Grand Terrace ATTEST: Secretary, Community Redevelopment Agency for the City of Grand Terrace , \ I, Brenda Stanfill. Secretary of the Community Redevelopment Agency of the City of Grand"Terrace, do,hereby certify that the foregoing Resolution was introduced and adopted by the Community Redevelopment Agency of the City of Grand Terrace at a meeting held on the_day of , 2004 by the following vote: AYES: NOES: ABSENT: ABSTAIN: Secretary,of,the Community Redevelopment Agency of the City of Grand Terrace IN WITNESS WHEREOF, I have set my hand and affixed the official seal of the Community Redevelopment Agency of the City of Grand Terrace, California, this day of , 2004. Secretary of the Community Redevelopment Agency City of Grand Terrace LAW OFFICES OF HARPER & BURNS LLP A LIMITED LIABILITY PARTNERSHIP INCLUDING A PROFESSIONAL CORPORATION , 453 S.GLASSELL STREET AL AN R.BURNS ORANGE,CALIFORNIA 92866 RIVERSIDE I SAN BERNARDINO CO. JOHN R.HARPER` (909)674-0698 COLIN R.BURNS (714)771-7728 OF COUNSEL FAX (714)744-3350 JUDI A.CURTIN* MICHAEL MONTGOMERY* •A PROFESSIONAL CORPORATION STAFF REPORT TO: Members of the Community Redevelopment Agency of the City of Grand Terrace Board of Directors FROM: John R. Harper, City Attorney DATE: July 22, 2004 RE: Community Redevelopment Agency of the City of Grand Terrace Community Redevelopment Project Area Refunding Tax Allocation Bonds Series 2004 "A", Series 2004 `B" and Series 2004 "C" As you are aware,the Redevelopment Agency has previously issued Tax Allocation Bonds, Series 1993 "A" and Series 1993 `B", as well as entering into a loan agreement with Zion Bank. Additionally, the City has available housing funds and receives tax increment which must be dedicated to the low and moderate income housing fund. Based upon a financial analysis by Urban Futures, Inc., and Wedbush Morgan Securities,Inc., it is in the Agency's best economic interest to refund the outstanding bonds and to issue housing bonds. The refunding of the existing bonds will not only reduce the cost to the Redevelopment Agency (and City taxpayers) (not unlike refinancing a home during this time of low interest rates),but also the refunding will allow the Agency to reduce the term of the debt to seven (7) years. This refunding will have no immediate economic impact on the Agency, but will allow the Agency to eliminate its debt more quickly and return tax increment funds to the City General Fund, should the Agency choose to do so. Recommendation: It is recommended that the Redevelopment Agency Board adopt the accompanying resolution approving the financing and the associated financing documents. Fiscal Impact:None PFA Item No. GTPFA RESOLUTION NO. 2004- RESOLUTION OF THE GRAND TERRACE PUBLIC FINANCING AUTHORITY APPROVING THE FORMS OF AND AUTHORIZING THE EXECUTION OF AN INDENTURE OF TRUST, A BOND PURCHASE CONTRACT, CONTINUING DISCLOSURE AGREEMENT AND AN OFFICIAL STATEMENT RELATING TO THE ISSUANCE OF THE AGENCY'S TAX ALLOCATION BONDS AND APPROVING CERTAIN ACTIONS IN CONNECTION THEREWITH WHEREAS, the Grand Terrace Public Financing Authority (the "Authority") is a joint powers authority organized pursuant to Title 1, Division 7, Chapter 5 of the Government Code of the State of California; and WHEREAS, for the corporate purposes of the Community Redevelopment Agency of the City of Grand Terrace (the "Agency"), the Agency has determined to issue at this time tax allocation bonds in a total principal amount Not to Exceed Sixteen Million Dollars ($16,000,000), and to use the proceeds of such Bonds to refund outstanding bonds, defease an existing Loan Agreement, fund low and moderate income housing projects, and to pay costs in connection with the issuance'of the Bonds and to make certain other deposits as required by the Indenture; and WHEREAS, the purposes stated above will be accomplished by the Authority purchasing such Bonds from the Agency and selling such Bonds to Wedbush Morgan Securities (the "Underwriter") pursuant to the Marks-Roos Local Bond Pooling Act of 1985 (Government Code Section 6584 et seq.). WHEREAS, there have been prepared and submitted to this meeting forms of: (1) a draft of the Indenture of Trust of the Agency; and (2) a draft of the Preliminary Official Statement of the 'Agency to be used in connection with the sale of the Bonds (such Preliminary Official Statement in the form presented at this meeting with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as "Preliminary Official Statement"); and (3) a draft of the proposed Bond Purchase Contract among the Agency, the Underwriter and the Authority; and 1 (4) a draft of the proposed Continuing Disclosure Agreement between the Authority and the Underwriter. NOW, THEREFORE, BE IT RESOLVED by the Grand Terrace Public Financing Authority, as follows: Section 1. Subject to the provisions of Section 2 hereof, the purchase of the Bonds in the aggregate principal amount Not to Exceed Sixteen Million Dollars ($16,000,000) on the terms and conditions set forth in, and subject to the limitations specified in, the Indenture and the Purchase Agreement, is hereby authorized and approved. The Bonds will be dated, will bear interest at the rates, will mature on the dates, will be issued in the form, will have such sinking fund installments, will be subject to redemption, and will be as otherwise provided in the Indenture, as the same will be completed as provided in this Resolution. Section 2. The Indenture of Trust, in substantially the form submitted at this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. Section 3. The Bond Purchase Contract among the Agency, the Underwriter and the Authority, in substantially the form submitted at this meeting and made a part hereof as though set forth in full herein are hereby approved. The Executive Director of the Authority is hereby authorized and directed to execute the Purchase Agreement in the form presented at this meeting with such changes, insertions and omissions as may be approved by the Executive Director, said execution being conclusive evidence of such approval. Section 4. The Preliminary Official Statement in substantially the form presented at this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved and the use of the Preliminary Official Statement in connection with the offering and sale of the Bonds is hereby authorized and approved. Section 5. The preparation and delivery of an Official Statement, and its use by the Underwriter, in connection with the offering and sale of the Bonds, be and the same is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement with such changes, insertions and omissions as may be requested by Bond Counsel or the Underwriter and approved by the Chairman of the Agency, such approval to be conclusively evidenced by the execution and delivery thereof. Section 6. The Chairman of the Authority, the Treasurer, the Secretary of the Authority, and any other proper officer of the Agency, acting singly, be and each of them hereby is authorized and directed to execute and deliver any and all documents and instruments, including any agreements with the Agency relating to the Bonds, and to do and cause to be done any and all acts and things necessary or proper for carrying out the transactions contemplated by the Indenture, the Purchase Agreement, the Official Statement, this Resolution and any such agreements. Section 7. This Resolution shall take effect immediately upon its adoption. PASSED AND APPROVED by the Grand Terrace Public Financing Authority at a regular meeting held on , 2004. Chairman Grand Terrace Public Financing Authority ATTEST: Secretary for the Grand Terrace Public Financing Authority I, Brenda Stanfill, Secretary of the Grand Terrace Public Financing Authority, do hereby certify that the foregoing Resolution was introduced and adopted at a meeting held on the day of , 2004 by the following vote: AYES: NOES: ABSENT: ABSTAIN: Secretary for the Grand Terrace Public Financing Authority Check Registers Dated July 22, 2004 vchlist Voucher List Page: 1 07/15/2004 2:33:13PM CITY OF GRAND TERRACE Bank code : bofa Voucher Date Vendor Invoice Description/Account Amount 53813 7/7/2004 001907 COSTCO#478 0478 15 0271 CHILD CARE SUPPLIES 10-440-220-000-000 28.66 Total : 28.66 53814 7/7/2004 001907 COSTCO#478 0478 13 0236 CHILD CARE SUPPLIES 10-440=220-000-000 8.68 Total : 8.68 53819 7/7/2004 006315 ROLLINS, RICHARD June, 2004 June Open/Close/Clean Park 10-450-245-000-000 1,085.00 Total : 1,085.00 53821 7/13/2004 006720 SO.CA.EDISON COMPANY June, 2004 June electricity 16-510-238-000-000 25.12 10-805-238-000-000 781.40 Total : 806.52 53822. 7/13/2004 010374 GUZMAN, FRANK 07132004 Ref Initiative Filing Fee 23-301-65-00 200.00 Total : 200.00 53851 7/22/2004 001023 ABC SCHOOL SUPPLY INC X00323070101 CHILD CARE SUPPLIES 10-440-228-000-000 219.14 Total : 219.14 53852 7/22/2004 010373 BORRERO, ESTELLA 07072004 Refund swim lessons-Jonah 10-430-30 56.00 Total : 56.00 53853 7/22/2004 001713 CA. DEPT. OF TRANSPORTATION 167643 May 1-215 signal maint/energy 16-510-238-000-000 250.02 Total : 250.02 53854 7/22/2004 010217 CALIFORNIA OVERNIGHT 4385350 Document delivery service 10-140-210-000-000 12.96 Total : 12.96 Page: 1 :1 vchlist Voucher List Page: 2 07/15/2004 2:33:13PM CITY OF GRAND TERRACE Bank code : bofa Voucher Date Vendor Invoice Description/Account Amount 53855 7/22/2004 001750 CHILDCRAFT EDUCATION CORP. M03386570101 CHILD CARE SUPPLIES 10-440-228-000-000 309.72 M03386570103 CHILD-CARE SUPPLIES - 10-440-228-000-000 - - 69.21 Total : 378.93 53856 7/22/2004 001867 COMMERCIAL LANDSCAPE SUPPLY 129513 Park maint supplies 10-450-245-000-000 152.04 Total : 152.04 53857 7/22/2004 001930 DAILY JOURNAL CORPORATION B693035 LEGAL ADVERTISING 10-125-230-000-000 36.34 Total : 36.34 53858 7/22/2004 001937 DANKA OFFICE IMAGING COMPANY 701676139 DANKA COPIER 34-400-246-000-000 51.70 10-175-246-000-000 23.50 10-172-246-000-000 18.80 701676143 DANKA COPIER 34-400-246-000-000 2.87 10-175-246-000-000 1.30 10-172-246-000-000 1.04 - Total : 99.21 53859 7/22/2004 001942 DATA TICKET INC. 9968 PARKING CITATION PROCESSING 10-140-255-000-000 100.00 Total : 100.00 53860 7/22/2004 002082 DISCOUNT SCHOOL SUPPLIES D03581470102 CHILD CARE SUPPLIES 10-440-228-000-000 258.81 D03581780001 CHILD CARE SUPPLIES - 10-440-221-000-000 210.26 Total : 469.07 53861 7/22/2004 010370 EDSTROM, ANITA 07082004 Refund swim lessons-Sydney 10-430-30 56.00 Total : 56.00 Page: 2 l I 1 vchlist 1;:,ucher List Page: 3. 07/15/2004 2:33:13PM CITY OF GRAND TERRACE Bank code : bofa Voucher Date Vendor Invoice Description/Account Amount 53862 7/22/2004 010198 ENVIRONMENTS, INC. 471684- CHILD CARE SUPPLIES 10-440-228-000-000 100.67 472422 CHILD CARE SUPPLIES - 10-440-228-000-000 - - 28.20 Total : 128.87 53863 7/22/2004 002301 FEDEX 1-890-77387 June document delivery service 10-190-211-000-000 18.15 Total : 18.15 53864 7/22/2004 002710 FOX OCCUPATIONAL MEDICAL CT. 12844 NEW EMPLOYEE PHYSICALS 10-190-224-000-000 132.00 Total : 132.00 53865 7/22/2004 002740 FRUIT GROWERS SUPPLY 32064458 Park maint supplies 10-450-245-000-000 - 5.47 32064460 Park maint supplies 10-450-245-000-000 4.53 Total : 10.00 53866 7/22/2004 002901 G.T. AREA CHAMBER OF COMMERCE 3868 Install dinner-Cortes & Berry 10-110-270-000-000 25.00 10-180-270=000-000 25.00 Total : 50.00 53867 7/22/2004 010181 GOPHER PATROL 43998 GOPHER ERADICATION SERVICES 10-450-245-000-000 445.00 Total : 445.00 53868 7/22/2004 003224 HYDRO-SCAPE PRODUCTS INC. 3447897-00 SPRINKLER.MATERIALS 10-450-245-000-000 36.10 3448845-00 SPRINKLER MATERIALS 10-450-245-000-000 34.43 Total : 70.53 53869 7/22/2004 003858 J.Z.'S PARTY CHARM 2113 - Linens &tables 23-200-12-00 75.79 Page: 3 vchlist Voucher List Page: 4 07/15/2004 2:33:13PM CITY OF GRAND TERRACE Bank code: bofa Voucher Date Vendor Invoice Description/Account Amount 53869 7/22/2004 003858 J.Z.'S PARTY CHARM (Continued) Total : 75.79 53870 7/22/2004 003850 JANI-KING 06040105 CLEANING SERVICES 34-400-246-000-000 150.00 Total : 150.00 53871 7/22/2004 003863 KAPLAN COMPANIES 0000890744 CHILD CARE SUPPLIES - 10-440-228-000-000 88.13 Total : 88.13 53872 7/22/2004 010372 KURR, CAROLYN 07062004 Refund swim lessons-Trinity 10-430=30 ' 112.00 Total : 112.00 53873 7/22/2004 004299 LAKESHORE LEARNING MATERIALS 2-175214 CHILD CARE SUPPLIES 10-440-228-000-000 187.97 - 10-440-223-000-000 70.59 2-175215 CHILD CARE SUPPLIES 10-440-221-000-000 500.00 10-440-219-000-000 182.80 Total : 941.36 53874 7/22/2004 010371 LE FORGE, LYNNE 07072004 Refund swim lessons-Christine 10-430-30 28.00 Total : 28.00 53875 7/22/2004 010369 LOMA LINDA ANIMAL HOSPITAL 0001 Jan. chips &rabies shots 10-190-256-000-000 1,368.00 Total : 1,368.00 53876 7/22/2004 004620 MCI TELECOMMUNICATIONS June 7FW5900 June EOC phone line/usage 10-808-235-000-000 32.37 Total : 32.37 53877 7/22/2004 010326 NATIONS RENT 0182 996943 June water trailer rental-Rollins Pk 32-600-205-000-000 873.00 Total : 873.00 Page: 4 vchlist- V'� ,;her List Page: 5 07/15/2004 2:33:13PM CITY OF GRAND TERRACE Bank code: bofa Voucher Date Vendor Invoice Description/Account Amount 53878 7/22/2004 010171 REPUBLIC ELECTRIC 2069 June siqnal maint 16-510-255-000-000 280.00 Total : 280.00 53879 7/22/2004 006285 RIVERSIDE HIGHLAND WATER CO 2208 OUTSOURCE OF SEWER BILLING 21-572-255-000-000 785.36 June, 2004 June const mtr-Rollins Park 10-450-245-000-000 20.00 Total : 805.36 53880 7/22/2004 006453 S.B. COUNTY AUDITOR/CONTROLLER- 1235 BOOKING FEES 10-410-259-000-000 1,437.48 Total : 1,437.48 53881 7/22/2004 006681 SMART& FINAL - 0083837 GT DAYS/GRAD SUPPLIES 10-440-228-000-000 - 70.35 Total : 70.35 53882 1/22/2004 006720 SO.CA.EDISON COMPANY June, 2004 June electricity 16-510-238-000-000 3,649.40 26-600-238-000-000 49.80 26-601-238-000-000 41.50 26-602-238-000-000 58.10 Total : 3,796.80 53883 7/22/2004 006730 SO.CA.GAS COMPANY June, 2004 June CNG fuel 34-800-272-000-000 42.96 10-440-272-000-000 25.27 10-180-272-000-000 89.70 10-805-238-000-000 15.32 10-190-238-000-000 114.46 10-440-238-000-000 36.91 Total : 324.62 53884 7/22/2004 006898 SYSCO FOOD SERVICES OF L.A. 4063014999 C. Care food supplies - 10-440-220-000-000 659.54 Total : 659.54 Page: 5 vchlist Voucher List Page: 6 07/15/2004 2:33:13PM CITY OF GRAND TERRACE Bank code : bofa Voucher Date Vendor Invoice Description/Account Amount 53885 7/22/2004 010316 TEACHERS' DISCOUNT M51084590102 CHILD CARE SUPPLIES 10-440-228-000-000 44.55 Total : 44.55 53886 7/22/2004 010091 TELEPACIFIC COMMUNICATIONS 914890-0 May/June phone usage/charges 10-190-235-000-000 960.28 Total : 960.28 53887 7/22/2004 006980 TEXACO/SHELL 800020968740 June vehicle fuel 16-900-254-000-000 142.21 10-180-272-000-000 61.92 Total : 204.13 53888 7/22/2004 006565 THE SUN S105957623A June C. Care sub teacher/assist ad 10-440-230-000-000 234.14 Total : 234.14 53889 7/22/2004 010252 TRAFFIC OPERATIONS INC. 4511 RE STRIP AFTER SLURRY 16-900-258-000-000 737.80 Total : 737.80 53890 7/22/2004 007795 WAXIE 64535917 03 Maint supplies 10-180-245-000-000 801.21 64538176 03 Maint supplies 10-180-245-000-000 66.43 Total : 867.64 53891 7/22/2004 007843 WEST COAST ARBORISTS INC 32724 TREE REMOVAL&TRIMMING 16-900-260-000-000 9,010.00 Total : 9,010.00 53892 7/22/2004 007987 XEROX CORPORATION 003595445 UPSTAIRS XEROX 10-190-700-000-000 447.48 Total : 447.48 47 Vouchers for bank code : bofa Bank total : 28,363.94 47 Vouchers in this report Total vouchers : 28,363.94 Page: 6 vchlist liUvrher List Page: 7 07/15/2004 2:33:13PM CITY OF GRAND TERRACE Bank code : bofa Voucher Date Vendor Invoice Description/Account Amount I certify that, to the best of my knowledge, the afore-listed checks for payment of City and Community Redevelopment Agency liabilities have been audited by me and are necessary and appropriate expenditu-res-for the operation of the City and Agency. Larry Ronnow, Finance Director Page: 7 c- vchlist Voucher List Page: 1 07/15/2004 1:47:30PM CITY OF GRAND TERRACE Bank code : bofa Voucher Date Vendor Invoice Description/Account Amount 53809 7/7/2004 010340 BLUE CROSS OF CALIFORNIA, PERS-CH 0010856861 HEALTH INS CORTES 10-110-142-000-000 303.67 10-110-120-000-000 52.73 Total : 356.40 53810 7/7/2004 010344 WOLFPACK INS. SERVICES TRUST July, 2004 JuIV Delta Dental Ins-B. Cortes 10-110-120-000-000 62.22 Total : 62.22 53811 7/7/2004 001907 COSTCO#478 047811 0256 C. Care supplies 10-440-220-000-006 23.00 10-440-228-000-000 163.31 Total : 186.31 53812 7/7/2004 010290 KAISER PERMANENTE JuIV, 2004 JuIV health ins.-L. Garcia 10-110-142-000-000 241.41 10-110-120-000-000 66.01 Total : 307.42 53820 7/7/2004 010344 WOLFPACK INS. SERVICES TRUST Auqust, 2004 Auq. Delta dental-B. Cortes 10-110-120-000-000 62.22 Total : 62.22 53823 7/14/2004 004350 LEAGUE OF CALIFORNIA CITIES, INLA 07142004 7/15 Dinner-Cortes 10-110-270-000-000 35.00 Total : 35.00 53824 7/14/2004 004740 MMASC 07132004 7/21-23 Palm Desert Conf-Berry 10-180-270-000-000 245.00 Total : 245.00 53825 7/15/2004 004350 LEAGUE OF CALIFORNIA CITIES, INLA 07142004 7/16 Dinner Mtq-L. Garcia 10-110-270-000-000 35.00 Total : 35.00 53826 7/22/2004 001072 ADT SECURITY SERVICES 74013240 CHILD CARE MONITORING 10-440-247-000-000 375.00 Page: 1 vchlist Nrvua:her List Page: 2 07/15/2004 1:47:30PM CITY OF GRAND TERRACE Bank code : bofa Voucher Date Vendor Invoice Description/Account Amount 53826 7/22/2004 001072 ADT SECURITY SERVICES (Continued) Total : 375.00 53827 7/22/2004 001867 COMMERCIAL LANDSCAPE SUPPLY 129696 LANDSCAPE SUPPLIES 10-450-245-000-000 _ _ 136.69 Total : 136.69 53828 7/22/2004 003210 DEPT 32-2500233683 002859/82953 HARDWARE AND SUPPLIES 10-450-245-000-000 51.33 012121/82963 HARDWARE AND SUPPLIES 10-450-245-000-000 51.33 Total : 102.66 53829 7/22/2004 002727 FREEMAN COMPANY, J R 272881-0 Petty cash envelopes 10-190-210-000-000 14.84 10-440-210-000-000 14.83 10-190-210-000-000 1.15 10-440-210-000-000 1.15 Total : 31.97 53830 7/22/2004 002740 FRUIT GROWERS SUPPLY 32064509 MAINT SUPPLIES 10-450-245-000-000 50.42 Total : 50.42 53831 7/22/2004 002901 G.T.AREA CHAMBER OF COMMERCE 3874 July Newsletter 10-125-213-000-000 620.75 Total : 620.75 53832 7/22/2004 002910 GRAND TERRACE LIONS CLUB 06212004 FY 2004/05 Comm Ctr Rent 10-440-241-000-000 2,400.00 Total : 2,400.00 53833 7/22/2004 003152 HARPER & BURNS LLPN 07012004 Light/Landscape Dist Annual Levy 26-600-250-000-000 833.33 26-601-250-000-000 833.33 26-602-250-000-000 833.34 Total : 2,500.00 53834 7/22/2004 003224 HYDRO-SCAPE PRODUCTS INC. 3454848-00 LANDSCAPE/MAINTENANCE SUPPLIES Page: 2 vchlist Voucher List Page: 3 07/15/2004 1:47:30PM CITY OF GRAND TERRACE Bank-code : bofa Voucher Date Vendor Invoice Description/Account Amount 53834 7/22/2004 003224 HYDRO-SCAPE PRODUCTS INC. (Continued) 10-450-245-000-000 695.84 Total : 695.84 53835 7/22/2004 003425 INLAND EMPIRE ECONOMIC C-1047 FY 04/05 Annual Investment 32-370-265-000-000 2,500.00 Total : 2,500.00 53836 7/22/2004 003747 J & M TROPHIES 36580 Engraved plate 10-110-220-000-000 8_62 Total : 8.62 .53837 7/22/2004 003800 JAGUAR COMPUTER SYSTEMS INC 36285 July Eden server pmt 10-140-701-000-000 291.32 36286 July mail server pmt 10-380-701-000-000 406.10 Total : 697.42 53838 7/22/2004 003850. JANI-KING 07040090 July c. care cleaning 10-440-244-000-000 815.00 Total : 815.00 53839 7/22/2004 004299 LAKESHORE LEARNING MATERIALS 7/9/04 Trx03 CHILD CARE SUPPLIES 10-440-223-000-000 50.01 Total : 50.01 53840 7/22/2004 004370 LELAND NURSERY 210572 PLANTS & SUPPLIES 10-450-246-000-000 203.11 Total : 203.11 53841 7/22/2004 010269 NATIONAL RENT A FENCE CO. RI-710147 July fence rental-Rollins Park 32-600-207-000-000 154.00 Total : 154.00 53842 7/22/2004 005450 OTIS ELEVATOR COMPANY SAU06425V704 ELEVATOR MAINTENANCE 10-180-245-000-000 266.43 Total : 266.43 Page: 3 vchlist V'�ui�.her List Page: 4 07/15/2004 1:47:30PM CITY OF GRAND TERRACE Bank code : bofa Voucher Date Vendor Invoice Description/Account Amount 53843 7/22/2004 005586 PETTY CASH_ 07132004 Reimburse petty cash 10-440-228-000-000 37.41 10-440-223-000-000 29.20 Total : 66.61 53844 7/22/2004 006285 RIVERSIDE-HIGHLAND WATER CO 2208a SEWER BILLING.OUTSOURCE 21-572-255-000-000 785.36 Total : 785.36 53845 7/22/2004 006310 ROADRUNNER STORAGE July, 2004 July storage fee 10-140-241-000-000 63.00 Total : 63.00 53846 7/22/2004 006453 S.B. COUNTY AUDITOR/CONTROLLER 07012004 04/05 CAL-ID Contribution 10-410-258-000-000 9,187.50 Total : 9,187.50 53847 7/22/2004 006556 S.B. COUNTY TREASURER 1143 1/3 share LAFCO 04/05 Budget Alloc 10-190-265-000-000 665.52 Total : 665.52 53848 7/22/2004 006695 SO.CA.ASS'N OF GOVERNMENT 0600-157 FY 04/05 Membership Dues 10-190-265-000-000 1,108.00 Total : 1,108.00 53849 7/22/2004 006800 STERN & COMPANY INC., M L 06242004 Pmt 7, Lease No. 97-01 10-190-715-000-000 15,377.22 Total : -15,377.22 53850 7/22/2004 010375 WESTERN FAIR ASSOCIATION 07022004 Annual Member Dues 23-200-12-00 175.00 Total : 175.00 ### 7/15/2004 007400 U. S. BANK TRUST N.A. July, 2004 LEASE PAYMENTS 33-300-206-000-000 22,906.40 Total : 22,906.40 34 Vouchers for bank code: bofa Bank total : 63,232.10 Page: 4 vchlist Voucher List Page: 5 07/15/2004 1:47:30PM ' CITY OF GRAND TERRACE Bank code : bofa Voucher Date Vendor Invoice Description/Account Amount 34 Vouchers in this report Total vouchers: 63,232.10 I certify that, to the best of my knowledge, the afore-listed checks for payment of City and Community Redevelopment Agency liabilities have been audited by me and are necessary and appropriate expenditures for the operation of the City and Agency. Larry Ronnow, Finance Director Page: 5 f vchlist Voucher List Page: 1 07/15/2004 1:49:01PM CITY OF GRAND TERRACE Bank code : bofa Voucher Date Vendor Invoice Description/Account Amount 53807 7/6/2004 010368 REINARZ, LAURA 071204 BIRTHDAY BONUS 34-800-110-000-000 50.00 - - Total : 50.00 53808 7/6/2004 001205 HASLER INC. 1256494 MAIL MACHINE RENTAL 10-190-211-000-000 250.52 Total : 250.52 53815 7/7/2004 003420 INLAND COUNTIES INSURANCE SVCS 070104dental Dental &Vision for July 04 10-022-63-00 1,006.68 Total : 1,006.68 53816 7/7/2004 004587 MANAGED HEALTH NETWORK 070104mhn MANAGED HEALTH NETWORK 10-120-142-000-000 10.95 10-125-142-000-000 10.95 10-140-142-000-000 16.38 10-172-142-000-000 2.91 10-175-142-000-000 2.35 10-180-142-000-000 16.50 10-370-142-000-000 7.73 10-380-142-000-000 5.48 10-440-142-000-000 141.84 10-450-142-000-000 5.48 21-572-142-000-000 5.57 32-370-142-000-000 2.35 34-400-142-000-000 18.32 34-800-142-000-000 10.95 10-022-61-00 10.74 Total : 268.50 53817 7/7/2004 006772 STANDARD INSURANCE COMPANY 0701041ife STANDARD INS- LIFE AND DISABILITY Page: 1 vchlist Voucher List Page: 2 07/15/2004 1:49:01 PM CITY OF GRAND TERRACE Bank code : bofa Voucher Date Vendor Invoice Description/Account Amount 53817 7/7/2004 006772 STANDARD INSURANCE COMPANY (Continued) 10-120-142-000-000 18.25 10-125-142-000-000 11:75 10-140-142-000-000 19.50 10-172-142-000-000 3.26 10-175-142-000-000 2.60 10-180-142-000-000 18•88 10-370-142-000-000 9.10 10-380-142-000-000 6.50 10-440-142-000-000 76.75 10-450-142-.000-000 6.50 32-370-142-000-000 2.60 34-800-142-000-000 11.75 21-572-142-000-000 5.87 34-400-142-000-000 _ 21.44 10-022-63-00 1,222.37 Total : 1,437.12 53818 7/7/2004 005452 PACIFICARE OF CALIFORNIA 070104health PACIFICARE HEALTH INS 10-175-142-000-000 189.88 10-180-142-000-000 716.65 10-370-142-000-000 488.57 10-380-142=000-000 241.41 10-440-142-000-000 482.82 10-450-142-000-000 202.69 21-572-142-000-000 272.53 32-370-142-000-000 139.59 34-400-142-000-000 997.34 10-110-142-000-000 390.17 10-022-63-00 6,279.91 10-120-142-000-000 545.08 10-125-142-000-000 405.38 10-140-142-000-000 935.25 10-172-142-000-000 237.34 Total : 12,524.61 6 Vouchers for bank code: bofa Bank total : 15,537.43 Page: 2 } vchlist Voucher List ` Page: 3 07/15/2004 1:49:01 PM CITY OF GRAND TERRACE Bank code : bofa Voucher Date Vendor Invoice Description/Account Amount 6 Vouchers in this report Total vouchers : 15,537.43 I certify that, to the best of my knowledge, the afore-listed checks for payment of City and Community Redevelopment Agency liabilities have been audited by me and are necessary and appropriate expenditures for the operation of the City and Agency. Larry Ronnow, Finance Director Page: 3 C0 E10E11-A F P 2 0 VAL CITY OF GRAND TERRACE CITY COUNCIL MINUTES REGULAR MEETING- JULY 8, 2004 A regular meeting of the City Council of the City of Grand Terrace was called to order in the Council Chambers, Grand Terrace Civic Center, 22795 Barton Road, Grand Terrace, California, on July 8, 2004, at 6:30 p.m. PRESENT: Herman Hilkey, Mayor Maryetta Ferr6,Mayor Pro Tem Lee Ann Garcia, Councilmember Bea Cortes, Councilmember Tom Schwab, City Manager Brenda Stanfill, City Clerk Larry Ronnow,Finance Director Jerry Glander, Building& Safety Director John Harper, City Attorney Lt. Hector Guerra, Sheriff's Department ABSENT: Don Larkin, Councilmember Steve Berry, Assistant City Manager Gary Koontz, Community Development Director The City Council meeting was opened with invocation by Councilwoman Garcia, followed by the Pledge of Allegiance led by Councilwoman Cortes. SPECIAL PRESENTATIONS 2A. Girl's Fast-Pitch Softball - The Golden G's Mayor Hilkey introduced Jerry Andrews the coach of The Golden G's -the girls fast-pitch 13-14 year old division softball team. Charles Lotshaw, Manager of the Golden G's indicated that the team ended their season as the champions of the Junior Softball Division with only one loss and introduced the members of the team. CONSENT CALENDAR CC-2004-67 MOTION BY COUNCILMEMBER GARCIA, SECOND BY MAYOR PRO TEM FERRE, CARRIED 4-0-1-0 (COUNCILMEMBER LARKIN WAS ABSENT), to approve the following consent calendar items: COUN IL AGENDA FTEM NOe��D Council Minutes July 8,2004 Page 2 3A. Approval of Check Register Dated June 30, 2004 & July 8, 2004 3B. Ratify 07-08-2004 CRA Action 3C. Waive Full Reading of Ordinances on Agenda 3D. Approval of 06-24-2004 Minutes PUBLIC COMMENT Patricia Farley, 12513 Michigan Avenue, feels that we need to improve the accuracy and completeness of information in the Community and they need to feel that they have a voice and are being heard. She indicated that there is a group of people that have formed the Community Awareness Group. It is non political information group. They would like to work with the Council to get complete information so that they can share it. They will be meeting the second Monday of every month at 7:00 p.m. at the Community Center. They appreciate any information that the Council can get to them so that they can feel like they are participating. ORAL REPORTS 5A. Committee Reports 1. Historical & Cultural Activities Committee A. Minutes of 06-07-2004 CC-2004-68 MOTION BY COUNCILMEMBER CORTES, SECOND BY MAYOR PRO TEM FERRE, CARRIED 4-0-1-0 (COUNCILMEMBER LARKIN WAS ABSENT), to accept the June 7,2004 Minutes of the Historical and Cultural Activities Committee. COUNCIL REPORTS Mayor Pro Tem Ferr6, indicated that the two committees that she is on do not meet during the summer. She requested an update on the demolition of the property on Grand Terrace Road. Building and Safety/Housing Director Glander,responded that the demolition is underway. Councilmember Garcia, stated that there has been a lot of activity in Sacramento lately. Proposition 65 will be on the November 2004 ballot and possibly one that will be put out by the State Legislators. They should know by the next Council Meeting. She wished Dallas, her son a Happy 6`h Birthday. Mayor Hilkey, thanked Councilmember Garcia and City Manager Schwab for keeping everyone up-to-date on what is going on in Sacramento. Council Minutes July 8,2004 Page 3 Councilmember Cortes, reported that at the SANBAG Board of Directors meeting they approved the award of computer hardware to six cities that applied for the items through the California Office of Traffic Safety and Grand Terrace was one of the cities. The grant is $6,500 and should be coming in September. It is for an OTS Plotter, Supplies and Equipment. They also voted for the President and the Vice-President for 2004-2005. Second District Supervisor Paul Biane will be the President and Councilmember Kelly Chastain from the City of Colton will be the Vice-President for the Board of SANBAG. Mayor Hilkey, reported that the Grand Terrace Area Chamber of Commerce held their Installation Dinner. He indicated the Bobbie Forbes is the new President and congratulated her. Omnitrans met and deferred increasing the size of their current building until the Measure I funds have been passed or not. He indicated that ICTN was at the meeting this evening and will be broadcasting the introduction of the Girl's Softball team tonight. PUBLIC HEARING 6A. An Ordinance of the City Council of the City of Grand Terrace Authorizing an Amendment to the Contract Between the City Council and the Board of Administration of the California Public Employees' Retirement System CityManager Schwab,indicated that this item was negotiated between Staff and the Council during the meet and confer process. He indicated that approval of this ordinance will implement the change to the contract. Mayor Hilkey opened discussion to the Public, there being none he returned discussion to the Council. CC-2004-69 MOTION BY COUNCILMEMBER CORTES, SECOND BY MAYOR PRO TEM FERRE, CARRIED 4-0-1-0 (COUNCILMEMBER LARKIN WAS ABSENT), to approve the first reading of an Ordinance of the City Council of the City of Grand Terrace Authorizing an Amendment to the Contract Between the City Council and the Board of Administration of the California Public Employees'Retirement System UNFINISHED BUSINESS -None NEW BUSINESS 8A. ' Reappointment of Commission/Committee Members Patricia Farley, 12513 Michigan Avenue, expressed her concern with the members of the Planning Commission and feels that they should not be reappointed to represent the Community. They would also like to request the removal of Brian Whitley and Matthew Council Minutes July 8,2004 Page 4 Addington. She feels that they have disregarded all of the comments that the members of the public have made and that they are not properly representing their rights and concerns. CC-2004-70 MOTION BY COUNCILMEMBER GARCIA, SECOND BY MAYOR PRO TEM FERRE, CARRIED 4-0-1-0 (COUNCILMEMBER LARKIN WAS ABSENT), to reappoint the following individuals to their respective Commission/Committees and direct staff to notify them: Planning Commission Doug Wilson Tom Comstock Crime Prevention Committee Philomene Spisak JoAnn Johnson Dick Rollins Emergency Operations Committee JoAnn Johnson Richard Haubert Vic Pfennighausen Richard Maxfield Historical & Cultural Activities Committee Pauline Grant Colleen Edmundson Ann Petta 8B. An Ordinance of the City Council of the City of Grand Terrace Eliminating the Time Limit on Establishment of Loans,Advances and Indebtedness, Extending the Time Limit of the Effectiveness of the Redevelopment Plan,Extending the Time Limit for Payment of Indebtedness and Receipt of Taxes Under Authority of the Redevelopment Plan for the Grand Terrace Community Redevelopment Project Patricia Farley, 12513 Michigan Avenue, expressed her concern with items that she is reading in reports and hopes that the City is following the law. CC-2004-71 MOTION BY COUNCILMEMBER FERRE, SECOND BY COUNCILMEMBER CORTES,CARRIED 4-0-1-0(COUNCILMEMBER LARKIN WAS ABSENT),to approve the first reading of an Ordinance of the City Council of the City of Grand Terrace Eliminating the Time Limit on Establishment of Loans, Advances and Indebtedness,Extending the Time Limit of the Effectiveness of the Redevelopment Council Minutes July 8,2004 Page 5 Plan, Extending the Time Limit for Payment of Indebtedness and Receipt of Taxes Under Authority of the Redevelopment Plan for the Grand Terrace Community Redevelopment Project 8C. Adoption of a Resolution Requesting the Board of Supervisors to Consolidate a General Municipal Election to be held on November 2, 2004, with the Statewide General Election and Setting Priorities for Filing a Written Argument Regarding a City Measure and Directing the City Attorney to Prepare an Impartial Analysis Patricia Farley, 12513 Michigan Avenue, feels that the Mayor should be voted upon by the community. She would like someone from each side to write the pros and cons for directly electing a Mayor. City Attorney Harper, indicated that he will be writing the impartial analysis, which is the effect of the measure on the existing law and the operation of the measure. He indicated that the proponents of the initiative have the opportunity to write a pro argument. The City Council has the ability to appoint someone to write a con argument if they so desire. Jeffrey McConnell, 21758 Walnut Avenue, indicated that he would volunteer to write the argument against the measure. Bill Hays, 22114 De Berry Street, indicated that he is a member of the Community Awareness Group and feels that they should be able to pick someone to write the pro. Betty Guzman,feels that Mr.McConnell is not the best person to write the argument against the measure. CC-2004-72 MOTION BY MAYOR PRO TEM FERRE, SECOND BY COUNCILMEMBER GARCIA,CARRIED 4-0-1-0(COUNCILMEMBER LARKIN WAS ABSENT),to approve a Resolution requesting the Board of Supervisors of the County of San Bernardino to Consolidate a General Municipal Election to be held on November 2, 2004,with the Statewide General Election to be held on the Date Pursuant to Section 10403 of the Elections Code CC-2004-73 MOTION BY MAYOR HILKEY, SECOND BY COUNCILMEMBER CORTES, CARRIED 3-0-1-1 (COUNCILMEMBER LARKIN WAS ABSENT AND COUNCILMEMBER GARCIA ABSTAINED), to approve a Resolution Setting Priorities for Filing a Written Argument Regarding a City Measure and Directing the City Attorney to Prepare an Impartial Analysis and to authorize Dan Buchanan and Jeffrey McConnell to write a written argument against the proposed measure. CLOSED SESSION-None Council Minutes July 8,2004 Page 6 ORDER OF ADJOURNMENT Mayor Hilkey adjourned the City Council Meeting at 7:40 p.m., until the next CRA/City Council Meeting which is scheduled to be held on Thursday, July 22, 2004 at 6:30 p.m. CITY CLERK of the City of Grand Terrace MAYOR of the City of Grand Terrace THE CITY OF GRAND TERRACE 777-7 Z -A ��SAF FREPORP'T' ,L_T:y CRA ITEM COUNCIL ITEM(X MEETING DATE : July 22, 2004 AGENDA ITEM SUBJECT: RESOLUTION TO DIRECT COLLECTION OF DELINQUENT SEWER USER FEES ON SAN BERNARDINO COUNTY TAX ROLL 2004-2005 FUNDING REQUIRED NO FUNDING REQUIRED XX The County has requested resolution for specific direction to collect the City delinquent sewer user fees on the upcoming 2003-2004 property tax roll . The City Council adopted Ordinance No. 112, as amended by Ordinance No. 144 (1993) ,Ordinance 163 (1996) and Ordinance 180 (1998) , "Comprehensive Fee Schedule, , establishing the fees for taxes, permits, licenses, services, facilities and activities provided by the City of Grand Terrace. Ordinance No. 112, Exhibit "A" , Item 17 (c) , "Sewer User Charges, Lien Status of Delinquent Charges; states that "Any sewer service charges unpaid for a period of six (6) months shall cause a lien to be recorded upon the real property served . . . Once the lien is placed on the real property, the delinquent amount and all penalties shall be added to the tax roll?[ . The Finance Department has reported 2 potential parcels in which sewer user charges are delinquent more than six (6) months . Each user and property owner, if different than the user, has been given ample notice of the potential city actions. The final number of parcels submitted may be increased if more delinquent users are found or reduced if the delinquent user pays the amount due before Staff submits the notice to apply special assessments to the tax roll to the Auditor-Controller. The final list and a Council Resolution to direct collection of delinquent sewer users is due in the Auditor- Controller' s office by August 10, 2004 . -1- 0 Lb 14— A"G i E N D A I T EM, N 0. -1 THE CITY OF GRAND TERRACE Page 2 Delinquent Sewer Users Tax Roll Collection A Six month delinquency represents three regular billing cycles; a courtesy notice after the third and fifth month and a "goldenrod" notice after the six month with a copy of the ordinance. In accordance with Government Code Sec.29304 the County' s processing cost, not to exceed $2 . 00 per parcel, is added to the total assessment. There are 2 delinquent accounts eligible for the tax roll this year. St,�aff=;Recolririerids ' tliat' Council :, 1. Approve and adopt by resolution the Written Report of Delinquent Sewer User Accounts containing the description of each parcel number and amount of delinquent fees for all sewer accounts delinquent over six months . 2 . Direct staff to file such report with the Auditor/Controller of San Bernardino County for the purpose of collection of such delinquent fees, along with the general property taxes for the 2004-2005 property tax roll . -2- THE CITY OF GRAND TERRACE Page 3 Delinquent Sewer Users Tax Roll collection Delinquent Sewer Users as of 7/9/04 : Service Name Address Amount APN Peters 22820 Minona $ 328.74 0276-242-05-0-000 Marciniak 12808 Fremontia $ 414.00 0277-421-13-0-000 742.74 -3- RESOLUTION NO. 2003- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GRAND TERRACE, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, ADOPTING A REPORT OF DELINQUENT SEWER USERS FEE AND DIRECTING THAT SUCH DELINQUENT FEES BE COLLECTED ON THE TAX ROLL AND BE IMPOSED AS A LIEN UPON PROPERTY WITHIN THE CITY OF GRAND TERRACE WHEREAS, pursuant to Sections 5471 of the California Health and Safety Code, the City Council of the City of Grand Terrace did fix reasonable sewer user fees; and WHEREAS, pursuant to Section 5473 of the California Health and Safety Code the City Council has elected to have delinquent sewer user fees of more than six months, for fiscal year 2003-2004 collected on the tax roll, in the same manner, by the same persons and at the same time as together with and not separately from, the general taxes, and has caused a written report ("Written Report") to be prepared and filed with the City Clerk containing a description of each such parcel or real property and the amount of the delinquent sewer user fee, for each such parcel for said fiscal years; and WHEREAS, the City Council has adopted Ordinance No. 180 relating to establishment of a fee and service charge. NOW, THEREFORE, the City Council of the City of Grand Terrace, does hereby resolve as follows: 1. The Written Report filed with the City Clerk contains a description of each parcel of real property and the amount of the delinquent sewer user fees,for the fiscal year 2003- 2004 and the Written Report is therefore approved and adopted. 2. The delinquent sewer user fees, shall be forwarded for the San Bernardino County Auditor Controller and shall be collected on the tax roll for fiscal year 2004-2005 in the same manner, by the same person, at the same time, together with and not separately from, the general taxes. 3. The Finance Director shall file with the Auditor Controller a copy of the Written Report, with a statement endorsed thereon over the signature of the City Clerk that it has been fully adopted by the City Council, together with a certified copy of this Resolution. PASSED, APPROVED AND ADOPTED this 22"d day of July, 2004. Mayor of the City of Grand Terrace 1 ATTEST: City Clerk of the City of Grand Terrace I, BRENDA STANFILL, City Clerk of the City of Grand Terrace, do hereby certify that Resolution No. 2004- was introduced and adopted at a regular meeting of the City Council of the City of Grand Terrace held on the 22"d day of July, 2004, by the following vote: AYES: NOES: ABSENT: ABSTAIN: `-- Brenda Stanfill, City Clerk Approved as to form: City Attorney 2 CITY OF GRAND TERRACE EMERGENCY OPERATIONS COMMITTEE JUL 0 ': 2004 Regular Meeting MINUTES - � OF GRAND TERRACE ^'.=RKS DEPARTMENT-1 JUNE 1,2004 The Grand Terrace Emergency Operations Committee met at the regular time at the Emergency Operations Center at 22795 Barton Road,Building 3. The meeting was called to order by Chairman JoAnn Johnson at 6:02 p.m. Agendas were distributed. MEMBERS PRESENT-Vic Pfennighausen, Claire McElwee,JoAnn Johnson,Dottie Raborn, Glenn Nichols and Richard(Ric)Maxfield. MEMBERS ABSENT— Richard Haubert. CITY STAFF— Steve Berry GUESTS PRESENT— None APPROVAL OF MINUTES of May 4,2004 was given, with motion by Glenn Nichols and second by Dottie Raborn. Approved minutes are to be sent to the Council. LIAISON REPORT by Steve Berry: a. Steve reported that he was finishing up the Multi-Hazard Plan. b. Steve reported on the May 19'h spill of malathyon on the property adjacent to Terrace Hills School. c. Steve reported on the meeting he attended at the Apple Valley Fire Station (OACC) d. Grand Terrace Days was discussed: 1. Vic and JoAnn will be at the EOC trailer. There will be Red Cross pamphlets and EOC supplies available. 2. City Maintenance Dept. will deliver the trailer. 3. Ric will assist Richard at the parade route. C6 L AQENEDA ITEFT, H0.1 141C J EQUIPMENT AND FACILITIES REPORT by Vic Pfennighausen a. Equipment all functional and in good shape with the exception of'hoist on trailer. This will be repaired after Grand Terrace Days. b. The Trunk Tracker has been purchased and Vic will have it programmed. c. Two E-Z Up tents were purchased. NEW BUSINESS- a. Vic reported on County ECS training session on May 18a'' b. There was discussion about the possibility of access to County 800 system in event of an emergency. This will be continued at next meeting. c. Claire submitted her resignation as she is moving out of State. Dottie offered to fill in as Secretary until a permanent one is found. TRAINING/SPEAKERS a. Tour of Arrowhead Hospital will be set up at a later date. b. Tour of the County EOC will be set up at a later date. c. The City training/round table is set for Wednesday, October 13, 2004 in the Community Room— 10:00 A.M. til Noon. ADJOURNMENT AT 7:10 P.M. Respectfully submitted, Claire McElwee, Secretary NEXT MEETING WILL BE JULY 6, 2004 AT 6:00 P.M. CITY OF GRAND TERRACE i,-i L U t CRIME.PREVENTION COMMITTEE. Regular Meeting JUL I C 2004 MINUTES June 14, 2004 "CITY 0!::(37 FINNT)TERRA r The Grand Terrace-Crime Prevention Committee met for the regular meeting at the Senior Center. Meeting was called to order at 6:00 p.m.by Chairperson, Philomene Spisak. MEMBERS PERSENT were Philomene Spisak, Chairperson, JoAnn Johnson, Dottie Raborn, Dick Rollins, Lew Neeb, Claire McElwee and Don Bennett. Also, Alternate, Pat.Smith. MEMBERS ABSENT—None. CITY STAFF/SHERIFF'S DEPT.— SSS, Kathy Gray GUESTS PRESENT—Bob Stewart INTRODUCTIONS - None. AGENDA was approved with motion by Claire McElwee and second by Dick Rollins. MINUTES for the meeting of May 10, 2004 were approved with motion by Dottie Raborn and second by Don Bennett. PUBLIC COMMENT—None. CORRESPONDENCE—Letter of resignation from Claire McElwee. See below. UNFINISHED BUSINESS A. Swindles—Nothing new., B. Other a. Dick Rollins suggested again that,signs be placed at all entrances of the city regarding Traffic Laws-Strictly Enforced. b. Discussion on parking situation at Grand Royal andlon Newport. C. Dirt blows off the Edison property very badly. 'Should be controlled somehow. d. Is there a Sand and Dust Abatement ordinance? e. Traffic will be VERY bad when construction begins-on 1-215 in this area. f. Canal and Barton is a very bad intersection., g. It was suggested that crime statistics should be in the Blue Mountain Outlook. h.. Perhaps Dick would write something and Kathy could edit and submit. NEW BUSINESS A. Crime Prevention Planning—Nothing new. B. Resignation of Claire McElwee a. Letter was introduced under Correspondence, above. b. Dottie Raborn made the motion to accept and Pat Smith seconded. c. There was no opposition, although we are sorry to see her leave. d. Chairperson, Spisak will write Action Item for Council.11C , REPORTS A. Summary of Law Enforcement Activity— Kathy Gray a. Kathy had maps indicating degrees of crime in different areas. b. She also had graphs comparing the last three years. c. Chairperson, Spisak would like to have copy of crime reports to discuss at meetings. E B. Citizen Patrol Report—Bob Stewart a. May reported 199 hours. Total for 2004 is 1127 hours. b. Many have been on vacation or ill. c. Good turnout for Grand Terrace Days. d. Some irate over parking, but generally well behaved. e. Volunteers were needed for Sheriff's Family Picnic on June 13`h C. Other Community Programs—No reports D. Member Reports a. Don asked if access to Blue Mountain was closed off. There being no further business to discuss, the meeting was adjourned at approximately 7:00 p.m. Respectfully Submitted, e � Secretary, JoAnn Johnson I RAND TERR C Staff Report COUNCIL ITEM (XX) MEETING DATE: July 22, 2004 SUBJECT: Adoption of an Ordinance Eliminating the Time Limit on Establishment of Loans, Advances and Indebtedness, Extending the Time Limit of the Effectiveness of the Redevelopment Plan, Extending the Time Limit for Payment of Indebtedness and Receipt of Taxes Under the Redevelopment Plan for the Grand Terrace Community Redevelopment Project BACKGROUND: The ability of the Community Redevelopment Agency to incur new indebtedness expired on January 1, 2004, pursuant to the terms of AB 1290, which became effective in 1994. The Amended Redevelopment Plan that was adopted in 1981 had a provision to allow the Agency to incur indebtedness until 2016, but that provision was subsequently restricted by the language contained in AB 1290. In September of 2003, as part of the State Budget approval, the legislature adopted SB 1045 which required an ERAF contribution by all redevelopment agencies for fiscal year 2003-04. To offset the loss of this revenue, SB 1045 allows the City to extend the effective date of the Redevelopment Plan and the last date to receive tax increment by one year. DISCUSSION In 2001, the California legislature adopted SB 211 which amended Health and Safety Code Section 33333.6(e)(2), and allowed a redevelopment agency to eliminate the last day to incur debt. As a condition to eliminating this limit, the Agency will be required to make statutory pass through payments to taxing entities with which the Agency does not currently have a pass through agreement. The amount is based on a percentage of future increases in assessed value which occur after the tax year in which the original final date to incur indebtedness would have occurred (FY 03-04). SB 1045 allows the Agency to extend by one year the effective date of the Redevelopment Plan, and the last date to receive tax increment by one year. These revisions to the Redevelopment Plan do not trigger any additional payments by or obligations of the Agency. STAFF RECOMMENDATION: That the City Council: 1. Conduct the Public Hearing and Adopt Ordinance No. , Eliminating the Time Limit on Establishment of Loans, Advances and Indebtedness, Extending the Time Limit of the Effectiveness of the Redevelopment Plan, Extending the Time Limit for Payment of Indebtedness and Receipt of Taxes Under the Redevelopment Plan for the Grand Terrace Community Redevelopment Project COU'NUL AGENDA MEM NO.!�� FISCAL IMPACT: The elimination of the time limit on incurring debt will enable the Agency to have greater flexibility in considering refunding options for the Agency's outstanding 1993 Tax Allocation Bonds. There will be a statutory pass through obligation with respect to a portion of future tax increment revenues, for taxing entities that do not currently have a tax sharing agreement. The extension of the effective date of the Redevelopment Plan and the time limit to receive tax increment will enable the Agency to recover all or a portion of the tax revenues lost as a result of the FY 2003-04 ERAF shift. ATTACHMENT Ordinance No. ORDINANCE NO. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF GRAND TERRACE ELIMINATING THE TIME LIMIT ON ESTABLISHMENT OF LOANS, ADVANCES AND INDEBTEDNESS,EXTENDING THE TIME LIMIT OF THE EFFECTIVENESS OF THE REDEVELOPMENT PLAN,EXTENDING THE TIME LIMIT FOR PAYMENT OF INDEBTEDNESS AND RECEIPT OF TAXES UNDER AUTHORITY OF THE REDEVELOPMENT PLAN FOR THE GRAND TERRACE COMMUNITY REDEVELOPMENT PROJECT WHEREAS: The City Council ("Council") of the City of Grand Terrace ("City") adopted Ordinance No. 25 on September 27, 1979, adopting the Redevelopment Plan for the Grand Terrace Community Redevelopment Project (the"Plan" and "Project," respectively); and WHEREAS: The Plan and the Project were amended to include certain territory by Ordinance No. 52 on July 15, 1981; and WHEREAS: The Plan has a time limit of January 1, 2004,within which the Grand Terrace Community Redevelopment Agency(the"Agency") may incur debt in conjunction with implementation thereof in conformity with the California Community Redevelopment Law(CCRL; California Health and Safety Code Section 33000, et seq.); and WHEREAS: CCRL Section 33333.6(e)(2)was amended by the California legislature in 2001, effective January 1,2002 ("SB211"), to provide that as to redevelopment plans originally adopted prior to January 1, 1994,the legislative body of an agency (Council)may enact an ordinance eliminating the deadline on incurring indebtedness formerly required by Section 33333.6 of the CCRL, and to further provide that such ordinance maybe adopted without compliance with CCRL Section 33354.6, Article 12 of the CCRL, or any other provision of the CCRL pertaining to amendments of redevelopment plans, except that the redevelopment agency must make the payments to affected taxing entities required by CCRL Section 33607.7 from the date each constituent plan reaches the previously existing deadline(s) to incur debt; and WHEREAS: Pursuant to CCRL Section 33333.6, the Plan established a time limit on the effectiveness of the Plan and a time limit on the period for payment of indebtedness and receipt of property taxes under authority of the Plan; and WHEREAS: By and through Senate Bill 1045 ("SB 1045") CCRL Section 33333.6 was amended to provide that as to redevelopment plans originally adopted before January 1, 1994, and when such redevelopment agency is required to make a payment to the Educational Revenue Augmentation Fund (ERAF) in fiscal year 2003-2004 pursuant to CCRL 33681.9, the Council, as the legislative body of the Agency, may enact an ordinance to extend by one year the time limit on the effectiveness of the C:\WINDOWS\TEMP\SB 211 Ordinance Grand Terrace.doc Redevelopment Plans and the time limit for payment of indebtedness and receipt of property taxes under authority of the Redevelopment Plans, without compliance with the normal procedures for redevelopment plan amendments including provisions promulgated in CCRL Section 33354.6 and Article 12; and WHEREAS: The enactment of this Ordinance is exempt from the California Environmental Quality Act(CEQA; Public Resources Code Section 21000, et seq.)pursuant to CEQA Guidelines Section 15378(b)(4) (California Code of Regulations Section 15378(b)(4))because the actions described herein are fiscal activities which do not involve any commitment to any specific project which may result in potentially significant physical impacts on the environment. NOW THEREFORE,THE CITY COUNCIL OF THE CITY OF GRAND TERRACE HEREBY ORDAINS AS FOLLOWS: SECTION 1. The time limit to incur debt set forth in the Plan and the implementation thereof, is hereby eliminated; and the Agency is hereby authorized to incur indebtedness and any other obligations with respect to the Plan in accordance with all remaining provisions of the Plan, at any time during which the Plan is effective. SECTION 2. The current time limit on the effectiveness of the Plan is hereby extended by one year (from the existing time limit of July 15,2016)to July 15,2017, and the Agency is hereby authorized to act with respect to the Plan at any time during which the Plan is effective. SECTION 3. The current time limit on paying indebtedness or receiving property taxes pursuant to the Plan and CCRL is hereby extended by one year(from the existing time of July 15, 2026)to July 15,2027, and the Agency is hereby authorized to act with respect thereto during such extended period. SECTION 4. Except with respect to the amendments set forth herein the Plan shall remain unchanged and in full force and effect in accordance with its terms. SECTION 5. This Ordinance shall go into effect and be in full force and operation from and after thirty(30)days after its final passage and adoption. The City Clerk shall certify to the passage and adoption of this Ordinance and shall cause this Ordinance to be published as set forth below. SECTION 6. A notice shall be published once in a newspaper of general circulation in the City, setting forth the title of this Ordinance, the date of its introduction and the places where this Ordinance is posted. Within fifteen (15) days following final adoption, a summary of the Ordinance with the names of the council members and votes shall be published in a newspaper of general circulation. CAWINDOWSUEMMSB 211 Ordinance Grand Terrace.doc Introduced and first read at a meeting of the City Council of the City of Grand Terrace held the day of ,2004, and thereafter PASSED AND ADOPTED at a regular meeting of said City Council held the day of , 2004,by the following roll call vote: AYES: NOES: ABSENT: ABSTAIN: CITY OF GRAND TERRACE By: Mayor C:\WINDOWS\TEMP\SB 211 Ordinance Grand Terrace.doc STATE OF CALIFORNIA ) COUNTY OF SAN BERNARDINO ) ss. CITY OF GRAND TERRACE ) CERTIFICATION OF-ORDINANCE CITY COUNCIL I, , City Clerk of the City of Grand Terrace, California, do hereby certify that this is a true and correct copy of the original Ordinance No. , for which the original is on file in my office. WITNESS MY HAND AND THE SEAL OF THE CITY OF GRAND TERRACE, on this day of ,2004. (seal) C:\WINDOWS\TEMP\SB 211 Ordinance Grand Terrace.doc ORDINANCE NO. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF GRAND TERRACE AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE CITY COUNCIL AND THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM. THE CITY COUNCIL OF THE CITY OF GRAND TERRACE DOES HEREBY ORDAIN AS FOLLOWS: Section 1. That an amendment to the contract between the City Council of the City of Grand Terrace and the Board of Administration, California Public Employees' Retirement System is hereby authorized,a copy of said amendment being attached hereto,marked Exhibit, and by such reference made a part hereof as though herein set out in full. Section 2. The Mayor ofthe City Council is hereby authorized,empowered,and directed to execute said amendment for and on behalf of said Agency. Section 3. This Ordinance shall take effect 30 days after the date of its adoption, and prior to the expiration of 15 days from the passage thereof shall be published at least once in the San Bernardino Sun Telegram, a newspaper of general circulation,published and circulated in San Bernardino County and thenceforth and thereafter the same shall be in full force and effect. First read at a regular meeting of the City Council of said City held on the 8th day of July,2004,and finally adopted and ordered posted at a regular meeting of said City Council on the 22nd day of July 2004. ATTEST: City Clerk of the City of Grand Terrace Mayor of the City of Grand Terrace and and of the City Council thereof. of the City Council thereof. ORDINANCE NO. Page 2 I, Brenda Stanfill, City Clerk of the City of Grand Terrace, do hereby certify that the foregoing Ordinance was introduced and adopted at a regular meeting of the City Council of the City of Grand Terrace held on the 22na day of July, 2004, by the following vote: AYES: NOES: ABSENT: ABSTAIN: City Clerk Approved as to form: City Attorney LAW OFFICES OF HARPER& BURNS LLP A LIMITED LIABILITY PARTNERSHIP INCLUDING A PROFESSIONAL CORPORATION 453 S.GLASSELL STREET ALAN R-BURNS ORANGE,CALIFORNIA 92866 RIVERSIDE/SAN BERNARDINO CO. JOHN R.HARPER' (909)674-0698 COLIN R.BURNS (714)771-7728 OF COUNSEL FAX (714) 744-3350 JUDI A.CURTIN* MICHAEL MONTGOMERY* 'A PROFESSIONAL CORPORATION STAFF REPORT TO: Members of the Community Redevelopment Agency of the City of Grand Terrace Board of Directors FROM: John R. Harper, City Attorney DATE: July 22, 2004 RE: Community Redevelopment Agency of the City of Grand Terrace Community Redevelopment Project Area Refunding Tax Allocation Bonds Series 2004 "A", Series 2004 "B" and Series 2004 ".C" As you are aware, the Redevelopment Agency has previously issued Tax Allocation Bonds, Series 1993 "A"and Series 1993 `B", as well as entering into a loan agreement with Zion Bank. Additionally,the City has available housing funds and receives tax increment which must be dedicated to the low and moderate income housing fund. Based upon a financial analysis by Urban Futures, Inc., and Wedbush Morgan Securities, Inc., it is in the Agency's best economic interest to refund the outstanding bonds and to issue housing bonds. The refunding of the existing bonds will not only reduce the cost to the Redevelopment Agency (and City taxpayers) (not unlike refinancing a home during this time of low interest rates), but also the refunding will allow the Agency to reduce the term of the debt to seven (7) years. This refunding will have no immediate economic impact on the Agency, but will allow the Agency to eliminate its debt more quickly and return tax increment funds to the City General Fund, should the Agency choose to do so. Recommendation: It is recommended that the Redevelopment Agency Board adopt the accompanying resolution approving the financing and the associated financing documents. Fiscal Impact: None RESOLUTION NO. 2004- A RESOLUTION OF THE CITY OF GRAND TERRACE, CALIFORNIA, APPROVING THE, SALE OF TAX ALLOCATION BONDS WHEREAS, the Community Redevelopment Agency of the City of Grand Terrace (the "Agency") is an Agency duly created, established and authorized to transact business and exercise its powers, all under and pursuant to the Community Redevelopment Law (Part I of Division 24 (commencing with Section 33000) of the Health and Safety Code of the State of California) and the. powers of the Agency include the power to issue bonds for any of its corporate purposes; and WHEREAS, a Redevelopment Plan known as the "Community Redevelopment Agency of the City of Grand Terrace, Grand Terrace Redevelopment Project" .has been adopted and approved by Ordinance No. 17 of the Community Redevelopment Agency of the City of Grand Terrace (the "Agency"), adopted on April 19, 1979 as amended by Ordinance No. 52 adopted on July 15, 1 b81 and Ordinance No. 207 adopted on September 12, 2002, and all requirements of law for and precedent to the adoption and approval of said Redevelopment Plan have been duly complied with; and WHEREAS, the Agency has adopted its Resolution entitled: "A RESOLUTION OF THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF GRAND TERRACE APPROVING THE FORMS OF AND AUTHORIZING THE EXECUTION OF AN INDENTURE OF TRUST, A BOND PURCHASE CONTRACT, CONTINUING DISCLOSURE AGREEMENT AND AN OFFICIAL STATEMENT RELATING TO THE ISSUANCE OF THE AGENCY'S TAX ALLOCATION BONDS AND APPROVING CERTAIN ACTIONS IN CONNECTION THEREWITH" and WHEREAS, under and pursuant to the above- Resolution, the Agency has authorized the issuance and sale of Not to Exceed $16,000,000 Grand Terrace Redevelopment Project Refunding Tax Allocation Bonds Series 2004A, Series 2004B and Series 2004C, (the "Bonds"). NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Grand Terrace at a regular meeting held on , 2004. Section 1. Approval of Issuance of Bonds. The issuance of a principal amount Not to Exceed $16,000,000 of Community Redevelopment Agency of the City of Grand Terrace Refunding Tax Allocation Bonds, Series 2004A, 2004B and 2004C in order to fund certain redevelopment projects of the Agency is hereby authorized and approved pursuant to Health and Safety Code Section 33640. Section 2. Effective Date. This Resolution shall take effect upon adoption. PASSED AND APPROVED by the City Council of the of the City of Grand Terrace at a regular meeting held on the day of 2004. Mayor ATTEST: City Clerk I, Brenda Stanfill, City Clerk for the City of Grand Terrace do hereby certify that the foregoing Resolution was regularly introduced and adopted by the City Council at a meeting thereof held on the_ day of 2004, by the following vote: AYES: NOES: ABSENT: ABSTAIN: IN WITNESS WHEREOF, I have set my hand and affixed the official seal of the City of Grand Terrace, California, this day of , 2004. City Clerk CITY . 0 STAFF REPORT G �;;� ROND TERR CE City Manager's Office CRA ITEM ( ) COUNCIL ITEM (X) MEETING DATE: JULY 22, 2004 SUBJECT: SCHEDULE OUTDOOR ADVENTURE CENTER SPECIFIC PLAN PUBLIC HEARING. FUNDING REQUIRED ( ) NO FUNDING REQUIRED (X) The Outdoor Adventure Center specific plan was approved by the Planning Commission on their meeting of June 3, 2004. The next step is for the Council to schedule a public hearing for the specific plan. Because of various vacations scheduled we need to identify a date when all five members of the city council will be available to hear the OAC specific plan presentation and to hold the public hearing. AUGUST Sunday Monday Tuesday Wednesday Thursday Friday Saturday 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Council Meeting 15 16 17 18 19 20 21 22 23 24 25 26 7 28 Council Meeting 29 30 31 SEPTEMBER Sunday Monday Tuesday Wednesday Thursday Friday Saturday 1 2 3 4 5 6 7 8 9 11 Council Meeting 12 13 14 15 16 17 18 19 20 21 22 23 4 25 Council Meeting 26 27 28 29 3 The above is a calendar for the month of August and September with the council meeting dates circled Council needs to discuss setting a public hearing either at a regular scheduled meeting in either of those months or to pick a day for a special meeting. STAFF RECOMMENDATION: STAFF RECOMMENDS THAT COUNCIL CONSIDER THE DATES IN AUGUST AND SEPTEMBER TO HOLD THE OAC PUBLIC HEARING ON THE SPECIFIC PLAN. July 7 2004 Draft COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF GRAND TERRACE and U.S. BANK NATIONAL ASSOCIATION As Trustee INDENTURE OF TRUST $15,000,000 COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF GRAND TERRACE SECURING S COMMUNITY-REDEVELOPMENT PROJECT AREA REFUNDING TAX ALLOCATION BONDS SERIES 2004 Dated as of TABLE OF CONTENTS 1 Page Recitals...................................................... ............. ................................... 1 GrantingClauses............................................................................................. 2 ARTICLE I SECTION 101 Definitions ....................................................................... 4 ARTICLE II THE BONDS SECTION 201. Amount, Issuance & Purpose of Bonds .................................... 15 SECTION 202. Nature of Bonds................................................................ 15 SECTION 203. Description of Bonds..........................................................16 SECTION204. Interest ......................... .............................................. 16 SECTION 205. Place of Payment .............. . ............................................ 17 SECTION206 Form of Bond .................... ............................................. 17 SECTION 207. Execution of Bonds............................................................ 17 SECTION 208. Registration and Exchange ................................................... 18 SECTION209. Bond Register ..... ............................................................ 18 SECTION 210. Delivery of the Bonds....... . . ..................................... ....... 18 SECTION 211 Lost, Stolen, Destroyed or Mutilated Bonds............................... 19 SECTION 212 Cancellation of Bonds................ ...................... . ............... 19 SECTION 213. Validity of the Bonds ....... ... .............................................20 SECTION 214 Issuance of Additional Bonds . . . .............................. ........20 SECTION 215. Insurer to be deemed owner of Bonds and other Rights of Bond Insurer ...................................22 SECTION 216 Book-Entry Level System ........... .......................................22 SECTION 217. Optional Redemption............ .............................................24 SECTION 218 Sinking Fund Redemption. ... .. .................................... ........24 SECTION 219 Call and Redemption; Notice of Redemption...............................24 SECTION 220 Redemption Fund.................... . ......................................25 SECTION 221 Partial Redemption of Bonds.................................................25 SECTION 222 Effect of Redemption........... . ...........................................26 SECTION 223 Purchase of Bonds................... .........................................26 ARTICLE III REVENUES AND FUNDS SECTION 301 Source of Payment of Bonds ................................................27 SECTION 302. Creation of Funds and Accounts . .................................. .. ....27 SECTION 303. Sale of Bonds; Disposition of Bond Proceeds; Development Fund . ...... .................... ... ..........27 SECTION 304. Final Balances................. ... . ........................................28 SECTION 305 Security of Funds....................... . ...... ................ ............28 SECTION 306 Non-Presentment of Bonds...................................................28 SECTION 307. Moneys to be Held in Trust.. ..............................................29 ARTICLE IV REVENUES AND APPLICATION SECTION 401 Pledged Tax Revenues ........... ............................................30 2 i SECTION402. Special Fund....................................................................31 SECTION 403. Payments of Principal, Premium and Interest.........................................................................32 SECTION 404. Revenues to be Held for all Bondowners; Certain Exceptions...........................................................32 ARTICLE V INVESTMENT OF MONEYS SECTION 501. Excess Investment Earnings..................................................34 SECTION 502. Investment of Moneys in Funds and Accounts ...................... . .............................................36 SECTION 503. Investments; Arbitrage; Special Arbitrage Restriction ........................................................36 ARTICLE VI COVENANTS OF AGENCY PAYMENT; FURTHER ASSURANCES SECTION 601. Payment of Principal or Redemption Price and Interest on Bonds ................................................38 SECTION 602. Covenants of the Agency .....................................................38 SECTION 603. Compliance with Indenture. Contracts. Laws and Regulations........................................................43 SECTION 604. Amendment to Redevelopment Plan SECTION 605 Continuing Disclosure ........................................................43 ARTICLE VII DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDOWNERS SECTION701. Defaults ....................................................................... .44 SECTION 702 Application of Funds upon Acceleration ...................................47 ARTICLE VIII THE TRUSTEE AND THE PAYING AGENT SECTION 801. Appointment of Duties, Immunities and Liabilities of Trustee ................... ....................................48 SECTION 802. Liabilitv of Trustee............................................................51 SECTION 803 Right of Trustee to Rely on Documents....................................52 SECTION 804. Intervention by Trustee .......................................................52 SECTION 805 Designation & Successor of Paying Agent. Agreement with Paying Agent .............................................52 ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 901. Amendments: Supplemental Indenture ......:..............................54 ARTICLE DEFEASANCE SECTION 1001. Defeasance......................................................................54 ARTICLE XI MISCELLANEOUS SECTION 1101. Consents, Etc. of Bondowners...............................................57 SECTION 1102 Consent of Bond Insurer & Notice to RatingAgencies................................................................59 SECTION 1103. Limitation of Rights...........................................................59 SECTION 1104. Severability .....................................................................59 SECTION 1105 CUSIP Numbers ...............................................................60 SECTION 1106. Successor is Deemed Included in All References to Predecessor..................................................60 SECTION 1107 Counterparts.............................................. .....................60 SECTION 1108 Applicable Law ............................................ ...................60 SECTION 1109 Captions.................................................. .. ...................60 SECTION 1110. Compliance Certificate Opinions............................................60 SECTION 1111 Conflict with Trust Indenture Act of 1939.................................60 SECTION 1112 Successors ......................................................................60 SECTION 111, Execution of Documents and Proof of Ownership by Bondowners ...................... . .... ...................61 SECTION 1114 Waiver of Personal Liability ............................. . .................61 SECTION 1115 Notices ..................... ... ...... .......................... ..............61 SIGNATURE PAGE EXHIBIT A - FORM OF BOND FORM OF CERTIFICATE OF AUTHENTICATION OF BOND STATEMENT OF INSURANCE THIS INDENTURE OF TRUST. dated as of 2004 is entered into between the Community Redevelopment Agency of the City of Grand Terrace, a public body corporate and politic (the "Agency"), and U.S. Bank National Association, a national banking association, duly authorized to accept and execute trusts of the character herein set forth, as trustee (the "Trustee") 4 RECITALS : WHEREAS, the Agency is a redevelopment agency (a public body, corporate and politic) duly created, established and authorized to transact business and exercise its powers, all under and pursuant to the Community Redevelopment Law (Part 1 of Division 24 (commencing with Section 33000) of the Health and Safety Code of the State of California), and the powers of the Agency include the power to issue bonds or notes for any of its corporate purposes; and WHEREAS, the Agency has previously issued its Community Redevelopment Agency City of Grand Terrace, Community Development Project Refunding Tax Allocation Bonds Series 1993A (the "1993A Bonds") in the principal amount of$5,025,000; and WHEREAS, the Agency has previously issued its Community Redevelopment Agency of the City of Grand Terrace, Community Redevelopment Prolect Area Refunding Tax Allocation Bonds, Series 1993B ("the 1993B Bonds") in the principal amount of$8,750,000, WHEREAS the Agency has previously entered into the Redevelopment Agency of the City of Grand Terrace Subordinate Tax Allocation Loan Agreement (the "Loan Agreement") dated July 9, 2003, and in the principal amount of$1,3000,000; and WHEREAS, for the corporate purposes of the Agency, the Agency deems it necessary to,issue at this time tax allocation bonds in a total principal amount of Fifteen Million Dollars ($15,000,000) (the "Bonds") and use the proceeds of such Bonds to refund the Outstanding 1993A Bonds, the 1993B Bonds, the Loan Agreement and to issue low and moderate income housing bonds and to pay costs in connection with the issuance of the Bonds and to make certain other deposits as required by this Indenture, and WHEREAS, the purposes stated above will be accomplished by issuing at this time such tax allocation bonds pursuant to this Indenture and that certain resolution of the Agency adopted on 2004 providing for the issuance of "Community Redevelopment Agency of the City of Grand Terrace, Community Redevelopment Project Area Refunding Tax Allocation Bonds, Series 2004. and WHEREAS, the execution and delivery of the Bonds and of the Indenture have been duly authorized and all things necessary to make the Bonds, when executed by the Agency and authenticated by the Trustee, valid and binding legal obligations of the Agency and to snake this Indenture a valid and binding legal instrument for the security of the Bonds, have been done NOW, THEREFORE, THIS INDENTURE OF TRUST WITNESSED That the Agency, in consideration of the promises, the acceptance by the Trustee of the trusts hereby created, the purchase and acceptance of the Bonds by the purchasers thereof, and of other good and valuable consideration, the receipt of which is hereby acknowledged, and in order to secure the payment of the principal of, premium, if any, and interest on all Bonds Outstanding hereunder from time to time, according to their tenor and effect, and to secure the observance and performance by the Agency of all the covenants expressed or implied herein and in the Bonds, does hereby convey, pledge and assign unto the Trustee, and unto its successors and assigns forever and does hereby grant to it and them a security interest, together with all right, title and interest of the Agency, in- GRANTING CLAUSE FIRST The Pledged Tax Revenues together with all other revenues, and all moneys and securities held by the Trustee in any Fund or Account together with investment earnings thereon established pursuant to the terms of the Indenture and any and all other property of each name and nature from time to time hereafter by delivery or by writing of any kind pledged or assigned as and for additional security hereunder, by anyone, to the Trustee, (the "Trust Estate") which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof. TO HAVE AND TO HOLD all and singular the Trust Estate, whether now owned or hereafter acquired, unto the Trustee and its respective successors in said trusts and assigns forever. IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all present and future owners of the Bonds, from time to time issued under,and secured by this Indenture without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the other Bonds. PROVIDED, HOWEVER, that if the Agency, its successors or assigns, shall well and truly pay, or cause to be paid, the principal of the Bonds and the interest and premium, if any, due or to become due thereon, at the times and in the manner mentioned in the Bonds, according to the true intent and meaning thereof, and shall cause the payments to be made into the Special Fund as required hereunder or shall provide, as permitted by Article XI hereof, for the payment thereof, and shall well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of this Indenture to be kept, performed and observed by it, and shall pay or cause to be paid to the Trustee and all Paying Agents all sums of money due or to become due to them in accordance with the terms and provisions hereof, then this Indenture and the rights hereby granted shall cease, determine and be void, otherwise this Indenture is to be and remain in full force and effect. THIS INDENTURE OF TRUST FURTHER WITNESSED, and it is expressly declared, that all Bonds issued and secured hereunder are to be issued, authenticated and delivered and the Revenue ,,hereby assigned and pledged are to be dealt with and disposed of under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as hereinafter expressed, and the Agency has agreed and covenanted, and does hereby agree and covenant.. with the Trustee and with the respective holders from time to time of the Bonds, as follows. ARTICLE I DEFINITIONS Section 101. Definitions. (A) For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: 6 (1) "This Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. (2) All references in this Indenture to designated "Articles", "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Indenture. The words "herein", "hereof", "hereto". "hereby", and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. (3) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular (4) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with applicable generally accepted accounting principles as in effect from time to time. (5) Every "request", "order", "demand", "application", "appointment", "notice", "statement", "certificate", "consent", or similar action hereunder by the Agency shall, unless the form thereof is specifically provided, be in writing signed by a duly authorized officer or agent of the Agency with a duly authorized signature. (B) For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: "Act" means Articles 1 through 4 (commencing with Government Code Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of the State, as in existence on the closing date or as amended thereafter from time to time "Additional Bonds" means bonds (including, without limitation, bonds, notes, interim certificates, debentures or other obligations) secured by a pledge of Pledged Tax Revenues on a parity with the Bonds. "Agency" means the Community Redevelopment Agency of the City of Grand Terrace. "Alternative Reserve Account Securitv" means one or more letters of credit, surety bonds bond insurance policies, or other form of guaranty from a financial institution for the benefit of the Trustee, the long-term, unsecured obligations of which are rated not less than "A" by Moody's Investors Services. or "A" by Standard & Poor's in substitution for or in place of all or any portion of the Reserve Requirement, which shall require written consent of Bond Insurer as to the provider of the security and as to its structure. "Annual Debt Service" means, for any Bond Year, the principal and interest, including scheduled sinking fund payments, payable on the Outstanding Bonds in such Bond Year. "Authority" means the Grand Terrace Financing Authority, a joint exercise of powers authority duly organized and existing under the laws of the State, including the Act 7 ' "Bond" or "Bonds" means the "Community Redevelopment Agency of the City of Grand Terrace Redevelopment Project Area Refunding Tax Allocation Bonds; Series 2004 authorized by this Indenture. "Bondowner" "Owner" or "Owner of Bonds," or any similar term, means any person who shall be the registered owner or his duly authorized attorney, trustee or representative of any Outstanding Bond. For the purpose of Bondowners' voting rights or consents, Bonds owned by or held for the account of the Agency, or the City, directly or indirectly (as certified by the City or Agency to the Trustee), shall not be counted. "Bond Fund" means the fund by that name established and held by the Agency pursuant to Section 302 hereof. "Bond Insurer" or "Insurer,*" means "Bond Year" means the twelve (12) month period commencing on September 2 of each year and each anniversary date thereafter, provided that the first Bond Year shall extend from the closing date to September 1, 2005 "Business Day" means a day of the year other than a day on which banks in California, or New York are required or authorized to remain closed. "CEDE and CO." means the nominee of DTC, and any successor nominee of DTC with respect to the Bonds. "Certificate" or "Certificate of the Agency" means a certificate signed by the Chairman or Executive Director of the Agency or their respective deputies "Chairman" means the chairman of the Agency appointed pursuant to Section 33113 of the Health and Safety Code of the State of California, or other duly appointed officer of the Agency authorized by the Agency by resolution or bylaw to perform the functions of the chairman in the event of the chairman's absence or disqualification. "City" means the City of Grand Terrace, California "Code" means the Internal Revenue Code of 1986, as amended and any regulations, rulings, judicial decisions, and notices, announcements and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it, or any applicable regulations adopted under the Internal Revenue Code of 1954, as amended "Computation Year" means the twelve (12) month period commencing on March 1 of each year and ending on August 31 of the following year "Continuing Disclosure Agreement" shall mean that certain Continuing Disclosure Agreement executed by the Agency and the Dissemination Agent named therein dated the date of issuance and delivery of the Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. "Costs of Issuance" means the costs and expenses incurred in connection with the issuance and sale of the Bonds including the initial fees and expenses of the Trustee, the premium for the Municipal Bond Insurance Policy legal fees and expenses of the Trustee and the Agency, costs of printing the 8 Bonds and Official Statement, fees of financial consultants and other fees and expenses set forth in a Certificate of the Agency. "Cost of Issuance Fund" means that fund created pursuant to Section 302. "County" means the County of San Bernardino, California "Delivery Date" means the date the Bonds are delivered to the original purchaser thereof. Depository" means (a) initially, DTC, and (b) any other Securities Depositories acting as Depository pursuant to Section 216. "Depository System Participant" means any participant in the Depository's book-entry system. "DTC" means The Depository Trust Company, New York, New York, and its successors and assigns "Event of Default" means any of the events described in Section 801 hereof. "Excess Investment Earnines" shall have the meaning attributed to such term in Section 501. "Fiscal Year" means any twelve (12) month period beginning on July 1st and ending on the next following June 30th. "Government Oblieations" means direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury and CATS and TGRS ) or obligations the principal of and interest on are unconditionally guaranteed by the United States of America. "Gross Proceeds" means the sum of the following amounts: (1) original proceeds, being the amounts received by the Agency, or held by the Trustee as proceeds of the original issuance of the Bonds (after payment of all expenses of issuing the Bonds); (ii) investment proceeds, being amounts received at any time by the Agency or the Trustee, such as interest and dividends, resulting from the investment of proceeds of the Bonds, including profits and less losses received on such investment; (iii) amounts, other than original proceeds and investment proceeds, held to any fund or account and reasonably expected to be used to pay principal of or interest on the Bonds; (iv) securities or obligations pledged as security for the payment of the Bonds by an ultimate obligor (or a related person) or the Agency; (v) amounts used to pay principal or interest with respect to the Bonds; and (vi) amounts received as a result of investing the amounts listed in clauses (1) through (v). "Indenture" means this Indenture of Trust between the Agency and the Trustee, as originally adopted or as it may be amended or supplemented by any Supplemental Indenture entered into pursuant to the provisions hereof "Independent Financial Consultant," or "Independent Redevelopment Consultant" means any individual or firm engaged to the profession involved, appointed by the Agency, and who, or each of whom, has a favorable reputation in the field in which his/her opinion or certificate will be given, and: (1) Is in fact independent and not under domination of the Agency, (2) Does not have any substantial interest, direct or indirect, with the Agency; and 9 (3) Is not connected with the Agency as an officer or employee of the Agency, but who may be regularly retained to make reports to the Agency. "Interest Payment Date" means September 1 and March 1 of each year commencing September 1, 2004. "Investment Property" means any security, any obligation, any annuity contract and any investment-type property (other than any tax-exempt bond, any demand deposit SLG and any qualified temporary investment within the meaning of paragraph (A)(4) or (5) of Section 148 of the Code), as determined pursuant to the Code and Regulations "Law" means the Community Redevelopment Law of the State of California (conunencing with Health and Safety Code Section 33000). "Loan Agreement" means the Agency's remaining principal balance of the Redevelopment Agency of the City of Grand Terrace Subordinate Tax Allocation Loan Agreement, by and between the Agency and Zion First National Bank, dated July 9, 2003. "Maximum Annual Debt Service" means the maximum amount of scheduled principal and interest payable on the Bonds in any Bond Year from and after the date of calculation, including any scheduled sinking fund redemptions. "Moody's" means Moody's Investor Service, Inc., New York, New York. "Municipal Bond Insurance Policy" means the municipal bond insurance policy issued by the Bond Insurer insuring the payment when due of the principal of and interest on the Bonds as provided .therein. "1993 Bonds Indenture" means the Indenture of the Trust, dated as of September 8, 2003, by and between the Agency and the Trustee for the Series 1993A and Series 1993B Bonds. "Nominee" means (a) initially, CEDE & CO. as nominee of DTC. and (b) any other nominee of the Depository designated pursuant to Section 216(a). "Nonpurpose Investment" means any Investment Property in which Gross Proceeds are invested and which is not acquired to carry out the governmental purpose of the Bonds "Opinion of Counsel" means a written opinion of an attorney or firm of attorneys of favorable reputation in the field of municipal bond law. Any opinion of such counsel may be based upon, insofar as it is related to factual matters, information which is in the possession of the Agency as shown by a certificate or opinion of, or representation by, an officer or officers of the Agency, unless such counsel knows, or in the exercise of reasonable care should have known, that the certificate, opinion or representation with respect to the matters upon which his or her opinion may be based, as aforesaid, is erroneous. "Outstanding", when used as of any particular time with reference to Bonds, means, subject to the provisions of Article XI, all Bonds except• 10 1 (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation: (b) Bonds paid or deemed to have been paid pursuant to Section 1001 and Section 306 hereof; and °) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the Agency pursuant to the Indenture or any Supplemental Indenture. "Pass-Through Agreements" means the agreements entered into on or prior to the date hereof pursuant to Section 33401 of the Health and Safety Code entitled, respectively, the Redevelopment Agency of the City of Grand Terrace Pass-Through Agreement with the Flood Control District of San Bernardino County, the County -of San Bernardino, the Riverside-Corona Resources Conservation District, the County of San Bernardino on behalf of County Service Area 38 and the County Superintendent of Schools, all dated June 8, 1993, and the Redevelopment Agency of the City of Grand Terrace Pass-Through Agreement with the Colton Joint Unified School District dated July 8, 1993. "Paying Agent" means any paying agent appointed by the Agency pursuant to this Indenture. "Permitted Investments" means: A. Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of Treasury, and CATS and TGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. B. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): 1. U.S. Export-Import Bank (Eximbank) - Direct obligations or fully guaranteed certificates of beneficial ownership 2. Farmers Home Administration (FHA) - Certificates of beneficial ownership Federal Financing Bank 4 Federal Housing Administration Debentures (FHA) 5 General Services Administration - Participation certificates 6. Government National Morteaee Association (GNMA or "Ginnie Mae") GMNA - guaranteed mortgage-backed bonds GMNA - guaranteed pass-through obligations 7. U.S. Maritime Administration - Guaranteed Title XI financing 8. U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds 11 New Communities Debentures - U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds C. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): 1 Federal Home Loan Bank System - Senior debt obligations 2. Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac") Participation Certificates Senior,debt obligations 3. Federal National Mortgage Association (FNMA or "Fannie Mae") Mortgage-backed securities and senior debt obligations 4 Student Loan Marketing Association (SLMA or "Sallie Mae") Senior debt obligations 5 Resolution Funding Corp. (REFCORP) obligations 1 Farm Credit System Consolidated systemwide bonds and notes. D. Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm- G; AAAm; or AAm, and if rated by Moody"s rated Aaa, Aal or Aa2 E Certificates of deposit secured at all times by collateral described to (A) and/or (B) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral. F. Certificates of deposit.. savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF. G. Investment Agreements, including GIC's, forward Purchase Agreement and Reserve Fund acceptable to the Insurer H Commercial paper rated, at the time of purchase, "Prime -1" by Moody's and "A-1" or better by S&P. I. Bonds or notes issued by any state or municipality which are rated at the time of purchase by Moody's and S&P to one of the two highest rating categories assigned by such agencies. J. Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating at the time of purchase of "Prime -1" or "A3" or better by Moody's and "A-1" or "A" or better by S&P. 12 K. Any state administered pool investment fund in which the Agency is statutorily permitted or required to invest. L Repurchase Agreements for 30 days or less must follow the following criteria. Repurchase Agreements which exceed 30 days must be acceptable to the Insurer (criteria available upon request). - Repurchase agreements provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to a municipal entity (buyer/lender), and the transfer of cash from a municipal entity to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the municipal entity in exchange for the securities at a specified date 1. Repos must be between the municipal entity and a dealer bank or securities firm a. Primary dealers son the Federal Reserve reporting dealer list which are rated A or better by Standard & Poor's Corporation and Moody's Investor Services, or b. Banks rated "A" or above by Standard & Poor's Corporation and Moody's Investor Services. 2 The written repo contract must include the following,_ a Securities which are acceptable for transfer are. (1) Direct U.S. governments, or (2) Federal agencies backed by the full ,faith and credit of the U.S. government (and FNMA & FHLMC) b. The term of the repo may be up to 30 days c The collateral must be delivered to the municipal entity, Trustee (if Trustee is not supplying the collateral) or third party acting as agent for the Trustee (if the Trustee is supplying the collateral) before/simultaneous with payment perfection by possession of certificated securities) d. Valuation of Collateral (1) The securities must be valued weekly, marked-to-market at current market price plus accrued interest (a) The value of collateral must be equal to 104% of the amount of cash transferred by the municipal entity to the dealer bank or security firm under the repo plus accrued interest. If the value of securities held as collateral slips below 104% of the value of the cash transferred by Trustee, then additional cash and/or acceptable securities must be transferred. If. however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105% 3. Legal opinion which must be delivered to the Trustee. l� a. Repo meets guidelines under state law for legal investments of public funds. "Pledged Tax Revenues" means that portion of taxes levied upon taxable property in the Project Area and received by the Agency for the Project Area of the Agency pursuant to Article 6 of Chapter 6 of the Law and Section 16 of Article XVI of the Constitution of the State of California or pursuant to other applicable State laws, and as provided in the Redevelopment Plan, and (to the extent permitted by law) all payments, subventions and reimbursements, if any, to the Agency specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations. "Project Area" means the project area described and defined in the Redevelopment Plan. "Rating Agencies" shall mean Standard and Poor's Ratings Group, New York, New York and Moody's Investors Service, Inc., New York, New York or their respective successors and assigns. "Redevelopment Plan" means the Redevelopment Plan for the Community Redevelopment Agency of the City of Grand Terrace Community Redevelopment Project Area, approved and adopted by the City Council of the City of Grand Terrace and includes any amendment thereof hereafter or heretofore made pursuant to the Law. "Redevelopment Project" means the Community Redevelopment Agency for the City of Grand Terrace Community Redevelopment Project. "Regular Record Date" means the close of business on August 15 or February 15, preceding each Interest Payment Date, as applicable. "Regulations" means the regulations adopted by the Department of Treasury from time to time "Report" means a document in writing signed by an Independent Financial Consultant and includine. (a) A statement that the person or firm making or giving such Report has read the pertinent provisions of this Indenture to which such Report relates; (b) A brief statement as to the nature and scope of the examination or investigation upon which the Report is based; and ©) A statement that, in the opinion of such person or firm, sufficient examination or investigation was made as is necessary to enable said consultant to express an informed opinion with respect to the subject matter referred to in the Report "Representations Letter" means the Letter of Representation from the Agency and the Trustee to DTC in which the Agency and the Trustee make certain representations to DTC with respect to the Bonds, the payment thereof and delivery of notices with respect thereto or any comparable letter to a successor depository to DTC for the Bonds. "Reserve Account" means the account by that name pursuant to Section 302 hereof "Reserve Requirement" means, as of the date of computation, an amount equal to Maximum Annual Debt Service of the outstanding principal amount of the Refunding Tax Allocation Bonds for the Bonds 14 "Revenues" means the Pledged Tax Revenues together with all other moneys held by the Trustee in any Fund or Account and the interest earnings thereon. "S&P" means Standard and Poors Ratings Group, New York, New York. "Securities Depositories" means The Depository Trust Company, 711 Stewart Avenue, Garden City, New York 11530, Fax-(516) 227-4039 or 4190; Midwest Securities Trust Company, Capital Structures-Call Notification, 440 South LaSalle Street, Chicago, Illinois 60605, Fax-(312) 663-2343, Philadelphia Depository Trust Company, Reorganization Division, 1900 Market Street, Philadelphia, Pennsylvania 19103, Attention: Bond Department, Fax-(215) 496-5058; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and / or such other securities depositories as the Agency may designate in a written request of the Agency delivered to the Trustee. "Special Fund" means the Fund by that name established and held by the Trustee pursuant to Section 302. "State" means the State of California. "Supplemental Indenture" or "supplemental indenture" means any indenture then in full force and effect which has been duly entered into by the Agency under the Law, or any act supplementary thereto or amendatory thereof. at a meeting of the Agency duly convened and held, at which a quorum was present and acted thereon, amendatory of or supplemental to this Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder "Tax Certificate" means that certain Tax Certificate executed in connection with the issuance of the Bonds or any Additional Bonds. "Tax Exempt" means the Refunding Tax Allocation Bonds for the 2004 Series, 2004B Series and the 2004C Series, issued pursuant to the Indenture. "Taxable Bonds" means the Refunding Tax Allocation Bonds for the 2004B Series, issued pursuant to the Indenture "Treasurer" or "Treasurer of the Agency" means the officer who is then performing the functions of Treasurer of the Agency "Trustee" means the trustee appointed by the Agency pursuant to Section 801 hereof, its successors and assigns, and any other corporation or association which may at any time be substituted in its place, as provided in this Indenture. J 1J ARTICLE II THE BONDS ' Section 201. Amount, Issuance and Purpose of Bonds Under and pursuant to the Law and under and pursuant to this Indenture, Bonds of the Agency in a principal amount of Fifteen Million Dollars ($15,000,000) to refund the Outstanding 1993A Bonds, 1993B Bonds and defesance the Loan to fund low and moderate income housing which shall be issued by the Agency for the corporate purposes of the Agency and such issue of Bonds is hereby created and authorized. Section 202. Nature of Bonds. The Bonds shall be and are special obligations of the Agency and are secured irrevocable pledge (which pledge shall be effected in the manner and to the extent hereinafter provided) of, and are payable as to principal and interest from Pledged Tax Revenues and other funds as hereinafter provided in Section 401. The Bonds and interest thereon are not a debt of the City, the State of California or any of its political subdivisions, and neither the City, the State nor any of its political subdivisions is liable on them. In no event shall the Bonds or interest thereon be payable out of any funds or properties other than those of the Agency as set forth in this Indenture. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or 16 restriction. Neither the members of the Agency nor any persons executing the Bonds are liable personally on the Bonds by reason of their issuance. The Bonds shall be and are equally secured by an irrevocable pledge of the Pledged Tax Revenues and other funds as hereinafter provided, without priority for number, date of sale, date of execution or date of delivery, except as expressly provided herein. The validity of the Bonds is not and shall not be dependent upon: (a) the completion of the Project Area or any part 'thereof; (b) the performance by anyone of his/her obligations relative to the Project Area; or °) the proper expenditure of the proceeds of the Bonds Nothing in this Indenture shall preclude: (a) the payment of the Bonds from the proceeds of refunding bonds issued pursuant to the Law; or (b) the payment of the Bonds from any legally available funds. Nothing in this Indenture shall prevent the Agency from making advances of its own funds, however derived, to any of the uses and purposes mentioned in this Indenture In the event of a defeasance of the Bonds in accordance with Article X, the Trustee shall cause a final accounting for such period or periods as shall be requested by the Agency to be prepared and filed with the Agency, and the Trustee, upon the request of the Agency, shall release the rights of the Bondowners under this Indenture except: (1) the rights of the Trustee to receive compensation and indemnification pursuant to Article VIII; and (ii) the right to receive interest and principal payments. In addition, notwithstanding anything to the contrary in this Indenture, the obligation of the Agency to pay Excess Investment Earnings, if any, owed to the United States government shall survive the payment in full or defeasance of the Bonds. In the event of such a defeasance, the Trustee shall execute and deliver to the Agency all such instruments as may be reasonably requested by the Agency to evidence such release, discharge and satisfaction, and upon written request of the Agency the Trustee shall pay over or deliver to the Agency all moneys or securities held by it pursuant to this Indenture which are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption and the Trustee's fees and expenses. Provision shall be made by the Agency, satisfactory to the Trustee, for first class mailed notice, postage prepaid, to the Owners of such Bonds that such moneys are so available for such payment. Section 203. Description of Series Bonds. The Bonds shall be issued in an aggregate principal amount of Fifteen Million Dollars ($15,000.000) and shall be designated "Community Redevelopment Agency of the City of Grand Terrace, Community Redevelopment Project Area Refunding Tax Allocation Bonds, Series 2004". The Bonds shall be issued in the form of fully registered bonds in denominations of$5,000 each or any whole multiple thereof. The Bonds shall be initially dated as of 2004 and shall be lettered and numbered in the manner determined by the Trustee. The Bonds shall be authenticated on the date of authentication thereof by the Trustee. The Bonds shall mature on September 1_ in each of the years and in the amounts and shall bear interest at the rates per annum as follows. 17 Section 205. Interest. The Bonds shall bear interest at the rates set forth in Section 203 hereof, payable semiannually on September 1 and March 1 of each year, commencing March 1, 2005. Each Bond shall bear interest until its principal sum has been paid, provided, however, that if funds are available for the payment thereof in full accordance with the terms of this Indenture, the Bond shall cease to bear interest at its maturity. Interest on the Bonds shall be calculated on the basis of a 360-day year of twelve (12) 30-day months. Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless: (i) it •is authenticated as of an Interest Payment Date, in which event it shall bear interest from that Interest Payment Date; (ii) it is authenticated after a Regular Record Date and before the following Interest Payment Date, and if the Agency shall not be in default in the payment of interest due on such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date; or (iii) it is authenticated on or before August 15, 2004 in which event it shall bear interest from September 1, 2004 Interest on the Bonds shall be paid by the Trustee (out of the appropriate funds) by check mailed by first class mail, postage prepaid on the Interest Payment Date to the registered owner as his/her naive and address appears on the register kept by the Trustee at the close of business on the Regular Record Date preceding the Interest Payment Date or, upon request in writing made on or before the Regular Record Date preceding the Interest Payment Date by a Bondowner of$1,000,000 or more in principal amount of Bonds, payment shall be made on the Interest Payment Date by wire transfer in immediately available funds to an account designated by such Bondowner to the Trustee. Should payment come due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day without accruing additional interest from the Interest Payment Date. Section 206. Place of Payment The Bonds and the interest thereon shall be payable in lawful money of the United States of America and the Bonds shall be payable upon presentation at the -corporate trust office of the Trustee, designated by the Trustee in writing (except interest which shall be payable by check as provided in Section 205) Section 207. Form of Bonds. The Bonds shall be substantially in the form attached hereto and by this reference incorporated herein as Exhibit "A". This form is hereby approved and adopted as the 18 form of the Bond, and of the exchange, registration and assignment provisions pertaining thereto,.with necessary or appropriate variations, omissions and insertions as permitted or required by this Indenture. Any Bonds issued pursuant to this Indenture may be initially issued in temporary form exchangeable for definitive Bonds when the same are ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Agency, shall be without coupons and may contain references to any of the provisions of this Indenture as may be appropriate. Every temporary Bond shall be executed by the Agency and authenticated and delivered by the Trustee upon the same conditions and in substantially the same form and manner as the definitive Bonds. If the Agency issues temporary Bonds, it will execute and furnish definitive Bonds without delay, and, thereupon, the temporary Bonds shall be surrendered for cancellation at the corporate trust office'designated by the Trustee, in writing. or at such other place as the Agency may approve. The Trustee shall deliver to exchange for the surrendered temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations of this same issue. Until exchanged, the temporary Bonds shall be entitled to the same benefits under this Indenture as definitive Bonds of this same issue Section 208. Execution of Bonds. The Bonds shall be signed on behalf of the Agency by its Chairman and by its Executive Director, by manual or facsimile signature, and the seal of the Agency shall be impressed, imprinted or reproduced thereon. The foregoing officers are hereby authorized and directed to sign the Bonds in accordance with this Section. If any Agency member or officer whose manual or facsimile signature appears on the Bonds ceases to be a member or officer before delivery of the Bonds, his/her signature is as effective as if he or she had remained in office. The Trustee shall authenticate the Bonds on registration and/or exchange to effectuate the registration and exchange provisions set forth in Section 208, and only those Bonds that have endorsed ''on them a certificate of authentication, substantially in the form set forth in Exhibit A, duly executed by ",the Trustee, shall be entitled to any rights, benefits or security under this Indenture. No Bonds shall be valid or obligatory for any purpose unless and until the certificate of authentication has been duly executed by the Trustee. The certificate of the Trustee upon any Bond shall be conclusive and the only evidence that the Bond has been duly authenticated and delivered under this Indenture. The Trustee's certificate of authentication on any Bond shall be deemed to have been duly executed if signed by an authorized officer of the Trustee, but it shall not be necessary that the same officer sign the certificate of authentication on all of the Bonds that may be issued hereunder Section 29. Reeistratton and Exchange. The Bonds shall be issued only in fully registered form. The Bonds may be exchanged for other Bonds of equal aggregate denominations. Transfer of ownership of a Bond or Bonds shall be made by exchanging the same for a new Bond or Bonds. All exchanges shall be made in such a manner and upon such reasonable terms and conditions as may be determined and prescribed by the Agency The person, firm or corporation requesting the exchange shall pay any tax or governmental charge that may be imposed in connection with the exchange. The Agency shall pay all other registration and exchange costs and charges including the cost of printing new Bonds Section 210. Bond Register. The Trustee will keep at its corporate trust office in St. Paul, Minnesota, sufficient books for the registration and transfer of the Bonds. The books shall be open to inspection by the Agency at all times during regular business hours: and, upon presentation for such purpose, the Trustee shall under such reasonable regulations as it may prescribe, register or transfer, or cause to be registered or transferred, on the register, the Bonds as hereinbefore provided. The Trustee and Agency may conclusively rely upon the registration books of the Trustee as to the registered owners and will not be affected byrny notice to the contrary 19 Section 211. Delivery of the Bonds. Upon the execution and delivery of this Indenture, the Agency shall execute and deliver to the Trustee, and the Trustee shall authenticate the Bonds and deliver them or make them available for pickup to the purchasers as directed by the Agency as provided in this Section 211. Prior to the delivery by the Trustee of any of the Bonds there shall have been filed with the Trustee: (1) A copy, duly certified by the Secretary of the Agency, of resolutions of the Agency authorizing the issuance of the Bonds and the execution and delivery of this Indenture; (2) Original executed counterparts of this Indenture: (3) An opinion of Bond Counsel that the issuance of the Bonds and the execution of this Indenture have been duly and validly authorized, that all requirements under this Indenture precedent to the delivery of the Bonds have been satisfied and that the Bonds and the Indenture are valid and binding obligations. enforceable against the Agency in accordance with their terms (subject to any applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement of creditor's rights generally and subject also to the application of equitable principles if equitable remedies are sought); (4) A request and authorization to the Trustee on behalf of the Agency directing the Trustee as to the amounts required to be deposited into the Costs of Issuance Fund: (5) A request and authorization to the Trustee on behalf of the Agency to authenticate and deliver the Bonds to the purchasers therein identified upon payment to the Trustee, but for the account of the Agency, of a sum specified in such request and authorization. The proceeds of such payment shall be transferred and deposited pursuant to Article III hereof and as indicated in such request and authorization. (6) An original executed counterpart of the Tax Certificate of the Agency establishing expectations to the effect that the Bonds will not be "arbitrage bonds" within the meaning of Section 148 of the Code; and (7)_ Any additional agreements, certificates, documents or other items or matters authorized or required by the provisions of the resolution. Section 212. Lost, Stolen, Destroyed or Mutilated Bonds. Should any Bond become mutilated or be lost or destroyed, the Agency shall cause to be executed, and the Trustee shall authenticate and deliver, a new Bond of like outstanding principal amount and maturity in exchange and substitution for, and upon cancellation of, such mutilated Bond or in lieu of and in substitution for such lost or destroyed Bond; provided, however, that the Agency and the Trustee shall so execute, authenticate and deliver only if the Bond owner has paid the reasonable expenses and charges of the Trustee in connection therewith and, in the case of a lost or destroyed Bond, has furnished to the Trustee evidence of such loss or destruction and indemnity satisfactory to it. If any such Bond shall have matured, instead of issuing a new Bond the Trustee may pay the same without surrender thereof upon receipt of the afore- mentioned indemnity. Section 213. Cancellation of Bonds. All Bonds surrendered to the Trustee for payment at maturity or, in the case of call and redemption prior to maturity, at the redemption date, shall upon 20 payment therefor be canceled immediately and destroyed by the Trustee. A,certificate of destruction shall forthwith be transmitted to the Treasurer. Any Bonds purchased by the Agency shall be transferred to the Trustee and shall be canceled immediately and destroyed. Section 214. Validity of the Bonds. The validity of the authorization and issuance of the Bonds is not dependent on and-shall,not-be affected in any way by any proceedings taken.by the Agency or the Trustee. The recital contained in the Bonds that they are issued in accordance with the Constitution and laws of the State and the laws of the Agency shall be conclusive evidence of their validity and of compliance with the provisions of law in their issuance. Section 215. Issuance of Additional Bonds. If at any time the Agency determines it needs to do so, the Agency may provide for the issuance of, and sell, Additional Bonds in such principal amounts as it estimates will be needed. The issuance and sale of any Additional Bonds shall be subject to the following conditions precedent- (a) The Agency shall certify that it is and shall be in compliance with all covenants in this Indenture. (b) The Additional Bonds shall be on such terms and conditions as may be set forth in a supplemental resolution and indenture, which shall provide for (I) bonds substantially in accordance with this Indenture, (ii) the deposit of moneys into the Reserve Account in an amount (which may be represented by a Conforming Letter of Credit described in Section 402(c)) sufficient, together with the balance of the Reserve Account, to equal the Reserve Requirement on all Bonds expected to be outstanding including the Outstanding Bonds, and (iii) the disposition of surplus Pledged Tax Revenues to substantially the same manner as Section 402(d) hereof. ©) Receipt of a certificate or opinion of an Independent Financial Consultant showing: (I) For the current and each future Bond Year the debt service for each such Bond Year with respect to all Bonds and Additional Bonds reasonably expected to be outstanding following the issuance of the Additional Bonds; (ii) For the most recent Fiscal Year of collection, the Pledged Tax Revenues received by the Agency; (iii) That the Pledged Tax Revenues referred to in (ii) above are at least equal to 1.25 times Maximum Annual Debt Service on all Bonds, and Additional Bonds to be outstanding following the'issuance of the Additional Bonds (excluding debt service with respect to any portion of the Additional Bonds deposited in an escrowed proceeds account); and (d) The Additional Bonds shall mature on and interest shall be payable on the same dates as the Bonds, (except the first interest payment may be from the date of the Additional Bonds until the next succeeding September 1 or March 1; and (e) Additional Bonds may not have a variable interest rate. If all or a portion of the proceeds of the Additional Bonds or the Bonds are to be applied under Sections 33334.2 and 33334.6 of the Law, Pledged Tax Revenues for purposes of this Section 214 shall 21 include that portion of taxes allocated under Section 33670 of the Law for payment of the Bonds or the Additional Bonds which are applied for the purposes of Section 33334.2 and specifically pledged to the repayment of such Additional Bonds, to the maximum extent.permitted by the Law. Notwithstanding the foregoing, if the Agency is to compliance with all covenants set forth in this Indenture, the Agency may issue and sell obligations pursuant to the Law, having a lien on the Pledged Tax Revenues which is junior to the Bonds, (used herein "obligations" shall include, without limitation, bonds, notes, interim certificates, debenture or other obligations, loans, advances or other forms of indebtedness incurred by the Agency). Section 216. Bond Insurer to be Deemed Owner of Bonds and Other Riehts of Bond Insurer. (a) Notwithstanding any provision of this Indenture to the contrary, the Bond Insurer shall, at all times, be deemed the exclusive owner of all Bonds for the purpose of: (i) The execution and delivery of any amendment, supplement, change or modification of or to the Indenture of Trust; and despite Section 901, no further consent from any Bondowner shall be required; and, (ii) In accordance with the Municipal Bond Insurance Policy, all purposes of Article VII hereof, including the initiation or exercise of any action, direction, consent, waiver, right or remedy to be undertaken by the Trustee or by the Bond Owners under this Indenture of Trust. (b) The Bond Insurer shall be notified to advance of the execution of any Supplemental Indenture of Trust or any amendment, change or modification to this Indenture of Trust. Section 217. Book-Entry Bonds. (a) Original Delivery. The Bonds shall be initially delivered in the form of a separate single fully registered Bond (which may be typewritten) for each maturity of the Bonds. Upon initial delivery, the ownership of each such Bond shall be registered on the Bond register maintained by the Trustee pursuant to Section 211 hereof in the name of the Nominee. Except as provided in subsection ©), the ownership of all of the Outstanding Bonds shall be registered in the name of the Nominee on such Bond register. With respect to Bonds the ownership of which shall be registered in the name of the Nominee, the Agency and the Trustee shall have no responsibility or obligation to any Depository System Participant or to any person on behalf of which the Agency holds an interest to the Bonds. Without limiting the generality of the immediately preceding sentence, the Agency and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee or any Depository System Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Depository System Participant or any other person, other than a Bond Owner as shown in the registration books, of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository of the beneficial interests to the Bonds to be redeemed in the event the Agency elects to redeem the Bonds in part, (iv) the payment to any Depository System Participant or any other person, other than a Bond Owner as shown in the registration books, of any amount with respect to principal, premium, if any, or interest represented by the Bonds or (v) any consent given or other action taken by the Depository as Owner of the Bonds. The Agency and the Trustee may treat and consider the person in whose name each Bond is registered as the absolute owner of such Bond for the purpose of payment of principal, premium, if any, and interest represented by 22 such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers of ownership of such Bond, and for all other purposes whatsoever. The Trustee shall pay the principal, interest and premium, if any, represented by the Bonds only to the respective Owners or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge all obligations with respect to payment of principal, interest and premium, if any, represented by the Bonds to the extent of the sum or sums so paid. No person other than a Bond Owner shall receive a Bond evidencing the obligation of the Agency to make payments of principal, interest and premium, if any, pursuant to this Indenture. Upon delivery by the Depository to the Agency of written notice to the effect that the Depository has determined to substitute a new Nominee in its place, such new nominee shall become the Nominee hereunder for all purposes: and upon receipt of such a notice the Agency shall promptly deliver a copy of the same to the Trustee. (b) Representation Letter. In order to qualify the Bonds for the Depository's book-entry system, the Agency shall execute and deliver to such Depository a letter representing such matters as shall be necessary to so qualify the Bonds. The execution and delivery of such letter shall not in any way limit the provisions of subsection (a) above or in any other way impose upon the Agency or the Trustee any obligation whatsoever with respect to persons having interests in the Bonds other than the Bond Owners Upon the written acceptance by the Trustee, the Trustee shall agree to take all action reasonably necessary for all representations of the Agency in such letter with respect to the Trustee to at all times be complied with. In addition to the execution and delivery of such letter, the Agency may take any other actions, not inconsistent with this Indenture, to qualify the Bonds for the Depository's book-entry program °) Transfers Outside Book-Entry System. In the event that either (I) the Depository determines not to continue to act as Depository for the Bonds, or (ii) the Agency determines to terminate the Depository as such, then the Agency shall thereupon discontinue the book-entry system with such Depository. In such event, the Depository shall cooperate with the Agency and the Trustee in the issuance of replacement Bonds by providing the Trustee with a list showing the interests of the Depository System Participants in the Bonds, and by surrendering the Bonds, registered in the name of the Nominee, to the Trustee on or before the date such replacement Bonds are to be issued. The Depository, by accepting delivery of the Bonds, agrees to be bound by the provisions of this subsection °). If, prior to the termination of the Depository acting as such, the Agency fails to identify another Securities Depository to replace the Depository, then the Bonds shall no longer be required to be registered in the Registration Books in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging Bonds shall designate, in accordance with the provisions hereof In the event the Agency determines that it is in the best interests of the beneficial owners of the Bonds that they be able to obtain certificated Bonds, the Agency may notify the Depository System Participants of the availability of such certificated Bonds through the Depository. In such event, the Trustee will authenticate, transfer and exchange Bonds as required by the Depository and others in appropriate amounts; and whenever the Depository requests, the Trustee and the Agency shall cooperate with the Depository in taking appropriate action (y) to make available one or more separate certificates evidencing the Bonds to any Depository System Participant having Bonds credited to its account with the Depository, or (z) to arrange for another Securities Depository to maintain custody of a single certificate evidencing such Bonds, all at the Agency's expense. (d) Payments to the Nominee. Notwithstanding any other provision of this Indenture to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal, interest and premium, if any, represented by such Bond and all notices with respect to such 2 . Bond shall be made and given, respectively, as provided in the letter described in subsection (b) of this Section or as otherwise instructed by the Depository. Section 218. Optional Redemption. The Bonds maturing on or before September 1, 2011 are not subject to call and optional redemption prior to maturity. The Bonds maturing after September 1, 2011 may be called before maturity and redeemed at the option of the Agency, in whole or in part from the proceeds of refunding bonds or other source of available funds, on September 1, or on any date thereafter, prior to maturity, and by lot within any maturity in the manner determined by the Agency. The date on which Bonds are to be presented for redemption is sometimes referred to as the "redemption date." Bonds called for redemption shall be redeemed at the redemption prices (expressed as a percentage of the principal amount of Bonds to be redeemed) plus accrued interest to the redemption date as shown in the following table- Redemption Date Redemption Interest September 1, through August 31, 102.0% September 1, through August 31, 101.0% September 1, thereafter 100.0% Section 219. Term Bonds Sinking Fund Redemption. The Bonds maturing September 1 (the "Term Bonds") are subject to mandatory redemption on each March 1, commencing on September 1. , at a redemption price equal to the principal amount thereof together with accrued interest, from minimum sinking account payments made by the Agency in the years and amounts as follows: Year Amount Section 220. Call and Redemption: Notice of Redemption. The Agency may by resolution direct the call and redemption prior to maturity of Bonds by the Trustee pursuant to Section 219 hereof in such amounts as there are funds available for use in redemption and shall give notice to the Trustee of the redemption at least forty-five (45) days prior to the redemption date. Notice of redemption prior to maturity shall be given by first class mail, postage prepaid not less than thirty (30) nor more than sixty (60) days prior to the redemption date to the registered owner of each such Bond at the address shown on the registration books of the Trustee. Neither the failure to receive such notice nor any defect in any notice mailed shall affect the sufficiency of the proceedings for the redemption of any Bonds. The notice of redemption shall: (a) state the redemption date. (b) state the redemption price; (c) state the numbers of the Bonds to be redeemed; provided, however, that whenever any call for redemption includes all of the Outstanding Bonds, the numbers of the Bonds need not be stated; (d) state, as to any Bonds redeemed in•part only, the registered Bond numbers and the principal portion thereof to be redeemed; and (e) state that interest on the principal portion of the Bonds designated for redemption shall cease to accrue from and after the redemption date and that on the redemption date there shall become due and payable on each of such Bonds the redemption price for each Bond 24 The actual receipt by the Owner of any Bond or notice of redemption shall not be a condition precedent to redemption, and failure to receive notice shall not affect the validity of the proceedings for the redemption of the Bonds or the cessation of interest on the redemption date. Notice of redemption of Bonds shall be given by the Trustee on behalf of the Agency and at the expense of the Agency. A certificate by the Trustee that notice of redemption has been given in accordance with this Indenture shall be conclusive as against all parties, and no Bondowner whose Bond is called for redemption may object to the redemption or the cessation of interest on the redemption date by claiming or showing that it failed to receive actual notice of call and redemption, Section 221. Bonds Redemption Fund. The Trustee shall establish, maintain and hold in trust a separate fund which is hereby created for the purpose of this Indenture entitled "Community Redevelopment Agency of the City of Grand Terrace, Community Redevelopment Project Area Refunding Tax Allocation Bonds Redemption Fund Series 2004,(hereinafter referred to as the "Redemption Fund"). There shall be delivered to the Trustee immediately available funds and set aside in the respective Redemption Funds (or, as to sinking fund redemption pursuant to Section 220 hereof, in the Principal Account of the respective Special Fund) prior to mailing notice of optional redemption, moneys for the purpose of and sufficient to redeem, at the premiums, if any, payable as provided in this Indenture, the Bonds designated in the notice of redemption. The moneys must be set aside in the respective Redemption Funds (or the Principal Account, as the case may be) solely for that purpose and shall be applied on or after the redemption date to the payment (principal and premium, if any) of the Bonds to be redeemed,upon presentation and surrender of the Bonds. Section 222. Partial Redemption of Bonds. Upon surrender of any Bond redeemed in part only, the Agency shall execute and the Trustee shall authenticate and deliver to the registered owner, at the expense of the Agency, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bond surrendered and of the same interest rate and same maturity. Section 223. Effect of Redemption. Notice of redemption having been duly given as provided above, and moneys for payment of the principal of, premium, if any, and interest payable upon redemption of the Bonds being set aside as provided above. the Bonds, or parts thereof, called for redemption shall, on the redemption date, become due and payable at the redemption price specified in the notice. Interest on the Bonds, or parts thereof, as the case may be, called for redemption shall cease to accrue. The Bonds, or parts thereof redeemed, shall cease to be entitled to any lien, benefit or security under this Indenture, and the Owners of the Bonds shall have no rights except to receive payment of the redemption price upon surrender of the Bonds, and, in the case of partial redemption of Bonds, also to receive a new Bond or Bonds for the unredeemed balance as provided above. Section 224. Purchase of Bonds. In lieu of redemption or otherwise, the Agency is hereby authorized to purchase Bonds on the open market at any time and the Trustee will settle these purchases from moneys deposited by the Agency with the Trustee at a price not to exceed the principal amount of Bonds plus the applicable premium and accrued interest, if any, to the date of purchase plus brokerage fees, if any. 25 ARTICLE III REVENUES AND FUNDS Section 301 Source of Payment of Bonds. The Bonds and all payments required of the Agency hereunder are not general obligations of the Agency but are limited obligations as described in Section 202 hereof. The Pledged Tax Revenues and all moneys held in the Special Fund and the Redemption Fund are hereby conveyed, pledged and assigned absolutely and as a first lien pledge as security for the equal and ratable benefit of the holders of the Bonds and shall be used for no other purpose than payment of the principal of, premium (if any) and interest on the Bonds, except as may be otherwise expressly authorized in this Indenture. Section 302. Creation of Funds and Accounts. There is hereby created with the Treasurer special trust funds called the "Coirvnunit_y Redevelopment Agency of the City of Grand Terrace Convnunity Redevelopment Project Area Redevelopment Fund (hereinafter sometimes called the "Redevelopment Fund") and the "Community Redevelopment Agency of the City of Grand Terrace Community Redevelopment Project Bond Fund" (hereinafter sometimes called the "Bond Fund") There is hereby created with the Trustee a special trust fund called the "Community Redevelopment Agency of the City of Grand Terrace Community Redevelopment Project Area, Special Fund" with special trust accounts contained therein known as the "Interest Account", the "Principal Account", the "Reserve Account" and the "Surplus Account", and hereby established a special trust fund called the "Costs of Issuance Fund", and a special trust fund called the "Excess Investment Earnings Fund " So long as any of the Bonds, or any interest on them, remain unpaid, the Agency shall not have any beneficial right or interest in the Pledged Tax Revenues except as provided in this Indenture and the moneys in the foregoing funds and accounts shall be used for no purposes other than those required or permitted by this Indenture and the Law Each Fund and Account (other than the Bond Fund and the Redevelopment Fund) shall be maintained by the Trustee as a separate and distinct trust fund or account to be held, managed, invested, disbursed and administered as provided in this Indenture. All moneys deposited in the Funds and Accounts shall be used solely for the purposes set forth in this Indenture. The Trustee shall keep and maintain adequate records pertaining to each Fund and Account and all disbursements therefrom (other than the Bond Fund and the Redevelopment Fund as to which the Agency will keep such records). 26 Section 303. Sale of Bonds; Disposition of Bond Proceeds; Redevelopment Fund. The Agency may provide by resolution for the sale of the Bonds in the manner provided by the Law. Upon the delivery of the Bonds to the purchasers thereof, the Trustee, on behalf of the Agency, shall receive the proceeds from the sale of the Bonds, deposit such proceeds in the Special Fund and the Costs of Issuance Fund and dispose of the proceeds and moneys so deposited as follows: (1) Deposit in the Interest Account an amount equal to the accrued interest paid by the purchasers of the Bonds or $ (2) Deposit in the Reserve Account a sum sufficient to bring the balance in such account equal to the Reserve Requirement, such initial deposit S (3) Deposit in the Costs of.Issuance Fund an amount set forth in a Certificate of the Agency to pay Costs of Issuance; (4) Transfer to the Escrow Bank_for deposit in the Escrow Fund an amount as set forth in a Certificate of the Agency which when added to the other moneys on deposit therein will be sufficient together with interest thereon, to pay principal of, premium and interest on the 1993A Bonds and the 1993B Bonds and the Loan Agreement on or prior to 1, 2004 and to redeem on such date all of the Outstanding Bonds at the redemption price of 100% of the principal amount thereof together with accrued interest to the date of redemption. The Trustee may rely upon the Certificate of the Agency and is not responsible for such funds; (5) Transfer to the Agency for deposit with the Agency's Low and Moderate Income Housing Fund, the amount of S B. The moneys deposited in the Costs of Issuance Fund shall be applied by the Trustee to the payment of Costs of Issuance as directed by a Certificate of the Agency. Any moneys remaining in the Costs of Issuance Fund on March 1, 2005, shall be transferred by the Trustee to the Agency for deposit in the Redevelopment Fund. Thereafter, the Costs of Issuance Fund shall be closed and all further responsibility for payment of Costs of Issuance shall belong solely to the Agency Section 304. Final Balances. Upon the deposit with the Trustee of moneys sufficient to pay all principal of, premium, if any, and interest on the Bonds, and upon satisfaction of all claims against the Agency hereunder, including all fees, charges and expenses of the Trustee, and any Paving Agent fees which are properly due and payable hereunder, or upon the making of adequate provisions for the payment of such amounts as permitted hereby, all moneys remaining in all Funds and Accounts shall be paid to the Agency, except for any funds held in the Excess Investment Earnings Fund which must be paid to the United States government. Section 305. Security of Funds. All moneys deposited with the Trustee or with any agent of the Trustee appointed pursuant to Section 805 of this Indenture shall be held in trust and (except for moneys held by the Trustee, as Paying Agent, or remitted to any paying agent for the payment of the principal of, premium, if any, and interest on the Bonds) shall, while held by the Trustee, constitute part of the Trust Estate and shall be and remain entitled to the benefit and shall be subject to the security of this Indenture for the equal and proportionate benefit of the holders of all Outstanding Bonds. Section 306. Non-Presentment of Bonds. In the event any Bond shall not be presented for payment when the principal thereof becomes due, either at maturity or otherwise, or at the date fixed 27 for redemption thereof, if moneys sufficient to pay such Bond shall have been deposited in the Special Fund or Redemption Fund, or in the event any interest payment remains unclaimed and unpaid as applicable, all liability of the Agency to the holder thereof for the payment of such Bond or interest shall forthwith cease, terminate and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such moneys subject to the limitation set forth in Section 1001, without liability for interest thereon, for the benefit of the holder of such Bond who shall thereafter be restricted exclusively to such moneys, for any claim of whatever nature on his or her part under this Indenture or on, or with respect to, said Bond. 'Provided, in accordance with Section 1001, any funds held by the Trustee which remain unclaimed for a period of two (2) years following the date upon which such funds were scheduled to be paid shall be paid over to the Agency, and all liability of the Trustee with respect thereto shall cease. Section 307. Moneys to be Held in Trust. All moneys required to be deposited with or paid to the Trustee under any provisions of this Indenture shall be held by the Trustee in trust and applied for the purposes herein specified ARTICLE IV REVENUES AND APPLICATION Section 401. Pledged Tax Revenues. As provided in the Redevelopment Plan, pursuant to Article 6 of the Law and Section 16 of Article XVl of the Constitution of the State of California, taxes levied upon taxable property in the Redevelopment Proect Area each year by or for the benefit of the State of California, any city, county, city and county, district, or other public corporation (herein sometimes collectively called "taxing agencies") after the effective date of the Ordinance approving the Redevelopment Plan (being Ordinance No. 17 the City of Grand Terrace, which became effective on April 19, 1979, Ordinance No. 52 of the City of Grand Terrace which became effective July 15, 1981, and Ordinance No. 202 of the City of Grand Terrace which became effective on September 12, 2002, (except, as to area included in the Redevelopment Project Area by amendment, the taxes levied upon the taxable property in the area included by amendment after the effective date of the Ordinance No. 502 amending the area), shall be divided as follows. (a) That portion of the taxes which would be produced by the rate upon which the tax is levied each year by or for each of the taxing agencies upon the total sum of the assessed value of the taxable property in the Redevelopment Project Area as shown upon the assessment roll used in connection with the taxation of such property by such taxing agency last equalized prior to April 19, 1979 (being the effective date of Ordinance No. 17, referred to above), and July 15, 1981, (being effective the date of Ordinance No. 52 referred to above) shall be allocated to and when collected shall be paid into the funds of the respective taxing agencies as taxes by or for the taxing agencies on all other property; and (b) Except for that portion of the taxes in excess of the amount identified in (a) above which are attributable to a tax rate levied by a taxing agency for the purpose of producing revenues in an amount sufficient to make annual repayments of the principal of, and the interest on, any bonded indebtedness approved by the voters of the taxing agency on or after January 1, 1989 for the acquisition or improvement of real property, which portion shall be allocated to, and when collected shall be paid into, the fund of that taxing agency, that portion of the levied taxes each year in excess of such amounts shall be allocated to and when collected shall be paid to the Agency. This portion of the levied taxes and (to the extent permitted b), law) all payments, subventions and reimbursements, if any, to the Agency specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations are herein referred to as "Pledged Tax Revenues". 28 The foregoing provisions of this Section are a portion of the provisions of Article 6 of the Law as applied to the Bonds and shall be interpreted in accordance with Article 6, and the further provisions and definitions contained in Article 6 are incorporated by reference herein and shall apply. The Pledged Tax Revenues received by the Agency on or after the date of issue of the Bonds shall be deposited in the Bond Fund and promptly paid into the Special Fund held by the Trustee and are hereby irrevocably pledged to the payment of the principal of, premium, if any, and interest on the Bonds, and any Additional Bonds, and until all of the Bonds and all interest thereon, have been paid (or until moneys for that purpose have been irrevocably set aside), the Pledged Tax Revenues (subject to the exception set forth in Section 402(d)), shall be applied solely to the payment of the Bonds and any Additional Bonds plus premium, if any, and the interest thereon as provided in this Indenture. This allocation and pledge is for the exclusive benefit of the Owners of the Bonds and shall be irrevocable. Section 33645 of the Health and Safety Code provides, in applicable part as follows: "The resolution, trust indenture, or mortgage shall provide that tax increment funds allocated to an agency pursuant to Section 33670 shall not be payable to a trustee on account of any issued bonds when sufficient funds have been placed with the trustee to redeem all Outstanding Bonds of the issue." This Indenture is intended to comply with the above-quoted provision and shall be so construed. - Section 402 Special Fund. The Agency shall pay or cause to be paid to the Trustee for deposit in the Special Fund in accordance with this Section and Section 401 hereof all Pledged Tax Revenues in the amounts and within the times set forth herein. The interest on the Bonds until maturity shall be paid by the Trustee on behalf of the Agency from the Interest Account of the Special Fund. At the maturity of the Bonds, and after all interest then due on the Bonds then Outstanding has been paid or provided for, moneys remaining in the Special Fund shall be applied to the payment of the principal of any of such Bonds Without limiting the generality of the foregoing and for the purpose of assuring that the payments referred to above will be made as scheduled, the Pledged Tax Revenues accumulated in the Special Fund shall be used in the following priority; provided, however, to the extent that deposits have been made in any of the Accounts referred to below from the proceeds of the sale of the Bonds or otherwise, the deposits below need not be made: (a) Interest Account. Deposits shall be made into the Interest Account from funds deposited by the Agency in the Special Fund so that the balance in the Interest Account four (4) Business Days prior to the next Interest Payment Date shall be equal to 180 days' interest on the then Outstanding Bonds. Moneys in the Interest Account shall be used for the payment of interest on the Bonds as interest becomes due (b) Principal Account. Not later than four (4) Business Days before September 1 of each year commencing in 2005, the Trustee shall withdraw from the Special Fund and deposit in the Principal Account an amount which, when added to the amount deposited in the Principal Account from proceeds of any refunding bonds or notes on or prior to that date, will be equal to the principal becoming due and payable on the Outstanding Bonds on March I of each year. No deposit need be made into the Principal Account if the amount contained therein is at least equal to the principal to become due on the next succeeding September 1, upon all of the Bonds issued hereunder and then Outstanding. All moneys deposited in the Principal Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal on the Bonds as it shall become due and payable. 29 °) Reserve Account. After deposits have been made pursuant to subparagraphs (a) and (b) above, deposits shall be made to the Reserve Account, if necessary, in order to cause the amount on deposit therein to equal the Reserve Requirement. Moneys in the Reserve Account shall be transferred to the Interest Account to pay interest on the Bonds-, as it becomes due and then to the Principal Account to pay principal on the Bonds to the extent Pledged Tax Revenues are insufficient therefor. Upon the payment or redemption in full of the principal of and interest on all of the Outstanding Bonds or upon provision therefore pursuant to Article X, the Reserve Requirement shall be recalculated and any or all of the amounts in the Reserve Account in excess of the Reserve Requirement shall at the written direction of the Agency be applied towards such payment or withdrawn by the Trustee and transferred as hereinafter provided. Any portion of the Reserve Account which is in excess of the Reserve Requirement shall be transferred to the Interest Account on or before six (6) Business Days prior to each Interest Payment Date. Anything to the contrary herein notwithstanding, the Agency may at any time substitute an Alternate Reserve Account Security, and upon such substitution, the Agency shall be entitled to receive all moneys then held in the Reserve Account free and clear of the lien of the Indenture. In the event the Agency delivers an Alternate Reserve Account Security, the Trustee shall hold and apply such instrument pursuant to the Indenture so as to have moneys available thereunder for the purposes and at the tunes required under the Indenture. The Trustee shall deliver a demand for payment under the Alternate Reserve Account Security, not less than three days prior to the date upon which moneys are required under the Indenture. The Trustee shall apply all cash amounts in the Reserve Account to the purposes provided in the Indenture prior to making any demand for payment under the Alternate Reserve Account Security. The Trustee shall maintain adequate records as to the amount available to be drawn at any given time under the Alternate Reserve Account Security. In the event the Agency delivers an Alternate Reserve Account Security, the Trustee shall hold -and apply such instrument pursuant to the Indenture so as to have moneys required under the Indenture Section 403. Payments of Principal, Premium and Interest. The Trustee shall make available to the Paying Agent, if other than the Trustee, from the Revenues sufficient amounts to pay the principal of, premium, if any, and interest on, the Bonds as the same become due and payable, to the extent it holds such amount. Section 404. Revenues to be Held for All Bondowners: Certain Exceptions. The Revenues shall, until applied as provided in this Indenture, be held by the Trustee for the benefit of the holders of all Outstanding Bonds, except that any portion of the Revenues held pursuant to Section 306 hereof representing principal or redemption price of and interest on, any Bonds previously called for redemption in accordance with Section 220 of this Indenture or previously matured shall be held for the benefit of the holders of such Bonds only and shall not be deposited or invested pursuant to Article V hereof, notwithstanding any provision of Article t% 30 ARTICLE V INVESTMENT OF MONEYS Section 501. Excess Investment Earnings (a) The Agency, at the sole cost of the Agency, shall calculate Excess Investment Earnings in accordance with paragraph (b), and the Agency shall give written instruction to the Trustee to pay Excess Investment Earnings to the United States government in accordance with paragraph 0). The "term "Excess Investment Earnings" means an amount equal to the sum of. (I) The excess of: (A) the aggregate amount earned from the Delivery Date on all Nonpurpose Investment in which Gross Proceeds of the Bonds are invested (other than amounts attributable to an excess described in this subparagraph (I)), over (B) the amount that would have been earned if the yield on such Nonpurpose Investment (other than amounts attributable to an excess described in this subparagraph (I)) had been equal to the yield on the Bonds, plus (ii) any income attributable to the excess described in paragraph (I) (b) On or prior to the last day of the first Computation Year, the Agency, at the sole cost of Agency, shall calculate the Excess Investment Earnings referenced to subparagraph (I) of paragraph (a). The Agency shall transfer to and direct the Trustee to deposit the amount so calculated into the Excess Investment Earnings Fund. Thereafter, prior to the last day of each Computation Year and on the date of the retirement of the Bonds, the Agency shall calculate the amount of Excess Investment Earnings referenced in subparagraphs (1) and (ii) of paragraph (a) and direct corresponding transfers into the Excess Investment Earnings Fund. The calculations shall be made by a nationally recognized Bond Counsel or an Independent Public Financial Consultant or other qualified person or firm retained by the Agency in accordance with the following (I) Except as provided in (h), in determining the amount described in subparagraph (i)(A) of paragraph (a), the aggregate amount earned on Nonpurpose Investment shall include: (1) all income realized under federal income tax accounting principles (whether or not the person earning such income is subject to federal income tax) with respect to such Nonpurpose Investment and with respect to the reinvestment of investment receipts from such Nonpurpose 31 Investment (without regard to the transaction costs incurred in acquiring, carrying, selling or redeeming such Nonpurpose Investment), including, but not limited to, gain or loss realized on the disposition of such Nonpurpose Investment (without regard to when such gains are taken into account under Section 453 of the Code relating to the taxable year of inclusion of gross income), and income under Section 1272 of the Code (relating to original issue discount) and (2) any unrealized gain or loss as of the date of retirement of the Bonds if any Nonpurpose Investment is retained after such date; (ii) In determining the amount described in subparagraph (i) of paragraph (a), an obligation or security shall be treated as acquired for its fair market value at the time it becomes a Nonpurpose Investment, so that gain or loss on the disposition of such an obligation or security shall be computed with reference to such fair market value as its adjusted basis; (iii) In determining the amount described in subparagraph (i)(B) of paragraph (a), the yield on the Bonds shall be determined based on the actual _yield of the Bonds through maturity (with adjustments for discount or premium); and (iv) In determining the amount described in subparagraph (ii) of paragraph (a), all income attributable to the excess described in subparagraph (i) of paragraph (a) must be taken into account, whether or not that income exceeds the yield with respect to the Bonds, and no amount may be treated as "negative arbitrage " 9 Upon receipt of written direction of the Agency, the Trustee shall pay Excess Investment Earnings from the Excess Investment Earnings Fund to the United States government in installments with the first payment to be made not later than thirty (30) days after the end of the fifth Computation Year and with subsequent payments to be made not later than five (5) years after the preceding payment was due. The Agency shall assure that each installment is in an amount equal to at least 90 percent of the Excess Investment Earnings with respect to the Bonds as of the close of the Computation Year. Upon the written direction of the Agency, which direction shall be given before sixty (60) days after the retirement of the Bonds, the Trustee shall pay from the Excess Investment Earnings Fund, or the Agency shall pay directly, 100 percent of the theretofore unpaid Excess Investment Earnings of the Bonds. The Trustee or the Agency shall remit such payments to the United States eovernment at the address and in the manner directed by the Agency and prescribed by the Regulations as the same may be to effect from time to time, together with such reports and statements prepared by Agency as may be prescribed by such Regulations. If the Trustee follows the written, instructions as supplied by the Agency, it shall be deemed to have complied with this subsection and shall have no responsibility to calculate or verify Excess Investment Earnings or to take action in the absence of instructions from the Agency or to determine if a rebate report has been filed; (d) In order to assure that Excess Investment Earnings are paid to the United States rather than to a third party, investments by the Agency in certificates of deposit and in investment agreements shall be made only in accordance with the Regulations therefor as from time to time in effect. The Agency shall give the Trustee written instructions regarding such investments and the Trustee shall have no liability if it follows those instructions or if it fails to take any action in the absence of instructions, (e) The Agency shall keep and retain for a period of six (6) years following the retirement of the Bonds records of the determinations made pursuant to this Section. The Trustee shall keep a record of all investments made with moneys on deposit in any Fund or Account held by it hereunder and shall provide a report of such investments to the Agency at least quarterly. Such report shall 32 contain a reference to the date of purchase, the date of sale, the purchase price, the sales price, the principal amount and coupon rate of each obligation purchased or sold; and (f) Payments pursuant to this Section shall be made to the maximum extent possible from moneys on deposit in the Excess Investment Earnings Fund and, to the extent of any deficiency therein for such purpose, shall be made from the Special Fund. In the event of any remaining deficiency in available moneys for the purposes of such transfer, such deficiency shall be paid by the Agency from any available funds. Section 502. Investment of Moneys in Funds and Accounts. Moneys in the Bond Fund, Special Fund and the Accounts therein (other than the Reserve Account) and the Redemption Fund shall be invested and reinvested by the Agency (as to the Bond Fund) or the Trustee (as to the other Funds and Accounts) in Permitted Investments, provided that such investments mature by their terms prior to the date on which such moneys are required to be',paid out hereunder. Such investments shall be made in specific investments meeting the requirements of this Section as directed in writing by the Executive Director or Finance Director of the City (such written request to be received by 12:00 noon two (2) days prior to such investment) or, in the absence of such written direction, by the Trustee in Permitted Investments described in parts D of the definition thereof. Moneys in the Redevelopment Fund shall be invested by the Treasurer in any legal investments for Agency funds. Moneys in the Reserve Account shall be invested by the Trustee at the written direction of the Executive Director or Finance Director of the Agency solely in Permitted Investments which may be withdrawn without penalty at such time as such moneys will be needed. Moneys in the Excess Investment Earnings Fund shall be invested at the written direction of the Executive Director or Finance Director of the Agency in Government Obligations which mature before the date such amounts are required to be paid to the United States. The Trustee shall be protected from any liability in acting in accordance with this section or the Agency's direction, and shall not be liable for any loss suffered in connection with any investment made in accordance with this Section unless such loss results from its negligence. The Trustee may deem investments directed by the Agency as Permitted Investments without'independent investigation thereof. Obligations purchased as an investment of moneys in any Fund or Account held by the Trustee hereunder shall be deemed to be part of such Fund or Account. Any or all interest or gain received from such investments or moneys in the Special Fund and the Accounts therein shall be deposited by the Trustee in the Special Fund and respective Accounts therein and any loss incurred in connection with such investments shall be debited against the fund or account from which the investment was made. The Agency acknowledges that to the extent that regulations of the Comptroller of the Currency or applicable regulatory agency grant the Agency the right to receive brokerage confirmations of security transactions, the Agency waives receipt of such confirmations. The Trustee shall furnish to the Agency periodic statements which include detail of all investments transactions made by the Trustee. Section 503. Investments; Arbitrage; Special Arbitrage Restriction. The Trustee may make any and all investments permitted by the provisions of Section 501 hereof through its own bond department or that of its affiliates. As and when any amount invested pursuant to this Article may be needed for disbursement, the Trustee may cause a sufficient amount of such investments to be sold and reduced to cash to the credit of such funds. The Trustee agrees to comply with any written instruction delivered to it by the Agency relative to compliance with the requirements of Section 148 of the Code, and any lawful regulations proposed or promulgated thereunder. The Agency covenants with all purchasers and holders of the Bonds from time to time outstanding that so long as any of the Bonds remain outstanding, moneys on deposit with the Trustee under the Indenture, whether or not such moneys were derived from the proceeds of the sale of the Bonds or from any other source, will not be used in a manner which will cause the Bonds to be 33 "arbitrage bonds" within the meaning of Section 148 of the Code, and any lawful regulations proposed or promulgated thereunder, including Section 1.103-13, 1.103-13.5 and 1.103-15 of the Regulations, as the same exist on this date, or may from time to time hereafter be amended, supplemented or revised. The Agency reserves the right, however, for any investment of such moneys permitted by California law to be made, if, when and to the extent that said Section 148 or regulations promulgated thereunder shall be repealed or relaxed or shall be held void by final judgment of a court of competent jurisdiction,. but only if.any investment _made by_ virtue of such repeal, relaxation or decision would not, in the written opinion of Bond Counsel, result in making the interest on the Bonds subject to federal income taxation. 34 ARTICLE VI COVENANTS OF AGENCY PAYMENT; FURTHER ASSURANCES Section 601. Payment of Principal or Redemption Price of and Interest on Bonds. The Agency shall promptly pay or'cause the Trustee to pay the principal or redemption price of, and the interest on, every Bond issued hereunder according to the terms .thereof, but shall be required to make such payment or cause such payment to be made only out of Revenues. Section 602. Covenants of the Agency. As long as the Bonds are Outstanding and unpaid, the Agency shall (through its proper members, officers, agents or employees) faithfully perform and abide by all of the covenants, undertakings and provisions contained in this Indenture or in any Bond issued hereunder, including the following covenants and agreements for the benefit of the Bondowners which are necessary, convenient and desirable to secure the Bonds and will tend to make them more marketable; provided, however, that the Covenants do not require the Agency to expend any,funds other than the Pledged Tax Revenues: Covenant 1. Complete Redevelopment Project; Amendment to Redevelopment Plan. The Agency covenants and agrees that it will diligently carry out and continue to completion in a sound and economical manner, with all practicable dispatch, the Redevelopment Project in accordance with its "duty to do so under and in accordance with the Law and the Redevelopment Plan. The Redevelopment Plan may be amended as provided in the Law upon written approval of the Bond Insurer but no amendment shall be made unless it will.not substantially impair the security of the Bonds, or the rights of the Bondowners, as shown by an Opinion of Counsel, based upon a certificate or opinion of an Independent Financial Consultant appointed by the Agency. Covenant 2. Use of Proceeds, Manaeement and Operation of Properties. The Agency covenants and agrees that the proceeds of the sale of the Bonds will be deposited and used as provided in this Indenture and that it will manage and operate all properties owned by it comprising any part of the Project Area in a sound and businesslike manner consistent with the Redevelopment Plan. Covenant 3. No Priority. The Agency covenants and agrees that it will not encumber, pledge or place any charge or lien upon Pledged Tax Revenues prior to or superior to the lien of the Bonds and interest thereon. Except as permitted by Section 215 hereof, it will not issue any obligations, payable as to principal or interest, from the Pledged Tax Revenues which have any lien upon the Pledged Tax Revenues on a parity with the Bonds authorized herein. Notwithstanding the foregoing, nothing in this Indenture shall prevent the Agency: (i) from issuing and selling pursuant to law, refunding obligations payable from and having any lawful lien upon the Pledged Tax Revenues, if such refunding obligations are issued for the purpose of, and are sufficient for the purpose of, refunding all of the Outstanding Bonds or Additional Bonds in accordance with the provisions of Section 215 hereof; (ii) from issuing and selling obligations which have, or purport to have, any lien upon the Pledged Tax Revenues which is junior to the Bonds, or (iii) from issuing and selling bonds or other obligations which are payable in whole or in part from sources other than the Pledged Tax Revenues. As used herein "obligations" shall include, without limitation, bonds, notes, interim certificates, 35 debentures or other obligations, loans, advances, or other forms of indebtedness incurred by the Agency. Covenant 4. Punctual Payment. The Agency covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and interest on each of the Bonds, on the date, at the place and in the manner provided in the Bonds. Covenant 5. Payment of Taxes and Other Charges. The Agency covenants and agrees that it will from time to time pay and discharge, or cause to be paid and discharged, all taxes and payments in lieu of taxes, service charges, assessments or other governmental charges which may lawfully be imposed upon the Agency or any of the properties then owned by it in the Project Area, or upon the revenues and income therefrom, and will pay all lawful claims for labor, materials and supplies which if unpaid might become a lien or charge upon any of the properties, revenues or income or which might impair the security of the Bonds, or the use of Pledged Tax Revenues or other legally available funds to pay the principal of and interest on the Bonds, all to the end that the priority and security of the Bonds, shall be preserved; provided, however, that nothing in this Covenant shall require the Agency to make any such payment so long as the Agency in good faith shall contest the validity of the payment. Covenant 6. Books and Accounts; Financial Statements. The Agency covenants and agrees that it will at all times keep, or cause to be kept, proper and current books and accounts (separate from all other records and accounts) in which complete and accurate entries shall be made of all transactions relating to the Redevelopment Project and the Pledged Tax Revenues and other funds relating to the Redevelopment Project. The Agency will prepare within one hundred eighty (180) days after the close of each of its Fiscal Years a complete financial statement or statements for the year, in reasonable detail covering the Pledged Tax Revenues and other funds, accompanied by an opinion of an Independent Certified Public Accountant appointed by the Agency, and will furnish a copy of the statement or statements to the Trustee, the Bond Insurer and any rating agency which maintains a rating on the Bonds and, upon written request, to any Bondowner. The Trustee shall have no duty to review the Agency's financial statements. Covenant 7. Eminent Domain Proceedings. The Agency covenants and agrees that if all or any part of the Project Area should be taken, by eminent domain proceedings or other proceedings authorized by law, for any public or other use under which the property will be tax exempt, it shall take all steps necessary to adjust accordingly the base year valuation of the Project Area. Covenant 8. Disposition of Property. The Agency covenants and agrees that it will not dispose of more than ten percent (10%) of the land area in the Project Area (except property shown in the Redevelopment Plan in effect on the date this Indenture is adopted as planned for public use, or property to be used for public streets, public off-street parking, sewage facilities, parks, easements or right-of-way for public utilities, or other similar uses) to public bodies or other persons or entities whose property is tax exempt, unless such disposition will not result in the security of the Bonds or the rights of Bondowners being substantially impaired, as shown by an Opinion of Counsel, based upon the certificate or opinion of an Independent Financial Consultant appointed by the Agency. Covenant 9. Protection of Security and Rights of Bondowners. The Agency covenants and agrees to preserve and protect the security of the Bonds, and the rights of the Bondowners and to contest by court action or otherwise: (a) the assertion by any officer of any government unit or any other person whatsoever against the Agency that: (i) the Law is unconstitutional or (ii) that the Pledged Tax Revenues pledged hereunder cannot be paid to the Agency for the debt service on the Bonds; or (b) any other action affecting the validity of the Bonds, or diluting the security therefor. The Agency 36 covenants and agrees to take no action which, in the Opinion of Counsel would result in: (a) the Pledged Tax Revenues being withheld unless the withholding is being contested in good faith; and (b) the interest received by the Bondowners becoming includable in gross income under federal income tax laws. Covenant 10._ Federal Tax Covenants. The Agency covenants and agrees to contest by court action or otherwise any assertion by the United States of America or any department or agency thereof that the interest received by the Bondowners is includable in gross income of the recipient under federal income tax laws on the date of issuance of the Bonds. In order to preserve the exclusion from gross income of interest on the Bonds, the Additional Bonds, and for no other reason, the Agency covenants to comply with all applicable requirements of the Internal Revenue Code of 1986, as amended (the "Code"), together with any amendments thereto or regulations promulgated thereunder necessary to preserve such tax exemption and specifically covenants, without limiting the generality of the foregoing, that: (a) It will make no use of the proceeds of the Bonds at any time during the term thereof which, if such use had been reasonably expected at the date the Bonds are issued, would have caused such Bonds to be "arbitrage bonds" within the meaning of Section 148 or "private activity bonds" within the meaning of Section 141 of the United States Internal Revenue Code of 1986, as amended, and the Regulations; (b) It will ensure that the payment of principal of and interest on the Bonds shall not be directly or indirectly guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof) and no portion of the moneys contained in any of the Funds or Accounts created herein shall be (i) used in making loans guaranteed by the United States (or any agency or instrumentality thereof); (ii) invested directly or indirectly in deposits or accounts insured by the Federal Deposit Insurance Corporation, National Credit Union Administration or any other similar federally chartered corporation; and (iii) otherwise invested directly or indirectly in obligations guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof); except (1) during the initial period following issuance of the Bonds and ending on the final expenditure of the Bond proceeds; (2) for amounts held in the Reserve Account, or other reserve funds satisfying Section 148(d) of the Code; (3) for amounts held in the Special Fund and other bona fide debt service funds; (4) for investments in obligations issued by the United States Treasury; (5) for investments in obligations guaranteed by the Federal National Mortgage Association, Government National Mortgage Association or Federal Home Loan Mortgage Corporation, or (6) for investments permitted under regulations issued pursuant to Section 149(b)(3)(B) of the Code; °) (i) it shall keep a detailed accounting of all transactions contemplated under this Indenture or in any way relating to the receipt or disbursement of any of the Gross Proceeds of the Bonds for a period of six years after the later of the date of payment of all Excess Investment Earnings to the United States or the date the Agency disburses the last of the Gross Proceeds of the Bonds; (ii) except for the investment of moneys in tax-exempt bonds or Gross Proceeds invested during an applicable temporary period permitted under the Treasury Regulations or amounts invested in a reasonably required reserve or replacement fund (subject to the limitations of Section 148(d)2 of the Code), it will not allow Gross Proceeds of the Bonds to be invested at any time in Nonpurpose Investment with a yield in excess of the yield on the Bonds plus 1/8 of one percent; (iii) it will neither invest Gross Proceeds nor cause Gross Proceeds to be invested in Nonpurpose Investments if the yield on such Nonpurpose Investments would be less than the yield that would have resulted in an arm's-length transaction; and (iv) it will not sell or otherwise dispose of or cause to be sold or otherwise 37 disposed of Nonpurpose Investment, if such sale or disposition would result in a smaller profit or larger loss than would have resulted from a sale at fair market value arrived at in an arm's- length transaction; (d) Notwithstanding the foregoing provisions regarding restrictions on investment of moneys under this Indenture, an amount not exceeding the lesser of five percent (5%) of - Bond proceeds or $100,000 may be invested at a yield in excess of the yield on the Bonds plus 1/8 of one percent; and (e) It is the purpose of this covenant and Section 502 hereof to preserve the exclusion of the interest paid on the Bonds from gross income for the purposes of the federal tax laws. Anything to the contrary in this Indenture notwithstanding, if at any time the Agency determines, based on the opinion of Harper & Burns LLP, a limited liability partnership including a Professional Corporation, or other bond counsel experienced in the field of tax exempt financing, that a different manner or method of compliance with this covenant than that provided in Section 502 hereof will not cause interest on the Bonds to be included in gross income for purposes of the federal tax laws under Section 103 of the Code, the Agency may utilize such different manner or method at its election. Covenant 11. Taxation of Leased Property. Whenever any property in the Project Area has been redeveloped and thereafter is leased by the Agency to any person or persons (other than a public agency), or whenever the Agency leases real property in the Project Area to any person or persons (other than a public agency) for redevelopment, the property shall be assessed and taxed'in the same manner as privately owned property, as required by Section 33673 of the Law, and the lease or contract shall provide:, (a) that the lessee shall pay taxes upon the assessed value of the entire property and not merely upon the assessed value of his or its.leasehold interest; and (b) that if for any reason the taxes levied on the property in any year during the term of the lease or contract are less than the taxes which would have been levied if the entire property,had been assessed and taxed in the same manner as privately owned property, the lessee shall pay such difference to the Agency within thirty (30) days after the taxes for the year become payable to the taxing agencies and in no event later than the delinquency date of such taxes established by law. All such payments shall be treated as Pledged Tax Revenues, and when received by the Agency shall be used as provided herein. Covenant 12. Single Sum Payments.in Lieu of Taxes. As an alternative to payment to the Agency pursuant to subsection (b) of Covenant 11, the new owner or owners of property becoming exempt from taxation may elect to make payment to the Agency in a single sum equal to the amount estimated by an Independent Financial Consultant to be receivable by the Agency from taxes on said property from the date of said payment to the maturity date of the Bonds, less a reasonable discount value. All such single sum payments in lieu of taxes shall be treated as Pledged Tax Revenues and shall be transferred to the Trustee for deposit in the Special Fund. Covenant 13. Tax Revenues. The Agency shall comply with all requirements of the Law to insure the allocation and payment to it of the Pledged Tax Revenues including, without limitation, the timely filing of any necessary statements of indebtedness with appropriate officials of Riverside County. The Agency further covenants and agrees that, except for the Pass-Through Agreements, it has not entered into any agreements with other taxing entities as of the date of this Indenture for the pass-through of any Pledged Tax Revenues to such entities and will not hereafter enter into any such agreement which requires payment to such taxing entities prior to deposit of Pledged Tax Revenues in the Special Fund. The Agency has not and will not incur any loans, obligations or indebtedness repayable from Pledged Tax Revenues, or receive Pledged Tax.Revenues in any other manner, such that the total aggregate debt service on said loans, obligations or indebtedness incurred 38 from and after the date of adoption of the Redevelopment Plan and aggregate receipt of Pledged Tax Revenues, when added to the total aggregate debt service on the Bonds, will exceed the maximum amount of Pledged Tax Revenues to be divided and allocated to the Agency pursuant to the Redevelopment Plan. Covenant 14. Limitation on Indebtedness. The Agency covenants and agrees that is has not and will not incur any loans, obligations or indebtedness repayable from Pledged Tax Revenues such that the total aggregate debt service on said loans, obligations or indebtedness incurred from and after the date of adoption of the Redevelopment Plan, when added to the total aggregate debt service on the Bonds and any Additional Bonds, will exceed the maximum amount of Pledged Tax Revenues to be divided and allocated to the Agency pursuant to the Redevelopment Plan. The Agency shall file annually with the Trustee on or prior to August 1 of each year a Written Certificate of the Agency certifying that Pledged Tax Revenues received by the Agency through the date of the certificate, combined with the amount remaining to be paid on all outstanding obligations of the Agency will not exceed the Redevelopment Plan limit. To the extent it does, all Pledged Tax Revenues will be applied to the payment of such outstanding obligations. Section 603. Compliance with Indenture, Contracts, Laws and Regulations. The Agency shall faithfully observe and perform all the covenants, conditions and requirements of this Indenture, shall not issue any Bonds in any manner other than in accordance with this Indenture, and shall not exercise its discretion in any way that might materially weaken, diminish or impair the security intended to be given pursuant to this Indenture. Subject to the limitations and consistent with the covenants, conditions and requirements contained in this Indenture, the Agency shall comply with the terms, covenants and provisions, express or implied, of all contracts concerning or affecting the application of proceeds of the Bonds or the Revenues. The Agency shall comply promptly, fully and faithfully with and abide by any statute, law, ordinance, order, rule or regulation, judgment, decree, direction or i equirement now in force or hereafter enacted, adopted, prescribed, imposed or entered by any competent governmental authority or agency applicable to or affecting the Redevelopment Project. Section 604. Amendment to Redevelopment Plan. The Agency hereby covenants that the Redevelopment Plan shall not be amended without prior written consent of the Bond Insurer. Section 605. Continuing Disclosure. The Agency will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of this Indenture, failure of the Agency to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default; however, any holder or beneficial owner of the Bonds, may take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. 39 ARTICLE VII DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE Section 701. Defaults A. Events of Default. Each of the following shall constitute an Event of Default: . (1) If, on the date which is three (3) Business Days prior to any Interest Payment Date, the amount of moneys on deposit in the Special Fund and the Accounts therein or the Redemption Fund are insufficient to pay in full the principal of, interest or redemption premium (if any) on the Bonds, coming due and payable on such Interest Payment Date, whether at maturity as therein expressed, by acceleration or otherwise; or if default shall be made in the payment of principal, premium, if any, or interest on any Bond when due; (2) Default made by the Agency in the observance of any of the covenants, agreements or conditions contained in this Indenture, where the default continues for a period of thirty (30) days following written notice to the Agency; or (3) The Agency shall file a petition seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law of the United States of America or the State, or if a court of competent jurisdiction shall approve a petition, filed with or without the consent of the Agency, seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or the State, or if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Agency or of the whole or any substantial part of its property. If an Event of Default has occurred as defined under subsection (1) or (3) of this Section and is continuing, then and in each and every such case during the continuance of such Event of Default, unless the principal of the Bonds, shall have already become due and payable, the Trustee shall declare the principal of the Bonds, together with the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Bonds, to the contrary notwithstanding. Immediately upon becoming aware of the occurrence of an Event of Default, the Trustee shall give notice of such Event of Default to the Agency by telephone confirmed in writing. Such notice shall also state whether the principal of the Bonds, shall have been declared to be or have immediately become due and payable. The Trustee shall also give such notice to the Owners of the Bonds, specifically including the Bond Insurer by first class mail, postage prepaid, which shall include the statement that interest on the Bonds shall cease to accrue from and after the date of acceleration specified in such notice. These provisions, however, are subject to the condition that if, at any time after the principal of the Bonds shall have been so declared due and payable because of an Event of Default under subsection (1) of this Section, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Agency shall deposit with the Trustee a sum sufficient to pay all principal on matured prior to such declaration and all matured installments of interest (if any) upon all the Bonds, with interest at the rate of twelve percent (12%) per annum on such overdue installments of principal and the reasonable fees and expenses of the Trustee (including attorney fees and expenses), and any and all other defaults known to the Trustee (other than in the payment of 40 principal of and interest on the Bonds, due and payable solely by reason of such declaration) shall have been made good or cured or provision shall have been made therefor, then, and in every such case, the Owners of at least a majority in aggregate principal amount of the Bonds, then Outstanding, with written notice to the Agency and the Trustee, may, on behalf of the Owners of all of the Bonds, rescind and annul such declaration and its consequences. However, no such rescission and annulment shall _ extend to--or- shall affect any subsequent default, or shall impair or exhaust any right or power consequent thereon. ' B. Certain Remedies of Bondowners. The Bond Insurer, acting on its own, shall have the right to direct all remedies upon an Event of Default. Upon written request of the Bond Insurer in each Event of Default described A(2) above, and with respect to Events of Default described in A (1) and A (3), the Trustee (upon payment of its fees and expenses (including attorneys' fees) and receipt of indemnification satisfactory to it to so act), shall have the right, for the equal benefit and protection of all Bondowners similarly situated: (1) By mandamus, suit, action or proceeding, to compel the Agency and its members, officers, agents or employees to perform each and every term, provision and covenant contained in this Indenture and in the Bonds, and to require the carrying out of any or all covenants and agreements of the Agency and the fulfillment of all duties imposed upon it by the Law; (2) By suit, action or proceeding in equity, to enjoin any acts or things which are unlawful, or the violation of any of the Bondowners' rights; or (3) Upon the happening of any event of default (as defined in this Section), by suit, action or proceeding in any court of competent jurisdiction, to require the Agency and its members and employees to account as if it and they were the trustees of an express trust. Provided, however, that with respect to any default described in Section 701(A)(2) that relates to payment of Trustee fees or expenses or indemnification, the Trustee may take action permitted hereunder without obtaining a written request of the Bond Insurer. C. - Non-Waiver. Nothing in this Section or in any other provisions of this Indenture, or in the Bonds, shall affect or impair the obligation of the Agency, which is absolute and unconditional, to pay the principal of and interest on the Bonds to the respective Owners of the Bonds at the date of maturity, as herein provided, or affect or impair the right, which is also absolute and unconditional, of the Owners to institute suit to enforce the payment by virtue of the contract embodied in the Bonds. No remedy conferred upon any Bondowner or Trustee by the Indenture is intended to be exclusive of any other remedy, but each remedy is cumulative and in addition to every other remedy and may be exercised without exhausting and without regard to any other remedy conferred by the Law or any other law of the State of California. No waiver of any default or breach of any duty or contract by any Bondowner or Trustee shall affect any subsequent default or breach of any duty or contract or shall impair any rights or remedies on the subsequent default or breach. No delay or omission of any Bondowner or Trustee to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed as a waiver of any default or acquiescence therein. Every substantive right and every remedy conferred upon the Bondowners or Trustee may be enforced and exercised as often as may be deemed expedient. In case any suit, action or proceeding to enforce any right, or exercise any remedy, shall be brought and should said suit, action or proceeding be 41 abandoned, or be determined adversely to the Bondowners or Trustee, then, and in every such case, the Agency or Trustee and the Bondowners shall be restored to their former positions, rights and remedies as if the suit, action or proceeding had not been brought or taken. D. Actions by Trustee as Attorney-in-Fact. Any suit, action or proceeding which any Bondowner of Bonds shall have the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal benefit and protection of all Owners of Bonds similarly situated and the Trustee is hereby appointed (and the successive respective registered owners of the Bonds issued hereunder, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney-in-fact of the respective registered owners of the Bonds for the purpose of bringing any suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the respective registered owners of the Bonds as a class or classes, as may be necessary or advisable in the opinion of the Trustee as attorney-in-fact; provided, however, the Trustee shall not be required to act hereunder pursuant to this subsection D unless and until it shall receive payment of its fees and expenses (including attorneys fees) and indemnification satisfactory to it against any liability it may incur. E. General. After the issuance and delivery of the Bonds, this Indenture, and any supplemental resolutions hereto, shall be irrepealable, but shall be subject to modification or amendment to the extent and in the manner provided in this Indenture, but to no greater extent and in no other manner. Section 702. Application of Funds Upon Acceleration. All of the amounts in the Special Fund and the Accounts therein upon the date of the declaration of acceleration as provided in Section 701, and all sums thereafter received by the Trustee hereunder, shall be applied by the Trustee after deducting (1) its own fees and expenses (including fees and expenses of its attorneys) in declaring such Event of Default and in collecting such sums, and all outstanding fees and expenses of the Trustee, '(2) the costs and expenses of the Bondowners, including reasonable compensation to its or their agents, attorneys and counsel, upon presentation of the Bonds (and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid) to the payment of the whole amount then owing and unpaid on the Bonds on the date on which amounts are applied to pay principal of the Outstanding Bonds, together with interest on the overdue principal and overdue installments of interest at the rate of twelve percent (12%) per annum (to the extent permitted by law and to the extent that such interest on overdue installments of principal and interest shall have been collected) and, in case such moneys will be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest. 42 ARTICLE VIII THE TRUSTEE AND THE PAYING AGENT Section 801. Appointment, Duties, Immunities and Liabilities of Trustee. (a) The Agency hereby appoints U.S. Bank National Association as Trustee and principal Paying Agent and authorizes the Trustee to designate in writing a corporate trust office of the Trustee as the principal place of payment for the Bonds, such appointment and designation to remain in effect until notice of change is filed with the Trustee. The Trustee shall, prior to an Event of Default, and after the curing of all Events of Default which may have occurred, perform such duties and only such duties as are specifically set forth in this Indenture. The Trustee shall, during the existence of any Event of Default (which has not been cured), exercise such of the rights and powers vested in it by this Indenture 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 his/her own affairs. All references to the Trustee in this Article VIII include references to the Trustee when it is acting as Paying Agent and bond registrar. (b) The Agency may remove the Trustee at any time unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee if at any time requested to do so by an instrument or concurrent instruments in writing signed by the Bondowners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or if at any time the Trustee shall cease to be eligible in accordance with subsection (e) of this Section, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; in each case by giving written notice of such removal to the Trustee and the Bond Insurer, and thereupon shall appoint a successor Trustee by an instrument in writing. ©) The Trustee may at any time resign by giving written notice of such resignation to the Agency and the Bondowners, by first class mail. Upon receiving such notice of resignation, the Agency shall promptly appoint a successor Trustee by an instrument in writing. (d) Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. Promptly upon such acceptance, the Agency shall notify the Bondowners in writing. If no successor Trustee shall have been appointed and have accepted appointment within 45 days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Bondowner (on behalf of himself and all other Bondowners) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under this Indenture shall signify its acceptance of such appointment by executing and delivering to the Agency and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless at the request of the Agency or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under this Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Upon request of the successor Trustee, the Agency shall execute and deliver any and all instruments as may be 43 reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. The Trustee's rights to indemnification hereunder and to payment of its fees and expenses shall survive its resignation or removal and the final payment or defeasance of the Bonds. (e) Any Trustee appointed under the provisions of this Section in succession to the Trustee shall be a trust company, association or commercial bank having trust powers and having a corporate trust office located within or without the State, having a combined capital and surplus of at least fifty million dollars ($50,000,000), and subject to supervision or examination by federal or state authority. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this Section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this subsection (e), the Trustee shall resign immediately in the manner and with the effect specified in this Section. (f) Any company or association into which the Trustee may be merged or converted or with which it may be consolidated or any company or association resulting from any merger, conversion or consolidation to which it shall be a party or any company or association to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such company or association shall be eligible under subsection (e) of this Section, shall be the successor to such Trustee without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. (g) The permissive right of the Trustee to do things enumerated or contemplated by this Indenture shall not be construed as a duty and the Trustee shall not be liable in the performance of its obligations hereunder except for its negligence or willful misconduct. (h) The Trustee shall not be required to take notice or be deemed to have notice of any event of default hereunder except failure by the Agency to cause to be made any of the payments to the Bondowners required to be made by Article IV or X hereof, unless the Trustee shall be specifically notified in writing of such event of default by the Agency, by the Registered Owners of at least twenty- five percent (25%) in aggregate principal amount of all Bonds then Outstanding. (i) The Trustee shall not be required to give any bond or surety in respect of the execution of its trusts and powers hereunder. 0) Except for the actions required to be taken by the Trustee pursuant to Section 701(A) hereof, upon an Event of Default, to declare the principal of the Bonds immediately due and payable and to give notice of an Event of Default before taking any action under Article VII hereof or this Section at the request of the Bondowners, or Bond Insurer, the Trustee may require that indemnity satisfactory to the Trustee be furnished'by the Bondowners or Bond Insurer for the payment of its fees and reimbursement of all expenses to which it may be put, including reasonable attorneys fees, and to protect it against all liability, except liability which is adjudicated to have resulted from its negligence or willful misconduct in connection with any action so taken. (k) All moneys received by the Trustee or any Paying Agent shall, until used or applied or invested as herein provided, be held in trust for the purposes for which they were received and shall not be commingled with the general funds of the Trustee or any Paying Agent, but need not be segregated from other funds except to the extent required by law. (1) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: 44 i (1) This subsection shall not be construed to limit the effect of subsection (a) of this Section; (2) The Trustee shall not be liable hereunder for any error of judgment made in good faith-by an officer of-the—T-rustee, unless it-shall-be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the owners of a majority in aggregate principal amount of the Bonds Outstanding or Bond Insurer relating to the time, method and place of conducting any proceeding or any remedy available to the Trustee, or the exercise of any trust or power conferred upon the Trustee, under this Indenture; and (4) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (m) The Agency agrees to pay the reasonable fees and costs and expenses of the Trustee, including its reasonable attorneys' fees, pursuant to this Indenture, as set forth in the fee schedule delivered to the Agency from time to time. The Trustee shall have a first lien upon the Trust Estate to secure the payment of-all sums due to the Trustee Section 802. Liability of Trustee. The recitals, statements and representations by the Agency contained in this Indenture or in the Bonds and in any other document or disclosure in 'connection with the sale of the Bonds shall be taken and construed as made by and on the part of the Agency, and not the Trustee, and the Trustee does not assume, and shall not have, any responsibility or obligations for the correctness of any thereof. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee undertakes to perform such duties, and only such duties as are specifically set forth in this Indenture and no implied duties or obligations shall be read into this Indenture against the Trustee. No provision in this Indenture shall require the Trustee to risk or expend its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not assured to it. In accepting the trust hereby created, the Trustee acts solely as Trustee for the Bondowners and not in its individual capacity and all persons including, without limitation, the Bondowners and the City or the Agency, having any claim against the Trustee arising from this Indenture shall look only to the funds and accounts held by the Trustee hereunder for payment except as otherwise provided herein. Under no circumstances shall the Trustee be liable in its individual capacity for the obligations evidenced by the Bonds. The Trustee shall not be deemed to have knowledge of any Event of Default hereunder unless and until it shall have actual knowledge thereof. 45 The Trustee shall not be accountable for the sufficiency of the security for the Bonds the use or application by the Agency or any other party of any funds which the Trustee has released under this Indenture. The Agency covenants to indemnify the Trustee and to hold it harmless against any loss, liability, expenses or advances, including, but not limited to fees and expenses of counsel and other experts, incurred or made without negligence or willful misconduct on the part of the Trustee: (i) in the exercise and performance of any of the powers and duties hereunder by the Trustee; (ii) relating to or arising out of the Redevelopment Project, or the conditions, occupancy, use, possession, conduct or management of, or work done in or about, or from the planning, design, acquisition, installation or construction of the Redevelopment Project or any part thereof; or (iii) arising out of material fact or omission or alleged omission to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading in any official statement or other offering circular utilized in connection with the sale of the Bonds, including the costs and expenses of defending itself against any claim of liability arising under this Indenture. The Trustee may become the owner of Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Bondowners, whether or not such committee shall represent the Bondowners of a majority in principal amount of the Bonds then Outstanding. Section 803. Right of Trustee to Rely on Documents. The Trustee shall be protected hereunder in acting upon any notice, resolution, request, consent, order, certificate, report, opinion, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties, including, without limitation, all funding and disbursement requisitions and notices. The Trustee was not responsible for the drafting of said documents and shall not have any responsibility or liability for the accuracy of the Official Statement. The Trustee may consult with counsel, who may be counsel of or to the Agency, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. The Trustee may employ attorneys, agents or receivers in the performance of any of its duties hereunder and shall not be answerable for the misconduct of such attorney, agent or receiver selected by it with reasonable care. The Trustee shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. Whenever in the administration of the trusts imposed upon it by this Indenture, the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate of the Agency, and such certificate shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of this Indenture in reliance upon such certificate, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. Section 804. Intervention by Trustee. In any judicial proceedings to which the Agency is a party and which in the opinion of the Trustee and its counsel has a substantial bearing on the interest of owners of the Bonds, the Trustee may in its discretion intervene on behalf of Bondowners and, upon being indemnified to its satisfaction, (as provided in Section 801 0) hereof), shall do so if 46 requested in writing by the owners of a majority in aggregate principal amount of all Bonds then Outstanding. Section 805. Designation and Successor of Paying Agent; Agreement with Paying Agent. The Trustee shall be a Paying Agent for the Bonds. Any Paying Agent appointed under the provisions-of-this Section shall be a commercial bank, national-association or trust company eligible to act as Trustee hereunder. The Trustee may remove or replace any Paying Agent by written instrument, which removal or replacement shall not require any consents or approvals. The Trustee shall notify all Bondowners by mail of and upon appointment, removal or replacement of the Paying Agent, such notice to include the name and address of the then appointed Paying Agent, if any. Any commercial bank, or association or trust company with or into which any Paying Agent may be merged or consolidated, or to which the assets and business of such Paying Agent may be sold, shall be deemed the successor of such Paying Agent for the purposes of this Indenture. If the position of Paying Agent shall become vacant for any reason, the Agency may appoint a bank or trust company as such Paying Agent to fill such vacancy. The Paying Agent shall enjoy the same protective provisions in the performance of its duties hereunder as are specified in Sections 801, 802, 803 and 804 hereof with respect to the Trustee insofar as such provisions may be applicable. ARTICLE IX SUPPLEMENTAL INDENTURES Section 901. Amendments: Supplemental Indentures. This Indenture, and the rights and obligations of the Agency and of the Owners of the Bonds issued hereunder, may be modified or 47 amended at any time by Supplemental Indenture adopted by the Agency: (a) without the consent of Bbndowners, if the modification or amendment is for the purpose of adding covenants and agreements further to secure Bond payment, to prescribe further limitations and restrictions on Bond issuance, to surrender rights or privileges of the Agency, to make modifications not affecting any Outstanding series of Bonds only with the consent of the Trustee, for the purpose of curing any ambiguities, defects or inconsistent provisions in this Indenture or to insert such provisions clarifying matters or questions arising under this Indenture as are necessary and desirable to accomplish the same, provided that the modifications or amendments do not adversely affect the rights of the Owners of any Outstanding Bonds; or (b) for any purpose with the consent of the Bondowners holding not less than sixty percent (60%) in aggregate principal amount of the Outstanding Bonds, exclusive of Bonds, if any, owned on the bond register by the Agency or the City, and obtained as hereinafter set forth; provided, however, that no modification or amendment shall, without the express consent of the Bondowner or registered owner of the Bond affected, reduce the principal amount of any Bond, reduce the interest rate payable on it, extend its maturity or the times for paying interest, change the monetary medium in which principal and interest is payable, or create a mortgage pledge or lien upon the revenues superior to or on a parity (except as provided in Section 215) with the pledge and lien created for the Bonds and any Additional Bonds or reduce the percentage of consent required for amendment or modification and provided further, that no amendments affecting the duties, obligations or rights of the Trustee shall take affect without the consent of the Trustee. Any act done pursuant to a modification or amendment permitted by this Section 901 shall be binding upon the Owners of all of the Bonds, and shall not be deemed an infringement of any of the provisions of this Indenture or of the Law, whatever the character of the act may be, and may be done and performed as fully and freely as if expressly permitted by the original terms of this Indenture, no Bondowner shall have any right or interest to object to the action, to question its propriety or to enjoin or restrain the Agency or its officers from taking any action pursuant to such modification or amendment. The Trustee may request from the Agency and shall thereafter receive an Opinion of Counsel that any such Supplemental Indenture complies with the provisions of this Article IX, and the Trustee may conclusively rely upon such opinion. ' Notwithstanding the foregoing provisions of Section 901, this Indenture may only be amended or modified with the written consent of the Bond Insurer. A. Calling Bondowners' Meeting. If the Agency shall desire to obtain the Bondowners' consent, it may duly adopt a resolution calling a meeting of the Bondowners for the purpose of considering the action for which consent is desired, or alternatively it may obtain such consent in writing without a meeting. B. Notice of Meeting. Notice specifying the purpose, 'place, date and hour of a Bondowners' meeting shall be mailed, postage prepaid by the Agency, to the respective registered owners at their addresses appearing on the bond register as maintained by the Trustee. The notice shall set forth the nature of the proposed action for which consent is desired. The place, date and hour of the meeting and the date or dates of mailing the notice shall be determined by the Agency in its discretion; provided that such notice shall be mailed at least 15 days prior to the date of the Bondowners' meeting. The actual receipt by any Bondowner of notice of any Bondowners' meeting shall not be a condition precedent to the holding of the meeting, and failure to receive notice shall not affect the validity of the proceedings at the meeting. A certificate by the Interim Secretary of the Agency approved by resolution of the Agency, that the meeting has been called and that notice has been given as provided herein, shall be conclusive as against all parties and no Bondowner shall have the right to show that he failed to receive actual notice of the meeting. 48 C. Voting Qualifications. The Trustee shall prepare and deliver to the chairman of the meeting a statement of the names and addresses of the registered owners of Bonds, as shown on the Trustee's Bond register. This statement shall show maturities, serial numbers and principal amounts so that voting qualifications can be determined. No Bondowners shall be entitled to vote at the meeting unless their names appear upon the statement. No Bondowners.shall be permitted to vote with respect to a larger aggregate principal amount of Bonds than is set against their names on the statement. D. Issuer-Owned Bonds. The Agency covenants that it will present at the meeting a certificate, signed and verified by one of its members and by the Treasurer, stating the Bond numbers and principal amounts of all Bonds owned by, or held for account of, the Agency or the City, directly or indirectly. No person shall be permitted at the meeting to vote or consent with respect to any Bond appearing upon the certificate, or any Bond which is established at or prior to the meeting to be owned by the Agency or the City, directly or indirectly, and no such Bond (in this Indenture referred to as "issuer-owned Bonds") shall be counted in determining whether a quorum is present at the meeting. E. Quorum and Procedure. A representation of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding (exclusive of issuer-owned Bonds, if any) shall be necessary to constitute a quorum at any meeting of Bondowners, but less than a quorum may adjourn the meeting from time to time, and the meeting may be held as adjourned without further notice, whether such adjournment shall have been held by a quorum or by less than a quorum. The Agency' shall, by an instrument in writing, appoint a temporary chairman of the meeting, and the meeting shall be organized by the election of a permanent chairman and secretary. At any meeting each Bondowner shall be entitled to one vote for every $5,000 principal amount of,Bonds with respect to which he shall be qualified to vote as set forth above, and the vote may be given in person or by proxy duly appointed by an instrument in writing presented at the meeting. The Agency and/or the Trustee by their duly authorized representatives and counsel, may attend any meeting of the Bondowners, but shall not be required to do so. F. Vote Required. At any Bondowners meeting there shall be submitted for the consideration and action of the Bondowners a statement of the proposed action for which consent is desired. If the action is consented to and approved by Bondowners holding at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding (exclusive of issuer-owned Bonds), the chairman and secretary of the meeting shall so certify in writing to the Agency. The certificate shall constitute complete evidence of consent of the Bondowners under the provisions of this Indenture. A certificate signed and verified by the chairman and the secretary of any Bondowners meeting shall be conclusive evidence and the only competent evidence of matters stated in the certificate relating to proceedings taken at the meeting. 49 ARTICLE X DEFEASANCE Section 1001. Defeasance. If the Agency shall pay or cause to be paid, or' there shall be otherwise paid or provisions for payment made to or for the holders and owners of the Bonds, the principal, premium, if any, and interest due or to become•due thereon at the time and in the manner stipulated therein, and if the Agency shall keep, perform and observe all and singular the covepants and promises in the Bonds-and in this Indenture expressed as to be kept, performed and observed by it or on its part, and shall pay or cause to be paid to the Trustee all sums of money due or to become due according to the provisions hereof then this Indenture and the lien, rights and interest created hereby shall cease, determine and become null and void (except as to any surviving rights of registration, transfer or exchange of Bonds herein provided for and except for the rights of the Trustee to receive compensation and indemnification in accordance with Article VIII hereof), whereupon the Trustee shall cancel and discharge this Indenture, and execute and deliver to the Agency such instruments in writing as shall be reasonably requested by the Agency and requisite to discharge this Indenture, and release, assign and deliver unto the Agency any and all the estate, right, title�and interest in and to any and all right assigned or pledged to the Trustee or otherwise subject to this Indenture, except moneys or securities held by the Trustee for the payment of its fees and expenses and for payment of the principal of, premium, if any, and interest on the Bonds, and except for any funds held in the Excess Investment Earnings Fund held for payment to the United States government. The lien of the Indenture shall be discharged if the Agency shall pay and discharge the entire indebtedness on all Bonds Outstanding in any one or more of the following ways: (a) , By well and truly paying or causing to be paid the principal of and interest on all Bonds Outstanding, together with all amounts due the Trustee as and when the same become due and payable; (b) By depositing with the Trustee, in a spdcial trust fund created for such purpose, at or before maturity, available moneys which, together with the other moneys then on deposit in the Special Fund and Accounts therein, is fully sufficient to pay all Bonds Outstanding, including all principal and interest together with all amounts due the Trustee; or ©) By depositing with the Trustee, in a special trust created for such purpose, available moneys invested in Government Obligations in such amount as an Independent Financial Consultant shall determine will, together with the interest to accrue thereon without reinvestment and moneys then on deposit in the Special Fund and Accounts therein, be fully sufficient to pay and discharge any indebtedness on all Bonds (including all principal and interest together with all amounts due the Trustee) at or before maturity; then, at the option of the Agency, and notwithstanding that all Bonds shall not have been surrendered for payment, the pledge of the Pledged Tax Revenues and other funds provided for in this Indenture and all other obligations of the Agency under this Indenture with respect to all Bonds Outstanding shall cease and terminate, except only the obligation of the Agency to pay or cause to be paid to the Owners of the Bonds not so surrendered and paid all sums due thereon and the rights of the Trustee to indemnification and payment of fees and expenses under Article VIII hereof. Notice of the exercise of such option shall be filed with the Trustee. Any funds held by the Trustee after discharge of the lien of the Indenture including any funds which have not been claimed by the person entitled thereto within two (2) years following the date upon which such funds were scheduled to be paid, or which are not required for said 50 purpose, shall be paid over to the Agency and thereafter Bond Owners shall look only to the Agency for payment. 51 ARTICLE XI MISCELLANEOUS Section 1101. Consents, Etc. of Bondowners. Any consent, approval, direction or other instrument required by this Indenture to be signed and executed by the Bondowners may be in any number of concurrent writings of similar tenor and may be signed or executed by such Bondowners in person or by agent appointed in writing. Proof of the execution of any such consent, approval, direction or other instrument or of the writing appointing any such agent, if made in the following manner, shall be sufficient for any of the purposes of this Indenture, and shall be conclusive in favor of the Trustee with regard to any action taken under such request or other instrument, namely: (a) The fact and date of the execution by any person of any such instrument or writing may be proved by the certificate of any officer in any jurisdiction who by law has power to take acknowledgments within such jurisdiction that the person signing such instrument or writing acknowledged before him the execution thereof, or by affidavit of any witness to such execution; and (b) The fact of ownership of Bonds and the amount or amounts, numbers and other identification of such Bonds, and the date of holding the same shall be proved by the registration books maintained by the Trustee pursuant to Section 209 thereof. Section 1102. Consent of Bond Insurer and Notice to Rating Agencies. Any and all Sections of this Indenture or any other legal document in connection with the issuance of the Bonds which requires the notice and/or consent of the Bondowners or Trustee shall be deemed to also require the consent and/or notice of the Bond Insurer and notice to the Rating Agencies. Section 1103. Limitation of Rights. With the exception of rights herein expressly conferred, nothing expressed or mentioned in or to be implied from this Indenture or the Bonds is intended or shall be construed to give to any person other than the parties hereto, and the holders of the Bonds any legal or equitable right, remedy or claim under or in respect to this Indenture. This Indenture and all of the covenants, conditions and provisions hereof are intended to be and are for the sole and exclusive benefit of the parties hereto, and the holders of the Bonds as herein provided. Section 1104. Severability. If any provision of this Indenture shall be invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions, or in all cases because it conflicts with any other provision or provisions hereof or any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses or Sections in this Indenture contained, shall not affect the remaining portions of this Indenture, or any part thereof. Section 1105. CUSIP Numbers. CUSIP identification numbers will be imprinted on the Bonds, but numbers shall not constitute a part of the contract evidenced by the Bonds and no liability shall attach to the Agency or any of the officers or agents because of or on account of said numbers. Any error or omission with respect to the numbers shall not constitute cause for refusal by the successful bidder to accept delivery of and pay for the Bonds. Section 1106. Successor is Deemed Included in All References to Predecessor. Whenever in this Indenture or any Supplemental Indenture either the Agency or the Trustee is named or referred to, 52 such reference shall be deemed to include the successors or assigns thereof,,and all the covenants and agreements in this Indenture contained by or on behalf of the Agency or the Trustee shall inure to the benefit of the respective successors and assigns thereof whether so expressed or not. Section 1107. Counterparts. This Indenture may be simultaneously executed in several counterparts, each of which shall be_an original and all of which.shall constitute but one and the same instrument. Section 1108. Applicable Law. This Indenture shall be governed by and construed in accordance with the laws of the State of California. Section 1109. Captions. The captions or headings in this Indenture are for convenience only and in no way define, limit, or describe the scope or intent of any provisions or sections of this Indenture. Section 1110. Compliance Certificates and Opinions. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) A statement that the person or persons making such certificate or opinion have read such covenant or condition and the definitions herein relating thereto; (b) A brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; ©) A statement that, in the opinion of the signers, they have made or caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) A statement as to whether or not, in the opinion of the signers, such condition or covenant has been complied with. Section 1111. Conflict with Trust Indenture Act of 1939. If this Indenture is qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act") and any provision of the 1939 Act limits, qualifies or conflicts with another provision hereof which is required to be included in this Indenture by any of the provisions of the 1939 Act, such required provision shall control. Section 1112. Execution of Documents and Proof of Ownership by Bondowners. Any request, declaration or other instrument which this Indenture may require or permit to be executed by Bondowners may be in one or more instruments of similar tenor, and shall be executed by the Bondowners in person or by their attorneys appointed in writing. Except as otherwise herein expressly provided, the fact and date of the execution by any Bondowner or his attorney of such request, declaration or other instrument, or of such writing appointing such attorney, may be provided by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state in which he purports to, act, that the person signing such request, declaration or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer. Except as otherwise herein expressly provided, the amount of Bonds transferable by delivery held by any such person executing such request, declaration or other instrument or writing as a Bondowner, and the numbers thereof, and the date of his owning such Bonds, may be proved by the 53 registration books to be maintained pursuant to Section 209. The Trustee may nevertheless in its discretion require further or other proof in cases where it deems the same desirable. The ownership of registered Bonds and the amount, maturity, number and date of holding the same shall be proved by the, registry books. Any request, declaration or other instrument or writing of the Bondowner of any Bond shall bind all future Owners of such Bonds in respect of anything done or suffered to be done by the Agency or the Trustee in good'faith and in accordance therewith. Section 1113. Waiver of Personal Liability. No member, officer, agent or employee of the Agency shall be individually or personally liable for the payment of the principal of or interest on the Bonds; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law. Section 1114. Notices. All written notices to be given under this Indenture shall be given by mail or personal delivery to the party entitled thereto at its address set forth below, or at such other address as the party may provide to the other parties in writing from time to time. Notice shall be effective upon receipt or, in the case of personal delivery, upon delivery.to the address set forth below: Section 1115. All Obligations Due on Business Days. If the date for making any payment, or the last date for the performing of airy act or the exercising of any right is a day which not a Business Day, such payment shall be made, act performed, or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided under this Indenture of Trust. If to the Agency: Community Redevelopment Agency of City of Grand Terrace 22795 Barton Road Grand Terrace, California 92324 Attention: Executive Director If to the Trustee: U.S. Bank 633 West Fifth Street, 24`h Floor Los Angeles, California 90071 Attention: Ashraf Almurdaah, Vice President If to the Insurer: IN WITNESS WHEREOF, the Community Redevelopment Agency of the City of Grand Terrace, California has caused these presents to be signed in its name and on its behalf by its Chairman and its seal to be hereunto affixed and attested by its Secretary and to evidence its acceptance of the trusts hereby created the Trustee has caused these presents to be signed in its name and behalf by one of its duly authorized officers all as of , 2004. 54 Community Redevelopment Agency of the of Grand Terrace By: Chairman Attest: Secretary of the Community Redevelopment Agency City of Grand Terrace U.S. Bank National Association By: (Authorized Signer) 55 Preliminary Official Statement dated August 2004 Standard&Poor's: " Moody's Investors Service: " " NEW.ISSUE—FULL BOOK-ENTRY Insured—See"Ratings" herein) In the opinion of Bond Counsel, under existing laws, regulations, ridings and judicial decisions, and assuming continuing compliance with the covenants of the Community Redevelopment Agency of the City of Grand Terrace(the "Agency')intended to preserve the exclusion from gross income for federal income tax purposes of interest on the Bonds, interest (and original issue discount) on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, the interest on all the Bonds is also exempt from present State of California personal income taxes. See "CONCLUDING INFORMATION—Tax Exemption" herein for a discussion of the effect of certain provisions of the Code on Owners of the Bonds. $15,000,000." COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF GRAND TERRACE COMMUNITY REDEVELOPMENT PROJECT AREA REFUNDING TAX ALLOCATION BONDS SERIES 2004 Dated: Delivery Date Due: September 1,as shown below The Bonds will be delivered as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ("DTC"), and will be available to ultimate purchasers ("Beneficial Owners") in the denomination of $5,000 or any integral multiple thereof,under the book-entry system maintained by DTC.'Beneficial Owners will not be entitled to receive delivery of bonds representing their ownership interest in the Bonds. The principal of, premium if any, and semiannual interest (due March 1 and September 1 of each year, commencing March 1,2005)on the Bonds will be payable by U.S.Bank National Association,as Trustee, to DTC for subsequent disbursement to DTC participants, so long as DTC or its nominee remains the registered owner of the Bonds(see"THE BONDS—Book-Entry System"herein). The Bonds are subject to optional redemption prior to maturity as described herein. The Bonds maturing on September 1,2017 are subject to mandatory redemption from minimum sinking account payments,in part by lot, on September 1, 2013, and on each September I thereafter at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date. MATURITY SCHEDULE* Maturity Date Principal Interest Maturity Date Principal Interest September 1 Amount Rate Yield September 1 Amount Rate Yield 2005 $1,550,000 2009 $1,695,000 2006 1,580,000 2010 1,750,000 2007 1,610,000 2011 1,810,000 2008 1,645,000 $3,360,000— %Term Bonds due September 1,2017 Yield— % The Bonds are being issued to refund the Agency's Community Redevelopment Project Area,Refunding Tax Allocation Bonds,Series 1993A Bonds of which$3,525,000 are currently outstanding(the"I993A Bonds"),a bank loan by and between the Agency and Zions First National Bank of which $1,190,000 is currently outstanding (the "2003 Bank Loan"), the Agency's Community Redevelopment Project Area, Taxable Tax Allocation Bonds, Series 1993B Bonds of which $2,780,000 are currently outstanding (the "1993B Bonds") and to provide moneys for projects benefiting low and moderate income housing in the Project Area. The Bonds are payable from and secured by the Pledged Tax Revenues as defined herein to be derived from the Project Area. Taxes levied on the property within the Project Area on that portion of the taxable valuation over and above the taxable valuation of the base year property tax roll (1980-81 for the original portion of the Project Area and 1981-82 for the amended portion of the Project Area),to the extent they constitute Pledged Tax Revenues, shall be deposited in the Special Fund and administered by the Trustee for the payment of the principal of and interest on the Bonds. Payment of the principal of and interest on the Bonds when due will be insured by a municipal bond insurance policy(the"Municipal Bond Insurance Policy")to be issued by (" " or the"Bond Insurer"),simultaneously with the delivery of the Bonds. This cover page of the Official Statement contains information for quick reference only. It is not a complete summary of the Bonds. Investors should read the entire Official Statement to obtain information essential to the making of an informed investment decision. Attention is hereby directed to certain Risk Factors more fully described herein. The Bonds are not a debt of the City of Grand Terrace,the State of California or any of its political subdivisions and neither said City, said State or any of its political subdivisions is liable therefor. The principal of and interest on the Bonds are payable solely from the Pledged Tax Revenues allocated to the Agency from the Project Area as defined herein and in the Indenture. The Bonds are being issued for sale to the Grand Terrace Public Financing Authority(the"Authority"). The Authority will resell the Bonds to the Underwriter. The Bonds are offered, when, as and if issued,subject to the approval of Harper&Burns,LLP, Orange, California,Bond Counsel. Certain legal matters will be passed on for the Agency by Stradling Yocca Carlson&Rauth, a Professional Corporation,Newport Beach, California, Disclosure Counsel. It is anticipated that the Bonds will be available for delivery in book-entry form to DTC in New York, New York on or about August 26,2004 WEDBUSH MORGAN SECURITIES The date of this Official Statement is August_,2004. *Preliminary,subject to change. COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF GRAND TERRACE, CALIFORNIA AGENCY GOVERNING BOARD Herman Hilkey, Clzairnzan Maryetta Ferre, Vice Chairman Lee Ann Garcia,Member Don Larkin,Member Bea Cortes,Member CITY COUNCIL Herman Hilkey,Mayor Maryetta Ferre,Mayor pro Tem Lee Ann Garcia, Councibnan Don Larkin, Councibnan Bea Cortes, Councibnan CITY AND AGENCY STAFF Thomas Schwab, City Manager Larry Ronnow,Finance Director Brenda Stanfill, City Clerk Tracey Martinez,Deputy City Clerk SPECIAL SERVICES Bond Counsel Harper&Burns, LLP Orange, California Trustee and Escrow Bank U.S. Bank National Association Los Angeles, California Financial Advisor Urban Futures, Inc. Orange, California Underwriter Wedbush Morgan Securities Solana Beach, California Disclosure Counsel Stradling Yocca Carlson &Rauth a Professional Corporation Newport Beach, California TABLE OF CONTENTS Page Page INTRODUCTORY STATEMENT...............................I State Budget.........:......................................255 SOURCES AND USES OF FUNDS.............................3 Changes in Redevelopment Law........................26 THE BONDS................................................................3 PROPERTY TAXATION IN CALIFORNIA............26 Authority for Issuance..........................................3 Property Tax Collection Procedures..................26 Description of the Bonds......................................3 Supplemental Assessments Book-Entry System..............................................4 Property Tax Administrative Costs....................27 Discontinuation of Book-Entry Form;Payment Unitary Property................................................28 to Beneficial Owners.......................................6 Article XIIIA of the State Constitution..............28 Redemption and Purchase of Bonds.....................6 Appropriations Limitation-Article XIIIB.........29 Purchase of Bonds................................................7 Personal Property Tax Special Subventions......29 SECURITY FOR THE BONDS...................................7 Future Initiatives................................................29 THE INDENTURE.............:.........................................8 Recent Litigation Regarding Increase in Allocation of Bond Proceeds................. ................ Assessed Valuation.......................................29 Pledged Tax Revenues-Application...................9 Appeals of Assessed Values..............................30 Investment of Moneys in Funds and Accounts...10 THE PROJECT AREA...............................................31 Issuance of Additional Bonds.............................I I Limitations and Requirements of the Covenants of the Agency....................................12 Redevelopment Plan.....................................31 Events of Default and Remedies.........................15 Agreements with Various Taxing Agencies.......31 Application of Funds Upon Acceleration...........16 Largest Taxpayers..............................................32 Amendments.......................................................17 PLEDGED TAX REVENUES...................................32 THE AUTHORITY.....................................................18 Schedule of Historical Pledged Tax Revenues..32 THE AGENCY...........................................................18 Projected Taxable Valuation and Pledged Tax Members and Officers........................................18 Revenues......................................................33 Agency Powers...................................................18 Annual Debt Service..........................................34 Financial Advisor...............................................19 Debt Service Coverage......................................35 Tax Increment Financing....................................19 BOND INSURANCE.................................................35 Housing Set-Aside..............................................19 CONCLUDING INFORMAT10N.............................35 Factors Affecting Redevelopment Ratings...............................................................35 Agencies Generally.......................................20 Underwriting......................................................35 RISK FACTORS.........................................................21 Legal Opinion....................................................36 Limitations on Remedies....................................21 Tax Exemption Reduction of Pledged Tax Revenues..................21 No Litigation......................................................37 Limited Obligations............................................22 Legality for Investment in California.................37 Development Risks.............................................22 Continuing Disclosure.......................................37 Levy and Collection...........................................22 Miscellaneous....................................................38 Reduction in Inflationary Rate...........................22 SUPPLEMENTAL INFORMATION- Bankruptcy and Foreclosure...............................23 THE CITY OF GRAND TERRACE.................46 Property Held By FDIC......................................23 APPENDIX A-Definitions .....................................A-1 Seismic Factors ..................................................23 APPENDIX B-Financial Advisor's Tax Increment Proposition 8 Adjustments.................................24 Report..........................................................B-1 The Bezaire Case................................................24 APPENDIX C-Specimen Municipal Bond Educational Revenue Augmentation Fund; Insurance Policy..........................................C-1 For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, the Preliminary Official Statement and the Official Statement, as of their respective dates, are deemed final by the Agency, provided, however, that pricing, underwriting and other information contained in the Preliminary Official Statement is subject to completion or amendment in accordance with Rule 15c2-12. No dealer, broker,salesman or other person has been authorized to give any information or to make any representations, other than those contained in this Official Statement, and, if given or made, such information or representations must not be relied upon as having been authorized by the Agency. The information and expressions of opinion stated herein are subject to change without notice. The delivery of this Official Statement shall not, under any circumstances, create any implication that there has been no change in the affairs of the Agency or the Project Area since the date hereof. The information set forth herein has been obtained from official sources, and the Agency and the Underwriter have a reasonable basis for believing that the information set forth is accurate. (This Page Left Intentionally Blank) OFFICIAL STATEMENT $15,000,000* COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF GRAND TERRACE COMMUNITY REDEVELOPMENT PROJECT AREA REFUNDING TAX ALLOCATION BONDS SERIES 2004 INTR OD UCT OR Y S TA TEMENT This Official Statement, including the cover page, is provided to furnish information in connection with the sale by the Agency of the Bonds. The Bonds are being issued pursuant to the Constitution and laws of the State of California (the "State"), including the Community Redevelopment Law (Part 1, Division 24, commencing with Section 33000 of the Health and Safety Code of. the State). (the "Law") and an Indenture of Trust, dated August 1, 2004 (the "Indenture") between the Agency and U.S. Bank National Association, as trustee (the "Trustee") approved by a resolution adopted by the Agency on July 22, 2004 (the "Resolution"). The Bonds will be sold to the Grand Terrace Public Financing Authority(the "Authority") pursuant to the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5 of Division 7 of Title 1 (commencing with Section 6484) of the California Government Code (the UPA Law"). The Bonds purchased by the Authority will be resold immediately to Wedbush Morgan Securities (the "Underwriter"). The City of Grand Terrace (the "City") is approximately 60 miles east of the City of Los -Angeles and 5 miles south of the City of San Bernardino and is located in San Bernardino County (the "County"). The City is a general law city incorporated on November 30, 1978 and provides for a Council-Manager form of government made up of five Council Members elected to four-year overlapping terms. The City encompasses an area of approximately 3.7 square miles and the 2004 population is estimated to be 12,250. The Agency was established on April 19, 1979 by the City Council of the City with the adoption of Ordinance No. 17, pursuant to the Law. The five members of the City Council serve as the governing body of the Agency, and exercise all the rights, powers, duties and privileges of the Agency. The Redevelopment Plan for Community Redevelopment Project Area (the "Redevelopment Plan") was approved by Ordinance No. 25 adopted by the City Council of the City on September 27, 1979 and amended by Ordinance No. 52 adopted by the City Council of the City on July 15, 1981. The Community Redevelopment Project Area (the "Project Area") encompasses the entire city and totals approximately 2,365 acres. The Project Area is zoned for mixed land uses with residential property as the dominant land use. The Law authorizes the financing of redevelopment projects through the use of tax increment revenues. This method provides that the taxable valuation of the property within a project area on the property tax roll last equalized prior to the effective date of the ordinance which adopts the redevelopment plan becomes the "base year" valuation. Assuming the taxable valuation never drops below the base year level, the taxing agencies thereafter receive that *Preliminary,subject to change. portion of the taxes produced by applying then current tax rates to the base year valuation, and the redevelopment agency is allocated the remaining portion produced by applying then current tax rates to the increase in valuation over the base year. Such incremental tax revenues allocated to a redevelopment agency may be pledged to the payment of agency obligations. ,generally, tax increment revenues from one project area may not be used to repay indebtedness incurred for another project area. Redevelopment agencies have no power to levy property taxes and must look specifically to the allocation of taxes as described above. See "RISK FACTORS." The Bonds are being issued to refund the Agency's Community Redevelopment Project Area, Refunding Tax Allocation Bonds, Series 1993A Bonds of which $3,525,000 are currently outstanding (the "1993A Bonds"), a bank loan by and between the Agency and Zions First National Bank of which $1,190,000 are currently outstanding (the "2003 Bank Loan"), the Agency's Community Redevelopment Project Area, Taxable Tax Allocation Bonds, Series 1993B Bonds of which $2,780,000 are'currently outstanding (the "1993B Bonds") and to provide moneys for projects benefiting low and moderate income housing in the Project Area. The Bonds are payable from and are secured by a pledge of the Pledged Tax Revenues (described herein under the section entitled "SECURITY FOR THE BONDS"). Payment of the principal of and interest on the Bonds when due will be insured by a municipal bond insurance policy (the "Municipal Bond Insurance Policy") to be issued by or the "Bond Insurer") simultaneously with the delivery of the Bonds. Brief descriptions of the Bonds, the Indenture, the Agency and the City are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Resolution, the Indenture, the Law, the Constitution and the laws of the State as well as the proceedings of the Agency and the City are qualified in their entirety by reference to such documents. References herein to the Bonds are qualified in their entirety by reference to the form thereof included in the Indenture and the information with respect thereto included herein, copies of which are all available for inspection at the offices of the Agency. During the period of the offering of the Bonds, copies of the forms of all documents are available at the offices of Wedbush Morgan Securities, 201 Lomas Santa Fe Drive, Suite 500, Solana Beach, California 92075 and thereafter from the City Clerk's office, City of Grand Terrace, 22795 Barton Road, Grand Terrace, California 92324. 2 SOURCES AND USES OF FUNDS The estimated sources and uses of funds, excluding accrued interest on'the Bonds, is summarized as follows: Sources Principal Amount,of Bonds .................................................. $15,000,000.00' Reoffering Premium.............................................................. TotalSources........................................................... Uses Original Issue Discount......................................................... Underwriter's Discount ......................................................... Reserve Account (1).............................................................. Costs of Issuance Fund (2).................................................... 1993A Bonds Escrow Fund (3)............................................. 1993B Bonds Escrow Fund (4)............................................. 2003 Bank Loan Escrow Fund (5)........................................ HousingFund (6)................................................................... TotalUses................................................................ (1) An amount equal to the Reserve Requirement. (2) Includes the Municipal Bond Insurance Policy premium. (3) An amount sufficient to pay the principal of, premium and interest on the 1993A Bonds on their first available call date. (4) An amount sufficient to pay the principal and interest on the 1993B Bonds to their final maturity date of September 1, 2018. (5) An amount sufficient to pay the principal of, premium and interest on the Bank Loan on its first available call date. (6) An amount to be used for projects benefiting low and moderate income housing. THE BONDS Authority for Issuance The Bonds were authorized for issuance pursuant to the Indenture approved by the Resolution. Description of the Bonds The Bonds will be issued as one fully registered Bond for each maturity, in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"), as registered owner of all Bonds. See "Book-Entry System" below. The initially issued Bonds will be dated the Delivery Date and mature on September 1 in the years and in the amounts shown on the cover page of this Official Statement. The Bonds will bear interest at the rates shown on the cover page of this Official Statement, payable semiannually on March I and September 1 (each an "Interest Payment Date") in each year, commencing on March 1, 2005, by check mailed to the registered owners thereof or upon the request of the Owners of$1,000,000 or more in principal amount of Bonds, by wire transfer to an account in the United States which shall be designated *Preliminary,subject to change. 3 by such Owner to the Trustee on or before the Regular Record Date preceding the Interest Payment Date. Book-Entry System THE INFORMATION IN THIS SECTION CONCERNING DTC AND DTC'S BOOK- ENTRY ONLY FORM HAS BEEN OBTAINED FROM SOURCES THAT THE AUTHORITY BELIEVES TO BE RELIABLE, BUT THE AUTHORITY TAKES NO RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS THEREOF. THE BENEFICIAL OWNERS (AS HEREINAFTER DEFINED) SHOULD CONFIRM THE FOLLOWING INFORMATION WITH DTC OR THE DTC PARTICIPANTS. The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest 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 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 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, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. 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 Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation J 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 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. 4 Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual,.Beneficial Owners of the Bonds; : DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 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. l Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be prepaid. Neither DTC nor Cede& Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under-its usual procedures, DTC mails an Omnibus Proxy to the Agency as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, premium, if any, and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Agency or the Trustee, on payment 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 nor its nominee, the Trustee, or the Agency, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of 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 depository with respect to the Bonds at any time by giving reasonable notice to the Agency or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical Bonds are required to be printed and delivered. The Agency may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, physical Bonds will be printed and delivered. 5 The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the City and Agency believe to be reliable, but the City and Agency take no responsibility for the accuracy thereof. Discontinuation of Book Entry Only Form; Payment to Beneficial Owners In the event that the book-entry form described above is no longer used with respect to the Bonds, the following provisions will govern the payment, registration, transfer, exchange and replacement of the Bonds. The principal of the Bonds and any premium upon the redemption thereof prior to the maturity will be payable in lawful money of the United States of America upon presentation and surrender of the Bonds at the principal corporate.trust office of the Trustee. Interest on the Bonds will be paid by the Trustee by check mailed to the person whose name appears on the registration books of the Trustee,as the registered owner, and to that person's address appearing on the registration books as of the close of business on the 15th day of the month next preceding an interest payment date. Any bond may be exchanged for Bonds of any authorized denomination upon presentation and surrender at the principal corporate trust office of the Trustee, together with a request for exchange signed by the registered owner or by a person legally empowered to do so in a form satisfactory to, the Trustee. A Bond may be transferred only on the Bond registration books upon presentation and surrender of the Bond at the principal corporate trust office of the Trustee together with an assignment executed by the registered owner or by a person legally empowered to do in a form satisfactory to the Trustee. Upon exchange or transfer, the Trustee shall complete, authenticate and deliver a new Bond or Bonds of any authorized denomination or denominations requested by the owner equal in the aggregate to the unmatured principal amount of the Bond surrendered and bearing interest at the same rate and maturing on the same date. Neither the Agency nor the Trustee will be required to issue or transfer any Bond during a 'Period beginning with the opening of business on the 15th'day of the month next preceding any interest payment date and ending with the close of business on that interest payment date. Redemption and Purchase of Bonds Optional Redemption. The Bonds maturing on or before September 1, 2013 are not subject to redemption prior to their stated maturities. The Bonds maturing after September 1, 2013 are subject to redemption at the option of the Agency, in whole or in part, by lot within any maturity in the manner determined by the Agency, from the proceeds of refunding bonds or other available funds, on September 1, 2013 or on any date thereafter prior to maturity. Bonds called for redemption will be redeemed on the following redemption dates and at the following redemption prices (expressed as a percentage of the principal amount of Bonds to be redeemed) plus accrued interest to the redemption date as follows: Redemption Date Redemption Price September 1, 2013 and thereafter 100.0% 6 Sinking Account Redemption. The Bonds maturing on September 1, 2017 will be subject to mandatory redemption, on each September 1, commencing on September 1, 2012, at a redemption price equal to the principal amount thereof together with accrued interest thereon to the redemption date, without premium, from minimum sinking account payments made by the Agency in the years and amounts as follows: Year Amount 2012 $505,000 2013 530,000 2014 550,000 2015 570,000 2016 590,000 2017 (maturity) 615,000 Notice of Redemption. As provided in the Indenture, notice of redemption will be given by first class mail, postage prepaid not less than thirty(30) nor more than sixty (60) days prior to the redemption date, to the registered owners of the Bonds designated for redemption at their addresses appearing on the registration books of the Trustee, but neither failure to receive such notice or any defect in the notice so mailed will affect the sufficiency of the proceedings for redemption or the cessation of interest on the redemption date. Purchase of Bonds In lieu of redemption or otherwise, the Agency is authorized to purchase Bonds on the open market at any time and the Trustee will, upon written direction of the Agency, settle these purchases from moneys deposited by the Agency with the Trustee at a price not to exceed the principal amount of Bonds plus the applicable premium and accrued interest, if any, to the date of purchase plus brokerage fees, if any. SECURITY FOR THE.BONDS As provided in the Redevelopment Plan, pursuant to Article 6 of the Law and Section 16 of Article XVI of the Constitution of the State of California, taxes levied upon taxable property in the Project Area each year by or for the benefit of the State of California, any city, county, city and county, district, or other public corporation (herein sometimes collectively called "taxing agencies") after the effective date of the ordinance approving the Redevelopment Plan (being Ordinance No. 25 of the City of Grand Terrace, which became effective on October 27, 1979 and Ordinance No. 52 of the City of Grand Terrace, which became effective on August 14, 1981), will be divided as follows: (a) That portion of the taxes which would be produced by the rate upon which the tax is levied each year by or for each of the taxing agencies upon the total sum of the assessed value of the taxable property in the Project Area as shown upon the assessment roll used in connection with the taxation of such property by such taxing agency last equalized prior to October 27, 1979 (being the effective date of Ordinance No. 25, referred to above), and August 14, 1981 (being the effective date of Ordinance No. 52, referred to above), shall be allocated to and when collected shall be paid into the funds of the respective taxing agencies as taxes by or for the taxing agencies on all other property are paid; (b) Except for that portion of the taxes in excess of the amount identified in (a) above which are attributable to a tax rate levied by a taxing agency for the purpose of producing revenues in an amount sufficient to make annual repayments of the principal 7 of, and the interest on, any bonded indebtedness approved by the voters of the taxing agency on or after January 1, 1989 for the acquisition or improvement of real property, which portion shall be allocated to, and when collected shall be paid into, the fund of that taxing agency, that portion of the levied taxes each year in excess of such amounts shall be allocated to and when collected shall be paid to the Agency. This portion of the levied taxes and (to the extent permitted by law) all payments, subventions and reimbursements, if any, to the Agency specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations are herein referred to as "Tax Revenues." The Pledged Tax Revenues consist of the Tax Revenues less amounts required to be paid to taxing agencies pursuant to the Pass-Through Agreements. The Bonds are payable from and are specifically secured by an irrevocable pledge of the Pledged Tax Revenues derived from the Project Area, and interest earnings on funds held on deposit in trust for the Bondowners by the Trustee. The Agency has no power to levy and collect taxes, and various factors beyond its control could affect the amount of Pledged Tax Revenues available in any year to pay the principal of and interest on the Bonds. (See "RISK FACTORS" herein.) The Bonds are not a debt of the City of Grand Terrace, the State of California or any of its political subdivisions, and neither said City, said State or any of.its political subdivisions is liable therefor. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. THE INDENTURE The following is a summary of certain provisions of the Indenture and does not purport to be complete. Reference is hereby made to the Indenture and to Appendix A for the definition of certain terms used herein. Copies of the Indenture are available from the Agency upon request. All capitalized terms used herein and not otherwise defined shall have the same meaning as used in the Indenture. Allocation of Bond Proceeds The Indenture provides for the continuation with the Treasurer of the Agency of special trust funds called the "Community Redevelopment Project Area, Housing Fund" (the "Housing Fund") and the "Community Redevelopment Project Area, Bond Fund" (the 'Bond Fund"). The Indenture provides for the continuation with the Trustee of a special trust fund called the "Community Redevelopment Project Area, Special Fund" (the "Special Fund"), with special trust accounts therein known as the "Interest Account", the 'Principal Account", the 'Reserve Account" and the "Surplus Account," a special trust fund called the "Costs of Issuance Fund," and a special trust fund called the "Excess Investment Earnings Fund." (1) Deposit in the Reserve Account an amount sufficient to bring the balance in the Reserve Account to the Reserve Requirement, initially$ ; (2) Deposit in the Costs of Issuance Fund an amount set forth in a Certificate of the Agency to pay Costs of Issuance; (3) Transfer $ to the Escrow Bank for deposit in the appropriate Escrow Fund; and 8 (4) After making the above deposits, the balance of the proceeds from the sale of the Bonds, if any, shall be transferred to the Agency for deposit in the Housing Fund. Pledged Tax Revenues -Application Pledged Tax Revenues will be deposited by the Trustee in the Special Fund. The principal of and interest on the Outstanding Bonds through maturity will be paid by the Trustee from the Special Fund. Without limiting the generality of the foregoing and for the purpose of assuring that the payments referred to above will be made as scheduled, the Pledged Tax Revenues accumulated in the Special Fund will be used in the following priority; provided, however, to the extent that deposits have been made in any of the Accounts referred to below from the proceeds of the sale of the Bonds or otherwise, the deposits below need not be made: (1) Interest Account. Deposits will be made into the Interest Account so that the balance in the Interest Account four (4) Business Days prior to the next Interest Payment Date will be equal to 180 days' interest on the then Outstanding Bonds. Moneys in the Interest Account will be used solely for the payment of interest on the Outstanding Bonds as interest becomes due. (2) Principal Account. Not later than four (4) Business Days before September 1 of each year commencing in 2005, the Trustee shall withdraw from the Special Fund and deposit in the Principal Account an amount which, when added to the amount deposited in the Principal Account from proceeds of any refunding bonds or notes on or prior to that date, will be equal to the principal becoming due and payable on the Outstanding Bonds on September 1 of each year, including principal payable by reason of any mandatory sinking fund installments pursuant to the Indenture. No deposit need be made into the Principal Account if the amount contained therein is at least equal to the principal to become due on the next succeeding September 1, upon all of the Bonds issued and then Outstanding. All moneys deposited in the Principal Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Outstanding Bonds as it shall become due and payable. (3) Reserve Account. After deposits have been made pursuant to (1) and (2) above, deposits will be made to the Reserve Account, if necessary, in order to cause the amount on deposit therein to equal the Reserve Requirement. Moneys in the Reserve Account will be transferred to the Interest Account and then to the Principal Account to pay principal and interest on the Outstanding Bonds to the extent Pledged Tax Revenues are insufficient therefor. Any portion of the Reserve Account which is in excess of the Reserve Requirement will be transferred, to the Interest Account on or before six (6) Business Days prior to each Interest Payment Date. Anything to the contrary herein notwithstanding, the Agency may at any time substitute an Alternate Reserve Account Security, and upon such substitution, the Agency shall be entitled to receive all moneys then held in the Reserve Account free and clear of the lien of the Indenture. In the event the Agency delivers.an Alternate Reserve Account Security, the Trustee shall hold and apply such instrument pursuant to the Indenture so as to have moneys available thereunder for the purposes and at the times required under the Indenture. The Trustee shall deliver a demand for payment under the Alternate Reserve Account Security not less than three days prior to the date upon which moneys are required under the Indenture. The Trustee shall apply all cash amounts in the Reserve Account to the purposes provided in the Indenture prior to making any demand 9 for payment under the Alternate Reserve Account Security. The Trustee shall maintain adequate records as to the amount available to be drawn at any given time under the Alternate Reserve Account Security. In the event the Agency delivers an Alternate Reserve Account Security, the Trustee shall hold and apply such instrument pursuant to the Indenture so as to have moneys required under the Indenture. (4) ', Surplus Account. It is the intent of the Indenture: (i) that the deposits in (1) and (2) above to the Interest Account and the Principal Account, respectively, will be made as scheduled, and that all payments to the Excess Investment Earnings Fund shall be made as scheduled, and (ii) that the deposits in (3) above to the Reserve Account will be made as necessary to maintain a balance equal to the Reserve Requirement if, and only if, the Pledged Tax Revenues are sufficient therefor. Should it be necessary to defer all or part of any deposits referred to in (3) above, such deferred deposits will be cumulative and will be made when the Pledged Tax Revenues are sufficient to make the deposits required by (1) and (2) and thereafter make the deposits required by (3). The Agency shall not be obligated to deposit in the Bond Fund in'any Bond Year an amount of Pledged Tax Revenues which, together with other available amounts in the Bond Fund, exceeds the amounts required to be transferred to the Trustee for deposit into the Interest Account, the Principal Account and the Reserve Account in such Bond Year pursuant to the Indenture. In the event that for any reason whatsoever any amounts shall remain on deposit in the Bond Fund on any September 1 after making all of the transfers theretofore required to be made pursuant to the preceding clauses (1) through (3), the Agency may withdraw such amounts from the Bond Fund, to be used for any lawful purpose of the Agency. If annually, on September 1, the above transfers have been made so that the required amounts as of that time are in the Interest Account, the Principal Account and the Reserve Account and the required transfer has been made to the Excess Investment Earnings Fund as defined in the Indenture, any surplus balances in the Special Fund shall be deposited in the Surplus Account by the Trustee and shall be transferred upon written direction of the Agency to the Agency and may be used and applied by the Agency for any lawful purpose including, without limitation, the purchase and/or call and redemption of the Bonds and any Additional Bonds. The Indenture also creates an Excess Investment Earnings Fund for the purpose of collecting the amounts required, if any, to be rebated to the United States in accordance with the requirements of Section 148(f) of the Code. Section 148 of the Code requires, among other things and with certain exceptions, that any amounts earned on nonpurpose investments in excess of the amount which would have been earned if,such investments were made at a rate equal to the yield on the Bonds be rebated to the United States. The Indenture requires the Agency to calculate such amount and deposit it into the Excess Investment Earnings Fund for eventual rebate to the United States Treasury. Investment of Moneys in Funds and Accounts Moneys in the Bond Fund, Special Fund and the Accounts therein (other than the Reserve Account) and the Redemption Fund shall be invested and reinvested by the Agency (as to the Bond Fund) or the Trustee (as to the other Funds and Accounts) in Permitted Investments, provided that such investments mature by their terms prior to the date on which such moneys are required to be paid out thereunder. Such investments shall be made in specific investments meeting the requirements of this paragraph as directed in writing by the Executive Director or Finance Director of the City (such written request to be received by 12:00 noon two (2) days prior to such investment) or, in the absence of such written direction, by the Trustee in Permitted 10 Investments described in part (a) or (e) of the definition thereof. The Trustee shall be protected from any liability in acting in accordance with this section or the Agency's direction. Moneys in the Redevelopment Fund shall be invested by the Treasurer in any legal investments for Agency funds. Moneys in the Reserve Account shall be invested by the Trustee solely in Permitted Investments which may be withdrawn without penalty at such time as such moneys will be needed. Moneys in the Excess Investment Earnings Fund shall be invested in Government Obligations which mature before the date such amounts are required to be paid to the United States. Obligations purchased as an investment of moneys in any Fund or Account held by the Trustee shall be deemed to be part of such Fund or Account. Any or all interest or gain received from such investments of moneys in the Special Fund and the Accounts therein shall be deposited .by the Trustee in the Special Fund and respective Accounts therein and any loss incurred in connection with such investments shall be debited against the Fund or Account from which the investment was made. Issuance of Additional Bonds If at any time the Agency determines it needs to do so but only following an amendment to the Redevelopment Plan, the Agency may provide for the issuance of, and sell, Additional Bonds in such principal amount as it estimates will be needed. The issuance and sale of any Additional Bonds will be subject to the following conditions precedent: (a) the Agency must be in compliance with all covenants set forth in the Indenture; (b) the Additional Bonds will be on such terms and conditions as may be set forth in a supplemental resolution or indenture, which will provide for (i) bonds substantially in accordance with the Indenture, (ii) the deposit of moneys into the Reserve Account in an amount (which may be represented by an Alternate Reserve Account Security pursuant to the Indenture) sufficient, together with the balance of the Reserve Account, to equal the Reserve Requirement on all Bonds expected to be outstanding including the Outstanding Bonds, and (iii) the disposition of surplus Pledged Tax Revenues in substantially the same manner as set forth in the Indenture; (c) receipt of a certificate or opinion of an Independent Financial Consultant showing: (i) for the current and each future Bond Year the debt service for each such Bond Year with respect to all Bonds and Additional Bonds reasonably expected to be outstanding following the issuance of the Additional Bonds; (ii) for the most recent Fiscal Year of collection, the Pledged Tax Revenues received by the Agency; (iii) that the Pledged Tax Revenues referred to in (ii) above are at least equal to 1.25 times Maximum Annual Debt Service on all Bonds and Additional Bonds to be Outstanding following the issuance of the Additional Bonds (excluding debt service with respect to any portion of the Additional Bonds deposited in an escrowed proceeds account); (d) the Additional Bonds shall mature on and interest shall be payable on the same dates as the Bonds (except the first interest payment may be from the date of the Additional Bonds until the next succeeding March 1 or September 1); and 11 (e) additional Bonds may not have a variable interest rate. If all or a portion of the proceeds of the Additional Bonds or the Bonds are to be applied under Sections 33334.2 and 33334.6 of the Law, Pledged Tax Revenues for purposes of the Indenture shall include that portion of taxes allocated under Section 33670 of the Law for payment of the Bonds or the Additional Bonds which are applied for the purposes of Section 33334.2 and specifically pledged to the repayment of such Additional Bonds, to the maximum extent permitted by the Law. Notwithstanding the foregoing, if the Agency is in compliance with all covenants set forth in the Indenture, the Agency may issue and sell obligations pursuant to the Law, having a lien on the Pledged Tax Revenues which is junior to the Bonds. Covenants of the Agency As long as the Bonds are Outstanding and unpaid, the Agency will (through its proper members, officers, agents or employees) faithfully perform and abide by all of the covenants, undertakings and provisions contained in the Indenture or in any Bond issued under the Indenture, including the following covenants and agreements for the benefit of the Bondowners which are necessary, convenient and desirable to secure the Bonds and will tend to make them more marketable; provided, however, that the covenants do not require the Agency to expend any funds other than the Pledged Tax Revenues: Covenant 1. Complete Redevelopment Project; Amendment to Redevelopment Plan. The Agency covenants and agrees that it will diligently carry out and continue to completion in a sound and economical manner, with all practicable dispatch, the Redevelopment Project in accordance with its duty to do so under and in accordance with the Law-and the Redevelopment Plan. The Redevelopment Plan may be amended as provided in the Law upon written approval of the Bond Insurer but no amendment will be made unless it will not substantially impair the security of the Bonds or the rights of the Bondowners, as shown by an Opinion of Counsel,based upon a certificate or opinion of an Independent Financial Consultant appointed by the Agency. Covenant 2. Use of Proceeds; Management and Operation of Properties. The Agency covenants and agrees that the proceeds of the sale of the Bonds will be deposited and used as provided in the Indenture and that it will manage and operate all properties owned by it comprising any part of the Project Area in a sound and businesslike manner consistent with the Redevelopment Plan. Covenant 3. No Priority. The Agency covenants and agrees that it will not encumber, pledge or,place any charge or lien upon Pledged Tax Revenues prior to or superior to the lien of the Bonds and interest thereon. Except as permitted in the Indenture, it will not issue any obligations, payable as to principal or interest, from the Pledged Tax Revenues, which have any lien upon the Pledged Tax Revenues on a parity with the Bonds. Notwithstanding the foregoing, nothing in the Indenture will prevent the Agency (i) from issuing and selling pursuant to law, refunding obligations payable from and having any lawful lien upon the Pledged Tax Revenues, if such refunding obligations are issued for the purpose of, and are sufficient for the purpose of, refunding all of the Outstanding Bonds or Additional Bonds, (ii) from issuing and selling obligations which have, or purport to have, any lien upon the Pledged Tax Revenues which is junior to the Bonds, or (iii) from issuing and selling bonds or other obligations which are payable in whole or in part from sources other than the Pledged Tax Revenues. As used in the Indenture, "obligations" shall include, without limitation, bonds, notes, interim certificates, debentures or other obligations, loans, advances, or other forms of indebtedness incurred by the Agency. 12 Covenant 4. Punctual Payment. The Agency covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and interest on each of the Bonds on the date, at the place and in the manner provided in the Bonds. Covenant 5. Payment of Taxes and Other Charges. The Agency covenants and agrees that it will from time to time pay and discharge, or cause to be paid and discharged, all taxes and payments in lieu of,taxes, service charges, assessments or other governmental charges which may lawfully be imposed upon the Agency or any of the properties then owned by it in the Project Area, or upon the revenues and income therefrom, and will pay all lawful claims for labor, materials and supplies which if unpaid might become a lien or charge upon any of the properties, revenues or income or which might impair the security of the Bonds or the use of Pledged Tax Revenues or other legally available funds to pay the principal of and interest on the Bonds, all to the end that the priority and security of the Bonds will be preserved; provided, however, that nothing in this covenant will require the Agency to make any such payment so long as the Agency in good faith contests the validity of the payment. ,Covenant 6. Books and Accounts; Financial Statements. The Agency covenants and agrees that it will at all times keep, or cause to be kept, proper and current books and accounts (separate from all other records and accounts) in which complete and accurate entries will be made of all transactions relating to the Redevelopment Project and the Pledged Tax Revenues and other funds relating to the Redevelopment Project. The Agency will prepare within one hundred eighty (180) days after the close of each of its Fiscal Years a complete financial statement or statements for the year in reasonable detail covering the Pledged Tax Revenues and other funds, accompanied by an opinion of an Independent Certified Public Accountant appointed by the Agency, and will furnish a copy of the statement or statements to the Trustee, the Bond Insurer and any rating agency which maintains a rating on the Bonds, and, upon written request, to any Bondowner. The Trustee shall have no duty to review the Agency's financial statements. Covenant 7. Eminent Domain Proceeds. The Agency covenants and agrees that if all or any part of the Project Area should be taken, by eminent domain proceedings or other proceedings authorized by law, for any public or other use under which the property will be tax exempt, it will take all steps necessary to adjust accordingly the base year valuation of the Project Area. Covenant 8. Disposition of Property. The Agency covenants and agrees that it will not dispose of more than ten percent (10%) of the land area in the Project Area (except property shown in the Redevelopment Plan in effect on the date the Indenture is adopted as planned for public use, or property to be used for public streets, public offstreet parking, sewage facilities, parks, easements or right-of-way for public utilities, or other similar uses) to public bodies or other persons or entities whose property is tax exempt, unless such disposition will not result in the security of the Bonds or the rights of Bondowners being substantially impaired, as shown by an Opinion of Counsel, based upon the certificate or opinion of an Independent Financial Consultant appointed by the Agency. Covenant 9. Protection of Security and Rights of Bondowners. The Agency covenants and agrees to preserve and protect the security of the Bonds and the rights of the Bondowners and to contest by court action or otherwise (a) the assertion by any officer of any government unit or any other person whatsoever against the Agency that (i) the Law is unconstitutional or (ii) that the Pledged Tax Revenues pledged under the Indenture cannot be paid to the Agency for the debt service on the Bonds, or (b) any other action affecting the validity of the Bonds or diluting the security therefor. The Agency covenants and agrees to take no action which, in the Opinion of Counsel would result in: (a) the Pledged Tax Revenues being withheld unless the withholding is 13 being contested in good faith; and (b) the interest received by the Bondowners becoming includable in gross income under federal income tax laws. Covenant 10. Federal Tax Covenants. The Agency covenants and agrees-to contest by court action or otherwise any assertion by the United States of America or any department or agency thereof that the interest received by the Bondowners is includable in gross income of the recipient under federal income tax laws or the date of issuance of the Bonds. In order to preserve the exclusion from gross income of interest on the Bonds, and for no other reason, the Agency covenants to comply with all applicable requirements of the Internal Revenue Code of 1986, as amended (the "Code"), together with any amendments thereto or regulations promulgated thereunder necessary to- preserve such tax exemption as more specifically provided in the Indenture. Covenant 11. Taxation of Leased Property. Whenever any property in the Project Area has been redeveloped and thereafter is ]eased by the Agency to any person or persons (other than a public agency) or whenever the Agency leases real property in the Project Area to any person or persons (other than a public agency) for redevelopment, the property shall be assessed and taxed in the same manner as privately owned property as required by Section 33673 of the Law, and the lease or contract shall provide (a) that the lessee shall pay taxes upon the assessed value of the entire property and not merely upon the assessed value of his or its leasehold interest, and (b) that if for any reason the taxes levied on the property in any year during the term of the lease or contract are less than the taxes which would have been levied if the entire property had been assessed and taxed in the same manner as privately owned property, the lessee shall pay such difference to the Agency within thirty(30) days after the taxes for the year become payable to the taxing agencies and in no event later than-the delinquency date of such taxes established by law. All such payments shall be treated as Pledged Tax Revenues, and when received by the Agency shall be used as provided in the Indenture. Covenant 12. Single Sum Payments in Lieu of Taxes. As an alternative to payment to the Agency pursuant to (b) of Covenant 11, the new owner or owners of property becoming exempt from taxation may elect to make payment to the Agency in a single sum equal to the amount estimated by an Independent Financial Consultant to be receivable by the Agency from taxes on said property from the date of said payment to the maturity date of the Bonds, less a reasonable discount value. All such single sum payments in lieu of taxes shall be treated as Pledged Tax Revenues and shall be transferred to the Trustee for deposit in the Special Fund. Covenant 13. Pledged Tax Revenues. The Agency shall comply with all requirements of the Law to insure the allocation and payment to it of the Pledged Tax Revenues including, without limitation, the timely filing of any necessary statements of indebtedness with appropriate officials of San Bernardino County, and shall forward information copies of each such filing to the Trustee. The Agency further covenants and agrees that, except for the Pass-Through Agreements, it has not entered into any agreements with other tax entities as of the date of the Indenture for the pass-through of any Pledged Tax Revenues to such entities and will not enter into any such agreement which requires payment to such taxing entities prior to deposit of Pledged Tax Revenues in the Special Fund. The Agency has not and will not incur any loans, obligations or indebtedness repayable from Pledged Tax Revenues, or receive Pledged Tax Revenues in any other manner, such that the total aggregate debt service on said loans, obligations or indebtedness incurred from and after the date of adoption of the Redevelopment Plan and aggregate receipt of Pledged Tax Revenues, when added to the total aggregate debt service on the Bonds will exceed the maximum amount of tax revenues to be divided and allocated to the Agency pursuant to the Redevelopment Plan. Covenant 14. Llnnnitatlonn on Indebtedness. The Agency covenants and agrees that is has not and will not incur any loans, obligations or indebtedness repayable from Pledged Tax 14 Revenues such that the total aggregate debt service on said loans, obligations or indebtedness incurred from and after the date of adoption of the Redevelopment'Plan, when added to the total aggregate debt service on the Bonds and any Additional Bonds, will exceed -the maximum amount of Pledged Tax Revenues to be divided and allocated to the Agency pursuant to the Redevelopment Plan. The Agency shall file annually with the Trustee on or prior to August 1 of each year a Written Certificate of the Agency certifying that Pledged Tax Revenues received by the Agency through the date of the certificate, combined with the amount remaining to be paid on all outstanding obligations of the Agency will not exceed the Redevelopment Plan limit. To the extent it does, all Pledged Tax Revenues will be applied to the payment of such outstanding obligations. Continuing Disclosure. The Agency will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of the Indenture, failure of the Agency to comply, with the Continuing Disclosure Agreement shall not be considered an Event of Default; however, any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. Events of Default and Remedies - Each of the following shall constitute an Event of Default under the Indenture: (1) If, on the date which is three (3) Business Days prior to any Interest Payment Date, the amount of moneys on deposit in the Special Fund and the Accounts therein or the Redemption Fund are insufficient to pay in full the principal of, interest or redemption premium (if any) on the Bonds coming due and payable on such Interest Payment Date, whether at maturity as therein expressed, by acceleration or otherwise; or if default shall be made in the payment of principal, premium, if any, or interest on any Bond when due; (2) Default made by the Agency in the observance of any of the covenants, agreements or conditions contained in the Indenture or in the Bonds, where the default continues for a period of thirty(30) days following written notice to the Agency; or (3) The Agency files a petition seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law of the United States of America or the State, or if a court of competent jurisdiction shall approve a petition, filed with or without the consent of the Agency, seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or the State, or if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Agency or of the whole or any substantial part of its property. If an Event of Default has occurred as defined under subsection (1) or (3) above and is continuing, then and in each and every such case during the continuance of such Event of Default, unless the principal of the Bonds shall have already become due and payable; the Trustee shall declare the principal of the Bonds, together with the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in the Indenture or in the Bonds to- the contrary notwithstanding. Immediately upon becoming aware of the occurrence of an Event of Default, the Trustee shall give notice of such Event of Default to the Agency by telephone confirmed in writing. 15 Such notice shall also state whether the principal of the Bonds shall have been declared to be or have immediately become due and payable. The Trustee shall also give such notice to the Owners of the Bonds, specifically including the Bond Insurer, by first class mail, postage prepaid, which shall include the statement that interest on the Bonds shall cease to accrue from and after the date of acceleration specified in such notice. These provisions, however, are subject to the condition that if, at any time after the principal of the Bonds shall have been so declared due and payable because of an Event of Default under (1) above, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Agency shall deposit with the Trustee a sum sufficient to pay all principal on the Bonds matured prior to such declaration and all matured installments of interest (if any) upon all the Bonds, with interest at the rate of twelve percent (12%) per annum on such overdue installments of principal and the reasonable fees and expenses of the Trustee (including attorney fees and expenses), and any and all other defaults known to the Trustee (other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration) shall have been made good or cured or provision shall have been made therefor, then, and in every such case, the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding, with written notice to the Agency and the Trustee, may, on behalf of the Owners of all of the Bonds, rescind and annul such declaration and its consequences. However, no such rescission and annulment shall extend to or shall affect any subsequent default, or shall impair or exhaust any right or power consequent thereon. Upon written request of the Bond Insurer, in each Event of Default described in (2) above, the Trustee (upon receipt of indemnification to so act), shall have the right, for the equal benefit and protection of all Bondowners similarly situated: (1) by mandamus, suit, action or proceeding, to compel the Agency and its members, officers, agents or employees to perform each and every term, provision and covenant contained in the Indenture and in the Bonds, and to require the carrying out of any or all such covenants and agreements of the Agency and the fulfillment of all duties imposed upon it by the Law; (2) by suit, action or proceeding in equity, to enjoin any acts or things which are unlawful, or the violation of any of the Bondowners' rights; or (3) upon the happening of any event of default (as defined in the Indenture and summarized above), by suit, action or proceeding in any court of competent jurisdiction, to require the Agency and its members and employees to account as if it and they were trustees of an express trust. Anything in the Indenture to the contrary notwithstanding, upon the occurrence and continuance of an event of default as described above, the Bond Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Bondowners or the Trustee for the benefit of the Bondowners under the Indenture, including, without limitation, acceleration of the maturity of the Bonds as described in the Indenture and the right to annul any declaration of acceleration, and the Bond Insurer shall also be entitled to approve all waivers of events of default. Application of Funds Upon Acceleration All of the amounts in the Special Fund and the Accounts therein upon the date of the declaration of acceleration as provided in the Indenture, and all sums thereafter received by the Trustee, shall be applied by the Trustee after deducting (1) its own fees and expenses (including fees and expenses of its attorneys) in declaring such Event of Default and in collecting such 16 sums, and all outstanding fees and expenses of the Trustee, (2) the costs and expenses of the Bondowners, including reasonable compensation to its or'their agents, attorneys and counsel, upon presentation of the Bonds (and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid) to the payment of the whole amount then owing and unpaid on the Bonds on the date on which amounts are applied to pay principal of the Outstanding Bonds, together with interest on the overdue principal and overdue installments of interest at the rate of twelve percent (12%) per annum (to the extent permitted by law and to the extent that such interest on overdue installments of principal and interest shall have been collected) and, in case such moneys will be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest. Amendments The Indenture, and the rights and obligations of the Agency and of the Owners of the Bonds may be modified or amended at any time by Supplemental Indenture adopted by the Agency with the consent of the Bond Insurer: (a) without the consent of Bondowners, if the modification or amendment is for the purpose of adding covenants and agreements further to secure Bond payment, to prescribe further limitations and restrictions on Bond issuance, to surrender rights or privileges of the Agency, to make modifications not affecting any Outstanding series of Bonds only with the consent of the Trustee, for the purpose of curing any ambiguities, defects or inconsistent provisions in the Indenture or to insert provisions clarifying matters or questions arising under the Indenture, provided that the modifications or amendments do not adversely affect the rights of the Owners of any Outstanding Bonds; or (b) for any purpose with the consent' of the Owners of at least 60% in aggregate principal amount of the Outstanding Bonds (exclusive of Bonds owned by the Agency or the City) provided, however, that no modification or amendment will, without the express consent of the Bondowner or registered owner of the Bond affected, reduce the principal amount of any Bond, reduce the interest rate payable on it, extend its maturity or the times for paying interest, change the monetary medium in which principal and interest is payable, or create a mortgage pledge or lien on the revenues superior to or on a parity with the pledge and lien created for the Bonds and.any Additional Bonds or reduce the percentage of consent required for amendment or modification and provided further, that no amendments affecting the duties, obligations or rights of the Trustee shall take affect without the consent of the Trustee. Any act done pursuant to a modification or amendment permitted by the Indenture will be binding upon the Owners of all of the Bonds, and shall not be deemed an infringement of any of the provisions of the Indenture or of the Law, whatever the character of the act may be, and may be done and performed as fully and freely as if expressly permitted by the original terms of the Indenture. No Bondowner will Have any right or interest to object to the action, to question its propriety or to enjoin or restrain the Agency or its officers from taking any action pursuant to such modification or amendment. The Trustee may obtain an opinion of counsel that any such Supplemental Indenture complies with the provisions of the Indenture and the Trustee may conclusively rely upon such opinion. 17 Notwithstanding the foregoing provisions, the Indenture may only be amended or modified with the written consent of the Bond Insurer. THE A UTHORITY The Grand Terrace Public Financing Authority (the "Authority") was created by a Joint Exercise of Powers Agreement, approved by resolution on December 13, 1990, by and between the City and the Agency. Such Agreement was entered into pursuant to the provisions of Articles 1, 2 and 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code. The Authority was created for the purpose of assisting the financing or refinancing of certain public capital facilities within the City. Under the JPA Law, the Authority has the power to purchase bonds issued by any local agency at public or negotiated sale and may sell such bonds to public or private purchasers at public or negotiated sale. The Authority is governed by a five-member Board of Directors (the "Board") which consists of the members of the City Council of the City of Grand Terrace. The Mayor acts as Chairman of the Authority, the City Manager as its Executive Director, the City Clerk as its Secretary and the Finance Director of the City as the Treasurer of the Authority. THE A GENCY The Agency was established on April 19, 1979 by the City Council of the City with the adoption of Ordinance No. 17, pursuant to the Law. The five members of the City Council serve as the governing body of the Agency, and exercise all the rights, powers, duties and privileges of the Agency. Members and Officers The members and officers of the Agency and the expiration of their terms are as follows: Terre Alember Expiration Herman Hilkey, Chairman November, 2006 Maryetta Ferre, Vice Chairman November, 2004 Lee Ann Garcia,Member November, 2004 Don Larkin,Member November, 2004 Bea Cortes,Member November, 2006 Agency Powers All powers of the Agency are vested in its governing body. Pursuant to the Law, the Agency is a separate public body which may exercise broad governmental functions and authority to accomplish its purposes, including, but not limited to, the right of eminent domain, the right to issue bonds or notes and expend their proceeds and the right to acquire, sell, rehabilitate, develop, administer or lease property. The Agency may demolish buildings, clear land and cause to be constructed certain improvements including streets, sidewalks, and public utilities. The Agency may not construct or develop buildings, with the exception of public facilities and housing, but must sell or lease cleared property to redevelopers for construction and development in accordance with the Redevelopment Plan. 18 r Financial Advisor Urban Futures, Inc., of Orange, California ("Urban Futures"), formed in the early 1970s, provides services in the areas of planning, redevelopment and finance to both governmental and private sector clients. Urban Futures is--currently engaged in consulting activities for a number of cities and redevelopment agencies in the State. Over the past five years, Urban Futures has completed planning, economic and financial consulting assignments for over 130 government clients in the State. Urban Futures has acted as financial consultant to the Agency concerning the Bonds. As financial consultant, Urban Futures will receive compensation contingent upon the sale and delivery of the Bonds. Tax Increment Financing The Law authorizes the financing of redevelopment projects through the use of tax increment revenues. This method provides that the taxable valuation of the property within a redevelopment project area on the property tax roll last equalized prior to the effective date of the ordinance which adopts the redevelopment plan becomes the base year valuation. Assuming the taxable valuation never drops below the base year level, the taxing agencies thereafter receive that portion of the taxes produced by applying then current tax rates to the base year valuation, and the redevelopment agency is allocated the remaining portion produced by applying then current tax rates to the increase in valuation over the base year. Such incremental tax revenues allocated to a redevelopment agency may be pledged to the payment of agency obligations. Generally, tax increment revenues from one project area may not be used to repay indebtedness incurred for another project area. Redevelopment agencies have no power to levy property taxes and must look specifically to the allocation of taxes as described above. See "RISK FACTORS." The Law authorizes redevelopment agencies to make payments to school districts and other taxing agencies to alleviate any financial burden or detriments to such taxing agencies caused by a redevelopment project. The Agency has entered into a number of agreements for this purpose. See "THE PROJECT AREA—Agreements with Various Taxing Agencies." Housing.Set Aside In accordance with Section 33334.2 of the Law, not less than twenty percent (20%) of all taxes which are allocated to the Agency shall be used by the Agency for purposes of improving, increasing and preserving the City's supply of housing for persons and families of low or moderate income. This requirement is applicable unless the Agency makes the finding that: 1. No need for such housing exists in the City; 2. Less than twenty percent (20%) is sufficient to meet such housing needs of the City; or 3. A substantial effort is presently being carried out with other funds (either local, State or federal) and that such efforts are equivalent in impact to twenty percent (20%) of all taxes which are allocated to the Agency. Both the "no need" finding (item 1 above) and the "less than 20% finding" (item 2 above) must apply to very low income as well as low and moderate income households, must be 19 consistent with the housing element of the community's general plan and the annual report of its planning agency, and do not become effective until after certain filings have been made with the State Department of Housing and Community Development ("HCD"). Neither finding can be made unless the housing element is in proper form and up to date and has been filed with HCD. The "equivalent effort" finding (item 3 above) must apply to the community's share of regional housing needs as well as its own existing and projected needs. After June 30, 1993, no agency may make this finding unless it can show evidence that it is required in order to meet contractual obligations to bondholders or other private entities incurred prior to May 1, 1991 and made in reliance on the ability to make the finding. Funds available from the twenty percent (20%) requirement may be used outside the Project Area on a finding by the Agency and the City Council that such use will be of benefit to the Project Area. See "THE PROJECT AREA—Limitations and Requirements of the Redevelopment Plan." The Law also permits agencies with more than one project area to set aside less than twenty percent (20%) of the taxes allocated to the agency from one project area if the difference is made up from another project area in the same year and if the agency and the legislative body of the community find that such use of funds will benefit such other project area. Factors Affecting Redevelopment Agencies Generally Other features of California law which bear on redevelopment agencies include general provisions which require public agencies to let contracts for construction only after competitive bidding. The Law provides that construction in excess of$5,000 undertaken by the Agency shall be done only after competitive bidding. California statutes also provide for offenses punishable as felonies which involve direct or indirect interest of a public official in a contract made by such official in his official capacity. In addition, the Law prohibits any Agency or City official or employee who, in the course of his duties, is required to participate in the formulation or approval of plans or policies, from'acquiring any interest in property in the Project Area. Under a State initiative enacted in 1974, public officials are required to make extensive disclosures regarding their financial interests by filing such disclosures as public records. As of the date of this Official Statement, the members of the City Council and the Agency, and other City and Agency officials have made the required filings. California also has strict laws regarding public meetings (known as the Ralph M. Brown Act)which generally makes all Agency and City meetings open to the public. Filinc of Statement of Indebtedness. Section 33675 of the Law provides for the filing not later than the first day of October of each year with the County Auditor of a statement of indebtedness certified by the chief fiscal officer of the Agency for each redevelopment plan which provides for the allocation of taxes. The statement of indebtedness is required to contain the date on which the bonds were delivered, the principal amount, term, purposes and interest rate of the bonds and the outstanding balance and amount due on the bonds. Similar information must be given for each loan, advance or indebtedness that the Agency has incurred or entered into which is payable from tax increment. Section 33675 also provides that payments of tax increment revenues from the County Auditor to the Agency may not exceed the amounts shown on the Agency's statement of indebtedness. The Section further provides that the statement of indebtedness is prima facie evidence of the indebtedness of the Agency, but that the County Auditor may dispute the amount of indebtedness shown on the statement in certain cases and the disputed amount may be withheld from allocation and payment to the Agency. Provision is made for time limits under 20 which the dispute can be made by the County Auditor as well as provisions for a determination by the superior court in a declaratory relief action of the proper disposition of the matter. The issue in any such action shall involve only-the amount of the indebtedness and not'the validity of any contract or debt instrument, or any expenditures pursuant thereto. Payments to a trustee under a bond Indenture or indenture or payments to a public agency in connection with payments by such public agency pursuant to a bond issue shall not be disputed in any action under Section 33675. RISK FA CTORS Limitations on Remedies The enforceability of the rights and remedies of the Owners of the Bonds and the Trustee and the obligations incurred by the Agency may be subject to the following: the federal Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under State law of certain remedies; the exercise of the United States of America of the powers delegated to it by the federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest "of serving a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or State government, if initiated, could subject the Owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitations or modification of their rights. Reduction of Pledged Tax Revenues Pledged Tax Revenues allocated to the Agency (which constitute the ultimate source of payments of principal and interest on the Bonds, as discussed herein) are determined by the amount of incremental valuation of taxable property in the Project Area, the current rate or rates at which property in the Project Area is taxed and the percentage of taxes collected in the Project Area. Although the Agency believes the projections of Pledged Tax Revenues contained herein are reasonable, several types of events which are beyond the control of the Agency could occur and cause a reduction in available Pledged Tax Revenues. First, a reduction of taxable values of property or tax rates in the Project Area or a reduction of the rate of increase in taxable values of property in the Project Area caused by economic or other factors beyond the Agency's control (such as a relocation out of the Project Area by one or more major property owners, successful appeals by property owners for a reduction in a property's assessed value, a reduction of the general inflationary rate, a reduction in transfers of property, construction activity or other events that permit reassessment of property at lower values, or the destruction of property caused by natural or other disasters, including earthquake) could occur, thereby causing a reduction in Pledged Tax Revenues. The risk increases in proportion to the percent of total assessed value attributable to any single assessee in the Project Area. Second, the State electorate or Legislature could adopt limitations with the effect of reducing Pledged Tax Revenues payable to the Agency. Third, a reduction in the tax rate applicable to property in the Project Area by reason of discontinuation of certain override tax levies approved prior to January 1, 1989, in excess of the 1% basic levy, will reduce Pledged Tax Revenues available to pay debt service. Such override can be expected to decline over time until it reaches the 1% basic levy and may be discontinued at any time, which may cause a reduction in Pledged Tax Revenues. Fourth, delinquencies in the payment of property taxes by the owners of land in the Project Area could have an adverse effect 21 on the Agency's ability to make timely debt service payments. The Agency believes the historical delinquency experience in the Project Area has not been greater than the City-wide historical experience. Any reduction in Pledged Tax Revenues, whether for any of the foregoing reasons or any other reason, could have an adverse effect on the Agency's ability to pay the principal of and interest on the Bonds or to issue refunding bonds to refund the Bonds at or prior to maturity. Limited Obligations The Bonds are special obligations of the Agency secured by and solely payable from amounts on deposit in the indicated Funds and Accounts established under the Indenture. The Bonds are secured by a pledge of the Pledged Tax Revenues. The Bonds are not a debt, liability or obligation of the-City, the State or any political subdivisions thereof and neither the City, the State nor any political subdivisions thereof are liable for payment on the Bonds. The Bonds do not constitute an indebtedness within the meaning of any State constitutional or statutory debt limitation. Developm ent Risks The Agency's collection of Pledged Tax Revenues is directly affected by the economic strength of the Project Area. Projected additional development within the Project Area will be subject to all the risks generally associated with real estate development projects, including unexpected delays, disruptions and changes. Real estate development operations may be adversely affected by changes in general economic conditions, fluctuations in real estate market and interest rates, unexpected increases in development costs and other similar factors. Further, real estate development operations within the Project Area could be adversely affected by future governmental regulations or policies, including governmental regulations or policies to restrict or control development. If projected development in the Project Area is delayed or halted, the economy of the Project Area could be affected, causing a reduction in Pledged Tax Revenues available to pay the debt service on the Bonds. Levy and Collection The Agency has no power to levy and collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the Pledged Tax Revenues, and accordingly, could have an adverse effect on the ability of the Agency to pay debt service on the Bonds. Likewise, delinquencies in the payment of property taxes could have an adverse effect on the Agency's ability to make timely debt service payments. Reduction in Inflationary Rate As described in greater detail below, Article XIIIA of the State Constitution provides that the full cash value base of real property used in determining taxable value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. Such measure is computed on a calendar year basis. In January 1996, the State Board of.Bqualization reported an actual annual inflation rate of 1.11%. This marked only the third time since the adoption of Article XIIIA in 1978 that the actual inflation rate has been less than 2%. Should the assessed value of secured property not increase at the estimated annual rates incorporated herein, the Agency's receipt of future Pledged Tax Revenues may be adversely affected. 22 Pankruptcy and Foreclosure On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. Although the court upheld the priority of unpaid taxes imposed before the bankruptcy petition, unpaid taxes imposed after the filing of the bankruptcy petition were declared to be "administrative expenses" of the bankruptcy estate, payable after all secured creditors. As a result, the secured creditor was able to foreclosure on the property and retain all the proceeds of the sale except the amount of the pre-petition taxes. According td the court's ruling, as administrative expenses, post-petition taxes would be paid if the debtor had sufficient assets to do so after all authorized payment to secured creditors. In certain circumstances, payment of such administrative expenses may be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise) it would at that time•become subject to current ad valorem taxes. To the extent the rule of Glasply is applied to properties within the Project,Area, any resultant reduction or delay in the collection of property taxes could reduce the amount of Pledged Tax Revenues available to the Agency to make timely payments of debt service on the Bonds. Property Held By FDIC The ability of the Agency to receive Pledged Tax Revenues derived from delinquent taxes may be limited in certain respects with regard to properties in which the Federal Deposit Insurance Corporation ("FDIC") has or obtains an interest. In the event that any financial ,institution making any loan which is secured by real property within the Project Area is taken over by the FDIC and prior thereto or thereafter, the tax installments go into default, the ability of the County to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid taxes may be limited. The FDIC's policy statement regarding the payment of State and local real property taxes (the "Policy Statement") provides that the FDIC intends to pay valid real property taxes, interest and penalties, in accordance with State law, on property which at the time of the tax levy is owned by institutions in an FDIC receivership, unless abandonment of the FDIC interest is determined to be appropriate. Moreover, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, it will not permit its lien to be foreclosed out by a taxing authority without its specific consent, nor will it pay or recognize liens for any penalties, fines or similar claims imposed for the nonpayment of taxes. The Agency is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency on a parcel within the Project Area in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed out at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Seismic Factors The City is located in an area of seismic activity and, therefore, could be subject to potentially destructive earthquakes. Numerous active and inactive fault lines pass through, or near; the area in which the City is located. The occurrence of severe seismic activity in the City could result in substantial damage to property located in the Project Area, and could lead to 23 successful appeals for reduction of assessed values of such property. Such a reduction could result in a decrease in Pledged Tax Revenues received by the Agency. Proposition 8 Adjustments Proposition 8, approved in 1978 (California Revenue and Taxation Code Section 51(b)), provides for the assessment of real property at the lesser of its originally determined (base year) full cash value compounded annually by the inflation factor, or its full cash value as of the lien date, taking into account reductions in value due to damage, destruction, obsolescence or other factors causing a decline in market value. Reductions based on Proposition 8 do not establish new base year values, and the property may be reassessed on a following lien date up to the lower of the then-current fair market value or the factored base year value. Properties in the Project Area have not been subject'to Proposition 8 adjustments made by the County Assessor in any significant amount. The Bezaire Case On November 2, 2001, in an Orange County Superior Court case styled County of Orange V. Orange County Assessment Appeals Board No. 3, Case No. OOCC03385 ("Bezaire'), the Orange County Superior Court issued a Minute Order holding that the Orange County Assessor (the "Assessor") had violated the 2% maximum annual inflation adjustment limit of Article XIIIA of the California Constitution. The Assessor had increased the assessed value of a single family residential property by 4% in one _year, after subject the property to no increase the previous year, when the market value of the property declined below its taxable value. ' The Assessor established the 4% value increase by detennining that the property's then-current market value was greater than the assessed value would have been if the 2% annual inflation adjustment had been applied the previous year. The State Board of Equalization had approved this methodology for increasing assessed values in similar circumstances. The Orange County Superior Court has entered a ruling which allows restatement of the complaint as a class action. Should the matter be upheld on appeal it could limit the rate at which county assessors car, increase the assessed value of properties which have been subject to reductions in assessed value. In December 2002, the court certified a "class action" status for the case and defined the class of potential plaintiffs to include all of the people in Orange County subject to the recapture. In 2002, two other Superior Courts (Los Angeles and San Diego) ruled differently on the recapture issue. The Superior Court to the Bezaire Case entered a Final Judgment on April 18, 2003. On June 12. 2003, the Orange County Assessor and Tax Collector, in conjunction with the County of Orange, filed a notice of appeal of action in the Court of Appeal of the State of California, and on March 26, 2004, the Court of Appeal of the State of California, Fourth Appellate District, filed its opinion reversing the trial court's Judgment, holding that the trial court erred in ruling that assessments are always limited to no more than two percent of the previous year's assessment and remanding to the trial court with directions to enter judgment in favor of the County of Orange petitioners. The Court of Appeal held that the 2% annual inflation adjustment provision permits a maximum 2% annual increase calculated against the original acquisition cost base, rather than calculated against any reduced base resulting from any intervening downward reassessment in the wake of a decline in property values, such as might happen with a general deflation or a disaster. On May 5, 2004, the Respondent filed a petition to the California Supreme Court for a review of the decision published by the Court of Appeal on March 26, 2004. The California Supreme Court is expected to issue its decision to accept or deny this petition for review within 60 to 90 days. The Agency is unable to predict how the California Supreme Court will rule on this petition or, if they do decide to take the appeal, how the Court will rule on the case. 24 Educational Revenue Augmentation Fund; State Budget The Agency's Tax Revenues may be reduced by specific legislative shifts in property tax allocations. The State budget for fiscal year 1993-94 transferred $2.6 billion to school districts from cities, counties and other local governments, including redevelopment agencies. As part of the budget's transfer of moneys to school districts, the State Legislature required redevelopment agencies to transfer approximately $65 million to the Educational Revenue Augmentation Fund ("ERAF") in both fiscal years 1993-94 and 1994-95. The amount required to be paid by a redevelopment agency under such legislation was apportioned among all of its redevelopment project areas on a collective basis, and was not allocated separately to individual project areas. Faced with a projected $23.6 billion budget gap for fiscal year 2002-03, the State Legislature adopted and the Governor signed AB 1768 requiring redevelopment agencies to pay into ERAF $75 million. AB 1768 required the payment into ERAF in fiscal year 2002-03 only. As part of the overall legislation to enact the 2003-04 State Budget, the State enacted as urgency legislation, SB 1045, Chapter 260, Statutes of 2003 ("Chapter 260") as part of the 2003-04 State Budget requiring redevelopment agencies to pay into ERAF in fiscal year 2003-04 an aggregate amount of $135 million. Chapter 260 requires the payment into ERAF in fiscal year 2003-04 only. Chapter 260 provides that one-half of an agency's ERAF obligation is calculated based on the gross tax increment received by such agency and the other one-half of such agency's ERAF obligation is calculated based on the net tax increment revenues (after any pass-through payments to other taxing entities), as such tax increment revenues are shown in Table 7 of the fiscal year 2002-03 Annual Report of the California Controller. The Agency's ERAF obligation for,fiscal year 2003-04 is approximately $188,532.76. The Agency expects to pay such amount from surplus Tax Revenues. The 2003-04 State Budget does not resolve the State's structural deficit between revenues and expenditures. It is therefore anticipated that there will be additional future legislation which addresses this situation. The Agency cannot predict what measures may be proposed or implemented for the current fiscal year or in the future. Given the magnitude of the State's budgetary deficit, it is possible that future legislation will further reduce Tax Revenues. At least two components of the State's fiscal year 2003-04 Budget are the subject of legal challenges. Plaintiffs have challenged the legality of $10.7 billion of deficit reduction bonds which the State planned to issue and a Superior Court in Sacramento recently held that the State's plan to finance approximately $1.9 billion of contributions to its pension funds was unconstitutional. If these legal challenges are ultimately successful or result in delays beyond the current fiscal year, the State could take other actions to balance the budget in the 2003-04 fiscal year that would have an adverse financial impact on the Agency. In addition, other elements of the State's budget for this and future years may be affected by other legal challenges related to the motor vehicle license fee increase and the recall of the Governor of the State. On January 9, 2004, the Governor submitted the 2004-05 Governor's Budget to the California Legislature. The Governor's Budget identifies $22.1 billion worth of debt inherited by the current gubernatorial administration and indicates that, absent any changes in policies, State deficits would continue, estimated at $14 billion in fiscal year 2004-05. The Governor's Budget contemplates a shift of $1.3 billion of revenues from local government to the State; the manner in which this would be allocated amongst local governmental agencies (including redevelopment agencies) is not specified and may be addressed in future legislation. 25 The Governor's Budget states in part: Educational Revenue Augmentation Fund(ERAF)Increase During the State budget crisis in 1992-93 and 1993-94, a series of measures were enacted requiring local governments (counties, cities, special districts, and redevelopment agencies) to shift a portion of the property taxes they receive to the ERAF that was created in each county for allocation to school districts, county offices of education, and community college districts. Any property tax revenue growth from year to year is distributed among local agencies and the county ERAF. Because the State uses the ERAF to support Proposition 98 requirements for schools and community colleges, any growth in the ERAF on an annual basis reduces the State's General Fund Proposition 98 obligation. In 2003-04, local governments' vehicle license fee revenues were reduced by $1.3 billion due to lag time necessary to implement higher fees when the offset was eliminated on June 20, 2003. Chapter 231, Statutes of 2003, provided that this "gap" in funding would be repaid to local governments in 2006-07. In response to the State's fiscal constraints, the Governor's Budget proposes to continue this gap level of reduction ($1.3 billion) to local governments in the form of an increased ERAF shift beginning in 2004-05. Local governments would shift approximately $1.3 billion of property tax revenues to the ERAF in order to decrease the State's General Fund Proposition 98 obligation. Details of the shift proposal will be forthcoming, but will adhere to the structure and methodology of the prior two shifts. On May 13, 2004, the Governor issued the May Revision to the Governor's Budget. The May Revision provides, in part, for an ERAF shift to be borne by redevelopment agencies in the amount of$250 million statewide for each of 2004-05 and 2005-06. No additional details as to the implementation of this ERAF shift are set forth in the May Revision. Based upon the foregoing, investors should assume that there will be reductions in Tax Increment Revenues available to the Agency, which will in turn reduce those moneys available as Tax Revenues. The magnitude of such reductions cannot be quantified at this time, but it may be substantial and affect multiple years. Changes in Redevelopment Law There can be no assurance that the State electorate will not at some future time adopt initiatives or that the State Legislature will not enact legislation that will amend the Redevelopment Law or other laws or the Constitution of the State resulting in a reduction of Pledged Tax Revenues, and consequently, have an adverse effect on the Agency's ability to repay debt service on the Bonds. PROPERTY TAXATIONIN CALIF'OIlNIA Property Tax Collection Procedures In the State, property which is subject to ad valorem taxes is classified as "secured" or "unsecured." The secured classification includes property on which any property tax levied by a county becomes a lien on that property. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other 26 liens on the secured property arising pursuant to State law, regardless of the time of the creation of other liens. Secured and unsecured property are entered separately on the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property. The exclusive means of enforcing the payment of delinquent taxes with respect to property on the secured roll is the sale of the property securing the taxes to the State for the amount of taxes which are delinquent. The taxing authority has four ways of collecting unsecured personal property taxes: (i) initiating a civil action against the taxpayer, (ii) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer, (iii) filing a certificate of delinquency for record in the county recorder's office to obtain a lien on certain property of the taxpayer, and (iv) seizing and selling' personal property, improvements or possessory interests belonging or assessed to the assessee. A 10% penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, property on the secured roll on which taxes are delinquent is sold to the State on or about March 30 of each fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1.5%per month to the time of redemption. If taxes are unpaid for a period of five years.or more, the property is deeded to the State and then is subject to sale by the county tax collector. A 10% penalty also applies to delinquent taxes with respect to property on the unsecured roll, and further, an additional penalty of 1.5% per month accrues with respect to such taxes beginning the first day of the third month following the delinquency date. The valuation of property is determined as of the January 1 lien date as equalized in August of each year and equal installments of taxes levied upon secured property become delinquent on the following December 10 and April 10. Taxes on unsecured property are due ,January 1 and become delinquent August 31. Historically, tax payment practices by the County provided for payment to the agencies of approximately 50% of the secured taxes by the third week in January of each year, an additional 50% of the secured taxes in early May of each year. In accordance with the County's current policy, the Agency expects to receive approximately 50% of the secured taxes by the third week in January of each year and approximately 50% of the secured taxes in early May of each year. Supplemental Assessments California Revenue and Taxation Code Section 75.70 provides for the supplemental assessment and taxation of property as of the occurrence of a change of ownership or completion of new construction. Prior to the enactment of this law, the assessment of such changes was permitted only as of the next tax lien date following the change, and this delayed the realization of increased property taxes from the new assessments for up to 14 months. This statute provides increased revenue to redevelopment agencies to the extent that supplemental assessments of new construction or changes of ownership occur within the boundaries of redevelopment projects subsequent to the January 1 lien date. To the extent such supplemental assessments occur within the Project Area, Pledged Tax Revenues may increase. Property Tax Administrative Costs In 1990, the Legislature enacted SB 2557 (Chapter 466, Statutes of 1990) which allows counties to charge for the cost of assessing, collecting and allocating property tax revenues to local government jurisdictions in proportion to the tax-derived revenues allocated to each. SB 1559 (Chapter 697, Statutes of 1992) explicitly includes redevelopment agencies among the 27 I jurisdictions which are subject to such charges. For Fiscal Year 2003-04 the County's administrative charge to the Agency for the Project Area was $58,862. Unimy Property AB 454 (Statutes of 1987, Chapter 921) provides the method of reporting and allocating property tax revenues generated from most State-assessed unitary properties. Under AB 454, the State reports to each county auditor-controller only the county-wide unitary taxable value of each utility, without an indication of the distribution of the value among tax rate areas. AB 454 provides two formulas for auditor-controllers to use in order to determine the allocation of unitary property taxes generated by the county-wide unitary value, which are: (i) for revenue generated from the 1% tax rate, each jurisdiction is to receive up to 102% of its prior year unitary property tax increment revenue; however, if county-wide revenues generated from unitary properties are greater that 102% of prior year revenues. each jurisdiction receives a percentage share of the excess unitary revenues equal to the percentage of each jurisdiction's share of secured property taxes; (ii) for revenue generated from the application of the debt service tax rate to county-wide unitary taxable value, each jurisdiction is to receive a percentage share of revenue based on the jurisdiction's annual debt service requirements and the percentage of property taxes received by each jurisdiction from unitary property taxes. The provisions of AB 454 apply to all State-assessed property, except railroads and non- unitary properties the valuation of which will continue to be allocated to individual tax rate areas. AB 454 allows, generally, valuation growth or decline of State-assessed unitary property to be shared by all jurisdictions within a county. Due to the limited amount of unitary property within the Project Area, the Agency does not expect the impact of AB 454 or the settlement agreement to have an adverse effect on the Agency's ability to pay debt service on the Bonds. Artiele XIIIA of the,state Constitution Article XIIIA limits the amount of ad valorem taxes on real property to 1% of"full cash value" of such property, as determined by the county assessor. Article XHIA defines "full cash value" to mean "the County Assessor's valuation of real property as shown on the 1975-76 tax bill 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." Furthermore, the "full cash value" of all real property may be increased to reflect the rate of inflation, as shown by the consumer price index, not to exceed 2%per year, or may be reduced. Article XIHA has subsequently been amended to permit-reduction of the "full cash value" base in the event of declining property values caused by substantial damage, destruction or other factors, and to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster and in other special circumstances. Article XHIA (i) exempts from the 1% tax limitation taxes to pay debt service on (a) indebtedness approved by the voters prior to July 1, 1978 or (b) bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition; (ii) requires a vote of two-thirds of the qualified electorate to impose special taxes, or certain additional ad valorem taxes; and (iii) requires the approval of two-thirds of all members of the State Legislature to change any State tax laws resulting in increased tax revenues. 28 The validity of Article XIIIA has been upheld by both the California Supreme Court and the United States Supreme Court. Appropriations Limitation -Article XIIIB Article XIIIB limits the annual appropriations of the State and its political subdivisions to the level of appropriations 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 such appropriations limit is the 1978/79 fiscal year, and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies. Section 33678 of the Redevelopment Law provides that the allocation of taxes to a redevelopment agency for the purpose of paying principal of, or interest on, loans, advances, or indebtedness shall not be deemed the receipt by an agency of proceeds of taxes levied by or on behalf of an agency within the meaning of Article XIIIB, nor shall such portion of taxes be deemed receipt of proceeds of taxes by, or an appropriation subject to the limitation of, any other public body within the meaning or for the purpose of the Constitution and laws of the State, including Section 33678 of the Redevelopment Law. The constitutionality of Section 33678 has been upheld in two California appellate court decisions. On the basis of these decisions, the Agency has not adopted an appropriations limit. Personal Property Tax Special Subventions Government Code Section 16112.7 generally provides that on or after July 31, 1990, no redevelopment agency shall pledge special personal property tax subvention payments as security for payments of the principal and interest on bonds .Future Initiatives Article XIIIA, Article XIBB and certain other propositions affecting property tax levies were each adopted as measures which qualified for the ballot pursuant to California's initiative process. From time to time other initiative measures could be adopted, further affecting Agency revenues or the Agency's ability to expand revenues. Recent Litigation Regarding Increase in Assessed Valuation On November 2, 2001, the Orange County, California Superior Court issued a Minute Order in the case,of County of Orange v. County of Orange County Assessment Appeals Board No. 3. The case involved the assessed value of a property that exceeded the prior_year's assessed value by more than 2%. The increase of a property's assessed value by more than 2% is a common practice among California assessors when the prior year value of the property is less than the base year value of the property (the value assigned upon change of ownership or new construction) and the current year, market value of property is equal to or higher than the computed base year value for the current year. Such instances occur when the prior year value of the property was determined by an appeal or assessor initiated reduction and the condition causing reduction (e.g., recession in the real estate market) has ceased to influence the value of property. The court ruled that the California Constitution and the California Revenue and Taxation Code limit the year to year change in value of property to 2% except in situations described in law but not limited to the instances mentioned above. The court also found that the California Constitution does not authorize a temporary decline in the base value of property that can be restored at a rate higher than 2%. At this time, the Orange County Superior Court is considering 29 possible class certification for a challenge to the Orange County assessor's practice. It is unclear whether, or to what extent, this potential class may affect assessments outside of Orange County. The Agency is unable to predict the effect on Tax Revenues if the ruling described above is ultimately determined to have applicability to the County of San Bernardino and the Tax Revenues allocated to the Agency. The Financial Advisor has not made any adjustment in its projections of Tax Revenues shown in the text of this Official Statement and in Appendix B by reason of the foregoing litigation. Pledged Tax Revenues that secure the Bonds under the Indenture could be reduced, which to turn could impair the ability of the Agency to make payments on the Bonds when due if the above described litigation is upheld and any similar litigation is brought with xespect to the Project Area. No hnpact on Pledged Tax Revenues Arising fi-onz Santa Ana Litigation. The State Court of Appeals recently upheld a Superior Court decision which held the Santa Ana Unified School District had the right to receive payments from the Orange County Redevelopment Agency pursuant to a resolution adopted by the School District in 1996 under former Section 33676(a) of the California Redevelopment Law (Santa Ana Unified School District v. Orange County Redevelopment Agency; App. 4 Dist. 2001 108 Cal. Rptr.2d 770, 90 Cal.App 4th 404, review denied). Former Section 33676(a)(2) provided that, unless a negotiated tax sharing agreement had been entered into, upon passage of a resolution prior to adoption of a redevelopment plan, affected taxing agencies and every school and community college district could elect to be allocated increases in the assessed value of taxable property in the project areas based on inflation growth (the "2% Property Tax Increase"). Former Section 33676(a)(2) was repealed as part of mayor revisions made to the California Redevelopment Law pursuant to the Reform Act of 1993 ("AB 1290"). The changes to the California Redevelopment Law contained in AB,-1290 were effective as of January 1, 1994. The Court of Appeals affinned the lower court ruling that due to an amendment to former Section 336 76(a) which occurred in 1984, school and community college districts were to automatically receive the 2% Property Tax Increase even without adopting the appropriate resolution prior to the adoption of a redevelopment plan. Appeals of Assessed Values Pursuant to California law, a property owner may apply for a reduction of the property tax assessment for such owner's property by filing a written application, in a form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. In the County, a property owner desiring to reduce the assessed value of such owner's property in any one year must submit an application to the County Assessment Appeals Board (the "Appeals Board"). Applications for any tax year must be submitted by September 15 of such tax year. Following a review of each application by the staff of the County Assessor's Office, the staff makes a recommendation to the Appeals Board on each application which has not been rejected for incompleteness or untimeliness or withdrawn. The Appeals Board holds a hearing and either reduces the assessment or confirms the assessment. The Appeals Board generally is required to determine the outcome of appeals within two years of each appeal's filing date. Any reduction in the assessment ultimately granted applies only to the year for which application is made and during which the written application is filed. The assessed value increases to its pre- reduction level for fiscal years following the year for which the reduction application is filed. However, if the taxpayer establishes through proof of comparable values that the property continues to be overvalued (known as "ongoing hardship"), the Assessor has the power to grant a reduction not only for the year for which application was originally made, but also for the then current year as well. Appeals for reduction in the "base _year" value of an assessment, which generally must be made within three years of the date of change to ownership or completion of new construction that determined the base year, if successful, reduce the assessment for the year 30 in which the appeal is taken and prospectively thereafter. Moreover, in the case of any reduction in any one year of assessed value granted for "ongoing hardship" in the then current year, and also in any cases involving stipulated appeals for prior years relating to base year and personal property assessments, the Agency's tax increment attributable to such properties will be reduced in the then current year. In practice, such a reduced assessment may remain in effect beyond the year in which it is granted. See "THE PROJECT AREA—Largest Local Secured Taxpayers" for information regarding the assessed valuations of the top ten property owners within the Project Area. TIDE PROJECT AREA On September 27, 1979 the Agency adopted a redevelopment plan for the Grand Terrace Community Redevelopment Project (the "Original Area"). The Original Area consisted of approximately 640 acres of land. On July 15, 1981 the Original Area was expanded to include all of the area within the City. The revised area was named the "Revised Grand Terrace Community Redevelopment Project Area," and is referred to herein as the "Project Area." The additional area added by this amendment to the redevelopment plan is referred to as the "Amended Area." The Project Area contains approximately 3.7 square miles or 2,365 acres. Of the total acreage within the Project Area % of the residential acreage is developed with single-family homes and apartments; % of the commercial acreage is developed, and _% of the industrial acreage is developed. The Project Area has approximately _ acres of vacant, developable land. Of this area approximately acres are zoned for single-family housing development, _ acres for commercial development and acres for industrial development. Limitations and requirements of the Redevelopment Plan Pursuant to the Redevelopment Plan, the total tax increment revenues received by the Agency over the life of the Redevelopment Plan cannot exceed $70,000,000. The total amount of outstanding bonded indebtedness incurred by the Agency, payable from tax increment revenues. which can be outstanding at any one time cannot exceed $15,000,000. In accordance with State Law, unless certain findings are made, not less than twenty percent (20%) of tax increment revenues allocated to the Agency from the Project Area shall be used for the purpose of increasing, improving and preserving the supply of housing for families of low or moderate income. See "THE AGENCY—Housing Set-Aside." The Redevelopment Plan expires on July 15, 2016. Pursuant to Section 33333.6(c) of the Law, the Agency may receive tax increment revenue to pay outstanding indebtedness for 10 years beyond the terinmation date of the Redevelopment Plan. Agreements with Various Taxing Agencies The Agency has entered into three Pass-Through Agreements with the following agencies: I) the County of San Bernardino: 2) the Colton Joint Unified School District; and 3) the San Bernardino Valley Municipal Water District. The Pass-Through Agreements are discussed in "APPENDIX B —Financial Advisor's Tax Increment Report" herein. 31 Largest Taxpayers Set forth below are the ten largest taxpayers in the Project Area based on the 2003-04 property tax roll. The total valuation of these taxpayers is $78,210,469 which represents approximately 14.19% of the total valuation in the Project Area. Fiscal Year 2003-04 Percent of , Taxpayer Taxable Valuation Total Valuation 1. North Waterf6rd Apartments $30,170,135 5.47% 2. Wilden Pump &Engineering Co. 17,911,636 3.25 3. Grand Terrace LLC 7,089,930 1.29 4. Terrance Assisted Grand 5,692,088 1.03 5. Long Beach Dev Associates 4,028,500 0.73 6. Amemar Inc. 3,944,141 0.72 7. Viking Investment Properties 3,888,604 0.71 8. Howard House Family LP2 1,893,167 0.34 9. 2004 D Avenue LLC 1,810.500 0.33 10. Equalities LLC SA 1.781.768 0.32 Total $18.210.469 14.190/c Total Taxable Valuation Source: Urban Futures, Inc. PLEDGED TAX REVENUES Pledged Tax Revenues (as described in the section "SECURITY FOR THE BONDS" herein) are to be deposited in the Special Fund, administered by the Trustee and applied to the payment of the principal of and interest on the Outstanding Bonds. Schedule of Historical fledged Tax Revenues The following table is a schedule of the taxable valuations and resulting Pledged Tax Revenues in the Project Area for the fiscal years 2000-01 through 2003-04. The base year valuation for the Project Area was established in fiscal year 1980-81 for the original Project Area and 1981-82 for the amendment portion of the Project Area. 2000-01 2001-02 2002-03 2003-04 Total Assessed Valuation $462,375,131 $505,729,860 $528,868,545 S564,143,963 Less: Base Year Valuation 138.276.479 138.276.479 138.276.479 138.276.479 Incremental Valuation $324,098.652 $367,453.381 $390,592,066 $425,867,484 Total Gross Revenues S 3,701,000 S 3,918,443 S 4,141,252 S 4,398,577 Pass-Through Payments 1.226.696 1,298,768 1.372.618 1,457.912 Less- County Admin. Fees 55.983 69.344 65.557 58.862 Tax Revenues S 2.418.321 S 2,550.331 S 2,703 077 $ 2.881,803 Cumulative Tax Rev. $ 38.297,753 (1) Increase over base year valuation Source: Urban Futures, Inc. 32 Projected Taxable Valuation wid Pledged Tax Reveimes The Agency has retained Urban Futures to provide-projections of Pledged Tax Revenues from developments in the Project Area. The table below sets forth those projections for fiscal years 2004-05 through 2008-09. The Agency believes the assumptions (set forth in the footnotes to the table) upon which the projections are based are reasonable; however, some assumptions may not materiali7,e and unanticipated events and circumstances may occur, (see 'RISK FACTORS"). Therefore, the actual Pledged Tax Revenues received during the forecast period may vary from the projections and the variations may be material. A summary of the projected Pledged Tax Revenues is as follows: Fiscal Taxable Incremental Pledged Tax Year, Valuation (1) Valuation (2) revenues 2004-05 $597,231,738 $458,955,259 $2,958,143 2005-06 615,148,690 476,872,211 3,070,510 2006-07 633.603,151 495,326,672 3,186,359 2007-08 652,611,245 514,334,766 3,305;795 2008-09 672,189,583 533,913,104 3,428,929 (1) Taxable valuation increased by $16,163,456 in 2004-05 and thereafter each _year by a 2% inflationary and a 1% growth factor. (2) Incremental valuation consists of the assessed valuation less the adjusted base year valuations of$138,276,479 for the Project Area. Source: Urban Futures, Inc. JJ Annual Debt Service Set forth below is the annual debt service (assuming minimum sinking account payments) for the term of the Bonds. Community Redevelopment Project Area Annual Debt Service Maturity Date Total September 1 of Principal Interest Debt Service (1) 2005 $1,550,000 $4597361 $2,009,361 2006 1,580,000 427,030 2,007,030 2007 1,610,000 395,430 2,005,430 2008 1,645,000 355,985 2,000,985 2009 1,695.000 309.925 2,004,925 2010 1,750,000 257,380 2,007,380 2011 1,810,000 197,880 2,007,880 2012 505.000 132,720 637,720 2013 530,000 112,773 642,773 2014 550,000 91,838 641,838 2015 570,000 70,113 640,113 2016 590,000 47,598 637,598 2017 615.000 24.293 639.293 Total $15,000,000 52.882.326 $17.882,326 (1) The Bonds debt service is based on an estimated net interest'-rate of 3.669% 34 Debt Service Coverage Set forth below is the estimated debt service coverage of the Bonds using Fiscal Years 2004-05 through 2008-09 projected Pledged Tax Revenues. ---- —Pledgged --- Deserve - - Annual Fiscal Tax Account Total Annual Debt Debt Service Year Revenues Earnings (1) Revenues Service Coverage 2004-05 $2,958,143 $60,000 S3,018,143 $2,009,361 1.50x 2005-06 3,070,510 60,000 3,130,510 2,007,030 1.56x 2006-07 3,186,359 60,000 3,246,359 2,005,430 1.62x 2007-08 3,305,795 60,000 3,365,795 2,000,985 1.68x 2008-09 3,428,929 6000 3.488.929 2,004,925 1.74x (1) Assumes the moneys in the Reserve Account invested at a combined average annual rate of four percent (4.00%). BOND INSURANCE [INFORMATION TO FOLLOW] CONCL UDING INFORMA 7'ION Ratings Standard & Poor's Ratings Group and Moody's Investors Service, Inc. have assigned their respective municipal ratings of"AAA" and "Aaa" to this issue of Bonds with the understanding that upon delivery of the Bonds, a policy insuring the payment when due of the principal of and interest on the Bonds will be issued by These ratings reflect the rating agencies' views of the creditworthiness of the Bond h3surer. In addition, S&P has assigned a municipal bond rating of " " to the Bonds. This rating reflects the view of S&P as to the credit quality of the Bonds without regard to the delivery of the Municipal Bond Insurance Policy. The explanation of the significance of the ratings may be obtained fi•om Standard & Poor's Ratings Group, 55 Water Street, New York, New York 10041 (212) 438-2124 or Moody's Investors Service, Inc., 99 Church Street,New York, New York 10007, (212) 553-0300. There is no assurance that the ratmgs will continue for any given period of time or that it will not be revised downward or withdrawn entirely by the respective rating agency, if in the judgment of the rating agency circumstances so warrant. Any such downward revision or withdrawal of the ratings may have an adverse effect on the market price of the Bonds. Oiderwrithig The Bonds have been sold at a net interest rate of %. The original purchase price to be paid is S for the Bonds. The Underwriter intends to offer the Bonds to the public initially at the yields set forth on the coves- page of this Official Statement, which yields may subsequently change without any requirement of prior notice. The Underwnter reserves the right to join with dealers and other-underwriters in offering the Bonds to the public. The Underwriter may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) at prices lower than the public offering prices, and such dealers may reallow any such discounts on sales to other dealers. 35 Legal Opinion The opinion of Harper & Bums, Orange, California, Bond Counsel, approving the validity of the Bonds and stating that interest on the Bonds is excluded from gross income for federal income tax purposes and that such interest is also exempt from personal income taxes of the State of California under present State income tax laws, will be furnished to the Agency at the time of delivery of the Bonds. Compensation for Bond Counsel's services is entirely contingent upon the sale and delivery of the Bonds. A copy of such opinion, certified by an officer of the Agency by his facsimile signature, will be printed on the back of each definitive Bond. No charge will be made to the purchaser for such printing or certification. The legal opinion is only as to legality and is not intended to be nor is it to be interpreted or relied upon as a disclosure document or an express or implied recommendation as to the investment quality of the Bonds. In addition, certain legal matters will be passed on for the Agency by Stradling Yocca Carlson &Rauth, a Professional Corporation,Newport Beach, California, as Disclosure Counsel. Tax Exemption In the opinion of Harper&Burns, LLP, Orange, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, interest on the Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that; with respect to corporations, interest on the .Bonds will be included as an adjustment in the calculation of alternative minimum taxable income which may affect the alternative minimum tax liability of such corporations. In addition; the difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity_ are to be sold to the public) and the stated redemption price at maturity with respect to a Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bondowner before receipt of cash attributable to such excludable income. The amount of original issue discount that accrues to the owner of the Bond is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and its exempt from State of California personal income tax. The amount by which a Bond Owner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond Owner's basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium. 36 Bond Counsel's opinion as to the exclusion from gross income,of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the Agency, and others and is subject to the condition that the Agency comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code") and the Act, that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with the requirements of the Code and the Act might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Agency has covenanted to comply with all such requirements. Bond Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code and the Act, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) on the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences of the Bonds. No Litigation There is no action, suit or proceeding known to the Agency to be pending or threatened, restraining or enjoining the execution or delivery of the Bonds or the Indenture or in any way contesting or affecting the validity of the foregoing or any proceedings of the Agency taken with respect to any of the foregoing. Legality for hnvesunent in California The Law provides that obligations authorized and issued under the Law shall be legal investments for all banks, trust companies and savings banks, insurance companies, and various other financial institutions, as well as for trust funds. The Bonds are also authorized security for .public deposits under the Law. The Superintendent of Banks of the State of California has previously ruled that obligations of a redevelopment agency are eligible for savings bank investment in California. Continuing Disclosure Pursuant to a Continuing Disclosure Agreement with U.S. Bank National Association, as Dissemination Agent (the "Disclosure Agreement"), the Agency has agreed to provide, or cause to be provided, to each nationally recognized municipal securities information repository and any public or private repository or entity desiplated by the State as a state repository for purposes of Rule 15c2-12(b)(5) (the "Rule") adopted by the Securities and Exchange Commission (each, a "Repository"), certain annual financial information and operating data, including its audited financial statements, information of the type set forth in this Official Statement under the headings "THE PROJECT AREA—Largest Local Secured Taxpayers" and "PLEDGED TAB' REVENUES—Schedule of Historical Pledged Tax Revenues" and'a discussion of any property tax appeals, which, either alone or in the aggregate could have a material adverse affect or, Pledged Tax Revenues. In addition, the Agency has agreed to provide, or cause to be provided, 37 to each Repository in a timely manner notice of the following "Listed Events" if material: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3)modifications to rights of Owners of Bonds; (4) contingent or unscheduled Bond calls; (5) defeasances; (6) rating changes; (7) adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds; (8) unscheduled draws on the Reserve Account reflecting financial difficulties; (9) unscheduled draws on the Municipal Bond Insurance Policy reflecting financial difficulties; (10) substitution of the provider of the Municipal Bond Insurance Policy, or any failure by the Bond Insurer to perform thereon; and (11) release, substitution or sale of property securing repayment of the Bonds. These covenants have been made in order to assist the Underwriter in complying with the Rule. The Agency has never failed to comply in all material respects with any previous undertakings with regard to the Rule to provide annual reports or notices of material events. The Agency may amend the Disclosure Agreement, and waive any provision thereof, by written agreement of the parties, without the consent of the Owners, if all of the following conditions are satisfied: (1) such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law (including rules or regulations) or in interpretations thereof, or a change in the identity, nature or status of the Agency or the type of business conducted thereby; (2) the Disclosure Agreement as so amended would have complied with the requirements of the Rule as of the date of the Disclosure Agreement, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; (3) the Agency shall have delivered to the Dissemination Agent an opinion of nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Agency and the Dissemination Agent, to the same effect as set forth in clause (2) above; (4) the Agency shall have delivered to the Dissemination Agent an opinion of nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Agency, to the effect that the amendment does not materially impair the interests of the Owners; and (5) the Agency shall have delivered copies of such opinion and amendment to each Repository. In addition, the Agency's obligations under the Disclosure Agreement shall terminate upon the defeasance or payment in full of all of the Bonds. The provisions of the Disclosure Agreement are intended to be for the benefit of the Owners and shall be enforceable by the Trustee on behalf of such Owners, provided that any enforcement action by any such person shall be limited to a right to obtain specific enforcement of the Agency's obligations under the Disclosure Agreement and any failure by the Agency to comply with the provisions thereof shall not be an Event of Default under the Indenture. Miscellayaeous All of the preceding summaries of the Indenture, the Law, other applicable legislation, the. Redevelopment Plan for the Project Area, agreements and other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the Agency for further information in connection therewith. This Official Statement does not constitute a contract with the purchasers of the Bonds. Any statements made in this Official Statement involving matters of opinion or 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. 38 The execution and delivery of this Official Statement by its Executive Director has been duly authorized by the Agency. COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF GRAND TERRACE By: Is/ Executive Director 39 SUPPLEMENTAL INFORMATION THE CITY OF GRAND TERRACE The following information concerning the City of Grand Terrace is presented as general background data. The Bonds are not an obligation of the City of Grand Terrace, the County of San Bernardino, the State of California or any of its political subdivisions, and neither said City, said County, said State nor any of its political subdivisions is liable therefor. Generalinformatiore The City of Grand Terrace was incorporated on November 30, 1978. Grand Terrace is situated in San Bernardino County, California, five miles south of San Bernardino and five miles northeast of Riverside. Grand Terrace is a general law city and operates under the council- member form of government. The City Council consists of five members elected at large for staggered four-year terms. The May or is appointed by the City Council from among its members. The City Treasurer's office is combined with the City Council appointed position of City Manager. Population The following table sets forth population estimates for the City, the County of San Bernardino and the State of California for the past ten years: CITY OF GRAND TERRACE ESTIMATED POPULATION Year City of San Bernardino State of (January 1) Grand Terrace County California 1995 12,200 1,573,900 31,617,000 1996 12.000 1.590,800 31-837,000 1997 11,900 1.613.500 32,207,000 1998 11,750 1.637,900 32,657,000 1999 11,650 1,666,600 33,140,000 2000 11.600 1.701.700 33,753.000 2001 11,750 11747.600 34,43100 2002 12.000 1,793,700 35,049,000 2003 12,150 1.842,100 35,612,000 2004 12.250 11886,500 36.144.000 Source: State of California Department of Finance; Demographic Research Unit 40 Employment and Industry The City is located in the Riverside-San Bernardino Labor Market Area. Iri the county of San Bernardino the labor force employment and unemployment figures over the last four years for the County is as follows. Riverside-San Bernardino Labor Market Area 2001 2002 2003 2004 (3) Agriculture 21,700 20,900 20,300 26,500 Natural Resources and Mining 1,300 1,200 1,200 1,200 Construction 80,100 88,400 90,900 98,900 Manufacturing 120,100 118,600 115,400 114,900 Trade, Transportation and Utilities 212,200 219,400 225,400 239,100 Information 12,900 14,600 14,100 13,100 Financial Activities 34,800 38,200 39,500 43,000 Professional and Business Services 97,000 101,700 106,800 120,600 Educational and Health Services 102,200 106,000 112,400 116,100 Leisure and Hospitality 100,800 104,400 107,200 112,300 Other Services 35,000 37,100 38,100 38,800 Government 200.200 212.700 211.400 213,700 Total, All Industries 1 0 1.050,700 1.084,000 1,138.200 Total Civilian Labor Force (2) 1,508,000 1,562,300 1,638,800 1,725,900 Total Unemployment 77.200 78.200 96,300 90.000 Unemployment Rate 5.1% 5.0% 5.9% 5.2% (1) Industry employment is by place of work: excludes self-employed individuals, unpaid family workers, household domestic workers and workers on strike. (2) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers and workers on strike. (3) Through May, 2004. Source: State Employment Development Department, Labor Market Information Division. 41 Commercial Activity The following table demonstrates the growth in the number of business permits and taxable transactions in the City: CITY OF GRAND TERRACE TAXABLE TRANSACTIONS (in thousands) Retail Stores Total Outlets Number of Taxable Number of Taxable Year Permits Transactions Permits Transactions 1994 61 15,798 211 18,839 1995 62 17,998 216 22,376 1996 69 19,546 210 23,668 1997 74 20,709 225 27,545 1998 87 25,110 219 40,198 1999 88 26,583 20 7 42,683 2000 88 26,760 206 45,274 2001 90 30.127 203 527010 2002 96 31,611 212 56,010 2003,(1) 106 16.544 224 31,240 (1) Through the second quarter. Source: State Board of Equalization. Buildi»g Activity The following presents the residential building permit valuations for the City of Grand Terrace for the calendar years 2000 through May, 2004: RESIDENTIAL BUILDING PERMIT VALUATIONS CITY OF GRAND TERRACE (Valuation in 000) 2000 2001 2002 2003 2004 (1 Residential Single Unri $2.423 $1,590 $243 $735 $4017 Multiple Units 0 0 0 0 0 Total Residential $2.423 $1,590 $243 $735 $4017 No. of New Dwelling Units Single Unit 14 9 1 3 19 Multiple Units 0 0 0 0 0 Total Units 14 9 1 3 19 (1) Through May, 2004. Source: California Building Permit Activity, Economic Sciences Corporation 42 Recreation Griffin Park (1.6 acres) is a small linear park located along the Metropolitan Water District easement in the northeastern portion of the City which provides a connection between Merle Court and Observation Drive. It is intended primarily for passive recreational use. Pico Park (8.90 acres) is the largest park in the community. Built in 1995, the park has three ball fields, basketball courts, in addition to restroom facilities, snack bar facilities and picnic areas. Richard Rollins Park (5.35 acres) provides playfields for active recreation and is located adjacent to the grounds of Terrace Middle School, which provides additional facilities for active recreation, including a swimming pool. The school facilities are owned and maintained by the Colton Unified School District. TJ Austin Park (2.5 acres) is a small linear park along the Metropolitan Water District easement in the northeastern portion of the City between Raven and Robin Ways. It is intended primarily for passive recreational use. San Bernardino and Riverside Counties have numerous regional parks open to the public that provide many types of recreation, .including fishing, horseback riding, and picnicking. Camp-in sites are also available at some of the parks. Community Services and Utilities Police protection within the City is provided by the San Bernardino County Sheriffs Department. Fire protection is supplied by the County Fire Department. Electricity in the City is provided by the Southern California Edison Company, natural gas by Southern California Gas ;Company, and telephone service by Pacific Bell. Water is supplied by the Riverside Highland Water Company, which has a maximum capacity of 15, gallons per day. Sewage service is supplied by the City of Colton. A branch of the San Bernardino County Library system is located in the City's Civic Center building. Loma Linda University Medical Center and the Veterans Hospital are less than 10 miles away in Loma Linda The City has a very active Senior Center in operation since July 1991. Most of the programs and activities are open to the adult public regardless residency The City operates an award winning childcare program. Started in 1986, over 2,500 children have gone through the program. Education The schools in Grand Terrace are part of the Colton Unified School District. There are two elementary schools and one middle school located within the City. High school students attend Colton High School, which is approximately 3.5 miles away. The Colton Unified School District covers an area of 48 square miles in San Bernardino County. The District has 27 schools and provides service to approximately 22,000 students. In 1986, Colton High School was honored as one of 30 distinguished high schools in the State of California. Terrace Hills Middle School was commended nationally as a Distinguished 43 Middle School and on a statewide basis as a Partnership School. Terrace View Elementary school received the California Distinguished School award in 1998 and most recently was nominated a National Blue Ribbon School, o e of two in the County of San Bernardino. California State University at San Bernardino is located within 13 miles of the City, and University of California at Riverside is located within 4 minutes. There is also a private university located in Redlands. Several junior colleges are located in San Bernardino and Riverside counties. Transpoilation The City is served principally by two major freeways. Traveling southwest to north, Interstate 215 intersects the western portion of the City, providing access to San Diego to the south and Las Vegas to the northeast. Interstate 10, located_dust north of the City, traverses in a west-to-east direction, providing access to Los Angeles to the west and Phoenix to the east. Ontario International Airport is approximately 25 miles away by freeway. The City is served by the Burlington Northern Santa Fe and the Union Pacific railroads. Moreover, there is an Amtrak depot in San Bernardino. The City, through its agent the Riverside Transit Agency, has a Joint Powers Agreement with Ornnrtrans System, which provides bus service primarily in the southwestern portion of San Bernardino County. Greyhound bus service is available within five minutes from the City. Business and Economic Development The Cit_y's location, business friendly attitude, and its commitment to future generations through long term financial solvency creates the perfect environment for growing firms, such as Wilden Pump. a fortune 500 company with $4.5 billion in worldwide revenue. The City is highly accessible by being located along the I-215, I-60, and 1-10 freeway corridors. Each day over 500.000 vehicles pass by the City. Only 20 minutes from Ontario International Airport and adjacent to the eastern terminus of the Alameda Railroad Corridor the city can meet the transportation and retail traffic count needs of any business. With lower business operating costs, top performing schools, high median income levels and an outstanding quality of life for its residents, Grand Terrace is one of the most attractive city for doing business in southern California. Due to the beauty of its location, nearness to the-Loma Linda Medical cluster, and high educational levels, the City expects to be a hub for medical related, high technology industries. It has approximately 20 acres of affordable prime commercial land located close to the I-215 freeway and 100 acres of underutilized or vacant commercial/industrial land and business park area along the freeway in a redevelopment zone. Meanwhile, its retail base is expanding rapidly in the specialty goods area. Mr. TV Video, for instance, is ranked 41 st in electronic sales of Mitsubishi's 700 nationwide dealers. 44 (This Page Deft Int.entlonally Blank) APPENDIX A DEFINITIONS ('Phis Page Left Intentionally Blank) DEFINITIONS The following are definitions of certain terms contained in the Indenture and used in this Official Statement. Additional Bonds means bonds (including, without limitation, bonds, notes, interim certificates, debentures or other obligations) secured by a pledge of Pledged Tax Revenues on a parity with the Bonds. Aeency means the Community Redevelopment Agency of the City of Grand Terrace. Alternative Reserve Account Security means one or more letters of credit, surety bonds, bond insurance policies, or other form of guaranty from a financial institution for the benefit of the Trustee, the long-term, unsecured obligations of which are rated not less than "A" by Moody's Investors Services, or "A" by Standard & Poor's in substitution for or in place of all or any portion of the Reserve Requirement, which shall require written consent of Bond Insurer as to the provider of the security and as to its structure Annual Debt Service means, for any Bond Year, the principal and interest, including scheduled sinking fund payments, payable on the Outstanding Bonds in such Bond Year. Authority means the Grand Terrace Public Financing Authority, a joint exercise of powers authority duly organized and existing under the laws of the State, including the Act. Bond or Bonds means the Agency's, Community Redevelopment Project Area Refunding Tax Allocation Bonds, Series 2004. Bond Insurer means Bondowner or Owner of Bonds, or any similar tenn. means any person who shall be the registered owner or his duly authorized attorney, trustee or representative of any Outstanding Bond. Bond Year means the twelve (12) month period commencing on September 2 of each year and each anniversary date thereafter, provided that the first Bond Year shall extend from the closing date to September 1, 2005. Business Day means a day of the year other than a day on which banks in California or New York are required or authorized to remain closed. Cede & Co. means the nominee of DTC. and any successor nominee of DTC with respect to the Bonds. Certificate or Certificate of the Agency means a certificate signed by the Chairman or Executive Director of the Agency or their respective deputies. Chairman means the chainnan of the Agency appointed pursuant to Section 33113 of the Health and Safety Code of the State of California, or other duly appointed officer of the Agency authorized by the Agency by resolution or bylaw to perform the functions of the chairman in the event of the chairman's absence or disqualification. City means the City of Grand Terrace, California. A-1 Code means the Internal Revenue Code of 1986, as amended and any regulations, rulings, judicial decisions, and notices, announcements and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it, or any applicable regulations adopted under the Internal Revenue Code of 1954, as amended. Computation Year means the twelve (12) month period commencing September 1 of each year and ending on,August 31 of the following year; provided that the first Computation Year shall commence on the Delivery Date and end on August 31, 2005. Continuing Disclosure Agreement means that certain Continuing Disclosure Agreement executed by the Agency and the Trustee as Dissemination Agent and dated the date of issuance and delivery of the Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. Costs of Issuance means the costs and expenses incurred in connection with the issuance and sale of the Bonds including the acceptance and initial fees and expenses of the Trustee, the premium for the Municipal Bond Insurance Policy, legal fees and expenses of the Trustee and the Agency, costs of printing the Bonds and Official Statement, fees of financial consultants and other fees and expenses set forth in a Certificate of the Agency. County means the County of San Bernardino, California. Delivery Date means the date the Bonds are delivered to the original purchaser thereof. Depository means (a) initially, DTC, and (b) any other Securities Depository acting as Depository pursuant to the Indenture. DTC means The Depository Trust Company, New York, New York, and its successors .and assigns. Fiscal Year means any twelve (12) month period beginning on July 1st and ending on the next following June 30th. Govenvnent Oblieations means direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of Treasury, and CATS and TGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. Gross Proceeds means the sum of the following amounts: (i) original proceeds, being the amounts received by the Agency, or held by the Trustee as proceeds of the original issuance of the Bonds (after payment of all expenses of issuing the Bonds); (ii) investment proceeds, being amounts received at any time by the Agency or the Trustee, such as interest and dividends; resulting from the investment of proceeds of the Bonds, including profits and less losses received on such investment; (iii) amounts, other than original proceeds and investment proceeds, held in any fund or account and reasonably expected to be used to pay principal of or interest on the Bonds; (iv) securities or obligations pledged as security for the payment of the Bonds by an ultimate obligor(or a related person) or the Agency; (v) amounts used to pay principal or interest with respect to the Bonds; and, (vi) amounts received as a result of investing the amounts listed in clauses (i) through (v). Indenture means the Indenture of Trust between the Agency and the Trustee, dated as of August 1, 2004, as originally adopted or as it may be amended or supplemented by any Supplemental Indenture entered into pursuant to the provisions thereof. A-2 Independent Financial Consultant, or Independent Redevelopment Consultant means any individual or firm engaged in the profession involved, appointed by the Agency, and who, or each of whom, has a favorable reputation in the field in which his/her opinion or certificate will be given, and: (1) is in fact independent and not under domination of the Agency; (2) does not have any substantial interest, direct or indirect, with the Agency; and (3) is not connected with the Agency as an officer or employee of the Agency, but who may be regularly retained to make reports to the Agency. Interest Payment Date means March 1 and September 1 of each year commencing March 1, 2005. Investment Property'means any security, any obligation, any annuity contract and any investment-type property (other than any tax exempt bond, any demand deposit SLG and any qualified temporary investment within the meaning of paragraph (A)(4) or (5) of Section 148 of the Code), as detennined pursuant to the Code and Regulations. Law means the Community Redevelopment Law of the State of California (commencing with Health and Safety Code Section 33000). Maximum Annual Debt Service means the maximum amount of scheduled principal-and interest payable in any Bond Year fi-orn and after the date of calculation, including any scheduled sinking fund redemptions. Mood 's means Moody's Investor Service, Inc.,New York, New York. Municipal Bond hisurance Policy means the municipal bond insurance policy issued by the Bond Insurer insunng the payment when due of the principal of and interest on the Bonds as provided therein. 1993A Bonds means the Agency's $3,525.000 remaining principal balance of Community Redevelopment Project Area, Refunding Tax Allocation Bonds, Series 1993A. 1993A Bonds Indenture means the Indenture of Trust, dated as of August 1, 1993, by and between the Agency and the Trustee for the 1993A Bonds. 1993B Bonds means the Agency's $2,780,000 remaining principal balance of Community Redevelopment Project Area, Taxable Tax Allocation Bonds, Series 1993B. 1993B Bonds Indenture means the Indenture of Trust, dated as of August 1, 1993, by and between the Agency and the Trustee for the 1993B Bonds. Opinion of Counsel means a written opinion of an attorney or firm of attorneys of favorable reputation in the field of municipal bond law. Any opinion of such counsel may be based upon, insofar as it is related to factual matters, infonnation which is in the possession of the Agency as shown by a certificate or opinion of, or representation by, an officer or officers of the Agency, unless such counsel knows, or in the exercise of reasonable care should have known, that the certificate, opinion or representation with respect to the matters upon which his or her opinion may be based, as aforesaid, is erroneous. A-3 Outstanding, when used as of any particular time with reference to Bonds, means, subject to the provisions of the Indenture, all Bonds except: (a) Bonds canceled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds paid or deemed to have been paid pursuant to the Indenture; and (c) Bonds in lieu of or in substitution for which other Bonds have been authorized, executed, issued and delivered by the Agency pursuant to the Indenture or any Supplemental Indenture. Pass-Through Agreements means the agreements entered into (1) that agreement by and among the Agency, City and San Bernardino Valley Municipal Water District, dated September 10, 1981; (ii) that certain settlement agreement dated as of November 11, 1981 entered into by and among the Agency, City and County of San Bernardino, as amended by an amended settlement agreement entered into by such parties, dated June 15, 1993; and (iii) that Agreement by and among the Agency, City and Colton Joint Unified School District, dated July 8, 1993 pursuant to Section 33401 of the Bealth and Safety Code. Permitted Investments means: (a) Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department,of Treasury, and CATS and TGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America; (b) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the federal agencies as set forth in the Indenture, and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself); (c) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by .any of the non-full faith and credit U.S. government agencies. as set forth in the Indenture, (stripped securities are only permitted if they have been stripped by the agency itself); (d) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G, AAAm. or Aam and if rated by Moody's rated Aaa; Aal or Aa2; (e) Certificates of deposit secured at all times by collateral described in (a) and/or (b) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral; (f) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF; (g) Investment Agreements, including GIC's, Forward Purchase Agreements and Reserve Fund Put Agreements, acceptable to MBIA; (h) Commercial paper rated, at the time of purchase, "Prime-1" by Moody's or "A-1" or better by S&P; (1) Bonds or notes issued by any state.or municipality which are rated by Moody's or S&P in one of the two highest rating categories assigned by such agencies; 0) Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of "Prime-1" or "AY or better by Moody's and "A-1" or "A" or better by S&P; (k) Any state administered pool investment fund in which the Agency is statutorily permitted or required to invest (1) Repurchase agreements providing for the transfer of securities from a dealer bank or securities firm (seller/borrower) to a municipal entity (buyer/lender), and the transfer of cash from a municipal entity to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the municipal entity in exchange for the securities at a specified date. Repurchase Agreements must satisfy the criteria in the Indenture or be approved by MBIA. Pledeed Tax Revenues means the Tax Revenues less amounts required to be paid to taxing agencies pursuant to the Pass-Through Agreements. A-4 Project Area means the project area described and defined in the Redevelopment Plan. Rating Agencies shall mean Standard &Poor's Ratings Group, New York, New York and Moody's Investors Service, Inc., New York, New York, or their respective successors and assigns. Redevelopment Plan means the Redevelopment Plan for the Community Redevelopment Project Area, approved and adopted by the City Council of the City of Grand Terrace and includes any amendment thereof, theretofore or thereafter made pursuant to the Law. Redevelopment Project means the Community Redevelopment Project Area No. One. Regular Record Date means the close of business on February 15 or August 15, preceding each Interest Payment Date, as applicable. Regulations means the regulations adopted by the Department of Treasury from time to time. Report means a document in writing signed by an Independent Financial Consultant and including: (a) A statement that the person or firm making or giving such Report has read the pertinent provisions of the Indenture to which such Report relates; (b) A brief statement as to the nature and scope of the examination or investigation upon which the Report is based: and (c) A statement that, in the opinion of such person or firm, sufficient examination or investigation was made as is necessary to enable said consultant to express an informed opinion with respect to the subject matter referred to in the Report. Reserve Requirement means, with respect to the Bonds. an amount equal to the least of (1) ten percent (10%) of the proceeds of the Bonds, (ii) Maximum Annual Debt Service, or (iii) 125% of Average Annual Debt Service. Revenues means the Pledged Tax Revenues together with all other moneys held by the Trustee in any Fund or Account and the interest earnings thereon. S&P means Standard and Poors Ratings Group, New York, New York. Securities Depositories means The Depository Trust Company, 711 Stewart Avenue, Garden Agency, New York 11530, Fax (516) 277-4039 or 4190; Midwest Securities Trust Company, Capital Structures-Call Notification, 440 South LaSalle Street, Chicago, Illinois 60605, Fax (312) 663-2343; Philadelphia Depository Trust Company, Reorganization Division, 1900 Market Street, Philadelphia, Pennsylvania 19103, Attention: Bond Department, Fax (215) 496-5058: and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the Agency may designate in a written request of the Agency delivered to the Trustee. State means the State of California. Supplemental Indenture or supplemental indenture means any indenture then in full force and effect which has been duly entered into by the Agency under the Law, or any act A-5 supplementary thereto and amendatory thereof, at a meeting of the Agency duly convened and held, at which a quorum was present and acted thereon, amendatory of or supplemental to the Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized thereunder. Tax Certificate means that certain Tax Certificate executed in connection with the issuance of the Bonds or any Additional Bonds. Tax Revenues means that portion of taxes levied upon taxable property in the Project Area and received by the Agency for the Project Area of the Agency pursuant to Article 6 of Chapter 6 of the Law and Section 16 of Article XVI of the Constitution of the State of California; or pursuant to other applicable State laws, and as provided in the Redevelopment Plan, and (to the extent permitted by law) all payments, subventions and reimbursements, if any, to the Agency specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations. Treasurer or Treasurer of the Agency means the officer who is then performing the functions of Treasurer of the Agency. Trustee means the trustee appointed by the Agency pursuant to the Indenture, its successors and assigns, and any other corporation or association which may at any time be substituted in its place, as provided in the Indenture. 2003 Bank Loan means the loan by and between the Agency and Zions First National Bank of which $1,190,000 is currently outstanding. A-6 APPENDIX B FINANCIAL ADVISOR'S TAX INCREMENT REPORT (This Page left Intentionally Blank) APPENDIX B SPECIMEN MUNICIPAL CIPAL BOND INSURANCE POLICY (This Page heft Intentionally Blank) $1590009000Y CO1VIMUNITY REDEVELOPMENT AGENCY OF THE CITE' OF GRAND TERRACE COMMUNITY REDEVELOPMENT PROJECT AREA REFUNDING TAX ALLOCATION BONDS SERIES 2004 BOND PURCHASE CONTRACT August , 2004 Community Redevelopment Agency of the City of Grand Terrace 22795 Barton Road Grand Terrace, CA 92324 Grand Terrace Public Financing Authority 22795 Barton Road Grand Terrace, CA 92324 Ladies and Gentlemen: Wedbush Morgan Securities (the "Underwriter"), acting not as fiduciary or agent for you, but on behalf of itself, hereby offers to enter into this Bond Purchase Contract (the "Purchase Contract") with the Community Redevelopment Agency of the City of Grand Terrace (the "Issuer") and the Grand Terrace Public Financing Authority (the "Authority") for the purchase and sale from the Authority immediately after the purchase by the Authority from the Issuer, of the Issuer's Community Redevelopment Project Area, Refunding Tax Allocation Bonds, Series 2004 (the "Bonds"). This offer is made subject to acceptance thereof by the Issuer prior to 9:00 p.m., Pacific Time, on the date hereof, as evidenced by the signature of the Executive Director of the Issuer and by an officer of the Authority in the spaces provided herein. This Purchase Contract shall be in full force and effect in accordance with its terms and shall be binding upon the Issuer and the Underwriter 1. Purchase and Sale of the Bonds. Upon the teens and conditions and upon the basis of the representations and agreements herein set forth, the Underwriter hereby agrees to purchase from the Authority, which will purchase from the Issuer, for offering to the public, and the Authority hereby agrees to sell to the Underwriter all (but not less than all) of the Issuer's $15,000,000* aggregate principal amount of Community Redevelopment Project Area, Refunding Tax Allocation Bonds, Series 2004, at a discount of % and less original issue discount of $ The Issuer hereby agrees to sell the Bonds to the Authority (for Preliminary,subject to chanee immediate purchase by the Underwriter hereunder) for the same purchase price as is paid by the Underwriter to the Authority. The Bonds will mature and bear interest at the interest rate as shown in Appendix A herein and will be subject to redemption according to the terms set forth in the Indenture. The Bonds will be authorized and issued pursuant to an Indenture of Trust, dated August 1, 2004 (the "Indenture") approved by a resolution adopted by the Issuer on July 22, 2004 (the "Resolution"), and in accordance with the Community Redevelopment Law (Part 1 of Division 24 of the California Health and Safety Code) (the "Law"), and the Constitution and other applicable laws of the State of California (the "State"). The Bonds will be purchased and sold by the Authority pursuant to the provisions of Chapter 5 of Division 7 of Title 1 (commencing with Section 6584) of the California Government Code (the UPA Act"). The Underwriter agrees to make a bona fide public offering of the Bonds at the initial offering price set forth in the Official Statement; however, the Underwriter reserves the right to make concessions to dealers and to change such initial offering price as the Underwriter shall deem necessary in connection with the marketing of the Bonds. The Underwriter agrees that, in connection with the public offering and initial delivery of the Bonds to the purchasers thereof from the Underwriter, the Underwriter will deliver or cause to be delivered to each purchaser a copy of the Official Statement prepared in corunectron with the Bonds. Terms defined in the Official Statement are used herein as so defined. 2. Official Statement. The Issuer shall deliver, or cause to be delivered, to the Underwriter two (2) executed copies of the final Official Statement prepared in connection with the Bonds, in such form as shall be approved by the Issuer and the Underwriter and which Official Statement shall be final in all respects in accordance with Rule 15c2-12 promulgated pursuant to the Securities Exchange Act of 1934, and which Official Statement shall be final in all respects in accordance with Rule 15c2-12 promulgated pursuant to the Securities Exchange Act of 1934. and such additional conformed copies thereof as the Underwriter may reasonably request. The Issuer deems the Preliminary Official Statement (the "Preliminary Official Statement") to be "final" as of its date for purposes of such Rule 15c2-12, omitting only such information as is permitted under such Rule 15c2-12. By acceptance of this Purchase Contract, the Issuer hereby authorizes the use of copies of the Official Statement in connection with the public offering and sale of the Bonds, and ratifies and approves the distribution by the of Underwriter the Preliminary Official Statement. 3. The Closing. At 9:00 a.m.. Pacific Time, on August , 2004 or at such other time or on such earlier or later business day as shall have been mutually agreed upon by the Issuer and the Underwriter, the Issuer will cause to be delivered (1) the Bonds, through the facilities of The Depository Trust Company, to the Underwriter in New York, New York, and (ii) the documents hereinafter mentioned at the offices of Harper & Burns, LLP ('Bond Counsel"), Orange, California or another place to be mutually agreed upon by the Issuer and the Underwriter. The Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in Section I hereof in immediately available funds to the order of the Issuer. Such payment and delivery, together with the delivery of the aforementioned documents, is herein called the "Closing". The Bonds will be delivered in such denominations and deposited in the account or accounts specified by the Underwriter pursuant to written notice not later than five business days prior to Closing. 4. Representations and Agreements of the Issuer. The Issuer- represents and agrees that: (a) The Issuer is a public body. corporate and politic, duly organized and existing, and authorized to transact business and exercise powers, under and pursuant to the Constitution and laws of the State, including the Law, and has, and at the date of the Closing will have, full legal right, power and authority (1) to enter into this Purchase Contract, (ii)to issue, sell and deliver the Bonds to the Authority, which will immediately sell and deliver the Bonds to the Underwriter, acting on its own behalf, as provided herein, (ill) to adopt the Resolution approving the Indenture, and (iv) to carry out and to consummate the transactions contemplated by this Purchase Contract, the Indenture, the Continuing Disclosure Agreement (the "Disclosure Agreement") between the Issuer and the Trustee as Dissemination Agent with respect to the Bonds, the Refunded Bonds Escrow Agreement (the "Escrow Agreement") and the Official Statement; (b) The Preliminary Official Statement, as of its date, was true, correct and complete in all material respects and did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading; (c) The Official Statement is, and will be, as of the Closing Date, true, correct and complete in all material respects and does not, and will not, as of the Closing Date, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading; (d) The Issuer to the best of its knowledge has complied, and will at the Closing Date be in compliance, in all respects, with the Law and any other applicable laws of the State; (e) , By all necessary official action of the Issuer prior to or concurrently with the acceptance hereof, the Issuer has duly authorized and approved the Preliminary Official Statement and the Official Statement, and has duly authorized and approved the execution and delivery of, and the performance by the Issuer of the obligations on its part contained in, the Indenture, the Bonds, the Disclosure Agreement, the Escrow Agreement and this Purchase Contract, and, as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded; (f) As of the time of acceptance hereof and as of the time of the Closing, except as otherwise disclosed in the Official Statement, the Issuer to the best of its knowledge is not and will not be in breach of or in default under any applicable constitutional provision, law or administrative rule or regulation of the State, of the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, indenture, resolution, ordinance, agreement or other instrument to which the Issuer is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument; and, the adoption of the Resolution and the execution and delivery of the Bonds, the Disclosure Agreement and this Purchase Contract, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree, loan agreement, note. indenture, resolution, agreement or other instrument to which the Issuer is a party or is otherwise subject; and, except as described in the Official Statement, the Issuer has not entered into any contract or arrangement of any kind which might give rise to any lien or encumbrance on the revenues and amounts pledged pursuant to, or subject to the lien of, the Indenture or expressly pledged taxes allocated to, and paid into, a special fund of, the Agency pursuant to Section 33641.5 or Section 33670 of the Law, to secure, directly or indirectly, the obligations of the Agency including, but not limited to, bonded indebtedness and agreements pursuant to subdivision (b) of Section 33401 of the Law such that the Agency's obligations J thereunder should have priority over the claim to the Pledged Tax Revenues established by the Indenture; (g) To the best of its knowledge all approvals, consents and orders of any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to adoption of the Resolution, the execution of the Escrow Agreement, the Disclosure Agreement and the Indenture, execution and delivery by the Issuer of this Purchase Contract and the issuance, sale and delivery of the Bonds have been obtained or will be obtained prior to the Closing; (h) The Bonds when issued, authenticated and delivered in accordance with the Indenture will be validly issued, and will be valid and binding, obligations of the Issuer: (i) To the best of its knowledge the terms and provisions of the Indenture comply in all respects with the requirements of the Law and the Indenture, the Escrow Agreement, the Disclosure Agreement and this Purchase Contract, when properly executed and delivered by the respective parties thereto and hereto, will constitute the valid, legal and binding obligations of the Issuer enforceable in accordance with their respective terms, except as enforcement may by limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and general rules of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity); 0) To the best of its knowledge there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or, to the knowledge of the Issuer, threatened, against the Issuer, affecting the existence of the Issuer or the titles of its members or officers, or seeking to prohibit,restrain or enjoin the sale, issuance or delivery of the Bonds or the payment or collection of any amounts pledged or to be pledged to pay the principal of, redemption premium, if any, and interest on the Bonds; or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the Bonds, the Indenture, the Escrow Agreement, the Disclosure Agreement or this Purchase Contract or the consummation of the transactions contemplated thereby and hereby, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement, or contesting the power or authority of the Issuer to issue the Bonds, to adopt the Resolution approving the Indenture or to execute and deliver this Purchase Contract, nor is there any basis therefor, wherein an unfavorable decision, ruling or finding would materially adversely affect the Issuer or the validity or enforceability of the Bonds, the Indenture, the Escrow Agreement, the Disclosure Agreement or this Purchase Contract: (k) Any certificate signed by an authorized officer or official of the Issuer and delivered to the Underwriter shall be deemed a representation of the Issuer to the Underwriter as to the statements made therein: (1) Each of the Bonds shall be secured in the manner and to the extent set forth in the Indenture under which each such Bond is to be issued, (m)- During the period commencing on the date hereof and ending on the date ninety (90) days following the Closing Date, if any event shall occur of which the Issuer has knowledge and as a result of which it may be necessary to supplement the Official Statement in order to make the statements therein, in light of the circumstances existing at such time, not misleading, the Issuer shall forthwith notify the Underwriter thereof and, if in the opinion of the Underwriter such event requires an amendment or supplement to the Q Official Statement, the Issuer will at no expense to the Underwriter amend or supplement the Official Statement in a form and manner jointly approved by the Issuer and Underwriter. The Issuer's obligation pursuant to this section (m) shall tenninate on the earlier of (i) ninety (90) days from the end of the "underwriting period", as defined in Rule 15c2-12, or (ii) the time when the Official Statement is available to any person from a nationally recognized municipal securities information repository, but in no case less than twenty-five(25) days following the end of the underwriting period; (n) The Issuer 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; provided, however, that the Issuer shall not be required to consent to service of process outside of California; (o) The Issuer will apply the proceeds of the Bonds in accordance with the Indenture and all other applicable documents and as described in the Official Statement; (p) The Issuer shall provide or cause to be provided to the Underwriter not more than 200 copies of the Preliminary Official Statement in order to satisfy the Underwriter's obligation under Rule 15c2-12 with respect to the distribution to each potential customer, upon request, of a copy of a Preliminary Official Statement; (q) The Issuer shall provide to the Underwriter, not later than seven (7) business days after the date of this Purchase Contract, but in any event in sufficient time to accompany any confinnation sent by the Underwriter to a purchaser of the Bonds, 200 copies of the Official Statement to satisfy the Underwriter's obligation under Rule 15c2- 12 with respect to the distribution of the Official Statement; (r) The Underwriter agrees to notify the Issuer in writing following the occurrence of the "end of the underwriting period" as defined in Rule 15c2-12 for the Bonds. Unless otherwise notified in writing by the Underwriter on or prior to the Closing Date, the Issuer can assume that the "end of the underwriting period" for the Bonds for all purposes of Rule 15c2-12 is the Closing Date; (s) The Issuer will not invest or otherwise use proceeds of the Bonds in any manner which would cause the Bonds to be considered arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code").- and (t) The Issuer will, at the Underwriter's request, take any action reasonably necessary to assure or maintain the exclusion from gross income for purposes of federal income taxes of interest on the Bonds and will not take any action, or permit any action to be taken with respect to which it may exercise control, which would result in the loss of that exclusion. 5. Representations and Agreements of the Authority. The Authority represents and agrees that: (a) The Authority is a joint powers authority, duly organized and existing, and authorized to transact business and exercise powers, under and pursuant to the Constitution and laws of the.State, including�the JPA Act, with full legal right, power and authority to purchase and sell Bonds and to execute, deliver and perform its obligations 5 under this Purchase Contract and to carry out and consummate the transactions contemplated by this Purchase Contract; (b) The Authority to the best of its knowledge has complied, and will at the Closing be in compliance, in all material respects, with the JPA Act and any other applicable laws of the State; (c) By all necessary official action of the Authority prior to or concurrently with the acceptance hereof, the Authority has duly authorized and approved the execution and delivery of, and the performance by the Authority of the obligations on its part contained in this Purchase Contract, and, as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded; (d) - To the best of its knowledge there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or overtly threatened in writing, against the Authority, affecting the existence of the Authority or the titles of its members or officers, or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Bonds or in any way contesting or affecting the validity or enforceability of this Purchase Contract or the consunvnation of the transactions contemplated hereby. or contesting the power or authority of the Authority to purchase the Bonds from the Issuer or to sell the Bonds to the Underwriter or to execute and deliver this Purchase Contract, wherein an unfavorable decision, ruling or finding would materially adversely affect the Authority or the validity or enforceability of this Purchase Contract; and (e) Any certificate signed by an authorized officer of the Authority and delivered to the Underwriter shall be deemed a representation of the Authority to the Underwriter as to the statements made therein. 6. Representations of the Underwriter. The Underwriter represents that it has full right, power, and authority to enter into this Purchase Contract 7. Covenants. The Issuer covenants with the Underwriter that so long as the Underwriter, or dealers, if any, are participating in the distribution of the Bonds which constitute the whole or a part of their unsold participations, if an event known to the Issuer occurs affecting the Issuer or the transactions contemplated by the Indenture and the issuance of the Bonds, which could cause the Official Statement to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, the Issuer shall notify the Underwriter and if in the opinion of the Issuer, the Underwriter or Bond Counsel, such event requires an amendment or supplement to the Official Statement, the Issuer will amend or supplement the Official Statement in a form and in a manner jointly approved by the Issuer and the Underwriter, and the Issuer will bear the cost of making and printing such amendment or supplement to the Official Statement and distributing such amendment or supplement to Owners of the Bonds. 8. Conditions to Obligations of Underwriter. The Underwriter has entered into this Purchase Contract in reliance upon the representations and agreements of the Issuer contained herein and upon the accuracy of the statements to be contained in the documents, opinions, and instruments to be delivered at the Closing. Accordingly. the Underwriter's obligation under this Purchase Contract to purchase, accept delivery of, and pay for the Bonds on the Closing Date is subject to the performance by the Issuer of its obligations hereunder at or prior to the Closing. The following additional conditions precedent relate to the Closing, in connection with the Underwriter's obligation to purchase the Bonds: 6 (a) At the time of the Closing, (i) the representations of the Issuer contained herein to the best of its knowledge shall be true, complete and correct; and (ii) the Indenture shall be in full force and effect and shall not have been amended, modified or supplemented, except as may have been agreed to to writing by the Underwriter; (b) , The Underwriter shall have the right to cancel its obligation to purchase the Bonds if between the date hereof and the Closing, (i) legislation shall have been enacted (or indenture or resolution passed) by or introduced or pending legislation amended in the Congress of the United States or the State or shall have been reported out of committee or be pending in committee, or a decision shall have been rendered by a court of the United States or the State or the Tax Court of the United States, or a ruling shall have been made or indenture shall have been proposed or made or any other release or announcement shall have been made by the Treasury Department of the United States or the Internal Revenue Service, or other federal or State authority, with respect to State taxation upon interest on obligations of the general character of the Bonds or with respect to the security pledged to pay debt service on the Bonds, that, in the Underwriter's reasonable judgment, materially adversely affects the market for the Bonds, or the market price generally of obligations of the general character of the Bonds or (ii) there shall exist any event that, in the Underwriter's reasonable judgment, either (A) makes untrue or incorrect in any material respect any statement or information in the Official Statement or (B) is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein not misleading in any material respect, or (iii) there shall have occurred any outbreak of hostilities or other local, national or international calamity or crisis, or a default with respect to the debt obligations of, or the institution of proceedings under the federal bankruptcy laws, the effect of which on the financial markets of the United States will be such as in the Underwriter's reasonable judgment, makes it impracticable for the Underwriter to market the Bonds or enforce contracts for the sale of the Bonds, or (iv) there shall be in force a general suspension of tradmg on the New York Stock Exchange, or inimmum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices of securities shall have been required and be in force on the New York Stock Exchange, whether by virtue of determination by that Exchange or by order of the Securities and Exchange Commission of the United States or any other governmental authority having jurisdiction that, in the Underwriter's reasonable judgment, makes it impracticable for the Underwriter to market the Bonds or enforce contracts for the sale of the Bonds, or (v) a general banking moratorium shall have been declared by federal, New York or State authorities having jurisdiction and be in force that, to the Underwriter's reasonable judgment, makes it impracticable for the Underwriter to market the Bonds or enforce contracts for the sale of the Bonds, or (vi) legislation shall be enacted or be proposed or actively considered for enactment, or a decision by a court of the United States shall be rendered, or a ruling, regulation, proposed regulation or statement by or on behalf of the Securities and Exchange Commission of the United States or other governmental agency having jurisdiction of the subject matter shall be made, to the effect that the Bonds or any obligations of the general character of the Bonds are not exempt from the registration, qualification or other requirements of the Securities Act of 1933, as amended and as then in effect, or of the Trust Indenture Act of 1939, as amended and as then in effect, or otherwise are or would be in violation of any provision of the federal securities laws, or (vii) the New York Stock Exchange or other national securities exchange, or any governmental authority, shall impose any material restrictions not now in force with respect to the Bonds or obligations of the general character of the Bonds or securities generally, or materially mcrease any such restrictions now in force, including those relating to the extension of credit by, or the charge to the net capital requirements of, underwriters, or (viii) there shall have been any materially adverse change in the affairs of 7 the Issuer which in the Underwriter's reasonable judgment materially adversely affects the market for the Bonds, or (ix) general political, economic or market conditions which, in the sole opinion of the Underwriter, shall not be satisfactory to permit the sale of the Bonds; and (c) At or prior to the Closing, the Underwriter and the Issuer shall receive the following: (1) The unqualified approving opinion of Harper & Burns, Orange, California, bond counsel (the "Bond Counsel"), in form and substance acceptable to the Underwriter, addressed to the Issuer, dated the date of the Closing; (2) A supplemental opinion of Bond Counsel, addressed to the Underwriter and the Issuer in form and substance acceptable to each of them, dated the date of Closing, to the following effect: (i) The Issuer has duly authorized, executed and delivered the Indenture and the Purchase Contract. The Indenture and the Purchase Contract constitute the legal, valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights, to the application of equitable principles when equitable remedies are sought and to the exercise of judicial discretion in appropriate cases; (ii) The Official Statement has been duly authorized, executed and delivered by the Issuer; (iii) The statements and information contained or summarized in the Preliminary Official Statement and Official Statement under the headings "THE- BONDS," "SECURITY FOR THE BONDS," "THE INDENTURE," "CONCLUDING INFORMATION - Legal Opinion," and "Tax Exemption;" the Cover Page and "INTRODUCTORY STATEMENT," in so far as the Cover Page and "INTRODUCTORY STATEMENT" describe the Bonds, security for the Bonds, the Indenture, and the legal opinion of Bond Counsel concerning certain federal and State tax matters relatme to the Bonds, and "APPENDIX A - Definitions" (but not including any statistical or financial information set forth under such headings, as to which no opinion need be expressed) insofar as such statements purport to sunumarize certain provisions of the Law, the Bonds the Indenture and the opinion of such Bond Counsel concerning certain federal and State tax matters relating to the Bonds, are accurate in all material respects.- (iv) The Bonds are exempt from registration under the Securities Act of 1933, as amended; and (v) The Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended. (3) The opinion of counsel to the Issuer, addressed to the Underwriter and the Issuer, in form and substance acceptable to each of them, dated the date of the Closing, to the following effect. 8 (i) The Issuer is a public body, corporate and politic, duly organized and validly existing under and by virtue of the Constitution and the laws of the State: (ii) The Indenture has been duly approved by the Resolution of the Issuer adopted at a regular meeting duly called and held in accordance with the requirements of all applicable laws and at which a quorum of the members of the Issuer was continuously present; (iii) Except as described in the Official Statement, there is no litigation pending or, to the best of such counsel's knowledge after due inquiry, threatened, which: (a) challenges the right or title of any member or officer of the Issuer to hold his or her respective office or exercise or perform the powers and duties pertaining thereto; (b) challenges the validity or enforceability of the Bonds, the Indenture or the Purchase Contract; (c) seeks to restrain or enjoin the issuance and sale of the Bonds, the adoption or effectiveness of the Resolution and Indenture, or the execution and delivery by the Issuer of, or the performance by the Issuer of its obligations under the Bonds or the Purchase Contract; or (d) if determined adversely to the Issuer or its interests, would have a material and adverse affect upon the financial condition, assets, properties or operations of the Issuer.- (iv) The Bonds and the Purchase Contract have each been duly authorized; executed and delivered by the Issuer, and the Indenture, the Bonds and the Purchase Contract constitute the valid and binding legal obligations of the Issuer enforceable in accordance with their respective terms except as such enforceability may be limited or otherwise affected by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws or general principles of equity limiting or otherwise affecting the enforcement of creditors' rights, whether now existing or hereafter enacted: (v) The execution and delivery by the Issuer of, and the performance by the Issuer of its obligations under the Bonds, the Indenture and the Purchase Contract. do not conflict with. violate or constitute a default under any provision of any law; court order or decree or any contract, instrument or agreement to which the Issuer is a party or by which it is bound; (vi) The Issuer has obtained all authorizations, approvals, consents or other orders of the State or any other governmental authority or agency within the State having jurisdiction over the Issuer for the valid authorization, issuance and delivery by the Issuer of the Bonds and to effectuate the subordinations under the pass through agreements as described in the Official Statement; and (vii) The statements and information contained in the Preliminary Official Statement and Official Statement under the headings, "THE AGENCY." "PROPERTY TAXATION IN CALIFORNIA," "THE PROJECT AREA." "PLEDGED TAX REVENUES." "CONCLUDING INFORMATION - No Litigation" and "Legality for Investment in California" and "SUPPLEMENTAL INFORMATION - The City of Grand Terrace" (excluding therefrom any financial statements and statistical data 9 s as to which no opinion need be expressed) are accurate in all material respects. (4) The opinion of counsel to the Authority, addressed to the Underwriter and the Issuer, in form and substance acceptable to each of them, dated the date of the Closing, to the following effect: (1) The Authority is a joint powers authority, duly created and validly existing under and by virtue of the Constitution and the laws of the State; (ii) Except as described in the Official Statement, to the best of such counsel's knowledge after due inquiry, there is no litigation pending or overtly threatened in writing, which: (a) challenges the right or title of any member or officer of the Authority to hold his or her respective office or exercise or perform the powers and duties pertaining thereto; (b) challenges the validity or enforceability of the Purchase Contract; or (c) seeks to restrain or enjoin the execution and delivery by the Authority of or the performance by the Authority of its obligations under, the Purchase Contract: (iii) The Purchase Contract has been duly authorized, executed and delivered by the Authority, and the Purchase Contract constitutes the valid and binding obligation of the Authority enforceable in accordance with its terms except as such enforceability may be limited or otherwise affected by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws or court decisions or general principles of equity limiting or otherwise affecting the enforcement of creditors' rights. whether now existing or hereafter enacted and except that no opinion need be given as to any provisions relating to indemnification nor as to specific enforceability or other equitable remedies; (iv) To the best of such counsel's knowledge, the execution and delivery by the Authority of and the performance by the Authority of its obligations under the Purchase Contract are not prohibited by and do not violate or constitute a default under any provision of any law, court order or decree or any contract, instrument or agreement to which the Authority is a party or by which it is bound; (v) To the best of such counsel's knowledge, the Authority has obtained all authorizations, approvals, consents or other orders of the State or any other governmental authority or agency within the State having jurisdiction over the Authority required for the valid purchase and sale by the Authority of the Bonds; and (vi) The statements and information contained in the Official Statement under the heading "THE AUTHORITY" present a fair and accurate summary of such provisions; (5) A certificate dated the date of the Closing, signed by the Executive Director or appropriate officer of the Issuer, to the effect that to the best of his knowledge: (i) the representations and covenants of the Issuer contained herein are true and correct in all material respects on and as of the date of the Closing with the same effect as if made on the date of Closing; (ii) the Issuer has complied 10 with all the agreements and satisfied all of the conditions on its part to be performed or satisfied at or prior to the Closing; (iii) no event affecting the Issuer has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the Closing Date any statement or information contained in the Official Statement or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein not misleading in any material respect; and (iv) the Indenture remains in full force and effect and has not been amended to any respect, except as approved in writing by the Underwriter, since the date of the Indenture; (6) A certificate of the Trustee dated the date of the Closing, to the effect that: (i) the Trustee is organized and existing as a' national banking association under and by the virtue of the laws of the United States of America, having full power and being qualified and duly authorized to perform the duties and obligations of the Trustee under and pursuant to the Indenture; (ii) the Trustee has agreed to perform the. duties and obligations of the Trustee as set forth in the Indenture; (iii) to the best of its knowledge, compliance with the provisions on the Trustee's part contained in the Indenture, will not conflict with or constitute a breach of or default under any material law, administrative regulation, judgment, decree, loan agreement, indenture, resolution, bond, note, agreement or other instrument to which the Trustee is a party or is otherwise subject, as a result of which the Trustee's ability to perform its obligations under the Indenture would be impaired, nor will any such compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets held by the Trustee pursuant to the lien created by the Indenture under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, agreement or other instrument, except as provided by the Indenture; and (iv) to the best of the knowledge of the Trustee, the Trustee has not been served in any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, nor is any such action, suit, proceeding, inquiry or investigation threatened against the Trustee, affecting the existence of the Trustee, or the titles of its officers to their respective offices or seeking to prohibit, restrain or enjoin the delivery of the Bonds issued under the Indenture or the collection of revenues pledged or to be pledged to pay the principal of, premium, if any, and interest on the Bonds issued under the Indenture, or the pledge thereof, or in any way contesting the powers of the Trustee or its authority to enter into or perform its obligations under the Indenture, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Indenture; (8) Two (2) copies of this Purchase Contract duly executed and delivered by the parties thereto; (9) Two (2) copies of the Official Statement, executed on behalf of the Issuer by the Executive Director of the Issuer; (10) One (1) certified copy of the Indenture and all other resolutions of the Issuer and the City relating to the issuance of the Bonds; (11) An opinion of counsel to the Bond Insurer to the effect that (i) the Municipal Bond Insurance Policy is valid, binding and enforceable against the Bond Insurer in accordance with its terms. except as such enforceability may be limited by laws affecting the enforcement of creditors'rights generally, and (ii) the 11 statements and information contained in the Official Statement under the headings "BOND INSURANCE," "SUPPLEMENTAL INFORMATION" and "APPENDIX C — Specimen Municipal Bond Insurance Policy" are accurate in all material respects; (12) A certificate dated the date of the Closing, signed by the President of Urban Futures, Inc., Financial Advisor, to the effect that (i) the Preliminary Official Statement, as of its date, was true, correct and complete in all material respects and did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading and (ii) the Official Statement is, and will be, as of the Closing Date, true, correct and complete in all material respects and does not, and will not, as of the Closing Date, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading, (13) An opinion; dated the date of the Closing and addressed to the Underwriter and the Issuer, of Disclosure Counsel, stating that based upon its participation in the preparation of the Official Statement and without having undertaken to determine independently the accuracy or completeness of the statements in the Official Statement, such Counsel has no reason to believe that, as of the date of Closing, the Official Statement (except for financial, statistical and numerical data included in the Official Statement, as to which no view need be expressed) contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein; in light of the circumstances under which they were made, not misleading, (14) Such additional legal opinions, certificates, proceedings; instruments and other documents as the Underwriter, Bond Counsel or Disclosure Counsel may reasonably request to evidence compliance by the Issuer with this Purchase Contract, legal requirements, and the performance or satisfaction by the Issuer at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the Issuer: (15) Rating letters from Standard & Poor's Corporation and Moody's Investors Service, Inc. confirming the ratings on the Bonds; (16) All pertinent documents relating to the Municipal Bond Insurance Policy including the Municipal Bond Insurance Policy Specimen; and (17) The Continuing Disclosure Certificate of the Issuer required by SEC Rule 15c2-12. The Issuer will furnish the Underwriter with such conformed copies of such opinions, certificates, letters and documents as the Underwriter may reasonably request. If the Issuer is unable to satisfy the conditions to the obligations of the Underwriter contained in this Purchase Contract, or if the obligations of the Underwriter shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate and neither the Underwriter nor the Issuer shall have any further obligations hereunder, except as provided in Section 8 hereof. However, the Underwriter may in its discretion waive one or more of the conditions imposed by this Purchase Contract for the protection of the Underwriter and proceed with the related Closing 12 9. Expenses. The Underwriter shall be under no obligation to pay, and the Issuer shall pay fi-om its available funds or from the proceeds of the Bonds, certain expenses set forth in this Section, including but not limited to: (i) all expenses in connection with the preparation, distribution and delivery of the Preliminary Official Statement, the Official Statement and any amendment or supplement thereto, (ii) all expenses in connection with the printing, issuance and delivery of the Bonds, (iii) the fees and disbursements of Bond Counsel and Disclosure Counsel in connection with the Bonds, (iv) the fees and disbursements of counsel to the Issuer in connection with the Bonds, (v) the disbursements of the Issuer in connection with the issuance of the Bonds, and (vi) the fees and disbursements of the Trustee. The Underwriter shall pay all advertising expenses in connection with the public offering of the Bonds and all other expenses incurred by it in connection with its public offering and distribution of the Bonds. 10. Notice. Any notice or other communication to be given to the Issuer under this Purchase Contract may be given by delivering the same in writing at the address set forth above. Any such notice or conununication to be given to the Underwriter may be given by delivering the same in writing to: Wedbush Morgan Securities 201 Lomas Santa Fe Drive, Suite 500 Solana Beach, CA 92075 Attention: Ms. Robin M. Thomas 11. GoveminQ Law. This Purchase Contract shall be governed.by the laws of the State of California. This Purchase Contract may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument 1� 12. Parties in Interest. This Purchase Contract is made solely for the benefit of the signatories hereto (including the successors or assigns of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof except as provided in Section 9 hereof. All representations and agreements in this Purchase Contract shall remain operative and in full force and effect, regardless of(a) delivery of and payment for any of the Bonds and (b) any termination of this Purchase Contract. Respectfully submitted, WEDBUSH MORGAN SECURITIES By Its• Senior Vice President Accepted as of the date first stated above: COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF GRAND TERRACE By Its: Executive Director GRAND TERRACE PUBLIC FINANCING AUTHORITY By Its: Executive Director 14 APPENDIX A $1590009000* COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF GRAND TERRACE COMMUNITY REDEVELOPMENT PROJECT AREA REFUNDING TAX ALLOCATION ]BONDS SERIES 2004 Maturity Date Principal Interest March 1 of Amount Rate Yield Price 2005 2006 2007 2008 2009 2010 2011 2017 Total Preliminary,subject to change. A-1 No. $ $ COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF GRAND TERRACE COMMUNITY REDEVELOPMENT PROJECT AREA REFUNDING TAX ALLOCATION BONDS SERIES 2004 Interest Rate Maturity Date Date of Issuance CUSIP REGISTERED OWNER: PRINCIPAL SUM: The Community Redevelopment Agency of the City of Grand Terrace (hereinafter sometimes called the "Agency"), a public body, corporate and politic, duly organized and existing under the laws of the State of California, for value received, hereby promises to pay (but solely out of the funds hereinafter mentioned) to the registered owner specified above or registered assigns (herein sometimes referred to as "registered owner") the principal sum stated above on the date stated above and to pav the registered owner on each September 1 and March 1, commencing on-March 1, 2005 (each such date an "Interest Payment Date") by check mailed by first class mail, postage prepaid as such registered owner's name and address appear on the register kept by the Trustee (defined below) as of the close of business on the fifteenth (15th) dal of the month next preceding each Interest Payment Date (the "regular record date"), interest on the principal sum from the Interest Payment Date next preceding the date of authentication hereof (unless (i) the date of authentication hereof is an Interest Payment Date, in which event from that Interest Payment Date, (ii) the date of authentication hereof is after the regular record date and prior to the next succeeding Interest Payment Date, and if the Agency shall not default in the payment of interest due on said Interest Payment Date, from said Interest Payment Date, or (iii) the date of authentication hereof is prior to August 15, 2004, in which event from September 1, 2004 until the principal hereof shall have been paid or provided for in accordance with the Indenture hereinafter referred to, at the rate per annnunn set forth above. Both principal and interest on this Bond are payable in lawful money of the United States of America, and (except for interest which is payable by check as stated above) are payable upon presentation of this Bond at the corporate trust office, designated in writing by U.S. Bank National Association, as Trustee (the "Trustee"). This Bond and the interest hereon are not a debt of the Community Redevelopment Agency of the City of Grand Terrace, the State of California or any of its political subdivisions, and neither the City, the State nor any of its political subdivisions is liable for the payment of any principal or interest. In no event shall this Bond or the interest hereon be payable out of anv funds or properties other than the funds of the Agency as set forth in the Indenture hereinafter mentioned. This Bond does not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. Neither the members of the Agency nor any persons executing this Bond are liable personally on this Bond by reason of its issuance. This Bond is one of a duly authorized issue of Bonds of the Agency designated "Community Redevelopment Agency of the City of Grand Terrace, Grand Terrace Community Redevelopment Project Area Refunding Tax Allocation Bonds Series 2004" (herein called the "Bonds"), in an aggregate principal amount of Fifteen Million Dollars ($15,000,000), all of like tenor (except for Bond numbers, maturities and amounts) and all of which have been issued pursuant to and in full conformity with the Constitution and laws of the State of California and particularly the Community Redevelopment Law (Part 1 of Division 24 of the health and Safety Code of the State of California) for the corporate purposes the Agency and are authorized by and issued pursuant to the Resolution adopted by the Agency on , 2004 (the resolution being herein referred to as the "Resolution") and that certain Indenture of Trust dated as of , 2004 between the Agency and the Trustee (the "Indenture"). Copies of the Indenture are on file with the Secretary of the Agency and the Trustee. All of the Bonds are secured in accordance with the terms of the Indenture, reference to which is hereby made for a specific description of the security provided for the Bonds, for the nature, extent and manner of enforcement of such security, for the covenants and agreements made for the benefit of the Bondowners, and for a statement of the rights of the Bondowners. By the acceptance of this Bond the registered owner hereof consents to all of the terms, conditions and provisions of the Indenture. In the manner provided in the Indenture, the Indenture and the rights and obligations of the Agency and of the Bondowners may (with certain exceptions as stated in the Indenture) be modified or amended with the consent of the Owners of not less than sixty percent (60%) in aggregate principal amount of Outstanding Bonds, exclusive of issuer-owned Bonds, unless the modification or amendment is for the purpose of curing ambiguities, defects, or accomplishing the other purposes set forth in the Indenture in which case no Bondowners' consent is required. The principal.of and interest on this Bond are secured by an irrevocable pledge of, and are payable solely out of, the Pledged Tax Revenues (as that term is defined in the Indenture) on a parity with the Series 2004B Bonds and the Series 2004C Bonds, and certain other available moneys, all as more particularly set forth in the Indenture. The Indenture is adopted under and this Bond is issued under and is to be construed in accordance -*vitb the laws of the State of California. The Series 2004 Bonds maturing on or before September 1, 2011 are not subject to redemption prior to their respective stated maturities. The Outstanding Bonds maturing September 1, 2011, may be called before maturity and redeemed at the option of the Agency in whole or in part from the proceeds of refunding bonds or other source of available funds on September 1, , or on any date thereafter prior to maturity in the manner determined by the Agency. If less than all of the Bonds Outstanding are to be redeemed at any one time, the Bonds to be redeemed shall be redeemed by lot -,within a maturity. Bonds called for redemption shall be redeemed at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed) plus accrued interest to the redemption date as show in the following tables: Redemption Date Redemption Price September 1, through August 31, 102.55c September 1, through August 31, 101.0% September 1 through August 31, 100.0% The Bonds maturing September 1, (the "Term Bonds") are subject to mandatory redemption in part from sinking fund installments commencing on September 1, at a redemption price equal to the principal amount thereof together with accrued interest to the redemption date without premium, from minimum.sinking account payments made by the Agency in the years and amounts as follows: Year Amount Year Amount This Bond is issued in fully registered form and is negotiable upon proper transfer of registration. This Bond may be exchanged for an aggregate principal amount of Bonds of other authorized denominations. This Bond is transferable by the registered owner, in person or by his attorney duly authorized in writing, at the corporate trust office, designated by the Trustee in writing, upon surrender and cancellation of this Bond but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture. Upon transfer, a new Bond of any authorized denomination or denominations for the same aggregate principal amount and maturity of the same issue will be issued to the transferee in exchange therefor. The Agency and the Trustee may treat the registered owner of this Bond (as evidenced by the Trustee's registration books) as its absolute owner for all purposes, and the Agency and the Trustee shall not be affected by any notice to the contrary. This Bond shall not be entitled to any benefit under the Indenture, or become valid or obligatory for any purpose, until the certificate of authentication hereon endorsed shall have been signed by the Trustee. It is hereby recited, certified and declared that any and all acts, conditions and things required to exist, to happen and to be performed precedent to and in the issuance of this Bond exist, have happened and have been performed in due time, form and manner as required by the Constitution and laws of the State of California. IN «TITNESS WHEREOF, the Community Redevelopment Agency of the City of Grand Terrace has caused this Bond to be signed on its behalf by its Chairman and the seal of the Agency to be reproduced hereon. Chairman of the Community Redevelopment Agency of the City of Grand Terrace CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the Resolution and in the Agreement -which has been authenticated on , 2004. By Authorized Signatory ° (FORM OF ASSIGNMENT OF BOND) For value received the undersigned hereby sells, assigns and transfers unto whose social security or other tax identifying number is the within- mentioned Bond and hereby irrevocably constitutes and appoints , attorney, to transfer the same on the Bond register of the Trustee with full power of substitution in the premises. Dated: NOTE: The signature to this assignment must correspond with the name as written on the face of the within Bond in every particular, without alterations or enlargement or any change whatsoever. Signature Guaranteed: NOTE:Signature(s) must be guaranteed by an eligible guarantor. STATEMENT OF INSURANCE $15,000,000 COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF GRAND TERRACE REDEVELOPMENT PROJECT AREA REFUNDING TAX ALLOCATION BONDS SERIES 2004 REFUNDED BONDS ESCROW AGREEMENT This Escrow Agreement (the "Agreement"), dated as of by and between (i) the Community Redevelopment Agency of the City of Grand Terrace (the "Agency") and (ii) U.S. Bank Trust National Association, as escrow bank ("the "Escrow Bank"). WITNESSETH WHEREAS, the Agency has previously issued its Community Redevelopment Agency City of Grand Terrace, Community Development Project Refunding Tax Allocation Bonds Series 1993A (the "1993A Bonds") in the principal amount of $5,025,000, its Community Redevelopment Agency of the City of Grand Terrace, Community Redevelopment Project Area Refunding Tax Allocation Bonds, Series 1993B (the 1993B Bonds") in the principal amount of $8,750,000, and entered into the Redevelopment Agency of the City of Grand Terrace Subordinate Tax Allocation Loan Agreement (the "Loan Agreement") dated July 9, 2003, and in the principal amount of$1,300,00 (together the "Refunded Bonds"); WHEREAS, for the purpose, of refunding the remaining portion of the Refunded Bonds. the Agency is issuing its S15,000,000 Grand Terrace Redevelopment Project Refunding Tax Allocation Bonds, Series 2004 (the "Bonds"); WHEREAS, a portion of the proceeds of the sale of the Bonds is to be deposited and held pursuant to this Agreement: WHEREAS, such proceeds are to be invested in the obligations set forth in Exhibit A attached hereto: NOW, THEREFORE, in consideration of the foregoing and the mutual covenants hereinafter set forth, the parties hereto agree as follows SECTION 1., Appointment of Escrow Bank. The Agency hereby appoints the Escrow Bank as escrow bank for all purposes of this Agreement and in accordance with the terms and provisions of this Agreement, and the Escrow Bank accepts such appointment. All capitalized terms used here shall be as defined in the Indenture of Trust between the Agency and U.S. Bank Trust National Association, as Trustee, securing the Grand Terrace Redevelopment Project Area Refunding Tax Allocation Bonds, Series 2004, dated 2004. SECTION 2. Certificates and Moneys Received. The Agency hereby establishes with the Escrow Bank the Refunded Bonds Escrow Fund, as described in Section 3 hereof (the "Escrow Fund"). The Escrow Bank acknowledges receipt of federal funds derived from the proceeds of the Bonds in the amount of $ which the Escrow Bank is hereby directed by the Agency to immediately invest (together with S transferred from the Reserve Account with respect to the Refunded Bonds) in the U.S. Treasury State and Local Government Series obligations (the "Government Obligations") listed on Exhibit A hereto at the prices indicated on such Exhibit. The Escrow Bank shall not be liable for losses on any investment made by it pursuant to and in compliance with such written instructions. According to the special report of McGladrey & Pullen, LLP attached hereto as Exhibit B, the maturing principal of and interest, if any, payable on the Government Obligations, held in the Refunded Bonds Escrow Fund and described in Exhibit "A" hereto, shall be sufficient to pay the scheduled principal and interest on the Refunded Bonds described in Exhibit A-2 of the special report of McGladrey & Pullen as attached as a part of Exhibit "B" and to optionally redeem the Refunded Bonds maturing after March 1, 2002, including any premium due thereon. The Escrow Bank may conclusively rely upon such report. SECTION 3. Establishment of Refunded Bonds Escrow Fund. (a) There is hereby created and established a special, segregated and irrevocable trust fund, designated as the Refunded Bonds Escrow Fund, to be held by the Escrow Bank, separate and apart from all other funds of the Agency and the Escrow Bank. (a) Concurrently with the execution of this Agreement. the Escrow Bank shall deposit the Government Obligations described in Exhibit "A" hereto in the Refunded Bonds Escrow Fund. The Escrow Bank shall deposit all proceeds (whether principal or interest) derived from the Government Obligations in the Refunded Bonds Escrow Fund. SECTION 4. Escrow Funds Constitute Trust Funds. The Government Obligations and any cash in the Refunded Bonds Escrow Fund shall constitute an irrevocable deposit of said Government Obligations and cash in trust solely for the purposes provided in this Agreement. SECTION 5. Use and Application of Trust Funds. (a) The Escrow Bank shall withdraw amounts from the Refunded Bonds Escrow Fund for the sole purpose of making payments on the Refunded Bonds at the times and in the such amounts as described in Exhibit "A-2" to the special report of McGladrey & Pullen LLP, attached hereto as Exhibit "B". (b) The Escrow Bank shall collect the matured principal of and interest, if any, on the Government Obligations in the Refunded Bonds Escrow Fund as the same become due and payable for the purpose of making the payments required by this Section 5. (c) The liability of the Escrow Bank to make the payments required by this Section 5 shall be limited to the moneys and Government Obligations in the Refunded Bonds Escrow Fund. - (d) In the event the maturing principal of and interest on the Government Obligations and other money held by the Escrow Bank shall be insufficient to make the payments described in Section 5, the Escrow Bank shall give prompt notice of such insufficiency to the Agency, and the Agency shall cure such insufficiency. The Escrow Bank shall have no liability for such insufficiency. SECTION 6. No Power To Invest and Dispose. Except as otherwise expressly provided above and pursuant to written direction of the Agency, the Escrow Bank shall have no power or duty to invest any moneys held hereunder or to make substitution of the Government Obligations held hereunder or to sell, transfer, or otherwise dispose of the Government Obligations held hereunder. The Agency shall have no right to withdraw or substitute any Government Obligations in the Refunded Bonds Escrow Fund. SECTION 7. Redemption of Outstanding Bonds. The Agency hereby elects, and notifies the Escrow Bank of its election, to redeem Refunded Bonds as described in Exhibit B. The Escrow Bank in its capacity as Trustee for the Refunded Bonds shall give notice, in the name of the Agency,. of the redemption of such outstanding Refunded Bonds in the form and in the manner specified and required by the Refunded Bonds Indenture. SECTION 8. Transfer of Excess Moneys. All amounts, if any, remaining on deposit in the Refunded Bonds Escrow Fund after the payments required by Section 3 and 8 hereof have been made shall be remitted by the Escrow Bank to the Agency as its absolute property and free from trust. SECTION 9. Books and Records. The Escrow Bank agrees to maintain customary books and records for the Refunded Bonds Escrow Fund and to account separately for deposits therein, investment thereof, earnings thereon and losses (if any) with respect thereto. The Escrow Bank agrees to provide the Agency with statements on or before the fifteenth day of the month of March, 2002. SECTION 10. Escrow Bank's Fees and Expenses. The Agency shall pay the Escrow Bank compensation for its duties under this Agreement, including out-of-pocket costs such as publication costs, legal fees and other costs and expenses relating hereto and, in addition, fees and expenses relating to the purchase of the Government Obligations described herein._ SECTION 11. Responsibility of Escrow Bank. The Escrow Bank shall not be responsible for the sufficiency of the moneys and Government Obligations deposited with it hereunder for the purposes contemplated by this Agreement or for the sufficiency or accuracy of the form, execution or validity of the outstanding Refunded Bonds, or any documents deposited hereunder or attached hereto nor shall it be liable in any respect on account of the identity, authority or rights of the persons executing or delivering, or purporting to execute or deliver, any such bonds, documents or papers. It may rely upon any paper, document or other writing believed by it in good faith to be authentic in making any delivery or money or property hereunder. The Escrow Bank shall not be responsible for any of the recitals or representations contained herein. Whenever in the administration of this Agreement the Escrow Bank shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of gross negligence or willful misconduct on the part of the Escrow Bank, be deemed to be conclusively provided and established by a certificate of an authorized representative of the Agency and such certificate shall, in the absence of gross negligence or willful misconduct on the part of the Escrow Bank, be full warrant to the Escrow Bank for any action taken or suffered by it under the provisions of this Agreement upon the faith thereof. (a) Any bank, association or trust company into which the Escrow Bank may be merged or with which it may be consolidated or to whom all or substantially all of the corporate trust business shall be sold or transferred shall become the Escrow Bank without action of the Agency. (b) The Escrow Bank may consult with counsel of its own choice (which may be counsel to the Agency) and the Opinion of such counsel shall be full and complete authorization and protection with respect to any action taken, suffered, or omitted in good faith in accordance with such opinion of counsel. (c) The Escrow Bank shall not be liable for any losses arising from any investment made pursuant to this Agreement. SECTION 12. Indemnity. To the extent permitted by law, the Agency hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated) to indemnify, protect, save and keep harmless the Escrow Bank and its respective successors, assigns, agents, employees and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions. suits, costs, expenses and disbursements (including reasonable legal fees and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Bank at any time (whether or not also indemnified against the same by the Agency or any other person under any other agreement or instrument, but without double indemnity) in any way relating to or arising out of the execution, delivery and performance of this Agreement, the establishment hereunder of the Refunded Bonds Escrow Fund, the acceptance of the funds and securities deposited therein, the purchase of any securities to be purchased pursuant thereto, the retention of such securities or the proceeds thereof and any payment, transfer-or other application of moneys or securities by the Escrow Bank in accordance with the provisions of this Agreement; provided, however, that the Agency shall not be required to indemnify the Escrow Bank against the Escrow Bank's own gross negligence or willful misconduct or the gross negligence or willful misconduct of the Escrow Bank's respective successors, assigns, agents and employees or the material breach by the Escrow Bank of the terms of this Agreement. In no event shall the Agency or the Escrow Bank be liable to any person by reason of the transactions contemplated hereby other than 'to each other as set forth in this Section. The indemnities contained in this Section shall survive the termination of this Agreement, and the resignation or removal of the Escrow Bank. SECTION 13. Termination of Agreement. This Agreement shall terminate when all moneys and Government Obligations, together with any income and interest thereon, in the Refunded Bonds Escrow Fund have been transferred and applied in accordance with the terms hereof. SECTION 14. Limitation on Liability. The Escrow Bank shall have no liability under, or duty to inquire into the terms and provisions of the Agreement, and it is agreed that its duties are purely ministerial in nature, and that the Bank shall incur no liability whatsoever except for willful misconduct or gross negligence so long as it has acted in good faith. ' The Escrow Bank shall not be bound by any modification, amendment, termination, cancellation, recission or supersession of this Agreement unless the same shall be in writing and signed by the Agency and the Escrow Bank. SECTION 15. Resignation of Escrow Bank. The Escrow Bank may at any time resign hereunder by giving written notice of its resignation to the other parties hereto, at their address set forth in Section 16, at least 30 days prior to the date specified for such resignation to take effect, and upon the effective date of such resignation, the Government Obligations hereunder shall be delivered by it to such person as may be designated in writing by the Agency whereupon all the Escrow Bank's obligations hereunder shall, nevertheless, cease and terminate. If no such person shall have been designated by such date, all obligations of the Escrow Bank hereunder shall nevertheless cease and terminate. The Escrow Bank's sole responsibility thereafter shall be to keep safely all Government Obligations then held by it and to deliver the same to a person designated by the Agency or in accordance with the directions of a final order or judgment of a court of competent jurisdiction. SECTION 16. Notices. Notices, requests, and other communications required under this Agreement shall be in writing and considered validly served when delivered by first class mail, or facsimile followed by delivery of the original by first class mail. Either party may change its notice information by written notice delivered as provided herein to the other party by first class mail. Agency Address Escrow Bank Address Community Redevelopment Agency U.S. Bank of the City of Grand Terrace 633 West Fifth Street, 24" Floor 22795 Barron Road Los Angeles, California 90071 Grand Terrace, California 92324 Attention: Ashraf Almurdaah, Attention: Thomas Schwab Vice President SECTION 17. Severability. If any one or more of the covenants or agreements provided in this Agreement on the part of the Agency or the Escrow Bank to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenant or agreement shall be deemed and construed to be severable from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Agreement. SECTION 18. Applicable Law. This Agreement shall be governed by the applicable law of the State of California SECTION 19. Counterparts. This 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. SECTION 20. Section Headings Not Controlling. The headings of the several sections of this Agreement have been prepared for convenience of reference only and shall not control, affect the meaning of, or be taken as an interpretation of, any provision of this Agreement IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly authorized officers and their corporate seals to be hereunto affixed and attested as of the date hereinbefore set forth. Executed on COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF GRAND TERRACE By: Thomas Schwab, Executive Director U.S. BANK By: Authorized Officer