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Pension Debt Refinancing and Related Bond Financing March 16, 2021 Page 2 confirming that the contract with CalPERS and the pension UAL are each an "obligation imposed by law" under the State Constitution which can be refunded under the provisions of the Government Code, which permit local agencies to refund outstanding debt without additional voter approval. Unless challenged, the judicial validation proceedings are largely administrative managed by special legal counsel. Under normal circumstances, the validation proceedings take approximately 90 days. Due to the pandemic, we have assumed the process could take up to 6 months. Summary of Validation Proceedings: • File Validation Action with Orange County Superior Court • Receive Order for Publication of Summons from the Court • Legal publication for 21 consecutive days • Waiting period for ex parte application to file default judgment • Clerk enters default judgement and schedules a hearing (Hearing for default judgement and entry of judgment • Appeal Period (30 days) Work Performed Concurrently with Validation Proceedings The City will conduct a competitive procurement process for an underwriter and recommend one or more underwriters for the refinancing. The underwriter initially purchases the bonds from the City at a discount expressed as a fraction of a $1,000 bond and resells the bonds to investors for a profit. Once the City contracts with an underwriter, the financing team will prepare the Preliminary Official Statement (POS), which is the offering document that must contain all material information enabling investors to make an informed purchase decision. The City can sell the refunding bonds only after the Validation 30-day Appeal Period has ended, and the City Council approves the POS. Agreements to Be Approved With Proposed Resolution There are two documents attached to the proposed Resolution. • Bond Purchase Agreement — City Council approves the form of terms and conditions for selling the bonds to the underwriters. The financing team will finalize the agreement upon bond pricing. (Exhibit 3) • Trust Agreement — City Council approves the form of terms and conditions for the Trustee to register, transfer, and pay the bonds. US Bank is the Trustee for existing City outstanding bonds. The financing team will finalize the Trust Agreement upon bond pricing and execution of the Bond Purchase Agreement. (Exhibit 2) City Council 33 — 2 3/16/2021